CORRESP 1 filename1.htm

 

[Letterhead of Skadden, Arps, Slate, Meagher & Flom LLP]

 

 

 

June 5, 2014

 

 

 

Dominic Minore

Senior Counsel

Division of Investment Management

Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

 

 

RE:

TCP Capital Corp.

 

Registration Statement on Form N-2

 

File Numbers 333-194669

 

Dear Mr. Minore:

 

TCP Capital Corp. (the “Company” or the “Holding Company”) has today filed Pre-Effective Amendment No. 2 (“Amendment No. 2”) to its registration statement initially filed on Form N-2 on March 18, 2014 (the “Registration Statement”).  In this letter, Special Value Continuation Partners, LP is referred to as the Operating Company.  On behalf of the Company, enclosed please find for your convenience copies of Amendment No. 2, together with marked copies of Amendment No. 2 indicating changes to the Registration Statement.

 

We are in receipt of oral comments provided by you on May 28, 2014 to Richard Prins of Skadden, Arps, Slate, Meagher & Flom LLP regarding the Company’s Registration Statement. The Company has considered your comments and has authorized us to make on its behalf the responses and changes to the Company’s Registration Statement discussed below. The comments are set forth below and are followed by the Company’s response.  Capitalized terms not defined herein shall have meanings set forth in the Registration Statement.

 



 

Securities and Exchange Commission

June 5, 2014

Page 2

 

 

Risks (page 23)

 

1.     Comment:         Please revise the following portion of the third sentence: “… are the principal risks associated with an investment in the Company or generally associated…” so that it reads “… are the principal risks associated with an investment in the Company as well as generally associated… .”

 

Response:       The Company has revised its disclosure in response to your comment.

 

 

Management Fee (page 105)

 

2.     Comment:         Please supplementally confirm that derivatives will be valued in accordance with the Company’s valuation policies and that the Company will not show derivatives at their notional amount in the Company’s financial statements, including the schedules of investments.

 

Response:       The Company supplementally confirms that derivatives will be valued in accordance with its valuation policies and that the Company will not show derivatives at their notional amount in its financial statements (including the schedules of investments) unless required to do so by GAAP.

 

 

Description of Our Debt Securities (page 129)

 

3.     Comment:         Please file as correspondence on EDGAR a form of prospectus supplement for retail debt securities that includes more specific sample disclosure of the basic terms and features of an offering of such type of debt securities.  Additionally, please undertake to provide for staff review the preliminary prospectus supplement relating to any proposed debt offering pursuant to this registration statement that in the Company’s judgment materially differs in basic features and terms from those included in the form of prospectus supplement for retail debt securities prior to the commencement of any such debt offering.

 

Response:       The Company has filed as correspondence herewith as Exhibit A a form of prospectus supplement for retail debt securities in response to your comment.  The Company believes that this form includes likely features and terms to be included in a

 



 

Securities and Exchange Commission

June 5, 2014

Page 3

 

 

prospectus supplement for retail debt securities if and when the Company determines to issue such debt securities. Of course, the specific terms of such securities issued may differ from those set forth in the form of prospectus supplement.  Additionally, the Company undertakes to provide for Staff review prior to offering the preliminary prospectus supplement relating to any proposed debt offering pursuant to this registration statement that in the Company’s judgment materially differs in basic features and terms from those included in the form of prospectus supplement for retail debt securities.

 

 

Part C — Other Information

 

 

Item 25.(2) Exhibits

 

4.     Comment:         Please expand the disclosure appearing at the top of the exhibits index section starting on page C-2 to affirm that the Company has included the additional specific disclosures of material information regarding material contractual provisions in the agreements filed by exhibit to the registration statement. In addition, please supplementally explain the genesis of the disclosure and why it is included. Please provide references to other registration statements filed with the Securities and Exchange Commission that include similar disclosure.

 

 

Response:       The Company has revised the referenced disclosure in response to your comment to reflect that the Company is responsible for considering, and has considered, whether it is necessary to include any additional specific disclosures of material information regarding material contractual provisions.

 

 

The disclosure is included to help investors understand the complete context in which the terms of an agreement included or incorporated by reference as exhibits to the Registration Statement should be evaluated while acknowledging the Company’s responsibility to ensure disclosures regarding material contractual provisions are not misleading as required by Exchange Act Release No. 51283 (March 1, 2005).  The Company acknowledges that the referenced disclosure is more commonly included among non-investment company registrants in their Exchange Act filings, such as Form 10-Ks, Form 10-Qs and Form 8-Ks.  The Company notes, however, that such non-investment company registrants are allowed forward incorporation by reference into their registration statements for their Exchange Act filings, and thus the disclosure is automatically incorporated into their registration statements.  Registered investment companies and business development companies, on the other hand, cannot forward incorporate by

 



 

Securities and Exchange Commission

June 5, 2014

Page 4

 

 

reference Exchange Act filings into their registration statements.  Therefore, the Company believes that it is appropriate to include such disclosure for a business development company.

 

The Company respectfully directs the Staff to the filings of USA Synthetic Fuel Corp., Amendment No. 1 to Registration Statement (Form S-3/A) (May 9, 2014); Empire Resorts, Inc., Amendment No. 2 to Registration Statement (Form S-3/A) (Feb. 11, 2014); Chiquita Brands Int’l, Inc., Amendment No. 1 to Registration Statement (Form (S-3/A) (Dec. 23, 2013); Prospect Capital Corp., Pre-Effective Amendment No. 1 to Registration Statement (Form N-2/A) (Oct. 11, 2013); and BlackRock Preferred Partners LLC, Post-Effective Amendment No. 2 to Registration Statement (Form POS-EX) (July 27, 2012) as a few examples of registration statements that include similar disclosure. The Company further advises the Staff that similar disclosure has been accepted by the Staff in previous comment letters so long as registrants include an acknowledgment similar to that which is included by the Company on page C-3. Please see LI3 Energy, Inc., SEC Staff Comment Letter (Feb. 27, 2012) (publicly available Apr. 16, 2012); Perfumania Holdings, Inc., SEC Staff Comment Letter (Feb. 17, 2012) (publicly available Apr. 30, 2012); and Newcastle Investment Corp., SEC Staff Comment Letter (Aug. 5, 2010) (publicly available Nov. 23, 2010).

 

5.     Comment:         File as an exhibit, in a pre-effective amendment to the registration statement, the form of statement of preferences, or similar document, that the Holding Company anticipates entering into in respect of its issuance of preferred stock.  Additionally, please file as correspondence on EDGAR a form of prospectus supplement for preferred stock that includes more specific sample disclosure of the basic terms and features of an offering of such type of securities.

 

Response:       The Company has included as an exhibit to the Registration Statement a form of certificate of designation in response to your comment.  The Company has also filed as correspondence herewith as Exhibit B a form of prospectus supplement for preferred stock in response to your comment.  The Company believes that such forms include likely features and terms to be included in a certificate of designation or prospectus supplement, as applicable, if and when the Company determines to issue preferred stock. Of course, the specific terms of preferred stock issued may differ from those set forth in the form of certificate of designation and/or prospectus supplement, as applicable.

 



 

Securities and Exchange Commission

June 5, 2014

Page 5

 

 

The Holding Company and the Operating Company acknowledge that:

 

1.         the Holding Company and the Operating Company are responsible for the adequacy and accuracy of the disclosure in the filing;

 

 

2.         should the Securities and Exchange Commission (the “Commission”) or the staff, acting pursuant to delegated authority, declare the filing effective, it does not foreclose the Commission from taking any action with respect to the filing;

 

 

3.         the action of the Commission or the staff, acting pursuant to delegated authority, in declaring the filing effective, does not relieve the Holding Company and the Operating Company from their full responsibility for the adequacy and accuracy of the disclosure in the filing; and

 

 

4.         the Holding Company and the Operating Company may not assert this action as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

 

 

The Company intends to commence an offering promptly after the effective date of this Registration Statement and thereafter from time to time.

 

 

The Company has not and does not expect to submit an exemptive application or no-action request in connection with the Registration Statement.  If you have any questions or comments or require any additional information in connection with the above, please telephone the undersigned at (212) 735-2790 or Steven Grigoriou at (416) 777-4727.

 

 

 

Very truly yours,

 

 

 

 

/s/ Richard T. Prins

 

 

Richard T. Prins

 


 

EXHIBIT A

 

The information in this [preliminary] prospectus supplement is not complete and may be changed. A registration statement relating to these securities has been filed with and declared effective by the Securities and Exchange Commission. This [preliminary] prospectus supplement is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED             , 201

 

[FORM OF [PRELIMINARY] PROSPECTUS SUPPLEMENT TO BE USED IN CONJUNCTION WITH FUTURE RETAIL DEBT SECURITIES OFFERINGS](1)

 

[PRELIMINARY] PROSPECTUS SUPPLEMENT
(To Prospectus dated                 , 201   )

 

GRAPHIC

 

% [Insert ranking] Notes due

 

$

 


 

We are a holding company (the “Holding Company”) with no direct operations of our own, and currently our only business and sole asset is our ownership of all of the common limited partner interests in Special Value Continuation Partners, LP (the “Operating Company”), which represents approximately         % of the common equity and        % of the combined common and preferred equity interests of the Operating Company as of         , 201  . We and the Operating Company are externally managed, closed-end, non-diversified management investment companies that have elected to be treated as business development companies under the Investment Company Act of 1940 (the “1940 Act”). Our and the Operating Company’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. Both we and the Operating Company seek to achieve this investment objective primarily through investments in debt securities of middle-market companies. Our primary investment focus is investing in and originating of leveraged loans to performing middle-market companies.

 

Tennenbaum Capital Partners, LLC (the “Advisor”) serves as our and the Operating Company’s investment advisor. The Advisor is a leading investment manager and specialty lender to middle-market companies that had in excess of $        billion in capital commitments from investors (“committed capital”) under management as

 


(1)         In addition to the sections outlined in this form of prospectus supplement, each prospectus supplement actually used in connection with an offering conducted pursuant to the registration statement to which this form of prospectus supplement is attached will be updated to include such other information as may then be required to be disclosed therein pursuant to applicable law or regulation as in effect as of the date of each such prospectus supplement, including, without limitation, information particular to the terms of each security offered thereby and any related risk factors or tax considerations pertaining thereto. This form of prospectus supplement is intended only to provide a rough approximation of the nature and type of disclosure that may appear in any actual prospectus supplement used for the purposes of offering securities pursuant to the registration statement to which this form of prospectus supplement is attached, and is not intended to and does not contain all of the information that would appear is any such actual prospectus supplement, and should not be used or relied upon in connection with any offer or sale of securities.

 



 

of           , 201   , approximately     % of which consists of our committed capital. SVOF/MM, LLC, an affiliate of the Advisor, is the Operating Company’s general partner and provides the administrative services necessary for us to operate.

 

We are offering $                  in aggregate principal amount of % notes due             , or the “Notes.” The Notes will mature on                             . We will pay interest on the Notes on            ,            ,            and            of each year, beginning on                 . In our sole discretion, we may redeem the Notes in whole or in part at any time or from time to time on or after              , at the redemption price set forth under “Specific Terms of the Notes and the Offering—Optional redemption” in this prospectus supplement. The Notes will be issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

 

The Notes will be our direct unsecured obligations and rank pari passu, or equally in right of payment, with all outstanding and future unsecured unsubordinated indebtedness issued by the Holding Company.

 

We intend to list the Notes on the                              , and expect trading in the Notes on           to begin within                  days of the original issue date under the symbol “                       .” The Notes are expected to trade “flat,” which means that purchasers will not pay, and sellers will not receive, any accrued and unpaid interest on the Notes that is not reflected in the trading price. Currently, there is no public market for the Notes.


 

You should read this prospectus supplement and the accompanying prospectus carefully before you invest in our securities. We may not sell any securities through agents, underwriters or dealers without delivery of the prospectus and a prospectus supplement describing the method and terms of the offering of such securities.

 

This prospectus supplement and the accompanying prospectus contain important information you should know before investing in our securities. Please read it carefully before you invest and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission (the “SEC”). A Statement of Additional Information, dated                   , 201   , containing additional information about the Holding Company and the Operating Company has been filed with the Securities and Exchange Commission and is incorporated by reference in its entirety into this prospectus supplement and the accompanying prospectus. The Advisor maintains a website at http://www.tennenbaumcapital.com and we make all of our annual, quarterly and current reports, proxy statements and other publicly filed information available, free of charge, on or through this website. You may also obtain free copies of our annual and quarterly reports, request a free copy of the Statement of Additional Information, the table of contents of which is on page       of the accompanying prospectus and make stockholder inquiries by contacting us at Tennenbaum Capital Partners, LLC, c/o Investor Relations, 2951 28th Street, Suite 1000, Santa Monica, California 90405 or by calling us collect at (310) 566-1094. The Securities and Exchange Commission maintains a website at http://www.sec.gov where such information is available without charge upon request. Information contained on our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus, and you should not consider information contained on our website to be part of this prospectus supplement or the accompanying prospectus.

 

The debt securities in which we typically invest are either rated below investment grade by independent rating agencies or would be rated below investment grade if such securities were rated by rating agencies. Below investment grade securities, which are often referred to as “hybrid securities,” “junk bonds” or “leveraged loans” are regarded as having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may be illiquid and difficult to value and typically do not require repayment of principal prior to maturity, which potentially heightens the risk that we may lose all or part of our investment.  In addition, a majority of the Operating Company’s debt investments include interest reset provisions that may make it more difficult for the borrowers to make debt repayments to the Operating Company if the reset provision has the effect of increasing the applicable interest rate.

 

Shares of closed-end investment companies, including business development companies, frequently trade at a discount from their net asset value. If our shares trade at a discount to our net asset value, it will likely increase the risk of loss for purchasers in the offerings. Investing in our securities involves a high degree of risk, including credit risk and the risk of the use of leverage. Before investing in our securities, you should read the discussion of the material risks of investing in the Company  in “Risks” beginning on page S-   of this prospectus supplement and on page                 of the accompanying prospectus.

 

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 



 

 

 

Per Unit

 

Total

 

Public offering price

 

$

 

 

$

 

 

Underwriting Discount

 

$

 

 

$

 

 

Proceeds, before expenses, to the Company (1)

 

$

 

 

$

 

 

 


(1)                                 We estimate that we will incur approximately $                 of expenses relating to this offering, resulting in net proceeds, after underwriting discount and expenses, to us of approximately $                   million.

 

Delivery of the Notes in book-entry form only through The Depository Trust Company will be made on or about                   , 201                          .

 

[We have granted the underwriters an option to purchase up to an additional $                 total aggregate principal amount of Notes offered hereby, to cover overallotments, if any, within    days of the date of this prospectus supplement. If the underwriters exercise this option in full, the total price to the public, sales load and net proceeds will be $              , $              , and $              , respectively. See “Underwriting.”]

 

THE NOTES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

 

Prospectus Supplement dated             , 201

 



 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

In addition to factors previously identified elsewhere in this prospectus supplement and the accompanying prospectus, including the “Risks” section of this prospectus supplement and the accompanying prospectus, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

 

·                  the introduction, withdrawal, success and timing of business initiatives and strategies;

 

·                  changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;

 

·                  the valuation of our investments in portfolio companies, particularly those having no liquid trading market;

 

·                  the relative and absolute investment performance and operations of the Advisor;

 

·                  the impact of increased competition;

 

·                  the impact of future acquisitions and divestitures;

 

·                  the unfavorable resolution of legal proceedings;

 

·                  our business prospects and the financial condition and prospects of our portfolio companies;

 

·                  the adequacy of our cash resources and working capital;

 

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

 

·                  the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us, the Advisor or our portfolio companies;

 

·                  the ability of the Advisor to identify suitable investments for us and to monitor and administer our investments;

 

·                  our contractual arrangements and relationships with third parties;

 

·                  any future financings and investments by us;

 

·                  the ability of the Advisor to attract and retain highly talented professionals;

 

·                  fluctuations in interest rates or foreign currency exchange rates; and

 

·                  the impact of changes to tax legislation and, generally, our tax position.

 

This prospectus supplement and the accompanying prospectus contain, and other statements that we may make may contain, forward-looking statements with respect to future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “potential,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.

 

Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to and do

 

i



 

not undertake to update forward-looking statements. These forward-looking statements do not meet the safe harbor for forward-looking statements pursuant to Section 27A of the Securities Act or Section 21E of the Securities Exchange Act. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.  Statistical and market data used in this prospectus has been obtained from governmental and independent industry sources and publications. We have not independently verified the data obtained from these sources. Forward-looking information obtained from these sources is subject to the same qualifications and the additional uncertainties regarding the other forward-looking statements contained in this prospectus, for which the safe harbor provided in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act is not available.

 

You should rely only on the information contained in this prospectus supplement, the accompanying prospectus and the Statement of Additional Information, or SAI, incorporated by reference in its entirety in the accompanying prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information in this prospectus supplement and the accompanying prospectus is accurate only as of the date on the front of this prospectus supplement and of the accompanying prospectus, respectively,  and the information in the SAI is accurate only as of its respective date. Our business, financial condition and prospects may have changed since that date. To the extent required by applicable law, we will update this prospectus supplement, the accompanying prospectus and the SAI during the offering period to reflect material changes to the disclosure herein.

 

ii



 

TABLE OF CONTENTS

 

PROSPECTUS SUPPLEMENT

 

PROSPECTUS SUMMARY

S-1

SPECIFIC TERMS OF THE NOTES AND THE OFFERING

S-4

SELECTED CONDENSED FINANCIAL DATA

S-8

RISK FACTORS

S-9

USE OF PROCEEDS

S-12

RATIO OF EARNINGS TO FIXED CHARGES

S-13

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

S-14

CAPITALIZATION

S-26

SUPPLEMENT TO MATERIAL U.S. FEDERAL TAX MATTERS

S-27

UNDERWRITING

S-31

LEGAL MATTERS

S-34

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

S-34

ADDITIONAL INFORMATION

S-34

INDEX TO FINANCIAL STATEMENTS

S-F-1

 

PROSPECTUS

 

[Insert table of contents from base prospectus]

 


 

PROSPECTUS SUMMARY

 

This summary highlights some of the information in this prospectus supplement. This summary is not complete and may not contain all of the information that you may want to consider before investing in the Notes. You should read the entire prospectus supplement, the accompanying prospectus, including “Risks,” and the Statement of Additional Information, dated                        , 201   (the “SAI”).

 

Throughout this prospectus supplement, unless the context otherwise requires, a reference to:

 

“Holding Company” refers to Special Value Continuation Fund, LLC, a Delaware limited liability company, for the periods prior to the consummation of the Conversion (as defined below) described elsewhere in this prospectus and to TCP Capital Corp. for the periods after the consummation of the Conversion;

 

“Operating Company” refers to Special Value Continuation Partners, LP, a Delaware limited partnership;

 

“TCPC Funding” refers to TCPC Funding I LLC, a Delaware limited liability company;

 

“TCPC SBIC” refers to TCPC SBIC, LP, a Delaware limited partnership;

 

“Advisor” refers to Tennenbaum Capital Partners, LLC, a Delaware limited liability company and the investment manager; and

 

“General Partner” and “Administrator” refer to SVOF/MM, LLC, a Delaware limited liability company, the general partner of the Operating Company and an affiliate of the Advisor and administrator of the Holding Company and the Operating Company.

 

For simplicity, this prospectus supplement uses the term “Company,” “we,” “us” and “our” to include the Holding Company and, where appropriate in the context, the Operating Company and TCPC Funding, on a consolidated basis. For example, (i) although all or substantially all of the net proceeds from this offering will be invested in the Operating Company and all or substantially all of the Holding Company’s investments will be made through the Operating Company, this prospectus supplement generally refers to the Holding Company’s investments through the Operating Company as investments by the “Company,” and (ii) although the Operating Company and TCPC Funding and not the Holding Company has entered into the Leverage Program (defined below), this prospectus supplement generally refers to the Operating Company’s use of the Leverage Program as borrowings by the “Company,” in all instances in order to make the operations and investment strategy easier to understand. The Holding Company and the Operating Company have the same investment objective and policies and the assets, liabilities and results of operations of the Holding Company are consolidated with those of the Operating Company as described in the accompanying prospectus under “Prospectus Summary—Operating and Regulatory Tax Structure.”

 

On April 2, 2012, we completed a conversion under which TCP Capital Corp. succeeded to the business of Special Value Continuation Fund, LLC and its consolidated subsidiaries, and the members of Special Value Continuation Fund, LLC became stockholders of TCP Capital Corp. In this prospectus supplement, we refer to such transactions as the “Conversion.” Unless otherwise indicated, the disclosure in this prospectus supplement gives effect to the Conversion.

 

The Company

 

We are an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. See the accompanying prospectus “Prospectus Summary— Company History and BDC Conversion.” We completed our initial public offering on April 10, 2012.

 

Our investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. We seek to achieve our investment objective primarily through

 

S-1



 

investments in debt securities of middle-market companies, which we typically define as those with enterprise values between $100 million and $1.5 billion. While we primarily focus on privately negotiated investments in debt of middle-market companies, we make investments of all kinds and at all levels of the capital structure, including in equity interests such as preferred or common stock and warrants or options received in connection with our debt investments. Our investment activities benefit from what we believe are the competitive advantages of the Advisor, including its diverse in-house skills, proprietary deal flow, and consistent and rigorous investment process focused on established, middle-market companies. We expect to generate returns through a combination of the receipt of contractual interest payments on debt investments and origination and similar fees, and, to a lesser extent, equity appreciation through options, warrants, conversion rights or direct equity investments. Substantially all of our operating history and performance results have been achieved through our predecessor, Special Value Continuation Fund, LLC, which was a registered investment company but was neither a business development company nor a publicly traded company. There are no material operating differences between us and our predecessor, however, as a BDC we are deemphasizing distressed debt investments. See “Prospectus Summary— Company History and BDC Conversion” in the accompanying prospectus.

 

To achieve our investment objectives, we intend to focus on a subset of the broader investment strategies historically pursued by the Advisor. Our primary investment focus is the ongoing origination of and investments in leveraged loans of performing middle-market companies. For the purposes of this prospectus supplement, the term “leveraged loans” refers to senior debt investments that rank ahead of subordinated debt and that generally have the benefit of security interests in the assets of the borrower.

 

Our investments generally range from $10 million to $35 million per company, the size of which may grow over time in proportion with our capital base. We expect to generate current returns through a combination of the receipt of contractual interest payments on debt investments and origination and similar fees, and, to a lesser extent, equity appreciation through options, warrants, conversion rights or direct equity investments. We often receive equity interests such as preferred or common stock and warrants or options in connection with our debt investments. From time to time we may also use other investment strategies, which are not our primary focus, to attempt to enhance the overall return of our portfolio. These investment strategies may include, but are not limited to, the purchase of discounted debt, opportunistic investments, and financial instruments to hedge currency or interest rate risk associated with our portfolio.

 

On April 22, 2014, our wholly-owned subsidiary, TCPC SBIC received a Small Business Investment Company (“SBIC”) license from the Small Business Administration (“SBA”). In anticipation of receiving an SBIC license, we have requested exemptive relief from the SEC to permit us to exclude the debt of TCPC SBIC guaranteed by the SBA from our 200% asset coverage test under the 1940 Act.  Pursuant to the 200% asset coverage ratio limitation, we are permitted to borrow one dollar for every dollar we have in assets less all liabilities and indebtedness not represented by debt securities issued by us or loans obtained by us. For example, as of December 31, 2013, we had approximately $550 million in assets less all liabilities and indebtedness not represented by debt securities issued by us or loans obtained by us, which would permit us to borrow up to approximately $550 million, notwithstanding other limitations on our borrowings pursuant to our Leverage Program.

 

If granted, the exemptive relief provides us with increased flexibility under the 200% asset coverage test by permitting TCPC SBIC to borrow up to $150 million more than it would otherwise be able to absent the receipt of this exemptive relief.  As a result, we, in effect, will be permitted to have a lower asset coverage ratio than the 200% asset coverage ratio limitation under the 1940 Act and, therefore, we can have more debt outstanding than assets to cover such debt. For example, we will be able to borrow up to $150 million more than the approximately $550 million permitted under the 200% asset coverage ratio limit as of December 31, 2013. For additional information on SBA regulations that affect our access to SBA-guaranteed debentures, see “Risk Factors — Risks Relating to Our Business — Our SBIC subsidiary is subject to SBA regulations, and any failure to comply with SBA regulations could have an adverse effect on our operations.”

 

The SBIC license allows TCPC SBIC to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA and other customary procedures. SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi-annually and have a ten year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, will have a superior claim to TCPC SBIC’s assets over our stockholders in the event we liquidate TCPC SBIC or the SBA exercises its remedies under the SBA-guaranteed debentures issued by TCPC SBIC upon an event of default.

 

As described in more detail in the accompanying prospectus under “Prospectus Summary— Company History and BDC Conversion,” we have no employees of our own and currently our only business and sole asset is the ownership of all of the common limited partner interests of the Operating Company. Our investment activities are externally managed by the Advisor. Additionally, the Holding Company expects that it will continue to seek to qualify as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code, or the Code.

 

As of               , 201  , we held investments in           portfolio companies. The aggregate fair value as of             , 201   of investments in these portfolio companies held on that date is approximately $            . Our portfolio across all our interest-bearing investments had an annualized current yield of          % as of                     , 201  .

 

Recent Developments

 

[Insert description of recent developments at time of offering.]

 

Company Information

 

Our administrative and executive offices are located at 2951 28th Street, Suite 1000, Santa Monica, CA 90405, and our telephone number is (310) 566-1094. The Advisor maintains a website at http://www.tennenbaumcapital.com. Information contained on this website is not incorporated by reference into this prospectus supplement or the accompanying prospectus, and you should not consider information contained on the Advisor’s website to be part of this prospectus supplement or the accompanying prospectus.

 

S-2



 

Presentation of Historical Financial Information

 

Unless otherwise indicated, historical references contained in this prospectus supplement and the accompanying prospectus, as applicable, in “— Selected Financial Data,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Senior Securities” and “Portfolio Companies” relate to the Holding Company and the Operating Company on a consolidated basis.

 

For further information please see the “Prospectus Summary” in the accompanying prospectus.

 

S-3



 

SPECIFIC TERMS OF THE NOTES AND THE OFFERING

 

This prospectus supplement sets forth certain terms of the Notes that we are offering pursuant to this prospectus supplement and supplements the accompanying prospectus that is attached to the back of this prospectus supplement. This section outlines the specific legal and financial terms of the Notes. You should read this section together with the more general description of the Notes in the accompanying prospectus under the heading “Description of Our Debt Securities” before investing in the Notes. Capitalized terms used in this prospectus supplement and not otherwise defined shall have the meanings ascribed to them in the accompanying prospectus.

 

Issuer

 

TCP Capital Corp.

 

 

 

Title of the securities

 

             % Notes due             

 

 

 

Initial aggregate principal amount being offered

 

$             

 

 

 

Overallotment option

 

The underwriters may also purchase from us up to an additional $                                   aggregate principal amount of Notes solely to cover overallotments, if any, within               days of the date of this prospectus supplement.

 

 

 

Initial public offering price

 

         % of the aggregate principal amount.

 

 

 

Principal payable at maturity

 

         % of the aggregate principal amount; the principal amount of each Note will be payable on its stated maturity date at the office of the Paying Agent, Registrar and Transfer Agent for the Notes or at such other office in New York City as we may designate.

 

 

 

Type of Note

 

Fixed rate note

 

 

 

Listing

 

We intend to list the Notes on the                          within                days of the original issue date under the symbol “              .”

 

 

 

Interest rate

 

         % per year

 

 

 

Day count basis

 

360-day year of twelve 30-day months

 

 

 

Original issue date

 

 

 

 

 

Stated maturity date

 

 

 

 

 

Date interest starts accruing

 

 

 

 

 

Interest payment dates

 

Each             ,                  ,                  and                commencing                          . If an interest payment date falls on a non-business day, the applicable interest payment will be made on the next business day and no additional interest will accrue as a result of such delayed payment.

 

 

 

Interest periods

 

The initial interest period will be the period from and including                          , to, but excluding, the initial interest payment date, and the subsequent interest periods will be the periods from and including an interest payment date to, but excluding, the next interest payment date or the stated maturity date, as the case may be.

 

 

 

Regular record dates for interest

 

Each            ,              ,                 and                      .

 

 

 

Specified currency

 

U.S. Dollars

 

S-4



 

Place of payment

 

New York City

 

 

 

Ranking of Notes

 

The Notes will be our direct unsecured obligations and will rank:

 

 

 

 

 

·      pari passu with our other outstanding and future senior unsecured indebtedness, including without limitation, [list outstanding amounts of various debt securities];

 

 

 

 

 

·      senior to any of our future indebtedness that expressly provides it is subordinated to the Notes;

 

 

 

 

 

·      effectively subordinated to all our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, including without limitation, the $                 million of borrowings under our Revolving Facilities [and $                 million of SBA-guaranteed debentures outstanding] as of                        ; and

 

 

 

 

 

·      structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Operating Company, TCPC Funding and TCPC SBIC.

 

 

 

Denominations

 

We will issue the Notes in denominations of $25 and integral multiples of $25 in excess thereof.

 

 

 

Business day

 

Each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York City are authorized or required by law or executive order to close.

 

 

 

Optional redemption

 

The Notes may be redeemed in whole or in part at any time or from time to time at our option on or after                     , upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price of 100% of the outstanding principal amount thereof plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to but not including the date fixed for redemption.

 

 

 

 

 

You may be prevented from exchanging or transferring the Notes when they are subject to redemption. In case any Notes are to be redeemed in part only, the redemption notice will provide that, upon surrender of such Note, you will receive, without a charge, a new Note or Notes of authorized denominations representing the principal amount of your remaining unredeemed Notes.

 

 

 

 

 

Any exercise of our option to redeem the Notes will be done

 

S-5



 

 

 

in compliance with the Investment Company Act of 1940, as amended, and the rules, regulations and interpretations promulgated thereunder, which we collectively refer to as the 1940 Act, to the extent applicable.

 

 

 

 

 

If we redeem only some of the Notes, the Trustee or DTC, as applicable, will determine the method for selection of the particular Notes to be redeemed, in accordance with the indenture governing the Notes, and in accordance with the rules of any national securities exchange or quotation system on which the Notes are listed. Unless we default in payment of the redemption price, on and after the date of redemption, interest will cease to accrue on the Notes called for redemption.

 

 

 

Sinking fund

 

The Notes will not be subject to any sinking fund.

 

 

 

Repayment at option of Holders

 

Holders will not have the option to have the Notes repaid prior to the stated maturity date.

 

 

 

Defeasance and covenant defeasance

 

The Notes are subject to defeasance by us.

 

 

 

 

 

The Notes are subject to covenant defeasance by us.

 

 

 

Form of Notes

 

The Notes will be represented by global securities that will be deposited and registered in the name of The Depository Trust Company, or DTC, or its nominee. Except in limited circumstances, you will not receive certificates for the Notes. Beneficial interests in the Notes will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Investors may elect to hold interests in the Notes through either DTC, if they are a participant, or indirectly through organizations which are participants in DTC.

 

 

 

Trustee, Paying Agent, Registrar and Transfer Agent

 

U.S. Bank National Association

 

 

 

Other covenants

 

In addition to the covenants described in the prospectus attached to this prospectus supplement, the following covenants shall apply to the Notes:

 

 

 

 

 

·      We agree that for the period of time during which the Notes are outstanding, we will not violate Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the U.S. Securities and Exchange Commission (the “SEC”).

 

 

 

 

 

·      If, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934 to file any periodic reports with the SEC, we agree to furnish to holders

 

S-6



 

 

 

of the Notes and the Trustee, for the period of time during which the Notes are outstanding, our audited annual consolidated financial statements, within                days of our fiscal year end, and unaudited interim consolidated financial statements, within                   days of our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with applicable United States generally accepted accounting principles.

 

 

 

[Modification to Events of Default

 

The following event of default, as described in the accompanying prospectus, will not apply to the Notes:

 

 

 

 

 

·      Any class of debt securities has an asset coverage, as such term is defined in the 1940 Act, of less than 100 per centum on the last business day of each of twenty-four consecutive calendar months.]

 

 

 

Global Clearance and Settlement Procedures

 

Interests in the Notes will trade in DTC’s Same Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by DTC to be settled in immediately available funds. None of the issuer, the Trustee or the paying agent will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

 

 

 

Use of Proceeds

 

The net proceeds we receive from the sale of the $                 million aggregate principal amount of Notes in this offering will be $                     million [(or $                      million if the underwriters fully exercise their overallotment option), after deducting the underwriting discounts and commissions of $                    million [(or $                           million if the underwriters fully exercise their overallotment option)] payable by us and estimated offering expenses of approximately $                       payable by us.

 

 

 

 

 

We intend to use the net proceeds from this offering to reduce our borrowings outstanding under the Revolving Facilities, if any, and to make investments in portfolio companies in accordance with our investment objective and for other general corporate purposes, including payment of operating expenses. Pending investment, we may invest the remaining net proceeds of this offering primarily in cash, cash equivalents, U.S. Government securities and other high-quality debt investments that mature in one year or less. These securities may have lower yields than our other investments and accordingly may result in lower distributions, if any, during such period.

 

S-7


 

SELECTED CONDENSED FINANCIAL DATA

 

The selected consolidated financial and other data below reflects the consolidated historical operations of the Holding Company and the Operating Company. This consolidated financial and other data is the Holding Company’s historical financial and other data. The Operating Company will continue to be the Holding Company’s sole investment following the completion of this offering.

 

The selected consolidated financial data below for the years ended December 31, 201 , 201 , 201 , 20   and 20   has been derived from the consolidated financial statements that were audited by our independent registered public accounting firm. [Quarterly financial information is derived from unaudited financial data, but in the opinion of management, reflects all adjustments (consisting only of normal recurring adjustments) that are necessary to present fairly the results of such interim periods. Interim results at and for the                        and                         months ended                                                      , 201       are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 201                .] This selected financial data should be read in conjunction with our financial statements and related notes thereto, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Senior Securities” included elsewhere in this prospectus supplement and the accompanying prospectus.

 

The historical and future financial information may not be representative of the Company’s financial information in future periods.

 

 

 

For the Three Months Ended

 

 

 

 

 

March 31,

 

For the Year Ended December 31,

 

 

 

2014

 

2013

 

2013

 

2012

 

2011

 

2010

 

2009

 

Performance Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

 

 

$

 

 

$

66,979,064

 

$

49,243,332

 

$

42,113,358

 

$

32,410,819

 

$

26,678,140

 

Dividend income

 

 

 

 

 

 

1,811,189

 

10,610,159

 

13,547,924

 

 

Other income

 

 

 

 

 

2,629,982

 

1,138,238

 

2,134,159

 

1,842,469

 

417,533

 

Total investment income

 

 

 

 

 

69,609,046

 

52,192,759

 

54,857,676

 

47,801,212

 

27,095,673

 

Interest and credit agreement expenses

 

 

 

 

 

2,339,447

 

857,757

 

942,288

 

893,806

 

949,554

 

Investment advisory expense

 

 

 

 

 

8,820,229

 

6,908,942

 

6,787,188

 

6,787,188

 

6,787,188

 

Other expenses

 

 

 

 

 

4,119,108

 

4,105,700

 

1,520,474

 

1,213,685

 

1,426,099

 

Total expenses

 

 

 

 

 

15,278,784

 

11,872,399

 

9,249,950

 

8,894,679

 

9,162,841

 

Net investment income

 

 

 

 

 

54,330,262

 

40,320,360

 

45,607,726

 

38,906,533

 

17,932,832

 

Realized and unrealized gains (losses)

 

 

 

 

 

9,071,361

 

(12,784,251

)

(38,878,881

)

31,621,019

 

36,142,346

 

Dividends to preferred interest holders

 

 

 

 

 

(1,494,552

)

(1,602,799

)

(1,545,555

)

(1,519,759

)

(1,740,964

)

Distributions of incentive allocation

 

 

 

 

 

(12,381,416

)

 

 

 

 

Net increase (decrease) in net assets from operations

 

$

 

 

$

 

 

$

49,525,655

 

$

25,933,310

 

$

5,183,290

 

$

69,007,793

 

$

52,334,214

 

Per Share Data (at the end of the period):*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in net assets from operations

 

$

 

 

$

 

 

$

1.91

 

$

1.21

 

$

12.37

 

$

164.72

 

$

124.92

 

Distributions declared per share

 

 

 

 

 

(1.53

)

(1.43

)

(75.19

)

(89.99

)

(36.28

)

Average weighted shares outstanding for the period

 

 

 

 

 

25,926,493

 

21,475,847

 

418,956

 

418,956

 

418,956

 

 


*                 Per share amounts prior to the Conversion on April 2, 2012 are calculated based on 418,956 shares outstanding. Per share amounts subsequent to the Conversion are calculated on weighted-average shares outstanding for each period.

 

 

 

For the Three Months Ended

 

 

 

 

 

March 31,

 

For the Year Ended December 31,

 

 

 

2014

 

2013

 

2013

 

2012

 

2011

 

2010

 

2009

 

Assets and Liabilities Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

$

 

 

$

 

 

$

766,262,959

 

517,683,087

 

378,960,536

 

453,034,872

 

343,062,967

 

Other assets

 

 

 

 

 

37,066,243

 

31,559,015

 

24,492,967

 

20,604,286

 

119,642,507

 

Total assets

 

 

 

 

 

803,329,202

 

549,242,102

 

403,453,503

 

473,639,158

 

462,705,474

 

Amount drawn on credit facility

 

 

 

 

 

95,000,000

 

74,000,000

 

29,000,000

 

50,000,000

 

75,000,000

 

Other liabilities

 

 

 

 

 

23,045,112

 

24,728,267

 

2,116,211

 

25,050,178

 

20,431,955

 

Total liabilities

 

 

 

 

 

118,045,112

 

98,728,267

 

31,116,211

 

75,050,178

 

95,431,955

 

Preferred limited partner interests

 

 

 

 

 

134,504,252

 

134,526,285

 

134,466,418

 

134,377,869

 

134,368,337

 

Non-controlling interest

 

 

 

 

 

1,168,583

 

 

 

 

 

Net assets

 

$

 

 

$

 

 

$

549,611,255

 

$

315,987,550

 

$

237,870,874

 

$

264,187,584

 

$

232,879,791

 

Investment Activity Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No. of portfolio companies at period end

 

 

 

 

 

67

 

54

 

41

 

44

 

40

 

Acquisitions

 

$

 

 

$

 

 

$

471,087,319

 

$

359,020,926

 

$

237,870,874

 

$

262,837,727

 

$

144,313,178

 

Sales, repayments, and other disposals

 

$

 

 

$

 

 

$

235,641,665

 

$

211,216,033

 

$

216,916,444

 

$

192,419,667

 

$

195,383,341

 

Weighted-Average Yield on debt investments at end of period

 

 

%

 

%

10.9

%

11.3

%

14.2

%

13.1

%

12.5

%

 

 

S-8



 

RISK FACTORS

 

Investing in the Notes involves a high degree of risk. In addition to the other information contained in this prospectus supplement and the accompanying prospectus, you should carefully consider the following supplementary risk factors together with the risk factors set forth in the accompanying prospectus before making an investment in the Notes. The risks set out below and in the accompanying prospectus are not the only risks we face. Additional risks and uncertainties not presently known to us might also impair our operations and performance. If any of the events described herein or in the accompanying prospectus occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, our net asset value and the market price of the Notes could decline, and you may lose part or all of your investment.

 

Risks Relating to the Notes

 

The Notes will be unsecured and therefore will be effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.

 

The Notes will not be secured by any of our assets or any of the assets of our subsidiaries. As a result, the Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes. As of            , we had $              million of outstanding borrowings under our Leverage Program.

 

The Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

 

The Notes are obligations exclusively of the Holding Company and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future.  Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including trade creditors) and holders of preferred stock, if any, of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, the Notes will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or otherwise. As of                          , we had $              million borrowings outstanding under our Leverage Program. All of such indebtedness would be structurally senior to the Notes. In addition, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to the Notes.

 

The indenture under which the Notes will be issued will contain limited protection for holders of the Notes.

 

The indenture under which the Notes will be issued offers limited protection to holders of the Notes. The terms of the indenture and the Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have a material adverse impact on your investment in the Notes. In particular, the terms of the indenture and the Notes will not place any restrictions on our or our subsidiaries’ ability to:

 

·      issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed

 

S-9



by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the SEC;

 

·      pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, including subordinated indebtedness;

 

·      sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);

 

·      enter into transactions with affiliates;

 

·      create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;

 

·      make investments; or

 

·      create restrictions on the payment of dividends or other amounts to us from our subsidiaries.

 

Furthermore, the terms of the indenture and the Notes do not protect holders of the Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow or liquidity.

 

Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the Notes may have important consequences for you as a holder of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes or negatively affecting the trading value of the Notes.

 

Certain of our current debt instruments include more protections for their holders than the indenture and the Notes. See “Risk Factors — Risks related to our business — The creditors under the Revolving Facilities have a first claim on all of the Company’s assets included in the collateral for the Revolving Facilities.” in the accompanying prospectus. In addition, other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default.

 

There is no existing trading market for the Notes and, even if                    approves the listing of the Notes, an active trading market for the Notes may not develop, which could limit your ability to sell the Notes or affect the market price of the Notes.

 

The Notes will be a new issue of debt securities for which there initially will not be a trading market. We intend to list the Notes on the                            within                days of the original issue date under the symbol “              .” However, there is no assurance that the Notes will be approved for listing on                                     . Moreover, even if the listing of the Notes is approved, we cannot provide any assurances that an active trading market will develop for the Notes or that you will be able to sell your Notes. If the Notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, if any, general economic conditions, our financial condition, performance and prospects and other factors. The underwriters have advised us that they may make a market in the Notes, but they are not obligated to do so. The underwriters may discontinue any market-making in the Notes at any time at their sole discretion. Accordingly, we cannot assure you that the Notes will be approved for listing on               , that a liquid trading market will develop for the Notes, that you will be able to sell your Notes at a particular time or that the price you receive when you sell will be favorable. To the extent an active

 

S-10



 

trading market does not develop, the liquidity and trading price for the Notes may be harmed. Accordingly, you may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.

 

If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.

 

Any default under the agreements governing our indebtedness, including a default under the Revolving Facilities or other indebtedness to which we may be a party that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the Revolving Facilities or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders under the Revolving Facilities or other debt that we may incur in the future to avoid being in default. If we breach our covenants under the Revolving Facilities or other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default and our lenders or debt holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, including the lenders under the Revolving Facilities, could proceed against the collateral securing the debt. Because the Revolving Facilities have, and any future credit facilities will likely have, customary cross-default provisions, if the indebtedness thereunder or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due. See “Description of Our Debt Securities” in the accompanying prospectus.

 

[Insert additional risk factors applicable to the Notes and any additional relevant risk factors not included in the base prospectus to the extent required to be disclosed by applicable law or regulation.]

 

S-11



 

USE OF PROCEEDS

 

We estimate that the net proceeds from the sale of the $          million aggregate principal amount of Notes in this offering, after deducting estimated expenses of this offering payable by us, will be approximately $          million [(or $           million, if the over-allotment is exercised in full)] based on a public offering price of 100% of par.

 

We intend to use the net proceeds from this offering to reduce our borrowings outstanding under the Revolving Facilities, if any, and to make investments in portfolio companies in accordance with our investment objective and for other general corporate purposes, including payment of operating expenses. Pending investment, we may invest the remaining net proceeds of this offering primarily in cash, cash equivalents, U.S. Government securities and other high-quality debt investments that mature in one year or less. These securities may have lower yields than our other investments and accordingly may result in lower distributions, if any, during such period.

 

[Describe further use of proceeds and include any other relevant information to the extent required to be disclosed by applicable law or regulation.]

 

S-12



 

RATIO OF EARNINGS TO FIXED CHARGES

 

[Insert information required by Item 503(d) of Regulation S-K at time of offering.]

 

S-13


 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The information contained in this section should be read in conjunction with the selected financial data appearing elsewhere in this prospectus supplement and the accompanying prospectus and our consolidated financial statements and related notes thereto appearing elsewhere in this prospectus supplement and the accompanying prospectus.

 

Overview

 

The Holding Company is a Delaware corporation formed on April 2, 2012 and is an externally managed, closed-end, non-diversified management investment company. The Holding Company elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to seek to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. We invest primarily in the debt of middle-market companies, including senior secured loans, junior loans, mezzanine debt and bonds. Such investments may include an equity component, and, to a lesser extent, we may make equity investments directly. Investment operations are conducted either in Special Value Continuation Partners, LP, a Delaware Limited Partnership (the “Operating Company”), of which the Holding Company owns 100% of the common limited partner interests, or in one of the Operating Company’s wholly-owned subsidiaries, TCPC Funding I, LLC (“TCPC Funding”) and TCPC SBIC, LP (the “SBIC”). The Operating Company has also elected to be treated as a BDC under the 1940 Act. The General Partner of the Operating Company is SVOF/MM, LLC (“SVOF/MM”), which also serves as the administrator (“Administrator”) of the Holding Company and the Operating Company. The managing member of SVOF/MM is Tennenbaum Capital Partners, LLC (the “Advisor”), which serves as the investment manager to the Holding Company, the Operating Company, TCPC Funding, and the SBIC. Most of the equity interests in the General Partner are owned directly or indirectly by the Advisor and its employees.

 

The SBIC was organized as a Delaware limited partnership in June 2013. On April 22, 2014, the SBIC received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958.

 

The Holding Company has elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes. As a RIC, the Holding Company will not be taxed on its income to the extent that it distributes such income each year and satisfies other applicable income tax requirements. The Operating Company, TCPC Funding, and the SBIC have elected to be treated as partnerships for U.S. federal income tax purposes.

 

Our leverage program is comprised of $116 million in available debt under a senior secured revolving credit facility issued by the Operating Company (the “Operating Company Facility”), $150 million in available debt under a senior secured revolving credit facility issued by TCPC Funding, (the “TCPC Funding Facility,” and, together with the Operating Company Facility, the “Revolving Facilities”), and $134 million of outstanding preferred limited partner interests in the Operating Company (the “Preferred Interests,” and, together with the Revolving Facilities, the “Leverage Program”).

 

To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to our stockholders generally at least 90% of our investment company taxable income, as defined by the Internal Revenue Code of 1986, as amended, for each year. Pursuant to this election, we generally will not have to pay corporate level taxes on any income that we distribute to our stockholders provided that we satisfy those requirements.

 

Investments

 

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity, the general economic environment and the competitive environment for the types of investments we make.

 

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities and indebtedness of private U.S. companies, public U.S. operating companies whose securities are not listed on a national securities exchange or registered under the Securities Exchange Act of 1934, as amended, public domestic operating companies having a market capitalization of less than $250 million, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. We are also permitted to make certain follow-on investments in companies that were eligible portfolio companies at the time of initial investment but that no longer meet the definition. As of March 31, 2014, 88.3% of our total assets were invested in qualifying assets.

 

Revenues

 

We generate revenues primarily in the form of interest on the debt we hold. We also generate revenue from dividends on our equity interests and capital gains on the sale of warrants and other debt or equity interests that we acquire. Our investments in fixed income instruments generally have an expected maturity of three to five years, although we have no lower or upper constraint on maturity. Interest on our debt investments is generally payable quarterly or semi-annually. Payments of principal of our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some

 

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cases, our debt investments and preferred stock investments may defer payments of cash interest or dividends or PIK. Any outstanding principal amount of our debt investments and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of prepayment fees, commitment, origination, structuring or due diligence fees, fees for providing significant managerial assistance, consulting fees and other investment related income.

 

Expenses

 

Our primary operating expenses include the payment of a base management fee and, depending on our operating results, incentive compensation, expenses reimbursable under the management agreement, administration fees and the allocable portion of overhead under the administration agreement. The base management fee and incentive compensation remunerates the Advisor for work in identifying, evaluating, negotiating, closing and monitoring our investments. Our administration agreement with SVOF/MM, LLC (the “Administrator”) provides that the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to us under the administration agreement, as well as any costs and expenses incurred by the Administrator or its affiliates relating to any non-investment advisory, administrative or operating services provided by the Administrator or its affiliates to us. We also bear all other costs and expenses of our operations and transactions (and the Holding Company’s common stockholders indirectly bear all of the costs and expenses of the Holding Company, the Operating Company, TCPC Funding and the SBIC), which may include those relating to:

 

·                  our  organization;

 

·                  calculating our net asset value (including the cost and expenses of any independent valuation firms);

 

·                  interest payable on debt, if any, incurred to finance our investments;

 

·                  costs of future offerings of our common stock and other securities, if any;

 

·                  the base management fee and any incentive compensation;

 

·                  dividends and distributions on our preferred shares, if any, and common shares;

 

·                  administration fees payable under the administration agreement;

 

·                  fees payable to third parties relating to, or associated with, making investments;

 

·                  transfer agent and custodial fees;

 

·                  registration fees;

 

·                  listing fees;

 

·                  taxes;

 

·                  director fees and expenses;

 

·                  costs of preparing and filing reports or other documents with the SEC;

 

·                  costs of any reports, proxy statements or other notices to our stockholders, including printing costs;

 

·                  our fidelity bond;

 

·                  directors and officers/errors and omissions liability insurance, and any other insurance premiums;

 

·                  indemnification payments;

 

·                  direct costs and expenses of administration, including audit and legal costs; and

 

·                  all other expenses reasonably incurred by us and the Administrator in connection with administering our business, such as the allocable portion of overhead under the administration agreement, including rent and other allocable portions of the cost of certain of our officers and their respective staffs.

 

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The investment management agreement provides that the base management fee be calculated at an annual rate of 1.5% of our total assets (excluding cash and cash equivalents) payable quarterly in arrears. For purposes of calculating the base management fee, “total assets” is determined without deduction for any borrowings or other liabilities. The base management fee is calculated based on the value of our total assets (excluding cash and cash equivalents) at the end of the most recently completed calendar quarter.

 

Additionally, the investment management agreement and the Amended and Restated Limited Partnership Agreement provide that the Advisor or its affiliates may be entitled to incentive compensation under certain circumstances. The incentive compensation equals the sum of (1) 20% of all ordinary income since January 1, 2013 and (2) 20% of all net realized capital gains (net of any net unrealized capital depreciation) since January 1, 2013, with each component being subject to a total return requirement of 8% of contributed common equity annually. The incentive compensation is payable to the General Partner by the Operating Company pursuant to the Amended and Restated Limited Partnership Agreement. If the Operating Company is terminated or for any other reason incentive compensation is not paid by the Operating Company, it would be paid pursuant to the investment management agreement between us and the Advisor. The determination of incentive compensation is subject to limitations under the 1940 Act and the Advisers Act.

 

Critical accounting policies

 

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. Management considers the following critical accounting policies important to understanding the financial statements. In addition to the discussion below, our critical accounting policies are further described in the notes to our financial statements.

 

Valuation of portfolio investments

 

We value our portfolio investments at fair value based upon the principles and methods of valuation set forth in policies adopted by our board of directors. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Market participants are buyers and sellers in the principal (or most advantageous) market for the asset that (i) are independent of us, (ii) are knowledgeable, having a reasonable understanding about the asset based on all available information (including information that might be obtained through due diligence efforts that are usual and customary), (iii) are able to transact for the asset, and (iv) are willing to transact for the asset or liability (that is, they are motivated but not forced or otherwise compelled to do so).

 

Investments for which market quotations are readily available are valued at such market quotations unless the quotations are deemed not to represent fair value. We generally obtain market quotations from recognized exchanges, market quotation systems, independent pricing services or one or more broker-dealers or market makers. However, short term debt investments with remaining maturities within 90 days are generally valued at amortized cost, which approximates fair value. Debt and equity securities for which market quotations are not readily available, which is the case for many of our investments, or for which market quotations are deemed not to represent fair value, are valued at fair value using a consistently applied valuation process in accordance with our documented valuation policy that has been reviewed and approved by our board of directors, who also approve in good faith the valuation of such securities as of the end of each quarter. Due to the inherent uncertainty and subjectivity of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments and may differ materially from the values that we may ultimately realize. In addition, changes in the market environment and other events may have differing impacts on the market quotations used to value some of our investments than on the fair values of our investments for which market quotations are not readily available. Market quotations may be deemed not to represent fair value in certain circumstances where we believe that facts and circumstances applicable to an issuer, a seller or purchaser, or the market for a particular security cause current market quotations to not reflect the fair value of the security. Examples of these events could include cases where a security trades infrequently causing a quoted purchase or sale price to become stale, where there is a “forced” sale by a distressed seller, where market quotations vary substantially among market makers, or where there is a wide bid-ask spread or significant increase in the bid-ask spread.

 

The valuation process adopted by our board of directors with respect to investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value is as follows:

 

·                  The investment professionals of the Advisor provide recent portfolio company financial statements and other reporting materials to independent valuation firms approved by our board of directors.

 

·                  Such firms evaluate this information along with relevant observable market data to conduct independent appraisals each quarter, and their preliminary valuation conclusions are documented and discussed with senior management of the Advisor.

 

S-16



 

·                  The fair value of smaller investments comprising in the aggregate less than 5% of our total capitalization may be determined by the Advisor in good faith in accordance with our valuation policy without the employment of an independent valuation firm.

 

·                  The audit committee of the board of directors discusses the valuations, and the board of directors approves the fair value of each investment in our portfolio in good faith based on the input of the Advisor, the respective independent valuation firms (to the extent applicable) and the audit committee of the board of directors.

 

Those investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in determining the fair value of our investments include, as relevant and among other factors: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables, our principal market (as the reporting entity) and enterprise values.

 

When valuing all of our investments, we strive to maximize the use of observable inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances.

 

Our investments may be categorized based on the types of inputs used in their valuation. The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Investments are classified by GAAP into the three broad levels as follows:

 

Level 1 — Investments valued using unadjusted quoted prices in active markets for identical assets.

 

Level 2 — Investments valued using other unadjusted observable market inputs, e.g. quoted prices in markets that are not active or quotes for comparable instruments.

 

Level 3 — Investments that are valued using quotes and other observable market data to the extent available, but which also take into consideration one or more unobservable inputs that are significant to the valuation taken as a whole.

 

As of March 31, 2014, 0.1% of our investments were categorized as Level 1, 16.9% were categorized as Level 2, 81.8% were Level 3 investments valued based on valuations by independent third party sources, and 1.2% were Level 3 investments valued based on valuations by the Advisor.

 

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the financial statements.

 

Revenue recognition

 

Interest and dividend income, including income paid in kind, is recorded on an accrual basis to the extent that such amounts are determined to be collectible. Origination, structuring, closing, commitment and other upfront fees earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income received upon the early repayment of a loan or debt security are included in interest income.

 

Certain of our debt investments are purchased at a considerable discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. GAAP generally requires that discounts on the acquisition of corporate bonds, municipal bonds and treasury bonds be amortized using the effective-interest or constant-yield method. GAAP also requires that we consider the collectability of interest when making accruals.

 

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Accordingly, when accounting for purchase discounts, we recognize discount accretion income when it is probable that such amounts will be collected.

 

Net realized gains or losses and net change in unrealized appreciation or depreciation

 

We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Realized gains and losses are computed using the specific identification method. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

 

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Portfolio and investment activity

 

During the three months ended March 31, 2014, we invested approximately $110.4 million across 8 new and 3 existing portfolio companies. Of these investments, 99% were in senior secured debt comprised of senior loans ($97.1 million, or 88% of the total) and senior secured notes ($13.0 million, or 11% of the total). The remaining $0.3 million (1% of the total) were comprised of two equity investments and PIK payments received on investments in unsecured debt. Additionally, we received approximately $66.9 million in proceeds from sales or repayments of investments during the three months ended March 31, 2014.

 

At March 31, 2014, our investment portfolio of $815.7 million (at fair value) consisted of 70 portfolio companies and was invested 96% in debt investments, of which 99% was in senior secured debt and 1% in unsecured or subordinated debt. In aggregate, our investment portfolio was invested 77% in senior secured loans, 18% in senior secured notes, 1% in unsecured or subordinated debt, and 4% in equity investments. Our average portfolio company investment at fair value was approximately $11.7 million. Our largest portfolio company investment by value was approximately $29.9 million and our five largest portfolio company investments by value comprised approximately 13% of our portfolio at March 31, 2014. At December 31, 2013, our investment portfolio of $766.3 million (at fair value) consisted of 67 portfolio companies and was invested 95% in debt investments, of which 98% was in senior secured debt and 2% in unsecured or subordinated debt. In aggregate, our investment portfolio was invested 76% in senior secured loans, 17% in senior secured notes, 2% in unsecured or subordinated debt, and 5% in equity investments. Our average portfolio company investment at fair value was approximately $11.4 million. Our largest portfolio company investment by value was approximately $21.3 million and our five largest portfolio company investments by value comprised approximately 13% of our portfolio at December 31, 2013.

 

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The industry composition of our portfolio at fair value at March 31, 2014 was as follows:

 

 

 

Percent of Total

 

Industry

 

Investments

 

Computer Systems Design and Related Services

 

10.1

%

Software Publishers

 

7.2

%

Wireless Telecommunications

 

4.0

%

Newspaper, Periodical, Book, and Directory Publishers

 

3.8

%

Nondepository Credit Intermediation

 

3.2

%

Radio and Television Broadcasting

 

3.1

%

Wired Telecommunications Carriers

 

3.1

%

Scheduled Air Transportation

 

2.6

%

Communications Equipment Manufacturing

 

2.5

%

Nonscheduled Air Transportation

 

2.4

%

Retail

 

2.2

%

Advertising, Public Relations, and Related Services

 

2.2

%

Scientific Research and Development Services

 

2.2

%

Chemical Manufacturing

 

2.1

%

Electric Power Generation, Transmission and Distribution

 

2.1

%

Business Support Services

 

2.1

%

Electrical Equipment and Component Manufacturing

 

2.1

%

Activities Related to Real Estate

 

2.0

%

Textile Furnishings Mills

 

2.0

%

Professional, Scientific, and Technical Services

 

2.0

%

Full-Service Restaurants

 

1.9

%

Oil and Gas Extraction

 

1.9

%

Motion Picture and Video Industries

 

1.9

%

Structured Note Funds

 

1.9

%

Basic Chemical Manufacturing

 

1.8

%

Grocery Stores

 

1.8

%

Plastics Products Manufacturing

 

1.8

%

Other Telecommunications

 

1.7

%

Semiconductor and Other Electronic Component Manufacturing

 

1.7

%

Gaming Industries

 

1.7

%

Lessors of Real Estate

 

1.7

%

Insurance Carriers

 

1.4

%

Artificial Synthetic Fibers and Filaments Manufacturing

 

1.4

%

Fabricated Metal Product Manufacturing

 

1.3

%

Satellite Telecommunications

 

1.3

%

Nonresidential Building Construction

 

1.2

%

Specialty Hospitals

 

1.2

%

Merchant Wholesalers

 

1.1

%

Computer Equipment Manufacturing

 

1.1

%

Data Processing, Hosting, and Related Services

 

1.0

%

Beverage Manufacturing

 

1.0

%

Accounting, Tax Preparation, Bookkeeping, and Payroll Services

 

1.0

%

Other

 

4.2

%

Total

 

100.0

%

 

The weighted average effective yield of the debt securities in our portfolio was 10.8% at March 31, 2014 and 10.9% at December 31, 2013. The weighted average effective yields on our senior debt and other debt investments were 10.7% and 4.1%, respectively, at March 31, 2014, versus 10.9% and 13.1% at December 31, 2013.

 

At March 31, 2014, 73.4% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate, and 26.6% bore interest at fixed rates. The percentage of our floating rate debt investments that bore interest based on an interest rate floor was 92.5% at March 31, 2014. At December 31, 2013, 71.2% of our debt investments bore interest based on floating rates, and 28.8% bore interest at fixed rates. The percentage of our floating rate debt investments that bore interest based on an interest rate floor was 92.1% at December 31, 2013.

 

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Results of operations

 

Investment income

 

Investment income totaled $22.7 million and $16.9 million, respectively, for the three months ended March 31, 2014 and 2013, of which $19.7 million and $16.5 million were attributable to interest and fees on our debt investments, $2.0 million and $0.0 million to dividends from equity securities, and $1.0 million and $0.4 million to other income, respectively. The increase in investment income in the three months ended March 31, 2014 compared to the three months ended March 31, 2013 reflects an increase in interest income due to the larger investment portfolio and a higher percentage of the portfolio in income-producing assets in the three months ended March 31, 2014 compared to the three months ended March 31, 2013 and an increase in dividend income and other income.

 

Expenses

 

Total operating expenses for the three months ended March 31, 2014 and 2013 were $4.9 million and $2.9 million respectively, comprised of $2.9 million and $2.0 million in base management fees, $0.2 million and $0.1 million in legal and professional fees, $0.6 million and $0.2 million in interest expense and fees related to the Revolving Facilities, $0.4 million and $0.1 million in amortization of debt issuance costs, and $0.8 million and $0.5 million in other expenses, respectively. The increase in expenses in the three months ended March 31, 2014 compared to the three months ended March 31, 2013 primarily reflects the increase in management fees due to the larger portfolio and the increase in interest expense and other costs related to the increase in available and outstanding debt.

 

Net investment income

 

Net investment income was $17.8 million and $14.0 million respectively, for the three months ended March 31, 2014 and 2013. The increase in in net investment income in the three months ended March 31, 2014 compared to the three months ended March 31, 2013  primarily reflects the increased interest and dividend income in the three months ended March 31, 2014, partially offset by the increase in expenses.

 

Net realized and unrealized gain or loss

 

Net realized gains (losses) for the three months ended March 31, 2014 and 2013 were $(6.8) million and $0.5 million respectively. The net realized loss during the three months ended March 31, 2014 was due primarily to the disposition of our investment in ESP Holdings, Inc., an investment made prior to our initial public offering as part of our legacy distressed strategy. For the three months ended March 31, 2014 and 2013, the change in net unrealized appreciation was $12.0 million and $1.8 million, respectively.

 

Income tax expense, including excise tax

 

The Holding Company has elected to be treated as a RIC under Subchapter M of the Internal Revenue Code (“the Code”) and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, the Holding Company must, among other things, timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. The Holding Company has made and intends to continue to make the requisite distributions to its stockholders which will generally relieve the Holding Company from U.S. federal income taxes.

 

Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a 4% excise tax on such income. Any excise tax expense is recorded at yearend as such amounts are known. There was no U.S. federal excise tax recorded during the three months ended March 31, 2014 and 2013.

 

Dividends to preferred equity holders

 

Dividends on the Preferred Interests for the three months ended March 31, 2014 and 2013 were $0.4 million and $0.4 million, respectively, as average LIBOR rates for the two periods were similar.

 

Incentive compensation

 

Incentive compensation distributable to the General Partner for the three months ended March 31, 2014 and 2013 was $3.5 million and $2.7 million, respectively. Incentive compensation for the three months ended March 31, 2014 and 2013 was distributable due to our performance exceeding the total return threshold. The change in reserve for incentive compensation to the

 

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General Partner for the three months ended March 31, 2014 and 2013 was $1.0 million and $0.5 million, respectively. The change in reserve for incentive compensation for the three months ended March 31, 2014 and 2013 reflects the increase in the amount in excess of distributable incentive compensation which would have been earned by the General Partner had we liquidated at net asset value at March 31, 2014 and 2013, respectively.

 

Net increase or decrease in net assets resulting from operations

 

The net increase in net assets resulting from operations was $18.1 million and $12.8 million for the three months ended March 31, 2014 and 2013, respectively. The higher net increase in net assets resulting from operations for the three months ended March 31, 2014 compared to the three months ended March 31, 2013 primarily reflects the increase in net investment income and the increase in net realized and unrealized gains.

 

Liquidity and capital resources

 

Since our inception, our liquidity and capital resources have been generated primarily through the initial private placement of common shares of Special Value Continuation Fund, LLC (the predecessor entity) which were subsequently converted to common stock of the Holding Company, the net proceeds from the initial and secondary public offerings of our common stock, draws on our Leverage Program, and cash flows from operations, including investments sales and repayments and income earned from investments and cash equivalents. The primary uses of cash have been investments in portfolio companies, cash distributions to our equity holders, payments to service our Leverage Program and other general corporate purposes.

 

On May 17, 2013, the Leverage Program was expanded with the issuance of the TCPC Funding Facility. This facility is a senior secured revolving credit facility, pursuant to which amounts may be drawn up to $150 million subject to certain collateral and other restrictions. The facility is expandable to $200 million subject to the consent of the lender and other customary conditions.

 

Amounts outstanding and available under the combined Leverage Program at March 31, 2014 were as follows:

 

 

 

Rate *

 

Outstanding

 

Available

 

Total Facility

 

Operating Company Facility

 

L+44

 

$

82,000,000

 

$

34,000,000

 

$

116,000,000

 

TCPC Funding Facility

 

L+250

 

75,000,000

 

75,000,000

 

150,000,000

 

Preferred Interests

 

L+85

 

134,000,000

 

 

134,000,000

 

Total Leverage Program

 

 

 

$

291,000,000

 

$

109,000,000

 

$

400,000,000

 

 


* Based on either LIBOR or the lender’s cost of funds, subject to certain limitations.

 

Net cash used in operating activities during the three months ended March 31, 2014 was $43.7 million. Our primary use of cash in operating activities during this period consisted of the settlement of acquisitions of investments (net of dispositions) of $42.4 million, partially offset by net investment income less preferred dividends and incentive allocation (net of non-cash income and expenses) of approximately $1.3 million.

 

Net cash provided by financing activities was $47.8 million during the three months ended March 31, 2014, consisting primarily of $62.0 million of net draws under our Revolving Facilities, reduced by $13.0 million of dividends on common equity, $0.4 million of dividends on the Preferred Interests, and payment of $0.8 million in debt issuance costs.

 

At March 31, 2014, we had $27.1 million in cash and cash equivalents.

 

The Revolving Facilities are secured by substantially all of the assets in our portfolio, including cash and cash equivalents, and are subject to compliance with customary affirmative and negative covenants, including the maintenance of a minimum shareholders’ equity, the maintenance of a ratio of not less than 200% of total assets (less total liabilities other than indebtedness) to the sum of total preferred equity and indebtedness, and restrictions on certain payments and issuance of debt. Economic conditions, like those that began in 2007 and which have continued, may result in a decrease in the value of our investments, which would affect both the asset coverage ratios and the value of the collateral securing the Revolving Facilities, and may therefore impact our ability to borrow under the Revolving Facilities. In addition to regulatory restrictions that restrict our ability to raise capital, the Leverage Program contains various covenants which, if not complied with, could accelerate repayment under the Revolving Facilities or require redemption of the Preferred Interests, thereby materially and adversely affecting our liquidity, financial condition and results of operations. At March 31, 2014, we were in compliance with all financial and operational covenants required by the Leverage Program.

 

Unfavorable economic conditions, while potentially creating attractive opportunities for us, may decrease liquidity and raise the cost of capital generally, which could limit our ability to renew, extend or replace the Leverage Program on terms as favorable as

 

S-22



 

are currently included therein. If we are unable to renew, extend or replace the Leverage Program upon the various dates of maturity, we expect to have sufficient funds to repay the outstanding balances in full from our net investment income and sales of, and repayments of principal from, our portfolio company investments, as well as from anticipated debt and equity capital raises, among other sources. Unfavorable economic conditions may limit our ability to raise capital or the ability of the companies in which we invest to repay our loans or engage in a liquidity event, such as a sale, recapitalization or initial public offering. The Operating Company Facility matures in July 2016 and the Preferred Interests will be subject to mandatory redemption in July 2016. The TCPC Funding Facility matures in May 2017. Any inability to renew, extend or replace the Revolving Facilities or replace the Preferred Interests could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.

 

Challenges in the market are intensified for us by certain regulatory limitations under the Code and the 1940 Act. To maintain our qualification as a RIC, we must satisfy, among other requirements, an annual distribution requirement to pay out at least 90% of our ordinary income and short-term capital gains to our stockholders. Because we are required to distribute our income in this manner, and because the illiquidity of many of our investments may make it difficult for us to finance new investments through the sale of current investments, our ability to make new investments is highly dependent upon external financing. While we anticipate being able to continue to satisfy all covenants and repay the outstanding balance under the Leverage Program when due, there can be no assurance that we will be able to do so, which could lead to an event of default.

 

Contractual obligations

 

In addition to obligations under our Leverage Program, we have entered into several contracts under which we have future commitments. Pursuant to an investment management agreement, the Advisor manages our day-to-day operations and provides investment advisory services to us. Payments under the investment management agreement will be equal to a percentage of the value of our gross assets (excluding cash and cash equivalents) and an incentive compensation, plus reimbursement of certain expenses incurred by the Advisor. Under our administration agreement, the Administrator provides us with administrative services, facilities and personnel. Payments under the administration agreement are equal to an allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations to us, and may include rent and our allocable portion of the cost of certain of our officers and their respective staffs. We are responsible for reimbursing the Advisor for due diligence and negotiation expenses, fees and expenses of custodians, administrators, transfer and distribution agents, counsel and directors, insurance, filings and registrations, proxy expenses, expenses of communications to investors, compliance expenses, interest, taxes, portfolio transaction expenses, costs of responding to regulatory inquiries and reporting to regulatory authorities, costs and expenses of preparing and maintaining our books and records, indemnification, litigation and other extraordinary expenses and such other expenses as are approved by the directors as being reasonably related to our organization, offering, capitalization, operation or administration and any portfolio investments, as applicable. The Advisor is not responsible for any of the foregoing expenses and such services are not investment advisory services under the 1940 Act. Either party may terminate each of the investment management agreement and administration agreement without penalty upon not less than 60 days’ written notice to the other.

 

Distributions

 

Our quarterly dividends and distributions to common stockholders are recorded on the ex-dividend date. Distributions are declared considering our estimate of annual taxable income available for distribution to stockholders and the amount of taxable income carried over from the prior year for distribution in the current year. We do not have a policy to pay distributions at a specific level and expect to continue to distribute substantially all of our taxable income. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.

 

The following tables summarize dividends declared for the three months ended March 31, 2014 and March 31, 2013:

 

Date Declared

 

Record Date

 

Payment Date

 

Amount Per Share

 

Total
Amount

 

March 6, 2014

 

March 17, 2014

 

March 31, 2014

 

$

0.36

 

$

13,031,970

 

Total for three months ended March 31, 2014

 

 

 

 

 

$

0.36

 

$

13,031,970

 

 

 

 

 

 

 

 

 

 

 

March 7, 2013

 

March 18, 2013

 

March 29, 2013

 

$

0.40

*

$

8,591,051

 

Total for three months ended March 31, 2013

 

 

 

 

 

$

0.40

 

$

8,591,051

 

 


* Includes a special dividend of $0.05.

 

S-23



 

The following table summarizes the total shares issued in connection with our dividend reinvestment plan for the three months ended March 31, 2014 and 2013:

 

 

 

2014

 

2013

 

Shares Issued

 

104

 

1,104

 

Average Price Per Share

 

$

16.55

 

$

15.96

 

Proceeds

 

$

1,717

 

$

17,614

 

 

We have elected to be taxed as a RIC under Subchapter M of the Code. In order to maintain favorable RIC tax treatment, we must distribute annually to our stockholders 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 the assets legally available for distribution. In order to avoid certain excise taxes imposed on RICs, we must distribute during each calendar year an amount at least equal to the sum of:

 

·                  98% of our ordinary income (not taking into account any capital gains or losses) for the calendar year;

 

·                  98.2% of the amount by which our capital gains exceed our capital losses (adjusted for certain ordinary losses) for the one-year period generally ending on October 31 of the calendar year; and

 

·                  certain undistributed amounts from previous years on which we paid no U.S. federal income tax.

 

We may, at our discretion, carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. If we choose to do so, all other things being equal, this would increase expenses and reduce the amounts available to be distributed to our stockholders. We will accrue excise tax on estimated taxable income as required. 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 have adopted an “opt in” dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend or other distribution payable in cash, each stockholder that has not “opted in” to our dividend reinvestment plan will receive such dividends in cash, rather than having their dividends automatically reinvested in additional shares of our common stock.

 

We may not be able to achieve operating results that will allow us to make dividends and distributions at a specific level or to increase the amount of these dividends and distributions from time to time. Also, we may be limited in our ability to make dividends and distributions due to the asset coverage test applicable to us as a BDC under the 1940 Act and due to provisions in our existing and future credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of favorable RIC tax treatment. In addition, in accordance with U.S. generally accepted accounting principles and tax regulations, we include in income certain amounts that we have not yet received in cash, such as PIK interest, which represents contractual interest 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 and may be subject to an excise tax.

 

In order to satisfy the annual distribution requirement applicable to RICs, we have the ability to declare a large portion of a dividend in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash and certain requirements are met, the entire distribution would be treated as a dividend for U.S. federal income tax purposes.

 

Related Parties

 

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

 

·                  Each of the Holding Company, the Operating Company, TCPC Funding, and the SBIC has entered into an investment management agreement with the Advisor.

 

·                  The Administrator provides us with administrative services necessary to conduct our day-to-day operations. For providing these services, facilities and personnel, the Administrator may be reimbursed by us for expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our officers and the Administrator’s administrative staff and providing, at our request and on our behalf, significant managerial assistance to our portfolio companies to which we are required to provide such assistance.

 

S-24



 

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

 

·                  Pursuant to its limited partnership agreement, the general partner of the Operating Company is SVOF/MM, LLC. SVOF/MM, LLC is an affiliate of the Advisor and the general partners or managing member of certain other funds managed by the Advisor.

 

The Advisor and its affiliates, employees and associates currently do and in the future may manage other funds and accounts. The Advisor and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds or accounts. Accordingly, conflicts may arise regarding the allocation of investments or opportunities among us and those accounts. In general, the Advisor will allocate investment opportunities pro rata among us and the other funds and accounts (assuming the investment satisfies the objectives of each) based on the amount of committed capital each then has available. The allocation of certain investment opportunities in private placements is subject to independent director approval pursuant to the terms of the co-investment exemptive order applicable to us. In certain cases, investment opportunities may be made other than on a pro rata basis. For example, we may desire to retain an asset at the same time that one or more other funds or accounts desire to sell it or we may not have additional capital to invest at a time the other funds or accounts do. If the Advisor is unable to manage our investments effectively, we may be unable to achieve our investment objective. In addition, the Advisor may face conflicts in allocating investment opportunities between us and certain other entities that could impact our investment returns. While our ability to enter into transactions with our affiliates is restricted under the 1940 Act, we have received an exemptive order from the SEC permitting certain affiliated investments subject to certain conditions. As a result, we may face conflict of interests and investments made pursuant to the exemptive order conditions which could in certain circumstances affect adversely the price paid or received by us or the availability or size of the position purchased or sold by us.

 

Recent Developments

 

From April 1, 2014 through May 2, 2014, the Operating Company has invested approximately $58.2 million in six senior secured loans  with a combined effective yield of approximately 9.8%.

 

On April 22, 2014, the SBIC received a license from the SBA to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958.

 

On May 8, 2014, the Company’s board of directors declared a regular second quarter cash dividend of $0.36 per share and a $0.05 per share special dividend. Both dividends are payable on June 30, 2014 to stockholders of record as of the close of business on June 18, 2014.

 

Quantitative and qualitative disclosure about market risk

 

We are subject to financial market risks, including changes in interest rates. At March 31, 2014, 73.4% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate. The interest rates on such investments generally reset by reference to the current market index after one to six months. At March 31, 2014, the percentage of our floating rate debt investments that bore interest based on an interest rate floor was 92.5%. Floating rate investments subject to a floor generally reset by reference to the current market index after one to six months only if the index exceeds the floor.

 

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We assess our portfolio companies periodically to determine whether such companies will be able to continue making interest payments in the event that interest rates increase. There can be no assurances that the portfolio companies will be able to meet their contractual obligations at any or all levels of increases in interest rates.

 

Based on our March 31, 2014 balance sheet, the following table shows the annual impact on net income (excluding the related incentive compensation impact) of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure:

 

Basis Point Change

 

Interest income

 

Interest Expense

 

Net Income

 

Up 300 basis points

 

$

11,613,205

 

$

(8,730,000

)

$

2,883,205

 

Up 200 basis points

 

$

6,142,664

 

$

(5,820,000

)

$

322,664

 

Up 100 basis points

 

$

3,264,456

 

$

(2,910,000

)

$

354,456

 

Down 100 basis points

 

$

(128,955

)

$

681,231

 

$

552,276

 

Down 200 basis points

 

$

(128,955

)

$

681,231

 

$

552,276

 

Down 300 basis points

 

$

(128,955

)

$

681,231

 

$

552,276

 

 

S-25


 

CAPITALIZATION

 

The following table sets forth (1) our actual capitalization at                   , 201    and (2) our capitalization on a pro forma basis giving effect to the sale of $            aggregate principal amount of Notes in this offering at the assumed offering price of 100% of par. You should read this table together with “Use of Proceeds” in this prospectus supplement and the accompanying prospectus.

 

 

 

As of       , 201

 

 

 

Actual

 

Pro forma

 

Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

 

 

$

 

 

Investments

 

 

 

 

 

Other assets

 

 

 

 

 

Total assets

 

$

 

 

$

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Operating Company Facility(1)

 

$

 

 

$

 

 

TCPC Funding Facility(2)

 

 

 

 

 

The Notes

 

 

 

 

Other liabilities

 

 

 

 

 

Total liabilities

 

$

 

 

$

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred Interests,(3) $20,000/share liquidation preference; 6,700 shares authorized, 6,700 preferred interests issued and outstanding, actual; 6,700 preferred interests issued and outstanding, pro forma

 

$

 

 

$

 

 

Accumulated dividends on Preferred Interests

 

 

 

 

 

Common stock, par value $0.001 per share;                   shares of common stock authorized;                      stock issued and outstanding, actual;                      common stock issued and outstanding, pro forma

 

 

 

 

 

Preferred stock, par value $0.001 per share;               shares of preferred stock authorized;                  shares of preferred stock issued and outstanding, actual;             shares of preferred stock issued and outstanding, pro forma

 

 

 

 

 

Capital in excess of par value

 

 

 

 

 

Accumulated net investment income

 

 

 

 

 

Accumulated net realized losses

 

 

 

 

 

Accumulated net unrealized depreciation

 

 

 

 

 

Net assets applicable to common shareholders

 

$

 

 

$

 

 

 

 

 

 

 

 

Total capitalization

 

$

 

 

$

 

 

 


(1)         The above table reflects our liabilities under the Operating Company Facility as of                            , 201    . As of             , 201   , our debt outstanding under the Operating Company Facility was $                  million.

 

(2)         The above table reflects our liabilities under the TCPC Funding Facility as of                               , 201   . As of                      , 201   , our debt outstanding under the TCPC Funding Facility was $                     million.

 

(3)         Preferred Interests are a component of the $        million Leverage Program of the Operating Company.

 

S-26



 

SUPPLEMENT TO MATERIAL U.S. FEDERAL TAX MATTERS

 

The following summary of certain U.S. federal income tax considerations supplements the discussion set forth under the heading “Material U.S. Federal Income Tax Considerations” in the accompanying prospectus and is subject to the qualifications and assumptions set forth therein.

 

The following is a general summary of certain U.S. federal income tax considerations relating to the purchase, ownership and disposition of the Notes. This discussion is based upon the Code, Treasury Regulations and judicial decisions and administrative interpretations thereof, all as of the date hereof and all of which are subject to change or differing interpretations, possibly with retroactive effect. No ruling from the IRS has been sought regarding any matter discussed herein. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax aspects set forth below.

 

This discussion applies only to a holder of Notes that acquires the Notes for cash pursuant to this offering at the initial offering price and who holds the Notes as a capital asset (generally, property held for investment) under the Code. This discussion does not address any U.S. federal estate or gift tax consequences or any state, local or non-U.S. tax consequences. In addition, this discussion does not address all aspects of U.S. federal income taxation that may be applicable to investors in light of their particular circumstances, or to investors subject to special treatment under U.S. federal income tax law, including, but not limited to:

 

·      banks, insurance companies or other financial institutions;

 

·      persons subject to the alternative minimum tax;

 

·      cooperatives;

 

·      tax-exempt organizations;

 

·      dealers in securities;

 

·      traders in securities that elect a mark-to-market method of accounting;

 

·      “U.S. Noteholders” (as defined below) whose functional currency is not the U.S. dollar;

 

·      U.S. expatriates;

 

·      foreign persons or entities (except to the extent set forth below);

 

·      persons deemed to sell the Notes under the constructive sale provisions of the Code; or

 

·      persons that hold the Notes as part of a straddle, hedge, conversion transaction or other integrated investment.

 

If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) owns Notes, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partners in a partnership that owns Notes should consult their tax advisors as to the particular U.S. federal income tax consequences applicable to them.

 

We encourage investors to consult their tax advisors regarding the specific consequences of an investment in our Notes, including tax reporting requirements, the applicability of U.S. federal, state, local and non-U.S. tax laws, eligibility for the benefits of any applicable tax treaty and the effect of any possible changes in the tax laws.

 

S-27



 

Consequences to U.S. Noteholders

 

The following is a general summary of certain U.S. federal income tax consequences that will apply to you if you are a U.S. Noteholder. Certain U.S. federal income tax consequences to non-U.S. Noteholders are described under “Consequences to Non-U.S. Noteholders” below. For purposes of this summary, the term “U.S. Noteholder” means a beneficial owner of a Note that is, for U.S. federal income tax purposes (i) an individual who is a citizen or resident of the U.S., (ii) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, that is created or organized under the laws of the U.S., any of the States or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust (A) if a court within the U.S. is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of such trust, or (B) that has made a valid election to be treated as a U.S. person for U.S. federal income tax purposes.

 

Stated interest on the Notes

 

A U.S. Noteholder generally will be required to recognize stated interest as ordinary income at the time it is paid or accrued on the Notes in accordance with its regular method of accounting for U.S. federal income tax purposes. The Notes are not being issued with original issue discount for U.S. federal income tax purposes.

 

Sale, exchange, redemption or other taxable disposition of the Notes

 

Upon the sale, exchange, redemption or other taxable disposition of a Note, a U.S. Noteholder generally will recognize capital gain or loss in an amount equal to the difference between (1) the sum of cash plus the fair market value of all other property received on such disposition (except to the extent such cash or property is attributable to accrued but unpaid interest, which, to the extent not previously included in income, generally will be taxable as ordinary income) and (2) its adjusted tax basis in the Note. A U.S. Noteholder’s adjusted tax basis in a Note generally will equal the price the U.S. Noteholder paid for the Note. Such capital gain or loss will be long-term capital gain or loss if, at the time of such taxable disposition, the U.S. Noteholder has held the Note for more than one year. The deductibility of capital losses is subject to limitations.

 

Medicare Tax

 

Certain U.S. Noteholders who are individuals, estates or trusts and whose income exceeds certain thresholds will be required to pay a 3.8% Medicare tax on all or a portion of their interest and other investment income, including interest on the Notes and capital gains from the sale or other disposition of the Notes.

 

Consequences to Non-U.S. Noteholders

 

The following is a general summary of certain U.S. federal income tax consequences that will apply to you if you are a non-U.S. Noteholder. A beneficial owner of a Note that is not a partnership or other pass through entity for U.S. federal income tax purposes or a U.S. Noteholder is referred to herein as a “non-U.S. Noteholder.”

 

Stated interest on the Notes

 

Stated interest paid or accrued to a non-U.S. Noteholder will generally not be subject to U.S. federal income or withholding tax if the interest is not effectively connected with its conduct of a trade or business within the U.S., and the non-U.S. Noteholder:

 

·      does not own, actually or constructively, 10% or more of the total combined voting power of all classes of our stock entitled to vote;

 

·      is not a “controlled foreign corporation” with respect to which we are, directly or indirectly, a “related person;”

 

S-28



 

·      is not a bank whose receipt of interest on the Notes is described in section 881(c)(3)(A) of the Code; and

 

·      provides its name and address, and certifies, under penalties of perjury, that it is not a U.S. person (on a properly executed IRS Form W-8BEN or other applicable form), or holds its Notes through certain foreign intermediaries and satisfies the certification requirements of applicable Treasury Regulations.

 

If a non-U.S. Noteholder does not qualify for an exemption under these rules, interest income from the Notes may be subject to withholding tax at the rate of 30% (or lower applicable treaty rate). Stated interest that is effectively connected with a non-U.S. Noteholder’s conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment), however, would not be subject to a 30% withholding tax so long as the non-U.S. Noteholder provides us or our paying agent an adequate certification (currently on IRS Form W-8ECI); such payments of interest generally would be subject to U.S. federal income tax on a net basis at the rates applicable to U.S. persons generally. In addition, if a non-U.S. Noteholder is a foreign corporation and the stated interest is effectively connected with its conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment), it may also be subject to a 30% (or lower applicable treaty rate) branch profits tax on its effectively connected earnings and profits for the taxable year, subject to adjustments. To claim the benefit of a tax treaty, a non-U.S. Noteholder must provide a properly executed IRS Form W-8BEN (or other applicable form) to us or our paying agent before the payment of stated interest and may be required to obtain a U.S. taxpayer identification number and provide documentary evidence issued by foreign governmental authorities to prove residence in the foreign country.

 

Sale, exchange, redemption or other taxable disposition of the Notes

 

Any gain recognized by a non-U.S. Noteholder on the sale, exchange, redemption or other taxable disposition of the Notes (except with respect to accrued and unpaid interest, which would be taxed as described under “Consequences to Non-U.S. Noteholders—Stated interest on the Notes” above) generally will not be subject to U.S. federal income tax unless:

 

·      the non-U.S. Noteholder’s gain is effectively connected with its conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment); or

 

·      the non-U.S. Noteholder is a nonresident alien individual present in the U.S. for 183 or more days in the taxable year within which the sale, exchange, redemption or other disposition takes place and certain other requirements are met.

 

If a non-U.S. Noteholder is a holder described in the first bullet point above, the net gain derived from the sale, exchange, redemption or other taxable disposition of its Notes generally will be subject to U.S. federal income tax on a net basis at the rates applicable to U.S. persons generally. In addition, if such non-U.S. Noteholder is a foreign corporation, it may also be subject to a 30% (or lower applicable treaty rate) branch profits tax on its effectively connected earnings and profits for the taxable year, subject to adjustments. If a non-U.S. Noteholder is a holder described in the second bullet point above, it will be subject to a flat 30% U.S. federal income tax on the gain derived from the sale, exchange, redemption or other taxable disposition of its Notes, which may be offset by U.S. source capital losses, even though it is not considered a resident of the United States.

 

Non-U.S. Noteholders should consult any applicable income tax treaties that may provide for different rules. In addition, non-U.S. Noteholders are urged to consult their tax advisors regarding the tax consequences of the purchase, ownership and disposition of the Notes.

 

S-29



 

Information Reporting and Backup Withholding

 

U.S. Noteholders

 

Payments of principal and interest on, or the proceeds of the sale or other disposition of, a note are generally subject to information reporting unless the U.S. Noteholder is an exempt recipient (such as a corporation). Such payments may also be subject to U.S. federal backup withholding tax at the applicable rate if the recipient of such payment fails to supply a taxpayer identification number, certified under penalties of perjury, as well as certain other information or otherwise fails to establish an exemption from backup withholding. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against that U.S. Noteholder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS.

 

Non-U.S. Noteholders

 

A non-U.S. Noteholder may be required to comply with certain certification procedures to establish that the holder is not a U.S. person (as defined under the Code) in order to avoid backup withholding tax with respect to our payment of principal and interest on, or the proceeds of the sale or other disposition of, a Note. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against that non-U.S. Noteholder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS. In certain circumstances, the name and address of the beneficial owner and the amount of interest paid on a Note, as well as the amount, if any, of tax withheld, may be reported to the IRS. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which the non-U.S. Noteholder resides.

 

[Insert further disclosure regarding federal income tax consequences of an investment in the Notes to the extent required to be disclosed by applicable law or regulation.]

 

S-30



 

UNDERWRITING

 

and              are acting as joint book-running managers of the offering and as representatives of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement dated              , each underwriter named below severally agrees to purchase aggregate principal amount of Notes indicated in the following table:

 

Underwriters

 

Principal
Amount of
Notes

 

 

 

$

 

 

 

 

 

 

Total

 

$

 

 

 

The underwriters are committed to take and pay for all of the Notes being offered, if any are purchased, other than the Notes covered by the option described below.

 

[Overallotment Option

 

If the underwriters sell more Notes than the total number set forth in the table above, the underwriters have an option to buy up to an additional $              aggregate principal amount of the Notes solely to cover overallotments, if any. They may exercise that option for       days. If any Notes are purchased pursuant to this option, the underwriters will severally purchase such Notes in approximately the same proportion as set forth in the table above. ]

 

Commissions and Discounts

 

The following table shows the per Note and total underwriting discounts and commissions to be paid by us to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional Notes.

 

Paid by the Company

 

No Exercise

 

Full Exercise

 

Per Note

 

 

%

 

%

Total

 

$

 

 

$

 

 

 

Notes sold by the underwriters to the public will initially be offered at the public offering price set forth on the cover of this prospectus supplement and to certain dealers at a price less a concession not in excess of % of the aggregate principal amount of Notes. The underwriters may allow, and the dealers may reallow, a discount from the concession not in excess of      % of the aggregate principal amount of the Notes to certain broker dealers. If all the Notes are not sold at the public offering price, the representative may change the offering price and the other selling terms. The offering of the Notes by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.

 

We estimate that our share of the total expenses of the offering, excluding underwriting discounts, will be approximately $              .

 

We have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act.

 

S-31



 

[Lock-up Agreement

 

We have agreed not to directly or indirectly sell, offer to sell, enter into any agreement to sell, or otherwise dispose of, any debt securities issued by the Company which are substantially similar to the Notes or securities convertible into such debt securities which are substantially similar to the Notes for a period of              days after the date of this prospectus supplement without first obtaining the prior written consent of              and              .

 

The              —day restricted period described in the preceding paragraph will be automatically extended if: (1) during the last 17 days of the              —day restricted period we issue an earnings release or announce material news or a material event; or (2) prior to the expiration of the       —day restricted period, we announce that we will release earnings results during the 15-day period following the last day of the       —day restricted period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release of the announcement of the material news or material event. ]

 

Listing

 

The Notes are a new issue of securities with no established trading market. We intend to list the Notes on the                     and expect trading in the Notes on              to begin within              days after the original issue date under the symbol “       .” Currently there is no public market for the Notes and we can provide no assurance that the Notes will be approved for listing on              or that an active trading market will develop for the Notes.

 

We have been advised by the underwriters that they presently intend to make a market in the Notes after completion of the offering as permitted by applicable laws and regulations. The underwriters are not obligated, however, to make a market in the Notes and any such market-making may be discontinued at any time in the sole discretion of the underwriters without any notice. Accordingly, no assurance can be given as to the liquidity of, or development of a public trading market for, the Notes. If an active public trading market for the Notes does not develop, the market price and liquidity of the Notes may be adversely affected.

 

Price Stabilizations and Short Positions

 

In connection with the offering,              , on behalf of the underwriters, may purchase and sell Notes in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of Notes than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional Notes from us in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional Notes or purchasing Notes in the open market. In determining the source of Notes to close out the covered short position, the underwriters will consider, among other things, the price of Notes available for purchase in the open market as compared to the price at which they may purchase additional Notes pursuant to the option granted to them. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing Notes in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the Notes in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of Notes made by the underwriters in the open market prior to the completion of the offering.

 

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representative has repurchased Notes sold by or for the account of such underwriter in stabilizing or short covering transactions.

 

Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of our Notes, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the

 

S-32



 

market price of our Notes. As a result, the price of the Notes may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the              , in the over-the-counter market or otherwise.

 

Additional Underwriter Compensation

 

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for the Company, for which they received or will receive customary fees and expenses, including acting as underwriters for our securities offerings.

 

In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of the Company (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with the Company. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

 

[Certain of the net proceeds from the sale of the Notes, not including underwriting compensation, may be paid to affiliates of              and              as lenders under the Revolving Facilities.]

 

Settlement

 

We expect that delivery of the Notes will be made against payment therefor on or about       , which will be the [fifth] business day following the date of the pricing of the Notes (such settlement being herein referred to as “T+[5]”). Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes prior to the date of delivery hereunder will be required, by virtue of the fact that the Notes initially will settle in T+[5] business days, to specify an alternate settlement arrangement at the time of any such trade to prevent a failed settlement.

 

Electronic Delivery

 

The underwriters may make this prospectus supplement and accompanying prospectus available in an electronic format. The prospectus supplement and accompanying prospectus in electronic format may be made available on a website maintained by any of the underwriters, and the underwriters may distribute such documents electronically. The underwriters may agree with us to allocate a limited number of securities for sale to their online brokerage customers. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations.

 

Other Jurisdictions

 

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the Notes offered by this prospectus supplement in any jurisdiction where action for that purpose is required. The Notes offered by this prospectus supplement may not be offered or sold, directly or indirectly, nor may this prospectus supplement or any other offering material or advertisements in connection with the offer and sale of any such Notes be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus supplement comes are advised to inform themselves about and to observe any restriction relating to the offering and the distribution of this prospectus supplement. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell or a solicitation of an offer to buy the Notes offered by this prospectus supplement and the accompanying prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

 

The addresses of the underwriters are:                     .

 

S-33



 

LEGAL MATTERS

 

Certain legal matters in connection with the securities offered hereby have been passed upon for the Company by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, and for the underwriters by [Underwriters’ Counsel], [City, State].

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

is the independent registered public accounting firm for the Company.

 

ADDITIONAL INFORMATION

 

We have filed with the SEC a registration statement on Form N-2, together with all amendments and related exhibits, and the SAI, under the 1933 Act, with respect to the securities offered by this prospectus supplement. The registration statement contains additional information about us and the securities being registered by this prospectus supplement and the accompanying prospectus. This prospectus supplement and the accompanying prospectus do not contain all of the information set forth in the registration statement, including any exhibits and schedules it may contain. For further information concerning us or the securities we are offering, please refer to the registration statement. Statements contained in this prospectus supplement and the accompanying prospectus as to the contents of any contract or other document referred to describe the material terms thereof but are not necessarily complete and in each instance reference is made to the copy of any contract or other document filed as an exhibit to the registration statement. Each statement is qualified in all respects by this reference.

 

We file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Securities Exchange Act of 1934. You may obtain free copies of this information, request a free copy of the Statement of Additional Information, the table of contents of which is on page         of the accompanying prospectus and make stockholder inquiries by contacting us at Tennenbaum Capital Partners, LLC, c/o Investor Relations, 2951 28th Street, Suite 1000, Santa Monica, California 90405 or by calling us collect at (310) 566-1094.  You may also inspect and copy these reports, proxy statements and other information, as well as the registration statement of which the accompanying prospectus forms a part and the related exhibits and schedules, at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549-0102. In addition, the SEC maintains an Internet website that contains reports, proxy and information statements and other information filed electronically by us with the SEC at http://www.sec.gov.

 

No dealer, salesperson or other individual has been authorized to give any information or to make any representation other than those contained in this prospectus supplement and the accompanying prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by us or the underwriters. This prospectus supplement does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this prospectus supplement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in our affairs or that information contained herein is correct as of any time subsequent to the date hereof.

 

S-34


 

INDEX TO FINANCIAL STATEMENTS

 

TCP Capital Corp.

 

(successor to Special Value Continuation Fund, LLC)

 

Interim Financial Statements

 

Consolidated Statements of Assets and Liabilities as of March 31, 2014 (unaudited) and December 31, 2013

S-F-2

Consolidated Statements of Investments as of March 31, 2014 (unaudited) and December 31, 2013

S-F-3

Consolidated Statements of Operations for the three months ended March 31, 2014 (unaudited) and March 31, 2013 (unaudited)

S-F-15

Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2014 (unaudited) and year ended December 31, 2013

S-F-16

Consolidated Statements of Cash Flows for the three months ended March 31, 2014 (unaudited) and March 31, 2013 (unaudited)

S-F-17

Notes to Consolidated Financial Statements (unaudited)

S-F-18

Consolidated Schedule of Changes in Investments in Affiliates for the three months ended March 31, 2014 (unaudited) and year ended December 31, 2013

S-F-35

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers as of March 31, 2014 (unaudited) and December 31, 2013

S-F-37

Consolidating Statement of Assets and Liabilities as of March 31, 2014 (unaudited) and December 31, 2013

S-F-38

Consolidating Statement of Operations for the three months ended March 31, 2014 (unaudited) and March 31, 2013 (unaudited)

S-F-40

 

Special Value Continuation Partners, LP

 

Interim Financial Statements

 

Consolidated Statements of Assets and Liabilities as of March 31, 2014 (unaudited) and December 31, 2013

S-F-42

Consolidated Statements of Investments as of March 31, 2014 (unaudited) and December 31, 2013

S-F-43

Consolidated Statements of Operations for the three months ended March 31, 2014 (unaudited) and March 31, 2013 (unaudited)

S-F-55

Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2014 (unaudited) and year ended December 31, 2013

S-F-56

Consolidated Statements of Cash Flows for the three months ended March 31, 2014 (unaudited) and March 31, 2013 (unaudited)

S-F-57

Notes to Consolidated Financial Statements (unaudited)

S-F-58

Consolidated Schedule of Changes in Investments in Affiliates for the three months ended March 31, 2014 (unaudited) and year ended December 31, 2013

S-F-71

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers as of March 31, 2014 (unaudited) and December 31, 2013

S-F-73

 

S-F-1



 

TCP Capital Corp.

 

Consolidated Statements of Assets and Liabilities

 

 

 

March 31, 2014

 

December 31, 2013

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Investments, at fair value:

 

 

 

 

 

Companies less than 5% owned (cost of $741,804,363 and $684,569,508, respectively)

 

$

744,016,378

 

$

678,326,915

 

Companies 5% to 25% owned (cost of $54,759,445 and $73,946,547, respectively)

 

53,487,621

 

69,068,808

 

Companies more than 25% owned (cost of $41,985,865 and $42,588,724 respectively)

 

18,153,749

 

18,867,236

 

Total investments (cost of $838,549,673 and $801,104,779, respectively)

 

815,657,748

 

766,262,959

 

 

 

 

 

 

 

Cash and cash equivalents

 

27,141,436

 

22,984,182

 

Accrued interest income:

 

 

 

 

 

Companies less than 5% owned

 

8,279,978

 

6,282,353

 

Companies 5% to 25% owned

 

679,599

 

415,061

 

Companies more than 25% owned

 

38,519

 

41,691

 

Deferred debt issuance costs

 

3,360,310

 

2,969,085

 

Receivable for investments sold

 

1,031,717

 

3,605,964

 

Options (cost $51,750)

 

8,605

 

14,139

 

Prepaid expenses and other assets

 

1,184,123

 

753,768

 

Total assets

 

857,382,035

 

803,329,202

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Debt

 

157,000,000

 

95,000,000

 

Incentive allocation payable

 

3,486,403

 

3,318,900

 

Payable for investments purchased

 

1,514,602

 

14,706,942

 

Payable to the Investment Manager

 

463,629

 

1,121,108

 

Interest payable

 

332,040

 

430,969

 

Unrealized depreciation on swaps

 

300,684

 

331,183

 

Accrued expenses and other liabilities

 

2,915,706

 

3,136,010

 

Total liabilities

 

166,013,064

 

118,045,112

 

 

 

 

 

 

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

 

 

 

Preferred equity facility

 

 

 

 

 

Series A preferred limited partner interests in Special Value Continuation Partners, LP; $20,000/interest liquidation preference; 6,700 interests authorized, issued and outstanding

 

134,000,000

 

134,000,000

 

Accumulated dividends on Series A preferred equity facility

 

493,757

 

504,252

 

Total preferred limited partner interests

 

134,493,757

 

134,504,252

 

 

 

 

 

 

 

Non-controlling interest

 

 

 

 

 

General Partner interest in Special Value Continuation Partners, LP

 

2,204,587

 

1,168,583

 

 

 

 

 

 

 

Net assets applicable to common shareholders

 

$

554,670,627

 

$

549,611,255

 

 

 

 

 

 

 

Composition of net assets applicable to common shareholders

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized, 36,200,020 and 36,199,916 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively

 

36,200

 

36,200

 

Paid-in capital in excess of par

 

667,843,737

 

667,842,020

 

Accumulated net investment income

 

24,929,736

 

24,016,095

 

Accumulated net realized losses

 

(112,595,624

)

(105,800,278

)

Accumulated net unrealized depreciation

 

(23,338,835

)

(35,314,199

)

Non-controlling interest

 

(2,204,587

)

(1,168,583

)

Net assets applicable to common shareholders

 

$

554,670,627

 

$

549,611,255

 

 

 

 

 

 

 

Net assets per share

 

$

15.32

 

$

15.18

 

 

See accompanying notes.

 

S-F-2



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (92.87%)

 

 

 

 

 

 

 

 

 

Bank Debt (76.36%) (1)

 

 

 

 

 

 

 

 

 

Accounting, Tax Preparation, Bookkeeping, and Payroll Services (0.93%)

 

 

 

 

 

 

 

 

 

Expert Global Solutions, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 7.25% (Q),1.25% LIBOR Floor, due 4/3/18

 

$

694,441

 

$

699,603

 

$

679,684

 

0.08

%

Expert Global Solutions, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 11% (Q), 1.5% LIBOR Floor, due 10/3/18

 

$

7,434,877

 

7,235,805

 

7,174,657

 

0.85

%

Total Accounting, Tax Preparation, Bookkeeping, and Payroll Services

 

 

 

7,935,408

 

7,854,341

 

 

 

 

 

 

 

 

 

 

 

 

 

Activities Related to Real Estate (1.97%)

 

 

 

 

 

 

 

 

 

Greystone Select Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 8% (M), 1% LIBOR Floor, due 3/26/21

 

$

16,594,230

 

16,366,059

 

16,635,715

 

1.97

%

 

 

 

 

 

 

 

 

 

 

Advertising, Public Relations, and Related Services (2.15%)

 

 

 

 

 

 

 

 

 

Doubleplay III Limited, Senior Secured 1st Lien Facility A1 Term Loan, EURIBOR + 6.25% (Q), 1.25% EURIBOR Floor, due 3/18/18 - (United Kingdom) (4), (10)

 

$

13,165,705

 

16,495,992

 

18,082,540

 

2.15

%

 

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (0.24%)

 

 

 

 

 

 

 

 

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16 (2)

 

$

2,056,927

 

2,056,927

 

2,056,927

 

0.24

%

 

 

 

 

 

 

 

 

 

 

Basic Chemical Manufacturing (1.79%)

 

 

 

 

 

 

 

 

 

PeroxyChem, LLC, Senior Secured Term Loan, LIBOR + 6.5% (M), 1% LIBOR Floor, due 2/28/20

 

$

15,000,000

 

14,702,579

 

15,075,000

 

1.79

%

 

 

 

 

 

 

 

 

 

 

Business Support Services (1.76%)

 

 

 

 

 

 

 

 

 

STG-Fairway Acquisitions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.25% (Q), 1.25% LIBOR Floor, due 8/28/19

 

$

14,643,455

 

13,965,887

 

14,863,107

 

1.76

%

 

 

 

 

 

 

 

 

 

 

Chemical Manufacturing (2.08%)

 

 

 

 

 

 

 

 

 

Archroma, Senior Secured Lien Term Loan B, LIBOR + 8.25% (Q), 1.25% LIBOR Floor, due 9/30/18

 

$

17,412,500

 

17,088,698

 

17,499,563

 

2.08

%

 

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (1.79%)

 

 

 

 

 

 

 

 

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625% (Q), 1.25% LIBOR Floor, due 12/11/18 (2)

 

$

14,962,500

 

14,812,875

 

15,059,756

 

1.79

%

 

 

 

 

 

 

 

 

 

 

Computer Equipment Manufacturing (1.08%)

 

 

 

 

 

 

 

 

 

ELO Touch Solutions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 10.5% (Q), 1.5% LIBOR Floor, due 12/1/18

 

$

10,000,000

 

9,678,717

 

9,075,000

 

1.08

%

 

 

 

 

 

 

 

 

 

 

Converted Paper Products Manufacturing (0.42%)

 

 

 

 

 

 

 

 

 

Ranpak Corp., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1.25% LIBOR Floor, due 4/23/20

 

$

3,469,573

 

3,434,877

 

3,551,976

 

0.42

%

 

 

 

 

 

 

 

 

 

 

Computer Systems Design and Related Services (9.73%)

 

 

 

 

 

 

 

 

 

Autoalert, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 4.75 % (Q) Cash + 4% PIK, 0.25% LIBOR Floor, due 3/31/19

 

$

30,000,000

 

29,400,000

 

29,940,000

 

3.55

%

Blue Coat Systems, Inc., Senior Secured 1st Lien Revolver Term Loan, LIBOR + 3.5% (Q), 1% LIBOR Floor, due 5/31/18 (13)

 

$

 

(960,000

)

(441,060

)

(0.05

)%

Blue Coat Systems, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1% LIBOR Floor, due 6/28/20

 

$

15,000,000

 

14,878,125

 

15,581,250

 

1.85

%

Coreone Technologies, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 3.75% (Q) Cash + 5% PIK, 1% LIBOR Floor, due 9/4/18

 

$

13,726,261

 

13,412,993

 

13,643,903

 

1.62

%

OnX Enterprise Solutions, Ltd., Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

10,613,333

 

10,468,033

 

10,708,853

 

1.27

%

OnX USA, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

5,306,667

 

5,237,760

 

5,354,427

 

0.64

%

Websense, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1% LIBOR Floor, due 12/27/20

 

$

7,200,000

 

7,164,000

 

7,254,000

 

0.85

%

Total Computer Systems Design and Related Services

 

 

 

79,600,911

 

82,041,373

 

 

 

 

 

 

 

 

 

 

 

 

 

Electric Power Generation, Transmission and Distribution (2.07%)

 

 

 

 

 

 

 

 

 

Panda Sherman Power, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7.5% (Q), 1.5% LIBOR Floor, due 9/14/18

 

$

11,070,172

 

10,938,274

 

11,402,277

 

1.35

%

Panda Temple Power II, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q), 1.25% LIBOR Floor, due 4/3/19

 

$

5,892,970

 

5,834,041

 

6,062,393

 

0.72

%

Total Electric Power Generation, Transmission and Distribution

 

 

 

16,772,315

 

17,464,670

 

 

 

 

 

 

 

 

 

 

 

 

 

Electrical Equipment and Component Manufacturing (1.99%)

 

 

 

 

 

 

 

 

 

Palladium Energy, Inc., 1st Lien Senior Secured Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 12/26/17

 

$

16,500,317

 

16,239,377

 

16,739,572

 

1.99

%

 

 

 

 

 

 

 

 

 

 

Electrical Equipment Manufacturing (0.82%)

 

 

 

 

 

 

 

 

 

API Technologies Corp., Senior Secured 1st Lien Term Loan, LIBOR + 7.5% (M), 1.5% LIBOR Floor, due 2/6/18

 

$

6,947,590

 

6,878,114

 

6,912,852

 

0.82

%

Financial Investment Activities (0.70%)

 

 

 

 

 

 

 

 

 

Marsico Capital Management, Senior Secured 1st Lien Term Loan, LIBOR + 5% (M), due 12/31/22 (11)

 

$

10,606,841

 

13,355,425

 

5,939,831

 

0.70

%

 

S-F-3



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Freight Transportation Arrangement (0.44%)

 

 

 

 

 

 

 

 

 

Livingston International, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/18/20 (10)

 

$

3,665,217

 

$

3,599,623

 

$

3,724,777

 

0.44

%

 

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (1.87%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18 (2)

 

$

5,164,796

 

5,164,796

 

1,402,242

 

0.17

%

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

1,422,456

 

1,394,868

 

1,422,456

 

0.17

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/21/16 (2)

 

$

3,647,717

 

3,647,717

 

3,647,717

 

0.43

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

7,087,612

 

7,087,612

 

7,087,612

 

0.84

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

2,232,131

 

2,194,774

 

2,232,131

 

0.26

%

Total Full-Service Restaurants

 

 

 

19,489,767

 

15,792,158

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming Industries (1.66%)

 

 

 

 

 

 

 

 

 

AP Gaming I, LLC, Senior Secured 1st Lien Revolver Term Loan, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 12/20/18 (13)

 

$

 

(1,000,000

)

(984,375

)

(0.12

)%

AP Gaming I, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 12/20/20

 

$

14,962,500

 

14,523,696

 

14,962,500

 

1.78

%

Total Gaming Industries

 

 

 

13,523,696

 

13,978,125

 

 

 

 

 

 

 

 

 

 

 

 

 

Grocery Stores (1.78%)

 

 

 

 

 

 

 

 

 

Bashas, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 9.35% (M), 1.5% LIBOR Floor, due 12/28/15

 

$

14,781,475

 

14,740,030

 

15,003,197

 

1.78

%

 

 

 

 

 

 

 

 

 

 

Insurance Carriers (1.39%)

 

 

 

 

 

 

 

 

 

Acrisure, LLC, 2nd Lien Additional Notes, LIBOR + 10.5% (Q), 1% LIBOR Floor, due 3/7/20

 

$

680,363

 

564,204

 

674,555

 

0.08

%

Acrisure, LLC, 2nd Lien Notes, LIBOR + 10.5% (Q), 1% LIBOR Floor, due 3/7/20

 

$

11,051,757

 

10,832,378

 

11,040,705

 

1.31

%

Total Insurance Carriers

 

 

 

11,396,582

 

11,715,260

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Related Activities (0.76%)

 

 

 

 

 

 

 

 

 

Confie Seguros Holding II Co., 2nd Lien Term Loan, LIBOR + 9% (M), 1.25% LIBOR Floor, due 5/8/19

 

$

6,341,809

 

6,249,086

 

6,397,332

 

0.76

%

 

 

 

 

 

 

 

 

 

 

Merchant Wholesalers (1.09%)

 

 

 

 

 

 

 

 

 

Envision Acquisition Company, LLC, 2nd Lien Term Loan, LIBOR + 8.75% (M), 1% LIBOR Floor, due 11/4/21

 

$

9,079,011

 

8,897,430

 

9,158,452

 

1.09

%

 

 

 

 

 

 

 

 

 

 

Motion Picture and Video Industries (1.82%)

 

 

 

 

 

 

 

 

 

CORE Entertainment, Inc., Senior Secured 1st Lien Term Loan, 9%, due 6/21/17

 

$

9,462,231

 

9,386,095

 

8,421,386

 

1.00

%

CORE Entertainment, Inc., Senior Secured 2nd Lien Term Loan, 13.5%, due 6/21/18

 

$

7,569,785

 

7,505,822

 

6,933,923

 

0.82

%

Total Motion Picture and Video Industries

 

 

 

16,891,917

 

15,355,309

 

 

 

 

 

 

 

 

 

 

 

 

 

Newspaper, Periodical, Book, and Directory Publishers (3.64%)

 

 

 

 

 

 

 

 

 

Hanley-Wood, LLC, 1st Lien FILO Term Loan, LIBOR + 6.75% (Q), 1.25% LIBOR Floor, due 7/15/18

 

$

16,561,400

 

16,561,400

 

16,420,628

 

1.95

%

MediMedia USA, Inc., 1st Lien Revolver, LIBOR + 6.75% (M), due 5/20/18

 

$

5,270,000

 

4,107,500

 

4,833,908

 

0.57

%

MediMedia USA, Inc., 1st Lien Term Loan, LIBOR + 6.75% (M), 1.25% LIBOR Floor, due 11/20/18

 

$

9,676,875

 

9,420,314

 

9,434,953

 

1.12

%

Total Newspaper, Periodical, Book, and Directory Publishers

 

 

 

30,089,214

 

30,689,489

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonresidential Building Construction (1.20%)

 

 

 

 

 

 

 

 

 

NCM Group Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 11.5% (Q), 1% LIBOR Floor, due 8/29/18

 

$

10,000,000

 

9,620,619

 

10,145,000

 

1.20

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (2.11%)

 

 

 

 

 

 

 

 

 

One Sky Flight, LLC, Senior Secured 2nd Lien Term Loan, 12% Cash + 3% PIK, due 6/3/19

 

$

18,243,983

 

16,984,017

 

17,742,274

 

2.11

%

 

 

 

 

 

 

 

 

 

 

Oil and Gas Extraction (1.83%)

 

 

 

 

 

 

 

 

 

Willbros Group, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.25% LIBOR Floor, due 8/7/19

 

$

15,246,603

 

14,876,555

 

15,443,512

 

1.83

%

 

 

 

 

 

 

 

 

 

 

Other Telecommunications (1.67%)

 

 

 

 

 

 

 

 

 

Securus Technologies, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/30/21

 

$

14,000,000

 

13,860,000

 

14,072,940

 

1.67

%

 

 

 

 

 

 

 

 

 

 

Petroleum and Coal Products Manufacturing (0.46%)

 

 

 

 

 

 

 

 

 

Boomerang Tube, LLC, 2nd Lien Term Loan, LIBOR + 9.5% (Q), 1.5% LIBOR Floor, due 10/11/17

 

$

3,987,092

 

3,902,548

 

3,887,415

 

0.46

%

 

S-F-4



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Professional, Scientific, and Technical Services (1.91%)

 

 

 

 

 

 

 

 

 

ConvergeOne Holdings, 1st Lien Term Loan, LIBOR + 8% (Q), 1.25% LIBOR Floor, due 5/8/19

 

$

16,112,709

 

$

15,930,795

 

$

16,112,709

 

1.91

%

 

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (2.94%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q) Cash + 4% PIK, 2% LIBOR Floor, due 8/3/16

 

$

7,014,361

 

6,678,521

 

6,856,537

 

0.82

%

The Tennis Channel, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 8.5% (Q), due 5/29/17

 

$

17,771,217

 

17,344,546

 

17,842,301

 

2.12

%

Total Radio and Television Broadcasting

 

 

 

24,023,067

 

24,698,838

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail (2.10%)

 

 

 

 

 

 

 

 

 

Kenneth Cole Productions, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 10.40% (M), 1% LIBOR Floor, due 9/25/17

 

$

11,000,000

 

10,796,475

 

11,055,000

 

1.31

%

Shopzilla, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.5% (Q), due 3/31/16

 

$

6,710,057

 

6,584,026

 

6,699,991

 

0.79

%

Total Retail

 

 

 

17,380,501

 

17,754,991

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.40%)

 

 

 

 

 

 

 

 

 

Aircraft Secured Mortgages - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL, 8%, due 3/15/17 (6)

 

$

268,686

 

268,686

 

275,740

 

0.03

%

N918DL, 8%, due 8/15/18 (6)

 

$

369,976

 

369,976

 

379,440

 

0.05

%

N954DL, 8%, due 3/20/19 (6)

 

$

493,667

 

493,667

 

504,730

 

0.06

%

N955DL, 8%, due 6/20/19 (6)

 

$

513,363

 

513,363

 

524,620

 

0.06

%

N956DL, 8%, due 5/20/19 (6)

 

$

512,024

 

512,024

 

523,430

 

0.06

%

N957DL, 8%, due 6/20/19 (6)

 

$

517,853

 

517,853

 

529,210

 

0.06

%

N959DL, 8%, due 7/20/19 (6)

 

$

523,634

 

523,634

 

534,990

 

0.06

%

N960DL, 8%, due 10/20/19 (6)

 

$

545,211

 

545,211

 

556,410

 

0.07

%

N961DL, 8%, due 8/20/19 (6)

 

$

538,309

 

538,309

 

549,780

 

0.07

%

N976DL, 8%, due 2/15/18 (6)

 

$

373,436

 

373,436

 

383,520

 

0.05

%

Aircraft Secured Mortgages - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA, 20%, due 10/26/16 (2)

 

$

305,802

 

305,802

 

370,358

 

0.04

%

N512UA, 20%, due 10/26/16 (2)

 

$

311,984

 

311,984

 

380,048

 

0.05

%

N536UA, 16%, due 9/29/14 (2)

 

$

69,373

 

69,373

 

71,630

 

0.01

%

N545UA, 16%, due 8/29/15 (2)

 

$

214,325

 

214,325

 

233,415

 

0.03

%

N585UA, 20%, due 10/25/16 (2)

 

$

366,316

 

366,316

 

446,310

 

0.05

%

N659UA, 12%, due 2/28/16 (6)

 

$

2,439,123

 

2,439,123

 

2,635,667

 

0.31

%

N661UA, 12%, due 5/4/16 (6)

 

$

2,619,284

 

2,619,284

 

2,862,717

 

0.34

%

Total Scheduled Air Transportation

 

 

 

10,982,366

 

11,762,015

 

 

 

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (1.64%)

 

 

 

 

 

 

 

 

 

Isola USA Corporation, Senior Secured Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 11/29/18

 

$

14,492,188

 

14,285,320

 

14,854,492

 

1.76

%

SunEdison, Inc., Senior Secured Letters of Credit, 3.75%, due 2/28/17 (12), (13)

 

$

 

(1,031,717

)

(1,031,717

)

(0.12

)%

Total Semiconductor and Other Electronic Component Manufacturing

 

 

 

13,253,603

 

13,822,775

 

 

 

 

 

 

 

 

 

 

 

 

 

Software Publishers (6.91%)

 

 

 

 

 

 

 

 

 

Acronis International GmbH, 1st Lien Term Loan, LIBOR + 9.5% (Q), 1% LIBOR Floor, due 2/21/17 - (Switzerland) (10)

 

$

13,628,929

 

13,363,718

 

13,676,630

 

1.62

%

BlackLine Systems, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 0.4% (Q) Cash + 7.6% PIK, 1.5% LIBOR Floor, due 9/25/18

 

$

12,818,762

 

12,050,059

 

12,440,609

 

1.48

%

Deltek, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.75% (Q), 1.25% LIBOR Floor, due 10/10/19

 

$

15,000,000

 

14,811,452

 

15,324,975

 

1.82

%

Edmentum, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 5/17/19

 

$

16,500,000

 

16,271,792

 

16,788,750

 

1.99

%

Total Software Publishers

 

 

 

56,497,021

 

58,230,964

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.59%)

 

 

 

 

 

 

 

 

 

UBC Healthcare Analytics, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 7/1/18

 

$

4,933,947

 

4,909,278

 

4,958,617

 

0.59

%

Support Activities for Mining (0.00%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

McDermott International, Inc., Bridge Facility Commitment

 

$

 

 

 

 

 

S-F-5



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

Principal

 

 

 

 

 

Percent of

 

 

 

Amount or

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Textile Furnishings Mills (1.96%)

 

 

 

 

 

 

 

 

 

Lexmark Carpet Mills, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 10% (Q),

 

 

 

 

 

 

 

 

 

1% LIBOR Floor, due 9/30/18

 

$

16,351,467

 

$

15,942,680

 

$

16,523,158

 

1.96

%

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.83%)

 

 

 

 

 

 

 

 

 

Integra Telecom Holdings, Inc., 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1.25% LIBOR

 

 

 

 

 

 

 

 

 

Floor, due 2/22/20

 

$

15,000,000

 

14,709,735

 

15,390,000

 

1.83

%

 

 

 

 

 

 

 

 

 

 

Wireless Telecommunications Carriers (3.84%)

 

 

 

 

 

 

 

 

 

Alpheus Communications, LLC, Senior Secured 1st Lien Delayed Draw FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18 (13)

 

$

 

(11,183

)

(7,874

)

 

Alpheus Communications, LLC, Senior Secured 1st Lien FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18

 

$

8,248,124

 

8,166,127

 

8,190,387

 

0.97

%

Globalive Wireless Management Corp., Senior Secured 1st Lien Term Loan, LIBOR + 10.9% (Q), due 4/30/14 - (Canada) (10)

 

$

3,037,292

 

2,933,872

 

3,067,665

 

0.36

%

Gogo, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 6/21/17

 

$

19,461,356

 

18,587,291

 

21,115,572

 

2.51

%

Total Wireless Telecommunications Carriers

 

 

 

29,676,107

 

32,365,750

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Bank Debt

 

 

 

636,810,398

 

643,577,280

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Corporate Debt Securities (16.51%)

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (1.10%)

 

 

 

 

 

 

 

 

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16 (2), (5)

 

$

9,268,000

 

7,586,317

 

9,268,000

 

1.10

%

 

 

 

 

 

 

 

 

 

 

Beverage Manufacturing (1.00%)

 

 

 

 

 

 

 

 

 

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18 (5)

 

$

7,780,000

 

7,780,000

 

8,441,300

 

1.00

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.90%)

 

 

 

 

 

 

 

 

 

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19 (5)

 

$

7,098,916

 

6,960,435

 

7,560,346

 

0.90

%

 

 

 

 

 

 

 

 

 

 

Fabricated Metal Product Manufacturing (1.31%)

 

 

 

 

 

 

 

 

 

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16 (5), (7)

 

$

12,500,000

 

12,322,875

 

11,000,000

 

1.31

%

 

 

 

 

 

 

 

 

 

 

Lessors of Real Estate (1.60%)

 

 

 

 

 

 

 

 

 

Hunt Companies, Inc., Senior Secured Notes, 9.625%, due 3/1/21 (5)

 

$

13,084,000

 

12,922,359

 

13,476,520

 

1.60

%

 

 

 

 

 

 

 

 

 

 

Nondepository Credit Intermediation (3.07%)

 

 

 

 

 

 

 

 

 

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19 - (Cayman Islands) (5), (8), (10)

 

$

10,000,000

 

9,829,350

 

10,850,000

 

1.29

%

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18 (5), (10)

 

$

15,084,000

 

15,084,000

 

15,084,000

 

1.78

%

Total Nondepository Credit Intermediation

 

 

 

24,913,350

 

25,934,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Plastics Products Manufacturing (1.72%)

 

 

 

 

 

 

 

 

 

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18 (5)

 

$

13,600,000

 

13,600,000

 

14,478,995

 

1.72

%

 

 

 

 

 

 

 

 

 

 

Retail (0.01%)

 

 

 

 

 

 

 

 

 

Shop Holding LLC, Convertible Promissory Note, 5%, due 8/5/15 (5)

 

$

73,140

 

73,140

 

71,494

 

0.01

%

 

 

 

 

 

 

 

 

 

 

Satellite Telecommunications (1.25%)

 

 

 

 

 

 

 

 

 

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19 (5), (7), (10)

 

$

9,914,000

 

9,914,000

 

10,576,999

 

1.25

%

 

 

 

 

 

 

 

 

 

 

Scientific Research and Development Services (2.14%)

 

 

 

 

 

 

 

 

 

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17 (5)

 

$

17,200,000

 

16,536,295

 

18,060,000

 

2.14

%

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.61%)

 

 

 

 

 

 

 

 

 

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17 (5)

 

$

5,000,000

 

5,000,000

 

5,150,000

 

0.61

%

 

 

 

 

 

 

 

 

 

 

Structured Note Funds (1.80%)

 

 

 

 

 

 

 

 

 

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21 - (Cayman Islands) (5), (10)

 

$

15,000,000

 

15,000,000

 

15,147,000

 

1.80

%

 

 

 

 

 

 

 

 

 

 

Total Other Corporate Debt Securities

 

 

 

132,608,771

 

139,164,654

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Debt Investments

 

 

 

769,419,169

 

782,741,934

 

 

 

 

S-F-6


 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (3.91%)

 

 

 

 

 

 

 

 

 

Business Support Services (0.26%)

 

 

 

 

 

 

 

 

 

Findly Talent, LLC, Membership Units (3), (5)

 

708,229

 

$

230,938

 

$

162,185

 

0.02

%

STG-Fairway Holdings, LLC, Class A Units (3), (5)

 

841,479

 

943,287

 

1,990,939

 

0.24

%

Total Business Support Services

 

 

 

1,174,225

 

2,153,124

 

 

 

 

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (0.59%)

 

 

 

 

 

 

 

 

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units (2), (3), (5)

 

5,000,000

 

5,000,000

 

5,000,000

 

0.59

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.11%)

 

 

 

 

 

 

 

 

 

Anacomp, Inc., Class A Common Stock (3), (5), (6)

 

1,255,527

 

26,711,048

 

891,424

 

0.11

%

 

 

 

 

 

 

 

 

 

 

Depository Credit Intermediation (0.06%)

 

 

 

 

 

 

 

 

 

Doral Financial Corporation, Common Stock - (Puerto Rico) (3), (10), (12)

 

53,890

 

11,699,417

 

467,763

 

0.06

%

 

 

 

 

 

 

 

 

 

 

Financial Investment Activities (0.00%)

 

 

 

 

 

 

 

 

 

Marsico Holdings, LLC, Common Interest Units (3), (5), (11)

 

168,698

 

172,694

 

25,305

 

 

 

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (0.00%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Membership Units (2), (3), (5)

 

13,161,000

 

2,010,777

 

 

 

 

 

 

 

 

 

 

 

 

 

Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing (0.00%)

 

 

 

 

 

 

 

 

 

Precision Holdings, LLC, Class C Membership Interests (3), (5)

 

33

 

 

7,397

 

 

 

 

 

 

 

 

 

 

 

 

Nonmetallic Mineral Mining and Quarrying (0.19%)

 

 

 

 

 

 

 

 

 

EPMC HoldCo, LLC, Membership Units (2), (5)

 

1,312,720

 

 

1,562,137

 

0.19

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (0.17%)

 

 

 

 

 

 

 

 

 

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,843

 

1,274,000

 

1,412,078

 

0.17

%

 

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (0.04%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Warrants to Purchase Common Stock (3), (5)

 

233,470

 

300,322

 

357,209

 

0.04

%

 

 

 

 

 

 

 

 

 

 

Retail (0.06%)

 

 

 

 

 

 

 

 

 

Shop Holding, LLC, Class A Units (3), (5)

 

507,167

 

480,049

 

476,628

 

0.06

%

Shop Holding, LLC, Warrants to Purchase Class A Units (3), (5)

 

326,691

 

 

17,834

 

 

Total Electronic Shopping

 

 

 

480,049

 

494,462

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.11%)

 

 

 

 

 

 

 

 

 

Equipment Trusts - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL Trust Beneficial Interests (5), (6)

 

795

 

94,231

 

123,930

 

0.01

%

N918DL Trust Beneficial Interests (5), (6)

 

673

 

105,629

 

141,270

 

0.02

%

N954DL Trust Beneficial Interests (5), (6)

 

636

 

126,797

 

69,190

 

0.01

%

N955DL Trust Beneficial Interests (5), (6)

 

618

 

127,179

 

112,710

 

0.01

%

N956DL Trust Beneficial Interests (5), (6)

 

623

 

118,190

 

108,290

 

0.01

%

N957DL Trust Beneficial Interests (5), (6)

 

618

 

128,014

 

109,140

 

0.01

%

N959DL Trust Beneficial Interests (5), (6)

 

614

 

128,843

 

109,990

 

0.01

%

N960DL Trust Beneficial Interests (5), (6)

 

602

 

132,148

 

109,140

 

0.01

%

N961DL Trust Beneficial Interests (5), (6)

 

610

 

131,332

 

103,700

 

0.01

%

N976DL Trust Beneficial Interests (5), (6)

 

709

 

108,697

 

102,862

 

0.01

%

Equipment Trusts - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA Trust Beneficial Interests (2), (5)

 

56

 

211,477

 

453,896

 

0.05

%

N512UA Trust Beneficial Interests (2), (5)

 

56

 

206,766

 

446,071

 

0.05

%

N536UA Trust Beneficial Interests (2), (5)

 

86

 

424,460

 

526,943

 

0.06

%

N545UA Trust Beneficial Interests (2), (5)

 

71

 

371,557

 

632,959

 

0.08

%

N585UA Trust Beneficial Interests (2), (5)

 

56

 

229,521

 

465,546

 

0.06

%

United N659UA-767, LLC (N659UA) (5), (6)

 

439

 

2,197,988

 

2,950,833

 

0.35

%

United N661UA-767, LLC (N661UA) (5), (6)

 

426

 

2,161,205

 

2,961,015

 

0.35

%

Total Scheduled Air Transportation

 

 

 

7,004,034

 

9,527,485

 

 

 

 

 

 

 

 

 

 

 

 

 

Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing (0.09%)

 

 

 

 

 

 

 

 

 

KAGY Holding Company, Inc., Series A Preferred Stock (2), (3), (5)

 

9,778

 

1,091,200

 

721,467

 

0.09

%

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (0.03%)

 

 

 

 

 

 

 

 

 

AIP/IS Holdings, LLC, Membership Units (3), (5)

 

352

 

 

229,504

 

0.03

%

 

 

 

 

 

 

 

 

 

 

Software Publishers (0.06%)

 

 

 

 

 

 

 

 

 

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,232,731

 

522,678

 

530,074

 

0.06

%

 

S-F-7



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.14%)

 

 

 

 

 

 

 

 

 

Integra Telecom, Inc., Common Stock (3), (5)

 

1,274,522

 

$

8,433,884

 

$

5,586,951

 

0.67

%

Integra Telecom, Inc., Warrants (3), (5)

 

346,939

 

19,920

 

186,275

 

0.02

%

V Telecom Investment S.C.A., Common Shares - (Luxembourg) (3), (4), (5), (10)

 

1,393

 

3,236,256

 

3,763,159

 

0.45

%

Total Wired Telecommunications Carriers

 

 

 

11,690,060

 

9,536,385

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Equity Securities

 

 

 

69,130,504

 

32,915,814

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments

 

 

 

838,549,673

 

815,657,748

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents (3.22%)

 

 

 

 

 

 

 

 

 

Wells Fargo & Company, Overnight Repurchase Agreement, 0.03%,

 

 

 

 

 

 

 

 

 

Collateralized by Freddie Mac Note

 

 

 

 

 

 

$

16,373,605

 

1.95

%

Union Bank of California, Commercial Paper, 0.10%, due 4/1/14

 

 

 

 

 

 

6,000,000

 

0.71

%

Cash Denominated in Foreign Currencies

 

 

 

 

 

 

121,879

 

0.01

%

Cash Held on Account at Various Institutions

 

 

 

 

 

 

4,645,952

 

0.55

%

Cash and Cash Equivalents

 

 

 

 

 

27,141,436

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Cash and Investments (9)

 

 

 

 

 

$

842,799,184

 

100.00

%

 


Notes to Statement of Investments:

 

(1)                                 Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933. Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower.

 

(2)                                 Non-controlled affiliate — as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates.

 

(3)                                 Non-income producing security.

 

(4)                                 Principal amount denominated in foreign currency.  Amortized cost and fair value converted from foreign currency to US dollars. (See Note 2)

 

(5)                                 Restricted security. (See Note 2)

 

(6)                                 Controlled issuer — as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer).  Investment is not more than 50% owned nor deemed to be a significant subsidiary. See Consolidated Schedule of Changes in Investments in Affiliates.

 

(7)                                 Investment has been segregated to collateralize certain unfunded commitments.

 

(8)                                 $5,000,000 principal amount of this investment has been segregated to collateralize certain unfunded commitments.

 

(9)                                 All cash and investments, except those referenced in Notes 7 and 8 above, are pledged as collateral under the Revolving Facilities as described in Note 4 to the Consolidated Financial Statements.

 

(10)                          Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act.  Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

 

(11)                          Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act.  Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

 

(12)                          Publicly traded company with a market capitalization greater than $250 million and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act.  Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

 

(13)                          Negative balances relate to an unfunded commitment that was acquired and valued at a discount.

 

LIBOR or EURIBOR resets monthly (M), quarterly (Q), or semiannually (S).

 

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $110,386,498, and $66,876,929, respectively for the three months ended March 31, 2014. Aggregate acquisitions includes investment assets received as payment in kind.  Aggregate dispositions includes principal paydowns on and maturities of debt investments.  The total value of restricted securities and bank debt as of March 31, 2014 was $815,189,985, or 96.7% of total cash and investments of the Company.

 

Options and Swaps at March 31, 2014 were as follows:

 

Investment 

 

Notional Amount

 

Fair Value

 

 

 

 

 

 

 

Interest Rate Cap, 4%, expires 5/15/2016

 

$

25,000,000

 

$

8,605

 

Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 3/31/17

 

$

4,289,019

 

$

(300,684

)

 

See accompanying notes.

 

S-F-8



 

TCP Capital Corp.

 

Consolidated Statement of Investments

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (92.05%)

 

 

 

 

 

 

 

 

 

Bank Debt (74.53%) (1)

 

 

 

 

 

 

 

 

 

Accounting, Tax Preparation, Bookkeeping, and Payroll Services (1.03%)

 

 

 

 

 

 

 

 

 

Expert Global Solutions, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 7.25% (Q), 1.25% LIBOR Floor, due 4/3/18

 

$

699,754

 

$

701,280

 

$

703,691

 

0.09

%

Expert Global Solutions, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 11% (Q), 1.5% LIBOR Floor, due 10/3/18

 

$

7,434,877

 

7,228,004

 

7,382,833

 

0.94

%

Total Accounting, Tax Preparation, Bookkeeping, and Payroll Services

 

 

 

7,929,284

 

8,086,524

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising, Public Relations, and Related Services (2.12%)

 

 

 

 

 

 

 

 

 

Doubleplay III Limited, Senior Secured 1st Lien Facility A1 Term Loan, EURIBOR + 6.25% (Q), 1.25% EURIBOR Floor, due 3/18/18 - (United Kingdom) (4), (10)

 

$

13,165,705

 

16,428,630

 

16,736,606

 

2.12

%

 

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (0.26%)

 

 

 

 

 

 

 

 

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16 (2)

 

$

2,056,927

 

2,056,927

 

2,056,927

 

0.26

%

 

 

 

 

 

 

 

 

 

 

Business Support Services (1.89%)

 

 

 

 

 

 

 

 

 

STG-Fairway Acquisitions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.25% (Q), 1.25% LIBOR Floor, due 8/28/19

 

$

14,643,455

 

13,944,123

 

14,929,002

 

1.89

%

 

 

 

 

 

 

 

 

 

 

Chemical Manufacturing (2.20%)

 

 

 

 

 

 

 

 

 

Archroma, Senior Secured Lien Term Loan B, LIBOR + 8.25% (Q), 1.25% LIBOR Floor, due 9/30/18

 

$

17,456,250

 

17,107,125

 

17,401,699

 

2.20

%

 

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (1.91%)

 

 

 

 

 

 

 

 

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625% (Q), 1.25% LIBOR Floor, due 12/11/18 (2)

 

$

15,000,000

 

14,850,000

 

15,097,500

 

1.91

%

 

 

 

 

 

 

 

 

 

 

Computer Equipment Manufacturing (1.15%)

 

 

 

 

 

 

 

 

 

ELO Touch Solutions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 10.5% (Q), 1.5% LIBOR Floor, due 12/1/18

 

$

10,000,000

 

9,666,672

 

9,100,000

 

1.15

%

 

 

 

 

 

 

 

 

 

 

Converted Paper Products Manufacturing (0.45%)

 

 

 

 

 

 

 

 

 

Ranpak Corp., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1.25% LIBOR Floor, due 4/23/20

 

$

3,469,573

 

3,434,877

 

3,573,660

 

0.45

%

 

 

 

 

 

 

 

 

 

 

Computer Systems Design and Related Services (5.40%)

 

 

 

 

 

 

 

 

 

Blue Coat Systems, Inc., Senior Secured 1st Lien Revolver Term Loan, LIBOR + 3.5% (Q), 1% LIBOR Floor, due 5/31/18

 

$

4,500,000

 

3,540,000

 

4,060,800

 

0.51

%

Blue Coat Systems, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1% LIBOR Floor, due 6/28/20

 

$

15,000,000

 

14,878,125

 

15,300,000

 

1.94

%

OnX Enterprise Solutions, Ltd., Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

10,640,000

 

10,483,300

 

10,709,160

 

1.36

%

OnX USA, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

5,320,000

 

5,244,790

 

5,354,580

 

0.68

%

Websense, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1% LIBOR Floor, due 12/27/20

 

$

7,200,000

 

7,164,000

 

7,218,000

 

0.91

%

Total Computer Systems Design and Related Services

 

 

 

41,310,215

 

42,642,540

 

 

 

 

 

 

 

 

 

 

 

 

 

Electric Power Generation, Transmission and Distribution (2.21%)

 

 

 

 

 

 

 

 

 

Panda Sherman Power, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7.5% (Q), 1.5% LIBOR Floor, due 9/14/18

 

$

11,070,172

 

10,932,474

 

11,402,277

 

1.44

%

Panda Temple Power II, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q), 1.25% LIBOR Floor, due 4/3/19

 

$

5,892,970

 

5,834,041

 

6,069,759

 

0.77

%

Total Electric Power Generation, Transmission and Distribution

 

 

 

16,766,515

 

17,472,036

 

 

 

 

 

 

 

 

 

 

 

 

 

Electrical Equipment and Component Manufacturing (2.08%)

 

 

 

 

 

 

 

 

 

Palladium Energy, Inc., 1st Lien Senior Secured Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 12/26/17

 

$

16,500,317

 

16,225,541

 

16,426,066

 

2.08

%

 

 

 

 

 

 

 

 

 

 

Financial Investment Activities (0.49%)

 

 

 

 

 

 

 

 

 

Marsico Capital Management, Senior Secured 1st Lien Term Loan, LIBOR + 5% (M), due 12/31/22 (11)

 

$

10,637,623

 

13,394,183

 

3,882,732

 

0.49

%

 

 

 

 

 

 

 

 

 

 

Freight Transportation Arrangement (0.48%)

 

 

 

 

 

 

 

 

 

Livingston International, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/18/20 (10)

 

$

3,665,217

 

3,597,620

 

3,756,848

 

0.48

%

 

S-F-9



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (2.04%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18 (2)

 

$

5,164,796

 

$

5,164,796

 

$

2,197,621

 

0.28

%

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

1,370,199

 

1,339,883

 

1,370,199

 

0.17

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/21/16 (2)

 

$

3,626,947

 

3,626,947

 

3,626,947

 

0.46

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

6,825,328

 

6,825,328

 

6,825,328

 

0.86

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

2,150,088

 

2,109,019

 

2,150,088

 

0.27

%

Total Full-Service Restaurants

 

 

 

19,065,973

 

16,170,183

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming Industries (1.87%)

 

 

 

 

 

 

 

 

 

AP Gaming I, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 12/20/20

 

$

15,000,000

 

14,550,000

 

14,737,500

 

1.87

%

 

 

 

 

 

 

 

 

 

 

Grocery Stores (1.91%)

 

 

 

 

 

 

 

 

 

Bashas, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 9.35% (M), 1.5% LIBOR Floor, due 12/28/15

 

$

14,843,788

 

14,802,168

 

15,066,445

 

1.91

%

 

 

 

 

 

 

 

 

 

 

Inland Water Transportation (1.64%)

 

 

 

 

 

 

 

 

 

US Shipping Corp, Senior Secured 1st Lien Term Loan B, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/30/18

 

$

12,603,333

 

12,477,300

 

12,965,679

 

1.64

%

 

 

 

 

 

 

 

 

 

 

Insurance Related Activities (0.81%)

 

 

 

 

 

 

 

 

 

Confie Seguros Holding II Co., 2nd Lien Term Loan, LIBOR + 9% (M), 1.25% LIBOR Floor, due 5/8/19

 

$

6,341,809

 

6,245,733

 

6,391,370

 

0.81

%

 

 

 

 

 

 

 

 

 

 

Merchant Wholesalers (1.16%)

 

 

 

 

 

 

 

 

 

Envision Acquisition Company, LLC, 2nd Lien Term Loan, LIBOR + 8.75% (M), 1% LIBOR Floor, due 11/4/21

 

$

9,079,011

 

8,897,430

 

9,192,498

 

1.16

%

 

 

 

 

 

 

 

 

 

 

Motion Picture and Video Industries (1.97%)

 

 

 

 

 

 

 

 

 

CORE Entertainment, Inc., Senior Secured 1st Lien Term Loan, 9%, due 6/21/17

 

$

9,462,231

 

9,381,116

 

8,610,631

 

1.09

%

CORE Entertainment, Inc., Senior Secured 2nd Lien Term Loan, 13.5%, due 6/21/18

 

$

7,569,785

 

7,502,054

 

6,858,225

 

0.88

%

Total Motion Picture and Video Industries

 

 

 

16,883,170

 

15,468,856

 

 

 

 

 

 

 

 

 

 

 

 

 

Newspaper, Periodical, Book, and Directory Publishers (3.90%)

 

 

 

 

 

 

 

 

 

Hanley-Wood, LLC, 1st Lien FILO Term Loan, LIBOR + 6.75% (Q), 1.25% LIBOR Floor, due 7/15/18

 

$

16,707,600

 

16,707,600

 

16,699,246

 

2.13

%

MediMedia USA, Inc., 1st Lien Revolver, LIBOR + 6.75% (M), due 5/20/18

 

$

4,960,000

 

3,797,500

 

4,523,908

 

0.57

%

MediMedia USA, Inc., 1st Lien Term Loan, LIBOR + 6.75% (M), 1.25% LIBOR Floor, due 11/20/18

 

$

9,701,250

 

9,433,029

 

9,458,719

 

1.20

%

Total Newspaper, Periodical, Book, and Directory Publishers

 

 

 

29,938,129

 

30,681,873

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonresidential Building Construction (1.25%)

 

 

 

 

 

 

 

 

 

NCM Group Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 11.5% (Q), 1% LIBOR Floor, due 8/29/18

 

$

10,000,000

 

9,620,619

 

9,875,000

 

1.25

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (2.24%)

 

 

 

 

 

 

 

 

 

One Sky Flight, LLC, Senior Secured 2nd Lien Term Loan, 12% Cash + 3% PIK, due 5/4/19

 

$

18,200,000

 

16,929,086

 

17,708,600

 

2.24

%

 

 

 

 

 

 

 

 

 

 

Oil and Gas Extraction (1.98%)

 

 

 

 

 

 

 

 

 

Willbros Group, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.25% LIBOR Floor, due 8/7/19

 

$

15,426,118

 

15,051,713

 

15,657,510

 

1.98

%

 

 

 

 

 

 

 

 

 

 

Other Telecommunications (1.76%)

 

 

 

 

 

 

 

 

 

Securus Technologies, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/30/21

 

$

14,000,000

 

13,860,000

 

13,925,660

 

1.76

%

 

 

 

 

 

 

 

 

 

 

Petroleum and Coal Products Manufacturing (0.95%)

 

 

 

 

 

 

 

 

 

Boomerang Tube, LLC, 2nd Lien Term Loan, LIBOR + 9.5% (Q), 1.5% LIBOR Floor, due 10/11/17

 

$

7,749,023

 

7,563,978

 

7,477,807

 

0.95

%

 

 

 

 

 

 

 

 

 

 

Professional, Scientific, and Technical Services (3.14%)

 

 

 

 

 

 

 

 

 

Connolly, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 9.25% (Q), 1.25% LIBOR Floor, due 7/15/19

 

$

12,000,000

 

11,829,534

 

12,270,000

 

1.55

%

ConvergeOne Holdings, 1st Lien Term Loan, LIBOR + 8% (Q), 1.25% LIBOR Floor, due 5/8/19

 

$

12,654,643

 

12,464,823

 

12,570,236

 

1.59

%

Total Professional, Scientific, and Technical Services

 

 

 

24,294,357

 

24,840,236

 

 

 

 

 

 

 

 

 

 

 

 

 

Promoters of Performing Arts, Sports, and Similar Events (1.40%)

 

 

 

 

 

 

 

 

 

Stadium Management Group, Senior Secured 2nd Lien Term Loan, LIBOR + 9.50% (M), 1.25% LIBOR Floor, due 12/7/18

 

$

11,000,000

 

10,817,390

 

11,055,000

 

1.40

%

 

S-F-10



 

TCP Capital Corp.

 

 Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (3.09%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q) Cash + 4% PIK, 2% LIBOR Floor, due 8/3/16

 

$

6,995,124

 

$

6,648,634

 

$

6,774,778

 

0.86

%

The Tennis Channel, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 8.5% (Q), due 5/29/17

 

$

17,589,459

 

17,134,705

 

17,615,843

 

2.23

%

Total Radio and Television Broadcasting

 

 

 

23,783,339

 

24,390,621

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail (2.29%)

 

 

 

 

 

 

 

 

 

Kenneth Cole Productions, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 10.40% (M), 1% LIBOR Floor, due 9/25/17

 

$

11,272,727

 

11,051,496

 

11,329,090

 

1.44

%

Shopzilla, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.5% (Q), due 3/31/16

 

$

6,710,057

 

6,525,027

 

6,683,216

 

0.85

%

Total Retail

 

 

 

17,576,523

 

18,012,306

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.60%)

 

 

 

 

 

 

 

 

 

Aircraft Secured Mortgages - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL, 8%, due 3/15/17 (6)

 

$

289,048

 

289,048

 

296,820

 

0.04

%

N918DL, 8%, due 8/15/18 (6)

 

$

388,001

 

388,001

 

397,290

 

0.05

%

N954DL, 8%, due 3/20/19 (6)

 

$

514,375

 

514,375

 

524,620

 

0.07

%

N955DL, 8%, due 6/20/19 (6)

 

$

533,283

 

533,283

 

543,320

 

0.07

%

N956DL, 8%, due 5/20/19 (6)

 

$

532,275

 

532,275

 

542,640

 

0.07

%

N957DL, 8%, due 6/20/19 (6)

 

$

537,947

 

537,947

 

548,250

 

0.07

%

N959DL, 8%, due 7/20/19 (6)

 

$

543,573

 

543,573

 

553,520

 

0.07

%

N960DL, 8%, due 10/20/19 (6)

 

$

564,855

 

564,855

 

574,430

 

0.07

%

N961DL, 8%, due 8/20/19 (6)

 

$

558,427

 

558,427

 

568,310

 

0.07

%

N976DL, 8%, due 2/15/18 (6)

 

$

394,360

 

394,360

 

404,600

 

0.05

%

Aircraft Secured Mortgages - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA, 20%, due 10/26/16 (2)

 

$

328,848

 

328,848

 

404,605

 

0.05

%

N512UA, 20%, due 10/26/16 (2)

 

$

334,535

 

334,535

 

414,010

 

0.05

%

N536UA, 16%, due 9/29/14 (2)

 

$

108,845

 

108,845

 

114,000

 

0.01

%

N545UA, 16%, due 8/29/15 (2)

 

$

249,695

 

249,695

 

275,405

 

0.03

%

N585UA, 20%, due 10/25/16 (2)

 

$

392,794

 

392,794

 

486,115

 

0.06

%

N659UA, 12%, due 2/28/16 (6)

 

$

2,708,150

 

2,708,150

 

2,948,986

 

0.37

%

N661UA, 12%, due 5/4/16 (6)

 

$

2,880,186

 

2,880,186

 

3,171,026

 

0.40

%

Total Scheduled Air Transportation

 

 

 

11,859,197

 

12,767,947

 

 

 

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (1.87%)

 

 

 

 

 

 

 

 

 

Isola USA Corporation, Senior Secured Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 11/29/18

 

$

14,583,333

 

14,366,560

 

14,729,167

 

1.87

%

 

 

 

 

 

 

 

 

 

 

Software Publishers (7.13%)

 

 

 

 

 

 

 

 

 

BlackLine Systems, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 0.4% (Q) Cash + 7.6% PIK, 1.5% LIBOR Floor, due 9/25/18

 

$

12,579,747

 

11,811,044

 

12,183,485

 

1.56

%

Coreone Technologies, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 3.75% (Q) Cash + 5% PIK, 1% LIBOR Floor, due 9/4/18

 

$

13,556,801

 

13,243,533

 

13,455,125

 

1.72

%

Deltek, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.75% (Q), 1.25% LIBOR Floor, due 10/10/19

 

$

15,000,000

 

14,805,253

 

15,300,000

 

1.94

%

Edmentum, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 5/17/19

 

$

15,000,000

 

14,748,486

 

15,112,500

 

1.91

%

Total Software Publishers

 

 

 

54,608,316

 

56,051,110

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.70%)

 

 

 

 

 

 

 

 

 

UBC Healthcare Analytics, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 7/1/18

 

$

5,526,021

 

5,498,391

 

5,559,177

 

0.70

%

 

 

 

 

 

 

 

 

 

 

Textile Furnishings Mills (2.08%)

 

 

 

 

 

 

 

 

 

Lexmark Carpet Mills, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 10% (Q), 1% LIBOR Floor, due 9/30/18

 

$

16,351,467

 

15,942,680

 

16,392,346

 

2.08

%

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.96%)

 

 

 

 

 

 

 

 

 

Integra Telecom Holdings, Inc., 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1.25% LIBOR Floor, due 2/22/20

 

$

15,000,000

 

14,701,027

 

15,459,375

 

1.96

%

 

S-F-11



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

Principal

 

 

 

 

 

Percent of

 

 

 

Amount or

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Wireless Telecommunications Carriers (4.12%)

 

 

 

 

 

 

 

 

 

Alpheus Communications, LLC, Senior Secured 1st Lien Delayed Draw FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18 (13)

 

$

 

$

(11,183

)

$

(8,437

)

 

Alpheus Communications, LLC, Senior Secured 1st Lien FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18

 

$

8,248,124

 

8,166,127

 

8,186,263

 

1.04

%

Globalive Wireless Management Corp., Senior Secured 1st Lien Term Loan, LIBOR + 10.9% (Q), due 4/30/14 - (Canada) (10)

 

$

3,037,292

 

2,933,872

 

3,067,665

 

0.39

%

Gogo, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 6/21/17

 

$

19,587,428

 

18,707,700

 

21,252,360

 

2.69

%

Total Wireless Telecommunications Carriers

 

 

 

29,796,516

 

32,497,851

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Bank Debt

 

 

 

585,841,307

 

588,236,257

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Corporate Debt Securities (17.52%)

 

 

 

 

 

 

 

 

 

Architectural, Engineering, and Related Services (1.01%)

 

 

 

 

 

 

 

 

 

ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19 (2), (5)

 

$

7,959,369

 

7,959,369

 

7,959,369

 

1.01

%

 

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (1.17%)

 

 

 

 

 

 

 

 

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16 (2), (5)

 

$

9,268,000

 

7,586,317

 

9,268,000

 

1.17

%

 

 

 

 

 

 

 

 

 

 

Beverage Manufacturing (1.04%)

 

 

 

 

 

 

 

 

 

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18 (5)

 

$

7,780,000

 

7,780,000

 

8,207,900

 

1.04

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.97%)

 

 

 

 

 

 

 

 

 

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19 (5)

 

$

7,098,916

 

6,960,435

 

7,631,335

 

0.97

%

 

 

 

 

 

 

 

 

 

 

Fabricated Metal Product Manufacturing (1.38%)

 

 

 

 

 

 

 

 

 

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16 (5) , (7)

 

$

12,500,000

 

12,322,875

 

10,875,000

 

1.38

%

 

 

 

 

 

 

 

 

 

 

Metal Ore Mining (0.78%)

 

 

 

 

 

 

 

 

 

St Barbara Ltd., 1st Priority Senior Secured Notes, 8.875%, due 4/15/18 - (Australia) (5)

 

$

7,359,000

 

7,326,651

 

6,144,765

 

0.78

%

 

 

 

 

 

 

 

 

 

 

Nondepository Credit Intermediation (3.25%)

 

 

 

 

 

 

 

 

 

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19 - (Cayman Islands) (5), (10)

 

$

10,000,000

 

9,824,072

 

10,700,000

 

1.35

%

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18 (5), (10)

 

$

15,000,000

 

15,000,000

 

14,962,500

 

1.90

%

Total Nondepository Credit Intermediation

 

 

 

24,824,072

 

25,662,500

 

 

 

 

 

 

 

 

 

 

 

 

 

Plastics Products Manufacturing (1.83%)

 

 

 

 

 

 

 

 

 

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18 (5)

 

$

13,600,000

 

13,600,000

 

14,426,622

 

1.83

%

 

 

 

 

 

 

 

 

 

 

Satellite Telecommunications (1.31%)

 

 

 

 

 

 

 

 

 

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19 (5), (8), (10)

 

$

9,914,000

 

9,914,000

 

10,335,345

 

1.31

%

 

 

 

 

 

 

 

 

 

 

Scientific Research and Development Services (2.23%)

 

 

 

 

 

 

 

 

 

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17 (5)

 

$

17,200,000

 

16,536,295

 

17,630,000

 

2.23

%

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.65%)

 

 

 

 

 

 

 

 

 

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17 (5)

 

$

5,000,000

 

5,000,000

 

5,137,500

 

0.65

%

 

 

 

 

 

 

 

 

 

 

Structured Note Funds (1.90%)

 

 

 

 

 

 

 

 

 

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21 - (Cayman Islands) (5), (10)

 

$

15,000,000

 

15,000,000

 

15,000,000

 

1.90

%

 

 

 

 

 

 

 

 

 

 

Total Other Corporate Debt Securities

 

 

 

134,810,014

 

138,278,336

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Debt Investments

 

 

 

720,651,321

 

726,514,593

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (5.04%)

 

 

 

 

 

 

 

 

 

Architectural, Engineering, and Related Services (0.87%)

 

 

 

 

 

 

 

 

 

ESP Holdings, Inc., Cumulative Preferred 15% (2), (3), (5)

 

20,297

 

2,249,930

 

3,947,862

 

0.51

%

ESP Holdings, Inc., Common Stock (2), (3), (5)

 

88,670

 

9,311,782

 

2,856,346

 

0.36

%

Total Architectural, Engineering, and Related Services

 

 

 

11,561,712

 

6,804,208

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Support Services (0.22%)

 

 

 

 

 

 

 

 

 

STG-Fairway Holdings, LLC, Class A Units (3), (5)

 

841,479

 

1,174,225

 

1,722,508

 

0.22

%

 

S-F-12


 

TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (continued)

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (0.64%)

 

 

 

 

 

 

 

 

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units (2), (3), (5)

 

5,000,000

 

$

5,000,000

 

$

5,000,000

 

0.64

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.13%)

 

 

 

 

 

 

 

 

 

Anacomp, Inc., Class A Common Stock (3), (5), (6)

 

1,255,527

 

26,711,048

 

1,004,422

 

0.13

%

 

 

 

 

 

 

 

 

 

 

Depository Credit Intermediation (0.11%)

 

 

 

 

 

 

 

 

 

Doral Financial Corporation, Common Stock - (Puerto Rico) (3), (12)

 

53,890

 

11,699,417

 

843,913

 

0.11

%

 

 

 

 

 

 

 

 

 

 

Financial Investment Activities (0.00%)

 

 

 

 

 

 

 

 

 

Marsico Holdings, LLC, Common Interest Units (3), (5), (11)

 

168,698

 

172,694

 

4,302

 

 

 

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (0.00%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Membership Units (2), (3), (5)

 

13,161,000

 

2,010,777

 

 

 

 

 

 

 

 

 

 

 

 

 

Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing (0.01%)

 

 

 

 

 

 

 

 

 

Precision Holdings, LLC, Class C Membership Interests (3), (5)

 

33

 

 

41,645

 

0.01

%

 

 

 

 

 

 

 

 

 

 

Nonmetallic Mineral Mining and Quarrying (0.20%)

 

 

 

 

 

 

 

 

 

EPMC HoldCo, LLC, Membership Units (2), (5)

 

1,312,720

 

 

1,562,137

 

0.20

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (0.16%)

 

 

 

 

 

 

 

 

 

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,843

 

1,274,000

 

1,268,904

 

0.16

%

 

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (0.04%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Warrants to Purchase Common Stock (3), (5)

 

233,470

 

300,322

 

354,874

 

0.04

%

 

 

 

 

 

 

 

 

 

 

Retail (0.07%)

 

 

 

 

 

 

 

 

 

Shop Holding, LLC, Class A Units (3), (5)

 

490,037

 

462,576

 

532,919

 

0.07

%

Shop Holding, LLC, Warrants to Purchase Class A Units (3), (5)

 

326,691

 

 

38,258

 

 

Total Electronic Shopping

 

 

 

462,576

 

571,177

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.19%)

 

 

 

 

 

 

 

 

 

Equipment Trusts - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL Trust Beneficial Interests (5), (6)

 

727

 

97,376

 

125,970

 

0.02

%

N918DL Trust Beneficial Interests (5), (6)

 

623

 

109,938

 

142,970

 

0.02

%

N954DL Trust Beneficial Interests (5), (6)

 

591

 

133,027

 

68,000

 

0.01

%

N955DL Trust Beneficial Interests (5), (6)

 

576

 

133,868

 

113,560

 

0.01

%

N956DL Trust Beneficial Interests (5), (6)

 

580

 

133,907

 

108,800

 

0.01

%

N957DL Trust Beneficial Interests (5), (6)

 

576

 

134,785

 

109,650

 

0.01

%

N959DL Trust Beneficial Interests (5), (6)

 

573

 

135,658

 

110,500

 

0.01

%

N960DL Trust Beneficial Interests (5), (6)

 

563

 

139,173

 

109,650

 

0.01

%

N961DL Trust Beneficial Interests (5), (6)

 

570

 

138,350

 

103,870

 

0.01

%

N976DL Trust Beneficial Interests (5), (6)

 

654

 

113,413

 

103,033

 

0.01

%

Equipment Trusts - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA Trust Beneficial Interests (2), (5)

 

54

 

197,409

 

465,625

 

0.06

%

N512UA Trust Beneficial Interests (2), (5)

 

53

 

193,046

 

458,277

 

0.06

%

N536UA Trust Beneficial Interests (2), (5)

 

81

 

396,289

 

656,766

 

0.08

%

N545UA Trust Beneficial Interests (2), (5)

 

67

 

348,071

 

641,840

 

0.08

%

N585UA Trust Beneficial Interests (2), (5)

 

53

 

214,737

 

571,706

 

0.07

%

United N659UA-767, LLC (N659UA) (5), (6)

 

412

 

2,097,640

 

2,840,323

 

0.36

%

United N661UA-767, LLC (N661UA) (5), (6)

 

400

 

2,066,062

 

2,852,677

 

0.36

%

Total Scheduled Air Transportation

 

 

 

6,782,749

 

9,583,217

 

 

 

 

 

 

 

 

 

 

 

 

 

Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing (0.08%)

 

 

 

 

 

 

 

 

 

KAGY Holding Company, Inc., Series A Preferred Stock (2), (3), (5)

 

9,778

 

1,091,200

 

662,134

 

0.08

%

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (0.03%)

 

 

 

 

 

 

 

 

 

AIP/IS Holdings, LLC, Membership Units (3), (5)

 

352

 

 

229,504

 

0.03

%

 

 

 

 

 

 

 

 

 

 

Software Publishers (0.07%)

 

 

 

 

 

 

 

 

 

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,232,731

 

522,678

 

561,632

 

0.07

%

 

S-F-13



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.22%)

 

 

 

 

 

 

 

 

 

Integra Telecom, Inc., Common Stock (3), (5)

 

1,274,522

 

$

8,433,884

 

$

5,583,686

 

0.72

%

Integra Telecom, Inc., Warrants (3), (5)

 

346,939

 

19,920

 

194,050

 

0.02

%

V Telecom Investment S.C.A, Common Shares - (Luxembourg) (3), (4), (5), (10)

 

1,393

 

3,236,256

 

3,756,053

 

0.48

%

Total Wired Telecommunications Carriers

 

 

 

11,690,060

 

9,533,789

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Equity Securities

 

 

 

80,453,458

 

39,748,366

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments

 

 

 

801,104,779

 

766,262,959

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents (2.91%)

 

 

 

 

 

 

 

 

 

Wells Fargo & Company, Overnight Repurchase Agreement, 0.09%,

 

 

 

 

 

 

 

 

 

Collateralized by Freddie Mac Note

 

 

 

 

 

$

10,501,688

 

1.33

%

Union Bank of California, Commercial Paper, 0.10%, due 1/2/14

 

 

 

 

 

8,499,976

 

1.07

%

Cash Denominated in Foreign Currencies

 

 

 

 

 

121,389

 

0.02

%

Cash Held on Account at Various Institutions

 

 

 

 

 

3,861,129

 

0.49

%

Cash and Cash Equivalents

 

 

 

 

 

22,984,182

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Cash and Investments (9)

 

 

 

 

 

$

789,247,141

 

100.00

%

 


Notes to Statement of Investments:

 

(1)                                 Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933. Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower.

 

(2)                                 Non-controlled affiliate — as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates.

 

(3)                                 Non-income producing security.

 

(4)                                 Principal amount denominated in foreign currency.  Amortized cost and fair value converted from foreign currency to US dollars. (See Note 2)

 

(5)                                 Restricted security. (See Note 2)

 

(6)                                 Controlled issuer — as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer). Investment is not more than 50% owned nor deemed to be a significant subsidiary. See Consolidated Schedule of Changes in Investments in Affiliates.

 

(7)                                 Investment has been segregated to collateralize certain unfunded commitments.

 

(8)                                 $2,000,000 principal amount of this investment has been segregated to collateralize certain unfunded commitments.

 

(9)                                 All cash and investments, except those referenced in Notes 7 and 8 above, are pledged as collateral under the Revolving Facilities as described in Note 4 to the Consolidated Financial Statements.

 

(10)                          Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

 

(11)                          Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act.  Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

 

(12)                          Publicly traded company with a market capitalization greater than $250 million and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

 

(13)                          Negative balances relate to an unfunded commitment that was acquired and valued at a discount.

 

LIBOR or EURIBOR resets monthly (M), quarterly (Q), or semiannually (S).

 

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $471,087,319, and $235,641,665, respectively for the year ended December 31, 2013. Aggregate acquisitions includes investment assets received as payment in kind.  Aggregate dispositions includes principal paydowns on and maturities of debt investments.  The total value of restricted securities and bank debt as of December 31, 2013 was $765,419,046, or 97.0% of total cash and investments of the Company.

 

Options and Swaps at December 31, 2013 were as follows:

 

Investment 

 

Notional Amount

 

Fair Value

 

 

 

 

 

 

 

Interest Rate Cap, 4%, expires 5/15/2016

 

$

25,000,000

 

$

14,139

 

Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 3/31/17

 

$

4,289,019

 

$

(331,183

)

 

See accompanying notes.

 

S-F-14



 

TCP Capital Corp.

 

Consolidated Statements of Operations

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Investment income

 

 

 

 

 

Interest income:

 

 

 

 

 

Companies less than 5% owned

 

$

18,140,743

 

$

15,240,367

 

Companies 5% to 25% owned

 

1,336,864

 

893,512

 

Companies more than 25% owned

 

257,627

 

330,317

 

Dividend income:

 

 

 

 

 

Companies 5% to 25% owned

 

1,968,748

 

 

Other income:

 

 

 

 

 

Companies less than 5% owned

 

634,733

 

157,533

 

Companies 5% to 25% owned

 

121,039

 

101,103

 

Companies more than 25% owned

 

208,890

 

142,911

 

Total investment income

 

22,668,644

 

16,865,743

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

Management and advisory fees

 

2,886,208

 

1,964,738

 

Interest expense

 

456,861

 

136,407

 

Amortization of deferred debt issuance costs

 

372,755

 

108,564

 

Administrative expenses

 

256,806

 

167,808

 

Legal fees, professional fees and due diligence expenses

 

204,156

 

139,052

 

Commitment fees

 

191,199

 

22,589

 

Director fees

 

85,712

 

71,809

 

Insurance expense

 

53,900

 

36,273

 

Custody fees

 

50,807

 

29,419

 

Other operating expenses

 

319,586

 

192,971

 

Total operating expenses

 

4,877,990

 

2,869,630

 

 

 

 

 

 

 

Net investment income

 

17,790,654

 

13,996,113

 

 

 

 

 

 

 

Net realized and unrealized gain (loss) on investments and foreign currency

 

 

 

 

 

Net realized gain (loss):

 

 

 

 

 

Investments in companies less than 5% owned

 

(6,795,721

)

517,658

 

Investments in companies 5% to 25% owned

 

375

 

 

Net realized gain (loss)

 

(6,795,346

)

517,658

 

 

 

 

 

 

 

Net change in net unrealized appreciation/depreciation

 

11,975,364

 

1,837,731

 

Net realized and unrealized gain

 

5,180,018

 

2,355,389

 

 

 

 

 

 

 

Dividends on Series A preferred equity facility

 

(369,135

)

(393,413

)

Net change in accumulated dividends on Series A preferred equity facility

 

10,495

 

16,011

 

Distributions of incentive allocation to the General Partner from:

 

 

 

 

 

Net investment income

 

(3,486,403

)

(2,723,742

)

Net change in reserve for incentive allocation

 

(1,036,004

)

(471,078

)

 

 

 

 

 

 

Net increase in net assets applicable to common shareholders resulting from operations

 

$

18,089,625

 

$

12,779,280

 

 

 

 

 

 

 

Basic and diluted earnings per common share

 

$

0.50

 

$

0.60

 

Basic and diluted weighted average common shares outstanding

 

36,199,917

 

21,477,628

 

 

  See accompanying notes.

 

S-F-15



 

TCP Capital Corp.

 

Consolidated Statements of Changes in Net Assets

 

 

 

Common Stock

 

Paid in
Capital

 

Accumulated
Net

 

Accumulated

 

Accumulated
Net

 

Non-

 

 

 

 

 

Shares

 

Par
Amount

 

in Excess of
Par

 

Investment
Income

 

Net Realized
Losses

 

Unrealized
Depreciation

 

controlling
Interest

 

Total Net
Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2012

 

21,477,628

 

$

21,478

 

$

444,234,060

 

$

22,526,179

 

$

(59,023,861

)

$

(91,770,306

)

$

 

$

315,987,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in public offering

 

14,720,000

 

14,720

 

224,548,170

 

 

 

 

 

224,562,890

 

Issuance of common stock from dividend reinvestment plan

 

2,288

 

2

 

37,414

 

 

 

 

 

37,416

 

Net investment income

 

 

 

 

54,330,262

 

 

 

 

54,330,262

 

Realized and unrealized gains (losses)

 

 

 

 

 

(47,384,746

)

56,456,107

 

 

9,071,361

 

Dividends on Series A preferred equity facility

 

 

 

 

(1,494,552

)

 

 

 

(1,494,552

)

General Partner incentive allocation

 

 

 

 

(10,567,142

)

(645,691

)

 

(1,168,583

)

(12,381,416

)

Dividends paid to common shareholders

 

 

 

 

(40,502,256

)

 

 

 

(40,502,256

)

Tax reclassification of stockholders’ equity in accordance with generally accepted accounting principles

 

 

 

(977,624

)

(276,396

)

1,254,020

 

 

 

 

Balance at December 31, 2013

 

$

36,199,916

 

$

36,200

 

$

667,842,020

 

$

24,016,095

 

$

(105,800,278

)

$

(35,314,199

)

$

(1,168,583

)

$

549,611,255

 

Issuance of common stock in public offering

 

 

 

 

 

 

 

 

 

Issuance of common stock from dividend reinvestment plan

 

104

 

 

1,717

 

 

 

 

 

1,717

 

Net investment income

 

 

 

 

17,790,654

 

 

 

 

17,790,654

 

Realized and unrealized gains (losses)

 

 

 

 

 

(6,795,346

)

11,975,364

 

 

5,180,018

 

Dividends on Series A preferred equity facility

 

 

 

 

(358,640

)

 

 

 

(358,640

)

General Partner incentive allocation

 

 

 

 

(3,486,403

)

 

 

(1,036,004

)

(4,522,407

)

Dividends paid to common shareholders

 

 

 

 

(13,031,970

)

 

 

 

(13,031,970

)

Balance at March 31, 2014

 

$

36,200,020

 

$

36,200

 

$

667,843,737

 

$

24,929,736

 

$

(112,595,624

)

$

(23,338,835

)

$

(2,204,587

)

$

554,670,627

 

 

See accompanying notes.

 

S-F-16



 

TCP Capital Corp.

 

Consolidated Statements of Cash Flows

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Net increase in net assets applicable to common shareholders resulting from operations

 

$

18,089,625

 

$

12,779,280

 

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

 

 

 

 

 

Net realized loss (gain)

 

6,795,346

 

(517,658

)

Net change in unrealized appreciation/depreciation of investments

 

(11,974,865

)

(1,880,949

)

Dividends paid on Series A preferred equity facility

 

369,135

 

393,413

 

Net change in accumulated dividends on Series A preferred equity facility

 

(10,495

)

(16,011

)

Net change in reserve for incentive allocation

 

1,036,004

 

471,078

 

Accretion of original issue discount

 

(551,826

)

(825,555

)

Net accretion of market discount/premium

 

(178,840

)

(81

)

Interest and dividend income paid in kind

 

(1,084,557

)

(253,156

)

Amortization of deferred debt issuance costs

 

372,755

 

108,564

 

Changes in assets and liabilities:

 

 

 

 

 

Purchases of investment securities

 

(109,301,941

)

(40,010,595

)

Proceeds from sales, maturities and paydowns of investments

 

66,876,929

 

51,006,153

 

Increase in accrued interest income - companies less than 5% owned

 

(1,997,625

)

(2,546,216

)

Increase in accrued interest income - companies 5% to 25% owned

 

(264,538

)

(4,073

)

Decrease in accrued interest income - companies more than 25% owned

 

3,172

 

2,835

 

Decrease in receivable for investments sold

 

2,574,247

 

7,727,415

 

Increase in prepaid expenses and other assets

 

(430,355

)

(433,296

)

Decrease in payable for investments purchased

 

(13,192,340

)

(21,657,527

)

Decrease in payable to the Investment Manager

 

(657,479

)

(3,651

)

Increase (decrease) in interest payable

 

(98,929

)

31,937

 

Increase in incentive allocation payable

 

167,503

 

2,723,742

 

Decrease in accrued expenses and other liabilities

 

(220,304

)

(986,661

)

Net cash (used in) provided by operating activities

 

(43,679,378

)

6,108,988

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Proceeds from draws on credit facilities

 

114,000,000

 

6,000,000

 

Principal repayments on credit facilities

 

(52,000,000

)

(10,000,000

)

Payments of debt issuance costs

 

(763,980

)

 

Dividends paid on Series A preferred equity facility

 

(369,135

)

(393,413

)

Dividends paid to common shareholders

 

(13,031,970

)

(8,591,051

)

Proceeds from shares issued in connection with dividend reinvestment plan

 

1,717

 

17,615

 

Net cash provided by (used in) financing activities

 

47,836,632

 

(12,966,849

)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

4,157,254

 

(6,857,861

)

Cash and cash equivalents at beginning of period

 

22,984,182

 

18,035,189

 

Cash and cash equivalents at end of period

 

$

27,141,436

 

$

11,177,328

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

Interest payments

 

$

235,336

 

$

104,470

 

Excise tax payments

 

 

969,946

 

 

See accompanying notes.

 

S-F-17


 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited)

 

March 31, 2014

 

1. Organization and Nature of Operations

 

TCP Capital Corp. (the “Company”) is a Delaware corporation formed on April 2, 2012 as an externally managed, closed-end, non-diversified management investment company. The Company elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. The Company invests primarily in the debt of middle-market companies, including senior secured loans, junior loans, mezzanine debt and bonds. Such investments may include an equity component, and, to a lesser extent, the Company may make equity investments directly.

 

Investment operations are conducted in Special Value Continuation Partners, LP, a Delaware limited partnership (the “Partnership”), of which the Company owns 100% of the common limited partner interests, or in one of the Partnership’s wholly owned subsidiaries, TCPC Funding I, LLC, a Delaware limited liability company (“TCPC Funding”) and TCPC SBIC, LP, a Delaware limited partnership (the “SBIC”). The Partnership has also elected to be treated as a BDC under the 1940 Act. The SBIC was organized in June 2013, and on April 22, 2014, received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958. These consolidated financial statements include the accounts of the Company, the Partnership, TCPC Funding and the SBIC. All significant intercompany transactions and balances have been eliminated in the consolidation.

 

The Company has elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes. As a RIC, the Company will not be taxed on its income to the extent that it distributes such income each year and satisfies other applicable income tax requirements. The Partnership, TCPC Funding, and the SBIC have elected to be treated as partnerships for U.S. federal income tax purposes.

 

The general partner of the Partnership is SVOF/MM, LLC, which also serves as the administrator of the Company and the Partnership (the “Administrator” or the “General Partner”). The managing member of the General Partner is Tennenbaum Capital Partners, LLC (the “Advisor”), which serves as the Investment Manager to the Company, the Partnership, TCPC Funding, and the SBIC. Most of the equity interests in the General Partner are owned directly or indirectly by the Advisor and its employees.

 

Company management consists of the Investment Manager and the Board of Directors. Partnership management consists of the General Partner and the Board of Directors. The Investment Manager and the General Partner direct and execute the day-to-day operations of the Company and the Partnership, respectively, subject to oversight from the respective Board of Directors, which sets the broad policies of the Company and performs certain functions required by the 1940 Act in the case of the Partnership.

 

S-F-18



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

1. Organization and Nature of Operations (continued)

 

The Board of Directors of the Partnership has delegated investment management of the Partnership’s assets to the Investment Manager. Each Board of Directors consists of five persons, three of whom are independent. If the Company or the Partnership has preferred equity interests outstanding, as the Partnership currently does, the holders of the preferred interests voting separately as a class are entitled to elect two of the Directors. The remaining directors will be subject to election by holders of the common shares and preferred interests voting together as a single class.

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The following is a summary of the significant accounting policies of the Company and the Partnership.

 

Use of Estimates

 

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates and assumptions to be reasonable, actual results could differ from those estimates and differences could be material.

 

Investment Valuation

 

The Company’s investments are generally held by the Partnership, TCPC Funding, or the SBIC. Management values investments at fair value based upon the principles and methods of valuation set forth in policies adopted by the Partnership’s Board of Directors and in conformity with procedures set forth in the Revolving Facilities and the statement of preferences for the Preferred Interests, as defined in Note 4, below. Fair value is generally defined as the amount for which an investment would be sold in an orderly transaction between market participants at the measurement date.

 

All investments are valued at least quarterly based on affirmative pricing or quotations from independent third-party sources, with the exception of investments priced directly by the Investment Manager which together comprise, in total, less than 5% of the capitalization of the Partnership. Investments listed on a recognized exchange or market quotation system, whether U.S. or foreign, are valued for financial reporting purposes as of the last business day of the reporting period using the closing price on the date of valuation. Liquid investments not listed on a recognized exchange or market quotation system are valued using prices provided by a nationally recognized pricing service or by using quotations from broker-dealers. Investments not priced by a pricing service or for which market quotations are either not readily available or are determined to be unreliable are

 

S-F-19



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

valued using affirmative valuations performed by independent valuation services or, for investments aggregating less than 5% of the total capitalization of the Partnership, directly by the Investment Manager.

 

Fair valuations of investments are determined under guidelines adopted by the Boards of Directors of the Company and the Partnership, and are subject to their approval. Generally, to increase objectivity in valuing the investments, the Investment Manager will utilize external measures of value, such as public markets or third-party transactions, whenever possible. The Investment Manager’s valuation is not based on long-term work-out value, immediate liquidation value, nor incremental value for potential changes that may take place in the future. The values assigned to investments that are valued by the Investment Manager are based on available information and do not necessarily represent amounts that might ultimately be realized, as these amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated. The foregoing policies apply to all investments, including those in companies and groups of affiliated companies aggregating more than 5% of the Company’s assets.

 

Fair valuations of investments in each asset class are determined using one or more methodologies including the market approach, income approach, or, in the case of recent investments, the cost approach, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present value 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 may be taken into account include, as relevant:  available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market and enterprise values, among other factors.

 

Unobservable inputs used in the fair value measurement of Level 3 investments as of March 31, 2014 included the following:

 

Asset Type

 

Fair Value

 

Valuation Technique

 

Unobservable Input

 

Range (Weighted Avg.)

Bank Debt

 

$

317,003,161

 

Market rate approach

 

Market yields

 

3.8% - 16.5% (10.9%)

 

 

238,578,988

 

Market quotations

 

Indicative bid/ask quotes

 

1 - 3 (2)

 

 

15,792,158

 

Market comparable companies

 

Revenue multiples

 

0.4x (0.4x)

 

 

2,056,927

 

Market comparable companies

 

EBITDA multiples

 

7.8x (7.8x)

Other Corporate Debt

 

71,494

 

Market rate approach

 

Market yields

 

16.3% (16.3%)

 

 

54,707,520

 

Market quotations

 

Indicative bid/ask quotes

 

1 – 2 (1)

 

 

16,828,346

 

Market comparable companies

 

EBITDA multiples

 

7.8x - 10.0x (8.8x)

Equity

 

9,527,486

 

Market rate approach

 

Market yields

 

13.0% - 18.0% (13.6%)

 

 

3,587,881

 

Market quotations

 

Indicative bid/ask quotes

 

1 - 1 (1)

 

 

891,424

 

Market comparable companies

 

Revenue multiples

 

0.4x - 1.1x (1.1x)

 

 

18,441,260

 

Market comparable companies

 

EBITDA multiples

 

4.0x – 6.6x (5.8x)

 

S-F-20



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Generally, a change in an unobservable input may result in a change to the value of an investment as follows:

 

Input

 

Impact to Value if
Input Increases

 

Impact to Value if
Input Decreases

 

Market yields

 

Decrease

 

Increase

 

Revenue multiples

 

Increase

 

Decrease

 

EBITDA multiples

 

Increase

 

Decrease

 

 

Investments may be categorized based on the types of inputs used in valuing such investments. The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Transfers between levels are recognized as of the beginning of the reporting period.

 

At March 31, 2014, the Company’s investments were categorized as follows:

 

Level

 

Basis for Determining Fair Value

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

1

 

Quoted prices in active markets for identical assets

 

$

 

$

 

$

467,763

 

2

 

Other observable market inputs *

 

70,146,046

 

67,557,294

 

 

3

 

Independent third-party pricing sources that employ significant unobservable inputs

 

573,872,294

 

64,047,014

 

29,595,404

 

3

 

Investment Manager valuations with significant unobservable inputs

 

(441,060

)

7,560,346

 

2,852,647

 

Total

 

 

 

$

643,577,280

 

$

139,164,654

 

$

32,915,814

 

 


* For example, quoted prices in inactive markets or quotes for comparable investments.

 

S-F-21



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Changes in investments categorized as Level 3 during the three months ended March 31, 2014 were as follows:

 

 

 

Independent Third-Party Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

515,953,643

 

$

53,334,634

 

$

36,066,746

 

Net realized and unrealized gains (losses)

 

4,633,345

 

833,673

 

(1,034,764

)

Acquisitions

 

98,772,793

 

13,080,946

 

894,302

 

Dispositions

 

(30,758,320

)

(14,077,239

)

(6,330,880

)

Transfers out of Level 3 *

 

(14,729,167

)

 

 

Transfers into Level 3 †

 

 

10,875,000

 

 

Ending balance

 

$

573,872,294

 

$

64,047,014

 

$

29,595,404

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

5,296,423

 

$

862,015

 

$

325,048

 

 


*  Comprised of one investment that transferred to Level 2 due to increased observable market activity.

†  Comprised of one investment that transferred from Level 2 due to reduced trading volumes.

 

 

 

Investment Manager Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

4,060,800

 

$

7,631,335

 

$

2,837,707

 

Net realized and unrealized gains (losses)

 

(1,860

)

(70,989

)

(188,519

)

Acquisitions

 

 

 

230,938

 

Dispositions

 

(4,500,000

)

 

(27,479

)

Ending balance

 

$

(441,060

)‡

$

7,560,346

 

$

2,852,647

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

(1,860

)

$

(70,989

)

$

(215,999

)

 


‡  Negative balance relates to an unfunded commitment that was acquired and valued at a discount.

 

There were no transfers between Level 1 and 2 during the three months ended March 31, 2014.

 

S-F-22



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

At March 31, 2013, the Company’s investments were categorized as follows:

 

Level

 

Basis for Determining Fair Value

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

1

 

Quoted prices in active markets for identical assets

 

$

 

$

 

$

759,522

 

2

 

Other observable market inputs *

 

111,560,238

 

61,901,366

 

 

3

 

Independent third-party pricing sources that employ significant unobservable inputs

 

275,074,150

 

17,509,840

 

34,225,001

 

3

 

Investment Manager valuations with significant unobservable inputs

 

 

7,552,970

 

1,411,858

 

Total

 

 

 

$

386,634,388

 

$

86,964,176

 

$

36,396,381

 

 


* For example, quoted prices in inactive markets or quotes for comparable investments.

 

Changes in investments categorized as Level 3 during the three months ended March 31, 2013 were as follows:

 

 

 

Independent Third-Party Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

359,343,326

 

$

17,171,637

 

$

32,675,370

 

Net realized and unrealized gains (losses)

 

(2,705,665

)

332,962

 

1,418,164

 

Acquisitions

 

15,489,607

 

5,241

 

778,020

 

Dispositions

 

(38,401,835

)

 

(646,553

)

Transfers out of Level 3 †

 

(58,651,283

)

 

 

Ending balance

 

$

275,074,150

 

$

17,509,840

 

$

34,225,001

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

(1,074,858

)

$

332,962

 

$

1,418,164

 

 


† Comprised of eight investments that transferred to Level 2 due to increased observable market activity.

 

 

 

Investment Manager Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

 

$

7,167,458

 

$

1,424,764

 

Net realized and unrealized gains (losses)

 

 

350,718

 

(12,906

)

Acquisitions

 

 

34,794

 

 

Ending balance

 

$

 

$

7,552,970

 

$

1,411,858

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

 

$

350,718

 

$

(12,906

)

 

There were no transfers between Level 1 and 2 during the three months ended March 31, 2013.

 

S-F-23



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Investment Transactions

 

Investment transactions are recorded on the trade date, except for private transactions that have conditions to closing, which are recorded on the closing date. The cost of investments purchased is based upon the purchase price plus those professional fees which are specifically identifiable to the investment transaction. Realized gains and losses on investments are recorded based on the identification method, which typically allocates the highest cost inventory to the basis of investments sold.

 

Cash and Cash Equivalents

 

Cash consists of amounts held in accounts with brokerage firms and the custodian bank. Cash equivalents consist of highly liquid investments with an original maturity of three months or less.

 

Repurchase Agreements

 

In connection with transactions in repurchase agreements, it is the Company’s policy that the custodian take possession of the underlying collateral, the fair value of which is required to exceed the principal amount of the repurchase transaction, including accrued interest, at all times. If the seller defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.

 

Restricted Investments

 

The Company may invest without limitation in instruments that are subject to legal or contractual restrictions on resale. These instruments generally may be resold to institutional investors in transactions exempt from registration or to the public if the securities are registered. Disposal of these investments may involve time-consuming negotiations and additional expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted investments is included at the end of the Consolidated Statement of Investments. Restricted investments, including any restricted investments in affiliates, are valued in accordance with the investment valuation policies discussed above.

 

Foreign Investments

 

The Company may invest in instruments traded in foreign countries and denominated in foreign currencies. Foreign currency denominated investments comprised approximately 2.7% and 2.7% of total investments at March 31, 2014 and December 31, 2013, respectively. Such positions were converted at the respective closing rate in effect at March 31, 2014 and December 31, 2013 and reported in U.S. dollars. Purchases and sales of investments and income and expense items denominated in foreign currencies, when they occur, are translated into U.S. dollars on the respective dates of such transactions. The portion of gains and losses on foreign investments resulting from fluctuations in foreign currencies is included in net realized and unrealized gain or loss from investments.

 

S-F-24


 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Investments in foreign companies and securities of foreign governments may involve special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government. These risks include, among other things, revaluation of currencies, less reliable information about issuers, different transaction clearance and settlement practices, and potential future adverse political and economic developments. Moreover, investments in foreign companies and securities of foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies and the U.S. government.

 

Derivatives

 

In order to mitigate certain currency exchange and interest rate risks, the Partnership has entered into certain swap and option transactions. All derivatives are recognized as either assets or liabilities in the Consolidated Statement of Assets and Liabilities. The transactions entered into are accounted for using the mark-to-market method with the resulting change in fair value recognized in earnings for the current period. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in interest rates and the value of foreign currency relative to the U.S. dollar.

 

The Partnership did not enter into any new derivative transactions during the three months ended March 31, 2014. At March 31, 2014, the Partnership held an interest rate cap with a notional amount of $25,000,000 and a cross currency basis swap with a notional amount of $4,289,019. Gains and losses from derivatives during the three months ended March 31, 2014 were included in net realized and unrealized loss on investments in the Consolidated Statement of Operations as follows:

 

Instrument

 

Realized Gains
(Losses)

 

Unrealized Gains
(Losses)

 

Cross currency basis swaps

 

$

 

$

30,499

 

Interest rate cap

 

$

 

$

(5,534

)

 

The Partnership did not enter into any new derivative transactions during the three months ended March 31, 2013. At March 31, 2013, the Partnership held a cross currency basis swap with a notional amount of $6,040,944. Gains and losses from derivatives during the three months ended March 31, 2013 were included in net realized and unrealized loss on investments in the Consolidated Statement of Operations as follows:

 

Instrument

 

Realized Gains
(Losses)

 

Unrealized Gains
(Losses)

 

Cross currency basis swaps

 

$

 

$

169,983

 

 

Valuations of derivatives held at March 31, 2014 and March 31, 2013 were determined using observable market inputs other than quoted prices in active markets for identical assets and, accordingly, are classified as Level 2 in the GAAP valuation hierarchy.

 

S-F-25



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Debt Issuance Costs

 

Costs of approximately $3.5 million were incurred during 2006 in connection with placing the Partnership’s revolving credit facility (see Note 4). Additional costs of approximately $1.5 million were incurred during 2013 in connection with the extension of the facility. These costs were deferred and are being amortized on a straight-line basis over the estimated remaining life of the facility. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Company or the Partnership.

 

Costs of approximately $1.6 million were incurred during 2013 in connection with placing TCPC Funding’s revolving credit facility (see Note 4). Additional costs of approximately $0.8 million were incurred in 2014 in connection with the extension of the facility. These costs were deferred and are being amortized on a straight-line basis over three years, the estimated life of that facility. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Company or the Partnership.

 

Revenue Recognition

 

Interest and dividend income, including income paid in kind, is recorded on an accrual basis. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts, earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income received upon the early repayment of a loan or debt security are included in interest income.

 

Certain debt investments are purchased at a considerable discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. GAAP generally requires that discounts on the acquisition of corporate bonds, municipal bonds and treasury bonds be amortized using the effective-interest or constant-yield method. GAAP also requires the collectability of interest to be considered when making accruals. Accordingly, when accounting for purchase discounts, discount accretion income is recognized when it is probable that such amounts will be collected, generally at disposition. When principal payments on a loan are received in an amount in excess of the loan’s amortized cost, the excess principal payments are recorded as interest income.

 

Income Taxes

 

The Company intends to comply with the applicable provisions of the Internal Revenue Code of 1986, as amended, pertaining to regulated investment companies and to make distributions of taxable income sufficient to relieve it from substantially all federal income taxes. Accordingly, no provision for income taxes is required in the consolidated financial statements. The income or loss of the Partnership, TCPC Funding and the SBIC is reported in the respective partners’ income tax returns. In accordance with ASC Topic 740 — Income Taxes , the Company recognizes in its consolidated financial statements the effect of a tax position when it is determined that such position is more likely than not, based on the technical merits, to be sustained upon examination. As of

 

S-F-26



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

March 31, 2014, all tax years of the Company, the Partnership, TCPC Funding and the SBIC since January 1, 2010 remain subject to examination by federal tax authorities. No such examinations are currently pending.

 

During the three months ended March 31, 2014, the Company did not pay any excise taxes. During the three months ended March 31, 2013 the Company paid $969,946 in excise taxes related to income earned in 2012.

 

Cost and unrealized appreciation and depreciation of the Partnership’s investments (including derivatives) for U.S. federal income tax purposes at March 31, 2014 were as follows:

 

Unrealized appreciation

 

$

34,662,507

 

Unrealized depreciation

 

(57,898,261

)

Net unrealized depreciation

 

(23,235,754

)

 

 

 

 

Cost

 

$

838,601,423

 

 

3. Management Fees, Incentive Compensation and Other Expenses

 

The Company’s management fee is calculated at an annual rate of 1.5% of total assets (excluding cash and cash equivalents) on a consolidated basis as of the beginning of each quarter and is payable to the Investment Manager quarterly in arrears.

 

Incentive compensation is only paid to the extent the total performance of the Company exceeds a cumulative 8% annual return since January 1, 2013 (the “Total Return Hurdle”). Beginning January 1, 2013, the incentive compensation equals 20% of net investment income (reduced by preferred dividends) and 20% of net realized gains (reduced by any net unrealized losses), subject to the Total Return Hurdle. The incentive compensation is payable quarterly in arrears as an allocation and distribution to the General Partner and is calculated as the difference between cumulative incentive compensation earned since January 1, 2013 and cumulative incentive compensation paid since January 1, 2013. A reserve for incentive compensation is accrued based on the amount of additional incentive compensation that would have been distributable to the General Partner assuming a hypothetical liquidation of the Company at net asset value on the balance sheet date. At March 31, 2014, the General Partner’s equity interest in the Partnership was comprised entirely of the reserve amount and is reported as a non-controlling interest in the consolidated financial statements of the Company.

 

The Company and the Partnership bear all respective expenses incurred in connection with the business of the Company and the Partnership, including fees and expenses of outside contracted services, such as custodian, administrative, legal, audit and tax preparation fees, costs of valuing investments, insurance costs, brokers’ and finders’ fees relating to investments, and any other transaction costs associated with the purchase and sale of investments.

 

S-F-27



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

4. Leverage

 

At March 31, 2014 and December 31, 2013, leverage was comprised of amounts outstanding under senior secured revolving credit facilities issued by the Partnership (the “Partnership Facility”) and TCPC Funding (the “TCPC Funding Facility,” and, together with the Partnership Facility, the “Revolving Facilities”) as well as amounts outstanding under a preferred leverage facility issued by the Partnership (the “Preferred Interests”), as follows:

 

 

 

March 31, 2014

 

December 31, 2013

 

Partnership Facility

 

$

82,000,000

 

$

45,000,000

 

TCPC Funding Facility

 

75,000,000

 

50,000,000

 

Total Debt

 

$

157,000,000

 

$

95,000,000

 

 

 

 

 

 

 

Preferred Interests

 

134,000,000

 

134,000,000

 

Total Leverage

 

$

291,000,000

 

$

229,000,000

 

 

The combined weighted-average interest and dividend rates on total amounts outstanding under the leverage facilities at March 31, 2014 and December 31, 2013 were 1.35% and 1.38%, respectively.

 

Amounts outstanding under the Revolving Facilities are carried at cost in the Statement of Assets and Liabilities. As of March 31, 2014, the estimated fair value of the TCPC Funding Facility approximated its carrying value, and the Partnership Facility had an estimated fair value of $81,286,654. The estimated fair values of the Revolving Facilities are determined by discounting projected remaining payments using market interest rates for our borrowings and entities with similar credit risks at the measurement date. At March 31, 2014, the Revolving Facilities would be deemed to be Level 3 in the GAAP valuation hierarchy.

 

Partnership Facility

 

The Partnership Facility provides for amounts to be drawn up to $116 million, subject to certain collateral and other restrictions. The Partnership Facility matures on July 31, 2016. Most of the cash and investments held directly by the Partnership, as well as the net assets of TCPC Funding and the SBIC, are included in the collateral for the facility.

 

Advances under the Partnership Facility through July 31, 2014 bear interest at an annual rate equal to 0.44% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). Advances under the Partnership Facility for periods from July 31, 2014 through the maturity date of the facility will bear interest at an annual rate equal to 2.5% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.20% per annum on the unused portion of the facility, or 0.25% per annum when less than $46.4 million in borrowings are outstanding. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Partnership fail to satisfy certain financial or other covenants. As of March 31, 2014, the Partnership was in full compliance with such covenants.

 

S-F-28



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

4. Leverage (continued)

 

TCPC Funding Facility

 

The TCPC Funding Facility, issued on May 15, 2013, provides for amounts to be drawn up to $150 million, subject to certain collateral and other restrictions. The TCPC Funding Facility matures on May 15, 2017, subject to extension by the lender at the request of TCPC Funding. The facility contains an accordion feature which allows for expansion of the facility up to $200 million subject to consent from the lender and other customary conditions. The cash and investments of TCPC Funding are included in the collateral for the facility.

 

As of March 31, 2014, borrowings under the TCPC Funding Facility bore interest at a rate of LIBOR plus 2.50% per annum. In connection with the extension and expansion of the facility on February 21, 2014, the interest rate was reduced to a rate of LIBOR plus 2.50% effective March 15, 2014.  In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.75% per annum on the unused portion of the facility, or 1.00% per annum when the unused portion is greater than 33% of the total facility. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should TCPC Funding fail to satisfy certain financial or other covenants. As of March 31, 2014, TCPC Funding was in full compliance with such covenants.

 

Preferred Equity

 

At March 31, 2014, the Preferred Interests were comprised of 6,700 Series A preferred limited partner interests issued and outstanding with a liquidation preference of $20,000 per interest. The Preferred Interests accrue dividends at an annual rate equal to 0.85% plus either LIBOR or the interestholder’s cost of funds (subject to a cap of LIBOR plus 20 basis points). The Preferred Interests are redeemable at the option of the Partnership, subject to certain conditions. Additionally, under certain conditions, the Partnership may be required to either redeem certain of the Preferred Interests or repay indebtedness, at the Partnership’s option. Such conditions would include a failure by the Partnership to maintain adequate collateral as required by its credit facility agreement or by the Statement of Preferences of the Preferred Interests or a failure by the Partnership to maintain sufficient asset coverage as required by the 1940 Act. As of March 31, 2014, the Partnership was in full compliance with such requirements.

 

5. Commitments, Concentration of Credit Risk and Off-Balance Sheet Risk

 

The Partnership, TCPC Funding and the SBIC conduct business with brokers and dealers that are primarily headquartered in New York and Los Angeles and are members of the major securities exchanges. Banking activities are conducted with a firm headquartered in the San Francisco area.

 

In the normal course of business, investment activities involve executions, settlement and financing of various transactions resulting in receivables from, and payables to, brokers, dealers and the custodian. These activities may expose the Company, the Partnership, TCPC Funding and the SBIC to risk in the event that such parties are unable to fulfill contractual obligations. Management does not anticipate any material losses from counterparties with whom it conducts business. Consistent with standard business practice, the Company, the

 

S-F-29



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

5. Commitments, Concentration of Credit Risk and Off-Balance Sheet Risk (continued)

 

Partnership, TCPC Funding and the SBIC enter into contracts that contain a variety of indemnifications, and are engaged from time to time in various legal actions. The maximum exposure under these arrangements and activities is unknown. However, management expects the risk of material loss to be remote.

 

The Consolidated Statement of Investments includes certain revolving loan facilities and other loan commitments held by the Partnership with aggregate unfunded balances of $36,361,742 at March 31, 2014. The Company has also provided a $20,861,473 guarantee on a bridge facility, which the Company believes is unlikely to be funded.

 

6. Related Parties

 

The Company, the Partnership, TCPC Funding, the SBIC, the Investment Manager, the General Partner and their members and affiliates may be considered related parties. From time to time, the Partnership advances payments to third parties on behalf of the Company which are reimbursable through deductions from distributions to the Company. At March 31, 2014, no such amounts were outstanding. From time to time, the Investment Manager advances payments to third parties on behalf of the Company and the Partnership and receives reimbursement from the Company and the Partnership. At March 31, 2014, amounts reimbursable to the Investment Manager totaled $463,629, as reflected in the Consolidated Statement of Assets and Liabilities.

 

Pursuant to administration agreements between the Administrator and each of the Company and the Partnership (the “Administration Agreements”), the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to the Company or the Partnership, as well as costs and expenses incurred by the Administrator or its affiliates relating to any administrative, operating, or other non-investment advisory services provided by the Administrator or its affiliates to the Company or the Partnership. For the three months ended March 31, 2014, expenses allocated pursuant to the Administration Agreements totaled $256,806. The Administrator waived reimbursement of all administrative expenses prior to January 1, 2013.

 

7. Stockholders’ Equity and Dividends

 

The following table summarizes the total shares issued in connection with the Company’s dividend reinvestment plan for the three months ended March 31, 2014.

 

 

 

Shares Issued

 

Price Per Share

 

Net Proceeds

 

Shares issued from dividend reinvestment plan

 

104

 

$

16.55

 

$

1,717

 

 

S-F-30



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

7. Stockholders’ Equity and Dividends

 

The following table summarizes the total shares issued and proceeds received in the public offering of the Company’s common stock net of underwriting discounts and offering costs as well as shares issued in connection with the Company’s dividend reinvestment plan for the year ended December 31, 2013.

 

 

 

Shares Issued

 

Price Per Share

 

Net Proceeds

 

May 21, 2013 public offering

 

5,175,000

 

$

15.63

 

$

78,176,790

 

October 1, 2013 public offering

 

4,370,000

 

$

15.76

 

$

66,473,600

 

December 18, 2013 public offering

 

5,175,000

 

$

16.00

 

$

79,912,500

 

Shares issued from dividend reinvestment plan

 

2,288

 

$

16.35

 

$

37,416

 

 

The Company’s dividends are recorded on the ex-dividend date. The following table summarizes the Company’s dividends declared for the three months ended March 31, 2014:

 

Date Declared

 

Record Date

 

Payment Date

 

Amount Per Share

 

Total Amount

 

March 6, 2014

 

March 17, 2014

 

March 31, 2014

 

$

0.36

 

$

13,031,970

 

 

 

 

 

 

 

 

 

$

13,031,970

 

 

The following table summarizes the Company’s dividends declared for the three months ended March 31, 2013:

 

Date Declared

 

Record Date

 

Payment Date

 

Amount Per Share

 

Total Amount

 

March 7, 2013

 

March 18, 2013

 

March 29, 2013

 

$

0.40

*

$

8,591,051

 

 

 

 

 

 

 

 

 

$

8,591,051

 

 


* Includes a special dividend of $0.05.

 

8. Earnings Per Share

 

The following information sets forth the computation of the net increase in net assets per share resulting from operations for the three months ended March 31, 2014 and March 31, 2013:

 

 

 

Three Months Ended
March 31, 2014

 

Three Months Ended
March 31, 2013

 

Net increase in net assets applicable to common shareholders resulting from operations

 

$

18,089,625

 

$

12,779,280

 

Weighted average shares outstanding

 

36,199,917

 

21,477,628

 

Earnings per share

 

$

0.50

 

$

0.60

 

 

S-F-31


 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

9. Subsequent Events

 

On April 22, 2014, the SBIC received a license from the SBA to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958.

 

On May 8, 2014, the Company’s board of directors declared a regular second quarter cash dividend of $0.36 per share and a $0.05 per share special dividend. Both dividends are payable on June 30, 2014 to stockholders of record as of the close of business on June 18, 2014.

 

S-F-32



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

10. Financial Highlights

 

 

 

Three Months Ended

 

 

 

March 31, 2014

 

March 31, 2013

 

 

 

 

 

 

 

Per Common Share

 

 

 

 

 

Per share NAV at beginning of period (1)

 

$

15.18

 

$

14.71

 

 

 

 

 

 

 

Investment operations:

 

 

 

 

 

Net investment income

 

0.49

 

0.65

 

Net realized and unrealized gain

 

0.14

 

0.11

 

Dividends on Series A preferred equity facility

 

(0.01

)

(0.01

)

Incentive allocation reserve and distributions

 

(0.12

)

(0.15

)

Total from investment operations

 

0.50

 

0.60

 

 

 

 

 

 

 

Distributions to common shareholders from:

 

 

 

 

 

Net investment income

 

(0.36

)

(0.40

)

Per share NAV at end of period

 

$

15.32

 

$

14.91

 

 

 

 

 

 

 

Per share market price at end of period

 

$

16.55

 

$

15.96

 

 

 

 

 

 

 

Total return based on market value (1), (2)

 

0.8

%

11.0

%

Total return based on net asset value (1), (2)

 

3.3

%

4.1

%

 

 

 

 

 

 

Shares outstanding at end of period

 

36,200,020

 

21,478,732

 

 

S-F-33



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

10. Financial Highlights (continued)

 

 

 

Three Months Ended

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Ratios to average common equity: (4), (5)

 

 

 

 

 

Net investment income (6)

 

12.4

%

16.8

%

Expenses

 

3.6

%

3.6

%

Expenses and incentive allocation (7)

 

4.2

%

4.4

%

 

 

 

 

 

 

Ending common shareholder equity

 

$

554,670,627

 

$

320,635,079

 

Portfolio turnover rate

 

8.7

%

7.8

%

Weighted-average debt outstanding

 

$

98,266,667

 

$

73,355,556

 

Weighted-average interest rate on debt

 

1.9

%

0.8

%

Weighted-average number of common shares

 

36,199,917

 

21,477,640

 

Average debt per share

 

$

2.71

 

$

3.42

 

 


(1)

Not annualized.

(2)

Total return based on market value equals the change in ending market value per share during the period plus declared dividends per share during the period, divided by the market value per share at the beginning of the period.

(3)

Total return based on net asset value equals the change in net asset value per share during the period plus declared dividends per share during the period, divided by the beginning net asset value per share at the beginning of the period.

(4)

Annualized, except for incentive allocation.

(5)

These ratios include interest expense but do not reflect the effect of dividends on the preferred equity facility.

(6)

Net of incentive allocation.

(7)

Includes incentive allocation payable to the General Partner and all Company expenses.

 

S-F-34



 

TCP Capital Corp.

 

Consolidated Schedule of Changes in Investments in Affiliates (1)

 

Three Months Ended March 31, 2014

 

Security

 

Acquisitions

 

Dispositions (2)

 

Dividends or
Interest (3)

 

 

 

 

 

 

 

 

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16

 

$

 

$

 

$

316,578

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16

 

 

 

 

Anacomp, Inc., Class A Common Stock

 

 

 

 

EPMC HoldCo, LLC, Membership Units

 

 

 

 

ESP Holdings, Inc., Cumulative Preferred 15%

 

 

(2,489,100

)

1,968,748

 

ESP Holdings, Inc., Common Stock

 

 

(2,955,297

)

289,315

 

ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19

 

 

(7,959,369

)

205,175

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18

 

 

(37,500

)

332,896

 

KAGY Holding Company, Inc., Series A Preferred Stock

 

 

 

 

N510UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(23,046

)

15,999

 

N512UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(22,551

)

16,292

 

N536UA Aircraft Secured Mortgage, 16%, due 9/29/14

 

 

(39,471

)

3,551

 

N545UA Aircraft Secured Mortgage, 16%, due 8/29/15

 

 

(35,371

)

9,269

 

N585UA Aircraft Secured Mortgage, 20%, due 10/25/16

 

 

(26,478

)

19,115

 

N659UA Aircraft Secured Mortgage, 12%, due 2/28/16

 

 

(269,027

)

78,303

 

N661UA Aircraft Secured Mortgage, 12%, due 5/4/16

 

 

(260,901

)

81,466

 

N510UA Equipment Trust Beneficial Interests

 

23,046

 

(8,978

)

20,872

 

N512UA Equipment Trust Beneficial Interests

 

22,551

 

(8,831

)

20,723

 

N536UA Equipment Trust Beneficial Interests

 

39,471

 

(11,300

)

29,930

 

N545UA Equipment Trust Beneficial Interests

 

35,371

 

(11,884

)

26,412

 

N585UA Equipment Trust Beneficial Interests

 

26,478

 

(11,694

)

23,102

 

N913DL Aircraft Secured Mortgage, 8%, due 3/15/17

 

 

(20,362

)

5,573

 

N918DL Aircraft Secured Mortgage, 8%, due 8/15/18

 

 

(18,025

)

7,576

 

N954DL Aircraft Secured Mortgage, 8%, due 3/20/19

 

 

(20,708

)

10,099

 

N955DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(19,920

)

10,485

 

N956DL Aircraft Secured Mortgage, 8%, due 5/20/19

 

 

(20,251

)

10,462

 

N957DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(20,094

)

10,576

 

N959DL Aircraft Secured Mortgage, 8%, due 7/20/19

 

 

(19,938

)

10,690

 

N960DL Aircraft Secured Mortgage, 8%, due 10/20/19

 

 

(19,644

)

11,119

 

N961DL Aircraft Secured Mortgage, 8%, due 8/20/19

 

 

(20,119

)

10,986

 

N976DL Aircraft Secured Mortgage, 8%, due 2/15/18

 

 

(20,924

)

7,674

 

N913DL Equipment Trust Beneficial Interests

 

20,362

 

(23,508

)

3,996

 

N918DL Equipment Trust Beneficial Interests

 

18,025

 

(22,334

)

3,175

 

N954DL Equipment Trust Beneficial Interests

 

20,708

 

(26,938

)

2,896

 

N955DL Equipment Trust Beneficial Interests

 

19,920

 

(26,609

)

2,687

 

N956DL Equipment Trust Beneficial Interests

 

20,251

 

(35,968

)

(6,301

)

N957DL Equipment Trust Beneficial Interests

 

20,094

 

(26,864

)

2,634

 

N959DL Equipment Trust Beneficial Interests

 

19,938

 

(26,754

)

2,579

 

N960DL Equipment Trust Beneficial Interests

 

19,644

 

(26,669

)

2,366

 

N961DL Equipment Trust Beneficial Interests

 

20,119

 

(27,137

)

2,424

 

N976DL Equipment Trust Beneficial Interests

 

20,924

 

(25,640

)

2,776

 

RM Holdco, LLC, Membership Units

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18

 

 

 

14,461

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/19/16

 

68,263

 

(47,493

)

100,987

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/19/16

 

262,284

 

 

332,454

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/19/16

 

85,754

 

 

108,422

 

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16

 

54,984

 

 

69,456

 

United N659UA-767, LLC (N659UA)

 

269,027

 

(168,678

)

92,624

 

United N661UA-767, LLC (N661UA)

 

260,901

 

(165,758

)

97,034

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units

 

 

 

 

 

Notes to Schedule of Changes in Investments in Affiliates:

 


(1)    The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Company of 5% or more of the issuers’ voting securities.

(2)    Dispositions include sales, paydowns, mortgage amortizations, and aircraft depreciation.

(3)    Also includes fee and lease income as applicable.

 

S-F-35



 

TCP Capital Corp.

 

Consolidated Schedule of Changes in Investments in Affiliates (1)

 

Three Months Ended March 31, 2014

 

Security

 

Acquisitions

 

Dispositions (2)

 

Dividends or
Interest (3)

 

 

 

 

 

 

 

 

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16

 

$

2,056,927

 

$

 

$

128,215

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16

 

7,586,317

 

 

640,007

 

Anacomp, Inc., Class A Common Stock

 

 

 

 

EPMC HoldCo, LLC, Membership Units

 

 

(1,481,930

)

 

ESP Holdings, Inc., Cumulative Preferred 15%

 

 

 

 

ESP Holdings, Inc., Common Stock

 

 

 

32,627

 

ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19

 

749,529

 

 

1,199,575

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18

 

14,850,000

 

 

83,281

 

International Wire Group Holdings, Inc., Senior Secured Notes, 8.5%, due 10/15/17

 

 

(15,759,750

)

443,715

 

KAGY Holding Company, Inc., Series A Preferred Stock

 

8,096,057

 

(1,644

)

 

N510UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(81,562

)

74,646

 

N512UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(79,808

)

75,593

 

N536UA Aircraft Secured Mortgage, 16%, due 9/29/14

 

 

(143,097

)

29,100

 

N545UA Aircraft Secured Mortgage, 16%, due 8/29/15

 

 

(128,230

)

50,422

 

N585UA Aircraft Secured Mortgage, 20%, due 10/25/16

 

 

(93,707

)

88,705

 

N659UA Aircraft Secured Mortgage, 12%, due 2/28/16

 

 

(999,280

)

390,117

 

N661UA Aircraft Secured Mortgage, 12%, due 5/4/16

 

 

(969,098

)

401,041

 

N510UA Equipment Trust Beneficial Interests

 

81,562

 

(35,912

)

72,866

 

N512UA Equipment Trust Beneficial Interests

 

79,808

 

(35,323

)

72,497

 

N536UA Equipment Trust Beneficial Interests

 

143,097

 

(45,201

)

104,929

 

N545UA Equipment Trust Beneficial Interests

 

128,359

 

(47,536

)

92,525

 

N585UA Equipment Trust Beneficial Interests

 

93,707

 

(46,776

)

80,203

 

N913DL Aircraft Secured Mortgage, 8%, due 3/15/17

 

 

(77,509

)

26,248

 

N918DL Aircraft Secured Mortgage, 8%, due 8/15/18

 

 

(68,612

)

33,806

 

N954DL Aircraft Secured Mortgage, 8%, due 3/20/19

 

 

(78,825

)

44,415

 

N955DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(75,824

)

45,803

 

N956DL Aircraft Secured Mortgage, 8%, due 5/20/19

 

 

(77,085

)

45,775

 

N957DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(76,487

)

46,204

 

N959DL Aircraft Secured Mortgage, 8%, due 7/20/19

 

 

(75,896

)

46,629

 

N960DL Aircraft Secured Mortgage, 8%, due 10/20/19

 

 

(74,776

)

48,285

 

N961DL Aircraft Secured Mortgage, 8%, due 8/20/19

 

 

(76,582

)

47,846

 

N976DL Aircraft Secured Mortgage, 8%, due 2/15/18

 

 

(79,647

)

34,759

 

N913DL Equipment Trust Beneficial Interests

 

77,509

 

(94,032

)

12,045

 

N918DL Equipment Trust Beneficial Interests

 

68,612

 

(89,338

)

9,213

 

N954DL Equipment Trust Beneficial Interests

 

78,825

 

(107,751

)

7,578

 

N955DL Equipment Trust Beneficial Interests

 

75,824

 

(106,437

)

6,891

 

N956DL Equipment Trust Beneficial Interests

 

77,085

 

(107,904

)

6,845

 

N957DL Equipment Trust Beneficial Interests

 

76,487

 

(107,457

)

6,648

 

N959DL Equipment Trust Beneficial Interests

 

75,896

 

(107,015

)

6,456

 

N960DL Equipment Trust Beneficial Interests

 

74,776

 

(106,678

)

5,662

 

N961DL Equipment Trust Beneficial Interests

 

76,582

 

(108,546

)

5,805

 

N967DL Equipment Trust Beneficial Interests

 

79,647

 

(102,560

)

7,056

 

RM Holdco, LLC, Membership Units

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18

 

57,991

 

 

57,992

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/19/16

 

16,974

 

(149,183

)

413,430

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/19/16

 

567,205

 

 

1,258,016

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/19/16

 

186,901

 

 

410,004

 

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16

 

1,339,883

 

 

182,711

 

United N659UA-767, LLC (N659UA)

 

999,280

 

(674,714

)

316,842

 

United N661UA-767, LLC (N661UA)

 

969,098

 

(663,034

)

313,627

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units

 

5,000,000

 

 

 

 

Notes to Schedule of Changes in Investments in Affiliates:

 


(1)    The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Company of 5% or more of the issuers’ voting securities.

(2)    Dispositions include sales, paydowns, mortgage amortizations, and aircraft depreciation.

(3)    Also includes fee and lease income as applicable.

 

S-F-36



 

TCP Capital Corp.

 

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers

 

March 31, 2014

 

Investment

 

Acquisition Date

 

 

 

AIP/IS Holdings, LLC, Membership Units

 

Var. 2009 & 2010

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19

 

9/26/13

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17

 

3/5/12

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19

 

10/19/12

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18

 

7/26/13

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16

 

1/20/11

Findly Talent, LLC, Membership Units

 

1/1/14

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock

 

12/4/13

Hunt Companies, Inc., Senior Secured Notes, 9.625%, due 3/1/21

 

2/25/14

Integra Telecom, Inc., Common Stock

 

11/19/09

Integra Telecom, Inc., Warrants

 

11/19/09

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18

 

5/8/13

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21

 

8/1/13

Marsico Holdings, LLC Common Interest Units

 

9/10/12

Precision Holdings, LLC, Class C Membership Interests

 

Var. 2010 & 2011

Shop Holdings, LLC, Convertible Promissory Note, 5%, due 8/5/15

 

2/5/14

Shop Holding, LLC, Class A Units

 

6/2/11

Shop Holding, LLC, Warrants to Purchase Class A Units

 

6/2/11

SiTV, Inc., Warrants to Purchase Common Stock

 

8/3/12

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock

 

9/25/13

STG-Fairway Holdings, LLC, Class A Units

 

12/30/10

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19

 

9/26/11

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18

 

11/13/13

V Telecom Investment S.C.A, Common Shares

 

11/9/12

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17

 

6/6/13

 

December 31, 2013

 

Investment

 

Acquisition Date

 

 

 

AIP/IS Holdings, LLC, Membership Units

 

Var. 2009 & 2010

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19

 

9/26/13

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17

 

3/5/12

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19

 

10/19/12

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18

 

7/26/13

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16

 

1/20/11

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock

 

12/4/13

Integra Telecom, Inc., Common Stock

 

11/19/09

Integra Telecom, Inc., Warrants

 

11/19/09

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18

 

5/8/13

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21

 

8/1/13

Marsico Holdings, LLC Common Interest Units

 

9/10/12

Precision Holdings, LLC, Class C Membership Interests

 

Var. 2010 & 2011

Shop Holding, LLC, Class A Units

 

6/2/11

Shop Holding, LLC, Warrants to Purchase Class A Units

 

6/2/11

SiTV, Inc., Warrants to Purchase Common Stock

 

8/3/12

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock

 

9/25/13

St Barbara Ltd., 1st Priority Senior Secured Notes, 8.875%, due 4/15/18

 

3/22/13

STG-Fairway Holdings, LLC, Class A Units

 

12/30/10

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19

 

9/26/11

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18

 

11/13/13

V Telecom Investment S.C.A, Common Shares

 

11/9/12

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17

 

6/6/13

 

S-F-37


 

 

TCP Capital Corp

 

Consolidating Statement of Assets and Liabilities

 

March 31, 2014

 

 

 

 

 

Special Value

 

 

 

 

 

 

 

TCP

 

Continuation

 

 

 

TCP

 

 

 

Capital Corp.

 

Partners, LP

 

 

 

Capital Corp.

 

 

 

Standalone

 

Consolidated

 

Eliminations

 

Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

Companies less than 5% owned

 

$

 

$

744,016,378

 

$

 

$

744,016,378

 

Companies 5% to 25% owned

 

 

53,487,621

 

 

53,487,621

 

Companies more than 25% owned

 

 

18,153,749

 

 

18,153,749

 

Investment in subsidiary

 

555,836,984

 

 

(555,836,984

)

 

Total investments

 

555,836,984

 

815,657,748

 

(555,836,984

)

815,657,748

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

27,141,436

 

 

27,141,436

 

Accrued interest income

 

 

8,998,096

 

 

8,998,096

 

Deferred debt issuance costs

 

 

3,360,310

 

 

3,360,310

 

Receivable for investments sold

 

 

1,031,717

 

 

1,031,717

 

Interest rate cap option

 

 

8,605

 

 

8,605

 

Receivable from subsidiary

 

98,697

 

 

(98,697

)

 

Prepaid expenses and other assets

 

12,545

 

1,171,578

 

 

1,184,123

 

Total assets

 

555,948,226

 

857,369,490

 

(555,935,681

)

857,382,035

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Debt

 

 

157,000,000

 

 

157,000,000

 

Incentive allocation payable

 

 

3,486,403

 

 

3,486,403

 

Payable for investment securities purchased

 

 

1,514,602

 

 

1,514,602

 

Payable to the Investment Manager

 

319,323

 

144,306

 

 

463,629

 

Interest payable

 

 

332,040

 

 

332,040

 

Unrealized depreciation on swaps

 

 

300,684

 

 

300,684

 

Payable to Parent

 

 

98,697

 

(98,697

)

 

Accrued expenses and other liabilities

 

958,276

 

1,957,430

 

 

2,915,706

 

Total liabilities

 

1,277,599

 

164,834,162

 

(98,697

)

166,013,064

 

 

 

 

 

 

 

 

 

 

 

Preferred equity facility

 

 

 

 

 

 

 

 

 

Series A preferred limited partner interests

 

 

134,000,000

 

 

134,000,000

 

Accumulated dividends on Series A preferred equity facility

 

 

493,757

 

 

493,757

 

Total preferred limited partner interests

 

 

134,493,757

 

 

134,493,757

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

 

 

 

 

 

 

 

 

General Partner interest in Special Value Continuation Partners, LP

 

 

 

2,204,587

 

2,204,587

 

 

 

 

 

 

 

 

 

 

 

Net assets

 

$

554,670,627

 

$

558,041,571

 

$

(558,041,571

)

$

554,670,627

 

 

 

 

 

 

 

 

 

 

 

Composition of net assets

 

 

 

 

 

 

 

 

 

Common stock

 

$

36,200

 

$

 

$

 

$

36,200

 

Additional paid-in capital

 

667,843,737

 

666,530,318

 

(666,530,318

)

667,843,737

 

Accumulated deficit

 

(113,209,310

)

(108,488,747

)

110,693,334

 

(111,004,723

)

Non-controlling interest

 

 

 

(2,204,587

)

(2,204,587

)

Net assets

 

$

554,670,627

 

$

558,041,571

 

$

(558,041,571

)

$

554,670,627

 

 

S-F-38



 

TCP Capital Corp

 

Consolidating Statement of Assets and Liabilities

 

December 31, 2013

 

 

 

 

 

Special Value

 

 

 

 

 

 

 

TCP

 

Continuation

 

 

 

TCP

 

 

 

Capital Corp.

 

Partners, LP

 

 

 

Capital Corp.

 

 

 

Standalone

 

Consolidated

 

Eliminations

 

Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

Companies less than 5% owned

 

$

 

$

678,326,915

 

$

 

$

678,326,915

 

Companies 5% to 25% owned

 

 

69,068,808

 

 

69,068,808

 

Companies more than 25% owned

 

 

18,867,236

 

 

18,867,236

 

Investment in subsidiary

 

551,095,042

 

 

(551,095,042

)

 

Total investments

 

551,095,042

 

766,262,959

 

(551,095,042

)

766,262,959

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

22,984,182

 

 

22,984,182

 

Accrued interest income

 

 

6,739,105

 

 

6,739,105

 

Receivable for investments sold

 

 

3,605,964

 

 

3,605,964

 

Deferred debt issuance costs

 

 

2,969,085

 

 

2,969,085

 

Interest rate cap option

 

 

14,139

 

 

14,139

 

Receivable from subsidiary

 

531,717

 

 

(531,717

)

 

Prepaid expenses and other assets

 

30,493

 

723,275

 

 

753,768

 

Total assets

 

551,657,252

 

803,298,709

 

(551,626,759

)

803,329,202

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Debt

 

 

95,000,000

 

 

95,000,000

 

Payable for investment securities purchased

 

 

14,706,942

 

 

14,706,942

 

Incentive allocation payable

 

 

3,318,900

 

 

3,318,900

 

Payable to the Investment Manager

 

833,737

 

287,371

 

 

1,121,108

 

Interest payable

 

 

430,969

 

 

430,969

 

Unrealized depreciation on swaps

 

 

331,183

 

 

331,183

 

Payable to Parent

 

 

531,717

 

(531,717

)

 

Accrued expenses and other liabilities

 

1,212,260

 

1,923,750

 

 

3,136,010

 

Total liabilities

 

2,045,997

 

116,530,832

 

(531,717

)

118,045,112

 

 

 

 

 

 

 

 

 

 

 

Preferred equity facility

 

 

 

 

 

 

 

 

 

Series A preferred limited partner interests

 

 

134,000,000

 

 

134,000,000

 

Accumulated dividends on Series A preferred equity facility

 

 

504,252

 

 

504,252

 

Total preferred limited partner interests

 

 

134,504,252

 

 

134,504,252

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

 

 

 

 

 

 

 

 

General Partner interest in Special Value Continuation Partners, LP

 

 

 

1,168,583

 

1,168,583

 

 

 

 

 

 

 

 

 

 

 

Net assets

 

$

549,611,255

 

$

552,263,625

 

$

(552,263,625

)

$

549,611,255

 

 

 

 

 

 

 

 

 

 

 

Composition of net assets

 

 

 

 

 

 

 

 

 

Common stock

 

$

36,200

 

$

 

$

 

$

36,200

 

Additional paid-in capital

 

667,842,020

 

666,530,318

 

(666,530,318

)

667,842,020

 

Accumulated deficit

 

(118,266,965

)

(114,266,693

)

115,435,276

 

(117,098,382

)

Non-controlling interest

 

 

 

(1,168,583

)

(1,168,583

)

Net assets

 

$

549,611,255

 

$

552,263,625

 

$

(552,263,625

)

$

549,611,255

 

 

S-F-39



 

TCP Capital Corp.

 

Consolidating Statement of Operations (Unaudited)

 

Three Months Ended March 31, 2014

 

 

 

 

 

Special Value

 

 

 

 

 

 

 

TCP

 

Continuation

 

 

 

TCP

 

 

 

Capital Corp.

 

Partners, LP

 

 

 

Capital Corp.

 

 

 

Standalone

 

Consolidated

 

Eliminations

 

Consolidated

 

Investment income

 

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

Companies less than 5% owned

 

$

 

$

18,140,743

 

$

 

$

18,140,743

 

Companies 5% to 25% owned

 

 

1,336,864

 

 

1,336,864

 

Companies more than 25% owned

 

 

257,627

 

 

257,627

 

Dividend income:

 

 

 

 

 

 

 

 

 

Companies 5% to 25% owned

 

 

1,968,748

 

 

1,968,748

 

Other income:

 

 

 

 

 

 

 

 

 

Companies less than 5% owned

 

 

634,733

 

 

634,733

 

Companies 5% to 25% owned

 

 

121,039

 

 

121,039

 

Companies more than 25% owned

 

 

208,890

 

 

208,890

 

Total interest and related investment income

 

 

22,668,644

 

 

22,668,644

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

Management and advisory fees

 

 

2,886,208

 

 

2,886,208

 

Interest expense

 

 

456,861

 

 

456,861

 

Amortization of deferred debt issuance costs

 

 

372,755

 

 

372,755

 

Administration expenses

 

 

256,806

 

 

256,806

 

Legal fees, professional fees and due diligence expenses

 

86,396

 

117,760

 

 

204,156

 

Commitment fees

 

 

191,199

 

 

191,199

 

Director fees

 

28,689

 

57,023

 

 

85,712

 

Insurance expense

 

17,948

 

35,952

 

 

53,900

 

Custody fees

 

875

 

49,932

 

 

50,807

 

Other operating expenses

 

303,605

 

15,981

 

 

319,586

 

Total expenses

 

437,513

 

4,440,477

 

 

4,877,990

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

(437,513

)

18,228,167

 

 

17,790,654

 

 

 

 

 

 

 

 

 

 

 

Net realized and unrealized gain (loss) on investments and foreign currency

 

 

 

 

 

 

 

 

 

Net realized loss:

 

 

 

 

 

 

 

 

 

Investments in companies less than 5% owned

 

 

(6,795,721

)

 

(6,795,721

)

Investments in companies 5% to 25% owned

 

 

375

 

 

375

 

Net realized loss

 

 

(6,795,346

)

 

(6,795,346

)

Net change in unrealized appreciation/depreciation

 

 

11,975,364

 

 

11,975,364

 

Net realized and unrealized gain

 

 

5,180,018

 

 

5,180,018

 

 

 

 

 

 

 

 

 

 

 

Interest in earnings of subsidiary

 

18,527,138

 

 

(18,527,138

)

 

Dividends paid on Series A preferred equity facility

 

 

(369,135

)

 

(369,135

)

Net change in accumulated dividends on Series A preferred equity facility

 

 

10,495

 

 

10,495

 

Distributions of incentive allocation to the General Partner from net investment income

 

 

 

(3,486,403

)

(3,486,403

)

Distributions of incentive allocation to the General Partner from net realized gains

 

 

 

 

 

Net change in reserve for incentive allocation

 

 

 

(1,036,004

)

(1,036,004

)

 

 

 

 

 

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

18,089,625

 

$

23,049,545

 

$

(23,049,545

)

$

18,089,625

 

 

S-F-40



 

TCP Capital Corp.

 

Consolidating Statement of Operations

 

Three Months Ended March 31, 2013

 

 

 

 

 

Special Value

 

 

 

 

 

 

 

TCP

 

Continuation

 

 

 

TCP

 

 

 

Capital Corp.

 

Partners, LP

 

 

 

Capital Corp.

 

 

 

Standalone

 

Standalone

 

Eliminations

 

Consolidated

 

Investment income

 

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

Unaffiliated issuers

 

$

 

$

15,240,367

 

$

 

$

15,240,367

 

Controlled companies

 

 

330,317

 

 

330,317

 

Affiliates

 

 

893,512

 

 

893,512

 

Other income:

 

 

 

 

 

 

 

 

 

Unaffiliated issuers

 

 

157,533

 

 

157,533

 

Controlled companies

 

 

142,911

 

 

142,911

 

Other Affiliates

 

 

101,103

 

 

101,103

 

Total interest and related investment income

 

 

16,865,743

 

 

16,865,743

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

Management and advisory fees

 

 

1,964,738

 

 

1,964,738

 

Administration expenses

 

 

167,808

 

 

167,808

 

Amortization of deferred debt issuance costs

 

 

108,564

 

 

108,564

 

Legal fees, professional fees and due diligence expenses

 

64,590

 

74,462

 

 

139,052

 

Interest expense

 

 

136,407

 

 

136,407

 

Commitment fees

 

 

22,589

 

 

22,589

 

Director fees

 

23,750

 

48,059

 

 

71,809

 

Insurance expense

 

12,072

 

24,201

 

 

36,273

 

Custody fees

 

875

 

28,544

 

 

29,419

 

Other operating expenses

 

56,562

 

136,409

 

 

192,971

 

Total expenses

 

157,849

 

2,711,781

 

 

2,869,630

 

 

 

 

 

 

 

 

 

 

 

Net investment income before taxes

 

(157,849

)

14,153,962

 

 

13,996,113

 

 

 

 

 

 

 

 

 

 

 

Excise tax expense

 

 

 

 

 

Net investment income

 

(157,849

)

14,153,962

 

 

13,996,113

 

 

 

 

 

 

 

 

 

 

 

Net realized and unrealized gain (loss) on investments and foreign currency

 

 

 

 

 

 

 

 

 

Net realized gain

 

 

517,658

 

 

517,658

 

Net change in unrealized appreciation/depreciation

 

19,326,769

 

1,837,731

 

(19,326,769

)

1,837,731

 

Net realized and unrealized gain (loss)

 

19,326,769

 

2,355,389

 

(19,326,769

)

2,355,389

 

 

 

 

 

 

 

 

 

 

 

Dividends paid on Series A preferred equity facility

 

 

(393,413

)

 

(393,413

)

Net change in accumulated dividends on Series A preferred equity facility

 

 

16,011

 

 

16,011

 

Distributions of incentive allocation to the General Partner

 

 

 

(2,723,742

)

(2,723,742

)

Net change in reserve for General Partner incentive allocation

 

 

 

(471,078

)

(471,078

)

 

 

 

 

 

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

19,168,920

 

$

16,131,949

 

$

(22,521,589

)

$

12,779,280

 

 

S-F-41


 

 

 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statements of Assets and Liabilities

 

 

 

March 31, 2014

 

December 31, 2013

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Investments, at fair value:

 

 

 

 

 

Companies less than 5% owned (cost of $741,804,363 and $684,569,508, respectively)

 

$

744,016,378

 

$

678,326,915

 

Companies 5% to 25% owned (cost of $54,759,445 and $73,946,547, respectively)

 

53,487,621

 

69,068,808

 

Companies more than 25% owned (cost of $41,985,865 and $42,588,724 respectively)

 

18,153,749

 

18,867,236

 

Total investments (cost of $838,549,673 and $801,104,779, respectively)

 

815,657,748

 

766,262,959

 

 

 

 

 

 

 

Cash and cash equivalents

 

27,141,436

 

22,984,182

 

Accrued interest income:

 

 

 

 

 

Companies less than 5% owned

 

8,279,978

 

6,282,353

 

Companies 5% to 25% owned

 

679,599

 

415,061

 

Companies more than 25% owned

 

38,519

 

41,691

 

Deferred debt issuance costs

 

3,360,310

 

2,969,085

 

Receivable for investments sold

 

1,031,717

 

3,605,964

 

Options (cost $51,750)

 

8,605

 

14,139

 

Prepaid expenses and other assets

 

1,171,578

 

723,275

 

Total assets

 

857,369,490

 

803,298,709

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Debt

 

157,000,000

 

95,000,000

 

Incentive allocation payable

 

3,486,403

 

3,318,900

 

Payable for investments purchased

 

1,514,602

 

14,706,942

 

Interest payable

 

332,040

 

430,969

 

Unrealized depreciation on swaps

 

300,684

 

331,183

 

Payable to the Investment Manager

 

144,306

 

287,371

 

Payable to Parent

 

98,697

 

531,717

 

Accrued expenses and other liabilities

 

1,957,430

 

1,923,750

 

Total liabilities

 

164,834,162

 

116,530,832

 

 

 

 

 

 

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

 

 

 

Preferred equity facility

 

 

 

 

 

Series A preferred limited partner interests; $20,000/interest liquidation preference; 6,700 interests authorized, issued and outstanding

 

134,000,000

 

134,000,000

 

Accumulated dividends on Series A preferred equity facility

 

493,757

 

504,252

 

Total preferred limited partner interests

 

134,493,757

 

134,504,252

 

 

 

 

 

 

 

Net assets applicable to common limited and general partners

 

$

558,041,571

 

$

552,263,625

 

 

 

 

 

 

 

Composition of net assets applicable to common limited and general partners

 

 

 

 

 

Paid-in capital

 

666,530,318

 

666,530,318

 

Accumulated net investment income

 

27,448,077

 

26,850,149

 

Accumulated net realized losses

 

(112,597,990

)

(105,802,644

)

Accumulated net unrealized depreciation

 

(23,338,834

)

(35,314,198

)

Net assets applicable to common limited and general partners

 

$

558,041,571

 

$

552,263,625

 

 

See accompanying notes.

 

S-F-42



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Unaudited)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (92.87%)

 

 

 

 

 

 

 

 

 

Bank Debt (76.36%) (1)

 

 

 

 

 

 

 

 

 

Accounting, Tax Preparation, Bookkeeping, and Payroll Services (0.93%)

 

 

 

 

 

 

 

 

 

Expert Global Solutions, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 7.25% (Q),1.25% LIBOR Floor, due 4/3/18

 

$

694,441

 

$

699,603

 

$

679,684

 

0.08

%

Expert Global Solutions, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 11% (Q), 1.5% LIBOR Floor, due 10/3/18

 

$

7,434,877

 

7,235,805

 

7,174,657

 

0.85

%

Total Accounting, Tax Preparation, Bookkeeping, and Payroll Services

 

 

 

7,935,408

 

7,854,341

 

 

 

 

 

 

 

 

 

 

 

 

 

Activities Related to Real Estate (1.97%)

 

 

 

 

 

 

 

 

 

Greystone Select Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 8% (M), 1% LIBOR Floor, due 3/26/21

 

$

16,594,230

 

16,366,059

 

16,635,715

 

1.97

%

 

 

 

 

 

 

 

 

 

 

Advertising, Public Relations, and Related Services (2.15%)

 

 

 

 

 

 

 

 

 

Doubleplay III Limited, Senior Secured 1st Lien Facility A1 Term Loan, EURIBOR + 6.25% (Q), 1.25% EURIBOR Floor, due 3/18/18 - (United Kingdom) (4), (10)

 

$

13,165,705

 

16,495,992

 

18,082,540

 

2.15

%

 

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (0.24%)

 

 

 

 

 

 

 

 

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16 (2)

 

$

2,056,927

 

2,056,927

 

2,056,927

 

0.24

%

 

 

 

 

 

 

 

 

 

 

Basic Chemical Manufacturing (1.79%)

 

 

 

 

 

 

 

 

 

PeroxyChem, LLC, Senior Secured Term Loan, LIBOR + 6.5% (M), 1% LIBOR Floor, due 2/28/20

 

$

15,000,000

 

14,702,579

 

15,075,000

 

1.79

%

 

 

 

 

 

 

 

 

 

 

Business Support Services (1.76%)

 

 

 

 

 

 

 

 

 

STG-Fairway Acquisitions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.25% (Q), 1.25% LIBOR Floor, due 8/28/19

 

$

14,643,455

 

13,965,887

 

14,863,107

 

1.76

%

 

 

 

 

 

 

 

 

 

 

Chemical Manufacturing (2.08%)

 

 

 

 

 

 

 

 

 

Archroma, Senior Secured Lien Term Loan B, LIBOR + 8.25% (Q), 1.25% LIBOR Floor, due 9/30/18

 

$

17,412,500

 

17,088,698

 

17,499,563

 

2.08

%

 

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (1.79%)

 

 

 

 

 

 

 

 

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625% (Q), 1.25% LIBOR Floor, due 12/11/18 (2)

 

$

14,962,500

 

14,812,875

 

15,059,756

 

1.79

%

 

 

 

 

 

 

 

 

 

 

Computer Equipment Manufacturing (1.08%)

 

 

 

 

 

 

 

 

 

ELO Touch Solutions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 10.5% (Q), 1.5% LIBOR Floor, due 12/1/18

 

$

10,000,000

 

9,678,717

 

9,075,000

 

1.08

%

 

 

 

 

 

 

 

 

 

 

Converted Paper Products Manufacturing (0.42%)

 

 

 

 

 

 

 

 

 

Ranpak Corp., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1.25% LIBOR Floor, due 4/23/20

 

$

3,469,573

 

3,434,877

 

3,551,976

 

0.42

%

 

 

 

 

 

 

 

 

 

 

Computer Systems Design and Related Services (9.73%)

 

 

 

 

 

 

 

 

 

Autoalert, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 4.75 % (Q) Cash + 4% PIK, 0.25% LIBOR Floor, due 3/31/19

 

$

30,000,000

 

29,400,000

 

29,940,000

 

3.55

%

Blue Coat Systems, Inc., Senior Secured 1st Lien Revolver Term Loan, LIBOR + 3.5% (Q), 1% LIBOR Floor, due 5/31/18 (13)

 

$

 

(960,000

)

(441,060

)

(0.05

)%

Blue Coat Systems, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1% LIBOR Floor, due 6/28/20

 

$

15,000,000

 

14,878,125

 

15,581,250

 

1.85

%

Coreone Technologies, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 3.75% (Q) Cash + 5% PIK, 1% LIBOR Floor, due 9/4/18

 

$

13,726,261

 

13,412,993

 

13,643,903

 

1.62

%

OnX Enterprise Solutions, Ltd., Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

10,613,333

 

10,468,033

 

10,708,853

 

1.27

%

OnX USA, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

5,306,667

 

5,237,760

 

5,354,427

 

0.64

%

Websense, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1% LIBOR Floor, due 12/27/20

 

$

7,200,000

 

7,164,000

 

7,254,000

 

0.85

%

Total Computer Systems Design and Related Services

 

 

 

76,600,911

 

82,041,373

 

 

 

 

 

 

 

 

 

 

 

 

 

Electric Power Generation, Transmission and Distribution (2.07%)

 

 

 

 

 

 

 

 

 

Panda Sherman Power, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7.5% (Q), 1.5% LIBOR Floor, due 9/14/18

 

$

11,070,172

 

10,938,274

 

11,402,277

 

1.35

%

Panda Temple Power II, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q), 1.25% LIBOR Floor, due 4/3/19

 

$

5,892,970

 

5,834,041

 

6,062,393

 

0.72

%

Total Electric Power Generation, Transmission and Distribution

 

 

 

16,772,315

 

17,464,670

 

 

 

 

 

 

 

 

 

 

 

 

 

Electrical Equipment and Component Manufacturing (1.99%)

 

 

 

 

 

 

 

 

 

Palladium Energy, Inc., 1st Lien Senior Secured Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 12/26/17

 

$

16,500,317

 

16,239,377

 

16,739,572

 

1.99

%

 

 

 

 

 

 

 

 

 

 

Electrical Equipment Manufacturing (0.82%)

 

 

 

 

 

 

 

 

 

API Technologies Corp., Senior Secured 1st Lien Term Loan, LIBOR + 7.5% (M), 1.5% LIBOR Floor, due 2/6/18

 

$

6,947,590

 

6,878,114

 

6,912,852

 

0.82

%

Financial Investment Activities (0.70%)

 

 

 

 

 

 

 

 

 

Marsico Capital Management, Senior Secured 1st Lien Term Loan, LIBOR + 5% (M), due 12/31/22 (11)

 

$

10,606,841

 

13,355,425

 

5,939,831

 

0.70

%

 

S-F-43



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Freight Transportation Arrangement (0.44%)

 

 

 

 

 

 

 

 

 

Livingston International, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/18/20 (10)

 

$

3,665,217

 

$

3,599,623

 

$

3,724,777

 

0.44

%

 

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (1.87%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18 (2)

 

$

5,164,796

 

5,164,796

 

1,402,242

 

0.17

%

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

1,422,456

 

1,394,868

 

1,422,456

 

0.17

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/21/16 (2)

 

$

3,647,717

 

3,647,717

 

3,647,717

 

0.43

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

7,087,612

 

7,087,612

 

7,087,612

 

0.84

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

2,232,131

 

2,194,774

 

2,232,131

 

0.26

%

Total Full-Service Restaurants

 

 

 

19,489,767

 

15,792,158

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming Industries (1.66%)

 

 

 

 

 

 

 

 

 

AP Gaming I, LLC, Senior Secured 1st Lien Revolver Term Loan, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 12/20/18 (13)

 

$

 

(1,000,000

)

(984,375

)

(0.12

)%

AP Gaming I, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 12/20/20

 

$

14,962,500

 

14,523,696

 

14,962,500

 

1.78

%

Total Gaming Industries

 

 

 

13,523,696

 

13,978,125

 

 

 

 

 

 

 

 

 

 

 

 

 

Grocery Stores (1.78%)

 

 

 

 

 

 

 

 

 

Bashas, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 9.35% (M), 1.5% LIBOR Floor, due 12/28/15

 

$

14,781,475

 

14,740,030

 

15,003,197

 

1.78

%

 

 

 

 

 

 

 

 

 

 

Insurance Carriers (1.39%)

 

 

 

 

 

 

 

 

 

Acrisure, LLC, 2nd Lien Additional Notes, LIBOR + 10.5% (Q), 1% LIBOR Floor, due 3/7/20

 

$

680,363

 

564,204

 

674,555

 

0.08

%

Acrisure, LLC, 2nd Lien Notes, LIBOR + 10.5% (Q), 1% LIBOR Floor, due 3/7/20

 

$

11,051,757

 

10,832,378

 

11,040,705

 

1.31

%

Total Insurance Carriers

 

 

 

11,396,582

 

11,715,260

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Related Activities (0.76%)

 

 

 

 

 

 

 

 

 

Confie Seguros Holding II Co., 2nd Lien Term Loan, LIBOR + 9% (M), 1.25% LIBOR Floor, due 5/8/19

 

$

6,341,809

 

6,249,086

 

6,397,332

 

0.76

%

 

 

 

 

 

 

 

 

 

 

Merchant Wholesalers (1.09%)

 

 

 

 

 

 

 

 

 

Envision Acquisition Company, LLC, 2nd Lien Term Loan, LIBOR + 8.75% (M), 1% LIBOR Floor, due 11/4/21

 

$

9,079,011

 

8,897,430

 

9,158,452

 

1.09

%

 

 

 

 

 

 

 

 

 

 

Motion Picture and Video Industries (1.82%)

 

 

 

 

 

 

 

 

 

CORE Entertainment, Inc., Senior Secured 1st Lien Term Loan, 9%, due 6/21/17

 

$

9,462,231

 

9,386,095

 

8,421,386

 

1.00

%

CORE Entertainment, Inc., Senior Secured 2nd Lien Term Loan, 13.5%, due 6/21/18

 

$

7,569,785

 

7,505,822

 

6,933,923

 

0.82

%

Total Motion Picture and Video Industries

 

 

 

16,891,917

 

15,355,309

 

 

 

 

 

 

 

 

 

 

 

 

 

Newspaper, Periodical, Book, and Directory Publishers (3.64%)

 

 

 

 

 

 

 

 

 

Hanley-Wood, LLC, 1st Lien FILO Term Loan, LIBOR + 6.75% (Q), 1.25% LIBOR Floor, due 7/15/18

 

$

16,561,400

 

16,561,400

 

16,420,628

 

1.95

%

MediMedia USA, Inc., 1st Lien Revolver, LIBOR + 6.75% (M), due 5/20/18

 

$

5,270,000

 

4,107,500

 

4,833,908

 

0.57

%

MediMedia USA, Inc., 1st Lien Term Loan, LIBOR + 6.75% (M), 1.25% LIBOR Floor, due 11/20/18

 

$

9,676,875

 

9,420,314

 

9,434,953

 

1.12

%

Total Newspaper, Periodical, Book, and Directory Publishers

 

 

 

30,089,214

 

30,689,489

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonresidential Building Construction (1.20%)

 

 

 

 

 

 

 

 

 

NCM Group Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 11.5% (Q), 1% LIBOR Floor, due 8/29/18

 

$

10,000,000

 

9,620,619

 

10,145,000

 

1.20

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (2.11%)

 

 

 

 

 

 

 

 

 

One Sky Flight, LLC, Senior Secured 2nd Lien Term Loan, 12% Cash + 3% PIK, due 6/3/19

 

$

18,243,983

 

16,984,017

 

17,742,274

 

2.11

%

 

 

 

 

 

 

 

 

 

 

Oil and Gas Extraction (1.83%)

 

 

 

 

 

 

 

 

 

Willbros Group, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.25% LIBOR Floor, due 8/7/19

 

$

15,246,603

 

14,876,555

 

15,443,512

 

1.83

%

 

 

 

 

 

 

 

 

 

 

Other Telecommunications (1.67%)

 

 

 

 

 

 

 

 

 

Securus Technologies, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/30/21

 

$

14,000,000

 

13,860,000

 

14,072,940

 

1.67

%

 

 

 

 

 

 

 

 

 

 

Petroleum and Coal Products Manufacturing (0.46%)

 

 

 

 

 

 

 

 

 

Boomerang Tube, LLC, 2nd Lien Term Loan, LIBOR + 9.5% (Q), 1.5% LIBOR Floor, due 10/11/17

 

$

3,987,092

 

3,902,548

 

3,887,415

 

0.46

%

 

S-F-44



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Professional, Scientific, and Technical Services (1.91%)

 

 

 

 

 

 

 

 

 

ConvergeOne Holdings, 1st Lien Term Loan, LIBOR + 8% (Q), 1.25% LIBOR Floor, due 5/8/19

 

$

16,112,709

 

$

15,930,795

 

$

16,112,709

 

1.91

%

 

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (2.94%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q) Cash + 4% PIK, 2% LIBOR Floor, due 8/3/16

 

$

7,014,361

 

6,678,521

 

6,856,537

 

0.82

%

The Tennis Channel, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 8.5% (Q), due 5/29/17

 

$

17,771,217

 

17,344,546

 

17,842,301

 

2.12

%

Total Radio and Television Broadcasting

 

 

 

24,023,067

 

24,698,838

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail (2.10%)

 

 

 

 

 

 

 

 

 

Kenneth Cole Productions, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 10.40% (M), 1% LIBOR Floor, due 9/25/17

 

$

11,000,000

 

10,796,475

 

11,055,000

 

1.31

%

Shopzilla, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.5% (Q), due 3/31/16

 

$

6,710,057

 

6,584,026

 

6,699,991

 

0.79

%

Total Retail

 

 

 

17,380,501

 

17,754,991

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.40%)

 

 

 

 

 

 

 

 

 

Aircraft Secured Mortgages - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL, 8%, due 3/15/17 (6)

 

$

268,686

 

268,686

 

275,740

 

0.03

%

N918DL, 8%, due 8/15/18 (6)

 

$

369,976

 

369,976

 

379,440

 

0.05

%

N954DL, 8%, due 3/20/19 (6)

 

$

493,667

 

493,667

 

504,730

 

0.06

%

N955DL, 8%, due 6/20/19 (6)

 

$

513,363

 

513,363

 

524,620

 

0.06

%

N956DL, 8%, due 5/20/19 (6)

 

$

512,024

 

512,024

 

523,430

 

0.06

%

N957DL, 8%, due 6/20/19 (6)

 

$

517,853

 

517,853

 

529,210

 

0.06

%

N959DL, 8%, due 7/20/19 (6)

 

$

523,634

 

523,634

 

534,990

 

0.06

%

N960DL, 8%, due 10/20/19 (6)

 

$

545,211

 

545,211

 

556,410

 

0.07

%

N961DL, 8%, due 8/20/19 (6)

 

$

538,309

 

538,309

 

549,780

 

0.07

%

N976DL, 8%, due 2/15/18 (6)

 

$

373,436

 

373,436

 

383,520

 

0.05

%

Aircraft Secured Mortgages - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA, 20%, due 10/26/16 (2)

 

$

305,802

 

305,802

 

370,358

 

0.04

%

N512UA, 20%, due 10/26/16 (2)

 

$

311,984

 

311,984

 

380,048

 

0.05

%

N536UA, 16%, due 9/29/14 (2)

 

$

69,373

 

69,373

 

71,630

 

0.01

%

N545UA, 16%, due 8/29/15 (2)

 

$

214,325

 

214,325

 

233,415

 

0.03

%

N585UA, 20%, due 10/25/16 (2)

 

$

366,316

 

366,316

 

446,310

 

0.05

%

N659UA, 12%, due 2/28/16 (6)

 

$

2,439,123

 

2,439,123

 

2,635,667

 

0.31

%

N661UA, 12%, due 5/4/16 (6)

 

$

2,619,284

 

2,619,284

 

2,862,717

 

0.34

%

Total Scheduled Air Transportation

 

 

 

10,982,366

 

11,762,015

 

 

 

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (1.64%)

 

 

 

 

 

 

 

 

 

Isola USA Corporation, Senior Secured Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 11/29/18

 

$

14,492,188

 

14,285,320

 

14,854,492

 

1.76

%

SunEdison, Inc., Senior Secured Letters of Credit, 3.75%, due 2/28/17 (12), (13)

 

$

 

(1,031,717

)

(1,031,717

)

(0.12

)%

Total Semiconductor and Other Electronic Component Manufacturing

 

 

 

13,253,603

 

13,822,775

 

 

 

 

 

 

 

 

 

 

 

 

 

Software Publishers (6.91%)

 

 

 

 

 

 

 

 

 

Acronis International GmbH, 1st Lien Term Loan, LIBOR + 9.5% (Q), 1% LIBOR Floor, due 2/21/17 - (Switzerland) (10)

 

$

13,628,929

 

13,363,718

 

13,676,630

 

1.62

%

BlackLine Systems, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 0.4% (Q) Cash + 7.6% PIK, 1.5% LIBOR Floor, due 9/25/18

 

$

12,818,762

 

12,050,059

 

12,440,609

 

1.48

%

Deltek, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.75% (Q), 1.25% LIBOR Floor, due 10/10/19

 

$

15,000,000

 

14,811,452

 

15,324,975

 

1.82

%

Edmentum, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 5/17/19

 

$

16,500,000

 

16,271,792

 

16,788,750

 

1.99

%

Total Software Publishers

 

 

 

56,497,021

 

58,230,964

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.59%)

 

 

 

 

 

 

 

 

 

UBC Healthcare Analytics, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 7/1/18

 

$

4,933,947

 

4,909,278

 

4,958,617

 

0.59

%

Support Activities for Mining (0.00%)

 

 

 

 

 

 

 

 

 

McDermott International, Inc., Bridge Facility Commitment

 

$

 

 

 

 

 

S-F-45



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

Principal

 

 

 

 

 

Percent of

 

 

 

Amount or

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Textile Furnishings Mills (1.96%)

 

 

 

 

 

 

 

 

 

Lexmark Carpet Mills, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 10% (Q), 1% LIBOR Floor, due 9/30/18

 

$

16,351,467

 

$

15,942,680

 

$

16,523,158

 

1.96

%

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.83%)

 

 

 

 

 

 

 

 

 

Integra Telecom Holdings, Inc., 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1.25% LIBOR Floor, due 2/22/20

 

$

15,000,000

 

14,709,735

 

15,390,000

 

1.83

%

 

 

 

 

 

 

 

 

 

 

Wireless Telecommunications Carriers (3.84%)

 

 

 

 

 

 

 

 

 

Alpheus Communications, LLC, Senior Secured 1st Lien Delayed Draw FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18 (13)

 

$

 

(11,183

)

(7,874

)

 

Alpheus Communications, LLC, Senior Secured 1st Lien FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18

 

$

8,248,124

 

8,166,127

 

8,190,387

 

0.97

%

Globalive Wireless Management Corp., Senior Secured 1st Lien Term Loan, LIBOR + 10.9% (Q), due 4/30/14 - (Canada) (10)

 

$

3,037,292

 

2,933,872

 

3,067,665

 

0.36

%

Gogo, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 6/21/17

 

$

19,461,356

 

18,587,291

 

21,115,572

 

2.51

%

Total Wireless Telecommunications Carriers

 

 

 

29,676,107

 

32,365,750

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Bank Debt

 

 

 

636,810,398

 

643,577,280

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Corporate Debt Securities (16.51%)

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (1.10%)

 

 

 

 

 

 

 

 

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16 (2), (5)

 

$

9,268,000

 

7,586,317

 

9,268,000

 

1.10

%

 

 

 

 

 

 

 

 

 

 

Beverage Manufacturing (1.00%)

 

 

 

 

 

 

 

 

 

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18 (5)

 

$

7,780,000

 

7,780,000

 

8,441,300

 

1.00

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.90%)

 

 

 

 

 

 

 

 

 

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19 (5)

 

$

7,098,916

 

6,960,435

 

7,560,346

 

0.90

%

 

 

 

 

 

 

 

 

 

 

Fabricated Metal Product Manufacturing (1.31%)

 

 

 

 

 

 

 

 

 

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16 (5), (7)

 

$

12,500,000

 

12,322,875

 

11,000,000

 

1.31

%

 

 

 

 

 

 

 

 

 

 

Lessors of Real Estate (1.60%)

 

 

 

 

 

 

 

 

 

Hunt Companies, Inc., Senior Secured Notes, 9.625%, due 3/1/21 (5)

 

$

13,084,000

 

12,922,359

 

13,476,520

 

1.60

%

 

 

 

 

 

 

 

 

 

 

Nondepository Credit Intermediation (3.07%)

 

 

 

 

 

 

 

 

 

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19 - (Cayman Islands) (5), (8), (10)

 

$

10,000,000

 

9,829,350

 

10,850,000

 

1.29

%

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18 (5), (10)

 

$

15,084,000

 

15,084,000

 

15,084,000

 

1.78

%

Total Nondepository Credit Intermediation

 

 

 

24,913,350

 

25,934,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Plastics Products Manufacturing (1.72%)

 

 

 

 

 

 

 

 

 

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18 (5)

 

$

13,600,000

 

13,600,000

 

14,478,995

 

1.72

%

 

 

 

 

 

 

 

 

 

 

Retail (0.01%)

 

 

 

 

 

 

 

 

 

Shop Holding LLC, Convertible Promissory Note, 5%, due 8/5/15 (5)

 

$

73,140

 

73,140

 

71,494

 

0.01

%

 

 

 

 

 

 

 

 

 

 

Satellite Telecommunications (1.25%)

 

 

 

 

 

 

 

 

 

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19 (5), (7), (10)

 

$

9,914,000

 

9,914,000

 

10,576,999

 

1.25

%

 

 

 

 

 

 

 

 

 

 

Scientific Research and Development Services (2.14%)

 

 

 

 

 

 

 

 

 

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17 (5)

 

$

17,200,000

 

16,536,295

 

18,060,000

 

2.14

%

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.61%)

 

 

 

 

 

 

 

 

 

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17 (5)

 

$

5,000,000

 

5,000,000

 

5,150,000

 

0.61

%

 

 

 

 

 

 

 

 

 

 

Structured Note Funds (1.80%)

 

 

 

 

 

 

 

 

 

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21 - (Cayman Islands) (5), (10)

 

$

15,000,000

 

15,000,000

 

15,147,000

 

1.80

%

Total Other Corporate Debt Securities

 

 

 

132,608,771

 

139,164,654

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Debt Investments

 

 

 

769,419,169

 

782,741,934

 

 

 

 

S-F-46



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (3.91%)

 

 

 

 

 

 

 

 

 

Business Support Services (0.26%)

 

 

 

 

 

 

 

 

 

Findly Talent, LLC, Membership Units (3), (5)

 

708,229

 

$

230,938

 

$

162,185

 

0.02

%

STG-Fairway Holdings, LLC, Class A Units (3), (5)

 

841,479

 

943,287

 

1,990,939

 

0.24

%

Total Business Support Services

 

 

 

1,174,225

 

2,153,124

 

 

 

 

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (0.59%)

 

 

 

 

 

 

 

 

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units (2), (3), (5)

 

5,000,000

 

5,000,000

 

5,000,000

 

0.59

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.11%)

 

 

 

 

 

 

 

 

 

Anacomp, Inc., Class A Common Stock (3), (5), (6)

 

1,255,527

 

26,711,048

 

891,424

 

0.11

%

 

 

 

 

 

 

 

 

 

 

Depository Credit Intermediation (0.06%)

 

 

 

 

 

 

 

 

 

Doral Financial Corporation, Common Stock - (Puerto Rico) (3), (12)

 

53,890

 

11,699,417

 

467,763

 

0.06

%

 

 

 

 

 

 

 

 

 

 

Financial Investment Activities (0.00%)

 

 

 

 

 

 

 

 

 

Marsico Holdings, LLC, Common Interest Units (3), (5), (11)

 

168,698

 

172,694

 

25,305

 

 

 

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (0.00%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Membership Units (2), (3), (5)

 

13,161,000

 

2,010,777

 

 

 

 

 

 

 

 

 

 

 

 

 

Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing (0.00%)

 

 

 

 

 

 

 

 

 

Precision Holdings, LLC, Class C Membership Interests (3), (5)

 

33

 

 

7,397

 

 

 

 

 

 

 

 

 

 

 

 

Nonmetallic Mineral Mining and Quarrying (0.19%)

 

 

 

 

 

 

 

 

 

EPMC HoldCo, LLC, Membership Units (2), (5)

 

1,312,720

 

 

1,562,137

 

0.19

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (0.17%)

 

 

 

 

 

 

 

 

 

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,843

 

1,274,000

 

1,412,078

 

0.17

%

 

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (0.04%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Warrants to Purchase Common Stock (3), (5)

 

233,470

 

300,322

 

357,209

 

0.04

%

 

 

 

 

 

 

 

 

 

 

Retail (0.06%)

 

 

 

 

 

 

 

 

 

Shop Holding, LLC, Class A Units (3), (5)

 

507,167

 

480,049

 

476,628

 

0.06

%

Shop Holding, LLC, Warrants to Purchase Class A Units (3), (5)

 

326,691

 

 

17,834

 

 

Total Electronic Shopping

 

 

 

480,049

 

494,462

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.11%)

 

 

 

 

 

 

 

 

 

Equipment Trusts - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL Trust Beneficial Interests (5), (6)

 

795

 

94,231

 

123,930

 

0.01

%

N918DL Trust Beneficial Interests (5), (6)

 

673

 

105,629

 

141,270

 

0.02

%

N954DL Trust Beneficial Interests (5), (6)

 

636

 

126,797

 

69,190

 

0.01

%

N955DL Trust Beneficial Interests (5), (6)

 

618

 

127,179

 

112,710

 

0.01

%

N956DL Trust Beneficial Interests (5), (6)

 

623

 

118,190

 

108,290

 

0.01

%

N957DL Trust Beneficial Interests (5), (6)

 

618

 

128,014

 

109,140

 

0.01

%

N959DL Trust Beneficial Interests (5), (6)

 

614

 

128,843

 

109,990

 

0.01

%

N960DL Trust Beneficial Interests (5), (6)

 

602

 

132,148

 

109,140

 

0.01

%

N961DL Trust Beneficial Interests (5), (6)

 

610

 

131,332

 

103,700

 

0.01

%

N976DL Trust Beneficial Interests (5), (6)

 

709

 

108,697

 

102,862

 

0.01

%

Equipment Trusts - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA Trust Beneficial Interests (2), (5)

 

56

 

211,477

 

453,896

 

0.05

%

N512UA Trust Beneficial Interests (2), (5)

 

56

 

206,766

 

446,071

 

0.05

%

N536UA Trust Beneficial Interests (2), (5)

 

86

 

424,460

 

526,943

 

0.06

%

N545UA Trust Beneficial Interests (2), (5)

 

71

 

371,557

 

632,959

 

0.08

%

N585UA Trust Beneficial Interests (2), (5)

 

56

 

229,521

 

465,546

 

0.06

%

United N659UA-767, LLC (N659UA) (5), (6)

 

439

 

2,197,988

 

2,950,833

 

0.35

%

United N661UA-767, LLC (N661UA) (5), (6)

 

426

 

2,161,205

 

2,961,015

 

0.35

%

Total Scheduled Air Transportation

 

 

 

7,004,034

 

9,527,485

 

 

 

 

 

 

 

 

 

 

 

 

 

Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing (0.09%)

 

 

 

 

 

 

 

 

 

KAGY Holding Company, Inc., Series A Preferred Stock (2), (3), (5)

 

9,778

 

1,091,200

 

721,467

 

0.09

%

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (0.03%)

 

 

 

 

 

 

 

 

 

AIP/IS Holdings, LLC, Membership Units (3), (5)

 

352

 

 

229,504

 

0.03

%

 

 

 

 

 

 

 

 

 

 

Software Publishers (0.06%)

 

 

 

 

 

 

 

 

 

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,232,731

 

522,678

 

530,074

 

0.06

%

 

S-F-47



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.14%)

 

 

 

 

 

 

 

 

 

Integra Telecom, Inc., Common Stock (3), (5)

 

1,274,522

 

$

8,433,884

 

$

5,586,951

 

0.67

%

Integra Telecom, Inc., Warrants (3), (5)

 

346,939

 

19,920

 

186,275

 

0.02

%

V Telecom Investment S.C.A., Common Shares - (Luxembourg) (3), (4), (5), (10)

 

1,393

 

3,236,256

 

3,763,159

 

0.45

%

Total Wired Telecommunications Carriers

 

 

 

11,690,060

 

9,536,385

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Equity Securities

 

 

 

69,130,504

 

32,915,814

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments

 

 

 

838,549,673

 

815,657,748

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents (3.22%)

 

 

 

 

 

 

 

 

 

Wells Fargo & Company, Overnight Repurchase Agreement, 0.03%,

 

 

 

 

 

 

 

 

 

Collateralized by Freddie Mac Note

 

 

 

 

 

 

$

16,373,605

 

1.95

%

Union Bank of California, Commercial Paper, 0.10%, due 4/1/14

 

 

 

 

 

 

6,000,000

 

0.71

%

Cash Denominated in Foreign Currencies

 

 

 

 

 

 

121,879

 

0.01

%

Cash Held on Account at Various Institutions

 

 

 

 

 

 

4,645,952

 

0.55

%

Cash and Cash Equivalents

 

 

 

 

 

27,141,436

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Cash and Investments (9)

 

 

 

 

 

$

842,799,184

 

100.00

%

 


Notes to Statement of Investments:

 

(1)

Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933. Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower.

(2)

Non-controlled affiliate — as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates.

(3)

Non-income producing security.

(4)

Principal amount denominated in foreign currency. Amortized cost and fair value converted from foreign currency to US dollars. (See Note 2)

(5)

Restricted security. (See Note 2)

(6)

Controlled issuer — as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer). Investment is not more than 50% owned nor deemed to be a significant subsidiary. See Consolidated Schedule of Changes in Investments in Affiliates.

(7)

Investment has been segregated to collateralize certain unfunded commitments.

(8)

$5,000,000 principal amount of this investment has been segregated to collateralize certain unfunded commitments.

(9)

All cash and investments, except those referenced in Notes 7 and 8 above, are pledged as collateral under the Revolving Facilities as described in Note 4 to the Consolidated Financial Statements.

(10)

Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership ‘s total assets.

(11)

Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership ‘s total assets.

(12)

Publicly traded company with a market capitalization greater than $250 million and as a result is not a qualifying asset under Section 55(a)  of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership ‘s total assets

(13)

Negative balances relate to an unfunded commitment that was acquired and valued at a discount.

 

LIBOR or EURIBOR resets monthly (M), quarterly (Q), or semiannually (S).

 

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $110,386,498, and $66,876,929, respectively for the three months ended March 31, 2014. Aggregate acquisitions includes investment assets received as payment in kind.  Aggregate dispositions includes principal paydowns on and maturities of debt investments.  The total value of restricted securities and bank debt as of March 31, 2014 was $815,189,985, or 96.7% of total cash and investments of the Partnership.

 

Options and Swaps at March 31, 2014 were as follows:

 

Investment

 

Notional Amount

 

Fair Value

 

 

 

 

 

 

 

Interest Rate Cap, 4%, expires 5/15/2016

 

$

25,000,000

 

$

8,605

 

Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 3/31/17

 

$

4,289,019

 

$

(300,684

)

 

See accompanying notes.

 

S-F-48



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (92.05%)

 

 

 

 

 

 

 

 

 

Bank Debt (74.53%) (1)

 

 

 

 

 

 

 

 

 

Accounting, Tax Preparation, Bookkeeping, and Payroll Services (1.03%)

 

 

 

 

 

 

 

 

 

Expert Global Solutions, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 7.25% (Q), 1.25% LIBOR Floor, due 4/3/18

 

$

699,754

 

$

701,280

 

$

703,691

 

0.09

%

Expert Global Solutions, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 11% (Q),1.5% LIBOR Floor, due 10/3/18

 

$

7,434,877

 

7,228,004

 

7,382,833

 

0.94

%

Total Accounting, Tax Preparation, Bookkeeping, and Payroll Services

 

 

 

7,929,284

 

8,086,524

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising, Public Relations, and Related Services (2.12%)

 

 

 

 

 

 

 

 

 

Doubleplay III Limited, Senior Secured 1st Lien Facility A1 Term Loan, EURIBOR + 6.25% (Q), 1.25% EURIBOR Floor, due 3/18/18 - (United Kingdom) (4), (10)

 

$

13,165,705

 

16,428,630

 

16,736,606

 

2.12

%

 

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (0.26%)

 

 

 

 

 

 

 

 

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16 (2)

 

$

2,056,927

 

2,056,927

 

2,056,927

 

0.26

%

 

 

 

 

 

 

 

 

 

 

Business Support Services (1.89%)

 

 

 

 

 

 

 

 

 

STG-Fairway Acquisitions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.25% (Q), 1.25% LIBOR Floor, due 8/28/19

 

$

14,643,455

 

13,944,123

 

14,929,002

 

1.89

%

 

 

 

 

 

 

 

 

 

 

Chemical Manufacturing (2.20%)

 

 

 

 

 

 

 

 

 

Archroma, Senior Secured Lien Term Loan B, LIBOR + 8.25% (Q), 1.25% LIBOR Floor, due 9/30/18

 

$

17,456,250

 

17,107,125

 

17,401,699

 

2.20

%

 

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (1.91%)

 

 

 

 

 

 

 

 

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625% (Q), 1.25% LIBOR Floor, due 12/11/18 (2)

 

$

15,000,000

 

14,850,000

 

15,097,500

 

1.91

%

 

 

 

 

 

 

 

 

 

 

Computer Equipment Manufacturing (1.15%)

 

 

 

 

 

 

 

 

 

ELO Touch Solutions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 10.5% (Q),1.5% LIBOR Floor, due 12/1/18

 

$

10,000,000

 

9,666,672

 

9,100,000

 

1.15

%

 

 

 

 

 

 

 

 

 

 

Converted Paper Products Manufacturing (0.45%)

 

 

 

 

 

 

 

 

 

Ranpak Corp., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1.25% LIBOR Floor, due 4/23/20

 

$

3,469,573

 

3,434,877

 

3,573,660

 

0.45

%

 

 

 

 

 

 

 

 

 

 

Computer Systems Design and Related Services (5.40%)

 

 

 

 

 

 

 

 

 

Blue Coat Systems, Inc., Senior Secured 1st Lien Revolver Term Loan, LIBOR + 3.5% (Q), 1% LIBOR Floor, due 5/31/18

 

$

4,500,000

 

3,540,000

 

4,060,800

 

0.51

%

Blue Coat Systems, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1% LIBOR Floor, due 6/28/20

 

$

15,000,000

 

14,878,125

 

15,300,000

 

1.94

%

OnX Enterprise Solutions, Ltd., Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q),due 9/3/18

 

$

10,640,000

 

10,483,300

 

10,709,160

 

1.36

%

OnX USA, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

5,320,000

 

5,244,790

 

5,354,580

 

0.68

%

Websense, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1% LIBOR Floor, due 12/27/20

 

$

7,200,000

 

7,164,000

 

7,218,000

 

0.91

%

Total Computer Systems Design and Related Services

 

 

 

41,310,215

 

42,642,540

 

 

 

 

 

 

 

 

 

 

 

 

 

Electric Power Generation, Transmission and Distribution (2.21%)

 

 

 

 

 

 

 

 

 

Panda Sherman Power, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7.5% (Q), 1.5% LIBOR Floor, due 9/14/18

 

$

11,070,172

 

10,932,474

 

11,402,277

 

1.44

%

Panda Temple Power II, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q), 1.25% LIBOR Floor, due 4/3/19

 

$

5,892,970

 

5,834,041

 

6,069,759

 

0.77

%

Total Electric Power Generation, Transmission and Distribution

 

 

 

16,766,515

 

17,472,036

 

 

 

 

 

 

 

 

 

 

 

 

 

Electrical Equipment and Component Manufacturing (2.08%)

 

 

 

 

 

 

 

 

 

Palladium Energy, Inc., 1st Lien Senior Secured Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 12/26/17

 

$

16,500,317

 

16,225,541

 

16,426,066

 

2.08

%

 

 

 

 

 

 

 

 

 

 

Financial Investment Activities (0.49%)

 

 

 

 

 

 

 

 

 

Marsico Capital Management, Senior Secured 1st Lien Term Loan, LIBOR + 5% (M), due 12/31/22 (11)

 

$

10,637,623

 

13,394,183

 

3,882,732

 

0.49

%

 

 

 

 

 

 

 

 

 

 

Freight Transportation Arrangement (0.48%)

 

 

 

 

 

 

 

 

 

Livingston International, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/18/20 (10)

 

$

3,665,217

 

3,597,620

 

3,756,848

 

0.48

%

 

S-F-49


 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (2.04%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18 (2)

 

$

5,164,796

 

$

5,164,796

 

$

2,197,621

 

0.28

%

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

1,370,199

 

1,339,883

 

1,370,199

 

0.17

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/21/16 (2)

 

$

3,626,947

 

3,626,947

 

3,626,947

 

0.46

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

6,825,328

 

6,825,328

 

6,825,328

 

0.86

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

2,150,088

 

2,109,019

 

2,150,088

 

0.27

%

Total Full-Service Restaurants

 

 

 

19,065,973

 

16,170,183

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming Industries (1.87%)

 

 

 

 

 

 

 

 

 

AP Gaming I, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 12/20/20

 

$

15,000,000

 

14,550,000

 

14,737,500

 

1.87

%

 

 

 

 

 

 

 

 

 

 

Grocery Stores (1.91%)

 

 

 

 

 

 

 

 

 

Bashas, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 9.35% (M), 1.5% LIBOR Floor, due 12/28/15

 

$

14,843,788

 

14,802,168

 

15,066,445

 

1.91

%

 

 

 

 

 

 

 

 

 

 

Inland Water Transportation (1.64%)

 

 

 

 

 

 

 

 

 

US Shipping Corp, Senior Secured 1st Lien Term Loan B, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/30/18

 

$

12,603,333

 

12,477,300

 

12,965,679

 

1.64

%

 

 

 

 

 

 

 

 

 

 

Insurance Related Activities (0.81%)

 

 

 

 

 

 

 

 

 

Confie Seguros Holding II Co., 2nd Lien Term Loan, LIBOR + 9% (M), 1.25% LIBOR Floor, due 5/8/19

 

$

6,341,809

 

6,245,733

 

6,391,370

 

0.81

%

 

 

 

 

 

 

 

 

 

 

Merchant Wholesalers (1.16%)

 

 

 

 

 

 

 

 

 

Envision Acquisition Company, LLC, 2nd Lien Term Loan, LIBOR + 8.75% (M), 1% LIBOR Floor, due 11/4/21

 

$

9,079,011

 

8,897,430

 

9,192,498

 

1.16

%

 

 

 

 

 

 

 

 

 

 

Motion Picture and Video Industries (1.97%)

 

 

 

 

 

 

 

 

 

CORE Entertainment, Inc., Senior Secured 1st Lien Term Loan, 9%, due 6/21/17

 

$

9,462,231

 

9,381,116

 

8,610,631

 

1.09

%

CORE Entertainment, Inc., Senior Secured 2nd Lien Term Loan, 13.5%, due 6/21/18

 

$

7,569,785

 

7,502,054

 

6,858,225

 

0.88

%

Total Motion Picture and Video Industries

 

 

 

16,883,170

 

15,468,856

 

 

 

 

 

 

 

 

 

 

 

 

 

Newspaper, Periodical, Book, and Directory Publishers (3.90%)

 

 

 

 

 

 

 

 

 

Hanley-Wood, LLC, 1st Lien FILO Term Loan, LIBOR + 6.75% (Q), 1.25% LIBOR Floor, due 7/15/18

 

$

16,707,600

 

16,707,600

 

16,699,246

 

2.13

%

MediMedia USA, Inc., 1st Lien Revolver, LIBOR + 6.75% (M), due 5/20/18

 

$

4,960,000

 

3,797,500

 

4,523,908

 

0.57

%

MediMedia USA, Inc., 1st Lien Term Loan, LIBOR + 6.75% (M), 1.25% LIBOR Floor, due 11/20/18

 

$

9,701,250

 

9,433,029

 

9,458,719

 

1.20

%

Total Newspaper, Periodical, Book, and Directory Publishers

 

 

 

29,938,129

 

30,681,873

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonresidential Building Construction (1.25%)

 

 

 

 

 

 

 

 

 

NCM Group Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 11.5% (Q), 1% LIBOR Floor, due 8/29/18

 

$

10,000,000

 

9,620,619

 

9,875,000

 

1.25

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (2.24%)

 

 

 

 

 

 

 

 

 

One Sky Flight, LLC, Senior Secured 2nd Lien Term Loan, 12% Cash + 3% PIK, due 5/4/19

 

$

18,200,000

 

16,929,086

 

17,708,600

 

2.24

%

 

 

 

 

 

 

 

 

 

 

Oil and Gas Extraction (1.98%)

 

 

 

 

 

 

 

 

 

Willbros Group, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.25% LIBOR Floor, due 8/7/19

 

$

15,426,118

 

15,051,713

 

15,657,510

 

1.98

%

 

 

 

 

 

 

 

 

 

 

Other Telecommunications (1.76%)

 

 

 

 

 

 

 

 

 

Securus Technologies, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/30/21

 

$

14,000,000

 

13,860,000

 

13,925,660

 

1.76

%

 

 

 

 

 

 

 

 

 

 

Petroleum and Coal Products Manufacturing (0.95%)

 

 

 

 

 

 

 

 

 

Boomerang Tube, LLC, 2nd Lien Term Loan, LIBOR + 9.5% (Q), 1.5% LIBOR Floor, due 10/11/17

 

$

7,749,023

 

7,563,978

 

7,477,807

 

0.95

%

 

 

 

 

 

 

 

 

 

 

Professional, Scientific, and Technical Services (3.14%)

 

 

 

 

 

 

 

 

 

Connolly, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 9.25% (Q), 1.25% LIBOR Floor, due 7/15/19

 

$

12,000,000

 

11,829,534

 

12,270,000

 

1.55

%

ConvergeOne Holdings, 1st Lien Term Loan, LIBOR + 8% (Q), 1.25% LIBOR Floor, due 5/8/19

 

$

12,654,643

 

12,464,823

 

12,570,236

 

1.59

%

Total Professional, Scientific, and Technical Services

 

 

 

24,294,357

 

24,840,236

 

 

 

 

 

 

 

 

 

 

 

 

 

Promoters of Performing Arts, Sports, and Similar Events (1.40%)

 

 

 

 

 

 

 

 

 

Stadium Management Group, Senior Secured 2nd Lien Term Loan, LIBOR + 9.50% (M), 1.25% LIBOR Floor, due 12/7/18

 

$

11,000,000

 

10,817,390

 

11,055,000

 

1.40

%

 

S-F-50



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (3.09%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q) Cash + 4% PIK, 2% LIBOR Floor, due 8/3/16

 

$

6,995,124

 

$

6,648,634

 

$

6,774,778

 

0.86

%

The Tennis Channel, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 8.5% (Q), due 5/29/17

 

$

17,589,459

 

17,134,705

 

17,615,843

 

2.23

%

Total Radio and Television Broadcasting

 

 

 

23,783,339

 

24,390,621

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail (2.29%)

 

 

 

 

 

 

 

 

 

Kenneth Cole Productions, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 10.40% (M), 1% LIBOR Floor, due 9/25/17

 

$

11,272,727

 

11,051,496

 

11,329,090

 

1.44

%

Shopzilla, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.5% (Q), due 3/31/16

 

$

6,710,057

 

6,525,027

 

6,683,216

 

0.85

%

Total Retail

 

 

 

17,576,523

 

18,012,306

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.60%)

 

 

 

 

 

 

 

 

 

Aircraft Secured Mortgages - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL, 8%, due 3/15/17 (6)

 

$

289,048

 

289,048

 

296,820

 

0.04

%

N918DL, 8%, due 8/15/18 (6)

 

$

388,001

 

388,001

 

397,290

 

0.05

%

N954DL, 8%, due 3/20/19 (6)

 

$

514,375

 

514,375

 

524,620

 

0.07

%

N955DL, 8%, due 6/20/19 (6)

 

$

533,283

 

533,283

 

543,320

 

0.07

%

N956DL, 8%, due 5/20/19 (6)

 

$

532,275

 

532,275

 

542,640

 

0.07

%

N957DL, 8%, due 6/20/19 (6)

 

$

537,947

 

537,947

 

548,250

 

0.07

%

N959DL, 8%, due 7/20/19 (6)

 

$

543,573

 

543,573

 

553,520

 

0.07

%

N960DL, 8%, due 10/20/19 (6)

 

$

564,855

 

564,855

 

574,430

 

0.07

%

N961DL, 8%, due 8/20/19 (6)

 

$

558,427

 

558,427

 

568,310

 

0.07

%

N976DL, 8%, due 2/15/18 (6)

 

$

394,360

 

394,360

 

404,600

 

0.05

%

Aircraft Secured Mortgages - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA, 20%, due 10/26/16 (2)

 

$

328,848

 

328,848

 

404,605

 

0.05

%

N512UA, 20%, due 10/26/16 (2)

 

$

334,535

 

334,535

 

414,010

 

0.05

%

N536UA, 16%, due 9/29/14 (2)

 

$

108,845

 

108,845

 

114,000

 

0.01

%

N545UA, 16%, due 8/29/15 (2)

 

$

249,695

 

249,695

 

275,405

 

0.03

%

N585UA, 20%, due 10/25/16 (2)

 

$

392,794

 

392,794

 

486,115

 

0.06

%

N659UA, 12%, due 2/28/16 (6)

 

$

2,708,150

 

2,708,150

 

2,948,986

 

0.37

%

N661UA, 12%, due 5/4/16 (6)

 

$

2,880,186

 

2,880,186

 

3,171,026

 

0.40

%

Total Scheduled Air Transportation

 

 

 

11,859,197

 

12,767,947

 

 

 

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (1.87%)

 

 

 

 

 

 

 

 

 

Isola USA Corporation, Senior Secured Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 11/29/18

 

$

14,583,333

 

14,366,560

 

14,729,167

 

1.87

%

 

 

 

 

 

 

 

 

 

 

Software Publishers (7.13%)

 

 

 

 

 

 

 

 

 

BlackLine Systems, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 0.4% (Q) Cash + 7.6% PIK, 1.5% LIBOR Floor, due 9/25/18

 

$

12,579,747

 

11,811,044

 

12,183,485

 

1.56

%

Coreone Technologies, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 3.75% (Q) Cash + 5% PIK, 1% LIBOR Floor, due 9/4/18

 

$

13,556,801

 

13,243,533

 

13,455,125

 

1.72

%

Deltek, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.75% (Q), 1.25% LIBOR Floor, due 10/10/19

 

$

15,000,000

 

14,805,253

 

15,300,000

 

1.94

%

Edmentum, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 5/17/19

 

$

15,000,000

 

14,748,486

 

15,112,500

 

1.91

%

Total Software Publishers

 

 

 

54,608,316

 

56,051,110

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.70%)

 

 

 

 

 

 

 

 

 

UBC Healthcare Analytics, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 7/1/18

 

$

5,526,021

 

5,498,391

 

5,559,177

 

0.70

%

 

 

 

 

 

 

 

 

 

 

Textile Furnishings Mills (2.08%)

 

 

 

 

 

 

 

 

 

Lexmark Carpet Mills, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 10% (Q), 1% LIBOR Floor, due 9/30/18

 

$

16,351,467

 

15,942,680

 

16,392,346

 

2.08

%

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.96%)

 

 

 

 

 

 

 

 

 

Integra Telecom Holdings, Inc., 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1.25% LIBOR Floor, due 2/22/20

 

$

15,000,000

 

14,701,027

 

15,459,375

 

1.96

%

 

S-F-51



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

Principal

 

 

 

 

 

Percent of

 

 

 

Amount or

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Wireless Telecommunications Carriers (4.12%)

 

 

 

 

 

 

 

 

 

Alpheus Communications, LLC, Senior Secured 1st Lien Delayed Draw FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18 (13)

 

$

 

$

(11,183

)

$

(8,437

)

 

Alpheus Communications, LLC, Senior Secured 1st Lien FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18

 

$

8,248,124

 

8,166,127

 

8,186,263

 

1.04

%

Globalive Wireless Management Corp., Senior Secured 1st Lien Term Loan, LIBOR + 10.9% (Q), due 4/30/14 - (Canada) (10)

 

$

3,037,292

 

2,933,872

 

3,067,665

 

0.39

%

Gogo, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 6/21/17

 

$

19,587,428

 

18,707,700

 

21,252,360

 

2.69

%

Total Wireless Telecommunications Carriers

 

 

 

29,796,516

 

32,497,851

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Bank Debt

 

 

 

585,841,307

 

588,236,257

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Corporate Debt Securities (17.52%)

 

 

 

 

 

 

 

 

 

Architectural, Engineering, and Related Services (1.01%)

 

 

 

 

 

 

 

 

 

ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19 (2), (5)

 

$

7,959,369

 

7,959,369

 

7,959,369

 

1.01

%

 

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (1.17%)

 

 

 

 

 

 

 

 

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16 (2), (5)

 

$

9,268,000

 

7,586,317

 

9,268,000

 

1.17

%

 

 

 

 

 

 

 

 

 

 

Beverage Manufacturing (1.04%)

 

 

 

 

 

 

 

 

 

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18 (5)

 

$

7,780,000

 

7,780,000

 

8,207,900

 

1.04

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.97%)

 

 

 

 

 

 

 

 

 

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19 (5)

 

$

7,098,916

 

6,960,435

 

7,631,335

 

0.97

%

 

 

 

 

 

 

 

 

 

 

Fabricated Metal Product Manufacturing (1.38%)

 

 

 

 

 

 

 

 

 

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16 (5), (7)

 

$

12,500,000

 

12,322,875

 

10,875,000

 

1.38

%

 

 

 

 

 

 

 

 

 

 

Metal Ore Mining (0.78%)

 

 

 

 

 

 

 

 

 

St Barbara Ltd., 1st Priority Senior Secured Notes, 8.875%, due 4/15/18 - (Australia) (5)

 

$

7,359,000

 

7,326,651

 

6,144,765

 

0.78

%

 

 

 

 

 

 

 

 

 

 

Nondepository Credit Intermediation (3.25%)

 

 

 

 

 

 

 

 

 

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19 - (Cayman Islands) (5), (10)

 

$

10,000,000

 

9,824,072

 

10,700,000

 

1.35

%

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18 (5), (10)

 

$

15,000,000

 

15,000,000

 

14,962,500

 

1.90

%

Total Nondepository Credit Intermediation

 

 

 

24,824,072

 

25,662,500

 

 

 

 

 

 

 

 

 

 

 

 

 

Plastics Products Manufacturing (1.83%)

 

 

 

 

 

 

 

 

 

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18 (5)

 

$

13,600,000

 

13,600,000

 

14,426,622

 

1.83

%

 

 

 

 

 

 

 

 

 

 

Satellite Telecommunications (1.31%)

 

 

 

 

 

 

 

 

 

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19 (5), (8), (10)

 

$

9,914,000

 

9,914,000

 

10,335,345

 

1.31

%

 

 

 

 

 

 

 

 

 

 

Scientific Research and Development Services (2.23%)

 

 

 

 

 

 

 

 

 

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17 (5)

 

$

17,200,000

 

16,536,295

 

17,630,000

 

2.23

%

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.65%)

 

 

 

 

 

 

 

 

 

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17 (5)

 

$

5,000,000

 

5,000,000

 

5,137,500

 

0.65

%

 

 

 

 

 

 

 

 

 

 

Structured Note Funds (1.90%)

 

 

 

 

 

 

 

 

 

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21 - (Cayman Islands) (5), (10)

 

$

15,000,000

 

15,000,000

 

15,000,000

 

1.90

%

 

 

 

 

 

 

 

 

 

 

Total Other Corporate Debt Securities

 

 

 

134,810,014

 

138,278,336

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Debt Investments

 

 

 

720,651,321

 

726,514,593

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (5.04%)

 

 

 

 

 

 

 

 

 

Architectural, Engineering, and Related Services (0.87%)

 

 

 

 

 

 

 

 

 

ESP Holdings, Inc., Cumulative Preferred 15% (2), (3), (5)

 

20,297

 

2,249,930

 

3,947,862

 

0.51

%

ESP Holdings, Inc., Common Stock (2), (3), (5)

 

88,670

 

9,311,782

 

2,856,346

 

0.36

%

Total Architectural, Engineering, and Related Services

 

 

 

11,561,712

 

6,804,208

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Support Services (0.22%)

 

 

 

 

 

 

 

 

 

STG-Fairway Holdings, LLC, Class A Units (3), (5)

 

841,479

 

1,174,225

 

1,722,508

 

0.22

%

 

S-F-52



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (continued)

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (0.64%)

 

 

 

 

 

 

 

 

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units (2), (3), (5)

 

5,000,000

 

$

5,000,000

 

$

5,000,000

 

0.64

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.13%)

 

 

 

 

 

 

 

 

 

Anacomp, Inc., Class A Common Stock (3), (5), (6)

 

1,255,527

 

26,711,048

 

1,004,422

 

0.13

%

 

 

 

 

 

 

 

 

 

 

Depository Credit Intermediation (0.11%)

 

 

 

 

 

 

 

 

 

Doral Financial Corporation, Common Stock - (Puerto Rico) (3), (12)

 

53,890

 

11,699,417

 

843,913

 

0.11

%

 

 

 

 

 

 

 

 

 

 

Financial Investment Activities (0.00%)

 

 

 

 

 

 

 

 

 

Marsico Holdings, LLC, Common Interest Units (3), (5), (11)

 

168,698

 

172,694

 

4,302

 

 

 

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (0.00%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Membership Units (2), (3), (5)

 

13,161,000

 

2,010,777

 

 

 

 

 

 

 

 

 

 

 

 

 

Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing (0.01%)

 

 

 

 

 

 

 

 

 

Precision Holdings, LLC, Class C Membership Interests (3), (5)

 

33

 

 

41,645

 

0.01

%

 

 

 

 

 

 

 

 

 

 

Nonmetallic Mineral Mining and Quarrying (0.20%)

 

 

 

 

 

 

 

 

 

EPMC HoldCo, LLC, Membership Units (2), (5)

 

1,312,720

 

 

1,562,137

 

0.20

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (0.16%)

 

 

 

 

 

 

 

 

 

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,843

 

1,274,000

 

1,268,904

 

0.16

%

 

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (0.04%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Warrants to Purchase Common Stock (3), (5)

 

233,470

 

300,322

 

354,874

 

0.04

%

 

 

 

 

 

 

 

 

 

 

Retail (0.07%)

 

 

 

 

 

 

 

 

 

Shop Holding, LLC, Class A Units (3), (5)

 

490,037

 

462,576

 

532,919

 

0.07

%

Shop Holding, LLC, Warrants to Purchase Class A Units (3), (5)

 

326,691

 

 

38,258

 

 

Total Electronic Shopping

 

 

 

462,576

 

571,177

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.19%)

 

 

 

 

 

 

 

 

 

Equipment Trusts - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL Trust Beneficial Interests (5), (6)

 

727

 

97,376

 

125,970

 

0.02

%

N918DL Trust Beneficial Interests (5), (6)

 

623

 

109,938

 

142,970

 

0.02

%

N954DL Trust Beneficial Interests (5), (6)

 

591

 

133,027

 

68,000

 

0.01

%

N955DL Trust Beneficial Interests (5), (6)

 

576

 

133,868

 

113,560

 

0.01

%

N956DL Trust Beneficial Interests (5), (6)

 

580

 

133,907

 

108,800

 

0.01

%

N957DL Trust Beneficial Interests (5), (6)

 

576

 

134,785

 

109,650

 

0.01

%

N959DL Trust Beneficial Interests (5), (6)

 

573

 

135,658

 

110,500

 

0.01

%

N960DL Trust Beneficial Interests (5), (6)

 

563

 

139,173

 

109,650

 

0.01

%

N961DL Trust Beneficial Interests (5), (6)

 

570

 

138,350

 

103,870

 

0.01

%

N976DL Trust Beneficial Interests (5), (6)

 

654

 

113,413

 

103,033

 

0.01

%

Equipment Trusts - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA Trust Beneficial Interests (2), (5)

 

54

 

197,409

 

465,625

 

0.06

%

N512UA Trust Beneficial Interests (2), (5)

 

53

 

193,046

 

458,277

 

0.06

%

N536UA Trust Beneficial Interests (2), (5)

 

81

 

396,289

 

656,766

 

0.08

%

N545UA Trust Beneficial Interests (2), (5)

 

67

 

348,071

 

641,840

 

0.08

%

N585UA Trust Beneficial Interests (2), (5)

 

53

 

214,737

 

571,706

 

0.07

%

United N659UA-767, LLC (N659UA) (5), (6)

 

412

 

2,097,640

 

2,840,323

 

0.36

%

United N661UA-767, LLC (N661UA) (5), (6)

 

400

 

2,066,062

 

2,852,677

 

0.36

%

Total Scheduled Air Transportation

 

 

 

6,782,749

 

9,583,217

 

 

 

 

 

 

 

 

 

 

 

 

 

Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing (0.08%)

 

 

 

 

 

 

 

 

 

KAGY Holding Company, Inc., Series A Preferred Stock (2), (3), (5)

 

9,778

 

1,091,200

 

662,134

 

0.08

%

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (0.03%)

 

 

 

 

 

 

 

 

 

AIP/IS Holdings, LLC, Membership Units (3), (5)

 

352

 

 

229,504

 

0.03

%

 

 

 

 

 

 

 

 

 

 

Software Publishers (0.07%)

 

 

 

 

 

 

 

 

 

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,232,731

 

522,678

 

561,632

 

0.07

%

 

S-F-53



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.22%)

 

 

 

 

 

 

 

 

 

Integra Telecom, Inc., Common Stock (3), (5)

 

1,274,522

 

$

8,433,884

 

$

5,583,686

 

0.72

%

Integra Telecom, Inc., Warrants (3), (5)

 

346,939

 

19,920

 

194,050

 

0.02

%

V Telecom Investment S.C.A, Common Shares - (Luxembourg) (3), (4), (5), (10)

 

1,393

 

3,236,256

 

3,756,053

 

0.48

%

Total Wired Telecommunications Carriers

 

 

 

11,690,060

 

9,533,789

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Equity Securities

 

 

 

80,453,458

 

39,748,366

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments

 

 

 

801,104,779

 

766,262,959

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents (2.91%)

 

 

 

 

 

 

 

 

 

Wells Fargo & Company, Overnight Repurchase Agreement, 0.09%,

 

 

 

 

 

 

 

 

 

Collateralized by Freddie Mac Note

 

 

 

 

 

$

10,501,688

 

1.33

%

Union Bank of California, Commercial Paper, 0.10%, due 1/2/14

 

 

 

 

 

8,499,976

 

1.07

%

Cash Denominated in Foreign Currencies

 

 

 

 

 

121,389

 

0.02

%

Cash Held on Account at Various Institutions

 

 

 

 

 

3,861,129

 

0.49

%

Cash and Cash Equivalents

 

 

 

 

 

22,984,182

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Cash and Investments (9)

 

 

 

 

 

$

789,247,141

 

100.00

%

 


Notes to Statement of Investments:

 

(1)

Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933. Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower.

 

 

(2)

Non-controlled affiliate — as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates.

 

 

(3)

Non-income producing security.

 

 

(4)

Principal amount denominated in foreign currency. Amortized cost and fair value converted from foreign currency to US dollars. (See Note 2)

 

 

(5)

Restricted security. (See Note 2)

 

 

(6)

Controlled issuer — as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer). Investment is not more than 50% owned nor deemed to be a significant subsidiary. See Consolidated Schedule of Changes in Investments in Affiliates.

 

 

 

 

(7)

Investment has been segregated to collateralize certain unfunded commitments.

 

 

(8)

$2,000,000 principal amount of this investment has been segregated to collateralize certain unfunded commitments.

 

 

(9)

All cash and investments, except those referenced in Notes 7 and 8 above, are pledged as collateral under the Revolving Facilities as described in Note 4 to the Consolidated Financial Statements.

 

 

 

 

(10)

Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership ‘s total assets.

 

 

(11)

Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership ‘s total assets.

 

 

(12)

Publicly traded company with a market capitalization greater than $250 million and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership ‘s total assets.

 

 

(13)

Negative balances relate to an unfunded commitment that was acquired and valued at a discount.

 

LIBOR or EURIBOR resets monthly (M), quarterly (Q), or semiannually (S).

 

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $471,087,319, and $235,641,665, respectively for the year ended December 31, 2013. Aggregate acquisitions includes investment assets received as payment in kind.  Aggregate dispositions includes principal paydowns on and maturities of debt investments.  The total value of restricted securities and bank debt as of December 31, 2013 was $765,419,046, or 97.0% of total cash and investments of the Partnership.

 

Options and Swaps at December 31, 2013 were as follows:

 

Investment

 

Notional Amount

 

Fair Value

 

 

 

 

 

 

 

Interest Rate Cap, 4%, expires 5/15/2016

 

$

25,000,000

 

$

14,139

 

Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 3/31/17

 

$

4,289,019

 

$

(331,183

)

 

See accompanying notes.

 

S-F-54


 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statements of Operations

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Investment income

 

 

 

 

 

Interest income:

 

 

 

 

 

Companies less than 5% owned

 

$

18,140,743

 

$

15,240,367

 

Companies 5% to 25% owned

 

1,336,864

 

893,512

 

Companies more than 25% owned

 

257,627

 

330,317

 

Dividend income:

 

 

 

 

 

Companies 5% to 25% owned

 

1,968,748

 

 

Other income:

 

 

 

 

 

Companies less than 5% owned

 

634,733

 

157,533

 

Companies 5% to 25% owned

 

121,039

 

101,103

 

Companies more than 25% owned

 

208,890

 

142,911

 

Total investment income

 

22,668,644

 

16,865,743

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

Management and advisory fees

 

2,886,208

 

1,964,738

 

Interest expense

 

456,861

 

136,407

 

Amortization of deferred debt issuance costs

 

372,755

 

108,564

 

Administrative expenses

 

256,806

 

167,808

 

Legal fees, professional fees and due diligence expenses

 

117,760

 

74,462

 

Commitment fees

 

191,199

 

22,589

 

Director fees

 

57,023

 

48,059

 

Insurance expense

 

35,952

 

24,201

 

Custody fees

 

49,932

 

28,544

 

Other operating expenses

 

15,981

 

136,409

 

Total operating expenses

 

4,440,477

 

2,711,781

 

 

 

 

 

 

 

Net investment income

 

18,228,167

 

14,153,962

 

 

 

 

 

 

 

Net realized and unrealized gain (loss) on investments and foreign currency

 

 

 

 

 

Net realized gain (loss):

 

 

 

 

 

Investments in companies less than 5% owned

 

(6,795,721

)

517,658

 

Investments in companies 5% to 25% owned

 

375

 

 

Net realized gain (loss)

 

(6,795,346

)

517,658

 

 

 

 

 

 

 

Net change in net unrealized appreciation/depreciation

 

11,975,364

 

1,837,731

 

Net realized and unrealized gain

 

5,180,018

 

2,355,389

 

 

 

 

 

 

 

Dividends on Series A preferred equity facility

 

(369,135

)

(393,413

)

Net change in accumulated dividends on Series A preferred equity facility

 

10,495

 

16,011

 

Net increase in net assets applicable to common limited and general partners resulting from operations

 

$

23,049,545

 

$

16,131,949

 

 

See accompanying notes.

 

S-F-55



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statements of Changes in Net Assets

 

 

 

Three Months Ended March 31, 2014 (Unaudited)

 

 

 

 

 

Common

 

 

 

 

 

 

 

Limited

 

General

 

 

 

Total

 

Partner

 

Partner

 

Net assets applicable to common limited and general partners, beginning of year

 

$

552,263,625

 

$

551,095,042

 

$

1,168,583

 

Net investment income

 

18,228,167

 

14,670,036

 

3,558,131

 

Net realized loss

 

(6,795,346

)

(5,436,277

)

(1,359,069

)

Net change in unrealized appreciation/depreciation

 

11,975,364

 

9,580,291

 

2,395,073

 

Dividends paid on preferred equity facility

 

(369,135

)

(295,308

)

(73,827

)

Net change in accumulated dividends on preferred equity facility

 

10,495

 

8,396

 

2,099

 

Net increase in net assets applicable to common limited and general partners resulting from operations

 

23,049,545

 

18,527,139

 

4,522,406

 

Distributions to common limited and general partners from:

 

 

 

 

 

 

 

Net investment income

 

(17,271,599

)

(13,785,196

)

(3,486,403

)

Net assets applicable to common limited and general partners, end of period (including accumulated net investment income of $27,448,077, $27,097,562 and $350,515, respectively)

 

$

558,041,571

 

$

555,836,984

 

$

2,204,587

 

 

 

 

Year Ended December 31, 2013

 

 

 

 

 

Common

 

 

 

 

 

 

 

Limited

 

General

 

 

 

Total

 

Partner

 

Partner

 

Net assets applicable to common limited and general partners, beginning of year

 

$

317,209,574

 

$

317,209,574

 

$

 

 

 

 

 

 

 

 

 

Contributions from common limited partner

 

225,201,350

 

225,201,350

 

 

 

 

 

 

 

 

 

 

Net investment income

 

56,340,223

 

45,474,169

 

10,866,054

 

Net realized loss

 

(47,384,746

)

(37,907,797

)

(9,476,949

)

Net change in unrealized appreciation/depreciation

 

56,456,107

 

45,164,886

 

11,291,221

 

Dividends paid on preferred equity facility

 

(1,516,585

)

(1,213,268

)

(303,317

)

Net change in accumulated dividends on preferred equity facility

 

22,033

 

17,626

 

4,407

 

Net increase in net assets applicable to common limited and general partners resulting from operations

 

63,917,032

 

51,535,616

 

12,381,416

 

 

 

 

 

 

 

 

 

Distributions to common limited and general partners from:

 

 

 

 

 

 

 

Net investment income

 

(53,418,640

)

(42,851,498

)

(10,567,142

)

Realized gains

 

(645,691

)

 

(645,691

)

Net assets applicable to common limited and general partners, end of period (including accumulated net investment income of $26,850,149, $26,499,634 and $350,515, respectively)

 

$

552,263,625

 

$

551,095,042

 

$

1,168,583

 

 

See accompanying notes.

 

S-F-56



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statements of Cash Flows

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Net increase in net assets applicable to common limited and general partners resulting from operations

 

$

23,049,545

 

$

16,131,949

 

Adjustments to reconcile net increase in net assets applicable to common limited and general partners resulting from operations to net cash (used in) provided by operating activities:

 

 

 

 

 

Net realized loss (gain)

 

6,795,346

 

(517,658

)

Net change in unrealized appreciation/depreciation of investments

 

(11,974,865

)

(1,880,949

)

Dividends paid on Series A preferred equity facility

 

369,135

 

393,413

 

Net change in accumulated dividends on Series A preferred equity facility

 

(10,495

)

(16,011

)

Accretion of original issue discount

 

(551,826

)

(825,555

)

Net accretion of market discount/premium

 

(178,840

)

(81

)

Interest and dividend income paid in kind

 

(1,084,557

)

(253,156

)

Amortization of deferred debt issuance costs

 

372,755

 

108,564

 

Changes in assets and liabilities:

 

 

 

 

 

Purchases of investment securities

 

(109,301,941

)

(40,010,595

)

Proceeds from sales, maturities and paydowns of investments

 

66,876,929

 

51,006,153

 

Increase in accrued interest income - companies less than 5% owned

 

(1,997,625

)

(2,546,216

)

Increase in accrued interest income - companies 5% to 25% owned

 

(264,538

)

(4,073

)

Decrease in accrued interest income - companies more than 25% owned

 

3,172

 

2,835

 

Decrease in receivable for investments sold

 

2,574,247

 

7,727,415

 

Increase in prepaid expenses and other assets

 

(448,303

)

(435,089

)

Decrease in payable for investments purchased

 

(13,192,340

)

(21,657,527

)

Increase (decrease) in payable to the Investment Manager

 

(143,065

)

20,071

 

Increase in payable to parent

 

(433,020

)

 

Increase (decrease) in interest payable

 

(98,929

)

31,937

 

Increase in accrued expenses and other liabilities

 

33,680

 

83,601

 

Net cash (used in) provided by operating activities

 

(39,605,535

)

7,359,028

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Proceeds from draws on credit facilities

 

114,000,000

 

6,000,000

 

Principal repayments on credit facilities

 

(52,000,000

)

(10,000,000

)

Payments of debt issuance costs

 

(763,980

)

 

Dividends paid on Series A preferred equity facility

 

(369,135

)

(393,413

)

Dividends paid to common limited partner

 

(13,785,196

)

(9,823,476

)

Distributions of incentive allocation to the General Partner

 

(3,318,900

)

 

Net cash provided by (used in) financing activities

 

43,762,789

 

(14,216,889

)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

4,157,254

 

(6,857,861

)

Cash and cash equivalents at beginning of period

 

22,984,182

 

18,035,189

 

Cash and cash equivalents at end of period

 

$

27,141,436

 

$

11,177,328

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

Interest payments

 

$

235,336

 

$

104,470

 

 

See accompanying notes.

 

S-F-57



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements

 

March 31, 2014

 

1. Organization and Nature of Operations

 

Special Value Continuation Partners, LP (the “Partnership”) a Delaware limited partnership, commenced operations on July 31, 2006 as an externally managed, closed-end, non-diversified management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). On April 2, 2012, the Partnership elected to be treated as a business development company (“BDC”) under the 1940 Act (the “Conversion”). The Partnership’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection.

 

Investment operations are conducted either directly in the Partnership or in one of the Partnership’s wholly owned subsidiaries, TCPC Funding I, LLC, a Delaware limited liability company (“TCPC Funding”) and TCPC SBIC, LP, a Delaware limited partnership (the “SBIC”). The SBIC was organized in June 2013, and on April 22, 2014, received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958. The Partnership, TCPC Funding, and the SBIC invest primarily in the debt of middle-market companies, including senior secured loans, junior loans, mezzanine debt and bonds. Such investments may include an equity component, and, to a lesser extent, the Partnership, TCPC Funding, and the SBIC may make equity investments directly. The Partnership, TCPC Funding, and the SBIC have elected to be treated as partnerships for U.S. federal income tax purposes. TCP Capital Corp. (“TCPC”) owns the entire common limited partner interest in the Partnership. TCPC has also elected to be treated as a business development company under the 1940 Act.

 

The general partner of the Partnership is SVOF/MM, LLC, which also serves as the administrator of TCPC and the Partnership (the “Administrator” or the “General Partner”). The managing member of the General Partner is Tennenbaum Capital Partners, LLC, which serves as the Investment Manager to TCPC, the Partnership, TCPC Funding and the SBIC. Most of the equity interests in the General Partner are owned directly or indirectly by the Investment Manager and its employees.

 

Partnership management consists of the General Partner and the Board of Directors. The General Partner directs and executes the day-to-day operations of the Partnership subject to oversight from the Board of Directors, which performs certain functions required by the 1940 Act. The Board of Directors has delegated investment management of the Partnership’s assets to the Investment Manager. The Board of Directors consists of five persons, three of whom are independent. If the Partnership has preferred limited partner interests outstanding, as it currently does, the holders of the preferred limited partner interests voting separately as a class are entitled to elect two of the Directors. The remaining directors will be subject to election by holders of the common limited partner interests and preferred limited partner interests voting together as a single class.

 

S-F-58



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements of the Partnership include the accounts of the Partnership, TCPC Funding and the SBIC and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The following is a summary of the significant accounting policies of the Partnership and TCPC Funding.

 

Use of Estimates

 

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates and assumptions to be reasonable, actual results could differ from those estimates and differences could be material.

 

Investment Valuation

 

Management values investments at fair value based upon the principles and methods of valuation set forth in policies adopted by the Board of Directors and in conformity with procedures set forth in the Senior Facilities and the Statement of Preferences for the Preferred Interests, as defined in Note 4, below. Fair value is generally defined as the amount for which an investment would be sold in an orderly transaction between market participants at the measurement date.

 

All investments are valued at least quarterly based on affirmative pricing or quotations from independent third-party sources, with the exception of investments priced directly by the Investment Manager which together comprise, in total, less than 5% of the capitalization of the Partnership. Investments listed on a recognized exchange or market quotation system, whether U.S. or foreign, are valued for financial reporting purposes as of the last business day of the reporting period using the closing price on the date of valuation. Liquid investments not listed on a recognized exchange or market quotation system are valued using prices provided by a nationally recognized pricing service or by using quotations from broker-dealers. Investments not priced by a pricing service or for which market quotations are either not readily available or are determined to be unreliable are valued using affirmative valuations performed by independent valuation services or, for investments aggregating less than 5% of the total capitalization of the Partnership, directly by the Investment Manager.

 

Fair valuations of investments are determined under guidelines adopted by the Board of Directors, and are subject to their approval. Generally, to increase objectivity in valuing investments, the Investment Manager will utilize external measures of value, such as public markets or third-party transactions, whenever possible. The Investment Manager’s valuation is not based on long-term work-out value, immediate liquidation value, nor incremental value for potential changes that may take place in the future. The values assigned to investments that are valued by the Investment Manager are based on available information and do not necessarily represent amounts that might ultimately be realized, as these amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated. The foregoing policies apply to

 

S-F-59


 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

all investments, including those in companies and groups of affiliated companies aggregating more than 5% of the Partnership’s assets.

 

Fair valuations of investments in each asset class are determined using one or more methodologies including the market approach, income approach, or, in the case of recent investments, the cost approach, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present value 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 may be taken into account include, as relevant:  available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market and enterprise values, among other factors.

 

Unobservable inputs used in the fair value measurement of Level 3 investments as of March 31, 2014 included the following:

 

Asset Type

 

Fair Value

 

Valuation Technique

 

Unobservable Input

 

Range (Weighted Avg.)

Bank Debt

 

$

317,003,161

 

Market rate approach

 

Market yields

 

3.8% - 16.5% (10.9%)

 

 

238,578,988

 

Market quotations

 

Indicative bid/ask quotes

 

1 - 3 (2)

 

 

15,792,158

 

Market comparable companies

 

Revenue multiples

 

0.4x (0.4x)

 

 

2,056,927

 

Market comparable companies

 

EBITDA multiples

 

7.8x (7.8x)

Other Corporate

 

71,494

 

Market rate approach

 

Market yields

 

16.3% (16.3%)

Debt

 

54,707,520

 

Market quotations

 

Indicative bid/ask quotes

 

1 – 2 (1)

 

 

16,828,346

 

Market comparable companies

 

EBITDA multiples

 

7.8x - 10.0x (8.8x)

Equity

 

9,527,486

 

Market rate approach

 

Market yields

 

13.0% - 18.0% (13.6%)

 

 

3,587,881

 

Market quotations

 

Indicative bid/ask quotes

 

1 - 1 (1)

 

 

891,424

 

Market comparable companies

 

Revenue multiples

 

0.4x - 1.1x (1.1x)

 

 

18,441,260

 

Market comparable companies

 

EBITDA multiples

 

4.0x – 6.6x (5.8x)

 

Generally, a change in an unobservable input may result in a change to the value of an investment as follows:

 

Input

 

Impact to Value if
Input Increases

 

Impact to Value if
Input Decreases

 

Market yields

 

Decrease

 

Increase

 

Revenue multiples

 

Increase

 

Decrease

 

EBITDA multiples

 

Increase

 

Decrease

 

 

Investments may be categorized based on the types of inputs used in valuing such investments. The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Transfers between levels are recognized as of the beginning of the reporting period.

 

S-F-60



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

At March 31, 2014, the Partnership’s investments were categorized as follows:

 

Level

 

Basis for Determining Fair Value

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

1

 

Quoted prices in active markets for identical assets

 

$

 

$

 

$

467,763

 

2

 

Other observable market inputs *

 

70,146,046

 

67,557,294

 

 

3

 

Independent third-party pricing sources that employ significant unobservable inputs

 

573,872,294

 

64,047,014

 

29,595,404

 

3

 

Investment Manager valuations with significant unobservable inputs

 

(441,060

)

7,560,346

 

2,852,647

 

Total

 

 

 

$

643,577,280

 

$

139,164,654

 

$

32,915,814

 

 


*  For example, quoted prices in inactive markets or quotes for comparable investments.

 

Changes in investments categorized as Level 3 during the three months ended March 31, 2014 were as follows:

 

 

 

Independent Third-Party Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

515,953,643

 

$

53,334,634

 

$

36,066,746

 

Net realized and unrealized gains (losses)

 

4,633,345

 

833,673

 

(1,034,764

)

Acquisitions

 

98,772,793

 

13,080,946

 

894,302

 

Dispositions

 

(30,758,320

)

(14,077,239

)

(6,330,880

)

Transfers out of Level 3 *

 

(14,729,167

)

 

 

Transfers into Level 3 †

 

 

10,875,000

 

 

Ending balance

 

$

573,872,294

 

$

64,047,014

 

$

29,595,404

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

5,296,423

 

$

862,015

 

$

325,048

 

 


*  Comprised of one investment that transferred to Level 2 due to increased observable market activity.

†  Comprised of one investment that transferred from Level 2 due to reduced trading volumes.

 

 

 

Investment Manager Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

4,060,800

 

$

7,631,335

 

$

2,837,707

 

Net realized and unrealized gains (losses)

 

(1,860

)

(70,989

)

(188,519

)

Acquisitions

 

 

 

230,938

 

Dispositions

 

(4,500,000

)

 

(27,479

)

Ending balance

 

$

(441,060

)‡

$

7,560,346

 

$

2,852,647

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

(1,860

)

$

(70,989

)

$

(215,999

)

 


‡ Negative balance relates to an unfunded commitment that was acquired and valued at a discount.

 

S-F-61



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

There were no transfers between Level 1 and 2 during the three months ended March 31, 2014.

 

At March 31, 2013, the Partnership’s investments were categorized as follows:

 

Level

 

Basis for Determining Fair Value

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

1

 

Quoted prices in active markets for identical assets

 

$

 

$

 

$

759,522

 

2

 

Other observable market inputs *

 

111,560,238

 

61,901,366

 

 

3

 

Independent third-party pricing sources that employ significant unobservable inputs

 

275,074,150

 

17,509,840

 

34,225,001

 

3

 

Investment Manager valuations with significant unobservable inputs

 

 

7,552,970

 

1,411,858

 

Total

 

 

 

$

386,634,388

 

$

86,964,176

 

$

36,396,381

 

 


*  For example, quoted prices in inactive markets or quotes for comparable investments.

 

Changes in investments categorized as Level 3 during the three months ended March 31, 2013 were as follows:

 

 

 

Independent Third-Party Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

359,343,326

 

$

17,171,637

 

$

32,675,370

 

Net realized and unrealized gains (losses)

 

(2,705,665

)

332,962

 

1,418,164

 

Acquisitions

 

15,489,607

 

5,241

 

778,020

 

Dispositions

 

(38,401,835

)

 

(646,553

)

Transfers out of Level 3 †

 

(58,651,283

)

 

 

Ending balance

 

$

275,074,150

 

$

17,509,840

 

$

34,225,001

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

(1,074,858

)

$

332,962

 

$

1,418,164

 

 


† Comprised of eight investments that transferred to Level 2 due to increased observable market activity.

 

 

 

Investment Manager Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

 

$

7,167,458

 

$

1,424,764

 

Net realized and unrealized gains (losses)

 

 

350,718

 

(12,906

)

Acquisitions

 

 

34,794

 

 

Ending balance

 

$

 

$

7,552,970

 

$

1,411,858

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

 

$

350,718

 

$

(12,906

)

 

There were no transfers between Level 1 and 2 during the three months ended March 31, 2013.

 

S-F-62



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Investment Transactions

 

Investment transactions are recorded on the trade date, except for private transactions that have conditions to closing, which are recorded on the closing date. The cost of investments purchased is based upon the purchase price plus those professional fees which are specifically identifiable to the investment transaction. Realized gains and losses on investments are recorded based on the identification method, which typically allocates the highest cost inventory to the basis of investments sold.

 

Cash and Cash Equivalents

 

Cash consists of amounts held in accounts with brokerage firms and the custodian bank. Cash equivalents consist of highly liquid investments with an original maturity of three months or less.

 

Repurchase Agreements

 

In connection with transactions in repurchase agreements, it is the Partnership’s policy that the custodian take possession of the underlying collateral, the fair value of which is required to exceed the principal amount of the repurchase transaction, including accrued interest, at all times. If the seller defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.

 

Restricted Investments

 

The Partnership may invest without limitation in instruments that are subject to legal or contractual restrictions on resale. These instruments generally may be resold to institutional investors in transactions exempt from registration or to the public if the securities are registered. Disposal of these investments may involve time-consuming negotiations and additional expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted investments is included at the end of the Consolidated Statement of Investments. Restricted investments, including any restricted investments in affiliates, are valued in accordance with the investment valuation policies discussed above.

 

Foreign Investments

 

The Partnership may invest in instruments traded in foreign countries and denominated in foreign currencies. Foreign currency denominated investments comprised approximately 2.7% and 2.7% of total investments at March 31, 2014 and December 31, 2013, respectively. Such positions were converted at the respective closing rate in effect at March 31, 2014 and December 31, 2013 and reported in U.S. dollars. Purchases and sales of investments and income and expense items denominated in foreign currencies, when they occur, are translated into U.S. dollars on the respective dates of such transactions. The portion of gains and losses on foreign investments resulting from fluctuations in foreign currencies is included in net realized and unrealized gain or loss from investments.

 

Investments in foreign companies and securities of foreign governments may involve special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government.

 

S-F-63



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

These risks include, among other things, revaluation of currencies, less reliable information about issuers, different transaction clearance and settlement practices, and potential future adverse political and economic developments. Moreover, investments in foreign companies and securities of foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies and the U.S. government.

 

Derivatives

 

In order to mitigate certain currency exchange and interest rate risks, the Partnership has entered into certain swap and option transactions. All derivatives are recognized as either assets or liabilities in the Consolidated Statement of Assets and Liabilities. The transactions entered into are accounted for using the mark-to-market method with the resulting change in fair value recognized in earnings for the current period. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in interest rates and the value of foreign currency relative to the U.S. dollar.

 

 

The Partnership did not enter into any new derivative transactions during the three months ended March 31, 2014. At March 31, 2014, the Partnership held an interest rate cap with a notional amount of $25,000,000 and a cross currency basis swap with a notional amount of $4,289,019. Gains and losses from derivatives during the three months ended March 31, 2014 were included in net realized and unrealized loss on investments in the Consolidated Statement of Operations as follows:

 

Instrument

 

Realized Gains
(Losses)

 

Unrealized Gains
(Losses)

 

Cross currency basis swaps

 

$

 

$

30,499

 

Interest rate cap

 

$

 

$

(5,534

)

 

The Partnership did not enter into any new derivative transactions during the three months ended March 31, 2013. At March 31, 2013, the Partnership held a cross currency basis swap with a notional amount of $6,040,944. Gains and losses from derivatives during the three months ended March 31, 2013 were included in net realized and unrealized loss on investments in the Consolidated Statement of Operations as follows:

 

Instrument

 

Realized Gains
(Losses)

 

Unrealized Gains
(Losses)

 

Cross currency basis swaps

 

$

 

$

169,983

 

 

Valuations of derivatives held at March 31, 2014 and March 31, 2013 were determined using observable market inputs other than quoted prices in active markets for identical assets and, accordingly, are classified as Level 2 in the GAAP valuation hierarchy.

 

S-F-64



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Debt Issuance Costs

 

Costs of approximately $3.5 million were incurred during 2006 in connection with placing the Partnership’s revolving credit facility (see Note 4). Additional costs of approximately $1.5 million were incurred during 2013 in connection with the extension of the facility. These costs were deferred and are being amortized on a straight-line basis over the estimated remaining life of the facility. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Partnership.

 

Costs of approximately $1.6 million were incurred during 2013 in connection with placing TCPC Funding’s revolving credit facility (see Note 4). Additional costs of approximately $0.8 million were incurred in 2014 in connection with the extension of the facility. These costs were deferred and are being amortized on a straight-line basis over three years, the estimated life of that facility. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Partnership.

 

Revenue Recognition

 

Interest and dividend income, including income paid in kind, is recorded on an accrual basis. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts, earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income received upon the early repayment of a loan or debt security are included in interest income.

 

Certain debt investments are purchased at a considerable discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. GAAP generally requires that discounts on the acquisition of corporate bonds, municipal bonds and treasury bonds be amortized using the effective-interest or constant-yield method. GAAP also requires the collectability of interest to be considered when making accruals. Accordingly, when accounting for purchase discounts, discount accretion income is recognized when it is probable that such amounts will be collected, generally at disposition. When principal payments on a loan are received in an amount in excess of the loan’s amortized cost, the excess principal payments are recorded as interest income.

 

Income Taxes

 

The income or loss of the Partnership, TCPC Funding and the SBIC is reported in the respective partners’ income tax returns. Consequently, no income taxes are paid at the partnership level or reflected in the Partnership’s financial statements. In accordance with ASC Topic 740 — Income Taxes , the Partnership recognizes in its financial statements the effect of a tax position when it is determined that such position is more likely than not, based on the technical merits, to be sustained upon examination. As of March 31, 2014, all tax years of the Partnership since January 1, 2010 remain subject to examination by federal tax authorities. No such examinations are currently pending.

 

S-F-65



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Cost and unrealized appreciation and depreciation of investments (including derivatives) for U.S. federal income tax purposes at March 31, 2014 were as follows:

 

Unrealized appreciation

 

$

34,662,507

 

Unrealized depreciation

 

(57,898,261

)

Net unrealized depreciation

 

(23,235,754

)

 

 

 

 

Cost

 

$

838,601,423

 

 

3. Management Fees, Incentive Compensation and Other Expenses

 

The Partnership’s management fee is calculated at an annual rate of 1.5% of total assets (excluding cash and cash equivalents) of TCPC on a consolidated basis as of the beginning of each quarter and is payable to the Investment Manager quarterly in arrears.

 

Incentive compensation is only paid to the extent that TCPC’s total performance exceeds a cumulative 8% annual return since January 1, 2013 (the “Total Return Hurdle”). The incentive compensation equals 20% of net investment income (reduced by preferred dividends) and 20% of net realized gains (reduced by any net unrealized losses), subject to the Total Return Hurdle. The incentive compensation is payable quarterly in arrears as an allocation and distribution to the General Partner and is calculated as the difference between cumulative incentive compensation earned since January 1, 2013 and cumulative incentive compensation paid since January 1, 2013. A reserve for incentive compensation is allocated to the account of the General Partner based on the amount of additional incentive compensation that would have been distributable to the General Partner assuming a hypothetical liquidation of TCPC and the Partnership at net asset value on the balance sheet date. At March 31, 2014, the General Partner’s equity interest in the Partnership was comprised entirely of a reserve amount of $2,204,587 as reflected in the Consolidated Statement of Changes in Net Assets.

 

The Partnership bears all expenses incurred in connection with its business, including fees and expenses of outside contracted services, such as custodian, administrative, legal, audit and tax preparation fees, costs of valuing investments, insurance costs, brokers’ and finders’ fees relating to investments, and any other transaction costs associated with the purchase and sale of investments.

 

S-F-66


 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

4. Leverage

 

At March 31, 2014 and December 31, 2013, leverage was comprised of amounts outstanding under senior secured revolving credit facilities issued by the Partnership (the “Partnership Facility”) and TCPC Funding (the “TCPC Funding Facility,” and, together with the Partnership Facility, the “Revolving Facilities”) as well as amounts outstanding under a preferred leverage facility issued by the Partnership (the “Preferred Interests”), as follows:

 

 

 

March 31, 2014

 

December 31, 2013

 

Partnership Facility

 

$

82,000,000

 

$

45,000,000

 

TCPC Funding Facility

 

75,000,000

 

50,000,000

 

Total Debt

 

$

157,000,000

 

$

95,000,000

 

 

 

 

 

 

 

Preferred Interests

 

134,000,000

 

134,000,000

 

Total Leverage

 

$

291,000,000

 

$

229,000,000

 

 

The combined weighted-average interest and dividend rates on total amounts outstanding under the leverage facilities at March 31, 2014 and December 31, 2013 were 1.35% and 1.38%, respectively.

 

Amounts outstanding under the Revolving Facilities are carried at cost in the Statement of Assets and Liabilities. As of March 31, 2014, the estimated fair value of the TCPC Funding Facility approximated its carrying value, and the Partnership Facility had an estimated fair value of $81,286,654. The estimated fair values of the Revolving Facilities are determined by discounting projected remaining payments using market interest rates for our borrowings and entities with similar credit risks at the measurement date. At March 31, 2014, the Revolving Facilities would be deemed to be Level 3 in the GAAP valuation hierarchy.

 

Partnership Facility

 

The Partnership Facility provides for amounts to be drawn up to $116 million, subject to certain collateral and other restrictions. The Partnership Facility matures on July 31, 2016. Most of the cash and investments held directly by the Partnership, as well as the net assets of TCPC Funding and the SBIC, are included in the collateral for the facility.

 

Advances under the Partnership Facility through July 31, 2014 bear interest at an annual rate equal to 0.44% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). Advances under the Partnership Facility for periods from July 31, 2014 through the maturity date of the facility will bear interest at an annual rate equal to 2.5% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.20% per annum on the unused portion of the facility, or 0.25% per annum when less than $46.4 million in borrowings are outstanding. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Partnership fail to satisfy certain financial or other covenants. As of March 31, 2014, the Partnership was in full compliance with such covenants.

 

S-F-67



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

4. Leverage (continued)

 

TCPC Funding Facility

 

The TCPC Funding Facility, issued on May 15, 2013, provides for amounts to be drawn up to $150 million, subject to certain collateral and other restrictions. The TCPC Funding Facility matures on May 15, 2017, subject to extension by the lender at the request of TCPC Funding. The facility contains an accordion feature which allows for expansion of the facility up to $200 million subject to consent from the lender and other customary conditions. The cash and investments of TCPC Funding are included in the collateral for the facility.

 

As of March 31, 2014, borrowings under the TCPC Funding Facility bore interest at a rate of LIBOR plus 2.50% per annum. In connection to the extension and expansion of the facility on February 21, 2014, the interest rate was reduced to a rate of LIBOR plus 2.50% effective March 15, 2014.  In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.75% per annum on the unused portion of the facility, or 1.00% per annum when the unused portion is greater than 33% of the total facility. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should TCPC Funding fail to satisfy certain financial or other covenants. As of March 31, 2014, TCPC Funding was in full compliance with such covenants.

 

Preferred Equity

 

At March 31, 2014, the Preferred Interests were comprised of 6,700 Series A preferred limited partner interests issued and outstanding with a liquidation preference of $20,000 per interest. The Preferred Interests accrue dividends at an annual rate equal to 0.85% plus either LIBOR or the interestholder’s cost of funds (subject to a cap of LIBOR plus 20 basis points). The Preferred Interests are redeemable at the option of the Partnership, subject to certain conditions. Additionally, under certain conditions, the Partnership may be required to either redeem certain of the Preferred Interests or repay indebtedness, at the Partnership’s option. Such conditions would include a failure by the Partnership to maintain adequate collateral as required by its credit facility agreement or by the Statement of Preferences of the Preferred Interests or a failure by the Partnership to maintain sufficient asset coverage as required by the 1940 Act. As of March 31, 2014, the Partnership was in full compliance with such requirements.

 

 

5. Commitments, Concentration of Credit Risk and Off-Balance Sheet Risk

 

The Partnership, TCPC Funding and the SBIC conduct business with brokers and dealers that are primarily headquartered in New York and Los Angeles and are members of the major securities exchanges. Banking activities are conducted with a firm headquartered in the San Francisco area.

 

In the normal course of business, investment activities involve executions, settlement and financing of various transactions resulting in receivables from, and payables to, brokers, dealers and the custodian. These activities may expose the Partnership to risk in the event that such parties are unable to fulfill contractual obligations. Management does not anticipate any material losses from counterparties with whom it conducts business. Consistent with standard business practice, the Partnership, TCPC Funding and the SBIC enter into contracts that contain a variety of indemnifications, and are engaged from time to time in various legal actions. The maximum

 

S-F-68



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

5. Commitments, Concentration of Credit Risk and Off-Balance Sheet Risk (continued)

 

exposure under these arrangements and activities is unknown. However, management expects the risk of material loss to be remote.

 

The Consolidated Statement of Investments includes certain revolving loan facilities and other loan commitments held by the Partnership with aggregate unfunded balances of $36,361,742 at March 31, 2014. The Company has also provided a $20,861,473 guarantee on a bridge facility, which the Company believes is unlikely to be funded.

 

 

6. Related Parties

 

TCPC, the Partnership, TCPC Funding, the SBIC, the Investment Manager, the General Partner and their members and affiliates may be considered related parties. From time to time, the Partnership advances payments to third parties on behalf of TCPC which are reimbursable through deductions from distributions to TCPC. At March 31, 2014, no such amounts were outstanding. From time to time, the Investment Manager advances payments to third parties on behalf of the Partnership and receives reimbursement from the Partnership. At March 31, 2014, amounts reimbursable to the Investment Manager totaled $144,306, as reflected in the Consolidated Statement of Assets and Liabilities.

 

Pursuant to an administration agreement between the Administrator and the Partnership (the “Administration Agreement”), the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to the Partnership, as well as costs and expenses incurred by the Administrator or its affiliates relating to any administrative, operating, or other non-investment advisory services provided by the Administrator or its affiliates to the Partnership. For the three months ended March 31, 2014, expenses allocated pursuant to the Administration Agreements totaled $256,806. The Administrator waived reimbursement of all administrative expenses prior to January 1, 2013.

 

7.  Distributions

 

The Partnership’s distributions are recorded on the record date. The timing of distributions is determined by the General Partner, which has provided the Investment Manager with certain criteria for such distributions.

 

8. Subsequent Events

 

On April 22, 2014, the SBIC received a license from the SBA to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958.

 

S-F-69



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

9 . Financial Highlights

 

The financial highlights with respect to the common limited partner are as follows:

 

 

 

Three Months Ended

 

 

 

March 31, 2014

 

 

 

 

 

Return on invested assets (1), (2)

 

3.6

%

 

 

 

 

Gross return to common limited partner (1)

 

4.2

%

Less: General Partner incentive allocation (1)

 

(0.8

)%

Return to common limited partner (1), (3)

 

3.4

%

 

 

 

 

Ratios to average common equity: (4), (5)

 

 

 

Net investment income

 

13.3

%

Expenses

 

3.2

%

Expenses and General Partner allocation

 

4.0

%

 

 

 

 

Ending net assets attributable to common limited partner

 

$

555,836,984

 

Portfolio turnover rate (1)

 

8.7

%

Weighted-average debt outstanding

 

$

98,266,667

 

Weighted-average interest rate on debt

 

1.9

%

 


(1) Not annualized.

 

(2) Return on invested assets is a time-weighted, geometrically linked rate of return and excludes cash and cash equivalents.

 

(3) Returns (net of dividends on the preferred equity facility, allocations to General Partner and Partnership expenses, including financing costs and management fees) are calculated on a monthly geometrically linked, time-weighted basis.

 

(4) Net investment income and expenses annualized. General Partner allocation not annualized.

 

(5) These ratios include interest expense but do not reflect the effect of dividends on the preferred equity facility.

 

S-F-70



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Schedule of Changes in Investments in Affiliates (1)

 

Three Months Ended March 31, 2014

 

Security

 

Acquisitions

 

Dispositions (2)

 

Dividends or Interest (3)

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16

 

$

 

$

 

$

316,578

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16

 

 

 

 

Anacomp, Inc., Class A Common Stock

 

 

 

 

EPMC HoldCo, LLC, Membership Units

 

 

 

 

ESP Holdings, Inc., Cumulative Preferred 15%

 

 

(2,489,100

)

1,968,748

 

ESP Holdings, Inc., Common Stock

 

 

(2,955,297

)

289,315

 

ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19

 

 

(7,959,369

)

205,175

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18

 

 

(37,500

)

332,896

 

KAGY Holding Company, Inc., Series A Preferred Stock

 

 

 

 

N510UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(23,046

)

15,999

 

N512UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(22,551

)

16,292

 

N536UA Aircraft Secured Mortgage, 16%, due 9/29/14

 

 

(39,471

)

3,551

 

N545UA Aircraft Secured Mortgage, 16%, due 8/29/15

 

 

(35,371

)

9,269

 

N585UA Aircraft Secured Mortgage, 20%, due 10/25/16

 

 

(26,478

)

19,115

 

N659UA Aircraft Secured Mortgage, 12%, due 2/28/16

 

 

(269,027

)

78,303

 

N661UA Aircraft Secured Mortgage, 12%, due 5/4/16

 

 

(260,901

)

81,466

 

N510UA Equipment Trust Beneficial Interests

 

23,046

 

(8,978

)

20,872

 

N512UA Equipment Trust Beneficial Interests

 

22,551

 

(8,831

)

20,723

 

N536UA Equipment Trust Beneficial Interests

 

39,471

 

(11,300

)

29,930

 

N545UA Equipment Trust Beneficial Interests

 

35,371

 

(11,884

)

26,412

 

N585UA Equipment Trust Beneficial Interests

 

26,478

 

(11,694

)

23,102

 

N913DL Aircraft Secured Mortgage, 8%, due 3/15/17

 

 

(20,362

)

5,573

 

N918DL Aircraft Secured Mortgage, 8%, due 8/15/18

 

 

(18,025

)

7,576

 

N954DL Aircraft Secured Mortgage, 8%, due 3/20/19

 

 

(20,708

)

10,099

 

N955DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(19,920

)

10,485

 

N956DL Aircraft Secured Mortgage, 8%, due 5/20/19

 

 

(20,251

)

10,462

 

N957DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(20,094

)

10,576

 

N959DL Aircraft Secured Mortgage, 8%, due 7/20/19

 

 

(19,938

)

10,690

 

N960DL Aircraft Secured Mortgage, 8%, due 10/20/19

 

 

(19,644

)

11,119

 

N961DL Aircraft Secured Mortgage, 8%, due 8/20/19

 

 

(20,119

)

10,986

 

N976DL Aircraft Secured Mortgage, 8%, due 2/15/18

 

 

(20,924

)

7,674

 

N913DL Equipment Trust Beneficial Interests

 

20,362

 

(23,508

)

3,996

 

N918DL Equipment Trust Beneficial Interests

 

18,025

 

(22,334

)

3,175

 

N954DL Equipment Trust Beneficial Interests

 

20,708

 

(26,938

)

2,896

 

N955DL Equipment Trust Beneficial Interests

 

19,920

 

(26,609

)

2,687

 

N956DL Equipment Trust Beneficial Interests

 

20,251

 

(35,968

)

(6,301

)

N957DL Equipment Trust Beneficial Interests

 

20,094

 

(26,864

)

2,634

 

N959DL Equipment Trust Beneficial Interests

 

19,938

 

(26,754

)

2,579

 

N960DL Equipment Trust Beneficial Interests

 

19,644

 

(26,669

)

2,366

 

N961DL Equipment Trust Beneficial Interests

 

20,119

 

(27,137

)

2,424

 

N976DL Equipment Trust Beneficial Interests

 

20,924

 

(25,640

)

2,776

 

RM Holdco, LLC, Membership Units

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18

 

 

 

14,461

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/19/16

 

68,263

 

(47,493

)

100,987

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/19/16

 

262,284

 

 

332,454

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/19/16

 

85,754

 

 

108,422

 

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16

 

54,984

 

 

69,456

 

United N659UA-767, LLC (N659UA)

 

269,027

 

(168,678

)

92,624

 

United N661UA-767, LLC (N661UA)

 

260,901

 

(165,758

)

97,034

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units

 

 

 

 

 


Notes to Schedule of Changes in Investments in Affiliates:

(1) The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Partnership of 5% or more of the issuers’ voting securities.

(2) Dispositions include sales, paydowns, mortgage amortizations, and aircraft depreciation.

(3) Also includes fee and lease income as applicable.

 

S-F-71


 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Schedule of Changes in Investments in Affiliates (1)

 

Year Ended December 31, 2013

 

Security

 

Acquisitions

 

Dispositions (2)

 

Dividends or Interest (3)

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16

 

$

2,056,927

 

$

 

$

128,215

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16

 

7,586,317

 

 

640,007

 

Anacomp, Inc., Class A Common Stock

 

 

 

 

EPMC HoldCo, LLC, Membership Units

 

 

(1,481,930

)

 

ESP Holdings, Inc., Cumulative Preferred 15%

 

 

 

 

ESP Holdings, Inc., Common Stock

 

 

 

32,627

 

ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19

 

749,529

 

 

1,199,575

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18

 

14,850,000

 

 

83,281

 

International Wire Group Holdings, Inc., Senior Secured Notes, 8.5%, due 10/15/17

 

 

(15,759,750

)

443,715

 

KAGY Holding Company, Inc., Series A Preferred Stock

 

8,096,057

 

(1,644

)

 

N510UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(81,562

)

74,646

 

N512UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(79,808

)

75,593

 

N536UA Aircraft Secured Mortgage, 16%, due 9/29/14

 

 

(143,097

)

29,100

 

N545UA Aircraft Secured Mortgage, 16%, due 8/29/15

 

 

(128,230

)

50,422

 

N585UA Aircraft Secured Mortgage, 20%, due 10/25/16

 

 

(93,707

)

88,705

 

N659UA Aircraft Secured Mortgage, 12%, due 2/28/16

 

 

(999,280

)

390,117

 

N661UA Aircraft Secured Mortgage, 12%, due 5/4/16

 

 

(969,098

)

401,041

 

N510UA Equipment Trust Beneficial Interests

 

81,562

 

(35,912

)

72,866

 

N512UA Equipment Trust Beneficial Interests

 

79,808

 

(35,323

)

72,497

 

N536UA Equipment Trust Beneficial Interests

 

143,097

 

(45,201

)

104,929

 

N545UA Equipment Trust Beneficial Interests

 

128,359

 

(47,536

)

92,525

 

N585UA Equipment Trust Beneficial Interests

 

93,707

 

(46,776

)

80,203

 

N913DL Aircraft Secured Mortgage, 8%, due 3/15/17

 

 

(77,509

)

26,248

 

N918DL Aircraft Secured Mortgage, 8%, due 8/15/18

 

 

(68,612

)

33,806

 

N954DL Aircraft Secured Mortgage, 8%, due 3/20/19

 

 

(78,825

)

44,415

 

N955DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(75,824

)

45,803

 

N956DL Aircraft Secured Mortgage, 8%, due 5/20/19

 

 

(77,085

)

45,775

 

N957DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(76,487

)

46,204

 

N959DL Aircraft Secured Mortgage, 8%, due 7/20/19

 

 

(75,896

)

46,629

 

N960DL Aircraft Secured Mortgage, 8%, due 10/20/19

 

 

(74,776

)

48,285

 

N961DL Aircraft Secured Mortgage, 8%, due 8/20/19

 

 

(76,582

)

47,846

 

N976DL Aircraft Secured Mortgage, 8%, due 2/15/18

 

 

(79,647

)

34,759

 

N913DL Equipment Trust Beneficial Interests

 

77,509

 

(94,032

)

12,045

 

N918DL Equipment Trust Beneficial Interests

 

68,612

 

(89,338

)

9,213

 

N954DL Equipment Trust Beneficial Interests

 

78,825

 

(107,751

)

7,578

 

N955DL Equipment Trust Beneficial Interests

 

75,824

 

(106,437

)

6,891

 

N956DL Equipment Trust Beneficial Interests

 

77,085

 

(107,904

)

6,845

 

N957DL Equipment Trust Beneficial Interests

 

76,487

 

(107,457

)

6,648

 

N959DL Equipment Trust Beneficial Interests

 

75,896

 

(107,015

)

6,456

 

N960DL Equipment Trust Beneficial Interests

 

74,776

 

(106,678

)

5,662

 

N961DL Equipment Trust Beneficial Interests

 

76,582

 

(108,546

)

5,805

 

N967DL Equipment Trust Beneficial Interests

 

79,647

 

(102,560

)

7,056

 

RM Holdco, LLC, Membership Units

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18

 

57,991

 

 

57,992

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/19/16

 

16,974

 

(149,183

)

413,430

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/19/16

 

567,205

 

 

1,258,016

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/19/16

 

186,901

 

 

410,004

 

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16

 

1,339,883

 

 

182,711

 

United N659UA-767, LLC (N659UA)

 

999,280

 

(674,714

)

316,842

 

United N661UA-767, LLC (N661UA)

 

969,098

 

(663,034

)

313,627

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units

 

5,000,000

 

 

 

 


Notes to Schedule of Changes in Investments in Affiliates:

(1) The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Partnership of 5% or more of the issuers’ voting securities.

(2) Dispositions include sales, paydowns, mortgage amortizations, and aircraft depreciation.

(3) Also includes fee and lease income as applicable.

 

S-F-72



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers

 

March 31, 2014

 

Investment

 

Acquisition Date

 

 

 

AIP/IS Holdings, LLC, Membership Units

 

Var. 2009 & 2010

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19

 

9/26/13

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17

 

3/5/12

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19

 

10/19/12

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18

 

7/26/13

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16

 

1/20/11

Findly Talent, LLC, Membership Units

 

1/1/14

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock

 

12/4/13

Hunt Companies, Inc., Senior Secured Notes, 9.625%, due 3/1/21

 

2/25/14

Integra Telecom, Inc., Common Stock

 

11/19/09

Integra Telecom, Inc., Warrants

 

11/19/09

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18

 

5/8/13

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21

 

8/1/13

Marsico Holdings, LLC Common Interest Units

 

9/10/12

Precision Holdings, LLC, Class C Membership Interests

 

Var. 2010 & 2011

Shop Holdings, LLC, Convertible Promissory Note, 5%, due 8/5/15

 

2/5/14

Shop Holding, LLC, Class A Units

 

6/2/11

Shop Holding, LLC, Warrants to Purchase Class A Units

 

6/2/11

SiTV, Inc., Warrants to Purchase Common Stock

 

8/3/12

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock

 

9/25/13

STG-Fairway Holdings, LLC, Class A Units

 

12/30/10

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19

 

9/26/11

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18

 

11/13/13

V Telecom Investment S.C.A, Common Shares

 

11/9/12

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17

 

6/6/13

 

December 31, 2013

 

Investment

 

Acquisition Date

 

 

 

AIP/IS Holdings, LLC, Membership Units

 

Var. 2009 & 2010

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19

 

9/26/13

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17

 

3/5/12

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19

 

10/19/12

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18

 

7/26/13

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16

 

1/20/11

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock

 

12/4/13

Integra Telecom, Inc., Common Stock

 

11/19/09

Integra Telecom, Inc., Warrants

 

11/19/09

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18

 

5/8/13

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21

 

8/1/13

Marsico Holdings, LLC Common Interest Units

 

9/10/12

Precision Holdings, LLC, Class C Membership Interests

 

Var. 2010 & 2011

Shop Holding, LLC, Class A Units

 

6/2/11

Shop Holding, LLC, Warrants to Purchase Class A Units

 

6/2/11

SiTV, Inc., Warrants to Purchase Common Stock

 

8/3/12

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock

 

9/25/13

St Barbara Ltd., 1st Priority Senior Secured Notes, 8.875%, due 4/15/18

 

3/22/13

STG-Fairway Holdings, LLC, Class A Units

 

12/30/10

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19

 

9/26/11

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18

 

11/13/13

V Telecom Investment S.C.A, Common Shares

 

11/9/12

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17

 

6/6/13

 

S-F-73


 

 

GRAPHIC

 

% [Insert ranking/conversion information] Notes due

 

$

 


 

PROSPECTUS SUPPLEMENT

 


 

[Underwriters]

 

             , 201

 

 


 

EXHIBIT B

 

The information in this [preliminary] prospectus supplement is not complete and may be changed. A registration statement relating to these securities has been filed with and declared effective by the Securities and Exchange Commission. This [preliminary] prospectus supplement is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED                          , 201

 

[FORM OF [PRELIMINARY] PROSPECTUS SUPPLEMENT TO BE USED IN CONJUNCTION WITH FUTURE PREFERRED STOCK OFFERINGS](1)

 

[PRELIMINARY] PROSPECTUS SUPPLEMENT
(To Prospectus dated                          , 201   )

 

Shares

 

GRAPHIC

 

Series                     Preferred Stock
Liquidation Preference $                 per Share

 


 

We are a holding company (the “Holding Company”) with no direct operations of our own, and currently our only business and sole asset is our ownership of all of the common limited partner interests in Special Value Continuation Partners, LP (the “Operating Company”), which represents approximately         % of the common equity and        % of the combined common and preferred equity interests of the Operating Company as of         , 201  . We and the Operating Company are externally managed, closed-end, non-diversified management investment companies that have elected to be treated as business development companies under the Investment Company Act of 1940 (the “1940 Act”). Our and the Operating Company’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. Both we and the Operating Company seek to achieve this investment objective primarily through investments in debt securities of middle-market companies. Our primary investment focus is investing in and originating of leveraged loans to performing middle-market companies.

 


(1)         In addition to the sections outlined in this form of prospectus supplement, each prospectus supplement actually used in connection with an offering conducted pursuant to the registration statement to which this form of prospectus supplement is attached will be updated to include such other information as may then be required to be disclosed therein pursuant to applicable law or regulation as in effect as of the date of each such prospectus supplement, including, without limitation, information particular to the terms of each security offered thereby and any related risk factors or tax considerations pertaining thereto. This form of prospectus supplement is intended only to provide a rough approximation of the nature and type of disclosure that may appear in any actual prospectus supplement used for the purposes of offering securities pursuant to the registration statement to which this form of prospectus supplement is attached, and is not intended to and does not contain all of the information that would appear is any such actual prospectus supplement, and should not be used or relied upon in connection with any offer or sale of securities.

 



 

Tennenbaum Capital Partners, LLC (the “Advisor”) serves as our and the Operating Company’s investment advisor. The Advisor is a leading investment manager and specialty lender to middle-market companies that had in excess of $        billion in capital commitments from investors (“committed capital”) under management as of            , 201   , approximately     % of which consists of our committed capital. SVOF/MM, LLC, an affiliate of the Advisor, is the Operating Company’s general partner and provides the administrative services necessary for us to operate.

 

All of the            shares of Series [     ] preferred stock, or the preferred stock, offered by this prospectus supplement are being sold by us. Each share of preferred stock has a liquidation preference of $                 per share, and the share of preferred stock are subject to redemption at the option of the holder as described in this prospectus supplement.  [We have applied to list the Series [   ] Preferred Stock on                  [so that trading on the exchange will begin within                  days after the date of this prospectus supplement, subject to notice of issuance.  Prior to the expected commencement of trading on                  , the underwriters to not intend to make a market in our preferred stock.  Consequently, it is anticipated that, prior to the commencement of trading on                  , an investment in our preferred stock will be illiquid and holders thereof may not be able to sell such shares as it is unlikely that a secondary market for our preferred stock will develop.  If a secondary market does develop prior to the commencement of trading on                  , holders of our preferred stock may be able to sell such shares only at substantial discounts from their liquidation preference.]  The trading symbol for our preferred stock will be “                  ”.]

 


 

You should read this prospectus supplement and the accompanying prospectus carefully before you invest in our securities. We may not sell any securities through agents, underwriters or dealers without delivery of the prospectus and a prospectus supplement describing the method and terms of the offering of such securities.

 

This prospectus supplement and the accompanying prospectus contain important information you should know before investing in our securities. Please read it carefully before you invest and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission (the “SEC”). A Statement of Additional Information, dated                   , 201   , containing additional information about the Holding Company and the Operating Company has been filed with the Securities and Exchange Commission and is incorporated by reference in its entirety into this prospectus supplement and the accompanying prospectus. The Advisor maintains a website at http://www.tennenbaumcapital.com and we make all of our annual, quarterly and current reports, proxy statements and other publicly filed information available, free of charge, on or through this website. You may also obtain free copies of our annual and quarterly reports, request a free copy of the Statement of Additional Information, the table of contents of which is on page       of the accompanying prospectus and make stockholder inquiries by contacting us at Tennenbaum Capital Partners, LLC, c/o Investor Relations, 2951 28th Street, Suite 1000, Santa Monica, California 90405 or by calling us collect at (310) 566-1094. The Securities and Exchange Commission maintains a website at http://www.sec.gov where such information is available without charge upon request. Information contained on our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus, and you should not consider information contained on our website to be part of this prospectus supplement or the accompanying prospectus.

 

The debt securities in which we typically invest are either rated below investment grade by independent rating agencies or would be rated below investment grade if such securities were rated by rating agencies. Below investment grade securities, which are often referred to as “hybrid securities,” “junk bonds” or “leveraged loans” are regarded as having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may be illiquid and difficult to value and typically do not require repayment of principal prior to maturity, which potentially heightens the risk that we may lose all or part of our investment.  In addition, a majority of the Operating Company’s debt investments include interest reset provisions that may make it more difficult for the borrowers to make debt repayments to the Operating Company if the reset provision has the effect of increasing the applicable interest rate.

 

Shares of closed-end investment companies, including business development companies, frequently trade at a discount from their net asset value. If our shares trade at a discount to our net asset value, it will likely increase the risk of loss for purchasers in the offerings. Investing in our securities involves a high degree of risk, including credit risk and the risk of the use of leverage. Before investing in our securities, you should read the discussion of the material risks of investing in the Company in “Risks” beginning on page S-                    of this prospectus supplement and on page                        of the accompanying prospectus.

 



 

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

Per Share

 

Total

 

Public offering price

 

$

 

 

$

 

 

Underwriting Discounts

 

$

 

 

$

 

 

Proceeds, before expenses, to the Company (1)

 

$

 

 

$

 

 

 


(1)         We estimate that we will incur expenses of approximately $                ($       per share) in connection with this offering. Such expenses will be borne by us. Stockholders will indirectly bear such expenses, which will reduce the net asset value per share of the shares purchased by investors in this offering. Net proceeds, after expenses and sales load, will be approximately $                ($            per share).

 

The underwriters expect to deliver the shares to purchasers on or about               , 201   .

 

[We have granted the underwriters an option to purchase up to                  additional shares of our preferred stock at the public offering price, less the sales load, within          days of the date of this prospectus [solely to cover overallotments, if any]. If the underwriters exercise this option in full, the total price to the public, sales load and net proceeds will be $              , $              , and $              , respectively. See “Underwriting.”]

 


 

Prospectus Supplement dated            , 201

 



 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

In addition to factors previously identified elsewhere in this prospectus supplement and the accompanying prospectus, including the “Risks” section of this prospectus supplement and the accompanying prospectus, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

 

·                  the introduction, withdrawal, success and timing of business initiatives and strategies;

 

·                  changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;

 

·                  the valuation of our investments in portfolio companies, particularly those having no liquid trading market;

 

·                  the relative and absolute investment performance and operations of the Advisor;

 

·                  the impact of increased competition;

 

·                  the impact of future acquisitions and divestitures;

 

·                  the unfavorable resolution of legal proceedings;

 

·                  our business prospects and the financial condition and prospects of our portfolio companies;

 

·                  the adequacy of our cash resources and working capital;

 

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

 

·                  the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us, the Advisor or our portfolio companies;

 

·                  the ability of the Advisor to identify suitable investments for us and to monitor and administer our investments;

 

·                  our contractual arrangements and relationships with third parties;

 

·                  any future financings and investments by us;

 

·                  the ability of the Advisor to attract and retain highly talented professionals;

 

·                  fluctuations in interest rates or foreign currency exchange rates; and

 

·                  the impact of changes to tax legislation and, generally, our tax position.

 

This prospectus supplement and the accompanying prospectus contain, and other statements that we may make may contain, forward-looking statements with respect to future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “potential,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.

 

i



 

Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to and do not undertake to update forward-looking statements. These forward-looking statements do not meet the safe harbor for forward-looking statements pursuant to Section 27A of the Securities Act or Section 21E of the Securities Exchange Act. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.  Statistical and market data used in this prospectus has been obtained from governmental and independent industry sources and publications. We have not independently verified the data obtained from these sources. Forward-looking information obtained from these sources is subject to the same qualifications and the additional uncertainties regarding the other forward-looking statements contained in this prospectus, for which the safe harbor provided in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act is not available.

 

You should rely only on the information contained in this prospectus supplement, the accompanying prospectus and the Statement of Additional Information, or SAI, incorporated by reference in its entirety in the accompanying prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information in this prospectus supplement and the accompanying prospectus is accurate only as of the date on the front of this prospectus supplement and of the accompanying prospectus, respectively,  and the information in the SAI is accurate only as of its respective date. Our business, financial condition and prospects may have changed since that date. To the extent required by applicable law, we will update this prospectus supplement, the accompanying prospectus and the SAI during the offering period to reflect material changes to the disclosure herein.

 

ii



 

TABLE OF CONTENTS

 

PROSPECTUS SUPPLEMENT

 

PROSPECTUS SUMMARY

S-1

SPECIFIC TERMS OF THE PREFERRED STOCK AND THE OFFERING

S-4

SELECTED CONDENSED FINANCIAL DATA

S-5

RISK FACTORS

S-6

USE OF PROCEEDS

S-7

RATIO OF EARNINGS TO FIXED CHARGES

S-8

DESCRIPTION OF OUR PREFERRED STOCK

S-9

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

S-12

CAPITALIZATION

S-24

SUPPLEMENT TO MATERIAL U.S. FEDERAL TAX MATTERS

S-25

UNDERWRITING

S-26

LEGAL MATTERS

S-29

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

S-29

ADDITIONAL INFORMATION

S-29

INDEX TO FINANCIAL STATEMENTS

S-F-1

 

PROSPECTUS

 

[Insert table of contents from base prospectus]

 


 

PROSPECTUS SUMMARY

 

This summary highlights some of the information in this prospectus supplement. This summary is not complete and may not contain all of the information that you may want to consider before investing in our preferred stock. You should read the entire prospectus supplement, the accompanying prospectus, including “Risks,” and the Statement of Additional Information, dated                     , 201   (the “SAI”).

 

Throughout this prospectus supplement, unless the context otherwise requires, a reference to:

 

“Holding Company” refers to Special Value Continuation Fund, LLC, a Delaware limited liability company, for the periods prior to the consummation of the Conversion (as defined below) described elsewhere in this prospectus and to TCP Capital Corp. for the periods after the consummation of the Conversion;

 

“Operating Company” refers to Special Value Continuation Partners, LP, a Delaware limited partnership;

 

“TCPC Funding” refers to TCPC Funding I LLC, a Delaware limited liability company;

 

“TCPC SBIC” refers to TCPC SBIC, LP, a Delaware limited partnership;

 

“Advisor” refers to Tennenbaum Capital Partners, LLC, a Delaware limited liability company and the investment manager; and

 

“General Partner” and “Administrator” refer to SVOF/MM, LLC, a Delaware limited liability company, the general partner of the Operating Company and an affiliate of the Advisor and administrator of the Holding Company and the Operating Company.

 

For simplicity, this prospectus supplement uses the term “Company,” “we,” “us” and “our” to include the Holding Company and, where appropriate in the context, the Operating Company and TCPC Funding, on a consolidated basis. For example, (i) although all or substantially all of the net proceeds from this offering will be invested in the Operating Company and all or substantially all of the Holding Company’s investments will be made through the Operating Company, this prospectus supplement generally refers to the Holding Company’s investments through the Operating Company as investments by the “Company,” and (ii) although the Operating Company and TCPC Funding and not the Holding Company has entered into the Leverage Program (defined below), this prospectus supplement generally refers to the Operating Company’s use of the Leverage Program as borrowings by the “Company,” in all instances in order to make the operations and investment strategy easier to understand. The Holding Company and the Operating Company have the same investment objective and policies and the assets, liabilities and results of operations of the Holding Company are consolidated with those of the Operating Company as described in the accompanying prospectus under “Prospectus Summary—Operating and Regulatory Tax Structure.”

 

On April 2, 2012, we completed a conversion under which TCP Capital Corp. succeeded to the business of Special Value Continuation Fund, LLC and its consolidated subsidiaries, and the members of Special Value Continuation Fund, LLC became stockholders of TCP Capital Corp. In this prospectus supplement, we refer to such transactions as the “Conversion.” Unless otherwise indicated, the disclosure in this prospectus supplement gives effect to the Conversion.

 

The Company

 

We are an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. See the accompanying prospectus “Prospectus Summary— Company History and BDC Conversion.” We completed our initial public offering on April 10, 2012.

 

Our investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. We seek to achieve our investment objective primarily through investments in debt securities of middle-market companies, which we typically define as those with enterprise values between $100

 

S-1



 

million and $1.5 billion. While we primarily focus on privately negotiated investments in debt of middle-market companies, we make investments of all kinds and at all levels of the capital structure, including in equity interests such as preferred or common stock and warrants or options received in connection with our debt investments. Our investment activities benefit from what we believe are the competitive advantages of the Advisor, including its diverse in-house skills, proprietary deal flow, and consistent and rigorous investment process focused on established, middle-market companies. We expect to generate returns through a combination of the receipt of contractual interest payments on debt investments and origination and similar fees, and, to a lesser extent, equity appreciation through options, warrants, conversion rights or direct equity investments. Substantially all of our operating history and performance results have been achieved through our predecessor, Special Value Continuation Fund, LLC, which was a registered investment company but was neither a business development company nor a publicly traded company. There are no material operating differences between us and our predecessor, however, as a BDC we are deemphasizing distressed debt investments. See “Prospectus Summary— Company History and BDC Conversion” in the accompanying prospectus.

 

To achieve our investment objectives, we intend to focus on a subset of the broader investment strategies historically pursued by the Advisor. Our primary investment focus is the ongoing origination of and investments in leveraged loans of performing middle-market companies. For the purposes of this prospectus supplement, the term “leveraged loans” refers to senior debt investments that rank ahead of subordinated debt and that generally have the benefit of security interests in the assets of the borrower.

 

Our investments generally range from $10 million to $35 million per company, the size of which may grow over time in proportion with our capital base. We expect to generate current returns through a combination of the receipt of contractual interest payments on debt investments and origination and similar fees, and, to a lesser extent, equity appreciation through options, warrants, conversion rights or direct equity investments. We often receive equity interests such as preferred or common stock and warrants or options in connection with our debt investments. From time to time we may also use other investment strategies, which are not our primary focus, to attempt to enhance the overall return of our portfolio. These investment strategies may include, but are not limited to, the purchase of discounted debt, opportunistic investments, and financial instruments to hedge currency or interest rate risk associated with our portfolio.

 

On April 22, 2014, our wholly-owned subsidiary, TCPC SBIC received a Small Business Investment Company (“SBIC”) license from the Small Business Administration (“SBA”). In anticipation of receiving an SBIC license, we have requested exemptive relief from the SEC to permit us to exclude the debt of TCPC SBIC guaranteed by the SBA from our 200% asset coverage test under the 1940 Act.  Pursuant to the 200% asset coverage ratio limitation, we are permitted to borrow one dollar for every dollar we have in assets less all liabilities and indebtedness not represented by debt securities issued by us or loans obtained by us. For example, as of December 31, 2013, we had approximately $550 million in assets less all liabilities and indebtedness not represented by debt securities issued by us or loans obtained by us, which would permit us to borrow up to approximately $550 million, notwithstanding other limitations on our borrowings pursuant to our Leverage Program. 

 

If granted, the exemptive relief provides us with increased flexibility under the 200% asset coverage test by permitting TCPC SBIC to borrow up to $150 million more than it would otherwise be able to absent the receipt of this exemptive relief.  As a result, we, in effect, will be permitted to have a lower asset coverage ratio than the 200% asset coverage ratio limitation under the 1940 Act and, therefore, we can have more debt outstanding than assets to cover such debt. For example, we will be able to borrow up to $150 million more than the approximately $550 million permitted under the 200% asset coverage ratio limit as of December 31, 2013. For additional information on SBA regulations that affect our access to SBA-guaranteed debentures, see “Risk Factors — Risks Relating to Our Business — Our SBIC subsidiary is subject to SBA regulations, and any failure to comply with SBA regulations could have an adverse effect on our operations.”

 

The SBIC license allows TCPC SBIC to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA and other customary procedures. SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi-annually and have a ten year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, will have a superior claim to TCPC SBIC’s assets over our stockholders in the event we liquidate TCPC SBIC or the SBA exercises its remedies under the SBA-guaranteed debentures issued by TCPC SBIC upon an event of default.

 

As described in more detail in the accompanying prospectus under “Prospectus Summary— Company History and BDC Conversion,” we have no employees of our own and currently our only business and sole asset is the ownership of all of the common limited partner interests of the Operating Company. Our investment activities are externally managed by the Advisor. Additionally, the Holding Company expects that it will continue to seek to qualify as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code, or the Code.

 

As of               , 201  , we held investments in           portfolio companies. The aggregate fair value as of             , 201   of investments in these portfolio companies held on that date is approximately $            . Our portfolio across all our interest-bearing investments had an annualized current yield of          % as of                     , 201  .

 

Recent Developments

 

[Insert description of recent developments at time of offering.]

 

Company Information

 

Our administrative and executive offices are located at 2951 28th Street, Suite 1000, Santa Monica, CA 90405, and our telephone number is (310) 566-1094. The Advisor maintains a website at http://www.tennenbaumcapital.com. Information contained on this website is not incorporated by reference into this prospectus supplement or the accompanying prospectus, and you should not consider information contained on the Advisor’s website to be part of this prospectus supplement or the accompanying prospectus.

 

S-2



 

Presentation of Historical Financial Information

 

Unless otherwise indicated, historical references contained in this prospectus supplement and the accompanying prospectus, as applicable, in “— Selected Financial Data,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Senior Securities” and “Portfolio Companies” relate to the Holding Company and the Operating Company on a consolidated basis.

 

For further information please see the “Prospectus Summary” in the accompanying prospectus.

 

S-3



 

SPECIFIC TERMS OF THE PREFERRED STOCK AND THE OFFERING

 

This prospectus supplement sets forth certain terms of our preferred stock that we are offering pursuant to this prospectus supplement and supplements the accompanying prospectus that is attached to the back of this prospectus supplement. This section outlines the specific legal and financial terms of our preferred stock. You should read this section together with the more general description of our preferred stock in this prospectus supplement under the heading “Description of Our Preferred Stock” and in the accompanying prospectus under the headings “Description of Our Capital Stock—Preferred Stock” and “Description of Our Preferred Stock” before investing in our preferred stock. Capitalized terms used in this prospectus supplement and not otherwise defined shall have the meanings ascribed to them in the accompanying prospectus.

 

Shares of Series [  ] Preferred Stock Offered by Us

 

           shares, excluding           shares of preferred stock issuable pursuant to the overallotment often granted to the Underwriters.

 

 

 

Shares of Series [  ] Preferred Stock Outstanding after this Offering

 

           shares excluding           shares of preferred stock issuable pursuant to the overallotment often granted to the Underwriters..

 

 

 

Use of Proceeds

 

We intend to use the net proceeds from this offering to reduce our borrowings outstanding under the Revolving Facilities, if any, and to make investments in portfolio companies in accordance with our investment objective and for other general corporate purposes, including payment of operating expenses. Pending investment, we may invest the remaining net proceeds of this offering primarily in cash, cash equivalents, U.S. Government securities and other high-quality debt investments that mature in one year or less. These securities may have lower yields than our other investments and accordingly may result in lower distributions, if any, during such period.

 

 

 

Dividend Rate

 

          % per annum

 

 

 

Dividend Payment Dates

 

          ,          ,           and            or each year, commencing on          ,

 

 

 

Record Dates

 

          ,          ,           and

 

 

 

[          ] symbol

 

“                 ”

 

 

 

Liquidation Preference

 

The liquidation preference of our preferred stock is $           per share.

 

 

 

Restrictions on Dividend, Redemption and Other Payments

 

No full dividends and distributions will be declared or paid on the preferred stock for any dividend period, or a part of a dividend period, unless the full cumulative dividends and distributions due through the most recent dividend payment dates for all outstanding shares of preferred stock have been, or contemporaneously are, declared and paid through the most recent dividend payment dates for each series of preferred stock. If full cumulative dividends and distributions due have not been paid on all outstanding preferred stock of any series, any dividends and distributions being declared and paid on preferred stock will be declared and paid as nearly pro rata as possible in proportion to the respective amounts of dividends and distributions accumulated but unpaid on the shares of each such series of preferred stock on the relevant dividend payment date. No holders of preferred stock will be entitled to any dividends and distributions in excess of full cumulative dividends and distributions as provided in the Certificate of Designations.

 

 

 

Optional Redemption

 

The preferred stock may be redeemed, in whole or in part, at any time after             ,           at a redemption price per share equal to the applicable percentage set forth below multiplied by the sum of the liquidation preference per share  plus accrued but unpaid dividends not previously added to the liquidation preference on such share.

 

          Year               Applicable Percentage       %

 

 

 

Redemption at the Option of the Holder

 

On and after           ,          , each holder of our preferred stock will have the right to require us to repurchase all or any part of such holder’s preferred stock at a purchase price per share equal to         % of the sum of the liquidation preference per share plus accrued but unpaid dividends.  In addition, each holder of our preferred stock will have the right to require us to repurchase all or any part of such holder’s preferred stock at a purchase price per share equal to        % of the sum of the liquidation preference per share plus accrued but unpaid dividends upon the occurrence of certain fundamental changes.

 

 

 

Voting Rights

 

The holders of the preferred stock have the right to elect [two] members of the Board of Directors. Additional voting rights associated with the preferred stock are described under the heading “Description of Preferred Stock — Voting Rights.”

 

 

 

Rating

 

The preferred stock is not rated.

 

 

 

Conversion

 

[Describe any applicable conversion provisions set forth in the Certificate of Designations.]

 

 

 

Exchange

 

[Describe any applicable exchange provisions set forth in the Certificate of Designations.]

 

 

 

Material United States Federal Income Tax Consequences

 

[Insert summary disclosure regarding federal income tax consequences of an investment in the preferred stock.]

 

S-4


 

SELECTED CONDENSED FINANCIAL DATA

 

The selected consolidated financial and other data below reflects the consolidated historical operations of the Holding Company and the Operating Company. This consolidated financial and other data is the Holding Company’s historical financial and other data. The Operating Company will continue to be the Holding Company’s sole investment following the completion of this offering.

 

The selected consolidated financial data below for the years ended December 31, 201 , 201 , 201 , 20   and 20   has been derived from the consolidated financial statements that were audited by our independent registered public accounting firm. [Quarterly financial information is derived from unaudited financial data, but in the opinion of management, reflects all adjustments (consisting only of normal recurring adjustments) that are necessary to present fairly the results of such interim periods. Interim results at and for the                        and                         months ended                      , 201       are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 201                              .] This selected financial data should be read in conjunction with our financial statements and related notes thereto, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Senior Securities” included elsewhere in this prospectus supplement and the accompanying prospectus.

 

The historical and future financial information may not be representative of the Company’s financial information in future periods.

 

 

 

For the Three Months Ended

 

 

 

 

 

March 31,

 

For the Year Ended December 31,

 

 

 

2014

 

2013

 

2013

 

2012

 

2011

 

2010

 

2009

 

Performance Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

 

 

$

 

 

$

66,979,064

 

$

49,243,332

 

$

42,113,358

 

$

32,410,819

 

$

26,678,140

 

Dividend income

 

 

 

 

 

 

1,811,189

 

10,610,159

 

13,547,924

 

 

Other income

 

 

 

 

 

2,629,982

 

1,138,238

 

2,134,159

 

1,842,469

 

417,533

 

Total investment income

 

 

 

 

 

69,609,046

 

52,192,759

 

54,857,676

 

47,801,212

 

27,095,673

 

Interest and credit agreement expenses

 

 

 

 

 

2,339,447

 

857,757

 

942,288

 

893,806

 

949,554

 

Investment advisory expense

 

 

 

 

 

8,820,229

 

6,908,942

 

6,787,188

 

6,787,188

 

6,787,188

 

Other expenses

 

 

 

 

 

4,119,108

 

4,105,700

 

1,520,474

 

1,213,685

 

1,426,099

 

Total expenses

 

 

 

 

 

15,278,784

 

11,872,399

 

9,249,950

 

8,894,679

 

9,162,841

 

Net investment income

 

 

 

 

 

54,330,262

 

40,320,360

 

45,607,726

 

38,906,533

 

17,932,832

 

Realized and unrealized gains (losses)

 

 

 

 

 

9,071,361

 

(12,784,251

)

(38,878,881

)

31,621,019

 

36,142,346

 

Dividends to preferred interest holders

 

 

 

 

 

(1,494,552

)

(1,602,799

)

(1,545,555

)

(1,519,759

)

(1,740,964

)

Distributions of incentive allocation

 

 

 

 

 

(12,381,416

)

 

 

 

 

Net increase (decrease) in net assets from operations

 

$

 

 

$

 

 

$

49,525,655

 

$

25,933,310

 

$

5,183,290

 

$

69,007,793

 

$

52,334,214

 

Per Share Data (at the end of the period):*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in net assets from operations

 

$

 

 

$

 

 

$

1.91

 

$

1.21

 

$

12.37

 

$

164.72

 

$

124.92

 

Distributions declared per share

 

 

 

 

 

(1.53

)

(1.43

)

(75.19

)

(89.99

)

(36.28

)

Average weighted shares outstanding for the period

 

 

 

 

 

25,926,493

 

21,475,847

 

418,956

 

418,956

 

418,956

 

 


*                 Per share amounts prior to the Conversion on April 2, 2012 are calculated based on 418,956 shares outstanding. Per share amounts subsequent to the Conversion are calculated on weighted-average shares outstanding for each period.

 

 

 

For the Three Months Ended

 

 

 

 

 

March 31,

 

For the Year Ended December 31,

 

 

 

2014

 

2013

 

2013

 

2012

 

2011

 

2010

 

2009

 

Assets and Liabilities Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

$

 

 

$

 

 

$

766,262,959

 

517,683,087

 

378,960,536

 

453,034,872

 

343,062,967

 

Other assets

 

 

 

 

 

37,066,243

 

31,559,015

 

24,492,967

 

20,604,286

 

119,642,507

 

Total assets

 

 

 

 

 

803,329,202

 

549,242,102

 

403,453,503

 

473,639,158

 

462,705,474

 

Amount drawn on credit facility

 

 

 

 

 

95,000,000

 

74,000,000

 

29,000,000

 

50,000,000

 

75,000,000

 

Other liabilities

 

 

 

 

 

23,045,112

 

24,728,267

 

2,116,211

 

25,050,178

 

20,431,955

 

Total liabilities

 

 

 

 

 

118,045,112

 

98,728,267

 

31,116,211

 

75,050,178

 

95,431,955

 

Preferred limited partner interests

 

 

 

 

 

134,504,252

 

134,526,285

 

134,466,418

 

134,377,869

 

134,368,337

 

Non-controlling interest

 

 

 

 

 

1,168,583

 

 

 

 

 

Net assets

 

$

 

 

$

 

 

$

549,611,255

 

$

315,987,550

 

$

237,870,874

 

$

264,187,584

 

$

232,879,791

 

Investment Activity Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No. of portfolio companies at period end

 

 

 

 

 

67

 

54

 

41

 

44

 

40

 

Acquisitions

 

$

 

 

$

 

 

$

471,087,319

 

$

359,020,926

 

$

237,870,874

 

$

262,837,727

 

$

144,313,178

 

Sales, repayments, and other disposals

 

$

 

 

$

 

 

$

235,641,665

 

$

211,216,033

 

$

216,916,444

 

$

192,419,667

 

$

195,383,341

 

Weighted-Average Yield on debt investments at end of period

 

 

%

 

%

10.9

%

11.3

%

14.2

%

13.1

%

12.5

%

 

S-5



 

RISK FACTORS

 

Investing in our securities involves a number of significant risks. Before you invest in our securities, you should be aware of various risks, including those described below and those set forth in the accompanying prospectus. You should carefully consider these risk factors, together with all of the other information included in this prospectus supplement and the accompanying prospectus, before you decide whether to make an investment in our securities. The risks set out below are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. If any of the following events occur, our business, financial condition, results of operations and cash flows could be materially and adversely affected. In such case, our net asset value and the trading price of our common stock could decline, and you may lose all or part of your investment. The risk factors described below, together with those set forth in the accompanying prospectus, are the principal risk factors associated with an investment in us as well as those factors generally associated with an investment company with investment objectives, investment policies, capital structure or trading markets similar to ours.

 

[Market yields may increase, which would result in a decline in the price of our preferred stock.

 

The prices of fixed income investments, such as our preferred stock, vary inversely with changes in market yields. The market yields on securities comparable to our preferred stock may increase, which could result in a decline in the secondary market price of our preferred stock prior to the term redemption date. See “Description of Preferred Stock—Dividends and Dividend Periods”.]

 

[Prior to this offering, there has been no public market for our preferred stock, and we cannot assure you that the market price of our preferred stock will not decline following the offering.

 

We cannot assure you that a trading market will develop for our preferred stock after this offering or, if one develops, that such trading market can be sustained. [During a period of up to                   days from the date of this prospectus supplement, the preferred stock will not be listed on any securities exchange. During this period, the underwriters do not intend to make a market in our preferred stock. Consequently, an investment in our preferred stock during this period will likely be illiquid and holders thereof may not be able to sell such shares as it is unlikely that a secondary market for our preferred stock will develop during this period. If a secondary market does develop during this period, holders of our preferred stock may be able to sell such shares only at substantial discounts from liquidation preference.] [Application has been made to list our preferred stock on            [so that trading on the exchange will begin within                   days from the date of this prospectus supplement, subject to notice of issuance]. If we are unable to list the preferred stock on a national securities exchange, holders thereof may be unable to sell such shares at all, or if they are able to, only at substantial discounts from liquidation preference. Even after the preferred stock is listed on                   as anticipated, there is a risk that the market for such shares may be thinly traded and relatively illiquid compared to the market for other types of securities, with the spread between the bid and asked prices considerably greater than the spreads of other securities with comparable terms and features.]]

 

[The preferred stock are unrated securities.

 

We do not intend to have the preferred stock rated by any rating agency. Unrated securities typically trade at a discount to similar, rated securities, depending on the rating of the rated securities.  As a result, there is a risk that the preferred stock may trade at a price that is lower than what they might otherwise trade at if rated by a rating agency.]

 

[The preferred stock will be subordinate to the rights of holders of senior indebtedness.

 

While holders of our preferred stock will have equal liquidation and distribution rights to any other preferred stock that might be issued by us, they will be subordinated to the rights of holders of senior indebtedness, if any. Therefore, dividends, distributions and other payments to holders of our preferred stock in liquidation or otherwise may be subject to prior payments due to the holders of senior indebtedness. In addition, the 1940 Act may provide debt holders with voting rights that are superior to the voting rights of the preferred stock.]

 

[Insert any additional relevant risk factors not included in the base prospectus to the extent required to be disclosed by applicable law or regulation.]

 

S-6



 

USE OF PROCEEDS

 

The net proceeds of the offering are estimated to be approximately $             million [(approximately $             million if the underwriters exercise their overallotment option to purchase additional shares in full)], assuming an offering of                     shares of preferred stock in this offering at the assumed public offering price of $                  per share and after deducting the underwriting discounts and commissions and estimated offering expenses of approximately $             payable by us.

 

We intend to use the net proceeds from this offering to reduce our borrowings outstanding under the Revolving Facilities, if any, and to make investments in portfolio companies in accordance with our investment objective and for other general corporate purposes, including payment of operating expenses. Pending investment, we may invest the remaining net proceeds of this offering primarily in cash, cash equivalents, U.S. Government securities and other high-quality debt investments that mature in one year or less. These securities may have lower yields than our other investments and accordingly may result in lower distributions, if any, during such period.

 

[Describe further the use of proceeds and include any other relevant information to the extent required to be disclosed by applicable law or regulation.]

 

S-7



 

RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS

 

[Insert information required by Item 503(d) of Regulation S-K at time of offering.]

 

S-8



 

DESCRIPTION OF OUR PREFERRED STOCK

 

The following is a brief description of the terms of our preferred stock. This is not a complete description and is subject to and entirely qualified by reference to our Certificate of Incorporation and the Certificate of Designations setting forth the terms of the preferred stock. These documents are filed with the SEC as exhibits to our registration statement of which this prospectus supplement is a part, and the Certificate of Designations is attached as Appendix A to this prospectus supplement.

 

General

 

At the time of issuance the Preferred Stock will be fully paid and non-assessable and have no preemptive, conversion or exchange rights or rights to cumulative voting. The Preferred Stock and all other preferred stock that we may issue from time to time in accordance with the 1940 Act, if any, are senior as to dividends and distributions to our common stock. We may issue additional series of preferred stock in the future to the extent permitted under the 1940 Act.

 

Dividends

 

Holders of our Preferred Stock are entitled to receive dividends per shares in an amount equal to           % per annum, or the dividend rate.  Dividends will be payable quarterly in arrears on           ,           ,                      ,           ,           ,           and           ,           (each, a “Dividend Payment Date”), commencing on           ,           to holders of record as of the immediately preceding           ,           ,           and           .    [In addition, in the event a cash dividend or other distribution in cash is declared on our common stock, holders of our Preferred Stock will be entitled to receive an additional amount equal to the liquidation preference divided by           , as may be adjusted from time to time, times the cash amount per share distributed or to be distributed in respect of our common stock.]

 

Dividends payable at the dividend rate will begin to accrue and be cumulative from           ,           , whether or not we have funds legally available for such dividends or such dividends are declared, and shall compound on each Dividend Payment Date (i.e., no dividends shall accrue on other dividends unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date).  Dividends that are payable on the Preferred Stock on any Dividend Payment Date shall be payable to holders of record of the Preferred Stock as they appear on the stock register of the Company on the record date for such dividend.

 

Dividends on our Preferred Stock will be computed on the basis of a 360-day year consisting of twelve 30-day months.  The amount of dividends payable on our preferred stock on any date prior to the end of a dividend period, and for the initial dividend period, will be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month.

 

Cash dividends will be paid only to the extent we have assets legally available for such payment and only when authorized by the board of directors and declared by us.  Dividends not paid in cash will be added to the liquidation preference.

 

We will not declare any dividend (other than a dividend payable in common stock) or other distribution on our common stock or purchase any common stock unless at the time of the declaration of such dividend or distribution or at the time of any such purchase we have an asset coverage of at least 200%, as computed in accordance with the 1940 Act, after deducting the amount of such dividend, distribution or purchase price.

 

Voting Rights

 

Except for matters that do not require the vote of holders of the Preferred Stock under the 1940 Act and except as otherwise provided in the Charter or Bylaws, in the Certificate of Designation or as otherwise required by applicable law, each holder of Preferred Stock will be entitled to one vote for each share of Preferred Stock held on

 

S-9



 

each matter submitted to a vote of stockholders of the Company and the holders of outstanding Preferred Stock and shares of Common Stock shall vote together as a single class on all matters submitted to stockholders. Notwithstanding the foregoing, the holders of the Preferred Stock, voting as a separate class, will have the right to elect [two] members of the Board of Directors.  The holders of outstanding shares of common stock together with the holders of outstanding shares of Preferred Stock, voting together as a single class, will elect the remaining members of the Board of Directors.

 

In addition, in the event that dividends on the Preferred Stock are unpaid in an amount equal to two full years’ dividends on the Preferred Stock, we will increase the size of our Board of Directors such that the holders of the Preferred Stock, voting as a separate class, will have the ability to elect a majority of the members of the Board of Directors until such time as all dividends in arrears shall have been paid or otherwise provided for at which point the size of the Board of Directors shall be decreased and the term of such additional directors shall terminate.

 

During the period in which any shares of Preferred Stock are outstanding, we will not, without the affirmative vote of the holders of a majority of the outstanding shares of Preferred Stock determined with reference to a “majority of outstanding voting securities” as that term is defined in Section 2(a)(42) of the 1940 Act, voting as a separate class:

 

·      amend, alter or repeal any of the preferences, rights or powers of the Preferred Stock so as to affect materially and adversely such preferences, rights or powers; or

 

·      subject to limited exceptions, create, authorize or issue shares of any class of capital stock ranking senior to or on a parity with the Preferred Stock with respect to the payment of dividends or the distribution of assets, or any securities convertible into, or warrants, options or similar rights to purchase, acquire or receive, such shares of capital stock ranking senior to or on a parity with the Preferred Stock or reclassify any authorized shares of our capital stock into any shares ranking senior to or on a parity with the Preferred Stock.

 

The affirmative vote of the holders of a “majority of outstanding voting securities”, voting as a separate class, will be required to approve any plan of reorganization (as such term is used in the 1940 Act) adversely affecting such shares or any action requiring a vote of our security holders under Section 13(a) of the 1940 Act.

 

Redemption

 

Optional Redemption.  The Preferred Stock may be redeemed, in whole or in part, at any time after           ,           , at our option, upon giving notice of redemption at a redemption price per share equal to the applicable percentage set forth below multiplied by the sum of the liquidation preference per share plus accrued but unpaid dividends not previously added to the liquidation preference on such share.  The following redemption prices are for shares of Preferred Stock redeemed during the           -month period commencing on           of the years set forth below:

 

Year       Applicable Percentage

 

Redemption at the Option of the Holder.  Upon the occurrence of certain bankruptcy events or the delisting of our common stock from a national securities exchange, each holder of the Preferred Stock will have the right to require us to repurchase all or any part of the holder’s Preferred Stock at a purchase price per share equal to           % of the sum of the liquidation preference per share plus accrued but unpaid dividends not previously added to the liquidation preference on such share.

 

On and after                      ,                      , each holder of the Preferred Stock will have the right, by providing written notice to us, to require us to repurchase all or any part of the holder’s Preferred Stock at a purchase price equal to           % of the sum of the liquidation preference per share plus accrued but unpaid dividends not previously added to the liquidation preference on such share.

 

S-10



 

Partial Redemption.  In case of any partial redemption of the preferred stock, the shares to be redeemed will be selected pro rata.  Subject to the provisions of the Articles Supplementary, we have full power and authority to prescribe the terms and conditions upon which shares of preferred stock shall be redeemed from time to time.  If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

 

Redemption Procedures.    We will provide notice of any redemption of the preferred stock by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on our books and through any means required under the 1940 Act.  Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption.

 

Liquidation

 

Upon any liquidation, dissolution or winding up by us, whether voluntary or involuntary, the holders of shares of our preferred stock will be entitled to be paid (before any distribution or payment is made upon any shares of common stock) the liquidation preference per share.  However, if upon liquidation, the available funds and assets to be distributed among the holders of our Preferred Stock are insufficient to permit payment in full of the liquidation preference per share, then our entire available funds and assets upon liquidation shall be distributed ratably among the holders on a pro rata basis.

 

If there are any of our available funds or assets upon liquidation remaining after the payment or distribution to the holders of the Preferred Stock of their full preferential amounts described above, all such remaining available funds and assets shall be distributed as follows: [describe applicable payment priority provisions].

 

Modification

 

Without the consent of any holders of the Preferred Stock, we, when authorized by resolution of the Board of Directors may amend or modify these terms of the Preferred Stock to cure any ambiguity, correct or supplement any provision herein which may be inconsistent with any other provision in the Certificate of Designation, make any other provisions with respect to matters or questions arising under these terms of the Preferred Stock that are not inconsistent with the provisions in the Certificate of Designation.

 

S-11


 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The information contained in this section should be read in conjunction with the selected financial data appearing elsewhere in this prospectus supplement and the accompanying prospectus and our consolidated financial statements and related notes thereto appearing elsewhere in this prospectus supplement and the accompanying prospectus.

 

Overview

 

The Holding Company is a Delaware corporation formed on April 2, 2012 and is an externally managed, closed-end, non-diversified management investment company. The Holding Company elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to seek to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. We invest primarily in the debt of middle-market companies, including senior secured loans, junior loans, mezzanine debt and bonds. Such investments may include an equity component, and, to a lesser extent, we may make equity investments directly. Investment operations are conducted either in Special Value Continuation Partners, LP, a Delaware Limited Partnership (the “Operating Company”), of which the Holding Company owns 100% of the common limited partner interests, or in one of the Operating Company’s wholly-owned subsidiaries, TCPC Funding I, LLC (“TCPC Funding”) and TCPC SBIC, LP (the “SBIC”). The Operating Company has also elected to be treated as a BDC under the 1940 Act. The General Partner of the Operating Company is SVOF/MM, LLC (“SVOF/MM”), which also serves as the administrator (“Administrator”) of the Holding Company and the Operating Company. The managing member of SVOF/MM is Tennenbaum Capital Partners, LLC (the “Advisor”), which serves as the investment manager to the Holding Company, the Operating Company, TCPC Funding, and the SBIC. Most of the equity interests in the General Partner are owned directly or indirectly by the Advisor and its employees.

 

The SBIC was organized as a Delaware limited partnership in June 2013. On April 22, 2014, the SBIC received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958.

 

The Holding Company has elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes. As a RIC, the Holding Company will not be taxed on its income to the extent that it distributes such income each year and satisfies other applicable income tax requirements. The Operating Company, TCPC Funding, and the SBIC have elected to be treated as partnerships for U.S. federal income tax purposes.

 

Our leverage program is comprised of $116 million in available debt under a senior secured revolving credit facility issued by the Operating Company (the “Operating Company Facility”), $150 million in available debt under a senior secured revolving credit facility issued by TCPC Funding, (the “TCPC Funding Facility,” and, together with the Operating Company Facility, the “Revolving Facilities”), and $134 million of outstanding preferred limited partner interests in the Operating Company (the “Preferred Interests,” and, together with the Revolving Facilities, the “Leverage Program”).

 

To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to our stockholders generally at least 90% of our investment company taxable income, as defined by the Internal Revenue Code of 1986, as amended, for each year. Pursuant to this election, we generally will not have to pay corporate level taxes on any income that we distribute to our stockholders provided that we satisfy those requirements.

 

Investments

 

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity, the general economic environment and the competitive environment for the types of investments we make.

 

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities and indebtedness of private U.S. companies, public U.S. operating companies whose securities are not listed on a national securities exchange or registered under the Securities Exchange Act of 1934, as amended, public domestic operating companies having a market capitalization of less than $250 million, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. We are also permitted to make certain follow-on investments in companies that were eligible portfolio companies at the time of initial investment but that no longer meet the definition. As of March 31, 2014, 88.3% of our total assets were invested in qualifying assets.

 

Revenues

 

We generate revenues primarily in the form of interest on the debt we hold. We also generate revenue from dividends on our equity interests and capital gains on the sale of warrants and other debt or equity interests that we acquire. Our investments in fixed income instruments generally have an expected maturity of three to five years, although we have no lower or upper constraint on maturity. Interest on our debt investments is generally payable quarterly or semi-annually. Payments of principal of our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some

 

S-12



 

cases, our debt investments and preferred stock investments may defer payments of cash interest or dividends or PIK. Any outstanding principal amount of our debt investments and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of prepayment fees, commitment, origination, structuring or due diligence fees, fees for providing significant managerial assistance, consulting fees and other investment related income.

 

Expenses

 

Our primary operating expenses include the payment of a base management fee and, depending on our operating results, incentive compensation, expenses reimbursable under the management agreement, administration fees and the allocable portion of overhead under the administration agreement. The base management fee and incentive compensation remunerates the Advisor for work in identifying, evaluating, negotiating, closing and monitoring our investments. Our administration agreement with SVOF/MM, LLC (the “Administrator”) provides that the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to us under the administration agreement, as well as any costs and expenses incurred by the Administrator or its affiliates relating to any non-investment advisory, administrative or operating services provided by the Administrator or its affiliates to us. We also bear all other costs and expenses of our operations and transactions (and the Holding Company’s common stockholders indirectly bear all of the costs and expenses of the Holding Company, the Operating Company, TCPC Funding and the SBIC), which may include those relating to:

 

·                  our  organization;

 

·                  calculating our net asset value (including the cost and expenses of any independent valuation firms);

 

·                  interest payable on debt, if any, incurred to finance our investments;

 

·                  costs of future offerings of our common stock and other securities, if any;

 

·                  the base management fee and any incentive compensation;

 

·                  dividends and distributions on our preferred shares, if any, and common shares;

 

·                  administration fees payable under the administration agreement;

 

·                  fees payable to third parties relating to, or associated with, making investments;

 

·                  transfer agent and custodial fees;

 

·                  registration fees;

 

·                  listing fees;

 

·                  taxes;

 

·                  director fees and expenses;

 

·                  costs of preparing and filing reports or other documents with the SEC;

 

·                  costs of any reports, proxy statements or other notices to our stockholders, including printing costs;

 

·                  our fidelity bond;

 

·                  directors and officers/errors and omissions liability insurance, and any other insurance premiums;

 

·                  indemnification payments;

 

·                  direct costs and expenses of administration, including audit and legal costs; and

 

·                  all other expenses reasonably incurred by us and the Administrator in connection with administering our business, such as the allocable portion of overhead under the administration agreement, including rent and other allocable portions of the cost of certain of our officers and their respective staffs.

 

S-13



 

The investment management agreement provides that the base management fee be calculated at an annual rate of 1.5% of our total assets (excluding cash and cash equivalents) payable quarterly in arrears. For purposes of calculating the base management fee, “total assets” is determined without deduction for any borrowings or other liabilities. The base management fee is calculated based on the value of our total assets (excluding cash and cash equivalents) at the end of the most recently completed calendar quarter.

 

Additionally, the investment management agreement and the Amended and Restated Limited Partnership Agreement provide that the Advisor or its affiliates may be entitled to incentive compensation under certain circumstances. The incentive compensation equals the sum of (1) 20% of all ordinary income since January 1, 2013 and (2) 20% of all net realized capital gains (net of any net unrealized capital depreciation) since January 1, 2013, with each component being subject to a total return requirement of 8% of contributed common equity annually. The incentive compensation is payable to the General Partner by the Operating Company pursuant to the Amended and Restated Limited Partnership Agreement. If the Operating Company is terminated or for any other reason incentive compensation is not paid by the Operating Company, it would be paid pursuant to the investment management agreement between us and the Advisor. The determination of incentive compensation is subject to limitations under the 1940 Act and the Advisers Act.

 

Critical accounting policies

 

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. Management considers the following critical accounting policies important to understanding the financial statements. In addition to the discussion below, our critical accounting policies are further described in the notes to our financial statements.

 

Valuation of portfolio investments

 

We value our portfolio investments at fair value based upon the principles and methods of valuation set forth in policies adopted by our board of directors. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Market participants are buyers and sellers in the principal (or most advantageous) market for the asset that (i) are independent of us, (ii) are knowledgeable, having a reasonable understanding about the asset based on all available information (including information that might be obtained through due diligence efforts that are usual and customary), (iii) are able to transact for the asset, and (iv) are willing to transact for the asset or liability (that is, they are motivated but not forced or otherwise compelled to do so).

 

Investments for which market quotations are readily available are valued at such market quotations unless the quotations are deemed not to represent fair value. We generally obtain market quotations from recognized exchanges, market quotation systems, independent pricing services or one or more broker-dealers or market makers. However, short term debt investments with remaining maturities within 90 days are generally valued at amortized cost, which approximates fair value. Debt and equity securities for which market quotations are not readily available, which is the case for many of our investments, or for which market quotations are deemed not to represent fair value, are valued at fair value using a consistently applied valuation process in accordance with our documented valuation policy that has been reviewed and approved by our board of directors, who also approve in good faith the valuation of such securities as of the end of each quarter. Due to the inherent uncertainty and subjectivity of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments and may differ materially from the values that we may ultimately realize. In addition, changes in the market environment and other events may have differing impacts on the market quotations used to value some of our investments than on the fair values of our investments for which market quotations are not readily available. Market quotations may be deemed not to represent fair value in certain circumstances where we believe that facts and circumstances applicable to an issuer, a seller or purchaser, or the market for a particular security cause current market quotations to not reflect the fair value of the security. Examples of these events could include cases where a security trades infrequently causing a quoted purchase or sale price to become stale, where there is a “forced” sale by a distressed seller, where market quotations vary substantially among market makers, or where there is a wide bid-ask spread or significant increase in the bid-ask spread.

 

The valuation process adopted by our board of directors with respect to investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value is as follows:

 

·                  The investment professionals of the Advisor provide recent portfolio company financial statements and other reporting materials to independent valuation firms approved by our board of directors.

 

·                  Such firms evaluate this information along with relevant observable market data to conduct independent appraisals each quarter, and their preliminary valuation conclusions are documented and discussed with senior management of the Advisor.

 

S-14



 

·                  The fair value of smaller investments comprising in the aggregate less than 5% of our total capitalization may be determined by the Advisor in good faith in accordance with our valuation policy without the employment of an independent valuation firm.

 

·                  The audit committee of the board of directors discusses the valuations, and the board of directors approves the fair value of each investment in our portfolio in good faith based on the input of the Advisor, the respective independent valuation firms (to the extent applicable) and the audit committee of the board of directors.

 

Those investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in determining the fair value of our investments include, as relevant and among other factors: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables, our principal market (as the reporting entity) and enterprise values.

 

When valuing all of our investments, we strive to maximize the use of observable inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances.

 

Our investments may be categorized based on the types of inputs used in their valuation. The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Investments are classified by GAAP into the three broad levels as follows:

 

Level 1 — Investments valued using unadjusted quoted prices in active markets for identical assets.

 

Level 2 — Investments valued using other unadjusted observable market inputs, e.g. quoted prices in markets that are not active or quotes for comparable instruments.

 

Level 3 — Investments that are valued using quotes and other observable market data to the extent available, but which also take into consideration one or more unobservable inputs that are significant to the valuation taken as a whole.

 

As of March 31, 2014, 0.1% of our investments were categorized as Level 1, 16.9% were categorized as Level 2, 81.8% were Level 3 investments valued based on valuations by independent third party sources, and 1.2% were Level 3 investments valued based on valuations by the Advisor.

 

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the financial statements.

 

Revenue recognition

 

Interest and dividend income, including income paid in kind, is recorded on an accrual basis to the extent that such amounts are determined to be collectible. Origination, structuring, closing, commitment and other upfront fees earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income received upon the early repayment of a loan or debt security are included in interest income.

 

Certain of our debt investments are purchased at a considerable discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. GAAP generally requires that discounts on the acquisition of corporate bonds, municipal bonds and treasury bonds be amortized using the effective-interest or constant-yield method. GAAP also requires that we consider the collectability of interest when making accruals.

 

S-15



 

Accordingly, when accounting for purchase discounts, we recognize discount accretion income when it is probable that such amounts will be collected.

 

Net realized gains or losses and net change in unrealized appreciation or depreciation

 

We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Realized gains and losses are computed using the specific identification method. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

 

S-16



 

Portfolio and investment activity

 

During the three months ended March 31, 2014, we invested approximately $110.4 million across 8 new and 3 existing portfolio companies. Of these investments, 99% were in senior secured debt comprised of senior loans ($97.1 million, or 88% of the total) and senior secured notes ($13.0 million, or 11% of the total). The remaining $0.3 million (1% of the total) were comprised of two equity investments and PIK payments received on investments in unsecured debt. Additionally, we received approximately $66.9 million in proceeds from sales or repayments of investments during the three months ended March 31, 2014.

 

At March 31, 2014, our investment portfolio of $815.7 million (at fair value) consisted of 70 portfolio companies and was invested 96% in debt investments, of which 99% was in senior secured debt and 1% in unsecured or subordinated debt. In aggregate, our investment portfolio was invested 77% in senior secured loans, 18% in senior secured notes, 1% in unsecured or subordinated debt, and 4% in equity investments. Our average portfolio company investment at fair value was approximately $11.7 million. Our largest portfolio company investment by value was approximately $29.9 million and our five largest portfolio company investments by value comprised approximately 13% of our portfolio at March 31, 2014. At December 31, 2013, our investment portfolio of $766.3 million (at fair value) consisted of 67 portfolio companies and was invested 95% in debt investments, of which 98% was in senior secured debt and 2% in unsecured or subordinated debt. In aggregate, our investment portfolio was invested 76% in senior secured loans, 17% in senior secured notes, 2% in unsecured or subordinated debt, and 5% in equity investments. Our average portfolio company investment at fair value was approximately $11.4 million. Our largest portfolio company investment by value was approximately $21.3 million and our five largest portfolio company investments by value comprised approximately 13% of our portfolio at December 31, 2013.

 

S-17



 

The industry composition of our portfolio at fair value at March 31, 2014 was as follows:

 

 

 

Percent of Total

 

Industry

 

Investments

 

Computer Systems Design and Related Services

 

10.1

%

Software Publishers

 

7.2

%

Wireless Telecommunications

 

4.0

%

Newspaper, Periodical, Book, and Directory Publishers

 

3.8

%

Nondepository Credit Intermediation

 

3.2

%

Radio and Television Broadcasting

 

3.1

%

Wired Telecommunications Carriers

 

3.1

%

Scheduled Air Transportation

 

2.6

%

Communications Equipment Manufacturing

 

2.5

%

Nonscheduled Air Transportation

 

2.4

%

Retail

 

2.2

%

Advertising, Public Relations, and Related Services

 

2.2

%

Scientific Research and Development Services

 

2.2

%

Chemical Manufacturing

 

2.1

%

Electric Power Generation, Transmission and Distribution

 

2.1

%

Business Support Services

 

2.1

%

Electrical Equipment and Component Manufacturing

 

2.1

%

Activities Related to Real Estate

 

2.0

%

Textile Furnishings Mills

 

2.0

%

Professional, Scientific, and Technical Services

 

2.0

%

Full-Service Restaurants

 

1.9

%

Oil and Gas Extraction

 

1.9

%

Motion Picture and Video Industries

 

1.9

%

Structured Note Funds

 

1.9

%

Basic Chemical Manufacturing

 

1.8

%

Grocery Stores

 

1.8

%

Plastics Products Manufacturing

 

1.8

%

Other Telecommunications

 

1.7

%

Semiconductor and Other Electronic Component Manufacturing

 

1.7

%

Gaming Industries

 

1.7

%

Lessors of Real Estate

 

1.7

%

Insurance Carriers

 

1.4

%

Artificial Synthetic Fibers and Filaments Manufacturing

 

1.4

%

Fabricated Metal Product Manufacturing

 

1.3

%

Satellite Telecommunications

 

1.3

%

Nonresidential Building Construction

 

1.2

%

Specialty Hospitals

 

1.2

%

Merchant Wholesalers

 

1.1

%

Computer Equipment Manufacturing

 

1.1

%

Data Processing, Hosting, and Related Services

 

1.0

%

Beverage Manufacturing

 

1.0

%

Accounting, Tax Preparation, Bookkeeping, and Payroll Services

 

1.0

%

Other

 

4.2

%

Total

 

100.0

%

 

The weighted average effective yield of the debt securities in our portfolio was 10.8% at March 31, 2014 and 10.9% at December 31, 2013. The weighted average effective yields on our senior debt and other debt investments were 10.7% and 4.1%, respectively, at March 31, 2014, versus 10.9% and 13.1% at December 31, 2013.

 

At March 31, 2014, 73.4% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate, and 26.6% bore interest at fixed rates. The percentage of our floating rate debt investments that bore interest based on an interest rate floor was 92.5% at March 31, 2014. At December 31, 2013, 71.2% of our debt investments bore interest based on floating rates, and 28.8% bore interest at fixed rates. The percentage of our floating rate debt investments that bore interest based on an interest rate floor was 92.1% at December 31, 2013.

 

S-18



 

Results of operations

 

Investment income

 

Investment income totaled $22.7 million and $16.9 million, respectively, for the three months ended March 31, 2014 and 2013, of which $19.7 million and $16.5 million were attributable to interest and fees on our debt investments, $2.0 million and $0.0 million to dividends from equity securities, and $1.0 million and $0.4 million to other income, respectively. The increase in investment income in the three months ended March 31, 2014 compared to the three months ended March 31, 2013 reflects an increase in interest income due to the larger investment portfolio and a higher percentage of the portfolio in income-producing assets in the three months ended March 31, 2014 compared to the three months ended March 31, 2013 and an increase in dividend income and other income.

 

Expenses

 

Total operating expenses for the three months ended March 31, 2014 and 2013 were $4.9 million and $2.9 million respectively, comprised of $2.9 million and $2.0 million in base management fees, $0.2 million and $0.1 million in legal and professional fees, $0.6 million and $0.2 million in interest expense and fees related to the Revolving Facilities, $0.4 million and $0.1 million in amortization of debt issuance costs, and $0.8 million and $0.5 million in other expenses, respectively. The increase in expenses in the three months ended March 31, 2014 compared to the three months ended March 31, 2013 primarily reflects the increase in management fees due to the larger portfolio and the increase in interest expense and other costs related to the increase in available and outstanding debt.

 

Net investment income

 

Net investment income was $17.8 million and $14.0 million respectively, for the three months ended March 31, 2014 and 2013. The increase in in net investment income in the three months ended March 31, 2014 compared to the three months ended March 31, 2013  primarily reflects the increased interest and dividend income in the three months ended March 31, 2014, partially offset by the increase in expenses.

 

Net realized and unrealized gain or loss

 

Net realized gains (losses) for the three months ended March 31, 2014 and 2013 were $(6.8) million and $0.5 million respectively. The net realized loss during the three months ended March 31, 2014 was due primarily to the disposition of our investment in ESP Holdings, Inc., an investment made prior to our initial public offering as part of our legacy distressed strategy. For the three months ended March 31, 2014 and 2013, the change in net unrealized appreciation was $12.0 million and $1.8 million, respectively.

 

Income tax expense, including excise tax

 

The Holding Company has elected to be treated as a RIC under Subchapter M of the Internal Revenue Code (“the Code”) and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, the Holding Company must, among other things, timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. The Holding Company has made and intends to continue to make the requisite distributions to its stockholders which will generally relieve the Holding Company from U.S. federal income taxes.

 

Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a 4% excise tax on such income. Any excise tax expense is recorded at yearend as such amounts are known. There was no U.S. federal excise tax recorded during the three months ended March 31, 2014 and 2013.

 

Dividends to preferred equity holders

 

Dividends on the Preferred Interests for the three months ended March 31, 2014 and 2013 were $0.4 million and $0.4 million, respectively, as average LIBOR rates for the two periods were similar.

 

Incentive compensation

 

Incentive compensation distributable to the General Partner for the three months ended March 31, 2014 and 2013 was $3.5 million and $2.7 million, respectively. Incentive compensation for the three months ended March 31, 2014 and 2013 was distributable due to our performance exceeding the total return threshold. The change in reserve for incentive compensation to the

 

S-19



 

General Partner for the three months ended March 31, 2014 and 2013 was $1.0 million and $0.5 million, respectively. The change in reserve for incentive compensation for the three months ended March 31, 2014 and 2013 reflects the increase in the amount in excess of distributable incentive compensation which would have been earned by the General Partner had we liquidated at net asset value at March 31, 2014 and 2013, respectively.

 

Net increase or decrease in net assets resulting from operations

 

The net increase in net assets resulting from operations was $18.1 million and $12.8 million for the three months ended March 31, 2014 and 2013, respectively. The higher net increase in net assets resulting from operations for the three months ended March 31, 2014 compared to the three months ended March 31, 2013 primarily reflects the increase in net investment income and the increase in net realized and unrealized gains.

 

Liquidity and capital resources

 

Since our inception, our liquidity and capital resources have been generated primarily through the initial private placement of common shares of Special Value Continuation Fund, LLC (the predecessor entity) which were subsequently converted to common stock of the Holding Company, the net proceeds from the initial and secondary public offerings of our common stock, draws on our Leverage Program, and cash flows from operations, including investments sales and repayments and income earned from investments and cash equivalents. The primary uses of cash have been investments in portfolio companies, cash distributions to our equity holders, payments to service our Leverage Program and other general corporate purposes.

 

On May 17, 2013, the Leverage Program was expanded with the issuance of the TCPC Funding Facility. This facility is a senior secured revolving credit facility, pursuant to which amounts may be drawn up to $150 million subject to certain collateral and other restrictions. The facility is expandable to $200 million subject to the consent of the lender and other customary conditions.

 

Amounts outstanding and available under the combined Leverage Program at March 31, 2014 were as follows:

 

 

 

Rate *

 

Outstanding

 

Available

 

Total Facility

 

Operating Company Facility

 

L+44

 

$

82,000,000

 

$

34,000,000

 

$

116,000,000

 

TCPC Funding Facility

 

L+250

 

75,000,000

 

75,000,000

 

150,000,000

 

Preferred Interests

 

L+85

 

134,000,000

 

 

134,000,000

 

Total Leverage Program

 

 

 

$

291,000,000

 

$

109,000,000

 

$

400,000,000

 

 


* Based on either LIBOR or the lender’s cost of funds, subject to certain limitations.

 

Net cash used in operating activities during the three months ended March 31, 2014 was $43.7 million. Our primary use of cash in operating activities during this period consisted of the settlement of acquisitions of investments (net of dispositions) of $42.4 million, partially offset by net investment income less preferred dividends and incentive allocation (net of non-cash income and expenses) of approximately $1.3 million.

 

Net cash provided by financing activities was $47.8 million during the three months ended March 31, 2014, consisting primarily of $62.0 million of net draws under our Revolving Facilities, reduced by $13.0 million of dividends on common equity, $0.4 million of dividends on the Preferred Interests, and payment of $0.8 million in debt issuance costs.

 

At March 31, 2014, we had $27.1 million in cash and cash equivalents.

 

The Revolving Facilities are secured by substantially all of the assets in our portfolio, including cash and cash equivalents, and are subject to compliance with customary affirmative and negative covenants, including the maintenance of a minimum shareholders’ equity, the maintenance of a ratio of not less than 200% of total assets (less total liabilities other than indebtedness) to the sum of total preferred equity and indebtedness, and restrictions on certain payments and issuance of debt. Economic conditions, like those that began in 2007 and which have continued, may result in a decrease in the value of our investments, which would affect both the asset coverage ratios and the value of the collateral securing the Revolving Facilities, and may therefore impact our ability to borrow under the Revolving Facilities. In addition to regulatory restrictions that restrict our ability to raise capital, the Leverage Program contains various covenants which, if not complied with, could accelerate repayment under the Revolving Facilities or require redemption of the Preferred Interests, thereby materially and adversely affecting our liquidity, financial condition and results of operations. At March 31, 2014, we were in compliance with all financial and operational covenants required by the Leverage Program.

 

Unfavorable economic conditions, while potentially creating attractive opportunities for us, may decrease liquidity and raise the cost of capital generally, which could limit our ability to renew, extend or replace the Leverage Program on terms as favorable as

 

S-20



 

are currently included therein. If we are unable to renew, extend or replace the Leverage Program upon the various dates of maturity, we expect to have sufficient funds to repay the outstanding balances in full from our net investment income and sales of, and repayments of principal from, our portfolio company investments, as well as from anticipated debt and equity capital raises, among other sources. Unfavorable economic conditions may limit our ability to raise capital or the ability of the companies in which we invest to repay our loans or engage in a liquidity event, such as a sale, recapitalization or initial public offering. The Operating Company Facility matures in July 2016 and the Preferred Interests will be subject to mandatory redemption in July 2016. The TCPC Funding Facility matures in May 2017. Any inability to renew, extend or replace the Revolving Facilities or replace the Preferred Interests could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.

 

Challenges in the market are intensified for us by certain regulatory limitations under the Code and the 1940 Act. To maintain our qualification as a RIC, we must satisfy, among other requirements, an annual distribution requirement to pay out at least 90% of our ordinary income and short-term capital gains to our stockholders. Because we are required to distribute our income in this manner, and because the illiquidity of many of our investments may make it difficult for us to finance new investments through the sale of current investments, our ability to make new investments is highly dependent upon external financing. While we anticipate being able to continue to satisfy all covenants and repay the outstanding balance under the Leverage Program when due, there can be no assurance that we will be able to do so, which could lead to an event of default.

 

Contractual obligations

 

In addition to obligations under our Leverage Program, we have entered into several contracts under which we have future commitments. Pursuant to an investment management agreement, the Advisor manages our day-to-day operations and provides investment advisory services to us. Payments under the investment management agreement will be equal to a percentage of the value of our gross assets (excluding cash and cash equivalents) and an incentive compensation, plus reimbursement of certain expenses incurred by the Advisor. Under our administration agreement, the Administrator provides us with administrative services, facilities and personnel. Payments under the administration agreement are equal to an allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations to us, and may include rent and our allocable portion of the cost of certain of our officers and their respective staffs. We are responsible for reimbursing the Advisor for due diligence and negotiation expenses, fees and expenses of custodians, administrators, transfer and distribution agents, counsel and directors, insurance, filings and registrations, proxy expenses, expenses of communications to investors, compliance expenses, interest, taxes, portfolio transaction expenses, costs of responding to regulatory inquiries and reporting to regulatory authorities, costs and expenses of preparing and maintaining our books and records, indemnification, litigation and other extraordinary expenses and such other expenses as are approved by the directors as being reasonably related to our organization, offering, capitalization, operation or administration and any portfolio investments, as applicable. The Advisor is not responsible for any of the foregoing expenses and such services are not investment advisory services under the 1940 Act. Either party may terminate each of the investment management agreement and administration agreement without penalty upon not less than 60 days’ written notice to the other.

 

Distributions

 

Our quarterly dividends and distributions to common stockholders are recorded on the ex-dividend date. Distributions are declared considering our estimate of annual taxable income available for distribution to stockholders and the amount of taxable income carried over from the prior year for distribution in the current year. We do not have a policy to pay distributions at a specific level and expect to continue to distribute substantially all of our taxable income. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.

 

The following tables summarize dividends declared for the three months ended March 31, 2014 and March 31, 2013:

 

Date Declared

 

Record Date

 

Payment Date

 

Amount Per Share

 

Total
Amount

 

March 6, 2014

 

March 17, 2014

 

March 31, 2014

 

$

0.36

 

$

13,031,970

 

Total for three months ended March 31, 2014

 

 

 

 

 

$

0.36

 

$

13,031,970

 

 

 

 

 

 

 

 

 

 

 

March 7, 2013

 

March 18, 2013

 

March 29, 2013

 

$

0.40

*

$

8,591,051

 

Total for three months ended March 31, 2013

 

 

 

 

 

$

0.40

 

$

8,591,051

 

 


* Includes a special dividend of $0.05.

 

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The following table summarizes the total shares issued in connection with our dividend reinvestment plan for the three months ended March 31, 2014 and 2013:

 

 

 

2014

 

2013

 

Shares Issued

 

104

 

1,104

 

Average Price Per Share

 

$

16.55

 

$

15.96

 

Proceeds

 

$

1,717

 

$

17,614

 

 

We have elected to be taxed as a RIC under Subchapter M of the Code. In order to maintain favorable RIC tax treatment, we must distribute annually to our stockholders 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 the assets legally available for distribution. In order to avoid certain excise taxes imposed on RICs, we must distribute during each calendar year an amount at least equal to the sum of:

 

·                  98% of our ordinary income (not taking into account any capital gains or losses) for the calendar year;

 

·                  98.2% of the amount by which our capital gains exceed our capital losses (adjusted for certain ordinary losses) for the one-year period generally ending on October 31 of the calendar year; and

 

·                  certain undistributed amounts from previous years on which we paid no U.S. federal income tax.

 

We may, at our discretion, carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. If we choose to do so, all other things being equal, this would increase expenses and reduce the amounts available to be distributed to our stockholders. We will accrue excise tax on estimated taxable income as required. 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 have adopted an “opt in” dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend or other distribution payable in cash, each stockholder that has not “opted in” to our dividend reinvestment plan will receive such dividends in cash, rather than having their dividends automatically reinvested in additional shares of our common stock.

 

We may not be able to achieve operating results that will allow us to make dividends and distributions at a specific level or to increase the amount of these dividends and distributions from time to time. Also, we may be limited in our ability to make dividends and distributions due to the asset coverage test applicable to us as a BDC under the 1940 Act and due to provisions in our existing and future credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of favorable RIC tax treatment. In addition, in accordance with U.S. generally accepted accounting principles and tax regulations, we include in income certain amounts that we have not yet received in cash, such as PIK interest, which represents contractual interest 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 and may be subject to an excise tax.

 

In order to satisfy the annual distribution requirement applicable to RICs, we have the ability to declare a large portion of a dividend in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash and certain requirements are met, the entire distribution would be treated as a dividend for U.S. federal income tax purposes.

 

Related Parties

 

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

 

·                  Each of the Holding Company, the Operating Company, TCPC Funding, and the SBIC has entered into an investment management agreement with the Advisor.

 

·                  The Administrator provides us with administrative services necessary to conduct our day-to-day operations. For providing these services, facilities and personnel, the Administrator may be reimbursed by us for expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our officers and the Administrator’s administrative staff and providing, at our request and on our behalf, significant managerial assistance to our portfolio companies to which we are required to provide such assistance.

 

S-22



 

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

 

·                  Pursuant to its limited partnership agreement, the general partner of the Operating Company is SVOF/MM, LLC. SVOF/MM, LLC is an affiliate of the Advisor and the general partners or managing member of certain other funds managed by the Advisor.

 

The Advisor and its affiliates, employees and associates currently do and in the future may manage other funds and accounts. The Advisor and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds or accounts. Accordingly, conflicts may arise regarding the allocation of investments or opportunities among us and those accounts. In general, the Advisor will allocate investment opportunities pro rata among us and the other funds and accounts (assuming the investment satisfies the objectives of each) based on the amount of committed capital each then has available. The allocation of certain investment opportunities in private placements is subject to independent director approval pursuant to the terms of the co-investment exemptive order applicable to us. In certain cases, investment opportunities may be made other than on a pro rata basis. For example, we may desire to retain an asset at the same time that one or more other funds or accounts desire to sell it or we may not have additional capital to invest at a time the other funds or accounts do. If the Advisor is unable to manage our investments effectively, we may be unable to achieve our investment objective. In addition, the Advisor may face conflicts in allocating investment opportunities between us and certain other entities that could impact our investment returns. While our ability to enter into transactions with our affiliates is restricted under the 1940 Act, we have received an exemptive order from the SEC permitting certain affiliated investments subject to certain conditions. As a result, we may face conflict of interests and investments made pursuant to the exemptive order conditions which could in certain circumstances affect adversely the price paid or received by us or the availability or size of the position purchased or sold by us.

 

Recent Developments

 

From April 1, 2014 through May 2, 2014, the Operating Company has invested approximately $58.2 million in six senior secured loans  with a combined effective yield of approximately 9.8%.

 

On April 22, 2014, the SBIC received a license from the SBA to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958.

 

On May 8, 2014, the Company’s board of directors declared a regular second quarter cash dividend of $0.36 per share and a $0.05 per share special dividend. Both dividends are payable on June 30, 2014 to stockholders of record as of the close of business on June 18, 2014.

 

Quantitative and qualitative disclosure about market risk

 

We are subject to financial market risks, including changes in interest rates. At March 31, 2014, 73.4% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate. The interest rates on such investments generally reset by reference to the current market index after one to six months. At March 31, 2014, the percentage of our floating rate debt investments that bore interest based on an interest rate floor was 92.5%. Floating rate investments subject to a floor generally reset by reference to the current market index after one to six months only if the index exceeds the floor.

 

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We assess our portfolio companies periodically to determine whether such companies will be able to continue making interest payments in the event that interest rates increase. There can be no assurances that the portfolio companies will be able to meet their contractual obligations at any or all levels of increases in interest rates.

 

Based on our March 31, 2014 balance sheet, the following table shows the annual impact on net income (excluding the related incentive compensation impact) of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure:

 

Basis Point Change

 

Interest income

 

Interest Expense

 

Net Income

 

Up 300 basis points

 

$

11,613,205

 

$

(8,730,000

)

$

2,883,205

 

Up 200 basis points

 

$

6,142,664

 

$

(5,820,000

)

$

322,664

 

Up 100 basis points

 

$

3,264,456

 

$

(2,910,000

)

$

354,456

 

Down 100 basis points

 

$

(128,955

)

$

681,231

 

$

552,276

 

Down 200 basis points

 

$

(128,955

)

$

681,231

 

$

552,276

 

Down 300 basis points

 

$

(128,955

)

$

681,231

 

$

552,276

 

 

S-23



 

CAPITALIZATION

 

The following table sets forth (1) our actual capitalization at                   , 201    and (2) our capitalization on a pro forma basis giving effect to the sale of our preferred stock in this offering at the assumed public offering price of $            per share and after deducting the underwriting discounts and commissions and offering expenses payable by us and the application of the estimated net proceeds of this offering. You should read this table together with “Use of Proceeds” in this prospectus supplement and the accompanying prospectus.

 

 

 

As of          , 201

 

 

 

Actual

 

Pro forma

 

Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

 

 

$

 

 

Investments

 

 

 

 

 

Other assets

 

 

 

 

 

Total assets

 

$

 

 

$

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Operating Company Facility(1)

 

$

 

 

$

 

 

TCPC Funding Facility(2)

 

 

 

 

 

Other liabilities

 

 

 

 

 

Total liabilities

 

$

 

 

$

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred Interests,(3) $20,000/share liquidation preference; 6,700 shares authorized, 6,700 preferred interests issued and outstanding, actual; 6,700 preferred interests issued and outstanding, pro forma

 

$

 

 

$

 

 

Accumulated dividends on Preferred Interests

 

 

 

 

 

Common stock, par value $0.001 per share;                  shares of common stock authorized;                         stock issued and outstanding, actual;                        common stock issued and outstanding, pro forma

 

 

 

 

 

Preferred stock, par value $0.001 per share;                       shares of preferred stock authorized;                     shares of preferred stock issued and outstanding, actual;              shares of preferred stock issued and outstanding, pro forma

 

 

 

 

 

Capital in excess of par value

 

 

 

 

 

Accumulated net investment income

 

 

 

 

 

Accumulated net realized losses

 

 

 

 

 

Accumulated net unrealized depreciation

 

 

 

 

 

Net assets applicable to common shareholders

 

$

 

 

$

 

 

 

 

 

 

 

 

Total capitalization

 

$

 

 

$

 

 

 


(1)         The above table reflects our liabilities under the Operating Company Facility as of                            , 201    . As of             , 201   , our debt outstanding under the Operating Company Facility was $                  million.

 

(2)         The above table reflects our liabilities under the TCPC Funding Facility as of                               , 201   . As of                      , 201   , our debt outstanding under the TCPC Funding Facility was $                     million.

 

(3)         Preferred Interests are a component of the $        million Leverage Program of the Operating Company.

 

S-24


 

SUPPLEMENT TO MATERIAL U.S. FEDERAL TAX MATTERS

 

[Insert disclosure regarding federal income tax consequences of an investment in the shares of preferred stock to the extent required to be disclosed by applicable law or regulation.]

 

S-25



 

UNDERWRITING

 

[Underwriter Representatives] are acting as representatives of each of the underwriters named below. Subject to the terms and conditions set forth in an underwriting agreement among us, the Advisor and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the number of shares of preferred stock set forth opposite its name below.

 

Underwriter

 

Number of Shares

 

[Underwriter]

 

 

 

[Underwriter]

 

 

 

Total

 

 

 

 

The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other conditions. Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all the shares of our preferred stock [(other than those covered by the over-allotment option described below)] if they purchase any of the shares of our preferred stock. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated.

 

We, the Advisor and the General Partner have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

 

The underwriters are offering the shares of preferred stock, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officer’s certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

 

Commissions and Discounts

 

The representatives have advised us that the underwriters propose initially to offer the shares to the public at the public offering price set forth on the cover page of this prospectus and to dealers at that price less a concession not in excess of $            per share. After the initial offering, the public offering price, concession or any other term of the offering may be changed. If all the shares of preferred stock are not sold at the public offering price, the underwriters may change the offering price and the other selling terms.

 

The following table shows the public offering price, underwriting discount and proceeds before expenses to us. The information assumes either no exercise or full exercise by the underwriters of their overallotment option.

 

 

 

Per Share

 

Without
Option

 

With
Option

 

Public offering price

 

$

 

 

$

 

 

$

 

 

Sales load (underwriting discount and commissions)

 

$

 

 

$

 

 

$

 

 

Proceeds, before expenses, to the Company

 

$

 

 

$

 

 

$

 

 

 

The expenses of the offering, not including the underwriting discount, are estimated at $       million and are payable by us, including up to $            of expenses that we have agreed to reimburse the underwriters for the Financial Industry Regulation Authority filing fees and reasonable legal fees and expenses incurred in connection with the review and approval by the Financial Industry Regulation Authority of the terms of the offer and sale of the preferred stock in this offering. Such expense will indirectly be borne by investors in this offering and will consequently lower their net asset value per share.

 

S-26



 

[Lock-up Agreements

 

We, the Advisor, and our officers and directors have agreed with the underwriters, subject to certain exceptions, not to issue, sell, dispose of or hedge any of our common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus supplement continuing through the date               days after the date of this prospectus supplement, except with the prior written consent of                                          .

 

The                         -day restricted period described in the preceding paragraph will be automatically extended if: (1) during the last 17 days of the                        -day restricted period we issue an earnings release or announce material news or a material event; or (2) prior to the expiration of the                    -day restricted period, we announce that we will release earnings results during the 15-day period following the last day of the                              -day period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release of the announcement of the material news or material event.]

 

[Overallotment Option

 

If the underwriters sell more shares of preferred stock than the total number set forth in the table above, we have granted to the underwriters an option, exercisable for         days from the date of this prospectus supplement, to purchase up to             additional shares of preferred stock at the public offering price less the underwriting discount. The underwriters may exercise the option solely for the purpose of covering over-allotments, if any, in connection with this offering. To the extent the option is exercised, each underwriter must purchase a number of additional shares of preferred stock approximately proportionate to that underwriter’s initial purchase commitment. Any shares of preferred stock issued or sold under the option will be issued and sold on the same terms and conditions as the other shares of preferred stock that are the subject of this offering.]

 

Price Stabilization, Short Positions and Penalty Bids

 

Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our preferred stock. However, the representatives may engage in transactions that stabilize the price of the preferred stock, such as bids or purchases to peg, fix or maintain that price.

 

[The shares of preferred stock are a new issue of securities with no established trading market. We intend to list the shares of preferred stock on                     . We expect trading in the shares of preferred stock on                  to begin within         days after the original issue date. Currently there is no public market for the shares of preferred stock.

 

We have been advised by the underwriters that they presently intend to make a market in the shares of preferred stock after completion of the offering as permitted by applicable laws and regulations. The underwriters are not obligated, however, to make a market in the shares of preferred stock and any such market-making may be discontinued at any time in the sole discretion of the underwriters without any notice. Accordingly, no assurance can be given as to the liquidity of, or development of a public trading market for, the shares of preferred stock. If any active public trading market for the shares of preferred stock does not develop, the market price and liquidity of the shares of preferred stock may be adversely affected.]

 

In connection with the offering, the underwriters may purchase and sell our preferred stock in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ overallotment option described above. The underwriters may close out any covered short position by either exercising their overallotment option or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the overallotment option. “Naked” short sales are sales in excess of the overallotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our preferred stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of shares of preferred stock made by the underwriters in the open market prior to the completion of the offering.

 

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

 

Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our preferred stock or preventing or retarding a decline in the market price of our preferred stock. As a result, the price of our preferred stock may be higher than the price that might otherwise exist in the open market. The underwriters may conduct these transactions on The Nasdaq Global Select Market, in the over-the-counter market or otherwise.

 

S-27



 

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our preferred stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

 

In addition, in connection with this offering, some of the underwriters may engage in passive market making transactions in the shares on                     , prior to the pricing and completion of the offering. Passive market making consists of displaying bids on                     no higher than the bid prices of independent market makers and making purchases at prices no higher than those independent bids and effected in response to order flow. Net purchases by a passive market maker on each day are limited to a specified percentage of the passive market maker’s average daily trading volume in the shares during a specified period and must be discontinued when that limit is reached. Passive market making may cause the price of the shares to be higher than the price that otherwise would exist in the open market in the absence of those transactions. If the underwriters commence passive market making transactions, they may discontinue them at any time.

 

Sales Outside the United States

 

No action has been taken in any jurisdiction (except in the United States) that would permit a public offering of the securities, or the possession, circulation or distribution of this prospectus supplement or accompanying prospectus or any other material relating to us or the securities in any jurisdiction where action for that purpose is required. Accordingly, the securities may not be offered or sold, directly or indirectly, and none of this prospectus supplement, the accompanying prospectus or any other offering material or advertisements in connection with the securities may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of any such country or jurisdiction.

 

Each of the underwriters may arrange to sell our preferred stock offered hereby in certain jurisdictions outside the United States, either directly or through affiliates, where it is permitted to do so.

 

[Insert applicable legends for jurisdictions in which offers and sales may be made.]

 

Electronic Offer, Sale and Distribution of Shares

 

In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail. In addition, [Lead Underwriter] may facilitate Internet distribution for this offering to certain of its Internet subscription customers. [Lead Underwriter] may allocate a limited number of shares for sale to its online brokerage customers. An electronic prospectus is available on the Internet web site maintained by [Lead Underwriter]. Other than the prospectus in electronic format, the information on the [Lead Underwriter] web site is not part of this prospectus.

 

Other Relationships

 

Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.

 

In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

 

[Describe any other specific transactions and compensation related thereto to the extent required to be disclosed by applicable law or regulation.]

 

[Describe if underwriters receiving proceeds of offering, if required by FINRA.]

 

[Insert principal business addresses of underwriters.]

 

[Insert applicable legends for jurisdictions in which offers and sales may be made.]

 

S-28



 

LEGAL MATTERS

 

Certain legal matters regarding the preferred stock offered hereby have been passed upon for the Company by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, and for the underwriters by [Underwriters’ Counsel], [City, State].

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

is the independent registered public accounting firm for the Company.

 

ADDITIONAL INFORMATION

 

We have filed with the SEC a registration statement on Form N-2, together with all amendments and related exhibits, and the SAI, under the 1933 Act, with respect to the securities offered by this prospectus supplement. The registration statement contains additional information about us and the securities being registered by this prospectus supplement and the accompanying prospectus. This prospectus supplement and the accompanying prospectus do not contain all of the information set forth in the registration statement, including any exhibits and schedules it may contain. For further information concerning us or the securities we are offering, please refer to the registration statement. Statements contained in this prospectus supplement and the accompanying prospectus as to the contents of any contract or other document referred to describe the material terms thereof but are not necessarily complete and in each instance reference is made to the copy of any contract or other document filed as an exhibit to the registration statement. Each statement is qualified in all respects by this reference.

 

We file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Securities Exchange Act of 1934. You may obtain free copies of this information, request a free copy of the Statement of Additional Information, the table of contents of which is on page         of the accompanying prospectus and make stockholder inquiries by contacting us at Tennenbaum Capital Partners, LLC, c/o Investor Relations, 2951 28th Street, Suite 1000, Santa Monica, California 90405 or by calling us collect at (310) 566-1094.  You may also inspect and copy these reports, proxy statements and other information, as well as the registration statement of which the accompanying prospectus forms a part and the related exhibits and schedules, at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549-0102. In addition, the SEC maintains an Internet website that contains reports, proxy and information statements and other information filed electronically by us with the SEC at http://www.sec.gov.

 

No dealer, salesperson or other individual has been authorized to give any information or to make any representation other than those contained in this prospectus supplement and the accompanying prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by us or the underwriters. This prospectus supplement does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this prospectus supplement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in our affairs or that information contained herein is correct as of any time subsequent to the date hereof.

 

S-29


 

INDEX TO FINANCIAL STATEMENTS

 

TCP Capital Corp.

 

(successor to Special Value Continuation Fund, LLC)

 

Interim Financial Statements

 

Consolidated Statements of Assets and Liabilities as of March 31, 2014 (unaudited) and December 31, 2013

S-F-2

Consolidated Statements of Investments as of March 31, 2014 (unaudited) and December 31, 2013

S-F-3

Consolidated Statements of Operations for the three months ended March 31, 2014 (unaudited) and March 31, 2013 (unaudited)

S-F-15

Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2014 (unaudited) and year ended December 31, 2013

S-F-16

Consolidated Statements of Cash Flows for the three months ended March 31, 2014 (unaudited) and March 31, 2013 (unaudited)

S-F-17

Notes to Consolidated Financial Statements (unaudited)

S-F-18

Consolidated Schedule of Changes in Investments in Affiliates for the three months ended March 31, 2014 (unaudited) and year ended December 31, 2013

S-F-35

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers as of March 31, 2014 (unaudited) and December 31, 2013

S-F-37

Consolidating Statement of Assets and Liabilities as of March 31, 2014 (unaudited) and December 31, 2013

S-F-38

Consolidating Statement of Operations for the three months ended March 31, 2014 (unaudited) and March 31, 2013 (unaudited)

S-F-40

 

Special Value Continuation Partners, LP

 

Interim Financial Statements

 

Consolidated Statements of Assets and Liabilities as of March 31, 2014 (unaudited) and December 31, 2013

S-F-42

Consolidated Statements of Investments as of March 31, 2014 (unaudited) and December 31, 2013

S-F-43

Consolidated Statements of Operations for the three months ended March 31, 2014 (unaudited) and March 31, 2013 (unaudited)

S-F-55

Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2014 (unaudited) and year ended December 31, 2013

S-F-56

Consolidated Statements of Cash Flows for the three months ended March 31, 2014 (unaudited) and March 31, 2013 (unaudited)

S-F-57

Notes to Consolidated Financial Statements (unaudited)

S-F-58

Consolidated Schedule of Changes in Investments in Affiliates for the three months ended March 31, 2014 (unaudited) and year ended December 31, 2013

S-F-71

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers as of March 31, 2014 (unaudited) and December 31, 2013

S-F-73

 

S-F-1



 

TCP Capital Corp.

 

Consolidated Statements of Assets and Liabilities

 

 

 

March 31, 2014

 

December 31, 2013

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Investments, at fair value:

 

 

 

 

 

Companies less than 5% owned (cost of $741,804,363 and $684,569,508, respectively)

 

$

744,016,378

 

$

678,326,915

 

Companies 5% to 25% owned (cost of $54,759,445 and $73,946,547, respectively)

 

53,487,621

 

69,068,808

 

Companies more than 25% owned (cost of $41,985,865 and $42,588,724 respectively)

 

18,153,749

 

18,867,236

 

Total investments (cost of $838,549,673 and $801,104,779, respectively)

 

815,657,748

 

766,262,959

 

 

 

 

 

 

 

Cash and cash equivalents

 

27,141,436

 

22,984,182

 

Accrued interest income:

 

 

 

 

 

Companies less than 5% owned

 

8,279,978

 

6,282,353

 

Companies 5% to 25% owned

 

679,599

 

415,061

 

Companies more than 25% owned

 

38,519

 

41,691

 

Deferred debt issuance costs

 

3,360,310

 

2,969,085

 

Receivable for investments sold

 

1,031,717

 

3,605,964

 

Options (cost $51,750)

 

8,605

 

14,139

 

Prepaid expenses and other assets

 

1,184,123

 

753,768

 

Total assets

 

857,382,035

 

803,329,202

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Debt

 

157,000,000

 

95,000,000

 

Incentive allocation payable

 

3,486,403

 

3,318,900

 

Payable for investments purchased

 

1,514,602

 

14,706,942

 

Payable to the Investment Manager

 

463,629

 

1,121,108

 

Interest payable

 

332,040

 

430,969

 

Unrealized depreciation on swaps

 

300,684

 

331,183

 

Accrued expenses and other liabilities

 

2,915,706

 

3,136,010

 

Total liabilities

 

166,013,064

 

118,045,112

 

 

 

 

 

 

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

 

 

 

Preferred equity facility

 

 

 

 

 

Series A preferred limited partner interests in Special Value Continuation Partners, LP; $20,000/interest liquidation preference; 6,700 interests authorized, issued and outstanding

 

134,000,000

 

134,000,000

 

Accumulated dividends on Series A preferred equity facility

 

493,757

 

504,252

 

Total preferred limited partner interests

 

134,493,757

 

134,504,252

 

 

 

 

 

 

 

Non-controlling interest

 

 

 

 

 

General Partner interest in Special Value Continuation Partners, LP

 

2,204,587

 

1,168,583

 

 

 

 

 

 

 

Net assets applicable to common shareholders

 

$

554,670,627

 

$

549,611,255

 

 

 

 

 

 

 

Composition of net assets applicable to common shareholders

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized, 36,200,020 and 36,199,916 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively

 

36,200

 

36,200

 

Paid-in capital in excess of par

 

667,843,737

 

667,842,020

 

Accumulated net investment income

 

24,929,736

 

24,016,095

 

Accumulated net realized losses

 

(112,595,624

)

(105,800,278

)

Accumulated net unrealized depreciation

 

(23,338,835

)

(35,314,199

)

Non-controlling interest

 

(2,204,587

)

(1,168,583

)

Net assets applicable to common shareholders

 

$

554,670,627

 

$

549,611,255

 

 

 

 

 

 

 

Net assets per share

 

$

15.32

 

$

15.18

 

 

See accompanying notes.

 

S-F-2



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (92.87%)

 

 

 

 

 

 

 

 

 

Bank Debt (76.36%) (1)

 

 

 

 

 

 

 

 

 

Accounting, Tax Preparation, Bookkeeping, and Payroll Services (0.93%)

 

 

 

 

 

 

 

 

 

Expert Global Solutions, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 7.25% (Q),1.25% LIBOR Floor, due 4/3/18

 

$

694,441

 

$

699,603

 

$

679,684

 

0.08

%

Expert Global Solutions, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 11% (Q), 1.5% LIBOR Floor, due 10/3/18

 

$

7,434,877

 

7,235,805

 

7,174,657

 

0.85

%

Total Accounting, Tax Preparation, Bookkeeping, and Payroll Services

 

 

 

7,935,408

 

7,854,341

 

 

 

 

 

 

 

 

 

 

 

 

 

Activities Related to Real Estate (1.97%)

 

 

 

 

 

 

 

 

 

Greystone Select Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 8% (M), 1% LIBOR Floor, due 3/26/21

 

$

16,594,230

 

16,366,059

 

16,635,715

 

1.97

%

 

 

 

 

 

 

 

 

 

 

Advertising, Public Relations, and Related Services (2.15%)

 

 

 

 

 

 

 

 

 

Doubleplay III Limited, Senior Secured 1st Lien Facility A1 Term Loan, EURIBOR + 6.25% (Q), 1.25% EURIBOR Floor, due 3/18/18 - (United Kingdom) (4), (10)

 

$

13,165,705

 

16,495,992

 

18,082,540

 

2.15

%

 

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (0.24%)

 

 

 

 

 

 

 

 

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16 (2)

 

$

2,056,927

 

2,056,927

 

2,056,927

 

0.24

%

 

 

 

 

 

 

 

 

 

 

Basic Chemical Manufacturing (1.79%)

 

 

 

 

 

 

 

 

 

PeroxyChem, LLC, Senior Secured Term Loan, LIBOR + 6.5% (M), 1% LIBOR Floor, due 2/28/20

 

$

15,000,000

 

14,702,579

 

15,075,000

 

1.79

%

 

 

 

 

 

 

 

 

 

 

Business Support Services (1.76%)

 

 

 

 

 

 

 

 

 

STG-Fairway Acquisitions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.25% (Q), 1.25% LIBOR Floor, due 8/28/19

 

$

14,643,455

 

13,965,887

 

14,863,107

 

1.76

%

 

 

 

 

 

 

 

 

 

 

Chemical Manufacturing (2.08%)

 

 

 

 

 

 

 

 

 

Archroma, Senior Secured Lien Term Loan B, LIBOR + 8.25% (Q), 1.25% LIBOR Floor, due 9/30/18

 

$

17,412,500

 

17,088,698

 

17,499,563

 

2.08

%

 

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (1.79%)

 

 

 

 

 

 

 

 

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625% (Q), 1.25% LIBOR Floor, due 12/11/18 (2)

 

$

14,962,500

 

14,812,875

 

15,059,756

 

1.79

%

 

 

 

 

 

 

 

 

 

 

Computer Equipment Manufacturing (1.08%)

 

 

 

 

 

 

 

 

 

ELO Touch Solutions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 10.5% (Q), 1.5% LIBOR Floor, due 12/1/18

 

$

10,000,000

 

9,678,717

 

9,075,000

 

1.08

%

 

 

 

 

 

 

 

 

 

 

Converted Paper Products Manufacturing (0.42%)

 

 

 

 

 

 

 

 

 

Ranpak Corp., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1.25% LIBOR Floor, due 4/23/20

 

$

3,469,573

 

3,434,877

 

3,551,976

 

0.42

%

 

 

 

 

 

 

 

 

 

 

Computer Systems Design and Related Services (9.73%)

 

 

 

 

 

 

 

 

 

Autoalert, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 4.75 % (Q) Cash + 4% PIK, 0.25% LIBOR Floor, due 3/31/19

 

$

30,000,000

 

29,400,000

 

29,940,000

 

3.55

%

Blue Coat Systems, Inc., Senior Secured 1st Lien Revolver Term Loan, LIBOR + 3.5% (Q), 1% LIBOR Floor, due 5/31/18 (13)

 

$

 

(960,000

)

(441,060

)

(0.05

)%

Blue Coat Systems, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1% LIBOR Floor, due 6/28/20

 

$

15,000,000

 

14,878,125

 

15,581,250

 

1.85

%

Coreone Technologies, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 3.75% (Q) Cash + 5% PIK, 1% LIBOR Floor, due 9/4/18

 

$

13,726,261

 

13,412,993

 

13,643,903

 

1.62

%

OnX Enterprise Solutions, Ltd., Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

10,613,333

 

10,468,033

 

10,708,853

 

1.27

%

OnX USA, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

5,306,667

 

5,237,760

 

5,354,427

 

0.64

%

Websense, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1% LIBOR Floor, due 12/27/20

 

$

7,200,000

 

7,164,000

 

7,254,000

 

0.85

%

Total Computer Systems Design and Related Services

 

 

 

79,600,911

 

82,041,373

 

 

 

 

 

 

 

 

 

 

 

 

 

Electric Power Generation, Transmission and Distribution (2.07%)

 

 

 

 

 

 

 

 

 

Panda Sherman Power, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7.5% (Q), 1.5% LIBOR Floor, due 9/14/18

 

$

11,070,172

 

10,938,274

 

11,402,277

 

1.35

%

Panda Temple Power II, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q), 1.25% LIBOR Floor, due 4/3/19

 

$

5,892,970

 

5,834,041

 

6,062,393

 

0.72

%

Total Electric Power Generation, Transmission and Distribution

 

 

 

16,772,315

 

17,464,670

 

 

 

 

 

 

 

 

 

 

 

 

 

Electrical Equipment and Component Manufacturing (1.99%)

 

 

 

 

 

 

 

 

 

Palladium Energy, Inc., 1st Lien Senior Secured Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 12/26/17

 

$

16,500,317

 

16,239,377

 

16,739,572

 

1.99

%

 

 

 

 

 

 

 

 

 

 

Electrical Equipment Manufacturing (0.82%)

 

 

 

 

 

 

 

 

 

API Technologies Corp., Senior Secured 1st Lien Term Loan, LIBOR + 7.5% (M), 1.5% LIBOR Floor, due 2/6/18

 

$

6,947,590

 

6,878,114

 

6,912,852

 

0.82

%

Financial Investment Activities (0.70%)

 

 

 

 

 

 

 

 

 

Marsico Capital Management, Senior Secured 1st Lien Term Loan, LIBOR + 5% (M), due 12/31/22 (11)

 

$

10,606,841

 

13,355,425

 

5,939,831

 

0.70

%

 

S-F-3



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Freight Transportation Arrangement (0.44%)

 

 

 

 

 

 

 

 

 

Livingston International, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/18/20 (10)

 

$

3,665,217

 

$

3,599,623

 

$

3,724,777

 

0.44

%

 

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (1.87%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18 (2)

 

$

5,164,796

 

5,164,796

 

1,402,242

 

0.17

%

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

1,422,456

 

1,394,868

 

1,422,456

 

0.17

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/21/16 (2)

 

$

3,647,717

 

3,647,717

 

3,647,717

 

0.43

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

7,087,612

 

7,087,612

 

7,087,612

 

0.84

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

2,232,131

 

2,194,774

 

2,232,131

 

0.26

%

Total Full-Service Restaurants

 

 

 

19,489,767

 

15,792,158

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming Industries (1.66%)

 

 

 

 

 

 

 

 

 

AP Gaming I, LLC, Senior Secured 1st Lien Revolver Term Loan, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 12/20/18 (13)

 

$

 

(1,000,000

)

(984,375

)

(0.12

)%

AP Gaming I, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 12/20/20

 

$

14,962,500

 

14,523,696

 

14,962,500

 

1.78

%

Total Gaming Industries

 

 

 

13,523,696

 

13,978,125

 

 

 

 

 

 

 

 

 

 

 

 

 

Grocery Stores (1.78%)

 

 

 

 

 

 

 

 

 

Bashas, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 9.35% (M), 1.5% LIBOR Floor, due 12/28/15

 

$

14,781,475

 

14,740,030

 

15,003,197

 

1.78

%

 

 

 

 

 

 

 

 

 

 

Insurance Carriers (1.39%)

 

 

 

 

 

 

 

 

 

Acrisure, LLC, 2nd Lien Additional Notes, LIBOR + 10.5% (Q), 1% LIBOR Floor, due 3/7/20

 

$

680,363

 

564,204

 

674,555

 

0.08

%

Acrisure, LLC, 2nd Lien Notes, LIBOR + 10.5% (Q), 1% LIBOR Floor, due 3/7/20

 

$

11,051,757

 

10,832,378

 

11,040,705

 

1.31

%

Total Insurance Carriers

 

 

 

11,396,582

 

11,715,260

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Related Activities (0.76%)

 

 

 

 

 

 

 

 

 

Confie Seguros Holding II Co., 2nd Lien Term Loan, LIBOR + 9% (M), 1.25% LIBOR Floor, due 5/8/19

 

$

6,341,809

 

6,249,086

 

6,397,332

 

0.76

%

 

 

 

 

 

 

 

 

 

 

Merchant Wholesalers (1.09%)

 

 

 

 

 

 

 

 

 

Envision Acquisition Company, LLC, 2nd Lien Term Loan, LIBOR + 8.75% (M), 1% LIBOR Floor, due 11/4/21

 

$

9,079,011

 

8,897,430

 

9,158,452

 

1.09

%

 

 

 

 

 

 

 

 

 

 

Motion Picture and Video Industries (1.82%)

 

 

 

 

 

 

 

 

 

CORE Entertainment, Inc., Senior Secured 1st Lien Term Loan, 9%, due 6/21/17

 

$

9,462,231

 

9,386,095

 

8,421,386

 

1.00

%

CORE Entertainment, Inc., Senior Secured 2nd Lien Term Loan, 13.5%, due 6/21/18

 

$

7,569,785

 

7,505,822

 

6,933,923

 

0.82

%

Total Motion Picture and Video Industries

 

 

 

16,891,917

 

15,355,309

 

 

 

 

 

 

 

 

 

 

 

 

 

Newspaper, Periodical, Book, and Directory Publishers (3.64%)

 

 

 

 

 

 

 

 

 

Hanley-Wood, LLC, 1st Lien FILO Term Loan, LIBOR + 6.75% (Q), 1.25% LIBOR Floor, due 7/15/18

 

$

16,561,400

 

16,561,400

 

16,420,628

 

1.95

%

MediMedia USA, Inc., 1st Lien Revolver, LIBOR + 6.75% (M), due 5/20/18

 

$

5,270,000

 

4,107,500

 

4,833,908

 

0.57

%

MediMedia USA, Inc., 1st Lien Term Loan, LIBOR + 6.75% (M), 1.25% LIBOR Floor, due 11/20/18

 

$

9,676,875

 

9,420,314

 

9,434,953

 

1.12

%

Total Newspaper, Periodical, Book, and Directory Publishers

 

 

 

30,089,214

 

30,689,489

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonresidential Building Construction (1.20%)

 

 

 

 

 

 

 

 

 

NCM Group Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 11.5% (Q), 1% LIBOR Floor, due 8/29/18

 

$

10,000,000

 

9,620,619

 

10,145,000

 

1.20

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (2.11%)

 

 

 

 

 

 

 

 

 

One Sky Flight, LLC, Senior Secured 2nd Lien Term Loan, 12% Cash + 3% PIK, due 6/3/19

 

$

18,243,983

 

16,984,017

 

17,742,274

 

2.11

%

 

 

 

 

 

 

 

 

 

 

Oil and Gas Extraction (1.83%)

 

 

 

 

 

 

 

 

 

Willbros Group, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.25% LIBOR Floor, due 8/7/19

 

$

15,246,603

 

14,876,555

 

15,443,512

 

1.83

%

 

 

 

 

 

 

 

 

 

 

Other Telecommunications (1.67%)

 

 

 

 

 

 

 

 

 

Securus Technologies, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/30/21

 

$

14,000,000

 

13,860,000

 

14,072,940

 

1.67

%

 

 

 

 

 

 

 

 

 

 

Petroleum and Coal Products Manufacturing (0.46%)

 

 

 

 

 

 

 

 

 

Boomerang Tube, LLC, 2nd Lien Term Loan, LIBOR + 9.5% (Q), 1.5% LIBOR Floor, due 10/11/17

 

$

3,987,092

 

3,902,548

 

3,887,415

 

0.46

%

 

S-F-4



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Professional, Scientific, and Technical Services (1.91%)

 

 

 

 

 

 

 

 

 

ConvergeOne Holdings, 1st Lien Term Loan, LIBOR + 8% (Q), 1.25% LIBOR Floor, due 5/8/19

 

$

16,112,709

 

$

15,930,795

 

$

16,112,709

 

1.91

%

 

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (2.94%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q) Cash + 4% PIK, 2% LIBOR Floor, due 8/3/16

 

$

7,014,361

 

6,678,521

 

6,856,537

 

0.82

%

The Tennis Channel, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 8.5% (Q), due 5/29/17

 

$

17,771,217

 

17,344,546

 

17,842,301

 

2.12

%

Total Radio and Television Broadcasting

 

 

 

24,023,067

 

24,698,838

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail (2.10%)

 

 

 

 

 

 

 

 

 

Kenneth Cole Productions, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 10.40% (M), 1% LIBOR Floor, due 9/25/17

 

$

11,000,000

 

10,796,475

 

11,055,000

 

1.31

%

Shopzilla, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.5% (Q), due 3/31/16

 

$

6,710,057

 

6,584,026

 

6,699,991

 

0.79

%

Total Retail

 

 

 

17,380,501

 

17,754,991

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.40%)

 

 

 

 

 

 

 

 

 

Aircraft Secured Mortgages - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL, 8%, due 3/15/17 (6)

 

$

268,686

 

268,686

 

275,740

 

0.03

%

N918DL, 8%, due 8/15/18 (6)

 

$

369,976

 

369,976

 

379,440

 

0.05

%

N954DL, 8%, due 3/20/19 (6)

 

$

493,667

 

493,667

 

504,730

 

0.06

%

N955DL, 8%, due 6/20/19 (6)

 

$

513,363

 

513,363

 

524,620

 

0.06

%

N956DL, 8%, due 5/20/19 (6)

 

$

512,024

 

512,024

 

523,430

 

0.06

%

N957DL, 8%, due 6/20/19 (6)

 

$

517,853

 

517,853

 

529,210

 

0.06

%

N959DL, 8%, due 7/20/19 (6)

 

$

523,634

 

523,634

 

534,990

 

0.06

%

N960DL, 8%, due 10/20/19 (6)

 

$

545,211

 

545,211

 

556,410

 

0.07

%

N961DL, 8%, due 8/20/19 (6)

 

$

538,309

 

538,309

 

549,780

 

0.07

%

N976DL, 8%, due 2/15/18 (6)

 

$

373,436

 

373,436

 

383,520

 

0.05

%

Aircraft Secured Mortgages - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA, 20%, due 10/26/16 (2)

 

$

305,802

 

305,802

 

370,358

 

0.04

%

N512UA, 20%, due 10/26/16 (2)

 

$

311,984

 

311,984

 

380,048

 

0.05

%

N536UA, 16%, due 9/29/14 (2)

 

$

69,373

 

69,373

 

71,630

 

0.01

%

N545UA, 16%, due 8/29/15 (2)

 

$

214,325

 

214,325

 

233,415

 

0.03

%

N585UA, 20%, due 10/25/16 (2)

 

$

366,316

 

366,316

 

446,310

 

0.05

%

N659UA, 12%, due 2/28/16 (6)

 

$

2,439,123

 

2,439,123

 

2,635,667

 

0.31

%

N661UA, 12%, due 5/4/16 (6)

 

$

2,619,284

 

2,619,284

 

2,862,717

 

0.34

%

Total Scheduled Air Transportation

 

 

 

10,982,366

 

11,762,015

 

 

 

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (1.64%)

 

 

 

 

 

 

 

 

 

Isola USA Corporation, Senior Secured Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 11/29/18

 

$

14,492,188

 

14,285,320

 

14,854,492

 

1.76

%

SunEdison, Inc., Senior Secured Letters of Credit, 3.75%, due 2/28/17 (12), (13)

 

$

 

(1,031,717

)

(1,031,717

)

(0.12

)%

Total Semiconductor and Other Electronic Component Manufacturing

 

 

 

13,253,603

 

13,822,775

 

 

 

 

 

 

 

 

 

 

 

 

 

Software Publishers (6.91%)

 

 

 

 

 

 

 

 

 

Acronis International GmbH, 1st Lien Term Loan, LIBOR + 9.5% (Q), 1% LIBOR Floor, due 2/21/17 - (Switzerland) (10)

 

$

13,628,929

 

13,363,718

 

13,676,630

 

1.62

%

BlackLine Systems, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 0.4% (Q) Cash + 7.6% PIK, 1.5% LIBOR Floor, due 9/25/18

 

$

12,818,762

 

12,050,059

 

12,440,609

 

1.48

%

Deltek, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.75% (Q), 1.25% LIBOR Floor, due 10/10/19

 

$

15,000,000

 

14,811,452

 

15,324,975

 

1.82

%

Edmentum, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 5/17/19

 

$

16,500,000

 

16,271,792

 

16,788,750

 

1.99

%

Total Software Publishers

 

 

 

56,497,021

 

58,230,964

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.59%)

 

 

 

 

 

 

 

 

 

UBC Healthcare Analytics, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 7/1/18

 

$

4,933,947

 

4,909,278

 

4,958,617

 

0.59

%

Support Activities for Mining (0.00%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

McDermott International, Inc., Bridge Facility Commitment

 

$

 

 

 

 

 

S-F-5



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

Principal

 

 

 

 

 

Percent of

 

 

 

Amount or

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Textile Furnishings Mills (1.96%)

 

 

 

 

 

 

 

 

 

Lexmark Carpet Mills, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 10% (Q),

 

 

 

 

 

 

 

 

 

1% LIBOR Floor, due 9/30/18

 

$

16,351,467

 

$

15,942,680

 

$

16,523,158

 

1.96

%

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.83%)

 

 

 

 

 

 

 

 

 

Integra Telecom Holdings, Inc., 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1.25% LIBOR

 

 

 

 

 

 

 

 

 

Floor, due 2/22/20

 

$

15,000,000

 

14,709,735

 

15,390,000

 

1.83

%

 

 

 

 

 

 

 

 

 

 

Wireless Telecommunications Carriers (3.84%)

 

 

 

 

 

 

 

 

 

Alpheus Communications, LLC, Senior Secured 1st Lien Delayed Draw FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18 (13)

 

$

 

(11,183

)

(7,874

)

 

Alpheus Communications, LLC, Senior Secured 1st Lien FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18

 

$

8,248,124

 

8,166,127

 

8,190,387

 

0.97

%

Globalive Wireless Management Corp., Senior Secured 1st Lien Term Loan, LIBOR + 10.9% (Q), due 4/30/14 - (Canada) (10)

 

$

3,037,292

 

2,933,872

 

3,067,665

 

0.36

%

Gogo, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 6/21/17

 

$

19,461,356

 

18,587,291

 

21,115,572

 

2.51

%

Total Wireless Telecommunications Carriers

 

 

 

29,676,107

 

32,365,750

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Bank Debt

 

 

 

636,810,398

 

643,577,280

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Corporate Debt Securities (16.51%)

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (1.10%)

 

 

 

 

 

 

 

 

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16 (2), (5)

 

$

9,268,000

 

7,586,317

 

9,268,000

 

1.10

%

 

 

 

 

 

 

 

 

 

 

Beverage Manufacturing (1.00%)

 

 

 

 

 

 

 

 

 

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18 (5)

 

$

7,780,000

 

7,780,000

 

8,441,300

 

1.00

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.90%)

 

 

 

 

 

 

 

 

 

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19 (5)

 

$

7,098,916

 

6,960,435

 

7,560,346

 

0.90

%

 

 

 

 

 

 

 

 

 

 

Fabricated Metal Product Manufacturing (1.31%)

 

 

 

 

 

 

 

 

 

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16 (5), (7)

 

$

12,500,000

 

12,322,875

 

11,000,000

 

1.31

%

 

 

 

 

 

 

 

 

 

 

Lessors of Real Estate (1.60%)

 

 

 

 

 

 

 

 

 

Hunt Companies, Inc., Senior Secured Notes, 9.625%, due 3/1/21 (5)

 

$

13,084,000

 

12,922,359

 

13,476,520

 

1.60

%

 

 

 

 

 

 

 

 

 

 

Nondepository Credit Intermediation (3.07%)

 

 

 

 

 

 

 

 

 

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19 - (Cayman Islands) (5), (8), (10)

 

$

10,000,000

 

9,829,350

 

10,850,000

 

1.29

%

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18 (5), (10)

 

$

15,084,000

 

15,084,000

 

15,084,000

 

1.78

%

Total Nondepository Credit Intermediation

 

 

 

24,913,350

 

25,934,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Plastics Products Manufacturing (1.72%)

 

 

 

 

 

 

 

 

 

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18 (5)

 

$

13,600,000

 

13,600,000

 

14,478,995

 

1.72

%

 

 

 

 

 

 

 

 

 

 

Retail (0.01%)

 

 

 

 

 

 

 

 

 

Shop Holding LLC, Convertible Promissory Note, 5%, due 8/5/15 (5)

 

$

73,140

 

73,140

 

71,494

 

0.01

%

 

 

 

 

 

 

 

 

 

 

Satellite Telecommunications (1.25%)

 

 

 

 

 

 

 

 

 

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19 (5), (7), (10)

 

$

9,914,000

 

9,914,000

 

10,576,999

 

1.25

%

 

 

 

 

 

 

 

 

 

 

Scientific Research and Development Services (2.14%)

 

 

 

 

 

 

 

 

 

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17 (5)

 

$

17,200,000

 

16,536,295

 

18,060,000

 

2.14

%

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.61%)

 

 

 

 

 

 

 

 

 

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17 (5)

 

$

5,000,000

 

5,000,000

 

5,150,000

 

0.61

%

 

 

 

 

 

 

 

 

 

 

Structured Note Funds (1.80%)

 

 

 

 

 

 

 

 

 

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21 - (Cayman Islands) (5), (10)

 

$

15,000,000

 

15,000,000

 

15,147,000

 

1.80

%

 

 

 

 

 

 

 

 

 

 

Total Other Corporate Debt Securities

 

 

 

132,608,771

 

139,164,654

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Debt Investments

 

 

 

769,419,169

 

782,741,934

 

 

 

 

S-F-6


 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (3.91%)

 

 

 

 

 

 

 

 

 

Business Support Services (0.26%)

 

 

 

 

 

 

 

 

 

Findly Talent, LLC, Membership Units (3), (5)

 

708,229

 

$

230,938

 

$

162,185

 

0.02

%

STG-Fairway Holdings, LLC, Class A Units (3), (5)

 

841,479

 

943,287

 

1,990,939

 

0.24

%

Total Business Support Services

 

 

 

1,174,225

 

2,153,124

 

 

 

 

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (0.59%)

 

 

 

 

 

 

 

 

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units (2), (3), (5)

 

5,000,000

 

5,000,000

 

5,000,000

 

0.59

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.11%)

 

 

 

 

 

 

 

 

 

Anacomp, Inc., Class A Common Stock (3), (5), (6)

 

1,255,527

 

26,711,048

 

891,424

 

0.11

%

 

 

 

 

 

 

 

 

 

 

Depository Credit Intermediation (0.06%)

 

 

 

 

 

 

 

 

 

Doral Financial Corporation, Common Stock - (Puerto Rico) (3), (10), (12)

 

53,890

 

11,699,417

 

467,763

 

0.06

%

 

 

 

 

 

 

 

 

 

 

Financial Investment Activities (0.00%)

 

 

 

 

 

 

 

 

 

Marsico Holdings, LLC, Common Interest Units (3), (5), (11)

 

168,698

 

172,694

 

25,305

 

 

 

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (0.00%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Membership Units (2), (3), (5)

 

13,161,000

 

2,010,777

 

 

 

 

 

 

 

 

 

 

 

 

 

Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing (0.00%)

 

 

 

 

 

 

 

 

 

Precision Holdings, LLC, Class C Membership Interests (3), (5)

 

33

 

 

7,397

 

 

 

 

 

 

 

 

 

 

 

 

Nonmetallic Mineral Mining and Quarrying (0.19%)

 

 

 

 

 

 

 

 

 

EPMC HoldCo, LLC, Membership Units (2), (5)

 

1,312,720

 

 

1,562,137

 

0.19

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (0.17%)

 

 

 

 

 

 

 

 

 

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,843

 

1,274,000

 

1,412,078

 

0.17

%

 

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (0.04%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Warrants to Purchase Common Stock (3), (5)

 

233,470

 

300,322

 

357,209

 

0.04

%

 

 

 

 

 

 

 

 

 

 

Retail (0.06%)

 

 

 

 

 

 

 

 

 

Shop Holding, LLC, Class A Units (3), (5)

 

507,167

 

480,049

 

476,628

 

0.06

%

Shop Holding, LLC, Warrants to Purchase Class A Units (3), (5)

 

326,691

 

 

17,834

 

 

Total Electronic Shopping

 

 

 

480,049

 

494,462

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.11%)

 

 

 

 

 

 

 

 

 

Equipment Trusts - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL Trust Beneficial Interests (5), (6)

 

795

 

94,231

 

123,930

 

0.01

%

N918DL Trust Beneficial Interests (5), (6)

 

673

 

105,629

 

141,270

 

0.02

%

N954DL Trust Beneficial Interests (5), (6)

 

636

 

126,797

 

69,190

 

0.01

%

N955DL Trust Beneficial Interests (5), (6)

 

618

 

127,179

 

112,710

 

0.01

%

N956DL Trust Beneficial Interests (5), (6)

 

623

 

118,190

 

108,290

 

0.01

%

N957DL Trust Beneficial Interests (5), (6)

 

618

 

128,014

 

109,140

 

0.01

%

N959DL Trust Beneficial Interests (5), (6)

 

614

 

128,843

 

109,990

 

0.01

%

N960DL Trust Beneficial Interests (5), (6)

 

602

 

132,148

 

109,140

 

0.01

%

N961DL Trust Beneficial Interests (5), (6)

 

610

 

131,332

 

103,700

 

0.01

%

N976DL Trust Beneficial Interests (5), (6)

 

709

 

108,697

 

102,862

 

0.01

%

Equipment Trusts - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA Trust Beneficial Interests (2), (5)

 

56

 

211,477

 

453,896

 

0.05

%

N512UA Trust Beneficial Interests (2), (5)

 

56

 

206,766

 

446,071

 

0.05

%

N536UA Trust Beneficial Interests (2), (5)

 

86

 

424,460

 

526,943

 

0.06

%

N545UA Trust Beneficial Interests (2), (5)

 

71

 

371,557

 

632,959

 

0.08

%

N585UA Trust Beneficial Interests (2), (5)

 

56

 

229,521

 

465,546

 

0.06

%

United N659UA-767, LLC (N659UA) (5), (6)

 

439

 

2,197,988

 

2,950,833

 

0.35

%

United N661UA-767, LLC (N661UA) (5), (6)

 

426

 

2,161,205

 

2,961,015

 

0.35

%

Total Scheduled Air Transportation

 

 

 

7,004,034

 

9,527,485

 

 

 

 

 

 

 

 

 

 

 

 

 

Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing (0.09%)

 

 

 

 

 

 

 

 

 

KAGY Holding Company, Inc., Series A Preferred Stock (2), (3), (5)

 

9,778

 

1,091,200

 

721,467

 

0.09

%

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (0.03%)

 

 

 

 

 

 

 

 

 

AIP/IS Holdings, LLC, Membership Units (3), (5)

 

352

 

 

229,504

 

0.03

%

 

 

 

 

 

 

 

 

 

 

Software Publishers (0.06%)

 

 

 

 

 

 

 

 

 

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,232,731

 

522,678

 

530,074

 

0.06

%

 

S-F-7



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.14%)

 

 

 

 

 

 

 

 

 

Integra Telecom, Inc., Common Stock (3), (5)

 

1,274,522

 

$

8,433,884

 

$

5,586,951

 

0.67

%

Integra Telecom, Inc., Warrants (3), (5)

 

346,939

 

19,920

 

186,275

 

0.02

%

V Telecom Investment S.C.A., Common Shares - (Luxembourg) (3), (4), (5), (10)

 

1,393

 

3,236,256

 

3,763,159

 

0.45

%

Total Wired Telecommunications Carriers

 

 

 

11,690,060

 

9,536,385

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Equity Securities

 

 

 

69,130,504

 

32,915,814

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments

 

 

 

838,549,673

 

815,657,748

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents (3.22%)

 

 

 

 

 

 

 

 

 

Wells Fargo & Company, Overnight Repurchase Agreement, 0.03%,

 

 

 

 

 

 

 

 

 

Collateralized by Freddie Mac Note

 

 

 

 

 

 

$

16,373,605

 

1.95

%

Union Bank of California, Commercial Paper, 0.10%, due 4/1/14

 

 

 

 

 

 

6,000,000

 

0.71

%

Cash Denominated in Foreign Currencies

 

 

 

 

 

 

121,879

 

0.01

%

Cash Held on Account at Various Institutions

 

 

 

 

 

 

4,645,952

 

0.55

%

Cash and Cash Equivalents

 

 

 

 

 

27,141,436

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Cash and Investments (9)

 

 

 

 

 

$

842,799,184

 

100.00

%

 


Notes to Statement of Investments:

 

(1)                                 Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933. Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower.

 

(2)                                 Non-controlled affiliate — as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates.

 

(3)                                 Non-income producing security.

 

(4)                                 Principal amount denominated in foreign currency.  Amortized cost and fair value converted from foreign currency to US dollars. (See Note 2)

 

(5)                                 Restricted security. (See Note 2)

 

(6)                                 Controlled issuer — as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer).  Investment is not more than 50% owned nor deemed to be a significant subsidiary. See Consolidated Schedule of Changes in Investments in Affiliates.

 

(7)                                 Investment has been segregated to collateralize certain unfunded commitments.

 

(8)                                 $5,000,000 principal amount of this investment has been segregated to collateralize certain unfunded commitments.

 

(9)                                 All cash and investments, except those referenced in Notes 7 and 8 above, are pledged as collateral under the Revolving Facilities as described in Note 4 to the Consolidated Financial Statements.

 

(10)                          Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act.  Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

 

(11)                          Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act.  Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

 

(12)                          Publicly traded company with a market capitalization greater than $250 million and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act.  Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

 

(13)                          Negative balances relate to an unfunded commitment that was acquired and valued at a discount.

 

LIBOR or EURIBOR resets monthly (M), quarterly (Q), or semiannually (S).

 

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $110,386,498, and $66,876,929, respectively for the three months ended March 31, 2014. Aggregate acquisitions includes investment assets received as payment in kind.  Aggregate dispositions includes principal paydowns on and maturities of debt investments.  The total value of restricted securities and bank debt as of March 31, 2014 was $815,189,985, or 96.7% of total cash and investments of the Company.

 

Options and Swaps at March 31, 2014 were as follows:

 

Investment 

 

Notional Amount

 

Fair Value

 

 

 

 

 

 

 

Interest Rate Cap, 4%, expires 5/15/2016

 

$

25,000,000

 

$

8,605

 

Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 3/31/17

 

$

4,289,019

 

$

(300,684

)

 

See accompanying notes.

 

S-F-8



 

TCP Capital Corp.

 

Consolidated Statement of Investments

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (92.05%)

 

 

 

 

 

 

 

 

 

Bank Debt (74.53%) (1)

 

 

 

 

 

 

 

 

 

Accounting, Tax Preparation, Bookkeeping, and Payroll Services (1.03%)

 

 

 

 

 

 

 

 

 

Expert Global Solutions, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 7.25% (Q), 1.25% LIBOR Floor, due 4/3/18

 

$

699,754

 

$

701,280

 

$

703,691

 

0.09

%

Expert Global Solutions, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 11% (Q), 1.5% LIBOR Floor, due 10/3/18

 

$

7,434,877

 

7,228,004

 

7,382,833

 

0.94

%

Total Accounting, Tax Preparation, Bookkeeping, and Payroll Services

 

 

 

7,929,284

 

8,086,524

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising, Public Relations, and Related Services (2.12%)

 

 

 

 

 

 

 

 

 

Doubleplay III Limited, Senior Secured 1st Lien Facility A1 Term Loan, EURIBOR + 6.25% (Q), 1.25% EURIBOR Floor, due 3/18/18 - (United Kingdom) (4), (10)

 

$

13,165,705

 

16,428,630

 

16,736,606

 

2.12

%

 

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (0.26%)

 

 

 

 

 

 

 

 

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16 (2)

 

$

2,056,927

 

2,056,927

 

2,056,927

 

0.26

%

 

 

 

 

 

 

 

 

 

 

Business Support Services (1.89%)

 

 

 

 

 

 

 

 

 

STG-Fairway Acquisitions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.25% (Q), 1.25% LIBOR Floor, due 8/28/19

 

$

14,643,455

 

13,944,123

 

14,929,002

 

1.89

%

 

 

 

 

 

 

 

 

 

 

Chemical Manufacturing (2.20%)

 

 

 

 

 

 

 

 

 

Archroma, Senior Secured Lien Term Loan B, LIBOR + 8.25% (Q), 1.25% LIBOR Floor, due 9/30/18

 

$

17,456,250

 

17,107,125

 

17,401,699

 

2.20

%

 

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (1.91%)

 

 

 

 

 

 

 

 

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625% (Q), 1.25% LIBOR Floor, due 12/11/18 (2)

 

$

15,000,000

 

14,850,000

 

15,097,500

 

1.91

%

 

 

 

 

 

 

 

 

 

 

Computer Equipment Manufacturing (1.15%)

 

 

 

 

 

 

 

 

 

ELO Touch Solutions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 10.5% (Q), 1.5% LIBOR Floor, due 12/1/18

 

$

10,000,000

 

9,666,672

 

9,100,000

 

1.15

%

 

 

 

 

 

 

 

 

 

 

Converted Paper Products Manufacturing (0.45%)

 

 

 

 

 

 

 

 

 

Ranpak Corp., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1.25% LIBOR Floor, due 4/23/20

 

$

3,469,573

 

3,434,877

 

3,573,660

 

0.45

%

 

 

 

 

 

 

 

 

 

 

Computer Systems Design and Related Services (5.40%)

 

 

 

 

 

 

 

 

 

Blue Coat Systems, Inc., Senior Secured 1st Lien Revolver Term Loan, LIBOR + 3.5% (Q), 1% LIBOR Floor, due 5/31/18

 

$

4,500,000

 

3,540,000

 

4,060,800

 

0.51

%

Blue Coat Systems, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1% LIBOR Floor, due 6/28/20

 

$

15,000,000

 

14,878,125

 

15,300,000

 

1.94

%

OnX Enterprise Solutions, Ltd., Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

10,640,000

 

10,483,300

 

10,709,160

 

1.36

%

OnX USA, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

5,320,000

 

5,244,790

 

5,354,580

 

0.68

%

Websense, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1% LIBOR Floor, due 12/27/20

 

$

7,200,000

 

7,164,000

 

7,218,000

 

0.91

%

Total Computer Systems Design and Related Services

 

 

 

41,310,215

 

42,642,540

 

 

 

 

 

 

 

 

 

 

 

 

 

Electric Power Generation, Transmission and Distribution (2.21%)

 

 

 

 

 

 

 

 

 

Panda Sherman Power, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7.5% (Q), 1.5% LIBOR Floor, due 9/14/18

 

$

11,070,172

 

10,932,474

 

11,402,277

 

1.44

%

Panda Temple Power II, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q), 1.25% LIBOR Floor, due 4/3/19

 

$

5,892,970

 

5,834,041

 

6,069,759

 

0.77

%

Total Electric Power Generation, Transmission and Distribution

 

 

 

16,766,515

 

17,472,036

 

 

 

 

 

 

 

 

 

 

 

 

 

Electrical Equipment and Component Manufacturing (2.08%)

 

 

 

 

 

 

 

 

 

Palladium Energy, Inc., 1st Lien Senior Secured Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 12/26/17

 

$

16,500,317

 

16,225,541

 

16,426,066

 

2.08

%

 

 

 

 

 

 

 

 

 

 

Financial Investment Activities (0.49%)

 

 

 

 

 

 

 

 

 

Marsico Capital Management, Senior Secured 1st Lien Term Loan, LIBOR + 5% (M), due 12/31/22 (11)

 

$

10,637,623

 

13,394,183

 

3,882,732

 

0.49

%

 

 

 

 

 

 

 

 

 

 

Freight Transportation Arrangement (0.48%)

 

 

 

 

 

 

 

 

 

Livingston International, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/18/20 (10)

 

$

3,665,217

 

3,597,620

 

3,756,848

 

0.48

%

 

S-F-9



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (2.04%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18 (2)

 

$

5,164,796

 

$

5,164,796

 

$

2,197,621

 

0.28

%

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

1,370,199

 

1,339,883

 

1,370,199

 

0.17

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/21/16 (2)

 

$

3,626,947

 

3,626,947

 

3,626,947

 

0.46

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

6,825,328

 

6,825,328

 

6,825,328

 

0.86

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

2,150,088

 

2,109,019

 

2,150,088

 

0.27

%

Total Full-Service Restaurants

 

 

 

19,065,973

 

16,170,183

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming Industries (1.87%)

 

 

 

 

 

 

 

 

 

AP Gaming I, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 12/20/20

 

$

15,000,000

 

14,550,000

 

14,737,500

 

1.87

%

 

 

 

 

 

 

 

 

 

 

Grocery Stores (1.91%)

 

 

 

 

 

 

 

 

 

Bashas, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 9.35% (M), 1.5% LIBOR Floor, due 12/28/15

 

$

14,843,788

 

14,802,168

 

15,066,445

 

1.91

%

 

 

 

 

 

 

 

 

 

 

Inland Water Transportation (1.64%)

 

 

 

 

 

 

 

 

 

US Shipping Corp, Senior Secured 1st Lien Term Loan B, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/30/18

 

$

12,603,333

 

12,477,300

 

12,965,679

 

1.64

%

 

 

 

 

 

 

 

 

 

 

Insurance Related Activities (0.81%)

 

 

 

 

 

 

 

 

 

Confie Seguros Holding II Co., 2nd Lien Term Loan, LIBOR + 9% (M), 1.25% LIBOR Floor, due 5/8/19

 

$

6,341,809

 

6,245,733

 

6,391,370

 

0.81

%

 

 

 

 

 

 

 

 

 

 

Merchant Wholesalers (1.16%)

 

 

 

 

 

 

 

 

 

Envision Acquisition Company, LLC, 2nd Lien Term Loan, LIBOR + 8.75% (M), 1% LIBOR Floor, due 11/4/21

 

$

9,079,011

 

8,897,430

 

9,192,498

 

1.16

%

 

 

 

 

 

 

 

 

 

 

Motion Picture and Video Industries (1.97%)

 

 

 

 

 

 

 

 

 

CORE Entertainment, Inc., Senior Secured 1st Lien Term Loan, 9%, due 6/21/17

 

$

9,462,231

 

9,381,116

 

8,610,631

 

1.09

%

CORE Entertainment, Inc., Senior Secured 2nd Lien Term Loan, 13.5%, due 6/21/18

 

$

7,569,785

 

7,502,054

 

6,858,225

 

0.88

%

Total Motion Picture and Video Industries

 

 

 

16,883,170

 

15,468,856

 

 

 

 

 

 

 

 

 

 

 

 

 

Newspaper, Periodical, Book, and Directory Publishers (3.90%)

 

 

 

 

 

 

 

 

 

Hanley-Wood, LLC, 1st Lien FILO Term Loan, LIBOR + 6.75% (Q), 1.25% LIBOR Floor, due 7/15/18

 

$

16,707,600

 

16,707,600

 

16,699,246

 

2.13

%

MediMedia USA, Inc., 1st Lien Revolver, LIBOR + 6.75% (M), due 5/20/18

 

$

4,960,000

 

3,797,500

 

4,523,908

 

0.57

%

MediMedia USA, Inc., 1st Lien Term Loan, LIBOR + 6.75% (M), 1.25% LIBOR Floor, due 11/20/18

 

$

9,701,250

 

9,433,029

 

9,458,719

 

1.20

%

Total Newspaper, Periodical, Book, and Directory Publishers

 

 

 

29,938,129

 

30,681,873

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonresidential Building Construction (1.25%)

 

 

 

 

 

 

 

 

 

NCM Group Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 11.5% (Q), 1% LIBOR Floor, due 8/29/18

 

$

10,000,000

 

9,620,619

 

9,875,000

 

1.25

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (2.24%)

 

 

 

 

 

 

 

 

 

One Sky Flight, LLC, Senior Secured 2nd Lien Term Loan, 12% Cash + 3% PIK, due 5/4/19

 

$

18,200,000

 

16,929,086

 

17,708,600

 

2.24

%

 

 

 

 

 

 

 

 

 

 

Oil and Gas Extraction (1.98%)

 

 

 

 

 

 

 

 

 

Willbros Group, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.25% LIBOR Floor, due 8/7/19

 

$

15,426,118

 

15,051,713

 

15,657,510

 

1.98

%

 

 

 

 

 

 

 

 

 

 

Other Telecommunications (1.76%)

 

 

 

 

 

 

 

 

 

Securus Technologies, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/30/21

 

$

14,000,000

 

13,860,000

 

13,925,660

 

1.76

%

 

 

 

 

 

 

 

 

 

 

Petroleum and Coal Products Manufacturing (0.95%)

 

 

 

 

 

 

 

 

 

Boomerang Tube, LLC, 2nd Lien Term Loan, LIBOR + 9.5% (Q), 1.5% LIBOR Floor, due 10/11/17

 

$

7,749,023

 

7,563,978

 

7,477,807

 

0.95

%

 

 

 

 

 

 

 

 

 

 

Professional, Scientific, and Technical Services (3.14%)

 

 

 

 

 

 

 

 

 

Connolly, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 9.25% (Q), 1.25% LIBOR Floor, due 7/15/19

 

$

12,000,000

 

11,829,534

 

12,270,000

 

1.55

%

ConvergeOne Holdings, 1st Lien Term Loan, LIBOR + 8% (Q), 1.25% LIBOR Floor, due 5/8/19

 

$

12,654,643

 

12,464,823

 

12,570,236

 

1.59

%

Total Professional, Scientific, and Technical Services

 

 

 

24,294,357

 

24,840,236

 

 

 

 

 

 

 

 

 

 

 

 

 

Promoters of Performing Arts, Sports, and Similar Events (1.40%)

 

 

 

 

 

 

 

 

 

Stadium Management Group, Senior Secured 2nd Lien Term Loan, LIBOR + 9.50% (M), 1.25% LIBOR Floor, due 12/7/18

 

$

11,000,000

 

10,817,390

 

11,055,000

 

1.40

%

 

S-F-10



 

TCP Capital Corp.

 

 Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (3.09%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q) Cash + 4% PIK, 2% LIBOR Floor, due 8/3/16

 

$

6,995,124

 

$

6,648,634

 

$

6,774,778

 

0.86

%

The Tennis Channel, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 8.5% (Q), due 5/29/17

 

$

17,589,459

 

17,134,705

 

17,615,843

 

2.23

%

Total Radio and Television Broadcasting

 

 

 

23,783,339

 

24,390,621

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail (2.29%)

 

 

 

 

 

 

 

 

 

Kenneth Cole Productions, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 10.40% (M), 1% LIBOR Floor, due 9/25/17

 

$

11,272,727

 

11,051,496

 

11,329,090

 

1.44

%

Shopzilla, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.5% (Q), due 3/31/16

 

$

6,710,057

 

6,525,027

 

6,683,216

 

0.85

%

Total Retail

 

 

 

17,576,523

 

18,012,306

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.60%)

 

 

 

 

 

 

 

 

 

Aircraft Secured Mortgages - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL, 8%, due 3/15/17 (6)

 

$

289,048

 

289,048

 

296,820

 

0.04

%

N918DL, 8%, due 8/15/18 (6)

 

$

388,001

 

388,001

 

397,290

 

0.05

%

N954DL, 8%, due 3/20/19 (6)

 

$

514,375

 

514,375

 

524,620

 

0.07

%

N955DL, 8%, due 6/20/19 (6)

 

$

533,283

 

533,283

 

543,320

 

0.07

%

N956DL, 8%, due 5/20/19 (6)

 

$

532,275

 

532,275

 

542,640

 

0.07

%

N957DL, 8%, due 6/20/19 (6)

 

$

537,947

 

537,947

 

548,250

 

0.07

%

N959DL, 8%, due 7/20/19 (6)

 

$

543,573

 

543,573

 

553,520

 

0.07

%

N960DL, 8%, due 10/20/19 (6)

 

$

564,855

 

564,855

 

574,430

 

0.07

%

N961DL, 8%, due 8/20/19 (6)

 

$

558,427

 

558,427

 

568,310

 

0.07

%

N976DL, 8%, due 2/15/18 (6)

 

$

394,360

 

394,360

 

404,600

 

0.05

%

Aircraft Secured Mortgages - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA, 20%, due 10/26/16 (2)

 

$

328,848

 

328,848

 

404,605

 

0.05

%

N512UA, 20%, due 10/26/16 (2)

 

$

334,535

 

334,535

 

414,010

 

0.05

%

N536UA, 16%, due 9/29/14 (2)

 

$

108,845

 

108,845

 

114,000

 

0.01

%

N545UA, 16%, due 8/29/15 (2)

 

$

249,695

 

249,695

 

275,405

 

0.03

%

N585UA, 20%, due 10/25/16 (2)

 

$

392,794

 

392,794

 

486,115

 

0.06

%

N659UA, 12%, due 2/28/16 (6)

 

$

2,708,150

 

2,708,150

 

2,948,986

 

0.37

%

N661UA, 12%, due 5/4/16 (6)

 

$

2,880,186

 

2,880,186

 

3,171,026

 

0.40

%

Total Scheduled Air Transportation

 

 

 

11,859,197

 

12,767,947

 

 

 

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (1.87%)

 

 

 

 

 

 

 

 

 

Isola USA Corporation, Senior Secured Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 11/29/18

 

$

14,583,333

 

14,366,560

 

14,729,167

 

1.87

%

 

 

 

 

 

 

 

 

 

 

Software Publishers (7.13%)

 

 

 

 

 

 

 

 

 

BlackLine Systems, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 0.4% (Q) Cash + 7.6% PIK, 1.5% LIBOR Floor, due 9/25/18

 

$

12,579,747

 

11,811,044

 

12,183,485

 

1.56

%

Coreone Technologies, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 3.75% (Q) Cash + 5% PIK, 1% LIBOR Floor, due 9/4/18

 

$

13,556,801

 

13,243,533

 

13,455,125

 

1.72

%

Deltek, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.75% (Q), 1.25% LIBOR Floor, due 10/10/19

 

$

15,000,000

 

14,805,253

 

15,300,000

 

1.94

%

Edmentum, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 5/17/19

 

$

15,000,000

 

14,748,486

 

15,112,500

 

1.91

%

Total Software Publishers

 

 

 

54,608,316

 

56,051,110

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.70%)

 

 

 

 

 

 

 

 

 

UBC Healthcare Analytics, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 7/1/18

 

$

5,526,021

 

5,498,391

 

5,559,177

 

0.70

%

 

 

 

 

 

 

 

 

 

 

Textile Furnishings Mills (2.08%)

 

 

 

 

 

 

 

 

 

Lexmark Carpet Mills, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 10% (Q), 1% LIBOR Floor, due 9/30/18

 

$

16,351,467

 

15,942,680

 

16,392,346

 

2.08

%

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.96%)

 

 

 

 

 

 

 

 

 

Integra Telecom Holdings, Inc., 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1.25% LIBOR Floor, due 2/22/20

 

$

15,000,000

 

14,701,027

 

15,459,375

 

1.96

%

 

S-F-11



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

Principal

 

 

 

 

 

Percent of

 

 

 

Amount or

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Wireless Telecommunications Carriers (4.12%)

 

 

 

 

 

 

 

 

 

Alpheus Communications, LLC, Senior Secured 1st Lien Delayed Draw FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18 (13)

 

$

 

$

(11,183

)

$

(8,437

)

 

Alpheus Communications, LLC, Senior Secured 1st Lien FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18

 

$

8,248,124

 

8,166,127

 

8,186,263

 

1.04

%

Globalive Wireless Management Corp., Senior Secured 1st Lien Term Loan, LIBOR + 10.9% (Q), due 4/30/14 - (Canada) (10)

 

$

3,037,292

 

2,933,872

 

3,067,665

 

0.39

%

Gogo, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 6/21/17

 

$

19,587,428

 

18,707,700

 

21,252,360

 

2.69

%

Total Wireless Telecommunications Carriers

 

 

 

29,796,516

 

32,497,851

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Bank Debt

 

 

 

585,841,307

 

588,236,257

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Corporate Debt Securities (17.52%)

 

 

 

 

 

 

 

 

 

Architectural, Engineering, and Related Services (1.01%)

 

 

 

 

 

 

 

 

 

ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19 (2), (5)

 

$

7,959,369

 

7,959,369

 

7,959,369

 

1.01

%

 

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (1.17%)

 

 

 

 

 

 

 

 

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16 (2), (5)

 

$

9,268,000

 

7,586,317

 

9,268,000

 

1.17

%

 

 

 

 

 

 

 

 

 

 

Beverage Manufacturing (1.04%)

 

 

 

 

 

 

 

 

 

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18 (5)

 

$

7,780,000

 

7,780,000

 

8,207,900

 

1.04

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.97%)

 

 

 

 

 

 

 

 

 

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19 (5)

 

$

7,098,916

 

6,960,435

 

7,631,335

 

0.97

%

 

 

 

 

 

 

 

 

 

 

Fabricated Metal Product Manufacturing (1.38%)

 

 

 

 

 

 

 

 

 

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16 (5) , (7)

 

$

12,500,000

 

12,322,875

 

10,875,000

 

1.38

%

 

 

 

 

 

 

 

 

 

 

Metal Ore Mining (0.78%)

 

 

 

 

 

 

 

 

 

St Barbara Ltd., 1st Priority Senior Secured Notes, 8.875%, due 4/15/18 - (Australia) (5)

 

$

7,359,000

 

7,326,651

 

6,144,765

 

0.78

%

 

 

 

 

 

 

 

 

 

 

Nondepository Credit Intermediation (3.25%)

 

 

 

 

 

 

 

 

 

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19 - (Cayman Islands) (5), (10)

 

$

10,000,000

 

9,824,072

 

10,700,000

 

1.35

%

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18 (5), (10)

 

$

15,000,000

 

15,000,000

 

14,962,500

 

1.90

%

Total Nondepository Credit Intermediation

 

 

 

24,824,072

 

25,662,500

 

 

 

 

 

 

 

 

 

 

 

 

 

Plastics Products Manufacturing (1.83%)

 

 

 

 

 

 

 

 

 

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18 (5)

 

$

13,600,000

 

13,600,000

 

14,426,622

 

1.83

%

 

 

 

 

 

 

 

 

 

 

Satellite Telecommunications (1.31%)

 

 

 

 

 

 

 

 

 

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19 (5), (8), (10)

 

$

9,914,000

 

9,914,000

 

10,335,345

 

1.31

%

 

 

 

 

 

 

 

 

 

 

Scientific Research and Development Services (2.23%)

 

 

 

 

 

 

 

 

 

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17 (5)

 

$

17,200,000

 

16,536,295

 

17,630,000

 

2.23

%

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.65%)

 

 

 

 

 

 

 

 

 

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17 (5)

 

$

5,000,000

 

5,000,000

 

5,137,500

 

0.65

%

 

 

 

 

 

 

 

 

 

 

Structured Note Funds (1.90%)

 

 

 

 

 

 

 

 

 

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21 - (Cayman Islands) (5), (10)

 

$

15,000,000

 

15,000,000

 

15,000,000

 

1.90

%

 

 

 

 

 

 

 

 

 

 

Total Other Corporate Debt Securities

 

 

 

134,810,014

 

138,278,336

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Debt Investments

 

 

 

720,651,321

 

726,514,593

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (5.04%)

 

 

 

 

 

 

 

 

 

Architectural, Engineering, and Related Services (0.87%)

 

 

 

 

 

 

 

 

 

ESP Holdings, Inc., Cumulative Preferred 15% (2), (3), (5)

 

20,297

 

2,249,930

 

3,947,862

 

0.51

%

ESP Holdings, Inc., Common Stock (2), (3), (5)

 

88,670

 

9,311,782

 

2,856,346

 

0.36

%

Total Architectural, Engineering, and Related Services

 

 

 

11,561,712

 

6,804,208

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Support Services (0.22%)

 

 

 

 

 

 

 

 

 

STG-Fairway Holdings, LLC, Class A Units (3), (5)

 

841,479

 

1,174,225

 

1,722,508

 

0.22

%

 

S-F-12


 

TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (continued)

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (0.64%)

 

 

 

 

 

 

 

 

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units (2), (3), (5)

 

5,000,000

 

$

5,000,000

 

$

5,000,000

 

0.64

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.13%)

 

 

 

 

 

 

 

 

 

Anacomp, Inc., Class A Common Stock (3), (5), (6)

 

1,255,527

 

26,711,048

 

1,004,422

 

0.13

%

 

 

 

 

 

 

 

 

 

 

Depository Credit Intermediation (0.11%)

 

 

 

 

 

 

 

 

 

Doral Financial Corporation, Common Stock - (Puerto Rico) (3), (12)

 

53,890

 

11,699,417

 

843,913

 

0.11

%

 

 

 

 

 

 

 

 

 

 

Financial Investment Activities (0.00%)

 

 

 

 

 

 

 

 

 

Marsico Holdings, LLC, Common Interest Units (3), (5), (11)

 

168,698

 

172,694

 

4,302

 

 

 

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (0.00%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Membership Units (2), (3), (5)

 

13,161,000

 

2,010,777

 

 

 

 

 

 

 

 

 

 

 

 

 

Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing (0.01%)

 

 

 

 

 

 

 

 

 

Precision Holdings, LLC, Class C Membership Interests (3), (5)

 

33

 

 

41,645

 

0.01

%

 

 

 

 

 

 

 

 

 

 

Nonmetallic Mineral Mining and Quarrying (0.20%)

 

 

 

 

 

 

 

 

 

EPMC HoldCo, LLC, Membership Units (2), (5)

 

1,312,720

 

 

1,562,137

 

0.20

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (0.16%)

 

 

 

 

 

 

 

 

 

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,843

 

1,274,000

 

1,268,904

 

0.16

%

 

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (0.04%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Warrants to Purchase Common Stock (3), (5)

 

233,470

 

300,322

 

354,874

 

0.04

%

 

 

 

 

 

 

 

 

 

 

Retail (0.07%)

 

 

 

 

 

 

 

 

 

Shop Holding, LLC, Class A Units (3), (5)

 

490,037

 

462,576

 

532,919

 

0.07

%

Shop Holding, LLC, Warrants to Purchase Class A Units (3), (5)

 

326,691

 

 

38,258

 

 

Total Electronic Shopping

 

 

 

462,576

 

571,177

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.19%)

 

 

 

 

 

 

 

 

 

Equipment Trusts - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL Trust Beneficial Interests (5), (6)

 

727

 

97,376

 

125,970

 

0.02

%

N918DL Trust Beneficial Interests (5), (6)

 

623

 

109,938

 

142,970

 

0.02

%

N954DL Trust Beneficial Interests (5), (6)

 

591

 

133,027

 

68,000

 

0.01

%

N955DL Trust Beneficial Interests (5), (6)

 

576

 

133,868

 

113,560

 

0.01

%

N956DL Trust Beneficial Interests (5), (6)

 

580

 

133,907

 

108,800

 

0.01

%

N957DL Trust Beneficial Interests (5), (6)

 

576

 

134,785

 

109,650

 

0.01

%

N959DL Trust Beneficial Interests (5), (6)

 

573

 

135,658

 

110,500

 

0.01

%

N960DL Trust Beneficial Interests (5), (6)

 

563

 

139,173

 

109,650

 

0.01

%

N961DL Trust Beneficial Interests (5), (6)

 

570

 

138,350

 

103,870

 

0.01

%

N976DL Trust Beneficial Interests (5), (6)

 

654

 

113,413

 

103,033

 

0.01

%

Equipment Trusts - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA Trust Beneficial Interests (2), (5)

 

54

 

197,409

 

465,625

 

0.06

%

N512UA Trust Beneficial Interests (2), (5)

 

53

 

193,046

 

458,277

 

0.06

%

N536UA Trust Beneficial Interests (2), (5)

 

81

 

396,289

 

656,766

 

0.08

%

N545UA Trust Beneficial Interests (2), (5)

 

67

 

348,071

 

641,840

 

0.08

%

N585UA Trust Beneficial Interests (2), (5)

 

53

 

214,737

 

571,706

 

0.07

%

United N659UA-767, LLC (N659UA) (5), (6)

 

412

 

2,097,640

 

2,840,323

 

0.36

%

United N661UA-767, LLC (N661UA) (5), (6)

 

400

 

2,066,062

 

2,852,677

 

0.36

%

Total Scheduled Air Transportation

 

 

 

6,782,749

 

9,583,217

 

 

 

 

 

 

 

 

 

 

 

 

 

Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing (0.08%)

 

 

 

 

 

 

 

 

 

KAGY Holding Company, Inc., Series A Preferred Stock (2), (3), (5)

 

9,778

 

1,091,200

 

662,134

 

0.08

%

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (0.03%)

 

 

 

 

 

 

 

 

 

AIP/IS Holdings, LLC, Membership Units (3), (5)

 

352

 

 

229,504

 

0.03

%

 

 

 

 

 

 

 

 

 

 

Software Publishers (0.07%)

 

 

 

 

 

 

 

 

 

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,232,731

 

522,678

 

561,632

 

0.07

%

 

S-F-13



 

TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.22%)

 

 

 

 

 

 

 

 

 

Integra Telecom, Inc., Common Stock (3), (5)

 

1,274,522

 

$

8,433,884

 

$

5,583,686

 

0.72

%

Integra Telecom, Inc., Warrants (3), (5)

 

346,939

 

19,920

 

194,050

 

0.02

%

V Telecom Investment S.C.A, Common Shares - (Luxembourg) (3), (4), (5), (10)

 

1,393

 

3,236,256

 

3,756,053

 

0.48

%

Total Wired Telecommunications Carriers

 

 

 

11,690,060

 

9,533,789

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Equity Securities

 

 

 

80,453,458

 

39,748,366

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments

 

 

 

801,104,779

 

766,262,959

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents (2.91%)

 

 

 

 

 

 

 

 

 

Wells Fargo & Company, Overnight Repurchase Agreement, 0.09%,

 

 

 

 

 

 

 

 

 

Collateralized by Freddie Mac Note

 

 

 

 

 

$

10,501,688

 

1.33

%

Union Bank of California, Commercial Paper, 0.10%, due 1/2/14

 

 

 

 

 

8,499,976

 

1.07

%

Cash Denominated in Foreign Currencies

 

 

 

 

 

121,389

 

0.02

%

Cash Held on Account at Various Institutions

 

 

 

 

 

3,861,129

 

0.49

%

Cash and Cash Equivalents

 

 

 

 

 

22,984,182

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Cash and Investments (9)

 

 

 

 

 

$

789,247,141

 

100.00

%

 


Notes to Statement of Investments:

 

(1)                                 Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933. Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower.

 

(2)                                 Non-controlled affiliate — as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates.

 

(3)                                 Non-income producing security.

 

(4)                                 Principal amount denominated in foreign currency.  Amortized cost and fair value converted from foreign currency to US dollars. (See Note 2)

 

(5)                                 Restricted security. (See Note 2)

 

(6)                                 Controlled issuer — as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer). Investment is not more than 50% owned nor deemed to be a significant subsidiary. See Consolidated Schedule of Changes in Investments in Affiliates.

 

(7)                                 Investment has been segregated to collateralize certain unfunded commitments.

 

(8)                                 $2,000,000 principal amount of this investment has been segregated to collateralize certain unfunded commitments.

 

(9)                                 All cash and investments, except those referenced in Notes 7 and 8 above, are pledged as collateral under the Revolving Facilities as described in Note 4 to the Consolidated Financial Statements.

 

(10)                          Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

 

(11)                          Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act.  Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

 

(12)                          Publicly traded company with a market capitalization greater than $250 million and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

 

(13)                          Negative balances relate to an unfunded commitment that was acquired and valued at a discount.

 

LIBOR or EURIBOR resets monthly (M), quarterly (Q), or semiannually (S).

 

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $471,087,319, and $235,641,665, respectively for the year ended December 31, 2013. Aggregate acquisitions includes investment assets received as payment in kind.  Aggregate dispositions includes principal paydowns on and maturities of debt investments.  The total value of restricted securities and bank debt as of December 31, 2013 was $765,419,046, or 97.0% of total cash and investments of the Company.

 

Options and Swaps at December 31, 2013 were as follows:

 

Investment 

 

Notional Amount

 

Fair Value

 

 

 

 

 

 

 

Interest Rate Cap, 4%, expires 5/15/2016

 

$

25,000,000

 

$

14,139

 

Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 3/31/17

 

$

4,289,019

 

$

(331,183

)

 

See accompanying notes.

 

S-F-14



 

TCP Capital Corp.

 

Consolidated Statements of Operations

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Investment income

 

 

 

 

 

Interest income:

 

 

 

 

 

Companies less than 5% owned

 

$

18,140,743

 

$

15,240,367

 

Companies 5% to 25% owned

 

1,336,864

 

893,512

 

Companies more than 25% owned

 

257,627

 

330,317

 

Dividend income:

 

 

 

 

 

Companies 5% to 25% owned

 

1,968,748

 

 

Other income:

 

 

 

 

 

Companies less than 5% owned

 

634,733

 

157,533

 

Companies 5% to 25% owned

 

121,039

 

101,103

 

Companies more than 25% owned

 

208,890

 

142,911

 

Total investment income

 

22,668,644

 

16,865,743

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

Management and advisory fees

 

2,886,208

 

1,964,738

 

Interest expense

 

456,861

 

136,407

 

Amortization of deferred debt issuance costs

 

372,755

 

108,564

 

Administrative expenses

 

256,806

 

167,808

 

Legal fees, professional fees and due diligence expenses

 

204,156

 

139,052

 

Commitment fees

 

191,199

 

22,589

 

Director fees

 

85,712

 

71,809

 

Insurance expense

 

53,900

 

36,273

 

Custody fees

 

50,807

 

29,419

 

Other operating expenses

 

319,586

 

192,971

 

Total operating expenses

 

4,877,990

 

2,869,630

 

 

 

 

 

 

 

Net investment income

 

17,790,654

 

13,996,113

 

 

 

 

 

 

 

Net realized and unrealized gain (loss) on investments and foreign currency

 

 

 

 

 

Net realized gain (loss):

 

 

 

 

 

Investments in companies less than 5% owned

 

(6,795,721

)

517,658

 

Investments in companies 5% to 25% owned

 

375

 

 

Net realized gain (loss)

 

(6,795,346

)

517,658

 

 

 

 

 

 

 

Net change in net unrealized appreciation/depreciation

 

11,975,364

 

1,837,731

 

Net realized and unrealized gain

 

5,180,018

 

2,355,389

 

 

 

 

 

 

 

Dividends on Series A preferred equity facility

 

(369,135

)

(393,413

)

Net change in accumulated dividends on Series A preferred equity facility

 

10,495

 

16,011

 

Distributions of incentive allocation to the General Partner from:

 

 

 

 

 

Net investment income

 

(3,486,403

)

(2,723,742

)

Net change in reserve for incentive allocation

 

(1,036,004

)

(471,078

)

 

 

 

 

 

 

Net increase in net assets applicable to common shareholders resulting from operations

 

$

18,089,625

 

$

12,779,280

 

 

 

 

 

 

 

Basic and diluted earnings per common share

 

$

0.50

 

$

0.60

 

Basic and diluted weighted average common shares outstanding

 

36,199,917

 

21,477,628

 

 

  See accompanying notes.

 

S-F-15



 

TCP Capital Corp.

 

Consolidated Statements of Changes in Net Assets

 

 

 

Common Stock

 

Paid in
Capital

 

Accumulated
Net

 

Accumulated

 

Accumulated
Net

 

Non-

 

 

 

 

 

Shares

 

Par
Amount

 

in Excess of
Par

 

Investment
Income

 

Net Realized
Losses

 

Unrealized
Depreciation

 

controlling
Interest

 

Total Net
Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2012

 

21,477,628

 

$

21,478

 

$

444,234,060

 

$

22,526,179

 

$

(59,023,861

)

$

(91,770,306

)

$

 

$

315,987,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in public offering

 

14,720,000

 

14,720

 

224,548,170

 

 

 

 

 

224,562,890

 

Issuance of common stock from dividend reinvestment plan

 

2,288

 

2

 

37,414

 

 

 

 

 

37,416

 

Net investment income

 

 

 

 

54,330,262

 

 

 

 

54,330,262

 

Realized and unrealized gains (losses)

 

 

 

 

 

(47,384,746

)

56,456,107

 

 

9,071,361

 

Dividends on Series A preferred equity facility

 

 

 

 

(1,494,552

)

 

 

 

(1,494,552

)

General Partner incentive allocation

 

 

 

 

(10,567,142

)

(645,691

)

 

(1,168,583

)

(12,381,416

)

Dividends paid to common shareholders

 

 

 

 

(40,502,256

)

 

 

 

(40,502,256

)

Tax reclassification of stockholders’ equity in accordance with generally accepted accounting principles

 

 

 

(977,624

)

(276,396

)

1,254,020

 

 

 

 

Balance at December 31, 2013

 

$

36,199,916

 

$

36,200

 

$

667,842,020

 

$

24,016,095

 

$

(105,800,278

)

$

(35,314,199

)

$

(1,168,583

)

$

549,611,255

 

Issuance of common stock in public offering

 

 

 

 

 

 

 

 

 

Issuance of common stock from dividend reinvestment plan

 

104

 

 

1,717

 

 

 

 

 

1,717

 

Net investment income

 

 

 

 

17,790,654

 

 

 

 

17,790,654

 

Realized and unrealized gains (losses)

 

 

 

 

 

(6,795,346

)

11,975,364

 

 

5,180,018

 

Dividends on Series A preferred equity facility

 

 

 

 

(358,640

)

 

 

 

(358,640

)

General Partner incentive allocation

 

 

 

 

(3,486,403

)

 

 

(1,036,004

)

(4,522,407

)

Dividends paid to common shareholders

 

 

 

 

(13,031,970

)

 

 

 

(13,031,970

)

Balance at March 31, 2014

 

$

36,200,020

 

$

36,200

 

$

667,843,737

 

$

24,929,736

 

$

(112,595,624

)

$

(23,338,835

)

$

(2,204,587

)

$

554,670,627

 

 

See accompanying notes.

 

S-F-16



 

TCP Capital Corp.

 

Consolidated Statements of Cash Flows

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Net increase in net assets applicable to common shareholders resulting from operations

 

$

18,089,625

 

$

12,779,280

 

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

 

 

 

 

 

Net realized loss (gain)

 

6,795,346

 

(517,658

)

Net change in unrealized appreciation/depreciation of investments

 

(11,974,865

)

(1,880,949

)

Dividends paid on Series A preferred equity facility

 

369,135

 

393,413

 

Net change in accumulated dividends on Series A preferred equity facility

 

(10,495

)

(16,011

)

Net change in reserve for incentive allocation

 

1,036,004

 

471,078

 

Accretion of original issue discount

 

(551,826

)

(825,555

)

Net accretion of market discount/premium

 

(178,840

)

(81

)

Interest and dividend income paid in kind

 

(1,084,557

)

(253,156

)

Amortization of deferred debt issuance costs

 

372,755

 

108,564

 

Changes in assets and liabilities:

 

 

 

 

 

Purchases of investment securities

 

(109,301,941

)

(40,010,595

)

Proceeds from sales, maturities and paydowns of investments

 

66,876,929

 

51,006,153

 

Increase in accrued interest income - companies less than 5% owned

 

(1,997,625

)

(2,546,216

)

Increase in accrued interest income - companies 5% to 25% owned

 

(264,538

)

(4,073

)

Decrease in accrued interest income - companies more than 25% owned

 

3,172

 

2,835

 

Decrease in receivable for investments sold

 

2,574,247

 

7,727,415

 

Increase in prepaid expenses and other assets

 

(430,355

)

(433,296

)

Decrease in payable for investments purchased

 

(13,192,340

)

(21,657,527

)

Decrease in payable to the Investment Manager

 

(657,479

)

(3,651

)

Increase (decrease) in interest payable

 

(98,929

)

31,937

 

Increase in incentive allocation payable

 

167,503

 

2,723,742

 

Decrease in accrued expenses and other liabilities

 

(220,304

)

(986,661

)

Net cash (used in) provided by operating activities

 

(43,679,378

)

6,108,988

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Proceeds from draws on credit facilities

 

114,000,000

 

6,000,000

 

Principal repayments on credit facilities

 

(52,000,000

)

(10,000,000

)

Payments of debt issuance costs

 

(763,980

)

 

Dividends paid on Series A preferred equity facility

 

(369,135

)

(393,413

)

Dividends paid to common shareholders

 

(13,031,970

)

(8,591,051

)

Proceeds from shares issued in connection with dividend reinvestment plan

 

1,717

 

17,615

 

Net cash provided by (used in) financing activities

 

47,836,632

 

(12,966,849

)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

4,157,254

 

(6,857,861

)

Cash and cash equivalents at beginning of period

 

22,984,182

 

18,035,189

 

Cash and cash equivalents at end of period

 

$

27,141,436

 

$

11,177,328

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

Interest payments

 

$

235,336

 

$

104,470

 

Excise tax payments

 

 

969,946

 

 

See accompanying notes.

 

S-F-17


 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited)

 

March 31, 2014

 

1. Organization and Nature of Operations

 

TCP Capital Corp. (the “Company”) is a Delaware corporation formed on April 2, 2012 as an externally managed, closed-end, non-diversified management investment company. The Company elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. The Company invests primarily in the debt of middle-market companies, including senior secured loans, junior loans, mezzanine debt and bonds. Such investments may include an equity component, and, to a lesser extent, the Company may make equity investments directly.

 

Investment operations are conducted in Special Value Continuation Partners, LP, a Delaware limited partnership (the “Partnership”), of which the Company owns 100% of the common limited partner interests, or in one of the Partnership’s wholly owned subsidiaries, TCPC Funding I, LLC, a Delaware limited liability company (“TCPC Funding”) and TCPC SBIC, LP, a Delaware limited partnership (the “SBIC”). The Partnership has also elected to be treated as a BDC under the 1940 Act. The SBIC was organized in June 2013, and on April 22, 2014, received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958. These consolidated financial statements include the accounts of the Company, the Partnership, TCPC Funding and the SBIC. All significant intercompany transactions and balances have been eliminated in the consolidation.

 

The Company has elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes. As a RIC, the Company will not be taxed on its income to the extent that it distributes such income each year and satisfies other applicable income tax requirements. The Partnership, TCPC Funding, and the SBIC have elected to be treated as partnerships for U.S. federal income tax purposes.

 

The general partner of the Partnership is SVOF/MM, LLC, which also serves as the administrator of the Company and the Partnership (the “Administrator” or the “General Partner”). The managing member of the General Partner is Tennenbaum Capital Partners, LLC (the “Advisor”), which serves as the Investment Manager to the Company, the Partnership, TCPC Funding, and the SBIC. Most of the equity interests in the General Partner are owned directly or indirectly by the Advisor and its employees.

 

Company management consists of the Investment Manager and the Board of Directors. Partnership management consists of the General Partner and the Board of Directors. The Investment Manager and the General Partner direct and execute the day-to-day operations of the Company and the Partnership, respectively, subject to oversight from the respective Board of Directors, which sets the broad policies of the Company and performs certain functions required by the 1940 Act in the case of the Partnership.

 

S-F-18



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

1. Organization and Nature of Operations (continued)

 

The Board of Directors of the Partnership has delegated investment management of the Partnership’s assets to the Investment Manager. Each Board of Directors consists of five persons, three of whom are independent. If the Company or the Partnership has preferred equity interests outstanding, as the Partnership currently does, the holders of the preferred interests voting separately as a class are entitled to elect two of the Directors. The remaining directors will be subject to election by holders of the common shares and preferred interests voting together as a single class.

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The following is a summary of the significant accounting policies of the Company and the Partnership.

 

Use of Estimates

 

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates and assumptions to be reasonable, actual results could differ from those estimates and differences could be material.

 

Investment Valuation

 

The Company’s investments are generally held by the Partnership, TCPC Funding, or the SBIC. Management values investments at fair value based upon the principles and methods of valuation set forth in policies adopted by the Partnership’s Board of Directors and in conformity with procedures set forth in the Revolving Facilities and the statement of preferences for the Preferred Interests, as defined in Note 4, below. Fair value is generally defined as the amount for which an investment would be sold in an orderly transaction between market participants at the measurement date.

 

All investments are valued at least quarterly based on affirmative pricing or quotations from independent third-party sources, with the exception of investments priced directly by the Investment Manager which together comprise, in total, less than 5% of the capitalization of the Partnership. Investments listed on a recognized exchange or market quotation system, whether U.S. or foreign, are valued for financial reporting purposes as of the last business day of the reporting period using the closing price on the date of valuation. Liquid investments not listed on a recognized exchange or market quotation system are valued using prices provided by a nationally recognized pricing service or by using quotations from broker-dealers. Investments not priced by a pricing service or for which market quotations are either not readily available or are determined to be unreliable are

 

S-F-19



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

valued using affirmative valuations performed by independent valuation services or, for investments aggregating less than 5% of the total capitalization of the Partnership, directly by the Investment Manager.

 

Fair valuations of investments are determined under guidelines adopted by the Boards of Directors of the Company and the Partnership, and are subject to their approval. Generally, to increase objectivity in valuing the investments, the Investment Manager will utilize external measures of value, such as public markets or third-party transactions, whenever possible. The Investment Manager’s valuation is not based on long-term work-out value, immediate liquidation value, nor incremental value for potential changes that may take place in the future. The values assigned to investments that are valued by the Investment Manager are based on available information and do not necessarily represent amounts that might ultimately be realized, as these amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated. The foregoing policies apply to all investments, including those in companies and groups of affiliated companies aggregating more than 5% of the Company’s assets.

 

Fair valuations of investments in each asset class are determined using one or more methodologies including the market approach, income approach, or, in the case of recent investments, the cost approach, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present value 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 may be taken into account include, as relevant:  available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market and enterprise values, among other factors.

 

Unobservable inputs used in the fair value measurement of Level 3 investments as of March 31, 2014 included the following:

 

Asset Type

 

Fair Value

 

Valuation Technique

 

Unobservable Input

 

Range (Weighted Avg.)

Bank Debt

 

$

317,003,161

 

Market rate approach

 

Market yields

 

3.8% - 16.5% (10.9%)

 

 

238,578,988

 

Market quotations

 

Indicative bid/ask quotes

 

1 - 3 (2)

 

 

15,792,158

 

Market comparable companies

 

Revenue multiples

 

0.4x (0.4x)

 

 

2,056,927

 

Market comparable companies

 

EBITDA multiples

 

7.8x (7.8x)

Other Corporate Debt

 

71,494

 

Market rate approach

 

Market yields

 

16.3% (16.3%)

 

 

54,707,520

 

Market quotations

 

Indicative bid/ask quotes

 

1 – 2 (1)

 

 

16,828,346

 

Market comparable companies

 

EBITDA multiples

 

7.8x - 10.0x (8.8x)

Equity

 

9,527,486

 

Market rate approach

 

Market yields

 

13.0% - 18.0% (13.6%)

 

 

3,587,881

 

Market quotations

 

Indicative bid/ask quotes

 

1 - 1 (1)

 

 

891,424

 

Market comparable companies

 

Revenue multiples

 

0.4x - 1.1x (1.1x)

 

 

18,441,260

 

Market comparable companies

 

EBITDA multiples

 

4.0x – 6.6x (5.8x)

 

S-F-20



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Generally, a change in an unobservable input may result in a change to the value of an investment as follows:

 

Input

 

Impact to Value if
Input Increases

 

Impact to Value if
Input Decreases

 

Market yields

 

Decrease

 

Increase

 

Revenue multiples

 

Increase

 

Decrease

 

EBITDA multiples

 

Increase

 

Decrease

 

 

Investments may be categorized based on the types of inputs used in valuing such investments. The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Transfers between levels are recognized as of the beginning of the reporting period.

 

At March 31, 2014, the Company’s investments were categorized as follows:

 

Level

 

Basis for Determining Fair Value

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

1

 

Quoted prices in active markets for identical assets

 

$

 

$

 

$

467,763

 

2

 

Other observable market inputs *

 

70,146,046

 

67,557,294

 

 

3

 

Independent third-party pricing sources that employ significant unobservable inputs

 

573,872,294

 

64,047,014

 

29,595,404

 

3

 

Investment Manager valuations with significant unobservable inputs

 

(441,060

)

7,560,346

 

2,852,647

 

Total

 

 

 

$

643,577,280

 

$

139,164,654

 

$

32,915,814

 

 


* For example, quoted prices in inactive markets or quotes for comparable investments.

 

S-F-21



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Changes in investments categorized as Level 3 during the three months ended March 31, 2014 were as follows:

 

 

 

Independent Third-Party Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

515,953,643

 

$

53,334,634

 

$

36,066,746

 

Net realized and unrealized gains (losses)

 

4,633,345

 

833,673

 

(1,034,764

)

Acquisitions

 

98,772,793

 

13,080,946

 

894,302

 

Dispositions

 

(30,758,320

)

(14,077,239

)

(6,330,880

)

Transfers out of Level 3 *

 

(14,729,167

)

 

 

Transfers into Level 3 †

 

 

10,875,000

 

 

Ending balance

 

$

573,872,294

 

$

64,047,014

 

$

29,595,404

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

5,296,423

 

$

862,015

 

$

325,048

 

 


*  Comprised of one investment that transferred to Level 2 due to increased observable market activity.

†  Comprised of one investment that transferred from Level 2 due to reduced trading volumes.

 

 

 

Investment Manager Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

4,060,800

 

$

7,631,335

 

$

2,837,707

 

Net realized and unrealized gains (losses)

 

(1,860

)

(70,989

)

(188,519

)

Acquisitions

 

 

 

230,938

 

Dispositions

 

(4,500,000

)

 

(27,479

)

Ending balance

 

$

(441,060

)‡

$

7,560,346

 

$

2,852,647

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

(1,860

)

$

(70,989

)

$

(215,999

)

 


‡  Negative balance relates to an unfunded commitment that was acquired and valued at a discount.

 

There were no transfers between Level 1 and 2 during the three months ended March 31, 2014.

 

S-F-22



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

At March 31, 2013, the Company’s investments were categorized as follows:

 

Level

 

Basis for Determining Fair Value

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

1

 

Quoted prices in active markets for identical assets

 

$

 

$

 

$

759,522

 

2

 

Other observable market inputs *

 

111,560,238

 

61,901,366

 

 

3

 

Independent third-party pricing sources that employ significant unobservable inputs

 

275,074,150

 

17,509,840

 

34,225,001

 

3

 

Investment Manager valuations with significant unobservable inputs

 

 

7,552,970

 

1,411,858

 

Total

 

 

 

$

386,634,388

 

$

86,964,176

 

$

36,396,381

 

 


* For example, quoted prices in inactive markets or quotes for comparable investments.

 

Changes in investments categorized as Level 3 during the three months ended March 31, 2013 were as follows:

 

 

 

Independent Third-Party Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

359,343,326

 

$

17,171,637

 

$

32,675,370

 

Net realized and unrealized gains (losses)

 

(2,705,665

)

332,962

 

1,418,164

 

Acquisitions

 

15,489,607

 

5,241

 

778,020

 

Dispositions

 

(38,401,835

)

 

(646,553

)

Transfers out of Level 3 †

 

(58,651,283

)

 

 

Ending balance

 

$

275,074,150

 

$

17,509,840

 

$

34,225,001

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

(1,074,858

)

$

332,962

 

$

1,418,164

 

 


† Comprised of eight investments that transferred to Level 2 due to increased observable market activity.

 

 

 

Investment Manager Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

 

$

7,167,458

 

$

1,424,764

 

Net realized and unrealized gains (losses)

 

 

350,718

 

(12,906

)

Acquisitions

 

 

34,794

 

 

Ending balance

 

$

 

$

7,552,970

 

$

1,411,858

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

 

$

350,718

 

$

(12,906

)

 

There were no transfers between Level 1 and 2 during the three months ended March 31, 2013.

 

S-F-23



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Investment Transactions

 

Investment transactions are recorded on the trade date, except for private transactions that have conditions to closing, which are recorded on the closing date. The cost of investments purchased is based upon the purchase price plus those professional fees which are specifically identifiable to the investment transaction. Realized gains and losses on investments are recorded based on the identification method, which typically allocates the highest cost inventory to the basis of investments sold.

 

Cash and Cash Equivalents

 

Cash consists of amounts held in accounts with brokerage firms and the custodian bank. Cash equivalents consist of highly liquid investments with an original maturity of three months or less.

 

Repurchase Agreements

 

In connection with transactions in repurchase agreements, it is the Company’s policy that the custodian take possession of the underlying collateral, the fair value of which is required to exceed the principal amount of the repurchase transaction, including accrued interest, at all times. If the seller defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.

 

Restricted Investments

 

The Company may invest without limitation in instruments that are subject to legal or contractual restrictions on resale. These instruments generally may be resold to institutional investors in transactions exempt from registration or to the public if the securities are registered. Disposal of these investments may involve time-consuming negotiations and additional expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted investments is included at the end of the Consolidated Statement of Investments. Restricted investments, including any restricted investments in affiliates, are valued in accordance with the investment valuation policies discussed above.

 

Foreign Investments

 

The Company may invest in instruments traded in foreign countries and denominated in foreign currencies. Foreign currency denominated investments comprised approximately 2.7% and 2.7% of total investments at March 31, 2014 and December 31, 2013, respectively. Such positions were converted at the respective closing rate in effect at March 31, 2014 and December 31, 2013 and reported in U.S. dollars. Purchases and sales of investments and income and expense items denominated in foreign currencies, when they occur, are translated into U.S. dollars on the respective dates of such transactions. The portion of gains and losses on foreign investments resulting from fluctuations in foreign currencies is included in net realized and unrealized gain or loss from investments.

 

S-F-24


 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Investments in foreign companies and securities of foreign governments may involve special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government. These risks include, among other things, revaluation of currencies, less reliable information about issuers, different transaction clearance and settlement practices, and potential future adverse political and economic developments. Moreover, investments in foreign companies and securities of foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies and the U.S. government.

 

Derivatives

 

In order to mitigate certain currency exchange and interest rate risks, the Partnership has entered into certain swap and option transactions. All derivatives are recognized as either assets or liabilities in the Consolidated Statement of Assets and Liabilities. The transactions entered into are accounted for using the mark-to-market method with the resulting change in fair value recognized in earnings for the current period. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in interest rates and the value of foreign currency relative to the U.S. dollar.

 

The Partnership did not enter into any new derivative transactions during the three months ended March 31, 2014. At March 31, 2014, the Partnership held an interest rate cap with a notional amount of $25,000,000 and a cross currency basis swap with a notional amount of $4,289,019. Gains and losses from derivatives during the three months ended March 31, 2014 were included in net realized and unrealized loss on investments in the Consolidated Statement of Operations as follows:

 

Instrument

 

Realized Gains
(Losses)

 

Unrealized Gains
(Losses)

 

Cross currency basis swaps

 

$

 

$

30,499

 

Interest rate cap

 

$

 

$

(5,534

)

 

The Partnership did not enter into any new derivative transactions during the three months ended March 31, 2013. At March 31, 2013, the Partnership held a cross currency basis swap with a notional amount of $6,040,944. Gains and losses from derivatives during the three months ended March 31, 2013 were included in net realized and unrealized loss on investments in the Consolidated Statement of Operations as follows:

 

Instrument

 

Realized Gains
(Losses)

 

Unrealized Gains
(Losses)

 

Cross currency basis swaps

 

$

 

$

169,983

 

 

Valuations of derivatives held at March 31, 2014 and March 31, 2013 were determined using observable market inputs other than quoted prices in active markets for identical assets and, accordingly, are classified as Level 2 in the GAAP valuation hierarchy.

 

S-F-25



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Debt Issuance Costs

 

Costs of approximately $3.5 million were incurred during 2006 in connection with placing the Partnership’s revolving credit facility (see Note 4). Additional costs of approximately $1.5 million were incurred during 2013 in connection with the extension of the facility. These costs were deferred and are being amortized on a straight-line basis over the estimated remaining life of the facility. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Company or the Partnership.

 

Costs of approximately $1.6 million were incurred during 2013 in connection with placing TCPC Funding’s revolving credit facility (see Note 4). Additional costs of approximately $0.8 million were incurred in 2014 in connection with the extension of the facility. These costs were deferred and are being amortized on a straight-line basis over three years, the estimated life of that facility. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Company or the Partnership.

 

Revenue Recognition

 

Interest and dividend income, including income paid in kind, is recorded on an accrual basis. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts, earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income received upon the early repayment of a loan or debt security are included in interest income.

 

Certain debt investments are purchased at a considerable discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. GAAP generally requires that discounts on the acquisition of corporate bonds, municipal bonds and treasury bonds be amortized using the effective-interest or constant-yield method. GAAP also requires the collectability of interest to be considered when making accruals. Accordingly, when accounting for purchase discounts, discount accretion income is recognized when it is probable that such amounts will be collected, generally at disposition. When principal payments on a loan are received in an amount in excess of the loan’s amortized cost, the excess principal payments are recorded as interest income.

 

Income Taxes

 

The Company intends to comply with the applicable provisions of the Internal Revenue Code of 1986, as amended, pertaining to regulated investment companies and to make distributions of taxable income sufficient to relieve it from substantially all federal income taxes. Accordingly, no provision for income taxes is required in the consolidated financial statements. The income or loss of the Partnership, TCPC Funding and the SBIC is reported in the respective partners’ income tax returns. In accordance with ASC Topic 740 — Income Taxes , the Company recognizes in its consolidated financial statements the effect of a tax position when it is determined that such position is more likely than not, based on the technical merits, to be sustained upon examination. As of

 

S-F-26



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

March 31, 2014, all tax years of the Company, the Partnership, TCPC Funding and the SBIC since January 1, 2010 remain subject to examination by federal tax authorities. No such examinations are currently pending.

 

During the three months ended March 31, 2014, the Company did not pay any excise taxes. During the three months ended March 31, 2013 the Company paid $969,946 in excise taxes related to income earned in 2012.

 

Cost and unrealized appreciation and depreciation of the Partnership’s investments (including derivatives) for U.S. federal income tax purposes at March 31, 2014 were as follows:

 

Unrealized appreciation

 

$

34,662,507

 

Unrealized depreciation

 

(57,898,261

)

Net unrealized depreciation

 

(23,235,754

)

 

 

 

 

Cost

 

$

838,601,423

 

 

3. Management Fees, Incentive Compensation and Other Expenses

 

The Company’s management fee is calculated at an annual rate of 1.5% of total assets (excluding cash and cash equivalents) on a consolidated basis as of the beginning of each quarter and is payable to the Investment Manager quarterly in arrears.

 

Incentive compensation is only paid to the extent the total performance of the Company exceeds a cumulative 8% annual return since January 1, 2013 (the “Total Return Hurdle”). Beginning January 1, 2013, the incentive compensation equals 20% of net investment income (reduced by preferred dividends) and 20% of net realized gains (reduced by any net unrealized losses), subject to the Total Return Hurdle. The incentive compensation is payable quarterly in arrears as an allocation and distribution to the General Partner and is calculated as the difference between cumulative incentive compensation earned since January 1, 2013 and cumulative incentive compensation paid since January 1, 2013. A reserve for incentive compensation is accrued based on the amount of additional incentive compensation that would have been distributable to the General Partner assuming a hypothetical liquidation of the Company at net asset value on the balance sheet date. At March 31, 2014, the General Partner’s equity interest in the Partnership was comprised entirely of the reserve amount and is reported as a non-controlling interest in the consolidated financial statements of the Company.

 

The Company and the Partnership bear all respective expenses incurred in connection with the business of the Company and the Partnership, including fees and expenses of outside contracted services, such as custodian, administrative, legal, audit and tax preparation fees, costs of valuing investments, insurance costs, brokers’ and finders’ fees relating to investments, and any other transaction costs associated with the purchase and sale of investments.

 

S-F-27



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

4. Leverage

 

At March 31, 2014 and December 31, 2013, leverage was comprised of amounts outstanding under senior secured revolving credit facilities issued by the Partnership (the “Partnership Facility”) and TCPC Funding (the “TCPC Funding Facility,” and, together with the Partnership Facility, the “Revolving Facilities”) as well as amounts outstanding under a preferred leverage facility issued by the Partnership (the “Preferred Interests”), as follows:

 

 

 

March 31, 2014

 

December 31, 2013

 

Partnership Facility

 

$

82,000,000

 

$

45,000,000

 

TCPC Funding Facility

 

75,000,000

 

50,000,000

 

Total Debt

 

$

157,000,000

 

$

95,000,000

 

 

 

 

 

 

 

Preferred Interests

 

134,000,000

 

134,000,000

 

Total Leverage

 

$

291,000,000

 

$

229,000,000

 

 

The combined weighted-average interest and dividend rates on total amounts outstanding under the leverage facilities at March 31, 2014 and December 31, 2013 were 1.35% and 1.38%, respectively.

 

Amounts outstanding under the Revolving Facilities are carried at cost in the Statement of Assets and Liabilities. As of March 31, 2014, the estimated fair value of the TCPC Funding Facility approximated its carrying value, and the Partnership Facility had an estimated fair value of $81,286,654. The estimated fair values of the Revolving Facilities are determined by discounting projected remaining payments using market interest rates for our borrowings and entities with similar credit risks at the measurement date. At March 31, 2014, the Revolving Facilities would be deemed to be Level 3 in the GAAP valuation hierarchy.

 

Partnership Facility

 

The Partnership Facility provides for amounts to be drawn up to $116 million, subject to certain collateral and other restrictions. The Partnership Facility matures on July 31, 2016. Most of the cash and investments held directly by the Partnership, as well as the net assets of TCPC Funding and the SBIC, are included in the collateral for the facility.

 

Advances under the Partnership Facility through July 31, 2014 bear interest at an annual rate equal to 0.44% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). Advances under the Partnership Facility for periods from July 31, 2014 through the maturity date of the facility will bear interest at an annual rate equal to 2.5% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.20% per annum on the unused portion of the facility, or 0.25% per annum when less than $46.4 million in borrowings are outstanding. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Partnership fail to satisfy certain financial or other covenants. As of March 31, 2014, the Partnership was in full compliance with such covenants.

 

S-F-28



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

4. Leverage (continued)

 

TCPC Funding Facility

 

The TCPC Funding Facility, issued on May 15, 2013, provides for amounts to be drawn up to $150 million, subject to certain collateral and other restrictions. The TCPC Funding Facility matures on May 15, 2017, subject to extension by the lender at the request of TCPC Funding. The facility contains an accordion feature which allows for expansion of the facility up to $200 million subject to consent from the lender and other customary conditions. The cash and investments of TCPC Funding are included in the collateral for the facility.

 

As of March 31, 2014, borrowings under the TCPC Funding Facility bore interest at a rate of LIBOR plus 2.50% per annum. In connection with the extension and expansion of the facility on February 21, 2014, the interest rate was reduced to a rate of LIBOR plus 2.50% effective March 15, 2014.  In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.75% per annum on the unused portion of the facility, or 1.00% per annum when the unused portion is greater than 33% of the total facility. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should TCPC Funding fail to satisfy certain financial or other covenants. As of March 31, 2014, TCPC Funding was in full compliance with such covenants.

 

Preferred Equity

 

At March 31, 2014, the Preferred Interests were comprised of 6,700 Series A preferred limited partner interests issued and outstanding with a liquidation preference of $20,000 per interest. The Preferred Interests accrue dividends at an annual rate equal to 0.85% plus either LIBOR or the interestholder’s cost of funds (subject to a cap of LIBOR plus 20 basis points). The Preferred Interests are redeemable at the option of the Partnership, subject to certain conditions. Additionally, under certain conditions, the Partnership may be required to either redeem certain of the Preferred Interests or repay indebtedness, at the Partnership’s option. Such conditions would include a failure by the Partnership to maintain adequate collateral as required by its credit facility agreement or by the Statement of Preferences of the Preferred Interests or a failure by the Partnership to maintain sufficient asset coverage as required by the 1940 Act. As of March 31, 2014, the Partnership was in full compliance with such requirements.

 

5. Commitments, Concentration of Credit Risk and Off-Balance Sheet Risk

 

The Partnership, TCPC Funding and the SBIC conduct business with brokers and dealers that are primarily headquartered in New York and Los Angeles and are members of the major securities exchanges. Banking activities are conducted with a firm headquartered in the San Francisco area.

 

In the normal course of business, investment activities involve executions, settlement and financing of various transactions resulting in receivables from, and payables to, brokers, dealers and the custodian. These activities may expose the Company, the Partnership, TCPC Funding and the SBIC to risk in the event that such parties are unable to fulfill contractual obligations. Management does not anticipate any material losses from counterparties with whom it conducts business. Consistent with standard business practice, the Company, the

 

S-F-29



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

5. Commitments, Concentration of Credit Risk and Off-Balance Sheet Risk (continued)

 

Partnership, TCPC Funding and the SBIC enter into contracts that contain a variety of indemnifications, and are engaged from time to time in various legal actions. The maximum exposure under these arrangements and activities is unknown. However, management expects the risk of material loss to be remote.

 

The Consolidated Statement of Investments includes certain revolving loan facilities and other loan commitments held by the Partnership with aggregate unfunded balances of $36,361,742 at March 31, 2014. The Company has also provided a $20,861,473 guarantee on a bridge facility, which the Company believes is unlikely to be funded.

 

6. Related Parties

 

The Company, the Partnership, TCPC Funding, the SBIC, the Investment Manager, the General Partner and their members and affiliates may be considered related parties. From time to time, the Partnership advances payments to third parties on behalf of the Company which are reimbursable through deductions from distributions to the Company. At March 31, 2014, no such amounts were outstanding. From time to time, the Investment Manager advances payments to third parties on behalf of the Company and the Partnership and receives reimbursement from the Company and the Partnership. At March 31, 2014, amounts reimbursable to the Investment Manager totaled $463,629, as reflected in the Consolidated Statement of Assets and Liabilities.

 

Pursuant to administration agreements between the Administrator and each of the Company and the Partnership (the “Administration Agreements”), the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to the Company or the Partnership, as well as costs and expenses incurred by the Administrator or its affiliates relating to any administrative, operating, or other non-investment advisory services provided by the Administrator or its affiliates to the Company or the Partnership. For the three months ended March 31, 2014, expenses allocated pursuant to the Administration Agreements totaled $256,806. The Administrator waived reimbursement of all administrative expenses prior to January 1, 2013.

 

7. Stockholders’ Equity and Dividends

 

The following table summarizes the total shares issued in connection with the Company’s dividend reinvestment plan for the three months ended March 31, 2014.

 

 

 

Shares Issued

 

Price Per Share

 

Net Proceeds

 

Shares issued from dividend reinvestment plan

 

104

 

$

16.55

 

$

1,717

 

 

S-F-30



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

7. Stockholders’ Equity and Dividends

 

The following table summarizes the total shares issued and proceeds received in the public offering of the Company’s common stock net of underwriting discounts and offering costs as well as shares issued in connection with the Company’s dividend reinvestment plan for the year ended December 31, 2013.

 

 

 

Shares Issued

 

Price Per Share

 

Net Proceeds

 

May 21, 2013 public offering

 

5,175,000

 

$

15.63

 

$

78,176,790

 

October 1, 2013 public offering

 

4,370,000

 

$

15.76

 

$

66,473,600

 

December 18, 2013 public offering

 

5,175,000

 

$

16.00

 

$

79,912,500

 

Shares issued from dividend reinvestment plan

 

2,288

 

$

16.35

 

$

37,416

 

 

The Company’s dividends are recorded on the ex-dividend date. The following table summarizes the Company’s dividends declared for the three months ended March 31, 2014:

 

Date Declared

 

Record Date

 

Payment Date

 

Amount Per Share

 

Total Amount

 

March 6, 2014

 

March 17, 2014

 

March 31, 2014

 

$

0.36

 

$

13,031,970

 

 

 

 

 

 

 

 

 

$

13,031,970

 

 

The following table summarizes the Company’s dividends declared for the three months ended March 31, 2013:

 

Date Declared

 

Record Date

 

Payment Date

 

Amount Per Share

 

Total Amount

 

March 7, 2013

 

March 18, 2013

 

March 29, 2013

 

$

0.40

*

$

8,591,051

 

 

 

 

 

 

 

 

 

$

8,591,051

 

 


* Includes a special dividend of $0.05.

 

8. Earnings Per Share

 

The following information sets forth the computation of the net increase in net assets per share resulting from operations for the three months ended March 31, 2014 and March 31, 2013:

 

 

 

Three Months Ended
March 31, 2014

 

Three Months Ended
March 31, 2013

 

Net increase in net assets applicable to common shareholders resulting from operations

 

$

18,089,625

 

$

12,779,280

 

Weighted average shares outstanding

 

36,199,917

 

21,477,628

 

Earnings per share

 

$

0.50

 

$

0.60

 

 

S-F-31


 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

9. Subsequent Events

 

On April 22, 2014, the SBIC received a license from the SBA to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958.

 

On May 8, 2014, the Company’s board of directors declared a regular second quarter cash dividend of $0.36 per share and a $0.05 per share special dividend. Both dividends are payable on June 30, 2014 to stockholders of record as of the close of business on June 18, 2014.

 

S-F-32



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

10. Financial Highlights

 

 

 

Three Months Ended

 

 

 

March 31, 2014

 

March 31, 2013

 

 

 

 

 

 

 

Per Common Share

 

 

 

 

 

Per share NAV at beginning of period (1)

 

$

15.18

 

$

14.71

 

 

 

 

 

 

 

Investment operations:

 

 

 

 

 

Net investment income

 

0.49

 

0.65

 

Net realized and unrealized gain

 

0.14

 

0.11

 

Dividends on Series A preferred equity facility

 

(0.01

)

(0.01

)

Incentive allocation reserve and distributions

 

(0.12

)

(0.15

)

Total from investment operations

 

0.50

 

0.60

 

 

 

 

 

 

 

Distributions to common shareholders from:

 

 

 

 

 

Net investment income

 

(0.36

)

(0.40

)

Per share NAV at end of period

 

$

15.32

 

$

14.91

 

 

 

 

 

 

 

Per share market price at end of period

 

$

16.55

 

$

15.96

 

 

 

 

 

 

 

Total return based on market value (1), (2)

 

0.8

%

11.0

%

Total return based on net asset value (1), (2)

 

3.3

%

4.1

%

 

 

 

 

 

 

Shares outstanding at end of period

 

36,200,020

 

21,478,732

 

 

S-F-33



 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

March 31, 2014

 

10. Financial Highlights (continued)

 

 

 

Three Months Ended

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Ratios to average common equity: (4), (5)

 

 

 

 

 

Net investment income (6)

 

12.4

%

16.8

%

Expenses

 

3.6

%

3.6

%

Expenses and incentive allocation (7)

 

4.2

%

4.4

%

 

 

 

 

 

 

Ending common shareholder equity

 

$

554,670,627

 

$

320,635,079

 

Portfolio turnover rate

 

8.7

%

7.8

%

Weighted-average debt outstanding

 

$

98,266,667

 

$

73,355,556

 

Weighted-average interest rate on debt

 

1.9

%

0.8

%

Weighted-average number of common shares

 

36,199,917

 

21,477,640

 

Average debt per share

 

$

2.71

 

$

3.42

 

 


(1)

Not annualized.

(2)

Total return based on market value equals the change in ending market value per share during the period plus declared dividends per share during the period, divided by the market value per share at the beginning of the period.

(3)

Total return based on net asset value equals the change in net asset value per share during the period plus declared dividends per share during the period, divided by the beginning net asset value per share at the beginning of the period.

(4)

Annualized, except for incentive allocation.

(5)

These ratios include interest expense but do not reflect the effect of dividends on the preferred equity facility.

(6)

Net of incentive allocation.

(7)

Includes incentive allocation payable to the General Partner and all Company expenses.

 

S-F-34



 

TCP Capital Corp.

 

Consolidated Schedule of Changes in Investments in Affiliates (1)

 

Three Months Ended March 31, 2014

 

Security

 

Acquisitions

 

Dispositions (2)

 

Dividends or
Interest (3)

 

 

 

 

 

 

 

 

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16

 

$

 

$

 

$

316,578

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16

 

 

 

 

Anacomp, Inc., Class A Common Stock

 

 

 

 

EPMC HoldCo, LLC, Membership Units

 

 

 

 

ESP Holdings, Inc., Cumulative Preferred 15%

 

 

(2,489,100

)

1,968,748

 

ESP Holdings, Inc., Common Stock

 

 

(2,955,297

)

289,315

 

ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19

 

 

(7,959,369

)

205,175

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18

 

 

(37,500

)

332,896

 

KAGY Holding Company, Inc., Series A Preferred Stock

 

 

 

 

N510UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(23,046

)

15,999

 

N512UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(22,551

)

16,292

 

N536UA Aircraft Secured Mortgage, 16%, due 9/29/14

 

 

(39,471

)

3,551

 

N545UA Aircraft Secured Mortgage, 16%, due 8/29/15

 

 

(35,371

)

9,269

 

N585UA Aircraft Secured Mortgage, 20%, due 10/25/16

 

 

(26,478

)

19,115

 

N659UA Aircraft Secured Mortgage, 12%, due 2/28/16

 

 

(269,027

)

78,303

 

N661UA Aircraft Secured Mortgage, 12%, due 5/4/16

 

 

(260,901

)

81,466

 

N510UA Equipment Trust Beneficial Interests

 

23,046

 

(8,978

)

20,872

 

N512UA Equipment Trust Beneficial Interests

 

22,551

 

(8,831

)

20,723

 

N536UA Equipment Trust Beneficial Interests

 

39,471

 

(11,300

)

29,930

 

N545UA Equipment Trust Beneficial Interests

 

35,371

 

(11,884

)

26,412

 

N585UA Equipment Trust Beneficial Interests

 

26,478

 

(11,694

)

23,102

 

N913DL Aircraft Secured Mortgage, 8%, due 3/15/17

 

 

(20,362

)

5,573

 

N918DL Aircraft Secured Mortgage, 8%, due 8/15/18

 

 

(18,025

)

7,576

 

N954DL Aircraft Secured Mortgage, 8%, due 3/20/19

 

 

(20,708

)

10,099

 

N955DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(19,920

)

10,485

 

N956DL Aircraft Secured Mortgage, 8%, due 5/20/19

 

 

(20,251

)

10,462

 

N957DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(20,094

)

10,576

 

N959DL Aircraft Secured Mortgage, 8%, due 7/20/19

 

 

(19,938

)

10,690

 

N960DL Aircraft Secured Mortgage, 8%, due 10/20/19

 

 

(19,644

)

11,119

 

N961DL Aircraft Secured Mortgage, 8%, due 8/20/19

 

 

(20,119

)

10,986

 

N976DL Aircraft Secured Mortgage, 8%, due 2/15/18

 

 

(20,924

)

7,674

 

N913DL Equipment Trust Beneficial Interests

 

20,362

 

(23,508

)

3,996

 

N918DL Equipment Trust Beneficial Interests

 

18,025

 

(22,334

)

3,175

 

N954DL Equipment Trust Beneficial Interests

 

20,708

 

(26,938

)

2,896

 

N955DL Equipment Trust Beneficial Interests

 

19,920

 

(26,609

)

2,687

 

N956DL Equipment Trust Beneficial Interests

 

20,251

 

(35,968

)

(6,301

)

N957DL Equipment Trust Beneficial Interests

 

20,094

 

(26,864

)

2,634

 

N959DL Equipment Trust Beneficial Interests

 

19,938

 

(26,754

)

2,579

 

N960DL Equipment Trust Beneficial Interests

 

19,644

 

(26,669

)

2,366

 

N961DL Equipment Trust Beneficial Interests

 

20,119

 

(27,137

)

2,424

 

N976DL Equipment Trust Beneficial Interests

 

20,924

 

(25,640

)

2,776

 

RM Holdco, LLC, Membership Units

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18

 

 

 

14,461

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/19/16

 

68,263

 

(47,493

)

100,987

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/19/16

 

262,284

 

 

332,454

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/19/16

 

85,754

 

 

108,422

 

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16

 

54,984

 

 

69,456

 

United N659UA-767, LLC (N659UA)

 

269,027

 

(168,678

)

92,624

 

United N661UA-767, LLC (N661UA)

 

260,901

 

(165,758

)

97,034

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units

 

 

 

 

 

Notes to Schedule of Changes in Investments in Affiliates:

 


(1)    The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Company of 5% or more of the issuers’ voting securities.

(2)    Dispositions include sales, paydowns, mortgage amortizations, and aircraft depreciation.

(3)    Also includes fee and lease income as applicable.

 

S-F-35



 

TCP Capital Corp.

 

Consolidated Schedule of Changes in Investments in Affiliates (1)

 

Three Months Ended March 31, 2014

 

Security

 

Acquisitions

 

Dispositions (2)

 

Dividends or
Interest (3)

 

 

 

 

 

 

 

 

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16

 

$

2,056,927

 

$

 

$

128,215

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16

 

7,586,317

 

 

640,007

 

Anacomp, Inc., Class A Common Stock

 

 

 

 

EPMC HoldCo, LLC, Membership Units

 

 

(1,481,930

)

 

ESP Holdings, Inc., Cumulative Preferred 15%

 

 

 

 

ESP Holdings, Inc., Common Stock

 

 

 

32,627

 

ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19

 

749,529

 

 

1,199,575

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18

 

14,850,000

 

 

83,281

 

International Wire Group Holdings, Inc., Senior Secured Notes, 8.5%, due 10/15/17

 

 

(15,759,750

)

443,715

 

KAGY Holding Company, Inc., Series A Preferred Stock

 

8,096,057

 

(1,644

)

 

N510UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(81,562

)

74,646

 

N512UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(79,808

)

75,593

 

N536UA Aircraft Secured Mortgage, 16%, due 9/29/14

 

 

(143,097

)

29,100

 

N545UA Aircraft Secured Mortgage, 16%, due 8/29/15

 

 

(128,230

)

50,422

 

N585UA Aircraft Secured Mortgage, 20%, due 10/25/16

 

 

(93,707

)

88,705

 

N659UA Aircraft Secured Mortgage, 12%, due 2/28/16

 

 

(999,280

)

390,117

 

N661UA Aircraft Secured Mortgage, 12%, due 5/4/16

 

 

(969,098

)

401,041

 

N510UA Equipment Trust Beneficial Interests

 

81,562

 

(35,912

)

72,866

 

N512UA Equipment Trust Beneficial Interests

 

79,808

 

(35,323

)

72,497

 

N536UA Equipment Trust Beneficial Interests

 

143,097

 

(45,201

)

104,929

 

N545UA Equipment Trust Beneficial Interests

 

128,359

 

(47,536

)

92,525

 

N585UA Equipment Trust Beneficial Interests

 

93,707

 

(46,776

)

80,203

 

N913DL Aircraft Secured Mortgage, 8%, due 3/15/17

 

 

(77,509

)

26,248

 

N918DL Aircraft Secured Mortgage, 8%, due 8/15/18

 

 

(68,612

)

33,806

 

N954DL Aircraft Secured Mortgage, 8%, due 3/20/19

 

 

(78,825

)

44,415

 

N955DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(75,824

)

45,803

 

N956DL Aircraft Secured Mortgage, 8%, due 5/20/19

 

 

(77,085

)

45,775

 

N957DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(76,487

)

46,204

 

N959DL Aircraft Secured Mortgage, 8%, due 7/20/19

 

 

(75,896

)

46,629

 

N960DL Aircraft Secured Mortgage, 8%, due 10/20/19

 

 

(74,776

)

48,285

 

N961DL Aircraft Secured Mortgage, 8%, due 8/20/19

 

 

(76,582

)

47,846

 

N976DL Aircraft Secured Mortgage, 8%, due 2/15/18

 

 

(79,647

)

34,759

 

N913DL Equipment Trust Beneficial Interests

 

77,509

 

(94,032

)

12,045

 

N918DL Equipment Trust Beneficial Interests

 

68,612

 

(89,338

)

9,213

 

N954DL Equipment Trust Beneficial Interests

 

78,825

 

(107,751

)

7,578

 

N955DL Equipment Trust Beneficial Interests

 

75,824

 

(106,437

)

6,891

 

N956DL Equipment Trust Beneficial Interests

 

77,085

 

(107,904

)

6,845

 

N957DL Equipment Trust Beneficial Interests

 

76,487

 

(107,457

)

6,648

 

N959DL Equipment Trust Beneficial Interests

 

75,896

 

(107,015

)

6,456

 

N960DL Equipment Trust Beneficial Interests

 

74,776

 

(106,678

)

5,662

 

N961DL Equipment Trust Beneficial Interests

 

76,582

 

(108,546

)

5,805

 

N967DL Equipment Trust Beneficial Interests

 

79,647

 

(102,560

)

7,056

 

RM Holdco, LLC, Membership Units

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18

 

57,991

 

 

57,992

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/19/16

 

16,974

 

(149,183

)

413,430

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/19/16

 

567,205

 

 

1,258,016

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/19/16

 

186,901

 

 

410,004

 

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16

 

1,339,883

 

 

182,711

 

United N659UA-767, LLC (N659UA)

 

999,280

 

(674,714

)

316,842

 

United N661UA-767, LLC (N661UA)

 

969,098

 

(663,034

)

313,627

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units

 

5,000,000

 

 

 

 

Notes to Schedule of Changes in Investments in Affiliates:

 


(1)    The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Company of 5% or more of the issuers’ voting securities.

(2)    Dispositions include sales, paydowns, mortgage amortizations, and aircraft depreciation.

(3)    Also includes fee and lease income as applicable.

 

S-F-36



 

TCP Capital Corp.

 

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers

 

March 31, 2014

 

Investment

 

Acquisition Date

 

 

 

AIP/IS Holdings, LLC, Membership Units

 

Var. 2009 & 2010

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19

 

9/26/13

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17

 

3/5/12

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19

 

10/19/12

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18

 

7/26/13

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16

 

1/20/11

Findly Talent, LLC, Membership Units

 

1/1/14

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock

 

12/4/13

Hunt Companies, Inc., Senior Secured Notes, 9.625%, due 3/1/21

 

2/25/14

Integra Telecom, Inc., Common Stock

 

11/19/09

Integra Telecom, Inc., Warrants

 

11/19/09

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18

 

5/8/13

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21

 

8/1/13

Marsico Holdings, LLC Common Interest Units

 

9/10/12

Precision Holdings, LLC, Class C Membership Interests

 

Var. 2010 & 2011

Shop Holdings, LLC, Convertible Promissory Note, 5%, due 8/5/15

 

2/5/14

Shop Holding, LLC, Class A Units

 

6/2/11

Shop Holding, LLC, Warrants to Purchase Class A Units

 

6/2/11

SiTV, Inc., Warrants to Purchase Common Stock

 

8/3/12

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock

 

9/25/13

STG-Fairway Holdings, LLC, Class A Units

 

12/30/10

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19

 

9/26/11

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18

 

11/13/13

V Telecom Investment S.C.A, Common Shares

 

11/9/12

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17

 

6/6/13

 

December 31, 2013

 

Investment

 

Acquisition Date

 

 

 

AIP/IS Holdings, LLC, Membership Units

 

Var. 2009 & 2010

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19

 

9/26/13

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17

 

3/5/12

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19

 

10/19/12

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18

 

7/26/13

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16

 

1/20/11

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock

 

12/4/13

Integra Telecom, Inc., Common Stock

 

11/19/09

Integra Telecom, Inc., Warrants

 

11/19/09

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18

 

5/8/13

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21

 

8/1/13

Marsico Holdings, LLC Common Interest Units

 

9/10/12

Precision Holdings, LLC, Class C Membership Interests

 

Var. 2010 & 2011

Shop Holding, LLC, Class A Units

 

6/2/11

Shop Holding, LLC, Warrants to Purchase Class A Units

 

6/2/11

SiTV, Inc., Warrants to Purchase Common Stock

 

8/3/12

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock

 

9/25/13

St Barbara Ltd., 1st Priority Senior Secured Notes, 8.875%, due 4/15/18

 

3/22/13

STG-Fairway Holdings, LLC, Class A Units

 

12/30/10

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19

 

9/26/11

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18

 

11/13/13

V Telecom Investment S.C.A, Common Shares

 

11/9/12

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17

 

6/6/13

 

S-F-37


 

 

TCP Capital Corp

 

Consolidating Statement of Assets and Liabilities

 

March 31, 2014

 

 

 

 

 

Special Value

 

 

 

 

 

 

 

TCP

 

Continuation

 

 

 

TCP

 

 

 

Capital Corp.

 

Partners, LP

 

 

 

Capital Corp.

 

 

 

Standalone

 

Consolidated

 

Eliminations

 

Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

Companies less than 5% owned

 

$

 

$

744,016,378

 

$

 

$

744,016,378

 

Companies 5% to 25% owned

 

 

53,487,621

 

 

53,487,621

 

Companies more than 25% owned

 

 

18,153,749

 

 

18,153,749

 

Investment in subsidiary

 

555,836,984

 

 

(555,836,984

)

 

Total investments

 

555,836,984

 

815,657,748

 

(555,836,984

)

815,657,748

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

27,141,436

 

 

27,141,436

 

Accrued interest income

 

 

8,998,096

 

 

8,998,096

 

Deferred debt issuance costs

 

 

3,360,310

 

 

3,360,310

 

Receivable for investments sold

 

 

1,031,717

 

 

1,031,717

 

Interest rate cap option

 

 

8,605

 

 

8,605

 

Receivable from subsidiary

 

98,697

 

 

(98,697

)

 

Prepaid expenses and other assets

 

12,545

 

1,171,578

 

 

1,184,123

 

Total assets

 

555,948,226

 

857,369,490

 

(555,935,681

)

857,382,035

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Debt

 

 

157,000,000

 

 

157,000,000

 

Incentive allocation payable

 

 

3,486,403

 

 

3,486,403

 

Payable for investment securities purchased

 

 

1,514,602

 

 

1,514,602

 

Payable to the Investment Manager

 

319,323

 

144,306

 

 

463,629

 

Interest payable

 

 

332,040

 

 

332,040

 

Unrealized depreciation on swaps

 

 

300,684

 

 

300,684

 

Payable to Parent

 

 

98,697

 

(98,697

)

 

Accrued expenses and other liabilities

 

958,276

 

1,957,430

 

 

2,915,706

 

Total liabilities

 

1,277,599

 

164,834,162

 

(98,697

)

166,013,064

 

 

 

 

 

 

 

 

 

 

 

Preferred equity facility

 

 

 

 

 

 

 

 

 

Series A preferred limited partner interests

 

 

134,000,000

 

 

134,000,000

 

Accumulated dividends on Series A preferred equity facility

 

 

493,757

 

 

493,757

 

Total preferred limited partner interests

 

 

134,493,757

 

 

134,493,757

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

 

 

 

 

 

 

 

 

General Partner interest in Special Value Continuation Partners, LP

 

 

 

2,204,587

 

2,204,587

 

 

 

 

 

 

 

 

 

 

 

Net assets

 

$

554,670,627

 

$

558,041,571

 

$

(558,041,571

)

$

554,670,627

 

 

 

 

 

 

 

 

 

 

 

Composition of net assets

 

 

 

 

 

 

 

 

 

Common stock

 

$

36,200

 

$

 

$

 

$

36,200

 

Additional paid-in capital

 

667,843,737

 

666,530,318

 

(666,530,318

)

667,843,737

 

Accumulated deficit

 

(113,209,310

)

(108,488,747

)

110,693,334

 

(111,004,723

)

Non-controlling interest

 

 

 

(2,204,587

)

(2,204,587

)

Net assets

 

$

554,670,627

 

$

558,041,571

 

$

(558,041,571

)

$

554,670,627

 

 

S-F-38



 

TCP Capital Corp

 

Consolidating Statement of Assets and Liabilities

 

December 31, 2013

 

 

 

 

 

Special Value

 

 

 

 

 

 

 

TCP

 

Continuation

 

 

 

TCP

 

 

 

Capital Corp.

 

Partners, LP

 

 

 

Capital Corp.

 

 

 

Standalone

 

Consolidated

 

Eliminations

 

Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

Companies less than 5% owned

 

$

 

$

678,326,915

 

$

 

$

678,326,915

 

Companies 5% to 25% owned

 

 

69,068,808

 

 

69,068,808

 

Companies more than 25% owned

 

 

18,867,236

 

 

18,867,236

 

Investment in subsidiary

 

551,095,042

 

 

(551,095,042

)

 

Total investments

 

551,095,042

 

766,262,959

 

(551,095,042

)

766,262,959

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

22,984,182

 

 

22,984,182

 

Accrued interest income

 

 

6,739,105

 

 

6,739,105

 

Receivable for investments sold

 

 

3,605,964

 

 

3,605,964

 

Deferred debt issuance costs

 

 

2,969,085

 

 

2,969,085

 

Interest rate cap option

 

 

14,139

 

 

14,139

 

Receivable from subsidiary

 

531,717

 

 

(531,717

)

 

Prepaid expenses and other assets

 

30,493

 

723,275

 

 

753,768

 

Total assets

 

551,657,252

 

803,298,709

 

(551,626,759

)

803,329,202

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Debt

 

 

95,000,000

 

 

95,000,000

 

Payable for investment securities purchased

 

 

14,706,942

 

 

14,706,942

 

Incentive allocation payable

 

 

3,318,900

 

 

3,318,900

 

Payable to the Investment Manager

 

833,737

 

287,371

 

 

1,121,108

 

Interest payable

 

 

430,969

 

 

430,969

 

Unrealized depreciation on swaps

 

 

331,183

 

 

331,183

 

Payable to Parent

 

 

531,717

 

(531,717

)

 

Accrued expenses and other liabilities

 

1,212,260

 

1,923,750

 

 

3,136,010

 

Total liabilities

 

2,045,997

 

116,530,832

 

(531,717

)

118,045,112

 

 

 

 

 

 

 

 

 

 

 

Preferred equity facility

 

 

 

 

 

 

 

 

 

Series A preferred limited partner interests

 

 

134,000,000

 

 

134,000,000

 

Accumulated dividends on Series A preferred equity facility

 

 

504,252

 

 

504,252

 

Total preferred limited partner interests

 

 

134,504,252

 

 

134,504,252

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

 

 

 

 

 

 

 

 

General Partner interest in Special Value Continuation Partners, LP

 

 

 

1,168,583

 

1,168,583

 

 

 

 

 

 

 

 

 

 

 

Net assets

 

$

549,611,255

 

$

552,263,625

 

$

(552,263,625

)

$

549,611,255

 

 

 

 

 

 

 

 

 

 

 

Composition of net assets

 

 

 

 

 

 

 

 

 

Common stock

 

$

36,200

 

$

 

$

 

$

36,200

 

Additional paid-in capital

 

667,842,020

 

666,530,318

 

(666,530,318

)

667,842,020

 

Accumulated deficit

 

(118,266,965

)

(114,266,693

)

115,435,276

 

(117,098,382

)

Non-controlling interest

 

 

 

(1,168,583

)

(1,168,583

)

Net assets

 

$

549,611,255

 

$

552,263,625

 

$

(552,263,625

)

$

549,611,255

 

 

S-F-39



 

TCP Capital Corp.

 

Consolidating Statement of Operations (Unaudited)

 

Three Months Ended March 31, 2014

 

 

 

 

 

Special Value

 

 

 

 

 

 

 

TCP

 

Continuation

 

 

 

TCP

 

 

 

Capital Corp.

 

Partners, LP

 

 

 

Capital Corp.

 

 

 

Standalone

 

Consolidated

 

Eliminations

 

Consolidated

 

Investment income

 

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

Companies less than 5% owned

 

$

 

$

18,140,743

 

$

 

$

18,140,743

 

Companies 5% to 25% owned

 

 

1,336,864

 

 

1,336,864

 

Companies more than 25% owned

 

 

257,627

 

 

257,627

 

Dividend income:

 

 

 

 

 

 

 

 

 

Companies 5% to 25% owned

 

 

1,968,748

 

 

1,968,748

 

Other income:

 

 

 

 

 

 

 

 

 

Companies less than 5% owned

 

 

634,733

 

 

634,733

 

Companies 5% to 25% owned

 

 

121,039

 

 

121,039

 

Companies more than 25% owned

 

 

208,890

 

 

208,890

 

Total interest and related investment income

 

 

22,668,644

 

 

22,668,644

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

Management and advisory fees

 

 

2,886,208

 

 

2,886,208

 

Interest expense

 

 

456,861

 

 

456,861

 

Amortization of deferred debt issuance costs

 

 

372,755

 

 

372,755

 

Administration expenses

 

 

256,806

 

 

256,806

 

Legal fees, professional fees and due diligence expenses

 

86,396

 

117,760

 

 

204,156

 

Commitment fees

 

 

191,199

 

 

191,199

 

Director fees

 

28,689

 

57,023

 

 

85,712

 

Insurance expense

 

17,948

 

35,952

 

 

53,900

 

Custody fees

 

875

 

49,932

 

 

50,807

 

Other operating expenses

 

303,605

 

15,981

 

 

319,586

 

Total expenses

 

437,513

 

4,440,477

 

 

4,877,990

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

(437,513

)

18,228,167

 

 

17,790,654

 

 

 

 

 

 

 

 

 

 

 

Net realized and unrealized gain (loss) on investments and foreign currency

 

 

 

 

 

 

 

 

 

Net realized loss:

 

 

 

 

 

 

 

 

 

Investments in companies less than 5% owned

 

 

(6,795,721

)

 

(6,795,721

)

Investments in companies 5% to 25% owned

 

 

375

 

 

375

 

Net realized loss

 

 

(6,795,346

)

 

(6,795,346

)

Net change in unrealized appreciation/depreciation

 

 

11,975,364

 

 

11,975,364

 

Net realized and unrealized gain

 

 

5,180,018

 

 

5,180,018

 

 

 

 

 

 

 

 

 

 

 

Interest in earnings of subsidiary

 

18,527,138

 

 

(18,527,138

)

 

Dividends paid on Series A preferred equity facility

 

 

(369,135

)

 

(369,135

)

Net change in accumulated dividends on Series A preferred equity facility

 

 

10,495

 

 

10,495

 

Distributions of incentive allocation to the General Partner from net investment income

 

 

 

(3,486,403

)

(3,486,403

)

Distributions of incentive allocation to the General Partner from net realized gains

 

 

 

 

 

Net change in reserve for incentive allocation

 

 

 

(1,036,004

)

(1,036,004

)

 

 

 

 

 

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

18,089,625

 

$

23,049,545

 

$

(23,049,545

)

$

18,089,625

 

 

S-F-40



 

TCP Capital Corp.

 

Consolidating Statement of Operations

 

Three Months Ended March 31, 2013

 

 

 

 

 

Special Value

 

 

 

 

 

 

 

TCP

 

Continuation

 

 

 

TCP

 

 

 

Capital Corp.

 

Partners, LP

 

 

 

Capital Corp.

 

 

 

Standalone

 

Standalone

 

Eliminations

 

Consolidated

 

Investment income

 

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

Unaffiliated issuers

 

$

 

$

15,240,367

 

$

 

$

15,240,367

 

Controlled companies

 

 

330,317

 

 

330,317

 

Affiliates

 

 

893,512

 

 

893,512

 

Other income:

 

 

 

 

 

 

 

 

 

Unaffiliated issuers

 

 

157,533

 

 

157,533

 

Controlled companies

 

 

142,911

 

 

142,911

 

Other Affiliates

 

 

101,103

 

 

101,103

 

Total interest and related investment income

 

 

16,865,743

 

 

16,865,743

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

Management and advisory fees

 

 

1,964,738

 

 

1,964,738

 

Administration expenses

 

 

167,808

 

 

167,808

 

Amortization of deferred debt issuance costs

 

 

108,564

 

 

108,564

 

Legal fees, professional fees and due diligence expenses

 

64,590

 

74,462

 

 

139,052

 

Interest expense

 

 

136,407

 

 

136,407

 

Commitment fees

 

 

22,589

 

 

22,589

 

Director fees

 

23,750

 

48,059

 

 

71,809

 

Insurance expense

 

12,072

 

24,201

 

 

36,273

 

Custody fees

 

875

 

28,544

 

 

29,419

 

Other operating expenses

 

56,562

 

136,409

 

 

192,971

 

Total expenses

 

157,849

 

2,711,781

 

 

2,869,630

 

 

 

 

 

 

 

 

 

 

 

Net investment income before taxes

 

(157,849

)

14,153,962

 

 

13,996,113

 

 

 

 

 

 

 

 

 

 

 

Excise tax expense

 

 

 

 

 

Net investment income

 

(157,849

)

14,153,962

 

 

13,996,113

 

 

 

 

 

 

 

 

 

 

 

Net realized and unrealized gain (loss) on investments and foreign currency

 

 

 

 

 

 

 

 

 

Net realized gain

 

 

517,658

 

 

517,658

 

Net change in unrealized appreciation/depreciation

 

19,326,769

 

1,837,731

 

(19,326,769

)

1,837,731

 

Net realized and unrealized gain (loss)

 

19,326,769

 

2,355,389

 

(19,326,769

)

2,355,389

 

 

 

 

 

 

 

 

 

 

 

Dividends paid on Series A preferred equity facility

 

 

(393,413

)

 

(393,413

)

Net change in accumulated dividends on Series A preferred equity facility

 

 

16,011

 

 

16,011

 

Distributions of incentive allocation to the General Partner

 

 

 

(2,723,742

)

(2,723,742

)

Net change in reserve for General Partner incentive allocation

 

 

 

(471,078

)

(471,078

)

 

 

 

 

 

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

19,168,920

 

$

16,131,949

 

$

(22,521,589

)

$

12,779,280

 

 

S-F-41


 

 

 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statements of Assets and Liabilities

 

 

 

March 31, 2014

 

December 31, 2013

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Investments, at fair value:

 

 

 

 

 

Companies less than 5% owned (cost of $741,804,363 and $684,569,508, respectively)

 

$

744,016,378

 

$

678,326,915

 

Companies 5% to 25% owned (cost of $54,759,445 and $73,946,547, respectively)

 

53,487,621

 

69,068,808

 

Companies more than 25% owned (cost of $41,985,865 and $42,588,724 respectively)

 

18,153,749

 

18,867,236

 

Total investments (cost of $838,549,673 and $801,104,779, respectively)

 

815,657,748

 

766,262,959

 

 

 

 

 

 

 

Cash and cash equivalents

 

27,141,436

 

22,984,182

 

Accrued interest income:

 

 

 

 

 

Companies less than 5% owned

 

8,279,978

 

6,282,353

 

Companies 5% to 25% owned

 

679,599

 

415,061

 

Companies more than 25% owned

 

38,519

 

41,691

 

Deferred debt issuance costs

 

3,360,310

 

2,969,085

 

Receivable for investments sold

 

1,031,717

 

3,605,964

 

Options (cost $51,750)

 

8,605

 

14,139

 

Prepaid expenses and other assets

 

1,171,578

 

723,275

 

Total assets

 

857,369,490

 

803,298,709

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Debt

 

157,000,000

 

95,000,000

 

Incentive allocation payable

 

3,486,403

 

3,318,900

 

Payable for investments purchased

 

1,514,602

 

14,706,942

 

Interest payable

 

332,040

 

430,969

 

Unrealized depreciation on swaps

 

300,684

 

331,183

 

Payable to the Investment Manager

 

144,306

 

287,371

 

Payable to Parent

 

98,697

 

531,717

 

Accrued expenses and other liabilities

 

1,957,430

 

1,923,750

 

Total liabilities

 

164,834,162

 

116,530,832

 

 

 

 

 

 

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

 

 

 

Preferred equity facility

 

 

 

 

 

Series A preferred limited partner interests; $20,000/interest liquidation preference; 6,700 interests authorized, issued and outstanding

 

134,000,000

 

134,000,000

 

Accumulated dividends on Series A preferred equity facility

 

493,757

 

504,252

 

Total preferred limited partner interests

 

134,493,757

 

134,504,252

 

 

 

 

 

 

 

Net assets applicable to common limited and general partners

 

$

558,041,571

 

$

552,263,625

 

 

 

 

 

 

 

Composition of net assets applicable to common limited and general partners

 

 

 

 

 

Paid-in capital

 

666,530,318

 

666,530,318

 

Accumulated net investment income

 

27,448,077

 

26,850,149

 

Accumulated net realized losses

 

(112,597,990

)

(105,802,644

)

Accumulated net unrealized depreciation

 

(23,338,834

)

(35,314,198

)

Net assets applicable to common limited and general partners

 

$

558,041,571

 

$

552,263,625

 

 

See accompanying notes.

 

S-F-42



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Unaudited)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (92.87%)

 

 

 

 

 

 

 

 

 

Bank Debt (76.36%) (1)

 

 

 

 

 

 

 

 

 

Accounting, Tax Preparation, Bookkeeping, and Payroll Services (0.93%)

 

 

 

 

 

 

 

 

 

Expert Global Solutions, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 7.25% (Q),1.25% LIBOR Floor, due 4/3/18

 

$

694,441

 

$

699,603

 

$

679,684

 

0.08

%

Expert Global Solutions, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 11% (Q), 1.5% LIBOR Floor, due 10/3/18

 

$

7,434,877

 

7,235,805

 

7,174,657

 

0.85

%

Total Accounting, Tax Preparation, Bookkeeping, and Payroll Services

 

 

 

7,935,408

 

7,854,341

 

 

 

 

 

 

 

 

 

 

 

 

 

Activities Related to Real Estate (1.97%)

 

 

 

 

 

 

 

 

 

Greystone Select Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 8% (M), 1% LIBOR Floor, due 3/26/21

 

$

16,594,230

 

16,366,059

 

16,635,715

 

1.97

%

 

 

 

 

 

 

 

 

 

 

Advertising, Public Relations, and Related Services (2.15%)

 

 

 

 

 

 

 

 

 

Doubleplay III Limited, Senior Secured 1st Lien Facility A1 Term Loan, EURIBOR + 6.25% (Q), 1.25% EURIBOR Floor, due 3/18/18 - (United Kingdom) (4), (10)

 

$

13,165,705

 

16,495,992

 

18,082,540

 

2.15

%

 

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (0.24%)

 

 

 

 

 

 

 

 

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16 (2)

 

$

2,056,927

 

2,056,927

 

2,056,927

 

0.24

%

 

 

 

 

 

 

 

 

 

 

Basic Chemical Manufacturing (1.79%)

 

 

 

 

 

 

 

 

 

PeroxyChem, LLC, Senior Secured Term Loan, LIBOR + 6.5% (M), 1% LIBOR Floor, due 2/28/20

 

$

15,000,000

 

14,702,579

 

15,075,000

 

1.79

%

 

 

 

 

 

 

 

 

 

 

Business Support Services (1.76%)

 

 

 

 

 

 

 

 

 

STG-Fairway Acquisitions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.25% (Q), 1.25% LIBOR Floor, due 8/28/19

 

$

14,643,455

 

13,965,887

 

14,863,107

 

1.76

%

 

 

 

 

 

 

 

 

 

 

Chemical Manufacturing (2.08%)

 

 

 

 

 

 

 

 

 

Archroma, Senior Secured Lien Term Loan B, LIBOR + 8.25% (Q), 1.25% LIBOR Floor, due 9/30/18

 

$

17,412,500

 

17,088,698

 

17,499,563

 

2.08

%

 

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (1.79%)

 

 

 

 

 

 

 

 

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625% (Q), 1.25% LIBOR Floor, due 12/11/18 (2)

 

$

14,962,500

 

14,812,875

 

15,059,756

 

1.79

%

 

 

 

 

 

 

 

 

 

 

Computer Equipment Manufacturing (1.08%)

 

 

 

 

 

 

 

 

 

ELO Touch Solutions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 10.5% (Q), 1.5% LIBOR Floor, due 12/1/18

 

$

10,000,000

 

9,678,717

 

9,075,000

 

1.08

%

 

 

 

 

 

 

 

 

 

 

Converted Paper Products Manufacturing (0.42%)

 

 

 

 

 

 

 

 

 

Ranpak Corp., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1.25% LIBOR Floor, due 4/23/20

 

$

3,469,573

 

3,434,877

 

3,551,976

 

0.42

%

 

 

 

 

 

 

 

 

 

 

Computer Systems Design and Related Services (9.73%)

 

 

 

 

 

 

 

 

 

Autoalert, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 4.75 % (Q) Cash + 4% PIK, 0.25% LIBOR Floor, due 3/31/19

 

$

30,000,000

 

29,400,000

 

29,940,000

 

3.55

%

Blue Coat Systems, Inc., Senior Secured 1st Lien Revolver Term Loan, LIBOR + 3.5% (Q), 1% LIBOR Floor, due 5/31/18 (13)

 

$

 

(960,000

)

(441,060

)

(0.05

)%

Blue Coat Systems, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1% LIBOR Floor, due 6/28/20

 

$

15,000,000

 

14,878,125

 

15,581,250

 

1.85

%

Coreone Technologies, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 3.75% (Q) Cash + 5% PIK, 1% LIBOR Floor, due 9/4/18

 

$

13,726,261

 

13,412,993

 

13,643,903

 

1.62

%

OnX Enterprise Solutions, Ltd., Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

10,613,333

 

10,468,033

 

10,708,853

 

1.27

%

OnX USA, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

5,306,667

 

5,237,760

 

5,354,427

 

0.64

%

Websense, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1% LIBOR Floor, due 12/27/20

 

$

7,200,000

 

7,164,000

 

7,254,000

 

0.85

%

Total Computer Systems Design and Related Services

 

 

 

76,600,911

 

82,041,373

 

 

 

 

 

 

 

 

 

 

 

 

 

Electric Power Generation, Transmission and Distribution (2.07%)

 

 

 

 

 

 

 

 

 

Panda Sherman Power, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7.5% (Q), 1.5% LIBOR Floor, due 9/14/18

 

$

11,070,172

 

10,938,274

 

11,402,277

 

1.35

%

Panda Temple Power II, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q), 1.25% LIBOR Floor, due 4/3/19

 

$

5,892,970

 

5,834,041

 

6,062,393

 

0.72

%

Total Electric Power Generation, Transmission and Distribution

 

 

 

16,772,315

 

17,464,670

 

 

 

 

 

 

 

 

 

 

 

 

 

Electrical Equipment and Component Manufacturing (1.99%)

 

 

 

 

 

 

 

 

 

Palladium Energy, Inc., 1st Lien Senior Secured Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 12/26/17

 

$

16,500,317

 

16,239,377

 

16,739,572

 

1.99

%

 

 

 

 

 

 

 

 

 

 

Electrical Equipment Manufacturing (0.82%)

 

 

 

 

 

 

 

 

 

API Technologies Corp., Senior Secured 1st Lien Term Loan, LIBOR + 7.5% (M), 1.5% LIBOR Floor, due 2/6/18

 

$

6,947,590

 

6,878,114

 

6,912,852

 

0.82

%

Financial Investment Activities (0.70%)

 

 

 

 

 

 

 

 

 

Marsico Capital Management, Senior Secured 1st Lien Term Loan, LIBOR + 5% (M), due 12/31/22 (11)

 

$

10,606,841

 

13,355,425

 

5,939,831

 

0.70

%

 

S-F-43



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Freight Transportation Arrangement (0.44%)

 

 

 

 

 

 

 

 

 

Livingston International, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/18/20 (10)

 

$

3,665,217

 

$

3,599,623

 

$

3,724,777

 

0.44

%

 

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (1.87%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18 (2)

 

$

5,164,796

 

5,164,796

 

1,402,242

 

0.17

%

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

1,422,456

 

1,394,868

 

1,422,456

 

0.17

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/21/16 (2)

 

$

3,647,717

 

3,647,717

 

3,647,717

 

0.43

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

7,087,612

 

7,087,612

 

7,087,612

 

0.84

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

2,232,131

 

2,194,774

 

2,232,131

 

0.26

%

Total Full-Service Restaurants

 

 

 

19,489,767

 

15,792,158

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming Industries (1.66%)

 

 

 

 

 

 

 

 

 

AP Gaming I, LLC, Senior Secured 1st Lien Revolver Term Loan, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 12/20/18 (13)

 

$

 

(1,000,000

)

(984,375

)

(0.12

)%

AP Gaming I, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 12/20/20

 

$

14,962,500

 

14,523,696

 

14,962,500

 

1.78

%

Total Gaming Industries

 

 

 

13,523,696

 

13,978,125

 

 

 

 

 

 

 

 

 

 

 

 

 

Grocery Stores (1.78%)

 

 

 

 

 

 

 

 

 

Bashas, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 9.35% (M), 1.5% LIBOR Floor, due 12/28/15

 

$

14,781,475

 

14,740,030

 

15,003,197

 

1.78

%

 

 

 

 

 

 

 

 

 

 

Insurance Carriers (1.39%)

 

 

 

 

 

 

 

 

 

Acrisure, LLC, 2nd Lien Additional Notes, LIBOR + 10.5% (Q), 1% LIBOR Floor, due 3/7/20

 

$

680,363

 

564,204

 

674,555

 

0.08

%

Acrisure, LLC, 2nd Lien Notes, LIBOR + 10.5% (Q), 1% LIBOR Floor, due 3/7/20

 

$

11,051,757

 

10,832,378

 

11,040,705

 

1.31

%

Total Insurance Carriers

 

 

 

11,396,582

 

11,715,260

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Related Activities (0.76%)

 

 

 

 

 

 

 

 

 

Confie Seguros Holding II Co., 2nd Lien Term Loan, LIBOR + 9% (M), 1.25% LIBOR Floor, due 5/8/19

 

$

6,341,809

 

6,249,086

 

6,397,332

 

0.76

%

 

 

 

 

 

 

 

 

 

 

Merchant Wholesalers (1.09%)

 

 

 

 

 

 

 

 

 

Envision Acquisition Company, LLC, 2nd Lien Term Loan, LIBOR + 8.75% (M), 1% LIBOR Floor, due 11/4/21

 

$

9,079,011

 

8,897,430

 

9,158,452

 

1.09

%

 

 

 

 

 

 

 

 

 

 

Motion Picture and Video Industries (1.82%)

 

 

 

 

 

 

 

 

 

CORE Entertainment, Inc., Senior Secured 1st Lien Term Loan, 9%, due 6/21/17

 

$

9,462,231

 

9,386,095

 

8,421,386

 

1.00

%

CORE Entertainment, Inc., Senior Secured 2nd Lien Term Loan, 13.5%, due 6/21/18

 

$

7,569,785

 

7,505,822

 

6,933,923

 

0.82

%

Total Motion Picture and Video Industries

 

 

 

16,891,917

 

15,355,309

 

 

 

 

 

 

 

 

 

 

 

 

 

Newspaper, Periodical, Book, and Directory Publishers (3.64%)

 

 

 

 

 

 

 

 

 

Hanley-Wood, LLC, 1st Lien FILO Term Loan, LIBOR + 6.75% (Q), 1.25% LIBOR Floor, due 7/15/18

 

$

16,561,400

 

16,561,400

 

16,420,628

 

1.95

%

MediMedia USA, Inc., 1st Lien Revolver, LIBOR + 6.75% (M), due 5/20/18

 

$

5,270,000

 

4,107,500

 

4,833,908

 

0.57

%

MediMedia USA, Inc., 1st Lien Term Loan, LIBOR + 6.75% (M), 1.25% LIBOR Floor, due 11/20/18

 

$

9,676,875

 

9,420,314

 

9,434,953

 

1.12

%

Total Newspaper, Periodical, Book, and Directory Publishers

 

 

 

30,089,214

 

30,689,489

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonresidential Building Construction (1.20%)

 

 

 

 

 

 

 

 

 

NCM Group Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 11.5% (Q), 1% LIBOR Floor, due 8/29/18

 

$

10,000,000

 

9,620,619

 

10,145,000

 

1.20

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (2.11%)

 

 

 

 

 

 

 

 

 

One Sky Flight, LLC, Senior Secured 2nd Lien Term Loan, 12% Cash + 3% PIK, due 6/3/19

 

$

18,243,983

 

16,984,017

 

17,742,274

 

2.11

%

 

 

 

 

 

 

 

 

 

 

Oil and Gas Extraction (1.83%)

 

 

 

 

 

 

 

 

 

Willbros Group, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.25% LIBOR Floor, due 8/7/19

 

$

15,246,603

 

14,876,555

 

15,443,512

 

1.83

%

 

 

 

 

 

 

 

 

 

 

Other Telecommunications (1.67%)

 

 

 

 

 

 

 

 

 

Securus Technologies, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/30/21

 

$

14,000,000

 

13,860,000

 

14,072,940

 

1.67

%

 

 

 

 

 

 

 

 

 

 

Petroleum and Coal Products Manufacturing (0.46%)

 

 

 

 

 

 

 

 

 

Boomerang Tube, LLC, 2nd Lien Term Loan, LIBOR + 9.5% (Q), 1.5% LIBOR Floor, due 10/11/17

 

$

3,987,092

 

3,902,548

 

3,887,415

 

0.46

%

 

S-F-44



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Professional, Scientific, and Technical Services (1.91%)

 

 

 

 

 

 

 

 

 

ConvergeOne Holdings, 1st Lien Term Loan, LIBOR + 8% (Q), 1.25% LIBOR Floor, due 5/8/19

 

$

16,112,709

 

$

15,930,795

 

$

16,112,709

 

1.91

%

 

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (2.94%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q) Cash + 4% PIK, 2% LIBOR Floor, due 8/3/16

 

$

7,014,361

 

6,678,521

 

6,856,537

 

0.82

%

The Tennis Channel, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 8.5% (Q), due 5/29/17

 

$

17,771,217

 

17,344,546

 

17,842,301

 

2.12

%

Total Radio and Television Broadcasting

 

 

 

24,023,067

 

24,698,838

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail (2.10%)

 

 

 

 

 

 

 

 

 

Kenneth Cole Productions, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 10.40% (M), 1% LIBOR Floor, due 9/25/17

 

$

11,000,000

 

10,796,475

 

11,055,000

 

1.31

%

Shopzilla, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.5% (Q), due 3/31/16

 

$

6,710,057

 

6,584,026

 

6,699,991

 

0.79

%

Total Retail

 

 

 

17,380,501

 

17,754,991

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.40%)

 

 

 

 

 

 

 

 

 

Aircraft Secured Mortgages - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL, 8%, due 3/15/17 (6)

 

$

268,686

 

268,686

 

275,740

 

0.03

%

N918DL, 8%, due 8/15/18 (6)

 

$

369,976

 

369,976

 

379,440

 

0.05

%

N954DL, 8%, due 3/20/19 (6)

 

$

493,667

 

493,667

 

504,730

 

0.06

%

N955DL, 8%, due 6/20/19 (6)

 

$

513,363

 

513,363

 

524,620

 

0.06

%

N956DL, 8%, due 5/20/19 (6)

 

$

512,024

 

512,024

 

523,430

 

0.06

%

N957DL, 8%, due 6/20/19 (6)

 

$

517,853

 

517,853

 

529,210

 

0.06

%

N959DL, 8%, due 7/20/19 (6)

 

$

523,634

 

523,634

 

534,990

 

0.06

%

N960DL, 8%, due 10/20/19 (6)

 

$

545,211

 

545,211

 

556,410

 

0.07

%

N961DL, 8%, due 8/20/19 (6)

 

$

538,309

 

538,309

 

549,780

 

0.07

%

N976DL, 8%, due 2/15/18 (6)

 

$

373,436

 

373,436

 

383,520

 

0.05

%

Aircraft Secured Mortgages - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA, 20%, due 10/26/16 (2)

 

$

305,802

 

305,802

 

370,358

 

0.04

%

N512UA, 20%, due 10/26/16 (2)

 

$

311,984

 

311,984

 

380,048

 

0.05

%

N536UA, 16%, due 9/29/14 (2)

 

$

69,373

 

69,373

 

71,630

 

0.01

%

N545UA, 16%, due 8/29/15 (2)

 

$

214,325

 

214,325

 

233,415

 

0.03

%

N585UA, 20%, due 10/25/16 (2)

 

$

366,316

 

366,316

 

446,310

 

0.05

%

N659UA, 12%, due 2/28/16 (6)

 

$

2,439,123

 

2,439,123

 

2,635,667

 

0.31

%

N661UA, 12%, due 5/4/16 (6)

 

$

2,619,284

 

2,619,284

 

2,862,717

 

0.34

%

Total Scheduled Air Transportation

 

 

 

10,982,366

 

11,762,015

 

 

 

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (1.64%)

 

 

 

 

 

 

 

 

 

Isola USA Corporation, Senior Secured Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 11/29/18

 

$

14,492,188

 

14,285,320

 

14,854,492

 

1.76

%

SunEdison, Inc., Senior Secured Letters of Credit, 3.75%, due 2/28/17 (12), (13)

 

$

 

(1,031,717

)

(1,031,717

)

(0.12

)%

Total Semiconductor and Other Electronic Component Manufacturing

 

 

 

13,253,603

 

13,822,775

 

 

 

 

 

 

 

 

 

 

 

 

 

Software Publishers (6.91%)

 

 

 

 

 

 

 

 

 

Acronis International GmbH, 1st Lien Term Loan, LIBOR + 9.5% (Q), 1% LIBOR Floor, due 2/21/17 - (Switzerland) (10)

 

$

13,628,929

 

13,363,718

 

13,676,630

 

1.62

%

BlackLine Systems, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 0.4% (Q) Cash + 7.6% PIK, 1.5% LIBOR Floor, due 9/25/18

 

$

12,818,762

 

12,050,059

 

12,440,609

 

1.48

%

Deltek, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.75% (Q), 1.25% LIBOR Floor, due 10/10/19

 

$

15,000,000

 

14,811,452

 

15,324,975

 

1.82

%

Edmentum, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 5/17/19

 

$

16,500,000

 

16,271,792

 

16,788,750

 

1.99

%

Total Software Publishers

 

 

 

56,497,021

 

58,230,964

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.59%)

 

 

 

 

 

 

 

 

 

UBC Healthcare Analytics, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 7/1/18

 

$

4,933,947

 

4,909,278

 

4,958,617

 

0.59

%

Support Activities for Mining (0.00%)

 

 

 

 

 

 

 

 

 

McDermott International, Inc., Bridge Facility Commitment

 

$

 

 

 

 

 

S-F-45



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

Principal

 

 

 

 

 

Percent of

 

 

 

Amount or

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Textile Furnishings Mills (1.96%)

 

 

 

 

 

 

 

 

 

Lexmark Carpet Mills, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 10% (Q), 1% LIBOR Floor, due 9/30/18

 

$

16,351,467

 

$

15,942,680

 

$

16,523,158

 

1.96

%

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.83%)

 

 

 

 

 

 

 

 

 

Integra Telecom Holdings, Inc., 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1.25% LIBOR Floor, due 2/22/20

 

$

15,000,000

 

14,709,735

 

15,390,000

 

1.83

%

 

 

 

 

 

 

 

 

 

 

Wireless Telecommunications Carriers (3.84%)

 

 

 

 

 

 

 

 

 

Alpheus Communications, LLC, Senior Secured 1st Lien Delayed Draw FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18 (13)

 

$

 

(11,183

)

(7,874

)

 

Alpheus Communications, LLC, Senior Secured 1st Lien FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18

 

$

8,248,124

 

8,166,127

 

8,190,387

 

0.97

%

Globalive Wireless Management Corp., Senior Secured 1st Lien Term Loan, LIBOR + 10.9% (Q), due 4/30/14 - (Canada) (10)

 

$

3,037,292

 

2,933,872

 

3,067,665

 

0.36

%

Gogo, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 6/21/17

 

$

19,461,356

 

18,587,291

 

21,115,572

 

2.51

%

Total Wireless Telecommunications Carriers

 

 

 

29,676,107

 

32,365,750

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Bank Debt

 

 

 

636,810,398

 

643,577,280

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Corporate Debt Securities (16.51%)

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (1.10%)

 

 

 

 

 

 

 

 

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16 (2), (5)

 

$

9,268,000

 

7,586,317

 

9,268,000

 

1.10

%

 

 

 

 

 

 

 

 

 

 

Beverage Manufacturing (1.00%)

 

 

 

 

 

 

 

 

 

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18 (5)

 

$

7,780,000

 

7,780,000

 

8,441,300

 

1.00

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.90%)

 

 

 

 

 

 

 

 

 

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19 (5)

 

$

7,098,916

 

6,960,435

 

7,560,346

 

0.90

%

 

 

 

 

 

 

 

 

 

 

Fabricated Metal Product Manufacturing (1.31%)

 

 

 

 

 

 

 

 

 

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16 (5), (7)

 

$

12,500,000

 

12,322,875

 

11,000,000

 

1.31

%

 

 

 

 

 

 

 

 

 

 

Lessors of Real Estate (1.60%)

 

 

 

 

 

 

 

 

 

Hunt Companies, Inc., Senior Secured Notes, 9.625%, due 3/1/21 (5)

 

$

13,084,000

 

12,922,359

 

13,476,520

 

1.60

%

 

 

 

 

 

 

 

 

 

 

Nondepository Credit Intermediation (3.07%)

 

 

 

 

 

 

 

 

 

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19 - (Cayman Islands) (5), (8), (10)

 

$

10,000,000

 

9,829,350

 

10,850,000

 

1.29

%

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18 (5), (10)

 

$

15,084,000

 

15,084,000

 

15,084,000

 

1.78

%

Total Nondepository Credit Intermediation

 

 

 

24,913,350

 

25,934,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Plastics Products Manufacturing (1.72%)

 

 

 

 

 

 

 

 

 

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18 (5)

 

$

13,600,000

 

13,600,000

 

14,478,995

 

1.72

%

 

 

 

 

 

 

 

 

 

 

Retail (0.01%)

 

 

 

 

 

 

 

 

 

Shop Holding LLC, Convertible Promissory Note, 5%, due 8/5/15 (5)

 

$

73,140

 

73,140

 

71,494

 

0.01

%

 

 

 

 

 

 

 

 

 

 

Satellite Telecommunications (1.25%)

 

 

 

 

 

 

 

 

 

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19 (5), (7), (10)

 

$

9,914,000

 

9,914,000

 

10,576,999

 

1.25

%

 

 

 

 

 

 

 

 

 

 

Scientific Research and Development Services (2.14%)

 

 

 

 

 

 

 

 

 

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17 (5)

 

$

17,200,000

 

16,536,295

 

18,060,000

 

2.14

%

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.61%)

 

 

 

 

 

 

 

 

 

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17 (5)

 

$

5,000,000

 

5,000,000

 

5,150,000

 

0.61

%

 

 

 

 

 

 

 

 

 

 

Structured Note Funds (1.80%)

 

 

 

 

 

 

 

 

 

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21 - (Cayman Islands) (5), (10)

 

$

15,000,000

 

15,000,000

 

15,147,000

 

1.80

%

Total Other Corporate Debt Securities

 

 

 

132,608,771

 

139,164,654

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Debt Investments

 

 

 

769,419,169

 

782,741,934

 

 

 

 

S-F-46



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (3.91%)

 

 

 

 

 

 

 

 

 

Business Support Services (0.26%)

 

 

 

 

 

 

 

 

 

Findly Talent, LLC, Membership Units (3), (5)

 

708,229

 

$

230,938

 

$

162,185

 

0.02

%

STG-Fairway Holdings, LLC, Class A Units (3), (5)

 

841,479

 

943,287

 

1,990,939

 

0.24

%

Total Business Support Services

 

 

 

1,174,225

 

2,153,124

 

 

 

 

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (0.59%)

 

 

 

 

 

 

 

 

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units (2), (3), (5)

 

5,000,000

 

5,000,000

 

5,000,000

 

0.59

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.11%)

 

 

 

 

 

 

 

 

 

Anacomp, Inc., Class A Common Stock (3), (5), (6)

 

1,255,527

 

26,711,048

 

891,424

 

0.11

%

 

 

 

 

 

 

 

 

 

 

Depository Credit Intermediation (0.06%)

 

 

 

 

 

 

 

 

 

Doral Financial Corporation, Common Stock - (Puerto Rico) (3), (12)

 

53,890

 

11,699,417

 

467,763

 

0.06

%

 

 

 

 

 

 

 

 

 

 

Financial Investment Activities (0.00%)

 

 

 

 

 

 

 

 

 

Marsico Holdings, LLC, Common Interest Units (3), (5), (11)

 

168,698

 

172,694

 

25,305

 

 

 

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (0.00%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Membership Units (2), (3), (5)

 

13,161,000

 

2,010,777

 

 

 

 

 

 

 

 

 

 

 

 

 

Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing (0.00%)

 

 

 

 

 

 

 

 

 

Precision Holdings, LLC, Class C Membership Interests (3), (5)

 

33

 

 

7,397

 

 

 

 

 

 

 

 

 

 

 

 

Nonmetallic Mineral Mining and Quarrying (0.19%)

 

 

 

 

 

 

 

 

 

EPMC HoldCo, LLC, Membership Units (2), (5)

 

1,312,720

 

 

1,562,137

 

0.19

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (0.17%)

 

 

 

 

 

 

 

 

 

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,843

 

1,274,000

 

1,412,078

 

0.17

%

 

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (0.04%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Warrants to Purchase Common Stock (3), (5)

 

233,470

 

300,322

 

357,209

 

0.04

%

 

 

 

 

 

 

 

 

 

 

Retail (0.06%)

 

 

 

 

 

 

 

 

 

Shop Holding, LLC, Class A Units (3), (5)

 

507,167

 

480,049

 

476,628

 

0.06

%

Shop Holding, LLC, Warrants to Purchase Class A Units (3), (5)

 

326,691

 

 

17,834

 

 

Total Electronic Shopping

 

 

 

480,049

 

494,462

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.11%)

 

 

 

 

 

 

 

 

 

Equipment Trusts - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL Trust Beneficial Interests (5), (6)

 

795

 

94,231

 

123,930

 

0.01

%

N918DL Trust Beneficial Interests (5), (6)

 

673

 

105,629

 

141,270

 

0.02

%

N954DL Trust Beneficial Interests (5), (6)

 

636

 

126,797

 

69,190

 

0.01

%

N955DL Trust Beneficial Interests (5), (6)

 

618

 

127,179

 

112,710

 

0.01

%

N956DL Trust Beneficial Interests (5), (6)

 

623

 

118,190

 

108,290

 

0.01

%

N957DL Trust Beneficial Interests (5), (6)

 

618

 

128,014

 

109,140

 

0.01

%

N959DL Trust Beneficial Interests (5), (6)

 

614

 

128,843

 

109,990

 

0.01

%

N960DL Trust Beneficial Interests (5), (6)

 

602

 

132,148

 

109,140

 

0.01

%

N961DL Trust Beneficial Interests (5), (6)

 

610

 

131,332

 

103,700

 

0.01

%

N976DL Trust Beneficial Interests (5), (6)

 

709

 

108,697

 

102,862

 

0.01

%

Equipment Trusts - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA Trust Beneficial Interests (2), (5)

 

56

 

211,477

 

453,896

 

0.05

%

N512UA Trust Beneficial Interests (2), (5)

 

56

 

206,766

 

446,071

 

0.05

%

N536UA Trust Beneficial Interests (2), (5)

 

86

 

424,460

 

526,943

 

0.06

%

N545UA Trust Beneficial Interests (2), (5)

 

71

 

371,557

 

632,959

 

0.08

%

N585UA Trust Beneficial Interests (2), (5)

 

56

 

229,521

 

465,546

 

0.06

%

United N659UA-767, LLC (N659UA) (5), (6)

 

439

 

2,197,988

 

2,950,833

 

0.35

%

United N661UA-767, LLC (N661UA) (5), (6)

 

426

 

2,161,205

 

2,961,015

 

0.35

%

Total Scheduled Air Transportation

 

 

 

7,004,034

 

9,527,485

 

 

 

 

 

 

 

 

 

 

 

 

 

Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing (0.09%)

 

 

 

 

 

 

 

 

 

KAGY Holding Company, Inc., Series A Preferred Stock (2), (3), (5)

 

9,778

 

1,091,200

 

721,467

 

0.09

%

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (0.03%)

 

 

 

 

 

 

 

 

 

AIP/IS Holdings, LLC, Membership Units (3), (5)

 

352

 

 

229,504

 

0.03

%

 

 

 

 

 

 

 

 

 

 

Software Publishers (0.06%)

 

 

 

 

 

 

 

 

 

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,232,731

 

522,678

 

530,074

 

0.06

%

 

S-F-47



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

March 31, 2014

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.14%)

 

 

 

 

 

 

 

 

 

Integra Telecom, Inc., Common Stock (3), (5)

 

1,274,522

 

$

8,433,884

 

$

5,586,951

 

0.67

%

Integra Telecom, Inc., Warrants (3), (5)

 

346,939

 

19,920

 

186,275

 

0.02

%

V Telecom Investment S.C.A., Common Shares - (Luxembourg) (3), (4), (5), (10)

 

1,393

 

3,236,256

 

3,763,159

 

0.45

%

Total Wired Telecommunications Carriers

 

 

 

11,690,060

 

9,536,385

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Equity Securities

 

 

 

69,130,504

 

32,915,814

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments

 

 

 

838,549,673

 

815,657,748

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents (3.22%)

 

 

 

 

 

 

 

 

 

Wells Fargo & Company, Overnight Repurchase Agreement, 0.03%,

 

 

 

 

 

 

 

 

 

Collateralized by Freddie Mac Note

 

 

 

 

 

 

$

16,373,605

 

1.95

%

Union Bank of California, Commercial Paper, 0.10%, due 4/1/14

 

 

 

 

 

 

6,000,000

 

0.71

%

Cash Denominated in Foreign Currencies

 

 

 

 

 

 

121,879

 

0.01

%

Cash Held on Account at Various Institutions

 

 

 

 

 

 

4,645,952

 

0.55

%

Cash and Cash Equivalents

 

 

 

 

 

27,141,436

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Cash and Investments (9)

 

 

 

 

 

$

842,799,184

 

100.00

%

 


Notes to Statement of Investments:

 

(1)

Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933. Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower.

(2)

Non-controlled affiliate — as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates.

(3)

Non-income producing security.

(4)

Principal amount denominated in foreign currency. Amortized cost and fair value converted from foreign currency to US dollars. (See Note 2)

(5)

Restricted security. (See Note 2)

(6)

Controlled issuer — as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer). Investment is not more than 50% owned nor deemed to be a significant subsidiary. See Consolidated Schedule of Changes in Investments in Affiliates.

(7)

Investment has been segregated to collateralize certain unfunded commitments.

(8)

$5,000,000 principal amount of this investment has been segregated to collateralize certain unfunded commitments.

(9)

All cash and investments, except those referenced in Notes 7 and 8 above, are pledged as collateral under the Revolving Facilities as described in Note 4 to the Consolidated Financial Statements.

(10)

Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership ‘s total assets.

(11)

Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership ‘s total assets.

(12)

Publicly traded company with a market capitalization greater than $250 million and as a result is not a qualifying asset under Section 55(a)  of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership ‘s total assets

(13)

Negative balances relate to an unfunded commitment that was acquired and valued at a discount.

 

LIBOR or EURIBOR resets monthly (M), quarterly (Q), or semiannually (S).

 

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $110,386,498, and $66,876,929, respectively for the three months ended March 31, 2014. Aggregate acquisitions includes investment assets received as payment in kind.  Aggregate dispositions includes principal paydowns on and maturities of debt investments.  The total value of restricted securities and bank debt as of March 31, 2014 was $815,189,985, or 96.7% of total cash and investments of the Partnership.

 

Options and Swaps at March 31, 2014 were as follows:

 

Investment

 

Notional Amount

 

Fair Value

 

 

 

 

 

 

 

Interest Rate Cap, 4%, expires 5/15/2016

 

$

25,000,000

 

$

8,605

 

Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 3/31/17

 

$

4,289,019

 

$

(300,684

)

 

See accompanying notes.

 

S-F-48



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (92.05%)

 

 

 

 

 

 

 

 

 

Bank Debt (74.53%) (1)

 

 

 

 

 

 

 

 

 

Accounting, Tax Preparation, Bookkeeping, and Payroll Services (1.03%)

 

 

 

 

 

 

 

 

 

Expert Global Solutions, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 7.25% (Q), 1.25% LIBOR Floor, due 4/3/18

 

$

699,754

 

$

701,280

 

$

703,691

 

0.09

%

Expert Global Solutions, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 11% (Q),1.5% LIBOR Floor, due 10/3/18

 

$

7,434,877

 

7,228,004

 

7,382,833

 

0.94

%

Total Accounting, Tax Preparation, Bookkeeping, and Payroll Services

 

 

 

7,929,284

 

8,086,524

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising, Public Relations, and Related Services (2.12%)

 

 

 

 

 

 

 

 

 

Doubleplay III Limited, Senior Secured 1st Lien Facility A1 Term Loan, EURIBOR + 6.25% (Q), 1.25% EURIBOR Floor, due 3/18/18 - (United Kingdom) (4), (10)

 

$

13,165,705

 

16,428,630

 

16,736,606

 

2.12

%

 

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (0.26%)

 

 

 

 

 

 

 

 

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16 (2)

 

$

2,056,927

 

2,056,927

 

2,056,927

 

0.26

%

 

 

 

 

 

 

 

 

 

 

Business Support Services (1.89%)

 

 

 

 

 

 

 

 

 

STG-Fairway Acquisitions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.25% (Q), 1.25% LIBOR Floor, due 8/28/19

 

$

14,643,455

 

13,944,123

 

14,929,002

 

1.89

%

 

 

 

 

 

 

 

 

 

 

Chemical Manufacturing (2.20%)

 

 

 

 

 

 

 

 

 

Archroma, Senior Secured Lien Term Loan B, LIBOR + 8.25% (Q), 1.25% LIBOR Floor, due 9/30/18

 

$

17,456,250

 

17,107,125

 

17,401,699

 

2.20

%

 

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (1.91%)

 

 

 

 

 

 

 

 

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625% (Q), 1.25% LIBOR Floor, due 12/11/18 (2)

 

$

15,000,000

 

14,850,000

 

15,097,500

 

1.91

%

 

 

 

 

 

 

 

 

 

 

Computer Equipment Manufacturing (1.15%)

 

 

 

 

 

 

 

 

 

ELO Touch Solutions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 10.5% (Q),1.5% LIBOR Floor, due 12/1/18

 

$

10,000,000

 

9,666,672

 

9,100,000

 

1.15

%

 

 

 

 

 

 

 

 

 

 

Converted Paper Products Manufacturing (0.45%)

 

 

 

 

 

 

 

 

 

Ranpak Corp., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1.25% LIBOR Floor, due 4/23/20

 

$

3,469,573

 

3,434,877

 

3,573,660

 

0.45

%

 

 

 

 

 

 

 

 

 

 

Computer Systems Design and Related Services (5.40%)

 

 

 

 

 

 

 

 

 

Blue Coat Systems, Inc., Senior Secured 1st Lien Revolver Term Loan, LIBOR + 3.5% (Q), 1% LIBOR Floor, due 5/31/18

 

$

4,500,000

 

3,540,000

 

4,060,800

 

0.51

%

Blue Coat Systems, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1% LIBOR Floor, due 6/28/20

 

$

15,000,000

 

14,878,125

 

15,300,000

 

1.94

%

OnX Enterprise Solutions, Ltd., Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q),due 9/3/18

 

$

10,640,000

 

10,483,300

 

10,709,160

 

1.36

%

OnX USA, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7% (Q), due 9/3/18

 

$

5,320,000

 

5,244,790

 

5,354,580

 

0.68

%

Websense, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25% (Q), 1% LIBOR Floor, due 12/27/20

 

$

7,200,000

 

7,164,000

 

7,218,000

 

0.91

%

Total Computer Systems Design and Related Services

 

 

 

41,310,215

 

42,642,540

 

 

 

 

 

 

 

 

 

 

 

 

 

Electric Power Generation, Transmission and Distribution (2.21%)

 

 

 

 

 

 

 

 

 

Panda Sherman Power, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7.5% (Q), 1.5% LIBOR Floor, due 9/14/18

 

$

11,070,172

 

10,932,474

 

11,402,277

 

1.44

%

Panda Temple Power II, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q), 1.25% LIBOR Floor, due 4/3/19

 

$

5,892,970

 

5,834,041

 

6,069,759

 

0.77

%

Total Electric Power Generation, Transmission and Distribution

 

 

 

16,766,515

 

17,472,036

 

 

 

 

 

 

 

 

 

 

 

 

 

Electrical Equipment and Component Manufacturing (2.08%)

 

 

 

 

 

 

 

 

 

Palladium Energy, Inc., 1st Lien Senior Secured Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 12/26/17

 

$

16,500,317

 

16,225,541

 

16,426,066

 

2.08

%

 

 

 

 

 

 

 

 

 

 

Financial Investment Activities (0.49%)

 

 

 

 

 

 

 

 

 

Marsico Capital Management, Senior Secured 1st Lien Term Loan, LIBOR + 5% (M), due 12/31/22 (11)

 

$

10,637,623

 

13,394,183

 

3,882,732

 

0.49

%

 

 

 

 

 

 

 

 

 

 

Freight Transportation Arrangement (0.48%)

 

 

 

 

 

 

 

 

 

Livingston International, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/18/20 (10)

 

$

3,665,217

 

3,597,620

 

3,756,848

 

0.48

%

 

S-F-49


 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (2.04%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18 (2)

 

$

5,164,796

 

$

5,164,796

 

$

2,197,621

 

0.28

%

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

1,370,199

 

1,339,883

 

1,370,199

 

0.17

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/21/16 (2)

 

$

3,626,947

 

3,626,947

 

3,626,947

 

0.46

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

6,825,328

 

6,825,328

 

6,825,328

 

0.86

%

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)

 

$

2,150,088

 

2,109,019

 

2,150,088

 

0.27

%

Total Full-Service Restaurants

 

 

 

19,065,973

 

16,170,183

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming Industries (1.87%)

 

 

 

 

 

 

 

 

 

AP Gaming I, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 12/20/20

 

$

15,000,000

 

14,550,000

 

14,737,500

 

1.87

%

 

 

 

 

 

 

 

 

 

 

Grocery Stores (1.91%)

 

 

 

 

 

 

 

 

 

Bashas, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 9.35% (M), 1.5% LIBOR Floor, due 12/28/15

 

$

14,843,788

 

14,802,168

 

15,066,445

 

1.91

%

 

 

 

 

 

 

 

 

 

 

Inland Water Transportation (1.64%)

 

 

 

 

 

 

 

 

 

US Shipping Corp, Senior Secured 1st Lien Term Loan B, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/30/18

 

$

12,603,333

 

12,477,300

 

12,965,679

 

1.64

%

 

 

 

 

 

 

 

 

 

 

Insurance Related Activities (0.81%)

 

 

 

 

 

 

 

 

 

Confie Seguros Holding II Co., 2nd Lien Term Loan, LIBOR + 9% (M), 1.25% LIBOR Floor, due 5/8/19

 

$

6,341,809

 

6,245,733

 

6,391,370

 

0.81

%

 

 

 

 

 

 

 

 

 

 

Merchant Wholesalers (1.16%)

 

 

 

 

 

 

 

 

 

Envision Acquisition Company, LLC, 2nd Lien Term Loan, LIBOR + 8.75% (M), 1% LIBOR Floor, due 11/4/21

 

$

9,079,011

 

8,897,430

 

9,192,498

 

1.16

%

 

 

 

 

 

 

 

 

 

 

Motion Picture and Video Industries (1.97%)

 

 

 

 

 

 

 

 

 

CORE Entertainment, Inc., Senior Secured 1st Lien Term Loan, 9%, due 6/21/17

 

$

9,462,231

 

9,381,116

 

8,610,631

 

1.09

%

CORE Entertainment, Inc., Senior Secured 2nd Lien Term Loan, 13.5%, due 6/21/18

 

$

7,569,785

 

7,502,054

 

6,858,225

 

0.88

%

Total Motion Picture and Video Industries

 

 

 

16,883,170

 

15,468,856

 

 

 

 

 

 

 

 

 

 

 

 

 

Newspaper, Periodical, Book, and Directory Publishers (3.90%)

 

 

 

 

 

 

 

 

 

Hanley-Wood, LLC, 1st Lien FILO Term Loan, LIBOR + 6.75% (Q), 1.25% LIBOR Floor, due 7/15/18

 

$

16,707,600

 

16,707,600

 

16,699,246

 

2.13

%

MediMedia USA, Inc., 1st Lien Revolver, LIBOR + 6.75% (M), due 5/20/18

 

$

4,960,000

 

3,797,500

 

4,523,908

 

0.57

%

MediMedia USA, Inc., 1st Lien Term Loan, LIBOR + 6.75% (M), 1.25% LIBOR Floor, due 11/20/18

 

$

9,701,250

 

9,433,029

 

9,458,719

 

1.20

%

Total Newspaper, Periodical, Book, and Directory Publishers

 

 

 

29,938,129

 

30,681,873

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonresidential Building Construction (1.25%)

 

 

 

 

 

 

 

 

 

NCM Group Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 11.5% (Q), 1% LIBOR Floor, due 8/29/18

 

$

10,000,000

 

9,620,619

 

9,875,000

 

1.25

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (2.24%)

 

 

 

 

 

 

 

 

 

One Sky Flight, LLC, Senior Secured 2nd Lien Term Loan, 12% Cash + 3% PIK, due 5/4/19

 

$

18,200,000

 

16,929,086

 

17,708,600

 

2.24

%

 

 

 

 

 

 

 

 

 

 

Oil and Gas Extraction (1.98%)

 

 

 

 

 

 

 

 

 

Willbros Group, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.25% LIBOR Floor, due 8/7/19

 

$

15,426,118

 

15,051,713

 

15,657,510

 

1.98

%

 

 

 

 

 

 

 

 

 

 

Other Telecommunications (1.76%)

 

 

 

 

 

 

 

 

 

Securus Technologies, Inc., 2nd Lien Term Loan, LIBOR + 7.75% (Q), 1.25% LIBOR Floor, due 4/30/21

 

$

14,000,000

 

13,860,000

 

13,925,660

 

1.76

%

 

 

 

 

 

 

 

 

 

 

Petroleum and Coal Products Manufacturing (0.95%)

 

 

 

 

 

 

 

 

 

Boomerang Tube, LLC, 2nd Lien Term Loan, LIBOR + 9.5% (Q), 1.5% LIBOR Floor, due 10/11/17

 

$

7,749,023

 

7,563,978

 

7,477,807

 

0.95

%

 

 

 

 

 

 

 

 

 

 

Professional, Scientific, and Technical Services (3.14%)

 

 

 

 

 

 

 

 

 

Connolly, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 9.25% (Q), 1.25% LIBOR Floor, due 7/15/19

 

$

12,000,000

 

11,829,534

 

12,270,000

 

1.55

%

ConvergeOne Holdings, 1st Lien Term Loan, LIBOR + 8% (Q), 1.25% LIBOR Floor, due 5/8/19

 

$

12,654,643

 

12,464,823

 

12,570,236

 

1.59

%

Total Professional, Scientific, and Technical Services

 

 

 

24,294,357

 

24,840,236

 

 

 

 

 

 

 

 

 

 

 

 

 

Promoters of Performing Arts, Sports, and Similar Events (1.40%)

 

 

 

 

 

 

 

 

 

Stadium Management Group, Senior Secured 2nd Lien Term Loan, LIBOR + 9.50% (M), 1.25% LIBOR Floor, due 12/7/18

 

$

11,000,000

 

10,817,390

 

11,055,000

 

1.40

%

 

S-F-50



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

Principal

 

 

 

Fair

 

Cash and

 

Investment

 

Amount

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (3.09%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6% (Q) Cash + 4% PIK, 2% LIBOR Floor, due 8/3/16

 

$

6,995,124

 

$

6,648,634

 

$

6,774,778

 

0.86

%

The Tennis Channel, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 8.5% (Q), due 5/29/17

 

$

17,589,459

 

17,134,705

 

17,615,843

 

2.23

%

Total Radio and Television Broadcasting

 

 

 

23,783,339

 

24,390,621

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail (2.29%)

 

 

 

 

 

 

 

 

 

Kenneth Cole Productions, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 10.40% (M), 1% LIBOR Floor, due 9/25/17

 

$

11,272,727

 

11,051,496

 

11,329,090

 

1.44

%

Shopzilla, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.5% (Q), due 3/31/16

 

$

6,710,057

 

6,525,027

 

6,683,216

 

0.85

%

Total Retail

 

 

 

17,576,523

 

18,012,306

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.60%)

 

 

 

 

 

 

 

 

 

Aircraft Secured Mortgages - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL, 8%, due 3/15/17 (6)

 

$

289,048

 

289,048

 

296,820

 

0.04

%

N918DL, 8%, due 8/15/18 (6)

 

$

388,001

 

388,001

 

397,290

 

0.05

%

N954DL, 8%, due 3/20/19 (6)

 

$

514,375

 

514,375

 

524,620

 

0.07

%

N955DL, 8%, due 6/20/19 (6)

 

$

533,283

 

533,283

 

543,320

 

0.07

%

N956DL, 8%, due 5/20/19 (6)

 

$

532,275

 

532,275

 

542,640

 

0.07

%

N957DL, 8%, due 6/20/19 (6)

 

$

537,947

 

537,947

 

548,250

 

0.07

%

N959DL, 8%, due 7/20/19 (6)

 

$

543,573

 

543,573

 

553,520

 

0.07

%

N960DL, 8%, due 10/20/19 (6)

 

$

564,855

 

564,855

 

574,430

 

0.07

%

N961DL, 8%, due 8/20/19 (6)

 

$

558,427

 

558,427

 

568,310

 

0.07

%

N976DL, 8%, due 2/15/18 (6)

 

$

394,360

 

394,360

 

404,600

 

0.05

%

Aircraft Secured Mortgages - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA, 20%, due 10/26/16 (2)

 

$

328,848

 

328,848

 

404,605

 

0.05

%

N512UA, 20%, due 10/26/16 (2)

 

$

334,535

 

334,535

 

414,010

 

0.05

%

N536UA, 16%, due 9/29/14 (2)

 

$

108,845

 

108,845

 

114,000

 

0.01

%

N545UA, 16%, due 8/29/15 (2)

 

$

249,695

 

249,695

 

275,405

 

0.03

%

N585UA, 20%, due 10/25/16 (2)

 

$

392,794

 

392,794

 

486,115

 

0.06

%

N659UA, 12%, due 2/28/16 (6)

 

$

2,708,150

 

2,708,150

 

2,948,986

 

0.37

%

N661UA, 12%, due 5/4/16 (6)

 

$

2,880,186

 

2,880,186

 

3,171,026

 

0.40

%

Total Scheduled Air Transportation

 

 

 

11,859,197

 

12,767,947

 

 

 

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (1.87%)

 

 

 

 

 

 

 

 

 

Isola USA Corporation, Senior Secured Term Loan B, LIBOR + 8.25% (Q), 1% LIBOR Floor, due 11/29/18

 

$

14,583,333

 

14,366,560

 

14,729,167

 

1.87

%

 

 

 

 

 

 

 

 

 

 

Software Publishers (7.13%)

 

 

 

 

 

 

 

 

 

BlackLine Systems, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 0.4% (Q) Cash + 7.6% PIK, 1.5% LIBOR Floor, due 9/25/18

 

$

12,579,747

 

11,811,044

 

12,183,485

 

1.56

%

Coreone Technologies, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 3.75% (Q) Cash + 5% PIK, 1% LIBOR Floor, due 9/4/18

 

$

13,556,801

 

13,243,533

 

13,455,125

 

1.72

%

Deltek, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.75% (Q), 1.25% LIBOR Floor, due 10/10/19

 

$

15,000,000

 

14,805,253

 

15,300,000

 

1.94

%

Edmentum, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 5/17/19

 

$

15,000,000

 

14,748,486

 

15,112,500

 

1.91

%

Total Software Publishers

 

 

 

54,608,316

 

56,051,110

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.70%)

 

 

 

 

 

 

 

 

 

UBC Healthcare Analytics, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9% (Q), 1% LIBOR Floor, due 7/1/18

 

$

5,526,021

 

5,498,391

 

5,559,177

 

0.70

%

 

 

 

 

 

 

 

 

 

 

Textile Furnishings Mills (2.08%)

 

 

 

 

 

 

 

 

 

Lexmark Carpet Mills, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 10% (Q), 1% LIBOR Floor, due 9/30/18

 

$

16,351,467

 

15,942,680

 

16,392,346

 

2.08

%

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.96%)

 

 

 

 

 

 

 

 

 

Integra Telecom Holdings, Inc., 2nd Lien Term Loan, LIBOR + 8.5% (Q), 1.25% LIBOR Floor, due 2/22/20

 

$

15,000,000

 

14,701,027

 

15,459,375

 

1.96

%

 

S-F-51



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

Principal

 

 

 

 

 

Percent of

 

 

 

Amount or

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Debt Investments (continued)

 

 

 

 

 

 

 

 

 

Wireless Telecommunications Carriers (4.12%)

 

 

 

 

 

 

 

 

 

Alpheus Communications, LLC, Senior Secured 1st Lien Delayed Draw FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18 (13)

 

$

 

$

(11,183

)

$

(8,437

)

 

Alpheus Communications, LLC, Senior Secured 1st Lien FILO Term Loan, LIBOR + 6.92% (Q), 1% LIBOR Floor, due 5/31/18

 

$

8,248,124

 

8,166,127

 

8,186,263

 

1.04

%

Globalive Wireless Management Corp., Senior Secured 1st Lien Term Loan, LIBOR + 10.9% (Q), due 4/30/14 - (Canada) (10)

 

$

3,037,292

 

2,933,872

 

3,067,665

 

0.39

%

Gogo, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 9.75% (Q), 1.5% LIBOR Floor, due 6/21/17

 

$

19,587,428

 

18,707,700

 

21,252,360

 

2.69

%

Total Wireless Telecommunications Carriers

 

 

 

29,796,516

 

32,497,851

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Bank Debt

 

 

 

585,841,307

 

588,236,257

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Corporate Debt Securities (17.52%)

 

 

 

 

 

 

 

 

 

Architectural, Engineering, and Related Services (1.01%)

 

 

 

 

 

 

 

 

 

ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19 (2), (5)

 

$

7,959,369

 

7,959,369

 

7,959,369

 

1.01

%

 

 

 

 

 

 

 

 

 

 

Artificial Synthetic Fibers and Filaments Manufacturing (1.17%)

 

 

 

 

 

 

 

 

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16 (2), (5)

 

$

9,268,000

 

7,586,317

 

9,268,000

 

1.17

%

 

 

 

 

 

 

 

 

 

 

Beverage Manufacturing (1.04%)

 

 

 

 

 

 

 

 

 

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18 (5)

 

$

7,780,000

 

7,780,000

 

8,207,900

 

1.04

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.97%)

 

 

 

 

 

 

 

 

 

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19 (5)

 

$

7,098,916

 

6,960,435

 

7,631,335

 

0.97

%

 

 

 

 

 

 

 

 

 

 

Fabricated Metal Product Manufacturing (1.38%)

 

 

 

 

 

 

 

 

 

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16 (5), (7)

 

$

12,500,000

 

12,322,875

 

10,875,000

 

1.38

%

 

 

 

 

 

 

 

 

 

 

Metal Ore Mining (0.78%)

 

 

 

 

 

 

 

 

 

St Barbara Ltd., 1st Priority Senior Secured Notes, 8.875%, due 4/15/18 - (Australia) (5)

 

$

7,359,000

 

7,326,651

 

6,144,765

 

0.78

%

 

 

 

 

 

 

 

 

 

 

Nondepository Credit Intermediation (3.25%)

 

 

 

 

 

 

 

 

 

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19 - (Cayman Islands) (5), (10)

 

$

10,000,000

 

9,824,072

 

10,700,000

 

1.35

%

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18 (5), (10)

 

$

15,000,000

 

15,000,000

 

14,962,500

 

1.90

%

Total Nondepository Credit Intermediation

 

 

 

24,824,072

 

25,662,500

 

 

 

 

 

 

 

 

 

 

 

 

 

Plastics Products Manufacturing (1.83%)

 

 

 

 

 

 

 

 

 

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18 (5)

 

$

13,600,000

 

13,600,000

 

14,426,622

 

1.83

%

 

 

 

 

 

 

 

 

 

 

Satellite Telecommunications (1.31%)

 

 

 

 

 

 

 

 

 

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19 (5), (8), (10)

 

$

9,914,000

 

9,914,000

 

10,335,345

 

1.31

%

 

 

 

 

 

 

 

 

 

 

Scientific Research and Development Services (2.23%)

 

 

 

 

 

 

 

 

 

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17 (5)

 

$

17,200,000

 

16,536,295

 

17,630,000

 

2.23

%

 

 

 

 

 

 

 

 

 

 

Specialty Hospitals (0.65%)

 

 

 

 

 

 

 

 

 

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17 (5)

 

$

5,000,000

 

5,000,000

 

5,137,500

 

0.65

%

 

 

 

 

 

 

 

 

 

 

Structured Note Funds (1.90%)

 

 

 

 

 

 

 

 

 

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21 - (Cayman Islands) (5), (10)

 

$

15,000,000

 

15,000,000

 

15,000,000

 

1.90

%

 

 

 

 

 

 

 

 

 

 

Total Other Corporate Debt Securities

 

 

 

134,810,014

 

138,278,336

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Debt Investments

 

 

 

720,651,321

 

726,514,593

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (5.04%)

 

 

 

 

 

 

 

 

 

Architectural, Engineering, and Related Services (0.87%)

 

 

 

 

 

 

 

 

 

ESP Holdings, Inc., Cumulative Preferred 15% (2), (3), (5)

 

20,297

 

2,249,930

 

3,947,862

 

0.51

%

ESP Holdings, Inc., Common Stock (2), (3), (5)

 

88,670

 

9,311,782

 

2,856,346

 

0.36

%

Total Architectural, Engineering, and Related Services

 

 

 

11,561,712

 

6,804,208

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Support Services (0.22%)

 

 

 

 

 

 

 

 

 

STG-Fairway Holdings, LLC, Class A Units (3), (5)

 

841,479

 

1,174,225

 

1,722,508

 

0.22

%

 

S-F-52



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (continued)

 

 

 

 

 

 

 

 

 

Communications Equipment Manufacturing (0.64%)

 

 

 

 

 

 

 

 

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units (2), (3), (5)

 

5,000,000

 

$

5,000,000

 

$

5,000,000

 

0.64

%

 

 

 

 

 

 

 

 

 

 

Data Processing, Hosting, and Related Services (0.13%)

 

 

 

 

 

 

 

 

 

Anacomp, Inc., Class A Common Stock (3), (5), (6)

 

1,255,527

 

26,711,048

 

1,004,422

 

0.13

%

 

 

 

 

 

 

 

 

 

 

Depository Credit Intermediation (0.11%)

 

 

 

 

 

 

 

 

 

Doral Financial Corporation, Common Stock - (Puerto Rico) (3), (12)

 

53,890

 

11,699,417

 

843,913

 

0.11

%

 

 

 

 

 

 

 

 

 

 

Financial Investment Activities (0.00%)

 

 

 

 

 

 

 

 

 

Marsico Holdings, LLC, Common Interest Units (3), (5), (11)

 

168,698

 

172,694

 

4,302

 

 

 

 

 

 

 

 

 

 

 

 

Full-Service Restaurants (0.00%)

 

 

 

 

 

 

 

 

 

RM Holdco, LLC, Membership Units (2), (3), (5)

 

13,161,000

 

2,010,777

 

 

 

 

 

 

 

 

 

 

 

 

 

Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing (0.01%)

 

 

 

 

 

 

 

 

 

Precision Holdings, LLC, Class C Membership Interests (3), (5)

 

33

 

 

41,645

 

0.01

%

 

 

 

 

 

 

 

 

 

 

Nonmetallic Mineral Mining and Quarrying (0.20%)

 

 

 

 

 

 

 

 

 

EPMC HoldCo, LLC, Membership Units (2), (5)

 

1,312,720

 

 

1,562,137

 

0.20

%

 

 

 

 

 

 

 

 

 

 

Nonscheduled Air Transportation (0.16%)

 

 

 

 

 

 

 

 

 

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,843

 

1,274,000

 

1,268,904

 

0.16

%

 

 

 

 

 

 

 

 

 

 

Radio and Television Broadcasting (0.04%)

 

 

 

 

 

 

 

 

 

SiTV, Inc., Warrants to Purchase Common Stock (3), (5)

 

233,470

 

300,322

 

354,874

 

0.04

%

 

 

 

 

 

 

 

 

 

 

Retail (0.07%)

 

 

 

 

 

 

 

 

 

Shop Holding, LLC, Class A Units (3), (5)

 

490,037

 

462,576

 

532,919

 

0.07

%

Shop Holding, LLC, Warrants to Purchase Class A Units (3), (5)

 

326,691

 

 

38,258

 

 

Total Electronic Shopping

 

 

 

462,576

 

571,177

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled Air Transportation (1.19%)

 

 

 

 

 

 

 

 

 

Equipment Trusts - Aircraft Leased to Delta Air Lines, Inc.

 

 

 

 

 

 

 

 

 

N913DL Trust Beneficial Interests (5), (6)

 

727

 

97,376

 

125,970

 

0.02

%

N918DL Trust Beneficial Interests (5), (6)

 

623

 

109,938

 

142,970

 

0.02

%

N954DL Trust Beneficial Interests (5), (6)

 

591

 

133,027

 

68,000

 

0.01

%

N955DL Trust Beneficial Interests (5), (6)

 

576

 

133,868

 

113,560

 

0.01

%

N956DL Trust Beneficial Interests (5), (6)

 

580

 

133,907

 

108,800

 

0.01

%

N957DL Trust Beneficial Interests (5), (6)

 

576

 

134,785

 

109,650

 

0.01

%

N959DL Trust Beneficial Interests (5), (6)

 

573

 

135,658

 

110,500

 

0.01

%

N960DL Trust Beneficial Interests (5), (6)

 

563

 

139,173

 

109,650

 

0.01

%

N961DL Trust Beneficial Interests (5), (6)

 

570

 

138,350

 

103,870

 

0.01

%

N976DL Trust Beneficial Interests (5), (6)

 

654

 

113,413

 

103,033

 

0.01

%

Equipment Trusts - Aircraft Leased to United Airlines, Inc.

 

 

 

 

 

 

 

 

 

N510UA Trust Beneficial Interests (2), (5)

 

54

 

197,409

 

465,625

 

0.06

%

N512UA Trust Beneficial Interests (2), (5)

 

53

 

193,046

 

458,277

 

0.06

%

N536UA Trust Beneficial Interests (2), (5)

 

81

 

396,289

 

656,766

 

0.08

%

N545UA Trust Beneficial Interests (2), (5)

 

67

 

348,071

 

641,840

 

0.08

%

N585UA Trust Beneficial Interests (2), (5)

 

53

 

214,737

 

571,706

 

0.07

%

United N659UA-767, LLC (N659UA) (5), (6)

 

412

 

2,097,640

 

2,840,323

 

0.36

%

United N661UA-767, LLC (N661UA) (5), (6)

 

400

 

2,066,062

 

2,852,677

 

0.36

%

Total Scheduled Air Transportation

 

 

 

6,782,749

 

9,583,217

 

 

 

 

 

 

 

 

 

 

 

 

 

Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing (0.08%)

 

 

 

 

 

 

 

 

 

KAGY Holding Company, Inc., Series A Preferred Stock (2), (3), (5)

 

9,778

 

1,091,200

 

662,134

 

0.08

%

 

 

 

 

 

 

 

 

 

 

Semiconductor and Other Electronic Component Manufacturing (0.03%)

 

 

 

 

 

 

 

 

 

AIP/IS Holdings, LLC, Membership Units (3), (5)

 

352

 

 

229,504

 

0.03

%

 

 

 

 

 

 

 

 

 

 

Software Publishers (0.07%)

 

 

 

 

 

 

 

 

 

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock (3), (5)

 

1,232,731

 

522,678

 

561,632

 

0.07

%

 

S-F-53



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statement of Investments (Continued)

 

December 31, 2013

 

Showing Percentage of Total Cash and Investments of the Partnership

 

 

 

 

 

 

 

 

 

Percent of

 

 

 

 

 

 

 

Fair

 

Cash and

 

Investment

 

Shares

 

Cost

 

Value

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Equity Securities (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wired Telecommunications Carriers (1.22%)

 

 

 

 

 

 

 

 

 

Integra Telecom, Inc., Common Stock (3), (5)

 

1,274,522

 

$

8,433,884

 

$

5,583,686

 

0.72

%

Integra Telecom, Inc., Warrants (3), (5)

 

346,939

 

19,920

 

194,050

 

0.02

%

V Telecom Investment S.C.A, Common Shares - (Luxembourg) (3), (4), (5), (10)

 

1,393

 

3,236,256

 

3,756,053

 

0.48

%

Total Wired Telecommunications Carriers

 

 

 

11,690,060

 

9,533,789

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Equity Securities

 

 

 

80,453,458

 

39,748,366

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investments

 

 

 

801,104,779

 

766,262,959

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents (2.91%)

 

 

 

 

 

 

 

 

 

Wells Fargo & Company, Overnight Repurchase Agreement, 0.09%,

 

 

 

 

 

 

 

 

 

Collateralized by Freddie Mac Note

 

 

 

 

 

$

10,501,688

 

1.33

%

Union Bank of California, Commercial Paper, 0.10%, due 1/2/14

 

 

 

 

 

8,499,976

 

1.07

%

Cash Denominated in Foreign Currencies

 

 

 

 

 

121,389

 

0.02

%

Cash Held on Account at Various Institutions

 

 

 

 

 

3,861,129

 

0.49

%

Cash and Cash Equivalents

 

 

 

 

 

22,984,182

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Cash and Investments (9)

 

 

 

 

 

$

789,247,141

 

100.00

%

 


Notes to Statement of Investments:

 

(1)

Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933. Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower.

 

 

(2)

Non-controlled affiliate — as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates.

 

 

(3)

Non-income producing security.

 

 

(4)

Principal amount denominated in foreign currency. Amortized cost and fair value converted from foreign currency to US dollars. (See Note 2)

 

 

(5)

Restricted security. (See Note 2)

 

 

(6)

Controlled issuer — as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer). Investment is not more than 50% owned nor deemed to be a significant subsidiary. See Consolidated Schedule of Changes in Investments in Affiliates.

 

 

 

 

(7)

Investment has been segregated to collateralize certain unfunded commitments.

 

 

(8)

$2,000,000 principal amount of this investment has been segregated to collateralize certain unfunded commitments.

 

 

(9)

All cash and investments, except those referenced in Notes 7 and 8 above, are pledged as collateral under the Revolving Facilities as described in Note 4 to the Consolidated Financial Statements.

 

 

 

 

(10)

Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership ‘s total assets.

 

 

(11)

Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership ‘s total assets.

 

 

(12)

Publicly traded company with a market capitalization greater than $250 million and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership ‘s total assets.

 

 

(13)

Negative balances relate to an unfunded commitment that was acquired and valued at a discount.

 

LIBOR or EURIBOR resets monthly (M), quarterly (Q), or semiannually (S).

 

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $471,087,319, and $235,641,665, respectively for the year ended December 31, 2013. Aggregate acquisitions includes investment assets received as payment in kind.  Aggregate dispositions includes principal paydowns on and maturities of debt investments.  The total value of restricted securities and bank debt as of December 31, 2013 was $765,419,046, or 97.0% of total cash and investments of the Partnership.

 

Options and Swaps at December 31, 2013 were as follows:

 

Investment

 

Notional Amount

 

Fair Value

 

 

 

 

 

 

 

Interest Rate Cap, 4%, expires 5/15/2016

 

$

25,000,000

 

$

14,139

 

Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 3/31/17

 

$

4,289,019

 

$

(331,183

)

 

See accompanying notes.

 

S-F-54


 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statements of Operations

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Investment income

 

 

 

 

 

Interest income:

 

 

 

 

 

Companies less than 5% owned

 

$

18,140,743

 

$

15,240,367

 

Companies 5% to 25% owned

 

1,336,864

 

893,512

 

Companies more than 25% owned

 

257,627

 

330,317

 

Dividend income:

 

 

 

 

 

Companies 5% to 25% owned

 

1,968,748

 

 

Other income:

 

 

 

 

 

Companies less than 5% owned

 

634,733

 

157,533

 

Companies 5% to 25% owned

 

121,039

 

101,103

 

Companies more than 25% owned

 

208,890

 

142,911

 

Total investment income

 

22,668,644

 

16,865,743

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

Management and advisory fees

 

2,886,208

 

1,964,738

 

Interest expense

 

456,861

 

136,407

 

Amortization of deferred debt issuance costs

 

372,755

 

108,564

 

Administrative expenses

 

256,806

 

167,808

 

Legal fees, professional fees and due diligence expenses

 

117,760

 

74,462

 

Commitment fees

 

191,199

 

22,589

 

Director fees

 

57,023

 

48,059

 

Insurance expense

 

35,952

 

24,201

 

Custody fees

 

49,932

 

28,544

 

Other operating expenses

 

15,981

 

136,409

 

Total operating expenses

 

4,440,477

 

2,711,781

 

 

 

 

 

 

 

Net investment income

 

18,228,167

 

14,153,962

 

 

 

 

 

 

 

Net realized and unrealized gain (loss) on investments and foreign currency

 

 

 

 

 

Net realized gain (loss):

 

 

 

 

 

Investments in companies less than 5% owned

 

(6,795,721

)

517,658

 

Investments in companies 5% to 25% owned

 

375

 

 

Net realized gain (loss)

 

(6,795,346

)

517,658

 

 

 

 

 

 

 

Net change in net unrealized appreciation/depreciation

 

11,975,364

 

1,837,731

 

Net realized and unrealized gain

 

5,180,018

 

2,355,389

 

 

 

 

 

 

 

Dividends on Series A preferred equity facility

 

(369,135

)

(393,413

)

Net change in accumulated dividends on Series A preferred equity facility

 

10,495

 

16,011

 

Net increase in net assets applicable to common limited and general partners resulting from operations

 

$

23,049,545

 

$

16,131,949

 

 

See accompanying notes.

 

S-F-55



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statements of Changes in Net Assets

 

 

 

Three Months Ended March 31, 2014 (Unaudited)

 

 

 

 

 

Common

 

 

 

 

 

 

 

Limited

 

General

 

 

 

Total

 

Partner

 

Partner

 

Net assets applicable to common limited and general partners, beginning of year

 

$

552,263,625

 

$

551,095,042

 

$

1,168,583

 

Net investment income

 

18,228,167

 

14,670,036

 

3,558,131

 

Net realized loss

 

(6,795,346

)

(5,436,277

)

(1,359,069

)

Net change in unrealized appreciation/depreciation

 

11,975,364

 

9,580,291

 

2,395,073

 

Dividends paid on preferred equity facility

 

(369,135

)

(295,308

)

(73,827

)

Net change in accumulated dividends on preferred equity facility

 

10,495

 

8,396

 

2,099

 

Net increase in net assets applicable to common limited and general partners resulting from operations

 

23,049,545

 

18,527,139

 

4,522,406

 

Distributions to common limited and general partners from:

 

 

 

 

 

 

 

Net investment income

 

(17,271,599

)

(13,785,196

)

(3,486,403

)

Net assets applicable to common limited and general partners, end of period (including accumulated net investment income of $27,448,077, $27,097,562 and $350,515, respectively)

 

$

558,041,571

 

$

555,836,984

 

$

2,204,587

 

 

 

 

Year Ended December 31, 2013

 

 

 

 

 

Common

 

 

 

 

 

 

 

Limited

 

General

 

 

 

Total

 

Partner

 

Partner

 

Net assets applicable to common limited and general partners, beginning of year

 

$

317,209,574

 

$

317,209,574

 

$

 

 

 

 

 

 

 

 

 

Contributions from common limited partner

 

225,201,350

 

225,201,350

 

 

 

 

 

 

 

 

 

 

Net investment income

 

56,340,223

 

45,474,169

 

10,866,054

 

Net realized loss

 

(47,384,746

)

(37,907,797

)

(9,476,949

)

Net change in unrealized appreciation/depreciation

 

56,456,107

 

45,164,886

 

11,291,221

 

Dividends paid on preferred equity facility

 

(1,516,585

)

(1,213,268

)

(303,317

)

Net change in accumulated dividends on preferred equity facility

 

22,033

 

17,626

 

4,407

 

Net increase in net assets applicable to common limited and general partners resulting from operations

 

63,917,032

 

51,535,616

 

12,381,416

 

 

 

 

 

 

 

 

 

Distributions to common limited and general partners from:

 

 

 

 

 

 

 

Net investment income

 

(53,418,640

)

(42,851,498

)

(10,567,142

)

Realized gains

 

(645,691

)

 

(645,691

)

Net assets applicable to common limited and general partners, end of period (including accumulated net investment income of $26,850,149, $26,499,634 and $350,515, respectively)

 

$

552,263,625

 

$

551,095,042

 

$

1,168,583

 

 

See accompanying notes.

 

S-F-56



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Statements of Cash Flows

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Net increase in net assets applicable to common limited and general partners resulting from operations

 

$

23,049,545

 

$

16,131,949

 

Adjustments to reconcile net increase in net assets applicable to common limited and general partners resulting from operations to net cash (used in) provided by operating activities:

 

 

 

 

 

Net realized loss (gain)

 

6,795,346

 

(517,658

)

Net change in unrealized appreciation/depreciation of investments

 

(11,974,865

)

(1,880,949

)

Dividends paid on Series A preferred equity facility

 

369,135

 

393,413

 

Net change in accumulated dividends on Series A preferred equity facility

 

(10,495

)

(16,011

)

Accretion of original issue discount

 

(551,826

)

(825,555

)

Net accretion of market discount/premium

 

(178,840

)

(81

)

Interest and dividend income paid in kind

 

(1,084,557

)

(253,156

)

Amortization of deferred debt issuance costs

 

372,755

 

108,564

 

Changes in assets and liabilities:

 

 

 

 

 

Purchases of investment securities

 

(109,301,941

)

(40,010,595

)

Proceeds from sales, maturities and paydowns of investments

 

66,876,929

 

51,006,153

 

Increase in accrued interest income - companies less than 5% owned

 

(1,997,625

)

(2,546,216

)

Increase in accrued interest income - companies 5% to 25% owned

 

(264,538

)

(4,073

)

Decrease in accrued interest income - companies more than 25% owned

 

3,172

 

2,835

 

Decrease in receivable for investments sold

 

2,574,247

 

7,727,415

 

Increase in prepaid expenses and other assets

 

(448,303

)

(435,089

)

Decrease in payable for investments purchased

 

(13,192,340

)

(21,657,527

)

Increase (decrease) in payable to the Investment Manager

 

(143,065

)

20,071

 

Increase in payable to parent

 

(433,020

)

 

Increase (decrease) in interest payable

 

(98,929

)

31,937

 

Increase in accrued expenses and other liabilities

 

33,680

 

83,601

 

Net cash (used in) provided by operating activities

 

(39,605,535

)

7,359,028

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Proceeds from draws on credit facilities

 

114,000,000

 

6,000,000

 

Principal repayments on credit facilities

 

(52,000,000

)

(10,000,000

)

Payments of debt issuance costs

 

(763,980

)

 

Dividends paid on Series A preferred equity facility

 

(369,135

)

(393,413

)

Dividends paid to common limited partner

 

(13,785,196

)

(9,823,476

)

Distributions of incentive allocation to the General Partner

 

(3,318,900

)

 

Net cash provided by (used in) financing activities

 

43,762,789

 

(14,216,889

)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

4,157,254

 

(6,857,861

)

Cash and cash equivalents at beginning of period

 

22,984,182

 

18,035,189

 

Cash and cash equivalents at end of period

 

$

27,141,436

 

$

11,177,328

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

Interest payments

 

$

235,336

 

$

104,470

 

 

See accompanying notes.

 

S-F-57



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements

 

March 31, 2014

 

1. Organization and Nature of Operations

 

Special Value Continuation Partners, LP (the “Partnership”) a Delaware limited partnership, commenced operations on July 31, 2006 as an externally managed, closed-end, non-diversified management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). On April 2, 2012, the Partnership elected to be treated as a business development company (“BDC”) under the 1940 Act (the “Conversion”). The Partnership’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection.

 

Investment operations are conducted either directly in the Partnership or in one of the Partnership’s wholly owned subsidiaries, TCPC Funding I, LLC, a Delaware limited liability company (“TCPC Funding”) and TCPC SBIC, LP, a Delaware limited partnership (the “SBIC”). The SBIC was organized in June 2013, and on April 22, 2014, received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958. The Partnership, TCPC Funding, and the SBIC invest primarily in the debt of middle-market companies, including senior secured loans, junior loans, mezzanine debt and bonds. Such investments may include an equity component, and, to a lesser extent, the Partnership, TCPC Funding, and the SBIC may make equity investments directly. The Partnership, TCPC Funding, and the SBIC have elected to be treated as partnerships for U.S. federal income tax purposes. TCP Capital Corp. (“TCPC”) owns the entire common limited partner interest in the Partnership. TCPC has also elected to be treated as a business development company under the 1940 Act.

 

The general partner of the Partnership is SVOF/MM, LLC, which also serves as the administrator of TCPC and the Partnership (the “Administrator” or the “General Partner”). The managing member of the General Partner is Tennenbaum Capital Partners, LLC, which serves as the Investment Manager to TCPC, the Partnership, TCPC Funding and the SBIC. Most of the equity interests in the General Partner are owned directly or indirectly by the Investment Manager and its employees.

 

Partnership management consists of the General Partner and the Board of Directors. The General Partner directs and executes the day-to-day operations of the Partnership subject to oversight from the Board of Directors, which performs certain functions required by the 1940 Act. The Board of Directors has delegated investment management of the Partnership’s assets to the Investment Manager. The Board of Directors consists of five persons, three of whom are independent. If the Partnership has preferred limited partner interests outstanding, as it currently does, the holders of the preferred limited partner interests voting separately as a class are entitled to elect two of the Directors. The remaining directors will be subject to election by holders of the common limited partner interests and preferred limited partner interests voting together as a single class.

 

S-F-58



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements of the Partnership include the accounts of the Partnership, TCPC Funding and the SBIC and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The following is a summary of the significant accounting policies of the Partnership and TCPC Funding.

 

Use of Estimates

 

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates and assumptions to be reasonable, actual results could differ from those estimates and differences could be material.

 

Investment Valuation

 

Management values investments at fair value based upon the principles and methods of valuation set forth in policies adopted by the Board of Directors and in conformity with procedures set forth in the Senior Facilities and the Statement of Preferences for the Preferred Interests, as defined in Note 4, below. Fair value is generally defined as the amount for which an investment would be sold in an orderly transaction between market participants at the measurement date.

 

All investments are valued at least quarterly based on affirmative pricing or quotations from independent third-party sources, with the exception of investments priced directly by the Investment Manager which together comprise, in total, less than 5% of the capitalization of the Partnership. Investments listed on a recognized exchange or market quotation system, whether U.S. or foreign, are valued for financial reporting purposes as of the last business day of the reporting period using the closing price on the date of valuation. Liquid investments not listed on a recognized exchange or market quotation system are valued using prices provided by a nationally recognized pricing service or by using quotations from broker-dealers. Investments not priced by a pricing service or for which market quotations are either not readily available or are determined to be unreliable are valued using affirmative valuations performed by independent valuation services or, for investments aggregating less than 5% of the total capitalization of the Partnership, directly by the Investment Manager.

 

Fair valuations of investments are determined under guidelines adopted by the Board of Directors, and are subject to their approval. Generally, to increase objectivity in valuing investments, the Investment Manager will utilize external measures of value, such as public markets or third-party transactions, whenever possible. The Investment Manager’s valuation is not based on long-term work-out value, immediate liquidation value, nor incremental value for potential changes that may take place in the future. The values assigned to investments that are valued by the Investment Manager are based on available information and do not necessarily represent amounts that might ultimately be realized, as these amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated. The foregoing policies apply to

 

S-F-59


 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

all investments, including those in companies and groups of affiliated companies aggregating more than 5% of the Partnership’s assets.

 

Fair valuations of investments in each asset class are determined using one or more methodologies including the market approach, income approach, or, in the case of recent investments, the cost approach, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present value 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 may be taken into account include, as relevant:  available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market and enterprise values, among other factors.

 

Unobservable inputs used in the fair value measurement of Level 3 investments as of March 31, 2014 included the following:

 

Asset Type

 

Fair Value

 

Valuation Technique

 

Unobservable Input

 

Range (Weighted Avg.)

Bank Debt

 

$

317,003,161

 

Market rate approach

 

Market yields

 

3.8% - 16.5% (10.9%)

 

 

238,578,988

 

Market quotations

 

Indicative bid/ask quotes

 

1 - 3 (2)

 

 

15,792,158

 

Market comparable companies

 

Revenue multiples

 

0.4x (0.4x)

 

 

2,056,927

 

Market comparable companies

 

EBITDA multiples

 

7.8x (7.8x)

Other Corporate

 

71,494

 

Market rate approach

 

Market yields

 

16.3% (16.3%)

Debt

 

54,707,520

 

Market quotations

 

Indicative bid/ask quotes

 

1 – 2 (1)

 

 

16,828,346

 

Market comparable companies

 

EBITDA multiples

 

7.8x - 10.0x (8.8x)

Equity

 

9,527,486

 

Market rate approach

 

Market yields

 

13.0% - 18.0% (13.6%)

 

 

3,587,881

 

Market quotations

 

Indicative bid/ask quotes

 

1 - 1 (1)

 

 

891,424

 

Market comparable companies

 

Revenue multiples

 

0.4x - 1.1x (1.1x)

 

 

18,441,260

 

Market comparable companies

 

EBITDA multiples

 

4.0x – 6.6x (5.8x)

 

Generally, a change in an unobservable input may result in a change to the value of an investment as follows:

 

Input

 

Impact to Value if
Input Increases

 

Impact to Value if
Input Decreases

 

Market yields

 

Decrease

 

Increase

 

Revenue multiples

 

Increase

 

Decrease

 

EBITDA multiples

 

Increase

 

Decrease

 

 

Investments may be categorized based on the types of inputs used in valuing such investments. The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Transfers between levels are recognized as of the beginning of the reporting period.

 

S-F-60



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

At March 31, 2014, the Partnership’s investments were categorized as follows:

 

Level

 

Basis for Determining Fair Value

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

1

 

Quoted prices in active markets for identical assets

 

$

 

$

 

$

467,763

 

2

 

Other observable market inputs *

 

70,146,046

 

67,557,294

 

 

3

 

Independent third-party pricing sources that employ significant unobservable inputs

 

573,872,294

 

64,047,014

 

29,595,404

 

3

 

Investment Manager valuations with significant unobservable inputs

 

(441,060

)

7,560,346

 

2,852,647

 

Total

 

 

 

$

643,577,280

 

$

139,164,654

 

$

32,915,814

 

 


*  For example, quoted prices in inactive markets or quotes for comparable investments.

 

Changes in investments categorized as Level 3 during the three months ended March 31, 2014 were as follows:

 

 

 

Independent Third-Party Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

515,953,643

 

$

53,334,634

 

$

36,066,746

 

Net realized and unrealized gains (losses)

 

4,633,345

 

833,673

 

(1,034,764

)

Acquisitions

 

98,772,793

 

13,080,946

 

894,302

 

Dispositions

 

(30,758,320

)

(14,077,239

)

(6,330,880

)

Transfers out of Level 3 *

 

(14,729,167

)

 

 

Transfers into Level 3 †

 

 

10,875,000

 

 

Ending balance

 

$

573,872,294

 

$

64,047,014

 

$

29,595,404

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

5,296,423

 

$

862,015

 

$

325,048

 

 


*  Comprised of one investment that transferred to Level 2 due to increased observable market activity.

†  Comprised of one investment that transferred from Level 2 due to reduced trading volumes.

 

 

 

Investment Manager Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

4,060,800

 

$

7,631,335

 

$

2,837,707

 

Net realized and unrealized gains (losses)

 

(1,860

)

(70,989

)

(188,519

)

Acquisitions

 

 

 

230,938

 

Dispositions

 

(4,500,000

)

 

(27,479

)

Ending balance

 

$

(441,060

)‡

$

7,560,346

 

$

2,852,647

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

(1,860

)

$

(70,989

)

$

(215,999

)

 


‡ Negative balance relates to an unfunded commitment that was acquired and valued at a discount.

 

S-F-61



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

There were no transfers between Level 1 and 2 during the three months ended March 31, 2014.

 

At March 31, 2013, the Partnership’s investments were categorized as follows:

 

Level

 

Basis for Determining Fair Value

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

1

 

Quoted prices in active markets for identical assets

 

$

 

$

 

$

759,522

 

2

 

Other observable market inputs *

 

111,560,238

 

61,901,366

 

 

3

 

Independent third-party pricing sources that employ significant unobservable inputs

 

275,074,150

 

17,509,840

 

34,225,001

 

3

 

Investment Manager valuations with significant unobservable inputs

 

 

7,552,970

 

1,411,858

 

Total

 

 

 

$

386,634,388

 

$

86,964,176

 

$

36,396,381

 

 


*  For example, quoted prices in inactive markets or quotes for comparable investments.

 

Changes in investments categorized as Level 3 during the three months ended March 31, 2013 were as follows:

 

 

 

Independent Third-Party Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

359,343,326

 

$

17,171,637

 

$

32,675,370

 

Net realized and unrealized gains (losses)

 

(2,705,665

)

332,962

 

1,418,164

 

Acquisitions

 

15,489,607

 

5,241

 

778,020

 

Dispositions

 

(38,401,835

)

 

(646,553

)

Transfers out of Level 3 †

 

(58,651,283

)

 

 

Ending balance

 

$

275,074,150

 

$

17,509,840

 

$

34,225,001

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

(1,074,858

)

$

332,962

 

$

1,418,164

 

 


† Comprised of eight investments that transferred to Level 2 due to increased observable market activity.

 

 

 

Investment Manager Valuation

 

 

 

Bank Debt

 

Other
Corporate Debt

 

Equity
Securities

 

Beginning balance

 

$

 

$

7,167,458

 

$

1,424,764

 

Net realized and unrealized gains (losses)

 

 

350,718

 

(12,906

)

Acquisitions

 

 

34,794

 

 

Ending balance

 

$

 

$

7,552,970

 

$

1,411,858

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)

 

$

 

$

350,718

 

$

(12,906

)

 

There were no transfers between Level 1 and 2 during the three months ended March 31, 2013.

 

S-F-62



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Investment Transactions

 

Investment transactions are recorded on the trade date, except for private transactions that have conditions to closing, which are recorded on the closing date. The cost of investments purchased is based upon the purchase price plus those professional fees which are specifically identifiable to the investment transaction. Realized gains and losses on investments are recorded based on the identification method, which typically allocates the highest cost inventory to the basis of investments sold.

 

Cash and Cash Equivalents

 

Cash consists of amounts held in accounts with brokerage firms and the custodian bank. Cash equivalents consist of highly liquid investments with an original maturity of three months or less.

 

Repurchase Agreements

 

In connection with transactions in repurchase agreements, it is the Partnership’s policy that the custodian take possession of the underlying collateral, the fair value of which is required to exceed the principal amount of the repurchase transaction, including accrued interest, at all times. If the seller defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.

 

Restricted Investments

 

The Partnership may invest without limitation in instruments that are subject to legal or contractual restrictions on resale. These instruments generally may be resold to institutional investors in transactions exempt from registration or to the public if the securities are registered. Disposal of these investments may involve time-consuming negotiations and additional expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted investments is included at the end of the Consolidated Statement of Investments. Restricted investments, including any restricted investments in affiliates, are valued in accordance with the investment valuation policies discussed above.

 

Foreign Investments

 

The Partnership may invest in instruments traded in foreign countries and denominated in foreign currencies. Foreign currency denominated investments comprised approximately 2.7% and 2.7% of total investments at March 31, 2014 and December 31, 2013, respectively. Such positions were converted at the respective closing rate in effect at March 31, 2014 and December 31, 2013 and reported in U.S. dollars. Purchases and sales of investments and income and expense items denominated in foreign currencies, when they occur, are translated into U.S. dollars on the respective dates of such transactions. The portion of gains and losses on foreign investments resulting from fluctuations in foreign currencies is included in net realized and unrealized gain or loss from investments.

 

Investments in foreign companies and securities of foreign governments may involve special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government.

 

S-F-63



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

These risks include, among other things, revaluation of currencies, less reliable information about issuers, different transaction clearance and settlement practices, and potential future adverse political and economic developments. Moreover, investments in foreign companies and securities of foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies and the U.S. government.

 

Derivatives

 

In order to mitigate certain currency exchange and interest rate risks, the Partnership has entered into certain swap and option transactions. All derivatives are recognized as either assets or liabilities in the Consolidated Statement of Assets and Liabilities. The transactions entered into are accounted for using the mark-to-market method with the resulting change in fair value recognized in earnings for the current period. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in interest rates and the value of foreign currency relative to the U.S. dollar.

 

 

The Partnership did not enter into any new derivative transactions during the three months ended March 31, 2014. At March 31, 2014, the Partnership held an interest rate cap with a notional amount of $25,000,000 and a cross currency basis swap with a notional amount of $4,289,019. Gains and losses from derivatives during the three months ended March 31, 2014 were included in net realized and unrealized loss on investments in the Consolidated Statement of Operations as follows:

 

Instrument

 

Realized Gains
(Losses)

 

Unrealized Gains
(Losses)

 

Cross currency basis swaps

 

$

 

$

30,499

 

Interest rate cap

 

$

 

$

(5,534

)

 

The Partnership did not enter into any new derivative transactions during the three months ended March 31, 2013. At March 31, 2013, the Partnership held a cross currency basis swap with a notional amount of $6,040,944. Gains and losses from derivatives during the three months ended March 31, 2013 were included in net realized and unrealized loss on investments in the Consolidated Statement of Operations as follows:

 

Instrument

 

Realized Gains
(Losses)

 

Unrealized Gains
(Losses)

 

Cross currency basis swaps

 

$

 

$

169,983

 

 

Valuations of derivatives held at March 31, 2014 and March 31, 2013 were determined using observable market inputs other than quoted prices in active markets for identical assets and, accordingly, are classified as Level 2 in the GAAP valuation hierarchy.

 

S-F-64



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Debt Issuance Costs

 

Costs of approximately $3.5 million were incurred during 2006 in connection with placing the Partnership’s revolving credit facility (see Note 4). Additional costs of approximately $1.5 million were incurred during 2013 in connection with the extension of the facility. These costs were deferred and are being amortized on a straight-line basis over the estimated remaining life of the facility. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Partnership.

 

Costs of approximately $1.6 million were incurred during 2013 in connection with placing TCPC Funding’s revolving credit facility (see Note 4). Additional costs of approximately $0.8 million were incurred in 2014 in connection with the extension of the facility. These costs were deferred and are being amortized on a straight-line basis over three years, the estimated life of that facility. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Partnership.

 

Revenue Recognition

 

Interest and dividend income, including income paid in kind, is recorded on an accrual basis. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts, earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income received upon the early repayment of a loan or debt security are included in interest income.

 

Certain debt investments are purchased at a considerable discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. GAAP generally requires that discounts on the acquisition of corporate bonds, municipal bonds and treasury bonds be amortized using the effective-interest or constant-yield method. GAAP also requires the collectability of interest to be considered when making accruals. Accordingly, when accounting for purchase discounts, discount accretion income is recognized when it is probable that such amounts will be collected, generally at disposition. When principal payments on a loan are received in an amount in excess of the loan’s amortized cost, the excess principal payments are recorded as interest income.

 

Income Taxes

 

The income or loss of the Partnership, TCPC Funding and the SBIC is reported in the respective partners’ income tax returns. Consequently, no income taxes are paid at the partnership level or reflected in the Partnership’s financial statements. In accordance with ASC Topic 740 — Income Taxes , the Partnership recognizes in its financial statements the effect of a tax position when it is determined that such position is more likely than not, based on the technical merits, to be sustained upon examination. As of March 31, 2014, all tax years of the Partnership since January 1, 2010 remain subject to examination by federal tax authorities. No such examinations are currently pending.

 

S-F-65



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies (continued)

 

Cost and unrealized appreciation and depreciation of investments (including derivatives) for U.S. federal income tax purposes at March 31, 2014 were as follows:

 

Unrealized appreciation

 

$

34,662,507

 

Unrealized depreciation

 

(57,898,261

)

Net unrealized depreciation

 

(23,235,754

)

 

 

 

 

Cost

 

$

838,601,423

 

 

3. Management Fees, Incentive Compensation and Other Expenses

 

The Partnership’s management fee is calculated at an annual rate of 1.5% of total assets (excluding cash and cash equivalents) of TCPC on a consolidated basis as of the beginning of each quarter and is payable to the Investment Manager quarterly in arrears.

 

Incentive compensation is only paid to the extent that TCPC’s total performance exceeds a cumulative 8% annual return since January 1, 2013 (the “Total Return Hurdle”). The incentive compensation equals 20% of net investment income (reduced by preferred dividends) and 20% of net realized gains (reduced by any net unrealized losses), subject to the Total Return Hurdle. The incentive compensation is payable quarterly in arrears as an allocation and distribution to the General Partner and is calculated as the difference between cumulative incentive compensation earned since January 1, 2013 and cumulative incentive compensation paid since January 1, 2013. A reserve for incentive compensation is allocated to the account of the General Partner based on the amount of additional incentive compensation that would have been distributable to the General Partner assuming a hypothetical liquidation of TCPC and the Partnership at net asset value on the balance sheet date. At March 31, 2014, the General Partner’s equity interest in the Partnership was comprised entirely of a reserve amount of $2,204,587 as reflected in the Consolidated Statement of Changes in Net Assets.

 

The Partnership bears all expenses incurred in connection with its business, including fees and expenses of outside contracted services, such as custodian, administrative, legal, audit and tax preparation fees, costs of valuing investments, insurance costs, brokers’ and finders’ fees relating to investments, and any other transaction costs associated with the purchase and sale of investments.

 

S-F-66


 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

4. Leverage

 

At March 31, 2014 and December 31, 2013, leverage was comprised of amounts outstanding under senior secured revolving credit facilities issued by the Partnership (the “Partnership Facility”) and TCPC Funding (the “TCPC Funding Facility,” and, together with the Partnership Facility, the “Revolving Facilities”) as well as amounts outstanding under a preferred leverage facility issued by the Partnership (the “Preferred Interests”), as follows:

 

 

 

March 31, 2014

 

December 31, 2013

 

Partnership Facility

 

$

82,000,000

 

$

45,000,000

 

TCPC Funding Facility

 

75,000,000

 

50,000,000

 

Total Debt

 

$

157,000,000

 

$

95,000,000

 

 

 

 

 

 

 

Preferred Interests

 

134,000,000

 

134,000,000

 

Total Leverage

 

$

291,000,000

 

$

229,000,000

 

 

The combined weighted-average interest and dividend rates on total amounts outstanding under the leverage facilities at March 31, 2014 and December 31, 2013 were 1.35% and 1.38%, respectively.

 

Amounts outstanding under the Revolving Facilities are carried at cost in the Statement of Assets and Liabilities. As of March 31, 2014, the estimated fair value of the TCPC Funding Facility approximated its carrying value, and the Partnership Facility had an estimated fair value of $81,286,654. The estimated fair values of the Revolving Facilities are determined by discounting projected remaining payments using market interest rates for our borrowings and entities with similar credit risks at the measurement date. At March 31, 2014, the Revolving Facilities would be deemed to be Level 3 in the GAAP valuation hierarchy.

 

Partnership Facility

 

The Partnership Facility provides for amounts to be drawn up to $116 million, subject to certain collateral and other restrictions. The Partnership Facility matures on July 31, 2016. Most of the cash and investments held directly by the Partnership, as well as the net assets of TCPC Funding and the SBIC, are included in the collateral for the facility.

 

Advances under the Partnership Facility through July 31, 2014 bear interest at an annual rate equal to 0.44% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). Advances under the Partnership Facility for periods from July 31, 2014 through the maturity date of the facility will bear interest at an annual rate equal to 2.5% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.20% per annum on the unused portion of the facility, or 0.25% per annum when less than $46.4 million in borrowings are outstanding. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Partnership fail to satisfy certain financial or other covenants. As of March 31, 2014, the Partnership was in full compliance with such covenants.

 

S-F-67



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

4. Leverage (continued)

 

TCPC Funding Facility

 

The TCPC Funding Facility, issued on May 15, 2013, provides for amounts to be drawn up to $150 million, subject to certain collateral and other restrictions. The TCPC Funding Facility matures on May 15, 2017, subject to extension by the lender at the request of TCPC Funding. The facility contains an accordion feature which allows for expansion of the facility up to $200 million subject to consent from the lender and other customary conditions. The cash and investments of TCPC Funding are included in the collateral for the facility.

 

As of March 31, 2014, borrowings under the TCPC Funding Facility bore interest at a rate of LIBOR plus 2.50% per annum. In connection to the extension and expansion of the facility on February 21, 2014, the interest rate was reduced to a rate of LIBOR plus 2.50% effective March 15, 2014.  In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.75% per annum on the unused portion of the facility, or 1.00% per annum when the unused portion is greater than 33% of the total facility. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should TCPC Funding fail to satisfy certain financial or other covenants. As of March 31, 2014, TCPC Funding was in full compliance with such covenants.

 

Preferred Equity

 

At March 31, 2014, the Preferred Interests were comprised of 6,700 Series A preferred limited partner interests issued and outstanding with a liquidation preference of $20,000 per interest. The Preferred Interests accrue dividends at an annual rate equal to 0.85% plus either LIBOR or the interestholder’s cost of funds (subject to a cap of LIBOR plus 20 basis points). The Preferred Interests are redeemable at the option of the Partnership, subject to certain conditions. Additionally, under certain conditions, the Partnership may be required to either redeem certain of the Preferred Interests or repay indebtedness, at the Partnership’s option. Such conditions would include a failure by the Partnership to maintain adequate collateral as required by its credit facility agreement or by the Statement of Preferences of the Preferred Interests or a failure by the Partnership to maintain sufficient asset coverage as required by the 1940 Act. As of March 31, 2014, the Partnership was in full compliance with such requirements.

 

 

5. Commitments, Concentration of Credit Risk and Off-Balance Sheet Risk

 

The Partnership, TCPC Funding and the SBIC conduct business with brokers and dealers that are primarily headquartered in New York and Los Angeles and are members of the major securities exchanges. Banking activities are conducted with a firm headquartered in the San Francisco area.

 

In the normal course of business, investment activities involve executions, settlement and financing of various transactions resulting in receivables from, and payables to, brokers, dealers and the custodian. These activities may expose the Partnership to risk in the event that such parties are unable to fulfill contractual obligations. Management does not anticipate any material losses from counterparties with whom it conducts business. Consistent with standard business practice, the Partnership, TCPC Funding and the SBIC enter into contracts that contain a variety of indemnifications, and are engaged from time to time in various legal actions. The maximum

 

S-F-68



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

5. Commitments, Concentration of Credit Risk and Off-Balance Sheet Risk (continued)

 

exposure under these arrangements and activities is unknown. However, management expects the risk of material loss to be remote.

 

The Consolidated Statement of Investments includes certain revolving loan facilities and other loan commitments held by the Partnership with aggregate unfunded balances of $36,361,742 at March 31, 2014. The Company has also provided a $20,861,473 guarantee on a bridge facility, which the Company believes is unlikely to be funded.

 

 

6. Related Parties

 

TCPC, the Partnership, TCPC Funding, the SBIC, the Investment Manager, the General Partner and their members and affiliates may be considered related parties. From time to time, the Partnership advances payments to third parties on behalf of TCPC which are reimbursable through deductions from distributions to TCPC. At March 31, 2014, no such amounts were outstanding. From time to time, the Investment Manager advances payments to third parties on behalf of the Partnership and receives reimbursement from the Partnership. At March 31, 2014, amounts reimbursable to the Investment Manager totaled $144,306, as reflected in the Consolidated Statement of Assets and Liabilities.

 

Pursuant to an administration agreement between the Administrator and the Partnership (the “Administration Agreement”), the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to the Partnership, as well as costs and expenses incurred by the Administrator or its affiliates relating to any administrative, operating, or other non-investment advisory services provided by the Administrator or its affiliates to the Partnership. For the three months ended March 31, 2014, expenses allocated pursuant to the Administration Agreements totaled $256,806. The Administrator waived reimbursement of all administrative expenses prior to January 1, 2013.

 

7.  Distributions

 

The Partnership’s distributions are recorded on the record date. The timing of distributions is determined by the General Partner, which has provided the Investment Manager with certain criteria for such distributions.

 

8. Subsequent Events

 

On April 22, 2014, the SBIC received a license from the SBA to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958.

 

S-F-69



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Notes to Consolidated Financial Statements (Continued)

 

March 31, 2014

 

9 . Financial Highlights

 

The financial highlights with respect to the common limited partner are as follows:

 

 

 

Three Months Ended

 

 

 

March 31, 2014

 

 

 

 

 

Return on invested assets (1), (2)

 

3.6

%

 

 

 

 

Gross return to common limited partner (1)

 

4.2

%

Less: General Partner incentive allocation (1)

 

(0.8

)%

Return to common limited partner (1), (3)

 

3.4

%

 

 

 

 

Ratios to average common equity: (4), (5)

 

 

 

Net investment income

 

13.3

%

Expenses

 

3.2

%

Expenses and General Partner allocation

 

4.0

%

 

 

 

 

Ending net assets attributable to common limited partner

 

$

555,836,984

 

Portfolio turnover rate (1)

 

8.7

%

Weighted-average debt outstanding

 

$

98,266,667

 

Weighted-average interest rate on debt

 

1.9

%

 


(1) Not annualized.

 

(2) Return on invested assets is a time-weighted, geometrically linked rate of return and excludes cash and cash equivalents.

 

(3) Returns (net of dividends on the preferred equity facility, allocations to General Partner and Partnership expenses, including financing costs and management fees) are calculated on a monthly geometrically linked, time-weighted basis.

 

(4) Net investment income and expenses annualized. General Partner allocation not annualized.

 

(5) These ratios include interest expense but do not reflect the effect of dividends on the preferred equity facility.

 

S-F-70



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Schedule of Changes in Investments in Affiliates (1)

 

Three Months Ended March 31, 2014

 

Security

 

Acquisitions

 

Dispositions (2)

 

Dividends or Interest (3)

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16

 

$

 

$

 

$

316,578

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16

 

 

 

 

Anacomp, Inc., Class A Common Stock

 

 

 

 

EPMC HoldCo, LLC, Membership Units

 

 

 

 

ESP Holdings, Inc., Cumulative Preferred 15%

 

 

(2,489,100

)

1,968,748

 

ESP Holdings, Inc., Common Stock

 

 

(2,955,297

)

289,315

 

ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19

 

 

(7,959,369

)

205,175

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18

 

 

(37,500

)

332,896

 

KAGY Holding Company, Inc., Series A Preferred Stock

 

 

 

 

N510UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(23,046

)

15,999

 

N512UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(22,551

)

16,292

 

N536UA Aircraft Secured Mortgage, 16%, due 9/29/14

 

 

(39,471

)

3,551

 

N545UA Aircraft Secured Mortgage, 16%, due 8/29/15

 

 

(35,371

)

9,269

 

N585UA Aircraft Secured Mortgage, 20%, due 10/25/16

 

 

(26,478

)

19,115

 

N659UA Aircraft Secured Mortgage, 12%, due 2/28/16

 

 

(269,027

)

78,303

 

N661UA Aircraft Secured Mortgage, 12%, due 5/4/16

 

 

(260,901

)

81,466

 

N510UA Equipment Trust Beneficial Interests

 

23,046

 

(8,978

)

20,872

 

N512UA Equipment Trust Beneficial Interests

 

22,551

 

(8,831

)

20,723

 

N536UA Equipment Trust Beneficial Interests

 

39,471

 

(11,300

)

29,930

 

N545UA Equipment Trust Beneficial Interests

 

35,371

 

(11,884

)

26,412

 

N585UA Equipment Trust Beneficial Interests

 

26,478

 

(11,694

)

23,102

 

N913DL Aircraft Secured Mortgage, 8%, due 3/15/17

 

 

(20,362

)

5,573

 

N918DL Aircraft Secured Mortgage, 8%, due 8/15/18

 

 

(18,025

)

7,576

 

N954DL Aircraft Secured Mortgage, 8%, due 3/20/19

 

 

(20,708

)

10,099

 

N955DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(19,920

)

10,485

 

N956DL Aircraft Secured Mortgage, 8%, due 5/20/19

 

 

(20,251

)

10,462

 

N957DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(20,094

)

10,576

 

N959DL Aircraft Secured Mortgage, 8%, due 7/20/19

 

 

(19,938

)

10,690

 

N960DL Aircraft Secured Mortgage, 8%, due 10/20/19

 

 

(19,644

)

11,119

 

N961DL Aircraft Secured Mortgage, 8%, due 8/20/19

 

 

(20,119

)

10,986

 

N976DL Aircraft Secured Mortgage, 8%, due 2/15/18

 

 

(20,924

)

7,674

 

N913DL Equipment Trust Beneficial Interests

 

20,362

 

(23,508

)

3,996

 

N918DL Equipment Trust Beneficial Interests

 

18,025

 

(22,334

)

3,175

 

N954DL Equipment Trust Beneficial Interests

 

20,708

 

(26,938

)

2,896

 

N955DL Equipment Trust Beneficial Interests

 

19,920

 

(26,609

)

2,687

 

N956DL Equipment Trust Beneficial Interests

 

20,251

 

(35,968

)

(6,301

)

N957DL Equipment Trust Beneficial Interests

 

20,094

 

(26,864

)

2,634

 

N959DL Equipment Trust Beneficial Interests

 

19,938

 

(26,754

)

2,579

 

N960DL Equipment Trust Beneficial Interests

 

19,644

 

(26,669

)

2,366

 

N961DL Equipment Trust Beneficial Interests

 

20,119

 

(27,137

)

2,424

 

N976DL Equipment Trust Beneficial Interests

 

20,924

 

(25,640

)

2,776

 

RM Holdco, LLC, Membership Units

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18

 

 

 

14,461

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/19/16

 

68,263

 

(47,493

)

100,987

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/19/16

 

262,284

 

 

332,454

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/19/16

 

85,754

 

 

108,422

 

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16

 

54,984

 

 

69,456

 

United N659UA-767, LLC (N659UA)

 

269,027

 

(168,678

)

92,624

 

United N661UA-767, LLC (N661UA)

 

260,901

 

(165,758

)

97,034

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units

 

 

 

 

 


Notes to Schedule of Changes in Investments in Affiliates:

(1) The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Partnership of 5% or more of the issuers’ voting securities.

(2) Dispositions include sales, paydowns, mortgage amortizations, and aircraft depreciation.

(3) Also includes fee and lease income as applicable.

 

S-F-71



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Schedule of Changes in Investments in Affiliates (1)

 

Year Ended December 31, 2013

 

Security

 

Acquisitions

 

Dispositions (2)

 

Dividends or Interest (3)

 

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16

 

$

2,056,927

 

$

 

$

128,215

 

AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16

 

7,586,317

 

 

640,007

 

Anacomp, Inc., Class A Common Stock

 

 

 

 

EPMC HoldCo, LLC, Membership Units

 

 

(1,481,930

)

 

ESP Holdings, Inc., Cumulative Preferred 15%

 

 

 

 

ESP Holdings, Inc., Common Stock

 

 

 

32,627

 

ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19

 

749,529

 

 

1,199,575

 

Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18

 

14,850,000

 

 

83,281

 

International Wire Group Holdings, Inc., Senior Secured Notes, 8.5%, due 10/15/17

 

 

(15,759,750

)

443,715

 

KAGY Holding Company, Inc., Series A Preferred Stock

 

8,096,057

 

(1,644

)

 

N510UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(81,562

)

74,646

 

N512UA Aircraft Secured Mortgage, 20%, due 10/26/16

 

 

(79,808

)

75,593

 

N536UA Aircraft Secured Mortgage, 16%, due 9/29/14

 

 

(143,097

)

29,100

 

N545UA Aircraft Secured Mortgage, 16%, due 8/29/15

 

 

(128,230

)

50,422

 

N585UA Aircraft Secured Mortgage, 20%, due 10/25/16

 

 

(93,707

)

88,705

 

N659UA Aircraft Secured Mortgage, 12%, due 2/28/16

 

 

(999,280

)

390,117

 

N661UA Aircraft Secured Mortgage, 12%, due 5/4/16

 

 

(969,098

)

401,041

 

N510UA Equipment Trust Beneficial Interests

 

81,562

 

(35,912

)

72,866

 

N512UA Equipment Trust Beneficial Interests

 

79,808

 

(35,323

)

72,497

 

N536UA Equipment Trust Beneficial Interests

 

143,097

 

(45,201

)

104,929

 

N545UA Equipment Trust Beneficial Interests

 

128,359

 

(47,536

)

92,525

 

N585UA Equipment Trust Beneficial Interests

 

93,707

 

(46,776

)

80,203

 

N913DL Aircraft Secured Mortgage, 8%, due 3/15/17

 

 

(77,509

)

26,248

 

N918DL Aircraft Secured Mortgage, 8%, due 8/15/18

 

 

(68,612

)

33,806

 

N954DL Aircraft Secured Mortgage, 8%, due 3/20/19

 

 

(78,825

)

44,415

 

N955DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(75,824

)

45,803

 

N956DL Aircraft Secured Mortgage, 8%, due 5/20/19

 

 

(77,085

)

45,775

 

N957DL Aircraft Secured Mortgage, 8%, due 6/20/19

 

 

(76,487

)

46,204

 

N959DL Aircraft Secured Mortgage, 8%, due 7/20/19

 

 

(75,896

)

46,629

 

N960DL Aircraft Secured Mortgage, 8%, due 10/20/19

 

 

(74,776

)

48,285

 

N961DL Aircraft Secured Mortgage, 8%, due 8/20/19

 

 

(76,582

)

47,846

 

N976DL Aircraft Secured Mortgage, 8%, due 2/15/18

 

 

(79,647

)

34,759

 

N913DL Equipment Trust Beneficial Interests

 

77,509

 

(94,032

)

12,045

 

N918DL Equipment Trust Beneficial Interests

 

68,612

 

(89,338

)

9,213

 

N954DL Equipment Trust Beneficial Interests

 

78,825

 

(107,751

)

7,578

 

N955DL Equipment Trust Beneficial Interests

 

75,824

 

(106,437

)

6,891

 

N956DL Equipment Trust Beneficial Interests

 

77,085

 

(107,904

)

6,845

 

N957DL Equipment Trust Beneficial Interests

 

76,487

 

(107,457

)

6,648

 

N959DL Equipment Trust Beneficial Interests

 

75,896

 

(107,015

)

6,456

 

N960DL Equipment Trust Beneficial Interests

 

74,776

 

(106,678

)

5,662

 

N961DL Equipment Trust Beneficial Interests

 

76,582

 

(108,546

)

5,805

 

N967DL Equipment Trust Beneficial Interests

 

79,647

 

(102,560

)

7,056

 

RM Holdco, LLC, Membership Units

 

 

 

 

RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18

 

57,991

 

 

57,992

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/19/16

 

16,974

 

(149,183

)

413,430

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/19/16

 

567,205

 

 

1,258,016

 

RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/19/16

 

186,901

 

 

410,004

 

RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16

 

1,339,883

 

 

182,711

 

United N659UA-767, LLC (N659UA)

 

999,280

 

(674,714

)

316,842

 

United N661UA-767, LLC (N661UA)

 

969,098

 

(663,034

)

313,627

 

Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units

 

5,000,000

 

 

 

 


Notes to Schedule of Changes in Investments in Affiliates:

(1) The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Partnership of 5% or more of the issuers’ voting securities.

(2) Dispositions include sales, paydowns, mortgage amortizations, and aircraft depreciation.

(3) Also includes fee and lease income as applicable.

 

S-F-72



 

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

 

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers

 

March 31, 2014

 

Investment

 

Acquisition Date

 

 

 

AIP/IS Holdings, LLC, Membership Units

 

Var. 2009 & 2010

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19

 

9/26/13

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17

 

3/5/12

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19

 

10/19/12

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18

 

7/26/13

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16

 

1/20/11

Findly Talent, LLC, Membership Units

 

1/1/14

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock

 

12/4/13

Hunt Companies, Inc., Senior Secured Notes, 9.625%, due 3/1/21

 

2/25/14

Integra Telecom, Inc., Common Stock

 

11/19/09

Integra Telecom, Inc., Warrants

 

11/19/09

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18

 

5/8/13

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21

 

8/1/13

Marsico Holdings, LLC Common Interest Units

 

9/10/12

Precision Holdings, LLC, Class C Membership Interests

 

Var. 2010 & 2011

Shop Holdings, LLC, Convertible Promissory Note, 5%, due 8/5/15

 

2/5/14

Shop Holding, LLC, Class A Units

 

6/2/11

Shop Holding, LLC, Warrants to Purchase Class A Units

 

6/2/11

SiTV, Inc., Warrants to Purchase Common Stock

 

8/3/12

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock

 

9/25/13

STG-Fairway Holdings, LLC, Class A Units

 

12/30/10

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19

 

9/26/11

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18

 

11/13/13

V Telecom Investment S.C.A, Common Shares

 

11/9/12

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17

 

6/6/13

 

December 31, 2013

 

Investment

 

Acquisition Date

 

 

 

AIP/IS Holdings, LLC, Membership Units

 

Var. 2009 & 2010

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19

 

9/26/13

BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17

 

3/5/12

Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19

 

10/19/12

Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18

 

7/26/13

Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16

 

1/20/11

Flight Options Holdings I, Inc., Warrants to Purchase Common Stock

 

12/4/13

Integra Telecom, Inc., Common Stock

 

11/19/09

Integra Telecom, Inc., Warrants

 

11/19/09

Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18

 

5/8/13

Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21

 

8/1/13

Marsico Holdings, LLC Common Interest Units

 

9/10/12

Precision Holdings, LLC, Class C Membership Interests

 

Var. 2010 & 2011

Shop Holding, LLC, Class A Units

 

6/2/11

Shop Holding, LLC, Warrants to Purchase Class A Units

 

6/2/11

SiTV, Inc., Warrants to Purchase Common Stock

 

8/3/12

SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock

 

9/25/13

St Barbara Ltd., 1st Priority Senior Secured Notes, 8.875%, due 4/15/18

 

3/22/13

STG-Fairway Holdings, LLC, Class A Units

 

12/30/10

The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19

 

9/26/11

Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18

 

11/13/13

V Telecom Investment S.C.A, Common Shares

 

11/9/12

Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17

 

6/6/13

 

S-F-73


 

 

Shares

 

GRAPHIC

 

Series                     Preferred Stock
Liquidation Preference $                                 per Share

 


 

PROSPECTUS SUPPLEMENT

 


 

[Underwriters]

 

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