UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20172020
OR
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¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 814-00733
Triangle Capital CorporationBarings BDC, Inc.
(Exact name of registrant as specified in its charter)
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| | | | | | | |
Maryland | | 06-1798488 |
(State or other jurisdiction of | | (I.R.S. Employer |
incorporation or organization) | | Identification No.) |
| |
3700 Glenwood Avenue,300 South Tryon Street, Suite 530
Raleigh,2500 Charlotte, North Carolina
| | 2761228202 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’sRegistrant's telephone number, including area code: (919) 719-4770(704) 805-7200
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
Common Stock, par value $0.001 per share | BBDC | The New York Stock Exchange |
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 ý 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 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, or a smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company”company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer | ý¨ | Accelerated filer | ¨ý |
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
| | Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
The number of shares outstanding of the registrant’s Common Stock on November 1, 20179, 2020 was 47,740,832.47,961,753.
TRIANGLE CAPITAL CORPORATIONBARINGS BDC, INC.
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
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PART I – FINANCIAL INFORMATION |
Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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PART II – OTHER INFORMATION |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
TRIANGLE CAPITAL CORPORATIONBarings BDC, Inc.
Consolidated Balance Sheets
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| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| (Unaudited) | | |
Assets: | | | |
Investments at fair value: | | | |
Non-Control / Non-Affiliate investments (cost of $998,836,068 and $888,974,154 as of September 30, 2017 and December 31, 2016, respectively) | $ | 908,181,226 |
| | $ | 857,604,639 |
|
Affiliate investments (cost of $153,091,223 and $162,539,224 as of September 30, 2017 and December 31, 2016, respectively) | 146,607,453 |
| | 161,510,773 |
|
Control investments (cost of $86,861,024 and $45,418,113 as of September 30, 2017 and December 31, 2016, respectively) | 36,403,000 |
| | 18,791,769 |
|
Total investments at fair value | 1,091,191,679 |
| | 1,037,907,181 |
|
Cash and cash equivalents | 81,003,756 |
| | 107,087,663 |
|
Interest, fees and other receivables | 9,744,381 |
| | 10,189,788 |
|
Prepaid expenses and other current assets | 1,827,994 |
| | 1,659,570 |
|
Deferred financing fees | 5,439,945 |
| | 2,699,960 |
|
Property and equipment, net | 91,195 |
| | 106,494 |
|
Total assets | $ | 1,189,298,950 |
| | $ | 1,159,650,656 |
|
Liabilities: | | | |
Accounts payable and accrued liabilities | $ | 5,540,240 |
| | $ | 6,797,244 |
|
Interest payable | 1,723,664 |
| | 3,996,940 |
|
Taxes payable | — |
| | 489,691 |
|
Deferred income taxes | 1,196,745 |
| | 2,053,701 |
|
Borrowings under credit facility | 141,118,837 |
| | 127,011,475 |
|
Notes | 163,241,179 |
| | 162,755,381 |
|
SBA-guaranteed debentures payable | 246,084,869 |
| | 245,389,966 |
|
Total liabilities | 558,905,534 |
| | 548,494,398 |
|
Commitments and contingencies (Note 8) | | | |
Net Assets: | | | |
Common stock, $0.001 par value per share (150,000,000 shares authorized, 47,740,832 and 40,401,292 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively) | 47,741 |
| | 40,401 |
|
Additional paid-in capital | 822,780,495 |
| | 686,835,054 |
|
Net investment income in excess of (less than) distributions | (4,483,783 | ) | | 5,884,512 |
|
Accumulated realized losses | (41,242,051 | ) | | (24,211,594 | ) |
Net unrealized depreciation | (146,708,986 | ) | | (57,392,115 | ) |
Total net assets | 630,393,416 |
| | 611,156,258 |
|
Total liabilities and net assets | $ | 1,189,298,950 |
| | $ | 1,159,650,656 |
|
Net asset value per share | $ | 13.20 |
| | $ | 15.13 |
|
| | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| (Unaudited) | | |
Assets: | | | |
Investments at fair value: | | | |
Non-Control / Non-Affiliate investments (cost of $903,128,567 and $1,085,866,720 as of September 30, 2020 and December 31, 2019, respectively) | $ | 886,610,176 | | | $ | 1,066,845,054 | |
Affiliate investments (cost of $18,258,270 and $10,158,270 as of September 30, 2020 and December 31, 2019, respectively) | 19,158,075 | | | 10,229,813 | |
| | | |
Short-term investments (cost of $210,503,875 and $96,568,940 as of September 30, 2020 and December 31, 2019, respectively) | 210,503,390 | | | 96,568,940 | |
Total investments at fair value | 1,116,271,641 | | | 1,173,643,807 | |
Cash | 7,112,312 | | | 13,567,849 | |
Foreign currencies (cost of $7,532,555 and $8,360,011 as of September 30, 2020 and December 31, 2019, respectively) | 7,675,046 | | | 8,423,716 | |
Interest and fees receivable | 7,749,841 | | | 5,265,980 | |
Prepaid expenses and other assets | 3,831,057 | | | 1,112,559 | |
Deferred financing fees | 4,440,269 | | | 5,366,119 | |
Receivable from unsettled transactions | 75,486,443 | | | 45,254,808 | |
Total assets | $ | 1,222,566,609 | | | $ | 1,252,634,838 | |
Liabilities: | | | |
Accounts payable and accrued liabilities | $ | 1,373,856 | | | $ | 1,524,830 | |
Interest payable | 766,815 | | | 2,491,534 | |
| | | |
| | | |
| | | |
Administrative fees payable | 300,000 | | | 400,000 | |
Base management fees payable | 3,375,262 | | | 3,266,722 | |
Payable from unsettled transactions | — | | | 4,924,150 | |
Borrowings under credit facilities | 463,703,208 | | | 352,488,419 | |
Debt securitization | 177,536,048 | | | 316,664,474 | |
Notes payable | 49,534,479 | | | — | |
Total liabilities | 696,589,668 | | | 681,760,129 | |
Commitments and contingencies (Note 7) | | | |
Net Assets: | | | |
Common stock, $0.001 par value per share (150,000,000 shares authorized, 47,961,753 and 48,950,803 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively) | 47,962 | | | 48,951 | |
Additional paid-in capital | 846,636,727 | | | 853,766,370 | |
Total distributable earnings (loss) | (320,707,748) | | | (282,940,612) | |
Total net assets | 525,976,941 | | | 570,874,709 | |
Total liabilities and net assets | $ | 1,222,566,609 | | | $ | 1,252,634,838 | |
Net asset value per share | $ | 10.97 | | | $ | 11.66 | |
See accompanying notes.
TRIANGLE CAPITAL CORPORATION
Barings BDC, Inc.
Unaudited Consolidated Statements of Operations
| | | Three Months Ended | | Three Months Ended | | Nine Months Ended | | Nine Months Ended | | Three Months Ended | | Three Months Ended | | Nine Months Ended | | Nine Months Ended |
| September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 | | September 30, 2020 | | September 30, 2019 | | September 30, 2020 | | September 30, 2019 |
Investment income: | | | | | | | | Investment income: | | | | | | | |
Interest income: | | | | | | | | Interest income: | |
Non-Control / Non-Affiliate investments | $ | 20,629,534 |
| | $ | 17,270,300 |
| | $ | 62,755,411 |
| | $ | 52,938,976 |
| Non-Control / Non-Affiliate investments | $ | 15,205,310 | | | $ | 18,169,034 | | | $ | 47,850,786 | | | $ | 54,853,833 | |
Affiliate investments | 3,329,256 |
| | 3,380,867 |
| | 10,580,976 |
| | 10,121,974 |
| |
Control investments | 281,147 |
| | 303,708 |
| | 861,294 |
| | 764,622 |
| |
| Short-term investments | | Short-term investments | 12,237 | | | 279,908 | | | 336,842 | | | 703,947 | |
Total interest income | 24,239,937 |
| | 20,954,875 |
| | 74,197,681 |
| | 63,825,572 |
| Total interest income | 15,217,547 | | | 18,448,942 | | | 48,187,628 | | | 55,557,780 | |
Dividend income: | | | | | | | | Dividend income: | |
Non-Control / Non-Affiliate investments | 57,515 |
| | 167,468 |
| | 1,318,748 |
| | (1,030,703 | ) | Non-Control / Non-Affiliate investments | — | | | 4,221 | | | 2,603 | | | 8,932 | |
Affiliate investments | 137,470 |
| | 244,233 |
| | 241,714 |
| | 706,495 |
| |
Control investments | — |
| | — |
| | — |
| | 300,000 |
| |
| Total dividend income | 194,985 |
| | 411,701 |
| | 1,560,462 |
| | (24,208 | ) | Total dividend income | — | | | 4,221 | | | 2,603 | | | 8,932 | |
Fee and other income: | | | | | | | | Fee and other income: | |
Non-Control / Non-Affiliate investments | 2,104,631 |
| | 1,585,403 |
| | 4,980,285 |
| | 5,662,081 |
| Non-Control / Non-Affiliate investments | 769,126 | | | 848,792 | | | 2,380,552 | | | 1,669,819 | |
Affiliate investments | 479,802 |
| | 319,289 |
| | 951,091 |
| | 855,855 |
| |
Control investments | 107,292 |
| | 110,000 |
| | 307,292 |
| | 310,000 |
| |
| Total fee and other income | 2,691,725 |
| | 2,014,692 |
| | 6,238,668 |
| | 6,827,936 |
| Total fee and other income | 769,126 | | | 848,792 | | | 2,380,552 | | | 1,669,819 | |
Payment-in-kind interest income: | | | | | | | | Payment-in-kind interest income: | |
Non-Control / Non-Affiliate investments | 1,963,525 |
| | 2,719,831 |
| | 6,756,172 |
| | 8,373,124 |
| Non-Control / Non-Affiliate investments | 342,469 | | | — | | | 577,090 | | | — | |
Affiliate investments | 622,613 |
| | 1,175,899 |
| | 2,118,550 |
| | 3,259,634 |
| |
| Total payment-in-kind interest income | 2,586,138 |
| | 3,895,730 |
| | 8,874,722 |
| | 11,632,758 |
| Total payment-in-kind interest income | 342,469 | | | — | | | 577,090 | | | — | |
Interest income from cash and cash equivalents | 175,273 |
| | 135,459 |
| | 421,062 |
| | 228,129 |
| |
Interest income from cash | | Interest income from cash | — | | | 2,152 | | | 631 | | | 9,022 | |
Total investment income | 29,888,058 |
| | 27,412,457 |
| | 91,292,595 |
| | 82,490,187 |
| Total investment income | 16,329,142 | | | 19,304,107 | | | 51,148,504 | | | 57,245,553 | |
Operating expenses: | | | | | | | | Operating expenses: | | | | | | | |
Interest and other financing fees | 7,394,241 |
| | 6,757,718 |
| | 21,418,371 |
| | 20,040,942 |
| Interest and other financing fees | 3,738,991 | | | 6,727,780 | | | 14,367,855 | | | 19,598,992 | |
Base management fee (Note 2) | | Base management fee (Note 2) | 3,375,262 | | | 3,263,803 | | | 10,904,422 | | | 8,845,753 | |
| Compensation expenses | 4,323,708 |
| | 3,963,797 |
| | 12,149,527 |
| | 17,510,762 |
| Compensation expenses | — | | | 107,779 | | | 48,410 | | | 334,869 | |
General and administrative expenses | 1,019,192 |
| | 859,785 |
| | 3,403,385 |
| | 3,170,330 |
| |
General and administrative expenses (Note 2) | | General and administrative expenses (Note 2) | 1,254,723 | | | 1,217,570 | | | 4,044,453 | | | 5,108,595 | |
Total operating expenses | 12,737,141 |
| | 11,581,300 |
| | 36,971,283 |
| | 40,722,034 |
| Total operating expenses | 8,368,976 | | | 11,316,932 | | | 29,365,140 | | | 33,888,209 | |
| Net investment income | 17,150,917 |
| | 15,831,157 |
| | 54,321,312 |
| | 41,768,153 |
| Net investment income | 7,960,166 | | | 7,987,175 | | | 21,783,364 | | | 23,357,344 | |
Realized and unrealized gains (losses) on investments and foreign currency borrowings: | | | | | | | | |
Realized and unrealized gains (losses) on investments and foreign currency transactions: | | Realized and unrealized gains (losses) on investments and foreign currency transactions: | |
Net realized gains (losses): | | | | | | | | Net realized gains (losses): | |
Non-Control / Non-Affiliate investments | 4,066,263 |
| | (11,213,561 | ) | | (3,036,048 | ) | | (5,007,647 | ) | Non-Control / Non-Affiliate investments | (19,477,823) | | | (1,066,536) | | | (36,233,667) | | | (1,146,287) | |
Affiliate investments | (4,443,680 | ) | | 2,106 |
| | (999,336 | ) | | (1,680,198 | ) | |
Control investments | (8,503,633 | ) | | — |
| | (12,995,073 | ) | | — |
| |
| Net realized losses on investments | | Net realized losses on investments | (19,477,823) | | | (1,066,536) | | | (36,233,667) | | | (1,146,287) | |
Foreign currency transactions | | Foreign currency transactions | (1,028,262) | | | 83,037 | | | (1,089,787) | | | 83,037 | |
Net realized losses | (8,881,050 | ) | | (11,211,455 | ) | | (17,030,457 | ) | | (6,687,845 | ) | Net realized losses | (20,506,085) | | | (983,499) | | | (37,323,454) | | | (1,063,250) | |
Net unrealized appreciation (depreciation): | | | | | | | | Net unrealized appreciation (depreciation): | |
Non-Control / Non-Affiliate investments | (64,601,974 | ) | | 11,731,534 |
| | (70,083,204 | ) | | (596,458 | ) | Non-Control / Non-Affiliate investments | 56,467,202 | | | (2,209,225) | | | 2,522,789 | | | 25,202,059 | |
Affiliate investments | (2,313,261 | ) | | (303,939 | ) | | (11,651,017 | ) | | 1,130,412 |
| Affiliate investments | 1,624,230 | | | 40,119 | | | 828,262 | | | (121,970) | |
Control investments | 2,047,411 |
| | (8,546,464 | ) | | (5,981,149 | ) | | (8,098,464 | ) | |
| Net unrealized appreciation (depreciation) on investments | (64,867,824 | ) | | 2,881,131 |
| | (87,715,370 | ) | | (7,564,510 | ) | Net unrealized appreciation (depreciation) on investments | 58,091,432 | | | (2,169,106) | | | 3,351,051 | | | 25,080,089 | |
Foreign currency borrowings | (897,734 | ) | | 342,409 |
| | (1,601,501 | ) | | (569,382 | ) | |
Foreign currency transactions | | Foreign currency transactions | (2,144,050) | | | 374,278 | | | (1,756,412) | | | 374,278 | |
Net unrealized appreciation (depreciation) | (65,765,558 | ) | | 3,223,540 |
| | (89,316,871 | ) | | (8,133,892 | ) | Net unrealized appreciation (depreciation) | 55,947,382 | | | (1,794,828) | | | 1,594,639 | | | 25,454,367 | |
Net realized and unrealized losses on investments and foreign currency borrowings | (74,646,608 | ) | | (7,987,915 | ) | | (106,347,328 | ) | | (14,821,737 | ) | |
Tax benefit (provision) | (985 | ) | | 36,431 |
| | (305,166 | ) | | 47,342 |
| |
Net realized losses and unrealized appreciation (depreciation) on investments and foreign currency transactions | | Net realized losses and unrealized appreciation (depreciation) on investments and foreign currency transactions | 35,441,297 | | | (2,778,327) | | | (35,728,815) | | | 24,391,117 | |
Loss on extinguishment of debt | | Loss on extinguishment of debt | (216,474) | | | (13,357) | | | (660,066) | | | (143,108) | |
Benefit from (provision for) taxes | | Benefit from (provision for) taxes | (7,362) | | | — | | | 10,105 | | | (499) | |
Net increase (decrease) in net assets resulting from operations | $ | (57,496,676 | ) | | $ | 7,879,673 |
| | $ | (52,331,182 | ) | | $ | 26,993,758 |
| Net increase (decrease) in net assets resulting from operations | $ | 43,177,627 | | | $ | 5,195,491 | | | $ | (14,595,412) | | | $ | 47,604,854 | |
Net investment income per share—basic and diluted | $ | 0.36 |
| | $ | 0.42 |
| | $ | 1.18 |
| | $ | 1.19 |
| Net investment income per share—basic and diluted | $ | 0.17 | | | $ | 0.16 | | | $ | 0.45 | | | $ | 0.46 | |
Net increase (decrease) in net assets resulting from operations per share—basic and diluted | $ | (1.20 | ) | | $ | 0.21 |
| | $ | (1.14 | ) | | $ | 0.77 |
| Net increase (decrease) in net assets resulting from operations per share—basic and diluted | $ | 0.90 | | | $ | 0.10 | | | $ | (0.30) | | | $ | 0.94 | |
Dividends/distributions per share: | | | | | | | | Dividends/distributions per share: | | | | | | | |
Regular quarterly dividends/distributions | $ | 0.45 |
| | $ | 0.45 |
| | $ | 1.35 |
| | $ | 1.44 |
| |
| Total dividends/distributions per share | $ | 0.45 |
| | $ | 0.45 |
| | $ | 1.35 |
| | $ | 1.44 |
| Total dividends/distributions per share | $ | 0.16 | | | $ | 0.14 | | | $ | 0.48 | | | $ | 0.39 | |
Weighted average shares outstanding—basic and diluted | 47,743,990 |
| | 38,115,449 |
| | 46,079,139 |
| | 35,199,704 |
| Weighted average shares outstanding—basic and diluted | 47,961,753 | | | 49,987,312 | | | 48,274,397 | | | 50,535,246 | |
See accompanying notes.
TRIANGLE CAPITAL CORPORATIONBarings BDC, Inc.
Unaudited Consolidated Statements of Changes in Net Assets
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Total Distributable Earnings (Loss) | | Total Net Assets |
Three Months Ended September 30, 2019 | Number of Shares | | Par Value | | | |
Balance, June 30, 2019 | 50,314,275 | | | $ | 50,314 | | | $ | 875,245,919 | | | $ | (292,216,528) | | | $ | 583,079,705 | |
Net investment income | — | | | — | | | — | | | 7,987,175 | | | 7,987,175 | |
| | | | | | | | | |
Net realized gain on investments / foreign currency transactions | — | | | — | | | — | | | (983,499) | | | (983,499) | |
Net unrealized appreciation of investments / foreign currency transactions | — | | | — | | | — | | | (1,794,828) | | | (1,794,828) | |
Loss on extinguishment of debt | — | | | — | | | — | | | (13,357) | | | (13,357) | |
| | | | | | | | | |
Dividends / distributions | — | | | — | | | — | | | (6,935,311) | | | (6,935,311) | |
| | | | | | | | | |
| | | | | | | | | |
Purchases of shares in repurchase plan | (895,733) | | | (895) | | | (8,894,010) | | | — | | | (8,894,905) | |
| | | | | | | | | |
| | | | | | | | | |
Balance, September 30, 2019 | 49,418,542 | | | $ | 49,419 | | | $ | 866,351,909 | | | $ | (293,956,348) | | | $ | 572,444,980 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Investment Income in Excess of Distributions | | Accumulated Realized Losses on Investments | | Net Unrealized Depreciation | | Total Net Assets |
| Number of Shares | | Par Value | | | | | |
Balance, December 31, 2015 | 33,375,126 |
| | $ | 33,375 |
| | $ | 549,242,439 |
| | $ | 16,127,141 |
| | $ | (25,813,329 | ) | | $ | (31,221,871 | ) | | $ | 508,367,755 |
|
Net investment income | — |
| | — |
| | — |
| | 41,768,153 |
| | — |
| | — |
| | 41,768,153 |
|
Stock-based compensation | — |
| | — |
| | 7,502,500 |
| | — |
| | — |
| | — |
| | 7,502,500 |
|
Realized gain (loss) on investments | — |
| | — |
| | — |
| | — |
| | (6,687,845 | ) | | 7,532,502 |
| | 844,657 |
|
Net unrealized loss on investments / foreign currency | — |
| | — |
| | — |
| | — |
| | — |
| | (15,666,394 | ) | | (15,666,394 | ) |
Tax benefit | — |
| | — |
| | — |
| | 47,342 |
| | — |
| | — |
| | 47,342 |
|
Dividends / distributions | 120,562 |
| | 120 |
| | 2,325,851 |
| | (51,389,199 | ) | | — |
| | — |
| | (49,063,228 | ) |
Public offering of common stock | 6,742,362 |
| | 6,742 |
| | 129,129,554 |
| | — |
| | — |
| | — |
| | 129,136,296 |
|
Issuance of restricted stock | 364,605 |
| | 365 |
| | (365 | ) | | — |
| | — |
| | — |
| | — |
|
Common stock withheld for payroll taxes upon vesting of restricted stock | (197,252 | ) | | (197 | ) | | (3,581,675 | ) | | — |
| | — |
| | — |
| | (3,581,872 | ) |
Balance, September 30, 2016 | 40,405,403 |
| | $ | 40,405 |
| | $ | 684,618,304 |
| | $ | 6,553,437 |
| | $ | (32,501,174 | ) | | $ | (39,355,763 | ) | | $ | 619,355,209 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Investment Income in Excess of (Less Than) Distributions | | Accumulated Realized Losses on Investments | | Net Unrealized Depreciation | | Total Net Assets |
| Number of Shares | | Par Value | | | | | |
Balance, December 31, 2016 | 40,401,292 |
| | $ | 40,401 |
| | $ | 686,835,054 |
| | $ | 5,884,512 |
| | $ | (24,211,594 | ) | | $ | (57,392,115 | ) | | $ | 611,156,258 |
|
Net investment income | — |
| | — |
| | — |
| | 54,321,312 |
| | — |
| | — |
| | 54,321,312 |
|
Stock-based compensation | — |
| | — |
| | 4,499,374 |
| | — |
| | — |
| | — |
| | 4,499,374 |
|
Realized gain (loss) on investments | — |
| | — |
| | — |
| | — |
| | (17,030,457 | ) | | 18,724,566 |
| | 1,694,109 |
|
Net unrealized loss on investments / foreign currency | — |
| | — |
| | — |
| | — |
| | — |
| | (108,041,437 | ) | | (108,041,437 | ) |
Tax provision | — |
| | — |
| | — |
| | (305,166 | ) | | — |
| | — |
| | (305,166 | ) |
Dividends / distributions | 91,366 |
| | 91 |
| | 1,637,467 |
| | (64,384,441 | ) | | — |
| | — |
| | (62,746,883 | ) |
Public offering of common stock | 7,000,000 |
| | 7,000 |
| | 131,989,144 |
| | — |
| | — |
| | — |
| | 131,996,144 |
|
Issuance of restricted stock | 360,470 |
| | 361 |
| | (361 | ) | | — |
| | — |
| | — |
| | — |
|
Common stock withheld for payroll taxes upon vesting of restricted stock | (112,296 | ) | | (112 | ) | | (2,180,183 | ) | | — |
| | — |
| | — |
| | (2,180,295 | ) |
Balance, September 30, 2017 | 47,740,832 |
| | $ | 47,741 |
| | $ | 822,780,495 |
| | $ | (4,483,783 | ) | | $ | (41,242,051 | ) | | $ | (146,708,986 | ) | | $ | 630,393,416 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Total Distributable Earnings (Loss) | | Total Net Assets |
Three Months Ended September 30, 2020 | Number of Shares | | Par Value | | | |
Balance, June 30, 2020 | 47,961,753 | | | $ | 47,962 | | | $ | 846,636,727 | | | $ | (356,211,495) | | | $ | 490,473,194 | |
Net investment income | — | | | — | | | — | | | 7,960,166 | | | 7,960,166 | |
| | | | | | | | | |
Net realized loss on investments / foreign currency transactions | — | | | — | | | — | | | (20,506,085) | | | (20,506,085) | |
Net unrealized appreciation of investments / foreign currency transactions | — | | | — | | | — | | | 55,947,382 | | | 55,947,382 | |
Loss on extinguishment of debt | — | | | — | | | — | | | (216,474) | | | (216,474) | |
Provision for taxes | — | | | — | | | — | | | (7,362) | | | (7,362) | |
Dividends / distributions | — | | | — | | | — | | | (7,673,880) | | | (7,673,880) | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Balance, September 30, 2020 | 47,961,753 | | | $ | 47,962 | | | $ | 846,636,727 | | | $ | (320,707,748) | | | $ | 525,976,941 | |
See accompanying notes.
Barings BDC, Inc.
TRIANGLE CAPITAL CORPORATIONUnaudited Consolidated Statements of Changes in Net Assets — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Total Distributable Earnings (Loss) | | Total Net Assets |
Nine Months Ended September 30, 2019 | Number of Shares | | Par Value | | | |
Balance, December 31, 2018 | 51,284,064 | | | $ | 51,284 | | | $ | 884,894,249 | | | $ | (321,978,246) | | | $ | 562,967,287 | |
Net investment income | — | | | — | | | — | | | 23,357,344 | | | 23,357,344 | |
| | | | | | | | | |
Net realized loss on investments / foreign currency transactions | — | | | — | | | — | | | (1,063,250) | | | (1,063,250) | |
Net unrealized appreciation of investments / foreign currency transactions | — | | | — | | | — | | | 25,454,367 | | | 25,454,367 | |
Loss on extinguishment of debt | — | | | — | | | — | | | (143,108) | | | (143,108) | |
Provision for taxes | — | | | — | | | — | | | (499) | | | (499) | |
Dividends / distributions | — | | | — | | | — | | | (19,582,956) | | | (19,582,956) | |
| | | | | | | | | |
| | | | | | | | | |
Purchases of shares in repurchase plan | (1,865,522) | | | (1,865) | | | (18,542,340) | | | — | | | (18,544,205) | |
| | | | | | | | | |
| | | | | | | | | |
Balance, September 30, 2019 | 49,418,542 | | | $ | 49,419 | | | $ | 866,351,909 | | | $ | (293,956,348) | | | $ | 572,444,980 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Total Distributable Earnings (Loss) | | Total Net Assets | |
Nine Months Ended September 30, 2020 | Number of Shares | | Par Value | | | | |
Balance, December 31, 2019 | 48,950,803 | | | $ | 48,951 | | | $ | 853,766,370 | | | $ | (282,940,612) | | | $ | 570,874,709 | | |
Net investment income | — | | | — | | | — | | | 21,783,364 | | | 21,783,364 | | |
| | | | | | | | | | |
Net realized loss on investments / foreign currency transactions | — | | | — | | | — | | | (37,323,454) | | | (37,323,454) | | |
Net unrealized appreciation of investments / foreign currency transactions | — | | | — | | | — | | | 1,594,639 | | | 1,594,639 | | |
Loss on extinguishment of debt | — | | | — | | | — | | | (660,066) | | | (660,066) | | |
Income tax benefit | — | | | — | | | — | | | 10,105 | | | 10,105 | | |
Dividends / distributions | — | | | — | | | — | | | (23,171,724) | | | (23,171,724) | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Purchases of shares in repurchase plan | (989,050) | | | (989) | | | (7,129,643) | | | — | | | (7,130,632) | | |
| | | | | | | | | | |
Balance, September 30, 2020 | 47,961,753 | | | $ | 47,962 | | | $ | 846,636,727 | | | $ | (320,707,748) | | | $ | 525,976,941 | | |
See accompanying notes.
Barings BDC, Inc.
Unaudited Consolidated Statements of Cash Flows
|
| | | | | | | |
| Nine Months Ended | | Nine Months Ended |
| September 30, 2017 | | September 30, 2016 |
Cash flows from operating activities: | | | |
Net increase (decrease) in net assets resulting from operations | $ | (52,331,182 | ) | | $ | 26,993,758 |
|
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: | | | |
Purchases of portfolio investments | (391,502,625 | ) | | (163,867,651 | ) |
Repayments received/sales of portfolio investments | 231,730,067 |
| | 182,153,894 |
|
Loan origination and other fees received | 5,733,890 |
| | 3,205,460 |
|
Net realized loss on investments | 17,030,457 |
| | 6,687,845 |
|
Net unrealized depreciation on investments | 88,572,326 |
| | 9,525,827 |
|
Net unrealized depreciation on foreign currency borrowings | 1,601,501 |
| | 569,382 |
|
Deferred income taxes | (856,956 | ) | | (1,961,317 | ) |
Payment-in-kind interest accrued, net of payments received | (519,326 | ) | | (4,177,550 | ) |
Amortization of deferred financing fees | 1,857,810 |
| | 1,644,826 |
|
Accretion of loan origination and other fees | (3,863,096 | ) | | (3,676,003 | ) |
Accretion of loan discounts | (466,191 | ) | | (307,081 | ) |
Accretion of discount on SBA-guaranteed debentures payable | — |
| | 31,899 |
|
Depreciation expense | 51,275 |
| | 52,369 |
|
Stock-based compensation | 4,499,374 |
| | 7,502,500 |
|
Changes in operating assets and liabilities: | | | |
Interest, fees and other receivables | 445,407 |
| | (2,074,332 | ) |
Prepaid expenses and other current assets | (168,424 | ) | | (743,114 | ) |
Accounts payable and accrued liabilities | (1,257,004 | ) | | (2,827,297 | ) |
Interest payable | (2,273,276 | ) | | (2,176,980 | ) |
Taxes payable | (489,691 | ) | | (735,498 | ) |
Net cash provided by (used in) operating activities | (102,205,664 | ) | | 55,820,937 |
|
Cash flows from investing activities: | | | |
Purchases of property and equipment | (35,976 | ) | | (69,177 | ) |
Net cash used in investing activities | (35,976 | ) | | (69,177 | ) |
Cash flows from financing activities: | | | |
Borrowings under SBA-guaranteed debentures payable | — |
| | 32,800,000 |
|
Repayments of SBA-guaranteed debentures payable | — |
| | (7,800,000 | ) |
Borrowings under credit facility | 106,700,000 |
| | 68,901,849 |
|
Repayments of credit facility | (94,194,139 | ) | | (109,300,000 | ) |
Financing fees paid | (3,417,094 | ) | | (1,123,400 | ) |
Net proceeds related to public offering of common stock | 131,996,144 |
| | 129,136,296 |
|
Common stock withheld for payroll taxes upon vesting of restricted stock | (2,180,295 | ) | | (3,581,872 | ) |
Cash dividends/distributions paid | (62,746,883 | ) | | (49,063,228 | ) |
Net cash provided by financing activities | 76,157,733 |
| | 59,969,645 |
|
Net increase (decrease) in cash and cash equivalents | (26,083,907 | ) | | 115,721,405 |
|
Cash and cash equivalents, beginning of period | 107,087,663 |
| | 52,615,418 |
|
Cash and cash equivalents, end of period | $ | 81,003,756 |
| | $ | 168,336,823 |
|
Supplemental disclosure of cash flow information: | | | |
Cash paid for interest | $ | 20,955,808 |
| | $ | 19,929,857 |
|
Summary of non-cash financing transactions: | | | |
Dividends/distributions paid through DRIP share issuances | $ | 1,637,558 |
| | $ | 2,325,971 |
|
| | | | | | | | | | | |
| Nine Months Ended | | Nine Months Ended |
| September 30, 2020 | | September 30, 2019 |
Cash flows from operating activities: | | | |
Net increase (decrease) in net assets resulting from operations | $ | (14,595,412) | | | $ | 47,604,854 | |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: | | | |
Purchases of portfolio investments | (316,723,958) | | | (294,160,380) | |
Repayments received / sales of portfolio investments | 416,989,098 | | | 251,057,329 | |
| | | |
Purchases of short-term investments | (697,141,628) | | | (577,451,108) | |
Sales of short-term investments | 583,220,977 | | | 571,122,802 | |
Loan origination and other fees received | 6,075,019 | | | 5,118,390 | |
Net realized loss on investments | 36,233,667 | | | 1,146,287 | |
Net realized (gain) loss on foreign currency transactions | 1,089,787 | | | (83,037) | |
Net unrealized appreciation of investments | (3,351,051) | | | (25,080,089) | |
Net unrealized (appreciation) depreciation of foreign currency transactions | 1,756,412 | | | (374,278) | |
| | | |
Payment-in-kind interest accrued, net of payments received | (577,090) | | | — | |
Amortization of deferred financing fees | 1,113,839 | | | 951,134 | |
Loss on extinguishment of debt | 660,066 | | | 143,108 | |
| | | |
Accretion of loan origination and other fees | (1,676,063) | | | (1,254,234) | |
Amortization / accretion of purchased loan premium / discount | (1,138,000) | | | (187,967) | |
| | | |
| | | |
| | | |
Changes in operating assets and liabilities: | | | |
Interest and fees receivables | (2,699,114) | | | 595,826 | |
Prepaid expenses and other assets | (2,569,056) | | | 2,421,921 | |
Accounts payable and accrued liabilities | (118,876) | | | 65,869 | |
Interest payable | (1,724,576) | | | 2,141,975 | |
| | | |
| | | |
Net cash provided by (used in) operating activities | 4,824,041 | | | (16,221,598) | |
| | | |
| | | |
| | | |
| | | |
Cash flows from financing activities: | | | |
| | | |
| | | |
Borrowings under credit facilities | 236,239,474 | | | 188,225,262 | |
Repayments of credit facilities | (127,523,364) | | | (466,000,000) | |
Proceeds from debt securitization | — | | | 348,250,000 | |
Repayment of debt securitization | (139,897,128) | | | (7,468,690) | |
Proceeds from notes | 50,000,000 | | | — | |
Financing fees paid | (544,874) | | | (8,246,692) | |
| | | |
Purchases of shares in repurchase plan | (7,130,632) | | | (18,544,205) | |
| | | |
Cash dividends / distributions paid | (23,171,724) | | | (19,582,956) | |
Net cash provided by (used in) financing activities | (12,028,248) | | | 16,632,719 | |
Net increase (decrease) in cash and foreign currencies | (7,204,207) | | | 411,121 | |
Cash and foreign currencies, beginning of period | 21,991,565 | | | 12,426,982 | |
Cash and foreign currencies, end of period | $ | 14,787,358 | | | $ | 12,838,103 | |
Supplemental disclosure of cash flow information: | | | |
Cash paid for interest | $ | 13,372,484 | | | $ | 14,398,249 | |
| | | |
| | | |
See accompanying notes.
Barings BDC, Inc.
Unaudited Consolidated Schedule of Investments
September 30, 2020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
Non–Control / Non–Affiliate Investments: | | | | | | |
| | | | | | | | | | |
1WorldSync, Inc. (4.2%)*(5) (7) (8) (10) | | IT Consulting & Other Services | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 6.8% Cash, Acquired 07/19, Due 07/25) | | $ | 858,894 | | | $ | 844,671 | | | $ | 841,716 | |
| | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 7.0% Cash, Acquired 07/19, Due 07/25) | | 21,418,269 | | | 21,061,882 | | | 20,989,904 | |
| | | | 22,277,163 | | | 21,906,553 | | | 21,831,620 | |
| | | | | | | | | | |
Accelerate Learning, Inc. (1.4%)*(5) (7) (8) (11) | | Education Services | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 5.6% Cash, Acquired 12/18, Due 12/24) | | 7,567,965 | | | 7,455,531 | | | 7,195,485 | |
| | | | 7,567,965 | | | 7,455,531 | | | 7,195,485 | |
| | | | | | | | | | |
Accurus Aerospace Corporation (4.1%)*(5) (7) (8) (10) | | Aerospace & Defense | | First Lien Senior Secured Term Loan (LIBOR + 5.5%, 6.5% Cash, Acquired 10/18, Due 10/24) | | 24,562,500 | | | 24,298,740 | | | 21,393,938 | |
| | | | 24,562,500 | | | 24,298,740 | | | 21,393,938 | |
| | | | | | | | | | |
Acrisure, LLC (0.4%)*(5) (8) (9) | | Property & Casualty Insurance | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 3.7% Cash, Acquired 03/20, Due 02/27) | | 1,990,000 | | | 1,714,306 | | | 1,917,863 | |
| | | | 1,990,000 | | | 1,714,306 | | | 1,917,863 | |
| | | | | | | | | | |
ADE Holding (d/b/a AD Education) (1.0%)*(3) (5) (7) (8) (15) | | Education Services | | First Lien Senior Secured Term Loan (EURIBOR + 5.0%, 5.0% Cash, Acquired 01/20, Due 01/27) | | 5,232,622 | | | 4,972,254 | | | 5,099,606 | |
| | | | 5,232,622 | | | 4,972,254 | | | 5,099,606 | |
| | | | | | | | | | |
ADMI Corp. (0.6%)*(6) (8) (9) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 2.9% Cash, Acquired 08/18, Due 04/25) | | 3,421,732 | | | 3,431,035 | | | 3,281,441 | |
| | | | 3,421,732 | | | 3,431,035 | | | 3,281,441 | |
| | | | | | | | | | |
Aftermath Bidco Corporation (2.2%)*(5) (7) (8) (10) | | Professional Services | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 6.8% Cash, Acquired 04/19, Due 04/25) | | 11,581,395 | | | 11,374,840 | | | 11,320,814 | |
| | | | 11,581,395 | | | 11,374,840 | | | 11,320,814 | |
| | | | | | | | | | |
Air Canada 2020-2 Class B Pass Through Trust (1.5%)*(5) | | Airlines | | Structured Secured Note - Class B (9.0% Cash, Acquired 09/20, Due 10/25) | | 7,500,000 | | | 7,500,000 | | | 7,852,969 | |
| | | | 7,500,000 | | | 7,500,000 | | | 7,852,969 | |
| | | | | | | | | | |
Altice USA, Inc. (0.5%)*(3) (5) (8) (9) | | Cable & Satellite | | First Lien Senior Secured Term Loan (LIBOR + 2.25%, 2.4% Cash, Acquired 09/18, Due 01/26) | | 2,487,374 | | | 2,212,589 | | | 2,399,793 | |
| | | | 2,487,374 | | | 2,212,589 | | | 2,399,793 | |
| | | | | | | | | | |
American Dental Partners, Inc. (1.8%)*(5) (7) (8) (10) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 5.3% Cash, Acquired 11/18, Due 03/23) | | 9,825,000 | | | 9,810,201 | | | 9,271,001 | |
| | | | 9,825,000 | | | 9,810,201 | | | 9,271,001 | |
| | | | | | | | | | |
American Scaffold, Inc. (1.8%)*(5) (7) (8) (10) | | Aerospace & Defense | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 6.3% Cash, Acquired 09/19, Due 09/25) | | 9,735,797 | | | 9,549,448 | | | 9,468,062 | |
| | | 9,735,797 | | | 9,549,448 | | | 9,468,062 | |
| | | | | | | | | | |
Anagram Holdings, LLC (2.7%)*(3) (5) (7) | | Chemicals, Plastics, & Rubber | | First Lien Senior Secured Note (10.0% Cash, 5.0% PIK, Acquired 08/20, Due 08/25) | | 13,673,780 | | | 12,526,549 | | | 14,220,731 | |
| | | | 13,673,780 | | | 12,526,549 | | | 14,220,731 | |
| | | | | | | | | | |
Anchorage Capital CLO Ltd: Series 2013-1A (0.4%)*(3) (5) (8) (10) | | Structured Finance | | Structured Secured Note - Class DR (LIBOR + 6.8%, 7.1% Cash, Acquired 03/20, Due 10/30) | | 2,000,000 | | | 1,738,801 | | | 1,914,828 | |
| | | | 2,000,000 | | | 1,738,801 | | | 1,914,828 | |
| | | | | | | | | | |
Anju Software, Inc. (2.5%)*(5) (7) (8) (10) | | Application Software | | First Lien Senior Secured Term Loan (LIBOR + 5.5%, 6.6% Cash, Acquired 02/19, Due 02/25) | | 13,701,182 | | | 13,428,607 | | | 13,008,014 | |
| | | | 13,701,182 | | | 13,428,607 | | | 13,008,014 | |
| | | | | | | | | | |
Apex Bidco Limited (0.4%)*(3) (5) (7) (12) | | Business Equipment & Services | | First Lien Senior Secured Term Loan (GBP LIBOR + 6.50%, 7.0% Cash, Acquired 01/20, Due 01/27) (8) | | 1,883,976 | | | 1,846,562 | | | 1,827,457 | |
| | Subordinated Senior Unsecured Term Loan (8.0% PIK, Acquired 01/20, Due 07/27) | | 238,623 | | | 234,872 | | | 231,464 | |
| | | | 2,122,599 | | | 2,081,434 | | | 2,058,921 | |
| | | | | | | | | | |
Apex Tool Group, LLC (0.4%)*(5) (6) (8) (9) | | Industrial Machinery | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 6.5% Cash, Acquired 08/18, Due 08/24) | | 2,041,814 | | | 1,999,069 | | | 1,931,556 | |
| | | 2,041,814 | | | 1,999,069 | | | 1,931,556 | |
| | | | | | | | | | |
AQA Acquisition Holding, Inc. (f/k/a SmartBear) (0.9%)*(5) (7) (8) (10) | | High Tech Industries | | Second Lien Senior Secured Term Loan (LIBOR + 8.0%, 9.0% Cash, Acquired 10/18, Due 05/24) | | 4,959,088 | | | 4,872,484 | | | 4,865,857 | |
| | | | 4,959,088 | | | 4,872,484 | | | 4,865,857 | |
| | | | | | | | | | |
Barings BDC, Inc.
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2020
TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments September 30, 2017 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
Non–Control / Non–Affiliate Investments: | | | | | | |
| | | | | | | | | | |
Access Medical Acquisition, Inc. (3%)* | | Operator of Primary Care Clinics | | Subordinated Notes (10% Cash, 2% PIK, Due 01/22) | | $ | 13,819,514 |
| | $ | 13,620,530 |
| | $ | 13,620,530 |
|
| | Class A Units (1,500,000 units) | | | | 901,026 |
| | 2,610,000 |
|
| | | | 13,819,514 |
| | 14,521,556 |
| | 16,230,530 |
|
| | | | | | | | | | |
Aden & Anais Holdings, Inc. (0%)* | | Baby Products | | Common Stock (20,000 shares) | | | | 2,000,000 |
| | 1,117,000 |
|
| | | | | | 2,000,000 |
| | 1,117,000 |
|
| | | | | | | | | | |
AM General, LLC (5%)* | | Defense Manufacturing | | Senior Note (LIBOR + 7.25%, 8.5% Cash, Due 12/21)(8) | | 9,500,000 |
| | 9,368,788 |
| | 9,410,000 |
|
| | Second Lien Term Note (LIBOR +11.75%, 13.0% Cash, Due 06/22)(8) | | 20,000,000 |
| | 19,459,561 |
| | 19,641,000 |
|
| | | | 29,500,000 |
| | 28,828,349 |
| | 29,051,000 |
|
| | | | | | | | | | |
Avantor Performance Materials Holdings, LLC (2%)* | | Life Sciences and Advanced Technologies | | Second Lien Term Note (LIBOR + 8.25%, 9.5% Cash, Due 03/25)(8) | | 15,000,000 |
| | 14,856,508 |
| | 14,976,000 |
|
| | | | 15,000,000 |
| | 14,856,508 |
| | 14,976,000 |
|
| | | | | | | | | | |
AVL Holdings, Inc. (0%)* | | Manufacturer and Distributor for Independent Artists and Authors | | Common Stock (138 shares) | | | | 1,300,000 |
| | 2,049,000 |
|
| | | | | | 1,300,000 |
| | 2,049,000 |
|
| | | | | | | | | | |
Baker Hill Acquisition, LLC (2%)* | | Loan Origination Software Solutions Provider | | Second Lien Term Notes (LIBOR + 11.0%, 12.3% Cash, Due 03/21)(8) | | 13,500,000 |
| | 13,358,951 |
| | 11,000,000 |
|
| | Delayed Draw Term Note (LIBOR + 11.0%, 12.3% Cash, Due 03/21)(8) | | 1,500,000 |
| | 1,481,072 |
| | 1,481,072 |
|
| | Limited Partnership Interest | | | | 1,498,500 |
| | 103,000 |
|
| | | | 15,000,000 |
| | 16,338,523 |
| | 12,584,072 |
|
| | | | | | | | | | |
Cafe Enterprises, Inc. (1%)* | | Restaurant | | Second Lien Term Note (Prime + 5.75%, 10.0% Cash, Due 03/19)(6)(8) | | 2,000,000 |
| | 1,990,411 |
| | 1,454,000 |
|
| | Subordinated Note (7% Cash, 7% PIK, Due 09/19)(6) | | 14,632,863 |
| | 13,745,570 |
| | 2,801,000 |
|
| | Series C Preferred Stock (10,000 shares) | | | | 1,000,000 |
| | — |
|
| | | | 16,632,863 |
| | 16,735,981 |
| | 4,255,000 |
|
| | | | | | | | | | |
Captek Softgel International, Inc. (5%)* | | Nutraceuticals Manufacturer | | Subordinated Note (10% Cash, 1.5% PIK, Due 01/23) | | 30,695,433 |
| | 30,405,827 |
| | 30,405,827 |
|
Common Stock (38,023 shares) | | | | 3,957,697 |
| | 4,059,000 |
|
| | | 30,695,433 |
| | 34,363,524 |
| | 34,464,827 |
|
| | | | | | | | | | |
Carolina Beverage Group, LLC (0%)* | | Beverage Manufacturing and Packaging | | Class B Units (11,974 units) | | | | 119,735 |
| | 1,183,000 |
|
| | | | | 119,735 |
| | 1,183,000 |
|
| | | | | | | | | | |
Centerfield Media Holding Company (0%)* | | Digital Marketing | | Common Shares (500 shares) | | | | 500,000 |
| | 1,121,000 |
|
| | | |
|
| | 500,000 |
| | 1,121,000 |
|
| | | | | | | | | | |
CIBT Global, Inc. (2%)* | | Provider of Mobility Services | | Second Lien Term Note (LIBOR + 7.75%, 9.1% Cash, Due 06/25)(8) | | 10,000,000 |
| | 9,902,191 |
| | 9,840,000 |
|
| | | | 10,000,000 |
| | 9,902,191 |
| | 9,840,000 |
|
| | | | | | | | | | |
CIS Acquisition, LLC (0%)* | | Secure Communications and Computing Solutions Provider | | Units (1.09 units) | | | | 277,538 |
| | 277,538 |
|
| | | | | | 277,538 |
| | 277,538 |
|
| | | | | | | | | | |
Community Intervention Services, Inc. (1%)* | | Provider of Behavioral Health Services | | Subordinated Note (7% Cash, 6% PIK, Due 01/21) (6) | | 20,294,798 |
| | 17,732,558 |
| | 3,717,000 |
|
| | | | 20,294,798 |
| | 17,732,558 |
| | 3,717,000 |
|
| | | | | | | | | | |
Constellis Holdings, LLC (1%)* | | Provider of Security and Risk Management Services | | Second Lien Term Note (LIBOR + 9.0%, 10.3% Cash, Due 04/25)(8) | | 5,000,000 |
| | 4,928,155 |
| | 4,903,000 |
|
| | | | 5,000,000 |
| | 4,928,155 |
| | 4,903,000 |
|
| | | | | | | | | | |
CPower Ultimate HoldCo, LLC (0%)* | | Demand Response Business | | Units (345,542 units) | | | | 345,542 |
| | 345,542 |
|
| | | | | | 345,542 |
| | 345,542 |
|
| | | | | | | | | | |
CWS Holding Company, LLC (0%)* | | Manufacturer of Custom Windows and Sliding Doors | | Class A Units (1,500,000 units) | | | | 1,500,000 |
| | 1,624,000 |
|
| | | | | 1,500,000 |
| | 1,624,000 |
|
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
Arch Global Precision LLC (2.5%)*(5) (7) (8) (10) | | Industrial Machinery | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 5.0% Cash, Acquired 04/19, Due 04/26) | | $ | 13,472,831 | | | $ | 13,265,371 | | | $ | 13,278,284 | |
| | | | 13,472,831 | | | 13,265,371 | | | 13,278,284 | |
| | | | | | | | | | |
Armstrong Transport Group (Pele Buyer, LLC ) (1.4%)*(5) (7) (8) (10) | | Air Freight & Logistics | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 5.8% Cash, Acquired 06/19, Due 06/24) | | 5,368,480 | | | 5,286,234 | | | 5,243,394 | |
| | First Lien Senior Secured Term Loan (LIBOR + 6.0%, 6.2% Cash, Acquired 07/20, Due 06/24) | | 2,000,318 | | | 1,961,993 | | | 2,000,318 | |
| | | | 7,368,798 | | | 7,248,227 | | | 7,243,712 | |
| | | | | | | | | | |
Ascensus Specialties, LLC (1.3%)*(5) (7) (8) (9) | | Specialty Chemicals | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 4.9% Cash, Acquired 09/19, Due 09/26) | | 7,037,126 | | | 6,975,230 | | | 6,942,179 | |
| | | | 7,037,126 | | | 6,975,230 | | | 6,942,179 | |
| | | | | | | | | | |
ASPEQ Heating Group LLC (1.7%)*(5) (7) (8) (17) | | Building Products, Air and Heating | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 6.3% Cash, Acquired 11/19, Due 11/25) | | 8,968,089 | | | 8,850,558 | | | 8,833,568 | |
| | | | 8,968,089 | | | 8,850,558 | | | 8,833,568 | |
| | | | | | | | | | |
Auxi International (0.3%)*(3) (5) (7) (8) (14) | | Commercial Finance | | First Lien Senior Secured Term Loan (EURIBOR + 5.5%, 5.5% Cash, Acquired 12/19, Due 12/26) | | 1,641,711 | | | 1,513,488 | | | 1,596,564 | |
| | | | 1,641,711 | | | 1,513,488 | | | 1,596,564 | |
| | | | | | | | | | |
Aveanna Healthcare Holdings, Inc. (0.9%)*(6) (8) (10) | | Health Care Facilities | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 5.3% Cash, Acquired 10/18, Due 03/24) | | 1,465,984 | | | 1,452,738 | | | 1,378,391 | |
| | First Lien Senior Secured Term Loan (LIBOR + 5.5%, 6.5% Cash, Acquired 10/18, Due 03/24) | | 3,511,966 | | | 3,512,719 | | | 3,299,211 | |
| | | | 4,977,950 | | | 4,965,457 | | | 4,677,602 | |
| | | | | | | | | | |
AVSC Holding Corp. (0.8%)* (5) (6) (8) (11) | | Advertising | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 4.25% Cash, Acquired 08/18, Due 03/25) | | 4,917,073 | | | 4,895,932 | | | 3,650,926 | |
| | First Lien Senior Secured Term Loan (LIBOR + 4.50%, 5.5% Cash, Acquired 08/18, Due 03/25) (7) | | 750,000 | | | 550,978 | | | 562,500 | |
| | | | 5,667,073 | | | 5,446,910 | | | 4,213,426 | |
| | | | | | | | | | |
Bass Pro Group, LLC (0.4%)*(5) (8) (10) | | General Merchandise Stores | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 5.8% Cash, Acquired 03/20, Due 09/24) | | 1,984,655 | | | 1,787,822 | | | 1,963,578 | |
| | | | 1,984,655 | | | 1,787,822 | | | 1,963,578 | |
| | | | | | | | | | |
BDP International, Inc. (f/k/a BDP Buyer, LLC) (4.7%)*(5) (7) (8) (10) | | Air Freight & Logistics | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 5.8% Cash, Acquired 12/18, Due 12/24) | | 24,562,500 | | | 24,197,584 | | | 24,562,500 | |
| | | | 24,562,500 | | | 24,197,584 | | | 24,562,500 | |
| | | | | | | | | | |
Beacon Pointe Advisors, LLC (0.1%)*(5) (7) (8) (10) | | Asset Manager & Custody Bank | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 6.0% Cash, Acquired 03/20, Due 03/26) | | 633,182 | | | 612,411 | | | 614,342 | |
| | | | 633,182 | | | 612,411 | | | 614,342 | |
| | | | | | | | | | |
Benify (Bennevis AB) (0.3%)*(3) (5) (7) (8) (16) | | High Tech Industries | | First Lien Senior Secured Term Loan (STIBOR + 5.25%, 5.3% Cash, Acquired 07/19, Due 07/26) | | 1,458,053 | | | 1,365,873 | | | 1,436,182 | |
| | | | 1,458,053 | | | 1,365,873 | | | 1,436,182 | |
| | | | | | | | | | |
Blackhawk Network Holdings Inc. (0.9%)*(6) (8) (9) | | Data Processing & Outsourced Services | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 3.1% Cash, Acquired 11/18, Due 06/25) | | 4,924,433 | | | 4,924,433 | | | 4,630,494 | |
| | | | 4,924,433 | | | 4,924,433 | | | 4,630,494 | |
| | | | | | | | | | |
Boxer Parent Company Inc. (0.4%)*(5) (8) (9) | | Software/Services | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 4.4% Cash, Acquired 03/20, Due 10/25) | | 1,984,848 | | | 1,800,811 | | | 1,922,147 | |
| | | | 1,984,848 | | | 1,800,811 | | | 1,922,147 | |
| | | | | | | | | | |
Brown Machine Group Holdings, LLC (1.0%)*(5) (7) (8) (10) | | Industrial Equipment | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 6.3% Cash, Acquired 10/18, Due 10/24) | | 5,286,022 | | | 5,239,308 | | | 5,153,872 | |
| | | | 5,286,022 | | | 5,239,308 | | | 5,153,872 | |
| | | | | | | | | | |
Cadent, LLC (f/k/a Cross MediaWorks) (1.4%)*(5) (7) (8) (10) | | Media & Entertainment | | First Lien Senior Secured Term Loan (LIBOR + 5.5%, 6.5% Cash, Acquired 09/18, Due 09/23) | | 7,532,846 | | | 7,487,168 | | | 7,397,255 | |
| | | | 7,532,846 | | | 7,487,168 | | | 7,397,255 | |
| | | | | | | | | | |
Carlson Travel, Inc (0.4%)*(5) (7) | | Business Travel Management | | First Lien Senior Secured Note (6.8% Cash, Acquired 09/20, Due 12/25) | | 3,000,000 | | | 2,362,500 | | | 2,265,000 | |
| | | | 3,000,000 | | | 2,362,500 | | | 2,265,000 | |
| | | | | | | | | | |
Carlyle Aviation Partners Ltd. (0.2%)*(5) | | Structured Finance | | Structured Secured Note, Series 2019-2 - Class A (3.4% Cash, Acquired 3/20, Due 10/39) | | 929,148 | | | 841,103 | | | 870,716 | |
| | Structured Secured Note, Series 2018-2 - Class A (4.5% Cash, Acquired 03/20, Due 11/38) | | 434,772 | | | 393,979 | | | 404,368 | |
| | | | 1,363,920 | | | 1,235,082 | | | 1,275,084 | |
| | | | | | | | | | |
Barings BDC, Inc.
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2020
TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments — (Continued) September 30, 2017 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
Data Source Holdings, LLC (0%)* | | Print Supply Chain Management Services | | Common Units (47,503 units) | | | | $ | 1,000,000 |
| | $ | 882,000 |
|
| | | | | 1,000,000 |
| | 882,000 |
|
| | | | | | | | | | |
Del Real, LLC (3%)* | | Hispanic Refrigerated Foods Company | | Subordinated Note (11% Cash, Due 04/23) | | $ | 14,000,000 |
| | 13,751,325 |
| | 13,751,325 |
|
| | Class A Units (3,000,000 units) | | | | 3,000,000 |
| | 3,442,000 |
|
| | | | 14,000,000 |
| | 16,751,325 |
| | 17,193,325 |
|
| | | | | | | | | | |
Dimora Brands, Inc. (3%)* | | Hardware Designer and Distributor | | Second Lien Term Note (LIBOR + 8.5%, 9.7% Cash, Due 08/25)(8) | | 20,000,000 |
| | 19,600,000 |
| | 19,600,000 |
|
| | | | 20,000,000 |
| | 19,600,000 |
| | 19,600,000 |
|
| | | | | | | | | | |
DLC Acquisition, LLC (6%)* | | Staffing Firm | | Senior Notes (LIBOR + 8.0%, 10% Cash, Due 12/20)(8) | | 21,978,125 |
| | 21,785,931 |
| | 21,785,931 |
|
| Senior Note (10% Cash, 2% PIK, Due 12/20) | | 17,187,831 |
| | 17,024,644 |
| | 17,024,644 |
|
| | | 39,165,956 |
| | 38,810,575 |
| | 38,810,575 |
|
| | | | | | | | | | |
Dyno Acquiror, Inc. (1%)* | | Sewing Products and Seasonal Decorative Products Supplier | | Subordinated Note (10.5% Cash, 1.5% PIK, Due 08/20) | | 4,646,082 |
| | 4,623,967 |
| | 4,623,967 |
|
| Series A Units (600,000 units) | | | | 600,000 |
| | 591,000 |
|
| | | 4,646,082 |
| | 5,223,967 |
| | 5,214,967 |
|
| | | | | | | | | | |
Eckler's Holdings, Inc. (0%)* | | Restoration Parts and Accessories for Classic Cars and Trucks | | Subordinated Note (7.7% Cash, Due 06/19)(6) | | 13,941,700 |
| | 13,242,814 |
| | 3,126,000 |
|
| Common Stock (18,029 shares) | | | | 183,562 |
| | — |
|
| Series A Preferred Stock (1,596 shares) | | | | 1,596,126 |
| | — |
|
| Series B Preferred Stock (702 shares) | | | | 435,127 |
| | — |
|
| | | 13,941,700 |
| | 15,457,629 |
| | 3,126,000 |
|
| | | | | | | | | | |
Fridababy Holdings, LLC (4%)* | | Baby Products | | Subordinated Notes (LIBOR + 9.0%, 10.3% Cash, Due 10/21)(8) | | 23,000,000 |
| | 22,614,777 |
| | 22,614,777 |
|
| | Class B Units (4,500 units) | | | | 273,401 |
| | 288,000 |
|
| | | | 23,000,000 |
| | 22,888,178 |
| | 22,902,777 |
|
| | | | | | | | | | |
FrontStream Holdings, LLC (1%)* | | Payment and Donation Management Product Service Provider | | Subordinated Note (LIBOR + 6.0%, 7.3% Cash, Due 12/20)(6)(8) | | 14,624,745 |
| | 14,272,931 |
| | 7,315,000 |
|
| | Series C-2 Preferred Shares (500 shares) | | | | 500,000 |
| | — |
|
| | | | 14,624,745 |
| | 14,772,931 |
| | 7,315,000 |
|
| | | | | | | | | | |
Frozen Specialties, Inc. (2%)* | | Frozen Foods Manufacturer | | Subordinated Note (10% Cash, 4% PIK, Due 3/18) | | 14,094,381 |
| | 14,094,381 |
| | 14,094,381 |
|
| | 14,094,381 |
| | 14,094,381 |
| | 14,094,381 |
|
| | | | | | | | | | |
GST AutoLeather, Inc. (0%)* | | Supplier of Automotive Interior Leather | | Subordinated Note (11% Cash, 2% PIK, Due 01/21)(6) | | 24,140,883 |
| | 23,073,507 |
| | 2,450,000 |
|
| | | | 24,140,883 |
| | 23,073,507 |
| | 2,450,000 |
|
| | | | | | | | | | |
Halo Branded Solutions, Inc. (2%)* | | Supply Chain Services | | Subordinated Notes (11% Cash, 1% PIK, Due 10/22) | | 10,490,124 |
| | 10,292,192 |
| | 10,292,192 |
|
| | Class A1 Units (2,600 units) | | | | 2,600,000 |
| | 4,034,000 |
|
| | | | 10,490,124 |
| | 12,892,192 |
| | 14,326,192 |
|
| | | | | | | | | | |
HemaSource, Inc. (2%)* | | Medical Products Distributor | | Subordinated Note (9.5% Cash, 1.5% PIK, Due 01/24) | | 10,030,833 |
| | 9,836,481 |
| | 9,836,481 |
|
| | Class A Units (1,000,000 units) | | | | 1,000,000 |
| | 1,000,000 |
|
| | | | 10,030,833 |
| | 10,836,481 |
| | 10,836,481 |
|
| | | | | | | | | | |
HKW Capital Partners IV, L.P. (0%)*(4) | | Multi-Sector Holdings | | 0.6% Limited Partnership Interest | | | | 922,279 |
| | 1,533,000 |
|
| | | | | | 922,279 |
| | 1,533,000 |
|
| | | | | | | | | | |
HTC Borrower, LLC (4%)* | | Hunting and Outdoor Products | | Subordinated Notes (10% Cash, 3% PIK, Due 09/20) | | 26,730,722 |
| | 26,501,283 |
| | 26,501,283 |
|
| | | | 26,730,722 |
| | 26,501,283 |
| | 26,501,283 |
|
| | | | | | | | | | |
ICP Industrial, Inc. (4%)* | | Coatings Formulator and Manufacturer | | Second Lien Term Note (LIBOR + 8.5%, 9.7% Cash, Due 04/22)(8) | | 7,500,000 |
| | 7,442,511 |
| | 7,442,511 |
|
| | Subordinated Notes (10% Cash, 1% PIK, Due 10/22) | | 8,149,614 |
| | 8,021,608 |
| | 8,021,608 |
|
| | Subordinated Notes (14% PIK, Due 10/22) | | 6,374,723 |
| | 6,325,018 |
| | 6,325,018 |
|
| | Class A Units (1,289 units) | | | | 1,751,483 |
| | 1,643,000 |
|
| | | | 22,024,337 |
| | 23,540,620 |
| | 23,432,137 |
|
| | | | | | | | | | |
IDERA, Inc. (2%)* | | Software Provider | | Second Lien Term Note (LIBOR + 9.0%, 10.2% Cash, Due 06/25)(8) | | 10,000,000 |
| | 9,853,115 |
| | 9,853,115 |
|
| | | | 10,000,000 |
| | 9,853,115 |
| | 9,853,115 |
|
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
Centralis Finco S.a.r.l. (0.2%)*(3) (5) (7) (8) (14) | | Diversified Financial Services | | First Lien Senior Secured Term Loan (EURIBOR + 5.25%, 5.3% Cash, Acquired 5/20, Due 5/27) | | $ | 831,808 | | | $ | 731,243 | | | $ | 806,450 | |
| | | | 831,808 | | | 731,243 | | | 806,450 | |
| | | | | | | | | | |
Cineworld Group PLC (0.4%)*(3) (5) (8) (11) | | Leisure Products | | First Lien Senior Secured Term Loan (LIBOR + 2.25%, 2.5% Cash, Acquired 4/20, Due 2/25) | | 2,981,586 | | | 1,989,848 | | | 1,971,156 | |
| | | | 2,981,586 | | | 1,989,848 | | | 1,971,156 | |
| | | | | | | | | | |
Clarios Global LP (0.4%)*(5) (8) (9) | | Auto Parts & Equipment | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 3.6% Cash, Acquired 3/20, Due 4/26) | | 1,984,962 | | | 1,801,408 | | | 1,930,991 | |
| | | | 1,984,962 | | | 1,801,408 | | | 1,930,991 | |
| | | | | | | | | | |
Classic Collision (Summit Buyer, LLC) (1.1%)*(5) (7) (8) (10) | | Auto Collision Repair Centers | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 5.5% Cash, Acquired 01/20, Due 01/26) | | 5,582,424 | | | 5,303,593 | | | 5,582,424 | |
| | | | 5,582,424 | | | 5,303,593 | | | 5,582,424 | |
| | | | | | | | | | |
CM Acquisitions Holdings Inc. (3.9%)*(5) (7) (8) (11) | | Internet & Direct Marketing
| | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 5.5% Cash, Acquired 05/19, Due 05/25) | | 20,434,481 | | | 20,129,562 | | | 20,264,435 | |
| | | | 20,434,481 | | | 20,129,562 | | | 20,264,435 | |
| | | | | | | | | | |
CMT Opco Holding, LLC (Concept Machine) (1.0%)*(5) (7) (8) (11) | | Distributors | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 6.0% Cash, Acquired 01/20, Due 01/25) | | 5,437,083 | | | 5,340,979 | | | 5,007,553 | |
| | LLC Units (10,185 units, Acquired 01/20) | | | | 407,915 | | | 306,379 | |
| | | | 5,437,083 | | | 5,748,894 | | | 5,313,932 | |
| | | | | | | | | | |
Confie Seguros Holding II Co. (0.4%)*(5) (8) (9) | | Insurance Brokerage Services | | Second Lien Senior Secured Term Loan (LIBOR + 8.5%, 8.7% Cash, Acquired 10/19, Due 11/25) | | 2,500,000 | | | 2,365,231 | | | 1,906,250 | |
| | | | 2,500,000 | | | 2,365,231 | | | 1,906,250 | |
| | | | | | | | | | |
Contabo Finco S.À R.L (0.3%)*(3) (5) (7) (8) (14) | | Internet Software and Services | | First Lien Senior Secured Term Loan (EURIBOR + 5.75%, 5.8% Cash, Acquired 10/19, Due 10/26) | | 1,421,669 | | | 1,308,924 | | | 1,376,558 | |
| | | | 1,421,669 | | | 1,308,924 | | | 1,376,558 | |
| | | | | | | | | | |
Container Store Group, Inc., (The) (0.5%)*(3) (6) (8) (10) | | Retail | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 6.0% Cash, Acquired 09/18, Due 09/23) | | 2,869,873 | | | 2,871,724 | | | 2,704,855 | |
| | | | 2,869,873 | | | 2,871,724 | | | 2,704,855 | |
| | | | | | | | | | |
CSL DualCom (2.4%)*(3) (5) (7) (8) (12) | | Tele-communications | | First Lien Senior Secured Term Loan (GBP LIBOR + 5.5%, 5.6% Cash, Acquired 09/20, Due 09/27) | | 12,829,485 | | | 12,128,593 | | | 12,341,964 | |
| | | | 12,829,485 | | | 12,128,593 | | | 12,341,964 | |
| | | | | | | | | | |
Dart Buyer, Inc. (2.3%)*(3) (5) (7) (8) (10) | | Aerospace & Defense | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 6.3% Cash, Acquired 04/19, Due 04/25) | | 12,354,672 | | | 12,124,446 | | | 12,058,967 | |
| | | | 12,354,672 | | | 12,124,446 | | | 12,058,967 | |
| | | | | | | | | | |
Diamond Sports Group, LLC (0.2%)* (5) (8) (9) | | Broadcasting | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 3.4% Cash, Acquired 03/20, Due 08/26) | | 992,481 | | | 785,480 | | | 765,868 | |
| | | | 992,481 | | | 785,480 | | | 765,868 | |
| | | | | | | | | | |
Distinct Holdings, Inc. (1.4%)*(5) (7) (8) (10) | | Systems Software | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 5.8% Cash, Acquired 04/19, Due 12/23) | | 7,535,774 | | | 7,467,659 | | | 7,396,362 | |
| | | | 7,535,774 | | | 7,467,659 | | | 7,396,362 | |
| | | | | | | | | | |
DreamStart Bidco SAS (d/b/a SmartTrade) (0.5%)*(3) (5) (7) (8) (15) | | Diversified Financial Services | | First Lien Senior Secured Term Loan (EURIBOR + 4.5%, 4.5% Cash, 1.8% PIK, Acquired 03/20, Due 03/27) | | 2,862,667 | | | 2,597,617 | | | 2,757,703 | |
| | | | 2,862,667 | | | 2,597,617 | | | 2,757,703 | |
| | | | | | | | | | |
Elmwood CLO: Series 2019-1A (0.6%)*(3) (5) (8) (10) | | Structured Finance | | Structured Secured Note - Class E (LIBOR + 7.10%, 7.4% Cash, Acquired 03/20, Due 04/30) | | 3,000,000 | | | 2,673,958 | | | 2,923,074 | |
| | | | 3,000,000 | | | 2,673,958 | | | 2,923,074 | |
| | | | | | | | | | |
Endo International PLC (0.9%)*(3) (5) (6) (8) (10) | | Pharmaceuticals | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 5.0% Cash, Acquired 09/18, Due 04/24) | | 4,825,914 | | | 4,861,718 | | | 4,584,618 | |
| | | | 4,825,914 | | | 4,861,718 | | | 4,584,618 | |
| | | | | | | | | | |
Envision Healthcare Corp. (0.4%)* (5) (8) (9) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 3.75%, 3.9% Cash, Acquired 03/20, Due 10/25) | | 3,164,825 | | | 2,231,579 | | | 2,275,857 | |
| | | | 3,164,825 | | | 2,231,579 | | | 2,275,857 | |
| | | | | | | | | | |
Exeter Property Group, LLC (2.2%)*(5) (7) (8) (9) | | Real Estate | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 4.7% Cash, Acquired 02/19, Due 08/24) | | 11,893,750 | | | 11,763,359 | | | 11,655,875 | |
| | | | 11,893,750 | | | 11,763,359 | | | 11,655,875 | |
| | | | | | | | | | |
Eyemart Express LLC (0.3%)*(6) (8) (9) | | Retail | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.0% Cash, Acquired 08/18, Due 08/24) | | 1,422,131 | | | 1,425,756 | | | 1,373,537 | |
| | | | 1,422,131 | | | 1,425,756 | | | 1,373,537 | |
| | | | | | | | | | |
Barings BDC, Inc.
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2020
TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments — (Continued) September 30, 2017 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
Inland Pipe Rehabilitation Holding Company LLC (0%)* | | Cleaning and Repair Services | | Membership Interest Purchase Warrant (3%) | | | | $ | 853,500 |
| | $ | 596,000 |
|
| | | | 853,500 |
| | 596,000 |
|
| | | | | | | | | | |
Integrated Efficiency Solutions, Inc. (3%)* | | Energy Services Contracting Firm | | Senior Secured Term Note (LIBOR + 9.25%, 10.6% Cash, Due 06/22)(8) | | $ | 18,500,000 |
| | 18,188,844 |
| | 18,188,844 |
|
Series B Preferred Units (238,095 units) | | | | 300,000 |
| | 300,000 |
|
| | 18,500,000 |
| | 18,488,844 |
| | 18,488,844 |
|
| | | | | | | | | | |
IPS Structural Adhesives Holdings, Inc. (2%)* | | Specialty Adhesives and Plumbing Products Manufacturer | | Second Lien Term Note (LIBOR + 9.5%, 10.7% Cash, Due 12/24)(8) | | 15,000,000 |
| | 14,718,778 |
| | 14,903,000 |
|
| | | | 15,000,000 |
| | 14,718,778 |
| | 14,903,000 |
|
| | | | | | | | | | |
Keystone Peer Review Organization, Inc. (0%)* | | Healthcare - Managed Care | | Second Lien Term Note (LIBOR + 9.25%, 10.6% Cash, Due 05/25)(8) | | 3,000,000 |
| | 2,942,497 |
| | 2,927,000 |
|
| | | | 3,000,000 |
| | 2,942,497 |
| | 2,927,000 |
|
| | | | | | | | | | |
KidKraft, Inc. (4%)* | | Children's Toy Manufacturer and Distributor | | Second Lien Term Note (11% Cash, 1% PIK, Due 03/22) | | 27,876,081 |
| | 27,401,586 |
| | 27,401,586 |
|
| | | | 27,876,081 |
| | 27,401,586 |
| | 27,401,586 |
|
| | | | | | | | | | |
K-Square Restaurant Partners, LP (0%)* | | Restaurant | | Class A Units of Limited Partnership (2,000 units) | | | | 638,260 |
| | 2,759,000 |
|
| | | | | | 638,260 |
| | 2,759,000 |
|
| | | | | | | | | | |
Lakeview Health Holdings, Inc. (3%)* | | Substance Abuse Treatment Service Provider | | Senior Note (LIBOR + 6.75%, 8.1% Cash, Due 12/21)(8) | | 18,473,037 |
| | 18,298,370 |
| | 18,298,370 |
|
| | Common Stock (2,000 shares) | | | | 2,000,000 |
| | 1,149,000 |
|
| | | | 18,473,037 |
| | 20,298,370 |
| | 19,447,370 |
|
| | | | | | | | | | |
Media Storm, LLC (1%)* | | Marketing Services | | Subordinated Note (10% Cash, Due 08/19)(6) | | 6,709,091 |
| | 6,541,519 |
| | 3,571,000 |
|
Membership Units (1,216,204 units) | | | | 1,176,957 |
| | — |
|
| | 6,709,091 |
| | 7,718,476 |
| | 3,571,000 |
|
| | | | | | | | | | |
MIC Holding LLC (1%)* | | Firearm Accessories Manufacturer and Distributor | | Preferred Units (1,470 units) | | | | 1,470,000 |
| | 3,333,000 |
|
| | Common Units (30,000 units) | | | | 30,000 |
| | 5,572,000 |
|
| | | | | | 1,500,000 |
| | 8,905,000 |
|
| | | | | | | | | | |
Micross Solutions LLC (3%)* | | Provider of Semiconductor Products and Services | | Senior Note (LIBOR + 5.50%, 6.8% Cash, Due 08/23)(8) | | 15,000,000 |
| | 14,820,000 |
| | 14,820,000 |
|
Class A-2 Common Units (1,979,524 units) | | | | 2,019,693 |
| | 2,246,000 |
|
| | 15,000,000 |
| | 16,839,693 |
| | 17,066,000 |
|
| | | | | | | | | | |
Motor Vehicle Software Corporation (3%)* | | Provider of EVR Services | | Subordinated Note (10% Cash, 0.5% PIK, Due 03/21) | | 20,321,960 |
| | 20,043,031 |
| | 20,043,031 |
|
| | Class A Units (1,000,000 units) | | | | 1,087,460 |
| | 1,526,000 |
|
| | | | 20,321,960 |
| | 21,130,491 |
| | 21,569,031 |
|
| | | | | | | | | | |
Nautic Partners VII, LP (0%)*(4) | | Multi-Sector Holdings | | 0.4% Limited Partnership Interest | | | | 1,180,910 |
| | 1,748,000 |
|
| | | | | | 1,180,910 |
| | 1,748,000 |
|
| | | | | | | | | | |
Nomacorc, LLC (3%)* | | Synthetic Wine Cork Producer | | Subordinated Note (10% Cash, 2.3% PIK, Due 07/21) | | 21,234,114 |
| | 20,972,775 |
| | 17,400,000 |
|
| | Limited Partnership Interest | | | | 2,161,185 |
| | — |
|
| | | | 21,234,114 |
| | 23,133,960 |
| | 17,400,000 |
|
| | | | | | | | | | |
Orchid Underwriters Agency, LLC (1%)* | | Insurance Underwriter | | Subordinated Note (10% Cash, 1.5% PIK, Due 03/23) | | 2,127,072 |
| | 2,086,080 |
| | 2,086,080 |
|
Subordinated Note (13.5% PIK, Due 03/24) | | 785,362 |
| | 770,531 |
| | 770,531 |
|
Class A Preferred Units (15,000 units) | | | | 338,158 |
| | 927,000 |
|
Class A Common Units (15,000 units) | | | | — |
| | 1,153,000 |
|
| | 2,912,434 |
| | 3,194,769 |
| | 4,936,611 |
|
| | | | | | | | | | |
ProAmpac PG Borrower LLC (2%)* | | Manufacturer of Flexible Packaging Products | | Second Lien Term Note (LIBOR + 8.5%, 9.8% Cash, Due 11/24)(8) | | 15,000,000 |
| | 14,789,664 |
| | 14,982,000 |
|
| | | | 15,000,000 |
| | 14,789,664 |
| | 14,982,000 |
|
| | | | | | | | | | |
Q International Courier, LLC (2%)* | | Third-Party Logistics Provider | | Second Lien Term Note (LIBOR + 8.25%, 9.6% Cash, Due 09/25)(8) | | 14,000,000 |
| | 13,720,000 |
| | 13,720,000 |
|
| | | | 14,000,000 |
| | 13,720,000 |
| | 13,720,000 |
|
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
F24 (Stairway BidCo Gmbh)) (0.7%)*(3) (5) (7) (8) (14) | | Software Services | | First Lien Senior Secured Term Loan (EURIBOR + 6.5%, 6.5% Cash, Acquired 08/20, Due 08/27) | | $ | 3,912,838 | | | $ | 3,770,493 | | | $ | 3,731,425 | |
| | | | 3,912,838 | | | 3,770,493 | | | 3,731,425 | |
| | | | | | | | | | |
Foundation Risk Partners, Corp. (0.3%)*(5) (8) (10) | | Financial Services | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 5.8% Cash, Acquired 09/20, Due 11/23) | | 1,458,333 | | | 1,195,833 | | | 1,195,833 | |
| | Second Lien Senior Secured Term Loan (LIBOR + 8.50%, 9.5% Cash, Acquired 09/20, Due 11/24) | | 486,111 | | | 325,694 | | | 325,694 | |
| | | | 1,944,444 | | | 1,521,527 | | | 1,521,527 | |
| | | | | | | | | | |
Frazer Consultants, LLC (d/b/a Tribute Technology) (1.3%)*(5) (7) (8) (11) | | Software Services | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 4.9% Cash, Acquired 11/19, Due 08/23) | | 6,688,791 | | | 6,633,268 | | | 6,688,791 | |
| | | | 6,688,791 | | | 6,633,268 | | | 6,688,791 | |
| | | | | | | | | | |
GoldenTree Loan Opportunities IX, Limited: Series 2014-9A (0.2%)*(3) (5) (8) (10) | | Structured Finance | | Structured Secured Note - Class DR2 (LIBOR + 3.0%, 3.3% Cash, Acquired 03/20, Due 10/29) | | 1,250,000 | | | 909,635 | | | 1,187,548 | |
| | | | 1,250,000 | | | 909,635 | | | 1,187,548 | |
| | | | | | | | | | |
Gulf Finance, LLC (0.1%)*(5) (8) (9) | | Oil & Gas Exploration & Production | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 6.3% Cash, Acquired 10/18, Due 08/23) | | 1,050,973 | | | 938,230 | | | 738,309 | |
| | | | 1,050,973 | | | 938,230 | | | 738,309 | |
| | | | | | | | | | |
Hawaiian Airlines 2020-1 Class B Pass Through Certificates (1.4%)*(5) | | Airlines | | Structured Secured Note - Class B (11.3% Cash, Acquired 08/20, Due 09/25) | | 7,500,000 | | | 7,500,000 | | | 7,544,657 | |
| | | | 7,500,000 | | | 7,500,000 | | | 7,544,657 | |
| | | | | | | | | | |
Heartland, LLC (0.9%)*(5) (7) (8) (11) | | Commercial Services & Supplies | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 5.8% Cash, Acquired 08/19, Due 08/25) | | 5,462,750 | | | 5,289,830 | | | 4,954,660 | |
| | | | 5,462,750 | | | 5,289,830 | | | 4,954,660 | |
| | | | | | | | | | |
Heilbron (f/k/a Sucsez (Bolt Bidco B.V.)) (2.0%)*(3) (5) (7) (8) (15) (20) | | Insurance | | First Lien Senior Secured Term Loan (EURIBOR + 5.0%, 5.0% Cash, Acquired 09/19, Due 09/26) | | 9,980,450 | | | 9,208,134 | | | 9,730,939 | |
| | First Lien Senior Secured Term Loan (EURIBOR + 6.0%, 6.0% Cash, Acquired 07/20, Due 09/26) | | 1,047,298 | | | 809,090 | | | 820,844 | |
| | | | 11,027,748 | | | 10,017,224 | | | 10,551,783 | |
| | | | | | | | | | |
Highbridge Loan Management Ltd: Series 2014A-19 (0.2%)*(3) (5) (8) (10) | | Structured Finance | | Structured Secured Note - Class E (LIBOR + 6.75%, 7.0% Cash, Acquired 03/20, Due 07/30) | | 1,000,000 | | | 833,957 | | | 953,633 | |
| | | | 1,000,000 | | | 833,957 | | | 953,633 | |
| | | | | | | | | | |
Holley Performance Products (Holley Purchaser, Inc.) (4.2%)*(5) (7) (8) (10) | | Automotive Parts & Equipment | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 5.3% Cash, Acquired 10/18, Due 10/25) | | 22,140,638 | | | 21,885,536 | | | 22,091,928 | |
| | | | 22,140,638 | | | 21,885,536 | | | 22,091,928 | |
| | | | | | | | | | |
HW Holdco, LLC (Hanley Wood LLC) (1.4%)*(5) (7) (8) (10) | | Advertising | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 5.5% Cash, Acquired 12/18, Due 12/24) | | 7,527,218 | | | 7,388,421 | | | 7,339,037 | |
| | | | 7,527,218 | | | 7,388,421 | | | 7,339,037 | |
| | | | | | | | | | |
Hyperion Materials & Technologies, Inc. (2.5%)*(5) (7) (8) (10) | | Industrial Machinery | | First Lien Senior Secured Term Loan (LIBOR + 5.5%, 6.5% Cash, Acquired 08/19, Due 08/26) | | 13,890,785 | | | 13,670,491 | | | 13,197,635 | |
| | | | 13,890,785 | | | 13,670,491 | | | 13,197,635 | |
| | | | | | | | | | |
IM Analytics Holding, LLC (d/b/a NVT) (1.4%)*(5) (7) (8) (10) | | Electronic Instruments & Components | | First Lien Senior Secured Term Loan (LIBOR + 7.0%, 8.1% Cash, Acquired 11/19, Due 11/23) | | 8,229,921 | | | 8,163,688 | | | 7,214,349 | |
| | Warrant (68,950 units, Acquired 11/19) | | | | — | | | — | |
| | | | 8,229,921 | | | 8,163,688 | | | 7,214,349 | |
| | | | | | | | | | |
Institutional Shareholder Services, Inc. (0.9%)*(5) (7) (8) (10) | | Diversified Support Services | | Second Lien Senior Secured Term Loan (LIBOR + 8.5%, 8.7% Cash, Acquired 03/19, Due 03/27) | | 4,951,685 | | | 4,826,396 | | | 4,803,134 | |
| | | | 4,951,685 | | | 4,826,396 | | | 4,803,134 | |
| | | | | | | | | | |
International Wire Group Inc. (0.4%)*(5) | | Electrical Components & Equipment | | Second Lien Senior Secured Note (10.8% Cash, Acquired 08/20, Due 08/21) | | 2,500,000 | | | 2,262,170 | | | 2,237,500 | |
| | | | 2,500,000 | | | 2,262,170 | | | 2,237,500 | |
| | | | | | | | | | |
ISS#2, LLC (d/b/a Industrial Services Solutions) (1.4%)*(5) (7) (8) (11) | | Commercial Services & Supplies | | First Lien Senior Secured Term Loan (LIBOR + 5.5%, 6.8% Cash, Acquired 02/20, Due 02/26) | | 7,856,419 | | | 7,713,534 | | | 7,463,598 | |
| | | | 7,856,419 | | | 7,713,534 | | | 7,463,598 | |
| | | | | | | | | | |
Jade Bidco Limited (Jane's) (2.3%)*(3) (5) (7) (8) | | Aerospace & Defense | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 5.0% Cash, 2.0% PIK, Acquired 11/19, Due 12/26)(11) | | 10,432,352 | | | 10,176,058 | | | 10,145,462 | |
| | First Lien Senior Secured Term Loan (EURIBOR + 4.5%, 4.5% Cash, 2.0% PIK, Acquired 11/19, Due 12/26)(15) | | 1,951,595 | | | 1,791,142 | | | 1,897,926 | |
| | | | 12,383,947 | | | 11,967,200 | | | 12,043,388 | |
| | | | | | | | | | |
Barings BDC, Inc.
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2020
TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments — (Continued) September 30, 2017 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
REP WWEX Acquisition Parent, LLC (2%)* | | Third-Party Logistics Provider | | Second Lien Term Note (LIBOR + 8.75%, 10.2% Cash, Due 02/25)(8) | | $ | 15,000,000 |
| | $ | 14,789,517 |
| | $ | 14,920,000 |
|
| | | | 15,000,000 |
| | 14,789,517 |
| | 14,920,000 |
|
| | | | | | | | | | |
RMP Group, Inc. (2%)* | | Provider of RCM Services to Hospitals and Physician Groups | | Subordinated Note (10.5% Cash, 1% PIK, Due 09/22) | | 10,058,460 |
| | 9,872,305 |
| | 9,872,305 |
|
| | Units (1,000 units) | | | | 1,000,000 |
| | 706,000 |
|
| | | | 10,058,460 |
| | 10,872,305 |
| | 10,578,305 |
|
| | | | | | | | | | |
RockYou, Inc. (0%)* | | Mobile Game Advertising Network | | Common Stock (67,585 shares) | | | | 111,000 |
| | 111,000 |
|
| | | | | | 111,000 |
| | 111,000 |
|
| | | | | | | | | | |
Rotolo Consultants, Inc. (2%)* | | Landscape Services | | Subordinated Note (11% Cash, 3% PIK, Due 08/21) | | 7,574,709 |
| | 7,467,551 |
| | 7,467,551 |
|
| | Series A Preferred Units (39 units) | | | | 3,654,253 |
| | 5,691,000 |
|
| | | | 7,574,709 |
| | 11,121,804 |
| | 13,158,551 |
|
| | | | | | | | | | |
SCA Pharmaceuticals, LLC (2%)* | | Provider of Pharmaceutical Products | | Subordinated Note (LIBOR + 9.0%, 10.3% Cash, Due 12/20)(8) | | 10,000,000 |
| | 9,820,631 |
| | 9,820,631 |
|
| | | | 10,000,000 |
| | 9,820,631 |
| | 9,820,631 |
|
| | | | | | | | | | |
Schweiger Dermatology Group, LLC (3%)* | | Provider of Dermatology Services | | Senior Notes (LIBOR + 8.5%, 9.8% Cash, Due 06/22)(8) | | 20,000,000 |
| | 19,639,784 |
| | 19,639,784 |
|
| | | | 20,000,000 |
| | 19,639,784 |
| | 19,639,784 |
|
| | | | | | | | | | |
SCUF Gaming, Inc. (4%)* | | Gaming Controller Manufacturer | | Senior Notes (LIBOR + 8.5%, 9.7% Cash, Due 12/21)(8) | | 25,008,000 |
| | 24,568,745 |
| | 24,568,745 |
|
| | Revolver Loan (LIBOR + 8.5%, 9.7% Cash, Due 06/18)(8) | | 1,500,000 |
| | 1,500,000 |
| | 1,500,000 |
|
| | Common Stock (27,112 shares) | | | | 742,000 |
| | 316,000 |
|
| | | | 26,508,000 |
| | 26,810,745 |
| | 26,384,745 |
|
| | | | | | | | | | |
Smile Brands, Inc. (4%)* | | Dental Service Organization | | Subordinated Notes (10% Cash, 2% PIK, Due 02/23) | | 22,681,843 |
| | 22,289,511 |
| | 22,289,511 |
|
| | Class A Units (3,000 units) | | | | 3,000,000 |
| | 2,876,000 |
|
| | | | 22,681,843 |
| | 25,289,511 |
| | 25,165,511 |
|
| | | | | | | | | | |
SPC Partners V, LP (0%)*(4) | | Multi-Sector Holdings | | 0.7% Limited Partnership Interest | | | | 2,247,369 |
| | 2,321,000 |
|
| | | | | | 2,247,369 |
| | 2,321,000 |
|
| | | | | | | | | | |
Specialized Desanders, Inc. (2%)*(4) | | Sand and Particulate Removal Equipment Provider for Oil and Gas Companies | | Subordinated Note (11% Cash, 2% PIK, Due 10/20) | | 10,117,769 |
| | 10,053,062 |
| | 7,463,727 |
|
Class C Partnership Units (2,000,000 units) | | | | 1,937,421 |
| | 3,662,000 |
|
| | | 10,117,769 |
| | 11,990,483 |
| | 11,125,727 |
|
| | | | | | | | | | |
St. Croix Hospice Acquisition Corp. (1%)* | | Hospice Services Provider | | Second Lien Term Note (LIBOR + 8.75%, 10.0% Cash, Due 03/24)(8) | | 9,200,000 |
| | 9,062,000 |
| | 9,062,000 |
|
| | Series A Preferred Units (500 units) | | | | 500,000 |
| | 500,000 |
|
| | Class B Common Units (500 units) | | | | — |
| | — |
|
| | | | 9,200,000 |
| | 9,562,000 |
| | 9,562,000 |
|
| | | | | | | | | | |
Tate's Bake Shop (2%)* | | Producer of Baked Goods | | Subordinated Note (10% Cash, 3% PIK, Due 02/20) | | 10,983,585 |
| | 10,879,180 |
| | 10,983,585 |
|
| | Limited Partnership Interest | | | | 925,000 |
| | 1,760,000 |
|
| | | | 10,983,585 |
| | 11,804,180 |
| | 12,743,585 |
|
| | | | | | | | | | |
Tax Advisors Group, LLC (2%)* | | Tax Advisory Services | | Subordinated Note (10% Cash, 2% PIK, Due 12/22) | | 12,400,000 |
| | 12,160,592 |
| | 12,160,592 |
|
| | Class A Units (386 units) | | | | 1,458,824 |
| | 1,458,824 |
|
| | | | 12,400,000 |
| | 13,619,416 |
| | 13,619,416 |
|
| | | | | | | | | | |
TCFI Merlin LLC ("Merlin") and TCFI CSG LLC ("CSG") (3%)* | | Specialty Staffing Service Provider | | Senior Notes (LIBOR + 8.5%, 9.7% Cash, Due 09/19)(8) | | 20,184,192 |
| | 19,918,528 |
| | 19,918,528 |
|
| | Limited Partnership Units - Merlin (500,500 units) | | | | 285,485 |
| | 645,000 |
|
| | Class A Units - CSG (100,000 units) | | | | 100,000 |
| | 158,000 |
|
| | | | 20,184,192 |
| | 20,304,013 |
| | 20,721,528 |
|
| | | | | | | | | | |
The Cook & Boardman Group, LLC (3%)* | | Distributor of Doors and Related Products | | Subordinated Note (10% Cash, 2.5% PIK, Due 03/20) | | 15,123,450 |
| | 14,977,282 |
| | 14,977,282 |
|
| | Class A Units (1,400,000 units) | | | | 1,400,000 |
| | 2,773,000 |
|
| | | | 15,123,450 |
| | 16,377,282 |
| | 17,750,282 |
|
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
JetBlue 2019-1 Class B Pass Through Trust (1.0%)*(5) | | Airlines | | Structured Secured Note - Class B (8.0% Cash, Acquired 08/20, Due 11/27) | | $ | 5,000,000 | | | $ | 5,000,000 | | | $ | 5,163,463 | |
| | | | 5,000,000 | | | 5,000,000 | | | 5,163,463 | |
| | | | | | | | | | |
Kenan Advantage Group Inc. (0.8%)*(6) (8) (9) | | Trucking | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.0% Cash, Acquired 08/18, Due 07/22) | | 4,276,698 | | | 4,274,962 | | | 4,103,363 | |
| | | | 4,276,698 | | | 4,274,962 | | | 4,103,363 | |
| | | | | | | | | | |
Kene Acquisition, Inc. (En Engineering) (1.4%)*(5) (7) (8) (10) | | Oil & Gas Equipment & Services | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 5.3% Cash, Acquired 08/19, Due 08/26) | | 7,317,225 | | | 7,187,235 | | | 7,151,434 | |
| | | | 7,317,225 | | | 7,187,235 | | | 7,151,434 | |
| | | | | | | | | | |
LAC Intermediate, LLC (f/k/a Lighthouse Autism Center) (1.7%)*(5) (7) (8) (10) | | Healthcare & Pharmaceuticals | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 6.8% Cash, Acquired 10/18, Due 10/24) | | 9,261,163 | | | 9,075,623 | | | 8,866,605 | |
| | Class A LLC Units (154,320 units, Acquired 10/18) | | | | 154,320 | | | 166,574 | |
| | | | 9,261,163 | | | 9,229,943 | | | 9,033,179 | |
| | | | | | | | | | |
Learfield Communications, LLC (1.3%)*(5) (8) (9) (19) | | Broadcasting
| | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 4.3% Cash, Acquired 08/20, Due 12/23) | | 137,159 | | | 96,697 | | | 116,184 | |
| | First Lien Senior Secured Term Loan (PRIME + 2.00%, 5.3% Cash, 10.0% PIK, Acquired 08/20, Due 12/23) | | 7,000,000 | | | 6,931,678 | | | 6,947,500 | |
| | | | 7,137,159 | | | 7,028,375 | | | 7,063,684 | |
| | | | | | | | | | |
LTI Holdings, Inc. (Boyd Corporation) (2.1%)*(5) (6) (8) (9) | | Industrial Conglomerates | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 3.6% Cash, Acquired 09/18, Due 09/25) | | 11,760,000 | | | 11,809,119 | | | 10,905,518 | |
| | | | 11,760,000 | | | 11,809,119 | | | 10,905,518 | |
| | | | | | | | | | |
Mallinckrodt Plc (0.5%)* (5) (6) (8) (10) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 3.5% Cash, Acquired 08/18, Due 09/24) | | 3,229,053 | | | 3,220,610 | | | 2,702,329 | |
| | | | 3,229,053 | | | 3,220,610 | | | 2,702,329 | |
| | | | | | | | | | |
MB2 Dental Solutions, LLC (1.5%)*(5) (7) (8) (10) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 6.5%, 7.6% Cash, Acquired 09/19, Due 09/23) | | 7,970,743 | | | 7,900,309 | | | 7,869,116 | |
| | | | 7,970,743 | | | 7,900,309 | | | 7,869,116 | |
| | | | | | | | | | |
Media Recovery, Inc. (SpotSee) (0.4%)*(5) (7) (8) (10) | | Containers, Packaging and Glass | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 6.8% Cash, Acquired 11/19, Due 11/25) | | 2,227,543 | | | 2,188,757 | | | 2,135,693 | |
| | | | 2,227,543 | | | 2,188,757 | | | 2,135,693 | |
| | | | | | | | | | |
Music Reports, Inc. (1.2%)*(5) (7) (8) (10) | | Media & Entertainment | | First Lien Senior Secured Term Loan (LIBOR + 6.25%, 7.3% Cash, Acquired 08/20, Due 08/26) | | 6,592,972 | | | 6,428,148 | | | 6,428,148 | |
| | | | 6,592,972 | | | 6,428,148 | | | 6,428,148 | |
| | | | | | | | | | |
Neuberger Berman CLO Ltd: Series 2020-36A (0.5%)*(3) (5) (8) (10) | | Structured Finance | | Structured Secured Note - Class E (LIBOR + 7.81%, 8.1% Cash, Acquired 03/20, Due 04/33) | | 2,500,000 | | | 2,476,304 | | | 2,499,470 | |
| | | | 2,500,000 | | | 2,476,304 | | | 2,499,470 | |
| | | | | | | | | | |
NGS US Finco, LLC (f/k/a Dresser Natural Gas Solutions) (2.3%)*(5) (7) (8) (9) | | Energy Equipment & Services | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 5.3% Cash, Acquired 10/18, Due 10/25) | | 11,916,381 | | | 11,871,673 | | | 11,878,249 | |
| | | | 11,916,381 | | | 11,871,673 | | | 11,878,249 | |
| | | | | | | | | | |
Nouryon Finance B.V. (Starfruit US Holdco, LLC) (0.4%)*(3) (5) (8) (9) | | Specialty Chemicals | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 3.2% Cash, Acquired 03/20, Due 10/25) | | 1,984,491 | | | 1,790,303 | | | 1,918,586 | |
| | | | 1,984,491 | | | 1,790,303 | | | 1,918,586 | |
| | | | | | | | | | |
Options Technology Ltd. (2.1%)*(3) (5) (7) (8) (10) | | Computer Services | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 5.5% Cash, Acquired 12/19, Due 12/25) | | 11,034,649 | | | 10,787,963 | | | 10,755,587 | |
| | | | 11,034,649 | | | 10,787,963 | | | 10,755,587 | |
| | | | | | | | | | |
Pare SAS (SAS Maurice MARLE) (0.9%)*(3) (5) (7) (8) (14) | | Health Care Equipment | | First Lien Senior Secured Term Loan (EURIBOR + 5.25%, 6.8% Cash, 1.5% PIK, Acquired 12/19, Due 12/26) | | 4,734,565 | | | 4,413,816 | | | 4,637,507 | |
| | | | 4,734,565 | | | 4,413,816 | | | 4,637,507 | |
| | | | | | | | | | |
Patriot New Midco 1 Limited (Forensic Risk Alliance) (1.6%)*(3) (5) (7) (8) | | Diversified Financial Services | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 6.8% Cash, Acquired 02/20, Due 02/27)(11) | | 4,720,287 | | | 4,591,360 | | | 4,445,391 | |
| | First Lien Senior Secured Term Loan (EURIBOR + 5.75%, 5.8% Cash, Acquired 02/20, Due 02/27) (15) | | 4,158,610 | | | 3,758,277 | | | 3,916,425 | |
| | | | 8,878,897 | | | 8,349,637 | | | 8,361,816 | |
| | | | | | | | | | |
Phoenix Services International LLC (0.5%)*(6) (8) (9) | | Steel | | First Lien Senior Secured Term Loan (LIBOR + 3.75%, 4.8% Cash, Acquired 08/18, Due 03/25) | | 2,932,331 | | | 2,941,028 | | | 2,800,376 | |
| | | | 2,932,331 | | | 2,941,028 | | | 2,800,376 | |
| | | | | | | | | | |
Barings BDC, Inc.
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2020
TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments — (Continued) September 30, 2017 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
Tosca Services, LLC (4%)* | | Perishable Food Supply Chain Management | | Senior Note (LIBOR + 9.5%, 10.7% Cash, Due 12/20)(8) | | $ | 28,258,474 |
| | $ | 27,997,197 |
| | $ | 27,997,197 |
|
| | | | 28,258,474 |
| | 27,997,197 |
| | 27,997,197 |
|
| | | | | | | | | | |
Trademark Global LLC (3%)* | | Supplier to Mass Market Internet Retail | | Subordinated Note (10% Cash, 1.3% PIK, Due 04/23) | | 14,800,000 |
| | 14,603,600 |
| | 14,603,600 |
|
| | Class A Units (1,500,000 units) | | | | 1,500,000 |
| | 1,500,000 |
|
| | Class B Units (1,500,000 units) | | | | — |
| | 363,000 |
|
| | | | 14,800,000 |
| | 16,103,600 |
| | 16,466,600 |
|
| | | | | | | | | | |
Travelpro Products, Inc. ("Travelpro") and TP - Holiday Group Limited ("TP") (3%)* | | Luggage and Travel Bag Supplier | | Second Lien Term Note - Travelpro (11% Cash, 2% PIK, Due 11/22) | | 10,280,411 |
| | 10,094,230 |
| | 10,094,230 |
|
| | Second Lien Term Note - TP (11% Cash, 2% PIK, Due 11/22)(4) | | 9,105,711 |
| | 8,938,148 |
| | 9,376,544 |
|
| | Common Units - Travelpro (2,000,000 units) | | | | 2,000,000 |
| | 2,266,000 |
|
| | | | 19,386,122 |
| | 21,032,378 |
| | 21,736,774 |
|
| | | | | | | | | | |
United Biologics, LLC (2%)* | | Allergy Immunotherapy | | Senior Note (12% Cash, 2% PIK, Due 04/18) | | 12,955,563 |
| | 12,955,562 |
| | 11,605,000 |
|
| Class A-1 Common Units (18,818 units) | | | | 137,324 |
| | — |
|
| Class A Common Units (177,935 units) | | | | 1,999,989 |
| | — |
|
| Class A-2 Common Kicker Units (444,003 units) | | | | — |
| | — |
|
| Class A-1 Common Kicker Units (14,114 units) | | | | — |
| | — |
|
| Class A, Class A-1, Class A-1 Kicker & Class B Unit Purchase Warrants | | | | 838,117 |
| | — |
|
| | | | 12,955,563 |
| | 15,930,992 |
| | 11,605,000 |
|
| | | | | | | | | | |
Vantage Mobility International, LLC (5%)* | | Wheelchair Accessible Vehicle Manufacturer | | Subordinated Notes (10.5% Cash, Due 09/21) | | 30,708,796 |
| | 30,189,737 |
| | 30,189,737 |
|
| | Class A Units (1,750,000 units) | | | | 1,750,000 |
| | 995,000 |
|
| | | | 30,708,796 |
| | 31,939,737 |
| | 31,184,737 |
|
| | | | | | | | | | |
Wheel Pros Holdings, Inc. (3%)* | | Wheel/Rim and Performance Tire Distributor | | Subordinated Note (LIBOR + 7.0%, 11% Cash, Due 06/20)(8) | | 16,435,000 |
| | 16,198,669 |
| | 16,198,669 |
|
| | Class A Units (2,000 units) | | | | 1,954,144 |
| | 2,087,000 |
|
| | | | 16,435,000 |
| | 18,152,813 |
| | 18,285,669 |
|
| | | | | | | | | | |
Women's Marketing, Inc. (0%)* | | Full-Service Media Organization | | Subordinated Note (11% Cash, 1.5% PIK, Due 06/21)(6) | | 18,537,823 |
| | 16,141,439 |
| | — |
|
| | Class A Common Units (16,300 units) | | | | 1,630,000 |
| | — |
|
| | | | 18,537,823 |
| | 17,771,439 |
| | — |
|
| | | | | | | | | | |
WSO Holdings, LP (0%)* | | Organic/Fair Trade Sugar, Syrup, Nectar and Honey Producer | | Common Points (3,121 points) | | | | 3,089,581 |
| | 2,396,000 |
|
| | | | | 3,089,581 |
| | 2,396,000 |
|
| | | | | | |
YummyEarth Inc. (4%)* | | Organic Candy Manufacturer | | Senior Notes (LIBOR + 8.5%, 9.8% Cash, Due 08/20)(8) | | 30,250,000 |
| | 29,943,370 |
| | 24,657,000 |
|
| | Limited Partnership Interest | | | | 3,496,500 |
| | — |
|
| | | | 30,250,000 |
| | 33,439,870 |
| | 24,657,000 |
|
| | | | | | |
Subtotal Non–Control / Non–Affiliate Investments | | 942,022,874 |
| | 998,836,068 |
| | 908,181,226 |
|
| | | | | | | | | | |
Affiliate Investments: | | | | | | | | | | |
All Metals Holding, LLC (1%)* | | Steel Processor and Distributor | | Subordinated Note (12% Cash, 1% PIK, Due 12/21) | | 6,482,284 |
| | 6,319,348 |
| | 6,319,348 |
|
| | Units (318,977 units) | | | | 793,331 |
| | 790,000 |
|
| | | | 6,482,284 |
| | 7,112,679 |
| | 7,109,348 |
|
| | | | | | | | | | |
Consolidated Lumber Holdings, LLC (0%)* | | Lumber Yard Operator | | Class A Units (15,000 units) | | | | 1,500,000 |
| | 2,972,000 |
|
| | | |
|
| | 1,500,000 |
| | 2,972,000 |
|
| | | | | | | | | | |
DPII Holdings, LLC (0%)* | | Satellite Communication Business | | Tranche III Subordinated Note (19% PIK, Due 01/18)(6) | | 2,778,885 |
| | 2,148,462 |
| | 2,148,000 |
|
| | Tranche I & II Subordinated Notes (12% Cash, 4% PIK, Due 01/18)(6) | | 3,859,842 |
| | 2,881,603 |
| | 502,000 |
|
| | Class A Membership Interest (17,308 units) | | | | 1,107,692 |
| | — |
|
| | | | 6,638,727 |
| | 6,137,757 |
| | 2,650,000 |
|
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
Playtika Holding Corp. (0.7%)*(5) (8) (10) | | Leisure, Amusement & Entertainment | | First Lien Senior Secured Term Loan (LIBOR + 6.0%, 7.1% Cash, Acquired 03/20, Due 12/24) | | $ | 3,850,000 | | | $ | 3,569,560 | | | $ | 3,848,576 | |
| | | | 3,850,000 | | | 3,569,560 | | | 3,848,576 | |
| | | | | | | | | | |
Premier Technical Services Group (Project Graphite) (0.5%)*(3) (5) (7) (8) (13) | | Construction & Engineering | | First Lien Senior Secured Term Loan (GBP LIBOR + 6.75%, 7.5% Cash, Acquired 08/19, Due 06/26) | | 2,940,259 | | | 2,677,987 | | | 2,706,073 | |
| | | | 2,940,259 | | | 2,677,987 | | | 2,706,073 | |
| | | | | | | | | | |
Process Equipment, Inc. (ProcessBarron) (1.2%)*(5) (7) (8) (10) (11) | | Industrial Air & Material Handling Equipment | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 6.3% Cash, Acquired 03/19, Due 03/25) | | 6,684,916 | | | 6,588,875 | | | 6,063,219 | |
| | | | 6,684,916 | | | 6,588,875 | | | 6,063,219 | |
| | | | | | | | | | |
Professional Datasolutions, Inc. (PDI) (4.4%)*(5) (7) (8) (10) | | Application Software | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 5.5% Cash, Acquired 03/19, Due 10/24) | | 22,983,010 | | | 22,955,060 | | | 22,946,238 | |
| | | | 22,983,010 | | | 22,955,060 | | | 22,946,238 | |
| | | | | | | | | | |
Project Potter Buyer, LLC (Command Alkon) (1.9%)*(5) (7) (8) (9) | | Software | | First Lien Senior Secured Term Loan (LIBOR + 8.25%, 9.3% Cash, Acquired 04/20, Due 04/27) | | 9,870,877 | | | 9,588,196 | | | 9,662,601 | |
| | Class A Units (104.4 units, Acquired 04/20) | | | | 104,384 | | | 136,564 | |
| | Class B Units (38,426.7 units, Acquired 4/20) | | | | — | | | — | |
| | | | 9,870,877 | | | 9,692,580 | | | 9,799,165 | |
| | | | | | | | | | |
PSC UK Pty Ltd. (0.4%)*(3) (5) (7) (8) (12) | | Insurance Services | | First Lien Senior Secured Term Loan (GBP LIBOR + 6.0%, 6.5% Cash, Acquired 11/19, Due 11/24) | | 2,062,238 | | | 1,983,472 | | | 1,996,942 | |
| | | | 2,062,238 | | | 1,983,472 | | | 1,996,942 | |
| | | | | | | | | | |
Radiate HoldCo, LLC (0.3%)*(5) (8) (9) | | Cable & Satellite | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 4.3% Cash, Acquired 09/20, Due 09/26) | | 1,746,415 | | | 1,746,415 | | | 1,713,669 | |
| | | | 1,746,415 | | | 1,746,415 | | | 1,713,669 | |
| | | | | | | | | | |
Recovery Point Systems, Inc. (2.2%)*(5) (7) (8) (10) | | Technology | | First Lien Senior Secured Term Loan (LIBOR + 6.5%, 7.5% Cash, Acquired 08/20, Due 07/26) | | 11,795,776 | | | 11,564,165 | | | 11,559,860 | |
| | | | 11,795,776 | | | 11,564,165 | | | 11,559,860 | |
| | | | | | | | | | |
Refinitiv US Holdings, Inc. (0.6%)*(5) (9) | | Data Processing & Outsourced Services | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 3.4% Cash, Acquired 03/20, Due 10/25) | | 3,012,716 | | | 2,745,948 | | | 2,979,908 | |
| | | | 3,012,716 | | | 2,745,948 | | | 2,979,908 | |
| | | | | | | | | | |
RR Ltd: Series 2019-6A (0.4%)*(3) (5) (10) | | Structured Finance | | Structured Secured Note - Class D (LIBOR + 6.75%, 7.0% Cash, Acquired 03/20, Due 04/30) | | 2,000,000 | | | 1,649,961 | | | 1,849,426 | |
| | | | 2,000,000 | | | 1,649,961 | | | 1,849,426 | |
| | | | | | | | | | |
Ruffalo Noel Levitz, LLC (1.8%)*(5) (7) (8) (10) | | Media Services | | First Lien Senior Secured Term Loan (LIBOR + 6.0%, 7.0% Cash, Acquired 01/19, Due 05/22) | | 9,641,206 | | | 9,566,226 | | | 9,496,588 | |
| | | | 9,641,206 | | | 9,566,226 | | | 9,496,588 | |
| | | | | | | | | | |
Scaled Agile, Inc. (0.9%)*(5) (7) (8) (9) | | Research & Consulting Services | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 5.8% Cash, Acquired 06/19, Due 06/24) | | 4,857,479 | | | 4,817,601 | | | 4,808,905 | |
| | | | 4,857,479 | | | 4,817,601 | | | 4,808,905 | |
| | | | | | | | | | |
SCI Packaging Inc. (0.9%)*(6) (8) (10) | | Metal & Glass Containers | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 3.5% Cash, Acquired 08/18, Due 04/24) | | 4,923,664 | | | 4,915,618 | | | 4,612,882 | |
| | | | 4,923,664 | | | 4,915,618 | | | 4,612,882 | |
| | | | | | | | | | |
Seaworld Entertainment, Inc. (1.1%)*(3) (6) (8) (9) | | Leisure Facilities | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 3.1% Cash, Acquired 08/18, Due 03/24) | | 5,923,469 | | | 5,916,134 | | | 5,498,934 | |
| | | | 5,923,469 | | | 5,916,134 | | | 5,498,934 | |
| | | | | | | | | | |
Serta Simmons Bedding LLC (2.0%)* (5) (8) (9) | | Home Furnishings | | Super Priority First Out (LIBOR + 7.5%, 8.5% Cash, Acquired 6/20, Due 08/23) | | 7,443,107 | | | 7,235,952 | | | 7,331,460 | |
| | Super Priority Second Out (LIBOR + 7.5%, 8.5% Cash, Acquired 6/20, Due 08/23) | | 3,652,949 | | | 3,381,618 | | | 2,969,848 | |
| | | | 11,096,056 | | | 10,617,570 | | | 10,301,308 | |
| | | | | | | | | | |
Smile Brands Group Inc. (1.1%)*(5) (7) (8) (10) (11) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 4.9% Cash, Acquired 10/18, Due 10/24) | | 5,851,605 | | | 5,808,132 | | | 5,657,743 | |
| | | | 5,851,605 | | | 5,808,132 | | | 5,657,743 | |
| | | | | | | | | | |
Springbrook Software (SBRK Intermediate, Inc.) (1.9%)*(5) (7) (8) (10) | | Enterprise Software and Services | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 6.8% Cash, Acquired 12/19, Due 12/26) | | 10,442,083 | | | 10,214,537 | | | 10,191,155 | |
| | | | 10,442,083 | | | 10,214,537 | | | 10,191,155 | |
| | | | | | | | | | |
Syniverse Holdings, Inc. (1.5%)*(5) (6) (8) (10) | | Technology Distributors | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 6.0% Cash, Acquired 08/18, Due 03/23) | | 10,263,158 | | | 10,235,328 | | | 7,876,974 | |
| | | | 10,263,158 | | | 10,235,328 | | | 7,876,974 | |
Barings BDC, Inc.
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2020
TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments — (Continued) September 30, 2017 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
FCL Holding SPV, LLC (0%)* | | Commercial Printing Services | | Class A Interest (24,873 units) | | | | $ | 292,000 |
| | $ | 602,000 |
|
| | Class B Interest (48,427 units) | | | | — |
| | — |
|
| | Class C Interest (3,746 units) | | | | — |
| | — |
|
| | | | | | 292,000 |
| | 602,000 |
|
| | | | | | | | | | |
Mac Land Holdings, Inc. (0%)* | | Environmental and Facilities Services | | Common Stock (139 shares) | | | | 369,000 |
| | 369,000 |
|
| | | | | | 369,000 |
| | 369,000 |
|
| | | | | | | | | | |
NB Products, Inc. (8%)* | | Distributor of Work Apparel and Accessories | | Subordinated Note (12% Cash, 2% PIK, Due 02/20) | | $ | 23,453,631 |
| | 23,166,924 |
| | 23,166,924 |
|
| Jr. Subordinated Note (10% PIK, Due 02/20) | | 5,067,665 |
| | 4,980,083 |
| | 4,980,083 |
|
| Jr. Subordinated Bridge Note (20% PIK, Due 05/21) | | 2,318,244 |
| | 2,294,294 |
| | 2,294,294 |
|
| Series A Redeemable Senior Preferred Stock (7,839 shares) | | | | 7,621,648 |
| | 10,134,000 |
|
| Common Stock (1,668,691 shares) | | | | 333,738 |
| | 11,133,000 |
|
| | | 30,839,540 |
| | 38,396,687 |
| | 51,708,301 |
|
| | | | | | | | | | |
Passport Food Group, LLC (3%)* | | Manufacturer of Ethnic Food Products | | Senior Notes (LIBOR + 9.0%, 10.3% Cash, Due 03/22)(8) | | 20,000,000 |
| | 19,631,708 |
| | 17,684,000 |
|
| | Common Stock (20,000 shares) | | | | 2,000,000 |
| | 783,000 |
|
| | | | 20,000,000 |
| | 21,631,708 |
| | 18,467,000 |
|
| | | | | | | | | | |
PCX Aerostructures, LLC (4%)* | | Aerospace Components Manufacturer | | Subordinated Note (10.5% Cash, Due 10/19) | | 31,647,359 |
| | 31,219,054 |
| | 24,799,000 |
|
| Series A Preferred Stock (6,066 shares) | | | | 6,065,621 |
| | — |
|
Series B Preferred Stock (411 shares) | | | | 410,514 |
| | — |
|
Class A Common Stock (121,922 shares) | | | | 30,480 |
| | — |
|
| | | 31,647,359 |
| | 37,725,669 |
| | 24,799,000 |
|
| | | | | | | | | | |
Team Waste, LLC (2%)* | | Environmental and Facilities Services | | Subordinated Note (10% Cash, 2% PIK, Due 8/23) | | 4,006,667 |
| | 3,916,667 |
| | 3,916,667 |
|
| | Preferred Units (500,000 units) | | | | 10,000,000 |
| | 10,000,000 |
|
| | | | 4,006,667 |
| | 13,916,667 |
| | 13,916,667 |
|
| | | | | | | | | | |
Technology Crops, LLC (1%)* | | Supply Chain Management Services | | Subordinated Notes (12% Cash, 5% PIK, Due 11/17) | | 12,294,102 |
| | 12,294,102 |
| | 9,451,000 |
|
Common Units (50 units) | | | | 500,000 |
| | — |
|
| | | 12,294,102 |
| | 12,794,102 |
| | 9,451,000 |
|
| | | | | | | | | | |
TGaS Advisors, LLC (2%)* | | Advisory Solutions to Pharmaceutical Companies | | Senior Note (10% Cash, 1% PIK, Due 11/19) | | 9,560,682 |
| | 9,453,137 |
| | 9,453,137 |
|
| Preferred Units (1,685,357 units) | | | | 1,556,069 |
| | 1,336,000 |
|
| | | 9,560,682 |
| | 11,009,206 |
| | 10,789,137 |
|
| | | | | | | | | | |
Tulcan Fund IV, L.P. (0%)* | | Custom Forging and Fastener Supplies | | Common Units (1,000,000 units) | | | | 1,000,000 |
| | — |
|
| | | | | | 1,000,000 |
| | — |
|
| | | | | | | | | | |
United Retirement Plan Consultants, Inc. (0%)* | | Retirement Plan Administrator | | Series A Preferred Shares (9,400 shares) | | | | 205,748 |
| | 286,000 |
|
| | Common Shares (100,000 shares) | | | | 1,000,000 |
| | 348,000 |
|
| | | | | | 1,205,748 |
| | 634,000 |
|
| | | | | | | | | | |
Wythe Will Tzetzo, LLC (0%)* | �� | Confectionery Goods Distributor | | Series A Preferred Units (99,829 units) | | | | — |
| | 3,140,000 |
|
| | | | | | — |
| | 3,140,000 |
|
| | | | | | | | | | |
Subtotal Affiliate Investments | | | | 121,469,361 |
| | 153,091,223 |
| | 146,607,453 |
|
| | | | | | | | | | |
Control Investments: | | | | | | | | | | |
CRS Reprocessing, LLC (1%)* | | Fluid Reprocessing Services | | Debtor in Possession Loan (8% PIK, Due (11/17)(6) | | 700,000 |
| | 700,000 |
| | 700,000 |
|
| | Senior Notes (LIBOR + 3.5%, Due 06/17)(6)(8) | | 2,942,769 |
| | 2,942,769 |
| | 502,000 |
|
| | Split Collateral Term Loans (8% Cash, Due 06/17)(6) | | 31,243,725 |
| | 17,542,464 |
| | 6,557,000 |
|
| Subordinated Note (5% Cash, Due 09/17)(6) | | 7,136,824 |
| | 125,000 |
| | — |
|
Series F Preferred Units (705,321 units) | | | | 9,134,807 |
| | — |
|
| Common Units (15,174 units) | | | | — |
| | — |
|
| | | 42,023,318 |
| | 30,445,040 |
| | 7,759,000 |
|
| | | | | | | | | | |
DialogDirect, Inc. (2%)* | | Business Process Outsourcing Provider | | Subordinated Notes (8% PIK, Due 10/19)(6) | | 21,005,082 |
| | 20,020,226 |
| | 10,197,000 |
|
| | Class A Common Units (1,176,500 units) | |
|
| | — |
| | — |
|
| | | | 21,005,082 |
| | 20,020,226 |
| | 10,197,000 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
| | | | | | | | | | |
Tahoe Subco 1 Ltd. (Almonde, Inc.) (2.1%)*(3) (5) (6) (8) (11) | | Internet Software & Services | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 4.5% Cash, Acquired 09/18, Due 06/24) | | $ | 11,828,390 | | | $ | 11,836,116 | | | $ | 11,032,931 | |
| | | | 11,828,390 | | | 11,836,116 | | | 11,032,931 | |
| | | | | | | | | | |
Team Health Holdings, Inc. (1.1%)*(5) (6) (8) (9) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 3.8% Cash, Acquired 09/18, Due 02/24) | | 6,840,506 | | | 6,664,086 | | | 5,719,416 | |
| | | | 6,840,506 | | | 6,664,086 | | | 5,719,416 | |
| | | | | | | | | | |
The Hilb Group, LLC (1.8%)*(5) (7) (8) (9) (10) | | Insurance Brokerage | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 6.8% Cash, Acquired 12/19, Due 12/26) | | 9,767,134 | | | 9,503,409 | | | 9,474,877 | |
| | | | 9,767,134 | | | 9,503,409 | | | 9,474,877 | |
| | | | | | | | | | |
Total Safety U.S. Inc. (1.3%)*(5) (8) (10) | | Diversified Support Services | | First Lien Senior Secured Term Loan (LIBOR + 6.0%, 7.0% Cash, Acquired 11/19, Due 08/25) | | 6,948,915 | | | 6,687,013 | | | 6,611,893 | |
| | | | 6,948,915 | | | 6,687,013 | | | 6,611,893 | |
| | | | | | | | | | |
Transit Technologies LLC (1.1%)*(5) (7) (8) (10) | | Software | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 5.0% Cash, Acquired 02/20, Due 02/25) | | 6,785,305 | | | 6,575,927 | | | 6,014,494 | |
| | | | 6,785,305 | | | 6,575,927 | | | 6,014,494 | |
| | | | | | | | | | |
Transportation Insight, LLC (4.6%)*(5) (7) (8) (10) | | Air Freight & Logistics | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 4.8% Cash, Acquired 08/18, Due 12/24) | | 24,589,328 | | | 24,418,931 | | | 24,343,435 | |
| | | | 24,589,328 | | | 24,418,931 | | | 24,343,435 | |
| | | | | | | | | | |
Triumph Group Inc. (0.7%)*(3) (5) | | Aerospace & Defense | | First Lien Senior Secured Note (8.9% Cash, Acquired 08/20, Due 06/24) | | 3,266,000 | | | 3,266,000 | | | 3,478,290 | |
| | | | 3,266,000 | | | 3,266,000 | | | 3,478,290 | |
| | | | | | | | | | |
Truck-Lite Co., LLC (3.4%)*(5) (7) (8) (10) | | Automotive Parts and Equipment | | First Lien Senior Secured Term Loan (LIBOR + 6.25%, 7.3% Cash, Acquired 12/19, Due 12/26) | | 19,468,270 | | | 19,062,504 | | | 18,080,155 | |
| | | | 19,468,270 | | | 19,062,504 | | | 18,080,155 | |
| | | | | | | | | | |
Trystar, LLC (3.0%)*(5) (7) (8) (10) | | Power Distribution Solutions | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 5.8% Cash, Acquired 09/18, Due 09/23) | | 15,637,813 | | | 15,464,677 | | | 15,345,385 | |
| | Class A LLC Units (361.5 units, Acquired 09/18) | | | | 361,505 | | | 365,533 | |
| | | | 15,637,813 | | | 15,826,182 | | | 15,710,918 | |
| | | | | | | | | | |
U.S. Anesthesia Partners, Inc. (2.4%)*(5) (6) (8) (11) | | Managed Health Care | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.0% Cash, Acquired 09/18, Due 06/24) | | 13,481,027 | | | 13,524,906 | | | 12,705,868 | |
| | | | 13,481,027 | | | 13,524,906 | | | 12,705,868 | |
| | | | | | | | | | |
U.S. Silica Company (0.2%)*(5) (8) (9) | | Metal & Glass Containers | | First Lien Senior Secured Term Loan (LIBOR + 4.0%, 5.0% Cash, Acquired 08/18, Due 05/25) | | 1,491,380 | | | 1,494,324 | | | 1,242,036 | |
| | | | 1,491,380 | | | 1,494,324 | | | 1,242,036 | |
| | | | | | | | | | |
UKFast Leaders Limited (5.4%)*(3) (5) (7) (8) (18) | | Technology | | First Lien Senior Secured Term Loan (GBP LIBOR + 6.75%, 6.8% Cash, Acquired 09/20, Due 9/27) | | 22,912,134 | | | 22,121,627 | | | 22,224,770 | |
| | Super Senior Secured Term Loan (GBP LIBOR + 3.25%, 3.3% Cash, Acquired 09/20, Due 3/27) | | 6,248,763 | | | 6,033,283 | | | 6,061,300 | |
| | | | 29,160,897 | | | 28,154,910 | | | 28,286,070 | |
| | | | | | | | | | |
USF Holdings LLC (U.S. Farathane, LLC) (0.5%)*(6) (8) (10) | | Auto Parts & Equipment | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 4.5% Cash, Acquired 08/18, Due 12/21) | | 3,088,580 | | | 3,093,550 | | | 2,665,444 | |
| | | | 3,088,580 | | | 3,093,550 | | | 2,665,444 | |
| | | | | | | | | | |
USLS Acquisition, Inc. (f/k/a US Legal Support, Inc.) (2.8%)*(5) (7) (8) (10) (11) | | Legal Services | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 6.8% Cash, Acquired 11/18, Due 11/24) | | 16,430,096 | | | 16,194,004 | | | 14,884,078 | |
| | | | 16,430,096 | | | 16,194,004 | | | 14,884,078 | |
| | | | | | | | | | |
Utac Ceram (2.6%)*(3) (5) (8) (14) | | Business Services | | First Lien Senior Secured Term Loan (EURIBOR + 5.75%, 5.8% Cash, Acquired 09/20, Due 09/27) | | 14,071,806 | | | 13,503,424 | | | 13,597,762 | |
| | | | 14,071,806 | | | 13,503,424 | | | 13,597,762 | |
| | | | | | | | | | |
Validity, Inc. (0.9%)*(5) (7) (8) (10) | | IT Consulting & Other Services | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 5.1% Cash, Acquired 07/19, Due 05/25) | | 5,051,351 | | | 4,915,036 | | | 4,724,276 | |
| | | | 5,051,351 | | | 4,915,036 | | | 4,724,276 | |
| | | | | | | | | | |
Winebow Group, LLC, (The) (2.6%)*(5) (8) (9) | | Consumer Goods | | First Lien Senior Secured Term Loan (LIBOR + 3.75%, 4.8% Cash, Acquired 11/19, Due 07/21) | | 10,787,718 | | | 10,070,655 | | | 8,896,525 | |
| | Second Lien Senior Secured Term Loan (LIBOR + 7.5%, 8.5% Cash, Acquired 10/19, Due 01/22) (7) | | 7,141,980 | | | 4,813,864 | | | 4,999,386 | |
| | | | 17,929,698 | | | 14,884,519 | | | 13,895,911 | |
| | | | | | | | | | |
Barings BDC, Inc.
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2020
TRIANGLE CAPITAL CORPORATION Unaudited Consolidated Schedule of Investments — (Continued) September 30, 2017 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
| | | | | | | | | | |
Frank Entertainment Group, LLC (1%)* | | Movie Theatre and Family Entertainment Operator | | Senior Note (6% Cash, Due 06/19)(6) | | $ | 10,939,428 |
| | $ | 10,526,358 |
| | $ | 6,169,000 |
|
| | Second Lien Term Note (2.5% Cash, Due 09/19)(6) | | 2,078,396 |
| | 2,050,693 |
| | — |
|
| | Redeemable Preferred Units (2,800,000 units) | | | | 2,800,000 |
| | — |
|
| | Class B Redeemable Preferred Units (2,800,000 units) | | | | 2,800,000 |
| | — |
|
| | Class A Common Units (606,552 units) | | | | 1,000,000 |
| | — |
|
| | | | 13,017,824 |
| | 19,177,051 |
| | 6,169,000 |
|
| | | | | | | | | | |
Frontstreet Facility Solutions, Inc. (1%)* | | Retail, Restaurant and Commercial Facilities Maintenance | | Subordinated Note (13% Cash, Due 03/21) | | 8,462,629 |
| | 8,439,709 |
| | 4,250,000 |
|
| | Series A Convertible Preferred Stock (60,000 shares) | | | | 250,575 |
| | — |
|
| | Series B Convertible Preferred Stock (20,000 shares) | | | | 500,144 |
| | — |
|
| | Common Stock (27,890 shares) | | | | 279 |
| | |
| | | | 8,462,629 |
| | 9,190,707 |
| | 4,250,000 |
|
| | | | | | | | | | |
SRC Worldwide, Inc. (1%)* | | Specialty Chemical Manufacturer | | Common Stock (5,000 shares) | | | | 8,028,000 |
| | 8,028,000 |
|
| | | | | | 8,028,000 |
| | 8,028,000 |
|
| | | | | | | | | | |
| | | | | | | | | | |
Subtotal Control Investments | | | | 84,508,853 |
| | 86,861,024 |
| | 36,403,000 |
|
| | | | | | | | |
Total Investments, September 30, 2017 (173%)* | | | | $ | 1,148,001,088 |
| | $ | 1,238,788,315 |
| | $ | 1,091,191,679 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
World 50, Inc. (2.6%)*(5) (7) (8) (9) | | Professional Services | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 6.3% Cash, Acquired 01/20, Due 01/26) | | $ | 13,945,025 | | | $ | 13,607,509 | | | $ | 13,535,173 | |
| | | | 13,945,025 | | | 13,607,509 | | | 13,535,173 | |
| | | | | | | | | | |
Subtotal Non–Control / Non–Affiliate Investments | | 929,268,108 | | | 903,128,567 | | | 886,610,176 | |
| | | | | | | | | | |
Affiliate Investments:(4) | | | | | | | | | | |
Jocassee Partners LLC (3.0%)*(3) (5) | | Investment Funds & Vehicles | | 9.1% Member Interest, Acquired 06/19 | | | | 15,158,270 | | | 15,952,545 | |
| | | | | | 15,158,270 | | | 15,952,545 | |
| | | | | | | | | | |
Thompson Rivers LLC (0.6%)*(3) (5) | | Investment Funds & Vehicles | | 10% Member Interest, Acquired 06/20 | | | | 3,100,000 | | | 3,205,530 | |
| | | | | | 3,100,000 | | | 3,205,530 | |
| | | | | | | | | | |
Subtotal Affiliate Investments | | | | 18,258,270 | | | 19,158,075 | |
| | | | | | | | | | |
Short-Term Investments: | | | | | | | | | | |
| | | | | | | | | | |
BlackRock, Inc. (4.0%)*(5) | | Money Market Fund | | BlackRock Liquidity Temporary Fund (0.13% yield) | | | | 21,000,000 | | | 21,000,000 | |
| | | | | | 21,000,000 | | | 21,000,000 | |
| | | | | | | | | | |
Federated Investment Management Company (30.4%)* (6) | | Money Market Fund | | Federated Government Obligation Fund (0.01% yield) | | | | 160,046,690 | | | 160,046,690 | |
| | | | | | 160,046,690 | | | 160,046,690 | |
| | | | | | | | | | |
HSBC Holdings PLC (0.5%)*(5) | | Money Market Fund | | HSBC Funds U.S. Government Money Market Fund (0.03% yield) | | | | 2,600,330 | | | 2,600,330 | |
| | | | | | 2,600,330 | | | 2,600,330 | |
| | | | | | | | | | |
JPMorgan Chase & Co. (5.1%)* (6) | | Money Market Fund | | JPMorgan Prime Money Market Fund (0.16% yield) | | | | 26,856,855 | | | 26,856,370 | |
| | | | | | 26,856,855 | | | 26,856,370 | |
| | | | | | | | | | |
Subtotal Short-Term Investments | | | | 210,503,875 | | | 210,503,390 | |
| | | | | | | | |
Total Investments, September 30, 2020 (212.23%)* | | | | $ | 929,268,108 | | | $ | 1,131,890,712 | | | $ | 1,116,271,641 | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign Currency Forward Contracts: | | | | | | | | | | |
Description | | Notional Amount to be Purchased | | Notional Amount to be Sold | | | | Settlement Date | | Unrealized Appreciation (Depreciation) |
Foreign currency forward contract (CAD) | | C$13,495,000 | | $10,081,420 | | | | 10/02/20 | | $ | 21,550 | |
Foreign currency forward contract (CAD) | | $10,255,950 | | C$13,495,000 | | | | 10/02/20 | | 152,979 | |
| | | | | | | | | | |
Foreign currency forward contract (EUR) | | €4,672,157 | | $5,487,094 | | | | 10/02/20 | | (8,286) | |
Foreign currency forward contract (EUR) | | $5,374,120 | | €4,672,157 | | | | 10/02/20 | | (104,687) | |
Foreign currency forward contract (EUR) | | $3,412,466 | | €2,906,604 | | | | 01/05/21 | | (3,740) | |
| | | | | | | | | | |
Foreign currency forward contract (GBP) | | £1,285,558 | | $1,594,070 | | | | 10/02/20 | | 67,899 | |
Foreign currency forward contract (GBP) | | $1,696,763 | | £1,285,558 | | | | 10/02/20 | | 34,794 | |
Foreign currency forward contract (GBP) | | $529,136 | | £415,299 | | | | 01/05/21 | | (8,147) | |
| | | | | | | | | | |
Foreign currency forward contract (SEK) | | $80,985 | | 751,190kr | | | | 10/02/20 | | (2,947) | |
Foreign currency forward contract (SEK) | | 751,190kr | | $84,268 | | | | 10/02/20 | | (336) | |
Foreign currency forward contract (SEK) | | $92,284 | | 821,594kr | | | | 01/05/21 | | 362 | |
| | | | | | | | | | |
Total Foreign Currency Forward Contracts, September 30, 2020 | | | | | | | | $ | 149,441 | |
* Fair value as a percentpercentage of net assets.
(1)All debt investments are income producing, unless otherwise noted. Equity and any equity-linked investments are non-income producing, unless otherwise noted. The Company's Board of Directors (the "Board") determined in good faith that all investments were valued at fair value in accordance with the Company's valuation policies and procedures and the Investment Company Act of 1940, as amended, (the "1940 Act") based on, among other things, the input of the Company's external investment adviser, Barings LLC ("Barings"), the Company’s Audit Committee and an independent valuation firm that has been engaged to assist in the valuation of the Company's senior secured, middle-market investments. In addition, all debt investments are variable rate investments unless otherwise noted. Index-based floating interest rates are generally subject to a contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to LIBOR, EURIBOR, GBP LIBOR, STIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically reset semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan.
(2)All of the Company’s portfolio company investments (including joint venture and short-term investments), which as of September 30, 2020 represented 212.2% of the Company’s net assets, are subject to legal restrictions on sales. The acquisition date represents the date of the Company's initial investment in the relevant portfolio company.
| |
(1) | All debt investments are income producing, unless otherwise noted. Equity and equity-linked investments are non-income producing, unless otherwise noted. The fair values of all investments were determined using significant unobservable inputs. |
| |
(2) | Disclosures of interest rates on notes include cash interest rates and payment-in-kind (“PIK”) interest rates. |
| |
(3) | All investments are restricted as to resale and were valued at fair value as determined in good faith by the Board of Directors. |
| |
(4) | Investment is not a qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 2.4% of total investments at fair value as of September 30, 2017. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets. If at any time qualifying assets do not represent at least 70% of the Company's total assets, the Company will be precluded from acquiring any additional non-qualifying asset until such time as it complies with the requirements of Section 55(a). |
| |
(5) | PIK non-accrual investment |
| |
(6) | Non-accrual investment |
| |
(7) | All of the Company's investments, unless otherwise noted, are encumbered either as security for the Company's senior secured credit facility or in support of the SBA-guaranteed debentures issued by Triangle Mezzanine Fund LLLP and Triangle Mezzanine Fund II LP. |
| |
(8) | Index-based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. |
Barings BDC, Inc.
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2020
(3)Investment is not a qualifying investment as defined under Section 55(a) of the 1940 Act. Non-qualifying assets represent 19.2% of total investments at fair value as of September 30, 2020. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets. If at any time qualifying assets do not represent at least 70% of the Company's total assets, the Company will be precluded from acquiring any additional non-qualifying asset until such time as it complies with the requirements of Section 55(a).
(4)As defined in the 1940 Act, the Company is deemed to be an “affiliated person” of the portfolio company as the Company owns 5% or more of the portfolio company's voting securities (“non-controlled affiliate”). Transactions related to investments in non-controlled affiliates for the nine months ended September 30, 2020 were listed below:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amount of Realized Gain (Loss) | Amount of Unrealized Gain (Loss) | Amount of Interest or Dividends Credited to Income(b) | December 31, 2019 Value | Gross Additions (c) | Gross Reductions (d) | September 30, 2020 Value |
Portfolio Company | Type of Investment(a) |
Jocassee Partners LLC | 9.1% Member Interest | $ | — | | $ | 722,732 | | $ | — | | $ | 10,229,813 | | $ | 5,722,732 | | $ | — | | $ | 15,952,545 | |
| | — | | 722,732 | | — | | 10,229,813 | | 5,722,732 | | — | | 15,952,545 | |
| | | | | | | | |
Thompson Rivers LLC | 10% Member Interest | — | | 105,530 | | — | | — | | 3,205,530 | | — | | 3,205,530 | |
| | — | | 105,530 | | — | | — | | 3,205,530 | | — | | 3,205,530 | |
| | | | | | | | |
Total Affiliate Investments | $ | — | | $ | 828,262 | | $ | — | | $ | 10,229,813 | | $ | 8,928,262 | | $ | — | | $ | 19,158,075 | |
(a) Equity and equity-linked investments are non-income producing, unless otherwise noted.
(b) Represents the total amount of interest, fees or dividends credited to income for the portion of the year an investment was included in the Affiliate category.
(c) Gross additions include increases in the cost basis of investments resulting from new investments and follow-on investments. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation.
(d) Gross reductions include decreases in the total cost basis of investments resulting from principal repayments or sales. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.
(5)Some or all of the investment is or will be encumbered as security for the Company's credit facility entered into in February 2019 (and subsequently amended in December 2019) with ING Capital LLC (the "February 2019 Credit Facility").
(6)Some or all of the investment is encumbered as security for the Company's $449.3 million term debt securitization entered into in May 2019 (the "Debt Securitization").
(7)The fair value of the investment was determined using significant unobservable inputs.
(8)Debt investment includes interest rate floor feature.
(9)The interest rate on these loans is subject to 1 Month LIBOR, which as of September 30, 2020 was 0.14825%.
(10)The interest rate on these loans is subject to 3 Month LIBOR, which as of September 30, 2020 was 0.23388%.
(11)The interest rate on these loans is subject to 6 Month LIBOR, which as of September 30, 2020 was 0.25975%.
(12)The interest rate on these loans is subject to 3 Month GBP LIBOR, which as of September 30, 2020 was 0.06088%.
(13)The interest rate on these loans is subject to 6 Month GBP LIBOR, which as of September 30, 2020 was 0.08750%.
(14)The interest rate on these loans is subject to 3 Month EURIBOR, which as of September 30, 2020 was -0.498%.
(15)The interest rate on these loans is subject to 6 Month EURIBOR, which as of September 30, 2020 was -0.480%.
(16)The interest rate on these loans is subject to 3 Month STIBOR, which as of September 30, 2020 was -0.084%.
(17)The interest rate on these loans is subject to 2 Month LIBOR, which as of September 30, 2020 was 0.19388%.
(18)The interest rate on these loans is subject to 1 month GBP LIBOR, which as of September 30, 2020 was 0.04538%.
(19)The interest rate on these loans is subject to Prime, which as of September 30, 2020 was 3.25%.
(20)The interest rate on these loans is subject to 1 Month EURIBOR, which as of September 30, 2020 was -0.529%.
See accompanying notes.
Barings BDC, Inc.
Consolidated Schedule of Investments
December 31, 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
Non–Control / Non–Affiliate Investments: | | | | | | |
| | | | | | | | | | |
1WorldSync, Inc. (3.9%)*(5) (7) (8) | | IT Consulting & Other Services | | First Lien Senior Secured Term Loan (LIBOR + 7.25%, 9.2% Cash, Acquired 07/19, Due 07/25) | | $ | 22,445,913 | | | $ | 22,024,832 | | | $ | 22,000,839 | |
| | | | 22,445,913 | | | 22,024,832 | | | 22,000,839 | |
| | | | | | | | | | |
24 Hour Fitness Worldwide, Inc. (0.6%)*(4) (6) (8) | | Leisure Facilities | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.3% Cash, Acquired 08/18, Due 05/25) | | 4,612,441 | | | 4,652,772 | | | 3,475,889 | |
| | | | 4,612,441 | | | 4,652,772 | | | 3,475,889 | |
| | | | | | | | | | |
Accelerate Learning, Inc. (1.3%)*(5) (7) (8) | | Education Services | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 6.4% Cash, Acquired 12/18, Due 12/24) | | 7,567,964 | | | 7,438,417 | | | 7,271,525 | |
| | | | 7,567,964 | | | 7,438,417 | | | 7,271,525 | |
| | | | | | | | | | |
Accurus Aerospace Corporation (4.1%)*(5) (7) (8) | | Aerospace & Defense | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 6.4% Cash, Acquired 10/18, Due 10/24) | | 24,750,000 | | | 24,442,153 | | | 23,423,629 | |
| | | | 24,750,000 | | | 24,442,153 | | | 23,423,629 | |
| | | | | | | | | | |
Acrisure, LLC (0.9%)*(6) (8) | | Property & Casualty Insurance | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 6.2% Cash, Acquired 08/18, Due 11/23) | | 4,961,929 | | | 4,986,542 | | | 4,968,131 | |
| | | | 4,961,929 | | | 4,986,542 | | | 4,968,131 | |
| | | | | | | | | | |
ADMI Corp. (0.6%)*(6) (8) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.5% Cash, Acquired 08/18, Due 04/25) | | 3,447,500 | | | 3,458,266 | | | 3,449,672 | |
| | | | 3,447,500 | | | 3,458,266 | | | 3,449,672 | |
| | | | | | | | | | |
Aftermath Bidco Corporation (2.1%)*(5) (7) (8) | | Professional Services | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 7.8% Cash, Acquired 04/19, Due 04/25) | | 12,259,030 | | | 12,010,502 | | | 12,016,813 | |
| | | | 12,259,030 | | | 12,010,502 | | | 12,016,813 | |
| | | | | | | | | | |
AlixPartners LLP (0.9%)*(6) (8) | | Investment Banking & Brokerage | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.5% Cash, Acquired 09/18, Due 04/24) | | 4,961,735 | | | 4,980,608 | | | 4,985,005 | |
| | | | 4,961,735 | | | 4,980,608 | | | 4,985,005 | |
| | | | | | | | | | |
Alliant Holdings LP (0.9%)*(6) (8) | | Property & Casualty Insurance | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 09/18, Due 05/25) | | 4,922,531 | | | 4,929,349 | | | 4,919,775 | |
| | | | 4,922,531 | | | 4,929,349 | | | 4,919,775 | |
| | | | | | | | | | |
American Dental Partners, Inc. (1.7%)*(5) (8) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 6.2% Cash, Acquired 11/18, Due 03/23) | | 9,900,000 | | | 9,880,958 | | | 9,751,500 | |
| | | | 9,900,000 | | | 9,880,958 | | | 9,751,500 | |
| | | | | | | | | | |
American Scaffold, Inc. (1.7%)*(5) (7) (8) | | Aerospace & Defense | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 7.2% Cash, Acquired 09/19, Due 09/25) | | 9,784,844 | | | 9,574,185 | | | 9,576,821 | |
| | | 9,784,844 | | | 9,574,185 | | | 9,576,821 | |
| | | | | | | | | | |
Anju Software, Inc. (2.4%)*(5) (7) (8) | | Application Software | | First Lien Senior Secured Term Loan (LIBOR + 5.5%, 7.4% Cash, Acquired 02/19, Due 02/25) | | 13,820,065 | | | 13,505,384 | | | 13,485,435 | |
| | | | 13,820,065 | | | 13,505,384 | | | 13,485,435 | |
| | | | | | | | | | |
Apex Tool Group, LLC (1.2%)*(4) (6) (8) | | Industrial Machinery | | First Lien Senior Secured Term Loan (LIBOR + 5.5%, 7.3% Cash, Acquired 08/18, Due 08/24) | | 7,145,435 | | | 7,014,166 | | | 7,032,680 | |
| | | 7,145,435 | | | 7,014,166 | | | 7,032,680 | |
| | | | | | | | | | |
Applied Systems Inc. (0.9%)*(6) (8) | | Application Software | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.2% Cash, Acquired 09/19, Due 09/24) | | 4,963,321 | | | 4,993,617 | | | 4,978,360 | |
| | | | 4,963,321 | | | 4,993,617 | | | 4,978,360 | |
| | | | | | | | | | |
AQA Acquisition Holding, Inc. (f/k/a SmartBear) (0.9%)*(5) (7) (8) | | High Tech Industries | | Second Lien Senior Secured Term Loan (LIBOR + 8.0%, 10.1% Cash, Acquired 10/18, Due 05/24) | | 4,959,088 | | | 4,857,998 | | | 4,859,316 | |
| | | | 4,959,088 | | | 4,857,998 | | | 4,859,316 | |
| | | | | | | | | | |
Arch Global Precision LLC (1.4%)*(5) (7) (8) | | Industrial Machinery | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 6.6% Cash, Acquired 04/19, Due 04/26) | | 8,285,058 | | | 8,160,532 | | | 8,202,739 | |
| | | | 8,285,058 | | | 8,160,532 | | | 8,202,739 | |
| | | | | | | | | | |
Armstrong Transport Group (Pele Buyer, LLC ) (0.8%)*(5) (7) (8) | | Air Freight & Logistics | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 6.5% Cash, Acquired 06/19, Due 06/24) | | 4,679,427 | | | 4,581,840 | | | 4,575,617 | |
| | | | 4,679,427 | | | 4,581,840 | | | 4,575,617 | |
| | | | | | | | | | |
Ascend Learning, LLC (0.9%)*(6) (8) | | IT Consulting & Other Services | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 09/18, Due 07/24) | | 4,961,928 | | | 4,971,130 | | | 4,989,864 | |
| | | 4,961,928 | | | 4,971,130 | | | 4,989,864 | |
| | | | | | | | | | |
Ascensus Specialties, LLC (1.4%)*(5) (7) (8) | | Specialty Chemicals | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 6.4% Cash, Acquired 09/19, Due 09/26) | | 8,092,810 | | | 8,014,212 | | | 8,023,386 | |
| | | | 8,092,810 | | | 8,014,212 | | | 8,023,386 | |
| | | | | | | | | | |
Barings BDC, Inc.
Consolidated Schedule of Investments — (Continued)
December 31, 2019
TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments December 31, 2016
|
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
Non–Control / Non–Affiliate Investments: | | | | | | |
ACA Holdings LLC (0%)* | | Security Company | | Preferred Units (2,000,000 units) | | | | $ | 2,000,000 |
| | $ | 1,242,000 |
|
| | | | | | 2,000,000 |
| | 1,242,000 |
|
| | | | | | | | | | |
Access Medical Acquisition, Inc. (3%)* | | Operator of Primary Care Clinics | | Subordinated Notes (10% Cash, 2% PIK, Due 01/22) | | $ | 13,819,514 |
| | 13,593,292 |
| | 13,593,292 |
|
| | Class A Units (1,500,000 units) | | | | 901,026 |
| | 3,618,000 |
|
| | | | 13,819,514 |
| | 14,494,318 |
| | 17,211,292 |
|
| | | | | | | | | | |
Aden & Anais Holdings, Inc. (0%)* | | Baby Products | | Common Stock (20,000 shares) | | | | 2,000,000 |
| | 2,000,000 |
|
| | | | | | 2,000,000 |
| | 2,000,000 |
|
| | | | | | | | | | |
Agilex Flavors & Fragrances, Inc. (2%)* | | Custom Fragrance Producer | | Subordinated Note (12% Cash, Due 11/21) | | 13,168,124 |
| | 13,048,983 |
| | 13,048,983 |
|
Common Units (1,250 units) | | | | 1,250,000 |
| | 2,227,000 |
|
| | | 13,168,124 |
| | 14,298,983 |
| | 15,275,983 |
|
| | | | | | | | | | |
AGM Automotive, LLC (1%)* | | Auto Industry Interior Components Supplier | | Units (1,500,000 units) | | | | 630,134 |
| | 4,266,000 |
|
| | | | | 630,134 |
| | 4,266,000 |
|
| | | | | | | | | | |
Avkem International, LLC (1%)* | | Flux and Foundry Manufacturer and Supplier | | Subordinated Note (10% Cash, 4% PIK, Due 12/17) | | 4,112,935 |
| | 4,075,177 |
| | 4,075,177 |
|
| | | | 4,112,935 |
| | 4,075,177 |
| | 4,075,177 |
|
| | | | | | | | | | |
AVL Holdings, Inc. (0%)* | | Manufacturer and Distributor for Independent Artists and Authors | | Common Stock (138 shares) | | | | 1,300,000 |
| | 1,767,000 |
|
| | | | | | 1,300,000 |
| | 1,767,000 |
|
| | | | | | | | | | |
Baker Hill Acquisition, LLC (2%)* | | Loan Origination Software Solutions Provider | | Subordinated Notes (LIBOR + 11.0%, 12% Cash, Due 03/21)(8) | | 13,500,000 |
| | 13,334,260 |
| | 12,320,000 |
|
| | Limited Partnership Interest | | | | 1,498,500 |
| | 721,000 |
|
| | | | 13,500,000 |
| | 14,832,760 |
| | 13,041,000 |
|
| | | | | | | | | | |
Cafe Enterprises, Inc. (2%)* | | Restaurant | | Subordinated Note (7% Cash, 7% PIK, Due 09/19) | | 13,882,800 |
| | 13,743,461 |
| | 10,331,000 |
|
| | Series C Preferred Stock (10,000 shares) | | | | 1,000,000 |
| | — |
|
| | | | 13,882,800 |
| | 14,743,461 |
| | 10,331,000 |
|
| | | | | | | | | | |
Capital Contractors, Inc. (0%)* | | Janitorial and Facilities Maintenance Services | | Subordinated Notes (5% Cash, Due 6/20) | | 9,843,542 |
| | 9,711,658 |
| | — |
|
Series A Redeemable Preferred Stock (200 shares) | | | | 2,000,000 |
| | — |
|
Common Stock Warrants (20 shares) | | | | 492,000 |
| | — |
|
| | 9,843,542 |
| | 12,203,658 |
| | — |
|
| | | | | | | | | | |
Captek Softgel International, Inc. (3%)* | | Nutraceutical Manufacturer | | Subordinated Note (10% Cash, 2.5% PIK, Due 06/21) | | 15,407,336 |
| | 15,150,497 |
| | 15,150,497 |
|
Common Stock (15,000 shares) | | | | 1,500,000 |
| | 1,500,000 |
|
| | | 15,407,336 |
| | 16,650,497 |
| | 16,650,497 |
|
| | | | | | | | | | |
Carolina Beverage Group, LLC (0%)* | | Beverage Manufacturing and Packaging | | Class B Units (11,974 units) | | | | 119,735 |
| | 264,000 |
|
| | | | | 119,735 |
| | 264,000 |
|
| | | | | | | | | | |
Centerfield Media Holding Company (4%)* | | Digital Marketing | | Subordinated Note (10% Cash, 3.5% PIK, Due 03/21) | | 18,857,978 |
| | 18,567,590 |
| | 19,235,000 |
|
| | Common Shares (1,000 shares) | | | | 1,000,000 |
| | 2,220,000 |
|
| | | | 18,857,978 |
| | 19,567,590 |
| | 21,455,000 |
|
| | | | | | | | | | |
Community Intervention Services, Inc. (2%)* | | Provider of Behavioral Health Services | | Subordinated Note (7% Cash, 6% PIK, Due 01/21) (5) | | 18,736,265 |
| | 17,717,756 |
| | 14,134,000 |
|
| | | | 18,736,265 |
| | 17,717,756 |
| | 14,134,000 |
|
| | | | | | | | | | |
Comverge, Inc. (3%)* | | Provider of Intelligent Energy Management Solutions | | Senior Note (12% Cash, Due 05/18) | | 15,505,583 |
| | 15,406,749 |
| | 15,406,749 |
|
Preferred Stock (703 shares) | | | | 554,458 |
| | 835,000 |
|
Common Stock (1,000,000 shares) | | | | 100,000 |
| | 353,000 |
|
| | | 15,505,583 |
| | 16,061,207 |
| | 16,594,749 |
|
| | | | | | | | | | |
CPower Ultimate HoldCo, LLC (0%)* | | Demand Response Business | | Units (345,542 units) | | | | 345,542 |
| | 345,542 |
|
| | | | | | 345,542 |
| | 345,542 |
|
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
ASPEQ Heating Group LLC (1.8%)*(5) (7) (8) | | Building Products, Air and Heating | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 7.2% Cash, Acquired 11/19, Due 11/25) | | $ | 10,535,858 | | | $ | 10,381,002 | | | $ | 10,403,101 | |
| | | | 10,535,858 | | | 10,381,002 | | | 10,403,101 | |
| | | | | | | | | | |
AssuredPartners Capital, Inc. (0.9%)*(6) (8) | | Property & Casualty Insurance | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.3% Cash, Acquired 08/18, Due 10/24) | | 4,957,568 | | | 4,966,915 | | | 4,968,722 | |
| | | 4,957,568 | | | 4,966,915 | | | 4,968,722 | |
| | | | | | | | | | |
Auxi International (1.0%)*(3) (5) (7) (8) | | Commercial Finance | | First Lien Senior Secured Term Loan (EURIBOR + 5.5%, 5.5% Cash, Acquired 12/19, Due 12/26) | | 5,578,822 | | | 5,359,131 | | | 5,429,359 | |
| | | | 5,578,822 | | | 5,359,131 | | | 5,429,359 | |
| | | | | | | | | | |
Avantor, Inc. (0.3%)*(3) (6) (8) | | Health Care Equipment | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 08/18, Due 11/24) | | 1,477,017 | | | 1,494,467 | | | 1,489,320 | |
| | | | 1,477,017 | | | 1,494,467 | | | 1,489,320 | |
| | | | | | | | | | |
Aveanna Healthcare Holdings, Inc. (0.8%)*(6) (8) | | Health Care Facilities | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 6.0% Cash, Acquired 10/18, Due 03/24) | | 1,473,559 | | | 1,457,678 | | | 1,415,545 | |
| | First Lien Senior Secured Term Loan (LIBOR + 5.5%, 7.3% Cash, Acquired 10/18, Due 03/24) | | 3,529,748 | | | 3,530,607 | | | 3,400,700 | |
| | | | 5,003,307 | | | 4,988,285 | | | 4,816,245 | |
| | | | | | | | | | |
AVSC Holding Corp. (1.4%)*(4) (5) (6) (8) | | Advertising | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.1% Cash, Acquired 08/18, Due 03/25) | | 7,879,699 | | | 7,843,898 | | | 7,840,301 | |
| | | | 7,879,699 | | | 7,843,898 | | | 7,840,301 | |
| | | | | | | | | | |
Bausch Health Companies Inc. (0.8%)*(3) (6) (8) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.7% Cash, Acquired 08/18, Due 05/25) | | 4,581,718 | | | 4,600,701 | | | 4,604,627 | |
| | | | 4,581,718 | | | 4,600,701 | | | 4,604,627 | |
| | | | | | | | | | |
BDP International, Inc. (f/k/a BDP Buyer, LLC) (4.3%)*(5) (7) (8) | | Air Freight & Logistics | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 6.7% Cash, Acquired 12/18, Due 12/24) | | 24,750,000 | | | 24,326,180 | | | 24,449,263 | |
| | | | 24,750,000 | | | 24,326,180 | | | 24,449,263 | |
| | | | | | | | | | |
Benify (Bennevis AB) (0.2%)*(3) (5) (7) (8) | | High Tech Industries | | First Lien Senior Secured Term Loan (STIBOR + 5.75%, 5.85% Cash, Acquired 07/19, Due 07/26) | | 1,394,029 | | | 1,363,957 | | | 1,373,219 | |
| | | | 1,394,029 | | | 1,363,957 | | | 1,373,219 | |
| | | | | | | | | | |
Berlin Packaging LLC (1.5%)*(4) (5) (6) (8) | | Forest Products /Containers | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.7% Cash, Acquired 08/18, Due 11/25) | | 8,372,500 | | | 8,389,597 | | | 8,297,734 | |
| | | | 8,372,500 | | | 8,389,597 | | | 8,297,734 | |
| | | | | | | | | | |
Blackhawk Network Holdings Inc. (0.9%)*(6) (8) | | Data Processing & Outsourced Services | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 11/18, Due 06/25) | | 4,962,217 | | | 4,962,217 | | | 4,957,056 | |
| | | | 4,962,217 | | | 4,962,217 | | | 4,957,056 | |
| | | | | | | | | | |
Brown Machine Group Holdings, LLC (0.9%)*(5) (7) (8) | | Industrial Equipment | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 7.2% Cash, Acquired 10/18, Due 10/24) | | 5,286,022 | | | 5,231,847 | | | 5,016,305 | |
| | | | 5,286,022 | | | 5,231,847 | | | 5,016,305 | |
| | | | | | | | | | |
Cadent, LLC (f/k/a Cross MediaWorks) (1.4%)*(5) (7) (8) | | Media & Entertainment | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 7.0% Cash, Acquired 09/18, Due 09/23) | | 7,866,556 | | | 7,806,344 | | | 7,827,224 | |
| | | | 7,866,556 | | | 7,806,344 | | | 7,827,224 | |
| | | | | | | | | | |
Capital Automotive LLC (0.9%)*(6) (8) | | Automotive Retail | | First Lien Senior Secured Term Loan (LIBOR + 2.5%, 4.3% Cash, Acquired 09/18, Due 03/24) | | 4,987,277 | | | 4,999,916 | | | 4,998,199 | |
| | | | 4,987,277 | | | 4,999,916 | | | 4,998,199 | |
| | | | | | | | | | |
CM Acquisitions Holdings Inc. (f/k/a Campaign Monitor (UK) Limited) (3.5%)*(5) (7) (8) | | Internet & Direct Marketing
| | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 6.5% Cash, Acquired 05/19, Due 05/25) | | 20,537,685 | | | 20,188,267 | | | 20,161,398 | |
| | | | 20,537,685 | | | 20,188,267 | | | 20,161,398 | |
| | | | | | | | | | |
Confie Seguros Holding II Co. (0.4%)*(5) (7) (8) | | Insurance Brokerage Services | | Second Lien Senior Secured Term Loan (LIBOR + 8.5%, 10.4% Cash, Acquired 10/19, Due 11/25) | | 2,500,000 | | | 2,350,797 | | | 2,312,500 | |
| | | | 2,500,000 | | | 2,350,797 | | | 2,312,500 | |
| | | | | | | | | | |
Contabo Finco S.À R.L (0.9%)*(3) (5) (7) (8) | | Internet Software and Services | | First Lien Senior Secured Term Loan (EURIBOR + 5.75%, 5.75% Cash, Acquired 10/19, Due 10/26) | | 5,069,246 | | | 4,853,087 | | | 4,900,448 | |
| | | | 5,069,246 | | | 4,853,087 | | | 4,900,448 | |
| | | | | | | | | | |
Container Store Group, Inc., (The) (0.5%)*(6) (7) (8) | | Retail | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 6.8% Cash, Acquired 09/18, Due 09/23) | | 2,929,197 | | | 2,931,249 | | | 2,753,445 | |
| | | | 2,929,197 | | | 2,931,249 | | | 2,753,445 | |
| | | | | | | | | | |
Core & Main LP (0.7%)*(6) (8) | | Building Products | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.5% Cash, Acquired 09/18, Due 08/24) | | 3,979,695 | | | 3,995,692 | | | 3,978,024 | |
| | | | 3,979,695 | | | 3,995,692 | | | 3,978,024 | |
| | | | | | | | | | |
Barings BDC, Inc.
Consolidated Schedule of Investments — (Continued)
December 31, 2019
TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments — (Continued) December 31, 2016 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
CWS Holding Company, LLC (0%)* | | Manufacturer of Custom Windows and Sliding Doors | | Class A Units (1,500,000 units) | | | | $ | 1,500,000 |
| | $ | 2,076,000 |
|
| | | | | 1,500,000 |
| | 2,076,000 |
|
| | | | | | | | | | |
Data Source Holdings, LLC (0%)* | | Print Supply Chain Management Services | | Common Units (47,503 units) | | | | 1,000,000 |
| | 940,000 |
|
| | | | | 1,000,000 |
| | 940,000 |
|
| | | | | | | | | | |
Del Real, LLC (2%)* | | Hispanic Refrigerated Foods Company | | Subordinated Note (11% Cash, Due 04/23) | | $ | 14,000,000 |
| | 13,727,515 |
| | 13,727,515 |
|
| | Class A Units (3,000,000 units) | | | | 3,000,000 |
| | 3,000,000 |
|
| | | | 14,000,000 |
| | 16,727,515 |
| | 16,727,515 |
|
| | | | | | | | | | |
DialogDirect, Inc. (2%)* | | Business Process Outsourcing Provider | | Subordinated Notes (12% Cash, 1.5% PIK, Due 04/20) | | 16,126,541 |
| | 16,020,226 |
| | 11,994,000 |
|
| | | 16,126,541 |
| | 16,020,226 |
| | 11,994,000 |
|
| | | | | | | | | | |
Dimora Brands, Inc. (2%)* | | Hardware Designer and Distributor | | Subordinated Note (LIBOR + 10.0%, 11% Cash, Due 10/23)(8) | | 12,500,000 |
| | 12,267,514 |
| | 12,267,514 |
|
| | | | 12,500,000 |
| | 12,267,514 |
| | 12,267,514 |
|
| | | | | | | | | | |
DLC Acquisition, LLC (6%)* | | Staffing Firm | | Senior Notes (LIBOR + 8.0%, 10% Cash, Due 12/20)(8) | | 21,312,500 |
| | 21,047,577 |
| | 21,047,577 |
|
| Senior Note (10% Cash, 2% PIK, Due 12/20) | | 16,929,763 |
| | 16,735,793 |
| | 16,735,793 |
|
| | | 38,242,263 |
| | 37,783,370 |
| | 37,783,370 |
|
| | | | | | | | | | |
Dyno Acquiror, Inc. (1%)* | | Sewing Products and Seasonal Decorative Products Supplier | | Subordinated Note (12% Cash, 2% PIK, Due 11/19) | | 7,531,330 |
| | 7,474,744 |
| | 7,474,744 |
|
| Series A Units (600,000 units) | | | | 600,000 |
| | 739,000 |
|
| | | 7,531,330 |
| | 8,074,744 |
| | 8,213,744 |
|
| | | | | | | | | | |
Eckler's Holdings, Inc. (1%)* | | Restoration Parts and Accessories for Classic Cars and Trucks | | Subordinated Note (11% Cash, 4.5% PIK, Due 07/18) | | 9,941,563 |
| | 9,882,596 |
| | 8,396,000 |
|
| Common Stock (18,029 shares) | | | | 183,562 |
| | — |
|
| Series A Preferred Stock (1,596 shares) | | | | 1,596,126 |
| | — |
|
| Series B Preferred Stock (185 shares) | | | | 185,127 |
| | — |
|
| | | 9,941,563 |
| | 11,847,411 |
| | 8,396,000 |
|
| | | | | | | | | | |
Fresh-G Restaurant Holding, LLC (0%)* | | Restaurant | | Class A Units (5,000 units) | | | | 500,000 |
| | — |
|
| | | | | | 500,000 |
| | — |
|
| | | | | | | | | | |
Flowchem Holdings LLC (0%)* | | Services to Crude Oil Pipeline Operators | | Common Units (1,000,000 units) | | | | 782,356 |
| | 2,552,000 |
|
| | | | | 782,356 |
| | 2,552,000 |
|
| | | | | | | | | | |
Fridababy Holdings, LLC (4%)* | | Baby Products | | Senior Notes (LIBOR + 9.0%, 10% Cash, Due 10/21)(8) | | 23,000,000 |
| | 22,558,007 |
| | 22,558,007 |
|
| | Class B Units (4,500 units) | | | | 273,401 |
| | 273,401 |
|
| | | | 23,000,000 |
| | 22,831,408 |
| | 22,831,408 |
|
| | | | | | | | | | |
FrontStream Holdings, LLC (2%)* | | Payment and Donation Management Product Service Provider | | Subordinated Note (12.5% Cash, Due 12/20) | | 13,375,000 |
| | 13,254,632 |
| | 12,643,000 |
|
| | Series C-2 Preferred Shares (500 shares) | | | | 500,000 |
| | 435,000 |
|
| | | | 13,375,000 |
| | 13,754,632 |
| | 13,078,000 |
|
| | | | | | | | | | |
Frontstreet Facility Solutions, Inc. (1%)* | | Retail, Restaurant and Commercial Facilities Maintenance | | Subordinated Note (11% Cash, 2% PIK, Due 07/18) | | 8,462,629 |
| | 8,418,332 |
| | 6,771,000 |
|
| | Series A Convertible Preferred Stock (2,500 shares) | | | | 250,000 |
| | — |
|
| | Series B Convertible Preferred Stock (5,556 shares) | | | | 500,000 |
| | — |
|
| | | | 8,462,629 |
| | 9,168,332 |
| | 6,771,000 |
|
| | | | | | | | | | |
Frozen Specialties, Inc. (2%)* | | Frozen Foods Manufacturer | | Subordinated Note (10% Cash, 4% PIK, Due 12/17) | | 13,675,353 |
| | 13,675,353 |
| | 13,675,353 |
|
| | 13,675,353 |
| | 13,675,353 |
| | 13,675,353 |
|
| | | | | | | | | | |
GST AutoLeather, Inc. (4%)* | | Supplier of Automotive Interior Leather | | Subordinated Note (11% Cash, 2% PIK, Due 01/21) | | 23,131,473 |
| | 22,812,032 |
| | 22,812,032 |
|
| | | | 23,131,473 |
| | 22,812,032 |
| | 22,812,032 |
|
| | | | | | | | | | |
Halo Branded Solutions, Inc. (2%)* | | Supply Chain Services | | Subordinated Notes (11% Cash, 1% PIK, Due 10/22) | | 10,410,398 |
| | 10,190,992 |
| | 10,190,992 |
|
| | Class A1 Units (2,600 units) | | | | 2,600,000 |
| | 3,308,000 |
|
| | | | 10,410,398 |
| | 12,790,992 |
| | 13,498,992 |
|
| | | | | | | | | | |
HKW Capital Partners IV, L.P. (0%)*(4) | | Multi-Sector Holdings | | 0.6% Limited Partnership Interest | | | | 835,283 |
| | 1,231,000 |
|
| | | | | | 835,283 |
| | 1,231,000 |
|
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
CPG Intermediate LLC (0.4%)*(6) (8) | | Specialty Chemicals | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.3% Cash, Acquired 08/18, Due 11/24) | | $ | 2,110,623 | | | $ | 2,112,734 | | | $ | 2,122,506 | |
| | | | 2,110,623 | | | 2,112,734 | | | 2,122,506 | |
| | | | | | | | | | |
CPI International Inc. (0.8%)*(6) (8) | | Electronic Components | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.3% Cash, Acquired 09/18, Due 07/24) | | 4,747,070 | | | 4,753,808 | | | 4,557,187 | |
| | | | 4,747,070 | | | 4,753,808 | | | 4,557,187 | |
| | | | | | | | | | |
Dart Buyer, Inc. (1.8%)*(3) (5) (7) (8) | | Aerospace & Defense | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 7.2% Cash, Acquired 04/19, Due 04/25) | | 10,571,782 | | | 10,307,197 | | | 10,315,912 | |
| | | | 10,571,782 | | | 10,307,197 | | | 10,315,912 | |
| | | | | | | | | | |
Dimora Brands, Inc. (0.5%)*(6) (8) | | Building Products | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.3% Cash, Acquired 08/18, Due 08/24) | | 2,941,442 | | | 2,944,373 | | | 2,919,381 | |
| | | | 2,941,442 | | | 2,944,373 | | | 2,919,381 | |
| | | | | | | | | | |
Distinct Holdings, Inc. (1.3%)*(5) (7) (8) | | Systems Software | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 6.7% Cash, Acquired 04/19, Due 12/23) | | 7,592,719 | | | 7,509,950 | | | 7,519,228 | |
| | | | 7,592,719 | | | 7,509,950 | | | 7,519,228 | |
| | | | | | | | | | |
Duff & Phelps Corporation (1.2%)*(4) (6) (8) | | Research & Consulting Services | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.0% Cash, Acquired 09/18, Due 02/25) | | 6,754,286 | | | 6,769,081 | | | 6,725,310 | |
| | | | 6,754,286 | | | 6,769,081 | | | 6,725,310 | |
| | | | | | | | | | |
Edelman Financial Center, LLC, The (f/k/a Edelman Financial Group, Inc.) (0.9%)*(6) (8) | | Investment Banking & Brokerage | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.0% Cash, Acquired 09/18, Due 07/25) | | 4,962,406 | | | 4,999,143 | | | 4,986,176 | |
| | | | 4,962,406 | | | 4,999,143 | | | 4,986,176 | |
| | | | | | | | | | |
Endo International PLC (1.3%)*(3) (4) (6) (8) | | Pharmaceuticals | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 6.1% Cash, Acquired 09/18, Due 04/24) | | 7,878,788 | | | 7,939,415 | | | 7,524,242 | |
| | | | 7,878,788 | | | 7,939,415 | | | 7,524,242 | |
| | | | | | | | | | |
Exeter Property Group, LLC (2.2%)*(5) (7) (8) | | Real Estate | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 6.2% Cash, Acquired 02/19, Due 08/24) | | 12,437,500 | | | 12,276,532 | | | 12,351,037 | |
| | | | 12,437,500 | | | 12,276,532 | | | 12,351,037 | |
| | | | | | | | | | |
ExGen Renewables IV, LLC (f/k/a Exelon Corp.) (0.5%)*(3) (6) (8) | | Electric Utilities | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.9% Cash, Acquired 09/18, Due 11/24) | | 2,865,257 | | | 2,888,576 | | | 2,822,278 | |
| | | | 2,865,257 | | | 2,888,576 | | | 2,822,278 | |
| | | | | | | | | | |
Eyemart Express (0.6%)*(6) (8) | | Retail | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 08/18, Due 08/24) | | 3,452,217 | | | 3,462,081 | | | 3,456,463 | |
| | | | 3,452,217 | | | 3,462,081 | | | 3,456,463 | |
| | | | | | | | | | |
Fieldwood Energy LLC (1.5%)*(4) (5) (6) (8) | | Oil & Gas Equipment & Services | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 7.2% Cash, Acquired 08/18, Due 04/22) | | 10,000,000 | | | 10,065,208 | | | 8,322,200 | |
| | | | 10,000,000 | | | 10,065,208 | | | 8,322,200 | |
| | | | | | | | | | |
Filtration Group Corporation (0.8%)*(6) (8) | | Industrial Machinery | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 09/18, Due 03/25) | | 4,774,230 | | | 4,804,208 | | | 4,788,840 | |
| | | | 4,774,230 | | | 4,804,208 | | | 4,788,840 | |
| | | | | | | | | | |
Flex Acquisition Holdings, Inc. (1.7%)*(4) (5) (6) (8) | | Paper Packaging | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.3% Cash, Acquired 08/18, Due 06/25) | | 9,782,731 | | | 9,800,160 | | | 9,695,077 | |
| | | | 9,782,731 | | | 9,800,160 | | | 9,695,077 | |
| | | | | | | | | | |
Frazer Consultants, LLC (d/b/a Tribute Technology) (1.3%)*(5) (7) (8) | | Software Services | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 5.7% Cash, Acquired 11/19, Due 08/23) | | 7,742,985 | | | 7,667,700 | | | 7,684,869 | |
| | | | 7,742,985 | | | 7,667,700 | | | 7,684,869 | |
| | | | | | | | | | |
Graftech International Ltd. (1.6%)*(3) (4) (6) (7) (8) | | Specialty Chemicals | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.3% Cash, Acquired 08/18, Due 02/25) | | 9,013,889 | | | 9,081,525 | | | 8,980,087 | |
| | | | 9,013,889 | | | 9,081,525 | | | 8,980,087 | |
| | | | | | | | | | |
Gulf Finance, LLC (0.1%)*(4) (8) | | Oil & Gas Exploration & Production | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 7.0% Cash, Acquired 10/18, Due 08/23) | | 1,058,979 | | | 920,988 | | | 826,003 | |
| | | | 1,058,979 | | | 920,988 | | | 826,003 | |
| | | | | | | | | | |
Harbor Freight Tools USA Inc.(1.0%)*(6) (8) | | Specialty Stores | | First Lien Senior Secured Term Loan (LIBOR + 2.5%, 4.3% Cash, Acquired 08/18, Due 08/23) | | 5,979,675 | | | 5,931,148 | | | 5,951,870 | |
| | | | 5,979,675 | | | 5,931,148 | | | 5,951,870 | |
| | | | | | | | | | |
Hayward Industries, Inc. (1.4%)*(4) (6) (8) | | Leisure Products | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.3% Cash, Acquired 08/18, Due 08/24) | | 8,221,922 | | | 8,247,578 | | | 8,147,924 | |
| | | | 8,221,922 | | | 8,247,578 | | | 8,147,924 | |
| | | | | | | | | | |
Barings BDC, Inc.
Consolidated Schedule of Investments — (Continued)
December 31, 2019
TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments — (Continued) December 31, 2016 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
| | | | | | | | | | |
HTC Borrower, LLC (4%)* | | Hunting and Outdoor Products | | Subordinated Notes (10% Cash, 3% PIK, Due 09/20) | | $ | 26,131,706 |
| | $ | 25,854,767 |
| | $ | 25,854,767 |
|
| | | | 26,131,706 |
| | 25,854,767 |
| | 25,854,767 |
|
| | | | | | | | | | |
ICP Industrial, Inc. (4%)* | | Coatings Formulator and Manufacturer | | Second Lien Term Note (LIBOR + 8.5%, 9.5% Cash, Due 04/22)(8) | | 7,500,000 |
| | 7,435,556 |
| | 7,435,556 |
|
| | Subordinated Notes (10% Cash, 1% PIK, Due 10/22) | | 8,088,123 |
| | 7,946,278 |
| | 7,946,278 |
|
| | Subordinated Notes (14% PIK, Due 10/22) | | 5,743,159 |
| | 5,688,352 |
| | 5,688,352 |
|
| | Class A Units (1,289 units) | | | | 1,751,483 |
| | 1,929,000 |
|
| | | | 21,331,282 |
| | 22,821,669 |
| | 22,999,186 |
|
| | | | | | | | | | |
Inland Pipe Rehabilitation Holding Company LLC (0%)* | | Cleaning and Repair Services | | Membership Interest Purchase Warrant (3%) | | | | 853,500 |
| | 1,527,000 |
|
| | | | 853,500 |
| | 1,527,000 |
|
| | | | | | | | | | |
IPS Structural Adhesives Holdings, Inc. (2%)* | | Specialty Adhesives and Plumbing Products Manufacturer | | Second Lien Term Note (LIBOR + 9.5%, 10.5% Cash, Due 12/24)(8) | | 15,000,000 |
| | 14,700,000 |
| | 14,700,000 |
|
| | | | 15,000,000 |
| | 14,700,000 |
| | 14,700,000 |
|
| | | | | | | | | | |
KidKraft, Inc. (4%)* | | Children's Toy Manufacturer and Distributor | | Second Lien Term Note (11% Cash, 1% PIK, Due 03/22) | | 27,668,623 |
| | 27,135,218 |
| | 27,135,218 |
|
| | | | 27,668,623 |
| | 27,135,218 |
| | 27,135,218 |
|
| | | | | | | | | | |
K-Square Restaurant Partners, LP (1%)* | | Restaurant | | Class A Units of Limited Partnership (2,000 units) | | | | 638,260 |
| | 3,830,000 |
|
| | | | | | 638,260 |
| | 3,830,000 |
|
| | | | | | | | | | |
Lakeview Health Holdings, Inc. (3%)* | | Substance Abuse Treatment Service Provider | | Senior Note (LIBOR + 6.75%, 7.8% Cash, Due 12/21)(8) | | 18,612,633 |
| | 18,412,633 |
| | 18,412,633 |
|
| | Common Stock (2,000 shares) | | | | 2,000,000 |
| | 2,000,000 |
|
| | | | 18,612,633 |
| | 20,412,633 |
| | 20,412,633 |
|
| | | | | | | | | | |
Media Storm, LLC (1%)* | | Marketing Services | | Subordinated Note (10% Cash, Due 08/19) | | 6,545,455 |
| | 6,533,934 |
| | 5,055,000 |
|
Membership Units (1,216,204 units) | | | | 1,176,957 |
| | 260,000 |
|
| | 6,545,455 |
| | 7,710,891 |
| | 5,315,000 |
|
| | | | | | | | | | |
MIC Holding LLC (2%)* | | Firearm Accessories Manufacturer and Distributor | | Preferred Units (1,470 units) | | | | 1,470,000 |
| | 3,012,000 |
|
| | Common Units (30,000 units) | | | | 30,000 |
| | 8,837,000 |
|
| | | | | | 1,500,000 |
| | 11,849,000 |
|
| | | | | | | | | | |
Micross Solutions LLC (4%)* | | Provider of Semiconductor Products and Services | | Subordinated Note (12% Cash, 3% PIK, Due 06/18) | | 24,435,074 |
| | 24,342,230 |
| | 24,342,230 |
|
Class A-2 Common Units (1,979,524 units) | | | | 2,019,693 |
| | 1,875,000 |
|
| | 24,435,074 |
| | 26,361,923 |
| | 26,217,230 |
|
| | | | | | | | | | |
Motor Vehicle Software Corporation (3%)* | | Provider of EVR Services | | Subordinated Note (10% Cash, 0.5% PIK, Due 03/21) | | 20,245,100 |
| | 19,917,945 |
| | 19,917,945 |
|
| | Class A Units (1,000,000 units) | | | | 1,076,210 |
| | 1,372,000 |
|
| | | | 20,245,100 |
| | 20,994,155 |
| | 21,289,945 |
|
| | | | | | | | | | |
Nautic Partners VII, LP (0%)*(4) | | Multi-Sector Holdings | | 0.4% Limited Partnership Interest | | | | 1,093,312 |
| | 1,520,000 |
|
| | | | | | 1,093,312 |
| | 1,520,000 |
|
| | | | | | | | | | |
Nomacorc, LLC (3%)* | | Synthetic Wine Cork Producer | | Subordinated Note (10% Cash, 2.3% PIK, Due 07/21) | | 20,875,890 |
| | 20,572,926 |
| | 16,597,000 |
|
| | Limited Partnership Interest | | | | 2,150,637 |
| | — |
|
| | | | 20,875,890 |
| | 22,723,563 |
| | 16,597,000 |
|
| | | | | | | | | | |
Orchid Underwriters Agency, LLC (4%)* | | Insurance Underwriter | | Term B Note (10% Cash, Due 11/19) | | 21,409,670 |
| | 21,125,036 |
| | 21,125,036 |
|
Class A Preferred Units (15,000 units) | | | | 1,500,000 |
| | 1,972,000 |
|
Class A Common Units (15,000 units) | | | | — |
| | 1,624,000 |
|
| | 21,409,670 |
| | 22,625,036 |
| | 24,721,036 |
|
| | | | | | | | | | |
PowerDirect Marketing, LLC (0%)* | | Marketing Services | | Senior Note (13% Cash, 2% PIK, Due 06/17)(6) | | 8,573,531 |
| | 5,077,482 |
| | 850,000 |
|
Common Unit Purchase Warrants | | | | 590,200 |
| | — |
|
| | 8,573,531 |
| | 5,667,682 |
| | 850,000 |
|
| | | | | | | | | | |
ProAmpac PG Borrower LLC (2%)* | | Manufacturer of Flexible Packaging Products | | Second Lien Term Note (LIBOR + 8.5%, 9.5% Cash, Due 11/24)(8) | | 15,000,000 |
| | 14,775,000 |
| | 14,775,000 |
|
| | | | 15,000,000 |
| | 14,775,000 |
| | 14,775,000 |
|
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
Heartland, LLC (0.9%)*(5) (7) (8) | | Commercial Services & Supplies | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 6.7% Cash, Acquired 08/19, Due 08/25) | | $ | 5,504,030 | | | $ | 5,260,931 | | | $ | 5,280,431 | |
| | | | 5,504,030 | | | 5,260,931 | | | 5,280,431 | |
| | | | | | | | | | |
Heilbron (f/k/a Sucsez (Bolt Bidco B.V.)) (1.2%)*(3) (5) (7) (8) | | Insurance | | First Lien Senior Secured Term Loan (EURIBOR + 5.0%, 5.0% Cash, Acquired 09/19, Due 09/26) | | 6,948,082 | | | 6,633,562 | | | 6,713,253 | |
| | | | 6,948,082 | | | 6,633,562 | | | 6,713,253 | |
| | | | | | | | | | |
Hertz Corporation (The) (1.0%)*(3) (6) (8) | | Rental & Leasing Services | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.6% Cash, Acquired 09/18, Due 06/23) | | 5,814,910 | | | 5,806,679 | | | 5,845,206 | |
| | | | 5,814,910 | | | 5,806,679 | | | 5,845,206 | |
| | | | | | | | | | |
Holley Performance Products (Holley Purchaser, Inc.) (3.9%)*(5) (7) (8) | | Packaging | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 6.9% Cash, Acquired 10/18, Due 10/25) | | 22,309,650 | | | 22,020,784 | | | 22,015,260 | |
| | | | 22,309,650 | | | 22,020,784 | | | 22,015,260 | |
| | | | | | | | | | |
Hub International Limited (0.9%)*(6) (8) | | Property & Casualty Insurance | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.7% Cash, Acquired 08/18, Due 04/25) | | 4,962,217 | | | 4,966,855 | | | 4,955,666 | |
| | | | 4,962,217 | | | 4,966,855 | | | 4,955,666 | |
| | | | | | | | | | |
HW Holdco, LLC (f/k/a Hanley Wood LLC) (1.3%)*(5) (7) (8) | | Advertising | | First Lien Senior Secured Term Loan (LIBOR + 6.25%, 8.1% Cash, Acquired 12/18, Due 12/24) | | 7,584,677 | | | 7,422,931 | | | 7,447,061 | |
| | | | 7,584,677 | | | 7,422,931 | | | 7,447,061 | |
| | | | | | | | | | |
Hyland Software Inc. (0.9%)*(6) (8) | | Technology Distributors | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.3% Cash, Acquired 09/18, Due 07/24) | | 4,962,312 | | | 5,001,673 | | | 4,984,046 | |
| | | | 4,962,312 | | | 5,001,673 | | | 4,984,046 | |
| | | | | | | | | | |
Hyperion Materials & Technologies, Inc. (2.4%)*(5) (7) (8) | | Industrial Machinery | | First Lien Senior Secured Term Loan (LIBOR + 5.5%, 7.3% Cash, Acquired 08/19, Due 08/26) | | 13,995,753 | | | 13,751,206 | | | 13,873,283 | |
| | | | 13,995,753 | | | 13,751,206 | | | 13,873,283 | |
| | | | | | | | | | |
IM Analytics Holding, LLC (d/b/a NVT) (1.6%)*(5) (7) (8) | | Electronic Instruments and Components | | First Lien Senior Secured Term Loan (LIBOR + 6.5%, 8.4% Cash, Acquired 11/19, Due 11/23) | | 9,292,112 | | | 9,201,220 | | | 9,222,019 | |
| | Warrant (77,265 units, Acquired 11/19) | | | | — | | | — | |
| | | | | | 9,292,112 | | | 9,201,220 | | | 9,222,019 | |
| | | | | | | | | | |
Immucor Inc. (0.4%)*(4) (8) | | Healthcare | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 6.9% Cash, Acquired 09/18, Due 06/21) | | 2,466,061 | | | 2,486,174 | | | 2,454,496 | |
| | | | 2,466,061 | | | 2,486,174 | | | 2,454,496 | |
| | | | | | | | | | |
Infor Software Parent, LLC (0.9%)*(6) (8) | | Systems Software | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.7% Cash, Acquired 08/18, Due 02/22) | | 4,970,073 | | | 4,976,381 | | | 4,989,606 | |
| | | | 4,970,073 | | | 4,976,381 | | | 4,989,606 | |
| | | | | | | | | | |
Institutional Shareholder Services, Inc. (0.8%)*(5) (7) (8) | | Diversified Support Services | | Second Lien Senior Secured Term Loan (LIBOR + 8.5%, 10.4% Cash, Acquired 03/19, Due 03/27) | | 4,951,685 | | | 4,816,340 | | | 4,840,149 | |
| | | | 4,951,685 | | | 4,816,340 | | | 4,840,149 | |
| | | | | | | | | | |
Internet Brands, Inc.(f/k/a Micro Holding Corp.) (0.7%)*(6) (8) | | Entertainment | | First Lien Senior Secured Term Loan (LIBOR + 3.75%, 5.5% Cash, Acquired 08/18, Due 09/24) | | 3,969,543 | | | 3,992,088 | | | 3,973,949 | |
| | | | 3,969,543 | | | 3,992,088 | | | 3,973,949 | |
| | | | | | | | | | |
ION Trading Technologies Ltd. (2.5%)*(3) (4) (6) (8) | | Electrical Components & Equipment | | First Lien Senior Secured Term Loan (LIBOR + 4.0%, 6.1% Cash, Acquired 08/18, Due 11/24) | | 14,773,869 | | | 14,745,732 | | | 14,145,980 | |
| | | | 14,773,869 | | | 14,745,732 | | | 14,145,980 | |
| | | | | | | | | | |
IRB Holding Corporation (0.7%)*(6) (8) | | Food Retail | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.2% Cash, Acquired 08/18, Due 02/25) | | 3,969,697 | | | 3,984,302 | | | 3,990,657 | |
| | | | 3,969,697 | | | 3,984,302 | | | 3,990,657 | |
| | | | | | | | | | |
Jade Bidco Limited (4.2%)*(3) (5) (7) (8) | | Aerospace & Defense | | First Lien Senior Secured Term Loan (LIBOR + 6.0%, 7.9% Cash, Acquired 11/19, Due 12/26) | | 20,933,517 | | | 20,363,170 | | | 20,377,010 | |
| | First Lien Senior Secured Term Loan (EURIBOR + 6.0%, 6.0% Cash, Acquired 11/19, Due 12/26) | | 3,748,582 | | | 3,581,938 | | | 3,648,928 | |
| | | | | | 24,682,099 | | | 23,945,108 | | | 24,025,938 | |
| | | | | | | | | | |
Jaguar Holding Company I (0.9%)*(6) (8) | | Life Sciences Tools & Services | | First Lien Senior Secured Term Loan (LIBOR + 2.5%, 4.3% Cash, Acquired 08/18, Due 08/22) | | 4,922,680 | | | 4,923,566 | | | 4,945,620 | |
| | | | 4,922,680 | | | 4,923,566 | | | 4,945,620 | |
| | | | | | | | | | |
Kenan Advantage Group Inc. (1.1%)*(4) (5) (6) (8) | | Trucking | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 08/18, Due 07/22) | | 6,203,297 | | | 6,200,149 | | | 6,145,172 | |
| | | | 6,203,297 | | | 6,200,149 | | | 6,145,172 | |
| | | | | | | | | | |
Barings BDC, Inc.
Consolidated Schedule of Investments — (Continued)
December 31, 2019
TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments — (Continued) December 31, 2016 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
RockYou, Inc. (0%)* | | Mobile Game Advertising Network | | Common Stock (67,585 shares) | | | | $ | 111,000 |
| | $ | 111,000 |
|
| | | | | | 111,000 |
| | 111,000 |
|
| | | | | | | | | | |
Rotolo Consultants, Inc. (1%)* | | Landscape Services | | Subordinated Note (11% Cash, 3% PIK, Due 08/21) | | $ | 6,904,210 |
| | 6,792,686 |
| | 6,792,686 |
|
| | Series A Preferred Units (39 units) | | | | 3,654,253 |
| | 1,671,000 |
|
| | | | 6,904,210 |
| | 10,446,939 |
| | 8,463,686 |
|
| | | | | | | | | | |
SCA Pharmaceuticals, LLC (0%)* | | Provider of Pharmaceutical Products | | Subordinated Note (LIBOR + 9.0%, 10% Cash, Due 12/20)(8) | | 3,000,000 |
| | 2,700,000 |
| | 2,700,000 |
|
| | | | 3,000,000 |
| | 2,700,000 |
| | 2,700,000 |
|
| | | | | | | | | | |
SCUF Gaming, Inc. (4%)* | | Gaming Controller Manufacturer | | Senior Notes (LIBOR + 8.5%, 9.5% Cash, Due 12/21)(8) | | 25,008,000 |
| | 24,507,840 |
| | 24,507,840 |
|
| | Common Stock (27,112 shares) | | | | 742,000 |
| | 742,000 |
|
| | | | 25,008,000 |
| | 25,249,840 |
| | 25,249,840 |
|
| | | | | | | | | | |
Smile Brands, Inc. (4%)* | | Dental Service Organization | | Subordinated Notes (10% Cash, 2% PIK, Due 02/23) | | 22,341,283 |
| | 21,910,129 |
| | 21,910,129 |
|
| | Class A Units (3,000 units) | | | | 3,000,000 |
| | 3,000,000 |
|
| | | | 22,341,283 |
| | 24,910,129 |
| | 24,910,129 |
|
| | | | | | | | | | |
SPC Partners V, LP (0%)*(4) | | Multi-Sector Holdings | | 0.7% Limited Partnership Interest | | | | 1,922,865 |
| | 2,019,000 |
|
| | | | | | 1,922,865 |
| | 2,019,000 |
|
| | | | | | | | | | |
Specialized Desanders, Inc. (2%)*(4) | | Sand and Particulate Removal Equipment Provider for Oil and Gas Companies | | Subordinated Note (12% Cash, 2% PIK, Due 03/20) | | 16,110,042 |
| | 15,966,524 |
| | 12,524,143 |
|
Class C Partnership Units (2,000,000 units) | | | | 1,937,421 |
| | 2,813,000 |
|
| | | 16,110,042 |
| | 17,903,945 |
| | 15,337,143 |
|
| | | | | | | | | | |
Tate's Bake Shop (2%)* | | Producer of Baked Goods | | Subordinated Note (10% Cash, 3% PIK, Due 02/20) | | 10,737,451 |
| | 10,606,430 |
| | 10,606,430 |
|
| | Limited Partnership Interest | | | | 925,000 |
| | 1,310,000 |
|
| | | | 10,737,451 |
| | 11,531,430 |
| | 11,916,430 |
|
| | | | | | | | | | |
TCFI Merlin LLC (2%)* | | Specialty Staffing Service Provider | | Senior Notes (10% Cash, 1% PIK, Due 09/19) | | 13,396,027 |
| | 13,212,935 |
| | 13,212,935 |
|
| | Limited Partnership Units (500,500 units) | | | | 500,000 |
| | 578,000 |
|
| | | | 13,396,027 |
| | 13,712,935 |
| | 13,790,935 |
|
| | | | | | | | | | |
The Cook & Boardman Group, LLC (3%)* | | Distributor of Doors and Related Products | | Subordinated Note (10% Cash, 2.5% PIK, Due 03/20) | | 14,840,320 |
| | 14,656,890 |
| | 14,656,890 |
|
| | Class A Units (1,400,000 units) | | | | 1,400,000 |
| | 2,663,000 |
|
| | | | 14,840,320 |
| | 16,056,890 |
| | 17,319,890 |
|
| | | | | | | | | | |
Trademark Global LLC (3%)* | | Supplier to Mass Market Internet Retail | | Subordinated Note (10% Cash, 1.3% PIK, Due 04/23) | | 14,800,000 |
| | 14,584,165 |
| | 14,584,165 |
|
| | Class A Units (1,500,000 units) | | | | 1,500,000 |
| | 1,500,000 |
|
| | Class B Units (1,500,000 units) | | | | — |
| | — |
|
| | | | 14,800,000 |
| | 16,084,165 |
| | 16,084,165 |
|
| | | | | | | | | | |
Travelpro Products, Inc. ("Travelpro") and TP - Holiday Group Limited ("TP") (3%)* | | Luggage and Travel Bag Supplier | | Second Lien Term Note - Travelpro (11% Cash, 2% PIK, Due 11/22) | | 10,126,055 |
| | 9,919,675 |
| | 9,919,675 |
|
| | Second Lien Term Note - TP (11% Cash, 2% PIK, Due 11/22)(4) | | 8,970,540 |
| | 8,784,798 |
| | 8,562,599 |
|
| | Common Units - Travelpro (2,000,000 units) | | | | 2,000,000 |
| | 2,077,000 |
|
| | | | 19,096,595 |
| | 20,704,473 |
| | 20,559,274 |
|
| | | | | | | | | | |
United Biologics, LLC (2%)* | | Allergy Immunotherapy | | Senior Note (12% Cash, 2% PIK, Due 04/18) | | 12,758,807 |
| | 12,686,184 |
| | 12,686,184 |
|
| Class A-1 Common Units (18,818 units) | | | | 137,324 |
| | 137,000 |
|
| Class A Common Units (177,935 units) | | | | 1,999,989 |
| | 1,767,000 |
|
| Class A-2 Common Kicker Units (444,003 units) | | | | — |
| | — |
|
| Class A-1 Common Kicker Units (14,114 units) | | | | — |
| | — |
|
| Class A, Class A-1, Class A-1 Kicker & Class B Unit Purchase Warrants | | | | 838,117 |
| | 361,000 |
|
| | | | 12,758,807 |
| | 15,661,614 |
| | 14,951,184 |
|
| | | | | | | | | | |
Vantage Mobility International, LLC (5%)* | | Wheelchair Accessible Vehicle Manufacturer | | Subordinated Notes (10.2% Cash, Due 09/21) | | 29,350,000 |
| | 28,785,893 |
| | 28,785,893 |
|
| | Class A Units (1,750,000 units) | | | | 1,750,000 |
| | 1,750,000 |
|
| | | | 29,350,000 |
| | 30,535,893 |
| | 30,535,893 |
|
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
Kene Acquisition, Inc. (1.1%)*(5) (7) (8) | | Oil & Gas Equipment & Services | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 6.2% Cash, Acquired 08/19, Due 08/26) | | $ | 6,635,895 | | | $ | 6,488,912 | | | $ | 6,490,475 | |
| | | | 6,635,895 | | | 6,488,912 | | | 6,490,475 | |
| | | | | | | | | | |
K-Mac Holdings Corp. (0.2%)*(6) (8) | | Restaurants | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 08/18, Due 03/25) | | 994,342 | | | 997,356 | | | 979,925 | |
| | | | 994,342 | | | 997,356 | | | 979,925 | |
| | | | | | | | | | |
Kronos Inc. (1.1%)*(6) (8) | | Application Software | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.9% Cash, Acquired 08/18, Due 11/23) | | 5,998,096 | | | 6,018,120 | | | 6,024,727 | |
| | | | 5,998,096 | | | 6,018,120 | | | 6,024,727 | |
| | | | | | | | | | |
LAC Intermediate, LLC (f/k/a Lighthouse Autism Center) (1.4%)*(5) (7) (8) | | Healthcare & Pharmaceuticals | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 7.7% Cash, Acquired 10/18, Due 10/24) | | 7,887,705 | | | 7,666,906 | | | 7,550,895 | |
| | Class A LLC Units (154,320 units, Acquired 10/18) | | | | 154,320 | | | 163,135 | |
| | | | 7,887,705 | | | 7,821,226 | | | 7,714,030 | |
| | | | | | | | | | |
LTI Holdings, Inc. (1.9%)*(4) (6) (8) | | Industrial Conglomerates | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.3% Cash, Acquired 09/18, Due 09/25) | | 11,850,000 | | | 11,906,192 | | | 10,610,016 | |
| | | | 11,850,000 | | | 11,906,192 | | | 10,610,016 | |
| | | | | | | | | | |
Mallinckrodt Plc (0.5%)*(3) (4) (5) (6) (8) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.9% Cash, Acquired 08/18, Due 09/24) | | 3,254,149 | | | 3,243,401 | | | 2,648,519 | |
| | | | 3,254,149 | | | 3,243,401 | | | 2,648,519 | |
| | | | | | | | | | |
MB2 Dental Solutions, LLC (0.8%)*(5) (7) (8) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 6.9% Cash, Acquired 09/19, Due 09/23) | | 4,723,425 | | | 4,670,058 | | | 4,671,419 | |
| | | | 4,723,425 | | | 4,670,058 | | | 4,671,419 | |
| | | | | | | | | | |
Media Recovery, Inc. (0.6%)*(5) (7) (8) | | Containers, Packaging and Glass | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 7.7% Cash, Acquired 11/19, Due 11/25) | | 3,233,126 | | | 3,169,337 | | | 3,176,175 | |
| | | | 3,233,126 | | | 3,169,337 | | | 3,176,175 | |
| | | | | | | | | | |
Men's Wearhouse, Inc. (The) (1.4%)*(4) (6) (8) | | Apparel Retail | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 4.9% Cash, Acquired 08/18, Due 04/25) | | 9,845,114 | | | 9,928,392 | | | 7,843,307 | |
| | | | 9,845,114 | | | 9,928,392 | | | 7,843,307 | |
| | | | | | | | | | |
Nautilus Power, LLC (0.6%)*(6) (8) | | Independent Power Producers & Energy Traders | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 6.0% Cash, Acquired 09/18, Due 05/24) | | 3,220,650 | | | 3,234,041 | | | 3,206,157 | |
| | | | 3,220,650 | | | 3,234,041 | | | 3,206,157 | |
| | | | | | | | | | |
NFP Corp. (1.5%)*(4) (6) (8) | | Specialized Finance | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 08/18, Due 01/24) | | 8,564,081 | | | 8,562,584 | | | 8,521,261 | |
| | | | 8,564,081 | | | 8,562,584 | | | 8,521,261 | |
| | | | | | | | | | |
NGS US Finco, LLC (f/k/a Dresser Natural Gas Solutions) (2.1%)*(5) (7) (8) | | Energy Equipment & Services | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 6.0% Cash, Acquired 10/18, Due 10/25) | | 11,994,231 | | | 11,943,470 | | | 11,870,574 | |
| | | | 11,994,231 | | | 11,943,470 | | | 11,870,574 | |
| | | | | | | | | | |
NVA Holdings, Inc. (0.7%)*(6) (8) | | Health Care Facilities | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 6.5% Cash, Acquired 08/18, Due 02/25) | | 3,979,900 | | | 3,973,472 | | | 3,975,761 | |
| | | | 3,979,900 | | | 3,973,472 | | | 3,975,761 | |
| | | | | | | | | | |
Omaha Holdings LLC (0.9%)*(6) (8) | | Auto Parts & Equipment | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.5% Cash, Acquired 09/18, Due 03/24) | | 4,961,929 | | | 4,991,732 | | | 4,961,929 | |
| | | | 4,961,929 | | | 4,991,732 | | | 4,961,929 | |
| | | | | | | | | | |
Omnitracs, LLC (0.8%)*(6) (8) | | Application Software | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.7% Cash, Acquired 08/18, Due 03/25) | | 4,619,141 | | | 4,606,867 | | | 4,600,387 | |
| | | | 4,619,141 | | | 4,606,867 | | | 4,600,387 | |
| | | | | | | | | | |
Options Technology Ltd. (1.9%)*(3) (5) (7) (8) | | Computer Services | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 6.5% Cash, Acquired 12/19, Due 12/25) | | 11,090,100 | | | 10,810,546 | | | 10,838,484 | |
| | | | 11,090,100 | | | 10,810,546 | | | 10,838,484 | |
| | | | | | | | | | |
Ortho-Clinical Diagnostics Bermuda Co. Ltd. (2.0%)*(4) (6) (8) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.3% Cash, Acquired 08/18, Due 06/25) | | 11,286,170 | | | 11,289,852 | | | 11,142,722 | |
| | | | 11,286,170 | | | 11,289,852 | | | 11,142,722 | |
| | | | | | | | | | |
Pare SAS (SAS Maurice MARLE) (2.4%)*(3) (5) (7) (8) | | Health Care Equipment | | First Lien Senior Secured Term Loan (EURIBOR + 6.75%, 5.75% Cash, 1.0% PIK, Acquired 12/19, Due 12/26) | | 13,918,994 | | | 13,521,804 | | | 13,640,614 | |
| | | | 13,918,994 | | | 13,521,804 | | | 13,640,614 | |
| | | | | | | | | | |
PAREXEL International Corp. (1.1%)*(4) (6) (8) | | Pharmaceuticals | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.6% Cash, Acquired 09/18, Due 09/24) | | 6,680,843 | | | 6,655,192 | | | 6,544,821 | |
| | | | 6,680,843 | | | 6,655,192 | | | 6,544,821 | |
| | | | | | | | | | |
Barings BDC, Inc.
Consolidated Schedule of Investments — (Continued)
December 31, 2019
TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments — (Continued) December 31, 2016 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
Water Pik, Inc. (5%)* | | Oral Health and Shower Head Supplier | | Second Lien Term Loan (LIBOR + 8.75%, 9.8% Cash, Due 01/21)(8) | | $ | 31,150,970 |
| | $ | 30,769,847 |
| | $ | 30,769,847 |
|
| | | | 31,150,970 |
| | 30,769,847 |
| | 30,769,847 |
|
| | | | | | | | | | |
Wheel Pros Holdings, Inc. (3%)* | | Wheel/Rim and Performance Tire Distributor | | Subordinated Note (LIBOR + 7.0%, 11% Cash, Due 06/20)(8) | | 13,822,500 |
| | 13,605,040 |
| | 13,605,040 |
|
| | Class A Units (2,000 units) | | | | 1,954,144 |
| | 1,954,000 |
|
| | | | 13,822,500 |
| | 15,559,184 |
| | 15,559,040 |
|
| | | | | | | | | | |
Women's Marketing, Inc. (2%)* | | Full-Service Media Organization | | Subordinated Note (11% Cash, 1.5% PIK, Due 06/21)(6) | | 16,868,045 |
| | 16,141,439 |
| | 11,093,000 |
|
| | Class A Common Units (16,300 units) | | | | 1,630,000 |
| | — |
|
| | | | 16,868,045 |
| | 17,771,439 |
| | 11,093,000 |
|
| | | | | | | | | | |
WSO Holdings, LP (1%)* | | Organic/Fair Trade Sugar, Syrup, Nectar and Honey Producer | | Common Points (3,000 points) | | | | 3,000,000 |
| | 3,576,000 |
|
| | | | | 3,000,000 |
| | 3,576,000 |
|
| | | | | | |
YummyEarth Inc. (3%)* | | Organic Candy Manufacturer | | Senior Notes (LIBOR + 8.5%, 9.5% Cash, Due 08/20)(8) | | 22,000,000 |
| | 21,565,471 |
| | 19,564,000 |
|
| | Limited Partnership Interest | | | | 3,496,500 |
| | — |
|
| | | | 22,000,000 |
| | 25,061,971 |
| | 19,564,000 |
|
| | | | | | |
Subtotal Non–Control / Non–Affiliate Investments | | 825,243,841 |
| | 888,974,154 |
| | 857,604,639 |
|
| | | | | | | | | | |
Affiliate Investments: | | | | | | | | | | |
All Metals Holding, LLC (1%)* | | Steel Processor and Distributor | | Subordinated Note (12% Cash, 1% PIK, Due 12/21) | | 6,433,333 |
| | 6,249,220 |
| | 6,249,220 |
|
| | Units (318,977 units) | | | | 793,331 |
| | 754,000 |
|
| | | | 6,433,333 |
| | 7,042,551 |
| | 7,003,220 |
|
| | | | | | | | | | |
CIS Secure Computing Inc. (2%)* | | Secure Communications and Computing Solutions Provider | | Subordinated Note (12% Cash, 3% PIK, Due 03/18) | | 11,670,708 |
| | 11,670,708 |
| | 11,670,708 |
|
Common Stock (84 shares) | | | | 502,320 |
| | 2,155,000 |
|
| | 11,670,708 |
| | 12,173,028 |
| | 13,825,708 |
|
| | | | | | | | | | |
Consolidated Lumber Company LLC (1%)* | | Lumber Yard Operator | | Subordinated Note (10% Cash, 2% PIK, Due 09/20) | | 4,193,848 |
| | 4,121,389 |
| | 4,278,000 |
|
| | Class A Units (15,000 units) | | | | 1,500,000 |
| | 2,481,000 |
|
| | | | 4,193,848 |
| | 5,621,389 |
| | 6,759,000 |
|
| | | | | | | | | | |
DPII Holdings, LLC (0%)* | | Satellite Communication Business | | Tranche I & II Subordinated Notes (12% Cash, 4% PIK, Due 01/18)(6) | | 3,744,709 |
| | 3,227,001 |
| | 2,356,001 |
|
| | Tranche III Subordinated Note (19% PIK, Due 01/18)(6) | | 2,408,752 |
| | 2,148,462 |
| | — |
|
| | Class A Membership Interest (17,308 units) | | | | 1,107,692 |
| | — |
|
| | | | 6,153,461 |
| | 6,483,155 |
| | 2,356,001 |
|
| | | | | | | | | | |
FCL Holding SPV, LLC (0%)* | | Commercial Printing Services | | Class A Interest (24,873 units) | | | | 292,000 |
| | 645,000 |
|
| | Class B Interest (48,427 units) | | | | — |
| | 101,000 |
|
| | Class C Interest (3,746 units) | | | | — |
| | — |
|
| | | | | | 292,000 |
| | 746,000 |
|
| | | | | | | | | | |
Frank Entertainment Group, LLC (3%)* | | Movie Theatre and Family Entertainment Operator | | Senior Note (LIBOR + 7%, 10% Cash, 5.8% PIK, Due 06/18)(8) | | 9,997,644 |
| | 9,940,684 |
| | 9,940,684 |
|
| | Class A Redeemable Preferred Units (10.5% Cash) (196,718 units) | | | | 3,934,666 |
| | 4,566,904 |
|
| | Class B Redeemable Preferred Units (18,667 units) | | | | 433,334 |
| | 1,660,810 |
|
| | Class C Redeemable Preferred Units (25,846 units) | | | | 600,000 |
| | 600,000 |
|
| | Class A Common Units (43,077 units) | | | | 1,000,000 |
| | — |
|
| | Class A Common Warrants | | | | 632,000 |
| | — |
|
| | | | 9,997,644 |
| | 16,540,684 |
| | 16,768,398 |
|
| | | | | | | | | | |
MS Bakery Holdings, Inc. (1%)* | | Baked Goods Provider | | Preferred Units (233 units) | | | | 211,867 |
| | 397,000 |
|
| Common B Units (3,000 units) | | | | 23,140 |
| | 2,110,000 |
|
| Common A Units (1,652 units) | | | | 14,993 |
| | 1,162,000 |
|
| | | | | | 250,000 |
| | 3,669,000 |
|
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
Penn Engineering & Manufacturing Corp. (0.3%)*(6) (8) | | Industrial Conglomerates | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.5% Cash, Acquired 09/18, Due 06/24) | | $ | 1,684,725 | | | $ | 1,696,539 | | | $ | 1,682,619 | |
| | | | 1,684,725 | | | 1,696,539 | | | 1,682,619 | |
| | | | | | | | | | |
PeroxyChem Holdings, L.P. (1.5%)*(5) (7) (8) | | Diversified Chemicals | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 7.1% Cash, Acquired 10/19, Due 09/24) | | 8,415,118 | | | 8,374,666 | | | 8,384,879 | |
| | | | 8,415,118 | | | 8,374,666 | | | 8,384,879 | |
| | | | | | | | | | |
Phoenix Services International LLC (0.5%)*(6) (8) | | Steel | | First Lien Senior Secured Term Loan (LIBOR + 3.75%, 5.5% Cash, Acquired 08/18, Due 03/25) | | 2,954,887 | | | 2,964,982 | | | 2,757,885 | |
| | | | 2,954,887 | | | 2,964,982 | | | 2,757,885 | |
| | | | | | | | | | |
PODS Enterprises, Inc. (0.9%)*(6) (8) | | Packaging | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.5% Cash, Acquired 09/18, Due 12/24) | | 4,961,943 | | | 4,975,275 | | | 4,982,088 | |
| | | | 4,961,943 | | | 4,975,275 | | | 4,982,088 | |
| | | | | | | | | | |
Premier Technical Services Group (0.5%)*(3) (5) (7) (8) | | Construction & Engineering | | First Lien Senior Secured Term Loan (GBP LIBOR + 6.75%, 7.5% Cash, Acquired 08/19, Due 08/26) | | 2,875,549 | | | 2,533,643 | | | 2,752,808 | |
| | | | 2,875,549 | | | 2,533,643 | | | 2,752,808 | |
| | | | | | | | | | |
Pro Mach Inc. (1.0%)*(5) (6) (8) | | Industrial Machinery | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.5% Cash, Acquired 08/18, Due 03/25) | | 5,909,774 | | | 5,893,603 | | | 5,847,013 | |
| | | | 5,909,774 | | | 5,893,603 | | | 5,847,013 | |
| | | | | | | | | | |
ProAmpac Intermediate Inc. (1.7%)*(4) (6) (8) | | Packaged Foods & Meats | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.4% Cash, Acquired 08/18, Due 11/23) | | 9,846,482 | | | 9,857,895 | | | 9,680,372 | |
| | | | 9,846,482 | | | 9,857,895 | | | 9,680,372 | |
| | | | | | | | | | |
Process Equipment, Inc. (1.1%)*(5) (7) (8) | | Industrial Air & Material Handling Equipment | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 6.9% Cash, Acquired 03/19, Due 03/25) | | 6,762,500 | | | 6,635,562 | | | 6,546,325 | |
| | | | 6,762,500 | | | 6,635,562 | | | 6,546,325 | |
| | | | | | | | | | |
Professional Datasolutions, Inc. (PDI) (4.0%)*(5) (7) (8) | | Application Software | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 6.4% Cash, Acquired 03/19, Due 10/24) | | 23,158,008 | | | 23,120,723 | | | 22,879,936 | |
| | | | 23,158,008 | | | 23,120,723 | | | 22,879,936 | |
| | | | | | | | | | |
PSC UK Pty Ltd. (0.6%)*(3) (5) (7) (8) | | Insurance Services | | First Lien Senior Secured Term Loan (GBP LIBOR + 5.5%, 6.3% Cash, Acquired 11/19, Due 11/24) | | 3,625,921 | | | 3,396,509 | | | 3,494,295 | |
| | | | 3,625,921 | | | 3,396,509 | | | 3,494,295 | |
| | | | | | | | | | |
Qlik Technologies Inc. (Alpha Intermediate Holding, Inc.) (0.9%)*(6) (8) | | Application Software | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.5% Cash, Acquired 08/18, Due 04/24) | | 4,974,555 | | | 4,974,727 | | | 4,977,689 | |
| | | | 4,974,555 | | | 4,974,727 | | | 4,977,689 | |
| | | | | | | | | | |
Red Ventures, LLC (1.0%)*(6) (8) | | Advertising | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 09/18, Due 11/24) | | 5,954,774 | | | 5,985,039 | | | 5,990,919 | |
| | | | 5,954,774 | | | 5,985,039 | | | 5,990,919 | |
| | | | | | | | | | |
RedPrairie Holding, Inc. (0.9%)*(6) (8) | | Computer Storage & Peripherals | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.6% Cash, Acquired 09/18, Due 10/23) | | 4,961,637 | | | 4,990,946 | | | 4,989,571 | |
| | | | 4,961,637 | | | 4,990,946 | | | 4,989,571 | |
| | | | | | | | | | |
Renaissance Learning, Inc. (0.9%)*(6) (8) | | Application Software | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.0% Cash, Acquired 08/18, Due 05/25) | | 5,391,318 | | | 5,387,730 | | | 5,354,711 | |
| | | | 5,391,318 | | | 5,387,730 | | | 5,354,711 | |
| | | | | | | | | | |
Reynolds Group Holdings Ltd. (0.9%)*(6) (8) | | Packaging | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.5% Cash, Acquired 09/18, Due 02/23) | | 4,961,637 | | | 4,979,527 | | | 4,973,297 | |
| | | | 4,961,637 | | | 4,979,527 | | | 4,973,297 | |
| | | | | | | | | | |
Ruffalo Noel Levitz, LLC (1.7%)*(5) (7) (8) | | Media Services | | First Lien Senior Secured Term Loan (LIBOR + 6.0%, 7.9% Cash, Acquired 01/19, Due 05/22) | | 9,714,617 | | | 9,607,656 | | | 9,641,334 | |
| | | | 9,714,617 | | | 9,607,656 | | | 9,641,334 | |
| | | | | | | | | | |
Scaled Agile, Inc. (0.9%)*(5) (7) (8) | | Research & Consulting Services | | First Lien Senior Secured Term Loan (LIBOR + 5.25%, 7.0% Cash, Acquired 06/19, Due 06/24) | | 4,986,980 | | | 4,940,603 | | | 4,941,809 | |
| | | | 4,986,980 | | | 4,940,603 | | | 4,941,809 | |
| | | | | | | | | | |
SCI Packaging Inc. (0.9%)*(6) (8) | | Metal & Glass Containers | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.2% Cash, Acquired 08/18, Due 04/24) | | 4,961,832 | | | 4,952,139 | | | 4,940,149 | |
| | | | 4,961,832 | | | 4,952,139 | | | 4,940,149 | |
| | | | | | | | | | |
Seadrill Ltd. (0.9%)*(3) (4) (8) | | Oil & Gas Equipment & Services | | First Lien Senior Secured Term Loan (LIBOR + 6.0%, 7.9% Cash, Acquired 09/18, Due 02/21) | | 9,809,097 | | | 9,508,856 | | | 4,883,066 | |
| | | | 9,809,097 | | | 9,508,856 | | | 4,883,066 | |
| | | | | | | | | | |
Barings BDC, Inc.
Consolidated Schedule of Investments — (Continued)
December 31, 2019
TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments — (Continued) December 31, 2016 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
NB Products, Inc. (8%)* | | Distributor of Work Apparel and Accessories | | Subordinated Note (12% Cash, 2% PIK, Due 02/20) | | $ | 23,105,315 |
| | $ | 22,751,190 |
| | $ | 22,751,190 |
|
| Jr. Subordinated Note (10% PIK, Due 02/20) | | 4,705,830 |
| | 4,595,921 |
| | 4,595,921 |
|
| Jr. Subordinated Bridge Note (20% PIK, Due 05/21) | | 2,002,586 |
| | 1,972,727 |
| | 1,972,727 |
|
| Series A Redeemable Senior Preferred Stock (7,839 shares) | | | | 7,621,648 |
| | 9,412,000 |
|
| Common Stock (1,668,691 shares) | | | | 333,738 |
| | 9,779,000 |
|
| | | 29,813,731 |
| | 37,275,224 |
| | 48,510,838 |
|
| | | | | | | | | | |
PCX Aerostructures, LLC (4%)* | | Aerospace Component Manufacturer | | Subordinated Note (10.5% Cash, Due 10/19) | | 29,647,359 |
| | 29,148,152 |
| | 21,960,000 |
|
| Series A Preferred Stock (6,066 shares) | | | | 6,065,621 |
| | — |
|
Series B Preferred Stock (411 shares) | | | | 410,514 |
| | — |
|
Class A Common Stock (121,922 shares) | | | | 30,480 |
| | — |
|
| | | 29,647,359 |
| | 35,654,767 |
| | 21,960,000 |
|
| | | | | | | | | | |
Team Waste, LLC (1%)* | | Environmental and Facilities Services | | Preferred Units (455,000 units) | | | | 9,100,000 |
| | 9,100,000 |
|
| | | | | | | 9,100,000 |
| | 9,100,000 |
|
| | | | | | | | | | |
Technology Crops, LLC (2%)* | | Supply Chain Management Services | | Subordinated Notes (12% Cash, 5% PIK, Due 09/17) | | 11,837,622 |
| | 11,837,622 |
| | 11,837,622 |
|
Common Units (50 units) | | | | 500,000 |
| | — |
|
| | | 11,837,622 |
| | 12,337,622 |
| | 11,837,622 |
|
| | | | | | | | | | |
TGaS Advisors, LLC (2%)* | | Advisory Solutions to Pharmaceutical Companies | | Senior Note (10% Cash, 1% PIK, Due 11/19) | | 9,674,276 |
| | 9,521,986 |
| | 9,521,986 |
|
| Preferred Units (1,685,357 units) | | | | 1,556,069 |
| | 1,270,000 |
|
| | | 9,674,276 |
| | 11,078,055 |
| | 10,791,986 |
|
| | | | | | | | | | |
Tulcan Fund IV, L.P. (0%)* | | Custom Forging and Fastener Supplies | | Common Units (1,000,000 units) | | | | 1,000,000 |
| | — |
|
| | | | | | 1,000,000 |
| | — |
|
| | | | | | | | | | |
United Retirement Plan Consultants, Inc. (0%)* | | Retirement Plan Administrator | | Series A Preferred Shares (9,400 shares) | | | | 205,748 |
| | 257,000 |
|
| | Common Shares (100,000 shares) | | | | 1,000,000 |
| | 301,000 |
|
| | | | | | 1,205,748 |
| | 558,000 |
|
| | | | | | | | | | |
Waste Recyclers Holdings, LLC (0%)* | | Environmental and Facilities Services | | Class A Preferred Units (280 units) | | | | 2,251,100 |
| | — |
|
Class B Preferred Units (11,484,867 units) | | | | 3,304,218 |
| | 817,000 |
|
Common Unit Purchase Warrant (1,170,083 units) | | | | 748,900 |
| | — |
|
Common Units (153,219 units) | | | | 180,783 |
| | — |
|
| | | | | 6,485,001 |
| | 817,000 |
|
| | | | | | | | | | |
Wythe Will Tzetzo, LLC (1%)* | | Confectionery Goods Distributor | | Series A Preferred Units (99,829 units) | | | | — |
| | 6,808,000 |
|
| | | | | | — |
| | 6,808,000 |
|
| | | | | | | | | | |
Subtotal Affiliate Investments | | | | 119,421,982 |
| | 162,539,224 |
| | 161,510,773 |
|
| | | | | | | | | | |
Control Investments: | | | | | | | | | | |
CRS Reprocessing, LLC (1%)* | | Fluid Reprocessing Services | | Senior Notes (LIBOR + 3.5%, 4.3% Cash, Due 06/17)(8) | | 2,942,769 |
| | 2,942,769 |
| | 2,942,769 |
|
| Split Collateral Term Loans (8% Cash, Due 06/17) | | 11,192,464 |
| | 11,192,464 |
| | 6,182,000 |
|
Series F Preferred Units (705,321 units) | | | | 9,134,807 |
| | — |
|
| Common Units (15,174 units) | | | | — |
| | — |
|
| | | 14,135,233 |
| | 23,270,040 |
| | 9,124,769 |
|
| | | | | | | | | | |
DCWV Acquisition Corporation (0%)* | | Arts & Crafts and Home Decor Products Designer and Supplier | | Senior Subordinated Note (15% PIK, Due 12/19)(6) | | 291,875 |
| | 250,000 |
| | 250,000 |
|
| | Subordinated Note (12% Cash, 3% PIK, Due 12/19)(6) | | 8,090,699 |
| | 6,178,633 |
| | 1,389,000 |
|
| Jr. Subordinated Note (15% PIK, Due 12/19)(6) | | 2,440,829 |
| | 2,000,000 |
| | — |
|
| Series A Preferred Equity (1,200 shares) | | | | 1,200,000 |
| | — |
|
| 100% Common Shares | | | | — |
| | — |
|
| | | 10,823,403 |
| | 9,628,633 |
| | 1,639,000 |
|
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
Seaworld Entertainment, Inc. (1.0%)*(3) (6) (8) | | Leisure Facilities | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 08/18, Due 03/24) | | $ | 5,954,081 | | | $ | 5,945,241 | | | $ | 5,978,910 | |
| | | | 5,954,081 | | | 5,945,241 | | | 5,978,910 | |
| | | | | | | | | | |
Serta Simmons Bedding LLC (0.6%)*(4) (5) (8) | | Home Furnishings | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.2% Cash, Acquired 10/19, Due 11/23) | | 4,961,929 | | | 3,927,986 | | | 3,184,963 | |
| | | | 4,961,929 | | | 3,927,986 | | | 3,184,963 | |
| | | | | | | | | | |
SIWF Holdings, Inc. (1.6%)*(4) (6) (8) | | Home Furnishings | | First Lien Senior Secured Term Loan (LIBOR + 4.25%, 6.0% Cash, Acquired 08/18, Due 06/25) | | 9,350,501 | | | 9,403,797 | | | 9,303,749 | |
| | | | 9,350,501 | | | 9,403,797 | | | 9,303,749 | |
| | | | | | | | | | |
SK Blue Holdings, LP (0.7%)*(6) (7) (8) | | Commodity Chemicals | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 6.8% Cash, Acquired 09/18, Due 10/25) | | 4,160,612 | | | 4,158,472 | | | 4,129,407 | |
| | | | 4,160,612 | | | 4,158,472 | | | 4,129,407 | |
| | | | | | | | | | |
Smile Brands Group Inc. (0.9%)*(5) (7) (8) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 6.6% Cash, Acquired 10/18, Due 10/24) | | 5,390,141 | | | 5,339,191 | | | 5,293,980 | |
| | | | 5,390,141 | | | 5,339,191 | | | 5,293,980 | |
| | | | | | | | | | |
Solenis International, LLC (f/k/a Solenis Holdings, L.P.) (1.4%)*(5) (6) (8) | | Specialty Chemicals | | First Lien Senior Secured Term Loan (LIBOR + 4.0%, 5.9% Cash, Acquired 08/18, Due 06/25) | | 7,880,000 | | | 7,922,706 | | | 7,781,500 | |
| | | | 7,880,000 | | | 7,922,706 | | | 7,781,500 | |
| | | | | | | | | | |
SonicWALL, Inc. (0.8%)*(6) (8) | | Internet Software & Services | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.4% Cash, Acquired 08/18, Due 05/25) | | 4,455,000 | | | 4,457,031 | | | 4,336,185 | |
| | | | 4,455,000 | | | 4,457,031 | | | 4,336,185 | |
| | | | | | | | | | |
Springbrook Software (SBRK Intermediate, Inc.) (1.8%)*(5) (7) (8) | | Enterprise Software and Services | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 7.7% Cash, Acquired 12/19, Due 12/26) | | 10,520,990 | | | 10,269,533 | | | 10,294,130 | |
| | | | 10,520,990 | | | 10,269,533 | | | 10,294,130 | |
| | | | | | | | | | |
SRS Distribution, Inc. (0.9%)*(6) (8) | | Building Products | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.0% Cash, Acquired 09/18, Due 05/25) | | 4,974,811 | | | 4,899,772 | | | 4,930,038 | |
| | | | 4,974,811 | | | 4,899,772 | | | 4,930,038 | |
| | | | | | | | | | |
SS&C Technologies, Inc. (0.3%)*(3) (6) (8) | | Computer & Electronics Retail | | First Lien Senior Secured Term Loan (LIBOR + 2.25%, 4.0% Cash, Acquired 10/18, Due 04/25) | | 1,742,327 | | | 1,738,643 | | | 1,753,042 | |
| | | | 1,742,327 | | | 1,738,643 | | | 1,753,042 | |
| | | | | | | | | | |
Syniverse Holdings, Inc. (1.7%)*(4) (6) (8) | | Technology Distributors | | First Lien Senior Secured Term Loan (LIBOR + 5.0%, 6.8% Cash, Acquired 08/18, Due 03/23) | | 10,342,105 | | | 10,306,230 | | | 9,612,573 | |
| | | | 10,342,105 | | | 10,306,230 | | | 9,612,573 | |
| | | | | | | | | | |
Tahoe Subco 1 Ltd. (2.6%)*(3) (4) (6) (8) | | Internet Software & Services | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.7% Cash, Acquired 09/18, Due 06/24) | | 14,800,754 | | | 14,806,789 | | | 14,677,463 | |
| | | | 14,800,754 | | | 14,806,789 | | | 14,677,463 | |
| | | | | | | | | | |
Team Health Holdings, Inc. (1.0%)*(4) (6) (8) | | Health Care Services | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.5% Cash, Acquired 09/18, Due 02/24) | | 6,893,671 | | | 6,679,490 | | | 5,560,159 | |
| | | | 6,893,671 | | | 6,679,490 | | | 5,560,159 | |
| | | | | | | | | | |
Tempo Acquisition LLC (1.0%)*(6) (8) | | Investment Banking & Brokerage | | First Lien Senior Secured Term Loan (LIBOR + 2.75%, 4.5% Cash, Acquired 09/18, Due 05/24) | | 5,589,753 | | | 5,606,977 | | | 5,618,876 | |
| | | | 5,589,753 | | | 5,606,977 | | | 5,618,876 | |
| | | | | | | | | | |
The Hilb Group, LLC (1.8%)*(5) (7) (8) | | Insurance Brokerage | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 7.4% Cash, Acquired 12/19, Due 12/26) | | 10,357,834 | | | 10,029,427 | | | 10,049,762 | |
| | | | 10,357,834 | | | 10,029,427 | | | 10,049,762 | |
| | | | | | | | | | |
Total Safety U.S. Inc. (0.8%)*(5) (8) | | Diversified Support Services | | First Lien Senior Secured Term Loan (LIBOR + 6.0%, 7.9% Cash, Acquired 11/19, Due 08/25) | | 4,937,500 | | | 4,668,972 | | | 4,650,533 | |
| | | | 4,937,500 | | | 4,668,972 | | | 4,650,533 | |
| | | | | | | | | | |
Transportation Insight, LLC (3.9%)*(5) (7) (8) | | Air Freight & Logistics | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 6.3% Cash, Acquired 08/18, Due 12/24) | | 22,286,485 | | | 22,088,329 | | | 22,245,067 | |
| | | | 22,286,485 | | | 22,088,329 | | | 22,245,067 | |
| | | | | | | | | | |
Truck-Lite Co., LLC (3.7%)*(5) (7) (8) | | Automotive Parts and Equipment | | First Lien Senior Secured Term Loan (LIBOR + 6.25%, 8.1% Cash, Acquired 12/19, Due 12/24) | | 21,794,872 | | | 21,298,442 | | | 21,337,947 | |
| | | | 21,794,872 | | | 21,298,442 | | | 21,337,947 | |
| | | | | | | | | | |
Trystar, LLC (2.9%)*(5) (7) (8) | | Power Distribution Solutions | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 6.7% Cash, Acquired 09/18, Due 09/23) | | 15,999,318 | | | 15,782,579 | | | 15,963,771 | |
| | LLC Units (361.5 units, Acquired 09/18) | | | | 361,505 | | | 597,581 | |
| | | | 15,999,318 | | | 16,144,084 | | | 16,561,352 | |
| | | | | | | | | | |
Barings BDC, Inc.
Consolidated Schedule of Investments — (Continued)
December 31, 2019
TRIANGLE CAPITAL CORPORATION Consolidated Schedule of Investments — (Continued) December 31, 2016 |
| | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1)(2)(7) | | Principal Amount | | Cost | | Fair Value(3) |
Gerli & Company (0%)* | | Specialty Woven Fabrics Manufacturer | | Subordinated Note (13% Cash, Due 1/17)(6) | | $ | 648,527 |
| | $ | 375,000 |
| | $ | — |
|
Subordinated Note (8.5% Cash, Due 1/17)(6) | | 4,900,843 |
| | 3,000,000 |
| | — |
|
Class A Preferred Shares (1,211 shares) | | | | 855,000 |
| | — |
|
Class C Preferred Shares (744 shares) | | | | — |
| | — |
|
Class E Preferred Shares (400 shares) | | | | 161,440 |
| | — |
|
Common Stock (300 shares) | | | | 100,000 |
| | — |
|
| | | 5,549,370 |
| | 4,491,440 |
| | — |
|
| | | | | | | | |
SRC Worldwide, Inc. (1%)* | | Specialty Chemical Manufacturer | | Common Stock (5,000 shares) | | | | 8,028,000 |
| | 8,028,000 |
|
| | | | | | 8,028,000 |
| | 8,028,000 |
|
| | | | | | | | | | |
| | | | | | | | | | |
Subtotal Control Investments | | | | 30,508,006 |
| | 45,418,113 |
| | 18,791,769 |
|
| | | | | | | | |
Total Investments, December 31, 2016 (170%)* | | | | $ | 975,173,829 |
| | $ | 1,096,931,491 |
| | $ | 1,037,907,181 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
U.S. Anesthesia Partners, Inc. (2.4%)*(4) (6) (8) | | Managed Health Care | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 09/18, Due 06/24) | | $ | 13,585,533 | | | $ | 13,637,823 | | | $ | 13,534,587 | |
| | | | 13,585,533 | | | 13,637,823 | | | 13,534,587 | |
| | | | | | | | | | |
U.S. Silica Company (0.2%)*(3) (4) (5) (8) | | Metal & Glass Containers | | First Lien Senior Secured Term Loan (LIBOR + 4.0%, 5.8% Cash, Acquired 08/18, Due 05/25) | | 1,502,945 | | | 1,506,348 | | | 1,324,200 | |
| | | | 1,502,945 | | | 1,506,348 | | | 1,324,200 | |
| | | | | | | | | | |
USF Holdings LLC (0.5%)*(6) (7) (8) | | Auto Parts & Equipment | | First Lien Senior Secured Term Loan (LIBOR + 3.5%, 5.3% Cash, Acquired 08/18, Due 12/21) | | 3,224,841 | | | 3,233,041 | | | 2,902,357 | |
| | | | 3,224,841 | | | 3,233,041 | | | 2,902,357 | |
| | | | | | | | | | |
USIC Holdings, Inc. (1.2%)*(5) (6) (8) | | Packaged Foods & Meats | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.0% Cash, Acquired 08/18, Due 12/23) | | 6,896,886 | | | 6,925,717 | | | 6,866,746 | |
| | | | 6,896,886 | | | 6,925,717 | | | 6,866,746 | |
| | | | | | | | | | |
USI Holdings Corp. (0.9%)*(6) (8) | | Property & Casualty Insurance | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.9% Cash, Acquired 08/18, Due 05/24) | | 4,961,929 | | | 4,956,994 | | | 4,956,967 | |
| | | | 4,961,929 | | | 4,956,994 | | | 4,956,967 | |
| | | | | | | | | | |
USLS Acquisition, Inc. (f/k/a US Legal Support, Inc.) (2.8%)*(5) (7) (8) | | Legal Services | | First Lien Senior Secured Term Loan (LIBOR + 5.75%, 7.7% Cash, Acquired 11/18, Due 11/24) | | 16,513,432 | | | 16,260,417 | | | 16,107,839 | |
| | | | 16,513,432 | | | 16,260,417 | | | 16,107,839 | |
| | | | | | | | | | |
Validity, Inc. (0.7%)*(5) (7) (8) | | IT Consulting & Other Services | | First Lien Senior Secured Term Loan (LIBOR + 4.75%, 6.7% Cash, Acquired 07/19, Due 05/25) | | 4,178,543 | | | 3,989,821 | | | 3,977,081 | |
| | | | 4,178,543 | | | 3,989,821 | | | 3,977,081 | |
| | | | | | | | | | |
Venator Materials LLC (0.3%)*(3) (6) (8) | | Commodity Chemicals | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 09/18, Due 08/24) | | 1,562,199 | | | 1,566,972 | | | 1,547,873 | |
| | | | 1,562,199 | | | 1,566,972 | | | 1,547,873 | |
| | | | | | | | | | |
Veritas Bermuda Intermediate Holdings Ltd. (0.8%)*(6) (8) | | Technology Distributors | | First Lien Senior Secured Term Loan (LIBOR + 4.5%, 6.3% Cash, Acquired 09/18, Due 01/23) | | 4,961,735 | | | 4,784,696 | | | 4,767,235 | |
| | | | 4,961,735 | | | 4,784,696 | | | 4,767,235 | |
| | | | | | | | | | |
VF Holding Corp. (2.1%)*(4) (5) (6) (8) | | Systems Software | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.0% Cash, Acquired 08/18, Due 07/25) | | 11,880,000 | | | 11,885,248 | | | 11,728,768 | |
| | | | 11,880,000 | | | 11,885,248 | | | 11,728,768 | |
| | | | | | | | | | |
Wilsonart, LLC (0.9%)*(6) (8) | | Building Products | | First Lien Senior Secured Term Loan (LIBOR + 3.25%, 5.2% Cash, Acquired 11/18, Due 12/23) | | 4,961,832 | | | 4,961,832 | | | 4,970,118 | |
| | | | 4,961,832 | | | 4,961,832 | | | 4,970,118 | |
| | | | | | | | | | |
Winebow Group, LLC, (The) (1.7%)*(4) (5) (8) | | Consumer Goods | | First Lien Senior Secured Term Loan (LIBOR + 3.75%, 5.5% Cash, Acquired 11/19, Due 07/21) | | 7,088,420 | | | 6,425,336 | | | 6,361,857 | |
| | Second Lien Senior Secured Term Loan (LIBOR + 7.5%, 9.3% Cash, Acquired 10/19, Due 01/22) | | 4,911,766 | | | 3,314,045 | | | 3,209,004 | |
| | | | 12,000,186 | | | 9,739,381 | | | 9,570,861 | |
| | | | | | | | | | |
Wink Holdco, Inc. (0.7%)*(6) (8) | | Managed Health Care | | First Lien Senior Secured Term Loan (LIBOR + 3.0%, 4.8% Cash, Acquired 08/18, Due 12/24) | | 3,969,620 | | | 3,967,724 | | | 3,972,121 | |
| | | | 3,969,620 | | | 3,967,724 | | | 3,972,121 | |
| | | | | | | | | | |
Xperi Corp. (0.4%)*(3) (6) (8) | | Semiconductor Equipment | | First Lien Senior Secured Term Loan (LIBOR + 2.5%, 4.3% Cash, Acquired 08/18, Due 12/23) | | 2,049,364 | | | 2,042,322 | | | 2,048,729 | |
| | | | 2,049,364 | | | 2,042,322 | | | 2,048,729 | |
| | | | | | | | | | |
Subtotal Non–Control / Non–Affiliate Investments | | 1,099,631,654 | | | 1,085,886,720 | | | 1,066,845,054 | |
| | | | | | | | | | |
Affiliate Investment: (9) | | | | | | | | | | |
Jocassee Partners LLC (1.8%)*(3) (5) (8) | | Investment Funds & Vehicles | | 9.1% Member Interest, Acquired 06/19 | | | | 10,158,270 | | | 10,229,813 | |
| | | | | | 10,158,270 | | | 10,229,813 | |
| | | | | | | | | | |
Subtotal Affiliate Investment | | | | 10,158,270 | | | 10,229,813 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Barings BDC, Inc.
Consolidated Schedule of Investments — (Continued)
December 31, 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Type of Investment(1) (2) | | Principal Amount | | Cost | | Fair Value |
Short-Term Investments: | | | | | | | | | | |
| | | | | | | | | | |
BNY Mellon Investment Advisor, Inc. (12.6%)*(4) (5) | | Money Market Fund | | Dreyfus Government Cash Management Fund (1.5% yield) | | | | $ | 71,963,994 | | | $ | 71,963,994 | |
| | | | | | 71,963,994 | | | 71,963,994 | |
| | | | | | | | | | |
Federated Investment Management Company (4.3%)*(6) | | Money Market Fund | | Federated Government Obligation Fund (1.5% yield) | | | | 24,604,946 | | | 24,604,946 | |
| | | | | | 24,604,946 | | | 24,604,946 | |
| | | | | | | | | | |
Subtotal Short-Term Investments | | | | 96,568,940 | | | 96,568,940 | |
| | | | | | | | |
Total Investments, December 31, 2019 (205.6%)* | | | | $ | 1,099,631,654 | | | $ | 1,192,613,930 | | | $ | 1,173,643,807 | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign Currency Forward Contracts: | | | | | | | | | | |
Description | | Notional Amount to be Purchased | | Notional Amount to be Sold | | | | Settlement Date | | Unrealized Appreciation (Depreciation) |
Foreign currency forward contract (EUR) | | $158,244 | | €142,781 | | | | 01/02/20 | | $ | (2,028) | |
Foreign currency forward contract (EUR) | | €142,781 | | $158,547 | | | | 01/02/20 | | 1,724 | |
Foreign currency forward contract (EUR) | | $506,967 | | €453,920 | | | | 04/02/20 | | (5,440) | |
| | | | | | | | | | |
Foreign currency forward contract (GBP) | | $707,963 | | £549,253 | | | | 01/02/20 | | (19,660) | |
Foreign currency forward contract (GBP) | | £549,253 | | $718,861 | | | | 01/02/20 | | 8,763 | |
Foreign currency forward contract (GBP) | | $227,890 | | £175,529 | | | | 04/02/20 | | (5,215) | |
| | | | | | | | | | |
Foreign currency forward contract (SEK) | | $95,654 | | 920,569kr | | | | 01/02/20 | | (2,687) | |
Foreign currency forward contract (SEK) | | 920,569kr | | $96,846 | | | | 01/02/20 | | 1,495 | |
Foreign currency forward contract (SEK) | | $97,360 | | 912,212kr | | | | 04/02/20 | | (511) | |
| | | | | | | | | | |
Total Foreign Currency Forward Contracts, December 31, 2019 | | | | | | | | $ | (23,559) | |
* Fair value as a percentpercentage of net assetsassets.
(1)All debt investments are income producing, unless otherwise noted. Equity and any equity-linked investments are non-income producing, unless otherwise noted. The Board determined in good faith that all investments were valued at fair value in accordance with the Company's valuation policies and procedures and the 1940 Act based on, among other things, the input of Barings, the Company’s Audit Committee and an independent valuation firm that has been engaged to assist in the valuation of the Company's middle-market investments. In addition, all debt investments are variable rate investments unless otherwise noted. Index-based floating interest rates are generally subject to a contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically reset semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan.
(2)All of the Company’s portfolio company investments (including joint venture and short-term investments), which as of December 31, 2019 represented 206% of the Company’s net assets, are subject to legal restrictions on sales. The acquisition date represents the date of the Company's initial investment in the relevant portfolio company.
(3)Investment is not a qualifying investment as defined under Section 55(a) of the 1940 Act. Non-qualifying assets represent 14.8% of total investments at fair value as of December 31, 2019. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets. If at any time qualifying assets do not represent at least 70% of the Company's total assets, the Company will be precluded from acquiring any additional non-qualifying asset until such time as it complies with the requirements of Section 55(a).
(4)Some or all of the investment is or will be encumbered as security for Barings BDC Senior Funding I, LLC's credit facility entered into in August 2018 with Bank of America, N.A., as subsequently amended in December 2018 and February 2020 (the "August 2018 Credit Facility").
(5)Some or all of the investment is or will be encumbered as security for the February 2019 Credit Facility.
(6)Some or all of the investment is encumbered as security for the Company's Debt Securitization.
(7)The fair value of the investment was determined using significant unobservable inputs.
(8)Debt investment includes interest rate floor feature.
Barings BDC, Inc.
Consolidated Schedule of Investments — (Continued)
December 31, 2019
| |
(1) | All debt investments are income producing, unless otherwise noted. Equity and equity-linked investments are non-income producing, unless otherwise noted. The fair values of all investments were determined using significant unobservable inputs. |
| |
(2) | Disclosures of interest rates on notes include cash interest rates and payment-in-kind (“PIK”) interest rates. |
| |
(3) | All investments are restricted as to resale and were valued at fair value as determined in good faith by the Board of Directors. |
| |
(4) | Investment is not a qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 2.5% of total investments at fair value as of December 31, 2016. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets. If at any time qualifying assets do not represent at least 70% of the Company's total assets, the Company will be precluded from acquiring any additional non-qualifying asset until such time as it complies with the requirements of Section 55(a). |
| |
(5) | PIK non-accrual investment |
| |
(6) | Non-accrual investment |
| |
(7) | All of the Company's investments, unless otherwise noted, are encumbered either as security for the Company's senior secured credit facility or in support of the SBA-guaranteed debentures issued by Triangle Mezzanine Fund LLLP and Triangle Mezzanine Fund II LP. |
| |
(8) | Index-based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. |
(9)As defined in the 1940 Act, the Company is deemed to be an “affiliated person” of the portfolio company as the Company owns 5% or more of the portfolio company's voting securities (“non-controlled affiliate”). Transactions related to investments in non-controlled affiliates for the year ended December 31, 2019 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amount of Realized Gain (Loss) | Amount of Unrealized Gain (Loss) | Amount of Interest or Dividends Credited to Income(b) | December 31, 2018 Value | Gross Additions (c) | Gross Reductions (d) | December 31, 2019 Value |
Portfolio Company | Type of Investment(a) |
Jocassee Partners LLC | 9.1% Member Interest | $ | — | | $ | 71,543 | | $ | — | | $ | — | | $ | 10,229,813 | | $ | — | | $ | 10,229,813 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total Affiliate Investments | $ | — | | $ | 71,543 | | $ | — | | $ | — | | $ | 10,229,813 | | $ | — | | $ | 10,229,813 | |
(a) Equity and equity-linked investments are non-income producing, unless otherwise noted.
(b) Represents the total amount of interest, fees or dividends credited to income for the portion of the year an investment was included in the Affiliate category.
(c) Gross additions include increases in the cost basis of investments resulting from new investments and follow-on investments. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation.
(d) Gross reductions include decreases in the total cost basis of investments resulting from principal repayments or sales. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.
See accompanying notes.
TRIANGLE CAPITAL CORPORATION
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements
1. ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
Organization and Business
Triangle Capital CorporationBarings BDC, Inc. (the "Company") and its wholly ownedwholly-owned subsidiaries including Triangle Mezzanine Fund LLLP (“Triangle SBIC”), Triangle Mezzanine Fund II LP (“Triangle SBIC II”) and Triangle Mezzanine Fund III LP (“Triangle SBIC III”) (collectively, the “Company”), are specialty finance companies. Triangle SBIC, Triangle SBIC II and Triangle SBIC III are specialty finance limited partnerships formed to make investments primarily in lower middle market companies located throughout the United States. On September 11, 2003, Triangle SBIC was licensed to operate as a Small Business Investment Company (“SBIC”) under the authority of the United States Small Business Administration (“SBA”). On May 26, 2010, Triangle SBIC II obtained its license to operate as an SBIC and on January 6, 2017, Triangle SBIC III obtained its license to operate as an SBIC. As SBICs, Triangle SBIC, Triangle SBIC II and Triangle SBIC III are subject to a variety of regulations concerning, among other things, the size and nature of the companies in which they may invest and the structure of those investments.
The Company currently operates as a closed-end, non-diversified investment company and has elected to be treated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). The Company is internally managed by its executive officers under the supervision of its Board of Directors (the "Board"). The Company does not pay management or advisory fees, but instead incurs the operating costs associated with employing executive management and investment and portfolio management professionals. Triangle SBIC has also elected for federal income tax purposes to be treated as a BDCregulated investment company ("RIC") under the 1940 Act.Internal Revenue Code of 1986, as amended (the "Code").
Organization
The Company is a Maryland corporation incorporated on October 10, 2006. On August 2, 2018, the Company entered into an investment advisory agreement (the "Advisory Agreement") and an administration agreement (the "Administration Agreement") and became an externally-managed BDC managed by the Barings LLC ("Barings" or the "Adviser"). An externally-managed BDC generally does not have any employees, and its investment and management functions are provided by an outside investment adviser and administrator under an advisory agreement and administration agreement. Instead of the Company directly compensating employees, the Company pays the Adviser for investment and management services pursuant to the terms of the Advisory Agreement and the Administration Agreement. See Note 2 - Agreements and Related Party Transactions for additional information regarding the Advisory Agreement and the Administration Agreement.
Basis of Presentation
The financial statements of the Company include the accounts of Triangle Capital CorporationBarings BDC, Inc. and its wholly-owned subsidiaries. The effects of all intercompany transactions between Triangle Capital Corporationthe Company and its wholly-owned subsidiaries have been eliminated in consolidation. Under theThe Company is an investment company rules and, regulations pursuant to Article 6 of Regulation S-Xtherefore, applies the specialized accounting and Financial Accounting Standards Board ("FASB")reporting guidance in Accounting Standards Codification ("ASC") Topic 946, Financial Services -– Investment Companies,Companies. ASC 946 states that consolidation by the Company of an investee that is precluded from consolidating portfolio company investments, including those in which it has a controlling interest, unless the portfolionot an investment company is another investment company. An exception to this general principle occurs ifnot appropriate, except when the Company holds a controlling interest in an operating company that provides all or substantially all of its services directly to the Company or to its portfolio companies. None of the portfolio investments made by the Company qualify for this exception. Therefore, the Company's investment portfolio is carried on the Unaudited and Audited Consolidated Balance Sheets at fair value, as discussed further in Note 2,3, with any adjustments to fair value recognized as “Net"Net unrealized appreciation (depreciation)”" on the Unaudited Consolidated Statements of Operations.
The accompanying unaudited consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States (“("U.S. GAAP”GAAP") for interim financial information and pursuant to the requirements for reporting on Form 10-Q and ArticleArticles 6, 10 and 12 of Regulation S-X. Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments necessary for the fair presentation of financial statements for the interim period, have been reflected in the unaudited consolidated financial statements. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. Additionally, the unaudited consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2016.2019. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the unaudited consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.
Public Offering of Common StockRecently Issued Accounting Standards
On February 28, 2017,In August 2018, the Company filed a prospectus supplement pursuant to which 7,000,000 shares of common stock were offered for sale at a priceFASB issued Accounting Standards Update, 2018-13, Disclosure Framework - Changes to the publicDisclosure Requirements for Fair Value Measurement ("ASU 2018-13"), which includes new, eliminated and modified fair value disclosure requirements. The new guidance requires disclosure of $19.50 per share. Pursuant to this offering, 7,000,000 shares were soldthe range and delivered resultingweighted average of the significant unobservable inputs for Level 3 fair value measurements and the way it is calculated. The guidance also eliminates the following disclosures: (i) amount and reason for transfers between Level 1 and Level 2, (ii) policy for timing of transfers between levels of the fair value hierarchy and (iii) valuation processes for Level 3 fair value measurement. In addition, the disclosure is modified such that the narrative description for the recurring Level 3 fair value measures should communicate information about the measurement uncertainty in net proceeds tofair value measurements as of the reporting date rather than a point in the future. The guidance is effective for all entities for interim and annual periods beginning after December 15, 2019. The Company after underwriting discountsadopted the aforementioned guidance on January 1, 2020 and offering expenses,it did not have a material impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued Accounting Standards Update, 2020-04, Facilitation of approximately $132.0 million.the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The amendments in ASU 2020-04 provide optional expedients and
TRIANGLE CAPITAL CORPORATIONBarings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. ASU 2020- 04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of adopting ASU 2020- 04 on its consolidated financial statements.
Share Purchase Programs
On September 24, 2018, the Adviser entered into a Rule 10b5-1 Purchase Plan (the “10b5-1 Plan”) that qualified for the safe harbors provided by Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Pursuant to the 10b5-1 Plan, an independent broker made purchases of shares of the Company's common stock on the open market on behalf of the Adviser in accordance with purchase guidelines specified in the 10b5-1 Plan. The maximum aggregate purchase price of all shares purchased under the 10b5-1 Plan was $50.0 million. On February 11, 2019, the Adviser fulfilled its obligations under the 10b5-1 Plan to purchase an aggregate amount of $50.0 million in shares of the Company's common stock and the 10b5-1 Plan terminated in accordance with its terms. Upon completion of the 10b5-1 Plan, the Adviser had purchased 5,084,302 shares of the Company's common stock pursuant to the 10b5-1 Plan. As of September 30, 2020, the Adviser owned a total of 13,639,681 shares of our common stock, or 28.4% of the total shares outstanding.
On February 25, 2019, the Company adopted a share repurchase plan, pursuant to Board approval, for the purpose of repurchasing shares of the Company's common stock in the open market during the 2019 fiscal year (the "2019 Share Repurchase Plan"). The Board authorized the Company to repurchase in 2019 up to a maximum of 5.0% of the amount of shares outstanding under the following targets:
•a maximum of 2.5% of the amount of shares of the Company's common stock outstanding if shares traded below NAV per share but in excess of 90% of NAV per share; and
•a maximum of 5.0% of the amount of shares of the Company's common stock outstanding if shares traded below 90% of NAV per share.
The 2019 Share Repurchase Plan was executed in accordance with applicable rules under the Exchange Act including Rules 10b5-1 and 10b-18 thereunder, as well as certain price, market volume and timing constraints specified in the 2019 Share Repurchase Plan. The 2019 Share Repurchase Plan was designed to allow the Company to repurchase its shares both during its open window periods and at times when it otherwise might be prevented from doing so under applicable insider trading laws or because of self-imposed trading blackout periods. A broker selected by the Company was delegated the authority to repurchase shares on the Company's behalf in the open market, pursuant to, and under the terms and limitations of, the 2019 Share Repurchase Plan. During the three and nine months ended September 30, 2019, the Company repurchased a total of 895,733 shares and 1,865,522 shares, respectively, of its common stock in the open market under the Share Repurchase Plan at an average price of $9.93 per share and $9.94 per share, respectively, including broker commissions.
On February 27, 2020, the Board approved an open-market share repurchase program for the 2020 fiscal year (the “2020 Share Repurchase Program”). Under the 2020 Share Repurchase Program, the Company is authorized during fiscal year 2020 to repurchase up to a maximum of 5.0% of the amount of shares outstanding as of February 27, 2020 if shares trade below NAV per share, subject to liquidity and regulatory constraints.
Purchases under the 2020 Share Repurchase Program may be made in open-market transactions and include transactions being executed by a broker selected by the Company that has been delegated the authority to repurchase shares on the Company's behalf in the open market in accordance with applicable rules under the Exchange Act, including Rules 10b5-1 and 10b-18 thereunder, and pursuant to, and under the terms and limitations of, the 2020 Share Repurchase Program. There is no assurance that the Company will purchase shares at any specific discount levels or in any specific amounts. During the nine months ended September 30, 2020, the Company repurchased a total of 989,050 shares of its common stock in the open market under the 2020 Share Repurchase Program at an average price of $7.21 per share including broker commissions.
2. AGREEMENTS AND RELATED PARTY TRANSACTIONS
On August 2, 2018, the Company entered into the Advisory Agreement and the Administration Agreement with the Adviser, an investment adviser registered under the Investment Advisers Act of 1940, as amended. Pursuant to the Advisory Agreement and the Administration Agreement, the Adviser serves as the Company’s investment adviser and administrator and manages its investment portfolio. The Company’s then-current board of directors unanimously approved the Advisory Agreement at an in-person meeting on March 22, 2018. The Company’s stockholders approved the Advisory Agreement at a July 24, 2018 special meeting of stockholders.
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
Advisory Agreement
Pursuant to the Advisory Agreement, the Adviser manages the Company's day-to-day operations and provides the Company with investment advisory services. Among other things, the Adviser (i) determines the composition of the portfolio of the Company, the nature and timing of the changes therein and the manner of implementing such changes; (ii) identifies, evaluates and negotiates the structure of the investments made by the Company; (iii) executes, closes, services and monitors the investments that the Company makes; (iv) determines the securities and other assets that the Company will purchase, retain or sell; (v) performs due diligence on prospective portfolio companies and (vi) provides the Company with such other investment advisory, research and related services as the Company may, from time to time, reasonably require for the investment of its funds.
The Advisory Agreement provides that, absent fraud, willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, the Adviser, and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with the Adviser (collectively, the "IA Indemnified Parties"), are entitled to indemnification from the Company for any damages, liabilities, costs, demands, charges, claims and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) incurred by the IA Indemnified Parties in or by reason of any pending, threatened or completed action, suit, investigation or other proceeding (including an action or suit by or in the right of the Company or its security holders) arising out of any actions or omissions or otherwise based upon the performance of any of the Adviser’s duties or obligations under the Advisory Agreement or otherwise as an investment adviser of the Company. The Adviser’s services under the Advisory Agreement are not exclusive, and the Adviser is generally free to furnish similar services to other entities so long as its performance under the Advisory Agreement is not adversely affected.
The Adviser has entered into a personnel-sharing arrangement with its affiliate, Barings International Investment Limited ("BIIL"). BIIL is a wholly-owned subsidiary of Baring Asset Management Limited, which in turn is an indirect, wholly-owned subsidiary of the Adviser. Pursuant to this arrangement, certain employees of BIIL may serve as "associated persons" of the Adviser and, in this capacity, subject to the oversight and supervision of the Adviser, may provide research and related services, and discretionary investment management and trading services (including acting as portfolio managers) to the Company on behalf of the Adviser. This arrangement is based on no-action letters of the staff of the Securities and Exchange Commission (the "SEC") that permit SEC-registered investment advisers to rely on and use the resources of advisory affiliates or "participating affiliates," subject to the supervision of that SEC-registered investment adviser. BIIL is a "participating affiliate" of the Adviser, and the BIIL employees are "associated persons" of the Adviser.
Under the Advisory Agreement, the Company pays the Adviser (i) a base management fee (the "Base Management Fee") and (ii) an incentive fee (the "Incentive Fee") as compensation for the investment advisory and management services it provides the Company thereunder.
Base Management Fee
The Base Management Fee is calculated based on the Company’s gross assets, including assets purchased with borrowed funds or other forms of leverage and excluding cash and cash equivalents, at an annual rate of 1.375%. The annual rate of the Base Management Fee was 1.0% for the period from August 2, 2018 through December 31, 2018, and was 1.125% for the period commencing on January 1, 2019 through December 31, 2019.
The Base Management Fee is payable quarterly in arrears on a calendar quarter basis. The Base Management Fee is calculated based on the average value of the Company’s gross assets, excluding cash and cash equivalents, at the end of the two most recently completed calendar quarters prior to the quarter for which such fees are being calculated. Base Management Fees for any partial month or quarter are appropriately pro-rated.
For the three and nine months ended September 30, 2020, the Base Management Fee determined in accordance with the terms of the Advisory Agreement was approximately $3.4 million and $10.9 million, respectively. For the three and nine months ended September 30, 2019, the Base Management Fee was approximately $3.3 million and $8.8 million, respectively. As of September 30, 2020, the Base Management Fee of $3.4 million for the three months ended September 30, 2020 was unpaid and included in "Base management fees payable" in the accompanying Unaudited Consolidated Balance Sheet. As of December 31, 2019, the Base Management Fee of $3.3 million for the three months ended December 31, 2019 was unpaid and included in "Base management fees payable" in the accompanying Consolidated Balance Sheet.
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
Incentive Fee
The Incentive Fee is comprised of two parts: (1) a portion based on the Company’s pre-incentive fee net investment income (the "Income-Based Fee") and (2) a portion based on the net capital gains received on the Company’s portfolio of securities on a cumulative basis for each calendar year, net of all realized capital losses and all unrealized capital depreciation for that same calendar year (the "Capital Gains Fee").
The Income-Based Fee is calculated as follows:
(i)For each quarter from and after August 2, 2018 through December 31, 2019 (the "Pre-2020 Period"), the Income-Based Fee was calculated and payable quarterly in arrears based on the Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter for which such fees were being calculated. In respect of the Pre-2020 Period, "Pre-Incentive Fee Net Investment Income" means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence, managerial assistance and consulting fees or other fees that the Company receives from portfolio companies) accrued during the relevant calendar quarter, minus the Company’s operating expenses for such quarter (including the Base Management Fee, expenses payable under the Administration Agreement, any interest expense and any dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind interest and zero coupon securities), accrued income not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.
(ii)For each quarter beginning on and after January 1, 2020 (the "Post-2019 Period"), the Income-Based Fee is calculated and payable quarterly in arrears based on the Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter and the eleven preceding calendar quarters (or such fewer number of preceding calendar quarters counting each calendar quarter beginning on or after January 1, 2020) (each such period referred to as the "Trailing Twelve Quarters") for which such fees are being calculated and is payable promptly following the filing of the Company’s financial statements for such quarter. In respect of the Post-2019 Period, "Pre-Incentive Fee Net Investment Income" means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence, managerial assistance and consulting fees or other fees that the Company receives from portfolio companies) accrued during the relevant Trailing Twelve Quarters, minus the Company’s operating expenses for such Trailing Twelve Quarters (including the Base Management Fee, expenses payable under the Administration Agreement, any interest expense and any dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee) divided by the number of quarters that comprise the relevant Trailing Twelve Quarters. Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind interest and zero coupon securities), accrued income not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.
(iii)Pre-Incentive Fee Net Investment Income, expressed as a rate of return on the value of the Company’s net assets (defined as total assets less senior securities constituting indebtedness and preferred stock) at the end of the calendar quarter for which such fees are being calculated, is compared to a "hurdle rate", expressed as a rate of return on the value of the Company’s net assets at the end of the most recently completed calendar quarter, of 2% per quarter (8% annualized). The Company pays the Adviser the Income-Based Fee with respect to the Company’s Pre-Incentive Fee Net Investment Income in each calendar quarter as follows:
(1)(a) With respect to the Pre-2020 Period, no Income-Based Fee for any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income (as defined in paragraph (i) above) did not exceed the hurdle rate;
(b) With respect to the Post-2019 Period, no Income-Based Fee for any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income (as defined in paragraph (ii) above) does not exceed the hurdle rate;
(2)(a) With respect to the Pre-2020 Period, 100% of the Company’s Pre-Incentive Fee Net Investment Income (as defined in paragraph (i) above) for any calendar quarter with respect to that portion of the Pre-Incentive Fee Net Investment Income for such quarter, if any, that exceeded the hurdle rate but was less than 2.5% (10% annualized) (the "Pre-2020 Catch-Up Amount"). The Pre-2020 Catch-Up Amount was intended to provide the Adviser with an incentive fee of 20% on all of the Company’s Pre-Incentive Fee Net Investment Income (as
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
defined in paragraph (i) above) when the Company’s Pre-Incentive Fee Net Investment Income (as defined in paragraph (i) above) reached 2% per quarter (8% annualized);
(b) With respect to the Post-2019 Period, 100% of the Company’s Pre-Incentive Fee Net Investment Income (as defined in paragraph (ii) above) with respect to that portion of the Pre-Incentive Fee Net Investment Income (as defined in paragraph (ii) above), if any, that exceeds the hurdle rate but is less than 2.5% (10% annualized) (the "Post-2019 Catch-Up Amount"). The Post-2019 Catch-Up Amount is intended to provide the Adviser with an incentive fee of 20% on all of the Company’s Pre-Incentive Fee Net Investment Income (as defined in paragraph (ii) above) when the Company’s Pre-Incentive Fee Net Investment Income (as defined in paragraph (ii) above) reaches 2% per quarter (8% annualized);
(3)(a) With respect to the Pre-2020 Period, 20% of the amount of the Company’s Pre-Incentive Fee Net Investment Income (as defined in paragraph (i) above) for any calendar quarter with respect to that portion of the Pre-Incentive Fee Net Investment Income (as defined in paragraph (i) above) for such quarter, if any, that exceeded the Pre-2020 Catch-Up Amount; and
(b) With respect to the Post-2019 Period, 20% of the amount of the Company’s Pre-Incentive Fee Net Investment Income (as defined in paragraph (ii) above) for any calendar quarter with respect to that portion of the Pre-Incentive Fee Net Investment Income (as defined in paragraph (ii) above), if any, that exceeds the Post-2019 Catch-Up Amount.
However, with respect to the Post-2019 Period, the Income-Based Fee paid to the Adviser will not be in excess of the Incentive Fee Cap. With respect to the Post-2019 Period, the "Incentive Fee Cap" for any quarter is an amount equal to (a) 20% of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarters minus (b) the aggregate Income-Based Fee that was paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters. The Incentive Fee Cap is not subject to recoupment.
Cumulative Net Return means (x) the aggregate net investment income in respect of the relevant Trailing Twelve Quarters minus (y) any Net Capital Loss (as defined below), if any, in respect of the relevant Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company pays no Income-Based Fee to the Adviser for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the Income-Based Fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company pays an Income-Based Fee to the Adviser equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the Income-Based Fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company pays an Income-Based Fee to the Adviser equal to the Income-Based Fee calculated as described above for such quarter without regard to the Incentive Fee Cap.
Net Capital Loss in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.
The Capital Gains Fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Advisory Agreement), and is calculated at the end of each applicable year by subtracting (1) the sum of the Company’s cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (2) the Company’s cumulative aggregate realized capital gains, in each case calculated from August 2, 2018. If such amount is positive at the end of such year, then the Capital Gains Fee payable for such year is equal to 20% of such amount, less the cumulative aggregate amount of Capital Gains Fees paid in all prior years. If such amount is negative, then there is no Capital Gains Fee payable for such year. If the Advisory Agreement is terminated as of a date that is not a calendar year end, the termination date will be treated as though it were a calendar year end for purposes of calculating and paying a Capital Gains Fee. The Company did not pay any Incentive Fee for the three or nine months ended September 30, 2020 or 2019.
Payment of Company Expenses
Under the Advisory Agreement, all investment professionals of the Adviser and its staff, when and to the extent engaged in providing services required to be provided by the Adviser under the Advisory Agreement, and the compensation and routine overhead expenses of such personnel allocable to such services, are provided and paid for by the Adviser and not by the Company, except that all costs and expenses relating to the Company's operations and transactions, including, without limitation, those items listed in the Advisory Agreement, will be borne by the Company.
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
Administration Agreement
Under the terms of the Administration Agreement, the Adviser performs (or oversees, or arranges for, the performance of) the administrative services necessary for the operation of the Company, including, but not limited to, office facilities, equipment, clerical, bookkeeping and record-keeping services at such office facilities and such other services as the Adviser, subject to review by the Board, from time to time, determines to be necessary or useful to perform its obligations under the Administration Agreement. The Adviser also, on behalf of the Company and subject oversight by the Board, arranges for the services of, and oversees, custodians, depositories, transfer agents, dividend disbursing agents, other stockholder servicing agents, accountants, attorneys, valuation experts, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable.
The Company is required to reimburse the Adviser for the costs and expenses incurred by the Adviser in performing its obligations and providing personnel and facilities under the Administration Agreement, or such lesser amount as may be agreed to in writing by the Company and the Adviser from time to time. If the Company and the Adviser agree to a reimbursement amount for any period which is less than the full amount otherwise permitted under the Administration Agreement, then the Adviser will not be entitled to recoup any difference thereof in any subsequent period or otherwise. The costs and expenses incurred by the Adviser on behalf of the Company under the Administration Agreement include, but are not limited to:
•the allocable portion of the Adviser’s rent for the Company’s Chief Financial Officer and the Chief Compliance Officer and their respective staffs, which is based upon the allocable portion of the usage thereof by such personnel in connection with their performance of administrative services under the Administration Agreement;
•the allocable portion of the salaries, bonuses, benefits and expenses of the Company’s Chief Financial Officer and Chief Compliance Officer and their respective staffs, which is based upon the allocable portion of the time spent by such personnel in connection with performing administrative services for the Company under the Administration Agreement;
•the actual cost of goods and services used for the Company and obtained by the Adviser from entities not affiliated with the Company, which is reasonably allocated to the Company on the basis of assets, revenues, time records or other method conforming with generally accepted accounting principles;
•all fees, costs and expenses associated with the engagement of a sub-administrator, if any; and
•costs associated with (a) the monitoring and preparation of regulatory reporting, including registration statements and amendments thereto, prospectus supplements, and tax reporting, (b) the coordination and oversight of service provider activities and the direct cost of such contractual matters related thereto and (c) the preparation of all financial statements and the coordination and oversight of audits, regulatory inquiries, certifications and sub-certifications.
For the three and nine months ended September 30, 2020, the Company incurred and was invoiced by the Adviser for expenses of approximately $0.3 million and $0.9 million, respectively, under the terms of the Administration Agreement, which amount is included in "General and administrative expenses" in the accompanying Unaudited Consolidated Statements of Operations. For the three and nine months ended September 30, 2019, the Company incurred and was invoiced by the Adviser for expenses of approximately $0.5 million and $1.9 million, respectively, under the terms of the Administration Agreement, which amount is included in "General and administrative expenses" in the accompanying Unaudited Consolidated Statements of Operations. As of September 30, 2020, the administrative expenses for the three months ended September 30, 2020 were unpaid and included in "Administrative fees payable" in the accompanying Unaudited Consolidated Balance Sheet. As of December 31, 2019, the administrative expenses of $0.4 million incurred for the three months ended December 31, 2019 were unpaid and included in "Administrative fees payable" in the accompanying Consolidated Balance Sheet.
3. INVESTMENTS
Portfolio Composition
The Company invests in senior secured private debt investments in well-established middle-market businesses that operate across a wide range of industries, as well as syndicated senior secured loans, structured products, bonds and subordinated debt securities of privately held companies, generally secured by security interests in portfolio company assets. In addition,other fixed income securities. Structured products include collateralized loan obligations and asset-backed securities. The Adviser's existing SEC co-investment exemptive relief under the 1940 Act, permits the Company generally invests in one or more equity instruments ofand the borrower, such as direct preferred or common equity interests. The Company's investments generally range from $5.0 million to $50.0 million per portfolio company. In certain situations, we have partnered with otherAdviser's affiliated private funds and SEC-registered funds to provide larger financing commitments.co-invest in loans originated by the Adviser, which allows the Adviser to efficiently implement its senior secured private debt investment strategy for the Company.
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
The cost basis of the Company's debt investments includes any unamortized original issuepurchased premium or discount, unamortized loan origination fees and payment-in-kind (“PIK”)PIK interest, if any. Summaries of the composition of the Company’s investment portfolio at cost and fair value, and as a percentage of total investments, are shown in the following tables:
| | | | | | | | | | | | Cost | | Percentage of Total Portfolio | | Fair Value | | Percentage of Total Portfolio | | Percentage of Total Net Assets |
September 30, 2020: | | September 30, 2020: | | | | | | | | | |
Senior debt and 1st lien notes | | Senior debt and 1st lien notes | $ | 850,882,033 | | | 75 | % | | $ | 833,101,689 | | | 75 | % | | 158 | % |
Subordinated debt and 2nd lien notes | | Subordinated debt and 2nd lien notes | 19,700,711 | | | 2 | | | 19,369,286 | | | 2 | | | 4 | |
Structured products | | Structured products | 31,517,698 | | | 3 | | | 33,164,151 | | | 3 | | | 6 | |
Equity shares | | Equity shares | 1,028,125 | | | — | | | 975,050 | | | — | | | — | |
Investments in joint ventures | | Investments in joint ventures | 18,258,270 | | | 2 | | | 19,158,075 | | | 2 | | | 4 | |
Short-term investments | | Short-term investments | 210,503,875 | | | 18 | | | 210,503,390 | | | 18 | | | 40 | |
| Cost | | Percentage of Total Portfolio | | Fair Value | | Percentage of Total Portfolio | | $ | 1,131,890,712 | | | 100 | % | | $ | 1,116,271,641 | | | 100 | % | | 212 | % |
September 30, 2017: | | | | | | | | |
December 31, 2019: | | December 31, 2019: | | | | | | | | | |
Senior debt and 1st lien notes | | Senior debt and 1st lien notes | $ | 1,070,031,715 | | | 90 | % | | $ | 1,050,863,369 | | | 90 | % | | 184 | % |
Subordinated debt and 2nd lien notes | $ | 812,599,788 |
| | 66 | % | | $ | 688,995,595 |
| | 63 | % | Subordinated debt and 2nd lien notes | 15,339,180 | | | 1 | | | 15,220,969 | | | 1 | | | 3 | |
Senior debt and 1st lien notes | 290,613,735 |
| | 23 |
| | 270,479,180 |
| | 25 |
| |
Equity shares | 133,883,175 |
| | 11 |
| | 131,120,904 |
| | 12 |
| Equity shares | 515,825 | | | — | | | 760,716 | | | — | | | — | |
Equity warrants | 1,691,617 |
| | — |
| | 596,000 |
| | — |
| |
Investment in joint venture | | Investment in joint venture | 10,158,270 | | | 1 | | | 10,229,813 | | | 1 | | | 2 | |
Short-term investments | | Short-term investments | 96,568,940 | | | 8 | | | 96,568,940 | | | 8 | | | 17 | |
| $ | 1,238,788,315 |
| | 100 | % | | $ | 1,091,191,679 |
| | 100 | % | | $ | 1,192,613,930 | | | 100 | % | | $ | 1,173,643,807 | | | 100 | % | | 206 | % |
December 31, 2016: | | | | | | | | |
Subordinated debt and 2nd lien notes | $ | 753,635,857 |
| | 69 | % | | $ | 690,159,367 |
| | 67 | % | |
Senior debt and 1st lien notes | 198,616,110 |
| | 18 |
| | 191,643,157 |
| | 18 |
| |
Equity shares | 140,524,807 |
| | 13 |
| | 154,216,657 |
| | 15 |
| |
Equity warrants | 4,154,717 |
| | — |
| | 1,888,000 |
| | — |
| |
| $ | 1,096,931,491 |
| | 100 | % | | $ | 1,037,907,181 |
| | 100 | % | |
During the three months ended September 30, 2017,2020, the Company made seven15 new investments totaling approximately $110.3$127.3 million, andnine investments in sixteen existing portfolio companies totaling approximately $30.2$16.3 million and an additional investment in one joint venture equity portfolio company totaling $1.6 million. During the nine months ended September 30, 2017,2020, the Company made twenty-two47 new investments totaling approximately $328.2$263.9 million, and investments in twenty-five18 existing portfolio companies totaling approximately $63.3$39.8 million, one new joint venture equity investment totaling $3.1 million and an additional investment in one joint venture equity portfolio company totaling $5.0 million.
During the three months ended September 30, 2016,2019, the Company made three12 new investments totaling approximately $83.9$106.4 million, andsix investments in nine existing portfolio companies totaling approximately $4.5$13.9 million and one new joint venture equity investment totaling $10.2 million. During the nine months ended September 30, 2016,2019, the Company made six26 new investments totaling approximately $130.2$245.9 million, andsix investments in seventeen existing portfolio companies totaling approximately $33.7$12.2 million and one new joint venture equity investment totaling $10.2 million.
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
The industry composition of investments at fair value at September 30, 2020 and December 31, 2019, excluding short-term investments, was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
Aerospace and Defense | $ | 58,442,645 | | | 6.4 | % | | $ | 71,899,486 | | | 6.7 | % |
Automotive | 50,350,943 | | | 5.5 | % | | 29,879,546 | | | 2.8 | % |
Banking, Finance, Insurance and Real Estate | 47,351,823 | | | 5.2 | % | | 83,826,677 | | | 7.8 | % |
Beverage, Food and Tobacco | 13,895,909 | | | 1.5 | % | | 11,837,328 | | | 1.1 | % |
Capital Equipment | 42,783,842 | | | 4.7 | % | | 62,694,548 | | | 5.8 | % |
Chemicals, Plastics, and Rubber | 23,081,495 | | | 2.5 | % | | 31,989,552 | | | 3.0 | % |
Construction and Building | 8,833,568 | | | 1.0 | % | | 23,222,638 | | | 2.2 | % |
Consumer Goods: Durable | 12,232,864 | | | 1.4 | % | | 30,207,496 | | | 2.8 | % |
Consumer Goods: Non-durable | — | | | — | % | | 13,958,377 | | | 1.3 | % |
Containers, Packaging and Glass | 6,748,576 | | | 0.8 | % | | 32,465,070 | | | 3.0 | % |
Electrical Components & Equipment | 2,237,500 | | | 0.3 | % | | — | | | — | % |
Energy: Electricity | 15,710,919 | | | 1.7 | % | | 16,561,352 | | | 1.5 | % |
Energy: Oil and Gas | 738,309 | | | 0.1 | % | | 14,031,270 | | | 1.3 | % |
Healthcare and Pharmaceuticals | 82,142,249 | | | 9.1 | % | | 106,336,903 | | | 9.9 | % |
High Tech Industries | 104,643,133 | | | 11.6 | % | | 124,598,066 | | | 11.6 | % |
Hotel, Gaming and Leisure | 7,470,090 | | | 0.8 | % | | 5,978,910 | | | 0.6 | % |
Investment Funds and Vehicles | 19,158,075 | | | 2.1 | % | | 10,229,813 | | | 0.9 | % |
Media: Advertising, Printing and Publishing | 21,049,051 | | | 2.3 | % | | 30,919,615 | | | 2.9 | % |
Media: Broadcasting and Subscription | 11,423,663 | | | 1.3 | % | | — | | | — | % |
Media: Diversified and Production | 34,609,190 | | | 3.8 | % | | 31,962,571 | | | 3.0 | % |
Metals and Mining | 17,320,696 | | | 1.9 | % | | 12,284,823 | | | 1.1 | % |
Retail | 10,672,464 | | | 1.2 | % | | 28,438,030 | | | 2.6 | % |
Services: Business | 127,022,048 | | | 14.0 | % | | 127,261,336 | | | 11.8 | % |
Services: Consumer | 26,897,347 | | | 3.0 | % | | 35,667,981 | | | 3.3 | % |
Structured Products | 33,164,151 | | | 3.6 | % | | — | | | — | % |
Telecommunications | 48,505,008 | | | 5.4 | % | | 33,725,812 | | | 3.1 | % |
Transportation: Cargo | 60,253,010 | | | 6.7 | % | | 83,353,452 | | | 7.7 | % |
Transportation: Consumer | — | | | — | % | | 5,845,206 | | | 0.5 | % |
Utilities: Electric | 7,151,434 | | | 0.8 | % | | 6,028,435 | | | 0.6 | % |
Utilities: Oil and Gas | 11,878,249 | | | 1.3 | % | | 11,870,574 | | | 1.1 | % |
Total | $ | 905,768,251 | | | 100.0 | % | | $ | 1,077,074,867 | | | 100.0 | % |
Jocassee Partners LLC
On May 8, 2019, the Company entered into an agreement with South Carolina Retirement Systems Group Trust ("SCRS") to create and co-manage Jocassee Partners LLC ("Jocassee"), a joint venture, which invests in a highly diversified asset mix including senior secured, middle-market, private debt investments, syndicated senior secured loans and structured products. The Company and SCRS committed to initially provide $50.0 million and $500.0 million, respectively, of equity capital to Jocassee. Equity contributions will be called from each member on a pro-rata basis, based on their equity commitments. As of September 30, 2020, Jocassee had $118.6 million in senior secured private middle-market debt investments, $370.0 million in U.S. syndicated senior secured loans, $152.1 million in European syndicated senior secured loans, $23.8 million in structured product investments, $6.2 million in an equity investment, $28.8 million in a joint venture investment and $24.4 million in short-term investments.As of December 31, 2019, Jocassee had $41.3 million in senior secured private middle-market debt investments, $140.8 million in U.S. syndicated senior secured loans, $57.3 million in European syndicated senior secured loans, $8.2 million in an equity investment and $36.7 million in a short-term investment.
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
The Company may sell portions of its investments via assignment to Jocassee. Since inception, as of September 30, 2020 and December 31, 2019, the Company had sold $107.1 million and $36.1 million, respectively, of its investments to Jocassee. The sale of the investments met the criteria set forth in ASC 860, Transfers and Servicing for treatment as a sale and satisfies the following conditions:
•Assigned investments have been isolated from the Company, and put presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other receivership;
•each participant has the right to pledge or exchange the assigned investments it received, and no condition both constrains the participant from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the Company; and
•the Company, its consolidated affiliates or its agents do not maintain effective control over the assigned investments through either: (i) an agreement that entitles and/or obligates the Company to repurchase or redeem the assets before maturity, or (ii) the ability to unilaterally cause the holder to return specific assets, other than through a cleanup call.
The Company has determined that Jocassee is an investment company under ASC, Topic 946, Financial Services - Investment Companies, however, in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a substantially wholly owned investment company subsidiary, which is an extension of the operations of the Company, or a controlled operating company whose business consists of providing services to the Company. The Company does not consolidate its interest in Jocassee as it is not a substantially wholly owned investment company subsidiary. In addition, the Company does not control Jocassee due to the allocation of voting rights among Jocassee members.
As of September 30, 2020 and December 31, 2019, Jocassee had the following commitments, contributions and unfunded commitments from its members:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2020 |
Member | | Total Commitments | | Contributed Capital | | Return of Capital (not recallable) | | Unfunded Commitments |
Barings BDC, Inc. | | $ | 50,000,000 | | | $ | 15,000,000 | | | $ | — | | | $ | 35,000,000 | |
South Carolina Retirement Systems Group Trust | | 500,000,000 | | | 150,000,000 | | | — | | | 350,000,000 | |
Total | | $ | 550,000,000 | | | $ | 165,000,000 | | | $ | — | | | $ | 385,000,000 | |
| | | | | | | | |
| | As of December 31, 2019 |
Member | | Total Commitments | | Contributed Capital | | Return of Capital (not recallable) | | Unfunded Commitments |
Barings BDC, Inc. | | $ | 50,000,000 | | | $ | 10,000,000 | | | $ | — | | | $ | 40,000,000 | |
South Carolina Retirement Systems Group Trust | | 500,000,000 | | | 100,000,000 | | | — | | | 400,000,000 | |
Total | | $ | 550,000,000 | | | $ | 110,000,000 | | | $ | — | | | $ | 440,000,000 | |
Thompson Rivers, LLC
On April 28, 2020, Thompson Rivers LLC (“Thompson Rivers”) was formed as a Delaware limited liability company. On May 13, 2020, the Company entered into a limited liability company agreement (“LLC Agreement”) with Jocassee. The Company and Jocassee have committed to initially provide $10.0 million and $90.0 million, respectively, of equity capital to Thompson Rivers. Equity contributions (and equity ownership) are on a pro-rata basis, based on their equity commitments (10% for the Company and 90% for Jocassee). As of September 30, 2020, Thompson Rivers had $79.5 million in commercial mortgage-backed securities and $7.7 million in cash.
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
The Company has determined that Thompson Rivers is an investment company under ASC, Topic 946, Financial Services - Investment Companies, however, in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a substantially wholly owned investment company subsidiary, which is an extension of the operations of the Company, or a controlled operating company whose business consists of providing services to the Company. The Company does not consolidate its interest in Thompson Rivers as it is not a substantially wholly owned investment company subsidiary. In addition, the Company does not control Thompson Rivers due to the allocation of voting rights among Thompson Rivers members.
As of September 30, 2020, Thompson Rivers had the following commitments, contributions and unfunded commitments from its members:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2020 |
Member | | Total Commitments | | Contributed Capital | | Return of Capital (not recallable) | | Unfunded Commitments |
Barings BDC, Inc. | | $ | 10,000,000 | | | $ | 3,100,000 | | | $ | — | | | $ | 6,900,000 | |
Jocassee Partners LLC | | 90,000,000 | | | 27,900,000 | | | — | | | 62,100,000 | |
Total | | $ | 100,000,000 | | | $ | 31,000,000 | | | $ | — | | | $ | 69,000,000 | |
Investment Valuation
The Company has a valuation policy, as well as established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring (at least quarterly) basis in accordance with the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures ("ASC Topic 820"). The Company's current valuation policy and processes were established by the Adviser and have been approved by the Board.
Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date. For the Company’s portfolio securities, fair value is generally the amount that the Company might reasonably expect to receive upon the current sale of the security. Under ASC Topic 820, the fair value measurement assumes that the sale occurs in the principal market for the security, or in the absence of a principal market, in the most advantageous market for the security. Under ASC Topic 820, if no market for the security exists or if the Company does not have access to the principal market, the security should be valued based on the sale occurring in a hypothetical market.
Under ASC Topic 820, there are three levels of valuation inputs, as follows:
Level 1 Inputs – include quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Inputs – include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 Inputs – include inputs that are unobservable and significant to the fair value measurement.
A financial instrument is categorized within the ASC Topic 820 valuation hierarchy based upon the lowest level of input to the valuation process that is significant to the fair value measurement. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, unrealized appreciation and depreciation related to such investments categorized as Level 3 investments within the tables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
The Company’s investment portfolio includes certain debt and equity instruments of privately held companies for which quoted prices or other inputs falling within the categories of Level 1 and Level 2 are generally not available. In such cases, the Company determines the fair value of its investments in good faith primarily using Level 3 inputs. In certain cases, quoted prices or other observable inputs exist, and the Company assesses the appropriateness of the use of these third-party quotes in determining fair value based on (i) its understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer and (ii) the depth and consistency of broker quotes and the correlation of changes in broker quotes with the underlying performance of the portfolio company.
There is no single technique for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment. The recorded fair values of the Company’s Level 3 investments may differ significantly from fair values that would have been used had an active market for the securities existed. In addition, changes in
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.
Investment Valuation Process
The CompanyAdviser has established a valuation policy, as well as establishedPricing Committee that is, subject to the oversight of the Board, responsible for the approval, implementation and documentedoversight of the processes and methodologies for determiningthat relate to the fair valuespricing and valuation of portfolio company investments on a recurring basisassets held by the Company. The Adviser uses internal pricing models, in accordance with internal pricing procedures established by the 1940 ActAdviser's Pricing Committee, to price an asset in the event an acceptable price cannot be obtained from an approved external source.
The Adviser reviews its valuation methodologies on an ongoing basis and FASB ASC Topic 820, Fair Value Measurementsupdates are made accordingly to meet changes in the marketplace. The Adviser has established internal controls to ensure its valuation process is operating in an effective manner. The Adviser (1) maintains valuation and Disclosures (“ASC Topic 820”). pricing procedures that describe the specific methodology used for valuation and (2) approves and documents exceptions and overrides of valuations. In addition, the Pricing Committee performs an annual review of valuation methodologies.
The Company's valuation policy and processes were established by management of the Company with the assistance of certain third-party advisors and were approved by the Board. Under ASC Topic 820, theremoney market fund investments are three levels of valuation inputs, as follows:
generally valued using Level 1 Inputs – include quoted prices (unadjusted) in active markets for identical assets or liabilities.
inputs and its syndicated senior secured loans and structured product investments are generally valued using Level 2 Inputs – include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 Inputs – include inputs that are unobservable and significant to the fair value measurement.
inputs. The Company’s investment portfolio is primarily comprised ofCompany's senior secured, middle-market, private debt and equity instruments of privately held companies for which quoted prices or other inputs falling within the categories of Level 1 and Level 2investments are generally not available. Therefore, the Company determines the fair value of its investments in good faith primarilyvalued using Level 3 inputs. In certain
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
cases, quoted prices or other observable inputs may exist, and if so, the Company assesses the appropriateness of the use of these third-party quotes in determining fair value based on (i) its understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer and (ii) the depth and consistency of broker quotes and the correlation of changes in broker quotes with the underlying performance of the portfolio company.
Under ASC Topic 820, a financial instrument is categorized within the ASC Topic 820 valuation hierarchy based upon the lowest level of input to the valuation process that is significant to the fair value measurement. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, unrealized appreciation and depreciation related to such investments categorized as Level 3 investments within the tables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
There is no single standard for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment. The recorded fair values of the Company’s investments may differ significantly from fair values that would have been used had an active market for the securities existed. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.Independent Valuation Review
The Company’s valuation process is led by the Company’s executive officers. The Company’s valuation process begins with a quarterly review of each investment in the Company’s investment portfolio by the Company’s executive officers and investment committee. Valuations of each portfolio security are then prepared by the Company’s investment professionals, who have direct responsibility for the origination, management and monitoring of each investment. Under the Company’s valuation policy, each investment valuation is subject to (i) a review by the lead investment officer responsible for the portfolio company investment and (ii) a peer review by a second investment officer or executive officer of the Company. Generally, any investment that is valued below cost is subjected to review by one of the Company’s executive officers. After the peer review is complete, the Company engages twohas engaged an independent valuation firms, including Duff & Phelps, LLC (collectively, the “Valuation Firms”),firm to provide third-party reviews of certain investments, as described further below. Finally, the Board has the responsibility for reviewing and approving, in good faith, the fair value of the Company’s investments in accordance with the 1940 Act.
The Valuation Firms provide third-party valuation consulting services toat the Companyend of each fiscal quarter which consist of certain limited procedures that the Company identified and requested the Valuation Firmsvaluation firm to perform (hereinafter referred to as the “Procedures”"Procedures"). The Procedures generally consist of a review of the quarterly fair values of the Company's middle-market investments, and are generally performed with respect to each portfolio companymiddle-market investment at least once in every calendar year and for new portfolio companies,investments, at least once in the twelve-month period subsequent to the initial investment. In addition, the Procedures arewill generally be performed with respect to a portfolio company whenan investment where there has been a significant change in the fair value or performance of the investment. Prior to the first quarter of 2020, the Procedures were generally performed with respect to each investment every quarter beginning in the quarter after the investment was made. In certain instances, the Company may determine that it is not cost-effective, and as a result is not in the Company’s stockholders’stockholders' best interest,interests, to request the Valuation Firmsindependent valuation firm to perform the Procedures on one or more portfolio companies.certain investments. Such instances include, but are not limited to, situations where the fair value of the investment in the portfolio company is determined to be insignificant relative to the total investment portfolio.
The total number of middle-market investments and the percentage of the Company's total middle-market investment portfolio on which the Procedures were performed are summarized below by period:
| | | | | | | | | | | | | | |
For the quarter ended: | | Total companies | | Percent of total investments at fair value(1) |
| | | | |
| | | | |
March 31, 2019 | | 18 | | 100% |
June 30, 2019 | | 22 | | 100% |
September 30, 2019 | | 28 | | 100% |
December 31, 2019 | | 38 | | 100% |
March 31, 2020 | | 30 | | 62% |
June 30, 2020 | | 33 | | 53% |
September 30, 2020 | | 66 | | 100% |
| | | | |
|
| | | |
For the quarter ended: | Total companies | | Percent of total investments at fair value(1) |
March 31, 2016 | 18 | | 27% |
June 30, 2016 | 19 | | 30% |
September 30, 2016 | 19 | | 33% |
December 31, 2016 | 20 | | 33% |
March 31, 2017 | 18 | | 30% |
June 30, 2017 | 20 | | 29% |
September 30, 2017 | 22 |
| 25% |
(1)Exclusive of the fair value of new middle-market investments made during the quarter for which the Procedures were not performed and certain middle-market investments repaid subsequent to the end of the reporting period. For September 30, 2020, the Procedures were performed on two of the seven investments made during the quarter. | |
(1) | Exclusive of the fair value of new investments made during the quarter. |
Upon completion of the Procedures, the Valuation Firmsvaluation firm concluded that, with respect to each investment reviewed by each Valuation Firm,the valuation firm, the fair value of those investments subjected to the Procedures appeared reasonable. TheFinally, the Board is ultimately responsible for determiningdetermined in good faith that the Company's investments were valued at fair value in accordance with the Company's valuation policies and procedures and the 1940 Act based on, among other things, the input of Barings, the Company’s investments in good faith.Audit Committee and the independent valuation firm.
TRIANGLE CAPITAL CORPORATIONBarings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
Valuation Techniques
Investment Valuation Inputs
Under ASC Topic 820, fair value isThe Company's valuation techniques are based upon both observable and unobservable pricing inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date. For the Company’s portfolio securities, fair value is generally the amount that the Company might reasonably expect to receive upon the current saleCompany's market assumptions. The Company's assessment of the security. Under ASC Topic 820,significance of a particular input to the fair value measurement assumes thatin its entirety requires judgment and considers factors specific to the sale occursfinancial instrument. The Company determines the estimated fair value of its loans and investments using primarily an income approach. Generally, an independent pricing service provider is the preferred source of pricing a loan, however, to the extent the independent pricing service provider price is unavailable or not relevant and reliable, the Company may use broker quotes. The Company attempts to maximize the use of observable inputs and minimize the use of unobservable inputs. The availability of observable inputs can vary from investment to investment and is affected by a wide variety of factors, including the type of security, whether the security is new and not yet established in the principalmarketplace, the liquidity of markets and other characteristics particular to the security.
Market Approach
The Company values its syndicated senior secured loans and structured product investments using values provided by independent pricing services that have been approved by the Adviser's Pricing Committee. The prices received from these pricing service providers are based on yields or prices of securities of comparable quality, type, coupon and maturity and/or indications as to value from dealers and exchanges. The Company will seek to obtain two prices from the pricing services with one price representing the primary source and the other representing an independent control valuation. The Company evaluates the prices obtained from brokers or independent pricing service providers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. The Company also performs back-testing of valuation information obtained from independent pricing service providers and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, the Company performs due diligence procedures surrounding independent pricing service providers to understand their methodology and controls to support their use in the valuation process.
Income Approach
The Company utilizes an Income Approach model in valuing its private debt investment portfolio, which consists primarily of middle-market senior secured loans with floating reference rates. As independent pricing service provider and broker quotes have not historically been consistently relevant and reliable, the fair value is determined using an internal index-based pricing model that takes into account both the movement in the spread of one or more performing credit indices as well as changes in the credit profile of the borrower. The implicit yield for each debt investment is calculated at the date the investment is made. This calculation takes into account the acquisition price (par less any upfront fee) and the relative maturity assumptions of the underlying asset. As of each balance sheet date, the implied yield for each investment is reassessed, taking into account changes in the discount margin of the baseline index, probabilities of default and any changes in the credit profile of the issuer of the security, orsuch as fluctuations in operating levels and leverage. If there is an observable price available on a comparable security/issuer, it is used to calibrate the absenceinternal model. If the valuation process for a particular debt investment results in a value above par, the value is typically capped at the greater of a principal market, in the most advantageous market for the security. Under ASC Topic 820, if no market for the security exists or if the Company does not have access to the principal market, the security should be valued basedamount plus any prepayment penalty in effect or 100% of par on the sale occurring inbasis that a hypothetical market. The securities inmarket participant is likely unwilling to pay a greater amount than that at which the Company invests are generally only purchased and sold in merger and acquisition transactions, in which case the entire portfolio company is sold to a third-party purchaser. As a result, unless the Company has the ability to control such a transaction, the assumed principal market for the Company’s securities is a hypothetical secondary market. The Level 3 inputs to the Company’s valuation process reflect the Company’s best estimate of the assumptions that would be used by market participants in pricing the investment in a transaction in a hypothetical secondary market.borrower could refinance.
Enterprise Value Waterfall Approach
In valuing equity securities, (including warrants), the Company estimates fair value using an “Enterprise"Enterprise Value Waterfall”Waterfall" valuation model. The Company estimates the enterprise value of a portfolio company and then allocates the enterprise value to the portfolio company’s securities in order of their relative liquidation preference. In addition, the model assumes that any outstanding debt or other securities that are senior to the Company’s equity securities are required to be repaid at par. Generally, the waterfall proceeds flow from senior debt tranches of the capital structure to junior and subordinated debt, followed by each class or preferred stock and finally the common stock. Additionally, the Company estimatesmay estimate the fair value of a limited number of its debt securitiessecurity using the Enterprise Value Waterfall approach in cases wherewhen the Company does not expect to receive full repayment.
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
To estimate the enterprise value of the portfolio company, the Company primarily uses a valuation model based on a transaction multiple, which generally is the original transaction multiple, and measures of the portfolio company’s financial performance. In addition, the Company considers other factors, including but not limited to (i) offers from third parties to purchase the portfolio company, (ii) the implied value of recent investments in the equity securities of the portfolio company, (iii) publicly available information regarding recent sales of private companies in comparable transactions and (iv) when the Company believes there are comparable companies that are publicly traded, the Company performs a review of these publicly traded companies and the market multiple of their equity securities. For certain non-performing assets, the Company may utilize the liquidation or collateral value of the portfolio company's assets in its estimation of enterprise value.
Valuation of Investment in Jocassee
The significant Company estimates the fair value of its investment in Jocassee Partners LLC using the net asset value of Jocassee Partners LLC and its ownership percentage. The net asset value of Jocassee Partners LLC is determined in accordance with the specialized accounting guidance for investment companies.
Valuation of Investment in Thompson Rivers
The Company estimates the fair value of its investment in Thompson Rivers LLC using the net asset value of Thompson Rivers LLC and its ownership percentage. The net asset value of Thompson Rivers LLC is determined in accordance with the specialized accounting guidance for investment companies.
Level 3 Unobservable Inputs
The following tables summarize the significant unobservable inputs to the Enterprise Value Waterfall model are (i) an appropriate transaction multipleCompany used in the valuation of its Level 3 debt and (ii) a measureequity securities as of the portfolio company’s financial performance, which generallySeptember 30, 2020 and December 31, 2019. The weighted average range of unobservable inputs is either earnings before interest, taxes, depreciation and amortization, as adjusted (“Adjusted EBITDA”) or revenues. Such inputs can be based on historical operating results, projectionsfair value of future operating results or a combination thereof. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for certain non-recurring items. In determining the operating results input,investments.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
September 30, 2020: | Fair Value | | Valuation Model | | Level 3 Input | | Range of Inputs | | Weighted Average |
Senior debt and 1st lien notes(1) | $ | 639,860,762 | | | Income Approach | | Implied Spread | | 4.3% – 12.0% | | 6.5% |
Subordinated debt and 2nd lien notes(2) | 9,900,456 | | | Income Approach | | Implied Spread | | 8.7% – 9.7% | | 9.2% |
Equity shares | 975,050 | | | Enterprise Value Waterfall Approach | | Adjusted EBITDA Multiple | | 8.2x – 11.9x | | 9.7x |
(1) Excludes investments with an aggregate fair value amounting to $14,783,231, which the Company utilizes the most recent portfolio company financial statementsvalued using unadjusted prices from independent pricing services and forecasts available as of the valuation date. The Company also consultsindependent indicative broker quotes where pricing inputs are not readily available.
(2) Excludes investments with the portfolio company’s senior management to obtain updates on the portfolio company’s performance, including information such as industry trends, new product development, loss of customers and other operational issues.
Fair value measurements using the Enterprise Value Waterfall model can be sensitive to changes in one or more of the inputs. Assuming all other inputs to the Enterprise Value Waterfall model remain constant, any increase (decrease) in either the transaction multiple, Adjusted EBITDA or revenues for a particular equity security would result in a higher (lower)an aggregate fair value for that security.
Income Approach
In valuing debt securities,amounting to $4,999,386, which the Company utilizesvalued using unadjusted prices from independent pricing services and independent indicative broker quotes where pricing inputs are not readily available.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2019: | Fair Value | | Valuation Model | | Level 3 Input | | Range of Inputs | | Weighted Average |
Senior debt and 1st lien notes(1) | $ | 528,907,788 | | | Income Approach | | Implied Spread | | 4.6% – 8.0% | | 5.7% |
Subordinated debt and 2nd lien notes(2) | 9,699,465 | | | Income Approach | | Implied Spread | | 8.8% – 9.4% | | 9.1% |
Equity shares | 760,716 | | | Enterprise Value Waterfall Approach | | Adjusted EBITDA Multiple | | 10.0x – 12.3x | | 10.5x |
(1) Excludes investments with an “Income Approach” model that considers factors including, but not limitedaggregate fair value amounting to (i) the stated yield on the debt security, (ii) the portfolio company’s current Adjusted EBITDA as compared to the portfolio company’s historical or projected Adjusted EBITDA as of the date the investment was made and the portfolio company’s anticipated Adjusted EBITDA for the next twelve months of operations, (iii) the portfolio company’s current Leverage Ratio (defined as the portfolio company’s total indebtedness divided by Adjusted EBITDA) as compared to its Leverage Ratio as of the date the investment was made, (iv) publicly available information regarding current pricing and credit metrics for similar proposed and executed investment transactions of private companies and (v) when$26,592,519, which the Company believes a relevant comparison exists, currentvalued using unadjusted prices from independent pricing services and credit metrics for similar proposedindependent indicative broker quotes where pricing inputs are not readily available.
(2) Excludes investments with an aggregate fair value amounting to $2,312,500, which the Company valued using unadjusted prices from independent pricing services and executed investment transactions ofindependent indicative broker quotes where pricing inputs are not readily available.
TRIANGLE CAPITAL CORPORATIONBarings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
publicly traded debt. In addition, the Company uses a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. This risk rating system covers both qualitative and quantitative aspects of the business and the securities held.
The Company considers the factors above, particularly any significant changes in the portfolio company’s results of operations and leverage, and develops an expectation of the yield that a hypothetical market participant would require when purchasing the debt investment (the “Required Rate of Return”). The Required Rate of Return, along with the Leverage Ratio and Adjusted EBITDA, are the significant Level 3 inputs to the Income Approach model. For investments where the Leverage Ratio and Adjusted EBITDA have not fluctuated significantly from the date the investment was made or have not fluctuated significantly from the Company’s expectations as of the date the investment was made, and where there have been no significant fluctuations in the market pricing for such investments, the Company may conclude that the Required Rate of Return is equal to the stated rate on the investment and therefore, the debt security is appropriately priced. In instances where the Company determines that the Required Rate of Return is different from the stated rate on the investment, the Company discounts the contractual cash flows on the debt instrument using the Required Rate of Return in order to estimate the fair value of the debt security.
Fair value measurements using the Income Approach model can be sensitive to changes in one or more of the inputs. Assuming all other inputs to the Income Approach model remain constant, any increase (decrease) in the Required Rate of Return or Leverage Ratio inputs for a particular debt security would result in a lower (higher) fair value for that security. Assuming all other inputs to the Income Approach model remain constant, any increase (decrease) in the Adjusted EBITDA input for a particular debt security would result in a higher (lower) fair value for that security.
The fair value of the Company’s royalty rights are calculated based on specific provisions contained in the pertinent operating or royalty agreements. The determination of the fair value of such royalty rights is not a significant component of the Company’s valuation process.
The ranges and weighted average values of the significant Level 3 inputs used in the valuation of the Company’s debt and equity securities at September 30, 2017 and December 31, 2016 are summarized as follows:
|
| | | | | | | | | | | |
September 30, 2017: | Fair Value(1) | | Valuation Model | | Level 3 Inputs | | Range of Inputs | | Weighted Average |
Subordinated debt and 2nd lien notes | $ | 637,935,010 |
| | Income Approach | | Required Rate of Return | | 9.6% – 25.0% | | 12.1% |
| | | | Leverage Ratio | | 1.6x – 10.3x | | 4.7x |
| | | | Adjusted EBITDA | | $2.6 million – $280.6 million | | $45.9 million |
Subordinated debt and 2nd lien notes | 40,077,000 |
| | Enterprise Value Waterfall Approach | | Adjusted EBITDA Multiple | | 3.9x – 10.0x | | 6.9x |
| | | | Adjusted EBITDA | | $1.8 million – $31.4 million | | $11.2 million |
| | | | | Revenue Multiple | | 0.8x – 0.8x | | 0.8x |
| | | | | Revenues | | $80.0 million – $80.0 million | | $80.0 million |
Senior debt and 1st lien notes | 270,479,180 |
| | Income Approach | | Required Rate of Return | | 6.8% – 25.0% | | 11.4% |
| | | | Leverage Ratio | | 1.0x – 7.4x | | 4.0x |
| | | | Adjusted EBITDA | | $3.5 million – $129.5 million | | $17.4 million |
Equity shares and warrants | 131,716,904 |
| | Enterprise Value Waterfall Approach | | Adjusted EBITDA Multiple | | 3.3x – 14.9x | | 7.7x |
| | | | Adjusted EBITDA | | $0.5 million – $60.0 million | | $15.9 million |
| | | | | Revenue Multiple | | 0.8x – 3.0x | | 1.2x |
| | | | | Revenues | | $17.5 million – $80.0 million | | $52.8 million |
| |
(1) | One subordinated debt investment with a fair value of $10,983,585 was repaid subsequent to the end of the reporting period and was valued at its transaction price. |
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | |
December 31, 2016: | Fair Value(1) | | Valuation Model | | Level 3 Input | | Range of Inputs | | Weighted Average |
Subordinated debt and 2nd lien notes | $ | 646,856,367 |
| | Income Approach | | Required Rate of Return | | 9.5% – 35.0% | | 13.8% |
| | | | Leverage Ratio | | 0.1x – 9.5x | | 4.8x |
| | | | Adjusted EBITDA | | $2.6 million – $169.8 million | | $27.9 million |
Subordinated debt and 2nd lien notes | 19,790,000 |
| | Enterprise Value Waterfall Approach | | Adjusted EBITDA Multiple | | 5.0x – 6.7x | | 5.8x |
| | | | Adjusted EBITDA | | $0.6 million – 4.9 million | | $2.1 million |
| | | | Revenue Multiple | | 0.8x – 0.8x | | 0.8x |
| | | | Revenues | | $98.0 million – $98.0 million | | $98.0 million |
Senior debt and 1st lien notes | 190,793,157 |
| | Income Approach | | Required Rate of Return | | 4.3% – 20.0% | | 11.0% |
| | | | Leverage Ratio | | 0.0x – 8.3x | | 3.2x |
| | | | Adjusted EBITDA | | $4.0 million – $14.1 million | | $9.3 million |
Equity shares and warrants | 152,435,657 |
| | Enterprise Value Waterfall Approach | | Adjusted EBITDA Multiple | | 3.3x – 14.9x | | 7.4x |
| | | | Adjusted EBITDA | | ($1.4 million) – $82.1 million | | $15.0 million |
| | | | | Revenue Multiple | | 0.8x – 4.0x | | 1.4x |
| | | | | Revenues | | $19.0 million – $98.0 million | | $61.7 million |
| |
(1) | Certain subordinated debt investments with a total fair value of $23,513,000 and certain equity securities with a total fair value of $3,669,000 were repaid or redeemed subsequent to the end of the reporting period and were valued at their transaction price. One senior debt investment with a total fair value of $850,000 was expected to be repaid subsequent to the end of the reporting period and was valued at its expected settlement value. |
The following table presentstables present the Company’s investment portfolio at fair value as of September 30, 20172020 and December 31, 2016,2019, categorized by the ASC Topic 820 valuation hierarchy, as previously described:
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value as of September 30, 2020 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Senior debt and 1st lien notes | $ | — | | | $ | 178,457,696 | | | $ | 654,643,993 | | | $ | 833,101,689 | |
Subordinated debt and 2nd lien notes | — | | | 4,469,444 | | | 14,899,842 | | | 19,369,286 | |
Structured products | — | | | 33,164,151 | | | — | | | 33,164,151 | |
Equity shares | — | | | — | | | 975,050 | | | 975,050 | |
Short-term investments | 210,503,390 | | | — | | | — | | | 210,503,390 | |
Investments subject to leveling | $ | 210,503,390 | | | $ | 216,091,291 | | | $ | 670,518,885 | | | $ | 1,097,113,566 | |
Investments in joint ventures(1) | | | | | | | 19,158,075 | |
| | | | | | | $ | 1,116,271,641 | |
| | | | | | | |
| Fair Value as of December 31, 2019 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Senior debt and 1st lien notes | $ | — | | | $ | 495,363,062 | | | $ | 555,500,307 | | | $ | 1,050,863,369 | |
Subordinated debt and 2nd lien notes | — | | | 3,209,004 | | | 12,011,965 | | | 15,220,969 | |
Equity shares | — | | | — | | | 760,716 | | | 760,716 | |
Short-term investments | 96,568,940 | | | — | | | — | | | 96,568,940 | |
Investments subject to leveling | $ | 96,568,940 | | | $ | 498,572,066 | | | $ | 568,272,988 | | | $ | 1,163,413,994 | |
Investment in joint venture(1) | | | | | | | 10,229,813 | |
| | | | | | | $ | 1,173,643,807 | |
|
| | | | | | | | | | | | | | | |
| Fair Value as of September 30, 2017 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Subordinated debt and 2nd lien notes | $ | — |
| | $ | — |
| | $ | 688,995,595 |
| | $ | 688,995,595 |
|
Senior debt and 1st lien notes | — |
| | — |
| | 270,479,180 |
| | 270,479,180 |
|
Equity shares | — |
| | — |
| | 131,120,904 |
| | 131,120,904 |
|
Equity warrants | — |
| | — |
| | 596,000 |
| | 596,000 |
|
| $ | — |
| | $ | — |
| | $ | 1,091,191,679 |
| | $ | 1,091,191,679 |
|
| | | | | | | |
| Fair Value as of December 31, 2016 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Subordinated debt and 2nd lien notes | $ | — |
| | $ | — |
| | $ | 690,159,367 |
| | $ | 690,159,367 |
|
Senior debt and 1st lien notes | — |
| | — |
| | 191,643,157 |
| | 191,643,157 |
|
Equity shares | — |
| | — |
| | 154,216,657 |
| | 154,216,657 |
|
Equity warrants | — |
| | — |
| | 1,888,000 |
| | 1,888,000 |
|
| $ | — |
| | $ | — |
| | $ | 1,037,907,181 |
| | $ | 1,037,907,181 |
|
(1)The Company's investments in Jocassee and Thompson Rivers are measured at fair value using net asset value and have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Unaudited Consolidated Balance Sheet and Consolidated Balance Sheet.
TRIANGLE CAPITAL CORPORATIONBarings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
The following tables reconcile the beginning and ending balances of the Company’s investment portfolio measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months endedSeptember 30, 20172020 and 2016:2019:
| | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2020: | Senior Debt and 1st Lien Notes | | Subordinated Debt and 2nd Lien Notes | | Equity Shares | | | | Total |
Fair value, beginning of period | $ | 555,500,307 | | | $ | 12,011,965 | | | $ | 760,716 | | | | | $ | 568,272,988 | |
New investments | 206,929,866 | | | 660,263 | | | 512,299 | | | | | 208,102,428 | |
Transfers into Level 3, net | 19,063,921 | | | 1,996,471 | | | — | | | | | 21,060,392 | |
Proceeds from sales of investments | (91,889,896) | | | (415,977) | | | — | | | | | (92,305,873) | |
Loan origination fees received | (4,744,340) | | | (19,808) | | | — | | | | | (4,764,148) | |
Principal repayments received | (20,157,266) | | | — | | | — | | | | | (20,157,266) | |
Payment in kind interest earned | 236,572 | | | 35,108 | | | — | | | | | 271,680 | |
| | | | | | | | | |
Accretion of loan premium | 16,426 | | | — | | | — | | | | | 16,426 | |
Accretion of deferred loan origination revenue | 1,653,596 | | | 26,081 | | | — | | | | | 1,679,677 | |
Realized gain (loss) | 70,946 | | | (26,253) | | | — | | | | | 44,693 | |
Unrealized appreciation (depreciation) | (12,036,139) | | | 631,992 | | | (297,965) | | | | | (11,702,112) | |
Fair value, end of period | $ | 654,643,993 | | | $ | 14,899,842 | | | $ | 975,050 | | | | | $ | 670,518,885 | |
| | Nine Months Ended September 30, 2017: | Subordinated Debt and 2nd Lien Notes | | Senior Debt and 1st Lien Notes | | Equity Shares | | Equity Warrants | | Total | |
Nine Months Ended September 30, 2019: | | Nine Months Ended September 30, 2019: | Senior Debt and 1st Lien Notes | | Subordinated Debt and 2nd Lien Notes | | Equity Shares | | | Total |
Fair value, beginning of period | $ | 690,159,367 |
| | $ | 191,643,157 |
| | $ | 154,216,657 |
| | $ | 1,888,000 |
| | $ | 1,037,907,181 |
| Fair value, beginning of period | $ | 257,987,259 | | | $ | 7,679,132 | | | $ | 515,825 | | | | $ | 266,182,216 | |
New investments | 220,193,495 |
| | 158,635,429 |
| | 12,673,701 |
| | — |
| | 391,502,625 |
| New investments | 249,345,678 | | | 4,951,685 | | | — | | | | 254,297,363 | |
Reclassifications | 22,558,007 |
| | (22,558,007 | ) | | — |
| | — |
| | — |
| |
| Transfers out of Level 3 | | Transfers out of Level 3 | (37,144,143) | | | — | | | — | | | | (37,144,143) | |
Proceeds from sales of investments | — |
| | — |
| | (27,036,478 | ) | | (479,408 | ) | | (27,515,886 | ) | Proceeds from sales of investments | (13,765,869) | | | — | | | — | | | | (13,765,869) | |
Loan origination fees received | (3,471,655 | ) | | (2,262,235 | ) | | — |
| | — |
| | (5,733,890 | ) | Loan origination fees received | (4,939,839) | | | (148,551) | | | — | | | | (5,088,390) | |
Principal repayments received | (163,054,918 | ) | | (41,159,263 | ) | | — |
| | — |
| | (204,214,181 | ) | Principal repayments received | (46,384,560) | | | (2,980,874) | | | — | | | | (49,365,434) | |
PIK interest earned | 8,033,507 |
| | 841,215 |
| | — |
| | — |
| | 8,874,722 |
| |
PIK interest payments received | (7,847,417 | ) | | (507,979 | ) | | — |
| | — |
| | (8,355,396 | ) | |
Accretion of loan discounts | 411,497 |
| | 54,694 |
| | — |
| | — |
| | 466,191 |
| |
| Accretion of loan premium | | Accretion of loan premium | (13,011) | | | — | | | — | | | | (13,011) | |
Accretion of deferred loan origination revenue | 2,798,373 |
| | 1,064,723 |
| | — |
| | — |
| | 3,863,096 |
| Accretion of deferred loan origination revenue | 1,163,453 | | | 63,413 | | | — | | | | 1,226,866 | |
Realized gain (loss) | (20,656,958 | ) | | (2,110,952 | ) | | 7,721,145 |
| | (1,983,692 | ) | | (17,030,457 | ) | |
Unrealized gain (loss) | (60,127,703 | ) | | (13,161,602 | ) | | (16,454,121 | ) | | 1,171,100 |
| | (88,572,326 | ) | |
Realized loss | | Realized loss | (47,768) | | | — | | | — | | | | (47,768) | |
Unrealized appreciation | | Unrealized appreciation | 1,501,737 | | | 124,484 | | | 179,835 | | | | 1,806,056 | |
Fair value, end of period | $ | 688,995,595 |
| | $ | 270,479,180 |
| | $ | 131,120,904 |
| | $ | 596,000 |
| | $ | 1,091,191,679 |
| Fair value, end of period | $ | 407,702,937 | | | $ | 9,689,289 | | | $ | 695,660 | | | | $ | 418,087,886 | |
|
| | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2016: | Subordinated Debt and 2nd Lien Notes | | Senior Debt and 1st Lien Notes | | Equity Shares | | Equity Warrants | | Total |
Fair value, beginning of period | $ | 699,125,083 |
| | $ | 132,929,264 |
| | $ | 141,555,369 |
| | $ | 3,667,000 |
| | $ | 977,276,716 |
|
New investments | 145,487,825 |
| | 3,000,000 |
| | 14,729,826 |
| | 650,000 |
| | 163,867,651 |
|
Reclassifications | 4,020,247 |
| | (4,020,247 | ) | | — |
| | — |
| | — |
|
Proceeds from sales of investments | — |
| | — |
| | (14,838,506 | ) | | (5,627,106 | ) | | (20,465,612 | ) |
Loan origination fees received | (3,165,460 | ) | | (40,000 | ) | | — |
| | — |
| | (3,205,460 | ) |
Principal repayments received | (157,151,997 | ) | | (4,536,285 | ) | | — |
| | — |
| | (161,688,282 | ) |
PIK interest earned | 10,548,903 |
| | 1,083,855 |
| | — |
| | — |
| | 11,632,758 |
|
PIK interest payments received | (7,219,058 | ) | | (236,150 | ) | | — |
| | — |
| | (7,455,208 | ) |
Accretion of loan discounts | 156,879 |
| | 150,202 |
| | — |
| | — |
| | 307,081 |
|
Accretion of deferred loan origination revenue | 3,289,162 |
| | 386,841 |
| | — |
| | — |
| | 3,676,003 |
|
Realized gain (loss) | (15,371,087 | ) | | (1,560,322 | ) | | 7,090,358 |
| | 3,153,206 |
| | (6,687,845 | ) |
Unrealized gain (loss) | (10,065,698 | ) | | (168,648 | ) | | 253,619 |
| | 454,900 |
| | (9,525,827 | ) |
Fair value, end of period | $ | 669,654,799 |
| | $ | 126,988,510 |
| | $ | 148,790,666 |
| | $ | 2,298,000 |
| | $ | 947,731,975 |
|
All realized and unrealized gains and losses and unrealized appreciation and depreciation are included in earnings (changes in net assets) and are reported on separate line items within the Company’s Unaudited Consolidated Statements of Operations. Pre-tax net unrealized lossesappreciation (depreciation) on Level 3 investments of $73.4$18.8 million and $111.6 million during the three and nine months ended September 30, 2017, were related to portfolio company investments that were still held by the Company as of September 30, 2017. Pre-tax net unrealized losses on investments of $11.1 million and $17.2$(13.8) million during the three and nine months ended September 30, 2016, respectively, were2020 was related to portfolio company investments that were still held by the Company as of September 30, 2016.2020. Pre-tax net unrealized appreciation on Level 3 investments of $3.1 million and $19.6 million during the three and nine months ended September 30, 2019 was related to portfolio company investments that were still held by the Company as of September 30, 2019.
The Company’s primary investment objective is to generate current income and capital appreciation by investing directly in privately-held lower middle market companies to help these companies fund acquisitions, growth or refinancing. DuringExclusive of short-term investments, during the nine months ended September 30, 2017,2020, the Company made investments of approximately $382.3 million in portfolio
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
companies to which it was not previously contractually committed to provide such financing. During the nine months ended September 30, 2017, the Company made investments of $9.2 million in companies to which it was previously committed to provide such financing.
During the nine months ended September 30, 2016, the Company made investments of approximately $157.0$297.0 million in portfolio companies to which it was not previously contractually committed to provide such financing. During the nine months ended September 30, 2016,2020, the Company made investments of $6.9$14.8 million in portfolio companies to which it was previously committed to provide such financing. The details
Exclusive of short-term investments, during the nine months ended September 30, 2019, the Company made investments of approximately $257.5 million in portfolio companies to which it was not previously contractually committed to provide such financing. During the nine months ended September 30, 2019, the Company made investments of $10.7 million in portfolio companies to which it was previously committed to provide such financing.
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
Unsettled Purchases and Sales of Investments
Investment transactions are recorded based on the trade date of the Company’s investments have been disclosedtransaction. As a result, unsettled purchases and sales are recorded as payables and receivables from unsettled transactions, respectively. While purchases and sales of the Company's syndicated senior secured loans generally settle on a T+7 basis, the settlement period will sometimes extend past the scheduled settlement. In such cases, the Company generally is contractually owed and recognizes interest income equal to the applicable margin ("spread") beginning on the Consolidated Schedules of Investments.
Warrants
When originating a debt security, the Company will sometimes receive warrants or other equity-related securities from the borrower. The Company determines the cost basisT+7 date. Such income is accrued as interest receivable and is collected upon settlement of the warrants or other equity-related securities received based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and warrants or other equity-related securities received. Any resulting difference between the face amount of the debt and its recorded fair value resulting from the assignment of value to the warrant or other equity instruments is treated as original issue discount and accreted into interest income over the life of the loan.investment transaction.
Realized Gain or Loss and Unrealized Appreciation or Depreciation of Portfolio Investments
Realized gains or losses are recorded upon the sale or liquidation of investments and are calculated as the difference between the net proceeds from the sale or liquidation, if any, and the cost basis of the investment using the specific identification method. Unrealized appreciation or depreciation reflects the difference between the fair value of the investments and the cost basis of the investments.
Investment Classification
In accordance with the provisions of the 1940 Act, the Company classifies investments by level of control. As defined in the 1940 Act, “Control Investments”"Control Investments" are investments in those companies that the Company is deemed to “Control.” “Affiliate Investments”"Control." "Affiliate Investments" are investments in those companies that are “Affiliated Companies”"Affiliated Persons" of the Company, as defined in the 1940 Act, other than Control Investments. “Non-Control"Non-Control / Non-Affiliate Investments”Investments" are those that are neither Control Investments nor Affiliate Investments. Generally, under the 1940 Act, the Company is deemed to control a company in which it has invested if the Company owns more than 25.0% of the outstanding voting securities of such company, has greater than 50.0% representation on its board (i.e., securities with the right to elect directors) and/or has the power to exercise control over the management or policies of such portfolio company. TheAs of September 30, 2020, the Company does not “Control” any of its portfolio companies for the purposes of the 1940 Act. Under the 1940 Act, the Company is deemed to be an affiliateAffiliated Person of a company in which the Company has invested if it owns at least 5.0%, but no more than 25.0%, of the outstanding voting securities of such company.
Investment Income
Interest income, adjusted forincluding amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Company writes off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. Dividend income is recorded on the ex-dividend date. The Company had negative dividend income of $24,208 during the nine months ended September 30, 2016, consisting of dividend income of approximately $1.3 million and a negative true-up adjustment of $1.3 million related to a portfolio company distribution that was received in 2015. In 2015, the Company received information that indicated that the tax character of the distribution was 100% dividend income, but received updated information in the first quarter of 2016 indicating that only 14% of the distribution was dividend income and the remainder was a return of capital, which necessitated the adjustment.
Fee Income
Origination, facility, commitment, consent and other advance fees received in connection with loan agreements ("Loan Origination Fees") are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of its
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
business, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and loan waiver and amendment fees, and are recorded as investment income when earned.
Fee income for the three and nine months ended September 30, 2017 and 2016 was as follows: |
| | | | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended | | Nine Months Ended | | Nine Months Ended |
| September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 |
Recurring Fee Income: | | | | | | | |
Amortization of loan origination fees | $ | 598,288 |
| | $ | 498,733 |
| | $ | 1,828,783 |
| | $ | 1,584,691 |
|
Management, valuation and other fees | 232,272 |
| | 298,033 |
| | 689,663 |
| | 716,328 |
|
Total Recurring Fee Income | 830,560 |
| | 796,766 |
| | 2,518,446 |
| | 2,301,019 |
|
Non-Recurring Fee Income: | | | | | | | |
Prepayment fees | 273,106 |
| | 374,778 |
| | 1,004,509 |
| | 1,863,135 |
|
Acceleration of unamortized loan origination fees | 1,340,781 |
| | 626,648 |
| | 2,344,435 |
| | 2,091,313 |
|
Advisory and structuring fees | 230,000 |
| | 200,000 |
| | 230,000 |
| | 200,000 |
|
Loan amendment fees | 17,278 |
| | — |
| | 132,278 |
| | 17,770 |
|
Other fees | — |
| | 16,500 |
| | 9,000 |
| | 354,699 |
|
Total Non-Recurring Fee Income | 1,861,165 |
| | 1,217,926 |
| | 3,720,222 |
| | 4,526,917 |
|
Total Fee Income | $ | 2,691,725 |
| | $ | 2,014,692 |
| | $ | 6,238,668 |
| | $ | 6,827,936 |
|
Payment-in-Kind Interest
TheAs of September 30, 2020 and December 31, 2019, the Company currently holds,held investments that contained PIK interest provisions, and expects tothe Company may hold additional investments with PIK interest provisions in the future, some loans in its portfolio that contain PIK interest provisions. Thefuture. PIK interest, computed at the contractual rate specified in each loan agreement, is periodically added to the principal balance of the loan, rather than being paid to the Company in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.
PIK interest, which is a non-cash source of income at the time of recognition, is included in the Company’s taxable income and therefore affects the amount the Company is required to distribute to its stockholders to maintain its tax treatment as a regulated investment company ("RIC")RIC for federal income tax purposes, even though the Company has not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Company writes off any accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
Fee Income
Origination, facility, commitment, consent and other advance fees received in connection with loan agreements ("Loan Origination Fees") are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of its business, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and loan waiver and amendment fees, and are recorded as investment income when earned.
Fee income for the three and nine months ended September 30, 2020 and 2019 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended | | Nine Months Ended | | Nine Months Ended |
| September 30, 2020 | | September 30, 2019 | | September 30, 2020 | | September 30, 2019 |
Recurring Fee Income: | | | | | | | |
Amortization of loan origination fees | $ | 503,114 | | | $ | 245,038 | | | $ | 1,396,253 | | | $ | 591,162 | |
Management, valuation and other fees | 174,416 | | | 80,431 | | | 504,171 | | | 211,313 | |
Total Recurring Fee Income | 677,530 | | | 325,469 | | | 1,900,424 | | | 802,475 | |
Non-Recurring Fee Income: | | | | | | | |
Prepayment fees | — | | | — | | | 84,151 | | | 59,617 | |
Acceleration of unamortized loan origination fees | 31,549 | | | 465,695 | | | 280,123 | | | 663,073 | |
Advisory, loan amendment and other fees | 60,047 | | | 57,628 | | | 115,854 | | | 144,654 | |
Total Non-Recurring Fee Income | 91,596 | | | 523,323 | | | 480,128 | | | 867,344 | |
Total Fee Income | $ | 769,126 | | | $ | 848,792 | | | $ | 2,380,552 | | | $ | 1,669,819 | |
Concentration of Credit Risk
The Company’s investments are generally in lower middle market companies in a variety of industries. As of both September 30, 20172020 and December 31, 2016,2019, there were no individual investments representing greater than 10% of the fair value of the Company’s portfolio. As of both September 30, 20172020 and December 31, 2016,2019, the Company’s largest single portfolio company investment, excluding short-term investments, represented approximately 4.7%3.1% and 2.3%, respectively, of the fair value of the Company’s portfolio.portfolio, exclusive of short-term investments. Income, consisting of interest, dividends, fees, other investment income and realization of gains or losses on equity interests, can fluctuate dramatically upon repayment of an investment or sale of an equity interest and in any given year can be highly concentrated among several portfolio companies.
The Company’s investments carry a number of risks including, but not limited to: (i) investing in lower middle market companies which may have limited financial resources and may have limited operating histories, (ii) investing in senior subordinated debt which ranks equal to or lower than debt held by other investors and (iii) holding investments that are not publicly traded and are subject to legal and other restrictions on resale and other risks common to investing in below investment grade debt and equity instruments.
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
As of September 30, 2017, $815.42020, $965.3 million of the Company's assets were or will be pledged as collateral for the February 2019 Credit Facility, and $257.3 million of the Company's assets were pledged as collateral for the Company's third amended and restated senior secured credit facility, as amended on May 1, 2017 (the “Credit Facility”), and $373.9 million were subject to superior claim over the Company's stockholders by the SBA. If the Company defaults on its obligations under the Credit Facility or its SBA-guaranteed debentures, the lenders and/or the SBA may have the right to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interests or their superior claims.
Debt Securitization.
Investments Denominated in Foreign CurrencyCurrencies
As of both September 30, 2017 and December 31, 2016,2020 the Company held investmentsone investment that was denominated in two portfolio companiesSwedish kronas, eleven investments that were denominated in Canadian dollars.Euros and five investments that were denominated in British pounds sterling. As of December 31, 2019, the Company held one investment that was denominated in Swedish kronas, five investments that were denominated in Euros and two investments that were denominated in British pounds sterling.
At each balance sheet date, portfolio company investments denominated in foreign currencies are translated into United States dollars using the spot exchange rate on the last business day of the period. Purchases and sales of foreign portfolio company investments, and any income from such investments, are translated into United States dollars using the rates of exchange prevailing on the respective dates of such transactions.
Although the fair values of foreign portfolio company investments and the fluctuation in such fair values are translated into United States dollars using the applicable foreign exchange rates described above, the Company does not isolateseparately report that portion of the change in fair values resulting from foreign currency exchange rates fluctuations from the change in fair values of the underlying investment. All fluctuations in fair value are included in net unrealized appreciation (depreciation) of investments in the Company's Unaudited Consolidated Statements of Operations.
In addition, during the nine months ended September 30, 2020, the Company entered into forward currency contracts primarily to help mitigate the impact that an adverse change in foreign exchange rates would have on net interest income from
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
the Company's investments and related borrowings denominated in foreign currencies. Net unrealized appreciation or depreciation on foreign currency contracts are included in "Net unrealized appreciation (depreciation) - foreign currency transactions" and net realized gains or losses on forward currency contracts are included in "Net realized gains (losses) - foreign currency transactions" in the Company's Unaudited Consolidated Statements of Operations.
Investments denominated in foreign currencies and foreign currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the United StatesU.S. Dollar.
3. SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES
The following schedules present information about investments in and advances to affiliates for the nine months ended September 30, 2017 and year ended December 31, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2017: | Amount of Realized Gain (Loss) | Amount of Unrealized Gain (Loss) | Amount of Interest or Dividends Credited to Income(2) | December 31, 2016 Value | Gross Additions (3) | Gross Reductions(4) | September 30, 2017 Value |
Portfolio Company | Type of Investment(1) |
Control Investments: | | | | | | | | |
CRS Reprocessing, LLC | Debtor in Possession Loan (8% PIK)(5) | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 700,000 |
| $ | — |
| $ | 700,000 |
|
Senior Notes (LIBOR + 3.5%)(5)(6) | — |
| (2,440,769 | ) | 66,184 |
| 2,942,769 |
| — |
| 2,440,769 |
| 502,000 |
|
Split Collateral Term Loans (8% Cash)(5) | — |
| (5,975,000 | ) | 513,963 |
| 6,182,000 |
| 6,350,000 |
| 5,975,000 |
| 6,557,000 |
|
Subordinated Note (5% Cash)(5) | — |
| (125,000 | ) | — |
| — |
| 125,000 |
| 125,000 |
| — |
|
Series F Preferred Units (705,321 units) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Common Units (15,174 units) | — |
| — |
| — |
| — |
| — |
| | — |
|
| — |
| (8,540,769 | ) | 580,147 |
| 9,124,769 |
| 7,175,000 |
| 8,540,769 |
| 7,759,000 |
|
| | | | | | | | |
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2017: | Amount of Realized Gain (Loss) | Amount of Unrealized Gain (Loss) | Amount of Interest or Dividends Credited to Income(2) | December 31, 2016 Value | Gross Additions (3) | Gross Reductions(4) | September 30, 2017 Value |
Portfolio Company | Type of Investment(1) |
DCWV Acquisition Corporation | Senior Subordinated Note (15% PIK) | $ | (250,000 | ) | $ | — |
| $ | — |
| $ | 250,000 |
| $ | — |
| $ | 250,000 |
| $ | — |
|
Subordinated Note (12% Cash, 3% PIK) | (7,053,633 | ) | 6,789,633 |
| — |
| 1,389,000 |
| 6,789,633 |
| 8,178,633 |
| — |
|
Jr. Subordinated Note (15% PIK) | (1,200,000 | ) | 1,200,000 |
| — |
| — |
| — |
| — |
| — |
|
Series A Preferred Equity (1,200 shares) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
100% Common Shares | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| (8,503,633 | ) | 7,989,633 |
| — |
| 1,639,000 |
| 6,789,633 |
| 8,428,633 |
| — |
|
| | | | | | | | |
DialogDirect, Inc. | Subordinated Note (8% PIK)(5) | — |
| (3,183,000 | ) | — |
| — |
| 13,380,000 |
| 3,183,000 |
| 10,197,000 |
|
Class A Common Units (1,176,500 units) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| — |
| (3,183,000 | ) | — |
| — |
| 13,380,000 |
| 3,183,000 |
| 10,197,000 |
|
| | | | | | | | |
Frank Entertainment Group, LLC(7) | Senior Note (6% Cash, Due 06/19)(5) | — |
| (3,279,470 | ) | — |
| — |
| 9,448,470 |
| 3,279,470 |
| 6,169,000 |
|
Second Lien Term Note (2.5% Cash)(5) | — |
| (1,876,693 | ) | — |
| — |
| 1,876,693 |
| 1,876,693 |
| — |
|
Redeemable Preferred Units (2,800,000 units) | — |
| (1,074,000 | ) | — |
| — |
| 1,074,000 |
| 1,074,000 |
| — |
|
Redeemable Class B Preferred Units (2,800,000 units) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Class A Common Units (606,552 units) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| — |
| (6,230,163 | ) | — |
| — |
| 12,399,163 |
| 6,230,163 |
| 6,169,000 |
|
| | | | | | | | |
Frontstreet Facility Solutions, Inc. | Subordinated Note (13% Cash) | — |
| (507,292 | ) | 288,439 |
| — |
| 4,757,292 |
| 507,292 |
| 4,250,000 |
|
Series A Convertible Preferred Stock (60,000 shares) | — |
| (575 | ) | — |
| — |
| 575 |
| 575 |
| — |
|
Series B Convertible Preferred Stock (20,000 shares) | — |
| (144 | ) | — |
| — |
| 144 |
| 144 |
| — |
|
Common Stock (27,890 shares) | — |
| (279 | ) | — |
| — |
| 279 |
| 279 |
| — |
|
| — |
| (508,290 | ) | 288,439 |
| — |
| 4,758,290 |
| 508,290 |
| 4,250,000 |
|
| | | | | | | | |
Gerli & Company | Subordinated Note (13% Cash) | (375,000 | ) | 375,000 |
| — |
| — |
| 375,000 |
| 375,000 |
| — |
|
Subordinated Note (8.5% Cash) | (3,000,000 | ) | 3,000,000 |
| — |
| — |
| 3,000,000 |
| 3,000,000 |
| — |
|
Class A Preferred Shares (1,211 shares) | (855,000 | ) | 855,000 |
| — |
| — |
| 855,000 |
| 855,000 |
| — |
|
Class C Preferred Shares (744 shares) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Class E Preferred Shares (400 shares) | (161,440 | ) | 161,440 |
| — |
| — |
| 161,440 |
| 161,440 |
| — |
|
Common Stock (300 shares) | (100,000 | ) | 100,000 |
| — |
| — |
| 100,000 |
| 100,000 |
| — |
|
| (4,491,440 | ) | 4,491,440 |
| — |
| — |
| 4,491,440 |
| 4,491,440 |
| — |
|
| | | | | | | | |
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2017: | Amount of Realized Gain (Loss) | Amount of Unrealized Gain (Loss) | Amount of Interest or Dividends Credited to Income(2) | December 31, 2016 Value | Gross Additions (3) | Gross Reductions(4) | September 30, 2017 Value |
Portfolio Company | Type of Investment(1) |
SRC Worldwide, Inc. | Common Stock (5,000 shares) | $ | — |
| $ | — |
| $ | 300,000 |
| $ | 8,028,000 |
| $ | — |
| $ | — |
| $ | 8,028,000 |
|
| — |
| — |
| 300,000 |
| 8,028,000 |
| — |
| — |
| 8,028,000 |
|
| | | | | | | | |
Total Control Investments | (12,995,073 | ) | (5,981,149 | ) | 1,168,586 |
| 18,791,769 |
| 48,993,526 |
| 31,382,295 |
| 36,403,000 |
|
| | | | | | | | |
Affiliate Investments: | | | | | | | | |
All Metals Holding, LLC | Subordinated Note (12% Cash, 1% PIK) | — |
| — |
| 657,541 |
| 6,249,220 |
| 70,128 |
| — |
| 6,319,348 |
|
Units (318,977 units) | — |
| 36,000 |
| — |
| 754,000 |
| 36,000 |
| — |
| 790,000 |
|
| — |
| 36,000 |
| 657,541 |
| 7,003,220 |
| 106,128 |
| — |
| 7,109,348 |
|
| | | | | | | | |
CIS Secure Computing Inc. | Subordinated Note (12% Cash, 3% PIK) | — |
| — |
| 1,154,260 |
| 11,670,708 |
| 207,319 |
| 11,878,027 |
| — |
|
Common Stock (84 shares) | 1,672,321 |
| (1,652,680 | ) | — |
| 2,155,000 |
| 1,672,322 |
| 3,827,322 |
| — |
|
| 1,672,321 |
| (1,652,680 | ) | 1,154,260 |
| 13,825,708 |
| 1,879,641 |
| 15,705,349 |
| — |
|
| | | | | | | | |
Consolidated Lumber Holdings, LLC | Subordinated Note (10% Cash, 2% PIK) | — |
| (156,611 | ) | 194,082 |
| 4,278,000 |
| 78,750 |
| 4,356,750 |
| — |
|
Class A Units (15,000 units) | — |
| 491,000 |
| 196,262 |
| 2,481,000 |
| 491,000 |
| — |
| 2,972,000 |
|
| — |
| 334,389 |
| 390,344 |
| 6,759,000 |
| 569,750 |
| 4,356,750 |
| 2,972,000 |
|
| | | | | | | | |
DPII Holdings, LLC | Tranche III Subordinated Note (19% PIK)(5) | — |
| 2,148,000 |
| — |
| — |
| 2,148,000 |
| — |
| 2,148,000 |
|
Tranche I & II Subordinated Notes (12% Cash, 4% PIK)(5) | — |
| (1,508,603 | ) | — |
| 2,356,001 |
| — |
| 1,854,001 |
| 502,000 |
|
Class A Membership Interest (17,308 units) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| — |
| 639,397 |
| — |
| 2,356,001 |
| 2,148,000 |
| 1,854,001 |
| 2,650,000 |
|
| | | | | | | | |
FCL Holding SPV, LLC | Class A Interest (24,873 units) | — |
| (43,000 | ) | 45,452 |
| 645,000 |
| — |
| 43,000 |
| 602,000 |
|
Class B Interest (48,427 units) | — |
| (101,000 | ) | — |
| 101,000 |
| — |
| 101,000 |
| — |
|
Class B Interest (3,746 units) | — |
| | — |
| — |
| — |
| — |
| — |
|
| — |
| (144,000 | ) | 45,452 |
| 746,000 |
| — |
| 144,000 |
| 602,000 |
|
| | | | | | | | |
Frank Entertainment Group, LLC(7) | Senior Note (LIBOR + 7%, 10% Cash, 5.8% PIK)(6) | — |
| (1,077,888 | ) | 823,087 |
| 9,940,684 |
| 351,600 |
| 10,292,284 |
| — |
|
Second Lien Term Note (10% Cash) | — |
| (174,000 | ) | 15,000 |
| — |
| 1,200,000 |
| 1,200,000 |
| — |
|
Class A Redeemable Preferred Units (10.5% Cash) (196,718 units) | — |
| (3,492,904 | ) | — |
| 4,566,904 |
| — |
| 4,566,904 |
| — |
|
Class B Redeemable Preferred Units (18,667 units) | — |
| (1,660,810 | ) | — |
| 1,660,810 |
| — |
| 1,660,810 |
| — |
|
Class C Redeemable Preferred Units (25,846 units) | — |
| (600,000 | ) | — |
| 600,000 |
| — |
| 600,000 |
| — |
|
Class A Common Units (43,077 units) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Class A Common Warrants | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| — |
| (7,005,602 | ) | 838,087 |
| 16,768,398 |
| 1,551,600 |
| 18,319,998 |
| — |
|
| | | | | | | | |
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2017: | Amount of Realized Gain (Loss) | Amount of Unrealized Gain (Loss) | Amount of Interest or Dividends Credited to Income(2) | December 31, 2016 Value | Gross Additions (3) | Gross Reductions(4) | September 30, 2017 Value |
Portfolio Company | Type of Investment(1) |
Mac Land Holdings, Inc. | Common Stock (139 shares) | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 369,000 |
| $ | — |
| $ | 369,000 |
|
| — |
| — |
| — |
| — |
| 369,000 |
| — |
| 369,000 |
|
| | | | | | | | |
MS Bakery Holdings, Inc. | Preferred Units (233 units) | 185,133 |
| (185,133 | ) | — |
| 397,000 |
| 185,133 |
| 582,133 |
| — |
|
Common B Units (3,000 units) | 2,087,323 |
| (2,086,860 | ) | — |
| 2,110,000 |
| 2,087,323 |
| 4,197,323 |
| — |
|
Common A Units (1,652 units) | 1,147,007 |
| (1,147,007 | ) | — |
| 1,162,000 |
| 1,147,007 |
| 2,309,007 |
| — |
|
| 3,419,463 |
| (3,419,000 | ) | — |
| 3,669,000 |
| 3,419,463 |
| 7,088,463 |
| — |
|
| | | | | | | | |
Native Maine Operations, Inc. | Senior Notes (LIBOR + 9%)(6) | — |
| — |
| 1,476,540 |
| — |
| 18,000,000 |
| 18,000,000 |
| — |
|
Preferred Units (20,000 units) | — |
| — |
| — |
| — |
| 2,000,000 |
| 2,000,000 |
| — |
|
| — |
| — |
| 1,476,540 |
| — |
| 20,000,000 |
| 20,000,000 |
| — |
|
| | | | | | | | |
NB Products, Inc. | Subordinated Note (12% Cash, 2% PIK) | — |
| — |
| 2,643,824 |
| 22,751,190 |
| 415,734 |
| — |
| 23,166,924 |
|
Jr. Subordinated Note (10% PIK) | — |
| — |
| 376,848 |
| 4,595,921 |
| 384,162 |
| — |
| 4,980,083 |
|
Jr. Subordinated Bridge Note (20% PIK) | — |
| — |
| 321,567 |
| 1,972,727 |
| 321,567 |
| — |
| 2,294,294 |
|
Series A Redeemable Senior Preferred Stock (7,839 shares) | — |
| 722,000 |
| — |
| 9,412,000 |
| 722,000 |
| — |
| 10,134,000 |
|
Common Stock (1,668,691 shares) | — |
| 1,354,000 |
| — |
| 9,779,000 |
| 1,354,000 |
| — |
| 11,133,000 |
|
| — |
| 2,076,000 |
| 3,342,239 |
| 48,510,838 |
| 3,197,463 |
| — |
| 51,708,301 |
|
| | | | | | | | |
Passport Food Group, LLC | Senior Notes (LIBOR + 9.0%, 10.3% Cash, Due 03/22)(6) | — |
| (1,947,708 | ) | 1,076,866 |
| — |
| 19,631,708 |
| 1,947,708 |
| 17,684,000 |
|
Common Stock (20,000 shares) | — |
| (1,217,000 | ) | — |
| — |
| 2,000,000 |
| 1,217,000 |
| 783,000 |
|
| — |
| (3,164,708 | ) | 1,076,866 |
| — |
| 21,631,708 |
| 3,164,708 |
| 18,467,000 |
|
| | | | | | | | |
PCX Aerostructures, LLC | Subordinated Note (10.5% Cash) | — |
| 768,098 |
| 2,460,740 |
| 21,960,000 |
| 2,839,000 |
| — |
| 24,799,000 |
|
Series A Preferred Stock (6,066 shares) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Series B Preferred Stock (411 shares) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Class A Common Stock (121,922 shares) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| — |
| 768,098 |
| 2,460,740 |
| 21,960,000 |
| 2,839,000 |
| — |
| 24,799,000 |
|
| | | | | | | | |
Team Waste, LLC | Subordinated Note (10% Cash, 2% PIK) | — |
| — |
| 40,000 |
| — |
| 3,916,667 |
| — |
| 3,916,667 |
|
Preferred Units (500,000 units) | — |
| — |
| 9,000 |
| 9,100,000 |
| 900,000 |
| — |
| 10,000,000 |
|
| — |
| — |
| 49,000 |
| 9,100,000 |
| 4,816,667 |
| — |
| 13,916,667 |
|
| | | | | | | | |
Technology Crops, LLC | Subordinated Notes (12% Cash, 5% PIK) | — |
| (2,843,102 | ) | 1,552,035 |
| 11,837,622 |
| 456,480 |
| 2,843,102 |
| 9,451,000 |
|
Common Units (50 units) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| — |
| (2,843,102 | ) | 1,552,035 |
| 11,837,622 |
| 456,480 |
| 2,843,102 |
| 9,451,000 |
|
| | | | | | | | |
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2017: | Amount of Realized Gain (Loss) | Amount of Unrealized Gain (Loss) | Amount of Interest or Dividends Credited to Income(2) | December 31, 2016 Value | Gross Additions (3) | Gross Reductions(4) | September 30, 2017 Value |
Portfolio Company | Type of Investment(1) |
TGaS Advisors, LLC | Senior Note (10% Cash, 1% PIK) | $ | — |
| $ | — |
| $ | 849,227 |
| $ | 9,521,986 |
| $ | 117,880 |
| $ | 186,729 |
| $ | 9,453,137 |
|
Preferred Units (1,685,357 units) | — |
| 66,000 |
| — |
| 1,270,000 |
| 66,000 |
| — |
| 1,336,000 |
|
| — |
| 66,000 |
| 849,227 |
| 10,791,986 |
| 183,880 |
| 186,729 |
| 10,789,137 |
|
| | | | | | | | |
Tulcan Fund IV, L.P. | Common Units (1,000,000 units) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| | | | | | | | |
United Retirement Plan Consultants, Inc. | Series A Preferred Shares (9,400 shares) | — |
| 29,000 |
| — |
| 257,000 |
| 29,000 |
| — |
| 286,000 |
|
Common Shares (100,000 shares) | — |
| 47,000 |
| — |
| 301,000 |
| 47,000 |
| — |
| 348,000 |
|
| — |
| 76,000 |
| — |
| 558,000 |
| 76,000 |
| — |
| 634,000 |
|
| | | | | | | | |
Waste Recyclers Holdings, LLC | Class A Preferred Units (280 units) | (2,251,100 | ) | 2,251,100 |
| — |
| — |
| 2,251,100 |
| 2,251,100 |
| — |
|
Class B Preferred Units (11,484,867 units) | (2,935,218 | ) | 2,487,218 |
| — |
| 817,000 |
| 2,487,218 |
| 3,304,218 |
| — |
|
Common Unit Purchase Warrant (1,170,083 units) | (748,900 | ) | 748,900 |
| — |
| — |
| 748,900 |
| 748,900 |
| — |
|
Common Units (153,219 units) | (180,783 | ) | 180,783 |
| — |
| — |
| 180,783 |
| 180,783 |
| — |
|
| (6,116,001 | ) | 5,668,001 |
| — |
| 817,000 |
| 5,668,001 |
| 6,485,001 |
| — |
|
| | | | | | | | |
Wythe Will Tzetzo, LLC | Series A Preferred Units (99,829 units) | — |
| (3,668,000 | ) | — |
| 6,808,000 |
| — |
| 3,668,000 |
| 3,140,000 |
|
| — |
| (3,668,000 | ) | — |
| 6,808,000 |
| — |
| 3,668,000 |
| 3,140,000 |
|
| | | | | | | | |
Investments not held at the end of the period | | 24,881 |
| — |
| — |
| — |
| 24,881 |
| 24,881 |
| — |
|
Deferred taxes | | — |
| 582,190 |
| — |
| — |
| — |
| — |
| — |
|
| | | | | | | | |
Total Affiliate Investments | $ | (999,336 | ) | $ | (11,651,017 | ) | $ | 13,892,331 |
| $ | 161,510,773 |
| $ | 68,937,662 |
| $ | 83,840,982 |
| $ | 146,607,453 |
|
| |
(1) | All debt investments are income producing, unless otherwise noted. Equity and equity-linked investments are non-income producing, unless otherwise noted. The fair values of all investments were determined using significant unobservable inputs. |
| |
(2) | Represents the total amount of interest, fees or dividends credited to income for the portion of the year an investment was included in Control or Affiliate categories, respectively. Amounts include accrued PIK interest if the description of the security includes disclosure of a PIK interest rate. |
| |
(3) | Gross additions include increase in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation. |
| |
(4) | Gross reductions include decreases in the total cost basis of investments resulting from principal or PIK repayments or sales. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation. |
| |
(5) | Non-accrual investment |
| |
(6) | Index-based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. |
| |
(7) | During the quarter ended September 30, 2017, as a result of a balance sheet restructuring, Frank Entertainment Group, LLC moved from an affiliate investment to a control investment. |
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | |
Year Ended December 31, 2016: | Amount of Realized Gain (Loss) | Amount of Unrealized Gain (Loss) | Amount of Interest or Dividends Credited to Income(2) | December 31, 2015 Value | Gross Additions (3) | Gross Reductions(4) | December 31, 2016 Value |
Portfolio Company | Type of Investment(1) |
Control Investments: | | | | | | | | |
CRS Reprocessing, LLC | Senior Notes (LIBOR + 3.5%, 4.3% Cash)(6) | $ | — |
| $ | — |
| $ | 120,067 |
| $ | 2,942,769 |
| $ | — |
| $ | — |
| $ | 2,942,769 |
|
Split Collateral Term Loans (8% Cash) | — |
| (5,010,464 | ) | 897,649 |
| 6,192,464 |
| 5,000,000 |
| 5,010,464 |
| 6,182,000 |
|
Series F Preferred Units (705,321 units) | — |
| (5,221,000 | ) | — |
| 5,221,000 |
| — |
| 5,221,000 |
| — |
|
Common Units (15,174 units) | — |
| — |
| 333 |
| — |
| — |
| | — |
|
| — |
| (10,231,464 | ) | 1,018,049 |
| 14,356,233 |
| 5,000,000 |
| 10,231,464 |
| 9,124,769 |
|
| | | | | | | | |
DCWV Acquisition Corporation | Senior Subordinated Note (15% PIK)(5) | — |
| — |
| — |
| 250,000 |
| — |
| — |
| 250,000 |
|
Subordinated Note (12% Cash, 3% PIK)(5) | — |
| (1,728,000 | ) | — |
| 3,117,000 |
| — |
| 1,728,000 |
| 1,389,000 |
|
Jr. Subordinated Note (15% PIK)(5) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Series A Preferred Equity (1,200 shares) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
100% Common Shares | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| — |
| (1,728,000 | ) | — |
| 3,367,000 |
| — |
| 1,728,000 |
| 1,639,000 |
|
| | | | | | | | |
Gerli & Company | Subordinated Note (13% Cash)(5) | — |
| (375,000 | ) | — |
| 375,000 |
| — |
| 375,000 |
| — |
|
Subordinated Note (8.5% Cash)(5) | — |
| (437,000 | ) | — |
| 437,000 |
| — |
| 437,000 |
| — |
|
Class A Preferred Shares (1,211 shares) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Class C Preferred Shares (744 shares) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Class E Preferred Shares (400 shares) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Common Stock (300 shares) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| — |
| (812,000 | ) | — |
| 812,000 |
| — |
| 812,000 |
| — |
|
| | | | | | | | |
SRC Worldwide, Inc. | Common Stock (5,000 shares) | — |
| 1,307,000 |
| 700,000 |
| 6,921,000 |
| 1,307,000 |
| 200,000 |
| 8,028,000 |
|
| — |
| 1,307,000 |
| 700,000 |
| 6,921,000 |
| 1,307,000 |
| 200,000 |
| 8,028,000 |
|
| | | | | | | | |
Total Control Investments | — |
| (11,464,464 | ) | 1,718,049 |
| 25,456,233 |
| 6,307,000 |
| 12,971,464 |
| 18,791,769 |
|
| | | | | | | | |
Affiliate Investments: | | | | | | | | |
All Aboard America! Holdings Inc. | Subordinated Note (12% Cash, 3% PIK) | — |
| — |
| 2,440,362 |
| 14,953,191 |
| 577,433 |
| 15,530,624 |
| — |
|
Membership Units in LLC | 3,118,958 |
| (2,723,218 | ) | — |
| 5,024,000 |
| 3,118,958 |
| 8,142,958 |
| — |
|
| 3,118,958 |
| (2,723,218 | ) | 2,440,362 |
| 19,977,191 |
| 3,696,391 |
| 23,673,582 |
| — |
|
| | | | | | | | |
All Metals Holding, LLC | Subordinated Note (12% Cash, 1% PIK) | — |
| — |
| — |
| — |
| 6,249,220 |
| — |
| 6,249,220 |
|
Units (318,977 units) | — |
| (55,331 | ) | — |
| — |
| 809,331 |
| 55,331 |
| 754,000 |
|
| — |
| (55,331 | ) | — |
| — |
| 7,058,551 |
| 55,331 |
| 7,003,220 |
|
| | | | | | | | |
American De-Rosa Lamparts, LLC and Hallmark Lighting, LLC | Subordinated Note (12% Cash, 3% PIK) | — |
| — |
| 663,502 |
| 7,186,235 |
| 227,130 |
| 7,413,365 |
| — |
|
Membership Units (8,364 units) | 3,555,652 |
| (3,251,347 | ) | 102,800 |
| 3,872,000 |
| 3,555,652 |
| 7,427,652 |
| — |
|
| 3,555,652 |
| (3,251,347 | ) | 766,302 |
| 11,058,235 |
| 3,782,782 |
| 14,841,017 |
| — |
|
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | |
Year Ended December 31, 2016: | Amount of Realized Gain (Loss) | Amount of Unrealized Gain (Loss) | Amount of Interest or Dividends Credited to Income(2) | December 31, 2015 Value | Gross Additions (3) | Gross Reductions(4) | December 31, 2016 Value |
Portfolio Company | Type of Investment(1) |
| | | | | | | | |
CIS Secure Computing Inc. | Subordinated Note (12% Cash, 3% PIK) | $ | — |
| $ | — |
| $ | 1,757,750 |
| $ | 11,323,440 |
| $ | 347,268 |
| $ | — |
| $ | 11,670,708 |
|
Common Stock (84 shares) | — |
| 1,956,000 |
| — |
| 199,000 |
| 1,956,000 |
| — |
| 2,155,000 |
|
| — |
| 1,956,000 |
| 1,757,750 |
| 11,522,440 |
| 2,303,268 |
| — |
| 13,825,708 |
|
| | | | | | | | |
Consolidated Lumber Company LLC | Subordinated Note (10% Cash, 2% PIK) | — |
| 156,611 |
| 1,480,383 |
| 14,332,445 |
| 564,627 |
| 10,619,072 |
| 4,278,000 |
|
Class A Units (15,000 units) | — |
| 981,000 |
| 451,128 |
| 1,500,000 |
| 981,000 |
| — |
| 2,481,000 |
|
| — |
| 1,137,611 |
| 1,931,511 |
| 15,832,445 |
| 1,545,627 |
| 10,619,072 |
| 6,759,000 |
|
| | | | | | | | |
DPII Holdings, LLC | Tranche I & II Subordinated Notes (12% Cash, 4% PIK)(5) | — |
| (871,000 | ) | 115,147 |
| 3,558,804 |
| 5,708 |
| 1,208,511 |
| 2,356,001 |
|
Tranche III Subordinated Note (19% PIK)(5) | — |
| (2,148,462 | ) | — |
| — |
| 2,148,462 |
| 2,148,462 |
| — |
|
Class A Membership Interest (17,308 units) | — |
| (795,000 | ) | — |
| 795,000 |
| — |
| 795,000 |
| — |
|
| — |
| (3,814,462 | ) | 115,147 |
| 4,353,804 |
| 2,154,170 |
| 4,151,973 |
| 2,356,001 |
|
| | | | | | | | |
FCL Holding SPV, LLC | Class A Interest (24,873 units) | — |
| 195,000 |
| — |
| — |
| 645,000 |
| — |
| 645,000 |
|
Class B Interest (48,427 units) | — |
| 101,000 |
| — |
| — |
| 101,000 |
| — |
| 101,000 |
|
Class B Interest (3,746 units) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| — |
| 296,000 |
| — |
| — |
| 746,000 |
| — |
| 746,000 |
|
| | | | | | | | |
Frank Entertainment Group, LLC | Senior Note (LIBOR +7%, 10% Cash, 5.8% PIK)(6) | — |
| — |
| 1,599,606 |
| 9,592,545 |
| 605,281 |
| 257,142 |
| 9,940,684 |
|
Class A Redeemable Preferred Units (10.5% Cash) (196,718 units) | — |
| — |
| 324,995 |
| 4,566,904 |
| — |
| — |
| 4,566,904 |
|
Class B Redeemable Preferred Units (18,667 units) | — |
| — |
| — |
| 1,660,810 |
| — |
| — |
| 1,660,810 |
|
Class C Redeemable Preferred Units (25,846 units) | — |
| — |
| — |
| 600,000 |
| — |
| — |
| 600,000 |
|
Class A Common Units (43,077 units) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Class A Common Warrants | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| — |
| — |
| 1,924,601 |
| 16,420,259 |
| 605,281 |
| 257,142 |
| 16,768,398 |
|
| | | | | | | | |
GenPref LLC | 7.0% LLC Interest | 30,823 |
| 6,762 |
| — |
| 16,400 |
| 37,585 |
| 53,985 |
| — |
|
| 30,823 |
| 6,762 |
| — |
| 16,400 |
| 37,585 |
| 53,985 |
| — |
|
| | | | | | | | |
MS Bakery Holdings, Inc. | Preferred Units (233 units) | — |
| 30,000 |
| — |
| 367,000 |
| 30,000 |
| — |
| 397,000 |
|
Common B Units (3,000 units) | — |
| 303,000 |
| — |
| 1,807,000 |
| 303,000 |
| — |
| 2,110,000 |
|
Common A Units (1,652 units) | — |
| 167,000 |
| — |
| 995,000 |
| 167,000 |
| — |
| 1,162,000 |
|
| — |
| 500,000 |
| — |
| 3,169,000 |
| 500,000 |
| — |
| 3,669,000 |
|
| | | | | | | | |
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | |
Year Ended December 31, 2016: | Amount of Realized Gain (Loss) | Amount of Unrealized Gain (Loss) | Amount of Interest or Dividends Credited to Income(2) | December 31, 2015 Value | Gross Additions (3) | Gross Reductions(4) | December 31, 2016 Value |
Portfolio Company | Type of Investment(1) |
NB Products, Inc. | Subordinated Note (12% Cash, 2% PIK) | $ | — |
| $ | — |
| $ | 3,368,353 |
| $ | 20,327,140 |
| $ | 2,424,050 |
| $ | — |
| $ | 22,751,190 |
|
Jr. Subordinated Note (10% PIK) | — |
| — |
| 462,929 |
| 4,126,030 |
| 469,891 |
| — |
| 4,595,921 |
|
Jr. Subordinated Bridge Note (20% PIK) | — |
| — |
| 244,654 |
| — |
| 1,972,727 |
| — |
| 1,972,727 |
|
Series A Redeemable Senior Preferred Stock (7,839 shares) | — |
| 887,000 |
| — |
| 8,525,000 |
| 887,000 |
| — |
| 9,412,000 |
|
Common Stock (1,668,691 shares) | — |
| 5,782,000 |
| — |
| 3,997,000 |
| 5,782,000 |
| — |
| 9,779,000 |
|
| — |
| 6,669,000 |
| 4,075,936 |
| 36,975,170 |
| 11,535,668 |
| — |
| 48,510,838 |
|
| | | | | | | | |
PCX Aerostructures, LLC | Subordinated Note (10.5% Cash) | — |
| (6,001,060 | ) | 3,339,521 |
| 18,612,000 |
| 9,409,060 |
| 6,061,060 |
| 21,960,000 |
|
Series A Preferred Stock (6,066 shares) | — |
| (1,912,668 | ) | — |
| 1,191,000 |
| 721,668 |
| 1,912,668 |
| — |
|
Series B Preferred Stock (411 shares) | — |
| (410,514 | ) | — |
| — |
| 410,514 |
| 410,514 |
| — |
|
Class A Common Stock (121,922 shares) | — |
| (3,626 | ) | — |
| — |
| 3,626 |
| 3,626 |
| — |
|
| — |
| (8,327,868 | ) | 3,339,521 |
| 19,803,000 |
| 10,544,868 |
| 8,387,868 |
| 21,960,000 |
|
| | | | | | | | |
Team Waste, LLC | Preferred Units (455,000 units) | — |
| — |
| 36,000 |
| 5,500,000 |
| 3,600,000 |
| — |
| 9,100,000 |
|
| — |
| — |
| 36,000 |
| 5,500,000 |
| 3,600,000 |
| — |
| 9,100,000 |
|
| | | | | | | | |
Technology Crops, LLC | Subordinated Notes (12% Cash, 5% PIK) | — |
| — |
| 1,944,252 |
| 11,252,123 |
| 585,499 |
| — |
| 11,837,622 |
|
Common Units (50 units) | — |
| (400,000 | ) | — |
| 400,000 |
| — |
| 400,000 |
| — |
|
| — |
| (400,000 | ) | 1,944,252 |
| 11,652,123 |
| 585,499 |
| 400,000 |
| 11,837,622 |
|
| | | | | | | | |
TGaS Advisors, LLC | Senior Note (10% Cash, 1% PIK) | — |
| — |
| 1,180,938 |
| 9,633,898 |
| 177,061 |
| 288,973 |
| 9,521,986 |
|
Preferred Units (1,685,357 units) | — |
| (27,712 | ) | 33,000 |
| 1,427,000 |
| — |
| 157,000 |
| 1,270,000 |
|
| — |
| (27,712 | ) | 1,213,938 |
| 11,060,898 |
| 177,061 |
| 445,973 |
| 10,791,986 |
|
| | | | | | | | |
Tulcan Fund IV, L.P. | Common Units (1,000,000 units) | — |
| (416,000 | ) | — |
| 416,000 |
| — |
| 416,000 |
| — |
|
| — |
| (416,000 | ) | — |
| 416,000 |
| — |
| 416,000 |
| — |
|
| | | | | | | | |
UCS Super HoldCo LLC | Membership Units (1,000 units) | (2,000,000 | ) | 2,000,000 |
| — |
| — |
| 2,000,000 |
| 2,000,000 |
| — |
|
Participation Interest | (626,437 | ) | 700,000 |
| — |
| 300,000 |
| 700,000 |
| 1,000,000 |
| — |
|
| (2,626,437 | ) | 2,700,000 |
| — |
| 300,000 |
| 2,700,000 |
| 3,000,000 |
| — |
|
| | | | | | | | |
United Retirement Plan Consultants, Inc. | Series A Preferred Shares (9,400 shares) | — |
| 505,252 |
| — |
| 446,000 |
| 265,000 |
| 454,000 |
| 257,000 |
|
Common Shares (100,000 shares) | — |
| (599,000 | ) | — |
| — |
| 611,000 |
| 310,000 |
| 301,000 |
|
| — |
| (93,748 | ) | — |
| 446,000 |
| 876,000 |
| 764,000 |
| 558,000 |
|
| | | | | | | | |
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | |
Year Ended December 31, 2016: | Amount of Realized Gain (Loss) | Amount of Unrealized Gain (Loss) | Amount of Interest or Dividends Credited to Income(2) | December 31, 2015 Value | Gross Additions (3) | Gross Reductions(4) | December 31, 2016 Value |
Portfolio Company | Type of Investment(1) |
Waste Recyclers Holdings, LLC | Class A Preferred Units (280 units) | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Class B Preferred Units (11,484,867 units) | — |
| 74,000 |
| — |
| 743,000 |
| 74,000 |
| — |
| 817,000 |
|
Common Unit Purchase Warrant (1,170,083 units) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Common Units (153,219 units) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| — |
| 74,000 |
| — |
| 743,000 |
| 74,000 |
| — |
| 817,000 |
|
| | | | | | | | |
Wythe Will Tzetzo, LLC | Series A Preferred Units (99,829 units) | — |
| (1,528,000 | ) | 195,997 |
| 8,336,000 |
| — |
| 1,528,000 |
| 6,808,000 |
|
| — |
| (1,528,000 | ) | 195,997 |
| 8,336,000 |
| — |
| 1,528,000 |
| 6,808,000 |
|
| | | | | | | | |
Investments not held at the end of the period | | 319,802 |
| — |
| — |
| — |
| 319,802 |
| 319,802 |
| — |
|
Deferred taxes | | — |
| 1,825,301 |
| — |
| — |
| — |
| — |
| — |
|
| | | | | | | | |
Total Affiliate Investments | $ | 4,398,798 |
| $ | (5,473,012 | ) | $ | 19,741,317 |
| $ | 177,581,965 |
| $ | 52,842,553 |
| $ | 68,913,745 |
| $ | 161,510,773 |
|
| |
(1) | All debt investments are income producing, unless otherwise noted. Equity and equity-linked investments are non-income producing, unless otherwise noted. The fair values of all investments were determined using significant unobservable inputs. |
| |
(2) | Represents the total amount of interest, fees or dividends credited to income for the portion of the year an investment was included in Control or Affiliate categories, respectively. Amounts include accrued PIK interest if the description of the security includes disclosure of a PIK interest rate. |
| |
(3) | Gross additions include increase in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation. |
| |
(4) | Gross reductions include decreases in the total cost basis of investments resulting from principal or PIK repayments or sales. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation. |
| |
(5) | Non-accrual investment |
| |
(6) | Index-based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. |
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
4. INCOME TAXES
The Company has elected for federal income tax purposes to be treated as a RIC under the Internal Revenue Code of 1986, as amended (the "Code"), and intends to make the required distributions to its stockholders as specified therein. In order to maintain its tax treatment as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay taxes only on the portion of its taxable income and gains it does not distribute (actually or constructively) and certain built-in gains. The Company has historically met its minimum distribution requirements and continually monitors its distribution requirements with the goal of ensuring compliance with the Code.
The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”("ICTI"), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% U.S. federal excise tax on such excess. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. The Company may be required to recognize ICTI in certain circumstances in which it does not receive cash. For example, if the Company holds debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), the Company must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by the Company in the same taxable year. The Company may also have to include in ICTI other amounts that it has not yet received in cash, such as (i) PIK interest income and (ii) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included in the Company’s ICTI for the year of accrual, the Company may be required to make a distribution to its stockholders in order to satisfy the minimum distribution requirements, even though the Company will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
TheIn addition, the Company has certaina wholly-owned taxable subsidiariessubsidiary (the “Taxable Subsidiaries”Subsidiary”), each of which holds one or more of itscertain portfolio investments that are listed on the Unaudited and Audited Consolidated ScheduleSchedules of Investments. The Taxable Subsidiaries areSubsidiary is consolidated for financial reporting purposes, such that the Company’s consolidated financial statements reflect the Company’s investments in the portfolio companies owned by the Taxable Subsidiaries.Subsidiary. The purpose of the Taxable SubsidiariesSubsidiary is to permit the Company to hold certain portfolio companies that are organized as limited liability companies (“LLCs”)LLCs (or other forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of the RIC’s gross revenue for income tax purposes must consist of qualifying investment income. Absent the Taxable Subsidiaries,Subsidiary, a proportionate amount of any gross income of an LLC (or other pass-through entity) portfolio investment would flow through directly to the RIC. To the extent that such income did not consist of qualifying investment income, it could jeopardize the Company’s ability to qualify as a RIC and therefore cause the Company to incur significant amounts of federal income taxes. When LLCs (or other pass-through entities) are owned by the Taxable Subsidiaries,Subsidiary, their income is taxed to the Taxable SubsidiariesSubsidiary and does not flow through to the RIC, thereby helping the Company preserve its RIC statustax treatment and resultant tax advantages. The Taxable Subsidiaries areSubsidiary is not consolidated for income tax purposes and may generate income tax expense or benefit as a result of their ownership of the portfolio companies. This income tax expense or benefit is reflected in the Company’s Unaudited Consolidated Statements of Operations. Additionally, any unrealized appreciation related to portfolio investments held by the Taxable SubsidiariesSubsidiary (net of unrealized depreciation related to portfolio investments held by the Taxable Subsidiaries)Subsidiary) is reflected net of applicable federal and state income taxes in the Company's Unaudited Consolidated Statements of Operations, with the related deferred tax assets or liabilities presentedincluded in "Accounts payable and accrued liabilities" in the Company's Unaudited and Audited Consolidated Balance Sheet.Sheets.
For federal income tax purposes, the cost of investments owned as of September 30, 20172020 and December 31, 20162019 was approximately $1.2 billion$1,132.2 million and $1.1 billion,$1,192.7 million, respectively. As of September 30, 2020, net unrealized depreciation on
TRIANGLE CAPITAL CORPORATIONBarings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
the Company's investments (tax basis) was approximately $18.7 million, consisting of gross unrealized appreciation, where the fair value of the Company's investments exceeds their tax cost, of approximately $9.7 million and gross unrealized depreciation, where the tax cost of the Company's investments exceeds their fair value, of approximately $28.4 million. As of December 31, 2019, net unrealized depreciation on the Company's investments (tax basis) was approximately $20.1 million, consisting of gross unrealized appreciation, where the fair value of the Company's investments exceeds their tax cost, of approximately $2.5 million and gross unrealized depreciation, where the tax cost of the Company's investments exceeds their fair value, of approximately $22.6 million.
5. BORROWINGS
The Company had the following borrowings outstanding as of September 30, 2017 and December 31, 2016:
|
| | | | | | | | | | | |
Issuance/Pooling Date | Maturity Date | | Interest Rate as of September 30, 2017 | | September 30, 2017 | | December 31, 2016 |
SBA-Guaranteed Debentures: | | | | | | | |
March 25, 2009 | March 1, 2019 | | 5.337% | | $ | 22,000,000 |
| | $ | 22,000,000 |
|
March 24, 2010 | March 1, 2020 | | 4.825% | | 6,800,000 |
| | 6,800,000 |
|
September 22, 2010 | September 1, 2020 | | 3.687% | | 32,590,000 |
| | 32,590,000 |
|
March 29, 2011 | March 1, 2021 | | 4.474% | | 75,400,000 |
| | 75,400,000 |
|
September 21, 2011 | September 1, 2021 | | 3.392% | | 19,100,000 |
| | 19,100,000 |
|
March 27, 2013 | March 1, 2023 | | 3.155% | | 30,000,000 |
| | 30,000,000 |
|
September 24, 2014 | September 1, 2024 | | 3.790% | | 31,310,000 |
| | 31,310,000 |
|
September 21, 2016 | September 1, 2026 | | 2.723% | | 32,800,000 |
| | 32,800,000 |
|
Less: Deferred financing fees | | | | | (3,915,131 | ) | | (4,610,034 | ) |
Total SBA-Guaranteed Debentures | | | | | $ | 246,084,869 |
| | $ | 245,389,966 |
|
Credit Facility: | | | | | | | |
May 1, 2017 | April 30, 2022 | | 3.998% | | $ | 141,118,837 |
| | $ | 127,011,475 |
|
Total Credit Facility | | | | | $ | 141,118,837 |
| | $ | 127,011,475 |
|
Notes: | | | | | | | |
October 19, 2012 | December 15, 2022 | | 6.375% | | $ | 80,500,000 |
| | $ | 80,500,000 |
|
February 6, 2015 | March 15, 2022 | | 6.375% | | 86,250,000 |
| | 86,250,000 |
|
Less: Deferred financing fees | | | | | (3,508,821 | ) | | (3,994,619 | ) |
Total Notes | | | | | $ | 163,241,179 |
| | $ | 162,755,381 |
|
SBA-Guaranteed Debentures
Under the Small Business Investment Act of 1958, as amended, and current SBA policy applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding at any time, SBA-guaranteed debentures up to two times (and in certain cases, up to three times) the amount of its regulatory capital. As of September 30, 2017, the maximum statutory limit on the dollar amount of outstanding SBA-guaranteed debentures that can be issued by a single SBIC was $150.0 million and by a group of SBICs under common control was $350.0 million. As of September 30, 2017, Triangle SBIC had issued the maximum $150.0 million of SBA-guaranteed debentures and Triangle SBIC II had issued $100.0 million of SBA-guaranteed debentures, leaving borrowing capacity of a maximum of $100.0 million of SBA-guaranteed debentures for Triangle SBIC III. Interest payments on SBA-guaranteed debentures are payable semi-annually and there are no principal payments required on these debentures prior to maturity, nor do the debentures carry any prepayment penalties. The weighted average interest rate for all SBA-guaranteed debentures as of both September 30, 2017 and December 31, 2016 was 3.90%. As of both September 30, 20172020 and December 31, 2016,2019:
| | | | | | | | | | | | | | | | | | | | | | | |
Issuance Date | Maturity Date | | Interest Rate as of September 30, 2020 | | September 30, 2020 | | December 31, 2019 |
Credit Facilities: | | | | | | | |
August 3, 2018 - Class A-1 | NA | | NA | | $ | — | | | $ | 107,200,000 | |
February 21, 2019 | February 21, 2024 | | 2.138% | | 463,703,208 | | | 245,288,419 | |
Total Credit Facilities | | | | | $ | 463,703,208 | | | $ | 352,488,419 | |
Debt Securitization: | | | | | | | |
May 9, 2019 - Class A-1 2019 Notes | April 15, 2027 | | 1.295% | | $ | 126,813,048 | | | $ | 266,710,176 | |
May 9, 2019 - Class A-2 2019 Notes | April 15, 2027 | | 1.925% | | 51,500,000 | | | 51,500,000 | |
(Less: Deferred financing fees) | | | | | (777,000) | | | (1,545,702) | |
Total Debt Securitization | | | | | $ | 177,536,048 | | | $ | 316,664,474 | |
Notes: | | | | | | | |
September 24, 2020 - August 2025 Notes | August 4, 2025 | | 4.660% | | $ | 25,000,000 | | | $ | — | |
September 29, 2020 - August 2025 Notes | August 4, 2025 | | 4.660% | | 25,000,000 | | | — | |
(Less: Deferred financing fees) | | | | | (465,521) | | | — | |
Total Notes | | | | | $ | 49,534,479 | | | $ | — | |
August 2018 Credit Facility
On July 3, 2018, the Company formed Barings BDC Senior Funding I, LLC, an indirectly wholly-owned Delaware limited liability company (“BSF”), the primary purpose of which was to function as the Company's special purpose, bankruptcy-remote, financing subsidiary. On August 3, 2018, BSF entered into the August 2018 Credit Facility (as subsequently amended in December 2018 and in February 2020) with Bank of America, N.A., as administrative agent (the "Administrative Agent") and Class A-1 Lender, Société Générale, as Class A Lender, and Bank of America Merrill Lynch, as sole lead arranger and sole book manager. BSF and the Administrative Agent also entered into a security agreement dated as of August 3, 2018 (the "Security Agreement") pursuant to which BSF’s obligations under the August 2018 Credit Facility were secured by a first-priority security interest in substantially all SBA-guaranteed debentures were pooled.
of the assets of BSF, including its portfolio of investments (the "Pledged Property"). In additionconnection with the first-priority security interest established under the Security Agreement, all of the Pledged Property was held in the custody of State Street Bank and Trust Company, as collateral administrator (the "Collateral Administrator"). The Collateral Administrator maintained and performed certain collateral administration services with respect to the Pledged Property pursuant to a one-time 1.0% feecollateral administration agreement among BSF, the Administrative Agent and the Collateral Administrator. Generally, the Collateral Administrator was authorized to make distributions and payments from Pledged Property based only on the total commitment fromwritten instructions of the SBA,Administrative Agent.
The August 2018 Credit Facility initially provided for borrowings in an aggregate amount up to $750.0 million, including up to $250.0 million borrowed under the Class A Loan Commitments and up to $500.0 million borrowed under the Class A-1 Loan Commitments. Effective February 28, 2019, the Company also pays a one-time 2.425% fee onreduced its Class A Loan Commitments to $100.0 million, which reduced total commitments under the amountAugust 2018 Credit Facility to $600.0 million. Effective May 9, 2019, the Company further reduced its Class A Loan Commitments under the August 2018 Credit Facility from $100.0 million to zero and reduced its Class A-1 Loan Commitments under the August 2018 Credit Facility from $500.0 million to $300.0 million, which collectively reduced total commitments under the August 2018 Credit Facility to $300.0 million. Effective June 18, 2019, the Company further reduced its Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $300.0 million to $250.0 million. Effective August 14, 2019, the Company further reduced its Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $250.0 million to $177.0 million. Effective October 29, 2019, the Company further reduced its Class A-1 Loan Commitments, and therefore total
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
commitments, under the August 2018 Credit Facility from $177.0 million to $150.0 million. Effective January 21, 2020, the Company further reduced its Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $150.0 million to $80.0 million. Effective April 23, 2020, the Company further reduced its Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $80.0 million to $30.0 million. Finally, effective June 26, 2020, the Company further reduced its Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $30.0 million to zero. In connection with these reductions, the pro rata portion of each SBA-guaranteed debenture issued. These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements using the effective interest method. Upon prepayment of an SBA-guaranteed debenture, any unamortized deferred financing costs related to the SBA-guaranteed debenture areAugust 2018 Credit Facility was written off and recognized as a loss on extinguishment of debt in the UnauditedCompany's Consolidated Statements of Operations.
On February 21, 2020, the Company extended the maturity date of the August 2018 Credit Facility from August 3, 2020 to August 3, 2021. On June 30, 2020, following the repayment of all borrowings, interest, and fees payable thereunder and at the election of the Company, the August 2018 Credit Facility was terminated, including all commitments and obligations of Bank of America, N.A. to lend or make advances to BSF. In addition, the Security Agreement was terminated and all security interests in the assets of BSF in favor of the lenders were terminated. As a result of these terminations, all obligations of BSF under the August 2018 Credit Facility and Security Agreement were fully discharged.
All borrowings under the August 2018 Credit Facility bore interest, subject to BSF’s election, on a per annum basis equal to (i) the applicable base rate plus the applicable spread or (ii) the applicable LIBOR rate plus the applicable spread. The applicable base rate was equal to the greater of (i) the federal funds rate plus 0.5%, (ii) the prime rate or (iii) one-month LIBOR plus 1.0%. The applicable LIBOR rate depended on the term of the borrowing under the August 2018 Credit Facility, which could be either one month or three months. BSF was required to pay commitment fees on the unused portion of the August 2018 Credit Facility. BSF could prepay any borrowing at any time without premium or penalty, except that BSF could have been liable for certain funding breakage fees if prepayments occurred prior to expiration of the relevant interest period. BSF could also permanently reduce all or a portion of the commitment amount under the August 2018 Credit Facility without penalty.
Borrowings under the August 2018 Credit Facility were subject to compliance with a borrowing base, pursuant to which the amount of funds advanced by the lenders to BSF would vary depending upon the types of assets in BSF’s portfolio. Assets were required to meet certain criteria to be included in the borrowing base, and the borrowing base was subject to certain portfolio restrictions including investment size, sector concentrations, investment type and credit ratings.
Under the August 2018 Credit Facility, BSF made certain representations and warranties and was required to comply with various covenants, reporting requirements and other customary requirements for credit facilities of this nature. In addition to other customary events of default included in financing transactions, the August 2018 Credit Facility contained the following events of default: (a) the failure to make principal payments when due or interest payments within two business days of when due; (b) borrowings under the credit facility exceeding the applicable advance rates; (c) the purchase by BSF of certain ineligible assets; (d) the insolvency or bankruptcy of BSF; and (e) the decline of BSF’s NAV below a specified threshold.
Borrowings of BSF were considered borrowings by the Company for purposes of complying with the asset coverage requirements under the 1940 Act applicable to business development companies. The obligations of BSF under the August 2018 Credit Facility were non-recourse to the Company.
As of December 31, 2019, BSF had borrowings of $107.2 million, outstanding under the August 2018 Credit Facility with an interest rate of 2.940%. As of December 31, 2019, the total fair value of the borrowings outstanding under the August 2018 Credit Facility was $107.2 million. The fair values of the SBA-guaranteed debenturesborrowings outstanding under the August 2018 Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of September 30, 2017 and December 31, 2016, the carrying amounts of the SBA-guaranteed debentures were approximately $246.1 million and $245.4 million, respectively. As of September 30, 2017 and December 31, 2016, the fair values of the SBA-guaranteed debentures were $260.5 million and $264.9 million, respectively.
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
February 2019 Credit Facility
In May 2015,On February 21, 2019, the Company entered into the February 2019 Credit Facility which was(as subsequently amended in May 2017.December 2019) with ING Capital LLC ("ING"), as administrative agent, and the lenders party thereto. The amendment, among other things, increasedinitial commitments from $300.0 million to $435.0 million and extendedunder the maturity by two years. The revolving period of theFebruary 2019 Credit Facility ends April 30, 2021 followed by a one-year amortization period with a final maturity date of April 30, 2022.total $800.0 million. The Company has the ability to borrow in both United States dollars as well as foreign currencies under the Credit Facility. The Credit Facility, which is structured to operate like a revolving credit facility, is secured primarily by the Company's assets, excluding the assets of the Company’s wholly-owned SBIC subsidiaries. TheFebruary 2019 Credit Facility has an accordion feature that allows for an increase in the total borrowing sizecommitments of up to $550.0$400.0 million, subject to certain conditions and the satisfaction of specified financial covenants. Using this accordion feature, in July 2017, theThe Company increased its commitmentscan borrow foreign currencies directly under the February 2019 Credit Facility. The February 2019 Credit Facility, from $435.0 million to $465.0 million,which is structured as a revolving credit facility, is secured primarily by a material portion of the Company's assets and in September 2017,guaranteed by certain subsidiaries of the Company again increased its commitments underCompany. Following the termination of the August 2018 Credit Facility from $465.0 millionon June 30, 2020, BSF became a subsidiary guarantor and its assets will secure the February 2019 Credit Facility. The revolving period of the February 2019 Credit Facility ends on February 21, 2023, followed by a one-year repayment period with a final maturity date of February 21, 2024.
Barings BDC, Inc.
Notes to $480.0 million.Unaudited Consolidated Financial Statements — (Continued)
Borrowings under the February 2019 Credit Facility bear interest, subject to the Company's election, on a per annum basis equal to (i) the applicable base rate plus 1.75%1.00% (or 1.50%1.25% if the Company receivesno longer maintains an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.75%2.00% (or 2.50%2.25% if the Company receivesno longer maintains an investment grade credit rating), (iii) for borrowings denominated in certain foreign currencies other than Australian dollars, the applicable currency rate for the foreign currency as defined in the credit agreement plus 2.00% (or 2.25% if the Company no longer maintains an investment grade credit rating) or (iii)(iv) for borrowings denominated in CanadianAustralian dollars, the applicable Canadian Dealer OfferedAustralian dollars Screen Rate, plus 2.75%2.20% (or 2.50%2.45% if the Company receivesno longer maintains an investment grade credit rating). The applicable base rate is equal to the greatergreatest of (i) the prime rate, (ii) the federal funds rate plus 0.5% or, (iii) the Overnight Bank Funding Rate plus 0.5%, (iv) the adjusted one-month LIBORthree-month applicable currency rate plus 2.0%1.0% and (v) 1%. The applicable LIBORcurrency rate depends on the currency and term of the draw under the February 2019 Credit Facility. The
In addition, the Company (i) paid a commitment fee of 0.375% per annum on undrawn amounts for the period beginning on the closing date of the February 2019 Credit Facility to and including the date that was six months after the closing date of the February 2019 Credit Facility, and (ii) thereafter pays a commitment fee of 1.00%(x) 0.5% per annum on undrawn amounts if the usedunused portion of the February 2019 Credit Facility is lessgreater than or equal to 25.0%two-thirds of total commitments or (y) 0.375% per annum on undrawn amounts if the usedunused portion of the February 2019 Credit Facility is greaterequal to or less than 25.0%two-thirds of total commitments. These commitment fees are included in interest and otherIn connection with entering into the February 2019 Credit Facility, the Company incurred financing fees onof approximately $6.4 million, which will be amortized over the Company's Unaudited Consolidated Statements of Operations. Borrowings under the Credit Facility are limited to a borrowing base, which includes certain cash and a portion of eligible debt investments.
As of September 30, 2017, the Company had United States dollar borrowings of $124.3 million outstanding under the Credit Facility with an interest rate of 3.99% and non-United States dollar borrowings denominated in Canadian dollars of $21.0 million ($16.8 million in United States dollars) outstanding under the Credit Facility with a weighted average interest rate of 4.06%. The borrowings denominated in Canadian dollars are translated into United States dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign exchange rates on the Credit Facility borrowings is included in unrealized appreciation (depreciation) on foreign currency borrowings in the Company's Unaudited Consolidated Statements of Operations. The borrowings denominated in Canadian dollars may be positively or negatively affected by movements in the rate of exchange between the United States dollar and the Canadian dollar. This movement is beyond the controlremaining life of the Company and cannot be predicted. As of December 31, 2016, the Company had United States dollar borrowings of $105.7 million outstanding under theFebruary 2019 Credit Facility with an interest rate of 3.37% and non-United States dollar borrowings denominated in Canadian dollars of $28.6 million ($21.3 million United States dollars) outstanding under the Credit Facility with an interest rate of 3.64%.Facility.
The fair value of the borrowings outstanding under the Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of September 30, 2017 and December 31, 2016, the fair values of the borrowings outstanding under the Credit Facility were $141.1 million and $127.0 million, respectively.
TheFebruary 2019 Credit Facility contains certain affirmative and negative covenants, including but not limited to (i) maintaining a minimum interest coverage ratio,stockholders' equity, (ii) maintaining a minimum consolidated tangibleobligors' net worth, (iii) maintaining a minimum asset coverage ratio, (iv) meeting a minimum liquidity test and (iv)(v) maintaining the Company's status as a RICregulated investment company and as a BDC.business development company. The February 2019 Credit Facility also contains customary events of default with customary cure and notice provisions, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, change of control, and material adverse effect. The February 2019 Credit Facility also permits Branch Banking and Trust Company, the administrative agent to select an independent third-partythird party valuation firm to determine valuations of certain portfolio investments for purposes of borrowing base provisions. In connection with the February 2019 Credit Facility, the Company also entered into new collateral documents. As of September 30, 20172020, the Company was in compliance with all covenants under the February 2019 Credit Facility.
As of September 30, 2020, the Company had U.S. dollar borrowings of $325.0 million outstanding under the February 2019 Credit Facility with a weighted average interest rate of 2.188% (weighted average one month LIBOR of 0.188%), borrowings denominated in Swedish kronas of 12.8kr million ($1.4 million U.S. dollars) with an interest rate of 2.00% (one month STIBOR of 0.000%), borrowings denominated in British pounds sterling of £40.3 million ($52.1 million U.S. dollars) with a weighted average interest rate of 2.063% (weighted average one month GBP LIBOR of 0.063%) and borrowings denominated in Euros of €72.6 million ($85.1 million U.S. dollars) with an interest rate of 2.00% (weighted average one month EURIBOR of 0.000%). The borrowings denominated in foreign currencies were translated into U.S. dollars based on the spot rate at the relevant balance sheet date. The impact resulting from changes in foreign exchange rates on the February 2019 Credit Facility borrowings is included in "Net unrealized appreciation (depreciation) - foreign currency transactions" in the Company's Unaudited Consolidated Statements of Operations.
As of December 31, 2019, the Company had U.S. dollar borrowings of $195.0 million outstanding under the February 2019 Credit Facility with a weighted average interest rate of 4.054%, borrowings denominated in Swedish kronas of 12.8kr million ($1.4 million U.S. dollars) with an interest rate of 2.25%, borrowings denominated in British pounds sterling of £4.7 million ($6.3 million U.S. dollars) with an interest rate of 3.0%, and borrowings denominated in Euros of €38.0 million ($42.7 million U.S. dollars) with an interest rate of 2.25%. The borrowings denominated in foreign currencies were translated into U.S. dollars based on the spot rate at the relevant balance sheet date. The impact resulting from changes in foreign exchange rates on the February 2019 Credit Facility borrowings is included in "Net unrealized appreciation (depreciation) - foreign currency transactions" in the Company's Unaudited Consolidated Statements of Operations.
As of September 30, 2020 and December 31, 2016,2019, the total fair value of the borrowings outstanding under the February 2019 Credit Facility was $463.7 million and $245.3 million, respectively. The fair values of the borrowings outstanding under the February 2019 Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.
Debt Securitization
On May 9, 2019, the Company completed a $449.3 million term debt securitization. Term debt securitizations are also known as collateralized loan obligations and are a form of secured financing incurred by the Company, which is consolidated by the Company for financial reporting purposes and subject to its overall asset coverage requirement. The notes offered in the
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
Debt Securitization (collectively, the “2019 Notes”) were issued by Barings BDC Static CLO Ltd. 2019-I (“BBDC Static CLO Ltd.”) and Barings BDC Static CLO 2019-I, LLC, wholly-owned and consolidated subsidiaries of the Company (collectively, the “Issuers”), and are secured by a diversified portfolio of senior secured loans and participation interests therein. The Debt Securitization was executed through a private placement of approximately $296.8 million of AAA(sf) Class A-1 Senior Secured Floating Rate 2019 Notes (“Class A-1 2019 Notes”), which bore interest at the three-month LIBOR plus 1.02%; $51.5 million of AA(sf) Class A-2 Senior Secured Floating Rate 2019 Notes (“Class A-2 2019 Notes”), which bore interest at the three-month LIBOR plus 1.65%; and $101.0 million of Subordinated 2019 Notes which did not bear interest and were not rated. The Company retained all of the Subordinated 2019 Notes issued in the Debt Securitization in exchange for the Company’s sale and contribution to BBDC Static CLO Ltd. of the initial closing date portfolio, which included senior secured loans and participation interests therein distributed to the Company by BSF. The 2019 Notes were scheduled to mature on April 15, 2027; however, the 2019 Notes could be redeemed by the Issuers, at the direction of the Company as holder of the Subordinated 2019 Notes, on any business day after May 9, 2020. In connection with the sale and contribution, the Company made customary representations, warranties and covenants to the Issuers.
The Class A-1 2019 Notes and Class A-2 2019 Notes were the secured obligations of the Issuers, the Subordinated 2019 Notes are the unsecured obligations of BBDC Static CLO Ltd., and the indenture governing the 2019 Notes included customary covenants and events of default. The 2019 Notes were not registered under the Securities Act or any state securities or “blue sky” laws and could not be offered or sold in the United States absent registration with the SEC or an applicable exemption from registration. As of September 30, 2020, the Company was in compliance with all covenants under the Class A-1 2019 Notes and Class A-2 2019 Notes.
The Company serves as collateral manager to BBDC Static CLO Ltd. under a collateral management agreement and has agreed to irrevocably waive all collateral management fees payable pursuant to the collateral management agreement.
The Class A-1 2019 Notes and the Class A-2 2019 Notes issued in connection with the Debt Securitization had floating rate interest provisions based on the three-month LIBOR that reset quarterly, except that LIBOR for the first interest accrual period was calculated by reference to an interpolation between the rate for deposits with a term equal to the next shorter period of time for which rates were available and the rate appearing for deposits with a term equal to the next longer period of time for which rates were available.
During the three and nine months ended September 30, 2020, $48.1 million and $139.9 million, respectively, of the Class A-1 2019 Notes were repaid. As of September 30, 2020, the Company had borrowings of $126.8 million outstanding under the Class A-1 2019 Notes with an interest rate of 1.295% (three month LIBOR of 0.275%) and borrowings of $51.5 million outstanding under the Class A-2 2019 Notes with an interest rate of 1.925% (three month LIBOR of 0.275%).
During the year ended December 31, 2019, $30.0 million of the Class A-1 2019 Notes were repaid. As of December 31, 2019, the Company had borrowings of $266.7 million outstanding under the Class A-1 2019 Notes with an interest rate of 3.021% and borrowings of $51.5 million outstanding under the Class A-2 2019 Notes with an interest rate of 3.651%.
As of September 30, 2020, the total fair value of the Class A-1 2019 Notes and the Class A-2 2019 Notes was $126.1 million and $51.0 million, respectively. As of December 31, 2019, the total fair value of the Class A-1 2019 Notes and the Class A-2 2019 Notes was $266.8 million and $51.5 million, respectively. The fair value determinations of the Company’s 2019 Notes were based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.
On October 15, 2020, the remaining 2019 Notes were repaid in full.
August 2025 Notes
On August 3, 2020, the Company entered into a Note Purchase Agreement (the "Note Purchase Agreement") with Massachusetts Mutual Life Insurance Company governing the issuance of (i) $50.0 million in aggregate principal amount of Series A senior unsecured notes (the "Series A Notes") due August 2025 with a fixed interest rate of 4.66% per year, and (ii) up to $50.0 million in aggregate principal amount of additional senior unsecured notes (the "Additional Notes" and, collectively with the Series A Notes, the "August 2025 Notes") due August 2025 with a fixed interest rate per year to be determined, in each case, to qualified institutional investors in a private placement. An aggregate principal amount of $25.0 million of the Series A Notes was issued on September 24, 2020 and an aggregate principal amount of $25.0 million of the Series A Notes was issued on September 29, 2020, both of which will mature on August 4, 2025 unless redeemed, purchased or prepaid prior to such date by the Company or its affiliates in accordance with their terms. Interest on the August 2025 Notes will be due semiannually in March and September, beginning in March 2021. In addition, the Company is obligated to offer to repay the August 2025 Notes
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
at par if certain change in control events occur. The August 2025 Notes are the Company's general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.
The Note Purchase Agreement contains customary terms and conditions for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of the Company’s status as a BDC within the meaning of the 1940 Act, minimum shareholders’ equity, maximum net debt to equity ratio and minimum asset coverage ratio. The Note Purchase Agreement also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under our other indebtedness or that of our subsidiary guarantors, certain judgements and orders, and certain events of bankruptcy. As of September 30, 2020, the Company was in compliance with all covenants of the Credit Facility.Note Purchase Agreement.
The August 2025 Notes were offered in reliance on Section 4(a)(2) of the Securities Act. The August 2025 Notes have not and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.
As of September 30, 2020, the fair value of the outstanding Series A Notes was $50.0 million. The fair value of the Series A Notes is based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.
6. DERIVATIVE INSTRUMENTS
The Company enters into forward currency contracts from time to time to primarily help mitigate the impact that an adverse change in foreign exchange rates would have on net interest income from the Company's investments and related borrowings denominated in foreign currencies. Net unrealized appreciation or depreciation on foreign currency contracts are included in "Net unrealized appreciation (depreciation) - foreign currency transactions" and net realized gains or losses on forward currency contracts are included in "Net realized gains (losses) - foreign currency transactions" in the Unaudited Consolidated Statements of Operations. Forward currency contracts are considered undesignated derivative instruments.
The following table presents the Company's foreign currency forward contracts as of September 30, 2020 and December 31, 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of September 30, 2020: Description | | Notional Amount to be Purchased | | Notional Amount to be Sold | | Maturity Date | | Gross Amount of Recognized Assets | | | | Balance Sheet Location of Net Amounts |
Foreign currency forward contract (CAD) | | C$13,495,000 | | $10,081,420 | | 10/02/20 | | $ | 21,550 | | | | | Prepaid expenses and other assets |
Foreign currency forward contract (CAD) | | $10,255,950 | | C$13,495,000 | | 10/02/20 | | 152,979 | | | | | Prepaid expenses and other assets |
| | | | | | | | | | | | |
Foreign currency forward contract (EUR) | | €4,672,157 | | $5,487,094 | | 10/02/20 | | (8,286) | | | | | Prepaid expenses and other assets |
Foreign currency forward contract (EUR) | | $5,374,120 | | €4,672,157 | | 10/02/20 | | (104,687) | | | | | Prepaid expenses and other assets |
Foreign currency forward contract (EUR) | | $3,412,466 | | €2,906,604 | | 01/05/21 | | (3,740) | | | | | Prepaid expenses and other assets |
| | | | | | | | | | | | |
Foreign currency forward contract (GBP) | | £1,285,558 | | $1,594,070 | | 10/02/20 | | 67,899 | | | | | Prepaid expenses and other assets |
Foreign currency forward contract (GBP) | | $1,696,763 | | £1,285,558 | | 10/02/20 | | 34,794 | | | | | Prepaid expenses and other assets |
Foreign currency forward contract (GBP) | | $529,136 | | £415,299 | | 01/05/21 | | (8,147) | | | | | Prepaid expenses and other assets |
| | | | | | | | | | | | |
Foreign currency forward contract (SEK) | | $80,985 | | 751,190kr | | 10/02/20 | | (2,947) | | | | | Prepaid expenses and other assets |
Foreign currency forward contract (SEK) | | 751,190kr | | $84,268 | | 10/02/20 | | (336) | | | | | Prepaid expenses and other assets |
Foreign currency forward contract (SEK) | | $92,284 | | 821,594kr | | 01/05/21 | | 362 | | | | | Prepaid expenses and other assets |
Total | | | | | | $ | 149,441 | | | | | |
TRIANGLE CAPITAL CORPORATIONBarings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2019: Description | | Notional Amount to be Purchased | | Notional Amount to be Sold | | Maturity Date | | Gross Amount of Recognized Assets | | | | Balance Sheet Location of Net Amounts |
Foreign currency forward contract (EUR) | | $158,244 | | €142,781 | | 01/02/20 | | $ | (2,028) | | | | | Accounts payable and accrued liabilities |
Foreign currency forward contract (EUR) | | €142,781 | | $158,547 | | 01/02/20 | | 1,724 | | | | | Accounts payable and accrued liabilities |
Foreign currency forward contract (EUR) | | $506,967 | | €453,920 | | 04/02/20 | | (5,440) | | | | | Accounts payable and accrued liabilities |
| | | | | | | | | | | | |
Foreign currency forward contract (GBP) | | $707,963 | | £549,253 | | 01/02/20 | | (19,660) | | | | | Accounts payable and accrued liabilities |
Foreign currency forward contract (GBP) | | £549,253 | | $718,861 | | 01/02/20 | | 8,763 | | | | | Accounts payable and accrued liabilities |
Foreign currency forward contract (GBP) | | $227,890 | | £175,529 | | 04/02/20 | | (5,215) | | | | | Accounts payable and accrued liabilities |
| | | | | | | | | | | | |
Foreign currency forward contract (SEK) | | $95,654 | | 920,569kr | | 01/02/20 | | (2,687) | | | | | Accounts payable and accrued liabilities |
Foreign currency forward contract (SEK) | | 920,569kr | | $96,846 | | 01/02/20 | | 1,495 | | | | | Accounts payable and accrued liabilities |
Foreign currency forward contract (SEK) | | $97,360 | | 912,212kr | | 04/02/20 | | (511) | | | | | Accounts payable and accrued liabilities |
Total | | | | | | $ | (23,559) | | | | | |
Notes
In October 2012, the Company issued $70.0 million of unsecured notes due 2022 (the "December 2022 Notes") and in November 2012, issued $10.5 million of December 2022 Notes pursuant to the exercise of an over-allotment option. The December 2022 Notes mature on December 15, 2022, and may be redeemed in whole or in part at any time or from time to time at the Company's option. The December 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning December 15, 2012. As of September 30, 2017 and December 31, 2016, the carrying amounts of the December 2022 Notes were $78.9 million and $78.7 million, respectively. As of September 30, 2017 and December 31, 2016, the fair values of the December 2022 Notes were $81.7 million and $81.9 million, respectively.
In February 2015, the Company issued $86.3 million of unsecured notes due 2022 (the "March 2022 Notes"). The March 2022 Notes mature on March 15, 2022 and may be redeemed in whole or in part at any time or from time to time at the Company's option on or after March 15, 2018. The March 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning March 15, 2015. The net proceeds to the Company from the sale of the March 2022 Notes, after underwriting discounts and offering expenses, were approximately $83.4 million. As of September 30, 20172020 and December 31, 2016,2019, the carrying amountstotal fair value of the March 2022 Notes were $84.4 millionCompany's foreign currency forward contracts was $149,441 and $84.1 million, respectively. As of September 30, 2017 and December 31, 2016, the fair values of the March 2022 Notes were $88.2 million and $87.7 million,$(23,559), respectively. The fair values of the December 2022 Notes and the March 2022 NotesCompany's foreign currency forward contracts are based on the closingunadjusted prices of each respective security on the New York Stock Exchange,from independent pricing services and independent indicative broker quotes, which are Level 1 inputs under ASC 820.
The indenture and supplements thereto relating to the December 2022 Notes and the March 2022 Notes contain certain covenants, including but not limited to (i) a requirement that the Company comply with the asset coverage requirement of the 1940 Act or any successor provisions, after giving effect to any exemptive relief granted to the Company by the Securities and Exchange Commission (“SEC”), (ii) a requirement that the Company will not declare any cash dividend, or declare any other cash distribution, upon a class of its capital stock, or purchase any such capital stock, unless, in every such case, at the time of the declaration of any such dividend or distribution, or at the time of any such purchase, the Company has an asset coverage (as defined in the 1940 Act) of at least 200% after deducting the amount of such dividend, distribution or purchase price, as the case may be, giving effect to any exemptive relief granted to the Company by the SEC and (iii) a requirement to provide financial information to the holders of the notes and the trustee under the indenture if the Company should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of September 30, 2017 and December 31, 2016, the Company was in compliance with all covenants of the December 2022 Notes and the March 2022 Notes.
6. EQUITY-BASED AND OTHER COMPENSATION PLANS
In February 2017, both the compensation committee of the Board and the Board adopted the Triangle Capital Corporation Omnibus Incentive Plan (the "Omnibus Plan"), and in May 2017, the Company’s stockholders approved the Omnibus Plan at the Company’s 2017 Annual Meeting of Stockholders. Prior to the approval of the Omnibus Plan, the Company compensated its professionals through two separate plans: the Amended and Restated 2007 Equity Incentive Plan (the "Equity Incentive Plan"), which provided for grants of restricted stock and options to employees, officers and directors, and the 2012 Executive Cash Incentive Plan (the "Cash Incentive Plan"), which provided for the payment of cash bonuses to employees and officers. The Omnibus Plan was created primarily for the purpose of combining the Equity Incentive Plan and the Cash Incentive Plan in order to reduce the administrative burden of monitoring the terms and conditions of two separate plans. The terms of the Equity Incentive Plan and the Cash Incentive Plan, as combined and reflected in the Omnibus Plan, are substantially similar to the respective terms of each standalone plan.
The Omnibus Plan provides for grants of restricted stock, incentive stock options, non-statutory stock options and cash-based and/or stock-based performance awards, collectively, “Awards,” to the Company’s existing and future employees. Equity-based awards granted under the Omnibus Plan to independent directors generally will vest over a one-year period and equity-based awards granted under the Omnibus Plan to executive officers and employees generally will vest ratably over a four-year period. In addition, the Omnibus Plan increased the maximum number of shares of the Company’s common stock with respect to which Awards may be granted under the Omnibus Plan to 4,000,000 shares of the Company’s common stock from 2,400,000 shares of the Company’s common stock that were approved under the Equity Incentive Plan. The Omnibus Plan expires May 3, 2027.2 inputs.
TRIANGLE CAPITAL CORPORATIONBarings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
The Company accounts for its equity-based compensation using the fair value method, as prescribed by ASC Topic 718, Stock Compensation. Accordingly, for restricted stock awards, the Company measures the grant date fair value based upon the market price of the Company’s common stock on the date of the grant and amortizes this fair value to compensation expense ratably over the requisite service period or vesting term.
The following table presents information with respect to equity-based compensation for the nine months ended September 30, 2017 and 2016:
|
| | | | | | | | | |
| Nine Months Ended September 30, 2017 | | Nine Months Ended September 30, 2016 |
| Number of Shares | | Weighted Average Grant Date Fair Value per Share | | Number of Shares | | Weighted Average Grant Date Fair Value per Share |
Unvested shares, beginning of period | 631,622 |
| | $21.23 | | 778,116 |
| | $24.10 |
Shares granted during the period | 360,470 |
| | $19.22 | | 364,605 |
| | $17.56 |
Shares vested during the period | (243,418 | ) | | $22.69 | | (417,815 | ) | | $23.28 |
Unvested shares, end of period | 748,674 |
| | $19.79 | | 724,906 |
| | $21.29 |
In the three months ended September 30, 2017, the Company recognized equity-based compensation expense of approximately $1.5 million, and in the nine months ended September 30, 2017, the Company recognized equity-based compensation expense of approximately $4.5 million. In the three months ended September 30, 2016, the Company recognized equity-based compensation expense of approximately $1.6 million. In the nine months ended September 30, 2016, the Company recognized equity-based compensation expense of approximately $7.5 million, $2.7 million of which related to the accelerated vesting of outstanding shares of restricted stock of the Company's former Chief Executive Officer, Garland S. Tucker III, who retired from his officer positions in February 2016.
As of September 30, 2017, there was approximately $11.1 million of total unrecognized compensation cost related to the Company’s non-vested restricted shares. This cost is expected to be recognized over a weighted average period of approximately 2.0 years.
The Board has adopted a nonqualified deferred compensation plan covering the Company’s executive officers and key employees. Any compensation deferred and the Company’s contributions will earn a return based on the returns on certain investments designated by the Compensation Committee of the Board. Participants are 100% vested in amounts deferred under the deferred compensation plan and the earnings thereon. Contributions to the plan and earnings thereon generally vest ratably over a four-year period.
The Company maintains a 401(k) plan in which all full-time employees who are at least 21 years of age are eligible to participate and receive employer contributions. Eligible employees may contribute a portion of their compensation on a pretax basis into the 401(k) plan up to the maximum amount allowed under the Code, and direct the investment of their contributions.
7. TRANSACTIONS WITH CONTROLLED COMPANIES
During each of the three months ended September 30, 2017 and 2016, the Company received management fees from SRC Worldwide, Inc., a 100%-owned portfolio company, of $100,000. During each of the nine months ended September 30, 2017 and 2016, the Company received management fees from SRC Worldwide, Inc. of $300,000. These fees were recognized as fee income in the Company's Unaudited Consolidated Statements of Operations. In addition, during the nine months ended September 30, 2016, the Company recognized $300,000 as dividend income from SRC Worldwide, Inc.
TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements — (Continued)
8. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is party to financial instruments with off-balance sheet risk, consisting primarily of unused commitments to extend financing to the Company's portfolio companies. Since commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company maintains sufficient borrowing capacity to cover unused commitments to extend financing. The balances of unused commitments to extend financing as of September 30, 20172020 and December 31, 20162019 were as follows:
| | | | | | | | | | | | | | |
Portfolio Company | Investment Type | September 30, 2020 | | December 31, 2019 |
ADE Holding(2) | Committed Capex Line | $ | 87,995 | | | $ | — | |
Anju Software, Inc.(1) | Delayed Draw Term Loan | 1,981,371 | | | 1,981,371 | |
Arch Global Precision, LLC | Delayed Draw Term Loan | 7,446,226 | | | 1,012,661 | |
Armstrong Transport Group (Pele Buyer, LLC)(1) | Delayed Draw Term Loan | — | | | 712,567 | |
Beacon Pointe Advisors, LLC(1) | Delayed Draw Term Loan | 363,636 | | | — | |
Centralis Finco S.a.r.l.(3) | Acquisition Facility | 475,319 | | | — | |
Classic Collision (Summit Buyer, LLC)(1) | Delayed Draw Term Loan | 10,123,058 | | | — | |
CM Acquisitions Holdings Inc.(1) | Delayed Draw Term Loan | 1,859,111 | | | 1,859,111 | |
Contabo Finco S.À R.L(4) | Delayed Draw Term Loan | 218,718 | | | 1,013,849 | |
CSL Dualcom(5) | Delayed Draw Term Loan | 3,421,195 | | | — | |
Dart Buyer, Inc.(1) | Delayed Draw Term Loan | 2,430,569 | | | 4,294,503 | |
DreamStart Bidco SAS(6) | Acquisition Facility | 954,222 | | | — | |
Foundation Risk Partners, Corp. | Delayed Draw Term Loan | 15,555,555 | | | — | |
Heartland, LLC(1) | Delayed Draw Term Loan | 8,729,695 | | | 8,729,695 | |
Heilbron (f/k/a Sucsez (Bolt Bidco B.V.))(7) | Accordion Facility | 9,799,720 | | | 2,605,531 | |
Jocassee Partners LLC | Joint Venture | 35,000,000 | | | 40,000,000 | |
Kene Acquisition, Inc.(1) | Delayed Draw Term Loan | 322,928 | | | 1,076,427 | |
LAC Intermediate, LLC(1) | Delayed Draw Term Loan | 2,731,482 | | | 4,367,284 | |
Options Technology Ltd.(1) | Delayed Draw Term Loan | 2,918,447 | | | 2,918,447 | |
Premier Technical Services Group(8) | Acquisition Facility | 1,132,547 | | | 1,297,915 | |
Process Equipment, Inc.(1) | Delayed Draw Term Loan | — | | | 654,493 | |
Professional Datasolutions, Inc. (PDI)(1) | Delayed Draw Term Loan | — | | | 1,666,994 | |
PSC UK Pty Ltd.(9) | GBP Acquisition Facility | 189,350 | | | 1,010,706 | |
Smile Brands Group, Inc.(1) | Delayed Draw Term Loan | 422,242 | | | 927,046 | |
Springbrook Software (SBRK Intermediate, Inc.)(1) | Delayed Draw Term Loan | 3,896,663 | | | 3,896,663 | |
Stairway BidCo GmbH(10) | Delayed Draw Term Loan | 2,134,276 | | | — | |
The Hilb Group, LLC(1) | Delayed Draw Term Loan | 1,923,114 | | | 2,904,066 | |
Thompson Rivers LLC | Joint Venture | 6,900,000 | | | — | |
Transit Technologies LLC(1) | Delayed Draw Term Loan | 6,785,305 | | | — | |
Transportation Insight, LLC(1) | Delayed Draw Term Loan | — | | | 2,464,230 | |
Truck-Lite Co., LLC(1) | Delayed Draw Term Loan | 2,884,615 | | | 3,205,128 | |
USLS Acquisition, Inc.(1) | Delayed Draw Term Loan | 450,466 | | | — | |
Utac Ceram(11) | Delayed Draw Term Loan | 3,166,156 | | | — | |
Validity, Inc.(1) | Delayed Draw Term Loan | — | | | 898,298 | |
Total unused commitments to extend financing | | $ | 134,303,981 | | | $ | 89,496,985 | |
(1)Represents a commitment to extend financing to a portfolio company where one or more of the Company's current investments in the portfolio company are carried at less than cost. The Company's estimate of the fair value of the current investments in this portfolio company includes an analysis of the fair value of any unfunded commitments.
(2)Actual commitment amount is denominated in Euros (€75,039) which was translated into U.S. dollars using the September 30, 2020 spot rate.
(3)Actual commitment amount is denominated in Euros (€405,337) which was translated into U.S. dollars using the September 30, 2020 spot rate.
(4)September 30, 2020 commitment amount is denominated in Euros (€186,516) which was translated into U.S. dollars using the September 30, 2020 spot rate. December 31, 2019 commitment amount was denominated in Euros (€903,207) which was translated into U.S. dollars using the December 31, 2019 spot rate.
(5)Actual commitment amount is denominated in British pounds sterling (£2,646,346) which was translated into U.S. dollars using the using the September 30, 2020 spot rate.
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
|
| | | | | | | | |
Portfolio Company | Investment Type | September 30, 2017 | | December 31, 2016 |
Baker Hill Acquisition, LLC(1) | Delayed Draw Term Loan | $ | 500,000 |
| | $ | — |
|
CRS Reprocessing, LLC | Debtor in Possession Loan | 3,300,000 |
| | — |
|
DPII Holdings LLC(1) | Guaranty | 576,925 |
| | 576,925 |
|
DLC Acquisition, LLC | Revolver | 1,800,000 |
| | 3,000,000 |
|
Eckler's Holdings, Inc.(1) | Equity Investment | 1,000,000 |
| | — |
|
Frank Entertainment Group, LLC(1) | Delayed Draw Senior Note | 489,796 |
| | — |
|
Frank Entertainment Group, LLC(1) | Delayed Draw Second Lien Term Note | 1,142,857 |
| | — |
|
Halo Branded Solutions, Inc. | Delayed Draw Term Loan | 3,250,000 |
| | 3,250,000 |
|
HKW Capital Partners IV, L.P. | Private Equity | 128,204 |
| | 530,032 |
|
Lakeview Health Acquisition Company | Revolver | 1,387,367 |
| | 1,387,367 |
|
Micross Solutions LLC | Delayed Draw Term Loan | 3,000,000 |
| | — |
|
Nautic Partners VII, LP | Private Equity | 532,532 |
| | 642,172 |
|
Nomacorc, LLC(1) | Equity Investment | 838,813 |
| | 849,362 |
|
Orchid Underwriters Agency, LLC | Delayed Draw Term Loan | 649,143 |
| | 8,400,000 |
|
Orchid Underwriters Agency, LLC | Revolver | — |
| | 5,000,000 |
|
SCA Pharmaceuticals, LLC | Delayed Draw Term Loan | — |
| | 12,000,000 |
|
Schweiger Dermatology Group, LLC | Delayed Draw Term Loan | 10,000,000 |
| | — |
|
SCUF Gaming, Inc. | Revolver | 2,000,000 |
| | 3,500,000 |
|
Smile Brands, Inc. | Equity Investment | 1,000,000 |
| | 1,000,000 |
|
Smile Brands, Inc. | Delayed Draw Term Loan | 18,826,531 |
| | 18,826,531 |
|
SPC Partners V, LP | Private Equity | 198,378 |
| | 522,881 |
|
SPC Partners VI, LP | Private Equity | 3,000,000 |
| | 3,000,000 |
|
TCFI Merlin LLC and TCFI CSG LLC | Revolver | 500,000 |
| | — |
|
Team Waste, LLC | Equity Investment | — |
| | 900,000 |
|
Team Waste, LLC | Delayed Draw Term Loan | 1,000,000 |
| | — |
|
TGaS Advisors, LLC | Revolver | 2,000,000 |
| | 2,000,000 |
|
YummyEarth Inc.(1) | Delayed Draw Term Loan | 1,000,000 |
| | 1,500,000 |
|
Total unused commitments to extend financing | | $ | 58,120,546 |
| | $ | 66,885,270 |
|
(6)Actual commitment amount is denominated in Euros (€813,731) which was translated into U.S. dollars using the September 30, 2020 spot rate. | |
(1) | Represents a commitment to extend financing to a portfolio company where one or more of the Company's current investments in the portfolio company are carried at less than cost. The Company's estimate of the fair value of the current investments in this portfolio company includes an analysis of the value of any unfunded commitments. |
(7)September 30, 2020 commitment amount is denominated in Euros (€8,356,897) which was translated into U.S. dollars using the September 30, 2020 spot rate. December 31, 2019 commitment amount was denominated in Euros (€2,321,187) which was translated into U.S. dollars using the December 31, 2019 spot rate.
(8)September 30, 2020 commitment amount is denominated in British pounds sterling (£876,042) which was translated into U.S. dollars using the September 30, 2020 spot rate. December 31, 2019 commitment amount was denominated in British pounds sterling (£979,743) which was translated into U.S. dollars using the December 31, 2019 spot rate.
(9)September 30, 2020 commitment amount is denominated in British pounds sterling (£146,466) which was translated into U.S. dollars using the September 30, 2020 spot rate. December 31, 2019 commitment amount was denominated in British pounds sterling (£762,941) which was translated into U.S. dollars using the December 31, 2019 spot rate.
(10)September 30, 2020 commitment amount is denominated in British pounds sterling (€1,820,044) which was translated into U.S. dollars using the September 30, 2020 spot rate.
(11)September 30, 2020 commitment amount is denominated in British pounds sterling (€2,700,000) which was translated into U.S. dollars using the September 30, 2020 spot rate.
The Company may,and certain of its former executive officers have been named as defendants in two putative securities class action lawsuits, each filed in the future,United States District Court for the Southern District of New York (and then transferred to the United States District Court for the Eastern District of North Carolina) on behalf of all persons who purchased or otherwise acquired our common stock between May 7, 2014 and November 1, 2017. The first lawsuit was filed on November 21, 2017, and was captioned Elias Dagher, et al., v. Triangle Capital Corporation, et al., Case No. 5:18-cv-00015-FL (the “Dagher Action”). The second lawsuit was filed on November 28, 2017, and was captioned Gary W. Holden, et al., v. Triangle Capital Corporation, et al., Case No. 5:18-cv-00010-FL (the “Holden Action”). The Dagher Action and the Holden Action were consolidated and are currently captioned In re Triangle Capital Corp. Securities Litigation, Master File No. 5:18-cv-00010-FL.
On April 10, 2018, the plaintiff filed its First Consolidated Amended Complaint. The complaint alleged certain violations of the securities laws, including, among other things, that the defendants made certain materially false and misleading statements and omissions regarding the Company’s business, operations and prospects between May 7, 2014 and November 1, 2017. The plaintiff seeks compensatory damages and attorneys’ fees and costs, among other relief, but did not specify the amount of damages being sought. On May 25, 2018, the defendants filed a motion to dismiss the complaint. On March 7, 2019, the court entered an order granting the defendants’ motion to dismiss. On March 28, 2019, the plaintiff filed a motion seeking leave to file a Second Consolidated Amended Complaint. On September 20, 2019, the court entered an order denying the plaintiff’s motion for leave to file a Second Consolidated Amended Complaint and dismissing the action with prejudice. On October 17, 2019, the plaintiff filed a notice of appeal seeking review of the court’s September 20, 2019 order. The plaintiff filed its opening brief with the United States Court of Appeals for the Fourth Circuit on January 6, 2020. The defendants filed their response brief on February 28, 2020, and the plaintiff filed its reply brief on March 27, 2020. The appeal is currently pending before the United States Court of Appeals for the Fourth Circuit.
In addition, the Company may be involved in litigation arising out of its operationsparty to certain lawsuits in the normal course of business or otherwise.business. Furthermore, third parties may try to seek to impose liability on the Company in connection with the activities of its portfolio companies. Since
While the outcome of any open legal proceedings, including those described above, cannot at this time be predicted with certainty, the Company does not expect that any reasonably possible losses arising from these matters will materially affect its inception, neither Triangle Capital Corporation nor anyfinancial condition or results of operations. Furthermore, in management's opinion, it is not possible to estimate a range of reasonably possible losses with respect to litigation contingencies.
COVID-19 Developments
During the three and nine months ended September 30, 2020, the spread of the Coronavirus and the COVID-19 pandemic had a significant impact on the U.S economy. To the extent the Company's portfolio companies are adversely impacted by the effects of the COVID-19 pandemic, it may have a material adverse impact on the Company's future net investment income, the fair value of its subsidiaries have been party to any material legal proceedings.portfolio investments, its financial condition and the results of operations and financial condition of the Company's portfolio companies.
TRIANGLE CAPITAL CORPORATIONBarings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
9.8. FINANCIAL HIGHLIGHTS
The following is a schedule of financial highlights for the nine months ended September 30, 20172020 and 2019:
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2020 | | 2019 |
Per share data: | | | |
Net asset value at beginning of period | $ | 11.66 | | | $ | 10.98 | |
Net investment income(1)(4) | 0.45 | | | 0.46 | |
Net realized loss on investments / foreign currency transactions(1) | (0.77) | | | (0.02) | |
Net unrealized appreciation on investments / foreign currency transactions(1) | 0.03 | | | 0.50 | |
Total increase (decrease) from investment operations(1) | (0.29) | | | 0.94 | |
Dividends/distributions paid to stockholders from net investment income | (0.48) | | | (0.39) | |
| | | |
| | | |
| | | |
| | | |
| | | |
Purchases of shares in share repurchase plan | 0.05 | | | 0.06 | |
| | | |
Loss on extinguishment of debt(1) | (0.01) | | | — | |
| | | |
Other(2) | 0.04 | | | (0.01) | |
Net asset value at end of period | $ | 10.97 | | | $ | 11.58 | |
Market value at end of period(3) | $ | 8.00 | | | $ | 10.15 | |
Shares outstanding at end of period | 47,961,753 | | | 49,418,542 | |
Net assets at end of period | $ | 525,976,941 | | | $ | 572,444,980 | |
Average net assets | $ | 513,677,913 | | | $ | 580,900,618 | |
Ratio of total expenses, including loss on extinguishment of debt and provision for taxes, to average net assets (annualized)(4) | 7.79 | % | | 7.81 | % |
| | | |
Ratio of net investment income to average net assets (annualized) | 5.65 | % | | 5.36 | % |
Portfolio turnover ratio (annualized) | 91.95 | % | | 71.57 | % |
Total return(5) | (16.51) | % | | 17.08 | % |
| | | |
| | | |
(1)Weighted average per share data—basic and 2016:diluted.
(2)Represents the impact of the different share amounts used in calculating per share data as a result of calculating certain per share data based upon the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.
(3)Represents the closing price of the Company’s common stock on the last day of the period.
(4)Does not include expenses of underlying investment companies, including joint ventures and short-term investments.
(5)Total return is based on purchase of stock at the current market price on the first day and a sale at the current market price on the last day of each period reported on the table and assumes reinvestment of dividends at prices obtained by the Company's dividend reinvestment plan during the period. Total return is not annualized.
9. MVC ACQUISITION
On August 10, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) among MVC Capital, Inc., a Delaware corporation (“MVC”), Mustang Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Acquisition Sub”), and Barings. The Merger Agreement provides that, on the terms and subject to the conditions set forth in the Merger Agreement, Acquisition Sub will merge with and into MVC, with MVC continuing as the surviving company and as a wholly-owned subsidiary of the Company (the “First Step”) and, immediately thereafter, MVC will merge with and into the Company, with the Company continuing as the surviving company (the “Second Step” and, together with the First Step, the “Merger”). The boards of directors of both the Company and MVC, including all of the respective independent directors, have approved the Merger Agreement and the transactions contemplated therein. The parties to the Merger Agreement intend the Merger to be treated as a “reorganization” within the meaning of Section 368(a)(1)(A) of the Code of 1986.
In the First Step, each share of MVC common stock issued and outstanding immediately prior to the effective time of the First Step (excluding any shares cancelled pursuant to the Merger Agreement) will be converted into the right to receive (i) $0.39492 per share in cash, without interest, from Barings (such amount of cash, the “Cash Consideration”) and (ii) 0.94024 (the "Exchange Ratio," such ratio as may be adjusted pursuant to the Merger Agreement) of a validly issued, fully paid and non-assessable share of the Company's common stock, par value $0.001 per share (the “Share Consideration” and together with the Cash Consideration, the “Merger Consideration”). Pursuant to the Merger Agreement, total value of the consideration to be received by MVC stockholders at closing is subject to adjustment as set forth in the Merger Agreement and may be different than the estimated total consideration described herein depending on a number of factors, including the number of outstanding
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
Per share data: | | | |
Net asset value at beginning of period | $ | 15.13 |
| | $ | 15.23 |
|
Net investment income(1) | 1.18 |
| | 1.19 |
|
Net realized loss on investments(1) | (0.37 | ) | | (0.19 | ) |
Net unrealized depreciation on investments / foreign currency(1) | (1.94 | ) | | (0.23 | ) |
Total increase (decrease) from investment operations(1) | (1.13 | ) | | 0.77 |
|
Dividends paid to stockholders from net investment income | (1.35 | ) | | (1.44 | ) |
Total dividends paid | (1.35 | ) | | (1.44 | ) |
Shares issued pursuant to Dividend Reinvestment Plan | 0.01 |
| | 0.03 |
|
Common stock offering | 0.61 |
| | 0.72 |
|
Stock-based compensation | (0.04 | ) | | 0.03 |
|
Tax provision(1) | (0.01 | ) | | — |
|
Other(2) | (0.02 | ) | | (0.01 | ) |
Net asset value at end of period | $ | 13.20 |
| | $ | 15.33 |
|
Market value at end of period(3) | $ | 14.28 |
| | $ | 19.70 |
|
Shares outstanding at end of period | 47,740,832 |
| | 40,405,403 |
|
Net assets at end of period | $ | 630,393,416 |
| | $ | 619,355,209 |
|
Average net assets | $ | 676,951,030 |
| | $ | 534,714,702 |
|
Ratio of total expenses, including provision for taxes, to average net assets (annualized) | 7.34 | % | | 10.14 | % |
Ratio of net investment income to average net assets (annualized) | 10.70 | % | | 10.42 | % |
Portfolio turnover ratio | 21.59 | % | | 16.89 | % |
Total return(4) | (15.56 | )% | | 10.62 | % |
Supplemental Data: | | | |
Efficiency ratio(5) | 17.04 | % | | 25.07 | % |
shares of the Company's and MVC's common stock, the payment of tax dividends by MVC, undistributed investment company taxable income and undistributed net capital gains of MVC and changes of the Euro-to-U.S. dollar exchange rate relating to certain of MVC’s investments between April 30, 2020 and the closing date. | |
(1) | Weighted average basic per share data. |
| |
(2) | Represents the impact of the different share amounts used in calculating per share data as a result of calculating certain per share data based upon the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date. |
| |
(3) | Represents the closing price of the Company’s common stock on the last day of the period. |
| |
(4) | Total return is based on purchase of stock at the current market price on the first day and a sale at the current market price on the last day of each period reported on the table and assumes reinvestment of dividends at prices obtained by the Company's dividend reinvestment plan during the period. Total return is not annualized. |
| |
(5) | Efficiency ratio equals the sum of (i) compensation and related expenses and (ii) general and administrative expenses divided by total investment income. |
Consummation of the First Step, which is currently anticipated to occur during the fourth quarter of fiscal year 2020, is subject to certain customary closing conditions, including (1) adoption of the Merger Agreement by a majority of the outstanding shares of MVC's common stock, (2) approval of the issuance of the Company's common stock in the First Step by a majority of the votes cast by the Company's stockholders on the matter, (3) approval of the issuance of the Company’s common stock in connection with the First Step at a price below the then-current net asset value per share of the Company common stock, if applicable, by the vote specified in Section 63(2)(A) of the 1940 Act, as amended, (4) the absence of certain legal impediments to the consummation of the Merger, (5) effectiveness of the registration statement for the Company's common stock to be issued as consideration in the First Step, (6) approval for listing on the New York Stock Exchange of the Company's common stock to be issued as consideration in the First Step, (7) subject to certain materiality standards, the accuracy of the representations and warranties and compliance with the covenants of each party to the Merger Agreement, and (8) required regulatory approvals (including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")). Early termination of the waiting period under the HSR Act was granted on September 30, 2020. In addition, the Company and MVC will take steps necessary to provide for the repayment at closing of MVC’s credit facilities and the redemption or assumption of MVC’s 6.25% senior notes due November 30, 2022.
The Company is expected to account for the Merger as an asset acquisition in accordance with the asset acquisition method of accounting as detailed in ASC 805-50, Business Combinations-Related Issues. Under asset acquisition accounting, acquiring assets in groups not only requires ascertaining the cost of the asset (or net assets), but also allocating that cost to the individual assets (or individual assets and liabilities) that make up the group. Per ASC 805-50-30-1, the acquired assets (as a group) are recognized based on their cost to the acquiring entity, which generally includes transaction costs of the asset acquisition, and no gain or loss is recognized unless the fair value of noncash assets given as consideration differs from the assets carrying amounts on the acquiring entity’s records. ASC 805-50-30-2 goes on to say asset acquisitions in which the consideration given is cash are measured by the amount of cash paid. However, if the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities incurred, or equity interests issued), measurement is based on the cost to the acquiring entity or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measured.
If the fair value of the net assets to be acquired exceeds the fair value of the Merger Consideration to be paid by the Company, then the Company would recognize a deemed contribution from Barings in an amount up to approximately $7.0 million. If the fair value of net assets to be acquired exceeds the fair value of the Merger Consideration to be paid by the Company and by Barings, then the Company would also recognize a purchase accounting gain. Alternatively, if the fair value of the net assets to be acquired is less than the fair value of the portion of the Merger Consideration to be paid by the Company, then the Company would recognize a purchase accounting loss. The Company expects any potential gain or loss would be classified as unrealized on the statement of operations until the underlying assets are sold.
The cost of the group of assets acquired in an asset acquisition is allocated to the individual assets acquired or liabilities assumed based on their relative fair values of net identifiable assets acquired other than “non-qualifying” assets (for example cash) and does not give rise to goodwill. The final allocation of the purchase price will be determined after the Merger is completed and after completion of a final analysis to determine the estimated relative fair values of the acquired assets and liabilities.
10. SUBSEQUENT EVENTS
In October 2017,Subsequent to September 30, 2020, the Company invested $32.5made approximately $155.4 million of new commitments, of which $130.6 million closed and funded. The $130.6 million of investments consist of $128.5 million of first lien senior secured debt investments and a $2.1 million second lien senior secured term loan with a combined weighted average yield of 6.2%. In addition, the Company funded $8.7 million of previously committed delayed draw term loans.
On October 15, 2020, the 2019 Notes were repaid in full. See Note 5 to our Unaudited Consolidated Financial Statements for information regarding the 2019 Notes.
On November 4, 2020, the Company entered into a Note Purchase Agreement (the “November NPA”) governing the issuance of (1) $62.5 million in aggregate principal amount of Series B senior unsecured notes (“Series B Notes”) due November 2025 with a fixed interest rate of 4.25% per year and (2) $112.5 million in aggregate principal amount of Series C senior unsecured notes (“Series C Notes” and, collectively with the Series B Notes, the “November Notes”) due November
Barings BDC, Inc.
Notes to Unaudited Consolidated Financial Statements — (Continued)
2027 with a fixed interest rate of 4.75% per year, in each case, to qualified institutional investors in a private placement. Each stated interest rate is subject to a step up of (x) 0.75% per year, to the extent the applicable November Notes do not satisfy certain investment grade conditions and/or (y) 1.50% per year, to the extent the ratio of secured debt securityto total assets exceeds specified thresholds, measured as of Deva Holdings, Inc. Undereach fiscal quarter end. The November Notes were delivered and paid for on November 5, 2020. The Series B Notes will mature on November 4, 2025 and the termsSeries C Notes will mature on November 4, 2027 unless redeemed, purchased or prepaid prior to such date by the Company or its affiliates in accordance with their terms. Interest on the November Notes will be due semiannually. In addition, the Company is obligated to offer to repay the November Notes at par if certain change in control events occur. The August 2025 Notes will be the Company's general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.
In connection with the November NPA, also on November 4, 2020, the Company amended the Note Purchase Agreement entered into on August 3, 2020 to reduce the aggregate principal amount of unissued Additional Notes from $50.0 million to $25.0 million.
On November 9, 2020 the Board declared a quarterly distribution of $0.17 per share payable on December 2, 2020 to holders of record as of November 25, 2020.
See Note 7 to our Unaudited Consolidated Financial Statements for information regarding the potential impact of the COVID-19 pandemic. To the extent the Company's portfolio companies are adversely impacted by the effects of the COVID-19 pandemic, it may have a material adverse impact on the Company's future net investment income, the debt security bears interest at a ratefair value of LIBOR plus 6.75% per annum.its portfolio investments, its financial condition and the results of operations and financial condition of the Company's portfolio companies.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion is designed to provide a better understanding of our unaudited consolidated financial statements for the three and nine months ended September 30, 2017,2020, including a brief discussion of our business, key factors that impacted our performance and a summary of our operating results. The following discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2016.2019. Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods.
Forward-Looking Statements
Some of the statements in this Quarterly Report constitute forward-looking statements because they relate to future events or our future performance or financial condition. Forward-looking statements may include, among other things, statements as to our future operating results, our business prospects and the prospects of our portfolio companies, the impact of the investments that we expect to make, the ability of our portfolio companies to achieve their objectives, our expected financings and investments, the adequacy of our cash resources and working capital, and the timing of cash flows, if any, from the operations of our portfolio companies. Words such as “expect,” “anticipate,” “target,” “goals,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “forecast,” “may,” “should,” “potential,”"expect," "anticipate," "target," "goals," "project," "intend," "plan," "believe," "seek," "estimate," "continue," "forecast," "may," "should," "potential," variations of such words, and similar expressions indicate a forward-looking statement, although not all forward-looking statements include these words. Readers are cautioned that the forward-looking statements contained in this Quarterly Report are only predictions, are not guarantees of future performance, and are subject to risks, events, uncertainties and assumptions that are difficult to predict. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factorsitems discussed herein, and in Item 1A entitled “Risk Factors”"Risk Factors" in Part I of our Annual Report on Form 10-K for the year ended December 31, 2016.2019 and in Item 1A entitled "Risk Factors" in Part II of our subsequently filed Quarterly Reports on Form 10-Q, including our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. Other factors that could cause our actual results and financial condition to differ materially include, but are not limited to, changes in political, economic or industry conditions, the economy,interest rate environment or conditions affecting the financial and capital markets, including with respect to changes from the impact of the Coronavirus (“COVID-19”) pandemic; the length and duration of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak; the effect of the COVID-19 pandemic on our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives; the effect of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business and on the availability of equity and debt capital and our use of borrowed money to finance a portion of our investments; risks associated with possible disruption due to terrorism in our operations or the economy generally, andgenerally; future changes in laws or regulations and conditions in our operating areas.areas and risks related to the pending MVC Capital, Inc. acquisition. These statements are based on our current expectations, estimates, forecasts, information and projections about the industry in which we operate and the beliefs and assumptions of our management as of the date of this Quarterly Report. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless we are required to do so by law. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
Overview of Our Business
We are a Maryland corporation incorporated on October 10, 2006. On August 2, 2018, we entered into an investment advisory agreement, or the Advisory Agreement, and an administration agreement, or the Administration Agreement, with Barings LLC, or Barings, and became an externally-managed BDC managed by Barings. An externally-managed BDC generally does not have any employees, and its investment and management functions are provided by an outside investment adviser and administrator under an advisory agreement and administration agreement. Instead of directly compensating employees, we pay Barings for investment and management services pursuant to the terms of the Advisory Agreement and the Administration Agreement. Under the terms of the Advisory Agreement, the fees paid to Barings for managing our affairs will be determined based upon an objective and fixed formula, as compared with the subjective and variable nature of the costs associated with employing management and employees in an internally-managed BDC structure, which has electedinclude bonuses that cannot be directly tied to be treated and operates as an internally managed business development company, or BDC,Company performance because of restrictions on incentive compensation under the Investment Company Act of 1940, as amended, or the 1940 Act. Our wholly-owned subsidiaries, Triangle Mezzanine Fund LLLP, or Triangle SBIC, Triangle Mezzanine Fund II LP, or Triangle SBIC II
When Barings became our external investment adviser in August 2018, they initially focused our investments in syndicated senior secured loans, bonds and Triangle Mezzanine Fund III LP, or Triangle SBIC III, are licensed as small business investment companies, or SBICs, by the United States Small Business Administration, or SBA. In addition, Triangle SBICother fixed income securities. Since that time, Barings has also electedbeen transitioning our portfolio to be treated assenior secured private debt investments in middle-market businesses that operate across a BDCwide range of industries. Barings’ existing SEC co-investment exemptive relief under the 1940 Act. We, Triangle SBIC, Triangle SBIC IIAct, or the Exemptive Relief, permits us and Triangle SBIC III invest primarilyBarings’ affiliated private funds and SEC-registered funds to co-invest in Barings-originated loans, which allows Barings to efficiently implement its senior secured private debt instruments, equityinvestment strategy for us.
Barings employs fundamental credit analysis, and targets investments warrantsin businesses with relatively low levels of cyclicality and operating risk. The hold size of each position will generally be dependent upon a number of factors including total facility size, pricing and structure, and the number of other securities of lower middle market privately-held companies located primarilylenders in the United States.
Our business isfacility. Barings has experience managing levered vehicles, both public and private, and seeks to provide capital to lower middle market companies located primarily inenhance our returns through the United States. We focus on investments in companiesuse of leverage with a history of generating revenuesprudent approach that prioritizes capital preservation. Barings believes this strategy and positive cash flows, an establishedapproach offers attractive risk/return with lower volatility given the potential for fewer defaults and greater resilience through market position and a proven management team with a strong operating discipline. Our target portfolio company has annual revenues between $20.0 million and $300.0 million and annual earnings before interest, taxes, depreciation and amortization, or EBITDA, between $5.0 million and $75.0 million.
We invest in senior and subordinated debt securities of privately held companies, generally secured by security interests in portfolio company assets. In addition, we generally invest in one or more equity instruments of the borrower, such as direct preferred or common equity interests. Our investments generally range from $5.0 million to $50.0 million per portfolio company. In certain situations, we have partnered with other funds to provide larger financing commitments.
cycles.
We generate revenues in the form of interest income, primarily from our investments in debt securities, loan origination and other fees and dividend income. Fees generated in connection with our debt investments are recognized over the life of the loan using the effective interest method or, in some cases, recognized as earned. In addition, we generate revenue in the form of capital gains, if any, on warrants or other equity-related securities that we acquire from our portfolio companies. Our syndicated senior secured loans generally bear interest between LIBOR plus 300 basis points and LIBOR plus 400 points. Our senior secured, middle-market, private debt investments generally have a termterms of between threefive and seven years. In addition, our fixedOur senior secured, middle-market, private debt investments typicallygenerally bear interest between 10.0%LIBOR (or the applicable currency rate for investments in foreign currencies) plus 450 basis points and 15.0% per annum and our variable debt investments are generally LIBOR-based and typically bear interest between 8.0% and 13.0%LIBOR plus 650 basis points per annum. CertainFrom time to time, certain of our debt investments may have a form of interest, referred to as payment-in-kind, or PIK, interest, thatwhich is not paid currently but is instead accrued and added to the loan balance and paid at the end of the term. In our negotiations with potential portfolio companies, we generally seek to minimize PIK interest. Cash interest on our debt investments is generally payable monthly; however, some of our debt investments pay cash interest on a quarterly basis.
As of both September 30, 20172020 and December 31, 2016,2019, the weighted average yield on the principal amount of our outstanding debt investments other than non-accrual debt investments was approximately 11.2% and 11.7%, respectively.6.2%. The weighted average yield on all of our outstanding investments (including equity and equity-linked investments but excluding non-accrual debt investments) was approximately 9.8% and 10.2% as of September 30, 2017 and December 31, 2016, respectively. The weighted average yield onthe principal amount all of our outstanding investments (including equity and equity-linked investments and non-accrual debtshort-term investments) was approximately 8.3%5.0% and 9.7%5.8% as of September 30, 20172020 and December 31, 2016, respectively.2019, respectively
COVID-19 Developments
The weighted average yields across our investment portfolio dependspread of the Coronavirus and the COVID-19 pandemic, and the related effect on the relative seniorityU.S. and global economies, has had adverse consequences for the business operations of our investments within the capital structuressome of our portfolio companies and has adversely affected, and threatens to continue to adversely affect, our operations and the operations of Barings, including with respect to us. Barings has taken proactive steps around COVID-19 to address the potential impacts on their people, clients, communities and everyone they come in contact with, directly or through their premises. Protecting their employees and supporting the communities in which they live and work is a priority. Having performed stress-testing on their systems and processes, Barings was operating a 100% remote-working model across the United States, Europe and Australia. Over the past few months, Barings shifted to remote working and limited opening (inviting employees to return to the office on a volunteer basis only) and/or flexible working arrangements in Asia, Europe and U.S. sites, while maintaining service levels to partners and clients. Barings’ cybersecurity policies are applied consistently when working remotely or in the office.
While we have been carefully monitoring the COVID-19 pandemic and its impact on our security interests inbusiness and the business of our portfolio company assets. Historically, since our IPO in 2007,companies, we have primarily focused on investmentscontinued to fund our existing debt commitments. In addition, we have continued to make and originate, and expect to continue to make and originate, new loans.
We cannot predict the full impact of the COVID-19 pandemic, including its duration in subordinated debt securities, which generally produce higher yields than more senior securities duethe United States and worldwide and the magnitude of the economic impact of the outbreak, including with respect to the risks inherenttravel restrictions, business closures and other quarantine measures imposed on service providers and other individuals by various local, state, and federal governmental authorities, as well as non-U.S. governmental authorities. Many public health experts have predicted that the COVID-19 pandemic will worsen in investingthe fall and winter months as people in less senior positions. Beginning in 2016,the U.S. spend more time indoors where the virus can spread more easily. As such, we beganare unable to shiftpredict the duration of any business and supply-chain disruptions, the extent to which COVID-19 will negatively affect our focus toward largerportfolio companies’ operating results or the impact that such disruptions may have on our results of operations and less cyclicalfinancial condition. Depending on the duration and extent of the disruption to the operations of our portfolio companies, we expect that certain portfolio companies will experience financial distress and began steeringpossibly default on their financial obligations to us and their other capital providers. We also expect that some of our portfolio composition with a focuscompanies may significantly curtail business operations, furlough or lay off employees and terminate service providers, and defer capital expenditures if subjected to prolonged and severe financial distress, which would likely impair their business on a balance between senior and subordinated securities. This shift toward more senior securities is intended to reduce our credit risks in exchange for lower-yielding investments, which in turn has resultedpermanent basis. These developments would likely result in a decrease in the weighted average yieldvalue of our investment in any such portfolio company.
The COVID-19 pandemic and the related disruption and financial distress experienced by our portfolio companies may have material adverse effects on our investment portfolio.income, particularly our interest income, received from our investments. In connection with the adverse effects of the COVID-19 pandemic, we may need to restructure our investments in some of our portfolio companies, which could result in reduced interest payments, an increase in the amount of PIK interest we receive, or result in permanent impairments on our investments. If we restructure a portfolio investment included in the borrowing base under the February 2019 Credit Facility in certain ways, including but not limited to a reduction in interest income received from any such investment or modification of a loan to accrue certain levels of PIK interest instead of cash, then such modifications could result in a reduction in the borrowing base under the February 2019 Credit Facility. In addition, if a portfolio investment included in the borrowing base under the February 2019 Credit Facility defaults on its obligations or if any such portfolio investment is placed on non-accrual, then there will be a reduction in the borrowing base under the February 2019 Credit Facility. Any reduction in the borrowing base under the February 2019 Credit Facility could have a material adverse effect on our results of operations, financial condition and available liquidity. In addition, any decreases in our net investment income would increase the portion of our cash flows dedicated to servicing our existing borrowings under the February 2019 Credit Facility, the Debt Securitization and the August 2025 Notes (each as defined below under "Liquidity and Capital Resources"). As a result, we continue this balanced strategy,may be required to reduce the amount of our distributions to stockholders.
As of September 30, 2020, we are permitted under the 1940 Act, as a BDC, to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowing. In addition, the February 2019 Credit Facility and the August 2025 Notes contains affirmative and negative covenants and events of default relating to minimum stockholders’ equity, minimum obligors’ net worth, minimum asset coverage, minimum liquidity and maintenance of RIC and BDC status, as well as cross-default provisions relating to other indebtedness.
As of September 30, 2020, we are in compliance with our asset coverage requirements under the percentage1940 Act. In addition, we are not in default under our credit facility as of September 30, 2020. However, any increase in unrealized depreciation of our investment portfolio that is comprised of senior debt investments increases, we expector further significant reductions in our investment-related risks to be mitigated to an extent, but we also expect the weighted average yields on our portfolio to continue to decrease.
Triangle SBIC, Triangle SBIC II and Triangle SBIC III are eligible to issue debentures to the SBA, which pools these with debentures of other SBICs and sells them in the capital markets at favorable interest rates, in partnet asset value as a result of the guaranteeeffects of paymentthe COVID-19 pandemic or otherwise increases the risk of breaching the relevant covenants, including those relating to minimum stockholders’ equity, minimum obligors’ net worth, and minimum asset coverage. If we fail to satisfy the covenants in the February 2019 Credit Facility or are unable to cure any event of default or obtain a waiver from the SBA. Triangle SBIC, Triangle SBIC IIapplicable lender, it could result in foreclosure by the lenders under the credit facility, which would accelerate our repayment obligations under the February 2019 Credit Facility and Triangle SBIC III invest these fundsthereby have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders.
We are also subject to financial risks, including changes in market interest rates. As of September 30, 2020, approximately $929.3 million (principal amount) of our debt portfolio companies. investments bore interest at variable rates, which generally are LIBOR-based (or based on an equivalent applicable currency rate), and many of which are subject to certain floors. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments, a decrease in in our operating expenses, including with respect to our income incentive fee, or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for an analysis of the impact of hypothetical base rate changes in interest rates.
We intend towill continue to operate Triangle SBIC, Triangle SBIC IImonitor the situation relating to the COVID-19 pandemic and Triangle SBIC IIIguidance from U.S. and international authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our plan of operation. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. However, to the extent our portfolio companies are adversely impacted by the effects of the COVID-19 pandemic, it may have a material adverse impact on our future net investment income, the fair value of our portfolio investments, its financial condition and the results of operations and financial condition of our portfolio companies.
Relationship with Our Adviser, Barings
Our investment adviser, Barings, a wholly-owned subsidiary of Massachusetts Mutual Life Insurance Company, is a leading global asset management firm and is registered with the SEC as SBICs,an investment adviser under the Investment Advisers Act of 1940, as amended. Barings’ primary investment capabilities include fixed income, private credit, real estate, equity, and alternative investments. Subject to the overall supervision of our board of directors, or the Board, Barings’ Global Private Finance Group, or BGPF, manages our day-to-day operations, and provides investment advisory and management services to us. BGPF is part of Barings' $269.6 billion Global Fixed Income Platform that invests in liquid, private and structured credit. BGPF manages private funds and separately managed accounts, along with multiple public vehicles.
Among other things, Barings (i) determines the composition of our portfolio, the nature and timing of the changes therein and the manner of implementing such changes; (ii) identifies, evaluates and negotiates the structure of the investments made by us; (iii) executes, closes, services and monitors the investments that we make; (iv) determines the securities and other assets that we will purchase, retain or sell; (v) performs due diligence on prospective portfolio companies and (vi) provides us with such other investment advisory, research and related services as we may, from time to time, reasonably require for the investment of our funds.
Under the terms of the Administration Agreement, Barings has agreed to perform (or oversee, or arrange for, the performance of) the administrative services necessary for our operation, including, but not limited to, office facilities, equipment, clerical, bookkeeping and record keeping services at such office facilities and such other services as Barings, subject to SBAreview by the Board, will from time to time determine to be necessary or useful to perform its obligations under the Administration Agreement. Barings will also, on our behalf and subject to the Board’s approval, arrange for the services of, and oversee, custodians, depositories, transfer agents, dividend disbursing agents, other stockholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to utilizebe necessary or desirable. Barings is responsible for the proceedsfinancial and other records that we are required to maintain and will prepare all reports and other materials required to be filed with the SEC or any other regulatory authority.
Stockholder Approval of Reduced Asset Coverage Ratio
On July 24, 2018, our stockholders voted at a special meeting of stockholders, or the Special Meeting, to approve a proposal to authorize us to be subject to a reduced asset coverage ratio of at least 150% under the 1940 Act. As a result of the stockholder approval at the Special Meeting, effective July 25, 2018, our applicable asset coverage ratio under the 1940 Act has been decreased to 150% from 200%. As a result, we are permitted under the 1940 Act to incur indebtedness at a level which is more consistent with a portfolio of senior secured debt. As of September 30, 2020, our asset coverage ratio was 176.0%.
Pending MVC Capital, Inc. Acquisition
On August 10, 2020, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) among MVC Capital, Inc., a Delaware corporation (“MVC”), Mustang Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Acquisition Sub”), and Barings. The Merger Agreement provides that, on the terms and subject to the conditions set forth in the Merger Agreement, Acquisition Sub will merge with and into MVC, with MVC continuing as the surviving company and as a wholly-owned subsidiary of us (the “First Step”) and, immediately thereafter, MVC will merge with and into us, and we continue as the surviving company (the “Second Step” and, together with the First Step, the “Merger”). The boards of directors of both us and MVC, including all of the respective independent directors, have approved the Merger Agreement and the transactions contemplated therein. The parties to the Merger Agreement intend the Merger to be treated as a “reorganization” within the meaning of Section 368(a)(1)(A) of the Code.
In the First Step, each share of MVC's common stock issued and outstanding immediately prior to the effective time of the First Step (excluding any shares cancelled pursuant to the Merger Agreement) will be converted into the right to receive (i) $0.39492 per share in cash, without interest, from Barings (such amount of cash, the “Cash Consideration”) and (ii) 0.94024 (the “Exchange Ratio,” such ratio as may be adjusted pursuant to the Merger Agreement) of a validly issued, fully paid and non-assessable share of the Company's common stock, par value $0.001 per share (the “Share Consideration” and together with the Cash Consideration, the “Merger Consideration”). Pursuant to the Merger Agreement, total value of the consideration to be received by MVC stockholders at closing is subject to adjustment as set forth in the Merger Agreement and may be different than the estimated total consideration described herein depending on a number of factors, including the number of outstanding shares of our and MVC common stock, the payment of tax dividends by MVC, undistributed investment company taxable income and undistributed net capital gains of MVC and changes of the Euro-to-U.S. dollar exchange rate relating to certain of MVC’s investments between April 30, 2020 and the closing date.
The Merger Agreement contains representations, warranties and covenants, including, among others, covenants relating to the operation of each of our and MVC’s businesses during the period prior to the closing of the Merger. We and MVC have agreed to convene and hold stockholder meetings for the purpose of obtaining the approvals required of our and MVC’s stockholders, respectively, and the boards of directors of us and MVC have agreed to recommend that their respective stockholders approve the applicable proposals.
The Merger Agreement provides that MVC shall not, and shall cause its representatives and subsidiaries not to, solicit proposals relating to alternative transactions, or, subject to certain exceptions, initiate or participate in discussions or negotiations regarding, or provide information with respect to, any proposal for an alternative transaction. However, the MVC board of directors may, subject to certain conditions, change its recommendation to the MVC stockholders or, on payment of a termination fee of approximately $2.94 million to us and the reimbursement of up to $1.18 million in expenses incurred by us and Barings, terminate the Merger Agreement and enter into an Alternative Acquisition Agreement (as defined in the Merger Agreement) for a Superior Proposal (as defined in the Merger Agreement) if it determines in good faith, after consultation with its outside legal counsel, that failure to do so would reasonably be expected to be inconsistent with its fiduciary duties or obligations under applicable law.
Consummation of the First Step, which is currently anticipated to occur during the fourth quarter of fiscal year 2020, is subject to certain customary closing conditions, including (1) adoption of the Merger Agreement by a majority of the outstanding shares of MVC common stock, (2) approval of the issuance of SBA-guaranteed debentures, referredCompany's common stock in the First Step by a majority of the votes cast by our stockholders on the matter, (3) approval of the issuance of our common stock in connection with the First Step at a price below the then-current net asset value per share of our common stock, if applicable, by the vote specified in Section 63(2)(A) of the 1940 Act, as amended, (4) the absence of certain legal impediments to hereinthe consummation of the Merger, (5) effectiveness of the registration statement for our common stock to be issued as SBA leverage,consideration in the First Step, (6) approval for listing on the New York Stock Exchange of our common stock to enhance returnsbe issued as consideration in the First Step, (7) subject to certain materiality standards, the accuracy of the representations and warranties and compliance with the covenants of each party to the Merger Agreement, and (8) required regulatory approvals (including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")). Early termination of the waiting period under the HSR Act was granted on September 30, 2020.
In addition, the Company and MVC will take steps necessary to provide for the repayment at closing of MVC’s credit facilities and the redemption or assumption of MVC’s 6.25% senior notes due November 30, 2022.
The Merger Agreement also contains certain termination rights in favor of us and MVC, including if the First Step is not completed on or before February 10, 2021 or if the requisite approvals of our stockholders.
stockholders or MVC's stockholders are not obtained. The Merger Agreement also provides that, upon the valid termination of the Merger Agreement under certain circumstances, we may be required to pay or cause to be paid to MVC a termination fee of approximately $4.70 million, or MVC may be required to pay or cause to be paid to us a termination fee of approximately $2.94 million.
Portfolio Investment Composition
The total value of our investment portfolio was $1.1 billion$1,116.3 million as of September 30, 2017,2020, as compared to $1.0 billion$1,173.6 million as of December 31, 2016.2019. As of September 30, 2017,2020, we had investments in 91115 portfolio companies, 11 structured product investments and four money market funds with an aggregate cost of $1.2 billion.$1,131.9 million. As of December 31, 2016,2019, we had investments in 88147 portfolio companies and two money market fund with an aggregate cost of $1.1 billion.$1,192.6 million. As of both September 30, 20172020 and December 31, 2016,2019, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.
As of September 30, 20172020 and December 31, 2016,2019, our investment portfolio consisted of the following investments:
| | | | | | | | | | | | Cost | | Percentage of Total Portfolio | | Fair Value | | Percentage of Total Portfolio |
September 30, 2020: | | September 30, 2020: | | | | | | | |
Senior debt and 1st lien notes | | Senior debt and 1st lien notes | $ | 850,882,033 | | | 75 | % | | $ | 833,101,689 | | | 75 | % |
Subordinated debt and 2nd lien notes | | Subordinated debt and 2nd lien notes | 19,700,711 | | | 2 | | | 19,369,286 | | | 2 | |
Structured products | | Structured products | 31,517,698 | | | 3 | | | 33,164,151 | | | 3 | |
Equity shares | | Equity shares | 1,028,125 | | | — | | | 975,050 | | | — | |
Investments in joint ventures | | Investments in joint ventures | 18,258,270 | | | 2 | | | 19,158,075 | | | 2 | |
Short-term investments | | Short-term investments | 210,503,875 | | | 18 | | | 210,503,390 | | | 18 | |
| Cost | | Percentage of Total Portfolio | | Fair Value | | Percentage of Total Portfolio | | $ | 1,131,890,712 | | | 100 | % | | $ | 1,116,271,641 | | | 100 | % |
September 30, 2017: | | | | | | | | |
Subordinated debt and 2nd lien notes | $ | 812,599,788 |
| | 66 | % | | $ | 688,995,595 |
| | 63 | % | |
Senior debt and 1st lien notes | 290,613,735 |
| | 23 |
| | 270,479,180 |
| | 25 |
| |
December 31, 2019: | | December 31, 2019: | | | | | | | |
Senior debt and 1st lien notes | | Senior debt and 1st lien notes | $ | 1,070,031,715 | | | 90 | % | | $ | 1,050,863,369 | | | 90 | % |
Subordinated debt and 2nd lien notes | | Subordinated debt and 2nd lien notes | 15,339,180 | | | 1 | | | 15,220,969 | | | 1 | |
Equity shares | 133,883,175 |
| | 11 |
| | 131,120,904 |
| | 12 |
| Equity shares | 515,825 | | | — | | | 760,716 | | | — | |
Equity warrants | 1,691,617 |
| | — |
| | 596,000 |
| | — |
| |
Investment in joint venture | | Investment in joint venture | 10,158,270 | | | 1 | | | 10,229,813 | | | 1 | |
Short-term investments | | Short-term investments | 96,568,940 | | | 8 | | | 96,568,940 | | | 8 | |
| $ | 1,238,788,315 |
| | 100 | % | | $ | 1,091,191,679 |
| | 100 | % | | $ | 1,192,613,930 | | | 100 | % | | $ | 1,173,643,807 | | | 100 | % |
December 31, 2016: | | | | | | | | |
Subordinated debt and 2nd lien notes | $ | 753,635,857 |
| | 69 | % | | $ | 690,159,367 |
| | 67 | % | |
Senior debt and 1st lien notes | 198,616,110 |
| | 18 |
| | 191,643,157 |
| | 18 |
| |
Equity shares | 140,524,807 |
| | 13 |
| | 154,216,657 |
| | 15 |
| |
Equity warrants | 4,154,717 |
| | — |
| | 1,888,000 |
| | — |
| |
| $ | 1,096,931,491 |
| | 100 | % | | $ | 1,037,907,181 |
| | 100 | % | |
Investment Activity
During the nine months ended September 30, 2017,2020, we made twenty-two47 new investments totaling $328.2$263.9 million, debtmade investments in seventeen18 existing portfolio companies totaling $58.9$39.8 million, made one new joint venture equity investment totaling $3.1 million and made an additional investment in one existing joint venture equity investments in eleven existing portfolio companiescompany totaling $4.4$5.0 million. We had fourteen portfolio company15 loans repaid at par totaling $185.3total $58.5 million and received normal principal repayments and partial loan prepayments totaling $18.9$10.0 million in the nine months ended September 30, 2017. We converted a portion of a subordinated debt investment in one portfolio company into an equity investment and recognizedprincipal payments. In addition, we sold $307.4 million of loans, recognizing a net realized loss on such conversion totaling $0.3 million. We wrote off equity investments in seven portfolio companies and recognized realized losses on the write-offsthese transactions of $14.0$36.4 million, and wrote offsold $71.0 million of middle-market portfolio company debt investments in four portfolio companiesto our joint venture and recognized realized lossesa loss on the write-offsthese transactions of $22.5$1.1 million. In addition, one loan investment was restructured. Under U.S. GAAP, this restructuring was considered a material modification and as a result, we recognized a loss of approximately $0.6 million related to this restructuring. Lastly, we received proceeds related to the sales of certain equity securities totaling $27.5 million and recognized net realized gains on such sales totaling $19.8$0.3 million in the nine months ended September 30, 2017.escrow distributions from legacy portfolio companies, which were recognized as realized gains.
During the nine months ended September 30, 2016,2019, we made six26 new investments totaling $130.2$245.9 million, debtsix investments in ten existing portfolio companies totaling $27.8$12.2 million and made one new joint venture equity investments in nine existing portfolio companiesinvestment totaling $5.9$10.2 million. We had ten portfolio companynine loans repaid at par totaling $137.4total $71.1 million, resulting inreceived $28.8 million of portfolio company principal payments. In addition, we sold $148.4 million of loans, recognizing a net realized gains totaling $0.7loss on these transactions of $0.9 million and sold $10.2 million of middle-market portfolio company debt investments to our joint venture. In addition, certain terms of one broadly syndicated loan investment were amended. Under U.S. GAAP, this amendment was considered a material modification and as a result, we recognized a loss of approximately $0.2 million related to the amendment. Lastly, we received normal principal repayments and partial loan prepayments totaling $24.0$0.5 million in the nine months ended September 30, 2016. We converted subordinated debt investments in oneescrow distributions from four portfolio company into an equity investmentcompanies, which were recognized as realized gains, and recognized a realizednet loss on such conversion totaling $1.6 million. We wrote off an equity investment in one portfolio company and recognized a realized loss on the write-off of $2.0$0.5 million and wrote off a debt investment in one portfolio company and recognized a realized loss on the write-off of $16.1 million. In addition, we received proceeds related to the sales of certain equity securities totaling $20.8 million and recognized net realized gains on such sales totaling $12.2 million in the nine months ended September 30, 2016.royalty payments due from a legacy Triangle Capital Corporation portfolio company.
Total portfolio investment activity for the nine months ended September 30, 20172020 and 20162019 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2020: | Senior Debt and 1st Lien Notes | | Subordinated debt and 2nd Lien Notes | | Structured Products | | Equity Shares | | | | Investments in Joint Ventures | | Short-term Investments | | Total |
Fair value, beginning of period | $ | 1,050,863,369 | | | $ | 15,220,969 | | | $ | — | | | $ | 760,716 | | | | | $ | 10,229,813 | | | $ | 96,568,940 | | | $ | 1,173,643,807 | |
New investments | 266,791,834 | | | 4,877,442 | | | 31,518,233 | | | 512,299 | | | | | 8,100,000 | | | 697,141,627 | | | 1,008,941,435 | |
| | | | | | | | | | | | | | | |
Proceeds from sales of investments | (378,007,349) | | | (415,977) | | | — | | | (247,908) | | | | | — | | | (583,220,976) | | | (961,892,210) | |
| | | | | | | | | | | | | | | |
Loan origination fees received | (5,894,794) | | | (180,225) | | | — | | | — | | | | | — | | | — | | | (6,075,019) | |
Principal repayments received | (68,510,620) | | | — | | | (38,879) | | | — | | | | | — | | | — | | | (68,549,499) | |
Payment in kind interest earned | 236,572 | | | 35,108 | | | — | | | — | | | | | — | | | — | | | 271,680 |
| | | | | | | | | | | | | | | |
Accretion of loan discounts | 1,058,002 | | | 45,338 | | | 34,660 | | | — | | | | | — | | | — | | | 1,138,000 | |
Accretion of deferred loan origination revenue | 1,649,982 | | | 26,081 | | | — | | | — | | | | | — | | | — | | | 1,676,063 | |
Realized gain (loss) | (36,473,291) | | | (26,253) | | | 3,684 | | | 247,908 | | | | | — | | | 14,285 | | | (36,233,667) | |
Unrealized appreciation (depreciation) | 1,387,984 | | | (213,197) | | | 1,646,453 | | | (297,965) | | | | | 828,262 | | | (486) | | | 3,351,051 | |
Fair value, end of period | $ | 833,101,689 | | | $ | 19,369,286 | | | $ | 33,164,151 | | | $ | 975,050 | | | | | $ | 19,158,075 | | | $ | 210,503,390 | | | $ | 1,116,271,641 | |
|
| | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2017: | Subordinated Debt and 2nd Lien Notes | | Senior Debt and 1st Lien Notes | | Equity Shares | | Equity Warrants | | Total |
Fair value, beginning of period | $ | 690,159,367 |
| | $ | 191,643,157 |
| | $ | 154,216,657 |
| | $ | 1,888,000 |
| | $ | 1,037,907,181 |
|
New investments | 220,193,495 |
| | 158,635,429 |
| | 12,673,701 |
| | — |
| | 391,502,625 |
|
Reclassifications | 22,558,007 |
| | (22,558,007 | ) | | — |
| | — |
| | — |
|
Proceeds from sales of investments | — |
| | — |
| | (27,036,478 | ) | | (479,408 | ) | | (27,515,886 | ) |
Loan origination fees received | (3,471,655 | ) | | (2,262,235 | ) | | — |
| | — |
| | (5,733,890 | ) |
Principal repayments received | (163,054,918 | ) | | (41,159,263 | ) | | — |
| | — |
| | (204,214,181 | ) |
PIK interest earned | 8,033,507 |
| | 841,215 |
| | — |
| | — |
| | 8,874,722 |
|
PIK interest payments received | (7,847,417 | ) | | (507,979 | ) | | — |
| | — |
| | (8,355,396 | ) |
Accretion of loan discounts | 411,497 |
| | 54,694 |
| | — |
| | — |
| | 466,191 |
|
Accretion of deferred loan origination revenue | 2,798,373 |
| | 1,064,723 |
| | — |
| | — |
| | 3,863,096 |
|
Realized gain (loss) | (20,656,958 | ) | | (2,110,952 | ) | | 7,721,145 |
| | (1,983,692 | ) | | (17,030,457 | ) |
Unrealized gain (loss) | (60,127,703 | ) | | (13,161,602 | ) | | (16,454,121 | ) | | 1,171,100 |
| | (88,572,326 | ) |
Fair value, end of period | $ | 688,995,595 |
| | $ | 270,479,180 |
| | $ | 131,120,904 |
| | $ | 596,000 |
| | $ | 1,091,191,679 |
|
Weighted average yield on debt investments at end of period(1) | | | | 11.2 | % |
Weighted average yield on total investments at end of period(1) | | | | 9.8 | % |
Weighted average yield on total investments at end of period | | | | 8.3 | % |
| |
(1) | Excludes non-accrual debt investments |
|
| | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2016: | Subordinated Debt and 2nd Lien Notes | | Senior Debt and 1st Lien Notes | | Equity Shares | | Equity Warrants | | Total |
Fair value, beginning of period | $ | 699,125,083 |
| | $ | 132,929,264 |
| | $ | 141,555,369 |
| | $ | 3,667,000 |
| | $ | 977,276,716 |
|
New investments | 145,487,825 |
| | 3,000,000 |
| | 14,729,826 |
| | 650,000 |
| | 163,867,651 |
|
Reclassifications | 4,020,247 |
| | (4,020,247 | ) | | — |
| | — |
| | — |
|
Proceeds from sales of investments | — |
| | — |
| | (14,838,506 | ) | | (5,627,106 | ) | | (20,465,612 | ) |
Loan origination fees received | (3,165,460 | ) | | (40,000 | ) | | — |
| | — |
| | (3,205,460 | ) |
Principal repayments received | (157,151,997 | ) | | (4,536,285 | ) | | — |
| | — |
| | (161,688,282 | ) |
PIK interest earned | 10,548,903 |
| | 1,083,855 |
| | — |
| | — |
| | 11,632,758 |
|
PIK interest payments received | (7,219,058 | ) | | (236,150 | ) | | — |
| | — |
| | (7,455,208 | ) |
Accretion of loan discounts | 156,879 |
| | 150,202 |
| | — |
| | — |
| | 307,081 |
|
Accretion of deferred loan origination revenue | 3,289,162 |
| | 386,841 |
| | — |
| | — |
| | 3,676,003 |
|
Realized gain (loss) | (15,371,087 | ) | | (1,560,322 | ) | | 7,090,358 |
| | 3,153,206 |
| | (6,687,845 | ) |
Unrealized gain (loss) | (10,065,698 | ) | | (168,648 | ) | | 253,619 |
| | 454,900 |
| | (9,525,827 | ) |
Fair value, end of period | $ | 669,654,799 |
| | $ | 126,988,510 |
| | $ | 148,790,666 |
| | $ | 2,298,000 |
| | $ | 947,731,975 |
|
Weighted average yield on debt investments at end of period(1) | | | | 12.3 | % |
Weighted average yield on total investments at end of period(1) | | | | 10.5 | % |
Weighted average yield on total investments at end of period | | | | 10.0 | % |
| |
(1) | Excludes non-accrual debt investments |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2019: | Senior Debt and 1st Lien Notes | | Subordinated debt and 2nd Lien Notes | | Equity Shares | | Investment in Joint Venture | | Short-term Investments | | Total |
Fair value, beginning of period | $ | 1,068,436,847 | | | $ | 7,679,132 | | | $ | 515,825 | | | $ | — | | | $ | 45,223,941 | | | $ | 1,121,855,745 | |
New investments | 253,138,778 | | | 4,951,685 | | | — | | | 10,158,270 | | | 577,451,108 | | | 845,699,841 | |
| | | | | | | | | | | |
Proceeds from sales of investments | (158,612,687) | | | — | | | 56,068 | | | — | | | (571,122,802) | | | (729,679,421) | |
Loan origination fees received | (4,969,839) | | | (148,551) | | | — | | | — | | | — | | | (5,118,390) | |
Principal repayments received | (96,932,135) | | | (2,980,874) | | | — | | | — | | | — | | | (99,913,009) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Accretion of loan discounts | 187,967 | | | — | | | — | | | — | | | — | | | 187,967 | |
Accretion of deferred loan origination revenue | 1,190,821 | | | 63,413 | | | — | | | — | | | — | | | 1,254,234 | |
Realized loss | (1,090,219) | | | — | | | (56,068) | | | — | | | — | | | (1,146,287) | |
Unrealized appreciation (depreciation) | 24,897,740 | | | 124,484 | | | 179,835 | | | (121,970) | | | — | | | 25,080,089 | |
Fair value, end of period | $ | 1,086,247,273 | | | $ | 9,689,289 | | | $ | 695,660 | | | $ | 10,036,300 | | | $ | 51,552,247 | | | $ | 1,158,220,769 | |
Non-Accrual Assets
Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. As of both September 30, 2017, the fair value of our non-accrual assets was $51.2 million, which comprised 4.7% of the total fair value of our portfolio,2020 and the cost of our non-accrual assets was $165.7 million, which comprised 13.4% of the total cost of our portfolio. As of December 31, 2016, the fair value of our2019, we had no non-accrual assets was $15.9 million, which comprised 1.5% of the total fair value of our portfolio, and the cost of our non-accrual assets was $38.4 million, which comprised 3.5% of the total cost of our portfolio.
Our non-accrual assets as of September 30, 2017 were as follows:
Cafe Enterprises, Inc.
During the three months ended June 30, 2017, we placed our subordinated debt investment in Cafe Enterprises, Inc., or Cafe, on PIK non-accrual status. During the three months ended June 30, 2017, we invested approximately $1.5 million in a second lien term note in order to provide liquidity to support Cafe. In September 2017, we placed our debt investments in Cafe on non-accrual status effective with the quarterly payments due September 30, 2017. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investments in Cafe for financial reporting purposes. As of September 30, 2017, the cost of our debt investments in Cafe was $15.7 million and the fair value of such investments was $4.3 million.
Community Intervention Services, Inc.
In June 2017, we placed our debt investment in Community Intervention Services, Inc., or Community, on non-accrual status effective with the quarterly payment due June 30, 2017. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in Community for financial reporting purposes. As of September 30, 2017, the cost of our debt investment in Community was $17.7 million and the fair value of such investment was $3.7 million.
CRS Reprocessing, LLC
On August 7, 2017, CRS Reprocessing, LLC, or CRS, filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. As a result, we placed our debt investments in CRS on non-accrual status and under U.S. GAAP, we no longer recognize interest income on our debt investments in CRS for financial reporting purposes. As of September 30, 2017, the cost of our debt investments in CRS was $21.3 million and the fair value of such investments was $7.8 million.
DialogDirect, Inc.
In March 2017, we placed our debt investments in DialogDirect, Inc., or Dialog, on non-accrual status effective with the monthly payments due January 31, 2017. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investments in Dialog for financial reporting purposes. As of September 30, 2017, the cost of our debt investments in Dialog was $20.0 million and the fair value of such investments was $10.2 million.
DPII Holdings, LLC
During the three months ended March 31, 2016, we placed our Tranche I & II subordinated debt investments in DPII Holdings, LLC, or Datapath, on PIK non-accrual status. During the three months ended June 30, 2016, we invested approximately $1.6 million in a Tranche III subordinated debt investment in order to provide liquidity to support Datapath. This Tranche III subordinated debt investment bears interest at a rate of 0% Cash and 19% PIK. In the three months ended June 30, 2016, we placed both our Tranche I & II subordinated debt investments and our Tranche III subordinated debt investment in Datapath on full non-accrual status. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investments in Datapath for financial reporting purposes. As of September 30, 2017, the cost of our debt investments in Datapath was $5.0 million and the fair value of such investments was $2.7 million.
Eckler's Holdings, Inc.
During the three months ended June 30, 2017, we placed our subordinated debt investment in Eckler's Holdings, Inc., or Eckler's, on PIK non-accrual status. During the three months ended June 30, 2017, we invested approximately $0.7 million in subordinated debt in order to provide liquidity to support Eckler's. In September 2017, we placed our debt investment in Eckler's on non-accrual status effective with the quarterly payment due September 30, 2017. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in Eckler's for financial reporting purposes. As of September 30, 2017, the cost of our debt investment in Eckler's was $13.2 million and the fair value of such investment was $3.1 million.
Frank Entertainment Group, LLC
In September 2017, we placed our debt investments in Frank Entertainment Group, LLC, or Frank, on non-accrual status effective with the monthly payments due July 31, 2017. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investments in Frank for financial reporting purposes. As of September 30, 2017, the cost of our debt investments in Frank was $12.6 million and the fair value of such investments was $6.2 million.assets.
FrontStream Holdings, LLC
In September 2017, we placed our debt investment in FrontStream Holdings, LLC, or Frontstream, on non-accrual status effective with the quarterly payment due September 30, 2017. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in Frontstream for financial reporting purposes. As of September 30, 2017, the cost of our debt investment in Frontstream was $14.3 million and the fair value of such investment was $7.3 million.GST AutoLeather, Inc.
On October 3, 2017, GST AutoLeather, Inc., or GST, filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. As a result, we placed our debt investment in GST on non-accrual status effective with the quarterly payment due September 30, 2017 and under U.S. GAAP, we no longer recognize interest income on our debt investment in GST for financial reporting purposes. As of September 30, 2017, the cost of our debt investment in GST was $23.1 million and the fair value of such investment was $2.5 million.
Media Storm, LLC.
In September 2017, we placed our debt investment in Media Storm, LLC, or Media Storm, on non-accrual status effective with the quarterly payment due September 30, 2017. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in Media Storm for financial reporting purposes. As of September 30, 2017, the cost of our debt investment in Media Storm was $6.5 million and the fair value of such investment was $3.6 million.
Women's Marketing, Inc.
During the three months ended September 30, 2016, we placed our debt investment in Women's Marketing, Inc., or Women's Marketing, on PIK non-accrual status. In December 2016, we placed our debt investment in Women's Marketing on non-accrual status effective with the monthly payment due November 30, 2016. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in Women's Marketing for financial reporting purposes. As of September 30, 2017, the cost of our debt investment in Women's Marketing was $16.1 million and the fair value of such investment was zero.
Results of Operations
Comparison of threeThree and Nine months ended September 30, 20172020 and September 30, 20162019
Operating results for the three and nine months ended September 30, 2020 and 2019 were as follows:
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| Three Months Ended | | Three Months Ended | | Nine Months Ended | | Nine Months Ended |
| September 30, 2020 | | September 30, 2019 | | September 30, 2020 | | September 30, 2019 |
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Total investment income | $ | 16,329,142 | | | $ | 19,304,107 | | | $ | 51,148,504 | | | $ | 57,245,553 | |
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Total operating expenses | 8,368,976 | | | 11,316,932 | | | 29,365,140 | | | 33,888,209 | |
Net investment income | 7,960,166 | | | 7,987,175 | | | 21,783,364 | | | 23,357,344 | |
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Net realized losses | (20,506,085) | | | (983,499) | | | (37,323,454) | | | (1,063,250) | |
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Net unrealized appreciation (depreciation) | 55,947,382 | | | (1,794,828) | | | 1,594,639 | | | 25,454,367 | |
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Loss on extinguishment of debt | (216,474) | | | (13,357) | | | (660,066) | | | (143,108) | |
Benefit from (provision for) taxes | (7,362) | | | — | | | 10,105 | | | (499) | |
Net increase (decrease) in net assets resulting from operations | $ | 43,177,627 | | | $ | 5,195,491 | | | $ | (14,595,412) | | | $ | 47,604,854 | |
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Net increases (decreases) in net assets resulting from operations can vary substantially from period to period due to various factors, including recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, quarterly comparisons of net changes in net assets resulting from operations may not be meaningful.
Investment Income
For the three months ended September 30, 2017, total investment income was $29.9 million, a 9.0% increase from $27.4 million of total | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended | | Nine Months Ended | | Nine Months Ended |
| September 30, 2020 | | September 30, 2019 | | September 30, 2020 | | September 30, 2019 |
Investment income: | | | | | | | |
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Interest income | $ | 15,217,547 | | | $ | 18,448,942 | | | $ | 48,187,628 | | | $ | 55,557,780 | |
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Dividend income | — | | | 4,221 | | | 2,603 | | | 8,932 | |
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Fee and other income | 769,126 | | | 848,792 | | | 2,380,552 | | | 1,669,819 | |
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Payment-in-kind interest income | 342,469 | | | — | | | 577,090 | | | — | |
Interest income from cash | — | | | 2,152 | | | 631 | | | 9,022 | |
Total investment income | $ | 16,329,142 | | | $ | 19,304,107 | | | $ | 51,148,504 | | | $ | 57,245,553 | |
The change in investment income for the three and nine months ended September 30, 2016. This increase2020, as compared to the three and nine months ended September 30, 2019, was primarily attributable to an increase in portfolio debt investments from September 30, 2016 to September 30, 2017 and a $0.6 million increase in non-recurring fee income, partially offset by a $0.1 million decrease in non-recurring dividend income, a decrease in PIK interest income due to a decrease in PIK yielding investmentsLIBOR from September 30, 20162019 to September 30, 20172020 and a $3.5 million decrease in investment income relating to non-accrual assets and PIK non-accrual assets. Non-recurringthe average size of our portfolio. These decreases were partially offset by increases in fee income was $1.9 million for the three months ended
from September 30, 2017,2019 to September 30, 2020 and the continued rotation of our portfolio from syndicated senior secured loans to senior secured private debt investments in middle-market businesses, structured products and special situation loans. The weighted average yield on the principal amount of our outstanding debt investments was 6.2% as of September 30, 2020, as compared to $1.2 million for the three months ended 5.9% as of September 30, 2016. Non-recurring dividend income was $0.2 million for the three months ended September 30, 2017, as compared to $0.3 million for the three months ended September 30, 2016.2019.
Operating Expenses
For | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended | | Nine Months Ended | | Nine Months Ended |
| September 30, 2020 | | September 30, 2019 | | September 30, 2020 | | September 30, 2019 |
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Operating expenses: | | | | | | | |
Interest and other financing fees | $ | 3,738,991 | | | $ | 6,727,780 | | | $ | 14,367,855 | | | $ | 19,598,992 | |
Base management fees | 3,375,262 | | | 3,263,803 | | | 10,904,422 | | | 8,845,753 | |
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Compensation expenses | — | | | 107,779 | | | 48,410 | | | 334,869 | |
General and administrative expenses | 1,254,723 | | | 1,217,570 | | | 4,044,453 | | | 5,108,595 | |
Total operating expenses | $ | 8,368,976 | | | $ | 11,316,932 | | | 29,365,140 | | | 33,888,209 | |
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Interest and Other Financing Fees
Interest and other financing fees during the three months ended September 30, 2017, operating2020 were attributable to borrowings under the February 2019 Credit Facility, the Debt Securitization and the 2025 Notes (each as defined below under "Liquidity and Capital Resources"). Interest and other financing fees during the nine months ended September 30, 2020 were attributable to borrowings under the August 2018 Credit Facility, the February 2019 Credit Facility, the Debt Securitization and the 2025 Notes. Interest and other financing fees during the three and nine months ended September 30, 2019 were attributable to borrowings under the August 2018 Credit Facility, the February 2019 Credit Facility and the Debt Securitization. The decrease in interest and other financing fees for both the three and nine months ended September 30, 2020 as compared to the three and nine months ended September 30, 2019 was primarily attributable to the decrease in interest rates as result of decreases in LIBOR, STIBOR, GBP LIBOR and EURIBOR, as well as a reduction in the applicable margin on borrowings under the February 2019 Credit Facility from 2.25% to 2.00% in July 2020 as a result of our investment grade credit rating.
Base Management Fees
Under the Advisory Agreement, we pay Barings a base management fee quarterly in arrears on a calendar quarter basis. The base management fee is calculated based on the average value of our gross assets, excluding cash and cash equivalents, at the end of the two most recently completed calendar quarters prior to the quarter for which such fees are being calculated. See Note 2 to our unaudited consolidated financial statements for additional information regarding the Advisory Agreement and the fee arrangement thereunder. For the three and nine months ended September 30, 2020, the amount of base management fee incurred was approximately $3.4 million and $10.9 million, respectively. For the three and nine months ended September 30, 2019, the amount of base management fee incurred was approximately $3.3 million and $8.8 million, respectively. The increase between periods was primarily due to the increase in the base management fee rate to 1.375% for the three and nine months ended September 30, 2020, pursuant to the terms of the Advisory Agreement, as compared to 1.125% for the three and nine months ended September 30, 2019.
General and Administrative Expenses
On August 2, 2018, we entered into the Administration Agreement with Barings. Under the terms of the Administration Agreement, Barings performs (or oversees, or arranges for, the performance of) the administrative services necessary for our operations. We are required to reimburse Barings for the costs and expenses increasedincurred by 10.0%Barings in performing its obligations and providing personnel and facilities under the Administration Agreement. See Note 2 to $12.7our unaudited consolidated financial statements for additional information regarding the Administration Agreement. For the three and nine months ended September 30, 2020, the amount of administration expense incurred and invoiced by Barings for expenses was approximately $0.3 million from $11.6and $0.9 million, respectively. For the three and nine months ended September 30, 2019, the amount of administration expense incurred and invoiced by the Adviser for expenses was approximately $0.5 million and $1.9 million, respectively. In addition to expenses incurred under the Administration Agreement, general and administrative expenses include Board fees, D&O insurance costs, as well as legal and accounting expenses.
Net Realized Gains (Losses)
Net realized gains (losses) during the three and nine months ended September 30, 2020 and 2019 were as follows:
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| Three Months Ended | | Three Months Ended | | Nine Months Ended | | Nine Months Ended |
| September 30, 2020 | | September 30, 2019 | | September 30, 2020 | | September 30, 2019 |
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Net realized gain (losses): | | | | | | | |
Non-Control / Non-Affiliate investments | $ | (19,477,823) | | | $ | (1,066,536) | | | $ | (36,233,667) | | | $ | (1,146,287) | |
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Net realized losses on investments | (19,477,823) | | | (1,066,536) | | | (36,233,667) | | | (1,146,287) | |
Foreign currency transactions | (1,028,262) | | | 83,037 | | | (1,089,787) | | | 83,037 | |
Net realized losses | $ | (20,506,085) | | | $ | (983,499) | | | $ | (37,323,454) | | | $ | (1,063,250) | |
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In the three months ended September 30, 2016. Our operating expenses consist of interest and other financing fees, compensation expenses and general and administrative expenses.
For the three months ended September 30, 2017, interest and other financing fees increased by 9.4% to $7.4 million from $6.8 million for the three months ended September 30, 2016. The increase in interest and other financing fees was primarily related to increased borrowings under our third amended and restated senior secured credit facility, as amended on May 1, 2017, or the Credit Facility.
Compensation expenses are primarily influenced by headcount and levels of business activity. Our compensation expenses include salaries, discretionary compensation, equity-based compensation and benefits. Discretionary compensation is significantly impacted by our level of total investment income, our investment results including investment realizations, prevailing labor markets and the external environment. As a result of these and other factors, our compensation expenses can fluctuate materially from period to period. Accordingly, the amount of compensation expenses2020, we recognized in any particular period may not be indicative of compensation expenses in a future period.
For the three months ended September 30, 2017, compensation expenses increased by 9.1% to $4.3 million from $4.0 million for the three months ended September 30, 2016. For the three months ended September 30, 2017, general and administrative expenses increased by 18.5% to $1.0 million from $0.9 million for the three months ended September 30, 2016.
In addition, our efficiency ratio (defined as the sum of compensation expenses and general and administrative expenses as a percentage of total investment income) increased to 17.9% for the three months ended September 30, 2017 from 17.6% for the three months ended September 30, 2016.
Net Investment Income
As a result of the $2.5 million increase in total investment income and the $1.2 million increase in operating expenses, net investment income increased by 8.3% to $17.2 million for the three months ended September 30, 2017 as compared to $15.8 million for the three months ended September 30, 2016.
Net Increase/Decrease in Net Assets Resulting from Operations
In the three months ended September 30, 2017, we recognized realized losses totaling $8.9$20.5 million, which consisted primarily of a net loss on the write-offour loan portfolio of one control investment totaling $8.5 million, a net loss on the write-off of one affiliate investment totaling $6.1$19.5 million and a net loss on foreign currency transactions of $1.0 million. In the write-offnine months ended September 30, 2020, we recognized net realized losses totaling $37.3 million, which consisted primarily of one non-control/non-affiliate investments totaling $2.0a net loss on our loan portfolio of $36.5 million and a net loss on foreign currency transactions of $1.1 million, partially offset by net gains$0.2 million in escrow distributions we received from the sale of five non-control/non-affiliate investments totaling $6.1 million, and a net gain from the sale of one affiliate investment totaling $1.7 million. legacy portfolio companies, which were recognized as realized gains.
In addition, during the three months ended September 30, 2017,2019, we recognized net realized losses totaling $1.0 million, which consisted primarily of a net loss on our syndicated senior secured loan portfolio of $0.5 million and a net loss of $0.5 million related to royalty payments due from a legacy Triangle Capital portfolio company, partially offset by a net gain on foreign currency
transactions of $0.1 million. In the nine months ended September 30, 2019, we recognized a net realized loss totaling $1.1 million, which consisted primarily of a net loss on our syndicated senior secured loan portfolio of $1.1 million and a net loss of $0.5 million related to royalty payments due from a legacy Triangle Capital portfolio company, partially offset by $0.5 million in escrow distributions we received from four portfolio companies, which were recognized as realized gains, and a net gain on foreign currency transactions of $0.1 million.
Net Unrealized Appreciation (Depreciation)
Net unrealized appreciation (depreciation) during three and nine months ended September 30, 2020 and 2019 was as follows:
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| Three Months Ended | | Three Months Ended | | Nine Months Ended | | Nine Months Ended |
| September 30, 2020 | | September 30, 2019 | | September 30, 2020 | | September 30, 2019 |
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Net unrealized appreciation (depreciation): | | | | | | | |
Non-Control / Non-Affiliate investments | $ | 56,467,202 | | | $ | (2,209,225) | | | $ | 2,522,789 | | | $ | 25,202,059 | |
Affiliate investments | 1,624,230 | | | 40,119 | | | 828,262 | | | (121,970) | |
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Net unrealized appreciation (depreciation) on investments | 58,091,432 | | | (2,169,106) | | | 3,351,051 | | | 25,080,089 | |
Foreign currency transactions | (2,144,050) | | | 374,278 | | | (1,756,412) | | | 374,278 | |
Net unrealized appreciation (depreciation) | $ | 55,947,382 | | | $ | (1,794,828) | | | $ | 1,594,639 | | | $ | 25,454,367 | |
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During the three months ended September 30, 2020, we recorded net unrealized appreciation totaling $55.9 million, consisting of net unrealized appreciation on our current portfolio of $29.7 million, net unrealized depreciation related to foreign currency transactions of $2.1 million and net unrealized appreciation reclassification adjustments of $28.4 million related to the net realized losses on the sales / repayments of certain investments. The net unrealized appreciation on our current portfolio of $29.7 million was driven primarily by the credit or fundamental performance of middle-market debt investments of $1.1 million, the impact of foreign currency exchange rates on middle-market debt investments of $1.9 million and the broad market moves for the entire investment portfolio of $26.7 million.
During the nine months ended September 30, 2020, we recorded net unrealized appreciation totaling $65.8$1.6 million, consisting of net unrealized depreciation on our current portfolio of $74.5$48.1 million, net unrealized depreciation related to foreign currency transactions of $1.8 million and net unrealized appreciation reclassification adjustments of $8.8$51.4 million related to the net realized gainslosses on the sales / repayments of certain investments. The net unrealized depreciation on our current portfolio of $48.0 million was driven primarily by the credit or fundamental performance of middle-market debt investments of $4.2 million and losses noted above.broad market moves for the entire investment portfolio of $45.7 million, partially offset by the impact of foreign currency exchange rates on middle-market debt investments of $1.9 million.
InDuring the three months ended September 30, 2016, we recognized realized losses totaling $11.2 million, which consisted primarily of a net loss on the write-off of one non-control/non-affiliate investment totaling $16.1 million, partially offset by net gains on the sales of four non-control/non-affiliate investments totaling $4.9 million. In addition, during the three months ended
September 30, 2016,2019, we recorded net unrealized appreciationdepreciation totaling $3.2$1.8 million, consisting of net unrealized depreciation on our current portfolio of $9.0$3.1 million, net unrealized appreciation related to foreign currency transactions of $0.4 million and net unrealized appreciation reclassification adjustments of $12.2$0.9 million related predominately to the net realized gains and losses noted above.
As a resulton the sales / repayments of these events, our net decrease in net assets resulting from operations was $57.5 million for the three months ended September 30, 2017, as compared to a net increase in net assets resulting from operations of $7.9 million for the three months ended September 30, 2016.
Comparison of nine months ended September 30, 2017 and September 30, 2016
Investment Income
Forcertain syndicated secured loans. During the nine months ended September 30, 2017, total investment income was $91.3 million, a 10.7% increase from $82.5 million of total investment income for the nine months ended September 30, 2016. This increase was primarily attributable to an increase in portfolio debt investments from September 30, 2016 to September 30, 2017 and a $1.9 million increase in non-recurring dividend income, partially offset by a $0.8 million decrease in non-recurring fee income, a decrease in PIK interest income due to a decrease in PIK yielding investments from September 30, 2016 to September 30, 2017 and a $5.1 million decrease in investment income relating to non-accrual assets and PIK non-accrual assets. Non-recurring fee income was $3.7 million for the nine months ended September 30, 2017 as compared to $4.5 million for the nine months ended September 30, 2016. Net non-recurring dividend income was $1.6 million for the nine months ended September 30, 2017 as compared to $(0.3) million for the nine months ended September 30, 2016. Our net negative non-recurring dividend income during the nine months ended September 30, 2016 consisted of non-recurring dividend income of approximately $0.9 million and a negative true-up adjustment of $1.3 million related to a portfolio company distribution that was received in 2015. In 2015, we received information that indicated that the tax character of the distribution was 100% dividend income, but received updated information in 2016 indicating that only 14% of the distribution was dividend income and the remainder was a return of capital, which necessitated the adjustment.
Operating Expenses
For the nine months ended September 30, 2017, operating expenses decreased by 9.2% to $37.0 million from $40.7 million for the nine months ended September 30, 2016. Our operating expenses consist of interest and other financing fees, compensation expenses and general and administrative expenses.
For the nine months ended September 30, 2017, interest and other financing fees increased by 6.9% to $21.4 million from $20.0 million for the nine months ended September 30, 2016. The increase in interest and other financing fees was related primarily to interest and fee amortization of $0.5 million on the incremental $25.0 million of borrowings outstanding under our SBA-guaranteed debentures and an increase of $0.8 million related to increased borrowings under our Credit Facility.
For the nine months ended September 30, 2017, compensation expenses decreased by 30.6% to $12.1 million from $17.5 million for the nine months ended September 30, 2016. The higher level of compensation expenses in the nine months ended September 30, 2016 was primarily related to one-time expenses associated with the retirement of our former Chief Executive Officer, Garland S. Tucker, III, from his officer positions in February 2016. Our Board of Directors awarded Mr. Tucker a $2.5 million cash bonus and accelerated the vesting of his outstanding shares of restricted stock, including 47,000 shares of restricted stock awarded to him in February 2016 based on his performance during 2015, and certain other compensation in connection with his retirement and in recognition of his long service. We recognized $5.5 million in one-time compensation expenses in the nine months ended September 30, 2016 associated with Mr. Tucker's retirement.
For the nine months ended September 30, 2017, general and administrative expenses increased by 7.4% to $3.4 million from $3.2 million for the nine months ended September 30, 2016.
In addition, our efficiency ratio (defined as the sum of compensation expenses and general and administrative expenses as a percentage of total investment income) decreased to 17.0% for the nine months ended September 30, 2017 from 25.1% for the nine months ended ended September 30, 2016.
Net Investment Income
As a result of the $8.8 million increase in total investment income and the $3.8 million decrease in operating expenses, net investment income increased by 30.1% to $54.3 million for the nine months ended September 30, 2017 as compared to $41.8 million for the nine months ended September 30, 2016.
Net Increase/Decrease in Net Assets Resulting from Operations
In the nine months ended September 30, 2017, we recognized realized losses totaling $17.0 million, which consisted primarily of net losses on the write-offs of two control investments totaling $13.0 million, a net loss on the write-off of one affiliate investment totaling $6.1 million and net losses on the restructurings/write-offs of five non-control/non-affiliate investments totaling $17.7 million, partially offset by net gains on the sales of twelve non-control/non-affiliate investments totaling $14.6 million and net gains on the sales of five affiliate investments totaling $5.1 million. In addition, during the nine months ended September 30, 2017,2019, we recorded net unrealized depreciationappreciation totaling $89.3$25.5 million, consisting of net unrealized depreciationappreciation on our current portfolio of $108.0$19.6 million, net unrealized appreciation related to foreign currency transactions of $0.4 million and net unrealized appreciation reclassification adjustments of $18.7$5.5 million related predominately to the net realized gains and losses noted above.
In the nine months ended September 30, 2016, we recognized realized losses totaling $6.7 million, which consisted primarily of net losses on the the write-off/sales of four affiliate investments totaling $1.7 million, a loss on the restructuring of one non-control/non-affiliate investment totaling $1.6 million and a loss on the write-off of one non-control/non-affiliate investment totaling $16.1 million, partially off-set by net gains on the sales// repayments of fourteen non-control/non-affiliate investments totaling $12.7 million. In addition, during the nine months ended September 30, 2016, we recorded net unrealized depreciation totaling $8.1 million, consisting of net unrealized depreciation on our current portfolio of $15.7 million and net unrealized appreciation reclassification adjustments of $7.5 million related to the realized gains and losses noted above.certain syndicated secured loans.
As a result of these events, our net decrease in net assets resulting from operations was $52.3 million for the nine months ended September 30, 2017, as compared to a net increase in net assets resulting from operations of $27.0 million for the nine months ended September 30, 2016.
Liquidity and Capital Resources
We believe that our current cash and cash equivalents on hand, our short-term investments, sales of our syndicated senior secured loans, our available borrowing capacity under the February 2019 Credit Facility and August 2020 Notes (as defined below under "Financing Transactions") and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months. This "Liquidity and Capital Resources" section should be read in conjunction with "COVID-19 Developments" above.
In the future, depending on the valuation of Triangle SBIC’s assets, Triangle SBIC II's assets and Triangle SBIC III’s assets pursuant to SBA guidelines, Triangle SBIC, Triangle SBIC II and Triangle SBIC III may be limited by provisions of the Small Business Investment Act of 1958, as amended, or the Small Business Investment Act, and SBA regulations governing SBICs, from making certain distributions to Triangle Capital Corporation that may be necessary to enable Triangle Capital Corporation to make the minimum required distributions to its stockholders and qualify as a regulated investment company, or RIC.
Cash Flows
For the nine months ended September 30, 2017,2020, we experienced a net decrease in cash and cash equivalents in the amount of $26.1$7.2 million. During that period, our operating activities provided $4.8 million in cash, consisting primarily of proceeds from sales of portfolio investments totaling $417.0 million and sales of short-term investments of $583.2 million, partially offset by purchases of portfolio investments of $316.7 million and purchases of short-term investments of $697.1 million. In addition, our financing activities used $12.0 million of cash, consisting primarily of repayments of the Debt Securitization of $139.9 million, share repurchases of $7.1 million and dividends paid in the amount of $23.2 million, partially offset by net borrowings under the August 2018 Credit Facility and the February 2019 Credit Facility of $108.7 million and net proceeds from the 2025 Notes issuance of $49.5 million. As of September 30, 2020, we had $14.8 million of cash on hand.
For the nine months ended September 30, 2019, we experienced a net increase in cash in the amount of $0.4 million. During that period, our operating activities used $102.2$16.2 million in cash, consisting primarily of newpurchases of portfolio investments of $391.5$294.2 million and purchases of short-term investments of $577.5 million, partially offset by repayments received from portfolio companies and proceeds from sales of portfolioinvestments totaling $251.1 million and sales of short-term investments of approximately $231.7$571.1 million. In addition, our financing activities increasedprovided $16.6 million of cash, by $76.2 million, consisting primarily of net proceeds from our public stock offering$449.3 million term debt securitization, or the Debt Securitization, of $132.0 million and net borrowings under the Credit Facility of $12.5$348.3 million, partially offset by cashnet repayments under the August 2018 Credit Facility and the February 2019 Credit Facility of $277.8 million, repayments of the Debt Securitization of $7.5 million, purchases of shares in the share repurchase plan of $18.5 million, financing fees paid of $8.2 million and dividends paid in the amount of $62.7$19.6 million. As of September 30, 2017,2019, we had $81.0$12.8 million of cash and cash equivalents on hand.
For the nine months ended September 30, 2016, we experienced a net increase in cash and cash equivalents in the amount of $115.7 million. During that period, our operating activities provided $55.8 million in cash, consisting primarily of repayments received from portfolio companies and proceeds from sales of portfolio investments of approximately $182.2 million, partially offset by new portfolio investments of $163.9 million. In addition, our financing activities increased cash by $60.0 million, consisting primarily of proceeds from the public stock offering of $129.1 million and borrowings under SBA-guaranteed debentures of $32.8 million, partially offset by cash dividends paid in the amount of $49.1 million, net repayments under the Credit Facility of $40.4 million and the repayment of our SBA-guaranteed Low or Moderate Income debenture of $7.8 million. As of September 30, 2016, we had $168.3 million of cash and cash equivalents on hand.
Financing Transactions
DueOn July 3, 2018, we formed Barings BDC Senior Funding I, LLC, an indirectly wholly-owned Delaware limited liability company, or BSF, the primary purpose of which was to Triangle SBIC’s, Triangle SBIC II'sfunction as our special purpose, bankruptcy-remote, financing subsidiary. On August 3, 2018, BSF entered into a credit facility, or the August 2018 Credit Facility (as subsequently amended in December 2018 and Triangle SBIC III’s statusFebruary 2020), with Bank of America, N.A., as licensed SBICs, Triangle SBIC, Triangle SBIC IIadministrative agent, or the Administrative Agent and Triangle SBIC III have the ability to issue debentures guaranteed by the SBA at favorable interest rates. Under the Small Business Investment ActClass A-1 Lender, Société Générale, as Class A Lender, and Bank of America Merrill Lynch, as sole lead arranger and sole book manager. BSF and the SBA rules applicableAdministrative Agent also entered into a security agreement dated as of August 3, 2018, or the Security Agreement, pursuant to SBICs,which BSF’s obligations under the August 2018 Credit Facility were secured by a first-priority security interest in substantially all of the assets of BSF, including its portfolio of investments, or the Pledged Property. In connection with the first-priority security interest established under the Security Agreement, all of the Pledged Property was held in the custody of State Street Bank and Trust Company, as collateral administrator, or the Collateral Administrator. The Collateral Administrator maintained and performed certain collateral administration services with respect to the Pledged Property pursuant to a collateral administration agreement among BSF, the Administrative Agent and the Collateral Administrator. Generally, the Collateral Administrator was authorized to make distributions and payments from Pledged Property based only on the written instructions of the Administrative Agent.
The August 2018 Credit Facility initially provided for borrowings in an SBIC (or group of SBICs under common control) can have outstanding at any time debentures guaranteed by the SBAaggregate amount up to two times (and in certain cases,$750.0 million, including up to three times)$250.0 million borrowed under the Class A Loan Commitments and up to $500.0 million borrowed under the Class A-1 Loan Commitments. Effective February 28, 2019, we reduced our Class A Loan Commitments to $100.0 million, which reduced total commitments under the August 2018 Credit Facility to $600.0 million. Effective May 9, 2019, we further reduced our Class A Loan Commitments under the August 2018 Credit Facility from $100.0 million to zero and reduced our Class A-1 Loan Commitments under the August 2018 Credit Facility from $500.0 million to $300.0 million, which collectively reduced total commitments under the August 2018 Credit Facility to $300.0 million. Effective June 18, 2019, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $300.0 million to $250.0 million. Effective August 14, 2019, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $250.0 million to $177.0 million. Effective October 29, 2019, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $177.0 million to $150.0 million. Effective January 21, 2020, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $150.0 million to $80.0 million. Effective April 23, 2020, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $80.0 million to $30.0 million. Finally, effective June 26, 2020, we further reduced our Class A-1 Loan Commitments, and therefore total commitments, under the August 2018 Credit Facility from $30.0 million to zero. In connection with these reductions, the pro rata portion of the unamortized deferred financing costs related to the August 2018 Credit Facility was written off and recognized as a loss on extinguishment of debt in our Consolidated Statements of Operations.
On February 21, 2020, we extended the maturity date of the August 2018 Credit Facility from August 3, 2020 to August 3, 2021. On June 30, 2020, following the repayment of all borrowings, interest, and fees payable thereunder and at our election,
amountthe August 2018 Credit Facility was terminated, including all commitments and obligations of its regulatory capital, which generally isBank of America, N.A. to lend or make advances to BSF. In addition, the amount raised from private investors.Security Agreement was terminated and all security interests in the assets of BSF in favor of the lenders were terminated. As a result of these terminations, all obligations of BSF under the August 2018 Credit Facility and Security Agreement were fully discharged.
All borrowings under the August 2018 Credit Facility bore interest, subject to BSF’s election, on a per annum basis equal to (i) the applicable base rate plus the applicable spread or (ii) the applicable LIBOR rate plus the applicable spread. The maximum statutory limitapplicable base rate was equal to the greater of (i) the federal funds rate plus 0.5%, (ii) the prime rate or (iii) one-month LIBOR plus 1.0%. The applicable LIBOR rate depended on the dollar amount of outstanding debentures guaranteed by the SBA issued by a single SBIC is currently $150.0 million and by a group of SBICs under common control is $350.0 million. Debentures guaranteed by the SBA have a maturity of ten years, with interest payable semi-annually. The principal amountterm of the debentures is notborrowing under the August 2018 Credit Facility, which could be either one month or three months. BSF was required to be paid before maturity but may be prepaidpay commitment fees on the unused portion of the August 2018 Credit Facility. BSF could prepay any borrowing at any time without penalty. As a result of its guarantee of our SBA-guaranteed debentures, the SBA has fixed-dollar claims on the assets of Triangle SBIC, Triangle SBIC II and Triangle SBIC IIIpremium or penalty, except that are superiorBSF could have been liable for certain funding breakage fees if prepayments occurred prior to the claims of our security holders.
As of September 30, 2017, Triangle SBIC had issued the maximum $150.0 million of SBA-guaranteed debentures and Triangle SBIC II had issued $100.0 million of SBA-guaranteed debentures, leaving borrowing capacity of a maximum of $100.0 million of SBA-guaranteed debentures for Triangle SBIC III. In addition to the one-time 1.0% fee on the total commitment from the SBA, we also pay a one-time 2.425% fee on the amount of each debenture issued. These fees are capitalized as deferred financing costs and are amortized over the termexpiration of the debt agreements usingrelevant interest period. BSF could also permanently reduce all or a portion of the effective interest method. The weighted average interest ratecommitment amount under the August 2018 Credit Facility without penalty. See Note 5 to our Unaudited Consolidated Financial Statements for all SBA-guaranteed debentures as of September 30, 2017 was 3.90%. As of both September 30, 2017 and December 31, 2016, all SBA-guaranteed debentures were pooled.additional information regarding the August 2018 Credit Facility.
In May 2015,On February 21, 2019, we entered into a credit facility, or the February 2019 Credit Facility which was(as subsequently amended in May 2017.December 2019), with ING Capital LLC, or ING, as administrative agent, and the lenders party thereto. The amendment, among other things, increasedinitial commitments from $300.0 million to $435.0 million and extendedunder the maturity by two years. The revolving period of theFebruary 2019 Credit Facility ends April 30, 2021 followed by a one-year amortization period with a final maturity date of April 30, 2022. We have the ability to borrow in both United States dollars as well as foreign currencies under the Credit Facility.total $800.0 million. The Credit Facility, which is structured to operate like a revolving credit facility, is secured primarily by our assets, excluding the assets of our wholly-owned SBIC subsidiaries. TheFebruary 2019 Credit Facility has an accordion feature that allows for an increase in the total borrowing sizecommitments of up to $550.0$400.0 million, subject to certain conditions and the satisfaction of specified financial covenants. Using this accordion feature, in July 2017, we increased our commitmentsWe can borrow foreign currencies directly under the February 2019 Credit Facility. The February 2019 Credit Facility, from $435.0 million to $465.0 million,which is structured as a revolving credit facility, is secured primarily by a material portion of our assets and in September 2017, we again increasedguaranteed by certain of our commitments undersubsidiaries. Following the termination of the August 2018 Credit Facility from $465.0 million to $480.0 million.on June 30, 2020 BSF became a subsidiary guarantor and its assets will secure the February 2019 Credit Facility. The revolving period of the February 2019 Credit Facility ends on February 21, 2023, followed by a one-year repayment period with a final maturity date of February 21, 2024.
Borrowings under the February 2019 Credit Facility bear interest, subject to our election, on a per annum basis equal to (i) the applicable base rate plus 1.75%1.00% (or 1.50%1.25% if we receiveno longer maintain an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.75%2.00% (or 2.50%2.25% if we receiveno longer maintain an investment grade credit rating) or, (iii) for borrowings denominated in Canadiancertain foreign currencies other than Australian dollars, the applicable Canadian Dealer Offeredcurrency rate for the foreign currency as defined in the credit agreement plus 2.00% (or 2.25% if we no longer maintain an investment grade credit rating), or (iv) for borrowings denominated in Australian dollars, the applicable Australian dollars Screen Rate, plus 2.75%2.20% (or 2.50%2.45% if we receiveno longer maintain an investment grade credit rating). The applicable base rate is equal to the greatergreatest of (i) the prime rate, (ii) the federal funds rate plus 0.5% or, (iii) the Overnight Bank Funding Rate plus 0.5%, (iv) the adjusted one-month LIBORthree-month applicable currency rate plus 2.0%1.0% and (v) 1%. The applicable LIBORcurrency rate depends on the currency and term of the draw under the February 2019 Credit Facility. We pay a commitment fee of 1.00%(x) 0.5% per annum on undrawn amounts if the usedunused portion of the February 2019 Credit Facility is lessgreater than or equal to 25.0%two-thirds of total commitments or (y) 0.375% per annum on undrawn amounts if the usedunused portion of the February 2019 Credit Facility is greaterequal to or less than 25.0%two-thirds of total commitments.
As of September 30, 2017,2020, we were in compliance with all covenants under the February 2019 Credit Facility and had United StatesU.S. dollar borrowings of $124.3$325.0 million outstanding under the Credit Facility with an interest rate of 3.99% and non-United States dollar borrowings denominated in Canadian dollars of $21.0 million ($16.8 million in United States dollars) outstanding under theFebruary 2019 Credit Facility with a weighted average interest rate of 4.06%2.188%, borrowings denominated in Swedish kronas of 12.8kr million ($1.4 million U.S. dollars) with an interest rate of 2.00%, borrowings denominated in British pounds sterling of £40.3 million ($52.1 million U.S. dollars) with a weighted average interest rate of 2.063% and borrowings denominated in Euros of €72.6 million ($85.1 million U.S. dollars) with a weighted average interest rate of 2.00%. The borrowings denominated in Canadian dollars areforeign currencies were translated into United StatesU.S. dollars based on the spot rate at eachthe relevant balance sheet date. The impact resulting from changes in foreign exchange rates on the February 2019 Credit Facility borrowings is included in "Net unrealized appreciation (depreciation) on- foreign currency borrowingstransactions" in our Unaudited Consolidated Statements of Operations.
The fair values of the borrowings denominated in Canadian dollars may be positivelyoutstanding under the February 2019 Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of September 30, 2020, the total fair value of the borrowings outstanding under the February 2019 Credit Facility was $463.7 million. See Note 5 to our Unaudited Consolidated Financial Statements for additional information regarding the February 2019 Credit Facility.
On May 9, 2019, we completed a $449.3 million term debt securitization, or negatively affected by movementsthe Debt Securitization. Term debt securitizations are also known as collateralized loan obligations and are a form of secured financing, which is consolidated for financial reporting purposes and subject to our overall asset coverage requirement. The notes offered in the rateDebt Securitization, collectively, the 2019 Notes, were issued by Barings BDC Static CLO Ltd. 2019-I, or BBDC Static CLO Ltd., and Barings BDC Static CLO 2019-I, LLC, our wholly-owned and consolidated subsidiaries. BBDC Static CLO Ltd. and Barings BDC
Static CLO 2019-I, LLC are collectively referred to herein as the Issuers. The 2019 Notes were secured by a diversified portfolio of senior secured loans and participation interests therein. The Debt Securitization was executed through a private placement of approximately $296.8 million of AAA(sf) Class A-1 Senior Secured Floating Rate 2019 Notes, or the Class A-1 2019 Notes, which bore interest at the three-month LIBOR plus 1.02%; $51.5 million of AA(sf) Class A-2 Senior Secured Floating Rate 2019 Notes, or the Class A-2 2019 Notes, which bore interest at the three-month LIBOR plus 1.65%; and $101.0 million of Subordinated 2019 Notes which did not bear interest and were not rated. We retained all of the Subordinated 2019 Notes issued in the Debt Securitization in exchange betweenfor our sale and contribution to BBDC Static CLO Ltd. of the initial closing date portfolio, which included senior secured loans and participation interests. The 2019 Notes were scheduled to mature on April 15, 2027; however the 2019 Notes could be redeemed by the Issuers, at our direction as holder of the Subordinated 2019 Notes, on any business day after May 9, 2020. In connection with the sale and contribution, we made customary representations, warranties and covenants to the Issuers.
The Class A-1 2019 Notes and Class A-2 2019 Notes were the secured obligations of the Issuers, the Subordinated 2019 Notes are the unsecured obligations of BBDC Static CLO Ltd., and the indenture governing the 2019 Notes included customary covenants and events of default. The 2019 Notes were not registered under the Securities Act of 1933, as amended, or the Securities Act, or any state securities or “blue sky” laws and could not be offered or sold in the United States dollarabsent registration with the Securities and Exchange Commission or an applicable exemption from registration.
We serve as collateral manager to BBDC Static CLO Ltd. under a collateral management agreement and we have agreed to irrevocably waive all collateral management fees payable pursuant to the collateral management agreement.
During the three months ended September 30, 2020, $48.1 million of the Class A-1 2019 Notes were repaid. As of September 30, 2020, we had borrowings of $126.8 million outstanding under the Class A-1 2019 Notes with an interest rate of 1.295% and borrowings of $51.5 million outstanding under the Class A-2 2019 Notes with an interest rate of 1.925%. The fair value determinations of the 2019 Notes were based on market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of September 30, 2020, the total fair value of the Class A-1 2019 Notes and the Canadian dollar. This movement is beyondClass A-2 2019 Notes was $126.1 million and $51.0 million, respectively. On October 15, 2020, the remaining 2019 Notes were repaid in full. See Note 5 to our Unaudited Consolidated Financial Statements for additional information regarding the Debt Securitization.
On August 3, 2020, we entered into a Note Purchase Agreement (the "Note Purchase Agreement") with Massachusetts Mutual Life Insurance Company governing the issuance of (i) $50.0 million in aggregate principal amount of Series A senior unsecured notes (the "Series A Notes") due August 2025 with a fixed interest rate of 4.66% per year, and (ii) up to $50.0 million in aggregate principal amount of additional senior unsecured notes (the "Additional Notes" and, collectively with the Series A Notes, the "August 2025 Notes") due August 2025 with a fixed interest rate per year to be determined, in each case, to qualified institutional investors in a private placement. An aggregate principal amount of $25.0 million of the Series A Notes was issued on September 24, 2020 and an aggregate principal amount of $25.0 million of the Series A Notes was issued on September 29, 2020, both of which will mature on August 4, 2025 unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms. Interest on the August 2025 Notes will be due semiannually in March and September, beginning in March 2021. In addition, we are obligated to offer to repay the August 2025 Notes at par if certain change in control events occur. The August 2025 Notes are our general unsecured obligations that rank pari passu with all outstanding and cannot be predicted.future unsecured unsubordinated indebtedness issued by us.
The Credit FacilityNote Purchase Agreement contains certaincustomary terms and conditions for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants including but not limited to (i) maintaining a minimum interest coverage ratio, (ii) maintaining a minimum consolidated tangible net worth, (iii) maintaining a minimum asset coverage ratio and (iv) maintainingsuch as information reporting, maintenance of our status as a RICBDC within the meaning of the 1940 Act, minimum shareholders’ equity, maximum net debt to equity ratio and as a BDC.minimum asset coverage ratio. The Credit FacilityNote Purchase Agreement also contains customary events of default with customary cure and notice provisions,periods, including, without limitation, nonpayment, misrepresentation of representations and warrantiesincorrect representation in aany material respect, breach of covenant, cross-default tounder our other indebtedness bankruptcy, changeor that of control,our subsidiary guarantors, certain judgements and material adverse effect. The Credit Facility also permits Branch Bankingorders, and Trust Company, the administrative agent, to select an independent third-party valuation firm to determine valuationscertain events of certain portfolio investments for purposes of borrowing base provisions. In connection with the Credit Facility, we also entered into collateral documents.bankruptcy. As of September 30, 2017,2020, we were in compliance with all covenants of the Credit Facility.Note Purchase Agreement.
In October 2012, we issued $70.0 million of unsecured notes due December 2022, or the December 2022The August 2025 Notes andwere offered in November 2012, we issued $10.5 million of December 2022 Notes pursuant to the exercise of an over-allotment option. The December 2022 Notes maturereliance on December 15, 2022, and may be redeemed in whole or in part at any time or from time to
time at our option. The December 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning December 15, 2012.
In February 2015, we issued $86.3 million of unsecured notes due March 2022, or the March 2022 Notes. The March 2022 Notes mature on March 15, 2022 and may be redeemed in whole or in part at any time or from time to time at our option on or after March 15, 2018. The March 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning March 15, 2015. The net proceeds from the saleSection 4(a)(2) of the March 2022Securities Act. The August 2025 Notes after underwriting discountshave not and offering expenses, were $83.4 million.
The indenture and related supplements thereto relating towill not be registered under the December 2022 Notes and the March 2022 Notes contain certain covenants, including but not limited to (i) a requirement that we comply with the asset coverage requirement of the 1940Securities Act or any successor provisions, after giving effectstate securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to any exemptive relief grantedan exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.
Share Repurchases
On February 25, 2019, we adopted a share repurchase plan, pursuant to Board approval, for the purpose of repurchasing shares of our common stock in the open market during the 2019 fiscal year, or the 2019 Share Repurchase Plan. The Board authorized us to repurchase in 2019 up to a maximum of 5.0% of the amount of shares outstanding under the following targets:
•a maximum of 2.5% of the amount of shares of our common stock outstanding if shares traded below NAV per share but in excess of 90% of NAV per share; and
•a maximum of 5.0% of the amount of shares of our common stock outstanding if shares traded below 90% of NAV per share.
The 2019 Share Repurchase Plan was executed in accordance with applicable rules under the Exchange Act, including Rules 10b5-1 and 10b-18 thereunder, as well as certain price, market volume and timing constraints specified in the 2019 Share Repurchase Plan. The 2019 Share Repurchase Plan was designed to allow us to repurchase our shares both during our open window periods and at times when we otherwise might be prevented from doing so under applicable insider trading laws or because of self-imposed trading blackout periods. A broker selected by us was delegated the SEC, (ii)authority to repurchase shares on our behalf in the open market, pursuant to, and under the terms and limitations of, the 2019 Share Repurchase Plan. During the nine months ended September 30, 2019, we repurchased a requirementtotal of 1,865,522 shares of our common stock in the open market under the Share Repurchase Plan at an average price of $9.94 per share, including broker commissions.
On February 27, 2020, the Board approved an open-market share repurchase program for the 2020 fiscal year, or the 2020 Share Repurchase Program. Under the 2020 Share Repurchase Program, we are authorized during fiscal year 2020 to repurchase up to a maximum of 5.0% of the amount of shares outstanding as of February 27, 2020 if shares trade below NAV per share, subject to liquidity and regulatory constraints.
Purchases under the 2020 Share Repurchase Program may be made in open-market transactions and include transactions being executed by a broker selected us that has been delegated the authority to repurchase shares on our behalf in the open market in accordance with applicable rules under the Exchange Act, including Rules 10b5-1 and 10b-18 thereunder, and pursuant to, and under the terms and limitations of, the 2020 Share Repurchase Program. There is no assurance that we will not declarepurchase shares at any cash dividend,specific discount levels or declarein any other cash distribution, uponspecific amounts. During the nine months ended September 30, 2020, we repurchased a classtotal of 989,050 shares of our capitalcommon stock or purchase any such capital stock, unless, in every such case, at the time of the declaration of any such dividend or distribution, or at the time of any such purchase, we have an asset coverage (as defined in the 1940 Act) of at least 200% after deducting the amount of such dividend, distribution or purchase price, as the case may be, giving effect to any exemptive relief granted to us by the SEC, and (iii) a requirement that we provide financial information to the holders of the notes and the trusteeopen market under the indenture if we should no longer be subject to the reporting requirements under the Securities Exchange Act2020 Share Repurchase Program at an average price of 1934, as amended, or the Exchange Act. As of September 30, 2017 and December 31, 2016, we were in compliance with all covenants of the December 2022 Notes and the March 2022 Notes.$7.21 per share, including broker commissions.
Distributions to Stockholders
We have elected to be treated as a RIC under the Internal Revenue Code of 1986, as amended, or the Code, and intend to make the required distributions to our stockholders as specified therein. In order to maintain our tax treatment as a RIC and to obtain RIC tax benefits, we must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then we are generally required to pay income taxes only on the portion of our taxable income and gains we do not distribute (actually or constructively) and certain built-in gains. We have historically met our minimum distribution requirements and continually monitor our distribution requirements with the goal of ensuring compliance with the Code. We can offer no assurance that we will achieve results that will permit the payment of any level of cash distributions and our ability to make distributions will be limited by the asset coverage requirement and related provisions under the 1940 Act and contained in theany applicable indenture and related supplements governingsupplements. In addition, in order to satisfy the annual distribution requirement applicable to RICs, we may declare a significant portion of our dividends in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash (which portion may be as low as 10% of such dividend, for dividends declared on or before December 2022 Notes31, 2020, and after that, 20% of such dividend under published guidance from the March 2022 Notes.Internal Revenue Service) and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, a stockholder generally would be subject to tax on 100% of the fair market value of the dividend on the date the dividend is received by the stockholder in the same manner as a cash dividend, even though most of the dividend was paid in shares of our common stock.
The minimum distribution requirements applicable to RICs require us to distribute to our stockholders each year at least 90% of our investment company taxable income, or ICTI, as defined by the Code. Depending on the level of ICTI and net capital gain, if any, earned in a tax year, we may choose to carry forward ICTIincome in excess of current year distributions into the next tax year and pay a 4% U.S. federal excise tax on such excess. Any such carryover ICTIincome must be distributed before the end of the next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.income.
ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. We may be required to recognize ICTI in certain circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), we must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in ICTI other amounts that we have not yet received in cash, such as (i) PIK interest income and (ii) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included in our ICTI for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
Recent Developments
Subsequent to September 30, 2020, we made approximately $155.4 million of new commitments, of which $130.6 million closed and funded. The $130.6 million of investments consist of $128.5 million of first lien senior secured debt investments and a $2.1 million second lien senior secured term loan with a combined weighted average yield of 6.2%. In addition, we funded $8.7 million of previously committed delayed draw term loans.
On October 2017, 15, 2020, the 2019 Notes were repaid in full.
On November 4, 2020,we invested $32.5entered into a Note Purchase Agreement (the “November NPA”) governing the issuance of (1) $62.5 million in aggregate principal amount of Series B senior unsecured notes (“Series B Notes”) due November 2025 with a fixed interest of 4.25% per year and (2) $112.5 million in aggregate principal amount of Series C senior unsecured notes (“Series C Notes” and, collectively with the Series B Notes, the “November Notes”) due November 2027 with a fixed interest of 4.75% per year, in each case, to qualified institutional investors in a private placement. Each stated interest rate is subject to a step up of (x) 0.75% per year, to the extent the applicable November Notes do not satisfy certain investment grade conditions and/or (y) 1.50% per year, to the extent the ratio of secured debt securityto total assets exceeds specified thresholds, measured as of Deva Holdings, Inc. Undereach fiscal quarter end. The November Notes were delivered and paid for on November 5, 2020. The Series B Notes will mature on November 4, 2025 and the termsSeries C Notes will mature on November 4, 2027 unless redeemed, purchased or prepaid prior to such date by us or its affiliates in accordance with their terms. Interest on the November Notes will be due semiannually. In addition, we are obligated to offer to repay the November Notes at par if certain change in control events occur. The August 2025 Notes will be our general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us.
In connection with the November NPA, also on November 4, 2020, we amended the Note Purchase Agreement entered into on August 3, 2020 to reduce the aggregate principal amount of the investment, the debt security bears interest atunissued Additional Notes from $50.0 million to $25.0 million.
On November 9, 2020 our Board declared a ratequarterly distribution of LIBOR plus 6.75%$0.17 per annum.share payable on December 2, 2020 to holders of record as of November 25, 2020.
Critical Accounting Policies and Use of Estimates
The preparation of our unaudited financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods covered by such financial statements. We have identified investment valuation and revenue recognition as our most critical accounting estimates. On an on-goingongoing basis, we evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.
Investment Valuation
The most significant estimate inherent in the preparation of our financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We have a valuation policy, as well as established and documented processes and methodologies for determining the fair values of portfolio company investments on a
recurring (quarterly)(at least quarterly) basis in accordance with the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820. Our current valuation policy and processes were established by our management with the assistance of certain third-party advisorsBarings and were approved by the Board.
Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date. For our portfolio securities, fair value is generally the amount that we might reasonably expect to receive upon the current sale of the security. The fair value measurement assumes that the sale occurs in the principal market for the security, or in the absence of a principal market, in the most advantageous market for the security. If no market for the security exists or if we do not have access to the principal market, the security should be valued based on the sale occurring in a hypothetical market.
Under ASC Topic 820, there are three levels of valuation inputs, as follows:
Level 1 Inputs – include quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Inputs – include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 Inputs – include inputs that are unobservable and significant to the fair value measurement.
Our investment portfolio is primarily comprised of debt and equity instruments of privately held companies for which quoted prices or other inputs falling within the categories of Level 1 and Level 2 are generally not available. Therefore, we determine the fair value of our investments in good faith primarily using Level 3 inputs. In certain cases, quoted prices or other observable inputs may exist, and if so, we assess the appropriateness of the use of these third-party quotes in determining fair value based on (i) our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer and (ii) the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance of the portfolio company.
Under ASC Topic 820, aA financial instrument is categorized within the ASC Topic 820 valuation hierarchy based upon the lowest level of input to the valuation process that is significant to the fair value measurement. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, unrealized appreciation and depreciation related to such investments categorized as Level 3 investments within the tables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
Our investment portfolio includes certain debt and equity instruments of privately held companies for which quoted prices or other inputs falling within the categories of Level 1 and Level 2 are generally not available. In such cases, we determine the fair value of our investments in good faith primarily using Level 3 inputs. In certain cases, quoted prices or other observable inputs exist, and if so, we assess the appropriateness of the use of these third-party quotes in determining fair value based on (i) our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer and (ii) the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance of the portfolio company.
There is no single standardtechnique for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment. The recorded fair values of our Level 3 investments may differ significantly from fair values that would have been used had an active market for the securities existed. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.
OurInvestment Valuation Process
Barings has established a Pricing Committee that is, subject to the oversight of the Board, responsible for the approval, implementation and oversight of the processes and methodologies that relate to the pricing and valuation of assets we hold. Barings uses internal pricing models, in accordance with internal pricing procedures established by the Pricing Committee, to price an asset in the event an acceptable price cannot be obtained from an approved external source.
Barings reviews its valuation methodologies on an ongoing basis and updates are made accordingly to meet changes in the marketplace. Barings has established internal controls to ensure its valuation process is led by our executive officers. Theoperating in an effective manner. Barings (1) maintains valuation process begins with a quarterlyand pricing procedures that describe the specific methodology used for valuation and (2) approves and documents exceptions and overrides of valuations. In addition, the Pricing Committee performs an annual review of each investment in our investment portfolio by our executive officersvaluation methodologies.
Our money market fund investments are generally valued using Level 1 inputs and our investment committee. Valuations of each portfolio securitysyndicated senior secured loans and structured product investments are then prepared by our investment professionals, whogenerally valued using Level 2 inputs. Our senior secured, middle-market, private debt investments are generally valued using Level 3 inputs.
Independent Valuation Review
We have direct responsibility for the origination, management and monitoring of each investment. Under our valuation policy, each investment valuation is subject to (i) a review by the lead investment officer responsible for the portfolio company investment and (ii) a peer review by a second investment officer or executive officer. Generally, any investment that is valued below cost is subjected to review by one of our executive officers. After the peer review is complete, we engage twoengaged an independent valuation firms, including Duff & Phelps, LLC, collectively referredfirm to as the Valuation Firms, to provide third-party reviews of certain investments, as described further below. Finally, the Board has the responsibility for reviewing and approving, in good faith, the fair value of our investments in accordance with the 1940 Act.
The Valuation Firms provide third-party valuation consulting services to usat the end of each fiscal quarter, which consist of certain limited procedures that we identified and requested the Valuation Firmsvaluation firm to perform which we refer(hereinafter referred to herein as the Procedures."Procedures"). The Procedures generally consist of a review of the quarterly fair values of our middle-market investments, and are generally performed with respect to each portfolio companymiddle-market investment at least once in every calendar year and for new portfolio companies,investments, at least
once in the twelve-month period subsequent to the initial investment. In addition, the Procedures arewill generally be performed with respect to a portfolio company whenan investment where there has been a significant change in the fair value or performance of the investment. Prior to the first quarter of 2020, the Procedures were generally performed with respect to each investment every quarter beginning in the quarter after the investment was made. In certain instances, we may determine that it is not cost-effective, and as a result is not in our stockholders’the stockholders' best interest,interests, to request the Valuation Firmsindependent valuation firm to perform the Procedures on one or more portfolio companies.certain investments. Such instances include, but are not limited to, situations where the fair value of the investment in the portfolio company is determined to be insignificant relative to the total investment portfolio.
The total number of senior secured, middle-market investments and the percentage of our total senior secured, middle-market investment portfolio on which the Procedures were performed are summarized below by period: |
| | | |
For the quarter ended: | Total companies | | Percent of total investments at fair value(1) |
March 31, 2016 | 18 | | 27% |
June 30, 2016 | 19 | | 30% |
September 30, 2016 | 19 | | 33% |
December 31, 2016 | 20 | | 33% |
March 31, 2017 | 18 | | 30% |
June 30, 2017 | 20 | | 29% |
September 30, 2017 | 22 | | 25% |
| | | | | | | | | | | | | | |
For the quarter ended: | | Total companies | | Percent of total investments at fair value(1) |
| | | | |
| | | | |
March 31, 2019 | | 18 | | 100% |
June 30, 2019 | | 22 | | 100% |
September 30, 2019 | | 28 | | 100% |
December 31, 2019 | | 38 | | 100% |
March 31, 2020 | | 30 | | 62% |
June 30, 2020 | | 33 | | 53% |
September 30, 2020 | | 66 | | 100% |
| | | | |
| |
(1) | Exclusive of the fair value of new investments made during the quarter. |
(1)Exclusive of the fair value of new middle-market investments made during the quarter for which the Procedures were not performed and certain middle-market investments repaid subsequent to the end of the reporting period. For September 30, 2020, the Procedures were performed on two of the seven investments made during the quarter.
Upon completion of the Procedures, the Valuation Firmsvaluation firm concluded that, with respect to each investment reviewed by each Valuation Firm,the valuation firm, the fair value of those investments subjected to the Procedures appeared reasonable. TheFinally, the Board is ultimately responsible for determiningdetermined in good faith that our investments were valued at fair value in accordance with our valuation policies and procedures and the 1940 Act based on, among other things, the input of Barings, our Audit Committee and the independent valuation firm.
Valuation Techniques
Our valuation techniques are based upon both observable and unobservable pricing inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. We determine the estimated fair value of our loans and investments using primarily an income approach. Generally, an independent pricing service provider is the preferred source of pricing a loan, however, to the extent the independent pricing service provider price is unavailable or not relevant and reliable, we may use broker quotes. We attempt to maximize the use of observable inputs and minimize the use of unobservable inputs. The availability of observable inputs can vary from investment to investment and is affected by a wide variety of factors, including the type of security, whether the security is new and not yet established in good faith.the marketplace, the liquidity of markets, and other characteristics particular to the security.
Investment Valuation Inputs
Under ASC Topic 820,Market Approach
We value our syndicated senior secured loans and structured product investments using values provided by independent pricing services that have been approved by the Barings' Pricing Committee. The prices received from these pricing service providers are based on yields or prices of securities of comparable quality, type, coupon and maturity and/or indications as to value from dealers and exchanges. We seek to obtain two prices from the pricing services with one price representing the primary source and the other representing an independent control valuation. We evaluate the prices obtained from brokers or independent pricing service providers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. We also perform back-testing of valuation information obtained from independent pricing service providers and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, we perform due diligence procedures surrounding independent pricing service providers to understand their methodology and controls to support their use in the valuation process.
Income Approach
We utilize an Income Approach model in valuing our private debt investment portfolio, which consists primarily of middle-market senior secured loans with floating reference rates. As independent pricing service provider and broker quotes have not historically been consistently relevant and reliable, the fair value is determined using an internal index-based pricing model that takes into account both the price that would be received to sell an assetmovement in the spread of one or paid to transfer a liabilitymore performing credit indices as well as changes in an orderly transaction between a willing buyer and a willing sellerthe credit profile of the borrower. The implicit yield for each debt investment is calculated at the measurement date. For our portfolio securities, fairdate the investment is made. This calculation takes into account the acquisition price (par less any upfront fee) and the relative maturity assumptions of the underlying asset. As of each balance sheet date, the implied yield for each investment is reassessed, taking into account changes in the discount margin of the baseline index, probabilities of default and any changes in the credit profile of the issuer of the security, such as fluctuations in operating levels and leverage. If there is an observable price available on a comparable security/issuer, it is used to calibrate the internal model. If the valuation process for a particular debt investment results in a value above par, the value is generallytypically capped at the amount that we might reasonably expect to receive upon the current salegreater of the security. Under ASC Topic 820, the fair value measurement assumes that the sale occursprincipal amount plus any prepayment penalty in the principal market for the security,effect or in the absence100% of a principal market, in the most advantageous market for the security. Under ASC Topic 820, if no market for the security exists or if we do not have access to the principal market, the security should be valued basedpar on the sale occurring inbasis that a hypothetical market. The securities inmarket participant is likely unwilling to pay a greater amount than that at which we invest are generally only purchased and sold in merger and acquisition transactions, in which case the entire portfolio company is sold to a third-party purchaser. As a result, unless we have the ability to control such a transaction, the assumed principal market for our securities is a hypothetical secondary market. The Level 3 inputs to our valuation process reflect management’s best estimate of the assumptions that would be used by market participants in pricing the investment in a transaction in a hypothetical secondary market.borrower could refinance.
Enterprise Value Waterfall Approach
In valuing equity securities, (including warrants), we estimate fair value using an “Enterprise"Enterprise Value Waterfall”Waterfall" valuation model. We estimate the enterprise value of a portfolio company and then allocate the enterprise value to the portfolio company’s securities in order of their relative liquidation preference. In addition, the model assumes that any outstanding debt or other securities that are senior to our equity securities are required to be repaid at par. Generally, the waterfall proceeds flow from senior debt tranches of the capital structure to junior and subordinated debt, followed by each class or preferred stock and finally the common stock. Additionally, we may estimate the fair value of a limited number of our debt securitiessecurity using the Enterprise Value Waterfall approach in cases wherewhen we do not expect to receive full repayment.
To estimate the enterprise value of the portfolio company, we primarily use a valuation model based on a transaction multiple, which generally is the original transaction multiple, and measures of the portfolio company’s financial performance. In addition, we consider other factors, including but not limited to (i) offers from third parties to purchase the portfolio company, (ii) the implied value of recent investments in the equity securities of the portfolio company, (iii) publicly available information regarding recent sales of private companies in comparable transactions and (iv) when management believes there are comparable companies that are publicly traded, we perform a review of these publicly traded companies and the market multiple of their equity securities. For certain non-performing assets, we may utilize the liquidation or collateral value of the portfolio company's assets in our estimation of enterprise value.
The significant Level 3 inputs to the Enterprise Value Waterfall model are (i) an appropriate transaction multiple and (ii) a measureValuation of the portfolio company’s financial performance, which generally is either earnings before interest, taxes,
depreciation and amortization, as adjusted, or Adjusted EBITDA, or revenues. Such inputs can be based on historical operating results, projections of future operating results or a combination thereof. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for certain non-recurring items. In determining the operating results input, we utilize the most recent portfolio company financial statements and forecasts available as of the valuation date. Management also consults with the portfolio company’s senior management to obtain updates on the portfolio company’s performance, including information such as industry trends, new product development, loss of customers and other operational issues. Additionally, we consider some or all of the following factors:
financial standing of the issuer of the security;
comparison of the business and financial plan of the issuer with actual results;
the size of the security held;
pending reorganization activity affecting the issuer, such as merger or debt restructuring;
ability of the issuer to obtain needed financing;
changesInvestment in the economy affecting the issuer;
financial statements and reports from portfolio company senior management and ownership;
the type of security, the security’s cost at the date of purchase and any contractual restrictions on the disposition of the security;
information as to any transactions or offers with respect to the security and/or sales to third parties of similar securities;
the issuer’s ability to make payments and the type of collateral;
the current and forecasted earnings of the issuer;
statistical ratios compared to lending standards and to other similar securities;
pending public offering of common stock by the issuer of the security;
special reports prepared by analysts; and
any other factors we deem pertinent with respect to a particular investment.
Fair value measurements using the Enterprise Value Waterfall model can be sensitive to changes in one or more of the inputs. Assuming all other inputs to the Enterprise Value Waterfall model remain constant, any increase (decrease) in either the transaction multiple, Adjusted EBITDA or revenues for a particular equity security would result in a higher (lower) fair value for that security.
Income Approach
In valuing debt securities, we utilize an “Income Approach” model that considers factors including, but not limited to, (i) the stated yield on the debt security, (ii) the portfolio company’s current Adjusted EBITDA as compared to the portfolio company’s historical or projected Adjusted EBITDA as of the date the investment was made and the portfolio company’s anticipated Adjusted EBITDA for the next twelve months of operations, (iii) the portfolio company’s current Leverage Ratio (defined as the portfolio company’s total indebtedness divided by Adjusted EBITDA) as compared to its Leverage Ratio as of the date the investment was made, (iv) publicly available information regarding current pricing and credit metrics for similar proposed and executed investment transactions of private companies and (v) when management believes a relevant comparison exists, current pricing and credit metrics for similar proposed and executed investment transactions of publicly traded debt. In addition, we use a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. This risk rating system covers both qualitative and quantitative aspects of the business and the securities held.Jocassee
We consider the factors above, particularly any significant changes in the portfolio company’s results of operations and leverage, and develop an expectation of the yield that a hypothetical market participant would require when purchasing the debt investment, which we refer to herein as the Required Rate of Return. The Required Rate of Return, along with the Leverage Ratio and Adjusted EBITDA, are the significant Level 3 inputs to the Income Approach model. For investments where the Leverage Ratio and Adjusted EBITDA have not fluctuated significantly from the date the investment was made or have not fluctuated significantly from management’s expectations as of the date the investment was made, and where there have been no significant fluctuations in the market pricing for such investments, we may conclude that the Required Rate of Return is equal to the stated rate on the investment and therefore, the debt security is appropriately priced. In instances where we determine
that the Required Rate of Return is different from the stated rate on the investment, we discount the contractual cash flows on the debt instrument using the Required Rate of Return in order to estimate the fair value of the debt security.
Fair value measurementsour investment in Jocassee Partners LLC, or Jocassee, using the Income Approach model can be sensitive to changesnet asset value of Jocassee and our ownership percentage. The net asset value of Jocassee is determined in one or moreaccordance with the specialized accounting guidance for investment companies.
Valuation of the inputs. Assuming all other inputs to the Income Approach model remain constant, any increase (decrease)Investment in the Required Rate of Return or Leverage Ratio inputs for a particular debt security would result in a lower (higher) fair value for that security. Assuming all other inputs to the Income Approach model remain constant, any increase (decrease) in the Adjusted EBITDA input for a particular debt security would result in a higher (lower) fair value for that security.Thompson Rivers
TheWe estimate the fair value of our royalty rights are calculated based on specific provisions containedinvestment in Thompson Rivers LLC using the pertinent operating or royalty agreements. The determination of the fairnet asset value of such royalty rights is not a significant component of our valuation process.
Revenue Recognition
InterestThompson Rivers LLC and Dividend Income
Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible.ownership percentage. The cessation of recognition of such interest will negatively impact the reported fairnet asset value of the investment. We write off any previously accrued and uncollected interest when itThompson Rivers LLC is determined that interest is no longer considered collectible. Dividend income is recorded on the ex-dividend date.
We may have to include in our ICTI interest income, including original issue discount income, from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements to maintain our RIC tax treatment, even though we will not have received and may not ever receive any corresponding cash amount. Additionally, any loss recognized by us for U.S. federal income tax purposes on previously accrued interest income will be treated as a capital loss.
Fee Income
Origination, facility, commitment, consent and other advance fees received in connectionaccordance with the origination of a loan, or Loan Origination Fees, are recorded as deferred income and recognized asspecialized accounting guidance for investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of our business, we receive certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and loan waiver and amendment fees, and are recorded as investment income when earned.companies.
Payment-in-Kind (PIK) Interest Income
We currently hold, and we expect to hold in the future, some loans in our portfolio that contain PIK interest provisions. The PIK interest, computed at the contractual rate specified in each loan agreement, is periodically added to the principal balance of the loan, rather than being paid to us in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.
PIK interest, which is a non-cash source of income at the time of recognition, is included in our taxable income and therefore affects the amount we are required to distribute to our stockholders to maintain our tax treatment as a RIC for U.S. federal income tax purposes, even though we have not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. We write off any previously accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.
We may have to include in our ICTI, PIK interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. As a result, we may be required to make a distribution to our stockholders in order to satisfy
the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount.
Off-Balance Sheet Arrangements
In the normal course of business, we are party to financial instruments with off-balance sheet risk, consisting primarily of unused commitments to extend financing to our portfolio companies. Since commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The balances of unused commitments to extend financing as of September 30, 20172020 and December 31, 20162019 were as follows:
| | | | | | | | | | | | | | |
Portfolio Company | Investment Type | September 30, 2020 | | December 31, 2019 |
ADE Holding(2) | Committed Capex Line | $ | 87,995 | | | $ | — | |
Anju Software, Inc.(1) | Delayed Draw Term Loan | 1,981,371 | | | 1,981,371 | |
Arch Global Precision, LLC | Delayed Draw Term Loan | 7,446,226 | | | 1,012,661 | |
Armstrong Transport Group (Pele Buyer, LLC)(1) | Delayed Draw Term Loan | — | | | 712,567 | |
Beacon Pointe Advisors, LLC(1) | Delayed Draw Term Loan | 363,636 | | | — | |
Centralis Finco S.a.r.l.(3) | Acquisition Facility | 475,319 | | | — | |
Classic Collision (Summit Buyer, LLC)(1) | Delayed Draw Term Loan | 10,123,058 | | | — | |
CM Acquisitions Holdings Inc.(1) | Delayed Draw Term Loan | 1,859,111 | | | 1,859,111 | |
Contabo Finco S.À R.L(4) | Delayed Draw Term Loan | 218,718 | | | 1,013,849 | |
CSL Dualcom(5) | Delayed Draw Term Loan | 3,421,195 | | | — | |
Dart Buyer, Inc.(1) | Delayed Draw Term Loan | 2,430,569 | | | 4,294,503 | |
DreamStart Bidco SAS(6) | Acquisition Facility | 954,222 | | | — | |
Foundation Risk Partners, Corp. | Delayed Draw Term Loan | 15,555,555 | | | — | |
Heartland, LLC(1) | Delayed Draw Term Loan | 8,729,695 | | | 8,729,695 | |
Heilbron (f/k/a Sucsez (Bolt Bidco B.V.))(7) | Accordion Facility | 9,799,720 | | | 2,605,531 | |
Jocassee Partners LLC | Joint Venture | 35,000,000 | | | 40,000,000 | |
Kene Acquisition, Inc.(1) | Delayed Draw Term Loan | 322,928 | | | 1,076,427 | |
LAC Intermediate, LLC(1) | Delayed Draw Term Loan | 2,731,482 | | | 4,367,284 | |
Options Technology Ltd.(1) | Delayed Draw Term Loan | 2,918,447 | | | 2,918,447 | |
Premier Technical Services Group(8) | Acquisition Facility | 1,132,547 | | | 1,297,915 | |
Process Equipment, Inc.(1) | Delayed Draw Term Loan | — | | | 654,493 | |
Professional Datasolutions, Inc. (PDI)(1) | Delayed Draw Term Loan | — | | | 1,666,994 | |
PSC UK Pty Ltd.(9) | GBP Acquisition Facility | 189,350 | | | 1,010,706 | |
Smile Brands Group, Inc.(1) | Delayed Draw Term Loan | 422,242 | | | 927,046 | |
Springbrook Software (SBRK Intermediate, Inc.)(1) | Delayed Draw Term Loan | 3,896,663 | | | 3,896,663 | |
Stairway BidCo GmbH(10) | Delayed Draw Term Loan | 2,134,276 | | | — | |
The Hilb Group, LLC(1) | Delayed Draw Term Loan | 1,923,114 | | | 2,904,066 | |
Thompson Rivers LLC | Joint Venture | 6,900,000 | | | — | |
Transit Technologies LLC(1) | Delayed Draw Term Loan | 6,785,305 | | | — | |
Transportation Insight, LLC(1) | Delayed Draw Term Loan | — | | | 2,464,230 | |
Truck-Lite Co., LLC(1) | Delayed Draw Term Loan | 2,884,615 | | | 3,205,128 | |
USLS Acquisition, Inc.(1) | Delayed Draw Term Loan | 450,466 | | | — | |
Utac Ceram(11) | Delayed Draw Term Loan | 3,166,156 | | | — | |
Validity, Inc.(1) | Delayed Draw Term Loan | — | | | 898,298 | |
Total unused commitments to extend financing | | $ | 134,303,981 | | | $ | 89,496,985 | |
(1)Represents a commitment to extend financing to a portfolio company where one or more of our current investments in the portfolio company are carried at less than cost. Our estimate of the fair value of the current investments in this portfolio company includes an analysis of the fair value of any unfunded commitments.
(2)Actual commitment amount is denominated in Euros (€75,039) which was translated into U.S. dollars using the September 30, 2020 spot rate.
(3)Actual commitment amount is denominated in Euros (€405,337) which was translated into U.S. dollars using the September 30, 2020 spot rate.
(4)September 30, 2020 commitment amount is denominated in Euros (€186,516) which was translated into U.S. dollars using the September 30, 2020 spot rate. December 31, 2019 commitment amount was denominated in Euros (€903,207) which was translated into U.S. dollars using the December 31, 2019 spot rate.
(5)Actual commitment amount is denominated in British pounds sterling (£2,646,346) which was translated into U.S. dollars using the using the September 30, 2020 spot rate.
(6)Actual commitment amount is denominated in Euros (€813,731) which was translated into U.S. dollars using the September 30, 2020 spot rate.
(7)September 30, 2020 commitment amount is denominated in Euros (€8,356,897) which was translated into U.S. dollars using the September 30, 2020 spot rate. December 31, 2019 commitment amount was denominated in Euros (€2,321,187) which was translated into U.S. dollars using the December 31, 2019 spot rate.
|
| | | | | | | | |
Portfolio Company | Investment Type | September 30, 2017 | | December 31, 2016 |
Baker Hill Acquisition, LLC(1) | Delayed Draw Term Loan | $ | 500,000 |
| | $ | — |
|
CRS Reprocessing, LLC | Debtor in Possession Loan | 3,300,000 |
| | — |
|
DPII Holdings LLC(1) | Guaranty | 576,925 |
| | 576,925 |
|
DLC Acquisition, LLC | Revolver | 1,800,000 |
| | 3,000,000 |
|
Eckler's Holdings, Inc.(1) | Equity Investment | 1,000,000 |
| | — |
|
Frank Entertainment Group, LLC(1) | Delayed Draw Senior Note | 489,796 |
| | — |
|
Frank Entertainment Group, LLC(1) | Delayed Draw Second Lien Term Note | 1,142,857 |
| | — |
|
Halo Branded Solutions, Inc. | Delayed Draw Term Loan | 3,250,000 |
| | 3,250,000 |
|
HKW Capital Partners IV, L.P. | Private Equity | 128,204 |
| | 530,032 |
|
Lakeview Health Acquisition Company | Revolver | 1,387,367 |
| | 1,387,367 |
|
Micross Solutions LLC | Delayed Draw Term Loan | 3,000,000 |
| | — |
|
Nautic Partners VII, LP | Private Equity | 532,532 |
| | 642,172 |
|
Nomacorc, LLC(1) | Equity Investment | 838,813 |
| | 849,362 |
|
Orchid Underwriters Agency, LLC | Delayed Draw Term Loan | 649,143 |
| | 8,400,000 |
|
Orchid Underwriters Agency, LLC | Revolver | — |
| | 5,000,000 |
|
SCA Pharmaceuticals, LLC | Delayed Draw Term Loan | — |
| | 12,000,000 |
|
Schweiger Dermatology Group, LLC | Delayed Draw Term Loan | 10,000,000 |
| | — |
|
SCUF Gaming, Inc. | Revolver | 2,000,000 |
| | 3,500,000 |
|
Smile Brands, Inc. | Equity Investment | 1,000,000 |
| | 1,000,000 |
|
Smile Brands, Inc. | Delayed Draw Term Loan | 18,826,531 |
| | 18,826,531 |
|
SPC Partners V, LP | Private Equity | 198,378 |
| | 522,881 |
|
SPC Partners VI, LP | Private Equity | 3,000,000 |
| | 3,000,000 |
|
TCFI Merlin LLC and TCFI CSG LLC | Revolver | 500,000 |
| | — |
|
Team Waste, LLC | Equity Investment | — |
| | 900,000 |
|
Team Waste, LLC | Delayed Draw Term Loan | 1,000,000 |
| | — |
|
TGaS Advisors, LLC | Revolver | 2,000,000 |
| | 2,000,000 |
|
YummyEarth Inc.(1) | Delayed Draw Term Loan | 1,000,000 |
| | 1,500,000 |
|
Total unused commitments to extend financing | | $ | 58,120,546 |
| | $ | 66,885,270 |
|
| |
(1) | Represents a commitment to extend financing to a portfolio company where one or more of our current investments in the portfolio company are carried at less than cost. Our estimate of the fair value of the current investments in this portfolio company includes an analysis of the value of any unfunded commitments. |
(8)September 30, 2020 commitment amount is denominated in British pounds sterling (£876,042) which was translated into U.S. dollars using the September 30, 2020 spot rate. December 31, 2019 commitment amount was denominated in British pounds sterling (£979,743) which was translated into U.S. dollars using the December 31, 2019 spot rate.
(9)September 30, 2020 commitment amount is denominated in British pounds sterling (£146,466) which was translated into U.S. dollars using the September 30, 2020 spot rate. December 31, 2019 commitment amount was denominated in British pounds sterling (£762,941) which was translated into U.S. dollars using the December 31, 2019 spot rate.
(10)September 30, 2020 commitment amount is denominated in British pounds sterling (€1,820,044) which was translated into U.S. dollars using the September 30, 2020 spot rate.
(11)September 30, 2020 commitment amount is denominated in British pounds sterling (€2,700,000) which was translated into U.S. dollars using the September 30, 2020 spot rate.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are subject to market risk. Market risk includes risks that arise from changes in interest rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. The prices of securities held by us may decline in response to certain events, including those directly involving the companies we invest in; conditions affecting the general economy; overall market changes; legislative reform; local, regional, national or global political, social or economic instability; and interest rate fluctuations.
In addition, weU.S. and global capital markets and credit markets have experienced a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across such markets and a general decline in the value of the securities held by us. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks.
We are also subject to interest rate risk. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. Our net investment income is affected by fluctuations in various interest rates, including LIBOR, Canadian Dealer Offered RateGBP LIBOR, EURIBOR, STIBOR and prime rates. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks.CDOR. We regularly measure exposure to interest rate risk and determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. As of September 30, 2017,2020, we were not a party to any interest rate hedging arrangements.
In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments, a decrease in in our operating expenses, including with respect to our income incentive fee, or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR.
As of September 30, 2017, 55.3%, or $610.02020, approximately $929.3 million (at cost), of our debt portfolio investments bore interest at fixed rates and 44.7%, or $493.2 million (at cost), (principal amount) of our debt portfolio investments bore interest at variable rates, which generally are LIBOR-based (or based on an equivalent applicable currency rate), and many of which are subject to certain floors. A hypothetical 200 basis point increase or decrease in the interest rates on our variable-rate debt investments could increase or decrease, as applicable, our investment income by a maximum of $9.9$18.6 million on an annual basis. All of our SBA-guaranteed debentures, our December 2022 Notes and our March 2022 Notes bear interest at fixed rates. Our
Borrowings under the February 2019 Credit Facility bearsbear interest, subject to our election, on a per annum basis equal to (i) the applicable base rate plus 1.75%1.00% (or 1.50%1.25% if we receiveno longer maintain an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.75%2.00% (or 2.50%2.25% if we receiveno longer maintain an investment grade credit rating), or (iii) for borrowings denominated in Canadiancertain foreign currencies other than Australian dollars, the applicable Canadian Dealer Offeredcurrency rate for the foreign currency as defined in the credit agreement plus 2.00% (or 2.25% if we no longer maintain an investment grade credit rating) or (iv) for borrowings denominated in Australian dollars, the applicable Australian dollars Screen Rate, plus 2.75%2.20% (or 2.50%2.45% if the we receiveno longer maintain an investment grade credit rating). The applicable base rate is equal to the greatergreatest of (i) the prime rate, (ii) the federal funds rate plus 0.5% or, (iii) the Overnight Bank Funding Rate plus 0.5%, (iv) the adjusted one-month LIBORthree-month applicable currency rate plus 2.0%1.0% and (v) 1%. The applicable LIBORcurrency rate depends on the currency and term of the draw under the February 2019 Credit Facility. A hypothetical 200 basis point increase or decrease in the interest rates on the February 2019 Credit Facility could increase or decrease, as applicable, our interest expense by a maximum of $6.9 million on an annual basis (based on the amount of outstanding borrowings under the February 2019 Credit Facility as of September 30, 2020). We pay a commitment fee of 1.00%(x) 0.5% per annum on undrawn amounts if the usedunused portion of the facilityFebruary 2019 Credit Facility is lessgreater than or equal to 25.0%two-thirds of total commitments or (y) 0.375% per annum on undrawn amounts if the usedunused portion of the facilityFebruary 2019 Credit Facility is greaterequal to or less than 25.0%two-thirds of total commitments.
The Class A-1 2019 Notes and the Class A-2 2019 Notes issued in connection with the Debt Securitization had floating rate interest provisions based on the three-month LIBOR that reset quarterly. On October 15, 2020, the 2019 Notes were repaid in full.
In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021. There is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement rate. As such, the potential effect of any such event on our cost of capital and net investment income cannot yet be determined. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market value for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us and could have a material adverse effect on our business, financial condition and results of operations.
Because we currently borrow,have previously borrowed, and plan to borrow in the future, money to make investments, our net investment income iswill be dependent upon the difference between the rate at which we borrow funds and the rate at which we invest the funds borrowed. Accordingly, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income if there is not a corresponding increase in interest income generated by our investment portfolio.
We may also have exposure to foreign currencies (currently the Canadian dollar) related to certain investments. Such investments are translated into United StatesU.S. dollars based on the spot rate at eachthe relevant balance sheet date, exposing us to movements in the exchange rate. In order to reduce our exposure to fluctuations in exchange rates, we generally borrow in Canadian dollarslocal foreign currencies under ourthe February 2019 Credit Facility to finance such investments. As of September 30, 2017,2020, we had non-United States dollar borrowings denominated in Canadian dollarsSwedish kronas of $21.012.8kr million ($16.81.4 million United StatesU.S. dollars) outstanding under the Credit Facilitywith an interest rate of 2.00%, borrowings denominated in British pounds sterling of £40.3 million ($52.1 million U.S. dollars) with a weighted average interest rate of 4.06%2.06% and borrowings denominated in Euros of €72.6 million ($85.1 million U.S. dollars) with a weighted average interest rate of 2.00%.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. It should be noted that any system of controls,
however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the third quarter of 20172020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
NeitherWe and certain of our former executive officers have been named as defendants in two putative securities class action lawsuits, each filed in the United States District Court for the Southern District of New York (and then transferred to the United States District Court for the Eastern District of North Carolina) on behalf of all persons who purchased or otherwise acquired our common stock between May 7, 2014 and November 1, 2017. The first lawsuit was filed on November 21, 2017, and was captioned Elias Dagher, et al., v. Triangle Capital Corporation, nor anyet al., Case No. 5:18-cv-00015-FL (the “Dagher Action”). The second lawsuit was filed on November 28, 2017, and was captioned Gary W. Holden, et al., v. Triangle Capital Corporation, et al., Case No. 5:18-cv-00010-FL (the “Holden Action”). The Dagher Action and the Holden Action were consolidated and are currently captioned In re Triangle Capital Corp. Securities Litigation, Master File No. 5:18-cv-00010-FL.
On April 10, 2018, the plaintiff filed its First Consolidated Amended Complaint. The complaint alleged certain violations of the securities laws, including, among other things, that the defendants made certain materially false and misleading statements and omissions regarding our business, operations and prospects between May 7, 2014 and November 1, 2017. The plaintiff seeks compensatory damages and attorneys’ fees and costs, among other relief, but did not specify the amount of damages being sought. On May 25, 2018, the defendants filed a motion to dismiss the complaint. On March 7, 2019, the court entered an order granting the defendants’ motion to dismiss. On March 28, 2019, the plaintiff filed a motion seeking leave to file a Second Consolidated Amended Complaint. On September 20, 2019, the court entered an order denying the plaintiff’s motion for leave to file a Second Consolidated Amended Complaint and dismissing the action with prejudice. On October 17, 2019, the plaintiff filed a notice of appeal seeking review of the court’s September 20, 2019 order. The plaintiff filed its subsidiariesopening brief with the United States Court of Appeals for the Fourth Circuit on January 6, 2020. The defendants filed their response brief on February 28, 2020, and the plaintiff filed its reply brief on March 27, 2020. The appeal is currently pending before the United States Court of Appeals for the Fourth Circuit.
We intend to defend ourselves vigorously against the allegations in the aforementioned actions. Neither the outcome of the lawsuits nor an estimate of any reasonably possible losses is determinable at this time. An adverse judgment for monetary damages could have a partymaterial adverse effect on our operations and liquidity. Except as discussed above, neither we nor our subsidiaries are currently subject to any material pending legal proceedings.proceedings, other than ordinary routine litigation incidental to our business.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, youYou should carefully consider the factors discussedrisks described below and all other information contained in Part I, “Item 1A. Risk Factors” in our Annualthis Quarterly Report on Form 10-K for10-Q, including our interim financial statements and the fiscal year ended December 31, 2016, filed with the SEC on February 22, 2017, which could materially affectrelated notes thereto, before making a decision to purchase our business, financial condition or operating results. There have been no material changes during the nine months ended September 30, 2017 to the risk factors discussed in our Annual Report on Form 10-K.securities. The risks and uncertainties described in our Annual Report on Form 10-Kbelow are not the only risks that we face.ones facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.results, as well as the market price of our securities.
If any of such risks actually occur, our business, financial condition or results of operations could be materially adversely affected. If that happens, the market price of our securities could decline, and you may lose all or part of your investment. Risks Relating to Our Investments
Covenant-Lite Loans
A significant number of high yield loans in the market, in particular the broadly syndicated loan market, may consist of covenant-lite loans, or “Covenant-Lite Loans.” A significant portion of the loans in which the Company may invest or get exposure to through its investments may be deemed to be Covenant-Lite Loans and it is possible that such loans may comprise a majority of the Company’s portfolio. Such loans do not require the borrower to maintain debt service or other financial ratios and do not include terms which allow the lender to monitor the performance of the borrower and declare a default if certain criteria are breached. Ownership of Covenant-Lite Loans may expose the Company to different risks, including with respect to liquidity, price volatility, ability to restructure loans, credit risks and less protective loan documentation, than is the case with loans that contain financial maintenance covenants.”
Risks Relating to the Merger
Sales of shares of the Company’s common stock after the completion of the Merger may cause the market price of the Company’s common stock to decline.
Based on the number of outstanding shares of MVC’s common stock as of the close of business on August 7, 2020, the Company would issue approximately 16.7 million shares of the Company’s common stock pursuant to the Merger Agreement. Former MVC stockholders may decide not to hold the shares of the Company’s common stock that they receive pursuant to the Merger Agreement. In addition, the Company’s stockholders may decide not to hold their shares of the Company’s common stock after completion of the Merger. In each case, such sales of the Company’s common stock could have the effect of depressing the market price for the Company’s common stock and may take place promptly following the completion of the Merger.
The Company’s stockholders will experience a reduction in percentage ownership and voting power in the combined company as a result of the Merger.
The Company’s stockholders will experience a substantial reduction in their respective percentage ownership interests and effective voting power in respect of the combined company relative to their respective ownership interests in the Company prior to the Merger. Consequently, the Company’s stockholders should expect to exercise less influence over the management and policies of the combined company following the Merger than they currently exercise over the management and policies of the Company.
If the Merger is consummated, based on the number of shares of the Company’s common stock issued and outstanding on the closing date, it is expected that current stockholders of the Company will own approximately 74.2% of the outstanding common stock and former MVC stockholders will own approximately 25.8% of the outstanding common stock. In addition, both prior to and after completion of the Merger, subject to certain restrictions in the Merger Agreement and the approval of the Company’s stockholders, the Company may issue additional shares of common stock (including, subject to certain restrictions under the 1940 Act, at prices below the Company’s then-current net asset value (“NAV”) per share), all of which would further reduce the percentage ownership of the combined company held by current stockholders. In addition, the issuance or sale by the Company of shares of common stock at a discount to NAV poses a risk of economic dilution to stockholders.
The NAV per share of the Company’s will be diluted if the Company issues shares at a price below the then-current NAV per share in connection with the Merger.
In connection with the Merger and subject to certain determinations required to be made by the Company’s board of directors, the Company’s stockholders will be asked to approve the Company’s ability to issue shares of its common stock at a price below the then-current NAV per share in connection with the Merger in the event that at the time of such issuance, the Company’s then-current NAV per share is greater than the value of the shares of MVC’s common stock being exchanged.
Under the Merger Agreement, the Exchange Ratio was fixed on August 10, 2020, at the signing of the Merger Agreement, subject to certain adjustments pursuant to the Merger Agreement. The Exchange Ratio was determined taking into account the NAV per share of the Company’s common stock and MVC’s common stock as of June 30, 2020 and April 30, 2020, respectively, and is not subject to adjustment based on changes in the NAV per share of the Company’s common stock or MVC’s common stock. In that regard, regardless of the date on which the Merger is consummated and the resulting date on which the shares of the Company’s common stock are issued, the Exchange Ratio upon which the shares of the Company’s common stock will be issued will not change (except for certain specified adjustments). Consequently, if, on the date that the Company’s common stock is issued, the per share value of MVC’s common stock were to decrease from its per share value as of April 30, 2020 and the NAV of the Company’s common stock were to remain the same, then the Company could be deemed to be issuing shares at a price below its then-current NAV per share. As a result, it is not known at this time whether the Company will be issuing shares of its common stock at a price below the then-current NAV per share to MVC’s stockholders in connection with the Merger. The determination of whether the Company is issuing its shares of its common stock at a price below the then-current NAV per share will be made at or around the time of the closing of the Merger.
If the Company were to issue shares of its common stock below its then-current NAV per share in connection with the Merger, such sales would result in an immediate dilution to the NAV per share of the Company’s common stock. This dilution would occur as a result of the issuance of shares at a price below the then-current NAV per share of the Company’s common stock and a proportionately greater decrease in the stockholders’ interest in the Company’s earnings and assets and their voting interest in the Company than the increase in the Company’s assets resulting from such issuance. Because the NAV of shares of the Company’s common stock at or around the time of the Merger is not currently known, the actual dilutive effect cannot be predicted.
The Company may be unable to realize the benefits anticipated by the Merger, including estimated cost savings, or it may take longer than anticipated to realize such benefits.
The realization of certain benefits anticipated as a result of the Merger will depend in part on the integration of MVC’s investment portfolio with the Company’s and the integration of MVC’s business with the Company’s. There can be no assurance that MVC’s investment portfolio or business can be operated profitably or integrated successfully into the Company’s operations in a timely fashion or at all. The dedication of management resources to such integration may divert attention from the day-to-day business of the combined company and there can be no assurance that there will not be substantial costs associated with the transition process or there will not be other material adverse effects as a result of these integration efforts. Such effects, including incurring unexpected costs or delays in connection with such integration and failure of MVC’s investment portfolio to perform as expected, could have a material adverse effect on the financial results of the combined company.
The Company also expects to achieve certain cost savings from the Merger when the two companies have fully integrated their portfolios. It is possible that the estimates of the potential cost savings could ultimately be incorrect. The cost savings estimates also assume the Company will be able to combine the operations of the Company and MVC in a manner that permits those cost savings to be fully realized. If the estimates turn out to be incorrect or if the Company is not able to successfully combine MVC’s investment portfolio or business with the operations of the Company, the anticipated cost savings may not be fully realized, or realized at all, or may take longer to realize than expected.
The announcement and pendency of the proposed Merger could adversely affect the Company’s business, financial results and operations.
The announcement and pendency of the proposed Merger could cause disruptions in and create uncertainty surrounding the Company’s business, including affecting its relationships with its existing and future borrowers, which could have a significant negative impact on its future revenues and results of operations, regardless of whether the Merger is completed. In addition, the Company diverted, and will continue to divert, significant management resources towards the completion of the Merger, which could have a significant negative impact on its future revenues and results of operations.
The Company is also subject to restrictions on the conduct of its business prior to the completion of the Merger as provided in the Merger Agreement, generally requiring the Company to conduct its business only in the ordinary course and subject to specific limitations, including, among other things, certain restrictions on its ability to make certain investments and acquisitions, sell, transfer or dispose of its assets, amend its organizational documents and enter into or modify certain material contracts. These restrictions could prevent the Company from pursuing otherwise attractive business opportunities, industry developments and future opportunities and may otherwise have a significant negative impact on its future investment income and results of operations.
The termination of the Merger Agreement could negatively impact the Company.
The Merger may not be completed. For example, either MVC or the Company may terminate the Merger Agreement if the Merger is not completed by February 10, 2021 (so long as the party seeking termination has not been the principal cause of the delay). If the Merger Agreement is terminated, there may be various consequences, including:
•the Company’s businesses may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger;
•the market price of the Company's common stock might decline to the extent that the market price prior to termination reflects a market assumption that the Merger will be completed;
•under certain circumstances, the Company may be required to pay or cause to be paid to MVC a termination fee of approximately $4.7 million; and
•the Company will have incurred substantial expenses (including investment banking, legal expenses and accounting fees and financing printing and other related charges) for which no ultimate benefit will have been received.
The Merger is subject to closing conditions, including stockholder approvals, that, if not satisfied or waived, will result in the Merger not being completed, which may result in material adverse consequences to the Company’s business and operations.
While there can be no assurances as to the exact timing, or that the Merger will be completed at all, the Company and MVC are working to complete the Merger in the fourth quarter of 2020. The Merger is subject to closing conditions, including required regulatory approvals (including the expiration of the waiting period under the HSR Act, and the rules and regulations
thereunder and the approval of the European Commission pursuant to the Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, and certain approvals of the Company’s and MVC’s respective stockholders that, if not satisfied, will prevent the Merger from being completed. Early termination of the waiting period under the HSR Act was granted on September 30, 2020. The closing condition that the Company’s stockholders approve the issuance of shares of the Company’s common stock in connection with the Merger and the issuance of shares of the Company’s common stock in connection with the Merger at a price below its then-current NAV may not be waived and must be satisfied for the Merger to be completed. The Company currently expects that all of its directors and executive officers will vote their shares of the Company’s common stock in favor of these proposals. If the Company’s stockholders do not approve these proposals and the Merger is not completed, the resulting failure of the Merger could have a material adverse impact on the Company’s business and operations. The closing condition that MVC stockholders adopt the Merger Agreement may not be waived and must be satisfied for the Merger to be completed. If MVC stockholders do not adopt the Merger Agreement and the Merger is not completed, the resulting failure to complete the Merger could have a material adverse impact on the Company’s business and operations.
MVC and the Company will be subject to contractual restrictions while the Merger is pending, including restrictions on pursuing alternatives to the Merger.
Uncertainty about the effect of the Merger may have an adverse effect on the Company and MVC and, consequently, on the combined company following completion of the Merger. These uncertainties may impair the Company’s and MVC’s abilities to motivate key personnel until the Merger is consummated and could cause those who deal with the Company and MVC to seek to change their existing business relationships with the Company and MVC, respectively. In addition, the Merger Agreement restricts the Company and MVC from taking actions that they might otherwise consider to be in their best interests. These restrictions may prevent the Company and MVC from pursuing certain business opportunities that may arise prior to the completion of the Merger, including restrictions on them pursuing alternatives to the Merger.
Subject to applicable law, each party may waive one or more conditions to the Merger without resoliciting approval from its respective stockholders.
Certain conditions to the Company’s and MVC’s obligations to complete the Merger may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by agreement of the Company and MVC. In the event that any such waiver does not require resolicitation of stockholders, the parties to the Merger Agreement will have the discretion to complete the Merger without seeking further stockholder approval. Accordingly, the terms and conditions as set forth in the Merger Agreement, including certain protections to the Company, may be waived. The conditions requiring approval of the Company’s stockholders and MVC’s stockholders, however, cannot be waived.
The market price of the Company’s common stock after the Merger may be affected by factors different from those affecting the Company’s common stock or MVC’s common stock currently.
The businesses of the Company and MVC differ in some respects and, accordingly, the results of operations of the combined company and the market price of the Company’s common stock after the Merger may be affected by factors different from those currently affecting the independent results of operations of each of the Company and MVC. These factors include:
•a larger stockholder base;
•a different portfolio composition; and
•a different capital structure
Accordingly, the historical trading prices and financial results of the Company may not be indicative of these matters for the combined company following the Merger.
The Merger may trigger certain “change of control” provisions and other restrictions in certain of the Company’s and MVC’s contracts and the failure to obtain any required consents or waivers could adversely impact the combined company.
Certain agreements of the Company and MVC or their controlled affiliates will or may require the consent of one or more counterparties in connection with the Merger. The failure to obtain any such consent may permit such counter-parties to terminate, or otherwise increase their rights or the Company’s or MVC’s obligations under, any such agreement because the Merger may violate an anti-assignment, change of control or similar provision. If this happens, the Company or MVC may have to seek to replace that agreement with a new agreement or seek a waiver or amendment to such agreement. The Company cannot assure you that it or MVC will be able to replace, amend or obtain a waiver under any such agreement on comparable terms or at all.
If any such agreement is material, the failure to obtain consents, amendments or waivers under, or to replace on similar terms or at all, any of these agreements could adversely affect the financial performance or results of operations of the combined company following the Merger, including preventing the Company from operating a material part of MVC’s business.
In addition, the consummation of the Merger may violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, or result in the termination, cancellation, acceleration or other change of any right or obligation (including any payment obligation) under the Company’s or MVC’s agreements. Any such violation, conflict, breach, loss, default or other effect could, either individually or in the aggregate, have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following completion of the Merger.
The combined company may not be able to obtain financing for additional capital requirements.
Following completion of the Merger, the combined company may seek significant ongoing capital funding and, although the Company anticipates that the combined company will be able to obtain such funding through cash generated from operations and subsequent debt, equity or hybrid offerings, there can be no assurances that the combined company will be able to obtain financing on acceptable terms or at all.
The Company has incurred and expects to incur substantial transaction fees and costs in connection with the Merger, whether or not the Merger is completed.
The Company has incurred and expects to incur additional material non-recurring expenses in connection with the Merger and completion of the transactions contemplated by the Merger Agreement. The Company has incurred significant legal, advisory and financial services fees in connection with the process of negotiating and evaluating the terms of the Merger. Additional significant unanticipated costs may be incurred in the course of coordinating the businesses of MVC and the Company after completion of the Merger.
Even if the Merger is not completed, the Company will need to pay certain costs relating to the Merger incurred prior to the date the Merger was abandoned, such as legal, accounting, financial advisory, filing and printing fees. Such costs may be significant and could have an adverse effect on the Company’s future results of operations, cash flows and financial condition.
Litigation filed against MVC or the Company in connection with the Merger could result in substantial costs and could delay or prevent the Merger from being completed.
From time to time, MVC and the Company may be subject to legal actions, including securities class action lawsuits and derivative lawsuits, as well as various regulatory, governmental and law enforcement inquiries, investigations and subpoenas in connection with the Merger. These or any similar securities class action lawsuits and derivative lawsuits, regardless of their merits, may result in substantial costs and divert management time and resources. An adverse judgment in such cases could have a negative impact on the Company’s liquidity and financial condition or could prevent the Merger from being completed.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
During the three months ended September 30, 2017,2020, in connection with our Dividend Reinvestment Plan for our common stockholders, we directed the plan administrator to purchase 68,35223,915 shares of our common stock for $956,662.13an aggregate of $193,178 in the open market in order to satisfy our obligations to deliver shares of common stock to our stockholders with respect to our dividend declared on August 2, 2017. In addition, during the three months ended September 30, 2017, 4,842 shares of our common stock were delivered to us at an average price per share of $13.77 in satisfaction of tax withholding obligations of a holder of restricted shares issued under the Triangle Capital Corporation Amended and Restated 2007 Equity Incentive Plan that vested during the period. The following chart summarizes repurchases of our common stock for the three months ended September 30, 2017:5, 2020.
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| | | | | | | | | | | | |
Period | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
July 1 through July 31, 2017 | — |
| | — |
| | — |
| | — |
|
August 1 through August 31, 2017 | 4,842 |
| | $ | 13.77 |
| | — |
| | — |
|
September 1 through September 30, 2017 | 68,352 |
| (1) | $ | 14.00 |
| | — |
| | — |
|
Total | 73,194 |
| | $ | 13.98 |
| | — |
| | — |
|
(1) These shares were purchased in the open market pursuant to the terms of our Dividend Reinvestment Plan.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Not applicable.
Applicable
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Number | Exhibit |
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3.1 | |
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3.2 | |
| |
4.13.3 | |
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4.2 | |
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4.3 | |
| |
4.4 | |
| |
4.5 | |
| |
4.63.4 | |
| |
4.710.1 | |
| |
4.8 | |
| |
4.9 | First Amendment to Third Amended and Restated Credit Agreement,purchasers party thereto, dated May 1, 2017, among the Company, Branch Banking and Trust Company, ING Capital LLC, Fifth Third Bank, Morgan Stanley Bank, N.A., Bank of North Carolina, EverBank Commercial Finance, Inc., First Tennessee Bank National Association, First National Bank of Pennsylvania, Capital Bank Corporation, Park Sterling Bank, Paragon Commercial Bank, Raymond James Bank, N.A. and Stifel Bank & TrustAugust 3, 2020 (Filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2017 and incorporated herein by reference). |
| |
10.1 | |
| |
10.2 | SupplementAgreement and Joinder Agreement for TrianglePlan of Merger, by and among the Company, MVC Capital, Corporation Credit AgreementInc., Mustang Acquisition Sub, Inc., and Barings LLC, dated September 29, 2017as of August 10, 2020 (Filed as Exhibit 10.12.1 to the Registrant'sRegistrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 3, 2017August 10, 2020 and incorporated herein by reference). |
| |
1110.3 | |
10.4 | |
| |
10.5 | |
| |
31.1 | |
| |
31.2 | |
| |
32.1 | |
| |
32.2 | |
** Furnished Herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
| | | BARINGS BDC, INC. |
| | | |
| | | TRIANGLE CAPITAL CORPORATION |
| | | |
Date: | November 1, 20179, 2020 | | /s/ E. Ashton PooleEric Lloyd |
| | | E. Ashton PooleEric Lloyd |
| | | President and Chief Executive Officer |
| | | (Principal Executive Officer) |
| | | |
Date: | November 1, 20179, 2020 | | /s/ Steven C. LillyJonathan Bock |
| | | Steven C. LillyJonathan Bock |
| | | Chief Financial Officer and Secretary |
| | | (Principal Financial Officer) |
| | | |
Date: | November 1, 20179, 2020 | | /s/ C. Robert Knox, Jr.Elizabeth A. Murray |
| | | C. Robert Knox, Jr.Elizabeth A. Murray |
| | | Principal Accounting Officer |
EXHIBIT INDEX
|
| |
Number | Exhibit |
| |
11 | |
| |
31.1 | |
| |
31.2 | |
| |
32.1 | |
| |
32.2 | |