10-Q 1 a2013093010qtcap.htm 10-Q 20130930 10Q TCAP
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
__________________________________________________________
Form 10-Q
__________________________________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 814-00733 
__________________________________________________________
Triangle Capital Corporation
(Exact name of registrant as specified in its charter)
__________________________________________________________
Maryland
 
06-1798488
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
3700 Glenwood Avenue, Suite 530
Raleigh, North Carolina
 
27612
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (919) 719-4770
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A 
__________________________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
¨
Accelerated filer
ý
 
 
 
 
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
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  ý
The number of shares outstanding of the registrant’s Common Stock on November 5, 2013 was 27,678,286.



TRIANGLE CAPITAL CORPORATION
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q

 
 
Page
 
PART I – FINANCIAL INFORMATION
Item 1.
 
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 


2


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

TRIANGLE CAPITAL CORPORATION
Consolidated Balance Sheets
 
 
September 30, 2013
 
December 31, 2012
 
(Unaudited)
 
 
Assets:
 
 
 
Investments at fair value:
 
 
 
Non-Control / Non-Affiliate investments (cost of $499,409,391 and $565,737,092 at September 30, 2013 and December 31, 2012, respectively)
$
519,185,426

 
$
579,078,939

Affiliate investments (cost of $106,302,777 and $123,019,204 at September 30, 2013 and December 31, 2012, respectively)
108,028,880

 
123,408,445

Control investments (cost of $7,977,878 and $11,474,208 at September 30, 2013 and December 31, 2012, respectively)
3,261,887

 
4,315,339

Total investments at fair value
630,476,193

 
706,802,723

Cash and cash equivalents
160,020,438

 
72,300,423

Interest and fees receivable
3,885,283

 
2,650,178

Prepaid expenses and other current assets
785,992

 
403,123

Deferred financing fees
11,441,030

 
12,323,430

Property and equipment, net
54,174

 
55,535

Total assets
$
806,663,110

 
$
794,535,412

Liabilities:
 
 
 
Accounts payable and accrued liabilities
$
7,128,708

 
$
6,405,570

Interest payable
1,072,595

 
3,136,574

Taxes payable
40,249

 
3,210,989

Deferred income taxes
2,780,236

 
1,342,456

Borrowings under credit facility
11,636,928

 

Notes
149,500,000

 
149,500,000

SBA-guaranteed debentures payable
193,238,889

 
213,604,579

Total liabilities
365,397,605

 
377,200,168

Net Assets:
 
 
 
Common stock, $0.001 par value per share (150,000,000 shares authorized, 27,678,286 and 27,284,798 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively)
27,678

 
27,285

Additional paid in capital
408,501,259

 
403,322,097

Investment income in excess of distributions
10,432,313

 
6,783,161

Accumulated realized gains
8,309,620

 
1,972,940

Net unrealized appreciation
13,994,635

 
5,229,761

Total net assets
441,265,505

 
417,335,244

Total liabilities and net assets
$
806,663,110

 
$
794,535,412

Net asset value per share
$
15.94

 
$
15.30


See accompanying notes.


3


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Operations

 
Three Months
Ended
 
Three Months
Ended
 
Nine Months Ended
 
Nine Months Ended
 
September 30,
2013
 
September 30,
2012
 
September 30,
2013
 
September 30,
2012
Investment income:
 
 
 
 
 
 
 
Loan interest, fee and dividend income:
 
 
 
 
 
 
 
Non-Control / Non-Affiliate investments
$
19,933,576

 
$
16,376,768

 
$
56,817,499

 
$
44,401,267

Affiliate investments
2,710,338

 
3,838,341

 
8,919,819

 
9,508,295

Control investments
50,334

 
49,384

 
145,899

 
161,375

Total loan interest, fee and dividend income
22,694,248

 
20,264,493

 
65,883,217

 
54,070,937

Payment-in-kind interest income:
 
 
 
 
 
 
 
Non-Control / Non-Affiliate investments
3,591,182

 
3,017,120

 
10,076,655

 
8,454,799

Affiliate investments
942,609

 
946,345

 
2,882,719

 
2,470,663

Control investments
6,058

 
20,250

 
17,886

 
60,221

Total payment-in-kind interest income
4,539,849

 
3,983,715

 
12,977,260

 
10,985,683

Interest income from cash and cash equivalent investments
81,071

 
78,500

 
176,774

 
344,407

Total investment income
27,315,168

 
24,326,708

 
79,037,251

 
65,401,027

Operating expenses:
 
 
 
 
 
 
 
Interest and other debt financing fees
4,997,620

 
4,046,885

 
15,098,655

 
11,502,245

General and administrative expenses
5,537,980

 
4,403,469

 
15,653,640

 
11,778,156

Total operating expenses
10,535,600

 
8,450,354

 
30,752,295

 
23,280,401

Net investment income
16,779,568

 
15,876,354


48,284,956

 
42,120,626

Realized and unrealized gains (losses) on investments and foreign currency borrowings:
 
 
 
 
 
 
 
Net realized gains (losses):
 
 
 
 
 
 
 
Non-Control / Non-Affiliate
1,006,339

 
816,393

 
4,013,789

 
3,600,501

Affiliate
17,811

 
785,132

 
4,613,810

 
785,132

Control

 

 
(2,290,919
)
 
838,039

Net realized gains (losses)
1,024,150

 
1,601,525

 
6,336,680

 
5,223,672

Net unrealized appreciation (depreciation):
 
 
 
 
 
 
 
Investments
4,892,807

 
(586,937
)
 
8,776,148

 
(2,011,835
)
Foreign currency borrowings
(11,274
)
 

 
(11,274
)
 

Net unrealized appreciation (depreciation)
4,881,533

 
(586,937
)
 
8,764,874

 
(2,011,835
)
Net realized and unrealized gains (losses) on investments and foreign currency borrowings
5,905,683

 
1,014,588

 
15,101,554

 
3,211,837

Loss on extinguishment of debt

 
(624,768
)
 
(412,673
)

(829,811
)
Income tax benefit (provision)
486,413

 
(34,388
)
 
466,110


(27,157
)
Net increase in net assets resulting from operations
$
23,171,664


$
16,231,786

 
$
63,439,947

 
$
44,475,495

Net investment income per share—basic and diluted
$
0.61

 
$
0.58

 
$
1.75

 
$
1.59

Net increase in net assets resulting from operations per share—basic and diluted
$
0.84

 
$
0.59

 
$
2.30

 
$
1.68

Dividends declared per common share
$
0.54

 
$
0.52

 
$
1.62

 
$
1.49

Weighted average number of shares outstanding—basic and diluted
27,619,464

 
27,290,493

 
27,541,442

 
26,545,542


See accompanying notes.


4


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Changes in Net Assets
 
 
Common Stock
 
Additional
Paid In
Capital
 
Investment
Income
in Excess of
Distributions
 
Accumulated
Realized
Gains
 
Net
Unrealized
Appreciation
 
Total
Net
Assets
 
Number
of Shares
 
Par
Value
 
 
 
 
 
Balance, December 31, 2011
22,774,726

 
$
22,775

 
$
318,297,269

 
$
6,847,486

 
$
1,011,649

 
$
8,107,776

 
$
334,286,955

Net investment income

 

 

 
42,120,626

 

 

 
42,120,626

Stock-based compensation

 

 
2,074,927

 

 

 

 
2,074,927

Net realized gain on investments

 

 

 

 
5,223,672

 
(3,713,579
)
 
1,510,093

Net unrealized appreciation of investments

 

 

 

 

 
1,701,744

 
1,701,744

Loss on extinguishment of debt

 

 

 
(829,811
)
 

 

 
(829,811
)
Income tax benefit

 

 

 
(27,157
)
 

 

 
(27,157
)
Dividends/distributions declared
113,112

 
113

 
2,462,834

 
(40,609,249
)
 

 

 
(38,146,302
)
Public offering of common stock
4,255,000

 
4,255

 
77,118,719

 

 

 

 
77,122,974

Issuance of restricted stock
235,086

 
235

 
(235
)
 

 

 

 

Common stock withheld for payroll taxes upon vesting of restricted stock
(57,539
)
 
(58
)
 
(1,111,386
)
 

 

 

 
(1,111,444
)
Balance, September 30, 2012
27,320,385

 
$
27,320

 
$
398,842,128

 
$
7,501,895

 
$
6,235,321

 
$
6,095,941

 
$
418,702,605

 
 
Common Stock
 
Additional
Paid In
Capital
 
Investment
Income
in Excess of
Distributions
 
Accumulated
Realized
Gains
 
Net
Unrealized
Appreciation
 
Total
Net
Assets
 
Number
of Shares
 
Par
Value
 
 
 
 
 
Balance, December 31, 2012
27,284,798

 
$
27,285

 
$
403,322,097

 
$
6,783,161

 
$
1,972,940

 
$
5,229,761

 
$
417,335,244

Net investment income

 

 

 
48,284,956

 

 

 
48,284,956

Stock-based compensation

 

 
2,817,267

 

 

 

 
2,817,267

Net realized gain on investments

 

 

 

 
6,336,680

 
(3,613,847
)
 
2,722,833

Net unrealized appreciation of investments

 

 

 

 

 
12,378,721

 
12,378,721

Loss on extinguishment of debt

 

 

 
(412,673
)
 

 

 
(412,673
)
Income tax benefit

 

 

 
466,110

 

 

 
466,110

Dividends/distributions declared
84,058

 
84

 
2,362,204

 
(44,689,241
)
 

 

 
(42,326,953
)
Issuance of restricted stock
309,430

 
309

 
(309
)
 

 

 

 

Balance, September 30, 2013
27,678,286

 
$
27,678

 
$
408,501,259

 
$
10,432,313

 
$
8,309,620

 
$
13,994,635

 
$
441,265,505


See accompanying notes.


5


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Cash Flows
 
 
Nine Months Ended
 
Nine Months Ended
 
September 30, 2013
 
September 30, 2012
Cash flows from operating activities:
 
 
 
Net increase in net assets resulting from operations
$
63,439,947

 
$
44,475,495

Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
 
 
 
Purchases of portfolio investments
(112,405,369
)
 
(228,510,522
)
Repayments received/sales of portfolio investments
210,113,002

 
113,898,080

Loan origination and other fees received
1,221,431

 
3,565,896

Net realized gain on investments
(6,336,680
)
 
(5,223,672
)
Net unrealized (appreciation) depreciation on investments
(10,213,928
)
 
1,420,124

Net unrealized depreciation on foreign currency borrowings
11,274

 

Deferred income taxes
1,437,780

 
591,712

Payment-in-kind interest accrued, net of payments received
(1,459,624
)
 
(5,501,302
)
Amortization of deferred financing fees
1,154,021

 
789,479

Loss on extinguishment of debt
412,673

 
829,811

Accretion of loan origination and other fees
(3,447,435
)
 
(2,397,275
)
Accretion of loan discounts
(1,144,867
)
 
(1,482,707
)
Accretion of discount on SBA-guaranteed debentures payable
134,310

 
131,748

Depreciation expense
30,417

 
24,145

Stock-based compensation
2,817,267

 
2,074,927

Changes in operating assets and liabilities:
 
 
 
Interest and fees receivable
(1,235,105
)
 
(2,086,562
)
Prepaid expenses
(382,869
)
 
172,301

Accounts payable and accrued liabilities
723,138

 
768,607

Interest payable
(2,063,979
)
 
(2,664,482
)
Taxes payable
(3,170,740
)
 
(1,095,866
)
Net cash provided by (used in) operating activities
139,634,664

 
(80,220,063
)
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(29,056
)
 
(20,667
)
Net cash used in investing activities
(29,056
)
 
(20,667
)
Cash flows from financing activities:
 
 
 
Repayments of SBA-guaranteed debentures payable
(20,500,000
)
 
(40,810,000
)
Borrowings under credit facility
11,625,654

 
26,000,000

Repayments of credit facility

 
(15,000,000
)
Proceeds from notes

 
69,000,000

Financing fees paid
(684,294
)
 
(3,572,059
)
Proceeds from public stock offerings, net of expenses

 
77,122,974

Common stock withheld for payroll taxes upon vesting of restricted stock

 
(1,111,444
)
Cash dividends paid
(42,326,953
)
 
(38,146,302
)
Net cash provided by (used in) financing activities
(51,885,593
)
 
73,483,169

Net increase in cash and cash equivalents
87,720,015

 
(6,757,561
)
Cash and cash equivalents, beginning of period
72,300,423

 
66,868,340

Cash and cash equivalents, end of period
$
160,020,438

 
$
60,110,779

Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
15,374,816

 
$
12,999,240

Summary of non-cash financing transactions:
 
 
 
Dividends paid through DRIP share issuances
$
2,362,288

 
$
2,462,947


See accompanying notes.


6


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments
September 30, 2013
Portfolio Company
 
Industry
 
Type of Investment(1)(2)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Non–Control / Non–Affiliate Investments:
 
 
 
 
 
 
Agilex Flavors & Fragrances, Inc. (3%)*
 
Custom Fragrance Producers
 
Subordinated Note (12% Cash, 1.5% PIK, Due 06/19)
 
$
12,649,575

 
$
12,419,618

 
$
12,419,618

Common Units (1,250 units)
 
 
 
1,250,000
 
1,273,000
 
 
 
12,649,575
 
13,669,618
 
13,692,618
 
 
 
 
 
 
 
 
 
 
 
Ambient Air Corporation (0%)*
 
Specialty Trade Contractors
 
Subordinated Note (0% Cash, 8% PIK, Due 06/20)
 
464,399
 
66,993
 
187,000
 
 
 
464,399

 
66,993

 
187,000

 
 
 
 
 
 
 
 
 
 
 
Applied Consultants, Inc. (3%)*
 
Oil and Gas Pipeline Infrastructure Inspection Services
 
Subordinated Note (10% Cash, 2% PIK, Due 01/19)
 
13,058,586

 
12,838,968

 
12,838,968

 
Class A Preferred (2,000,000 units)
 
 
 
2,000,000

 
2,000,000

 
 
 
 
13,058,586
 
14,838,968
 
14,838,968
 
 
 
 
 
 
 
 
 
 
 
Assurance Operations Corporation (0%)*
 
Metal Fabrication
 
Common Stock (517 shares)
 
 
 
516,867

 
925,000

 
 
 
 
 
516,867

 
925,000

 
 
 
 
 
 
 
 
 
 
 
Audio and Video Labs Holdings, Inc. (3%)*
 
Manufacturer and Distributor for Independent Artists and Authors
 
Subordinated Note (12% Cash, 2% PIK, Due 06/18)
 
13,201,434

 
12,967,751

 
12,967,751

Common Units (134 units)
 
 
 
1,300,000

 
1,206,000

 
 
 
13,201,434

 
14,267,751

 
14,173,751

 
 
 
 
 
 
 
 
 
 
 
Botanical Laboratories, Inc. (0%)*
 
Nutritional Supplement Manufacturing and Distribution
 
Common Unit Warrants (998,680 units)
 
 
 
237,301

 
580,603

 
 
 


 
237,301

 
580,603

 
 
 
 
 
 
 
 
 
 
 
Capital Contractors, Inc. (2%)*
 
Janitorial and Facilities Maintenance Services
 
Subordinated Notes (12% Cash, 2% PIK, Due
12/15)
 
9,516,873

 
9,165,179

 
9,165,179

Common Stock Warrants (20 shares)
 
 
 
492,000

 
362,000

 
 
9,516,873

 
9,657,179

 
9,527,179

 
 
 
 
 
 
 
 
 
 
 
Carolina Beverage Group, LLC (0%)*
 
Beverage
Manufacturing
and Packaging
 
Class B Units (11,974 units)
 
 
 
119,735

 
1,930,000

 
 
 
 
 
 
119,735

 
1,930,000

 
 
 
 
 
 
 
 
 
 
 
Charter Facilities Services, Inc. (2%)*
 
Retail, Restaurant, and Commercial Facilities Maintenance
 
Subordinated Note (10% Cash, 3% PIK, Due 07/18)
 
8,272,988

 
8,151,488

 
8,151,488

 
Convertible Preferred Units (2,500 units)
 
 
 
250,000

 
462,000

 
 
 
8,272,988

 
8,401,488

 
8,613,488

 
 
 
 
 
 
 
 
 
 
 
Chromaflo Technologies, LLC (0%)*
 
Colorant
Manufacturer
and Distributor
 
Preferred A Units (22,561 units)
 
 
 
2,071,224

 
2,036,000

 
 
 


 
2,071,224

 
2,036,000

 
 
 
 
 
 
 
 
 
 
 
Comverge, Inc. (4%)*
 
Provider of Intelligent Energy Management Solutions
 
Senior Note (12% Cash, 1% PIK, Due 05/18)
 
15,505,583

 
15,244,256

 
15,244,256

Preferred Units (900 units)
 
 
 
900,000

 
825,000

Common Units (1,000,000 units)
 
 
 
100,000

 

 
 
 
15,505,583

 
16,244,256

 
16,069,256

 
 
 
 
 
 
 
 
 
 
 
Continental Anesthesia Management, LLC (2%)*
 
Physicians
Management
Services
 
Subordinated Note (14.0% Cash, Due 11/14)
 
9,825,000

 
9,694,288

 
9,008,000

Warrant (263 shares)
 
 
 
276,100

 

 
 
9,825,000

 
9,970,388

 
9,008,000

 
 
 
 
 
 
 
 
 
 
 
CRS Reprocessing, LLC (6%)*
 
Fluid
Reprocessing
Services
 
Subordinated Note (12% Cash, 2% PIK, Due 11/15)
 
11,948,026

 
11,827,620

 
11,827,620

Subordinated Note (12% Cash, 2% PIK, Due 11/15)
 
13,176,432

 
12,180,550

 
12,180,550

Series C Preferred Units (30 units)
 
 
 
288,342

 
431,000

Common Unit Warrant (664 units)
 
 
 
1,759,556

 
2,566,000

Series D Preferred Units (16 units)
 
 
 
107,074

 
169,000

 
 
 
25,124,458

 
26,163,142

 
27,174,170

 
 
 
 
 
 
 
 
 
 
 
DataSource Incorporated (2%)*
 
Print Supply Chain Management Services
 
Subordinated Note (12% Cash, 2% PIK, Due 01/18)
 
8,715,117

 
8,574,673

 
8,574,673

 
Common Units (47 units)
 
 
 
1,000,000

 
1,159,000

 

 
8,715,117

 
9,574,673

 
9,733,673

 
 
 
 
 
 
 
 
 
 
 
DCWV Acquisition Corporation (1%)*
 
Arts & Crafts and Home Decor Products Designer and Supplier
 
Subordinated Note (12% Cash, 3% PIK, Due 09/17)
 
6,193,828

 
6,092,512

 
4,399,000

 

 
6,193,828

 
6,092,512

 
4,399,000

 
 
 
 
 
 
 
 
 
 
 
DLR Restaurants, LLC (0%)*
 
Restaurant
 
Royalty Rights
 
 
 

 

 
 
 


 

 

 
 
 
 
 
 
 
 
 
 
 
Dyno Acquiror, Inc. (2%)*
 
Sewing Products and Seasonal Decorative Products Supplier
 
Subordinated Note (12% Cash, 2% PIK, Due 11/18)
 
7,057,746

 
6,922,628

 
6,922,628

 
Preferred Series A Units (600,000 units)
 
 
 
600,000

 
600,000

 
 
 
7,057,746

 
7,522,628

 
7,522,628


7


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments
September 30, 2013
Portfolio Company
 
Industry
 
Type of Investment(1)(2)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Eckler's Holdings, Inc. (2%)*
 
Restoration Parts and Accessories for Classic Cars and Trucks
 
Subordinated Note (11% Cash, 4% PIK, Due 07/18)
 
$
7,013,376

 
$
6,870,614

 
$
6,870,614

 
Common Stock (18,029 shares)
 


 
183,562

 
204,000

 
Preferred Stock A (1,596 shares)
 


 
1,596,126

 
1,758,000

 

 
7,013,376

 
8,650,302

 
8,832,614

 
 
 
 
 
 
 
 
 
 
 
Electronic Systems Protection, Inc. (0%)*
 
Power Protection Systems Manufacturing
 
Common Stock (570 shares)
 
 
 
285,000

 
339,000

 
 
 
 


 
285,000

 
339,000

 
 
 
 
 
 
 
 
 
 
 
Foodstate, Inc. (1%)*
 
Nutritional Supplement Manufacturing and Distribution
 
Subordinated Note (12% Cash, 3.8% PIK, Due 10/16)
 
5,637,678

 
5,568,611

 
5,568,611

 
 
 
5,637,678

 
5,568,611

 
5,568,611

 
 
 
 
 
 
 
 
 
 
 
FrontStream Payments, Inc. (2%)*
 
Payment and Donation Management Product Service Provider
 
Senior Note (8% Cash, 6% PIK, Due 08/18)
 
7,053,667
 
6,913,667
 
6,913,667
 
 
 
 
7,053,667

 
6,913,667

 
6,913,667

 
 
 
 
 
 
 
 
 
 
 
Frozen Specialties, Inc. (2%)*
 
Frozen Foods Manufacturer
 
Subordinated Note (11% Cash, 4% PIK, Due 05/17)
 
10,783,729

 
10,754,687

 
10,754,687

 
 
10,783,729

 
10,754,687

 
10,754,687

 
 
 
 
 
 
 
 
 
 
 
Garden Fresh Restaurant Corp. (0%)*
 
Restaurant
 
Membership Units (5,000 units)
 
 
 
500,000

 
250,000

 
 
 
 
500,000

 
250,000

 
 
 
 
 
 
 
 
 
 
 
Glencoe Business Services Holdings (5%)*
 
Business Process Outsourcing Provider
 
Subordinated Note (12% Cash, 2.5% PIK, Due 06/18)
 
20,383,790

 
20,024,276

 
20,024,276

 
 
20,383,790

 
20,024,276

 
20,024,276

 
 
 
 
 
 
 
 
 
 
 
Grindmaster-Cecilware Corp. (1%)*
 
Food Services Equipment Manufacturer
 
Subordinated Note (12% Cash, 6% PIK, Due 04/16)
 
6,977,571

 
6,939,136

 
6,134,000

 
 
6,977,571

 
6,939,136

 
6,134,000

 
 
 
 
 
 
 
 
 
 
 
Hatch Chile Co., LLC (1%)*
 
Food Products Distributor
 
Senior Note (19% Cash, Due 07/15)
 
3,150,000

 
3,098,400

 
3,098,400

Subordinated Note (14% Cash, Due 07/15)
 
700,000

 
624,797

 
624,797

Unit Purchase Warrant (5,265 units)
 
 
 
149,800

 
336,000

 
 
3,850,000

 
3,872,997

 
4,059,197

 
 
 
 
 
 
 
 
 
 
 
Infrastructure Corporation of America, Inc. (3%)*
 
Roadway Maintenance, Repair and Engineering Services
 
Subordinated Note (12% Cash, 2% PIK, Due 09/18)
 
11,135,478

 
9,594,083

 
9,594,083

Common Stock Purchase Warrant (417,593 shares)
 
 
 
2,411,000

 
2,409,000

 
 
11,135,478

 
12,005,083

 
12,003,083

 
 
 
 
 
 
 
 
 
 
 
Inland Pipe Rehabilitation Holding Company LLC
(2%)*
 
Cleaning and Repair Services
 
Subordinated Note (13% Cash, 2% PIK, Due 12/16)
 
8,320,902

 
8,118,900

 
8,118,900

Membership Interest Purchase Warrant (3.0%)
 
 
 
853,500

 
2,028,000

 
 
8,320,902

 
8,972,400

 
10,146,900

 
 
 
 
 
 
 
 
 
 
 
IOS Acquisitions, Inc. (4%)*
 
Provider of Oil Country Tubular Goods Inspections and Repair Services
 
Subordinated Note (12% Cash, 2% PIK, Due 06/18)
 
17,264,366

 
16,958,780

 
16,958,780

Common Units (7,314 Class A Units)
 
 
 
1,699,847

 
1,262,000

 
 
17,264,366

 
18,658,627

 
18,220,780

 
 
 
 
 
 
 
 
 
 
 
Library Systems & Services, LLC (0%)*
 
Municipal Business Services
 
Common Stock Warrants (112 shares)
 
 
 
58,995

 
1,754,000

 
 


 
58,995

 
1,754,000

 
 
 
 
 
 
 
 
 
 
 
Magpul Industries Corp. (2%)*
 
Firearm Accessories Manufacturer and Distributor
 
Preferred Units (1,470 units)
 
 
 
1,470,000

 
1,939,000

Common Units (30,000 units)
 
 
 
30,000

 
5,961,000

 
 


 
1,500,000

 
7,900,000

 
 
 
 
 
 
 
 
 
 
 
Marine Acquisition Corp. (3%)*
 
Boat Steering System and Driver Control Provider
 
Subordinated Note (11.50% Cash, 2% PIK, Due 05/17)
 
12,000,000

 
11,775,430

 
11,775,430

 
 
 
12,000,000

 
11,775,430

 
11,775,430

 
 
 
 
 
 
 
 
 
 
 
Media Storm, LLC (2%)*
 
Marketing Services
 
Subordinated Note (12% Cash, 2% PIK, Due 10/17)
 
8,178,118

 
8,115,073

 
8,115,073

Membership Units (1,216,204 units)
 
 
 
1,176,957

 
1,331,000

 
 
8,178,118

 
9,292,030

 
9,446,073

 
 
 
 
 
 
 
 
 
 
 
Media Temple, Inc. (3%)*
 
Web Hosting Services
 
Convertible Note (8% Cash, 6% PIK, Due 04/15)
 
4,000,001
 
4,626,721
 
8,312,000
Common Stock Purchase Warrant (35,000 shares)
 
 
 
1,251,000

 
3,636,000

 
 
4,000,001

 
5,877,721

 
11,948,000

 
 
 
 
 
 
 
 
 
 
 
Micross Solutions LLC (3%)*
 
Provider of Semiconductor Products and Services
 
Subordinated Note (12% Cash, 2% PIK, Due 06/18)
 
10,777,399

 
10,634,493

 
10,634,493

Class A-2 Common Units (1,580,559 units)
 
 
 
1,580,599

 
1,444,000

 
 
10,777,399

 
12,215,092

 
12,078,493

 
 
 
 
 
 
 
 
 
 
 

8


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments
September 30, 2013
Portfolio Company
 
Industry
 
Type of Investment(1)(2)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Minco Technology Labs, LLC (0%)*
 
Semiconductor Distribution
 
Subordinated Note (6.5% Cash, 3.5% PIK, Due 12/16)
 
$
5,685,558

 
$
5,468,103

 
$
2,064,000

Class A Units (5,000 HoldCo. units)
 
 
 
500,000

 

Class A Units (3,907 OpCo. units)
 
 
 
3,907

 

 
 
5,685,558

 
5,972,010

 
2,064,000

 
 
 
 
 
 
 
 
 
 
 
My Alarm Center, LLC (3%)*
 
Security Company
 
Subordinated Note (12% Cash, 2.5% PIK, Due 09/17)
 
10,264,194

 
10,180,740

 
10,180,740

 
Preferred Units (2,000,000 units)
 


 
2,000,000

 
2,100,000

 
 
 
10,264,194

 
12,180,740

 
12,280,740

 
 
 
 
 
 
 
 
 
 
 
Novolyte Technologies, Inc. (0%)*
 
Specialty Manufacturing
 
Common Units (24,522 units)
 


 
43,905

 
178,801

 
 
 


 
43,905

 
178,801

 
 
 
 
 
 
 
 
 
 
 
Performance Health & Wellness Holdings, Inc. (3%)*
 
Designer and Manufacturer of Rehabilitation and Wellness Products
 
Subordinated Note (12% Cash, 1% PIK, Due 04/19)
 
13,128,317

 
12,954,478

 
12,954,478

 
Class A Limited Partnership Units (15,000 units)
 
 
 
1,500,000

 
1,297,000

 
 
 
13,128,317

 
14,454,478

 
14,251,478

 
 
 
 
 
 
 
 
 
 
 
PowerDirect Marketing, LLC (2%)*
 
Marketing Services
 
Subordinated Note (12% Cash, 2% PIK, Due 12/16)
 
7,273,117

 
6,787,285

 
6,787,285

Common Unit Purchase Warrants
 
 
 
590,200

 
718,000

 
 
7,273,117

 
7,377,485

 
7,505,285

 
 
 
 
 
 
 
 
 
 
 
Sheplers, Inc. (3%)*
 
Western Apparel Retailer
 
Subordinated Note (13.2% Cash, Due 12/16)
 
8,750,000

 
8,592,412

 
8,592,412

Subordinated Note (10% Cash, 7% PIK, Due 12/17)
 
4,241,781

 
4,188,941

 
4,188,941

 
 
 
12,991,781

 
12,781,353

 
12,781,353

 
 
 
 
 
 
 
 
 
 
 
Snacks Holding Corporation (2%)*
 
Trail Mixes and Nut Manufacturer and Marketer
 
Subordinated Note (12% Cash, 1% PIK, Due 5/20)
 
5,017,930

 
4,981,303

 
4,981,303

Preferred A Units (22,368 units)
 
 
 
1,053,897

 
2,366,000

Preferred B Units (10,380 units)
 
 
 
25,337

 
160,000

Common Units (190,935 units)
 
 
 
150,000

 
1,175,000

Common Stock Warrants (14,558 shares)
 
 
 
14,558

 
127,000

 
 
 
5,017,930

 
6,225,095

 
8,809,303

 
 
 
 
 
 
 
 
 
 
 
Specialized Tech, Inc. (3%)*(4)
 
Sand and Particulate Removal Equipment Provider for Oil and Gas Companies
 
Subordinated Note (12% Cash, 2% PIK, Due 03/19)
 
11,636,828

 
11,404,337

 
11,416,720

 
Common C Shares (2,000,000 shares)
 
 
 
1,937,421

 
1,939,488

 
 
 
11,636,828

 
13,341,758

 
13,356,208

 
 
 
 
 
 
 
 
 
 
 
SRC, Inc. (1%)*
 
Specialty Chemical Manufacturer
 
Subordinated Notes (12% Cash, 2% PIK, Due 09/14)
 
6,114,680

 
5,977,952

 
2,827,000

Common Stock Purchase Warrants
 
 
 
123,800

 

 
 
 
6,114,680

 
6,101,752

 
2,827,000

 
 
 
 
 
 
 
 
 
 
 
Stella Environmental Services, LLC (0%)*
 
Waste Transfer Stations
 
Common Stock Purchase Warrants
 
 
 
20,000

 
301,000

 
 
 


 
20,000

 
301,000

 
 
 
 
 
 
 
 
 
 
 
Syrgis Holdings, Inc. (0%)*
 
Specialty Chemical Manufacturer
 
Class C Units (2,114 units)
 
 
 
111,037

 
201,281

 
 
 
 
111,037

 
201,281

 
 
 
 
 
 
 
 
 
 
 
The Krystal Company (0%)*
 
Quick Service Restaurant
 
Class A Units of Limited Partnership (2,000 units)
 
 
 

 
1,375,000

 
 
 


 

 
1,375,000

 
 
 
 
 
 
 
 
 
 
 
TMR Automotive Service Supply, LLC (1%)*
 
Automotive Supplies
 
Subordinated Note (12% Cash, 1% PIK, Due 03/16)
 
4,250,000

 
4,080,857

 
4,080,857

Unit Purchase Warrant (316,858 units)
 
 
 
195,000

 
360,000

 
 
 
4,250,000

 
4,275,857

 
4,440,857

 
 
 
 
 
 
 
 
 
 
 
Tomich Brothers, LLC (3%)*
 
Squid and Wetfish Processor and Distributor
 
Subordinated Note (12% Cash, 3% PIK, Due 04/16)
 
12,221,591

 
12,022,613

 
12,022,613

 
 
12,221,591

 
12,022,613

 
12,022,613

 
 
 
 
 
 
 
 
 
 
 
Top Knobs USA, Inc. (0%)*
 
Hardware Designer and Distributor
 
Common Stock (26,593 shares)
 
 
 
750,000
 
1,325,000
 
 
 
 
 
750,000

 
1,325,000

 
 
 
 
 
 
 
 
 
 
 
Trinity Consultants Holdings, Inc. (2%)*
 
Air Quality Consulting Services
 
Subordinated Note (12% Cash, 2.0% PIK, Due 04/19)
 
8,284,654

 
8,158,889

 
8,158,889

Series A Preferred Stock (10,000 units)
 
 
 
785,775

 
928,000

Common Stock (50,000 units)
 
 
 
50,000

 
531,000

 
 
 
8,284,654

 
8,994,664

 
9,617,889

 
 
 
 
 
 
 
 
 
 
 

9


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments
September 30, 2013
Portfolio Company
 
Industry
 
Type of Investment(1)(2)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
TrustHouse Services Group, Inc. (0%)*
 
Food Management Services
 
Class A Units (1,557 units)
 
 
 
$
69,302

 
$
242,996

Class B Units (82 units)
 
 
 
3,647

 
8,794

Class E Units (838 units)
 
 
 
101,532

 
139,628

 
 
 
 
 


 
174,481

 
391,418

 
 
 
 
 
 
 
 
 
 
 
Tulsa Inspection Resources, Inc. (3%)*
 
Pipeline Inspection Services
 
Subordinated Note (14%-17.5% Cash, Due 03/14)
 
$
5,810,588

 
5,751,505

 
5,751,505

Common Units (2 units)
 
 
 
337,925

 
897,000

Common Stock Warrants (8 shares)
 
 
 
321,000

 
4,578,000

 
 
 
5,810,588

 
6,410,430

 
11,226,505

 
 
 
 
 
 
 
 
 
 
 
United Biologics, LLC (2%)*
 
Allergy Immunotherapy
 
Subordinated Note (12% Cash, 2% PIK, Due 03/17)
 
10,071,773

 
9,283,557

 
9,283,557

Class A Common Stock (177,935 shares)
 
 
 
1,999,989

 
807,000

Class A-1 Common Stock (18,818 shares)
 
 
 
137,324

 
137,324

Class A-1 Common Kicker Stock (14,114 shares)
 
 
 

 

Class A & Class B Unit Purchase Warrants
 
 
 
838,117

 
193,000

 
 
10,071,773

 
12,258,987

 
10,420,881

 
 
 
 
 
 
 
 
 
 
 
United Retirement Plan Consultants, Inc. (3%)*
 
Retirement Plan Administrator
 
Subordinated Note (12% Cash, 4% PIK, Due 09/16)
 
12,717,950

 
12,544,070

 
12,544,070

Preferred A Units (90,000 units)
 
 
 
900,000

 
1,065,000

Common Units (10,000 units)
 
 
 
100,000

 

 
 
12,717,950

 
13,544,070

 
13,609,070

 
 
 
 
 
 
 
 
 
 
 
Water Pik, Inc. (2%)*
 
Branded Oral Health and Replacement Shower Head Supplier
 
Second Lien Term Loan (9.8% Cash, Due 01/21)
 
10,000,000
 
9,657,688
 
9,657,688
 
 
 
10,000,000

 
9,657,688

 
9,657,688

 
 
 
 
 
 
 
 
 
 
 
Workforce Software, LLC (4%)*
 
Software Provider
 
Subordinated Note (11% Cash, 5% PIK, Due 11/16)
 
8,000,000

 
7,185,735

 
7,185,735

Class B Preferred Units (1,020,000 units)
 
 
 
1,020,000

 
1,217,000

Class C Preferred Units (624,253 units)
 
 
 
1,250,000

 
2,285,000

Common Unit Purchase Warrants (2,434,749 units)
 
 
 
952,300

 
8,539,000

 
 
 
8,000,000

 
10,408,035

 
19,226,735

 
 
 
 
 
 
 
 
 
 
 
WSO Holdings, LP (5%)*
 
Organic/Fair Trade Sugar, Syrup, Nectar and Honey Producer
 
Subordinated Note (12% Cash, 2% PIK, Due 10/17)
 
20,300,379

 
20,063,926

 
20,063,926

Common Points (3,000 points)
 
 
 
3,000,000

 
2,385,000

 
 
20,300,379

 
23,063,926

 
22,448,926

 
 
 
 
 
 
 
 
 
 
 
Xchange Technology Group, LLC (0%)*
 
Used and Refurbished IT Asset Supplier
 
Subordinated Note (8% Cash, Due 06/15)
 
6,389,456

 
5,904,000

 
250,000

Royalty Rights
 
 
 

 

 
 
6,389,456

 
5,904,000

 
250,000

 
 
 
 
 
 
 
 
 
 
 
Yellowstone Landscape Group, Inc. (7%)*
 
Landscaping Services
 
Subordinated Note (10% Cash, 2.5% PIK, Due 02/19)
 
30,056,250

 
30,056,250

 
30,056,250

 
 
30,056,250

 
30,056,250

 
30,056,250

 
 
 
 
 
 
 
Subtotal Non–Control / Non–Affiliate Investments
 
463,176,708

 
499,409,391

 
519,185,426

 
 
 
 
 
 
 
 
 
 
 
Affiliate Investments:
 
 
 
 
 
 
 
 
 
 
All Aboard America! Holdings Inc. (2%)*
 
Motor Coach Operator
 
Subordinated Note (12% Cash, 3% PIK, Due 10/17)
 
8,829,526

 
8,690,999

 
8,690,999

 
Convertible Preferred Interest in LLC
 
 
 
1,500,000

 
1,653,000

 
 
 
8,829,526

 
10,190,999

 
10,343,999

 
 
 
 
 
 
 
 
 
 
 
American De-Rosa Lamparts, LLC and Hallmark Lighting (1%)*
 
Lighting Wholesale and Distribution
 
Subordinated Note (12% Cash, 6% PIK, Due 6/16)
 
6,735,629

 
5,983,968

 
5,983,968

Membership Units (6,516 units)
 
 
 
620,653

 

 
 
 
6,735,629

 
6,604,621

 
5,983,968

 
 
 
 
 
 
 
 
 
 
 
AP Services, Inc. (0%)*
 
Fluid Sealing Supplies and Services
 
Class A Units (933 units)
 
 
 
302,886

 
556,618

Class B Units (496 units)
 
 
 

 
295,642

 
 
 


 
302,886

 
852,260

 
 
 
 
 
 
 
 
 
 
 

10


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments
September 30, 2013
Portfolio Company
 
Industry
 
Type of Investment(1)(2)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Asset Point, LLC (2%)*
 
Asset Management Software Provider
 
Senior Note (12% Cash, 5% PIK, Due 03/14)
 
$
6,548,989

 
$
6,548,987

 
$
6,548,987

Subordinated Note (12% Cash, 2% PIK, Due 07/15)
 
639,871

 
639,871

 
598,000

Subordinated Note (7% Cash, Due 03/14)
 
941,798

 
941,798

 
758,000

Membership Units (1,000,000 units)
 
 
 
8,203

 
556,000

Options to Purchase Membership Units (342,407 units)
 
 
 
500,000

 
214,000

Membership Unit Warrants (356,506 units)
 
 
 

 

 
 
 
8,130,658

 
8,638,859

 
8,674,987

 
 
 
 
 
 
 
 
 
 
 
Captek Softgel International, Inc. (2%)*
 
Nutraceutical Manufacturer
 
Subordinated Note (12% Cash, 4% PIK, Due 08/16)
 
8,885,092

 
8,785,157

 
8,785,157

Class A Units (80,000 units)
 
 
 
800,000

 
585,000

 
 
 
8,885,092

 
9,585,157

 
9,370,157

 
 
 
 
 
 
 
 
 
 
 
CIS Secure Computing Inc. (2%)*
 
Secure
Communications and Computing Solutions Provider
 
Subordinated Note (12% Cash, 3% PIK, Due 06/17)
 
10,377,906

 
10,234,996

 
10,234,996

Common Stock (84 shares)
 
 
 
502,320

 
610,000

 
 
10,377,906

 
10,737,316

 
10,844,996

 
 
 
 
 
 
 
 
 
 
 
Dyson Corporation (1%)*
 
Custom Forging and Fastener Supplies
 
Class A Units (1,000,000 units)
 
 
 
1,000,000

 
2,280,000

 
 
 
 
 
1,000,000

 
2,280,000

 
 
 
 
 
 
 
 
 
 
 
Main Street Gourmet, LLC (1%)*
 
Baked Goods Provider
 
Subordinated Note (12% Cash, 4.5% PIK, Due 10/16)
 
4,477,349

 
4,427,382

 
4,427,382

Jr. Subordinated Note (8% Cash, 2% PIK, Due 04/17)
 
1,051,547

 
1,038,746

 
1,038,746

Preferred Units (233 units)
 
 
 
211,867

 
296,000

Common B Units (3,000 units)
 
 
 
23,140

 
291,000

Common A Units (1,652 units)
 
 
 
14,993

 
160,000

 
 
 
5,528,896

 
5,716,128

 
6,213,128

 
 
 
 
 
 
 
 
 
 
 
PartsNow!, LLC (3%)*
 
Printer Parts Distributor
 
Subordinated Note (12% Cash, 3% PIK, Due 08/17)
 
11,368,580

 
11,189,311

 
11,189,311

 
Member Units (1,000,000 units)
 


 
1,000,000

 
1,362,000

 
Royalty Rights
 


 

 
75,000

 

 
11,368,580

 
12,189,311

 
12,626,311

 
 
 
 
 
 
 
 
 
 
 
Pine Street Holdings, LLC (0%)*
 
Oil and Gas Services
 
Preferred Units (200 units)
 
 
 
200,000

 

 
Common Unit Warrants (2,220 units)
 
 
 

 

 
 
 
 
 
200,000

 

 
 
 
 
 
 
 
 
 
 
 
Plantation Products, LLC (5%)*
 
Seed Manufacturing
 
Subordinated Notes (10.5% Cash, 7% PIK, Due 11/17)
 
14,517,231

 
14,341,182

 
14,341,182

Preferred Units (4,312 units)
 
 
 
4,312,000

 
4,936,000

Common Units (352,000 units)
 
 
 
88,000

 
3,711,000

 
 
 
14,517,231

 
18,741,182

 
22,988,182

 
 
 
 
 
 
 
 
 
 
 
QC Holdings, Inc. (0%)*
 
Lab Testing Services
 
Common Stock (5,594 shares)
 
 
 
563,602

 
470,000

 
 
 
 
 
563,602

 
470,000

 
 
 
 
 
 
 
 
 
 
 
Technology Crops International (1%)*
 
Supply Chain Management Services
 
Subordinated Note (12% Cash, 5% PIK, Due 03/15)
 
6,129,885

 
6,095,892

 
6,095,892

Common Units (50 units)
 
 
 
500,000

 
341,000

 
 
 
6,129,885

 
6,595,892

 
6,436,892

 
 
 
 
 
 
 
 
 
 
 
Venture Technology Groups, Inc. (0%)*
 
Fluid and Gas Handling Products Distributor
 
Subordinated Note (12.5% Cash, 4% PIK, Due 09/16)
 
6,749,511

 
5,703,715

 
741,000

Class A Units (1,000,000 units)
 
 
 
1,000,000

 

 
 
6,749,511

 
6,703,715

 
741,000

 
 
 
 
 
 
 
 
 
 
 
Waste Recyclers Holdings, LLC (0%)*
 
Environmental and Facilities Services
 
Class A Preferred Units (280 units)
 
 
 
2,251,100

 

Class B Preferred Units (985,372 units)
 
 
 
3,304,218

 
1,422,000

Class C Preferred Units (1,444,475 units)
 
 
 
246,598

 
740,000

Common Unit Purchase Warrant (1,170,083 units)
 
 
 
748,900

 

Common Units (153,219 units)
 
 
 
180,783

 

 
 
 
 
 
6,731,599

 
2,162,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

11


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments
September 30, 2013
Portfolio Company
 
Industry
 
Type of Investment(1)(2)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Wythe Will Tzetzo, LLC (2%)*
 
Confectionary Goods Distributor
 
Series A Preferred Units (74,764 units)
 
 
 
$
1,500,000

 
$
6,215,000

Common Unit Purchase Warrants (25,065 units)
 
 
 
301,510

 
1,826,000

 
 
 


 
1,801,510

 
8,041,000

 
 
 
 
 
 
 
 
 
 
 
Subtotal Affiliate Investments
 
 
 
87,252,914

 
106,302,777

 
108,028,880

 
 
 
 
 
 
 
 
 
 
 
Control Investments:
 
 
 
 
 
 
 
 
 
 
FCL Graphics, Inc. (“FCL”) and FCL Holding SPV, LLC (“SPV”) (1%)*
 
Commercial Printing Services
 
Senior Note-FCL (4.8% Cash, Due 09/16)
 
$
1,289,887

 
1,289,887

 
1,289,887

Senior Note-FCL (7.5% Cash, 2% PIK, Due 09/16)
 
1,189,281

 
1,189,279

 
1,047,000

Senior Note-SPV (2.0% Cash, 5.4% PIK, Due 09/16)
 
1,049,747

 
1,007,272

 
141,000

Members Interests-SPV (299,875 units)
 
 
 

 

 
 
 
3,528,915

 
3,486,438

 
2,477,887

 
 
 
 
 
 
 
 
 
 
 
Gerli & Company (0%)*
 
Specialty Woven Fabrics Manufacturer
 
Subordinated Note (13% Cash, Due 07/15)
 
425,231

 
375,000

 
375,000

Subordinated Note (8.5% Cash, Due 03/15)
 
3,713,187

 
3,000,000

 
409,000

Class A Preferred Shares (1,211 shares)
 
 
 
855,000

 

Class C Preferred Shares (744 shares)
 
 
 

 

Class E Preferred Shares (400 shares)
 
 
 
161,440

 

Common Stock (300 shares)
 
 
 
100,000

 

 
 
 
4,138,418

 
4,491,440

 
784,000

 
 
 
 
 
 
 
 
 
Subtotal Control Investments
 
 
 
7,667,333

 
7,977,878

 
3,261,887

 
 
 
 
 
 
 
 
 
Total Investments, September 30, 2013 (143%)*
 
 
 
$
558,096,955

 
$
613,690,046

 
$
630,476,193

*    Fair value as a percent of net assets
(1)
All debt investments are income producing. Equity and equity-linked investments are non-income producing.
(2)
Disclosures of interest rates on notes include cash interest rates and payment-in-kind (“PIK”) interest rates.
(3)
All investments are restricted as to resale and were valued at fair value as determined in good faith by the Board of Directors.
(4)
Investment is not a qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets.

See accompanying notes.

12


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments
December 31, 2012
Portfolio Company
 
Industry
 
Type of Investment(1)(2)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Non–Control / Non–Affiliate Investments:
 
 
 
 
 
 
Agilex Flavors & Fragrances, Inc. (3%)*
 
Custom Fragrance Producers
 
Subordinated Note (12% Cash, 1.5% PIK, Due 06/19)
 
$
12,506,771

 
$
12,256,771

 
$
12,256,771

Common Units (1,250 units)
 
 
 
1,250,000

 
1,250,000

 
 
 
12,506,771

 
13,506,771

 
13,506,771

 
 
 
 
 
 
 
 
 
 
 
Ambient Air Corporation (“AA”) and Peaden-Hobbs Mechanical, LLC (“PHM”) (1%)*
 
Specialty Trade Contractors
 
Subordinated Note-AA (15% Cash, 3% PIK, Due 06/13)
 
4,047,120

 
4,038,351

 
4,038,351

Subordinated Note-PHM (12% Cash, Due 09/12)
 
12,857

 
12,857

 
12,857

Common Stock-PHM (128,571 shares)
 
 
 
128,571

 
128,571

Common Stock Warrants-AA (455 shares)
 
 
 
142,361

 
242,000

 
 
 
4,059,977

 
4,322,140

 
4,421,779

 
 
 
 
 
 
 
 
 
 
 
Aramsco, Inc. (0%)*
 
Environmental Emergency Products Distributor
 
Subordinated Note (12% Cash, 2% PIK, Due 03/14)
 
1,231,819

 
1,156,696

 
1,156,696

 
 
 
1,231,819

 
1,156,696

 
1,156,696

 
 
 
 
 
 
 
 
 
 
 
Assurance Operations Corporation (0%)*
 
Metal Fabrication
 
Common Stock (517 shares)
 
 
 
516,867

 
905,000

 
 
 
 
 
516,867

 
905,000

 
 
 
 
 
 
 
 
 
 
 
Audio and Video Labs Holdings, Inc. (3%)*
 
Manufacturer and Distributor for Independent Artists and Authors
 
Subordinated Note (12% Cash, 2% PIK, Due 06/18)
 
13,002,889

 
12,742,889

 
12,742,889

Common Units (134 units)
 
 
 
1,300,000

 
1,300,000

 
 
 
13,002,889

 
14,042,889

 
14,042,889

 
 
 
 
 
 
 
 
 
 
 
Botanical Laboratories, Inc. (0%)*
 
Nutritional Supplement Manufacturing and Distribution
 
Common Unit Warrants (998,680 units)
 
 
 
474,600

 
1,031,000

 
 
 


 
474,600

 
1,031,000

 
 
 
 
 
 
 
 
 
 
 
Capital Contractors, Inc. (2%)*
 
Janitorial and Facilities Maintenance Services
 
Subordinated Notes (12% Cash, 2% PIK, Due
12/15)
 
9,373,742

 
8,924,127

 
8,924,127

Common Stock Warrants (20 shares)
 
 
 
492,000

 
339,000

 
 
9,373,742

 
9,416,127

 
9,263,127

 
 
 
 
 
 
 
 
 
 
 
Carolina Beverage Group, LLC (1%)*
 
Beverage Manufacturing
and Packaging
 
Class A Units (11,974 units)
 
 
 
1,077,615

 
1,367,000

 
Class B Units (11,974 units)
 
 
 
119,735

 
963,000

 
 
 
 
 
1,197,350

 
2,330,000

 
 
 
 
 
 
 
 
 
 
 
Chromaflo Technologies, LLC (5%)*
 
Colorant Manufacturer and Distributor
 
Subordinated Note (12% Cash, 2% PIK, Due 10/17)
 
16,466,899

 
16,174,905

 
16,174,905

Preferred A Units (22,561 units)
 
 
 
2,256,098

 
2,878,098

 
 
 
16,466,899

 
18,431,003

 
19,053,003

 
 
 
 
 
 
 
 
 
 
 
Comverge, Inc. (4%)*
 
Provider of Intelligent Energy Management Solutions
 
Subordinated Note (12% Cash, 3% PIK, Due 05/18)
 
15,042,500

 
14,751,744

 
14,751,744

Preferred Units (900 units)
 
 
 
900,000

 
900,000

Common Units (1,000,000 units)
 
 
 
100,000

 
100,000

 
 
 
15,042,500

 
15,751,744

 
15,751,744

 
 
 
 
 
 
 
 
 
 
 
Continental Anesthesia Management, LLC (2%)*
 
Physicians Management
Services
 
Senior Note (14% Cash, Due 11/14)
 
9,950,000

 
9,739,469

 
9,739,469

Warrant (263 shares)
 
 
 
276,100

 

 
 
9,950,000

 
10,015,569

 
9,739,469

 
 
 
 
 
 
 
 
 
 
 
CRS Reprocessing, LLC (7%)*
 
Fluid
Reprocessing
Services
 
Subordinated Note (10% Cash, 4% PIK, Due 11/15)
 
11,768,332

 
11,531,905

 
11,531,905

Subordinated Note (10% Cash, 4% PIK, Due 11/15)
 
12,978,264

 
11,746,721

 
11,746,721

Series C Preferred Units (30 units)
 
 
 
288,342

 
454,000

Common Unit Warrant (664 units)
 
 
 
1,759,556

 
3,653,000

Series D Preferred Units (16 units)
 
 
 
107,074

 
184,000

 
 
 
24,746,596

 
25,433,598

 
27,569,626

 
 
 
 
 
 
 
 
 
 
 
DataSource Incorporated (2%)*
 
Print Supply Chain Management Services
 
Subordinated Note (12% Cash, 2% PIK, Due 01/18)
 
8,584,263

 
8,425,564

 
8,425,564

 
Common Units (47 units)
 
 
 
1,000,000

 
1,000,000

 
 
 
8,584,263

 
9,425,564

 
9,425,564

 
 
 
 
 
 
 
 
 
 
 
DCWV Acquisition Corporation (1%)*
 
Arts & Crafts and Home Decor Products Designer and Supplier
 
Subordinated Note (12% Cash, 3% PIK, Due 09/17)
 
6,054,683

 
5,939,149

 
5,939,149

 
 
 
6,054,683

 
5,939,149

 
5,939,149

 
 
 
 
 
 
 
 
 
 
 
DLR Restaurants, LLC (3%)*
 
Restaurant
 
Subordinated Note (12% Cash, 2% PIK, Due 03/16)
 
10,934,260

 
10,764,337

 
10,764,337

Subordinated Note (12% Cash, 4% PIK, Due 03/16)
 
783,243

 
768,243

 
768,243

Royalty Rights
 
 
 

 
132,000

 
 
 
11,717,503

 
11,532,580

 
11,664,580


13


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments
December 31, 2012
Portfolio Company
 
Industry
 
Type of Investment(1)(2)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
 
 
 
 
 
 
 
 
 
 
 
Eckler's Holdings, Inc. (2%)*
 
Restoration Parts and Accessories for Classic Cars and Trucks
 
Subordinated Note (11% Cash, 4% PIK, Due 07/18)
 
$
6,804,178

 
$
6,645,927

 
$
6,645,927

 
Common Stock (18,029 shares)
 
 
 
183,562

 
183,562

 
Preferred Stock A (1,596.13 shares)
 
 
 
1,596,126

 
1,596,126

 
 
 
6,804,178

 
8,425,615

 
8,425,615

 
 
 
 
 
 
 
 
 
 
 
Electronic Systems Protection, Inc. (1%)*
 
Power Protection Systems Manufacturing
 
Subordinated Note (12% Cash, 2% PIK, Due 12/15)
 
4,246,680

 
4,219,387

 
4,219,387

Common Stock (570 shares)
 
 
 
285,000

 
301,000

 
 
 
4,246,680

 
4,504,387

 
4,520,387

 
 
 
 
 
 
 
 
 
 
 
Empire Facilities Management Group, Inc. (1%)*
 
Retail, Restaurant, and Commercial Facilities Maintenance
 
Subordinated Note (9% Cash, 4% PIK, Due 07/18)
 
5,101,061

 
5,019,203

 
5,019,203

 
Convertible Preferred Units (2,500 units)
 
 
 
250,000

 
250,000

 
 
 
5,101,061

 
5,269,203

 
5,269,203

 
 
 
 
 
 
 
 
 
 
 
Foodstate, Inc. (1%)*
 
Nutritional Supplement Manufacturing and Distribution
 
Subordinated Note (12% Cash, 3.8% PIK, Due 10/16)
 
5,480,349

 
5,398,773

 
5,398,773

 
 
 
5,480,349

 
5,398,773

 
5,398,773

 
 
 
 
 
 
 
 
 
 
 
Frozen Specialties, Inc. (1%)*
 
Frozen Foods Manufacturer
 
Subordinated Note (13% Cash, 5% PIK, Due 05/16)
 
6,245,877

 
6,190,449

 
6,190,449

 
 
6,245,877

 
6,190,449

 
6,190,449

 
 
 
 
 
 
 
 
 
 
 
Garden Fresh Restaurant Corp. (0%)*
 
Restaurant
 
Membership Units (5,000 units)
 
 
 
500,000

 
295,000

 
 
 
 
500,000

 
295,000

 
 
 
 
 
 
 
 
 
 
 
Glencoe Business Services Holdings (5%)*
 
Business Process Outsourcing Provider
 
Subordinated Note (12% Cash, 2.5% PIK, Due 06/18)
 
20,001,388

 
19,601,388

 
19,601,388

 
 
20,001,388

 
19,601,388

 
19,601,388

 
 
 
 
 
 
 
 
 
 
 
Grindmaster-Cecilware Corp. (1%)*
 
Food Services Equipment Manufacturer
 
Subordinated Note (12% Cash, 6% PIK, Due 04/16)
 
6,667,971

 
6,612,541

 
5,894,000

 
 
6,667,971

 
6,612,541

 
5,894,000

 
 
 
 
 
 
 
 
 
 
 
Hatch Chile Co., LLC (1%)*
 
Food Products Distributor
 
Senior Note (19% Cash, Due 07/15)
 
3,600,000

 
3,530,928

 
3,530,928

Subordinated Note (14% Cash, Due 07/15)
 
800,000

 
697,713

 
697,713

Unit Purchase Warrant (5,265 units)
 
 
 
149,800

 
229,000

 
 
4,400,000

 
4,378,441

 
4,457,641

 
 
 
 
 
 
 
 
 
 
 
Home Physicians, LLC (“HP”) and Home Physicians Holdings, LP (“HPH”) (2%)*
 
In-home Primary Care Physician Services
 
Subordinated Note-HP (12% Cash, 5% PIK, Due 03/16)
 
11,208,476

 
10,628,482

 
6,219,000

Subordinated Note-HPH (4% Cash, 6% PIK, Due 03/16)
 
1,364,331

 
1,303,361

 

Senior Subordinated Note-HP (14% Cash, 2% PIK, Due 03/16)
 
612,245

 
602,472

 
602,472

Royalty Rights
 
 
 

 

 
 
13,185,052

 
12,534,315

 
6,821,472

 
 
 
 
 
 
 
 
 
 
 
Infrastructure Corporation of America, Inc. (3%)*
 
Roadway Maintenance, Repair and Engineering Services
 
Subordinated Note (12% Cash, 1% PIK, Due 10/15)
 
10,989,934

 
10,213,309

 
10,213,309

Common Stock Purchase Warrant (199,526 shares)
 
 
 
980,000

 
1,164,000

 
 
10,989,934

 
11,193,309

 
11,377,309

 
 
 
 
 
 
 
 
 
 
 
Inland Pipe Rehabilitation Holding Company LLC (6%)*
 
Cleaning and Repair Services
 
Subordinated Note (13% Cash, 2.5% PIK, Due 12/16)
 
20,797,791

 
20,559,945

 
20,559,945

Membership Interest Purchase Warrant (3.0%)
 
 
 
853,500

 
2,726,000

 
 
20,797,791

 
21,413,445

 
23,285,945

 
 
 
 
 
 
 
 
 
 
 
IOS Acquisitions, Inc. (4%)*
 
Provider of Oil Country Tubular Goods Inspections and Repair Services
 
Subordinated Note (12% Cash, 2% PIK, Due 06/18)
 
17,004,723

 
16,664,723

 
16,664,723

Common Units (7,314 Class A Units)
 
 
 
1,699,847

 
1,699,847

 
 
17,004,723

 
18,364,570

 
18,364,570

 
 
 
 
 
 
 
 
 
 
 
Library Systems & Services, LLC (2%)*
 
Municipal Business Services
 
Subordinated Note (12.5% Cash, 4.5% PIK, Due 06/15)
 
5,250,002

 
5,159,230

 
5,159,230

Common Stock Warrants (112 shares)
 
 
 
58,995

 
1,486,000

 
 
5,250,002

 
5,218,225

 
6,645,230

 
 
 
 
 
 
 
 
 
 
 
Magpul Industries Corp. (4%)*
 
Firearm Accessories Manufacturer and Distributor
 
Subordinated Note (12% Cash, 3% PIK, Due 03/17)
 
13,300,000

 
13,080,247

 
13,080,247

Preferred Units (1,470 units)
 
 
 
1,470,000

 
1,694,000

Common Units (30,000 units)
 
 
 
30,000

 
3,100,000

 
 
13,300,000

 
14,580,247

 
17,874,247

 
 
 
 
 
 
 
 
 
 
 
Marine Acquisition Corp. (3%)*
 
Boat Steering System and Driver Control Provider
 
Subordinated Note (11.50% Cash, 2% PIK, Due 05/17)
 
12,000,000

 
11,740,879

 
11,740,879

 
 
 
12,000,000

 
11,740,879

 
11,740,879


14


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments
December 31, 2012
Portfolio Company
 
Industry
 
Type of Investment(1)(2)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
 
 
 
 
 
 
 
 
 
 
 
Media Storm, LLC (2%)*
 
Marketing Services
 
Subordinated Note (12% Cash, 2% PIK, Due 10/17)
 
$
8,056,663

 
$
7,984,771

 
$
7,984,771

Membership Units (1,216,204 units)
 
 
 
1,176,957

 
1,307,000

 
 
8,056,663

 
9,161,728

 
9,291,771

 
 
 
 
 
 
 
 
 
 
 
Media Temple, Inc. (4%)*
 
Web Hosting Services
 
Subordinated Note (12% Cash, 3% PIK, Due 04/15)
 
8,800,000

 
8,696,378

 
8,696,378

Convertible Note (8% Cash, 6% PIK, Due 04/15)
 
3,200,000

 
2,896,501

 
6,377,000

Common Stock Purchase Warrant (28,000 shares)
 
 
 
536,000

 
2,790,000

 
 
12,000,000

 
12,128,879

 
17,863,378

 
 
 
 
 
 
 
 
 
 
 
Micross Solutions LLC (3%)*
 
Provider of Semiconductor Products and Services
 
Subordinated Note (12% Cash, 2% PIK, Due 06/18)
 
10,615,311

 
10,456,311

 
10,456,311

Class A-2 Common Units (1,500,000 units)
 
 
 
1,500,000

 
1,500,000

 
 
10,615,311

 
11,956,311

 
11,956,311

 
 
 
 
 
 
 
 
 
 
 
Minco Technology Labs, LLC (1%)*
 
Semiconductor Distribution
 
Subordinated Note (6.5% Cash, 3.5% PIK, Due 05/16)
 
5,537,286

 
5,453,091

 
3,619,000

Class A Units (5,000 HoldCo. units)
 
 
 
500,000

 

Class A Units (3,907 OpCo. units)
 
 
 
3,907

 

 
 
5,537,286

 
5,956,998

 
3,619,000

 
 
 
 
 
 
 
 
 
 
 
My Alarm Center, LLC (2%)*
 
Security Company
 
Subordinated Note (12% Cash, 2.5% PIK, Due 09/17)
 
8,084,991

 
8,010,654

 
8,010,654

 
Preferred Units (2,000,000 units)
 
 
 
2,000,000

 
2,000,000

 
 
 
8,084,991

 
10,010,654

 
10,010,654

 
 
 
 
 
 
 
 
 
 
 
National Investment Managers Inc. (3%)*
 
Retirement Plan Administrator
 
Subordinated Note (12% Cash, 5% PIK, Due 09/16)
 
12,309,375

 
12,100,174

 
12,100,174

Preferred A Units (90,000 units)
 
 
 
900,000

 
658,000

Common Units (10,000 units)
 
 
 
100,000

 

 
 
12,309,375

 
13,100,174

 
12,758,174

 
 
 
 
 
 
 
 
 
 
 
Novolyte Technologies, Inc. (0%)*
 
Specialty Manufacturing
 
Common Units (24,522 units)
 
 
 
43,905

 
178,801

 
 
 
 
 
43,905

 
178,801

 
 
 
 
 
 
 
 
 
 
 
Performance Health & Wellness Holdings, Inc. (3%)*
 
Designer and Manufacturer of Rehabilitation and Wellness Products
 
Subordinated Note (12% Cash, 1% PIK, Due 04/19)
 
13,029,262

 
12,839,320

 
12,839,320

 
Class A Limited Partnership Units (15,000 units)
 
 
 
1,500,000

 
1,500,000

 
 
 
13,029,262

 
14,339,320

 
14,339,320

 
 
 
 
 
 
 
 
 
 
 
PowerDirect Marketing, LLC (2%)*
 
Marketing Services
 
Subordinated Note (12% Cash, 2% PIK, Due 05/16)
 
7,660,631

 
7,069,381

 
7,069,381

Common Unit Purchase Warrants
 
 
 
590,200

 
1,820,000

 
 
7,660,631

 
7,659,581

 
8,889,381

 
 
 
 
 
 
 
 
 
 
 
ROM Acquisition Corporation (3%)*
 
Military and Industrial Vehicle Equipment Manufacturing
 
Subordinated Note (12% Cash, 3% PIK, Due 03/17)
 
13,157,755

 
13,037,948

 
13,037,948

 
 
13,157,755

 
13,037,948

 
13,037,948

 
 
 
 
 
 
 
 
 
 
 
Sheplers, Inc. (3%)*
 
Western Apparel Retailer
 
Subordinated Note (13.15% Cash, Due 12/16)
 
8,750,000

 
8,564,503

 
8,564,503

Subordinated Note (10% Cash, 7% PIK, Due 12/17)
 
4,027,230

 
3,964,422

 
3,964,422

 
 
 
12,777,230

 
12,528,925

 
12,528,925

 
 
 
 
 
 
 
 
 
 
 
Snacks Holding Corporation (3%)*
 
Trail Mixes and Nut Manufacturer and Marketer
 
Subordinated Note (12% Cash, 1% PIK, Due 11/17)
 
7,152,710

 
6,835,477

 
6,835,477

Preferred A Units (22,368 units)
 
 
 
2,124,957

 
3,016,000

Preferred B Units (10,380 units)
 
 
 
986,059

 
1,430,000

Common Units (190,935 units)
 
 
 
150,000

 
415,000

Common Stock Warrants (14,558 shares)
 
 
 
14,558

 
40,000

 
 
 
7,152,710

 
10,111,051

 
11,736,477

 
 
 
 
 
 
 
 
 
 
 
SRC, Inc. (1%)*
 
Specialty Chemical Manufacturer
 
Subordinated Notes (12% Cash, 2% PIK, Due 12/14)
 
6,023,719

 
5,856,719

 
5,643,000

Common Stock Purchase Warrants
 
 
 
123,800

 

 
 
 
6,023,719

 
5,980,519

 
5,643,000

 
 
 
 
 
 
 
 
 
 
 
Stella Environmental Services, LLC (1%)*
 
Waste Transfer Stations
 
Subordinated Note (12% Cash, 3% PIK, Due 02/17)
 
5,916,326

 
5,788,004

 
5,788,004

Common Stock Purchase Warrants
 
 
 
20,000

 
259,000

 
 
 
5,916,326

 
5,808,004

 
6,047,004

 
 
 
 
 
 
 
 
 
 
 
Syrgis Holdings, Inc. (0%)*
 
Specialty Chemical Manufacturer
 
Class C Units (2,114 units)
 
 
 
111,037

 
201,281

 
 
 
 
111,037

 
201,281


15


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments
December 31, 2012
 
Portfolio Company
 
Industry
 
Type of Investment(1)(2)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
The Krystal Company (4%)*
 
Quick Service Restaurant
 
Subordinated Note (12% Cash, 3% PIK, Due 06/17)
 
$
12,514,671

 
$
12,296,595

 
$
12,296,595

 
Class A Units of Limited Partnership (2,000 units)
 
 
 
2,000,000

 
3,051,000

 
 
 
 
12,514,671

 
14,296,595

 
15,347,595

 
 
 
 
 
 
 
 
 
 
 
 
 
TMR Automotive Service Supply, LLC (1%)*
 
Automotive Supplies
 
Subordinated Note (12% Cash, 1% PIK, Due 03/16)
 
4,750,000

 
4,539,123

 
4,539,123

 
Unit Purchase Warrant (316,858 units)
 
 
 
195,000

 
384,000

 
 
 
 
4,750,000

 
4,734,123

 
4,923,123

 
 
 
 
 
 
 
 
 
 
 
 
 
Tomich Brothers, LLC (2%)*
 
Squid and Wetfish Processor and Distributor
 
Subordinated Note (12% Cash, 3% PIK, Due 04/16)
 
7,146,576

 
7,028,045

 
7,028,045

 
Royalty Rights
 
 
 

 

 
 
 
7,146,576

 
7,028,045

 
7,028,045

 
 
 
 
 
 
 
 
 
 
 
 
 
Top Knobs USA, Inc. (3%)*
 
Hardware Designer and Distributor
 
Common Stock (26,593 shares)
 
 
 
750,000

 
1,071,000

 
 
 
 

 
750,000

 
1,071,000

 
 
 
 
 
 
 
 
 
 
 
 
 
Trinity Consultants Holdings, Inc. (2%)*
 
Air Quality Consulting Services
 
Subordinated Note (12% Cash, 2.5% PIK, Due 11/17)
 
7,402,071

 
7,275,570

 
7,275,570

 
Series A Preferred Stock (10,000 units)
 
 
 
950,000

 
1,143,000

 
Common Stock (50,000 units)
 
 
 
50,000

 
478,000

 
 
 
 
7,402,071

 
8,275,570

 
8,896,570

 
 
 
 
 
 
 
 
 
 
 
 
 
TrustHouse Services Group, Inc.  (7%)*
 
Food Management Services
 
Subordinated Note (12% Cash, 2.25% PIK, Due 06/19)
 
25,334,160

 
25,050,372

 
25,050,372

 
Class A Units (1,557 units)
 
 
 
512,124

 
1,699,000

 
Class B Units (82 units)
 
 
 
26,954

 
70,000

 
Class E Units (838 units)
 
 
 
750,406

 
976,000

 
 
 
 
25,334,160

 
26,339,856

 
27,795,372

 
 
 
 
 
 
 
 
 
 
 
 
 
Tulsa Inspection Resources, Inc.   (2%)*
 
Pipeline Inspection Services
 
Subordinated Note (14%-17.5% Cash, Due 03/14)
 
5,810,588

 
5,670,249

 
5,670,249

 
Common Units (2 units)
 
 
 
337,925

 
569,000

 
Common Stock Warrants (8 shares)
 
 
 
321,000

 
2,188,000

 
 
 
 
5,810,588

 
6,329,174

 
8,427,249

 
 
 
 
 
 
 
 
 
 
 
 
 
United Biologics, LLC (3%)*
 
Allergy Immunotherapy
 
Subordinated Note (12% Cash, 2% PIK, Due 03/17)
 
10,169,051

 
9,250,348

 
9,250,348

 
Class A Common Stock (177,935 shares)
 
 
 
1,999,989

 
2,029,000

 
Class A & Class B Unit Purchase Warrants
 
 
 
838,117

 
349,000

 
 
 
 
10,169,051

 
12,088,454

 
11,628,348

 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale Floors, Inc. (1%)*
 
Commercial Services
 
Subordinated Note (12.5% Cash, 3.5% PIK, Due 06/14)
 
3,820,271

 
3,766,095

 
3,766,095

 
Membership Interest Purchase Warrant (4.0%)
 
 
 
132,800

 

 
 
 
 
3,820,271

 
3,898,895

 
3,766,095

 
 
 
 
 
 
 
 
 
 
 
 
 
Workforce Software, LLC (2%)*
 
Software Provider
 
Subordinated Note (11% Cash, 5% PIK, Due 11/16)
 
8,000,000

 
7,035,228

 
7,035,228

 
Class B Preferred Units (1,020,000 units)
 
 
 
1,020,000

 
1,133,000

 
Common Unit Purchase Warrants (2,434,749 units)
 
 
 
952,300

 
2,218,000

 
 
 
 
8,000,000

 
9,007,528

 
10,386,228

 
 
 
 
 
 
 
 
 
 
 
 
 
WSO Holdings, LP (6%)*
 
Organic/Fair Trade Sugar, Syrup, Nectar and Honey Producer
 
Subordinated Note (12% Cash, 2% PIK,
Due 10/17)
 
20,198,267

 
19,928,633

 
19,928,633

 
 
Common Points (3,000 points)
 
 
 
3,000,000

 
3,172,000

 
 
 
20,198,267

 
22,928,633

 
23,100,633

 
 
 
 
 
 
 
 
 
 
 
 
 
Xchange Technology Group, LLC (0%)*
 
Used and Refurbished IT Asset Supplier
 
Subordinated Note (8% Cash, Due 06/15)
 
6,024,000

 
5,904,000

 
1,512,000

 
Royalty Rights
 
 
 

 

 
 
 
6,024,000

 
5,904,000

 
1,512,000

 
 
 
 
 
 
 
 
 
 
 
 
 
Yellowstone Landscape Group, Inc. (4%)*
 
Landscaping Services
 
Subordinated Note (10% Cash, 6% PIK, Due 04/14)
 
15,247,823

 
15,132,751

 
15,132,751

 
 
 
15,247,823

 
15,132,751

 
15,132,751

 
 
 
 
 
 
 
 
 
Subtotal Non–Control / Non–Affiliate Investments
 
532,951,385

 
565,737,092

 
579,078,939

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

16


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments
December 31, 2012
Portfolio Company
 
Industry
 
Type of Investment(1)(2)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
 
 
 
 
 
 
 
 
 
 
 
Affiliate Investments:
 
 
 
 
 
 
 
 
 
 
All Aboard America! Holdings Inc. (2%)*
 
Motor Coach Operator
 
Subordinated Note (12% Cash, 3% PIK, Due 10/17)
 
$
8,631,169

 
$
8,473,203

 
$
8,473,203

 
Convertible Preferred Interest in LLC
 
 
 
1,500,000

 
1,500,000

 
 
 
8,631,169

 
9,973,203

 
9,973,203

 
 
 
 
 
 
 
 
 
 
 
American De-Rosa Lamparts, LLC and Hallmark Lighting (1%)*
 
Wholesale and Distribution
 
Subordinated Note (12% Cash, 6% PIK, Due 10/13)
 
6,436,764

 
5,679,311

 
5,679,311

Membership Units (6,516 units)
 
 
 
620,653

 

 
 
 
6,436,764

 
6,299,964

 
5,679,311

 
 
 
 
 
 
 
 
 
 
 
AP Services, Inc. (0%)*
 
Fluid Sealing Supplies and Services
 
Class A Units (933 units)
 
 
 
302,886

 
556,618

Class B Units (496 units)
 
 
 

 
295,642

 
 
 
 
302,886

 
852,260

 
 
 
 
 
 
 
 
 
 
 
Asset Point, LLC (2%)*
 
Asset Management Software Provider
 
Senior Note (12% Cash, 4% PIK, Due 03/13)
 
6,305,825

 
6,299,297

 
6,299,297

Senior Note (12% Cash, 2% PIK, Due 07/15)
 
630,247

 
630,247

 
576,000

Subordinated Note (7% Cash, Due 03/13)
 
941,798

 
941,798

 
647,000

Membership Units (1,000,000 units)
 
 
 
8,203

 
398,000

Options to Purchase Membership Units (342,407 units)
 
 
 
500,000

 
180,000

Membership Unit Warrants (356,506 units)
 
 
 

 

 
 
 
7,877,870

 
8,379,545

 
8,100,297

 
 
 
 
 
 
 
 
 
 
 
Axxiom Manufacturing, Inc. (0%)*
 
Industrial Equipment
Manufacturer
 
Common Stock (136,400 shares)
 
 
 
200,000

 
1,437,000

Common Stock Warrant (4,000 shares)
 
 
 

 
37,000

 
 
 
 
200,000

 
1,474,000

 
 
 
 
 
 
 
 
 
 
 
Captek Softgel International, Inc.  (2%)*
 
Nutraceutical Manufacturer
 
Subordinated Note (12% Cash, 4% PIK, Due 08/16)
 
8,620,064

 
8,500,212

 
8,500,212

Class A Units (80,000 units)
 
 
 
800,000

 
409,000

 
 
 
8,620,064

 
9,300,212

 
8,909,212

 
 
 
 
 
 
 
 
 
 
 
CIS Secure Computing Inc. (3%)*
 
Secure Communications and Computing Solutions Provider
 
Subordinated Note (12% Cash, 3% PIK, Due
06/17)
 
10,144,765

 
9,966,594

 
9,966,594

Common Stock (84 shares)
 
 
 
502,320

 
1,081,000

 
 
10,144,765

 
10,468,914

 
11,047,594

 
 
 
 
 
 
 
 
 
 
 
Dyson Corporation (1%)*
 
Custom Forging and Fastener Supplies
 
Class A Units (1,000,000 units)
 
 
 
1,000,000

 
3,122,000

 
 
 
 
 
1,000,000

 
3,122,000

 
 
 
 
 
 
 
 
 
 
 
Equisales, LLC (0%)*
 
Energy Products and Services
 
Subordinated Note (6.5% Cash, 10.5% PIK, Due 06/12)
 
3,574,630

 
3,157,043

 
250,000

Class A Units (500,000 units)
 
 
 
480,900

 

 
 
 
3,574,630

 
3,637,943

 
250,000

 
 
 
 
 
 
 
 
 
 
 
Fischbein Partners, LLC (2%)*
 
Packaging and Materials Handling Equipment Manufacturer
 
Class A Units (1,750,000 units)
 
 
 
417,088

 
6,616,000

 
 
 
 
 
417,088

 
6,616,000

 
 
 
 
 
 
 
 
 
 
 
Main Street Gourmet, LLC (1%)*
 
Baked Goods Provider
 
Subordinated Note (12% Cash, 4.5% PIK, Due 10/16)
 
4,327,970

 
4,268,044

 
4,268,044

Jr. Subordinated Note (8% Cash, 2% PIK, Due 04/17)
 
1,035,758

 
1,020,646

 
1,020,646

Preferred Units (233 units)
 
 
 
211,867

 
153,000

Common B Units (3,000 units)
 
 
 
23,140

 

Common A Units (1,652 units)
 
 
 
14,993

 

 
 
 
5,363,728

 
5,538,690

 
5,441,690

 
 
 
 
 
 
 
 
 
 
 
PartsNow!, LLC (3%)*
 
Printer Parts Distributor
 
Subordinated Note (12% Cash, 3% PIK, Due 08/17)
 
11,113,184

 
10,908,758

 
10,908,758

 
Member Units (1,000,000 units)
 
 
 
1,000,000

 
1,000,000

 
Royalty Rights
 
 
 

 

 
 
 
11,113,184

 
11,908,758

 
11,908,758

 
 
 
 
 
 
 
 
 
 
 
Pine Street Holdings, LLC (0%)*
 
Oil and Gas Services
 
Preferred Units (200 units)
 
 
 
200,000

 
417,000

 
Common Unit Warrants (2,220 units)
 
 
 

 
36,000

 
 
 
 
 
200,000

 
453,000

 
 
 
 
 
 
 
 
 
 
 

17


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments
December 31, 2012
Portfolio Company
 
Industry
 
Type of Investment(1)(2)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Plantation Products, LLC (6%)*
 
Seed Manufacturing
 
Subordinated Notes (10.5% Cash, 7% PIK, Due 11/17)
 
$
19,308,135

 
$
19,108,298

 
$
19,108,298

Preferred Units (4,312 units)
 
 
 
4,312,000

 
4,660,000

Common Units (352,000 units)
 
 
 
88,000

 
382,000

 
 
 
19,308,135

 
23,508,298

 
24,150,298

 
 
 
 
 
 
 
 
 
 
 
QC Holdings, Inc. (0%)*
 
Lab Testing Services
 
Common Stock (5,594 shares)
 
 
 
563,602

 
233,000

 
 
 
 
 
563,602

 
233,000

 
 
 
 
 
 
 
 
 
 
 
Technology Crops International (2%)*
 
Supply Chain Management Services
 
Subordinated Note (12% Cash, 5% PIK, Due 03/15)
 
5,902,282

 
5,853,425

 
5,853,425

Common Units (50 units)
 
 
 
500,000

 
680,000

 
 
 
5,902,282

 
6,353,425

 
6,533,425

 
 
 
 
 
 
 
 
 
 
 
Venture Technology Groups, Inc. (0%)*
 
Fluid and Gas Handling Products Distributor
 
Subordinated Note (12.5% Cash, 4% PIK, Due 09/16)
 
5,731,024

 
5,469,170

 
1,288,000

Class A Units (1,000,000 units)
 
 
 
1,000,000

 

 
 
5,731,024

 
6,469,170

 
1,288,000

 
 
 
 
 
 
 
 
 
 
 
Waste Recyclers Holdings, LLC (1%)*
 
Environmental and Facilities Services
 
Class A Preferred Units (280 units)
 
 
 
2,251,100

 

Class B Preferred Units (985,372 units)
 
 
 
3,304,218

 
2,974,000

Class C Preferred Units (1,444,475 units)
 
 
 
246,598

 
663,000

Common Unit Purchase Warrant (1,170,083 units)
 
 
 
748,900

 

Common Units (153,219 units)
 
 
 
180,783

 

 
 
 
 
 
6,731,599

 
3,637,000

 
 
 
 
 
 
 
 
 
 
 
Wythe Will Tzetzo, LLC (3%)*
 
Confectionary Goods Distributor
 
Subordinated Notes (13% Cash, Due 10/16)
 
10,357,475

 
9,964,397

 
9,964,397

Series A Preferred Units (74,764 units)
 
 
 
1,500,000

 
3,007,000

Common Unit Purchase Warrants (25,065 units)
 
 
 
301,510

 
768,000

 
 
 
10,357,475

 
11,765,907

 
13,739,397

 
 
 
 
 
 
 
 
 
 
 
Subtotal Affiliate Investments
 
 
 
103,061,090

 
123,019,204

 
123,408,445

 
 
 
 
 
 
 
 
 
 
 
Control Investments:
 
 
 
 
 
 
 
 
 
 
FCL Graphics, Inc. (“FCL”) and FCL Holding SPV, LLC (“SPV”) (1%)*
 
Commercial Printing Services
 
Senior Note-FCL (5.0% Cash, Due 09/16)
 
1,386,706

 
1,386,706

 
1,386,706

Senior Note-FCL (8.0% Cash, 2% PIK, Due 09/16)
 
1,171,394

 
1,170,881

 
1,006,000

Senior Note-SPV (2.5% Cash, 6% PIK, Due 09/16)
 
1,007,272

 
1,007,272

 

Members Interests-SPV (299,875 units)
 
 
 

 

 
 
 
3,565,372

 
3,564,859

 
2,392,706

 
 
 
 
 
 
 
 
 
 
 
Fire Sprinkler Systems, Inc. (0%)*
 
Specialty Trade Contractors
 
Subordinated Notes (2% PIK, Due 03/13)
 
3,565,051

 
2,992,528

 
140,000

Common Stock (2,978 shares)
 
 
 
294,624

 

 
 
3,565,051

 
3,287,152

 
140,000

 
 
 
 
 
 
 
 
 
 
 
Fischbein, LLC (0%)*
 
Packaging and Materials Handling Equipment Manufacturer
 
Class A-1 Common Units (501,984 units)
 
 
 
29,575

 
141,512

Class A Common Units (3,839,068 units)
 
 
 
226,182

 
927,121

 
 
 
 
255,757

 
1,068,633

 
 
 
 
 
 
 
 
 
 
 
Gerli & Company (0%)*
 
Specialty Woven Fabrics Manufacturer
 
Subordinated Note (10% Cash, Due 03/15)
 
264,694

 
250,000

 
250,000

Subordinated Note (8.5% Cash, Due 03/15)
 
3,483,770

 
3,000,000

 
464,000

Class A Preferred Shares (1,211 shares)
 
 
 
855,000

 

Class C Preferred Shares (744 shares)
 
 
 

 

Class E Preferred Shares (400 shares)
 
 
 
161,440

 

Common Stock (300 shares)
 
 
 
100,000

 

 
 
 
3,748,464

 
4,366,440

 
714,000

 
 
 
 
 
 
 
 
 
Subtotal Control Investments
 
 
 
10,878,887

 
11,474,208

 
4,315,339

 
 
 
 
 
 
 
 
 
Total Investments, December 31, 2012 (169%)*
 
 
 
$
646,891,362

 
$
700,230,504

 
$
706,802,723

*    Fair value as a percent of net assets
(1)
All debt investments are income producing. Equity and equity-linked investments are non-income producing.
(2)
Disclosures of interest rates on notes include cash interest rates and payment-in-kind (“PIK”) interest rates.
(3)
All investments are restricted as to resale and were valued at fair value as determined in good faith by the Board of Directors.

See accompanying notes.

18


TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements

1. ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
Organization and Business
Triangle Capital Corporation and its wholly owned subsidiaries, including Triangle Mezzanine Fund LLLP ( “Triangle SBIC”) and Triangle Mezzanine Fund II LP (“Triangle SBIC II”) (collectively, the “Company”), operate as a Business Development Company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). Triangle SBIC and Triangle SBIC II are specialty finance limited partnerships formed to make investments primarily in middle market companies located throughout the United States. On September 11, 2003, Triangle SBIC was licensed to operate as a Small Business Investment Company (“SBIC”) under the authority of the United States Small Business Administration (“SBA”). On May 26, 2010, Triangle SBIC II obtained its license to operate as an SBIC. As SBICs, both Triangle SBIC and Triangle SBIC II are subject to a variety of regulations concerning, among other things, the size and nature of the companies in which they may invest and the structure of those investments.
The Company currently operates as a closed-end, non-diversified investment company and has elected to be treated as a BDC under the 1940 Act. The Company is internally managed by its executive officers under the supervision of its Board of Directors. The Company does not pay management or advisory fees, but instead incurs the operating costs associated with employing executive management and investment and portfolio management professionals.
Basis of Presentation
The financial statements of the Company include the accounts of Triangle Capital Corporation and its wholly-owned subsidiaries, including Triangle SBIC and Triangle SBIC II. Triangle Capital Corporation, Triangle SBIC and Triangle SBIC II do not consolidate portfolio company investments. The effects of all intercompany transactions between the Company and its subsidiaries have been eliminated in consolidation.
The accompanying unaudited financial statements are presented in conformity with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments necessary for the fair presentation of financial statements for the interim period, have been reflected in the unaudited consolidated financial statements. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. Additionally, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the period ended December 31, 2012. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

2. INVESTMENTS
Portfolio Composition
The Company primarily invests in subordinated debt (or 2nd lien notes) of privately held companies. These subordinated debt investments generally are secured by a second priority security interest in the assets of the borrower. In addition, the Company generally invests in an equity instrument of the borrower, such as warrants to purchase common stock in the portfolio company or direct preferred or common equity interests. The Company also invests in senior debt (or 1st lien notes) on a more limited basis.
The cost basis of our debt investments includes any unamortized original issue discount, unamortized loan origination fees and payment-in-kind (“PIK”) interest, if any. Summaries of the composition of the Company’s investment portfolio at cost and fair value, and as a percentage of total investments, are shown in the following tables:

19


 
Cost
 
Percentage of
Total Portfolio
 
Fair Value
 
Percentage of
Total Portfolio
September 30, 2013:
 
 
 
 
 
 
 
Subordinated debt and 2nd lien notes
$
509,207,799

 
83
%
 
$
488,985,821

 
78
%
Senior debt and 1st lien notes
34,284,476

 
5

 
34,142,197

 
5

Equity shares
58,603,134

 
10

 
76,959,572

 
12

Equity warrants
11,594,637

 
2

 
30,313,603

 
5

Royalty rights

 

 
75,000

 

 
$
613,690,046

 
100
%
 
$
630,476,193

 
100
%
December 31, 2012:
 
 
 
 
 
 
 
Subordinated debt and 2nd lien notes
$
582,365,584

 
83
%
 
$
559,355,550

 
79
%
Senior debt and 1st lien notes
46,955,594

 
7

 
46,576,994

 
7

Equity shares
60,948,229

 
9

 
78,979,179

 
11

Equity warrants
9,961,097

 
1

 
21,759,000

 
3

Royalty rights

 

 
132,000

 

 
$
700,230,504

 
100
%
 
$
706,802,723

 
100
%

During the three months ended September 30, 2013, the Company made five new investments totaling approximately $75.2 million and one investment in an existing portfolio company totaling approximately $0.1 million. During the nine months ended September 30, 2013, the Company made seven new investments totaling approximately $87.8 million and thirteen investments in existing portfolio companies totaling approximately $24.6 million.

During the three months ended September 30, 2012, the Company made eight new investments totaling approximately $71.9 million. During the nine months ended September 30, 2012, the Company made nineteen new investments totaling approximately $225.3 million and six investments in existing portfolio companies totaling approximately $3.2 million.
Investment Valuation Process
The Company has established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring basis in accordance with the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”). Under ASC Topic 820, a financial instrument is categorized within the ASC Topic 820 valuation hierarchy based upon the lowest level of input to the valuation process that is significant to the fair value measurement. The three levels of valuation inputs established by ASC Topic 820 are as follows:
Level 1 Inputs – include quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Inputs – include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 Inputs – include inputs that are unobservable and significant to the fair value measurement.
The Company’s investment portfolio is comprised of debt and equity instruments of privately held companies for which quoted prices or other inputs falling within the categories of Level 1 and Level 2 are not available. Therefore, the Company determines the fair value of its investments in good faith using Level 3 inputs, pursuant to a valuation policy and process that is established by the management of the Company with the assistance of certain third-party advisors and subsequently approved by the Company’s Board of Directors. There is no single standard for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment. The recorded fair values of the Company’s investments may differ significantly from fair values that would have been used had an active market for the securities existed. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.
The Company’s valuation process is led by the Company’s executive officers and managing directors. The Company’s valuation process begins with a quarterly review of each investment in the Company’s investment portfolio by the Company’s executive officers and investment committee. Valuations of each portfolio security are then prepared by the Company’s investment professionals, who have direct responsibility for the origination, management and monitoring of each investment. Under the Company’s valuation policy, each investment valuation is subject to (i) a review by the lead investment officer responsible for the portfolio company investment and (ii) a peer review by a second investment officer or executive officer of

20


the Company. Generally, any investment that is valued below cost is subjected to review by one of the Company’s executive officers. After the peer review is complete, the Company engages two independent valuation firms, Duff & Phelps, LLC and Lincoln Partners Advisors LLC (collectively, the “Valuation Firms”), to provide third-party reviews of certain investments, as described further below. Finally, the Board of Directors has the responsibility for reviewing and approving, in good faith, the fair value of the Company’s investments in accordance with the 1940 Act.
The Valuation Firms provide third party valuation consulting services to the Company which consist of certain procedures that the Company identified and requested the Valuation Firms to perform (hereinafter referred to as the “Procedures”). The Procedures are performed with respect to each portfolio company at least once in every calendar year and for new portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In addition, the Procedures are generally performed with respect to a portfolio company when there has been a significant change in the fair value of the investment. In certain instances, the Company may determine that it is not cost-effective, and as a result is not in the Company’s stockholders’ best interest, to request the Valuation Firms to perform the Procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of the investment in the portfolio company is determined to be insignificant relative to the total investment portfolio.    
The total number of investments and the percentage of the investment portfolio on which the Procedures were performed are summarized below by period: 
For the quarter ended:
Total
companies
 
Percent of total
investments at
fair value(1)
March 31, 2012
10
 
19%
June 30, 2012
14
 
21%
September 30, 2012
16
 
33%
December 31, 2012
17
 
30%
March 31, 2013
17
 
23%
June 30, 2013
13
 
27%
September 30, 2013
14
 
28%

(1)
Exclusive of the fair value of new investments made during the quarter.
Upon completion of the Procedures, the Valuation Firms concluded that, with respect to each investment reviewed by each Valuation Firm, the fair value of those investments subjected to the Procedures appeared reasonable. The Company’s Board of Directors is ultimately responsible for determining the fair value of the Company’s investments in good faith.
Investment Valuation Inputs
Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date. For the Company’s portfolio securities, fair value is generally the amount that the Company might reasonably expect to receive upon the current sale of the security. Under ASC Topic 820, the fair value measurement assumes that the sale occurs in the principal market for the security, or in the absence of a principal market, in the most advantageous market for the security. Under ASC Topic 820, if no market for the security exists or if the Company does not have access to the principal market, the security should be valued based on the sale occurring in a hypothetical market. The securities in which the Company invests are generally only purchased and sold in merger and acquisition transactions, in which case the entire portfolio company is sold to a third-party purchaser. As a result, unless the Company has the ability to control such a transaction, the assumed principal market for the Company’s securities is a hypothetical secondary market. The Level 3 inputs to the Company’s valuation process reflect the Company’s best estimate of the assumptions that would be used by market participants in pricing the investment in a transaction in a hypothetical secondary market.
Enterprise Value Waterfall Approach
In valuing equity securities (including warrants), the Company estimates fair value using an “Enterprise Value Waterfall” valuation model. The Company estimates the enterprise value of a portfolio company and then allocates the enterprise value to the portfolio company’s securities in order of their relative liquidation preference. In addition, the Company assumes that any outstanding debt or other securities that are senior to the Company’s equity securities are required to be repaid at par. Additionally, the Company estimates the fair value of a limited number of its debt securities using the Enterprise Value Waterfall approach in cases where the Company does not expect to receive full repayment.

21


To estimate the enterprise value of the portfolio company, the Company primarily uses a valuation model based on a transaction multiple, which generally is the original transaction multiple, and measures of the portfolio company’s financial performance. In addition, the Company considers other factors, including but not limited to (i) offers from third-parties to purchase the portfolio company, (ii) the implied value of recent investments in the equity securities of the portfolio company, (iii) publicly available information regarding recent sales of private companies in comparable transactions and (iv) when the Company believes there are comparable companies that are publicly traded, the Company performs a review of these publicly traded companies and the market multiple of their equity securities.
The significant Level 3 inputs to the Enterprise Value Waterfall model are (i) an appropriate transaction multiple and (ii) a measure of the portfolio company’s financial performance, which generally is either earnings before interest, taxes, depreciation and amortization, as adjusted (“Adjusted EBITDA”) or revenues. Such inputs can be based on historical operating results, projections of future operating results or a combination thereof. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for certain non-recurring items. In determining the operating results input, the Company utilizes the most recent portfolio company financial statements and forecasts available as of the valuation date. The Company also consults with the portfolio company’s senior management to obtain updates on the portfolio company’s performance, including information such as industry trends, new product development, loss of customers and other operational issues. Fair value measurements using the Enterprise Value Waterfall model can be sensitive to significant changes in one or more of the inputs. A significant increase (decrease) in either the transaction multiple, Adjusted EBITDA or revenues for a particular equity security would result in a higher (lower) fair value for that security.
Income Approach
In valuing debt securities, the Company utilizes an “Income Approach” model that considers factors including, but not limited to, (i) the stated yield on the debt security, (ii) the portfolio company’s current Adjusted EBITDA as compared to the portfolio company’s historical or projected Adjusted EBITDA as of the date the investment was made and the portfolio company’s anticipated Adjusted EBITDA for the next twelve months of operations, (iii) the portfolio company’s current Leverage Ratio (defined as the portfolio company’s total indebtedness divided by Adjusted EBITDA) as compared to its Leverage Ratio as of the date the investment was made, (iv) publicly available information regarding current pricing and credit metrics for similar proposed and executed investment transactions of private companies and (v) when the Company believes a relevant comparison exists, current pricing and credit metrics for similar proposed and executed investment transactions of publicly traded debt. In addition, the Company uses a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. This risk rating system covers both qualitative and quantitative aspects of the business and the securities held.
The Company considers the factors above, particularly any significant changes in the portfolio company’s results of operations and leverage, and develops an expectation of the yield that a hypothetical market participant would require when purchasing the debt investment (the “Required Rate of Return”). The Required Rate of Return, along with the Leverage Ratio and Adjusted EBITDA, are the significant Level 3 inputs to the Income Approach model. For investments where the Leverage Ratio and Adjusted EBITDA have not fluctuated significantly from the date the investment was made or have not fluctuated significantly from the Company’s expectations as of the date the investment was made, and where there have been no significant fluctuations in the market pricing for such investments, the Company may conclude that the Required Rate of Return is equal to the stated rate on the investment and therefore, the debt security is appropriately priced. In instances where the Company determines that the Required Rate of Return is different from the stated rate on the investment, the Company discounts the contractual cash flows on the debt instrument using the Required Rate of Return in order to estimate the fair value of the debt security.
Fair value measurements using the Income Approach model can be sensitive to significant changes in one or more of the inputs. A significant increase (decrease) in the Required Rate of Return or Leverage Ratio inputs for a particular debt security may result in a lower (higher) fair value for that security. A significant increase (decrease) in the Adjusted EBITDA input for a particular debt security may result in a higher (lower) fair value for that security.
The fair value of the Company’s royalty rights are calculated based on specific provisions contained in the pertinent operating or royalty agreements. The determination of the fair value of such royalty rights is not a significant component of the Company’s valuation process.

22


The ranges and weighted average values of the significant Level 3 inputs used in the valuation of the Company’s debt and equity securities as of September 30, 2013 are summarized as follows:
 
Fair Value
 
Valuation
Model
 
Level 3
Inputs
 
Range of
Inputs
 
Weighted
Average
Subordinated debt and 2nd lien notes
$
482,178,821

 
Income
Approach
 
Required Rate of Return
 
9.8% – 30.0%
 
14.8%
 
 
 
 
Leverage Ratio
 
0.8x – 8.5x
 
3.7x
 
 
 
 
Adjusted EBITDA
 
$0.8 million – $57.7 million
 
$14.4 million
Subordinated debt and 2nd lien notes
6,807,000

 
Enterprise
Value Waterfall
Approach
 
Adjusted EBITDA Multiple
 
4.5x – 5.5x
 
4.9x
 
 
 
 
Adjusted EBITDA
 
$0.5 million – $5.0 million
 
$1.3 million
Senior debt and 1st lien notes
34,142,197

 
Income
Approach
 
Required Rate of Return
 
4.8% – 19.0%
 
14.4%
 
 
 
 
Leverage Ratio
 
0.0x – 8.5x
 
2.9x
 
 
 
 
Adjusted EBITDA
 
$0.8 million – $5.0 million
 
$2.5 million
Equity shares and warrants
107,273,175

 
Enterprise
Value Waterfall
Approach
 
Adjusted EBITDA Multiple
 
4.0x – 10.0x
 
6.6x
 
 
 
 
Adjusted EBITDA
 
$0.5 million – $61.2 million
 
$17.3 million
 
 
 
 
 
Revenue Multiple
 
1.5x – 4.5x
 
3.7x
 
 
 
 
 
Revenues
 
$8.2 million – $57.0 million
 
$46.5 million

The following table presents the Company’s investment portfolio at fair value as of September 30, 2013 and December 31, 2012, categorized by the ASC Topic 820 valuation hierarchy, as previously described:
 
Fair Value as of September 30, 2013
 
Level 1
 
Level 2
 
Level 3
 
Total
Subordinated debt and 2nd lien notes
$

 
$

 
$
488,985,821

 
$
488,985,821

Senior debt and 1st lien notes

 

 
34,142,197

 
34,142,197

Equity shares

 

 
76,959,572

 
76,959,572

Equity warrants

 

 
30,313,603

 
30,313,603

Royalty rights

 

 
75,000

 
75,000

 
$

 
$

 
$
630,476,193

 
$
630,476,193

 
 
 
 
 
 
 
 
 
Fair Value as of December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
Subordinated debt and 2nd lien notes
$

 
$

 
$
559,355,550

 
$
559,355,550

Senior debt and 1st lien notes

 

 
46,576,994

 
46,576,994

Equity shares

 

 
78,979,179

 
78,979,179

Equity warrants

 

 
21,759,000

 
21,759,000

Royalty rights

 

 
132,000

 
132,000

 
$

 
$

 
$
706,802,723

 
$
706,802,723



23


The following tables reconcile the beginning and ending balances of the Company’s investment portfolio measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2013 and 2012:
Nine Months Ended
September 30, 2013:
Subordinated
Debt and 2nd
Lien Notes
 
Senior Debt
and 1st Lien
Notes
 
Equity
Shares
 
Equity
Warrants
 
Royalty
Rights
 
Total
Fair value, beginning of period
$
559,355,550

 
$
46,576,994

 
$
78,979,179

 
$
21,759,000

 
$
132,000

 
$
706,802,723

New investments
94,654,025

 
8,500,000

 
7,105,344

 
2,146,000

 

 
112,405,369

Reclassifications
8,769,569

 
(8,769,569
)
 

 

 

 

Proceeds from sales of investments

 

 
(19,454,275
)
 
(1,427,011
)
 

 
(20,881,286
)
Loan origination fees received
(1,081,431
)
 
(140,000
)
 

 

 

 
(1,221,431
)
Principal repayments received
(176,684,897
)
 
(12,546,819
)
 

 

 

 
(189,231,716
)
PIK interest earned
12,187,919

 
789,341

 

 

 

 
12,977,260

PIK interest payments received
(11,010,028
)
 
(507,608
)
 

 

 

 
(11,517,636
)
Accretion of loan discounts
1,144,867

 

 

 

 

 
1,144,867

Accretion of deferred loan origination revenue
3,230,179

 
217,256

 

 

 

 
3,447,435

Realized gain
(4,581,707
)
 

 
10,003,836

 
914,551

 

 
6,336,680

Unrealized gain (loss)
3,001,775

 
22,602

 
325,488

 
6,921,063

 
(57,000
)
 
10,213,928

Fair value, end of period
$
488,985,821

 
$
34,142,197

 
$
76,959,572

 
$
30,313,603

 
$
75,000

 
$
630,476,193


Nine Months Ended
September 30, 2012:
Subordinated
Debt and 2nd
Lien Notes
 
Senior Debt
and 1st Lien
Notes
 
Equity
Shares
 
Equity
Warrants
 
Royalty
Rights
 
Total
Fair value, beginning of period
$
387,169,056

 
$
59,974,195

 
$
43,972,024

 
$
15,043,300

 
$
920,000

 
$
507,078,575

New investments
196,117,782

 
9,161,883

 
21,678,540

 
1,552,317

 

 
228,510,522

Proceeds from sales of investments

 

 
(7,554,964
)
 
(818,732
)
 
(874,400
)
 
(9,248,096
)
Loan origination fees received
(3,365,896
)
 
(200,000
)
 

 

 

 
(3,565,896
)
Principal repayments received
(97,223,732
)
 
(7,426,252
)
 

 

 

 
(104,649,984
)
PIK interest earned
9,840,162

 
1,145,521

 

 

 

 
10,985,683

PIK interest payments received
(4,838,397
)
 
(645,984
)
 

 

 

 
(5,484,381
)
Accretion of loan discounts
1,239,138

 
243,569

 

 

 

 
1,482,707

Accretion of deferred loan origination revenue
2,195,586

 
201,689

 

 

 

 
2,397,275

Realized gains
230,034

 

 
4,208,506

 
785,132

 

 
5,223,672

Unrealized gain (loss)
(12,031,319
)
 
477,213

 
5,994,599

 
4,075,983

 
63,400

 
(1,420,124
)
Fair value, end of period
$
479,332,414

 
$
62,931,834

 
$
68,298,705

 
$
20,638,000

 
$
109,000

 
$
631,309,953


All realized and unrealized gains and losses are included in earnings (changes in net assets) and are reported on separate line items within the Company’s Statements of Operations. Pre-tax net unrealized gains on investments of $5.1 million and $6.2 million, respectively, during the three and nine months ended September 30, 2013 were related to portfolio company investments that were still held by the Company as of September 30, 2013. Pre-tax net unrealized gains (losses) on investments of $0.3 million and ($1.0) million, respectively, during the three and nine months ended September 30, 2012 were related to portfolio company investments that were still held by the Company as of September 30, 2012.
Warrants
When originating a debt security, the Company will sometimes receive warrants or other equity-related securities from the borrower. The Company determines the cost basis of the warrants or other equity-related securities received based upon

24


their respective fair values on the date of receipt in proportion to the total fair value of the debt and warrants or other equity-related securities received. Any resulting difference between the face amount of the debt and its recorded fair value resulting from the assignment of value to the warrant or other equity instruments is treated as original issue discount and accreted into interest income over the life of the loan.
Realized Gain or Loss and Unrealized Appreciation or Depreciation of Portfolio Investments
Realized gains or losses are recorded upon the sale or liquidation of investments and are calculated as the difference between the net proceeds from the sale or liquidation, if any, and the cost basis of the investment using the specific identification method. Unrealized appreciation or depreciation reflects the difference between the fair value of the investments and the cost basis of the investments.
Investment Classification
In accordance with the provisions of the 1940 Act, the Company classifies investments by level of control. As defined in the 1940 Act, “Control Investments” are investments in those companies that the Company is deemed to “Control.” “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, other than Control Investments. “Non-Control / Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments. Generally, under the 1940 Act, the Company is deemed to control a company in which it has invested if the Company owns more than 25.0% of the voting securities of such company, has greater than 50.0% representation on its board or has the power to exercise control over management or policies of such portfolio company. The Company is deemed to be an affiliate of a company in which the Company has invested if it owns between 5.0% and 25.0% of the voting securities of such company.
Investment Income
Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes, until all principal and interest has been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Company writes off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. Dividend income is recorded on the ex-dividend date.
Fee Income
Origination, facility, commitment, consent and other advance fees received in connection with the loan agreements ("Loan Origination Fees") are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of its business, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, certain investment banking and structuring fees and loan waiver and amendment fees, and are recorded as investment income when earned.
Payment-in-Kind Interest
The Company currently holds, and expects to hold in the future, some loans in its portfolio that contain a payment-in-kind (“PIK”) interest provision. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan, rather than being paid to the Company in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.
PIK interest, which is a non-cash source of income, is included in the Company’s taxable income and therefore affects the amount the Company is required to distribute to its stockholders to maintain its qualification as a regulated investment company ("RIC") for federal income tax purposes, even though the Company has not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Company writes off any accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.

25


Concentration of Credit Risk
The Company’s investments are generally in lower middle market companies in a variety of industries. As of both September 30, 2013 and December 31, 2012, there were no individual investments greater than 10% of the fair value of the Company’s portfolio. As of September 30, 2013 and December 31, 2012, the Company’s largest single portfolio company investment represented approximately 4.8% and 3.9%, respectively, of the fair value of the Company’s portfolio. Income, consisting of interest, dividends, fees, other investment income, and realization of gains or losses on equity interests, can fluctuate dramatically upon repayment of an investment or sale of an equity interest and in any given year can be highly concentrated among several investees.
The Company’s investments carry a number of risks including, but not limited to: (i) investing in lower middle market companies which may have limited financial resources and may have limited operating histories, (ii) investing in senior subordinated debt which ranks equal to or lower than debt held by other investors and (iii) holding investments that are not publicly traded and are subject to legal and other restrictions on resale and other risks common to investing in below investment grade debt and equity instruments.

Investments Denominated in Foreign Currency
As of September 30, 2013, the Company held an investment in one portfolio company that was denominated in Canadian dollars.
At each balance sheet date, portfolio company investments denominated in foreign currencies are translated into United States dollars using the spot exchange rate on the last business day of the period. Purchases and sales of foreign portfolio company investments, and any income from such investments, are translated into United States dollars using the rates of exchange prevailing on the respective dates of such transactions.
Although the fair values of foreign portfolio company investments and the fluctuation in such fair values are translated into United States dollars using the applicable foreign exchange rates described above, the Company does not isolate that portion of the change in fair values resulting from foreign currency exchange rates fluctuations from the change in fair values of the underlying investment. All fluctuations in fair value are included in net unrealized appreciation (depreciation) of investments in our unaudited consolidated statements of operations.
Investments denominated in foreign currencies and foreign currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the United States dollar.

3. INCOME TAXES
The Company elected for federal income tax purposes to be treated as a RIC under the Internal Revenue Code of 1986, as amended (the "Code") commencing with its taxable year ended December 31, 2007. In order to maintain its qualification as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute (actually or constructively) and certain built-in gains. The Company has historically met its minimum distribution requirements and continually monitors its distribution requirements with the goal of ensuring compliance with the Code.
The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% excise tax on such excess. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. The Company may be required to recognize ICTI in certain circumstances in which it does not receive cash. For example, if the Company holds debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), the Company must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by the Company in the same taxable year. The Company may also have to include in ICTI other amounts that it has not yet received in cash, such as (i) PIK interest income and (ii) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue

26


discount or other amounts accrued will be included in the Company’s ICTI for the year of accrual, the Company may be required to make a distribution to its stockholders in order to satisfy the minimum distribution requirements, even though the Company will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
The Company has certain wholly-owned taxable subsidiaries (the “Taxable Subsidiaries”), each of which holds one or more of its portfolio investments that are listed on the Consolidated Schedule of Investments. The Taxable Subsidiaries are consolidated for financial reporting purposes, such that the Company’s consolidated financial statements reflect the Company’s investments in the portfolio companies owned by the Taxable Subsidiaries. The purpose of the Taxable Subsidiaries is to permit the Company to hold certain portfolio companies that are organized as limited liability companies (“LLCs”) (or other forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of the RIC’s gross revenue for income tax purposes must consist of investment income. Absent the Taxable Subsidiaries, a proportionate amount of any gross income of an LLC (or other pass-through entity) portfolio investment would flow through directly to the RIC. To the extent that such income did not consist of investment income, it could jeopardize the Company’s ability to qualify as a RIC and therefore cause the Company to incur significant amounts of federal income taxes. When LLCs (or other pass-through entities) are owned by the Taxable Subsidiaries, their income is taxed to the Taxable Subsidiaries and does not flow through to the RIC, thereby helping the Company preserve its RIC status and resultant tax advantages. The Taxable Subsidiaries are not consolidated for income tax purposes and may generate income tax expense as a result of their ownership of the portfolio companies. This income tax expense is reflected in the Company’s Consolidated Statements of Operations.
For federal income tax purposes, the cost of investments owned as of September 30, 2013 and December 31, 2012 was approximately $616.5 million and $704.0 million, respectively.

4. BORROWINGS
The Company had the following borrowings outstanding as of September 30, 2013 and December 31, 2012: 
Issuance/Pooling Date
Maturity Date
 
Interest Rate as of September 30, 2013
 
September 30, 2013
 
December 31, 2012
SBA-Guaranteed Debentures:
 
 
 
 
 
 
 
September 24, 2008
September 1, 2018
 
N/A
 
$

 
$
20,500,000

March 25, 2009
March 1, 2019
 
5.337%
 
22,000,000

 
22,000,000

March 24, 2010
March 1, 2020
 
4.825%
 
6,800,000

 
6,800,000

September 22, 2010
September 1, 2020
 
3.687%
 
32,590,000

 
32,590,000

March 29, 2011
March 1, 2021
 
4.474%
 
75,400,000

 
75,400,000

September 21, 2011
September 1, 2021
 
3.392%
 
19,100,000

 
19,100,000

March 27, 2013
March 1, 2023
 
3.155%
 
30,000,000

 
30,000,000

SBA-Guaranteed LMI Debenture:
 
 
 
 
 
 
 
September 14, 2010
March 1, 2016
 
2.508%
 
7,348,889

 
7,214,579

Credit Facility:
 
 
 
 
 
 
 
June 26, 2013
September 17, 2017
 
4.025%
 
11,636,928

 

Notes:
 
 
 
 
 
 
 
March 2, 2012
March 15, 2019
 
7.000%
 
69,000,000

 
69,000,000

October 19, 2012
December 15, 2022
 
6.375%
 
80,500,000

 
80,500,000

 
 
 
 
 
$
354,375,817

 
$
363,104,579

SBA and SBA LMI Debentures
Interest payments on SBA-guaranteed debentures are payable semi-annually and there are no principal payments required on these debentures prior to maturity, nor do the debentures carry any prepayment penalties. The Company’s SBA-guaranteed Low or Moderate Income (“LMI”) debenture is a five-year deferred interest debenture that was issued at a discount to par. The accretion of discount on the SBA-guaranteed LMI debenture is classified as interest expense in the Company’s consolidated financial statements.
In addition to a one-time 1.0% fee on the total commitment from the SBA, the Company also pays a one-time 2.425% fee on the amount of each SBA-guaranteed debenture issued and a one-time 2.0% fee on the amount of each SBA-guaranteed LMI debenture issued. These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements

27


using the effective interest method. Upon prepayment of an SBA-guaranteed debenture, any unamortized deferred financing costs related to the SBA-guaranteed debenture are written off and recognized as a loss on extinguishment of debt in the Consolidated Statements of Operations. In the nine months ended September 30, 2013 and 2012, the Company prepaid approximately $20.5 million and $40.8 million, respectively, of SBA-guaranteed debentures and recognized losses on extinguishment of debt of approximately $0.4 million and $0.8 million, respectively.
Under the Small Business Investment Act and current SBA policy applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding at any time, SBA-guaranteed debentures and SBA-guaranteed LMI debentures (collectively, SBA-guaranteed debentures) up to two times (and in certain cases, up to three times) the amount of its regulatory capital. As of September 30, 2013, the maximum statutory limit on the dollar amount of outstanding SBA-guaranteed debentures that can be issued by a single SBIC was $150.0 million and by a group of SBICs under common control was $225.0 million. As of September 30, 2013, Triangle SBIC had issued $118.7 million of SBA-guaranteed debentures and had the current capacity to issue up to the statutory maximum of $150.0 million, subject to SBA approval. As of September 30, 2013, Triangle SBIC II had issued $75.0 million in face amount of SBA-guaranteed debentures. The weighted average interest rate for all SBA-guaranteed debentures as of September 30, 2013 and December 31, 2012 was 4.07% and 4.05%, respectively. As of September 30, 2013, all SBA debentures were pooled. The weighted average interest rate as of December 31, 2012 included $183.6 million of pooled SBA-guaranteed debentures with a weighted average fixed rate of 4.48% and $30.0 million of unpooled SBA-guaranteed debentures with a weighted average interim interest rate of 1.42%.
The fair values of the SBA-guaranteed debentures are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of September 30, 2013 and December 31, 2012, the carrying amounts of the SBA-guaranteed debentures were approximately $193.2 million and $213.6 million, respectively. As of September 30, 2013 and December 31, 2012, the fair values of the SBA-guaranteed debentures were $205.0 million and $228.4 million, respectively.
Credit Facility
In June 2013, the Company entered into a second amended and restated senior secured credit facility (the “Credit Facility”) to provide liquidity in support of its investment and operational activities. The Credit Facility, which has an initial commitment of $165.0 million supported by nine financial institutions, replaced the Company's $165.0 million senior secured credit facility entered into in September 2012 (the “Prior Facility”). The Credit Facility, which matures on September 17, 2017, allows the Company to borrow foreign currencies (initially Canadian dollars) directly under the Credit Facility.    
The Credit Facility has an accordion feature that allows for an increase in the total commitment size up to $215.0 million, subject to certain conditions, and also contains a one-year extension option to September 17, 2018. The Credit Facility, which is structured to operate like a revolving credit facility, is secured primarily by the Company's assets, excluding the assets of Triangle SBIC and Triangle SBIC II.
Borrowings under the Credit Facility bear interest, subject to the Company's election, on a per annum basis equal to (i) the applicable base rate plus 1.75%, (ii) the applicable LIBOR rate plus 2.75%, or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75%. The applicable base rate is equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR rate plus 2.0%. The Company pays a commitment fee of 0.375% per annum on undrawn amounts, which is included with interest and other financing fees on the Company's Consolidated Statements of Operations. Borrowings under the Credit Facility are also limited to a borrowing base, which includes certain cash and a portion of eligible debt investments. 
As of September 30, 2013, the Company had non-United States dollar borrowings denominated in Canadian dollars of $12.0 million ($11.6 million United States dollars) outstanding under the Credit Facility with an interest rate of 4.03%. The borrowings denominated in Canadian dollars are translated into United States dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign exchange rates on the credit facility borrowings is included in unrealized appreciation (depreciation) on foreign currency borrowings in the Company's Consolidated Statements of Operations. The borrowings denominated in Canadian dollars may be positively or negatively affected by movements in the rate of exchange between the United States dollar and the Canadian dollar. This movement is beyond the control of the Company and cannot be predicted. As of December 31, 2012, the Company had no borrowings outstanding under the Prior Facility.
The fair value of the borrowings outstanding under the Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of September 30, 2013, the fair value of the borrowings outstanding under the Credit Facility was $11.6 million.

28


As with the Prior Facility, the Credit Facility contains certain affirmative and negative covenants, including but not limited to (i) maintaining a minimum interest coverage ratio, (ii) maintaining minimum consolidated tangible net worth and (iii) maintaining its status as a regulated investment company and as a business development company. As of September 30, 2013, the Company was in compliance with all covenants of the Credit Facility.
Notes
In March 2012, the Company issued $69.0 million of unsecured notes due 2019 (the “2019 Notes”). The 2019 Notes mature on March 15, 2019, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after March 15, 2015. The 2019 Notes bear interest at a rate of 7.00% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning June 15, 2012. The net proceeds to the Company from the sale of the 2019 Notes, after underwriting discounts and offering expenses, were approximately $66.7 million. As of both September 30, 2013 and December 31, 2012, the carrying amount of the 2019 Notes was approximately $69.0 million. As of September 30, 2013 and December 31, 2012, the fair values of the 2019 Notes were $70.5 million and $72.6 million, respectively.
In October 2012, the Company issued $70.0 million of unsecured notes due 2022 (the "2022 Notes") and in November 2012, issued $10.5 million of 2022 Notes pursuant to the exercise of an over-allotment option. The 2022 Notes mature on December 15, 2022, and may be redeemed in whole or in part at any time or from time to time at the Company's option on or after December 15, 2015.  The 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning December 15, 2012. The net proceeds to the Company from the sale of the 2022 Notes, after underwriting discounts and offering expenses, were approximately $77.8 million. As of both September 30, 2013 and December 31, 2012, the carrying amount of the 2022 Notes was approximately $80.5 million. As of September 30, 2013 and December 31, 2012, the fair values of the 2022 Notes were $78.2 million and $78.1 million, respectively. The fair values of the 2019 Notes and the 2022 Notes are based on the closing prices of each respective security on the New York Stock Exchange, which are Level 1 inputs under ASC 820.
The indenture and supplements thereto relating to the 2019 Notes and the 2022 Notes contain certain covenants, including but not limited to (i) a requirement that the Company comply with the asset coverage requirements of the 1940 Act or any successor provisions, and (ii) a requirement to provide financial information to the holders of the notes and the trustee under the indenture if the Company should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934.

5. EQUITY-BASED AND OTHER COMPENSATION PLANS
The Company’s Board of Directors and stockholders have approved the Triangle Capital Corporation Amended and Restated 2007 Equity Incentive Plan (the “Plan”), under which there are 2,400,000 shares of the Company’s Common Stock authorized for issuance. Under the Plan, the Board (or compensation committee, if delegated administrative authority by the Board) may award stock options, restricted stock or other stock-based incentive awards to executive officers, employees and directors. Equity-based awards granted under the Plan to independent directors generally will vest over a one-year period and equity-based awards granted under the Plan to executive officers and employees generally will vest ratably over a four-year period.
The Company accounts for its equity-based compensation plan using the fair value method, as prescribed by ASC Topic 718, Stock Compensation. Accordingly, for restricted stock awards, the Company measures the grant date fair value based upon the market price of the Company’s common stock on the date of the grant and amortizes this fair value to compensation expense ratably over the requisite service period or vesting term.
The following table presents information with respect to the Plan for the nine months ended September 30, 2013 and 2012:
 
Nine Months Ended
September 30, 2013
 
Nine Months Ended
September 30, 2012
 
Number of
Shares
 
Weighted Average
Grant Date Fair
Value per Share
 
Number of
Shares
 
Weighted Average
Grant Date Fair
Value per Share
Unvested shares, beginning of period
290,198

 
$18.52
 
359,555

 
$15.39
Shares granted during the period
309,430

 
$28.66
 
235,086

 
$19.00
Shares vested during the period
(7,455
)
 
$20.12
 
(140,464
)
 
$13.42
Unvested shares, end of period
592,173

 
$23.80
 
454,177

 
$17.87


29


In the three and nine months ended September 30, 2013, the Company recognized equity-based compensation expense of approximately $1.1 million and $2.8 million, respectively. In the three and nine months ended September 30, 2012, the Company recognized equity-based compensation expense of approximately $0.7 million and $2.1 million, respectively. This expense is included in general and administrative expenses in the Company’s Consolidated Statements of Operations.

As of September 30, 2013, there was approximately $11.3 million of total unrecognized compensation cost, related to the Company’s non-vested restricted shares. This cost is expected to be recognized over a weighted average period of approximately 2.3 years.
The Company’s Board of Directors has adopted a nonqualified deferred compensation plan covering the Company’s executive officers and key employees. Any compensation deferred and the Company’s contributions will earn a return based on the returns on certain investments designated by the Compensation Committee of the Company’s Board of Directors. Participants are 100% vested in amounts deferred under the deferred compensation plan and the earnings thereon. Contributions to the plan and earnings thereon vest ratably over a four-year period.
The Company maintains a 401(k) plan in which all full-time employees who are at least 21 years of age and have 90 days of service are eligible to participate and receive employer contributions. Eligible employees may contribute a portion of their compensation on a pretax basis into the 401(k) plan up to the maximum amount allowed under the Code, and direct the investment of their contributions.


30


6. FINANCIAL HIGHLIGHTS
The following is a schedule of financial highlights for the nine months ended September 30, 2013 and 2012:
 
Nine Months Ended September 30,
 
2013
 
2012
Per share data:
 
 
 
Net asset value at beginning of period
$
15.30

 
$
14.68

Net investment income(1)
1.75

 
1.59

Net realized gains(1)
0.23

 
0.20

Net unrealized appreciation (depreciation)(1)
0.32

 
(0.08
)
Total increase from investment operations(1)
2.30

 
1.71

Cash dividends/distributions declared
(1.62
)
 
(1.49
)
Shares issued pursuant to Dividend Reinvestment Plan
0.03

 
0.03

Common stock offerings

 
0.54

Stock-based compensation
(0.07
)
 
(0.09
)
Loss on extinguishment of debt(1)
(0.01
)
 
(0.03
)
Income tax benefit(1)
0.02

 

Other(2)
(0.01
)
 
(0.02
)
Net asset value at end of period
$
15.94

 
$
15.33

Market value at end of period(3)
$
29.37

 
$
25.66

Shares outstanding at end of period
27,678,286

 
27,320,385

Net assets at end of period
$
441,265,505

 
$
418,702,605

Average net assets
$
430,834,263

 
$
401,118,293

Ratio of total expenses to average net assets (annualized)
9.52
%
 
7.74
%
Ratio of net investment income to average net assets (annualized)
14.94
%
 
14.00
%
Portfolio turnover ratio
16.72
%
 
20.59
%
Total return(4)
21.58
%
 
42.00
%
Supplemental Data:
 
 
 
Efficiency ratio(5)
19.81
%
 
18.01
%
(1)
Weighted average basic per share data.
(2)
Represents the impact of the different share amounts used in calculating per share data as a result of calculating certain per share data based upon the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.
(3)
Represents the closing price of the Company’s common stock on the last day of the period.
(4)
Total return equals the change in the ending market value of the Company’s common stock during the period, plus dividends declared per share during the period, divided by the market value of the Company’s common stock on the first day of the period. Total return is not annualized.
(5)
Efficiency ratio equals general and administrative expenses divided by total investment income.

7. SUBSEQUENT EVENTS
On October 7, 2013, the Company invested $2.3 million in first lien senior debt of SRC, Inc. (“SRC”), bringing the Company’s total debt investments in SRC at cost to approximately $8.3 million (including the Company’s $6.0 million in SRC subordinated notes held as of September 30, 2013). On October 28, 2013, SRC filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. As a result of the filing, the Company placed its $6.0 million in SRC subordinated notes, which were on PIK non-accrual status for the quarter ended September 30, 2013, on non-accrual status effective October 1, 2013. Additionally, as part of the bankruptcy process and subsequent reorganization, the Company has committed to fund a debtor-in-possession credit facility to SRC totaling approximately $2.0 million.


31


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion is designed to provide a better understanding of our financial statements, including a brief discussion of our business, key factors that impacted our performance and a summary of our operating results. The following discussion should be read in conjunction with the Unaudited Financial Statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2012. Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods.
Forward-Looking Statements
Some of the statements in this Quarterly Report constitute forward-looking statements because they relate to future events or our future performance or financial condition. Forward-looking statements may include, among other things, statements as to our future operating results, our business prospects and the prospects of our portfolio companies, the impact of the investments that we expect to make, the ability of our portfolio companies to achieve their objectives, our expected financings and investments, the adequacy of our cash resources and working capital, and the timing of cash flows, if any, from the operations of our portfolio companies. Words such as “expect,” “anticipate,” “target,” “goals,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “forecast,” “may,” “should,” “potential,” variations of such words, and similar expressions indicate a forward-looking statement, although not all forward-looking statements include these words. Readers are cautioned that the forward-looking statements contained in this Quarterly Report are only predictions, are not guarantees of future performance, and are subject to risks, events, uncertainties and assumptions that are difficult to predict. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors discussed herein and in Item 1A entitled “Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2012. Other factors that could cause actual results to differ materially include, but are not limited to, changes in the economy, risks associated with possible disruption due to terrorism in our operations or the economy generally, and future changes in laws or regulations and conditions in our operating areas. These statements are based on our current expectations, estimates, forecasts, information and projections about the industry in which we operate and the beliefs and assumptions of our management as of the date of this Quarterly Report. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless we are required to do so by law. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
Overview of Our Business
We are a Maryland corporation which has elected to be treated and operates as an internally managed business development company, or BDC, under the Investment Company Act of 1940, or 1940 Act. Our wholly-owned subsidiaries, Triangle Mezzanine Fund LLLP, or Triangle SBIC, and Triangle Mezzanine Fund II LP, or Triangle SBIC II, are licensed as small business investment companies, or SBICs, by the United States Small Business Administration, or SBA. In addition, Triangle SBIC has also elected to be treated as a BDC under the 1940 Act. We, Triangle SBIC and Triangle SBIC II invest primarily in debt instruments, equity investments, warrants and other securities of lower middle market privately-held companies located in the United States.
Our business is to provide capital to lower middle market companies in the United States. We focus on investments in companies with a history of generating revenues and positive cash flows, an established market position and a proven management team with a strong operating discipline. Our target portfolio company has annual revenues between $20.0 million and $200.0 million and annual earnings before interest, taxes, depreciation and amortization, or EBITDA, between $3.0 million and $35.0 million.
We invest primarily in subordinated debt securities secured by second lien security interests in portfolio company assets, coupled with equity interests. On a more limited basis, we also invest in senior debt securities secured by first lien security interests in portfolio companies. Our investments generally range from $5.0 million to $35.0 million per portfolio company. In certain situations, we have partnered with other funds to provide larger financing commitments.
We generate revenues in the form of interest income, primarily from our investments in debt securities, loan origination and other fees and dividend income. Fees generated in connection with our debt investments are recognized over the life of the loan using the effective interest method or, in some cases, recognized as earned. In addition, we generate revenue in the form of capital gains, if any, on warrants or other equity-related securities that we acquire from our portfolio companies. Our debt

32


investments generally have a term of between three and seven years and typically bear interest at fixed rates between 12.0% and 17.0% per annum. Certain of our debt investments have a form of interest, referred to as payment-in-kind, or PIK, interest, that is not paid currently but is instead accrued and added to the loan balance and paid at the end of the term. In our negotiations with potential portfolio companies, we generally seek to minimize PIK interest. Cash interest on our debt investments is generally payable monthly; however, some of our debt investments pay cash interest on a quarterly basis. As of September 30, 2013 and December 31, 2012, the weighted average yield on our outstanding debt investments other than non-accrual debt investments was approximately 14.3% and 14.6%, respectively. The weighted average yield on all of our outstanding investments (including equity and equity-linked investments but excluding non-accrual debt investments) was approximately 12.8% and 13.3% as of September 30, 2013 and December 31, 2012, respectively. The weighted average yield on all of our outstanding investments (including equity and equity-linked investments and non-accrual debt investments) was approximately 12.4% and 12.9% as of September 30, 2013 and December 31, 2012 respectively.
Triangle SBIC and Triangle SBIC II are eligible to issue debentures to the SBA, which pools these with debentures of other SBICs and sells them in the capital markets at favorable interest rates, in part as a result of the guarantee of payment from the SBA. Triangle SBIC and Triangle SBIC II invest these funds in portfolio companies. We intend to continue to operate Triangle SBIC and Triangle SBIC II as SBICs, subject to SBA approval, and to utilize the proceeds from the issuance of SBA-guaranteed debentures, referred to herein as SBA leverage, to enhance returns to our stockholders.
Portfolio Investment Composition
The total value of our investment portfolio was $630.5 million as of September 30, 2013, as compared to $706.8 million as of December 31, 2012. As of September 30, 2013, we had investments in 78 portfolio companies with an aggregate cost of $613.7 million. As of December 31, 2012, we had investments in 82 portfolio companies with an aggregate cost of $700.2 million. As of both September 30, 2013 and December 31, 2012, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.
As of September 30, 2013 and December 31, 2012, our investment portfolio consisted of the following investments:
 
Cost
 
Percentage of
Total
Portfolio
 
Fair Value
 
Percentage of
Total
Portfolio
September 30, 2013:
 
 
 
 
 
 
 
Subordinated debt and 2nd lien notes
$
509,207,799

 
83
%
 
$
488,985,821

 
78
%
Senior debt and 1st lien notes
34,284,476

 
5

 
34,142,197

 
5

Equity shares
58,603,134

 
10

 
76,959,572

 
12

Equity warrants
11,594,637

 
2

 
30,313,603

 
5

Royalty rights

 

 
75,000

 

 
$
613,690,046

 
100
%
 
$
630,476,193

 
100
%
December 31, 2012:
 
 
 
 
 
 
 
Subordinated debt and 2nd lien notes
$
582,365,584

 
83
%
 
$
559,355,550

 
79
%
Senior debt and 1st lien notes
46,955,594

 
7

 
46,576,994

 
7

Equity shares
60,948,229

 
9

 
78,979,179

 
11

Equity warrants
9,961,097

 
1

 
21,759,000

 
3

Royalty rights

 

 
132,000

 

 
$
700,230,504

 
100
%
 
$
706,802,723

 
100
%

Investment Activity
During the nine months ended September 30, 2013, we made seven new investments totaling approximately $87.8 million, debt investments in ten existing portfolio companies totaling approximately $21.3 million and equity investments in five existing portfolio companies totaling approximately $3.3 million. We had seventeen portfolio company loans repaid at par of approximately $169.7 million resulting in realized gains of $1.2 million and received normal principal repayments and partial loan prepayments totaling approximately $17.9 million in the nine months ended September 30, 2013. We had three portfolio company loans settled at less than par with proceeds totaling approximately $1.7 million and recognized realized losses of $5.7 million. In addition, we received proceeds related to the sales of certain equity securities totaling $20.8 million and recognized net realized gains on such sales totaling approximately $10.8 million in the nine months ended September 30, 2013.


33


During the nine months ended September 30, 2012, we made nineteen new investments totaling approximately $225.3 million, debt investments in four existing portfolio companies totaling approximately $2.6 million and equity investments in three existing portfolio companies totaling approximately $0.6 million. We had eleven portfolio company loans repaid at par totaling approximately $96.9 million and received normal principal repayments and partial loan prepayments totaling approximately $7.7 million in the nine months ended September 30, 2012. In addition, we received proceeds related to the sale of certain equity securities totaling $9.2 million and realized gains totaling approximately $5.2 million in the nine months ended September 30, 2012.

Total portfolio investment activity for the nine months ended September 30, 2013 and 2012 was as follows:
Nine Months Ended
September 30, 2013:
Subordinated
Debt and 2nd
Lien Notes
 
Senior Debt
and 1st Lien
Notes
 
Equity
Shares
 
Equity
Warrants
 
Royalty
Rights
 
Total
Fair value, beginning of period
$
559,355,550

 
$
46,576,994

 
$
78,979,179

 
$
21,759,000

 
$
132,000

 
$
706,802,723

New investments
94,654,025

 
8,500,000

 
7,105,344

 
2,146,000

 

 
112,405,369

Reclassifications
8,769,569

 
(8,769,569
)
 

 

 

 

Proceeds from sales of investments

 

 
(19,454,275
)
 
(1,427,011
)
 

 
(20,881,286
)
Loan origination fees received
(1,081,431
)
 
(140,000
)
 

 

 

 
(1,221,431
)
Principal repayments received
(176,684,897
)
 
(12,546,819
)
 

 

 

 
(189,231,716
)
PIK interest earned
12,187,919

 
789,341

 

 

 

 
12,977,260

PIK interest payments received
(11,010,028
)
 
(507,608
)
 

 

 

 
(11,517,636
)
Accretion of loan discounts
1,144,867

 

 

 

 

 
1,144,867

Accretion of deferred loan origination revenue
3,230,179

 
217,256

 

 

 

 
3,447,435

Realized gain
(4,581,707
)
 

 
10,003,836

 
914,551

 

 
6,336,680

Unrealized gain (loss)
3,001,775

 
22,602

 
325,488

 
6,921,063

 
(57,000
)
 
10,213,928

Fair value, end of period
$
488,985,821

 
$
34,142,197

 
$
76,959,572

 
$
30,313,603

 
$
75,000

 
$
630,476,193

Weighted average yield on debt investments at end of period(1)
 
 
 
 
 
14.3
%
Weighted average yield on total investments at end of period(1)
 
 
 
 
 
12.8
%
Weighted average yield on total investments at end of period
 
 
 
 
 
12.4
%
(1)
Excludes non-accrual debt investments.
 

34


Nine Months Ended
September 30, 2012:
Subordinated
Debt and 2nd
Lien Notes
 
Senior Debt
and 1st Lien
Notes
 
Equity
Shares
 
Equity
Warrants
 
Royalty
Rights
 
Total
Fair value, beginning of period
$
387,169,056

 
$
59,974,195

 
$
43,972,024

 
$
15,043,300

 
$
920,000

 
$
507,078,575

New investments
196,117,782

 
9,161,883

 
21,678,540

 
1,552,317

 

 
228,510,522

Proceeds from sales of investments

 

 
(7,554,964
)
 
(818,732
)
 
(874,400
)
 
(9,248,096
)
Loan origination fees received
(3,365,896
)
 
(200,000
)
 

 

 

 
(3,565,896
)
Principal repayments received
(97,223,732
)
 
(7,426,252
)
 

 

 

 
(104,649,984
)
PIK interest earned
9,840,162

 
1,145,521

 

 

 

 
10,985,683

PIK interest payments received
(4,838,397
)
 
(645,984
)
 

 

 

 
(5,484,381
)
Accretion of loan discounts
1,239,138

 
243,569

 

 

 

 
1,482,707

Accretion of deferred loan origination revenue
2,195,586

 
201,689

 

 

 

 
2,397,275

Realized gains
230,034

 

 
4,208,506

 
785,132

 

 
5,223,672

Unrealized gain (loss)
(12,031,319
)
 
477,213

 
5,994,599

 
4,075,983

 
63,400

 
(1,420,124
)
Fair value, end of period
$
479,332,414

 
$
62,931,834

 
$
68,298,705

 
$
20,638,000

 
$
109,000

 
$
631,309,953

Weighted average yield on debt investments at end of period(1)
 
 
 
 
 
14.7
%
Weighted average yield on total investments at end of period(1)
 
 
 
 
 
13.4
%
Weighted average yield on total investments at end of period
 
 
 
 
 
13.1
%
(1)
Excludes non-accrual debt investments.

Non-Accrual Assets
Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. As of September 30, 2013, the fair value of our non-accrual assets was approximately $1.8 million, which comprised 0.3% of the total fair value of our portfolio, and the cost of our non-accrual assets was approximately $15.0 million, which comprised 2.4% of the total cost of our portfolio. As of December 31, 2012, the fair value of our non-accrual assets was approximately $2.4 million, which comprised 0.3% of the total fair value of our portfolio, and the cost of our non-accrual assets was approximately $14.9 million, which comprised 2.1% of the total cost of our portfolio.
Our non-accrual assets as of September 30, 2013 were as follows:
Gerli and Company
In November 2008, we placed our debt investment in Gerli and Company, or Gerli, on non-accrual status. As a result, under generally accepted accounting principles in the United States, or U.S. GAAP, we no longer recognize interest income on our debt investment in Gerli for financial reporting purposes. During the first quarter of 2011, we restructured our investment in Gerli. As a result of the restructuring, we received a new note from Gerli with a face amount of $3.0 million and a fair value of approximately $2.3 million and preferred stock with a liquidation preference of $0.4 million. In addition, we invested $375,000 in a Gerli senior subordinated note. Under the terms of the notes, interest on the notes is payable only if Gerli meets certain covenants, which they were not compliant with as of September 30, 2013. In the nine months ended September 30, 2013, we recognized unrealized depreciation on our debt investments in Gerli of approximately $0.1 million. As of September 30, 2013, the cost of our debt investments in Gerli was $3.4 million and the fair value of such investments was $0.8 million.
Venture Technology Groups, Inc.
In November 2012, we placed our debt investment in Venture Technology Groups, Inc., or VTG, on non-accrual status. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in VTG for financial reporting purposes. During the nine months ended September 30, 2013, we recorded unrealized depreciation of $0.8 million on our debt investment in VTG. As of September 30, 2013, the cost of our debt investment in VTG was $5.7 million and the fair value of such investment was $0.7 million.

35


Xchange Technology Groups, LLC
In March 2013, we placed our debt investment in Xchange Technology Groups, LLC, or XTG, on non-accrual status. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in XTG for financial reporting purposes. During the nine months ended September 30, 2013, we recorded unrealized depreciation of $1.3 million on our debt investment in XTG. As of September 30, 2013, the cost of our debt investment in XTG was $5.9 million and the fair value of such investment was $0.3 million. In October 2013, XTG filed for bankruptcy protection under Canada's Bankruptcy and Insolvency Act and under Chapter 15 of the United States Bankruptcy Code.
PIK Non-Accrual Assets
In addition to our non-accrual assets, as of September 30, 2013, we had debt investments in three portfolio companies (our subordinated notes to Minco Technology Labs, LLC, SRC, Inc. and FCL Holding SPV, LLC) that were on non-accrual only with respect to the PIK interest component of the loans. As of September 30, 2013, the fair value of these debt investments was approximately $5.0 million, or 0.8% of the total fair value of our portfolio and the cost of these assets was approximately $12.5 million, or 2.0% of the total cost of our portfolio.

Results of Operations
Comparison of three months ended September 30, 2013 and September 30, 2012
Investment Income
For the three months ended September 30, 2013, total investment income was $27.3 million, a 12% increase from $24.3 million of total investment income for the three months ended September 30, 2012. This increase was primarily attributable to a $3.0 million increase in total loan interest (including PIK interest), fee and dividend income. The increase in total loan interest, fee and dividend income was due to (i) an increase in non-recurring fee income of approximately $1.7 million, (ii) an increase in non-recurring dividend income of approximately $1.8 million and (iii) non-recurring PIK interest income of approximately $0.6 million in the three months ended September 30, 2013, partially offset by a decrease in loan interest of approximately $1.1 million due to a decrease in the weighted average yield on our outstanding investments during the three months ended September 30, 2013 as compared to the three months ended September 30, 2012. Non-recurring fee income was $3.2 million for the three months ended September 30, 2013 as compared to $1.5 million for the three months ended September 30, 2012, and non-recurring dividend income was $2.5 million for the three months ended September 30, 2013 as compared to $0.7 million for the three months ended September 30, 2012.
Operating Expenses
For the three months ended September 30, 2013, operating expenses increased by 25% to $10.5 million from $8.5 million for the three months ended September 30, 2012. Our operating expenses consist of interest and other debt financing fees and general and administrative expenses.
For the three months ended September 30, 2013, interest and other debt financing fees increased by 23% to $5.0 million from $4.0 million for the three months ended September 30, 2012. The increase in interest and other debt financing fees was related to (i) interest on our 2022 Notes, which were issued in the fourth quarter of 2012, of approximately $1.3 million for the quarter ended September 30, 2013 and (ii) an increase of $0.1 million in amortization of deferred financing fees related to costs associated with the 2022 Notes, partially offset by lower interest expense related to SBA-guaranteed debentures in the quarter ended September 30, 2013 versus the quarter ended September 30, 2012. The decrease in interest expense on SBA-guaranteed debentures was related to lower SBA loan balances and lower weighted average rates on outstanding SBA-guaranteed debentures for the quarter ended September 30, 2013 as compared to loan balances and weighted average rates on outstanding SBA-guaranteed debentures for the quarter ended September 30, 2012.
Our general and administrative expenses are primarily influenced by compensation, headcount and levels of business activity. Our compensation expenses include salaries, discretionary compensation, equity-based compensation and benefits. Discretionary compensation is significantly impacted by our level of total investment income, our investment results including investment realizations, prevailing labor markets and the external environment. As a result of these and other factors, our compensation expense can fluctuate materially from period to period. Accordingly, the amount of compensation expense recognized in any particular period may not be indicative of compensation expense in a future period.
For the three months ended September 30, 2013, general and administrative expenses increased by 26% to $5.5 million from $4.4 million for the three months ended September 30, 2012. In addition, our efficiency ratio (defined as general and administrative expenses as a percentage of total investment income) increased to 20.3% for the three months ended September 30, 2013 from 18.1% for the three months ended September 30, 2012. The increase in general and administrative expenses in the quarter ended September 30, 2013 was primarily related to increased discretionary compensation related to successful investment performance and investment realization, as well as increased equity-based compensation expenses.

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Net Investment Income
As a result of the $3.0 million increase in total investment income and the $2.1 million increase in expenses, net investment income increased by 6% to $16.8 million for the three months ended September 30, 2013 as compared to $15.9 million for the three months ended September 30, 2012.
Net Increase in Net Assets Resulting from Operations
In the three months ended September 30, 2013, we realized gains on the sales/repayments of three non-control/non-affiliate investments totaling approximately $1.0 million. In addition, during the three months ended September 30, 2013, we recorded net unrealized appreciation of investments totaling $4.9 million, consisting of unrealized appreciation on our current portfolio of approximately $4.7 million and unrealized appreciation reclassification adjustments of $0.2 million related to the realized gains and losses noted above.
In the three months ended September 30, 2012, we realized a gain on the sale of one affiliate investment of approximately $0.8 million and gains on the sales of two non-control/non-affiliate investments totaling approximately $0.8 million. In addition, during the three months ended September 30, 2012, we recorded net unrealized depreciation of investments totaling approximately $0.6 million, consisting of unrealized appreciation on our current portfolio of approximately $0.1 million and unrealized depreciation reclassification adjustments of $0.7 million related to the realized gains and losses noted above.
In the three months ended September 30, 2012, we recognized a non-cash loss on the extinguishment of debt of approximately $0.6 million related to a prepayment of SBA-guaranteed debentures.
As a result of these events, our net increase in net assets resulting from operations was $23.2 million for the three months ended September 30, 2013, an increase of 43% from the net increase in net assets resulting from operations of $16.2 million for the three months ended September 30, 2012.
Comparison of nine months ended September 30, 2013 and September 30, 2012
Investment Income
For the nine months ended September 30, 2013, total investment income was $79.0 million, a 21% increase from $65.4 million of total investment income for the nine months ended September 30, 2012. This increase was primarily attributable to a $13.8 million increase in total loan interest (including PIK interest), fee and dividend income. The increase in total loan interest, fee and dividend income was due to (i) a increase in our average portfolio investments outstanding from the nine months ended September 30, 2012 to the nine months ended September 30, 2013, (ii) an increase in non-recurring fee income of approximately $3.6 million, (iii) an increase in non-recurring dividend income of approximately $2.7 million and (iv) non-recurring PIK income of approximately $0.6 million in the nine months ended September 30, 2013. Non-recurring fee income was approximately $6.5 million for the nine months ended September 30, 2013 as compared to $2.9 million for the nine months ended September 30, 2012, and non-recurring dividend income was approximately $3.6 million for the nine months ended September 30, 2013 as compared to $0.9 million for the nine months ended September 30, 2012.
Operating Expenses
For the nine months ended September 30, 2013, operating expenses increased by 32% to $30.8 million from $23.3 million for the nine months ended September 30, 2012. Our operating expenses consist of interest and other debt financing fees and general and administrative expenses.
For the nine months ended September 30, 2013, interest and other debt financing fees increased by 31% to $15.1 million from $11.5 million for the nine months ended September 30, 2012. The increase in interest and other debt financing fees was related to (i) an increase in interest on our 2019 Notes, which were issued in the first quarter 2012, of approximately $0.8 million, (ii) interest on our 2022 Notes, which were issued in the fourth quarter of 2012, of approximately $3.8 million for the nine months ended September 30, 2013 and (iii) an increase of $0.7 million in amortization of deferred financing fees related to costs associated with the 2019 and 2022 Notes, partially offset by lower interest expense related to SBA-guaranteed debentures in the nine months ended September 30, 2013 versus the nine months ended September 30, 2012. The decrease in interest expense on SBA-guaranteed debentures related to lower SBA loan balances and lower weighted average rates on outstanding SBA-guaranteed debentures for the nine months ended September 30, 2013 as compared to loan balances and weighted average rates on outstanding SBA-guaranteed debentures for the nine months ended September 30, 2012.
Our general and administrative expenses are primarily influenced by compensation, headcount and levels of business activity. Our compensation expenses include salaries, discretionary compensation, equity-based compensation and benefits. Discretionary compensation is significantly impacted by our level of total investment income, our investment results including investment realizations, prevailing labor markets and the external environment. As a result of these and other factors, our compensation expense can fluctuate materially from period to period. Accordingly, the amount of compensation expense recognized in any particular period may not be indicative of compensation expense in a future period.

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For the nine months ended September 30, 2013, general and administrative expenses increased by 33% to $15.7 million from $11.8 million for the nine months ended September 30, 2012. In addition, our efficiency ratio (defined as general and administrative expenses as a percentage of total investment income) increased to 19.8% for the nine months ended September 30, 2013 from 18.0% for the nine months ended September 30, 2012. The increase in general and administrative expenses for the nine months ended September 30, 2013 was primarily related to increased discretionary compensation related to successful investment performance and investment realization, as well as increased equity-based compensation expenses.
Net Investment Income

As a result of the $13.6 million increase in total investment income and the $7.5 million increase in expenses, net investment income increased by 15% to $48.3 million for the nine months ended September 30, 2013 as compared to net investment income of $42.1 million for the nine months ended September 30, 2012.

Net Increase/Decrease in Net Assets Resulting from Operations

In the nine months ended September 30, 2013, we realized a gain on the sale of one control investment of approximately $0.7 million, a loss on the repayment of one control investment of approximately $3.0 million, gains on the sales of three affiliate investments of approximately $8.1 million, a loss on the repayment of one affiliate investment of approximately $3.4 million and gains on the sales/repayments of ten non-control/non-affiliate investments totaling approximately $4.0 million. In addition, during the nine months ended September 30, 2013, we recorded net unrealized appreciation of investments totaling $8.8 million, consisting of unrealized appreciation on our current portfolio of approximately $12.4 million and unrealized depreciation reclassification adjustments of $3.6 million related to the realized gains and losses noted above.

In the nine months ended September 30, 2012, we realized a gain on the sale of one control investment of approximately $0.8 million, a gain on the sale of one affiliate investment of approximately $0.8 million, gains on the sales of four non-control/non-affiliate investments totaling approximately $3.4 million and a gain on the repayment of one non-control/non-affiliate investment totaling approximately $0.2 million. In addition, during the nine months ended September 30, 2012, we recorded net unrealized depreciation of investments totaling $2.0 million, consisting of unrealized appreciation on our current portfolio of approximately $1.7 million and unrealized depreciation reclassification adjustments of $3.7 million related to the realized gains and losses noted above.
     
During the nine months ended September 30, 2013 and September 30, 2012, we recognized losses on extinguishment of debt of approximately $0.4 million and $0.8 million, respectively, related to prepayments of SBA-guaranteed debentures.

As a result of these events, our net increase in net assets resulting from operations was $63.4 million for the nine months ended September 30, 2013, an increase of 43% from the net increase in net assets resulting from operations of $44.5 million for the nine months ended September 30, 2012.
    
Liquidity and Capital Resources
We believe that our current cash and cash equivalents on hand, our available leverage under our credit facility and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months.
In the future, depending on the valuation of Triangle SBIC’s assets and Triangle SBIC II’s assets pursuant to SBA guidelines, Triangle SBIC and Triangle SBIC II may be limited by provisions of the Small Business Investment Act of 1958, and SBA regulations governing SBICs, from making certain distributions to Triangle Capital Corporation that may be necessary to enable Triangle Capital Corporation to make the minimum required distributions to its stockholders and qualify as a RIC.
Cash Flows
For the nine months ended September 30, 2013, we experienced a net increase in cash and cash equivalents in the amount of $87.7 million. During that period, our operating activities generated $139.6 million in cash, consisting primarily of repayments received from portfolio companies and proceeds from sales of portfolio investments of approximately $210.1 million, partially offset by purchases of portfolio investments of $112.4 million. In addition, financing activities reduced cash by $51.9 million, consisting primarily of cash dividends paid in the amount of $42.3 million and voluntary prepayments of SBA-guaranteed debentures of $20.5 million, partially offset by borrowings under our credit facility of $11.6 million. As of September 30, 2013, we had $160.0 million of cash and cash equivalents on hand.

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For the nine months ended September 30, 2012, we experienced a net decrease in cash and cash equivalents in the amount of $6.8 million. During that period, our operating activities used $80.2 million in cash, consisting primarily of new portfolio investments of $228.5 million, partially offset by repayments received from portfolio companies totaling $113.9 million. In addition, financing activities provided $73.5 million of cash, consisting primarily of proceeds from a public common stock offering of $77.1 million, net proceeds from a public offering of 2019 Notes of $66.7 million and credit facility borrowings of $26.0 million, partially offset by cash dividends paid in the amount of $38.1 million, voluntary prepayments of SBA-guaranteed debentures of $40.8 million and a repayment of borrowings under our credit facility of $15.0 million. As of September 30, 2012, we had $60.1 million of cash and cash equivalents on hand.
Financing Transactions
Due to Triangle SBIC’s and Triangle SBIC II’s status as licensed SBICs, Triangle SBIC and Triangle SBIC II have the ability to issue debentures guaranteed by the SBA at favorable interest rates. Under the Small Business Investment Act and the SBA rules applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding at any time debentures guaranteed by the SBA up to two times (and in certain cases, up to three times) the amount of its regulatory capital, which generally is the amount raised from private investors. The maximum statutory limit on the dollar amount of outstanding debentures guaranteed by the SBA issued by a single SBIC is currently $150.0 million and by a group of SBICs under common control is $225.0 million. Debentures guaranteed by the SBA have a maturity of ten years, with interest payable semi-annually. The principal amount of the debentures is not required to be paid before maturity but may be prepaid at any time, without penalty.
As of September 30, 2013, Triangle SBIC had issued $118.7 million of SBA-guaranteed debentures and had the current capacity to issue up to the statutory maximum of $150.0 million, subject to SBA approval. As of September 30, 2013, Triangle SBIC II had issued $75.0 million in face amount of SBA-guaranteed debentures. In addition to the one-time 1.0% fee on the total commitment from the SBA, the Company also pays a one-time 2.425% fee on the amount of each debenture issued (2.0% for SBA LMI debentures). These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements using the effective interest method. The weighted average interest rate for all SBA-guaranteed debentures as of September 30, 2013 was 4.07%. As of September 30, 2013, all SBA debentures were pooled.
In June 2013, we entered into a second amended and restated senior secured credit facility, or Credit Facility, to provide liquidity in support of our investment and operational activities. The Credit Facility, which has an initial commitment of $165.0 million supported by nine financial institutions, replaced our $165.0 million senior secured credit facility entered into in September 2012, or the Prior Facility. The Credit Facility, which matures on September 17, 2017, allows us to borrow foreign currencies (initially Canadian dollars) directly under the Credit Facility.    
The Credit Facility has an accordion feature that allows for an increase in the total commitment size up to $215.0 million, subject to certain conditions, and also contains a one-year extension option to September 17, 2018. The Credit Facility, which is structured to operate like a revolving credit facility, is secured primarily by our assets, excluding the assets of Triangle SBIC and Triangle SBIC II.
Borrowings under the Credit Facility bear interest, subject to our election, on a per annum basis equal to (i) the applicable base rate plus 1.75%, (ii) the applicable LIBOR rate plus 2.75%, or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75%. The applicable base rate is equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR rate plus 2.0%. We pay a commitment fee of 0.375% per annum on undrawn amounts, which is included with interest and other financing fees on our Consolidated Statements of Operations. Borrowings under the Credit Facility are also limited to a borrowing base, which includes certain cash and a portion of eligible debt investments. 
As of September 30, 2013, we had non-United States dollar borrowings denominated in Canadian dollars of $12.0 million ($11.6 million United States dollars) outstanding under the Credit Facility with an interest rate of 4.03%. The borrowings denominated in Canadian dollars are translated into United States dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign exchange rates on the credit facility borrowings is included in unrealized appreciation (depreciation) on foreign currency borrowings in our Consolidated Statements of Operations. The borrowings denominated in Canadian dollars may be positively or negatively affected by movements in the rate of exchange between the United States dollar and the Canadian dollar. This movement is beyond our control and cannot be predicted. As of December 31, 2012, we had no borrowings outstanding under the Prior Facility.
As with the Prior Facility, the Credit Facility contains certain affirmative and negative covenants, including but not limited to (i) maintaining a minimum interest coverage ratio, (ii) maintaining minimum consolidated tangible net worth and (iii)

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maintaining its status as a regulated investment company and as a business development company. As of September 30, 2013 we were in compliance with all covenants of the Credit Facility.
In March 2012, we issued $69.0 million of 2019 Notes. The 2019 Notes mature on March 15, 2019, and may be redeemed in whole or in part at any time or from time to time at our option on or after March 15, 2015. The 2019 Notes bear interest at a rate of 7.00% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning June 15, 2012. The net proceeds from the sale of the 2019 Notes, after underwriting discounts and offering expenses, were approximately $66.7 million.
In October 2012, we issued $70.0 million of 2022 Notes and in November 2012, we issued $10.5 million of 2022 Notes pursuant to the exercise of an over-allotment option. The 2022 Notes mature on December 15, 2022, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 15, 2015. The 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning December 15, 2012. The net proceeds from the sale of the 2022 Notes, after underwriting discounts and offering expenses, were approximately $77.8 million.
The indenture and supplements thereto relating to the 2019 Notes and the 2022 Notes contain certain covenants, including but not limited to (i) a requirement that we comply with the asset coverage requirements of the 1940 Act or any successor provisions, and (ii) a requirement that we provide financial information to the holders of the notes and the trustee under the indenture if we should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934.
Distributions to Stockholders
We elected to be treated as a RIC under the Code, commencing with our taxable year ended December 31, 2007. In order to maintain our qualification as a RIC and to obtain RIC tax benefits, we must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then we are generally required to pay income taxes only on the portion of our taxable income and gains we do not distribute (actually or constructively) and certain built-in gains. We have historically met our minimum distribution requirements and continually monitor our distribution requirements with the goal of ensuring compliance with the Code. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and our ability to make distributions will be limited by the asset coverage requirements under the 1940 Act.
The minimum distribution requirements applicable to RICs require us to distribute to our stockholders each year at least 90% of our investment company taxable income, or ICTI, as defined by the Code. Depending on the level of ICTI earned in a tax year, we may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% excise tax on such excess. Any such carryover ICTI must be distributed before the end of the next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. We may be required to recognize ICTI in certain circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), we must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in ICTI other amounts that we have not yet received in cash, such as (i) PIK interest income and (ii) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included in our ICTI for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
Current Market Conditions
We were able to secure access to additional liquidity in 2012, including public offerings of common stock and debt securities, new leverage through SBA-guaranteed debentures and entering into an expanded credit facility, and in 2013, were able to amend our credit facility to extend the term by one year. There can be no assurances, however, that the current market conditions will continue and that debt or equity capital will be available to us in the future on favorable terms, if it all. In 2008, the debt and equity capital markets in the United States were severely impacted by significant write-offs in the financial services sector relating to subprime mortgages and the re-pricing of credit risk in the broadly syndicated bank loan market,

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among other factors. These events, along with the deterioration of the housing market, led to an economic recession in the U.S. and abroad. Banks, investment companies and others in the financial services industry reported significant write-downs in the fair value of their assets, which led to the failure of a number of banks and investment companies, a number of distressed mergers and acquisitions and the government take-over of the nation's two largest government-sponsored mortgage companies. These events significantly impacted the financial and credit markets and reduced the availability of debt and equity capital for the market as a whole, and for financial firms in particular. Notwithstanding recent gains across both the equity and debt markets, recent U.S. budget deficit concerns and uncertainty regarding potential federal spending cuts and the federal debt ceiling, together with continued signs of deteriorating sovereign debt conditions in Europe, have increased the possibility that these unfavorable conditions in the debt and equity capital markets may reoccur in the future and could then continue for a prolonged period of time.

Recent Developments
On October 7, 2013, we invested $2.3 million in first lien senior debt of SRC, Inc. (“SRC”), bringing our total debt investments in SRC at cost to approximately $8.3 million (including our $6.0 million in SRC subordinated notes held as of September 30, 2013). On October 28, 2013, SRC filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. As a result of the filing, we placed our $6.0 million in SRC subordinated notes, which were on PIK non-accrual status for the quarter ended September 30, 2013, on non-accrual status effective October 1, 2013. Additionally, as part of the bankruptcy process and subsequent reorganization, we have committed to fund a debtor-in-possession credit facility to SRC totaling approximately $2.0 million.

Critical Accounting Policies and Use of Estimates
The preparation of our unaudited financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods covered by such financial statements. We have identified investment valuation and revenue recognition as our most critical accounting estimates. On an on-going basis, we evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.
Investment Valuation
The most significant estimate inherent in the preparation of our financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We have established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring (quarterly) basis in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820. Under ASC Topic 820, a financial instrument is categorized within the ASC Topic 820 valuation hierarchy based upon the lowest level of input to the valuation process that is significant to the fair value measurement. The three levels of valuation inputs established by ASC Topic 820 are as follows:
Level 1 Inputs – include quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Inputs – include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 Inputs – include inputs that are unobservable and significant to the fair value measurement.
Our investment portfolio is comprised of debt and equity instruments of privately held companies for which quoted prices or other inputs falling within the categories of Level 1 and Level 2 are not available. Therefore, we determine the fair value of our investments in good faith using Level 3 inputs, pursuant to a valuation policy and process that is established by our management with the assistance of certain third-party advisors and subsequently approved by our Board of Directors. There is no single standard for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment. The recorded fair values of our investments may differ significantly from fair values that would have been used had an active market for the securities existed. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.
Our valuation process is led by our executive officers and managing directors. The valuation process begins with a quarterly review of each investment in our investment portfolio by our executive officers and our investment committee. Valuations of each portfolio security are then prepared by our investment professionals, who have direct responsibility for the

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origination, management and monitoring of each investment. Under our valuation policy, each investment valuation is subject to (i) a review by the lead investment officer responsible for the portfolio company investment and (ii) a peer review by a second investment officer or executive officer. Generally, any investment that is valued below cost is subjected to review by one of our executive officers. After the peer review is complete, we engage two independent valuation firms, Duff & Phelps, LLC and Lincoln Partners Advisors LLC (collectively, the “Valuation Firms”), to provide third-party reviews of certain investments, as described further below. Finally, the Board of Directors has the responsibility for reviewing and approving, in good faith, the fair value of our investments in accordance with the 1940 Act.
The Valuation Firms provide third party valuation consulting services to us which consist of certain limited procedures that we identified and requested the Valuation Firms to perform (hereinafter referred to as the “Procedures”). The Procedures are performed with respect to each portfolio company at least once in every calendar year and for new portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In addition, the Procedures are generally performed with respect to a portfolio company when there has been a significant change in the fair value of the investment. In certain instances, we may determine that it is not cost-effective, and as a result is not in our stockholders’ best interest, to request the Valuation Firms to perform the Procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of the investment in the portfolio company is determined to be insignificant relative to the total investment portfolio.
The total number of investments and the percentage of our portfolio on which the Procedures were performed are summarized below by period:
For the quarter ended:
Total
companies
 
Percent of total
investments at
fair value(1)
March 31, 2012
10
 
19%
June 30, 2012
14
 
21%
September 30, 2012
16
 
33%
December 31, 2012
17
 
30%
March 31, 2013
17
 
23%
June 30, 2013
13
 
27%
September 30, 2013
14
 
28%
(1)
Exclusive of the fair value of new investments made during the quarter.
Upon completion of the Procedures, the Valuation Firms concluded that, with respect to each investment reviewed by each Valuation Firm, the fair value of those investments subjected to the Procedures appeared reasonable. Our Board of Directors is ultimately responsible for determining the fair value of our investments in good faith.
Investment Valuation Inputs
Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date. For our portfolio securities, fair value is generally the amount that we might reasonably expect to receive upon the current sale of the security. Under ASC Topic 820, the fair value measurement assumes that the sale occurs in the principal market for the security, or in the absence of a principal market, in the most advantageous market for the security. Under ASC Topic 820, if no market for the security exists or if we do not have access to the principal market, the security should be valued based on the sale occurring in a hypothetical market. The securities in which we invest are generally only purchased and sold in merger and acquisition transactions, in which case the entire portfolio company is sold to a third-party purchaser. As a result, unless we have the ability to control such a transaction, the assumed principal market for our securities is a hypothetical secondary market. The Level 3 inputs to our valuation process reflect management’s best estimate of the assumptions that would be used by market participants in pricing the investment in a transaction in a hypothetical secondary market.
Enterprise Value Waterfall Approach
In valuing equity securities (including warrants), we estimate fair value using an “Enterprise Value Waterfall” valuation model. We estimate the enterprise value of a portfolio company and then allocate the enterprise value to the portfolio company’s securities in order of their relative liquidation preference. In addition, the model assumes that any outstanding debt or other securities that are senior to our equity securities are required to be repaid at par. Additionally, we estimate the fair value of a limited number of its debt securities using the Enterprise Value Waterfall approach in cases where we do not expect to receive full repayment.

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To estimate the enterprise value of the portfolio company, we primarily use a valuation model based on a transaction multiple, which generally is the original transaction multiple, and measures of the portfolio company’s financial performance. In addition, we consider other factors, including but not limited to (i) offers from third-parties to purchase the portfolio company, (ii) the implied value of recent investments in the equity securities of the portfolio company, (iii) publicly available information regarding recent sales of private companies in comparable transactions and (iv) when management believes there are comparable companies that are publicly traded, we perform a review of these publicly traded companies and the market multiple of their equity securities.
The significant Level 3 inputs to the Enterprise Value Waterfall model are (i) an appropriate transaction multiple and (ii) a measure of the portfolio company’s financial performance, which generally is either earnings before interest, taxes, depreciation and amortization, as adjusted, or Adjusted EBITDA, or revenues. Such inputs can be based on historical operating results, projections of future operating results or a combination thereof. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for certain non-recurring items. In determining the operating results input, we utilize the most recent portfolio company financial statements and forecasts available as of the valuation date. Management also consults with the portfolio company’s senior management to obtain updates on the portfolio company’s performance, including information such as industry trends, new product development, loss of customers and other operational issues. Additionally, we consider some or all of the following factors:
financial standing of the issuer of the security;
comparison of the business and financial plan of the issuer with actual results;
the size of the security held;
pending reorganization activity affecting the issuer, such as merger or debt restructuring;
ability of the issuer to obtain needed financing;
changes in the economy affecting the issuer;
financial statements and reports from portfolio company senior management and ownership;
the type of security, the security’s cost at the date of purchase and any contractual restrictions on the disposition of the security;
information as to any transactions or offers with respect to the security and/or sales to third parties of similar securities;
the issuer’s ability to make payments and the type of collateral;
the current and forecasted earnings of the issuer;
statistical ratios compared to lending standards and to other similar securities; 
pending public offering of common stock by the issuer of the security;
special reports prepared by analysts; and
other pertinent factors.
Fair value measurements using the Enterprise Value Waterfall model can be sensitive to significant changes in one or more of the inputs. A significant increase in either the transaction multiple, Adjusted EBITDA or revenues for a particular equity security would result in a higher fair value for that security.
Income Approach
In valuing debt securities, we utilize an “Income Approach” model that considers factors including, but not limited to, (i) the stated yield on the debt security, (ii) the portfolio company’s current trailing twelve months, or TTM Adjusted EBITDA as compared to the portfolio company’s historical or projected Adjusted EBITDA as of the date the investment was made and the portfolio company’s anticipated Adjusted EBITDA for the next twelve months of operations, (iii) the portfolio company’s current Leverage Ratio (defined as the portfolio company’s total indebtedness divided by Adjusted EBITDA) as compared to its Leverage Ratio as of the date the investment was made, (iv) publicly available information regarding current pricing and credit metrics for similar proposed and executed investment transactions of private companies and (v) when management believes a relevant comparison exists, current pricing and credit metrics for similar proposed and executed investment transactions of publicly traded debt. In addition, we use a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. This risk rating system covers both qualitative and quantitative aspects of the business and the securities held.

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We consider the factors above, particularly any significant changes in the portfolio company’s results of operations and leverage, and develop an expectation of the yield that a hypothetical market participant would require when purchasing the debt investment (the “Required Rate of Return”). The Required Rate of Return, along with the Leverage Ratio and Adjusted EBITDA, are the significant Level 3 inputs to the Income Approach model. For investments where the Leverage Ratio and Adjusted EBITDA have not fluctuated significantly from the date the investment was made or have not fluctuated significantly from management’s expectations as of the date the investment was made, and where there have been no significant fluctuations in the market pricing for such investments, we may conclude that the Required Rate of Return is equal to the stated rate on the investment and therefore, the debt security is appropriately priced. In instances where we determine that the Required Rate of Return is different from the stated rate on the investment, we discount the contractual cash flows on the debt instrument using the Required Rate of Return in order to estimate the fair value of the debt security.
Fair value measurements using the Income Approach model can be sensitive to significant changes in one or more of the inputs. A significant increase (decrease) in the Required Rate of Return or Leverage Ratio inputs for a particular debt security may result in a lower (higher) fair value for that security. A significant increase (decrease) in the Adjusted EBITDA input for a particular debt security may result in a higher (lower) fair value for that security.
The fair value of our royalty rights are calculated based on specific provisions contained in the pertinent operating or royalty agreements. The determination of the fair value of such royalty rights is not a significant component of our valuation process.
Revenue Recognition
Interest and Dividend Income
Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The cessation of recognition of such interest will negatively impact the reported fair value of the investment. We write off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. Dividend income is recorded on the ex-dividend date.
We may have to include in our ICTI interest income, including OID income, from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements to maintain our RIC status, even though we will not have received and may not ever receive any corresponding cash amount. Additionally, any loss recognized by us for federal income tax purposes on previously accrued interest income will be treated as a capital loss.
Fee Income
Origination, facility, commitment, consent and other advance fees received in connection with the origination of a loan, or Loan Origination Fees, are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of our business, we receive certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, certain investment banking and structuring fees and loan waiver and amendment fees, and are recorded as investment income when earned.
Payment-in-Kind (PIK) Interest Income
We currently hold, and we expect to hold in the future, some loans in our portfolio that contain a PIK interest provision. The PIK interest, computed at the contractual rate specified in each loan agreement, is periodically added to the principal balance of the loan, rather than being paid to us in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.
PIK interest, which is a non-cash source of income, is included in our taxable income and therefore affects the amount we are required to distribute to our stockholders to maintain our qualification as a RIC for federal income tax purposes, even though we have not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting

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purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. We write off any previously accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.
We may have to include in our ICTI, PIK interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are subject to market risk. Market risk includes risks that arise from changes in interest rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. The prices of securities held by us may decline in response to certain events, including those directly involving the companies we invest in; conditions affecting the general economy; overall market changes; legislative reform; local, regional, national or global political, social or economic instability; and interest rate fluctuations.
The U.S economy recently experienced a severe recession. To the extent that recessionary conditions recur, the economy remains stagnant, any further downgrades to U.S. government’s sovereign credit rating occur, the European credit crisis continues, or the economy fails to return to pre-recession levels, the financial position and results of operations of certain of the lower middle market companies in our portfolio could be further affected adversely, which ultimately could lead to difficulty in our portfolio companies meeting debt service requirements and lead to an increase in defaults. There can be no assurance that the performance of our portfolio companies will not be further impacted by economic conditions, which could have a negative impact on our future results.
During 2011, we experienced a $6.4 million increase in the fair value of our investment portfolio related to unrealized appreciation of investments. In 2012, we experienced a $1.7 million increase in the fair value of our investment portfolio related to unrealized appreciation of investments, exclusive of $4.6 million of unrealized depreciation reclassification adjustments related to certain realized gains and losses. In the first nine months of 2013, we experienced a $12.4 million increase in the fair value of our investment portfolio related to unrealized appreciation of investments, exclusive of $3.6 million of unrealized depreciation reclassification adjustments related to certain realized gains.
As of September 30, 2013, the fair value of our non-accrual assets was approximately $1.8 million, which comprised approximately 0.3% of the total fair value of our portfolio, and the cost of our non-accrual assets was approximately $15.0 million, or 2.4% of the total cost of our portfolio.
In addition to our non-accrual assets, as of September 30, 2013, we had debt investments in three portfolio companies (our subordinated notes to Minco Technology Labs, LLC, SRC Inc. and FCL Holding SPV, LLC) that were on non-accrual only with respect to the PIK interest component of the loans. As of September 30, 2013, the fair value of these debt investments was approximately $5.0 million, or 0.8% of the total fair value of our portfolio and the cost of these assets was approximately $12.5 million, or 2.0% of the total cost of our portfolio.
In addition, we are subject to interest rate risk. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. Our net investment income is affected by fluctuations in various interest rates, including LIBOR, Canadian Dealer Offered Rate and prime rates. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks. We regularly measure exposure to interest rate risk and determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. As of September 30, 2013, we were not a party to any hedging arrangements.
As of September 30, 2013, approximately 94.7%, or $514.8 million (at cost), of our debt portfolio investments bore interest at fixed rates and approximately 5.3%, or $28.7 million (at cost), of our debt portfolio investments bore interest at

45


variable rates, which are either prime-based or LIBOR-based, and all of which are subject to certain floors. A hypothetical 200 basis point increase or decrease in the interest rates on our variable-rate debt investments could increase or decrease, as applicable, our investment income by a maximum of approximately $0.6 million on an annual basis. All of our SBA-guaranteed debentures, our 2019 Notes and our 2022 Notes bear interest at fixed rates. Our Credit Facility bears interest, subject to the Company's election, on a per annum basis equal to (i) the applicable base rate plus 1.75%, (ii) the applicable LIBOR rate plus 2.75%, or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75%. The applicable base rate is equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR rate plus 2.0%.
Because we currently borrow, and plan to borrow in the future, money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest the funds borrowed. Accordingly, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income if there is not a corresponding increase in interest income generated by our investment portfolio.

We may also have exposure to foreign currencies (Canadian dollar) related to certain investments. Such investments are translated into United States dollars based on the spot rate at each balance sheet date, exposing us to movements in the exchange rate. In order to reduce our exposure to fluctuations in exchange rates, we generally borrow in Canadian dollars under our Credit Facility to finance such investments. As of September 30, 2013, we had non-United States dollar borrowings denominated in Canadian dollars of $12.0 million ($11.6 million United States dollars) outstanding under the Credit Facility with an interest rate of 4.03%.

Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the third quarter of 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.
Neither Triangle Capital Corporation nor any of its subsidiaries is currently a party to any material pending legal proceedings.

Item 1A. Risk Factors.
In addition to the risks below and the other information set forth in this report, you should carefully consider the factors discussed in Part I., “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, which could materially affect our business, financial condition or operating results. The risks described herein and in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Pending legislation may allow us to incur additional leverage.

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As a BDC, under the 1940 Act generally we are not permitted to incur indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). Legislation pending reintroduction to the U.S. House of Representatives, if passed, would modify this section of the 1940 Act and increase the amount of debt that BDCs may incur by modifying the percentage from 200% to 150%. In addition, recent legislation introduced in the U.S. Congress would modify SBA regulations in a manner that may permit us to incur additional SBA leverage. There can be no assurance that either piece of legislation will be passed, but if passed as proposed, we may be able to incur additional indebtedness in the future and therefore your risk of an investment in us may increase.
The failure of U.S. lawmakers to reach an agreement on the national debt ceiling or a budget could have a material adverse effect on our financial condition and stock price.
On October 16, 2013, the U.S. Congress passed legislation to reopen the government through January 15, 2014 and effectively suspend the debt ceiling through February 7, 2014 to permit broader negotiations over budget issues. In the event U.S. lawmakers fail to reach a viable agreement on the national debt ceiling or a budget, the U.S. could default on its obligations, which could negatively impact the trading market for U.S. government securities. This may, in turn, negatively affect our ability to obtain financing for our investments. As a result, it may materially adversely affect our financial condition and stock price.
On August 5, 2011, Standard & Poor’s downgraded its long-term sovereign credit rating on the U.S. to AA+ for the first time due to the U.S. Congress’ inability to reach an effective agreement on the national debt ceiling and a budget in a timely manner. The current U.S. debt ceiling and budget deficit concerns have increased the possibility of the credit-rating agencies further downgrading the U.S. credit rating. On October 15, 2013, Fitch Ratings Service placed the U.S. credit rating on negative watch, warning that a failure by the U.S. Government to honor interest or principal payments on U.S. treasury securities would impact its decision on whether to downgrade the U.S. credit rating. Fitch also stated that the manner and duration of an agreement to raise the debt ceiling and resolve the budget impasse, as well as the perceived risk of such events occurring in the future, would weigh on its ratings.
The impact of any further downgrades to the U.S. government’s sovereign credit rating, or its perceived creditworthiness, and deteriorating sovereign debt conditions in Europe, is inherently unpredictable and could adversely affect the U.S. and global financial markets and economic conditions. There can be no assurance that governmental or other measures to aid economic recovery will be effective. These developments and the government’s credit concerns in general could cause interest rates and borrowing costs to rise, negatively impact our ability to access the capital markets on favorable terms, decrease our ability to borrow under our line of credit or result in a decision by other lenders not to extend credit to us. In addition, the broader financial turmoil and uncertainty may weigh heavily on our stock price. Continued adverse economic conditions could have a material adverse effect on our financial condition and stock price.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
None.

Item 3. Defaults Upon Senior Securities.
None.

Item 4. Mine Safety Disclosures.
Not applicable.

Item 5. Other Information.
None.


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Item 6. Exhibits.
Number
Exhibit
 
 
3.1
Articles of Amendment and Restatement of the Registrant (Filed as Exhibit (a)(3) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on December 29, 2006 and incorporated herein by reference).
 
 
3.2
Third Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 4, 2011 and incorporated herein by reference).
 
 
4.1
Form of Common Stock Certificate (Filed as Exhibit (d) to the Registrant’s Post-Effective Amendment No. 1 to the Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on February 15, 2007 and incorporated herein by reference).
 
 
4.2
Dividend Reinvestment Plan of the Registrant (Filed as Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission on March 12, 2008 and incorporated herein by reference).
 
 
4.3
Agreement to Furnish Certain Instruments (Filed as Exhibit 4.19 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on February 25, 2009 and incorporated herein by reference).
 
 
4.4
Indenture, dated March 2, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit (d)(5) to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).
 
 
4.5
First Supplemental Indenture, dated March 2, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit (d)(6) to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).
 
 
4.6
Form of 7.00% Senior Note Due 2019 (Contained in the First Supplemental Indenture filed as Exhibit (d)(6) to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).
 
 
4.7
Second Supplemental Indenture, dated October 19, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2012 and incorporated herein by reference).
 
 
4.8
Form of 6.375% Senior Note Due 2022 (Contained in the Second Supplemental Indenture filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2012 and incorporated herein by reference).
 
 
31.1
Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
 
 
31.2
Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
 
 
32.1
Chief Executive Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
 
 
32.2
Chief Financial Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

*
Filed Herewith.
**
Furnished Herewith.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 

 
TRIANGLE CAPITAL CORPORATION
 
 
 
 
Date:
November 6, 2013
 
/s/    Garland S. Tucker, III
 
 
 
Garland S. Tucker, III
 
 
 
Chief Executive Officer and
 
 
 
Chairman of the Board of Directors
 
 
 
 
Date:
November 6, 2013
 
/s/    Steven C. Lilly
 
 
 
Steven C. Lilly
 
 
 
Chief Financial Officer and Director
 
 
 
 
Date:
November 6, 2013
 
/s/    C. Robert Knox, Jr.
 
 
 
C. Robert Knox, Jr.
 
 
 
Principal Accounting Officer


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EXHIBIT INDEX

Number
Exhibit
 
 
3.1
Articles of Amendment and Restatement of the Registrant (Filed as Exhibit (a)(3) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on December 29, 2006 and incorporated herein by reference).
 
 
3.2
Third Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 4, 2011 and incorporated herein by reference).
 
 
4.1
Form of Common Stock Certificate (Filed as Exhibit (d) to the Registrant’s Post-Effective Amendment No. 1 to the Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on February 15, 2007 and incorporated herein by reference).
 
 
4.2
Dividend Reinvestment Plan of the Registrant (Filed as Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission on March 12, 2008 and incorporated herein by reference).
 
 
4.3
Agreement to Furnish Certain Instruments (Filed as Exhibit 4.19 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on February 25, 2009 and incorporated herein by reference).
 
 
4.4
Indenture, dated March 2, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit (d)(5) to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).
 
 
4.5
First Supplemental Indenture, dated March 2, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit (d)(6) to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).
 
 
4.6
Form of 7.00% Senior Note Due 2019 (Contained in the First Supplemental Indenture filed as Exhibit (d)(6) to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).
 
 
4.7
Second Supplemental Indenture, dated October 19, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2012 and incorporated herein by reference).
 
 
4.8
Form of 6.375% Senior Note Due 2022 (Contained in the Second Supplemental Indenture filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2012 and incorporated herein by reference).
 
 
31.1
Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
 
 
31.2
Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
 
 
32.1
Chief Executive Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
 
 
32.2
Chief Financial Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
*
Filed Herewith.
**
Furnished Herewith.

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