UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2016
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period to
Commission File No. 000-54899
CARLYLE GMS FINANCE, INC.
(Exact name of Registrant as specified in its charter)
Maryland | 80-0789789 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
520 Madison Avenue, 38th Floor, New York, NY 10022
(Address of principal executive office) (Zip Code)
(212) 813-4900
(Registrants telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Class |
Outstanding at August 10, 2016 | |
Common stock, $0.01 par value | 36,521,085 |
INDEX
Part I. |
Financial Information |
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Item 1. |
Financial Statements |
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3 | ||||||
4 | ||||||
5 | ||||||
6 | ||||||
Consolidated Schedules of Investments as of June 30, 2016 (unaudited) and December 31, 2015 |
7 | |||||
22 | ||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
53 | ||||
Item 3. |
76 | |||||
Item 4. |
77 | |||||
Part II. |
Other Information | |||||
Item 1. |
78 | |||||
Item 1A. |
78 | |||||
Item 2. |
78 | |||||
Item 3. |
78 | |||||
Item 4. |
78 | |||||
Item 5. |
78 | |||||
Item 6. |
78 | |||||
79 |
2
CARLYLE GMS FINANCE, INC.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(dollar amounts in thousands, except per share data)
June 30, 2016 |
December 31, 2015 |
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(unaudited) | ||||||||
ASSETS |
||||||||
Investments, at fair value |
||||||||
Investmentsnon-controlled/non-affiliated, at fair value (amortized cost of $1,205,871 and $1,079,720, respectively) |
$ | 1,186,520 | $ | 1,052,666 | ||||
Investmentscontrolled/affiliated, at fair value (amortized cost of $15,001 and $0, respectively) |
14,714 | | ||||||
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|
|
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Total investments, at fair value (amortized cost of $1,220,872 and $1,079,720, respectively) |
1,201,234 | 1,052,666 | ||||||
Cash and cash equivalents |
33,389 | 41,837 | ||||||
Receivable for investment sold |
22,031 | 1,987 | ||||||
Deferred financing costs |
3,687 | 3,877 | ||||||
Interest receivable |
4,206 | 3,279 | ||||||
Prepaid expenses and other assets |
403 | 386 | ||||||
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|
|
|
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Total assets |
$ | 1,264,950 | $ | 1,104,032 | ||||
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|
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LIABILITIES |
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Secured borrowings (Note 6) |
$ | 305,313 | $ | 234,313 | ||||
2015-1 Notes payable, net of unamortized debt issuance costs of $2,254 and $2,356, respectively (Note 7) |
270,746 | 270,644 | ||||||
Due to Investment Adviser |
150 | 189 | ||||||
Interest and credit facility fees payable (Notes 6 and 7) |
3,259 | 2,577 | ||||||
Dividend payable (Note 9) |
13,943 | 18,284 | ||||||
Base management and incentive fees payable (Note 4) |
11,944 | 5,277 | ||||||
Administrative service fees payable (Note 4) |
135 | 97 | ||||||
Other accrued expenses and liabilities |
1,542 | 925 | ||||||
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|
|
|
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Total liabilities |
607,032 | 532,306 | ||||||
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|
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Commitments and contingencies (Notes 8 and 11) |
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NET ASSETS |
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Common stock, $0.01 par value; 200,000,000 shares authorized; 36,517,329 shares and 31,524,083 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively |
365 | 315 | ||||||
Paid-in capital in excess of par value |
704,123 | 613,944 | ||||||
Offering costs |
(74 | ) | (74 | ) | ||||
Accumulated net investment income (loss), net of cumulative dividends of $93,131 and $65,851 at June 30, 2016 and December 31, 2015, respectively |
(14,848 | ) | (12,994 | ) | ||||
Accumulated net realized gain (loss) |
(12,010 | ) | (2,411 | ) | ||||
Accumulated net unrealized appreciation (depreciation) |
(19,638 | ) | (27,054 | ) | ||||
|
|
|
|
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Total net assets |
$ | 657,918 | $ | 571,726 | ||||
|
|
|
|
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NET ASSETS PER SHARE |
$ | 18.02 | $ | 18.14 | ||||
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|
|
The accompanying notes are an integral part of these consolidated financial statements.
3
CARLYLE GMS FINANCE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands, except per share data)
(unaudited)
For the three month periods ended | For the six month periods ended | |||||||||||||||
June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | |||||||||||||
Investment income: |
||||||||||||||||
Interest income from non-controlled/non-affiliated investments |
$ | 24,078 | $ | 15,814 | $ | 46,189 | $ | 28,430 | ||||||||
Other income from non-controlled/non-affiliated investments |
1,670 | 111 | 2,669 | 474 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total investment income |
25,748 | 15,925 | 48,858 | 28,904 | ||||||||||||
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|
|
|
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Expenses: |
||||||||||||||||
Base management fees (Note 4) |
4,345 | 3,080 | 8,485 | 5,803 | ||||||||||||
Incentive fees (Note 4) |
3,366 | 1,986 | 6,356 | 3,606 | ||||||||||||
Professional fees |
575 | 465 | 1,006 | 849 | ||||||||||||
Administrative service fees (Note 4) |
198 | 188 | 346 | 300 | ||||||||||||
Interest expense (Notes 6 and 7) |
3,825 | 2,129 | 7,424 | 3,909 | ||||||||||||
Credit facility fees (Note 6) |
858 | 446 | 1,457 | 874 | ||||||||||||
Directors fees and expenses |
144 | 106 | 264 | 207 | ||||||||||||
Other general and administrative |
419 | 606 | 922 | 865 | ||||||||||||
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|
|
|
|
|
|
|
|||||||||
Total expenses |
13,730 | 9,006 | 26,260 | 16,413 | ||||||||||||
Waiver of base management fees (Note 4) |
1,448 | 1,026 | 2,828 | 1,934 | ||||||||||||
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|
|
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Net expenses |
12,282 | 7,980 | 23,432 | 14,479 | ||||||||||||
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|
|
|
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Net investment income (loss) |
13,466 | 7,945 | 25,426 | 14,425 | ||||||||||||
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments: |
||||||||||||||||
Net realized gain (loss) on investmentsnon-controlled/non-affiliated |
(6,022 | ) | 593 | (9,599 | ) | 329 | ||||||||||
Net change in unrealized appreciation (depreciation) on investmentsnon-controlled/non-affiliated |
18,794 | 677 | 7,703 | 4,249 | ||||||||||||
Net change in unrealized appreciation (depreciation) on investmentscontrolled/affiliated |
(287 | ) | | (287 | ) | | ||||||||||
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|
|
|
|
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|
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Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments |
12,485 | 1,270 | (2,183 | ) | 4,578 | |||||||||||
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Net increase (decrease) in net assets resulting from operations |
$ | 25,951 | $ | 9,215 | $ | 23,243 | $ | 19,003 | ||||||||
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Basic and diluted earnings per common share (Note 9) |
$ | 0.75 | $ | 0.40 | $ | 0.70 | $ | 0.89 | ||||||||
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Weighted-average shares of common stock outstandingBasic and Diluted (Note 9) |
34,402,925 | 23,062,818 | 33,174,442 | 21,330,007 | ||||||||||||
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Dividends declared per common share (Note 9) |
$ | 0.40 | $ | 0.37 | $ | 0.80 | $ | 0.74 |
The accompanying notes are an integral part of these consolidated financial statements.
4
CARLYLE GMS FINANCE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(dollar amounts in thousands)
(unaudited)
For the six month periods ended | ||||||||
June 30, 2016 | June 30, 2015 | |||||||
Increase (decrease) in net assets resulting from operations: |
||||||||
Net investment income (loss) |
$ | 25,426 | $ | 14,425 | ||||
Net realized gain (loss) on investments |
(9,599 | ) | 329 | |||||
Net change in unrealized appreciation (depreciation) on investments |
7,416 | 4,249 | ||||||
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Net increase (decrease) in net assets resulting from operations |
23,243 | 19,003 | ||||||
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Capital transactions: |
||||||||
Common stock issued |
90,101 | 171,082 | ||||||
Reinvestment of dividends |
128 | 45 | ||||||
Dividends declared (Note 12) |
(27,280 | ) | (17,735 | ) | ||||
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Net increase (decrease) in net assets resulting from capital share transactions |
62,949 | 153,392 | ||||||
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Net increase (decrease) in net assets |
86,192 | 172,395 | ||||||
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Net assets at beginning of period |
571,726 | 338,257 | ||||||
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Net assets at end of period |
$ | 657,918 | $ | 510,652 | ||||
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The accompanying notes are an integral part of these consolidated financial statements.
5
CARLYLE GMS FINANCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
(unaudited)
For the six month periods ended | ||||||||
June 30, 2016 | June 30, 2015 | |||||||
Cash flows from operating activities: |
||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 23,243 | $ | 19,003 | ||||
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: |
||||||||
Amortization of deferred financing costs |
824 | 516 | ||||||
Net accretion of discount on securities |
(1,724 | ) | (1,223 | ) | ||||
Net realized (gain) loss on investments |
9,599 | (329 | ) | |||||
Net change in unrealized (appreciation) depreciation on investments |
(7,416 | ) | (4,249 | ) | ||||
Cost of investments purchased and change in payable for investments purchased |
(274,145 | ) | (359,342 | ) | ||||
Proceeds from sales and repayments of investments and change in receivable for investments sold |
105,074 | 126,483 | ||||||
Changes in operating assets: |
||||||||
Interest receivable |
(927 | ) | 1,810 | |||||
Prepaid expenses and other assets |
(17 | ) | (1,171 | ) | ||||
Changes in operating liabilities: |
||||||||
Due to Investment Adviser |
(39 | ) | 2 | |||||
Interest and credit facility fees payable |
682 | 283 | ||||||
Base management and incentive fees payable |
6,667 | (403 | ) | |||||
Administrative service fees payable |
38 | 29 | ||||||
Other accrued expenses and liabilities |
617 | 454 | ||||||
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|
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Net cash provided by (used in) operating activities |
(137,524 | ) | (218,137 | ) | ||||
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Cash flows from financing activities: |
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Proceeds from issuance of common stock |
90,101 | 171,082 | ||||||
Borrowings on Revolving Credit Facility and Facility |
225,000 | 223,700 | ||||||
Repayments of Revolving Credit Facility and Facility |
(154,000 | ) | (397,183 | ) | ||||
Proceeds from issuance of 2015-1 Notes |
| 273,000 | ||||||
Debt issuance costs paid |
(532 | ) | (675 | ) | ||||
Dividends paid in cash |
(31,493 | ) | (14,064 | ) | ||||
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Net cash provided by (used in) financing activities |
129,076 | 255,860 | ||||||
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Net increase (decrease) in cash and cash equivalents |
(8,448 | ) | 37,723 | |||||
Cash and cash equivalents, beginning of period |
41,837 | 8,754 | ||||||
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Cash and cash equivalents, end of period |
$ | 33,389 | $ | 46,477 | ||||
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Supplemental disclosures: |
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Offering expenses and debt issuance costs due |
$ | | $ | 1,893 | ||||
Interest paid during the period |
$ | 6,794 | $ | 3,562 | ||||
Dividends declared during the period |
$ | 27,280 | $ | 17,735 | ||||
Reinvestment of dividends |
$ | 128 | $ | 45 |
The accompanying notes are an integral part of these consolidated financial statements.
6
CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2016
(dollar amounts in thousands)
(unaudited)
Investmentsnon-controlled/non-affiliated (1) |
Industry |
Interest Rate |
Maturity Date |
Par/ Principal Amount |
Amortized Cost (6) |
Fair Value (7) |
Percentage of Net Assets |
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First Lien Debt (79.45%) |
||||||||||||||||||||||||||
Access CIG, LLC (2) (3) (4) (13) |
Business Services | 6.00 | % | 10/17/2021 | $ | 18,429 | $ | 18,305 | $ | 18,377 | 2.79 | % | ||||||||||||||
AF Borrower LLC (Accuvant) (2) (3) (4) (13) |
High Tech Industries | 6.25 | 1/28/2022 | 16,195 | 15,989 | 16,195 | 2.46 | |||||||||||||||||||
Alpha Packaging Holdings, Inc. (2) (3) (4) (13) |
Containers, Packaging & Glass | 5.25 | 5/12/2020 | 11,380 | 11,370 | 11,224 | 1.71 | |||||||||||||||||||
Anaren, Inc. (2) (3) (4) (13) |
Telecommunications | 5.50 | 2/18/2021 | 10,925 | 10,849 | 10,804 | 1.64 | |||||||||||||||||||
APX Group, Inc. (5) (8) |
Consumer Services | 6.38 | 12/1/2019 | 10,000 | 9,776 | 9,900 | 1.50 | |||||||||||||||||||
Audax AAMP Holdings, Inc. (2) (3) (4) (13) |
Durable Consumer Goods | 6.50 | 6/24/2017 | 10,725 | 10,677 | 10,504 | 1.60 | |||||||||||||||||||
BAART Programs, Inc. (2) (4) |
Healthcare & Pharmaceuticals | 8.21 | 10/9/2021 | 7,444 | 7,388 | 7,552 | 1.15 | |||||||||||||||||||
Blue Bird Body Company (2) (3) (4) (8) (13) |
Transportation: Consumer | 6.50 | 6/26/2020 | 8,013 | 7,720 | 8,006 | 1.22 | |||||||||||||||||||
Brooks Equipment Company, LLC (2) (3) (4) (13) |
Construction & Building | 6.00 | 8/29/2020 | 7,007 | 6,963 | 6,909 | 1.05 | |||||||||||||||||||
Capstone Logistics Acquisition, Inc. (2) (3) (4) (13) |
Transportation: Cargo | 5.50 | 10/7/2021 | 19,478 | 19,325 | 19,091 | 2.90 | |||||||||||||||||||
Captive Resources Midco, LLC (2) (3) (4) (5) (9) (13) |
Banking, Finance, Insurance & Real Estate | 6.75 | 6/30/2020 | 29,200 | 28,786 | 28,950 | 4.40 | |||||||||||||||||||
Castle Management Borrower LLC (Highgate Hotels L.P.) (2) (3) (4) (13) |
Hotel, Gaming & Leisure | 5.50 | 9/18/2020 | 9,554 | 9,492 | 9,277 | 1.41 | |||||||||||||||||||
Central Security Group, Inc. (2) (3) (4) (5) (13) |
Consumer Services | 6.63 | 10/6/2020 | 28,804 | 28,407 | 29,075 | 4.42 | |||||||||||||||||||
Colony Hardware Corporation (2) (3) (4) (5) (13) |
Construction & Building | 7.00 | 10/23/2021 | 17,124 | 16,871 | 17,124 | 2.60 | |||||||||||||||||||
CRCI Holdings Inc. (CLEAResult Consulting, Inc.) (2) (3) (4) (13) |
Utilities: Electric | 5.25 | 7/10/2019 | 5,880 | 5,865 | 5,820 | 0.89 | |||||||||||||||||||
Dent Wizard International Corporation (2) (3) (4) (13) |
Automotive | 5.75 | 4/7/2020 | 7,641 | 7,611 | 7,586 | 1.15 | |||||||||||||||||||
Derm Growth Partners III, LLC (Dermatology Associates) (2) (3) (4) (5) (13) (18) |
Healthcare & Pharmaceuticals | 7.50 | 5/31/2022 | 30,310 | 29,729 | 29,821 | 4.53 | |||||||||||||||||||
Dimensional Dental Management, LLC (2) (3) (5) (12) (15) |
Healthcare & Pharmaceuticals | 8.00 | 2/12/2021 | 18,000 | 17,566 | 17,924 | 2.72 | |||||||||||||||||||
Emerging Markets Communications, LLC (2) (3) (4) (13) |
Telecommunications | 6.75 | 7/1/2021 | 17,820 | 16,262 | 17,998 | 2.74 | |||||||||||||||||||
EP Minerals, LLC (2) (3) (4) (13) |
Metals & Mining | 5.50 | 8/20/2020 | 10,316 | 10,280 | 10,193 | 1.55 | |||||||||||||||||||
EIP Merger Sub, LLC (Evolve IP) (2) (3) (4) (5) (12) |
Telecommunications | 7.25 | 6/7/2021 | 23,750 | 23,055 | 23,111 | 3.51 | |||||||||||||||||||
FCX Holdings Corp. (2) (3) (4) (13) |
Capital Equipment | 5.50 | 8/4/2020 | 9,939 | 9,934 | 9,755 | 1.48 | |||||||||||||||||||
Genex Holdings, Inc. (2) (3) (13) |
Banking, Finance, Insurance & Real Estate |
5.25 | 5/30/2021 | 4,221 | 4,207 | 4,175 | 0.64 | |||||||||||||||||||
Global Software, LLC (2) (3) (4) (5) |
High Tech Industries | 6.50 | 5/2/2022 | 16,250 | 15,943 | 16,029 | 2.44 | |||||||||||||||||||
Green Energy Partners/Stonewall LLC (2) (3) (5) (13) |
Energy: Electricity | 6.50 | 11/13/2021 | 16,600 | 16,465 | 16,630 | 2.53 | |||||||||||||||||||
Hummel Station LLC (2) (3) (5) (13) |
Energy: Electricity | 7.00 | 10/27/2022 | 21,000 | 20,221 | 21,000 | 3.19 | |||||||||||||||||||
Imagine! Print Solutions, LLC (2) (3) (4) (5) (13) |
Media: Advertising, Printing & Publishing | 7.00 | 3/30/2022 | 18,554 | 18,282 | 18,739 | 2.85 | |||||||||||||||||||
Imperial Bag & Paper Co. LLC (2) (3) (4) (5) (13) |
Forest Products & Paper | 7.00 | 1/7/2022 | 21,331 | 21,044 | 21,544 | 3.27 | |||||||||||||||||||
Indra Holdings Corp. (Totes Isotoner) (2) (3) (5) (13) |
Non-durable Consumer Goods | 5.25 | 5/1/2021 | 14,285 | 14,182 | 12,780 | 1.94 | |||||||||||||||||||
International Medical Group, Inc.(2) (3) (5) (12) |
Banking, Finance, Insurance & Real Estate |
5.75 | 10/30/2020 | 30,000 | 29,460 | 29,589 | 4.50 | |||||||||||||||||||
Jackson Hewitt Inc. (2) (3) (4) (13) |
Retail | 8.00 | 7/30/2020 | 14,504 | 14,259 | 14,494 | 2.20 | |||||||||||||||||||
Language Line, LLC (2) (3) (4) (13) |
Telecommunications | 6.50 | 7/7/2021 | 22,197 | 22,007 | 22,142 | 3.37 |
The accompanying notes are an integral part of these consolidated financial statements.
7
CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of June 30, 2016
(dollar amounts in thousands)
(unaudited)
Investmentsnon-controlled/non-affiliated (1) |
Industry |
Interest Rate |
Maturity Date |
Par/ Principal Amount |
Amortized Cost (6) |
Fair Value (7) |
Percentage of Net Assets |
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First Lien Debt (79.45%) (continued) |
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Miller Heiman, Inc. (2) (3) (4) (13) |
Business Services | 7.00 | % | 9/30/2019 | $ | 18,844 | $ | 18,673 | $ | 12,782 | 1.94 | % | ||||||||||||||
Ministry Brands, LLC (2) (3) (5) (10) |
High Tech Industries | 8.00 | 11/20/2021 | 1,588 | 1,568 | 1,569 | 0.24 | |||||||||||||||||||
Ministry Brands, LLC (2) (3) (5) (12) |
High Tech Industries | 8.00 | 11/20/2021 | 27,082 | 26,699 | 27,524 | 4.18 | |||||||||||||||||||
MSX International, Inc. (2) (3) (4) (13) |
Automotive | 6.00 | 8/21/2020 | 9,499 | 9,431 | 9,440 | 1.43 | |||||||||||||||||||
National Technical Systems, Inc. (2) (3) (4) (5) (13) (14) |
Aerospace & Defense | 7.25 | 6/12/2021 | 25,805 | 25,506 | 24,965 | 3.79 | |||||||||||||||||||
NES Global Talent Finance US LLC (United Kingdom) (2)(3)(4)(8)(13) |
Energy: Oil & Gas | 6.50 | 10/3/2019 | 11,563 | 11,424 | 10,895 | 1.66 | |||||||||||||||||||
Paradigm Acquisition Corp. (2) (3) (4) (5) (13) |
Business Services | 6.00 | 6/2/2022 | 23,364 | 23,059 | 23,149 | 3.52 | |||||||||||||||||||
Pelican Products, Inc. (2) (3) (4) (13) |
Containers, Packaging & Glass | 5.25 | 4/11/2020 | 7,643 | 7,656 | 7,420 | 1.13 | |||||||||||||||||||
Plano Molding Company, LLC (2) (3) (4) (5) (13) |
Hotel, Gaming & Leisure | 7.00 | 5/12/2021 | 22,374 | 22,196 | 21,862 | 3.32 | |||||||||||||||||||
Product Quest Manufacturing, LLC (2) (3) (4) (5) (12) |
Containers, Packaging & Glass | 6.75 | 9/9/2020 | 28,000 | 27,520 | 26,793 | 4.07 | |||||||||||||||||||
Prowler Acquisition Corp. (Pipeline Supply and Service, LLC) (2) (3) (4) |
Wholesale | 5.50 | 1/28/2020 | 10,854 | 10,787 | 7,984 | 1.21 | |||||||||||||||||||
PSC Industrial Holdings Corp (2) (3) (4) (13) |
Environmental Industries | 5.75 | 12/5/2020 | 11,820 | 11,730 | 11,644 | 1.77 | |||||||||||||||||||
PSI Services LLC (2) (3) (4) (5) (12) |
Business Services | 8.00 | 2/27/2021 | 27,927 | 27,293 | 27,491 | 4.18 | |||||||||||||||||||
Reliant Pro Rehab, LLC (2) (3) (5) (12) |
Healthcare & Pharmaceuticals | 11.00 | 12/29/2017 | 22,444 | 22,108 | 22,278 | 3.39 | |||||||||||||||||||
SolAero Technologies Corp. (2) (3) (5) |
Telecommunications | 6.25 | 12/10/2020 | 9,104 | 9,030 | 8,763 | 1.33 | |||||||||||||||||||
SolAero Technologies Corp. (2) (3) (4) |
Telecommunications | 6.25 | 12/10/2020 | 10,827 | 10,751 | 10,421 | 1.58 | |||||||||||||||||||
Synarc-Biocore Holdings, LLC (2) (3) (4) (13) |
Healthcare & Pharmaceuticals | 5.50 | 3/10/2021 | 13,196 | 13,103 | 12,947 | 1.97 | |||||||||||||||||||
TASC, Inc. (2) (3) (4) (8) (13) |
Aerospace & Defense | 7.00 | 5/23/2020 | 17,888 | 17,324 | 17,858 | 2.71 | |||||||||||||||||||
Teaching Strategies, LLC (2) (3) (4) (13) |
Media: Advertising, Printing & Publishing | 6.13 | 10/1/2019 | 13,551 | 13,509 | 13,500 | 2.05 | |||||||||||||||||||
The Hilb Group, LLC (2) (3) (5) (12) (19) |
Banking, Finance, Insurance & Real Estate | 6.75 | 6/24/2021 | 27,177 | 26,565 | 26,972 | 4.10 | |||||||||||||||||||
The Hygenic Corporation (Performance Health) (2) (3) (4) (13) |
Non-durable Consumer Goods | 7.50 | 10/11/2020 | 15,840 | 15,656 | 15,840 | 2.41 | |||||||||||||||||||
The SI Organization, Inc. (2) (3) (4) (13) |
Aerospace & Defense | 5.75 | 11/23/2019 | 8,620 | 8,565 | 8,566 | 1.30 | |||||||||||||||||||
The Topps Company, Inc. (2) (3) (4) (13) |
Non-durable Consumer Goods | 7.25 | 10/2/2018 | 10,934 | 10,878 | 10,934 | 1.66 | |||||||||||||||||||
TK USA Enterprises, Inc. (2) (3) (5) (20) |
Construction & Building | 6.00 | 4/4/2022 | | (66 | ) | (35 | ) | 0.00 | |||||||||||||||||
TruckPro, LLC (2) (3) (4) (13) |
Automotive | 6.00 | 8/6/2018 | 9,488 | 9,459 | 9,401 | 1.43 | |||||||||||||||||||
U.S. Farathane, LLC (2) (3) (4) (13) |
Automotive | 5.75 | 12/23/2021 | 1,975 | 1,942 | 1,961 | 0.30 | |||||||||||||||||||
Vetcor Professional Practices, LLC (2) (3) (4) (5) (13) (16) |
Consumer Services | 7.25 | 4/20/2021 | 21,319 | 20,930 | 21,099 | 3.21 | |||||||||||||||||||
Violin Finco S.A.R.L. (Alexander Mann Solutions) |
||||||||||||||||||||||||||
(United Kingdom) (2) (3) (4) (8) (13) |
Business Services | 5.75 | 12/20/2019 | 10,518 | 10,455 | 10,518 | 1.60 | |||||||||||||||||||
Vistage Worldwide, Inc. (2) (3) (4) (13) |
Business Services | 6.50 | 8/19/2021 | 29,438 | 29,178 | 29,308 | 4.46 | |||||||||||||||||||
Vitera Healthcare Solutions, LLC (2) (3) (4) (13) |
Healthcare & Pharmaceuticals | 6.00 | 11/4/2020 | 9,389 | 9,327 | 8,935 | 1.36 | |||||||||||||||||||
Zest Holdings, LLC (2) (3) (4) (13) |
Durable Consumer Goods | 5.25 | 8/16/2020 | 9,530 | 9,530 | 9,292 | 1.41 | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
First Lien Debt Total |
$ | 960,076 | $ | 954,394 | 145.06 | % | ||||||||||||||||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
8
CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of June 30, 2016
(dollar amounts in thousands)
(unaudited)
Investmentsnon-controlled/non-affiliated (1) |
Industry |
Interest Rate |
Maturity Date |
Par/ Principal Amount |
Amortized Cost (6) |
Fair Value (7) |
Percentage of Net Assets |
|||||||||||||||||||
Second Lien Debt (18.27%) |
||||||||||||||||||||||||||
AF Borrower LLC (Accuvant) (2) (3) (5) |
High Tech Industries | 10.00 | % | 1/30/2023 | $ | 8,000 | $ | 7,930 | $ | 7,400 | 1.13 | % | ||||||||||||||
AIM Group USA Inc. (2) (3) (5) (13) |
Aerospace & Defense | 10.00 | 8/2/2022 | 23,000 | 22,682 | 21,379 | 3.25 | |||||||||||||||||||
Allied Security Holdings LLC (2) (3) (5) (13) |
Business Services | 8.00 | 8/13/2021 | 8,000 | 7,952 | 8,000 | 1.22 | |||||||||||||||||||
AmeriLife Group, LLC (2) (3) (5) |
Banking, Finance, Insurance & Real Estate |
9.75 | 1/10/2023 | 20,000 | 19,638 | 19,072 | 2.90 | |||||||||||||||||||
Argon Medical Devices, Inc. (2) (3) (4) (5) |
Healthcare & Pharmaceuticals | 10.50 | 6/23/2022 | 24,000 | 23,329 | 24,238 | 3.68 | |||||||||||||||||||
Berlin Packaging L.L.C. (2) (3) (5) (13) |
Containers, Packaging & Glass | 7.75 | 9/30/2022 | 9,200 | 9,142 | 8,993 | 1.37 | |||||||||||||||||||
Charter NEX US Holdings, Inc. (2) (3) (5) (13) |
Chemicals, Plastics & Rubber | 9.25 | 2/5/2023 | 7,394 | 7,298 | 7,242 | 1.10 | |||||||||||||||||||
Confie Seguros Holding II Co. (2) (3) (5) |
Banking, Finance, Insurance & Real Estate |
10.25 | 5/8/2019 | 12,000 | 11,908 | 11,310 | 1.72 | |||||||||||||||||||
DiversiTech Corporation (2) (3) (5) (13) |
Capital Equipment | 9.00 | 11/19/2022 | 8,400 | 8,299 | 8,114 | 1.23 | |||||||||||||||||||
Drew Marine Group Inc. (2) (3) (4) (5) |
Chemicals, Plastics & Rubber | 8.00 | 5/19/2021 | 12,500 | 12,480 | 12,005 | 1.83 | |||||||||||||||||||
Genex Holdings, Inc. (2) (3) (5) |
Banking, Finance, Insurance & Real Estate |
8.75 | 5/30/2022 | 7,990 | 7,910 | 7,739 | 1.18 | |||||||||||||||||||
Genoa, a QoL Healthcare Company, LLC (2) (3) (5) (13) |
Retail | 8.75 | 4/28/2023 | 9,900 | 9,811 | 9,594 | 1.46 | |||||||||||||||||||
Institutional Shareholder Services Inc. (2) (3) (5) (13) |
Banking, Finance, Insurance & Real Estate |
8.50 | 4/29/2022 | 12,500 | 12,402 | 11,994 | 1.82 | |||||||||||||||||||
Jazz Acquisition, Inc. (Wencor) (2) (3) (5) (13) |
Aerospace & Defense | 7.75 | 6/19/2022 | 6,700 | 6,675 | 5,282 | 0.80 | |||||||||||||||||||
Landslide Holdings, Inc. (LANDesk Software) (2) (3) (13) |
Software | 8.25 | 2/25/2021 | 3,500 | 3,481 | 3,364 | 0.51 | |||||||||||||||||||
MRI Software, LLC (2) (3) (5) |
Software | 9.00 | 6/23/2022 | 11,250 | 11,102 | 10,832 | 1.65 | |||||||||||||||||||
Phillips-Medisize Corporation (2) (3) (5) (13) |
Chemicals, Plastics & Rubber | 8.25 | 6/16/2022 | 5,000 | 4,961 | 4,726 | 0.72 | |||||||||||||||||||
Power Stop, LLC (5) (17) |
Automotive | 11.00 | 5/29/2022 | 10,000 | 9,821 | 9,943 | 1.51 | |||||||||||||||||||
Prime Security Services Borrower, LLC (Protection One, Inc.)(2) (3) (5) |
Consumer Services | 9.75 | 7/1/2022 | 6,700 | 6,612 | 6,742 | 1.02 | |||||||||||||||||||
Prowler Acquisition Corp. (Pipeline Supply and Service, LLC) (2) (3) (5) |
Wholesale | 9.50 | 7/28/2020 | 3,000 | 2,957 | 849 | 0.13 | |||||||||||||||||||
Systems Maintenance Services Holding, Inc. (2) (3) (4) |
High Tech Industries | 9.25 | 10/18/2020 | 6,000 | 5,962 | 5,894 | 0.90 | |||||||||||||||||||
TASC, Inc. (5) (8) |
Aerospace & Defense | 12.00 | 5/21/2021 | 6,000 | 5,897 | 6,010 | 0.91 | |||||||||||||||||||
Vitera Healthcare Solutions, LLC (2) (3) (4) |
Healthcare & Pharmaceuticals | 9.25 | 11/4/2021 | 2,000 | 1,978 | 1,863 | 0.28 | |||||||||||||||||||
Watchfire Enterprises, Inc. (2) (3) (5) (13) |
Media: Advertising, Printing & Publishing | 9.00 | 10/2/2021 | 7,000 | 6,927 | 6,798 | 1.03 | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
Second Lien Debt Total |
$ | 227,154 | $ | 219,383 | 33.35 | % | ||||||||||||||||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
9
CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of June 30, 2016
(dollar amounts in thousands)
(unaudited)
Investmentsnon-controlled/non-affiliated (1) |
Industry |
Maturity Date |
Par Amount |
Amortized Cost (6) |
Fair Value (7) |
Percentage of Net Assets |
||||||||||||||||
Structured Finance Obligations (0.67%) (5) (8) (11) |
||||||||||||||||||||||
1776 CLO I, Ltd., Subordinated Notes |
Structured Finance | 5/8/2020 | $ | 11,750 | $ | 7,370 | $ | 2,144 | 0.33 | % | ||||||||||||
Babson CLO Ltd., 2005-I, Subordinated Notes |
Structured Finance | 4/15/2019 | 7,632 | 333 | 85 | 0.01 | ||||||||||||||||
Clydesdale CLO 2005, Ltd., Subordinated Notes |
Structured Finance | 12/6/2017 | 5,750 | | 10 | 0.00 | ||||||||||||||||
MSIM Peconic Bay, Ltd., Subordinated Notes |
Structured Finance | 7/20/2019 | 4,500 | 1,012 | 1,063 | 0.16 | ||||||||||||||||
Nautique Funding Ltd., Income Notes |
Structured Finance | 4/15/2020 | 5,000 | 2,554 | 1,938 | 0.29 | ||||||||||||||||
Venture VI CDO Limited, Preference Shares |
Structured Finance | 8/3/2020 | 7,000 | 3,156 | 2,800 | 0.43 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Structured Finance Obligations Total |
$ | 14,425 | $ | 8,040 | 1.22 | % | ||||||||||||||||
|
|
|
|
|
|
Investmentsnon-controlled/non-affiliated (1) |
Industry |
Par Amount |
Cost | Fair Value (7) |
Percentage of Net Assets |
|||||||||||||
Equity Investments (0.39%) (5) |
||||||||||||||||||
Derm Growth Partners III, LLC (Dermatology Associates) |
Healthcare & Pharmaceuticals | $ | 1,000 | $ | 1,000 | $ | 1,025 | 0.16 | % | |||||||||
Global Software, LLC |
High Tech Industries | 1,000 | 1,001 | 1,002 | 0.15 | |||||||||||||
Power Stop, LLC |
Automotive | 7 | 715 | 888 | 0.13 | |||||||||||||
The Hilb Group, LLC |
Banking, Finance, Insurance & Real Estate | 1,500 | 1,500 | 1,788 | 0.27 | |||||||||||||
|
|
|
|
|
|
|||||||||||||
Equity Investments Total |
$ | 4,216 | $ | 4,703 | 0.71 | % | ||||||||||||
|
|
|
|
|
|
Investmentscontrolled/affiliated |
Industry |
Interest Rate |
Maturity Date |
Par Amount/ LLC Interest |
Cost | Fair Value (7) |
Percentage of Net Assets |
|||||||||||||||||||
Investment Fund (1.22%) (8) |
||||||||||||||||||||||||||
Middle Market Credit Fund, LLC, Mezzanine Loan (2) (5) (17) (21) |
Investment Fund | 10.15 | % | 6/24/2017 | $ | 1,000 | $ | 1,000 | $ | 1,000 | 0.15 | % | ||||||||||||||
Middle Market Credit Fund, LLC, Subordinated Loan and Members Interest (5) (21) |
Investment Fund | 0.001 | 3/1/2021 | 14,001 | 14,001 | 13,714 | 2.09 | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
Investment Fund Total |
$ | 15,001 | $ | 14,714 | 2.24 | % | ||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
Total investments |
$ | 1,220,872 | $ | 1,201,234 | 182.58 | % | ||||||||||||||||||||
|
|
|
|
|
|
(1) | Unless otherwise indicated, issuers of debt and equity investments held by Carlyle GMS Finance, Inc. (GMS Finance or the Company) are domiciled in the United States and issuers of structured finance obligations are domiciled in the Cayman Islands. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the Investment Company Act), the Company would be deemed to control a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of June 30, 2016, the Company does not control any of these portfolio companies. |
The accompanying notes are an integral part of these consolidated financial statements.
10
CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of June 30, 2016
(dollar amounts in thousands)
(unaudited)
Under the Investment Company Act, the Company would be deemed an affiliated person of a portfolio company if the Company owns 5% or more of the portfolio companys outstanding voting securities. As of June 30, 2016, the Company is not an affiliated person of any of these portfolio companies. |
(2) | Variable rate loans to the portfolio companies and variable rate notes of structured finance obligations bear interest at a rate that may be determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the Prime Rate), which generally resets quarterly. For each such loan and note, the Company has provided the interest rate in effect as of June 30, 2016. |
(3) | Loan includes interest rate floor feature. |
(4) | Denotes that all or a portion of the assets are owned by the Companys wholly-owned subsidiary, Carlyle GMS Finance SPV LLC (the Borrower Sub). The Borrower Sub has entered into a senior secured revolving credit facility (as amended, the Revolving Credit Facility). The lenders of the Revolving Credit Facility have a first lien security interest in substantially all of the assets of the Borrower Sub (see Note 6, Borrowings). Accordingly, such assets are not available to creditors of the Company or Carlyle GMS Finance MM CLO 2015-1 LLC (the 2015-1 Issuer), a wholly-owned and consolidated subsidiary of the Company. |
(5) | Denotes that all or a portion of the assets are owned by the Company. The Company has entered into a senior secured revolving credit facility (as amended, the Facility). The lenders of the Facility have a first lien security interest in substantially all of the portfolio investments held by the Company (see Note 6, Borrowings). Accordingly, such assets are not available to creditors of the Borrower Sub or the 2015-1 Issuer. |
(6) | Amortized cost represents original cost, including origination fees, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method. Equity tranche collateralized loan obligation (CLO) fund investments, which are referred to as structured finance obligations, are recorded at amortized cost using the effective interest method. |
(7) | Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements), pursuant to the Companys valuation policy. |
(8) | The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Companys total assets. |
(9) | Captive Resources Midco, LLC has an undrawn delayed draw term loan of $3,125 par value at LIBOR + 5.75%, 1.00% floor, and an undrawn revolver of $1,875 par value at LIBOR + 5.75%, 1.00% floor. An unused rate of 1.25% and 0.50% is charged on the delayed draw term loan and revolver principal, respectively, while undrawn. |
(10) | The Company receives less than the stated interest rate of this loan as a result of an agreement among lenders. The interest rate reduction is 2.75% on Ministry Brands, LLC. Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/first out loan, which has first priority ahead of the first lien/last out loan with respect to principal, interest and other payments. |
(11) | As of June 30, 2016, the Company has a greater than 25% but less than 50% equity or subordinated notes ownership interest in certain structured finance obligations. These investments have governing documents that preclude the Company from controlling management of the entity and therefore the Company has determined that the issuer of the investment is not a controlled affiliate or a non-controlled affiliate because the investments are not voting securities. |
(12) | In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company is entitled to receive additional interest as a result of an agreement among lenders as follows: Dimensional Dental Management, LLC (4.77%), Evolve IP (3.75%), International Medical Group, Inc. (6.42%), Ministry Brands, LLC (2.75%), Product Quest Manufacturing, LLC (3.27%), PSI Services LLC (4.50%), Reliant Pro Rehab, LLC (nil) and The Hilb Group, LLC (4.75%). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments. |
(13) | Denotes that all or a portion of the assets are owned by the 2015-1 Issuer and secure the notes issued in connection with a $400 million term debt securitization completed by the Company on June 26, 2015 (see Note 7, 2015-1 Notes). Accordingly, such assets are not available to the creditors of the Borrower Sub or the Company. |
(14) | National Technical Systems, Inc. has an undrawn delayed draw term loan of $4,469 par value at LIBOR + 6.25%, 1.00% floor, and an undrawn revolver of $2,031 par value at LIBOR + 6.25%, 1.00% floor. An unused rate of 1.00% and 0.50% is charged on the delayed draw term loan and revolver principal, respectively, while undrawn. |
(15) | Dimensional Dental Management, LLC has an undrawn last out delayed draw term loan of $2,507 par value at LIBOR + 7.00%, 1.00% floor. An unused rate of 1.00% is charged on the delayed draw term loan principal while undrawn. |
The accompanying notes are an integral part of these consolidated financial statements.
11
CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of June 30, 2016
(dollar amounts in thousands)
(unaudited)
(16) | Vetcor Professional Practices, LLC has an undrawn delayed draw term loan of $6,850 par value at LIBOR + 6.25%, 1.00% floor. An unused rate of 1.00% is charged on the principal while undrawn. |
(17) | Represents a corporate mezzanine loan, which is subordinated to senior secured term loans of the portfolio company/investment fund. |
(18) | Dermatology Associates has an undrawn delayed draw term loan of $7,270 par value at LIBOR + 6.50%, 1.00% floor, and an undrawn revolver of $2,420 par value at LIBOR + 6.50%, 1.00% floor. An unused rate of 1.00% is charged on the delayed draw term loan and the revolver principal while undrawn. |
(19) | The Hilb Group, LLC has an undrawn last out delayed draw term loan of $6,315 par value at LIBOR + 5.75%, 1.00% floor. An unused rate of 1.00% is charged on the delayed draw term loan principal while undrawn. |
(20) | TK USA Enterprises, Inc. has an undrawn revolver of $4,750 par value at LIBOR + 5.00%, 1.00% floor. An unused rate of 0.50% is charged on the principal while undrawn. |
(21) | Under the Investment Company Act, the Company is deemed to be an affiliated person of and control this investment fund because the Company owns more than 25% of the investment funds outstanding voting securities and/or has the power to exercise control over management or policies of such investment fund. See Note 5, Middle Market Credit Fund, LLC, for more details. |
The accompanying notes are an integral part of these consolidated financial statements.
12
CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of June 30, 2016
(dollar amounts in thousands)
(unaudited)
As of June 30, 2016, investments at fair value consisted of the following:
Type |
Amortized Cost |
Fair Value | % of Fair Value | |||||||||
First Lien Debt |
$ | 960,076 | $ | 954,394 | 79.45 | % | ||||||
Second Lien Debt |
227,154 | 219,383 | 18.27 | |||||||||
Structured Finance Obligations |
14,425 | 8,040 | 0.67 | |||||||||
Equity Investments |
4,216 | 4,703 | 0.39 | |||||||||
Investment Fund |
15,001 | 14,714 | 1.22 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 1,220,872 | $ | 1,201,234 | 100.00 | % | ||||||
|
|
|
|
|
|
The industrial composition of investments at fair value as of June 30, 2016 was as follows:
Industry |
Amortized Cost |
Fair Value | % of Fair Value | |||||||||
Aerospace & Defense |
$ | 86,649 | $ | 84,060 | 7.00 | % | ||||||
Automotive |
38,979 | 39,219 | 3.26 | |||||||||
Banking, Finance, Insurance & Real Estate |
142,376 | 141,589 | 11.79 | |||||||||
Business Services |
134,915 | 129,625 | 10.79 | |||||||||
Capital Equipment |
18,233 | 17,869 | 1.49 | |||||||||
Chemicals, Plastics & Rubber |
24,739 | 23,973 | 2.00 | |||||||||
Construction & Building |
23,768 | 23,998 | 2.00 | |||||||||
Consumer Services |
65,725 | 66,816 | 5.56 | |||||||||
Containers, Packaging & Glass |
55,688 | 54,430 | 4.53 | |||||||||
Durable Consumer Goods |
20,207 | 19,796 | 1.65 | |||||||||
Energy: Electricity |
36,686 | 37,630 | 3.13 | |||||||||
Energy: Oil & Gas |
11,424 | 10,895 | 0.91 | |||||||||
Environmental Industries |
11,730 | 11,644 | 0.97 | |||||||||
Forest Products & Paper |
21,044 | 21,544 | 1.79 | |||||||||
Healthcare & Pharmaceuticals |
125,528 | 126,583 | 10.54 | |||||||||
High Tech Industries |
75,092 | 75,613 | 6.29 | |||||||||
Hotel, Gaming & Leisure |
31,688 | 31,139 | 2.59 | |||||||||
Investment Fund |
15,001 | 14,714 | 1.22 | |||||||||
Media: Advertising, Printing & Publishing |
38,718 | 39,037 | 3.25 | |||||||||
Metals & Mining |
10,280 | 10,193 | 0.85 | |||||||||
Non-durable Consumer Goods |
40,716 | 39,554 | 3.29 | |||||||||
Retail |
24,070 | 24,088 | 2.01 | |||||||||
Software |
14,583 | 14,196 | 1.18 | |||||||||
Structured Finance |
14,425 | 8,040 | 0.67 | |||||||||
Telecommunications |
91,954 | 93,239 | 7.76 | |||||||||
Transportation: Cargo |
19,325 | 19,091 | 1.59 | |||||||||
Transportation: Consumer |
7,720 | 8,006 | 0.67 | |||||||||
Utilities: Electric |
5,865 | 5,820 | 0.48 | |||||||||
Wholesale |
13,744 | 8,833 | 0.74 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 1,220,872 | $ | 1,201,234 | 100.00 | % | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
13
CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of June 30, 2016
(dollar amounts in thousands)
(unaudited)
The geographical composition of investments at fair value as of June 30, 2016 was as follows:
Geography |
Amortized Cost |
Fair Value | % of Fair Value | |||||||||
Cayman Islands |
$ | 14,425 | $ | 8,040 | 0.67 | % | ||||||
United Kingdom |
21,879 | 21,413 | 1.78 | |||||||||
United States |
1,184,568 | 1,171,781 | 97.55 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 1,220,872 | $ | 1,201,234 | 100.00 | % | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
14
CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2015
(dollar amounts in thousands)
Investmentsnon-controlled/non-affiliated (1) |
Industry |
Interest Rate |
Maturity Date |
Par/ Principal Amount |
Amortized Cost (6) |
Fair Value (7) |
Percentage of Net Assets |
|||||||||||||||||||
First Lien Debt (75.53%) |
||||||||||||||||||||||||||
Access CIG, LLC (2) (3) (4) (13) |
Business Services | 6.00 | % | 10/17/2021 | $ | 18,522 | $ | 18,388 | $ | 18,291 | 3.20 | % | ||||||||||||||
AF Borrower LLC (Accuvant) (2) (3) (5) (13) |
High Tech Industries | 6.25 | 1/28/2022 | 16,277 | 16,055 | 15,829 | 2.77 | |||||||||||||||||||
Alpha Packaging Holdings, Inc. (2) (3) (4) (13) |
Containers, Packaging & Glass | 5.25 | 5/12/2020 | 11,409 | 11,398 | 11,180 | 1.96 | |||||||||||||||||||
Anaren, Inc. (2) (3) (4) (13) |
Telecommunications | 5.50 | 2/18/2021 | 10,981 | 10,898 | 10,759 | 1.88 | |||||||||||||||||||
APX Group, Inc. (5) (8) |
Consumer Services | 6.38 | 12/1/2019 | 10,000 | 9,749 | 9,575 | 1.67 | |||||||||||||||||||
Audax AAMP Holdings, Inc. (2) (3) (4) (13) |
Durable Consumer Goods | 6.50 | 6/24/2017 | 11,025 | 10,954 | 10,885 | 1.90 | |||||||||||||||||||
BAART Programs, Inc. (2) (4) |
Healthcare & Pharmaceuticals | 8.07 | 10/9/2021 | 7,481 | 7,422 | 7,556 | 1.32 | |||||||||||||||||||
Blue Bird Body Company (2) (3) (4) (8) (13) |
Transportation: Consumer | 6.50 | 6/26/2020 | 9,491 | 9,110 | 9,361 | 1.64 | |||||||||||||||||||
Brooks Equipment Company, LLC (2) (3) (4) (13) |
Construction & Building | 6.35 | 8/29/2020 | 7,209 | 7,160 | 7,097 | 1.24 | |||||||||||||||||||
Capstone Logistics Acquisition, Inc. (2) (3) (4) (13) |
Transportation: Cargo | 5.50 | 10/7/2021 | 19,750 | 19,582 | 19,134 | 3.35 | |||||||||||||||||||
Captive Resources Midco, LLC (2) (3) (4) (9) (13) |
Banking, Finance, Insurance & Real Estate | 6.75 | 6/30/2020 | 29,350 | 28,890 | 28,900 | 5.05 | |||||||||||||||||||
Castle Management Borrower LLC (Highgate Hotels L.P.) (2) (3) (4) (13) |
Hotel, Gaming & Leisure | 5.50 | 9/18/2020 | 9,878 | 9,807 | 9,535 | 1.67 | |||||||||||||||||||
Central Security Group, Inc. (2) (3) (4) (13) |
Consumer Services | 6.25 | 10/6/2020 | 24,750 | 24,444 | 23,884 | 4.18 | |||||||||||||||||||
Colony Hardware Corporation (2) (3) (5) (13) |
Construction & Building | 7.00 | 10/23/2021 | 13,000 | 12,787 | 12,861 | 2.25 | |||||||||||||||||||
CRCI Holdings Inc. (CLEAResult Consulting, Inc.) (2) (3) (4) (13) |
Utilities: Electric | 5.25 | 7/10/2019 | 5,910 | 5,892 | 5,704 | 1.00 | |||||||||||||||||||
Dent Wizard International Corporation (2) (3) (4) (13) |
Automotive | 5.75 | 4/7/2020 | 7,809 | 7,775 | 7,591 | 1.33 | |||||||||||||||||||
Emerging Markets Communications, LLC (2) (3) (4) (13) |
Telecommunications | 6.75 | 7/1/2021 | 17,910 | 16,225 | 16,882 | 2.95 | |||||||||||||||||||
EP Minerals, LLC (2) (3) (4) (13) |
Metals & Mining | 5.50 | 8/20/2020 | 10,369 | 10,329 | 10,168 | 1.78 | |||||||||||||||||||
FCX Holdings Corp. (2) (3) (4) (13) |
Capital Equipment | 5.50 | 8/4/2020 | 10,047 | 10,041 | 9,862 | 1.72 | |||||||||||||||||||
Genex Holdings, Inc. (2) (3) (13) |
Banking, Finance, Insurance & Real Estate |
5.25 | 5/30/2021 | 4,243 | 4,227 | 4,164 | 0.73 | |||||||||||||||||||
Green Energy Partners/Stonewall LLC (2) (3) (5) (13) |
Energy: Electricity | 6.50 | 11/13/2021 | 16,600 | 16,456 | 16,354 | 2.86 | |||||||||||||||||||
Hummel Station LLC (2) (3) (5) |
Energy: Electricity | 7.00 | 10/27/2022 | 21,000 | 20,174 | 20,553 | 3.59 | |||||||||||||||||||
Indra Holdings Corp. (Totes Isotoner) (2) (3) (5) (13) |
Non-durable Consumer Goods | 5.25 | 5/1/2021 | 14,285 | 14,173 | 13,818 | 2.42 | |||||||||||||||||||
International Medical Group, Inc.(2) (3) (5) (12) |
Banking, Finance, Insurance & Real Estate |
5.75 | 10/30/2020 | 30,000 | 29,415 | 30,276 | 5.30 | |||||||||||||||||||
Jackson Hewitt Inc. (2) (3) (4) (13) |
Retail | 8.00 | 7/30/2020 | 14,800 | 14,526 | 14,600 | 2.55 | |||||||||||||||||||
Language Line, LLC (2) (3) (4) (13) |
Telecommunications | 6.50 | 7/7/2021 | 23,896 | 23,675 | 23,697 | 4.14 | |||||||||||||||||||
Miller Heiman, Inc. (2) (3) (4) (13) |
Business Services | 6.75 | 9/30/2019 | 19,094 | 18,901 | 16,904 | 2.96 | |||||||||||||||||||
Ministry Brands, LLC (2) (3) (5) (10) (18) |
High Tech Industries | 8.00 | 11/20/2021 | 936 | 926 | 901 | 0.16 | |||||||||||||||||||
Ministry Brands, LLC (2) (3) (5) (12) (19) |
High Tech Industries | 8.00 | 11/20/2021 | 17,471 | 17,190 | 17,371 | 3.04 | |||||||||||||||||||
MSX International, Inc. (2) (3) (4) (13) |
Automotive | 6.00 | 8/21/2020 | 9,499 | 9,424 | 9,218 | 1.61 |
The accompanying notes are an integral part of these consolidated financial statements.
15
vCARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2015
(dollar amounts in thousands)
Investmentsnon-controlled/non-affiliated (1) |
Industry |
Interest Rate |
Maturity Date |
Par/ Principal Amount |
Amortized Cost (6) |
Fair Value (7) |
Percentage of Net Assets |
|||||||||||||||||||
First Lien Debt (75.53%) (continued) |
||||||||||||||||||||||||||
National Technical Systems, Inc. (2) (3) (4) (5) (13) (14) |
Aerospace & Defense | 7.00 | % | 6/12/2021 | $ | 25,935 | $ | 25,609 | $ | 24,919 | 4.36 | % | ||||||||||||||
NES Global Talent Finance US LLC (United Kingdom) (2) (3) (4) (8) (13) |
Energy: Oil & Gas | 6.50 | 10/3/2019 | 11,875 | 11,715 | 11,327 | 1.98 | |||||||||||||||||||
Paradigm Acquisition Corp. (2) (3) (5) (13) |
Business Services | 6.00 | 6/2/2022 | 23,482 | 23,154 | 22,984 | 4.02 | |||||||||||||||||||
Pelican Products, Inc. (2) (3) (4) (13) |
Containers, Packaging & Glass | 5.25 | 4/11/2020 | 7,817 | 7,832 | 7,444 | 1.30 | |||||||||||||||||||
Plano Molding Company, LLC (2) (3) (5) (13) |
Hotel, Gaming & Leisure | 7.00 | 5/12/2021 | 22,487 | 22,294 | 21,779 | 3.81 | |||||||||||||||||||
Product Quest Manufacturing, LLC (2) (3) (4) (5) (12) |
Containers, Packaging & Glass | 6.75 | 9/9/2020 | 28,000 | 27,477 | 27,810 | 4.86 | |||||||||||||||||||
Prowler Acquisition Corp. (Pipeline Supply and Service, LLC) (2) (3) (4) |
Wholesale | 5.50 | 1/28/2020 | 10,911 | 10,836 | 9,736 | 1.70 | |||||||||||||||||||
PSC Industrial Holdings Corp (2) (3) (4) (13) |
Environmental Industries | 5.75 | 12/5/2020 | 11,880 | 11,782 | 11,622 | 2.03 | |||||||||||||||||||
PSI Services LLC (2) (3) (4) (5) (12) |
Business Services | 8.00 | 2/27/2021 | 23,471 | 22,885 | 23,933 | 4.19 | |||||||||||||||||||
SolAero Technologies Corp. (2) (3) (4) |
Telecommunications | 5.75 | 12/10/2020 | 10,827 | 10,744 | 10,511 | 1.84 | |||||||||||||||||||
SolAero Technologies Corp. (2) (3) (13) |
Telecommunications | 6.25 | 12/10/2020 | 9,104 | 9,023 | 8,887 | 1.55 | |||||||||||||||||||
Synarc-Biocore Holdings, LLC (2) (3) (4) (13) |
Healthcare & Pharmaceuticals | 5.50 | 3/10/2021 | 13,264 | 13,162 | 12,599 | 2.20 | |||||||||||||||||||
Systems Maintenance Services Holding, Inc. (2) (3) (13) |
High Tech Industries | 5.00 | 10/18/2019 | 2,193 | 2,187 | 2,155 | 0.38 | |||||||||||||||||||
TASC, Inc. (2) (3) (4) (8) (13) |
Aerospace & Defense | 7.00 | 5/23/2020 | 18,351 | 17,713 | 17,916 | 3.13 | |||||||||||||||||||
Teaching Strategies, LLC (2) (3) (4) (13) |
Media: Advertising, Printing & Publishing | 6.00 | 10/1/2019 | 13,953 | 13,904 | 13,844 | 2.42 | |||||||||||||||||||
The Hilb Group, LLC (2) (3) (5) (12) (13) (15) |
Banking, Finance, Insurance & Real Estate | 6.75 | 6/24/2021 | 23,458 | 22,850 | 23,555 | 4.12 | |||||||||||||||||||
The Hygenic Corporation (Performance Health) (2) (3) (4) (13) |
Non-durable Consumer Goods | 6.00 | 10/11/2020 | 15,920 | 15,721 | 15,368 | 2.69 | |||||||||||||||||||
The SI Organization, Inc. (2) (3) (4) (13) |
Aerospace & Defense | 5.75 | 11/23/2019 | 8,778 | 8,716 | 8,724 | 1.53 | |||||||||||||||||||
The Topps Company, Inc. (2) (3) (4) (13) |
Non-durable Consumer Goods | 7.25 | 10/2/2018 | 11,395 | 11,326 | 11,395 | 1.99 | |||||||||||||||||||
TruckPro, LLC (2) (3) (4) (13) |
Automotive | 6.00 | 8/6/2018 | 9,683 | 9,648 | 9,546 | 1.67 | |||||||||||||||||||
U.S. Farathane, LLC (2) (3) (4) (13) |
Automotive | 6.75 | 12/23/2021 | 15,818 | 15,535 | 15,586 | 2.73 | |||||||||||||||||||
Vetcor Professional Practices, LLC (2) (3) (4) (5) (13) (16) |
Consumer Services | 7.00 | 4/20/2021 | 11,085 | 10,983 | 11,034 | 1.93 | |||||||||||||||||||
Violin Finco S.A.R.L. (Alexander Mann Solutions) (United Kingdom) (2) (3) (4) (8) (13) |
Business Services | 5.75 | 12/20/2019 | 11,252 | 11,176 | 11,241 | 1.97 | |||||||||||||||||||
Vistage Worldwide, Inc. (2) (3) (4) (13) |
Business Services | 6.50 | 8/19/2021 | 29,813 | 29,529 | 29,505 | 5.16 | |||||||||||||||||||
Vitera Healthcare Solutions, LLC (2) (3) (4) (13) |
Healthcare & Pharmaceuticals | 6.00 | 11/4/2020 | 9,437 | 9,369 | 9,107 | 1.59 | |||||||||||||||||||
Zest Holdings, LLC (2) (3) (4) (13) |
Durable Consumer Goods | 5.00 | 8/16/2020 | 9,694 | 9,694 | 9,597 | 1.69 | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
First Lien Debt Total |
$ | 800,857 | $ | 795,034 | 139.06 | % | ||||||||||||||||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
16
CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2015
(dollar amounts in thousands)
Investmentsnon-controlled/non-affiliated (1) |
Industry |
Interest Rate |
Maturity Date |
Par/ Principal Amount |
Amortized Cost (6) |
Fair Value (7) |
Percentage of Net Assets |
|||||||||||||||||||
Second Lien Debt (19.98%) |
||||||||||||||||||||||||||
AF Borrower LLC (Accuvant) (2) (3) (5) |
High Tech Industries | 10.00 | % | 1/30/2023 | $ | 8,000 | $ | 7,927 | $ | 7,666 | 1.34 | % | ||||||||||||||
Allied Security Holdings LLC (2) (3) (5) (13) |
Business Services | 8.00 | 8/13/2021 | 8,000 | 7,948 | 7,460 | 1.30 | |||||||||||||||||||
AmeriLife Group, LLC (2) (3) (5) |
Banking, Finance, Insurance & Real Estate |
9.75 | 1/10/2023 | 20,000 | 19,619 | 19,598 | 3.44 | |||||||||||||||||||
Argon Medical Devices, Inc. (2) (3) (4) (5) |
Healthcare & Pharmaceuticals | 12.00 | 6/23/2022 | 24,000 | 23,294 | 23,354 | 4.09 | |||||||||||||||||||
Berlin Packaging L.L.C. (2) (3) (5) (13) |
Containers, Packaging & Glass | 7.75 | 10/1/2022 | 9,200 | 9,139 | 8,694 | 1.52 | |||||||||||||||||||
Charter NEX US Holdings, Inc. (2) (3) (5) (13) |
Chemicals, Plastics & Rubber | 9.25 | 2/5/2023 | 10,000 | 9,864 | 9,459 | 1.65 | |||||||||||||||||||
Confie Seguros Holding II Co. (2) (3) (5) |
Banking, Finance, Insurance & Real Estate |
10.25 | 5/8/2019 | 12,000 | 11,896 | 11,820 | 2.07 | |||||||||||||||||||
Creganna Finance (US) LLC (Ireland) (2) (3) (5) (8) |
Healthcare & Pharmaceuticals | 9.00 | 6/1/2022 | 9,900 | 9,814 | 9,740 | 1.70 | |||||||||||||||||||
DiversiTech Corporation (2) (3) (5) (13) |
Capital Equipment | 9.00 | 11/19/2022 | 8,400 | 8,294 | 8,131 | 1.42 | |||||||||||||||||||
Drew Marine Group Inc. (2) (3) 4) (5) |
Chemicals, Plastics & Rubber | 8.00 | 5/19/2021 | 12,500 | 12,478 | 11,743 | 2.05 | |||||||||||||||||||
Genex Holdings, Inc. (2) (3) (5) |
Banking, Finance, Insurance & Real Estate |
8.75 | 5/30/2022 | 7,990 | 7,906 | 7,390 | 1.29 | |||||||||||||||||||
Genoa, a QoL Healthcare Company, LLC (2) (3) (5) (13) |
Retail | 8.75 | 4/28/2023 | 9,900 | 9,807 | 9,523 | 1.67 | |||||||||||||||||||
Institutional Shareholder Services Inc. (2) (3) (5) (13) |
Banking, Finance, Insurance & Real Estate |
8.50 | 4/30/2022 | 12,500 | 12,397 | 12,014 | 2.10 | |||||||||||||||||||
Jazz Acquisition, Inc. (Wencor) (2) (3) (5) (13) |
Aerospace & Defense | 7.75 | 6/19/2022 | 6,700 | 6,674 | 5,759 | 1.01 | |||||||||||||||||||
Landslide Holdings, Inc. (LANDesk Software) (2) (3) (13) |
Software | 8.25 | 2/25/2021 | 3,500 | 3,480 | 3,113 | 0.54 | |||||||||||||||||||
MRI Software, LLC (2) (3) (5) |
Software | 9.00 | 6/23/2022 | 11,250 | 11,093 | 10,890 | 1.91 | |||||||||||||||||||
Phillips-Medisize Corporation (2) (3) (5) (13) |
Chemicals, Plastics & Rubber | 8.25 | 6/16/2022 | 5,000 | 4,958 | 4,700 | 0.82 | |||||||||||||||||||
Power Stop, LLC (5) (17) |
Automotive | 11.00 | 5/29/2022 | 10,000 | 9,811 | 10,080 | 1.76 | |||||||||||||||||||
Prime Security Services Borrower, LLC (Protection One, Inc.) (2) (3) (5) |
Consumer Services | 9.75 | 7/1/2022 | 6,700 | 6,607 | 6,271 | 1.10 | |||||||||||||||||||
Prowler Acquisition Corp. (Pipeline Supply and Service, LLC) (2) (3) (5) |
Wholesale | 9.50 | 7/28/2020 | 3,000 | 2,953 | 2,493 | 0.44 | |||||||||||||||||||
Systems Maintenance Services Holding, Inc. (2) (3) (4) |
High Tech Industries | 9.25 | 10/18/2020 | 6,000 | 5,959 | 5,860 | 1.02 | |||||||||||||||||||
TASC, Inc. (5) (8) |
Aerospace & Defense | 12.00 | 5/21/2021 | 6,000 | 5,891 | 6,075 | 1.06 | |||||||||||||||||||
Vitera Healthcare Solutions, LLC (2) (3) (4) (13) |
Healthcare & Pharmaceuticals | 9.25 | 11/4/2021 | 2,000 | 1,976 | 1,784 | 0.31 | |||||||||||||||||||
Watchfire Enterprises, Inc. (2) (3) (5) (13) |
Media: Advertising, Printing & Publishing | 9.00 | 10/2/2021 | 7,000 | 6,923 | 6,779 | 1.19 | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
Second Lien Debt Total |
$ | 216,708 | $ | 210,396 | 36.80 | % | ||||||||||||||||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
17
CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2015
(dollar amounts in thousands)
Investmentsnon-controlled/non-affiliated (1) |
Industry |
Maturity Date |
Par/ Principal Amount |
Amortized Cost (6) |
Fair Value (7) |
Percentage of Net Assets |
||||||||||||||||
Structured Finance Obligations (4.26%) (5) (8) (11) |
||||||||||||||||||||||
1776 CLO I, Ltd., Subordinated Notes |
Structured Finance | 5/8/2020 | $ | 11,750 | $ | 8,079 | $ | 3,347 | 0.59 | % | ||||||||||||
AIMCO CLO, Series 2014-A, Class F, 5.47% (2) |
Structured Finance | 7/20/2026 | 2,700 | 2,369 | 1,701 | 0.30 | ||||||||||||||||
AIMCO CLO, Series 2014-A, Subordinated Notes |
Structured Finance | 7/20/2026 | 11,500 | 8,369 | 5,779 | 1.00 | ||||||||||||||||
Ares XXVIII CLO Ltd., Subordinated Notes |
Structured Finance | 10/17/2024 | 7,000 | 4,416 | 3,255 | 0.57 | ||||||||||||||||
Babson CLO Ltd. 2005-I, Subordinated Notes |
Structured Finance | 4/15/2019 | 7,632 | 333 | 86 | 0.02 | ||||||||||||||||
CIFC Funding 2007-III, Ltd., Income Notes |
Structured Finance | 7/26/2021 | 6,500 | 2,902 | 2,453 | 0.43 | ||||||||||||||||
Clydesdale CLO 2005, Ltd., Subordinated Notes |
Structured Finance | 12/6/2017 | 5,750 | | 11 | 0.00 | ||||||||||||||||
Flagship VII Limited, Subordinated Notes |
Structured Finance | 1/20/2026 | 7,000 | 4,781 | 3,184 | 0.56 | ||||||||||||||||
ING IM CLO 2012-1 LLC, Preferred Shares |
Structured Finance | 3/14/2022 | 7,610 | 4,637 | 3,789 | 0.66 | ||||||||||||||||
ING IM CLO 2012- 1 LLC, Subordinated Notes |
Structured Finance | 3/14/2022 | 2,500 | 1,523 | 1,245 | 0.22 | ||||||||||||||||
MSIM Peconic Bay, Ltd., Subordinated Notes |
Structured Finance | 7/20/2019 | 4,500 | 1,112 | 923 | 0.16 | ||||||||||||||||
Nautique Funding Ltd., Income Notes |
Structured Finance | 4/15/2020 | 5,000 | 2,760 | 2,275 | 0.40 | ||||||||||||||||
Steele Creek CLO 2014-I, LLC, Subordinated Notes |
Structured Finance | 8/21/2026 | 18,000 | 13,453 | 12,241 | 2.14 | ||||||||||||||||
Venture VI CDO Limited, Preference Shares |
Structured Finance | 8/3/2020 | 7,000 | 3,488 | 3,203 | 0.56 | ||||||||||||||||
Westwood CDO I, Ltd., Subordinated Notes |
Structured Finance | 3/25/2021 | 4,000 | 1,718 | 1,320 | 0.23 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Structured Finance Obligations Total |
$ | 59,940 | $ | 44,812 | 7.84 | % | ||||||||||||||||
|
|
|
|
|
|
Investmentsnon-controlled/non-affiliated (1) |
Industry | Par/ Principal Amount |
Cost | Fair Value (7) |
Percentage of Net Assets |
|||||||||||||||
Equity Investments (0.23%) (5) |
||||||||||||||||||||
Power Stop, LLC |
Automotive | $ | 7 | $ | 715 | $ | 788 | 0.14 | % | |||||||||||
The Hilb Group, LLC |
|
Banking, Finance, Insurance & Real Estate |
|
1,500 | 1,500 | 1,636 | 0.28 | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Equity Investments Total |
$ | 2,215 | $ | 2,424 | 0.42 | % | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total Investmentsnon-controlled/non-affiliated |
$ | 1,079,720 | $ | 1,052,666 | 184.12 | % |
(1) | Unless otherwise indicated, issuers of debt and equity investments held by GMS Finance are domiciled in the United States and issuers of structured finance obligations are domiciled in the Cayman Islands. Under the Investment Company Act, the Company would be deemed to control a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2015, the Company does not control any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an affiliated person of a portfolio company if the Company owns 5% or more of the portfolio companys outstanding voting securities. As of December 31, 2015, the Company is not an affiliated person of any of these portfolio companies. |
The accompanying notes are an integral part of these consolidated financial statements.
18
CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2015
(dollar amounts in thousands)
(2) | Variable rate loans to the portfolio companies and variable rate notes of structured finance obligations bear interest at a rate that may be determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the Prime Rate), which generally resets quarterly. For each such loan and note, the Company has provided the interest rate in effect as of December 31, 2015. |
(3) | Loan includes interest rate floor feature. |
(4) | Denotes that all or a portion of the assets are owned by the Borrower Sub. The Borrower Sub has entered into the Revolving Credit Facility. The lenders of the Revolving Credit Facility have a first lien security interest in substantially all of the assets of the Borrower Sub (see Note 6, Borrowings). Accordingly, such assets are not available to creditors of the Company or the 2015-1 Issuer. |
(5) | Denotes that all or a portion of the assets are owned by the Company. The Company has entered into the Facility. The lenders of the Facility have a first lien security interest in substantially all of the portfolio investments held by the Company (see Note 6, Borrowings). Accordingly, such assets are not available to creditors of the Borrower Sub or the 2015-1 Issuer. |
(6) | Amortized cost represents original cost, including origination fees, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method. Equity tranche CLO fund investments, which are referred to as structured finance obligations, are recorded at amortized cost using the effective interest method. |
(7) | Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements), pursuant to the Companys valuation policy. |
(8) | The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Companys total assets. |
(9) | Captive Resources Midco, LLC has an undrawn delayed draw term loan of $3,125 par value at LIBOR + 5.75%, 1.00% floor, and an undrawn revolver of $1,875 par value at LIBOR + 5.75%, 1.00% floor. An unused rate of 1.25% and 0.50% is charged on the delayed draw term loan and revolver principal, respectively, while undrawn. |
(10) | The Company receives less than the stated interest rate of this loan as a result of an agreement among lenders. Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/first out loan, which has first priority ahead of the first lien/last out loan with respect to principal, interest and other payments. |
(11) | As of December 31, 2015, the Company has a greater than 25% but less than 50% equity or subordinated notes ownership interest in certain structured finance obligations. These investments have governing documents that preclude the Company from controlling management of the entity and therefore the Company has determined that the issuer of the investment is not a controlled affiliate or a non-controlled affiliate because the investments are not voting securities. |
(12) | In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company is entitled to receive additional interest as a result of an agreement among lenders. Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments. |
(13) | Denotes that all or a portion of the assets are owned by the 2015-1 Issuer and secure the notes issued in connection with a $400 million term debt securitization completed by the Company on June 26, 2015 (see Note 7, 2015-1 Notes). Accordingly, such assets are not available to the creditors of the Borrower Sub or the Company. |
(14) | National Technical Systems, Inc. has an undrawn delayed draw term loan of $4,469 par value at LIBOR + 6.00%, 1.00% floor, and an undrawn revolver of $2,031 par value at LIBOR + 6.00%, 1.00% floor. An unused rate of 1.00% and 0.50% is charged on the delayed draw term loan and revolver principal, respectively, while undrawn. |
(15) | The Hilb Group, LLC has an undrawn delayed draw term loan of $10,034 par value at LIBOR + 5.75%, 1.00% floor. An unused rate of 1.00% is charged on the principal while undrawn. |
(16) | Vetcor Professional Practices LLC has an undrawn delayed draw term loan of $1,473 par value at LIBOR + 6.00%, 1.00% floor. An unused rate of 1.00% is charged on the principal while undrawn. |
(17) | Represents a corporate mezzanine loan, which is subordinated to senior secured term loans of the portfolio company. |
(18) | Ministry Brands, LLC has an undrawn first out delayed draw term loan of $64 par value at LIBOR + 7.00%, 1.00% floor. An unused rate of 1.00% is charged on the delayed draw term loan principal while undrawn. |
(19) | Ministry Brands, LLC has an undrawn last out delayed draw term loan of $1,530 par value at LIBOR + 7.00%, 1.00% floor. An unused rate of 1.00% is charged on the delayed draw term loan principal while undrawn. |
The accompanying notes are an integral part of these consolidated financial statements.
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CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2015
(dollar amounts in thousands)
As of December 31, 2015, investmentsnon-controlled/non-affiliated at fair value consisted of the following:
Type |
Amortized Cost |
Fair Value | % of Fair Value |
|||||||||
First Lien Debt |
$ | 800,857 | $ | 795,034 | 75.53 | % | ||||||
Second Lien Debt |
216,708 | 210,396 | 19.98 | |||||||||
Structured Finance Obligations |
59,940 | 44,812 | 4.26 | |||||||||
Equity Investments |
2,215 | 2,424 | 0.23 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 1,079,720 | $ | 1,052,666 | 100.00 | % | ||||||
|
|
|
|
|
|
The industrial composition of investmentsnon-controlled/non-affiliated at fair value as of December 31, 2015 was as follows:
Industry |
Amortized Cost |
Fair Value | % of Fair Value |
|||||||||
Aerospace & Defense |
$ | 64,603 | $ | 63,393 | 6.02 | % | ||||||
Automotive |
52,908 | 52,809 | 5.02 | |||||||||
Banking, Finance, Insurance & Real Estate |
138,700 | 139,353 | 13.24 | |||||||||
Business Services |
131,981 | 130,318 | 12.38 | |||||||||
Capital Equipment |
18,335 | 17,993 | 1.71 | |||||||||
Chemicals, Plastics & Rubber |
27,300 | 25,902 | 2.46 | |||||||||
Construction & Building |
19,947 | 19,958 | 1.90 | |||||||||
Consumer Services |
51,783 | 50,764 | 4.82 | |||||||||
Containers, Packaging & Glass |
55,846 | 55,128 | 5.24 | |||||||||
Durable Consumer Goods |
20,648 | 20,482 | 1.94 | |||||||||
Energy: Electricity |
36,630 | 36,907 | 3.51 | |||||||||
Energy: Oil & Gas |
11,715 | 11,327 | 1.08 | |||||||||
Environmental Industries |
11,782 | 11,622 | 1.10 | |||||||||
Healthcare & Pharmaceuticals |
65,037 | 64,140 | 6.09 | |||||||||
High Tech Industries |
50,244 | 49,782 | 4.73 | |||||||||
Hotel, Gaming & Leisure |
32,101 | 31,314 | 2.97 | |||||||||
Media: Advertising, Printing & Publishing |
20,827 | 20,623 | 1.96 | |||||||||
Metals & Mining |
10,329 | 10,168 | 0.97 | |||||||||
Non-durable Consumer Goods |
41,220 | 40,581 | 3.85 | |||||||||
Retail |
24,333 | 24,123 | 2.29 | |||||||||
Software |
14,573 | 14,003 | 1.33 | |||||||||
Structured Finance |
59,940 | 44,812 | 4.26 | |||||||||
Telecommunications |
70,565 | 70,736 | 6.72 | |||||||||
Transportation: Cargo |
19,582 | 19,134 | 1.82 | |||||||||
Transportation: Consumer |
9,110 | 9,361 | 0.89 | |||||||||
Utilities: Electric |
5,892 | 5,704 | 0.54 | |||||||||
Wholesale |
13,789 | 12,229 | 1.16 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 1,079,720 | $ | 1,052,666 | 100.00 | % | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
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CARLYLE GMS FINANCE, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
As of December 31, 2015
(dollar amounts in thousands)
The geographical composition of investmentsnon-controlled/non-affiliated at fair value as of December 31, 2015 was as follows:
Geography |
Amortized Cost |
Fair Value | % of Fair Value | |||||||||
Cayman Islands |
$ | 59,940 | $ | 44,812 | 4.26 | % | ||||||
Ireland |
9,814 | 9,740 | 0.93 | |||||||||
United Kingdom |
22,891 | 22,568 | 2.14 | |||||||||
United States |
987,075 | 975,546 | 92.67 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 1,079,720 | $ | 1,052,666 | 100.00 | % | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
21
CARLYLE GMS FINANCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
As of June 30, 2016
(dollar amounts in thousands, except per share data)
1. ORGANIZATION
Carlyle GMS Finance, Inc. (GMS Finance or the Company) is a Maryland corporation formed on February 8, 2012, and structured as an externally managed, non-diversified closed-end investment company. GMS Finance has elected to be regulated as a business development company (BDC) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the Investment Company Act). GMS Finance has elected to be treated, and intends to continue to comply with the requirements to qualify annually, as a regulated investment company (RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code).
GMS Finances investment objective is to generate current income and capital appreciation primarily through debt investments in U.S. middle market companies, which the Company defines as companies with approximately $10 million to $100 million of earnings before interest, taxes, depreciation and amortization (EBITDA). GMS Finance seeks to achieve its investment objective by investing primarily in first lien senior secured loans (which may include stand-alone first lien loans; first lien/last out loans, which are loans that have a secondary priority behind first lien/first out loans; unitranche loans, which are loans that combine features of first lien, second lien or subordinated loans, generally in a first lien position; and secured corporate bonds with features similar to the features of these categories of first lien loans) and second lien senior secured loans (which may include senior secured loans, and, to a lesser extent, secured corporate bonds, with a secondary priority behind first lien loans) (collectively, Middle Market Senior Loans). The Middle Market Senior Loans are generally made to private U.S. middle market companies that are, in many cases, controlled by private equity firms. Depending on market conditions, GMS Finance expects that between 70% and 80% of the value of its assets will be invested in Middle Market Senior Loans, with the balance invested in higher-yielding investments, which may include middle market junior loans such as corporate mezzanine loans, equity co-investments, broadly syndicated first lien and second lien senior secured loans, high-yield bonds, structured finance obligations and/or other opportunistic investments. GMS Finance expects that the composition of its portfolio will change over time given Carlyle GMS Investment Management L.L.C.s (the Investment Adviser) view on, among other things, the economic and credit environment (including with respect to interest rates) in which the Company is operating.
On May 2, 2013, GMS Finance completed its initial closing of capital commitments (the Initial Closing) and subsequently commenced substantial investment operations. If GMS Finance has not consummated an initial public offering of its common stock that results in an unaffiliated public float of at least 15% of the aggregate capital commitments received prior to the date of such initial public offering (a Qualified IPO) by May 2, 2018, then GMS Finance (subject to any necessary stockholder approvals and applicable requirements of the Investment Company Act) will use its best efforts to wind down and/or liquidate and dissolve.
GMS Finance is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012. GMS Finance will remain an emerging growth company for up to five years following an initial public offering, although if the market value of the common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, GMS Finance would cease to be an emerging growth company as of the following December 31.
GMS Finance is externally managed by the Investment Adviser, an investment adviser registered under the Investment Advisers Act of 1940, as amended. Carlyle GMS Finance Administration L.L.C. (the Administrator) provides the administrative services necessary for GMS Finance to operate. Both the Investment Adviser and the Administrator are wholly-owned subsidiaries of Carlyle Investment Management
22
L.L.C., a subsidiary of The Carlyle Group L.P. Carlyle refers to The Carlyle Group L.P., its affiliates and its consolidated subsidiaries, a global alternative asset manager publicly traded on NASDAQ Global Select Market under the symbol CG. Refer to the sec.gov website for further information on Carlyle.
Carlyle GMS Finance SPV LLC (the Borrower Sub) is a Delaware limited liability company that was formed on January 3, 2013. The Borrower Sub invests in first and second lien senior secured loans. The Borrower Sub is a wholly-owned subsidiary of the Company and is consolidated in these consolidated financial statements commencing from the date of its formation, January 3, 2013.
On June 26, 2015, the Company completed a $400 million term debt securitization (the 2015-1 Debt Securitization). The notes offered in the 2015-1 Debt Securitization (the 2015-1 Notes) were issued by Carlyle GMS Finance MM CLO 2015-1 LLC (the 2015-1 Issuer), a wholly-owned and consolidated subsidiary of the Company, and are secured by a diversified portfolio of the 2015-1 Issuer consisting primarily of first and second lien senior secured loans. Refer to Note 7 for details. The 2015-1 Issuer is consolidated in these consolidated financial statements commencing from the date of its formation, May 8, 2015.
On February 29, 2016, the Company and Credit Partners USA LLC (Credit Partners) entered into an amended and restated limited liability company agreement (as amended, the Limited Liability Company Agreement) to co-manage Middle Market Credit Fund, LLC (Credit Fund). Credit Fund primarily invests in first lien loans of middle-market companies. Credit Fund is managed by a six-member board of managers, on which the Company and Credit Partners each have equal representation. The Company and Credit Partners each have 50% economic ownership of Credit Fund and have commitments to fund, from time to time, capital of up to $400,000 each. Refer to Note 5, Middle Market Credit Fund, LLC, for details.
As a BDC, GMS Finance is required to comply with certain regulatory requirements. As part of these requirements, the Company must not acquire any assets other than qualifying assets specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of its total assets are qualifying assets (with certain limited exceptions).
GMS Finance has elected to be treated, and intends to continue to comply with the requirements to qualify annually, as a RIC under the Code, and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, GMS Finance must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. Pursuant to this election, GMS Finance generally does not have to pay corporate level taxes on any income that it distributes to stockholders, provided that GMS Finance satisfies those requirements.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (US GAAP). The Company is an investment company for the purposes of accounting and financial reporting in accordance with Accounting Standards Update (ASU) 2013-08, Financial ServicesInvestment Companies (ASU 2013-08): Amendments to the Scope, Measurement and Disclosure Requirements. The consolidated financial statements include the accounts of GMS Finance and its wholly-owned subsidiaries, the Borrower Sub and the 2015-1 Issuer. All significant intercompany balances and transactions have been eliminated. US GAAP for an investment company requires investments to be recorded at fair value. The carrying value for all other assets and liabilities approximates their fair value.
The interim financial statements have been prepared in accordance with US GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X. Accordingly, certain disclosures accompanying the annual consolidated financial statements
23
prepared in accordance with US GAAP are omitted. In the opinion of management, all adjustments considered necessary for the fair presentation of consolidated financial statements for the interim period presented have been included. These adjustments are of a normal, recurring nature. This Form 10-Q should be read in conjunction with the Companys annual report on Form 10-K for the year ended December 31, 2015. The results of operations for the three month and six month periods ended June 30, 2016 are not necessarily indicative of the operating results to be expected for the full year.
Use of Estimates
The preparation of consolidated financial statements in conformity with US GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Managements estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Companys accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on base management and incentive fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements. Actual results could differ from these estimates and such differences could be material.
Investments
Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the accompanying Consolidated Statements of Operations reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. See Note 3 for further information about fair value measurements.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits and highly liquid investments (e.g., money market funds, U.S. treasury notes) with original maturities of three months or less. Cash equivalents are carried at amortized cost, which approximates fair value. The Companys cash and cash equivalents are held with two large financial institutions and cash held in such financial institutions may, at times, exceed the Federal Deposit Insurance Corporation insured limit.
Revenue Recognition
Interest from Investments and Realized Gain/Loss on Investments
Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt securities purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including origination fees, adjusted for the accretion of discounts and amortization of premiums, if any. At time of exit, the realized gain or loss on an investment is the difference between the amortized cost at time of exit and the cash received at exit using the specific identification method.
The Company may have loans in its portfolio that contain payment-in-kind (PIK) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan
24
principal on the respective capitalization dates, and is generally due at maturity. As of June 30, 2016 and December 31, 2015 and for the three month and six month periods ended June 30, 2016 and 2015, no loans in the portfolio contained PIK provisions.
Interest income from investments in the equity class of collateralized loan obligation (CLO) funds, which are included in structured finance obligations, is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with Accounting Standards Codification (ASC) 325-40, Beneficial Interests in Securitized Financials Assets. We monitor the expected cash inflows from our CLO equity investments, including the expected residual payments and the effective yield is determined and updated at least quarterly. In estimating these cash flows, there are a number of assumptions that are subject to uncertainties, including the amount and timing of principal payments which are impacted by prepayments, repurchases, defaults, delinquencies and liquidations of or within the CLO funds. These uncertainties are difficult to predict and are subject to future events that could have impacted the Companys estimates if the information was known at the time. As a result, actual results may differ significantly from these estimates.
Other Income
Other income may include income such as consent, waiver, amendment, and syndication fees associated with the Companys investment activities as well as any fees for managerial assistance services rendered by the Company to portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees will be amortized into other income over the life of the guarantee. The unamortized amount, if any, is included in other assets in the accompanying Consolidated Statements of Assets and Liabilities. For the three month and six month periods ended June 30, 2016, the Company earned $1,670 and $2,669, respectively, in other income. For the three month and six month periods ended June 30, 2015, the Company earned $111 and $474, respectively, in other income.
Non-Accrual Income
Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon managements judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in managements judgment, are likely to remain current. Management may not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. As of June 30, 2016 and December 31, 2015 and for the three month and six month periods ended June 30, 2016 and 2015, no loans in the portfolio were on non-accrual status.
Revolving Credit Facility, Facility and 2015-1 Notes Related Costs, Expenses and Deferred Financing Costs (See Note 6, Borrowings, and Note 7, 2015-1 Notes)
Interest expense and unused commitment fees on the Revolving Credit Facility and Facility are recorded on an accrual basis. Unused commitment fees are included in credit facility fees in the accompanying Consolidated Statements of Operations.
The Revolving Credit Facility and Facility are recorded at carrying value, which approximates fair value.
Deferred financing costs include capitalized expenses related to the closing of the Revolving Credit Facility and Facility. Amortization of deferred financing costs for each credit facility is computed on the straight-line basis over the respective term of each credit facility, except for a portion that was accelerated in connection with the amendment of the Revolving Credit Facility as described in Note 6. The amortization of such costs is included in credit facility fees in the accompanying Consolidated Statements of Operations.
25
Deferred financing costs also include capitalized expenses including structuring and arrangement fees related to the offering of the 2015-1 Notes. These costs are presented as a direct deduction to the carrying amount of the 2015-1 Notes. Amortization of deferred financing costs for the 2015-1 Notes is computed on the effective yield method over the term of the 2015-1 Notes. The amortization of such costs is included in interest expense in the accompanying Consolidated Statements of Operations.
The 2015-1 Notes are recorded at carrying value, which approximates fair value.
Organization and Offering Costs
The Company agreed to reimburse the Investment Adviser for initial organization and offering costs incurred on behalf of GMS Finance up to $1,500. As of June 30, 2016 and December 31, 2015, $1,500 of organization and offering costs had been incurred by GMS Finance and $57 of excess organization and offering costs had been incurred by the Investment Adviser since inception. The $1,500 of incurred organization and offering costs are allocated to all stockholders based on their respective capital commitment and are re-allocated amongst all stockholders at the time of each capital drawdown subsequent to the Initial Closing. The Companys organization costs incurred are expensed and the offering costs are charged against equity when incurred.
Income Taxes
For federal income tax purposes, GMS Finance has elected to be treated as a RIC under the Code, and intends to make the required distributions to its stockholders as specified therein. In order to qualify as a RIC, GMS Finance must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then GMS Finance is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.
The minimum distribution requirements applicable to RICs require GMS Finance to distribute to its stockholders at least 90% of its investment company taxable income (ICTI), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, GMS Finance may choose to carry forward ICTI in excess of current year distributions into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
In addition, based on the excise distribution requirements, GMS Finance is subject to a 4% nondeductible federal excise tax on undistributed income unless GMS Finance distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by GMS Finance that is subject to corporate income tax is considered to have been distributed. GMS Finance intends to make sufficient distributions each taxable year to satisfy the excise distribution requirements.
The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are more-likely than not to be sustained by the applicable tax authority. All penalties and interest associated with income taxes, if any, are included in income tax expense.
The Borrower Sub and the 2015-1 Issuer are disregarded entities for tax purposes and are consolidated with the tax return of GMS Finance.
Capital Calls and Dividends and Distributions to Common Stockholders
The Company records the shares issued in connection with capital calls as of the effective date of the capital call. To the extent that the Company has taxable income available, the Company intends to make quarterly
26
distributions to its common stockholders. Dividends and distributions to common stockholders are recorded on the record date. The amount to be distributed is determined by the Board of Directors each quarter and is generally based upon the taxable earnings estimated by management and available cash. Net realized capital gains, if any, are generally distributed at least annually, although the Company may decide to retain such capital gains for investment.
The Company has adopted a dividend reinvestment plan that provides for reinvestment of any distributions on behalf of its stockholders, for those who have elected to participate in the plan. As a result of adopting such a plan, if the Board of Directors authorizes, and GMS Finance declares, a cash dividend or distribution, the stockholders who have elected to participate in the dividend reinvestment plan would have their cash dividends or distributions automatically reinvested in additional shares of the Companys common stock, rather than receiving cash. Prior to a Qualified IPO, the Company intends to use primarily newly issued shares of its common stock to implement the plan issued at the net asset value per share most recently determined by the Board of Directors. After a Qualified IPO, the Company intends to use primarily newly issued shares to implement the plan so long as the market value per share is equal to or greater than the net asset value per share as of the close of business on the relevant payment date for such dividend or distribution. If the market value per share is less than the net asset value per share as of the close of business on the relevant payment date, the plan administrator would purchase the common stock on behalf of participants in the open market, unless the Company instructs the plan administrator otherwise.
Functional Currency
The functional currency of the Company is the U.S. Dollar and all transactions were in U.S. Dollars.
Recent Accounting Standards Updates
On April 7, 2015, the Financial Accounting Standards Board issued ASU 2015-3, InterestImputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs (ASU 2015-3). ASU 2015-3 requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts and premiums. This guidance was effective for the Company on January 1, 2016 and the ASU requires the guidance to be applied on a retrospective basis. The Company adopted this guidance on January 1, 2016 and reclassified $2,356 of debt issuance costs from deferred financing costs to 2015-1 Notes payable in the accompanying Consolidated Statement of Assets and Liabilities as of December 31, 2015.
In May 2015, the Financial Accounting Standards Board issued ASU 2015-7, Fair Value Measurement (Topic 820)Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (ASU 2015-7). ASU 2015-7 provides amended guidance on the disclosures for investments in certain entities that calculate net asset value per share (or its equivalent). The amendments remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The guidance is effective for the Company on January 1, 2016. The Company adopted the new accounting guidance on January 1, 2016 and presented the fair value disclosures accordingly.
In August 2015, the Financial Accounting Standards Board issued ASU 2015-15, InterestImputation of Interest (Sub-topic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (ASU 2015-15). ASU 2015-03 does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. In accordance with ASU 2015-15, an entity may defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance
27
costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. This guidance was effective for the Company on January 1, 2016. The Company adopted the new accounting guidance and it did not have a material impact on the Companys consolidated financial statements.
3. FAIR VALUE MEASUREMENTS
The Company applies fair value accounting in accordance with the terms of Financial Accounting Standards Board ASC Topic 820, Fair Value Measurement (ASC 820). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., consensus pricing). When doing so, the Company determines whether the quote obtained is sufficient according to US GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.
Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or GMS Finances Board of Directors, does not represent fair value shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments, a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Directors engages a third-party valuation firm to provide positive assurance on portions of the Middle Market Senior Loans and equity investments portfolio each quarter (such that each non-traded investment other than Credit Fund and the 2015-1 Issuer is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of managements preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Directors (the Audit Committee) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Directors with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.
All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:
| the nature and realizable value of any collateral; |
| call features, put features and other relevant terms of debt; |
| the portfolio companys leverage and ability to make payments; |
| the portfolio companys public or private credit rating; |
| the portfolio companys actual and expected earnings and discounted cash flow; |
28
| prevailing interest rates and spreads for similar securities and expected volatility in future interest rates; |
| the markets in which the portfolio company does business and recent economic and/or market events; and |
| comparisons to comparable transactions and publicly traded securities. |
Investment performance data utilized are the most recently available financial statements and compliance certificates received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Companys investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements as of June 30, 2016 and December 31, 2015.
US GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.
Investments measured and reported at fair value are classified and disclosed based on the observability of inputs used in determination of fair values, as follows:
| Level Iinputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date. The types of financial instruments in Level I generally include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price. |
| Level IIinputs to the valuation methodology are either directly or indirectly observable as of the reporting date and are those other than quoted prices in active markets. The type of financial instruments in this category generally includes less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs. |
| Level IIIinputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are in this category generally include investments in privately-held entities, CLOs, and certain over-the-counter derivatives where the fair value is based on unobservable inputs. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investments level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Investment Advisers assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
29
Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur. For the three month and six month periods ended June 30, 2016 and 2015, there were no transfers between levels.
The following tables summarize the Companys investments measured at fair value on a recurring basis by the above fair value hierarchy levels as of June 30, 2016 and December 31, 2015:
June 30, 2016 | ||||||||||||||||
Level I | Level II | Level III | Total | |||||||||||||
Assets |
||||||||||||||||
First Lien Debt |
$ | | $ | 9,900 | $ | 944,494 | $ | 954,394 | ||||||||
Second Lien Debt |
| | 219,383 | 219,383 | ||||||||||||
Structured Finance Obligations |
| | 8,040 | 8,040 | ||||||||||||
Equity Investments |
| | 4,703 | 4,703 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
$ | | $ | 9,900 | $ | 1,176,620 | $ | 1,186,520 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Investments measured at net asset value (1) |
|
$ | 14,714 | |||||||||||||
|
|
|||||||||||||||
Total |
$ | 1,201,234 | ||||||||||||||
|
|
December 31, 2015 | ||||||||||||||||
Level I | Level II | Level III | Total | |||||||||||||
Assets |
||||||||||||||||
First Lien Debt |
$ | | $ | 9,575 | $ | 785,459 | $ | 795,034 | ||||||||
Second Lien Debt |
| | 210,396 | 210,396 | ||||||||||||
Structured Finance Obligations |
| | 44,812 | 44,812 | ||||||||||||
Equity Investments |
| | 2,424 | 2,424 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | | $ | 9,575 | $ | 1,043,091 | $ | 1,052,666 | ||||||||
|
|
|
|
|
|
|
|
(1) | Amount represents the Companys investments in Credit Fund. The fair value of these investments has been estimated using the net asset value of the Companys ownership interests in Credit Fund. |
30
The changes in the Companys investments at fair value for which the Company has used Level III inputs to determine fair value and net change in unrealized appreciation (depreciation) included in earnings for Level III investments still held are as follows:
Financial Assets For the three month period ended June 30, 2016 |
||||||||||||||||||||
First Lien Debt |
Second Lien Debt |
Structured Finance Obligations |
Equity Investments |
Total | ||||||||||||||||
Balance, beginning of period |
$ | 873,670 | $ | 227,890 | $ | 30,355 | $ | 2,795 | $ | 1,134,710 | ||||||||||
Purchases |
124,852 | | | 2,001 | 126,853 | |||||||||||||||
Sales |
(39,106 | ) | | (20,652 | ) | | (59,758 | ) | ||||||||||||
Paydowns |
(21,450 | ) | (12,493 | ) | (5,257 | ) | | (39,200 | ) | |||||||||||
Accretion of discount |
910 | 189 | | | 1,099 | |||||||||||||||
Net realized gains (losses) |
167 | | (6,189 | ) | | (6,022 | ) | |||||||||||||
Net change in unrealized appreciation (depreciation) |
5,451 | 3,797 | 9,783 | (93 | ) | 18,938 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance, end of period |
$ | 944,494 | $ | 219,383 | $ | 8,040 | $ | 4,703 | $ | 1,176,620 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held as of June 30, 2016 included in net change in unrealized appreciation (depreciation) on investments non-controlled/non-affiliated on the Consolidated Statements of Operations |
$ | 5,397 | $ | 3,797 | $ | 987 | $ | (93 | ) | $ | 10,088 | |||||||||
|
|
|
|
|
|
|
|
|
|
Financial Assets For the three month period ended June 30, 2015 |
||||||||||||||||||||
First Lien Debt |
Second Lien Debt |
Structured Finance Obligations |
Equity Investments |
Total | ||||||||||||||||
Balance, beginning of period |
$ | 582,393 | $ | 118,198 | $ | 78,131 | $ | | $ | 778,711 | ||||||||||
Purchases |
167,679 | 58,419 | 2,240 | 2,215 | 230,553 | |||||||||||||||
Sales |
(9,857 | ) | | (5,110 | ) | | (14,967 | ) | ||||||||||||
Paydowns |
(90,728 | ) | | (3,192 | ) | | (93,920 | ) | ||||||||||||
Accretion of discount |
840 | 36 | 5 | | 881 | |||||||||||||||
Net realized gains (losses) |
205 | | 388 | | 593 | |||||||||||||||
Net change in unrealized appreciation (depreciation) |
1,074 | 1,158 | (1,292 | ) | | 940 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance, end of period |
$ | 651,606 | $ | 177,811 | $ | 71,170 | $ | 2,215 | $ | 902,802 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held as of June 30, 2015 included in net change in unrealized appreciation (depreciation) on investments non-controlled/non-affiliated on the Consolidated Statements of Operations |
$ | 579 | $ | 1,158 | $ | (1,252 | ) | $ | | $ | 485 | |||||||||
|
|
|
|
|
|
|
|
|
|
31
Financial Assets For the six month period ended June 30, 2016 |
||||||||||||||||||||
First Lien Debt |
Second Lien Debt |
Structured Finance Obligations |
Equity Investments |
Total | ||||||||||||||||
Balance, beginning of period |
$ | 785,459 | $ | 210,396 | $ | 44,812 | $ | 2,424 | $ | 1,043,091 | ||||||||||
Purchases |
223,654 | 33,488 | | 2,001 | 259,143 | |||||||||||||||
Sales |
(41,299 | ) | (10,835 | ) | (30,457 | ) | | (82,591 | ) | |||||||||||
Paydowns |
(24,776 | ) | (12,493 | ) | (5,257 | ) | | (42,526 | ) | |||||||||||
Accretion of discount |
1,442 | 286 | (31 | ) | | 1,697 | ||||||||||||||
Net realized gains (losses) |
171 | | (9,770 | ) | | (9,599 | ) | |||||||||||||
Net change in unrealized appreciation (depreciation) |
(157 | ) | (1,459 | ) | 8,743 | 278 | 7,405 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance, end of period |
$ | 944,494 | $ | 219,383 | $ | 8,040 | $ | 4,703 | $ | 1,176,620 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held as of June 30, 2016 included in net change in unrealized appreciation (depreciation) on investments non-controlled/non-affiliated on the Consolidated Statements of Operations |
$ | (189 | ) | $ | (1,533 | ) | $ | (458 | ) | $ | 278 | $ | (1,902 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
Financial Assets For the six month period ended June 30, 2015 |
||||||||||||||||||||
First Lien Debt |
Second Lien Debt |
Structured Finance Obligations |
Equity Investments |
Total | ||||||||||||||||
Balance, beginning of period |
$ | 505,212 | $ | 107,874 | $ | 76,001 | $ | | $ | 689,087 | ||||||||||
Purchases |
253,976 | 68,272 | 10,059 | 2,215 | 334,522 | |||||||||||||||
Sales |
(9,857 | ) | | (8,421 | ) | | (18,278 | ) | ||||||||||||
Paydowns |
(103,076 | ) | | (5,129 | ) | | (108,205 | ) | ||||||||||||
Accretion of discount |
1,117 | 61 | 10 | | 1,188 | |||||||||||||||
Net realized gains (losses) |
207 | | 122 | | 329 | |||||||||||||||
Net change in unrealized appreciation (depreciation) |
4,207 | 1,604 | (1,472 | ) | | 4,159 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance, end of period |
$ | 651,606 | $ | 177,811 | $ | 71,170 | $ | 2,215 | $ | 902,802 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held as of June 30, 2015 included in net change in unrealized appreciation (depreciation) on investments non-controlled/non-affiliated on the Consolidated Statements of Operations |
$ | 3,436 | $ | 1,604 | $ | (1,755 | ) | $ | | $ | 3,285 | |||||||||
|
|
|
|
|
|
|
|
|
|
The Company generally uses the following framework when determining the fair value of investments that are categorized as Level III:
Investments in debt securities are initially evaluated to determine whether the enterprise value of the portfolio company is greater than the applicable debt. The enterprise value of the portfolio company is estimated using a market approach and an income approach. The market approach utilizes market value (EBITDA) multiples of publicly traded comparable companies and available precedent sales transactions of comparable
32
companies. The Company carefully considers numerous factors when selecting the appropriate companies whose multiples are used to value its portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. The income approach typically uses a discounted cash flow analysis of the portfolio company.
Investments in debt securities that do not have sufficient coverage through the enterprise value analysis are valued based on an expected probability of default and discount recovery analysis.
Investments in debt securities with sufficient coverage through the enterprise value analysis are generally valued using a discounted cash flow analysis of the underlying security. Projected cash flows in the discounted cash flow typically represent the relevant securitys contractual interest, fees and principal payments plus the assumption of full principal recovery at the securitys expected maturity date. The discount rate to be used is determined using an average of two market-based methodologies. Investments in debt securities may also be valued using consensus pricing.
Investments in structured finance obligations are generally valued using a discounted cash flow and/or consensus pricing.
Investments in equities are generally valued using a market approach and/or an income approach. The market approach utilizes EBITDA multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The income approach typically uses a discounted cash flow analysis of the portfolio company.
Investments in investment fund are valued using the net asset value of the Companys ownership interest in the funds.
33
The following tables summarize the quantitative information related to the significant unobservable inputs for Level III instruments which are carried at fair value as of June 30, 2016 and December 31, 2015:
Fair Value as of June 30, 2016 |
Valuation Techniques |
Significant Unobservable |
Range | Weighted Average |
||||||||||||||||
Low | High | |||||||||||||||||||
Investments in First Lien Debt |
$ | 848,005 | Discounted Cash Flow | Discount Rate | 5.19 | % | 21.97 | % | 8.35 | % | ||||||||||
96,489 | Consensus Pricing | Indicative Quotes | 95.17 | 100.00 | 99.19 | |||||||||||||||
|
|
|||||||||||||||||||
Total First Lien Debt |
944,494 | |||||||||||||||||||
|
|
|||||||||||||||||||
Investments in Second Lien Debt |
165,352 | Discounted Cash Flow | Discount Rate | 8.11 | % | 13.06 | % | 10.33 | % | |||||||||||
53,181 | Consensus Pricing | Indicative Quotes | 92.50 | 100.63 | 96.96 | |||||||||||||||
850 | Income Approach | Discount Rate | 15.99 | % | 15.99 | % | 15.99 | % | ||||||||||||
Market Approach | Comparable Multiple | 6.59x | 7.21x | 6.90x | ||||||||||||||||
|
|
|||||||||||||||||||
Total Second Lien Debt |
219,383 | |||||||||||||||||||
|
|
|||||||||||||||||||
Investments in Structured Finance Obligations |
6,882 | Discounted Cash Flow | Discount Rate | 18.30 | % | 19.30 | % | 18.62 | % | |||||||||||
Default Rate | 0.64 | 1.31 | 1.00 | |||||||||||||||||
Prepayment Rate | 13.05 | 35.00 | 24.51 | |||||||||||||||||
Recovery Rate | 64.91 | 70.00 | 67.86 | |||||||||||||||||
1,158 | Consensus Pricing | Indicative Quotes | 0.18 | 23.63 | 21.76 | |||||||||||||||
|
|
|||||||||||||||||||
Total Structured Finance Obligations |
8,040 | |||||||||||||||||||
|
|
|||||||||||||||||||
Investments in Equity |
4,703 | Income Approach | Discount Rate | 9.21 | % | 12.89 | % | 10.40 | % | |||||||||||
Market Approach | Comparable Multiple | 9.11x | 10.62x | 10.27x | ||||||||||||||||
|
|
|||||||||||||||||||
Total Equity Investments |
4,703 | |||||||||||||||||||
|
|
|||||||||||||||||||
Total Level III Investments |
$ | 1,176,620 | ||||||||||||||||||
|
|
34
Fair Value as of December 31, 2015 |
Valuation Techniques |
Significant Unobservable Inputs |
Range | Weighted Average |
||||||||||||||||
Low | High | |||||||||||||||||||
Investments in First Lien Debt |
$ | 618,172 | Discounted Cash Flow | Discount Rate | 5.57 | % | 13.37 | % | 8.19 | % | ||||||||||
167,287 | Consensus Pricing | Indicative Quotes | 96.50 | 99.38 | 97.97 | |||||||||||||||
|
|
|||||||||||||||||||
Total First Lien Debt |
785,459 | |||||||||||||||||||
|
|
|||||||||||||||||||
Investments in Second Lien Debt |
161,907 | Discounted Cash Flow | Discount Rate | 9.37 | % | 15.44 | % | 10.56 | % | |||||||||||
48,489 | Consensus Pricing | Indicative Quotes | 93.25 | 101.25 | 96.86 | |||||||||||||||
|
|
|||||||||||||||||||
Total Second Lien Debt |
210,396 | |||||||||||||||||||
|
|
|||||||||||||||||||
Investments in Structured Finance Obligations |
43,016 | Discounted Cash Flow | Discount Rate | 13.00 | % | 17.50 | % | 14.05 | % | |||||||||||
Default Rate | 0.19 | 1.56 | 1.09 | |||||||||||||||||
Prepayment Rate | 18.16 | 40.00 | 22.09 | |||||||||||||||||
Recovery Rate | 69.27 | 75.00 | 74.36 | |||||||||||||||||
1,796 | Consensus Pricing | Indicative Quotes | 0.18 | 63.00 | 59.69 | |||||||||||||||
|
|
|||||||||||||||||||
Total Structured Finance Obligations |
44,812 | |||||||||||||||||||
|
|
|||||||||||||||||||
Investments in Equity |
2,424 | Income Approach | Discount Rate | 10.19 | % | 10.90 | % | 10.42 | % | |||||||||||
Market Approach | Comparable Multiple | 9.94x | 11.09x | 10.71x | ||||||||||||||||
|
|
|||||||||||||||||||
Total Equity Investments |
2,424 | |||||||||||||||||||
|
|
|||||||||||||||||||
Total Level III Investments |
$ | 1,043,091 | ||||||||||||||||||
|
|
The significant unobservable inputs used in the fair value measurement of the Companys investments in first and second lien debt securities are discount rates and indicative quotes. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in indicative quotes in isolation may result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Companys investments in structured finance obligations are discount rates, default rates, prepayment rates, recovery rates and indicative quotes. Significant increases in discount rates, default rates or prepayment rates in isolation would result in a significantly lower fair value measurement, while a significant increase in recovery rates in isolation would result in a significantly higher fair value. Significant decreases in indicative quotes in isolation may result in a significantly lower fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Companys investments in equities are discount rates and comparable EBITDA multiples. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in comparable EBITDA multiples would result in a significantly lower fair value measurement.
35
Financial instruments disclosed but not carried at fair value
The following table presents the carrying value and fair value of the Companys secured borrowings disclosed but not carried at fair value as of June 30, 2016 and December 31, 2015:
June 30, 2016 | December 31, 2015 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
Secured borrowings |
$ | 305,313 | $ | 305,313 | $ | 234,313 | $ | 234,313 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 305,313 | $ | 305,313 | $ | 234,313 | $ | 234,313 | ||||||||
|
|
|
|
|
|
|
|
The carrying values of the secured borrowings approximate their respective fair values and are categorized as Level III within the hierarchy. Secured borrowings are valued generally using discounted cash flow analysis. The significant unobservable inputs used in the fair value measurement of the Companys secured borrowings are discount rates. Significant increases in discount rates would result in a significantly lower fair value measurement.
The following table represents the carrying values (before debt issuance costs) and fair values of the Companys 2015-1 Notes disclosed but not carried at fair value as of June 30, 2016 and December 31, 2015:
June 30, 2016 | December 31, 2015 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
Aaa/AAA Class A-1A Notes |
$ | 160,000 | $ | 158,411 | $ | 160,000 | $ | 157,200 | ||||||||
Aaa/AAA Class A-1B Notes |
40,000 | 39,796 | 40,000 | 39,700 | ||||||||||||
Aaa/AAA Class A-1C Notes |
27,000 | 27,267 | 27,000 | 26,823 | ||||||||||||
Aa2 Class A-2 Notes |
46,000 | 45,412 | 46,000 | 45,122 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 273,000 | $ | 270,886 | $ | 273,000 | $ | 268,845 | ||||||||
|
|
|
|
|
|
|
|
The fair value determination of the Companys 2015-1 Notes was based on the market quotation(s) received from broker/dealer(s). These fair value measurements were based on significant inputs not observable and thus represent Level III measurements as defined in the accounting guidance for fair value measurement.
The carrying value of other financial assets and liabilities approximates their fair value based on the short term nature of these items.
4. RELATED PARTY TRANSACTIONS
Investment Advisory Agreement
On April 3, 2013, the Companys Board of Directors, including a majority of the directors who are not interested persons as defined in Section 2(a)(19) of the Investment Company Act (the Independent Directors), approved an investment advisory agreement (the Investment Advisory Agreement) between the Company and the Investment Adviser in accordance with, and on the basis of an evaluation satisfactory to such directors as required by, Section 15(c) of the Investment Company Act. The initial term of the Investment Advisory Agreement is two years from April 3, 2013 and, unless terminated earlier, the Investment Advisory Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the vote of the Board of Directors and by the vote of a majority of the Independent Directors. On March 10, 2016, the Companys Board of Directors, including a majority of the Independent Directors, approved the continuance of the Advisory Agreement for a one year period. The Investment Advisory Agreement will automatically terminate in the event of an assignment and may be terminated by either party without penalty upon at least 60 days written notice to the other party. Subject to the overall supervision of the Board of Directors, the Investment Adviser provides investment advisory services to the Company. For providing these services, the Investment Adviser receives fees from the Company consisting of two componentsa base management fee and an incentive fee.
36
Prior to a Qualified IPO, the base management fee is calculated and payable quarterly in arrears at an annual rate of 1.50% of the average daily gross assets of the Company for the period adjusted for share issuances or repurchases, excluding any cash and cash equivalents and including assets acquired with leverage from use of the Revolving Credit Facility, Facility and 2015-1 Notes (see Note 6, Borrowings, and Note 7, 2015-1 Notes). For purposes of this calculation, cash and cash equivalents include any temporary investments in cash-equivalents, U.S. government securities and other high quality investment grade debt investments that mature in 12 months or less from the date of investment. Base management fees for any partial quarter are prorated. The Investment Adviser contractually waived one-third (0.50%) of the base management fee prior to a Qualified IPO. The fee waiver will terminate if and when a Qualified IPO has been consummated.
The incentive fee has two parts. The first part is calculated and payable quarterly in arrears based on the pre-incentive fee net investment income for the immediately preceding calendar quarter. The second part is determined and payable in arrears based on capital gains as of the end of each calendar year.
Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the operating expenses accrued for the quarter (including the base management fee, expenses payable under the administration agreement, and any interest expense or fees on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income does not include, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay-in-kind interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.
Prior to any Qualified IPO of the Companys common stock, pre-incentive fee net investment income, expressed as a rate of return on the average daily Hurdle Calculation Value (as defined below) throughout the immediately preceding calendar quarter, is compared to a hurdle rate of 1.50% per quarter (6% annualized). Hurdle Calculation Value means, on any given day, the sum of (x) the value of net assets as of the end of the calendar quarter immediately preceding such day plus (y) the aggregate amount of capital drawn from investors (or reinvested in the Company pursuant to a dividend reinvestment plan) from the beginning of the current quarter to such day minus (z) the aggregate amount of distributions (including share repurchases) made by the Company from the beginning of the current quarter to such day but only to the extent such distributions were not declared and accounted for on the books and records in a previous quarter.
GMS Finance pays its Investment Adviser an incentive fee with respect to its pre-incentive fee net investment income in each calendar quarter as follows:
| no incentive fee based on pre-incentive fee net investment income in any calendar quarter in which its pre-incentive fee net investment income does not exceed the hurdle of 1.50%; |
| 100% of pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle but is less than 1.875% in any calendar quarter (7.50% annualized). The Company refers to this portion of the pre-incentive fee net investment income (which exceeds the hurdle but is less than 1.875%) as the catch-up. The catch-up is meant to provide the Investment Adviser with approximately 20% of the Companys pre-incentive fee net investment income as if a hurdle did not apply if this net investment income exceeds 1.875% in any calendar quarter; and |
| 20% of the amount of pre-incentive fee net investment income, if any, that exceeds 1.875% in any calendar quarter (7.50% annualized) will be payable to the Investment Adviser. This reflects that once the hurdle is reached and the catch-up is achieved, 20% of all pre-incentive fee investment income thereafter is allocated to the Investment Adviser. |
37
The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20% of realized capital gains, if any, on a cumulative basis from inception through the date of determination, computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation, less the aggregate amount of any previously paid capital gain incentive fees, provided that, the incentive fee determined at the end of the first calendar year of operations may be calculated for a period of shorter than twelve calendar months to take into account any realized capital gains computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation.
The Company will defer payment of any incentive fee otherwise earned by the Investment Adviser if, during the most recent four full calendar quarter periods (or, if less, the number of full calendar quarters completed since the initial drawdown of capital from the stockholders, Initial Drawdown) ending on or prior to the date such payment is to be made, the sum of (a) the aggregate distributions to stockholders and (b) the change in net assets (defined as gross assets less indebtedness and before taking into account any incentive fees payable during the period) is less than 6.0% of net assets (defined as gross assets less indebtedness) at the beginning of such period, provided, that such percentage will be appropriately prorated during the four full calendar quarters immediately following the Initial Drawdown. These calculations are adjusted for any share issuances or repurchases. Any deferred incentive fees are carried over for payment in subsequent calculation periods. The Investment Adviser may earn an incentive fee under the Investment Advisory Agreement on the Companys repurchase of debt issued by the Company at a gain.
Prior to a Qualified IPO, from time to time, CGMSIM intends to pay certain individuals providing services to CGMSIM, including individuals who serve as our executive officer and/or director and individuals who are members of the CGMSIM team managing our investments (the CGMSIM Investment Team), a portion of each installment of the gross incentive fees that CGMSIM receives from us in consideration of their services on behalf of CGMSIM, with approximately 25% of the net after-tax amount paid to such members being paid in the form of newly issued shares of common stock purchased from us. In addition, following the completion of a Qualified IPO, from time to time, CGMSIM intends to purchase shares of our common stock in the open market at a purchase price, in the aggregate, equal to approximately 25% of each installment of the net after- tax incentive fees that CGMSIM receives from us, subject to market conditions. CGMSIM may then distribute those shares to individuals eligible for such payment in consideration of their services on behalf of CGMSIM.
For the three month and six month periods ended June 30, 2016, base management fees were $2,897 and $5,657, respectively (net of waiver of $1,448 and $2,828, respectively), incentive fees related to pre-incentive fee net investment income were $3,366 and $6,356, respectively, and there were no incentive fees related to realized capital gains. For the three month and six month periods ended June 30, 2015, base management fees were $2,054 and $3,869, respectively (net of waiver of $1,026 and $1,934, respectively), incentive fees related to pre-incentive fee net investment income were $1,986 and $3,606, respectively, and there were no incentive fees related to realized capital gains. For the three month and six month periods ended June 30, 2016 and 2015, there were no accrued capital gains incentive fees based upon the cumulative net realized and unrealized appreciation (depreciation) as of June 30, 2016 and 2015, respectively. The accrual for any capital gains incentive fee under US GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual.
As of June 30, 2016 and December 31, 2015, $11,944 and $5,277, respectively, was included in base management and incentive fees payable in the accompanying Consolidated Statements of Assets and Liabilities.
On April 3, 2013, the Investment Adviser entered into a personnel agreement with The Carlyle Group Employee Co., L.L.C. (Carlyle Employee Co.), an affiliate of the Investment Adviser, pursuant to which Carlyle Employee Co. provides the Investment Adviser with access to investment professionals.
38
Administration Agreement
On April 3, 2013, the Companys Board of Directors approved an administration agreement (the Administration Agreement) between the Company and the Administrator. Pursuant to the Administration Agreement, the Administrator provides services and receives reimbursements equal to an amount that reimburses the Administrator for its costs and expenses and the Companys allocable portion of overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including the Companys allocable portion of the compensation paid to or compensatory distributions received by the Companys officers (including the Chief Compliance Officer and Chief Financial Officer) and respective staff who provide services to the Company, operations staff who provide services to the Company, and any internal audit staff, to the extent internal audit performs a role in the Companys Sarbanes-Oxley Act internal control assessment. Reimbursement under the Administration Agreement occurs quarterly in arrears.
The initial term of the Administration Agreement is two years from April 3, 2013 and, unless terminated earlier, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Directors or by a majority vote of the outstanding voting securities of the Company and (ii) the vote of a majority of the Companys Independent Directors. On March 10, 2016, the Companys Board of Directors, including a majority of the Independent Directors, approved the continuance of the Administration Agreement for a one year period. The Administration Agreement may not be assigned by a party without the consent of the other party and may be terminated by either party without penalty upon at least 60 days written notice to the other party.
For the three month and six month periods ended June 30, 2016, GMS Finance incurred $198 and $346, respectively, and for the three month and six month periods ended June 30, 2015, GMS Finance incurred $188 and $300, respectively, in fees under the Administrative Agreement, which were included in administrative service fees in the accompanying Consolidated Statements of Operations. As of June 30, 2016 and December 31, 2015, $135 and $97, respectively, was unpaid and included in administrative service fees payable in the accompanying Consolidated Statements of Assets and Liabilities.
Sub-Administration Agreements
On April 3, 2013, the Administrator entered into sub-administration agreements with Carlyle Employee Co. and CELF Advisors LLP. Pursuant to the agreements, Carlyle Employee Co. and CELF Advisors LLP provide the Administrator with access to personnel.
On April 3, 2013, the Administrator entered into a sub-administration agreement with State Street Bank and Trust Company (as amended, the Sub-Administration Agreement). On March 11, 2015, the Companys Board of Directors, including a majority of the Independent Directors, approved an amendment to the Sub-Administration Agreement. The initial term of the Sub-Administration Agreement ends on April 1, 2017 and, unless terminated earlier, the Sub-Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Directors or by the vote of a majority of the outstanding voting securities of the Company and (ii) the vote of a majority of the Companys Independent Directors. The Sub-Administration Agreement may be terminated upon at least 60 days written notice and without penalty by the vote of a majority of the outstanding securities of the Company, or by the vote of the Board of Directors or by either party to the Sub-Administration Agreement.
For the three month and six month periods ended June 30, 2016, fees incurred in connection with the Sub-Administration Agreement, which amounted to $148 and $288, respectively, were included in other general and administrative in the accompanying Consolidated Statements of Operations. For the three month and six month periods ended June 30, 2015, fees incurred in connection with the Sub-Administration Agreement, which amounted to $128 and $219, respectively, were included in other general and administrative in the accompanying Consolidated Statements of Operations. As of June 30, 2016 and December 31, 2015, $288 and $138, respectively, was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities.
39
Placement Fees
On April 3, 2013, the Company entered into a placement fee arrangement with TCG Securities, L.L.C. (TCG), a licensed broker-dealer and an affiliate of the Investment Adviser, which may require stockholders to pay a placement fee to TCG for TCGs services.
For the three month and six month periods ended June 30, 2016, TCG earned placement fees of $3 and $6, respectively, from GMS Finance stockholders in connection with the issuance or sale of the Companys common stock. For the three month and six month periods ended June 30, 2015, TCG earned placement fees of $1 and $2, respectively, from GMS Finance stockholders in connection with the issuance or sale of the Companys common stock.
Board of Directors
GMS Finances Board of Directors currently consists of six members, four of whom are Independent Directors. The Board of Directors has established an Audit Committee consisting of its Independent Directors and a Pricing Committee of the Board of Directors (the Pricing Committee), and may establish additional committees in the future. For the three month and six month periods ended June 30, 2016, GMS Finance incurred $144 and $264, respectively and for the three month and six month periods ended June 30, 2015, GMS Finance incurred $106 and $207 respectively, in fees and expenses associated with its Independent Directors, the Audit Committee and the Pricing Committee. As of June 30, 2016 and December 31, 2015, $0 was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities. As of June 30, 2016 and December 31, 2015, current directors had committed $607 in capital commitments to the Company.
Transactions
On May 13, 2016, the Company sold an investment to a wholly-owned subsidiary of Credit Fund for proceeds of $20,038. The Company had no realized gain or loss on this trade. See Note 5, Middle Market Credit Fund, LLC, for further information about Credit Fund.
5. MIDDLE MARKET CREDIT FUND, LLC
Overview
On February 29, 2016, the Company and Credit Partners entered into the Limited Liability Company Agreement to co-manage Credit Fund, an unconsolidated Delaware limited liability company. Credit Fund primarily invests in first lien loans of middle-market companies. Credit Fund is managed by a six-member board of managers, on which the Company and Credit Partners each have equal representation. The Company and Credit Partners each have 50% economic ownership of Credit Fund and have commitments to fund, from time to time, capital of up to $400,000 each. Funding of such commitments generally requires the approval of the board of Credit Fund, including the board members appointed by the Company.
Together with Credit Partners, the Company co-invests through Credit Fund. Portfolio and investment decisions with respect to Credit Fund must be unanimously approved by a quorum of Credit Funds investment committee consisting of an equal number of representatives of the Company and Credit Partners. Therefore, although the Company owns more than 25% of the voting securities of Credit Fund, the Company does not believe that it has control over Credit Fund (other than for purposes of the Investment Company Act).
Middle Market Credit Fund SPV, LLC (the Credit Fund Sub), a Delaware limited liability company, was formed on April 5, 2016. The Credit Fund Sub primarily invests in first lien loans of middle-market companies. The Credit Fund Sub is a wholly-owned subsidiary of Credit Fund and is consolidated in Credit Funds consolidated financial statements commencing from the date of its formation.
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Selected Financial Data
Since inception of Credit Fund and through June 30, 2016, the Company and Credit Partners each made capital contributions of $1 in members equity and $14,000 in subordinated loans to Credit Fund. Additionally, Credit Fund borrowed $1,000 in mezzanine loans under a revolving credit facility with the Company (the Credit Fund Facility). As of June 30, 2016, Credit Fund had subordinated loans and members capital of $27,429 and mezzanine loans of $1,000. The Companys ownership interest in such subordinated loans and members capital was $13,714 and in mezzanine loans was $1,000.
As of June 30, 2016, Credit Fund held cash and cash equivalents totaling $20,283.
As of June 30, 2016, Credit Fund had total investments at fair value of $144,423, which was comprised of first lien senior secured loans to 9 portfolio companies. As of June 30, 2016 and for the three month and six month periods ended June 30, 2016, no loans in Credit Funds portfolio were on non-accrual status or contained PIK provisions. The portfolio companies in Credit Fund are U.S. middle market companies in industries similar to those in which the Company may invest directly. Additionally, as of June 30, 2016, Credit Fund had commitments to fund various undrawn revolvers and delayed draw investments to its portfolio companies totaling $4,397.
Below is a summary of Credit Funds portfolio, followed by a listing of the loans in Credit Funds portfolio as of June 30, 2016:
As of June 30, 2016 |
||||
Senior secured loans (1) |
$ | 146,685 | ||
Weighted average yields of senior secured loans based on amortized cost (2) |
6.07 | % | ||
Number of portfolio companies in Credit Fund |
9 |
(1) | At par/principal amount. |
(2) | Weighted average yields do not include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of June 30, 2016. Actual yields earned over the life of each investment could differ materially from the yields presented above. |
Consolidated Schedule of Investments as of June 30, 2016 |
||||||||||||||||||||||||
Investments (1) |
Industry | Interest Rate |
Maturity Date |
Par/Principal Amount |
Amortized Cost (5) |
Fair Value (6) |
||||||||||||||||||
First Lien Debt (100.00% of fair value) |
||||||||||||||||||||||||
DYK Prime Acquisition LLC (2) (3) (4) |
|
Chemicals, Plastics & Rubber |
|
5.75 | % | 4/1/2022 | $ | 5,925 | $ | 5,881 | $ | 5,815 | ||||||||||||
EIP Merger Sub, LLC (Evolve IP) (2) (3) (4) (7) |
Telecommunications | 7.25 | 6/7/2021 | 23,125 | 22,431 | 22,447 | ||||||||||||||||||
Generation Brands Holdings, Inc. (2) (3) (4) |
|
Durable Consumer Goods |
|
6.00 | 6/10/2022 | 20,000 | 19,803 | 19,776 | ||||||||||||||||
Jensen Hughes, Inc. (2) (3) (4) (8) |
Utilities: Electric | 6.00 | 12/4/2021 | 20,285 | 20,038 | 20,071 | ||||||||||||||||||
Kestra Financial, Inc. (2) (3) (4) |
|
Banking, Finance, Insurance & Real Estate |
|
6.25 | 6/24/2022 | 20,000 | 19,715 | 19,636 | ||||||||||||||||
Netsmart Technologies, Inc. (2) (3) (4) |
|
High Tech Industries |
|
5.75 | 4/19/2023 | 15,400 | 15,249 | 15,339 | ||||||||||||||||
PAI Holdco, Inc. (Parts Authority) (2) (3) (4) |
Automotive | 5.75 | 12/30/2022 | 10,000 | 9,915 | 9,751 | ||||||||||||||||||
Pasternack Enterprises, Inc. (Infinite RF) (2) (3) (4) |
Capital Equipment | 6.00 | 5/27/2022 | 12,000 | 11,895 | 11,784 | ||||||||||||||||||
TK USA Enterprises, Inc. (2) (3) (4) |
|
Construction & Building |
|
6.00 | 4/4/2023 | 19,950 | 19,660 | 19,804 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
First Lien Debt Total |
$ | 144,587 | $ | 144,423 | ||||||||||||||||||||
|
|
|
|
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(1) | Unless otherwise indicated, issuers of debt investments held by Credit Fund are domiciled in the United States |
(2) | Variable rate loans to the portfolio companies bear interest at a rate that may be determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the Prime Rate), which generally resets quarterly. For each such loan, Credit Fund has provided the interest rate in effect as of June 30, 2016. |
(3) | Loan includes interest rate floor feature. |
(4) | Denotes that all or a portion of the assets are owned by the Credit Fund Sub. The Credit Fund Sub has entered into a senior secured revolving credit facility (the Credit Fund Sub Facility). The lenders of the Credit Fund Sub Facility have a first lien security interest in substantially all of the assets of the Credit Fund Sub. Accordingly, such assets are not available to creditors of the Credit Fund, the Company or Credit Partners. |
(5) | Amortized cost represents original cost, including origination fees, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method. |
(6) | Fair value is determined in good faith by or under the discretion of the board of managers of Credit Fund, pursuant to Credit Funds valuation policy, which is substantially similar to the valuation policy of the Company provided in Note 3, Fair Value Measurements. |
(7) | Credit Fund receives less than the stated interest rate of this loan as a result of an agreement among lenders. The interest rate reduction is 1.25% on Evolve IP. Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/first out loan, which has first priority ahead of the first lien/last out loan with respect to principal, interest and other payments. |
(8) | Jensen Hughes, Inc. has an undrawn delayed draw term loan of $2,397 par value at LIBOR + 5.00%, 1.00% floor, and an undrawn revolver of $2,000 par value at LIBOR + 5.00%, 1.00% floor. An unused rate of 1.00% is charged on the delayed draw term loan and the revolver principal while undrawn. |
Below is certain summarized consolidated financial information for Credit Fund as of June 30, 2016 and for the three and six months ended June 2016. Credit Fund did not commence operations until May 2016.
June 30, 2016 | ||||
(unaudited) | ||||
Selected Consolidated Balance Sheet Information |
||||
ASSETS |
||||
Investments, at fair value (amortized cost of $144,587) |
$ | 144,423 | ||
Cash and other assets |
23,125 | |||
|
|
|||
Total assets |
$ | 167,548 | ||
|
|
|||
LIABILITIES AND MEMBERS EQUITY |
||||
Secured borrowings |
$ | 18,850 | ||
Mezzanine loans |
1,000 | |||
Other liabilities |
120,269 | |||
Subordinated loans and members equity |
27,429 | |||
|
|
|||
Liabilities and members equity |
$ | 167,548 | ||
|
|
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For the three and six month periods ended June 30, 2016 |
||||
Selected Consolidated Statement of Operations Information: |
||||
Total investment income |
$ | 16 | ||
|
|
|||
Expenses |
||||
Interest and credit facility expenses |
38 | |||
Other expenses |
387 | |||
|
|
|||
Total expenses |
425 | |||
|
|
|||
Net investment income (loss) |
(409 | ) | ||
|
|
|||
Net change in unrealized appreciation (depreciation) on investments |
(164 | ) | ||
|
|
|||
Net increase (decrease) resulting from operations |
$ | (573 | ) | |
|
|
Debt
Credit Fund Facility
The Credit Fund closed on June 24, 2016 on a revolving credit facility, the Credit Fund Facility, from which Credit Fund may from time to time request mezzanine loans from the Company. The maximum principal amount of the Credit Fund Facility is $100,000.
During the six month period ended June 30, 2016, there were mezzanine loans of $1,000 under the Credit Fund Facility. As of June 30, 2016, there was $1,000 in mezzanine loans outstanding.
Credit Fund Sub Facility
The Credit Fund Sub closed on June 24, 2016 on the Credit Fund Sub Facility. The Credit Fund Sub Facility provides for secured borrowings during the applicable revolving period up to an amount equal to $220,000, with an accordion feature that can increase the aggregate maximum credit commitment up to an amount not to exceed $1,400,000. The Facility is secured by a first lien security interest in substantially all of the portfolio investments held by the Credit Fund Sub and the Company and Credit Partners unfunded capital commitments.
During the six month period ended June 30, 2016, there were secured borrowings of $18,850 under the Credit Fund Sub Facility. As of June 30, 2016, there was $18,850 in secured borrowings outstanding.
6. BORROWINGS
In accordance with the Investment Company Act, the Company is only allowed to borrow amounts such that its asset coverage, as defined in the Investment Company Act, is at least 200% after such borrowing. As of June 30, 2016 and December 31, 2015, asset coverage was 213.77%, and 212.70%, respectively. During the six month period ended June 30, 2016, there were secured borrowings of $225,000 under the Revolving Credit Facility and Facility and repayments of $154,000 under the Facility. During the six month period ended June 30, 2015, there were secured borrowings of $223,700 under the Revolving Credit Facility and Facility and repayments of $397,183 under the Revolving Credit Facility and Facility. As of June 30, 2016 and December 31, 2015, there was $305,313 and $234,313, respectively, in secured borrowings outstanding.
Revolving Credit Facility
The Borrower Sub closed on May 24, 2013 on the Revolving Credit Facility, which was subsequently amended on June 30, 2014, June 19, 2015 and June 9, 2016. The Revolving Credit Facility provides for secured
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borrowings during the applicable revolving period up to an amount equal to the lesser of $400,000 (the borrowing base as calculated pursuant to the terms of the Revolving Credit Facility) and the amount of net cash proceeds and unpledged capital commitments the Company has received, with an accordion feature that can, subject to certain conditions, increase the aggregate maximum credit commitment up to an amount not to exceed $750,000, subject to restrictions imposed on borrowings under the Investment Company Act and certain restrictions and conditions set forth in the Revolving Credit Facility, including adequate collateral to support such borrowings. The Revolving Credit Facility has a revolving period through May 23, 2019 and a maturity date of May 22, 2021. Borrowings under the Revolving Credit Facility bear interest initially at the applicable commercial paper rate (if the lender is a conduit lender) or LIBOR (or, if applicable, a rate based on the prime rate or federal funds rate) plus 2.00% per year through May 23, 2018, with a pre-determined future interest rate increase of 0.50% during the final year of the revolving period and pre-determined future interest rate increases of 0.875%-1.75% over the two years following the end of the revolving period. The Borrower Sub is also required to pay an undrawn commitment fee of between 0.25% and 0.75% per year depending on the usage of the Revolving Credit Facility. Payments under the Revolving Credit Facility are made quarterly. The lenders have a first lien security interest on substantially all of the assets of the Borrower Sub.
As part of the Revolving Credit Facility, the Borrower Sub is subject to limitations as to how borrowed funds may be used and the types of loans that are eligible to be acquired by the Borrower Sub including, but not limited to, restrictions on sector and geographic concentrations, loan size, payment frequency, tenor and minimum investment ratings (or estimated ratings). In addition, borrowed funds are intended to be used primarily to purchase first lien loan assets, and the Borrower Sub is limited in its ability to purchase certain other assets (including, but not limited to, second lien loans, covenant-lite loans, revolving and delayed draw loans and discount loans) and other assets are not permitted to be purchased (including, but not limited to paid-in-kind loans and structured finance obligations). The Revolving Credit Facility has certain requirements relating to interest coverage, collateral quality and portfolio performance, including limitations on delinquencies and charge offs, certain violations of which could result in the immediate acceleration of the amounts due under the Revolving Credit Facility. The Revolving Credit Facility is also subject to a borrowing base that applies different advance rates to assets held by the Borrower Sub based generally on the fair market value of such assets. Under certain circumstances as set forth in the Revolving Credit Facility, the Company could be obliged to repurchase loans from the Borrower Sub.
As of June 30, 2016 and December 31, 2015, the Borrower Sub was in compliance with all covenants and other requirements of the Revolving Credit Facility.
Facility
The Company closed on March 21, 2014 on the Facility, which was subsequently amended on January 8, 2015 and May 25, 2016 (the Second Facility Amendment). The maximum principal amount of the Facility is $170,000, subject to availability under the Facility, which is based on certain advance rates multiplied by the value of the Companys portfolio investments (subject to certain concentration limitations) net of certain other indebtedness that the Company may incur in accordance with the terms of the Facility. Proceeds of the Facility may be used for general corporate purposes, including the funding of portfolio investments. Maximum capacity under the Facility may be increased to $225,000 through the exercise by the Company of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. The Facility includes a $20,000 limit for swingline loans and a $5,000 limit for letters of credit. The Company may borrow amounts in U.S. dollars or certain other permitted currencies. Amounts drawn under the Facility, including amounts drawn in respect of letters of credit, bear interest at either LIBOR plus an applicable spread of 2.25%, or an alternative base rate (which is the highest of a prime rate, the federal funds effective rate plus 0.50%, or one month LIBOR plus 1.00%) plus an applicable spread of 1.25%. The Company may elect either the LIBOR or the alternative base rate at the time of drawdown, and loans may be converted from one rate to another at any time, subject to certain conditions. The Company also pays a fee of 0.375% on undrawn amounts under the Facility and, in respect of each undrawn letter of credit, a fee and interest rate equal to the
44
then-applicable margin under the Facility while the letter of credit is outstanding. The availability period under the Facility will terminate on March 21, 2020 and the Facility will mature on March 21, 2021. During the period from March 21, 2020 to March 21, 2021, the Company will be obligated to make mandatory prepayments under the Facility out of the proceeds of certain asset sales, other recovery events and equity and debt issuances.
Subject to certain exceptions, the Facility is secured by a first lien security interest in substantially all of the portfolio investments held by the Company and the Companys unfunded investor equity capital commitments (provided that the amount of unfunded capital commitments ultimately available to the lenders is limited to $100,000). The pledge of unfunded investor equity capital commitments was subject to release once $100,000 of incremental capital had been called and received by the Company subsequent to January 8, 2015. The pledge of unfunded investor equity capital commitments had been released as of June 30, 2016. The Facility includes customary covenants, including certain financial covenants related to asset coverage, shareholders equity and liquidity, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.
Related to the Second Facility Amendment, $380 of deferred financing costs (representing the prorated financing costs related to a departing lender) were immediately expensed on May 25, 2016 in lieu of continuing to amortize over the term of the Facility.
As of June 30, 2016 and December 31, 2015, the Company was in compliance with all covenants and other requirements of the Facility.
Summary of Facilities
The facilities of the Company and the Borrower Sub consisted of the following as of June 30, 2016 and December 31, 2015:
June 30, 2016 | ||||||||||||||||
Total Facility | Borrowings Outstanding |
Unused Portion (1) | Amount Available (2) |
|||||||||||||
Revolving Credit Facility |
$ | 400,000 | $ | 190,313 | $ | 209,687 | $ | 8,457 | ||||||||
Facility |
170,000 | 115,000 | 55,000 | 55,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 570,000 | $ | 305,313 | $ | 264,687 | $ | 63,457 | ||||||||
|
|
|
|
|
|
|
|
December 31, 2015 | ||||||||||||||||
Total Facility | Borrowings Outstanding |
Unused Portion (1) | Amount Available (2) |
|||||||||||||
Revolving Credit Facility |
$ | 400,000 | $ | 170,313 | $ | 229,687 | $ | 3,155 | ||||||||
Facility |
150,000 | 64,000 | 86,000 | 86,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 550,000 | $ | 234,313 | $ | 315,687 | $ | 89,155 | ||||||||
|
|
|
|
|
|
|
|
(1) | The unused portion is the amount upon which commitment fees are based. |
(2) | Available for borrowing based on the computation of collateral to support the borrowings. |
As of June 30, 2016 and December 31, 2015, $1,338 and $966, respectively, of interest expense, $304 and $141, respectively, of unused commitment fees and $22 and $22, respectively, of other fees were included in interest and credit facility fees payable. For the three month and six month periods ended June 30, 2016, the weighted average interest rate was 2.63% and 2.62%, respectively, and average principal debt outstanding was $284,246 and $270,708, respectively. For the three month and six month periods ended June 30, 2015, the weighted average interest rate was 2.22% and 2.20%, respectively, and average principal debt outstanding was $363,649 and $345,319, respectively. As of June 30, 2016 and December 31, 2015, the interest rate was 2.82% and 2.37%, respectively, based on floating LIBOR rates.
45
For the three month and six month periods ended June 30, 2016 and 2015, the components of interest expense and credit facility fees on the facilities were as follows:
For the three month periods ended | For the six month periods ended | |||||||||||||||
June 30, 2016 |
June 30, 2015 |
June 30, 2016 |
June 30, 2015 |
|||||||||||||
Interest expense |
$ | 1,892 | $ | 2,129 | $ | 3,590 | $ | 3,909 | ||||||||
Facility unused commitment fee |
322 | 135 | 683 | 305 | ||||||||||||
Amortization of deferred financing costs |
510 | 281 | 722 | 513 | ||||||||||||
Other fees |
26 | 30 | 52 | 56 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total interest expense and credit facility fees |
$ | 2,750 | $ | 2,575 | $ | 5,047 | $ | 4,683 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash paid for interest expense |
$ | 1,688 | $ | 2,112 | $ | 3,208 | $ | 3,562 |
7. 2015-1 Notes
On June 26, 2015, the Company completed the 2015-1 Debt Securitization. The 2015-1 Notes were issued by the 2015-1 Issuer, a wholly-owned and consolidated subsidiary of the Company, and are secured by a diversified portfolio of the 2015-1 Issuer consisting primarily of first and second lien senior secured loans. The 2015-1 Debt Securitization was executed through a private placement of the 2015-1 Notes, consisting of $160 million of Aaa/AAA Class A-1A Notes which bear interest at the three-month London Interbank Offered Rate (LIBOR) plus 1.85%; $40 million of Aaa/AAA Class A-1B Notes which bear interest at the three-month LIBOR plus 1.75% for the first 24 months and the three-month LIBOR plus 2.05% thereafter; $27 million of Aaa/AAA Class A-1C Notes which bear interest at 3.75%; and $46 million of Aa2 Class A-2 Notes which bear interest at the three month LIBOR plus 2.70%. The 2015-1 Notes were issued at par and are scheduled to mature on July 15, 2027. The Company received 100% of the preferred interests (the Preferred Interests) issued by the 2015-1 Issuer on the closing date of the 2015-1 Debt Securitization in exchange for the Companys contribution to the Issuer of the initial closing date loan portfolio. The Preferred Interests do not bear interest and had a nominal value of $125.9 million at closing. In connection with the contribution, the Company made customary representations, warranties and covenants to the 2015-1 Issuer in the purchase agreement. The Class A-1A, Class A-1B and Class A-1C and Class A-2 Notes are included in the June 30, 2016 consolidated financial statements. The Preferred Interests were eliminated in consolidation.
On the closing date of the 2015-1 Debt Securitization, the 2015-1 Issuer effected a one-time distribution to the Company of a substantial portion of the proceeds of the private placement of the 2015-1 Notes, net of expenses, which distribution was used to repay a portion of certain amounts outstanding under the Revolving Credit Facility and the Facility. As part of the 2015-1 Debt Securitization, certain first and second lien senior secured loans were distributed by the Borrower Sub to the Company pursuant to a distribution and contribution agreement. The Company contributed the loans that comprised the initial closing date loan portfolio (including the loans distributed to the Company from the Borrower Sub) to the 2015-1 Issuer pursuant to a contribution agreement. Future loans transfers from the Company to the 2015-1 Issuer will be made pursuant to a sale agreement and are subject to the approval of the Companys Board of Directors. Assets of the 2015-1 Issuer are not available to the creditors of the Borrower Sub or the Company. In connection with the issuance and sale of the 2015-1 Notes, the Company made customary representations, warranties and covenants in the purchase agreement.
During the reinvestment period, pursuant to the indenture governing the 2015-1 Notes, all principal collections received on the underlying collateral may be used by the 2015-1 Issuer to purchase new collateral under the direction of Investment Adviser in its capacity as collateral manager of the 2015-1 Issuer and in accordance with the Companys investment strategy.
The Investment Adviser serves as collateral manager to the 2015-1 Issuer under a collateral management agreement (the Collateral Management Agreement). Pursuant to the Collateral Management Agreement, the 2015-1 Issuer pays management fees (comprised of base management fees, subordinated management fees and
46
incentive management fees) (Management Fees) to the Investment Adviser for rendering collateral management services. As per the Collateral Management Agreement, for the period the Company retains all of the Preferred Interests, the Investment Adviser does not earn Management Fees for providing such collateral management services. The Company currently retains all of the Preferred Interests, thus the Investment Adviser did not earn any management fees from the 2015-1 Issuer for the three month and six month periods ended June 30, 2016.
Pursuant to an undertaking by the Company in connection with the 2015-1 Debt Securitization, the Company has agreed to hold on an ongoing basis Preferred Interests with an aggregate dollar purchase price at least equal to 5% of the aggregate outstanding amount of all collateral obligations by the 2015-1 Issuer for so long as any securities of the 2015-1 Issuer remain outstanding. As of June 30, 2016, the Company was in compliance with its undertaking.
The 2015-1 Issuer pays ongoing administrative expenses to the trustee, independent accountants, legal counsel, rating agencies and independent managers in connection with developing and maintaining reports, and providing required services in connection with the administration of the 2015-1 Issuer.
As of June 30, 2016, there were 58 first lien and second lien senior secured loans with a total fair value of approximately $388,751 securing the 2015-1 Notes. The pool of loans in the securitization must meet certain requirements, including asset mix and concentration, term, agency rating, collateral coverage, minimum coupon, minimum spread and sector diversity requirements in the indenture governing the 2015-1 Notes.
For the six months ended June 30, 2016, the effective annualized weighted average interest rate, which includes amortization of debt issuance costs on the 2015-1 Notes, was 2.82% based on floating LIBOR rates.
For the three month and six month periods ended June 30, 2016 and 2015, the components of interest expense on the 2015-1 Notes were as follows:
For the three month periods ended | For the six month periods ended | |||||||||||||||
June 30, 2016 |
June 30, 2015 |
June 30, 2016 |
June 30, 2015 |
|||||||||||||
Interest expense |
$ | 1,882 | $ | 88 | $ | 3,732 | $ | 88 | ||||||||
Amortization of deferred financing costs |
51 | 3 | 102 | 3 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total interest expense and credit facility fees |
$ | 1,933 | $ | 91 | $ | 3,834 | $ | 91 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash paid for interest expense |
$ | 1,879 | $ | | $ | 3,586 | $ | |
8. COMMITMENTS AND CONTINGENCIES
A summary of significant contractual payment obligations was as follows as of June 30, 2016 and December 31, 2015:
Revolving Credit Facility and Facility | 2015-1 Notes | |||||||||||||||
Payment Due by Period |
June 30, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | ||||||||||||
Less than 1 Year |
$ | | $ | | $ | | $ | | ||||||||
1-3 Years |
| | | | ||||||||||||
3-5 Years |
305,313 | 64,000 | | | ||||||||||||
More than 5 Years |
| 170,313 | 273,000 | 273,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 305,313 | $ | 234,313 | $ | 273,000 | $ | 273,000 | ||||||||
|
|
|
|
|
|
|
|
In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnification and warranties. Future events could occur that lead to the execution of these provisions against the Company. The Company believes that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in the consolidated financial statements as of June 30, 2016 and December 31, 2015 for any such exposure.
47
As of June 30, 2016 and December 31, 2015, the Company had $1,192,765 and $1,174,340, respectively, in total capital commitments from stockholders, of which $487,538 and $559,214, respectively, was unfunded. As of June 30, 2016, current directors had committed $607 in capital commitments to the Company.
The Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:
Par Value as of | ||||||||
June 30, 2016 | December 31, 2015 | |||||||
Unfunded delayed draw commitments |
$ | 30,536 | $ | 20,695 | ||||
Unfunded revolving term loan commitments |
11,076 | 3,906 | ||||||
|
|
|
|
|||||
Total unfunded commitments |
$ | 41,612 | $ | 24,601 | ||||
|
|
|
|
As of June 30, 2016, the Company had remaining commitments to fund, from time to time, capital to Credit Fund of up to $385,999. Funding of such commitments generally requires the approval of the board of Credit Fund, including the board members appointed by the Company. As of June 30, 2016, the Company had remaining commitments to fund, from time to time, mezzanine loans to Credit Fund of up to $99,000, of which $21,038 was available for borrowing based on the computation of collateral to support the borrowings.
9. NET ASSETS
The Company has the authority to issue 200,000,000 shares of common stock, $0.01 per share par value.
During the six month period ended June 30, 2016, the Company issued 4,993,246 shares for $90,229 including reinvestment of dividends. The following table summarizes capital activity during the six month period ended June 30, 2016:
Common Stock |
Capital in Excess of Par Value |
Offering Costs |
Accumulated Net Investment Income (Loss) |
Accumulated Net Realized Gain (Loss) on Investments |
Accumulated Net Unrealized Appreciation (Depreciation) on Investments |
Total Net Assets |
||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||
Balance, beginning of period |
31,524,083 | $ | 315 | $ | 613,944 | $ | (74 | ) | $ | (12,994 | ) | $ | (2,411 | ) | $ | (27,054 | ) | $ | 571,726 | |||||||||||||
Common stock issued |
4,986,373 | 50 | 90,051 | | | | | 90,101 | ||||||||||||||||||||||||
Reinvestment of dividends |
6,873 | | 128 | | | | | 128 | ||||||||||||||||||||||||
Net investment income (loss) |
| | | | 25,426 | | | 25,426 | ||||||||||||||||||||||||
Net realized gain (loss) on investments |
| | | | | (9,599 | ) | | (9,599 | ) | ||||||||||||||||||||||
Net change in unrealized appreciation (depreciation) on investments |
| | | | | | 7,416 | 7,416 | ||||||||||||||||||||||||
Dividends declared |
| | | | (27,280 | ) | | | (27,280 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance, end of period |
36,517,329 | $ | 365 | $ | 704,123 | $ | (74 | ) | $ | (14,848 | ) | $ | (12,010 | ) | $ | (19,638 | ) | $ | 657,918 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
During the six month period ended June 30, 2015, the Company issued 8,823,238 shares for $171,127. The following table summarizes capital activity during the six month period ended June 30, 2015:
Common Stock |
Capital in Excess of Par Value |
Offering Costs |
Accumulated Net Investment Income (Loss) |
Accumulated Net Realized Gain (Loss) on Investments |
Accumulated Net Unrealized Appreciation (Depreciation) on Investments |
Total Net Assets |
||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||
Balance, beginning of period |
17,932,697 | $ | 179 | $ | 351,636 | $ | (74 | ) | $ | (4,388 | ) | $ | (57 | ) | $ | (9,039 | ) | $ | 338,257 | |||||||||||||
Common stock issued |
8,820,836 | 89 | 170,993 | | | | | 171,082 | ||||||||||||||||||||||||
Reinvestment of dividends |
2,402 | | 45 | | | | | 45 | ||||||||||||||||||||||||
Net investment income (loss) |
| | | | 14,425 | | | 14,425 | ||||||||||||||||||||||||
Net realized gain (loss) on investments |
| | | | | 329 | | 329 | ||||||||||||||||||||||||
Net change in unrealized appreciation (depreciation) on investments |
| | | | | | 4,249 | 4,249 | ||||||||||||||||||||||||
Dividends declared |
| | | | (17,735 | ) | | | (17,735 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance, end of period |
26,755,935 | $ | 268 | $ | 522,674 | $ | (74 | ) | $ | (7,698 | ) | $ | 272 | $ | (4,790 | ) | $ | 510,652 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes total shares issued and proceeds received related to capital subscriptions for the Companys common stock and reinvestment of dividends during the six month period ended June 30, 2016:
Shares Issued | Proceeds Received | |||||||
January 22, 2016* |
3,885 | $ | 74 | |||||
March 11, 2016 |
1,815,181 | 33,000 | ||||||
April 22, 2016* |
2,988 | 54 | ||||||
May 6, 2016 |
1,510,859 | 26,999 | ||||||
June 24, 2016 |
1,660,333 | 30,102 | ||||||
|
|
|
|
|||||
Total |
4,993,246 | $ | 90,229 | |||||
|
|
|
|
* | Represents shares issued upon the reinvestment of dividends |
The following table summarizes total shares issued and proceeds received related to capital subscriptions for the Companys common stock and reinvestment of dividends during the six month period ended June 30, 2015:
Shares Issued | Proceeds Received | |||||||
January 16, 2015 |
924,977 | $ | 18,000 | |||||
January 26, 2015* |
1,051 | 20 | ||||||
February 26, 2015 |
2,312,659 | 45,005 | ||||||
April 21, 2015* |
1,351 | 25 | ||||||
May 1, 2015 |
1,462,746 | 28,085 | ||||||
May 22, 2015 |
1,708,068 | 33,000 | ||||||
June 25, 2015 |
2,412,386 | 46,992 | ||||||
|
|
|
|
|||||
Total |
8,823,238 | $ | 171,127 | |||||
|
|
|
|
* | Represents shares issued upon the reinvestment of dividends |
Subscribed but unissued shares are presented in equity with a deduction of subscriptions receivable until cash is received for a subscription. There were no subscribed but unissued shares as of June 30, 2016 and December 31, 2015.
49
Subscription transactions during the six month periods ended June 30, 2016 and 2015 were executed at an offering price at a premium to net asset value due to the requirement to use prior quarter net asset value as offering price unless it would result in the Company selling shares of its common stock at a price below the current net asset value and also in order to effect a reallocation of organizational costs to subsequent investors. Such subscription transactions increased net asset value by $0.02 per share and $0.10 per share, respectively, for the six month periods ended June 30, 2016 and 2015, respectively.
The Company computes earnings per common share in accordance with ASC 260, Earnings Per Share. Basic earnings per common share were calculated by dividing net increase (decrease) in net assets resulting from operations attributable to the Company by the weighted-average number of common shares outstanding for the period.
Basic and diluted earnings per common share were as follows:
For the three month periods ended | For the six month periods ended | |||||||||||||||
June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | |||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 25,951 | $ | 9,215 | $ | 23,243 | $ | 19,003 | ||||||||
Weighted-average common shares outstanding |
34,402,925 | 23,062,818 | 33,174,442 | 21,330,007 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic and diluted earnings per common share |
$ | 0.75 | $ | 0.40 | $ | 0.70 | $ | 0.89 | ||||||||
|
|
|
|
|
|
|
|
The following table summarizes the Companys dividends declared and payable since inception through June 30, 2016:
Date Declared |
Record Date |
Payment Date |
Per Share Amount |
Total Amount |
||||||||
March 13, 2014 |
March 31, 2014 | April 14, 2014 | $ | 0.19 | $ | 2,449 | ||||||
June 26, 2014 |
June 30, 2014 | July 14, 2014 | $ | 0.27 | $ | 3,481 | ||||||
September 12, 2014 |
September 18, 2014 | October 9, 2014 | $ | 0.44 | $ | 5,956 | ||||||
December 19, 2014 |
December 29, 2014 | January 26, 2015 | $ | 0.35 | $ | 6,276 | ||||||
March 11, 2015 |
March 13, 2015 | April 17, 2015 | $ | 0.37 | $ | 7,833 | ||||||
June 24, 2015 |
June 30, 2015 | July 22, 2015 | $ | 0.37 | $ | 9,902 | ||||||
September 24, 2015 |
September 24, 2015 | October 22, 2015 | $ | 0.42 | $ | 11,670 | ||||||
December 29, 2015 |
December 29, 2015 | January 22, 2016 | $ | 0.40 | $ | 12,610 | ||||||
December 29, 2015 |
December 29, 2015 | January 22, 2016 | $ | 0.18 | (1) | $ | 5,674 | |||||
March 10, 2016 |
March 14, 2016 | April 22, 2016 | $ | 0.40 | $ | 13,337 | ||||||
June 8, 2016 |
June 8, 2016 | July 22, 2016 | $ | 0.40 | $ | 13,943 |
(1) | Represents a special dividend. |
50
10. CONSOLIDATED FINANCIAL HIGHLIGHTS
The following is a schedule of consolidated financial highlights for the six month periods ended June 30, 2016 and 2015:
For the six month periods ended | ||||||||
June 30, 2016 | June 30, 2015 | |||||||
Per Share Data: |
||||||||
Net asset value per share, beginning of period |
$ | 18.14 | $ | 18.86 | ||||
Net investment income (loss) (1) |
0.77 | 0.68 | ||||||
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments |
(0.11 | ) | 0.19 | |||||
|
|
|
|
|||||
Net increase (decrease) in net assets resulting from operations |
0.66 | 0.87 | ||||||
|
|
|
|
|||||
Dividends declared (2) |
(0.80 | ) | (0.74 | ) | ||||
Effect of subscription offering price (3) |
0.02 | 0.10 | ||||||
|
|
|
|
|||||
Net asset value per share, end of period |
$ | 18.02 | $ | 19.09 | ||||
|
|
|
|
|||||
Number of shares outstanding, end of period |
36,517,329 | 26,755,936 | ||||||
Total return (4) |
3.75 | % | 5.14 | % | ||||
Net assets, end of period |
$ | 657,918 | $ | 510,652 | ||||
Ratio to average net assets (5): |
||||||||
Expenses net of waiver, before incentive fees |
2.83 | % | 2.55 | % | ||||
Expenses net of waiver, after incentive fees |
3.88 | % | 3.40 | % | ||||
Expenses gross of waiver, after incentive fees |
4.34 | % | 3.86 | % | ||||
Net investment income (loss) (6) |
4.21 | % | 3.39 | % | ||||
Interest expense and credit facility fees |
1.47 | % | 1.12 | % | ||||
Ratios/Supplemental Data: |
||||||||
Asset coverage, end of period |
213.77 | % | 225.17 | % | ||||
Portfolio turnover |
9.36 | % | 16.21 | % | ||||
Total committed capital, end of period |
$ | 1,192,765 | $ | 1,151,104 | ||||
Ratio of total contributed capital to total committed capital, end of period |
59.13 | % | 45.51 | % | ||||
Weighted-average shares outstanding |
33,174,442 | 21,330,007 |
(1) | Net investment income (loss) per share was calculated as net investment income (loss) for the period divided by the weighted average number of shares outstanding for the period. |
(2) | Dividends declared per share was calculated as the sum of dividends declared during the period divided by the number of shares outstanding at each respective quarter-end date (refer to Note 9). |
(3) | Increase is due to offering price of subscriptions during the period (refer to Note 9). |
(4) | Total return (not annualized) is based on the change in net asset value per share during the period plus the declared dividends, assuming reinvestment of dividends in accordance with the dividend reinvestment plan, divided by the beginning net asset value for the period. Total return for the six month periods ended June 30, 2016 and 2015 is inclusive of $0.02 and $0.10, respectively, per share increase in net asset value for the periods related to the offering price of subscriptions. Ex |