497 1 d606742d497.htm 497 497
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Filed Pursuant to Rule 497
Registration Statement No. 333-217217

 

Prospectus Supplement

(to Prospectus dated June 5, 2018)

$50,000,000

THL Credit, Inc.

6.125% Notes due 2023

 

 

We are an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. We are managed by our investment adviser, THL Credit Advisors LLC, which also provides the administrative services necessary for us to operate.

Our investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated debt and equity securities of middle market companies. We are a direct lender to middle market companies and invest primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, we also make second lien secured loans and subordinated, or mezzanine, debt investments, which may include an associated equity component such as warrants, preferred stock or similar securities, and direct equity investments. Our first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. Unitranche structures may combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and our unitranche loans will expose us to the risks associated with second lien and/or subordinated loans to the extent we invest in the “last-out” tranche or subordinated tranche (or piece) of the unitranche loan. We also may provide advisory services to managed funds.

Substantially all of the debt securities in which we invest are below investment grade debt securities and are often referred to as “high yield” or “junk” securities. Exposure to below investment grade securities involves certain risk, and those securities are viewed as having predominately speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. A material amount of our debt investments contain interest reset provisions that may make it more difficult for the borrowers to make debt repayments. Further, our debt investments generally will not pay down principal during their term which could result in a substantial loss to us if the portfolio company is unable to refinance or repay the debt at maturity.

We are offering $50,000,000 in aggregate principal amount of 6.125% notes due 2023, or the “Notes.” The Notes will mature on October 30, 2023. We will pay interest on the Notes on March 30, June 30, September 30 and December 30 of each year, beginning on December 30, 2018. We may redeem the Notes in whole or in part at any time or from time to time on or after October 30, 2021, at the redemption price set forth under “Specific Terms of the Notes and the Offering-Optional redemption” in this prospectus supplement. The Notes will be issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

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

We intend to list the Notes offered hereby on the New York Stock Exchange (“NYSE”), under the trading symbol “TCRW.” The Notes are expected to trade “flat,” which means that purchasers will not pay, and sellers will not receive, any accrued and unpaid interest on the Notes that is not reflected in the trading price.

This prospectus supplement and the accompanying prospectus contain important information about us that a prospective investor should know before investing in the Notes. Please read this prospectus supplement and the accompanying prospectus before investing and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission. You may obtain this information free of charge or make stockholder inquiries by contacting us at THL Credit, Inc., 100 Federal Street, 31st floor, Boston, MA 02110, or by calling us at (800) 450-4424 or on our website at www.THLCreditBDC.com. The Securities and Exchange Commission maintains a website at www.sec.gov where such information is available without charge. Information contained on or accessed through our website is not incorporated by reference into this prospectus supplement and the accompanying prospectus, and you should not consider information contained on or accessed through our website to be part of this prospectus supplement and the accompanying prospectus.

 

 

An investment in the Notes involves risks that are described in the “Supplementary Risks” section beginning on page S-23 in this prospectus supplement and the “Risks ” section beginning on page 18 of the accompanying prospectus.

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

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

 

     Per Note      Total  

Public Offering Price

   $ 25.00      $ 50,000,000  

Sales Load (Underwriting Discounts and Commissions)

   $ 0.75      $ 1,500,000  

Proceeds to THL Credit, Inc. (before expenses) (1)

   $ 24.25      $ 48,500,000  

 

(1)

Before deducting expenses payable by us related to this offering, estimated at $0.3 million. We have agreed to reimburse the underwriters for certain FINRA related expenses. See “Underwriting” in the prospectus supplement.

The underwriters have an option to purchase up to an additional $7,500,000 aggregate principal amount of Notes from us at the public offering price, less the underwriting discounts and commissions, within 30 days from the date of this prospectus supplement to cover overallotments, if any. If the underwriters exercise this option in full, the total public offering price will be $57,500,000, the total underwriting discount and commissions (sales load) paid by us will be $1,725,000, and total proceeds, before expenses, will be $55,775,000.

Delivery of the Notes in book-entry form only through The Depository Trust Company will be made on or about October 5, 2018.

 

 

 

Book-Running Manager

 

Keefe, Bruyette & Woods, Inc.

                             A Stifel Company

 

Co-Lead Managers

Janney Montgomery Scott   B. Riley FBR   BB&T Capital Markets   D.A. Davidson & Co.   Ladenburg Thalmann   William Blair

The date of this prospectus supplement is October 2, 2018


Table of Contents

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

 

     Page  

About This Prospectus Supplement

     S-1  

Specific Terms of the Notes and the Offering

     S-2  

Special Note Regarding Forward-Looking Statements and Projections

     S-7  

Prospectus Supplement Summary

     S-8  

Selected Consolidated Financial Data

     S-20  

Supplementary Risks

     S-23  

Use of Proceeds

     S-26  

Ratio of Earnings to Fixed Charges

     S-27  

Capitalization

     S-28  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     S-29  

Senior Securities

     S-84  

Underwriting

     S-86  

Certain U.S. Federal Income and Estate Tax Consequences to Non-U.S. Holders

     S-90  

Legal Matters

     S-94  

Experts

     S-94  

Available Information

     S-94  

Index to Financial Statements

     S-95  

PROSPECTUS

 

     Page  

Prospectus Summary

     1  

Fees and Expenses

     12  

Selected Consolidated Financial Data

     15  

Risks

     18  

Special Note Regarding Forward-Looking Statements

     47  

Use of Proceeds

     48  

Price Range of Common Stock And Distributions

     49  

Ratio of Earnings to Fixed Charges

     52  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     53  

Senior Securities

     112  

Portfolio Companies

     114  

The Company

     122  

Management of the Company

     137  

Certain Relationships

     147  

Control Persons and Principal Stockholders

     153  

The Advisor

     155  

Determination of Net Asset Value

     170  

Sales of Common Stock Below Net Asset Value

     174  

Dividend Reinvestment Plan

     179  

Description of Our Capital Stock

     181  

Description of Our Preferred Stock

     184  

Description of Our Subscription Rights

     186  

Description of Warrants

     188  

Description of Our Debt Securities

     190  

Regulation

     204  

Tax Matters

     211  

Plan of Distribution

     218  

 

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     Page  

Custodian

     220  

Transfer Agent

     220  

Brokerage Allocations and Other Practices

     220  

Legal Matters

     220  

Experts

     220  

Additional Information

     221  

Management’s Report on Internal Control over Financial Reporting

     221  

Index to Financial Statements

     F-1  

 

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ABOUT THIS PROSPECTUS SUPPLEMENT

This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering of the Notes and also adds to and updates information contained in the accompanying prospectus. The second part is the accompanying prospectus, which gives more general information and disclosure. To the extent the information contained in this prospectus supplement differs from the information contained in the accompanying prospectus, the information in this prospectus supplement shall control. You should read this prospectus supplement and the accompanying prospectus together with the additional information described under the heading “Available Information” before investing in the Notes.

You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. Neither we nor the underwriters have authorized any other person to provide you with different or additional information from that contained in this prospectus supplement or the accompanying prospectus. If anyone provides you with different, additional or inconsistent information, you should not rely on it. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell, or a solicitation of an offer to buy, any Notes by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. The information contained in this prospectus supplement and the accompanying prospectus is complete and accurate only as of their respective dates, regardless of the time of their delivery or sale of the Notes. This prospectus supplement supersedes the accompanying prospectus to the extent it contains information different from or additional to the information in that prospectus.

It is expected that delivery of the notes will be made against payment therefor on or about October 5, 2018, which is the third business day following the date hereof (such settlement cycle being referred to as “T+3”). Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), trades in the secondary market generally are required to settle in two business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the notes on any date prior to the second business day before delivery thereof will be required, by virtue of the fact that the notes initially will settle in T+3, to specify an alternative settlement cycle at the time of any such trade to prevent failed settlement. Purchasers of the notes who wish to trade the notes prior to their date of delivery hereunder should consult their own advisors.

 

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SPECIFIC TERMS OF THE NOTES AND THE OFFERING

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

 

Issuer

THL Credit, Inc.

 

Title of the securities

6.125% Notes due 2023

 

Initial aggregate principal amount being offered

$50,000,000

 

Overallotment option

The underwriters may also purchase from us up to an additional $7,500,000 aggregate principal amount of Notes to cover overallotments, if any, within 30 days of the date of this prospectus supplement.

 

Initial public offering price

$25 per Note (Par)

 

Principal payable at maturity

100% of the aggregate principal amount; the principal amount of each Note will be payable on its stated maturity date at the office of the Trustee in the City of St. Paul, Minnesota or at such other office designated by the Trustee.

 

Type of Note

Fixed rate note

 

Listing

We intend to list the Notes offered hereby on the NYSE, under the trading symbol “TCRW.”

 

Interest rate

6.125% per year

 

Day count basis

360-day year of twelve 30-day months

 

Original issue date

October 5, 2018

 

Stated maturity date

October 30, 2023

 

Date interest starts accruing

October 5, 2018

 

Interest payment dates

Each March 30, June 30, September 30 and December 30, commencing December 30, 2018. If an interest payment date falls on a non-business day, the applicable interest payment will be made on the next business day and no additional interest will accrue as a result of such delayed payment.

 

Interest periods

The initial interest period will be the period from and including          , 2018, to, but excluding, the initial interest payment date, and the subsequent interest periods will be the periods from and including an interest payment date to, but excluding, the next interest payment date or the stated maturity date, as the case may be.

 

Regular record dates for interest

Each March 15, June 15, September 15 and December 15.

 

Specified currency

U.S. Dollars

 

Place of payment

St. Paul, Minnesota

 

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Ranking of Notes

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

 

   

pari passu with our other outstanding and future unsecured unsubordinated indebtedness;

 

   

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

 

   

effectively subordinated to all our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, including without limitation, the $113.0 million in borrowings outstanding as of September 30, 2018 under our revolving credit agreement, or Revolving Facility; and

 

   

structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, of which there is currently none.

 

Denominations

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

 

Business day

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

 

Optional redemption

The Notes may be redeemed in whole or in part at any time or from time to time at our option on or after October 30, 2021, upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price of 100% of the outstanding principal amount thereof plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to but not including the date fixed for redemption.

 

  You may be prevented from exchanging or transferring the Notes when they are subject to redemption. In case any Notes are to be redeemed in part only, the redemption notice will provide that, upon surrender of such Note, you will receive, without a charge, a new Note or Notes of authorized denominations representing the principal amount of your remaining unredeemed Notes. Any exercise of our option to redeem the Notes will be done in compliance with the indenture and the Investment Company Act of 1940, as amended, and the rules, regulations and interpretations promulgated thereunder, which we collectively refer to as the 1940 Act, to the extent applicable.

 

  If we redeem only some of the Notes, the Trustee will determine the method for selection of the particular Notes to be redeemed, in accordance with the indenture and the 1940 Act and in accordance with the rules of any national securities exchange or quotation system on which the Notes are listed, in each case, to the extent applicable. Unless we default in payment of the redemption price, on and after the date of redemption, interest will cease to accrue on the Notes called for redemption.

 

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Sinking fund

The Notes will not be subject to any sinking fund.

 

Repayment at option of Holders

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

 

Defeasance and covenant defeasance

The Notes are subject to defeasance by us.

 

  The Notes are subject to covenant defeasance by us.

 

  Under the Revolving Facility, as currently in effect, we would be prohibited from defeasing the Notes or effecting covenant defeasance under the Notes without the consent of the lenders.

 

Form of Notes

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

 

Trustee, Paying Agent and Security Registrar

U.S. Bank National Association is the trustee, security registrar and paying agent. U.S. Bank National Association, in each of its capacities, including without limitation as trustee, security registrar and paying agent, assumes no responsibility for the accuracy or completeness of the information concerning us or our affiliates or any other party contained in this document or the related documents or for any failure by us or any other party to disclose events that may have occurred and may affect the significance or accuracy of such information, or for any information provided to it by us, including but not limited to settlement amounts and any other information.

 

  We may maintain banking relationships in the ordinary course of business with the trustee and its affiliates.

 

Other covenants

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

 

   

We agree that for the period of time during which the Notes are outstanding, we will not violate Section 18(a)(1)(A) as modified by Section 61(a) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the U.S. Securities and Exchange Commission, or the SEC. Currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowings (or 150% if certain requirements are met).

 

   

We agree that, for the period of time during which the Notes are outstanding, we will not declare any dividend (except a dividend payable in our stock), or declare any other distribution (except a

 

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distribution payable in our stock), upon any class of our capital stock, or purchase or redeem any of our capital stock, if our asset coverage, as defined in the 1940 Act and after giving effect to any exemptive relief granted to us by the SEC with respect to such asset coverage, is (i) below the Asset Coverage Requirement (as defined below), which is currently 200% for us, at the time of the declaration of such dividend or distribution or purchase or redemption and after deducting the amount of such dividend, distribution, purchase or redemption and (ii) has been below the Asset Coverage Requirement for the six consecutive months immediately preceding such declaration or purchase or redemption, in each case whether or not we continue to be subject to the Asset Coverage Requirement. Notwithstanding the foregoing restriction, we will be permitted to declare a cash dividend or distribution on our capital stock only up to such amount as is necessary for us to maintain our status as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. “Asset Coverage Requirement” shall mean the asset coverage test set forth in Section 18(a)(1)(B) as modified by Section 61(a) of the 1940 Act or any successor provisions with respect to such asset coverage test.

Recent legislation has modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur under the 1940 Act from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. Under the legislation we will be allowed to increase our leverage capacity if stockholders representing at least a majority of the votes cast, when quorum is met, approve a proposal to do so. If we receive stockholder approval, we would be allowed to increase our leverage capacity on the first day after such approval. Alternatively, the legislation allows the majority of our independent directors to approve an increase in our leverage capacity, and such approval would become effective after one year. In either case, we would be required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage. As a result of this legislation, we may be able to change our Asset Coverage Requirement and increase our leverage up to an amount that reduces our asset coverage ratio from 200% to 150% if we receive the necessary approval and amend the Revolving Facility, with lender consent. We continue to evaluate whether we want to increase our leverage capacity under this new legislation.

 

Reports by the Company

If, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934 as amended, or the Exchange Act, to file any periodic reports with the SEC, we agree to furnish to holders of the Notes and the Trustee, for the period of time during which the Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end (other than our

 

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fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with applicable United States generally accepted accounting principles.

 

Modifications to events of default

The following events of default, as described in the prospectus attached to this prospectus supplement:

 

   

We do not pay the principal of, or any premium on, a debt security of the series on its due date, and do not cure this default within 5 days.

 

   

On the last business day of each of 24 consecutive calendar months, we have an asset coverage of less than 100%.

 

  with respect to the Notes has been revised to read as follows:

 

   

We do not pay the principal of, or any premium on, any Note on its due date.

 

   

On the last business day of each of 24 consecutive calendar months, we have an asset coverage of less than 100%, giving effect to any exemptive relief granted to us by the SEC.

 

Global Clearance and Settlement Procedures

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

 

Use of Proceeds

We estimate that the net proceeds we receive from the sale of the $50.0 million aggregate principal amount of Notes in this offering will be approximately $48.2 million (or approximately $55.4 million if the underwriters fully exercise their overallotment option) after deducting the underwriting discount of approximately $1.5 million (or approximately $1.7 million if the underwriters fully exercise their overallotment option) payable by us and estimated offering expenses of approximately $0.3 million payable by us.

 

  We intend to use the net proceeds from this offering, together with other available funds, to repay certain of our indebtedness, including the redemption of $50.0 million of our 6.75% notes due 2021, or the 2021 Notes, outstanding and/or the repayment of a portion of the $113.0 million of debt outstanding as of September 30, 2018 under our Revolving Facility. Through reborrowing under our Revolving Facility, we intend to invest in debt and equity securities in accordance with our investment objective and strategies.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONS

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

 

   

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

 

   

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

 

   

the relative and absolute investment performance and operations of our investment adviser;

 

   

the impact of increased competition;

 

   

the impact of future acquisitions and divestitures;

 

   

the unfavorable resolution of legal proceedings;

 

   

our business prospects and the prospects of our portfolio companies;

 

   

the impact, extent and timing of technological changes and the adequacy of intellectual property protection;

 

   

the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or THL Credit Advisors;

 

   

the ability of THL Credit Advisors to identify suitable investments for us and to monitor and administer our investments;

 

   

our contractual arrangements and relationships with third parties;

 

   

any future financings by us;

 

   

the ability of THL Credit Advisors to attract and retain highly talented professionals;

 

   

fluctuations in foreign currency exchange rates;

 

   

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

 

   

our ability to exit a controlled investment in a timely manner; and

 

   

the ability to fund Logan JV’s unfunded commitments to the extent approved by each member of the Logan JV investment committee.

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

Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to and do not undertake to update forward-looking statements. These forward-looking statements do not meet the safe harbor for forward-looking statements pursuant to Section 27A of the Securities Act of 1933, as amended, or the Securities Act, or Section 21E of the Exchange Act. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

 

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PROSPECTUS SUPPLEMENT SUMMARY

This summary highlights some of the information in this prospectus supplement and the accompanying prospectus. It is not complete and may not contain all of the information that you may want to consider before investing in our securities. You should read the entire prospectus supplement and the accompanying prospectus carefully, including “Supplementary Risks” and “Risks.” Throughout this prospectus supplement and the accompanying prospectus, we refer to THL Credit, Inc. and its consolidated subsidiaries as the “Company,” “we,” “us” or “our”; THL Credit Advisors LLC as “THL Credit Advisors,” the “Advisor” or the “Administrator”; Thomas H. Lee Partners, L.P. as “THL Partners”; THL Credit Greenway Fund LLC as “Greenway”; THL Credit Greenway Fund II LLC and related investment vehicle as “Greenway II”; THL Credit Opportunities, L.P. as “THL Credit Opportunities”; THL Credit Partners BDC Holdings, L.P. as “BDC Holdings”; and THL Credit Logan JV LLC as “Logan JV”.

THL Credit, Inc.

We are an externally managed, non-diversified closed-end management investment company incorporated in Delaware on May 26, 2009, that has elected to be regulated as a business development company, or BDC, under the 1940 Act. In addition, we have elected to be treated for tax purposes as a regulated investment company, or RIC, under Subchapter M of the Code. Our investment activities are managed by THL Credit Advisors and supervised by our board of directors, a majority of whom are independent of THL Credit Advisors and its affiliates. As a BDC, we are required to comply with certain regulatory requirements. See “Regulation” in the accompanying prospectus for discussion of BDC regulation and other regulatory considerations. We are also registered as an investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act.

Our investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated debt and equity securities of middle market companies. We are a direct lender to middle market companies and invest primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, we also make second lien secured loans and subordinated, or mezzanine, debt investments, which may include an associated equity component such as warrants, preferred stock or similar securities, and direct equity investments. Our first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. Unitranche structures may combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and our unitranche loans will expose us to the risks associated with second lien and /or subordinated loans to the extent we invest in the “last-out” tranche or subordinated tranche (or piece) of the unitranche loan. We also may provide advisory services to managed funds.

We intend to co-invest, subject to the conditions included in the exemptive order we received from the SEC, with certain of our affiliates. See “Certain Relationships” in the accompanying prospectus. We believe that such co-investments may afford us additional investment opportunities and an ability to achieve greater diversification.

We define middle market companies to mean both public and privately-held companies with annual earnings before interest, taxes, depreciation and amortization, or EBITDA, generally between $5 million and $25 million. We expect to generate returns primarily through a combination of contractual interest payments on debt investments, equity appreciation, origination and similar fees. We can offer no assurances that we will achieve our investment objective.

Since April 2010, after we completed our initial public offering and commenced principal operations, through June 30, 2018 we have been responsible for making, on behalf of ourselves, managed funds and



 

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separately managed account, over approximately an aggregate of $2.0 billion in commitments into 100 separate portfolio companies through a combination of both initial and follow-on investments. Since April 2010 through June 30, 2018, we, along with our managed funds and separately managed accounts, have received $1.4 billion of proceeds from the realization of investments. The Company alone has received $1.1 billion of proceeds from the realization of its investments during this same time period.

As a BDC, we are generally required to invest at least 70% of our total assets in “qualifying assets,” including securities of private or thinly traded public U.S. companies, cash, cash equivalents, U.S. Government securities and high-quality debt investments that mature in one year or less.

We are permitted to borrow money from time to time within the levels permitted by the 1940 Act. We have used, and expect to continue to use, our credit facilities and other borrowings, along with proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives.

Recent legislation has modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur under the 1940 Act from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. Under the legislation we will be allowed to increase our leverage capacity if stockholders representing at least a majority of the votes cast, when quorum is met, approve a proposal to do so. If we receive stockholder approval, we would be allowed to increase our leverage capacity on the first day after such approval. Alternatively, the legislation allows the majority of our independent directors to approve an increase in our leverage capacity, and such approval would become effective after one year. In either case, we would be required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage. As a result of this legislation, we may be able to change our Asset Coverage Requirement and increase our leverage up to an amount that reduces our asset coverage ratio from 200% to 150% if we receive the necessary approval and amend the Revolving Facility, with lender consent. We continue to evaluate whether we want to increase our leverage capacity under this new legislation. See “Regulation” for discussion of BDC regulation and other regulatory considerations.



 

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Organizational Overview

The Company was organized as a Delaware corporation on May 26, 2009 and initially funded on July 23, 2009. We commenced principal operations on April 21, 2010. The Company has formed substantially owned subsidiaries which serve as tax blockers that hold equity or equity-like investments in portfolio companies organized as limited liability companies or other forms of pass-through entities. The Company also has formed substantially owned subsidiaries which serve as the administrative agents on certain investment transactions, including THL Corporate Finance, Inc.

 

LOGO

 

(1)

THL Credit Advisors LLC is owned and controlled by certain employees of THL Credit Advisors and THL Credit SLS Senior Loan Strategies LLC, or SLS, and a partnership consisting of certain of the partners of THL Partners (defined below).

(2)

SLS is a wholly-owned subsidiary of THL Credit Advisors that focuses principally in investing in broadly syndicated senior loans.

(3)

Greenway I is an investment fund with $150 million of capital committed by affiliates of a single institutional investor, together with a nominal amount committed by the Company, all of which has been paid in and invested by Greenway I, which is managed by us.

(4)

Greenway II is an investment fund and, together with a related vehicle, has $187.0 million of capital committed by third party investors, all of which has been paid in and invested by Greenway II, together with a nominal amount committed by the Company, which is managed by us.

(5)

Logan JV is a joint venture entered into between the Company and Perspecta Trident LLC, or Perspecta, an affiliate of Perspecta Trust LLC, which invests primarily in senior secured first lien term loans. Logan JV has $250 million of capital commitments, of which the Company committed $200 million and Perspecta committed $50 million.

(6)

THL Credit Strategic Funding LLC is a wholly owned subsidiary of THL Credit Advisors that focuses principally on investing in directly originated middle market loans that may require seasoning for other managed funds or accounts.



 

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THL Credit Advisors LLC

Our investment activities are managed by our investment adviser, THL Credit Advisors. THL Credit Advisors is responsible for sourcing potential investments, conducting research on prospective investments, analyzing investment opportunities, structuring our investments, and monitoring our investments and portfolio companies on an ongoing basis. We pay THL Credit Advisors a management fee as a percentage of our gross assets and may pay incentive fees as a percentage of our ordinary income and capital gains.

THL Credit Advisors was formed as a Delaware limited liability company on June 26, 2009 and is registered as an investment adviser under the Advisers Act. THL Credit Advisors is an alternative credit investment manager for both direct lending and tradable credit investments through public and private vehicles, commingled funds including collateralized loan obligations, and separately managed accounts. THL Credit Advisors and its credit-focused affiliates manage assets of $15.9 billion across its two strategies investment platforms: Direct Lending and Tradable Credit.1

THL Credit Advisors benefits from a scaled and integrated business that draws on a diverse resource base and the credit and industry expertise of the entire platform. Fundamental credit analysis, rigorous and disciplined underwriting, well-structured investments and ongoing monitoring are the hallmarks of its credit culture.

THL Credit Advisors’ Direct Lending strategy invests primarily in secured loans, consisting of first lien senior secured including unitranche investments and to a lesser extent, second lien facilities. In certain instances, THL Credit Advisors’ Direct Lending strategy also makes subordinated debt investments and equity investments such as warrants, preferred stock or other similar securities.

THL Credit Advisors’ Tradable Credit strategy manages investments in secured bank loans, structured credit and high-yield securities through CLOs, separate accounts, sub-advisory and various fund formats, including private funds, certain CLOs and as sub-advisor to THL Credit Senior Loan Fund (NYSE: TSLF), a nondiversified, closed-end management investment company. The Advisor may serve as investment advisor to additional private funds, registered closed-end funds and CLOs in the future. See “Certain Relationships” in the accompanying prospectus for information regarding the allocation of investment opportunities.

THL Credit Advisors is headquartered in Boston, with additional origination teams in Chicago, Dallas, Los Angeles and New York, allowing it to be close to its portfolio companies as well as its origination and syndication sources. Over the years, THL Credit Advisors has developed deep and diverse national relationships that it leverages to maximize investment opportunities across its strategies.

THL Credit Advisor’s Direct Lending investment committee, which serves as our investment committee, is comprised of Christopher J. Flynn, Terrence W. Olson, W. Montgomery Cook, James R. Fellows and Howard H. Wu (the “Investment Committee Members”).

THL Credit Advisors has received an exemptive order from the SEC permitting it to negotiate, subject to the conditions of the order, co-investments among us and certain of its other investment advisory clients. See “Certain Relationships” in the accompanying prospectus.

THL Credit Advisors also serves as our Administrator and leases office space to us and provides us with equipment and office services. The tasks of the Administrator include overseeing our financial records, preparing reports to our stockholders and reports filed with the SEC and generally monitoring the payment of our expenses and the performance of administrative and professional services rendered to us by others.

 

1 

As of August 31, 2018, other than with respect to assets under management through THL Credit, Inc. and its related funds and separate account, which are as of June 30, 2018. Includes assets under management of THL Credit Advisors LLC and its consolidated subsidiary, THL Credit Senior Loan Strategies LLC.



 

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Relationship with Thomas H. Lee Partners, L.P. (“THL Partners”)

The Advisor is owned in part by a partnership consisting of certain of the partners of THL Partners. THL Partners is one of the world’s oldest and most experienced private equity firms. Since its founding in 1974, the firm has raised over $22 billion of equity capital and invested in more than 140 portfolio companies with an aggregate value of over $200 billion. THL Partners invests in growth-oriented businesses, headquartered primarily in North America, across three sectors: Business & Financial Services, Consumer & Healthcare, and Media, Information Services and Technology. The firm partners with portfolio company management to identify and implement operational and strategic improvements to accelerate sustainable revenue and profit growth. THL Partners strives to build companies of lasting value and generate superior investment returns. We believe we benefit from THL Credit Advisors’ relationship with THL Partners. THL Credit Advisors has access to the industry knowledge of THL Partners’ investment team to consult with the THL Partners team on specific industry issues, trends and other complementary matters.

Investment Approach

Our investment approach consists of the following four separate and distinct phases: (1) sourcing; (2) selecting; (3) structuring; and (4) supervising investments. Sourcing involves our efforts to generate as vast a universe of relevant and actionable investment opportunities as possible. Selecting represents our decision-making process regarding which of those investments to pursue. Structuring summarizes our creative approach to deploying capital on a case-by-case basis in a way that maximizes value. Supervising is a reference to our ongoing rigorous credit monitoring.

Sourcing

The elements of our sourcing efforts will include: (i) determining the market in which we intend to participate; (ii) identifying the opportunities within that market; (iii) having a clear strategy; (iv) knowing the competition; and (v) distinguishing our competitive advantages.

Determining the Market

We invest primarily in debt securities of sponsored issuers based in the middle market mainly in the United States. Our debt investments are composed of directly originated first lien senior secured loans, including unitranche investments. In certain instances, we also may make second lien loans and subordinated or mezzanine debt investments, which may include an associated equity component such as warrants, preferred stock and other similar securities, and direct equity co-investments. Our first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. Unitranche structures may combine characteristics of traditional first lien senior secured as well as second lien and/or subordinated loans and our unitranche loans will expose us to the risks associated with second lien and subordinated loans to the extent we invest in the “last-out” tranche. We also may provide advisory services to managed funds.

Market opportunity

We believe the environment for investing in middle market companies is attractive for several reasons, including:

Improved company fundamentals creating favorable lending trends. We believe that middle market companies are experiencing improved fundamentals driven by a stabilized economy and an increase in confidence. Middle market companies have recently displayed improvements in operating performance, resulting



 

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in stronger credit quality. Default levels remain relatively low, and volatility in the broader capital markets has eased, resulting in more middle market companies seeking growth capital at attractive lender credit metrics.

Meaningful availability of investable capital at private equity firms. Recent private equity data show over $1 trillion of cash reserves that private equity fund managers are actively looking to allocate to transactions involving new or existing portfolio companies.2 Private equity funds will often prefer to support these transactions with debt securities, including first lien and second lien loans from sources such as us.

Consolidation among commercial banks has reduced their focus on middle market business. We believe that many bank lenders have de-emphasized their service and product offerings to middle market companies in favor of lending to large corporate clients, managing capital markets transactions and providing other non-credit services to their customers. Further, many financial institutions and traditional lenders are faced with constrained balance sheets and are requiring existing issuers to reduce leverage. As a result, it allows us a greater opportunity to originate proprietary investment opportunities; a situation that we believe the investment professionals are equipped to capitalize upon as a result of their extensive experience.

Increased lending regulation has limited the ability of traditional lenders to provide capital to middle market companies. Heightened scrutiny of large bank institutions by regulatory bodies has prompted lending guidelines that have sought to limit leverage, deter banks from lengthening payment timelines and restrict banks from holding certain CLO securities. In response, banks have been participating less in the middle market lending arena, opening up opportunities for alternative lenders such as us. In addition to new lending activity, as companies look to refinance existing loans that do not abide by the current guidelines, the market opportunity should continue to expand.

Middle market companies are increasingly seeking lenders with long-term capital to provide flexible solutions for their debt and equity financing needs. Middle market companies continue to seek lenders with long-term capital to provide flexible solutions for their debt and equity financing needs. We believe that many middle market companies prefer to execute transactions with private capital providers such as us, rather than execute high-yield bond or equity transactions in the public markets, which may necessitate increased financial and regulatory compliance and reporting obligations. Further, we believe many middle market companies are inclined to seek capital from a small number of skilled, reliable and predictable providers with access to permanent capital that can satisfy their specific needs and serve as value-added financial partners with an understanding of, and longer-term view oriented towards the growth of their businesses. We aim to develop a constructive partnership with its portfolio companies to help them navigate economic cycles and operational issues which will arise.

The large yet fragmented middle market may offer lenders more attractive economic terms compared to the more efficient, syndicated markets. Investing in debt securities in the middle market may offer more favorable returns relative to their investment risk, when compared to investments in public high yield or syndicated bank loan securities. Furthermore, private equity sponsors focused on the middle market seek lenders with domain expertise and certainty of closing rather than running a fully efficient arranger process. Directly originated investments in the middle market may, in our experience, permit higher yields on investments and may also benefit from other more favorable terms relative to the broadly syndicated market, including lower leverage, tighter covenant packages, stronger call protection, and greater control of a work-out process in the case of a default.

 

2 

Source: 2018 Preqin Global Private Equity & Venture Capital Report.



 

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Investment strategy

We believe a strategy focused primarily on debt securities in middle market companies has a number of compelling attributes. First, the market for these instruments is relatively inefficient, allowing an experienced investor an opportunity to produce high risk-adjusted returns. Second, downside risk can be managed through an extensive credit-oriented underwriting process, creative structuring techniques and intensive portfolio monitoring. We believe private debt investments generally require the highest level of credit and legal due diligence among debt or credit asset classes. Lastly, compared with equity investments, returns on debt investments tend to be less volatile given the substantial current return component and seniority in the capital structure relative to equity. Though it is not part of our investment strategy, we currently have, and may acquire in the future, control investments in portfolio companies. See “Risks—Our equity ownership in a portfolio company may represent a control investment. Our ability to exit a control investment may be limited” in the accompanying prospectus.

We will consider opportunities within all industries and do not have fixed guidelines for industry concentration. As of June 30, 2018, our portfolio investments spanned several industries and the largest industries represented and the percentage of our investment portfolio at fair value were as follows: (i) industrials and manufacturing at 16.90%; (ii) consumer products and services at 16.71%; (iii) IT services at 10.06%; (iv) healthcare at 9.04%; and (v) financial services at 7.57%.

Competition

Our primary competitors to providing financing to middle market companies include other BDCs, public and private funds, commercial and investment banks, CLO funds, commercial finance companies and, to the extent they provide an alternative form of financing, private equity and hedge funds. Some of our competitors are substantially larger and have considerably greater financial and marketing resources than we do. For example, some competitors may have access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us.

Competitive advantages

We believe that we possess the following competitive advantages over many other capital providers to middle market companies:

Experienced management team. As stated above, the Investment Committee Members are experienced and many have worked together extensively and together with their past investment experiences have invested through multiple business and credit cycles in a variety of credit products with the objective of generating attractive, long-term, risk-adjusted returns. Each of the Investment Committee Members brings a unique investment perspective and skill-set by virtue of their complementary collective experiences as both debt and equity investors.

Proactive Sourcing Platform. We take a proactive, hands-on, and creative approach to investment sourcing. Our disciplined origination process includes proprietary tools and resources and employs a national platform with a regional focus. With offices in Boston, Chicago, Dallas, Los Angeles and New York, the Investment Committee Members have a deep and diverse relationship network in the debt capital and private equity markets. These activities and relationships provide an important channel through which we generate investment opportunities consistent with our investment strategy.



 

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Significant institutional expertise and brand recognition gained from investing over $2.0 billion in over 100 companies between June 2009 and June 30, 2018 across our direct lending credit strategy. We have developed the institutional knowledge and operational infrastructure required to successfully achieve our investment objectives. We benefit from proprietary deal flow from strong relationships with sponsors cultivated over eight years of doing business in the middle market. Our comprehensive underwriting methodology and monitoring processes have been implemented across all five regional offices. Additionally, the Investment Committee Members are supported by an experienced operational and administrative team.

Relationship with THL Partners. We are managed by THL Credit Advisors, the credit affiliate of THL Partners. As such, we have access to the relationship network and industry knowledge of THL Partners to enhance transaction sourcing capabilities. This also provides us with the opportunity to consult with investment team from THL Partners on specific industry issues, trends and other complementary matters.

Investments teams with a regional focus set up in Industry Verticals. We take a proactive, hands-on, and creative approach to investment sourcing. Our disciplined origination process includes proprietary tools and resources and employs a national platform with a regional focus. With offices in Boston, Chicago, Dallas, Los Angeles and New York, we have a deep and diverse relationship network. Given our five-office footprint, we are closer to smaller, regional sponsors and have cultivated deep relationships with these private equity firms. In many cases, regional sponsors prefer to partner with local lenders. Once an investment opportunity is sourced by one of our fives offices, the opportunity is transitioned to a lead underwriter while the individual who originated the opportunity remains closely involved in a relationship management capacity. We cover three primary industry verticals: Business & Financial Services (New York), Consumer & Healthcare (Boston, Dallas, Chicago and Los Angeles) and Information Services & Media (Los Angeles). Given our emphasis on three primary industry verticals, we have a strong preference for industry or sector-focused funds and/or sponsors who specialize in only several sectors as opposed to generalist private equity firms. Many middle market sponsors do not staff an internal capital markets resource (i.e., one who maintains a database and network of debt financing partners/arrangers); as such, a sponsor’s deal team leader without this resource is directly responsible for arranging debt financing as part of his/her deal process on a case-by-case basis. Middle market sponsors with this profile appreciate the value proposition of partnering with a trusted, local relationship and respected lender with deep domain expertise.

Selecting

Selecting investments to pursue requires us to have an employable investment philosophy, know our key metrics, have a process to consistently measure those metrics, and implement a repeatable underwriting process that enables our investment committee to make well-reasoned decisions.

Investment Philosophy

Our investment philosophy focuses on capital preservation, relative value, and establishing close relationships with portfolio companies. It is our expectation that this multifaceted focus should generate consistent, attractive, risk-adjusted returns coupled with low volatility.

Key Investment Metrics

Our value-oriented investment philosophy is primarily focused on maximizing yield relative to risk. Upon identifying a potential opportunity, we perform an initial screen to determine whether pursuing intensive due diligence is merited. As part of this process, we have identified several criteria we believe are important in



 

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evaluating and investing in prospective portfolio companies, which include, among other things: (i) value orientation/positive cash flow; (ii) seasoned management with significant equity ownership; (iii) strong competitive position; and (iv) exit strategy.

Due Diligence and Investment Process

We employ a rigorous and disciplined underwriting and due diligence process. Our process includes a comprehensive understanding of a portfolio company’s industry, market, operational, financial, organizational and legal position and prospects.

Underwriting Process

We employ an extensive due diligence approach tailored to each particular investment opportunity. To begin, we review the information memorandum that the company presenting the investment opportunity or its intermediary has prepared, and discuss the opportunity at a high level with the company’s management team, the sponsor or the intermediary, as applicable.

Investment Committee

The purpose of the investment committee is to evaluate and approve, as deemed appropriate, all investments by us. The committee process is intended to bring the diverse experience and perspectives of the committee’s members to the analysis and consideration of every investment. The committee also serves to provide investment consistency and adherence to THL Credit Advisors’ investment philosophies and policies. The investment committee also determines appropriate investment sizing and suggests ongoing monitoring requirements.

Structuring

Our approach to structuring involves us choosing the most appropriate variety of securities for each particular investment; and negotiating the best and most favorable terms.

Investment Structure

In order to achieve our investment objective, we invest primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, we also make second lien loans and subordinated or mezzanine debt investments, which may include an associated equity component such as warrants, preferred stock or similar securities and direct equity investments. Our current portfolio consists of debt investments that are approximately $2 million to $35 million of capital per transaction and have maturities of generally five years. We aim to target long-term hold sizes of less than 2.5% of the current cost basis of the total portfolio. In determining whether a prospective investment satisfies our investment criteria, we generally seek a high total return potential on a risk-adjusted basis, although there can be no assurance we will find investments satisfying that criterion or that any such investments will perform in accordance with expectations.

Investment Terms

We tailor the terms of each investment to the facts and circumstances of the transaction and the prospective portfolio company, negotiating a structure that protects our rights and manages our risk while creating incentives for the company to achieve its business plan and improve its profitability.



 

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Supervising

Supervision of our investments involves employing active monitoring methods and developing strong underlying management teams at each portfolio company.

Monitoring

We employ the use of board observation and information rights, regular dialogue with company management and sponsors, and detailed internally generated monitoring reports to actively monitor performance. Additionally, we have developed a monitoring template that promotes compliance with these standards and that is used as a tool to assess investment performance relative to plan.

Taxation

We have elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Code. As a RIC, we generally do not have to pay corporate-level federal income taxes on any income that we timely distribute to our stockholders. To maintain our qualification as a RIC, we must, among other things, meet certain source of income and asset diversification requirements. In addition, in order maintain our RIC tax treatment, we must timely distribute to our stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses. See “Tax Matters” in the accompanying prospectus.

We intend to timely distribute to our stockholders, for each taxable year, substantially all of our taxable income, except that we may in the future decide to retain some or all of our net capital gain for reinvestment and, depending on the level of taxable income earned in a particular year, we may choose not to distribute all of such taxable income and pay a non-deductible 4% federal excise tax on the undistributed income.

Leverage

We borrow funds to make additional investments, and we have granted, and may in the future grant, a security interest in our assets to lenders in connection with any such borrowings, including any borrowings by any of our subsidiaries. We use this practice, which is known as “leverage,” to attempt to increase returns to our common stockholders. However, leverage involves significant risks. See “Risks” in the accompanying prospectus. With certain limited exceptions, we are currently only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% (or 150% if certain requirements are met) after such borrowing. As of June 30, 2018, we had $253.2 million of borrowings outstanding. The amount of leverage that we employ will depend on our assessment of market and other factors at the time of any proposed borrowing.

Recent legislation has modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur under the 1940 Act from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. Under the legislation we will be allowed to increase our leverage capacity if stockholders representing at least a majority of the votes cast, when quorum is met, approve a proposal to do so. If we receive stockholder approval, we would be allowed to increase our leverage capacity on the first day after such approval. Alternatively, the legislation allows the majority of our independent directors to approve an increase in our leverage capacity, and such approval would become effective after one year. In either case, we would be required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage. As



 

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a result of this legislation, we may be able to change our Asset Coverage Requirement and increase our leverage up to an amount that reduces our asset coverage ratio from 200% to 150% if we receive the necessary approval and amend the Revolving Facility, with lender consent. We continue to evaluate whether we want to increase our leverage capacity under this new legislation.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources.”

Recent Developments

From July 1, 2018 through September 30, 2018, we closed two new first lien senior secured debt investments totaling $11.7 million and one new equity investment totaling $0.8 million. Additionally, we made follow-on investments totaling $7.9 million, including a $4.0 million investment in Logan JV. The new and follow-on fixed or floating rate investments have a combined weighted average yield based upon cost at the time of the investment of 9.8%.

On July 25, 2018, we received $15.0 million in proceeds from the partial repayment of our first lien senior secured term loan in Alex Toys, LLC.

On August 2, 2018, we received $5.2 million in proceeds from the repayment of our second lien term loan in Gold, Inc.

On August 7, 2018, in consultation with our board of directors, we accepted the Advisor’s proposal to extend its waiver of 100% of the incentive fees accrued through June 30, 2019. Such incentive fees waived shall not be subject to recoupment. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Related Party Transactions” for more information.

On August 7, 2018, our board of directors declared a dividend of $0.27 per share payable on September 28, 2018 to stockholders of record at the close of business on September 14, 2018.

On August 17, 2018, we received $10.2 million in proceeds from the repayment of our second lien term loan in Dodge Data & Analytics LLC.

On September 19, 2018, we received $11.1 million in proceeds from the repayments of our senior secured term loan and senior secured delayed draw term loan in BeneSys Inc.

Risks

Investing in the Notes offered hereby involves certain risks. You should consider the information under “Supplementary Risks” beginning on page S-23 of this prospectus supplement and “Risks” beginning on page 18 of the accompanying prospectus and the other information included in this prospectus supplement and the accompanying prospectus before deciding to invest in the Notes.

General Information

Our principal executive offices are located at 100 Federal Street, 31st floor, Boston, MA 02110, and we can be reached by telephone at (800) 450-4424. We maintain a website on the Internet at www.THLCreditBDC.com. Information contained on or accessed through our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus, and you should not consider that information to be part of this prospectus supplement or the accompanying prospectus.



 

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We file annual, quarterly and current periodic reports, proxy statements and other information with the SEC under the Exchange Act. This information is available at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information about the operation of the SEC’s public reference room by calling the SEC at 202-551-8090 . In addition, the SEC maintains an Internet website, at www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers, including us, who file documents electronically with the SEC.



 

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SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Senior Securities,” and the consolidated financial statements and related notes included elsewhere herein. Financial information is presented for the years ended December 31, 2017, 2016, 2015, 2014, and 2013 in thousands, except per share data. The Consolidated Statement of Operations, Per share and the Consolidated Statement of Assets and Liabilities data for the years ending 2017, 2016, 2015, 2014, and 2013 have been derived from our financial statements that were audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm. The historical data are not necessarily indicative of results to be expected for any future period. The selected financial and other data for the six months ended June 30, 2018 and 2017 and other interim financial information is derived from our unaudited financial statements, and in the opinion of management, reflects all adjustments (consisting only of normal recurring adjustments) that are necessary to present fairly the results of such interim periods. Interim results as of and for the six months ended June 30, 2018 and 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

 

    For the six
months ended
June 30,
    For the years ended December 31,  
    2018     2017     2017     2016     2015     2014     2013  

Statement of Operations data:

             

Total investment income

    $  35,046     $ 40,079     $ 78,773     $ 84,585     $ 94,195     $ 91,928     $ 74,650  

Incentive fees

    (9)       2,465       3,185       4,461       11,894       11,184       10,682  

Base management fees

    4,652       5,212       10,389       10,998       11,825       11,142       7,521  

All other expenses

    11,209       12,254       26,128       24,271       23,147       20,372       14,547  

Incentive fee waiver(1)

    —         —         (811     —         —         —         —    

Income tax (benefit) provision and excise tax

    268       305       168       155       (243     1,040       511  

Net investment income

    18,926       19,843       39,714       44,700       47,572       48,190       41,389  

Net realized (loss) gain on investments, including foreign currency

    (38,452)       (11,025     (17,307     (38,849 )     190       (12,855 )     2,604  

Net change in unrealized appreciation (depreciation) on investments, including foreign currency

    28,159       (3,462     (31,606     11,141       (17,875     2,243       309  

Net change in unrealized appreciation (depreciation) attributable to non-controlling interests

    (601)       113       (13     140       —         —         —    

Provision for taxes on realized gain on investments

    —         (835     (842     —         (8     (249 )     —    

(Provision) benefit for taxes on unrealized gain on investments

    (154)       1,896       2,146       137       (1,226     (151 )     (1,960

Interest rate derivative periodic interest payments, net

    —         —         (46     (276 )     (443     (458 )     (433

Net change in unrealized appreciation (depreciation) on interest rate derivative

    —         —         50       156       7       71       769  

Net increase in net assets resulting from operations

    7,878       6,530       (7,904     17,149       28,217       36,791       42,678  

Per share data:

             

Net asset value per common share attributable to THL Credit, Inc. at end of period

    $10.23     $ 11.48     $ 10.51     $ 11.82     $ 12.58     $ 13.08     $ 13.36  

Market price at end of period

    7.82       9.95       9.05       10.01       10.70       11.76       16.49  

Net investment income

    0.58       0.60       1.21       1.35       1.41       1.42       1.37  

Net realized (loss) gain on investments

    (1.18)       (0.34     (0.53     (1.17 )     0.01       (0.38 )     0.09  

Provision for taxes on realized gain on investments

    —         (0.02     (0.03     —         —         (0.01 )     —    

Net change in unrealized appreciation (depreciation) on investments

    0.86       (0.04     (0.96     0.33       (0.53     0.06       0.01  

Net change in unrealized appreciation (depreciation) on interest rate derivative

    —         —         —         —         —         —         0.01  

Benefit (provision) for taxes on unrealized gain on investments

    —         —         0.07       0.01       (0.04     —         (0.07

Interest rate derivative periodic interest payments, net

    —         —         —         (0.01 )     (0.01     (0.01 )     (0.01

Net increase in net assets resulting from operations

    0.26       0.20       (0.24     0.51       0.84       1.08       1.41  

Distributions declared

    (0.54)       (0.54     1.08       1.29       1.36       1.36       15.43  

 

(1) 

Waived incentive fees are not subject to recoupment.

 

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    As of June 30,     As of December 31,  
    2018     2017     2017     2016     2015     2014     2013  

Consolidated Statement of Assets and Liabilities data at period end:

             

Total investments at fair value

  $ 558,981     $ 674,332     $ 608,691     $ 669,203     $ 754,163     $ 784,220     $ 648,867  

Cash

    12,545       3,924       3,617       6,376       3,850       2,656       7,829  

Other assets

    21,146       16,460       15,376       15,825       13,278       21,713       14,365  

Total assets

    592,672       694,716       627,684       691,404       771,291       808,589       671,061  

Loans payable, net

    143,201       199,163       167,317       181,655       256,749       293,028       202,470  

Notes payable, net

    107,345       106,678       107,015       106,347       81,809       47,927       —    

Other liabilities

    7,863       11,777       9,323       13,582       13,834       24,013       15,649  

Total liabilities

    258,409       317,618       283,655       301,584       352,392       364,968       218,119  

Total net assets attributable to THL Credit, Inc.

    334,161       376,268       343,327       389,105       418,899       443,621       452,942  

Net assets attributable to non-controlling interest

    102       830       702       715       —         —         —    

Total net assets

    334,263       377,098       344,029       389,820       418,899       443,621       452,942  

Total return based on market value(3)

    (7.50 )%      4.94     1.14     5.76     2.41     (20.96 )%      22.10

Total return based on average net asset value(4)

    (0.10 )%      (0.59 )%      (1.95 )%      4.21     6.57     8.08     12.05

Other data:

             

Weighted average annual yield on debt and income-producing investments(1)(5)

    10.8%       10.6     10.1     10.9 %     11.2 %     11.7 %     11.7 %

Weighted average annual yield on debt and income-producing investments including Logan JV(2)(5)

    11.3%       11.0     10.7     11.2 %     11.3 %     11.7 %     11.7 %

Number of portfolio investments at year end

    43       46       47       47       55       60       54  

 

(1) 

Excludes yield on the Logan JV.

(2)

Not relevant to the years ending December 31, 2014 or 2013 as Logan JV commenced operations on December 3, 2014.

(3) 

Assumes dividends are reinvested.

(4) 

Total return based on average net asset value was calculated using the sum of ending net asset value plus dividends to shareholders during the period, divided by the beginning net asset value, minus 1. The total return does not reflect any sales load that may be paid by shareholders.

(5) 

The weighted average yield of our debt and income-producing investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of our fees and expenses. The weighted average yield was computed using the effective interest rates as the respective period, including accretion of original issue discount and loan origination fees. This weighted average yield reflects the impact of loans on non-accrual status, but excludes the effect of non-income-producing equity investments.

Selected Quarterly Financial Data (Unaudited):

The tables below present selected financial data for the first two quarters of the fiscal year ending December 31, 2018, and each of the quarters within the fiscal years ending December 31, 2017 and 2016. The quarterly financial data presented has been derived from unaudited financial data which, in the opinion of management, presents fairly, in all material respects, the financial positions and results of operations of the Company.

 

Quarter Ended

  Investment
Income
    Net Investment
Income
    Net Change in
Unrealized
Appreciation
(Depreciation)
on Investments
    Net Realized
Gain (Loss) on
Investments, net
of taxes
    Net Realized/
Unrealized Gain
(Loss) on

Interest Rate
Derivative
    Provision for
taxes (benefit)
on unrealized
gain on
investments
    Net Increase
In Net
Assets From
Operations
 
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
 

June 30, 2018

  $ 18,357     $ 0.56     $ 10,099     $ 0.31     $ 16,897     $ 0.52     $ (25,336   $ (0.78   $ —       $ —       $ (121   $ —       $ 1,539     $ 0.05  

March 31, 2018

  $ 16,688     $ 0.51     $ 8,827     $ 0.27     $ 10,663     $ 0.32     $ (13,117   $ (0.40   $ —       $ —       $ (32   $ —       $ 6,341     $ 0.19  

 

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Quarter Ended

  Investment
Income
    Net Investment
Income
    Net Change in
Unrealized
Appreciation
(Depreciation)
on Investments
    Net Realized
Gain (Loss) on
Investments, net
of taxes
    Net Realized/
Unrealized Gain
(Loss) on

Interest Rate
Derivative
    Provision for
taxes (benefit)
on unrealized
gain on
investments
    Net Increase
In Net
Assets From
Operations
 
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
 

December 31, 2017

  $ 18,583     $ 0.57     $ 8,720     $ 0.27     $ (32,139   $ (0.98   $ 4,991     $ 0.15     $ —       $ —       $ (116   $ —       $ (18,544   $ (0.56

September 30, 2017

    20,111       0.62       11,154       0.34       3,919       0.12       (11,325     (0.35     —         —         365       0.02       4,113       0.13  

June 30, 2017

    20,275       0.62       10,154       0.31       251       0.01       (10,876     (0.33     —         —         1,744       0.05       1,273       0.04  

March 31, 2017

    19,804       0.61       9,686       0.29       (3,650     (0.11     (939     (0.03     4       —         153       —         5,254       0.15  

Quarter Ended

  Investment
Income
    Net Investment
Income
    Net Change in
Unrealized
Appreciation
(Depreciation)

on Investments
    Net Realized
Gain (Loss) on
Investments, net

of taxes
    Net Realized/
Unrealized Gain
(Loss) on

Interest Rate
Derivative
    Provision for
taxes (benefit)
on unrealized
gain on
investments
    Net Increase
In Net
Assets From
Operations
 
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
    Total     Per
Share
 

December 31, 2016

  $ 19,970     $ 0.61     $ 9,139     $ 0.28     $ (939 )   $ (0.04 )   $ (1,018 )   $ (0.02 )   $ 10     $ 0.00     $ 724     $ 0.02     $ 7,916     $ 0.24  

September 30, 2016

    21,565       0.65       10,495       0.32       24,674       0.75       (24,980 )     (0.76 )     78       —       (381 )     (0.01 )     9,886       0.30  

June 30, 2016

    20,478       0.62       11,663       0.35       (15,852 )     (0.48 )     3,681       0.11       (53 )     —       (99 )     —       (660 )     (0.02 )

March 31, 2016

    22,572       0.69       13,402       0.40       3,398       0.10       (16,532 )     (0.50 )     (155 )     —       (107 )     —       6       0.00  

 

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SUPPLEMENTARY RISKS

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

The Notes will not be secured by any of our assets or any of the assets of our subsidiaries. As a result, the Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes. As of September 30, 2018 we had $113.0 million outstanding under the Revolving Facility. The indebtedness under the Revolving Facility is effectively senior to the Notes to the extent of the value of the assets securing such indebtedness.

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

The Notes are obligations exclusively of THL Credit, Inc. and not of any of our subsidiaries. None of our subsidiaries will be a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future. Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, the Notes will be structurally subordinated to all indebtedness and other liabilities of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish. In addition, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to the Notes.

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

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

 

   

issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the SEC (these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset

 

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coverage, as defined in the 1940 Act, equals at least 200% after such borrowings, or 150% if certain requirements are met);

 

   

pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, except that we have agreed that, for the period of time during which the Notes are outstanding, we will not declare any dividend (except a dividend payable in our stock), or declare any other distribution (except a distribution payable in our stock), upon any class of our capital stock, or purchase or redeem any of our capital stock, if our asset coverage, as defined in the 1940 Act and after giving effect to any exemptive relief granted to us by the SEC with respect to such asset coverage, is (i) below the Asset Coverage Requirement, which is currently 200% for us, at the time of the declaration of such dividend or distribution or purchase or redemption and after deducting the amount of such dividend, distribution, purchase or redemption and (ii) has been below the Asset Coverage Requirement for the six consecutive months immediately preceding such declaration or purchase or redemption in each case, whether or not we continue to be subject to the Asset Coverage Requirement. Notwithstanding the foregoing restriction, we will be permitted to declare a cash dividend or distribution on our capital stock only up to such amount as is necessary for us to maintain our status as a RIC under Subchapter M of the Code;

 

   

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

 

   

enter into transactions with affiliates;

 

   

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

 

   

make investments; or

 

   

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

In addition, the indenture will not require us to offer to purchase the Notes in connection with a change of control or any other event.

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

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

Certain of our current debt instruments include more protections for their holders than the indenture and the Notes. In addition, other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition, Liquidity and Capital Resources—Credit Facility.” The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the Notes.

 

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An active trading market for the Notes may not develop or be maintained, which could limit the market price of the Notes or your ability to sell them.

The Notes are a new issue of debt securities for which there is no trading market. We intend to list the Notes on the NYSE within 30 days of the original issue date. Although we expect the Notes to be listed on the NYSE, we cannot provide any assurances that an active trading market will develop or be maintained for the Notes or that you will be able to sell your Notes. If the Notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors. If a rating agency assigns the Notes a non-investment grade rating, the Notes may be subject to greater price volatility than securities of similar maturity without such a non-investment grade rating. Below investment grade securities, which are often referred to as “junk” bonds, are viewed as speculative investments because of concerns with respect to the issuer’s capacity to pay interest and repay principal. The underwriters have advised us that they intend to make a market in the Notes, but they are not obligated to do so. The underwriters may discontinue any market-making in the Notes at any time at their sole discretion. Accordingly, we cannot assure you that a liquid trading market will develop or be maintained for the Notes, that you will be able to sell your Notes at a particular time or that the price you receive when you sell will be favorable. To the extent an active trading market does not develop or is not maintained, the liquidity and trading price for the Notes may be harmed. Accordingly, you may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.

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

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

 

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USE OF PROCEEDS

The net proceeds from the sale of $50,000,000 aggregate principal amount of the Notes in this offering are approximately $48,173,250 (or approximately $55,448,250 if the underwriters fully exercise their overallotment option) after deducting the underwriting discounts and commissions of $1,500,000 (or $1,725,000 if the underwriters fully exercise their overallotment option) payable by us and estimated offering expenses of approximately $326,750 payable by us.

We intend to use the net proceeds from this offering, together with other available funds, to repay certain of our indebtedness, including the redemption of $50.0 million of the 2021 Notes, which bear interest at 6.75% per annum and mature on November 15, 2021, and/or the repayment of a portion of the $113.0 million of debt outstanding under our Revolving Facility, as of September 30, 2018, which debt currently bears interest at rates of 4.66%. Through reborrowing under our Revolving Facility, we intend to invest in debt and equity securities of middle market companies in accordance with our investment objective and strategies described in this prospectus supplement and the accompanying prospectus.

 

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RATIO OF EARNINGS TO FIXED CHARGES

For the six-month period ended June 30, 2018 and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013, our ratio of earnings to fixed charges, computed as set forth below, were as follows:

 

     For the six
months ended
June 30,

2018
     For the year
ended
December 31,
2017
     For the year
ended
December 31,
2016
     For the year
ended
December 31,
2015
     For the year
ended
December 31,
2014
     For the year
ended
December 31,
2013
 

Earnings to Fixed Charges (1)

     2.0:1        0.5:1        2.1:1        3.0:1        4.4:1        7.4:1  

 

For purposes of computing the ratios of earnings to fixed charges, earnings represent net increase in stockholders’ equity resulting from operations plus (or minus) income tax expense (benefit), including excise and other tax expenses, and fixed charges. Fixed charges include interest and credit facility fees expense and amortization of debt issuance costs.

 

(1)

Earnings include net realized and unrealized gains or losses. Net realized and unrealized gains or losses can vary substantially from period to period.

 

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CAPITALIZATION

The following table set forth our capitalization at June 30, 2018:

 

   

on an actual basis; and

 

   

on an as adjusted basis to give effect to the sale of $57,500,000 of Notes in this offering (assuming the full exercise of the underwriters’ overallotment option) in each case assuming a public offering price of 100% of par, and after deducting the estimated underwriting discounts and commissions of approximately $1,725,000 and estimated offering expenses of $326,750 payable by us.

You should read this table together with “Use of Proceeds”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated statement of assets and liabilities in this prospectus supplement and the accompanying prospectus.

 

     As of June 30, 2018  
     Actual
(unaudited)
     As Adjusted
(unaudited)
 
     (amounts in thousands)  

Assets:

     

Cash

   $ 12,545      $ 12,545  

Investments at fair value

   $ 558,981      $ 558,981  

Other assets

   $ 21,146      $ 21,062  
  

 

 

    

 

 

 

Total assets

   $ 592,672      $ 592,588  

Liabilities:

     

Revolving facility (1)

   $ 143,201      $ 137,753  

Existing Notes (2)

   $ 107,345      $ 58,371  

Notes offered hereby

   $ —        $ 55,364  

Other liabilities

   $ 7,863      $ 7,863  
  

 

 

    

 

 

 

Total liabilities

   $ 258,409      $ 259,351  

Net assets:

     

Common stock, par value $0.001 per share; 100,000,000 shares authorized, 33,169 shares issued and outstanding

   $ 33      $ 33  

Capital in excess of par value

   $ 433,974      $ 433,974  

Undistributed income and net losses

   $ (99,744    $ (100,770
  

 

 

    

 

 

 

Total net assets

   $ 334,263      $ 333,237  

 

(1)

The above table reflects the carrying value of indebtedness outstanding under the Revolving Facility of $143.2 million. The net proceeds from the sale of the Notes in this offering may be used to pay down a portion of the outstanding indebtedness under the Revolving Facility. The above table assumes that a portion of the outstanding indebtedness under the Revolving Facility will be paid with any net proceeds from the sale of the Notes in this offering remaining after the redemption of the 2021 Notes. See “Use of Proceeds” in this prospectus supplement for additional information.

(2)

The above table reflects the carrying value of the indebtedness under the 2021 Notes and 2022 Notes of $50.0 million and $60.0 million, less unamortized debt issuance costs of $1.0 million and $1.6 million, respectively. The net proceeds from the sale of the Notes in this offering are expected to be used to redeem 2021 Notes. See “Use of Proceeds” in this prospectus supplement for additional information.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this prospectus supplement and the accompanying prospectus. In addition to historical information, the following discussion and other parts of this prospectus supplement and the accompanying prospectus contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under “Supplementary Risks” and “Special Note Regarding Forward-Looking Statements and Projections” appearing elsewhere in this prospectus supplement and under “Risks” and “Special Note Regarding Forward-Looking Statements” in the accompanying prospectus.

Overview

THL Credit, Inc. was organized as a Delaware corporation on May 26, 2009 and initially funded on July 23, 2009. We commenced principal operations on April 21, 2010. Our investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated investments in debt and equity securities of middle market companies.

We, together with our credit-focused affiliates, collectively have $15.9 billion of assets under management.3 This amount included our assets, assets of the managed funds and a separate account managed by us, and assets of the collateralized loan obligations (CLOs), separate accounts and various fund formats, including any uncalled commitments of private funds, as managed by the investment professionals of the Advisor or its consolidated subsidiary.

We are a direct lender to middle market companies and invest primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, we also make second lien, subordinated, or mezzanine, debt investments, which may include an associated equity component such as warrants, preferred stock or other similar securities and direct equity investments. Our first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. Unitranche structures combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and our unitranche loans will expose us to the risks associated with second lien and subordinated loans to the extent we invest in the “last-out” tranche or subordinated tranche (or piece) of the unitranche loan. We may also provide advisory services to managed funds.

We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities of private or thinly traded public U.S. companies, cash, cash equivalents, U.S. Government securities and high-quality debt investments that mature in one year or less.

As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case organized in the United States.

We are also registered as an investment adviser under the Advisers Act.

 

3 

As of August 31, 2018, other than with respect to assets under management through THL Credit, Inc. and its related funds and separate account, which are as of June 30, 2018. Includes assets under management of THL Credit Advisors LLC and its consolidated subsidiary, THL Credit Senior Loan Strategies LLC.

 

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Since April 2010, after we completed our initial public offering and commenced principal operations, through June 30, 2018, we have been responsible for making, on behalf of ourselves, managed funds and separately managed account, over $2.0 billion in aggregate commitments into 100 separate portfolio companies through a combination of both initial and follow-on investments. Since April 2010 through June 30, 2018, we, along with our managed funds and separately managed account, have received $1.4 billion of gross proceeds from the realization of investments. The Company alone has received $1.1 billion of gross proceeds from the realization of its investments during this same time period.

We have elected to be treated as a RIC under Subchapter M of the Code. To qualify for tax treatment as a RIC, we must, among other things, meet certain source of income, asset diversification and distribution requirements. As a RIC, we generally will not have to pay corporate-level income taxes on any income we timely distribute to our stockholders.

Portfolio Composition and Investment Activity

Portfolio Composition

As of June 30, 2018, we had $559.0 million of portfolio investments (at fair value), which represents an $49.7 million, or 8.2% decrease from the $608.7 million (at fair value) as of December 31, 2017. Our portfolio consisted of 43 investments, including Greenway and Greenway II, as of June 30, 2018, compared to 47 portfolio investments, including Greenway and Greenway II, as of December 31, 2017. As of June 30, 2018, we had $177.7 million of controlled portfolio investments (at fair value) in six portfolio companies, which represents a $19.0 million, or 12.0% increase from $158.7 million (at fair value) as of December 31, 2017. The increase in controlled portfolio companies was the result of follow-on investments, primarily in the Logan JV, and changes in performance of certain investments. Our average controlling equity position at June 30, 2018 was approximately $29.6 and $29.6 at cost and fair value, respectively. Our investment in the Logan JV represented 14.9% and 10.7% of our portfolio investments at fair value as of June 30, 2018 and December 31, 2017, respectively. We will aim to increase our investment in the Logan JV over the 2018 fiscal year to represent 15% or more of our portfolio but not to exceed 30% of our portfolio.

At June 30, 2018, our average portfolio company investment, excluding Greenway, Greenway II, Logan JV, and portfolio investments where we only have an equity or fund investment and restructured investments where we converted debt to a controlling equity interest, at amortized cost and fair value, was approximately $12.7 million and $12.5 million, respectively. Going forward, we intend to limit new investments in new portfolio companies to 2.5% of our investment portfolio. Including investments in funds, investments where we hold equity only positions or restructured investments where we converted debt to a controlling equity position would not be representative of our typical portfolio investment size and were therefore excluded from the calculation. Our largest portfolio company investment, excluding the Logan JV and investments where we hold equity only positions or restructured investments where we converted debt to a controlling equity position, by cost and fair value was approximately $30.1 million and $30.0 million, respectively. Including such investments, our largest portfolio company investment at June 30, 2018 was our investment in the Logan JV, which totaled $84.6 million and $82.0 million at cost and fair value, respectively. At December 31, 2017, our average portfolio company investment, excluding Greenway, Greenway II, Logan JV, and portfolio investments where we only have an equity or fund investment and restructured investments where we converted debt to a controlling equity interest, at amortized cost and fair value, was approximately $14.5 million and $13.4 million, respectively. Our largest portfolio company investment as of December 31, 2017, excluding the Logan JV and investments where we hold equity only positions or restructured investments where we converted debt to a controlling equity position, by amortized cost and fair value was approximately $30.2 million and $30.5 million. Including such investments, our largest portfolio company investment at December 31, 2017 was our investment in the Logan JV, which totaled $67.0 and $65.4 at cost and fair value, respectively.

 

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At June 30, 2018, based upon fair value, 95.3% of our debt investments bore interest based on floating rates, which may be subject to interest rate floors, such as the London Interbank offer rate, or LIBOR, and Canadian Dollar Offered Rate, or CDOR, and 4.7% bore interest at fixed rates. At December 31, 2017, 93.1% of our debt investments bore interest based on floating rates, which may be subject to interest rate floors, such as LIBOR, and 6.9% bore interest at fixed rates.

The following table shows the weighted average yield by investment category at their current cost.

 

     As of  

Description:

   June 30,
2018
    December 31,
2017
 

First lien senior secured debt (1)

     10.5     10.0

Second lien debt

     12.0     6.9

Subordinated debt

     16.5     13.5

Investments in payment rights (2)

     14.4     16.6

Income-producing equity securities (3)

     9.5     14.0
  

 

 

   

 

 

 

Debt and income-producing investments (1)(4)

     10.8     10.1

Logan JV (5)

     14.1     14.2

All investments including Logan JV (1)(5)

     11.3     10.7

 

(1) 

Includes all loans on non-accrual status.

(2) 

Yields from investments in payment rights represent an effective yield expected from anticipated cash flows.

(3) 

Includes income from debt-like equity securities where there is a stated rate and amounts are due on a fixed payment schedule.

(4) 

Includes yields on controlled investments, but excludes the yield on the Logan JV.

(5) 

As of June 30, 2018 and December 31, 2017, the distributions declared and earned of $2.4 million and $2.6 million for the three months ended June 30, 2018 and December 31, 2017, respectively, represented a yield to us of 14.1% and 14.2%, respectively, based on average capital invested. We expect the dividend yield to fluctuate as a result of the timing of additional capital invested, the changes in asset yields in the underlying portfolio and the overall performance of the Logan JV investment portfolio.

The weighted average yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of our fees and expenses. The weighted average yield was computed using the effective interest rates as of June 30, 2018, including accretion of original issue discount and loan origination fees. This weighted average yield reflects the impact of loans on non-accrual status. There can be no assurance that the weighted average yield will remain at its current level. As of June 30, 2018 and December 31, 2017, 3.5% and 6.2% of our investment portfolio at fair value was comprised of non-income producing investments. We intend to continue to reduce our non-income producing investments in 2018 and beyond. No assurance can be given that we will be successful in achieving this target.

As of June 30, 2018 and December 31, 2017, portfolio investments, in which we have debt investments, had a median adjusted EBITDA of approximately $11.0 million and $11.0 million, respectively, based on the latest available financial information provided by the portfolio companies for each of these periods. As of June 30, 2018 and December 31, 2017, our median attachment point in the capital structure of our debt investments in portfolio companies is approximately 4.4 times and 4.3 times the portfolio company’s EBITDA, respectively, based on our latest available financial information for each of these periods.

We expect the percent of our portfolio investments in unsponsored investments to decrease significantly over time as we work through restructurings, which may include providing additional liquidity through revolving loans, and ultimately exit our unsponsored investments. However, these portfolio investments may require

 

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follow-on capital as we work through restructurings, which will increase our exposure to these investments. Going forward we expect unsponsored investments we make, if any, would only be in first lien senior secured investments. As of June 30, 2018, our portfolio of unsponsored investments included six investments. Five are performing at or above our expectations and have an Investment Score of 1 or 2. Two other unsponsored investments have Investment Scores of 3 and 5.

As of June 30, 2018, we have closed portfolio investments with 62 different sponsors since inception. As of December 31, 2017, we had closed portfolio investments with 62 different sponsors since inception.

The following table summarizes sponsored and unsponsored investments based on amortized cost and fair value (in millions).

 

     As of June 30, 2018     As of December 31, 2017  
     Amortized
Cost
     Fair
Value
     Fair
Value
as % of
Total
    Amortized
Cost
     Fair
Value
     Fair
Value
as % of
Total
 

Sponsored Investments (1)

   $ 393.8      $ 380.1        79.7   $ 477.7      $ 435.0        80.1

Unsponsored Investments (1)

     85.9        96.8        20.3     95.6        108.3        19.9
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

   $ 479.7      $ 476.9        100.0   $ 573.3      $ 543.3        100.0
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

(1) 

Excludes THL Credit Greenway Fund I LLC, THL Credit Greenway Fund II LLC, and THL Credit Logan JV LLC.

The following table summarizes the amortized cost and fair value of investments as of June 30, 2018 (in millions).

 

Description

   Amortized
Cost
     Percentage of
Total
    Fair Value (1)      Percentage of
Total
 

First lien senior secured debt

   $ 375.6        66.6   $ 368.0        65.7

Investment in Logan JV

     84.6        15.0     82.0        14.9

Equity investments

     49.3        8.7     55.9        10.0

Second lien debt

     31.5        5.6     31.3        5.6

Investment in payment rights

     10.3        1.8     11.2        2.0

Subordinated debt

     9.1        1.6     6.4        1.1

Investments in funds

     3.7        0.7     3.9        0.7

Warrants

     0.2        0.0     0.3        0.0
  

 

 

    

 

 

   

 

 

    

 

 

 

Total investments

   $ 564.3        100.0   $ 559.0        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) 

All investments are categorized as Level 3 in the fair value hierarchy, except for investments in funds and the Logan JV, which are excluded from the fair value hierarchy in accordance with ASU 2015-07. These assets are valued at net asset value.

 

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The following table summarizes the amortized cost and fair value of investments as of December 31, 2017 (in millions).

 

Description

   Amortized
Cost
     Percentage of
Total
    Fair Value (1)      Percentage of
Total
 

First lien senior secured debt

   $ 419.0        65.4   $ 407.0        66.9

Equity investments

     64.4        10.1     69.2        11.4

Investment in Logan JV

     67.0        10.5     65.4        10.7

Second lien debt

     53.4        8.3     32.8        5.4

Subordinated debt

     22.3        3.5     19.1        3.1

Investment in payment rights

     10.3        1.6     11.3        1.9

Investments in funds

     3.8        0.6     3.8        0.6

Warrants

     0.2        0.0     0.1        0.0
  

 

 

    

 

 

   

 

 

    

 

 

 

Total investments

   $ 640.4        100.0   $ 608.7        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) 

All investments are categorized as Level 3 in the fair value hierarchy, except for investments in funds and the Logan JV, which are excluded from the fair value hierarchy in accordance with ASU 2015-07. These assets are valued at net asset value.

We expect the percent of our core assets, which we define as first lien senior secured loans and the Logan JV, to continue to increase as a percent of total investments as we are repaid or liquidate our second lien debt, subordinated debt and other equity holdings over time and redeploy these proceeds. We intend to continue our efforts to reposition the portfolio towards more senior secured floating rate investments, which we believe will reduce our exposure to portfolio company risks and potential changes in interest rates.

The following is a summary of the industry classification in which the Company invests as of June 30, 2018 (in millions).

 

Industry

   Amortized
Cost
     Fair Value      % of Total
Portfolio
    % of Net
Assets
 

Industrials and manufacturing

   $ 96.2      $ 94.6        16.90     28.27

Consumer products and services

     99.0        93.5        16.71     27.94

Investment funds and vehicles

     84.6        82.0        14.67     24.53

IT services

     57.5        56.3        10.06     16.83

Healthcare

     51.3        50.5        9.04     15.12

Financial services

     41.0        42.3        7.57     12.66

Retail & grocery

     36.9        42.3        7.57     12.66

Energy / utilities

     46.6        38.6        6.91     11.56

Business services

     32.8        38.3        6.86     11.47

Media, entertainment and leisure

     17.2        17.1        3.07     5.13

Transportation

     1.0        3.1        0.56     0.93

Restaurants

     0.2        0.4        0.08     0.13
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Investments

   $ 564.3      $ 559.0        100.00     167.23
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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The following is a summary of the industry classification in which the Company invests as of December 31, 2017 (in millions)

 

Industry

   Amortized
Cost
     Fair Value      % of Total
Portfolio
    % of Net
Assets
 

Consumer products and services

   $ 122.0      $ 117.1        19.25     34.05

Industrials and manufacturing

     92.5        93.3        15.32     27.11

Financial services

     75.1        77.7        12.76     22.57

Investment funds and vehicles

     67.0        65.4        10.75     19.01

IT services

     57.4        56.2        9.23     16.32

Healthcare

     46.0        45.7        7.51     13.29

Business services

     38.6        42.3        6.94     12.29

Energy / utilities

     46.1        38.4        6.31     11.17

Retail & grocery

     41.6        37.6        6.18     10.93

Media, entertainment and leisure

     31.4        30.4        4.99     8.83

Transportation

     1.0        3.1        0.51     0.91

Restaurants

     21.7        1.5        0.25     0.45
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Investments

   $ 640.4      $ 608.7        100.00     176.93
  

 

 

    

 

 

    

 

 

   

 

 

 

Investment Activity

The following is a summary of our investment activity, presented on a cost basis, for the three and six months ended June 30, 2018 and 2017 (in millions).

 

     Three months
ended June 30,
    Six months
ended June 30,
 
     2018     2017     2018     2017  

New portfolio investments

   $ —       $ 17.4     $ —       $ 45.4  

Existing portfolio investments:

        

Follow-on investments (1) (2)

     19.2       4.5       25.6       9.7  

Delayed draw and revolver investments (1)

     5.3       1.1       10.6       6.7  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total existing portfolio investments

     24.5       5.6       36.2       16.4  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total portfolio investment activity

   $ 24.5     $ 23.0     $ 36.2     $ 61.8  
  

 

 

   

 

 

   

 

 

   

 

 

 

Number of new portfolio investments

     —         2       —         4  

Number of follow-on investments

     8       5       9       8  

First lien senior secured debt

   $ 13.3     $ 18.5     $ 18.6     $ 50.4  

Investment in Logan JV

     11.2       4.0       17.6       8.0  

Subordinated debt

     —         —         —         1.7  

Equity investments

     —         0.5       —         1.7  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total portfolio investments

   $ 24.5     $ 23.0     $ 36.2     $ 61.8  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average yield of new debt investments

     9.0     9.8     8.7     10.9

Weighted average yield, including all new income-producing investments (2)

     11.4     9.8     11.3     11.0

 

(1) 

Includes follow-on investments in controlled investments. Refer to Schedule 12-14 in the accompanying notes to the consolidated financial statements included in this prospectus supplement for additional detail.

(2) 

Includes follow-on investments in Logan JV

For the three and six months ended June 30, 2018, we had prepayments and sales of our investments, including any prepayment premiums, totaling $59.8 million and $69.6 million, respectively. For the three and six

 

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months ended June 30, 2017, we had prepayments and sales of our investments, including any prepayment premiums, totaling $32.7 million and $44.5 million, respectively. Please refer to “Results of Operations- Net Realized Gains and Losses on Investments, net of income tax provision” for additional details surrounding certain investments that were sold.

The following are proceeds received from notable prepayments, sales and other activity related to our investments (in millions):

For the six months ended June 30, 2018

 

   

Repayment of a subordinated term loan and realization of preferred equity interest in A10 Capital, LLC, which resulted in proceeds of $26.6 million, including a prepayment premium of $0.3 million;

 

   

Repayment of a first lien senior secured term loan in The John Gore Organization, Inc., which resulted in proceeds of $13.8 million, including a prepayment premium of $0.1 million;

 

   

Partial sale of a first lien senior secured term loan in Fairstone Financial Inc., which resulted in proceeds of $7.7 million;

 

   

Partial repayment of a first lien senior secured term loan in Home Partners of America, Inc., which resulted in proceeds of $5.9 million;

 

   

Sale of a second lien term loan in Specialty Brands Holdings, LLC, which resulted in proceeds received of $0.4 million.

 

   

Repayment of a first lien senior secured term loan and revolver in Togetherwork Holdings, LLC, which resulted in proceeds of $5.7 million, including a prepayment premium of $0.1 million, and

 

   

Sale of a first lien senior secured term loan, subordinated term loans, preferred equity and common equity in Aerogroup International Inc., which resulted in proceeds received of $2.5 million and $8.0 million recorded as an initial escrow receivable, at the time of sale.

For the six months ended June 30, 2017

 

   

Repayment of a senior secured term loan in Healthcarefirst, Inc. at par which resulted in proceeds of $8.3 million;

 

   

Sale of a second lien term loan in Hostway Corporation, which resulted in proceeds of $16.4 million;

 

   

Sale of a CLO residual interest in Flagship VIII, Ltd., which resulted in proceeds of $5.1 million;

 

   

Partial sale of a preferred equity position in A10 Capital, LLC, which resulted in proceeds of $4.3 million;

 

   

Partial repayment of a first lien senior secured term loan in MeriCal, LLC, which resulted in proceeds of $2.3 million, including a prepayment premium of $0.1 million;

 

   

Sale of a CLO residual interest in Flagship VII, Ltd., which resulted in proceeds of $2.2 million;

 

   

Realization of our equity interests in YP Equity Investors, LLC which resulted in proceeds of $1.7 million; and

 

   

Sale of a second lien term loan in Washington Inventory Service, which resulted in proceeds of $0.6 million.

Our level of investment activity can vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity, the general economic environment and the competitive environment for the types of investments we make. The frequency and volume of any prepayments may fluctuate significantly from period to period.

 

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Aggregate Cash Flow Realized Gross Internal Rate of Return

Since April 2010, after we completed our initial public offering and commenced principal operations, through June 30, 2018, our fully exited investments have resulted in an aggregate cash flow realized gross internal rate of return to us of 13.2% (based on cash invested of $1,026.3 million and total proceeds from these exited investments of $1,272.1 million). 84.9% of these exited investments resulted in an aggregate cash flow realized gross internal rate of return to us of 10% or greater. Internal rate of return, or IRR, is a measure of our discounted cash flows (inflows and outflows). Specifically, IRR is the discount rate at which the net present value of all cash flows is equal to zero. That is, IRR is the discount rate at which the present value of total cash invested in our investments is equal to the present value of all realized returns from the investments. Our IRR calculations are unaudited.

Cash invested, with respect to an investment, represents our aggregate cash investment in the debt or equity securities we acquire.

Realized returns, with respect to an investment, represents the total cash received with respect to each investment, including all amortization payments, interest, dividends, prepayment fees, upfront fees, original issue discount, amendment fees and other fees and proceeds.

Gross IRR, with respect to an investment, is calculated based on the dates that we invested capital and dates we received distributions, regardless of when we made distributions to our stockholders. Initial investments are assumed to occur at time zero, and all cash flows are deemed to occur on the date in which they did occur.

Gross IRR reflects historical results relating to our past performance and is not necessarily indicative of our future results. In addition, gross IRR does not reflect the effect of management fees, expenses, incentive fees or taxes borne, or to be borne, by us or our stockholders, and would be lower if it did.

Aggregate cash flow realized gross IRR on our exited investments reflects only invested and realized cash amounts as described above, and does not reflect any unrealized gains or losses in our portfolio or non-cash restructuring transactions. Cash flows exclude sales of participations if they were anticipated at the time of the initial investment.

Investment Risk

The value of our investments will generally fluctuate with, among other things, changes in prevailing interest rates, federal tax rates, counterparty risk, general economic conditions, the condition of certain financial markets, developments or trends in any particular industry and the financial condition of the issuer. During periods of limited liquidity and higher price volatility, our ability to dispose of investments at a price and time that we deem advantageous may be impaired.

Lower-quality debt securities involve greater risk of default or price changes due to changes in the credit quality of the issuer. The value of lower-quality debt securities often fluctuates in response to company, political, or economic developments and can decline significantly over short periods of time or during periods of general or regional economic difficulty. Lower-quality debt securities can be thinly traded or have restrictions on resale, making them difficult to sell at an acceptable price. The default rate for lower-quality debt securities is likely to be higher during economic recessions or periods of high interest rates.

THL Credit Logan JV LLC

On December 3, 2014, we entered into an agreement with Perspecta to create Logan JV, a joint venture, which invests primarily in senior secured first lien term loans. All Logan JV investment decisions must be unanimously approved by the Logan JV investment committee consisting of one representative from each of us and Perspecta.

 

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We have determined that Logan JV is an investment company under ASC 946, however, in accordance with such guidance, we will generally not consolidate our investment in a company other than a substantially owned investment company subsidiary or a controlled operating company whose business consists of providing services to us. Accordingly, we do not consolidate our non-controlling interest in Logan JV.

Logan JV is capitalized with equity contributions which are generally called from its members, on a pro-rata basis based on their equity commitments, as transactions are completed. Any decision by the Logan JV to call down on capital commitments requires the explicit authorization of us, coupled with that of Perspecta, and we may withhold such authorization for any reason in our sole discretion.

As of June 30, 2018 and December 31, 2017, Logan JV had the following commitments, contributions and unfunded commitments from its members (in millions).

 

     As of June 30, 2018  

Member

   Total
Commitments
     Contributed
Capital
     Unfunded
Commitments
 

THL Credit, Inc.

   $ 200.0      $ 80.6      $ 119.4  

Perspecta Trident LLC

     50.0        20.2        29.8  
  

 

 

    

 

 

    

 

 

 

Total Investments

   $ 250.0      $ 100.8      $ 149.2  
  

 

 

    

 

 

    

 

 

 

 

     As of December 31, 2017  

Member

   Total
Commitments
     Contributed
Capital
     Unfunded
Commitments
 

THL Credit, Inc.

   $ 200.0      $ 67.0      $ 133.0  

Perspecta Trident LLC

     50.0        16.8        33.2  
  

 

 

    

 

 

    

 

 

 

Total Investments

   $ 250.0      $ 83.8      $ 166.2  
  

 

 

    

 

 

    

 

 

 

Logan JV has a senior credit facility, or the Logan JV Credit Facility, with Deutsche Bank AG and other banks. As of June 30, 2018 and December 31, 2017, the Logan JV Credit Facility had $200.0 million and $175.0 million of commitments subject to leverage and borrowing base restrictions with an interest rate of three month LIBOR (with no LIBOR floor) plus 2.40% and LIBOR (with no LIBOR floor) plus 2.50%, respectively. The final maturity date of the Logan JV Credit Facility is January 12, 2023 with the revolving loan period ending on January 12, 2021. As of June 30, 2018 and December 31, 2017, Logan JV had $215.6 million and $169.6 million of outstanding borrowings under the credit facility, respectively.

As of June 30, 2018 and December 31, 2017, Logan JV had total investments at fair value of $294.9 million and $250.4 million, respectively. As of June 30, 2018 and December 31, 2017, Logan JV’s portfolio was comprised of senior secured first lien and second lien loans to 124 and 110 different borrowers, respectively. As of June 30, 2018 and December 31, 2017, there were no loans on non-accrual status. As of June 30, 2018 and December 31, 2017, Logan JV had unfunded commitments to fund revolver and delayed draw loans to its portfolio companies totaling $4.9 million and $1.4 million, respectively. The portfolio companies in Logan JV are in industries similar to those in which we may invest directly.

 

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Below is a summary of Logan JV’s portfolio, followed by a listing of the individual loans in Logan JV’s portfolio as of June 30, 2018 and December 31, 2017 (dollar amounts in thousands):

 

     As of
June 30,
2018
    As of
December 31,

2017
 

First lien secured debt, at par

   $ 282,502     $ 233,904  

Second lien debt, at par

     23,609       22,847  
  

 

 

   

 

 

 

Total debt investments, at par

   $ 306,111     $ 256,751  
  

 

 

   

 

 

 

Weighted average yield on first lien secured loans (1)

     6.9     6.4

Weighted average yield on second lien loans (1)

     10.1     9.3

Weighted average yield on all loans (1)

     7.2     6.7

Number of borrowers in Logan JV

     124       110  

Largest loan to a single borrower (2)

   $ 5,000     $ 5,000  

Total of five largest loans to borrowers (2)

   $ 24,784     $ 24,397  

 

(1) 

Weighted average yield at their current amortized cost.

(2) 

At current principal amount.

The weighted average yield of Logan JV’s debt investments is not the same as a return on Logan JV investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of our expenses. The weighted average yield was computed using the effective interest rates as of June 30, 2018 and December 31, 2017, respectively, but excluding the effective rates on investments on non-accrual status, if any. There can be no assurance that the weighted average yield will remain at its current level.

For the three and six months ended June 30, 2018, our share of income from distributions declared related to our Logan JV LLC equity interest was $2.4 million and $4.8 million, respectively, which amounts are included in dividend income and realized gains from controlled investments in the Consolidated Statements of Operations. For the three and six months ended June 30, 2017, our share of income from distributions declared related to our Logan JV LLC equity interest was $2.1 million and $4.2 million, respectively, which amounts are included in dividend income from controlled investments in the Consolidated Statements of Operations. As of June 30, 2018 and December 31, 2017, $2.6 million and $2.6 million, respectively, of income related to the Logan JV was included in interest, dividends and fees receivable on the Consolidated Statements of Assets and Liabilities. As of June 30, 2018, the distributions declared and earned of $9.9 million for the twelve months ended June 30, 2018, represented a dividend yield to the Company of 14.1% based upon average capital invested. As of December 31, 2017, distributions declared and earned of $9.3 million for the twelve months ended December 31, 2017, represented a dividend yield to the Company of 14.2% based upon average capital invested. We expect the dividend yield to fluctuate as a result of the timing of additional capital invested, the changes in asset yields in the underlying portfolio and the overall performance of the Logan JV investment portfolio.

 

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Table of Contents

Logan JV Loan Portfolio as of June 30, 2018

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

Senior Secured First Lien Term Loans

             

Canada

             

Can Am Construction Inc

  Construction & Building   7.59% (LIBOR +5.5%)     06/29/2017       07/01/2024       1,188     $ 1,157     $ 1,203  

Parq Holdings LP

  Hotel, Gaming & Leisure   9.83% (LIBOR +7.5%)     12/05/2014       12/17/2020       993       986       995  

PNI Canada Acquireco Corp

  High Tech Industries   7.84% (LIBOR +5.75%)     08/23/2017       09/21/2022       1,811       1,719       1,827  
           

 

 

   

 

 

 

Total Canada

            $ 3,862     $ 4,025  
           

 

 

   

 

 

 

Germany

             

Rhodia Acetow

  Construction & Building   7.95% (LIBOR +5.5%)     04/21/2017       05/31/2023       990     $ 978     $ 995  

VAC Germany Holding GmbH

  Metals & Mining   6.33% (LIBOR +4%)     02/26/2018       02/26/2025       2,993       2,978       3,008  
           

 

 

   

 

 

 

Total Germany

            $ 3,956     $ 4,003  
           

 

 

   

 

 

 

United Kingdom

             

EG Group

  Retail   6.33% (LIBOR +4%)     03/23/2018       02/07/2025       2,860     $ 2,846     $ 2,839  
           

 

 

   

 

 

 

Total United Kingdom

            $ 2,846     $ 2,839  
           

 

 

   

 

 

 

United States of America

             

1A Smart Start LLC

  Services: Consumer   6.59% (LIBOR +4.5%)     03/20/2017       02/21/2022       1,588     $ 1,583     $ 1,588  

1A Smart Start LLC

  Services: Consumer   6.84% (LIBOR +4.75%)     08/28/2015       02/21/2022       2,438       2,424       2,438  

A Place for Mom Inc

  Services: Consumer   5.84% (LIBOR +3.75%)     07/28/2017       08/10/2024       3,970       3,953       3,982  

A10 Capital, LLC

  Services: Business   8.58% (LIBOR +6.5%)     04/25/2018       04/27/2023       5,000       4,952       4,950  

Advanced Computer Software

  High Tech Industries   6.78% (LIBOR +4.75%)     05/25/2018       05/31/2024       1,500       1,496       1,511  

Advanced Integration Technology LP

  Aerospace & Defense   7.22% (LIBOR +4.75%)     07/15/2016       04/03/2023       1,965       1,950       1,965  

AgroFresh Inc.

  Services: Business   7.11% (LIBOR +4.75%)     12/01/2015       07/31/2021       1,950       1,942       1,940  

Air Medical Group Holdings Inc

  Healthcare & Pharmaceuticals   6.34% (LIBOR +4.25%)     09/26/2017       03/14/2025       2,239       2,223       2,212  

Alpha Media LLC

  Media: Broadcasting & Subscription   8.1% (LIBOR +6%)     02/24/2016       02/25/2022       3,172       3,074       3,013  

American Sportsman Holdings Co

  Retail   7.09% (LIBOR +5%)     11/22/2016       09/25/2024       3,970       3,922       3,981  

Ansira Holdings, Inc. (3)

  Media: Advertising, Printing & Publishing   7.73% (LIBOR +5.75%)     04/17/2018       12/20/2022       613       68       67  

Ansira Holdings, Inc.

  Media: Advertising, Printing & Publishing   7.84% (LIBOR +5.75%)     12/20/2016       12/20/2022       140       139       139  

Ansira Holdings, Inc.

  Media: Advertising, Printing & Publishing   7.84% (LIBOR +5.75%)     12/20/2016       12/20/2022       1,719       1,706       1,710  

AP Gaming I LLC

  Hotel, Gaming & Leisure   6.34% (LIBOR +4.25%)     06/06/2016       02/15/2024       2,475       2,469       2,498  

 

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Table of Contents

Logan JV Loan Portfolio as of June 30, 2018

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

APC Aftermarket

  Automotive   7.36% (LIBOR +5%)     05/09/2017       05/10/2024       495       487       486  

Aptean, Inc.

  Services: Business   6.59% (LIBOR +4.25%)     02/15/2016       12/20/2022       1,975       1,959       1,977  

Avaya Inc

  Telecommunications   6.32% (LIBOR +4.25%)     11/09/2017       12/15/2024       2,601       2,575       2,608  

Barbri Inc

  Media: Diversified & Production   6.25% (LIBOR +4.25%)     12/01/2017       11/21/2023       3,491       3,475       3,496  

Beasley Mezzanine Holdings LLC

  Media: Broadcasting & Subscription   6.09% (LIBOR +4%)     11/17/2017       11/01/2023       2,966       2,952       2,996  

Big Ass Fans LLC

  Services: Business   6.08% (LIBOR +3.75%)     11/07/2017       05/21/2024       2,488       2,476       2,497  

Big River Steel LLC

  Metals & Mining   7.33% (LIBOR +5%)     08/15/2017       08/23/2023       1,985       1,968       2,019  

BI-LO LLC

  Retail   10.33% (LIBOR +8%)     05/15/2018       05/31/2024       1,500       1,440       1,452  

Bomgar Corp

  Telecommunications   6.33% (LIBOR +4%)     04/17/2018       04/18/2025       2,000       1,995       2,010  

Brand Energy & Infrastructure Services, Inc.

  Services: Business   6.61% (LIBOR +4.25%)     06/16/2017       06/21/2024       2,970       2,944       2,979  

Catapult Learning, Inc.

  Services: Consumer   8.52% (LIBOR +6.35%)     05/22/2018       05/18/2023       4,739       4,692       4,692  

Catapult Learning, Inc. (4) (14)

  Services: Consumer   6.84% (LIBOR +4.5%)     05/22/2018       05/18/2023       261       (3     (3

CC Amulet Intermediate, LLC (5) (14)

  Healthcare & Pharmaceuticals   3.34% (LIBOR +1%)     06/18/2018       04/30/2024       1,538       (15     (15

CC Amulet Intermediate, LLC

  Healthcare & Pharmaceuticals   6.84% (LIBOR +4.75%)     06/18/2018       04/30/2024       3,462       3,427       3,427  

Clear Balance Holdings, LLC

  Banking, Finance, Insurance & Real Estate   8.08% (LIBOR +5.75%)     07/07/2015       10/05/2023       4,963       4,942       4,938  

Commercial Barge Line Co

  Transportation: Cargo   10.84% (LIBOR +8.75%)     11/06/2015       11/12/2020       1,331       1,300       932  

Constellis Holdings, LLC

  Aerospace & Defense   7.33% (LIBOR +5%)     04/18/2017       04/21/2024       1,980       1,964       1,991  

Conyers Park Parent Merger Sub Inc

  Retail   5.86% (LIBOR +3.5%)     06/21/2017       07/07/2024       1,985       1,976       2,012  

Country Fresh Holdings, LLC

  Beverage, Food & Tobacco   7.33% (LIBOR +5%)     07/14/2017       03/31/2023       4,747       4,708       4,593  

Covenant Surgical Partners Inc (11)

  Healthcare & Pharmaceuticals   7.11% (LIBOR +4.75%)     09/29/2017       10/04/2024       690       412       417  

Covenant Surgical Partners Inc

  Healthcare & Pharmaceuticals   6.81% (LIBOR +4.5%)     09/29/2017       10/04/2024       2,296       2,291       2,308  

CPI Acquisition, Inc.

  Services: Consumer   6.36% (LIBOR +4.5%)     08/14/2015       08/17/2022       4,187       4,095       2,544  

CryoLife Inc

  Healthcare & Pharmaceuticals   6.33% (LIBOR +4%)     11/15/2017       12/02/2024       1,990       1,981       2,006  

CT Technologies Intermediate Holdings, Inc

  Healthcare & Pharmaceuticals   6.34% (LIBOR +4.25%)     02/11/2015       12/01/2021       1,930       1,935       1,832  

Deerfield Holdings Corp

  Banking, Finance, Insurance & Real Estate   5.58% (LIBOR +3.25%)     12/06/2017       12/06/2024       249       249       249  

DigiCert, Inc.

  Services: Business   6.84% (LIBOR +4.75%)     09/20/2017       10/31/2024       998       993       998  

DXP Enterprises, Inc.

  Energy: Oil & Gas   6.84% (LIBOR +4.75%)     08/16/2017       08/29/2023       1,489       1,476       1,497  

 

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Table of Contents

Logan JV Loan Portfolio as of June 30, 2018

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

Evo Payments International, LLC

  Services: Business   5.36% (LIBOR +3.25%)     12/08/2016       12/22/2023       2,607       2,587       2,603  

Fleetpride

  Automotive   6.59% (LIBOR +4.5%)     03/28/2018       11/19/2022       1,674       1,625       1,687  

Freedom Mortgage Corporation

  Banking, Finance, Insurance & Real Estate   6.84% (LIBOR +4.75%)     02/17/2017       02/23/2022       —         —         —    

FullBeauty Brands LP

  Retail   6.84% (LIBOR +4.75%)     03/08/2016       10/14/2022       3,909       3,730       1,622  

Gold Standard Baking, Inc.

  Wholesale   8.5% (LIBOR +4.5%)     05/19/2015       04/23/2021       2,910       2,903       2,706  

Golden West Packaging Group LLC

  Forest Products & Paper   7.34% (LIBOR +5.25%)     02/09/2018       06/20/2023       4,872       4,849       4,878  

Great Dane Merger Sub Inc

  Services: Business   5.86% (LIBOR +3.75%)     05/02/2018       05/21/2025       3,000       2,985       3,015  

Green Plains Inc

  Chemicals, Plastics & Rubber   7.6% (LIBOR +5.5%)     08/18/2017       08/29/2023       1,418       1,406       1,439  

Gruden Acquisition Inc.

  Transportation: Cargo   7.83% (LIBOR +5.5%)     06/21/2017       08/18/2022       1,980       1,940       1,997  

Gulf Finance, LLC

  Energy: Oil & Gas   7.59% (LIBOR +5.25%)     08/17/2016       08/25/2023       1,884       1,843       1,635  

Heartland Dental LLC (6)(14)

  Services: Consumer   6.09% (LIBOR +3.75%)     04/19/2018       04/17/2025       196       (1     (1

Heartland Dental LLC

  Services: Consumer   5.84% (LIBOR +3.75%)     04/19/2018       04/30/2025       1,304       1,298       1,299  

Help/Systems Holdings, Inc.

  Services: Business   5.84% (LIBOR +3.75%)     03/23/2018       03/28/2025       2,000       1,995       2,003  

Higginbotham Insurance Agency, Inc.

  Banking, Finance, Insurance & Real Estate   5.84% (LIBOR +3.75%)     12/14/2017       12/19/2024       4,975       4,952       4,913  

Idera Inc

  High Tech Industries   6.6% (LIBOR +4.5%)     06/27/2017       06/28/2024       2,344       2,323       2,376  

Impala Private Holdings II LLC

  Services: Business   6.1% (LIBOR +4%)     11/10/2017       11/14/2024       1,658       1,651       1,659  

Infoblox Inc.

  High Tech Industries   6.59% (LIBOR +4.5%)     11/03/2016       11/07/2023       2,147       2,107       2,169  

Insurance Technologies

  Banking, Finance, Insurance & Real Estate   8.39% (LIBOR +6.5%)     03/26/2015       12/15/2021       3,032       3,010       3,032  

Insurance Technologies (12)(14)

  Banking, Finance, Insurance & Real Estate   2.34% (LIBOR +0%)     03/26/2015       12/15/2021       137       (1     —    

International Textile Group Inc

  Consumer goods: Durable   6.98% (LIBOR +5%)     04/20/2018       04/19/2024       1,000       995       1,007  

Isagenix International LLC

  Consumer goods: Non-Durable   8.08% (LIBOR +5.75%)     04/26/2018       04/26/2025       2,000       1,980       2,005  

Kemet Corporation

  High Tech Industries   8.09% (LIBOR +6%)     04/21/2017       04/26/2024       950       926       964  

Kestra Financial, Inc.

  Banking, Finance, Insurance & Real Estate   6.59% (LIBOR +4.5%)     06/10/2016       06/24/2022       3,920       3,881       3,910  

KMG Chemicals Inc

  Chemicals, Plastics & Rubber   4.84% (LIBOR +2.75%)     06/13/2017       06/15/2024       734       731       736  

LifeScan Global Corp (13)

  Healthcare & Pharmaceuticals   8.34% (LIBOR +6%)     06/19/2018       06/18/2024       2,250       2,183       2,188  

 

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Table of Contents

Logan JV Loan Portfolio as of June 30, 2018

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

LSCS Holdings Inc. (9)

  Healthcare & Pharmaceuticals   6.34% (LIBOR +4.25%)     03/09/2018       03/17/2025       544       427       430  

LSCS Holdings Inc.

  Healthcare & Pharmaceuticals   6.75% (LIBOR +4.25%)     03/09/2018       03/17/2025       2,171       2,160       2,171  

Lyons Magnus Inc

  Beverage, Food & Tobacco   5.59% (LIBOR +2.5%)     06/08/2018       11/11/2024       3,984       3,971       4,001  

MAG DS Corp.

  Aerospace & Defense   6.76% (LIBOR +4.75%)     06/01/2018       05/30/2025       3,000       2,970       2,993  

Mavenir Systems Inc

  Services: Business   8.03% (LIBOR +6%)     05/01/2018       05/01/2025       2,000       1,961       2,005  

MCS Group Holdings LLC

  Services: Business   7.08% (LIBOR +4.75%)     05/12/2017       05/20/2024       1,980       1,972       1,916  

MDVIP Inc

  Services: Business   6.34% (LIBOR +4.25%)     11/10/2017       11/14/2024       3,025       3,011       3,040  

Merrill Communications LLC

  Media: Advertising, Printing & Publishing   7.61% (LIBOR +5.25%)     05/29/2015       06/01/2022       1,750       1,744       1,772  

Miller’s Ale House Inc

  Beverage, Food & Tobacco   6.84% (LIBOR +4.75%)     05/24/2018       05/21/2025       2,400       2,388       2,403  

Morphe, LLC

  Consumer goods: Non-Durable   8.33% (LIBOR +6%)     02/21/2017       02/10/2023       2,813       2,780       2,813  

Nasco Healthcare, Inc.

  Healthcare & Pharmaceuticals   7.02% (LIBOR +4.5%)     07/13/2015       06/30/2021       4,513       4,501       4,467  

New Insight Holdings Inc

  Services: Business   7.86% (LIBOR +5.5%)     12/08/2017       12/20/2024       1,990       1,898       1,960  

NextCare, Inc. (10)(14)

  Healthcare & Pharmaceuticals   7.09% (LIBOR +4.75%)     02/13/2018       02/28/2023       588       (5     (6

NextCare, Inc.

  Healthcare & Pharmaceuticals   6.84% (LIBOR +4.75%)     02/13/2018       02/28/2023       3,403       3,371       3,369  

Northern Star Holdings Inc.

  Services: Business   7.08% (LIBOR +4.75%)     03/28/2018       03/14/2025       4,239       4,219       4,245  

Oak Point Partners, LLC

  Banking, Finance, Insurance & Real Estate   7.09% (LIBOR +4.75%)     09/13/2017       09/13/2023       3,000       2,967       3,000  

OB Hospitalist Group Inc

  Healthcare & Pharmaceuticals   6.23% (LIBOR +4.25%)     08/08/2017       08/01/2024       2,364       2,354       2,376  

Odyssey Logistics & Technology Corp

  Transportation: Cargo   5.84% (LIBOR +3.75%)     10/06/2017       10/12/2024       1,990       1,980       2,002  

OpenLink

  High Tech Industries   7.33% (LIBOR +5%)     03/02/2018       03/21/2025       1,985       1,975       1,997  

Output Services Group Inc

  Services: Business   6.34% (LIBOR +4.25%)     03/26/2018       03/21/2024       3,721       3,703       3,759  

Output Services Group Inc (8)(14)

  Services: Business   6.59% (LIBOR +4.25%)     03/26/2018       03/31/2024       769       (4     8  

Park Place Technologies, LLC

  Services: Business   6.09% (LIBOR +4%)     03/22/2018       03/22/2025       2,340       2,329       2,343  

Ping Identity Corp

  High Tech Industries   5.84% (LIBOR +3.75%)     01/23/2018       01/24/2025       1,500       1,493       1,503  

Project Leopard Holdings Inc

  High Tech Industries   6.09% (LIBOR +4%)     06/21/2017       07/07/2023       1,737       1,733       1,739  

PSC Industrial Outsourcing, LP

  Environmental Industries   5.84% (LIBOR +3.75%)     10/05/2017       10/11/2024       1,990       1,972       1,995  

PT Holdings LLC

  Wholesale   6.33% (LIBOR +4%)     12/04/2017       12/09/2024       —         —         —    

Quidditch Acquisition Inc

  Beverage, Food & Tobacco   9.09% (LIBOR +7%)     03/16/2018       03/21/2025       1,019       999       1,029  

 

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Table of Contents

Logan JV Loan Portfolio as of June 30, 2018

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

Red Ventures LLC

  Media: Diversified & Production   6.09% (LIBOR +4%)     10/18/2017       11/08/2024       2,481       2,459       2,497  

SCS Holdings Inc

  Services: Business   6.34% (LIBOR +4.25%)     11/20/2015       10/30/2022       1,751       1,741       1,758  

Silverback Merger Sub Inc

  High Tech Industries   5.58% (LIBOR +3.5%)     08/11/2017       08/21/2024       1,191       1,188       1,179  

Sirva Worldwide, Inc.

  Transportation: Cargo   8.86% (LIBOR +6.5%)     11/18/2016       11/22/2022       2,757       2,706       2,767  

Situs Group Holdings Corporation

  Banking, Finance, Insurance & Real Estate   6.59% (LIBOR +4.5%)     02/21/2018       02/27/2023       3,990       3,971       3,970  

SMS Systems Maintenance Services Inc

  Services: Business   7.09% (LIBOR +5%)     02/09/2017       10/30/2023       2,955       2,943       2,384  

SoClean, Inc

  Consumer goods: Non-Durable   8.31% (LIBOR +6%)     02/13/2018       12/20/2022       3,175       3,145       3,175  

Standard Media Group LLC (13)

  Media: Diversified & Production   6.34% (LIBOR +4%)     06/22/2018       06/19/2025       2,000       1,990       2,003  

Starfish- V Merger Sub Inc

  High Tech Industries   7.09% (LIBOR +5%)     08/11/2017       08/16/2024       1,241       1,230       1,246  

STS Operating, Inc.

  Services: Consumer   5.84% (LIBOR +3.75%)     04/27/2018       12/11/2024       1,496       1,493       1,497  

TerraForm AP Acquisition Holdings LLC

  Energy: Electricity   6.58% (LIBOR +4.25%)     10/11/2016       06/27/2022       809       809       812  

ThoughtWorks, Inc.

  High Tech Industries   6.09% (LIBOR +4%)     10/06/2017       10/11/2024       3,000       2,993       3,021  

ThoughtWorks, Inc.

  High Tech Industries   6.09% (LIBOR +4%)     04/19/2018       10/11/2024       571       569       574  

ThoughtWorks, Inc. (7)(14)

  High Tech Industries   6.34% (LIBOR +4%)     04/19/2018       10/12/2024       429       (2     2  

TKC Holdings Inc

  Consumer goods: Durable   5.85% (LIBOR +3.75%)     06/08/2017       02/01/2023       296       295       296  

TOMS Shoes LLC

  Retail   7.59% (LIBOR +5.5%)     12/18/2014       10/30/2020       1,935       1,876       1,472  

Tupelo Buyer Inc

  Transportation: Consumer   5.81% (LIBOR +3.75%)     10/02/2017       10/07/2024       2,215       2,200       2,217  

TV Borrower US LLC

  High Tech Industries   7.08% (LIBOR +4.75%)     02/16/2017       02/22/2024       988       983       990  

Uber Technologies, Inc.

  Transportation: Consumer   6% (LIBOR +4%)     03/22/2018       04/04/2025       2,800       2,786       2,813  

US Salt LLC

  Chemicals, Plastics & Rubber   6.84% (LIBOR +4.75%)     11/30/2017       12/01/2023       2,993       2,965       2,992  

US Shipping Corp

  Utilities: Oil & Gas   6.34% (LIBOR +4.25%)     03/09/2016       06/26/2021       206       199       199  

Utility One Source L.P.

  Construction & Building   7.59% (LIBOR +5.5%)     04/07/2017       04/18/2023       990       982       1,016  

Verdesian Life Sciences LLC

  Chemicals, Plastics & Rubber   7.36% (LIBOR +5%)     12/09/2014       07/01/2020       2,061       1,924       1,988  

Vertiv Group Corporation

  Capital Equipment   6% (LIBOR +4%)     09/30/2015       11/30/2023       1,504       1,468       1,497  

Viewpoint Inc

  High Tech Industries   6.55% (LIBOR +4.25%)     07/18/2017       07/19/2024       993       988       997  

Vistage Worldwide, Inc.

  Services: Business   6.05% (LIBOR +4%)     02/06/2018       02/10/2025       2,514       2,508       2,523  

Weight Watchers International, Inc.

  Beverage, Food & Tobacco   7.06% (LIBOR +4.75%)     11/20/2017       11/29/2024       2,633       2,584       2,668  

 

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Table of Contents

Logan JV Loan Portfolio as of June 30, 2018

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

Wirepath Home Systems LLC

  Services: Consumer   6.83% (LIBOR +4.5%)     07/31/2017       08/05/2024       2,978       2,964       2,994  

Women’s Care Florida LLP

  Healthcare & Pharmaceuticals   6.59% (LIBOR +4.5%)     08/18/2017       09/29/2023       4,975       4,953       4,969  

Yak Access LLC (13)

  Construction & Building   7.34% (LIBOR +5%)     06/29/2018       06/13/2025       3,000       2,910       2,910  

Zenith Merger Sub, Inc.

  Services: Business   7.83% (LIBOR +5.5%)     12/22/2017       12/13/2023       2,985       2,958       2,970  
           

 

 

   

 

 

 

Total United States of America

            $ 264,140     $ 260,500  
           

 

 

   

 

 

 
             
           

 

 

   

 

 

 

Total Senior Secured First Lien Term Loans

            $ 274,804     $ 271,367  
           

 

 

   

 

 

 

Second Lien Term Loans

             

Luxembourg

             

Lully Finance S.a.r.l.

  Telecommunications   10.59% (LIBOR +8.5%)     07/31/2015       10/16/2023       1,000     $ 993     $ 998  
           

 

 

   

 

 

 

Total Luxembourg

            $ 993     $ 998  
           

 

 

   

 

 

 

United States of America

             

ABG Intermediate Holdings 2 LLC

  Consumer goods: Non-Durable   9.84% (LIBOR +7.75%)     09/26/2017       09/29/2025       2,333     $ 2,317     $ 2,339  

BJ’s Wholesale Club, Inc.

  Beverage, Food & Tobacco   9.53% (LIBOR +7.5%)     01/27/2017       02/03/2025       —         —         —    

CH Hold Corp

  Automotive   9.34% (LIBOR +7.25%)     01/26/2017       02/03/2025       1,000       996       1,016  

Constellis Holdings, LLC

  Aerospace & Defense   11.33% (LIBOR +9%)     04/18/2017       04/21/2025       1,000       987       1,012  

DigiCert, Inc.

  Services: Business   10.09% (LIBOR +8%)     09/20/2017       10/31/2025       750       747       734  

DiversiTech Holdings Inc

  Capital Equipment   9.84% (LIBOR +7.5%)     05/18/2017       06/02/2025       2,000       1,983       2,030  

Gruden Acquisition Inc.

  Transportation: Cargo   10.83% (LIBOR +8.5%)     07/31/2015       08/18/2023       500       484       503  

Midwest Physician Administrative Services, LLC

  Healthcare & Pharmaceuticals   9.09% (LIBOR +7%)     08/11/2017       08/15/2025       979       970       984  

NextCare, Inc.

  Healthcare & Pharmaceuticals   10.84% (LIBOR +8.75%)     02/13/2018       08/28/2023       1,000       986       985  

NN Inc.

  Automotive   10.03% (LIBOR +8%)     05/03/2018       04/19/2023       3,000       2,941       2,985  

Optiv Security Inc

  Services: Business   9.31% (LIBOR +7.25%)     01/19/2017       01/31/2025       1,500       1,494       1,456  

Park Place Technologies, LLC

  Services: Business   10.09% (LIBOR +8%)     03/22/2018       03/29/2026       700       693       702  

Pathway Partners Vet Management

  Healthcare & Pharmaceuticals   10.09% (LIBOR +8%)     10/04/2017       10/10/2025       1,899       1,882       1,890  

Pathway Partners Vet Management

  Healthcare & Pharmaceuticals   10.09% (LIBOR +8%)     10/04/2017       10/10/2025       101       100       100  

Red Ventures LLC

  Media: Diversified & Production   10.09% (LIBOR +8%)     10/18/2017       11/08/2025       497       490       507  

SESAC Holdco II LLC

  Media: Diversified & Production   9.34% (LIBOR +7.25%)     02/13/2017       02/24/2025       1,000       992       994  

 

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Table of Contents

Logan JV Loan Portfolio as of June 30, 2018

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

TKC Holdings Inc

  Consumer goods: Durable   10.1% (LIBOR +8%)     01/31/2017       02/01/2024       1,850       1,837       1,856  

TV Borrower US LLC

  High Tech Industries   10.58% (LIBOR +8.25%)     02/16/2017       02/22/2025       1,000       987       990  

Viewpoint Inc

  High Tech Industries   12.25% (LIBOR +8.25%)     07/18/2017       07/21/2025       1,000       991       1,005  

Wash Multifamily Laundry Systems, LLC.

  Services: Consumer   9.09% (LIBOR +7%)     05/04/2015       05/15/2023       425       424       413  

Wash Multifamily Laundry Systems, LLC.

  Services: Consumer   9.09% (LIBOR +7%)     05/04/2015       05/12/2023       75       74       72  

Total United States of America

            $ 22,375     $ 22,573  
           

 

 

   

 

 

 
             
           

 

 

   

 

 

 

Total Second Lien Term Loans

            $ 23,368     $ 23,571  
           

 

 

   

 

 

 
             
           

 

 

   

 

 

 

Total Investments

            $ 298,172     $ 294,938  
           

 

 

   

 

 

 

Cash and cash equivalents

             

Dreyfus Government Cash Management Fund

              29,356       29,356  

Other cash accounts

              53       53  
           

 

 

   

 

 

 

Total Cash and cash equivalents

            $ 29,409     $ 29,409  
           

 

 

   

 

 

 

 

(1)

Variable interest rates indexed to 30-day, 60-day, 90-day or 180-day LIBOR rates, at the borrower’s option. LIBOR rates are subject to interest rate floors.

(2)

Represents fair value in accordance with ASC Topic 820.

(3)

Represents a delayed draw commitment of $613,171, of which $543,250 was unfunded as of June 30, 2018. Unfunded amounts of a delayed draw position have a lower rate than the contractual fully funded rate. Issuer pays 2.50% unfunded commitment fee on delayed draw term loan and/or revolving loan facilities.

(4)

Represents a delayed draw commitment of $260,664, which was unfunded as of June 30, 2018. Issuer does not pay unfunded commitment fee on delayed draw term loan and/or revolving loan facilities.

(5)

Represents a delayed draw commitment of $1,538,462, which was unfunded as of June 30, 2018. Issuer pays 1.00% unfunded commitment fee on delayed draw term loan and/or revolving loan facilities.

(6)

Represents a delayed draw commitment of $195,652, which was unfunded as of June 30, 2018. Issuer pays 1.875% unfunded commitment fee on delayed draw term loan and/or revolving loan facilities.

(7)

Represents a delayed draw commitment of $428,571, which was unfunded as of June 30, 2018. Issuer pays 2.00% unfunded commitment fee on delayed draw term loan and/or revolving loan facilities.

(8)

Represents a delayed draw commitment of $769,231, which was unfunded as of June 30, 2018. Issuer pays 4.25% unfunded commitment fee on delayed draw term loan and/or revolving loan facilities.

(9)

Represents a delayed draw commitment of $544,000, of which $114,240 was unfunded as of June 30, 2018. Unfunded amounts of a delayed draw position have a lower rate than the contractual fully funded rate. Issuer pays 4.25% unfunded commitment fee on delayed dray term loan and/or revolving loan facilities.

(10)

Represents a delayed draw commitment of $588,235, which was unfunded as of June 30, 2018. Issuer pays 1.00% unfunded commitment fee on delayed draw term loan and/or revolving loan facilities.

 

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Table of Contents

Logan JV Loan Portfolio as of June 30, 2018

(dollar amounts in thousands)

 

(11)

Represents a delayed draw commitment of $690,373, of which $276,923 was unfunded as of June 30, 2018. Unfunded amounts of a delayed draw position have a lower rate than the contractual fully funded rate. Issuer pays 4.50% unfunded commitment fee on delayed dray term loan and/or revolving loan facilities.

(12)

Represents a delayed draw commitment of $136,964, which was unfunded as of June 30, 2018. Issuer pays 0.50% unfunded commitment fee on delayed draw term loan and/or revolving loan facilities.

(13)

Unsettled trade that interest will start to accrue on when the trade settles. 3 month Libor as of June 30, 2018 is shown to reflect possible projected interest rate.

(14)

Unfunded amount will start to accrue interest when the position is funded. 3 month Libor as of June 30, 2018 is shown to reflect possible projected interest rate.

 

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Table of Contents

Logan JV Loan Portfolio as of December 31, 2017

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

Senior Secured First Lien Term Loans

             

Canada

             

Can Am Construction Inc

  Construction & Building   7.07% (LIBOR +5.5%)     06/29/2017       07/01/2024       1,194     $ 1,160     $ 1,206  

Parq Holdings LP

  Hotel, Gaming & Leisure   9.19% (LIBOR +7.5%)     12/05/2014       12/17/2020       998     $ 989     $ 1,005  

PNI Canada Acquireco Corp

  High Tech Industries   7.32% (LIBOR +5.75%)     08/23/2017       09/21/2022       1,820     $ 1,717     $ 1,764  
           

 

 

   

 

 

 

Total Canada

            $ 3,866     $ 3,975  
           

 

 

   

 

 

 

Cayman Islands

             

Lindblad Maritime

  Hotel, Gaming & Leisure   6.34% (LIBOR +4.5%)     06/23/2015       05/08/2021       334     $ 336     $ 337  
           

 

 

   

 

 

 

Total Cayman Islands

            $ 336     $ 337  
           

 

 

   

 

 

 

Denmark

             

Rhodia Acetow

  Construction & Building   7.19% (LIBOR +5.5%)     04/21/2017       05/31/2023       995     $ 982     $ 999  
           

 

 

   

 

 

 

Total Denmark

            $ 982     $ 999  
           

 

 

   

 

 

 

Luxembourg

             

AMS FinCo SARL

  Services: Business   7.07% (LIBOR +5.5%)     05/17/2017       05/27/2024       2,488     $ 2,465     $ 2,512  
           

 

 

   

 

 

 

Total Luxembourg

            $ 2,465     $ 2,512  
           

 

 

   

 

 

 

United States of America

             

1A Smart Start LLC

  Services: Consumer   6.19% (LIBOR +4.5%)     03/20/2017       02/21/2022       1,593     $ 1,588     $ 1,586  

1A Smart Start LLC

  Services: Consumer   6.44% (LIBOR +4.75%)     08/28/2015       02/21/2022       2,450     $ 2,434     $ 2,450  

A Place for Mom Inc

  Services: Consumer   5.69% (LIBOR +4%)     07/28/2017       08/10/2024       3,990     $ 3,971     $ 4,002  

Advanced Integration Technology LP

  Aerospace & Defense   6.32% (LIBOR +4.75%)     07/15/2016       04/03/2023       1,975     $ 1,958     $ 1,990  

AgroFresh Inc.

  Services: Business   6.44% (LIBOR +4.75%)     12/01/2015       07/31/2021       1,955     $ 1,946     $ 1,935  

Air Medical Group Holdings Inc

  Healthcare & Pharmaceuticals   4.25% (LIBOR +4.25%)     09/26/2017       09/25/2024       2,250     $ 2,233     $ 2,259  

Alpha Media LLC

  Media: Broadcasting & Subscription   7.42% (LIBOR +6%)     02/24/2016       02/25/2022       3,299     $ 3,184     $ 3,159  

American Sportsman Holdings Co

  Retail   6.569% (LIBOR +5%)     11/22/2016       09/25/2024       3,990     $ 3,938     $ 3,985  

Ansira Holdings, Inc. (3)

  Media: Advertising, Printing & Publishing   8.19% (LIBOR +6.5%)     12/20/2016       12/20/2022       254     $ 138     $ 139  

Ansira Holdings, Inc.

  Media: Advertising, Printing & Publishing   8.19% (LIBOR +6.5%)     12/20/2016       12/20/2022       1,728     $ 1,714     $ 1,719  

AP Gaming I LLC

  Hotel, Gaming & Leisure   7.07% (LIBOR +5.5%)     06/06/2017       02/15/2024       2,488     $ 2,482     $ 2,517  

APC Aftermarket

  Automotive   6.41% (LIBOR +5%)     05/09/2017       05/10/2024       498     $ 488     $ 492  

Aptean, Inc.

  Services: Business   5.95% (LIBOR +4.25%)     12/15/2017       12/20/2022       1,985     $ 1,967     $ 2,004  

Avaya Inc

  Telecommunications   6.23% (LIBOR +4.75%)     11/09/2017       12/15/2024       2,614     $ 2,586     $ 2,577  

 

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Table of Contents

Logan JV Loan Portfolio as of December 31, 2017

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

Barbri Inc

  Media: Diversified & Production   5.73% (LIBOR +4.25%)     12/01/2017       11/21/2023       3,500     $ 3,483     $ 3,500  

Beasley Mezzanine Holdings LLC

  Media: Broadcasting & Subscription   5.49% (LIBOR +4%)     11/17/2017       11/15/2023       3,033     $ 3,018     $ 3,064  

Big Ass Fans LLC

  Services: Business   5.94% (LIBOR +4.25%)     11/07/2017       05/21/2024       2,500     $ 2,488     $ 2,511  

Big River Steel LLC

  Metals & Mining   6.69% (LIBOR +5%)     08/15/2017       08/23/2023       1,995     $ 1,976     $ 2,017  

Birch Communications, Inc.

  Telecommunications   8.6% (LIBOR +7.25%)     12/05/2014       07/17/2020       1,289     $ 1,280     $ 1,234  

Brand Energy & Infrastructure Services, Inc.

  Services: Business   5.63% (LIBOR +4.25%)     06/16/2017       06/21/2024       2,985     $ 2,957     $ 3,000  

Clear Balance Holdings, LLC

  Banking, Finance, Insurance & Real Estate   7.44% (LIBOR +5.75%)     07/07/2015       06/30/2020       4,988     $ 4,976     $ 4,938  

Commercial Barge Line Co

  Transportation: Cargo   10.32% (LIBOR +8.75%)     11/06/2015       11/12/2020       1,369     $ 1,330     $ 800  

Constellis Holdings, LLC

  Aerospace & Defense   6.69% (LIBOR +5%)     04/18/2017       04/21/2024       1,990     $ 1,972     $ 2,014  

ConvergeOne Holdings Corp.

  Telecommunications   6.45% (LIBOR +4.75%)     06/15/2017       06/20/2024       1,990     $ 1,972     $ 1,997  

Conyers Park Parent Merger Sub Inc

  Retail   5.39% (LIBOR +4%)     06/21/2017       07/07/2024       1,995     $ 1,986     $ 2,012  

Country Fresh Holdings, LLC

  Beverage, Food & Tobacco   6.69% (LIBOR +5%)     07/14/2017       03/31/2023       4,874     $ 4,829     $ 4,825  

Covenant Surgical Partners Inc (5)

  Healthcare & Pharmaceuticals   6.13% (LIBOR +4.75%)     09/29/2017       09/28/2024       692     $ 126     $ 133  

Covenant Surgical Partners Inc

  Healthcare & Pharmaceuticals   6.09% (LIBOR +4.75%)     09/29/2017       10/04/2024       2,308     $ 2,302     $ 2,325  

CPI Acquisition, Inc.

  Services: Consumer   5.96% (LIBOR +4.5%)     08/14/2015       08/17/2022       4,187     $ 4,084     $ 3,057  

CryoLife Inc

  Healthcare & Pharmaceuticals   5.36% (LIBOR +4%)     11/15/2017       12/02/2024       2,000     $ 1,990     $ 2,020  

CT Technologies Intermediate Holdings, Inc

  Healthcare & Pharmaceuticals   5.82% (LIBOR +4.25%)     02/11/2015       12/01/2021       1,940     $ 1,946     $ 1,939  

Cvent, Inc.

  Services: Business   5.32% (LIBOR +3.75%)     06/16/2016       11/29/2024       1,990     $ 1,972     $ 1,995  

Deerfield Holdings Corp

  Banking, Finance, Insurance & Real Estate   3.25% (LIBOR +3.25%)     12/06/2017       12/06/2024       250     $ 249     $ 251  

DigiCert, Inc.

  Services: Business   6.13% (LIBOR +4.75%)     09/20/2017       10/31/2024       1,000     $ 995     $ 1,014  

DXP Enterprises, Inc.

  Energy: Oil & Gas   7.07% (LIBOR +5.5%)     08/16/2017       08/29/2023       1,496     $ 1,482     $ 1,511  

EmployBridge Holding Co.

  Services: Business   8.19% (LIBOR +6.5%)     02/04/2015       05/15/2020       2,912     $ 2,907     $ 2,844  

EnergySolutions, LLC

  Environmental Industries   6.45% (LIBOR +4.75%)     07/28/2017       05/29/2020       3,727     $ 3,774     $ 3,783  

Evo Payments International, LLC

  Services: Business   5.57% (LIBOR +4%)     12/08/2016       12/22/2023       2,620     $ 2,598     $ 2,646  

Fairmount Santrol Holdings Inc.

  Metals & Mining   7.69% (LIBOR +6%)     10/27/2017       11/01/2022       2,000     $ 1,971     $ 2,028  

Freedom Mortgage Corporation

  Banking, Finance, Insurance & Real Estate   6.96% (LIBOR +5.5%)     02/17/2017       02/23/2022       2,956     $ 2,948     $ 3,002  

FullBeauty Brands LP

  Retail   6.32% (LIBOR +4.75%)     03/08/2016       10/14/2022       3,929     $ 3,729     $ 2,325  

 

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Table of Contents

Logan JV Loan Portfolio as of December 31, 2017

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

Gold Standard Baking, Inc.

  Wholesale   6.25% (LIBOR +4.5%)     05/19/2015       04/23/2021       2,925     $ 2,917     $ 2,918  

Green Plains Inc

  Chemicals, Plastics & Rubber   7.07% (LIBOR +5.5%)     08/18/2017       08/29/2023       1,425     $ 1,411     $ 1,439  

Gruden Acquisition Inc.

  Transportation: Cargo   7.19% (LIBOR +5.5%)     06/21/2017       08/18/2022       1,990     $ 1,945     $ 1,998  

Gulf Finance, LLC

  Energy: Oil & Gas   6.95% (LIBOR +5.25%)     08/17/2016       08/25/2023       1,946     $ 1,899     $ 1,756  

Heartland Dental LLC

  Services: Consumer   6.45% (LIBOR +4.75%)     07/28/2017       07/31/2023       1,000     $ 995     $ 1,015  

Higginbotham Insurance Agency, Inc.

  Banking, Finance, Insurance & Real Estate   3.75% (LIBOR +3.75%)     12/14/2017       11/30/2024       5,000     $ 4,975     $ 5,013  

Idera Inc

  High Tech Industries   6.57% (LIBOR +5%)     06/27/2017       06/28/2024       2,356     $ 2,334     $ 2,358  

Impala Private Holdings II LLC

  Services: Business   5.7% (LIBOR +4%)     11/10/2017       11/14/2024       1,667     $ 1,658     $ 1,661  

Infoblox Inc.

  High Tech Industries   6.57% (LIBOR +5%)     11/03/2016       11/07/2023       2,205     $ 2,168     $ 2,221  

Insurance Technologies

  Banking, Finance, Insurance & Real Estate   7.74% (LIBOR +6.5%)     03/26/2015       12/15/2021       3,406     $ 3,377     $ 3,406  

Insurance Technologies(4)

  Banking, Finance, Insurance & Real Estate   0.5% (LIBOR +0.5%)     03/26/2015       12/15/2021       137     $ (1   $ —    

Jackson Hewitt Tax Service Inc

  Services: Consumer   8.38% (LIBOR +7%)     07/24/2015       07/30/2020       931     $ 921     $ 923  

Kemet Corporation

  High Tech Industries   7.57% (LIBOR +6%)     04/21/2017       04/26/2024       975     $ 948     $ 986  

Kestra Financial, Inc.

  Banking, Finance, Insurance & Real Estate   6.94% (LIBOR +5.25%)     06/10/2016       06/24/2022       3,940     $ 3,896     $ 3,940  

KMG Chemicals Inc

  Chemicals, Plastics & Rubber   4.32% (LIBOR +2.75%)     06/13/2017       06/15/2024       809     $ 805     $ 813  

Lindblad Expeditions Inc

  Hotel, Gaming & Leisure   6.34% (LIBOR +4.5%)     06/23/2015       05/08/2021       2,591     $ 2,600     $ 2,610  

Lyons Magnus Inc aka

  Consumer goods: Non-Durable   5.68% (LIBOR +4.25%)     11/03/2017       11/11/2024       2,500     $ 2,488     $ 2,527  

Margaritaville Holdings LLC

  Beverage, Food & Tobacco   7.46% (LIBOR +6%)     03/12/2015       03/12/2021       4,177     $ 4,155     $ 4,177  

MCS Group Holdings LLC

  Services: Business   6.25% (LIBOR +4.75%)     05/12/2017       05/20/2024       1,990     $ 1,981     $ 2,005  

MDVIP Inc

  Services: Business   5.66% (LIBOR +4.25%)     11/10/2017       11/14/2024       3,040     $ 3,025     $ 3,048  

Merrill Communications LLC

  Media: Advertising, Printing & Publishing   6.63% (LIBOR +5.25%)     05/29/2015       06/01/2022       1,750     $ 1,743     $ 1,765  

Meter Readings Holding, LLC

  Utilities: Electric   7.23% (LIBOR +5.75%)     08/17/2016       08/29/2023       2,967     $ 2,941     $ 2,982  

Morphe, LLC

  Retail   7.69% (LIBOR +6%)     02/21/2017       02/10/2023       2,888     $ 2,850     $ 2,873  

Nasco Healthcare, Inc.

  Healthcare & Pharmaceuticals   6.07% (LIBOR +4.5%)     07/13/2015       06/30/2021       4,536     $ 4,523     $ 4,513  

New Insight Holdings Inc

  Services: Business   7.13% (LIBOR +5.5%)     12/08/2017       12/20/2024       2,000     $ 1,900     $ 1,918  

NextCare, Inc.

  Healthcare & Pharmaceuticals   7.57% (LIBOR +6%)     08/21/2015       07/31/2018       2,919     $ 2,916     $ 2,919  

 

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Logan JV Loan Portfolio as of December 31, 2017

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

Oak Point Partners, LLC

  Banking, Finance, Insurance & Real Estate   7.32% (LIBOR +5.75%)     09/13/2017       09/13/2023       3,000     $ 2,964     $ 2,978  

OB Hospitalist Group Inc

  Healthcare & Pharmaceuticals   5.61% (LIBOR +4.25%)     08/08/2017       08/01/2024       2,400     $ 2,389     $ 2,424  

Odyssey Logistics & Technology Corp

  Transportation: Cargo   5.82% (LIBOR +4.25%)     10/06/2017       10/12/2024       2,000     $ 1,990     $ 2,010  

Pre-Paid Legal Services, Inc

  Services: Business   6.82% (LIBOR +5.25%)     05/21/2015       07/01/2019       828     $ 826     $ 831  

Project Leopard Holdings Inc

  High Tech Industries   7.19% (LIBOR +5.5%)     06/21/2017       07/07/2023       1,746     $ 1,742     $ 1,760  

PSC Industrial Outsourcing, LP

  Environmental Industries   5.71% (LIBOR +4.25%)     10/05/2017       10/11/2024       2,000     $ 1,981     $ 2,030  

PT Holdings LLC

  Wholesale   5.57% (LIBOR +4%)     12/04/2017       12/09/2024       3,000     $ 2,985     $ 3,018  

Quest Software

  High Tech Industries   6.92% (LIBOR +5.5%)     11/09/2017       10/31/2022       2,725     $ 2,706     $ 2,773  

Red Ventures LLC

  Media: Diversified & Production   4.25% (LIBOR +4%)     10/18/2017       11/08/2024       2,494     $ 2,470     $ 2,495  

Riverbed Technology, Inc.

  High Tech Industries   4.82% (LIBOR +3.25%)     02/25/2015       04/24/2022       966     $ 962     $ 953  

SCS Holdings Inc

  Services: Business   5.82% (LIBOR +4.25%)     11/20/2015       10/30/2022       1,807     $ 1,796     $ 1,821  

Silverback Merger Sub Inc

  High Tech Industries   5.44% (LIBOR +4%)     08/11/2017       08/21/2024       1,197     $ 1,194     $ 1,210  

Sirva Worldwide, Inc.

  Transportation: Cargo   7.99% (LIBOR +6.5%)     11/18/2016       11/22/2022       2,878     $ 2,818     $ 2,906  

SMS Systems Maintenance Services Inc

  Services: Business   6.57% (LIBOR +5%)     02/09/2017       10/30/2023       2,970     $ 2,957     $ 2,554  

Starfish- V Merger Sub Inc

  High Tech Industries   6.69% (LIBOR +5%)     08/11/2017       08/16/2024       1,247     $ 1,235     $ 1,220  

TerraForm AP Acquisition Holdings LLC

  Energy: Electricity   5.94% (LIBOR +4.25%)     10/11/2016       06/27/2022       868     $ 868     $ 873  

Thoughtworks, Inc.

  High Tech Industries   6.07% (LIBOR +4.5%)     10/06/2017       10/11/2024       3,000     $ 2,993     $ 3,008  

TKC Holdings Inc

  Consumer goods: Durable   5.67% (LIBOR +4.25%)     06/08/2017       02/01/2023       298     $ 296     $ 300  

TOMS Shoes LLC

  Retail   6.98% (LIBOR +5.5%)     12/18/2014       10/30/2020       1,945     $ 1,873     $ 1,157  

Tupelo Buyer Inc

  Transportation: Consumer   5.64% (LIBOR +4.25%)     10/02/2017       10/07/2024       1,600     $ 1,585     $ 1,618  

TV Borrower US LLC

  High Tech Industries   6.44% (LIBOR +4.75%)     02/16/2017       02/22/2024       993     $ 988     $ 998  

US Renal Care Inc

  Healthcare & Pharmaceuticals   5.94% (LIBOR +4.25%)     11/17/2015       12/30/2022       1,960     $ 1,946     $ 1,936  

US Salt LLC

  Chemicals, Plastics & Rubber   4.75% (LIBOR +4.75%)     11/30/2017       12/01/2023       3,000     $ 2,970     $ 3,000  

US Shipping Corp

  Utilities: Oil & Gas   5.82% (LIBOR +4.25%)     03/09/2016       06/26/2021       211     $ 203     $ 189  

Utility One Source L.P.

  Construction & Building   7.07% (LIBOR +5.5%)     04/07/2017       04/18/2023       995     $ 986     $ 1,019  

Verdesian Life Sciences LLC

  Chemicals, Plastics & Rubber   6.38% (LIBOR +5%)     12/09/2014       07/01/2020       2,119     $ 1,944     $ 1,907  

Vertiv Group Corporation

  Capital Equipment   5.35% (LIBOR +4%)     09/30/2016       11/30/2023       1,504     $ 1,465     $ 1,505  

 

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Logan JV Loan Portfolio as of December 31, 2017

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

Viewpoint Inc

  High Tech Industries   5.94% (LIBOR +4.25%)     07/18/2017       07/19/2024       998     $ 993     $ 1,002  

Weight Watchers International, Inc.

  Beverage, Food & Tobacco   6.23% (LIBOR +4.75%)     11/20/2017       11/29/2024       2,700     $ 2,647     $ 2,721  

Wirepath Home Systems LLC

  Services: Business   6.87% (LIBOR +5.25%)     07/31/2017       08/05/2024       2,993     $ 2,978     $ 3,034  

Women’s Care Florida LLP

  Healthcare & Pharmaceuticals   6.07% (LIBOR +4.5%)     08/18/2017       09/29/2023       5,000     $ 4,976     $ 4,994  

Zenith Merger Sub, Inc.

  Services: Business   7.06% (LIBOR +5.5%)     12/22/2017       12/13/2023       3,000     $ 2,970     $ 2,970  

Zest Holdings LLC

  Healthcare & Pharmaceuticals   5.82% (LIBOR +4.25%)     04/13/2017       08/16/2023       1,985     $ 1,981     $ 2,006  
           

 

 

   

 

 

 

Total United States of America

            $ 223,014     $ 220,603  
           

 

 

   

 

 

 

Total Senior Secured First Lien Term Loans

            $ 230,663     $ 228,426  

Second Lien Term Loans

             

Luxembourg

             

Lully Finance S.a.r.l.

  Telecommunications   10.069% (LIBOR +8.5%)     07/31/2015       10/16/2023       1,000     $ 993     $ 985  
           

 

 

   

 

 

 

Total Luxembourg

            $ 993     $ 985  
           

 

 

   

 

 

 

United States of America

             

ABG Intermediate Holdings 2 LLC

  Consumer goods: Durable   9.44% (LIBOR +7.75%)     09/26/2017       09/29/2025       2,333     $ 2,316     $ 2,368  

BJ’s Wholesale Club, Inc.

  Beverage, Food & Tobacco   8.95% (LIBOR +7.5%)     01/27/2017       02/03/2025       3,000       2,987       2,939  

CH Hold Corp

  Automotive   8.82% (LIBOR +7.25%)     01/26/2017       02/03/2025       1,000       996       1,023  

Constellis Holdings, LLC

  Aerospace & Defense   10.69% (LIBOR +9%)     04/18/2017       04/21/2025       1,000       986       1,003  

DigiCert, Inc.

  Services: Business   9.38% (LIBOR +8%)     09/20/2017       10/31/2025       750       746       756  

DiversiTech Holdings Inc

  Capital Equipment   9.2% (LIBOR +7.5%)     05/18/2017       06/02/2025       2,000       1,981       2,025  

Gruden Acquisition Inc.

  Transportation: Cargo   10.19% (LIBOR +8.5%)     07/31/2015       08/18/2023       500       482       499  

Midwest Physician Administrative Services, LLC

  Healthcare & Pharmaceuticals   8.42% (LIBOR +7%)     08/11/2017       08/15/2025       1,000       990       1,006  

Optiv Security Inc

  Services: Business   8.63% (LIBOR +7.25%)     01/19/2017       01/31/2025       1,500       1,493       1,352  

Pathway Partners Vet Management

  Healthcare & Pharmaceuticals   9.57% (LIBOR +8%)     10/04/2017       10/10/2025       1,389       1,375       1,382  

Pathway Partners Vet Management (6)

  Healthcare & Pharmaceuticals   8% (LIBOR +8%)     10/04/2017       10/10/2025       611       (6     (3

Red Ventures LLC

  Media: Diversified & Production   9.57% (LIBOR +8%)     10/18/2017       11/08/2025       544       536       545  

SESAC Holdco II LLC

  Media: Diversified & Production   8.73% (LIBOR +7.25%)     02/13/2017       02/24/2025       1,000       991       986  

TKC Holdings Inc

  Consumer goods: Durable   9.42% (LIBOR +8%)     01/31/2017       02/01/2024       1,850       1,836       1,864  

 

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Logan JV Loan Portfolio as of December 31, 2017

(dollar amounts in thousands)

 

Type of Investment/

Portfolio company

 

Industry

 

Interest Rate (1)

  Initial
Acquisition
Date
    Maturity
Date
    Principal     Amortized
Cost
    Fair
Value (2)
 

TV Borrower US LLC

  High Tech Industries   9.94% (LIBOR +8.25%)     02/16/2017       02/22/2025       1,000       987       995  

Viewpoint Inc

  High Tech Industries   9.94% (LIBOR +8.25%)     07/18/2017       07/21/2025       1,000       991       998  

Wash Multifamily Laundry Systems, LLC.

  Services: Consumer   8.57% (LIBOR +7%)     05/04/2015       05/15/2023       425       423       423  

Wash Multifamily Laundry Systems, LLC.

  Services: Consumer   8.57% (LIBOR +7%)     05/04/2015       05/12/2023       75       74       74  

Total United States of America

            $ 20,184     $ 20,235  
           

 

 

   

 

 

 

Total Second Lien Term Loans

            $ 21,177     $ 21,220  
           

 

 

   

 

 

 

Equity Investments

             

United States of America

             

Avaya Inc

  Telecommunications       12/15/2017         870       870       754  

Total United States of America

            $ 870     $ 754  
           

 

 

   

 

 

 

Total Equity Investments

            $ 870     $ 754  
           

 

 

   

 

 

 

Total Investments

            $ 252,710     $ 250,400  
           

 

 

   

 

 

 

Cash and cash equivalents

             

Dreyfus Government Cash Management Fund

              10,023       10,023  

Other cash accounts

              614       614  
           

 

 

   

 

 

 

Total Cash and cash equivalents

            $ 10,637     $ 10,637  
           

 

 

   

 

 

 

 

(1)

Variable interest rates indexed to 30-day, 60-day, 90-day or 180-day LIBOR rates, at the borrower’s option. LIBOR rates are subject to interest rate floors.

(2)

Represents fair value in accordance with ASC Topic 820.

(3)

Represents a delayed draw commitment of $113, which was unfunded as of December 31, 2017.

(4)

Represents a delayed draw commitment of $137, which was unfunded as of December 31, 2017.

(5)

Represents a delayed draw commitment of $565, which was unfunded as of December 31, 2017.

(6)

Represents a delayed draw commitment of $611, which was unfunded as of December 31, 2017.

 

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Below is certain summarized financial information for Logan JV as of June 30, 2018 and December 31, 2017 and for the three and six months ended June 30, 2018 and 2017:

Selected Balance Sheet Information

 

     As of
June 30,

2018
     As of
December 31,

2017
 
    

(Dollars in

thousands)

    

(Dollars in

thousands)

 

Assets:

     

Investments at fair value (cost of $298,172 and $252,710, respectively)

   $ 294,938      $ 250,400  

Capital contributions receivable

     1,000        —    

Cash

     29,409        10,637  

Other assets

     4,534        9,605  
  

 

 

    

 

 

 

Total assets

   $ 329,881      $ 270,642  
  

 

 

    

 

 

 

Liabilities:

     

Loans payable reported net of unamortized debt issuance costs

   $ 213,161      $ 168,110  

Payable for investments purchased

     8,625        15,616  

Distribution payable

     3,270        3,300  

Other liabilities

     2,334        1,854  
  

 

 

    

 

 

 

Total liabilities

   $ 227,390      $ 188,880  
  

 

 

    

 

 

 

Members’ capital

   $ 102,491      $ 81,762  
  

 

 

    

 

 

 

Total liabilities and members’ capital

   $ 329,881      $ 270,642  
  

 

 

    

 

 

 

Selected Statement of Operations Information

 

     For the three
months
ended
June 30,
2018
     For the three
months
ended
June 30,
2017
     For the six
months
ended
June 30,
2018
     For the six
months
ended
June 30,
2017
 
    

(Dollars in

thousands)

    

(Dollars in

thousands)

    

(Dollars in

thousands)

    

(Dollars in

thousands)

 

Interest income

   $ 5,458      $ 4,067      $ 9,963      $ 8,159  

Fee income

     49        97        108        224  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     5,507        4,164        10,071        8,383  

Credit facility expenses (1)

     2,690        1,479        4,488        2,854  

Other fees and expenses

     89        115        208        191  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     2,779        1,594        4,696        3,045  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income

     2,728        2,570        5,375        5,338  

Net realized gains

     220        204        279        431  

Net change in unrealized appreciation (depreciation) on investments

     (2,068      (1,851      (925      (1,704
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in members’ capital from operations

   $ 880      $ 923      $ 4,729      $ 4,065  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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(1)

As of June 30, 2018, Logan JV had $215,555 of outstanding debt under its credit facility with an effective interest rate of 4.63% per annum. As of December 31, 2017, Logan JV had $169,632 of outstanding debt under its credit facility with an effective interest rate of 3.92% per annum.

Investment in Tax Receivable Agreement Payment Rights

In June 2012, we invested in a tax receivable agreement, or TRA, that entitles us to certain payment rights, or TRA Payment Rights, from Duff & Phelps Corporation, or Duff & Phelps. The TRA transfers the economic value of certain tax deductions, or tax benefits, taken by Duff & Phelps to us and entitles us to a stream of payments to be received. The TRA payment right is, in effect, a subordinated claim on the issuing company which can be valued based on the credit risk of the issuer, which includes projected future earnings, the liquidity of the underlying payment right, risk of tax law changes, the effective tax rate and any other factors which might impact the value of the payment right.

Through the TRA, we are entitled to receive an annual tax benefit payment based upon 85% of the savings from certain deductions along with interest. The payments that we are entitled to receive result from cash savings, if any, in U.S. federal, state or local income tax that Duff & Phelps realizes (i) from the tax savings derived from the goodwill and other intangibles created in connection with the Duff & Phelps initial public offering and (ii) from other income tax deductions. These tax benefit payments will continue until the relevant deductions are fully utilized, which was projected to be 16 years from the initial investment date. Pursuant to the TRA, we maintain the right to enforce Duff & Phelps payment obligations as a transferee of the TRA contract. If Duff & Phelps chooses to pre-pay and terminate the TRA, we will be entitled to the present value of the expected future TRA payments. If Duff & Phelps breaches any material obligation then all obligations are accelerated and calculated as if an early termination occurred. Failure to make a payment is a breach of a material obligation if the failure occurs for more than three months.

The projected annual tax benefit payment is accrued on a quarterly basis and paid annually. The payment is allocated between a reduction in the cost basis of the investment and interest income based upon an amortization schedule. Based upon the characteristics of the investment, we have chosen to categorize the investment in the TRA payment rights as an investment in payment rights.

For the three months ended June 30, 2018 and 2017, we recognized interest income totaling $0.4 million and $0.5 million, respectively, related to the TRA. For the six months ended June 30, 2018 and 2017, we recognized interest income totaling $0.7 million and $1.0 million, respectively, related to the TRA.

Asset Quality

We employ the use of board observation and information rights, regular dialogue with company management and sponsors, and detailed internally generated monitoring reports to actively monitor performance. Additionally, THL Credit has developed a monitoring template that promotes compliance with these standards and that is used as a tool to assess investment performance relative to plan.

As part of the monitoring process, the Advisor assesses the risk profile of each of our investments and assigns each portfolio investment a score of a 1, 2, 3, 4 or 5.

The investment performance scores, or IPS, are as follows:

1—The portfolio investment is performing above our underwriting expectations.

2—The portfolio investment is performing as expected at the time of underwriting. All new investments are initially scored a 2.

3—The portfolio investment is operating below our underwriting expectations and requires closer monitoring. The company may be out of compliance with financial covenants, however, principal or interest payments are generally not past due.

 

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4—The portfolio investment is performing materially below our underwriting expectations and returns on our investment are likely to be impaired. Principal or interest payments may be past due, however, full recovery of principal and interest payments are expected.

5—The portfolio investment is performing substantially below expectations and the risk of the investment has increased substantially. The company is in payment default and the principal and interest payments are not expected to be repaid in full.

For purposes of clarity, underwriting as referenced herein may be redetermined after the initial investment as a result of a transformative credit event or other material event whereby such initial underwriting is deemed by the Advisor to be no longer appropriate for the purpose of assessing investment performance relative to plan. For any investment receiving a score of a 3 or lower THL Credit Advisors will increase their level of focus and prepare regular updates for the investment committee summarizing current operating results, material impending events and recommended actions.

The Advisor monitors and, when appropriate, changes the investment scores assigned to each investment in our portfolio. In connection with our investment valuation process, the Advisor and board of directors review these investment scores on a quarterly basis. Our average investment score was 2.10 and 2.24 at June 30, 2018 and December 31, 2017, respectively. The following is a distribution of the investment scores of our portfolio companies at June 30, 2018 and December 31, 2017 (in millions):

 

     June 30, 2018     December 31, 2017  

Investment Score

   Amortized
Cost
     % of
Total
Portfolio
based on
Amortized
Cost
    Fair Value      % of
Total
Portfolio
based on
FV
    Amortized
Cost
     % of
Total
Portfolio
based on
Amortized
Cost
    Fair Value      % of
Total
Portfolio
based on
FV
 

1 (a)

   $ 97.4        17.3   $ 102.0        18.2   $ 63.1        9.9   $ 69.4        11.4

2 (b)

     302.5        53.6     311.2        55.8     436.1        68.1     437.9        71.9

3 (c)

     141.6        25.1     123.8        22.1     69.4        10.8     60.7        10.0

4 (d)

     —          0.0     —          0.0     28.4        4.4     20.0        3.3

5 (e)

     22.8        4.0     22.0        3.9     43.4        6.8     20.7        3.4
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 564.3        100.0   $ 559.0        100.0     640.4        100.0     608.7        100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(a)

As of June 30, 2018 and December 31, 2017, Investment Score “1” included $6.2 million and $0.0 million, respectively, of loans to companies in which we also hold equity securities.

(b)

As of June 30, 2018 and December 31, 2017, Investment Score “2” included $111.8 million and $147.3 million, respectively, of loans to companies in which we also hold equity securities.

(c)

As of June 30, 2018 and December 31, 2017, Investment Score “3” included $52.9 million and $48.9 million, respectively, of loans to companies in which we also hold equity securities.

(d)

As of June 30, 2018 and December 31, 2017, Investment Score “4” included no loans to companies in which we also hold equity securities.

(e)

As of June 30, 2018 and December 31, 2017, Investment Score “5” included $13.0 million and $12.6, respectively, of loans to companies in which we also hold equity securities.

Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or when it is no longer probable that principal or interest will be collected. However, we may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection. As of June 30, 2018, we had loans on non-accrual status with an amortized cost basis of $9.7 million and fair value of $4.0 million. As of December 31, 2017, we had loans on non-accrual status with an amortized cost basis of $56.3 million and fair value of $21.0 million. The decrease in loans on non-accrual status is attributable in part to our exit of certain non-accrual loans and restructuring of other loans. For additional information, please refer to

 

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Table of Contents

the Consolidated Schedules of Investments as of June 30, 2018 and December 31, 2017. We record the reversal of any previously accrued income against the same income category reflected in the Consolidated Statement of Operations.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2018 and 2017

Investment Income

We generate revenues primarily in the form of interest on the debt and other income-producing securities we hold. Other income-producing securities include investments in funds and an investment in payment rights. Our investments in fixed income instruments generally have an expected maturity of five to seven years, and typically bear interest at a fixed or floating rate. Interest on our debt securities is generally payable quarterly. Payments of principal of our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some cases, our debt instruments and preferred stock investments may defer payments of dividends or pay interest in-kind, or PIK. Any outstanding principal amount of our debt securities and any accrued but unpaid interest will generally become due at the maturity date. The level of interest income we receive is directly related to the balance of interest-bearing investments multiplied by the weighted average yield of our investments. In addition to interest income, we may receive dividends and other distributions related to our equity investments. We may also generate revenue in the form of fees from the management of Greenway and Greenway II, prepayment premiums, commitment, loan origination, structuring or due diligence fees, exit fees, amendment fees, portfolio company administration fees, fees for providing significant managerial assistance and consulting fees. These fees may or may not be recurring in nature as part of our normal business operations. We will disclose below what amounts, if any, are material non-recurring fees that have been recorded as income during each respective period.

The following shows the breakdown of investment income for the three and six months ended June 30, 2018 and 2017 (in millions):

 

     Three months
ended June 30,
     Six months
ended June 30,
 
     2018      2017      2018      2017  

Interest income on debt securities

           

Cash interest

   $ 11.8      $ 13.0      $ 23.5      $ 25.5  

PIK interest

     0.6        0.4        0.7        1.2  

Prepayment premiums

     0.3        —          0.4        0.1  

Net accretion of discounts and other fees

     1.2        1.1        1.9        2.2  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total interest on debt securities

     13.9        14.5        26.5        29.0  

Dividend income (1)

     2.8        3.3        5.4        6.4  

Interest income on other income-producing securities (1)

     0.9        1.1        1.9        2.4  

Fees related to non-controlled, affiliated investments

     0.3        0.3        0.5        0.5  

Other income (2)

     0.5        1.1        0.7        1.8  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investment income

   $ 18.4      $ 20.3      $ 35.0      $ 40.1  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Includes dividend income from preferred and common equity interests in C&K Market, Inc., Copperweld Bimetallics, LLC, and Logan JV.

(2)

For three months ended June 30, 2018 and 2017, we recognized $0 and $0.4 million, respectively, of non-recurring fees from portfolio companies. For the six months ended June 30, 2018 and 2017, we recognized $0.1 million and $0.5 million, respectively, of non-recurring fees from portfolio companies.

 

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