10-Q 1 tm2311537d2_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 March 31, 2023

 

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 x 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 43,159,035 shares of common stock, par value $0.001 per share, outstanding as of May 12, 2023.

 

 

 

 

 

AUDAX CREDIT BDC INC.

TABLE OF CONTENTS

 

PART I.  FINANCIAL INFORMATION:   
       
Item 1.  Financial Statements   
       
   Statements of Assets and Liabilities as of March 31, 2023 (unaudited) and December 31, 2022  2
       
   Statements of Operations for the three months ended March 31, 2023 (unaudited) and 2022 (unaudited)  3
       
   Statements of Changes in Net Assets for the three months ended March 31, 2023 (unaudited) and 2022 (unaudited)  4
       
   Statements of Cash Flows for the three months ended March 31, 2023 (unaudited) and 2022 (unaudited)  5
       
   Schedules of Investments as of March 31, 2023 (unaudited) and December 31, 2022  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  40
       
Item 3.  Quantitative and Qualitative Disclosures About Market Risk  47
       
Item 4.  Controls and Procedures  48
       
PART II.  OTHER INFORMATION:   
       
Item 1.  Legal Proceedings  49
       
Item 1A.  Risk Factors  49
       
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  50
       
Item 6.  Exhibits  50
       
SIGNATURES  51

 

 

 

Audax Credit BDC Inc.

Statements of Assets and Liabilities

March 31, 2023 and December 31, 2022

(Expressed in U.S. Dollars)

 

   March 31, 2023   December 31, 2022 
   (unaudited)     
Assets          
Investments, at fair value          
Non-Control/Non-Affiliate investments (Cost of $406,272,865 and $427,700,856, respectively)  $398,843,940   $420,828,658 
Cash and cash equivalents   32,284,422    15,923,163 
Interest receivable   2,441,253    2,421,871 
Receivable from bank loan repayment   126,627    61,072 
Other assets   168,750    - 
Receivable from investments sold   -    4,415,431 
Total assets  $433,864,992   $443,650,195 
           
Liabilities          
Payable for short-term borrowings(a)  $8,724,062   $13,178,611 
Payable for investments purchased   1,677,500    - 
Fees due to investment advisor, net of waivers(b)   1,164,564    1,137,309 
Fee due to administrator(b)   66,250    66,250 
Accrued expenses and other liabilities   912,803    790,347 
Total liabilities  $12,545,179   $15,172,517 
Commitments and contingencies(c)          
           
Net Assets          
Common stock, $0.001 par value per share, 100,000,000 shares authorized, 44,753,084 and 46,376,461 shares issued and outstanding, respectively  $44,753   $46,376 
Capital in excess of par value   422,957,588    437,955,965 
Total distributable loss   (1,682,528)   (9,524,663)
Total Net Assets  $421,319,813   $428,477,678 
           
Net Asset Value per Share of Common Stock at End of Period  $9.41   $9.24 
           
Shares Outstanding   44,753,084    46,376,461 

 

(a)Refer to Note 8-Borrowings for additional information.
(b)Refer to Note 4-Related Party Transactions for additional information.
(c)Refer to Note 9-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 
   March 31, 2023   March 31, 2022 
Investment Income          
Interest income          
Non-Control/Non-Affiliate  $10,011,292   $5,389,818 
Other   64,550    384 
Total interest income   10,075,842    5,390,202 
Other income          
Non-Control/Non-Affiliate   62,635    38,118 
Total income   10,138,477    5,428,320 
           
Expenses          
Base management fee(a)  $1,108,854   $1,038,439 
Incentive fee(a)   1,333,105    426,322 
Interest expense(b)   227,652    41,166 
Professional fees   98,636    81,675 
Other expenses   74,766    79,177 
Administrative fee(a)   66,250    66,250 
Directors' fees   63,750    56,250 
Expenses before waivers from investment adviser and administrator   2,973,013    1,789,279 
Base management fee waivers(a)   (388,099)   (363,454)
Incentive fee waivers(a)   (889,296)   (383,690)
Total expenses, net of waivers   1,695,618    1,042,135 
Net Investment Income   8,442,859    4,386,185 
           
Realized and Unrealized (Loss) Gain on Investments          
Net realized (loss) gain on investments   (43,997)   225,786 
Net change in unrealized depreciation on investments   (556,727)   (1,566,163)
Net realized and unrealized loss on investments   (600,724)   (1,340,377)
           
Net Increase in Net Assets Resulting from Operations  $7,842,135   $3,045,808 
           
Basic and Diluted per Share of Common Stock:          
Net investment income  $0.19   $0.10 
Net increase in net assets resulting from operations  $0.17   $0.07 
           
Weighted average shares of common stock outstanding basic and diluted   45,420,472    42,774,798 

 

(a)Refer to Note 4-Related Party Transactions for additional information
(b)Refer to Note 8-Borrowings 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)

 

   Three Months Ended
March 31, 2023		   Three Months Ended
March 31, 2022		 
Operations          
Net investment income  $8,442,859   $4,386,185 
Net realized (loss) gain on investments   (43,997)   225,786 
Net change in unrealized depreciation on investments   (556,727)   (1,566,163)
Net increase in net assets resulting from operations   7,842,135    3,045,808 
           
Capital Share Transactions:          
Issuance of common stock   -    30,000,000 
Repurchases of common stock   (15,000,000)   - 
Net increase in net assets from capital share transactions   (15,000,000)   30,000,000 
           
Net (Decrease) Increase in Net Assets   (7,157,865)   33,045,808 
Net Assets, Beginning of Period   428,477,678    373,947,334 
Net Assets, End of Period  $421,319,813   $406,993,142 

 

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)

 

   Three Months Ended   Three Months Ended 
   March 31, 2023   March 31, 2022 
Cash flows from operating activities:          
Net increase in net assets resulting from operations  $7,842,135   $3,045,808 
Adjustments to reconcile net increase in net assets from operations to net cash provided by (used in) operating activities:          
Net realized loss (gain) on investments   43,997    (225,786)
Net change in unrealized depreciation on investments   556,727    1,566,163 
Accretion of original issue discount interest and payment-in-kind interest   (253,136)   (206,238)
Decrease in receivable from investments sold   4,415,431    - 
Increase in interest receivable   (19,382)   (469,597)
Increase in receivable from bank loan repayment   (65,555)   (70,746)
Increase in other assets   (168,750)   (157,500)
Increase in accrued expenses and other liabilities   122,456    93,284 
Increase in fees due to investment advisor(a)   27,255    783,868 
(Increase) decrease in payable for investments purchased   1,677,500    (16,634,436)
           
Investment activity:          
Investments purchased   (8,376,737)   (33,568,785)
Proceeds from investments sold   9,262,833    4,047,932 
Repayment of bank loans   20,751,034    12,318,646 
Total investment activity   21,637,130    (17,202,207)
           
Net cash provided by (used in) operating activities   35,815,808    (29,477,387)
           
Cash flows from financing activities:          
Issuance of shares of common stock   -    30,000,000 
Repurchases of shares of common stock   (15,000,000)   - 
Repayments of short-term borrowings(b)   (4,454,549)   - 
           
Net cash (used in) provided by financing activities   (19,454,549)   30,000,000 
           
Net increase in cash and cash equivalents   16,361,259    522,613 
           
Cash and cash equivalents:          
Cash and cash equivalents, beginning of period   15,923,163    11,058,796 
           
Cash and cash equivalents, end of period  $32,284,422   $11,581,409 
           
Supplemental cash flow information Interest paid on short-term financing  $119,524   $41,166 
           
           
Supplemental non-cash information Payment-in-kind ("PIK") interest income  $87,506   $61,319 

 

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

 

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

 

5

 

 

Audax Credit BDC Inc.

Schedule of Investments

As of March 31, 2023

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (93.8%)(g)(h)(i):                  
                   
Healthcare & Pharmaceuticals                  
American Vision Partners, Unitranche Initial Term Loan, 10.94% (LIBOR + 5.75%), maturity 9/30/27(j)  9/22/2021  $4,935,901   $4,867,782   $4,789,706 
RevHealth, Unitranche Initial Term Loan, 10.66% (SOFR + 5.75%), maturity 7/22/28(j)  7/22/2022   4,259,418    4,180,330    4,168,698 
Radiology Partners, Senior Secured Term B Loan (First Lien), 9.44% (LIBOR + 4.25%), maturity 7/9/25  6/28/2018   4,215,792    4,360,152    3,793,548 
Young Innovations, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 11/7/24  11/6/2017   3,706,381    3,700,647    3,660,052 
PharMedQuest, Unitranche Term A Loan, 10.41% (SOFR + 5.50%), maturity 11/6/24(j)  11/6/2019   3,278,398    3,276,101    3,266,993 
InHealth Medical Alliance, Unitranche Initial Term Loan, 8.41% (SOFR + 3.50%), 3.50% PIK, maturity 6/28/28  6/25/2021   3,526,186    3,497,787    3,173,567 
InterMed, Unitranche Initial Term Loan, 11.41% (SOFR + 6.50%), maturity 12/24/29(j)  12/22/2022   3,023,758    2,938,440    2,963,585 
Waystar, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 10/22/26(k)  9/19/2019   2,912,443    2,907,844    2,907,448 
Advancing Eyecare, Senior Secured Initial Term Loan, 10.66% (SOFR + 5.75%), maturity 6/29/29  5/27/2022   2,525,310    2,461,363    2,518,997 
Premise Health, Senior Secured Initial Term Loan (First Lien), 8.41% (SOFR + 3.50%), maturity 7/10/25  8/15/2018   2,253,110    2,256,549    2,247,477 
Soliant, Senior Secured Initial Term Loan, 9.19% (LIBOR + 4.00%), maturity 3/31/28  3/26/2021   2,115,249    2,100,755    2,115,249 
nThrive, Senior Secured Initial Loan (Second Lien), 11.94% (LIBOR + 6.75%), maturity 12/17/29  11/19/2021   2,000,000    1,976,551    1,977,500 
CPS, Unitranche Closing Date Term Loan, 10.69% (LIBOR + 5.50%), maturity 6/1/28(j)  5/18/2022   1,943,754    1,939,304    1,943,754 
Gastro Health, Senior Secured Initial Term Loan (First Lien), 9.69% (LIBOR + 4.50%), maturity 7/3/28  7/2/2021   1,970,538    1,961,132    1,916,348 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 9.41% (SOFR + 4.50%), maturity 12/22/25  12/19/2018   1,915,000    1,913,906    1,881,488 
Therapy Brands, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 5/18/28  5/12/2021   1,858,544    1,850,838    1,826,020 
Advanced Diabetes Supply, Senior Secured First Incremental Term Loan, 10.16% (SOFR + 5.25%), maturity 12/30/27  7/13/2021   1,848,968    1,833,633    1,821,233 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 8.69% (LIBOR + 3.50%), maturity 7/24/26(k)  7/23/2019   1,930,000    1,933,010    1,807,570 
Upstream Rehabilitation, Senior Secured August 2021 Incremental Term Loan (First Lien), 9.16% (SOFR + 4.25%), maturity 11/20/26  10/24/2019   1,946,578    1,944,178    1,728,401 
Blue Cloud, Senior Secured Closing Date Term Loan, 9.91% (SOFR + 5.00%), maturity 1/21/28  12/13/2021   1,485,000    1,464,689    1,459,013 
Quantum Health, Senior Secured Amendment No. 1 Refinancing Term Loan (First Lien), 9.69% (LIBOR + 4.50%), maturity 12/22/27  12/18/2020   1,473,750    1,457,213    1,444,275 
Mission Vet Partners, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 4/27/28  12/15/2021   1,477,500    1,465,148    1,414,706 
Symplr, Senior Secured Initial Term Loan (First Lien), 9.41% (SOFR + 4.50%), maturity 12/22/27  11/23/2020   1,470,000    1,453,494    1,322,768 
Ivy Rehab, Senior Secured Initial Term Loan (First Lien), 9.66% (SOFR + 4.75%), maturity 4/23/29  3/11/2022   1,280,605    1,257,487    1,264,597 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 8.69% (LIBOR + 3.50%), maturity 5/1/24  1/10/2019   1,140,692    1,140,627    1,109,323 
Solis Mammography, Senior Secured Initial Term Loan (First Lien), 9.94% (LIBOR + 4.75%), maturity 4/17/28  4/1/2021   1,067,232    1,059,427    1,059,228 
Cirtec Medical, Senior Secured (USD) Initial Term Loan, 11.16% (SOFR + 6.25%), maturity 1/24/29  1/30/2023   1,000,000    968,055    992,500 
Solis Mammography, Senior Secured Initial Term Loan (Second Lien), 13.19% (LIBOR + 8.00%), maturity 4/16/29  4/1/2021   1,000,000    987,992    992,500 
Micro Merchant Systems, Unitranche Initial Term Loan, 10.66% (SOFR + 5.75%), maturity 12/14/27  3/2/2022   990,000    980,283    985,050 
Wedgewood, Senior Secured Initial Term Loan, 9.16% (SOFR + 4.25%), maturity 3/31/28  2/24/2021   985,000    976,895    985,000 
nThrive, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 12/18/28  11/19/2021   990,000    986,250    980,100 
Forefront, Senior Secured Closing Date Term Loan, 9.16% (SOFR + 4.25%), maturity 4/1/29  3/23/2022   988,021    972,529    978,141 
Allied Benefit Systems, Senior Secured Initial Term B Loan, 9.69% (LIBOR + 4.50%), maturity 11/18/26  10/21/2020   977,500    967,671    970,169 
Epic Staffing Group, Senior Secured Initial Term Loan, 10.91% (SOFR + 6.00%), maturity 6/28/29  6/27/2022   819,390    763,167    817,341 
UDG, Senior Secured Initial Dollar Term Loan (First Lien), 9.44% (LIBOR + 4.25%), maturity 8/19/28(k)(l)  8/6/2021   631,875    627,302    621,607 
ImageFirst, Senior Secured Initial Term Loan, 9.69% (LIBOR + 4.50%), maturity 4/27/28  4/26/2021   603,239    600,888    598,714 
Western Dental, Senior Secured 2022 Incremental Term Loan, 10.44% (LIBOR + 5.25%), maturity 8/18/28  6/21/2022   496,250    487,343    483,844 
AccentCare, Senior Secured 2021 Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 6/22/26  6/15/2021   491,250    491,250    478,969 
MedRisk, Senior Secured Initial Term Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 5/10/28(k)  4/1/2021   492,500    488,477    475,918 
Confluent Health, Senior Secured Amendment No. 1 Term Loan, 12.41% (SOFR + 7.50%), maturity 11/28/28(k)  4/11/2023   500,000    465,000    465,000 
Press Ganey, Senior Secured 2020 Incremental Term Loan (First Lien) Retired 05/25/2021, 8.94% (LIBOR + 3.75%), maturity 7/24/26(k)  10/1/2020   490,022    486,644    458,937 
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 9.44% (LIBOR + 4.25%), maturity 8/31/26(k)  8/2/2019   519,965    517,591    458,513 
RMP & MedA/Rx, Senior Secured Term Loan, 9.41% (SOFR + 4.50%), maturity 2/6/25  3/22/2021   459,375    456,092    454,781 
RMP & MedA/Rx, Senior Secured Term Loan (First Lien), 9.16% (SOFR + 4.25%), maturity 2/6/25  2/27/2017   391,962    391,969    388,042 
RevHealth, Senior Secured Revolving Loan, 10.66% (SOFR + 5.75%), maturity 7/22/28(j)  1/24/2023   107,877    107,877    105,579 
Blue Cloud, Senior Secured Revolving Loan, 9.91% (SOFR + 5.00%), maturity 1/21/28  12/14/2022   72,727    72,727    71,455 
CPS, Senior Secured Revolving Credit Loan, 10.69% (LIBOR + 5.50%), maturity 6/1/28(j)  5/18/2022   -    (714)   - 
Ivy Rehab, Senior Secured Revolving Credit Loan (First Lien), 9.66% (SOFR + 4.75%), maturity 4/21/28  3/11/2022   -    (3,367)   - 
InterMed, Senior Secured Revolving Loan, 11.41% (SOFR + 6.50%), maturity 12/24/28(j)  12/22/2022   -    (21,598)   - 
                   
Services: Business                  
LegalShield, Senior Secured Initial Term Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 12/15/28(k)  12/7/2021   4,455,000    4,417,214    4,391,427 
InnovateMR, Unitranche Initial Term Loan, 11.19% (LIBOR + 6.00%), maturity 1/20/28(j)  12/16/2021   4,194,210    4,132,070    4,142,955 
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 10.19% (LIBOR + 5.00%), maturity 9/23/25(m)  9/26/2019   3,860,000    3,841,363    3,860,000 
RevSpring, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 10/11/25(m)  10/5/2018   3,830,000    3,827,927    3,830,000 
Eliassen, Unitranche Initial Term Loan, 10.66% (SOFR + 5.75%), maturity 4/7/28  3/31/2022   3,353,519    3,301,749    3,336,751 
Veritext, Senior Secured Initial Term Loan (First Lien), 8.69% (LIBOR + 3.50%), maturity 8/1/25  8/14/2018   3,070,998    3,056,927    3,063,321 
Discovery Education, Unitranche Initial Term Loan (First Lien), 10.66% (SOFR + 5.75%), maturity 4/6/29  3/25/2022   2,985,000    2,939,820    2,970,075 
Fleetwash, Senior Secured Incremental Term Loan, 9.66% (SOFR + 4.75%), maturity 10/1/24  9/25/2018   2,865,844    2,857,427    2,844,350 
The Facilities Group, Unitranche Initial Term Loan, 10.94% (LIBOR + 5.75%), maturity 11/30/27  12/10/2021   2,800,116    2,774,484    2,772,115 
Industrial Services Group, Unitranche Initial Term Loan, 11.16% (SOFR + 6.25%), maturity 12/7/28(j)  12/7/2022   2,755,000    2,651,902    2,693,656 
Service Logic, Senior Secured Closing Date Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 10/29/27  10/23/2020   2,529,117    2,510,392    2,516,471 
CoolSys, Senior Secured Closing Date Initial Term Loan, 9.94% (LIBOR + 4.75%), maturity 8/11/28  8/4/2021   2,557,899    2,532,391    2,506,741 
Duff & Phelps, Senior Secured Initial Dollar Term Loan (First Lien), 8.66% (SOFR + 3.75%), maturity 4/9/27(k)  3/6/2020   2,431,250    2,417,414    2,360,343 
TRC Companies, Senior Secured Initial Term Loan (Second Lien), 11.94% (LIBOR + 6.75%), maturity 12/7/29  11/19/2021   2,000,000    1,980,000    1,980,000 
ECi Software, Senior Secured Initial Term Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 11/9/27(k)  9/17/2020   1,955,000    1,948,852    1,914,434 
Veregy, Senior Secured Initial Term Loan, 11.19% (LIBOR + 6.00%), maturity 11/3/27  11/2/2020   1,955,000    1,913,330    1,906,125 
Liberty Group, Unitranche Initial Term Loan, 10.66% (SOFR + 5.75%), maturity 6/9/28(j)  6/6/2022   1,940,227    1,903,213    1,901,738 
Mediaocean, Senior Secured Initial Term Loan, 8.41% (SOFR + 3.50%), maturity 12/15/28(k)  12/9/2021   1,980,000    1,963,267    1,880,178 
InnovateMR, Unitranche First Amendment Term Loan, 11.69% (LIBOR + 6.50%), maturity 1/20/28(j)  12/23/2022   1,881,564    1,824,025    1,858,571 
Insight Global, Unitranche Closing Date Term Loan, 11.19% (LIBOR + 6.00%), maturity 9/22/28  9/22/2021   1,477,500    1,451,843    1,477,500 
Addison Group, Senior Secured Initial Term Loan, 9.16% (SOFR + 4.25%), maturity 12/29/28  1/19/2022   1,485,000    1,481,800    1,473,863 
OSG Billing Services, Senior Secured Amended and Restated Term A Loan, 10.41% (SOFR + 5.50%), 1.50% PIK, maturity 6/26/26  8/31/2022   1,443,704    1,441,970    1,111,652 
Veritext, Senior Secured Initial Term Loan (Second Lien), 11.94% (LIBOR + 6.75%), maturity 7/31/26  8/14/2018   1,000,000    997,442    997,500 
Vistage, Senior Secured Initial Term Loan, 10.16% (SOFR + 5.25%), maturity 7/13/29  7/18/2022   995,000    969,630    990,025 
trustaff, Senior Secured Initial Term Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 3/6/28  12/9/2021   984,925    982,871    984,925 
Divisions Maintenance Group, Senior Secured Term B Loan, 9.94% (LIBOR + 4.75%), maturity 5/27/28  5/21/2021   985,000    977,191    977,613 
Health Management Associates, Senior Secured Term Loan A, 11.16% (SOFR + 6.25%), maturity 3/31/29(k)  3/31/2023   1,000,000    964,671    970,000 
Secretariat International, Senior Secured Initial Term Loan (First Lien), 9.94% (LIBOR + 4.75%), maturity 12/29/28  12/16/2021   973,250    968,964    963,517 
TRC Companies, Senior Secured Initial Term Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 12/8/28(k)  11/19/2021   990,025    985,866    961,151 
eResearch, Senior Secured Initial Term Loan (First Lien), 9.69% (LIBOR + 4.50%), maturity 2/4/27(k)  12/1/2020   977,393    977,393    924,863 
WIRB-Copernicus Group, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 1/8/27(k)  12/13/2019   972,500    966,803    921,449 
Diversified, Senior Secured Initial Term Loan, 9.91% (SOFR + 5.00%), 1.50% PIK, maturity 12/23/23  4/19/2019   904,750    903,454    875,346 
Accolite, Senior Secured Initial Term Loan, 10.91% (SOFR + 6.00%), maturity 4/10/29(k)  3/31/2023   750,000    727,500    727,500 

 

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

 

6

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2023

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h)(i) (Continued):                  
                   
Services: Business (continued)                  
VC3, Senior Secured Delayed Draw Term Loan D, 10.16% (SOFR + 5.25%), maturity 3/12/27(j)  9/16/2022  $742,423   $694,346   $713,736 
Therma Holdings, Senior Secured Initial Term Loan (2021), 8.94% (LIBOR + 3.75%), maturity 12/16/27(k)  12/11/2020   588,852    587,028    580,755 
System One, Senior Secured Initial Term Loan, 8.91% (SOFR + 4.00%), maturity 3/2/28  1/28/2021   491,250    489,460    488,794 
Engineering Solutions, Senior Secured Term Loan (First Lien), 11.91% (SOFR + 7.00%), maturity 4/1/30(k)  3/31/2023   500,000    485,000    485,000 
Industrial Services Group, Senior Secured Revolving Loan, 11.16% (SOFR + 6.25%), maturity 12/7/28(j)  12/7/2022   95,238    78,095    93,117 
Health Management Associates, Senior Secured Revolving Loan, 11.16% (SOFR + 6.25%), maturity 3/31/29(k)  3/31/2023   -    (2,131)   - 
VC3, Senior Secured Revolving Credit, 10.16% (SOFR + 5.25%), maturity 3/12/27(j)  7/21/2022   -    (2,692)   - 
Discovery Education, Senior Secured Revolving Credit Loan (First Lien), 10.66% (SOFR + 5.75%), maturity 4/7/28  3/25/2022   -    (4,038)   - 
Liberty Group, Senior Secured Revolving Loan, 10.66% (SOFR + 5.75%), maturity 6/9/28(j)  6/6/2022   -    (4,545)   - 
                   
High Tech Industries                  
Netsmart, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 10/1/27(k)  9/29/2020   3,430,000    3,419,539    3,394,637 
Golden Source, Unitranche Initial Term Loan, 10.41% (SOFR + 5.50%), maturity 5/12/28(j)  3/25/2022   3,444,514    3,373,232    3,378,952 
Planview, Senior Secured Closing Date Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 12/17/27(k)  12/11/2020   2,599,054    2,577,765    2,468,568 
Idera, Senior Secured Term B-1 Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 3/2/28(k)  6/27/2017   2,566,580    2,566,589    2,455,896 
Ivanti Software, Senior Secured 2021 Specified Refinancing Term Loan (First Lien), 9.44% (LIBOR + 4.25%), maturity 12/1/27(k)  11/20/2020   2,955,150    2,924,088    2,437,216 
Flexera, Senior Secured Term B-1 Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 3/3/28(k)  2/16/2020   2,352,123    2,352,123    2,322,721 
PracticeTek, Unitranche Initial Term Loan, 10.44% (LIBOR + 5.25%), maturity 11/23/27(j)  11/22/2021   2,376,956    2,326,395    2,318,177 
Precisely, Senior Secured Third Amendment Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 4/24/28(k)  3/19/2021   2,462,500    2,451,790    2,197,781 
Barracuda, Senior Secured Initial Term Loan (Second Lien), 11.91% (SOFR + 7.00%), maturity 5/31/30  5/17/2022   2,000,000    1,940,000    1,980,000 
Sophos, Senior Secured Dollar Tranche Term Loan (First Lien), 8.69% (LIBOR + 3.50%), maturity 3/5/27(k)(o)  1/16/2020   1,945,027    1,878,025    1,930,440 
QuickBase, Senior Secured Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 4/2/26  3/29/2019   1,925,000    1,920,863    1,900,938 
Intermedia, Senior Secured New Term Loan (First Lien), 11.19% (LIBOR + 6.00%), maturity 7/21/25  7/13/2018   1,915,000    1,909,695    1,876,700 
HelpSystems, Senior Secured Term Loan, 8.91% (SOFR + 4.00%), maturity 11/19/26  12/19/2019   1,964,663    1,959,217    1,856,361 
OEConnection, Senior Secured Initial Term Loan, 9.19% (LIBOR + 4.00%), maturity 9/25/26  9/24/2019   1,588,180    1,584,527    1,580,239 
Bomgar, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 4/18/25(k)  5/25/2018   1,606,294    1,610,255    1,575,509 
Digital Room, Senior Secured Closing Date Term Loan (First Lien), 10.44% (LIBOR + 5.25%), maturity 12/21/28  12/16/2021   1,485,000    1,472,340    1,470,150 
SmartBear, Senior Secured Initial Term Loan (First Lien), 9.44% (LIBOR + 4.25%), maturity 3/3/28  11/20/2020   982,500    974,834    977,588 
WellSky, Senior Secured Incremental Term B-1 Loan (First Lien), 10.66% (SOFR + 5.75%), maturity 3/10/28  8/16/2022   995,000    967,288    972,613 
ORBCOMM, Senior Secured Closing Date Term Loan (First Lien), 9.44% (LIBOR + 4.25%), maturity 9/1/28  6/17/2021   985,000    980,814    952,988 
Imperva, Senior Secured Term Loan, 9.19% (LIBOR + 4.00%), maturity 1/12/26  9/23/2020   973,453    968,119    941,816 
Infoblox, Senior Secured Initial Term Loan (First Lien), 8.66% (SOFR + 3.75%), maturity 12/1/27(k)  10/7/2020   982,500    979,224    913,312 
Barracuda, Senior Secured Initial Term Loan (First Lien), 9.41% (SOFR + 4.50%), maturity 5/31/29(k)  5/17/2022   498,750    484,734    481,451 
DigiCert, Senior Secured Initial Term Loan (First Lien), 8.91% (SOFR + 4.00%), maturity 10/16/26(k)  3/13/2020   485,000    469,089    475,984 
Cloudera, Senior Secured Initial Term Loan (First Lien), 8.66% (SOFR + 3.75%), maturity 10/8/28(k)  8/10/2021   495,000    490,892    473,963 
PracticeTek, Senior Secured Revolving Loan, 10.44% (LIBOR + 5.25%), maturity 11/23/27(j)  11/22/2021   -    (7,156)   - 
Golden Source, Senior Secured Revolving Loan, 10.41% (SOFR + 5.50%), maturity 5/12/28(j)  8/22/2022   -    (9,390)   - 
                   
Containers, Packaging & Glass                  
InMark, Unitranche Incremental Term Loan, 10.91% (SOFR + 6.00%), maturity 12/23/26(j)  12/10/2021   6,403,679    6,290,130    6,373,564 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 8.69% (LIBOR + 3.50%), maturity 5/30/24  5/11/2017   3,309,350    3,305,891    3,143,882 
Brook & Whittle, Senior Secured Initial Term Loan (First Lien), 8.91% (SOFR + 4.00%), maturity 12/14/28  12/9/2021   3,123,365    3,100,691    3,123,365 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 7/18/26  7/17/2019   2,484,291    2,476,895    2,478,081 
PCI, Senior Secured Term B Loan (First Lien), 8.69% (LIBOR + 3.50%), maturity 11/30/27(k)  9/25/2020   2,437,719    2,430,972    2,388,100 
Paragon Films, Senior Secured Closing Date Term Loan (First Lien), 10.19% (LIBOR + 5.00%), maturity 12/16/28  12/15/2021   1,980,000    1,961,731    1,970,100 
Resource Label Group, Senior Secured Closing Date Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 7/7/28  7/2/2021   1,856,250    1,848,572    1,856,250 
Intertape Polymer, Senior Secured Initial Term Loan (First Lien), 9.66% (SOFR + 4.75%), maturity 6/28/28(p)  6/15/2022   1,990,000    1,918,937    1,844,173 
TricorBraun, Senior Secured Closing Date Initial Term Loan (First Lien), 8.44% (LIBOR + 3.25%), maturity 3/3/28(k)  1/29/2021   1,805,787    1,798,545    1,767,414 
Potters Industries, Senior Secured Initial Term Loan, 9.19% (LIBOR + 4.00%), maturity 12/14/27  11/19/2020   1,470,000    1,460,195    1,458,975 
Technimark, Senior Secured Initial Term Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 7/7/28  6/30/2021   1,473,750    1,467,858    1,440,591 
Tekni-Plex, Senior Secured Tranche B-3 Initial Term Loan, 9.19% (LIBOR + 4.00%), maturity 9/15/28(k)  7/29/2021   1,125,363    1,123,159    1,090,724 
Novolex, Senior Secured Term B Loan (First Lien), 9.16% (SOFR + 4.25%), maturity 4/13/29(k)  3/30/2022   992,500    971,178    971,533 
Lacerta, Senior Secured Term Loan, 10.69% (LIBOR + 5.50%), maturity 12/30/26  2/8/2021   977,500    969,585    967,725 
Pregis, Senior Secured Initial Term Loan (First Lien), 8.66% (SOFR + 3.75%), maturity 7/31/26(k)  7/25/2019   967,500    966,259    946,215 
Applied Adhesives, Senior Secured Term A Loan, 9.69% (LIBOR + 4.50%), maturity 3/12/27  3/12/2021   619,917    615,285    618,367 
Five Star Packaging, Senior Secured Initial Term Loan (First Lien), 9.16% (SOFR + 4.25%), maturity 5/5/29(k)  4/27/2022   497,500    490,850    492,214 
Golden West Packaging, Senior Secured Initial Term Loan, 10.44% (LIBOR + 5.25%), maturity 12/1/27  11/29/2021   487,500    483,377    486,281 
Pregis, Senior Secured Third Amendment Refinancing Term Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 7/31/26(k)  12/9/2020   492,500    490,862    480,343 
Applied Adhesives, Senior Secured Revolving Loan, 9.94% (LIBOR + 4.75%), maturity 3/12/27  3/12/2021   -    (616)   - 
                   
Banking, Finance, Insurance & Real Estate                  
Cerity Partners, Unitranche Initial Term Loan, 10.66% (SOFR + 5.75%), maturity 7/27/29  7/28/2022   4,636,201    4,565,395    4,636,201 
Confluence, Senior Secured Initial Term Loan (First Lien), 8.66% (SOFR + 3.75%), maturity 7/31/28  7/22/2021   3,950,000    3,931,655    3,905,563 
Cherry Bekaert, Unitranche Term B Loan, 10.41% (SOFR + 5.50%), maturity 6/30/28(j)  6/13/2022   3,541,657    3,457,833    3,457,498 
Alera, Unitranche 2022 Incremental Term Loan, 11.41% (SOFR + 6.50%), maturity 9/30/28  8/31/2022   3,444,283    3,366,270    3,418,451 
Ascensus, Senior Secured Initial Term Loan (First Lien), 8.69% (LIBOR + 3.50%), maturity 8/2/28(k)  11/17/2021   2,970,000    2,958,741    2,892,038 
EPIC Insurance, Unitranche Closing Date Term Loan, 10.44% (LIBOR + 5.25%), maturity 9/29/28  8/27/2021   2,365,835    2,334,103    2,342,177 
American Beacon Advisors, Senior Secured Tranche D Term Loan (Second Lien), 13.19% (LIBOR + 8.00%), maturity 4/30/25  10/31/2017   2,117,133    2,121,918    2,090,669 
Kestra Financial, Senior Secured Initial Term Loan, 9.16% (SOFR + 4.25%), maturity 6/3/26(k)  4/29/2019   1,930,000    1,920,327    1,895,019 
Beta+, Senior Secured Initial Term Loan, 10.16% (SOFR + 5.25%), maturity 7/1/29(k)  6/24/2022   1,990,000    1,873,037    1,751,200 
Orion, Senior Secured 2021 Refinancing Term Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 9/24/27(k)  8/4/2020   1,466,325    1,455,027    1,379,130 
SIAA, Unitranche Initial Term Loan, 11.44% (LIBOR + 6.25%), maturity 4/28/28(j)  4/21/2021   1,157,824    1,140,564    1,133,126 
Advisor Group, Senior Secured Term B-1 Loan, 9.69% (LIBOR + 4.50%), maturity 7/31/26(k)  1/31/2020   1,016,303    1,016,343    1,002,461 
Community Brands, Unitranche Initial Term Loan, 10.66% (SOFR + 5.75%), maturity 2/24/28  2/23/2022   990,000    970,436    980,100 
LERETA, Senior Secured Initial Term Loan, 10.44% (LIBOR + 5.25%), maturity 7/30/28  7/27/2021   985,000    976,648    970,225 
EdgeCo, Senior Secured Third Amendment Term Loan (First Lien), 9.94% (LIBOR + 4.75%), maturity 6/1/26  3/29/2022   297,000    275,141    294,030 
Integro, Senior Secured 2022 Refinancing Term Loan (First Lien), 12.25% (Fixed), 12,25% PIK, maturity 5/8/23(q)  10/9/2015   221,287    224,508    221,287 
Cherry Bekaert, Senior Secured Revolving Credit Loan, 10.41% (SOFR + 5.50%), maturity 6/30/28(j)  8/1/2022   184,942    184,942    180,547 
Beta+, Senior Secured Revolving Credit Loan, 10.16% (SOFR + 5.25%), maturity 7/1/27(k)  6/24/2022   83,715    77,499    73,670 
EPIC Insurance, Senior Secured Revolving Loan, 10.44% (LIBOR + 5.25%), maturity 9/30/27  8/27/2021   34,796    34,526    34,448 

 

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

 

7

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2023

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h)(i) (Continued):                  
                   
Capital Equipment                  
Tank Holding, Unitranche Initial Term Loan, 10.91% (SOFR + 6.00%), maturity 3/31/28(n)  3/25/2022  $3,970,000   $3,900,081   $3,960,075 
Plaskolite, Senior Secured 2021-1 Refinancing Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 12/15/25  12/12/2018   3,831,800    3,800,083    3,606,279 
Excelitas, Unitranche Closing Date Euro Term Loan,  (Other + 5.75%), maturity 8/12/29  6/15/2022   2,969,565    3,013,358    2,947,293 
Burke Porter Group, Senior Secured Closing Date Term Loan, 10.91% (SOFR + 6.00%), maturity 7/29/29  9/30/2022   2,328,333    2,267,873    2,305,050 
Flow Control Group, Senior Secured Initial Term Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 3/31/28(k)  3/17/2021   1,661,975    1,659,741    1,611,426 
Radwell, Unitranche Initial Term Loan, 10.66% (SOFR + 5.75%), maturity 4/1/29  3/11/2022   1,488,750    1,466,387    1,488,750 
Edward Don, Senior Secured Initial Term Loan, 9.44% (LIBOR + 4.25%), maturity 7/2/25  6/26/2018   1,370,943    1,369,824    1,313,363 
Therm-O-Disc, Senior Secured Initial Term Loan (First Lien), 10.91% (SOFR + 6.00%), maturity 5/31/29  5/26/2022   995,000    923,611    985,050 
Cleaver Brooks, Senior Secured Initial Term Loan, 10.66% (SOFR + 5.75%), maturity 7/31/28  7/18/2022   987,500    969,013    982,563 
MW Industries, Senior Secured Initial Term Loan, 11.91% (SOFR + 7.00%), maturity 3/31/30(k)  3/31/2023   1,000,000    970,000    970,000 
TriMark, Senior Secured Second Amendment Tranche B Loan (Super Senior Priority), 8.69% (LIBOR + 3.50%), maturity 8/28/24  1/31/2022   961,124    961,124    624,731 
Culligan, Senior Secured 2022 Refinancing Term B Loan, 8.94% (LIBOR + 3.75%), maturity 7/31/28(k)  6/17/2021   558,281    555,526    540,489 
Infinite Electronics, Senior Secured Initial Term Loan (First Lien), 8.44% (LIBOR + 3.25%), maturity 3/2/28  2/24/2021   491,269    490,379    490,041 
Duravant, Senior Secured Incremental Amendment No. 5 Term Loan (First Lien), 8.69% (LIBOR + 3.50%), maturity 5/19/28(k)  3/5/2020   486,269    486,269    480,494 
SPX Flow, Senior Secured Term Loan, 9.41% (SOFR + 4.50%), maturity 4/5/29(k)  3/18/2022   435,707    418,334    416,919 
Tank Holding, Senior Secured Revolving Credit Loan, 10.91% (SOFR + 6.00%), maturity 3/31/28  3/25/2022   41,846    38,892    41,742 
Burke Porter Group, Senior Secured Revolving Credit Loan, 10.91% (SOFR + 6.00%), maturity 7/29/28  8/11/2022   38,991    28,586    38,601 
Radwell, Senior Secured Revolving Loan, 10.66% (SOFR + 5.75%), maturity 4/1/28  3/11/2022   10,666    9,466    10,666 
Cleaver Brooks, Senior Secured Revolving Loan, 10.66% (SOFR + 5.75%), maturity 7/31/28  7/21/2022   -    (2,462)   - 
                   
Aerospace & Defense                  
StandardAero, Senior Secured 2020 Term B-1 Loan, 8.69% (LIBOR + 3.50%), maturity 4/6/26(k)  1/24/2019   3,229,324    3,225,247    3,164,027 
CPI International, Unitranche Initial Term Loan, 10.41% (SOFR + 5.50%), maturity 10/6/29  5/18/2022   3,000,000    2,935,553    2,962,500 
HDT Global, Senior Secured Initial Term Loan, 10.94% (LIBOR + 5.75%), maturity 7/8/27  6/30/2021   3,193,750    3,105,909    2,874,375 
Whitcraft, Senior Secured Term Loan, 11.91% (SOFR + 7.00%), maturity 2/15/29  3/31/2023   2,000,000    1,920,000    1,985,000 
Amentum, Senior Secured Tranche 3 Term Loan (First Lien), 8.91% (SOFR + 4.00%), maturity 2/15/29(k)  2/10/2022   1,985,000    1,975,811    1,945,300 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 12.94% (LIBOR + 7.75%), maturity 4/30/26  5/10/2018   2,000,000    2,005,185    1,920,000 
StandardAero, Senior Secured 2020 Term B-2 Loan, 8.69% (LIBOR + 3.50%), maturity 4/6/26(k)  1/24/2019   1,736,196    1,734,004    1,701,090 
Peraton, Senior Secured Term B Loan (First Lien), 8.66% (SOFR + 3.75%), maturity 2/1/28(k)  2/23/2021   962,112    958,559    952,092 
API Technologies, Senior Secured Initial Term Loan (First Lien), 9.44% (LIBOR + 4.25%), maturity 5/9/26  1/15/2020   967,337    949,766    870,603 
BlueHalo, Unitranche Initial Term Loan, 11.69% (LIBOR + 6.50%), maturity 10/31/25  11/17/2021   492,763    486,502    481,676 
Novaria Group, Senior Secured Initial Term Loan, 10.41% (SOFR + 5.50%), maturity 1/27/27  1/24/2020   481,818    478,991    477,000 
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 4/30/25  7/18/2019   481,878    480,642    457,784 
BlueHalo, Senior Secured Revolving Loan, 11.69% (LIBOR + 6.50%), maturity 10/31/25  11/17/2021   13,314    11,825    13,015 
Whitcraft, Senior Secured Revolving Credit Loan, 11.91% (SOFR + 7.00%), maturity 2/15/29  3/31/2023   -    (10,714)   - 
                   
Chemicals, Plastics & Rubber                  
DuBois Chemicals, Senior Secured Term Loan (Second Lien) - 2019, 13.69% (LIBOR + 8.50%), maturity 9/30/27  10/8/2019   3,000,000    2,983,545    2,985,000 
Vertellus, Senior Secured Initial Term Loan, 10.66% (SOFR + 5.75%), maturity 12/22/27  12/18/2020   2,955,169    2,897,379    2,888,677 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 8.44% (LIBOR + 3.25%), maturity 1/31/25  1/26/2018   2,593,500    2,597,669    2,504,024 
Unifrax, Senior Secured USD Term Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 12/12/25(k)  11/5/2018   2,394,950    2,376,629    2,178,842 
USALCO, Unitranche Term Loan A, 11.19% (LIBOR + 6.00%), maturity 10/19/27  10/26/2021   1,975,000    1,958,531    1,960,188 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 11.94% (LIBOR + 6.75%), maturity 9/6/26(k)  8/16/2018   2,000,000    2,001,289    1,775,000 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 9.69% (LIBOR + 4.50%), maturity 9/30/26(k)  10/8/2019   1,754,866    1,731,324    1,706,607 
Ascensus Specialties, Senior Secured Initial Term Loan, 9.16% (SOFR + 4.25%), maturity 6/30/28  12/3/2021   492,467    484,967    487,542 
Boyd Corp, Senior Secured Initial Term Loan (First Lien), 8.69% (LIBOR + 3.50%), maturity 9/6/25(k)  11/7/2018   486,005    470,510    470,514 
Polytek, Senior Secured Term Loan, 10.66% (SOFR + 5.75%), maturity 9/20/24  12/23/2020   488,878    484,565    464,434 
USALCO, Senior Secured Revolving Loan, 11.19% (LIBOR + 6.00%), maturity 10/19/26  10/26/2021   96,774    93,548    96,048 
Vertellus, Senior Secured Revolving Credit Loan, 10.66% (SOFR + 5.75%), maturity 12/22/25  12/18/2020   74,215    64,085    72,546 
                   
Transportation: Cargo                  
Evans Network, Senior Secured Initial Term Loan (First Lien), 9.44% (LIBOR + 4.25%), maturity 8/19/28  8/6/2021   3,618,367    3,584,708    3,618,367 
Capstone Logistics, Senior Secured Closing Date Term Loan (First Lien), 9.66% (SOFR + 4.75%), maturity 11/12/27  11/12/2020   2,090,298    2,074,714    2,090,298 
AIT Worldwide Logistics, Senior Secured Initial Term Loan (First Lien), 9.94% (LIBOR + 4.75%), maturity 4/6/28(k)  12/9/2021   1,970,000    1,965,826    1,907,610 
St. George Logistics, Senior Secured Initial Term Loan, 10.91% (SOFR + 6.00%), maturity 3/24/26  4/28/2022   1,485,000    1,464,909    1,485,000 
Worldwide Express, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 7/26/28(k)  7/23/2021   1,481,250    1,471,849    1,438,664 
FLS Transportation, Senior Secured Term B Loan, 10.44% (LIBOR + 5.25%), maturity 12/15/28  4/14/2022   1,214,348    1,203,738    1,214,348 
Omni Logistics, Senior Secured Initial Term Loan (First Lien), 10.19% (LIBOR + 5.00%), maturity 12/30/26  11/24/2021   1,213,886    1,203,670    1,189,608 
Magnate, Senior Secured Initial Term Loan (First Lien), 10.69% (LIBOR + 5.50%), maturity 12/29/28  3/11/2022   914,734    898,080    912,448 
FLS Transportation, Senior Secured Revolving Credit Loan, 10.44% (LIBOR + 5.25%), maturity 12/17/27  4/14/2022   -    (889)   - 
Omni Logistics, Senior Secured Revolving Credit Loan (First Lien), 10.19% (LIBOR + 5.00%), maturity 12/30/25  11/24/2021   -    (1,119)   - 
                   
Services: Consumer                  
Ned Stevens 2022-2, Unitranche Initial Term Loan, 11.66% (SOFR + 6.75%), maturity 11/1/29(j)  11/1/2022   3,659,828    3,532,029    3,562,810 
A Place For Mom, Senior Secured Term Loan, 9.69% (LIBOR + 4.50%), maturity 2/10/26  7/28/2017   2,201,313    2,201,351    2,157,287 
Smart Start, Senior Secured Term B Loan (Second Lien), 12.94% (LIBOR + 7.75%), maturity 12/16/29  12/10/2021   2,000,000    1,969,176    1,960,000 
Smart Start, Senior Secured Term B Loan (First Lien), 9.69% (LIBOR + 4.50%), maturity 12/16/28  12/10/2021   1,975,000    1,964,401    1,935,500 
FullBloom, Senior Secured Initial Term Loan (First Lien), 9.16% (SOFR + 4.25%), maturity 12/15/28  12/10/2021   1,488,750    1,476,045    1,473,863 
Teaching Strategies, Senior Secured Initial Term Loan (First Lien), 8.66% (SOFR + 3.75%), maturity 8/31/28  8/19/2021   987,500    978,377    980,094 
Spring Education, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 7/30/25(k)  7/26/2018   955,000    954,063    949,031 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 10.69% (LIBOR + 5.50%), maturity 5/9/25  5/4/2018   584,823    582,311    584,823 
Ned Stevens 2022-2, Senior Secured Revolving Loan, 11.66% (SOFR + 6.75%), maturity 11/1/29(j)  11/1/2022   -    (10,154)   - 
                   
Beverage, Food & Tobacco                  
Bettcher Industries, Senior Secured Initial Term Loan (Second Lien), 12.16% (SOFR + 7.25%), maturity 12/14/29  12/13/2021   2,500,000    2,478,362    2,450,000 
Sovos Brands, Senior Secured Initial Term Loan (First Lien), 8.69% (LIBOR + 3.50%), maturity 6/8/28(k)  6/8/2021   2,033,001    2,033,001    2,020,295 
Bettcher Industries, Senior Secured Initial Term Loan (First Lien), 8.91% (SOFR + 4.00%), maturity 12/14/28  12/13/2021   1,980,000    1,961,105    1,940,400 
Hissho Sushi, Unitranche Term Loan, 10.91% (SOFR + 6.00%), maturity 5/18/28(j)  4/7/2022   1,843,214    1,808,000    1,843,214 
Dessert Holdings, Senior Secured Initial Term Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 6/9/28  6/7/2021   1,757,335    1,746,054    1,674,411 
Monogram Foods, Senior Secured Initial Term Loan, 9.19% (LIBOR + 4.00%), maturity 8/28/28  8/13/2021   987,500    979,160    962,813 
Hissho Sushi, Senior Secured Revolving Credit Loan, 10.91% (SOFR + 6.00%), maturity 5/18/28(j)  4/7/2022   9,524    8,857    9,524 

 

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

 

8

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2023

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h)(i) (Continued):                  
                   
Construction & Building                  
A1 Garage Door Service, Unitranche Term Loan A, 11.41% (SOFR + 6.50%), maturity 12/23/28(j)  12/22/2022  $1,875,534   $1,811,282   $1,831,157 
Tangent, Senior Secured Closing Date Term Loan (First Lien), 9.94% (LIBOR + 4.75%), maturity 11/30/27  10/2/2019   1,772,314    1,765,942    1,728,006 
PlayPower, Senior Secured Initial Term Loan, 10.69% (LIBOR + 5.50%), maturity 5/8/26  5/10/2019   1,732,611    1,732,611    1,559,350 
PlayCore, Senior Secured Initial Term Loan (Second Lien), 12.94% (LIBOR + 7.75%), maturity 9/29/25  2/7/2020   1,500,000    1,482,259    1,500,000 
Specialty Products & Insulation, Senior Secured Tranche B-1 Term Loan, 10.16% (SOFR + 5.25%), maturity 12/21/27  3/16/2022   991,523    982,642    991,523 
Dodge Construction Network, Senior Secured Initial Term Loan (First Lien), 9.66% (SOFR + 4.75%), maturity 2/23/29  2/10/2022   992,500    979,667    982,575 
PlayCore, Senior Secured Initial Term Loan (First Lien), 8.94% (LIBOR + 3.75%), maturity 9/30/24  9/18/2017   944,432    943,567    944,432 
Acuren, Senior Secured Initial Term Loan, 9.19% (LIBOR + 4.00%), maturity 1/23/27(k)  1/17/2020   472,540    471,226    471,505 
Hoffman Southwest, Senior Secured Initial Term Loan, 10.69% (LIBOR + 5.50%), maturity 8/14/23  5/16/2019   409,984    412,934    407,934 
A1 Garage Door Service, Senior Secured Revolving Loan, 11.41% (SOFR + 6.50%), maturity 12/23/28(j)  12/22/2022   -    (8,264)   - 
                   
Automotive                  
BBB Industries, Senior Secured Initial Term Loan (First Lien), 10.16% (SOFR + 5.25%), maturity 7/31/29(k)  6/30/2022   2,992,500    2,715,912    2,862,326 
Highline, Senior Secured Initial Term Loan (First Lien), 9.69% (LIBOR + 4.50%), maturity 11/9/27  10/29/2020   2,806,364    2,754,762    2,757,252 
Rough Country, Senior Secured Initial Term Loan (First Lien), 8.69% (LIBOR + 3.50%), maturity 7/28/28  7/26/2021   1,955,000    1,950,875    1,945,225 
Truck Hero, Senior Secured Initial Term Loan, 8.94% (LIBOR + 3.75%), maturity 1/31/28(k)  1/20/2021   1,470,000    1,470,000    1,313,555 
Innovative XCessories, Senior Secured Initial Term Loan, 9.44% (LIBOR + 4.25%), maturity 3/5/27  2/27/2020   784,050    783,233    689,964 
Safe Fleet, Senior Secured Initial Term Loan (Second Lien), 11.66% (SOFR + 6.75%), maturity 2/2/26  2/23/2022   500,000    500,000    495,000 
Wheel Pros, Senior Secured Initial Term Loan (First Lien), 9.69% (LIBOR + 4.50%), maturity 5/11/28(k)  4/23/2021   492,500    488,897    351,901 
                   
Environmental Industries                  
Alliance Environmental Group, Unitranche Initial Term Loan, 11.19% (LIBOR + 6.00%), maturity 12/30/27(j)  12/30/2021   4,105,339    4,039,973    3,933,474 
Denali Water Solutions, Senior Secured Closing Date Term Loan, 9.44% (LIBOR + 4.25%), maturity 3/27/28  3/18/2021   1,965,000    1,948,165    1,930,613 
Keter Environmental Services, Unitranche Closing Date Term Loan, 11.69% (LIBOR + 6.50%), maturity 10/29/27  11/5/2021   493,750    489,642    491,281 
Denali Water Solutions, Senior Secured Amendment No. 3 Term Loan, 9.53% (SOFR + 4.63%), maturity 3/27/28  5/5/2022   496,250    480,690    487,566 
Alliance Environmental Group, Senior Secured Revolving Loan, 11.19% (LIBOR + 6.00%), maturity 12/30/27(j)  12/30/2021   298,013    291,391    285,537 
Keter Environmental Services, Senior Secured Revolving Loan, 11.69% (LIBOR + 6.50%), maturity 10/29/27  11/5/2021   27,360    26,585    27,223 
                   
Wholesale                  
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 8.19% (LIBOR + 3.00%), maturity 3/20/25  3/16/2018   3,799,805    3,800,418    3,761,807 
                   
Media: Advertising, Printing & Publishing                  
MediaRadar, Unitranche Closing Date Term A Loan, 10.91% (SOFR + 6.00%), maturity 7/22/28(j)  5/23/2022   1,827,852    1,785,374    1,758,020 
Ansira, Unitranche Legacy Term Loan, 6.50% (Fixed), maturity 12/20/24(r)  12/20/2016   2,266,689    2,263,320    861,342 
MediaRadar, Senior Secured Revolving Loan, 10.91% (SOFR + 6.00%), maturity 7/22/28(j)  9/16/2022   -    (7,407)   - 
                   
Hotels, Gaming & Leisure                  
Northstar, Senior Secured Term Loan, 12.44% (LIBOR + 7.25%), 1.00% PIK, maturity 6/7/24  5/8/2017   1,277,015    1,277,015    1,235,512 
Auto Europe, Senior Secured Initial Dollar Term Loan, 9.91% (SOFR + 5.00%), maturity 10/21/23  10/19/2016   1,119,231    1,117,832    895,385 
                   
Consumer Goods: Non-durable                  
Augusta Sportswear, Senior Secured Initial Term Loan, 10.41% (SOFR + 5.50%), maturity 4/25/25  11/2/2016   2,001,028    1,999,579    1,991,023 
                   
Metals & Mining                  
Dynatect (A&A), Senior Secured Term B Loan, 9.69% (LIBOR + 4.50%), maturity 9/30/24  8/16/2019   1,689,870    1,680,609    1,689,870 
                   
Utilities: Electric                  
Systems Control, Senior Secured Initial Term Loan, 9.69% (LIBOR + 4.50%), maturity 3/28/25  6/15/2021   1,471,609    1,470,110    1,456,893 
                   
Forest Products & Paper                  
Loparex, Senior Secured Initial Term Loan (First Lien), 9.69% (LIBOR + 4.50%), maturity 7/31/26  7/29/2019   1,447,500    1,439,814    1,447,500 
                   
Retail                  
Varsity Brands, Senior Secured Third Amendment Extended Term Loan (First Lien), 9.91% (SOFR + 5.00%), maturity 12/15/26  10/17/2018   954,828    957,550    942,893 
StubHub, Senior Secured USD Term B Loan, 8.41% (SOFR + 3.50%), maturity 2/12/27(k)  1/31/2020   483,750    482,366    353,140 
                   
Utilities: Water                  
Aegion, Senior Secured Initial Term Loan, 9.94% (LIBOR + 4.75%), maturity 5/17/28  4/1/2021   984,998    981,133    967,761 
                   
Energy: Electricity                  
Franklin Energy, Senior Secured Term B Loan (First Lien), 9.19% (LIBOR + 4.00%), maturity 8/14/26  8/14/2019   965,000    963,567    945,700 
                   
Consumer Goods: Durable                  
Careismatic, Senior Secured Initial Term Loan (First Lien), 8.44% (LIBOR + 3.25%), maturity 1/6/28  1/22/2021   491,250    490,260    471,600 
                   
Total Bank Loans          $402,971,119   $395,014,667 

 

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

 

9

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2023

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par  Cost   Value 
EQUITY AND PREFERRED SHARES:  NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.9%)(g)(h):                
                 
Services: Business                
InnovateMR, Class A Units (387.31 Class A Units) (j) (s) (t)  12/16/2021     $387,311   $588,723 
Industrial Services Group, Class A Units (238.10 Class A Units) (j) (s) (u)  12/7/2022      238,095    239,347 
Liberty Group, Series A-Preferred Units (113,636.36 Series A-Preferred Units) (j) (s) (v)  6/6/2022      113,636    165,801 
VC3, Class A Units (7,499.03 Class A Units) (j) (s) (w)  9/16/2022      29,846    29,846 
                 
High Tech Industries                
PracticeTek, Class A Units (344,833.35 Class A Units) (j) (s) (x)  11/22/2021      377,255    354,188 
Golden Source, Class A Units (117,370.89 Class A Units) (j) (s) (y)  3/25/2022      117,371    248,067 
                 
Healthcare & Pharmaceuticals                
InterMed, Class A Units (2,484.00 Class A Units) (j) (s) (z)  12/22/2022      248,380    238,705 
RevHealth, Class A-1 Units (20,547.95 Class A-1 Units) (j) (s) (aa)  7/22/2022      205,479    210,811 
Ivy Rehab, Class A Units (100.00 Class A Units) (j) (s) (ab)  3/11/2022      100,000    74,010 
                 
Beverage, Food & Tobacco                
Hissho Sushi, Class A Units (25,000.00 Class A Units) (j) (s) (ac)  4/7/2022      250,000    350,485 
                 
Environmental Industries                
Alliance Environmental Group, A-1 Preferred Units (331.13 A-1 Preferred Units) (j) (s) (ad)  9/30/2019      331,126    303,067 
                 
Chemicals, Plastics & Rubber  12/22/2020      165,138    283,916 
Vertellus, Series A Units (1,651.00 Series A Units) (j) (s) (ae)                
                 
Construction & Building                
A1 Garage Door Service, Class A Common Units (272.73 Class A Common Units) (j) (s) (af)  12/22/2022      272,727    274,638 
                 
Services: Consumer                
Ned Stevens, Class B Common Units (261.44 Class B Common Units) (j) (s) (ag)  11/1/2022      261,438    226,201 
                 
Banking, Finance, Insurance & Real Estate                
Cherry Bekaert, Class A Units (129,870.13 Class A Units) (j) (s) (ah)  6/30/2022      129,870    167,153 
                 
Media: Advertising, Printing & Publishing                
MediaRadar, Class A-1 Units (74,074.07 Class A-1 Units) (j) (s) (ai)  9/16/2022      74,074    74,315 
                 
Total Equity and Preferred Shares        $3,301,746   $3,829,273 
                 
Total Portfolio Investments (aj)        $406,272,865   $398,843,940 

 

(a)All companies are located in the United States of America, unless otherwise noted.
(b)Interest rate percentages represent actual interest rates as of March 31, 2023, which are indexed to the noted reference rate. The referenced rates are subject to interest floors which can vary based on contractual agreements with the borrower.
(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)The negative cost, if applicable, is the result of the capitalized discount being greater than the principal amount outstanding on the unfunded loan commitment.
(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 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.
(l)The Company headquarters for UDG is located in Ireland.
(m)The Company purchased the investment, pursuant to a repurchase agreement with a rate of 1.9626 basis points per day with Macquarie US Trading LLC, dated June 21, 2022, due June 16, 2023.
(n)The Company purchased the investment, pursuant to a repurchase agreement with a rate of 1.9530 bais points per day with Macquarie US Trading LLC, dated July 19, 2022, due June 12, 2023.
(o)The Company headquarters for Sophos is located in United Kingdom.
(p)The Company headquarters for Intertape Polymer is located in Canada.
(q)The Company headquarters for Integro is located in United Kingdom.
(r)Investment is on non-accrual
(s)Investment is non-income producing.
(t)Represents an investment in APD INN Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(u)Represents an investment in APD ISG Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(v)Represents an investment in APD TLG Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(w)Represents an investment in APD VC3 Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(x)Represents an investment in APD Ptek Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(y)Represents an investment in APD Gol Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(z)Represents an investment in APD IMD Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(aa)Represents an investment in APD RH Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ab)Represents an investment in APD IVY Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ac)Represents an investment in APD Sush Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ad)Represents an investment in APD AEG Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ae)Represents an investment in ADP VERT Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(af)Represents an investment in APD GAR Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ag)Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ah)Represents an investment in APD CBA Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ai)Represents an investment in APD MDR Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(aj)At March 31, 2023, the cost of investments for income tax purposes was $406,272,865, the gross unrealized depreciation for federal tax purposes was $9,776,480, the gross unrealized appreciation for federal income tax purposes was $2,347,555, and the net unrealized depreciation was $7,428,925.

 

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

 

10

 

 

Audax Credit BDC Inc.

Schedule of Investments

As of December 31, 2022

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (97.4%)(g)(h):                  
                   
Healthcare & Pharmaceuticals                  
American Vision Partners, Unitranche Initial Term Loan, 10.52% (LIBOR + 5.75%), maturity 9/30/27 (i)  9/22/2021  $4,948,401   $4,879,828   $4,856,470 
RevHealth, Unitranche Initial Term Loan, 10.34% (SOFR + 5.75%), maturity 7/22/28 (i)  7/22/2022   4,270,120    4,188,380    4,150,791 
Radiology Partners, Senior Secured Term B Loan (First Lien), 9.02% (LIBOR + 4.25%), maturity 7/9/25  6/28/2018   4,215,792    4,360,152    3,863,383 
Young Innovations, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 11/7/24  11/6/2017   3,716,210    3,710,302    3,674,403 
PharMedQuest, Unitranche Term A Loan, 10.09% (SOFR + 5.50%), maturity 11/6/24 (i)  11/6/2019   3,280,898    3,270,149    3,273,829 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 3/14/25 (j)  5/30/2018   3,222,954    3,231,080    3,222,954 
InHealth Medical Alliance, Unitranche Initial Term Loan, 8.09% (SOFR + 3.50%) 3.50% PIK, maturity 6/28/28  6/25/2021   3,473,575    3,444,004    3,126,218 
InterMed, Unitranche Initial Term Loan, 11.09% (SOFR + 6.50%), maturity 12/24/29 (i) (j)  12/22/2022   3,023,758    2,937,365    2,948,164 
Waystar, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 10/22/26  9/19/2019   2,919,950    2,914,826    2,905,350 
Advancing Eyecare, Senior Secured Initial Term Loan, 10.34% (SOFR + 5.75%), maturity 6/29/29  5/27/2022   2,531,655    2,465,757    2,525,326 
Premise Health, Senior Secured Initial Term Loan (First Lien), 8.09% (SOFR + 3.50%), maturity 7/10/25  8/15/2018   2,259,008    2,262,783    2,253,361 
Soliant, Senior Secured Initial Term Loan, 8.77% (LIBOR + 4.00%), maturity 3/31/28  3/26/2021   2,115,249    2,100,146    2,115,249 
nThrive, Senior Secured Initial Loan (Second Lien), 11.52% (LIBOR + 6.75%), maturity 12/17/29  11/19/2021   2,000,000    1,975,615    1,977,500 
CPS, Unitranche Closing Date Term Loan, 10.52% (LIBOR + 5.75%), maturity 6/1/28 (i)  5/18/2022   1,953,546    1,948,936    1,945,105 
Gastro Health, Senior Secured Initial Term Loan (First Lien), 9.27% (LIBOR + 4.50%), maturity 7/3/28  7/2/2021   1,974,288    1,964,641    1,919,995 
Upstream Rehabilitation, Senior Secured August 2021 Incremental Term Loan (First Lien), 8.84% (SOFR + 4.25%), maturity 11/20/26  10/24/2019   1,951,531    1,949,032    1,917,379 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 9.09% (SOFR + 4.50%), maturity 12/22/25  12/19/2018   1,920,000    1,916,944    1,886,400 
Therapy Brands, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 5/18/28  5/12/2021   1,863,262    1,855,208    1,835,313 
Advanced Diabetes Supply, Senior Secured First Incremental Term Loan, 9.84% (SOFR + 5.25%), maturity 12/30/27  7/13/2021   1,853,637    1,837,653    1,835,101 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 7/24/26 (j)  7/23/2019   1,935,000    1,938,010    1,778,391 
Blue Cloud, Unitranche Closing Date Term Loan, 9.59% (SOFR + 5.00%), maturity 1/21/28  12/13/2021   1,488,750    1,467,872    1,470,141 
Quantum Health, Senior Secured Amendment No. 1 Refinancing Term Loan (First Lien), 9.27% (LIBOR + 4.50%), maturity 12/22/27  12/18/2020   1,477,500    1,459,860    1,460,878 
Mission Vet Partners, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 4/27/28  12/15/2021   1,481,250    1,468,364    1,447,922 
Symplr, Senior Secured Initial Term Loan (First Lien), 9.09% (SOFR + 4.50%), maturity 12/22/27  11/23/2020   1,473,750    1,456,190    1,342,955 
Ivy Rehab, Senior Secured Initial Term Loan (First Lien), 9.34% (SOFR + 4.75%), maturity 4/23/29  3/11/2022   1,147,092    1,124,711    1,132,753 
Solis Mammography, Senior Secured Initial Term Loan (First Lien), 9.52% (LIBOR + 4.75%), maturity 4/17/28  4/1/2021   1,069,941    1,061,811    1,061,916 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 5/1/24  1/10/2019   1,143,735    1,143,669    1,034,162 
Solis Mammography, Senior Secured Initial Term Loan (Second Lien), 12.77% (LIBOR + 8.00%), maturity 4/16/29  4/1/2021   1,000,000    987,505    992,500 
Micro Merchant Systems, Unitranche Initial Term Loan, 10.34% (SOFR + 5.75%), maturity 12/14/27  3/2/2022   992,500    982,465    990,019 
Wedgewood, Senior Secured Initial Term Loan, 9.02% (LIBOR + 4.25%), maturity 3/31/28  2/24/2021   987,500    979,070    987,500 
nThrive, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 12/18/28  11/19/2021   992,500    988,500    982,575 
Allied Benefit Systems, Senior Secured Initial Term B Loan, 9.27% (LIBOR + 4.50%), maturity 11/18/26  10/21/2020   980,000    969,646    980,000 
Forefront, Senior Secured Closing Date Term Loan, 8.84% (SOFR + 4.25%), maturity 4/1/29  3/23/2022   978,236    962,181    968,454 
Epic Staffing Group, Senior Secured Initial Term Loan, 10.59% (SOFR + 6.00%), maturity 6/28/29  6/27/2022   821,454    763,696    819,400 
UDG, Senior Secured Initial Dollar Term Loan (First Lien), 9.02% (LIBOR + 4.25%), maturity 8/19/28 (k)  8/6/2021   631,875    626,966    624,766 
ImageFirst, Senior Secured Initial Term Loan, 9.27% (LIBOR + 4.50%), maturity 4/27/28  4/26/2021   604,773    602,336    600,237 
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 9.02% (LIBOR + 4.25%), maturity 8/31/26  8/2/2019   521,312    518,666    515,447 
Western Dental, Senior Secured 2022 Incremental Term Loan, 10.02% (LIBOR + 5.25%), maturity 8/18/28  6/21/2022   497,500    488,274    485,063 
AccentCare, Senior Secured 2021 Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 6/22/26  6/15/2021   492,500    492,500    480,188 
MedRisk, Senior Secured Initial Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 5/10/28 (j)  4/1/2021   493,750    489,558    467,334 
RMP & MedA/Rx, Senior Secured Term Loan, 9.27% (LIBOR + 4.50%), maturity 2/6/25  3/22/2021   465,625    462,043    462,133 
Press Ganey, Senior Secured 2020 Incremental Term Loan (First Lien) Retired 05/25/2021, 8.52% (LIBOR + 3.75%), maturity 7/24/26 (j)  10/1/2020   491,269    487,720    451,508 
RMP & MedA/Rx, Senior Secured Term Loan (First Lien), 9.02% (LIBOR + 4.25%), maturity 2/6/25  2/27/2017   397,482    397,490    394,501 
Blue Cloud, Senior Secured Revolving Loan, 9.59% (SOFR + 5.00%), maturity 1/21/28  12/14/2022   50,000    50,000    49,375 
CPS, Senior Secured Revolving Credit Loan, 10.52% (LIBOR + 5.75%), maturity 6/1/28 (i)  5/18/2022   -    (714)   - 
Ivy Rehab, Senior Secured Revolving Credit Loan (First Lien), 9.34% (SOFR + 4.75%), maturity 4/21/28  3/11/2022   -    (3,367)   - 
InterMed, Senior Secured Revolving Loan, 11.09% (SOFR + 6.50%), maturity 12/24/28 (i) (j)  12/22/2022   -    (21,598)   - 
                   
Services: Business                  
LegalShield, Senior Secured Initial Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 12/15/28 (j)  12/7/2021   4,466,250    4,426,965    4,305,152 
InnovateMR, Unitranche Initial Term Loan, 10.27% (LIBOR + 5.50%), maturity 1/20/28 (i)  12/16/2021   4,200,101    4,134,245    4,200,101 
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 9.77% (LIBOR + 5.00%), maturity 9/23/25 (l)  9/26/2019   3,870,000    3,849,940    3,870,000 
RevSpring, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 10/11/25 (l)  10/5/2018   3,840,000    3,837,742    3,840,000 
Eliassen, Unitranche Initial Term Loan, 10.34% (SOFR + 5.75%), maturity 4/7/28  3/31/2022   3,361,944    3,309,152    3,345,135 
Veritext, Senior Secured Initial Term Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 8/1/25 (j)  8/14/2018   3,079,058    3,064,961    3,079,058 
Discovery Education, Unitranche Initial Term Loan (First Lien), 10.34% (SOFR + 5.75%), maturity 4/6/29  3/25/2022   2,992,500    2,945,651    2,970,056 
Fleetwash, Senior Secured Incremental Term Loan, 9.34% (SOFR + 4.75%), maturity 10/1/24  9/25/2018   2,873,288    2,863,535    2,851,738 
The Facilities Group, Unitranche Initial Term Loan, 10.52% (LIBOR + 5.75%), maturity 11/30/27  12/10/2021   2,726,358    2,700,991    2,705,911 
Industrial Services Group, Unitranche First Lien Term Loan, 10.84% (SOFR + 6.25%), maturity 12/7/28 (i)  12/7/2022   2,761,905    2,657,619    2,640,476 
CoolSys, Senior Secured Closing Date Initial Term Loan, 9.52% (LIBOR + 4.75%), maturity 8/11/28  8/4/2021   2,564,375    2,538,048    2,513,088 
Service Logic, Senior Secured Closing Date Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 10/29/27  10/23/2020   2,535,569    2,516,126    2,510,213 
Duff & Phelps, Senior Secured Initial Dollar Term Loan (First Lien), 8.34% (SOFR + 3.75%), maturity 4/9/27 (j)  3/6/2020   2,437,500    2,422,596    2,282,499 
TRC Companies, Senior Secured Initial Term Loan (Second Lien), 11.52% (LIBOR + 6.75%), maturity 12/7/29  11/19/2021   2,000,000    1,980,000    1,980,000 
Liberty Group, Unitranche Initial Term Loan, 10.34% (SOFR + 5.75%), maturity 6/9/28 (i)  6/6/2022   1,945,114    1,906,873    1,919,735 
Veregy, Senior Secured Initial Term Loan, 10.77% (LIBOR + 6.00%), maturity 11/3/27  11/2/2020   1,960,000    1,916,318    1,911,000 
InnovateMR, Senior Secured First Amendment Term Loan, 10.09% (SOFR + 5.50%), maturity 1/20/28 (i)  12/23/2022   1,891,019    1,832,654    1,891,019 
ECi Software, Senior Secured Initial Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 11/9/27 (j)  9/17/2020   1,960,000    1,953,585    1,886,500 
Mediaocean, Senior Secured Initial Term Loan, 8.27% (LIBOR + 3.50%), maturity 12/15/28 (j)  12/9/2021   1,985,000    1,967,596    1,822,726 
Insight Global, Unitranche Closing Date Term Loan, 10.77% (LIBOR + 6.00%), maturity 9/22/28  9/22/2021   1,481,250    1,454,671    1,481,250 
Addison Group, Senior Secured Initial Term Loan, 8.84% (SOFR + 4.25%), maturity 12/29/28  1/19/2022   1,488,750    1,485,425    1,477,584 

 

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

 

11

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 2022

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Services: Business (continued)                  
OSG Billing Services, Senior Secured Amended and Restated Term A Loan, 10.09% (SOFR + 5.50%) 1.50% PIK, maturity 6/26/26  8/31/2022  $1,442,041   $1,440,308   $1,355,519 
First Advantage, Senior Secured Term B-1 Loan (First Lien), 7.52% (LIBOR + 2.75%), maturity 1/31/27 (j)  1/23/2020   1,100,312    1,091,680    1,082,432 
Veritext, Senior Secured Initial Term Loan (Second Lien), 11.52% (LIBOR + 6.75%), maturity 7/31/26 (j)  8/14/2018   1,000,000    997,283    1,000,000 
Vistage, Senior Secured Initial Term Loan, 9.84% (SOFR + 5.25%), maturity 7/13/29  7/18/2022   997,500    971,265    992,513 
trustaff, Senior Secured Initial Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 3/6/28  12/9/2021   987,437    985,293    987,437 
TRC Companies, Senior Secured Initial Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 12/8/28  11/19/2021   992,513    988,187    985,069 
Divisions Maintenance Group, Senior Secured Term B Loan, 9.52% (LIBOR + 4.75%), maturity 5/27/28  5/21/2021   987,500    979,366    985,031 
Secretariat International, Senior Secured Initial Term Loan (First Lien), 9.52% (LIBOR + 4.75%), maturity 12/29/28  12/16/2021   975,711    971,287    965,953 
WIRB-Copernicus Group, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 1/8/27  12/13/2019   975,000    968,894    965,250 
Diversified, Senior Secured Initial Term Loan, 9.59% (SOFR + 5.00%), maturity 12/23/23  4/19/2019   899,347    897,624    870,118 
eResearch, Senior Secured Initial Term Loan (First Lien), 9.27% (LIBOR + 4.50%), maturity 2/4/27 (j)  12/1/2020   979,906    979,906    867,520 
VC3, Unitranche, 9.84% (SOFR + 5.25%), maturity 3/12/27 (i)  9/16/2022   742,423    694,346    702,569 
Therma Holdings, Senior Secured Initial Term Loan (2021), 8.52% (LIBOR + 3.75%), maturity 12/16/27 (j)  12/11/2020   590,428    588,526    560,541 
System One, Senior Secured Initial Term Loan, 8.59% (SOFR + 4.00%), maturity 3/2/28  1/28/2021   492,500    490,627    490,038 
Insight Global, Senior Secured Revolving Loan, 10.77% (LIBOR + 6.00%), maturity 9/22/27  9/23/2021   53,671    53,671    53,671 
VC3, Senior Secured Revolving Credit, 9.84% (SOFR + 5.25%), maturity 3/12/27 (i)  7/21/2022   -    (2,692)   - 
Discovery Education, Senior Secured Revolving Credit Loan (First Lien), 10.34% (SOFR + 5.75%), maturity 4/7/28  3/25/2022   -    (4,038)   - 
Liberty Group, Senior Secured Revolving Loan, 10.34% (SOFR + 5.75%), maturity 6/9/28 (i)  6/6/2022   -    (4,545)   - 
Industrial Services Group, Senior Secured Revolver, 10.84% (SOFR + 6.25%), maturity 12/7/28 (i)  12/7/2022   -    (17,143)   - 
                   
High Tech Industries                  
Qlik, Senior Secured 2021 Refinancing Term Loan, 8.77% (LIBOR + 4.00%), maturity 4/26/24 (j) (l)  3/29/2019   3,861,200    3,852,597    3,776,254 
Golden Source, Unitranche Initial Term Loan, 10.09% (SOFR + 5.50%), maturity 5/12/28 (i)  3/25/2022   3,454,402    3,380,910    3,341,463 
Netsmart, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 10/1/27 (j)  9/29/2020   3,438,750    3,427,753    3,320,543 
Jaggaer, Senior Secured Initial Term Loan (First Lien), 8.34% (SOFR + 3.75%), maturity 8/14/26 (j)  8/9/2019   3,059,478    3,056,395    2,980,314 
Infogroup, Senior Secured Term Loan (First Lien), 9.77% (LIBOR + 5.00%), maturity 4/3/23 (j)  3/28/2017   2,829,862    2,826,938    2,829,862 
Planview, Senior Secured Closing Date Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 12/17/27  12/11/2020   2,605,701    2,583,676    2,504,958 
Idera, Senior Secured Term B-1 Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 3/2/28 (j)  6/27/2017   2,573,127    2,573,136    2,433,214 
Ivanti Software, Senior Secured 2021 Specified Refinancing Term Loan (First Lien), 9.02% (LIBOR + 4.25%), maturity 12/1/27 (j)  11/20/2020   2,962,613    2,931,550    2,359,291 
PracticeTek, Unitranche Initial Term Loan, 11.02% (LIBOR + 6.25%), maturity 11/23/27 (i)  11/22/2021   2,382,968    2,329,122    2,299,688 
Precisely, Senior Secured Third Amendment Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 4/24/28  3/19/2021   2,468,750    2,457,445    2,299,440 
Flexera, Senior Secured Term B-1 Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 3/3/28 (j)  2/16/2020   2,358,160    2,358,160    2,268,998 
Barracuda, Senior Secured Initial Term Loan (Second Lien), 11.59% (SOFR + 7.00%), maturity 5/31/30  5/17/2022   2,000,000    1,940,000    1,977,500 
QuickBase, Senior Secured Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 4/2/26  3/29/2019   1,930,000    1,925,451    1,905,875 
Sophos, Senior Secured Dollar Tranche Term Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 3/5/27 (j) (n)  1/16/2020   1,950,024    1,877,853    1,895,706 
Intermedia, Senior Secured New Term Loan (First Lien), 10.77% (LIBOR + 6.00%), maturity 7/21/25  7/13/2018   1,920,000    1,913,976    1,881,600 
HelpSystems, Senior Secured Term Loan, 8.59% (SOFR + 4.00%), maturity 11/19/26  12/19/2019   1,969,727    1,963,923    1,870,502 
Bomgar, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 4/18/25  5/25/2018   1,610,595    1,615,029    1,598,516 
OEConnection, Senior Secured Initial Term Loan, 8.77% (LIBOR + 4.00%), maturity 9/25/26  9/24/2019   1,592,260    1,588,315    1,584,299 
Digital Room, Senior Secured Closing Date Term Loan (First Lien), 10.02% (LIBOR + 5.25%), maturity 12/21/28  12/16/2021   1,488,750    1,475,605    1,473,863 
SmartBear, Senior Secured Initial Term Loan (First Lien), 9.02% (LIBOR + 4.25%), maturity 3/3/28  11/20/2020   985,000    976,981    980,075 
WellSky, Senior Secured Incremental Term B-1 Loan (First Lien), 10.34% (SOFR + 5.75%), maturity 3/10/28  8/16/2022   997,500    968,858    975,056 
ORBCOMM, Senior Secured Closing Date Term Loan (First Lien), 9.02% (LIBOR + 4.25%), maturity 9/1/28  6/17/2021   987,500    983,149    955,406 
Imperva, Senior Secured Term Loan, 8.77% (LIBOR + 4.00%), maturity 1/12/26  9/23/2020   975,981    970,223    949,142 
Infoblox, Senior Secured Initial Term Loan (First Lien), 8.34% (SOFR + 3.75%), maturity 12/1/27 (j)  10/7/2020   985,000    981,549    913,095 
Cloudera, Senior Secured Initial Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 10/8/28  8/10/2021   496,250    491,967    492,528 
Barracuda, Senior Secured Initial Term Loan (First Lien), 9.09% (SOFR + 4.50%), maturity 5/31/29 (j)  5/17/2022   500,000    485,490    483,055 
DigiCert, Senior Secured Initial Term Loan (First Lien), 8.59% (SOFR + 4.00%), maturity 10/16/26 (j)  3/13/2020   486,250    469,111    470,795 
PracticeTek, Senior Secured Revolving Loan, 11.02% (LIBOR + 6.25%), maturity 11/23/27 (i)  11/22/2021   -    (7,156)   - 
Golden Source, Senior Secured Revolving Loan, 10.09% (SOFR + 5.50%), maturity 5/12/28 (i)  8/22/2022   -    (9,390)   - 
                   
Containers, Packaging & Glass                  
InMark, Unitranche Incremental Term Loan, 10.59% (SOFR + 6.00%), maturity 12/23/26 (i)  12/10/2021   6,419,952    6,305,403    6,419,952 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 5/30/24  5/11/2017   3,318,093    3,313,837    3,226,846 
Brook & Whittle, Senior Secured Initial Term Loan (First Lien), 8.59% (SOFR + 4.00%), maturity 12/14/28  12/9/2021   3,131,265    3,107,930    3,131,265 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 7/18/26  7/17/2019   2,490,744    2,482,832    2,490,744 
PCI, Senior Secured Term B Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 11/30/27 (j)  9/25/2020   2,443,938    2,436,928    2,323,928 
Paragon Films, Senior Secured Closing Date Term Loan (First Lien), 9.77% (LIBOR + 5.00%), maturity 12/16/28  12/15/2021   1,985,000    1,966,087    1,975,075 
Intertape Polymer, Senior Secured Initial Term Loan (First Lien), 9.34% (SOFR + 4.75%), maturity 6/28/28 (o)  6/15/2022   1,995,000    1,921,340    1,899,699 
Resource Label Group, Senior Secured Closing Date Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 7/7/28  7/2/2021   1,860,949    1,852,924    1,860,949 
TricorBraun, Senior Secured Closing Date Initial Term Loan (First Lien), 8.02% (LIBOR + 3.25%), maturity 3/3/28 (j)  1/29/2021   1,810,382    1,802,881    1,731,648 
Potters Industries, Senior Secured Initial Term Loan, 8.77% (LIBOR + 4.00%), maturity 12/14/27  11/19/2020   1,473,750    1,463,413    1,462,697 
Technimark, Senior Secured Initial Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 7/7/28  6/30/2021   1,477,500    1,471,343    1,444,256 
Tekni-Plex, Senior Secured Tranche B-3 Initial Term Loan, 8.77% (LIBOR + 4.00%), maturity 9/15/28 (j)  7/29/2021   1,128,183    1,125,889    1,086,079 
Lacerta, Senior Secured Term Loan, 10.27% (LIBOR + 5.50%), maturity 12/30/26  2/8/2021   980,000    971,686    970,200 
Novolex, Senior Secured Term B Loan (First Lien), 8.84% (SOFR + 4.25%), maturity 4/13/29 (j)  3/30/2022   995,000    972,844    950,101 
Pregis, Senior Secured Initial Term Loan (First Lien), 8.34% (SOFR + 3.75%), maturity 7/31/26 (j)  7/25/2019   970,000    968,670    945,386 
Applied Adhesives, Senior Secured Term A Loan, 9.52% (LIBOR + 4.75%), maturity 3/12/27  3/12/2021   593,430    588,737    591,946 
Five Star Packaging, Senior Secured Initial Term Loan (First Lien), 8.84% (SOFR + 4.25%), maturity 5/5/29  4/27/2022   498,750    491,854    495,009 
Pregis, Senior Secured Third Amendment Refinancing Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 7/31/26  12/9/2020   493,750    492,024    492,516 
Golden West Packaging, Senior Secured Initial Term Loan, 10.02% (LIBOR + 5.25%), maturity 12/1/27  11/29/2021   490,625    486,330    489,398 
Applied Adhesives, Senior Secured Revolving Loan, 9.52% (LIBOR + 4.75%), maturity 3/12/27  3/12/2021   -    (616)   - 

 

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

 

12

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 2022

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Banking, Finance, Insurance & Real Estate                  
Cerity Partners, Senior Secured Initial Term Loan, 10.34% (SOFR + 5.75%), maturity 7/27/29 (i)  7/28/2022  $4,647,849   $4,574,823   $4,570,390 
Confluence, Senior Secured Initial Term Loan (First Lien), 8.34% (SOFR + 3.75%), maturity 7/31/28  7/22/2021   3,960,000    3,941,319    3,915,450 
Cherry Bekaert, Unitranche Term B Loan, 10.09% (SOFR + 5.50%), maturity 6/30/28 (i)  6/13/2022   3,550,571    3,464,800    3,479,035 
Ascensus, Senior Secured Initial Term Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 8/2/28  11/17/2021   2,977,500    2,965,493    2,917,950 
Alera, Unitranche 2022 Incremental Term Loan, 11.09% (SOFR + 6.50%), maturity 9/30/28  8/31/2022   2,819,600    2,740,779    2,798,453 
EPIC Insurance, Unitranche Closing Date Term Loan, 10.02% (LIBOR + 5.25%), maturity 9/29/28  8/27/2021   2,371,834    2,338,982    2,359,975 
American Beacon Advisors, Senior Secured Tranche D Term Loan (Second Lien), 12.77% (LIBOR + 8.00%), maturity 4/30/25  10/31/2017   2,117,133    2,121,970    2,093,316 
Beta+, Senior Secured Initial Term Loan, 9.84% (SOFR + 5.25%), maturity 7/1/29  6/24/2022   1,995,000    1,956,752    1,985,025 
Kestra Financial, Senior Secured Initial Term Loan, 8.84% (SOFR + 4.25%), maturity 6/3/26  4/29/2019   1,935,000    1,924,606    1,920,488 
Orion, Senior Secured 2021 Refinancing Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 9/24/27  8/4/2020   1,470,065    1,458,041    1,393,806 
SIAA, Unitranche Initial Term Loan, 11.02% (LIBOR + 6.25%), maturity 4/28/28  4/21/2021   1,160,762    1,142,944    1,140,125 
Advisor Group, Senior Secured Term B-1 Loan, 9.27% (LIBOR + 4.50%), maturity 7/31/26 (j)  1/31/2020   1,018,929    1,018,969    998,780 
Community Brands, Senior Secured Initial Term Loan, 10.34% (SOFR + 5.75%), maturity 2/24/28  2/23/2022   992,500    972,300    982,575 
LERETA, Senior Secured Initial Term Loan, 10.02% (LIBOR + 5.25%), maturity 7/30/28  7/27/2021   987,500    978,810    972,688 
Sedgwick Claims, Senior Secured Initial Term Loan, 8.02% (LIBOR + 3.25%), maturity 12/31/25 (j)  2/12/2020   484,848    484,476    472,424 
EdgeCo, Senior Secured Third Amendment Term Loan (First Lien), 9.52% (LIBOR + 4.75%), maturity 6/1/26  3/29/2022   297,750    275,745    295,517 
Integro, Senior Secured 2022 Refinancing Term Loan (First Lien), 12.25% (Fixed) 12.25% PIK, maturity 5/8/23 (n)  10/9/2015   228,698    232,323    228,698 
Cherry Bekaert, Senior Secured Revolving Credit Loan, 10.09% (SOFR + 5.50%), maturity 6/30/28 (i)  8/1/2022   184,942    184,942    181,215 
EPIC Insurance, Senior Secured Revolving Loan, 10.02% (LIBOR + 5.25%), maturity 9/30/27  8/27/2021   -    (269)   - 
Beta+, Senior Secured Revolving Credit Loan, 9.84% (SOFR + 5.25%), maturity 7/1/27  6/24/2022   -    (6,216)   - 
                   
Capital Equipment                  
FloWorks, Senior Secured Initial Term Loan (First Lien), 10.34% (SOFR + 5.75%), maturity 12/27/28 (j)  3/1/2022   3,980,000    3,856,250    3,980,000 
Tank Holding, Unitranche Initial Term Loan, 10.59% (SOFR + 6.00%), maturity 3/31/28 (m)  3/25/2022   3,980,000    3,907,511    3,970,050 
Plaskolite, Senior Secured 2021-1 Refinancing Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 12/15/25  12/12/2018   3,841,575    3,807,287    3,624,046 
Excelitas, Senior Secured Closing Date Euro Term Loan, 10.52% (Other + 5.75%), maturity 8/12/29  6/15/2022   2,969,565    3,013,358    2,947,293 
Burke Porter Group, Unitranche Closing Date Term Loan, 10.59% (SOFR + 6.00%), maturity 7/29/29 (i)  9/30/2022   2,333,333    2,271,028    2,310,000 
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 9/30/24 (j)  4/20/2018   2,037,048    2,037,048    2,037,048 
Flow Control Group, Senior Secured Initial Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 3/31/28 (j)  3/17/2021   1,666,204    1,663,888    1,588,626 
Radwell, Unitranche Initial Term Loan, 10.34% (SOFR + 5.75%), maturity 4/1/29  3/11/2022   1,492,500    1,469,422    1,492,500 
Edward Don, Senior Secured Initial Term Loan, 9.02% (LIBOR + 4.25%), maturity 7/2/25  6/26/2018   1,370,943    1,369,445    1,350,378 
Therm-O-Disc, Senior Secured Initial Term Loan (First Lien), 10.59% (SOFR + 6.00%), maturity 5/31/29  5/26/2022   997,500    923,600    992,513 
Cleaver Brooks, Senior Secured Initial Term Loan, 10.34% (SOFR + 5.75%), maturity 7/31/28  7/18/2022   993,750    974,648    988,781 
TriMark, Senior Secured Second Amendment Tranche B Loan (Super Senior Priority), 8.27% (LIBOR + 3.50%), maturity 8/28/24  1/31/2022   963,589    963,589    684,148 
Culligan, Senior Secured 2022 Refinancing Term B Loan, 8.52% (LIBOR + 3.75%), maturity 7/31/28 (j)  6/17/2021   559,688    556,920    528,555 
Infinite Electronics, Senior Secured Initial Term Loan (First Lien), 8.02% (LIBOR + 3.25%), maturity 3/2/28  2/24/2021   492,500    491,568    491,269 
Duravant, Senior Secured Incremental Amendment No. 5 Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 5/19/28 (j)  3/5/2020   487,500    487,500    472,799 
SPX Flow, Senior Secured Term Loan, 9.09% (SOFR + 4.50%), maturity 4/5/29 (j)  3/18/2022   498,750    478,053    467,134 
Burke Porter Group, Senior Secured Revolving Credit Loan, 10.59% (SOFR + 6.00%), maturity 7/29/28 (i)  8/11/2022   54,991    44,586    54,441 
Tank Holding, Senior Secured Revolving Credit Loan, 10.59% (SOFR + 6.00%), maturity 3/31/28  3/25/2022   24,615    21,662    24,554 
Cleaver Brooks, Senior Secured Revolving Loan, 10.34% (SOFR + 5.75%), maturity 7/31/28  7/21/2022   15,385    12,923    15,308 
Radwell, Senior Secured Revolving Loan, 10.34% (SOFR + 5.75%), maturity 4/1/28  3/11/2022   -    (1,200)   - 
                   
Aerospace & Defense                  
HDT Global, Senior Secured Initial Term Loan, 10.52% (LIBOR + 5.75%), maturity 7/8/27  6/30/2021   3,237,500    3,146,132    3,132,281 
StandardAero, Senior Secured 2020 Term B-1 Loan, 8.27% (LIBOR + 3.50%), maturity 4/6/26 (j)  1/24/2019   3,237,691    3,233,062    3,094,520 
CPI International, Senior Secured Initial Term Loan, 10.09% (SOFR + 5.50%), maturity 10/6/29  5/18/2022   3,000,000    2,933,703    2,977,500 
Amentum, Senior Secured Tranche 3 Term Loan (First Lien), 8.59% (SOFR + 4.00%), maturity 2/15/29  2/10/2022   1,990,000    1,980,482    1,990,000 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 12.52% (LIBOR + 7.75%), maturity 4/30/26  5/10/2018   2,000,000    2,005,563    1,920,000 
Whitcraft, Unitranche Initial Term Loan, 10.77% (LIBOR + 6.00%), maturity 4/3/23  3/6/2020   1,942,344    1,936,382    1,864,650 
StandardAero, Senior Secured 2020 Term B-2 Loan, 8.27% (LIBOR + 3.50%), maturity 4/6/26 (j)  1/24/2019   1,740,694    1,738,206    1,663,720 
Tronair, Senior Secured Initial Term Loan (First Lien), 10.52% (LIBOR + 5.75%) PIK, maturity 9/8/23  9/30/2016   1,344,845    1,343,776    1,291,051 
Peraton, Senior Secured Term B Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 2/1/28 (j)  2/23/2021   964,612    960,887    943,714 
API Technologies, Senior Secured Initial Term Loan (First Lien), 9.02% (LIBOR + 4.25%), maturity 5/9/26  1/15/2020   969,849    951,105    872,864 
BlueHalo, Unitranche Initial Term Loan, 10.77% (LIBOR + 6.00%), maturity 10/31/25  11/17/2021   494,014    487,514    488,457 
Novaria Group, Senior Secured Initial Term Loan, 10.09% (SOFR + 5.50%), maturity 1/27/27  1/24/2020   481,818    478,783    477,000 
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 4/30/25  7/18/2019   483,082    481,741    463,759 
BlueHalo, Senior Secured Revolving Loan, 10.77% (LIBOR + 6.00%), maturity 10/31/25  11/17/2021   91,486    89,997    90,456 
                   
Chemicals, Plastics & Rubber                  
DuBois Chemicals, Senior Secured Term Loan (Second Lien) - 2019, 13.27% (LIBOR + 8.50%), maturity 9/30/27  10/8/2019   3,000,000    2,981,878    2,985,000 
Vertellus, Senior Secured Initial Term Loan, 10.34% (SOFR + 5.75%), maturity 12/22/27  12/18/2020   2,962,613    2,902,499    2,910,767 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 8.02% (LIBOR + 3.25%), maturity 1/31/25  1/26/2018   2,600,325    2,604,902    2,574,322 
Unifrax, Senior Secured USD Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 12/12/25 (j)  11/5/2018   2,401,203    2,382,882    2,142,329 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 11.52% (LIBOR + 6.75%), maturity 9/6/26  8/16/2018   2,000,000    2,001,368    1,995,000 
USALCO, Unitranche Term Loan A, 10.77% (LIBOR + 6.00%), maturity 10/19/27  10/26/2021   1,980,000    1,962,805    1,960,200 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 9.27% (LIBOR + 4.50%), maturity 9/30/26  10/8/2019   1,759,343    1,734,161    1,746,148 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 10/28/24 (j)  11/30/2018   957,179    950,212    936,958 
Ascensus Specialties, Senior Secured Initial Term Loan, 9.02% (LIBOR + 4.25%), maturity 6/30/28  12/3/2021   493,722    485,722    488,785 
Boyd Corp, Senior Secured Initial Term Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 9/6/25  11/7/2018   487,277    469,149    486,059 
Polytek, Senior Secured Term Loan, 10.34% (SOFR + 5.75%), maturity 9/20/24  12/23/2020   490,119    485,649    465,613 
USALCO, Senior Secured Revolving Loan, 10.77% (LIBOR + 6.00%), maturity 10/19/26  10/26/2021   137,097    133,871    135,726 
Vertellus, Senior Secured Revolving Credit Loan, 10.34% (SOFR + 5.75%), maturity 12/22/25  12/18/2020   -    (10,130)   - 

 

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

 

13

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 2022

(Expressed in U.S. Dollars)

 

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Transportation: Cargo                  
Evans Network, Senior Secured Initial Term Loan (First Lien), 9.02% (LIBOR + 4.25%), maturity 8/19/28  8/6/2021  $3,636,735   $3,601,783   $3,636,735 
Capstone Logistics, Senior Secured Closing Date Term Loan (First Lien), 9.52% (LIBOR + 4.75%), maturity 11/12/27  11/12/2020   2,095,641    2,079,357    2,095,641 
AIT Worldwide Logistics, Senior Secured Initial Term Loan (First Lien), 9.52% (LIBOR + 4.75%), maturity 4/6/28  12/9/2021   1,975,000    1,970,660    1,897,545 
St. George Logistics, Senior Secured Initial Term Loan, 10.59% (SOFR + 6.00%), maturity 3/24/26  4/28/2022   1,492,500    1,471,706    1,492,500 
Worldwide Express, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 7/26/28 (j)  7/23/2021   1,485,000    1,475,223    1,363,831 
FLS Transportation, Senior Secured Term B Loan, 10.02% (LIBOR + 5.25%), maturity 12/15/28  4/14/2022   1,217,391    1,206,381    1,217,391 
Omni Logistics, Senior Secured Initial Term Loan (First Lien), 9.77% (LIBOR + 5.00%), maturity 12/30/26  11/24/2021   1,148,217    1,137,659    1,136,735 
Magnate, Senior Secured Initial Term Loan (First Lien), 10.27% (LIBOR + 5.50%), maturity 12/29/28  3/11/2022   954,107    936,858    954,107 
Odyssey Logistics, Senior Secured New Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 10/12/24 (j)  11/20/2018   4,191    4,183    4,110 
FLS Transportation, Senior Secured Revolving Credit Loan, 10.02% (LIBOR + 5.25%), maturity 12/17/27  4/14/2022   -    (889)   - 
Omni Logistics, Senior Secured Revolving Credit Loan (First Lien), 9.77% (LIBOR + 5.00%), maturity 12/30/25  11/24/2021   -    (1,119)   - 
                   
Services: Consumer                  
Ned Stevens, Senior Secured Initial Term Loan, 11.34% (SOFR + 6.75%), maturity 11/1/29 (i)  11/1/2022   3,553,922    3,422,937    3,411,765 
A Place For Mom, Senior Secured Term Loan, 9.27% (LIBOR + 4.50%), maturity 2/10/26  7/28/2017   2,208,078    2,208,116    2,163,917 
Smart Start, Senior Secured Term B Loan (Second Lien), 12.52% (LIBOR + 7.75%), maturity 12/16/29  12/10/2021   2,000,000    1,967,924    1,975,000 
Smart Start, Senior Secured Term B Loan (First Lien), 9.27% (LIBOR + 4.50%), maturity 12/16/28  12/10/2021   1,980,000    1,967,493    1,957,725 
FullBloom, Senior Secured Initial Term Loan (First Lien), 8.84% (SOFR + 4.25%), maturity 12/15/28  12/10/2021   1,492,500    1,479,301    1,477,575 
Teaching Strategies, Senior Secured Initial Term Loan (First Lien), 8.34% (SOFR + 3.75%), maturity 8/31/28  8/19/2021   990,000    980,710    982,575 
Spring Education, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 7/30/25 (j)  7/26/2018   957,500    956,472    937,838 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 10.27% (LIBOR + 5.50%), maturity 5/9/25  5/4/2018   605,234    602,154    605,234 
Ned Stevens, Senior Secured Revolving Loan, 11.34% (SOFR + 6.75%), maturity 11/1/29 (i)  11/1/2022   -    (10,154)   - 
                   
Beverage, Food & Tobacco                  
Bettcher Industries, Senior Secured Initial Term Loan (Second Lien), 11.84% (SOFR + 7.25%), maturity 12/14/29  12/13/2021   2,500,000    2,477,592    2,450,000 
Sovos Brands, Senior Secured Initial Term Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 6/8/28  6/8/2021   2,033,001    2,033,001    2,033,001 
Bettcher Industries, Senior Secured Initial Term Loan (First Lien), 8.59% (SOFR + 4.00%), maturity 12/14/28  12/13/2021   1,985,000    1,965,440    1,945,300 
Hissho Sushi, Unitranche Term Loan, 10.59% (SOFR + 6.00%), maturity 5/18/28 (i)  4/7/2022   1,847,857    1,811,445    1,835,156 
Dessert Holdings, Senior Secured Initial Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 6/9/28  6/7/2021   1,761,792    1,750,148    1,735,365 
Monogram Foods, Senior Secured Initial Term Loan, 8.77% (LIBOR + 4.00%), maturity 8/28/28  8/13/2021   990,000    981,323    965,250 
Hissho Sushi, Senior Secured Revolving Credit Loan, 10.59% (SOFR + 6.00%), maturity 5/18/28 (i)  4/7/2022   28,571    27,905    28,375 
                   
Automotive                  
BBB Industries, Senior Secured Initial Term Loan (First Lien), 9.84% (SOFR + 5.25%), maturity 7/31/29  6/30/2022   3,000,000    2,713,911    2,857,500 
Highline, Senior Secured Initial Term Loan (First Lien), 9.27% (LIBOR + 4.50%), maturity 11/9/27  10/29/2020   2,813,523    2,759,164    2,764,286 
Rough Country, Senior Secured Initial Term Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 7/28/28  7/26/2021   1,975,000    1,970,698    1,965,125 
Truck Hero, Senior Secured Initial Term Loan, 8.52% (LIBOR + 3.75%), maturity 1/31/28  1/20/2021   1,473,750    1,473,750    1,366,443 
Innovative XCessories, Senior Secured Initial Term Loan, 9.02% (LIBOR + 4.25%), maturity 3/5/27  2/27/2020   786,124    785,092    691,789 
Safe Fleet, Senior Secured Initial Term Loan (Second Lien), 11.34% (SOFR + 6.75%), maturity 2/2/26  2/23/2022   500,000    500,000    495,000 
Wheel Pros, Senior Secured Initial Term Loan (First Lien), 9.27% (LIBOR + 4.50%), maturity 5/11/28  4/23/2021   493,750    489,984    380,681 
                   
Construction & Building                  
A1 Garage Door Service, Unitranche Term A Loan, 11.09% (SOFR + 6.50%), maturity 12/23/28 (i) (j)  12/22/2022   1,826,446    1,762,273    1,771,653 
Tangent, Senior Secured Closing Date Term Loan (First Lien), 9.52% (LIBOR + 4.75%), maturity 11/30/27  10/2/2019   1,781,392    1,774,395    1,768,032 
PlayPower, Senior Secured Initial Term Loan, 10.27% (LIBOR + 5.50%), maturity 5/8/26  5/10/2019   1,737,472    1,737,472    1,563,725 
PlayCore, Senior Secured Initial Term Loan (Second Lien), 12.52% (LIBOR + 7.75%), maturity 9/29/25  2/7/2020   1,500,000    1,480,817    1,500,000 
Specialty Products & Insulation, Senior Secured Tranche B-1 Term Loan, 9.84% (SOFR + 5.25%), maturity 12/21/27  3/16/2022   994,023    984,887    994,023 
Dodge Construction Network, Senior Secured Initial Term Loan (First Lien), 9.34% (SOFR + 4.75%), maturity 2/23/29  2/10/2022   995,000    981,676    987,538 
PlayCore, Senior Secured Initial Term Loan (First Lien), 8.52% (LIBOR + 3.75%), maturity 9/30/24  9/18/2017   946,930    945,987    946,930 
Acuren, Senior Secured Initial Term Loan, 9.02% (LIBOR + 4.25%), maturity 1/23/27  1/17/2020   473,783    472,348    473,783 
Hoffman Southwest, Senior Secured Initial Term Loan, 10.27% (LIBOR + 5.50%), maturity 8/14/23  5/16/2019   422,238    425,188    421,183 
A1 Garage Door Service, Senior Secured Revolving Loan, 11.09% (SOFR + 6.50%), maturity 12/23/28 (i) (j)  12/22/2022   -    (8,264)   - 
                   
Environmental Industries                  
Alliance Environmental, Unitranche Initial Term Loan, 10.77% (LIBOR + 6.00%), maturity 12/30/27 (i)  12/30/2021   4,115,728    4,046,325    3,959,048 
Denali Water Solutions, Senior Secured Closing Date Term Loan, 9.02% (LIBOR + 4.25%), maturity 3/27/28  3/18/2021   1,970,000    1,952,515    1,935,525 
Keter Environmental Services, Unitranche Closing Date Term Loan, 11.27% (LIBOR + 6.50%), maturity 10/29/27  11/5/2021   495,000    490,704    492,525 
Denali Water Solutions, Senior Secured Amendment No. 3 Term Loan, 9.21% (SOFR + 4.63%), maturity 3/27/28  5/5/2022   497,500    481,376    488,794 
Alliance Environmental, Senior Secured Revolving Loan, 10.77% (LIBOR + 6.00%), maturity 12/30/27 (i)  12/30/2021   314,570    307,947    302,594 
Keter Environmental Services, Unitranche Revolving Loan, 11.27% (LIBOR + 6.50%), maturity 10/29/27  11/5/2021   27,360    26,585    27,223 
                   
Consumer Goods: Non-durable                  
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 11/21/23  11/9/2016   2,368,573    2,367,209    2,321,201 
Augusta Sportswear, Senior Secured Initial Term Loan, 10.09% (SOFR + 5.50%), maturity 4/25/25  11/2/2016   2,001,028    1,999,579    1,991,023 
Hoffmaster Group, Senior Secured Initial Term Loan (Second Lien), 14.27% (LIBOR + 9.50%), maturity 11/21/24  2/7/2020   1,250,000    1,250,000    1,221,875 
                   
Wholesale                  
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 7.77% (LIBOR + 3.00%), maturity 3/20/25  3/16/2018   3,809,768    3,810,380    3,771,670 
                   
Media: Diversified & Production                  
MediaRadar, Unitranche Closing Date Term A Loan, 10.59% (SOFR + 6.00%), maturity 7/22/28 (i)  5/23/2022   1,832,444    1,788,565    1,756,837 
Ansira, Unitranche Legacy Term Loan, 6.50% (Fixed) 6.50% PIK, maturity 12/20/24 (q)  12/20/2016   2,266,689    2,263,320    952,010 
MediaRadar, Senior Secured Revolving Loan, 10.59% (SOFR + 6.00%), maturity 7/22/28 (i)  9/16/2022   -    (7,407)   - 
                   
Hotels, Gaming & Leisure                  
Northstar, Senior Secured Term Loan, 12.02% (LIBOR + 7.25%) 1.00% PIK, maturity 6/7/24  5/8/2017   1,294,954    1,294,954    1,252,868 
Auto Europe, Senior Secured Initial Dollar Term Loan, 9.59% (SOFR + 5.00%), maturity 10/21/23  10/19/2016   1,119,231    1,117,283    895,385 

 

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

 

14

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 2022

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS:  NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Metals & Mining                  
Dynatect (A&A), Senior Secured Term B Loan, 9.27% (LIBOR + 4.50%), maturity 9/30/24  8/16/2019  $1,689,870   $1,680,609   $1,689,870 
                   
Forest Products & Paper                  
Loparex, Senior Secured Initial Term Loan (First Lien), 9.27% (LIBOR + 4.50%), maturity 7/31/26  7/29/2019   1,451,250    1,443,028    1,451,250 
                   
Utilities: Electric                  
Systems Control, Senior Secured Initial Term Loan, 9.27% (LIBOR + 4.50%), maturity 3/28/25  6/15/2021   1,475,482    1,473,812    1,442,284 
                   
Retail                  
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 8.27% (LIBOR + 3.50%), maturity 12/16/24 (j)  10/17/2018   957,221    960,242    925,274 
StubHub, Senior Secured USD Term B Loan, 8.27% (LIBOR + 3.50%), maturity 2/12/27  1/31/2020   485,000    483,510    465,600 
                   
Utilities: Water                  
Aegion, Senior Secured Initial Term Loan, 9.52% (LIBOR + 4.75%), maturity 5/17/28  4/1/2021   987,499    983,463    970,217 
                   
Energy: Electricity                  
Franklin Energy, Senior Secured Term B Loan (First Lien), 8.77% (LIBOR + 4.00%), maturity 8/14/26  8/14/2019   967,500    965,978    948,150 
                   
Consumer Goods: Durable                  
Careismatic, Senior Secured Initial Term Loan (First Lien), 8.02% (LIBOR + 3.25%), maturity 1/6/28  1/22/2021   492,500    491,455    472,800 
                   
Total Bank Loans          $424,399,110   $417,174,660 

 

EQUITY AND PREFERRED SHARES:  NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.9%)(g)(h):                     
                      
Services: Business                     
InnovateMR, Class A Units (387.31 Class A Units) (i) (p) (r)  12/16/2021          $387,311   $503,132 
Industrial Services Group, Class A Units (238.10 Class A Units) (i) (p) (s)  12/7/2022           238,095    238,095 
Liberty Group, Series A-Preferred Units (113,636.36 Series A-Preferred Units) (i) (p) (t)  6/6/2022           113,636    151,883 
VC3, Class A Units (7,499.03 Class A Units) (i) (p) (u)  9/16/2022           29,846    29,846 
                      
High Tech Industries                     
PracticeTek, Class A Units (344,833.35 Class A Units) (i) (p) (v)  11/22/2021           377,255    377,815 
Golden Source, Class A Units (117,370.89 Class A Units) (i) (p) (w)  3/25/2022           117,371    180,475 
                      
Healthcare & Pharmaceuticals                     
InterMed, Class A Units (2,484 Class A Units) (i) (p) (x)  12/22/2022           248,380    248,380 
RevHealth, Class A-1 Units (20,547.95 Class A-1 Units) (i) (p) (y)  7/22/2022           205,479    200,873 
Ivy Rehab, Class A Units (100 Class A Units) (i) (p) (z)  3/11/2022           100,000    74,010 
                      
Beverage, Food & Tobacco                     
Hissho Sushi, Class A Units (25,000 Class A Units) (i) (p) (aa)  4/7/2022           250,000    317,845 
                      
Environmental Industries                     
Alliance Environmental Group, A-1 Preferred Units (331.13 A-1 Preferred Units) (i) (p) (ab)  9/30/2019           331,126    311,970 
                      
Construction & Building                     
A1 Garage Door Service, Class A Common Units (272.73 Class A Common Units) (i) (p) (ac)  12/22/2022           272,727    272,727 
                      
Services: Consumer                     
Ned Stevens, Class B Common Units (261.44 Class B Common Units) (i) (p) (ad)  11/1/2022           261,438    261,438 
                      
Chemicals, Plastics & Rubber                     
Vertellus, Series A Units (1,651 Series A Units) (i) (p) (ae)  12/22/2020           165,138    253,318 
                      
Banking, Finance, Insurance & Real Estate                     
Cherry Bekaert, Class A Units (129,870.13 Class A Units) (i) (p) (af)  6/30/2022           129,870    159,143 
                      
Media: Advertising, Printing & Publishing                     
MediaRadar, Class A-1 Units (74,074.07 Class A-1 Units) (i) (p) (ag)  9/16/2022           74,074    73,048 
                      
Total Equity and Preferred Shares             $3,301,746   $3,653,998 
                      
Total Portfolio Investments (ah)             $427,700,856   $420,828,658 

 

(a)All companies are located in the United States of America, unless otherwise noted.
(b)Interest rate percentages represent actual interest rates as of December 31, 2022, which are indexed to the noted reference rate. The referenced rates are subject to interest floors which can vary based on contractual agreements with the borrower.
(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)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.
(j)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.
(k)The Company headquarters for UDG is located in Ireland.
(l)The Company purchased the investment, pursuant to a repurchase agreement with a rate of 1.9626 basis points per day with Macquarie US Trading LLC, dated June 21, 2022, due January 17, 2023.
(m)The Company purchased the investment, pursuant to a repurchase agreement with a rate of 1.9530 basis points per day with Macquarie US Trading LLC, dated July 19, 2022, due January 15, 2023.
(n)The Company headquarters for Sophos & Integro are located in United Kingdom.
(o)The Company headquarters for Intertape Polymer is located in Canada.
(p)Investment is non-income producing.
(q)Investment is on non-accrual
(r)Represents an investment in APD INN Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(s)Represents an investment in APD ISG Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(t)Represents an investment in APD TLG Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(u)Represents an investment in APD VC3 Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(v)Represents an investment in APD Ptek Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(w)Represents an investment in APD Gol Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(x)Represents an investment in APD IMD Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(y)Represents an investment in APD RH Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(z)Represents an investment in APD IVY Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(aa)Represents an investment in APD Sush Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ab)Represents an investment in APD AEG Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ac)Represents an investment in APD GAR Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ad)Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ae)Represents an investment in ADP VERT Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(af)Represents an investment in APD CBA Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ag)Represents an investment in APD MDR Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ah)At December 31, 2022, the cost of investments for income tax purposes was $427,700,856, the gross unrealized depreciation for federal tax purposes was $9,092,100, the gross unrealized appreciation for federal income tax purposes was $2,219,902, and the net unrealized depreciation was $6,872,198.

 

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

 

15

 

 

Audax Credit BDC Inc.

Notes to Financial Statements

March 31, 2023

(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.

 

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.

 

Certain prior period information has been reclassified to conform to the current period presentation. The reclassification has no effect on the Company’s financial position, or the results of operations as previously reported.

 

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 as of March 31, 2023 and December 31, 2022. 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.

 

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.

 

17

 

 

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. This permits boards, subject to board oversight and certain other conditions, to designate certain parties to perform the fair value determinations.

 

19

 

 

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

 

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 March 31, 2023, the Company held one investment on non-accrual, which represented 0.56% and 0.22% of the Company’s total portfolio at cost and fair market value, respectively. As of December 31, 2022, the Company held one investment on non-accrual, which represented 0.53% and 0.23% of the Company’s total portfolio at cost and fair market value, respectively.

 

The Company currently holds loans in the portfolio that contain OID and that contain 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 March 31, 2023, the Company held 235 investments in loans with OID. The Company accrued OID income of $165,630 for the three months ended March 31, 2023. The unamortized balance of OID on debt investments as of March 31, 2023 totaled $4,534,506. As of December 31, 2022, the Company held 239 investments in loans with OID. The Company accrued OID income of $144,919 for the three months ended March 31, 2022. The unamortized balance of OID investments as of December 31, 2022, totaled $4,510,014.

 

As of March 31, 2023, the Company held seven investments which had a PIK interest component. The Company recorded $87,506 in PIK interest income for the three months ended March 31, 2023. As of March 31, 2022, the Company held three investments which had a PIK interest component. The Company recorded $61,319 in PIK interest income for the three months ended March 31, 2022.

 

As of March 31, 2023 and December 31, 2022, the Company held $32,284,422 and $15,923,163 in cash and cash equivalents, respectively. For the three months ended March 31, 2023 and 2022 the Company earned $64,550 and $384, 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.

 

For the three months ended March 31, 2023 and 2022, the Company accrued $62,635 and $38,118 of other income, respectively, related to amendment fees.

 

20

 

 

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, 2024. 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 March 31, 2023, $307,693,482 of the Company’s investments were valued using unobservable inputs, and $91,150,458 were valued using observable inputs. During the three months ended March 31, 2023, $9,724,149 transferred into Level 3 due to a decrease in observable prices in the market and $37,787,878 transferred out of Level 3 due to the liquidity in the market and transparency of inputs.

 

As of December 31, 2022, $339,976,294 of the Company’s investments were valued using unobservable inputs, and $80,852,364 were valued using observable inputs. During the year ended December 31, 2022, $160,938,497 transferred into Level 3 due to a decrease in observable prices in the market and $997,500 transferred out of Level 3 due to the liquidity in the market and transparency of inputs.

 

The following table presents the Company’s investments carried at fair value as of March 31, 2023 and December 31, 2022, by caption on the Company’s accompanying statements of assets and liabilities and by security type.

 

   Assets at Fair Value as of March 31, 2023 
   Level 1   Level 2   Level 3   Total 
First Lien Debt  $-   $89,375,458   $185,234,925   $274,610,383 
Unitranche Debt   -    -    97,301,115    97,301,115 
Second Lien Debt   -    1,775,000    21,328,169    23,103,169 
Equity and Preferred Shares   -    -    3,829,273    3,829,273 
Total  $-   $91,150,458   $307,693,482   $398,843,940 

 

   Assets at Fair Value as of December 31, 2022 
   Level 1   Level 2   Level 3   Total 
First Lien Debt  $-   $75,132,547   $220,893,916   $296,026,463 
Unitranche Debt   -    4,719,817    91,865,688    96,585,505 
Second Lien Debt   -    1,000,000    23,562,691    24,562,691 
Equity and Preferred Shares   -    -    3,653,999    3,653,999 
Total  $-   $80,852,364   $339,976,294   $420,828,658 

 

21

 

 

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 March 31, 2023. 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 March 31, 2023
    Fair     Valuation   Unobservable       Weighted
    Value     Technique   Inputs (1)   Range (2)   Average (3)
First Lien Debt   $ 152,185,661      Matrix Pricing    Senior Leverage   0.48x - 11.81x   5.05x
                 Total Leverage   0.48x - 11.81x   5.95x
                 Interest Coverage   0.44x - 18.90x   2.22x
                 Debt Service Coverage   0.43x - 12.05x   1.83x
                 TEV Coverage   0.68x - 19.41x   2.50x
                 Liquidity   13.06% - 402.87%   129.47%
                 Spread Comparison   300bps - 725bps   464bps
                         
First Lien Debt     33,049,264      Market Analysis    Senior Leverage   0.83x - 49.62x   8.76x
                 Total Leverage   0.83x - 49.62x   9.99x
                 Interest Coverage   (0.13)x - 3.62x   1.65x
                 Debt Service Coverage   (0.19)x - 2.86x   1.33x
                 TEV Coverage   0.16x - 15.49x   1.60x
                 Liquidity   24.85% - 439.19%   100.98%
                 Spread Comparison   0bps - 575bps   429bps
                         
Unitranche Debt     93,266,206      Matrix Pricing    Senior Leverage   4.52x - 7.73x   6.08x
                 Total Leverage   4.52x - 8.37x   6.18x
                 Interest Coverage   0.66x - 2.64x   1.83x
                 Debt Service Coverage   0.46x - 2.23x   1.56x
                 TEV Coverage   1.26x - 8.02x   2.23x
                 Liquidity   13.06% - 789.19%   165.25%
                 Spread Comparison   500bps - 700bps   586bps
                         
Unitranche Debt     4,034,909      Market Analysis    Senior Leverage   12.92x - 15.67x   13.50x
                 Total Leverage   12.92x - 15.67x   13.50x
                 Interest Coverage   0.38x - 0.85x   0.75x
                 Debt Service Coverage   0.35x - 0.74x   0.66x
                 TEV Coverage   0.49x - 0.84x   0.77x
                 Liquidity   56.53% - 86.73%   80.28%
                 Spread Comparison   0bps - 350bps   275bps
                         
Second Lien Debt     21,328,169      Matrix Pricing    Senior Leverage   3.26x - 10.92x   6.96x
                 Total Leverage   3.26x - 10.92x   6.96x
                 Interest Coverage   0.67x - 3.82x   1.78x
                 Debt Service Coverage   0.58x - 3.25x   1.49x
                 TEV Coverage   1.18x - 2.64x   1.72x
                 Liquidity   62.88% - 262.14%   136.54%
                 Spread Comparison   675bps - 850bps   751bps
                         
Total   $ 303,864,209                  

 

(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 the referenced rate for each investment to the spread over the referenced rate 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 $3,829,273 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, 2022. 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, 2022
   Fair   Valuation  Unobservable     Weighted
   Value   Technique    Inputs (1)    Range (2)  Average (3)
First Lien Debt  $187,013,801    Matrix Pricing  Senior Leverage  0.48x - 23.60x  5.18x
           Total Leverage  0.48x - 28.27x  6.13x
           Interest Coverage  0.67x - 18.90x  2.25x
           Debt Service Coverage  0.49x - 12.05x  1.86x
           TEV Coverage  0.71x - 19.41x  2.40x
           Liquidity  13.86% - 426.46%  126.31%
           Spread Comparison  300bps - 675bps  449bps
                  
First Lien Debt   33,651,417    Market Analysis  Senior Leverage  2.63x - 49.62x  7.92x
           Total Leverage  2.63x - 49.62x  9.43x
           Interest Coverage  (0.13)x - 3.62x  1.79x
           Debt Service Coverage  (0.19)x - 2.83x  1.47x
           TEV Coverage  0.16x - 3.42x  1.83x
           Liquidity  22.80% - 811.22%  137.00%
           Spread Comparison  350bps - 725bps  449bps
                  
Unitranche Debt   87,787,461    Matrix Pricing  Senior Leverage  4.63x - 12.00x  6.22x
           Total Leverage  4.73x - 12.00x  6.31x
           Interest Coverage  0.60x - 2.88x  1.95x
           Debt Service Coverage  0.53x - 2.28x  1.62x
           TEV Coverage  0.96x - 6.58x  2.14x
           Liquidity  64.00% - 293.80%  141.30%
           Spread Comparison  500bps - 650bps  580bps
                  
Unitranche Debt   4,078,227    Market Analysis  Senior Leverage  12.92x - 14.48x  13.28x
           Total Leverage  12.92x - 14.48x  13.28x
           Interest Coverage  0.40x - 0.85x  0.74x
           Debt Service Coverage  0.35x - 0.74x  0.65x
           TEV Coverage  0.53x - 0.84x  0.77x
           Liquidity  48.28% - 86.73%  77.75%
           Spread Comparison  350bps - 650bps  420bps
                  
Second Lien Debt   23,562,691    Matrix Pricing  Senior Leverage  3.26x - 10.92x  6.95x
           Total Leverage  3.26x - 10.92x  6.95x
           Interest Coverage  0.67x - 3.82x  1.87x
           Debt Service Coverage  0.58x - 3.25x  1.55x
           TEV Coverage  1.08x - 2.85x  1.79x
           Liquidity  62.88% - 262.14%  135.17%
           Spread Comparison  675bps - 950bps  758bps
Total  $336,093,597             

 

  (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 the referenced rate for each investment to the spread over the referenced rate 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 $3,882,697 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.

 

23

 

 

The following tables provide the changes in fair value, broken out by security type, during the three months ended March 31, 2023 and 2022 for all investments for which the Company determines fair value using unobservable (Level 3) factors.

 

Three Months Ended March 31, 2023  First Lien
Debt		   Unitranche
Debt		   Second Lien
Debt		   Equity and
Preferred
Shares		   Total 
Fair Value as of December31, 2022  $220,893,916   $91,865,688   $23,562,691   $3,653,999   $339,976,294 
Transfers into Level 3   4,004,332    4,719,817    1,000,000    -    9,724,149 
Transfers out of Level 3   (35,792,878)   -    (1,995,000)   -    (37,787,878)
Total gains:                         
Net realized gain(a)   1,488    5,819    -    -    7,307 
Net unrealized (depreciation) appreciation(b)   (1,057,298)   65,039    4,196    175,274    (812,789)
New investments, repayments and settlements:(c)                         
Purchases   2,076,838    2,686,144    -    -    4,762,982 
Settlements/repayments   (4,996,566)   (2,146,723)   (1,250,000)   -    (8,393,289)
Net amortization of premiums, PIK, discounts and fees   105,093    105,331    6,282    -    216,706 
Sales   -    -    -    -    - 
Fair Value as of March 31, 2023  $185,234,925   $97,301,115   $21,328,169   $3,829,273   $307,693,482 

 

  (a) Included in net realized (loss) gain on the accompanying Statement of Operations for the three months ended March 31, 2023.
  (b) Included in net change in unrealized depreciation on the accompanying Statement of Operations for the three months ended March 31, 2023.
  (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.
   
   

 

Three Months Ended March 31, 2022  First Lien
Debt		   Unitranche
Debt		   Second Lien
Debt		   Equity and
Preferred
Shares		   Total 
Fair Value as of December31, 2021  $118,049,277   $19,092,768   $14,701,508   $1,346,357   $153,189,910 
Transfers into Level 3   63,131,533    6,206,403    4,435,000    -    73,772,936 
Transfers out of Level 3   (23,883,610)   (1,591,442)   -    -    (25,475,052)
Total gains:                         
Net realized gain(a)   108,706    -    8,440    107,938    225,084 
Net unrealized (depreciation) appreciation(b)   (277,413)   19,206    15,811    3,011    (239,385)
New investments, repayments and settlements:(c)                         
Purchases   2,233,749    977,647    500,000    -    3,711,396 
Settlements/repayments   (5,890,560)   (61,419)   (500,000)   -    (6,451,979)
Net amortization of premiums, PIK, discounts and fees   66,502    71,360    6,999    -    144,861 
Sales   (360,400)   -    -    (188,450)   (548,850)
Fair Value as of March 31, 2022  $153,177,784   $24,714,523   $19,167,758   $1,268,856   $198,328,921 

 

  (a) Included in net realized gain on the accompanying Statement of Operations for the three months ended March 31, 2022.
  (b) Included in net change in unrealized depreciation on the accompanying Statement of Operations for the three months ended March 31, 2022.
  (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 March 31, 2023 and 2022 was ($505,752) and ($655,200), respectively.

 

Investment Activities

 

The Company held a total of 244 investments with an aggregate fair value of $398,843,940 as of March 31, 2023. During the three months ended March 31, 2023, the Company invested in 7 new investments for a combined $6,486,826 and in existing investments for a combined $1,889,911. The Company also received $20,751,034 in repayments from investments and $9,262,833 from investments sold during the three months ended March 31, 2023.

 

The Company held a total of 252 investments with an aggregate fair value of $420,828,658 as of December 31, 2022. During the three months ended March 31, 2022, the Company invested in 22 new investments for a combined $30,097,098 and in existing investments for a combined $3,471,687. The Company also received $12,318,646 in repayments from investments and $4,047,932 from investments sold during the three months ended March 31, 2022.

 

Investment Concentrations

 

As of March 31, 2023, the Company’s investment portfolio consisted of investments in 216 companies located in 35 states across 25 different industries, with an aggregate fair value of $398,843,940. The five largest investments at fair value as of March 31, 2023 totaled $25,056,022, or 6.28% of the Company’s total investment portfolio as of such date. As of March 31, 2023, the Company’s average investment was $1,665,053 at cost.

 

24

 

 

As of December 31, 2022, the Company’s investment portfolio consisted of investments in 222 companies located in 37 states across 25 different industries, with an aggregate fair value of $420,828,658. The five largest investments at fair value as of December 31, 2022 totaled $24,910,205, or 5.92%, of the Company’s total investment portfolio as of such date. As of December 31, 2022, the Company’s average investment was $1,697,226 at cost.

 

The following table outlines the Company’s investments by security type as of March 31, 2023 and December 31, 2022:

 

   March 31, 2023 
   Cost   Percentage of
Total
Investments		   Fair Value   Percentage of
Total
Investments		 
First Lien Debt  $280,850,892    69.13%  $274,610,383    68.85%
Unitranche Debt   98,696,509    24.29%   97,301,115    24.40%
Second Lien Debt   23,423,718    5.77%   23,103,169    5.79%
Total Debt Investments   402,971,119    99.19%   395,014,667    99.04%
Equity and Preferred Shares   3,301,746    0.81%   3,829,273    0.96%
Total Equity Investments   3,301,746    0.81%   3,829,273    0.96%
Total Investments  $406,272,865    100.00%  $398,843,940    100.00%

 

   December 31, 2022 
   Cost   Percentage of
Total
Investments		   Fair Value   Percentage of
Total
Investments		 
First Lien Debt  $301,685,656    70.54%  $296,026,463    70.34%
Unitranche Debt   98,045,938    22.92%   96,585,505    22.95%
Second Lien Debt   24,667,515    5.77%   24,562,691    5.84%
Total Debt Investments   424,399,109    99.23%   417,174,659    99.13%
Equity and Preferred Shares   3,301,747    0.77%   3,653,999    0.87%
Total Equity Investments   3,301,747    0.77%   3,653,999    0.87%
Total Investments  $427,700,856    100.00%  $420,828,658    100.00%

 

25

 

 

Investments at fair value consisted of the following industry classifications as of March 31, 2023 and December 31, 2022:

 

   March 31, 2023   December 31, 2022 
Industry  Fair Value   Percentage of
Total
Investments		   Fair Value   Percentage of
Total
Investments		 
Healthcare & Pharmaceuticals  $72,867,230    18.28%  $74,735,672    17.76%
Services: Business   70,471,274    17.67    69,269,858    16.46 
High Tech Industries   41,936,255    10.51    51,379,328    12.21 
Containers, Packaging & Glass   33,897,897    8.50    33,987,694    8.08 
Banking, Finance, Insurance & Real Estate   32,824,993    8.23    32,865,053    7.81 
Capital Equipment   22,813,532    5.72    28,019,443    6.66 
Aerospace & Defense   19,804,462    4.97    21,269,972    5.05 
Chemicals, Plastics & Rubber   17,873,338    4.48    19,080,225    4.53 
Transportation: Cargo   13,856,343    3.47    13,798,595    3.28 
Services: Consumer   13,829,609    3.47    13,773,067    3.27 
Beverage, Food & Tobacco   11,251,142    2.82    11,310,292    2.69 
Construction & Building   10,691,120    2.68    10,699,594    2.54 
Automotive   10,415,223    2.61    10,520,824    2.50 
Environmental Industries   7,458,761    1.87    7,517,679    1.79 
Wholesale   3,761,807    0.94    3,771,670    0.90 
Media: Advertising, Printing & Publishing   2,693,677    0.68    2,781,895    0.66 
Hotels, Gaming & Leisure   2,130,897    0.53    2,148,253    0.51 
Consumer Goods: Non-Durable   1,991,023    0.50    5,534,099    1.32 
Metals & Mining   1,689,870    0.42    1,689,870    0.40 
Utilities: Electric   1,456,893    0.37    1,442,284    0.34 
Forest Products & Paper   1,447,500    0.36    1,451,250    0.34 
Retail   1,296,033    0.32    1,390,874    0.33 
Utilities: Water   967,761    0.24    970,217    0.23 
Energy: Electricity   945,700    0.24    948,150    0.23 
Consumer Goods: Durable   471,600    0.12    472,800    0.11 
   $398,843,940    100.00%  $420,828,658    100.00%

 

Investments at fair value were included in the following geographic regions of the United States as of March 31, 2023 and December 31, 2022:

 

   March 31, 2023   December 31, 2022 
Geographic Region  Fair Value   Percentage of
Total
Investments		   Fair Value   Percentage of
Total
Investments		 
Midwest  $94,189,212    23.61%  $99,995,134    23.76%
Northeast   93,880,562    23.54    97,037,723    23.06 
Southeast   60,466,643    15.16    54,739,431    14.77 
West   51,140,271    12.82    54,750,013    13.01 
Southwest   48,886,497    12.26    62,170,072    13.01 
East   34,504,571    8.65    36,228,410    8.61 
South   7,601,402    1.91    4,420,172    1.87 
Other(a)   4,617,506    1.16    3,606,809    1.05 
Northwest   3,557,276    0.89    7,880,894    0.86 
Total Investments  $398,843,940    100.00%  $420,828,658    100.00%

 

(a) The Company headquarters for Sophos is located in the United Kingdom. The Company headquarters for UDG is located in Ireland. The Company headquarters for Intertape Polymer is located in Canada. The Company headquarters for Integro is located in the 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 March 31, 2023:

 

For the Fiscal Years Ending December 31:  Amount 
2023  $5,691,630 
2024   26,531,544 
2025   50,194,594 
2026   55,843,658 
2027   71,844,037 
Thereafter   197,400,162 
Total contractual repayments   407,505,625 
Adjustments to cost basis on debt investments(a)   (4,534,506)
Total Cost Basis of Debt Investments Held at March 31, 2023:  $402,971,119 

 

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

 

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.

 

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 months ended March 31, 2023, the Company recorded base management fees of $1,108,854 and waivers to the base management fees of $388,099, as set forth within the accompanying statements of operations. For the three months ended March 31, 2022, the Company recorded base management fees of $1,038,439 and waivers to the base management fees of $363,454, as set forth within the accompanying statements of operations.

 

27

 

 

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.

 

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%).

 

28

 

 

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.

 

Under the Investment Advisory Agreement, we do not pay any Capital Gains Incentive Fee in respect of unrealized capital appreciation in our portfolio.  However, under U.S. generally accepted accounting principles, or GAAP, we are required to accrue for the Capital Gain Incentive Fee on a quarterly basis as if such unrealized capital appreciation were realized in full at the end of each period. If the Capital Gain Incentive Fee Base, adjusted as required by GAAP to include unrealized appreciation, is positive at the end of a period, then GAAP and the terms of the Investment Advisory Agreement require us to accrue a capital gain incentive fee equal to 20% of such amount, less the aggregate amount of actual capital gain incentive fees paid or capital gain incentive fees accrued under GAAP in all prior periods. If such amount is negative, then there is no accrual for such period. The resulting accrual under GAAP for a capital gain incentive fee payable in any period will result in additional expense if such cumulative amount is greater than in the prior period, or in a reversal of previously recorded expense if such cumulative amount is less than in the prior period. We can offer no assurance that any unrealized capital appreciation will be realized in the future.

 

For the three months ended March 31, 2023, the Company recorded incentive fees related to net investment income of $1,333,105. Offsetting the incentive fees were waivers of the incentive fees of $889,296 for the three months ended March 31, 2023, as set forth within the accompanying statements of operations. For the three months ended March 31, 2022, the Company recorded incentive fees related to net investment income of $426,322. Offsetting the incentive fees were waivers of the incentive fees of $383,690 for the three months ended March 31, 2022, 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.

 

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, for both the three months ended March 31, 2023 and 2022, as set forth within the accompanying statements of operations.

 

29

 

 

Related Party Fees

 

Fees due to related parties as of March 31, 2023 and December 31, 2022 on the Company’s accompanying statements of assets and liabilities were as follows:

 

   March 31, 2023   December 31, 2022 
Net base management fee due to Adviser  $720,755   $732,900 
Net incentive fee due to Adviser   443,809    404,409 
Total fees due to Adviser, net of waivers   1,164,564    1,137,309 
Fee due to Administrator, net of waivers   66,250    66,250 
Total Related Party Fees Due  $1,230,814   $1,203,559 

 

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 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 months ended March 31, 2023 and 2022:

 

   Three Months Ended
March 31, 2023		   Three Months Ended
March 31, 2022		 
Numerator for basic and diluted net increase in net assets resulting from operations per common share  $7,842,135   $3,045,808 
Denominator for basic and diluted weighted average common shares   45,420,472    42,774,798 
Basic and diluted net increase in net assets resulting from operations per common share  $0.17   $0.07 

 

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.

 

During the year ended December 31, 2022, the Fund executed a total of $50,000,000 in Tender Offers that resulted in differing GAAP vs. tax treatment of proceeds distributed. For GAAP purposes the transaction is treated as a redemption of shares whereas tax regulations dictate dividend distribution treatment to the extent of fund level earnings and profits. Given that the fund did not have sufficient earnings and profits to support the distribution, the entire value of the Tender Offer is treated as a return of capital for tax purposes.

 

30

 

 

The Company had aggregate distributions declared and paid to its stockholders for the year ended December 31, 2022 of $24,507,347, or $0.54 per share. The tax character of the distributions declared and paid represented $23,797,493 from ordinary income and $709,854 from tax return of capital. The Company had aggregate distributions declared and paid to its stockholders for the year ended December 31, 2021 of $15,794,187, or $0.40 per share. The tax character of the distributions declared and paid represented $15,541,807 from ordinary income and $252,380 from tax return of capital.

 

The determination of the tax attributes of the Company’s distributions, including distributions in connection with tender offers, are 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.

 

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 year ended December 31, 2022 and 2021, 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 year ended December 31, 2022 and 2021, 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, 2022		   Year Ended
December 31, 2021		 
Capital in excess of par value  $-   $- 
Accumulated net investment income   (430)   - 
Accumulated net realized gain (loss)   430    - 

 

At December 31, 2022 and 2021, 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.

 

   As of December 31,
2022		   As of December 31,
2021		 
Other temporary book/tax differences  $(152,362)  $(172,677)
Net tax basis unrealized depreciation   (6,872,198)   (1,238,244)
Accumulated net realized loss   (2,500,103)   (3,353,867)
Components of tax distributable (loss) earnings at period end  $(9,524,663)  $(4,764,788)

 

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, 2022.

 

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, 2022, the Company has long-term capital loss carryforward of $2,500,103. 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 2020, 2021, and 2022 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, 2022, 2021, and 2020, no tax expense or any related interest or penalties were incurred.

 

31

 

 

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 
$110,000,000   December 15, 2021 

 

As of March 31, 2023, there were no remaining unfunded capital commitments by the Company’s investors.

 

The number of shares of Common Stock issued and outstanding as of March 31, 2023 and December 31, 2022, were 44,753,084 and 46,376,461, respectively.

 

The following table details the activity of Stockholders’ Equity for the three months ended March 31, 2023 and 2022:

 

Three Months Ended March 31, 2023  Common Stock   Capital in
Excess of Par
Value		   Total
Distributable
(Loss) Earnings		   Total
Stockholders'
Equity		 
Balance as of December 31, 2022  $46,376   $437,955,965   $(9,524,663)  $428,477,678 
Net investment income   -    -    8,442,859    8,442,859 
Net realized loss from investment transactions   -    -    (43,997)   (43,997)
Net change in unrealized depreciation on investments   -    -    (556,727)   (556,727)
Repurchase of shares   (1,623)   (14,998,377)   -    (15,000,000)
Balance as of March 31, 2023  $44,753   $422,957,588   $(1,682,528)  $421,319,813 

 

Three Months Ended March 31, 2022  Common Stock   Capital in Excess
of Par Value		   Total
Distributable
(Loss) Earnings		   Total
Stockholders'
Equity		 
Balance as of December 31, 2021  $39,961   $378,672,161   $(4,764,788)  $373,947,334 
Net investment income   -    -    4,386,185    4,386,185 
Net realized gain from investment transactions   -    -    225,786    225,786 
Net change in unrealized depreciation on investments   -    -    (1,566,163)   (1,566,163)
Issuance of shares   3,206    29,996,794    -    30,000,000 
Balance as of March 31, 2022  $43,167   $408,668,955   $(1,718,980)  $406,993,142 

 

32

 

 

Note 8. Borrowings

 

Short-Term Borrowings

 

From time to time, the Company finances the purchase of certain investments through repurchase agreements. In the repurchase agreements, the Company enters into a trade to sell an investment and contemporaneously enters into a trade to buy the same investment back on a specified date in the future with the same counterparty. Investments sold under repurchase agreements are accounted for as collateralized borrowings as the sale of the investment does not qualify for sale accounting under ASC Topic 860—Transfers and Servicing and remains as an investment on the Statement of Assets and Liabilities. The Company uses repurchase agreements as a short-term financing alternative. As of March 31, 2023, the Company had short-term borrowing outstanding of $8,724,062. For the three months ended March 31, 2023, the Company recorded interest expense of $227,652 in connection with short-term borrowings. As of December 31, 2022, the Company had short-term borrowings outstanding of $13,178,611. For the three months ended March 31, 2022, the Company recorded interest expense in connection with short-term borrowings of $41,166.

 

Note 9. 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 March 31, 2023 and December 31, 2022:

 

Investment  Industry  March 31, 2023  December 31, 2022 
PracticeTek, Senior Secured Delayed Draw Term Loan, 10.44% (LIBOR + 5.25%), maturity 11/23/27  High Tech Industries  $1,889,313  $1,889,313 
Industrial Services Group, Senior Secured Delayed Draw Term Loan, 11.16% (SOFR + 6.25%), maturity 12/7/28  Services: Business   1,428,571   1,428,571 
EdgeCo, Senior Secured Delayed Draw Term D Loan (First Lien), 9.94% (LIBOR + 4.75%), maturity 6/1/26  Banking, Finance, Insurance & Real Estate   1,200,000   1,200,000 
VC3, Senior Secured Delayed Draw Term Loan D, 10.16% (SOFR + 5.25%), maturity 3/12/27  Services: Business   1,176,923   1,176,923 
Golden Source, Senior Secured Delayed Draw Term Loan, 10.41% (SOFR + 5.50%), maturity 5/12/28  Services: Business   938,967   938,967 
InterMed, Senior Secured Delayed Draw Term Loan, 11.41% (SOFR + 6.50%), maturity 12/24/29  Healthcare & Pharmaceuticals   863,931   863,931 
InterMed, Senior Secured Revolving Loan, 11.41% (SOFR + 6.50%), maturity 12/24/28  Healthcare & Pharmaceuticals   863,931   846,172 
Discovery Education, Senior Secured Delayed Draw Term Loan (First Lien), 10.66% (SOFR + 5.75%), maturity 4/6/29  Services: Business   807,692   718,563 
Ned Stevens 2022-2, Senior Secured Delayed Draw Term Loan, 11.66% (SOFR + 6.75%), maturity 11/1/29  Services: Consumer   731,092   807,692 
CPI International, Senior Secured Delayed Draw Term Loan, 10.41% (SOFR + 5.50%), maturity 10/6/24  Aerospace & Defense   718,563   687,983 
Cherry Bekaert, Senior Secured Delayed Draw Term Loan, 10.41% (SOFR + 5.50%), maturity 6/30/28  Banking, Finance, Insurance & Real Estate   687,983   629,630 
Eliassen, Senior Secured Initial Delayed Draw Term Loan, 10.66% (SOFR + 5.75%), maturity 4/7/28  Services: Business   629,630   625,344 
A1 Garage Door Service, Senior Secured Closing Date Delayed Draw Term Loan, 11.41% (SOFR + 6.50%), maturity 12/23/28  Construction & Building   571,556   571,429 
Alera, Senior Secured 2022 Delayed Draw Term Loan, 11.41% (SOFR + 6.50%), maturity 9/30/28  Banking, Finance, Insurance & Real Estate   540,000   1,173,333 
Golden Source, Senior Secured Revolving Loan, 10.41% (SOFR + 5.50%), maturity 5/12/28  Services: Business   469,484   469,484 
CoolSys, Senior Secured Delayed Draw Term Loan, 9.94% (LIBOR + 4.75%), maturity 8/11/28  Services: Business   465,278   465,278 
Advancing Eyecare, Senior Secured Initial Delayed Draw Term Loan, 10.66% (SOFR + 5.75%), maturity 6/29/29  Healthcare & Pharmaceuticals   462,000   462,000 
Cherry Bekaert, Senior Secured Revolving Credit Loan, 10.41% (SOFR + 5.50%), maturity 6/30/28  Banking, Finance, Insurance & Real Estate   431,531   431,530 
Industrial Services Group, Senior Secured Revolving Loan, 11.16% (SOFR + 6.25%), maturity 12/7/28  Services: Business   413,333   513,699 
Vertellus, Senior Secured Revolving Credit Loan, 10.66% (SOFR + 5.75%), maturity 12/22/25  Chemicals, Plastics & Rubber   412,023   486,239 
RevHealth, Senior Secured Revolving Loan, 10.66% (SOFR + 5.75%), maturity 7/22/28  Healthcare & Pharmaceuticals   405,822   308,344 
Blue Cloud, Senior Secured Delayed Draw Term Loan, 9.91% (SOFR + 5.00%), maturity 1/21/28  Healthcare & Pharmaceuticals   400,000   400,000 
Micro Merchant Systems, Senior Secured Delayed Draw Term Loan, 10.66% (SOFR + 5.75%), maturity 12/14/27  Healthcare & Pharmaceuticals   370,370   370,370 
InnovateMR, Senior Secured Revolving Loan, 11.19% (LIBOR + 6.00%), maturity 1/20/28  Services: Business   365,388   365,388 
PracticeTek, Senior Secured Revolving Loan, 10.44% (LIBOR + 5.25%), maturity 11/23/27  High Tech Industries   357,824   357,824 
Ned Stevens 2022-2, Senior Secured Revolving Loan, 11.66% (SOFR + 6.75%), maturity 11/1/29  Services: Consumer   338,469   338,469 
Evans Network, Senior Secured Delayed Draw Term Loan (First Lien), 9.44% (LIBOR + 4.25%), maturity 8/19/28  Transportation: Cargo   326,531   326,531 
Paragon Films, Senior Secured Delayed Draw Term Loan (First Lien), 10.19% (LIBOR + 5.00%), maturity 12/16/28  Containers, Packaging & Glass   297,030   297,030 
MediaRadar, Senior Secured Revolving Loan, 10.91% (SOFR + 6.00%), maturity 7/22/28  Media: Advertising, Printing & Publishing   296,296   296,296 
Cerity Partners, Senior Secured Initial Revolving Loan, 10.66% (SOFR + 5.75%), maturity 7/27/28  Banking, Finance, Insurance & Real Estate   286,738   - 
A1 Garage Door Service, Senior Secured Revolving Loan, 11.41% (SOFR + 6.50%), maturity 12/23/28  Construction & Building   275,482   275,482 
Whitcraft, Senior Secured Revolving Credit Loan, 11.91% (SOFR + 7.00%), maturity 2/15/29  Aerospace & Defense   267,857   - 
Burke Porter Group, Senior Secured Revolving Credit Loan, 10.91% (SOFR + 6.00%), maturity 7/29/28  Capital Equipment   265,000   286,738 
Accolite, Senior Secured Initial DDTL Loan, 10.91% (SOFR + 6.00%), maturity 4/10/29  Services: Business   250,000   - 
Discovery Education, Senior Secured Revolving Credit Loan (First Lien), 10.66% (SOFR + 5.75%), maturity 4/7/28  Services: Business   230,769   230,769 
Liberty Group, Senior Secured Revolving Loan, 10.66% (SOFR + 5.75%), maturity 6/9/28  Services: Business   227,273   227,273 
Liberty Group, Senior Secured Delayed Draw Term Loan, 10.66% (SOFR + 5.75%), maturity 6/9/28  Services: Business   204,545   200,001 
USALCO, Senior Secured Revolving Loan, 11.19% (LIBOR + 6.00%), maturity 10/19/26  Chemicals, Plastics & Rubber   201,613   204,545 
Radwell, Senior Secured Delayed Draw Term Loan, 10.66% (SOFR + 5.75%), maturity 4/1/29  Capital Equipment   200,001   185,484 
Beta+, Senior Secured Revolving Credit Loan, 10.16% (SOFR + 5.25%), maturity 7/1/27  Banking, Finance, Insurance & Real Estate   192,573   276,289 
The Facilities Group, Senior Secured Delayed Draw Term Loan, 10.94% (LIBOR + 5.75%), maturity 11/30/27  Services: Business   185,549   266,185 
Alliance Environmental Group, Senior Secured Delayed Draw Term Loan, 11.19% (LIBOR + 6.00%), maturity 12/30/27  Environmental Industries   182,119   177,273 
Epic Staffing Group, Senior Secured Delayed Draw Term Loan, 10.91% (SOFR + 6.00%), maturity 6/28/29  Healthcare & Pharmaceuticals   174,419   174,419 
Ivy Rehab, Senior Secured Revolving Credit Loan (First Lien), 9.66% (SOFR + 4.75%), maturity 4/21/28  Healthcare & Pharmaceuticals   168,350   168,350 
Health Management Associates, Senior Secured Delayed Draw Term Loan, 11.16% (SOFR + 6.25%), maturity 3/31/29  Services: Business   159,858   - 
Insight Global, Senior Secured Revolving Loan, 11.19% (LIBOR + 6.00%), maturity 9/22/27  Services: Business   134,178   80,507 
Hissho Sushi, Senior Secured Revolving Credit Loan, 10.91% (SOFR + 6.00%), maturity 5/18/28  Beverage, Food & Tobacco   133,333   111,111 
EPIC Insurance, Senior Secured Revolving Loan, 10.44% (LIBOR + 5.25%), maturity 9/30/27  Banking, Finance, Insurance & Real Estate   127,046   161,841 
Cleaver Brooks, Senior Secured Revolving Loan, 10.66% (SOFR + 5.75%), maturity 7/31/28  Capital Equipment   123,077   113,834 
Community Brands, Senior Secured Delayed Draw Term Loan, 10.66% (SOFR + 5.75%), maturity 2/24/28  Banking, Finance, Insurance & Real Estate   117,647   118,154 
Omni Logistics, Senior Secured Revolving Credit Loan (First Lien), 10.19% (LIBOR + 5.00%), maturity 12/30/25  Transportation: Cargo   113,834   117,647 
Micro Merchant Systems, Senior Secured Revolving Loan, 10.66% (SOFR + 5.75%), maturity 12/14/27  Healthcare & Pharmaceuticals   111,111   114,286 
InnovateMR, Senior Secured Delayed Draw Term Loan, 11.69% (LIBOR + 6.50%), maturity 1/20/28  Services: Business   108,981   - 
Tank Holding, Senior Secured Revolving Credit Loan, 10.91% (SOFR + 6.00%), maturity 3/31/28  Capital Equipment   103,385   161,041 
FLS Transportation, Senior Secured Revolving Credit Loan, 10.44% (LIBOR + 5.25%), maturity 12/17/27  Transportation: Cargo   88,889   107,692 
BlueHalo, Senior Secured Revolving Loan, 11.69% (LIBOR + 6.50%), maturity 10/31/25  Aerospace & Defense   85,958   16,556 
Ansira, Senior Secured New Delayed Draw Term Loan, 6.50% (Fixed), maturity 12/20/24  Media: Advertising, Printing & Publishing   84,290   88,889 
Radwell, Senior Secured Revolving Loan, 10.66% (SOFR + 5.75%), maturity 4/1/28  Capital Equipment   77,332   79,998 
VC3, Senior Secured Revolving Credit, 10.16% (SOFR + 5.25%), maturity 3/12/27  Services: Business   76,923   76,923 
CPS, Senior Secured Revolving Credit Loan, 10.69% (LIBOR + 5.50%), maturity 6/1/28  Healthcare & Pharmaceuticals   71,414   68,750 
Applied Adhesives, Senior Secured Revolving Loan, 9.94% (LIBOR + 4.75%), maturity 3/12/27  Containers, Packaging & Glass   71,111   71,414 
Community Brands, Senior Secured Revolving Loan, 10.66% (SOFR + 5.75%), maturity 2/24/28  Banking, Finance, Insurance & Real Estate   58,824   58,824 
Keter Environmental Services, Senior Secured Revolving Loan, 11.69% (LIBOR + 6.50%), maturity 10/29/27  Environmental Industries   50,160   50,160 
Blue Cloud, Senior Secured Revolving Loan, 9.91% (SOFR + 5.00%), maturity 1/21/28  Healthcare & Pharmaceuticals   46,591   182,119 
Magnate, Senior Secured Delayed Draw Term Loan (First Lien), 10.69% (LIBOR + 5.50%), maturity 12/29/28  Transportation: Cargo   36,607   36,607 
Alliance Environmental Group, Senior Secured Revolving Loan, 11.19% (LIBOR + 6.00%), maturity 12/30/27  Environmental Industries   33,113   17,551 
Health Management Associates, Senior Secured Revolving Loan, 11.16% (SOFR + 6.25%), maturity 3/31/29  Services: Business   28,419   - 
EPIC Insurance, Senior Secured Delayed Draw Term Loan, 10.44% (LIBOR + 5.25%), maturity 9/29/28  Banking, Finance, Insurance & Real Estate   21,877   21,877 
Ivy Rehab, Senior Secured Delayed Draw Term Loan (First Lien), 9.66% (SOFR + 4.75%), maturity 4/23/29  Healthcare & Pharmaceuticals   12,092   176,471 
Forefront, Senior Secured Delayed Draw Term Loan, 9.16% (SOFR + 4.25%), maturity 4/1/29  Healthcare & Pharmaceuticals   5,660   7,786 
Omni Logistics, Senior Secured Tranche 2 DDTL (First Lien) Retired 03/22/2023, 10.19% (LIBOR + 5.00%), maturity 12/30/26  Transportation: Cargo   -   71,111 
Applied Adhesives, Senior Secured Delayed Draw Term Loan, 9.69% (LIBOR + 4.50%), maturity 3/12/27  Containers, Packaging & Glass   -   27,721 
      $24,253,527  $24,258,010 

 

Unfunded commitments represent all amounts unfunded as of March 31, 2023 and December 31, 2022. These amounts may or may not be funded to the borrowing party now or in the future.

 

34

 

 

Note 10. Financial Highlights

 

   Three Months Ended
March 31, 2023		   Three Months Ended
March 31, 2022		 
Per Share Data:          
Net asset value, beginning of period  $9.24   $9.36 
Net investment income(a)   0.19    0.10 
Net realized (loss) gain on investments and change in unrealized depreciation on investments(a)(b)   (0.02)   (0.03)
Net increase in net assets resulting from operations  $0.17   $0.07 
Net asset value at end of period  $9.41   $9.43 
Total return(c)   1.84%   0.75%
Shares of common stock outstanding at end of period   44,753,084    43,166,536 
           
Statement of Assets and Liabilities Data:          
Net assets at end of period  $421,319,813   $406,993,142 
Average net assets(d)   424,072,674    406,436,056 
           
Ratio/Supplemental Data:          
Ratio of gross expenses to average net assets - annualized(e)   2.84%   1.79%
Ratio of net expenses to average net assets - annualized(f)   1.62%   1.04%
Ratio of net investment income to average net assets - annualized   8.07%   4.38%
Portfolio turnover(g)   2.09%   0.99%

 

(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) 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.
(d) Average net assets are computed using the average balance of net assets at the end of each month of the reporting  period.
(e) Ratio of gross expenses to average net assets is computed using expenses before waivers from the Adviser and Administrator.
(f) Ratio of net expenses to average net assets is computed using total expenses net of waivers from the Adviser and Administrator.
(g) Not annualized.

 

Note 11. 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 12. Subsequent Events

 

Subsequent to March 31, 2023 through May 12, 2023, the Company invested $8,156,066 at cost in 22 different portfolio companies. On March 27, 2023, the Company issued a Tender Offer to repurchase $15.0 million worth of Common Stock from the Stockholder. The Offer was accepted on April 24, 2023.

 

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;
●changes in political, economic or industry conditions, rising interest rates and conditions affecting the financial and capital markets, which could result in changes to the value of our assets;
●changes in the general economy, slowing economy, rising inflation and risk of recession;
●supply chain disruptions in connection with shutdowns in China and elsewhere and similar factors related to COVID-19;
●uncertainty surrounding financial and political stability of the United States, the United Kingdom, the European Union, and China, and the war between Russia and Ukraine;
●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;
●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;
●our ability to continue to effectively manage our business due to COVID-19 and similar pandemics;
●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 20, 2023 (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 and Related Developments

 

Market disruptions caused by the COVID-19 pandemic have adversely affected the business operations of some, if not all, of our portfolio companies and may continue to affect their operations, as well as and the operations of our Adviser. We cannot predict the ultimate full impact of COVID-19 on our business operations, 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. Such contagious variants, in conjunction with business re-openings, more frequent social gatherings, and decreasing public concern regarding COVID-19 have resulted in surges in the rates of COVID-19 infections in the United States and worldwide. Even if the prevalence of COVID-19 diminishes, lingering impacts such as supply chain disruptions and inflation are negatively affecting our portfolio companies and may lead to a decline in economic growth. We expect COVID-19 and/or other health pandemics and consequent supply chain disruptions to affect negatively our operating results and financial condition and the operating results and financial condition of our portfolio companies. 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.

 

37

 

 

PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY

 

Portfolio Composition

 

The fair value of our investments, comprised of syndicated loans and equity, as of March 31, 2023, was approximately $398,843,940 and held in 216 portfolio companies as of March 31, 2023. The fair value of our investments, comprised of syndicated loans and equity, as of December 31, 2022, was approximately $420,828,658 and held in 222 portfolio companies as of December 31, 2022.

 

During the three months ended March 31, 2023, we invested in 7 new syndicated investments for a combined $6,486,826 and in existing investments for a combined $1,889,911. We also received $20,751,034 in repayments from investments and $9,262,833 from investments sold during the three months ended March 31, 2023. During the three months ended March 31, 2022, we invested in 22 new syndicated investments for a combined $30,097,098 and in existing investments for a combined $3,471,687. We also received $12,318,646 in repayments from investments and $4,047,932 from investments sold during the three months ended March 31, 2022.

 

In addition, for the three months ended March 31, 2023, we had a change in unrealized depreciation of approximately $556,727 and realized losses of $43,997. For the three months ended March 31, 2022, we had a change in unrealized depreciation of approximately $1,566,163 and realized gains of $225,786.

 

Our investment activity for the three months ended March 31, 2023 and 2022, is presented below:

 

   Three Months Ended
March 31, 2023		   Three Months Ended
March 31, 2022		 
Beginning investment portfolio, at fair value  $420,828,658   $403,054,374 
Investments in new portfolio investments   6,486,826    30,097,098 
Investments in existing portfolio investments   1,889,911    3,471,687 
Principal repayments   (20,751,034)   (12,318,646)
Proceeds from investments sold   (9,262,833)   (4,047,932)
Change in premiums, discounts and amortization   253,136    206,238 
Net change in unrealized depreciation on investments   (556,727)   (1,566,163)
Realized (loss) gain on investments   (43,997)   225,786 
Ending portfolio investment activity, at fair value  $398,843,940   $419,122,442 
Number of portfolio investments   244    242 
Average investment amount, at cost  $1,665,053   $1,743,499 
Percentage of  investments at floating rates   99.18%   100.00%

 

As of March 31, 2023 and December 31, 2022, our entire portfolio consisted of non-controlled/non-affiliated investments.

 

RECENT DEVELOPMENTS

 

Subsequent to March 31, 2023 through May 12, 2023, the Company invested $8,156,066 at cost in 22 different portfolio companies.

 

38

 

 

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 and Related Developments” section above.

 

Revenue

 

Total investment income for the three months ended March 31, 2023 and 2022 is presented in the table below.

 

   Three Months Ended
March 31, 2023		   Three Months Ended
March 31, 2022		 
Total interest income from non-controlled/non-affiliated investments  $10,011,292   $5,389,818 
Total other interest income   64,550    384 
Total other income   62,635    38,118 
Total investment income  $10,138,477   $5,428,320 

 

Total investment income for the three months ended March 31, 2023 increased to $10,138,477 from $5,428,320 for the three months ended March 31, 2022, and was primarily driven by an increase in interest rate spreads over the period and our increasing investment balance. As of March 31, 2023 and 2022, the size of our debt portfolio was $402,971,119 and $420,316,183 at amortized cost, respectively, with total debt principal amount outstanding of $407,505,625 and $423,552,801, respectively.

 

Expenses

 

Total expenses net of waivers for the three months ended March 31, 2023 and 2022, were as follows:

 

   Three Months Ended
March 31, 2023		   Three Months Ended
March 31, 2022		 
Base management fee(a)  $1,108,854   $1,038,439 
Incentive fee(a)   1,333,105    426,322 
Interest expense(b)   227,652    41,166 
Professional fees   98,636    81,675 
Other expenses   74,766    79,177 
Administrative fee(a)   66,250    66,250 
Directors' fees   63,750    56,250 
Total expenses   2,973,013    1,789,279 
Base management fee waivers(a)   (388,099)   (363,454)
Incentive fee waivers(a)   (889,296)   (383,690)
Total expenses, net of waivers  $1,695,618   $1,042,135 

 

 
(a) Refer to Note 4-Related Party Transactions within the financial statements for a description of the relevant fees.
(b) Refer to Note 8-Borrowing within the financial statements for a description of the relevant expenses.

 

39

 

 

The increase in base management fees before waivers for the three months ended March 31, 2023 in comparison to the three months ended March 31, 2022 was driven by our increasing average gross assets balance. For the three months ended March 31, 2023 and 2022, we accrued gross base management fees before waivers of $1,108,854 and $1,038,439, respectively. Offsetting those fees, we recognized base management fee waivers of $388,099 and $363,454 for three months ended March 31, 2023 and 2022, respectively. For the three months ended March 31, 2023 and 2022, we accrued incentive fees related to net investment income before waivers of $1,333,105 and $426,322, respectively. Offsetting those fees, we recognized incentive fee waivers of $889,296 and $383,690, respectively. Additionally, we accrued $66,250 of administrative fees for each of the three months ended March 31, 2023 and 2022. 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 March 31, 2023 and 2022, we incurred professional fees of $98,636 and $81,675, respectively, related to audit fees, tax fees, and legal fees. During the three months ended March 31, 2023 and 2022, we incurred expenses related to fees paid to our independent directors of $63,750 and $56,250 for the three months ended March 31, 2023 and 2022, respectively.

 

During the three months ended March 31, 2023 and 2022, we incurred interest expense of $227,652 and $41,166, respectively, in connection with our short-term borrowings. Refer to Note 8 — Borrowings in the notes accompanying our financial statements for more information related to interest expense.

 

Realized and Unrealized Gains and Losses

 

For the three months ended March 31, 2023, we recognized $43,997 in net realized losses. For the three months ended March 31, 2022, we recognized $225,786 in net realized gains.

 

Net change in unrealized (depreciation) appreciation on investments for the three months ended March 31, 2023 and 2022 was as follows:

 

Type  Three Months Ended
March 31, 2023		   Three Months Ended
March 31, 2022		 
First Lien Debt  $(589,260)  $(1,535,347)
Unitranche Debt   72,983    17,102 
Second Lien Debt   (215,724)   (50,930)
Equity and Preferred Shares   175,274    3,012 
Net change in unrealized depreciation on investments  $(556,727)  $(1,566,163)

 

Net change in unrealized depreciation on investments during the three months ended March 31, 2023 was primarily due to the change in the results and financial position of the portfolio companies. Net change in unrealized depreciation on investments during the three months ended March 31, 2022 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 March 31, 2023 and December 31, 2022, we had cash of $32,284,422 and $15,923,163, respectively. This “Financial Condition, Liquidity and Capital Resources” section should be read in conjunction with the “COVID-19 and Related Developments” section above.

 

40

 

 

Operating Activities

 

Net cash provided by operating activities for the three months ended March 31, 2023 was $35,815,808. The primary operating activities during this period were investments in portfolio companies. The Company invested $6,486,826 in new portfolio investments and $1,889,911 in existing portfolio investments during the three months ended March 31, 2023. This was offset by repayments of bank loans and sales of investments of $20,751,034 and $9,262,833, respectively. Net cash used in operating activities for the three months ended March 31, 2022 was $29,477,387. The primary operating activities during this period were investments in portfolio companies. The Company invested $30,097,098 in new portfolio investments and $3,471,687 in existing portfolio investments during the three months ended March 31, 2022. This was offset by repayments of bank loans and sales of investments of $12,318,646 and $4,047,932, respectively.

 

As of March 31, 2023, we had 70 investments with unfunded commitments of $24,253,527. As of December 31, 2022, we had 66 investments with unfunded commitments of $24,258,010. We believe that, as of both March 31, 2023 and December 31, 2022, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

 

The following table summarizes our total portfolio activity during the three months ended March 31, 2023 and 2022:

 

   Three Months Ended March 31, 2023   Three Months Ended March 31, 2022 
Beginning investment portfolio  $420,828,658   $403,054,374 
Investments in new portfolio investments   6,486,826    30,097,098 
Investments in existing portfolio investments   1,889,911    3,471,687 
Principal repayments   (20,751,034)   (12,318,646)
Proceeds from sales of investments   (9,262,833)   (4,047,932)
Net change in unrealized depreciation on investments   (556,727)   (1,566,163)
Net realized (loss) gain on investments   (43,997)   225,786 
Net change in premiums, discounts and amortization   253,136    206,238 
Investment Portfolio, at Fair Value  $398,843,940   $419,122,442 

 

Financing Activities

 

Net cash used in our financing activities for the three months ended March 31, 2023 was $19,454,549, which consisted of $15,000,000 in repurchases of 1,623,377 shares to our stockholders in connection with the Tender Offer during the period and $4,454,549 in connection with repayments of our short-term borrowings during the period. Net cash provided by our financing activities for the three months ended March 31, 2022 was $30,000,000 from issuances of 3,205,128 shares of Common Stock to our stockholders in connection with our capital calls during the period.

 

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
$110,000,000  December 15, 2021

 

As of March 31, 2023, there were no remaining unfunded capital commitments by the Company’s investors.

 

41

 

 

The number of shares of our Common Stock issued and outstanding as of March 31, 2023 and December 31, 2022, were 44,753,084 and 46,376,461, 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.

 

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 did not declare or pay distributions for the three months ended March 31, 2023 and 2022.

 

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 March 31, 2023 and 2022, we recorded base management fees of $1,108,854 and $1,038,439, respectively. Offsetting these fees were waivers to the base management fees of $388,099 and $363,454, respectively, as set forth within the accompanying statements of operations.

 

For the three months ended March 31, 2023 and 2022, we recorded incentive fees of $1,333,105 and $426,322, respectively. Offsetting these waivers to the incentive fees of $889,296 and $383,690, respectively, as set forth within the accompanying statements of operations.

 

For both of the three months ended March 31, 2023 and 2022, we recorded administrative fees of $66,250, respectively, as set forth within the accompanying statements of operations.

 

42

 

 

Fees due to related parties as of March 31, 2023 and December 31, 2022 on our accompanying statements of assets and liabilities were as follows:

 

   March 31, 2023   December 31, 2022 
Net base management fee due to Adviser  $720,755   $732,900 
Net incentive fee due to Adviser   443,809    404,409 
Total fees due to Adviser, net of waivers   1,164,564    1,137,309 
Fee due to Administrator, net of waivers   66,250    66,250 
Total Related Party Fees Due  $1,230,814   $1,203,559 

 

Tender Offers

 

To provide our stockholders with limited liquidity, we may, in the absolute discretion of our Board of Directors, conduct a 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.

 

On January 9, 2023, the Company issued a Tender Offer to repurchase $15.0 million worth of Common Stock from the Stockholder. The Offer was accepted on February 7, 2023. On March 27, 2023, the Company issued a Tender Offer to repurchase $15.0 million worth of Common Stock from the Stockholder. The Offer was accepted on April 24, 2023.

 

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.

 

43

 

 

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;

 

44

 

 

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

 

(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.

 

45

 

 

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.

 

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, 2022, 2021, and 2020.

 

46

 

 

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, or the Adviser, 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 nor the Adviser 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 March 31, 2023, we had 70 investments with unfunded commitments of $24,253,527. As of December 31, 2022, we had 66 investments with unfunded commitments of $24,258,010. We believe that, as of March 31, 2023 and December 31, 2022, 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, inflation resulting from supply chain disruptions caused by the war between Russia and Ukraine and the COVID-19 pandemic has resulted in a general increase of certain interest rates by the U.S. Federal Reserve and other central banks. A continued increase in interest rates, including SOFR, could affect our gross investment income.

 

47

 

 

Change in interest rates   Increase (decrease) in
investment income		  
Up 300 basis points   9,853,882 
Up 200 basis points   5,778,826 
Up 100 basis points   1,703,769 
Down 100 basis points   (66,806)
Down 200 basis points   (66,806)
Down 300 basis points   (66,806)

 

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 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.

 

48

 

 

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, 2022 filed with the SEC on March 20, 2023.

 

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.

 

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 over the next year following the calendar quarter in which the approval was obtained. On January 9, 2023, the Company issued a Tender Offer to repurchase $15.0 million worth of Common Stock from the Stockholder. The Offer was accepted on February 7, 2023. On March 27, 2023, the Company issued a Tender Offer to repurchase $15.0 million worth of Common Stock from the Stockholder. The Offer was accepted on April 24, 2023.

 

49

 

 

Political, social and economic uncertainty, including uncertainty related to Russia’s military invasion of Ukraine, create and exacerbate risks.

 

Russia’s invasion of Ukraine in February 2022 and corresponding events have had, and could continue to have, severe adverse effects on regional and global economic markets. Following Russia’s actions, various governments, including the United States, have issued broad-ranging economic sanctions against Russia, including, among other actions, a prohibition on doing business with certain Russian companies, large financial institutions, officials and oligarchs; a commitment by certain countries and the European Union to remove selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications, the electronic banking network that connects banks globally; and restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions. The duration of hostilities and the vast array of sanctions and related events (including cyberattacks and espionage) cannot be predicted. Those events present material uncertainty and risk with respect to markets globally, which pose potential adverse risks to us and the performance of our investments and operations. Any such market disruptions could affect our portfolio companies’ operations and, as a result, could have a material adverse effect on our business, financial condition and results of operations.

 

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

 

Not applicable.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

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).

 

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

 

50

 

 

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: May 12, 2023 By:

/s/ Michael P. McGonigle

    Michael P. McGonigle
    Chief Executive Officer

 

Date: May 12, 2023 By:

/s/ Richard T. Joseph

    Richard T. Joseph
    Chief Financial Officer

 

51