10-Q 1 v359328_10q.htm QUARTERLY REPORT

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

  x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the Quarter Ended September 30, 2013

 

  ¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Commission File Number: 814-00899

 

TCP CAPITAL CORP.

(Exact Name of Registrant as Specified in Charter)

 

Delaware       56-2594706

(State or Other Jurisdiction

of Incorporation)

     

(IRS Employer

Identification No.)

 

2951 28th Street, Suite 1000

Santa Monica, California

  90405
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code (310) 566-1000

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨   Accelerated filer                ¨
     
Non-accelerated filer   x   Smaller Reporting company ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

 

The number of shares of the Registrant’s common stock, $0.001 par value, outstanding as of November 7, 2013 was 31,024,802.

 

 
 

 

Table of Contents

TCP CAPITAL CORP.

 

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2013

 

TABLE OF CONTENTS

 

        Page
Part I.   Financial Information    
         
Item 1.   Financial Statements    
    Consolidated Statements of Assets and Liabilities as of September 30, 2013 (unaudited) and December 31, 2012   2
    Consolidated Statements of Investments as of September 30, 2013 (unaudited) and December 31, 2012   3
    Consolidated Statements of Operations for the three and nine months ended September 30, 2013 (unaudited) and September 30, 2012 (unaudited)   15
    Consolidated Statements of Changes in Net Assets for the nine months ended September 30, 2013 (unaudited) and year ended December 31, 2012   16
    Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 (unaudited) and September 30, 2012 (unaudited)   17
    Notes to Consolidated Financial Statements (unaudited)   18
    Consolidated Schedule of Changes in Investments in Affiliates for the nine months ended September 30, 2013 (unaudited) and year ended December 31, 2012   35
    Consolidated Schedule of Restricted Securities of Unaffiliated Issuers as of September 30, 2013 (unaudited) and December 31, 2012   37
    Consolidating Statement of Assets and Liabilities as of September 30, 2013 (unaudited) and December 31, 2012   38
    Consolidating Statement of Operations for the nine months ended September 30, 2013 (unaudited) and September 30, 2012 (unaudited)   40
         
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   42
         
Item 3.   Quantitative and Qualitative Disclosures About Market Risk   54
         
Item 4.   Controls and Procedures   55
         
Part II.   Other Information    
         
Item 1.   Legal Proceedings   55
         
Item 1A.    Risk Factors   55
         
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds   55
         
Item 3.   Defaults upon Senior Securities   55
         
Item 4.   Mine Safety Disclosures   55
         
Item 5.   Other Information   55
         
Item 6.   Exhibits   55

 

1
 

 

TCP Capital Corp.

 

Consolidated Statements of Assets and Liabilities

 

   September 30, 2013   December 31, 2012 
   (unaudited)     
Assets          
Investments, at fair value:          
Unaffiliated issuers (cost of $690,002,299 and $508,302,758, respectively)  $633,694,938   $440,772,190 
Controlled companies (cost of $43,182,589 and $44,964,189 respectively)   19,657,258    22,489,208 
Other affiliates (cost of $53,463,548 and $55,803,421, respectively)   50,743,291    54,421,689 
Total investments (cost of $786,648,436 and $609,070,368, respectively)   704,095,487    517,683,087 
           
Cash and cash equivalents   12,566,659    18,035,189 
Accrued interest income:          
Unaffiliated issuers   6,385,367    4,039,149 
Controlled companies   44,775    53,524 
Other affiliates   803,786    482,634 
Deferred debt issuance costs   3,284,278    696,018 
Receivable for investments sold   1,287,801    7,727,415 
Unrealized appreciation on swaps   52,694    179,364 
Options (cost $51,750)   19,152    - 
Prepaid expenses and other assets   716,981    345,722 
Total assets   729,256,980    549,242,102 
           
Liabilities          
Debt   150,000,000    74,000,000 
Payable for investments purchased   36,918,454    21,814,819 
Incentive allocation payable   2,694,156    - 
Interest payable   289,907    119,233 
Payable to the Investment Manager   280,451    109,200 
Accrued expenses and other liabilities   2,158,495    2,685,015 
Total liabilities   192,341,463    98,728,267 
           
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   534,213    526,285 
Total preferred limited partner interests   134,534,213    134,526,285 
           
Non-controlling interest          
General Partner interest in Special Value Continuation Partners, LP   877,563    - 
           
Net assets applicable to common shareholders  $401,503,741   $315,987,550 
           
Composition of net assets applicable to common shareholders          
Common stock, $0.001 par value; 200,000,000 shares authorized, 26,654,802 and 21,477,628 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively   26,655    21,478 
Paid-in capital in excess of par   522,441,180    444,234,060 
Accumulated net investment income   25,069,435    22,526,179 
Accumulated net realized losses   (62,109,479)   (59,023,861)
Accumulated net unrealized depreciation   (83,046,487)   (91,770,306)
Non-controlling interest   (877,563)   - 
Net assets applicable to common shareholders  $401,503,741   $315,987,550 
           
Net assets per share  $15.06   $14.71 

 

See accompanying notes.

 

2
 

 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited)

 

September 30, 2013

 

Showing Percentage of Total Cash and Investments of the Company 

 

 

               Percent of 
   Principal       Fair   Cash and 
Investment  Amount   Cost   Value   Investments 
                 
Debt Investments (92.85%)                    
Bank Debt (76.59%) (1)                    
Accounting, Tax Preparation, Bookkeeping, and Payroll Services (1.16%)                    
Expert Global Solutions, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 7.25%, 1.25% LIBOR Floor, due 4/3/18  $704,837   $702,697   $718,934    0.10%
Expert Global Solutions, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 11%, 1.5% LIBOR Floor, due 10/3/18  $7,434,877    7,220,292    7,561,270    1.06%
Total Accounting, Tax Preparation, Bookkeeping, and Payroll Services        7,922,989    8,280,204      
                     
Artificial Synthetic Fibers and Filaments Manufacturing (0.29%)                    
AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16 (2)  $2,056,927    2,056,927    2,056,927    0.29%
                     
Business Support Services (2.09%)                    
STG-Fairway Acquisitions, Inc., Senior Secured 2nd Lien Term Loan,  LIBOR + 9.25%, 1.25% LIBOR Floor, due 8/28/19  $14,643,455    13,922,519    15,009,541    2.09%
                     
Chemical Manufacturing (2.42%)                    
Archroma, Senior Secured Lien Term Loan B, LIBOR + 8.25%, 1.25% LIBOR Floor, due 9/30/18  $17,500,000    17,150,000    17,325,000    2.42%
                     
Computer Equipment Manufacturing (1.17%)                    
ELO Touch Solutions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 10.5%, 1.5% LIBOR Floor, due 12/1/18  $10,000,000    9,654,753    8,400,000    1.17%
                     
Converted Paper Products Manufacturing (0.50%)                    
Ranpak Corp., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25%,  1.25% LIBOR Floor, due 4/23/20  $3,469,573    3,434,877    3,556,313    0.50%
                     
Computer Systems Design and Related Services (5.36%)                    
Blue Coat Systems, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.5%, 1% LIBOR Floor, due 6/28/20  $15,000,000    14,878,125    15,112,500    2.11%
Onx Enterprise Solutions, Ltd, Senior Secured 1st Lien Term Loan, LIBOR + 7% , due 9/3/18 LIBOR + 7% , due 9/3/18  $10,666,667    10,509,574    10,746,667    1.49%
Onx USA, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7% , due 9/3/18  $5,333,333    5,254,787    5,373,333    0.75%
Websense, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25%, 1% LIBOR  Floor, due 12/27/20  $7,200,000    7,164,000    7,209,000    1.01%
Total Computer Systems Design and Related Services        37,806,486    38,441,500      
                     
Drugs and Druggists' Sundries Merchant Wholesalers (1.27%)                    
Envision Acquisition Company, LLC, 2nd Lien Term Loan, LIBOR + 8.75%,  1% LIBOR Floor, due 9/23/21  $9,079,011    8,897,430    9,067,662    1.27%
                     
Electric Power Generation, Transmission and Distribution (2.41%)                    
Panda Sherman Power, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7.5%,  1.5% LIBOR Floor, due 9/14/18  $11,070,172    10,926,683    11,236,225    1.57%
Panda Temple Power II, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 6%,  1.25% LIBOR Floor, due 4/3/19  $5,892,970    5,834,041    5,999,780    0.84%
Total Electric Power Generation, Transmission and Distribution        16,760,724    17,236,005      
                     
Electrical Equipment and Component Manufacturing (2.33%)                    
Palladium Energy, Inc., 1st Lien Senior Secured Term Loan, LIBOR + 9%, 1% LIBOR Floor, due 12/26/17  $16,500,317    16,212,713    16,714,821    2.33%
                     
Electronic Shopping (1.06%)                    
Shopzilla, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.5%, due 3/31/16  $7,606,723    7,368,382    7,606,723    1.06%
                     
Financial Investment Activities (0.30%)                    
Marsico Capital Management, Senior Secured 1st Lien Term Loan,  LIBOR + 5%, due 12/31/22  $10,654,939    13,415,987    2,184,263    0.30%
                     
Freight Transportation Arrangement (0.53%)                    
Livingston International, Inc., 2nd Lien Term Loan, LIBOR + 7.75%,  1.25% LIBOR Floor, due 4/18/20  $3,750,000    3,678,794    3,775,781    0.53%
                     
Full-Service Restaurants (2.41%)                    
RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18 (2)  $5,106,805    5,106,805    3,516,036    0.49%
RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1,  12% Cash + 7% PIK, due 3/21/16 (2)  $1,332,013    1,299,048    1,332,013    0.19%
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/21/16 (2)  $3,682,296    3,682,296    3,682,296    0.51%
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK,  due 3/21/16 (2)  $6,631,746    6,631,746    6,631,746    0.93%
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16 (2)  $2,090,096    2,045,422    2,090,096    0.29%
Total Full-Service Restaurants        18,765,317    17,252,187      

 

3
 

 

 TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

September 30, 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)                    
Gaming Industries (2.14%)                    
AGS LLC, 1st Lien Term Loan, LIBOR + 10%, 1.5% LIBOR Floor, due 8/15/16  $13,269,231   $12,865,029   $13,561,154    1.89%
AGS LLC, DDTL 1st Lien Term Loan, LIBOR + 10%, 1.5% LIBOR Floor, due 8/15/16  $1,730,769    1,672,303    1,768,846    0.25%
Total Gaming Industries        14,537,332    15,330,000      
                     
Grocery Stores (2.12%)                    
Bashas, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 9.35%, 1.5% LIBOR Floor, due 12/28/15  $14,952,340    14,910,425    15,176,625    2.12%
                     
Inland Water Transportation (1.81%)                    
US Shipping Corp, Senior Secured 1st Lien Term Loan B, LIBOR + 7.75%, 1.25% LIBOR Floor, due 4/30/18  $12,635,000    12,508,650    12,950,875    1.81%
                     
Insurance Related Activities (0.89%)                    
Confie Seguros Holding II Co., 2nd Lien Term Loan, LIBOR + 9%, 1.25% LIBOR  Floor, due 5/8/19  $6,341,809    6,242,396    6,377,482    0.89%
                     
Iron and Steel Mills and Ferroalloy Manufacturing (0.66%)                    
Essar Steel Algoma, Inc., Senior Secured Term Loan, LIBOR + 7.5%, 1.25% LIBOR Floor, due 9/20/14  $4,633,352    4,587,939    4,717,911    0.66%
                     
Motion Picture and Video Industries (2.15%)                    
CORE Entertainment, Inc., Senior Secured 1st Lien Term Loan, 9%, due 6/21/17  $9,462,231    9,376,143    8,563,319    1.19%
CORE Entertainment, Inc., Senior Secured 2nd Lien Term Loan, 13.5%, due 6/21/18  $7,569,785    7,498,335    6,880,935    0.96%
Total Motion Picture and Video Industries        16,874,478    15,444,254      
                     
Newspaper, Periodical, Book, and Directory Publishers (4.31%)                    
Hanley-Wood, LLC, 1st Lien FILO Term Loan, LIBOR + 6.75%, 1.25% LIBOR Floor, due 7/15/18  $16,853,800    16,853,800    16,659,981    2.32%
MediMedia USA, Inc., 1st Lien Revolver, LIBOR + 6.75%, due 5/20/18  $5,270,000    4,107,500    4,833,908    0.67%
MediMedia USA, Inc., 1st Lien Term Loan, LIBOR + 6.75%, 1.25% LIBOR Floor, due 11/20/18  $9,725,625    9,445,718    9,482,484    1.32%
Total Newspaper, Periodical, Book, and Directory Publishers        30,407,018    30,976,373      
                     
Nonresidential Building Construction (1.40%)                    
NCM Group Holdings, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 11.5%,  1% LIBOR Floor, due 8/29/18  $10,000,000    9,607,266    10,020,000    1.40%
                     
Oil and Gas Extraction (2.17%)                    
Willbros Group, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9.75%, 1.25% LIBOR Floor, due 8/7/19  $15,464,780    15,089,437    15,565,301    2.17%
                     
Other Amusement and Recreation Industries (1.66%)                    
Intrawest Cayman L.P., 1st Lien Term Loan, LIBOR + 5.75%, 1.25% LIBOR Floor,  due 12/4/17 - (Cayman Islands)  $1,240,625    1,224,626    1,259,234    0.18%
Intrawest Cayman L.P., 2nd Lien Term Loan, LIBOR + 9.5%, 1.25% LIBOR Floor, due 12/4/18 - (Cayman Islands)  $10,250,000    10,020,472    10,617,258    1.48%
Total Other Amusement and Recreation Industries        11,245,098    11,876,492      
                     
Other Telecommunications (1.93%)                    
Securus Technologies, Inc., 2nd Lien Term Loan, LIBOR + 7.75%, 1.25% LIBOR Floor, due 4/30/21  $14,000,000    13,860,000    13,807,570    1.93%
                     
Petroleum and Coal Products Manufacturing (1.12%)                    
Boomerang Tube, LLC, 2nd Lien Term Loan, LIBOR + 9.5%, 1.5% LIBOR Floor, due 10/11/17  $8,199,092    7,992,438    7,994,115    1.12%
                     
Professional, Scientific, and Technical Services (3.56%)                    
Connolly, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 9.25%, 1.25%  LIBOR Floor, due 7/15/19  $12,000,000    11,823,991    12,150,000    1.70%
ConvergeOne Holdings, 1st Lien Term Loan, LIBOR + 8%, 1.25% LIBOR Floor, due 5/8/19  $13,398,750    13,197,769    13,315,008    1.86%
Total Professional, Scientific, and Technical Services        25,021,760    25,465,008      
                     
Promoters of Performing Arts, Sports, and Similar Events (1.53%)                    
Stadium Management Group, Senior Secured 2nd Lien Term Loan, LIBOR + 9.50%, 1.25% LIBOR Floor, due 12/7/18  $11,000,000    10,810,717    11,000,000    1.53%

 

4
 

 

TCP Capital Corp.

 

 Consolidated Statement of Investments (Unaudited) (Continued)

 

September 30, 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 (3.38%)                    
SiTV, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6% Cash + 4% PIK,  2% LIBOR Floor, due 8/3/16  $6,963,670   $6,606,633   $6,695,569    0.93%
The Tennis Channel, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 8.5%, due 5/29/17  $17,411,475    16,932,362    17,542,061    2.45%
Total Radio and Television Broadcasting        23,538,995    24,237,630      
                     
Retail (1.59%)                    
Kenneth Cole Productions, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 10.40%, 1% LIBOR Floor, due 9/25/17  $11,272,727    11,039,147    11,385,454    1.59%
                     
Scheduled Air Transportation (1.89%)                    
Aircraft Secured Mortgages - Aircraft Leased to Delta Air Lines, Inc.                    
N913DL, 8%, due 3/15/17 (6)  $309,009    309,009    312,630    0.04%
N918DL, 8%, due 8/15/18 (6)  $405,670    405,670    406,810    0.06%
N954DL, 8%, due 3/20/19 (6)  $534,674    534,674    533,120    0.07%
N955DL, 8%, due 6/20/19 (6)  $552,809    552,809    549,950    0.08%
N956DL, 8%, due 5/20/19 (6)  $552,126    552,126    549,780    0.08%
N957DL, 8%, due 6/20/19 (6)  $557,644    557,644    554,710    0.08%
N959DL, 8%, due 7/20/19 (6)  $563,117    563,117    559,810    0.08%
N960DL, 8%, due 10/20/19 (6)  $584,112    584,112    579,360    0.08%
N961DL, 8%, due 8/20/19 (6)  $578,149    578,149    574,430    0.08%
N976DL, 8%, due 2/15/18 (6)  $414,871    414,871    417,690    0.06%
Aircraft Secured Mortgages - Aircraft Leased to United Airlines, Inc.                    
N510UA, 20%, due 10/26/16 (2)  $350,779    350,779    432,155    0.06%
N512UA, 20%, due 10/26/16 (2)  $355,995    355,995    440,895    0.06%
N536UA, 16%, due 9/29/14 (2)  $146,778    146,778    155,325    0.02%
N545UA, 16%, due 8/29/15 (2)  $283,688    283,688    314,355    0.04%
N585UA, 20%, due 10/25/16 (2)  $417,991    417,991    517,750    0.07%
N659UA, 12%, due 2/28/16 (6)  $2,969,265    2,969,265    3,220,168    0.45%
N661UA, 12%, due 5/4/16 (6)  $3,133,414    3,133,414    3,433,856    0.48%
Total Scheduled Air Transportation        12,710,091    13,552,794      
                     
Semiconductor and Other Electronic Component Manufacturing (1.95%)                    
Isola USA Corporation, 1st Lien Term Loan, LIBOR + 8%, 2% LIBOR Floor, due 9/30/15  $14,000,000    13,975,000    14,000,000    1.95%
                     
Software Publishers (7.72%)                    
BlackLine Systems, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 0.4% Cash + 7.6% PIK, 1.5% LIBOR Floor, due 9/25/18  $12,327,311    11,558,608    11,797,237    1.65%
Coreone Technologies, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 3.75% Cash + 5% PIK, 1% LIBOR Floor, due 9/4/18  $13,385,761    13,058,716    13,345,603    1.86%
Deltek, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.75%, 1.25% LIBOR  Floor, due 10/10/19  $15,000,000    14,799,078    15,131,325    2.11%
Edmentum, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.75%, 1.5% LIBOR  Floor due 5/17/19  $15,000,000    14,740,242    15,037,500    2.10%
Total Software Publishers        54,156,644    55,311,665      
                     
Specialty Hospitals (0.77%)                    
UBC Healthcare Analytics, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9%,  1% LIBOR Floor, due 7/1/18  $5,526,021    5,498,391    5,503,917    0.77%
                     
Textile Furnishings Mills (2.29%)                    
Lexmark Carpet Mills, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 10%,  1% LIBOR Floor, due 9/30/18  $16,351,467    15,942,680    16,400,522    2.29%
                     
Wired Telecommunications Carriers (2.88%)                    
Bulgaria Telecom Company AD, 1st Lien Facility 1A Term Loan,  EURIBOR + 5.5%, due 11/9/17 - (Bulgaria) (4)  3,228,624    3,488,734    4,096,584    0.57%
Integra Telecom Holdings, Inc., 2nd Lien Term Loan, LIBOR + 8.5%, 1.25% LIBOR  Floor, due 2/22/20  $15,000,000    14,692,351    15,434,775    2.14%
Viva Telecom Bulgaria EAD, 1st Lien Facility 1B Term Loan, EURIBOR + 5.5%,  due 11/9/17 - (Luxembourg) (4)  970,906    1,049,125    1,231,917    0.17%
Total Wired Telecommunications Carriers        19,230,210    20,763,276      

 

5
 

 

  TCP Capital Corp.

 

 Consolidated Statement of Investments (Unaudited) (Continued)

 

September 30, 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 (3.37%)                    
Globalive Wireless Management Corp., Senior Secured 1st Lien Term Loan,  LIBOR + 10.9%, due 4/30/14 - (Canada)  $3,037,292   $2,933,872   $3,067,665    0.43%
Gogo, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 9.75%, 1.5% LIBOR Floor, due 6/21/17  $19,713,500    18,827,593    21,093,446    2.94%
Total Wireless Telecommunications Carriers        21,761,465    24,161,111      
                     
Total Bank Debt        548,595,475    548,925,302      
                     
Other Corporate Debt Securities (16.26%)                    
Architectural, Engineering, and Related Services (1.06%)                    
ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes,  6% Cash + 10% PIK, due 12/31/19 (2), (5)   $7,574,339    7,574,339    7,574,339    1.06%
                     
Artificial Synthetic Fibers and Filaments Manufacturing (1.27%)                    
AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16 (2), (5)  $9,268,000    7,586,317    9,124,346    1.27%
                     
Beverage Manufacturing (1.12%)                    
Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18 (5)  $7,780,000    7,780,000    7,993,950    1.12%
                     
Data Processing, Hosting, and Related Services (1.06%)                    
The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19 (5)  $7,063,598    6,925,117    7,628,686    1.06%
                     
Fabricated Metal Product Manufacturing (1.48%)                    
Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16 (5)  $12,500,000    12,322,875    10,500,000    1.48%
                     
Metal Ore Mining (0.90%)                    
St Barbara Ltd., 1st Priority Senior Secured Notes, 8.875%, due 4/15/18 (5)  $7,359,000    7,324,728    6,475,920    0.90%
                     
Nondepository Credit Intermediation (1.49%)                    
Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19 (5)  $10,000,000    9,818,866    10,700,000    1.49%
                     
Plastics Products Manufacturing (1.99%)                    
Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18 (5)  $13,600,000    13,600,000    14,242,248    1.99%
                     
Satellite Telecommunications (1.40%)                    
Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19 (5)  $9,914,000    9,914,000    10,062,710    1.40%
                     
Scientific Research and Development Services (2.40%)                    
BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17 (5)  $17,200,000    16,536,295    17,200,000    2.40%
                     
Structured Note Funds (2.09%)                    
Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21 (5)  $15,000,000    15,000,000    15,000,000    2.09%
                     
Total Other Corporate Debt Securities        114,382,537    116,502,199      
                     
Total Debt Investments        662,978,012    665,427,501      
                     
Equity Securities (5.40%)                    
Architectural, Engineering, and Related Services (0.94%)                    
ESP Holdings, Inc., Cumulative Preferred 15% (2), (3), (5)   20,297    2,249,930    3,947,862    0.54%
ESP Holdings, Inc., Common Stock (2), (3), (5)   88,670    9,311,782    2,864,872    0.40%
Total Architectural, Engineering, and Related Services        11,561,712    6,812,734      
                     
Business Support Services (0.18%)                    
STG-Fairway Holdings, LLC, Class A Units (3), (5)   80,396    1,100,348    1,310,535    0.18%
                     
Data Processing, Hosting, and Related Services (0.14%)                    
Anacomp, Inc., Class A Common Stock (3), (5), (6)   1,255,527    26,711,048    1,016,977    0.14%
                     
Depository Credit Intermediation (0.14%)                    
Doral Financial Corporation, Common Stock (3)   53,890    11,699,417    1,028,216    0.14%
                     
Electric Power Generation, Transmission and Distribution (0.00%)                    
La Paloma Residual Bank Debt Claim (3), (5)   1,830,453    1,486,222    18    0.00%

 

6
 

 

 TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

September 30, 2013

 

Showing Percentage of Total Cash and Investments of the Company

 

               Percent of 
           Fair   Cash and 
Investment  Shares   Cost   Value   Investments 
                 
Equity Securities (continued)                    
Electronic Shopping (0.15%)                    
Shop Holding, LLC, Class A Units (3), (5)   490,037   $462,576   $876,641    0.11%
Shop Holding, LLC, Warrants to Purchase Class A Units (3), (5)   326,691    -    257,742    0.04%
Total Electronic Shopping        462,576    1,134,383      
                     
Financial Investment Activities (0.00%)                    
Marsico Holdings, LLC, Common Interest Units (3), (5)   168,698    172,694    9,278    - 
                     
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    1,396    22,295    - 
                     
Nonmetallic Mineral Mining and Quarrying (0.22%)                    
EPMC HoldCo, LLC, Membership Units (2), (5)   1,312,720    -    1,562,137    0.22%
                     
Other Amusement and Recreation Industries (0.01%)                    
Bally Total Fitness Holding Corporation, Common Stock (3), (5)   10,315    45,186,963    51,575    0.01%
Bally Total Fitness Holding Corporation, Warrants (3), (5)   18,394    -    2    - 
Total Other Amusement and Recreation Industries        45,186,963    51,577      
                     
Radio and Television Broadcasting (0.05%)                    
SiTV, Inc., Warrants to Purchase Common Stock (3), (5)   233,470    300,322    361,879    0.05%
                     
Scheduled Air Transportation (1.40%)                    
Equipment Trusts - Aircraft Leased to Delta Air Lines, Inc.                    
N913DL Trust Beneficial Interests (5), (6)   660    100,924    127,840    0.02%
N918DL Trust Beneficial Interests (5), (6)   574    114,603    144,330    0.02%
N954DL Trust Beneficial Interests (5), (6)   548    139,665    67,150    0.01%
N955DL Trust Beneficial Interests (5), (6)   535    140,951    114,070    0.02%
N956DL Trust Beneficial Interests (5), (6)   538    141,032    109,140    0.02%
N957DL Trust Beneficial Interests (5), (6)   535    141,952    110,160    0.02%
N959DL Trust Beneficial Interests (5), (6)   532    142,867    111,010    0.02%
N960DL Trust Beneficial Interests (5), (6)   524    146,586    117,980    0.02%
N961DL Trust Beneficial Interests (5), (6)   530    145,765    120,360    0.02%
N976DL Trust Beneficial Interests (5), (6)   599    118,542    103,190    0.01%
Equipment Trusts - Aircraft Leased to United Airlines, Inc.                    
N510UA Trust Beneficial Interests (2), (5)   51    184,456    482,632    0.07%
N512UA Trust Beneficial Interests (2), (5)   50    180,417    475,760    0.07%
N536UA Trust Beneficial Interests (2), (5)   76    369,656    665,221    0.09%
N545UA Trust Beneficial Interests (2), (5)   63    325,962    655,903    0.09%
N585UA Trust Beneficial Interests (2), (5)   50    201,234    588,050    0.08%
United N659UA-767, LLC (N659UA) (5), (6)   386    2,005,203    2,906,192    0.41%
United N661UA-767, LLC (N661UA) (5), (6)   375    1,978,592    2,916,543    0.41%
Total Scheduled Air Transportation        6,578,407    9,815,531      
                     
Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing (0.23%)                    
KAGY Holding Company, Inc., Series A Preferred Stock (2), (3), (5)   9,777,740    1,091,200    1,632,576    0.23%
                     
Semiconductor and Other Electronic Component Manufacturing (0.03%)                    
AIP/IS Holdings, LLC, Membership Units (3), (5)   352    -    229,504    0.03%
                     
Software Publishers (0.08%)                    
SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock (3), (5)   1,232,731    522,678    540,429    0.08%
                     
Support Activities for Mining (0.51%)                    
DeepOcean Group Holding BV, Common Stock - (Norway) (3), (5)   145,824    3,094,604    3,631,017    0.51%

 

7
 

 

TCP Capital Corp.

 

Consolidated Statement of Investments (Unaudited) (Continued)

 

September 30, 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 (1.32%)                    
Integra Telecom, Inc., Common Stock (3), (5)   1,274,522   $8,433,884   $5,606,832    0.77%
Integra Telecom, Inc., Warrants (3), (5)   346,939    19,920    205,050    0.03%
V Telecom Investment S.C.A, Common Shares - (Luxembourg) (3), (4), (5)   1,393    3,236,256    3,697,018    0.52%
Total Wired Telecommunications Carriers        11,690,060    9,508,900      
                     
Total Equity Securities        123,670,424    38,667,986      
                     
Total Investments (7)        786,648,436    704,095,487      
                     
Cash and Cash Equivalents             12,566,659    1.75%
                     
Total Cash and Investments            $716,662,146    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).
(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.
(7)Includes investments with an aggregate market value of $2,940,000 that have been segregated to collateralize certain unfunded commitments.

 

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $354,541,956 and $176,516,172, respectively for the nine months ended September 30, 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 September 30, 2013 was $703,067,274, or 98.1% of total cash and investments of the Company.

 

Options and Swaps at September 30, 2013 were as follows:

  

Investment  Notional
Amount
   Fair Value 
         
Interest Rate Cap, 4%, expires 5/15/2016  $25,000,000   $19,152 
Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 5/16/14  $6,040,944   $52,694 

 

See accompanying notes.

 

8
 

 

TCP Capital Corp.

 

Consolidated Statement of Investments

 

December 31, 2012

 

Showing Percentage of Total Cash and Investments of the Company

 

               Percent of 
   Principal       Fair   Cash and 
Investment  Amount   Cost   Value   Investments 
                 
Debt Investments (90.12%)                    
Bank Debt (75.60%) (1)                    
Accounting, Tax Preparation, Bookkeeping, and Payroll Services (3.16%)                    
Expert Global Solutions, LLC, Senior Secured 1st Lien Term Loan B, LIBOR + 6.75%, 1.25% LIBOR Floor, due 4/2/18  $1,916,252   $1,882,302   $1,925,239    0.36%
Expert Global Solutions, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 9.5%, 1.5% LIBOR Floor, due 10/2/18  $14,976,011    14,493,414    14,953,547    2.80%
Total Accounting, Tax Preparation, Bookkeeping, and Payroll Services        16,375,716    16,878,786      
                     
Business Support Services (3.58%)                    
STG-Fairway Acquisitions, Inc., Senior Secured 2nd Lien Term Loan, 12.5%, due 12/29/15  $19,878,935    18,821,586    19,193,112    3.58%
                     
Computer Equipment Manufacturing (1.78%)                    
ELO Touch Solutions, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 10.5%, 1.5% LIBOR Floor, due 12/4/18  $10,000,000    9,621,530    9,550,000    1.78%
                     
Electric Power Generation, Transmission and Distribution (3.41%)                    
Panda Sherman Power, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 7.5%, 1.5% LIBOR Floor, due 9/14/18  $11,070,172    10,910,286    11,263,900    2.10%
Astoria Generating Company Acquisitions, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 9.35%, 1.5% LIBOR Floor, due 12/28/15  $7,000,000    6,727,929    7,040,845    1.31%
Total Electric Power Generation, Transmission and Distribution        17,638,215    18,304,745      
                     
Electronic Shopping (2.13%)                    
Shopzilla, Inc., Senior Secured 2nd Lien Term Loan, 13%, due 6/1/14  $11,382,687    10,869,637    11,422,526    2.13%
                     
Equipment Rental and Leasing (3.28%)                    
Sky Funding AMR Lease Portfolio, Senior Subordinated 1st Lien Term Loan, 10%, due 9/6/16 - (Ireland)  $17,000,000    16,412,490    17,595,000    3.28%
                     
Financial Investment Activities (0.02%)                    
Marsico Capital Management, Senior Secured 1st Lien Term Loan, LIBOR + 5%, due 12/31/22  $11,281,905    14,205,420    5,753,772    1.07%
                     
Full-Service Restaurants (3.20%)                    
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/19/16 (2)  $3,759,156    3,759,156    3,759,156    0.70%
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/19/16 (2)  $6,258,122    6,258,122    6,258,122    1.17%
RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18 (2)  $5,106,805    5,106,805    5,106,805    0.96%
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/19/16 (2)  $1,976,470    1,922,118    1,976,470    0.37%
Total Full-Service Restaurants        17,046,201    17,100,553      
                     
Gaming Industries (5.61%)                    
Golden Gaming, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7% Cash + 1% PIK, 2% LIBOR Floor, due 4/15/16  $15,975,628    15,600,947    15,735,993    2.94%
AGS LLC, 1st Lien Term Loan, LIBOR + 10%, 1.5% LIBOR Floor, due 8/15/16  $13,269,231    12,781,083    13,395,288    2.50%
AGS LLC, DDTL 1st Lien Term Loan, LIBOR + 10%, 1.5% LIBOR Floor, due 8/15/16  $865,385    796,154    881,827    0.17%
Total Gaming Industries        29,178,184    30,013,108      
                     
Grocery Stores (2.58%)                    
Bashas, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 9.35%, 1.5% LIBOR Floor, due 12/28/15  $13,461,182    13,461,182    13,797,711    2.58%

 

9
 

 

TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2012

 

Showing Percentage of Total Cash and Investments of the Company

 

               Percent of 
   Principal       Fair   Cash and 
Investment  Amount   Cost   Value   Investments 
                 
Debt Investments (continued)                    
Insurance Related Activities (1.04%)                    
Confie Seguros Holding II Co., 2nd Lien Term Loan, LIBOR + 9%, 1.25% LIBOR Floor, due 7/26/19  $5,600,000   $5,490,103   $5,590,676    1.04%
                     
Iron and Steel Mills and Ferroalloy Manufacturing (1.22%)                    
Essar Steel Algoma, Inc., Senior Secured Term Loan, LIBOR + 7.5%, 1.25% LIBOR Floor, due 9/20/14  $6,581,231    6,464,979    6,537,367    1.22%
                     
Motion Picture and Video Industries (2.83%)                    
CORE Entertainment, Inc., Senior Secured 1st Lien Term Loan, 9%, due 6/21/17  $9,462,231    9,362,125    8,220,313    1.53%
CORE Entertainment, Inc., Senior Secured 2nd Lien Term Loan, 13.5%, due 6/21/18  $7,569,785    7,488,038    6,964,202    1.30%
Total Motion Picture and Video Industries        16,850,163    15,184,515      
                     
Motor Vehicle Parts Manufacturing (2.41%)                    
DMI SMW Holding Corporation, Term Loan, LIBOR + 7.75%, 1.5% LIBOR Floor, due 12/21/17  $12,935,000    12,938,292    12,902,663    2.41%
                     
Other Amusement and Recreation Industries (2.14%)                    
Intrawest Cayman L.P., 1st Lien Term Loan, LIBOR + 5.75%, 1.25% LIBOR Floor, due 12/4/17 - (Cayman Islands)  $1,250,000    1,231,250    1,257,813    0.23%
Intrawest Cayman L.P., 2nd Lien Term Loan, LIBOR + 9.5%, 1.25% LIBOR Floor, due 12/4/18 - (Cayman Islands)  $10,250,000    9,993,750    10,250,000    1.91%
Total Other Amusement and Recreation Industries        11,225,000    11,507,813      
                     
Other Electrical Equipment and Component Manufacturing (3.03%)                    
Palladium Energy, Inc., Term Loan, LIBOR + 9%, 1% LIBOR Floor, due 12/21/17  $16,500,317    16,170,991    16,219,812    3.03%
                     
Other Professional, Scientific, and Technical Services (2.27%)                    
Connolly, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 9.25%, 1.25% LIBOR Floor, due 7/26/19  $12,000,000    11,808,454    12,157,500    2.27%
                     
Petroleum and Coal Products Manufacturing (1.57%)                    
Boomerang Tube, LLC, 2nd Lien Term Loan, LIBOR + 9.5%, 1.5% LIBOR Floor, due 10/2/17  $8,522,741    8,277,159    8,416,206    1.57%
                     
Pharmaceutical and Medicine Manufacturing (1.51%)                    
Pharmaceutical Research Associates, Inc., 2nd Lien Term Loan, LIBOR + 9.25%, 1.25% LIBOR Floor, due 6/10/19  $8,000,000    7,840,000    8,085,000    1.51%
                     
Promoters of Performing Arts, Sports, and Similar Events (2.06%)                    
Stadium Management Group, Senior Secured 2nd Lien Term Loan, LIBOR + 9.50%, 1.25% LIBOR Floor, due 12/7/18  $11,000,000    10,792,091    11,055,000    2.06%
                     
Radio and Television Broadcasting (4.58%)                    
Encompass Digital Media, Inc., 1st Lien Term Loan, LIBOR + 6.5%, 1.5% LIBOR Floor, due 8/10/17  $7,940,000    7,802,595    8,039,250    1.50%
Granite Broadcasting Corporation, Senior Secured 1st Lien Term Loan B, LIBOR + 7.25%, 1.25% LIBOR Floor, due 5/23/18  $9,950,000    9,719,719    9,974,875    1.86%
SiTV, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6% Cash + 4% PIK, 2% LIBOR Floor, due 8/3/16  $6,806,343    6,421,282    6,523,880    1.22%
Total Radio and Television Broadcasting        23,943,596    24,538,005      
                     
Retail (1.90%)                    
Kenneth Cole Productions, Inc., Senior Secured 1st Lien FILO Term Loan, LIBOR + 10.60%, 1% LIBOR Floor, due 9/25/17  $10,000,000    9,717,763    10,200,000    1.90%

 

10
 

 

 TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2012

 

Showing Percentage of Total Cash and Investments of the Company

 

               Percent of 
   Principal       Fair   Cash and 
Investment  Amount   Cost   Value   Investments 
                 
Debt Investments (continued)                    
Scheduled Air Transportation (3.11%)                    
Delta Air Lines, Inc., Aircraft Secured Mortgage (N913DL), 8%, due 7/15/18 (6)  $366,557   $366,557   $367,370    0.07%
Delta Air Lines, Inc., Aircraft Secured Mortgage (N918DL), 8%, due 7/15/18 (6)  $456,613    456,613    454,580    0.08%
Delta Air Lines, Inc., Aircraft Secured Mortgage (N954DL), 8%, due 9/20/19 (6)  $593,200    593,200    597,720    0.11%
Delta Air Lines, Inc., Aircraft Secured Mortgage (N955DL), 8%, due 9/20/19 (6)  $609,107    609,107    612,000    0.11%
Delta Air Lines, Inc., Aircraft Secured Mortgage (N956DL), 8%, due 9/20/19 (6)  $609,360    609,360    612,850    0.11%
Delta Air Lines, Inc., Aircraft Secured Mortgage (N957DL), 8%, due 9/20/19 (6)  $614,434    614,434    617,440    0.12%
Delta Air Lines, Inc., Aircraft Secured Mortgage (N959DL), 8%, due 9/20/19 (6)  $619,468    619,468    622,030    0.12%
Delta Air Lines, Inc., Aircraft Secured Mortgage (N960DL), 8%, due 9/20/19 (6)  $639,631    639,631    640,730    0.12%
Delta Air Lines, Inc., Aircraft Secured Mortgage (N961DL), 8%, due 9/20/19 (6)  $635,009    635,009    636,990    0.12%
Delta Air Lines, Inc., Aircraft Secured Mortgage (N976DL), 8%, due 7/15/18 (6)  $474,007    474,007    473,280    0.09%
United Airlines, Inc., Aircraft Secured Mortgage (N510UA), 20%, due 9/26/16 (2)  $410,410    410,410    548,340    0.10%
United Airlines, Inc., Aircraft Secured Mortgage (N512UA), 20%, due 10/26/16 (2)  $414,343    414,343    556,225    0.10%
United Airlines, Inc., Aircraft Secured Mortgage (N536UA), 16%, due 8/21/14 (2)  $251,941    251,941    277,780    0.05%
United Airlines, Inc., Aircraft Secured Mortgage (N545UA), 16%, due 7/17/15 (2)  $377,925    377,925    436,810    0.08%
United Airlines, Inc., Aircraft Secured Mortgage (N585UA), 20%, due 10/25/16 (2)  $486,501    486,501    653,220    0.12%
United Airlines, Inc., Aircraft Secured Mortgage (N659UA), 12%, due 3/28/16 (6)  $3,707,430    3,707,430    4,264,148    0.80%
United Airlines, Inc., Aircraft Secured Mortgage (N661UA), 12%, due 5/4/16 (6)  $3,849,284    3,849,284    4,351,424    0.81%
         15,115,220    16,722,937      
Semiconductor and Other Electronic Component Manufacturing (2.61%)                    
Isola USA Corporation, 1st Lien Term Loan, LIBOR + 8%, 2% LIBOR Floor, due 9/29/15  $14,000,000    13,975,000    14,000,000    2.61%
                     
Software Publishers (8.47%)                    
Blackboard, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6%, 1.5% LIBOR Floor, due 10/4/18  $2,671,613    2,457,884    2,705,008    0.51%
Deltek, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 8.75%, 1.25% LIBOR Floor, due 10/10/19  $15,000,000    14,781,719    15,275,025    2.85%
Edmentum, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.75%, 1.5% LIBOR Floor due 5/8/19  $15,000,000    14,717,168    14,831,250    2.77%
SumTotal Systems, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 9%, 1.25% LIBOR Floor, due 5/13/19  $7,600,000    7,449,234    7,524,000    1.41%
The TriZetto Group, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 7.25%, 1.25% LIBOR Floor, due 3/28/19  $5,000,000    4,927,523    4,979,175    0.93%
Total Software Publishers        44,333,528    45,314,458      
                     
Support Activities for Mining (0.06%)                    
Trico Shipping AS, 1st Lien Term Loan A, LIBOR + 8.5%, 1.5% LIBOR Floor, due 5/13/14 - (Norway)  $228,803    228,803    228,803    0.04%
Trico Shipping AS, 1st Lien Term Loan B, LIBOR + 8.5%, 1.5% LIBOR Floor, due 5/13/14 - (Norway)  $80,543    80,543    80,543    0.02%
Total Support Activities for Mining        309,346    309,346      
                     
Wired Telecommunications Carriers (2.52%)                    
Bulgaria Telecom Company AD, 1st Lien Facility 1A Term Loan, EURIBOR + 5.5%, due 11/9/17 - (Bulgaria) (4)  3,262,515    3,525,355    3,744,685    0.70%
Integra Telecom Holdings, Inc., 1st Lien Term Loan, LIBOR + 7.25%, 2% LIBOR Floor, due 4/15/15  $8,477,489    8,070,172    8,518,096    1.60%
Viva Telecom Bulgaria EAD, 1st Lien Facility 1B Term Loan, EURIBOR + 5.5%, due 11/9/17 - (Luxembourg) (4)  980,713    1,059,723    1,125,653    0.22%
Total Wired Telecommunications Carriers        12,655,250    13,388,434      

 

11
 

 

 TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2012

 

Showing Percentage of Total Cash and Investments of the Company

 

               Percent of 
   Principal       Fair   Cash and 
Investment  Amount   Cost   Value   Investments 
                 
Debt Investments (continued)                    
Wireless Telecommunications Carriers (0.56%)                    
Globalive Wireless Management Corp., Senior Secured 1st Lien Term Loan, LIBOR + 8.9%, due 10/9/12 - (Canada)  $3,037,292   $2,933,872   $3,000,845    0.56%
Gogo, LLC, Senior Secured 1st Lien Term Loan, LIBOR + 9.75%, 1.5% LIBOR Floor, due 6/21/17  $10,168,765    9,762,014    10,270,452    1.92%
Total Wireless Telecommunications        12,695,886    13,271,297      
                     
Total Bank Debt        404,232,982    405,010,342      
                     
Other Corporate Debt Securities (14.51%)                    
Architectural, Engineering, and Related Services (1.33%)                    
ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19 (2), (5)  $7,209,840    7,209,840    7,134,137    1.33%
                     
Artificial Synthetic Fibers and Filaments Manufacturing (1.72%)                    
AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/14  $18,536,000    15,172,634    9,221,660    1.72%
                     
Data Processing, Hosting, and Related Services (1.34%)                    
The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19 (5)  $6,958,697    6,820,215    7,167,458    1.34%
                     
Metal and Mineral (except Petroleum) Merchant Wholesalers (2.48%)                    
Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16 (5)  $12,500,000    12,322,875    13,296,875    2.48%
                     
Nondepository Credit Intermediation (1.87%)                    
Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19 (5)  $10,000,000    9,803,494    10,037,500    1.87%
                     
Nonferrous Metal Production and Processing (2.88%)                    
International Wire Group Holdings, Inc., Senior Secured Notes, 8.5%, due 10/15/17 (2), (5)  $15,000,000    15,000,000    15,450,000    2.88%
                     
Scientific Research and Development Services (2.89%)                    
BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17 (5)  $17,110,000    16,446,295    15,484,550    2.89%
                     
Total Other Corporate Debt Securities        82,775,353    77,792,180      
                     
Total Debt Investments        487,008,335    482,802,522      
                     
Equity Securities (6.51%)                    
Other Amusement and Recreation Industries (0.01%)                    
Bally Total Fitness Holding Corporation, Common Stock (3), (5)   6,058    45,186,963    27,746    0.01%
Bally Total Fitness Holding Corporation, Warrants (3), (5)   10,924    -    1    - 
Total Other Amusement and Recreation Industries        45,186,963    27,747      
                     
Architectural, Engineering, and Related Services (1.10%)                    
ESP Holdings, Inc., Cumulative Preferred 15% (2), (3), (5)   20,297    2,249,930    3,643,088    0.68%
ESP Holdings, Inc., Common Stock (2), (3), (5)   88,670    9,311,782    2,263,124    0.42%
Total Architectural, Engineering, and Related Services        11,561,712    5,906,212      
                     
Business Support Services (0.05%)                    
STG-Fairway Holdings, LLC, Class A Units (3), (5)   80,396    1,100,348    241,188    0.05%
                     
Data Processing, Hosting, and Related Services (0.23%)                    
Anacomp, Inc., Class A Common Stock (3), (5), (6)   1,255,527    26,711,048    1,255,527    0.23%

 

12
 

 

TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2012

 

Showing Percentage of Total Cash and Investments of the Company

 

               Percent of 
           Fair   Cash and 
Investment  Shares   Cost   Value   Investments 
                 
Equity Securities (continued)                    
                     
Depository Credit Intermediation (0.15%)                    
Doral Financial Corporation, Common Stock (3)   1,077,795   $11,699,417   $780,431    0.15%
                     
Electric Power Generation, Transmission and Distribution (0.01%)                    
La Paloma Residual Bank Debt Claim (3), (5)   1,830,453    1,574,284    51,253    0.01%
                     
Electronic Shopping (0.21%)                    
Shop Holding, LLC, Class A Units (3), (5)   490,037    462,576    915,198    0.16%
Shop Holding, LLC, Warrants to Purchase Class A Units (3), (5)   326,691    -    283,346    0.05%
Total Electronic Shopping        462,576    1,198,544      
                     
Financial Investment Activities (0.02%)                    
Marsico Holdings, LLC, Common Interest Units (3), (5)   168,698    172,694    84,349    0.02%
                     
Full-Service Restaurants (0.16%)                    
RM Holdco, LLC, Membership Units (2), (3), (5)   13,161,000    2,010,777    849,478    0.16%
                     
Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing (0.00%)                    
Precision Holdings, LLC, Class C Membership Interests (3), (5)   33    1,396    21,317    - 
                     
Nonmetallic Mineral Mining and Quarrying (0.51%)                    
EPMC HoldCo, LLC, Membership Units (2), (5)   1,312,720    -    2,730,458    0.51%
                     
Radio and Television Broadcasting (0.06%)                    
SiTV, Inc., Warrants to Purchase Common Stock (3), (5)   233,470    300,322    336,197    0.06%
                     
Scheduled Air Transportation (1.83%)                    
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N913DL) (5), (6)   466    113,899    111,520    0.02%
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N918DL) (5), (6)   433    130,664    120,530    0.02%
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N954DL) (5), (6)   421    161,952    113,390    0.02%
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N955DL) (5), (6)   417    164,481    160,650    0.03%
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N956DL) (5), (6)   418    164,726    163,200    0.03%
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N957DL) (5), (6)   417    165,755    163,880    0.03%
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N959DL) (5), (6)   416    166,778    164,390    0.03%
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N960DL) (5), (6)   412    171,075    169,660    0.03%
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N961DL) (5), (6)   415    170,315    171,360    0.03%
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N976DL) (5), (6)   442    136,326    83,300    0.02%
United Airlines, Inc., Equipment Trust Beneficial Interests (N510UA) (2), (5)   43    151,759    479,682    0.09%
United Airlines, Inc., Equipment Trust Beneficial Interests (N512UA) (2), (5)   43    148,561    473,761    0.09%
United Airlines, Inc., Equipment Trust Beneficial Interests (N536UA) (2), (5)   62    298,394    624,746    0.12%
United Airlines, Inc., Equipment Trust Beneficial Interests (N545UA) (2), (5)   52    267,249    616,897    0.12%
United Airlines, Inc., Equipment Trust Beneficial Interests (N585UA) (2), (5)   43    167,806    583,391    0.11%
United N659UA-767, LLC (N659UA) (5), (6)   312    1,773,072    2,771,428    0.52%
United N661UA-767, LLC (N661UA) (5), (6)   303    1,759,997    2,789,809    0.52%
Total Scheduled Air Transportation        6,112,809    9,761,594      
                     
Semiconductor and Other Electronic Component Manufacturing (0.01%)                    
AIP/IS Holdings, LLC, Membership Units (3), (5)   352    -    68,922    0.01%
                     
Support Activities for Mining (0.61%)                    
DeepOcean Group Holding AS, Common Stock - (Norway) (3), (5)   145,824    3,477,627    3,255,535    0.61%

 

13
 

  

TCP Capital Corp.

 

Consolidated Statement of Investments (Continued)

 

December 31, 2012

 

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 (1.55%)                    
Integra Telecom, Inc., Common Stock (3), (5)   1,274,522   $8,433,884   $5,038,718    0.94%
Integra Telecom, Inc., Warrants (3), (5)   346,939    19,920    -    - 
V Telecom Investment S.C.A, Common Shares - (Luxembourg) (3), (4), (5)   1,393    3,236,256    3,273,095    0.61%
Total Wired Telecommunications Carriers        11,690,060    8,311,813      
                     
Total Equity Securities        122,062,033    34,880,565      
                     
Total Investments (7)        609,070,368    517,683,087      
                     
Cash and Cash Equivalents             18,035,189    3.37%
                     
Total Cash and Investments            $535,718,276    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).

(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).

(7)Includes investments with an aggregate market value of $1,382,875 that have been segregated to collateralize certain unfunded commitments.

 

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $359,020,926 and $211,216,033, respectively for the year ended December 31, 2012. 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, 2012 was $507,680,996, or 94.8% of total cash and investments of the Company.

 

Swaps at December 31, 2012 were as follows:

 

Investment  Notional
Amount
   Fair Value 
           
Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 5/16/14  $6,040,944   $179,364 

 

See accompanying notes.

 

14
 

 

TCP Capital Corp.

 

Consolidated Statements of Operations (Unaudited)

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2013   2012   2013   2012 (1) 
                 
Investment income                    
Interest income:                    
Unaffiliated issuers  $14,257,066   $10,162,568   $41,745,035   $27,140,094 
Controlled companies   293,711    360,975    936,296    360,975 
Other affiliates   1,938,950    1,310,590    4,035,115    4,556,220 
Dividend income:                    
Other affiliates   -    -    -    1,811,189 
Other income:                    
Unaffiliated issuers   529,011    -    1,105,959    520,580 
Controlled companies   183,650    94,726    495,165    440,584 
Other affiliates   85,983    182,114    305,739    182,114 
Total investment income   17,288,371    12,110,973    48,623,309    35,011,756 
                     
Operating expenses                    
Management and advisory fees   2,205,517    1,737,237    6,110,550    4,986,901 
Interest expense   340,711    33,575    663,820    90,023 
Administrative expenses   256,806    -    592,422    - 
Amortization of deferred debt issuance costs   218,764    110,977    470,242    330,519 
Legal fees, professional fees and due diligence expenses   188,284    294,746    489,488    656,522 
Commitment fees   85,749    61,487    146,843    193,848 
Director fees   76,478    37,500    220,288    137,500 
Insurance expense   55,020    37,098    133,816    93,061 
Custody fees   45,776    25,797    105,427    72,300 
Professional fees relating to the Conversion   -    -    -    411,523 
Other operating expenses   227,287    168,903    644,793    276,766 
Total operating expenses   3,700,392    2,507,320    9,577,689    7,248,963 
                     
Net investment income before taxes   13,587,979    9,603,653    39,045,620    27,762,793 
                     
Excise tax expense   -    -    -    502,978 
Net investment income   13,587,979    9,603,653    39,045,620    27,259,815 
                     
Net realized and unrealized gain (loss) on investments and foreign currency                    
Net realized gain (loss):                    
Investments in unaffiliated issuers   804,482    8,403,999    (2,773,020)   5,299,895 
Investments in non-controlled affiliates   -    -    -    718,845 
Net realized gain (loss)   804,482    8,403,999    (2,773,020)   6,018,740 
                     
Net change in net unrealized appreciation/depreciation   2,132,565    (8,059,602)   8,723,819    (13,059,404)
Net realized and unrealized gain (loss)   2,937,047    344,397    5,950,799    (7,040,664)
                     
Dividends paid on Series A preferred equity facility   (364,043)   (397,050)   (1,131,014)   (1,142,233)
Net change in accumulated dividends on Series A preferred equity facility   (23,939)   (2,071)   (7,928)   (69,164)
Distributions of incentive allocation to the General Partner from:                    
Net investment income   (2,639,999)   -    (7,581,335)   - 
Net realized gains   (54,157)   -    (312,598)   - 
Net change in reserve for incentive allocation   (533,253)   -    (877,563)   - 
                     
Net increase in net assets applicable to common  shareholders resulting from operations  $12,909,635   $9,548,929   $35,085,981   $19,007,754 
                     
Basic and diluted earnings per common share  $0.48   $0.44   $1.47    N/A 
Basic and diluted weighted average common shares outstanding   26,654,702    21,475,635    23,942,996    N/A 

 

See accompanying notes.

 

(1) Prior to the Conversion on April 2, 2012, the Company's portfolio had different objectives.

 

15
 

  

TCP Capital Corp.

 

Consolidated Statements of Changes in Net Assets (Unaudited)

  

   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, 2011   418,956   $419   $364,742,957   $13,515,239   $(45,411,498)  $(94,976,243)  $-   $237,870,874 
                                         
Retirement of old common stock in the Conversion   (418,956)   (419)   419    -    -    -    -    - 
Issuance of common stock in the Conversion   15,725,635    15,726    (15,726)   -    -    -    -    - 
Issuance of common stock in public offering   5,750,000    5,750    80,956,005    -    -    -    -    80,961,755 
Issuance of common stock from dividend reinvestment plan   1,993    2    30,383    -    -    -    -    30,385 
Net investment income   -    -    -    40,320,360                   40,320,360 
Realized and unrealized gains (losses)   -    -    -     -    (15,990,188)   3,205,937    -    (12,784,251)
Dividends on Series A preferred equity facility   -    -    -    (1,602,799)   -    -    -    (1,602,799)
General Partner incentive allocation   -    -    -    -    -    -    -    - 
Dividends paid to common shareholders   -    -    -    (28,808,774)   -    -    -    (28,808,774)
Tax reclassification of stockholders' equity in accordance with generally accepted accounting principles   -    -    (1,479,978)   (897,847)   2,377,825    -    -    - 
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   5,175,000    5,175    78,171,615    -    -    -    -    78,176,790 
Issuance of common stock from dividend reinvestment plan   2,174    2    35,505    -    -    -    -    35,507 
Net investment income   -    -    -    39,045,620    -    -    -    39,045,620 
Realized and unrealized gains (losses)   -    -    -    -    (2,773,020)   8,723,819    -    5,950,799 
Dividends on Series A preferred equity facility   -    -    -    (1,138,942)   -    -    -    (1,138,942)
General Partner incentive allocation   -    -    -    (7,581,335)   (312,598)   -    (877,563)   (8,771,496)
Dividends paid to common shareholders   -    -    -    (27,782,087)   -    -    -    (27,782,087)
Balance at September 30, 2013   26,654,802   $26,655   $522,441,180   $25,069,435   $(62,109,479)  $(83,046,487)  $(877,563)  $401,503,741 

 

See accompanying notes.

 

16
 

  

TCP Capital Corp.

 

Consolidated Statements of Cash Flows (Unaudited)

 

   Nine Months Ended September 30, 
   2013   2012 
         
Operating activities          
Net increase in net assets applicable to common shareholders resulting from operations  $35,085,981   $19,007,754 
Adjustments to reconcile net increase in net assets applicable to common shareholders resulting from operations to net cash provided by (used in) operating activities:          
Net realized loss (gain)   2,773,020    (6,018,740)
Net change in unrealized appreciation/depreciation of investments   (8,675,023)   13,426,667 
Dividends paid on Series A preferred equity facility   1,131,014    1,142,233 
Net change in accumulated dividends on Series A preferred equity facility   7,928    69,164 
Net change in reserve for incentive allocation   877,563    - 
Accretion of original issue discount   (1,703,018)   (521,847)
Net accretion of market discount/premium   (674,077)   (1,708,108)
Interest and dividend income paid in kind   (1,248,459)   (1,761,682)
Amortization of deferred debt issuance costs   470,242    330,519 
Changes in assets and liabilities:          
Purchases of investment securities   (353,293,497)   (243,833,001)
Proceeds from sales, maturities and paydowns of investments   176,516,172    129,105,822 
Decrease (increase) in accrued interest income - unaffiliated issuers   (2,346,218)   177,904 
Decrease (increase) in accrued interest income - controlled companies   8,749    (56,280)
Increase in accrued interest income - other affiliates   (321,152)   (606,711)
Decrease (increase) in receivable for investments sold   6,439,614    (6,864,975)
Decrease (increase) in prepaid expenses and other assets   (371,259)   1,193,639 
Increase in payable for investments purchased   15,103,635    19,657,089 
Increase in payable to the Investment Manager   171,251    22,711 
Decrease in management and advisory fees payable   -    (565,599)
Increase (decrease) in interest payable   170,674    (17,743)
Increase in incentive allocation payable   2,694,156    - 
Decrease in accrued expenses and other liabilities   (526,520)   (110,927)
Net cash used in operating activities   (127,709,224)   (77,932,111)
           
Financing activities          
Proceeds from draws on credit facilities   191,000,000    122,000,000 
Principal repayments on credit facilities   (115,000,000)   (103,000,000)
Payments of debt issuance costs   (3,058,502)   - 
Dividends paid on Series A preferred equity facility   (1,131,014)   (1,142,233)
Dividends paid to common shareholders   (27,782,087)   (20,218,188)
Proceeds from shares issued in connection with dividend reinvestment plan   35,507    13,234 
Proceeds from common shares sold, net of underwriting and offering costs   78,176,790    80,961,755 
Net cash provided by financing activities   122,240,694    78,614,568 
           
Net increase (decrease) in cash and cash equivalents   (5,468,530)   682,457 
Cash and cash equivalents at beginning of period   18,035,189    10,831,678 
Cash and cash equivalents at end of period  $12,566,659   $11,514,135 
           
Supplemental cash flow information          
Interest payments  $493,146   $107,766 
Excise tax payments   969,946    502,978 

 

See accompanying notes.

 

17
 

  

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited)

 

September 30, 2013

 

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 TCPC Funding I, LLC, a Delaware limited liability company (“TCPC Funding”), which is a wholly owned subsidiary of the Partnership. The Partnership has also elected to be treated as a BDC under the 1940 Act. These consolidated financial statements include the accounts of the Company, the Partnership and TCPC Funding. All significant intercompany transactions and balances have been eliminated in the consolidation.

 

The Company was formed through the conversion on April 2, 2012 of the Company’s predecessor, Special Value Continuation Fund, LLC (“SVCF”), from a limited liability company to a corporation in a non-taxable transaction, leaving the Company as the surviving entity (the “Conversion”). At the time of the Conversion, all limited liability company interests were exchanged for 15,725,635 shares of common stock in the Company. As a result of the Conversion, the books and records of SVCF have become the books and records of the surviving entity. On April 3, 2012, the Company completed its initial public offering. For periods prior to April 2, 2012, the consolidated financial statements and related footnotes reflect the performance of SVCF. Per share amounts prior to the conversion are not considered useful and have been marked as “N/A” in the consolidated financial statements.

 

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 and TCPC Funding 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”). The managing member of the Administrator is Tennenbaum Capital Partners, LLC (the “Advisor”), which serves as the Investment Manager to the Company, the Partnership, and TCPC Funding. 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.

 

18
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

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. At September 30, 2013, 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.

 

Preferred Equity

 

At September 30, 2013, the Partnership had 6,700 Series A preferred limited partner interests (the “Preferred Interests”) issued and outstanding with a liquidation preference of $20,000 per preferred limited interest. 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 September 30, 2013, the Partnership was in full compliance with such requirements.

 

The Preferred Interests accrue dividends at an annual rate equal to LIBOR plus 0.85% or, in the case of any holders of Preferred Interests that are CP Conduits (as defined in the leveraging documents), the higher of (i) LIBOR plus 0.85% or (ii) the CP Conduit’s cost of funds rate plus 0.85%, subject to certain limitations and adjustments.

 

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.

 

Investment Valuation

 

The Company’s investments are generally held by the Partnership or TCPC Funding. 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 Senior Facilities, as defined in Note 4, below, and the Statement of Preferences for the Preferred Interests. 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.

 

19
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

2. Summary of Significant Accounting Policies (continued)

 

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 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.

 

20
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

2. Summary of Significant Accounting Policies (continued)

 

Unobservable inputs used in the fair value measurement of Level 3 investments as of September 30, 2013 included the following:

 

Asset Type  Fair Value   Valuation Technique  Unobservable Input  Range (Weighted Avg.)
Bank Debt  $448,827,207   Market rate approach  Market yields  5.1% - 17.6% (10.5%)
        Market quotations  Indicative bid/ask quotes  1 - 4 (2)
        Market comparable companies  Revenue multiples  0.4x (0.4x)
        Market comparable companies  EBITDA multiples  6.5x (6.5x)
Other Corporate Debt  $45,803,291   Market rate approach  Market yields  14.2% (14.2%)
        Market quotations  Indicative bid/ask quotes  1 – 11 (4)
        Market comparable companies  EBITDA multiples  6.5x - 10.0x (8.1x)
Equity  $37,639,774   Market rate approach  Market yields  13.0% - 18.0% (13.6%)
        Market quotations  Indicative bid/ask quotes  1 - 2 (1)
        Market comparable companies  Revenue multiples  0.4x - 1.1x (1.1x)
        Market comparable companies  EBITDA multiples  3.4x – 8.0x (5.5x)

 

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 September 30, 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  $-   $-   $1,028,216 
2  Other observable market inputs*   100,098,095    70,698,908    - 
3  Independent third-party pricing sources that employ significant unobservable inputs   448,827,207    38,174,605    34,757,266 
3  Investment Manager valuations with significant unobservable inputs   -    7,628,686    2,882,504 
Total     $548,925,302   $116,502,199   $38,667,986 

 

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

 

21
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

2. Summary of Significant Accounting Policies (continued)

 

Changes in investments categorized as Level 3 during the nine months ended September 30, 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)   (1,062,389)   7,520,997    (3,573,701)
Acquisitions   215,773,748    22,962,665    11,023,992 
Dispositions   (100,185,011)   (15,172,634)   (3,215,534)
Transfers out of Level 3*   (58,651,283)   (10,300,000)   - 
Transfers into Level 3   33,608,816    15,991,940    - 
Reclassifications within Level 3   -    -    (2,152,861)
Ending balance  $448,827,207   $38,174,605   $34,757,266 
                
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)  $(740,697)  $1,570,023   $(2,724,223)

 

* Comprised of nine investments that transferred to Level 2 due to increased observable market activity.

 Comprised of five investments that transferred from Level 2 due to reduced trading volumes.

 Comprised of one investment that was reclassified to Investment Manager Valuation.

   

   Investment Manager Valuation 
   Bank Debt   Other
Corporate Debt
   Equity
Securities
 
Beginning balance  $-   $7,167,458   $1,424,764 
Net realized and unrealized gains (losses)   -    356,327    (607,055)
Acquisitions   -    104,901    - 
Dispositions   -    -    (88,066)
Reclassifications within Level 3§    -    -    2,152,861 
Ending balance  $-   $7,628,686   $2,882,504 
                
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)  $-   $356,327   (607,055)

 

§ Comprised of one investment that was reclassified from Independent Third-Party Valuation. 

 

There were no transfers between Level 1 and 2 during the nine months ended September 30, 2013.

 

22
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

2. Summary of Significant Accounting Policies (continued)

 

At December 31, 2012, 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  $-   $-   $780,431 
2  Other observable market inputs *   45,667,016    53,453,085    - 
3  Independent third-party pricing sources that employ significant  unobservable inputs   359,343,326    17,171,637    32,675,370 
3  Investment Manager valuations with significant unobservable inputs   -    7,167,458    1,424,764 
Total     $405,010,342   $77,792,180   $34,880,565 

 

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

  

Changes in investments categorized as Level 3 during the year ended December 31, 2012 were as follows:

 

   Independent Third-Party Valuation 
   Bank Debt   Other
Corporate Debt
   Equity
Securities
 
Beginning balance  $159,949,811   $24,061,229   $68,114,764 
Net realized and unrealized losses   (8,709,385)   (6,540,882)   (7,100,618)
Acquisitions   288,929,785    3,731,290    9,584,408 
Dispositions   (84,994,292)   -    (37,923,184)
Transfers out of Level 3    -    (4,080,000)   - 
Transfers into Level 3    4,167,407    -    - 
Ending balance  $359,343,326   $17,171,637   $32,675,370 
                
Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized losses, above)  $(5,856,277)  $127,255   $(9,797,319)

 

Comprised of one investment that transferred to Level 2 due to increased trading volumes.

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

 

23
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

2. Summary of Significant Accounting Policies (continued)

 

   Investment Manager Valuation 
   Bank Debt   Other
Corporate Debt
   Equity
Securities
 
Beginning balance  $51,436   $7,464,188   $1,252,190 
Net realized and unrealized gains (losses)   -    284,156    274,554 
Acquisitions   -    148,281    - 
Dispositions   -    (729,167)   (5,842)
Transfers out of Level 3 §    -    -    (147,574)
Reclassifications within Level 3 **   (51,436)   -    51,436 
Ending balance  $-   $7,167,458   $1,424,764 
                
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)  $-   $272,637   $274,555 

 

§ Comprised of one investment that transferred to Level 2 due to increased trading volumes.

**Comprised of claims in the liquidation of a portfolio company that were reclassified as equity.

 

There were no transfers between Level 1 and 2 during the year ended December 31, 2012.

 

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.

 

24
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

2. Summary of Significant Accounting Policies (continued)

   

Foreign Investments

 

The Company may invest in instruments traded in foreign countries and denominated in foreign currencies. Foreign currency denominated investments comprised approximately 1.3% and 1.6% of total investments at September 30, 2013 and December 31, 2012, respectively. Such positions were converted at the respective closing rate in effect at September 30, 2013 and December 31, 2012 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. These risks include, among other things, revaluation of currencies, less reliable information about issuers, different transactions 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 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.

 

During the nine months ended September 30, 2013, TCPC Funding purchased an interest rate cap with a notional amount of $25,000,000. At September 30, 2013 and September 30, 2012, the Partnership held a cross currency basis swap with a notional amount of $6,040,944. Gains and losses from derivatives during the nine months ended September 30, 2013 were included in net realized and unrealized loss on investments in the Statement of Operations as follows:

 

25
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

2. Summary of Significant Accounting Policies (continued)

 

Instrument  Realized Gains (Losses)   Unrealized Gains (Losses) 
Cross currency basis swaps  $-   $(126,670)
Interest rate cap  $-   $(32,598)

 

Gains and losses from derivatives during the nine months ended September 30, 2012 were included in net realized and unrealized loss on investments in the Statement of Operations as follows:

 

Instrument  Realized Gains (Losses)   Unrealized Gains (Losses) 
Cross currency basis swaps  $-   $145,906 

 

Valuations of derivatives held at September 30, 2013 and September 30, 2012 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.

 

Debt Issuance Costs

 

Costs of approximately $3.5 million were incurred during 2006 in connection with placing the Partnership’s revolving credit facility. Additional costs of approximately $1.5 million were incurred during 2013 in connection with the extension of the facility (see Note 4). 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). 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, the Partnership or TCPC Funding.

 

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 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.

 

26
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

2. Summary of Significant Accounting Policies (continued)

 

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 and TCPC Funding 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 September 30, 2013, all tax years of the Company, the Partnership, and TCPC Funding since January 1, 2010 remain subject to examination by federal tax authorities. No such examinations are currently pending.

  

During the nine months ended September 30, 2013, the Company paid $969,946 in excise taxes related to income earned in 2012. During the nine months ended September 30, 2012, the Company paid $502,978 in excise taxes related to income earned in 2011.

  

Cost and unrealized appreciation and depreciation of investments (including derivatives) for U.S. federal income tax purposes at September 30, 2013 were as follows:

 

Unrealized appreciation  $30,645,941 
Unrealized depreciation   (113,178,794)
Net unrealized depreciation   (82,532,853)
      
Cost  $786,700,186 

 

3. Management Fees, Incentive Compensation and Other Expenses

 

Following the Conversion, 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.

 

27
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

3. Management Fees, Incentive Compensation and Other Expenses (continued)

 

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”). The Company did not incur any incentive compensation prior to January 1, 2013. 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 incentive compensation distributable to the General Partner assuming a hypothetical liquidation of the Company at net asset value on the balance sheet date. At September 30, 2013, the General Partner’s equity interest in the Partnership was comprised entirely of the reserve amount and is reported as a minority interest in the consolidated financial statements of the Company.

 

Prior to the Conversion, the Investment Manager received an annual management and advisory fee, payable monthly in arrears, equal to 1.0% of committed capital, defined as the sum of the maximum amount of the Preferred Interests, the maximum amount available under the revolving credit facility, the initial value of the contributed general partnership equity and the initial value of the contributed common equity, subject to reduction by the amount of the revolving credit facility commitment when the facility is no longer outstanding, and by the amount of the Preferred Interests when less than $1 million in liquidation preference of preferred securities remains outstanding. In addition to the management fee, the General Partner was entitled to a performance allocation equal to 20% of all cumulative income and gain distributions, subject to an 8% hurdle on undistributed contributed equity with a catch up for the General Partner.

 

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.

 

4. Debt

 

At September 30, 2013 and December 31, 2012, debt 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 “Senior Facilities”) as follows:

 

   September 30, 2013   December 31, 2012 
Partnership Facility  $102,000,000   $74,000,000 
TCPC Funding Facility   48,000,000    - 
Total Debt  $150,000,000   $74,000,000 

 

28
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

4. Debt (continued)

 

Partnership Facility

 

The Partnership Facility provides for amounts to be drawn up to $116 million, subject to certain collateral and other restrictions. On September 19, 2013, the Partnership Facility was amended to extend the maturity date from July 31, 2014 to July 31, 2016. Most of the cash and investments held directly by the Partnership, as well as the net assets of TCPC Funding, are included in the collateral for the facility.

 

Advances under the Partnership Facility through July 31, 2014 bear interest at LIBOR plus 0.44% per annum, except in the case of loans from CP Conduits, which bear interest at the higher of LIBOR plus 0.44% or the CP Conduit’s cost of funds plus 0.44%, subject to certain limitations. Advances under the Partnership Facility for periods from July 31, 2014 through the maturity date of the facility will bear interest at LIBOR plus 2.50% per annum, except in the case of loans from CP Conduits, which bear interest at the higher of LIBOR plus 2.50% or the CP Conduit’s cost of funds plus 2.50%, subject to certain limitations. 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 September 30, 2013, the Partnership was in full compliance with such covenants.

 

TCPC Funding Facility

 

The TCPC Funding Facility, issued on May 17, 2013, provides for amounts to be drawn up to $100 million, subject to certain collateral and other restrictions. The facility matures May 17, 2016, subject to extension by the lender at the request of TCPC Funding, and 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.

 

Borrowings under the TCPC Funding Facility bear interest at a rate of LIBOR plus 2.75% per annum. 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 September 30, 2013, TCPC Funding was in full compliance with such covenants.

 

29
 

  

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

4. Debt (continued)

 

The condensed balance sheet of TCPC Funding at September 30, 2013 was as follows:

 

Assets:     
Cash  $1,531,311 
Investments   96,543,370 
Other assets   2,024,193 
Total assets  $100,098,874 
      
Liabilities:     
Debt  $48,000,000 
Payables   239,829 
Total liabilities   48,239,829 
      
Equity   51,859,045 
Total liabilities and equity  $100,098,874 

 

The weighted-average interest rates on total outstanding borrowings at September 30, 2013 and December 31, 2012 were 1.39% and 0.65%, respectively.

 

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

 

The Partnership and TCPC Funding 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 New York 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, and TCPC Funding 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 Partnership, and TCPC Funding 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 held by the Partnership with aggregate unfunded balances of $2,480,000 at September 30, 2013.

 

30
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

6. Related Parties

 

The Company, the Partnership, TCPC Funding, 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 September 30, 2013, 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 September 30, 2013, amounts reimbursable to the Investment Manager totaled $280,451, 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 nine months ended September 30, 2013, expenses allocated pursuant to the Administration Agreements totaled $592,422. 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 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 nine months ended September 30, 2013. In addition to the issuances summarized below, the Company priced a public offering of its common stock on September 26, 2013, the sale of which closed on October 1, 2013 (see Note 9, Subsequent Events).

 

   Shares Issued   Price Per Share   Net Proceeds 
May 21, 2013 public offering   5,175,000   $15.63   $78,176,790 
Shares issued from dividend reinvestment plan   2,174   $16.33   $35,507 

 

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, 2012.

 

   Shares Issued   Price Per Share   Net Proceeds 
April 3, 2012 initial public offering   5,750,000   $14.75   $80,961,755 
Shares issued from dividend reinvestment plan   1,993   $15.25   $30,385 

 

31
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

7. Stockholders’ Equity and Dividends (continued)

 

The Company’s dividends are recorded on the ex-dividend date. The following table summarizes the Company’s dividends declared for the nine months ended September 30, 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 
May 8, 2013  June 7, 2013  June 28, 2013  $0.36   $9,595,344 
August 8, 2013  September 9, 2013  September 30, 2013  $0.36   $9,595,692 

 

* Includes a special dividend of $0.05.

 

The following table summarizes the Company’s dividends declared for the year ended December 31, 2012:

 

Date Declared  Record Date  Payment Date  Amount Per Share   Total Amount 
March 9, 2012  March 9, 2012  April 3, 2012  $0.34  $5,400,000 
April 3, 2012  June 15, 2012  June 29, 2012  $0.34   $7,301,716 
August 9, 2012  September 14, 2012  September 28, 2012  $0.35   $7,516,472 
November 7, 2012  December 17, 2012  December 31, 2012  $0.40  $8,590,586 

 

Based on 15,725,635 pro-forma converted shares before the initial public offering.

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 and nine months ended September 30, 2013:

 

   Three Months Ended
September 30, 2013
   Nine Months Ended
September 30, 2013
 
Net increase in net assets applicable to common shareholders resulting from operations  $12,909,635   $35,085,981 
Weighted average shares outstanding   26,654,702    23,942,996 
Earnings per share  $0.48   $1.47 

  

9. Subsequent Events

 

On October 1, 2013, the Company closed a public offering of 4.37 million shares of its common stock at $15.76 per share for gross proceeds of approximately $68.9 million and net proceeds of $66.5 million, net of underwriter discounts and approximately $0.3 million of expenses related to the offering.

 

On November 7, 2013, the Company’s board of directors declared a regular third quarter cash dividend of $0.36 per share and a special dividend of $0.05 per share. Both dividends are payable on December 31, 2013 to stockholders of record as of the close of business on December 10, 2013.

 

32
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

10. Financial Highlights

 

   Nine Months
Ended
 
   September 30, 2013 
Per Common Share     
Per share NAV at the beginning of period  $14.71 
      
Investment operations:     
Net investment income   1.64 
Net realized and unrealized gain (loss)   0.25 
Dividends on Series A preferred equity facility   (0.05)
Incentive allocation reserve and distributions   (0.37)
 Total from investment operations   1.47 
      
Distributions to common shareholders from:     
Net investment income   (1.12)
Per share NAV at end of period  $15.06 
      
Per share market price at end of period  $16.23 
      
Total return based on market value (1), (2)   17.7%
Total return based on net asset value (1), (2)   10.1%
      
Shares outstanding at end of period   26,654,802 

 

33
 

 

TCP Capital Corp.

 

Notes to Consolidated Financial Statements (Unaudited) (Continued)

 

September 30, 2013

 

10. Financial Highlights (continued)

 

   Nine Months
Ended
 
   September 30, 2013 
Ratios to average common equity: (4), (5)     
Net investment income (6)   12.2%
Expenses   3.5%
Expenses and incentive allocation (7)   5.7%
      
Ending common shareholder equity  $401,503,741 
Portfolio turnover rate (1)   31.1%
Weighted-average debt outstanding  $77,106,227 
Weighted-average interest rate on debt   1.2%
Weighted-average number of common shares   23,942,996 
Average debt per share  $3.22 

 

(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.

 

34
 

 

TCP Capital Corp.

 

Consolidated Schedule of Changes in Investments in Affiliates (1) (Unaudited)

 

Nine Months Ended September 30, 2013

 

Security  Value,
Beginning of
Period
   Acquisitions   Dispositions (2)   Value,
End of
Period
 
                 
AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16  $-   $2,056,927   $-   $2,056,927 
AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16   -    7,586,317    -    9,124,346 
Anacomp, Inc., Class A Common Stock   1,255,527    -    -    1,016,977 
EPMC HoldCo, LLC, Membership Units   2,730,458    -    (1,481,930)   1,562,137 
ESP Holdings, Inc., Cumulative Preferred 15%   3,643,088    -    -    3,947,862 
ESP Holdings, Inc., Common Stock   2,263,124    -    -    2,864,872 
ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19   7,134,137    364,499    -    7,574,339 
KAGY Holding Company, Inc., Series A Preferred Stock   -    8,096,057         1,632,576 
N510UA Aircraft Secured Mortgage, 20%, due 10/26/16   548,340    -    (59,630)   432,155 
N512UA Aircraft Secured Mortgage, 20%, due 10/26/16   556,225    -    (58,349)   440,895 
N536UA Aircraft Secured Mortgage, 16%, due 9/29/14   277,780    -    (105,163)   155,325 
N545UA Aircraft Secured Mortgage, 16%, due 8/29/15   436,810    -    (94,237)   314,355 
N585UA Aircraft Secured Mortgage, 20%, due 10/25/16   653,220    -    (68,510)   517,750 
N659UA Aircraft Secured Mortgage, 12%, due 2/28/16   4,264,148    -    (738,165)   3,220,168 
N661UA Aircraft Secured Mortgage, 12%, due 5/4/16   4,351,424    -    (715,870)   3,433,856 
N510UA Equipment Trust Beneficial Interests   479,682    59,630    (26,934)   482,632 
N512UA Equipment Trust Beneficial Interests   473,761    58,349    (26,492)   475,760 
N536UA Equipment Trust Beneficial Interests   624,746    105,163    (33,901)   665,221 
N545UA Equipment Trust Beneficial Interests   616,897    94,366    (35,652)   655,903 
N585UA Equipment Trust Beneficial Interests   583,391    68,510    (35,082)   588,050 
N913DL Aircraft Secured Mortgage, 8%, due 3/15/17   367,370    -    (57,549)   312,630 
N918DL Aircraft Secured Mortgage, 8%, due 8/15/18   454,580    -    (50,943)   406,810 
N954DL Aircraft Secured Mortgage, 8%, due 3/20/19   597,720    -    (58,526)   533,120 
N955DL Aircraft Secured Mortgage, 8%, due 6/20/19   612,000    -    (56,298)   549,950 
N956DL Aircraft Secured Mortgage, 8%, due 5/20/19   612,850    -    (57,234)   549,780 
N957DL Aircraft Secured Mortgage, 8%, due 6/20/19   617,440    -    (56,790)   554,710 
N959DL Aircraft Secured Mortgage, 8%, due 7/20/19   622,030    -    (56,351)   559,810 
N960DL Aircraft Secured Mortgage, 8%, due 10/20/19   640,730    -    (55,519)   579,360 
N961DL Aircraft Secured Mortgage, 8%, due 8/20/19   636,990    -    (56,860)   574,430 
N976DL Aircraft Secured Mortgage, 8%, due 2/15/18   473,280    -    (59,136)   417,690 
N913DL Equipment Trust Beneficial Interests   111,520    57,549    (70,524)   127,840 
N918DL Equipment Trust Beneficial Interests   120,530    50,943    (67,003)   144,330 
N954DL Equipment Trust Beneficial Interests   113,390    58,526    (80,813)   67,150 
N955DL Equipment Trust Beneficial Interests   160,650    56,298    (79,828)   114,070 
N956DL Equipment Trust Beneficial Interests   163,200    57,234    (80,928)   109,140 
N957DL Equipment Trust Beneficial Interests   163,880    56,790    (80,593)   110,160 
N959DL Equipment Trust Beneficial Interests   164,390    56,351    (80,261)   111,010 
N960DL Equipment Trust Beneficial Interests   169,660    55,519    (80,008)   117,980 
N961DL Equipment Trust Beneficial Interests   171,360    56,860    (81,410)   120,360 
N967DL Equipment Trust Beneficial Interests   83,300    59,136    (76,920)   103,190 
RM Holdco, LLC, Membership Units   849,478    -    -    - 
RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18   5,106,805    -    -    3,516,036 
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/19/16   3,759,156    13,179    (90,039)   3,682,296 
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/19/16   6,258,122    373,624    -    6,631,746 
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/19/16   1,976,470    123,303    -    2,090,096 
RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16   -    1,299,048    -    1,332,013 
United N659UA-767, LLC (N659UA)   2,771,428    738,165    (506,035)   2,906,193 
United N661UA-767, LLC (N661UA)   2,789,809    715,870    (497,275)   2,916,543 

 

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.

 

35
 

 

TCP Capital Corp.

 

Consolidated Schedule of Changes in Investments in Affiliates (1)

 

Year Ended December 31, 2012

 

Security  Value,
Beginning
of
Period
   Acquisitions   Dispositions (2)   Value,
End of
Period
 
                 
Anacomp, Inc., Class A Common Stock  $740,761   $-   $-   $1,255,527 
Delta Air Lines, Inc., Aircraft Secured Mortgage (N913DL), 8%, due 7/15/18   -    403,947    (37,389)   367,370 
Delta Air Lines, Inc., Aircraft Secured Mortgage (N918DL), 8%, due 7/15/18   -    490,003    (33,390)   454,580 
Delta Air Lines, Inc., Aircraft Secured Mortgage (N954DL), 8%, due 9/20/19   -    631,014    (37,814)   597,720 
Delta Air Lines, Inc., Aircraft Secured Mortgage (N955DL), 8%, due 9/20/19   -    645,523    (36,417)   612,000 
Delta Air Lines, Inc., Aircraft Secured Mortgage (N956DL), 8%, due 9/20/19   -    646,372    (37,011)   612,850 
Delta Air Lines, Inc., Aircraft Secured Mortgage (N957DL), 8%, due 9/20/19   -    651,170    (36,735)   617,440 
Delta Air Lines, Inc., Aircraft Secured Mortgage (N959DL), 8%, due 9/20/19   -    655,930    (36,462)   622,030 
Delta Air Lines, Inc., Aircraft Secured Mortgage (N960DL), 8%, due 9/20/19   -    675,587    (35,956)   640,730 
Delta Air Lines, Inc., Aircraft Secured Mortgage (N961DL), 8%, due 9/20/19   -    671,812    (36,803)   636,990 
Delta Air Lines, Inc., Aircraft Secured Mortgage (N976DL), 8%, due 7/15/18   -    512,643    (38,636)   473,280 
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N913DL)   -    145,176    (31,277)   111,520 
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N918DL)   -    162,691    (32,027)   120,530 
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N954DL)   -    202,368    (40,415)   113,390 
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N955DL)   -    204,598    (40,116)   160,650 
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N956DL)   -    205,404    (40,679)   163,200 
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N957DL)   -    206,328    (40,572)   163,880 
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N959DL)   -    207,244    (40,467)   164,390 
Delta Air Lines, Inc., Equipment Trust Beneficial Interests (N960DL)   -    211,653    (40,578)   169,660 
Delta Air Lines, Inc., Equipment Trus