UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549Table of Contents
FORM 10-QUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2022
or
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☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file numbernumber: 000-55660
Goldman Sachs Private Middle Market Credit LLC
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 81-3233378 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
200 West Street, New York, New York | 10282 | |
(Address of Principal Executive | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (212) 902-0300
Not Applicable
Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report.
Not Applicable
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
None | None | None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☐☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer: | ☐ | Accelerated filer: | ☐ | Non-accelerated filer: | ☒ | Smaller reporting company: | ☐ | |||||||
Emerging growth company: | ☒ |
Emerging growth company X
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. X☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO X☒
The number
As of May 10, 2022, there were 10,687,877 units of the registrant’s limited liability companycompany’s common units outstanding at November 2, 2017 was 5,023,428.outstanding.
GOLDMAN SACHS PRIVATE MIDDLEMIDDLE MARKET CREDIT LLC
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022
INDEX PAGE
| 3 | |||||
PART | 4 | |||||
ITEM 1. | 4 | |||||
4 | ||||||
5 | ||||||
6 | ||||||
7 | ||||||
Consolidated Schedules of Investments | 8 | |||||
16 | ||||||
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33 | ||||
ITEM 3. | 45 | |||||
ITEM 4. | 46 | |||||
PART | 46 | |||||
ITEM 1. | 46 | |||||
ITEM 1A. | 46 | |||||
ITEM 2. | 51 | |||||
ITEM 3. | 51 | |||||
ITEM 4. | 51 | |||||
ITEM 5. | 51 | |||||
ITEM 6. | 51 | |||||
53 |
2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “target,” “estimate,” “intend,” “continue” or “believe” or the negatives of, or other variations on, these terms or comparable terminology. You should read statements that contain these words carefully because they discuss our plans, strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters. We believe that it is important to communicate our future expectations to our investors. Our forward-looking statements include information in this report regarding general domestic and global economic conditions, our future financing plans, our ability to operate as a business development company (“BDC”) and the expected performance of, and the yield on, our portfolio companies. There may be events in the future, however, that we are not able to predict accurately or control. The factors listed under “Risk Factors” in this report and in our annual report on Form 10-K for the year ended December 31, 2016,2021, as well as any cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. The occurrence of the events described in these risk factors and elsewhere in this report could have a material adverse effect on our business, results of operations and financial position. Any forward-looking statement made by us in this report speaks only as of the date of this report. Factors or events that could cause our actual results to differ from our forward-looking statements may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the U.S. Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K. UnderThe safe harbor provisions of Section 21E(b)(2)(B)21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995which preclude civil liability for certain forward-looking statements, do not apply to the forward-looking statements made in periodic reports we file under the Exchange Act, such as this quarterly report on Form 10-Q.because we are an investment company.
The following factors are among those that may cause actual results to differ materially from our forward-looking statements:
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our expected financings and investments;
the use of borrowed money to finance a portion of our investments;
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3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Goldman Sachs Private Middle Market Credit LLC
Consolidated Statements of Financial Condition
(in thousands, except unit and per unit amounts)
September 30, 2017 (Unaudited) | December 31, 2016 | |||||||
Assets | ||||||||
Non-controlled/non-affiliated investments, at fair value (cost of $663,426 and $199,182, respectively) | $ | 664,370 | $ | 199,436 | ||||
Investments in affiliated money market fund (cost of $1 and $138,311, respectively) | 1 | 138,311 | ||||||
Cash | 37,553 | 3,863 | ||||||
Receivable for common units sold | 2,435 | – | ||||||
Interest and dividends receivable from non-controlled/non-affiliated investments | 2,594 | 645 | ||||||
Deferred financing costs | 784 | 1,351 | ||||||
Deferred offering costs | – | 859 | ||||||
Other assets | 17 | – | ||||||
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|
|
|
|
| |||
Total assets | $ | 707,754 | $ | 344,465 | ||||
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|
|
|
|
| |||
Liabilities | ||||||||
Debt | $ | 289,000 | $ | 130,000 | ||||
Interest and other debt expenses payable | 615 | 188 | ||||||
Management fees payable | 1,351 | 698 | ||||||
Incentive fees payable | 3,736 | – | ||||||
Distribution payable | 9,962 | 2,998 | ||||||
Accrued offering costs | – | 285 | ||||||
Accrued organization costs | – | 115 | ||||||
Directors’ fees payable | 27 | – | ||||||
Accrued expenses and other liabilities | 1,007 | 740 | ||||||
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|
|
|
|
| |||
Total liabilities | $ | 305,698 | $ | 135,024 | ||||
|
|
|
|
|
| |||
Commitments and Contingencies (Note 7) | ||||||||
Members’ Capital | ||||||||
Preferred units (0 units issued and outstanding) | $ | – | $ | – | ||||
Common units (4,123,094 and 2,142,978 units issued and outstanding at September 30, 2017 and December 31, 2016, respectively) | 405,176 | 209,521 | ||||||
Accumulated net realized gain (loss) | (11 | ) | – | |||||
Accumulated undistributed net investment income (distributions in excess of net investment income) | (4,053 | ) | (334 | ) | ||||
Net unrealized appreciation (depreciation) on investments | 944 | 254 | ||||||
|
|
|
|
|
| |||
TOTAL MEMBERS’ CAPITAL | $ | 402,056 | $ | 209,441 | ||||
|
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|
|
|
| |||
TOTAL LIABILITIES AND MEMBERS’ CAPITAL | $ | 707,754 | $ | 344,465 | ||||
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|
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| |||
Net asset value per unit | $ | 97.51 | $ | 97.73 |
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
Assets |
|
|
|
|
|
| ||
Investments, at fair value |
|
|
|
|
|
| ||
Non-controlled/non-affiliated investments (cost of $711,943 and $822,888) |
| $ | 689,985 |
|
| $ | 793,150 |
|
Non-controlled affiliated investments (cost of $5,254 and $5,254) |
|
| 6,755 |
|
|
| 6,720 |
|
Total investments, at fair value (amortized cost of $717,197 and $828,142) |
| $ | 696,740 |
|
| $ | 799,870 |
|
Investments in affiliated money market fund (cost of $79,559 and $125,127) |
|
| 79,559 |
|
|
| 125,127 |
|
Cash |
|
| 17,498 |
|
|
| 15,130 |
|
Receivable for investments sold |
|
| 67 |
|
|
| 68 |
|
Interest and dividends receivable |
|
| 6,599 |
|
|
| 7,562 |
|
Deferred financing costs |
|
| 2,210 |
|
|
| 2,506 |
|
Unrealized appreciation on foreign currency forward contracts |
|
| 58 |
|
|
| 46 |
|
Other assets |
|
| 120 |
|
|
| — |
|
Total assets |
| $ | 802,851 |
|
| $ | 950,309 |
|
Liabilities |
|
|
|
|
|
| ||
Debt |
| $ | 247,439 |
|
| $ | 307,242 |
|
Interest and other debt expenses payable |
|
| 2,094 |
|
|
| 2,682 |
|
Management fees payable |
|
| 2,015 |
|
|
| 2,160 |
|
Incentive fees payable |
|
| 52,693 |
|
|
| 51,487 |
|
Directors’ fees payable |
|
| 49 |
|
|
| 5 |
|
Accrued expenses and other liabilities |
|
| 1,126 |
|
|
| 1,129 |
|
Total liabilities |
| $ | 305,416 |
|
| $ | 364,705 |
|
Commitments and contingencies (Note 8) |
|
|
|
|
|
| ||
Members’ capital |
|
|
|
|
|
| ||
Preferred units (0 units issued and outstanding) |
| $ | — |
|
| $ | — |
|
Common units (10,687,877 and 10,687,877 units issued and outstanding as of March 31, 2022 and December 31, 2021, respectively) |
|
| 573,309 |
|
|
| 663,936 |
|
Distributable earnings |
|
| (75,874 | ) |
|
| (78,332 | ) |
Total members’ capital |
| $ | 497,435 |
|
| $ | 585,604 |
|
Total liabilities and members’ capital |
| $ | 802,851 |
|
| $ | 950,309 |
|
Net asset value per unit |
| $ | 46.54 |
|
| $ | 54.79 |
|
The accompanying notes are part of these unaudited consolidated financial statements.
4
Goldman Sachs Private Middle Market Credit LLC
Consolidated Statements of Operations
(in thousands, except unit and per unit amounts)
(Unaudited)
For the three months ended September 30, 2017 | For the three months ended September 30, 2016 | For the nine months ended September 30, 2017 | For the period from June 9, 2016 (inception) to September 30, 2016 | |||||||||||||
Investment Income: | ||||||||||||||||
From non-controlled/non-affiliated investments: | ||||||||||||||||
Interest income | $ | 14,749 | $ | 1,195 | $ | 33,014 | $ | 1,195 | ||||||||
Other income | 177 | 9 | 644 | 9 | ||||||||||||
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| |||||
Total investment income from non-controlled/non-affiliated investments | 14,926 | 1,204 | 33,658 | 1,204 | ||||||||||||
From non-controlled affiliated investments: | ||||||||||||||||
Dividend income | 2 | 12 | 14 | 12 | ||||||||||||
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| |||||
Total investment income from non-controlled affiliated investments | 2 | 12 | 14 | 12 | ||||||||||||
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|
| |||||
Total investment income | $ | 14,928 | $ | 1,216 | $ | 33,672 | $ | 1,216 | ||||||||
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|
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| |||||
Expenses: | ||||||||||||||||
Interest and other debt expenses | $ | 2,980 | $ | 437 | $ | 5,982 | $ | 437 | ||||||||
Management fees | 1,351 | 611 | 3,129 | 611 | ||||||||||||
Incentive fees | 1,541 | – | 3,736 | – | ||||||||||||
Offering costs | – | 395 | 949 | 395 | ||||||||||||
Professional fees | 375 | 211 | 819 | 211 | ||||||||||||
Administration, custodian and transfer agent fees | 150 | 83 | 372 | 83 | ||||||||||||
Directors’ fees | 31 | 78 | 90 | 78 | ||||||||||||
Organization costs | – | 22 | – | 360 | ||||||||||||
Other expenses | 85 | 28 | 259 | 28 | ||||||||||||
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|
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Total expenses | $ | 6,513 | $ | 1,865 | $ | 15,336 | $ | 2,203 | ||||||||
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Management fees waiver | $ | – | $ | (391 | ) | $ | – | $ | (391 | ) | ||||||
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Net expenses | $ | 6,513 | $ | 1,474 | $ | 15,336 | $ | 1,812 | ||||||||
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NET INVESTMENT INCOME (LOSS) | $ | 8,415 | $ | (258 | ) | $ | 18,336 | $ | (596 | ) | ||||||
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| |||||
Net realized and unrealized gains (losses) on investment transactions: | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Non-controlled/non-affiliated investments | $ | (9 | ) | $ | – | $ | (11 | ) | $ | – | ||||||
Net change in unrealized appreciation (depreciation) from: | ||||||||||||||||
Non controlled/non-affiliated investments | 261 | 12 | 690 | 12 | ||||||||||||
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|
| |||||
Net realized and unrealized gains (losses) | $ | 252 | $ | 12 | $ | 679 | $ | 12 | ||||||||
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|
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| |||||
NET INCREASE (DECREASE) IN MEMBERS’ CAPITAL RESULTING FROM OPERATIONS | $ | 8,667 | $ | (246 | ) | $ | 19,015 | $ | (584 | ) | ||||||
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| |||||
Net investment income (loss) per unit (basic and diluted) | $ | 2.41 | $ | (0.47 | ) | $ | 6.77 | $ | (1.35 | ) | ||||||
Earnings (loss) per unit (basic and diluted) | $ | 2.48 | $ | (0.45 | ) | $ | 7.02 | $ | (1.32 | ) | ||||||
Weighted average units outstanding | 3,492,675 | 547,715 | 2,708,267 | 442,016 | ||||||||||||
Distributions declared per unit | $ | 2.42 | $ | – | $ | 6.84 | $ | – |
|
| For the Three Months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
Investment income: |
|
|
|
|
|
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From non-controlled/non-affiliated investments: |
|
|
|
|
|
| ||
Interest income |
| $ | 16,756 |
|
| $ | 25,756 |
|
Payment-in-kind income |
|
| 970 |
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|
| 1,334 |
|
Other income |
|
| 200 |
|
|
| 433 |
|
From non-controlled affiliated investments: |
|
|
|
|
|
| ||
Interest income |
|
| — |
|
|
| — |
|
Dividend income |
|
| 57 |
|
|
| 54 |
|
Other income |
|
| — |
|
|
| — |
|
Total investment income |
| $ | 17,983 |
|
| $ | 27,577 |
|
Expenses: |
|
|
|
|
|
| ||
Interest and other debt expenses |
| $ | 2,842 |
|
| $ | 4,444 |
|
Management fees |
|
| 2,015 |
|
|
| 3,068 |
|
Incentive fees |
|
| 1,206 |
|
|
| 4,398 |
|
Professional fees |
|
| 169 |
|
|
| 240 |
|
Directors’ fees |
|
| 49 |
|
|
| 61 |
|
Other general and administrative expenses |
|
| 296 |
|
|
| 424 |
|
Total expenses |
| $ | 6,577 |
|
| $ | 12,635 |
|
Net investment income |
| $ | 11,406 |
|
| $ | 14,942 |
|
Net realized and unrealized gains (losses): |
|
|
|
|
|
| ||
Net realized gain (loss) from: |
|
|
|
|
|
| ||
Non-controlled/non-affiliated investments |
| $ | (13,098 | ) |
| $ | 7,490 |
|
Foreign currency forward contracts |
|
| 14 |
|
|
| (53 | ) |
Foreign currency transactions |
|
| (112 | ) |
|
| 18 |
|
Net change in unrealized appreciation (depreciation) from: |
|
|
|
|
|
| ||
Non-controlled/non-affiliated investments |
|
| 7,780 |
|
|
| (232 | ) |
Non-controlled affiliated investments |
|
| 35 |
|
|
| 245 |
|
Foreign currency forward contracts |
|
| 12 |
|
|
| 114 |
|
Foreign currency translations |
|
| 843 |
|
|
| 2,465 |
|
Net realized and unrealized gains (losses) |
| $ | (4,526 | ) |
| $ | 10,047 |
|
(Provision) benefit for taxes on unrealized appreciation/depreciation on investments |
| $ | (49 | ) |
| $ | (67 | ) |
Net increase in members’ capital from operations |
| $ | 6,831 |
|
| $ | 24,922 |
|
Weighted average units outstanding |
|
| 10,687,877 |
|
|
| 10,687,877 |
|
Net investment income per unit (basic and diluted) |
| $ | 1.07 |
|
| $ | 1.40 |
|
Earnings per unit (basic and diluted) |
| $ | 0.64 |
|
| $ | 2.33 |
|
The accompanying notes are part of these unaudited consolidated financial statements.
5
Goldman Sachs Private Middle Market Credit LLC
Consolidated Statements of Changes in Members’ Capital
(in thousands, except unit and per unit amounts)
(Unaudited)
For the nine months ended September 30, 2017 | For the period from June 9, 2016 (inception) to September 30, 2016 | |||||||
Increase (decrease) in Members’ Capital resulting from operations: | ||||||||
Net investment income (loss) | $ | 18,336 | $ | (596 | ) | |||
Net realized gain (loss) on investments | (11 | ) | – | |||||
Net change in unrealized appreciation (depreciation) on investments | 690 | 12 | ||||||
|
|
|
|
|
| |||
Net increase (decrease) in Members’ Capital resulting from operations | $ | 19,015 | $ | (584 | ) | |||
|
|
|
|
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| |||
Distributions to unitholders from: | ||||||||
Net investment income | $ | (22,055 | ) | $ | – | |||
|
|
|
|
|
| |||
Total distributions to unitholders | $ | (22,055 | ) | $ | – | |||
|
|
|
|
|
| |||
Capital transactions: | ||||||||
Issuance of units (1,980,116 and 1,681,503 units, respectively) | $ | 195,655 | $ | 165,039 | ||||
|
|
|
|
|
| |||
Net increase in Members’ Capital resulting from capital transactions | $ | 195,655 | $ | 165,039 | ||||
|
|
|
|
|
| |||
TOTAL INCREASE (DECREASE) IN MEMBERS’ CAPITAL | $ | 192,615 | $ | 164,455 | ||||
|
|
|
|
|
| |||
Members’ Capital at beginning of period | $ | 209,441 | $ | – | ||||
|
|
|
|
|
| |||
Members’ Capital at end of period | $ | 402,056 | $ | 164,455 | ||||
|
|
|
|
|
| |||
Accumulated undistributed net investment income (distributions in excess of net investment income) | $ | (4,053 | ) | $ | (596 | ) | ||
|
|
|
|
|
|
|
| For the Three Months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
|
|
|
|
|
|
| ||
Members’ capital at beginning of period |
| $ | 585,604 |
|
| $ | 809,718 |
|
Increase in members’ capital from operations: |
|
|
|
|
|
| ||
Net investment income |
| $ | 11,406 |
|
| $ | 14,942 |
|
Net realized gain (loss) |
|
| (13,196 | ) |
|
| 7,455 |
|
Net change in unrealized appreciation (depreciation) |
|
| 8,670 |
|
|
| 2,592 |
|
(Provision) benefit for unrealized appreciation/depreciation on investments |
|
| (49 | ) |
|
| (67 | ) |
Net increase in members’ capital from operations |
| $ | 6,831 |
|
| $ | 24,922 |
|
Distributions to unitholders from: |
|
|
|
|
|
| ||
Return of capital |
| $ | (90,627 | ) |
| $ | — |
|
Distributable earnings |
| $ | (4,373 | ) |
| $ | — |
|
Total distributions to unitholders |
| $ | (95,000 | ) |
| $ | — |
|
Total increase (decrease) in members’ capital |
| $ | (88,169 | ) |
| $ | 24,922 |
|
Members’ capital at end of period |
| $ | 497,435 |
|
| $ | 834,640 |
|
Distributions per unit |
| $ | 8.89 |
|
| $ | — |
|
The accompanying notes are part of these unaudited consolidated financial statements.
6
Goldman Sachs Private Middle Market Credit LLC
Consolidated Statements of Cash Flows
(in thousands, except unit and per unit amounts)
(Unaudited)
For the nine months ended September 30, 2017 | For the period from June 9, 2016 (inception) to September 30, 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net increase (decrease) in Members’ Capital resulting from operations: | $ | 19,015 | $ | (584 | ) | |||
Adjustments to reconcile net increase (decrease) in Members’ Capital resulting from operations to net cash provided by (used for) operating activities: | ||||||||
Purchases of investments | (522,458 | ) | (146,115 | ) | ||||
Investments in affiliated money market fund, net | 138,310 | (153,004 | ) | |||||
Proceeds from sales of investments and principal repayments | 59,665 | – | ||||||
Net realized (gain) loss on investments | 11 | – | ||||||
Net change in unrealized (appreciation) depreciation on investments | (690 | ) | (12 | ) | ||||
Amortization of premium and accretion of discount, net | (1,462 | ) | (26 | ) | ||||
Amortization of deferred financing costs | 847 | 180 | ||||||
Amortization of deferred offering costs | 949 | 395 | ||||||
Increase (decrease) in operating assets and liabilities: | ||||||||
(Increase) decrease in receivable for common units sold | (2,435 | ) | – | |||||
(Increase) decrease in interest and dividends receivable | (1,949 | ) | (294 | ) | ||||
(Increase) decrease in other assets | (19 | ) | (6 | ) | ||||
Increase (decrease) in interest and other debt expenses payable | 420 | 182 | ||||||
Increase (decrease) in management fees payable | 653 | 220 | ||||||
Increase (decrease) in incentive fees payable | 3,736 | – | ||||||
Increase (decrease) in accrued organization costs | (115 | ) | 360 | |||||
Increase (decrease) in directors’ fees payable | 27 | 78 | ||||||
Increase (decrease) in accrued expenses and other liabilities | 269 | 538 | ||||||
|
|
|
|
|
| |||
Net cash provided by (used for) operating activities | $ | (305,226 | ) | $ | (298,088 | ) | ||
|
|
|
|
|
| |||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common units | $ | 195,655 | $ | 164,881 | ||||
Offering costs paid | (375 | ) | (15 | ) | ||||
Distributions paid | (15,091 | ) | – | |||||
Financing costs paid | (273 | ) | (1,399 | ) | ||||
Borrowings on debt | 492,000 | 137,500 | ||||||
Repayments of debt | (333,000 | ) | – | |||||
|
|
|
|
|
| |||
Net cash provided by (used for) financing activities | $ | 338,916 | $ | 300,967 | ||||
|
|
|
|
|
| |||
Net increase (decrease) in cash | 33,690 | 2,879 | ||||||
Cash, beginning of period | 3,863 | – | ||||||
|
|
|
|
|
| |||
Cash, end of period | $ | 37,553 | $ | 2,879 | ||||
|
|
|
|
|
| |||
Supplemental and non-cash financing activities | ||||||||
Interest expense paid | $ | 4,305 | $ | 76 | ||||
Accrued but unpaid deferred financing and debt issuance costs | $ | 7 | $ | 352 | ||||
Accrued but unpaid offering costs | $ | – | $ | 1,552 | ||||
Accrued but unpaid distributions | $ | 9,962 | $ | – |
The accompanying notes are part of these unaudited consolidated financial statements.
7
Goldman Sachs Private Middle Market Credit LLC
Consolidated Schedule of Investments as of September 30, 2017
(in thousands, except unit and per unit amounts)
(Unaudited)
Portfolio Company | Industry | Interest | Maturity | Par Amount | Cost | Fair Value | ||||||||||||||
Investments at Fair Value – 165.24%#* | ||||||||||||||||||||
Corporate Debt – 163.52% | ||||||||||||||||||||
1st Lien/Senior Secured Debt – 45.65% | ||||||||||||||||||||
Clinical Supplies Management Holdings, | Containers & Packaging | L + 7.75% (1.00% Floor) | 10/12/2021 | $ | 23,979 | $ | 23,568 | $ | 23,559 | |||||||||||
Clinical Supplies Management Holdings, | Containers & Packaging | L + 7.75% (1.00% Floor) | 10/12/2021 | 2,000 | (33 | ) | (35 | ) | ||||||||||||
Continuum Managed Services LLC(+) (4) | IT Services | L + 8.75% (1.00% Floor) | 06/08/2023 | 31,770 | 30,930 | 30,896 | ||||||||||||||
Continuum Managed Services LLC(2) (3) (4) | IT Services | L + 8.75% (1.00% Floor) | 06/08/2023 | 2,658 | (69 | ) | (73 | ) | ||||||||||||
Continuum Managed Services LLC(2) (3) (4) | IT Services | L + 8.75% (1.00% Floor) | 06/08/2022 | 3,280 | (85 | ) | (90 | ) | ||||||||||||
Datacor Holdings, Inc.(1) | Chemicals | 9.50% | 08/12/2022 | 14,000 | 13,761 | 13,755 | ||||||||||||||
FWR Holding Corporation(++++) | Hotels, Restaurants & Leisure | L + 6.00% (1.00% Floor) | 08/21/2023 | 13,671 | 13,334 | 13,329 | ||||||||||||||
FWR Holding Corporation(+++) (2) | Hotels, Restaurants & Leisure | L + 6.00% (1.00% Floor) | 08/21/2023 | 1,764 | 442 | 441 | ||||||||||||||
FWR Holding Corporation(2) (3) | Hotels, Restaurants & Leisure | L + 6.00% (1.00% Floor) | 08/21/2019 | 4,410 | (108 | ) | (110 | ) | ||||||||||||
Dade Bag & Paper Co. LLC(+) (1) (4) | Distributors | L + 7.50% (1.00% Floor) | 06/10/2024 | 16,359 | 16,043 | 16,032 | ||||||||||||||
Netvoyage Corporation(+) (1) (4) | Software | L + 9.50% (1.00% Floor) | 03/24/2022 | 12,527 | 12,297 | 12,308 | ||||||||||||||
Netvoyage Corporation(1) (2) (3) (4) | Software | L + 9.50% (1.00% Floor) | 03/24/2022 | 1,044 | (19 | ) | (18 | ) | ||||||||||||
SF Home Décor, LLC(+++) (4) | Household Products | L + 9.50% (1.00% Floor) | 07/13/2022 | 31,205 | 30,298 | 30,269 | ||||||||||||||
Xactly Corporation(+) (4) | Internet Software & Services | L + 7.25% (1.00% Floor) | 07/29/2022 | 29,800 | 29,220 | 29,204 | ||||||||||||||
Xactly Corporation(2) (3) (4) | Internet Software & Services | L + 7.25% (1.00% Floor) | 07/29/2022 | 2,554 | (49 | ) | (51 | ) | ||||||||||||
Yasso, Inc.(++) (1) (4) | Food Products | L + 7.75% (1.00% Floor) | 03/23/2022 | 14,428 | 14,163 | 14,139 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total 1st Lien/Senior Secured Debt | 183,693 | 183,555 | ||||||||||||||||||
1st Lien/Last-Out Unitranche (5) – 28.03% | ||||||||||||||||||||
Intelligent Document Solutions, Inc.(+++) (4) | Diversified Financial Services | L + 8.25% (1.00% Floor) | 08/31/2022 | 17,900 | 17,459 | 17,453 | ||||||||||||||
myON, LLC(+) (1) (4) | Internet Software & Services | L + 8.50% (1.00% Floor) | 02/17/2022 | 11,300 | 11,096 | 11,102 | ||||||||||||||
Smarsh, Inc.(+) (1) (4) | Software | L + 7.88% (1.00% Floor) | 03/31/2021 | 26,135 | 25,704 | 25,677 | ||||||||||||||
Vantage Mobility International, LLC(+) (1) | Health Care Equipment & Supplies | L + 7.75% (1.00% Floor) | 09/09/2021 | 25,111 | 24,692 | 24,672 | ||||||||||||||
You Fit, LLC(+++) (1) | Diversified Consumer Services | L + 6.75% (1.00% Floor) | 01/04/2022 | 34,500 | 33,509 | 33,810 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total 1st Lien/Last-Out Unitranche | 112,460 | 112,714 | ||||||||||||||||||
2nd Lien/Senior Secured Debt – 89.01% | ||||||||||||||||||||
American Dental Partners, Inc.(+++) (1) (4) | Health Care Providers & Services | L + 8.50% (1.00% Floor) | 09/25/2023 | 13,600 | 13,283 | 13,294 | ||||||||||||||
Association Member Benefits Advisors, | Insurance | L + 8.75% (1.00% Floor) | 06/08/2023 | 28,000 | 27,492 | 27,440 | ||||||||||||||
Country Fresh Holdings, LLC(+++) (4) | Food Products | L + 8.75% (1.00% Floor) | 10/02/2023 | 13,800 | 13,531 | 13,524 | ||||||||||||||
DuBois Chemicals, Inc.(+) (1) (4) | Chemicals | L + 8.00% (1.00% Floor) | 03/15/2025 | 20,000 | 19,570 | 19,800 | ||||||||||||||
ERC Finance, LLC(+) (4) | Health Care Providers & Services | L + 8.00% (1.00% Floor) | 09/21/2025 | 29,800 | 29,131 | 29,129 | ||||||||||||||
Granicus, Inc.(+++) (1) | Software | L + 9.00% (1.00% Floor) | 09/07/2023 | 25,500 | 25,044 | 25,054 | ||||||||||||||
Market Track, LLC(+) (1) (4) | Internet Catalog & Retail | L + 7.75% (1.00% Floor) | 06/05/2025 | 32,800 | 31,843 | 31,816 | ||||||||||||||
National Spine and Pain Centers, LLC(+++) (1) (4) | Health Care Providers & Services | L + 8.25% (1.00% Floor) | 12/02/2024 | 28,500 | 27,671 | 27,645 | ||||||||||||||
Oasis Outsourcing Holdings, Inc.(+) (4) | Diversified Financial Services | L + 7.25% (1.00% Floor) | 07/01/2024 | 33,580 | 33,088 | 33,076 | ||||||||||||||
PPC Industries Inc.(+++) (4) | Containers & Packaging | L + 8.00% (1.00% Floor) | 05/08/2025 | 13,300 | 13,172 | 13,267 | ||||||||||||||
Procare Software, LLC(+++) (1) | Diversified Financial Services | L + 8.75% (1.00% Floor) | 09/30/2022 | 35,000 | 34,331 | 34,475 | ||||||||||||||
Recipe Acquisition Corp.(+++) (1) | Food Products | L + 9.00% (1.00% Floor) | 12/01/2022 | 20,000 | 19,672 | 19,650 | ||||||||||||||
Regulatory DataCorp, Inc.(+) (1) | Diversified Financial Services | L + 9.00% (1.00% Floor) | 09/21/2023 | 15,000 | 14,732 | 14,738 | ||||||||||||||
SMB Shipping Logistics, LLC(++++) (1) (4) | Air Freight & Logistics | L + 8.75% (1.00% Floor) | 02/03/2025 | 20,000 | 19,717 | 19,700 | ||||||||||||||
Zep Inc.(+) (4) | Chemicals | L + 8.25% (1.00% Floor) | 08/11/2025 | 35,700 | 34,813 | 35,254 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total 2nd Lien/Senior Secured Debt | 357,090 | 357,862 | ||||||||||||||||||
Unsecured Debt – 0.83% | ||||||||||||||||||||
Recipe Acquisition Corp.(1) | Food Products | 13.25% PIK | 12/21/2022 | 3,400 | 3,333 | 3,340 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total Unsecured Debt | 3,333 | 3,340 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
Total Corporate Debt | 656,576 | 657,471 |
|
| For the Three Months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
|
|
|
|
|
|
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net increase in Members’ Capital from operations: |
| $ | 6,831 |
|
| $ | 24,922 |
|
Adjustments to reconcile net increase (decrease) in Members’ Capital from operations to net cash provided by (used for) operating activities: |
|
|
|
|
|
| ||
Purchases of investments |
|
| (164 | ) |
|
| (14,525 | ) |
Payment-in-kind interest capitalized |
|
| (908 | ) |
|
| (1,022 | ) |
Investments in affiliated money market fund, net |
|
| 45,568 |
|
|
| 33,160 |
|
Proceeds from sales of investments and principal repayments |
|
| 100,371 |
|
|
| 78,048 |
|
Net realized (gain) loss |
|
| 13,101 |
|
|
| (7,491 | ) |
Net change in unrealized (appreciation) depreciation on investments |
|
| (7,815 | ) |
|
| (13 | ) |
Net change in unrealized (appreciation) depreciation on foreign currency forward contracts and transactions |
|
| (50 | ) |
|
| (63 | ) |
Amortization of premium and accretion of discount, net |
|
| (1,455 | ) |
|
| (1,915 | ) |
Amortization of deferred financing costs |
|
| 330 |
|
|
| 327 |
|
Change in operating assets and liabilities: |
|
|
|
|
|
| ||
(Increase) decrease in receivable for investments sold |
|
| 1 |
|
|
| (90 | ) |
(Increase) decrease in interest and dividends receivable |
|
| 963 |
|
|
| (840 | ) |
(Increase) decrease in other assets |
|
| (120 | ) |
|
| (121 | ) |
Increase (decrease) in interest and other debt expenses payable |
|
| (588 | ) |
|
| (296 | ) |
Increase (decrease) in management fees payable |
|
| (145 | ) |
|
| (176 | ) |
Increase (decrease) in incentive fees payable |
|
| 1,206 |
|
|
| 4,398 |
|
Increase (decrease) in directors’ fees payable |
|
| 44 |
|
|
| 54 |
|
Increase (decrease) in accrued expenses and other liabilities |
|
| (3 | ) |
|
| 152 |
|
Net cash provided by (used for) operating activities |
| $ | 157,167 |
|
| $ | 114,509 |
|
Cash flows from financing activities: |
|
|
|
|
|
| ||
Distributions paid |
| $ | (95,000 | ) |
| $ | (113,000 | ) |
Financing costs paid |
|
| (34 | ) |
|
| — |
|
Repayments of debt |
|
| (59,803 | ) |
|
| (2,491 | ) |
Net cash provided by (used for) financing activities |
| $ | (154,837 | ) |
| $ | (115,491 | ) |
Net increase (decrease) in cash |
|
| 2,330 |
|
|
| (982 | ) |
Effect of foreign exchange rate changes on cash and cash equivalents |
|
| 38 |
|
|
| (51 | ) |
Cash, beginning of period |
|
| 15,130 |
|
|
| 25,384 |
|
Cash, end of period |
| $ | 17,498 |
|
| $ | 24,351 |
|
Supplemental and non-cash activities |
|
|
|
|
|
| ||
Interest expense paid |
| $ | 3,063 |
|
| $ | 4,271 |
|
The accompanying notes are part of these unaudited consolidated financial statements.
7
Goldman Sachs Private Middle Market Credit LLC
Consolidated Schedule of Investments as of September 30, 2017March 31, 2022
(in thousands, except unit and per unit amounts)
(Unaudited)
Portfolio Company | Industry | Coupon | Shares | Cost | Fair Value | |||||||||||||||
Preferred Stock – 0.66% | ||||||||||||||||||||
Datacor Holdings, Inc.(1) (6) (7) | Chemicals | 1,000,000 | $ | 1,000 | $ | 1,030 | ||||||||||||||
Recipe Acquisition Corp.(1) (6) | Food Products | 11.00% PIK | 1,600 | 1,496 | 1,640 | |||||||||||||||
|
|
|
| |||||||||||||||||
Total Preferred Stock | 2,496 | 2,670 | ||||||||||||||||||
Common Stock – 1.03% | ||||||||||||||||||||
Continuum Managed Services LLC – Class A(1) (4) (6) | IT Services | 1,079 | 1,079 | 1,079 | ||||||||||||||||
Continuum Managed Services LLC – Class B(1) (4) (6) | IT Services | 731,623 | 11 | 11 | ||||||||||||||||
myON, LLC(1) (4) (6) | Internet Software & Services | 24,131 | 900 | 900 | ||||||||||||||||
National Spine and Pain Centers, LLC(1) (4) (6) | Health Care Providers & Services | 900 | 900 | 900 | ||||||||||||||||
Yasso, Inc.(1) (4) (6) | Food Products | 1,360 | 1,360 | 1,233 | ||||||||||||||||
|
|
|
| |||||||||||||||||
Total Common Stock | 4,250 | 4,123 | ||||||||||||||||||
Portfolio Company | Industry | Units | Cost | Fair Value | ||||||||||||||||
Warrants – 0.03% | ||||||||||||||||||||
Recipe Acquisition Corp.(1) (6) | Food Products | 44 | $ | 104 | $ | 106 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total Warrants | 104 | 106 | ||||||||||||||||||
Yield | Shares | Cost | Fair Value | |||||||||||||||||
Investments in Affiliated Money Market Fund – 0.00% # * | ||||||||||||||||||||
Goldman Sachs Financial Square Government Fund – Institutional Shares(8) | 0.91%(8) | 822 | $ | 1 | $ | 1 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total Investments in Affiliated Money Market Fund | 1 | 1 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
TOTAL INVESTMENTS – 165.24% | $ | 663,427 | $ | 664,371 | ||||||||||||||||
|
|
|
| |||||||||||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS – (65.24%) | $ | (262,315 | ) | |||||||||||||||||
|
| |||||||||||||||||||
MEMBERS’ CAPITAL – 100.00% | $ | 402,056 | ||||||||||||||||||
|
|
Investment # | Industry | Interest | Reference Rate and | Floor | Maturity | Par/Shares |
| Cost |
| Fair |
| Footnotes | |||
1st Lien/Senior Secured Debt - 80.27% |
|
|
|
|
|
|
|
|
|
|
|
| |||
CorePower Yoga LLC | Diversified Consumer Services | 8.01% | L + 7.00% (incl. 5.00% PIK) | 1.01% | 05/14/25 | $ | 16,047 |
| $ | 15,894 |
| $ | 13,118 |
| (1) (2) (3) |
CorePower Yoga LLC | Diversified Consumer Services |
| L + 7.00% (incl. 5.00% PIK) | 1.00% | 05/14/25 |
| 1,070 |
|
| (10 | ) |
| (195 | ) | (1) (2) (3) (4) |
Diligent Corporation | Professional Services | 7.25% | L + 6.25% | 1.00% | 08/04/25 | € | 23,657 |
|
| 27,122 |
|
| 26,302 |
| (1) (2) (3) |
Diligent Corporation | Professional Services | 7.25% | L + 6.25% | 1.00% | 08/04/25 |
| 15,284 |
|
| 15,132 |
|
| 15,361 |
| (1) (2) (3) |
Diligent Corporation | Professional Services |
| L + 6.25% | 1.00% | 08/04/25 |
| 1,900 |
|
| (25 | ) |
| 9 |
| (1) (2) (3) (4) |
Hollander Sleep & Décor (dba SureFit) | Household Products | 10.75% | L + 9.75% | 1.00% | 07/13/23 |
| 25,948 |
|
| 25,654 |
|
| 25,040 |
| (1) (2) (3) |
iCIMS, Inc. | Software | 7.50% | L + 6.50% | 1.00% | 09/12/24 |
| 45,158 |
|
| 44,737 |
|
| 45,158 |
| (1) (2) (3) |
iCIMS, Inc. | Software | 7.50% | L + 6.50% | 1.00% | 09/12/24 |
| 8,317 |
|
| 8,230 |
|
| 8,317 |
| (1) (3) |
iCIMS, Inc. | Software | 7.50% | L + 6.50% | 1.00% | 09/12/24 |
| 2,822 |
|
| 2,798 |
|
| 2,822 |
| (1) (3) |
Internet Truckstop Group, LLC (dba Truckstop) | Transportation Infrastructure | 6.51% | L + 5.50% | 1.01% | 04/02/25 |
| 33,551 |
|
| 33,022 |
|
| 33,467 |
| (1) (2) (3) |
Internet Truckstop Group, LLC (dba Truckstop) | Transportation Infrastructure |
| L + 5.50% | 1.00% | 04/02/25 |
| 2,800 |
|
| (41 | ) |
| (7 | ) | (1) (2) (3) (4) |
Lithium Technologies, Inc. | Interactive Media & Services | 9.03% | L + 8.00% | 1.03% | 10/03/22 |
| 58,727 |
|
| 58,479 |
|
| 58,140 |
| (1) (2) (3) |
Lithium Technologies, Inc. | Interactive Media & Services | 9.00% | L + 8.00% | 1.00% | 10/03/22 |
| 3,371 |
|
| 1,336 |
|
| 1,315 |
| (1) (2) (3) (4) |
MMIT Holdings, LLC (dba Managed Markets Insight & Technology) | Health Care Technology | 7.25% | L + 6.25% | 1.00% | 09/15/27 |
| 28,114 |
|
| 27,594 |
|
| 27,692 |
| (1) (2) (3) |
MMIT Holdings, LLC (dba Managed Markets Insight & Technology) | Health Care Technology | 7.25% | L + 6.25% | 1.00% | 09/15/27 |
| 2,930 |
|
| 2,875 |
|
| 2,886 |
| (1) (2) (3) |
MMIT Holdings, LLC (dba Managed Markets Insight & Technology) | Health Care Technology |
| L + 6.25% | 1.00% | 09/15/27 |
| 2,518 |
|
| (46 | ) |
| (38 | ) | (1) (2) (3) (4) |
Picture Head Midco LLC | Entertainment | 7.75% | S + 6.75% | 1.00% | 08/31/23 |
| 28,958 |
|
| 28,709 |
|
| 28,741 |
| (1) (2) (3) |
SPay, Inc. (dba Stack Sports) | Interactive Media & Services | 10.25% | L + 9.25% (incl. 3.50% PIK) | 1.00% | 06/17/24 |
| 17,817 |
|
| 17,687 |
|
| 16,837 |
| (1) (2) (3) |
SPay, Inc. (dba Stack Sports) | Interactive Media & Services | 10.25% | L + 9.25% (incl. 3.50% PIK) | 1.00% | 06/17/24 |
| 1,286 |
|
| 1,276 |
|
| 1,215 |
| (1) (2) (3) |
SPay, Inc. (dba Stack Sports) | Interactive Media & Services | 10.25% | L + 9.25% (incl. 3.50% PIK) | 1.00% | 06/17/24 |
| 641 |
|
| 638 |
|
| 606 |
| (1) (2) (3) |
Vantage Mobility International, LLC | Health Care Equipment & Supplies | 4.50% | L + 3.50% | 1.00% | 03/21/24 |
| 6,640 |
|
| 1,260 |
|
| 6,208 |
| (3) |
Vantage Mobility International, LLC | Health Care Equipment & Supplies | 4.50% | L + 3.50% | 1.00% | 03/21/24 |
| 853 |
|
| 853 |
|
| 853 |
| (3) |
Viant Medical Holdings, Inc. | Health Care Equipment & Supplies | 7.25% | L + 6.25% | 1.00% | 07/02/25 |
| 19,166 |
|
| 18,961 |
|
| 18,782 |
| (1) (2) |
VRC Companies, LLC (dba Vital Records Control) | Commercial Services & Supplies | 6.25% | L + 5.50% | 0.75% | 06/29/27 |
| 13,194 |
|
| 13,017 |
|
| 12,996 |
| (1) (2) (3) |
VRC Companies, LLC (dba Vital Records Control) | Commercial Services & Supplies | 6.51% | L + 5.50% | 1.01% | 06/29/27 |
| 2,213 |
|
| 881 |
|
| 877 |
| (1) (2) (3) (4) |
VRC Companies, LLC (dba Vital Records Control) | Commercial Services & Supplies | 8.00% | P + 4.50% | 3.50% | 06/29/27 |
| 443 |
|
| 38 |
|
| 38 |
| (1) (2) (3) (4) |
Wine.com, LLC | Beverages | 8.00% | L + 7.00% | 1.00% | 11/14/24 |
| 9,600 |
|
| 9,504 |
|
| 9,600 |
| (1) (2) (3) |
Wine.com, LLC | Beverages | 8.00% | L + 7.00% | 1.00% | 11/14/24 |
| 2,300 |
|
| 2,266 |
|
| 2,300 |
| (1) (3) |
Xactly Corporation | IT Services | 8.25% | L + 7.25% | 1.00% | 07/31/23 |
| 40,879 |
|
| 40,594 |
|
| 40,879 |
| (1) (2) (3) |
Xactly Corporation | IT Services |
| L + 7.25% | 1.00% | 07/31/23 |
| 2,554 |
|
| (15 | ) |
| — |
| (1) (2) (3) (4) |
Total 1st Lien/Senior Secured Debt |
|
|
|
|
|
|
|
| 398,420 |
|
| 399,319 |
|
|
The accompanying notes are part of these consolidated financial statements.
8
Goldman Sachs Private Middle Market Credit LLC
Consolidated Schedule of Investments as of March 31, 2022 (continued)
(in thousands, except unit and per unit amounts)
(Unaudited)
Investment # | Industry | Interest | Reference Rate | Floor | Maturity | Par/Shares |
| Cost |
| Fair |
| Footnotes | |||
1st Lien/Last-Out Unitranche (5) - 15.51% |
|
|
|
|
|
|
|
| |||||||
Doxim, Inc. | Diversified Financial Services | 7.00% | L + 6.00% | 1.00% | 02/28/24 | $ | 30,617 |
| $ | 30,246 |
| $ | 30,158 |
| (1) (2) (3) |
Doxim, Inc. | Diversified Financial Services | 7.00% | L + 6.00% | 1.00% | 02/28/24 |
| 23,681 |
|
| 23,401 |
|
| 23,325 |
| (1) (2) (3) |
Doxim, Inc. | Diversified Financial Services | 8.00% | L + 7.00% | 1.00% | 02/28/24 |
| 5,903 |
|
| 5,804 |
|
| 5,785 |
| (1) (3) |
Doxim, Inc. | Diversified Financial Services | 9.00% | L + 8.00% | 1.00% | 02/28/24 |
| 4,625 |
|
| 4,541 |
|
| 4,613 |
| (1) (2) (3) |
Doxim, Inc. | Diversified Financial Services | 9.00% | L + 8.00% | 1.00% | 02/28/24 |
| 3,435 |
|
| 3,380 |
|
| 3,426 |
| (1) (3) |
Vantage Mobility International, LLC | Health Care Equipment & Supplies | 7.00% | L + 6.00% PIK | 1.00% | 03/21/24 |
| 17,393 |
|
| 13,503 |
|
| 9,827 |
| (2) (3) |
Total 1st Lien/Last-Out Unitranche |
|
|
|
|
|
|
|
| 80,875 |
|
| 77,134 |
|
| |
2nd Lien/Senior Secured Debt - 38.88% |
|
|
|
|
|
|
|
| |||||||
Chase Industries, Inc. (dba Senneca Holdings) | Building Products |
| 10.00% PIK |
| 11/11/25 | $ | 12,850 |
| $ | 11,531 |
| $ | 1,799 |
| (1) (2) (3) (6) |
Chase Industries, Inc. (dba Senneca Holdings) | Building Products |
|
|
| 05/11/26 |
| 16,405 |
|
| — |
|
| — |
| (1) (2) (3) (7) |
Genesis Acquisition Co. (dba ProCare Software) | Diversified Financial Services | 7.71% | L + 7.50% |
| 07/31/25 |
| 10,500 |
|
| 10,356 |
|
| 10,211 |
| (1) (2) (3) |
Genesis Acquisition Co. (dba ProCare Software) | Diversified Financial Services | 8.25% | L + 7.50% | 0.75% | 07/31/25 |
| 8,610 |
|
| 8,453 |
|
| 8,373 |
| (1) (3) |
Genesis Acquisition Co. (dba ProCare Software) | Diversified Financial Services | 7.81% | L + 7.50% |
| 07/31/25 |
| 3,061 |
|
| 2,972 |
|
| 2,977 |
| (1) (2) (3) |
Genesis Acquisition Co. (dba ProCare Software) | Diversified Financial Services | 7.71% | L + 7.50% |
| 07/31/25 |
| 2,700 |
|
| 2,659 |
|
| 2,626 |
| (1) (2) (3) |
Intelligent Medical Objects, Inc. | Health Care Technology | 9.50% | L + 8.50% | 1.00% | 12/22/24 |
| 30,800 |
|
| 30,455 |
|
| 30,415 |
| (1) (2) (3) |
National Spine and Pain Centers, LLC | Health Care Providers & Services | 9.25% | L + 8.25% | 1.00% | 12/02/24 |
| 28,500 |
|
| 28,122 |
|
| 27,788 |
| (1) (2) (3) |
Odyssey Logistics & Technology Corporation | Road & Rail | 9.00% | L + 8.00% | 1.00% | 10/12/25 |
| 28,152 |
|
| 27,808 |
|
| 26,744 |
| (1) (2) |
Recipe Acquisition Corp. (dba Roland Foods) | Food Products | 10.01% | L + 9.00% | 1.00% | 12/22/22 |
| 20,000 |
|
| 19,898 |
|
| 19,700 |
| (2) (3) |
Spectrum Plastics Group, Inc. | Containers & Packaging | 8.01% | L + 7.00% | 1.00% | 01/31/26 |
| 9,975 |
|
| 9,947 |
|
| 9,097 |
| (1) (2) |
YI, LLC (dba Young Innovations) | Health Care Equipment & Supplies | 8.75% | L + 7.75% | 1.00% | 11/07/25 |
| 22,903 |
|
| 22,530 |
|
| 22,273 |
| (1) (2) (3) |
Zep Inc. | Chemicals | 9.26% | L + 8.25% | 1.00% | 08/11/25 |
| 34,878 |
|
| 34,424 |
|
| 31,390 |
| (1) (2) |
Total 2nd Lien/Senior Secured Debt |
|
|
|
|
|
|
|
| 209,155 |
|
| 193,393 |
|
| |
Unsecured Debt - 1.23% |
|
|
|
|
|
|
|
| |||||||
Recipe Acquisition Corp. (dba Roland Foods) | Food Products | 13.25% | 13.25% PIK |
| 12/21/22 | $ | 6,336 |
| $ | 6,324 |
| $ | 6,098 |
| (3) |
Total Unsecured Debt |
|
|
|
|
|
|
|
| 6,324 |
|
| 6,098 |
|
|
The accompanying notes are part of these consolidated financial statements.
9
Goldman Sachs Private Middle Market Credit LLC
Consolidated Schedule of Investments as of March 31, 2022 (continued)
(in thousands, except unit and per unit amounts)
(Unaudited)
Investment # | Industry | Interest | Initial | Par/Shares |
| Cost |
| Fair |
| Footnotes | |||
Preferred Stock - 2.30% |
|
|
|
|
|
|
|
|
|
| |||
Recipe Acquisition Corp. (dba Roland Foods) | Food Products | 11.00% PIK | 12/22/16 |
| 1,600 |
| $ | 1,496 |
| $ | 2,196 |
| (3) (7) |
Vantage Mobility International, LLC | Health Care Equipment & Supplies |
| 05/23/19 |
| 15,025,203 |
|
| 6,010 |
|
| — |
| (2) (3) (7) |
Wine.com, LLC | Beverages |
| 11/14/18 |
| 337,425 |
|
| 2,900 |
|
| 7,099 |
| (1) (3) (7) |
Wine.com, LLC | Beverages |
| 03/03/21 |
| 78,199 |
|
| 1,933 |
|
| 2,154 |
| (1) (3) (7) |
Total Preferred Stock |
|
|
|
|
|
| 12,339 |
|
| 11,449 |
|
| |
Common Stock - 1.87% |
|
|
|
|
|
|
| ||||||
Collaborative Imaging Holdco, LLC (dba Texas Radiology Associates) - Class B | Health Care Providers & Services |
| 03/30/18 |
| 12,370 |
| $ | 1,668 |
| $ | 2,486 |
| ^^^ (1) (3) |
Collaborative Imaging Holdco, LLC (dba Texas Radiology Associates) - Performance Units | Health Care Providers & Services |
| 03/30/18 |
| 11,675 |
|
| 232 |
|
| 916 |
| ^^^ (1) (3) (7) (9) |
Country Fresh Holding Company Inc. | Food Products |
| 04/29/19 |
| 986 |
|
| 1,232 |
|
| — |
| (1) (2) (3) (7) |
Elah Holdings, Inc. | Capital Markets |
| 05/09/18 |
| 69,386 |
|
| 3,354 |
|
| 3,353 |
| ^ (1) (3) (7) |
National Spine and Pain Centers, LLC | Health Care Providers & Services |
| 06/02/17 |
| 900 |
|
| 900 |
|
| 354 |
| (1) (3) (7) |
Vantage Mobility International, LLC | Health Care Equipment & Supplies |
| 10/15/21 |
| 426,294 |
|
| — |
|
| — |
| (3) (7) |
Vantage Mobility International, LLC | Health Care Equipment & Supplies |
| 05/23/19 |
| 7,026,420 |
|
| — |
|
| — |
| (2) (3) (7) |
Yasso, Inc. | Food Products |
| 03/23/17 |
| 1,360 |
|
| 1,360 |
|
| 2,207 |
| (1) (3) (7) |
Total Common Stock |
|
|
|
|
|
| 8,746 |
|
| 9,316 |
|
| |
Warrants - 0.01% |
|
|
|
|
|
|
| ||||||
KDOR Holdings Inc. (dba Senneca Holdings) | Building Products |
| 05/29/20 |
| 311 |
| $ | 115 |
| $ | — |
| (1) (3) (7) |
KDOR Holdings Inc. (dba Senneca Holdings) | Building Products |
| 05/29/20 |
| 2,974 |
|
| 1,096 |
|
| — |
| (1) (3) (7) |
KDOR Holdings Inc. (dba Senneca Holdings) | Building Products |
| 06/22/20 |
| 62 |
|
| 23 |
|
| — |
| (1) (3) (7) |
Recipe Acquisition Corp. (dba Roland Foods) | Food Products |
| 12/22/16 |
| 44 |
|
| 104 |
|
| 31 |
| (3) (7) |
Total Warrants |
|
|
|
|
|
| 1,338 |
|
| 31 |
|
| |
Investments in Affiliated Money Market Fund - 15.99% |
|
|
|
|
|
|
| ||||||
Goldman Sachs Financial Square Government Fund - Institutional Shares |
|
|
|
| 79,558,940 |
| $ | 79,559 |
| $ | 79,559 |
| ^^^ (10) |
Total Investments in Affiliated Money Market Fund |
|
|
|
|
|
| 79,559 |
|
| 79,559 |
|
| |
Total Investments - 156.06% |
|
| $ | 796,756 |
| $ | 776,299 |
|
|
The accompanying notes are part of these consolidated financial statements.
10
Goldman Sachs Private Middle Market Credit LLC
Consolidated Schedule of Investments as of March 31, 2022 (continued)
(in thousands, except unit and per unit amounts)
(Unaudited)
(+) |
|
(++) | Par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments. Par amount is denominated in U.S. Dollars ("$"), unless otherwise noted, or Euro ("€"). |
# | Percentages are based on |
^ | As defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”), the investment is deemed to be an “affiliated person” of the Company because the Company owns, either directly or indirectly, 5% or more of the portfolio company’s outstanding voting securities. See Note 3 “Significant Agreements and Related Party Transactions.” |
^^^ | The |
(1) |
|
(2) |
|
|
The fair value of the investment was determined using significant unobservable inputs. See Note 5 “Fair Value |
(4) | Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. |
The negative cost, if applicable, is the result of the capitalized discount being greater than the principal amount outstanding on the loan. The negative fair value, if applicable, is the result of the capitalized discount on the loan. |
|
(5) | In exchange for the greater risk of loss, the “last-out” portion of the |
(6) | The investment is on non-accrual status. See Note 2 “Significant Accounting Policies.” |
(7) | Non-income producing security. |
(8) | Securities exempt from registration under the Securities Act of 1933, and may be deemed to be “restricted securities.” As of March 31, 2022, the aggregate fair value of these securities is $20,796 or 4.18% of the Company's net assets. The initial acquisition dates have been included for such securities. |
(9) | The investment is not a qualifying asset under Section 55(a) of the Investment Company |
(10) | The | |
PIK | Payment-In-Kind | |
L – LIBOR0
PIK – Payment-In-Kind
ADDITIONAL INFORMATION |
|
|
|
|
| |
Foreign currency forward contracts |
|
|
|
|
| |
Counterparty | Currency Purchased | Currency Sold | Settlement | Unrealized Appreciation |
| |
|
|
|
|
|
| |
|
|
|
|
|
| |
Bank of America, N.A. | U.S. Dollar 284 | Euro 238 | 04/06/22 | $ | 20 |
|
Bank of America, N.A. | U.S. Dollar 287 | Euro 241 | 07/06/22 |
| 20 |
|
Bank of America, N.A. | U.S. Dollar 291 | Euro 244 | 10/06/22 |
| 18 |
|
|
|
|
| $ | 58 |
|
The accompanying notes are part of these unaudited consolidated financial statements.
9
11
Goldman Sachs Private Middle Market Credit LLC
Consolidated Schedule of Investments as of December 31, 20162021
(in thousands, except unit and per unit amounts)
Portfolio Company | Industry | Interest | Maturity | Par Amount | Cost | Fair Value | ||||||||||||||
Investments at Fair Value – 95.22%# | ||||||||||||||||||||
Corporate Debt – 93.98% | ||||||||||||||||||||
1st Lien/Senior Secured Debt – 20.79% | ||||||||||||||||||||
Clinical Supplies Management Holdings, Inc.(++) | Containers & Packaging | L + 7.75% (1.00% Floor) | 10/12/2021 | $ | 5,300 | $ | 5,198 | $ | 5,194 | |||||||||||
Clinical Supplies Management Holdings, Inc.(+) (2) | Containers & Packaging | L + 7.75% (1.00% Floor) | 10/12/2021 | 14,000 | 5,112 | 5,080 | ||||||||||||||
Clinical Supplies Management Holdings, Inc.(2) (3) | Containers & Packaging | L + 7.75% (1.00% Floor) | 10/12/2021 | 2,000 | (38 | ) | (40 | ) | ||||||||||||
Datacor Holdings, Inc. | Chemicals | 9.50% | 08/12/2022 | 14,000 | 13,734 | 13,720 | ||||||||||||||
Greenskies Renewable Energy, LLC(++) | Construction & Engineering | L + 9.00% (0.50% Floor) | 08/19/2021 | 20,000 | 19,623 | 19,600 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total 1st Lien/Senior Secured Debt | 43,629 | 43,554 | ||||||||||||||||||
1st Lien/Last-Out Unitranche (4) – 11.23% | ||||||||||||||||||||
Vantage Mobility International, LLC(+) | Health Care Equipment & Supplies | L + 7.75% (1.00% Floor) | 09/09/2021 | 24,000 | 23,544 | 23,520 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total 1st Lien/Last-Out Unitranche | 23,544 | 23,520 | ||||||||||||||||||
2nd Lien/Senior Secured Debt – 60.37% | ||||||||||||||||||||
Association Member Benefits Advisors, LLC(++) | Insurance | L + 8.75% (1.00% Floor) | 06/08/2023 | 28,000 | 27,445 | 27,440 | ||||||||||||||
Global Healthcare Exchange, LLC(+) | Health Care Technology | L + 8.75% (1.00% Floor) | 08/14/2023 | 15,000 | 14,782 | 15,150 | ||||||||||||||
Granicus, Inc.(++) | Software | L + 9.00% (1.00% Floor) | 09/07/2023 | 25,500 | 25,005 | 24,990 | ||||||||||||||
Procare Software, LLC(++) | Diversified Financial Services | L + 8.75% (1.00% Floor) | 09/30/2022 | 25,000 | 24,515 | 24,500 | ||||||||||||||
Recipe Acquisition Corp.(++) | Food Products | L + 9.00% (1.00% Floor) | 12/01/2022 | 20,000 | 19,620 | 19,650 | ||||||||||||||
Regulatory DataCorp, Inc.(++) | Diversified Financial Services | L + 9.00% (1.00% Floor) | 09/21/2023 | 15,000 | 14,709 | 14,700 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total 2nd Lien/Senior Secured Debt | 126,076 | 126,430 | ||||||||||||||||||
Unsecured Debt – 1.59% | ||||||||||||||||||||
Recipe Acquisition Corp. | Food Products | 13.25% PIK | 12/21/2022 | 3,400 | 3,333 | 3,332 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total Unsecured Debt | 3,333 | 3,332 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
Total Corporate Debt | 196,582 | 196,836 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
Portfolio Company | Industry | Coupon | Shares | Cost | Fair Value | |||||||||||||||
Preferred Stock – 1.19% | ||||||||||||||||||||
Datacor Holdings, Inc.(5) (6) | Chemicals | 1,000,000 | $ | 1,000 | $ | 1,000 | ||||||||||||||
Recipe Acquisition Corp.(5) | Food Products | 11.00% PIK | 1,600 | 1,496 | 1,500 | |||||||||||||||
|
|
|
| |||||||||||||||||
Total Preferred Stock | 2,496 | 2,500 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
Portfolio Company | Industry | Units | Cost | Fair Value | ||||||||||||||||
Warrants – 0.05% | ||||||||||||||||||||
Recipe Acquisition Corp. (5) | Food Products | 44 | $ | 104 | $ | 100 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total Warrants | 104 | 100 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
Yield | Shares | Cost | Fair Value | |||||||||||||||||
Investments in Affiliated Money Market Fund – 66.04%# | ||||||||||||||||||||
Goldman Sachs Financial Square Government Fund | 0.45%(1) | 138,311,004 | $ | 138,311 | $ | 138,311 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total Investments in Affiliated Money Market Fund | 138,311 | 138,311 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
TOTAL INVESTMENTS – 161.26% | $ | 337,493 | $ | 337,747 | ||||||||||||||||
|
|
|
| |||||||||||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS – (61.26%) | $ | (128,306 | ) | |||||||||||||||||
|
| |||||||||||||||||||
MEMBERS’ CAPITAL – 100.00% | $ | 209,441 | ||||||||||||||||||
|
|
Investment # | Industry | Interest | Reference Rate and | Floor | Maturity | Par/Shares |
| Cost |
| Fair |
| Footnotes | |||
1st Lien/Senior Secured Debt - 75.92% |
|
|
|
|
|
|
|
|
|
|
|
| |||
CorePower Yoga LLC | Diversified Consumer Services | 8.00% | L + 7.00% (incl. 5.00% PIK) | 1.00% | 05/14/25 | $ | 15,849 |
| $ | 15,686 |
| $ | 12,956 |
| (1) (2) (3) |
CorePower Yoga LLC | Diversified Consumer Services |
| L + 7.00% (incl. 5.00% PIK) | 1.00% | 05/14/25 |
| 1,070 |
|
| (11 | ) |
| (195 | ) | (1) (2) (3) (4) |
Diligent Corporation | Professional Services | 7.25% | L + 6.25% | 1.00% | 08/04/25 | € | 23,717 |
|
| 27,172 |
|
| 27,205 |
| (1) (2) (3) |
Diligent Corporation | Professional Services | 7.25% | L + 6.25% | 1.00% | 08/04/25 |
| 15,323 |
|
| 15,161 |
|
| 15,438 |
| (1) (2) (3) |
Diligent Corporation | Professional Services |
| L + 6.25% | 1.00% | 08/04/25 |
| 1,900 |
|
| (27 | ) |
| 14 |
| (1) (2) (3) (4) |
Experity, Inc. | Health Care Technology | 6.25% | L + 5.50% | 0.75% | 07/22/27 |
| 33,678 |
|
| 33,524 |
|
| 33,514 |
| (1) (2) (3) |
Experity, Inc. | Health Care Technology |
| L + 5.50% | 0.75% | 07/22/27 |
| 2,972 |
|
| (13 | ) |
| (14 | ) | (1) (2) (3) (4) |
Hollander Sleep & Décor (dba SureFit) | Household Products | 10.75% | L + 9.75% | 1.00% | 07/13/23 |
| 26,145 |
|
| 25,796 |
|
| 25,230 |
| (1) (2) (3) |
iCIMS, Inc. | Software | 7.50% | L + 6.50% | 1.00% | 09/12/24 |
| 45,158 |
|
| 44,699 |
|
| 45,158 |
| (1) (2) (3) |
iCIMS, Inc. | Software | 7.50% | L + 6.50% | 1.00% | 09/12/24 |
| 8,317 |
|
| 8,223 |
|
| 8,317 |
| (1) (3) |
iCIMS, Inc. | Software | 7.50% | L + 6.50% | 1.00% | 09/12/24 |
| 2,822 |
|
| 2,796 |
|
| 2,822 |
| (1) (3) |
Internet Truckstop Group, LLC (dba Truckstop) | Transportation Infrastructure | 6.75% | L + 5.75% | 1.00% | 04/02/25 |
| 33,638 |
|
| 33,069 |
|
| 33,553 |
| (1) (2) (3) |
Internet Truckstop Group, LLC (dba Truckstop) | Transportation Infrastructure |
| L + 5.75% | 1.00% | 04/02/25 |
| 2,800 |
|
| (44 | ) |
| (7 | ) | (1) (2) (3) (4) |
Lithium Technologies, Inc. | Interactive Media & Services | 9.00% | L + 8.00% | 1.00% | 10/03/22 |
| 58,727 |
|
| 58,362 |
|
| 57,846 |
| (1) (2) (3) |
Lithium Technologies, Inc. | Interactive Media & Services | 9.00% | L + 8.00% | 1.00% | 10/03/22 |
| 3,371 |
|
| 1,329 |
|
| 1,298 |
| (1) (2) (3) (4) |
MMIT Holdings, LLC (dba Managed Markets Insight & Technology) | Health Care Technology | 7.25% | L + 6.25% | 1.00% | 09/15/27 |
| 28,185 |
|
| 27,644 |
|
| 27,621 |
| (1) (2) (3) |
MMIT Holdings, LLC (dba Managed Markets Insight & Technology) | Health Care Technology | 7.25% | L + 6.25% | 1.00% | 09/15/27 |
| 2,938 |
|
| 2,880 |
|
| 2,879 |
| (1) (2) (3) |
MMIT Holdings, LLC (dba Managed Markets Insight & Technology) | Health Care Technology | 7.25% | L + 6.25% | 1.00% | 09/15/27 |
| 2,518 |
|
| 267 |
|
| 264 |
| (1) (2) (3) (4) |
Picture Head Midco LLC | Entertainment | 7.75% | L + 6.75% | 1.00% | 08/31/23 |
| 29,031 |
|
| 28,740 |
|
| 28,450 |
| (1) (2) (3) |
Power Stop, LLC | Auto Components | 4.60% | L + 4.50% |
| 10/19/25 |
| 11,155 |
|
| 11,138 |
|
| 11,071 |
| (1) (2) |
SPay, Inc. (dba Stack Sports) | Interactive Media & Services | 10.25% | L + 9.25% (incl. 3.50% PIK) | 1.00% | 06/17/24 |
| 17,487 |
|
| 17,344 |
|
| 16,525 |
| (1) (2) (3) |
SPay, Inc. (dba Stack Sports) | Interactive Media & Services | 10.25% | L + 9.25% (incl. 3.50% PIK) | 1.00% | 06/17/24 |
| 1,261 |
|
| 1,251 |
|
| 1,192 |
| (1) (2) (3) |
SPay, Inc. (dba Stack Sports) | Interactive Media & Services | 10.25% | L + 9.25% (incl. 3.50% PIK) | 1.00% | 06/17/24 |
| 629 |
|
| 626 |
|
| 594 |
| (1) (2) (3) |
Vantage Mobility International, LLC | Health Care Equipment & Supplies | 4.50% | L + 3.50% | 1.00% | 03/21/24 |
| 6,640 |
|
| 1,043 |
|
| 6,208 |
| (3) |
Vantage Mobility International, LLC | Health Care Equipment & Supplies | 4.50% | L + 3.50% | 1.00% | 03/21/24 |
| 853 |
|
| 853 |
|
| 853 |
| (3) |
Viant Medical Holdings, Inc. | Health Care Equipment & Supplies | 7.25% | L + 6.25% | 1.00% | 07/02/25 |
| 19,215 |
|
| 18,996 |
|
| 19,119 |
| (1) (2) |
VRC Companies, LLC (dba Vital Records Control) | Commercial Services & Supplies | 6.25% | L + 5.50% | 0.75% | 06/29/27 |
| 13,228 |
|
| 13,042 |
|
| 13,029 |
| (1) (2) (3) |
VRC Companies, LLC (dba Vital Records Control) | Commercial Services & Supplies | 6.25% | L + 5.50% | 0.75% | 06/29/27 |
| 2,215 |
|
| 844 |
|
| 842 |
| (1) (2) (3) (4) |
VRC Companies, LLC (dba Vital Records Control) | Commercial Services & Supplies |
| L + 5.50% | 0.75% | 06/29/27 |
| 443 |
|
| (6 | ) |
| (7 | ) | (1) (2) (3) (4) |
Wine.com, LLC | Beverages | 8.00% | L + 7.00% | 1.00% | 11/14/24 |
| 9,600 |
|
| 9,496 |
|
| 9,600 |
| (1) (2) (3) |
Wine.com, LLC | Beverages | 8.00% | L + 7.00% | 1.00% | 11/14/24 |
| 2,300 |
|
| 2,263 |
|
| 2,300 |
| (1) (3) |
The accompanying notes are part of these unaudited consolidated financial statements.
1012
Goldman Sachs Private Middle Market Credit LLC
Consolidated Schedule of Investments as of December 31, 20162021 (continued)
(in thousands, except unit and per unit amounts)
Investment # | Industry | Interest | Reference Rate | Floor | Maturity | Par/Shares |
| Cost |
| Fair |
| Footnotes | |||
Xactly Corporation | IT Services | 8.25% | L + 7.25% | 1.00% | 07/31/23 | $ | 40,879 |
| $ | 40,544 |
| $ | 40,879 |
| (1) (2) (3) |
Xactly Corporation | IT Services |
| L + 7.25% | 1.00% | 07/31/23 |
| 2,554 |
|
| (18 | ) |
| — |
| (1) (2) (3) (4) |
Total 1st Lien/Senior Secured Debt |
|
|
|
|
|
|
|
| 442,669 |
|
| 444,554 |
|
| |
1st Lien/Last-Out Unitranche (5) - 22.66% |
|
|
|
|
|
|
|
| |||||||
Doxim, Inc. | Diversified Financial Services | 7.00% | L + 6.00% | 1.00% | 02/28/24 | $ | 30,617 |
| $ | 30,202 |
| $ | 30,541 |
| (1) (2) (3) |
Doxim, Inc. | Diversified Financial Services | 7.00% | L + 6.00% | 1.00% | 02/28/24 |
| 23,681 |
|
| 23,368 |
|
| 23,621 |
| (1) (2) (3) |
Doxim, Inc. | Diversified Financial Services | 8.00% | L + 7.00% | 1.00% | 02/28/24 |
| 5,918 |
|
| 5,807 |
|
| 5,844 |
| (1) (3) |
Doxim, Inc. | Diversified Financial Services | 9.00% | L + 8.00% | 1.00% | 02/28/24 |
| 4,637 |
|
| 4,543 |
|
| 4,672 |
| (1) (2) (3) |
Doxim, Inc. | Diversified Financial Services | 9.00% | L + 8.00% | 1.00% | 02/28/24 |
| 3,443 |
|
| 3,382 |
|
| 3,469 |
| (1) (3) |
Smarsh, Inc. | Interactive Media & Services | 9.25% | L + 8.25% | 1.00% | 11/20/25 |
| 55,214 |
|
| 54,785 |
|
| 54,800 |
| (1) (2) (3) |
Vantage Mobility International, LLC | Health Care Equipment & Supplies | 7.00% | L + 6.00% PIK | 1.00% | 03/21/24 |
| 17,050 |
|
| 13,149 |
|
| 9,761 |
| (2) (3) |
Total 1st Lien/Last-Out Unitranche |
|
|
|
|
|
|
|
| 135,236 |
|
| 132,708 |
|
| |
2nd Lien/Senior Secured Debt - 33.37% |
|
|
|
|
|
|
|
| |||||||
Chase Industries, Inc. (dba Senneca Holdings) | Building Products |
| 10.00% PIK |
| 11/11/25 | $ | 12,850 |
| $ | 11,531 |
| $ | 1,799 |
| (1) (2) (3) (6) |
Chase Industries, Inc. (dba Senneca Holdings) | Building Products |
| 11.00% PIK |
| 05/11/26 |
| 12,850 |
|
| 12,529 |
|
| — |
| (1) (2) (3) (6) |
Genesis Acquisition Co. (dba ProCare Software) | Diversified Financial Services | 7.63% | L + 7.50% |
| 07/31/25 |
| 10,500 |
|
| 10,346 |
|
| 10,290 |
| (1) (2) (3) |
Genesis Acquisition Co. (dba ProCare Software) | Diversified Financial Services | 8.25% | L + 7.50% | 0.75% | 07/31/25 |
| 8,610 |
|
| 8,443 |
|
| 8,438 |
| (1) (3) |
Genesis Acquisition Co. (dba ProCare Software) | Diversified Financial Services | 7.70% | L + 7.50% |
| 07/31/25 |
| 3,061 |
|
| 2,966 |
|
| 3,000 |
| (1) (2) (3) |
Genesis Acquisition Co. (dba ProCare Software) | Diversified Financial Services | 7.63% | L + 7.50% |
| 07/31/25 |
| 2,700 |
|
| 2,656 |
|
| 2,646 |
| (1) (2) (3) |
Intelligent Medical Objects, Inc. | Health Care Technology | 9.50% | L + 8.50% | 1.00% | 12/22/24 |
| 30,800 |
|
| 30,428 |
|
| 30,492 |
| (1) (2) (3) |
National Spine and Pain Centers, LLC | Health Care Providers & Services | 9.25% | L + 8.25% | 1.00% | 12/02/24 |
| 28,500 |
|
| 28,091 |
|
| 27,788 |
| (1) (2) (3) |
Odyssey Logistics & Technology Corporation | Road & Rail | 9.00% | L + 8.00% | 1.00% | 10/12/25 |
| 28,152 |
|
| 27,788 |
|
| 26,744 |
| (1) (2) |
Recipe Acquisition Corp. (dba Roland Foods) | Food Products | 10.00% | L + 9.00% | 1.00% | 12/22/22 |
| 20,000 |
|
| 19,865 |
|
| 19,600 |
| (2) (3) |
Spectrum Plastics Group, Inc. | Containers & Packaging | 8.00% | L + 7.00% | 1.00% | 01/31/26 |
| 9,975 |
|
| 9,946 |
|
| 9,110 |
| (1) (2) |
YI, LLC (dba Young Innovations) | Health Care Equipment & Supplies | 8.75% | L + 7.75% | 1.00% | 11/07/25 |
| 22,903 |
|
| 22,508 |
|
| 22,502 |
| (1) (2) (3) |
Zep Inc. | Chemicals | 9.25% | L + 8.25% | 1.00% | 08/11/25 |
| 34,878 |
|
| 34,396 |
|
| 33,018 |
| (1) (2) |
Total 2nd Lien/Senior Secured Debt |
|
|
|
|
|
|
|
| 221,493 |
|
| 195,427 |
|
| |
Unsecured Debt - 1.03% |
|
|
|
|
|
|
|
| |||||||
Recipe Acquisition Corp. (dba Roland Foods) | Food Products | 13.25% | 13.25% PIK |
| 12/21/22 | $ | 6,336 |
| $ | 6,321 |
| $ | 6,019 |
| (3) |
Total Unsecured Debt |
|
|
|
|
|
|
|
| 6,321 |
|
| 6,019 |
|
|
The accompanying notes are part of these consolidated financial statements.
13
Goldman Sachs Private Middle Market Credit LLC
Consolidated Schedule of Investments as of December 31, 2021 (continued)
(in thousands, except unit and per unit amounts)
Investment # | Industry | Interest | Initial | Par/Shares |
| Cost |
| Fair |
| Footnotes | |||
Preferred Stock - 2.06% |
|
|
|
|
|
|
|
|
|
| |||
Recipe Acquisition Corp. (dba Roland Foods) | Food Products | 11.00% PIK | 12/22/16 |
| 1,600 |
| $ | 1,496 |
| $ | 2,112 |
| (3) (7) |
Vantage Mobility International, LLC | Health Care Equipment & Supplies |
| 05/23/19 |
| 15,025,203 |
|
| 6,010 |
|
| — |
| (2) (3) (7) |
Wine.com, LLC | Beverages |
| 11/14/18 |
| 337,425 |
|
| 2,900 |
|
| 7,837 |
| (1) (3) (7) |
Wine.com, LLC | Beverages |
| 03/03/21 |
| 78,199 |
|
| 1,933 |
|
| 2,099 |
| (1) (3) (7) |
Total Preferred Stock |
|
|
|
|
|
| 12,339 |
|
| 12,048 |
|
| |
Common Stock - 1.55% |
|
|
|
|
|
|
| ||||||
Collaborative Imaging Holdco, LLC (dba Texas Radiology Associates) - Class B | Health Care Providers & Services |
| 03/30/18 |
| 12,370 |
| $ | 1,668 |
| $ | 2,495 |
| ^^^ (1) (3) |
Collaborative Imaging Holdco, LLC (dba Texas Radiology Associates) - Performance Units | Health Care Providers & Services |
| 03/30/18 |
| 11,675 |
|
| 232 |
|
| 871 |
| ^^^ (1) (3) (7) (9) |
Country Fresh Holding Company Inc. | Food Products |
| 04/29/19 |
| 986 |
|
| 1,232 |
|
| — |
| (1) (2) (3) (7) |
Elah Holdings, Inc. | Capital Markets |
| 05/09/18 |
| 69,386 |
|
| 3,354 |
|
| 3,354 |
| ^ (1) (3) (7) |
National Spine and Pain Centers, LLC | Health Care Providers & Services |
| 06/02/17 |
| 900 |
|
| 900 |
|
| 446 |
| (1) (3) (7) |
Vantage Mobility International, LLC | Health Care Equipment & Supplies |
| 10/15/21 |
| 426,294 |
|
| — |
|
| — |
| (3) (7) |
Vantage Mobility International, LLC | Health Care Equipment & Supplies |
| 05/23/19 |
| 7,026,420 |
|
| — |
|
| — |
| (2) (3) (7) |
Yasso, Inc. | Food Products |
| 03/23/17 |
| 1,360 |
|
| 1,360 |
|
| 1,929 |
| (1) (3) (7) |
Total Common Stock |
|
|
|
|
|
| 8,746 |
|
| 9,095 |
|
| |
Warrants - 0.00% |
|
|
|
|
|
|
| ||||||
KDOR Holdings Inc. (dba Senneca Holdings) | Building Products |
| 05/29/20 |
| 155 |
| $ | 115 |
| $ | — |
| (1) (3) (7) |
KDOR Holdings Inc. (dba Senneca Holdings) | Building Products |
| 05/29/20 |
| 1,487 |
|
| 1,096 |
|
| — |
| (1) (3) (7) |
KDOR Holdings Inc. (dba Senneca Holdings) | Building Products |
| 06/22/20 |
| 31 |
|
| 23 |
|
| — |
| (1) (3) (7) |
Recipe Acquisition Corp. (dba Roland Foods) | Food Products |
| 12/22/16 |
| 44 |
|
| 104 |
|
| 19 |
| (3) (7) |
Total Warrants |
|
|
|
|
|
| 1,338 |
|
| 19 |
|
| |
Investments in Affiliated Money Market Fund - 21.37% |
|
|
|
|
|
|
| ||||||
Goldman Sachs Financial Square Government Fund - Institutional Shares |
|
|
|
| 125,127,041 |
| $ | 125,127 |
| $ | 125,127 |
| ^^^ (10) |
Total Investments in Affiliated Money Market Fund |
|
|
|
|
|
| 125,127 |
|
| 125,127 |
|
| |
Total Investments - 157.96% |
|
| $ | 953,269 |
| $ | 924,997 |
|
|
The accompanying notes are part of these consolidated financial statements.
14
Goldman Sachs Private Middle Market Credit LLC
Consolidated Schedule of Investments as of December 31, 2021 (continued)
(in thousands, except unit and per unit amounts)
(+) | Represents the actual interest rate for partially or fully funded debt in effect as of the reporting date. Variable rate loans bear interest at a rate that may be determined by the larger of the floor or the reference to either LIBOR ("L") or alternate base rate (commonly based on the U.S. Prime Rate ("P"), unless otherwise noted) at the borrower’s option, which reset periodically based on the terms of the credit agreement. L loans are typically indexed to 12 month, 6 month, 3 month, 2 month, 1 month or 1 week L rates. As of December 31, 2021, rates for the 12 month, 6 month, 3 month, 2 month, 1 month and 1 week L are 0.58%, 0.34%, 0.21%, 0.15%, 0.10% and 0.08%, respectively. As of December 31, 2021, P was 3.25%. For investments with multiple reference rates or alternate base rates, the interest rate shown is the weighted average interest rate in effect at December 31, 2021. |
(++) | Par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments. Par amount is denominated in U.S. Dollars ("$") unless otherwise noted, Euro ("€"). |
# | Percentages are based on |
^ | As defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”), the investment is deemed to be an “affiliated person” of the Company because the Company owns, either directly or indirectly, 5% or more of the portfolio company’s outstanding voting securities. See Note 3 “Significant Agreements and Related Party Transactions.” |
^^^ | The |
(1) | Represent co-investments made with the Company’s affiliates in accordance with the terms of the exemptive relief received from the U.S. Securities and Exchange Commission. See Note 3 “Significant Agreements and Related Party Transactions.” |
(2) | All, or a portion of, the assets are pledged as collateral for the revolving credit facility with JPMorgan Chase Bank, National Association (the “JPM Revolving Credit Facility”). See Note 6 “Debt.” |
(3) | The |
|
Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. |
The negative cost, if applicable, is the result of the capitalized discount being greater than the principal amount outstanding on the loan. The negative fair value, if applicable, is the result of the capitalized discount on the loan. See Note 8 “Commitments and Contingencies.” |
(5) | In |
(6) | The investment is on non-accrual status. See Note 2 “Significant Accounting Policies.” |
(7) | Non-income producing security. |
(8) | Securities exempt from registration under the Securities Act of 1933, and may be deemed to be “restricted securities.” As of December 31, 2021, the aggregate fair value of these securities is $21,162 or 3.61% of the Company's net assets. The initial acquisition dates have been included for such securities. |
(9) | The investment is not a qualifying asset under Section 55(a) of the Investment Company |
(10) | The annualized seven-day yield as of December 31, 2021 is 0.03%. |
PIK | Payment-In-Kind |
L – LIBOR
PIK – Payment-In-Kind
ADDITIONAL INFORMATION |
|
|
|
|
| |
Foreign currency forward contracts |
|
|
|
|
| |
Counterparty | Currency Purchased | Currency Sold | Settlement | Unrealized Appreciation |
| |
Bank of America, N.A. | U.S. Dollar 290 | Euro 244 | 01/06/22 | $ | 12 |
|
Bank of America, N.A. | U.S. Dollar 284 | Euro 238 | 04/06/22 |
| 12 |
|
Bank of America, N.A. | U.S. Dollar 287 | Euro 241 | 07/06/22 |
| 11 |
|
Bank of America, N.A. | U.S. Dollar 291 | Euro 244 | 10/06/22 |
| 11 |
|
|
|
|
| $ | 46 |
|
The accompanying notes are part of these unaudited consolidated financial statements.
1115
Goldman Sachs Private Middle Market Credit LLC
Notes to the Consolidated Financial Statements
(in thousands, except unit and per unit amounts)
(Unaudited)
1. ORGANIZATION
Goldman Sachs Private Middle Market Credit LLC (the “Company”, which term refers to either Goldman Sachs Private Middle Market Credit LLC or Goldman Sachs Private Middle Market Credit LLC together with its consolidated subsidiaries, as the context may require), initially established on December 23, 2015 as Private Middle Market Credit LP, a Delaware limited partnership, converted to a Delaware limited liability company on April 4, 2016 and commenced investment operations on July 1, 2016. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “Investment Company Act”). In addition, the Company has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2016.
The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through direct originations of secured debt, including first lien debt, unitranche loans, including last out portions of such loans, and second lien debt, and unsecured debt, including mezzanine debt, as well as through select equity investments.
Goldman Sachs Asset Management, L.P. (“GSAM”), a Delaware limited partnership and an affiliate of Goldman Sachs & Co. LLC (including its predecessors, “GS & Co.”), is the investment adviser (the “Investment Adviser”) of the Company. The term “Goldman Sachs” refers to The Goldman Sachs Group, Inc. (“GS Group Inc.”), together with GS & Co., GSAM and its other subsidiaries.
On May 6, 2016 (the “Initial Closing Date”), the Company began accepting subscription agreements (“Subscription Agreements”) from investors acquiring common units of the Company’s limited liability company interests (“Units”) in the Company’s private offering. Under the terms of the Subscription Agreements, investors are required to make capital contributions up to the undrawn amount of their capital commitment to purchase Units each time the Company delivers a drawdown notice. On November 1, 2016, the Company’s board of directors (the “Board of Directors” or the “Board”) approved an amended and restated limited liability company agreement and approved an extension of the final date on which the Company would accept Subscription Agreements to May 5, 2017.
The investment period commenced on the Initial Closing Date and will continue untilcontinued through May 5, 2019, provided that it may be extended by2019. Following the Boardend of Directors, in its discretion, for one additional six-month period, and, with the approval of a majority-in-interest of the unitholders, for up to one additional year thereafter. In addition, the Board of Directors may terminate the investment period, at any timethe Company has the right to issue drawdowns only (i) to pay, and/or establish reserves for, actual or anticipated Company expenses, liabilities, including the payment or repayment of indebtedness for borrowed money (including through the issuance of notes and other evidence of indebtedness), other indebtedness, financings or extensions of credit, or other obligations, contingent or otherwise, including the Management Fee (as defined below), whether incurred before or after the end of the investment period, (ii) to fulfill investment commitments made or approved by the BDC investment committee of GSAM’s Private Credit Group (the “BDC Investment Committee”) prior to the expiration of the investment period, (iii) to engage in its discretion.hedging transactions or (iv) to make additional investments in existing portfolio companies (including transactions to hedge interest rate or currency risks related to such additional investment).
The term of the Company is until May 5, 2024, subject to the Board of Directors’ right to liquidate the Company at any time and to extend the term of the Company for up to two successive one-year periods. Upon the request of the Board of Directors and the approval of a majority-in-interest of the unitholders,Unitholders, the term of the Company may be further extended.
Credit Alternatives GP LLC (the “Initial Member”), an affiliate of the Investment Adviser, made a capital contribution to the Company of one hundred dollars on June 9, 2016 (inception) and served as the sole initial member of the Company. The Company cancelled the Initial Member’s interest in the Company on July 14, 2016, the first date on which investors (other than the Initial Member) made their initial capital contribution to purchase Units (the “Initial Drawdown Date”).
The Company has formed certain wholly owned subsidiaries, which are structured as Delaware limited liability companies, to hold certain investments, including equity or equity-like investments in portfolio companies and corporate debt of portfolio companies.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s functional currency is U.S. dollars (“USD”) and these consolidated financial statements have been prepared in that currency. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to Regulation S-X. This requires the Company to make certain estimates and assumptions that may affect the amounts reported in the consolidated financial statements and accompanying notes. These consolidated financial statements reflect normal and recurring adjustments that in the opinion of the Company are necessary for the fair statement of the results for the periods presented. Actual results may differ from the estimates and assumptions included in the consolidated financial statements.
12
Certain financial information that is included in annual consolidated financial statements, including certain financial statement disclosures, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes related thereto for the year ended December 31, 2016,2021, included in the Company’s Annual Reportannual report on Form 10-K, which was filed with
16
the U.S. Securities and Exchange Commission (the “SEC”)SEC on February 28, 2017.March 4, 2022. The results for the three and nine months ended September 30, 2017March 31, 2022 are not necessarily indicative of the results to be expected for the full fiscal year, any other interim period or any future year or period.
Certain prior period information has been reclassified to conform to the current period presentation. The reclassification has no effect on the Company’s consolidated financial position or the consolidated results of operations as previously reported
As an investment company, the Company applies the accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946,Financial Services – Investment Companies (“ASC 946”) issued by the Financial Accounting Standards Board (“FASB”).
Basis of Consolidation
As provided under ASC 946, the Company will not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the financial position and results of operations of its wholly owned subsidiary,subsidiaries, PMMC Blocker I, LLC (formerly known as My-On PMMC Blocker, LLC.LLC), PMMC Blocker II, LLC, PMMC Wine I, LLC and Goldman Sachs Private Middle Market Credit SPV LLC (“SPV”). All significant intercompany transactions and balances have been eliminated in consolidation.
Revenue Recognition
The Company records its investment transactions on a trade date basis.basis, which is the date when the Company assumes the risks for gains and losses related to that instrument. Realized gains and losses are based on the specific identification method.
Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discounts and premiums to par value on investments purchased are accreted and amortized, respectively, into interest income over the life of the respective investment using the effective interest method. Loan origination fees, original issue discount (“OID”) and market discounts or premiums are capitalized and amortized into interest income using the effective interest method or straight-line method, as applicable. Exit fees that are receivable upon repayment of a loan or debt security are amortized into interest income over the life of the respective investment. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income. For the three and nine months ended September 30, 2017,income, for which the Company has earned $0 and $700, respectively, in prepayment premiums and $17 and $568, respectively, in accelerated accretion of upfront loan origination fees and unamortized discounts. For the three months ended September 30, 2016 and for the period from June 9, 2016 (inception) to September 30, 2016, the Company earned no prepayment premiums and no accelerated accretion of upfront loan origination fees and unamortized discounts.following:
|
| For the Three Months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
Prepayment premiums |
| $ | 552 |
|
| $ | — |
|
Accelerated amortization of upfront loan origination fees and unamortized discounts |
| $ | 441 |
|
| $ | 670 |
|
Fees received from portfolio companies (directors’ fees, consulting fees, administrative fees, tax advisory fees and other similar compensation) are paid to the Company, unless, to the extent required by applicable law or exemptive relief, if any, therefrom, the Company only receives its allocable portion of such fees when invested in the same portfolio company as another account managed by Goldman Sachs.the Investment Adviser.
Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies and on the ex-dividend date for publicly traded portfolio companies. Interest and dividend income are presented net of withholding tax, if any.
Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the principal amount or shares (if equity) of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity or upon the investment being called by the issuer. PIK is recorded as interest or dividend income, as applicable. If at any point the Company believes PIK is not expected to be realized, the investment generating PIK will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are generally reversed through interest or dividend income, respectively.
Certain structuring fees, amendment fees, syndication fees and syndicationcommitment fees are recorded as other income when earned. Administrative agent fees received by the Company are recorded as other income when the services are rendered over time.
17
Non-Accrual Investments
Loans or debt securitiesInvestments are placed on non-accrual status when it is probable that principal, interest or interestdividends will not be collected according to contractual terms. Accrued interest or dividends generally isare reversed when a loan or debt securityan investment is placed on non-accrual status. Interest or dividend payments received on non-accrual loans or debt securitiesinvestments may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans and debt securitiesinvestments are restored to accrual status when past due principal and interest or dividends are paid and, in management’s judgment, principal and interest or dividend payments are likely to remain current. The Company may make exceptions to this treatment if a loan or debt securityan investment has sufficient collateral value and is in the process of collection. As of September 30, 2017March 31, 2022, the Company had certain investments held in one portfolio company on non-accrual status, which represented 1.6% and 0.3% of the total investments (excluding investments in money market funds, if any) at amortized cost and at fair value, respectively. As of December 31, 2016,2021, the Company did not have anyhad certain investments held in one portfolio company on non-accrual status.
Investments
13
Investments
The Company carries its investments in accordance with ASC Topic 820,Fair Value Measurements and Disclosures (“ASC 820”), issued by the FASB, which defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations or alternative price sources. In the absence of quoted market prices, broker or dealer quotations or alternative price sources, investments are measured at fair value as determined by the Board of Directors within the meaning of the Investment Company Act.
Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. See Note 5 “Fair Value Measurement.”
The Company generally invests in illiquid securities, including debt and equity investments, of middle-market companies. The Board of Directors has delegated to the Investment Adviser day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Company’s portfolio investments. Under valuation procedures adopted by the Board of Directors, market quotations are generally used to assess the value of the investments for which market quotations are readily available. The Investment Adviser obtains these market quotations from independent pricing services or at the bid prices obtained from at least two brokers or dealers, if available; otherwise from a principal market maker or a primary market dealer. To assess the continuing appropriateness of pricing sources and methodologies, the Investment Adviser regularly performs price verification procedures and issues challenges as necessary to independent pricing services or brokers, and any differences are reviewed in accordance with the valuation procedures. If the Board of Directors or Investment Adviser has a bona fide reason to believe any such market quotation does not reflect the fair value of an investment, it may independently value such investment in accordance with valuation procedures for investments for which market quotations are not readily available.
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With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, the valuation procedures adopted by the Board of Directors contemplate a multi-step valuation process each quarter, as described below:
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Money Market Funds
Investments in money market funds are valued at net asset value (“NAV”) per share. See Note 3 “Significant Agreements and Related Party Transactions.”
Cash
Cash consists of deposits held at a custodian bank. As of September 30, 2017March 31, 2022 and December 31, 2016,2021, the Company held $37,553an aggregate cash balance of $17,498 and $3,863, respectively,$15,130. Foreign currency of $2,405 and $2,430 (acquisition cost of $2,504 and $2,568) is included in cash.cash as of March 31, 2022 and December 31, 2021.
Foreign Currency Translation
Amounts denominated in foreign currencies are translated into U.S. dollarsUSD on the following basis: (i) investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollarsUSD based upon currency exchange rates effective on the datelast business day of valuation;the period; and (ii) purchases and sales of investments, borrowings and repayments of such borrowings, income, and expense itemsexpenses denominated in foreign currencies are translated into U.S. dollarsUSD based upon currency exchange rates prevailing on the transaction dates.
19
The Company does not isolate thatthe portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are included within the net realized and unrealized gains or losses on investment transactions.investments. Fluctuations arising from the translation of non-investment assets and liabilities are included with the net change in unrealized gains (losses) on foreign currency translations on the Consolidated Statements of Operations.
Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.
Derivatives
The Company may enter into foreign currency forward contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations in the value of foreign currencies. In a foreign currency forward contract, the Company agrees to receive or deliver a fixed quantity of one currency for another, at a pre-determined price at a future date. Forward foreign currency contracts are marked-to-market at the applicable forward rate. Unrealized appreciation (depreciation) on foreign currency forward contracts are recorded on the Consolidated Statements of Financial Condition by counterparty on a net basis, not taking into account collateral posted which is recorded separately, if applicable. Notional amounts of foreign currency forward contract assets and liabilities are presented separately on the Consolidated Schedules of Investments. Purchases and settlements of foreign currency forward contracts having the same settlement date and counterparty are generally settled net and any realized gains or losses are recognized on the settlement date. The Company does not utilize hedge accounting and as such, the Company recognizes its derivatives at fair value with changes in the net unrealized appreciation (depreciation) on foreign currency forward contracts recorded on the Consolidated Statements of Operations.
Income Taxes
The Company recognizes tax positions in its consolidated financial statements only when it is more likely than not that the position will be sustained upon examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized upon settlement. The Company reports any interest expense related to income tax matters in income tax expense, and any income tax penalties under expenses inon the Consolidated Statements of Operations.
The Company’s tax positions have been reviewed based on applicable statutes of limitation for tax assessments, which may vary by jurisdiction, and based on such review, the Company has concluded that no additional provision for income tax is required in the consolidated financial statements. The Company is subject to potential examination by certain taxing authorities in various jurisdictions. The Company’s tax positions are subject to ongoing interpretation of laws and regulations by taxing authorities.
The Company has elected to be treated as a RIC commencing with its taxable year ended December 31, 2016. So long as the Company maintains its status as a RIC, it will generally not be subjectrequired to pay corporate-level U.S. federal income tax on any ordinary income or capital gains that it distributes at least annually to its stockholdersUnitholders as dividends. As a result, any U.S. federal income tax liability related to income earned and distributed by the Company represents obligations of the Company’s stockholdersUnitholders and will not be reflected inon the consolidated financial statements of the Company.
To qualifymaintain its tax treatment as a RIC, the Company must meet specified source-of-income and asset diversification requirements and timely distribute to its unitholdersUnitholders for each taxable year at least 90% of its investment company taxable income (generally, its net ordinary income plus the excess of its realized net short-term capital gains over realized net long-term capital losses, determined without regard to the dividends paid deduction). In order for the Company not to be subject to U.S. federal excise taxes, it must distribute annually an amount at least equal to the sum of (i) 98% of its net ordinary income (taking into account certain deferrals and elections) for the calendar year, (ii) 98.2% of its capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (iii) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. The Company, at its discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% nondeductible U.S. federal excise tax on this income. If the Company chooses to do so, this generally would increase expenses and reduce the amount available to be distributed to unitholders.Unitholders. The Company will accrue excise tax on estimated undistributed taxable income as required.
DistributionsCertain of the Company’s consolidated subsidiaries are subject to U.S. federal and state corporate level income taxes. Income tax expense, if any, is included under the income category for which it applies in the Consolidated Statements of Operations.
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Distributions
Distributions from net investment income and net realized capital gains are determined in accordance with U.S. federal income tax regulations, which may differ from those amounts determined in accordance with GAAP. The Company may pay distributions in excess of its taxable net investment income. This excess would be a tax-free return of capital in the period and reduce the unitholder’sUnitholder’s tax basis in its Units. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent they are charged or credited to common Units accumulated undistributed net investment income or accumulated net realized gain (loss),distributable earnings, as appropriate, in the period that the differences arise. Temporary and permanent differences are primarily attributable to differences in the tax treatment of certain loans and the tax characterization of income and non-deductible expenses. These differences are generally determined in conjunction with the preparation of the Company’s annual RIC tax return. Distributions to common unitholdersUnitholders are recorded on the ex-dividendrecord date. The amount to be paid out as a distribution is determined by the Board of Directors each quarter and is generally based upon the earnings estimated by the Investment Adviser. The Company may pay distributions to its unitholdersUnitholders in a year in excess of its net ordinary income and capital gains for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes. The Company intends to timely distribute to its unitholdersUnitholders substantially all of its annual taxable income for each year, except that the Company may retain certain net capital gains for reinvestment and depending upon the level of the Company’s taxable income earned in a year, the Company may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax. As described in Note 1 – “Organization,” the Company’s investment period ended on May 5, 2019. The Company has, and currently intends to continue to, make distributions of the net proceeds attributable to the repayment or disposition of investments (together with any interest, dividends and other net cash flow in respect of such investments) until the Company’s term ends and the Company is dissolved. The specific tax characteristics of the Company’s distributions will be reported to unitholdersUnitholders after the end of the calendar year. All distributions will be subject to available funds, and no assurance can be given that the Company will be able to declare such distributions in future periods.
15
Deferred Financing Costs
Deferred financing costs consist of fees and expenses paid in connection with the closing of, and amendments to, the Company’s revolving credit facility with JPMorgan Chase Bank, National Association (the “Revolving“JPM Revolving Credit Facility”). These costs are amortized using the straight-line method over the respective term of the JPM Revolving Credit Facility. Deferred financing costs related to the JPM Revolving Credit Facility are presented separately as an asset on the Company’s Consolidated Statements of Financial Condition.
Organization Costs3. SIGNIFICANT AGREEMENTS AND RELATED PARTY TRANSACTIONS
Organization costs include costs relating to the formation and organization of the Company. These costs are expensed as incurred. Upon the Initial Drawdown Date, unitholders bore such costs. Unitholders that made capital commitments after the Initial Drawdown Date bore a pro rata portion of such costs at the time of their first investment in the Company.
Offering Costs
Offering costs consist primarily of fees and expenses incurred in connection with the continuous offering of Units, including legal, printing and other costs, as well as costs associated with the preparation and filing of the Company’s registration statement on Form 10. Offering costs were recognized as a deferred charge and were amortized on a straight line basis over 12 months beginning on the date of commencement of investment operations.
Investment Advisory Agreement
The Company entered into an investment advisory agreement effective as of April 11, 2016 (the “Investment Advisory Agreement”) with the Investment Adviser, pursuant to which the Investment Adviser manages the Company’s investment program and related activities.
Management Fee
The Company pays the Investment Adviser a management fee (the “Management Fee”), payable quarterly in arrears, equal to 0.375% (i.e., an annual rate of 1.50%), of the average NAV of the Company (including un-invested cash and cash equivalents) at the end of the then-current quarter and the prior calendar quarter (and, in the case of the Company’s first quarter, the NAV as of such quarter-end). The Management Fee for any partial quarter will be appropriately prorated.
For the three and nine months ended September 30, 2017, Management Fees amounted to $1,351 and $3,129, respectively. As of September 30, 2017, $1,351 remained payable. For the three months ended September 30, 2016March 31, 2022 and for the period from June 9, 2016 (inception) to September 30, 2016,2021, Management Fees amounted to $611$2,015 and $611, respectively.$3,068. As of March 31, 2022, $2,015 remained payable.
Incentive Fee
Pursuant to the Investment Advisory Agreement, the Company pays to the Investment Adviser an Incentive Fee (the “Incentive Fee”) as follows:
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The Incentive Fee is calculated on a cumulative basis and the amount of the Incentive Fee payable prior to a proposed distribution will be determined and, if applicable, paid in accordance with the foregoing formula each time amounts are to be distributed to the unitholders.Unitholders. The Incentive Fee is a fee owed by the Company to the Investment Adviser and is not paid out of distributions made to unitholders.Unitholders.
In no event will an amount be paid with respect to the Incentive Fee to the extent it would cause the aggregate amount of the Company’s capital gains paid in respect of the Incentive Fee to exceed 20% of the Company’s realized capital gains computed net of all realized capital losses and unrealized capital depreciation, in each case determined on a cumulative basis from inception of the Company through the date of the proposed payment (the “Incentive Fee Cap”).
“Contributed Capital” is the aggregate amount of capital contributions that have been made by all unitholdersUnitholders in respect of their Units to the Company. All distributions (or deemed distributions), including investment income (i.e. proceeds received in respect of interest payments, dividends and fees) and proceeds attributable to the repayment or disposition of any Investment, to unitholdersUnitholders will be considered a return of Contributed Capital. Unreturned Contributed Capital equals aggregate Contributed Capital minus cumulative distributions, but is never less than zero.
The term “proceeds intended for distribution and Incentive Fee payments” includes proceeds from the full or partial realization of the Company’s Investments and income from investing activities and may include return of capital, ordinary income and capital gains.
If, at the termination of the Company, the Investment Adviser has received aggregate payments of Incentive Fees in excess of the amount the Investment Adviser would have received had the Incentive Fees been determined upon such termination, then the Investment Adviser will reimburse the Company for the difference between the amount of Incentive Fees actually received and the amount determined at termination (the “Investment Adviser Reimbursement Obligation”). However, the Investment Adviser will not be required to reimburse the Company an amount greater than the aggregate Incentive Fees paid to the Investment Adviser, reduced by the excess (if any) of (a) the aggregate federal, state and local income tax liability the Investment Adviser incurred in connection with the payment of such Incentive Fees (assuming the highest marginal applicable federal and New York city and state income tax rates applied to such payments), over (b) an amount equal to the U.S. federal and state tax benefits available to the Investment Adviser by virtue of the payment made by the Investment Adviser pursuant to its Investment Adviser Reimbursement Obligation (assuming that, to the extent such payments are deductible by the Investment Adviser, the benefit of such deductions will be computed using the then highest marginal applicable federal and New York city and state income tax rates).
If the Investment Advisory Agreement is terminated prior to the termination of the Company (other than the Investment Adviser voluntarily terminating the agreement), the Company will pay to the Investment Adviser a final Incentive Fee payment (the “Final Incentive Fee Payment”). The Final Incentive Fee Payment will be calculated as of the date the Investment Advisory Agreement is terminated and will equal the amount of Incentive Fee that would be payable to the Investment Adviser if (a) all Investments were liquidated for their current value (but without taking into account any unrealized appreciation of any Investment), and any unamortized deferred Investment-related fees would be deemed accelerated, (b) the proceeds from such liquidation were used to pay all of the Company’s outstanding liabilities, and (c) the remainder was distributed to unitholdersUnitholders and paid as Incentive Fee in accordance with the Incentive Fee waterfall described above for determining the amount of the Incentive Fee, subject to the Incentive Fee Cap. The Company will make the Final Incentive Fee Payment in cash on or immediately following the date the Investment Advisory Agreement is so terminated. The Investment Adviser Reimbursement Obligation will be determined as of the date of the termination of the Investment Advisory Agreement for purposes of the Final Incentive Fee Payment.
For the three and nine months ended September 30, 2017,March 31, 2022 and 2021, the Company accrued unvested Incentive Fees of $1,541$1,206 and $3,736, respectively.$4,398. As of September 30, 2017, $3,736 remained payable. ForMarch 31, 2022, $52,693 was payable in accordance with the three months ended September 30, 2016 and forterms of the period from June 9, 2016 (inception) to September 30, 2016, the Company did not accrue Incentive Fees.Investment Advisory Agreement.
Expense Limitation
Pursuant to the Investment Advisory Agreement, Company expenses borne by the Company in the ordinary course on an annual basis (excluding Management Fee, Incentive Fee, organizational and start-up expenses and leverage-related expenses) will not exceed an amount equal to 0.5% of the aggregate amount of commitments to the Company by holders of its common Units; provided, however, that expenses incurred outside of the ordinary course, including litigation and similar expenses, are not subject to such cap. To date,For the three months ended March 31, 2022 and 2021, there have been no reimbursements from the Investment Adviser pursuant to this provision.
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Administration and Custodian Fees
The Company has entered into an administration agreement with State Street Bank and Trust Company (the “Administrator”) under which the Administrator provides various accounting and administrative services to the Company. The Company pays the Administrator fees for its services as it determines are commercially reasonable in its sole discretion. The Company also reimburses the Administrator for all reasonable expenses. To the extent that the Administrator outsources any of its functions, the Administrator pays any compensation associated with such functions. The Administrator also serves as the Company’s custodian (the “Custodian”).
For the three and nine months ended September 30, 2017,March 31, 2022 and 2021, the Company incurred expenses for services provided by the Administrator and the Custodian of $114$174 and $288, respectively.$269. As of September 30, 2017, $5March 31, 2022, $174 remained payable. For the three months ended September 30, 2016 and for the period from June 9, 2016 (inception) to September 30, 2016, the Company incurred expenses for services provided by the Administrator and the Custodian of $69 and $69, respectively.
Transfer Agent Fees
State Street Bank and Trust Company serves as the Company’s transfer agent (“Transfer Agent”), registrar and disbursing agent. For the three and nine months ended September 30, 2017,March 31, 2022 and 2021, the Company incurred expenses for services provided by the Transfer Agent of $36$19 and $84, respectively.$28. As of September 30, 2017, $14March 31, 2022, $24 remained payable. For
Affiliates
The table below presents the three months ended September 30, 2016 and for the period from June 9, 2016 (inception) to September 30, 2016, the Company incurred expenses for services provided by the Transfer Agent of $14 and $14, respectively.
Affiliates
The Company’s investments in affiliates for the nine months ended September 30, 2017 were as follows.affiliated investments:
Fair Value as of December 31, | Gross Additions(2) | Gross Reductions(3) | Net Realized Gains/ (Losses) | Change in Unrealized Gains/(Losses) | Fair Value as of 2017 | Dividend, Interest | Other Income |
| Beginning |
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| Gross |
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| Gross |
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| Net |
|
| Net Change |
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| Ending |
|
| Dividend, |
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For the Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2022 |
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Non-Controlled Affiliates |
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Goldman Sachs Financial Square Government | $ | 138,311 | $ | 197,657 | $ | (335,967 | ) | $ | – | $ | – | $ | 1 | $ | 14 | $ | – | |||||||||||||||||||||||||||||||||||||||||||
Goldman Sachs Financial Square Government Fund |
| $ | 125,127 |
| $ | 184,402 |
| $ | (229,970 | ) |
| $ | — |
| $ | — |
| $ | 79,559 |
| $ | 15 |
| |||||||||||||||||||||||||||||||||||||
Collaborative Imaging, LLC (dba Texas Radiology Associates) |
| 3,366 |
| — |
| — |
| — |
| 36 |
| 3,402 |
| 42 |
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Elah Holdings, Inc. |
| 3,354 |
| — |
| — |
| — |
| (1 | ) |
| 3,353 |
| — |
| ||||||||||||||||||||||||||||||||||||||||||||
Total Non-Controlled Affiliates | $ | 138,311 | $ | 197,657 | $ | (335,967 | ) | $ | – | $ | – | $ | 1 | $ | 14 | $ | – |
| $ | 131,847 |
|
| $ | 184,402 |
|
| $ | (229,970 | ) |
| $ | — |
|
| $ | 35 |
|
| $ | 86,314 |
|
| $ | 57 |
| |||||||||||||||
For the Year Ended December 31, 2021 | For the Year Ended December 31, 2021 |
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Non-Controlled Affiliates |
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Goldman Sachs Financial Square Government Fund |
| $ | 144,658 |
| $ | 1,319,922 |
| $ | (1,339,453 | ) |
| $ | — |
| $ | — |
| $ | 125,127 |
| $ | 36 |
| |||||||||||||||||||||||||||||||||||||
Collaborative Imaging, LLC (dba Texas Radiology Associates) |
| 2,676 |
| — |
| — |
| — |
| 690 |
| 3,366 |
| 188 |
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Elah Holdings, Inc. |
| 3,353 |
| — |
| — |
| — |
| 1 |
| 3,354 |
| — |
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Total Non-Controlled Affiliates |
| $ | 150,687 |
|
| $ | 1,319,922 |
|
| $ | (1,339,453 | ) |
| $ | — |
|
| $ | 691 |
|
| $ | 131,847 |
|
| $ | 224 |
|
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Gross additions may include increases in the cost basis of investments resulting from new portfolio investments, PIK, |
(2) | Gross reductions may include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category. |
The Company’s investments in affiliates for the period from June 9, 2016 (inception) to December 31, 2016 were as follows:
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Fair Value as of June 9, 2016 | Gross Additions(2) | Gross Reductions(3) | Net Realized Gains/ (Losses) | Change in Unrealized Gains/(Losses) | Fair Value as of 2016 | Dividend, Interest, | Other Income | |||||||||||||||||||||||||
Non-Controlled Affiliates | ||||||||||||||||||||||||||||||||
Goldman Sachs Financial Square Government | $ | – | $ | 398,443 | $ | (260,132 | ) | $ | – | $ | – | $ | 138,311 | $ | 25 | $ | – | |||||||||||||||
Total Non-Controlled Affiliates | $ | – | $ | 398,443 | $ | (260,132 | ) | $ | – | $ | – | $ | 138,311 | $ | 25 | $ | – |
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Co-investment Activity
In certain circumstances, negotiated co-investments by the Company and other funds managed by the Investment Adviser may be made only pursuant to an order from the SEC permitting the Company to do so. On January 4, 2017, the SEC granted GSAM, Goldman Sachs BDC, Inc. (“GS BDC”), Goldman Sachs Middle Market Lending Corp. (“GS MMLC”)to the Investment Adviser and the CompanyBDCs advised by the Investment Adviser exemptive relief (“Exemptive Relief”on which we expect to rely to co-invest with other funds managed by the Investment Adviser in a manner consistent with our investment, objectives, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors (the “Relief”). Additionally, if our Investment Adviser forms certain other accounts in the future, we may co-invest on a concurrent basis with such other affiliates, subject to compliance with the Relief, applicable regulations and regulatory guidance, as well as applicable allocation procedures. On March 15, 2022, the SEC published a notice of an application that permitsis intended to supersede the Relief and, if granted, would permit limited additional flexibility for the Company to co-investenter into co-investment transactions with GS BDC, GS MMLCproprietary accounts of Goldman Sachs (the “Application”). As a result of the Relief and certain other funds that maythe Application, if granted, there could be significant overlap in our investment portfolio and the investment portfolios as another client account managed by our Investment Adviser (collectively with the Company, the “Accounts”). GSAM including the GSAMPrivate Credit Alternatives Team, in the future, subject to certain terms and conditions in the Exemptive Relief. The GSAM Credit Alternatives Team is comprised ofcomprises investment professionals dedicated to the Company’s investment strategy and other funds that share a similar investment strategy with the Company, who are responsible for identifying investment opportunities, conducting research and due diligence on prospective investments, negotiating and structuring the Company’s investments and monitoring and servicing the Company’s investments, together with investment professionals who are primarily focused on investment strategies in syndicated, liquid credit. Under the terms of the Exemptiveour Relief and Application, if granted, a “required majority” (as defined in Section 57(o) of the Investment Company Act) of the Company’s independent directors must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to the Company and the Company’s stockholdersUnitholders and do not involve overreaching in respect of the Company or its stockholdersUnitholders on the part of any person concerned, and (2) the transaction is consistent with the interests of the Company’s stockholdersUnitholders and is consistent with the then-current investment objectives and strategies of the Company. As a result of the Exemptive Relief, there could be significant overlap in the Company’s investment portfolio and the investment portfolios of GS BDC, GS MMLC and/or other funds established by the GSAM Credit Alternatives Team that could avail themselves of the Exemptive Relief.
4. INVESTMENTS
As of the dates indicated, theThe Company’s investments (excluding an investmentinvestments in a money market fund managed by an affiliate of Group Inc. of $1 and $138,311, respectively)funds, if any) consisted of the following:
September 30, 2017 | December 31, 2016 | |||||||||||||||
Investment Type | Cost | Fair Value | Cost | Fair Value | ||||||||||||
1st Lien/Senior Secured Debt | $ | 183,693 | $ | 183,555 | $ | 43,629 | $ | 43,554 | ||||||||
1st Lien/Last-Out Unitranche | 112,460 | 112,714 | 23,544 | 23,520 | ||||||||||||
2nd Lien/Senior Secured Debt | 357,090 | 357,862 | 126,076 | 126,430 | ||||||||||||
Unsecured Debt | 3,333 | 3,340 | 3,333 | 3,332 | ||||||||||||
Preferred Stock | 2,496 | 2,670 | 2,496 | 2,500 | ||||||||||||
Common Stock | 4,250 | 4,123 | – | – | ||||||||||||
Warrants | 104 | 106 | 104 | 100 | ||||||||||||
Total Investments | $ | 663,426 | $ | 664,370 | $ | 199,182 | $ | 199,436 |
As of the dates indicated, the
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| March 31, 2022 |
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| December 31, 2021 |
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Investment Type |
| Cost |
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| Fair Value |
|
| Cost |
|
| Fair Value |
| ||||
1st Lien/Senior Secured Debt |
| $ | 398,420 |
|
| $ | 399,319 |
|
| $ | 442,669 |
|
| $ | 444,554 |
|
1st Lien/Last-Out Unitranche |
|
| 80,875 |
|
|
| 77,134 |
|
|
| 135,236 |
|
|
| 132,708 |
|
2nd Lien/Senior Secured Debt |
|
| 209,155 |
|
|
| 193,393 |
|
|
| 221,493 |
|
|
| 195,427 |
|
Unsecured Debt |
|
| 6,324 |
|
|
| 6,098 |
|
|
| 6,321 |
|
|
| 6,019 |
|
Preferred Stock |
|
| 12,339 |
|
|
| 11,449 |
|
|
| 12,339 |
|
|
| 12,048 |
|
Common Stock |
|
| 8,746 |
|
|
| 9,316 |
|
|
| 8,746 |
|
|
| 9,095 |
|
Warrants |
|
| 1,338 |
|
|
| 31 |
|
|
| 1,338 |
|
|
| 19 |
|
Total Investments |
| $ | 717,197 |
|
| $ | 696,740 |
|
| $ | 828,142 |
|
| $ | 799,870 |
|
The industry composition of the Company’s portfolioinvestments at fair value and net assets was as follows:
|
| March 31, 2022 |
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| December 31, 2021 |
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Industry |
| Fair Value |
|
| Net Assets |
|
| Fair Value |
|
| Net Assets |
| ||||
Diversified Financial Services |
|
| 13.1 | % |
|
| 18.4 | % |
|
| 11.6 | % |
|
| 15.8 | % |
Interactive Media & Services |
|
| 11.2 |
|
|
| 15.7 |
|
|
| 16.5 |
|
|
| 22.6 |
|
Health Care Technology |
|
| 8.8 |
|
|
| 12.3 |
|
|
| 11.9 |
|
|
| 16.2 |
|
Health Care Equipment & Supplies |
|
| 8.3 |
|
|
| 11.6 |
|
|
| 7.3 |
|
|
| 10.0 |
|
Software |
|
| 8.1 |
|
|
| 11.3 |
|
|
| 7.0 |
|
|
| 9.6 |
|
Professional Services |
|
| 6.0 |
|
|
| 8.4 |
|
|
| 5.3 |
|
|
| 7.3 |
|
IT Services |
|
| 5.9 |
|
|
| 8.2 |
|
|
| 5.1 |
|
|
| 7.0 |
|
Transportation Infrastructure |
|
| 4.8 |
|
|
| 6.7 |
|
|
| 4.2 |
|
|
| 5.7 |
|
Chemicals |
|
| 4.5 |
|
|
| 6.3 |
|
|
| 4.1 |
|
|
| 5.6 |
|
Health Care Providers & Services |
|
| 4.5 |
|
|
| 6.3 |
|
|
| 4.0 |
|
|
| 5.4 |
|
Food Products |
|
| 4.3 |
|
|
| 6.1 |
|
|
| 3.7 |
|
|
| 5.1 |
|
Entertainment |
|
| 4.1 |
|
|
| 5.8 |
|
|
| 3.6 |
|
|
| 4.8 |
|
Road & Rail |
|
| 3.8 |
|
|
| 5.4 |
|
|
| 3.4 |
|
|
| 4.6 |
|
Household Products |
|
| 3.6 |
|
|
| 5.0 |
|
|
| 3.2 |
|
|
| 4.3 |
|
Beverages |
|
| 3.0 |
|
|
| 4.3 |
|
|
| 2.7 |
|
|
| 3.7 |
|
Commercial Services & Supplies |
|
| 2.0 |
|
|
| 2.8 |
|
|
| 1.7 |
|
|
| 2.4 |
|
Diversified Consumer Services |
|
| 1.9 |
|
|
| 2.6 |
|
|
| 1.6 |
|
|
| 2.2 |
|
Containers & Packaging |
|
| 1.3 |
|
|
| 1.8 |
|
|
| 1.1 |
|
|
| 1.5 |
|
Capital Markets |
|
| 0.5 |
|
|
| 0.7 |
|
|
| 0.4 |
|
|
| 0.6 |
|
Building Products |
|
| 0.3 |
|
|
| 0.4 |
|
|
| 0.2 |
|
|
| 0.3 |
|
Auto Components |
|
| — |
|
|
| — |
|
|
| 1.4 |
|
|
| 1.9 |
|
Total |
|
| 100.0 | % |
|
| 140.1 | % |
|
| 100.0 | % |
|
| 136.6 | % |
24
The geographic composition of the Company’s investments at fair value was as follows:
Industry | September 30, 2017 | December 31, 2016 | ||||||
Diversified Financial Services | 15.0 | % | 19.7 | % | ||||
Health Care Providers & Services | 10.7 | – | ||||||
Chemicals | 10.5 | 7.4 | ||||||
Software | 9.5 | 12.5 | ||||||
Food Products | 8.1 | 12.3 | ||||||
Internet Software & Services | 6.2 | – | ||||||
Containers & Packaging | 5.5 | 5.1 | ||||||
Diversified Consumer Services | 5.1 | – | ||||||
IT Services | 4.8 | – | ||||||
Internet Catalog & Retail | 4.8 | – | ||||||
Household Products | 4.5 | – | ||||||
Insurance | 4.1 | 13.8 | ||||||
Health Care Equipment & Supplies | 3.7 | 11.8 | ||||||
Air Freight & Logistics | 3.0 | – | ||||||
Distributors | 2.4 | – | ||||||
Hotels, Restaurants & Leisure | 2.1 | – | ||||||
Construction & Engineering | – | 9.8 | ||||||
Health Care Technology | – | 7.6 | ||||||
Total | 100.0 | % | 100.0 | % |
Geographic |
| March 31, 2022 |
|
| December 31, 2021 |
| ||
United States |
|
| 98.0 | % |
|
| 98.3 | % |
Canada |
|
| 2.0 |
|
|
| 1.7 |
|
Total |
|
| 100.0 | % |
|
| 100.0 | % |
195. FAIR VALUE MEASUREMENT
As of the dates indicated, the geographic composition of the Company’s portfolio at fair value was as follows:
Geographic | September 30, 2017 | December 31, 2016 | ||||||
United States | 100.0 | % | 100.0 | % | ||||
Total | 100.0 | % | 100.0 | % |
The fair value of a financial instrument is the amount that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price).
The fair value hierarchy under ASC 820 prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these securities. The three levels of the fair value hierarchy are as follows:
Basis of Fair Value Measurement
Level 1 – Inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. The types of financial instruments included in Level 1 include unrestricted securities, including equities and derivatives, listed in active markets.
Level 2 – Inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities and certain over-the-counter derivatives where the fair value is based on observable inputs.
Level 3 – Inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include investments in privately held entities and certain over-the-counter derivatives where the fair value is based on unobservable inputs.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Note 2 “Significant Accounting Policies” should be read in conjunction with the information outlined below.
The table below presents the valuation techniques and the nature of significant inputs generally used in determining the fair value of Level 2 and Level 3 Instruments.
25
Level 2 Instruments | Valuation Techniques and Significant Inputs | |
Equity and Fixed Income | The types of instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency include commercial paper, most government agency obligations, most corporate debt securities, certain mortgage-backed securities, certain bank loans, less liquid publicly listed equities, certain state and municipal obligations, certain money market instruments and certain loan commitments. Valuations of Level 2 Equity and Fixed Income instruments can be verified to quoted prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. Consideration is given to the nature of the quotations (e.g. indicative or firm) and the relationship of recent market activity to the prices provided from alternative pricing sources. | |
Derivative Contracts | OTC derivatives (both centrally cleared and bilateral) are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources with reasonable levels of price transparency. Where models are used, the selection of a particular model to value an OTC derivative depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence. |
20
The table below presents the valuation techniques and the nature of significant inputs generally used in determining the fair value of Level 3 Instruments.
Level 3 Instruments | Valuation Techniques and Significant Inputs | |
Bank Loans, Corporate Debt, and Other Debt Obligations | Valuations are generally based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, market yields and recovery assumptions. The significant inputs are generally determined based on relative value analyses, which incorporate comparisons both to credit default swaps that reference the same underlying credit risk and to other debt instruments for the same issuer for which observable prices or broker quotes are available. Other valuation methodologies are used as appropriate including market comparables, transactions in similar instruments and recovery/liquidation analysis. | |
Equity | Recent third-party investments or pending transactions are considered to be the best evidence for any change in fair value. When these are not available, the following valuation methodologies are used, as appropriate and available:
Evidence includes recent or pending reorganizations (for example, merger proposals, tender offers and debt restructurings) and significant changes in financial metrics, including:
|
26
The tables below present the ranges of significant unobservable inputs used to value the Company’s Level 3 assets and liabilities as of September 30, 2017March 31, 2022 and December 31, 2016.2021. These ranges represent the significant unobservable inputs that were used in the valuation of each type of instrument, but they do not represent a range of values for any one instrument. For example, the lowest yielddiscount rate in 1st Lien/Senior Secured Debt is appropriate for valuing that specific debt investment, but may not be appropriate for valuing any other debt investments in this asset class. Accordingly, the ranges of inputs presented below do not represent uncertainty in, or possible ranges of, fair value measurements of the Company’s Level 3 assets and liabilities.assets.
Level 3 Instruments |
| Fair Value(1)(2) |
|
| Valuation Techniques(3) |
| Significant Unobservable Inputs |
| Range of Significant Unobservable Inputs(4) |
| Weighted Average(5) | |
As of March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
| |
Bank Loans, Corporate Debt, and Other Debt Obligations | ||||||||||||
1st Lien/Senior Secured Debt | $ |
| 380,537 |
|
| Discounted cash flows |
| Discount Rate |
| 6.3% - 15.8% |
| 10.6% |
1st Lien/Last-Out Unitranche |
|
| 67,307 |
|
| Discounted cash flows |
| Discount Rate |
| 11.6% - 11.7% |
| 11.6% |
|
|
| 9,827 |
|
| Comparable multiples |
| EV/EBITDA(6) |
| — |
| 7.6x |
2nd Lien/Senior Secured Debt |
|
| 124,363 |
|
| Discounted cash flows |
| Discount Rate |
| 11.0% - 14.0% |
| 12.0% |
|
|
| 1,799 |
|
| Comparable multiples |
| EV/EBITDA(6) |
| — |
| 9.1x |
Unsecured Debt |
|
| 6,098 |
|
| Discounted cash flows |
| Discount Rate |
| — |
| 19.1% |
Equity | ||||||||||||
Preferred Stock | $ |
| 2,196 |
|
| Comparable multiples |
| EV/EBITDA(6) |
| — |
| 12.7x |
|
|
| 9,253 |
|
| Comparable multiples |
| EV/Revenue |
| — |
| 1.5x |
Common Stock |
|
| 6,755 |
|
| Discounted cash flows |
| Discount Rate |
| 14.6% - 30.5% |
| 23.8% |
|
|
| 2,009 |
|
| Comparable multiples |
| EV/EBITDA(6) |
| 9.7x - 11.2x |
| 10.9x |
|
|
| 552 |
|
| Comparable multiples |
| EV/Revenue |
| — |
| 2.0x |
Warrants |
|
| 31 |
|
| Comparable multiples |
| EV/EBITDA(6) |
| — |
| 12.7x |
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
| |
Bank Loans, Corporate Debt, and Other Debt Obligations | ||||||||||||
1st Lien/Senior Secured Debt | $ |
| 414,364 |
|
| Discounted cash flows |
| Discount Rate |
| 5.1% - 14.3% |
| 9.3% |
1st Lien/Last-Out Unitranche |
|
| 122,947 |
|
| Discounted cash flows |
| Discount Rate |
| 8.9% - 10.1% |
| 9.5% |
|
|
| 9,761 |
|
| Comparable multiples |
| EV/EBITDA(6) |
| — |
| 7.5x |
2nd Lien/Senior Secured Debt |
|
| 124,756 |
|
| Discounted cash flows |
| Discount Rate |
| 9.7% - 12.5% |
| 10.7% |
|
|
| 1,799 |
|
| Comparable multiples |
| EV/EBITDA(6) |
| — |
| 9.3x |
Unsecured Debt |
|
| 6,019 |
|
| Discounted cash flows |
| Discount Rate |
| — |
| 19.1% |
Equity | ||||||||||||
Preferred Stock | $ |
| 2,112 |
|
| Comparable multiples |
| EV/EBITDA(6) |
| — |
| 13.9x |
|
|
| 9,936 |
|
| Comparable multiples |
| EV/Revenue |
| — |
| 1.5x |
Common Stock |
|
| 6,720 |
|
| Discounted cash flows |
| Discount Rate |
| 14.6% - 31.1% |
| 24.2% |
|
|
| 1,893 |
|
| Comparable multiples |
| EV/EBITDA(6) |
| 10.5x - 12.7x |
| 12.2x |
|
|
| 482 |
|
| Comparable multiples |
| EV/Revenue |
| — |
| 2.2x |
Warrants |
|
| 19 |
|
| Comparable multiples |
| EV/EBITDA(6) |
| — |
| 13.9x |
|
|
| ||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
|
|
(2) | As of December 31, 2021, included within Level 3 assets of $700,808 is an amount of $0 for which the Investment Adviser did not develop the unobservable inputs (examples include single source broker quotations, third party pricing, and prior transactions). The income approach was used in the determination of fair value for $668,086 or 98.3% of Level 3 bank loans, corporate debt, and other debt obligations. |
(3) | The fair value of any one instrument may be determined using multiple valuation techniques. For example, market comparable and discounted cash flows may be used together to determine fair value. Therefore, the Level 3 balance encompasses both of these techniques. |
(4) | The range for an asset category consisting of a single investment |
(5) | Weighted average for an asset category consisting of multiple investments is calculated by weighting the significant unobservable input by the relative fair value of the investment. Weighted average for an asset category consisting of a single investment represents the significant unobservable input used in the fair value of the investment. |
(6) | Enterprise value of portfolio company as a multiple of earnings before interest, taxes, depreciation and amortization (“EBITDA”). |
21
|
|
| ||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
|
|
|
|
|
|
As noted above, the income and market approaches were used in the determination of fair value of certain Level 3 assets as of September 30, 2017March 31, 2022 and December 31, 2016.2021. The significant unobservable inputs used in the income approach are the discount rate or market yield used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. An increase in the discount rate or market yield would result in a decrease in the fair value. Included in the consideration and selection of discount rates or market yields is risk of default, rating of the investment, call provisions and comparable company investments. The significant unobservable inputs used in the market approach are based on market comparable transactions and market multiples of publicly traded comparable companies. Increases or decreases in the value of market comparable transactions or market multiples would result in an increase or decrease, respectively, in the fair value.
27
The following is a summary of the Company’s assets categorized within the fair value hierarchy as of September 30, 2017:hierarchy:
| March 31, 2022 |
|
| December 31, 2021 |
| |||||||||||||||||||||||||||||||||||||||||||
Assets | Level 1 | Level 2 | Level 3 | Total |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||||||||||||||
1st Lien/Senior Secured Debt | $ | – | $ | – | $ | 183,555 | $ | 183,555 |
| $ | — |
| $ | 18,782 |
| $ | 380,537 |
| $ | 399,319 |
|
| $ | — |
| $ | 30,190 |
| $ | 414,364 |
| $ | 444,554 |
| ||||||||||||||
1st Lien/Last-Out Unitranche | – | – | 112,714 | 112,714 |
| — |
| — |
| 77,134 |
| 77,134 |
|
|
| — |
| — |
| 132,708 |
| 132,708 |
| |||||||||||||||||||||||||
2nd Lien/Senior Secured Debt | – | 35,254 | 322,608 | 357,862 |
| — |
| 67,231 |
| 126,162 |
| 193,393 |
|
|
| — |
| 68,872 |
| 126,555 |
| 195,427 |
| |||||||||||||||||||||||||
Unsecured Debt | – | – | 3,340 | 3,340 |
| — |
| — |
| 6,098 |
| 6,098 |
|
|
| — |
| — |
| 6,019 |
| 6,019 |
| |||||||||||||||||||||||||
Preferred Stock | – | – | 2,670 | 2,670 |
| — |
| — |
| 11,449 |
| 11,449 |
|
|
| — |
| — |
| 12,048 |
| 12,048 |
| |||||||||||||||||||||||||
Common Stock | – | – | 4,123 | 4,123 |
| — |
| — |
| 9,316 |
| 9,316 |
|
|
| — |
| — |
| 9,095 |
| 9,095 |
| |||||||||||||||||||||||||
Warrants | – | – | 106 | 106 |
| — |
| — |
| 31 |
| 31 |
|
|
| — |
| — |
| 19 |
| 19 |
| |||||||||||||||||||||||||
Affiliated Money Market Fund | 1 | – | – | 1 |
|
| 79,559 |
|
|
| — |
|
|
| — |
|
|
| 79,559 |
|
|
| 125,127 |
|
|
| — |
|
|
| — |
|
|
| 125,127 |
| ||||||||||||
Total assets | $ | 1 | $ | 35,254 | $ | 629,116 | $ | 664,371 |
| $ | 79,559 |
|
| $ | 86,013 |
|
| $ | 610,727 |
|
| $ | 776,299 |
|
| $ | 125,127 |
|
| $ | 99,062 |
|
| $ | 700,808 |
|
| $ | 924,997 |
| ||||||||
Unrealized appreciation (depreciation) on foreign currency forward contracts |
| $ | — |
|
| $ | 58 |
|
| $ | — |
|
| $ | 58 |
|
| $ | — |
|
| $ | 46 |
|
| $ | — |
|
| $ | 46 |
|
The following isbelow table presents a summary of the Company’s assets categorized within thechanges in fair value hierarchy as of December 31, 2016:
Assets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
1st Lien/Senior Secured Debt | $ | – | $ | – | $ | 43,554 | $ | 43,554 | ||||||||
1st Lien/Last-Out Unitranche | – | – | 23,520 | 23,520 | ||||||||||||
2nd Lien/Senior Secured Debt | – | – | 126,430 | 126,430 | ||||||||||||
Unsecured Debt | – | – | 3,332 | 3,332 | ||||||||||||
Preferred Stock | – | – | 2,500 | 2,500 | ||||||||||||
Warrants | – | – | 100 | 100 | ||||||||||||
Affiliated Money Market Fund | 138,311 | – | – | 138,311 | ||||||||||||
Total assets | $ | 138,311 | $ | – | $ | 199,436 | $ | 337,747 |
Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. For the nine months ended September 30, 2017 and for the period from June 9, 2016 (inception) to September 30, 2016, there were no transfers between levels.
22
The following is a reconciliation of Level 3 assets for the nine months ended September 30, 2017:by investment type:
| Beginning |
| Purchases(1) |
| Net |
| Net Change |
| Sales and |
| Net |
| Transfers |
| Transfers |
| Ending |
| Net Change |
| ||||||||||
For the Three Months Ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
1st Lien/Senior Secured Debt | $ | 414,364 |
| $ | 729 |
| $ | (572 | ) | $ | (753 | ) | $ | (33,917 | ) | $ | 686 |
| $ | — |
| $ | — |
| $ | 380,537 |
| $ | (762 | ) |
1st Lien/Last-Out Unitranche |
| 132,708 |
|
| 343 |
|
| — |
|
| (1,214 | ) |
| (55,250 | ) |
| 547 |
|
| — |
|
| — |
|
| 77,134 |
|
| (1,200 | ) |
2nd Lien/Senior Secured Debt |
| 126,555 |
|
| — |
|
| (12,529 | ) |
| 11,995 |
|
| — |
|
| 141 |
|
| — |
|
| — |
|
| 126,162 |
|
| (536 | ) |
Unsecured Debt |
| 6,019 |
|
| — |
|
| — |
|
| 75 |
|
| — |
|
| 4 |
|
| — |
|
| — |
|
| 6,098 |
|
| 75 |
|
Preferred Stock |
| 12,048 |
|
| — |
|
| — |
|
| (599 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| 11,449 |
|
| (599 | ) |
Common Stock |
| 9,095 |
|
| — |
|
| — |
|
| 221 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 9,316 |
|
| 221 |
|
Warrants |
| 19 |
|
| — |
|
| — |
|
| 12 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 31 |
|
| 12 |
|
Total assets | $ | 700,808 |
| $ | 1,072 |
| $ | (13,101 | ) | $ | 9,737 |
| $ | (89,167 | ) | $ | 1,378 |
| $ | — |
| $ | — |
| $ | 610,727 |
| $ | (2,789 | ) |
For the Three Months Ended March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
1st Lien/Senior Secured Debt | $ | 745,875 |
| $ | 7,565 |
| $ | 1 |
| $ | 1,954 |
| $ | (55,589 | ) | $ | 1,400 |
| $ | — |
| $ | — |
| $ | 701,206 |
| $ | 2,442 |
|
1st Lien/Last-Out Unitranche |
| 131,579 |
|
| 6,049 |
|
| — |
|
| 980 |
|
| (8,692 | ) |
| 150 |
|
| — |
|
| — |
|
| 130,066 |
|
| 981 |
|
2nd Lien/Senior Secured Debt |
| 290,324 |
|
| — |
|
| — |
|
| 1,542 |
|
| (2,957 | ) |
| 306 |
|
| — |
|
| (34,629 | ) |
| 254,586 |
|
| 1,539 |
|
Unsecured Debt |
| 5,147 |
|
| — |
|
| — |
|
| (31 | ) |
| — |
|
| 3 |
|
| — |
|
| — |
|
| 5,119 |
|
| (31 | ) |
Preferred Stock |
| 10,397 |
|
| 1,933 |
|
| — |
|
| (625 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| 11,705 |
|
| (625 | ) |
Common Stock |
| 18,049 |
|
| — |
|
| 7,490 |
|
| (6,404 | ) |
| (10,750 | ) |
| — |
|
| — |
|
| — |
|
| 8,385 |
|
| 778 |
|
Warrants |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Total assets | $ | 1,201,371 |
| $ | 15,547 |
| $ | 7,491 |
| $ | (2,584 | ) | $ | (77,988 | ) | $ | 1,859 |
| $ | — |
| $ | (34,629 | ) | $ | 1,111,067 |
| $ | 5,084 |
|
Level 3 | Beginning Balance as of January 1, 2017 | Purchases(1) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation)(2) | Sales and Settlements(1) | Net Amortization of Premium/ Discount | Transfers In | Transfers Out | Ending Balance as of September 30, 2017 | |||||||||||||||||||||||||||
1st Lien/Senior Secured Debt | $ | 43,554 | $ | 180,173 | $ | (11 | ) | $ | (63 | ) | $ | (40,725 | ) | $ | 627 | $ | – | $ | – | $ | 183,555 | |||||||||||||||
1st Lien/Last-Out Unitranche | 23,520 | 92,609 | – | 278 | (3,940 | ) | 247 | – | – | 112,714 | ||||||||||||||||||||||||||
2nd Lien/Senior Secured Debt | 126,430 | 210,618 | – | (23 | ) | (15,000 | ) | 583 | – | – | 322,608 | |||||||||||||||||||||||||
Unsecured Debt | 3,332 | – | – | 7 | – | 1 | – | – | 3,340 | |||||||||||||||||||||||||||
Preferred Stock | 2,500 | – | – | 170 | – | – | – | – | 2,670 | |||||||||||||||||||||||||||
Common Stock | – | 4,250 | – | (127 | ) | – | – | – | – | 4,123 | ||||||||||||||||||||||||||
Warrants | 100 | – | – | 6 | – | – | – | – | 106 | |||||||||||||||||||||||||||
Total assets | $ | 199,436 | $ | 487,650 | $ | (11 | ) | $ | 248 | $ | (59,665 | ) | $ | 1,458 | $ | – | $ | – | $ | 629,116 |
(1) | Purchases may include PIK, |
(2) |
|
The following is a reconciliation of Level 3 assets for the period from June 9, 2016 (inception) to September 30, 2016:
Level 3 | Beginning Balance as of June 9, 2016 (Inception) | Purchases(1) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation)(2) | Sales and Settlements(1) | Net Discount | Transfers In | Transfers Out | Ending Balance as of September 30, 2016 | |||||||||||||||||||||||||||
1st Lien/Senior Secured Debt | $ | – | $ | 33,320 | $ | – | $ | (14 | ) | $ | – | $ | 14 | $ | – | $ | – | $ | 33,320 | |||||||||||||||||
1st Lien/Last-Out Unitranche | – | 23,520 | – | – | – | – | – | – | 23,520 | |||||||||||||||||||||||||||
2nd Lien/Senior Secured Debt | – | 73,500 | – | (10 | ) | – | 10 | – | – | 73,500 | ||||||||||||||||||||||||||
Preferred Stock | – | 1,000 | – | – | – | – | – | – | 1,000 | |||||||||||||||||||||||||||
Total assets | $ | – | $ | 131,340 | $ | – | $ | (24 | ) | $ | – | $ | 24 | $ | – | $ | – | $ | 131,340 |
|
|
Debt Not Carried at Fair Value
The fair value of the Company’s debt, which would have been categorized as Level 3 within the fair value hierarchy as of September 30, 2017March 31, 2022 and December 31, 2016,2021, approximates its carrying value.value because the JPM Revolving Credit Facility has variable interest based on selected short term rates.
28
6. DEBT
In accordance with the Investment Company Act, with certain exceptions, the Company is onlycurrently allowed to borrow amounts such that its asset coverage ratio, as defined in the Investment Company Act, is at least 2 to 1200% after such borrowing.borrowing (or 150% if certain requirements are met). As of September 30, 2017March 31, 2022 and December 31, 2016, the Company’s outstanding borrowings were $289,000 and $130,000, respectively, and2021, the Company’s asset coverage ratio based on the aggregate amount outstanding of senior securities (which includes the JPM Revolving Credit Facility) was 2.39 to 1300% and 2.61 to 1, respectively.290%.
The Company’s outstanding debt was as follows:
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||
|
| Aggregate |
|
| Amount |
|
| Carrying |
|
| Aggregate |
|
| Amount |
|
| Carrying |
| ||||||
JPM Revolving Credit Facility(1) |
| $ | 248,930 |
|
| $ | — |
|
| $ | 247,439 |
|
| $ | 307,930 |
|
| $ | — |
|
| $ | 307,242 |
|
(1) | The Company may borrow amounts in USD or certain other permitted currencies. Debt outstanding denominated in currencies other than USD has been converted to USD using the applicable foreign currency exchange rate as of the applicable reporting date. As of March 31, 2022, the Company had outstanding borrowings denominated in USD of $219,893 and in Euros (EUR) of 24,900. As of December 31, 2021, the Company had outstanding borrowings denominated in USD of $278,893 and in EUR of 24,900. |
The weighted average interest rates of the aggregate borrowings outstanding for the three months ended March 31, 2022 and for the year ended December 31, 2021 were 3.49% and 3.46%. The weighted average debt of the aggregate borrowings outstanding for the three months ended March 31, 2022 and for the year ended December 31, 2021 were $287,953 and $431,179.
JPM Revolving Credit Facility
On November 21, 2017, SPV entered into the JPM Revolving Credit Facility. JPMorgan Chase Bank, National Association (“JPM”) serves as administrative agent, State Street Bank and Trust Company serves as collateral agent, collateral administrator, bank and securities intermediary and the Company serves as portfolio manager under the JPM Revolving Credit Facility. State Street Bank and Trust Company also acts as the Company’s transfer agent, disbursing agent, custodian and administrator as well as SPV’s custodian. The Company entered into aamended the JPM Revolving Credit Facility on July 18, 2016 with Bank of America, N.A. as administrative agent (the “Administrative Agent”), lead arranger, letter of credit issuerAugust 17, 2018, December 10, 2018, February 22, 2019, April 3, 2020, August 26, 2020, November 23, 2020, June 21, 2021 and lender.
23
On March 3, 2017,Borrowings under the Company amended theJPM Revolving Credit Facility bear interest (at SPV’s election) at a per annum rate equal to amongeither (x) the three-month LIBOR (or other things:
temporarily increaselisted offered rate, depending upon the maximum committed principal amountcurrency of the Revolving Credit Facility by $100,000 to $350,000, with such temporary increase expiring on December 29, 2017borrowing) in effect or earlier pursuant(y) a rate per annum equal to the termsgreater of the Revolving Credit Facility; and
increase the interest rate on obligations under the Revolving Credit Facility to either (1) the prevailing London InterBank Offered Rate (“LIBOR”) for one, two, three or six months plus 3.00% per annum (increased from 2.25% per annum) or (2) an alternate base rate (the greater of(i) the prime rate of JPM in effect on such commercial bank,day and (ii) the federal funds rateFederal Funds Effective Rate in effect on such day plus 0.50%,; and, LIBORwith respect to advances denominated in a currency other than USD, the annual rate of interest is the reference rate then in effect for determining interest rates on commercial loans made in the applicable jurisdiction of such currency, in all cases, plus the applicable margin. The applicable margin is 3.25% per annum. SPV initially paid a commitment fee of 1.00%) plus 2.00% per annum (increased(or 0.50% per annum during the first nine months from 1.25% per annum).
The maximum principal amount of the date the JPM Revolving Credit Facility was $350,000 as of September 30, 2017, of which $289,000 was drawn as of September 30, 2017, subject to availability under the “Borrowing Base.” The Borrowing Base is calculated basedentered into) on the unfunded capital commitments of the investors meeting various eligibility requirements (subject to investor concentration limits) multiplied by specified advance rates. The Company has the ability to increase the maximum principalaverage daily unused amount of the financing commitments until the third anniversary of the JPM Revolving Credit Facility.
The JPM Revolving Credit Facility up to $750,000 subject to increasingis a multicurrency facility. As of March 31, 2022, the total commitments of existing lenders and/or obtaining commitments of new lenders and certain other conditions. Theunder the JPM Revolving Credit Facility will mature on July 17, 2018,were $248,930. All amounts outstanding under the JPM Revolving Credit Facility must be repaid by the sixth anniversary of the JPM Revolving Credit Facility, subject to a six month extension of the maturity date with the consent of the Administrative Agent andadministrative agent at such time.
SPV’s obligations to the extending lenders and certain other conditions.
The Company has the ability to elect either LIBOR or the alternative base rate at the time of draw-down, and loans may be converted from one rate to another at any time, subject to certain conditions. The Company pays a 0.25% annualized fee on a quarterly basis on committed but undrawn amounts under the Revolving Credit Facility.
Amounts drawn under theJPM Revolving Credit Facility may be prepaid at any time without premium or penalty, subject to applicable breakage costs. Loans are subject to mandatory prepayment for amounts exceeding the Borrowing Base or the lenders’ aggregate commitment and to the extent required to comply with the Investment Company Act, as applied to BDCs. Transfers of interests in the Company by investors are subject to certain restrictions under the Revolving Credit Facility and may trigger mandatory prepayment obligations.
The Revolving Credit Facility is secured by a perfected first priority security interest in all of SPV’s portfolio of investments and cash. The obligations of SPV under the unfunded capital commitmentsJPM Revolving Credit Facility are non-recourse to the Company, and the Company’s exposure under the JPM Revolving Credit Facility is limited to the value of the Company’s investors (with certain exceptions) andinvestment in SPV.
In connection with the proceeds thereof, including assignment of the right to make capital calls, receive and apply capital contributions, and enforce remedies and claims related thereto, and a pledge of the collateral account into which capital call proceeds are deposited. Additionally, under theJPM Revolving Credit Facility, the lenders can directly require investorsSPV has made certain customary representations and warranties and is required to fund their capital commitments, but lenders cannot seek recourse against a unitholder in excess of such unitholder’s obligation to contribute capital to the Company.
comply with various covenants, reporting requirements and other customary requirements for similar facilities. The JPM Revolving Credit Facility contains customary representations, warranties,events of default for similar financing transactions, including if a change of control of SPV occurs or if the Company is no longer the portfolio manager of SPV. Upon the occurrence and affirmativeduring the continuation of an event of default, JPM may declare the outstanding advances and negative covenants, including without limitation, treatment as a RICall other obligations under the Code and as a BDC under the Investment Company Act and restrictions on certain operations, including without limitation certain distributions. TheJPM Revolving Credit Facility includes customary conditions precedent to draw-down of loansimmediately due and customary events of default. The Company is in compliance with these covenants.payable.
Costs of $2,031$8,212 were incurred in connection with obtaining and amending the JPM Revolving Credit Facility, which have been recorded as deferred financing costs on the Consolidated Statements of Financial Condition and are being amortized over the life of the JPM Revolving Credit Facility using the straight-line method. As of September 30, 2017March 31, 2022 and December 31, 2016,2021, outstanding deferred financing costs were $784$2,210 and $1,351, respectively.$2,506.
29
The below table presents the summary information of the JPM Revolving Credit Facility forFacility:
|
| For the Three Months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
Borrowing interest expense |
| $ | 2,477 |
|
| $ | 4,063 |
|
Facility fees |
|
| 35 |
|
|
| 54 |
|
Amortization of financing costs |
|
| 330 |
|
|
| 327 |
|
Total |
| $ | 2,842 |
|
| $ | 4,444 |
|
Weighted average interest rate |
|
| 3.49 | % |
|
| 3.50 | % |
Average outstanding balance |
| $ | 287,953 |
|
| $ | 470,243 |
|
7. DERIVATIVES
The Company enters into foreign currency forward contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies.
In order to better define its contractual rights and to secure rights that will help the Company mitigate its counterparty risk, the Company may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or a similar agreement with its derivative counterparties. An ISDA Master Agreement is a bilateral agreement between the Company and a counterparty that governs OTC derivatives, including foreign currency forward contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Company and cash collateral received from the counterparty, if any, is included in the Consolidated Statements of Financial Condition as due to/due from broker. The Company minimizes counterparty credit risk by only entering into agreements with counterparties that they believe to be in good standing and by monitoring the financial stability of those counterparties.
For the three and nine months ended September 30, 2017 isMarch 31, 2022 and 2021, the Company’s average USD notional exposure to foreign currency forward contracts was $934 and $1,594.
The Company’s net exposure to foreign currency forward contracts by counterparty that are subject to ISDA Master Agreements or similar agreements presented on the Consolidated Statements of Financial Condition was as follows:
|
| Gross Amount of |
|
| Gross Amount of |
|
| Net Amount of Assets or |
|
| Collateral (Received) |
|
| Net Amounts (2) |
| |||||
March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Bank of America, N.A. |
| $ | 58 |
|
| $ | — |
|
| $ | 58 |
|
| $ | — |
|
| $ | 58 |
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Bank of America, N.A. |
| $ | 46 |
|
| $ | — |
|
| $ | 46 |
|
| $ | — |
|
| $ | 46 |
|
Three months ended September 30, 2017 | Three months ended September 30, 2016 | Nine months ended September 30, 2017 | For the period from June 9, 2016 (inception) to September 30, 2016 | |||||||||||||
Borrowing Interest Expense | $ | 2,608 | $ | 139 | $ | 4,811 | $ | 139 | ||||||||
Facility fees | 70 | 118 | 324 | 118 | ||||||||||||
Amortization of financing costs | 302 | 180 | 847 | 180 | ||||||||||||
Total | $ | 2,980 | $ | 437 | $ | 5,982 | $ | 437 | ||||||||
Weighted average interest rate | 4.30% | 2.96% | 4.10% | 2.96% | ||||||||||||
Average outstanding balance | $ | 240,853 | $ | 22,860 | * | $ | 156,756 | $ | 22,860 | * |
(1) |
|
(2) | Net amount represents the net amount due (to) from counterparty in the event of a default based on |
The effect of transactions in derivative instruments to the Consolidated Statements of Operations was as follows:
|
| For the Three Months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
Net realized gain (loss) on foreign currency forward contracts |
| $ | 14 |
|
| $ | (53 | ) |
Net change in unrealized appreciation (depreciation) on foreign currency forward contracts |
|
| 12 |
|
|
| 114 |
|
Total net realized and unrealized gains (losses) on foreign currency forward contracts |
| $ | 26 |
|
| $ | 61 |
|
24
Capital Commitments
The Company had aggregate capital commitments and undrawn capital commitments from investors as follows asfollows:
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||
|
| Capital |
|
| Unfunded |
|
| % of Capital |
|
| Capital |
|
| Unfunded |
|
| % of Capital |
| ||||||
Common Units |
| $ | 1,097,430 |
|
| $ | 60,359 |
|
|
| 95 | % |
| $ | 1,097,430 |
|
| $ | 60,359 |
|
|
| 95 | % |
30
Table of the dates indicated:Contents
September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||
Capital Commitments | Unfunded Capital Commitments | % of Capital Commitments Funded | Capital Commitments | Unfunded Capital Commitments | % of Capital Commitments Funded | |||||||||||||||||||
Common Units | $ | 1,097,430 | $ | 691,381 | 37 | % | $ | 1,001,880 | $ | 791,485 | 21 | % |
Portfolio Company Commitments
The Company may enter into investment commitments to fund investments.investments through signed commitment letters. In many circumstances, borrower acceptance and final terms are subject to transaction-related contingencies. These are disclosed as commitments upon execution of a final agreement. As of September 30, 2017,March 31, 2022, the Company believed that it had adequate financial resources to satisfy its unfunded commitments. The Company had the following unfunded commitments by investment typestypes:
|
|
| Unfunded Commitment Balances(1) |
| ||||||
|
|
| March 31, 2022 |
|
|
| December 31, 2021 |
| ||
1st Lien/Senior Secured Debt |
|
|
|
|
|
|
|
| ||
CorePower Yoga LLC |
| $ |
| 1,070 |
|
| $ |
| 1,070 |
|
Diligent Corporation |
|
|
| 1,900 |
|
|
|
| 1,900 |
|
Internet Truckstop Group, LLC (dba Truckstop) |
|
|
| 2,800 |
|
|
|
| 2,800 |
|
Lithium Technologies, Inc. |
|
|
| 2,023 |
|
|
|
| 2,023 |
|
MMIT Holdings, LLC (dba Managed Markets Insight & Technology) |
|
|
| 2,518 |
|
|
|
| 2,203 |
|
VRC Companies, LLC (dba Vital Records Control) |
|
|
| 1,702 |
|
|
|
| 1,784 |
|
Xactly Corporation |
|
|
| 2,554 |
|
|
|
| 2,554 |
|
Experity, Inc. |
|
| — |
|
|
|
| 2,972 |
| |
Total |
| $ |
| 14,567 |
|
| $ |
| 17,306 |
|
Contingencies
September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||
Commitment Expiration Date(1) | Unfunded Commitment(2) | Fair Value(3) | Commitment Expiration Date(1) | Unfunded Commitment(2) | Fair Value(3) | |||||||||||||||||||
1st Lien/Senior Secured Debt | ||||||||||||||||||||||||
Clinical Supplies Management Holdings, Inc. | – | $ | – | $ | – | 04/12/2018 | $ | 8,640 | $ | (173 | ) | |||||||||||||
Continuum Managed Services LLC | 06/08/2019 | 2,658 | (73 | ) | – | – | – | |||||||||||||||||
FWR Holding Corporation | 08/21/2019 | 4,410 | (110 | ) | – | – | – | |||||||||||||||||
Clinical Supplies Management Holdings, Inc. | 10/12/2021 | 2,000 | (35 | ) | 10/12/2021 | 2,000 | (40 | ) | ||||||||||||||||
Netvoyage Corporation | 03/24/2022 | 1,044 | (18 | ) | – | – | – | |||||||||||||||||
Continuum Managed Services LLC | 06/08/2022 | 3,280 | (90 | ) | – | – | – | |||||||||||||||||
Xactly Corporation | 07/29/2022 | 2,554 | (51 | ) | – | – | – | |||||||||||||||||
FWR Holding Corporation | 08/21/2023 | 1,279 | (32 | ) | – | – | – | |||||||||||||||||
Total 1st Lien/Senior Secured Debt | $ | 17,225 | $ | (409 | ) | $ | 10,640 | $ | (213 | ) | ||||||||||||||
Total | $ | 17,225 | $ | (409 | ) | $ | 10,640 | $ | (213 | ) |
|
|
|
Contingencies
In the normal course of business, the Company enters into contracts that provide a variety of general indemnifications. Any exposure ofto the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.
9. MEMBERS’ CAPITAL
Capital Drawdowns
The following table summarizes the total Units issued and proceeds received related to capital drawdowns delivered pursuant to the Subscription Agreements for the nine months ended September 30, 2017.
Unit Issue Date | Units Issued | Proceeds Received | ||||||
April 27, 2017 | 203,758 | $ | 20,013 | |||||
April 28, 2017 | 535 | 53 | ||||||
May 26, 2017 | 444,153 | 43,897 | ||||||
June 29, 2017 | 441,837 | 43,897 | ||||||
August 21, 2017 | 557,806 | 54,872 | ||||||
September 28, 2017 | 332,027 | 32,923 | ||||||
Total capital drawdowns | 1,980,116 | $ | 195,655 |
25
The following table summarizes the total Units issued and proceeds received related to capital drawdowns delivered pursuant to the Subscription Agreements from June 9, 2016 (inception) to September 30, 2016.
Unit Issue Date | Units Issued | Proceeds Received | ||||||
July 14, 2016 | 310,360 | $ | 31,036 | |||||
July 15, 2016 | 4,000 | 400 | ||||||
August 23, 2016 | 160,219 | 15,718 | ||||||
September 15, 2016 | 1,206,924 | 117,885 | ||||||
Total capital drawdowns | 1,681,503 | $ | 165,039 |
The Company did not issue a capital drawdown for the three months ended March 31, 2022 and 2021.
Distributions
The following table reflects the distributions declared on the Company’s common UnitsUnits:
Date Declared |
| Record Date |
| Payment Date |
| Amount Per Unit |
|
| |
For the Three Months Ended March 31, 2022 |
|
|
|
|
|
| |||
February 3, 2022 |
| February 3, 2022 |
| February 17, 2022 |
| $ | 8.89 |
| (1) |
The company did not issue a distribution for the ninethree months ended September 30, 2017:March 31, 2021.
There were no distributions for the period from June 9, 2016 (inception) to September 30, 2016.10. EARNINGS PER UNIT
The following information sets forth the computation of basic and diluted earnings per unit for the three and nine months ended September 30, 2017, for the three months ended September 30, 2016 and for the period from June 9, 2016 (inception) to September 30, 2016.unit:
For the three months ended September 30, 2017 | For the three months ended September 30, 2016 | For the nine months ended September 30, 2017 | For the period from September 30, 2016 | |||||||||||||
Numerator for basic and diluted earnings per unit - increase in Members’ Capital resulting from operations | $ | 8,667 | $ | (246 | ) | $ | 19,015 | $ | (584 | ) | ||||||
Denominator for basic and diluted earnings per unit - the weighted average Units outstanding | 3,492,675 | 547,715 | 2,708,267 | 442,016 | ||||||||||||
Basic and diluted earnings (loss) per unit | $ | 2.48 | $ | (0.45 | ) | $ | 7.02 | $ | (1.32 | ) |
|
| For the Three Months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
|
|
|
|
|
|
| ||
Net increase in Members’ Capital from operations |
| $ | 6,831 |
|
| $ | 24,922 |
|
Weighted average Units outstanding |
|
| 10,687,877 |
|
|
| 10,687,877 |
|
Basic and diluted earnings per unit |
| $ | 0.64 |
|
| $ | 2.33 |
|
Diluted earnings per unit equal basic earnings per unit because there were no common unit equivalents outstanding during the period presented.
26
31
Below isTable of Contents
11. FINANCIAL HIGHLIGHTS
The below table presents the schedule of financial highlights of the CompanyCompany:
|
| For the Three Months Ended |
| |||||
|
| March 31, 2022 |
|
| March 31, 2021 |
| ||
Per Unit Data:(1) |
|
|
|
|
|
| ||
NAV, beginning of period |
| $ | 54.79 |
|
| $ | 75.76 |
|
Net investment income |
|
| 1.07 |
|
|
| 1.40 |
|
Net realized and unrealized gains (losses)(2) |
|
| (0.43 | ) |
|
| 0.94 |
|
Income tax provision, realized and unrealized gains |
|
| — |
|
|
| (0.01 | ) |
Net increase in net assets from operations(2) |
|
| 0.64 |
|
|
| 2.33 |
|
Distributions declared: |
|
|
|
|
|
| ||
From return of capital |
|
| (8.48 | ) |
|
| — |
|
From net investment income |
|
| (0.41 | ) |
|
| — |
|
Total distributions declared |
|
| (8.89 | ) |
|
| — |
|
Total increase (decrease) in net assets |
|
| (8.25 | ) |
|
| 2.33 |
|
NAV, end of period |
| $ | 46.54 |
|
| $ | 78.09 |
|
Units outstanding, end of period |
|
| 10,687,877 |
|
|
| 10,687,877 |
|
Weighted average units outstanding |
|
| 10,687,877 |
|
|
| 10,687,877 |
|
Total return based on NAV(3) |
|
| 1.17 | % |
|
| 3.08 | % |
Supplemental Data/Ratio:(4) |
|
|
|
|
|
| ||
Members' Capital, end of period |
| $ | 497,435 |
|
| $ | 834,640 |
|
Ratio of expenses (without incentive fees and interest and other debt expenses) to Members’ Capital |
|
| 1.90 | % |
|
| 1.88 | % |
Ratio of interest and other debt expenses to average Members’ Capital |
|
| 2.13 | % |
|
| 2.19 | % |
Ratio of incentive fees to average Members’ Capital |
|
| 0.22 | % |
|
| 0.53 | % |
Ratio of total expenses to average Members’ Capital |
|
| 4.25 | % |
|
| 4.60 | % |
Ratio of net investment income (loss) to average Members’ Capital |
|
| 9.22 | % |
|
| 9.00 | % |
Portfolio turnover |
|
| — |
| (5) |
| 1 | % |
For the nine months ended September 30, 2017 | For the period from June 9, 2016 (inception) to September 30, 2016 | |||||||
Per Unit Data:(1) | ||||||||
NAV, beginning of period | $ | 97.73 | $ | 100.00 | ||||
Net investment income (loss) | 6.77 | (1.35 | ) | |||||
Net realized and unrealized gains (losses) | (0.15 | )(2) | (0.85 | ) | ||||
|
|
|
|
|
| |||
Net increase (decrease) in net assets resulting from operations | 6.62 | (2.20 | ) | |||||
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| |||
Distributions declared from net investment income(3) | (6.84 | ) | – | |||||
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| |||
Total increase (decrease) in net assets | (0.22 | ) | (2.20 | ) | ||||
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| |||
NAV, end of period | $ | 97.51 | $ | (97.80 | ) | |||
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Units outstanding, end of period | 4,123,094 | 1,681,503 | ||||||
Weighted average units outstanding | 2,708,267 | 442,016 | ||||||
Total return based on NAV(4) | 6.77% | (2.20)% | ||||||
Ratio/Supplemental Data (all amounts in thousands except ratios): | ||||||||
Members’ Capital, end of period | $ | 402,056 | $ | 164,455 | ||||
Ratio of net expenses to average Members’ Capital(5) | 7.12% | 11.28% | ||||||
Ratio of expenses (without incentive fees and interest and other debt expenses) to Members’ | 2.69% | 8.94% | ||||||
Ratio of interest and other debt expenses to average Members’ Capital(5) | 3.02% | 3.24% | ||||||
Ratio of incentive fees to average Members’ Capital(5) | 1.41% | –% | ||||||
Ratio of total expenses to average Members’ Capital(5) | 7.12% | 12.18% | ||||||
Ratio of net investment income (loss) to average Members’ Capital(5) | 9.91% | (2.25)% | ||||||
Average debt outstanding | $ | 156,756 | $ | 22,860 | ||||
Average debt per unit(6) | $ | 57.88 | $ | 51.72 | ||||
Portfolio turnover | 14% | –% |
12. SUBSEQUENT EVENTS
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Subsequent events after the date of the Consolidated Statements of Financial Condition date have been evaluated through the date the unaudited consolidated financial statements were issued. Other than the items discussed below, theThe Company has concluded that there is no impact requiring adjustment or disclosure in the consolidated financial statements.
On October 23, 2017, the Company deliveredThe company will pay a capital drawdown notice$65,000 distribution to its investors relating to the saleUnitholders as of approximately 900,334 common Units for an aggregate offering price of approximately $87,794. The common Units were issued on October 30, 2017.
On October 31, 2017, the Board of Directors declared a distribution equal to an amount up to the Company’s taxable earnings per unit, including net investment income (if positive) for the period October 1, 2017 through December 31, 2017,record date May 11, 2022 payable on or about January 23, 2018 to unitholders of record as of December 29, 2017.
27
32
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and other parts of this report contain forward-looking information that involves risks and uncertainties. References to “we,” “us,” “our,” and the “Company,” mean Goldman Sachs Private Middle Market Credit LLC, unless otherwise specified. The terms “GSAM,” our “Adviser” or our “Investment Adviser” refer to Goldman Sachs Asset Management, L.P., a Delaware limited partnership. The term “Group“GS Group Inc.” refers to The Goldman Sachs Group, Inc. The term “Goldman Sachs” refers to GS Group Inc., together with Goldman Sachs & Co. LLC (including its predecessors, “GS & Co.”), GSAM and its other subsidiaries and affiliates. The discussion and analysis contained in this section refers to our financial condition, results of operations and cash flows. The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. Please see “Cautionary Statement Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with this discussion and analysis. Our actual results could differ materially from those anticipated by such forward-looking information due to factors discussed under “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this report.
OVERVIEW
We are a specialty finance company focused on lending to middle-market companies. We are a closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “Investment Company Act”). In addition, we have elected to be treated, and expect to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2016. From our commencement of investment operations on July 1, 2016 through September 30, 2017,March 31, 2022, we have originated $741.50 million$2.30 billion in aggregate principal amount of debt and equity investments prior to any subsequent exits and repayments. We seek to generate current income and, to a lesser extent, capital appreciation primarily through direct originations of secured debt, including first lien, unitranche, including last out portions of such loans, and second lien debt, and unsecured debt, including mezzanine debt, as well as through select equity investments. “Unitranche”
“Unitranche” loans are first lien loans that may extend deeper in a company’sborrower’s capital structure than traditional first lien debt and may provide for a waterfall of cash flow priority between different lenders in the unitranchesuch loan. In a number of instances, we may find another lender to provide the “first out” portion of sucha unitranche loan andwhile we retain the “last out” portion of such loan, in which case, the “first out” portion of the loan would generally receive priority with respect to the payment of principal, interest and any other amounts due thereunder overas compared to the “last out” portion that we would continue to hold. In exchange for thetaking greater risk of loss, the “last out” portion generally earns a higher interest rate than theour “first out” portion.portion of the loan. We use the term “mezzanine” to refer to debt that ranks senior in right of payment only to a borrower’s equity securities and ranks junior in right of payment to all of such borrower’s other indebtedness. We may make multiple investments in the same portfolio company.
We expect to invest, under normal circumstances, at least 80% of our net assets (plus any borrowings for investment purposes), directly or indirectly in private middle-market credit obligations and related instruments. We define “credit obligations and related instruments” for this purpose as any fixed-income instrument, including loans to, and bonds and preferred stock of, portfolio companies and other instruments that provide exposure to such fixed-income instruments. “Middle market” is used to refer to companies with between $5 million and $200 million of annual earnings before interest expense, income tax expense, depreciation and amortization (“EBITDA”) excluding certain one-time and non-recurring items that are outside the operations of between $5 million and $75 million annually. these companies. While, as a result of fluctuations in the net asset value (“NAV”NAV”) of one asset relative to another asset,other assets, private middle-market credit obligations and related instruments may represent less than 80% of our net assets (plus any borrowings for investment purposes) at any time, we may not invest, under normal circumstances, more than 20% of our net assets (plus any borrowings for investment purposes) in securities and other instruments that are not private middle-market credit obligations and related instruments. To the extent we determine to invest indirectly in private middle-market credit obligations and related instruments, we may invest through certain synthetic instruments, including derivatives that have similar economic characteristics to private middle-market credit obligations which we will value at market value or, if no market value is ascertainable, at fair value for the purpose of complying with the above mentioned policy.obligations. For purposes of determining compliance with our 80% policy, each applicable derivative instrument will be valued based upon its market value. We will notify unitholdersour Unitholders at least 60 days prior to any change to the 80% investment policy described above.
We expect to directly or indirectly invest at least 70% of our total assets in middle-market companies domiciled in the United States. However, we may from time to time invest opportunistically in large U.S. companies, non-U.S. companies, stressed or distressed debt, structured products, private equity or other opportunities, subject to limits imposed by the Investment Company Act.
33
While our investment program is expected to focus primarily on debt investments, our investments may include equity features, such as a direct investment in the equity or convertible securities of a portfolio company or warrants or options to buy a minority interest in a portfolio company. Any warrants we may receive with debt securities will generally require only a nominal cost to exercise, so as a portfolio company appreciates in value, we may achieve additional investment return from these equity investments. We may structure the warrants to provide provisions protecting our rights as a minority-interest holder, as well as puts, or rights to sell such securities back to the portfolio company, upon the occurrence of specified events. In many cases, we may also obtain registration rights in connection with these equity investments, which may include demand and “piggyback” registration rights.
28
For a discussion of the competitive landscape we face, please see “Risk“Item 1A. Risk Factors—Competition—We operate in a highly competitive market for investment opportunities” and “Business—“Item 1. Business—Competitive Advantages”Advantages.” in our annual report on Form 10-K for the year ended December 31, 2016.2021.
Impact of COVID-19 Pandemic
Our investment portfolio continues to be focused on industries and sectors that are generally expected to be more durable than industries and sectors that are more prone to economic cycles. Given the persistence of COVID-19 and the difficulty in predicting the next phase of the pandemic, our portfolio companies continue to face an uncertain operating environment. While the spread of the Omicron variant had waned considerably in many parts of the world by the end of the first quarter of 2022, some countries (most notably China) faced more challenging circumstances in trying to contain a surge in infections. Recovery from the economic effects of COVID-19 has continued to progress, but the possibility exists that our portfolio companies could encounter new or worsening business disruptions that may reduce, over time, the amount of interest and dividend income that we receive and may require us to contribute additional capital to such portfolio companies. We may need to restructure our investments in some portfolio companies, which could result in reduced interest payments from or permanent impairments of our investments, and could result in the restructuring of certain of our investments from income paying investments into non-income paying equity investments. Any such decrease in our net investment income would increase the percentage of our cash flows dedicated to our debt obligations and distribution payments to our Unitholders. As a result, we may be required to reduce the future amount of distributions to our Unitholders. The global economy remains vulnerable to the risk that new variants of COVID-19 could emerge, and we continue to closely monitor our exposures to industries that would be most negatively impacted if the COVID-19 pandemic were to intensify.
For further information about the risks associated with COVID-19, see “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2021.
Impact of Russian Invasion of Ukraine
The Russian invasion of Ukraine has negatively affected the global economy and has resulted in significant disruptions in financial markets and increased macroeconomic uncertainty. In addition, governments around the world have responded to Russia’s invasion by imposing economic sanctions and export controls on certain industry sectors, companies and individuals in or associated with Russia. Russia has imposed its own restrictions against investors and countries outside Russia and has proposed additional measures aimed at non-Russian-owned businesses. Businesses in the U.S. and globally have experienced shortages in materials and increased costs for transportation, energy and raw materials due, in part, to the negative effects of the war on the global economy. The escalation or continuation of the war between Russia and Ukraine or other hostilities presents heightened risks relating to cyber-attacks, the frequency and volume of failures to settle securities transactions, supply chain disruptions, inflation, as well as the potential for increased volatility in commodity, currency and other financial markets. The extent and duration of the war, sanctions and resulting market disruptions, as well as the potential adverse consequences for our portfolio companies are difficult to predict.
KEY COMPONENTS OF OPERATIONS
Investments
We expect that ourOur level of investment activity willcan and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment, the amount of capital we have available to us and the competitive environment for the type of investments we make.
As a BDC, we may not acquire any assets other than “qualifying assets” specified in the Investment Company Act, unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), “eligible portfolio companies” include certain companies that do not have any securities listed on a national securities exchange and public companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million.
Revenues34
Revenues
We generate revenues in the form of interest income on debt investments and, to a lesser extent, capital gains and distributions, if any, on equity securities that we may acquire in portfolio companies. Some of our investments may provide for deferred interest payments or payment-in-kind interest.(“PIK”) income. The principal amount of the debt investments and any accrued but unpaid interest generally becomes due at the maturity date.
We generate revenues primarily through receipt of interest income from the investments we hold. In addition, we may generate revenue in the form of commitment, origination, structuring, syndication, exit fees or diligence fees, fees for providing managerial assistance and consulting fees. Portfolio company fees (directors’ fees, consulting fees, administrative fees, tax advisory fees and other similar compensation) will be paid to us, unless, to the extent required by applicable law or exemptive relief, if any, therefrom, we receive our allocable portion of such fees when invested in the same portfolio company as other client accounts managed by our Investment Adviser (including Goldman Sachs BDC, Inc. (“GS BDC”) and “Goldman Sachs Middle Market Lending Corp. (“GS MMLC”), collectively,(collectively with the Company, the “Accounts”), which other Accounts could receive their allocable portion of such fee. We do not expect to receive material feesfee income as it is not our principal investment strategy. We record contractual prepayment premiums on loans and debt securities as interest income.
Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies and on the ex-dividend date for publicly traded portfolio companies. Interest and dividend income are presented net of withholding tax, if any.
Expenses
Our primary operating expenses include the payment of the management fee (the “Management Fee”) and the incentive fee (the “Incentive Fee”) to the Investment Adviser, legal and professional fees, interest and other debt expenses and other operating and overhead related expenses. The Management Fee and Incentive Fee compensate our Investment Adviser for its work in identifying, evaluating, negotiating, closing and monitoring our investments. Pursuant to an investment advisory agreement with the Investment Adviser (the “Investment Advisory Agreement”), Company expenses borne by us in the ordinary course on an annual basis (excluding Management Fees, Incentive Fees, organizational and start-up expenses and leverage-related expenses) will not exceed an amount equal to 0.5% of the aggregate amount of commitments to us by holders of our common units of the Company’sour limited liability company interests (“Units”); provided, however, that expenses incurred outside of the ordinary course, including litigation and similar expenses, are not subject to such cap. We bear all other costs and expenses of our operations and transactions in accordance with our Investment Advisory Agreement and administration agreement (“Administration(the “Administration Agreement”), including those relating to:
including:
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•
•
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35
•
Our Investment Adviser will not be required to pay expenses of activities which are primarily intended to result in sales of Units.
We expect our general and administrative expenses to be relatively stable or decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines. Costs relating to future offerings of securities would be incremental.
Leverage
Our revolving credit facility (the “RevolvingThe JPM Revolving Credit Facility”)Facility allows us to borrow money and lever our investment portfolio, subject to the limitations of the Investment Company Act, with the objective of increasing our yield. This is known as “leverage” and could increase or decrease returns to our Unitholders. The use of leverage involves significant risks. As a BDC, with certain limited exceptions, we are only permitted to borrow amounts such that our asset coverage ratio, as defined in the Investment Company Act, equals at least 2 to 1200% after such borrowing.borrowing (or 150% if certain requirements are met). As of March 31, 2022 and December 31, 2021, our asset coverage ratio based on the aggregate amount outstanding of our senior securities (which includes the JPM Revolving Credit Facility) was 300% and 290%. The Small Business Credit Availability Act modified the applicable provisions of the Investment Company Act to reduce the required asset coverage ratio applicable to BDCs to 150%, subject to certain approval and disclosure requirements and, in the case of BDCs without common equity listed on a national securities exchange, such as the Company, an offer to repurchase shares held by the BDC’s stockholders as of the date the requisite approval is obtained. As a result, BDCs are able to increase their leverage capacity if shareholders approve a proposal to do so. If a BDC receives shareholder approval, it would be allowed to increase its leverage capacity on the first day after such approval. Alternatively, the legislation allows the majority of the directors who are not “interested persons,” as defined in the Investment Company Act, of the BDC to approve an increase in its leverage capacity, and such approval would become effective after one year. Certain trading practices and investments, such as reverse repurchase agreements, may be considered borrowings or involve leverage and thus may be subject to Investment Company Act restrictions. In accordance with applicable SEC staff guidance and interpretations, when we engage in such transactions, instead of maintaining an asset coverage ratio of at least 2 to 1,200% (or 150% if the above referenced requirements are met), we may segregate or earmark liquid assets, or enter into an offsetting position, in an amount at least equal to our exposure, on a mark-to-market basis, to such transactions (as calculated pursuant to requirements of the SEC). Short-term credits necessary for the settlement of securities transactions and arrangements with respect to securities lending will not be considered borrowings for these purposes. Practices and investments that may involve leverage but are not considered borrowings are not subject to the Investment Company Act’s asset coverage requirement, and we will not otherwise segregate or earmark liquid assets or enter into offsetting positions for such transactions. The amount of leverage that we employ will depend on our Investment Adviser’s and our boardBoard of directors (the “Board of Directors” or the “Board”)Directors’ assessment of market conditions and other factors at the time of any proposed borrowing.
30
PORTFOLIO AND INVESTMENT ACTIVITY
As of September 30, 2017 and December 31, 2016, ourOur portfolio (excluding our investmentinvestments in a money market fund managed by an affiliate of Group Inc. of less than $0.01 million and $138.31 million, respectively)funds, if any) consisted of the following:
As of |
| As of | |||||||||||||||||||||||||||||||||||||||
September 30, 2017 | December 31, 2016 |
| March 31, 2022 |
|
| December 31, 2021 | |||||||||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Percentage of Total Portfolio at Fair Value | Amortized Cost | Fair Value | Percentage of Total Portfolio at Fair Value |
| Amortized |
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| Fair Value |
|
| Amortized |
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| Fair |
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| |||||||||||||||||||||||
($ in millions) | ($ in millions) |
| ($ in millions) | ||||||||||||||||||||||||||||||||||||||
First Lien/Senior Secured Debt | $ | 183.70 | $ | 183.56 | 27.6 | % | $ | 43.63 | $ | 43.55 | 21.8 | % |
| $ | 398.42 |
| $ | 399.32 |
|
| $ | 442.67 |
| $ | 444.55 |
| |||||||||||||||
First Lien/Last-Out Unitranche | 112.46 | 112.71 | 17.0 | 23.54 | 23.52 | 11.8 |
| 80.87 |
| 77.13 |
| 135.24 |
| 132.71 |
| ||||||||||||||||||||||||||
Second Lien/Senior Secured Debt | 357.09 | 357.86 | 53.9 | 126.08 | 126.44 | 63.4 |
| 209.16 |
| 193.39 |
| 221.49 |
| 195.43 |
| ||||||||||||||||||||||||||
Unsecured Debt | 3.33 | 3.34 | 0.5 | 3.33 | 3.33 | 1.7 |
| 6.32 |
| 6.10 |
| 6.32 |
| 6.02 |
| ||||||||||||||||||||||||||
Preferred Stock | 2.50 | 2.67 | 0.4 | 2.50 | 2.50 | 1.3 |
| 12.34 |
| 11.45 |
| 12.34 |
| 12.05 |
| ||||||||||||||||||||||||||
Common Stock | 4.25 | 4.12 | 0.6 | – | – | – |
| 8.75 |
| 9.32 |
| 8.75 |
| 9.10 |
| ||||||||||||||||||||||||||
Warrants | 0.10 | 0.11 | 0.0 | 0.10 | 0.10 | 0.0 |
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| 1.34 |
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| 0.03 |
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| 1.34 |
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| 0.02 |
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Total Investments | $ | 663.43 | $ | 664.37 | 100.0 | % | $ | 199.18 | $ | 199.44 | 100.0 | % |
| $ | 717.20 |
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| $ | 696.74 |
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| $ | 828.15 |
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| $ | 799.88 |
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As
36
Table of September 30, 2017 and December 31, 2016, theContents
The weighted average yield onof our portfolio by asset type (excluding our investmentinvestments in a money market fund managed by an affiliate of Group Inc.)funds, if any), at amortized cost and fair value, was as follows:
As of |
| As of |
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September 30, 2017 | December 31, 2016 |
| March 31, 2022 |
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| December 31, 2021 |
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Amortized Cost | Fair Value | Amortized Cost | Fair Value |
| Amortized |
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| Fair Value |
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| Amortized |
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| Fair Value |
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Weighted Average Yield(1) |
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First Lien/Senior Secured Debt(2) | 10.0% | 10.0% | 10.0% | 10.1% |
| 8.9 | % |
| 9.0 | % |
| 8.5 | % |
| 8.7 | % | ||||||||||||||||
First Lien/Last-Out Unitranche(2)(4) | 10.2% | 10.2% | 10.2% | 10.2% | ||||||||||||||||||||||||||||
First Lien/Last-Out Unitranche(2)(3) |
| 10.8 |
| 12.6 |
| 10.1 |
| 10.7 |
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Second Lien/Senior Secured Debt(2) | 10.1% | 10.1% | 10.2% | 10.2% |
| 9.0 |
| 10.6 |
| 8.5 |
| 10.2 |
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Unsecured Debt(2) | 13.8% | 13.7% | 13.8% | 13.8% |
| 13.5 |
| 19.1 |
| 13.4 |
| 19.2 |
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Preferred Stock | 0.0% | 0.0% | 0.0% | 0.0% |
| — |
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| — |
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| — |
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| — |
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Common Stock | 0.0% | 0.0% | – | – |
| — |
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| — |
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| — |
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| — |
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Warrants | 0.0% | 0.0% | 0.0% | 0.0% |
| — |
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| — |
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| — |
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| — |
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Total Portfolio | 10.0% | 10.0% | 10.1% | 10.1% |
| 8.9 | % |
| 9.7 | % |
| 8.6 | % |
| 9.2 | % |
(1) | The weighted average yield of our portfolio does not represent the total return to our Unitholders. |
(2) | Computed based on (a) the | |
(3) | The calculation includes incremental yield earned on the |
(4) | Computed based on (a) the |
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As of March 31, 2022, the total portfolio weighted average yield measured at amortized cost and fair value was 8.9% and 9.7%, as compared to 8.6% and 9.2%, as of December 31, 2021.
The following table presents certain selected information regarding our investment portfolio (excluding our investmentinvestments in a money market fund managed by an affiliate of Group Inc.) as of September 30, 2017 and December 31, 2016:funds, if any):
As of | As of |
| ||||||||||||||
September 30, 2017 | December 31, 2016 | March 31, |
| December 31, |
| |||||||||||
Number of portfolio companies | 29 | 10 |
| 28 |
| 31 |
| |||||||||
Percentage of performing debt bearing a floating rate(1) | 97.4% | 91.3% |
| 99.1 | % |
| 99.2 | % | ||||||||
Percentage of performing debt bearing a fixed rate(1)(2) | 2.6% | 8.7% |
| 0.9 | % |
| 0.8 | % | ||||||||
Weighted average leverage (net debt/EBITDA)(3) | 5.1x | 5.0x |
| 6.3x |
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| 6.3x |
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Weighted average interest coverage(3) | 2.8x | 2.9x |
| 2.2x |
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| 2.3x |
| ||||||||
Median EBITDA(3)(4) | $ | 35.66 million | $ | 14.95 million | ||||||||||||
Median EBITDA(3) | $ | 61.3 million |
| $ | 61.3 million |
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(1) | Measured on a fair value basis. Excludes investments, if any, placed on non-accrual. |
(2) | Includes income producing preferred stock |
(3) | For a particular portfolio company, For a particular portfolio company, we also calculate the level of contractual interest expense owed by the portfolio company, and compare that amount to EBITDA (“interest coverage ratio”). We believe this calculation method assists in describing the risk of our portfolio investments, as it takes into consideration contractual interest obligations of the portfolio company. Weighted average interest coverage is weighted based on the fair value of our performing debt investments, excluding investments where interest coverage may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue. Median EBITDA is based on our debt investments, excluding investments where net debt to EBITDA may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue. Portfolio company statistics are derived from the most recently available financial statements of each portfolio company as of the |
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37
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Our Investment Adviser monitors our portfolio companies on an ongoing basis. It monitorsbasis, the financial trends of each portfolio company to determine if they areit is meeting theirits respective business plansplan and to assess the appropriate course of action for each company. Our Investment Adviser has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:
(i) assessment of success in adhering to the portfolio company’s business plan and compliance with covenants;
(ii) periodic or regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor to discuss financial position, requirements and accomplishments;
(iii) comparisons to our other portfolio companies in the industry, if any;
(iv) attendance at and participation in board meetings or presentations by portfolio companies; and
(v) review of monthly and quarterly financial statements and financial projections of portfolio companies.
As part of the monitoring process, our Investment Adviser also employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Investment Adviser grades the credit risk of all investments on a scale of 1 to 4.4 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (e.g.(i.e., at the time of origination or acquisition), although it may also take into account in certain circumstances the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. The grading system for our investments is as follows:
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an investment grade of•
Our Investment Adviser grades the investments in our portfolio at least quarterlyeach quarter and it is possible that the grade of a portfolio investment may be reduced or increased over time. For investments gradedwith a grade of 3 or 4, ourthe Investment Adviser enhances its level of scrutiny over the monitoring of such portfolio company. The following table shows the composition of our portfolio (excluding our investmentinvestments in a money market fund managed by an affiliate of Group Inc.)funds, if any) on the 1 to 4 grading scale as of September 30, 2017 and December 31, 2016:scale:
As of | ||||||||||||||||
September 30, 2017 | December 31, 2016 | |||||||||||||||
Investment Performance Rating | Fair Value | Percentage of Total Portfolio at Fair Value | Fair Value | Percentage of Total Portfolio at Fair Value | ||||||||||||
(in millions) | (in millions) | |||||||||||||||
Grade 1 | $ | – | – | % | $ | – | – | % | ||||||||
Grade 2 | 664.37 | 100.0 | 199.44 | 100.0 | ||||||||||||
Grade 3 | – | – | – | – | ||||||||||||
Grade 4 | – | – | – | – | ||||||||||||
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Total Investments | $ | 664.37 | 100.0 | % | $ | 199.44 | 100.0 | % | ||||||||
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| As of |
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| March 31, 2022 |
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| December 31, 2021 |
| ||||||||||
Investment Performance Rating |
| Fair Value |
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| Percentage of |
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| Fair Value |
|
| Percentage of |
| ||||
|
| (in millions) |
|
|
|
|
| (in millions) |
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Grade 1 |
| $ | — |
|
|
| — | % |
| $ | — |
|
|
| — | % |
Grade 2 |
|
| 637.02 |
|
|
| 91.4 |
|
|
| 740.63 |
|
|
| 92.6 |
|
Grade 3 |
|
| 57.92 |
|
|
| 8.3 |
|
|
| 57.45 |
|
|
| 7.2 |
|
Grade 4 |
|
| 1.80 |
|
|
| 0.3 |
|
|
| 1.80 |
|
|
| 0.20 |
|
Total Investments |
| $ | 696.74 |
|
|
| 100.0 | % |
| $ | 799.88 |
|
|
| 100.0 | % |
32
The following table shows the amortized cost of our performing and non-accrual investments as of September 30, 2017 and December 31, 2016:(excluding investments in money market funds, if any):
As of |
| As of |
| |||||||||||||||||||||||||||||
September 30, 2017 | December 31, 2016 |
| March 31, 2022 |
|
| December 31, 2021 |
| |||||||||||||||||||||||||
Amortized Cost | Percentage of Total Portfolio at Amortized Cost | Amortized Cost | Percentage of Total Portfolio at Amortized Cost |
| Amortized |
|
| Percentage of |
|
| Amortized |
|
| Percentage of |
| |||||||||||||||||
(in millions) | (in millions) |
| (in millions) |
|
|
|
|
| (in millions) |
|
|
|
| |||||||||||||||||||
Performing | $ | 663.43 | 100.0 | % | $ | 199.18 | 100.0 | % |
| $ | 705.67 |
| 98.4 | % |
| $ | 804.08 |
| 97.1 | % | ||||||||||||
Non-accrual | – | – | – | – |
|
| 11.53 |
|
|
| 1.6 |
|
|
| 24.07 |
|
|
| 2.9 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total Investments | $ | 663.43 | 100.0 | % | $ | 199.18 | 100.0 | % |
| $ | 717.20 |
|
|
| 100.0 | % |
| $ | 828.15 |
|
|
| 100.0 | % | ||||||||
|
|
|
|
Loans or debt securities
38
Investments are placed on non-accrual status when it is probable that principal, interest or interestdividends will not be collected according to the contractual terms. Accrued interest or dividends generally isare reversed when a loan or debt securityan investment is placed on non-accrual status. Interest or dividend payments received on non-accrual loans or debt securitiesinvestments may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans and debt securitiesinvestments are restored to accrual status when past due principal and interest isor dividends are paid and, in management’s judgment, principal and interest or dividend payments are likely to remain current. We may make exceptions to this treatment if the loan has sufficient collateral value and is in the process of collection.
The following table shows our investment activity for the three months ended September 30, 2017 and 2016 by investment type:type(1):
For the Three Months Ended | ||||||||
September 30, 2017 | September 30, 2016 | |||||||
(in millions) | ||||||||
New investment commitments at cost: | ||||||||
Gross originations | $ | 210.79 | $ | 146.12 | ||||
Less: Syndications(1) | – | – | ||||||
|
|
|
| |||||
Net amount of new investments committed at cost: | $ | 210.79 | $ | 146.12 | ||||
Amount of investments committed at cost(2): | ||||||||
First Lien/Senior Secured Debt | $ | 81.71 | $ | 33.32 | ||||
First Lien/Last-Out Unitranche | 18.54 | 23.52 | ||||||
Second Lien/Senior Secured Debt | 110.54 | 88.28 | ||||||
Unsecured Debt | – | – | ||||||
Preferred Stock | – | 1.00 | ||||||
Common Stock | – | – | ||||||
Warrants | – | – | ||||||
|
|
|
| |||||
Total | $ | 210.79 | $ | 146.12 | ||||
|
|
|
| |||||
Proceeds from investments sold or repaid: | ||||||||
First Lien/Senior Secured Debt | $ | 11.67 | $ | – | ||||
First Lien/Last-Out Unitranche | 0.07 | – | ||||||
Second Lien/Senior Secured Debt | – | – | ||||||
Unsecured Debt | – | – | ||||||
Preferred Stock | – | – | ||||||
Common Stock | – | – | ||||||
Warrants | – | – | ||||||
|
|
|
| |||||
Total | $ | 11.74 | $ | – | ||||
|
|
|
| |||||
Net increase (decrease) in portfolio | $ | 199.05 | $ | 146.12 | ||||
|
|
|
| |||||
Number of new investment commitments in new portfolio companies(3) | 8 | 8 | ||||||
Total new investment commitment amount in new portfolio companies(3) | $ | 209.70 | $ | 146.12 | ||||
Average new investment commitment amount in new portfolio companies(3) | $ | 26.21 | $ | 18.27 | ||||
Number of new investment commitments in existing portfolio companies(3) | 1 | – | ||||||
Total new investment commitment amount in existing portfolio companies(3) | $ | 1.09 | $ | – | ||||
Weighted average remaining term for new investment commitments (in years)(3)(4) | 6.3 | 5.8 | ||||||
Percentage of new debt investment commitments at floating interest rates(3) | 100.0% | 87.5% | ||||||
Percentage of new debt investment commitments at fixed interest rates(3) | –% | 12.5% | ||||||
Weighted average yield on new debt and income producing investment commitments(2) (3) (5) | 9.8% | 10.3% | ||||||
Weighted average yield on new investment commitments(2) (3) (6) | 9.8% | 10.2% | ||||||
Weighted average yield on debt and income producing investments sold or paid down(7) | 10.7% | N/A | ||||||
Weighted average yield on investments sold or paid down(8) | 10.7% | N/A |
|
| For the Three Months Ended |
|
| |||||
|
| March 31, |
|
| March 31, |
|
| ||
|
| ($ in millions) |
|
| |||||
Amount of investments committed at cost: |
|
|
|
|
|
|
| ||
First Lien/Senior Secured Debt |
| $ | — |
|
| $ | 6.56 |
|
|
First Lien/Last-Out Unitranche |
|
| — |
|
|
| 5.83 |
|
|
Preferred Stock |
|
| — |
|
|
| 1.93 |
|
|
Total |
| $ | — |
|
| $ | 14.32 |
|
|
Proceeds from investments sold or repaid: |
|
|
|
|
|
|
| ||
First Lien/Senior Secured Debt |
| $ | 44.78 |
|
| $ | 51.14 |
|
|
First Lien/Last-Out Unitranche |
|
| 55.25 |
|
|
| 8.69 |
|
|
Second Lien/Senior Secured Debt |
|
| — |
|
|
| 2.96 |
|
|
Common Stock |
|
| — |
|
|
| 10.75 |
|
|
Total |
| $ | 100.03 |
|
| $ | 73.54 |
|
|
Net (decrease) in portfolio |
| $ | (100.03 | ) |
| $ | (59.22 | ) |
|
Number of new portfolio companies with new investment commitments |
|
| — |
|
|
| — |
|
|
Total new investment commitment amount in new portfolio companies |
| $ | — |
|
| $ | — |
|
|
Average new investment commitment amount in new portfolio companies |
| $ | — |
|
| $ | — |
|
|
Number of existing portfolio companies with new investment commitments |
|
| — |
|
|
| 3 |
|
|
Total new investment commitment amount in existing portfolio companies |
| $ | — |
|
| $ | 14.33 |
|
|
Weighted average remaining term for new investment commitments (in years)(2) |
|
| — |
|
|
| 3.2 |
|
|
Percentage of new debt investment commitments at cost for floating interest rates |
| N/A |
|
|
| 100.0 | % |
| |
Percentage of new debt investment commitments at cost for fixed interest rates |
| N/A |
|
|
| 0.0 | % |
| |
Weighted average yield on new debt and income producing investment commitments(3) |
| N/A |
|
|
| 8.8 | % |
| |
Weighted average yield on new investment commitments(4) |
| N/A |
|
|
| 7.6 | % |
| |
Weighted average yield on debt and income producing investments sold or repaid(5) |
|
| 7.9 | % |
|
| 7.3 | % |
|
Weighted average yield on investments sold or repaid(6) |
|
| 7.9 | % |
|
| 6.2 | % |
|
(1) |
|
|
33
|
(2) | Calculated as of the end of the relevant period and the maturity date of the individual investments. |
(3) | Computed based on (a) the |
(4) | Computed based on (a) the |
(5) | Computed based on (a) the |
(6) | Computed based on (a) the |
39
RESULTS OF OPERATIONS
Our operating results for the three and nine months ended September 30, 2017, for the three months ended September 30, 2016 and for the period from June 9, 2016 (inception) to September 30, 2016 were as follows:
| For the Three Months Ended |
| ||||||||||||||||||||||
For the Three Months Ended September 30, 2017 | For the Three Months Ended September 30, 2016 | For the Nine Months Ended September 30, 2017 | For the Period from June 9, 2016 (Inception) to September 30, 2016 |
| March 31, |
|
| March 31, |
| |||||||||||||||
($ in millions) |
| ($ in millions) |
| |||||||||||||||||||||
Total investment income | $ | 14.93 | $ | 1.22 | $ | 33.67 | $ | 1.22 |
| $ | 17.98 |
| $ | 27.58 |
| |||||||||
|
|
|
| |||||||||||||||||||||
Total expenses | (6.51 | ) | (1.87 | ) | (15.33 | ) | (2.20 | ) | ||||||||||||||||
Management fee waiver | – | 0.39 | – | 0.39 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Net expenses | (6.51 | ) | (1.48 | ) | (15.33 | ) | (1.81 | ) |
|
| 6.58 |
|
|
| 12.64 |
| ||||||||
|
|
|
| |||||||||||||||||||||
Net investment income (loss) | 8.42 | (0.26 | ) | 18.34 | (0.59 | ) | ||||||||||||||||||
Net investment income |
| 11.40 |
| 14.94 |
| |||||||||||||||||||
Net realized gain (loss) on investments | (0.01 | ) | – | (0.01 | ) | – |
| (13.10 | ) |
| 7.49 |
| ||||||||||||
Net unrealized appreciation (depreciation) on investments | 0.26 | 0.01 | 0.69 | 0.01 |
| 7.82 |
| 0.01 |
| |||||||||||||||
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in Members’ Capital resulting from operations | $ | 8.67 | $ | (0.25 | ) | $ | 19.02 | $ | (0.58 | ) | ||||||||||||||
|
|
|
| |||||||||||||||||||||
Net realized and unrealized gain (losses) on forward contracts, translations and transactions |
| 0.76 |
| 2.55 |
| |||||||||||||||||||
Income tax (provision) benefit, realized and unrealized gain/loss |
|
| (0.05 | ) |
|
| (0.07 | ) | ||||||||||||||||
Net increase in Members’ Capital from operations |
| $ | 6.83 |
|
| $ | 24.92 |
|
Net increase in Members’ Capital resultingmembers’ capital from operations after tax can vary from period to period as a result of various factors, including acquisitions, the level of new investment commitments, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio. As a result, comparisons may not be meaningful.
Investment Income
| For the Three Months Ended |
| ||||||||||||||||||||||
For the Three Months Ended September 30, 2017 | For the Three Months Ended September 30, 2016 | For the Nine Months Ended September 30, 2017 | For the Period from June 9, 2016 (inception) to September 30, 2016 |
| March 31, |
|
| March 31, |
| |||||||||||||||
($ in millions) |
| ($ in millions) |
| |||||||||||||||||||||
Interest | $ | 14.75 | $ | 1.20 | $ | 33.01 | $ | 1.20 |
| $ | 16.75 |
| $ | 25.76 |
| |||||||||
Payment-in-kind income |
| 0.97 |
| 1.33 |
| |||||||||||||||||||
Dividend income | – | 0.01 | 0.01 | 0.01 |
| 0.06 |
| 0.06 |
| |||||||||||||||
Other income | 0.18 | 0.01 | 0.65 | 0.01 |
|
| 0.20 |
|
|
| 0.43 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||
Total investment income | $ | 14.93 | $ | 1.22 | $ | 33.67 | $ | 1.22 |
| $ | 17.98 |
|
| $ | 27.58 |
| ||||||||
|
|
|
|
In the table above:
34
Investment income
Expenses
|
| For the Three Months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
|
| ($ in millions) |
| |||||
Interest and other debt expenses |
| $ | 2.84 |
|
| $ | 4.44 |
|
Management fees |
|
| 2.01 |
|
|
| 3.07 |
|
Incentive fees |
|
| 1.21 |
|
|
| 4.40 |
|
Professional fees |
|
| 0.17 |
|
|
| 0.24 |
|
Directors’ fees |
|
| 0.05 |
|
|
| 0.06 |
|
Other general and administrative expenses |
|
| 0.30 |
|
|
| 0.43 |
|
Total expenses |
| $ | 6.58 |
|
| $ | 12.64 |
|
In the table above:
40
ExpensesTable of Contents
For the Three Months Ended September 30, 2017 | For the Three Months Ended September 30, 2016 | For the Nine Months Ended September 30, 2017 | For the Period from June 9, 2016 (inception) to September 30, 2016 | |||||||||||||
($ in millions) | ||||||||||||||||
Interest and other debt expenses | $ | 2.98 | $ | 0.44 | $ | 5.98 | $ | 0.44 | ||||||||
Management fees | 1.35 | 0.61 | 3.13 | 0.61 | ||||||||||||
Incentive fees | 1.54 | – | 3.74 | – | ||||||||||||
Offering costs | – | 0.39 | 0.95 | 0.39 | ||||||||||||
Professional fees | 0.38 | 0.22 | 0.82 | 0.22 | ||||||||||||
Administration, custodian and transfer agent fees | 0.15 | 0.08 | 0.37 | 0.08 | ||||||||||||
Directors’ fees | 0.03 | 0.08 | 0.09 | 0.08 | ||||||||||||
Organization costs | – | 0.02 | – | 0.36 | ||||||||||||
Other expenses | 0.08 | 0.03 | 0.25 | 0.03 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | $ | 6.51 | $ | 1.87 | $ | 15.33 | $ | 2.21 | ||||||||
Management fees waiver | – | $ | (0.39 | ) | – | $ | (0.39 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net expenses | $ | 6.51 | $ | 1.48 | $ | 15.33 | $ | 1.82 | ||||||||
|
|
|
|
|
|
|
|
Net Realized Gains (Losses) and Change in Unrealized Appreciation (Depreciation) on Investments
The realized gains and losses on fully exited and partially exited investments in portfolio companies consisted of the following:
|
| For the Three Months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
|
| (in millions) |
| |||||
Chase Industries, Inc. (dba Senneca Holdings) |
| $ | (12.53 | ) |
| $ | — |
|
Wrike, Inc. |
|
| — |
|
|
| 7.49 |
|
Other, net |
|
| (0.57 | ) |
|
| — |
|
Net realized gain (loss) |
| $ | (13.10 | ) |
| $ | 7.49 |
|
For the three months ended September 30, 2017, we accrued incentive feesMarch 31, 2022, net realized losses were primarily driven by the amendment of $1.54 million, management fees of $1.35 million and interest and other debt expenses due to our Revolving Credit Facility of $2.98 million. In addition, our expenses consisted of $0.38 million in professional fees and $0.26 million of other general administrative expenses.
For the nine months ended September 30, 2017, we accrued incentive fees of $3.74 million, management fees of $3.13 million, expenses related to the continuous offeringone of our common Unitssecond lien debt investment in Chase Industries, Inc. (dba Senneca Holdings) to a non-income producing debt resulting in realized loss of $0.95 million, and interest and other debt expenses due to our Revolving Credit Facility of $5.98 million. In addition, our expenses consisted of $0.82 million in professional fees and $0.71 million of other general administrative expenses.
For the three months ended September 30, 2016 and for the period from June 9, 2016 (inception) through September 30, 2016, we accrued gross management fees before waivers of $0.61 million and $0.61 million, respectively. Offsetting those fees, we received management fee waivers of $0.39 million and $0.39 million, respectively, which resulted in net management fees of $0.22$12.53 million.
For the three months ended September 30, 2016 and forMarch 31, 2021, net realized gains were primarily driven by the period from June 9, 2016 (inception) through September 30, 2016,sale of our investment in Wrike, Inc. In February 2021, we incurred organization costssold our common stock, which resulted in a realized gain of $0.02 million and $0.36 million, respectively. For the three months ended September 30, 2016 and for the period from June 9, 2016 (inception) through September 30, 2016, we accrued for offering costs of $0.39 million and $0.39 million, respectively.$7.49 million.
Interest and credit facility expenses for the three months ended September 30, 2016 and for the period from June 9, 2016 (inception) through September 30, 2016 were $0.44 million and $0.44 million, respectively, due to our entry into the Revolving Credit Facility.
In addition, our expenses for the three months ended September 30, 2016 and for the period from June 9, 2016 (inception) through September 30, 2016 consisted of $0.22 million and $0.22 million in professional fees, and $0.19 million and $0.19 million of other general and administrative expenses, respectively.
Net Unrealized Appreciation (Depreciation) on Investments
Any changes in fair value are recorded in change in unrealized appreciation (depreciation) on investments. For further details on the valuation process, refer to “Critical“Note 2 “Significant Accounting Policies—Valuation of Portfolio Investments.”Investments” in our consolidated financial statements. Net change in unrealized appreciation (depreciation) on investments for the three and nine months ended September 30, 2017 and the three months ended September 30, 2016 and for the period from June 9 (inception) to September 30, 2016 were as follows:
For the Three Months Ended September 30, 2017 | For the Three Months Ended September 30, 2016 | For the Nine Months Ended September��30, 2017 | For the Period from June 9, 2016 (inception) to September 30, 2016 | |||||||||||||
($ in millions) | ||||||||||||||||
Unrealized appreciation | $ | 0.78 | $ | 0.04 | $ | 1.49 | $ | 0.04 | ||||||||
Unrealized depreciation | (0.52 | ) | (0.03 | ) | (0.80 | ) | (0.03 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net change in unrealized appreciation (depreciation) on investments | $ | 0.26 | $ | 0.01 | $ | 0.69 | $ | 0.01 | ||||||||
|
|
|
|
|
|
|
|
|
| For the Three Months Ended |
| |||||
|
| March 31, |
|
| March 31, |
| ||
|
| ($ in millions) |
| |||||
Unrealized appreciation |
| $ | 13.98 |
|
| $ | 10.80 |
|
Unrealized depreciation |
|
| (6.16 | ) |
|
| (10.79 | ) |
Net change in unrealized appreciation (depreciation) on investments |
| $ | 7.82 |
|
| $ | 0.01 |
|
35
The change in unrealized appreciation (depreciation) on investments forconsisted of the three and nine months ended September 30, 2017,following:
|
| For the Three |
| |
|
| ($ in millions) |
| |
Portfolio Company: |
|
|
| |
Chase Industries, Inc. (dba Senneca Holdings) |
| $ | 12.53 |
|
Recipe Acquisition Corp. (dba Roland Foods) |
|
| 0.40 |
|
Picture Head Midco LLC |
|
| 0.32 |
|
Yasso, Inc. |
|
| 0.28 |
|
Lithium Technologies, Inc. |
|
| 0.19 |
|
Vantage Mobility International, LLC |
|
| (0.51 | ) |
Wine.com, LLC |
|
| (0.69 | ) |
Diligent Corporation |
|
| (0.91 | ) |
Doxim, Inc. |
|
| (0.91 | ) |
Other, net(1) |
|
| (1.22 | ) |
Zep Inc. |
|
| (1.66 | ) |
Total |
| $ | 7.82 |
|
(1) | Includes gross unrealized appreciation of $0.27 million and gross unrealized depreciation of $(1.49) million. |
Net change in unrealized appreciation (depreciation) in our investments for the three months ended September 30, 2016March 31, 2022 was primarily driven by the reversal of unrealized depreciation in connection with the aforementioned amendment of Chase Industries, Inc. (dba Senneca Holdings).
41
|
| For the Three |
| |
|
| ($ in millions) |
| |
Portfolio Company: |
|
|
| |
Other, net(1) |
| $ | 5.78 |
|
Odyssey Logistics & Technology Corporation |
|
| 1.36 |
|
SMB Shipping Logistics, LLC (dba Worldwide Express) |
|
| 0.90 |
|
Yasso, Inc. |
|
| 0.84 |
|
Empirix, Inc. |
|
| 0.76 |
|
Smarsh, Inc. |
|
| 0.67 |
|
Wine.com, LLC |
|
| (0.26 | ) |
Recipe Acquisition Corp. (dba Roland Foods) |
|
| (0.44 | ) |
CorePower Yoga LLC |
|
| (0.63 | ) |
Fenergo Finance 3 Limited |
|
| (1.24 | ) |
Wrike, Inc. |
|
| (7.73 | ) |
Total |
| $ | 0.01 |
|
(1) | Includes gross unrealized appreciation of $6.27 million and gross unrealized depreciation of $(0.49) million. |
Net change in unrealized appreciation (depreciation) in our investments for the period from June 9, 2016 (inception) to September 30, 2016 consistedthree months ended March 31, 2021 was primarily driven by the reversal of unrealized appreciation in connection with the following:aforementioned sale of Wrike, Inc.
For the Three Months Ended September 30, 2017 | For the Three Months Ended September 30, 2016 | For the Nine Months Ended September 30, 2017 | For the Period from June 9, 2016 (inception) to September 30, 2016 | |||||||||||||
($ in millions) | ||||||||||||||||
Portfolio Company: | ||||||||||||||||
American Dental Partners, Inc. | $ | 0.03 | $ | – | $ | 0.01 | $ | – | ||||||||
Association Member Benefits Advisors, LLC | (0.01 | ) | – | (0.05 | ) | – | ||||||||||
Clinical Supplies Management Holdings, Inc. | (0.02 | ) | – | 0.03 | – | |||||||||||
Continuum Managed Services, LLC | (0.03 | ) | – | (0.04 | ) | – | ||||||||||
Datacor Holdings, Inc. | (0.04 | ) | (0.01 | ) | 0.04 | (0.01 | ) | |||||||||
DuBois Chemicals, Inc. | (0.01 | ) | – | 0.23 | – | |||||||||||
Global Healthcare Exchange, LLC | – | 0.04 | (0.37 | ) | 0.04 | |||||||||||
Granicus, Inc. | (0.01 | ) | – | 0.03 | – | |||||||||||
Greenskies Renewable Energy, LLC | – | (0.01 | ) | 0.02 | (0.01 | ) | ||||||||||
Market Track, LLC | (0.02 | ) | – | (0.03 | ) | – | ||||||||||
MyON, LLC | 0.02 | – | 0.01 | – | ||||||||||||
National Spine and Pain Centers, LLC | (0.02 | ) | – | (0.02 | ) | – | ||||||||||
Netvoyage Corporation | 0.02 | – | 0.01 | – | ||||||||||||
PPC Industries, Inc. | (0.04 | ) | – | 0.10 | – | |||||||||||
Procare Software, LLC | 0.15 | – | 0.16 | – | ||||||||||||
Recipe Acquisition Corp. | 0.08 | (0.01 | ) | 0.10 | (0.01 | ) | ||||||||||
Regulatory DataCorp, Inc. | 0.03 | – | 0.02 | – | ||||||||||||
SF Home Décor, LLC | (0.03 | ) | – | (0.03 | ) | – | ||||||||||
Smarsh, Inc. | (0.02 | ) | – | (0.03 | ) | – | ||||||||||
SMB Shipping Logistics, LLC | – | – | (0.02 | ) | – | |||||||||||
Vantage Mobility International, LLC | (0.02 | ) | – | – | – | |||||||||||
Xactly Corporation | (0.02 | ) | – | (0.02 | ) | – | ||||||||||
Yasso, Inc. | (0.14 | ) | – | (0.15 | ) | – | ||||||||||
You Fit, LLC | (0.04 | ) | – | 0.30 | – | |||||||||||
Zep, Inc. | 0.44 | – | 0.44 | – | ||||||||||||
Other, net | (0.04 | ) | – | (0.05 | ) | – | ||||||||||
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Total | $ | 0.26 | $ | 0.01 | $ | 0.69 | $ | 0.01 | ||||||||
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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The primary use of existing funds and any funds raised in the future is expected to be for our investments in portfolio companies, cash distributions to our unitholdersUnitholders or for other general corporate purposes, including paying for operating expenses or debt service to the extent we borrow or issue senior securities.
We expect to generate cash primarily from the net proceeds of any future offerings of securities, drawdowns of capital commitments, future borrowings and cash flows from operations. To the extent we determine that additional capital would allow us to take advantage of additional investment opportunities, if the market for debt financing presents attractively priced debt financing opportunities, or if our Board of Directors otherwise determines that leveraging our portfolio would be in our best interest and the best interests of our unitholders,Unitholders, we may enter into credit facilities in addition to our existing credit facilities,the JPM Revolving Credit Facility, or issue other senior securities. We would expect any such credit facilities may be secured by certain of our assets and may contain advance rates based upon pledged collateral. The pricing and other terms of any such facilities would depend upon market conditions when we enter into any such facilities as well as the performance of our business, among other factors. As a BDC, with certain limited exceptions, we are only permitted to borrow amounts such that our asset coverage ratio, as defined in the Investment Company Act, is at least 2 to 1200% after such borrowing.borrowing (or 150% if certain requirements are met). See “—Key Components of Operations—Leverage.” As of September 30, 2017March 31, 2022 and December 31, 2016,2021, our asset coverage ratio based on the aggregate amount outstanding of our senior securities (which includes the JPM Revolving Credit Facility) was 2.39 to 1300% and 2.61 to 1, respectively.290%. We may also refinance or repay any of our indebtedness at any time based on our financial condition and market conditions.
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As of September 30, 2017, we had cash of approximately $37.55 million, an increase of $33.69 million from December 31, 2016. In addition, as of September 30, 2017, we had anWe may enter into investment commitments through signed commitment letters which may ultimately become investment transactions in a money market fund managed by an affiliate of Group Inc. of less than $0.01 million. Cash used by operating activitiesthe future. We regularly evaluate and carefully consider our unfunded commitments using GSAM’s proprietary risk management framework for the nine months ended September 30, 2017 was approximately $305.22 million, primarily driven by net purchasespurpose of investments of $462.79 millionplanning our capital resources and other operating activities of $0.24 million, offset by net sales of investments in the affiliated money market fund of $138.31 million, and increase in Members’ Capital resulting from operations of $19.02 million. Cash provided by financing activities for the nine months ended September 30, 2017 was approximately $338.91 million, primarily driven by proceeds from the issuance of common Units of $195.65 million and net borrowings on debt of $159.00 million, partially offset by distributions paid of $15.09 million and other financing activities of $0.65 million.ongoing liquidity, including our financial leverage.
As of September 30, 2016, we had cash of approximately $2.88 million. In addition, as of September 30, 2016, we had an investment in a money market fund managed by an affiliate of Group Inc. of $153.00 million. Cash used by operating activities for the three months ended September 30, 2016 was approximately $298.09 million, primarily driven by purchases of investments of $146.12 million, net purchase of investments in the affiliated money market fund of $153.00 million, and decrease in net assets resulting from operations of $0.58 million, partially offset by proceeds from other operating activities of $1.61 million. Cash provided by financing activities for the period from June 9, 2016 (inception) to September 30, 2016 was approximately $300.97 million, primarily driven by proceeds from the issuance of common units of $164.88 and borrowings on debt of $137.50 million, partially offset by other financing activities of $1.41 million.
To the extent permissible under the risk retention rules and applicable provisions of the 1940 Act, we may raise capital by securitizing certain of our investments, including through the formation of one or more collateralized loan obligations or asset based facilities, while retaining all or most of the exposure to the performance of these investments. This would involve contributing a pool of assets to a special purpose entity, and selling debt interests in such entity on a non-recourse or limited-recourse basis to purchasers. We may also pursue other forms of debt financing, including potentially from the Small Business Administration through a future small business investment company subsidiary (subject to regulatory approvals).
Credit Alternatives GP LLC (the “Initial Member”), an affiliate of our Investment Adviser, made a capital contribution to us of $100 on June 9, 2016 and served as our sole initial member. We cancelled the Initial Member’s interest in the Company on July 14, 2016. On May 6, 2016, we began accepting subscription agreements (“Subscription Agreements”) from investors acquiring common Units in our private offering. Under the terms of the Subscription Agreements, investors are required to make capital contributions up to the amount of their undrawn capital commitment to purchase Units each time we deliver a drawdown notice.
As of September 30, 2017, we had aggregate capital commitments and undrawn capital commitments from investors as follows:
September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||
Capital Commitments ($ in millions) | Unfunded Capital Commitments ($ in millions) | % of Capital Commitments Funded | Capital Commitments ($ in millions) | Unfunded Capital Commitments ($ in millions) | % of Capital Commitments Funded | |||||||||||||||||||
Common Units | $ | 1,097.43 | $ | 691.38 | 37% | $ | 1,001.88 | $ | 791.49 | 21% |
The following table summarizes the total Units issued and proceeds received related to capital drawdowns delivered pursuant to the Subscription Agreements for the nine months ended September 30, 2017:
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| March 31, 2022 |
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| December 31, 2021 |
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| Capital |
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| Unfunded |
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| % of Capital |
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| Capital |
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| Unfunded |
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| % of Capital |
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Common Units |
| $ | 1,097.43 |
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| $ | 60.36 |
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| 95 | % |
| $ | 1,097.43 |
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| $ | 60.36 |
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| 95 | % |
Unit Issue Date | Units Issued | Proceeds Received ($ in millions) | ||||
April 27, 2017 | 203,758 | $ | 20.01 | |||
April 28, 2017 | 535 | 0.05 | ||||
May 26, 2017 | 444,153 | 43.90 | ||||
June 29, 2017 | 441,837 | 43.90 | ||||
August 21, 2017 | 557,806 | 54.87 | ||||
September 28, 2017 | 332,027 | 32.92 | ||||
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Total capital drawdowns | 1,980,116 | $ | 195.65 | |||
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The following table summarizes the total Units issued and proceeds received related to capital drawdowns delivered pursuant to the Subscription Agreements from June 9, 2016 (inception) to September 30, 2016.
Unit Issue Date | Units Issued | Proceeds Received ($ in millions) | ||||
July 14, 2016 | 310,360 | $ | 31.04 | |||
July 15, 2016 | 4,000 | 0.40 | ||||
August 23, 2016 | 160,219 | 15.72 | ||||
September 15, 2016 | 1,206,924 | 117.88 | ||||
Total capital drawdowns | 1,681,503 | $ | 165.04 |
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We did not issue a capital drawdown for the three months ended March 31, 2022 and 2021.
Contractual Obligations
We have entered into certain contracts under which we have future commitments. Payments under the Investment Advisory Agreement, pursuant to which GSAM has agreed to serve as our Investment Adviser, are equal to (1) a percentage of our average NAV and (2) an Incentive Fee based on investment performance. Under the Administration Agreement, pursuant to which State Street Bank and Trust Company has agreed to furnish us with the administrative services necessary to conduct our day-to-day operations, we pay our administrator such fees as may be agreed between us and our administrator that we determine are commercially reasonable in our sole discretion. EitherGenerally, either party may terminate the Investment Advisory Agreement without penalty on at least 60 days’ written notice to the other party. Generally, eitherEither party may terminate the Administration Agreement without penalty upon at least 30 days’ written notice to the other party.
The following table shows our contractual obligations as of September 30, 2017:March 31, 2022:
Payments Due by Period ($ in millions) | ||||||||||||||||||||
Total | Less Than 1 Year | 1 – 3 Years | 3 – 5 Years | More Than 5 Years | ||||||||||||||||
Revolving Credit Facility | $ | 289.00 | $ | 289.00 | $ | – | $ | – | $ | – |
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| Payments Due by Period ($ in millions) |
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| Total |
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| 1 – 3 |
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| 3 – 5 |
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| More Than |
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JPM Revolving Credit Facility(1) |
| $ | 247.44 |
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| $ | — |
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| $ | 247.44 |
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| $ | — |
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| $ | — |
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(1) | The Company may borrow amounts in USD or certain other permitted currencies. Debt outstanding denominated in currencies other than USD has been converted to USD using the applicable foreign currency exchange rate as of the applicable reporting date. As of March 31, 2022, the Company had outstanding borrowings denominated in USD of $219.89 million and in Euros (EUR) of 24.90 million. As of December 31, 2021, the Company had outstanding borrowings denominated in USD of $278.89 million and in EUR of 24.90 million. |
JPM Revolving Credit Facility
WeOn November 21, 2017, Goldman Sachs Private Middle Market Credit SPV LLC (“SPV”), our wholly-owned subsidiary, entered into athe JPM Revolving Credit Facility. JPMorgan Chase Bank, National Association (“JPM”) serves as administrative agent, State Street Bank and Trust Company serves as collateral agent, collateral administrator, bank and securities intermediary and we serve as portfolio manager under the JPM Revolving Credit Facility. State Street Bank and Trust Company also acts as our transfer agent, disbursing agent, custodian and administrator as well as SPV’s custodian. The Company amended the JPM Revolving Credit Facility on July 18, 2016 with Bank of America, N.A. as administrative agent (the “Administrative Agent”), lead arranger, letter of credit issuerAugust 17, 2018, December 10, 2018, February 22, 2019, April 3, 2020, August 26, 2020, November 23, 2020, June 21, 2021 and a lender.January 28th, 2022.
On March 3, 2017, we amendedBorrowings under the JPM Revolving Credit Facility bear interest (at SPV’s election) at a per annum rate equal to amongeither (x) the three-month LIBOR (or other things:
temporarily increaselisted offered rate, depending upon the maximum committed principal amountcurrency of the Revolving Credit Facility by $100.00 million to $350.00 million, with such temporary increase expiring on December 29, 2017borrowing) in effect or earlier pursuant(y) a rate per annum equal to the termsgreater of the Revolving Credit Facility; and
increase the interest rate on obligations under the Revolving Credit Facility to either (1) the prevailing LIBOR for one, two, three or six months plus 3.00% per annum (increased from 2.25% per annum) or (2) an alternate base rate (the greater of(i) the prime rate of JPM in effect on such commercial bank,day and (ii) the federal funds rateFederal Funds Effective Rate in effect on such day plus 0.50%,; and, LIBORwith respect to advances denominated in a currency other than USD, the annual rate of interest is the reference rate then in effect for determining interest rates on commercial loans made in the applicable jurisdiction of such currency, in all cases, in each case, plus the applicable margin. The applicable margin is 3.25% per annum. SPV initially paid a commitment fee of 1.00%) plus 2.00% per annum (increased(or 0.50% per annum during the first nine months from 1.25% per annum).
The maximum principalthe date the JPM Revolving Credit Facility was entered into) on the average daily unused amount of the financing commitments until the third anniversary of the JPM Revolving Credit Facility.
The JPM Revolving Credit Facility is $350.00 million asa multicurrency facility. As of September 30, 2017, of which $289.00 million was drawn as of September 30, 2017, subject to availabilityMarch 31, 2022, the total commitments under the “Borrowing Base.” The Borrowing Base is calculated based on the unfunded capital commitments of the investors meeting various eligibility requirements (subject to investor concentration limits) multiplied by specified advance rates. We have the ability to increase the maximum principal amount of theJPM Revolving Credit Facility up to $750.00 million, subject to increasing commitments of existing lenders and/or obtaining commitments of new lenders and certain other conditions. Thewere $248.93 million. All amounts outstanding under the JPM Revolving Credit Facility will mature on July 17, 2018,must be repaid by the sixth anniversary of the JPM Revolving Credit Facility, subject to a six month extension of the maturity date with the consent of the Administrative Agent andadministrative agent at such time.
SPV’s obligations to the extending lenders and certain other conditions.
We have the ability to elect either LIBOR or the alternative base rate at the time of draw-down, and loans may be converted from one rate to another at any time, subject to certain conditions. We pay a 0.25% annualized fee on a quarterly basis on committed but undrawn amounts under the Revolving Credit Facility.
Amounts drawn under theJPM Revolving Credit Facility may be prepaid at any time without premium or penalty, subject to applicable breakage costs. Loans are subject to mandatory prepayment for amounts exceeding the Borrowing Base or the lenders’ aggregate commitment and to the extent required to comply with the Investment Company Act, as applied to BDCs. Transfers of interests in the Company by investors are subject to certain restrictions under the Revolving Credit Facility and may trigger mandatory prepayment obligations.
The Revolving Credit Facility is secured by a perfected first priority security interest in the unfunded capital commitmentsall of our investors (with certain exceptions)SPV’s portfolio of investments and the proceeds thereof, including assignmentcash. The obligations of the right to make capital calls, receive and apply capital contributions, and enforce remedies and claims related thereto, and a pledge of the collateral account into which capital call proceeds are deposited. Additionally,SPV under the JPM Revolving Credit Facility are non-recourse to us, and our exposure under the lenders can directly require investorsJPM Revolving Credit Facility is limited to fund their capital commitments, but lenders cannot seek recourse against a unitholderthe value of our investment in excess of such unitholder’s obligationSPV.
In connection with the JPM Revolving Credit Facility, SPV has made certain customary representations and warranties and is required to contribute capital to us.
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comply with various covenants, reporting requirements and other customary requirements for similar facilities. The JPM Revolving Credit Facility contains customary representations, warranties,events of default for similar financing transactions, including if a change of control of SPV occurs or if we are no longer the portfolio manager of SPV. Upon the occurrence and affirmativeduring the continuation of an event of default, JPM may declare the outstanding advances and negative covenants, including without limitation, treatment as a RICall other obligations under the Code and as a BDC under the Investment Company Act and restrictions on certain operations, including without limitation, certain distributions. TheJPM Revolving Credit Facility includes customary conditions precedentimmediately due and payable.
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Off-Balance Sheet Arrangements
We may become a party to draw-downinvestment commitments and to financial instruments with off-balance sheet risk in the normal course of loansour business to fund investments and customary eventsto meet the financial needs of default. We areour portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in compliance with these covenants.excess of the amount recognized in the balance sheet. As of March 31, 2022, we believed that we had adequate financial resources to satisfy our unfunded commitments. Our unfunded commitments to provide funds to portfolio companies were as follows:
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| As of |
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| March 31, |
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| December 31, |
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| (in millions) |
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Unfunded Commitments |
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First Lien/Senior Secured Debt |
| $ | 14.57 |
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| $ | 17.31 |
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Total |
| $ | 14.57 |
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| $ | 17.31 |
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HEDGING
Subject to applicable provisions of the Investment Company Act and applicable Commodity Futures Trading Commission (“CFTC”) regulations, we may enter into hedging transactions in a manner consistent with SEC guidance. To the extent that any of our loans isare denominated in a currency other than U.S. dollars, we may enter into currency hedging contracts to reduce our exposure to fluctuations in currency exchange rates. We may also enter into interest rate hedging agreements. Such hedging activities, which will be subject to compliance with applicable legal requirements, may include the use of futures, options, swaps and forward contracts. Costs incurred in entering into such contracts or in settling them, if any, will be borne by us. Our Investment Adviser has claimed no-action relief from CFTC registration and regulation as a commodity pool operator pursuant to a CFTC staff no-action letter (the “BDC CFTC No-Action Letter”)Rule 4.5 with respect to our operations, with the result that we will be limited in our ability to use futures contracts or options on futures contracts or engage in swap transactions. Specifically, the BDC CFTC No-Action LetterRule 4.5 imposes strict limitations on using such derivatives other than for hedging purposes, whereby the use of derivatives not used solely for hedging purposes is generally limited to situations where (i) the aggregate initial margin and premiums required to establish such positions does not exceed five percent of the liquidation value of our portfolio, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into; or (ii) the aggregate net notional value of such derivatives does not exceed 100% of the liquidation value of our portfolio. Moreover, we anticipate entering into transactions involving such derivatives to a very limited extent solely for hedging purposes or otherwise within the limitations of the BDC CFTC No-Action Letter. As of September 30, 2017, no hedging arrangements were used.Rule 4.5.
OFF-BALANCE SHEET ARRANGEMENTSRECENT DEVELOPMENTS
We may become a party to financial instruments with off-balance sheet risk in the normal course of our business to fund investments and to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. As of September 30, 2017, we believed that we had adequate financial resources to satisfy our unfunded commitments. As of September 30, 2017 and December 31, 2016 our unfunded commitments to provide funds to portfolio companies were as follows:
As of | ||||||||
September 30, 2017 | December 31, 2016 | |||||||
(in millions) | ||||||||
Unfunded Commitments | ||||||||
First Lien/Senior Secured Debt | $ | 17.23 | $ | 10.64 | ||||
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Total | $ | 17.23 | $ | 10.64 | ||||
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As of September 30, 2017, we had aggregate Commitmentsthe date of this report, the BDC Investment Committee (as defined below) consisted of the following voting members: Alex Chi, Michael Mastropaolo, David Miller, James Reynolds, Kevin Sterling, Jordan Walter, and undrawn CommitmentsDavid Yu, along with members from investorsGoldman Sachs’s Compliance, Legal, Tax, and Controllers divisions: Josh Bouaziz, Hristo Dimitrov, Craig Farber, and Stanley Matuszewski.
We will pay a $65.00 million distribution to Unitholders as follows:
September 30, 2017 | ||||||||||||
Capital Commitments ($ in millions) | Unfunded Capital Commitments ($ in millions) | % of Capital Commitments Funded | ||||||||||
Common Units | $ | 1,097.43 | $ | 691.38 | 37% |
RECENT DEVELOPMENTS
On October 23, 2017, we delivered a capital drawdown notice to our investors relating to the sale of approximately 900,334 shares of common Units for an aggregate offering price of approximately $87,794. The common Units were issued on October 30, 2017.
On October 31, 2017, our Board of Directors declared a distribution equal to an amount up to our taxable earnings per unit, including net investment income (if positive) for the period October 1, 2017 through December 31, 2017,record date May 11, 2022 payable on or about January 23, 2018 to unitholders of record as of December 29, 2017.May 30, 2022.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ materially. In addition to the discussion below,
For a description of our critical accounting policies, are further described in the notes to the consolidated financial statements.
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Valuation of Portfolio Investments
As a BDC, we conduct the valuation of our assets, pursuant to which our NAV is determined, at all times consistent with GAAP and the Investment Company Act. Our Board of Directors, with the assistance of our Audit Committee, determines the fair value of our assets on at least a quarterly basis, in accordance with the terms of Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 820,Fair Value Measurement and Disclosures (“ASC 820”). Our valuation procedures are described in more detail below.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same—to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).
ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value. The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these securities.
The three-level hierarchy for fair value measurement is defined as follows:
Level 1—inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. The types of financial instruments included in Level 1 include unrestricted securities, including equities and derivatives, listed in active markets.
Level 2—inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. The type of financial instruments in this category includes less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.
Level 3—inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include investments in privately held entities and certain over-the-counter derivatives where the fair value is based on unobservable inputs.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the financial instrument.
Currently, the majority of our investments fall within Level 3 of the fair value hierarchy. We do not expect that there will be readily available market values for most of the investments which are in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our Board of Directors using a documented valuation policy, described below, and a consistently applied valuation process. The factors that may be taken into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, and the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. Available current market data are considered such as applicable market yields and multiples of publicly traded securities, comparison of financial ratios of peer companies, and changes in the interest rate environment and the credit markets that may affect the price at which similar investments would trade in their principal market, and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation.
40
With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, the valuation procedures adopted by our Board of Directors contemplates a multi-step valuation process each quarter, as described below:
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When our NAV is determined other than on a quarter-end (such as in connection with issuances of Units on dates occurring mid-quarter), it is determined by our Investment Adviser, acting under delegated authority from, and subject to the supervision of, our Board of Directors and in accordance with procedures adopted by our Board of Directors.
Investment Transactions and Related Investment Income
We record our investment transactions on a trade date basis. Realized gains and losses are based on the specific identification method. Dividend income on common equity investments are recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. Interest income and dividend income are presented net of withholding tax, if any. Accretion of discounts and amortization of premiums, which are included in interest income and expense, are recorded over the life of the underlying instrument using the effective interest method.
Fair value generally is based on quoted market prices, broker or dealer quotations, or alternative price sources. In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments in securities are measured at fair value as determined by our Investment Adviser and/or by one or more independent third parties.
Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. For additional information, see Note 2 “Significant Accounting Policies” to our consolidated financial statements included in this report. We consider the most significant accounting policies to be those related to our Valuation of Portfolio Investments, Revenue Recognition, Non-Accrual Investments, Distribution Policy and Income Taxes.
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41ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We may also invest in newly-issued debt securities that are sold by issuers with an OID to par value of 1% to 3%, although we do not expect OID securities to comprise a material portion of our portfolio. To the extent we purchase such new issues with OID, the discounts will be accreted over the life of the securities, as required under GAAP. Loan origination fees, OID and market discounts or premiums are capitalized, and we accrete or amortize such amounts into income over the life of the loan. We record contractual prepayment premiums on loans and debt securities as interest income.
Non-Accrual Status
Loans or debt securities are placed on non-accrual status when it is probable that principal or interest will not be collected according to contractual terms. Accrued interest generally is reversed when a loan or debt security is placed on non-accrual status. Interest payments received on non-accrual loans or debt securities may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans and debt securities are restored to accrual status when past due principal and interest is paid and, in management’s judgment, principal and interest payments are likely to remain current. We may make exceptions to this treatment if the loan has sufficient collateral value and is in the process of collection.
Distribution Policy
We intend to pay quarterly distributions to our unitholders out of assets legally available for distribution. Future quarterly distributions, if any, will be determined by our Board of Directors. All distributions will be subject to lawfully available funds therefor, and no assurance can be given that we will be able to declare distributions in future periods.
We have elected to be treated, and expect to qualify annually, as a RIC under Subchapter M of the Code, commencing with our taxable year ending December 31, 2016. To qualify and maintain our status as a RIC, we must, among other things, timely distribute to our unitholders at least 90% of our investment company taxable income for each taxable year. We intend to timely distribute to our unitholders substantially all of our annual taxable income for each year, except that we may retain certain net capital gains for reinvestment and, depending upon the level of taxable income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax. The distributions we pay to our unitholders in a year may exceed our net ordinary income and capital gains for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes. The specific tax characteristics of our distributions will be reported to unitholders after the end of the calendar year. Unitholders should read carefully any written disclosure regarding a distribution from us and should not assume that the source of any distribution is our net ordinary income or capital gains.
Federal Income Taxes
As a RIC, we generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our unitholders as dividends. To maintain our RIC status, we must meet specified source-of-income and asset diversification requirements and timely distribute to our unitholders at least 90% of our investment company taxable income for each year. Depending upon the level of taxable income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax. We generally will be required to pay such U.S. federal excise tax if our distributions during a calendar year do not exceed the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (3) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years.
Because federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the consolidated financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
We are subject to financial market risks, most significantly changes in interest rates. Interest rate sensitivity refers to the change in our earnings that may result from changes in the level of interest rates. Because we expect to fund a portion of our investments with borrowings, our net investment income is expected to be affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
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As of September 30, 2017March 31, 2022 and December 31, 2016,2021, on a fair value basis, approximately 2.6%0.9% and 8.7%0.8%, respectively, of our performing debt investments bore interest at a fixed rate (including income producing preferred stock investments), and approximately 97.4%99.1% and 91.3%99.2%, respectively, of our performing debt investments bore interest at a floating rate. Our borrowings under the JPM Revolving Credit Facility bear interest at a floating rate.
We regularly measure our exposure to interest rate risk. We assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities.
Based on our September 30, 2017March 31, 2022 balance sheet, the following table shows the annual impact on net income of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure:
Total Cashflow Sensitivities | Interest Income | Interest Expense | Total | |||||||||
Up 300 basis points | 17.26 | (8.09 | ) | 9.17 | ||||||||
Up 200 basis points | 11.51 | (5.39 | ) | 6.12 | ||||||||
Up 100 basis points | 5.76 | (2.70 | ) | 3.06 | ||||||||
Up 75 basis points | 4.31 | (2.02 | ) | 2.29 | ||||||||
Up 50 basis points | 2.88 | (1.35 | ) | 1.53 | ||||||||
Up 25 basis points | 1.44 | (0.68 | ) | 0.76 | ||||||||
Down 25 basis points | (1.38 | ) | 0.67 | (0.71 | ) | |||||||
Down 50 basis points | (1.60 | ) | 1.35 | (0.25 | ) | |||||||
Down 75 basis points | (1.59 | ) | 2.02 | 0.43 | ||||||||
Down 100 basis points | (1.60 | ) | 2.70 | 1.10 | ||||||||
Down 200 basis points | (1.59 | ) | 3.32 | 1.73 | ||||||||
Down 300 basis points | (1.59 | ) | 3.32 | 1.73 |
As of March 31, 2022 |
| Interest |
|
| Interest |
|
| Net |
| |||
($ in millions) |
|
|
|
|
|
|
|
|
| |||
Up 300 basis points |
| $ | 14.91 |
|
| $ | (5.65 | ) |
| $ | 9.26 |
|
Up 200 basis points |
|
| 9.54 |
|
|
| (3.77 | ) |
|
| 5.77 |
|
Up 100 basis points |
|
| 4.18 |
|
|
| (1.88 | ) |
|
| 2.30 |
|
Up 75 basis points |
|
| 2.84 |
|
|
| (1.41 | ) |
|
| 1.43 |
|
Up 50 basis points |
|
| 1.60 |
|
|
| (0.94 | ) |
|
| 0.66 |
|
Up 25 basis points |
|
| 0.74 |
|
|
| (0.47 | ) |
|
| 0.27 |
|
Down 25 basis points |
|
| (0.12 | ) |
|
| 0.47 |
|
|
| 0.35 |
|
Down 50 basis points |
|
| (0.20 | ) |
|
| 0.94 |
|
|
| 0.74 |
|
Down 75 basis points |
|
| (0.24 | ) |
|
| 1.41 |
|
|
| 1.17 |
|
Down 100 basis points |
|
| (0.26 | ) |
|
| 1.81 |
|
|
| 1.55 |
|
Down 200 basis points |
|
| (0.26 | ) |
|
| 1.81 |
|
|
| 1.55 |
|
Down 300 basis points |
|
| (0.26 | ) |
|
| 1.81 |
|
|
| 1.55 |
|
We may, in the future, hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the Investment Company Act, applicable CFTC regulations and in a manner consistent with SEC guidance. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates.
45
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our Chiefco-Chief Executive OfficerOfficers and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in RuleRules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chiefco-Chief Executive OfficerOfficers and Chief Financial Officer have concluded that our current disclosure controls and procedures arewere effective in timely alerting them to material information relating to us that is required to be disclosed by us in the reports we file or submit under the Exchange Act.as of March 31, 2022. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
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From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies. We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us.
Item 1A. Risk Factors.
An investment in our securities involves a high degree of risk. ThereExcept as set forth below, there have been no material changes to the risk factors previously reported under Item 1A:1A. “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2016,2021, which was filed with the SEC on February 28, 2017.March 4, 2022. Additional risks and uncertainties not currently known to the Companyus or that itwe currently deemsdeem to be immaterial may materially affect itsour business, financial condition and/or operating results.
Market Developments and General Business Environment
The capital markets are currently in a period of disruption and economic uncertainty. Such market conditions have materially and adversely affected debt and equity capital markets, which have had, and may continue to have, a negative impact on our business and operations.
The U.S. capital markets have experienced extreme disruption since the global outbreak of COVID-19. Such disruptions have been evidenced by volatility in global stock markets as a result of uncertainty regarding the COVID-19 pandemic, the fluctuating price of commodities such as oil, and Russia’s military invasion of Ukraine. Despite actions of the U.S. federal government and foreign governments, these events have contributed to worsening general economic conditions that are materially and adversely impacting broader financial and credit markets and reducing the availability of debt and equity capital for the market as a whole. These conditions could continue for a prolonged period of time or worsen in the future.
Significant changes or volatility in the capital markets may negatively affect the valuations of our investments. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan to hold an investment to maturity). Our valuations, and particularly valuations of private investments and private companies, are inherently uncertain, fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that may not reflect the full impact of the COVID-19 pandemic, Russia’s military invasion of Ukraine and measures taken in response thereto. Any public health emergency, including the COVID-19 pandemic or an outbreak of other existing or new epidemic diseases, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments and our portfolio companies.
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Significant changes in the capital markets, such as disruptions in economic activity caused by the COVID-19 pandemic and Russia’s military invasion of Ukraine, have limited and could continue to limit our investment originations, limit our ability to grow and have a material negative impact on our and our portfolio companies’ operating results and the fair values of our debt and equity investments. Additionally, the recent disruption in economic activity caused by the COVID-19 pandemic and Russia’s military invasion of Ukraine has had, and may continue to have, a negative effect on the potential for liquidity events involving our investments. The illiquidity of our investments may make it difficult for us to sell such investments to access capital, if required. As a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them to increase our liquidity. An inability on our part to raise incremental capital, and any required sale of all or a portion of our investments as a result, could have a material adverse effect on our business, financial condition or results of operations.
Further, current market conditions may make it difficult to raise equity capital, extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms and any failure to do so could have a material adverse effect on our business. The debt capital available to us in the future, if available at all, may bear a higher interest rate and may be available only on terms and conditions less favorable than those of our existing debt and such debt may need to be incurred in a rising interest rate environment. If we are unable to raise new debt or refinance our existing debt, then our equity investors will not benefit from the potential for increased returns on equity resulting from leverage, and we may be unable to make new commitments or to fund existing commitments to our portfolio companies. Any inability to extend the maturity of or refinance our existing debt, or to obtain new debt, could have a material adverse effect on our business, financial condition or results of operations.
Political, social and economic uncertainty, including uncertainty related to the COVID-19 pandemic and Russia’s military invasion of Ukraine, create and exacerbate risks.
The COVID-19 pandemic has created disruptions in supply chains and economic activity, contributed to labor difficulties and is having a particularly adverse impact on transportation, hospitality, tourism, entertainment and other industries, which may in the future adversely affect our financial condition, liquidity and results of operations. The extent to which the COVID-19 pandemic will negatively affect our financial condition, liquidity and results of operations will depend on future developments, including the emergence of new variants of COVID-19 and the effectiveness of vaccines and treatments over the long term and against new variants, which are highly uncertain and cannot be predicted.
While financial markets have rebounded from the significant declines that occurred early in the pandemic and global economic conditions generally improved, certain of the circumstances that arose or became more pronounced after the onset of the COVID-19 pandemic have persisted, including (i) relatively weak consumer confidence; (ii) low levels of the federal funds rate and yields on U.S. Treasury securities which, at times, were near zero; (iii) ongoing heightened credit risk with regard to industries that have been most severely impacted by the pandemic, including, at times, oil and gas, gaming and lodging, and airlines; (iv) higher cyber security, information security and operational risks; and (v) interruptions in the supply chain that have adversely affected many businesses and have contributed to higher rates of inflation.
Depending on the duration and severity of the pandemic going forward, as well as the effects of the pandemic on consumer and corporate confidence, the conditions noted above could continue for an extended period and other adverse developments may occur or reoccur, including (i) the decline in value and performance of us and our portfolio companies, (ii) the ability of our borrowers to continue to meet loan covenants or repay loans provided by us on a timely basis or at all, which may require us to restructure our investments or write down the value of our investments, (iii) our ability to comply with the covenants and other terms of our debt obligations and to repay such obligations, on a timely basis or at all, (iv) our ability to comply with certain regulatory requirements, such as asset coverage requirements under the Investment Company Act, (v) our ability to maintain our distributions at their current level or to pay them at all, or (vi) our ability to source, manage and divest investments and achieve our investment objectives, all of which could result in significant losses to us. We will also be negatively affected if the operations and effectiveness of any of our portfolio companies (or any of the key personnel or service providers of the foregoing) is compromised or if necessary or beneficial systems and processes are disrupted. See “—The capital markets are currently in a period of disruption and economic uncertainty. Such market conditions have materially and adversely affected debt and equity capital markets, which have had, and may continue to have, a negative impact on our business and operations.”
Governmental authorities worldwide have taken measures to stabilize the markets and support economic growth. The continued success of these measures is unknown, and they may not be sufficient to address future market dislocations or avert severe and prolonged reductions in economic activity.
In addition, disruptions in the capital markets caused by the COVID-19 pandemic have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. These and future market disruptions and/or illiquidity can be expected to have an adverse effect on our business, financial condition, results of operations and cash flows.
47
Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could limit our investment originations, limit our ability to grow and have a material negative impact on our and our portfolio companies’ operating results and the fair values of our debt and equity investments.
In addition, Russia’s invasion of Ukraine in February 2022 and corresponding events have had, and could continue to have, severe adverse effects on regional and global economic markets. Following Russia’s actions, various governments, including the United States, have issued broad-ranging economic sanctions against Russia, including, among other actions, a prohibition on doing business with certain Russian companies, large financial institutions, officials and oligarchs; a commitment by certain countries and the European Union to remove selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications, the electronic banking network that connects banks globally; and restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions. The duration of hostilities and the vast array of sanctions and related events (including cyberattacks and espionage) cannot be predicted. Those events present material uncertainty and risk with respect to markets globally, which pose potential adverse risks to us and the performance of our investments and operations. Any such market disruptions could affect our portfolio companies’ operations and, as a result, could have a material adverse effect on our business, financial condition and results of operations.
Terrorist attacks, acts of war, global health emergencies or natural disasters may impact the businesses in which we invest and harm our business, operating results and financial condition.
Terrorist acts, acts of war, global health emergencies or natural disasters may disrupt our operations, as well as the operations of the businesses in which we invest. Such acts have created, and continue to create, economic and political uncertainties and have contributed to global economic instability. See “— Political, social and economic uncertainty, including uncertainty related to the COVID-19 pandemic and Russia’s military invasion of Ukraine, create and exacerbate risks.” Any market disruptions as a result of such acts could affect our portfolio companies’ operations and, as a result, could have a material adverse effect on our business, financial condition and results of operations.
Legal and Regulatory
Our ability to enter into transactions with our affiliates is restricted.
As a BDC, we are prohibited under the Investment Company Act from knowingly participating in certain transactions with our affiliates without the prior approval of a majority of our Independent Directors who have no financial interest in the transaction, or in some cases, the prior approval of the SEC. For example, any person that owns, directly or indirectly, 5% or more of our outstanding voting securities is deemed our affiliate for purposes of the Investment Company Act. If this is the only reason such person is our affiliate, we are generally prohibited from buying any asset from, or selling any asset (other than our Units) to, such affiliate, absent the prior approval of such directors. The Investment Company Act also prohibits “joint” transactions with an affiliate, which could include joint investments in the same portfolio company, without approval of our Independent Directors or in some cases the prior approval of the SEC. Moreover, except in certain limited circumstances, we are prohibited from buying any asset from or selling any asset to a holder of more than 25% of our voting securities, absent prior approval of the SEC. The analysis of whether a particular transaction constitutes a joint transaction requires a review of the relevant facts and circumstances then existing.
In certain circumstances, we can make negotiated co-investments pursuant to an order from the SEC permitting us to do so. On January 4, 2017, the SEC granted to the Investment Adviser and the BDCs advised by the Investment Adviser exemptive relief on which we rely to co-invest with other funds managed by the Investment Adviser in a manner consistent with our investment objectives, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors (the “Relief”). Additionally, if our Investment Adviser forms other funds in the future, we may co-invest on a concurrent basis with such other affiliates, subject to compliance with the Relief, applicable regulations and regulatory guidance, as well as applicable allocation procedures. On March 15, 2022, the SEC published a notice of an application that is intended to supersede the Relief and, if granted, would permit limited additional flexibility for the Company to enter into co-investment transactions with proprietary accounts of Goldman Sachs (the “Application”). As a result of the Relief and the Application, if granted, there could be significant overlap in our investment portfolio and the investment portfolios of the Accounts. There can be no assurance when any such order will be obtained or that one will be obtained at all.
Our Business and Structure
Our Investment Adviser, its principals, investment professionals and employees and the members of its BDC Investment Committee have certain conflicts of interest.
Our Investment Adviser, its principals, affiliates, investment professionals and employees, the members of our investment committee (“BDC Investment Committee”) and our officers and directors serve or may serve now or in the future as investment advisers, officers, directors, principals of, or in other capacities with respect to, public or private entities (including other BDCs and other investment funds) that operate in the same or a related line of business as us. Certain of these individuals could have obligations to investors in other Accounts, the fulfillment of which is not in our best interests or the best interests of our Unitholders, and we expect that investment opportunities will satisfy the investment criteria for both us and such other Accounts. In addition, GSAM and its affiliates also manage other Accounts, and expect to manage other vehicles or accounts in the future, that have investment mandates that are similar, in whole
48
or in part, to ours and, accordingly, may invest in asset classes similar to those targeted by us. As a result, the Investment Adviser and/or its affiliates may face conflicts in allocating investment opportunities between us and such other entities. The fact that our investment advisory fees may be lower than those of certain other funds advised by GSAM could result in this conflict of interest affecting us adversely relative to such other funds.
Subject to applicable law, we may invest alongside Goldman Sachs and the Accounts.
As a result of the Relief and the Application, if granted, there could be significant overlap in our investment portfolio and the investment portfolios of the Accounts. In such circumstances, the Investment Adviser will adhere to its investment allocation policy in order to determine the Accounts to which to allocate investment opportunities. If we are unable to rely on our exemptive relief for a particular opportunity, when our Investment Adviser identifies certain investments, it will be required to determine which Accounts should make the investment at the potential exclusion of other Accounts. Accordingly, it is possible that we may not be given the opportunity to participate in investments made by other Accounts. See “—Legal and Regulatory—Our ability to enter into transactions with our affiliates is restricted.”
Our Investments
Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
Certain of our portfolio companies may be impacted by inflation, such as current inflation related to global supply chain disruptions. Recent inflationary pressures have increased the cost of energy and raw materials and may adversely affect consumer spending, economic growth and our portfolio companies’ operations. If our portfolio companies are unable to pass any increases in their costs along to their customers, it could adversely affect their results and impact their ability to pay interest and principal on our loans. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future unrealized losses and therefore reduce our net assets resulting from operations.
We are exposed to risks associated with changes in interest rates, including the current rising interest rate environment.
Debt investments that we make may be based on floating rates, such as SOFR (as defined below), LIBOR, the Euro Interbank Offered Rate, the Federal Funds Rate or the Prime Rate. General interest rate fluctuations may have a substantial negative impact on our investments, the value of our securities and our rate of return on invested capital. It is unclear how increased regulatory oversight and the future of LIBOR may affect market liquidity and the value of the financial obligations to be held by or issued to us that are linked to LIBOR, or how such changes could affect our investments and transactions and financial condition or results of operations. Central banks and regulators in a number of major jurisdictions (for example, the United States, United Kingdom, European Union, Switzerland and Japan) have convened working groups to find, and implement the transition to, suitable replacements for interbank offered rates. On March 5, 2021, the Financial Conduct Authority and ICE Benchmark Authority announced that the publication of all EUR and CHF LIBOR settings, the Spot Next/Overnight, 1 week, 2 month and 12 month JPY and GBP LIBOR settings, and the 1 week and 2 months US dollar LIBOR settings ceased to be published as of December 31, 2021, while the publication of the overnight, 1 month, 3 month, 6 month, and 12 months U.S. dollar (“USD”) LIBOR settings will cease after June 30, 2023. To identify a successor rate for USD LIBOR, the Alternative Reference Rates Committee (“ARRC”), a U.S.-based group convened by the Federal Reserve and the Federal Reserve Bank of New York, was formed. The ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by the U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. On December 6, 2021, the ARRC released a statement selecting and recommending forms of SOFR, along with associated spread adjustments and conforming changes, to replace references to 1-week and 2-month USD LIBOR. We expect that a substantial portion of our future floating rate investments will be linked to SOFR. At this time, it is not possible to predict the effect of the transition to SOFR.
Because we have borrowed money, and may issue preferred units to finance investments, our net investment income depends, in part, upon the difference between the rate at which we borrow funds or pay distributions on preferred units and the rate that our investments yield. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
A reduction in the interest rates on new investments relative to interest rates on current investments could also have an adverse impact on our net interest income. However, an increase in interest rates could decrease the value of any investments we hold which earn fixed interest rates, including subordinated loans, senior and junior secured and unsecured debt securities and loans and high yield bonds, and also could increase our interest expense, thereby decreasing our net income. Also, an increase in interest rates available to investors could make an investment in our common Units less attractive if we are not able to increase our dividend rate, which could reduce the value of our common Units. Further, rising interest rates could also adversely affect our performance if such increases cause our borrowing costs to rise at a rate in excess of the rate that our investments yield.
49
The U.S. Federal Reserve raised interest rates in March 2022, the first rate increase since 2018, and suggested additional interest rate increases throughout 2022. Changing interest rates may have unpredictable effects on markets, may result in heightened market volatility and may detract from our performance to the extent we are exposed to such interest rates and/or volatility. In periods of rising interest rates, such as the current interest rate environment, to the extent we borrow money subject to a floating interest rate, our cost of funds would increase, which could reduce our net investment income. Further, rising interest rates could also adversely affect our performance if such increases cause our borrowing costs to rise at a rate in excess of the rate that our investments yield. Further, rising interest rates could also adversely affect our performance if we hold investments with floating interest rates, subject to specified minimum interest rates (such as a LIBOR or SOFR floor, as applicable), while at the same time engaging in borrowings subject to floating interest rates not subject to such minimums. In such a scenario, rising interest rates may increase our interest expense, even though our interest income from investments is not increasing in a corresponding manner as a result of such minimum interest rates.
If general interest rates rise, there is a risk that the portfolio companies in which we hold floating rate securities will be unable to pay escalating interest amounts, which could result in a default under their loan documents with us. Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. In addition, rising interest rates may increase pressure on us to provide fixed rate loans to our portfolio companies, which could adversely affect our net investment income, as increases in our cost of borrowed funds would not be accompanied by increased interest income from such fixed-rate investments.
A change in the general level of interest rates can be expected to lead to a change in the interest rates we receive on many of our debt investments. Accordingly, a change in the interest rate could make it easier for us to meet or exceed the performance threshold in the Investment Management Agreement and may result in a substantial increase in the amount of incentive fees payable to our Investment Adviser with respect to the portion of the Incentive Fee based on income.
Many of our portfolio securities do not have a readily available market price, and we value these securities at fair value as determined in good faith under procedures adopted by our Board, which valuation is inherently subjective and may not reflect what we may actually realize for the sale of the investment.
The majority of our investments are, and are expected to continue to be, in debt instruments that do not have readily ascertainable market prices. The fair value of assets that are not publicly traded or whose market prices are not readily available are determined in good faith under procedures adopted by our Board of Directors. Our Board of Directors utilizes the services of independent third-party valuation firms (“Independent Valuation Advisors”) in determining the fair value of a portion of the securities in our portfolio. Investment professionals from our Investment Adviser also recommend portfolio company valuations using sources and/or proprietary models depending on the availability of information on our assets and the type of asset being valued, all in accordance with our valuation policy. The participation of our Investment Adviser in our valuation process could result in a conflict of interest, since the Management Fee is based in part on our gross assets and also because our Investment Adviser is receiving a performance-based Incentive Fee.
In addition, the Investment Adviser may value an identical asset differently than Goldman Sachs, another division or unit within Goldman Sachs or another Account values the asset, including because Goldman Sachs, such other division or unit or Account has information or uses valuation techniques and models that it does not share with, or that are different than those of, the Investment Adviser or the Company. These valuation differences for the same asset can result in significant differences in the treatment of such asset by the Investment Adviser, Goldman Sachs, and other divisions or units of Goldman Sachs, and/or among Accounts (e.g., with respect to an asset that is a loan, there can be differences when it is determined that such loan is deemed to be on nonaccrual status and/or in default).
Because fair valuations, and particularly fair valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and are often based to a large extent on estimates, comparisons and qualitative evaluations of private information, it may be more difficult for investors to value accurately our investments and could lead to undervaluation or overvaluation of our common Units. In addition, the valuation of these types of securities may result in substantial write-downs and earnings volatility.
On December 3, 2020, the SEC announced that it adopted Rule 2a-5 under the Investment Company Act, which establishes an updated regulatory framework for determining fair value in good faith for purposes of the Investment Company Act. The new rule clarifies how fund boards can satisfy their valuation obligations in light of recent market developments. The rule will permit boards, subject to board oversight and certain other conditions, to designate certain parties to perform the fair value determinations. The new rule went into effect on March 8, 2021 and has a compliance date of September 8, 2022. We will continue to review the new rule and its impact on us and our valuation policies.
Our NAV as of a particular date may be materially greater than or less than the value that would be realized if our assets were to be liquidated as of such date. For example, if we were required to sell a certain asset or all or a substantial portion of our assets on a particular date, the actual price that we would realize upon the disposition of such asset or assets could be materially less than the value of such asset or assets as reflected in our NAV. Volatile market conditions could also cause reduced liquidity in the market for certain
50
assets, which could result in liquidation values that are materially less than the values of such assets as reflected in our NAV.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table summarizes the total Units issued and proceeds received related to
We did not issue a capital drawdowns delivered pursuant to the Subscription Agreementsdrawdown for the three months ended September 30, 2017:March 31, 2022 and 2021.
Unit Issue Date | Units Issued | Proceeds Received ($ in millions) | ||||||
August 21, 2017 | 557,806 | 54.87 | ||||||
September 28, 2017 | 332,027 | 32.92 | ||||||
Total capital drawdowns | 889,833 | $ | 87.79 |
Each of the above issuances and sales of the common Units was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act and Regulation D or Regulation S under the Securities Act. Each purchaser of common Units was required to represent that it is (i) either an “accredited investor” as defined in Rule 501 of Regulation D under the Securities Act or, in the case of Units sold outside the United States, not a “U.S. person” in accordance with Regulation S of the Securities Act and (ii) was acquiring the common Units for investment and not with a view to resell or distribute. We did not engage in general solicitation or advertising, and did not offer securities to the public, in connection with such issuance and sale.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits.
The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Index to Exhibits, which is incorporated herein by reference.
44
51
INDEX TO EXHIBITS
EXHIBIT NO. | EXHIBIT | |
3.1 | ||
3.2 | ||
31.1* | ||
31.2* | ||
31.3* | ||
32.1* | ||
32.2* | ||
32.3* | ||
* Filed herewith.
4552
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GOLDMAN SACHS PRIVATE MIDDLE MARKET CREDIT LLC | |||||||||||
Date: | /s/ | ||||||||||
|
| Name: Alex Chi | |||||||||
Title: Co-Chief Executive Officer and | |||||||||||
( | |||||||||||
Date: | /s/ | ||||||||||
| Name: David Miller | ||||||||||
Title: Co-Chief Executive Officer and Co-President | |||||||||||
(Co-Principal Executive Officer) | |||||||||||
Date: May 10, 2022 | /s/ Carmine Rossetti | ||||||||||
Name: Carmine Rossetti | |||||||||||
Title: Chief Financial Officer and Treasurer
|
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