0001104659-21-104961.txt : 20210813 0001104659-21-104961.hdr.sgml : 20210813 20210813141543 ACCESSION NUMBER: 0001104659-21-104961 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210813 DATE AS OF CHANGE: 20210813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Audax Credit BDC Inc. CENTRAL INDEX KEY: 0001633858 IRS NUMBER: 473039124 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 814-01154 FILM NUMBER: 211171405 BUSINESS ADDRESS: STREET 1: 101 HUNTINGTON AVENUE CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: (617) 859-1513 MAIL ADDRESS: STREET 1: 101 HUNTINGTON AVENUE CITY: BOSTON STATE: MA ZIP: 02199 FORMER COMPANY: FORMER CONFORMED NAME: Audax Credit BDC, Inc. DATE OF NAME CHANGE: 20150415 FORMER COMPANY: FORMER CONFORMED NAME: Audax Senior BDC Inc. DATE OF NAME CHANGE: 20150212 10-Q 1 tm2118616d1_10q.htm FORM 10-Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2021

 

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                    

 

Commission file number: 814-01154

 

 

 

AUDAX CREDIT BDC INC.

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE   47-3039124

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

101 HUNTINGTON AVENUE    
BOSTON, MASSACHUSETTS   02199
(Address of principal executive office)   (Zip Code)

 

(617) 859-1500

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

None.

 

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   ¨     No  ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12 b-2 of the Exchange Act.

 

Large accelerated filer ¨ Accelerated filer ¨
       
Non-accelerated filer x Smaller reporting company ¨
       
Emerging growth company x    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨    No   x

 

The registrant had 39,961,405 shares of common stock, par value $0.001 per share, outstanding as of August 13, 2021.

 

 

 

 

 

 

AUDAX CREDIT BDC INC.

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION:  
     
Item 1. Financial Statements  
     
  Statements of Assets and Liabilities as of June 30, 2021 (unaudited) and December 31, 2020   2
  Statements of Operations for the three and six months ended June 30, 2021 (unaudited) and 2020 (unaudited) 3
  Statements of Changes in Net Assets for the six months ended June 30, 2021 (unaudited) and 2020 (unaudited) 4
  Statements of Cash Flows for the six months ended June 30, 2021 (unaudited) and 2020 (unaudited) 5
  Schedules of Investments as of June 30, 2021 (unaudited) and December 31, 2020 6
  Notes to Financial Statements (unaudited) 16
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  
     
  Overview 37
  Results of Operations 39
  Financial Condition, Liquidity and Capital Resources 41
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 48
     
Item 4. Controls and Procedures 49
     
PART II. OTHER INFORMATION:  
     
Item 1. Legal Proceedings 50
     
Item 1A. Risk Factors 50
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 50
     
Item 3. Defaults Upon Senior Securities 50
     
Item 4. Mine Safety Disclosures 50
     
Item 5. Other Information 51
     
Item 6. Exhibits 51
   
SIGNATURES 52

 

 

 

 

Audax Credit BDC Inc.

Statements of Assets and Liabilities
June 30, 2021 and December 31, 2020

(Expressed in U.S. Dollars)

 

   June 30, 2021    
   (unaudited)   December 31, 2020 
Assets          
Investments, at fair value          
Non-Control/Non-Affiliate investments (Cost of $356,415,001 and $358,990,792, respectively)  $355,059,390   $355,359,843 
Cash and cash equivalents   20,393,297    4,289,122 
Interest receivable   997,607    954,012 
Receivable from investments sold   229,794    - 
Receivable from bank loan repayment   22,493    - 
Other assets   97,500    - 
           
Total assets  $376,800,081   $360,602,977 
           
Liabilities          
Accrued expenses and other liabilities  $190,580   $316,522 
Fee due to administrator(a)   66,250    66,250 
Fees due to investment advisor, net of waivers(a)   626,320    614,844 
Payable for investments purchased   11,337,405    2,722,500 
           
Total liabilities  $12,220,555   $3,720,116 
Commitments and contingencies(b)          
           
Net Assets          
Common stock, $0.001 par value per share, 100,000,000 shares authorized, 39,009,533 and 38,343,580 shares issued and outstanding, respectively  $39,009   $38,343 
Capital in excess of par value   369,880,141    363,826,108 
Total distributable earnings   (5,339,624)   (6,981,590)
Total Net Assets  $364,579,526   $356,882,861 
           
Net Asset Value per Share of Common Stock at End of Period  $9.35   $9.31 
           
Shares Outstanding   39,009,533    38,343,580 

 

  (a) Refer to Note 4-Related Party Transactions for additional information.
  (b) Refer to Note 8-Commitments and Contingencies for additional information.

 

The accompanying notes are an integral part of these financial statements.

 

2

 

Audax Credit BDC Inc.

Statements of Operations

(Expressed in U.S. Dollars)

(unaudited)

 

   Three Months Ended   Three Months Ended   Six Months Ended   Six Months Ended 
   June 30, 2021   June 30, 2020   June 30, 2021   June 30, 2020 
Investment Income                    
Interest income                    
Non-Control/Non-Affiliate  $4,762,471   $4,961,112   $9,531,156   $10,163,820 
Other   356    1,325    630    29,995 
Total interest income   4,762,827    4,962,437    9,531,786    10,193,815 
Other income                    
Non-Control/Non-Affiliate   15,488    124,633    63,002    139,373 
Total income   4,778,315    5,087,070    9,594,788    10,333,188 
                     
Expenses                    
Base management fee(a)  $948,730   $942,530   $1,862,780   $1,823,382 
Incentive fee(a)   96,455    623,599    387,748    1,284,958 
Administrative fee(a)   66,250    66,250    132,500    132,500 
Directors' fees   56,250    52,500    112,500    105,000 
Professional fees   144,378    139,116    237,696    237,058 
Other expenses   116,707    59,805    205,930    108,190 
                     
Expenses before waivers from investment adviser and administrator   1,428,770    1,883,800    2,939,154    3,691,088 
Base management fee waivers(a)   (332,055)   (329,886)   (651,972)   (638,184)
Incentive fee waivers(a)   (86,809)   (552,873)   (348,973)   (1,116,651)
Total expenses, net of waivers   1,009,906    1,001,041    1,938,209    1,936,253 
Net Investment Income   3,768,409    4,086,029    7,656,579    8,396,935 
                     
Realized and Unrealized Gain (Loss) on Investments                    
Net realized (loss) gain on investments   (696,642)   384    (633,372)   (3,392)
Net change in unrealized appreciation (depreciation) on investments   1,149,424    2,368,943    2,275,338    (13,168,590)
Net realized and unrealized gain (loss) on investments   452,782    2,369,327    1,641,966    (13,171,982)
                     
Net Increase (Decrease) in Net Assets Resulting from Operations  $4,221,191   $6,455,356   $9,298,545   $(4,775,047)
                     
Basic and Diluted per Share of Common Stock:                    
Net investment income  $0.10   $0.11   $0.20   $0.23 
Net increase (decrease) in net assets resulting from operations  $0.11   $0.17   $0.24   $(0.13)
                     
Weighted average shares of common stock outstanding basic diluted   39,009,531    37,769,447    38,983,776    37,155,262 

 

  (a) Refer to Note 4-Related Party Transactions for additional information

 

The accompanying notes are an integral part of these financial statements.

 

3

 

 

Audax Credit BDC Inc.

Statements of Changes in Net Assets

(Expressed in U.S. Dollars)

(unaudited)

 

 

   Six Months Ended
June 30, 2021		   Six Months Ended
June 30, 2020		 
Operations          
Net investment income  $7,656,579   $8,396,935 
Net realized loss on investments   (633,372)   (3,392)
Net change in unrealized appreciation (depreciation) on investments   2,275,338    (13,168,590)
Net increase (decrease) in net assets resulting from operations   9,298,545    (4,775,047)
           
Distributions:          
Distributions to common stockholders   (7,656,579)   (8,125,607)
Return of capital to common stockholders   (145,326)   - 
Total distributions   (7,801,905)   (8,125,607)
           
Capital Share Transactions:          
Issuance of common stock   6,200,000    25,000,000 
Reinvestment of common stock   25    26 
Net increase in net assets from capital share transactions   6,200,025    25,000,026 
           
Net Increase in Net Assets   7,696,665    12,099,372 
           
Net Assets, Beginning of Period   356,882,861    331,399,673 
           
Net Assets, End of Period  $364,579,526   $343,499,045 

 

The accompanying notes are an integral part of these financial statements

 

4

 

Audax Credit BDC Inc.

Statements of Cash Flows

(Expressed in U.S. Dollars)

(unaudited)

 

 

   Six Months Ended   Six Months Ended 
   June 30, 2021   June 30, 2020 
Cash flows from operating activities:          
Net increase (decrease) in net assets resulting from operations     $9,298,545   $(4,775,047)
Adjustments to reconcile net increase (decrease) in net assets from operations to net cash provided by (used in) operating activities:           
Net realized loss on investments   633,372    3,392 
Net change in unrealized (appreciation) depreciation on investments   (2,275,338)   13,168,590 
Accretion of original issue discount interest and payment-in-kind interest   (380,092)   (216,568)
(Increase) Decrease in receivable from investments sold      (229,794)   1,993,379 
Increase in interest receivable    (43,595)   (32,583)
(Increase) decrease in receivable from bank loan repayment    (22,493)   70,177 
Increase in other assets   (97,500)   (98,529)
(Decrease) increase in accrued expenses and other liabilities    (125,942)   24,234 
Increase (decrease) in fees due to investment advisor(a)       11,476    (4,766)
Increase (decrease) in payable for investments purchased      8,614,905    (6,945,000)
Investment activity:          
Investments purchased    (55,617,977)   (36,506,991)
Proceeds from investments sold   10,135,008    5,743,556 
Repayment of bank loans   47,805,480    20,918,019 
Total investment activity   2,322,511    (9,845,416)
           
Net cash provided by (used in) operating activities   17,706,055    (6,658,137)
           
Cash flows from financing activities:           
Issuance of shares of common stock    6,200,000    25,000,000 
Distributions paid to common stockholders   (7,801,880)   (8,125,581)
           
Net cash (used in) provided by financing activities   (1,601,880)   16,874,419 
           
Net increase in cash and cash equivalents    16,104,175    10,216,282 
           
Cash and cash equivalents:          
Cash and cash equivalents, beginning of period   4,289,122    5,506,217 
           
Cash and cash equivalents, end of period  $20,393,297   $15,722,499 
           
Supplemental non-cash information          
Issuance of common shares in connection with dividend reinvestment plan  $25   $26 
Payment-in-kind ("PIK") interest income  $110,285   $35,921 

 

(a)Refer to Note 4-Related Party Transactions for additional information

 

The accompanying notes are an integral part of these financial statements.

 

5

 

Audax Credit BDC Inc.

Schedule of Investments 

As of June 30, 2021 

(Expressed in U.S. Dollars) 

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (97.3%)(g)(h):            
             
Healthcare & Pharmaceuticals               
Radiology Partners, Senior Secured Term B Loan (First Lien), 4.40% (Libor + 4.25%), maturity 7/9/25(i)  $4,215,792   $4,350,391   $4,220,971 
Advarra, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/26   4,166,817    4,135,365    4,166,816 
Young, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/7/24   3,775,182    3,767,147    3,737,430 
InHealth Medical Alliance, Senior Secured Term Loan, 7.00% (Libor + 6.00%), maturity 7/3/28(i)   3,500,000    3,465,000    3,465,000 
Confluent Health, Senior Secured Initial Term Loan, 5.15% (Libor + 5.00%), maturity 6/24/26   3,436,203    3,409,760    3,436,202 
PharMedQuest, Senior Secured Initial Term Loan, 6.50% (Libor + 5.50%), maturity 10/31/24   3,295,898    3,263,753    3,287,658 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 3.65% (Libor + 3.50%), maturity 3/14/25(i)   3,247,592    3,262,271    3,175,047 
Veritext, Senior Secured Initial Term Loan (First Lien), 3.40% (Libor + 3.25%), maturity 8/1/25(i)   3,137,207    3,122,963    3,120,998 
Waystar, Senior Secured Term Loan B, 4.15% (Libor + 4.00%), maturity 10/22/26(i)   2,964,987    2,956,808    2,973,817 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 8/18/23   2,867,533    2,852,719    2,810,182 
Soliant, Senior Secured Term Loan, 5.00% (Libor + 4.25%), maturity 3/31/28   2,500,000    2,481,250    2,500,000 
Packaging Coordinators, Senior Secured Term B Loan (First Lien), 4.25% (Libor + 3.50%), maturity 11/30/27(i)   2,493,750    2,485,170    2,498,902 
Zelis RedCard, Senior Secured Initial Term Loan, 3.65% (Libor + 3.50%), maturity 9/30/26(i)   2,432,866    2,421,059    2,430,426 
OB Hospitalist Group, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 8/1/24   2,316,088    2,308,642    2,316,088 
Premise Health, Senior Secured Initial Term Loan (First Lien), 3.65% (Libor + 3.50%), maturity 7/10/25   2,294,397    2,300,122    2,294,397 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 3.65% (Libor + 3.50%), maturity 7/24/26(i)   1,965,000    1,959,329    1,957,526 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 4.65% (Libor + 4.50%), maturity 12/22/25   1,950,000    1,937,919    1,925,625 
CareCentrix, Senior Secured Initial Term Loan, 4.65% (Libor + 4.50%), maturity 4/3/25   1,837,500    1,832,007    1,837,500 
Alpaca, Senior Secured Term Loan, 7.75% (Libor + 6.75%), maturity 4/19/24(j)   1,648,889    1,629,789    1,595,300 
Symplr, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 12/22/27(i)   1,496,250    1,473,750    1,499,756 
nThrive, Senior Secured Initial Loan (Second Lien), 8.50% (Libor + 7.75%), maturity 1/29/29   1,500,000    1,470,000    1,496,250 
Therapy Brands, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 5/18/28   1,500,000    1,492,500    1,488,750 
Upstream Rehabilitation, Senior Secured Term Loan, 4.65% (Libor + 4.50%), maturity 11/20/26(i)   1,481,250    1,479,427    1,485,172 
CPS, Unitranche, 6.50% (Libor + 5.50%), maturity 2/28/25   1,470,161    1,455,487    1,451,784 
Stepping Stones, Unitranche, 7.25% (Libor + 6.25%), maturity 3/9/27   1,435,441    1,419,738    1,431,853 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/1/24(i)   1,161,987    1,158,529    1,153,856 
nThrive, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 1/28/28(i)   1,000,000    995,000    1,000,681 
Veritext, Senior Secured Initial Term Loan (Second Lien), 7.15% (Libor + 7.00%), maturity 7/31/26   1,000,000    996,402    997,500 
Allied Benefit Systems, Senior Secured Initial Term B Loan, 5.50% (Libor + 4.75%), maturity 11/18/26   995,000    981,590    995,000 
Solis Mammography, Senior Secured Term Loan, 5.50% (Libor + 4.75%), maturity 4/17/28   1,000,000    990,000    995,000 
Solis Mammography, Senior Secured Term Loan (Second Lien ), 8.75% (Libor + 8.00%), maturity 4/1/29   1,000,000    985,000    995,000 
Wedgewood Pharmacy, Senior Secured TL, 5.25% (Libor + 4.50%), maturity 3/31/28   1,000,000    990,000    992,500 
Athena, Senior Secured Term B-1 Loan (First Lien), 4.40% (Libor + 4.25%), maturity 2/11/26(i)   984,975    978,032    990,549 
Ensemble, Senior Secured Closing Date Term Loan, 3.90% (Libor + 3.75%), maturity 8/3/26(i)   982,500    978,718    983,958 
Alcami, Senior Secured Initial Term Loan (First Lien), 4.40% (Libor + 4.25%), maturity 7/14/25   972,500    969,415    940,894 
Dermatologists of Central States, Senior Secured Term Loan, 8.00% (Libor + 7.00%), maturity 4/20/22   962,412    962,412    938,351 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 6.50% (Libor + 5.50%), maturity 5/9/25(i)   844,028    836,149    831,368 
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/10/23(i)   654,160    656,173    654,469 
AccentCare, Senior Secured 2021 Term Loan (First Lien), 4.15% (Libor + 4.00%), maturity 6/22/26(i)   500,000    500,000    501,250 
Press Ganey, Senior Secured 2020 Incremental Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 7/24/26(i)   498,750    494,209    500,877 
MedRisk, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 5/10/28(i)   500,000    495,000    500,827 
RMP & MedA/Rx, Senior Secured Term Loan, 5.50% (Libor + 4.50%), maturity 2/6/25   496,875    491,875    495,633 
RMP & MedA/Rx, Senior Secured Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 2/6/25   425,085    424,742    424,022 
Alpaca, Senior Secured Revolver, 7.75% (Libor + 6.75%), maturity 4/19/24(j)   129,426    125,543    125,220 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/24   -    (7,619)   - 
                
High Tech Industries            
Qlik, Senior Secured 2021 Refinancing Term Loan, 4.15% (Libor + 4.00%), maturity 4/26/24(i)   3,920,300    3,903,069    3,930,461 
Netsmart, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 10/1/27(i)   3,491,250    3,477,153    3,505,273 
Masergy, Senior Secured Initial Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 12/16/24   3,428,571    3,422,752    3,428,571 
Jaggaer, Senior Secured Initial Term Loan (First Lien), 3.90% (Libor + 3.75%), maturity 8/14/26(i)   3,106,912    3,102,778    3,113,121 
EverCommerce, Senior Secured Initial Term Loan, 5.65% (Libor + 5.50%), maturity 8/23/25(i)   3,106,884    3,045,395    3,106,884 
Ivanti Software, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 12/1/27(i)   2,992,500    2,952,271    3,000,689 
Infogroup, Senior Secured Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 4/3/23   2,874,900    2,860,800    2,846,151 
Planview, Senior Secured Closing Date Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 12/17/27(i)   2,645,584    2,619,556    2,654,689 
Idera, Senior Secured Term B-1 Loan (First Lien), 4.50% (Libor + 3.75%), maturity 3/2/28(i)   2,612,412    2,611,294    2,616,258 
Precisely, Senior Secured Vision Solutions, Inc. (Precisely Software Incorporated), 4.40% (Libor + 4.25%), maturity 4/24/28(i)   2,500,000    2,487,500    2,500,548 
Flexera Software, Senior Secured Term B-1 Loan (First Lien), 4.50% (Libor + 3.75%), maturity 3/3/28(i)   2,402,816    2,402,816    2,410,432 
ECi Software, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 11/9/27(i)   1,990,000    1,982,045    1,997,895 
Sophos, Senior Secured Dollar Tranche Term Loan (First Lien), 3.65% (Libor + 3.50%), maturity 3/5/27(i)(o)   1,980,006    1,877,844    1,969,229 
QuickBase, Senior Secured Term Loan (First Lien), 4.15% (Libor + 4.00%), maturity 4/2/26   1,960,000    1,953,051    1,950,200 
Intermedia , Senior Secured New Term Loan (First Lien), 7.00% (Libor + 6.00%), maturity 7/21/25   1,950,000    1,939,905    1,928,063 
Bomgar, Senior Secured Initial Term Loan (First Lien), 4.15% (Libor + 4.00%), maturity 4/18/25(i)   1,649,857    1,657,137    1,650,979 
OEConnection, Senior Secured Initial Term Loan, 4.15% (Libor + 4.00%), maturity 9/25/26   1,615,872    1,610,266    1,611,832 
Navex Global, Senior Secured Initial Term Loan (First Lien), 3.40% (Libor + 3.25%), maturity 9/5/25(i)   1,458,750    1,448,102    1,449,166 
Corsair, Senior Secured Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 8/28/24   1,162,057    1,155,041    1,162,057 

 

The accompanying notes are an integral part of these financial statements.

 

6

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of June 30, 2021 

(Expressed in U.S. Dollars) 

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):               
                
High Tech Industries (continued)               
Infoblox, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 12/1/27(i)  $1,000,000   $995,530   $1,003,612 
SmartBear, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.25%), maturity 3/3/28   1,000,000    990,000    1,000,000 
Barracuda, Senior Secured 2020 Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 2/12/25(i)   992,500    992,500    996,863 
Imperva, Senior Secured Term Loan, 5.00% (Libor + 4.00%), maturity 1/12/26(i)   991,152    982,906    995,924 
Veracode, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 11/5/27   997,500    988,494    995,006 
Unison, Unitranche, 8.00% (Libor + 7.00%), maturity 6/25/26   990,000    968,459    990,000 
Insurity, Senior Secured Closing Date Term Loan (First Lien), 4.15% (Libor + 4.00%), maturity 7/31/26   985,499    981,716    980,572 
Community Brands, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 12/2/22   821,511    818,909    815,350 
HelpSystems, Senior Secured Seventh Amendment Refinancing Loan (First Lien), 5.75% (Libor + 4.75%), maturity 11/19/26(i)   493,750    492,693    495,590 
DigiCert, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 4.00%), maturity 10/16/26(i)   493,750    469,519    495,032 
Liaison, Senior Secured 2021 Term Loan, 4.50% (Libor + 3.75%), maturity 3/11/28   497,500    496,253    493,769 
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 12/15/23(i)   477,408    476,431    477,869 
Skillsoft, Unitranche, 8.50% (Libor + 7.50%), maturity 4/27/25(i)   400,000    400,000    400,000 
GlobalLogic, Senior Secured Initial Term Loan, 2.90% (Libor + 2.75%), maturity 8/1/25(i)   214,214    213,727    214,214 
               
Services: Business               
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 9/23/25   3,930,000    3,901,796    3,910,350 
RevSpring, Senior Secured Initial Term Loan (First Lien), 4.15% (Libor + 4.00%), maturity 10/11/25(i)   3,900,000    3,896,678    3,893,504 
Addison, Senior Secured Initial Term Loan, 4.90% (Libor + 4.75%), maturity 4/15/26   2,940,000    2,900,104    2,940,000 
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 3.90% (Libor + 3.75%), maturity 2/9/26(i)   2,939,943    2,923,687    2,929,984 
Fleetwash, Senior Secured Incremental Term Loan, 5.75% (Libor + 4.75%), maturity 10/1/24   2,917,950    2,900,554    2,910,655 
Aimbridge, Senior Secured Initial Term Loan (2019) (First Lien), 3.90% (Libor + 3.75%), maturity 2/2/26(i)   2,937,675    2,930,231    2,878,398 
Duff & Phelps, Senior Secured Initial Dollar Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 4/9/27(i)   2,475,000    2,453,929    2,490,598 
HireRight, Senior Secured Initial Term Loan (Second Lien), 7.40% (Libor + 7.25%), maturity 7/10/26   2,500,000    2,484,490    2,437,500 
Newport Group, Senior Secured Initial Term Loan (First Lien), 3.65% (Libor + 3.50%), maturity 9/12/25(i)   2,433,693    2,423,931    2,424,319 
Vistage, Senior Secured Term B Loan (First Lien), 5.00% (Libor + 4.00%), maturity 2/10/25   2,335,958    2,332,388    2,335,958 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 6/19/24   2,331,975    2,331,975    2,320,315 
Service Logic, Senior Secured Closing Date Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 10/29/27   2,069,231    2,045,615    2,058,885 
Veregy, Senior Secured Incremental Term Loan, 7.00% (Libor + 6.00%), maturity 11/3/27   1,990,000    1,934,945    1,985,025 
Quantum Health, Senior Secured Amendment No. 1 Refinancing Term Loan (First Lien), 5.75% (Libor + 5.00%), maturity 12/22/27(i)   1,500,000    1,477,500    1,500,000 
Eliassen Group, Senior Secured Initial Term B Loan, 4.40% (Libor + 4.25%), maturity 11/5/24(i)   1,481,868    1,477,276    1,474,459 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 5.50% (Libor + 4.50%), maturity 3/27/24   1,451,891    1,448,740    1,441,002 
Epic Staffing Group, Senior Secured Initial Term Loan, 7.25% (Libor + 6.25%), maturity 2/5/27   1,253,615    1,223,615    1,244,213 
First Advantage, Senior Secured Term B-1 Loan (First Lien), 3.15% (Libor + 3.00%), maturity 1/31/27(i)   1,100,312    1,087,934    1,096,962 
eResearch (ERT), Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.50%), maturity 2/4/27(i)   994,981    994,981    1,000,856 
WCG, Senior Secured Term Loan, 5.00% (Libor + 4.00%), maturity 1/8/27(i)   990,000    981,521    994,048 
Divisions Maintenance Group, Senior Secured Term B Loan, 5.50% (Libor + 4.75%), maturity 5/27/28   1,000,000    990,000    992,500 
Franklin Energy, Senior Secured Term B Loan (First Lien), 4.15% (Libor + 4.00%), maturity 8/14/26   982,500    980,457    957,938 
Diversified, Senior Secured Initial Term Loan, 5.75% (Libor + 4.75%), maturity 12/23/23   899,347    895,168    892,602 
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 4.15% (Libor + 4.00%), maturity 6/3/26   541,099    538,088    539,746 
System One, Senior Secured Initial Term Loan, 5.25% (Libor + 4.50%), maturity 3/2/28(i)   500,000    497,500    500,000 
ImageFirst, Senior Secured Initial Term Loan, 5.25% (Libor + 4.50%), maturity 4/27/28   500,000    496,932    496,250 
Therma Holdings, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 12/16/27   417,258    413,065    415,172 
                
Chemicals, Plastics & Rubber               
Plaskolite, Senior Secured 2021-1 Refinancing Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 12/15/25(i)   3,900,225    3,851,017    3,924,852 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/30/24   3,370,557    3,361,688    3,261,014 
DuBois Chemicals, Senior Secured Term Loan (Second Lien) - 2019, 8.65% (Libor + 8.50%), maturity 9/30/27   3,000,000    2,972,217    2,992,500 
Vertellus, Senior Secured Term Loan Facility, 7.00% (Libor + 6.00%), maturity 12/22/27   2,987,250    2,912,250    2,964,846 
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 10/4/21   2,718,128    2,717,341    2,582,222 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 1/31/25(i)   2,641,275    2,648,229    2,544,038 
Unifrax, Senior Secured USD Term Loan (First Lien), 3.90% (Libor + 3.75%), maturity 12/12/25(i)   2,438,722    2,419,427    2,406,078 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 6.90% (Libor + 6.75%), maturity 9/6/26(i)   2,000,000    2,001,814    2,000,901 
Q Holding, Senior Secured Term B Loan (2019), 6.00% (Libor + 5.00%), maturity 12/29/23   1,965,000    1,957,922    1,935,525 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 4.65% (Libor + 4.50%), maturity 9/30/26   1,786,365    1,751,698    1,777,433 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 3/31/25(i)   967,500    964,614    962,502 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 10/28/24(i)   972,292    960,194    949,765 
Polytek, Senior Secured Term Loan, 5.75% (Libor + 4.75%), maturity 9/20/24   497,501    492,501    497,501 
Boyd Corp, Senior Secured Initial Term Loan (First Lien), 3.65% (Libor + 3.50%), maturity 9/6/25(i)   494,911    464,843    489,052 
Vertellus, Senior Secured Revolving Facility, 7.00% (Libor + 6.00%), maturity 12/22/25   -    (12,156)   - 

 

The accompanying notes are an integral part of these financial statements.

 

7

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of June 30, 2021 

(Expressed in U.S. Dollars) 

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):               
                
Aerospace & Defense               
CPI International, Senior Secured Second Amendment Incremental Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 7/26/24  $5,248,817   $5,204,132   $5,209,451 
HDT Global, Senior Secured Term Loan B, 6.50% (Libor + 5.75%), maturity 7/10/28(i)   3,500,000    3,395,000    3,395,000 
StandardAero, Senior Secured 2020 Term B-1 Loan, 3.65% (Libor + 3.50%), maturity 4/6/26(i)   3,287,887    3,280,035    3,203,477 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 7.75%), maturity 4/30/26   2,000,000    2,007,673    1,935,000 
Whitcraft, Unitranche, 7.00% (Libor + 6.00%), maturity 4/3/23   1,972,425    1,963,997    1,923,115 
StandardAero, Senior Secured 2020 Term B-2 Loan, 3.65% (Libor + 3.50%), maturity 4/6/26(i)   1,767,681    1,763,460    1,722,299 
Eton, Senior Secured Initial Term Loan (First Lien), 4.15% (Libor + 4.00%), maturity 5/1/25(i)   1,489,911    1,485,492    1,494,981 
Tronair, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 9/8/23   1,369,399    1,365,811    1,292,712 
Amentum, Senior Secured Tranche 2 Term Loan (First Lien), 5.50% (Libor + 4.75%), maturity 1/29/27(i)   997,500    979,620    1,008,836 
Peraton, Senior Secured Term B Loan (First Lien), 4.50% (Libor + 3.75%), maturity 2/1/28(i)   997,500    992,500    1,001,739 
Amentum, Senior Secured Tranche 1 Term Loan (First Lien), 3.65% (Libor + 3.50%), maturity 1/29/27(i)   990,000    962,492    989,952 
API Technologies, Senior Secured Initial Term Loan (First Lien), 4.40% (Libor + 4.25%), maturity 5/9/26(i)   984,925    959,337    972,816 
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 4/30/25(i)   490,309    488,353    480,955 
Novaria Group, Senior Secured Initial Term Loan, 6.50% (Libor + 5.50%), maturity 1/27/27   481,818    477,582    466,159 
                
Services: Consumer               
A Place For Mom, Senior Secured Term Loan, 4.75% (Libor + 3.75%), maturity 8/10/24   2,625,231    2,624,896    2,598,979 
Weld North, Senior Secured Term Loan B (First Lien), 4.75% (Libor + 4.00%), maturity 12/21/27(i)   2,432,643    2,432,643    2,440,144 
Cambium Learning, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 12/18/25(i)   2,251,586    2,173,005    2,251,586 
LegalShield, Senior Secured Initial Term Loan (First Lien), 3.40% (Libor + 3.25%), maturity 5/1/25(i)   1,927,000    1,917,584    1,916,396 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 3.40% (Libor + 3.25%), maturity 5/14/26(i)   1,537,419    1,534,691    1,534,101 
Ned Stevens, Senior Secured Term A Loan, 6.75% (Libor + 5.75%), maturity 9/30/25(j)   1,441,661    1,422,196    1,430,849 
Smart Start, Senior Secured Initial Term Loan, 5.75% (Libor + 4.75%), maturity 8/19/27(i)   992,513    983,617    994,994 
Spring Education, Senior Secured Initial Term Loan (First Lien), 4.40% (Libor + 4.25%), maturity 7/30/25(i)   972,500    970,947    939,934 
LegalShield, Senior Secured New Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 5/1/25   496,250    489,439    492,528 
StubHub, Senior Secured USD Term B Loan, 3.65% (Libor + 3.50%), maturity 2/12/27(i)   492,500    490,393    483,054 
Ned Stevens, Senior Secured Revolver, 5.75% (Libor + 4.75%), maturity 9/30/25(j)   -    (2,614)   - 
                
Banking, Finance, Insurance & Real Estate               
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 4/30/25   2,500,000    2,506,061    2,500,000 
AmeriLife, Senior Secured Initial Term Loan (First Lien), 4.15% (Libor + 4.00%), maturity 3/18/27   2,475,298    2,461,176    2,462,922 
Kestra Financial, Senior Secured Initial Term Loan, 4.40% (Libor + 4.25%), maturity 6/3/26(i)   1,965,000    1,950,401    1,969,738 
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 6.75% (Libor + 5.75%), maturity 10/31/22   1,944,823    1,936,902    1,905,927 
Orion, Senior Secured 2021 Refinancing Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 9/24/27(i)   1,492,509    1,477,509    1,497,813 
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 9/6/24   1,447,500    1,445,811    1,443,881 
Advisor Group, Senior Secured Term B-1 Loan, 4.65% (Libor + 4.50%), maturity 7/31/26(i)   1,034,686    1,028,387    1,038,469 
Mitchell International, Senior Secured Amendment No. 2 New Term Loan Facility (First Lien), 4.75% (Libor + 4.25%), maturity 11/29/24(i)   992,500    944,648    998,667 
SIAA, Unitranche, 7.25% (Libor + 6.25%), maturity 4/28/28   1,000,000    981,404    992,500 
Sedgwick Claims, Senior Secured Initial Term Loan, 3.40% (Libor + 3.25%), maturity 12/31/25(i)   492,424    491,897    487,824 
                
Containers, Packaging & Glass               
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 4.15% (Libor + 4.00%), maturity 7/18/26   2,894,446    2,881,961    2,887,210 
TricorBraun, Senior Secured Closing Date Initial Term Loan (First Lien), 3.75% (Libor + 3.25%), maturity 3/3/28(i)   1,511,246    1,503,690    1,503,025 
Technimark, Senior Secured Term Loan, 4.25% (Libor + 3.75%), maturity 7/15/28(i)   1,500,000    1,492,500    1,492,500 
Potters Industries, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 12/14/27   1,496,250    1,482,840    1,481,288 
Lacerta, Senior Secured Term Loan, 6.25% (Libor + 5.50%), maturity 12/30/26   995,000    985,000    990,025 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 4.15% (Libor + 4.00%), maturity 7/31/26(i)   985,000    983,148    985,738 
Tank Holding, Senior Secured 2020 Refinancing Term Loan (First Lien), 3.65% (Libor + 3.50%), maturity 3/26/26(i)   982,500    979,348    977,586 
Pregis Corporation, Senior Secured Third Amendment Refinancing Term Loan (First Lien), 4.50% (Libor + 4.00%), maturity 7/31/26   500,000    497,765    498,750 
Applied Adhesives, Senior Secured Term A Loan, 5.75% (Libor + 5.00%), maturity 3/12/27   498,750    493,101    497,503 
Berlin Packaging, Senior Secured Initial Term Loan (First Lien), 3.00% (Libor + 3.00%), maturity 11/7/25(i)   492,386    473,771    488,431 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 7.00% (Libor + 6.00%), maturity 5/12/22   465,186    464,767    465,186 
Applied Adhesives, Senior Secured Revolving Loan, 5.75% (Libor + 5.00%), maturity 3/12/27   29,867    29,156    29,792 
                
Capital Equipment               
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 3.90% (Libor + 3.75%), maturity 9/30/24(i)   2,037,185    2,037,185    1,985,679 
BAS, Senior Secured Repricing Term Loan, 4.75% (Libor + 3.75%), maturity 5/21/24(i)   1,939,215    1,941,889    1,939,215 
Excelitas, Senior Secured Initial Term Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 12/1/25(i)   1,500,000    1,481,037    1,502,560 
Edward Don, Senior Secured Initial Term Loan, 5.25% (Libor + 4.25%), maturity 7/2/25   1,370,943    1,367,272    1,302,395 
Flow Control Group, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 3/31/28(i)   1,000,000    997,500    1,002,099 
Cole-Parmer, Senior Secured Term B-1 Loan (First Lien), 4.15% (Libor + 4.00%), maturity 11/4/26(i)   987,500    984,057    989,668 
TriMark, Senior Secured Initial Term Loan (First Lien), 3.65% (Libor + 3.50%), maturity 8/28/24   978,529    895,739    596,903 
Infinite Electronics, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 3/2/28   500,000    498,750    496,250 
Restaurant Technologies, Senior Secured Initial Loan (Second Lien), 6.65% (Libor + 6.50%), maturity 10/1/26   500,000    503,259    498,750 
Duravant, Senior Secured Incremental Amendment No. 2 Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/19/24   492,424    492,424    492,424 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 12/2/24(i)   486,146    488,883    487,011 
                
Construction & Building               
Tangent, Senior Secured Closing Date Term Loan (First Lien), 4.90% (Libor + 4.75%), maturity 11/30/24   1,802,007    1,791,365    1,802,007 
PlayPower, Senior Secured Initial Term Loan, 5.65% (Libor + 5.50%), maturity 5/8/26   1,766,639    1,766,639    1,718,056 

 

The accompanying notes are an integral part of these financial statements.

 

8

 

Audax Credit BDC Inc. 

Schedule of Investments (Continued)

As of June 30, 2021 

(Expressed in U.S. Dollars) 

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):               
                
Construction & Building (continued)               
PlayCore, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 7.75%), maturity 9/29/25  $1,500,000   $1,472,492   $1,492,500 
DiversiTech Corporation, Senior Secured Tranche B-2 Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 12/2/24(i)   1,452,233    1,444,062    1,457,049 
Aegion, Senior Secured Initial Term Loan, 5.50% (Libor + 4.75%), maturity 5/17/28   1,000,000    995,000    992,500 
PlayCore, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 9/30/24(i)   961,921    960,520    958,974 
CHI Overhead Doors, Senior Secured Third Amendment Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 7/31/25   618,857    618,059    618,857 
DiversiTech Corporation, Senior Secured Initial Term Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 6/2/25   500,000    491,087    500,000 
Acuren, Senior Secured Initial Term Loan, 4.15% (Libor + 4.00%), maturity 1/23/27(i)   481,218    479,111    483,330 
Hoffman Southwest, Senior Secured Initial Term Loan, 6.00% (Libor + 5.00%), maturity 8/14/23   446,460    445,724    446,460 
                
Automotive               
Highline, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 11/9/27(i)   2,856,477    2,786,076    2,871,098 
Les Schwab Tire, Senior Secured Initial Term Loan, 4.25% (Libor + 3.50%), maturity 11/2/27(i)   1,990,000    1,980,979    1,993,594 
Truck Hero, Senior Secured Initial Term Loan, 4.50% (Libor + 3.75%), maturity 1/31/28(i)   1,496,250    1,496,250    1,498,466 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 2/3/25   972,500    954,017    965,206 
IXS, Senior Secured Initial Term Loan, 5.00% (Libor + 4.25%), maturity 3/5/27(i)   798,564    796,299    802,575 
Wheel Pros, Senior Secured Cov-Lite Term Loan, 4.65% (Libor + 4.50%), maturity 5/11/28(i)   500,000    495,000    502,005 
Safe Fleet, Senior Secured Initial Term Loan (Second Lien), 7.75% (Libor + 6.75%), maturity 2/2/26(i)   500,000    490,518    490,191 
                
Transportation: Cargo               
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 10/12/24(i)   3,590,398    3,587,219    3,549,635 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 10/7/24(i)   2,428,802    2,424,504    2,435,984 
Capstone Logistics, Senior Secured Closing Date Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 11/12/27   1,990,000    1,970,328    1,990,000 
Kenan Advantage Group, Senior Secured U.S. Term B-1 Loan, 4.50% (Libor + 3.75%), maturity 3/24/26(i)   995,000    990,013    998,140 
                
Wholesale               
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 3.00%), maturity 3/20/25   3,869,544    3,870,046    3,830,849 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 8/19/22   1,885,184    1,875,547    1,823,916 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 6/15/23   1,432,349    1,432,348    1,392,959 
                
Beverage, Food & Tobacco               
Sovos Brands, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 6/8/28(i)   2,452,455    2,452,455    2,465,048 
Dessert Holdings, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 6/9/28(i)   1,500,000    1,488,750    1,500,000 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 8/25/25   1,945,000    1,939,451    1,920,688 
                
Forest Products & Paper               
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/21/23(i)   2,406,369    2,400,428    2,325,948 
Loparex, Senior Secured Initial Term Loan (First Lien), 4.65% (Libor + 4.50%), maturity 7/31/26   1,473,750    1,462,396    1,466,381 
Hoffmaster Group, Senior Secured Initial Term Loan (Second Lien), 10.50% (Libor + 9.50%), maturity 11/21/24   1,250,000    1,250,000    1,209,375 
                
Consumer Goods: Non-durable               
Augusta Sportswear Group, Senior Secured Initial Term Loan, 5.50% (Libor + 4.50%), maturity 10/26/23(i)   2,173,916    2,164,995    2,152,176 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 6.25% (Libor + 5.00%), maturity 9/11/23   1,903,494    1,896,483    1,879,700 
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 12/16/24(i)   972,320    977,082    951,516 
                
Media: Advertising, Printing & Publishing               
Ansira, Unitranche, 7.50% (Libor + 6.50%), maturity 12/20/24   2,090,114    2,082,646    1,483,982 
Northstar, Senior Secured Term Loan, 6.75% (Libor + 6.25%), maturity 6/7/24   1,380,435    1,380,435    1,335,570 
Vestcom International, Senior Secured L/C Collaterilized, 5.00% (Libor + 4.00%), maturity 12/19/23(i)   775,705    777,516    778,613 
                
Environmental Industries               
Denali Water Solutions, Senior Secured Closing Date Term Loan, 5.00% (Libor + 4.25%), maturity 3/27/28   2,000,000    1,980,000    1,985,000 
Culligan, Senior Secured Term Loan B, 4.50% (Libor + 4.00%), maturity 7/31/28(i)   500,000    497,469    497,500 
                
Telecommunications               
ORBCOMM, Senior Secured Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 6/30/28(i)   1,000,000    995,000    1,002,500 
                
Utilities: Electric               
Systems Control, Senior Secured Initial Term Loan, 5.75% (Libor + 4.75%), maturity 3/28/25(i)   997,423    992,436    992,436 
                
Metals & Mining               
Dynatect, Senior Secured Term B Loan, 5.50% (Libor + 4.50%), maturity 9/30/22   941,904    941,375    923,066 
                
Hotel, Gaming & Leisure               
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.00% (Libor + 5.00%), maturity 10/21/23   1,119,231    1,114,043    895,385 
                
Health Care Equipment & Services               
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 4.40% (Libor + 4.25%), maturity 8/31/26(i)   529,394    525,334    530,771 
                
Consumer Goods: Durable               
Careismatic Brands, Senior Secured Initial Term Loan (First Lien), 3.75% (Libor + 3.25%), maturity 1/6/28(i)   500,000    498,750    498,792 
                
Total Bank Loans       $355,907,913   $354,631,756 

 

The accompanying notes are an integral part of these financial statements.

 

9

 

Audax Credit BDC Inc. 

Schedule of Investments (Continued) 

As of June 30, 2021 

(Expressed in U.S. Dollars) 

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
EQUITY AND PREFERRED SHARES:  NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.1%)(g)(h):               
                
Services: Consumer              
Ned Stevens, Class B Common Units (261,438 Common B units, Fair value of $226,386)(j)(k)(l)(m)       $261,438   $226,386 
               
Chemicals, Plastics & Rubber               
Vertellus, Series A Units (1,651 Series A units, Fair value of $167,478)(k)(m)(p)        165,138    167,478 
                
Healthcare & Pharmaceuticals               
Alpaca, Class A Units (45,746 Class A Units, Fair value of $33,770)(j)(k)(m)(n)        80,512    33,770 
                
Total Equity and Preferred Shares       $507,088   $427,634 
                
Total Portfolio Investments(q)       $356,415,001   $355,059,390 

 

(a) All companies are located in the United States of America, unless otherwise noted.
(b) Interest rate percentages represent actual interest rates which are indexed from then 30-day London Interbank Offered Rate ("LIBOR") unless otherwise noted. LIBOR rates are subject to interest rate floors which can vary based on the contractual agreement with the borrower.  Due dates represent the contractual maturity date.
(c) All loans are income-producing, unless otherwise noted.
(d) All investments are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act") unless otherwise noted.
(e) All investments are exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act.
(f)

Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.

(g) Percentages are calculated using fair value of investments over net assets.
(h) As defined in 1940 Act, the Company is not deemed to be an “Affiliated Person” of or “Control” this portfolio company because it neither owns 5% or more of the portfolio company’s outstanding voting securities nor has the power to exercise control over the management or policies of such portfolio company (including through a management agreement).
(i) Investment was valued using Level 2 inputs within the ASC 820 fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(j) Three of our affiliated funds, Audax Direct Lending Solutions Fund - A, L.P., Audax Direct Lending Solutions Fund - C, L.P., and Audax Direct Lending Solutions Fund - D, L.P.,'co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(k) Investment is non-income producing.
(l) Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(m) Other net assets of $0 at the aggregator levels are included in the fair value of the investments when using the net asset value as a practical expedient.
(n) Represents an investment in APD ALP Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(o) The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.
(p) Represents an investment in ADP VERT Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(q) At June 30, 2021, the cost of investments for income tax purposes was $356,415,001, the gross unrealized depreciation for federal tax purposes was $3,234,378, the gross unrealized appreciation for federal income tax purposes was $1,878,767, and the net unrealized depreciation was $1,355,611.

 

The accompanying notes are an integral part of these financial statements.

 

10

 

 

Audax Credit BDC Inc. 

Schedule of Investments 

As of December 31, 2020 

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (99.3%)(g)(h):               
                
Healthcare & Pharmaceuticals               
Advarra, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/26  $4,188,729   $4,154,267   $4,188,728 
Radiology Partners, Senior Secured Term B Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/25(i)   4,215,792    4,347,260    4,176,926 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/1/24   3,918,622    3,904,639    3,879,434 
Young, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/7/24   3,794,840    3,786,074    3,737,916 
Confluent Health, Senior Secured Initial Term Loan, 5.24% (Libor + 5.00%), maturity 6/24/26   3,453,734    3,424,590    3,453,733 
Specialty Care, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 9/1/23   3,308,843    3,311,499    3,308,842 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 3.74% (Libor + 3.50%), maturity 3/14/25(i)   3,247,592    3,264,389    3,125,437 
Veritext, Senior Secured Initial Term Loan (First Lien), 3.74% (Libor + 3.50%), maturity 8/1/25(i)   3,153,327    3,139,037    3,090,261 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 6.50% (Libor + 5.50%), maturity 8/18/23   2,880,590    2,864,047    2,786,971 
Packaging Coordinators, Senior Secured Term B Loan (First Lien), 4.50% (Libor + 3.75%), maturity 11/30/27(i)   2,500,000    2,490,762    2,511,458 
Waystar, Senior Secured Term Loan B, 4.24% (Libor + 4.00%), maturity 10/22/26   2,481,250    2,472,081    2,462,641 
MedRisk, Senior Secured Initial Term Loan (First Lien), 2.99% (Libor + 2.75%), maturity 12/27/24   2,425,000    2,429,293    2,425,000 
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.50%), maturity 9/23/24   2,421,519    2,404,861    2,409,412 
OB Hospitalist Group, Senior Secured Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 8/1/24   2,316,088    2,307,504    2,316,088 
Premise Health, Senior Secured Initial Term Loan (First Lien), 3.74% (Libor + 3.50%), maturity 7/10/25   2,306,194    2,312,549    2,306,194 
PharMedQuest, Senior Secured Initial Term Loan, 6.00% (Libor + 5.00%), maturity 10/31/24(j)   2,298,398    2,272,767    2,298,398 
MedRisk, Senior Secured Initial Loan (Second Lien), 6.99% (Libor + 6.75%), maturity 12/29/25   2,100,000    2,078,820    2,100,000 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 3.74% (Libor + 3.50%), maturity 7/24/26(i)   1,975,000    1,968,810    1,967,793 
Zelis RedCard, Senior Secured Initial Term Loan, 4.99% (Libor + 4.75%), maturity 9/30/26(i)   1,945,092    1,931,721    1,955,747 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 4.74% (Libor + 4.50%), maturity 12/22/25   1,960,000    1,946,588    1,937,950 
CareCentrix, Senior Secured Initial Term Loan, 4.74% (Libor + 4.50%), maturity 4/3/25(i)   1,862,500    1,856,296    1,831,763 
Alpaca, Senior Secured Term Loan, 7.75% (Libor + 6.75%), maturity 4/19/24(j)   1,657,302    1,636,678    1,591,010 
Symplr, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 12/22/27(i)   1,500,000    1,477,500    1,488,750 
Upstream Rehabilitation, Senior Secured Term Loan, 4.74% (Libor + 4.50%), maturity 11/20/26(i)   1,488,750    1,486,743    1,473,863 
CPS, Unitranche, 6.50% (Libor + 5.50%), maturity 2/28/25(j)   1,477,608    1,461,164    1,444,361 
Stepping Stones, Unitranche, 6.75% (Libor + 5.75%), maturity 12/12/24(j)   1,469,147    1,463,066    1,436,091 
Allied Benefit Systems, Senior Secured Term Loan B, 5.50% (Libor + 4.75%), maturity 11/18/26   1,000,000    985,273    992,500 
Ensemble, Senior Secured Closing Date Term Loan, 3.99% (Libor + 3.75%), maturity 8/3/26(i)   987,500    983,378    990,414 
Athena, Senior Secured Term B Loan (First Lien), 4.74% (Libor + 4.50%), maturity 2/11/26(i)   987,443    979,417    989,278 
Veritext, Senior Secured Initial Term Loan (Second Lien), 7.24% (Libor + 7.00%), maturity 7/31/26   1,000,000    996,131    987,500 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 6.50% (Libor + 5.50%), maturity 5/9/25   977,423    967,355    955,431 
Alcami, Senior Secured Initial Term Loan (First Lien), 4.49% (Libor + 4.25%), maturity 7/14/25   977,500    974,068    945,731 
Dermatologists of Central States, Senior Secured Term Loan, 8.00% (Libor + 7.00%), maturity 4/20/22(j)   967,378    967,378    935,938 
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/10/23(i)   912,467    915,992    902,122 
Specialty Care, Senior Secured Initial Term Loan (Second Lien), 9.25% (Libor + 8.25%), maturity 9/1/24   850,000    844,525    850,000 
Press Ganey, Senior Secured 2020 Incremental Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 7/24/26(i)   500,000    495,149    498,750 
Waystar, Senior Secured 2020 Incremental Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 10/22/26   498,750    497,500    495,009 
RMP & MedA/Rx, Senior Secured Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 2/6/25   430,606    430,014    430,606 
Alpaca, Senior Secured Revolver, 7.75% (Libor + 6.75%), maturity 4/19/24(j)   232,967    229,084    223,648 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/24   114,286    106,667    114,286 
Stepping Stones, Senior Secured COVID-19 Revolving Loan, 6.75% (Libor + 5.75%), maturity 6/30/21(j)   30,537    30,537    29,850 
                
High Tech Industries               
Qlik, Senior Secured 2019 Incremental Term Loan, 4.49% (Libor + 4.25%), maturity 4/26/24   3,940,000    3,919,979    3,910,450 
Netsmart, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 10/1/27(i)   3,500,000    3,484,841    3,513,749 
Masergy, Senior Secured Initial Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 12/16/24   3,428,571    3,421,842    3,428,571 
Syncsort, Senior Secured 2018 Refinancing Term Loan (First Lien), 6.49% (Libor + 6.25%), maturity 8/16/24(i)   3,387,038    3,367,343    3,385,883 
Jaggaer, Senior Secured Initial Term Loan (First Lien), 4.24% (Libor + 4.00%), maturity 8/14/26(i)   3,122,723    3,118,268    3,128,371 
Ivanti Software, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 12/1/27(i)   3,000,000    2,955,819    3,009,205 
EverCommerce, Senior Secured Initial Term Loan, 5.74% (Libor + 5.50%), maturity 8/23/25   2,978,453    2,920,009    2,978,453 
Infogroup, Senior Secured Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 4/3/23(i)   2,889,912    2,872,270    2,737,616 
Idera, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 6/28/24(i)   2,618,959    2,617,482    2,622,683 
ECi Software, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 11/9/27(i)   2,000,000    1,991,387    2,004,324 
Sophos, Senior Secured Dollar Tranche Term Loan (First Lien), 3.74% (Libor + 3.50%), maturity 3/5/27(i)(q)   1,990,000    1,878,212    1,983,324 
Flexera Software, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 2/26/25(i)   1,945,000    1,950,930    1,953,467 
QuickBase, Senior Secured Term Loan (First Lien), 4.24% (Libor + 4.00%), maturity 4/2/26   1,970,000    1,962,273    1,950,300 
Intermedia , Senior Secured New Term Loan (First Lien), 7.00% (Libor + 6.00%), maturity 7/21/25   1,960,000    1,948,624    1,945,300 
Planview, Senior Secured Closing Date Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 12/17/27(i)   1,750,000    1,732,500    1,750,000 
GlobalLogic, Senior Secured Initial Term Loan, 2.99% (Libor + 2.75%), maturity 8/1/25   1,715,313    1,708,011    1,702,448 
Bomgar, Senior Secured Initial Term Loan (First Lien), 4.24% (Libor + 4.00%), maturity 4/18/25(i)   1,706,250    1,714,482    1,693,453 
OEConnection, Senior Secured Initial Term Loan, 4.24% (Libor + 4.00%), maturity 9/25/26   1,617,452    1,611,336    1,609,365 
Liaison, Senior Secured Initial Term Loan, 5.25% (Libor + 4.25%), maturity 12/20/26   1,485,000    1,481,489    1,485,000 
Navex Global, Senior Secured Initial Term Loan (First Lien), 3.49% (Libor + 3.25%), maturity 9/5/25(i)   1,466,250    1,454,411    1,448,683 
Corsair, Senior Secured Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 8/28/24   1,386,885    1,377,896    1,386,885 

 

The accompanying notes are an integral part of these financial statements.

 

11

 

Audax Credit BDC Inc. 

Schedule of Investments (Continued) 

As of December 31, 2020 

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):               
                
High Tech Industries (continued)               
                
Infoblox, Senior Secured Term Loan, 4.50% (Libor + 3.75%), maturity 12/1/27(i)  $1,000,000   $995,091   $1,002,861 
SmartBear, Senior Secured Term Loan, 4.75% (Libor + 4.25%), maturity 11/20/27(i)   1,000,000    990,000    1,000,000 
Imperva, Senior Secured Term Loan, 5.00% (Libor + 4.00%), maturity 1/12/26(i)   996,209    987,170    999,433 
Barracuda, Senior Secured 2020 Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 2/12/25(i)   997,500    997,500    999,242 
Veracode, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 11/5/27   1,000,000    990,167    992,500 
Unison, Senior Secured 2020 Term Loan, 8.00% (Libor + 7.00%), maturity 6/25/26(j)   995,000    971,706    990,025 
Insurity, Senior Secured Closing Date Term Loan (First Lien), 4.24% (Libor + 4.00%), maturity 7/31/26(i)   990,000    985,877    978,863 
Community Brands, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 12/2/22   825,760    822,759    815,438 
Sparta, Senior Secured New Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 8/21/24(i)   787,901    788,125    787,901 
Global Knowledge, Senior Secured Initial Term Loan (Second Lien), 13.25% (Libor + 12.25%), maturity 1/20/22(i)(m)   1,000,000    997,516    600,000 
Idera, Senior Secured Loan (Second Lien), 10.00% (Libor + 9.00%), maturity 6/28/27   500,000    504,610    500,000 
DigiCert, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 4.00%), maturity 10/16/26(i)   496,250    469,743    497,274 
HelpSystems, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 11/19/26(i)   496,250    495,095    496,786 
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 12/15/23   479,908    478,749    479,908 
MultiPlan, Senior Secured Initial Term Loan, 3.75% (Libor + 2.75%), maturity 6/7/23(i)   431,919    428,247    431,919 
Endurance Int'l Group, Senior Secured Refinancing Loan (2018), 4.75% (Libor + 3.75%), maturity 2/9/23(i)   386,371    385,875    386,675 
                
Services: Business               
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 9/23/25   3,950,000    3,919,209    3,940,125 
RevSpring, Senior Secured Initial Term Loan (First Lien), 4.49% (Libor + 4.25%), maturity 10/11/25   3,920,000    3,916,337    3,880,800 
Addison, Senior Secured Initial Term Loan, 4.99% (Libor + 4.75%), maturity 4/15/26   2,955,000    2,910,360    2,947,613 
Fleetwash, Senior Secured Incremental Term Loan, 5.75% (Libor + 4.75%), maturity 10/1/24   2,932,838    2,913,011    2,918,173 
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 3.99% (Libor + 3.75%), maturity 2/9/26(i)   2,954,981    2,937,415    2,900,853 
Aimbridge, Senior Secured Initial Term Loan (2019) (First Lien), 3.99% (Libor + 3.75%), maturity 2/2/26(i)   2,952,625    2,944,493    2,812,180 
Duff & Phelps, Senior Secured Initial Dollar Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 4/9/27(i)   2,487,500    2,464,451    2,505,517 
Allied Universal, Senior Secured Initial Term Loan, 4.49% (Libor + 4.25%), maturity 7/10/26(i)   2,466,122    2,450,635    2,468,305 
HireRight, Senior Secured Initial Term Loan (Second Lien), 7.49% (Libor + 7.25%), maturity 7/10/26   2,500,000    2,482,759    2,462,500 
Newport Group, Senior Secured Initial Term Loan (First Lien), 3.74% (Libor + 3.50%), maturity 9/12/25(i)   2,446,206    2,435,371    2,391,166 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 6/19/24   2,369,662    2,369,662    2,343,003 
Vistage, Senior Secured Term B Loan (First Lien), 5.00% (Libor + 4.00%), maturity 2/10/25   2,335,958    2,331,487    2,335,958 
Service Logic, Senior Secured Closing Date Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 10/29/27   2,030,769    2,005,370    2,015,538 
Veregy, Senior Secured Incremental Term Loan, 7.00% (Libor + 6.00%), maturity 11/3/27(i)   2,000,000    1,940,783    1,980,000 
Eliassen Group, Senior Secured Initial Term B Loan, 4.49% (Libor + 4.25%), maturity 11/5/24   1,485,620    1,480,402    1,485,620 
First Advantage, Senior Secured Term Facility (First Lien), 3.49% (Libor + 3.25%), maturity 1/31/27(i)   1,493,747    1,480,164    1,481,489 
Quantum Health, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 5.00%), maturity 12/22/27(i)   1,500,000    1,477,500    1,477,500 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 5.50% (Libor + 4.50%), maturity 3/27/24   1,459,391    1,455,728    1,442,973 
DBi Services, Senior Secured Term B Loan (Second Lien), 9.00% (Libor + 9.00%), maturity 2/2/26   1,379,149    1,379,149    1,379,149 
WCG, Senior Secured Term Loan, 5.00% (Libor + 4.00%), maturity 1/8/27(i)   995,000    985,758    1,000,060 
Diversified, Senior Secured Initial Term Loan, 5.75% (Libor + 4.75%), maturity 12/23/23   982,575    977,610    980,119 
Franklin Energy, Senior Secured Term B Loan (First Lien), 4.24% (Libor + 4.00%), maturity 8/14/26   987,500    985,288    970,219 
eResearch (ERT), Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.50%), maturity 2/4/27(i)   498,747    498,747    498,231 
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 4.24% (Libor + 4.00%), maturity 6/3/26   493,734    490,417    493,734 
Therma Holdings, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 12/16/27(i)   419,355    415,161    419,355 
                
Chemicals, Plastics & Rubber               
Plaskolite, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 12/15/25(i)   3,920,000    3,865,981    3,919,776 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/30/24   3,392,624    3,382,274    3,316,290 
DuBois Chemicals, Senior Secured Term Loan (Second Lien), 8.74% (Libor + 8.50%), maturity 9/30/27   3,000,000    2,969,107    2,977,500 
Vertellus, Senior Secured Term Loan Facility, 7.00% (Libor + 6.00%), maturity 12/21/27(i)   3,000,000    2,925,000    2,925,000 
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 10/4/21   2,731,078    2,728,788    2,642,318 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 1/31/25(i)   2,654,925    2,662,649    2,533,273 
Unifrax, Senior Secured USD Term Loan (First Lien), 3.99% (Libor + 3.75%), maturity 12/12/25(i)   2,451,228    2,431,275    2,272,229 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 6.99% (Libor + 6.75%), maturity 9/6/26   2,000,000    2,001,952    1,980,000 
Q Holding, Senior Secured Term B Loan (2019), 6.00% (Libor + 5.00%), maturity 12/31/23   1,975,000    1,967,237    1,925,625 
Zep, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 8/12/24(i)   1,936,212    1,934,630    1,904,232 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 4.74% (Libor + 4.50%), maturity 9/30/26   1,795,385    1,757,677    1,781,919 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 3/31/25   972,500    969,266    962,775 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 10/28/24(i)   977,330    963,591    933,996 
Spartech, Senior Secured Term Loan, 5.50% (Libor + 4.50%), maturity 10/17/25   823,333    812,351    823,333 
Polytek, Senior Secured Term Loan, 6.00% (Libor + 5.00%), maturity 9/20/24(i)   500,000    495,000    495,000 
Boyd Corp, Senior Secured Initial Term Loan (First Lien), 3.74% (Libor + 3.50%), maturity 9/6/25(i)   497,455    464,093    485,309 
Vertellus, Senior Secured Revolving Facility, 7.00% (Libor + 6.00%), maturity 12/22/25(i)   -    (12,156)   - 

 

The accompanying notes are an integral part of these financial statements.

 

12

 

Audax Credit BDC Inc. 

Schedule of Investments (Continued) 

As of December 31, 2020 

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):               
                
Aerospace & Defense               

CPI International, Senior Secured Second Amendment Incremental Term Loan (First Lien), 5.75%

(Libor + 4.75%), maturity 7/26/24

  $5,275,326   $5,226,445   $5,248,949 
StandardAero, Senior Secured 2020 Term B-1 Loan, 3.74% (Libor + 3.50%), maturity 4/6/26(i)   3,304,620    3,295,719    3,180,284 

Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 8.75%

(Libor + 7.75%), maturity 4/30/26

   2,000,000    2,008,327    1,945,000 
Whitcraft, Unitranche, 7.00% (Libor + 6.00%), maturity 4/3/23   1,982,452    1,973,233    1,942,803 
StandardAero, Senior Secured 2020 Term B-2 Loan, 3.74% (Libor + 3.50%), maturity 4/6/26(i)   1,776,677    1,771,892    1,709,830 
Tronair, Senior Secured Initial Term Loan (First Lien), 4.99% (Libor + 4.75%), maturity 9/8/23   1,441,086    1,436,497    1,305,624 
Amentum, Senior Secured Tranche 2 Term Loan (First Lien), 5.50% (Libor + 4.75%), maturity 1/29/27(i)   1,000,000    980,364    1,010,710 
Eton, Senior Secured Initial Term Loan (First Lien), 4.74% (Libor + 4.50%), maturity 5/1/25(i)   993,645    990,088    997,154 
Amentum, Senior Secured Tranche 1 Term Loan (First Lien), 3.74% (Libor + 3.50%), maturity 1/29/27(i)   995,000    964,975    995,630 
API Technologies, Senior Secured Initial Term Loan (First Lien), 4.49% (Libor + 4.25%), maturity 5/9/26   989,950    962,144    978,813 
Eton, Senior Secured Initial Term Loan (Second Lien), 8.24% (Libor + 8.00%), maturity 5/1/26   500,000    495,340    498,750 
Novaria Group, Senior Secured Initial Term Loan, 6.25% (Libor + 5.25%), maturity 1/27/27   481,818    477,197    477,000 

Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 4/30/25(i)

   492,718    490,562    464,492 
                
Banking, Finance, Insurance & Real Estate               
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 4/30/23   2,500,000    2,506,156    2,500,000 
AmeriLife, Senior Secured Initial Term Loan (First Lien), 4.24% (Libor + 4.00%), maturity 3/18/27(i)   2,487,768    2,472,789    2,468,652 
Kestra Financial, Senior Secured Initial Term Loan, 4.49% (Libor + 4.25%), maturity 6/3/26   1,975,000    1,959,039    1,970,063 

Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 6.75% (Libor + 5.75%),

maturity 10/31/22

   1,959,163    1,941,037    1,944,469 
Orion, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 9/24/27(i)   1,496,250    1,481,250    1,505,340 
Advisor Group, Senior Secured Initial Term B Loan, 5.24% (Libor + 5.00%), maturity 7/31/26(i)   1,485,000    1,473,076    1,478,274 
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 9/6/24   1,455,000    1,453,049    1,447,725 
HighTower, Senior Secured Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 1/31/25   1,254,919    1,234,708    1,245,507 

Mitchell International, Senior Secured Amendment No. 2 New Term Loan Facility (First Lien), 4.75%

(Libor + 4.25%), maturity 11/29/24(i)

   997,500    945,583    1,001,159 
Aperio, Senior Secured Initial Commitment, 5.24% (Libor + 5.00%), maturity 10/25/24   933,889    930,413    933,889 
Sedgwick Claims, Senior Secured Initial Term Loan, 3.49% (Libor + 3.25%), maturity 12/31/25(i)   494,949    494,373    489,808 
                
Services: Consumer               
A Place For Mom, Senior Secured Term Loan, 4.75% (Libor + 3.75%), maturity 8/10/24   2,638,868    2,638,424    2,586,091 
Cambium Learning, Senior Secured Initial Term Loan (First Lien), 4.74% (Libor + 4.50%), maturity 12/18/25(i)   2,449,960    2,356,145    2,449,996 
Weld North, Senior Secured Term Loan B (First Lien), 4.75% (Libor + 4.00%), maturity 12/21/27(i)   2,444,868    2,444,868    2,438,756 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 3.49% (Libor + 3.25%), maturity 5/14/26(i)   2,069,000    2,064,997    2,032,545 
LegalShield, Senior Secured Initial Term Loan (First Lien), 3.49% (Libor + 3.25%), maturity 5/1/25(i)   1,927,000    1,916,403    1,916,690 
Ned Stevens, Senior Secured Term A Loan, 6.75% (Libor + 5.75%), maturity 9/30/25(j)   1,501,961    1,480,069    1,486,941 
Smart Start, Senior Secured Initial Term Loan, 5.75% (Libor + 4.75%), maturity 8/19/27   997,500    987,865    995,006 
Spring Education, Senior Secured Initial Term Loan (First Lien), 4.49% (Libor + 4.25%), maturity 7/30/25(i)   977,500    975,779    932,975 
LegalShield, Senior Secured New Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 5/1/25   498,750    491,474    495,009 
StubHub, Senior Secured USD Term B Loan, 3.74% (Libor + 3.50%), maturity 2/12/27   495,000    492,695    475,200 
Ned Stevens, Senior Secured Revolver, 5.75% (Libor + 4.75%), maturity 9/30/25(j)   -    (2,614)   - 
                
Automotive               
Mavis, Senior Secured Closing Date Term Loan (First Lien), 3.49% (Libor + 3.25%), maturity 3/20/25(i)   3,829,530    3,817,514    3,788,854 
Highline, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 11/9/27   2,863,636    2,786,320    2,849,318 
Les Schwab Tire, Senior Secured Initial Term Loan, 4.25% (Libor + 3.50%), maturity 11/2/27   2,000,000    1,990,162    1,985,000 
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 9.25% (Libor + 8.25%), maturity 4/21/25(i)   1,800,000    1,798,743    1,800,000 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 2/3/25   975,849    955,515    961,212 
Safe Fleet, Senior Secured Initial Term Loan (Second Lien), 7.75% (Libor + 6.75%), maturity 2/2/26   500,000    489,628    492,500 
IXS, Senior Secured Initial Term Loan, 6.00% (Libor + 5.00%), maturity 3/5/27(i)   302,710    300,050    302,710 
                
Containers, Packaging & Glass               
ProAmpac, Senior Secured 2020-1 Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/3/25   2,977,335    2,977,335    2,955,005 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 4.24% (Libor + 4.00%), maturity 7/18/26(i)   2,909,213    2,895,839    2,880,121 
Potters Industries, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 12/14/27(i)   1,500,000    1,485,273    1,498,125 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 3.99% (Libor + 3.75%), maturity 7/31/26   990,000    987,979    990,000 
Tank Holding, Senior Secured 2020 Refinancing Term Loan (First Lien), 3.49% (Libor + 3.25%), maturity 3/26/26(i)   987,500    984,017    972,735 
Pregis Corporation, Senior Secured Incremental Amendment No. 2 Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 7/31/26(i)   500,000    497,546    497,500 
Berlin Packaging, Senior Secured Initial Term Loan (First Lien), 3.00% (Libor + 3.00%), maturity 11/7/25(i)   494,924    474,388    490,252 
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 11/30/23(i)   482,347    482,347    481,141 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 7.00% (Libor + 6.00%), maturity 11/12/21   480,087    479,657    478,887 
                
Capital Equipment               
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 3.99% (Libor + 3.75%), maturity 9/30/24(i)   2,037,185    2,037,185    1,951,145 
BAS, Senior Secured Repricing Term Loan, 4.75% (Libor + 3.75%), maturity 5/21/24   1,949,363    1,951,659    1,944,490 
Excelitas, Senior Secured Initial Term Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 12/1/25   1,500,000    1,479,256    1,496,250 
Edward Don, Senior Secured Initial Term Loan, 5.25% (Libor + 4.25%), maturity 7/2/25   1,463,794    1,459,176    1,378,894 
Cole-Parmer, Senior Secured Closing Date Term Loan (First Lien), 4.49% (Libor + 4.25%), maturity 11/4/26   992,500    988,663    987,538 
TriMark, Senior Secured Initial Term Loan (First Lien), 3.74% (Libor + 3.50%), maturity 8/28/24   983,612    889,075    600,003 
Restaurant Technologies, Senior Secured Initial Loan (Second Lien), 6.74% (Libor + 6.50%), maturity 10/1/26   500,000    503,507    496,250 
Duravant, Senior Secured Incremental Amendment No. 2 Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/19/24   494,949    494,949    493,712 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 12/2/24   488,665    491,752    486,222 

 

13

 

Audax Credit BDC Inc. 

Schedule of Investments (Continued) 

As of December 31, 2020 

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):               
                
Construction & Building               
PlayPower, Senior Secured Initial Term Loan, 5.74% (Libor + 5.50%), maturity 5/8/26  $1,858,806   $1,858,806   $1,826,277 
Tangent, Senior Secured Closing Date Term Loan (First Lien), 4.99% (Libor + 4.75%), maturity 11/30/24   1,811,195    1,799,386    1,802,139 
PlayCore, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 7.75%), maturity 9/29/25   1,500,000    1,469,821    1,488,750 
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 4.00% (Libor + 3.00%), maturity 6/3/24(i)   1,459,711    1,450,295    1,456,062 
PlayCore, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 9/30/24   966,918    965,369    959,666 
CHI Overhead Doors, Senior Secured Third Amendment Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 7/31/25   621,975    618,961    621,975 
Hoffman Southwest, Senior Secured Initial Term Loan, 6.00% (Libor + 5.00%), maturity 8/14/23   517,526    515,491    513,645 
DiversiTech Corporation, Senior Secured Initial Term Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 6/2/25   500,000    489,906    498,750 
Acuren, Senior Secured Initial Term Loan, 4.49% (Libor + 4.25%), maturity 1/23/27(i)   496,250    493,945    496,809 
                
Transportation: Cargo               
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 10/12/24(i)   3,608,953    3,605,359    3,551,633 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 10/7/24(i)   2,441,354    2,436,251    2,437,864 
Capstone Logistics, Senior Secured Closing Date Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 11/12/27   2,000,000    1,978,572    1,985,000 
                
Wholesale               
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 3.00%), maturity 3/20/25   3,895,820    3,896,287    3,866,602 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 8/19/22   1,895,184    1,881,515    1,847,805 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 6/15/23   1,439,868    1,439,074    1,407,471 
                
Consumer Goods: Non-durable               
Augusta Sportswear Group, Senior Secured Initial Term Loan, 5.50% (Libor + 4.50%), maturity 10/26/23(i)   2,202,584    2,191,908    2,040,686 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 6.25% (Libor + 5.00%), maturity 9/11/23   1,906,766    1,898,262    1,885,315 
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 12/16/24(i)   977,352    982,680    942,014 
                
Forest Products & Paper               
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/21/23(i)   2,418,968    2,411,531    2,162,916 
Loparex, Senior Secured Initial Term Loan (First Lien), 4.74% (Libor + 4.50%), maturity 7/31/26(i)   1,481,250    1,468,881    1,470,141 
Hoffmaster Group, Senior Secured Initial Term Loan (Second Lien), 10.50% (Libor + 9.50%), maturity 11/21/24   1,250,000    1,250,000    1,209,375 
                
Beverage, Food & Tobacco               
Sovos Brands, Senior Secured Initial Term Loan (2018), 4.99% (Libor + 4.75%), maturity 11/20/25   2,458,728    2,442,754    2,458,728 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 4.75% (Libor + 3.75%), maturity 8/25/25   1,955,000    1,948,780    1,935,450 
                
Media: Advertising, Printing & Publishing               
Ansira, Unitranche, 7.50% (Libor + 6.50%), maturity 12/20/24   2,014,998    2,005,963    1,611,999 
Northstar, Senior Secured Term Loan, 6.75% (Libor + 6.25%), maturity 6/7/24   1,394,653    1,394,653    1,349,327 
Vestcom International, Senior Secured L/C Collaterilized, 5.00% (Libor + 4.00%), maturity 12/19/23   779,751    781,907    773,903 
                
Consumer Goods: Durable               
Strategic Partners, Senior Secured Initial Term Loan, 4.75% (Libor + 3.75%), maturity 6/30/23(i)   2,285,922    2,283,635    2,285,922 
                
Retail               
Grocery Outlet, Senior Secured 2020 Term Loan (First Lien), 2.99% (Libor + 2.75%), maturity 10/22/25(i)   1,269,483    1,267,698    1,270,891 
                
Metals & Mining               
Dynatect, Senior Secured Term B Loan, 5.50% (Libor + 4.50%), maturity 9/30/22   987,897    987,367    968,139 
                
Hotel, Gaming & Leisure               
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.00% (Libor + 5.00%), maturity 10/21/23   1,119,231    1,112,979    895,385 
                
Health Care Equipment & Services               
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 4.49% (Libor + 4.25%), maturity 8/31/26(i)   532,087    527,684    526,939 
                
Total Bank Loans       $357,702,705   $354,395,516 

 

14

 

Audax Credit BDC Inc. 

Schedule of Investments (Continued) 

As of December 31, 2020 

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Par   Cost   Value 
EQUITY AND PREFERRED SHARES:  NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.3%)(g)(h):               
                
Services: Business              
DBi Services, Class A-1 Preferred Units (800.53 units)(k)       $800,535   $576,385 
DBi Services, Class B Common Shares (169,362.31 shares)(l)(m)       -    - 
                
Chemicals, Plastics & Rubber               
Vertellus, Series A Units (1,651 Series A units, Fair value of $165,138)(i)(m)(r)        165,138    165,138 
                
Healthcare & Pharmaceuticals               
Alpaca, Class A Units (33,300.04 Class A Units, Fair value of $3,679)(j)(m)(o)(p)        60,976    3,679 
                
Services: Consumer               
Ned Stevens, Class B Common Units (261,438 Common B units, Fair value of $2,191)(j)(m)(n)(o)        261,438    219,125 
                
Total Equity and Preferred Shares       $1,288,087   $964,327 
               
Total Portfolio Investments(s)       $358,990,792   $355,359,843 

 

(a) All companies are located in the United States of America, unless otherwise noted.
(b) Interest rate percentages represent actual interest rates which are indexed from then 30-day London Interbank Offered Rate ("LIBOR") unless otherwise noted. LIBOR rates are subject to interest rate floors which can vary based on the contractual agreement with the borrower.  Due dates represent the contractual maturity date.
(c) All loans are income-producing, unless otherwise noted.
(d) All investments are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act") unless otherwise noted.
(e) All investments are exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act.
(f) Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(g) Percentages are calculated using fair value of investments over net assets.
(h) As defined in 1940 Act, the Company is not deemed to be an “Affiliated Person” of or “Control” this portfolio company because it neither owns 5% or more of the portfolio company’s outstanding voting securities nor has the power to exercise control over the management or policies of such portfolio company (including through a management agreement).
(i) Investment was valued using Level 2 inputs within the ASC 820 fair value hierarchy.  Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(j) Three of our affiliated funds, Audax Direct Lending Solutions Fund - A, L.P., Audax Direct Lending Solutions Fund - C, L.P., and Audax Direct Lending Solutions Fund - D, L.P., 'co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(k) Represents an investment owned by APD Dbi Preferred, Inc., a holding company for the investment in DBi.
(l) Represents an investment owned by APD Dbi Common, Inc., a holding company for the investment in DBi.
(m) Investment is non-income producing.
(n) Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(o) Other net assets of $0 at the aggregator levels are included in the fair value of the investments when using the net asset value as a practical expedient.
(p) Represents an investment in APD ALP Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(q) The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.
(r) Represents an investment in ADP VERT Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(s) At December 31, 2020, the cost of investments for income tax purposes was $358,990,792 the gross unrealized depreciation for federal tax purposes was $5,143,320, the gross unrealized appreciation for federal income tax purposes was $1,512,371, and the net unrealized depreciation was $3,630,949.

 

15

 

Audax Credit BDC Inc. 

Notes to Financial Statements 

June 30, 2021 

(unaudited)

 

Note 1. Organization

 

Audax Credit BDC Inc. (the “Company”) is a Delaware corporation that was formed on January 29, 2015. The Company is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, effective with the Company’s taxable year ended December 31, 2015, the Company has elected to be treated for federal income tax purposes, and intends to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).

 

The Company commenced business operations on July 8, 2015, the date on which the Company made its first investment. The Company was formed for the purpose of investing primarily in the debt of leveraged, non-investment grade middle market companies, with the principal objective of generating income and capital appreciation. The Company’s investment strategy is to invest primarily in first lien senior secured loans and selectively in second lien loans to middle market companies. During the period prior to July 8, 2015, the Company was a development stage company, as defined in Paragraph 915-10-05, Development Stage Entity, of the Financial Accounting Standards Board’s (“FASB’s”) Accounting Standards Codification, as amended (“ASC”). During this time, the Company was devoting substantially all of its efforts to establishing its business and its planned principal operations had not commenced. All losses incurred during the period prior to July 8, 2015 have been considered a part of the Company’s development stage activities.

 

Audax Management Company (NY), LLC (the “Adviser”) is the investment adviser of the Company. The Adviser is registered as an investment adviser with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended.

 

Note 2. Significant Accounting Policies

 

Basis of Presentation

 

As an investment company, the accompanying financial statements of the Company are prepared in accordance with the investment company accounting and reporting guidance of ASC Topic 946, “Financial Services – Investment Companies,” as amended (“ASC Topic 946”), which incorporates the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X, as well as generally accepted accounting principles in the United States of America (“GAAP”).

 

Certain financial information that is normally included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management of the Company, the unaudited financial results included herein contain all adjustments, consisting solely of normal accruals, considered necessary for the fair presentation of financial statements for the interim period included herein. The current period’s results of operations are not necessarily indicative of the operating results to be expected for future periods. The accounting records of the Company are maintained in U.S. dollars.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material.

 

16

 

Cash and Cash Equivalents

 

Cash and cash equivalents are stated at fair value. The Company considers all highly liquid investments purchased with maturities of three months or less and money market mutual funds to be cash equivalents. No cash equivalent balances were held on June 30, 2021 and December 31, 2020. At such dates, cash was not subject to any restrictions on withdrawal.

 

Expenses

 

The Company is responsible for investment expenses, legal expenses, auditing fees and other expenses related to the Company’s operations. Such fees and expenses, including expenses initially incurred by the Adviser, may be reimbursed by the Company.

 

Investment Valuation Policy

 

The Company conducts the valuation of the Company’s investments, pursuant to which the Company’s net asset value is determined, at all times consistent with GAAP and the 1940 Act. The Company’s Board of Directors (the “Board of Directors”), with the assistance of the Company’s Audit Committee (the “Audit Committee”), determines the fair value of the Company’s investments, for investments with a public market and for investments with no readily available public market, on at least a quarterly basis, in accordance with the terms of ASC Topic 820, “Fair Value Measurement,” (“ASC 820”). The Company’s valuation procedures are set forth in more detail below.

 

ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

 

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

 

The three-level hierarchy for fair value measurement is defined as follows:

 

Level 1 — Inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these instruments, even in situations where the Company holds a large position, and a sale could reasonably be expected to impact the quoted price.

 

Level 2 — Inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

 

17

 

Level 3 —Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, 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, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

 

Pursuant to the framework set forth above, the Company values securities traded in active markets on the measurement date by multiplying the exchange 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 from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets.

 

Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, the Company determines whether the quote obtained is sufficient in accordance with GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.

 

Securities 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 Board of Directors, does not represent fair value, are each valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. Inputs for these valuation techniques include relative credit information, observed market movement, industry sector information, and other market data, which may include benchmarking of comparable securities, issuer spreads, reported trades, and reference data, such as market research publications, when available. The process used to determine the applicable value is as follows:

 

(i) Each portfolio company or investment is initially valued by the investment professionals of the Adviser responsible for the portfolio investment using a standardized template designed to approximate fair market value based on observable market inputs and updated credit statistics and unobservable inputs. Additionally, as a part of the Company’s valuation process, the Adviser may employ the services of one or more independent valuation firms engaged by the Company;

 

(ii) Preliminary valuation conclusions are documented and discussed with the Company’s senior management and members of the Adviser’s valuation team;

 

(iii) The Audit Committee reviews the assessments of the Adviser or independent valuation firm (to the extent applicable) and provides the Board of Directors with recommendations with respect to the fair value of the investments in the Company’s portfolio; and

 

(iv) The Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of the investments in the Company’s portfolio in good faith based on the input of the Adviser, the independent valuation firm (to the extent applicable) and in accordance with the Company’s valuation policy.

 

18

 

The Audit Committee’s recommendation of fair value is generally based on its 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 company’s ability to make payments;

 

•the portfolio company’s actual and expected earnings and discounted cash flow;

 

•prevailing interest rates for like 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 publicly traded securities.

 

Investment performance data utilized are the most recently available as of the measurement date, which in many cases may reflect up to a one quarter lag in information.

 

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include the following:

 

•private placements and restricted securities that do not have an active trading market;

 

•securities whose trading has been suspended or for which market quotes are no longer available;

 

•debt securities that have recently gone into default and for which there is no current market;

 

•securities whose prices are stale; and

 

•securities affected by significant events.

 

The Board of Directors is responsible for the determination, in good faith, of the fair value of the Company’s portfolio investments.

 

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

 

Security transactions are recorded on the trade date (the date the order to buy or sell is executed or, in the case of privately issued securities, the closing date, which is when all terms of the transactions have been defined).

 

Realized gains and losses on investments are determined based on the identified cost method.

 

In addition, on December 3, 2020, the SEC announced that it adopted Rule 2a-5 under the 1940 Act, which establishes an updated regulatory framework for determining fair value in good faith for purposes of the 1940 Act. The new rule clarifies how fund boards can satisfy their valuation obligations in light of recent market developments. The rule will permit boards, subject to board oversight and certain other conditions, to designate certain parties to perform the fair value determinations. The Company will continue to review the adopted rule and its impact on the Company and its valuation policies, and intends to comply with such requirements on or before the SEC’s required compliance date in 2022.

 

Refer to Note 3 — Investments for additional information regarding fair value measurements and the Company’s application of ASC 820.

 

19

 

Interest Income Recognition

 

Interest income, adjusted for amortization of premium, acquisition costs, and amendment fees and the accretion of original issue discount (“OID”), are recorded on an accrual basis to the extent that such amounts are expected to be collected. Generally, when a loan becomes 120 days or more past due, or if the Company’s qualitative assessment indicates that the debtor is unable to service its debt or other obligations, the Company will place the loan on non-accrual status and cease recognizing interest income on that loan for financial reporting purposes until the borrower has demonstrated the ability and intent to pay contractual amounts due. However, the Company will remain contractually entitled to this interest. Interest payments received on non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current or, due to a restructuring, the interest income is deemed to be collectible. As of June 30, 2021, the Company did not hold any investment on non-accrual. As of December 31, 2020, the Company had one investment on non-accrual which represented 0.28% and 0.17% of its total portfolio at cost and fair market value, respectively.

 

The Company currently holds loans in the portfolio that contain OID and payment-in-kind (“PIK”) provisions. The Company recognizes OID for loans originally issued at a discount and recognizes the income over the life of the obligation based on an effective yield calculation. PIK interest, computed at the contractual rate specified in a loan agreement, is added to the principal balance of a loan and recorded as income over the life of the obligation. Therefore, the actual collection of PIK income may be deferred until the time of debt principal repayment. To maintain the ability to be taxed as a RIC, the Company may need to pay out of both OID and PIK non-cash income amounts in the form of distributions, even though the Company has not yet collected the cash on either.

 

As of June 30, 2021, the Company held 207 investments in loans with OID. The Company accrued OID income of $110,757 and $229,309 for the three and six months ended June 30, 2021, respectively. The unamortized balance of OID on debt investments as of June 30, 2021, totaled $2,366,766. As of December 31, 2020, the Company held 197 investments in loans with OID. The Company accrued OID income of $93,473 and $180,647 for the three and six months ended June 30, 2020, respectively. The unamortized balance of OID investments as of December 31, 2020, totaled $2,299,058.

 

As of June 30, 2021, the Company held three investments which had a PIK interest component. The Company recorded $110,285 and $150,783 of PIK interest income for three and six months ended June 30, 2021, respectively. As of June 30, 2020, the Company held two investments which had a PIK interest component. The Company recorded $35,921 of PIK interest income for both the three and six months ended June 30, 2020.

 

As of June 30, 2021 and December 31, 2020, the Company held $20,393,297 and $4,289,122 in cash and cash equivalents, respectively. For the three and six months ended June 30, 2021, the Company earned $356 and $630, respectively, of interest income related to cash, which is included in other interest income within the accompanying statement of operations. For the three and six months ended June 30, 2020, the Company earned $1,325 and $29,995, respectively, of interest income related to cash, which is included in other interest income within the accompanying statement of operations.

 

Other Income Recognition

 

The Company generally records prepayment fees and amendment fees upon receipt of cash or as soon as the Company becomes aware of the prepayment or amendment.

 

Dividend income on equity investments is accrued to the extent that such amounts are expected to be collected and if the Company has the option to collect such amounts in cash.

 

Prepayment fees, amendment fees and dividend income are accrued in other income in the accompanying statements of operations.

 

20

 

For the three and six months ended June 30, 2021, the Company accrued $15,488 and $63,002 of other income, respectively, related to amendment fees. For the three and six months ended June 30, 2020, the Company accrued $124,633 and $139,373 of other income, respectively, related to amendment fees.

 

New Accounting Pronouncements

 

In March 2020, FASB issued Accounting Standards Update No. 2020-04 (“ASU 2020-04”), “Reference Rate Reform (Topic 848)”. In response to concerns about structural risks of interbank offered rates, and particularly the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact of the guidance.

 

Note 3. Investments

 

Fair Value

 

In accordance with ASC 820, the fair value of the Company’s investments is determined to be the price that would be received for an investment in a current sale, assuming an orderly transaction between willing market participants on the measurement date. This fair value definition focuses on exit price in the principal, or most advantageous, market and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. ASC 820 also establishes the three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of a financial instrument as of the measurement date as described in Note 2 – Significant Accounting Policies.

 

As of June 30, 2021, $171,756,268 of the Company’s investments were valued using unobservable inputs, and $183,303,122 were valued using observable inputs. During the six months ended June 30, 2021, $23,687,416 transferred into Level 3 due to a decrease in observable prices in the market and $45,016,934 transferred out of Level 3 due to the liquidity in the market and transparency of inputs.

 

As of December 31, 2020, $199,000,205 of the Company’s investments were valued using unobservable inputs, and $156,359,638 were valued using observable inputs. During the six months ended June 30, 2020, $15,459,994 transferred into Level 3 due to a decrease in observable prices in the market and $33,853,439 transferred out of Level 3 due to price transparency.

 

The following table presents the Company’s investments carried at fair value as of June 30, 2021 and December 31, 2020, by caption on the Company’s accompanying statements of assets and liabilities and by security type.

 

   Assets at Fair Value as of June 30, 2021 
   Level 1   Level 2   Level 3   Total 
First lien debt  $-   $178,909,470   $150,845,688   $329,755,158 
Second lien debt   -    4,393,652    20,482,946    24,876,598 
Equity and Preferred Shares   -    -    427,634    427,634 
Total  $-   $183,303,122   $171,756,268   $355,059,390 

 

21

 

   Assets at Fair Value as of December 31, 2020 
   Level 1   Level 2   Level 3   Total 
First lien debt  $-   $153,794,500   $170,910,171   $324,704,671 
Second lien debt   -    2,400,000    27,290,845    29,690,845 
Equity and Preferred Shares   -    165,138    799,189    964,327 
Total  $-   $156,359,638   $199,000,205   $355,359,843 

 

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of June 30, 2021. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

 

             As of June 30, 2021
   Fair   Valuation  Unobservable     Weighted
   Value   Technique  Inputs (1)  Range (2)  Average (3)
First lien debt  $141,356,519   Matrix Pricing  Senior Leverage  1.12x - 10.71x  5.04x
           Total Leverage  1.12x - 13.35x  6.02x
           Interest Coverage  (0.84)x - 9.20x  2.64x
           Debt Service Coverage  (0.78)x - 8.71x  2.15x
           TEV Coverage  0.96x - 8.18x  2.57x
           Liquidity  45.77% - 521.18%  169.00%
           Spread Comparison  300bps - 700bps  461bps
                  
    9,489,169   Market Analysis  Senior Leverage  (103.61)x - 36.47x  (1.84)x
           Total Leverage  (127.51)x - 38.66x  (3.76)x
           Interest Coverage  (1.57)x - 1.15x  0.24x
           Debt Service Coverage  (1.57)x - 1.05x  0.18x
           TEV Coverage  (0.71)x - 0.86x  0.34x
           Liquidity  68.13% - 176.75%  103.45%
           Spread Comparison  350bps - 650bps  525bps
                  
Second lien debt   20,482,946   Matrix Pricing  Senior Leverage  3.80x - 14.94x  6.81x
           Total Leverage  3.80x - 14.94x  6.81x
           Interest Coverage  0.81x - 5.35x  2.49x
           Debt Service Coverage  0.71x - 4.77x  2.12x
           TEV Coverage  0.55x - 3.50x  2.02x
           Liquidity  86.07% - 272.95%  145.16%
           Spread Comparison  650bps - 950bps  783bps
Total  $171,328,634             

 

  (1)    For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility.  The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.
       
  (2)    Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority. The range may be a single data point when there is only one company represented in a specific credit seniority.
       
  (3)    Inputs are weighted based on the fair value of the investments included in the range.  

 

The table above does not include $427,634 of debt, equity and preferred shares which management values using other unobservable inputs, such as earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA multiples, as well as other qualitative information, including company specific information.

 

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of December 31, 2020. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

 

22

 

             As of December 31, 2020
   Fair   Valuation  Unobservable     Weighted
   Value   Technique  Inputs (1)  Range (2)  Average (3)
First lien debt  $165,118,266   Matrix Pricing  Senior Leverage  1.92x - 28.58x  5.22x
           Total Leverage  1.92x - 32.80x  6.31x
           Interest Coverage  0.46x - 5.97x  2.38x
           Debt Service Coverage  0.42x - 5.75x  1.98x
           TEV Coverage  0.58x - 7.42x  2.44x
           Liquidity  34.64% - 675.62%  173.68%
           Spread Comparison  275bps - 700bps  442bps
                  
Second lien debt   25,911,696   Matrix Pricing  Senior Leverage  4.40x - 11.03x  6.29x
           Total Leverage  4.40x - 11.03x  6.29x
           Interest Coverage  0.88x - 3.10x  2.15x
           Debt Service Coverage  0.77x - 2.75x  1.82x
           TEV Coverage  0.74x - 3.10x  1.98x
           Liquidity  100.90% - 326.75%  162.79%
           Spread Comparison  650bps - 950bps  761bps
Total  $191,029,962             

 

  (1)   For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility.  The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.
  (2)   Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority.  The range may be a single data point when there is only one company represented in a specific credit seniority.
  (3)   Inputs are weighted based on the fair value of the investments included in the range.

 

The table above does not include $7,970,243 of debt, equity and preferred shares which management values using other unobservable inputs, such as EBITDA and EBITDA multiples, as well as other qualitative information, including company specific information.

 

Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in market yields, discounts rate, leverage, EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of the Company’s investments. Generally, an increase or decrease in market yields, discount rates or leverage or an increase/decrease in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a corresponding decrease or increase, respectively, in the fair value of certain of the Company’s investments.

 

The following tables provide the changes in fair value, broken out by security type, during the six months ended June 30, 2021 and 2020 for all investments for which the Company determines fair value using unobservable (Level 3) factors.

 

23

 

Six Months Ended June 30, 2021  First lien debt   Second lien
debt		   Equity and
Preferred
Shares		   Total 
Fair Value as of December 31, 2020  $170,910,171   $27,290,845   $799,189   $199,000,205 
Transfers into Level 3   23,522,278    -    165,138    23,687,416 
Transfers out of Level 3   (41,048,184)   (3,968,750)   -    (45,016,934)
Total gains:                    
Net realized gain (loss)(a)    101,904    24,823    (383,174)   (256,447)
Net unrealized appreciation (depreciation)(b)   124,987    (582)   244,306    368,711 
New investments, repayments and settlements:(c)                    
Purchases   20,059,197    2,455,000    19,536    22,533,733 
Settlements/repayments   (23,022,823)   (3,950,000)   -    (26,972,823)
Net amortization of premiums, PIK, discounts and fees   198,158    77,380    -    275,538 
Sales   -    (1,445,770)   (417,361)   (1,863,131)
Fair Value as of June 30, 2021  $150,845,688   $20,482,946   $427,634   $171,756,268 

 

  (a) Included in net realized gain on the accompanying Statement of Operations for the six months ended June 30, 2021.
  (b)  Included in net change in unrealized appreciation on the accompanying Statement of Operations for the six months ended June 30, 2021.
  (c) Includes increases in the cost basis of investments resulting from portfolio investments, the amortization of discounts, and PIK, as well as decreases in the costs basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.

 

 

Six Months Ended June 30, 2020  First lien debt   Second lien
debt		   Equity and
Preferred
Shares		   Total 
Fair Value as of December 31, 2019  $227,392,535   $21,340,798   $719,257   $249,452,590 
Transfers into Level 3   15,459,994    -    -    15,459,994 
Transfers out of Level 3   (33,853,439)   -    -    (33,853,439)
Total gains:                    
Net realized loss(a)    (206,472)   -    -    (206,472)
Net unrealized depreciation(b)   (7,200,104)   (1,020,874)   134,296    (8,086,682)
New investments, repayments and settlements:(c)                    
Purchases   13,610,048    7,709,688    -    21,319,736 
Settlements/repayments   (16,227,619)   -    -    (16,227,619)
Net amortization of premiums, PIK, discounts and fees   164,241    10,599    -    174,840 
Sales   (2,847,684)   -    -    (2,847,684)
Fair Value as of June 30, 2020  $196,291,500   $28,040,211   $853,553   $225,185,264 

 

  (a)  Included in net realized loss on the accompanying Statement of Operations for the six months ended June 30, 2020.
  (b)  Included in net change in unrealized depreciation on the accompanying Statement of Operations for the six months ended June 30, 2020.
  (c)   Includes increases in the cost basis of investments resulting from portfolio investments, the amortization of discounts, and PIK, as well as decreases in the costs basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.

 

The change in unrealized value attributable to investments still held at June 30, 2021 and 2020 was $185,542 and $(8,084,718), respectively.

 

Investment Activities

 

The Company held a total of 225 investments with an aggregate fair value of $355,059,390 as of June 30, 2021. During the six months ended June 30, 2021, the Company invested in 43 new investments for a combined $48,768,159 and in existing investments for a combined $6,849,818. The Company also received $47,805,480 in repayments from investments and $10,135,008 from investments sold during the six months ended June 30, 2021.

 

24

 

The Company held a total of 216 investments with an aggregate fair value of $355,359,843 as of December 31, 2020. During the six months ended June 30, 2020, the Company invested in 30 new investments for a combined $25,148,863 and in existing investments for a combined $11,358,128. The Company also received $20,918,019 in repayments from investments and $5,743,556 from investments sold during the six months ended June 30, 2020.

 

Investment Concentrations

 

As of June 30, 2021, the Company’s investment portfolio consisted of investments in 199 companies located in 36 states across 24 different industries, with an aggregate fair value of $355,059,390. The five largest investments at fair value as of June 30, 2021 totaled $21,452,551, or 6.04%, of the Company’s total investment portfolio as of such date. As of June 30, 2021, the Company’s average investment was $1,584,067 at cost.

 

As of December 31, 2020, the Company’s investment portfolio consisted of investments in 186 companies located in 35 states across 22 different industries, with an aggregate fair value of $355,359,843. The five largest investments at fair value as of December 31, 2020 totaled $21,474,504, or 6.04%, of the Company’s total investment portfolio as of such date. As of December 31, 2020, the Company’s average investment was $1,661,994 at cost.

 

The following table outlines the Company’s investments by security type as of June 30, 2021 and December 31, 2020:

 

   June 30, 2021   December 31, 2020 
       Percentage of       Percentage of       Percentage of       Percentage of 
       Total       Total       Total       Total 
   Cost   Investments   Fair Value   Investments   Cost   Investments   Fair Value   Investments 
First lien debt  $330,973,111    92.86%  $329,755,158    92.87%  $327,535,610    91.24%  $324,704,671    91.37%
Second lien debt   24,934,802    7.00%   24,876,598    7.01%   30,167,095    8.40%   29,690,845    8.36%
Total Debt Investments   355,907,913    99.86%   354,631,756    99.88%   357,702,705    99.64%   354,395,516    99.73%
Equity and Preferred Shares   507,088    0.14%   427,634    0.12%   1,288,087    0.36%   964,327    0.27%
Total Equity Investments   507,088    0.14%   427,634    0.12%   1,288,087    0.36%   964,327    0.27%
Total Investments  $356,415,001    100.00%  $355,059,390    100.00%  $358,990,792    100.00%  $355,359,843    100.00%

 

25

 

Investments at fair value consisted of the following industry classifications as of June 30, 2021 and December 31, 2020:

 

   June 30, 2021   December 31, 2020 
Industry  Fair Value   Percentage of
Total Investments		   Fair Value   Percentage of
Total Investments		 
Healthcare & Pharmaceuticals  $77,654,175    21.87%  $76,049,509    21.40%
High Tech Industries   57,186,299    16.11    61,586,355    17.33 
Services: Business   49,061,239    13.82    50,490,828    14.21 
Chemicals, Plastics & Rubber   29,455,707    8.30    31,878,575    8.97 
Aerospace & Defense   25,096,492    7.07    20,755,039    5.84 
Services: Consumer   15,308,951    4.31    15,809,209    4.45 
Banking, Finance, Insurance & Real Estate   15,297,741    4.31    16,984,886    4.78 
Containers, Packaging & Glass   12,297,034    3.46    11,243,766    3.16 
Capital Equipment   11,292,954    3.18    9,834,504    2.77 
Construction & Building   10,469,733    2.95    9,664,073    2.72 
Automotive   9,123,135    2.57    12,179,594    3.43 
Transportation: Cargo   8,973,759    2.53    7,974,497    2.24 
Wholesale   7,047,724    1.98    7,121,878    2.00 
Beverage, Food & Tobacco   5,885,736    1.66    4,394,178    1.24 
Forest Products & Paper   5,001,704    1.41    4,842,432    1.36 
Consumer Goods: Non-durable   4,983,392    1.40    4,868,015    1.37 
Media: Advertising, Printing & Publishing   3,598,165    1.01    3,735,229    1.05 
Environmental Industries   2,482,500    0.70    -    - 
Telecommunications   1,002,500    0.28    -    - 
Utilities: Electric   992,436    0.28    -    - 
Metals & Mining   923,066    0.26    968,139    0.27 
Hotel, Gaming & Leisure   895,385    0.25    895,385    0.26 
Health Care Equipment & Services   530,771    0.15    526,939    0.15 
Consumer Goods: Durable   498,792    0.14    2,285,922    0.64 
Retail   -    -    1,270,891    0.36 
   $355,059,390    100.00%  $355,359,843    100.00%

 

Investments at fair value were included in the following geographic regions of the United States as of June 30, 2021 and December 31, 2020:

 

   June 30, 2021   December 31, 2020 
       Percentage       Percentage 
       of Total       of Total 
Geographic Region  Fair Value   Investments   Fair Value   Investments 
Midwest  $82,438,753    23.22%  $78,184,041    22.00%
Northeast   77,131,687    21.72    89,419,521    25.16 
West   50,864,603    14.33    55,600,298    15.65 
Southwest   46,832,425    13.19    42,906,177    12.07 
Southeast   43,571,554    12.27    41,633,230    11.72 
East   41,654,289    11.73    37,063,003    10.43 
Northwest   6,041,738    1.70    6,019,773    1.69 
South   4,555,112    1.29    2,550,476    0.72 
Other(a)   1,969,229    0.55    1,983,324    0.56 
Total Investments  $355,059,390    100.00%  $355,359,843    100.00%

 

(a) The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.

 

26

 

 

The geographic region indicates the location of the headquarters of the Company’s portfolio companies. A portfolio company may have a number of other business locations in other geographic regions.

 

Investment Principal Repayments

 

The following table summarizes the contractual principal repayments and maturity of the Company’s investment portfolio by fiscal year, assuming no voluntary prepayments, as of June 30, 2021:

 

For the Fiscal Years Ending December 31:  Amount 
2021  $4,531,798 
2022   14,120,657 
2023   25,990,209 
2024   63,393,221 
2025   78,200,106 
Thereafter   172,038,688 
Total contractual repayments   358,274,679 
Adjustments to cost basis on debt investments(a)   (2,366,766)
Total Cost Basis of Debt Investments Held at June 30, 2021:  $355,907,913 

 

(a)Adjustment to cost basis related to unamortized balance of OID investments.

 

COVID-19 Developments

 

During the six months ended June 30, 2021 and subsequent to June 30, 2021, the COVID-19 pandemic has had a significant impact on the U.S. economy. Certain of the Company's portfolio companies have been adversely impacted by the effects of the COVID-19 pandemic, which have resulted in a material adverse impact on the Company's net asset value, net investment income, the fair value of its portfolio investments, its financial condition and the results of operations and financial condition of the Company's portfolio companies and may continue to adversely affect the Company’s future net asset value, net investment income, the fair value of its portfolio investments, its financial condition and the results of operations and financial condition of the Company's portfolio companies.

 

Note 4. Related Party Transactions

 

Investment Advisory Agreement

The Company has entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Adviser. In accordance with the Investment Advisory Agreement, the Company pays the Adviser certain fees as compensation for its services, such fees consisting of a base management fee and an incentive fee (the “Incentive Fee”). The services the Adviser provides to the Company, subject to the overall supervision of the Board of Directors, include managing the day-to-day operations of, and providing investment services to, the Company. The Company also entered into a management fee waiver agreement with the Adviser (the “Waiver Agreement”), which the Company or the Adviser may terminate upon 60 days’ prior written notice.

 

Management Fee

The base management fee is calculated at an annual rate of 1.0% of the Company’s average gross assets including cash and any temporary investments in cash-equivalents, including U.S. government securities and other high-quality investment grade debt investments that mature in 12 months or less from the date of investment, payable quarterly in arrears on a calendar quarter basis.

 

27

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive the base management fee to the extent necessary so that the base management fee payable under the Investment Advisory Agreement equals, and is calculated in the same manner as if, the base management fee otherwise payable by the Company were calculated at an annual rate equal to 0.65% (instead of an annual rate of 1.00%).

 

For the three and six months ended June 30, 2021, the Company recorded base management fees of $948,730 and $1,862,780, respectively, and waivers to the base management fees of $332,055 and $651,972, respectively, as set forth within the accompanying statements of operations. For the three and six months ended June 30, 2020, the Company recorded base management fees of $942,530 and $1,823,382, respectively, and waivers to the base management fees of $329,886 and $638,184, respectively, as set forth within the accompanying statements of operations.

 

Incentive Fee

The Incentive Fee has two parts, as follows: the first part of the Incentive Fee is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, 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 Company’s operating expenses accrued for the quarter (including the base management fee, expenses payable under the Administration Agreement (as defined below) and any interest expense on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee).

 

The Company determines pre-incentive fee net investment income in accordance with GAAP, including, in the case of investments with a deferred interest feature, such as debt instruments with PIK interest, OID securities and accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.0% per quarter (4.0% annualized). The Company determines its average gross assets during each fiscal quarter and calculates the base management fee payable with respect to such amount at the end of each fiscal quarter. As a result, a portion of the Company’s net investment income is included in its gross assets for the period between the date on which such income is earned and the date on which such income is distributed. Therefore, the Company’s net investment income used to calculate part of the Incentive Fee is also included in the amount of the Company’s gross assets used to calculate the 1.0% annual base management fee. The Company pays its Adviser an Incentive Fee with respect to its pre-incentive fee net investment income in each calendar quarter as follows:

 

  •

no amount is paid on the income-portion of the Incentive Fee in any calendar quarter in which the Company’s pre-incentive fee net investment income does not exceed the hurdle of 1.0% (4.0% annualized);

     

 

 

 

 

 

 • 100% of the Company’s 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 rate but is less than 1.1765 % in any calendar quarter (4.706% annualized). The Company refers to this portion of its pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 1.1765%) as the “catch-up” provision. The catch-up is meant to provide the Adviser with 15.0% of the pre-incentive fee net investment income as if a hurdle rate did not apply if net investment income exceeds 1.1765% in any calendar quarter (4.706% annualized); and
     
  • 15.0% of the amount of the Company’s pre-incentive fee net investment income, if any, that exceeds 1.1765% in any calendar quarter (4.706% annualized) is payable to the Adviser.

 

28

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive its right to receive the Incentive Fee on pre-incentive fee net investment income to the extent necessary so that such Incentive Fee equals, and is calculated in the same manner as, the corresponding Incentive Fee on pre-incentive fee net investment income, if such Incentive Fee (i) were calculated based upon the Adviser receiving 10.0% (instead of 15.0%) of the applicable pre-incentive fee net investment income and (ii) did not include any “catch-up” feature in favor of the Adviser.

 

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 15.0% of the Company’s realized capital gains, if any, on a cumulative basis from June 16, 2015, the effective date of the Company’s registration statement on Form 10 (file no. 000-55426), through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain Incentive Fees with respect to each of the investments in the Company’s portfolio.

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive the Incentive Fee on capital gains to the extent necessary so that such portion of the Incentive Fee equals, and is calculated in the same manner as, the corresponding Incentive Fee on capital gains, if such portion of the Incentive Fee were calculated based upon the Adviser receiving 10.0% (instead of 15.0%).

 

In addition, pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive both components of the Incentive Fee to the extent necessary so that it does not receive Incentive Fees which are attributable to income and gains of the Company that exceed an annualized rate of 12.0% in any calendar quarter.

 

The waivers from the Adviser will remain effective until terminated earlier by either party upon 60 days’ prior written notice.

 

For the three and six months ended June 30, 2021, the Company recorded incentive fees related to net investment income of $96,455 and $387,748, respectively. Offsetting the incentive fees were waivers of the incentive fees of $86,809 and $348,973 for the three and six months ended June 30, 2021, respectively, as set forth within the accompanying statements of operations. For the three and six months ended June 30, 2020, the Company recorded incentive fees related to net investment income of $623,599 and $1,284,958, respectively. Offsetting the incentive fees were waivers of the incentive fees of $552,873 and $1,116,651 for the three and six months ended June 30, 2020, respectively, as set forth within the accompanying statements of operations.

 

Administration Agreement and Administrative Fee

The Company has also entered into an administration agreement (the “Administration Agreement”) with Audax Management Company, LLC (the “Administrator”) pursuant to which the Administrator provides administrative services to the Company. Under the Administration Agreement, the Administrator performs, or oversees the performance of administrative services necessary for the operation of the Company, which include being responsible for the financial records which the Company is required to maintain and prepare reports filed with the SEC. In addition, the Administrator assists in determining and publishing the Company’s net asset value, oversees the preparation and filing of the Company’s tax returns and the printing and dissemination of reports to the Company’s stockholders, and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. The Company reimburses the Administrator for its allocable portion of the costs and expenses incurred by the Administrator for overhead in performance by the Administrator of its duties under the Administration Agreement, including the cost of facilities, office equipment and the Company’s allocable portion of cost of compensation and related expenses of its Chief Financial Officer and Chief Compliance Officer and their respective staffs, as well as any costs and expenses incurred by the Administrator relating to any administrative or operating services provided by the Administrator to the Company. Such costs are reflected as an administrative fee in the accompanying statements of operations.

 

29

 

The Company has also entered into a fee waiver agreement with the Administrator, pursuant to which the Administrator may waive, in whole or in part, its entitlement to receive reimbursements from the Company.

 

The Company accrued administrative fees of $66,250 and $132,500 for the three and six months ended June 30, 2021, respectively, as set forth within the accompanying statements of operations. The Company accrued administrative fees of $66,250 and $132,500 for the three and six months ended June 30, 2020, respectively, as set forth within the accompanying statements of operations.

 

Related Party Fees

Fees due to related parties as of June 30, 2021 and December 31, 2020 on the Company’s accompanying statements of assets and liabilities were as follows:

 

   June 30, 2021   December 31, 2020 
Net base management fee due to Adviser  $616,675   $597,141 
Net incentive fee due to Adviser   9,645    17,703 
Total fees due to Adviser, net of waivers   626,320    614,844 
Fee due to Administrator, net of waivers   66,250    66,250 
Total Related Party Fees Due  $692,570   $681,094 

 

Note 5. Net Increase in Net Assets Resulting from Operations Per Share of Common Stock:

 

The following table sets forth the computation of basic and diluted net increase (decrease) in net assets resulting from operations per weighted average share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), for the three and six months ended June 30, 2021 and 2020:

 

   Three Months Ended
June 30, 2021		   Three Months Ended
June 30, 2020		   Six Months Ended
June 30, 2021		   Six Months Ended
June 30, 2020		 
Numerator for basic and diluted net increase (decrease) in net assets resulting from operations per common share  $4,221,191   $6,455,356   $9,298,545   $(4,775,047)
Denominator for basic and diluted weighted average common shares   39,009,531    37,769,447    38,983,776    37,155,262 
Basic and diluted net increase (decrease) in net assets resulting from operations per common share  $0.11   $0.17   $0.24   $(0.13)

 

Note 6. Income Tax

 

The Company has elected to be regulated as a BDC under the 1940 Act, as well as elected to be treated, and intends to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code. As a RIC, the Company generally is not subject to corporate-level U.S. federal income taxes on any ordinary income or capital gains that it timely distributes as dividends for U.S. federal income tax purposes to its stockholders. To qualify to be treated as a RIC, the Company is required to meet certain source of income and asset diversification requirements, and to timely distribute dividends out of assets legally available for distributions to its stockholders of an amount generally equal to at least 90% of the sum of its net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any (i.e., “investment company taxable income,” determined without regard to any deduction for dividends paid), for each taxable year. The amount to be paid out as distributions to the Company’s stockholders is determined by the Board of Directors and is based on management’s estimate of the fiscal year earnings. Based on that estimate, the Company intends to make the requisite distributions to its stockholders, which will generally relieve the Company from corporate-level U.S. federal income taxes. Although the Company currently intends to distribute its net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, recognized in respect of each taxable year as dividends out of the Company’s assets legally available for distribution, the Company in the future may decide to retain for investment and be subject to entity-level income tax on such net capital gains. Additionally, depending on the level of taxable income earned in a taxable year, the Company may choose to carry forward taxable income in excess of current year distributions into the next taxable year and incur a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, the Company will accrue an excise tax, if any, on estimated excess taxable income as such excess taxable income is earned.

 

30

 

The Company had aggregate distributions declared and paid to its stockholders for the year ended December 31, 2020 of $16,177,757, or $0.43 per share. The tax character of the distributions declared and paid represented $15,911,638 from ordinary income and $266,119 from tax return of capital. The Company had aggregate distributions declared and paid to its stockholders for the year ended December 31, 2019 of $17,084,202, or $0.52 per share. The tax character of the distributions declared and paid represented $16,941,968 from ordinary income and $142,234 from tax return of capital.

 

During the three and six months ended June 30, 2021, the Company declared and paid distributions of $7,801,905, or $0.20 per share. The tax character of the distributions declared and paid represented $7,656,579 from ordinary income and $145,326 from tax return of capital. During the three and six months ended June 30, 2020, the Company declared and paid distributions of $8,125,607, or $0.215 per share. The tax character of the distributions declared and paid represented $8,125,607 from ordinary income.

 

The determination of the tax attributes of the Company’s distributions is made annually at the end of the Company’s taxable year, based upon the Company’s taxable income for the full taxable year and distributions paid for the full taxable year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full taxable year. The actual tax characteristics of distributions to stockholders will be reported to the Company’s stockholders subject to information reporting after the close of each calendar year on Form 1099-DIV.

 

U.S. GAAP requires adjustments to certain components of net assets to reflect permanent differences between financial and tax reporting. These adjustments have no effect on net asset value per share. For the years ended December 31, 2020 and 2019, the Company recorded the following adjustments for permanent book to tax differences to reflect their tax characteristics. The adjustments only change the classification in net assets in the statements of assets and liabilities. During the years ended December 31, 2020 and 2019, the Company reclassified for book purposes amounts arising from permanent book/tax differences primarily related to distribution redesignations and return of capital distributions.

 

   Year Ended
December 31, 2020		   Year Ended
December 31, 2019		 
Capital in excess of par value  $-   $(1,583)
Accumulated net investment income   (37,662)   (49,515)
Accumulated net realized gain (loss)   37,662    51,098 

 

At December 31, 2020 and 2019, the components of distributable taxable earnings as detailed below differ from the amounts reflected in the Company’s statements of assets and liabilities by temporary book/tax differences primarily arising from amortization of organizational expenditures.

 

31

 

   As of
December 31,
2020		   As of
December 31,
2019		 
Other temporary book/tax differences  $(192,992)  $(213,307)
Net tax basis unrealized depreciation   (3,630,949)   (1,847,095)
Accumulated net realized loss   (3,157,649)   (670,443)
Components of tax distributable (deficit) earnings at period end  $(6,981,590)  $(2,730,845)

 

Certain losses incurred by the Company after October 31 of a taxable year are deemed to arise on the first business day of the Company’s next taxable year. The Company did not incur such losses after October 31 of the Company’s taxable year ended December 31, 2020.

 

Capital losses are generally eligible to be carried forward indefinitely, and retain their status as short-term or long-term in the manner originally incurred by the Company. As of December 31, 2020, the Company has long-term capital loss carryforward of $3,157,649. The Company has evaluated tax positions it has taken, expects to take, or that are otherwise relevant to the Company for purposes of determining whether any relevant tax positions would “more-likely-than-not” be sustained by the applicable tax authority in accordance with ASC Topic 740, “Income Taxes,” as modified by ASC Topic 946. The Company has analyzed such tax positions and has concluded that no unrecognized tax benefits should be recorded for uncertain tax positions for taxable years that may be open. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. The Company’s U.S. federal tax returns for fiscal years 2018, 2019, and 2020 remain subject to examination by the Internal Revenue Service. The Company records tax positions that are not deemed to meet a more-likely-than-not threshold as tax expenses as well as any applicable penalties or interest associated with such positions. During each of the years ended December 31, 2020, 2019, and 2018, no tax expense or any related interest or penalties were incurred.

 

Note 7. Equity

 

An investor made capital commitments to the Company in the amounts set forth below as of the date opposite each capital commitment:

 

Amount   Date
$140,000,000   June 23, 2015
$50,000,000   December 2, 2016
$100,000,000   On December 7, 2017
$40,000,000   March 22, 2019
$30,000,000   September 23, 2019
$11,200,000   March 20, 2020
$8,900,000   May 28, 2021

 

As of June 30, 2021, $8,900,000 of total capital commitments remained unfunded by the Company’s investors.

 

The number of shares of Common Stock issued and outstanding as of June 30, 2021 and December 31, 2020, were 39,009,533 and 38,343,580, respectively.

 

32

 

The following table details the activity of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020:

 

Three Months Ended June 30, 2021  Common Stock   Capital in Excess
of Par Value		   Total
Distributable
(Loss) Earnings		   Total
Stockholders'
Equity		 
Balance as of March 31, 2021  $39,009   $370,025,442   $(1,904,236)  $368,160,215 
Net investment income   -    -    3,768,409    3,768,409 
Net realized gain from investment transactions   -    -    (696,642)   (696,642)
Net change in unrealized appreciation on investments   -    -    1,149,424    1,149,424 
Issuance of shares   -    -    -    - 
Distributions to Stockholders   -    (145,326)   (7,656,579)   (7,801,905)
Reinvested Dividends   -    25    -    25 
Balance as of June 30, 2021  $39,009   $369,880,141   $(5,339,624)  $364,579,526 

 

Three Months Ended June 30, 2020  Common Stock   Capital in Excess
of Par Value		   Total
Distributable
(Loss) Earnings		   Total
Stockholders'
Equity		 
Balance as of March 31, 2020  $36,698   $349,093,820   $(13,961,248)  $335,169,270 
Net investment income   -    -    4,086,029    4,086,029 
Net realized gain from investment transactions   -    -    384    384 
Net change in unrealized appreciation on investments   -    -    2,368,943    2,368,943 
Issuance of shares   1,095    9,998,905    -    10,000,000 
Distributions to Stockholders   -    -    (8,125,607)   (8,125,607)
Reinvested Dividends   -    26    -    26 
Balance as of June 30, 2020  $37,793   $359,092,751   $(15,631,499)  $343,499,045 

 

Six Months Ended June 30, 2021  Common Stock   Capital in Excess
of Par Value		   Total
Distributable
(Loss) Earnings		   Total
Stockholders'
Equity		 
Balance as of December 31, 2020  $38,343   $363,826,108   $(6,981,590)  $356,882,861 
Net investment income   -    -    7,656,579    7,656,579 
Net realized gain from investment transactions   -    -    (633,372)   (633,372)
Net change in unrealized appreciation on investments   -    -    2,275,338    2,275,338 
Issuance of shares   666    6,199,334    -    6,200,000 
Distributions to Stockholders   -    (145,326)   (7,656,579)   (7,801,905)
Reinvested Dividends   -    25    -    25 
Balance as of June 30, 2021  $39,009   $369,880,141   $(5,339,624)  $364,579,526 

 

Six Months Ended June 30, 2020  Common Stock   Capital in Excess
of Par Value		   Total
Distributable
(Loss) Earnings		   Total
Stockholders'
Equity		 
Balance as of December 31, 2019  $35,110   $334,095,408   $(2,730,845)  $331,399,673 
Net investment income   -    -    8,396,935    8,396,935 
Net realized loss from investment transactions   -    -    (3,392)   (3,392)
Net change in unrealized depreciation on investments   -    -    (13,168,590)   (13,168,590)
Issuance of shares   2,683    24,997,317    -    25,000,000 
Distributions to Stockholders   -    -    (8,125,607)   (8,125,607)
Reinvested Dividends   -    26    -    26 
Balance as of June 30, 2020  $37,793   $359,092,751   $(15,631,499)  $343,499,045 

 

Note 8. Commitments and Contingencies

 

The Company may enter into certain credit agreements that include loan commitments where all or a portion of such commitment may be unfunded. The Company is generally obligated to fund the unfunded loan commitments at the borrowers’ discretion. Funded portions of credit agreements are presented on the accompanying schedule of investments. Unfunded loan commitments and funded portions of credit agreements are fair valued and unrealized appreciation or depreciation, if any, have been included in the accompanying statements of assets and liabilities and statements of operations.

 

33

 

The following table summarizes the Company’s significant contractual payment obligations as of June 30, 2021 and December 31, 2020:

 

Investment  Industry  June 30, 2021   December 31, 2020 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/24  Healthcare & Pharmaceuticals  $761,905   $1,100,952 
Service Logic, Senior Secured Closing Date Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 10/29/27  Services: Business   507,692    546,154 
Vertellus, Senior Secured Revolving Facility, 7.00% (Libor + 6.00%), maturity 12/22/25  Chemicals, Plastics & Rubber   486,239    486,239 
Therapy Brands, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 5/18/28  Healthcare & Pharmaceuticals   382,979    - 
Capstone Logistics, Senior Secured Closing Date Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 11/12/27  Transportation: Cargo   358,491    358,491 
TricorBraun, Senior Secured Closing Date Initial Term Loan (First Lien), 3.75% (Libor + 3.25%), maturity 3/3/28  Containers, Packaging & Glass   286,785    - 
Dessert Holdings, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 6/9/28  Beverage, Food & Tobacco   281,250    - 
Epic Staffing Group, Senior Secured Initial Term Loan, 7.25% (Libor + 6.25%), maturity 2/5/27  Services: Business   243,243    - 
Flow Control Group, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 3/31/28  Capital Equipment   190,477    - 
SIAA, Unitranche, 7.25% (Libor + 6.25%), maturity 4/28/28  Banking, Finance, Insurance & Real Estate   175,439    - 
Ned Stevens, Senior Secured Revolver, 5.75% (Libor + 4.75%), maturity 9/30/25  Services: Consumer   130,719    130,719 
Applied Adhesives, Senior Secured Term A Loan, 5.75% (Libor + 5.00%), maturity 3/12/27  Containers, Packaging & Glass   129,870    - 
Alpaca, Senior Secured Revolver, 7.75% (Libor + 6.75%), maturity 4/19/24  Healthcare & Pharmaceuticals   129,426    51,770 
ImageFirst, Senior Secured Initial Term Loan, 5.25% (Libor + 4.50%), maturity 4/27/28  Services: Business   113,636    - 
Solis Mammography, Senior Secured Term Loan, 5.50% (Libor + 4.75%), maturity 4/17/28  Healthcare & Pharmaceuticals   83,333    - 
Therma Holdings, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 12/16/27  Services: Business   80,645    80,645 
Applied Adhesives, Senior Secured Revolving Loan, 5.75% (Libor + 5.00%), maturity 3/12/27  Containers, Packaging & Glass   41,244    - 
OEConnection, Senior Secured Initial Term Loan, 4.15% (Libor + 4.00%), maturity 9/25/26  High Tech Industries   -    5,865 
Planview, Senior Secured Closing Date Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 12/17/27  High Tech Industries   -    408,879 
HighTower, Senior Secured Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 1/31/25  Banking, Finance, Insurance & Real Estate   -    241,935 
EverCommerce, Senior Secured Initial Term Loan, 5.65% (Libor + 5.50%), maturity 8/23/25  High Tech Industries   -    144,200 
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 4.15% (Libor + 4.00%), maturity 6/3/26  Services: Business   -    50,125 
Stepping Stones, Senior Secured COVID-19 Revolving Loan, 6.75% (Libor + 5.75%), maturity 6/30/21  Healthcare & Pharmaceuticals   -    36,644 
Stepping Stones, Unitranche, 6.75% (Libor + 5.75%), maturity 12/12/24  Healthcare & Pharmaceuticals   -    33,949 
      $4,383,373   $3,676,567 

 

Unfunded commitments represent all amounts unfunded as of June 30, 2021 and December 31, 2020. These amounts may or may not be funded to the borrowing party now or in the future.

 

Note 9. Financial Highlights

 

   Three Months Ended
June 30, 2021		   Three Months Ended
June 30, 2020		   Six Months Ended
June 30, 2021		   Six Months Ended
June 30, 2020		 
Per Share Data:                    
Net asset value, beginning of period  $9.44   $9.13   $9.31   $9.44 
Net investment income(a)   0.10    0.11    0.20    0.23 

Net realized gain (loss) on investments and change in

unrealized appreciation (depreciation) on investments(a)(b)

   0.01    0.06    0.04    (0.37)
Net increase (decrease) in net assets resulting from operations  $0.11   $0.17   $0.24   $(0.14)
                     
Effect of equity capital activity                    
Distributions to stockholders from net investment income   (0.20)   (0.21)   (0.20)   (0.21)
Distributions to stockholders from return of capital(c)   0.00    -    0.00    - 
Net asset value at end of period  $9.35   $9.09   $9.35   $9.09 
Total return(d)(h)   1.15%   1.91%   2.56%   (1.44)
Shares of common stock outstanding at end of period   39,009,533    37,793,522    39,009,533    37,793,522 
                     
Statement of Assets and Liabilities Data:                    
Net assets at end of period  $364,579,526   $343,499,045   $364,579,526   $343,499,045 
Average net assets(e)   368,203,033    346,800,278    367,216,591    345,465,958 
                     
Ratio/Supplemental Data:                    
Ratio of gross expenses to average net assets-annualized(f)   1.56%   2.18%   1.61%   2.15%
Ratio of net expenses to average net assets-annualized(g)   1.10%   1.16%   1.06%   1.13%
Ratio of net investment income to average net assets-annualized   4.11%   4.74%   4.20%   4.89%
Portfolio turnover(h)   1.41%   0.67%   2.82%   1.75%

 

(a)Based on weighted average basic per share of Common Stock data.
(b)The per share amount varies from the net realized and unrealized gain (loss) for the period because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time.
(c)For the three and six months ended June 30, 2021, the 0.00 is due to rounding.
(d)Total return is based on the change in net asset value during the respective periods.Total return also takes into account dividends and distributions, if any, reinvested in accordance with the Company's dividend reinvestment plan.
(e)Average net assets are computed using the average balance of net assets at the end of each month of the reporting  period.
(f)Ratio of gross expenses to average net assets is computed using expenses before waivers from the Adviser and Administrator.
(g)Ratio of net expenses to average net assets is computed using total expenses net of waivers from the Adviser and Administrator.
(h)Not annualized.

 

34

 

Note 10. Indemnification

 

In the normal course of business, the Company may enter into certain contracts that provide a variety of indemnities. The Company’s maximum exposure under these indemnities is unknown. The Company does not consider it necessary to record a liability in this regard.

 

Note 11. Subsequent Events

 

On June 14, 2021, the Company delivered a capital drawdown notice to an investor relating to the sale of 951,872 shares of the Common Stock for an aggregate offering price of $8.9 million. The sale closed on July 6, 2021.

 

The sale of Common Stock was made pursuant to a subscription agreement entered into by the Company and the investor. Under the terms of the subscription agreement, the investor is required to fund drawdowns to purchase shares of Common Stock up to the amount of its capital commitment on an as-needed basis with a minimum of 10 calendar days’ prior notice.

 

The issuance of the Common Stock is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof. The Company has not engaged in general solicitation or advertising with regard to the issuance and sale of the Common Stock and has not offered securities to the public in connection with such issuance and sale.

 

35

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

In this quarterly report on Form 10-Q, except where the context suggests otherwise, the terms “we,” us,” our” and the “Company” refer to Audax Credit BDC Inc. The information contained in this section should be read in the conjunction with the financial statements and notes to the financial statements appearing elsewhere in this quarterly report.

 

This quarterly report and other statements contain forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, our current and prospective portfolio investments, our industry, our beliefs and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including:

 

·our future operating results;
·our business prospects and the prospects of our portfolio companies;
·our ability to continue to effectively manage our business due to COVID-19 and similar pandemics;
·the ability of our portfolio companies to achieve their objectives;
·the timing of cash flows, if any, from the operations of our portfolio companies;
·the ability of our Adviser to locate suitable investments for us and to monitor and administer our investments;
·changes in the general economy;
·risk associated with possible disruptions in our operations or the economy generally;
·the effect of investments that we expect to make;
·our contractual arrangements and relationships with third parties;
·actual and potential conflicts of interest with Adviser and its affiliates;
·the dependence of our future success on the general economy and its effect on the industries in which we invest;
·changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes to the value of our assets;
·the adequacy of our financing sources and working capital;
·the ability of our Adviser and its affiliates to attract and retain highly talented professionals;
·our ability to qualify and maintain our qualification as a BDC and as a RIC; and
·the risks, uncertainties and other factors we identify under “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K filed on March 19, 2021 (file no. 814-01154) (the “Annual Report”).

 

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this quarterly report should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in the section entitled “Item 1A. Risk Factors” of this quarterly report and our Annual Report as well as risk factors described or identified in other filings we may make with the SEC from time to time. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. Moreover, we assume no duty and do not undertake to update the forward-looking statements. The forward-looking statements and projections contained in this quarterly report are excluded from the safe harbor protection provided by Section 27A of the Securities Act and provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

36

 

OVERVIEW

 

Audax Credit BDC Inc. is a Delaware corporation that was formed on January 29, 2015. We are an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a BDC under the 1940 Act. In addition, we have elected to be treated for U.S. federal income tax purposes, and intends to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code.

 

Our investment objective is to generate current income and, to a lesser extent, long-term capital appreciation. We intend to meet our investment objective by investing primarily in senior secured debt of privately owned U.S. middle market companies. We intend to invest at least 80% of our net assets plus the amount of any borrowings in “credit instruments,” which we define as any fixed income instruments.

 

Although we have no present intention of doing so, we may decide to incur leverage. If we do incur leverage, however, we anticipate that it will be used in limited circumstances and on a short-term basis for purposes such as funding distributions. As a BDC, we are limited in our use of leverage under the 1940 Act. Under the 1940 Act, a BDC generally is required to maintain asset coverage of 200% for senior securities representing indebtedness (such as borrowings from banks or other financial institutions) or stock (such as preferred stock). The Small Business Credit Availability Act (the “SBCAA”), which was signed into law on March 23, 2018, provides that a BDC's required asset coverage under the 1940 Act may be reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). This reduction in asset coverage permits a BDC to double the amount of leverage it may utilize, subject to certain approval, timing and reporting requirements, including either stockholder approval or approval of a majority of the directors who are not “interested persons” (as defined in the 1940 Act) of the BDC and who have no financial interest in the arrangement. In addition, as a non-traded BDC, if we receive the relevant approval to increase our authorized leverage, we will be required to offer our stockholders the opportunity to sell their shares of Common Stock over the next year following the calendar quarter in which the approval was obtained. In determining whether to use leverage, we will analyze the maturity, covenants and interest rate structure of the proposed borrowings, as well as the risks of such borrowings within the context of our investment outlook and the impact of leverage on our investment portfolio. The amount of any leverage that we will employ as a BDC will be subject to oversight by our Board of Directors.

 

We generate revenue in the form of interest on the debt securities that we hold in our portfolio companies. The senior debt we invest in generally has stated terms of three to ten years. Our senior debt investments generally bear interest at a floating rate. Interest on debt securities is generally payable quarterly or semiannually. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally will become due at the maturity date. In addition, we may generate revenue in the form of commitment and other fees in connection with transactions, although we do not expect to do so. OID as well as market discount and premium are accreted and amortized in determining our interest income. We record any prepayment premiums on loans and debt securities as income.

 

COVID-19 Developments

 

The market disruptions caused by the COVID-19 pandemic may continue to adversely affect the business operations of some, if not all, of our portfolio companies and may continue to affect our operations and the operations of our Adviser. As the COVID-19 outbreak and the related business restrictions continue to evolve, we cannot predict its full impact on our business operations, including its duration in the United States and worldwide, the extent of the global economic recovery and the uncertainty surrounding the efficiency and success of the global vaccination efforts as more contagious strains of the virus emerge in various countries, including the United States (particularly the “Delta variant”). Such contagious variants, in conjunction with business re-openings, more frequent social gatherings, including the re-opening of many schools and colleges across the country, and more relaxed mask requirements and social distancing have resulted in significant surges in the rates of COVID-19 infections worldwide. Furthermore, large portions of the population in the United States and elsewhere remain unvaccinated due to limited or no access to vaccines, the politicization of the vaccine rollout, the general public distrust of the safety and efficacy of the vaccine and the potential adverse reactions to the vaccine. Such developments may negatively affect the success of business re-openings and may lead to a decline in economic recovery, further increasing the risk that the pandemic will continue for a prolonged period of time. As such, the extent to which COVID-19 and/or other health pandemics may affect negatively our operating results and financial condition and the operating results and financial condition of our portfolio companies, as well as the duration of any potential business or supply-chain disruption for us, our Adviser and/or our portfolio companies, is uncertain.

 

37

 

We will continue to monitor developments relating to the COVID-19 pandemic and guidance from U.S. and international authorities, including federal, state and local public health officials and may take additional actions based on their recommendations. In these circumstances, there may be developments beyond our control requiring us to adjust our plan of operation. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. However, we do expect that it may continue to have a material adverse impact on our future net asset value, net investment income, the fair value of our portfolio investments, and the results of operations and financial condition of our portfolio companies, and that such adverse effects will persist for the duration of the pandemic and potentially for some time thereafter.

 

PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY

 

Portfolio Composition

 

The fair value of our investments, comprised of syndicated loans and equity, as of June 30, 2021, was approximately $355,059,390 and held in 199 portfolio companies. The fair value of our investments, comprised of syndicated loans and equity, as of December 31, 2020, was approximately $355,359,843 and held in 186 portfolio companies.

 

During the six months ended June 30, 2021, we invested in 43 new investments for a combined $48,768,159 and in existing investments for a combined $6,849,818. We also received $47,805,480 in repayments from investments and $10,135,008 from investments sold during the six months ended June 30, 2021. During the six months ended June 30, 2020, we invested in 30 new syndicated investments for a combined $25,148,863 and in existing investments for a combined $11,358,128. We also received $20,918,019 in repayments from investments and $5,743,556 from investments sold during the six months ended June 30, 2020.

 

In addition, for the three and six months ended June 30, 2021, we had a change in unrealized appreciation of approximately $1,149,424 and $2,275,338 respectively, and realized losses of $696,642 and $633,372, respectively. In addition, for the three and six months ended June 30, 2020, we had a change in unrealized appreciation (depreciation) of approximately $2,368,943 and $(13,168,590) respectively, and realized gains (losses) of $384 and $(3,392), respectively.

 

Our investment activity for the six months ended June 30, 2021 and 2020, is presented below:

 

   Six Months Ended
June 30, 2021		   Six Months Ended
June 30, 2020		 
Beginning investment portfolio, at fair value  $355,359,843   $330,874,911 
Investments in new portfolio investments   48,768,159    25,148,863 
Investments in existing portfolio investments   6,849,818    11,358,128 
Principal repayments   (47,805,480)   (20,918,019)
Proceeds from investments sold   (10,135,008)   (5,743,556)
Change in premiums, discounts and amortization   380,092    216,568 
Net change in unrealized appreciation (depreciation) on investments   2,275,338    (13,168,590)
Realized loss on investments   (633,372)   (3,392)
Ending portfolio investment activity, at fair value  $355,059,390   $327,764,913 
Number of portfolio investments   225    196 
Average investment amount, at cost  $1,584,067   $1,748,881 
Percentage of  investments at floating rates   100.00%   99.40%

 

As of June 30, 2021 and December 31, 2020, our entire portfolio consisted of non-controlled/non-affiliated investments.

 

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RECENT DEVELOPMENTS

 

Subsequent to June 30, 2021 and through August 13, 2021, we invested $7,151,324 at cost in 8 portfolio companies.

 

On June 14, 2021, we delivered a capital drawdown notice to an investor relating to the sale of 951,872 shares of the Common Stock for an aggregate offering price of $8.9 million. The sale closed on July 6, 2021.

 

The sale of Common Stock was made pursuant to a subscription agreement entered into by us and the investor. Under the terms of the subscription agreement, the investor is required to fund drawdowns to purchase shares of Common Stock up to the amount of its capital commitment on an as-needed basis with a minimum of 10 calendar days’ prior notice.

 

The issuance of the Common Stock is exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof. We have not engaged in general solicitation or advertising with regard to the issuance and sale of the Common Stock and have not offered securities to the public in connection with such issuance and sale.

 

RESULTS OF OPERATIONS

 

The net increase or decrease in net assets from operations may vary substantially from period to period as a result of various factors, including the recognition of realized gains and/or losses and net change in unrealized appreciation and depreciation. This “Results of Operations” section should be read in conjunction with the “COVID-19 Developments” section above.

 

Revenue

 

Total investment income for the three and six months ended June 30, 2021 and 2020 is presented in the table below.

 

 

   Three Months Ended
June 30, 2021		   Three Months Ended
June 30, 2020		   Six Months Ended
June 30, 2021		   Six Months Ended
June 30, 2020		 
Total interest income from non-controlled/non-affiliated investments  $4,762,471   $4,961,112   $9,531,156   $10,163,820 
Total other interest income   356    1,325    630    29,995 
Total other income   15,488    124,633    63,002    139,373 
Total investment income  $4,778,315   $5,087,070   $9,594,788   $10,333,188 

 

Total investment income for the three months ended June 30, 2021 decreased to $4,778,315 from $5,087,070 for the three months ended June 30, 2020, and was driven by the decrease in LIBOR. Total investment income for the six months ended June 30, 2021 decreased to $9,594,788 from $10,333,188 for the six months ended June 30, 2020, and was driven by a decrease in LIBOR which was partially offset by our interest income from our increasing investment balance. As of June 30, 2021 and 2020, the size of our debt portfolio was $355,907,913 and $343,394,706 at amortized cost, respectively, with total debt principal amount outstanding of $358,274,679 and $341,660,017, respectively.

 

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Expenses

 

Total expenses net of waivers for the three and six months ended June 30, 2021 and 2020, were as follows:

 

   Three Months Ended
June 30, 2021		   Three Months Ended
June 30, 2020		   Six Months Ended
June 30, 2021		   Six Months Ended
June 30, 2020		 
Base management fee(a)  $948,730   $942,530   $1,862,780   $1,823,382 
Incentive fee(a)   96,455    623,599    387,748    1,284,958 
Administrative fee(a)   66,250    66,250    132,500    132,500 
Directors' fees   56,250    52,500    112,500    105,000 
Professional fees   144,378    139,116    237,696    237,058 
Other expenses   116,707    59,805    205,930    108,190 
Total expenses   1,428,770    1,883,800    2,939,154    3,691,088 
Base management fee waivers(a)   (332,055)   (329,886)   (651,972)   (638,184)
Incentive fee waivers(a)   (86,809)   (552,873)   (348,973)   (1,116,651)
Total expenses, net of waivers  $1,009,906   $1,001,041   $1,938,209   $1,936,253 

 

(a) Refer to Note 4-Related Party Transactions within the financial statements for a description of the relevant fees.

 

The increase in base management fees before waivers for the three months ended June 30, 2021 in comparison to the three months ended June 30, 2020 was driven by our increasing invested balance. For the three months ended June 30, 2021 and 2020, we accrued gross base management fees before waivers of $948,730 and $942,530, respectively. Offsetting those fees, we recognized base management fee waivers of $332,055 and $329,886, respectively, for the same periods. The decrease in incentive fees related to net investment income for the three months ended June 30, 2021 in comparison to the three months ended June 30, 2020 was driven by the decrease in LIBOR which decreased the yield of our variable rate debt investments. For the three months ended June 30, 2021, we accrued incentive fees related to net investment income before waivers of $96,455, offset by incentive fee waivers of $86,809. For the three months ended June 30, 2020, we accrued incentive fees related to net investment income before waivers of $623,599, offset by incentive fee waivers of $552,873. Additionally, we accrued $66,250 of administrative fees for each of the three months ended June 30, 2021 and 2020. Refer to Note 4 — Related Party Transactions in the notes accompanying our financial statements for more information related to base management fees, incentive fees and waivers.

 

During the three months ended June 30, 2021 and 2020, we incurred other expenses of $116,707 and $59,805, respectively, related to subscription fees, operating fees, custody fees, and other company expenses. The increase in other expenses was driven by an increase in the Delaware state franchise tax applicable to the Company in the three months ended June 30, 2021. We also incurred expenses related to fees paid to our independent directors of $56,250 and $52,500 for each of the three-month period June 30, 2021 and 2020, respectively.

 

The increase in base management fees before waivers for the six months ended June 30, 2021 in comparison to the six months ended June 30, 2020 was driven by our increasing invested balance. For the six months ended June 30, 2021 and 2020, we accrued gross base management fees before waivers of $1,862,780 and $1,823,382, respectively. Offsetting those fees, we recognized base management fee waivers of $651,972 and $638,184, respectively. The decrease in incentive fees related to net investment income for the six months ended June 30, 2021 in comparison to the six months ended June 30, 2020 was driven by the decrease in LIBOR which decreased the yield of our variable rate debt investments. For the six months ended June 30, 2021, we accrued incentive fees related to net investment income before waivers of $387,748, offset by incentive fee waivers of $348,973. For the six months ended June 30, 2020, we accrued incentive fees related to net investment income before waivers of $1,284,958, offset by incentive fee waivers of $1,116,651. Additionally, we accrued $132,500 of administrative fees for both the six months ended June 30, 2021 and 2020. Refer to Note 4 — Related Party Transactions in the notes accompanying our financial statements for more information related to base management fees, incentive fees and waivers.

 

During the six months ended June 30, 2021 and 2020, we incurred other expenses of $205,930 and $108,190, respectively, related to subscription fees, operating fees, custody fees, and other company expenses. The increase in other expenses was driven by an increase in the Delaware state franchise tax applicable to the Company in the six months ended June 30, 2021. We also incurred expenses related to fees paid to our independent directors of $112,500 and $105,000 for each of the six-month period ended June 30, 2021 and 2020.

 

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Realized and Unrealized Gains and Losses

 

We recognized $(696,642) and $384 in net realized (losses) gains for the three months ended June 30, 2021 and 2020, respectively. We recognized $(633,372) and $(3,392) in net realized losses for the six months ended June 30, 2021 and 2020, respectively.

 

Net change in unrealized appreciation (depreciation) on investments for the three and six months ended June 30, 2021 and 2020 was as follows:

 

Type  Three Months Ended
June 30, 2021		   Three Months Ended
June 30, 2020		   Six Months Ended
June 30, 2021		   Six Months Ended
June 30, 2020		 
First Lien Debt  $478,044   $2,080,606   $1,612,986   $(12,253,129)
Second Lien Debt   385,035    124,110    418,045    (1,049,757)
Equity and Preferred Shares   286,345    164,227    244,307    134,296 
Net change in unrealized appreciation (depreciation) on investments  $1,149,424   $2,368,943   $2,275,338   $(13,168,590)

 

Net change in unrealized appreciation on investments during the three and six months ended June 30, 2021 was primarily due to the change in the results and financial position of the portfolio companies. Net change in unrealized appreciation (depreciation) on investments during the three and six months ended June 30, 2020 was primarily due to the change in the results and financial position of the portfolio companies.

 

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

 

We generate cash primarily from the net proceeds of any offering of shares of our Common Stock, from cash flows from interest and fees earned from our investments, and from principal repayments and proceeds from sales of our investments. Our primary use of cash is investments in portfolio companies, payments of our expenses and cash distributions to our stockholders. As of June 30, 2021 and December 31, 2020, we had cash of $20,393,297 and $4,289,122, respectively. This “Financial Condition, Liquidity and Capital Resources” section should be read in conjunction with the “COVID-19 Developments” section above.

 

Operating Activities

 

Net cash provided by operating activities for the six months ended June 30, 2021 was $17,706,055. This was primarily driven by repayment of bank loans and sales of investments totaling $47,805,480 and $10,135,008, respectively. This was partially offset by investments in portfolio companies. Net cash used in operating activities for the six months ended June 30, 2020 was $6,658,137. The primary operating activities during this period were investments in portfolio companies. This was partially offset by repayments of bank loans.

 

As of both June 30, 2021 and December 31, 2020, we had 17 investments with unfunded commitments of $4,383,373 and $3,676,567, respectively. We believe that, as of both June 30, 2021 and December 31, 2020, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

 

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The following table summarizes our total portfolio activity during the six months ended June 30, 2021 and 2020:

 

   Six Months Ended
June 30, 2021		   Six Months Ended
June 30, 2020		 
Beginning investment portfolio  $355,359,843   $330,874,911 
Investments in new portfolio investments   48,768,159    25,148,863 
Investments in existing portfolio investments   6,849,818    11,358,128 
Principal repayments   (47,805,480)   (20,918,019)
Proceeds from sales of investments   (10,135,008)   (5,743,556)
Net change in unrealized appreciation (depreciation) on investments   2,275,338    (13,168,590)
Net realized loss on investments   (633,372)   (3,392)
Net change in premiums, discounts and amortization   380,092    216,568 
Investment Portfolio, at Fair Value  $355,059,390   $327,764,913 

 

Financing Activities

 

Net cash used in our financing activities for the six months ended June 30, 2021 was $1,601,880 which consisted of $7,801,880 of distributions paid to our common stockholders. This was partially offset by $6,200,000 from issuances of 665,951 Shares to our stockholders, in connection with our capital calls during the period. Net cash provided by our financing activities for the six months ended June 30, 2020 was $25,000,000 from issuances of 2,684,276 Shares to our stockholders, in connection with our capital calls and our dividend reinvestment program during the period. This was partially offset by $8,125,581 of distributions paid to our common stockholders.

 

Equity Activity

 

An investor made capital commitments to us in the amounts set forth below as of the date opposite each capital commitment:

 

Amount   Date
$140,000,000   June 23, 2015
$50,000,000   December 2, 2016
$100,000,000   On December 7, 2017
$40,000,000   March 22, 2019
$30,000,000   September 23, 2019
$11,200,000   March 20, 2020
$8,900,000   May 28, 2021

 

As of June 30, 2021, $8,900,000 of total capital commitments remained unfunded by our investors.

 

The number of shares of our Common Stock issued and outstanding as of June 30, 2021 and December 31, 2020, were 39,009,533 and 38,343,580, respectively.

 

Distributions to Stockholders – Common Stock Distributions

 

We have elected to be treated, and intends to comply with the requirements to qualify annually, as a RIC for U.S. federal income tax purposes. As a RIC, we generally are not subject to corporate-level U.S. federal income taxes on ordinary income or capital gains that we timely distribute as dividends for U.S. federal income tax purposes to our stockholders. To qualify to be taxed as a RIC and thus avoid corporate-level income tax on the income that we distribute as dividends to our stockholders, we are required to distribute dividends to our stockholders each taxable year generally of an amount at least equal to 90% of our investment company taxable income, determined without regard to the deduction for any dividends paid. To avoid a 4% excise tax on undistributed earnings, we are required to distribute dividends to our stockholders in respect of each calendar year of an amount at least equal to the sum of (i) 98% of our ordinary income (taking into account certain deferrals and elections) for such calendar year, (ii) 98.2% of our capital gain net income, adjusted for certain ordinary losses, for the one-year period ending October 31 of that calendar year and (iii) any income or capital gains recognized, but not distributed, in preceding calendar years and on which we incurred no federal income tax. We intend to make distributions to stockholders on an annual basis of substantially all of our net investment income. Although we intend to make distributions of net realized capital gains, if any, at least annually, out of assets legally available for such distributions, we may in the future decide to retain such capital gains for investment. In addition, the extent and timing of special dividends, if any, will be determined by our Board of Directors and will largely be driven by portfolio specific events and tax considerations.

 

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We may fund our cash distributions from any sources of funds available, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee waivers from our Adviser. Our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from an offering. As a result, a portion of the distributions may represent a return of capital for U.S. federal income tax purposes. Thus the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a BDC under the 1940 Act. We declared and paid distributions of $7,801,905, or $0.200 per share during the three and six months ended June 30, 2021. We declared and paid distributions of $8,125,607, or $0.215 per share during the three and six months ended June 30, 2020.

 

The determination of the tax attributes of our distributions is made annually at the end of our taxable year, based upon our taxable income for the full taxable year and distributions paid for the full taxable year. Therefore, estimates made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. The actual tax characteristics of distributions to stockholders will be reported to stockholders subject to information reporting after the close of each calendar year on Form 1099-DIV.

 

Related Party Fees

 

For the three months ended June 30, 2021 and 2020, we recorded base management fees of $948,730 and $942,530, respectively. Offsetting these fees were waivers to the base management fees of $332,055 and $329,886, respectively, as set forth within the accompanying statements of operations.

 

For the six months ended June 30, 2021 and 2020, we recorded base management fees of $1,862,780 and $1,823,382, respectively. Offsetting those fees were waivers to the base management fees of $651,972 and $638,184, respectively, as set forth within the accompanying statements of operations.

 

For the three months ended June 30, 2021 and 2020, we recorded incentive fees of $96,455 and $623,599, respectively. Offsetting these fees were waivers to the incentive fees of $86,809 and $522,873, respectively, as set forth within the accompanying statements of operations.

 

For the six months ended June 30, 2021 and 2020, we recorded incentive fees of $387,748 and $1,284,958, respectively. Offsetting those fees were waivers to the incentive fees of $348,973 and $1,116,651, respectively, as set forth within the accompanying statements of operations.

 

For both the three months ended June 30, 2021 and 2020, we recorded administrative fees of $62,500, as set forth within the accompanying statements of operations. For both the six months ended June 30, 2021 and 2020, we recorded administrative fees of $132,500, as set forth within the accompanying statements of operations.

 

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Fees due to related parties as of June 30, 2021 and December 31, 2020 on our accompanying statements of assets and liabilities were as follows:

 

   June 30, 2021   December 31, 2020 
Net base management fee due to Adviser  $616,675   $597,141 
Net incentive fee due to Adviser   9,645    17,703 
Total fees due to Adviser, net of waivers   626,320    614,844 
Fee due to Administrator, net of waivers   66,250    66,250 
Total Related Party Fees Due  $692,570   $681,094 

 

Tender Offers

 

We do not currently intend to list shares of our Common Stock on any securities exchange, and we do not expect a public market for them to develop in the foreseeable future. Therefore, stockholders should not expect to be able to sell their shares of our Common Stock promptly or at a desired price. To provide our stockholders with limited liquidity, we may, in the absolute discretion of our Board of Directors, conduct an annual tender offer. Our tenders for the shares of Common Stock, if any, would be conducted on such terms as may be determined by our Board of Directors and in accordance with the requirements of applicable law, including Section 23(c) of the 1940 Act and Regulation M under the Exchange Act. We have not commenced any tender offers, and we do not currently intend to conduct any tender offers in the near future.

 

CRITICAL ACCOUNTING POLICIES

 

This discussion of our operations is based upon our financial statements, which are prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

 

Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we describe our critical accounting policies in the notes to our financial statements.

 

Valuation of Investments

 

We conduct the valuation of our investments, pursuant to which our net asset value is determined, at all times consistent with GAAP and the 1940 Act. Our Board of Directors, with the assistance of our Audit Committee, determines the fair value of our investments, for investments with a public market and for investments with no readily available public market, on at least a quarterly basis, in accordance with the terms of ASC 820. Our valuation procedures are set forth in more detail below.

 

ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

 

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

 

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The three-level hierarchy for fair value measurement is defined as follows:

 

Level 1 — Inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. We do not adjust the quoted price for these instruments, even in situations where we hold a large position, and a sale could reasonably be expected to impact the quoted price.

 

Level 2 — Inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

 

Level 3 — Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, 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, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

 

Pursuant to the framework set forth above, we value securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. We may also obtain quotes with respect to certain of our investments from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets.

 

Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, we determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we use the quote obtained.

 

Securities 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 our Board of Directors, does not represent fair value, are each valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. Inputs for these valuation techniques include relative credit information, observed market movement, industry sector information, and other market data, which may include benchmarking of comparable securities, issuer spreads, reported trades, and reference data, such as market research publications, when available. The process used to determine the applicable value is as follows:

 

(i) Each portfolio company or investment is initially valued by the investment professionals of the Adviser responsible for the portfolio investment using a standardized template designed to approximate fair market value based on observable market inputs and updated credit statistics and unobservable inputs. Additionally, as a part of our valuation process, the Adviser may employ the services of one or more independent valuation firms engaged by us;

 

(ii) Preliminary valuation conclusions are documented and discussed with our senior management and members of the Adviser’s valuation team;

 

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(iii) Our Audit Committee reviews the assessments of the Adviser or independent valuation firm (to the extent applicable) and provides our Board of Directors with recommendations with respect to the fair value of the investments in our portfolio; and

 

(iv) Our Board of Directors discusses the valuation recommendations of our Audit Committee and determines the fair value of the investments in our portfolio in good faith based on the input of the Adviser, the independent valuation firm (to the extent applicable) and in accordance with our valuation policy.

 

Our Audit Committee’s recommendation of fair value is generally based on its 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 company’s ability to make payments;

 

•the portfolio company’s actual and expected earnings and discounted cash flow;

 

•prevailing interest rates for like 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 publicly traded securities.

 

Investment performance data utilized are the most recently available as of the measurement date, which in many cases may reflect up to a one quarter lag in information.

 

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include the following:

 

•private placements and restricted securities that do not have an active trading market;

 

•securities whose trading has been suspended or for which market quotes are no longer available;

 

•debt securities that have recently gone into default and for which there is no current market;

 

•securities whose prices are stale; and

 

•securities affected by significant events.

 

Our Board of Directors is responsible for the determination, in good faith, of the fair value of our portfolio investments.

 

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

 

Security transactions are recorded on the trade date (the date the order to buy or sell is executed or, in the case of privately issued securities, the closing date, which is when all terms of the transactions have been defined). Realized gains and losses on investments are determined based on the identified cost method.

 

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In addition, on December 3, 2020, the SEC announced that it adopted Rule 2a-5 under the 1940 Act, which establishes an updated regulatory framework for determining fair value in good faith for purposes of the 1940 Act. The new rule clarifies how fund boards can satisfy their valuation obligations in light of recent market developments. The rule will permit boards, subject to board oversight and certain other conditions, to designate certain parties to perform the fair value determinations. We will continue to review the adopted rule and its impact on us and our valuation policies, and intend to comply with such requirements on or before the SEC’s required compliance date in 2022.

 

Refer to Note 3 — Investments in the notes to our accompanying financial statements included elsewhere in this quarterly report for additional information regarding fair value measurements and our application of ASC 820.

 

Revenue Recognition

 

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the principal balance, we generally will not accrue PIK interest for accounting purposes if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities for accounting purposes if we have reason to doubt our ability to collect such interest. OID, market discounts or premiums are accreted or amortized using the effective interest method as interest income. We record prepayment premiums on loans and debt securities as interest income.

 

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

 

We measure net realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

 

PIK Interest

 

We may have investments in our portfolio that contain a PIK interest provision. Any PIK interest will be added to the principal balance of such investments and is recorded as income if the portfolio company valuation indicates that such PIK interest is collectible. In order to maintain our status as a RIC, substantially all of this income must be included in the amounts paid out by us to stockholders in the form of dividends, even if we have not collected any cash.

 

U.S. Income Taxes

 

We have elected to be subject to tax as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to incur any corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute as dividends to our stockholders. To qualify and maintain our qualification as a RIC, we must meet certain source-of-income and asset diversification requirements as well as distribute dividends to our stockholders each taxable year of an amount generally at least equal to 90% of our investment company taxable income, determined without regard to any distributions paid.

 

Depending on the level of taxable income earned in a taxable year, we may choose to retain taxable income in excess of current year distributions into the next taxable year. We would then incur a 4% excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income may exceed estimated current year distributions, we will accrue an excise tax, if any, on estimated excess taxable income as taxable income is earned. We did not accrue any excise tax for the fiscal years ended December 31, 2020, 2019, and 2018.

 

47

 

Because U.S. federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified within capital accounts in the financial statements to reflect their tax character. Permanent differences may also result from differences in classification in certain items, such as the treatment of short-term gains as ordinary income for tax purposes. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

 

We evaluate tax positions taken or expected to be taken in the course of preparing our financial statements to determine whether any relevant tax positions would “more-likely-than-not” be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expensed in the current fiscal year. All penalties and interest associated with any income taxes accrued are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax law, regulations and interpretations thereof. Our accounting policy on income taxes is critical because if we are unable to qualify, or once qualified, maintain our tax status as a RIC, we would be required to record a provision for corporate-level U.S. federal income taxes, as well as any related state or local taxes which may be significant to our financial results.

 

COMMITMENTS AND CONTINGENCIES

 

From time to time, we, the Adviser or the Administrator may become party to legal proceedings in the ordinary course of business, including proceedings related to the enforcement of our rights under contracts with our portfolio companies. Neither we, the Adviser nor the Administrator is currently subject to any material legal proceedings.

 

Unfunded commitments to provide funds to portfolio companies are not reflected in our accompanying statements of assets and liabilities. Our unfunded commitments may be significant from time to time. These commitments are subject to the same underwriting and ongoing portfolio maintenance as are the on-balance sheet financial instruments that we hold. Since these commitments may expire without being drawn, the total commitment amount does not necessarily represent future cash requirements. We use cash flow from normal and early principal repayments and proceeds from borrowings and offerings to fund these commitments. As of June 30, 2021, we had 17 investments with unfunded commitments of $4,383,373. As of December 31, 2020, we had 14 investments with unfunded commitments of $3,676,567. We believe that, as of June 30, 2021 and December 31, 2020, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are subject to financial market risks, including changes in interest rates. During the period covered by our financial statements, many of the loans in our portfolio had floating interest rates, and we expect that many of our loans to portfolio companies in the future will also have floating interest rates based on LIBOR or an equivalent risk-free index rate. Interest rate fluctuations may have a substantial negative impact on our investments, the value of our Common Stock and our rate of return on invested capital. In addition, U.S. and global capital markets and credit markets have experienced a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across such markets and a general decline in value of the securities held by us. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

 

In addition, the COVID-19 pandemic has resulted in a decrease in LIBOR and a general reduction of certain interest rates by the U.S. Federal Reserve and other central banks. A continued decline in interest rates, including LIBOR, could result in a reduction of our gross investment income.

 

48

 

Change in interest rates  Increase (decrease) in
investment income		 
Down 300 basis points   (125,320)
Down 200 basis points   (125,320)
Down 100 basis points   (125,320)
Up 100 basis points   1,705,176 
Up 200 basis points   5,287,922 
Up 300 basis points   8,870,669 

 

Although we believe that this measure is indicative of our sensitivity to interest rate changes, it does not reflect potential changes in the credit market, credit quality, size and composition of the assets on the Consolidated Statements of Assets and Liabilities and other business developments that could affect our net increase in net assets resulting from operations or net investment income. Accordingly, no assurances can be given that actual results would not differ materially from those shown above.

 

In addition, any investments we make that are denominated in a foreign currency will be subject to risks associated with changes in currency exchange rates. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved.

 

We may hedge against interest rate and currency exchange rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

As of the period covered by quarterly this report, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness and design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective at a reasonable assurance level in timely alerting management, including the Chief Executive Officer and Chief Financial Officer, of material information about us required to be included in periodic SEC filings. However, in evaluation of the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

49

 

PART II–OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not currently subject to any material legal proceeding, nor, to our knowledge, is any material legal proceeding threatened against us.

 

From time to time, we, our Adviser or Administrator may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

 

From time to time, we are involved in various legal proceedings, lawsuits and claims incidental to the conduct of our business. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us.

 

ITEM 1A. RISK FACTORS

 

In addition to the risks discussed below, important risk factors that could cause results or events to differ from current expectations are described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 19, 2021.

 

Legislation passed in 2018 allows us to incur additional leverage and would require us to offer liquidity to our stockholders.

 

Under the 1940 Act, a BDC generally is required to maintain asset coverage of 200% for senior securities representing indebtedness (such as borrowings from banks or other financial institutions) or stock (such as preferred stock). The SBCAA, which was signed into law on March 23, 2018, provides that a BDC’s required asset coverage under the 1940 Act may be reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). This reduction in asset coverage permits a BDC to double the amount of leverage it may utilize, subject to certain approval, timing and reporting requirements, including either stockholder approval or approval of a majority of the directors who are not “interested persons” (as defined in the 1940 Act) of the BDC and who have no financial interest in the arrangement. As a result, if we receive the relevant approval and we comply with the applicable disclosure requirements, we would be able to incur additional leverage, which may increase the risk of investing in us. In addition, since our base management fee is payable based upon our average adjusted gross assets, which includes any borrowings for investment purposes, our base management fee expenses may increase if we incur additional leverage.

 

We have not commenced any tender offers, and we do not currently intend to conduct any tender offers. As a non-traded BDC, however, if we receive the relevant approval to increase our authorized leverage, we will be required to offer our stockholders the opportunity to sell their shares of Common Stock over the next year following the calendar quarter in which the approval was obtained. The timing and method for such offers has not been determined at this time.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

Refer to our Current Report on Form 8-K filed on July 6, 2021 for issuances of our Common Stock during the quarter ended June 30, 2021. Such issuances were exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act and Regulation D thereunder.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

50

 

ITEM 5. OTHER INFORMATION

 

Not applicable.

 

ITEM 6. EXHIBITS

 

3.1Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form 10 (File no. 000-55426), filed on April 17, 2015).

 

3.2Form of Bylaws (Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form 10 (File no. 000-55426), filed on April 17, 2015).

 

10.1*Subscription Agreement, dated as of May 28, 2021, by and between the Company and Mercer Audax Credit Feeder Fund LP.

 

31.1*Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

 

31.2*Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

 

32.1*Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (18 U.S.C. 1350).

 

32.2*Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (18 U.S.C. 1350).

 

99.1Code of Ethics (Incorporated by reference to Exhibit 99.1 to Pre-Effective Amendment No. 1 to the Registration Statement on Form 10, File No. 000-55426, filed on June 5, 2015).

 

 

*            Filed herewith

 

51

 

SIGNATURES

 

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

 

  Audax Credit BDC Inc.

 

Date: August 13, 2021

 By:

/s/ Michael P. McGonigle

    Michael P. McGonigle
    Chief Executive Officer

 

Date: August 13, 2021

 By:

/s/ Richard T. Joseph

    Richard T. Joseph
    Chief Financial Officer

 

52

 EX-10.1 2 tm2118616d1_ex10-1.htm EXHIBIT 10.1

Exhibit 10.1

 

AUDAX CREDIT BDC INC.

 

Subscription Documents

 

Administrator:

 

Audax Management Company, LLC

101 Huntington Avenue

Boston, Massachusetts 02199

 

 

 

 

DIRECTIONS FOR THE COMPLETION
OF THE SUBSCRIPTION DOCUMENTS

 

Prospective investors must complete the Subscription Agreement, the Investor Questionnaire (the “Investor Questionnaire”) and any necessary attachments (the Subscription Agreement, the Investor Questionnaire and all such attachments collectively, the “Subscription Documents”) contained in this package in the manner described below. Capitalized terms not defined herein are used as defined in the Confidential Private Placement Memorandum of Audax Credit BDC Inc., a Delaware corporation (as amended or supplemented from time to time) (the “Memorandum”). For purposes of these Subscription Documents, the “Investor” is the person or entity for whose account the units will be purchased and that can satisfy the representations and warranties set forth in the Subscription Documents. Another person or entity with investment authority may execute the Subscription Documents on behalf of the Investor, but should indicate the capacity in which it is doing so and the name of the Investor.

 

1.          Subscription Agreement:

 

(a)          Each Investor should fill in the amount of the Capital Commitment (as defined in the Subscription Agreement), fill in the date, print the name of the Investor and sign (and print name, capacity and title of signatory, if applicable) on the signature page of the Subscription Agreement.

 

(b)          Each Investor should complete the appropriate acknowledgment form (making any changes to reflect the Investor’s circumstances).

 

2.          Investor Questionnaire:

 

(a)          In Section A, each Investor should fill in its name, type of entity, address, tax identification or social security number, contact person(s), telephone and facsimile numbers, email address, and the other requested information.

 

(b)          In connection with any offering under Regulation D of the Securities Act of 1933, as amended, each Investor should check the box or boxes in Section B which are next to the category or categories under which each of the equity owners of the Investor qualifies as an “accredited investor.”

 

(c)          Each Investor should check the box or boxes in Section C which are next to the category or categories under which the Investor qualifies as a “qualified purchaser.”

 

(d)          Each Investor that is an entity should provide the information and respond to the questions in Section D.

 

(e)          Each Investor should respond to the questions in Sections E, F and G.

 

(f)          Print the name of the Investor and sign (and print name, capacity and title of signatory, if applicable) on the final page of the Investor Questionnaire.

 

3.          Tax Forms:

 

Each U.S. Investor is required to fill in and sign and date the attached Form W-9, and each non-U.S. investor is required to fill in and date the relevant Form(s) W-8 (W-8BEN, W-8BEN-E, W-8IMY, W-8ECI or W-8EXP), as applicable, in accordance with the instructions to such Form. In the event that any applicable reduction or exemption from U.S. federal withholding tax is claimed, each Investor is required to provide all applicable attachments or addendums as required to claim such exemption or reduction.

 

 

 

 

4.          Evidence of Authorization:

 

Each Investor must provide satisfactory evidence of authorization.

 

For Corporations:

 

Generally, Investors which are corporations must submit certified corporate resolutions authorizing the subscription and identifying the corporate officer empowered to sign the Subscription Documents.

 

For Partnerships:

 

Partnerships must submit a certified copy of the partnership certificate (in the case of limited partnerships) or partnership agreement identifying the general partners.

 

For Limited Liability Companies:

 

Limited liability companies must submit a certified copy of the limited liability operating agreement or certificate of formation identifying the manager or managing member, as applicable, empowered to sign the Subscription Documents.

 

For Trusts:

 

Trusts must submit a copy of the trust agreement.

 

For Employee Benefit Plans:

 

Employee benefit plans must submit a certificate of an appropriate officer certifying that the subscription has been authorized and identifying the individual empowered to sign the Subscription Documents.

 

Each Investor may be required to submit further information for know your customer and anti-money laundering purposes, including, but not limited to, the information set forth in Exhibit A of this Subscription Agreement.

 

5.          Delivery of Subscription Documents:

 

Two (2) original completed and executed copies of the Subscription Agreement and the Investor Questionnaire, together with the Form W-9 or W-8, (W-8BEN, W-8BEN-E, W-8IMY, W-8ECI or W-8EXP), as applicable, the appropriate acknowledgment form and any required evidence of authorization, should be delivered to the Company at the following address:

 

Audax Management Company, LLC

Attn: Investor Relations

101 Huntington Avenue

Boston, MA 02199

 

 

 

 

With copies via facsimile to Audax Management Company, LLC, Attention: Investor Relations at (617) 859-1600 or via electronic mail to lprequest@audaxgroup.com, as soon as possible.

 

Inquiries regarding subscription procedures (including, if the Investor Questionnaire indicates that any Investor’s response to a question requires further information) should be directed to Audax Management Company, LLC by phone at (617) 859-1500, by fax at (617) 859-1600.

 

6.          Acceptance by the Company:

 

If the Investor’s subscription is accepted (in whole or in part) by the Company, a fully executed set of the Subscription Documents will be returned to the Investor. The Company may accept and countersign the Investor’s Subscription Agreement (in whole or in part) at any time.

 

7.          Wire Instructions:

 

Please wire funds to: Audax Senior BDC Inc.

 

  Bank:  Wells Fargo Bank, NA
  ABA #:  121-000-248
  Account Number:  6355067033
  Account Name:   CDO Clearing
  Reference:  AUDAX CREDIT BDC INC. A/C 84260000

 

[remainder of page intentionally left blank]

 

 

 

 

SUBSCRIPTION AGREEMENT

 

Audax Credit BDC Inc.

101 Huntington Avenue

Boston, Massachusetts 02199

 

Ladies and Gentlemen:

 

1.          Subscription.

 

(a)          The undersigned (the “Investor”) subscribes for and agrees to contribute to Audax Credit BDC Inc. or any successor thereto (the “Company”) the aggregate capital commitment in the amount set forth on the signature page hereto (“Capital Commitment”), and such Investor shall receive shares of common stock of the Company at the time of each drawdown under the Capital Commitment. The Investor understands that the Company has elected to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended (the “Code”).

 

The Investor acknowledges and agrees that this subscription (i) is irrevocable on the part of the Investor, (ii) is conditioned upon acceptance by or on behalf of the Company and (iii) may be accepted or rejected in whole or in part by the Company in its sole discretion at any time. The Investor agrees to be bound by all the terms and provisions of the Company’s Confidential Private Placement Memorandum, as amended, restated and/or supplemented from time to time (the “Memorandum”), the Company’s certificate of incorporation, substantially in the form attached hereto as Appendix A (as amended from time to time, the “Charter”), the Company’s bylaws, substantially in the form attached hereto as Appendix B (as amended from time to time, the “Bylaws”), the Investment Advisory Agreement by and between Audax Management Company (NY), LLC, our investment adviser (the “Adviser”), substantially in the form attached hereto as Appendix C (as amended from time to time, the “Advisory Agreement”), the Administration Agreement by and between the Company and Audax Management Company, LLC, our administrator (the “Administrator”), substantially in the form attached hereto as Appendix D (as amended from time to time, the “Administration Agreement” and, together with the Memorandum, the Charter, the Bylaws and the Advisory Agreement, collectively the “Operative Documents”), together with this subscription agreement (the “Subscription Agreement”). Capitalized terms not defined herein are used as defined in the Memorandum.

 

The Company has filed a registration statement on Form 10 (the “Form 10 Registration Statement”) which registered its common stock with the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Form 10 Registration Statement is not the offering document pursuant to which the Company is conducting this offering of securities and may not include all information regarding the Company contained in the Memorandum. Accordingly, Investors should rely exclusively on information contained in the Memorandum in making their investment decisions.

 

(b)          Payment in cleared funds for Shares must be received three business days prior to the Closing Date (as defined below). Subject to any legal or regulatory restrictions before the Closing Date, the Investor’s payment (the “Payment”) shall be held by the Company in a non-interest bearing account. If the subscription is rejected, the Payment shall be returned promptly to the Investor, and this Subscription Agreement shall have no force or effect.

 

 

 

 

2.          Closings.

 

(a)          The closing of the Offering (as defined in the Memorandum) will take place at the offices of Dechert LLP at 100 Oliver St., 40th Floor, Boston, Massachusetts 02110, on the date the Company accepts the Subscription Agreement unless otherwise agreed to by the parties (such date being the “Closing Date”). The Company may accept (in whole or in part) and countersign this Subscription Agreement at any time prior to or on the Closing Date.

 

(b)          The Investor agrees to provide any information reasonably requested by the Company to verify the accuracy of the representations contained herein, including, without limitation, the Investor Questionnaire. Upon acceptance of this Subscription Agreement (in whole or in part), the Company shall deliver to the Investor or its representative, a countersigned copy of this Subscription Agreement and other documents and instruments necessary to reflect the Capital Commitment, including any documents and instruments to be delivered pursuant to this Subscription Agreement.

 

3.          Drawdowns.

 

(a)          Subject to Section 3(d), the Investor agrees to purchase Shares for an aggregate purchase price equal to its Capital Commitment, payable at such times and in such amounts as required by the Company. The Company shall deliver a notice (the “Drawdown Notice”) to the Investor at least ten calendar days prior to the Drawdown (each, a “Drawdown Date”), setting forth the amount, in U.S. dollars, of the aggregate purchase price (the “Drawdown Purchase Price”) to be paid by the Investor to purchase Shares on such Drawdown Date. Each purchase of Shares pursuant to a Drawdown Notice shall be made at a per Share price equal to the then-current net asset value per Share.

 

(b)          Each Drawdown Purchase Price shall be payable, in U.S. dollars and in immediately available funds as set forth in wire transfer instructions included in the Drawdown Notice. In addition to the wire transfer instructions, each Drawdown Notice shall set forth (i) the Drawdown Date, (ii) the aggregate amount of the Drawdown and (iii) the Investor’s share of the Drawdown.

 

(c)          Concurrent with any payment of all or a portion of the Drawdown Purchase Price, the Company shall issue to the Investor a number of Shares equal to the amount of the Drawdown Purchase Price funded by the Investor on the applicable Drawdown Date divided by the most recently determined net asset value per Share as of such Drawdown Date.

 

(d)          Upon termination of the period (the “Commitment Period”) beginning on the Closing Date and ending on the completion of an initial public offering of the Shares or the listing of the Shares on a national securities exchange, the Investor shall be released from any further obligation to fund any portion of its Capital Commitment for which it has not received a Drawdown Notice prior to the termination of the Commitment Period.

 

(e)          The Investor acknowledges and agrees that the Company intends to allocate Drawdowns on each Drawdown Date to all Investors with an undrawn Capital Commitment pro rata in proportion to the then undrawn Capital Commitments of all Investors.

 

(f)          The Investor acknowledges that it may have capital commitments pursuant to other agreements with the Company and that the Capital Commitment pursuant to this Subscription Agreement shall in no way limit its obligations under such other agreements.

 

 

 

 

4.          Dividend Reinvestment Program. As described more fully in the Memorandum, the Company generally intends to distribute, out of assets legally available for distribution, substantially all of its available earnings, as determined by the Board of Directors in its discretion. The Company intends to reinvest all cash distributions declared by the Board of Directors on behalf of Investors who do not elect to receive their dividends in cash, crediting to each such Investor a number of Shares equal to the quotient determined by dividing the cash value of the distribution payable to such Investor by the net asset value per Share as last determined by the Board of Directors. The Investor may elect to receive any or all such distributions in cash by notifying the Administrator, in writing no later than 10 days prior to the record date for the first distribution that the Investor wishes to receive distributions in cash.

 

5.          Representations and Warranties of the Investor. To induce the Company to accept this subscription, the Investor represents and warrants as follows:

 

(a)          This Subscription Agreement has been duly authorized, executed and delivered by the Investor and, upon due authorization, execution and delivery by the Company, shall constitute the valid and legally binding agreement of the Investor enforceable in accordance with its terms against the Investor, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other laws of general application relating to or affecting the enforcement of creditors’ rights and remedies, as from time to time in effect, and (ii) application of equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

(b)          (i)          If the Investor is not a natural person, (A) that all of the equity owners of the Investor are “accredited investors” within the meaning of Regulation D under the Securities Act, (B) the Investor has the power and authority to enter into this Subscription Agreement and each other document required to be executed and delivered by the Investor in connection with this subscription for Shares, and to perform its obligations hereunder and thereunder and consummate the transactions contemplated hereby and thereby and (C) the person signing this Subscription Agreement on behalf of the Investor has been duly authorized to execute and deliver this Subscription Agreement and each other document required to be executed and delivered by the Investor in connection with this subscription for Shares.

 

(ii)          If the Investor is a natural person, the Investor has all requisite legal capacity to acquire and hold the Shares and to execute, deliver and comply with the terms of each of the documents required to be executed and delivered by the Investor in connection with this subscription for Shares. The execution and delivery by the Investor of, and compliance by the Investor with, this Subscription Agreement and each other document required to be executed and delivered by the Investor in connection with this subscription for Shares does not violate, represent a breach of, or constitute a default under, any instruments governing the Investor, any law, regulation or order, or any agreement to which the Investor is a party or by which the Investor is bound. This Subscription Agreement has been duly executed by the Investor and constitutes a valid and legally binding agreement of the Investor, enforceable against it in accordance with its terms.

 

(c)          The Shares to be acquired hereunder are being acquired by the Investor for the Investor’s own account for investment purposes only and not with a view to resale or distribution.

 

(d)          The Investor understands that the Company has filed an election to be treated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”), and has filed an election to be treated as a regulated investment company within the meaning of Section 851 of the Code, for U.S. federal income tax purposes; pursuant to those elections, the Investor shall be required to furnish certain information to the Company as required under Treasury Regulations § 1.852-6(a) and other regulations. If the Investor is unable or refuses to provide such information directly to the Company, the Investor understands that it shall be required to include additional information on its income tax return as provided in Treasury Regulations § 1.852-7.

 

 

 

 

(e)            (i)          The Investor understands that the offering and sale of the Shares are intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), applicable U.S. state securities laws and the laws of any non-U.S. jurisdictions by virtue of the private placement exemption from registration pursuant to Regulation D of the Securities Act, exemptions under applicable U.S. state securities laws and exemptions under the laws of any non-U.S. jurisdictions.

 

(ii)          The Investor understands that a legend will be placed on any certificate or certificates evidencing the Shares stating that they have not been registered under the Securities Act and setting forth or referring to the restrictions on transfers and sales thereof.

 

(iii)          The Investor understands that the offering and sale of the Shares in non-U.S. jurisdictions may be subject to additional restrictions and limitations and represents and warrants that it is acquiring its Shares in compliance with all applicable laws, rules, regulations and other legal requirements applicable to the Investor including, without limitation, the legal requirements of jurisdictions in which the Investor is resident and in which such acquisition is being consummated.

 

(f)          The Investor has been furnished and has carefully read this Subscription Agreement, each Operative Document, in each case as amended, restated and/or supplemented through the Closing Date, and a current copy of the Proxy Voting Policies and Procedures of the Adviser. The Investor has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares, is able to bear the risks of an investment in the Shares and understands the risks of, and other considerations relating to, a purchase of Shares, including the matters set forth under the caption “Risk Factors” in the Memorandum.

 

(g)          To the satisfaction of the Investor, the Investor has been furnished any materials the Investor has requested relating to the Company, the offering of Shares or any statement made in the Memorandum, and the Investor has been afforded the opportunity to ask questions of representatives of the Company concerning the terms and conditions of the offering and to obtain any additional information necessary to verify the accuracy of any representations or information set forth in the Memorandum.

 

(h)          Other than as set forth in this Subscription Agreement, the Operative Documents and any separate agreement in writing with the Company executed in conjunction with the Investor’s subscription for Shares, the Investor is not relying upon any other information, representation or warranty by the Company, its Adviser or any affiliate of the foregoing or any agent of them, written or otherwise, in determining to invest in the Company and the Investor understands that the Memorandum is not intended to convey tax or legal advice. The Investor has consulted, to the extent deemed appropriate by the Investor, with the Investor’s own advisers as to the financial, tax, legal, accounting, regulatory and related matters concerning an investment in Shares and on that basis understands the financial, tax, legal, accounting, regulatory and related consequences of an investment in Shares, and believes that an investment in the Shares is suitable and appropriate for the Investor.

 

(i)          If the Investor is not a “United States Person,” as defined below (a “non-U.S. Person”),

 

(a)          the Investor has heretofore notified the Company in writing of such status. For this purpose, “United States Person” means a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, an estate the income of which is subject to U.S. federal income taxation regardless of its source, or any trust (A) the administration of which may be subject to the primary supervision of a U.S. court and (B) the authority to control all of the substantial decisions of which is held by one or more U.S. persons.

 

 

 

 

(b)          The Investor shall notify the Company immediately if the Investor becomes a United States Person.

 

(c)          The Investor is acquiring the Shares for its own account for investment purposes only and is not subscribing on behalf of or funding its commitment with funds obtained from a United States Person.

 

(j)          If the Investor is, or is acting on behalf of, (i) an “employee benefit plan” (as defined in Section 3(3) of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) that is subject to Part 4 of Subtitle B of Title I of ERISA, (ii) a “plan” that is subject to Section 4975 of the Code, (iii) an entity whose underlying assets include “plan assets” of any employee benefit plan or other plan described in clause (i) or (ii) by reason of such plan’s investment in the entity or otherwise or (iv) an employee benefit plan subject to federal, state or local law (collectively, “Similar Law”) similar to Section 406 of ERISA or Section 4975 of the Code (each, a “Plan”), then the person executing this Subscription Agreement on behalf of the Plan represents and agrees that:

 

(i)          such person has completed Section D of the Investor Questionnaire, which, without limiting any other assurances in the Investor Questionnaire, such person hereby specifically represents and agrees is correct and complete;

 

(ii)          such person is a “fiduciary” of such Plan within the meaning of Section 3(21) of ERISA, Section 4975(e)(3) of the Code or Similar Law, and such person is authorized and has the discretion to execute the Subscription Agreement (the “Fiduciary”);

 

(iii)          unless otherwise indicated in writing to the Company, the Plan is not a participant-directed defined contribution plan;

 

(iv)          the Plan’s investment in the Company has been duly authorized under, and conforms in all respects to, the documents governing the Plan and the Fiduciary and complies with all applicable requirements of ERISA, the Code or Similar Law;

 

(v)          the Fiduciary is: (1) responsible for the decision to invest in the Company; (2) independent of the Company, the Adviser and their respective employees, officers, representatives and affiliates; and (3) qualified to make such investment decision;

 

(vi)          the Adviser and the Company and their respective employees, officers, representatives and affiliates do not have investment discretion, and are not otherwise acting in a fiduciary capacity, with respect to the investment of the Plan’s assets in the Company, and, without limiting the generality of the foregoing, the Fiduciary has not relied on, and is not relying on, any investment advice or recommendation of any such person with respect to the Plan’s investment in the Company;

 

(vii)          the Plan’s acquisition, holding and disposition of interests in the Company do not and will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violation of Similar Law;

 

(viii)          the Fiduciary expressly acknowledges that the Board of Directors has the authority to require the redemption, withdrawal or other cancellation of any Shares if the Board of Directors determines that the continued holding of such Shares, in the opinion of the Board of Directors, could result in the Company being subject to ERISA or Section 4975 of the Code;

 

 

 

 

(ix)          the Fiduciary has been informed about the fee structure of the Company, including, but not limited to, any performance fee or allocation, and has concluded that such fees are reasonable and the investment in the Company otherwise constitutes a reasonable contract or arrangement; and

 

(x)          the Fiduciary acknowledges and agrees that neither the Adviser nor any of its employees, representatives or affiliates will be a fiduciary with respect to the Plan as a result of the Plan’s investment in the Company, pursuant to the provisions of ERISA, the Code or any applicable Similar Laws, or otherwise.

 

If applicable, the Investor has identified its status as a Benefit Plan Investor (as defined below) to the Company in its completed Investor Questionnaire.  If the Investor has identified to the Company in its completed Investor Questionnaire that it is not currently a Benefit Plan Investor, but becomes a Benefit Plan Investor, without limiting the remedies available in the event of a breach, the Investor shall forthwith disclose to the Adviser promptly in writing such fact and also the percentage of such Investor’s equity interests held by Benefit Plan Investors.  For these purposes, a “Benefit Plan Investor” is (i) an “employee benefit plan” as defined in and subject to Part 4 of Subtitle B of Title I of ERISA, (ii) a “plan” as defined in and subject to Section 4975 of the Code, and (iii) any entity whose underlying assets are deemed for purposes of ERISA or Section 4975 of the Code to include “plan assets” by reason of such plan’s investment in the entity or otherwise. Without limiting the remedies available in the event of a breach, the Investor agrees to notify the Adviser promptly in writing if there is any change in the percentage of the Investor’s assets that are treated as “plan assets” for purposes of Section 3(42) of ERISA and any regulations promulgated thereunder as set forth in the Investor Questionnaire to this Subscription Agreement.

 

(k)          If the Investor is an insurance company and is investing the assets of its general account (or the assets of a wholly owned subsidiary of its general account) in the Company, it has identified in the Investor Questionnaire whether the assets underlying the general account constitute “plan assets” under Section 401(c) of ERISA. Without limiting the remedies available in the event of a breach, the Investor agrees promptly to notify the Company in writing if there is a change in the percentage of the general account’s assets that constitute plan assets for purposes of ERISA or Section 4975 of the Code, and shall disclose such new percentage ownership.

 

(l)          The Investor was offered the Shares through private negotiations, not through any general solicitation or general advertising.

 

(m)          Neither the Investor, nor any of its affiliates or beneficial owners, (i) appears on the list of Specially Designated Nationals and Blocked Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), the list of Foreign Sanctions Evaders maintained by OFAC, or any other lists of restricted parties maintained by the U.S. Government, nor are they otherwise a party with which any entity is prohibited to deal under the laws of the United States, or (ii) is a Person identified as a terrorist organization on any other relevant lists maintained by governmental authorities. The Investor further represents and warrants that the monies used to fund the investment in the Shares are not derived from, invested for the benefit of, or related in any way to, and that no monies or dividends received as a result of the investment in the Shares will be provided to or for the benefit of, the governments of, or persons within, any country (A) under a U.S. embargo enforced by OFAC, (B) that has been designated as a “non-cooperative country or territory” by the Financial Action Task Force on Money Laundering or (C) that has been designated by the U.S. Secretary of the Treasury as a “primary money laundering concern.” The Investor further represents and warrants that the Investor: (1) has conducted thorough due diligence with respect to all of its beneficial owners, (2) has established the identities of all beneficial owners and the source of each of the beneficial owner’s funds and (3) will retain evidence of any such identities, any such source of funds and any such due diligence. The Investor further represents and warrants that the Investor does not know or have any reason to suspect that (x) the monies used to fund the Investor’s investment in the Shares have been or will be derived from or related to any illegal activities, including money laundering activities, and (y) the proceeds from the Investor’s investment in the Shares will be used to finance any illegal activities. The representations with respect to the Investor’s policies, procedures and records in that certain letter from the Adviser to the Company’s Custodian (a copy of which was provided to the Investor) are accurate.

 

 

 

 

(n)          None of the information concerning the Investor nor any statement, certification, representation or warranty made by the Investor in this Subscription Agreement or in any document required to be provided under this Subscription Agreement (including the Investor Questionnaire and any forms W-9 or W-8 (W-8BEN, W-8BEN-E, W-8IMY, W-8ECI or W-8EXP)), as applicable, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading.

 

(o)          The execution, delivery and performance of this Subscription Agreement by the Investor do not and will not result in a breach of any of the terms, conditions or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, credit agreement, note or other evidence of indebtedness, or any lease or other agreement, or any license, permit, franchise or certificate, to which the Investor is a party or by which it is bound or to which any of its properties are subject, or require any authorization or approval under or pursuant to any of the foregoing, violate the organizational documents of the Investor, or violate in any material respect any statute, regulation, law, order, writ, injunction or decree to which the Investor is subject. The Investor has obtained all authorizations, consents, approvals and clearances of all courts, governmental agencies and authorities and such other persons, if any, required to permit the Investor to enter into this Subscription Agreement and to consummate the transactions contemplated hereby.

 

6.          Additional Limitations on Transfer of Shares. The Investor agrees that:

 

(i)          The Investor may not transfer any of its Shares unless (A) the Company provides its prior written consent, (B) the Transfer is made in accordance with applicable securities laws and (C) the Transfer is otherwise in compliance with the transfer restrictions set forth in Appendix E. No Transfer shall be effectuated except by registration of the Transfer on the Company’s books. Each transferee must agree to be bound by these restrictions and all other obligations as an Investor in the Company.

 

“Transfer” shall mean sell, offer for sale, exchange, transfer, assign, pledge, hypothecate or otherwise dispose of.

 

(ii)          The Investor acknowledges and understands that there are other substantial restrictions on the transferability of Shares under this Subscription Document, the Operative Documents and under applicable law including the fact that (A) there is no established market for the Shares and it is possible that no public market for the Shares will develop; (B) the Shares are not currently, and Investors have no rights to require that the Shares be, registered under the Securities Act or the securities laws of the various states or any non-U.S. jurisdiction and therefore cannot be Transferred unless subsequently registered or unless an exemption from such registration is available; and (C) the Investor may have to hold the Shares herein subscribed for and bear the economic risk of this investment indefinitely, and it may not be possible for the Investor to liquidate its investment in the Company.

 

 

 

 

7.          Disclosure of Investor’s Information. The Investor acknowledges and agrees that certain non-public information concerning the Investor set forth in this Agreement or otherwise disclosed by the Investor to the Company, or other agents of the Company, such as the Investor’s name, address, social security number, assets and income, and information regarding the Investor’s investment in the Company (collectively, the “Information”) (i) may be disclosed to the Adviser, Administrator, attorneys, accountants and auditors in furtherance of the Company’s business and to other service providers such as brokers who may have a need for the Information in connection with providing services to the Company, (ii) to third party service providers or financial institutions who may be providing marketing services to the Company; provided that such persons must agree to protect the confidentiality of the Information and use the Information only for the purposes of providing services to the Company, and (iii) as otherwise required or permitted by applicable law. The Company, Adviser and Administrator restrict access to the Information to its employees who need to know the Information to provide services to the Company and maintain physical, electronic and procedural safeguards that comply with U.S. federal standards to guard the Information.

 

8.          Compliance with Laws.

 

(a)          The Investor shall provide to the Company at any time such information as the Company determines to be necessary or appropriate (A) to comply with the anti-money laundering laws, rules and regulations of any applicable jurisdiction and (B) to respond to requests for information concerning the identity of Investors from any governmental authority, self-regulatory organization or financial institution in connection with its anti-money laundering compliance procedures, or to update such information. Failure to provide such information upon request may result in the compulsory redemption of the Investor’s Shares.

 

(b)          To comply with applicable U.S. anti-money laundering laws and regulations, all payments and contributions by the Investor to the Company, and all payments and distributions to the Investor, shall only be made in the Investor’s name and to and from a bank account of a bank based or incorporated in or formed under the laws of the United States or that is regulated in and either based or incorporated in or formed under the laws of the United States and that is not a “foreign shell bank” within the meaning of the U.S. Bank Secrecy Act (31 U.S.C. § 5311 et seq.), as amended, and the regulations promulgated thereunder by the U.S. Department of the Treasury, as such regulations may be amended from time to time.

 

(c)          The Investor understands and agrees that the Company may not accept any amounts from a prospective Investor if such prospective Investor cannot make the representations set forth above. If an existing Investor cannot make such representations, the Company may require the withdrawal of such Investor from the Company.

 

(d)          The Investor acknowledges and agrees that, in order to comply with the provisions of the U.S. Foreign Account Tax Compliance Act (“FATCA”) and avoid the imposition of U.S. federal withholding tax, the Company and Administrator may from time to time require further information and/or documentation from the Investor and, if and to the extent required under FATCA, the Investor’s direct and indirect beneficial owners (if any), relating to or establishing such person’s identity, residence (or jurisdiction of formation) and income tax status, and may provide or disclose such information and documentation to the U.S. Internal Revenue Service.  The Investor agrees that it shall provide such information and documentation concerning itself and its beneficial owners, if any, as and when requested by the Company or the Administrator sufficient for the Company to comply with its obligations under FATCA.  The Investor acknowledges that, if the Investor does not provide the requested information and documentation, the Company may, at its sole option and in addition to all other remedies available at law or in equity, immediately redeem such Investor’s Shares, reduce such Investor’s Capital Commitment, prohibit additional investments, decline or delay any redemption requests by the Investor and/or deduct from such Investor’s account and retain amounts sufficient to indemnify and hold harmless the Company from any and all withholding taxes, interest, penalties and other losses or liabilities suffered by the Company on account of the Investor not providing all requested information and documentation in a timely manner.  The Investor shall have no claim against the Company, the Administrator, the Adviser or any of their respective affiliates for any form of damages or liability as a result of any of the aforementioned actions.

 

 

 

 

9.          Credit Facilities. The Investor acknowledges and agrees that the Company may enter into one or more revolving or other credit facilities with one more syndicates of banks or otherwise incur indebtedness. In connection therewith, each Investor hereby agrees to cooperate with the Company and provide financial information and other documentation reasonably and customarily required to obtain such facilities.

 

10.          Dividend Reinvestment. Notwithstanding anything to the contrary provided in Section 4, in the event that the Investor has not otherwise elected to receive its dividends in cash and the reinvestment of any dividend (or any portion thereof) on behalf of the Investor would cause the Investor to hold in aggregate more than three percent (3%) of the outstanding Shares, the Investor shall be deemed to have elected to receive such dividend (or any portion thereof) in cash (but only to the extent necessary to avoid the occurrence of the foregoing consequence).

 

11.          Further Advice and Assurances. All information which the Investor has provided to the Company, including the information in the Investor Questionnaire, is true, correct and complete as of the date hereof, and the Investor agrees to notify the Company immediately in writing if any representation, warranty or information contained in this Subscription Agreement or any of the information in the Investor Questionnaire, becomes untrue at any time. The Investor agrees to provide such information and execute and deliver such documents with respect to itself and its direct and indirect beneficial owners as the Company may from time to time reasonably request to determine the eligibility of the Investor to purchase Shares in the Company, to verify the accuracy of the Investor’s representations and warranties herein, establish the identity of the Investor and the direct and indirect participants in its investment in Shares, to the extent applicable, to effect any transfer and admission and/or to comply with any law, rule or regulation to which the Company may be subject, including, without limitation, compliance with anti-money laundering laws and regulations or for any other reasonable purpose.

 

12.          Power of Attorney.

 

(a)          The Investor, by its execution hereof, hereby irrevocably makes, constitutes and appoints the Company as its true and lawful agent and attorney-in-fact, with full power of substitution and full power and authority in its name, place and stead, to make, execute, sign, acknowledge, swear to, record and file:

 

(i)          any and all filings required to be made by the Investor under the Exchange Act with respect to any of the Company’s securities which may be deemed to be beneficially owned by the Investor under the Exchange Act;

 

(ii)          all certificates and other instruments deemed advisable by the Company in order for the Company to enter into any borrowing or pledging arrangement;

 

 

 

 

(iii)          all certificates and other instruments deemed advisable by the Company to comply with the provisions of this Subscription Agreement and applicable law or to permit the Company to become or to continue as a business development company and/or regulated investment company under the Code; and

 

(iv)          all other instruments or papers not inconsistent with the terms of this Subscription Agreement, which may be required by law to be filed on behalf of the Company.

 

(b)          With respect to the Investor and the Company, the foregoing power of attorney:

 

(i)          is coupled with an interest and shall be irrevocable;

 

(ii)          may be exercised by the Company either by signing separately as attorney-in-fact for the Investor or, after listing all of the Investors, executing an instrument, by a single signature of the Company acting as attorney-in-fact for all of them;

 

(iii)          shall survive the assignment by the Investor of the whole or any fraction of its Shares;

 

(iv)          may not be used by the Company in any manner that is inconsistent with the terms of this Subscription Agreement and any other written agreement between the Company and the Investor.

 

13.          Indemnity. The Investor understands that the information provided herein (including the Investor Questionnaire) shall be relied upon by the Company for the purpose of determining the eligibility of the Investor to purchase Shares in the Company. To the fullest extent permitted under applicable law, the Investor agrees to indemnify and hold harmless the Company, the Adviser, the Administrator, and their affiliates and each partner, member, officer, director, employee and agent thereof, from and against any loss, damage or liability due to or arising out of a breach of any representation, warranty or agreement of the Investor contained in this Subscription Agreement (including the Investor Questionnaire) or in any other document provided by the Investor to the Company or in any agreement executed by the Investor in connection with the Investor’s investment in Shares.

 

14.          Miscellaneous. This Subscription Agreement is not transferable or assignable by the Investor. Any purported assignment of this Subscription Agreement shall be null and void. The representations and warranties made by the Investor in this Subscription Agreement (including the Investor Questionnaire) shall survive the closing of the transactions contemplated hereby and the dissolution of the Company without limitation as to time. The Investor Questionnaire, including the representations and warranties contained therein, is an integral part of this Subscription Agreement, and shall be deemed incorporated by reference herein. This Subscription Agreement may be executed in one or more counterparts, all of which together shall constitute one instrument. The headings contained in this Subscription Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Subscription Agreement. Notwithstanding the place where this Subscription Agreement may be executed by any of the parties hereto, the parties expressly agree that this Subscription Agreement shall be governed by and construed in accordance with the laws of the state of Delaware, and the parties hereto submit to the non-exclusive jurisdiction of the Delaware courts.

 

 

 

 

15.          Confidentiality. The Investor acknowledges that the Memorandum and other information relating to the Company has been submitted to the Investor on a confidential basis for use solely in connection with the Investor’s consideration of the purchase of Shares. The Investor agrees that, without the prior written consent of the Company (which consent may be withheld at the sole discretion of the Company), the Investor shall not (a) reproduce the Memorandum or any other information relating to the Company, in whole or in part, or (b) disclose the Memorandum or any other information relating to the Company to any person who is not an officer or employee of the Investor who is involved in its investments, or partner (general or limited) or affiliate of the Investor (it being understood and agreed that if the Investor is a pooled investment fund, it shall only be permitted to disclose the Memorandum or other information related to the Company if the Investor has required its investors to enter into confidentiality undertakings no less onerous than the provisions of this Section 15), except to the extent (1) such information is in the public domain (other than as a result of any action or omission of the Investor or any person to whom the Investor has disclosed such information) or (2) such information is required by applicable law or regulation to be disclosed; provided, however, that in the event disclosure is required pursuant to clause (2), the Investor agrees to (a) inform the Company of the full circumstances of the required disclosure, (b) consult with the Company as to the possible steps to avoid or limit the required disclosure and to take such steps where they would not result in material adverse consequences to the Investor and (c) provide the Company with an opportunity to review the contents of any such disclosure. The Investor further agrees to return the Memorandum and any other information relating to the Company if no purchase of Shares is made or upon the Company’s request therefore. The Investor acknowledges and agrees that monetary damages would not be sufficient remedy for any breach of this section by the Investor, and that in addition to any other remedies available to the Company in respect of any such breach, the Company shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach.

 

16.          Necessary Acts, Further Assurances. The parties shall at their own cost and expense execute and deliver such further documents and instruments and shall take such other actions as may be reasonably required or appropriate to evidence or carry out the intent and purposes of this Subscription Agreement or to show the ability to carry out the intent and purposes of this Subscription Agreement.

 

17.          No Joint Liability Among the Company, the Adviser, and the Administrator. The Company shall not be liable for the fulfillment of any obligation or the accuracy of any representation of the Adviser, or the Administrator under or in connection with this Subscription Agreement, the Adviser shall not be liable for the fulfillment of any obligation or the accuracy of any representation of the Company, or the Administrator under or in connection with this Subscription Agreement and the Administrator shall not be liable for the fulfillment of any obligation or the accuracy of any representation of the Company, or the Adviser under or in connection with this Subscription Agreement. There shall be no joint and several liability of the Company, the Adviser and the Administrator for any obligation under or in connection with this Subscription Agreement.

 

 

 

 

 

IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement as a deed on the date set forth below.

 

Date: May 28, 2021 Capital Commitment
   
  USD ONLY
   
  $8,900,000
   
  INDIVIDUAL INVESTOR:
   
   
  (Print Name)
   
   
  (Signature)
   
   
  (Witnessed By)
   
  PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY, TRUST, CUSTODIAL ACCOUNT, OTHER INVESTOR:
   
  Mercer Audax Credit Feeder Fund LP
  (Print Name of Entity)
   
  By:   
  (Signature)
   
  Harry Leggat – VP of Mercer Investments LLC, manager of the GP
  (Print Name and Title)
   
   
  (Witnessed By)

 

Agreed and accepted:

 

AUDAX CREDIT BDC INC.  
     
By:    
Name:    
Title:    

 

[Signature Page to Subscription Agreement]

 

 

 

 

INVESTOR QUESTIONNAIRE

 

A.General Information

 

1.Print Full Name of Investor:

 

 Individual:  
  FirstMiddle Last

 

 Entity: Mercer Audax Credit Feeder Fund LP
  Name of Entity

 

To assist the Company in preparing its tax filings, please check the category into which you fall:

 

  Partnership   x   Corporation   ¨
  S-Corporation   ¨   Estate   ¨
  Grantor Trust   ¨        
  Trust-EIN (a trust with an EIN in this format: 12-3456789)   ¨   Trust-SSN (a trust with an EIN in this format: 123-45-6789)   ¨
  IRA-EIN   ¨   IRA-SSN   ¨
  Exempt Organization   ¨        
  LLP   ¨   LLC   ¨
  Nominee-EIN   ¨   Nominee-SSN   ¨
  Other   ¨        

 

 Jurisdiction of Organization:  Cayman Islands
     
 Location of Domicile:  Cayman Islands*
     
2.U.S. Taxpayer Identification or Social Security Number:   N/A
     
3.Date of Birth:   
     
4.Primary Contact Person for this Account and for General Notices:   
     
 Name:     
 Address:     
     
 Telephone:     
 Fax:     

 

* Investor is a Cayman Islands exempted limited partnership that has a US general partner and is beneficially owned by non-US investors. Attached is Form W-8 IMY for the Investor along with Forms W-8 from beneficial owners and a withholding statement, including tax treaty jurisdictions.

 

5._________________________________ Residence (if an individual) or Principal Place of Business (if an entity) of the Investor (no P.O. Boxes, if any):

 

 

 

 

Address: c/o Mercer Investments LLC  
701 Market Street, Suite 1100 Saint. Louis, MO 63101  
Telephone: (314) 588-2500  
Fax: (314) 588-2525  
E-mail: harry.leggat@mercer.com  

 

6. For distributions of cash, please wire funds to the following bank account:
   
  Bank Name:  
     
  Bank Location:  
     
  Account Number:  
     
  Account Name:  
     
  Bank’s Routing No.:  
     
  For further credit to:  
     
  (if any)  
     
  Reference:  
     
  SWIFT Code:  

 

7. For distributions in-kind, please:
   
  Credit securities to my brokerage account at the following firm:
     
  Firm Name:  
     
  Address:  
     
  Account Name:  
     
  Account Number:  
     
  DTC Number:  

 

 

 

 

B.Regulation D – Accredited Investor Status

 

The Investor represents and warrants that each equity owner of the Investor is an “accredited investor” within the meaning of Regulation D under the Securities Act, and has indicated below each category under which such equity owner qualifies as an “accredited investor.”

 

The Investor is:

 

¨(i) an individual who had an income in excess of $200,000 in each of the two most recent years (or joint income with his or her spouse in excess of $300,000 in each of those years) and has a reasonable expectation of reaching the same income level in the coming year;

 

¨(ii) an individual who has a net worth (or joint net worth with his or her spouse) in excess of $1,000,000. For purposes of determining the Investor’s net worth, the Investor must exclude the value of his or her primary residence and any indebtedness secured by the primary residence up to its fair market value (i.e., any indebtedness secured by the residence that is in excess of the value of the home should be considered a liability and deducted from the Investor’s net worth).  The Investor must also subtract from his or her net worth any indebtedness secured by his or her primary residence that was obtained within the sixty days preceding the effective date of his or her subscription, unless such indebtedness was used to acquire the residence (in which case, the rule set forth in the preceding sentence would govern the application of such indebtedness when calculating the Investor’s net worth);

 

¨(iii) a broker or dealer registered pursuant to Section 15 of the Exchange Act;

 

¨(iv) a bank as defined in Section 3(a)(2) of the Securities Act or any savings and loan association as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity;

 

¨(v) an insurance company as defined in Section 2(a)(13) of the Securities Act;

 

¨(vi) an investment company registered under the 1940 Act;

 

¨(vii) an Individual Retirement Account (“IRA”) or revocable trust and the individual who established the IRA or each grantor of the trust is an accredited investor on the basis of (i) or (ii) above;

 

¨(viii) a self-directed pension plan and the participant who directed that assets of his or her account be invested in the Company is an accredited investor on the basis of (i) or (ii) above and such participant is the only participant whose account is being invested in the Company;

 

¨(ix) a pension plan which is not a self-directed plan and which has total assets in excess of $5,000,000;

 

¨(x) a trust which consists of a single trust (a) with total assets in excess of $5,000,000, (b) which was not formed for the specific purpose of investing in the Company and (c) whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment;

 

 

 

 

x (xi) a corporation, a partnership, a limited liability company or a Massachusetts or similar business trust, that was not formed for the specific purpose of acquiring an interest in the Company, with total assets in excess of $5,000,000;

 

¨(xii) an organization described in Section 501(c) of the Code, and exempt from U.S. income tax pursuant to Section 501(a) of the Code with total assets in excess of $5,000,000;

 

¨(xiii) an entity in which all of the equity owners are accredited investors;

 

¨(xiv) (A) a business development company as defined in Section 2(a)(48) of the 1940 Act or (B) a Small Business Investment Fund licensed by the United States Small Business Administration under Section 301(c) or (d) of the Small Business Investment Company Act of 1958;

 

¨(xv) a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended;

 

¨ (xvi) a director or executive officer of the Company; or

 

¨(xvii) none of the above applies (further information may be required).

 

Check all applicable categories.

 

 

 

 

C.Qualified Purchaser Status

 

Qualified Purchaser Status.  Please mark the appropriate box next to each description applicable to the Investor:

 

(1)¨   A natural person (including any person who will hold a joint, community property, or other similar shared ownership interest in the Company with that person’s qualified purchaser spouse) who owns at least $5,000,000 in “Investments” (as defined in Rule 2a51-1 under the 1940 Act).

 

(2)¨   A company* that owns at least $5,000,000 in Investments and that is owned directly or indirectly by or for two or more natural persons who are related as siblings or spouse (including former spouses), or direct lineal descendants by birth or adoption, spouses of such persons, the estates of such persons, or foundations, charitable organizations, or trusts established by or for the benefit of such persons.

 

(3)¨   A trust that is not covered by clause (2) above, and that was not formed for the specific purpose of investing in the Company, as to which the trustee or other person authorized to make decisions with respect to the trust, and each settlor or other person who has contributed assets to the trust, is a person described in clause (1), (2), or (4) below.

 

(4)x   A person (including a company), acting for its own account or the accounts of other qualified purchasers, who in the aggregate owns and invests on a discretionary basis, not less than $25,000,000 in Investments.

 

(5)¨   A natural person (including any person who will hold a joint, community property, or other similar shared ownership interest in the Company with that person’s qualified purchaser spouse) who owns at least $5,000,000 in Investments.

 

(6)¨   A “Qualified Institutional Buyer” as defined in Rule 144A under the Securities Act (as that term is modified by the limitations imposed thereon by Rule 2a51-1(g)(1) under the 1940 Act).

 

(7)¨   A company, regardless of the amount of its Investments, where each of the beneficial owners of securities issued by such company is a person described in clause (1), (2), (3), (4), or (5).  (If this item is checked, please contact the Company.  Additional requirements may apply.)

 

 

 

*For purposes of this Question, “company” includes a corporation, a partnership, an association, a joint-stock company, a trust or a fund.  In order to be a “qualified purchaser” any company that both (i) would, but for an exception provided in Sections 3(c)(1) or 3(c)(7) of the 1940 Act, be an investment company and (ii) was in existence prior to May 1, 1996, must have complied with the consent provisions of Section 2(a)(51)(C) of the 1940 Act.

 

 

 

 

D.            Required Supplemental Data

 

1.             Is the Investor, or is the Investor acting (directly or indirectly) on behalf of or using the assets of, a person that is or will be a Benefit Plan Investor (as defined below)?

 

¨ Yes            x No

 

A “Benefit Plan Investor” is as defined in 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (the “Plan Asset Regulation”) and includes (i) an “employee benefit plan” subject to Part 4, Subtitle B of Title I of ERISA, (ii) a “plan” subject to Section 4975 of the Code, and (iii) any entity whose underlying assets include “plan assets” by reason of such employee benefit plan’s or other plan’s investment in the entity or otherwise. A Benefit Plan Investor can also include an insurance company general account the assets of which are considered for purposes of ERISA or Section 4975 of the Code to be assets of a Benefit Plan Investor.

 

2.             If the Investor is, or is acting (directly or indirectly) on behalf of or using the assets of, a person that is or will be a Benefit Plan Investor, the Investor is:

 

  ¨ (a) an “employee benefit plan” or trust that is subject to Part 4, Subtitle B of Title I of ERISA;
       
  ¨ (b) a “plan” to which Section 4975 of the Code applies;
       
  ¨ (c) an entity (other than an insurance company generasl account) whose underlying assets include “plan assets” by reason of an employee benefit plan’s or other plan’s investment in the entity or otherwise for purposes of ERISA or Section 4975 of the Code;
       
      If Item 2(c) above is applicable, insert the maximum percentage of the assets of the entity that constitutes or may in the future constitute “plan assets” during the period of its investment in the Company:
       
      _________%
       
  ¨ (d) An insurance company using assets of its general account (directly or through subsidiaries) that are subject to ERISA or Section 4975 of the Code (including, without limitation, by virtue of Section 401(c) of ERISA).
       
      If Item 2(d) above is applicable, insert the maximum percentage of the general account as a whole that constitutes or may in the future constitute “plan assets” during the period of its investment in the Company:
       
      _________%

 

Without limiting the remedies available in the event of a breach, the Investor agrees promptly to notify the Adviser in writing if there is a change in the percentage set forth above, or any other response above, at such time or times as the Adviser may request.

 

 

3.            If the Investor is not subject to Title I of ERISA or Section 4975 of the Code, indicate whether or not such Investor is subject to any other federal, state, local, non-U.S. or other laws or regulations that could cause the underlying assets of the Company to be treated as assets of the Investor by virtue of its investment in the Company and thereby subject the Company and the Adviser (or other persons responsible for the investment and operation of the Company’s assets) to laws or regulations that are similar to Section 406 of ERISA or Section 4975 of the Code.

 

¨ Yes            x No

 

E.            Certain Unregistered Private Investment Companies:

 

Is the Investor a private investment company which is not registered under the 1940 Act in reliance on:

 

Section 3(c)(1) thereof?

¨ Yes             x No

       
Section 3(c)(7) thereof?

x Yes            ¨ No

 

F.            Controlling Persons:

 

Is the undersigned or will the undersigned be a person (including an entity) that has discretionary authority or control with respect to the assets of the Company or a person who provides investment advice with respect to the assets of the Company or an “affiliate” of such a person? For purposes of this representation and agreement, an “affiliate” is any person controlling, controlled by or under common control with any such person, including by reason of having the power to exercise a controlling influence over the management or policies of such person.

 

¨ Yes           x No

 

G.           Related Parties/Other Beneficial Interests:

 

1.            To the best of the Investor’s knowledge, does the Investor control, or is the Investor controlled by or under common control with, any other Investor in the Company?

 

¨ Yes            x No

 

If the question above was answered “Yes,” please indicate the name of such other investor in the space below:

 

____________________________________

 

2.            Will any other person or persons have a beneficial interest in the Shares to be acquired hereunder (other than as a shareholder, partner, policy owner or other beneficial owner of equity interests in the Investor)? (By way of example, and not limitation, “nominee” Investors or Investors who have entered into swap or other synthetic or derivative instruments or arrangements with regard to the Shares to be acquired herein would check “Yes”).

 

¨ Yes            x No

 

 

If either question above was answered “Yes,” please contact the Administrator for additional information that will be required.

 

H.            BHC Investor Status:

 

Is the Investor a “BHC Investor”?1

 

¨ Yes            x No

 

[remainder of page intentionally left blank]

 

 

1 A “BHC Investor” is defined as an Investor that is a bank holding company, as defined in Section 2(a) of the Bank Holding Company Act of 1956, as amended (the “BHC Act”), a non-bank subsidiary (for purposes of the BHC Act) of a bank holding company, a foreign banking organization, as defined in Regulation K of the Board of Governors of the Federal Reserve System (12 C.F.R. § 211.23) or any successor regulation, or a non-bank subsidiary (for purposes of the BHC Act) of a foreign banking organization which subsidiary is engaged, directly or indirectly in business in the United States and which in any case holds Shares for its own account.

 

 

  Signatures:
     
  INDIVIDUAL:
     
   
    (Signature)
     
   
    (Print Name)
     
     
  PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY, TRUST, CUSTODIAL ACCOUNT, OTHER:
     
  Mercer Audax Credit Feeder Fund LP
    (Name of Entity)
     
  By:  
    (Signature)
     
   
    (Print Name and Title)

 

 

APPENDIX A

 

[CERTIFICATE OF INCORPORATION]

 

 

APPENDIX B

 

[BYLAWS]

 

 

APPENDIX C

 

[FORM OF ADVISORY AGREEMENT]

 

 

APPENDIX D

 

[FORM OF ADMINISTRATION AGREEMENT]

 

 

APPENDIX E

 

TRANSFER RESTRICTIONS

 

No Transfer of the Investor’s Capital Commitment or all or any fraction of the Investor’s Shares may be made without (i) registration of the Transfer on the Company books and (ii) the prior written consent of the Administrator. In any event, the consent of the Company may be withheld (x) if the creditworthiness of the proposed transferee, as determined by the Company in its sole discretion, is not sufficient to satisfy all obligations under the Subscription Agreement or (y) unless, in the opinion of counsel (who may be counsel for the Company or the Investor) satisfactory in form and substance to the Company:

 

·such Transfer would not violate the Securities Act, the 1940 Act or any state (or other jurisdiction) securities or “Blue Sky” laws applicable to the Company or the Shares to be Transferred; and

 

·such Transfer would not be a “prohibited transaction” under ERISA or the Code or the regulations promulgated thereunder or cause all or any portion of the assets of the Company to constitute “plan assets” under ERISA, certain Department of Labor regulations or Section 4975 of the Code.

 

The Investor agrees that it shall pay all reasonable expenses, including attorneys’ fees, incurred by the Company in connection with any Transfer of all or any fraction of its Shares, prior to the consummation of such Transfer.

 

Any person that acquires all or any fraction of the Shares of the Investor in a Transfer permitted under this Appendix E shall be obligated to pay to the Company the appropriate portion of any amounts thereafter becoming due in respect of the Capital Commitment committed to be made by its predecessor in interest. The Investor agrees that, notwithstanding the Transfer of all or any fraction of its Shares, as between it and the Company it shall remain liable for its Capital Commitment prior to the time, if any, when the purchaser, assignee or transferee of such Shares, or fraction thereof, becomes a holder of such Shares.

 

The Company shall not recognize for any purpose any purported Transfer of all or any fraction of the Shares and shall be entitled to treat the transferor of Shares as the absolute owner thereof in all respects, and shall incur no liability for distributions or dividends made in good faith to it, unless the Company shall have given its prior written consent thereto and there shall have been filed with the Company a dated notice of such Transfer, in form satisfactory to the Company, executed and acknowledged by both the seller, assignor or transferor and the purchaser, assignee or transferee, and such notice (i) contains the acceptance by the purchaser, assignee or transferee of all of the terms and provisions of this Subscription Agreement and its agreement to be bound thereby, and (ii) represents that such Transfer was made in accordance with this Subscription Agreement, the provisions of the Memorandum and all applicable laws and regulations applicable to the transferee and the transferor.

 

 

EXHIBIT A

 

CIP MATRIX

 

To help the government fight the funding of terrorism and money laundering activities, U.S. federal law requires certain financial institutions to obtain, verify, and record information that identifies each person who opens an account.

 

The Company may reject your subscription if the required identifying information is not provided.

 

Each Investor must provide the following information and documents to the Administrator in order to satisfy its anti-money laundering program:

 

Non-U.S. Persons:

In addition to the specific requirements listed below, Non-U.S. Investors must also:

 

1.             Provide a translation for any documents not in English.

 

2.             (Other than individual Non-U.S. Persons) Provide a statement of account purpose, including: (a). Nature of the customer’s business and the market it serves; (b) Account purpose/Is the account being established on behalf of the customers’ customers? (c) Anticipated account activity

 

 

(Note: If an asterisk (*) appears next to an item listed below, the item is optional.)

 

Type of Investor Identification Information Verification Information

Individual

 

Individuals include owners of individual accounts, both individual owners of joint accounts and power of attorney

1.         Name of investor

2.         Physical address and mailing address (if different)

3.         Date of Birth

4.         Social Security Number

5.         Signed subscription document

6.         List of authorized signers (other than investor, if any)

7.         Source of Wealth*

8.         Telephone number*

9.         Occupation *

10.       Employer *

11.       Email address/website *

 

Copy of either:

1.  Passport OR

2.  Photo Drivers license OR

3.  Other government–issued photo ID

 

Note: Non-Documentary methods (i.e., PA compliance) may also be utilized for verification.

 

 

 

Type of Investor Identification Information Verification Information

Private Corporation

 

Private Corporation includes Limited Liability Companies (LLC)

1.         Name of corporation

2.         Beneficial Owners with more than 20% interest

3.         Physical address & mailing address (if different)

4.         U.S. TIN or other government ID number (accompanied by a description of the type of identification and the name of the issuing government body)

5.         Signed subscription document

6.         List of Authorized Signers

7.         Nature of business

8.         Source of Wealth*

9.         Telephone number*

10.       Email address/website *

 

Copy of either:

1.  Certificate of Incorporation OR

2.  Certificate of good standing OR

3.  Government issued business license

 

Note: Non-Documentary methods (i.e. PA compliance) may also be utilized for verification.

 

Foreign Banks: a Shell Bank certification must be supplied

 

U.S. Public Corporation

1.         Name of corporation

2.         Physical address & mailing address (if different)

3.         U.S. TIN or other government ID number

4.         Signed subscription document

5.         List of Authorized Signers

6.         Source of Wealth*

7.         Telephone number*

8.         Email address/website *

 

Obtain:

Ticker Symbol

 

Partnerships

 

Partnerships include Limited Partnership (LP)

1.         Name of partnership

2.         Partners with more than 20% interest

3.         Physical address & mailing address (if different)

4.         U.S. TIN or other government ID number

5.         Signed subscription document

6.         List of Authorized Signers

7.         Nature of business

8.         Source of Wealth*

9.         Telephone number*

10.       Email address/website *

 

Copy of:

1. Partnership/Membership Agreement

 

Note: Non-Documentary methods (i.e. PA compliance) may also be utilized for verification.

 

Non-U.S.-Based Partnerships:

Copy of:

1. An unexpired government-issued photo drivers license or other government-issued ID for all managing or general partner(s)

2. If the GP/managing partner is a business entity, U.S. TIN or other government ID number with a description of the type of the identification and the name of the issuing body

 

 

 

Type of Investor Identification Information Verification Information

U.S. Non-Profit

1.         Name of entity

2.         Physical address & mailing address (if different)

3.         U.S. TIN or other government ID number

4.         Signed subscription document

5.         List of Authorized Signers

6.         Nature of business

7.         Source of Wealth*

8.         Telephone number*

9.         Email address/website *

 

Copy of:

1. IRS Determination Letter

 

Note: Non-Documentary methods are not an acceptable backup for Non-Profits; IRS Determination Letter must be obtained.

Trust

1.         Name of trust

2.         List of Trustee(s)

3.         Physical address & mailing address (if different)

4.         U.S. TIN or other government ID number

5.         Signed subscription document

6.         Name of maker of trust (grantor/trustor)

7.         List of principal beneficiaries

8.         Source of Wealth*

9.         Telephone number of Trust*

10.       Successor Trustee*

11.       Email address/website *

 

Copy of:

1. Trust deed

 

Note: Non-Documentary methods are not an acceptable backup for Trusts; Trust deed must be obtained.

 

Investor declared as exempt from CIP

 

(ERISA Plan, Governmental Agency, Financial Institution subject to Section 352 of the USA PATRIOT Act or Publicly Traded Companies listed on the New York Stock Exchange & Nasdaq)

1.         Name of entity

2.         Physical address & mailing address (if different)

3.         U.S. TIN or other government ID number

4.         Signed subscription document

5.         List of authorized signers

6.         Telephone number *

7.         Email address/website *

 

Copy of:

1.     If ERISA – copy of IRS letter or IRS form 5500 or plan document

2.     If Governmental Agency – website research or alternative informational source

If Financial Institution subject to Section 352 of the USA PATRIOT Act certificate # for bank on FDIC website or look up CRD# for a Broker Dealer on the FINRA.org website

4.     If publicly traded company listed on the New York Stock Exchange or Nasdaq – Ticker symbol in order to research in Bloomberg

 

 

Individuals Associated with U.S. Entities

 

In addition to the identification verification performed on the entity (i.e. LLC, LP, trust), verification of the identities of the individuals listed below must also be performed, where applicable, as specified in the table.

 

·Beneficial Owners with more than 20% interest of Private Companies and Limited Liability Companies (LLC)

·Partners with more than 20% interest of all Partnerships including Limited Partnerships (LP)

·Trustees

 

Identification Information Verification Information

1.          Name

2.         Physical address & mailing address (if different)

3.         Date of birth

4.         U.S. TIN or other government ID number

Copy of:

 

1.   Passport OR

2.   Photo drivers license OR

3.   Other government-issued photo ID

 

Note: Non-Documentary methods (i.e. PA compliance) may also be utilized for verification.

 

 

Exhibit C

 

Contact Information Sheet for Mercer Audax Credit Feeder Fund, LP

 

For all correspondence, including statements, tax forms, legal documents, audits, performance letters, etc.

 

Harry Leggat

Mercer

701 Market Street

Suite 1100

St. Louis, MO 63101

Phone: (314) 588-2500

Email: harry.leggat@mercer.com

Mercer US PIP Operations Team: Kristin Ferrer, Zoya Filippova, Geraldine Arnold, Maxwell Bauer, David Greenberg, David Kowalczyk, Philip Stobie, Marcus Winston, Jeff Wagner, Steven Coots, Troy Tallman, Sam Sheridan and Emily O’Meara

701 Market Street, Suite 1100, St. Louis, MO 63101

Phone: (314) 588-2500

MercerUSPIPFunds@mercer.com

 

Mercer Alternatives Document Management Team: Stephanie Perry, Roy Cheng, Tammie Taylor, Mike Cottone and Bryan Garland

4370 Town Center Blvd, Suite 300, El Dorado Hills, CA 95762

Phone: (916) 231-3900

MercerAlts_DocMgmt@mercer.com

MercerAltsFOF-PE@mercer.com

 

Mercer Private Equity Team: Eric Rudy and Justin Straatman

701 Market Street, Suite 1100, St. Louis, MO 63101

Phone: (314) 588-2500

Email: SLH-PrivateEquity@mercer.com

 

IFS, A State Street Company

Attn: Melanie Klepper

100 Summer Street, Boston, MA 02110

Phone: (617) 662-7136

Email: MercerNAV@ifs.statestreet.com
  IFSPricingTeam@statestreet.com

 

Data Services

The Burgiss Group

111 River Street, 10th Floor, Hoboken, NJ 07030

Phone: (201) 724-9600

Email: dsdata@burgiss.com

 

 

EXHIBIT D

 

WIRE INSTRUCTIONS FOR MERCER AUDAX CREDIT FEEDER FUND, LP

 

Please update your records with the following wire instructions for Mercer Audax Credit Feeder Fund, LP

 

USD Cash Instructions

 

State Street Bank and Trust Company, Boston

One Lincoln Street

Boston, MA, USA

02111

 

ABA#: 011000028

DDA#: 10631877

Acct Name: Mercer Audax Credit Feeder Fund, LP

Ref: MEP2

 

DTC Settlement Instructions

 

State Street Bank

Participant #: 997

Agent Bank #: 26022

FINS ID#: 58873

FFC: SSC Fund MEP2

 

 

 EX-31.1 3 tm2118616d1_ex31-1.htm EXHIBIT 31.1

 

EXHIBIT 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT
RULES 13a-14 AND 15d-14

 

I, Michael P. McGonigle, Chief Executive Officer of Audax Credit BDC Inc., certify that:

 

1.            I have reviewed this quarterly report on Form 10-Q of Audax Credit BDC Inc.;

 

2.            Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.            Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.            The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)            Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)            Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)            Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)            Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.            The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)            All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

  

b)            Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 13, 2021

 

By: /s/ Michael P. McGonigle    
  Chief Executive Officer    

 

 EX-31.2 4 tm2118616d1_ex31-2.htm EXHIBIT 31.2

 

EXHIBIT 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT
RULES 13a-14 AND 15d-14

 

I, Richard T. Joseph, Chief Financial Officer of Audax Credit BDC Inc., certify that:

 

1.            I have reviewed this quarterly report on Form 10-Q of Audax Credit BDC Inc.;

 

2.            Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.            Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.            The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)            Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.            The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 13, 2021

 

By: /s/ Richard T. Joseph    
  Chief Financial Officer    

 

 EX-32.1 5 tm2118616d1_ex32-1.htm EXHIBIT 32.1

 

EXHIBIT 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,

As adopted pursuant to
SECTION 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Quarterly Report on Form 10-Q of Audax Credit BDC Inc. (the “Company”) for the quarterly period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael P. McGonigle, as Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1)            The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2)            The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Michael P. McGonigle    
Name: Michael P. McGonigle    
Title: Chief Executive Officer    

 

Date: August 13, 2021

 

 EX-32.2 6 tm2118616d1_ex32-2.htm EXHIBIT 32.2

 

EXHIBIT 32.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,

As adopted pursuant to
SECTION 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Quarterly Report on Form 10-Q of Audax Credit BDC Inc. (the “Company”) for the quarterly period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard T. Joseph, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1)            The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2)            The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Richard T. Joseph    
Name: Richard T. Joseph    
Title: Chief Financial Officer    

 

Date: August 13, 2021