UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER:
SCP Private Credit Income BDC LLC
(Exact name of registrant as specified in its charter)
Delaware | ||
(State of formation) | 83-0634992 Identification No.) |
500 Park Avenue | ||
(Address of principal executive offices) | 10022 |
(212) 993-1670
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
N/A | N/A | N/A |
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Unit
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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(§ (§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
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☐ | |||
Emerging growth company | ☒ | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒
If securities are registered pursuant to Section 12(b) of the Exchange Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to§240.10D-1(b) §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
As of June 30, 2022,2023, there was no established public market for the registrant’s units. The issuer had 22,354,715
Auditor Firm Id: 185 | Auditor Name: KPMG LLP | Auditor Location: New York, NY |
SCP PRIVATE CREDIT INCOME BDC LLC
FORM2022
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PART I
Item 1. Business
SCP Private Credit Income BDC LLC (the “Company”, “we”, “us” or “our”), a Delaware limited liability company formed in May 2018, is a
The Company was established to provide investors with attractive long-term returns through investments made pursuant to its investment strategy (the Company’s investments in portfolio companies are referred to herein as “Portfolio Investments”).
The Company’s principal focus is to invest in first lien secured floating rate loans primarily to upper middle market private leveraged companies (generally, loan sizes of $100 million to $300 million to companies with earnings before interest, tax, depreciation and amortization (“EBITDA”) between approximately $25 million and $100 million) that have significant free cash flow and are inourthe Adviser has direct experience. In addition to senior secured loans to upper middle market companies, the Company may invest a portion of its assets in
The Adviser believes the broad experience of the Adviser’s senior investment team enables it to successfully identify, assess and structure customized senior secured loans, and to manage potential risk and return at all stages of the economic cycle. As an unlisted BDC, the Company is not subject to many of the regulatory limitations that govern traditional lending institutions such as banks. This lack of regulation allows the Adviser to be more flexible than regulated lending institutions in selecting and structuring investments, adjusting investment criteria, transaction structures and, in some cases, the types of securities in which the Company is expected to invest. The Adviser believes financial sponsors, management teams and investment banks see this flexibility as a benefit, making it an attractive financing partner. The Adviser believes that this approach enables it to procure attractive investment opportunities throughout the economic cycle so that it can make investments consistent with its stated investment objective even during turbulent periods in the capital markets.
Moreover, the Company may opportunistically seek to acquire investments in the secondary market at attractive and/or discounted prices, especially during periods of significant market volatility. In analyzing such investments, the Company will employ a substantially similar analytical process as it uses for its primary investments as well as any prior knowledge of the target company.
The Adviser seeks to create a diverse, predominantly floating rate investment portfolio for the Company. There is no guarantee that the Company will achieve its goals or that even if achieved, an investment in the Company will result in gains to an investor. For the avoidance of doubt, any investment guidelines are based on total available capital including unfunded equity commitments from holders (“Unitholders”) of our units (“Units”).
The Company’s primary area of focus is the U.S. markets. The Company will use commercially reasonable efforts to not, and the Adviser will use commercially reasonable efforts to ensure that the Company will not, make any investments or conduct any activities outside of the U.S.
The Adviser — SLR Capital Partners, LLC
SLR serves as the Company’s investment adviser pursuant to an investment management agreement with the Company (as amended, restated or otherwise modified from time to time, the “Investment Management Agreement”). Subject to the overall supervision of the Company’s Board of Directors (the “Board”), the Adviser is responsible for managing the Company’s business and activities, including
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sourcing investment opportunities, conducting research, performing diligence on potential investments, structuring our investments, and monitoring the Company’s portfolio companies on an ongoing basis through a team of investment professionals. The managing members of the Adviser are Michael Gross and Bruce Spohler, who also oversee the Adviser’s investment committee (the “Investment Committee”).
The Board of Directors
Overall responsibility for the Company’s operations rests with the Board. The Board is responsible for overseeing the Adviser and other service providers in our operations in accordance with the provisions of the 1940 Act, applicable provisions of state and other laws, and the Limited Liability Company Agreement of the Company (as amended, restated or otherwise modified from time to time, the “LLC Agreement”). The Board currently consists of five members, three of whom are not “interested persons” of SLR as defined in Section 2(a)(19) of the 1940 Act. The Company refers to these individuals as our independent directors. The Board elects officers, who serve at the discretion of the Board. The responsibilities of each director include, among other things, the oversight of investment activities, the quarterly valuation of assets, and oversight of financing arrangements. The Board has established an audit committee and a nominating and corporate governance committee and may establish additional committees in the future.
Investment Management Agreement
Subject to the overall supervision of the Board, the Adviser manages the investments of, and provide certain services to, the Company pursuant to the Investment Management Agreement, including:
(iii) servicing investments including, without limitation, monitoring the investments and the creditworthiness of all issuers, developing and executing work out strategies where applicable; |
(v) undertaking certain compliance-related activities in respect of the Company in accordance with the investment objective; |
(vii) voting proxies, exercise rights, options, warrants, conversion privileges, and redemption privileges, and tender securities pursuant to a tender offer; |
The Company and its special-purpose vehicles (such as special-purpose vehicles used for credit facilities or tax blockers) engage or otherwise transact with one or more Service Providers (defined herein) in connection with their investment process, including in respect of Portfolio Investments. “Service Providers” include consultants (including in connection with the acquisition, management and disposition of Portfolio Investments), advisors, transaction finders or sources, operating partners, loan and other servicers, loan and other originators, property and other asset managers, investment bankers, valuation agents, pricing service providers, legal counsel, appraisers, industry or sector experts, joint venture partners and development partners, contract employees, outside legal counsel and/or temporary employees (as well as employees of any of the foregoing), whether working onsite or offsite. Any fees, costs, expenses and liabilities incurred in connection with services provided by Service Providers will be borne (directly or indirectly) by the Company, subject to the cap on operating expenses, and will not offset Management Fees (defined herein), and such amounts may be substantial.
Investment Management Agreement Term
Unless terminated earlier as described below, the Investment Management Agreement will remain in effect
The Investment Management Agreement will automatically terminate in the event of its “assignment” within the meaning of the 1940 Act and related Securities and Exchange Commission (“SEC”) guidance and interpretations. In accordance with the 1940 Act, without payment of any penalty, we may terminate the Investment Management Agreement with the Adviser upon 60 days’ written notice. In addition,
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without payment of any penalty, the Adviser may generally terminate the Investment Management Agreement upon 60 days’ written notice and, in certain circumstances, the Adviser may only be able to terminate the Investment Management Agreement upon 120 days’ written notice.
Notwithstanding the foregoing, at any time during the term of the Investment Management Agreement, the Adviser may assign the full and exclusive authority and responsibility granted to it under the Investment Management Agreement to an investment adviser under common control with the Adviser, subject to applicable law. The Adviser may take any actions that are necessary or incidental to any such assignment, including assigning the Investment Management Agreement or causing the Company to enter into a new Investment Management Agreement. It is expected that (x) any new investment adviser would be a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), (y) the management fee and incentive fee payable by the Company to such entities would be identical to that payable to the Adviser and (z) certain of the investment professionals would continue to be responsible for managing the Company’s assets.
Compensation of Adviser
Pursuant to the Investment Management Agreement we have entered into with the Adviser, we pay the Adviser a fee for investment advisory and management services consisting of two components: a base management fee and an incentive fee. The Adviser has also been appointed to provide administrative and coordination services to the Company (in such capacity, the “Administrative Coordinator”). We pay the Administrative Coordinator an administration fee for administrative and coordination services. The cost of the base management fee, the incentive fee, and the administration fee will ultimately be borne by our Unitholders.
Management Fees and Administration Fees
The Company pays the Adviser a management fee (the “Management Fee”), calculated as of the close of business in New York, New York on the last day of each calendar quarter (each such date, the “Management Fee Calculation Date”), in an amount equal to 1.5%
The Company pays the Administrative Coordinator, a fee (the “Administration Fee”), calculated as of the close of business in New York, New York on the last day of each calendar quarter (the “Administration Fee Calculation Date”), in an amount equal to 0.08%
Each of the Management Fee and the Administration Fee are appropriately adjusted for any stub period. Such fees are paid out of net current income and/or disposition proceeds or, to the extent such amounts are not available, from unfunded capital commitments that will be drawn down, or borrowings of the Company. The Adviser reserves the right, upon approval of the Board, to waive the Management Fee and the Administrative
Coordinator reserves the right, upon approval of the Board, to waive the Administration Fee to which each is entitled in respect of all Unitholders’ Units.
Incentive Fee
The Company makes distributions out of two categories: Current Proceeds and Disposition Proceeds (collectively referred to as “Investment Proceeds”). “Disposition Proceeds” means all amounts received by the Company upon the disposition of an investment, including full or partial repayments or amortization of principal (but excluding Current Proceeds). “Current Proceeds” means all proceeds from investments, including interest income, fee income, warrant gains, prepayment fees and exit fees, other than Disposition Proceeds. The Adviser apportions each Unitholder’s pro rata share of Investment Proceeds between Disposition Proceeds and Current Proceeds. Amounts of Investment Proceeds apportioned to Unitholders are divided between and distributed to Unitholders, on the one hand, and the Adviser, on the other hand, in the following amounts and order of priority:
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Adviser as an Incentive Fee, on the other hand, in the following amounts and order of priority:
Adviser as an Incentive Fee, on the other hand, in the following amounts and order of priority:
In no event will the Adviser receive amounts attributable to Disposition Proceeds that, as of any distribution or payment date, exceeds 20% of cumulative realized capital gains net of all cumulative realized capital losses and unrealized capital depreciation.
The Adviser has the right with respect to all Unitholders, upon approval of the Company’s independent directors, to waive or reduce the incentive fee to which it is entitled. The Adviser may also elect not to receive all or any portion of the incentive fee that would otherwise be distributed to it, and may cause any or all amounts subsequently available for distribution to the Unitholders to be distributed to the Adviser until it has received the same aggregate amount of incentive fees had it not previously waived receipt of incentive fees.
The Adviser is entitled to withhold from any distributions, in its discretion, any required tax withholdings. Amounts of taxes paid or withheld from amounts otherwise distributable to a Unitholder is deemed distributed for purposes of the calculations above.
Limitation of Liability and Indemnification
The Investment Management Agreement provides that the Adviser (which includes, for all purposes of this paragraph, its members, principals, officers, managers, investors, employees and other representatives and agents and entities controlling, controlled by or under common control with the Adviser) will not be liable to the Company or to the Unitholders for any loss suffered by the Company or the Unitholders which arises out of any action or inaction of the Adviser taken or made by the Adviser in good faith and in the belief that such action or inaction is in or is not contrary to the best interests of the Company, except for any loss resulting from fraud, willful misfeasance, gross negligence or reckless disregard of the duties of the Adviser in the conduct of the Adviser’s office, and except as otherwise required by applicable law. In addition, the Company will indemnify and hold harmless the Adviser, to the fullest extent permitted by applicable law, against any loss resulting from claims or threatened claims with respect to the Adviser’s performance
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Adviser Clawback
Upon liquidation of the Company, the Adviser will be required to restore funds to the Company for distribution to the Unitholders if and to the extent that the Adviser has received cumulative incentive fees in excess of the incentive fees that would have been payable to the Adviser on an aggregate basis covering all transactions of the Company; provided, however, that in no event will the Adviser be required to contribute an aggregate amount in excess of 100% of the net amount distributed to the Adviser (net of taxes) on account of its incentive fees. In addition, the Adviser will apply an interim incentive fee adjustment at the end of each fiscal year so that, in the event of any over-distribution of incentive fee to the Adviser (measured with respect to each Unitholder using the fair value of the Company’s portfolio at the end of the applicable fiscal year as if the Company were to liquidate on such date), future distributions that would, absent such interim incentive fee adjustment, otherwise be distributed to the Adviser as an incentive fee, shall be distributed to such Unitholder until such over-distribution (net of taxes payable by the Adviser with respect to such incentive fee) has been eliminated.
Administration Services
Pursuant to the Investment Management Agreement, the Adviser has also been appointed as Administrative Coordinator to provide administrative and coordination services to the Company. The Administrative Coordinator supervises or provides the Company’s administrative services, including operational trade support, net asset value calculations, financial reporting, fund accounting, registrar and transfer agent services. The Administrative Coordinator provides assistance to the Adviser in connection with communicating with investors and other persons with respect to the Company. The Administrative Coordinator, when acting in its administrative capacity, will not provide any investment advisory or investment management services to the Company. Pursuant to the Investment Management Agreement, the Company pays the Administrative Coordinator the Administration Fee for its services.
The Investment Management Agreement contains limitations on liability and indemnifications in favor of the Administrative Coordinator, provided that the Administrative Coordinator’s actions do not constitute fraud, bad faith, gross negligence or willful misconduct (collectively, “Wrongful Conduct”). The Administrative Coordinator’s liability to the Company is subject to an overall cap (except where the Administrative Coordinator has engaged in Wrongful Conduct). In the event that the Administrative Coordinator is terminated or resigns as the administrative coordinator to the Company, the Board reserves the ability to appoint one or more different or replacement administrative coordinators in its sole discretion at any time without notice to the Unitholders, or to assume the Administrative Coordinator’s role on the same or similar terms in providing administration services to the Company.
Concurrently with the review and approval of the Investment Management Agreement, our Board will review and approve the engagement of the Administrative Coordinator on an annual basis. In connection with such approval, the Board, including a majority of independent directors, reviews the engagement of the Administrative Coordinator to determine that the relevant provisions of the Investment Management Agreement are carried out satisfactorily and to determine, among other things, whether the fees payable to the Administrative Coordinator are reasonable in light of the services provided. The Board also considers the possibility of obtaining such services from a different third party and whether any other third party service provider would be capable of providing all such services at comparable cost, quality and timeliness.
Payment of Our Expenses under the Investment Management Agreement
The Company (directly or indirectly) bears:
(ii) all fees, costs, expenses and liabilities related to any audits or agreed upon procedures, tax forms and return preparations and filings, custodian fees and expenses, fund accounting, administrator services, financial statement preparation and reporting, web services for the benefit of Unitholders, delivery costs and expenses in connection with reporting obligations and communications and compliance services; |
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Investments;
In addition, the aggregate amount of the operating expenses relating to Unitholders investing directly in the Company set forth in clauses (ii)-(iv) and the operating expenses included in$350,000,000,$350 million, the Operating Expense Cap will be equal to $2,125,000.$2.125 million. For the avoidance of doubt, the Operating Expense Cap will not apply to any fees, costs, expenses and liabilities allocable to persons investing indirectly in the Company through any Unitholder.
For the avoidance of doubt, the Company will not bear the costs of any third-party valuation agent engaged solely for purposes of valuing the net asset value of the Company.
The Adviser or Administrative Coordinator and/or their affiliates had advanced organizational and offering expenses to the Company, which include organizational fees, costs, expenses and liabilities of the Company, including legal expenses, incurred in connection with the initial offering of Units and the formation and establishment of the Company (the “Organizational Expenses”). The Adviser or Administrative Coordinator (or such affiliate) will be reimbursed by the Company for such advanced expenses in an amount not to exceed $500,000. $307,563$0.5 million. $0.3 million of offering expenses were charged to capital and $83,589$0.1 million of organizational costs were expensed in 2019.
Placement Agreement
The Company has retained certain third parties to find potential investors (each a “Placement Agent”). If an investor purchases through a Placement
Agent, the Adviser may be subject to finder-related fees, the arrangements of which are set forth in detail in our Private Placement Memorandum.
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Use of Name
Pursuant to the LLC Agreement, SLR has granted us
Market Opportunity
The Company focuses on providing private corporate loans to upper middle market companies in the United States. We believe that the Company is well-positioned to provide a superior risk-adjusted return relative to publicly traded corporate bonds and loans for the following reasons:
Premium pricing in private corporate loans over public high yield and syndicated leveraged loans
Capturing illiquidity premiums:
Capturing size and risk premium:
Capitalizing on market inefficiencies
Stronger underwriting process in private corporate loans versus public high yield and syndicated leveraged loans
Deeper due diligence:
Inclusion of covenants:
Ability to exert greater influence over the negotiation of lending terms:
Lower default rates and higher recovery rates:
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Access to specialized lending markets with attractive return and risk characteristics
Single source lending to the upper middle market:
Non-traditional
Lending to rapidly developing healthcare companies:
Investment Selection
The Company has a broad, flexible investment mandate, and the Company is not subject to any investment guidelines, limitations or restrictions other than as set forth in this section. However, as a BDC, the Company is subject to certain limitations on the types of investments it is permitted to make.
The Company generally expects to invest in portfolio companies based in the U.S., including portfolio companies in the broadly-defined healthcare and life sciences industries.
Interpretation of the
The Company uses reasonable best efforts to achieve the guidelines set forth below. For purposes of the below guidelines, the Company’s “total portfolio” will equal the total amount of Commitments plus the Company’s total expected leverage, as reasonably determined by the Company. In addition, the Adviser may consider the impact of hedging transactions, and of cash and cash equivalents in the portfolio, in applying the below guidelines.
The below guidelines shall in no way restrict or otherwise limit the Company’s ability to acquire an investment in an issuer that is sufficiently large (as determined by the Adviser in its discretion) to enable the Company to influence or control any restructuring,
Secured Loans
The Company expects to invest at least 90% of its total portfolio in secured loans.
Floating Rate Loans
The Company expects to invest at least 85% of its total portfolio in floating rate loans.
Lower Middle Market Issuers
It is expected, at the time of investment, that the Company will not make an investment in a lower middle market corporate issuer (i.e.
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Minimum Number of Portfolio Companies
It is expected that the Company will invest in at least 18 companies.
Concentration of Top 10 Positions
It is expected that the Company’s top 10 investments will not exceed 60% of the greater of (i) the Company’s total portfolio and (ii) the market value of the Company’s assets.
Single Issuer
It is expected that the Company will not make an investment in an issuer if the Company’s aggregate investments in such issuer would, solely as a result of such investment, exceed 7.5% of the greater of (i) the Company’s total portfolio and (ii) the market value of the Company’s assets. It is expected that the Company will not make more than four (4) such investments and that the balance of the Company’s investments will be 5% or less of the greater of (i) the Company’s total portfolio and (ii) the market value of the Company’s assets.
Single Industry
It is expected that the Company will not make an investment in an issuer conducting its principal operations in a particular industry or(e.g.
Geographic Limitations
It is expected that the Company will not make investments in issuers that have their principal place of business located outside of the United States.
Target and Maximum ABL and Life Science Investments
It is expected that the Company’s investments in ABL companies and Life Science issuers will both be between 10% and 15% of the greater of (i) the Company’s total portfolio and (ii) the market value of the Company’s assets. It is also expected that the Company will not make an investment in an ABL or Life Science issuer if the Company’s aggregate investments in all such issuers would, solely as a result of such investment, exceed 40% of the greater of (i) the Company’s total portfolio and (ii) the market value of the Company’s assets.
Leverage
The Company is required to comply with the asset coverage requirements of the 1940 Act. The Company employs leverage and otherwise incurs indebtedness with respect to the portfolio both on a recourse and
It is currently expected that the Company will generally target, for directly borrowed funds, average leverage, excluding any subscription or similar credit facilities, of (i) with respect to Corporate investments, a(in (in each case, calculated excluding both the portion of any investment that the Company expects to syndicate, transfer or otherwise dispose of within 180 days of acquisition and any borrowings with respect thereto).
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Investment Process Overview
We are committed to our value-oriented investment philosophy, with a focus on the preservation of capital and a commitment to managing downside exposure.
Proprietary Sourcing and Origination
We believe that SLR’s senior investment professionals’ longstanding relationships with financial sponsors, corporate management teams, commercial and investment banks and other financial intermediaries provide us with a strong pipeline of proprietary origination opportunities. We believe the broad experience of our senior investment team and their ability to draw upon their average of over 2030 years of investment experience enables us to identify, assess and structure investments successfully.
We expect that the Company will benefit from SLR’s extensive experience investing in middle market companies. With the benefit of billions of dollars of investments made to hundreds of companies, SLR has developed an extensive database of information on middle market issuers and industries. The Adviser’s investment team is expected to include a number of SLR’s specialists in cash flow lending to sponsor-backed companies, asset-based lending and healthcare lending. We believe that the
Our senior investment team’s strong relationship network is enhanced by the collaborative role SLR plays in the private equity industry. SLR is an independent credit platform that does not pursue traditional private equity strategies, so the Company is not expected to be seen as a competitive threat to financial sponsors seeking to acquire a company. Our ability to offer tailored solutions, certainty of capital and scale is expected to provide us with greater deal flow. We also expect that our reputation as a constructive partner and a flexible “solutions provider” with a proven ability to evaluate highly complex situations should result in the ability to source a significant number of investment opportunities for the Company.
Additionally, the investment team has a well-developed network of relationships that includes industry executives, consultants, traders, brokers, advisors, lawyers, accountants, investment bankers and other industry sources, which can result in early notification of developing investment opportunities.
Due Diligence
Our “private equity” approach to credit investing typically incorporates extensive
Our due diligence typically includes:
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We also expect to evaluate the financial sponsor making the investment. Further, due to SLR’s considerable repeat business with sponsors, the Adviser’s investment team has direct experience with the management teams of many sponsors. A financial sponsor is typically the controlling shareholder upon completion of an investment and as such is considered critical to the success of the investment. The financial sponsor is evaluated using several key criteria, including:
Throughout the due diligence process, a deal team is in frequent dialogue with the management team and sponsor of the company in which we are considering investing to ensure that any concerns are addressed as early as possible through the process, which we believe increases the likelihood that unsuitable investments are filtered out before considerable time has been invested.
Upon the completion of due diligence and a decision to proceed with an investment in a company, the investment professionals leading the investment present the investment opportunity to the Investment Committee, which then determines the initial investment. Additional due diligence with respect to any investment may be conducted on our behalf by attorneys and independent accountants prior to the closing of the investment, as well as other outside advisers, as appropriate.
Portfolio Company Characteristics
We have identified several criteria that we believe are important in identifying and investing in prospective portfolio companies. These criteria provide general guidelines for investment decisions; however, not all of these criteria will be met by each prospective portfolio company in which we choose to invest.
For our cash flow loans to upper middle market companies, we generally seek companies that we believe will provide a steady stream of cash flow to repay our loans and reinvest in their respective businesses. We believe that such internally generated cash flow, leading to the
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payment of our interest and the repayment of our principal, represents a key means by which we will be able to exit from our investments over time. In addition, we also seek to invest in companies whose business models and expected future cash flows offer attractive exit possibilities. These companies include candidates for strategic acquisition by other industry participants and companies that may repay our investments through an initial public offering of units or another capital market transaction. We underwrite our investments on a
Our investment teams work in concert with sponsors to proactively manage investment opportunities by acting as a partner throughout the investment process. We actively focus on the middle-market financial sponsor community, with a particular focus on the
We divide our coverage of these sponsors among our more senior investment professionals, who are responsible for
Structure of Investments
We invest in portfolio companies primarily in the form of first lien senior secured loans. We seek to obtain security interests in the assets of our portfolio companies that serve as collateral in support of the repayment of these loans. We expect that this collateral will take the form of first priority liens on all of the assets of a portfolio company. Opportunistically, we will invest in senior secured loans with second priority liens on the assets of the portfolio company. We may make investments that have a delayed draw feature, which may be viewed as unfunded commitments. We believe that the Company will have sufficient assets to provide adequate cover to satisfy any such unfunded commitments.
Upper Middle Market Cash Flow Lending
Typically, we expect that the Company’s senior secured loans to middle market companies will have a first priority lien on all of the assets of the issuer, may be floating rate, may include upfront fees and may include meaningful prepayment penalties. Covenants are typically included. The loans generally are expected to have a five to six year final maturity and are often repaid within three years.
Middle Market Asset-based Lending
Typically, we expect that the Company’s asset-based loans will have a first priority lien or second priority lien on the assets of the issuer, may be floating rate, and may include upfront fees and meaningful prepayment penalties. As part of the underwriting process, we expect to receive a third-party valuation of the collateral and lend at a discount to the liquidation value. Borrowing base and maintenance covenants are generally expected to be included. The loans generally are expected to have a three to five year final maturity and are often repaid within one to two years.
We plan to differentiate ourselves by focusing on transitional borrowers, which are companies that are either experiencing a restructuring, are capital constrained, have tight execution timelines or have limited access to traditional lenders.
Opportunities in the asset-based lending strategy are not sourced from financial sponsors but from a variety of regional banks, consultants, other asset-basedasset- based lenders and companies themselves, with the deals that have historically progressed through SLR’s preliminary review having come from 90+ different sources.
Typically, we expect that the Company’s loans to healthcare companies will have a first priority lien, will be floating rate, and will include meaningful prepayment penalties, exit fees and success fees. The loans may include equity features, such as warrants or options to buy a minority interest in the portfolio company. We expect that these warrants will generally have a nominal exercise price and, thus, as a portfolio company appreciates in value, the Company will be well-positioned to achieve additional investment returns from this equity interest. The loans generally are expected to have a 12 to 18 month interest only period and then straight-line amortization with a four to five year final maturity. These loans are often repaid within two to three years.
Transaction Selection
Following the team’s rigorous due diligence process, the transaction team will discuss the potential investment opportunity with the Investment
Committee. Such discussion will often include detailed analyses of various factors, such as (i) the cash flow value creation for cash flow loans, (ii) historic and projected financials, (iii) the key drivers of revenues and the balance between unit volumes and price factors, (iv) key cost components, including raw materials, labor, overhead, insurance, etc., (v) capital expenditures, (vi) working capital needs, (vii) micro and macroeconomic trends that impact the business and industry, (viii) the business’s products and its sales channels, (ix) qualitative analysis of company management, (x) the competitive dynamics of the industry and the target company’s position, (xi) input from third-party consultants, (xii) potential exit considerations, and/or (xiii) a range of other factors relating to a given opportunity. For asset based loans, the core focus is on the Company’s liquidity profile, the liquidation value of the assets or portfolio, quality of controls and procedures, the quality of management, and regulatory risk. For life science lending, the core focus is on the quality of the Company’s product pipeline and stage of development, the investor base and access to additional capital and liquidity, and the quality of management.
It is expected that the Investment Committee will approve or reject investment recommendations, although it may delegate other decisions (including decisions relating to cash management and similarproviders)
Ongoing Relationships with Portfolio Companies
We will monitor our portfolio companies on an ongoing basis. We will monitor the financial trends of each portfolio company to determine if it is meeting its business plan and to assess the appropriate course of action for each company.
We have several methods of evaluating and monitoring the performance and fair value of our investments, which include the following:
In addition to various risk management and monitoring tools, the Adviser also uses an investment rating system to characterize and monitor our expected level of returns on each investment in our portfolio.
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We use an investment rating scale of 1 to 4. The following is a description of the conditions associated with each investment rating:
Investment Rating | Summary | |
1 | ||
Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk factors are generally favorable (including a potential exit) | ||
2 | Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk factors are neutral to favorable; all new investments are initially assessed a grade of 2 | |
3 | The portfolio company is performing below expectations, may be out of compliance with debt covenants, and requires procedures for closer monitoring | |
4 | The investment is performing well below expectations and is not anticipated to be repaid in full |
We will monitor and, when appropriate, change the investment ratings assigned to each investment in our portfolio.
Competition
Our primary competitors provide financing to middle-market companies and include other business development companies, commercial and investment banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity funds. Additionally, alternative investment vehicles, such as hedge funds, frequently invest in middle-market companies. As a result, competition for investment opportunities at middle-market companies can be intense. While many middle market companies were previously able to raise senior debt financing through traditional large financial institutions, we believe this approach to financing will become more difficult as implementation of U.S. and international financial reforms limits the capacity of large financial institutions to holdour investment adviserthe Adviser enable us to learn about, and compete effectively for, financing opportunities with attractive leveraged companies in the industries in which we seek to invest.
Term
On October 5, 2018 (the “Initial Closing Date”), the Company closed on $326,000,000$326 million in capital commitments. The offering period of the Company ended on April 5, 2019 (the “Offering Period”), six months after the Initial Closing Date. The term of the Company will be six years from the end of the Offering Period unless the Company is liquidated earlier as set forth in the LLC Agreement, but may be extended by the board of directors for up to two consecutive one year periods upon approval of the Company’s independent directors and the approval of unitholders of the Company (“Unitholders”), which approval will be obtained through a
Emerging Growth Company
We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and we are eligible to take advantage of certain specified reduced disclosure and other requirements that are otherwise generally applicable to public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). We expect to remain an emerging growth company for up to five years following the completion of any IPO or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.0equals or exceeds $1.07 billion, (ii) December 31 of the fiscal year that we become a “large accelerated filer” as defined in Rule
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Staffing
We do not currently have any employees. Mr. Gross, ourMr. Peteka,Shiraz Kajee, our Chief Financial Officer Treasurer and SecretaryTreasurer, serves as the Chief Financial Officer for SLR. Guy Talarico, our Chief Compliance Officer is a Managing Director of ACA Group, LLC, and Secretary, serves as ourthe Chief Compliance Officer.
Pursuant to the Investment Management Agreement, the Company has delegated full and exclusive authority and responsibility to the Adviser to invest, reinvest and dispose of the assets of the Company, and (together with the Administrative Coordinator) to manage the
The Private Offering
The Company is organized primarily for investors who may invest through one or more investment funds created by one or more financial institutions unaffiliated with the Company (collectively, the “Access Fund”). Certain other investors may also invest directly in the Company. For those investors who invest through the Access Fund, we expect that the Access Fund will issue a pro rata interest to each investor in the Access Fund (the “Access Fund Investors”) that, with respect to each Access Fund Investor’s investment in the Access Fund, corresponds to the pro rata share of the Units issued by the Company to the Access Fund. To purchase an interest in the Access Fund, each Access Fund LP will be required to represent that it is an “accredited investor” within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act (an “Accredited Investor”). To purchase Units, investors must be Accredited Investors and “qualified purchasers” for purposes of Section 3(c)(7) of the 1940 Act, or “knowledgeable employees” or companies owned exclusively by “knowledgeable employees” for purposes of the rules promulgated under the 1940 Act. Any sale of Units outside of the United States will be conducted in accordance with Regulation S under the Securities Act. We expect the Access Fund will pass its voting rights in respect of any Units of the Company held by the Access Fund through to the Access Fund Investors.
Key Person Event
Prior to the end of the period from the Initial Closing Date until the date that is three (3) years after the end of the Offering Period of the Company (the “Investment Period”), if both Michael Gross and Bruce Spohler (the “Principals”) die, become permanently incapacitated or cease to be actively involved in the management of the Company, the Investment Period shall terminate and the Company shall be wound down in accordance with the terms of the LLC Agreement. For the avoidance of doubt, if only one of the Principals dies or becomes permanently incapacitated, the preceding sentence will not be triggered. If either Principal voluntarily ceases to be actively involved in the management of the Company, the Company will suspend the Investment Period. If an acceptable replacement is not identified and approved by (i) the independent directors of the Company and (ii) the Unitholders subject to any requirements of the 1940 Act, within 90 days following the suspension of the Investment Period, the Investment Period shall terminate and all new investment activity shall cease.
Regulation as a Business Development Company
A BDC is regulated by the 1940 Act. A BDC must be organized in the U.S. for the purpose of investing in or lending to primarily private companies and making significant managerial assistance available to those investments that constitute qualifying assets (discussed below). A BDC may use capital provided by public unitholders and from other sources to make long-term, private investments in businesses.
The Company may not change the nature of its business so as to cease to be, or withdraw our election as, a BDC unless authorized by vote of a majority of outstanding voting securities, as required by the 1940 Act. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (a) 67% or more of such company’s voting securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented
As with other companies regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory requirements. A majority of the Company’s directors must be persons who are not interested persons, as that term is defined in Section 2(a)(19) of the 1940 Act. Additionally, the Company is required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the BDC. Furthermore, as a BDC, the Company is prohibited from protecting any director or officer against any liability to the Company or its Unitholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
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As a BDC, the Company is required to meet an asset coverage ratio, reflecting the value of our total assets to our total senior securities, which include all of our borrowings and any preferred units we may issue in the future, of at least 150%. The Company may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of directors who are not interested persons and, in some cases, prior approval by the SEC.
On June 13, 2017, SLR received an exemptive order that permits the Company to participate in negotiated
The Company is generally not able to issue and sell Units at a price below net asset value per Unit without Unitholder approval. The Company may, however, sell Units, or warrants, options or rights to acquire our Units, at a price below the then-current net asset value of our Units if the Board determines that such sale is in the best interests of the Company and the Unitholders, and the Unitholders approve such sale.
The Company may be periodically examined by the SEC for compliance with the federal securities laws, including the 1940 Act.
Qualifying Assets
Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the BDC’s total assets. The principal categories of qualifying assets relevant to our business are the following:
(a) is organized under the laws of, and has its principal place of business in, the U.S.; |
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Under Section 55(b) of the 1940 Act, the value of a BDC’s assets shall be determined as of the date of the most recent financial statements filed by such company with the SEC pursuant to Section 13 of the 1934 Act, and shall be determined no less frequently than annually.
Significant Managerial Assistance to Portfolio Companies
As a BDC, the Company offers, and must provide upon request, significant managerial assistance to its portfolio companies that constitute qualifying assets. This assistance could involve, among other things, monitoring the operations of portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. The Company may also receive fees for these services. The Administrative Coordinator provides such managerial assistance, if any, on the Company’s behalf to portfolio companies that request this assistance.
Temporary Investments
Pending investment in other types of “qualifying assets,” as described above, the Company’s investments may consist of cash, cash equivalents, U.S. government securities or high-quality investment grade debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of the Company’s assets are qualifying assets. Typically, we will invest in U.S. Treasury bills or other short-term, U.S. government securities, including agencies, or in repurchase agreements, provided that such repurchase agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as the Company, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price that is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no
Senior Securities
The Company is permitted, under specified conditions, to issue multiple classes of indebtedness and one class of units senior to Units if asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. In addition, while certain senior securities remain outstanding, the Company must make provisions to prohibit any distribution to Unitholders or the repurchase of such securities or units unless the Company meets the applicable asset coverage ratios at the time of the distribution or repurchase. The Company may also borrow amounts up to 5% of the value of total assets for temporary purposes without regard to asset coverage. The Company may borrow money, which would magnify the potential for gain or loss on amounts invested and may increase the risk of investing in the Company.
Code of Ethics
The Company and the Adviser have each adopted a code of ethics pursuant to Rulewww.sec.gov. www.sec.gov. You may also obtain copies of the code of ethics, after paying a duplicating fee, by electronic request at the following email address:publicinfo@sec.gov.
Proxy Voting Policies and Procedures
We have delegated our proxy voting responsibility to our investment adviser.the Adviser. A summary of the Proxy Voting Policies and Procedures of our adviserthe Adviser are set forth below. The guidelines are reviewed periodically by the Adviser and ournon-interested
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As an investment adviser registered under the Advisers Act, the Adviser has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, it recognizes that it must vote securities held by its clients in a timely manner free of conflicts of interest. These policies and procedures for voting proxies for investment advisory clients are intended to comply with Section 206 of, and Rule
The Adviser votes proxies relating to our portfolio securities in the best interest of Unitholders. The CompanyAdviser reviews on ainvestment adviserthe Adviser are made by the senior investment professionals who are responsible for monitoring each of our investments. To ensure that our vote is not the product of a conflict of interest, it requires that: (i) anyone involved in the decision making process disclose to a managing member of the CompanyAdviser any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (ii) employees involved in the decision making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties.
You may obtain information about how we voted proxies by making a written request for proxy voting information to: SCP Private Credit Income BDC LLC, 500 Park Avenue, New York, NY 10022.
Privacy Policy
We endeavor to maintain the privacy of our recordholders and to safeguard their
Generally, we will not receive any
We disclose
When the Company shares
The Company’s service providers, such as SLR and its transfer agent, are required to maintain physical, electronic, and procedural safeguards to protect recordholder
Personnel of affiliates may access recordholder information only for business purposes. The degree of access is based on the sensitivity of the information and on personnel need for the information to service a recordholder’s account or comply with legal requirements.
If a recordholder ceases to be a recordholder, we will adhere to the privacy policies and practices as described above. We may choose to modify our privacy policies at any time. Before we do so, we will notify recordholders and provide a description of our privacy policy.
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In the event of a corporate change in control resulting from, for example, a sale to, or merger with, another entity, or in the event of a sale of assets, we reserve the right to transfer your
Reporting Obligations
We furnish our Unitholders with annual reports containing audited financial statements, quarterly reports, and such other periodic reports as we determine to be appropriate or as may be required by law. We are required to comply with all periodic reporting, proxy solicitation and other applicable requirements under the 1934 Act.
Unitholders and the public may read and copy any materials we file with the SEC on the SEC’s website (
Certain U.S. Federal Income Tax Considerations
The following discussion is a general summary of certain U.S. federal income tax considerations applicable to the Company and to an investment in Units. This discussion is based on the provisions of the Code and the regulations of the U.S. Department of Treasury promulgated thereunder, or “Treasury regulations,” each as in effect as of the date of this report.
These provisions are subject to differing interpretations and change by legislative or administrative action, and any change may be retroactive. This discussion does not constitute a detailed explanation of all U.S. federal income tax aspects affecting the Company and its Unitholders and does not purport to deal with the U.S. federal income tax consequences that may be important to particular Unitholders in light of their individual investment circumstances or to some types of Unitholders subject to special tax rules, such as financial institutions, broker dealers, insurance companies,
For purposes of this discussion, a “U.S. Unitholder” is a beneficial owner of Units that is for U.S. federal income tax purposes:
For purposes of this discussion, a“Non-U.S.
If a partnership (or other entity classified as a partnership, for U.S. federal income tax purposes) holds Units, the treatment of the partnership and each partner for U.S. federal income tax purposes generally will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. An investor considering an investment in a partnership that will invest in Units should consult the disclosure documents provided to such investor from such partnership in conjunction with this discussion to determine the applicability of this discussion to an indirect investment in Units through such partnership. In addition, such investor should consult its own tax advisers regarding the U.S. federal income tax consequences of the acquisition, ownership and disposition of interests in a partnership and of Units by such partnership in light of such partner’s particular circumstances.
Taxation of the Company
The Company elected to be treated as a RIC under Subchapter M of the Code for 2018 and intends to qualify for taxation as a RIC annually. As a RIC, the Company generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it timely distributes to Unitholders as dividends.
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To qualify as a RIC, the Company must, among other things:
As a RIC, the Company (but not its Unitholders) is generally not subject to U.S. federal income tax on investment company taxable income and net capital gains that it timely distributes to Unitholders in any taxable year with respect to which it distributes an amount equal to at least 90% of the sum of its (i) investment company taxable income (which includes, among other items, dividends, interest and the excess of any net realized short-term capital gains over net realized long-term capital losses and other taxable income (other than any net capital gain), reduced by deductible expenses) determined without regard to the deduction for dividends and distributions paid and (ii) net
The Company is subject to a nondeductible 4% U.S. federal excise tax on certain of its undistributed income, unless it timely distributes (or is deemed to have timely distributed) an amount equal to the sum of:
While the Company currently expects to distribute any income and capital gains in order to avoid the imposition of this 4% U.S. federal excise tax, it may not be successful in avoiding entirely the imposition of this tax. In that case, the Company will be liable for the tax only on the amount by which it does not meet the foregoing distribution requirement.
The Company is authorized to borrow funds and to sell assets in order to satisfy distribution requirements. However, under the 1940 Act, it is not permitted to make distributions to Unitholders while any senior securities are outstanding unless it meets the applicable asset coverage ratios. Moreover, the Company’s ability to dispose of assets or otherwise distribute amounts necessary to meet distribution requirements may be limited by (1) the illiquid nature of its portfolio, (2) other requirements relating to status as a RIC, including the Diversification Tests and/or (3) the limitations under one or more credit facilities. If the Company disposes of assets in order to meet the Annual Distribution Requirement or to avoid the 4% U.S. federal excise tax, it may make such dispositions at times that, from an investment standpoint, are not advantageous.
A RIC is limited in its ability to deduct expenses in excess of its “investment company taxable income” (which is, generally, ordinary income plus the excess of net short-term capital gains over net long-term capital losses). If the Company’s expenses in a given year exceed investment company taxable income, it would experience a net operating loss for that year. However, a RIC is not permitted to carry forward net operating losses to subsequent years. In addition, expenses can be used only to offset investment company taxable income, not net capital gain. Due to these limits on the deductibility of expenses, the Company may, for tax purposes, have aggregate taxable income for several years that it is required to distribute and that is taxable to Unitholders even if such income is greater than the aggregate net income the
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Company actually earned during those years. Such required distributions may be made from cash assets or by liquidation of investments, if necessary. The Company may realize gains or losses from such liquidations. In the event the Company realizes net capital gains from such transactions, Unitholders may receive a larger capital gain distribution than they would have received in the absence of such transactions.
Check-the-Box
In connection with the intention to be taxed as a RIC, the Company filed a(i.e.
The remainder of this discussion assumes that the Company qualifies as a RIC for each taxable year.
Company Investments
Certain investment practices are subject to special and complex U.S. federal income tax provisions that may, among other things, (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions, including the dividends received deduction, (ii) convert lower taxed long-term capital gains and qualified dividend income into higher taxed short-term capital gains or ordinary income, (iii) convert ordinary loss or a deduction into capital loss (the deductibility of which is more limited), (iv) cause the Company to recognize income or gain without a corresponding receipt of cash, (v) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (vi) adversely alter the characterization of certain complex financial transactions or (vii) produce income that will not qualify as good income for purposes of the 90% Gross Income Test. The Company monitors transactions and may make certain tax elections and may be required to borrow money or dispose of securities to mitigate the effect of these rules and to prevent disqualification as a RIC but there can be no assurance of success in this regard.
Taxable Subsidiaries
Passive Foreign Investment Companies
Debt Instruments
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of accrual, the Company may be required to make a distribution to Unitholders in order to satisfy the Annual Distribution Requirement and to avoid the 4% U.S. federal excise tax, even though it will not have received any corresponding cash amount.
Warrants
Foreign Currency Transactions
General Tax Cooperation
The Company will provide Unitholders with certain information regarding the amount of each distribution by us characterized as a “return of capital distribution,” “interest-related dividend distribution,” “ordinary dividend distribution,” “short term capital gain distribution” or “long term capital gain distribution” for U.S. federal income tax purposes on an estimated basis in connection with such distribution and on a final basis not later than March 1st of the taxable year following the distribution. The Company and the Adviser shall use commercially reasonable efforts to provide Unitholders annually with any other tax information that the Company and the Adviser possess, or can reasonably obtain, reasonably requested by Unitholders in writing, concerning distributions by the Company or redemption of Units by the Company. The Company and the Adviser shall use commercially reasonable efforts to cooperate with Unitholders by providing any additional tax information and/or assisting in the filing of additional tax forms relating to the Company, as reasonably requested by Unitholders.
Importance of Obtaining Professional Advice
The foregoing analysis is not intended as a substitute for careful tax planning. Accordingly, prospective investors in the Company are strongly urged to consult their tax advisors with specific reference to their own situations regarding the possible tax consequences of an investment in the Company.
Summary Risk Factors
General Risks Related to Investment Strategy
• | The success of the Company’s investments will depend on the successful implementation of its investment strategy. | ||
• | The Company could be subject to the risks associated with investments in senior secured loans, subordinated loans, Mezzanine Securities (as defined below) and unsecured loans. | ||
• | The Company’s loans may permit borrowers to prepay, which could affect the yield of the Company’s investments. | ||
• | Terms and conditions of the Company’s loan agreements may be amended, modified or waived only by the agreement of the lenders. | ||
• | The Company may make investments in loans, or securities backed by loans, that are or may be non-performing loans. | ||
• | The Company’s success will depend, in part, on originating loans on advantageous terms. | ||
• | Bank loans and corporate loans may not be readily marketable and may be subject to restrictions on resale. | ||
• | The Company intends to make investments in the life sciences industry. Various segments of the life sciences industry are (or may become) (i) highly regulated, (ii) subject to frequent regulatory change and (iii) dependent upon various government or private insurance reimbursement programs. | ||
• | The value of the Company’s investments could be affected by factors affecting the economy and securities markets generally. | ||
• | Periods of market volatility have occurred and could continue to occur in response to pandemics or other events. | ||
• | The Adviser will rely on information provided by internal sources and third parties when conducting due diligence. | ||
• | Fixed and floating rate debt instruments are subject to the risks associated with change in interest rates. | ||
• | Most of the Company’s Portfolio Investments at any given time are expected to be illiquid. | ||
• | The Company is subject to risks related to inflation and deflation. | ||
• | Economic sanction laws may prohibit investments in certain countries and with certain individuals and companies. | ||
• | The Company may choose to waive or defer enforcement of covenants in the debt securities held in its portfolio, which may cause the Company to lose all or part of its investment in these companies. |
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General Risks Related to the Company
• | There can be no guarantee of returns and Unitholders may lose all of their money by investing in the Company. | ||
• | Pursuant to the LLC Agreement, Units are not generally transferable and voluntary withdrawal of Units is not allowed. | ||
• | The Company is subject to management risk because the Adviser actively manages its investment portfolio. | ||
• | If the professional staff of the Adviser fail to maintain their existing relationships or develop new relationships with other sponsors or sources of investment opportunities, the Company will not be able to grow its investment portfolio. | ||
• | The Company’s assets are available to satisfy all liabilities and other obligations of the Company. | ||
• | There is no assurance that the Adviser’s analysis of potential investments will take into consideration all appropriate factors. | ||
• | The Company could be substantially adversely affected by the unfavorable performance of any single investment. | ||
• | The Company will include in its income certain amounts that the Company has not yet received in cash. | ||
• | It is expected that the majority of the Company’s investments will not have market quotations available. | ||
• | Securities that the Adviser believes are not valued correctly may not ultimately be valued as projected. | ||
• | The Adviser may employ financial/analytical models that may not reflect actual results. | ||
• | The Company and the Adviser may be subject to the risks and costs of regulatory investigations or becoming involved in litigation with third parties. | ||
• | The Company and/or the Adviser may enter into various indemnification agreements or arrangements with third parties. | ||
• | The Company could be subject to the risks related to the Russian invasion of Ukraine. | ||
• | A Unitholder in default with respect to its unfunded Commitment may experience material adverse effects on its investment. | ||
• | Unitholders could be subject to cybersecurity risks associated with electronic databases and communications. | ||
• | Adverse developments affecting the financial services industry could have a material adverse effect on the Company, the Adviser and the Portfolio Investments. | ||
• | The Company is subject to technological risks, including those associated with artificial intelligence and machine learning technology. | ||
• • | The Company is subject to risks associated with ESG (as defined below) initiatives and climate change. The Company is subject to risks associated with U.S. government shutdowns, uncertainty over the U.S. debt ceiling and any related downgrades in the U.S.'s credit ratings. |
Risks Related to RICs and BDCs
• | No assurance can be given that the Company will be able to maintain qualification as a RIC. | ||
• | Unitholders will experience the increased risks pertaining to the Company’s use of leverage to partially finance its investments. | ||
• | The Company intends to distribute to Unitholders substantially all of its ordinary income and capital gain. | ||
• | A BDC must carry investments at market value or at fair value, as determined in good faith by the Board. | ||
• | At least 70% of a BDC’s assets must consist of “qualifying assets”. |
Regulatory Risks Relating to the Company
• | The Company could be precluded from conducting Rule 506 Offerings (as defined below) due to “Bad Actor” restrictions. | ||
• | The Company could be subject to the risks associated with complying with the Sarbanes-Oxley Act (as defined below). |
Other Risks Related to Portfolio Investments
• | The Company could be subject to the risks associated with investments in high yield securities, corporate debt securities, convertible securities, preferred stock, reverse repurchase agreements, and distressed companies. | ||
• | The Company could be subject to the risks associated with the use of warrants and rights. | ||
• | The Company could be subject to the risks associated with the elimination of LIBOR and use of SOFR. | ||
• | The Company could be subject to the risks associated with the effect of an economic slowdown on Portfolio Investments. | ||
• | The Company’s Portfolio Investments will require active monitoring and may, at times, involve participation in business strategy or reorganization proceedings. | ||
• | The Company could be subject to the risks associated with investments in zero-coupon bonds, deferred interest rate bonds and PIKs. | ||
• | The Company may dispose of its investments through whatever manner it deems to be advisable, including through asset sales, repackaging transactions, securitizations, initial public offerings, strategic transactions and other mergers and acquisitions activity, and/or any combination thereof. Therefore, the disposition of Company investments will be subject to the risks associated with the particular exit strategy utilized. |
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Item 1A. Risk Factors.
The purchase of Units involves a number of significant risks and other important factors relating to investments in BDCs generally, and relating to the strategy and investment objective of the Company in particular. An investment in the Company is a potentially suitable investment only for a sophisticated investor for whom such an investment does not represent a complete investment program and who, in consultation with its investment and tax advisors, fully understands and is capable of assuming the risks of an investment in the Company.
The Company holds certain investments and conducts certain activities through investing in wholly-owned SPVs. All references to investments by the Company in this annual report
There can be no assurance that the Company will achieve its investment objective, that the Company will not lose capital, that the Adviser’s judgment will result in profitable investments by the Company or that the Adviser will successfully be able to implement the Company’s investment strategy. An investment in the Company involves investment considerations and risk factors that prospective investors should consider before subscribing. No guarantee or representation is made that the Company’s investments will succeed.
Certain of the characteristics and risks of the portfolio instruments and investment, hedging, financing and disposition techniques that the Adviser may utilize in managing the Company are set forth below. This is not intended to be a complete description or enumeration of portfolio instruments, investment, hedging, financing or disposition techniques or risks.
The Company’s ability to achieve its investment objective may be affected by, among other things, the factors described below. The Company may also invest in instruments or engage in investment, hedging, financing or disposition techniques other than those described below, including instruments or investment, hedging, financing or disposition techniques that are not in existence as of the date of this annual report
The discussion below, to the extent it relates to bankruptcy law or proceedings or to debtors’ and creditors’ rights, is based upon principles of U.S. federal and state laws. Insofar as the Portfolio Investments,
General Risks Related to Investment Strategy
Senior Secured Loans
Subordinated Loans
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Mezzanine Securities
Unsecured Loans or Debt
Prepayment Risk
Investment Modification Risk
Collateral Risk
Defaults
In the event of any default under a loan directly held by the Company or a loan underlying a security held by the Company, the Company will bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the loan, which could have a material adverse effect on the Company’s cash flow from operations. Other
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bankruptcy trustee or
Litigation and Related Risks Associated with Origination and Servicing
Ability to Originate Loans on Advantageous Terms; Competition and Supply
Risks Relating to Bank Loans and Corporate Loans
Holders of bank loans, corporate loans and other forms of direct indebtedness depend primarily upon the creditworthiness of the corporate or other borrower for payment of principal and interest. If the Company does not receive scheduled interest or principal payments on such indebtedness, the value of the Company’s investments could be adversely affected. The Company may invest in secured and unsecured bank loans and corporate loans. Bank loans and corporate loans that are fully secured may offer the Company more protection than an unsecured loan in
Bank loans usually require, in addition to scheduled payments of interest and principal, the prepayment of the bank loan from free cash flow. The degree to which borrowers prepay bank loans, whether as a contractual requirement or at their election, may be affected by general business conditions, the financial condition of the borrower and competitive conditions among lenders, among others. As such, prepayments cannot be predicted with accuracy. Upon a prepayment, either in part or in full, the actual outstanding debt on which the Company derives interest income will be reduced. The effect of prepayments on the Company’s performance may or may not be mitigated by the receipt of prepayment fees and/or the Company’s reinvestment of prepayments in other bank loans that have similar or identical yields.
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The Company may purchase “assignments” of bank loans from lenders. The purchaser of an assignment typically succeeds to all the rights and obligations under the loan agreement with the same rights and obligations as the assigning lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than, those held by the assigning lender.
The Company may also invest in “participations” in bank loans. Participations by the Company in a lender’s portion of a bank loan typically will result in the Company having a contractual relationship only with such lender, not with the borrower. As a result, the Company may have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the participation and only upon receipt by such lender of such payments from the borrower. In connection with purchasing participations, the Company generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights with respect to any funds acquired by
In many cases bank loans and loan participations would not be deemed to be securities for purposes of U.S. federal and/or state securities laws. As a result, an investment in bank loans would not be afforded the same protections as an investment in securities, such as the extensive disclosure requirements under U.S. federal and/or state securities laws, which may adversely impact the Company’s ability to seek recourse in respect of such investments. Similarly, the documentation evidencing bank loans and loan participations will not necessarily be maintained with the Company’s custodian.
Investments in Life Science Industry
The life science industry spends heavily on research and development and in relatively new technologies. Research findings and technological innovation (together with patent expirations) may make any particular treatment, service or product less attractive if previously unknown or underappreciated risks are revealed, or if a more effective, less costly or less risky solution is or becomes available. Certain new technologies are more costly and time-consuming to reach viability and such companies may have difficulty establishing a market presence. Developing technologies are also more likely to have undeveloped regulatory frameworks and therefore there is a greater risk that regulatory developments may adversely affect the industry. Any such development could have a material adverse effect on the companies in which the Company invests.
General Economic and Market Risk
Various social and political circumstances in the U.S. and around the world (including wars and other forms of conflict, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration in the U.S. and worldwide. Such events, including rising trade tensions between the United States and China, other uncertainties regarding actual and potential shifts in U.S. and foreign, trade, economic and other policies with other countries, the large-scale invasion of Ukraine by Russia that began in February 2022 and resulting sanctions or other restrictive actions that the United States and other countries have imposed against Russia, and
Additionally, the Federal Reserve raised the Federal Funds Rate in 2022 and in 2023, and may raise or announce its intention to raise2023. Although the Federal Funds Rate further.Reserve left its benchmark
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rates steady in the fourth quarter of 2023, it has indicated that additional rate increases in the future may be necessary to mitigate inflationary pressures and there can be no assurance that the Federal Reserve will not make upward adjustments to the federal funds rate in 2024 the future. However, there are reports that the Federal Reserve may begin to cut the benchmark rates in 2024. These developments, along with the United States government’s credit and deficit concerns, global economic uncertainties and market volatility and the impacts
Continuing market uncertainty may have a significant impact on the business of the Company. Among other things, the level of investment opportunities may decline from the Adviser’s current expectations. One possible consequence is that the Company may take a longer than anticipated period to invest capital and/or the Company may be relatively concentrated in a limited number of investments. Consequently, during this period, the returns (if any) realized by Unitholders may be substantially adversely affected by the unfavorable performance of a small number of these investments. Furthermore, market conditions may unfavorably impact the Company’s ability to secure leverage on terms as favorable as more established borrowers in the market, or to obtain any leverage on commercially favorable terms. To the extent the Company is able to secure financing for investments, increases in interest rates or in the risk spread demanded by financing sources would make the use of leverage more expensive and could limit the Company’s ability to structure and consummate its investments. Although the Adviser believes that recent market dislocations will result in attractive investment opportunities, the Company may not be able to time the acquisition or disposition of its investments correctly, which could result in further depreciation in values.
Public Health Crises Risk
Despite actions of the U.S. federal government and foreign governments, the uncertainty surrounding the
General Credit Risk
Although most of the Company’s investments will not be rated by any credit rating agency, in some cases, the credit risk of some of the Company’s Portfolio Investments may be broadly gauged by the credit ratings of such Portfolio Investments. However, ratings are only the opinions of the agencies issuing them, may change less quickly than relevant circumstances, are not absolute guarantees of the quality of the rated securities and are subject to downgrade. Credit ratings and ratings agencies
General Leverage Risks
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the Company should expect that the effective leverage utilized by the Company may exceed such guideline, which only applies to direct borrowings; for instance, economic leverage inherent in the Company’s derivatives transactions and other investments will not be counted for purposes of such guideline, notwithstanding that such investments will be subject to many of the leverage-related risks described herein. In addition, determinations relating to leverage are inherently subjective and will involve the exercise of discretion by the Adviser (for instance, the Adviser may deem the amount of the Company’s direct borrowings to be reduced by cash and cash equivalents held by the Company or by a counterparty). See “—
The use of leverage has the potential to magnify the gains or the losses on investments and to make the Company’s returns more volatile. Moreover, if the Company is
In connection with any leverage utilized by the Company, the Company may secure its obligations with respect thereto with any and all of its assets, including its right to receive capital contributions from the Unitholders, pursuant to a pledge or other security agreement on terms that the Company determines are fair and reasonable to the Company. If the Company were to default on its obligations under such transactions, the counterparty could foreclose on the collateral and take possession of the Company’s assets and/or call capital from the Unitholders for purposes of repaying debt.
The terms of any leverage utilized by the Company are likely to impose significant restrictions on the Company’s operations and investment program, including as to the Company’s ability to pay distributions, incur additional leverage and engage in certain transactions.
Investments in Smaller and Middle Market Companies
Hedging Transactions and Related Risks
Due Diligence Risk
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companies or third parties. The Adviser expects that it will not be in a position to confirm the completeness, genuineness or accuracy of such information and data, and will therefore be dependent upon the integrity of the management of the entities filing such information and of such portfolio companies and third parties providing such information. In addition, there can be no assurance that any consultants or experts engaged by the Adviser will accurately evaluate such Portfolio Investments. Investment analyses and decisions by the Adviser may be undertaken on an expedited basis to enable the Company to take advantage of investment opportunities with accelerated timelines. In such cases, the available information at the time of an investment decision may be limited, inaccurate and/or incomplete. Accordingly, the Adviser cannot guarantee that its due diligence investigations will reveal or highlight all relevant facts that may be necessary or helpful in evaluating investment opportunities. Furthermore, the Company bears its proportionate share of all due diligence-related fees, costs, expenses and liabilities (including in respect of investments that are not ultimately consummated); such fees, costs, expenses and liabilities may be significant and could reduce Company returns.
Interest Rate Risk
The prices of long-term debt obligations generally fluctuate more than prices of short-term debt obligations as interest rates change. To the extent the Company invests in longer-term Portfolio Investments, it will be impacted to a greater degree by changes in market interest rates than if the Company invested primarily in short-term debt securities.
To the extent the Company borrows money or issues preferred Units to make investments, its net investment income will depend, in part, upon the difference between the rate at which it borrows funds or pays distributions on preferred Units and the rate at which the Company invests those funds. As a result, the Company can offer no assurance that a significant change in market interest rates will not have a material adverse effect on its net investment income in the event the Company uses debt to finance investments. In periods of rising interest rates, such as the currentrecent economic period, the Company’s cost of funds will increase because the interest rates on the amounts borrowed under the Company’s credit facilities or certain other financing arrangements will typically be floating, which could reduce the Company’s net investment income to the extent any Portfolio Investments have fixed interest rates, and the interest rate on Portfolio Investments with an interest rate floor (such as a SOFR (as defined below) floor) above then-current levels will not increase until interest rates exceed the applicable minimum interest rate floor. Rising interest rates may also increase the cost of debt for the Portfolio Investments, which could adversely impact the Portfolio Investment’s financial performance and ability to meet ongoing obligations to the Company.
The Company expects that its long-term fixed-rate investments will be financed primarily with equity and long-term debt. The Company may use interest rate risk management techniques in an effort to limit its exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. These activities could limit the Company’s ability to participate in the benefits of lower interest rates with respect to the hedged borrowings. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on the Company’s business, financial condition and results of operations.
Also, an increase in interest rates available to investors could make an investment in the Company’s Units less attractive if the Company is not able to increase its distribution rate, which could reduce the value of the Company’s Units.
Liquidity Risk
Inflation/Deflation Risk
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Any disruptions in the capital markets, as a result of inflation and a rising interest environment or otherwise, may increase the spread between the yields realized on risk-free and higher risk securities and can result in illiquidity in parts of the capital markets, significant write-offs in the financial sector and
Financial Fraud
OFAC, FCPA and Related Considerations
Such sanctions prohibit, among other things, transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals. These types of sanctions may restrict the Company’s investment activities.
In some countries, there is a greater acceptance than in the U.S. of government involvement in commercial activities, and of corruption. The Company may be adversely affected because of its unwillingness to participate in transactions that violate such laws or regulations. Such laws and regulations may make it difficult in certain circumstances for the Company to act successfully on investment opportunities and for Portfolio Investments to obtain or retain business.
Risks Relating to Waivers or Deferrals of Covenants and Covenant-Lite Loans
In addition, some of the loans in which the Company may invest may be “covenant-lite” loans. The Company uses the term “covenant-lite” loans to refer generally to loans that do not have a complete set of financial maintenance covenants. Generally, “covenant-lite” loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition. Accordingly, to the extent the Company invests in “covenant-lite” loans, the Company may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants.
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General Risks Related to the Company
Risk of Loss
No Market for Units
Management Risk and Reliance on Management
The success of the Company is highly dependent upon the financial and managerial experience of the Adviser and any consultants or other Service Providers retained by the Company. The success of the Adviser is highly dependent on the financial and managerial experience of the investment professionals, who may not continue to be employed by or associated with the Adviser during the entire term of the Company. In addition, a number of members of the professional staff of the Adviser are investors in other investment vehicles advised by SLR and are actively involved in managing the investment decisions of these investment vehicles, as well as investment decisions of other clients of SLR. Accordingly, the members of the professional staff of the Adviser have demands on their time for the investment, monitoring and other functions of other funds and other clients advised by SLR. In addition, competition in the financial services, private equity and alternative asset management industries for qualified investment professionals is intense. The Adviser’s continued ability to effectively manage the Company’s investments depends on its ability to attract new investment professionals and to retain and motivate its existing investment professionals.
Notwithstanding the foregoing, at any time during the Company’s term, the Adviser may assign the full and exclusive authority and responsibility granted to it under the Investment Management Agreement to an investment adviser under common control with the Adviser, subject to applicable law. The Adviser may take any actions that are necessary or incidental to any such assignment, including assigning the Investment Management Agreement or causing the Company to enter into a new Investment Management Agreement. Although it is expected that (x) any new investment adviser would be a registered investment adviser under the Advisers Act, (y) the management fee and incentive fee payable by the Company to such entities would be identical to that payable to the Adviser and (z) certain investment professionals would continue to be responsible for managing the Company’s assets, there is no guarantee that any or all of such characteristics will apply to any such new investment adviser.
The Investment Committee may delegate
Referral
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opportunities for the Company. If the Adviser is unable to source investment opportunities, the Company may hold a greater percentage of its assets in cash and cash equivalents than anticipated, which could impact potential returns on the Company’s portfolio.
Recourse to the Company’s Assets
Unspecified Use of Proceeds
Identification of Potential Investment Opportunities
Competition; Potential for Insufficient Investment Opportunities
Insufficient Capital
Concentration of Portfolio Investments
Third-Party Involvement
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enforcement of rights) one partner may have against the other, including in connection with foreclosure on partner loans, because of risks arising under state law. In addition, the Company may be liable for actions of its joint venture partners.
Leveraged Companies
Portfolio Turnover
No Assurance of Cash Distributions
In certain cases, the Company may recognize income before or without receiving the accompanying cash. Depending on the amount of noncash income, this could result in difficulty satisfying the annual distribution requirement applicable to RICs. Accordingly, the Company may have to sell some Portfolio Investments at times it would not consider advantageous, raise additional debt or equity capital or reduce new investments to meet these distribution requirements.
U.S.
Forward-Looking Statements
Projections
Valuation of Illiquid Assets
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sold. In addition, third-party pricing information may at times not be available regarding certain of the Company’s assets or, if available, may not be considered reliable. In particular, recent disruptions in the credit markets have resulted in a severe lack of liquidity for many securities, making them more difficult to value and, in many cases, putting significant downward pressure on prices. Subject to approval by the Board, the Adviser will determine the fair value of securities, loans or other instruments for which market quotes are not readily available (or if extraordinary events occur after the last readily available quotation). The Board will (1) periodically assess and manage valuation risks; (2) establish and apply fair value methodologies; (3) test fair value methodologies; (4) oversee and evaluate third-party pricing services, as applicable; (5) oversee the reporting required by Rule
There can be no assurance that such valuations will be reliable, accurate or reflective of the prices at which such investments are ultimately realized. In addition, certain of the securities or other assets that the Company seeks to sell or acquire via cross trade may be illiquid and difficult to value, therefore there can be no assurance that such valuation will be accurate.
Assets Believed to Be Undervalued or Incorrectly Valued
Model Risks
Regulatory Investigations or Third-Party Litigation
The Company’s investment activities may subject it to the risks and costs of becoming involved in litigation with third parties due to, among other reasons, the fact that different investor groups may have qualitatively different, and frequently conflicting, interests with respect to certain Portfolio Investments.
Broad Indemnification
The Company is required to indemnify the Adviser and its respective affiliates, each of the former, current and future shareholders, partners, members, other equity holders, officers, directors, employees, managers, trustees, agents and other representatives of the Adviser and its respective affiliates, and other persons set forth in the LLC Agreement as an “Indemnitee” for Claims (as defined in the LLC Agreement) that may accrue to or be incurred by an Indemnitee, in connection with any claim, demand, investigation, suit, proceeding or action in which an Indemnitee may become involved, as a party or otherwise, or with which an Indemnitee may be threatened, relating to or arising out of the investments or other activities of the Company, activities undertaken in connection with the Company, or otherwise relating to or arising out of the LLC Agreement or the Subscription Agreement, and otherwise as provided in the LLC Agreement or the Subscription
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Agreement. Such Claims may be material and have an adverse effect on the returns to the Unitholders. The Company may also provide broad indemnities, representations, warranties and covenants in connection with the acquisition, management and disposition of Portfolio Investments or otherwise in connection with the Company’s investment program.
Any indemnification obligations of the Company would be payable from the assets of the Company, including the unfunded Commitments of the Unitholders,
Adverse Consequences of Default
Upon the default of a Unitholder, the Company may deliver an amended funding notice to
Distributions in Kind
Risks Related to the Russian Invasion of Ukraine
Risks Related to Electronic Communications/Cybersecurity Risk
The Company relies on the Adviser’s enterprise-wide cybersecurity program, to protect its information, including due oversight of the cybersecurity programs of the Company’s key Service Providers and processes for the assessment, identification, and management of material risks from cybersecurity threats, including those associated with the use of third-party Service Providers. While the Adviser employs various measures to address cybersecurity-related issues, the Adviser, the Administrative Coordinator, the Company and their respective Service Providers may nevertheless be subject to operational and information security risks resulting from cybersecurity incidents. A cybersecurity incident refers to both intentional and unintentional events that may cause the Adviser, the Company or their respective Service Providers to lose or compromise confidential information, suffer data corruption or lose operational capacity. Cybersecurity incidents include stealing or corrupting data maintained online or digitally, denial of service attacks on websites, the unauthorized release of confidential information or various other operational disruptions. If unauthorized parties gain access to such information and technology systems, they may be able to steal, publish, delete or modify private and sensitive information, including nonpublic personal information related to Unitholders (and their beneficial owners) and material nonpublic information. The systems the CompanyAdviser has implemented to manage risks relating to these types of events could prove to be inadequate and, if compromised, could become inoperable for extended periods of time, cease to function properly or fail to adequately secure private information. Breaches such as those
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involving covertly introduced malware, impersonation of authorized users and industrial or other espionage may not be identified even with sophisticated prevention and detection systems, potentially resulting in further harm and preventing them from being addressed appropriately. The failure of these systems or of disaster recovery plans for any reason could cause significant interruptions in the Company’s and the Adviser’s operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to Unitholders, material nonpublic information and other sensitive information in the Adviser’s possession.
Although the Company is not currently aware of any cyber-attacks or other incidents that, individually or in the aggregate, have materially affected, or would reasonably be expected to materially affect, its operations or financial condition, there has been an increase in the frequency and sophistication of the cyber and security threats faced in the marketplace. Cyber-attacks and other security threats could originate from a wide variety of sources, including cyber criminals, nation state hackers, hacktivists and other outside or inside parties. The Company may be a target for attacks because, as a specialty finance company, it holds confidential and other sensitive information, including price information, about existing and potential investments. Further, the Company is dependent on third-party vendors for hosting hardware, software and data processing systems that it does not control. The Company also relies on third-party Service Providers for certain aspects of its business, including for certain information systems, technology and administration of its Portfolio Investments and compliance matters. While the Company relies on the cybersecurity strategy and policies implemented by the Adviser, its reliance on the Adviser and third-party Service Providers removes certain cybersecurity functions from outside of the Company’s immediate control, and cyber-attacks on the Adviser, on the Company or on third-party Service Providers could adversely affect the Company, its business, and its reputation. The costs related to cyber-attacks or other security threats or disruptions may not be fully insured or indemnified by others, including by the Company’s third-party providers.
As the Company’s reliance on computer hardware and software systems, data processing systems, and other technology has increased, so have the risks posed to such systems, both those the Adviser controls and those provided by third-party vendors. Cyber-attacks may originate from a wide variety of sources, and while the Adviser has implemented processes, procedures, and internal controls designed to mitigate cybersecurity risks and cyber-attacks, these measures do not guarantee that a cyber-attack will not occur or that the Company’s financial results, operations, or confidential information, personal, or other sensitive information will not be negatively impacted by such an incident, especially because the techniques of threat actors change frequently and are often not recognized until launched. The Adviser relies on industry accepted security measures and technology to securely maintain confidential and proprietary information maintained on its information systems, as well as on policies and procedures to protect against the unauthorized or unlawful disclosure of confidential, personal, or other sensitive information. Although the Adviser takes protective measures and endeavors to strengthen its computer systems, software, technology assets, and networks to prevent and address potential cyber-attacks, there can be no assurance that any of these measures prove effective. The Adviser expects to be required to devote increasing levels of funding and resources, which may in part be allocated to the Company, to comply with evolving cybersecurity and privacy laws and regulations and to continually monitor and enhance its cybersecurity procedures and controls. In addition, the Company, the Adviser, the Administrative Coordinator, or their employees, if any, may also be the target of fraudulent emails or other targeted attempts to gain unauthorized access to confidential, personal, or other sensitive information. The result of any cyber-attack or other security incidents may include disrupted operations, misstated or unreliable financial data, fraudulent transfers or requests for transfers of money, liability for stolen information (including personal information), investigations, misappropriation of assets, increased cybersecurity protection and insurance costs, litigation and damage to the Company’s business relationships, regulatory fines or penalties, or other adverse effects on its business, financial condition or results of operations. The Adviser may be required to expend significant additional resources to modify its protective measures and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks related to cyber-attacks. The rapid evolution and increasing prevalence of artificial intelligence technologies may also increase cybersecurity risks.
In addition, cybersecurity has become a top priority for global lawmakers and regulators around the world, and some jurisdictions have proposed or enacted laws requiring companies to notify regulators and individuals of data security breaches involving certain types of personal data. In particular, state and federal laws and regulations related to cybersecurity compliance continue to evolve and change, which may require substantial investments in new technology, software and personnel, which could affect the Company’s profitability. These changes may also result in enhanced and unforeseen consequences for cyber-related breaches and incidents, which may further adversely affect the Company’s profitability. If the Adviser fails to comply with the relevant and increasing laws and regulations, the Adviser could suffer financial losses, a disruption of its businesses, liability to investors, regulatory intervention or reputational damage.
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technology resources, introduce operational risks and otherwise heighten the risks described above. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts.
Cybersecurity risks are exacerbated by the businessrapidly increasing volume of its Portfolio Investments rely upon secure information technology systems forhighly sensitive data, processing, storage and reporting. Despite careful security and controls design, implementation and updating,including the Company’s proprietary business information, personal information of the Adviser’s employees, the Company’s investors and its Portfolio Investments’ information technology systems could become subject to cyber-attacks. Cyber-attacks include, but are not limited to, gaining unauthorized access to digital systems (e.g., through “hacking”, malicious
Cybersecurity incidents may adversely impact the Company and its Unitholders. There is no guarantee that the Company, the Adviser, and/or their respective Service Providers will be successful in protecting against cybersecurity incidents.
Financial Services Industry Risks. Cash not held in custody accounts and held by the Company, the Adviser and the Portfolio Investments in non-interest-bearing and interest-bearing operating accounts could, at times, exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. If such banking institutions were to fail, the Company, the Adviser, or the Portfolio Investments could lose all or a portion of those amounts held in excess of such insurance limits. In addition, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems, which could adversely affect the Company, the Adviser’s and the Portfolio Investments’ business, financial condition, results of operations, or prospects.
Although the Company and the Adviser assess its and the Portfolio Investments’ banking and financing relationships as the Company believes necessary or appropriate, the Company and the Portfolio Investments’ access to funding sources and other credit arrangements in amounts adequate to finance or capitalize current and projected future business operations could be significantly impaired by factors that affect the financial institutions with which the Company, the Adviser or the Portfolio Investments have arrangements directly or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which the Company, the Adviser or the Portfolio Investments have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.
In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for the Company, the Adviser, or the Portfolio Investments to acquire financing on acceptable terms or at all.
Technological Innovation Risks
Machine Learning Technology Risks. Recent technological advances in artificial intelligence and machine learning technology (“Machine Learning Technology”) pose risks to the Company and its Portfolio Investments. The Company and its Portfolio Investments could be
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exposed to the risks of Machine Learning Technology if third-party service providers or any counterparties use Machine Learning Technology in their business activities. The Company and the Adviser are not in a position to control the use of Machine Learning Technology in third-party products or services. Use of Machine Learning Technology could include the input of confidential information in contravention of applicable policies, contractual or other obligations or restrictions, resulting in such confidential information becoming part accessible by other third-party Machine Learning Technology applications and users. Machine Learning Technology and its applications continue to develop rapidly, and the Company cannot predict the risks that may arise from such developments.
Machine Learning Technology is generally highly reliant on the collection and analysis of large amounts of data, and it is not possible or practicable to incorporate all relevant data into the model that Machine Learning Technology utilizes to operate. Certain data in such models will inevitably contain a degree of inaccuracy and error and could otherwise be inadequate or flawed, which would be likely to degrade the effectiveness of Machine Learning Technology. To the extent the Company or its Portfolio Investments are exposed to the risks of Machine Learning Technology use, any such inaccuracies or errors could adversely impact the Company or its Portfolio Investments.
Corporate Social Responsibility Risks
The Company risks damage to its brand and reputation if it fails to act responsibly in a number of areas, including, but not limited to, diversity, equity and inclusion, human rights, climate change, environmental stewardship, support for local communities, corporate governance, transparency and consideringconsideration of ESG factors in the Company’s investment processes. Adverse incidents with respect to ESG activities could impact the value of the Company’s brand, its relationship with existing and future Portfolio Investments, the cost of the Company’s operations and relationships with investors, all of which could adversely affect its business and results of operations.
However, regional and investor specific sentiment may differ in what constitutes a material positive or negative ESG corporate practice. There is no guarantee that the Company’s corporate social responsibilityESG and sustainability practices will uniformly fit every investor’s definition of best practices for all environmental, social and governance considerations across geographies and investor types.
There is also a growing regulatory interest across jurisdictions in improving transparency regarding the definition, measurement and disclosure of ESG factors in order to allow investors to validate and better understand sustainability claims. For example, the SEC has proposed, or has announced that it is working on proposals for, rules that, among other matters, would establish a framework for reporting of climate-related risks, corporate and fund carbon emissions, broad diversity and capital management. At this time, there is uncertainty regarding the scope of such proposals or when they would become effective (if at all). In addition, in 2021, the SEC established an enforcement task force to look into ESG practices and disclosures by public companies and investment managers and has started to bring enforcement actions based on ESG disclosures not matching actual investment processes. Further, in 2022 the SEC issued a proposed rule regarding the enhancement and standardization of mandatory climate-related disclosures for investors that would mandate extensive disclosure of climate-related data, risks and opportunities for certain public companies.
The Company and its Portfolio Investments are subject to the risk that similar measures might be introduced in other jurisdictions in the future. Additionally, compliance with any new laws or regulations increases the Company’s regulatory burden and could make compliance more difficult and expensive, affect the manner in which the Company or its Portfolio Investments conduct its businesses and adversely affect the Company’s profitability.
Climate Change Risks
In December 2015 the United Nations, of which the U.S. is a member, adopted a climate accord with the long-term goal of limiting global warming and the short-term goal of significantly reducing greenhouse gas emissions. As a result, some of the Company’s Portfolio
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Investments may become subject to new or strengthened regulations or legislation, which could increase their operating costs and/or decrease their revenues.
Risks Related to RICs and BDCs
Failure to Qualify as a RIC
The income source requirement will be satisfied if the Company obtains at least 90% of gross income for each year from dividends, interest, foreign currency, payments with respect to loans of certain securities, gains from the sale of Units or other securities, net income from certain “qualified publicly traded partnerships,” or similar sources.
The asset diversification requirement will be satisfied if the Company meets certain asset diversification requirements at the end of each quarter of the taxable year. Failure to meet those requirements may result in the Company having to dispose of certain investments quickly in order to prevent the loss of qualification as a RIC. Because most of the Company’s investments will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.
The annual distribution requirement will be satisfied if the Company distributes to its Unitholders on an annual basis at least 90% of net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Because the Company may use debt financing, it is subject to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances, restrict the Company from making distributions necessary to satisfy the distribution requirement. If the Company is unable to obtain cash from other sources, it could fail to qualify as a RIC.
If the Company fails to qualify as a RIC for any reason and therefore becomes subject to corporate income tax, the resulting corporate taxes could substantially reduce net assets, the amount of income available for distribution and the amount of distributions.
Recognizing Income Before or Without Receiving Cash
Since in certain cases the Company may recognize income before or without receiving cash representing such income, the Company may have difficulty meeting the requirement to timely distribute at least 90% of its net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to maintain its qualification as a RIC. In such a case, the Company may have to sell some of its Portfolio Investments at times the Company would not consider advantageous or raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If the Company is not able to obtain cash from other sources and is otherwise unable to satisfy such distribution requirement, the Company may fail to maintain its qualification as a RIC and become subject to corporate-level U.S. federal income tax.
Tax Considerations Regarding Dividends for Private BDCs
Potential Dividend Deferrals
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income tax on its investment company taxable income and net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) that it timely distributes to Unitholders. The Company will be subject to a 4% U.S. federal excise tax on undistributed earnings of a RIC unless it distributes each calendar year at least the sum of (i) 98.0% of its ordinary income for the calendar year, (ii) 98.2% of its capital gains in excess of capital losses for the
Under the Code, the Company may pay certain RIC dividends after the end of the current year. In particular, if the Company pays a distribution in January of the following year that was declared in October, November, or December of the current year and is payable to Unitholders of record in the current year, the dividend will be treated for all U.S. federal income tax purposes as if it were paid on December 31 of the current year. In addition, under the Code, the Company may pay dividends, referred to as “spillover dividends,” that are paid during the following taxable year that will allow the Company to maintain its qualification for taxation as a RIC and eliminate its liability for corporate-level U.S. federal income tax. Under these spillover dividend procedures, the Company may defer distributions of income earned during the current year until December of the following year. For example, the Company may defer distributions of income earned during 20232024 until as late as December 31, 2024.2025. If the Company chooses to pay a spillover dividend, it will incur the 4% U.S. federal excise tax on some or all of the distribution.
Due to events such ascurrentrecent inflationary environment, the Company may take certain actions with respect to the timing and amounts of its distributions in order to preserve cash and maintain flexibility. For example, the Company may reduce and/or defer dividends to the following year as discussed above. To further preserve cash, the Company may combine these deferrals of dividends with one or more distributions that are payable partially in Units as discussed below under “
In-Kind
Changes in Tax Law
Permissible Incurred Leverage
Distribution and Asset Coverage Ratio
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securities, other evidences of indebtedness or preferred Units, and may borrow money from banks or other financial institutions, which are referred to collectively herein as “senior securities,” up to the maximum amount permitted by the 1940 Act. The 1940 Act permits the Company to issue senior securities in amounts such that its asset coverage, as defined in the 1940 Act, equals at least 150% after each issuance of senior securities. The Company’s ability to pay dividends or issue additional senior securities would be restricted if the asset coverage ratio were not at least 150%. If the value of the Company’s assets declines, the Company may be unable to satisfy this test. If that happens, the Company may be required to liquidate a portion of its investments and repay a portion of its indebtedness at a time when such sales or repayment may be disadvantageous. As a result of issuing senior securities, the Company will also be exposed to typical risks associated with leverage, including an increased risk of loss. If the Company issues preferred Units, such preferred Units will rank “senior” to common Units in the Company’s
To the extent the Company is constrained in its ability to issue debt or other senior securities, it will depend on issuances of capital interests to finance operations. As a BDC, the
Unrealized Depreciation
Qualifying Asset Requirements
Regulatory Risks Relating to the Company
Exemptive Relief
Regulatory Risks Relating to the Company
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laws apply with respect to loans originated by national banks and then
The financial services industry is subject to extensive regulation. Banking regulators have broad and largely discretionary powers, which include prohibiting “unsafe or unsound” practices; requiring affirmative actions to correct any violation or practice; issuing administrative orders that can be judicially enforced; directing increases in capital; directing the sale of subsidiaries or other assets; limiting dividends and distributions; restricting growth; assessing civil monetary penalties; removing officers and directors; and terminating deposit insurance. These actions and other regulatory requirements could have a material adverse effect on an investment in the Company. The financial institutions in which the Company will invest and with which the Company will transact are subject to laws, regulations, administrative actions and policies in each location in which they operate. The regulatory environment for private investment funds is evolving, and changes in the regulation or taxation of private investment funds may adversely affect the value of the investments held by the Company and the ability of the Company to execute its investment strategy.
In addition, the securities and futures markets are subject to comprehensive statutes, regulations and margin requirements. The SEC and
Risks Related to Changes in Regulatory Policy
Financial Services and Government Intervention
U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act
Changes to Derivatives Regulation
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Instruments Directive (“MIFID II”)),
The Dodd-Frank Act also created new categories of regulated market participants, such as “swap dealers,” “security-based swap dealers,” “major swap participants,” and “major security-based swap participants” who are subject to significant new capital, registration, recordkeeping, reporting, disclosure, business conduct and other regulatory requirements. The EU and some other jurisdictions are implementing similar requirements. Because these requirements are new and evolving (and some of the rules are not yet final), their ultimate impact remains unclear. However, even if the Company itself is not located in a particular jurisdiction or directly subject to the jurisdiction’s derivatives regulations, the Company may still be impacted to the extent the Company enters into a derivatives transaction with a regulated market participant or counterparty that is organized in that jurisdiction or otherwise subject to that jurisdiction’s derivatives regulations.
Based on information available as of the date of this annual report on
In November 2020, the SEC adopted new rules regarding the ability of a BDC (or a registered investment company) to use derivatives and other transactions that create future payment or delivery obligations. BDCs that use derivatives will be subject
Uncertainty of the U.S. Political Climate
“
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among others, the issuer, affiliated issuers, any investment manager or solicitor of the issuer, any director, executive officer or other officer participating in the offering of the issuer, any general partner or managing member of the foregoing entities, any promoter of the issuer and any beneficial owner of 20% or more of the issuer’s outstanding voting equity securities, calculated on the basis of voting power. A “disqualifying event” includes, among other things, certain (a) criminal convictions and court injunctions and restraining orders issued in connection with the purchase or sale of a security or false filings with the SEC, (b) final orders from the CFTC, U.S. Federal banking agencies and certain other regulators that bar a person from associating with a regulated entity or engaging in the business of securities, insurance or banking or that are based on certain fraudulent conduct, (c) SEC disciplinary orders relating to investment advisers, brokers, dealers and their associated
A disqualification will occur only in the case of a disqualifying event of a covered person that occurs on or after September 23, 2013, although issuers must disclose to potential investors in a Rule 506 Offering disqualifying events of covered persons that occurred before September 23, 2013. The rule provides an exception from disqualification if the issuer can show that it did not know and, in the exercise of reasonable care could not have known, that the issuer or any other covered person had a disqualifying event, although an issuer will not be able to establish that it has exercised reasonable care unless it has made, in light of the circumstances, factual inquiry into whether any disqualifications exist.
The Adviser has made, and on a periodic basis will continue to make, inquiries into whether any persons that the Adviser has determined to be affiliated issuers have been subject to any disqualifying events; however, in some circumstances the Adviser’s ability to determine whether the Company would be disqualified from relying on Rule 506 may depend on cooperation of third parties over whom the Company may have limited control and influence.
If any of the Adviser’s covered persons, including any affiliated issuer of the Company, is subject to a disqualifying event, the Company could lose the ability to raise capital in a future Rule 506 offering for a significant period of time and the Company’s business, financial condition and results of operations could be materially and adversely affected.
Changes to Accounting Standards
Licensing Requirements
Reporting Company Filing Requirements
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Administrative Coordinator to compensate them for hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses.
The systems and resources necessary to comply with public company reporting requirements will increase further once the Company ceases to be an “emerging growth company” under the JOBS Act. As long as the Company remains an emerging growth company, it intends to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. The Company will remain an emerging growth company for up to five years following any future IPO (however, the Company does not anticipate engaging in an IPO of its Units), although if the market value of the Units that
Additionally, because the Units are registered under the 1934 Act, ownership information for any person who beneficially owns 5% or more of the Units will have to be disclosed in a Schedule 13G or other filings with the SEC. Beneficial ownership for these purposes is determined in accordance with the rules of the SEC, and includes having voting or investment power over the securities. In some circumstances, Unitholders who choose to reinvest their dividends may see their percentage stake in the Company increased to more than 5%, thus triggering this filing requirement. Each Unitholder is responsible for determining their filing obligations and preparing the filings. In addition, Unitholders who hold more than 10% of a class of Units may be subject to Section 16(b) of the 1934 Act, which recaptures for the benefit of the Company profits from the purchase and sale of registered
Documentation of Internal Controls
The Company’s internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If the Company fails to maintain the adequacy of its internal controls, including any failure to implement required new or improved controls, or if the Company experiences difficulties in their implementation, the Company’s business and operating results could be harmed and it could fail to meet its financial reporting obligations.
Other Risks Related to Portfolio Investments
High Yield Debt and Unrated Securities
As with other Portfolio Investments, there may not be a liquid market for certain high yield debt which is held by the Company, which could result in the Company being unable to sell such securities for an extended period of time, if at all. In addition, as with other types of Portfolio Investments, the market for high yield debt has historically been subject to disruptions that have caused substantial volatility in the prices of such securities. Consolidation in the financial services industry has resulted in there being fewer market makers for high yield debt, which may result in further risk of illiquidity and volatility with respect to high yield debt held by the Company, and this trend may continue in the future. Furthermore, high yield debt which is held by the Company may not be registered under the Securities Act, and, unless so registered, the Company is not able to sell such high yield debt except pursuant to an exemption from registration under the Securities Act. Unrated securities may be less liquid than comparable rated securities and may also involve the risk that the Adviser may not accurately evaluate the security’s comparative credit rating.
Analysis of creditworthiness of issuers of high yield and unrated securities may be more complex than for issuers of higher-quality fixed income securities. Since it is expected that most of the Company’s assets will not be rated by any rating agency or will be rated below
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investment grade, the Company is more dependent on the Adviser’s creditworthiness analysis than if the Company invested exclusively in higher-quality and rated securities. Securities rated below investment grade are often referred to as “leveraged loans,” “high yield” or “junk” securities, and may be considered “high risk” compared to debt instruments that are rated investment grade. See “—
Equity-Related Securities
Convertible Securities Risk
The Company may invest in synthetic convertible securities, which are created through a combination of separate securities that possess the two principal characteristics of a traditional convertible security, i.e., an income-producing security (“income-producing component”) and the right to acquire an equity security (“convertible component”). The income-producing component is achieved by investing in
Preferred Securities Risk
Forwards and Derivatives Transactions
All derivatives transactions involve risks different from, and potentially greater than, the risks associated with investing directly in securities and other more traditional assets, including:
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Market Risk.
Management Risk.
Documentation Risk.
Regulatory Risk.
Other Risks.
Warrants
Risks Relating to Reference Rates
The ICE Benchmark Administration (“IBA”) (the entity that is responsible for calculating LIBOR) ceased providing overnight, one, three, six and twelve months USD LIBOR tenors on June 30, 2023. In addition, the United Kingdom’s Financial Conduct Authority (“FCA”), itwhich oversees the IBA, now prohibits entities supervised by the FCA from using LIBORs, including USD LIBOR, except in very limited circumstances.
In the United States, SOFR is the preferred alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. SOFR is published by the Federal Reserve Bank of New York each U.S. Government Securities Business Day, for transactions made on the immediately preceding U.S. Government Securities Business Day. Alternative reference rates that may acquirereplace LIBOR, including SOFR for USD transactions, may not yield the same or similar economic results as LIBOR over the lives of such transactions.
As of the filing date of this annual report on Form 10-K, many of the Company’s loans that continuereferenced LIBOR have been amended to use LIBOR. While many LIBORreference the forward-looking term rate published by CME Group Benchmark Administration Limited based on SOFR (“CME Term SOFR”) or CME Term SOFR plus a fixed spread adjustment. CME Term SOFR rates were phased out atare forward-looking rates that are derived by compounding projected overnight SOFR rates over one, three, and six months taking into account the endvalues of 2021,multiple consecutive, executed, one-month and three-month CME Group traded SOFR futures contracts and, in some cases, over-the-counter SOFR Overnight Indexed Swaps as an indicator of CME Term SOFR reference rate values. CME Term SOFR and the inputs on which it is based are derived from SOFR. Since CME Term SOFR is a selectionrelatively new market rate, there will likely be no established trading market for credit agreements
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or other financial instruments when they are issued, and an established market may never develop or may not be liquid. Market terms for instruments referencing CME Term SOFR rates may be lower than those of later-issued CME Term SOFR indexed instruments. Similarly, if CME Term SOFR does not prove to be widely used, U.S.-dollar LIBOR rates will continuethe trading price of instruments referencing CME Term SOFR may be lower than those of instruments indexed to be published until June 2023. On July 29, 2021,indices that are more widely used. Further, the U.S. Federal Reserve System, in conjunctioncomposition and characteristics of SOFR and CME Term SOFR are not the same as those of LIBOR. Even with the Alternative Reference Rates Committee,application of a steering committee comprised of large U.S. financial institutions, formally recommended replacing U.S.-dollarfixed spread adjustment, LIBOR withand CME Term SOFR will not have the Secured Overnight Financing Rate (“SOFR”), a new index calculated by short-term repurchase agreements, backed by Treasury securities. Further, on March 15, 2022,same composition and characteristics, and there can be no assurance that the Consolidation Appropriations Act of 2022, which includes the Adjustable Interest Rate (LIBOR) Act (“LIBOR Act”), was signed into law in the U.S. This legislation establishes a uniform benchmark replacement process for financial contracts that mature after June 30, 2023 which do not contain clearly defined or practicable fallback provisions. The legislation also creates a safe harbor that shields lenders from litigation if they choose to utilize a replacement rate, recommended byas so adjusted, will be a direct substitute for LIBOR.
There can be no guarantee that SOFR will not be discontinued or fundamentally altered in a manner that is materially adverse to the Boardinterests of Governors ofinvestors in loans referencing SOFR. If the Federal Reserve. Although the transition process away from LIBOR has become increasingly well-defined (e.g. the LIBOR Act now provides a uniform benchmark replacement for LIBOR-based instrumentsmanner in the U.S.), the transition process may involve, among other things, increased volatilitywhich SOFR or illiquidity in markets for instrumentsCME Term SOFR is calculated is changed, that currently rely on LIBOR andchange may result in a reduction in the value of certain instruments that the Company may acquire. Further, disruptions related to loans in the marketplace could have a material adverse effect on the ability of the Adviseramount of interest payable on such loans and the trading prices of the SOFR Loans. In addition, there can be no guarantee that loans referencing SOFR or its affiliatesCME Term SOFR will continue to enter into loansreference those rates until maturity or that, in the future, in accordance with the Company’s investment strategyloans will reference benchmark rates other than CME Term SOFR. Should any of these events occur, the Company’s loans, and have a material adverse effectthe yield generated thereby, could be affected. Specifically, the anticipated yield on the Company.Company’s loans may not be fully realized and the Company’s loans may be subject to increased pricing volatility and market risk.
Risks Related to Economic Recessions
Many of the Company’s Portfolio Investments may be susceptible to economic slowdowns or recessions and may be unable to repay its loans during these periods. The global
A Portfolio Investment’s failure to satisfy financial or operating covenants imposed by the Company or other lenders could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize the Portfolio Investment’s ability to meet its obligations under the debt that the Company holds. The Company may incur additional expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting Portfolio Investment. In addition, if one of the Company’s Portfolio Investments were to go bankrupt, depending on the facts and circumstances, including the extent to which the Company actually provided significant managerial assistance to that Portfolio Investment, a bankruptcy court
These Portfolio Investments may face intense competition, including competition from companies with greater financial resources, more extensive research and development, manufacturing, marketing and service capabilities and greater number of qualified and experienced managerial and technical personnel. They may need additional financing that they are unable to secure and that the Company is unable or unwilling to provide, or they may be subject to adverse developments unrelated to the technologies they acquire.
The Company’s business is directly influenced by the economic cycle and could be negatively impacted by a downturn in economic activity in the U.S. as well as globally. Fiscal and monetary actions taken by U.S.and certain regional bank failures, the Russian invasion of Ukraine and the ongoing war in the Middle East, negatively impacts consumer confidence and consumer credit factors, the Company’s business, financial condition and results of operations could be adversely affected. Moreover, Federal Reserve policy, including with respect to certain interest rates and the decision to end its quantitative easing policy, along with the general policies of the current Presidential administration, may also adversely affect the value, volatility and liquidity of dividend- and interest-paying securities. Market volatility, periods of rising interest rates, such as the currentrecent economic period, and/or a return to unfavorable economic conditions could adversely affect its business.
Risks Related to the U.S.’ Debt Ceiling. The significant debt in the U.S. is expected to hinder growth in the U.S. for the foreseeable future. In the future, the U.S. government may not be able to meet its debt payments unless the federal debt ceiling is raised. If legislation increasing
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the debt ceiling is not enacted, as needed, and the debt ceiling is reached, the U.S. federal government may stop or delay making payments on its obligations. Any default by the U.S. government on its obligations or any prolonged U.S. government shutdown could negatively impact the U.S. economy and our Portfolio Investments.In addition, concerns over the United States’ debt ceiling and budget-deficit have driven downgrades by rating agencies to the U.S. government’s credit rating. Downgrades by rating agencies to the U.S. government’s credit rating or concerns about its credit and deficit levels in general could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our debt portfolio and our ability to access the debt markets on favorable terms. In addition, a decreased U.S. government credit rating, any default by the U.S. government on its obligations, or any prolonged U.S. government shutdown, could create broader financial turmoil and uncertainty, which may weigh heavily on our financial performance and the value of our common stock. U.S. debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns or a recession in the U.S.
Risks Related to Portfolio Investment Monitoring and Involvement
Risks Associated with Bankruptcy and Insolvency Cases
Generally, the duration of a bankruptcy or insolvency case can only be roughly estimated. The reorganization of a company usually involves the design of a business plan, the development and negotiation of a plan of reorganization, plan approval by creditors and confirmation by the court. This process can involve substantial legal, professional and administrative costs to the company and to the Company; it is subject to unpredictable and lengthy delays; and during the process the company’s competitive position may erode, key management may depart and the company may not be able to invest adequately. In some cases, the company may not be able to reorganize and may be required to liquidate assets. In addition, the debt of companies in financial reorganization may, in some cases, not pay current interest and other charges, may not even accrue interest and other charges during reorganization, may be
During the pendency of a bankruptcy case, an automatic stay will prevent all creditors from taking action against the debtor to foreclose on collateral or otherwise to collect on amounts owed to such creditors. Unless a creditor’s claim in such case is secured by assets having a value in excess of such claim, or the bankruptcy estate is determined to be solvent, no interest will be permitted to accrue and, therefore, a creditor’s return on investment can be adversely affected by the passage of time during which the plan of reorganization of the debtor is being negotiated, approved by the creditors and confirmed by the bankruptcy court.
The priority of perfected liens held by secured creditors as of the commencement of the bankruptcy case is typically recognized in a bankruptcy case, unless avoided. Occasionally, however, a court
The administrative costs in connection with a bankruptcy case are frequently high and will generally be paid out of the debtor’s estate prior to any return to creditors (other than out of assets or proceeds thereof which are subject to valid and enforceable liens and other security
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interests) and equity holders. In addition, certain unsecured claims that have priority by law over the claims of certain creditors (for example, claims arising post-petition and certain claims for taxes) may be quite high.
U.S. bankruptcy law permits the classification of “substantially similar” claims in determining the classification of claims in a reorganization for the purpose of voting on a plan of reorganization. Because the standard for classification is vague, there exists a significant risk that the Company’s influence with respect to a class of securities can be lost by the inflation of the number and the amount of claims in, or other gerrymandering of, the class.
Although a creditor is not typically compelled to release direct claims it may have
Claims in bankruptcy cases are often paid at less than par and, depending on the debtor’s assets and liabilities, there may be no recovery at all for some classes of creditors. The claims of even over-secured secured creditors are often paid out over time, and may receive debt securities that will trade below par. Initially, only the debtor may file a proposed plan of reorganization. While the U.S. Bankruptcy Code permits
Even if a class of claims is entitled to a recovery in a reorganization or liquidation proceeding, such recovery could be in the form of instruments or interests different from the form of instrument or interest which formed the basis for the claim, including debt securities, equity securities, convertible securities, warrants, options, cash, interests in litigation claims or trusts formed to pursue such litigation claims, interests in liquidation trusts, or other property or interests, any of which could be illiquid and/or difficult to value. Furthermore, the terms of instruments or interests distributed in a bankruptcy or insolvency proceeding may differ from prevailing market terms for similar instruments or interests, and may have a market value of less than par.
The Company may be presented with the opportunity to make new investments in connection with the reorganization or liquidation of an issuer of Portfolio Investments, including, without limitation, through a rights offering, litigation financing, bridge financing or other exit financing. The Company may make such investments as
Contractual subordination provisions are enforceable when a borrower is in bankruptcy, as are most inter-creditor agreement terms. Furthermore, there are instances where creditors and equity holders may lose their ranking and priority when they take over management and functional operating control of a debtor. In those cases where the Company, by virtue of such action, is found to exercise “domination and control” of a debtor, the Company may lose its priority if the debtor or other creditors can demonstrate that the debtor’s business was adversely impacted or other creditors and/or equity holders were harmed by improper or unfair actions of the Company, whether or not the Company is found to be a controlling party of the debtor. In addition, loans extended to a financially distressed borrower by an entity that owns an equity interest in the borrower may be reclassified as having been an equity capital contribution, rather than a debt obligation.
Notwithstanding the corporate structure of various debtor entities, such as special purpose entities created to hold assets and to structure for bankruptcy remoteness, such entities may, in certain cases, be consolidated in bankruptcy proceedings, which can affect the outcome of such proceedings and the amounts ultimately received by creditors. In addition, if a claim can be asserted against only a parent holding entity, such claim may be structurally subordinated to claims against a subsidiary entity that owns assets.
The U.S. Bankruptcy Code and other laws and regulations affecting debtors’ and creditors’ rights are subject to change, including by way of legislative action or judicial interpretation. The U.S. Bankruptcy Codeandother laws and regulations affecting debtors’ and creditors’ rights are subject to change, including by way of legislative action orjudicial
Lack of Control over Investments
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non-controlling interest
Control Positions
To the extent that the Company owns a controlling stake in or is deemed an affiliate of a particular company, it may also be subject to certain additional bankruptcy or securities laws restrictions that could affect both the liquidity of the Company’s interest and the Company’s ability to liquidate its interest without adversely impacting the price thereof, including insider trading restrictions, the affiliate sale restrictions of Rule 144 of the Securities Act and the disclosure requirements of Sections 13 and 16 of the 1934 Act. Further, to the extent that affiliates of the Company or the Adviser are subject to such restrictions, the Company, by virtue of its affiliation with such entities, may be similarly restricted, regardless of whether the Company stands to benefit from such affiliate’s ownership.
If the Company, alone or as part of a group acting together for certain purposes, becomes the beneficial owner of more than 10% of certain classes of securities of a U.S. public company or places a director on the board of directors of such a company, the Company may be subject to certain additional reporting requirements and to liability for short-swing profits under Section 16 of the 1934 Act. Furthermore, the Company may also be subject to similar reporting requirements and
The exercise of control over a company, depending upon the amount and type of securities owned by the Company, contractual arrangements between the company and the Company, and other relevant factual circumstances, could result in an extension to one year of the
Lender Liability Considerations and Equitable Subordination
Fraudulent Conveyance and Preference Considerations
The measure of insolvency for purposes of the foregoing will vary. Generally, an issuer or obligor would be considered insolvent at a particular time if the sum of its debts were then greater than all of its property at a fair valuation, or if the present fair saleable value of its
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assets were less than the amount that would be required to pay its probable liabilities on its existing debts as they became absolute and matured. There can be no assurance as to what standard a court would apply in order to determine whether the issuer or obligor was “insolvent” after giving effect to the incurrence of the indebtedness and/or the granting of any security interest or other lien or that, regardless of the method of valuation, a court would not determine that the issuer was “insolvent” upon giving effect to such incurrence of indebtedness and/or grant of security interests or other lien.
The Company may invest in bank debt or other indebtedness issued by a borrower which is guaranteed by other entities within the borrower’s corporate family. In such circumstances, the borrower often has little or no assets other than the stock of its subsidiaries and, as a result, any recovery is often available only, if at all, from the entities that guaranteed the indebtedness. There is a risk, however, that the obligations of such guarantors and any security interests or other liens issued by the guarantors
If a transaction is found to have been a fraudulent conveyance, the transferee may be compelled to return the value of the assets transferred as of the time of the transfer, even if the then current value is substantially less. In addition, unless the transferee is deemed to be a “good faith” transferee, the return of the asset may not even provide for the compensation back to the transferee of the value paid to the transferor.
In addition, in the event of the insolvency (as determined by a court based on the law of the jurisdiction which is being applied) of an issuer of a Portfolio Investment, payments made on the Company’s Portfolio Investment, or new liens granted, could be subject to avoidance as a “preference” if made within a certain period of time (which may be as long as one year) before insolvency, depending on a number of factors.
In general, if payments on a Company’s Portfolio Investment are avoidable, whether as a fraudulent conveyance or preference, such payments can be recaptured either from the initial recipient (such as the Company) or from subsequent transferees of such payments, including Unitholders. Additionally, if the grant of a security interest or other lien is avoidable, whether as a fraudulent conveyance or preference, the value of the security interest or other lien can be recovered from the initial transferee or the entity for whose benefit such transfer was made (such as the Company), and such recovery could include the diminution in value of the property which was subject to the security interest or other lien from the date of transfer.
There can be no assurance that a successful cause of action for fraudulent conveyance or preference will not occur, or as to whether any fund, lending institution or other party from which the Company may directly or indirectly acquire a Portfolio Investment engaged in any conduct to give rise to such causes of action, and if it did, as to whether such causes of action could be asserted against the Company and/or the Unitholders.
Portfolio Investment Risk
There can be no assurance that a Portfolio Investment’s management team will be able to operate such Portfolio Investment successfully. In addition, instances of fraud or other illegal practices committed by the management team of a Portfolio Investment may undermine the Company’s investment in such Portfolio Investment and the Company may suffer losses. Additionally, Portfolio Investments need to attract, retain and develop executives and members of their management teams. There can be no assurance that a Portfolio Investment will be able to attract and develop suitable members of its management team, which may adversely affect the Company.
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Zero-Coupon Bonds, Deferred Interest Rate Bonds
To the extent the Company invests in OID instruments, including PIK, zero coupon bonds, and debt securities with attached warrants, investors will be exposed to the risks associated with the inclusion of
• | The interest payments deferred on a PIK loan are subject to the risk that the borrower may default when the deferred payments are due in cash at the maturity of the loan; | ||
• | The interest rates on PIK loans are higher to reflect the time-value of money on deferred interest payments and the higher credit risk of borrowers who may need to defer interest payments; | ||
• | PIK instruments may have unreliable valuations because the accruals require judgments about ultimate collectability of the deferred payments and the value of the associated collateral; | ||
• | An election to defer PIK income payments by adding them to principal increases the Company’s gross assets and, thus, increases future base fees to the Adviser and, because income payments will then be payable on a larger principal amount, the PIK election also increases the Adviser’s future income incentive fees at a compounding rate; | ||
• | Market prices of OID instruments are more volatile because they are affected to a greater extent by interest rate changes than instruments that pay interest periodically in cash; | ||
• | The deferral of interest on a PIK loan increases its loan-to-value ratio, which is a measure of the riskiness of a loan; and | ||
• | OID creates the risk of non-refundable cash payments to the Adviser based on non-cash accruals that may never be realized. |
Money Market and Other Liquid Instruments
Among other liquid investments, the Company may invest cash, pending investment, reinvestment or distribution thereof or in connection with the maintenance of reserves, in money fund products offered from time to time by its Custodian, including the use of bank “sweep” short-term offerings.
Pooled Investment Vehicles and Pass-through Entities
U.S. Government and Agency Securities
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Restricted Securities
In addition, a debtor in a reorganization case may be granted a trading restriction order by a bankruptcy court in order to protect such debtor’s net operating losses (a “NOL Order”). Such an order may prohibit or severely restrict the ability of some creditors to sell their claims and interests in the debtor. The Company’s ability to transfer its interests in such a debtor may be impaired, delayed or prohibited as a consequence of a NOL Order. The Company may also incur added expenses if it attempts to challenge or limit the scope of a NOL Order, and such an attempt may not be successful. Similarly, issuers with net operating losses sometimes adopt Unitholder rights plans or similar arrangements in order to preserve the ability to utilize such net operating losses in the future; any such actions could also limit or otherwise adversely impact the Company’s ability to transfer or dispose of its interests in any such issuer.
Risks Related to Disposition of Investments
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk Management and Strategy
We recognize the importance of assessing, identifying, and managing material risks from cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. These risks include, among other things, operational risks, financial loss, intellectual property theft, fraud, extortion, loss of sensitive data, harm to individuals including stockholders, violation of privacy or security laws, increased costs associated with mitigation of damages and remediation, and other legal and reputational risks. We have implemented several cybersecurity processes and controls to aid in our efforts to assess, identify, and manage such material risks.
We rely on the Adviser’s enterprise-wide cybersecurity program to protect our information, including due oversight of the cybersecurity programs of our key service providers and processes for the assessment, identification, and management of material risks from cybersecurity threats, including those associated with the use of third-party service providers. The Adviser considers such cybersecurity threats as part of its broader risk management framework, and its cybersecurity program is designed to, among other things, protect us, insofar as is practicable, from the hazards of cybersecurity threats and vulnerabilities in accordance with applicable legal requirements and guidance. The Adviser collaborates with third-party subject-matter experts, as necessary, to identify and assess material cybersecurity threat risks and evaluate and test its cybersecurity protections, including through continuous network and endpoint monitoring, employee anti-phishing training, vulnerability assessments, and penetration testing to inform the Adviser’s risk identification and assessment. The Adviser also performs due diligence reviews on third-parties that have access to our systems, data, or facilities that house such systems or data and continually monitors cybersecurity threat risks identified through such diligence.
Together with management, the Board has designated an Information Security Group (“ISG”) to monitor issues relating to cybersecurity and work with the Adviser’s third-party Information Technology (“IT”) service provider to evaluate potential cyber risk vulnerabilities. While its composition may change over time, the ISG currently consists of our Chief Financial Officer and Chief Compliance Officer. The ISG, together with the Adviser’s third-party IT service provider, annually reviews the cyber risks applicable to our business and the measures established by the Adviser and other service providers to protect against those risks and recommends changes or enhancements, as necessary. The Adviser’s management and the third-party IT service provider also monitor the Adviser’s network to identify internal and external cybersecurity threats and vulnerabilities in order to determine any steps that should be taken to protect information stored on the Adviser’s
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network and promptly inform the ISG of any identified cybersecurity threats or vulnerabilities. The ISG also makes inquiries of the Adviser’s management and the third-party IT service provider regarding such efforts.
Material Impact of Cybersecurity Risks
The potential impact of risks from cybersecurity threats on us are assessed on an ongoing basis, and how such risks could materially affect our business strategy, operational results, or financial condition are regularly evaluated. During the reporting period, we did not identify any risks from cybersecurity threats, including as a result of previous cybersecurity incidents, that we believe have materially affected, or are reasonably likely to materially affect, our business strategy, operational results, or financial condition. We further describe cybersecurity risks that we face in “The failure in cyber security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively” and “We, our Adviser and our portfolio companies are subject to risks associated with cyber-attacks” under “Item 1A. Risk Factors” of this annual report on Form 10-K.
Governance
The Board has overall responsibility for risk oversight, including risks related to cybersecurity threats. The Board is aware of the critical nature of managing these risks and has sought to establish oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity and appropriate review of the protections provided to us by the Adviser.
In conducting its duties, the ISG relies on the experience and expertise of the Adviser’s third-party IT service provider, which includes, among other things, over two decades of managing network security for companies, a track record of collaborating with management teams on incident response and threat mitigation, and, through various partnerships, vetting and implementing cutting-edge cybersecurity technologies. The ISG will provide a report, at least annually, to the entire Board regarding our cybersecurity threat risk management and strategy processes, covering topics such as data security posture, results from third-party assessments, progress towards pre-determined risk mitigation-related goals, the Adviser’s incident response plan, and cybersecurity threat risks or incidents and developments, as well as the steps the Adviser’s management has taken to respond to and mitigate such risks. The Adviser’s incident response plan provides guidelines for responding to cyber incidents and facilitates coordination across multiple operational functions of the Adviser. The incident response plan includes notification to the ISG and, depending on its nature, escalation to the Board, if appropriate. The Board is also encouraged to engage with the ISG on cybersecurity topics at other times, and material cybersecurity threats and risks are also considered by the Board in relation to other important matters that come before it.
Item 2. Properties
Our executive offices are located at 500 Park Avenue, New York, New York 10022, and are provided by SLR in accordance with the terms of the Investment Management Agreement. We believe that our office facilities are suitable and adequate for our business as it is presently conducted.
Item 3. Legal Proceedings
Neither we nor our subsidiaries are currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or our subsidiaries. From time to time, we or our subsidiaries may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Our business is also subject to extensive regulation, which may result in regulatory proceedings against us. While the outcome of these legal or regulatory proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Units will only be sold (i) in the U.S. only to U.S. persons who are “accredited investors” within the meaning of Regulation D under the Securities Act and (ii) outside the U.S. in accordance with Regulation S under the Securities Act. There is no public market for our Units, and none is expected to develop. For this reason, the Company is not providing the performance graph required by Item 201(e) of Regulation
Because Units are being acquired by investors in one or more transactions “not involving a public offering,” they are “restricted securities” and may be required to be held indefinitely. Our Units may not be sold, transferred, assigned, pledged or otherwise disposed of unless (i) our written consent is granted, and (ii) the Units are registered under applicable securities laws or specifically exempted from registration (in which case the unitholder may, at our option, be required to provide us with a legal opinion, in form and substance satisfactory to us, that registration is not required). We do not anticipate consenting to sales, transfers or assignments of Units. Accordingly, an investor must be willing to bear the economic risk of investment in the Units until we are liquidated. No sale, transfer, assignment, pledge or other disposition, whether voluntary or involuntary, of the Units may be made without our written consent.
Holders
As of February 24, 2023,23, 2024, there was 1 holder of record of our Units.
Recent Sales of Unregistered Securities
None, other than those already disclosed in certain Form
Issuer Repurchases of Equity Securities
None.
Distributions
Tax characteristics of all distributions will be reported to Unitholders on Form 1099 after the end of the calendar year. Future quarterly distributions, if any, will be determined by our Board. We expect that our distributions to Unitholders will generally be from accumulated net investment income, from net realized capital gains or
We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC tax treatment, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute realized net capital gains (i.e.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a business development company, we may in the future be limited in our ability to make distributions. Also, our revolving credit facility may limit our ability to declare distributions if we default under certain provisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of the tax benefits available to us as a regulated investment company. In addition, in accordance with GAAP and tax regulations, we include in income certain amounts that we have not yet received in cash, such as contractual
With respect to the distributions to Unitholders, income from origination, structuring, closing and certain other upfront fees associated with investments in portfolio companies are treated as taxable income and accordingly, distributed to Unitholders.
We cannot assure Unitholders that they will receive any distributions at a particular level.
Item 6. Reserved
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Annual Report on Form
These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:
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Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in the section entitled “Item 1A. Risk Factors” and elsewhere in this report.
These forward-looking statements apply only as of the date of this report. Moreover, we assume no duty and do not undertake to update the forward-lookingforward- looking statements.
The following analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes thereto contained elsewhere in this Annual Report on Form
Overview
The Company was formed as a limited liability company under the laws of the State of Delaware on May 18, 2018. We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), and have elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes. As such, we are required to comply with various regulatory requirements, such as the requirement to invest at least 70% of our assets in “qualifying assets,” source of income limitations, RIC asset diversification requirements, and the requirement to distribute annually at least 90% of our taxable income
SLR Capital Partners, LLC (the “Adviser”) serves as the Company’s investment adviser pursuant to an investment management agreement between the Company and the Adviser (as amended, restated or otherwise modified from time to time, the “Investment Management Agreement”). Subject to the overall supervision of the Company’s Board of Directors (the “Board”), the Adviser is responsible for managing the Company’s business and activities, including sourcing investment opportunities, conducting research, performing diligence on potential investments, structuring our investments, and monitoring our portfolio companies on an ongoing basis through a team of investment professionals. The managing members of the Adviser are Michael Gross and Bruce Spohler, who also oversee the Adviser’s investment committee. Pursuant to the Investment Management Agreement, the Adviser has also been appointed to provide administrative and coordination services to the Company (in such capacity, the “Administrative Coordinator”). The Administrative Coordinator supervises or provides the Company’s administrative services, including operational trade support, net asset value calculations, financial reporting, fund accounting, registrar and transfer agent services. The Administrative Coordinator also provides assistance to the Adviser in connection with communicating with investors and other persons with respect to the Company.
The Company is organized primarily for investors who may invest through one or more investment funds created by one or more financial institutions unaffiliated with the Company (collectively, the “Access Fund”). Certain other investors may also invest directly in the Company. For those investors who invest through the Access Fund, we expect the Access Fund will issue a pro rata interest to each investor in the Access Fund (the “Access Fund Investors”) that, with respect to each Access Fund Investor’s investment in the Access Fund, corresponds to the pro rata share of the units issued by the Company to the Access Fund. We also expect that units will only be sold (i) in the U.S. only to U.S. persons who are “accredited investors” within the meaning of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) and (ii) outside the U.S. in accordance with Regulation S under the Securities Act. Upon a sale of units to an investor, we expect the Access Fund will pass its voting rights in the Company through to the Access Fund Investors.
The Company’s principal focus is to invest in first lien secured floating rate loans primarily to upper middle market private leveraged companies (generally, loan sizes of $100 million to $300 million to companies with earnings before interest, tax, depreciation and amortization (“EBITDA”) between approximately $25 million and $100 million) that have significant free cash flow and are
60
Adviser will provide the Company a significant advantage to source loans over other lenders that do not have the capital base to provide significant debt financing.
The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and the Company may from time to time take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act.
Recent Developments
None.
Revenues
The Company’s principal focus is to invest in first lien secured floating rate loans primarily to upper middle market private leveraged companies (generally, loan sizes of $100 million to $300 million to companies with EBITDA between approximately $25 million and $100 million) that have significant free cash flow and are in
Expenses
The Company will (directly or indirectly) bear:
(ii) all fees, costs, expenses and liabilities related to any audits or agreed upon procedures, tax forms and return preparations and filings, custodian fees and expenses, fund accounting, administrator services, financial statement preparation and reporting, web services for the benefit of Unitholders, delivery costs and expenses in connection with reporting obligations and communications and compliance services; |
61
(xv) all fees, costs, expenses and liabilities for subscription services (to the extent such subscription is required by the general partner of the Access Fund); |
In addition, the aggregate amount of the operating expenses relating to Unitholders investing directly in the Company set forth in clauses (ii)-(iv) and the operating expenses included
Additionally, the Company will not bear the costs of any third-party valuation agent engaged solely for purposes of valuing the net asset value of the Company.
The Adviser or Administrative Coordinator and/or their affiliates has advanced organizational and offering expenses to the Company, which include organizational fees, costs, expenses and liabilities of the Company, including legal expenses, incurred in connection with the initial offering of Units and the formation and establishment of the Company. The Adviser or Administrative Coordinator (or such affiliate) has been reimbursed by the Company for such advanced costs and expenses in an amount not to exceed $0.5 million. Accordingly, $0.3 million of offering expenses were charged to capital and $0.1 million of organizational costs were expensed in 2019.
Macroeconomic Environment
Credit markets continued to be under pressureshowed resilience in 2023 in the face of persistent but declining inflationary pressures and higher interest rates. The U.S. economy grew during 2022 amid arisk-offenvironmentthe year and sustained macro-economic uncertainty due to record-high inflation, tighter financial conditions and growing recession risk. Centralcentral banks have remained focused on restoring price stability by raisingpostured toward lower interest ratesrates. The year ended with uncertainties around the economy and have signaled that growth may be hindered until inflation comes under control.
Portfolio and Investment Activity
During the year ended December 31, 2022,2023, we invested approximately $185.3$111.3 million across 4529 portfolio companies. This compares to investing approximately $377.4$185.3 million across 4845 portfolio companies for the year ended December 31, 2021.2022. Investments sold or prepaid during the year ended December 31, 20222023 totaled approximately $96.0$220.6 million versus approximately $108.2$96.0 million for the year ended December 31, 2021.
At December 31, 2022,2023, our portfolio consisted of 5644 portfolio companies and was invested 96.7% in senior secured loans and 3.3% in common equity/equity interests/warrants, in each case, measured at fair value versus 56 portfolio companies invested 100.0% in senior secured loans and 0.0% in common equity/equity interests/warrants, in each case, measured at fair value, versus 52at December 31, 2022.
At December 31, 2023, 96.4% of our income producing investment portfolio companies invested 99.9% in senior secured loanswas floating rate and 0.1% in common equity/equity interests/warrants, in each case,3.6% was fixed rate, measured at fair value, at December 31, 2021.
The investment period of the Company ended on December 31, 2022.
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Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies. Within the context of these critical accounting policies and disclosed subsequent events herein, we are not currently aware of any other reasonably likely events or circumstances that would result in materially different amounts being reported.
Valuation of Portfolio Investments
In December 2020, the SEC adopted new Rule new rule sets forth requirements for good faith determinations of fair value, as well as for the performance of fair value determinations, including related oversight and reporting obligations. The new rule also defines “readily available market quotations” for purposes of the definition of “value” under the 1940 Act, and the SEC noted that this definition will apply in all contexts under the 1940 Act. The Company will complycomplies with Rule
The Company conducts the valuation of its assets, pursuant to which the Company’s net asset value (the “NAV”) is determined, at all times consistent with GAAP and the 1940 Act. The Board will (1) periodically assess and manage valuation risks; (2) establish and apply fair value methodologies; (3) test fair value methodologies; (4) oversee and evaluate third-party pricing services, as applicable; (5) oversee the reporting required by Rule
It is anticipated that in respect of many of the Company’s assets, readily available market quotations will not be obtainable and that such assets will be valued at fair value. A market quotation is readily available for a security only when that quotation is a quoted price (unadjusted) in active markets for identical investments that the Company can access at the measurement date, provided that a quotation will not be readily available if it is not reliable. If the Company anticipates using a market quotation for a security, it will also monitor for circumstances that may necessitate the use of fair value, such as significant events that may cause concern over the reliability of a market quotation.
For purposes of calculating the NAV, the Company’s assets will generally be valued as described in Note 2(b) to the Company’s Consolidated Financial Statements.
Leverage
The Company is required to comply with the asset coverage requirements of the 1940 Act. The Company expects to employ leverage and otherwise incur indebtedness with respect to the portfolio both on a recourse2022,2023, the Company held $338.1$170.8 million of senior securities, for an asset coverage ratio of 158.0%257.1%.
Taxation as a Regulated Investment Company (“RIC”)
The Company elected to be treated as a RIC under Subchapter M of the Code and intends to qualify for taxation as a RIC annually. As a RIC, the Company generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it timely distributes to Unitholders as dividends. In order to qualify for taxation as a RIC, the Company is required, among other things, to be diversified at each quarter end and to timely distribute to its Unitholders at least 90% of investment company taxable income, as defined by the Code, for each year. There is no guarantee the Company will be able to
63
Recent Accounting Pronouncements
None.
Results of Operations
Results are shown for the fiscal years ended December 31, 20222023 and December 31, 2021.2022. Results for the fiscal period ended December 31, 20202021 can be found in Item 7 of the Company’s report on FormMarch 1, 2022,February 28, 2023, which is incorporated by reference herein.
Investment Income
For the fiscal years ended December 31, 20222023 and 2021,2022, gross investment income totaled $45.2$61.0 million and $22.3$45.2 million, respectively. The comparative increase in gross investment income is due to a substantial increase in the size of the income-producing portfolio along with higher LIBOR and SOFR.
Expenses
Expenses totaled $24.9$32.4 million and $13.0$24.9 million, respectively, for the fiscal years ended December 31, 20222023 and December 31, 2021,2022, of which $7.8$8.2 million and $6.1$7.8 million, respectively, were management, incentive and administration fees and $16.3$23.1 million and $6.2$16.3 million, respectively, were interest and other credit facility expenses. Other general and administrative expenses totaled $0.9$1.1 million and $0.8$0.9 million, respectively, for the fiscal years ended December 31, 20222023 and 2021.2022. Expenses generally consist of management fees, administration fees, performance-based incentive fees, administrative services expenses, insurance, legal expenses, directors’ fees and expenses, audit and tax expenses and other general and administrative expenses. Interest and other credit facility expenses generally consist of interest, unused fees, agency fees and financing costs, if any, among others. The comparative increase in expenses is generally due to higher interest expense from increased borrowings to support a larger portfolio, along with an increase in LIBOR and SOFR.
Net Investment Income
The Company’s net investment income totaled $28.6 million and $20.3 million, or $1.16 and $9.3 million, or $1.11 and $0.79 per average unit, respectively, for the fiscal years ended December 31, 20222023 and 2021.
Net Realized Gain
The Company had investment sales and prepayments totaling approximately $96$221 million and $108$96 million, respectively, for the fiscal years ended December 31, 20222023 and 2021.2022. Net realized gains over the same period totaled $0$0.08 million and $0.01 million, respectively.
Net Change in Unrealized Gain
For the fiscal years ended December 31, 20222023 and 2021,2022, net change in unrealized gain (loss) on the Company’s investments totaled ($9.0) million and $0.2 million, respectively. Net unrealized loss for the fiscal year ended December 31, 2023 is primarily due to depreciation on our investments in SLR-AMI Topco Blocker, LLC (f/k/a AmeriMark), TAUC Management, LLC and $2.6 million, respectively.Peter C. Foy & Associates Insurance Services, LLC, among others, partially offset by the reversal of previously recorded unrealized depreciation on our investments in World Insurance Associates, LLC and appreciation on our investments in iCIMS, Inc. and Pinnacle Treatment Centers, Inc., among others. Net unrealized gain for the fiscal year ended December 31, 2022 is primarily due to appreciation on our investments in Apex Service Partners, Ivy Fertility Services, LLC and ACRES Commercial Mortgage, LLC, among others, partially offset by the reversal of previously recorded unrealized appreciation on our investments in World Insurance Associates, LLC and Amerimark Holdings, LLC, among others. Net unrealized gain for the fiscal year ended December 31, 2021 is primarily due to appreciation on our investments in World Insurance Associates, LLC, Foundation Consumer Brands, LLC and MMIT Holdings, LLC, among others, partially offset by the reversal of previously recorded unrealized appreciation on our investments in Galway Partners Holdings, LLC and Worldwide Facilities, LLC, among others.
Net Increase in Unitholders’ Capital Resulting From Operations
For the fiscal years ended December 31, 20222023 and 2021,2022, the Company had a net increase in unitholders’ capital resulting from operations of $20.4$19.6 million and $11.9$20.4 million, respectively. For the same period,periods, income per average unit was $0.80 and $1.12, and $1.01, respectively.
Financial Condition, Liquidity and Capital Resources
Our primary uses of cash are for (i) investments in portfolio companies and other investments to comply with certain portfolio diversification requirements, (ii) the cost of operations (including paying the Adviser), (iii) debt service of any borrowings, and (iv) cash distributions to our Unitholders.
64
Equity
During the period March 12, 2019 (commencement of operations) to December 31, 2022,2023, on a net basis, the Company sold and issued 18,992,563 common units26,710,775 Units at an average price of $10.35$10.40 per unit,Unit, for grossnet proceeds of $196.5$277.8 million. All of our outstanding unitsUnits were issued and sold in reliance upon the available exemptions from registration requirements of Section 4(a)(2) of the Securities Act.Unfunded equity capital commitments totaled $129.5$48.2 million at December 31, 2022. The Offering Period of the Company ended on April 5, 2019.
Debt
Revolving credit facility due December 2023August 2024 (the
Revolving credit facility due December 20232024 (the
Cash Equivalents
We deem certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents. The Company makes purchases that are consistent with its purpose of making investments in securities described in paragraphs 1 through 3 of Section 55(a) of the 1940 Act. From time to time, including at or near the end of each fiscal quarter, we consider using various temporary investment strategies for our business. One strategy includes taking proactive steps by utilizing cash equivalents as temporary assets with the objective of enhancing our investment flexibility pursuant to Section 55 of the 1940 Act. More specifically, from2022.
Contractual Obligations
We have entered into certain contracts under which we have material future commitments. We have entered into the Investment Management Agreement with the Adviser in accordance with the 1940 Act. Under the Investment Management Agreement, the Company will pay the Adviser the Management Fee and the Incentive Fee, and the Administrative Coordinator the Administration Fee. Under the Investment Management Agreement, the Administrative Coordinator may engage or delegate certain administrative functions to third parties or affiliates on behalf of the Company. The Administrative Coordinator will be responsible for all expenses of its own staff responsible for
|
| Payments due by Period as of December 31, 2023 |
| |||||||||||||||||
|
| Total |
|
| Less than |
|
| 1-3 years |
|
| 3-5 years |
|
| More than |
| |||||
Credit facilities (1) |
| $ | 170.8 |
|
| $ | 170.8 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
65
Payments due by Period as of December 31, 2022 (dollars in millions) | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
Credit facilities (1) | $ | 338.1 | $ | — | $ | 338.1 | $ | — | $ | — | | |||||||||
If any of the contractual obligations discussed above are terminated, our costs under any new agreements that we enter into may increase. In addition, we would likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under the Investment Management Agreement. Any new investment advisory agreement would also be subject to approval by our Unitholders.
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Off-Balance
From20222023 and December 31, 2021,2022, respectively:
December 31, 2022 | December 31, 2021 | |||||||
(in millions) | ||||||||
Outset Medical, Inc. | $ | 11.9 | $ | — | ||||
RSC Acquisition, Inc. | 10.3 | — | ||||||
Human Interest Inc. | 6.8 | — | ||||||
CC SAG Holdings Corp. (Spectrum Automotive) | 6.6 | 8.0 | ||||||
Vessco Midco Holdings, LLC. | 5.0 | 5.9 | ||||||
iCIMS, Inc. | 3.9 | — | ||||||
Oral Surgery Partners Holdings, LLC. | 3.3 | — | ||||||
Glooko, Inc. | 3.2 | 5.3 | ||||||
Plastics Management, LLC. | 3.1 | 4.5 | ||||||
Arcutis Biotherapeutics, Inc. | 3.1 | 18.4 | ||||||
Spectrum Pharmaceuticals, Inc. | 3.0 | — | ||||||
High Street Buyer, Inc. | 2.8 | 1.1 | ||||||
Maurices, Incorporated | 2.7 | 5.0 | ||||||
Ardelyx, Inc. | 2.7 | — | ||||||
Southern Orthodontic Partners Management, LLC. | 2.6 | — | ||||||
Pediatric Home Respiratory Services, LLC. | 2.4 | — | ||||||
Cerapedics, Inc. | 2.4 | — | ||||||
Orthopedic Care Partners Management, LLC. | 2.2 | — | ||||||
Transportation Insight, LLC. | 1.8 | 3.8 | ||||||
Erie Construction Mid-west, LLC. | 1.6 | 1.6 | ||||||
RxSense Holdings, LLC. | 1.6 | 1.6 | ||||||
Kaseya, Inc. | 1.3 | — | ||||||
Nexus Intermediate III, LLC (Vortex) | 1.3 | 1.3 | ||||||
Enverus Holdings, Inc. | 1.2 | 1.8 | ||||||
Meditrina, Inc. | 1.2 | — | ||||||
Basic Fun, Inc. | 1.2 | 0.9 | ||||||
Kid Distro Holdings, LLC. | 1.1 | 1.1 | ||||||
GSM Acquisition Corp. | 1.1 | 1.1 | ||||||
Foundation Consumer Brands, LLC. | 1.0 | 1.0 | ||||||
Tilley Chemical Buyer, Inc. | 0.6 | 2.9 | ||||||
Ultimate Baked Goods Midco LLC. | 0.6 | 0.3 | ||||||
MRI Software LLC. | 0.6 | 2.2 | ||||||
Peter C. Foy & Associates Insurance Services, LLC. | 0.6 | 1.6 | ||||||
Pinnacle Treatment Centers, Inc. | 0.5 | 0.6 | ||||||
Ivy Fertility Services, LLC. | 0.5 | 1.9 | ||||||
BayMark Health Services, Inc. | 0.5 | 0.9 | ||||||
NAC Holdings Corporation | 0.5 | 6.5 | ||||||
TAUC Management, LLC. | 0.4 | 1.5 | ||||||
Apex Service Partners, LLC. | 0.3 | 4.2 | ||||||
SunMed Group Holdings, LLC. | 0.2 | 0.4 | ||||||
ENS Holdings III Corp. & ES Opco USA LLC. | 0.2 | 0.3 | ||||||
All States Ag Parts, LLC. | 0.2 | 0.3 | ||||||
World Insurance Associates, LLC. | 0.1 | 0.3 | ||||||
BridgeBio Pharma, Inc. | — | 9.8 | ||||||
Inszone Mid, LLC. | — | 5.3 | ||||||
RQM+ Corp. | — | 1.6 | ||||||
Rezolute, Inc. | — | 1.2 | ||||||
SOC Telemed, Inc. | — | 0.9 | ||||||
MMIT Holdings, LLC. | — | 0.8 | ||||||
Neuronetics, Inc. | — | 0.4 | ||||||
Total Commitments | $ | 98.2 | $ | 106.3 | ||||
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
(in millions) |
|
|
|
|
|
| ||
iCIMS, Inc. |
| $ | 2.3 |
|
| $ | 3.9 |
|
High Street Buyer, Inc. |
|
| 1.9 |
|
|
| 2.8 |
|
RxSense Holdings, LLC |
|
| 1.6 |
|
|
| 1.6 |
|
Nexus Intermediate III, LLC (Vortex) |
|
| 1.3 |
|
|
| 1.3 |
|
Kid Distro Holdings, LLC |
|
| 1.1 |
|
|
| 1.1 |
|
GSM Acquisition Corp. |
|
| 1.1 |
|
|
| 1.1 |
|
Foundation Consumer Brands, LLC |
|
| 1.0 |
|
|
| 1.0 |
|
Basic Fun, Inc. |
|
| 0.9 |
|
|
| 1.2 |
|
Ultimate Baked Goods Midco LLC |
|
| 0.7 |
|
|
| 0.6 |
|
ENS Holdings III Corp. & ES Opco USA LLC |
|
| 0.7 |
|
|
| 0.2 |
|
Kaseya, Inc. |
|
| 0.6 |
|
|
| 1.3 |
|
SunMed Group Holdings, LLC |
|
| 0.5 |
|
|
| 0.2 |
|
Vessco Midco Holdings, LLC |
|
| 0.4 |
|
|
| 5.0 |
|
TAUC Management, LLC |
|
| 0.4 |
|
|
| 0.4 |
|
CC SAG Holdings Corp. (Spectrum Automotive) |
|
| 0.2 |
|
|
| 6.6 |
|
Outset Medical, Inc. |
|
| — |
|
|
| 11.9 |
|
Accession Risk Management Group, Inc. |
|
| — |
|
|
| 10.3 |
|
Human Interest Inc. |
|
| — |
|
|
| 6.8 |
|
Oral Surgery Partners Holdings, LLC |
|
| — |
|
|
| 3.3 |
|
Glooko, Inc. |
|
| — |
|
|
| 3.2 |
|
Plastics Management, LLC |
|
| — |
|
|
| 3.1 |
|
Arcutis Biotherapeutics, Inc. |
|
| — |
|
|
| 3.1 |
|
Spectrum Pharmaceuticals, Inc. |
|
| — |
|
|
| 3.0 |
|
Maurices, Incorporated |
|
| — |
|
|
| 2.7 |
|
Ardelyx, Inc. |
|
| — |
|
|
| 2.7 |
|
Southern Orthodontic Partners Management, LLC |
|
| — |
|
|
| 2.6 |
|
Pediatric Home Respiratory Services, LLC |
|
| — |
|
|
| 2.4 |
|
Cerapedics, Inc. |
|
| — |
|
|
| 2.4 |
|
Orthopedic Care Partners Management, LLC |
|
| — |
|
|
| 2.2 |
|
Transportation Insight, LLC |
|
| — |
|
|
| 1.8 |
|
Erie Construction Mid-west, LLC |
|
| — |
|
|
| 1.6 |
|
Enverus Holdings, Inc. |
|
| — |
|
|
| 1.2 |
|
Meditrina, Inc. |
|
| — |
|
|
| 1.2 |
|
Tilley Distribution, Inc. |
|
| — |
|
|
| 0.6 |
|
MRI Software LLC |
|
| — |
|
|
| 0.6 |
|
Peter C. Foy & Associates Insurance Services, LLC |
|
| — |
|
|
| 0.6 |
|
Pinnacle Treatment Centers, Inc. |
|
| — |
|
|
| 0.5 |
|
Ivy Fertility Services, LLC |
|
| — |
|
|
| 0.5 |
|
BayMark Health Services, Inc. |
|
| — |
|
|
| 0.5 |
|
NAC Holdings Corporation |
|
| — |
|
|
| 0.5 |
|
Apex Service Partners, LLC |
|
| — |
|
|
| 0.3 |
|
All States Ag Parts, LLC |
|
| — |
|
|
| 0.2 |
|
World Insurance Associates, LLC |
|
| — |
|
|
| 0.1 |
|
Total Commitments |
| $ | 14.7 |
|
| $ | 98.2 |
|
The credit agreements of the above loan commitments contain customary lending provisions and/or are subject to the portfolio company’s achievement of certain milestones that allow relief to the Company from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business outlook for the company. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. As of December 31, 20222023 and December 31, 2021,2022, the Company had sufficient cash available and/or liquid securities available to fund its commitments.
67
Distributions
Tax characteristics of all distributions will be reported to unitholdersUnitholders on Form 1099 after the end of the calendar year. Future quarterly distributions, if any, will be determined by our Board. We expect that our distributions to unitholders will generally be from accumulated net investment income, from net realized capital gains or
We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC tax treatment, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute realized net capital gains (i.e.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a business development company, we may in the future be limited in our ability to make distributions. Also, our revolving credit facility may limit our ability to declare distributions if we default under certain provisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of the tax benefits available to us as a regulated investment company.RIC. In addition, in accordance with GAAP and tax regulations, we include in income certain amounts that we have not yet received in cash, such as contractualregulated investment company.
With respect to the distributions to unitholders,Unitholders, income from origination, structuring, closing and certain other upfront fees associated with investments in portfolio companies are treated as taxable income and accordingly, distributed to unitholders.
Related Parties
We have entered into the Investment Management Agreement with the Adviser. Mr. Gross, our Chairman,Peteka,Kajee, our Chief Financial Officer Treasurer and SecretaryTreasurer serves as the Chief Financial Officer for the Adviser and Mr. Talarico, our Chief Compliance Officer and Secretary, serves as Partner, General Counsel and Chief Compliance Officer for the Adviser.
The Adviser may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with ours. For example, the Adviser presently serves as investment adviser to SLR Investment Corp., a publicly traded BDC, which focuses on investing in senior secured loans, financing leases and to a lesser extent, unsecured loans and equity securities, SLR HC BDC LLC, an unlisted BDC whose principal focus is to invest directly and indirectly in senior secured loans and other debt instruments typically to middle market companies within the healthcare industry, and SLR Private Credit BDC II LLC, an unlisted BDC whose principal focus is to invest in first lien senior secured floating rate loans primarily to upper middle market leveraged companies with EBITDA between approximately $25 million and $250 million that have significant free cash flow and are inRichard L. Peteka,Shiraz Y. Kajee, our Chief Financial Officer, and Guy F. Talarico, our Chief Compliance Officer and Secretary, serve in similar capacities for SLR Investment Corp., SLR HC BDC LLC and SLR Private Credit BDC II LLC. The Adviser and certain investment advisory affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Adviser or its affiliates may determine that we should invest
68
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are subject to financial market risks, including changes in interest rates. Uncertainty with respect to the rising interest rates, inflationary pressures, risks in respect of a failure to increase the U.S. debt ceiling or a downgrade in the U.S. credit rating, the war inbetween Ukraine and Russia, certain regional bank failures, an inflationary environment, the ongoing war in the Middle East and health epidemics and pandemics introduced significant volatility in the financial markets, and the effects of this volatility hashave materially impacted and could continue to materially impact our market risks. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In a low interest rate environment, including a reduction of LIBOR or SOFR to zero, the difference between the total interest income earned on interest earning assets and the total interest expense incurred on interest bearing liabilities may be compressed, reducing our net interest income and potentially adversely affecting our operating results. Conversely, in a rising interest rate environment, such as the currentrecent economic environment, such difference could potentially increase thereby increasing our net investment income. During the fiscal year ended December 31, 2022,2023, certain investments in our investment portfolio had floating interest rates. These floating rate investments were primarily based on floating LIBOR or SOFR and typically have durations of one to three months after which they reset to current market interest rates. Additionally, some of these investments have floors. The Company also has revolving credit facilities that are generally based on floating LIBOR or SOFR. Assuming no changes to our balance sheet as of December 31, 20222023 and no new defaults by portfolio companies, a hypothetical one percent decrease in LIBOR or SOFR on our comprehensive floating rate assets and liabilities would decrease our net investment income by approximately eightseven cents per average unit over the next twelve months. Assuming no changes to our balance sheet as of December 31, 20222023 and no new defaults by portfolio companies, a hypothetical one percent increase in LIBOR or SOFR on our comprehensive floating rate assets and liabilities would increase our net investment income by approximately eightseven cents per average unit over the next twelve months. However, we may hedge against interest rate fluctuations from2022,2023, we have no interest rate hedging instruments outstanding on our balance sheet.
Increase (Decrease) in SOFR |
|
| (1.00 | %) |
|
| 1.00 | % |
Increase (Decrease) in Net Investment Income Per Unit Per Year |
| $ | (0.07 | ) |
| $ | 0.07 |
|
Increase (Decrease) in LIBOR/SOFR | (1.00%) | 1.00% | ||||||
Increase (Decrease) in Net Investment Income Per Unit Per Year | $ | (0.08) | $ | 0.08 |
69
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | ||||
71 | ||||
72 | ||||
73 | ||||
74 | ||||
75 | ||||
76 | ||||
82 | ||||
70
Report of Independent Registered Public Accounting Firm
To the UnitholdersUnitholders' and Board of Directors
SCP Private Credit Income BDC LLC:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, of SCP Private Credit Income BDC LLC (and subsidiaries) (the Company) as of December 31, 20222023 and 2021,2022, the related consolidated statements of operations, changes in unitholders’ capital, and cash flows for each of the years in the three-year period ended December 31, 20222023 and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20222023 and 2021,2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 20222023, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 20222023 and 2021,2022, by correspondence with the custodian, portfolio companies or agents. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2018.
New York, New York
February 28, 2023
71
SCP Private Credit Income BDC LLC
Consolidated Statements of Assets and
Liabilities
December 31, 2022 | December 31, 2021 | |||||||
Assets | ||||||||
Investments at fair value: | ||||||||
Non-controlled/non-affiliated | $ | 532,895 | $ | 439,886 | ||||
Cash | 16,697 | 11,181 | ||||||
Interest receivable | 3,647 | 2,253 | ||||||
Receivable for investments sold | — | 32 | ||||||
Prepaid expenses | 22 | 18 | ||||||
Total assets | $ | 553,261 | $ | 453,370 | ||||
Liabilities | ||||||||
Revolving credit facility due December 2023 (the “SPV Facility”) ($267,726 and $217,350 face amounts, respectively, reported net of unamortized debt issuance costs of $1,392 and $2,613, respectively. See note 5) | $ | 266,334 | $ | 214,737 | ||||
Revolving credit facility due December 2023 (the “Subscription Facility”) ($70,400 and $50,300 face amounts, respectively, reported net of unamortized debt issuance costs of $185 and $381, respectively. See note 5) | 70,215 | 49,919 | ||||||
Distributions payable | 10,825 | 7,277 | ||||||
Management fee payable (see note 3) | 519 | — | ||||||
Incentive fee payable (see note 3) | 4,025 | 2,749 | ||||||
Administration fee payable (see note 3) | 108 | 79 | ||||||
Interest payable (see note 5) | 4,041 | 1,601 | ||||||
Other liabilities and accrued expenses | 940 | 895 | ||||||
Total liabilities | $ | 357,007 | $ | 277,257 | ||||
Commitments and contingencies (see note 6) | ||||||||
Unitholders’ Capital | ||||||||
Common Unitholders’ capital (18,992,563 and 17,137,275 units, respectively, issued and outstanding. See note 2f) | 196,160 | 176,177 | ||||||
Accumulated distributable earnings (loss) (see note 2f) | 94 | (64 | ) | |||||
Total unitholders’ capital | $ | 196,254 | $ | 176,113 | ||||
Total liabilities and unitholders’ capital | $ | 553,261 | $ | 453,370 | ||||
Net asset value per unit | $ | 10.33 | $ | 10.28 | ||||
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
Assets |
|
|
|
|
|
| ||
Investments at fair value: |
|
|
|
|
|
| ||
Companies less than 5% owned (cost: $404,576 and $529,070, respectively) |
| $ | 406,610 |
|
| $ | 532,895 |
|
Companies 5% to 25% owned (cost: $21,187 and $0, respectively) |
|
| 13,958 |
|
|
| — |
|
Cash |
|
| 42,263 |
|
|
| 16,697 |
|
Interest receivable |
|
| 3,290 |
|
|
| 3,647 |
|
Receivable for investments sold |
|
| 40 |
|
|
| — |
|
Prepaid expenses |
|
| 21 |
|
|
| 22 |
|
Total assets |
| $ | 466,182 |
|
| $ | 553,261 |
|
Liabilities |
|
|
|
| ||||
Debt ($170,800 and $338,126 face amounts, respectively, reported net of unamortized debt issuance costs of $683 and $1,577, respectively. See note 5) |
| $ | 170,117 |
|
| $ | 336,549 |
|
Distributions payable |
|
| 15,152 |
|
|
| 10,825 |
|
Management fee payable (see note 3) |
|
| 4,288 |
|
|
| 519 |
|
Incentive fee payable (see note 3) |
|
| 4,449 |
|
|
| 4,025 |
|
Administration fee payable (see note 3) |
|
| 95 |
|
|
| 108 |
|
Interest payable (see note 5) |
|
| 3,400 |
|
|
| 4,041 |
|
Other liabilities and accrued expenses |
|
| 380 |
|
|
| 940 |
|
Total liabilities |
| $ | 197,881 |
|
| $ | 357,007 |
|
Commitments and contingencies (see note 6) |
|
|
|
| ||||
Unitholders' Capital |
|
|
|
| ||||
Common Unitholders' capital (26,710,775 and 18,992,563 units, respectively, issued and |
|
| 277,433 |
|
|
| 196,160 |
|
Accumulated distributable earnings (loss) (see note 2f) |
|
| (9,132 | ) |
|
| 94 |
|
Total unitholders’ capital |
| $ | 268,301 |
|
| $ | 196,254 |
|
Total liabilities and unitholders’ capital |
| $ | 466,182 |
|
| $ | 553,261 |
|
Net asset value per unit |
| $ | 10.04 |
|
| $ | 10.33 |
|
See notes to consolidated financial statements.
72
SCP Private Credit Income BDC LLC
Consolidated Statement of Operations
(in thousands, except unit amounts)
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Investment Income: | ||||||||||||
Interest income from non-controlled/non-affiliated | $ | 44,812 | $ | 22,219 | $ | 11,609 | ||||||
Other income from non-controlled/non-affiliated | 371 | 83 | 178 | |||||||||
Total investment income | 45,183 | 22,302 | 11,787 | |||||||||
Expenses: | ||||||||||||
Management fees (see note 3) | $ | 3,779 | $ | 2,654 | $ | 1,773 | ||||||
Incentive fees (see note 3) | 3,601 | 3,213 | — | |||||||||
Administration fees (see note 3) | 391 | 224 | 118 | |||||||||
Interest and other credit facility expenses (see note 5) | 16,287 | 6,167 | 3,657 | |||||||||
Other general and administrative expenses | 875 | 757 | 693 | |||||||||
Total expenses | 24,933 | 13,015 | 6,241 | |||||||||
Net investment income | $ | 20,250 | $ | 9,287 | $ | 5,546 | ||||||
Realized and unrealized gain on investments and cash equivalents: | ||||||||||||
Net realized gain on non-controlled/non-affiliated | $ | — | $ | 12 | $ | 151 | ||||||
Net change in unrealized gain on non-controlled/non-affiliated | 156 | 2,632 | 383 | |||||||||
Net realized and unrealized gain on non-controlled/non-affiliated | 156 | 2,644 | 534 | |||||||||
Net Increase in Unitholders’ Capital Resulting From Operations | $ | 20,406 | $ | 11,931 | $ | 6,080 | ||||||
Net Income Per Unit | $ | 1.12 | $ | 1.01 | $ | 0.70 | ||||||
|
| Year ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Investment Income: |
|
|
|
|
|
|
|
|
| |||
Interest: |
|
|
|
|
|
|
|
|
| |||
Companies less than 5% owned |
| $ | 60,150 |
|
| $ | 44,812 |
|
| $ | 22,219 |
|
Companies 5% to 25% owned |
|
| 148 |
|
|
| — |
|
|
| — |
|
Other income: |
|
|
|
|
|
|
|
|
| |||
Companies less than 5% owned |
|
| 666 |
|
|
| 371 |
|
|
| 83 |
|
Companies 5% to 25% ownerd |
|
| 23 |
|
|
| — |
|
|
| — |
|
Total investment income |
|
| 60,987 |
|
|
| 45,183 |
|
|
| 22,302 |
|
Expenses: |
|
|
|
|
|
| ||||||
Management fees (see note 3) |
| $ | 4,288 |
|
| $ | 3,779 |
|
| $ | 2,654 |
|
Incentive fees (see note 3) |
|
| 3,464 |
|
|
| 3,601 |
|
|
| 3,213 |
|
Administration fees (see note 3) |
|
| 411 |
|
|
| 391 |
|
|
| 224 |
|
Interest and other credit facility expenses (see note 5) |
|
| 23,132 |
|
|
| 16,287 |
|
|
| 6,167 |
|
Other general and administrative expenses |
|
| 1,124 |
|
|
| 875 |
|
|
| 757 |
|
Total expenses |
|
| 32,419 |
|
|
| 24,933 |
|
|
| 13,015 |
|
Net investment income |
| $ | 28,568 |
|
| $ | 20,250 |
|
| $ | 9,287 |
|
Realized and unrealized gain (loss) on investments and cash equivalents: |
|
|
|
|
|
|
|
|
| |||
Net realized gain on companies less than 5% owned and cash |
| $ | 80 |
|
| $ | — |
|
| $ | 12 |
|
Net change in unrealized gain (loss) on investments: |
|
|
|
|
|
|
|
|
| |||
Companies less than 5% owned |
|
| (8,565 | ) |
|
| 156 |
|
|
| 2,632 |
|
Companies 5% to 25% owned |
|
| (455 | ) |
|
| — |
|
|
| — |
|
Net change in unrealized gain (loss) on investments |
|
| (9,020 | ) |
|
| 156 |
|
|
| 2,632 |
|
Net realized and unrealized gain (loss) on investments and cash equivalents |
|
| (8,940 | ) |
|
| 156 |
|
|
| 2,644 |
|
Net Increase in Unitholders’ Capital Resulting From Operations |
| $ | 19,628 |
|
| $ | 20,406 |
|
| $ | 11,931 |
|
Net Income Per Unit |
| $ | 0.80 |
|
| $ | 1.12 |
|
| $ | 1.01 |
|
See notes to consolidated financial statements.
73
SCP Private Credit Income BDC LLC
Consolidated Statement of Changes in Unitholders’ Capital
(in thousands, except unit amounts)
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Increase in unitholders’ capital resulting from operations: | ||||||||||||
Net investment income | $ | 20,250 | $ | 9,287 | $ | 5,546 | ||||||
Net realized gain | — | 12 | 151 | |||||||||
Net change in unrealized gain | 156 | 2,632 | 383 | |||||||||
Net increase in unitholders’ capital resulting from operations | 20,406 | 11,931 | 6,080 | |||||||||
Distributions to unitholders (see note 9): | ||||||||||||
From distributable earnings | (20,265 | ) | (11,960 | ) | (6,633 | ) | ||||||
Increase (decrease) in unitholders’ capital resulting from capital activity (see note 7): | ||||||||||||
Contributions | 20,000 | 80,000 | 47,000 | |||||||||
Cancellation | — | — | (1 | ) | ||||||||
Net increase in unitholders’ capital resulting from capital activity | 20,000 | 80,000 | 46,999 | |||||||||
Total increase in unitholders’ capital | 20,141 | 79,971 | 46,446 | |||||||||
Unitholders’ capital, beginning of year | 176,113 | 96,142 | 49,696 | |||||||||
Unitholders’ capital, end of year | $ | 196,254 | $ | 176,113 | $ | 96,142 | ||||||
Capital unit activity (see note 7): | ||||||||||||
Units issued | 1,855,288 | 7,551,101 | 4,630,653 | |||||||||
Units canceled | — | — | (100 | ) | ||||||||
Net increase from capital unit activity | 1,855,288 | 7,551,101 | 4,630,553 | |||||||||
|
| Year ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Increase (decrease) in unitholders' capital resulting from operations: |
|
|
|
|
|
|
|
|
| |||
Net investment income |
| $ | 28,568 |
|
| $ | 20,250 |
|
| $ | 9,287 |
|
Net realized gain |
|
| 80 |
|
|
| — |
|
|
| 12 |
|
Net change in unrealized gain (loss) |
|
| (9,020 | ) |
|
| 156 |
|
|
| 2,632 |
|
Net increase in unitholders' capital resulting from operations |
|
| 19,628 |
|
|
| 20,406 |
|
|
| 11,931 |
|
Distributions to unitholders (see note 9a): |
|
|
|
|
|
| ||||||
From distributable earnings |
|
| (28,881 | ) |
|
| (20,265 | ) |
|
| (11,960 | ) |
Net distributions to Unitholders |
|
| (28,881 | ) |
|
| (20,265 | ) |
|
| (11,960 | ) |
Increase in unitholders' capital resulting from capital activity (see note 7): |
|
|
|
|
|
| ||||||
Contributions |
|
| 81,300 |
|
|
| 20,000 |
|
|
| 80,000 |
|
Net increase in unitholders' capital resulting from capital activity |
|
| 81,300 |
|
|
| 20,000 |
|
|
| 80,000 |
|
Total increase in unitholders' capital |
|
| 72,047 |
|
|
| 20,141 |
|
|
| 79,971 |
|
Unitholders' capital, beginning of year |
|
| 196,254 |
|
|
| 176,113 |
|
|
| 96,142 |
|
Unitholders' capital, end of year |
| $ | 268,301 |
|
| $ | 196,254 |
|
| $ | 176,113 |
|
Capital unit activity (see note 7): |
|
|
|
|
|
|
|
| ||||
Units issued |
|
| 7,718,212 |
|
|
| 1,855,288 |
|
|
| 7,551,101 |
|
Net increase from capital unit activity |
|
| 7,718,212 |
|
|
| 1,855,288 |
|
|
| 7,551,101 |
|
See notes to consolidated financial statements.
74
SCP Private Credit Income BDC LLC
Consolidated Statement of Cash Flows
(in thousands)
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net increase in unitholders’ capital resulting from operations | $ | 20,406 | $ | 11,931 | $ | 6,080 | ||||||
Adjustments to reconcile net increase in unitholders’ capital resulting from operations to net cash used in operating activities: | ||||||||||||
Net realized gain on investments and cash equivalents | — | (12 | ) | (151 | ) | |||||||
Net change in unrealized gain on investments | (156 | ) | (2,632 | ) | (383 | ) | ||||||
(Increase) decrease in operating assets: | ||||||||||||
Purchase of investments | (185,257 | ) | (377,385 | ) | (91,509 | ) | ||||||
Proceeds from disposition of investments | 95,355 | 106,964 | 47,913 | |||||||||
Net accretion of discount on investments | (2,270 | ) | (1,457 | ) | (730 | ) | ||||||
Capitalization of payment-in-kind | (681 | ) | — | (22 | ) | |||||||
Receivable for investments sold | 32 | (28 | ) | 106 | ||||||||
Interest receivable | (1,394 | ) | (1,626 | ) | 186 | |||||||
Other receivable | — | — | 57 | |||||||||
Prepaid expenses | (4 | ) | — | 2 | ||||||||
Increase (decrease) in operating liabilities: | ||||||||||||
Payable for cash equivalents purchased | — | (20,000 | ) | (9,969 | ) | |||||||
Management fee payable | 519 | (143 | ) | (258 | ) | |||||||
Incentive fee payable | 1,276 | 2,749 | — | |||||||||
Administration fee payable | 29 | 47 | (2 | ) | ||||||||
Interest payable | 2,440 | 1,094 | (247 | ) | ||||||||
Other liabilities and accrued expenses | 45 | 210 | 442 | |||||||||
Deferred financing costs | 1,720 | 976 | 600 | |||||||||
Net Cash Used in Operating Activities | (67,940 | ) | (279,312 | ) | (47,885 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||||
Contributions from unitholders | 20,000 | 80,000 | 47,000 | |||||||||
Cancellation of units | — | — | (1 | ) | ||||||||
Cash distributions paid | (16,717 | ) | (8,061 | ) | (3,255 | ) | ||||||
Proceeds from borrowings | 199,973 | 331,709 | 138,800 | |||||||||
Repayments of borrowings | (129,800 | ) | (143,700 | ) | (138,300 | ) | ||||||
Net Cash Provided by Financing Activities | 73,456 | 259,948 | 44,244 | |||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 5,516 | (19,364 | ) | (3,641 | ) | |||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 11,181 | 30,545 | 34,186 | |||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 16,697 | $ | 11,181 | $ | 30,545 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid for interest | $ | 13,847 | $ | 5,073 | $ | 3,904 | ||||||
|
| Year ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
| |||
Net increase in unitholders' capital resulting from operations |
| $ | 19,628 |
|
| $ | 20,406 |
|
| $ | 11,931 |
|
Adjustments to reconcile net increase in unitholders' capital resulting from |
|
|
|
|
|
|
|
|
| |||
Net realized gain on investments and cash equivalents |
|
| (80 | ) |
|
| — |
|
|
| (12 | ) |
Net change in unrealized (gain) loss on investments |
|
| 9,020 |
|
|
| (156 | ) |
|
| (2,632 | ) |
Deferred financing costs |
|
| 1,518 |
|
|
| 1,720 |
|
|
| 976 |
|
(Increase) decrease in operating assets: |
|
|
|
|
|
|
|
|
| |||
Purchase of investments |
|
| (111,306 | ) |
|
| (185,257 | ) |
|
| (377,385 | ) |
Proceeds from disposition of investments |
|
| 219,820 |
|
|
| 95,355 |
|
|
| 106,964 |
|
Net accretion of discount on investments |
|
| (3,133 | ) |
|
| (2,270 | ) |
|
| (1,457 | ) |
Capitalization of payment-in-kind income |
|
| (1,994 | ) |
|
| (681 | ) |
|
| — |
|
Receivable for investments sold |
|
| (40 | ) |
|
| 32 |
|
|
| (28 | ) |
Interest receivable |
|
| 357 |
|
|
| (1,394 | ) |
|
| (1,626 | ) |
Prepaid expenses |
|
| 1 |
|
|
| (4 | ) |
|
| — |
|
Increase (decrease) in operating liabilities: |
|
|
|
|
|
|
|
|
| |||
Payable for cash equivalents purchased |
|
| — |
|
|
| — |
|
|
| (20,000 | ) |
Management fee payable |
|
| 3,769 |
|
|
| 519 |
|
|
| (143 | ) |
Incentive fee payable |
|
| 424 |
|
|
| 1,276 |
|
|
| 2,749 |
|
Administration fee payable |
|
| (13 | ) |
|
| 29 |
|
|
| 47 |
|
Interest payable |
|
| (641 | ) |
|
| 2,440 |
|
|
| 1,094 |
|
Other liabilities and accrued expenses |
|
| (560 | ) |
|
| 45 |
|
|
| 210 |
|
Net Cash Provided by (Used in) Operating Activities |
|
| 136,770 |
|
|
| (67,940 | ) |
|
| (279,312 | ) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
| |||
Contributions from unitholders |
|
| 81,300 |
|
|
| 20,000 |
|
|
| 80,000 |
|
Cash distributions paid |
|
| (24,554 | ) |
|
| (16,717 | ) |
|
| (8,061 | ) |
Proceeds from borrowings |
|
| 83,876 |
|
|
| 199,973 |
|
|
| 331,709 |
|
Repayments of borrowings |
|
| (251,826 | ) |
|
| (129,800 | ) |
|
| (143,700 | ) |
Net Cash Provided by (Used in) Financing Activities |
|
| (111,204 | ) |
|
| 73,456 |
|
|
| 259,948 |
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
| 25,566 |
|
|
| 5,516 |
|
|
| (19,364 | ) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
|
| 16,697 |
|
|
| 11,181 |
|
|
| 30,545 |
|
CASH AND CASH EQUIVALENTS AT END OF YEAR |
| $ | 42,263 |
|
| $ | 16,697 |
|
| $ | 11,181 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
| |||
Cash paid for interest |
| $ | 23,773 |
|
| $ | 13,847 |
|
| $ | 5,073 |
|
See notes to consolidated financial statements.
75
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments
December 31, 2022
(in thousands, except share/unit amounts)
Description | Industry | Spread above Index (3) | Floor | Interest Rate (1) | Acquisition Date | Maturity Date | Par Amount | Cost | Fair Value | |||||||||||||||||||||||||
Bank Debt/Senior Secured Loans — 271.5% | ||||||||||||||||||||||||||||||||||
ACRES Commercial Mortgage, LLC (2) | Diversified Financial Services | S+705 | 1.00 | % | 11.38 | % | 12/24/2021 | 8/21/2028 | $ | 12,660 | $ | 12,437 | $ | 12,660 | ||||||||||||||||||||
Alimera Sciences, Inc. (2) | Pharmaceuticals | L+765 | 1.78 | % | 11.82 | % | 12/31/2019 | 7/1/2024 | 3,929 | 4,059 | 4,145 | |||||||||||||||||||||||
All State Ag Parts, LLC (2) | Trading Companies & Distributors | S+575 | 1.00 | % | 10.19 | % | 9/1/2021 | 9/1/2026 | 5,358 | 5,279 | 5,358 | |||||||||||||||||||||||
AmeriMark Intermediate Holdings, LLC (2)(5) | Internet & Catalog Retail | L+800 | 1.00 | % | 14.77 | % | 7/28/2021 | 10/15/2026 | 21,189 | 20,858 | 20,129 | |||||||||||||||||||||||
Apex Service Partners, LLC (2) | Diversified Consumer Services | S+525 | 1.00 | % | 9.42 | % | 11/5/2021 | 7/31/2025 | 21,450 | 21,134 | 21,450 | |||||||||||||||||||||||
Arcutis Biotherapeutics, Inc. (2)(4) . | Pharmaceuticals | L+745 | 0.10 | % | 11.62 | % | 12/22/2021 | 1/1/2027 | 24,520 | 24,654 | 24,827 | |||||||||||||||||||||||
Ardelyx, Inc. (2)(4) | Pharmaceuticals | L+795 | 0.10 | % | 12.12 | % | 2/23/2022 | 3/1/2027 | 3,319 | 3,328 | 3,328 | |||||||||||||||||||||||
Basic Fun, Inc. (2) | Specialty Retail | L+550 | 1.00 | % | 10.27 | % | 10/30/2020 | 10/30/2023 | 966 | 961 | 966 | |||||||||||||||||||||||
BayMark Health Services, Inc. (2) . | Health Care Providers & Services | L+500 | 1.00 | % | 9.73 | % | 6/29/2021 | 6/11/2027 | 15,861 | 15,733 | 15,861 | |||||||||||||||||||||||
BridgeBio Pharma, Inc. (2)(4) . | Biotechnology | — | — | 9.00 | % (6) | 11/17/2021 | 11/17/2026 | 14,362 | 14,257 | 14,362 | ||||||||||||||||||||||||
CC SAG Holdings Corp. (Spectrum Automotive) (2) | Diversified Consumer Services | L+575 | 0.75 | % | 10.48 | % | 6/29/2021 | 6/29/2028 | 6,491 | 6,407 | 6,491 | |||||||||||||||||||||||
Centrexion Therapeutics, Inc. | Pharmaceuticals | L+725 | 2.45 | % | 11.42 | % | 6/28/2019 | 1/1/2024 | 2,314 | 2,417 | 2,453 | |||||||||||||||||||||||
Cerapedics, Inc. (2) | Biotechnology | S+620 | 2.75 | % | 10.52 | % | 12/27/2022 | 1/1/2028 | 9,698 | 9,674 | 9,673 | |||||||||||||||||||||||
Enhanced Permanent Capital, LLC (2)(4) | Capital Markets | L+700 | 1.00 | % | 10.13 | % | 12/29/2020 | 12/29/2025 | 7,503 | 7,352 | 7,503 | |||||||||||||||||||||||
ENS Holdings III Corp. & ES Opco USA LLC (BlueFin) (2) | Trading Companies & Distributors | S+475 | 1.00 | % | 9.43 | % | 12/31/2019 | 12/31/2025 | 7,570 | 7,490 | 7,570 | |||||||||||||||||||||||
Enverus Holdings, Inc. (fka Drilling Info Holdings) (2) | IT Services | L+450 | — | 8.88 | % | 1/31/2020 | 7/30/2025 | 14,454 | 14,252 | 14,454 | ||||||||||||||||||||||||
Erie Construction Mid-west, LLC (2) | Building Products | S+475 | 1.00 | % | 9.79 | % | 8/5/2021 | 7/30/2027 | 11,381 | 11,222 | 11,381 | |||||||||||||||||||||||
Foundation Consumer Brands, LLC (2) | Personal Products | L+550 | 1.00 | % | 10.15 | % | 2/12/2021 | 2/12/2027 | 12,288 | 12,063 | 12,288 | |||||||||||||||||||||||
Glooko, Inc. (2) | Health Care Technology | L+790 | 0.10 | % | 12.07 | % | 9/30/2021 | 10/1/2026 | 2,831 | 2,838 | 2,838 | |||||||||||||||||||||||
GSM Acquisition Corp. (2) | Leisure Equipment & Products | S+500 | 1.00 | % | 9.03 | % | 4/20/2021 | 11/16/2026 | 14,069 | 13,961 | 13,928 | |||||||||||||||||||||||
Higginbotham Insurance Agency, Inc. (2) | Insurance | L+525 | 0.75 | % | 9.63 | % | 11/25/2020 | 11/25/2026 | 8,130 | 8,043 | 8,130 | |||||||||||||||||||||||
High Street Buyer, Inc. (2) | Insurance | L+600 | 0.75 | % | 8.75 | % | 4/16/2021 | 4/16/2028 | 11,606 | 11,408 | 11,606 | |||||||||||||||||||||||
Human Interest Inc. (2) | Internet Software & Services | S+785 | 1.00 | % | 11.97 | % | 6/30/2022 | 7/1/2027 | 6,799 | 6,690 | 6,799 | |||||||||||||||||||||||
iCIMS, Inc. (2) | Software | S+725 | 0.75 | % | 11.52 | % (7) | 8/18/2022 | 8/18/2028 | 13,757 | 13,527 | 13,517 | |||||||||||||||||||||||
Ivy Fertility Services, LLC (2) | Health Care Providers & Services | L+625 | 1.00 | % | 10.39 | % | 12/22/2021 | 2/25/2026 | 10,515 | 10,369 | 10,620 | |||||||||||||||||||||||
Kaseya, Inc. (2) | Software | S+575 | 0.75 | % | 10.33 | % | 6/22/2022 | 6/23/2029 | 10,966 | 10,810 | 10,966 | |||||||||||||||||||||||
Kid Distro Holdings, LLC (Distro Kid) (2) | Software | L+575 | 1.00 | % | 10.48 | % | 9/24/2021 | 10/1/2027 | 12,457 | 12,251 | 12,457 | |||||||||||||||||||||||
KORE Wireless Group, Inc. (2) | Wireless Telecommunication Services | S+550 | — | 10.08 | % | 3/12/2019 | 12/21/2024 | 14,104 | 13,992 | 14,104 | ||||||||||||||||||||||||
Maurices, Incorporated (2) | Specialty Retail | S+675 | 1.00 | % | 8.74 | % | 8/27/2021 | 6/1/2024 | 4,947 | 4,891 | 4,947 | |||||||||||||||||||||||
Meditrina, Inc. (2) | Health Care Equipment & Supplies | S+550 | 3.45 | % | 9.82 | % | 12/20/2022 | 12/1/2027 | 1,212 | 1,201 | 1,209 | |||||||||||||||||||||||
MRI Software LLC (2) | Software | L+550 | 1.00 | % | 10.23 | % | 7/23/2019 | 2/10/2026 | 15,308 | 15,180 | 15,308 | |||||||||||||||||||||||
NAC Holding Corporation (Jaguar) (2) | Insurance | S+525 | 1.00 | % | 9.45 | % | 7/30/2021 | 9/28/2024 | 12,461 | 12,355 | 12,461 | |||||||||||||||||||||||
Neuronetics, Inc. (2) . | Health Care Equipment & Supplies | L+765 | 1.66 | % | 11.82 | % | 3/2/2020 | 2/28/2025 | 3,056 | 3,143 | 3,224 | |||||||||||||||||||||||
Nexus Intermediate III, LLC (Vortex) (2) | Professional Services | L+550 | 0.75 | % | 10.22 | % | 12/13/2021 | 12/6/2027 | 5,947 | 5,858 | 5,947 | |||||||||||||||||||||||
Oral Surgery Partners Holdings, LLC | Health Care Providers & Services | S+625 | 1.00 | % | 10.92 | % | 11/29/2022 | 5/10/2024 | 2,206 | 2,164 | 2,162 | |||||||||||||||||||||||
Orthopedic Care Partners Management, LLC (2) | Health Care Providers & Services | S+650 | 1.00 | % | 10.91 | % | 8/17/2022 | 5/16/2024 | 4,226 | 4,200 | 4,226 | |||||||||||||||||||||||
Outset Medical, Inc. (2)(4) | Health Care Equipment & Supplies | S+515 | 2.75 | % | 9.33 | % | 11/3/2022 | 11/1/2027 | 11,865 | 11,796 | 11,775 | |||||||||||||||||||||||
Pediatric Home Respiratory Services, LLC (2) | Health Care Providers & Services | S+625 | 1.00 | % | 10.67 | % | 8/19/2022 | 12/4/2024 | 1,802 | 1,778 | 1,784 | |||||||||||||||||||||||
Peter C. Foy & Associates Insurance Services, LLC (2) | Insurance | S+600 | 0.75 | % | 11.21 | % | 10/29/2021 | 11/1/2028 | 15,579 | 15,444 | 15,579 | |||||||||||||||||||||||
Pinnacle Treatment Centers, Inc. (2) | Health Care Providers & Services | S+650 | 1.00 | % | 10.57 | % | 1/22/2020 | 1/2/2026 | 8,339 | 8,233 | 8,152 | |||||||||||||||||||||||
Plastics Management, LLC (2) | Health Care Providers & Services | S+500 | 1.00 | % | 9.89 | % | 8/26/2021 | 8/18/2027 | 12,117 | 11,967 | 12,117 | |||||||||||||||||||||||
Revlon Consumer Products Corporation (2) | Personal Products | P+475 | 2.75 | % | 12.25 | % | 5/7/2021 | 6/17/2023 | 13,905 | 13,876 | 13,974 | |||||||||||||||||||||||
RQM+ Corp. (2) | Life Sciences Tools & Services | S+575 | 1.00 | % | 10.59 | % | 8/20/2021 | 8/12/2026 | 15,680 | 15,499 | 15,680 | |||||||||||||||||||||||
RSC Acquisition, Inc. (2) | Insurance | S+550 | 0.75 | % | 9.26 | % | 10/5/2020 | 11/1/2026 | 9,345 | 9,191 | 9,345 | |||||||||||||||||||||||
RxSense Holdings LLC (2) | Diversified Consumer Services | L+500 | 1.00 | % | 9.41 | % | 3/17/2020 | 3/13/2026 | 14,674 | 14,522 | 14,674 | |||||||||||||||||||||||
Description |
| Industry |
| Spread |
|
| Floor |
|
| Interest |
|
| Acquisition |
| Maturity |
| Par |
|
| Cost |
|
| Fair |
| ||||||
Bank Debt/Senior Secured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
AMF Levered II, LLC(2) |
| Diversified Financial Services |
| S+705 |
|
|
| 1.00 | % |
|
| 12.52 | % |
| 12/24/2021 |
| 8/21/2028 |
| $ | 12,660 |
|
| $ | 12,469 |
|
| $ | 12,407 |
| |
Alimera Sciences, Inc.(2) |
| Pharmaceuticals |
| S+515 |
|
|
| 4.60 | % |
|
| 10.50 | % |
| 12/31/2019 |
| 5/1/2028 |
|
| 5,893 |
|
|
| 5,934 |
|
|
| 6,080 |
| |
All State Ag Parts, LLC(2) |
| Trading Companies & Distributors |
| S+600 |
|
|
| 1.00 | % |
|
| 11.61 | % |
| 9/1/2021 |
| 9/1/2026 |
|
| 5,165 |
|
|
| 5,107 |
|
|
| 5,165 |
| |
Arcutis Biotherapeutics, Inc.(2)(4). |
| Pharmaceuticals |
| S+745 |
|
|
| 0.10 | % |
|
| 12.90 | % |
| 12/22/2021 |
| 1/1/2027 |
|
| 24,520 |
|
|
| 25,044 |
|
|
| 25,011 |
| |
Ardelyx, Inc.(2)(4) |
| Pharmaceuticals |
| S+795 |
|
|
| 1.00 | % |
|
| 13.32 | % |
| 2/23/2022 |
| 3/1/2027 |
|
| 6,035 |
|
|
| 6,080 |
|
|
| 6,224 |
| |
Basic Fun, Inc.(2) |
| Specialty Retail |
| S+650 |
|
|
| 1.00 | % |
|
| 12.14 | % |
| 10/30/2020 |
| 7/2/2024 |
|
| 960 |
|
|
| 958 |
|
|
| 960 |
| |
BayMark Health Services, Inc.(2). |
| Health Care Providers & Services |
| S+500 |
|
|
| 1.00 | % |
|
| 10.61 | % |
| 6/29/2021 |
| 6/11/2027 |
|
| 15,701 |
|
|
| 15,599 |
|
|
| 15,701 |
| |
BridgeBio Pharma, Inc. (2)(4). |
| Biotechnology |
|
| — |
|
|
| — |
|
|
| 9.00 | % | (5) | 11/17/2021 |
| 11/17/2026 |
|
| 14,691 |
|
|
| 14,683 |
|
|
| 14,728 |
|
CC SAG Holdings Corp. (Spectrum |
| Diversified Consumer Services |
| S+575 |
|
|
| 0.75 | % |
|
| 11.22 | % |
| 6/29/2021 |
| 6/29/2028 |
|
| 12,545 |
|
|
| 12,391 |
|
|
| 12,545 |
| |
Cerapedics, Inc. (2) |
| Biotechnology |
| S+620 |
|
|
| 2.75 | % |
|
| 11.55 | % |
| 12/27/2022 |
| 1/1/2028 |
|
| 12,122 |
|
|
| 12,158 |
|
|
| 12,122 |
| |
Enhanced Permanent Capital, LLC(2)(4) |
| Capital Markets |
| S+700 |
|
|
| 1.00 | % |
|
| 12.44 | % |
| 12/29/2020 |
| 12/29/2025 |
|
| 9,062 |
|
|
| 8,922 |
|
|
| 9,062 |
| |
ENS Holdings III Corp. & ES Opco USA |
| Trading Companies & Distributors |
| S+475 |
|
|
| 1.00 | % |
|
| 10.20 | % |
| 12/31/2019 |
| 12/31/2025 |
|
| 6,967 |
|
|
| 6,916 |
|
|
| 6,967 |
| |
Erie Construction Mid-west, LLC(2) |
| Building Products |
| S+475 |
|
|
| 1.00 | % |
|
| 10.21 | % |
| 8/5/2021 |
| 7/30/2027 |
|
| 10,797 |
|
|
| 10,676 |
|
|
| 10,797 |
| |
Fertility (ITC) Investment Holdco, LLC(2) |
| Health Care Providers & Services |
| S+650 |
|
|
| 1.00 | % |
|
| 11.97 | % |
| 1/4/2023 |
| 1/3/2029 |
|
| 10,278 |
|
|
| 10,007 |
|
|
| 10,278 |
| |
Foundation Consumer Brands, LLC(2) |
| Personal Products |
| S+625 |
|
|
| 1.00 | % |
|
| 11.79 | % |
| 2/12/2021 |
| 2/12/2027 |
|
| 11,367 |
|
|
| 11,202 |
|
|
| 11,367 |
| |
Glooko, Inc.(2) |
| Health Care Technology |
| S+790 |
|
|
| 0.10 | % |
|
| 13.35 | % |
| 9/30/2021 |
| 10/1/2026 |
|
| 1,769 |
|
|
| 1,792 |
|
|
| 1,849 |
| |
GSM Acquisition Corp. (2) |
| Leisure Equipment & Products |
| S+500 |
|
|
| 1.00 | % |
|
| 10.47 | % |
| 4/20/2021 |
| 11/16/2026 |
|
| 13,928 |
|
|
| 13,846 |
|
|
| 13,928 |
| |
High Street Buyer, Inc. (2) |
| Insurance |
| S+575 |
|
|
| 0.75 | % |
|
| 11.00 | % |
| 4/16/2021 |
| 4/16/2028 |
|
| 11,976 |
|
|
| 11,803 |
|
|
| 11,976 |
| |
Human Interest Inc.(2) |
| Internet Software & Services |
| S+785 |
|
|
| 1.00 | % |
|
| 13.19 | % |
| 6/30/2022 |
| 7/1/2027 |
|
| 13,598 |
|
|
| 13,422 |
|
|
| 13,598 |
| |
iCIMS, Inc.(2) |
| Software |
| S+725 |
|
|
| 0.75 | % |
|
| 12.62 | % | (6) | 8/18/2022 |
| 8/18/2028 |
|
| 14,195 |
|
|
| 13,996 |
|
|
| 14,195 |
| |
Kaseya, Inc.(2) |
| Software |
| S+600 |
|
|
| 0.75 | % |
|
| 11.38 | % | (11) | 6/22/2022 |
| 6/23/2029 |
|
| 11,100 |
|
|
| 10,963 |
|
|
| 11,100 |
| |
Kid Distro Holdings, LLC (Distro Kid)(2) |
| Software |
| S+550 |
|
|
| 1.00 | % |
|
| 11.00 | % |
| 9/24/2021 |
| 10/1/2027 |
|
| 12,330 |
|
|
| 12,164 |
|
|
| 12,330 |
| |
Meditrina, Inc.(2) |
| Health Care Equipment & Supplies |
| S+550 |
|
|
| 3.45 | % |
|
| 10.85 | % |
| 12/20/2022 |
| 12/1/2027 |
|
| 1,212 |
|
|
| 1,215 |
|
|
| 1,224 |
| |
Neuronetics, Inc.(2). |
| Health Care Equipment & Supplies |
| S+565 |
|
|
| 3.95 | % |
|
| 11.00 | % |
| 3/2/2020 |
| 3/29/2028 |
|
| 5,238 |
|
|
| 5,259 |
|
|
| 5,238 |
| |
Nexus Intermediate III, LLC (Vortex)(2) |
| Professional Services |
| S+550 |
|
|
| 0.75 | % |
|
| 11.36 | % |
| 12/13/2021 |
| 12/6/2027 |
|
| 5,381 |
|
|
| 5,315 |
|
|
| 5,381 |
| |
Orthopedic Care Partners Management, |
| Health Care Providers & Services |
| S+650 |
|
|
| 1.00 | % |
|
| 12.11 | % |
| 8/17/2022 |
| 5/16/2024 |
|
| 6,368 |
|
|
| 6,354 |
|
|
| 6,368 |
| |
Outset Medical, Inc.(2)(4) |
| Health Care Equipment & Supplies |
| S+515 |
|
|
| 2.75 | % |
|
| 10.50 | % |
| 11/3/2022 |
| 11/1/2027 |
|
| 16,518 |
|
|
| 16,546 |
|
|
| 16,560 |
| |
Peter C. Foy & Associates Insurance |
| Insurance |
| S+600 |
|
|
| 0.75 | % |
|
| 11.47 | % |
| 10/29/2021 |
| 11/1/2028 |
|
| 15,422 |
|
|
| 15,307 |
|
|
| 15,113 |
| |
Pinnacle Treatment Centers, Inc.(2) |
| Health Care Providers & Services |
| S+650 |
|
|
| 1.00 | % |
|
| 11.95 | % |
| 1/22/2020 |
| 1/2/2026 |
|
| 8,254 |
|
|
| 8,180 |
|
|
| 8,254 |
| |
Plastics Management, LLC(2) |
| Health Care Providers & Services |
| S+500 |
|
|
| 1.00 | % |
|
| 10.45 | % |
| 8/26/2021 |
| 8/18/2027 |
|
| 15,058 |
|
|
| 14,912 |
|
|
| 15,058 |
| |
RQM+ Corp.(2) |
| Life Sciences Tools & Services |
| S+575 |
|
|
| 1.00 | % |
|
| 11.36 | % |
| 8/20/2021 |
| 8/12/2026 |
|
| 15,522 |
|
|
| 15,388 |
|
|
| 15,522 |
| |
RxSense Holdings LLC(2) |
| Diversified Consumer Services |
| S+500 |
|
|
| 1.00 | % |
|
| 10.48 | % |
| 3/17/2020 |
| 3/13/2026 |
|
| 14,486 |
|
|
| 14,380 |
|
|
| 14,486 |
| |
Southern Orthodontic Partners |
| Health Care Providers & Services |
| S+625 |
|
|
| 1.00 | % |
|
| 11.86 | % |
| 6/3/2022 |
| 1/27/2026 |
|
| 4,475 |
|
|
| 4,443 |
|
|
| 4,475 |
| |
SunMed Group Holdings, LLC(2) |
| Health Care Equipment & Supplies |
| S+550 |
|
|
| 0.75 | % |
|
| 10.96 | % |
| 6/16/2021 |
| 6/16/2028 |
|
| 7,604 |
|
|
| 7,512 |
|
|
| 7,604 |
| |
TAUC Management, LLC(2) |
| Health Care Providers & Services |
| P+450 |
|
|
| 1.00 | % |
|
| 13.00 | % |
| 2/12/2021 |
| 2/12/2027 |
|
| 9,003 |
|
|
| 8,925 |
|
|
| 8,373 |
| |
Tilley Distribution, Inc.(2) |
| Trading Companies & Distributors |
| S+600 |
|
|
| 1.00 | % |
|
| 11.50 | % |
| 12/8/2021 |
| 12/31/2026 |
|
| 12,331 |
|
|
| 12,233 |
|
|
| 12,331 |
| |
Transportation Insight, LLC(2) |
| Road & Rail |
| S+450 |
|
|
| 1.00 | % |
|
| 9.98 | % |
| 10/27/2021 |
| 12/18/2024 |
|
| 6,021 |
|
|
| 5,984 |
|
|
| 5,780 |
| |
Ultimate Baked Goods Midco LLC |
| Packaged Foods & Meats |
| S+625 |
|
|
| 1.00 | % |
|
| 11.71 | % |
| 8/12/2021 |
| 8/13/2027 |
|
| 7,554 |
|
|
| 7,430 |
|
|
| 7,479 |
| |
Vapotherm, Inc.(2) |
| Health Care Equipment & Supplies |
| S+930 |
|
|
| 1.00 | % |
|
| 14.75 | % | (7) | 2/18/2022 |
| 2/1/2027 |
|
| 13,196 |
|
|
| 13,401 |
|
|
| 13,394 |
| |
Vessco Midco Holdings, LLC(2) |
| Water Utilities |
| S+450 |
|
|
| 1.00 | % |
|
| 9.96 | % |
| 9/3/2021 |
| 11/2/2026 |
|
| 5,513 |
|
|
| 5,471 |
|
|
| 5,513 |
| |
Total Bank Debt/Senior Secured Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 404,387 |
|
| $ | 406,543 |
| ||||
See notes to consolidated financial statements.
76
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments (continued)
December 31, 2022
(in thousands)
Description |
| Industry |
|
|
|
|
|
|
| Acquisition |
|
|
| Shares/ Units |
|
| Cost |
|
| Fair |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Common Equity/Equity Interests/Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Assertio Holdings, Inc. Common Stock†(12) |
| Pharmaceuticals |
|
|
|
|
|
|
| 7/31/2023 |
|
|
|
| 4,230 |
|
| $ | 17 |
|
| $ | 5 |
|
Centrexion Therapeutics, Inc. Warrants† |
| Pharmaceuticals |
|
|
|
|
|
|
| 6/28/2019 |
|
|
|
| 56,483 |
|
|
| 27 |
|
|
| 9 |
|
Meditrina, Inc. Warrants† |
| Health Care |
|
|
|
|
|
|
| 12/20/2022 |
|
|
|
| 10,572 |
|
|
| 8 |
|
|
| 7 |
|
Senseonics Holdings, Inc Common |
| Health Care Equipment & Supplies |
|
|
|
|
|
|
| 7/25/2019 |
|
|
|
| 79,501 |
|
|
| 23 |
|
|
| 45 |
|
SLR-AMI Topco Blocker, LLC†(8)(9) |
| Internet & Catalog Retail |
|
|
|
|
|
|
| 6/16/2023 |
|
|
| - |
|
|
| 21,187 |
|
|
| 13,958 |
| |
Vapotherm, Inc.† |
| Health Care Equipment & Supplies |
|
|
|
|
|
|
| 2/18/2022 |
|
|
|
| 27,426 |
|
|
| 114 |
|
|
| 1 |
|
Total Common Equity/Equity Interests/Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 21,376 |
|
| $ | 14,025 |
| |
Total Investments(10) — 156.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 425,763 |
|
| $ | 420,568 |
| |
Liabilities in Excess of Other |
| Assets — (56.8%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (152,267 | ) | ||
Net Assets — 100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 268,301 |
| ||
Description | Industry | Spread above Index (3) | Floor | Interest Rate (1) | Acquisition Date | Maturity Date | Par Amount | Cost | Fair Value | |||||||||||||||||||||||||
Bank Debt/Senior Secured Loans (continued) | ||||||||||||||||||||||||||||||||||
Southern Orthodontic Partners Management, LLC (2) | Health Care Providers & Services | S+600 | 1.00 | % | 10.84 | % | 6/3/2022 | 1/27/2026 | $ | 1,901 | $ | 1,884 | $ | 1,901 | ||||||||||||||||||||
Spectrum Pharmaceuticals, Inc. (2) | Biotechnology | S+570 | 2.30 | % | 9.88 | % | 9/21/2022 | 9/1/2027 | 3,559 | 3,519 | 3,524 | |||||||||||||||||||||||
SunMed Group Holdings, LLC (2) | Health Care Equipment & Supplies | L+575 | 0.75 | % | 10.48 | % | 6/16/2021 | 6/16/2028 | 7,929 | 7,815 | 7,929 | |||||||||||||||||||||||
TAUC Management, LLC (2) | Health Care Providers & Services | L+525 | 1.00 | % | 9.98 | % | 2/12/2021 | 2/12/2027 | 9,013 | 8,912 | 8,968 | |||||||||||||||||||||||
Tilley Distribution, Inc. (2) | Trading Companies & Distributors | S+550 | 1.00 | % | 10.14 | % | 12/8/2021 | 12/31/2026 | 12,762 | 12,633 | 12,762 | |||||||||||||||||||||||
Transportation Insight, LLC (2) | Road & Rail | L+450 | 1.00 | % | 8.91 | % | 10/27/2021 | 12/18/2024 | 4,198 | 4,150 | 4,198 | |||||||||||||||||||||||
Ultimate Baked Goods Midco LLC (Rise Baking) (2) | Packaged Foods & Meats | L+650 | 1.00 | % | 10.88 | % | 8/12/2021 | 8/13/2027 | 7,877 | 7,717 | 7,877 | |||||||||||||||||||||||
Vapotherm, Inc. (2) | Health Care Equipment & Supplies | S+830 | 1.00 | % | 12.58 | % (8) | 2/18/2022 | 2/1/2027 | 12,070 | 12,076 | 12,131 | |||||||||||||||||||||||
Vessco Midco Holdings, LLC (2) | Water Utilities | L+450 | 1.00 | % | 7.87 | % | 9/3/2021 | 11/2/2026 | 2,207 | 2,189 | 2,206 | |||||||||||||||||||||||
World Insurance Associates, LLC (2) | Insurance | S+575 | 1.00 | % | 10.07 | % | 10/12/2020 | 4/1/2026 | 19,614 | 19,261 | 18,829 | |||||||||||||||||||||||
Total Bank Debt/Senior Secured Loans | $ | 528,920 | $ | 532,753 | ||||||||||||||||||||||||||||||
Shares/ Units | ||||||||||||||||||||||||||||||||||
Common Equity/Equity Interests/Warrants — 0.0% | ||||||||||||||||||||||||||||||||||
Centrexion Therapeutics, Inc. Warrants† | Pharmaceuticals | 6/28/2019 | 56,483 | 27 | 16 | |||||||||||||||||||||||||||||
Meditrina, Inc. Warrants† | Health Care Equipment & Supplies | 12/20/2022 | 10,572 | 8 | 8 | |||||||||||||||||||||||||||||
Senseonics Holdings, Inc. Common Stock† (4) | Health Care Equipment & Supplies | 7/25/2019 | 79,501 | 23 | 82 | |||||||||||||||||||||||||||||
Spectrum Pharmaceuticals, Inc. Warrants† | Biotechnology | 9/21/2022 | 53,930 | 17 | 5 | |||||||||||||||||||||||||||||
Vapotherm, Inc.† | Health Care Equipment & Supplies | 2/18/2022 | 12,960 | 75 | 31 | |||||||||||||||||||||||||||||
Total Common Equity/Equity Interests/Warrants | $ | 150 | $ | 142 | ||||||||||||||||||||||||||||||
Total Investments (9) — 271.5% | $ | 529,070 | $ | 532,895 | ||||||||||||||||||||||||||||||
| Liabilities in Excess of Other Assets — (171.5%) | (336,641 | ) | ||||||||||||||||||||||||||||||||
Net Assets — 100.0% | $ | 196,254 | ||||||||||||||||||||||||||||||||
Name of Issuer |
| Fair Value at June 16, 2023 |
| Gross Additions |
|
| Gross Reductions |
|
| Realized Gain (Loss) |
| Change in Unrealized Gain (Loss) |
| Fair Value at December 31, 2023 |
| Interest/Dividend Income |
| |||||||
Oldco AI, LLC (f/k/a Amerimark) |
| $ | 8,243 |
| $ | - |
|
| $ | (15,016 | ) | a | $ | - |
| $ | 6,773 |
| $ | - |
| $ | - |
|
Oldco AI, LLC (f/k/a Amerimark) |
|
| — |
|
| 1,110 |
|
|
| (1,110 | ) |
|
| - |
|
| - |
|
| - |
|
| 171 |
|
SLR-AMI Topco Blocker, LLC |
|
| 6,170 |
|
| 15,016 |
| a |
| - |
|
|
| - |
|
| (7,228 | ) |
| 13,958 |
|
| - |
|
|
| $ | 14,413 |
| $ | 16,126 |
|
| $ | (16,126 | ) |
| $ | - |
| $ | (455 | ) | $ | 13,958 |
| $ | 171 |
|
a Includes contribution of basis from Oldco AI, LLC to SLR-AMI Topco Blocker, LLC
† Non-income producing security.
See notes to consolidated financial statements.
77
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments (continued)
December 31, 2022
(in thousands)
Industry Classification | Percentage of Total | |||
Description | Industry | Spread above Index (3) | Libor Floor | Interest Rate (1) | Acquisition Date | Maturity Date | Par Amount | Cost | Fair Value | |||||||||||||||||||||||||
Bank Debt/Senior Secured Loans — 249.7% | ||||||||||||||||||||||||||||||||||
ACRES Commercial Mortgage, LLC (2) | Diversified Financial Services | L+705 | 1.00 | % | 8.05 | % | 12/24/2021 | 8/21/2028 | $ | 12,660 | $ | 12,407 | $ | 12,407 | ||||||||||||||||||||
Alimera Sciences, Inc. (2) | Pharmaceuticals | L+765 | 1.78 | % | 9.43 | % | 12/31/2019 | 7/1/2024 | 3,929 | 4,014 | 4,007 | |||||||||||||||||||||||
All State Ag Parts, LLC (2) | Trading Companies & Distributors | L+500 | 1.00 | % | 6.00 | % | 9/1/2021 | 9/1/2026 | 2,748 | 2,709 | 2,748 | |||||||||||||||||||||||
AmeriMark Intermediate Holdings, LLC (5) | Internet & Catalog Retail | L+600 | 1.00 | % | 7.00 | % | 7/28/2021 | 10/15/2026 | 22,191 | 21,763 | 21,747 | |||||||||||||||||||||||
Apex Service Partners, LLC (2) | Diversified Consumer Services | L+525 | 1.00 | % | 6.25 | % | 11/5/2021 | 7/31/2025 | 14,931 | 14,676 | 14,670 | |||||||||||||||||||||||
Arcutis Biotherapeutics, Inc. (2)(4) | Pharmaceuticals | L+745 | 0.10 | % | 7.55 | % | 12/22/2021 | 1/1/2027 | 9,195 | 9,157 | 9,154 | |||||||||||||||||||||||
Axcella Health, Inc. (2) | Pharmaceuticals | L+860 | 0.10 | % | 8.70 | % | 9/2/2021 | 9/1/2026 | 1,963 | 1,971 | 1,968 | |||||||||||||||||||||||
Basic Fun, Inc. (2) | Specialty Retail | L+550 | 1.00 | % | 6.50 | % | 10/30/2020 | 10/30/2023 | 1,297 | 1,283 | 1,297 | |||||||||||||||||||||||
BayMark Health Services, Inc. (2) | Health Care Providers & Services | L+500 | 1.00 | % | 6.00 | % | 6/29/2021 | 6/11/2027 | 15,639 | 15,489 | 15,639 | |||||||||||||||||||||||
BridgeBio Pharma, Inc. (2)(4) | Biotechnology | — | — | 9.00 | % | 11/17/2021 | 11/17/2026 | 14,627 | 14,419 | 14,407 | ||||||||||||||||||||||||
CC SAG Holdings Corp. (Spectrum Automotive) (2) | Diversified Consumer Services | L+575 | 0.75 | % | 6.50 | % | 6/29/2021 | 6/29/2028 | 5,148 | 5,075 | 5,148 | |||||||||||||||||||||||
Centrexion Therapeutics, Inc. | Pharmaceuticals | L+725 | 2.45 | % | 9.70 | % | 6/28/2019 | 1/1/2024 | 3,204 | 3,261 | 3,268 | |||||||||||||||||||||||
Cerapedics, Inc. (2) | Health Care Equipment & Supplies | L+695 | 2.50 | % | 9.45 | % | 3/22/2019 | 3/1/2025 | 5,248 | 5,376 | 5,366 | |||||||||||||||||||||||
Community Brands ParentCo, LLC (f/k/a Ministry Brands) (2) | Software | L+400 | 1.00 | % | 5.00 | % | 6/11/2021 | 12/2/2022 | 17,770 | 17,590 | 17,770 | |||||||||||||||||||||||
Drilling Info Holdings, Inc. (2) | IT Services | L+450 | — | 4.60 | % | 1/31/2020 | 7/30/2025 | 14,090 | 13,822 | 14,090 | ||||||||||||||||||||||||
Enhanced Permanent Capital, LLC (2)(4) | Capital Markets | L+700 | 1.00 | % | 8.00 | % | 12/29/2020 | 12/29/2025 | 5,554 | 5,417 | 5,554 | |||||||||||||||||||||||
ENS Holdings III Corp. & ES Opco USA LLC (BlueFin) (2) | Trading Companies & Distributors | L+475 | 1.00 | % | 5.75 | % | 12/31/2019 | 12/31/2025 | 7,527 | 7,422 | 7,527 | |||||||||||||||||||||||
Erie Construction Mid-west, LLC (2) | Building Products | L+475 | 1.00 | % | 5.75 | % | 8/5/2021 | 7/30/2027 | 11,732 | 11,538 | 11,732 | |||||||||||||||||||||||
Foundation Consumer Brands, LLC (2) | Personal Products | L+638 | 1.00 | % | 7.38 | % | 2/12/2021 | 2/12/2027 | 14,223 | 13,910 | 14,223 | |||||||||||||||||||||||
Glooko, Inc. (2) | Health Care Technology | L+790 | 0.10 | % | 8.00 | % | 9/30/2021 | 10/1/2026 | 1,769 | 1,764 | 1,760 | |||||||||||||||||||||||
GSM Acquisition Corp. (2) | Leisure Equipment & Products | L+500 | 1.00 | % | 6.00 | % | 4/20/2021 | 11/16/2026 | 14,170 | 14,039 | 14,170 | |||||||||||||||||||||||
Higginbotham Insurance Agency, Inc. (2) | Insurance | L+550 | 0.75 | % | 6.25 | % | 11/25/2020 | 11/25/2026 | 8,212 | 8,105 | 8,212 | |||||||||||||||||||||||
High Street Buyer, Inc. (2) | Insurance | L+600 | 0.75 | % | 6.75 | % | 4/16/2021 | 4/16/2028 | 9,241 | 9,064 | 9,241 | |||||||||||||||||||||||
Inszone Mid, LLC (2) | Insurance | L+575 | 1.00 | % | 6.75 | % | 9/28/2021 | 6/30/2026 | 4,713 | 4,668 | 4,690 | |||||||||||||||||||||||
Ivy Fertility Services, LLC (2) | Health Care Providers & Services | L+625 | 1.00 | % | 7.25 | % | 12/22/2021 | 2/25/2026 | 9,170 | 9,011 | 9,010 | |||||||||||||||||||||||
Kid Distro Holdings, LLC (Distro Kid) (2) | Software | L+600 | 1.00 | % | 7.00 | % | 9/24/2021 | 10/1/2027 | 12,583 | 12,340 | 12,331 | |||||||||||||||||||||||
KORE Wireless Group, Inc. (2)(4) | Wireless Telecommunication Services | L+550 | — | 5.72 | % | 3/12/2019 | 12/21/2024 | 14,251 | 14,087 | 14,251 | ||||||||||||||||||||||||
Maurices, Incorporated (2) | Specialty Retail | L+675 | 1.00 | % | 7.75 | % | 8/27/2021 | 6/1/2024 | 4,518 | 4,437 | 4,518 | |||||||||||||||||||||||
MMIT Holdings, LLC (2) | IT Services | L+625 | 1.00 | % | 7.25 | % | 9/21/2021 | 9/15/2027 | 13,126 | 12,921 | 13,126 | |||||||||||||||||||||||
MRI Software LLC (2) | Software | L+550 | 1.00 | % | 6.50 | % | 7/23/2019 | 2/10/2026 | 13,872 | 13,719 | 13,872 | |||||||||||||||||||||||
NAC Holding Corporation (Jaguar) (2) | Insurance | L+525 | 1.00 | % | 6.25 | % | 7/30/2021 | 9/28/2024 | 6,737 | 6,655 | 6,703 | |||||||||||||||||||||||
Neuronetics, Inc. (2) | Health Care Equipment & Supplies | L+765 | 1.66 | % | 9.31 | % | 3/2/2020 | 2/28/2025 | 3,056 | 3,107 | 3,108 | |||||||||||||||||||||||
Nexus Intermediate III, LLC (Vortex) (2) | Professional Services | L+550 | 0.75 | % | 6.25 | % | 12/13/2021 | 12/6/2027 | 5,992 | 5,888 | 5,887 | |||||||||||||||||||||||
Peter C. Foy & Associates Insurance Services, LLC (2) | Insurance | L+600 | 0.75 | % | 6.75 | % | 10/29/2021 | 11/1/2028 | 14,668 | 14,524 | 14,521 | |||||||||||||||||||||||
Pinnacle Treatment Centers, Inc . (2) | Health Care Providers & Services | L+575 | 1.00 | % | 6.75 | % | 1/22/2020 | 12/31/2022 | 4,696 | 4,678 | 4,696 | |||||||||||||||||||||||
Plastics Management, LLC (2) | Health Care Providers & Services | L+500 | 1.00 | % | 6.00 | % | 8/26/2021 | 8/18/2027 | 7,278 | 7,174 | 7,205 | |||||||||||||||||||||||
Revlon, Inc. (2)(4) | Personal Products | L+575 | 1.75 | % | 7.50 | % | 5/7/2021 | 5/7/2024 | 13,905 | 13,807 | 13,905 | |||||||||||||||||||||||
Rezolute, Inc. (2) | Biotechnology | L+875 | 0.12 | % | 8.87 | % | 4/14/2021 | 4/1/2026 | 1,206 | 1,204 | 1,203 | |||||||||||||||||||||||
RQM+ Corp. (2) | Life Sciences Tools & Services | L+575 | 1.00 | % | 6.75 | % | 8/20/2021 | 8/12/2026 | 6,982 | 6,916 | 6,964 | |||||||||||||||||||||||
RSC Acquisition, Inc. (2) | Insurance | L+550 | 0.75 | % | 6.25 | % | 10/5/2020 | 11/1/2026 | 5,123 | 4,982 | 5,123 | |||||||||||||||||||||||
Rubius Therapeutics, Inc. (2)(4) | Pharmaceuticals | L+550 | 2.10 | % | 7.60 | % | 3/12/2019 | 6/1/2026 | 7,872 | 8,028 | 8,029 | |||||||||||||||||||||||
RxSense Holdings LLC (2) | Diversified Consumer Services | L+500 | 1.00 | % | 6.00 | % | 3/17/2020 | 3/13/2026 | 10,543 | 10,391 | 10,543 | |||||||||||||||||||||||
scPharmaceuticals, Inc. (2) | Pharmaceuticals | L+795 | 2.23 | % | 10.18 | % | 9/17/2019 | 9/17/2023 | 801 | 814 | 813 | |||||||||||||||||||||||
SOC Telemed, Inc. (2) | Health Care Providers & Services | L+747 | 0.13 | % | 7.60 | % | 3/26/2021 | 4/1/2026 | 6,619 | 6,634 | 6,635 | |||||||||||||||||||||||
Description | Industry | Spread above Index (3) | Libor Floor | Interest Rate (1) | Acquisition Date | Maturity Date | Par Amount | Cost | Fair Value | |||||||||||||||||||||||||
Bank Debt/Senior Secured Loans (continued) | ||||||||||||||||||||||||||||||||||
SunMed Group Holdings, LLC (2) | Health Care Equipment & Supplies | L+575 | 0.75 | % | 6.50 | % | 6/16/2021 | 6/16/2028 | $ | 7,842 | $ | 7,713 | $ | 7,763 | ||||||||||||||||||||
TAUC Management, LLC (2) | Health Care Providers & Services | L+525 | 1.00 | % | 6.25 | % | 2/12/2021 | 2/12/2027 | 7,907 | 7,803 | 7,827 | |||||||||||||||||||||||
Tilley Chemical Buyer, Inc. (2) | Trading Companies & Distributors | L+600 | 1.00 | % | 7.00 | % | 12/8/2021 | 12/31/2026 | 9,798 | 9,677 | 9,676 | |||||||||||||||||||||||
Transportation Insight, LLC (2) | Road & Rail | L+450 | 1.00 | % | 5.50 | % | 10/27/2021 | 12/18/2024 | 2,300 | 2,266 | 2,265 | |||||||||||||||||||||||
Ultimate Baked Goods Midco LLC (Rise Baking) (2) | Packaged Foods & Meats | L+625 | 1.00 | % | 7.25 | % | 8/12/2021 | 8/13/2027 | 8,199 | 8,004 | 7,994 | |||||||||||||||||||||||
Vessco Midco Holdings, LLC (2) | Water Utilities | L+450 | 1.00 | % | 5.50 | % | 9/3/2021 | 11/2/2026 | 1,324 | 1,311 | 1,311 | |||||||||||||||||||||||
World Insurance Associates, LLC (2) | Insurance | L+575 | 1.00 | % | 6.75 | % | 10/12/2020 | 4/1/2026 | 19,587 | 19,137 | 19,587 | |||||||||||||||||||||||
Total Bank Debt/Senior Secured Loans | $ | 436,167 | $ | 439,661 | ||||||||||||||||||||||||||||||
Common Equity/Equity Interests/Warrants — 0.1% | Shares/Units | |||||||||||||||||||||||||||||||||
Centrexion Therapeutics, Inc. Warrants† | Pharmaceuticals | 6/28/2019 | 56,483 | 27 | 13 | |||||||||||||||||||||||||||||
Senseonics Holdings, Inc. Common Stock† (4) | Health Care Equipment & Supplies | 7/25/2019 | 79,501 | 23 | 212 | |||||||||||||||||||||||||||||
Total Common Equity/Equity Interests/Warrants | $ | 50 | $ | 225 | ||||||||||||||||||||||||||||||
Total Investments (6) — 249.8% | $ | 436,217 | $ | 439,886 | ||||||||||||||||||||||||||||||
Liabilities in Excess of Other Assets — (149.8%) | (263,773 | ) | ||||||||||||||||||||||||||||||||
Net Assets — 100.0% | $ | 176,113 | ||||||||||||||||||||||||||||||||
Investments (at December 31, | ||||
Health Care Providers & Services | 16.3 | % | ||
Health Care Equipment & Supplies | 10.5 | % | ||
Software | 8.9 | % | ||
Pharmaceuticals | 8.9 | % | ||
Insurance | 6.4 | % | ||
Diversified | 6.4 | % | ||
Biotechnology | 6.4 | % | ||
Trading Companies & | 5.8 | % | ||
Life Sciences Tools & Services | 3.7 | % | ||
Internet & Catalog Retail | 3.3 | % | ||
Leisure Equipment & Products | 3.3 | % | ||
Internet Software & Services | 3.2 | % | ||
Diversified Financial Services | 3.0 | % | ||
Personal Products | 2.7 | % | ||
Building Products | 2.6 | % | ||
Capital Markets | 2.2 | % | ||
Packaged Foods & Meats | 1.8 | % | ||
Road and Rail | 1.4 | % | ||
Water Utilities | 1.3 | % | ||
Professional Services | 1.3 | % | ||
Health Care Technology | 0.4 | % | ||
Specialty Retail | 0.2 | % | ||
Total Investments | ||||
100.0 | % |
See notes to consolidated financial statements.
78
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments
December 31, 2022
(in thousands, except share/unit amounts)
Description |
| Industry |
| Spread |
|
| Floor |
|
| Interest |
|
|
| Acquisition |
| Maturity |
| Par |
|
| Cost |
|
| Fair |
| ||||||
Bank Debt/Senior Secured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
ACRES Commercial Mortgage, LLC(2) |
| Diversified Financial Services |
| S+705 |
|
|
| 1.00 | % |
|
| 11.38 | % |
|
| 12/24/2021 |
| 8/21/2028 |
| $ | 12,660 |
|
| $ | 12,437 |
|
| $ | 12,660 |
| |
Alimera Sciences, Inc.(2) |
| Pharmaceuticals |
| L+765 |
|
|
| 1.78 | % |
|
| 11.82 | % |
|
| 12/31/2019 |
| 7/1/2024 |
|
| 3,929 |
|
|
| 4,059 |
|
|
| 4,145 |
| |
All State Ag Parts, LLC(2) |
| Trading Companies & Distributors |
| S+575 |
|
|
| 1.00 | % |
|
| 10.19 | % |
|
| 9/1/2021 |
| 9/1/2026 |
|
| 5,358 |
|
|
| 5,279 |
|
|
| 5,358 |
| |
AmeriMark Intermediate |
| Internet & Catalog Retail |
| L+800 |
|
|
| 1.00 | % |
|
| 14.77 | % |
|
| 7/28/2021 |
| 10/15/2026 |
|
| 21,189 |
|
|
| 20,858 |
|
|
| 20,129 |
| |
Apex Service Partners, LLC(2) |
| Diversified Consumer Services |
| S+525 |
|
|
| 1.00 | % |
|
| 9.42 | % |
|
| 11/5/2021 |
| 7/31/2025 |
|
| 21,450 |
|
|
| 21,134 |
|
|
| 21,450 |
| |
Arcutis Biotherapeutics, Inc.(2)(4). |
| Pharmaceuticals |
| L+745 |
|
|
| 0.10 | % |
|
| 11.62 | % |
|
| 12/22/2021 |
| 1/1/2027 |
|
| 24,520 |
|
|
| 24,654 |
|
|
| 24,827 |
| |
Ardelyx, Inc.(2)(4) |
| Pharmaceuticals |
| L+795 |
|
|
| 0.10 | % |
|
| 12.12 | % |
|
| 2/23/2022 |
| 3/1/2027 |
|
| 3,319 |
|
|
| 3,328 |
|
|
| 3,328 |
| |
Basic Fun, Inc.(2) |
| Specialty Retail |
| L+550 |
|
|
| 1.00 | % |
|
| 10.27 | % |
|
| 10/30/2020 |
| 10/30/2023 |
|
| 966 |
|
|
| 961 |
|
|
| 966 |
| |
BayMark Health Services, Inc.(2). |
| Health Care Providers & Services |
| L+500 |
|
|
| 1.00 | % |
|
| 9.73 | % |
|
| 6/29/2021 |
| 6/11/2027 |
|
| 15,861 |
|
|
| 15,733 |
|
|
| 15,861 |
| |
BridgeBio Pharma, Inc. (2)(4). |
| Biotechnology |
|
| — |
|
|
| — |
|
|
| 9.00 | % | (6) |
| 11/17/2021 |
| 11/17/2026 |
|
| 14,362 |
|
|
| 14,257 |
|
|
| 14,362 |
|
CC SAG Holdings Corp. (Spectrum |
| Diversified Consumer Services |
| L+575 |
|
|
| 0.75 | % |
|
| 10.48 | % |
|
| 6/29/2021 |
| 6/29/2028 |
|
| 6,491 |
|
|
| 6,407 |
|
|
| 6,491 |
| |
Centrexion Therapeutics, Inc. |
| Pharmaceuticals |
| L+725 |
|
|
| 2.45 | % |
|
| 11.42 | % |
|
| 6/28/2019 |
| 1/1/2024 |
|
| 2,314 |
|
|
| 2,417 |
|
|
| 2,453 |
| |
Cerapedics, Inc. (2) |
| Biotechnology |
| S+620 |
|
|
| 2.75 | % |
|
| 10.52 | % |
|
| 12/27/2022 |
| 1/1/2028 |
|
| 9,698 |
|
|
| 9,674 |
|
|
| 9,673 |
| |
Enhanced Permanent Capital, LLC(2)(4) |
| Capital Markets |
| L+700 |
|
|
| 1.00 | % |
|
| 10.13 | % |
|
| 12/29/2020 |
| 12/29/2025 |
|
| 7,503 |
|
|
| 7,352 |
|
|
| 7,503 |
| |
ENS Holdings III Corp. & ES Opco USA |
| Trading Companies & Distributors |
| S+475 |
|
|
| 1.00 | % |
|
| 9.43 | % |
|
| 12/31/2019 |
| 12/31/2025 |
|
| 7,570 |
|
|
| 7,490 |
|
|
| 7,570 |
| |
Enverus Holdings, Inc. (fka Drilling Info |
| IT Services |
| L+450 |
|
|
| — |
|
|
| 8.88 | % |
|
| 1/31/2020 |
| 7/30/2025 |
|
| 14,454 |
|
|
| 14,252 |
|
|
| 14,454 |
| |
Erie Construction Mid-west, LLC(2) |
| Building Products |
| S+475 |
|
|
| 1.00 | % |
|
| 9.79 | % |
|
| 8/5/2021 |
| 7/30/2027 |
|
| 11,381 |
|
|
| 11,222 |
|
|
| 11,381 |
| |
Foundation Consumer Brands, LLC(2) |
| Personal Products |
| L+550 |
|
|
| 1.00 | % |
|
| 10.15 | % |
|
| 2/12/2021 |
| 2/12/2027 |
|
| 12,288 |
|
|
| 12,063 |
|
|
| 12,288 |
| |
Glooko, Inc.(2) |
| Health Care Technology |
| L+790 |
|
|
| 0.10 | % |
|
| 12.07 | % |
|
| 9/30/2021 |
| 10/1/2026 |
|
| 2,831 |
|
|
| 2,838 |
|
|
| 2,838 |
| |
GSM Acquisition Corp. (2) |
| Leisure Equipment & Products |
| S+500 |
|
|
| 1.00 | % |
|
| 9.03 | % |
|
| 4/20/2021 |
| 11/16/2026 |
|
| 14,069 |
|
|
| 13,961 |
|
|
| 13,928 |
| |
Higginbotham Insurance Agency, Inc.(2) |
| Insurance |
| L+525 |
|
|
| 0.75 | % |
|
| 9.63 | % |
|
| 11/25/2020 |
| 11/25/2026 |
|
| 8,130 |
|
|
| 8,043 |
|
|
| 8,130 |
| |
High Street Buyer, Inc. (2) |
| Insurance |
| L+600 |
|
|
| 0.75 | % |
|
| 8.75 | % |
|
| 4/16/2021 |
| 4/16/2028 |
|
| 11,606 |
|
|
| 11,408 |
|
|
| 11,606 |
| |
Human Interest Inc.(2) |
| Internet Software & Services |
| S+785 |
|
|
| 1.00 | % |
|
| 11.97 | % |
|
| 6/30/2022 |
| 7/1/2027 |
|
| 6,799 |
|
|
| 6,690 |
|
|
| 6,799 |
| |
iCIMS, Inc.(2) |
| Software |
| S+725 |
|
|
| 0.75 | % |
|
| 11.52 | % | (7) |
| 8/18/2022 |
| 8/18/2028 |
|
| 13,757 |
|
|
| 13,527 |
|
|
| 13,517 |
| |
Ivy Fertility Services, LLC(2) |
| Health Care Providers & Services |
| L+625 |
|
|
| 1.00 | % |
|
| 10.39 | % |
|
| 12/22/2021 |
| 2/25/2026 |
|
| 10,515 |
|
|
| 10,369 |
|
|
| 10,620 |
| |
Kaseya, Inc.(2) |
| Software |
| S+575 |
|
|
| 0.75 | % |
|
| 10.33 | % |
|
| 6/22/2022 |
| 6/23/2029 |
|
| 10,966 |
|
|
| 10,810 |
|
|
| 10,966 |
| |
Kid Distro Holdings, LLC (Distro Kid)(2) |
| Software |
| L+575 |
|
|
| 1.00 | % |
|
| 10.48 | % |
|
| 9/24/2021 |
| 10/1/2027 |
|
| 12,457 |
|
|
| 12,251 |
|
|
| 12,457 |
| |
KORE Wireless Group, Inc.(2) |
| Wireless Telecommunication Services |
| S+550 |
|
|
| — |
|
|
| 10.08 | % |
|
| 3/12/2019 |
| 12/21/2024 |
|
| 14,104 |
|
|
| 13,992 |
|
|
| 14,104 |
| |
Maurices, Incorporated(2) |
| Specialty Retail |
| S+675 |
|
|
| 1.00 | % |
|
| 8.74 | % |
|
| 8/27/2021 |
| 6/1/2024 |
|
| 4,947 |
|
|
| 4,891 |
|
|
| 4,947 |
| |
Meditrina, Inc.(2) |
| Health Care Equipment & Supplies |
| S+550 |
|
|
| 3.45 | % |
|
| 9.82 | % |
|
| 12/20/2022 |
| 12/1/2027 |
|
| 1,212 |
|
|
| 1,201 |
|
|
| 1,209 |
| |
MRI Software LLC(2) |
| Software |
| L+550 |
|
|
| 1.00 | % |
|
| 10.23 | % |
|
| 7/23/2019 |
| 2/10/2026 |
|
| 15,308 |
|
|
| 15,180 |
|
|
| 15,308 |
| |
NAC Holding Corporation (Jaguar) (2) |
| Insurance |
| S+525 |
|
|
| 1.00 | % |
|
| 9.45 | % |
|
| 7/30/2021 |
| 9/28/2024 |
|
| 12,461 |
|
|
| 12,355 |
|
|
| 12,461 |
| |
Neuronetics, Inc.(2). |
| Health Care Equipment & Supplies |
| L+765 |
|
|
| 1.66 | % |
|
| 11.82 | % |
|
| 3/2/2020 |
| 2/28/2025 |
|
| 3,056 |
|
|
| 3,143 |
|
|
| 3,224 |
| |
Nexus Intermediate III, LLC (Vortex)(2) |
| Professional Services |
| L+550 |
|
|
| 0.75 | % |
|
| 10.22 | % |
|
| 12/13/2021 |
| 12/6/2027 |
|
| 5,947 |
|
|
| 5,858 |
|
|
| 5,947 |
| |
Oral Surgery Partners Holdings, LLC |
| Health Care Providers & Services |
| S+625 |
|
|
| 1.00 | % |
|
| 10.92 | % |
|
| 11/29/2022 |
| 5/10/2024 |
|
| 2,206 |
|
|
| 2,164 |
|
|
| 2,162 |
| |
Orthopedic Care Partners Management, |
| Health Care Providers & Services |
| S+650 |
|
|
| 1.00 | % |
|
| 10.91 | % |
|
| 8/17/2022 |
| 5/16/2024 |
|
| 4,226 |
|
|
| 4,200 |
|
|
| 4,226 |
| |
Outset Medical, Inc.(2)(4) |
| Health Care Equipment & Supplies |
| S+515 |
|
|
| 2.75 | % |
|
| 9.33 | % |
|
| 11/3/2022 |
| 11/1/2027 |
|
| 11,865 |
|
|
| 11,796 |
|
|
| 11,775 |
| |
Pediatric Home Respiratory Services, |
| Health Care Providers & Services |
| S+625 |
|
|
| 1.00 | % |
|
| 10.67 | % |
|
| 8/19/2022 |
| 12/4/2024 |
|
| 1,802 |
|
|
| 1,778 |
|
|
| 1,784 |
| |
Peter C. Foy & Associates Insurance |
| Insurance |
| S+600 |
|
|
| 0.75 | % |
|
| 11.21 | % |
|
| 10/29/2021 |
| 11/1/2028 |
|
| 15,579 |
|
|
| 15,444 |
|
|
| 15,579 |
| |
Pinnacle Treatment Centers, Inc.(2) |
| Health Care Providers & Services |
| S+650 |
|
|
| 1.00 | % |
|
| 10.57 | % |
|
| 1/22/2020 |
| 1/2/2026 |
|
| 8,339 |
|
|
| 8,233 |
|
|
| 8,152 |
| |
Plastics Management, LLC(2) |
| Health Care Providers & Services |
| S+500 |
|
|
| 1.00 | % |
|
| 9.89 | % |
|
| 8/26/2021 |
| 8/18/2027 |
|
| 12,117 |
|
|
| 11,967 |
|
|
| 12,117 |
| |
Revlon Consumer Products |
| Personal Products |
| P+475 |
|
|
| 2.75 | % |
|
| 12.25 | % |
|
| 5/7/2021 |
| 6/17/2023 |
|
| 13,905 |
|
|
| 13,876 |
|
|
| 13,974 |
| |
RQM+ Corp.(2) |
| Life Sciences Tools & Services |
| S+575 |
|
|
| 1.00 | % |
|
| 10.59 | % |
|
| 8/20/2021 |
| 8/12/2026 |
|
| 15,680 |
|
|
| 15,499 |
|
|
| 15,680 |
| |
RSC Acquisition, Inc.(2) |
| Insurance |
| S+550 |
|
|
| 0.75 | % |
|
| 9.26 | % |
|
| 10/5/2020 |
| 11/1/2026 |
|
| 9,345 |
|
|
| 9,191 |
|
|
| 9,345 |
| |
RxSense Holdings LLC(2) |
| Diversified Consumer Services |
| L+500 |
|
|
| 1.00 | % |
|
| 9.41 | % |
|
| 3/17/2020 |
| 3/13/2026 |
|
| 14,674 |
|
|
| 14,522 |
|
|
| 14,674 |
| |
See notes to consolidated financial statements.
79
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments (continued)
December 31, 2022
(in thousands)
Description |
| Industry |
| Spread |
| Floor |
|
| Interest |
|
| Acquisition |
| Maturity |
| Par |
|
| Cost |
|
| Fair |
| |||||
Bank Debt/Senior Secured Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Southern Orthodontic Partners |
| Health Care Providers & Services |
| S+600 |
|
| 1.00 | % |
|
| 10.84 | % |
| 6/3/2022 |
| 1/27/2026 |
| $ | 1,901 |
|
| $ | 1,884 |
|
| $ | 1,901 |
|
Spectrum Pharmaceuticals, Inc.(2) |
| Biotechnology |
| S+570 |
|
| 2.30 | % |
|
| 9.88 | % |
| 9/21/2022 |
| 9/1/2027 |
|
| 3,559 |
|
|
| 3,519 |
|
|
| 3,524 |
|
SunMed Group Holdings, LLC(2) |
| Health Care Equipment & Supplies |
| L+575 |
|
| 0.75 | % |
|
| 10.48 | % |
| 6/16/2021 |
| 6/16/2028 |
|
| 7,929 |
|
|
| 7,815 |
|
|
| 7,929 |
|
TAUC Management, LLC(2) |
| Health Care Providers & Services |
| L+525 |
|
| 1.00 | % |
|
| 9.98 | % |
| 2/12/2021 |
| 2/12/2027 |
|
| 9,013 |
|
|
| 8,912 |
|
|
| 8,968 |
|
Tilley Distribution, Inc.(2) |
| Trading Companies & Distributors |
| S+550 |
|
| 1.00 | % |
|
| 10.14 | % |
| 12/8/2021 |
| 12/31/2026 |
|
| 12,762 |
|
|
| 12,633 |
|
|
| 12,762 |
|
Transportation Insight, LLC(2) |
| Road & Rail |
| L+450 |
|
| 1.00 | % |
|
| 8.91 | % |
| 10/27/2021 |
| 12/18/2024 |
|
| 4,198 |
|
|
| 4,150 |
|
|
| 4,198 |
|
Ultimate Baked Goods Midco LLC |
| Packaged Foods & Meats |
| L+650 |
|
| 1.00 | % |
|
| 10.88 | % |
| 8/12/2021 |
| 8/13/2027 |
|
| 7,877 |
|
|
| 7,717 |
|
|
| 7,877 |
|
Vapotherm, Inc.(2) |
| Health Care Equipment & Supplies |
| S+830 |
|
| 1.00 | % |
|
| 12.58 | % | (8) | 2/18/2022 |
| 2/1/2027 |
|
| 12,070 |
|
|
| 12,076 |
|
|
| 12,131 |
|
Vessco Midco Holdings, LLC(2) |
| Water Utilities |
| L+450 |
|
| 1.00 | % |
|
| 7.87 | % |
| 9/3/2021 |
| 11/2/2026 |
|
| 2,207 |
|
|
| 2,189 |
|
|
| 2,206 |
|
World Insurance Associates, LLC(2) |
| Insurance |
| S+575 |
|
| 1.00 | % |
|
| 10.07 | % |
| 10/12/2020 |
| 4/1/2026 |
|
| 19,614 |
|
|
| 19,261 |
|
|
| 18,829 |
|
Total Bank Debt/Senior Secured |
| Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 528,920 |
|
| $ | 532,753 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares/ |
|
|
|
|
|
|
| |||||
Common Equity/Equity Interests/Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Centrexion Therapeutics, Inc. Warrants† |
| Pharmaceuticals |
|
|
|
|
|
|
|
|
| 6/28/2019 |
|
|
|
| 56,483 |
|
| $ | 27 |
|
| $ | 16 |
| ||
Meditrina, Inc. Warrants† |
| Health Care |
|
|
|
|
|
|
|
|
| 12/20/2022 |
|
|
|
| 10,572 |
|
|
| 8 |
|
|
| 8 |
| ||
Senseonics Holdings, Inc Common |
| Health Care Equipment & Supplies |
|
|
|
|
|
|
|
|
| 7/25/2019 |
|
|
|
| 79,501 |
|
|
| 23 |
|
|
| 82 |
| ||
Spectrum Pharmaceuticals, Inc. Warrants† |
| Biotechnology |
|
|
|
|
|
|
|
|
| 9/21/2022 |
|
|
|
| 53,930 |
|
|
| 17 |
|
|
| 5 |
| ||
Vapotherm, Inc.† |
| Health Care Equipment & Supplies |
|
|
|
|
|
|
|
|
| 2/18/2022 |
|
|
|
| 12,960 |
|
|
| 75 |
|
|
| 31 |
| ||
Total Common Equity/Equity |
| Interests/Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 150 |
|
| $ | 142 |
| |||
Total Investments(9) — 271.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 529,070 |
|
| $ | 532,895 |
| |||
Liabilities in Excess of Other |
| Assets — (171.5%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (336,641 | ) | ||||
Net Assets — 100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 196,254 |
| ||||
† Non-income producing security.
See notes to consolidated financial statements.
80
SCP Private Credit Income BDC LLC
Consolidated Schedule of Investments (continued)
December 31, 2022
(in thousands)
Industry Classification | Percentage of Total | |||
Insurance | 14.3 | % | ||
Health Care Providers & Services | 12.4 | % | ||
Software | 9.8 | % | ||
Diversified Consumer Services | 8.0 | % | ||
Health Care Equipment & Supplies | 6.8 | % | ||
Pharmaceuticals | 6.5 | % | ||
Biotechnology | 5.2 | % | ||
Personal Products | 4.9 | % | ||
Trading Companies & Distributors | 4.8 | % | ||
Internet & Catalog Retail | 3.8 | % | ||
Life Sciences Tools & Services | 2.9 | % | ||
IT Services | 2.7 | % | ||
Wireless Telecommunication Services | 2.7 | % | ||
Leisure Equipment & Products | 2.6 | % | ||
Diversified Financial Services | 2.4 | % | ||
Building Products | 2.1 | % | ||
Packaged Foods & Meats | 1.5 | % | ||
Capital Markets | 1.4 | % | ||
Internet Software & Services | 1.3 | % | ||
Professional Services | 1.1 | % | ||
Specialty Retail | 1.1 | % | ||
Road & Rail | 0.8 | % | ||
Health Care Technology | 0.5 | % | ||
Water Utilities | 0.4 | % | ||
Total Investments | 100.0 | % | ||
See notes to consolidated financial statements.
81
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements
December 31, 2022
(in thousands, except unit amounts)
Note 1. Organization
SCP Private Credit Income BDC LLC (the “Company”, “we”, “us” or “our”) is a Delaware limited liability company formed on May 18, 2018. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (“the 1940 Act”). Furthermore, as the Company is an investment company, it applies the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. In addition, for U.S. federal income tax purposes, the Company has elected to be treated, and intends to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company was formed primarily to provide investors with attractive long-term returns through investments made pursuant to the investment strategy of the Company described below (the Company’s investments in portfolio companies are referred to herein as “Portfolio Investments”).
On October 5, 2018 (the “Initial Closing Date”), the Company closed on $326,000$326,000 in capital commitments. On March 12, 2019, the sale and issuance of 2,800,000 units, at an aggregate purchase price of $28,000$28,000 ($10.00 per unit) occurred and the Company commenced operations. As of December 31, 2022, $196,5002023, $277,800 of capital commitments were drawn and $129,500$48,200 were unfunded.
The Company has implemented a corporate lending strategy focused on sourcing, underwriting and managing a diverse portfolio of private senior secured loans primarily to upper middle market companies (generally, loan sizes of $100,000$100,000 to $300,000$300,000 to companies with earnings before interest, tax, depreciation and amortization (“EBITDA”) between approximately $25,000$25,000 and $100,000)$100,000) across the United States. In addition to senior secured loans to upper middle market companies, the Company intends to invest a portion of its assets in
The offering period of the Company ended on April 5, 2019 (the “Offering Period”). The investment period of the Company ended on December 31, 2022. The term of the Company will be six years from the end of the Offering Period unless the Company is liquidated earlier as set forth in the Limited Liability Company Agreement of the Company (as amended, restated or otherwise modified from time to time, the “LLC Agreement”), but may be extended by the board of directors for up to two consecutive one year periods upon approval of the Company’s independent directors and the approval of unitholders of the Company (“Unitholders”), which approval will be obtained through a
Note 2. Summary of Significant Accounting Policies
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”), and include the accounts of the Company and certain wholly-owned subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts may have been reclassified to conform to current period
The preparation of consolidated financial statements in conformity with GAAP and pursuant to the requirements for reporting on Form
In the opinion of management, all adjustments which are of a normal recurring nature and considered necessary for the fair presentation of financial statements, have been included.
The significant accounting policies consistently followed by the Company are:
82
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements
December 31, 2023
(in thousands, except unit amounts)
The valuation principles set forth above may be modified from time to time without notice to Unitholders, in whole or in part, as determined by the Board in its sole discretion.
The Board will also (1) periodically assess and manage valuation risks; (2) establish and apply fair value methodologies; (3) test fair value methodologies; (4) oversee and evaluate third-party pricing services, as applicable; (5) oversee the reporting required by Rule
When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider the pricing indicated by the external event to corroborate the valuation. 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 investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in accordance with ASC2022,2023, there has been no change to the Company’s valuation approaches or techniques and the nature of the related inputs considered in the valuation process.
ASC Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:
Level
83
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements
December 31, 2023
(in thousands, except unit amounts)
Level
Level
In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The exercise of judgment is based in part on our knowledge of the asset class and our prior experience.
84
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements
December 31, 2023
(in thousands, except unit amounts)
Note 3. Agreements and Related Party Transactions
The Company has entered into an investment management agreement with the Adviser (the “Investment Management Agreement”) pursuant to which it will pay management fees, administrative coordinator fees and incentive fees to the Adviser. The Company will pay the Adviser a fee for investment advisory and management services consisting of two components: a base management fee and an incentive fee. The Company will also pay the Adviser (in its capacity as Administrative Coordinator, defined herein) an administration fee for administrative and coordination services. The cost of the base management fee, the incentive fee, and the administration fee will be borne by the Unitholders.
Management Fees and Administration Fees
The Company will pay the Adviser a management fee (the “Management Fee”), calculated as of the close of business in New York, New York on the last day of each calendar quarter (each such date, the “Management Fee Calculation Date”), in an amount equal to 1.5%1.5% per annum of Invested Capital (defined as, as of any date, the sum of (i) capital contributions to the Company plus (ii) the total amount of credit drawn on subscription credit facilities), and payable quarterly in arrears after such Management Fee Calculation Date.
Pursuant to the Investment Management Agreement, the Adviser has also been appointed to provide administrative and coordination services to the Company (in such capacity, the “Administrative Coordinator”). The Company will pay the Administrative Coordinator, a fee (the “Administration Fee”), calculated as of the close of business in New York, New York on the last day of each calendar quarter (the “Administration Fee Calculation Date”), in an amount equal to 0.08%0.08% per annum of the average Cost Basis (defined as the aggregate accreted and amortized cost of all portfolio investments, including any amounts reinvested in investments and the cost of investments acquired using leverage), as measured on the last day of the preceding quarter and the last day of the current quarter for the period ended and payable quarterly in arrears after such Administration Fee Calculation Date. The Administrative Coordinator will be responsible for all expenses of its own staff responsible for (i) certain
Each of the Management Fee and the Administration Fee will be appropriately adjusted for any stub period. Such fees will be paid out of net current income and/or disposition proceeds or, to the extent such amounts are not available, from unfunded capital commitments that will be drawn down, or borrowings of the Company. In the event that the Adviser arranges for the Company to pay any portion of a placement fee to a placement agent, the amount of management fees otherwise payable shall be reduced by an amount equal to 100%100% of such payment to the placement agent.
Incentive Fee
The Company will make distributions out of two categories: Current Proceeds and Disposition Proceeds (collectively referred to as “Investment Proceeds”). “Disposition Proceeds” means all amounts received by the Company upon the disposition of an investment, including full or partial repayments or amortization of principal (but excluding Current Proceeds). “Current Proceeds” means all proceeds from investments, including interest income, fee income, warrant gains, prepayment fees and exit fees, other than Disposition Proceeds. The Adviser will apportion each Unitholder’s pro rata share of Investment Proceeds between Disposition Proceeds and Current Proceeds. Amounts of Investment Proceeds apportioned to Unitholders will be divided between and distributed to Unitholders, on the one hand, and the Adviser, on the other hand, in the following amounts and order of priority:
(i) Disposition Proceeds apportioned to Unitholders shall be divided between and distributed to Unitholders, on the one hand, and paid to
85
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (continued)
December 31, 2022
(in thousands, except unit amounts)
(A)Contributions.Contributions. First, 100%100% to such Unitholder until such Unitholder has received cumulative distributions of Investment Proceeds pursuant to this clause (i)(A) equal to such Unitholder’s total Capital Contributions to the Company (including amounts contributed to pay Management Fees, Administration Fees, Organizational Expenses (as defined below) and other Company expenses);
(B)Return.Return. Second, 100%100% of all remaining Disposition Proceeds to Unitholders until they have each received cumulative distributions of Investment Proceeds, without duplication, pursuant to this clause (B) and clause (D) below and pursuant to clause (ii)(A) and clause (ii)(C) below equal to 6%6% per annum, compounded annually, on such Unitholder’s unreturned capital contributions to the Company (including amounts contributed to pay Management Fees, Administration Fees, Organizational Expenses and other Company expenses) (the “Return”Return”);
(C)80%80% of all remaining Disposition Proceeds paid to the Adviser as an Incentive Fee until the Adviser has received payments of Investment Proceeds with respect to Unitholders pursuant to this clause (C) and clause (ii)(B) equal to 15%15% of the total amounts distributed to Unitholders and paid to the Adviser pursuant to clause (B) above and this clause (C) and pursuant to clause (ii)(A) and clause (ii)(B); and
(D)85%85%/15% Shares.15% Shares. Thereafter, 85%85% to Unitholders and 15%15% paid to the Adviser as an Incentive Fee.
(ii) Current Proceeds apportioned to Unitholders shall be divided between and distributed to Unitholders, on the one hand, and paid to the Adviser as an Incentive Fee, on the other hand, in the following amounts and order of priority:
(A)Return.Return. First, 100%100% of all Current Proceeds to Unitholders until Unitholders have received cumulative distributions of Investment Proceeds, without duplication, pursuant to this clause (A) and clause (C) below and pursuant to clause (i)(B) and clause (i)(D) equal to the Preferred Return;
(B)15%80%80% of all remaining Current Proceeds paid to the Adviser as an Incentive Fee until the Adviser has received payments of Investment Proceeds with respect to Unitholders pursuant to this clause (B) and clause (i)(C) equal to 15%15% of the total amounts distributed to Unitholders and paid to the Adviser pursuant to clause (A) above and this clause (B) and pursuant to Section clause (i)(B) and clause (i)(C); and
(C)85%85%/15% Units.15% Units. Thereafter, 85%85% to Unitholders and 15%15% paid to the Adviser as an Incentive Fee.
In no event will the Adviser receive amounts attributable to Disposition Proceeds that, as of any distribution or payment date, exceeds 20% of cumulative realized capital gains net of all cumulative realized capital losses and unrealized capital depreciation.
The Adviser has the right with respect to all Unitholders, upon approval of the Company’s independent directors, to waive or reduce the incentive fee to which it is entitled. The Adviser may also elect not to receive all or any portion of the incentive fee that would otherwise be distributed to it, and may cause any or all amounts subsequently available for distribution to the Unitholders to be distributed to the Adviser until it has received the same aggregate amount of incentive fees had it not previously waived receipt of incentive fees.
The Adviser will be entitled to withhold from any distributions, in its discretion, any required tax withholdings. Amounts of taxes paid or withheld from amounts otherwise distributable to a Unitholder will be deemed distributed for purposes of the calculations above.
Upon liquidation of the Company, the Adviser will be required to restore funds to the Company for distribution to the Unitholders if and to the extent that the Adviser has received cumulative incentive fees in excess of the incentive fees that would have been payable to the Adviser on an aggregate basis covering all transactions of the Company; provided, however, that in no event will the Adviser be required to contribute an aggregate amount in excess of 100%100% of the net amount distributed to the Adviser (net of taxes) on account of its incentive fees. In addition, the Adviser will apply an interim incentive fee adjustment at the end of each fiscal year so that, in the event of any over-distribution of incentive fee to the Adviser (measured with respect to each Unitholder using the fair value of the Company’s portfolio at the end of the applicable fiscal year as if the Company were to liquidate on such date), future distributions that would, absent such interim incentive fee adjustment, otherwise be distributed to the Adviser as an incentive fee, shall be distributed to such Unitholder until such over-distribution (net of taxes payable by the Adviser with respect to such incentive fee) has been eliminated.
For the years ended December 31, 2023, 2022 2021 and 2020,2021, the Company incurred $3,779, $2,654$4,288, $3,779 and $1,773,$2,654, respectively, in Management Fees, $391, $224$411, $391 and $118,$224, respectively, in Administration Fees and $3,601, $3,213$3,464, $3,601 and $0,$3,213, respectively in Incentive Fees.
The aggregate amount of certain operating expenses relating to Unitholders investing directly in the Company will not exceed the Operating
86
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements
December 31, 2023
(in thousands, except unit amounts)
Expense Cap, calculated as follows: (A) if the Company has less than or equal to $400,000$400,000 in capital commitments, an amount equal to the sum of (x) the product of the capital commitments and 0.0025 and (y) $1,250,$1,250, or (B) if the Company has greater than $400,000$400,000 in capital commitments, $2,250.$2,250. Any amount in excess of the Operating Expense Cap for any fiscal year will be paid by the Adviser. For the avoidance of doubt, the Operating Expense Cap will not apply to any fees, costs, expenses and liabilities allocable to persons investing indirectly in the Company through any Unitholder. See “Payment of Our Expenses under the Investment Management Agreement” in Item 1.
The Adviser or Administrative Coordinator and/or their affiliates has advanced organizational and offering expenses to the Company, which include organizational fees, costs, expenses and liabilities of the Company, including legal expenses, incurred in connection with the initial offering of Units and the formation and establishment of the Company (“Organizational Expenses”). The Adviser or Administrative Coordinator (or such affiliate) has been reimbursed by the Company for such advanced costs and expenses in an amount not to exceed $500. $308$500. $308 of offering expenses were charged to capital and $84$84 of organizational costs were expensed in 2019.
Note 4. Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:
Level
Level
Level
When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3).
Gains and losses for assets and liabilities categorized within the Level 3 table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Such reclassifications involving Level 3 assets and liabilities are reported as transfers in/out of Level 3 as of the end of the quarter in which the reclassifications occur. Within the fair value hierarchy tables below, cash and cash equivalents are excluded but could be classified as Level 1.
87
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements
December 31, 2023
(in thousands, except unit amounts)
The following table presentstables present the balances of assets measured at fair value on a recurring basis, as of December 31, 20222023 and December 31, 2021:
Fair Value Measurements
As of December 31, 2022
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Bank Debt/Senior Secured Loans | $ | — | $ | — | $ | 532,753 | $ | 532,753 | ||||||||
Common Equity/Equity Interests/Warrants | 82 | — | 60 | 142 | ||||||||||||
Total Investments | $ | 82 | $ | — | $ | 532,813 | $ | 532,895 | ||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Bank Debt/Senior Secured Loans |
| $ | — |
|
| $ | — |
|
| $ | 406,543 |
|
| $ | 406,543 |
|
Common Equity/Equity Interests/Warrants |
|
| 50 |
|
|
| — |
|
|
| 13,975 |
|
|
| 14,025 |
|
Total Investments |
| $ | 50 |
|
| $ | — |
|
| $ | 420,518 |
|
| $ | 420,568 |
|
While the Company has not made an election to apply the fair value option of accounting to any of its debt obligations, if the Company’s debt obligations were carried at fair value at December 31, 2022,2023, the fair value of the SPV Facility and the Subscription Facility would be $267,726$170,800 and $70,400,$0, respectively.
Fair Value Measurements
As of December 31, 2022
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Bank Debt/Senior Secured Loans |
| $ | — |
|
| $ | — |
|
| $ | 532,753 |
|
| $ | 532,753 |
|
Common Equity/Equity Interests/Warrants |
|
| 82 |
|
|
| — |
|
|
| 60 |
|
|
| 142 |
|
Total Investments |
| $ | 82 |
|
| $ | — |
|
| $ | 532,813 |
|
| $ | 532,895 |
|
The following table provides a summary of the changes in fair value of Level 3 assets for the year ended December 31, 2023, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets still held at December 31, 2023:
|
| Bank Debt /Senior Secured Loans |
|
| Common Equity/Equity Interests/Warrants |
|
| Total |
| |||
Fair value, December 31, 2022 |
| $ | 532,753 |
|
| $ | 60 |
|
| $ | 532,813 |
|
Total gains or losses included in earnings: |
|
|
|
|
|
|
|
|
| |||
Net realized gain |
|
| 12 |
|
|
| — |
|
|
| 12 |
|
Net change in unrealized loss |
|
| (1,678 | ) |
|
| (7,294 | ) |
|
| (8,972 | ) |
Purchase of investment securities* |
|
| 95,190 |
|
|
| 21,226 |
|
|
| 116,416 |
|
Proceeds from dispositions of investment securities |
|
| (219,734 | ) |
|
| (17 | ) |
|
| (219,751 | ) |
Transfers into Level 3 |
|
| — |
|
|
| — |
|
|
| — |
|
Transfers out of Level 3 |
|
| — |
|
|
| — |
|
|
| — |
|
Fair value, December 31, 2023 |
| $ | 406,543 |
|
| $ | 13,975 |
|
| $ | 420,518 |
|
Unrealized losses for the period relating to those Level 3 |
|
|
|
|
|
|
|
|
| |||
Net change in unrealized loss |
| $ | (1,534 | ) |
| $ | (7,306 | ) |
| $ | (8,840 | ) |
* Includes PIK capitalization and accretion of discount
88
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (continued)
December 31, 2022
(in thousands, except unit amounts)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Bank Debt/Senior Secured Loans | $ | — | $ | — | $ | 439,661 | $ | 439,661 | ||||||||
Common Equity/Equity Interests/Warrants | 212 | — | 13 | 225 | ||||||||||||
Total Investments | $ | 212 | $ | — | $ | 439,674 | $ | 439,886 | ||||||||
The following table provides a summary of the changes in fair value of Level 3 assets for the year ended December 31, 2022, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets still held at December 31, 2022:
|
| Bank Debt/Senior Secured Loans |
|
| Common Equity/Equity Interests/Warrants |
|
| Total |
| |||
Fair value, December 31, 2021 |
| $ | 439,661 |
|
| $ | 13 |
|
| $ | 439,674 |
|
Total gains or losses included in earnings: |
|
|
|
|
|
|
|
| ||||
Net realized gain |
|
| — |
|
|
| — |
|
|
| — |
|
Net change in unrealized gain |
|
| 340 |
|
|
| (53 | ) |
|
| 287 |
|
Purchase of investment securities* |
|
| 188,107 |
|
|
| 100 |
|
|
| 188,207 |
|
Proceeds from dispositions of investment securities |
|
| (95,355 | ) |
|
| — |
|
|
| (95,355 | ) |
Transfers into Level 3 |
|
| — |
|
|
| — |
|
|
| — |
|
Transfers out of Level 3 |
|
| — |
|
|
| — |
|
|
| — |
|
Fair value, December 31, 2022 |
| $ | 532,753 |
|
| $ | 60 |
|
| $ | 532,813 |
|
Unrealized gains (losses) for the period relating to those Level 3 |
|
|
|
|
|
|
|
|
| |||
Net change in unrealized gain (loss) |
| $ | 744 |
|
| $ | (53 | ) |
|
| 691 |
|
Bank Debt /Senior Secured Loans | Common Equity/Equity Interests/ Warrants | Total | ||||||||||
Fair value, December 31, 2021 | $ | 439,661 | $ | 13 | $ | 439,674 | ||||||
Total gains or losses included in earnings: | ||||||||||||
Net realized gain (loss) | — | — | — | |||||||||
Net change in unrealized gain (loss) | 340 | (53 | ) | 287 | ||||||||
Purchase of investment securities | 188,107 | 100 | 188,207 | |||||||||
Proceeds from dispositions of investment securities | (95,355 | ) | — | (95,355 | ) | |||||||
Transfers into Level 3 | — | — | — | |||||||||
Transfers out of Level 3 | — | — | — | |||||||||
Fair value, December 31, 2022 | $ | 532,753 | $ | 60 | $ | 532,813 | ||||||
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period: | ||||||||||||
Net change in unrealized gain (loss) | $ | 744 | $ | (53 | ) | $ | 691 | |||||
Bank Debt/Senior Secured Loans | Common Equity/Equity Interests/Warrants | Total | ||||||||||
Fair value, December 31, 2020 | $ | 165,334 | $ | 30 | $ | 165,364 | ||||||
Total gains or losses included in earnings: | ||||||||||||
Net realized gain | 16 | — | 16 | |||||||||
Net change in unrealized gain | 2,437 | 6 | 2,443 | |||||||||
Purchase of investment securities | 378,842 | — | 378,842 | |||||||||
Proceeds from dispositions of investment securities | (106,968 | ) | — | (106,968 | ) | |||||||
Transfers into Level 3 | — | — | — | |||||||||
Transfers out of Level 3 (1) | — | (23 | ) | (23 | ) | |||||||
Fair value, December 31, 2021 | $ | 439,661 | $ | 13 | $ | 439,674 | ||||||
Unrealized gains for the period relating to those Level 3 assets that were still held by the Company at the end of the period: | ||||||||||||
Net change in unrealized gain (loss) | $ | 2,860 | $ | (1 | ) | 2,859 | ||||||
Quantitative Information about Level 3 Fair Value Measurements
The Company typically determines the fair value of its performing debt investments utilizing a yield analysis. In a yield analysis, a price is ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to current contractual interest rates, relative maturities and other key terms and risks associated with an investment. Among other factors, a significant determinant of risk is the amount of leverage used by the portfolio company relative to the total enterprise value of the company, and the rights and remedies of our investment within each portfolio company.
Significant unobservable quantitative inputs typically used in the fair value measurement of the Company’s Level 3 assets and liabilities primarily reflect current market yields, including indices, and readily available quotes from brokers, dealers, and pricing services as indicated by comparable assets and liabilities, as well as enterprise values, returns on equity and earnings before income taxes, depreciation and amortization (“EBITDA”) multiples of similar companies, and comparable market transactions for equity securities.
Quantitative information about the Company’s Level 3 asset fair value measurements as of December 31, 20222023 is summarized in the table below:
Liability | December 31, 2022 | Average) | ||||||||
|
| Asset or |
| Fair Value at December 31, 2023 |
|
| Principal |
| Unobservable |
| Range | |
Bank Debt/Senior Secured Loans |
| Asset |
| $ | 406,543 |
|
| Income Approach |
| Market Yield |
| 10.0%-17.6% (12.2%) |
Common Equity/Equity Interests/Warrants |
| Asset |
| $ | 17 |
|
| Market Approach |
| Volatility |
| 18.9%-18.9% (18.9%) |
|
|
|
| $ | 13,958 |
|
| EBITDA Multiple |
| Comparable Multiple |
| 5.5x-6.5x (6.0x) |
Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in derivingspreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets. Generally, an increase inmarketyields may result in a decrease in the fair value of certain of the Company’s investments.
Liability | December 31, 2021 | Average) | ||||||||
89
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements
December 31, 2023
(in thousands, except unit amounts)
Quantitative information about the Company’s Level 3 asset fair value measurements as of December 31, 2022 is summarized in the table below:
|
| Asset or Liability |
| Fair Value at December 31, 2022 |
|
| Principal Valuation Technique/Methodology |
| Unobservable Input |
| Range (Weighted Average) | |
Bank Debt/Senior Secured Loans |
| Asset |
| $ | 532,753 |
|
| Income Approach |
| Market Yield |
| 9.4%-16.2% (11.4%) |
Common Equity/Equity Interests/Warrants |
| Asset |
| $ | 60 |
|
| Market Approach |
| Volatility |
| 26.0%-26.0% (26.0%) |
Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in deriving bid-ask spreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets. Generally, an increase in market yields may result in a decrease in the fair value of certain of the Company’s investments.
Note 5. Debt
Revolving credit facility due August 2024 (the “SPV Facility
Revolving credit facility due December 31, 2022,
The average annualized interest cost for borrowings for the year ended December 31, 20222023 and the year ended December 31, 20212022 was 4.67%8.08% and 2.97%4.67%, respectively. These costs are exclusive of other credit facility expenses such as unused fees and fees paid to the20222023 and the year ended December 31, 20212022 was $343,350$338,126 and $273,850,$343,350, respectively.
90
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (continued)
December 31, 2022
(in thousands, except unit amounts)
Note 6. Commitments and Contingencies
The Company had unfunded debt commitments to various revolving and delayed-draw term loans. The total amount of these unfunded commitments as of December 31, 20222023 and December 31, 20212022 is $98,214$14,730 and $106,337,$98,214, respectively, comprised of the following:
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
iCIMS, Inc. |
| $ | 2,308 |
|
| $ | 3,867 |
|
High Street Buyer, Inc. |
|
| 1,890 |
|
|
| 2,797 |
|
RxSense Holdings, LLC |
|
| 1,558 |
|
|
| 1,558 |
|
Nexus Intermediate III, LLC (Vortex) |
|
| 1,264 |
|
|
| 1,264 |
|
Kid Distro Holdings, LLC |
|
| 1,121 |
|
|
| 1,121 |
|
GSM Acquisition Corp. |
|
| 1,101 |
|
|
| 1,101 |
|
Foundation Consumer Brands, LLC |
|
| 967 |
|
|
| 967 |
|
Basic Fun, Inc. |
|
| 960 |
|
|
| 1,195 |
|
Ultimate Baked Goods Midco LLC |
|
| 749 |
|
|
| 578 |
|
ENS Holdings III Corp. & ES Opco USA LLC |
|
| 717 |
|
|
| 179 |
|
Kaseya, Inc. |
|
| 625 |
|
|
| 1,315 |
|
SunMed Group Holdings, LLC |
|
| 515 |
|
|
| 268 |
|
Vessco Midco Holdings, LLC |
|
| 396 |
|
|
| 4,969 |
|
TAUC Management, LLC |
|
| 385 |
|
|
| 385 |
|
CC SAG Holdings Corp. (Spectrum Automotive) |
|
| 174 |
|
|
| 6,568 |
|
Outset Medical, Inc. |
|
| — |
|
|
| 11,865 |
|
Accession Risk Management Group, Inc. |
|
| — |
|
|
| 10,328 |
|
Human Interest Inc. |
|
| — |
|
|
| 6,799 |
|
Oral Surgery Partners Holdings, LLC |
|
| — |
|
|
| 3,277 |
|
Glooko, Inc. |
|
| — |
|
|
| 3,185 |
|
Plastics Management, LLC |
|
| — |
|
|
| 3,095 |
|
Arcutis Biotherapeutics, Inc. |
|
| — |
|
|
| 3,065 |
|
Spectrum Pharmaceuticals, Inc. |
|
| — |
|
|
| 2,966 |
|
Maurices, Incorporated |
|
| — |
|
|
| 2,733 |
|
Ardelyx, Inc. |
|
| — |
|
|
| 2,716 |
|
Southern Orthodontic Partners Management, LLC |
|
| — |
|
|
| 2,605 |
|
Pediatric Home Respiratory Services, LLC |
|
| — |
|
|
| 2,451 |
|
Cerapedics, Inc. |
|
| — |
|
|
| 2,424 |
|
Orthopedic Care Partners Management, LLC |
|
| — |
|
|
| 2,200 |
|
Transportation Insight, LLC |
|
| — |
|
|
| 1,860 |
|
Erie Construction Mid-west, LLC |
|
| — |
|
|
| 1,593 |
|
Enverus Holdings, Inc. |
|
| — |
|
|
| 1,251 |
|
Meditrina, Inc. |
|
| — |
|
|
| 1,212 |
|
Tilley Distribution, Inc. |
|
| — |
|
|
| 670 |
|
MRI Software LLC |
|
| — |
|
|
| 577 |
|
Peter C. Foy & Associates Insurance Services, LLC |
|
| — |
|
|
| 570 |
|
Pinnacle Treatment Centers, Inc. |
|
| — |
|
|
| 520 |
|
Ivy Fertility Services, LLC |
|
| — |
|
|
| 499 |
|
BayMark Health Services, Inc. |
|
| — |
|
|
| 499 |
|
NAC Holdings Corporation |
|
| — |
|
|
| 470 |
|
Apex Service Partners, LLC |
|
| — |
|
|
| 345 |
|
All States Ag Parts, LLC |
|
| — |
|
|
| 172 |
|
World Insurance Associates, LLC |
|
| — |
|
|
| 135 |
|
Total Commitments |
| $ | 14,730 |
|
| $ | 98,214 |
|
December 31, 2022 | December 31, 2021 | |||||||
Outset Medical, Inc. | $ | 11,865 | $ | — | ||||
RSC Acquisition, Inc. | 10,328 | — | ||||||
Human Interest Inc. | 6,799 | — | ||||||
CC SAG Holdings Corp. (Spectrum Automotive) | 6,568 | 7,965 | ||||||
Vessco Midco Holdings, LLC . | 4,969 | 5,862 | ||||||
iCIMS, Inc. | 3,867 | — | ||||||
Oral Surgery Partners Holdings, LLC . | 3,277 | — | ||||||
Glooko, Inc. | 3,185 | 5,308 | ||||||
Plastics Management, LLC . | 3,095 | 4,529 | ||||||
Arcutis Biotherapeutics, Inc. | 3,065 | 18,390 | ||||||
Spectrum Pharmaceuticals, Inc. | 2,966 | — | ||||||
High Street Buyer, Inc. | 2,797 | 1,080 | ||||||
Maurices, Incorporated | 2,733 | 4,969 | ||||||
Ardelyx, Inc. | 2,716 | — | ||||||
Southern Orthodontic Partners Management, LLC . | 2,605 | — | ||||||
Pediatric Home Respiratory Services, LLC . | 2,451 | — | ||||||
Cerapedics, Inc. | 2,424 | — | ||||||
Orthopedic Care Partners Management, LLC . | 2,200 | — | ||||||
Transportation Insight, LLC . | 1,860 | 3,819 | ||||||
Erie Construction Mid-west, LLC. | 1,593 | 1,593 | ||||||
RxSense Holdings, LLC . | 1,558 | 1,558 | ||||||
Kaseya, Inc. | 1,315 | — | ||||||
Nexus Intermediate III, LLC (Vortex) | 1,264 | 1,264 | ||||||
Enverus Holdings, Inc. | 1,251 | 1,758 | ||||||
Meditrina, Inc. | 1,212 | — | ||||||
Basic Fun, Inc. | 1,195 | 864 | ||||||
Kid Distro Holdings, LLC . | 1,121 | 1,121 | ||||||
GSM Acquisition Corp . | 1,101 | 1,138 | ||||||
Foundation Consumer Brands, LLC . | 967 | 967 | ||||||
Tilley Chemical Buyer, Inc . | 670 | 2,918 | ||||||
Ultimate Baked Goods Midco LLC . | 578 | 339 | ||||||
MRI Software LLC . | 577 | 2,170 | ||||||
Peter C. Foy & Associates Insurance Services, LLC . | 570 | 1,639 | ||||||
Pinnacle Treatment Centers, Inc. | 520 | 553 | ||||||
Ivy Fertility Services, LLC . | 499 | 1,917 | ||||||
BayMark Health Services, Inc. | 499 | 880 | ||||||
NAC Holdings Corporation | 470 | 6,535 | ||||||
TAUC Management, LLC . | 385 | 1,498 | ||||||
Apex Service Partners, LLC . | 345 | 4,221 | ||||||
SunMed Group Holdings, LLC . | 268 | 433 | ||||||
ENS Holdings III Corp. & ES Opco USA LLC . | 179 | 287 | ||||||
All States Ag Parts, LLC . | 172 | 328 | ||||||
World Insurance Associates, LLC . | 135 | 356 | ||||||
BridgeBio Pharma, Inc. | — | 9,751 | ||||||
Inszone Mid, LLC . | — | 5,273 | ||||||
RQM+ Corp . | — | 1,615 | ||||||
Rezolute, Inc. | — | 1,206 | ||||||
SOC Telemed, Inc. | — | 946 | ||||||
MMIT Holdings, LLC . | — | 850 | ||||||
Neuronetics, Inc. | — | 437 | ||||||
Total Commitments | $ | 98,214 | $ | 106,337 | ||||
The credit agreements of the above loan commitments contain customary lending provisions and/or are subject to the portfolio company’s achievement of certain milestones that allow relief to the Company from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business outlook for the company. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future
91
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements
December 31, 2023
(in thousands, except unit amounts)
cash requirements or future earning assets for the Company. As of December 31, 20222023 and December 31, 2021,2022, the Company had sufficient cash available and/or liquid securities available to fund its commitments and had reviewed them for any appropriate fair value adjustment.
In the normal course of its business, we invest or trade in various financial instruments and may enter into various investment activities with
Note 7. Unitholders’ Capital
Transactions in Unitholders’ capital were as follows:
|
| Year ended |
|
| Year ended |
| ||
Units at beginning of period |
|
| 18,992,563 |
|
|
| 17,137,275 |
|
Units issued |
|
| 7,718,212 |
|
|
| 1,855,288 |
|
Units issued and outstanding at end of period |
|
| 26,710,775 |
|
|
| 18,992,563 |
|
Year ended December 31, 2022 | Year ended December 31, 2021 | |||||||
Units at beginning of period | 17,137,275 | 9,586,174 | ||||||
Units issued | 1,855,288 | 7,551,101 | ||||||
Units issued and outstanding at end of period | 18,992,563 | 17,137,275 | ||||||
Note 8. Financial Highlights
The following is a schedule of financial highlights for the years ended December 31, 2023, December 31, 2022, December 31, 2021 and December 31, 2020 and the period March 12, 2019 (commencement of operations) to December 31, 2019:
|
| Year ended |
|
| Year ended |
|
| Year ended |
|
| Year ended |
|
| For the period March 12, 2019** to December 31, 2019 |
| |||||
Per Unit Data: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net asset value per unit, beginning of period |
| $ | 10.33 |
|
| $ | 10.28 |
|
| $ | 10.03 |
|
| $ | 10.03 |
|
| $ | 10.00 |
|
Net investment income (loss) |
|
| 1.16 |
|
|
| 1.11 |
|
|
| 0.79 |
|
|
| 0.65 |
|
|
| (0.07 | ) |
Net realized and unrealized gain (loss) |
|
| (0.28 | ) | * |
| 0.06 |
|
|
| 0.48 |
|
|
| 0.11 |
|
|
| 0.22 |
|
Net increase in Unitholders' capital resulting from operations |
|
| 0.88 |
|
|
| 1.17 |
|
|
| 1.27 |
|
|
| 0.76 |
|
|
| 0.15 |
|
Offering costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.12 | ) |
Distributions to Unitholders (see note 9a): |
|
|
|
|
|
|
|
|
|
|
| |||||||||
From distributable earnings |
|
| (1.15 | ) |
|
| (1.12 | ) |
|
| (1.02 | ) |
|
| (0.76 | ) |
|
| — |
|
From return of capital |
|
| (0.02 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net asset value per unit, end of period |
| $ | 10.04 |
|
| $ | 10.33 |
|
| $ | 10.28 |
|
| $ | 10.03 |
|
| $ | 10.03 |
|
Total Return(b)(c) |
|
| 8.52 | % |
|
| 11.38 | % |
|
| 12.66 | % |
|
| 7.58 | % |
|
| 0.30 | % |
Unitholders' capital, end of period |
| $ | 268,301 |
|
| $ | 196,254 |
|
| $ | 176,113 |
|
| $ | 96,142 |
|
| $ | 49,696 |
|
Units outstanding, end of period |
|
| 26,710,775 |
|
|
| 18,992,563 |
|
|
| 17,137,275 |
|
|
| 9,586,174 |
|
|
| 4,955,621 |
|
Ratios to average net assets of Unitholders' Capital (c): |
|
|
|
|
|
|
|
|
|
| ||||||||||
Net investment income (loss) |
|
| 11.08 | % |
|
| 10.48 | % |
|
| 7.61 | % |
|
| 6.35 | % |
|
| (0.71 | )% |
Operating expenses |
|
| 3.60 | % |
|
| 4.47 | % |
|
| 5.61 | % |
|
| 2.96 | % |
|
| 6.80 | % |
Interest and other credit facility expenses |
|
| 8.97 | % |
|
| 8.43 | % |
|
| 5.05 | % |
|
| 4.18 | % |
|
| 10.89 | % |
Total expenses |
|
| 12.57 | % |
|
| 12.90 | % |
|
| 10.66 | % |
|
| 7.14 | % |
|
| 17.69 | % |
Average debt outstanding |
| $ | 264,031 |
|
| $ | 301,447 |
|
| $ | 154,853 |
|
| $ | 64,742 |
|
| $ | 52,864 |
|
Portfolio turnover ratio |
|
| 22.0 | % |
|
| 19.6 | % |
|
| 39.3 | % |
|
| 32.8 | % |
|
| 15.2 | % |
Year ended December 31, 2022 | Year ended December 31, 2021 | Year ended December 31, 2020 | For the period March 12, 2019* to December 31, 2019 | |||||||||||||
Per Unit Data: (a) | ||||||||||||||||
Net asset value per unit, beginning of period | $ | 10.28 | $ | 10.03 | $ | 10.03 | $ | 10.00 | ||||||||
Net investment income (loss) | 1.11 | 0.79 | 0.65 | (0.07 | ) | |||||||||||
Net realized and unrealized gain | 0.06 | 0.48 | 0.11 | 0.22 | ||||||||||||
Net increase in Unitholders’ capital resulting from operations | 1.17 | 1.27 | 0.76 | 0.15 | ||||||||||||
Offering costs | — | — | — | (0.12 | ) | |||||||||||
Distributions to Unitholders: | ||||||||||||||||
From distributable earnings | (1.12 | ) | (1.02 | ) | (0.76 | ) | — | |||||||||
Net asset value per unit, end of period | $ | 10.33 | $ | 10.28 | $ | 10.03 | $ | 10.03 | ||||||||
Total Return(b)(c) | 11.38 | % | 12.66 | % | 7.58 | % | 0.30 | % | ||||||||
Unitholders’ capital, end of period | $ | 196,254 | $ | 176,113 | $ | 96,142 | $ | 49,696 | ||||||||
Units outstanding, end of period | 18,992,563 | 17,137,275 | 9,586,174 | 4,955,621 | ||||||||||||
Ratios to average net assets of Unitholders’ Capital (c): | ||||||||||||||||
Net investment income (loss) | 10.48 | % | 7.61 | % | 6.35 | % | (0.71 | )% | ||||||||
Operating expenses | 4.47 | % | 5.61 | % | 2.96 | % | 6.80 | % | ||||||||
Interest and other credit facility expenses | 8.43 | % | 5.05 | % | 4.18 | % | 10.89 | % | ||||||||
Total expenses | 12.90 | % | 10.66 | % | 7.14 | % | 17.69 | % | ||||||||
Average debt outstanding | $ | 301,447 | $ | 154,853 | $ | 64,742 | $ | 52,864 | ||||||||
Portfolio turnover ratio | 19.6 | % | 39.3 | % | 32.8 | % | 15.2 | % | ||||||||
92
SCP Private Credit Income BDC LLC
Notes to Consolidated Financial Statements (continued)
December 31, 2022
(in thousands, except unit amounts)
* Includes the impact of the different Unit amounts used in calculating per Unit data as a result of calculating certain per Unit data based upon the weighted average Units outstanding during the period and certain per Unit data based on the Units outstanding as of a period end.
** Commencement of operations
Note 9(a). Income Tax Information and Distributions to Unitholders
The tax character of distributions for the fiscal years ended December 31, 2023, 2022 2021 and 20202021 were as follows(1):
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||||||||||||||
Ordinary income |
| $ | 28,464 |
|
|
| 98.6 | % |
| $ | 19,841 |
|
|
| 97.9 | % |
| $ | 11,237 |
|
|
| 94.0 | % |
Capital gains |
|
| — |
|
|
| 0.0 | % |
|
| 424 |
|
|
| 2.1 | % |
| 723 |
|
|
| 6.0 | % | |
Distributions recognized in subsequent year |
|
| 417 |
|
|
| 1.4 | % |
|
| — |
|
|
| 0.0 | % |
|
| — |
|
|
| 0.0 | % |
Total distributions |
| $ | 28,881 |
|
|
| 100.0 | % |
| $ | 20,265 |
|
|
| 100.0 | % |
| $ | 11,960 |
|
|
| 100.0 | % |
2022 | 2021 | 2020 | ||||||||||||||||||||||
Ordinary income | $ | 19,841 | 97.9 | % | $ | 11,237 | 94.0 | % | $ | 6,474 | 97.6 | % | ||||||||||||
Capital gains | 424 | 2.1 | % | 723 | 6.0 | % | 159 | 2.4 | % | |||||||||||||||
Return of capital | — | 0.0 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
Total distributions | $ | 20,265 | 100.0 | % | $ | 11,960 | 100.0 | % | $ | 6,633 | 100.0 | % | ||||||||||||
As of December 31, 2023, 2022 2021 and 20202021 the total accumulated earnings (loss) on a tax basis were as follows(1):
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Undistributed ordinary income |
| $ | — |
|
| $ | 1,084 |
|
| $ | 988 |
|
Undistributed long-term net capital gains |
|
| — |
|
|
| — |
|
|
| — |
|
Total undistributed net earnings |
|
| — |
|
|
| 1,084 |
|
|
| 988 |
|
Post-October capital losses |
|
| — |
|
|
| — |
|
|
| — |
|
Capital loss carryforward |
|
| — |
|
|
| — |
|
|
| — |
|
Other book/tax temporary differences |
|
| (474 | ) |
|
| (63 | ) |
|
| (68 | ) |
Net unrealized depreciation |
|
| (8,658 | ) |
|
| (927 | ) |
|
| (984 | ) |
Total tax accumulated earnings (loss) |
| $ | (9,132 | ) |
| $ | 94 |
|
| $ | (64 | ) |
2022 | 2021 | 2020 | ||||||||||
Undistributed ordinary income | $ | 1,084 | $ | 988 | $ | 382 | ||||||
Undistributed long-term net capital gains | — | — | — | |||||||||
Total undistributed net earnings | 1,084 | 988 | 382 | |||||||||
Post-October capital losses | — | — | — | |||||||||
Capital loss carryforward | — | — | — | |||||||||
Other book/tax temporary differences | (63 | ) | (68 | ) | (74 | ) | ||||||
Net unrealized depreciation | (927 | ) | (984 | ) | (348 | ) | ||||||
Total tax accumulated earnings (loss) | $ | 94 | $ | (64 | ) | $ | (40 | ) | ||||
The Company recognizes in its consolidated financial statements the tax effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. To the best of our knowledge, we did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25 nor did we have any unrecognized tax benefits as of the periods presented herein. Although we file federal and state tax returns, our major tax jurisdiction is federal.Our tax returns for federal tax years since 20192020 remain subject to examination by the Internal Revenue Service and the state department of revenue.
Note 9(b). Other Tax Information (unaudited)
For the fiscal years ended December 31, 2023, 2022 2021 and 2020,2021, none of the ordinary distributions paid during the year were eligible for qualified dividend income treatment or the dividends received deduction for corporate stockholders. For the fiscal years ended December 31, 2023, 2022 and 2021, 94.02%, 98.60% and 2020, 98.60%, 99.67% and 98.50%99.67%, respectively, of each of the ordinary distributions paid during the year represent interest-related dividends. For the fiscal years ended December 31, 2023, 2022 and 2021, 4.85%, 1.36% and 2020, 1.36%, 0.41% and 3.71%0.41%, respectively, of the distributions represent short-term capital gains dividends.
Note 10. Subsequent Events
The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. There have been no subsequent events that require recognition or disclosure in these consolidated financial statements.
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of December 31, 20222023 (the end of the period covered by this report), our management, including our
(b) Report of Management on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 20222023 based upon the criteria in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on management’s assessment, management determined that the Company’s internal control over financial reporting was effective as of December 31, 2022.
Due to the Company’s status as an “emerging growth company” under the JOBS Act, the Company was not required to obtain an attestation report from the Company’s independent registered public accounting firm on the Company’s internal control over financial reporting as of December 31, 2022.
(c) Changes in Internal Controls Over Financial Reporting
Management has not identified any change in the Company’s internal control over financial reporting that occurred during the fourth quarter of 20222023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
Rule 10b5-1 Trading Plans
During the fiscal year ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) under the 1934 Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the 1934 Act or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Certain information with respect to the Company’s directors is set forth below, including their names, ages, a brief description of their recent business experience, including present occupations and employment, certain directorships that each person holds, the year in which each person became a director of the Company, and a discussion of their particular experience, qualifications, attributes or skills that lead the Company to conclude that such individual should serve as a director of the Company, in light of the Company’s business and structure. There were no legal proceedings of the type described in Item 401(f) of Regulation
Mr. Gross is an “interested person” of the Company as defined in the 1940 Act due to his position as
Name | Age | Position | Director Since | |||
Interested Directors | ||||||
| Michael S. Gross | 61 | Co-Chief Executive Officer, President and Director | 2018 | |||
| Bruce Spohler | 62 | Co-Chief Executive Officer, Chief Operating Officer and Director | 2018 | |||
Independent Directors | ||||||
| Steve Hochberg | 61 | Director | 2018 | |||
| David S. Wachter | 59 | Director | 2018 | |||
| Leonard A. Potter | 61 | Director | 2018 | |||
Name |
| Age |
| Position |
| Director Since |
Interested Directors |
|
|
|
|
|
|
Michael S. Gross |
| 62 |
| Co-Chief Executive Officer, President and Director |
| 2018 |
Bruce Spohler |
| 63 |
| Co-Chief Executive Officer, Chief Operating Officer and Director |
| 2018 |
Independent Directors |
|
|
|
|
|
|
Steve Hochberg |
| 62 |
| Director |
| 2018 |
David S. Wachter |
| 60 |
| Director |
| 2018 |
Leonard A. Potter |
| 62 |
| Director |
| 2018 |
The address for each of our directors is c/o SCP Private Credit Income BDC LLC, 500 Park Avenue, New York, NY 10022.
Executive Officers Who Are Not Directors
Name | Age | Position | ||
Shiraz Y. Kajee | 44 | |||
Chief Financial Officer | ||||
Guy Talarico | 68 | Chief Compliance Officer and Secretary |
Biographical Information
Interested Directors
Michael S. Gross
Bruce Spohler
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operating officer of SLR Investment Corp. since December 2007, and co-chief executive officer of SLR Investment Corp. since June 2019. Mr. Spohler has been thepartnermember of SLR. Mr. Spohler was previously the chief operating officer and a director of SLR Senior Investment Corp. from December 2010 to April 2022 and the co-chief executive officer of SLR Senior Investment Corp. from June 2019 to April 2022.
Independent Directors
Steven Hochberg
Leonard A. Potter
David S. Wachter
Executive Officers Who Are Not Directors
Shiraz Y. Kajee has been the Chief Financial Officer Treasurer and SecretaryTreasurer of the Company since June 2018.April 2023. He has been the chief financial officer treasurer and secretarytreasurer of SLR Investment Corp. since May 2012,April 2023, the chief financial officer treasurer and secretarytreasurer of SLR HC BDC LLC since September 2020April 2023 and the chief financial officer treasurer and secretarytreasurer of SLR Private Credit BDC II LLC since April 2022. In addition,2023. From December 2015 through March 2023, Mr. Peteka previouslyKajee served as a Managing Director at New Mountain Capital, L.L.C., which included serving as Chief Financial Officer and Treasurer of the chief
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Master of Science in Accounting and secretarya Bachelor of SLR Senior Investment Corp. from May 2012 to April 2022. Mr. Peteka joined SLR from Apollo Investment Corporation, a publicly-traded BDC, where he served from 2004 to 2012 as the chief financial officer and treasurer. Mr. Peteka holds a B.S.Business Administration in Finance from TheBaruch College at Old Westbury- City University of New York. He is a New York State Certified Public Accountant and an MBA in International Finance from St. John’s University.
Guy Talarico
Audit Committee
The Audit Committee operates pursuant to a charter approved by our Board. The charter sets forth the responsibilities of the Audit Committee. The Audit Committee’s responsibilities include selecting the independent registered public accounting firm for the Company, reviewing with such independent registered public accounting firm the planning, scope and results of their audit of the Company’s financial
Code of Ethics
The Company has adopted a code of ethics that applies to, among others, its senior officers, including its
Nomination of Directors
There have been no material changes to the procedures by which Unitholders may recommend nominees to our Board of Directors implemented since the filing of our annual report on Form2021.2022. The Nominating and Corporate Governance Committee of the Company currently does not consider nominees recommended by our Unitholders.
Item 11. Executive Compensation
Compensation of Executive Officers
None of our affiliated officers receives direct compensation from the Company. Mr. Gross, ourourthe Adviser, are entitled to a portion of any profits earned by the Company, which includes any fees payable by us to the Company under the terms of the Investment Management Agreement, less expenses incurred by Adviser in performing its services under the Investment Management Agreement. Mr. Gross and Mr. Spohler do not receive any additional compensation from Adviser in connection with the management of our portfolio.
Mr. Peteka,Kajee, our Chief Financial Officer and Treasurer and Mr. Talarico, our Chief Compliance Officer and Secretary is paid by the Adviser or its affiliates, and such costs or payments are not subject to reimbursement by the Company. Through unaffiliated ACA Group, LLC, Guy Talarico is our Chief Compliance Officer (“CCO”). ACA Group, LLC and our CCO are paid by us on a direct basis and will be approved annually by our Board of Directors.
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Compensation of Directors
The following table sets forth the compensation of the Company’s directors for the year ended December 31, 2022.2023.
Name |
| Fees Earned or Paid in Cash(1) |
|
| Stock Awards(2) |
|
| All Other Compensation |
|
| Total |
| ||||
Interested Directors |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Michael S. Gross |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Bruce Spohler |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Independent Directors |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Steven Hochberg |
| $ | 25,000 |
|
|
| — |
|
|
| — |
|
| $ | 25,000 |
|
David S. Wachter |
| $ | 25,000 |
|
|
| — |
|
|
| — |
|
| $ | 25,000 |
|
Leonard A. Potter |
| $ | 25,000 |
|
|
| — |
|
|
| — |
|
| $ | 25,000 |
|
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation | Total | ||||||||||||
Interested Directors | ||||||||||||||||
Michael S. Gross | — | — | — | — | ||||||||||||
Bruce Spohler | — | — | — | — | ||||||||||||
Independent Directors | ||||||||||||||||
Steven Hochberg | $ | 25,000 | — | — | $ | 25,000 | ||||||||||
David S. Wachter | $ | 25,000 | — | — | $ | 25,000 | ||||||||||
Leonard A. Potter | $ | 25,000 | — | — | $ | 25,000 | ||||||||||
Compensation Committee
The Company currently does not have a Compensation Committee.
Compensation Committee Interlocks and Insider Participation
During fiscal year 20222023 none of the Company’s executive officers served on the board of directors (or a compensation committee thereof or other board committee performing equivalent functions) of any entities that had one or more executive officers serve on the Compensation Committee of the Company or on the Board of Directors of the Company. No member of the Compensation Committee had any relationship requiring disclosure under any paragraph of Item 404 of Regulation
Compensation Committee Report
Currently, none of our executive officers are compensated by the Company, and as such the Company is not required to produce a report on executive officer compensation for inclusion in our annual report on Form
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters
The following table sets forth, as of February 24, 2023,23, 2024, the beneficial ownership of each director and executive officer of the Company, and the executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Unless otherwise indicated, the Company believes that each beneficial owner set forth in the table has sole voting and investment power and has the same address as the Company. Our address is 500 Park Avenue, New York, New York 10022.
Name and Address of Beneficial Owner | Number of Units | Percentage | ||||||||
Interested Directors | ||||||||||
Michael S. Gross | — | — | ||||||||
Bruce Spohler | — | — | ||||||||
Independent Directors | ||||||||||
Steven Hochberg | — | — | ||||||||
Leonard A. Potter | — | — | ||||||||
David S. Wachter | — | — | ||||||||
Executive Officers | ||||||||||
Shiraz Y. Kajee | — | — | ||||||||
Guy Talarico | — | — | ||||||||
All executive officers and directors as a group (7 persons) | — | — | ||||||||
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Set forth below is the dollar range of equity securities beneficially owned by each of our directors as of February 24, 2023.23, 2024. We are not part of a “family of investment companies,” as that term is defined in the 1940 Act.
Name of Director | Dollar Range of Equity Securities Beneficially | ||||
Interested Directors | — | ||||
Michael S. Gross | — | ||||
Bruce Spohler | — | ||||
Independent Directors | |||||
Steven Hochberg | — | ||||
Leonard A. Potter | — | ||||
David S. Wachter | — | ||||
(1)
Item 13. Certain Relationships and Related Transactions, and Director Independence
Transactions with Related Persons, Promoters and Certain Control Persons
Investment Management Agreement
We have entered into the Investment Management Agreement with the Adviser pursuant to which we pay management fees, administrative coordinator fees and incentive fees to the Adviser. The Board held a meeting on November 2, 2022October 25, 2023 to approve the Investment Management Agreement. In reliance on certain exemptive relief provided by the SEC, the Board ratified the approval of the Investment Management Agreement at its next in-person meeting held on November 6, 2023. Subject to certain restrictions, the Investment Management Agreement will remain in effect from year to year if approved annually by a majority of the Board, including a majority of independent directors, or by the holders of a majority of our outstanding voting securities until terminated by the Company, or by the Adviser, upon 90 days’ prior written notice.
Administration Services
Pursuant to the Investment Management Agreement, the Administrative Coordinator has also been appointed to provide administrative and coordination services to the Company. The Administrative Coordinator supervises or provides the Company’s administrative services, including operational trade support, net asset value calculations, financial reporting, fund accounting, registrar and transfer agent services. The Administrative Coordinator also provides assistance to the Adviser in connection with communicating with investors and other persons with respect to the Company. The Administrative Coordinator, when acting in its administrative capacity, does not provide any investment advisory or investment management services to the Company. Pursuant to the Investment Management Agreement, the Company pays the Administrative Coordinator the Administration Fee for its services.
The Investment Management Agreement contains limitations on liability and indemnifications in favor of the Administrative Coordinator, provided that the Administrative Coordinator’s actions do not constitute Wrongful Conduct. The Administrative Coordinator’s liability to the Company is subject to an overall cap (except where the Administrative Coordinator has engaged in Wrongful Conduct). In the event that the Administrative Coordinator is terminated or resigns as the administrative coordinator to the Company, the Board reserves the ability to appoint one or more different or replacement administrative coordinators in its sole discretion at any time without notice to the Unitholders, or to assume the Administrative Coordinator’s role on the same or similar terms in providing administration services to the Company.
Our Board will approve the engagement of the Administrative Coordinator on an annual basis. In connection with such approval, the Board, including a majority of independent directors, reviews the engagement of the Administrative Coordinator to determine that the relevant provisions of the Investment Management Agreement are carried out satisfactorily and to determine, among other things, whether the fees payable to the Administrative Coordinator are reasonable in light of the services provided. The Board also considers the possibility of obtaining such services from a different third party and whether any other third party service provider would be capable of providing all such services at comparable cost, quality and timeliness.
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Use of Name
Pursuant to the LLC Agreement, SLR has granted us
Relationship with the Adviser and Potential Conflicts of Interest
Conflicts of Interest; Other Activities of the Adviser
Similar conflicts of interest are likely to arise to the extent a Portfolio Investment is in competition with investments owned by the Adviser, its clients or affiliates (e.g.
All conflicts of interest will be resolved by the Adviser in its sole discretion. When making investment decisions where a conflict of interest may arise, the Adviser will endeavor to act in a fair and equitable manner as between the Company and other clients of SLR; however, there can be no assurance that the Adviser will be able to resolve such conflict of interest in a fair and equitable manner. For example, in certain instances the resolution of the conflict may result in the Adviser acting on behalf of itself, an affiliate or another client of an affiliate of SLR, or any of their respective affiliates (for example, by foreclosing on loans, putting an issuer into default and/or transacting with an issuer) in a manner that is not in the best interests, or is opposed to the interests, of the Company.
Subject to the foregoing and applicable law, (i) the Adviser and its affiliates expect to invest for the accounts of clients in various securities or other instruments or investments that are senior,
Conflicts of interest may also arise where, for example, the Company holds certain loans of an issuer, and that same issuer has issued other loans or instruments that are owned by other clients of SLR or by an entity in which other clients of SLR have an interest; in such circumstances, SLR may take actions with respect to the assets held by such client that are adverse to the Company, for example, by foreclosing on loans or by putting an issuer into default. In negotiating the terms and conditions of any such investments, or any subsequent amendments or waivers, the Adviser may find that the interests of the Company and the interests of one or more other clients of SLR could conflict. In these situations, decisions over whether to make an investment, proxy voting, corporate reorganization, how to exit an investment, the servicing of loans or bankruptcy matters are likely to result in conflicts of interest. Similarly, if an issuer in which the Company and one or more other clients of SLR directly or indirectly hold different classes of securities (or other assets, instruments or obligations issued by such issuer or underlying investments of such issuer) encounters financial problems, decisions over the terms of any
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restructuring or workout are likely to raise conflicts of interest (including, for example, conflicts over proposed waivers and amendments to debt covenants). For example, a debt holder may be better served by a liquidation of the issuer in which it may be paid in full, whereas an equity or junior bond holder might prefer a reorganization that holds the potential to create value for the equity holders. Although in some cases the Adviser may refrain from taking certain actions or making investments on behalf of the Company because of conflicts (potentially disadvantaging the Company as a result of actions not taken or investments not made), in other cases the Adviser will not refrain from taking actions or making investments on behalf of the Company that have the potential to disadvantage other SLR clients.
Except as otherwise expressly set forth in the LLC Agreement, or as required by law, the Adviser or its respective affiliates is not obligated to refer any actual or potential conflict of interest to Unitholders, or to act in accordance with their advice and counsel. However, if the Company chooses or is required under the LLC Agreement or by law to do so, matters approved by a majority in interest of Unitholders (as applicable) will be final and binding on the Company.
Certain Portfolio Investments may engage in activities or take actions that adversely impact the Company or its other Portfolio Investments. With respect to Portfolio Investments for which it does not exercise influence or control, the Adviser will likely have limited or no ability to impact such matters. Furthermore, with respect to Portfolio Investments for which it does exercise influence or control, there can be no assurance that the Adviser will be able to impact such matters; for example, directors appointed by the Adviser will have duties to persons other than the Company and/or may recuse themselves from matters presenting actual or potential conflicts of interest.
In addition, the Company may be unable or limited in its ability to acquire Portfolio Investments or take certain actions with respect to Portfolio Investments (including taking “active” positions with respect to such Portfolio Investments) due to the Adviser’s duties to other clients or under applicable law (including the Advisers Act, the 1940 Act and U.S. Employee Retirement Income Security Act of 1974 (“ERISA”)) or by the Adviser’s intention to avoid certain potential conflicts of interest or regulatory issues or obligations, and individual members of the investment team may be subject to similar constraints (or unable to participate in certain Company matters) due to similar considerations. Similarly, the Adviser may be required to take certain actions (including disposing of investments owned by the Company and/or other clients) due to such issues, obligations or potential conflicts. In order for the Adviser to adhere to its applicable fiduciary obligations as well as to address and/or mitigate conflicts of interest, it may not be possible or appropriate to make available resources of the Adviser that might be relevant to particular investment decisions by the investment professionals responsible for the Company’s investment program. Such restrictions could result in such investment professionals making investment or other decisions for the Company that are different from the decisions they would make if there were no such limits or restrictions.
In connection with its investment program, the Company, in the sole discretion of the Adviser may take various forms of action (“Litigation Actions”) with other investors and/or parties, including issuing demand letters, making and defending claims, filing lawsuits and/or taking other dispute resolution-related measures. In connection with such Litigation Actions, the Company may be required to bear certain fees, costs, expenses and liabilities. Other SLR clients that are or were investors in, or otherwise involved with, the subject investments may or may not (depending on the circumstances) be parties to such Litigation Actions, with the result that the Company may participate in Litigation Actions in which not all SLR clients with similar investments may participate, anddodoes not pursue legal claims on behalf of its separately managed client accounts.
Although the principals and employees of the Adviser will devote as much time to the Company as the Adviser deems appropriate, the principals and employees may have conflicts in allocating their time and services among the Company and the other accounts now or hereafter advised by the Adviser and/or its affiliates.
The Adviser, the Administrative Coordinator and the Custodian will from time to time act as investment advisers, administrators or custodians in relation to, or otherwise be involved with, other companies established by parties other than the Company. Such companies may have similar objectives to the Company. Should a conflict of interest arise, the Board will endeavor to ensure that it is resolved fairly, to the extent it is in a position to do so.
In implementing its investment program, the Company expects to seek to acquire rights (including rights of first offer, rights of first
101
ownership of a Portfolio Investment, the Adviser may be incentivized to extend such Portfolio Investment’s duration to enable such rights to be transferred to another entity. Conversely, the Company may not (or may be unable to) acquire or dispose of such rights, which could give rise to certain conflicts of interest; for instance, if another client of the Adviser or its affiliates has a right of first offer with respect to transaction types, the Company’s ability to pursue such transactions could be constrained if it does not acquire such right. In addition, the documentation relating to any assignment of such rights could be complex, difficult to enforce and (among other things) potentially expose the Company to the liabilities of another related entity.
The Company expects to make investments through joint ventures, strategic partnerships or similar arrangements with third parties, the terms of which will often provide for the payment of fees, incentive compensation and/or other amounts to such third parties. These amounts will typically be borne (directly or indirectly) by the Company. Such amounts will generally not give rise to a reduction in the Management Fees, Administration Fees or Incentive Fees payable by the Company, and the Adviser may therefore be incentivized to pursue investment opportunities arising under such arrangements (including to maintain or develop a long-term or strategic relationship with a third party).
Conflicts Related to Cross-Trades
Conflicts Related to Sale of Loans
Service Providers
Because certain services provided by Service Providers, such as the identification or analysis of investments, might otherwise be provided by employees of the Adviser, the Adviser will have an incentive to retain such Service Providers and have them paid by the Company rather than hiring employees or otherwise paying for these services out of its own resources, particularly since the fees, costs, expenses and liabilities of these parties may be substantial (e.g.
102
The Company expects to utilize or otherwise engage in transactions with, and to invest in entities that utilize or otherwise engage in transactions with, Service Providers that are owned by, affiliated with or otherwise related to the Company, other clients of the Adviser, the Adviser, or any affiliate or respective personnel thereof. The Company’s involvement with affiliated Service Providers will give rise to conflicts of interest. For example, (i) while the Adviser may have an incentive to cause the Company to utilize affiliated Service Providers, there can be no guarantee that such Service Providers will have a positive impact on the Company or its investments, or that they will produce results better than unaffiliated Service Providers; (ii) the Adviser may be less incentivized to pursue remedies and enforce rights against an affiliated Service Provider as compared to an unaffiliated Service Provider; (iii) the Adviser may be incentivized to utilize an affiliated Service Provider in order to support such entity, benefit or reduce amounts owed by the other users of or purchasers from such entity, and/or benefit the Adviser-affiliated owners of such entity (which may not include the Company), including by generating fees or other compensation paid to such entity (which will not offset the Management Fee, Administration Fee or Incentive Fees paid by the Company); (iv) while the fees and expenses paid to any Service Provider that is an affiliate of the Adviser will be determined in the Board’s commercially reasonable discretion, taking into account the relevant facts and circumstances and consistent with the responsibilities of the Board and the Adviser, the Board may still be incentivized to agree to more favorable compensation terms with an affiliated Service Provider than with an unaffiliated Service Provider, and such terms will not necessarily be confirmed as being comparable to the market rates for such services; (v) to the extent the Company acquires or sells an interest in an affiliated Service Provider via cross trade with another affiliate of the Adviser, such investment will likely be illiquid and difficult to value, and such valuation will result in conflicts of interest; and (vi) to the extent any such Service Provider is owned by or services multiple Adviser-affiliated entities, the allocation of opportunities and expenses among the relevant entities will require the exercise of discretion. In addition, any such Service Provider may have duties to parties other than the Company, and the Company may not be able to control or influence the standards or actions of such Service Provider notwithstanding its affiliation. Any such affiliated Service Provider may also be acquired by one or more third parties or an affiliate of the Adviser, which could reduce or eliminate any benefits the Company previously received by virtue of its prior affiliation.
Potential Conflicts Relating to the Allocation of Investment Opportunities among the Company and Other Investment Vehicles
The Company intends
The Adviser has written policies relating to the allocation of investment opportunities, and the Adviser will allocate investment opportunities that become known to the Adviser and that the Adviser considers appropriate for the Company among the Adviser’s sponsored funds and other clients, in accordance with the Adviser’s allocation policy and procedures. With respect to investment opportunities that are appropriate for other clients of SLR, on the one hand, and the Company, on the other hand, SLR has agreed upon an allocation methodology that it believes will result in the relevant clients each being allocated an appropriate level of such opportunity. Although the Adviser intends to allocate investment opportunities in a fair and equitable manner, decisions as to the allocation of investment opportunities present numerous conflicts of interest, which may not be resolved in a manner that is favorable to the Company’s interests. Moreover, allocation decisions
The Adviser expects that in certain circumstances it will permit other investment vehicles
Material
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consents, waivers or amendments with respect to loans, the Adviser’s ability to assess the desirability of such consents, waivers and amendments may be compromised). The Adviser may decline to pursue certain investment opportunities or exit strategies on behalf of the Company in order to avoid being in possession of
In addition, in circumstances when a Unitholder receives, in connection with its investment in the Company,
The Investment Committee may delegate investment and/or asset management decisions to other investment professionals of the Adviser in their sole discretion. Any decisions made by such subset or other investment professionals may be materially different and/or less optimal than decisions that would have been made by the Investment Committee.
In the event anyMNPI ProceduresCompany's Joint Code of Ethics and Insider Trading Policy from acting upon any such information. Due to these restrictions, the Company may not be able to conclude a transaction that it otherwise might have concluded. In other cases, because of confidential or
Co-Investments. With respect to a Portfolio Investment for which the Adviser
The Adviser is under no obligation to
Co-investments may
The Adviser may grant certain Unitholders a priority right to participate 104 Certain Potential Conflicts Relating to For administrative and other reasons, the Adviser may (i) cause the Company to be invoiced for, advance or otherwise bear on a temporary basis all or a portion of an expense ultimately intended to be borne in whole or in part by another vehicle managed by the Adviser or an affiliate and/or (ii) make corrective allocations of expenses among such vehicles to reflect their appropriate share of such expenses. Such measures generally will not include the imposition of an interest charge or other payments designed to compensate (whether for time value, opportunity cost or otherwise) a particular vehicle for temporarily bearing a disproportionate share of expenses. or more of the Company’s Units are not permitted to participateExpenses.Expenses. The appropriate allocation of fees and expenses among the Company and other funds or accounts advised by the Adviser or any of its affiliates often cannot be resolved by reference to(i.e.(i.e.,117
The Company and certain other funds managed by the Adviser or an affiliate may, but are not expected to hold certain investments and conduct certain activities through the same SPVs or other structures. The use of such common SPVs or other structures may give rise to various conflicts of interest; for example, the use of any such vehicle may make it more difficult to address specific considerations applicable to the Company than if separate vehicles were used. In addition, a level of discretion will be required with respect to each entity’s relative participation in any such vehicle, including adjustments intended to reflect the entities’ relative capital available for investment as of the conclusion of their respective offering periods.
Incentive Fee; Use of Leverage
Valuation. Subject to approval by the Board, the Adviser fair values securities, loans or other instruments for which market quotes are not readily available (or if extraordinary events occur after the last readily available quotation), and is subject to certain conflicts of interest in doing so. In particular, the Adviser may be incentivized to produce higher valuations in order to enhance Company performance, and/or due to the operation of the guideline.
Diverse Unitholder Group
Certain Business Relationships
Certain of our current directors and officers are directors or officers of the Adviser.
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Director Independence
Pursuant to Section 56 of the 1940 Act, a majority of a BDC’s board of directors must be comprised of persons who are not “interested persons,” as defined in Section 2(a)(19) of the 1940 Act, of the Company or any of its affiliates.
Consistent with these considerations, after review of all relevant transactions and relationships between each director, or any of his or her family members, and the Company, the Adviser, or of any of their respective affiliates, the Board has determined that Messrs. Hochberg, Potter and Wachter qualify as independent directors. Each director who serves on the Audit Committee is an independent director for purposes of Rule
Promoters and Certain Control Persons
The Adviser may be deemed a promoter of the Company. We have entered into the Investment Management Agreement with the Adviser. The Adviser, for its services to us, is entitled to receive management fees and incentive fees in addition to the reimbursement of certain expenses. In addition, under the Investment Management Agreement, we expect, to the extent permitted by applicable law and in the discretion of our Board, to indemnify the Adviser and certain of its affiliates.
Limitation on Liability of Directors; Indemnification and Advance of Expenses
Under the LLC Agreement, we will fully indemnify any person who was or is involved in any actual or threatened action, suit or proceeding by reason of the fact that such person is or was one of our directors or officers. So long as we are regulated under the 1940 Act, the above indemnification and limitation of liability is limited by the 1940 Act or by any valid rule, regulation or order of the SEC thereunder. The 1940 Act provides, among other things, that a company may not indemnify any director or officer against liability to it or its security holders to which he or she might otherwise be subject by reason of his or her willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office unless a determination is made by final decision of a court, by vote of a majority of a quorum of directors who are disinterested,
Item 14. Principal Accountant Fees and Services
KPMG LLP has advised us that neither the firm nor any present member or associate of it has any material financial interest, direct or indirect, in the Company or its affiliates.
Table below in thousands
Fiscal Year Ended December 31, 2022 | Fiscal Year Ended December 31, 2021 | |||||||
Audit Fees | $ | 187.5 | $ | 159.4 | ||||
Audit-Related Fees | — | — | ||||||
Tax Fees | 18.4 | 17.5 | ||||||
All Other Fees | — | — | ||||||
Total Fees: | $ | 205.9 | $ | 176.9 | ||||
|
| Fiscal Year |
|
| Fiscal Year |
| ||
Audit Fees |
| $ | 185.0 |
|
| $ | 187.5 |
|
Audit-Related Fees |
|
| — |
|
|
| — |
|
Tax Fees |
|
| 19.3 |
|
|
| 18.4 |
|
All Other Fees |
|
| — |
|
|
| — |
|
Total Fees: |
| $ | 204.3 |
|
| $ | 205.9 |
|
Audit Fees
Audit-Related Fees
Tax Services Fees
All Other Fees
106
Pre-Approval
Any requests for audit, audit-related, tax and other services that have not received2022,2023, the Audit Committee
107
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Documents Filed as Part of this Report
Index | Page No. | |||
71 | ||||
72 | ||||
73 | ||||
74 | ||||
75 | ||||
76 | ||||
82 | ||||
(b) Exhibits
The following exhibits are filed as part of this report or are hereby incorporated by reference to exhibits previously filed with the SEC:
Exhibit No. | Description | |
3.1 | ||
3.2 | ||
| Second Amended and Restated Limited Liability Company | ||
3.3 | ||
First Amendment to the Second Amended and Restated Limited Liability Company | ||
4.1 | ||
4.2 | ||
10.1 | ||
| Amended and Restated Investment Management Agreement with Solar Capital Partners, | ||
10.2 | ||
10.3 | ||
Form of Custodial Services Election Agreement by and between the Company and Citibank, N.A.(1) | ||
10.4 | ||
10.5 | ||
10.6 | ||
14.1 | ||
| Code of Business | ||
19.1 | ||
21.1 | ||
31.1 | ||
31.2 | ||
31.3 | ||
32.1 | ||
108
32.2 | ||
32.3 | ||
Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.* |
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | ||
Inline XBRL Taxonomy Extension Schema | ||
104 | ||
Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||
* Filed herewith
(1) |
Previously filed as an exhibit to Amendment No. 1 to the Registrant’s Registration Statement on Form 10 (File |
(2) | Previously filed as an exhibit to the Registrant’s report on Form |
(3) | Previously filed as an exhibit to the Registrant’s report on Form |
(4) | Previously filed as an exhibit to the Registrant’s report on Form |
(5) | Previously filed as an exhibit to the Registrant’s report on Form |
(6) | Previously filed as an exhibit to the Registrant’s report on Form |
(7) (8) | Previously filed as an exhibit to the Registrant’s report on Form Previously filed as an exhibit to the Registrant’s report on Form 8-K filed on October 26, 2023. |
Item 16. Form 10-K Summary
None.
109
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SCP PRIVATE CREDIT INCOME BDC LLC | ||||
/s/ | /s/ | |||
Michael S. Gross | Bruce J. Spohler | |||
Co-Chief Executive Officer, President, Chairman of the Boardand Director | Co-Chief Executive Officer, Chief and Director | |||
Date: February | Date: February 27, 2024 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.
Date | Signature | Title | ||
February 27, 2024 | ||||
/s/ | Co-Chief (Principal | |||
Michael S. Gross | ||||
February | /s/ | Co-Chief | ||
Bruce J. Spohler | ||||
February 27, 2024 | /s/ STEVEN HOCHBERG | Director | ||
Steven Hochberg | ||||
February | /s/ WACHTER | Director | ||
David S. Wachter | ||||
February | /s/ POTTER | Director | ||
Leonard A. Potter | ||||
February | /s/ | Chief Financial Officer (Principal Financial Officer) | ||
Shiraz Y. Kajee |
110