UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2019

OR

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

For the transition period to

Commission File No. 814-01248

TCG BDC II, INC.

(Exact name of Registrant as specified in its charter)

Maryland	81-5320146
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
520 Madison Avenue, 40th Floor, New York, NY 10022	(212) 813-4900
(Address of principal executive office) (Zip Code)	(Registrant’s telephone number, including area code)

N/A

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  ☒    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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☐    No  ☐

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	o
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.  x

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

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

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
N/A	N/A	N/A

The number of shares of the registrant’s common stock, $0.01 par value per share, outstanding at November 8, 2019 was 34,549,112.

TCG BDC II, INC.

INDEX

Part I.	Financial Information
Item 1.	Financial Statements
	Consolidated Statements of Assets and Liabilities as of September 30, 2019 (unaudited) and December 31, 2018	1
	Consolidated Statements of Operations for the three month and nine month periods ended September 30, 2019 (unaudited) and September 30, 2018 (unaudited)	2
	Consolidated Statements of Changes in Net Assets for the nine month periods ended September 30, 2019 (unaudited) and September 30, 2018 (unaudited)	3
	Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2019 (unaudited) and September 30, 2018 (unaudited)	4
	Consolidated Schedules of Investments as of September 30, 2019 (unaudited) and December 31, 2018	5
	Notes to Consolidated Financial Statements (unaudited)	18
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4.	Controls and Procedures	52
Part II.	Other Information
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults Upon Senior Securities	54
Item 4.	Mine Safety Disclosures	54
Item 5.	Other Information	54
Item 6.	Exhibits	54
	Signatures	55

TCG BDC II, INC.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(dollar amounts in thousands, except per share data)

	September 30, 2019			December 31, 2018
ASSETS	(unaudited)
Investments—non-controlled/non-affiliated, at fair value (amortized cost of $1,007,269 and $513,010, respectively)	$	1,002,874		$	510,427
Cash and cash equivalents	19,158			4,245
Deferred financing costs	2,556			1,527
Receivable for investment sold	1,262			1,243
Interest receivable from non-controlled/non-affiliated investments	8,699			2,181
Prepaid expenses and other assets	3,855			573
Total assets	$	1,038,404		$	520,196
LIABILITIES
Secured borrowings (Note 5)	$	406,079		$	217,700
Payable for investments purchased	—			1,870
Due to Investment Adviser	199			18
Interest and credit facility fees payable (Note 5)	3,104			1,848
Dividend payable (Note 7)	13,023			6,545
Management and incentive fees payable (Note 4)	4,142			2,020
Administrative service fees payable (Note 4)	33			45
Other accrued expenses and liabilities	1,486			936
Total liabilities	428,066			230,982
Commitments and contingencies (Notes 6 and 9)
NET ASSETS
Common stock, $0.01 par value; 200,000,000 shares authorized; 29,701,801 shares and 14,229,500 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	297			142
Paid-in capital in excess of par value	611,388			291,820
Subscribed but unissued shares	—			24,953
Subscription receivable	—			(24,953		)
Total distributable earnings (loss)	(1,347		)	(2,748		)
Total net assets	$	610,338		$	289,214
NET ASSETS PER SHARE	$	20.55		$	20.32

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

1

TCG BDC II, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollar amounts in thousands, except per share data)

(unaudited)

	For the three month periods ended						For the nine month periods ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Investment income:
From non-controlled/non-affiliated investments:
Interest income	$	21,582		$	7,223		$	53,468		$	14,206
Other income	1,659			503			4,024			656
Total investment income from non-controlled/non-affiliated investments	23,241			7,726			57,492			14,862
Total investment income	23,241			7,726			57,492			14,862
Expenses:
Organization costs (Note 2)	—			—			—			7
Offering costs (Note 2)	—			220			—			795
Management fees (Note 4)	1,718			640			4,131			1,330
Net investment income incentive fees (Note 4)	2,424			705			5,925			705
Capital gains incentive fees	—			630			—			630
Professional fees	153			180			488			462
Administrative service fees (Note 4)	31			149			230			357
Interest expense (Note 5)	4,140			1,312			10,566			2,340
Credit facility fees (Note 5)	603			279			1,497			798
Directors’ fees and expenses	50			48			146			150
Other general and administrative	400			201			951			527
Total expenses	9,519			4,364			23,934			8,101
Net investment income (loss)	13,722			3,362			33,558			6,761
Net change in unrealized appreciation (depreciation) on investments:
Net realized gain (loss) from:
Non-controlled/non-affiliated investments	(104		)	—			153			—
Net change in unrealized appreciation (depreciation):
Non-controlled/non-affiliated investments	(3,019		)	(124		)	(1,812		)	3,321
Net change in unrealized currency gains (losses) on non-investment assets and liabilities	687			—			687			—
Net realized gain (loss) change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	(2,436		)	(124		)	(972		)	3,321
Net increase (decrease) in net assets resulting from operations	$	11,286		$	3,238		$	32,586		$	10,082
Basic and diluted earnings per common share (Note 8)	$	0.45		$	0.36		$	1.60		$	1.60
Weighted-average shares of common stock outstanding—Basic and Diluted (Note 8)	24,910,884			8,926,599			20,371,658			6,290,222

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

2

TCG BDC II, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(dollar amounts in thousands)

(unaudited)

	For the nine month periods ended
	September 30, 2019			September 30, 2018
Increase (decrease) in net assets resulting from operations:
Net investment income (loss)	$	33,558		$	6,761
Net realized gain (loss) on investments	153			—
Net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	(1,125		)	3,321
Net increase (decrease) in net assets resulting from operations	32,586			10,082
Capital transactions:
Common stock issued	319,943			160,306
Dividends declared (Note 10)	(31,405		)	(7,834		)
Net increase (decrease) in net assets resulting from capital share transactions	288,538			152,472
Net increase (decrease) in net assets	321,124			162,554
Net assets at beginning of period	289,214			82,722
Net assets at end of period	$	610,338		$	245,276

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

3

TCG BDC II, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollar amounts in thousands)

(unaudited)

	For the nine month periods ended
	September 30, 2019			September 30, 2018
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	32,586		$	10,082
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Amortization of deferred financing costs	861			466
Amortization of deferred offering costs	—			795
Net accretion of discount on investments	(2,914		)	(550		)
Paid-in-kind interest	(1,131		)	—
Net realized (gain) loss on investments	(153		)	—
Net change in unrealized (appreciation) depreciation on investments	1,812			(3,321		)
Net change in unrealized currency (gains) losses on non-investment assets and liabilities	(687		)	—
Cost of investments purchased and change in payable for investments purchased	(571,857		)	(337,758		)
Proceeds from sales and repayments of investments and change in receivable for investments sold	79,907			18,665
Changes in operating assets:
Interest receivable	(6,518		)	(1,446		)
Prepaid expenses and other assets	(3,282		)	(486		)
Changes in operating liabilities:
Due to Investment Adviser	181			(2,690		)
Interest and credit facility fees payable	1,256			729
Management and incentive fees payable	2,122			1,093
Administrative service fees payable	(12		)	—
Accrued capital gains incentive fees	—			630
Other accrued expenses and liabilities	550			554
Net cash provided by (used in) operating activities	(467,279		)	(313,237		)
Cash flows from financing activities:
Proceeds from issuance of common stock	319,943			160,306
Borrowings on SPV Credit Facility and Subscription Facility	572,866			283,750
Repayments of SPV Credit Facility and Subscription Facility	(383,800		)	(172,000		)
Dividends paid in cash	(24,927		)	(3,574		)
Debt issuance costs paid	(1,890		)	(925		)
Offering costs paid	—			(78		)
Net cash provided by (used in) financing activities	482,192			267,479
Net increase (decrease) in cash and cash equivalents	14,913			(45,758		)
Cash and cash equivalents, beginning of period	4,245			70,570
Cash and cash equivalents, end of period	$	19,158		$	24,812
Supplemental disclosures:
Interest paid during the period	$	9,502		$	1,626
Dividends declared during the period	$	31,405		$	7,834

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

4

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of September 30, 2019

(dollar amounts in thousands)

(unaudited)

Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
First Lien Debt (82.96%)
Aero Operating, LLC (Dejana Industries, Inc.)	^+	(2)(3)(6)	Business Services	L + 7.25%	9.29%	1/5/2018	12/29/2022	$	6,292	$	6,243	$	6,244	1.02	%
Alpine SG, LLC	^+	(2)(3)	High Tech Industries	L + 5.50%	7.76%	2/2/2018	11/16/2022	15,301		15,178		15,345		2.51
American Physician Partners, LLC	^+	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 6.50%	8.60%	1/7/2019	12/21/2021	38,401		37,932		38,509		6.31
Analogic Corporation	^+	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 6.00%	8.04%	6/22/2018	6/22/2024	35,320		34,688		34,737		5.69
Anchor Hocking, LLC	^	(2)(3)	Durable Consumer Goods	L + 8.25%	10.50%	1/25/2019	1/25/2024	10,996		10,677		10,639		1.74
Apptio, Inc.	^+	(2)(3)(6)	Software	L + 7.25%	9.56%	1/10/2019	1/10/2025	35,541		34,845		34,972		5.73
Avenu Holdings, LLC	+	(2)(3)	Sovereign & Public Finance	L + 5.25%	7.35%	9/28/2018	9/28/2024	38,763		38,191		37,441		6.13
Barnes & Noble, Inc.	^	(2)(3)(9)	Retail	L + 5.50%	7.68%	8/7/2019	8/7/2024	17,860		17,425		17,414		2.85
BMS Holdings III Corp.	^	(2)(3)(6)	Construction & Building	L + 5.25%	7.35%	9/30/2019	9/30/2026	23,333		22,583		22,583		3.70
Central Security Group, Inc.	+	(2)(3)	Consumer Services	L + 5.63%	7.67%	4/5/2018	10/6/2021	3,593		3,582		3,543		0.58
Chartis Holding, LLC	^	(2)(3)(6)	Business Services	L + 5.00%	7.03%	5/1/2019	4/1/2025	15,966		15,539		16,060		2.63
Chemical Computing Group ULC (Canada)	^+	(2)(3)(6)(7)	Software	L + 5.25%	7.29%	8/30/2018	8/30/2023	15,676		15,479		15,556		2.55
Circustrix Holdings, LLC	^+	(2)(3)(6)	Hotel, Gaming & Leisure	L + 5.50%	7.54%	2/2/2018	12/16/2021	9,421		9,352		9,288		1.52
Comar Holding Company, LLC	^+	(2)(3)(6)	Containers, Packaging & Glass	L + 5.25%	7.30%	6/18/2018	6/18/2024	27,409		26,851		27,115		4.44
Cority Software Inc. (Canada)	^	(2)(3)(6)(7)	Software	L + 5.50%	7.82%	7/2/2019	7/2/2026	27,000		26,417		26,400		4.33
Derm Growth Partners III, LLC (Dermatology Associates)	^	(2)(3)	Healthcare & Pharmaceuticals	L + 7.25% (100% PIK)	9.35%	2/15/2018	5/31/2022	16,273		16,137		11,244		1.84
Digicel Limited	^+		Telecommunications	6.00%	6.00%	7/23/2019	4/15/2021	250		194		176		0.03
DTI Holdco, Inc.	^	(2)(3)	High Tech Industries	L + 4.75%	7.01%	12/18/2018	9/30/2023	1,980		1,871		1,806		0.30
Ensono, LP	+	(2)(3)	Telecommunications	L + 5.25%	7.29%	4/30/2018	6/27/2025	8,558		8,485		8,484		1.39
Ethos Veterinary Health LLC	^	(2)(3)(6)	Consumer Services	L + 4.75%	7.04%	5/17/2019	5/17/2026	10,888		10,763		10,903		1.79
GRO Sub Holdco, LLC (Grand Rapids)	^	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 6.00%	8.10%	2/28/2018	2/22/2023	6,606		6,519		6,118		1.00
iCIMS, Inc.	^+	(2)(3)(6)	Software	L + 6.50%	8.56%	9/12/2018	9/12/2024	23,930		23,489		23,655		3.88
Innovative Business Services, LLC	^+	(2)(3)(6)	High Tech Industries	L + 5.50%	7.80%	4/5/2018	4/5/2023	16,184		15,792		15,899		2.61
K2 Insurance Services, LLC	^	(2)(3)(6)	Banking, Finance, Insurance & Real Estate	L + 5.00%	7.19%	7/3/2019	7/1/2024	22,082		21,508		22,177		3.63
Kaseya Luxembourg Holdings S.C.A. (Luxembourg)	^	(2)(3)(6)(7)	High Tech Industries	L + 5.50%, 1.00% PIK	8.60%	5/3/2019	5/5/2025	19,088		18,674		18,803		3.08

5

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2019

(dollar amounts in thousands)

(unaudited)

Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)			Fair Value (5)			Percentage of Net Assets
First Lien Debt (82.96%) (continued)
Liqui-Box Holdings, Inc.	^	(2)(3)(6)	Containers, Packaging & Glass	L + 4.50%	6.59%	6/3/2019	6/3/2024	$	—	$	(26	)	$	(46	)	(0.01	)%
Mailgun Technologies, Inc.	^	(2)(3)(6)	High Tech Industries	L + 6.00%	8.11%	3/26/2019	3/26/2025	11,468		11,230			11,212			1.84
National Carwash Solutions, Inc.	^+	(2)(3)(6)	Automotive	L + 6.00%	8.10%	8/7/2018	4/28/2023	8,432		8,272			8,227			1.35
NES Global Talent Finance US, LLC (United Kingdom)	+	(2)(3)(7)	Energy: Oil & Gas	L + 5.50%	7.76%	5/9/2018	5/11/2023	9,916		9,779			9,747			1.60
Nexus Technologies, LLC	+	(2)(3)	High Tech Industries	L + 5.50%	7.60%	12/11/2018	12/5/2023	6,187		6,134			5,965			0.98
North American Dental Management, LLC	+	(2)(3)	Healthcare & Pharmaceuticals	P + 4.25%	9.25%	10/26/2018	7/7/2022	8,364		8,230			8,364			1.37
Northland Telecommunications Corporation	^+	(2)(3)(6)	Media: Broadcast & Subscription	L + 5.75%	7.79%	10/1/2018	10/1/2025	29,996		29,562			29,521			4.84
Paramit Corporation	^	(2)(3)	Capital Equipment	L + 4.50%	6.57%	5/3/2019	5/3/2025	7,163		7,099			7,169			1.18
PF Growth Partners, LLC	^	(2)(3)(6)	Hotel, Gaming & Leisure	L + 5.00%	7.08%	7/1/2019	7/11/2025	7,055		6,934			7,010			1.15
PPC Flexible Packaging, LLC	^+	(2)(3)(6)	Containers, Packaging & Glass	L + 5.25%	7.29%	11/23/2018	11/23/2024	13,626		13,426			13,392			2.19
Pretium Packaging, LLC	^+	(2)(3)	Containers, Packaging & Glass	L + 5.00%	7.12%	8/15/2019	11/14/2023	19,273		19,087			19,131			3.13
Propel Insurance Agency, LLC	^	(2)(3)	Banking, Finance, Insurance & Real Estate	L + 4.50%	6.60%	4/30/2019	6/1/2024	2,369		2,353			2,362			0.39
PSI Services, LLC	+	(2)(3)	Business Services	L + 5.00%	7.08%	9/19/2018	1/20/2023	4,505		4,455			4,505			0.74
Redwood Services Group, LLC	^+	(2)(3)	High Tech Industries	L + 6.00%	8.12%	11/13/2018	6/6/2023	7,708		7,648			7,613			1.25
Riveron Acquisition Holdings, Inc.	^	(2)(3)	Banking, Finance, Insurance & Real Estate	L + 6.25%	8.35%	5/22/2019	5/22/2025	15,661		15,365			15,667			2.57
Sapphire Convention, Inc. (Smart City)	^+	(2)(3)(6)	Telecommunications	L + 5.25%	7.27%	11/20/2018	11/20/2025	28,649		28,056			28,414			4.66
Smile Doctors, LLC	^+	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 6.00%	8.09%	10/6/2017	10/6/2022	20,758		20,620			20,474			3.35
Sovos Brands Intermediate, Inc.	+	(2)(3)	Beverage, Food & Tobacco	L + 5.00%	7.20%	11/16/2018	11/20/2025	19,949		19,769			19,781			3.24
SPay, Inc.	^	(2)(3)(6)	Hotel, Gaming & Leisure	L + 5.75%	7.82%	6/15/2018	6/15/2024	20,511		20,163			18,532			3.04
Tank Holding Corp.	^+	(2)(3)(6)	Capital Equipment	L + 4.00%	6.05%	3/26/2019	3/26/2024	7		7			7			—
The Leaders Romans Bidco Limited (United Kingdom)	^	(2)(3)(6)(7)	Banking, Finance, Insurance & Real Estate	L + 6.75%, 3.50% PIK	11.01%	7/23/2019	6/30/2024	£	19,765	23,947			23,404			3.83
Transform SR Holdings, LLC	^	(2)(3)	Retail	L + 7.25%	9.30%	2/11/2019	2/11/2024	19,050		18,878			18,860			3.09
Trump Card, LLC	^+	(2)(3)(6)	Transportation: Cargo	L + 5.50%	7.60%	6/26/2018	4/21/2022	7,652		7,593			7,599			1.25
Unifrutti Financing PLC (Cyprus)	^	(7)	Beverage, Food & Tobacco	7.50%, 1.00% PIK	8.50%	9/15/2019	9/15/2026	€	18,170	19,009			18,814			3.08
USLS Acquisition, Inc.	^+	(2)(3)(6)	Business Services	L + 5.75%	7.85%	11/30/2018	11/30/2024	22,193		21,783			21,779			3.57

6

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2019

(dollar amounts in thousands)

(unaudited)

Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)			Fair Value (5)			Percentage of Net Assets
First Lien Debt (82.96%) (continued)
VRC Companies, LLC	^	(2)(3)(6)	Business Services	L + 6.50%	8.57%	1/29/2019	3/31/2023	$	16,762	$	16,491		$	16,597		2.72	%
Westfall Technik, Inc.	^+	(2)(3)(6)	Chemicals, Plastics & Rubber	L + 5.75%	7.85%	9/13/2018	9/13/2024	27,153		26,495			25,934			4.25
WP CPP Holdings, LLC (CPP)	^	(2)(3)(6)	Aerospace & Defense	L + 3.75%	5.84%	7/18/2019	4/30/2025	—		(230		)	(163		)	(0.03	)
Zemax Software Holdings, LLC	^+	(2)(3)(6)	Software	L + 5.75%	7.85%	6/25/2018	6/25/2024	10,171		9,982			10,100			1.65
Zenith Merger Sub, Inc.	^+	(2)(3)(6)	Business Services	L + 5.25%	7.35%	12/13/2017	12/13/2023	17,069		16,861			16,931			2.77
First Lien Debt Total										$	837,386		$	832,013		136.32	%
Second Lien Debt (16.01%)
Access CIG, LLC	^	(2)(3)	Business Services	L + 7.75%	10.07%	2/14/2018	2/27/2026	$	2,700	$	2,679		$	2,687		0.44	%
Aimbridge Acquisition Co., Inc.	^	(2)(3)	Hotel, Gaming & Leisure	L + 7.50%	9.60%	2/1/2019	2/1/2027	7,727		7,598			7,542			1.23
Brave Parent Holdings, Inc.	^+	(2)(3)	Software	L + 7.50%	9.76%	10/3/2018	4/19/2026	19,062		18,660			18,107			2.97
Jazz Acquisition, Inc.	^	(2)(3)	Aerospace & Defense	L + 8.00%	10.10%	6/13/2019	6/18/2027	23,450		23,109			23,072			3.78
Outcomes Group Holdings, Inc.	^	(2)(3)	Business Services	L + 7.50%	9.62%	10/23/2018	10/26/2026	4,500		4,490			4,496			0.74
Pharmalogic Holdings Corp.	^	(2)(3)	Healthcare & Pharmaceuticals	L + 8.00%	10.04%	6/7/2018	12/11/2023	800		797			800			0.13
Quartz Holding Company (QuickBase, Inc.)	^	(2)(3)	Software	L + 8.00%	10.07%	4/2/2019	4/2/2027	11,900		11,673			11,812			1.93
Santa Cruz Holdco, Inc.	+	(2)(3)	Non-durable Consumer Goods	L + 8.25%	10.57%	12/15/2017	12/13/2024	7,600		7,538			7,567			1.24
Tank Holding Corp.	^	(2)(3)	Capital Equipment	L + 8.25%	10.34%	3/26/2019	3/26/2027	37,380		36,700			36,977			6.06
Ultimate Baked Goods MIDCO, LLC (Rise Baking)	+	(2)(3)	Beverage, Food & Tobacco	L + 8.00%	10.04%	8/9/2018	8/9/2026	8,333		8,183			8,224			1.35
WP CPP Holdings, LLC (CPP)	^	(2)(3)	Aerospace & Defense	L + 7.75%	10.01%	7/18/2019	4/30/2026	39,500		39,115			39,238			6.43
Second Lien Debt Total										$	160,542		$	160,522		26.30	%

7

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2019

(dollar amounts in thousands)

(unaudited)

Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Type	Acquisition Date	Shares/ Units	Cost		Fair Value (5)		Percentage of Net Assets
Equity Investment (1.03%)
ANLG Holdings, LLC	^	(8)	Healthcare & Pharmaceuticals	Common stock	6/22/2018	879,689	$	880	$	974	0.16	%
Avenu Holdings, LLC	^	(8)	Sovereign & Public Finance	Common stock	9/28/2018	172,413	172		149		0.02
Chartis Holding, LLC	^	(8)	Business Services	Common stock	5/1/2019	432,900	433		500		0.08
Cority Software Inc. (Canada)	^	(8)	Software	Common stock	7/2/2019	250,000	250		315		0.05
GRO Sub Holdco, LLC (Grand Rapids)	^	(8)	Healthcare & Pharmaceuticals	Common stock	3/29/2018	500,000	500		132		0.02
K2 Insurance Services, LLC	^	(8)	Banking, Finance, Insurance & Real Estate	Common stock	7/3/2019	432,900	432		433		0.07
Mailgun Technologies, Inc.	^	(8)	High Tech Industries	Common stock	3/26/2019	423,729	424		640		0.11
North Haven Goldfinch Topco, LLC	^	(8)	Containers, Packaging & Glass	Common stock	6/18/2018	2,314,815	2,315		2,461		0.40
Paramit Corporation	^	(8)	Capital Equipment	Common stock	6/17/2019	150,367	500		501		0.08
PPC Flexible Packaging, LLC	^	(8)	Containers, Packaging & Glass	Common stock	2/1/2019	964,854	965		1,184		0.19
SiteLock Group Holdings, LLC	^	(8)	High Tech Industries	Common stock	4/5/2018	446,427	446		561		0.09
Tank Holding Corp.	^	(8)	Capital Equipment	Common stock	3/26/2019	850,000	850		966		0.16
USLS Acquisition, Inc.	^	(8)	Business Services	Common stock	11/30/2018	640,569	641		781		0.13
Zenith American Holding, Inc.	^	(8)	Business Services	Preferred Stock	12/13/2017	219,616	220		403		0.07
Zenith American Holding, Inc.	^	(8)	Business Services	Common stock	12/13/2017	219,616	—		—		—
Zillow Topco LP	^	(8)	Software	Common stock	6/25/2018	312,500	313		339		0.06
Equity Investments Total							$	9,341	$	10,339	1.69	%
Total investments—non-controlled/non-affiliated							$	1,007,269	$	1,002,874	164.31	%
Total investments							$	1,007,269	$	1,002,874	164.31	%

^ Denotes that all or a portion of the assets are owned by TCG BDC II, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “BDC II” or the “Company”). The Company has entered into a revolving credit facility (as amended, the “Subscription Facility”). Accordingly, such assets are not available to creditors of TCG BDC II SPV LLC (the “SPV”).

+ Denotes that all or a portion of the assets are owned by the Company's wholly owned subsidiary, the SPV. The SPV has entered into a senior secured revolving credit facility (the “SPV Credit Facility” and, together with the Subscription Facility, the “Facilities”). The lenders of the SPV Credit Facility have a first lien security interest in substantially all of the assets of the SPV (see Note 5, Borrowings). Accordingly, such assets are not available to creditors of the Company.

(1) Unless otherwise indicated, issuers of debt and equity investments held by the Company are domiciled in the United States. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of September 30, 2019, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of September 30, 2019, the Company is not an “affiliated person” of any of these portfolio companies. Certain portfolio company investments are subject to contractual restrictions on sales.

(2) Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of September 30, 2019. As of September 30, 2019, the reference rates for all LIBOR loans were the 30-day LIBOR at 2.03%, the 90-day LIBOR at 2.09% and the 180-day LIBOR rate at 2.06%.

(3) Loan includes interest rate floor feature, generally 1.00%.

(4) Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.

8

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2019

(dollar amounts in thousands)

(unaudited)

(5) Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements), pursuant to the Company’s valuation policy. The fair value of all first lien and second lien debt investments and equity investments was determined using significant unobservable inputs.

(6) As of September 30, 2019, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:

Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount		Fair Value
First and Second Lien Debt—unfunded delayed draw and revolving term loans commitments
Aero Operating, LLC (Dejana Industries, Inc.)	Revolver	1.00	%	$	817	$	(6	)
American Physician Partners, LLC	Delayed Draw	0.50		350		1
American Physician Partners, LLC	Revolver	0.50		1,500		4
Analogic Corporation	Revolver	0.50		3,029		(46		)
Apptio, Inc.	Revolver	0.50		2,367		(36		)
BMS Holdings III Corp.	Delayed Draw	1.00		6,667		(167		)
Chartis Holding, LLC	Delayed Draw	0.50		6,402		24
Chartis Holding, LLC	Revolver	0.50		2,401		9
Chemical Computing Group	Revolver	0.50		903		(6		)
Circustrix Holdings, LLC	Delayed Draw	1.00		836		(11		)
Comar Holding Company, LLC	Delayed Draw	1.00		5,136		(44		)
Comar Holding Company, LLC	Revolver	0.50		1,608		(14		)
Cority Software Inc. (Canada)	Revolver	0.50		3,000		(60		)
Ethos Veterinary Health LLC	Delayed Draw	1.00		2,696		3
GRO Sub Holdco, LLC (Grand Rapids)	Revolver	0.50		1,071		(68		)
iCIMS, Inc.	Revolver	0.50		1,252		(14		)
Innovative Business Services, LLC	Revolver	1.00		2,232		(35		)
K2 Insurance Services, LLC	Delayed Draw	1.00		5,344		17
K2 Insurance Services, LLC	Revolver	0.50		2,290		7
Kaseya Luxembourg Holdings S.C.A. (Luxembourg)	Delayed Draw	0.50		1,918		(25		)
Kaseya Luxembourg Holdings S.C.A. (Luxembourg)	Revolver	0.50		1,102		(14		)
Liqui-Box Holdings, Inc.	Revolver	0.50		2,630		(46		)
Mailgun Technologies,Inc.	Revolver	0.50		1,342		(27		)
National Carwash Solutions, Inc.	Delayed Draw	1.00		1,494		(30		)
National Carwash Solutions, Inc.	Revolver	0.50		310		(6		)
Northland Cable Television, Inc.	Revolver	0.50		1,702		(26		)
PF Growth Partners, LLC	Delayed Draw	1.00		1,152		(6		)
PPC Industries Inc.	Revolver	0.50		1,957		(29		)
Sapphire Convention, Inc. (Smart City)	Revolver	0.50		4,528		(32		)
Smile Doctors LLC	Delayed Draw	1.00		2,157		(26		)
Smile Doctors LLC	Revolver	0.50		964		(11		)

9

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2019

(dollar amounts in thousands)

(unaudited)

Investments—non-controlled/non-affiliated	Type	Unused Fee	Par/ Principal Amount		Fair Value
SPay, Inc	Revolver	0.50	682		(64		)
Tank Holding Corp.	Revolver	0.50	40		—
The Leaders Romans Bidco Limited (United Kingdom)	Delayed Draw	1.69	3,922		(96		)
Trump Card LLC	Revolver	0.50	635		(4		)
USLS Acquisition, Inc.	Revolver	0.50	946		(17		)
VRC Companies, LLC	Delayed Draw	1.00	13,157		(72		)
Westfall Technik Inc	Delayed Draw	1.00	12,854		(402		)
Westfall Technik Inc	Revolver	0.50	647		(19		)
WP CPP Holdings, LLC	Delayed Draw	1.00	25,000		(163		)
Zemax Software Holdings, LLC	Revolver	0.50	1,284		(8		)
Zenith American Holding, Inc.	Delayed Draw	1.00	3,714		(23		)
Zenith American Holding, Inc.	Revolver	0.50	1,138		(7		)
Total unfunded commitments			$	135,176	$	(1,595	)

(7) The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(8) Security acquired in transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act, unless otherwise noted. As of September 30, 2019, the aggregate fair value of these securities is $10,339, or 1.69% of the Company's net assets.

(9) In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company is entitled to receive additional interest as a result of an agreement among lenders as follows: Barnes & Noble, Inc. (1.83%). Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.

As of September 30, 2019, investments at fair value consisted of the following:

Type	Amortized Cost		Fair Value		% of Fair Value
First Lien Debt (excluding First Lien/Last Out)	$	801,083	$	795,739	79.35	%
First Lien/Last Out Unitranche	36,303		36,274		3.61
Second Lien Debt	160,542		160,522		16.01
Equity Investments	9,341		10,339		1.03
Total	$	1,007,269	$	1,002,874	100.00	%

10

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2019

(dollar amounts in thousands)

(unaudited)

The rate type of debt investments at fair value as of September 30, 2019 was as follows:

Rate Type	Amortized Cost		Fair Value		% of Fair Value of First and Second Lien Debt
Floating Rate	$	978,725	$	973,545	98.09	%
Fixed Rate	19,203		18,990		1.91
Total	$	997,928	$	992,535	100.00	%

The industry composition of investments at fair value as of September 30, 2019 was as follows:

Industry	Amortized Cost		Fair Value		% of Fair Value
Aerospace & Defense	$	61,994	$	62,147	6.20	%
Automotive	8,272		8,227		0.82
Banking, Finance, Insurance & Real Estate	63,605		64,043		6.39
Beverage, Food & Tobacco	46,961		46,819		4.67
Business Services	89,835		90,983		9.07
Capital Equipment	45,156		45,620		4.55
Chemicals, Plastics & Rubber	26,495		25,934		2.59
Construction & Building	22,583		22,583		2.25
Consumer Services	14,345		14,446		1.44
Containers, Packaging & Glass	62,618		63,237		6.31
Durable Consumer Goods	10,677		10,639		1.06
Energy: Oil & Gas	9,779		9,747		0.97
Healthcare & Pharmaceuticals	126,303		121,352		12.10
High Tech Industries	77,397		77,844		7.76
Hotel, Gaming & Leisure	44,047		42,372		4.22
Media: Broadcast & Subscription	29,562		29,521		2.94
Non-durable Consumer Goods	7,538		7,567		0.75
Retail	36,303		36,274		3.62
Software	141,108		141,256		14.08
Sovereign & Public Finance	38,363		37,590		3.75
Telecommunications	36,735		37,074		3.70
Transportation: Cargo	7,593		7,599		0.76
Total	$	1,007,269	$	1,002,874	100.00	%

11

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2019

(dollar amounts in thousands)

(unaudited)

The geographical composition of investments at fair value as of September 30, 2019 was as follows:

Geography	Amortized Cost		Fair Value		% of Fair Value
Canada	$	42,146	$	42,271	4.21	%
Cyprus	19,009		18,814		1.88
Luxembourg	18,674		18,803		1.87
United Kingdom	33,726		33,151		3.31
United States	893,714		889,835		88.73
Total	$	1,007,269	$	1,002,874	100.00	%

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

12

TCG BDC II, INC.

SCHEDULE OF INVESTMENTS

As of December 31, 2018

(dollar amounts in thousands)

Investments—non-controlled/non-affiliated (1)	Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
First Lien Debt (85.96%)
Aero Operating, LLC (Dejana Industries, Inc.)	(2)(3)(6)	Business Services	L + 7.25%	9.60%	1/5/2018	12/29/2022	$	6,805	$	6,749	$	6,720	2.32	%
Alpine SG, LLC	(2)(3)	High Tech Industries	L + 6.00%	8.52%	2/2/2018	11/16/2022	9,695		9,613		9,659		3.34
Analogic Corporation	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 6.00%	8.52%	6/22/2018	6/22/2024	35,249		34,536		34,414		11.90
Avenu Holdings, LLC	(2)(3)	Sovereign & Public Finance	L + 5.25%	8.05%	9/28/2018	9/28/2024	39,056		38,400		38,354		13.26
Central Security Group, Inc.	(2)(3)	Consumer Services	L + 5.63%	8.15%	4/5/2018	10/6/2021	4,680		4,661		4,587		1.59
Chemical Computing Group ULC (Canada)	(2)(3)(6)(7)	Software	L + 5.50%	8.02%	8/30/2018	8/30/2023	15,794		15,565		15,618		5.40
CircusTrix Holdings, LLC	(2)(3)(6)	Hotel, Gaming & Leisure	L + 5.50%	8.02%	2/2/2018	12/16/2021	9,212		9,134		8,972		3.10
Comar Holding Company, LLC	(2)(3)(6)	Containers, Packaging & Glass	L + 5.25%	7.77%	6/18/2018	6/18/2024	27,086		26,450		26,506		9.17
Dade Paper & Bag, LLC	(2)(3)	Forest Products & Paper	L + 7.00%	9.24%	1/24/2018	6/9/2024	6,282		6,229		6,080		2.10
Datto, Inc.	(2)(3)(6)	High Tech Industries	L + 8.00%	10.46%	12/7/2017	12/7/2022	17,667		17,442		17,498		6.05
Derm Growth Partners III, LLC (Dermatology Associates)	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 6.25%	9.05%	2/15/2018	5/31/2022	14,342		14,130		14,119		4.88
DTI Holdco, Inc.	(2)(3)	High Tech Industries	L + 4.75%	7.28%	12/18/2018	9/30/2023	1,995		1,870		1,860		0.64
Ensono, LP	(2)(3)	Telecommunications	L + 5.25%	7.77%	4/30/2018	6/27/2025	8,623		8,542		8,450		2.92
GRO Sub Holdco, LLC (Grand Rapids)	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 6.00%	8.80%	2/28/2018	2/22/2024	6,661		6,489		6,209		2.15
iCIMS, Inc.	(2)(3)(6)	Software	L + 6.50%	8.94%	9/12/2018	9/12/2024	20,025		19,616		19,297		6.67
Innovative Business Services, LLC	(2)(3)(6)	High Tech Industries	L + 5.50%	7.91%	4/5/2018	4/5/2023	16,307		15,771		15,948		5.51
National Carwash Solutions, Inc.	(2)(3)(6)	Automotive	L + 6.00%	8.35%	8/7/2018	4/28/2023	5,843		5,661		5,688		1.98
NES Global Talent Finance US, LLC (United Kingdom)	(2)(3)(7)	Energy: Oil & Gas	L + 5.50%	8.03%	5/9/2018	5/11/2023	9,992		9,831		9,695		3.35
Nexus Technologies, LLC	(2)(3)	High Tech Industries	L + 5.50%	8.30%	12/11/2018	12/5/2023	6,234		6,177		6,158		2.13
North American Dental Management, LLC	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 5.25%	8.04%	10/26/2018	7/7/2023	3,422		3,264		3,276		1.13
Northland Telecommunications Corporation	(2)(3)(6)	Media: Broadcast & Subscription	L + 5.75%	8.10%	10/1/2018	10/1/2025	21,638		21,299		21,311		7.37
PPC Flexible Packaging, LLC	(2)(3)(6)	Containers, Packaging & Glass	L + 5.25%	7.77%	11/23/2018	11/23/2024	11,962		11,764		11,839		4.09
PSI Services, LLC	(2)(3)	Business Services	L + 5.00%	7.52%	9/19/2018	1/20/2023	4,546		4,489		4,445		1.54
Redwood Services Group, LLC	(2)(3)	High Tech Industries	L + 6.00%	8.71%	11/13/2018	6/6/2023	5,323		5,277		5,242		1.81
Sapphire Convention, Inc. (Smart City)	(2)(3)(6)	Telecommunications	L + 5.25%	7.89%	11/20/2018	11/20/2025	28,866		28,213		28,264		9.77
Smile Doctors, LLC	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 5.75%	8.55%	10/6/2017	10/6/2022	18,155		17,967		17,782		6.15
Sovos Brands Intermediate, Inc.	(2)	Beverage, Food & Tobacco	L + 5.00%	7.64%	11/16/2018	11/20/2025	20,100		19,902		19,782		6.84
SPay, Inc.	(2)(3)(6)	Hotel, Gaming & Leisure	L + 5.75%	8.22%	6/15/2018	6/15/2024	19,909		19,343		19,009		6.57
Trump Card, LLC	(2)(3)(6)	Transportation: Cargo	L + 5.00%	7.80%	6/26/2018	4/21/2022	8,157		8,087		8,036		2.78
USLS Acquisition, Inc.	(2)(3)(6)	Business Services	L + 5.75%	8.46%	11/30/2018	11/30/2024	17,730		17,281		17,178		5.94

13

TCG BDC II, INC.

SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2018

(dollar amounts in thousands)

Investments—non-controlled/non-affiliated (1)	Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
First Lien Debt (85.96%) (continued)
Westfall Technik, Inc.	(2)(3)(6)	Chemicals, Plastics & Rubber	L + 5.00%	7.79%	9/13/2018	9/13/2024	$	10,585	$	10,219	$	9,902	3.42	%
Zemax Software Holdings, LLC	(2)(3)(6)	Software	L + 5.75%	8.55%	6/25/2018	6/25/2024	10,248		10,051		10,144		3.51
Zenith Merger Sub, Inc.	(2)(3)(6)	Business Services	L + 5.50%	8.30%	12/13/2017	12/13/2023	6,758		6,672		6,700		2.32
First Lien Debt Total									$	440,694	$	438,742	151.70	%
Second Lien Debt (12.97%)
Access CIG, LLC	(2)(3)(6)	Business Services	L + 7.75%	10.46%	2/14/2018	2/27/2026	$	2,700	$	2,676	$	2,650	0.92	%
Argon Medical Devices Holdings, Inc.	(2)(3)	Healthcare & Pharmaceuticals	L + 8.00%	10.52%	11/2/2017	1/23/2026	7,500		7,467		7,446		2.57
Brave Parent Holdings, Inc.	(2)(3)	Software	L + 7.50%	10.02%	10/3/2018	4/19/2026	19,062		18,617		18,301		6.33
Outcomes Group Holdings, Inc.	(2)	Business Services	L + 7.50%	10.28%	10/23/2018	10/26/2026	4,500		4,490		4,447		1.54
PharmaLogic Holdings Corp.	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 8.00%	10.52%	6/7/2018	12/11/2023	563		560		563		0.19
Project Accelerate Parent, LLC	(2)(3)	Software	L + 8.50%	10.89%	1/2/2018	1/2/2026	17,500		17,097		17,196		5.95
Santa Cruz Holdco, Inc.	(2)(3)	Non-durable Consumer Goods	L + 8.25%	10.69%	12/15/2017	12/13/2024	7,600		7,532		7,496		2.59
Ultimate Baked Goods MIDCO, LLC (Rise Baking)	(2)(3)	Beverage, Food & Tobacco	L + 8.00%	10.52%	8/9/2018	8/9/2026	8,333		8,172		8,108		2.80
Second Lien Debt Total									$	66,611	$	66,207	22.89	%

Investments—non-controlled/non-affiliated (1)	Footnotes	Industry	Acquisition Date	Shares/ Units	Cost		Fair Value (5)		Percentage of Net Assets
Equity Investment (1.07%)(5)(8)
ANLG Holdings, LLC		Healthcare & Pharmaceuticals	6/22/2018	879,689	$	880	$	880	0.30	%
Avenu Holdings, LLC		Sovereign & Public Finance	9/28/2018	172,413	172		172		0.06
GRO Sub Holdco, LLC (Grand Rapids)		Healthcare & Pharmaceuticals	3/29/2018	500,000	500		219		0.09
North Haven Goldfinch Topco, LLC		Containers, Packaging & Glass	6/18/2018	2,314,815	2,315		2,102		0.73
SiteLock Group Holdings, LLC		High Tech Industries	4/5/2018	446,428	446		446		0.15
USLS Acquisition, Inc.		Business Services	11/30/2018	640,569	641		641		0.22
Zenith American Holding, Inc.		Business Services	12/13/2017	438,356	438		705		0.24
Zillow Topco LP		Software	6/25/2018	312,500	313		313		0.11
Equity Investments Total					$	5,705	$	5,478	1.90	%
Total investments—non-controlled/non-affiliated					$	513,010	$	510,427	176.49	%
Total investments					$	513,010	$	510,427	176.49	%

(1) Unless otherwise indicated, issuers of debt and equity investments held by the Company are domiciled in the United States. Under the Investment Company Act, the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2018, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2018, the Company is not an “affiliated person” of any of these portfolio companies. Certain portfolio company investments are subject to contractual restrictions on sales.

14

TCG BDC II, INC.

SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2018

(dollar amounts in thousands)

(2) Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2018. As of December 31, 2018, the reference rates for all LIBOR loans were the 30-day LIBOR at 2.50%, the 90-day LIBOR at 2.81% and the 180-day LIBOR rate at 2.88%.

(3) Loan includes interest rate floor feature, generally 1.00%.

(4) Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.

(5) Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements), pursuant to the Company’s valuation policy. The fair value of all first lien and second lien debt investments and equity investments was determined using significant unobservable inputs.

(6) As of December 31, 2018, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:

Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount		Fair Value
First and Second Lien Debt—unfunded delayed draw and revolving term loans commitments
Aero Operating LLC (Dejana Industries, Inc.)	Revolver	1.00	%	$	423	$	(5	)
Analogic Corporation	Revolver	0.50		3,365		(73		)
Chemical Computing Group ULC	Revolver	0.50		903		(9		)
CircusTrix Holdings, LLC	Delayed Draw	1.00		1,115		(26		)
Comar Holding Company, LLC	Delayed Draw	1.00		5,136		(87		)
Comar Holding Company, LLC	Revolver	0.50		2,129		(36		)
Datto, Inc.	Revolver	0.50		360		(3		)
Derm Growth Partners III, LLC (Dermatology Associates)	Delayed Draw	1.00		2,735		(34		)
Derm Growth Partners III, LLC (Dermatology Associates)	Revolver	0.50		846		(10		)
GRO Sub Holdco, LLC (Grand Rapids)	Delayed Draw	1.00		7,000		(85		)
GRO Sub Holdco, LLC (Grand Rapids)	Revolver	0.50		1,071		(13		)
iCIMS, Inc.	Revolver	0.50		1,252		(43		)
Innovative Business Services, LLC	Delayed Draw	1.00		3,886		(62		)
Innovative Business Services, LLC	Revolver	0.50		2,232		(36		)
National Carwash Solutions, Inc.	Delayed Draw	1.00		3,817		(57		)
National Carwash Solutions, Inc.	Revolver	0.50		632		(9		)
North American Dental Management, LLC	Delayed Draw	1.00		4,986		(86		)
Northland Telecommunications Corporation	Revolver	0.50		1,702		(24		)
PharmaLogic Holdings Corp.	Delayed Draw	1.00		236		—
PPC Flexible Packaging, LLC	Revolver	0.50		1,737		(16		)
Sapphire Convention, Inc. (Smart City)	Revolver	0.50		4,528		(82		)
Smile Doctors, LLC	Delayed Draw	1.00		6,394		(97		)
Smile Doctors, LLC	Revolver	0.50		51		(1		)
SPay, Inc.	Delayed Draw	1.00		10,227		(197		)
SPay, Inc.	Revolver	0.50		546		(19		)
Trump Card, LLC	Revolver	0.50		635		(9		)
USLS Acquisition, Inc.	Delayed Draw	1.00		4,137		(98		)
USLS Acquisition, Inc.	Revolver	0.50		1,419		(34		)

15

TCG BDC II, INC.

SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2018

(dollar amounts in thousands)

Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount		Fair Value
Westfall Technik, Inc.	Delayed Draw	1.00	%	$	15,258	$	(372	)
Westfall Technik, Inc.	Revolver	0.50		2,155		(53		)
Zemax Software Holdings, LLC	Revolver	0.50		1,284		(11		)
Zenith Merger Sub, Inc.	Revolver	0.50		736		(6		)
Total unfunded commitments				$	92,933	$	(1,693	)

(7) The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(8) Security acquired in transaction exempt from registration under the Securities Act, and may be deemed to be “restricted securities” under the Securities Act, unless otherwise noted. As of December 31, 2018, the aggregate fair value of these securities is $5,478, or 1.90% of the Company's net assets.

As of December 31, 2018, investments at fair value consisted of the following:

Type	Amortized Cost		Fair Value		% of Fair Value
First Lien Debt	$	440,694	$	438,742	85.96	%
Second Lien Debt	66,611		66,207		12.97
Equity Investments	5,705		5,478		1.07
Total	$	513,010	$	510,427	100.00	%

The rate type of debt investments at fair value as of December 31, 2018 was as follows:

Rate Type	Amortized Cost		Fair Value		% of Fair Value of First and Second Lien Debt
Floating Rate	$	507,305	$	504,949	100.00	%
Total	$	507,305	$	504,949	100.00	%

16

TCG BDC II, INC.

SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2018

(dollar amounts in thousands)

The industry composition of investments at fair value as of December 31, 2018 was as follows:

Industry	Amortized Cost		Fair Value		% of Fair Value
Automotive	$	5,661	$	5,688	1.11	%
Beverage, Food & Tobacco	28,074		27,890		5.46
Business Services	43,436		43,486		8.52
Chemicals, Plastics & Rubber	10,219		9,902		1.94
Consumer Services	4,661		4,587		0.90
Containers, Packaging & Glass	40,529		40,447		7.93
Energy: Oil & Gas	9,831		9,695		1.90
Forest Products & Paper	6,229		6,080		1.19
Healthcare & Pharmaceuticals	85,793		84,908		16.63
High Tech Industries	56,596		56,811		11.13
Hotel, Gaming & Leisure	28,477		27,981		5.48
Media: Broadcast & Subscription	21,299		21,311		4.18
Non-durable Consumer Goods	7,532		7,496		1.47
Software	81,259		80,869		15.84
Sovereign & Public Finance	38,572		38,526		7.55
Telecommunications	36,755		36,714		7.19
Transportation: Cargo	8,087		8,036		1.58
Total	$	513,010	$	510,427	100.00	%

The geographical composition of investments at fair value as of December 31, 2018 was as follows:

Geography	Amortized Cost		Fair Value		% of Fair Value
Canada	$	15,565	$	15,618	3.06	%
United Kingdom	9,831		9,695		1.90
United States	487,614		485,114		95.04
Total	$	513,010	$	510,427	100.00	%

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

17

TCG BDC II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As of September 30, 2019

(dollar amounts in thousands, except per share data)

1. ORGANIZATION

TCG BDC II, Inc. (together with its consolidated subsidiaries, “BDC II” or the “Company”) is a Maryland corporation formed on February 10, 2017 with the name Carlyle Private Credit, Inc., which was changed to TCG BDC II, Inc. on March 3, 2017. The Company is structured as an externally managed, non-diversified closed-end investment company. The Company is managed by its investment adviser, Carlyle Global Credit Investment Management L.L.C., “CGCIM” or “Investment Adviser”), a wholly owned subsidiary of The Carlyle Group L.P. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”). In addition, the Company has elected to be treated, and intends to continue to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”).

The Company’s investment objective is to generate attractive risk adjusted returns and current income primarily by investing in senior secured term loans to U.S. middle market companies in which private equity sponsors hold, directly or indirectly, a financial interest in the form of debt and/or equity. The Company generally uses the term “middle market” to refer to companies with approximately $10 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”), which the Company believes is a useful proxy for cash flow. The Company seeks to achieve its investment objective primarily through direct originations of secured debt, including first lien senior secured loans (which may include stand-alone first lien loans, first lien/last out loans, and "unitranche" loans) and second lien senior secured loans (collectively, “Middle Market Senior Loans”), with the balance of its assets invested in higher yielding investments (which may include unsecured debt, mezzanine debt and investments in equities), although the Company may make investments in issuers with EBITDA outside of such range. The Company expets that the composition of its portfolio will change over time given the Investment Adviser's view on, among other things, the economic and credit environment (including with respect to interest rates) in which the Company is operating.

The Company invests primarily in loans to middle market companies whose debt, if rated, is rated below investment grade and, if not rated, would likely be rated below investment grade if it were rated. Debt securities that are rated below investment grade are sometimes referred to as “high yield bonds,” “junk bonds” or “leveraged loans”. The Company also invests in debt securities of foreign companies, which may expose the Company to additional risks not typically associated with investing in U.S. companies. The Company may employ hedging techniques to minimize these risks, but the Company can offer no assurance that it will, in fact, hedge currency risk, or that if it does, such strategies will be effective.

The Company's investments in equities consist primarily of common stock, and to a lesser extent preferred stock, of private companies. The Company's investments in equities will typically be higher yielding than Middle Market Senior Loans because, in the case of common stock, the return realized upon the disposition of the investment is expected to be higher than the yield on Middle Market Senior Loans, and in the case of preferred stock, the cash and/or payment-in-kind dividends are expected to be higher than the yield on Middle Market Senior Loans, reflecting the increased risk associated with these investments.

On September 11, 2017, the Company completed its initial closing of capital commitments (the “Initial Closing”) and subsequently commenced substantial investment operations.

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

The Company is externally managed by the Investment Adviser, an investment adviser registered under the Investment Advisers Act of 1940, as amended. Carlyle Global Credit Administration L.L.C. (“CGCA” or the “Administrator”) provides the administrative services necessary for the Company to operate. Both the Investment Adviser and the Administrator are wholly owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of The Carlyle Group L.P. “Carlyle” refers to The Carlyle Group L.P. and its affiliates and its consolidated subsidiaries (other than portfolio companies of its affiliated funds), a global investment firm publicly traded on NASDAQ Global Select Market under the symbol “CG”. Refer to the sec.gov website for further information on Carlyle.

18

TCG BDC II SPV LLC (the “SPV”) is a Delaware limited liability company that was formed on January 28, 2019. The SPV invests in first and second lien senior secured loans. The SPV is a wholly owned subsidiary of the Company and is consolidated in these consolidated financial statements commencing from the date of its formation, January 28, 2019.

As a BDC, the Company is required to comply with certain regulatory requirements. As part of these requirements, the Company must not acquire any assets other than “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of its total assets are qualifying assets (with certain limited exceptions).

To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. Pursuant to this election, the Company generally does not have to pay corporate level taxes on any income that it distributes to stockholders, provided that the Company satisfies those requirements.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The Company is an investment company for the purposes of accounting and financial reporting in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the SPV. All significant intercompany balances and transactions have been eliminated. U.S. GAAP for an investment company requires investments to be recorded at fair value. The carrying value for all other assets and liabilities approximates their fair value.

The interim consolidated financial statements have been prepared in accordance with US GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X. Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, all adjustments considered necessary for the fair presentation of consolidated financial statements for the interim periods presented have been included. These adjustments are of a normal, recurring nature. This Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2018. The results of operations for the three month and nine month periods endedSeptember 30, 2019 are not necessarily indicative of the operating results to be expected for the full year.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on management and incentive fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements. Actual results could differ from these estimates and such differences could be material.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the accompanying Consolidated Statements of Operations reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. See Note 3 for further information about fair value measurements.

19

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposits and highly liquid investments (e.g., money market funds, U.S. treasury notes) with original maturities of three months or less. Cash equivalents are carried at amortized cost, which approximates fair value. The Company’s cash and cash equivalents are held with two large financial institutions and cash held in such financial institutions may, at times, exceed the Federal Deposit Insurance Corporation insured limit.

Revenue Recognition

Interest from Investments and Realized Gain/Loss on Investments

Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. At time of exit, the realized gain or loss on an investment is the difference between the amortized cost at time of exit and the cash received at exit using the specific identification method.

The Company may have loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in interest income in the Consolidated Statements of Operations. As of September 30, 2019, the fair value of the loans in the portfolio with PIK provisions was $72,265, which represented approximately 7.2% of total investments at fair value. As of December 31, 2018, there were no loans in the portfolio which contained PIK provisions. For the three month and nine month periods ended September 30, 2019, the Company earned $657 and $1,024 in PIK income, respectively included in interest income in the accompanying Consolidated Statements of Operations. For the three month and nine month periods ended September 30, 2018, no loans in the portfolio contained PIK provisions.

Other Income

Other income may include income such as consent, waiver, amendment, unused, underwriting, arranger and prepayment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees are amortized into other income over the life of the guarantee. The unamortized amount, if any, is included in other assets in the accompanying Consolidated Statements of Assets and Liabilities. For the three month and nine month periods endedSeptember 30, 2019, the Company earned $1,659 and $4,024, respectively, in other income, primarily from underwriting and prepayment fees. For the three month and nine month periods ended September 30, 2018, the Company earned $503 and $656, respectively, in other income, primarily from unused fees.

Non-Accrual Income

Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in management’s judgment, are likely to remain current. Management may not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. As of September 30, 2019 and December 31, 2018 and for the periods then ended, no loans in the portfolio were on non-accrual status.

Subscription Facility, SPV Credit Facility Related Costs, Expenses and Deferred Financing Costs (See Note 5, Borrowings)

Interest expense and unused commitment fees on the senior secured revolving credit facility (as amended, the “Subscription Facility”) and the SPV Credit Facility are recorded on an accrual basis. Unused commitment fees are included in credit facility fees in the accompanying Consolidated Statements of Operations.

The Subscription Facility and the SPV Credit Facility are recorded at carrying value, which approximates fair value.

20

Deferred financing costs include capitalized expenses related to the closing or amendments of the Subscription Facility. Amortization of deferred financing costs for the credit facility is computed on the straight-line basis over the term of the credit facility. The unamortized balance of such costs is included in deferred financing costs in the accompanying Consolidated Statements of Assets and Liabilities. The amortization of such costs is included in credit facility fees in the accompanying Consolidated Statements of Operations.

Organization and Offering Costs

The Company agreed to reimburse the Investment Adviser for initial organization and offering costs incurred on behalf of the Company up to $1,500. As of September 30, 2019 and December 31, 2018, $1,500 and $1,500, respectively, of initial organization and offering costs had been incurred by the Company and $629 and $544, respectively, of excess initial organization and offering costs had been incurred by the Investment Adviser. The $1,500 of incurred organization and offering costs are allocated to all stockholders based on their respective capital commitment and are re-allocated amongst all stockholders at the time of each capital drawdown subsequent to the Initial Closing. The Company’s initial organization costs incurred were expensed and the initial offering costs are being amortized over one year.

Income Taxes

For federal income tax purposes, the Company has elected to be treated as a RIC under the Code, and intends to make the required distributions to its stockholders as specified therein. In order to qualify as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.

The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed. The Company intends to make sufficient distributions each taxable year to satisfy the excise distribution requirements.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more likely than not” to be sustained by the applicable tax authority. All penalties and interest associated with income taxes, if any, are included in income tax expense. The SPV is a disregarded entity for tax purposes and will be consolidated with the tax return of the Company.

Dividends and Distributions to Common Stockholders

To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its common stockholders. Dividends and distributions to common stockholders are recorded on the record date. The amount to be distributed is determined by the Board of Directors each quarter and is generally based upon the taxable earnings estimated by management and available cash. Net realized capital gains, if any, are generally distributed at least annually, although the Company may decide to retain such capital gains for investment.

Dividends and distributions, if any, are paid in cash to common stockholders.

Foreign Currency Translations

The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the foreign exchange rate on the date of valuation.

Recent Accounting Standards Updates

21

The FASB issued Accounting Standards Update (“ASU”) ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement in August 2018, which modifies disclosure requirements pertaining to fair value measurement of Level 3 securities for public companies. Under the new standard, reporting entities can remove the disclosures no longer required and amend the disclosures immediately with retrospective application. The effective date for the additional disclosures for all public and nonpublic companies is for fiscal years, and interim periods within those years, beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures immediately and delay adoption of the additional disclosures until their effective date. The Company has elected to early adopt ASU 2018-13 in 2018. No significant changes were made to the Company’s fair value disclosures in the notes to the consolidated financial statements in order to comply with ASU 2018-13.

In September 2018, related to the Disclosure Update and Simplification release (the “DUS Release”) issued by the Securities and Exchange Commission (the "SEC") in August 2018, the FASB issued Compliance and Disclosure Interpretation 105.09 guidance (“CDI 105.09”) on compliance with the new requirement to present changes in shareholders’ equity in interim financial statements within Form 10-Q filings. The DUS Release requires disclosure of changes in shareholders’ equity within a registrant’s Form 10-Q filing on a quarter-to-date and year-to-date basis for both the current year and prior year comparative periods. CDI 105.09 notes that the SEC would not object if a registrant first discloses the changes in shareholders’ equity in its Form 10-Q for the quarter that begins after November 5, 2018. The Company has adopted the new requirement starting with the quarter that began on January 1, 2019, which did not have a material impact on the Company’s consolidated financial statements.

3. FAIR VALUE MEASUREMENTS

The Company applies fair value accounting in accordance with the terms of FASB ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.

Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or the Company’s Board of Directors, does not represent fair value shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments, a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Directors engages a third-party valuation firm to provide positive assurance on portions of the Middle Market Senior Loans and equity investments portfolio each quarter (such that each non-traded investment is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Directors (the “Audit Committee”) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Directors with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.

All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:

• the nature and realizable value of any collateral;

• call features, put features and other relevant terms of debt;

22

• the portfolio company’s leverage and ability to make payments;

• the portfolio company’s public or private credit rating;

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

• prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;

• the markets in which the portfolio company does business and recent economic and/or market events; and

• comparisons to comparable transactions and publicly traded securities.

Investment performance data utilized are the most recently available financial statements and compliance certificates received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements as of September 30, 2019 and December 31, 2018.

U.S. GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

Investments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:

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

• Level 2—inputs to the valuation methodology are either directly or indirectly observable as of the reporting date and are those other than quoted prices in active markets. Financial instruments in this category generally include less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

• Level 3—inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments in this category generally include investments in privately-held entities, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Investment Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur. For the three and nine month periods ended September 30, 2019 and 2018, there were no transfers between levels.

The following tables summarize the Company’s investments measured at fair value on a recurring basis by the above fair value hierarchy levels as of September 30, 2019 and December 31, 2018:

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	September 30, 2019
	Level 1		Level 2		Level 3		Total
Assets
First Lien Debt	$	—	$	—	$	832,013	$	832,013
Second Lien Debt	—		—		160,522		160,522
Equity Investments	—		—		10,339		10,339
Total	$	—	$	—	$	1,002,874	$	1,002,874

	December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets
First Lien Debt	$	—	$	—	$	438,742	$	438,742
Second Lien Debt	—		—		66,207		66,207
Equity Investments	—		—		5,478		5,478
Total	$	—	$	—	$	510,427	$	510,427

The changes in the Company’s investments at fair value for which the Company has used Level 3 inputs to determine fair value and net change in unrealized appreciation (depreciation) included in earnings for Level 3 investments still held are as follows:

	Financial Assets For the three month period ended September 30, 2019
	First Lien Debt			Second Lien Debt			Equity Investments		Total
Balance, beginning of period	$	650,422		$	131,509		$	8,620	$	790,551
Purchases	188,855			39,127			681		228,663
Sales	—			—			—		—
Paydowns	(4,859		)	(9,498		)	—		(14,357		)
Accretion of discount	999			141			—		1,140
Net realized gains (losses)	(104		)	—			—		(104		)
Net change in unrealized appreciation (depreciation)	(3,300		)	(757		)	1,038		(3,019		)
Balance, end of period	$	832,013		$	160,522		$	10,339	$	1,002,874
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held at the reporting date included in net change in unrealized appreciation (depreciation) on investments on the Consolidated Statements of Operations	$	(3,300	)	$	(732	)	$	1,038	$	(2,994	)

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	Financial Assets For the nine month period ended September 30, 2019
	First Lien Debt			Second Lien Debt			Equity Investments			Total
Balance, beginning of period	$	438,742		$	66,207		$	5,478		$	510,427
Purchases	446,695			120,570			3,853			571,118
Sales	(10,942		)	—			(486		)	(11,428		)
Paydowns	(41,250		)	(27,248		)	—			(68,498		)
Accretion of discount	2,305			609			—			2,914
Net realized gains (losses)	(116		)	—			269			153
Net change in unrealized appreciation (depreciation)	(3,421		)	384			1,225			(1,812		)
Balance, end of period	$	832,013		$	160,522		$	10,339		$	1,002,874
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held at the reporting date included in net change in unrealized appreciation (depreciation) on investments on the Consolidated Statements of Operations	$	(3,514	)	$	462		$	1,225		$	(1,827	)

	Financial Assets For the three month period ended September 30, 2018
	First Lien Debt			Second Lien Debt			Equity Investments		Total
Balance, beginning of period	$	238,994		$	55,182		$	4,898	$	299,074
Purchases	99,428			11,782			172		111,382
Paydowns	(13,907		)	—			—		(13,907		)
Accretion of discount	346			19			—		365
Net change in unrealized appreciation (depreciation)	(116		)	(48		)	40		(124		)
Balance, end of period	$	324,745		$	66,935		$	5,110	$	396,790
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held at the reporting date included in net change in unrealized appreciation (depreciation) on investments on the Statements of Operations	$	285		$	(48	)	$	40	$	277

	Financial Assets For the nine month period ended September 30, 2018
	First Lien Debt			Second Lien Debt		Equity Investments		Total
Balance, beginning of period	$	50,045		$	30,806	$	438	$	81,289
Purchases	290,258			35,411		4,626		330,295
Paydowns	(18,665		)	—		—		(18,665		)
Accretion of discount	503			47		—		550
Net change in unrealized appreciation (depreciation)	2,604			671		46		3,321
Balance, end of period	$	324,745		$	66,935	$	5,110	$	396,790
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held at the reporting date included in net change in unrealized appreciation (depreciation) on investments on the Statements of Operations	$	2,652		$	671	$	46	$	3,369

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The Company generally uses the following framework when determining the fair value of investments that are categorized as Level 3:

Investments in debt securities are initially evaluated to determine whether the enterprise value of the portfolio company is greater than the applicable debt. The enterprise value of the portfolio company is estimated using a market approach and an income approach. The market approach utilizes market value (EBITDA) multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The Company carefully considers numerous factors when selecting the appropriate companies whose multiples are used to value its portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. The income approach typically uses a discounted cash flow analysis of the portfolio company.

Investments in debt securities that do not have sufficient coverage through the enterprise value analysis are valued based on an expected probability of default and discount recovery analysis.

Investments in debt securities with sufficient coverage through the enterprise value analysis are generally valued using a discounted cash flow analysis of the underlying security. Projected cash flows in the discounted cash flow typically represent the relevant security’s contractual interest, fees and principal payments plus the assumption of full principal recovery at the security’s expected maturity date. The discount rate to be used is determined using an average of two market-based methodologies. Investments in debt securities may also be valued using consensus pricing.

Investments in equities are generally valued using a market approach and/or an income approach. The market approach utilizes EBITDA multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The income approach typically uses a discounted cash flow analysis of the portfolio company.

The following tables summarize the quantitative information related to the significant unobservable inputs for Level 3 instruments which are carried at fair value as of September 30, 2019 and December 31, 2018:

	Fair Value as of September 30, 2019		Valuation Techniques	Significant Unobservable Inputs	Range
					Low		High		Weighted Average
Investments in First Lien Debt	$	608,131	Discounted Cash Flow	Discount Rate	4.13	%	17.92	%	7.41	%
	223,882		Consensus Pricing	Indicative Quotes	70.46	%	100.00	%	97.76	%
Total First Lien Debt	832,013
Investments in Second Lien Debt	150,294		Discounted Cash Flow	Discount Rate	7.58	%	9.92	%	8.88	%
	10,228		Consensus Pricing	Indicative Quotes	97.60	%	99.50	%	98.10	%
Total Second Lien Debt	160,522
Investments in Equity	10,339		Income Approach	Discount Rate	7.89	%	12.44	%	9.33	%
			Market Approach	Comparable Multiple	6.37x		16.65x		10.97x
Total Equity Investments	10,339
Total Level 3 Investments	$	1,002,874

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	Fair Value as of December 31, 2018		Valuation Techniques	Significant Unobservable Inputs	Range
					Low		High		Weighted Average
Investments in First Lien Debt	$	432,295	Discounted Cash Flow	Discount Rate	5.57	%	9.63	%	7.38	%
	6,447		Consensus Pricing	Indicative Quotes	93.25	%	98.00	%	96.63	%
Total First Lien Debt	438,742
Investments in Second Lien Debt	63,556		Discounted Cash Flow	Discount Rate	7.93	%	9.81	%	9.41	%
	2,651		Consensus Pricing	Indicative Quotes	98.17	%	98.17	%	98.17	%
Total Second Lien Debt	66,207
Investments in Equity	5,478		Income Approach	Discount Rate	8.51	%	12.84	%	10.14	%
			Market Approach	Comparable Multiple	7.74x		14.70x		10.48x
Total Equity Investments	5,478
Total Level 3 Investments	$	510,427

The significant unobservable inputs used in the fair value measurement of the Company’s investments in first and second lien debt securities are discount rates, indicative quotes and comparable EBITDA multiples. Significant increases in discount rates in isolation would result in a significantly lower fair value measurement. Significant decreases in indicative quotes or comparable EBITDA multiples in isolation would result in a significantly lower fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Company’s investments in equities are discount rates and comparable EBITDA multiples. Significant increases in discount rates in isolation would result in a significantly lower fair value measurement. Significant decreases in comparable EBITDA multiples in isolation would result in a significantly lower fair value measurement.

Financial instruments disclosed but not carried at fair value

The following table presents the carrying value and fair value of the Company’s secured borrowings disclosed but not carried at fair value as of September 30, 2019 and December 31, 2018:

	September 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Secured borrowings	$	406,079	$	406,079	$	217,700	$	217,700
Total	$	406,079	$	406,079	$	217,700	$	217,700

The carrying values of the secured borrowings approximate their respective fair values and are categorized as Level 3 within the hierarchy. Secured borrowings are valued generally using discounted cash flow analysis. The significant unobservable inputs used in the fair value measurement of the Company’s secured borrowings are discount rates. Significant increases in discount rates would result in a significantly lower fair value measurement.

The carrying value of other financial assets and liabilities approximates their fair value based on the short term nature of these items.

4. RELATED PARTY TRANSACTIONS

Investment Advisory Agreement

On June 26, 2017, the Company entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Investment Adviser. The initial term of the Investment Advisory Agreement was two years from June 26, 2017 and, unless terminated earlier, the Investment Advisory Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the vote of the Board of Directors and by the vote of a majority of the directors who are not “interested persons” as defined in Section 2(a)(19) of the Investment Company Act (the “Independent Directors”). On May 6, 2019, the Company’s Board of Directors, including a majority of the Independent Directors, approved at an in-person meeting the continuance of the Company’s Investment Advisory Agreement with the Adviser for an additional one year term. The Investment Advisory Agreement will automatically terminate in the event of an

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assignment and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party. Pursuant to the Investment Advisory Agreement and subject to the overall supervision of the Board of Directors, the Investment Adviser provides investment advisory services to the Company. For providing these services, the Investment Adviser receives fees from the Company consisting of two components—a management fee and an incentive fee.

The management fee has been calculated and payable quarterly in arrears at an annual rate of 1.25% of the Company’s average Capital Under Management (as defined below) at the end of the then-current quarter and the prior calendar quarter (and, in the case of the Company’s first quarter, the Company’s Capital Under Management as of such quarter-end). “Capital Under Management” means cumulative capital called, less cumulative distributions categorized as Returned Capital. “Returned Capital” means unused capital commitments increased by the aggregate amount of (i) any portion of distributions made by the Company to an investor during the Investment Period which represents (A) proceeds realized from the sale or repayment of any investment (as opposed to investment income) during the Investment Period (but not in excess of the cost of any such investment) or (B) a return of such investor’s capital contributions to the Company, as determined by the Board of Directors, and (ii) any amount drawn down by the Company from unused capital commitments to pay management fees, incentive fees, organizational expenses or Company expenses, to the extent such investor receives subsequent distributions. The “Investment Period” commenced on September 11, 2017 and will continue until September 11, 2021, provided that it may be extended by the Board of Directors, in its discretion, for one additional one-year period, and, such end date may be further extended thereafter with the approval of holders of a majority of the shares of the Company’s common stock. For the avoidance of doubt, Capital Under Management does not include capital acquired through the use of leverage, and Returned Capital does not include distributions of the Company’s investment income (i.e., proceeds received in respect of interest payments, dividends or fees, net of expenses) or net realized capital gains to the investors.

The incentive fee consists of two parts. The first part has been calculated and payable quarterly in arrears and equals 15% of pre-incentive fee net investment income for the immediately preceding calendar quarter, subject to a preferred return of 1.75% per quarter (7% annualized), or “hurdle rate,” and a “catch-up” feature. The second part is determined and payable in arrears as of the end of each calendar year in an amount equal to 15% of realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation less the aggregate amount of any previously paid capital gain incentive fees, provided that no incentive fee on capital gains is payable to the Investment Adviser unless cumulative total return exceeds a 7% annual return on weighted average cumulative capital called less cumulative distributions categorized as Returned Capital.

For the three month and nine month periods endedSeptember 30, 2019, management fees were $1,718 and $4,131, respectively, incentive fees related to pre-incentive fee net investment income were $2,424 and $5,925, respectively, and there were no incentive fees related to realized capital gains as computed in accordance with the Investment Advisory Agreement. For the three month and nine month periods endedSeptember 30, 2018, management fees were $640 and $1,330, respectively, incentive fees related to pre-incentive fee net investment income were $705, and there were no incentive fees related to realized capital gains as computed in accordance with the Investment Advisory Agreement. For the three month and nine month periods endedSeptember 30, 2019, there were no accrued capital gains incentive fees based upon the cumulative net realized and unrealized appreciation (depreciation). For the three month and nine month periods endedSeptember 30, 2018, accrued capital gains incentive fees based upon the cumulative net realized and unrealized appreciation (depreciation) from inception through September 30, 2018 were $630. The accrual for any capital gains incentive fee under U.S. GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. No incentive fees on capital gains have been paid through September 30, 2019.

As of September 30, 2019 and December 31, 2018, $4,142 and $2,020, respectively, were included in management and incentive fees payable in the accompanying Consolidated Statements of Assets and Liabilities.

On June 26, 2017, the Investment Adviser entered into a personnel agreement with The Carlyle Group Employee Co., L.L.C. (“Carlyle Employee Co.”), an affiliate of the Investment Adviser, pursuant to which Carlyle Employee Co. provides the Investment Adviser with access to investment professionals.

Administration Agreement

On April 18, 2017, the Company entered into an administration agreement (the “Administration Agreement”) with the Administrator. Pursuant to the Administration Agreement, the Administrator furnishes the Company with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Under the Administration Agreement, the Administrator also performs, or oversees the performance of, required administrative services, which include, among other things, providing assistance in accounting, tax, legal, compliance, operations, technology and investor relations, and being

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responsible for the financial records of the Company. Payments under the Administration Agreement are equal to an amount that reimburses the Administrator for its costs and expenses and the allocable portion of overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including the allocable portion of the compensation paid to or compensatory distributions received by the Company’s officers (including the Chief Compliance Officer and Treasurer) and respective staff who provide services to the Company, operations staff who provide services to the Company, and internal audit staff in their role of performing the internal control assessment under the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party.

The initial term of the Administration Agreement was two years from April 18, 2017 and, unless terminated earlier, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Directors or by a majority vote of the outstanding voting securities of the Company and (ii) the vote of a majority of the Company’s Independent Directors. On May 6, 2019, the Company’s Board of Directors, including a majority of the Independent Directors, approved at an in-person meeting the continuance of the Company’s Administration Agreement with the Administrator for an additional one year term. The Administration Agreement may not be assigned by a party without the consent of the other party and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party.

For the three month and nine month periods endedSeptember 30, 2019, the Company incurred $31 and $230, respectively and for the three month and nine month periods endedSeptember 30, 2018, the Company incurred $149 and $357, respectively, in fees under the Administrative Agreement, which were included in administrative service fees in the accompanying Consolidated Statements of Operations. As of September 30, 2019 and December 31, 2018, $33 and $45, respectively, was unpaid and included in administrative service fees payable in the accompanying Consolidated Statements of Assets and Liabilities.

Sub-Administration Agreements

On June 26, 2017,the Administrator entered into sub-administration agreements with Carlyle Employee Co. (the “Carlyle Sub-Administration Agreement”). Pursuant to the Carlyle Sub-Administration Agreement, Carlyle Employee Co. provides the Administrator with access to personnel.

On June 22, 2017, the Administrator entered into a sub-administration agreement with State Street Bank and Trust Company (“State Street” and, such agreement, the “State Street Sub-Administration Agreement” and, together with the Carlyle Sub-Administration Agreements, the “Sub-Administration Agreements”).

On May 6, 2019, the Company’s Board of Directors, including a majority of the Independent Directors, approved at an in-person meeting the continuance of the Company’s Sub-Administration Agreements for an additional one year term.

For the three month and nine month periods endedSeptember 30, 2019, fees incurred in connection with the State Street Sub-Administration Agreement, which amounted to $217 and $587, respectively, were included in other general and administrative in the accompanying Consolidated Statements of Operations. For the three month and nine month periods endedSeptember 30, 2018, fees incurred in connection with the State Street Sub-Administration Agreement, which amounted to $124 and $330, respectively, were included in other general and administrative in the accompanying Consolidated Statements of Operations. As of September 30, 2019 and December 31, 2018, $1,139 and $552, respectively, was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities.

Placement Fees

On June 26, 2017, the Company entered into a placement fee arrangement with TCG Securities, L.L.C. (“TCG”), a licensed broker-dealer and an affiliate of the Investment Adviser, which may require stockholders to pay a placement fee to TCG for TCG’s services.

For the three month and nine month periods endedSeptember 30, 2019, TCG earned $287 and $931, respectively, in placement fees from the Company’s stockholders in connection with the issuance or sale of the Company’s common stock and paid $287 and $931, respectively, in placement fees to sub-placement agents. For the three month and nine month periods endedSeptember 30, 2018, TCG earned no placement fees from the Company’s stockholders in connection with the issuance or sale of the Company’s common stock.

Board of Directors

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The Company’s Board of Directors currently consists of five members, three of whom are Independent Directors. The Board of Directors has established an Audit Committee and a Pricing Committee of the Board of Directors, and may establish additional committees in the future. For the three month and nine month periods endedSeptember 30, 2019, the Company incurred $50 and $146, respectively, in fees and expenses associated with its Independent Directors’ services on the Company’s Board of Directors and its committees. For the three month and nine month periods endedSeptember 30, 2018, the Company incurred $48 and $150, respectively, in fees and expenses associated with its Independent Directors’ services on the Company’s Board of Directors and the Audit Committee. As of September 30, 2019 and December 31, 2018, there were no unpaid directors’ fees and expenses.

5. BORROWINGS

In accordance with the Investment Company Act, the Company is currently only allowed to borrow amounts such that its asset coverage, as defined in the Investment Company Act, is at least 200% after such borrowing. As of September 30, 2019 and December 31, 2018, asset coverage was 250.30% and 232.85%, respectively. During the three month and nine month periods endedSeptember 30, 2019, there were secured borrowings of $261,266 and $572,866, respectively, under the Subscription Facility and SPV Credit Facility and repayments of $179,500 and $383,800, respectively, under the Subscription Facility and SPV Credit Facility. During the three month and nine month periods endedSeptember 30, 2018, there were secured borrowings of $122,350 and $283,750, respectively, under the Subscription Facility and repayments of $93,000 and $172,000, respectively, under the Subscription Facility. As of September 30, 2019 and December 31, 2018, there was $406,079 and $217,700, respectively, in secured borrowings outstanding.

Subscription Facility

The Company closed on October 3, 2017 on the Subscription Facility, which was subsequently amended on March 14, 2018 and November 16, 2018. The maximum principal amount of the Subscription Facility, which was $375,000 as of December 31, 2018, was reduced to $325,000 during the third quarter. This amount is subject to availability under the Subscription Facility, which is based on certain of the Company’s unfunded investor equity capital commitments, and restrictions imposed on borrowings under the Investment Company Act. Proceeds of the Subscription Facility may be used for general corporate purposes, including the funding of portfolio investments. Maximum capacity under the Subscription Facility may be increased to $750,000 through the exercise by the Company of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. The Company may borrow amounts in U.S. dollars or certain other permitted currencies. Amounts drawn under the Subscription Facility bear interest initially at LIBOR plus an applicable spread of 1.55% per year. The Company also pays a fee of 0.25% on undrawn amounts under the Subscription Facility. The availability period under the Subscription Facility will terminate on the maturity date, October 3, 2020 (with two one-year extension options, subject to the Company’s and the lender’s consent).

Subject to certain exceptions, the Subscription Facility is secured by a first lien security interest in the Company’s unfunded investor equity capital commitments. The Subscription Facility includes customary covenants, including certain financial covenants related to shareholders’ equity and liquidity, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.

As of September 30, 2019 and December 31, 2018, the Company was in compliance with all covenants and other requirements of the Subscription Facility.

SPV Credit Facility

The SPV closed on April 1, 2019 on the SPV Credit Facility, which was amended October 25, 2019. The SPV Credit Facility provides for secured borrowings of $300,000 ($450,000 following the amendment), subject to availability under the SPV Credit Facility, with an accordion feature that can, subject to certain conditions, increase the aggregate maximum credit commitment up to an amount not to exceed $600,000, subject to restrictions and conditions set forth in the SPV Credit Facility, including adequate collateral to support such borrowings. The SPV Credit Facility has a maturity date of April 1, 2024. Borrowings under the SPV Credit Facility bear interest initially at LIBOR (or, if applicable, a rate based on the prime rate or federal funds rate) plus 2.25% per year with a 0.45% step-up based on collateral coverage and asset mix. The SPV is also required to pay an undrawn commitment fee of between 0.375% and 0.50% per year. Payments under the SPV Credit Facility are made quarterly. The lenders have a first lien security interest on substantially all of the assets of the SPV.

As of September 30, 2019, the SPV was in compliance with all covenants and other requirements of the SPV Credit Facility.

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Summary of Facilities

The Facilities consisted of the following as of September 30, 2019 and December 31, 2018:

	September 30, 2019
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
SPV Credit Facility	$	300,000	$	160,000	$	140,000	$	140,000
Subscription Facility	325,000		246,079		78,921		73,968
Total	$	625,000	$	406,079	$	218,921	$	213,968
	December 31, 2018
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
Subscription Facility	$	375,000	$	217,700	$	157,300	$	157,300
Total	$	375,000	$	217,700	$	157,300	$	157,300

(1) The unused portion is the amount upon which commitment fees are based.

(2) Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.

As of September 30, 2019 and December 31, 2018, $2,822 and $1,763, respectively, of interest expense, $282 and $85, respectively, of unused commitment fees were included in interest and credit facility fees payable. For the three month and nine month periods endedSeptember 30, 2019, the weighted average interest rate was 3.83% and 3.98%, respectively, and the average principal debt outstanding was $423,519 and $350,166, respectively. For the three month and nine month periods endedSeptember 30, 2018, the weighted average interest rate was 3.66% and 3.61%, respectively, and the average principal debt outstanding was $140,180 and $85,541, respectively. As of September 30, 2019 and December 31, 2018, the weighted average interest rate was 3.92% and 4.05%, respectively, based on floating LIBOR rates.

For the three month and nine month periods endedSeptember 30, 2019 and 2018, the components of interest expense and credit facility fees were as follows:

	For the three month periods ended				For the nine month period ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Interest expense	$	4,140	$	1,312	$	10,566	$	2,340
Facility unused commitment fee	289		102		636		332
Amortization of deferred financing costs	314		177		861		466
Total interest expense and credit facility fees	$	4,743	$	1,591	$	12,063	$	3,138
Cash paid for interest expense	$	4,143	$	1,218	$	9,502	$	1,626

6. COMMITMENTS AND CONTINGENCIES

A summary of significant contractual payment obligations was as follows as of September 30, 2019 and December 31, 2018:

	Secured Borrowings
Payment Due by Period	September 30, 2019		December 31, 2018
Less than 1 Year	$	—	$	—
1-3 Years	246,079		217,700
3-5 Years	160,000		—
More than 5 Years	—		—
Total	$	406,079	$	217,700

In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnification or warranties. Future events could occur that lead to the execution of these provisions against the Company. The Company

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believes that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in the consolidated financial statements as of September 30, 2019 and December 31, 2018 for any such exposure.

We have in the past, currently are and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments.

The Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:

	Par Value as of
	September 30, 2019		December 31, 2018
Unfunded delayed draw commitments	$	92,799	$	64,927
Unfunded revolving term loan commitments	42,377		28,006
Total unfunded commitments	$	135,176	$	92,933

7. NET ASSETS

The Company has the authority to issue 200,000,000 shares of common stock, $0.01 per share par value.

During the three month period ended September 30, 2019, the Company issued 6,528,536 shares for $135,005. The following table summarizes capital activity during the three month period ended September 30, 2019:

	Common Stock				Capital in Excess of Par Value		Accumulated Net Investment Income (Loss)			Accumulated Net Realized Gain (Loss) on Investments			Accumulated Net Unrealized Appreciation (Depreciation) on Investments			Total Net Assets
	Shares		Amount
Balance, beginning of period	23,173,265		$	232	$	476,448	$	1,533		$	233		$	(1,376	)	$	477,070
Common stock issued	6,528,536		65		134,940		—			—			—			135,005
Net investment income (loss)	—		—		—		13,722			—			—			13,722
Net realized gain (loss) on investments - non-controlled/non-affiliated	—		—		—		—			(104		)	—			(104		)
Net change in unrealized appreciation (depreciation) on investments	—		—		—		—			—			(3,019		)	(3,019		)
Net change in unrealized currency gains (losses) on non-investment assets and liabilities													687			687
Dividends declared	—		—		—		(13,023		)	—			—			(13,023		)
Tax reclassification of stockholders’ equity in accordance with U.S. GAAP	—		—		—		—			—			—			—
Balance, end of period	$	29,701,801	$	297	$	611,388	$	2,232		$	129		$	(3,708	)	$	610,338

During the nine month period endedSeptember 30, 2019, the Company issued 15,472,301 shares for $319,943. The following table summarizes capital activity during the nine month period endedSeptember 30, 2019:

	Common Stock			Capital in Excess of Par Value			Accumulated Net Investment Income (Loss)			Accumulated Net Realized Gain (Loss) on Investments			Accumulated Net Unrealized Appreciation (Depreciation) on Investments			Total Net Assets
	Shares	Amount
Balance, beginning of period	14,229,500	$	142	$	291,820		$	(141	)	$	(24	)	$	(2,583	)	$	289,214
Common stock issued	15,472,301	155		319,788			—			—			—			319,943
Net investment income (loss)	—	—		—			33,558			—			—			33,558
Net realized gain (loss) on investments - non-controlled/non-affiliated	—	—		—			—			153			—			153
Net change in unrealized appreciation (depreciation) on investments	—	—		—			—			—			(1,812		)	(1,812		)
Net change in unrealized currency gains (losses) on non-investment assets and liabilities													687			687
Dividends declared	—	—		—			(31,405		)	—			—			(31,405		)
Tax reclassification of stockholders’ equity in accordance with U.S. GAAP	—	—		(220		)	220						—			—
Balance, end of period	29,701,801	$	297	$	611,388		$	2,232		$	129		$	(3,708	)	$	610,338

During the three month period ended September 30, 2018, the Company issued 3,097,256 shares for $63,881. The following table summarizes capital activity during the three month period ended September 30, 2018:

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	Common Stock			Capital in Excess of Par Value			Accumulated Net Investment Income (Loss)			Accumulated Net Unrealized Appreciation (Depreciation) on Investments		Total Net Assets
	Shares	Amount
Balance, beginning of period	4,958,866	$	50	$	99,442		$	(774	)	$	1,514	$	100,232
Common stock issued	3,097,256	31		63,850			—			—		63,881
Net investment income (loss)	—	—		—			2,153			—		2,153
Net change in unrealized appreciation (depreciation) on investments	—	—		—			—			2,813		2,813
Dividends declared	—	—		—			(2,262		)	—		(2,262		)
Tax reclassification of stockholders’ equity in accordance with U.S. GAAP	—	—		(892		)	892			—		—
Balance, end of period	8,056,122	$	81	$	162,400		$	9		$	4,327	$	166,817

During the nine month period endedSeptember 30, 2018, the Company issued 7,726,900 shares for $160,306. The following table summarizes capital activity during the nine month period endedSeptember 30, 2018:

	Common Stock			Capital in Excess of Par Value			Accumulated Net Investment Income (Loss)			Accumulated Net Unrealized Appreciation (Depreciation) on Investments		Total Net Assets
	Shares	Amount
Balance, beginning of period	4,130,683	$	41	$	82,507		$	(708	)	$	882	$	82,722
Common stock issued	7,726,900	78		160,228			—			—		160,306
Net investment income (loss)	—	—		—			6,761			—		6,761
Net change in unrealized appreciation (depreciation) on investments	—	—		—			—			3,321		3,321
Dividends declared	—	—		—			(7,834		)	—		(7,834		)
Tax reclassification of stockholders’ equity in accordance with U.S. GAAP	—	—		(892		)	892			—		—
Balance, end of period	11,857,583	$	119	$	241,843		$	(889	)	$	4,203	$	245,276

The following table summarizes total shares issued and proceeds received related to capital activity during the nine month period endedSeptember 30, 2019:

	Shares Issued	Proceeds Received
January 10, 2019	1,218,407	$	24,953
February 28, 2019	1,677,049	35,000
March 26, 2019	1,940,070	39,990
May 8, 2019	1,195,615	25,000
June 26, 2019	2,912,624	60,000
August 14, 2019	2,873,565	60,000
September 25, 2019	3,654,971	75,000
Total	15,472,301	$	319,943

The following table summarizes total shares issued and proceeds received related to capital activity during the nine month period endedSeptember 30, 2018:

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	Shares Issued	Proceeds Received
March 7, 2018	240,800	$	4,941
March 28, 2018	587,788	12,003
May 16, 2018	694,960	14,414
June 7, 2018	454,599	9,469
June 20, 2018	1,947,292	39,998
August 22, 2018	1,207,628	25,307
September 13, 2018	1,387,273	29,174
September 26, 2018	1,206,560	25,000
Total	7,726,900	$	160,306

Subscription transactions during the nine month periods endedSeptember 30, 2019 and 2018 were executed at an offering price at a premium to net asset value in order to effect a reallocation of organizational costs to subsequent investors. For the nine month periods endedSeptember 30, 2019 and 2018, such subscription transactions increased net asset value by $0.11 per share and $0.13 per share, respectively.

The Company computes earnings per common share in accordance with ASC 260, Earnings Per Share. Basic earnings per common share were calculated by dividing net increase (decrease) in net assets resulting from operations attributable to the Company by the weighted-average number of common shares outstanding for the period.

Basic and diluted earnings per common share were as follows:

	For the three month periods ended				For the nine month periods ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Net increase (decrease) in net assets resulting from operations	$	11,286	$	3,238	$	32,586	$	10,082
Weighted-average common shares outstanding	24,910,884		8,926,599		20,371,658		6,290,222
Basic and diluted earnings per common share	$	0.45	$	0.36	$	1.60	$	1.60

The following table summarizes the Company’s dividends declared since inception:

Date Declared	Record Date	Payment Date	Per Share Amount
March 12, 2018	March 12, 2018	April 17, 2018	$	0.30
June 6, 2018	June 6, 2018	July 18, 2018	$	0.37
September 13, 2018	September 13, 2018	October 18, 2018	$	0.40
December 26, 2018	December 26, 2018	January 18, 2019	$	0.46
March 12, 2019	March 12, 2019	April 18, 2019	$	0.47
June 11, 2019	June 11, 2019	July 18, 2019	$	0.51
September 10, 2019	September 10, 2019	October 18, 2019	$	0.50

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8. CONSOLIDATED FINANCIAL HIGHLIGHTS

The following is a schedule of consolidated financial highlights for the nine month periods endedSeptember 30, 2019 and 2018:

	For the nine month periods ended
	September 30, 2019			September 30, 2018
Per Share Data:
Net asset value per share, beginning of period	$	20.32		$	20.03
Net investment income (loss) (1)	1.65			1.07
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	(0.05		)	0.53
Net increase (decrease) in net assets resulting from operations	1.60			1.60
Dividends declared (2)	(1.48		)	(1.07		)
Effect of offering price of subscriptions (3)	0.11			0.13
Net asset value per share, end of period	$	20.55		$	20.69
Number of shares outstanding, end of period	29,701,801			11,857,583
Total return based on net asset value (4)	8.42		%	8.64		%
Net assets, end of period	$	610,338		$	245,276
Ratio to average net assets (5):
Expenses before incentive fees	3.03		%	4.66		%
Expenses after incentive fees	4.02		%	5.58		%
Net investment income (loss)	5.64		%	4.66		%
Interest expense and credit facility fees	2.03		%	2.16		%
Ratios/Supplemental Data:
Asset coverage, end of period	250.30		%	242.19		%
Portfolio turnover	10.31		%	8.67		%
Total committed capital, end of period	$	1,227,687		$	938,329
Ratio of total contributed capital to total committed capital, end of period	49.91		%	25.88		%
Weighted-average shares outstanding	20,371,658			6,290,222

(1) Net investment income (loss) per share was calculated as net investment income (loss) for the period divided by the weighted average number of shares outstanding for the period.

(2) Dividends declared per share was calculated as the sum of dividends declared during the period divided by the number of shares outstanding at the quarter-end date (refer to Note 7, Net Assets).

(3) Increase (decrease) is due to the offering price of subscriptions during the period (refer to Note 7, Net Assets).

(4) Total return based on net asset value (not annualized) is based on the change in net asset value per share during the period plus the declared dividends divided by the beginning net asset value for the period. Total return for the nine month periods endedSeptember 30, 2019 and 2018 is inclusive of $0.11 and $0.13,respectively, per share increase (decrease) in net asset value for the period related to the offering price of subscriptions. Excluding the effects of these common stock issuances, total return (not annualized) would have been 7.87% and 7.99%, respectively, (refer to Note 7, Net Assets).

(5) These ratios to average net assets have not been annualized.

9. LITIGATION

The Company may become party to certain lawsuits in the ordinary course of business. The Company does not believe that the outcome of current matters, if any, will materially impact the Company or its consolidated financial statements. As of September 30, 2019 and December 31, 2018, the Company was not subject to any material legal proceedings, nor, to the Company’s knowledge, is any material legal proceeding threatened against the Company.

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In addition, portfolio investments of the Company could be the subject of litigation or regulatory investigations in the ordinary course of business. The Company does not believe that the outcome of any current contingent liabilities of its portfolio investments, if any, will materially affect the Company or these consolidated financial statements.

10. TAX

The Company has not recorded a liability for any uncertain tax positions pursuant to the provisions of ASC 740, Income Taxes, as of September 30, 2019 and September 30, 2018.

In the normal course of business, the Company is subject to examination by federal and certain state, local and foreign tax regulators. As of September 30, 2019 and 2018, the Company has yet to file a tax return and therefore is not subject to examination. The Company has elected a tax year-end of June 30 concurrent with the filing of the Company's first tax return.

The Company's taxable income for each period is an estimate and will not be finally determined until the Company files its tax return for each year. Therefore, the final taxable income earned in each period and carried forward for distribution in the following period may be different than this estimate. The tax character of the distributions paid for the period from July 1, 2019 to September 30, 2019 and for the period from July 1, 2018 to September 30, 2018 was as follows:

	For the period from July 1, 2019 to September 30, 2019		For the period from July 1, 2018 to September 30, 2018
Ordinary income	$	13,023	$	4,260
Tax return of capital	—		—

11. SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date the consolidated financial statements were issued. There have been no subsequent events that require recognition or disclosure through the date the consolidated financial statements were issued, except as disclosed below.

Subsequent to September 30, 2019, the Company borrowed $120,200 under the Subscription Facility and SPV Credit Facility to fund investment acquisitions. The Company also voluntarily repaid $105,000 under the Subscription Facility.

On October 25, 2019, the Company issued a capital call and delivered capital drawdown notices totaling $100,000. Proceeds from the capital call and the related issuance of 4,847,311 shares occurred November 6, 2019.

On October 25, 2019, the maximum principal amount under the SPV Credit Facility was increased from $300,000 to $450,000.

On October 29, 2019, the maximum principal amount under the Subscription Facility was reduced from $325,000 to $275,000.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(dollar amounts in thousands, except per share data, unless otherwise indicated)

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

We have included or incorporated by reference in this Form 10-Q, and from time to time our management may make, “forward-looking statements”. These forward-looking statements are not historical facts, but instead relate to future events or the future performance or financial condition of TCG BDC II, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “BDC II” or the “Company”). These statements are based on current expectations, estimates and projections about us, our current or prospective portfolio investments, our industry, our beliefs, and our assumptions. The forward-looking statements contained in this Form 10-Q and the documents incorporated by reference herein involve a number of risks and uncertainties, including statements concerning:

• our, or our portfolio companies’, future business, operations, operating results or prospects;

• the return or impact of current and future investments;

• the impact of any protracted decline in the liquidity of credit markets on our business;

• the impact of fluctuations in interest rates on our business;

• our future operating results;

• the impact of changes in laws, policies or regulations (including the interpretation thereof) affecting our operations or the operations of our portfolio companies;

• the valuation of our investments in portfolio companies, particularly those having no liquid trading market;

• our ability to recover unrealized losses;

• market conditions and our ability to access alternative debt markets and additional debt and equity capital;

• our contractual arrangements and relationships with third parties;

• the general economy and its impact on the industries in which we invest;

• uncertainty surrounding the financial stability of the United States, Europe and China;

• the social, geopolitical, financial, trade and legal implications of Brexit;

• the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives;

• competition with other entities and our affiliates for investment opportunities;

• the speculative and illiquid nature of our investments;

• the use of borrowed money to finance a portion of our investments;

• our expected financings and investments;

• the adequacy of our cash resources and working capital;

• the timing, form and amount of any dividend distributions;

• the timing of cash flows, if any, from the operations of our portfolio companies;

• the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments;

• currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars;

• the ability of The Carlyle Group Employee Co., L.L.C. to attract and retain highly talented professionals that can provide services to our investment adviser and administrator;

• our ability to maintain our status as a business development company;

• an inability to replicate the historical success of Carlyle; and

• our intent to satisfy the requirements of a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended.

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We use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may,” “plans,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2018 and Part II, Item 1A of and elsewhere in this Form 10-Q.

We have based the forward-looking statements included in this Form 10-Q on information available to us on the date of this Form 10-Q, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

OVERVIEW

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part I, Item 1 of this Form 10-Q “Financial Statements.” This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to those described in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2018 and Part II, Item 1A of this Form 10-Q “Risk Factors.” Our actual results could differ materially from those anticipated by such forward-looking statements due to factors discussed under “Risk Factors” and “Cautionary Statements Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-Q.

We were incorporated on February 10, 2017 as a Maryland corporation with the name Carlyle Private Credit, Inc., and our name was changed to TCG BDC II, Inc. on March 3, 2017. We are structured as an externally managed, non-diversified closed-end investment company. We are conducting the private offering of our shares of common stock to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended. We have elected to be regulated as a BDC under the Investment Company Act. We have elected to be treated, and intend to continue to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code.

Our investment objective is to generate attractive risk adjusted returns and current income primarily by investing in senior secured term loans to U.S. middle market companies in which private equity sponsors hold, directly or indirectly, a financial interest in the form of debt and/or equity. In describing our business, we generally use the term “middle market” to refer to companies with approximately $10 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”), which we believe is a useful proxy for cash flow. We seek to achieve our investment objective through direct originations of secured debt, including first lien senior secured loans, “unitranche” loans and second lien senior secured loans (“Middle Market Senior Loans”), with the balance our assets invested in investments that are typically higher yielding than Middle Market Senior Loans (which may include unsecured debt, mezzanine debt and investments in equities), although we may make investments in issuers with EBITDA outside of such range. The Company expects that the composition of its portfolio will change over time given the Investment Adviser's view on, among other things, the economic and credit environment (including with respect to interest rates) in which the Company is operating.

We invest primarily in loans to middle market companies whose debt, if rated, is rated below investment grade and, if not rated, would likely be rated below investment grade if it were rated. Debt securities that are rated below investment grade are sometimes referred to as “high yield bonds,” “junk bonds” or “leveraged loans”. We also invest in debt securities of foreign companies, which may expose us to additional risks not typically associated with investing in U.S. companies. We may employ hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk, or that if we do, such strategies will be effective.

Our investments in equities consist primarily of common stock, and to a lesser extent, preferred stock, of private companies. Our investments in equities will typically be higher yielding than Middle Market Senior Loans because, in the case of common stock, the return realized upon the disposition of the investment is expected to be higher than the yield on Middle Market Senior Loans, and in the case of preferred stock, the cash and/or payment-in-kind dividends are expected to be higher than the yield on Middle Market Senior Loans, reflecting the increased risk associated with these investments.

We are externally managed by our Investment Adviser, an investment adviser registered under the Advisers Act. Our Administrator provides the administrative services necessary for us to operate. Both our Investment Adviser and our Administrator are wholly owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of Carlyle. Our Investment Adviser’s five-person investment committee is responsible for reviewing and approving our investment

38

opportunities. The members of the investment committee have experience investing through different credit cycles. As of September 30, 2019, our Investment Adviser’s investment team included a team of 26 dedicated investment professionals. The five members of our Investment Adviser’s investment committee have an average of 26 years of industry experience. In addition, our Investment Adviser and its investment team are supported by a team of finance, operations and administrative professionals currently employed by Carlyle Employee Co., a wholly owned subsidiary of Carlyle.

In conducting our investment activities, we believe that we benefit from the significant scale, relationships and resources of Carlyle, including our Investment Adviser and its affiliates.

KEY COMPONENTS OF OUR RESULTS OF OPERATIONS

Investments

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt available to middle market companies, the general economic environment and the competitive environment for the type of investments we make.

Revenue

We generate revenue primarily in the form of interest income on debt investments we hold. In addition, we generate income from dividends on direct equity investments, capital gains on the sales of loans and debt and equity securities and various loan origination and other fees. Our debt investments generally have a stated term of five to eight years and generally bear interest at a floating rate usually determined on the basis of a benchmark such as LIBOR. Interest on these debt investments is generally paid quarterly. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. We may also generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees.

Expenses

Our primary operating expenses include the payment of: (i) investment advisory fees, including management fees and incentive fees, to our Investment Adviser pursuant to an investment advisory agreement (the “Investment Advisory Agreement”) between us and our Investment Adviser; (ii) costs and other expenses and our allocable portion of overhead incurred by our Administrator in performing its administrative obligations under an administration agreement (the “Administration Agreement”) between us and our Administrator; and (iii) other operating expenses as detailed below:

• our organization expenses and initial offering costs incurred prior to the filing of our election to be regulated as a BDC (the initial offering costs amortized over the 12 months beginning on the Initial Drawdown Date) in an amount of $1,500;

• administration fees payable under our Administration Agreement and Sub-Administration Agreements, including related expenses;

• the costs of any offerings of our common stock and other securities, if any;

• calculating individual asset values and our net asset value (including the cost and expenses of any independent valuation firms);

• expenses, including travel expenses, incurred by our Investment Adviser, or members of our Investment Adviser team managing our investments, or payable to third parties, performing due diligence on prospective portfolio companies and, if necessary, expenses of enforcing our rights;

• the management fee and any incentive fee payable under our Investment Advisory Agreement;

• certain costs and expenses relating to distributions paid on our shares;

• debt service and other costs of borrowings or other financing arrangements;

• the allocated costs incurred by our Investment Adviser in providing managerial assistance to those portfolio companies that request it;

• amounts payable to third parties relating to, or associated with, making or holding investments;

39

• the costs associated with subscriptions to data service, research-related subscriptions and expenses and quotation equipment and services used in making or holding investments;

• transfer agent and custodial fees;

• costs of hedging;

• commissions and other compensation payable to brokers or dealers;

• federal and state registration fees;

• any U.S. federal, state and local taxes, including any excise taxes;

• independent director fees and expenses;

• costs of preparing financial statements and maintaining books and records, costs of preparing tax returns, costs of Sarbanes-Oxley Act compliance and attestation and costs of filing reports or other documents with the SEC (or other regulatory bodies), and other reporting and compliance costs, including registration and listing fees, and the compensation of professionals responsible for the preparation or review of the foregoing;

• the costs of any reports, proxy statements or other notices to our stockholders (including printing and mailing costs), the costs of any stockholders’ meetings and the compensation of investor relations personnel responsible for the preparation of the foregoing and related matters;

• the costs of specialty and custom software for monitoring risk, compliance and overall portfolio, including any development costs incurred prior to the filing of our election to be regulated as a BDC;

• our fidelity bond;

• directors and officers/errors and omissions liability insurance, and any other insurance premiums;

• indemnification payments;

• direct fees and expenses associated with independent audits, agency, consulting and legal costs; and

• all other expenses incurred by us or our Administrator in connection with administering our business, including our allocable share of certain officers and their staff compensation.

We expect our general and administrative expenses to be relatively stable or to decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines.

PORTFOLIO AND INVESTMENT ACTIVITY

As of September 30, 2019, the fair value of our investments was approximately $1,002,874, comprised of 82 investments in 65 portfolio companies across 22 industries with 41 sponsors. As of December 31, 2018, the fair value of our investments was approximately $510,427, comprised of 49 investments in 41 portfolio companies across 17 industries with 31 sponsors.

Based on fair value as of September 30, 2019, our portfolio consisted of approximately 99.0% in secured debt (83.0% in first lien debt and 16.0% in second lien debt) and 1.0% in equity investments. Based on fair value as of September 30, 2019, approximately 98.1% of our debt portfolio was invested in debt bearing a floating interest rate, which primarily are subject to interest rate floors.

Based on fair value as of December 31, 2018, our portfolio consisted of approximately 98.9% in secured debt (86.0% in first lien debt and 13.0% in second lien debt) and 1.1% in equity investments. Based on fair value as of December 31, 2018, all of our debt portfolio was invested in debt bearing a floating interest rate, which primarily are subject to interest rate floors.

40

Our investment activity for the three month periods ended September 30, 2019 and 2018 is presented below (information presented herein is at amortized cost unless otherwise indicated):

	For the three month periods ended
	September 30, 2019			September 30, 2018
Investments:
Total investments, beginning of period	$	791,927		$	294,747
New investments purchased	228,663			111,382
Net accretion of discount on investments	1,140			365
Net realized gain (loss) on investments	(104		)	—
Investments sold or repaid	(14,357		)	(13,907		)
Total Investments, end of period	$	1,007,269		$	392,587
Principal amount of investments funded:
First Lien Debt (excluding First Lien/Last Out)	$	175,365		$	101,485
First Lien/Last Out Unitranche	17,860			—
Second Lien Debt	39,500			11,949
Equity Investments	681			172
Total	$	233,406		$	113,606
Principal amount of investments sold or repaid:
First Lien Debt (excluding First Lien/Last Out)	$	(4,859	)	$	(13,908	)
Second Lien Debt	(9,498		)	—
Total	$	(14,357	)	$	(13,908	)
Number of new funded investments	11			8
Average amount of new funded investments	$	20,788		$	13,923
Percentage of new funded debt investments at floating interest rates	91		%	100		%
Percentage of new funded debt investments at fixed interest rates	9		%	—		%

As of September 30, 2019 and December 31, 2018, investments consisted of the following:

	September 30, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
First Lien Debt (excluding First Lien/Last Out)	$	801,083	$	795,739	$	440,694	$	438,742
First Lien/Last Out Unitranche	36,303		36,274		—		—
Second Lien Debt	160,542		160,522		66,611		66,207
Equity Investments	9,341		10,339		5,705		5,478
Total	$	1,007,269	$	1,002,874	$	513,010	$	510,427

The weighted average yields ⁽¹⁾ for our first and second lien debt, based on the amortized cost and fair value as of September 30, 2019 and December 31, 2018, were as follows:

	September 30, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
First Lien Debt (excluding First Lien/Last Out)	8.50	%	8.56	%	8.76	%	8.80	%
First Lien/Last Out Unitranche	9.91	%	9.92	%	—	%	—	%
First Lien Debt Total	8.56	%	8.62	%	8.76	%	8.80	%
Second Lien Debt	10.44	%	10.44	%	10.90	%	10.96	%
First and Second Lien Debt Total	8.87	%	8.91	%	9.04	%	9.09	%

(1) Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of September 30, 2019 and December 31, 2018. Weighted average yield on debt and income producing securities at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and

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second lien debt at fair value included in such securities. Weighted average yield on debt and income producing securities at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at amortized cost included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.

Total weighted average yields (which includes the effect of accretion of discount and amortization of premiums) of our first and second lien debt investments as measured on an amortized cost basis decreased from 9.04% to 8.87% from December 31, 2018 to September 30, 2019, primarily due to the decrease in LIBOR.

See the Consolidated Schedules of Investments as of September 30, 2019 and December 31, 2018 in our consolidated financial statements in Part I, Item 1 of this Form 10-Q for more information on our investments, including a list of companies and type and amount of investments.

As part of the monitoring process, our Investment Adviser has developed risk policies pursuant to which it regularly assesses the risk profile of each of our debt investments and rates each of them based on the following categories, which we refer to as “Internal Risk Ratings”:

Internal Risk Ratings Definitions

Rating	Definition
1	Performing—Low Risk: Borrower is operating more than 10% ahead of the base case.
2	Performing—Stable Risk: Borrower is operating within 10% of the base case (above or below). This is the initial rating assigned to all new borrowers.
3	Performing—Management Notice: Borrower is operating more than 10% below the base case. A financial covenant default may have occurred, but there is a low risk of payment default.
4	Watch List: Borrower is operating more than 20% below the base case and there is a high risk of covenant default, or it may have already occurred. Payments are current although subject to greater uncertainty, and there is moderate to high risk of payment default.
5	Watch List—Possible Loss: Borrower is operating more than 30% below the base case. At the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Payment default is very likely or may have occurred. Loss of principal is possible.
6	Watch List—Probable Loss: Borrower is operating more than 40% below the base case, and at the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Payment default is very likely or may have already occurred. Additionally, the prospects for improvement in the borrower’s situation are sufficiently negative that impairment of some or all principal is probable.

Our Investment Adviser’s risk rating model is based on evaluating portfolio company performance in comparison to the base case when considering certain credit metrics including, but not limited to, adjusted EBITDA and net senior leverage as well as specific events including, but not limited to, default and impairment.

Our Investment Adviser monitors and, when appropriate, changes the investment ratings assigned to each debt investment in our portfolio. In connection with our quarterly valuation process, our Investment Adviser reviews our investment ratings on a regular basis. The following table summarizes the Internal Risk Ratings as of September 30, 2019 and December 31, 2018:

	September 30, 2019				December 31, 2018
	Fair Value		% of Fair Value		Fair Value		% of Fair Value
(dollar amounts in millions)
Internal Risk Rating 1	$	44.0	4.43	%	$	—	—	%
Internal Risk Rating 2	829.9		83.61		477.8		94.63
Internal Risk Rating 3	82.8		8.34		20.9		4.14
Internal Risk Rating 4	35.9		3.62		6.2		1.23
Internal Risk Rating 5	—		—		—		—
Internal Risk Rating 6	—		—		—		—
Total	$	992.6	100.00	%	$	504.9	100.00	%

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As of September 30, 2019 and December 31, 2018, the weighted average Internal Risk Rating of our debt investment portfolio was 2.1. As of September 30, 2019 and December 31, 2018, 3 and 1 of our debt investments, with an aggregate fair value of $35.9 million and $6.2 million, respectively, was assigned an Internal Risk Rating of 4-6 and no investments in the portfolio were on non-accrual status. All of our first and second lien debt investments were performing and current on their interest payments as of September 30, 2019 and December 31, 2018.

During the nine month period endedSeptember 30, 2019, 2 investments with fair value of $29.8 million were downgraded to an Internal Risk Rating of 4 due to changes in financial condition and performance of the respective portfolio companies.

CONSOLIDATED RESULTS OF OPERATIONS

For the three month and nine month periods endedSeptember 30, 2019 and 2018

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 losses and net change in unrealized appreciation and depreciation. As a result, quarterly comparisons may not be meaningful.

Investment Income

Investment income for the three month and nine month periods endedSeptember 30, 2019 and 2018 was as follows:

	For the three month periods ended				For the nine month periods ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
First Lien Debt	$	17,819	$	5,991	$	45,118	$	10,757
Second Lien Debt	5,422		1,735		12,374		4,105
Total investment income	$	23,241	$	7,726	$	57,492	$	14,862

The increase in investment income for the three month and nine month periods endedSeptember 30, 2019 from the comparable period in 2018 was primarily driven by our deployment of capital and increasing invested balance. The size of our portfolio increased to $1,007,269 as of September 30, 2019 from $392,587 as of September 30, 2018 at amortized cost, and total principal amount of investments outstanding increased to $1,024,767 as of September 30, 2019 from $399,870 as of September 30, 2018. As of September 30, 2019, the weighted average yield of our first and second lien debt investments decreased to 8.87% from 8.94% as of September 30, 2018, on amortized cost primarily due to the decrease in LIBOR.

Interest income on our first and second lien debt investments is dependent on the composition and credit quality of the portfolio. Generally, we expect the portfolio to generate predictable quarterly interest income based on the terms stated in each loan’s credit agreement. As of September 30, 2019 and 2018 and for the periods then ended, all of our first and second lien debt investments were performing and current on their interest payments.

Net investment income for the three month and nine month periods endedSeptember 30, 2019 and 2018 was as follows:

	For the three month periods ended				For the nine month periods ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Total investment income	$	23,241	$	7,726	$	57,492	$	14,862
Total expenses	9,519		4,364		23,934		8,101
Net investment income (loss)	$	13,722	$	3,362	$	33,558	$	6,761

Expenses

Expenses for the three month and nine month periods endedSeptember 30, 2019 and 2018 were comprised of the following:

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	For the three month periods ended				For the nine month periods ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Organization costs	$	—	$	—	$	—	$	7
Offering costs	—		220		—		795
Management fees	1,718		640		4,131		1,330
Net investment income incentive fees	2,424		705		5,925		705
Capital gains incentive fees	—		630		—		630
Professional fees	153		180		488		462
Administrative service fees	31		149		230		357
Interest expense	4,140		1,312		10,566		2,340
Credit facility fees	603		279		1,497		798
Directors’ fees and expenses	50		48		146		150
Other general and administrative	400		201		951		527
Total expenses	$	9,519	$	4,364	$	23,934	$	8,101

Interest expense and credit facility fees for the three month and nine month periods endedSeptember 30, 2019 and 2018 were comprised of the following:

	For the three month periods ended				For the nine month periods ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Interest expense	$	4,140	$	1,312	$	10,566	$	2,340
Facility unused commitment fee	289		102		636		332
Amortization of deferred financing costs	314		177		861		466
Total interest expense and credit facility fees	$	4,743	$	1,591	$	12,063	$	3,138
Cash paid for interest expense	$	4,143	$	1,218	$	9,502	$	1,626

The increase in interest expense for the three month and nine month periods endedSeptember 30, 2019 compared to the

comparable periods in 2018 was driven by increased drawings under the Subscription Facility and SPV Credit Facility related to increased deployment of capital for investments. For the three month period ended September 30, 2019, the average interest rate increased to 3.83% from 3.66% for the comparable period in 2018, and average principal debt outstanding increased to $423,519 from $140,180 for the comparable period in 2018. For the nine month period ended September 30, 2019, the average interest rate increased to 3.98% from 3.61% for the comparable period in 2018, and average principal debt outstanding increased to $350,166 from $85,541 for the comparable period in 2018.

The increase in management fees and incentive fees for the three month and nine month periods endedSeptember 30, 2019 was driven by our increased deployment of capital. For the three month periods ended September 30, 2019 and 2018, management fees were $1,718 and $640, respectively, incentive fees related to pre-incentive fee net investment income was $2,424 and $705 respectively, and there were no incentive fees related to realized capital gains as computed in accordance with the Investment Advisory Agreement. For the nine month periods endedSeptember 30, 2019 and 2018, management fees were $4,131 and $1,330, respectively, incentive fees related to pre-incentive fee net investment income were $5,925 and $705, and there were no incentive fees related to realized capital gains as computed in accordance with the Investment Advisory Agreement. For the three month and nine month periods endedSeptember 30, 2019, there were no accrued capital gains incentive fees based upon the cumulative net realized and unrealized appreciation (depreciation). For the three month and nine month periods endedSeptember 30, 2018, accrued capital gains incentive fees based upon the cumulative net realized and unrealized appreciation (depreciation) as of September 30, 2018 were $630. The accrual for any capital gains incentive fee under accounting principles generally accepted in the United States (“U.S. GAAP”) in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. No incentive fees on capital gains have been paid through September 30, 2019. See Note 4 to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for more information on the incentive and management fees.

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Professional fees include legal, rating agencies, audit, tax, valuation, technology and other professional fees incurred related to the management of the Company. Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our executive officers and their respective staff. Other general and administrative expenses include insurance, filing, research, subscriptions, sub-administrative fees and other costs.

Net Change in Unrealized Appreciation (Depreciation) on Investments

During the three month period ended September 30, 2019, we recorded realized loss of $104 on two investments, and no realized gains. We recorded a change in unrealized appreciation on 41 investments of $3,710 and a change in unrealized depreciation on 37 investments of $6,729. During the nine month period ended September 30, 2019, we recorded realized gain on two investments of $269, partially offset by a realized loss on three investments of $116. We recorded a change in unrealized appreciation on 53 investments of $7,502 and a change in unrealized depreciation on 28 investments of $9,314.

During the three month period ended September 30, 2018, we recorded a change in unrealized appreciation on 17 investments of $1,213 and a change in unrealized depreciation on 17 investments of $1,337. During the nine month period ended September 30, 2018, we recorded a change in unrealized appreciation on 30 investments of $3,882 and a change in unrealized depreciation on 4 investments of $561. There were no realized gains or losses recorded during the three and nine month periods ended September 30, 2018.

Net realized gain (loss) and net change in unrealized appreciation (depreciation) for the three month and nine month periods endedSeptember 30, 2019 and 2018 were as follows:

	For the three month periods ended						For the nine month periods ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Net realized gain (loss) on investments	$	(104	)	$	—		$	153		$	—
Net change in unrealized appreciation (depreciation) on investments	(3,019		)	(124		)	(1,812		)	3,321
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments	$	(3,123	)	$	(124	)	$	(1,659	)	$	3,321

Net realized gain (loss) and net change in unrealized appreciation (depreciation) by the type of investments for the three month and nine month periods endedSeptember 30, 2019 and 2018 were as follows:

	For the three month periods ended											For the nine month periods ended
	September 30, 2019						September 30, 2018					September 30, 2019						September 30, 2018
	Net realized gain (loss)			Net change in unrealized appreciation (depreciation)			Net realized gain (loss)		Net change in unrealized appreciation (depreciation)			Net realized gain (loss)			Net change in unrealized appreciation (depreciation)			Net realized gain (loss)		Net change in unrealized appreciation (depreciation)
First Lien Debt	$	(104	)	$	(3,300	)	$	—	$	(116	)	$	(116	)	(3,421		)	$	—	$	2,604
Second Lien Debt	—			(757		)	—		(48		)	—			384			—		671
Equity Investments	—			1,038			—		40			269			1,225			—		46
Total	$	(104	)	$	(3,019	)	$	—	$	(124	)	$	153		$	(1,812	)	$	—	$	3,321

Net change in unrealized appreciation in our investments for the three month and nine month periods endedSeptember 30, 2019 was primarily due to changes in various inputs utilized under our valuation methodology, including, but not limited to, market spreads, leverage multiples and borrower ratings, and the impact of exits.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We generate cash from the net proceeds of offerings of our common stock and through cash flows from operations, including investment sales and repayments as well as income earned on investments and cash equivalents. We may also fund a

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portion of our investments through borrowings under the Subscription Facility, as well as through securitization of a portion of our existing investments.

We entered into a revolving credit facility with a lender on October 3, 2017, which was subsequently amended on March 14, 2018 and November 16, 2018 (as amended, the “Subscription Facility”). The Subscription Facility provides for secured borrowings up to the lesser of $750,000 or certain of the unfunded capital commitments we have received, subject to restrictions imposed on borrowings under the Investment Company Act and adequate collateral to support such borrowings. The maximum principal amount of the Subscription Facility was reduced to $325,000 as of September 30, 2019 from $375,000 as of December 31, 2018. The Subscription Facility provides for a three-year revolving period and has a maturity date of October 3, 2020 (with two one-year extension options, subject to the Company’s and the lender’s consent). Borrowings under the Subscription Facility bear interest initially at LIBOR plus 1.55% per year. The Subscription Facility is secured by a first lien security interest in our equity investors’ unfunded capital commitments.

We entered into a revolving credit facility with a lender on April 1, 2019 (the “SPV Credit Facility”), which was subsequently amended on October 25, 2019. The SPV Credit Facility provides for secured borrowings of $300,000 ($450,000 following the amendment), subject to availability under the SPV Credit Facility, with an accordion feature that can, subject to certain conditions, increase the aggregate maximum credit commitment up to an amount not to exceed $600,000, subject to restrictions and conditions set forth in the SPV Credit Facility, including adequate collateral to support such borrowings. The SPV Credit Facility has a maturity date of April 1, 2024. Borrowings under the SPV Credit Facility bear interest initially at LIBOR (or, if applicable, a rate based on the prime rate or federal funds rate) plus 2.25% per year with a step-up based on collateral coverage and asset mix. The SPV Credit Facility is secured by a first lien security interest in our equity investors’ unfunded capital commitments.

Although we believe that we will remain in compliance, there are no assurances that we will continue to comply with the covenants in the Subscription Facility and/or SPV Credit Facility. Failure to comply with these covenants could result in a default under the Subscription Facility and/or SPV Credit Facility that, if we were unable to obtain a waiver from the lender, could result in the immediate acceleration of the amounts due under the Subscription Facility and/or SPV Credit Facility, and thereby have a material adverse impact on our business, financial condition and results of operations.

For more information on the Subscription Facility and the SPV Credit Facility, see Note 5 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

The primary use of existing funds and any funds raised in the future is expected to be for investments in portfolio companies, repayment of indebtedness, cash distributions to our stockholders and for other general corporate purposes.

As of September 30, 2019 and December 31, 2018, the Company had $19,158 and $4,245, respectively, in cash and cash equivalents. The Secured Borrowings consisted of the following as of September 30, 2019 and December 31, 2018:

	September 30, 2019
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
SPV Credit Facility	$	300,000	$	160,000	$	140,000	$	140,000
Subscription Facility	325,000		246,079		78,921		73,968
Total	$	625,000	$	406,079	$	218,921	$	213,968

	December 31, 2018
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
Subscription Facility	$	375,000	$	217,700	$	157,300	$	157,300
Total	$	375,000	$	217,700	$	157,300	$	157,300

(1) The unused portion is the amount upon which commitment fees are based.

(2) Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.

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Equity Activity

Shares issued as of September 30, 2019 and December 31, 2018 were 29,701,801 and 14,299,500, respectively.

The following table summarizes activity in the number of shares of our common stock outstanding during the nine month periods endedSeptember 30, 2019 and 2018:

	For the nine month periods ended
	September 30, 2019	September 30, 2018
Shares outstanding, beginning of period	14,229,500	4,130,683
Common stock issued	15,472,301	7,726,900
Shares outstanding, end of period	29,701,801	11,857,583

Contractual Obligations

A summary of our significant contractual payment obligations was as follows as of September 30, 2019 and December 31, 2018:

	SPV Credit Facility and Credit Facility
Payment Due by Period	September 30, 2019		December 31, 2018
Less than 1 Year	$	—	$	—
1-3 Years	246,079		217,700
3-5 Years	160,000		—
More than 5 Years	—		—
Total	$	406,079	$	217,700

As of September 30, 2019 and December 31, 2018, $406,079 and $217,700, respectively, of secured borrowings were outstanding under the Subscription Facility and SPV Credit Facility. For the three month periods ended September 30, 2019 and 2018, we incurred $4,140 and $1,312, respectively, of interest expense and $289 and $102, respectively, of unused commitment fees. For the nine month periods ended September 30, 2019 and 2018, we incurred $10,566 and $2,340, respectively, of interest expense and $636 and $332, respectively, of unused commitment fees.

OFF BALANCE SHEET ARRANGEMENTS

In the ordinary course of our business, we enter into contracts or agreements that contain indemnifications or warranties. Future events could occur which may give rise to liabilities arising from these provisions against us. We believe that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in these consolidated financial statements as of September 30, 2019 and December 31, 2018 included in Part I, Item 1 of this Form 10-Q for any such exposure.

We have in the past, currently are and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments.

We had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:

	Par Value as of
	September 30, 2019		December 31, 2018
Unfunded delayed draw commitments	$	92,799	$	64,927
Unfunded revolving term loan commitments	42,377		28,006
Total unfunded commitments	$	135,176	$	92,933

DIVIDENDS AND DISTRIBUTIONS TO COMMON STOCKHOLDERS

The following table summarizes our dividends declared and payable since inception through September 30, 2019:

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Date Declared	Record Date	Payment Date	Per Share Amount		Annualized Dividend Yield(1)
March 12, 2018	March 12, 2018	April 17, 2018	$	0.30	6.3	%
June 6, 2018	June 6, 2018	July 18, 2018	$	0.37	7.9	%
September 13, 2018	September 13, 2018	October 18, 2018	$	0.40	9.1	%
December 26, 2018	December 26, 2018	January 18, 2019	$	0.46	9.9	%
March 12, 2019	March 12, 2019	April 18, 2019	$	0.47	10.0	%
June 11, 2019	June 11, 2019	July 18, 2019	$	0.51	10.1	%
September 10, 2019	September 10, 2019	October 18, 2019	$	0.50	10.1	%

(1) Annualized dividend yield is calculated by dividing the declared dividend by the weighted average of the net asset value at the beginning of the quarter and the capital called during the quarter and annualizing over four quarterly periods.

CRITICAL ACCOUNTING POLICIES

The preparation of our consolidated financial statements requires us 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. Our critical accounting policies, including those relating to the valuation of our investment portfolio, are described below. The critical accounting policies should be read in connection with our consolidated financial statements in Part I, Item 1 of this Form 10-Q and in Part II, Item 8 of the Company’s annual report on Form 10-K for the year ended December 31, 2018.

Fair Value Measurements

The Company applies fair value accounting in accordance with the terms of Financial Accounting Standards Board ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.

Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or the Board of Directors, does not represent fair value shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments, a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Directors engages a third-party valuation firm to provide positive assurance on portions of the Middle Market Senior Loans and equity investments portfolio each quarter (such that each non-traded investment is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Directors (the “Audit Committee”) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Directors with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.

All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:

48

• the nature and realizable value of any collateral;

• call features, put features and other relevant terms of debt;

• the portfolio company’s leverage and ability to make payments;

• the portfolio company’s public or private credit rating;

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

• prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;

• the markets in which the portfolio company does business and recent economic and/or market events; and

• comparisons to comparable transactions and publicly traded securities.

Investment performance data utilized are the most recently available financial statements and compliance certificates received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements as of September 30, 2019 and December 31, 2018.

U.S. GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

For further information on the definition of the fair value hierarchies, our framework for determining fair value and the composition of our portfolio, see Note 3 to the consolidated financial statement in Part I, Item 1 of this Form 10-Q.

Use of Estimates

The preparation of consolidated financial statements in Part I, Item 1 of this Form 10-Q in conformity with U.S. GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on management and incentive fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements in Part I, Item 1 of this Form 10-Q. Actual results could differ from these estimates and such differences could be material.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the Consolidated Statements of Operations in Part I, Item 1 of this Form 10-Q reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

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Revenue Recognition

Interest from Investments and Realized Gain/Loss on Investments

Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. At time of exit, the realized gain or loss on an investment is the difference between the amortized cost at time of exit and the cash received at exit using the specific identification method.

The Company may have loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in interest income in the Consolidated Statements of Operations included in Part I, Item 1 of this Form 10-Q.

Other Income

Other income may include income such as consent, waiver, amendment, unused, underwriting, arranger and prepayment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees are amortized into other income over the life of the guarantee. The unamortized amount, if any, is included in other assets in the Consolidated Statements of Assets and Liabilities included in Part I, Item 1 of this Form 10-Q.

Non-Accrual Income

Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in management’s judgment, are likely to remain current. Management may not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

Income Taxes

For federal income tax purposes, the Company has elected to be treated as a RIC under the Code, and intends to make the required distributions to its stockholders as specified therein. In order to qualify as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.

The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed. The Company intends to make sufficient distributions each taxable year to satisfy the excise distribution requirements.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely than not” to be sustained by the applicable tax authority. All penalties and interest associated with income taxes, if any, are included in income tax expense.

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The SPV is a disregarded entity for tax purposes and will be consolidated with the tax return of the Company.

Dividends and Distributions to Common Stockholders

To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its common stockholders. Dividends and distributions to common stockholders are recorded on the record date. The amount to be distributed is determined by the Board of Directors each quarter and is generally based upon the taxable earnings estimated by management and available cash. Net realized capital gains, if any, are generally distributed at least annually, although the Company may decide to retain such capital gains for investment.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in the valuations of our investment portfolio and interest rates.

Valuation Risk

Our investments may not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board of Directors in accordance with our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and it is possible that the difference could be material.

Interest Rate Risk

As of September 30, 2019, on a fair value basis, all of our debt investments bear interest at a floating rate, which primarily are subject to interest rate floors. Interest rates on the investments held within our portfolio of investments are typically based on floating LIBOR, with many of these investments also having a LIBOR floor. Additionally, our Subscription Facility and the SPV Credit Facility are subject to floating interest rates and are currently paid based on floating LIBOR rates.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. There can be no assurance that a significant change in market interest rates will not have a material adverse effect on our income in the future.

The following table estimates the potential changes in net cash flow generated from interest income, should interest rates increase or decrease by 100, 200 or 300 basis points. These hypothetical interest income calculations are based on a model of the settled debt investments in our portfolio, held as of September 30, 2019 and December 31, 2018, and are only adjusted for assumed changes in the underlying base interest rates and the impact of that change on interest income. Interest expense is calculated based on outstanding secured borrowings as of September 30, 2019 and December 31, 2018 and based on the terms of our Subscription Facility. Interest expense on our Subscription Facility is calculated using the interest rate as of September 30, 2019 and 2018, adjusted for the hypothetical changes in rates, as shown below. We intend to continue to finance a portion of our investments with borrowings and the interest rates paid on our borrowings may impact significantly our net interest income.

We regularly measure exposure to interest rate risk. We assess interest rate risk and manage interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates.

Based on our Consolidated Statements of Assets and Liabilities as of September 30, 2019 and December 31, 2018, the following table shows the annual impact on net investment income of base rate changes in interest rates for our settled debt investments (considering interest rate floors for variable rate instruments) and outstanding secured borrowings assuming no changes in our investment and borrowing structure:

	As of September 30, 2019									As of December 31, 2018
Basis Point Change	Interest Income			Interest Expense			Net Investment Income			Interest Income			Interest Expense			Net Investment Income
Up 300 basis points	$	29,861		$	(12,203	)	$	17,658		$	15,441		$	(6,531	)	$	8,910
Up 200 basis points	$	19,907		$	(8,135	)	$	11,772		$	10,294		$	(4,354	)	$	5,940
Up 100 basis points	$	9,954		$	(4,068	)	$	5,886		$	5,147		$	(2,177	)	$	2,970
Down 100 basis points	$	(9,895	)	$	4,068		$	(5,827	)	$	(5,147	)	$	2,177		$	(2,970	)
Down 200 basis points	$	(19,606	)	$	8,135		$	(11,471	)	$	(8,267	)	$	4,354		$	(3,913	)
Down 300 basis points	$	(20,889	)	$	8,285		$	(12,604	)	$	(8,495	)	$	4,921		$	(3,574	)

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to the Company that is required to be disclosed by us in the reports we file or submit under the Exchange Act.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting during the three month period ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

The Company may become party to certain lawsuits in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. The Company is not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against the Company. See also Note 9 to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors.

There have been no material changes to the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2018. For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 28, 2019, which is accessible on the SEC’s website at sec.gov.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Except as previously reported by the Company on Form 8-K, we did not sell any equity securities during the period covered in this report that were not registered under the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

On November 4, 2019, the Board of Directors of the Company appointed Linda Pace, the Company’s President, to the additional positions of the Company’s Chief Executive Officer andthe Chair of the Board of Directors, in each case effective December 31, 2019.  Ms. Pace will fill the vacancies created by the resignation of Michael A. Hart effective that date and be a Class I Director of the Company.

Ms. Pace, 57, is also a Managing Director and Partner of Carlyle, the Global Head of Loans and Structured Credit as well as the President of TCG BDC, Inc. In addition, she serves as a member of the Investment Adviser’s investment committee and President of TCG BDC II, Inc. Ms. Pace was previously responsible for portfolio management for Carlyle High Yield Partners, deploying capital into the U.S. market in cash and synthetic form.

Item 6. Exhibits.

31.1	Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*
31.2	Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*
32.1	Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

* Filed herewith

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SIGNATURES

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

	TCG BDC II, INC.
Dated: November 8, 2019	By	/s/ Thomas M. Hennigan
		Thomas M. Hennigan Chief Financial Officer (principal financial officer)

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