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 June 30, 20212022
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 814-00813
OFS CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
| | | | | | | | |
| Delaware | | 46-1339639 |
| State or Other Jurisdiction of | | I.R.S. Employer Identification No. |
| Incorporation or Organization | | |
| | |
| 10 S. Wacker Drive, Suite 2500, Chicago, Illinois | | 60606 |
| Address of Principal Executive Offices | | Zip Code |
| | |
| (847) 734-2000 | |
| Registrant’s Telephone Number, Including Area Code |
| | |
| Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, $0.01 par value per share | OFS | The Nasdaq Global Select Market |
6.25%4.95% Notes due 20232028 | OFSSGOFSSH | The Nasdaq Global Select Market |
5.95% Notes due 2026 | OFSSI | The Nasdaq Global Select Market |
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
| Large accelerated filer | ¨ | Accelerated filer | ¨ |
| | | |
| Non-accelerated filer | ☒ | Smaller reporting company | ¨ |
| | | |
| Emerging growth company | ¨ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No ý
The number of shares of the issuer’s Common Stock, $0.01 par value, outstanding as of August 5, 20213, 2022 was 13,415,235.13,429,777.
OFS CAPITAL CORPORATION
TABLE OF CONTENTS
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Defined Terms
We have used "we," "us," "our," "our company"“we,” “us,” “our,” “our company” and "the Company"“the Company” to refer to OFS Capital Corporation in this report. We also have used several other terms in this report, which are explained or defined below:
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| Term | Explanation or Definition |
| 1940 Act | Investment Company Act of 1940, as amended |
| Adjusted NII | A financial measure calculated and presented on a basis other than in accordance with GAAP and represents net investment income excluding the capital gains incentive fee |
| Administration Agreement | Administration Agreement between the Company and OFS Services dated November 7, 2012 |
| Affiliated Account | An account, other than the Company, managed by OFS Advisor or an affiliate of OFS Advisor |
| Affiliated Fund | Certain other funds, including other BDCs and registered investment companies managed by OFS Advisor or by registered investment advisers controlling, controlled by, or under common control with, OFS Advisor |
| ASC | Accounting Standards Codification, as issued by the FASB |
ASUBDC | Accounting Standards Updates, as issued by the FASB |
BDC | Business Development Company under the 1940 Act |
| BLA | Business Loan Agreement, as amended, with Pacific Western Bank, as lender, which provides the Company with a senior secured revolving credit facility |
| BNP Facility | A secured revolving credit facility, as amended, that provides for borrowings in an aggregate principal amount up to $150,000,000 issued pursuant to a Revolving Credit and Security Agreement, as amended, by and among OFSCC-FS, the lenders from time to time parties thereto, BNP Paribas, as administrative agent, OFSCC-FS Holdings, LLC, a wholly owned subsidiary of the Company, as equityholder, the Company, as servicer, Citibank, N.A., as collateral agent and Virtus Group, LP, as collateral administrator |
| Board | The Company'sCompany’s board of directors |
| CLO | Collateralized loan obligation |
| Code | Internal Revenue Code of 1986, as amended |
| Company | OFS Capital Corporation and its consolidated subsidiaries |
| DRIP | Distribution reinvestment plan |
| EBITDA | Earnings before interest, taxes, depreciation and amortization |
| Exchange Act | Securities Exchange Act of 1934, as amended |
| FASB | Financial Accounting Standards Board |
| GAAP | Accounting principles generally accepted in the United States |
| HPCI | Hancock Park Corporate Income, Inc., a Maryland corporation and non-traded BDC for whom OFS Advisor serves as investment adviser |
| ICTI | Investment company taxable income, which is generally net ordinary income plus net short-term capital gains in excess of net long-term capital losses |
| Indicative Prices | Market quotations, prices from pricing services or bids from brokers or dealers |
| Investment Advisory Agreement | Investment Advisory and Management Agreement between the Company and OFS Advisor dated November 7, 2012 |
| LIBOR | London Interbank Offered Rate |
| NAV | Net asset value. NAV is calculated as consolidated total assets less consolidated total liabilities and can be expressed in the aggregate or on a per share basis |
| Net Loan Fees | The cumulative amount of fees, such as origination fees, discounts, premiums and amendment fees that are deferred and recognized as income over the life of the loan |
| OCCI | OFS Credit Company, Inc., a Delaware corporation and a non-diversified, closed-end management investment company for whom OFS Advisor serves as investment adviser |
| OFS Advisor | OFS Capital Management, LLC, a wholly owned subsidiary of OFSAM and registered investment advisor under the Investment Advisers Act of 1940, as amended |
| OFS Services | OFS Capital Services, LLC, a wholly owned subsidiary of OFSAM and affiliate of OFS Advisor |
| OFSAM | Orchard First Source Asset Management, LLC, a full-service provider of capital and leveraged finance solutions to U.S. corporations |
| OFSCC-FS | OFSCC-FS, LLC, an indirect wholly owned subsidiary of the Company |
OFSCC-FS Assets | Assets held by the Company through OFSCC-FS |
| | | | | |
| Term | Explanation or Definition |
OFSCC-MBOFSCC-FS Assets | Assets held by the Company through OFSCC-FS |
| OFSCC-MB | OFSCC-MB, Inc., a wholly owned subsidiary taxed under subchapter C of the Code that generally holds the equity investments of the Company that are taxed as pass-through entities |
| OID | Original issue discount |
| Order | An exemptive relief order from the SEC to permit us to co-invest in portfolio companies with Affiliated Funds in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions |
| Parent | OFS Capital Corporation |
| PIK | Payment-in-kind, non-cash interest or dividends payable as an addition to the loan or equity security producing the income |
| Portfolio Company Investment | A debt or equity investment in a portfolio company. Portfolio Company Investments exclude Structured Finance Notes |
| Prime Rate | United States Prime interest rate |
| PWB Credit Facility | SeniorA senior secured revolving credit facility, between the Company andas amended, with Pacific Western Bank, as lender, that provides for borrowings to the Company in an aggregate principal amount up to $35,000,000 |
Reunderwriting AnalysisRIC | A discount rate method based upon a hypothetical recapitalization of the entity given its current operating performance and current market condition |
RIC | Regulated investment company under the Code |
| SBA | United States Small Business Administration |
| SBIC | A fund licensed under the SBA Small Business Investment Company Program |
| SBIC Acquisition | The Company's acquisition of the remaining ownership interests in SBIC I LP and OFS SBIC I GP, LLC on December 4, 2013 |
SBIC Act | Small Business Investment Act of 1958, as amended |
| SBIC I LP | OFS SBIC I, LP, a wholly owned SBIC subsidiary of the Company |
| SBIC I GP | OFS SBIC I GP, LLC |
| SEC | United States Securities and Exchange Commission |
| Securities Act | Securities Act of 1933, as amended |
| SOFR | Secured Revolver Amendment | The amended Business Loan Agreement with Pacific Western Bank, as lender, dated February 17, 2021Overnight Financing Rate |
| Stock Repurchase Program | The open market stock repurchase program for shares of the Company’s common stock under Rule 10b-18 of the Exchange Act |
| Structured Finance Notes | CLO mezzanine debt, CLO subordinated debt and CLO loan accumulation facility positions |
Synthetic Rating Analysis | A discount rate method that assigns a surrogate debt rating to the entity based on known industry standards for assigning such ratings and then estimates the discount rate based on observed market yields for actual rated debt |
| Transaction Price | The cost ofprice in an arm'sarm’s length transaction occurring ininvolving the same security |
| Unsecured Notes | The combination of the Unsecured Notes Due September 2023, the Unsecured Notes Due April 2025, the Unsecured Notes Due October 2025, the Unsecured Notes Due October 2026, and the Unsecured Notes Due February 2026 and the Unsecured Notes Due October 2028 |
| Unsecured Notes Due April 2025 | The Company’s $50.0 million aggregate principal amount of 6.375% notes due April 30, 2025, which were redeemed on March 12, 2021 |
| Unsecured Notes Due February 2026 | The Company’s $125.0 million aggregate principal amount of 4.75% notes due February 10, 2026 |
| Unsecured Notes Due October 2025 | The Company’s $48.5 million aggregate principal amount of 6.5% notes due October 30, 2025, which were redeemed on March 12, 2021 |
| Unsecured Notes Due October 2026 | The Company's $54.3 million aggregate principal amount of 5.95% notes due October 31, 2026, which were redeemed on November 22, 2021 |
| Unsecured Notes Due October 2028 | The Company’s $55.0 million aggregate principal amount of 4.95% notes due October 31, 2028 |
| Unsecured Notes Due September 2023 | The Company’s $25.0 million aggregate principal amount of 6.25% notes due September 30, 2023, which were redeemed on November 1, 2021 |
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “should,” “targets,” “projects” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:
•our ability and experience operating a BDC or an SBIC, or maintaining our tax treatment as a RIC under Subchapter M of the Code;
•our dependence on key personnel;
•our ability to maintain or develop referral relationships;
•our ability to replicate historical results;
•the ability of OFS Advisor to identify, invest in and monitor companies that meet our investment criteria;
•the belief that the carrying amounts of our financial instruments, such as cash, receivables and payables approximate the fair value of such items due to the short maturity of such instruments and that such financial instruments are held with high credit quality institutions to mitigate the risk of loss due to credit risk;
•actual and potential conflicts of interest with OFS Advisor and other affiliates of OFSAM;
•constraint on investments due to access to material nonpublic information;
•restrictions on our ability to enter into transactions with our affiliates;
•the impact of interest and inflation rates on our business prospects and the prospects of our portfolio companies;
•our ability to comply with SBA regulations and requirements;
•the use of borrowed money to finance a portion of our investments;
•our ability to incur additional leverage pursuant to Section 61(a)(2) of the 1940 Act and the impact of such leverage on our net investment income and results of operations;
•competition for investment opportunities;
•our plans to focus on lower-yielding, first lien senior secured loans to larger borrowers and the impact on our risk profile, including our belief that the seniority of such loans in a borrower's capital structure may provide greater downside protection against adverse economic changes, including those caused by the impactongoing impacts of the coronavirus ("COVID-19"(“COVID-19”) pandemic;pandemic, the ongoing conflict between Russia and Ukraine, and rising interest and inflation rates;
•the percentage of investments that will bear interest on a floating rate or fixed rate basis;
•the impact of inflation rates on our business prospects and the prospects of our portfolio companies;
• the impact of any new tax legislation on our investments, our stockholders, and our business;
•interest rate volatility, including the decommissioning of LIBOR;transition from LIBOR to SOFR and/or other alternative reference rate(s);
•the ability of SBIC I LP to make distributions enabling us to meet RIC requirements;
•plans by SBIC I LP to repay its outstanding SBA debentures;
•our ability to raise debt or equity capital as a BDC;
•the timing, form and amount of any distributions from our portfolio companies;
•the impact of a protracted decline in the liquidity of credit markets on our business;
•the general economy and its impact on the industries in which we invest;
•changes inthe impact of current political, economic orand industry conditions, including changes in the interest rate environment, orsignificant market volatility, supply chain disruptions, other conditions affecting the financial and capital markets, including with respect to changes from the impact of the COVID-19 pandemic; the length and duration of the COVID-19 pandemic in the United States as well as worldwide and the magnitude of the economic impact of the pandemic; the effectongoing impacts of the COVID-19 pandemic on our business, financial condition, results of operations and cash flows and thosefair value of our portfolio companies (including investments;
•the expectation that a shift from cash interest to PIK interest will result from concessions granted to borrowers due to the COVID-19 pandemic), including our and their ability to achieve our respective objectives; the effectimpact of the disruptions causedongoing conflict between Russia and Ukraine;
by the COVID-19 pandemic, including those caused by variants of the virus, 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;
•the belief that we have sufficient levels of liquidity to support our existing portfolio companies and deploy capital in new investment opportunities;
•the belief that one or morelong-dated financing affords us operational flexibility;
•the fluctuation of the fair value of our investments can be restored to accrual status in the near term, or otherwise;
•uncertain valuations of our Portfolio Company Investments, including our belief that reverting back to an equal weighting of the Reunderwriting Analysis method and Synthetic Rating Analysis method more accurately captures certain data relateddue to the observed returninherent uncertainty of determining the fair value of investments that do not have a readily available market liquidityvalue; and the historic correlative relationship between these markets; and
•the effect of new or modified laws or regulations governing our operations.
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include, among others, those described or identified in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20202021, filed on March 4, 2022, and in "Part“Part II, Item 1A. Risk Factors"Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 20212022, filed on May 6, 2022, and this Quarterly Report on Form 10-Q. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.
We have based the forward-looking statements on information available to us on the date of this Quarterly Report on Form 10-Q. Except as required by the federal securities laws, 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. The forward-looking statements and projections contained in this Quarterly Report on Form 10-Q are excluded from the safe harbor protection provided by Section 21E of the Exchange Act.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
OFS Capital Corporation and Subsidiaries
Consolidated Statements of Assets and Liabilities
(Dollar amounts in thousands, except per share data)
| | | June 30,
2021 | | December 31,
2020 | | June 30,
2022 | | December 31,
2021 |
| | (unaudited) | | | | (unaudited) | | |
| Assets | Assets | | Assets | |
| Investments, at fair value: | Investments, at fair value: | | Investments, at fair value: | |
| Non-control/non-affiliate investments (amortized cost of $373,780 and $363,628, respectively) | $ | 358,471 | | | $ | 328,665 | | |
| Affiliate investments (amortized cost of $83,740 and $86,484, respectively) | 113,493 | | | 102,846 | | |
| Control investment (amortized cost of $11,057 and $10,911, respectively) | 12,062 | | | 10,812 | | |
| Total investments at fair value (amortized cost of $468,577 and $461,023, respectively) | 484,026 | | | 442,323 | | |
| Non-control/non-affiliate investments (amortized cost of $489,849 and $428,398, respectively) | | Non-control/non-affiliate investments (amortized cost of $489,849 and $428,398, respectively) | $ | 456,076 | | | $ | 421,567 | |
| Affiliate investments (amortized cost of $17,635 and $17,650, respectively) | | Affiliate investments (amortized cost of $17,635 and $17,650, respectively) | 91,601 | | | 72,584 | |
| Control investment (amortized cost of $0 and $11,264, respectively) | | Control investment (amortized cost of $0 and $11,264, respectively) | — | | | 12,948 | |
| Total investments, at fair value (amortized cost of $507,484 and $457,312, respectively) | | Total investments, at fair value (amortized cost of $507,484 and $457,312, respectively) | 547,677 | | | 507,099 | |
| Cash | Cash | 35,159 | | | 37,708 | | Cash | 14,844 | | | 43,048 | |
| Interest receivable | Interest receivable | 1,051 | | | 1,298 | | Interest receivable | 1,883 | | | 1,475 | |
| | Receivable for investments sold | | Receivable for investments sold | — | | | 14,893 | |
| Prepaid expenses and other assets | Prepaid expenses and other assets | 2,204 | | | 2,484 | | Prepaid expenses and other assets | 2,917 | | | 2,533 | |
| Total assets | Total assets | $ | 522,440 | | | $ | 483,813 | | Total assets | $ | 567,321 | | | $ | 569,048 | |
| | Liabilities | Liabilities | | Liabilities | |
| Revolving lines of credit | Revolving lines of credit | $ | 24,050 | | | $ | 32,050 | | Revolving lines of credit | $ | 134,100 | | | $ | 100,000 | |
| SBA debentures (net of deferred debt issuance costs of $865 and $1,088, respectively) | 94,640 | | | 104,182 | | |
| Unsecured notes (net of deferred debt issuance costs of $5,607 and $4,897 respectively) | 198,718 | | | 172,953 | | |
| SBA debentures (net of deferred debt issuance costs of $319 and $555, respectively) | | SBA debentures (net of deferred debt issuance costs of $319 and $555, respectively) | 50,601 | | | 69,365 | |
| Unsecured notes (net of deferred debt issuance costs of $4,155 and $4,554, respectively) | | Unsecured notes (net of deferred debt issuance costs of $4,155 and $4,554, respectively) | 175,845 | | | 175,446 | |
| Interest payable | Interest payable | 4,088 | | | 3,176 | | Interest payable | 3,714 | | | 3,685 | |
| Payable to adviser and affiliates (Note 3) | Payable to adviser and affiliates (Note 3) | 3,352 | | | 3,252 | | Payable to adviser and affiliates (Note 3) | 2,672 | | | 6,217 | |
| Payable for investments purchased | Payable for investments purchased | 16,363 | | | 8,411 | | Payable for investments purchased | 3,905 | | | 8,788 | |
| Accrued professional fees | Accrued professional fees | 597 | | | 495 | | Accrued professional fees | 383 | | | 452 | |
| Other liabilities | Other liabilities | 639 | | | 338 | | Other liabilities | 389 | | | 1,351 | |
| Total liabilities | Total liabilities | 342,447 | | | 324,857 | | Total liabilities | 371,609 | | | 365,304 | |
| | Commitments and contingencies (Note 6) | Commitments and contingencies (Note 6) | | Commitments and contingencies (Note 6) | |
| | Net assets | Net assets | | Net assets | |
| Preferred stock, par value of $0.01 per share, 2,000,000 shares authorized, -0- shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | $ | — | | | $ | — | | |
| Common stock, par value of $0.01 per share, 100,000,000 shares authorized, 13,415,235 and 13,409,559 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | 134 | | | 134 | | |
| Preferred stock, par value of $0.01 per share, 2,000,000 shares authorized, -0- shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | | Preferred stock, par value of $0.01 per share, 2,000,000 shares authorized, -0- shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | $ | — | | | $ | — | |
| Common stock, par value of $0.01 per share, 100,000,000 shares authorized, 13,429,777 and 13,422,413 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | | Common stock, par value of $0.01 per share, 100,000,000 shares authorized, 13,429,777 and 13,422,413 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 134 | | | 134 | |
| Paid-in capital in excess of par | Paid-in capital in excess of par | 187,179 | | | 187,124 | | Paid-in capital in excess of par | 185,195 | | | 185,113 | |
| Total distributable earnings (losses) | (7,320) | | | (28,302) | | |
| Total distributable earnings | | Total distributable earnings | 10,383 | | | 18,497 | |
| Total net assets | Total net assets | 179,993 | | | 158,956 | | Total net assets | 195,712 | | | 203,744 | |
| | Total liabilities and net assets | Total liabilities and net assets | $ | 522,440 | | | $ | 483,813 | | Total liabilities and net assets | $ | 567,321 | | | $ | 569,048 | |
| | Number of shares outstanding | Number of shares outstanding | 13,415,235 | | | 13,409,559 | | Number of shares outstanding | 13,429,777 | | | 13,422,413 | |
| Net asset value per share | Net asset value per share | $ | 13.42 | | | $ | 11.85 | | Net asset value per share | $ | 14.57 | | | $ | 15.18 | |
See Notes to Consolidated Financial Statements.Statements (unaudited).
OFS Capital Corporation and Subsidiaries
Consolidated Statements of Operations (unaudited)
(Dollar amounts in thousands, except per share data)
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| Investment income | Investment income | | | | | | | | Investment income | | | | | | | |
| Interest income: | Interest income: | | Interest income: | |
| Non-control/non-affiliate investments | Non-control/non-affiliate investments | $ | 9,089 | | | $ | 8,233 | | | $ | 17,616 | | | $ | 17,305 | | Non-control/non-affiliate investments | $ | 10,345 | | | $ | 9,384 | | | $ | 20,047 | | | $ | 18,245 | |
| Affiliate investments | Affiliate investments | 911 | | | 1,692 | | | 1,815 | | | 4,086 | | Affiliate investments | — | | | 932 | | | — | | | 1,860 | |
| Control investment | Control investment | 221 | | | 209 | | | 490 | | | 405 | | Control investment | — | | | 322 | | | 141 | | | 689 | |
| Total interest income | Total interest income | 10,221 | | | 10,134 | | | 19,921 | | | 21,796 | | Total interest income | 10,345 | | | 10,638 | | | 20,188 | | | 20,794 | |
| Payment-in-kind interest and dividend income: | | |
| | Dividend income: | | Dividend income: | |
| Non-control/non-affiliate investments | Non-control/non-affiliate investments | 275 | | | 264 | | | 593 | | | 525 | | Non-control/non-affiliate investments | — | | | — | | | 713 | | | — | |
| Affiliate investments | 80 | | | 191 | | | 151 | | | 460 | | |
| Control investment | 101 | | | 102 | | | 199 | | | 187 | | |
| Total payment-in-kind interest and dividend income | 456 | | | 557 | | | 943 | | | 1,172 | | |
| Dividend income: | | |
| | Affiliate investments | Affiliate investments | — | | | — | | | — | | | 100 | | Affiliate investments | 5 | | | 59 | | | 5 | | | 106 | |
| Control investment | Control investment | 136 | | | — | | | 136 | | | — | | Control investment | — | | | 136 | | | 45 | | | 136 | |
| Total dividend income | Total dividend income | 136 | | | — | | | 136 | | | 100 | | Total dividend income | 5 | | | 195 | | | 763 | | | 242 | |
| Fee income: | Fee income: | | Fee income: | |
| Non-control/non-affiliate investments | Non-control/non-affiliate investments | 603 | | | 279 | | | 870 | | | 764 | | Non-control/non-affiliate investments | 82 | | | 583 | | | 421 | | | 834 | |
| Affiliate investments | Affiliate investments | — | | | 8 | | | 37 | | | 13 | | Affiliate investments | — | | | — | | | — | | | 37 | |
| Control investment | Control investment | — | | | 3 | | | — | | | 6 | | Control investment | — | | | — | | | 6 | | | — | |
| Total fee income | Total fee income | 603 | | | 290 | | | 907 | | | 783 | | Total fee income | 82 | | | 583 | | | 427 | | | 871 | |
| Total investment income | Total investment income | 11,416 | | | 10,981 | | | 21,907 | | | 23,851 | | Total investment income | 10,432 | | | 11,416 | | | 21,378 | | | 21,907 | |
| Expenses | Expenses | | | | | | | | Expenses | | | | | | | |
| Interest expense | Interest expense | 4,241 | | | 4,931 | | | 9,066 | | | 9,853 | | Interest expense | 3,943 | | | 4,241 | | | 7,567 | | | 9,066 | |
| Management fee | Management fee | 1,876 | | | 1,869 | | | 3,710 | | | 3,888 | | Management fee | 2,056 | | | 1,876 | | | 4,076 | | | 3,710 | |
| Incentive fee | 809 | | | 215 | | | 809 | | | 1,098 | | |
| Income Incentive Fee | | Income Incentive Fee | — | | | 809 | | | — | | | 809 | |
| Capital Gains Fee | | Capital Gains Fee | (2,988) | | | — | | | (1,916) | | | — | |
| Professional fees | Professional fees | 489 | | | 460 | | | 876 | | | 1,108 | | Professional fees | 352 | | | 489 | | | 759 | | | 876 | |
| Administration fee | Administration fee | 439 | | | 500 | | | 1,007 | | | 1,020 | | Administration fee | 423 | | | 439 | | | 874 | | | 1,007 | |
| Other expenses | Other expenses | 327 | | | 399 | | | 654 | | | 746 | | Other expenses | 398 | | | 327 | | | 765 | | | 654 | |
| Total expenses before incentive fee waiver | 8,181 | | | 8,374 | | | 16,122 | | | 17,713 | | |
| Incentive fee waiver (see Note 3) | — | | | — | | | — | | | (441) | | |
| Total expenses, net of incentive fee waiver | 8,181 | | | 8,374 | | | 16,122 | | | 17,272 | | |
| Total expenses | | Total expenses | 4,184 | | | 8,181 | | | 12,125 | | | 16,122 | |
| Net investment income | Net investment income | 3,235 | | | 2,607 | | | 5,785 | | | 6,579 | | Net investment income | 6,248 | | | 3,235 | | | 9,253 | | | 5,785 | |
| | Net realized and unrealized gain (loss) on investments | Net realized and unrealized gain (loss) on investments | | Net realized and unrealized gain (loss) on investments | |
| Net realized loss on non-control/non-affiliate investments | Net realized loss on non-control/non-affiliate investments | (10,841) | | | (1,040) | | | (10,750) | | | (10,013) | | Net realized loss on non-control/non-affiliate investments | (190) | | | (10,841) | | | (203) | | | (10,750) | |
| | Net unrealized appreciation (depreciation) on non-control/non-affiliate investments, net of taxes | 17,866 | | | 6,808 | | | 19,384 | | | (15,614) | | |
| Net unrealized appreciation (depreciation) on affiliate investments | 11,465 | | | (880) | | | 13,391 | | | (3,804) | | |
| Net realized gain on control investments | | Net realized gain on control investments | — | | | — | | | 278 | | | — | |
| Income tax expense on net realized investment gains | | Income tax expense on net realized investment gains | — | | | — | | | (48) | | | — | |
| Net unrealized appreciation (depreciation) on non-control/non-affiliate investments | | Net unrealized appreciation (depreciation) on non-control/non-affiliate investments | (22,158) | | | 18,071 | | | (26,942) | | | 19,655 | |
| Net unrealized appreciation on affiliate investments | | Net unrealized appreciation on affiliate investments | 7,241 | | | 11,465 | | | 19,033 | | | 13,391 | |
| Net unrealized appreciation (depreciation) on control investment | Net unrealized appreciation (depreciation) on control investment | 716 | | | 163 | | | 1,104 | | | (1,501) | | Net unrealized appreciation (depreciation) on control investment | — | | | 716 | | | (1,684) | | | 1,104 | |
| | Deferred tax benefit (expense) on investments net unrealized appreciation/depreciation | | Deferred tax benefit (expense) on investments net unrealized appreciation/depreciation | 35 | | | (205) | | | (6) | | | (271) | |
| Net gain (loss) on investments | Net gain (loss) on investments | 19,206 | | | 5,051 | | | 23,129 | | | (30,932) | | Net gain (loss) on investments | (15,072) | | | 19,206 | | | (9,572) | | | 23,129 | |
| Loss on extinguishment of debt | Loss on extinguishment of debt | — | | | — | | | (2,299) | | | (149) | | Loss on extinguishment of debt | — | | | — | | | (144) | | | (2,299) | |
| | Net increase (decrease) in net assets resulting from operations | Net increase (decrease) in net assets resulting from operations | $ | 22,441 | | | $ | 7,658 | | | $ | 26,615 | | | $ | (24,502) | | Net increase (decrease) in net assets resulting from operations | $ | (8,824) | | | $ | 22,441 | | | $ | (463) | | | $ | 26,615 | |
| | Net investment income per common share – basic and diluted | Net investment income per common share – basic and diluted | $ | 0.24 | | | $ | 0.19 | | | $ | 0.43 | | | $ | 0.49 | | Net investment income per common share – basic and diluted | $ | 0.47 | | | $ | 0.24 | | | $ | 0.69 | | | $ | 0.43 | |
| Net increase (decrease) in net assets resulting from operations per common share – basic and diluted | Net increase (decrease) in net assets resulting from operations per common share – basic and diluted | $ | 1.67 | | | $ | 0.57 | | | $ | 1.98 | | | $ | (1.83) | | Net increase (decrease) in net assets resulting from operations per common share – basic and diluted | $ | (0.66) | | | $ | 1.67 | | | $ | (0.03) | | | $ | 1.98 | |
| Distributions declared per common share | Distributions declared per common share | $ | 0.22 | | | $ | 0.17 | | | $ | 0.42 | | | $ | 0.51 | | Distributions declared per common share | $ | 0.29 | | | $ | 0.22 | | | $ | 0.57 | | | $ | 0.42 | |
| Basic and diluted weighted average shares outstanding | Basic and diluted weighted average shares outstanding | 13,411,998 | | | 13,392,608 | | | 13,410,524 | | | 13,384,808 | | Basic and diluted weighted average shares outstanding | 13,425,477 | | | 13,411,998 | | | 13,423,970 | | | 13,410,524 | |
See Notes to Consolidated Financial Statements.Statements (unaudited).
OFS Capital Corporation and Subsidiaries
Consolidated Statements of Changes in Net Assets (unaudited)
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock | | Common Stock | | Paid-in capital in excess of par | | Total distributable earnings (losses) | | Total net assets |
| Number of shares | | Par value | | Number of shares | | Par value |
| Balances at January 1, 2020 | — | | | — | | | 13,376,836 | | | $ | 134 | | | $ | 187,305 | | | $ | (20,812) | | | $ | 166,627 | |
| Net decrease in net assets resulting from operations: | | | | | | | | | | | | | |
| Net investment income | — | | | — | | | — | | | — | | | — | | | 6,579 | | | 6,579 | |
| Net realized loss on investments | — | | | — | | | — | | | — | | | — | | | (10,013) | | | (10,013) | |
| Loss on extinguishment of debt | — | | | — | | | — | | | — | | | — | | | (149) | | | (149) | |
| Net unrealized depreciation on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | (20,919) | | | (20,919) | |
| Tax reclassifications of permanent differences | — | | | — | | | — | | | — | | | 36 | | | (36) | | | — | |
| Distributions to stockholders: | | | | | | | | | | | | | |
| Common stock issued from reinvestment of stockholder distributions | — | | | — | | | 22,858 | | | — | | | 96 | | | — | | | 96 | |
| Dividends declared | — | | | — | | | — | | | — | | | — | | | (6,824) | | | (6,824) | |
| Net increase (decrease) for the period ended June 30, 2020 | — | | | — | | | 22,858 | | | — | | | 132 | | | (31,362) | | | (31,230) | |
| Balances at June 30, 2020 | — | | | $ | — | | | 13,399,694 | | | $ | 134 | | | $ | 187,437 | | | $ | (52,174) | | | $ | 135,397 | |
| | | | | | | | | | | | | |
| Balances at March 31, 2020 | — | | | $ | — | | | 13,392,529 | | | $ | 134 | | | $ | 187,387 | | | $ | (57,538) | | | $ | 129,983 | |
| Net increase in net assets resulting from operations: | | | | | | | | | | | | | |
| Net investment income | — | | | — | | | — | | | — | | | — | | | 2,607 | | | 2,607 | |
| Net realized loss on investments | — | | | — | | | — | | | — | | | — | | | (1,040) | | | (1,040) | |
| Net unrealized appreciation on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | 6,091 | | | 6,091 | |
| Tax reclassifications of permanent differences | — | | | — | | | — | | | — | | | 18 | | | (18) | | | — | |
| Distributions to stockholders: | | | | | | | | | | | | | |
| Common stock issued from reinvestment of stockholder distributions | — | | — | | 7,165 | | | — | | | 32 | | | — | | | 32 | |
| Dividends declared | — | | | — | | | — | | | — | | | — | | | (2,276) | | | (2,276) | |
| Net increase for the period ended June 30, 2020 | — | | | — | | | 7,165 | | | — | | | 50 | | | 5,364 | | | 5,414 | |
| Balances at June 30, 2020 | — | | | $ | — | | | 13,399,694 | | | $ | 134 | | | $ | 187,437 | | | $ | (52,174) | | | $ | 135,397 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock | | Common Stock | | Paid-in capital in excess of par | | Total distributable earnings (losses) | | Total net assets |
| Number of shares | | Par value | | Number of shares | | Par value |
| Balances at December 31, 2020 | — | | | $ | — | | | 13,409,559 | | | $ | 134 | | | $ | 187,124 | | | $ | (28,302) | | | $ | 158,956 | |
| Net increase in net assets resulting from operations: | | | | | | | | | | | | | |
| Net investment income | — | | | — | | | — | | | — | | | — | | | 5,785 | | | 5,785 | |
| Net realized loss on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | (10,750) | | | (10,750) | |
| Loss on extinguishment of debt | — | | | — | | | — | | | — | | | — | | | (2,299) | | | (2,299) | |
| Net unrealized appreciation on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | 33,879 | | | 33,879 | |
| | | | | | | | | | | | | |
| Distributions to stockholders: | | | | | | | | | | | | | |
| Common stock issued from reinvestment of stockholder distributions | — | | | — | | | 6,376 | | | — | | | 60 | | | — | | | 60 | |
| Dividends declared | — | | | — | | | — | | | — | | | — | | | (5,633) | | | (5,633) | |
| Common stock repurchased under Stock Repurchase Program | — | | | — | | | (700) | | | — | | | (5) | | | — | | | (5) | |
| Net increase for the six month period ended June 30, 2021 | — | | | — | | | 5,676 | | | — | | | 55 | | | 20,982 | | | 21,037 | |
| Balances at June 30, 2021 | — | | | $ | — | | | 13,415,235 | | | $ | 134 | | | $ | 187,179 | | | $ | (7,320) | | | $ | 179,993 | |
| | | | | | | | | | | | | |
| Balances at March 31, 2021 | — | | | $ | — | | | 13,411,962 | | | $ | 134 | | | $ | 187,146 | | | $ | (26,810) | | | $ | 160,470 | |
| Net increase in net assets resulting from operations: | | | | | | | | | | | | | |
| Net investment income | — | | | — | | | — | | | — | | | — | | | 3,235 | | | 3,235 | |
| Net realized loss on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | (10,841) | | | (10,841) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Net unrealized appreciation on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | 30,047 | | | 30,047 | |
| | | | | | | | | | | | | |
| Distributions to stockholders: | | | | | | | | | | | | | |
| Common stock issued from reinvestment of stockholder distributions | — | | — | | 3,273 | | | — | | | 33 | | | — | | | 33 | |
| Dividends declared | — | | | — | | | — | | | — | | | — | | | (2,951) | | | (2,951) | |
| Net increase for the three month period ended June 30, 2021 | — | | | — | | | 3,273 | | | — | | | 33 | | | 19,490 | | | 19,523 | |
| Balances at June 30, 2021 | — | | | $ | — | | | 13,415,235 | | | $ | 134 | | | $ | 187,179 | | | $ | (7,320) | | | $ | 179,993 | |
| | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Statements of Changes in Net Assets (unaudited)
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock | | Common Stock | | Paid-in capital in excess of par | | Total distributable earnings (losses) | | Total net assets |
| Number of shares | | Par value | | Number of shares | | Par value |
| | | | | | | | | | | | | |
| Balances at January 1, 2021 | — | | | $ | — | | | 13,409,559 | | | $ | 134 | | | $ | 187,124 | | | $ | (28,302) | | | $ | 158,956 | |
| Net increase in net assets resulting from operations: | | | | | | | | | | | | | |
| Net investment income | — | | | — | | | — | | | — | | | — | | | 5,785 | | | 5,785 | |
| Net realized loss on investments | — | | | — | | | — | | | — | | | — | | | (10,750) | | | (10,750) | |
| Loss on extinguishment of debt | — | | | — | | | — | | | — | | | — | | | (2,299) | | | (2,299) | |
| Net unrealized appreciation on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | 33,879 | | | 33,879 | |
| | | | | | | | | | | | | |
| Distributions to stockholders: | | | | | | | | | | | | | |
| Common stock issued from reinvestment of stockholder distributions | — | | | — | | | 6,376 | | | — | | | 60 | | | — | | | 60 | |
| Dividends declared | — | | | — | | | — | | | — | | | — | | | (5,633) | | | (5,633) | |
| Common stock repurchased under stock repurchase program | — | | | — | | | (700) | | | — | | | (5) | | | — | | | (5) | |
| Net increase for the period ended June 30, 2021 | — | | | — | | | 5,676 | | | — | | | 55 | | | 20,982 | | | 21,037 | |
| Balances at June 30, 2021 | — | | | $ | — | | | 13,415,235 | | | $ | 134 | | | $ | 187,179 | | | $ | (7,320) | | | $ | 179,993 | |
| | | | | | | | | | | | | |
| Balances at March 31, 2021 | — | | | $ | — | | | 13,411,962 | | | $ | 134 | | | $ | 187,146 | | | $ | (26,810) | | | $ | 160,470 | |
| Net increase in net assets resulting from operations: | | | | | | | | | | | | | |
| Net investment income | — | | | — | | | — | | | — | | | — | | | 3,235 | | | 3,235 | |
| Net realized loss on investments | — | | | — | | | — | | | — | | | — | | | (10,841) | | | (10,841) | |
| | | | | | | | | | | | | |
| Net unrealized appreciation on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | 30,047 | | | 30,047 | |
| | | | | | | | | | | | | |
| Distributions to stockholders: | | | | | | | | | | | | | |
| Common stock issued from reinvestment of stockholder distributions | — | | | — | | | 3,273 | | | — | | | 33 | | | — | | | 33 | |
| Dividends declared | — | | | — | | | — | | | — | | | — | | | (2,951) | | | (2,951) | |
| | | | | | | | | | | | | |
| Net increase for the period ended June 30, 2021 | — | | | — | | | 3,273 | | | — | | | 33 | | | 19,490 | | | 19,523 | |
| Balances at June 30, 2021 | — | | | $ | — | | | 13,415,235 | | | $ | 134 | | | $ | 187,179 | | | $ | (7,320) | | | $ | 179,993 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock | | Common Stock | | Paid-in capital in excess of par | | Total distributable earnings (losses) | | Total net assets |
| Number of shares | | Par value | | Number of shares | | Par value |
| Balances at December 31, 2021 | — | | | $ | — | | | 13,422,413 | | | $ | 134 | | | $ | 185,113 | | | $ | 18,497 | | | $ | 203,744 | |
| Net decrease in net assets resulting from operations: | | | | | | | | | | | | | |
| Net investment income | — | | | — | | | — | | | — | | | — | | | 9,253 | | | 9,253 | |
| Net realized gain on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | 27 | | | 27 | |
| Loss on extinguishment of debt | — | | | — | | | — | | | — | | | — | | | (144) | | | (144) | |
| Net unrealized depreciation on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | (9,599) | | | (9,599) | |
| | | | | | | | | | | | | |
| Distributions to stockholders: | | | | | | | | | | | | | |
| Common stock issued from reinvestment of stockholder distributions | — | | | — | | | 7,364 | | | — | | | 82 | | | — | | | 82 | |
| Dividends declared | — | | | — | | | — | | | — | | | — | | | (7,651) | | | (7,651) | |
| | | | | | | | | | | | | |
| Net increase (decrease) for the six month period ended June 30, 2022 | — | | | — | | | 7,364 | | | — | | | 82 | | | (8,114) | | | (8,032) | |
| Balances at June 30, 2022 | — | | | $ | — | | | 13,429,777 | | | $ | 134 | | | $ | 185,195 | | | $ | 10,383 | | | $ | 195,712 | |
| | | | | | | | | | | | | |
| Balances at March 31, 2022 | — | | | $ | — | | | 13,425,429 | | | $ | 134 | | | $ | 185,152 | | | $ | 23,100 | | | $ | 208,386 | |
| Net decrease in net assets resulting from operations: | | | | | | | | | | | | | |
| Net investment income | — | | | — | | | — | | | — | | | — | | | 6,248 | | | 6,248 | |
| Net realized loss on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | (190) | | | (190) | |
| | | | | | | | | | | | | |
| Net unrealized depreciation on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | (14,882) | | | (14,882) | |
| | | | | | | | | | | | | |
| Distributions to stockholders: | | | | | | | | | | | | | |
| Common stock issued from reinvestment of stockholder distributions | — | | | — | | | 4,348 | | | — | | | 43 | | | — | | | 43 | |
| Dividends declared | — | | | — | | | — | | | — | | | — | | | (3,893) | | | (3,893) | |
| | | | | | | | | | | | | |
| Net increase (decrease) for the three month period ended June 30, 2022 | — | | | — | | | 4,348 | | | — | | | 43 | | | (12,717) | | | (12,674) | |
| Balances at June 30, 2022 | — | | | $ | — | | | 13,429,777 | | | $ | 134 | | | $ | 185,195 | | | $ | 10,383 | | | $ | 195,712 | |
See Notes to Consolidated Financial Statements.Statements (unaudited).
OFS Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows(unaudited)
(Dollar amounts in thousands)
| | | Six Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| Cash flows from operating activities | Cash flows from operating activities | | | | Cash flows from operating activities | | | |
| Net increase (decrease) in net assets resulting from operations | Net increase (decrease) in net assets resulting from operations | $ | 26,615 | | | $ | (24,502) | | Net increase (decrease) in net assets resulting from operations | $ | (463) | | | $ | 26,615 | |
| Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: | | |
| Net realized loss on investments | 10,750 | | | 10,013 | | |
| | Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities: | | Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities: | |
| Net realized (gain) loss on investments | | Net realized (gain) loss on investments | (75) | | | 10,750 | |
| Income tax expense on net realized investment gains | | Income tax expense on net realized investment gains | 48 | | | — | |
| Loss on extinguishment of debt | Loss on extinguishment of debt | 2,299 | | | 149 | | Loss on extinguishment of debt | 144 | | | 2,299 | |
| Net unrealized (appreciation) depreciation on investments, net of taxes | Net unrealized (appreciation) depreciation on investments, net of taxes | (33,879) | | | 20,919 | | Net unrealized (appreciation) depreciation on investments, net of taxes | 9,599 | | | (33,879) | |
| Amortization of Net Loan Fees | Amortization of Net Loan Fees | (1,521) | | | (760) | | Amortization of Net Loan Fees | (794) | | | (1,521) | |
| Amendment fees collected | Amendment fees collected | 97 | | | 31 | | Amendment fees collected | 112 | | | 97 | |
| Payment-in-kind interest and dividend income | Payment-in-kind interest and dividend income | (943) | | | (1,191) | | Payment-in-kind interest and dividend income | (316) | | | (943) | |
| Accretion of interest income on structured finance notes | (4,670) | | | (2,626) | | |
| Accretion of interest income on Structured Finance Notes | | Accretion of interest income on Structured Finance Notes | (4,785) | | | (4,670) | |
| Amortization of debt issuance costs | Amortization of debt issuance costs | 888 | | | 867 | | Amortization of debt issuance costs | 751 | | | 888 | |
| Amortization of intangible asset | Amortization of intangible asset | 111 | | | 98 | | Amortization of intangible asset | 205 | | | 111 | |
| Purchase and origination of portfolio investments | Purchase and origination of portfolio investments | (128,848) | | | (70,914) | | Purchase and origination of portfolio investments | (122,608) | | | (128,848) | |
| Proceeds from principal payments on portfolio investments | Proceeds from principal payments on portfolio investments | 100,817 | | | 56,276 | | Proceeds from principal payments on portfolio investments | 54,525 | | | 100,817 | |
| Proceeds from sale or redemption of portfolio investments | Proceeds from sale or redemption of portfolio investments | 10,294 | | | 65,528 | | Proceeds from sale or redemption of portfolio investments | 12,179 | | | 10,294 | |
| Proceeds from distributions received from structured finance notes | 6,356 | | | 3,290 | | |
| Proceeds from distributions received from Structured Finance Notes | | Proceeds from distributions received from Structured Finance Notes | 11,214 | | | 6,356 | |
| Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | Changes in operating assets and liabilities: | |
| Interest receivable | Interest receivable | 247 | | | 235 | | Interest receivable | (408) | | | 247 | |
| Interest payable | Interest payable | 912 | | | (396) | | Interest payable | 29 | | | 912 | |
| Payable to adviser and affiliates | Payable to adviser and affiliates | 100 | | | (1,412) | | Payable to adviser and affiliates | (3,545) | | | 100 | |
| Receivable for investment sold | Receivable for investment sold | — | | | (634) | | Receivable for investment sold | 14,893 | | | — | |
| Payable for investments purchased | Payable for investments purchased | 7,952 | | | (9,293) | | Payable for investments purchased | (4,883) | | | 7,952 | |
| Other assets and liabilities | Other assets and liabilities | 249 | | | 194 | | Other assets and liabilities | (535) | | | 249 | |
| Net cash provided by (used in) operating activities | (2,174) | | | 45,872 | | |
| Net cash used in operating activities | | Net cash used in operating activities | (34,713) | | | (2,174) | |
| | Cash flows from financing activities | Cash flows from financing activities | | Cash flows from financing activities | |
| Distributions paid to stockholders | Distributions paid to stockholders | (5,573) | | | (6,728) | | Distributions paid to stockholders | (7,569) | | | (5,573) | |
| Borrowings under revolving lines of credit | Borrowings under revolving lines of credit | 42,400 | | | 72,600 | | Borrowings under revolving lines of credit | 49,850 | | | 42,400 | |
| Repayments under revolving lines of credit | Repayments under revolving lines of credit | (50,400) | | | (77,300) | | Repayments under revolving lines of credit | (15,750) | | | (50,400) | |
| Repayments of SBA debentures | Repayments of SBA debentures | (9,765) | | | (16,110) | | Repayments of SBA debentures | (19,000) | | | (9,765) | |
| Redemption of unsecured notes | Redemption of unsecured notes | (98,525) | | | — | | Redemption of unsecured notes | — | | | (98,525) | |
| Proceeds from unsecured notes offering, net of discounts | Proceeds from unsecured notes offering, net of discounts | 121,791 | | | — | | Proceeds from unsecured notes offering, net of discounts | — | | | 121,791 | |
| Payment of deferred financing costs | Payment of deferred financing costs | (298) | | | — | | Payment of deferred financing costs | (1,022) | | | (298) | |
| Repurchases of common stock under Stock Repurchase Program | Repurchases of common stock under Stock Repurchase Program | (5) | | | — | | Repurchases of common stock under Stock Repurchase Program | — | | | (5) | |
| Net cash used in financing activities | (375) | | | (27,538) | | |
| Net increase (decrease) in cash | (2,549) | | | 18,334 | | |
| Net cash provided by (used in) financing activities | | Net cash provided by (used in) financing activities | 6,509 | | | (375) | |
| Net decrease in cash | | Net decrease in cash | (28,204) | | | (2,549) | |
| Cash at beginning of period | Cash at beginning of period | 37,708 | | | 13,447 | | Cash at beginning of period | 43,048 | | | 37,708 | |
| Cash at end of period | Cash at end of period | $ | 35,159 | | | $ | 31,781 | | Cash at end of period | $ | 14,844 | | | $ | 35,159 | |
| | Supplemental Disclosure of Cash Flow Information: | Supplemental Disclosure of Cash Flow Information: | | Supplemental Disclosure of Cash Flow Information: | |
| Cash paid for interest | Cash paid for interest | $ | 7,266 | | | $ | 9,383 | | Cash paid for interest | $ | 6,787 | | | $ | 7,266 | |
| Reinvestment of distributions to stockholders | Reinvestment of distributions to stockholders | 60 | | | 96 | | Reinvestment of distributions to stockholders | 82 | | | 60 | |
|
See Notes to Consolidated Financial Statements.Statements (unaudited).
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments (unaudited)
June 30, 20212022
(Dollar amounts in thousands)
| Portfolio Company (1)
Investment Type | Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets | Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Non-control/Non-affiliate Investments | Non-control/Non-affiliate Investments | | | | | | | | | | | | | | | | | | | Non-control/Non-affiliate Investments | | | | | | | | | | | | | | | | | | |
| Debt and Equity Investments | Debt and Equity Investments | | Debt and Equity Investments | |
| AAdvantage Loyalty IP Ltd. and American Airlines, Inc. (14) (15) (22) | | Scheduled Passenger Air Transportation | | |
| 24 Seven Holdco, LLC (15) | | 24 Seven Holdco, LLC (15) | | Temporary Help Services | |
| Senior Secured Loan | Senior Secured Loan | | | | 5.50% | | (L +4.75%) | | 3/10/2021 | | 4/28/2028 | | $ | 364 | | | $ | 360 | | | $ | 380 | | | 0.2 | % | Senior Secured Loan | | | | 7.60% | | (L +6.00%) | | 1/28/2022 | | 11/16/2027 | | $ | 8,955 | | | $ | 8,893 | | | $ | 8,861 | | | 4.4 | % |
| | Aegion Corporation (15) (22) | Aegion Corporation (15) (22) | | Water and Sewer Line and Related Structures Construction | | Aegion Corporation (15) (22) | | Water and Sewer Line and Related Structures Construction | |
| Senior Secured Loan | Senior Secured Loan | | | | 5.50% | | (L +4.75%) | | 4/1/2021 | | 5/17/2028 | | 632 | | | 628 | | | 628 | | | 0.3 | | Senior Secured Loan | | | | 6.27% | | (L +4.75%) | | 4/1/2021 | | 5/17/2028 | | 2,426 | | | 2,395 | | | 2,250 | | | 1.1 | |
| | Allen Media, LLC (14) (15) | Allen Media, LLC (14) (15) | | Cable and Other Subscription Programming | | Allen Media, LLC (14) (15) | | Cable and Other Subscription Programming | |
| Senior Secured Loan | Senior Secured Loan | | | | 5.65% | | (L +5.50%) | | 3/2/2021 | | 2/10/2027 | | 2,919 | | | 2,922 | | | 2,926 | | | 1.6 | | Senior Secured Loan | | | | 7.70% | | (SOFR +5.50%) | | 3/2/2021 | | 2/10/2027 | | 3,788 | | | 3,782 | | | 3,393 | | | 1.7 | |
| | All Star Auto Lights, Inc. (4) | | Motor Vehicle Parts (Used) Merchant Wholesalers | | |
| All Star Auto Lights, Inc. (4) (15) | | All Star Auto Lights, Inc. (4) (15) | | Motor Vehicle Parts (Used) Merchant Wholesalers | |
| Senior Secured Loan | | Senior Secured Loan | | | | 8.41% | | (L +6.50%) | | 12/19/2019 | | 8/20/2025 | | 23,217 | | | 22,935 | | | 23,217 | | | 11.9 | |
| | Astro One Acquisition Corporation | | Astro One Acquisition Corporation | | Other Miscellaneous Nondurable Goods Merchant Wholesalers | |
| Senior Secured Loan | | Senior Secured Loan | | | | 10.75% | | (L +8.50%) | | 1/31/2022 | | 9/14/2029 | | 3,000 | | | 2,656 | | | 2,486 | | | 1.3 | |
| | Asurion, LLC | | Asurion, LLC | | Communication Equipment Repair and Maintenance | |
| Senior Secured Loan | | Senior Secured Loan | | | | 6.92% | | (L +5.25%) | | 6/28/2022 | | 1/31/2028 | | 2,000 | | | 1,745 | | | 1,718 | | | 0.9 | |
| | Atlantis Holding, LLC (15) | | Atlantis Holding, LLC (15) | | Electronics and Appliance Stores | |
| Senior Secured Loan | Senior Secured Loan | | | | 9.00% | | (L +8.00%) | | 12/19/2019 | | 8/20/2024 | | 15,437 | | | 15,260 | | | 15,437 | | | 8.6 | | Senior Secured Loan | | | | 9.30% | | (SOFR +7.25%) | | 3/29/2022 | | 3/31/2029 | | 8,421 | | | 8,116 | | | 7,716 | | | 3.9 | |
| | Autokiniton US Holdings, Inc. (14) (15) | Autokiniton US Holdings, Inc. (14) (15) | | Automotive Parts and Accessories Stores | | Autokiniton US Holdings, Inc. (14) (15) | | Automotive Parts and Accessories Stores | |
| Senior Secured Loan | Senior Secured Loan | | | | 5.00% | | (L +4.50%) | | 3/26/2021 | | 4/6/2028 | | 1,714 | | | 1,710 | | | 1,730 | | | 1.0 | | Senior Secured Loan | | | | 5.62% | | (L +4.50%) | | 3/26/2021 | | 4/6/2028 | | 2,683 | | | 2,675 | | | 2,488 | | | 1.3 | |
| | A&A Transfer, LLC | | Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers | | |
| Senior Secured Loan (15) | | | | 7.75% | | (L +6.50%) | | 2/7/2020 | | 2/7/2025 | | 16,204 | | | 16,028 | | | 16,141 | | | 9.0 | | |
| Senior Secured Loan (Revolver) (5) | | | | 7.75% | | (L +6.50%) | | 2/7/2020 | | 2/7/2025 | | 427 | | | 396 | | | 425 | | | 0.2 | | |
| | | 16,631 | | | 16,424 | | | 16,566 | | | 9.2 | | |
| Ball Metalpack | | Metal Can Manufacturing | | |
| Senior Secured Loan | | | | 9.75% | | (L +8.75%) | | 6/8/2021 | | 7/31/2026 | | 1,250 | | | 1,225 | | | 1,225 | | | 0.7 | | |
| | Banijay Entertainment S.A.S. (14) (15) (22) | | Motion Picture and Video Production | | |
| Avison Young (15) (22) | | Avison Young (15) (22) | | Nonresidential Property Managers | |
| Senior Secured Loan | Senior Secured Loan | | | | 3.84% | | (L +3.75%) | | 4/5/2021 | | 3/3/2025 | | 997 | | | 993 | | | 995 | | | 0.6 | | Senior Secured Loan | | | | 6.99% | | (L +5.75%) | | 11/25/2021 | | 1/31/2026 | | 3,966 | | | 3,951 | | | 3,940 | | | 2.0 | |
| | Bass Pro Group, LLC (14) (15) | Bass Pro Group, LLC (14) (15) | | Sporting Goods Stores | | Bass Pro Group, LLC (14) (15) | | Sporting Goods Stores | |
| Senior Secured Loan | Senior Secured Loan | | | | 5.00% | | (L +4.25%) | | 2/26/2021 | | 2/24/2028 | | 5,719 | | | 5,709 | | | 5,746 | | | 3.2 | | Senior Secured Loan | | | | 5.42% | | (L +3.75%) | | 2/26/2021 | | 3/6/2028 | | 979 | | | 974 | | | 895 | | | 0.5 | |
|
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
June 30, 20212022
(Dollar amounts in thousands)
| Portfolio Company (1)
Investment Type | Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets | Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Baymark Health Services, Inc. (15) | Baymark Health Services, Inc. (15) | | Outpatient Mental Health & Sub. Abuse Centers | | Baymark Health Services, Inc. (15) | | Outpatient Mental Health & Sub. Abuse Centers | |
| Senior Secured Loan | Senior Secured Loan | | | | 9.50% | | (L +8.50%) | | 6/10/2021 | | 6/11/2028 | | $ | 4,962 | | | $ | 4,888 | | | $ | 4,873 | | | 2.7 | % | Senior Secured Loan | | | | 10.17% | | (L +8.50%) | | 6/10/2021 | | 6/11/2028 | | $ | 4,962 | | | $ | 4,898 | | | $ | 4,997 | | | 2.6 | % |
| Senior Secured Loan (Delayed Draw) (5) | Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | (L +8.50%) | | 6/10/2021 | | 6/11/2028 | | — | | | (37) | | | (44) | | | — | | Senior Secured Loan (Delayed Draw) (5) | | | | 10.17% | | (L +8.50%) | | 6/10/2021 | | 6/11/2028 | | 2,760 | | | 2,645 | | | 2,818 | | | 1.4 | |
| | | | 4,962 | | | 4,851 | | | 4,829 | | | 2.7 | % | | | | 7,722 | | | 7,543 | | | 7,815 | | | 4.0 | |
| Connect U.S. Finco LLC (14) (15) (22) | | Taxi Service | | |
| Senior Secured Loan | | 4.50% | | (L +3.50%) | | 11/20/2019 | | 12/11/2026 | | 1,975 | | | 1,975 | | | 1,980 | | | 1.1 | | |
| Boca Home Care Holdings, Inc. (20) | | Boca Home Care Holdings, Inc. (20) | | Services for the Elderly and Persons with Disabilities | |
| Senior Secured Loan (Delayed Draw) (5) (15) | | Senior Secured Loan (Delayed Draw) (5) (15) | | | | 8.80% | | (SOFR +6.50%) | | 2/25/2022 | | 2/25/2027 | | 9,669 | | | 9,579 | | | 9,421 | | | 4.8 | |
| Senior Secured Loan (Revolver) (5) | | Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (SOFR +6.50%) | | 2/25/2022 | | 2/25/2027 | | — | | | (12) | | | (33) | | | — | |
| Common Equity (1,290 Class A units) (10) (13) | | Common Equity (1,290 Class A units) (10) (13) | | | | 2/25/2022 | | — | | | 1,290 | | | 1,178 | | | 0.6 | |
| | | | | | | | 9,669 | | | 10,857 | | | 10,566 | | | 5.4 | |
| Constellis Holdings, LLC (10) | Constellis Holdings, LLC (10) | | Other Justice, Public Order, and Safety Activities | | Constellis Holdings, LLC (10) | | Other Justice, Public Order, and Safety Activities | |
| Common Equity (20,628 common shares) | Common Equity (20,628 common shares) | | 3/27/2020 | | 703 | | | 342 | | | 0.2 | | Common Equity (20,628 common shares) | | 3/27/2020 | | 703 | | | 29 | | | — | |
| | Convergint Technologies Holdings, LLC (15) | | Security Systems Services (except Locksmiths) | | |
| Senior Secured Loan (14) | | | | 4.50% | | (L +3.75%) | | 3/18/2021 | | 3/31/2028 | | 2,011 | | | 2,001 | | | 2,022 | | | 1.1 | | |
| Senior Secured Loan | | | | 7.50% | | (L +6.75%) | | 9/28/2018 | | 3/30/2029 | | 7,499 | | | 7,480 | | | 7,601 | | | 4.2 | | |
| Senior Secured Loan (Delayed Draw) (5) (14) | | | | 4.50% | | (L +3.75%) | | 4/6/2021 | | 3/31/2028 | | 320 | | | 318 | | | 322 | | | 0.2 | | |
| | | 9,830 | | | 9,799 | | | 9,945 | | | 5.5 | | |
| Corel Inc. (15) | | Software Publishers | | |
| Convergint Technologies Holdings, LLC | | Convergint Technologies Holdings, LLC | | Security Systems Services (except Locksmiths) | |
| Senior Secured Loan | Senior Secured Loan | | | | 5.14% | | (L +5.00%) | | 3/2/2021 | | 7/2/2026 | | 1,301 | | | 1,293 | | | 1,287 | | | 0.7 | | Senior Secured Loan | | | | 8.42% | | (L +6.75%) | | 9/28/2018 | | 3/30/2029 | | 4,838 | | | 4,827 | | | 4,795 | | | 2.5 | |
| | Dexko Global Inc. (15) | | Motor Vehicle Body Manufacturing | | |
| Corel Inc. (14) (15) | | Corel Inc. (14) (15) | | Software Publishers | |
| Senior Secured Loan | | Senior Secured Loan | | | | 6.57% | | (L +5.00%) | | 3/2/2021 | | 7/2/2026 | | 636 | | | 635 | | | 610 | | | 0.3 | |
| | Creation Technologies (15) (22) | | Creation Technologies (15) (22) | | Bare Printed Circuit Board Manufacturing | |
| Senior Secured Loan | | Senior Secured Loan | | 6.46% | | (L +5.50%) | | 9/24/2021 | | 10/5/2028 | | 2,000 | | | 1,986 | | | 1,761 | | | 0.9 | |
| | Dessert Holdings | | Dessert Holdings | | Ice Cream and Frozen Dessert Manufacturing | |
| Senior Secured Loan | Senior Secured Loan | | | | 9.25% | | (L +8.25%) | | 1/28/2021 | | 7/24/2025 | | 1,460 | | | 1,465 | | | 1,460 | | | 0.8 | | Senior Secured Loan | | | | 9.50% | | (L +7.25%) | | 2/2/2022 | | 6/8/2029 | | 1,667 | | | 1,639 | | | 1,593 | | | 0.8 | |
| | DHX Media Ltd. (14) (15) (22) | DHX Media Ltd. (14) (15) (22) | | Motion Picture and Video Production | | DHX Media Ltd. (14) (15) (22) | | Motion Picture and Video Production | |
| Senior Secured Loan | Senior Secured Loan | | | | 5.00% | | (L +4.25%) | | 3/19/2021 | | 3/18/2028 | | 2,494 | | | 2,446 | | | 2,488 | | | 1.3 | | Senior Secured Loan | | | | 5.92% | | (L +4.25%) | | 3/19/2021 | | 3/18/2028 | | 3,954 | | | 3,913 | | | 3,741 | | | 1.9 | |
| | Diamond Sports Group, LLC (14) (15) | Diamond Sports Group, LLC (14) (15) | | Television Broadcasting | | Diamond Sports Group, LLC (14) (15) | | Television Broadcasting | |
| Senior Secured Loan | Senior Secured Loan | | | | 3.36% | | (L +3.25%) | | 11/19/2019 | | 8/24/2026 | | 1,965 | | | 1,967 | | | 1,199 | | | — | | Senior Secured Loan | | | | 9.18% | | (SOFR +8.00%) | | 3/9/2022 | | 5/25/2026 | | 254 | | | 247 | | | 253 | | | 0.1 | |
| Senior Secured Loan | | Senior Secured Loan | | | | 4.43% | | (SOFR +3.25%) | | 11/19/2019 | | 8/24/2026 | | 1,945 | | | 1,945 | | | 473 | | | 0.2 | |
| | | | | | | 2,199 | | | 2,192 | | | 726 | | | 0.3 | |
| Eblens Holdings, Inc. (20) | | Shoe Store | | |
| Subordinated Loan (11) | | | | 12.00% cash / 1.00% PIK | | N/A | | 7/13/2017 | | 1/13/2023 | | 9,160 | | | 9,071 | | | 8,438 | | | 4.7 | | |
| Common Equity (71,250 Class A units) (10) | | | | 7/13/2017 | | 713 | | | 114 | | | 0.1 | | |
| | | 9,160 | | | 9,784 | | | 8,552 | | | 4.8 | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
June 30, 20212022
(Dollar amounts in thousands)
| Portfolio Company (1)
Investment Type | Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets | Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Electrical Components International, Inc. | | Current-Carrying Wiring Device Manufacturing | | |
| Senior Secured Loan (14) (15) | | | | 4.37% | | (L +4.25%) | | 4/8/2021 | | 6/26/2025 | | $ | 2,952 | | | $ | 2,912 | | | $ | 2,923 | | | 1.6 | % | |
| Directv Financing, LLC (14) (15) | | Directv Financing, LLC (14) (15) | | Wired Telecommunications Carriers | |
| Senior Secured Loan | Senior Secured Loan | | | | 8.62% | | (L +8.50%) | | 4/8/2021 | | 6/26/2026 | | 3,000 | | | 2,614 | | | 2,614 | | | 1.5 | | Senior Secured Loan | | | | 6.67% | | (L +5.00%) | | 7/22/2021 | | 8/2/2027 | | $ | 2,097 | | | $ | 2,093 | | | $ | 1,936 | | | 1.0 | % |
| | | | 5,952 | | | 5,526 | | | 5,537 | | | 3.1 | | | | |
| Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4) | | Electrical Contractors and Other Wiring Installation Contractors | | |
| East West Manufacturing (15) | | East West Manufacturing (15) | | Fluid Power Pump and Motor Manufacturing | |
| Senior Secured Loan | Senior Secured Loan | | 7.50% cash / 3.50% PIK | | (L +7.00%) | | 6/30/2017 | | 6/30/2022 | | 17,453 | | | 17,349 | | | 12,432 | | | 6.9 | | Senior Secured Loan | | | | 7.28% | | (SOFR +5.75%) | | 2/11/2022 | | 12/22/2028 | | 1,959 | | | 1,941 | | | 1,891 | | | 1.0 | |
| Preferred Equity (238,095 Series B units) (10) | | 6/30/2017 | | 300 | | | — | | | — | | |
| Preferred Equity (13,315 Series C units) (10) | | 8/13/2018 | | 13 | | | — | | | — | | |
| Senior Secured Loan (Delayed Draw) (5) | | Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | (SOFR +2.88%) | | 2/11/2022 | | 12/22/2028 | | — | | | (3) | | | (10) | | | — | |
| | | | | 1,959 | | | 1,938 | | | 1,881 | | | 1.0 | |
| Eblens Holdings, Inc. (20) | | Eblens Holdings, Inc. (20) | | Shoe Store | |
| Subordinated Loan (6) (11) | | Subordinated Loan (6) (11) | | | | 12.50% cash / 1.50% PIK | | N/A | | 7/13/2017 | | 1/13/2023 | | 9,261 | | | 9,210 | | | 7,142 | | | 3.6 | |
| Common Equity (71,250 Class A units) (10) | | Common Equity (71,250 Class A units) (10) | | | | 7/13/2017 | | 713 | | | — | | | — | |
| | | | | 9,261 | | | 9,923 | | | 7,142 | | | 3.6 | |
| Electrical Components International, Inc. | | Electrical Components International, Inc. | | Current-Carrying Wiring Device Manufacturing | |
| Senior Secured Loan | | Senior Secured Loan | | | | 10.03% | | (L +8.50%) | | 4/8/2021 | | 6/26/2026 | | 3,679 | | | 3,314 | | | 3,471 | | | 1.8 | |
| | EnergySolutions, LLC (14) (15) | | EnergySolutions, LLC (14) (15) | | Hazardous Waste Treatment and Disposal | |
| Senior Secured Loan | | Senior Secured Loan | | 6.00% | | (L +3.75%) | | 7/8/2021 | | 5/9/2025 | | 1,778 | | | 1,775 | | | 1,663 | | | 0.8 | |
| | Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4) (19) | | Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4) (19) | | Electrical Contractors and Other Wiring Installation Contractors | |
| Senior Secured Loan | | Senior Secured Loan | | 7.50% | | N/A | | 12/31/2021 | | 12/31/2025 | | 6,391 | | | 6,391 | | | 6,391 | | | 3.3 | |
| Senior Secured Loan (6) | | Senior Secured Loan (6) | | | | 10.00% PIK | | N/A | | 12/31/2021 | | 12/31/2026 | | 6,751 | | | 6,584 | | | 3,221 | | | 1.6 | |
| Senior Secured Loan (Revolver) (5) | | Senior Secured Loan (Revolver) (5) | | | | 7.50% | | N/A | | 11/29/2021 | | 12/31/2025 | | 771 | | | 771 | | | 771 | | | 0.4 | |
| Equity Participation Rights (23) | | Equity Participation Rights (23) | | | | 12/31/2021 | | — | | | 4,722 | | | — | | | — | |
| | | | | 17,453 | | | 17,662 | | | 12,432 | | | 6.9 | | | | | 13,913 | | | 18,468 | | | 10,383 | | | 5.3 | |
| Excelin Home Health, LLC (4) | Excelin Home Health, LLC (4) | | Home Health Care Services | | Excelin Home Health, LLC (4) | | Home Health Care Services | |
| Senior Secured Loan | Senior Secured Loan | | 11.50% | | (L +9.50%) | | 10/25/2018 | | 4/25/2024 | | 4,250 | | | 4,206 | | | 4,250 | | | 2.4 | | Senior Secured Loan | | | | 11.75% | | (L +9.50%) | | 10/25/2018 | | 9/30/2025 | | 4,250 | | | 4,172 | | | 4,208 | | | 2.2 | |
| | GGC Aerospace Topco L.P. | GGC Aerospace Topco L.P. | | Other Aircraft Parts and Auxiliary Equipment Manufacturing | | GGC Aerospace Topco L.P. | | Other Aircraft Parts and Auxiliary Equipment Manufacturing | |
| Common Equity (368,852 Class A units) (10) | Common Equity (368,852 Class A units) (10) | | 12/29/2017 | | 450 | | | 84 | | | — | | Common Equity (368,852 Class A units) (10) | | 12/29/2017 | | 450 | | | — | | | — | |
| Common Equity (40,984 Class B units) (10) | Common Equity (40,984 Class B units) (10) | | 12/29/2017 | | 50 | | | 3 | | | — | | Common Equity (40,984 Class B units) (10) | | 12/29/2017 | | 50 | | | — | | | — | |
| | | | 500 | | | 87 | | | — | | | | | 500 | | | — | | | — | |
| Inergex Holdings, LLC | | Other Computer Related Services | | |
| Senior Secured Loan | | 8.00% cash / 1.0% PIK | | (L +8.00%) | | 10/1/2018 | | 10/1/2024 | | 15,260 | | | 15,091 | | | 15,260 | | | 8.4 | | |
| Senior Secured Loan (Revolver) (5) (18) | | | | n/m (18) | | (L +7.00%) | | 10/1/2018 | | 10/1/2024 | | — | | | (15) | | | — | | | — | | |
| | | 15,260 | | | 15,076 | | | 15,260 | | | 8.4 | | |
| Intouch Midco Inc. (15) (22) | | All Other Professional, Scientific, and Technical Services | | |
| Senior Secured Loan | | | | 4.85% | | (L +4.75%) | | 12/20/2019 | | 8/24/2025 | | 2,300 | | | 2,241 | | | 2,297 | | | 1.3 | | |
| | Ivanti Software, Inc. (14) (15) | | Software Publishers | | |
| Senior Secured Loan | | | | 5.75% | | (L +4.75%) | | 3/26/2021 | | 12/1/2027 | | 5,986 | | | 6,022 | | | 6,001 | | | 3.3 | | |
| | I&I Sales Group, LLC | | Marketing Consulting Services | | |
| Senior Secured Loan (15) | | 9.50% | | (L +8.50%) | | 12/30/2020 | | 7/10/2025 | | 5,285 | | | 5,203 | | | 5,286 | | | 2.9 | | |
| Senior Secured Loan (Revolver) (5) (18) | | | | n/m (18) | | (L +8.50%) | | 12/30/2020 | | 7/10/2025 | | — | | | (2) | | | — | | | — | | |
| | | 5,285 | | | 5,201 | | | 5,286 | | | 2.9 | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
June 30, 20212022
(Dollar amounts in thousands)
| Portfolio Company (1)
Investment Type | Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets | Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Honor HN Buyer Inc | | Honor HN Buyer Inc | | Services for the Elderly and Persons with Disabilities | |
| Senior Secured Loan (15) | | Senior Secured Loan (15) | | | | 8.25% | | (L +6.00%) | | 10/15/2021 | | 10/15/2027 | | $ | 6,565 | | | $ | 6,449 | | | $ | 6,352 | | | 3.2 | % |
| Senior Secured Loan (Delayed Draw) (5) (15) | | Senior Secured Loan (Delayed Draw) (5) (15) | | | | 8.25% | | (L +6.00%) | | 10/15/2021 | | 10/15/2027 | | 1,913 | | | 1,859 | | | 1,779 | | | 0.9 | |
| Senior Secured Loan (Revolver) (5) | | Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +6.00%) | | 10/15/2021 | | 10/15/2027 | | — | | | (13) | | | (25) | | | — | |
| | | | | 8,478 | | | 8,295 | | | 8,106 | | | 4.1 | |
| Idera | | Idera | | Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | |
| Senior Secured Loan | | Senior Secured Loan | | | | 7.82% | | (L +6.75%) | | 1/27/2022 | | 3/2/2029 | | 4,000 | | | 4,000 | | | 3,744 | | | 1.9 | |
| | Inergex Holdings, LLC | | Inergex Holdings, LLC | | Other Computer Related Services | |
| Senior Secured Loan (11) | | Senior Secured Loan (11) | | | | 9.25% cash / 1.0% PIK | | (L +8.00%) | | 10/1/2018 | | 10/1/2024 | | 15,260 | | | 15,001 | | | 15,260 | | | 7.8 | |
| Senior Secured Loan (Revolver) (5) | | Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +7.00%) | | 10/1/2018 | | 10/1/2024 | | — | | | (11) | | | — | | | — | |
| | | | | 15,260 | | | 14,990 | | | 15,260 | | | 7.8 | |
| Intouch Midco Inc. (15) (22) | | Intouch Midco Inc. (15) (22) | | All Other Professional, Scientific, and Technical Services | |
| Senior Secured Loan | | Senior Secured Loan | | | | 6.42% | | (L +4.75%) | | 12/20/2019 | | 8/24/2025 | | 2,894 | | | 2,862 | | | 2,846 | | | 1.5 | |
| | Ivanti Software, Inc. (14) (15) | | Ivanti Software, Inc. (14) (15) | | Software Publishers | |
| Senior Secured Loan | | Senior Secured Loan | | | | 5.85% | | (L +4.25%) | | 3/26/2021 | | 12/1/2027 | | 2,978 | | | 2,988 | | | 2,573 | | | 1.3 | |
| | JP Intermediate B, LLC (15) | JP Intermediate B, LLC (15) | | Drugs and Druggists' Sundries Merchant Wholesalers | | JP Intermediate B, LLC (15) | | Drugs and Druggists' Sundries Merchant Wholesalers | |
| Senior Secured Loan | | Senior Secured Loan | | | | 6.74% | | (L +5.50%) | | 1/14/2021 | | 11/15/2025 | | 5,553 | | | 5,379 | | | 4,859 | | | 2.5 | |
| | Karman Buyer Corp (14) (15) | | Karman Buyer Corp (14) (15) | | Advertising Agencies | |
| Senior Secured Loan | Senior Secured Loan | | | | 6.50% | | (L +5.50%) | | 1/14/2021 | | 11/15/2025 | | $ | 5,919 | | | $ | 5,675 | | | $ | 5,736 | | | 3.2 | % | Senior Secured Loan | | | | 6.17% | | (L +4.50%) | | 3/2/2022 | | 10/28/2027 | | 2,296 | | | 2,264 | | | 2,119 | | | 1.1 | |
| | KNS Acquisition Corp. (14) (15) | KNS Acquisition Corp. (14) (15) | | Electronic Shopping and Mail-Order Houses | | KNS Acquisition Corp. (14) (15) | | Electronic Shopping and Mail-Order Houses | |
| Senior Secured Loan | Senior Secured Loan | | | | 7.00% | | (L +6.25%) | | 4/16/2021 | | 4/21/2027 | | 5,000 | | | 4,958 | | | 4,998 | | | 2.8 | | Senior Secured Loan | | | | 8.50% | | (L +6.25%) | | 4/16/2021 | | 4/21/2027 | | 6,869 | | | 6,830 | | | 6,635 | | | 3.4 | |
| | LogMeIn, Inc. (14) (15) | | Data Processing, Hosting, and Related Services | | |
| Senior Secured Loan | | | | 4.83% | | (L +4.75%) | | 3/26/2021 | | 8/31/2027 | | 4,994 | | | 4,991 | | | 4,992 | | | 2.8 | | |
| Kreg LLC | | Kreg LLC | | Other Ambulatory Health Care Services | |
| Senior Secured Loan (15) | | Senior Secured Loan (15) | | | | 8.50% | | (L +6.25%) | | 12/20/2021 | | 12/20/2026 | | 20,244 | | | 20,108 | | | 19,889 | | | 10.2 | |
| Senior Secured Loan (Revolver) (5) | | Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +6.25%) | | 12/20/2021 | | 12/20/2026 | | — | | | (15) | | | (39) | | | — | |
| | | | | | | 20,244 | | | 20,093 | | | 19,850 | | | 10.2 | |
| McGraw Hill Global Education Holdings, LLC (14) (15) | | All Other Publishers | | |
| Senior Secured Loan | | | | 5.75% | | (L +4.75%) | | 4/1/2021 | | 11/1/2024 | | 1,995 | | | 1,994 | | | 2,001 | | | 1.1 | | |
| | Micro Holding Corp (14) | | Internet Publishing and Broadcasting and Web Search Portals | | |
| Senior Secured Loan | | | | 3.60% | | (L +3.50%) | | 3/26/2021 | | 9/15/2024 | | 2,000 | | | 2,003 | | | 2,007 | | | 1.1 | | |
| | Milrose Consultants, LLC (4) (8) | | Administrative Management and General Management Consulting Services | | |
| Senior Secured Loan | | 7.60% | | (L +6.60%) | | 7/16/2019 | | 7/16/2025 | | 22,574 | | | 22,388 | | | 23,026 | | | 12.7 | | |
| | Odyssey Logistics and Technology Corporation (14) (15) | | Freight Transportation Arrangement | | |
| Senior Secured Loan | | 5.00% | | (L +4.00%) | | 4/5/2021 | | 10/12/2024 | | 1,995 | | | 1,966 | | | 1,972 | | | 1.1 | | |
| | Online Tech Stores, LLC (4) (6) | | Stationary & Office Supply Merchant Wholesaler | | |
| Subordinated Loan | | 10.50% cash / 3.0% PIK | | N/A | | 2/1/2018 | | 8/1/2023 | | 19,823 | | | 16,160 | | | 94 | | | 0.1 | | |
| | Panther BF Aggregator 2 LP (14) (15) (19) | | Other Commercial and Service Industry Machinery Manufacturing | | |
| Senior Secured Loan | | 3.35% | | (L +3.25%) | | 11/19/2019 | | 4/30/2026 | | 1,817 | | | 1,817 | | | 1,803 | | | 1.0 | | |
|
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
June 30, 20212022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Parfums Holding Company, Inc. (14) (15) | | Cosmetics, Beauty Supplies, and Perfume Stores | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.10% | | (L +4.00%) | | 6/25/2019 | | 6/30/2024 | | $ | 1,534 | | | $ | 1,533 | | | $ | 1,530 | | | 0.9 | % |
| | | | | | | | | | | | | | | | | | |
| Pelican Products, Inc. | | Unlaminated Plastics Profile Shape Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.75% | | (L +7.75%) | | 9/24/2018 | | 5/1/2026 | | 6,249 | | | 6,249 | | | 6,249 | | | 3.4 | |
| | | | | | | | | | | | | | | | | | |
| Peraton Inc. (14) (15) | | Management Consulting Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.50% | | (L +3.75%) | | 4/2/2021 | | 2/1/2028 | | 748 | | | 749 | | | 752 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | |
| Pike Corp. (14) (15) | | Electrical Contractors and Other Wiring Installation Contractors | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 3.11% | | (L +3.00%) | | 9/17/2020 | | 1/21/2028 | | 131 | | | 131 | | | 131 | | | 0.1 | |
| | | | | | | | | | | | | | | | | | |
| PM Acquisition LLC (20) | | All Other General Merchandise Stores | | | | | | | | | | | | | | | | |
| Common Equity (499 units) (10) (13) | | | | | | | | 9/30/2017 | | | | | | 499 | | | 1,308 | | | 0.7 | |
| | | | | | | | | | | | | | | | | | |
| Quest Software US Holdings Inc. (14) (15) | | Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.44% | | (L +4.25%) | | 6/25/2019 | | 5/16/2025 | | 1,148 | | | 1,145 | | | 1,149 | | | 0.6 | |
| | | | | | | | | | | | | | | | | | |
| Resource Label Group, LLC | | Commercial Printing (except Screen and Books) | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.50% | | (L +8.50%) | | 6/7/2017 | | 11/26/2023 | | 4,821 | | | 4,795 | | | 4,821 | | | 2.7 | |
| | | | | | | | | | | | | | | | | | |
| RPLF Holdings, LLC (10) (13) | | Software Publishers | | | | | | | | | | | | | | | | |
| Common Equity (254,110 Class A units) | | | | | | | | 1/17/2018 | | | | | | 492 | | | 791 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | |
| RSA Security (15) | | Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Senior Secured Loan (14) | | | | 5.50% | | (L +4.75%) | | 4/16/2021 | | 4/27/2028 | | 937 | | | 928 | | | 937 | | | 0.5 | |
| Senior Secured Loan | | | | 8.50% | | (L +7.75%) | | 4/16/2021 | | 4/27/2029 | | 2,670 | | | 2,633 | | | 2,633 | | | 1.5 | |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | (L +4.75%) | | 4/16/2021 | | 4/27/2028 | | — | | | — | | | — | | | — | |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | (L +7.75%) | | 4/16/2021 | | 4/16/2029 | | — | | | — | | | (21) | | | — | |
| | | | | | | | | | | | 3,607 | | | 3,561 | | | 3,549 | | | 2.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| LogMeIn, Inc. (14) (15) | | Data Processing, Hosting, and Related Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 6.35% | | (L +4.75%) | | 3/26/2021 | | 8/31/2027 | | $ | 2,961 | | | $ | 2,960 | | | $ | 2,287 | | | 1.2 | % |
| | | | | | | | | | | | | | | | | | |
| Magenta Buyer LLC (14) (15) | | Software Publishers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.98% | | (L +4.75%) | | 7/28/2021 | | 7/27/2028 | | 4,838 | | | 4,825 | | | 4,363 | | | 2.2 | |
| | | | | | | | | | | | | | | | | | |
| McGraw Hill Global Education Holdings, LLC (14) (15) | | All Other Publishers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.55% | | (L +4.75%) | | 4/1/2021 | | 7/28/2028 | | 2,298 | | | 2,278 | | | 2,088 | | | 1.1 | |
| | | | | | | | | | | | | | | | | | |
| Metasource (15) | | All Other Business Support Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.78% | | (SOFR +6.25%) | | 5/17/2022 | | 5/17/2027 | | 2,793 | | | 2,766 | | | 2,766 | | | 1.4 | |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | (SOFR +6.25%) | | 5/17/2022 | | 5/17/2024 | | — | | | (11) | | | (11) | | | — | |
| | | | | | | | | | | | 2,793 | | | 2,755 | | | 2,755 | | | 1.4 | |
| Milrose Consultants, LLC (4) | | Administrative Management and General Management Consulting Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 8.75% | | (L +6.50%) | | 7/16/2019 | | 7/16/2025 | | 22,250 | | | 22,250 | | | 21,803 | | | 11.1 | |
| Senior Secured Loan (Revolver) (5) | | | | 8.75% | | (L +6.50%) | | 7/16/2019 | | 7/16/2025 | | 476 | | | 469 | | | 444 | | | 0.2 | |
| | | | | | | | | | | | 22,726 | | | 22,719 | | | 22,247 | | | 11.3 | |
| Molded Devices, Inc. | | Other Industrial Machinery Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 7.00% | | (L +6.00%) | | 11/1/2021 | | 11/1/2026 | | 8,029 | | | 7,959 | | | 7,798 | | | 4.0 | |
| Senior Secured Loan (Delayed Draw) (5) (15) | | | | n/m (18) | | (L +6.00%) | | 11/1/2021 | | 11/1/2026 | | — | | | (6) | | | (42) | | | — | |
| Senior Secured Loan (Revolver) (5) | | | | 7.00% | | (L +6.00%) | | 11/1/2021 | | 11/1/2026 | | 603 | | | 594 | | | 575 | | | 0.3 | |
| | | | | | | | | | | | 8,632 | | | 8,547 | | | 8,331 | | | 4.3 | |
| Odyssey Logistics and Technology Corporation (14) (15) | | Freight Transportation Arrangement | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.24% | | (L +4.00%) | | 4/5/2021 | | 10/12/2024 | | 987 | | | 977 | | | 950 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
| One GI LLC | | Offices of Other Holding Companies | | | | | | | | | | | | | | | | |
| Senior Secured Loan (Delayed Draw) (15) | | | | 8.42% | | (L +6.75%) | | 12/13/2021 | | 12/22/2025 | | 7,545 | | | 7,414 | | | 7,221 | | | 3.7 | |
| Senior Secured Loan (Delayed Draw) (5) (15) | | | | n/m (18) | | (L +6.75%) | | 12/13/2021 | | 12/13/2023 | | — | | | (29) | | | (171) | | | (0.1) | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +6.75%) | | 12/13/2021 | | 12/22/2025 | | — | | | (25) | | | (62) | | | — | |
| | | | | | | | | | | | 7,545 | | | 7,360 | | | 6,988 | | | 3.6 | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
June 30, 20212022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Sentry Centers Holdings, LLC (10) (13) | | Convention and Trade Show Organizers | | | | | | | | | | | | | | | | |
| Preferred Equity (2,248 Series A units) | | | | | | | | 9/4/2020 | | | | | | $ | 51 | | | $ | — | | | — | % |
| Preferred Equity (1,603 Series B units) | | | | | | | | 9/4/2020 | | | | | | 160 | | | 28 | | | — | |
| Common Equity (269 units) | | | | | | | | 9/4/2020 | | | | | | 3 | | | — | | | — | |
| | | | | | | | | | | | | | 214 | | | 28 | | | — | |
| Signal Parent, Inc. (15) | | New Single-Family Housing Construction (except For-Sale Builders) | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.25% | | (L +3.50%) | | 3/25/2021 | | 4/3/2028 | | 851 | | | 842 | | | 835 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
| SourceHOV Tax, Inc. | | Other Accounting Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan (4) | | | | 7.50% | | (L +6.50%) | | 3/16/2020 | | 3/16/2025 | | 19,890 | | | 19,728 | | | 19,733 | | | 11.0 | |
| Senior Secured Loan (Revolver) (5) (18) | | | | n/m (18) | | (L +6.50%) | | 5/17/2021 | | 3/17/2025 | | — | | | (14) | | | (9) | | | — | |
| | | | | | | | | | | | 19,890 | | | 19,714 | | | 19,724 | | | 11.0 | |
| Southern Technical Institute, LLC (4) (10) | | Colleges, Universities, and Professional Schools | | | | | | | | | | | | | | | | |
| Equity appreciation rights | | | | | | | | 6/27/2018 | | | | | | — | | | 6,120 | | | 3.4 | |
| | | | | | | | | | | | | | | | | | |
| Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.,) (15) | | Child Day Care Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.40% | | (L +8.25%) | | 7/26/2018 | | 7/30/2026 | | 6,399 | | | 6,318 | | | 5,823 | | | 3.1 | |
| | | | | | | | | | | | | | | | | | |
| SSJA Bariatric Management LLC (15) | | Offices of Physicians, Mental Health Specialists | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 6.25% | | (L +5.25%) | | 8/26/2019 | | 8/26/2024 | | 9,825 | | | 9,762 | | | 9,825 | | | 5.5 | |
| Senior Secured Loan | | | | 6.25% | | (L +5.25%) | | 12/31/2020 | | 8/26/2024 | | 1,061 | | | 1,052 | | | 1,061 | | | 0.6 | |
| Senior Secured Loan (Revolver) (5) (18) | | | | n/m (18) | | (L +5.25%) | | 8/26/2019 | | 8/26/2024 | | — | | | (4) | | | — | | | — | |
| | | | | | | | | | | | 10,886 | | | 10,810 | | | 10,886 | | | 6.1 | |
| Stancor, L.P. (4) | | Pump and Pumping Equipment Manufacturing | | | | | | | | | | | | | | | | |
| Preferred Equity (1,250,000 Class A units), 8% PIK (10) | | | | | | | | 8/19/2014 | | | | | | 1,501 | | | 1,300 | | | 0.7 | |
| | | | | | | | | | | | | | | | | | |
| Staples, Inc. (14) (15) (22) | | Business to Business Electronic Markets | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.18% | | (L +5.00%) | | 6/24/2019 | | 4/16/2026 | | 2,945 | | | 2,883 | | | 2,875 | | | 1.6 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Parfums Holding Company, Inc. (14) (15) | | Cosmetics, Beauty Supplies, and Perfume Stores | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.67% | | (L +4.00%) | | 6/25/2019 | | 6/30/2024 | | $ | 1,462 | | | $ | 1,462 | | | $ | 1,384 | | | 0.7 | % |
| | | | | | | | | | | | | | | | | | |
| Peraton Inc. (14) (15) | | Management Consulting Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.42% | | (L +3.75%) | | 4/2/2021 | | 2/1/2028 | | 408 | | | 408 | | | 384 | | | 0.2 | |
| | | | | | | | | | | | | | | | | | |
| Planet Bingo, LLC (F/K/A 3rd Rock Gaming Holdings, LLC) (6) (10) | | Software Publishers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.00% | | N/A | | 3/13/2018 | | 3/12/2023 | | 16,728 | | | 14,192 | | | 7,303 | | | 3.7 | |
| | | | | | | | | | | | | | | | | | |
| PM Acquisition LLC (10) (20) | | All Other General Merchandise Stores | | | | | | | | | | | | | | | | |
| Common Equity (499 units) | | | | | | | | 9/30/2017 | | | | | | 499 | | | 1,119 | | | 0.6 | |
| | | | | | | | | | | | | | | | | | |
| Professional Pipe Holdings, LLC | | Plumbing, Heating, and Air-Conditioning Contractors | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.75% cash / 1.00% PIK | | (L +9.75%) | | 3/23/2018 | | 3/24/2025 | | 2,559 | | | 2,550 | | | 2,584 | | | 1.3 | |
| | | | | | | | | | | | | | | | | | |
| RC Buyer, Inc. | | Other Automotive Mechanical and Electrical Repair and Maintenance | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.75% | | (L +6.50%) | | 6/24/2022 | | 7/30/2029 | | 1,125 | | | 1,080 | | | 1,080 | | | 0.6 | |
| | | | | | | | | | | | | | | | | | |
| Reception Purchaser LLC (15) | | Transportation and Warehousing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.20% | | (SOFR +6.00%) | | 4/28/2022 | | 3/24/2028 | | 5,109 | | | 5,034 | | | 5,034 | | | 2.6 | |
| | | | | | | | | | | | | | | | | | |
| Resource Label Group, LLC (14) (15) | | Commercial Printing (except Screen and Books) | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.92% | | (L +4.25%) | | 7/2/2021 | | 7/7/2028 | | 3,420 | | | 3,411 | | | 3,207 | | | 1.6 | |
| | | | | | | | | | | | | | | | | | |
| RPLF Holdings, LLC (10) (13) | | Software Publishers | | | | | | | | | | | | | | | | |
| Common Equity (345,339 Class A units) | | | | | | | | 1/17/2018 | | | | | | 492 | | | 735 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
June 30, 20212022
(Dollar amounts in thousands)
| Portfolio Company (1)
Investment Type | Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets | Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| STS Operating, Inc. | | Industrial Machinery and Equipment Merchant Wholesalers | | |
| Senior Secured Loan (14) (15) | | 5.25% | | (L +4.25%) | | 5/16/2018 | | 12/11/2024 | | $ | 622 | | | $ | 621 | | | $ | 616 | | | 0.3 | % | |
| RSA Security (15) | | RSA Security (15) | | Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | |
| Senior Secured Loan (14) | | Senior Secured Loan (14) | | | | 5.93% | | (L +4.75%) | | 4/16/2021 | | 4/27/2028 | | $ | 2,783 | | | $ | 2,769 | | | $ | 2,412 | | | 1.2 | % |
| Senior Secured Loan | Senior Secured Loan | | 9.00% | | (L +8.00%) | | 5/15/2018 | | 4/30/2026 | | 9,073 | | | 9,070 | | | 8,933 | | | 5.0 | | Senior Secured Loan | | | | 8.97% | | (L +7.75%) | | 4/16/2021 | | 4/27/2029 | | 4,450 | | | 4,396 | | | 4,049 | | | 2.1 | |
| | 9,695 | | | 9,691 | | | 9,549 | | | 5.3 | | | | | 7,233 | | | 7,165 | | | 6,461 | | | 3.3 | |
| Sunshine Luxembourg VII SARL (14) (15) (22) | | Pharmaceutical Preparation Manufacturing | | |
| RumbleOn, Inc. (15) (22) | | RumbleOn, Inc. (15) (22) | | Other Industrial Machinery Manufacturing | |
| Senior Secured Loan | | Senior Secured Loan | | | | 9.25% | | (L +8.25%) | | 8/31/2021 | | 8/31/2026 | | 4,169 | | | 3,968 | | | 3,884 | | | 2.0 | |
| Senior Secured Loan (Delayed Draw) (5) | | Senior Secured Loan (Delayed Draw) (5) | | | | 9.25% | | (L +8.25%) | | 8/31/2021 | | 2/23/2023 | | 1,261 | | | 1,249 | | | 1,139 | | | 0.6 | |
| Warrants (warrants to purchase up to $600,000 in common stock) | | Warrants (warrants to purchase up to $600,000 in common stock) | | | | 8/31/2021 | | 2/28/2023 (12) | | 200 | | | 2 | | | — | |
| | | | | 5,430 | | | 5,417 | | | 5,025 | | | 2.6 | |
| Sentry Centers Holdings, LLC (10) (13) | | Sentry Centers Holdings, LLC (10) (13) | | Convention and Trade Show Organizers | |
| Preferred Equity (1,603 Series B units) | | Preferred Equity (1,603 Series B units) | | 9/4/2020 | | 160 | | | 101 | | | 0.1 | |
| | Signal Parent, Inc. (14) (15) | | Signal Parent, Inc. (14) (15) | | New Single-Family Housing Construction (except For-Sale Builders) | |
| Senior Secured Loan | Senior Secured Loan | | | | 4.50% | | (L +3.75%) | | 11/20/2019 | | 10/1/2026 | | 1,975 | | | 1,975 | | | 1,985 | | | 1.1 | | Senior Secured Loan | | 5.17% | | (L +3.50%) | | 3/25/2021 | | 4/3/2028 | | 1,831 | | | 1,815 | | | 1,611 | | | 0.8 | |
| | Tailwind Smith Cooper Intermediate Corporation (14) (15) | | Fabricated Pipe and Pipe Fitting Manufacturing | | |
| Southern Technical Institute, LLC (4) (23) | | Southern Technical Institute, LLC (4) (23) | | Colleges, Universities, and Professional Schools | |
| Equity appreciation rights | | Equity appreciation rights | | | | 6/27/2018 | | — | | | 7,192 | | | 3.7 | |
| | Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.,) (15) | | Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.,) (15) | | Child Day Care Services | |
| Senior Secured Loan | Senior Secured Loan | | 5.11% | | (L +5.00%) | | 2/23/2021 | | 5/28/2026 | | 2,587 | | | 2,544 | | | 2,584 | | | 1.4 | | Senior Secured Loan | | | | 10.50% | | (L +8.25%) | | 7/26/2018 | | 7/30/2026 | | 6,399 | | | 6,355 | | | 6,034 | | | 3.1 | |
| | Tank Holding Corp. (14) (15) | | Unlaminated Plastics Profile Shape Manufacturing | | |
| Senior Secured Loan | | 3.60% | | (L +3.50%) | | 6/24/2019 | | 3/26/2026 | | 1,965 | | | 1,971 | | | 1,955 | | | 1.1 | | |
| Senior Secured Loan | | 5.75% | | (L +5.00%) | | 12/18/2020 | | 3/26/2026 | | 891 | | | 879 | | | 895 | | | 0.5 | | |
| 2,856 | | | 2,850 | | | 2,850 | | | 1.6 | | |
| The Escape Game, LLC (4) | | Other amusement and recreation industries | | |
| SSJA Bariatric Management LLC (15) | | SSJA Bariatric Management LLC (15) | | Offices of Physicians, Mental Health Specialists | |
| Senior Secured Loan | Senior Secured Loan | | 9.75% | | (L +8.75%) | | 12/22/2017 | | 12/31/2021 | | 2,333 | | | 2,329 | | | 2,333 | | | 1.3 | | Senior Secured Loan | | | | 7.20% | | (SOFR +5.00%) | | 8/26/2019 | | 8/26/2024 | | 9,725 | | | 9,683 | | | 9,679 | | | 4.9 | |
| Senior Secured Loan | Senior Secured Loan | | 9.75% | | (L +8.75%) | | 2/14/2020 | | 12/22/2022 | | 7,000 | | | 6,979 | | | 7,000 | | | 3.9 | | Senior Secured Loan | | | | 7.20% | | (SOFR +5.00%) | | 12/31/2020 | | 8/26/2024 | | 1,051 | | | 1,044 | | | 1,046 | | | 0.5 | |
| Senior Secured Loan | Senior Secured Loan | | 9.75% | | (L +8.75%) | | 7/18/2019 | | 12/22/2022 | | 7,000 | | | 7,000 | | | 7,000 | | | 3.8 | | Senior Secured Loan | | | | 7.20% | | (SOFR +5.00%) | | 12/8/2021 | | 8/26/2024 | | 2,647 | | | 2,626 | | | 2,634 | | | 1.3 | |
| Senior Secured Loan (Delayed Draw) | | 8.00% | | (L +7.00%) | | 7/20/2018 | | 12/31/2021 | | 4,667 | | | 4,665 | | | 4,659 | | | 2.6 | | |
| Senior Secured Loan (Revolver) (5) | | Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (SOFR +5.00%) | | 8/26/2019 | | 8/26/2024 | | — | | | (3) | | | (3) | | | — | |
| | | | 21,000 | | | 20,973 | | | 20,992 | | | 11.6 | | | | | 13,423 | | | 13,350 | | | 13,356 | | | 6.7 | |
| Thryv, Inc. (14) (15) | | Directory and Mailing List Publishers | | |
| Senior Secured Loan | | 9.50% | | (L +8.50%) | | 2/18/2021 | | 3/1/2026 | | 2,314 | | | 2,257 | | | 2,351 | | | 1.3 | | |
| | Truck Hero, Inc. (14) (15) | | Truck Trailer Manufacturing | | |
| Senior Secured Loan | | 4.50% | | (L +3.75%) | | 4/1/2021 | | 1/31/2028 | | 748 | | | 747 | | | 749 | | | 0.4 | | |
| | TruGreen Limited Partnership | | Landscaping Services | | |
| Senior Secured Loan | | 9.25% | | (L +8.50%) | | 5/13/2021 | | 11/2/2028 | | 4,500 | | | 4,639 | | | 4,639 | | | 2.6 | | |
|
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
June 30, 20212022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| United Biologics Holdings, LLC (4) (10) | | Medical Laboratories | | | | | | | | | | | | | | | | |
| Preferred Equity (151,787 units) | | | | | | | | 4/16/2013 | | | | | | $ | 9 | | | $ | 12 | | | — | % |
| Warrants (29,374 units) | | | | | | | | 7/26/2012 | | 3/5/2022 (12) | | | | 82 | | | 5 | | | — | |
| | | | | | | | | | | | | | 91 | | | 17 | | | — | |
| United Natural Foods (14) (15) (22) | | General Line Grocery Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 3.60% | | (L +3.50%) | | 6/9/2020 | | 10/22/2025 | | 283 | | | 273 | | | 283 | | | 0.2 | |
| | | | | | | | | | | | | | | | | | |
| West Corporation (14) (15) | | All Other Telecommunications | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.50% | | (L +3.50%) | | 2/26/2021 | | 10/10/2024 | | 887 | | | 872 | | | 862 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
| Total Debt and Equity Investments | | | | | | | | | | | | $ | 307,467 | | | $ | 306,248 | | | $ | 290,226 | | | 161.0 | % |
| | | | | | | | | | | | | | | | | | |
| Structured Finance Note Investments (9) (16) (22) | | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2020 Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 13.26% | | | | 11/16/2020 | | 11/19/2031 | | 11,080 | | | 9,268 | | | 9,534 | | | 5.3 | |
| | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2021 Ltd (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 14.53% | | | | 5/28/2021 | | 7/18/2034 | | 8,630 | | | 7,267 | | | 7,288 | | | 4.0 | |
| | | | | | | | | | | | | | | | | | |
| Dryden 53 CLO, LTD. (7) | | | | | | | | | | | | | | | | | | |
| Income Notes | | | | 23.16% | | | | 10/26/2020 | | 1/15/2031 | | 2,700 | | | 1,704 | | | 1,780 | | | 1.0 | |
| Subordinated Notes | | | | 23.13% | | | | 10/26/2020 | | 1/15/2031 | | 2,159 | | | 1,363 | | | 1,424 | | | 0.8 | |
| | | | | | | | | | | | 4,859 | | | 3,067 | | | 3,204 | | | 1.8 | |
| Dryden 76 CLO, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 16.20% | | | | 9/27/2019 | | 10/20/2032 | | 2,750 | | | 2,215 | | | 2,385 | | | 1.3 | |
| | | | | | | | | | | | | | | | | | |
| Elevation CLO 2017-7, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 12.38% | | | | 2/6/2019 | | 7/15/2030 | | 10,000 | | | 6,577 | | | 5,678 | | | 3.2 | |
| | | | | | | | | | | | | | | | | | |
| Flatiron CLO 18, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 19.14% | | | | 1/2/2019 | | 4/17/2031 | | 9,680 | | | 7,111 | | | 7,369 | | | 4.1 | |
| | | | | | | | | | | | | | | | | | |
| Madison Park Funding XXIII, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 23.28% | | | | 1/8/2020 | | 7/27/2047 | | 10,000 | | | 6,468 | | | 7,402 | | | 4.1 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| SS Acquisition, LLC (15) | | Sports and Recreation Instruction | | | | | | | | | | | | | | | | |
| Senior Secured Loan (8) | | | | 7.87% | | (L +6.87%) | | 12/30/2021 | | 12/30/2026 | | $ | 3,042 | | | $ | 3,014 | | | $ | 3,016 | | | 1.5 | % |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | (L +6.87%) | | 12/30/2021 | | 12/30/2026 | | — | | | — | | | (15) | | | — | |
| | | | | | | | | | | | 3,042 | | | 3,014 | | | 3,001 | | | 1.5 | |
| Staples, Inc. (14) (15) (22) | | Business to Business Electronic Markets | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 6.29% | | (L +5.00%) | | 6/24/2019 | | 4/16/2026 | | 2,915 | | | 2,866 | | | 2,548 | | | 1.2 | |
| | | | | | | | | | | | | | | | | | |
| STS Operating, Inc. | | Industrial Machinery and Equipment Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.67% | | (L +8.00%) | | 5/15/2018 | | 4/30/2026 | | 9,073 | | | 9,071 | | | 9,035 | | | 4.5 | |
| | | | | | | | | | | | | | | | | | |
| The Escape Game, LLC (4) | | Other amusement and recreation industries | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.67% | | (L +7.00%) | | 12/21/2021 | | 12/22/2024 | | 16,333 | | | 16,333 | | | 16,234 | | | 8.3 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +7.00%) | | 12/21/2021 | | 12/22/2024 | | — | | | (38) | | | (28) | | | — | |
| | | | | | | | | | | | 16,333 | | | 16,295 | | | 16,206 | | | 8.3 | |
| Thryv, Inc. (14) (15) | | Directory and Mailing List Publishers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.74% | | (L +8.50%) | | 2/18/2021 | | 3/1/2026 | | 2,889 | | | 2,835 | | | 2,832 | | | 1.4 | |
| | | | | | | | | | | | | | | | | | |
| Tolemar Acquisition, INC. | | Motorcycle, Bicycle, and Parts Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 7.67% | | (L +6.00%) | | 10/14/2021 | | 10/14/2026 | | 15,583 | | | 15,516 | | | 15,559 | | | 7.9 | |
| Senior Secured Loan (Revolver) (5) | | | | 7.67% | | (L +6.00%) | | 10/14/2021 | | 10/14/2026 | | 746 | | | 735 | | | 742 | | | 0.4 | |
| | | | | | | | | | | | 16,329 | | | 16,251 | | | 16,301 | | | 8.3 | |
| Tony's Finer Foods Enterprises, LLC | | Supermarkets and Other Grocery (except Convenience) Stores | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 7.15% | | (SOFR +6.00%) | | 4/20/2022 | | 4/20/2028 | | 7,953 | | | 7,877 | | | 7,877 | | | 4.0 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (SOFR +6.00%) | | 4/20/2022 | | 4/20/2027 | | — | | | (10) | | | (10) | | | — | |
| | | | | | | | | | | | 7,953 | | | 7,867 | | | 7,867 | | | 4.0 | |
| TruGreen Limited Partnership | | Landscaping Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.75% | | (L +8.50%) | | 5/13/2021 | | 11/2/2028 | | 4,500 | | | 4,620 | | | 4,498 | | | 2.3 | |
| | | | | | | | | | | | | | | | | | |
| United Biologics Holdings, LLC (4) (10) | | Medical Laboratories | | | | | | | | | | | | | | | | |
| Preferred Equity (4,701 units) | | | | | | | | 4/16/2013 | | | | | | 9 | | | 16 | | | — | |
| Warrants (3,976 units) | | | | | | | | 7/26/2012 | | 4/16/2023 (12) | | | | 8 | | | 8 | | | — | |
| | | | | | | | | | | | | | 17 | | | 24 | | | — | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
June 30, 20212022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Madison Park Funding XXIX, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 17.08% | | | | 12/22/2020 | | 10/18/2047 | | $ | 9,500 | | | $ | 7,256 | | | $ | 7,373 | | | 4.1 | % |
| | | | | | | | | | | | | | | | | | |
| Monroe Capital MML CLO X, Ltd. | | | | | | | | | | | | | | | | | | |
| Mezzanine bond - Class E | | | | 10.82% | | (L +8.85%) | | 8/7/2020 | | 8/20/2031 | | 1,000 | | | 943 | | | 1,007 | | | 0.6 | |
| | | | | | | | | | | | | | | | | | |
| Park Avenue Institutional Advisers CLO Ltd 2021-1 | | | | | | | | | | | | | | | | | | |
| Mezzanine bond - Class E | | | | 8.74% | | (L +7.30%) | | 1/26/2021 | | 1/20/2034 | | 1,000 | | | 972 | | | 997 | | | 0.6 | |
| | | | | | | | | | | | | | | | | | |
| Octagon Investment Partners 39, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 18.62% | | | | 1/23/2020 | | 10/20/2030 | | 7,000 | | | 4,966 | | | 5,182 | | | 2.9 | |
| | | | | | | | | | | | | | | | | | |
| Redding Ridge 4 (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 17.77% | | | | 3/4/2021 | | 4/15/2030 | | 1,300 | | | 1,152 | | | 1,168 | | | 0.6 | |
| | | | | | | | | | | | | | | | | | |
| Regatta II Funding | | | | | | | | | | | | | | | | | | |
| Mezzanine bond - Class DR2 | | | | 13.83% | | (L +6.95%) | | 6/5/2020 | | 1/15/2029 | | 800 | | | 716 | | | 789 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | |
| THL Credit Wind River 2019‐3 CLO Ltd (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 10.68% | | | | 4/5/2019 | | 4/15/2031 | | 7,000 | | | 5,680 | | | 4,806 | | | 2.7 | |
| | | | | | | | | | | | | | | | | | |
| Trinitas CLO VIII (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 22.57% | | | | 3/4/2021 | | 7/20/2031 | | 5,200 | | | 3,205 | | | 3,360 | | | 1.9 | |
| | | | | | | | | | | | | | | | | | |
| Wellfleet CLO 2018-2 (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 21.08% | | | | 3/4/2021 | | 10/20/2031 | | 1,000 | | | 669 | | | 703 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | |
| Total Structured Finance Note Investments | | | | | | | | | | | | $ | 90,799 | | | $ | 67,532 | | | $ | 68,245 | | | 38.0 | % |
| | | | | | | | | | | | | | | | | | |
| Total Non-control/Non-affiliate Investments | | | | | | | | | | | | $ | 398,266 | | | $ | 373,780 | | | $ | 358,471 | | | 199.0 | % |
| Affiliate Investments | | | | | | | | | | | | | | | | | | |
| 3rd Rock Gaming Holdings, LLC (20) | | Software Publishers | | | | | | | | | | | | | | | | |
| Senior Secured Loan (6) | | | | 8.50% cash / 1.0% PIK | | (L +7.50%) | | 3/13/2018 | | 3/12/2023 | | 19,305 | | | 17,333 | | | 6,975 | | | 3.9 | |
| Common Equity (2,547,250 units) (10) (13) | | | | | | | | 3/13/2018 | | | | | | 2,547 | | | — | | | — | |
| | | | | | | | | | | | 19,305 | | | 19,880 | | | 6,975 | | | 3.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| West Corporation (14) (15) | | All Other Telecommunications | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.17% | | (L +3.50%) | | 2/26/2021 | | 10/10/2024 | | $ | 871 | | | $ | 861 | | | $ | 746 | | | 0.4 | % |
| Senior Secured Loan | | | | 5.67% | | (L +4.00%) | | 7/29/2021 | | 10/10/2024 | | 2,564 | | | 2,519 | | | 2,192 | | | 1.1 | |
| | | | | | | | | | | | 3,435 | | | 3,380 | | | 2,938 | | | 1.5 | |
| Yahoo / Verizon Media (14) (15) | | Internet Publishing and Broadcasting and Web Search Portals | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.17% | | (L +5.50%) | | 7/21/2021 | | 9/1/2027 | | 3,210 | | | 3,179 | | | 3,053 | | | 1.6 | |
| | | | | | | | | | | | | | | | | | |
| Total Debt and Equity Investments | | | | | | | | | | | | $ | 385,215 | | | $ | 387,507 | | | $ | 366,198 | | | 186.8 | % |
| | | | | | | | | | | | | | | | | | |
| Structured Finance Note Investments | | | | | | | | | | | | | | | | | | |
| Subordinated Notes and Mezzanine Debt (9) (22) | | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2020 Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 15.27% | | | | 11/16/2020 | | 10/20/2031 | | $ | 11,080 | | | $ | 9,520 | | | $ | 8,186 | | | 4.2 | % |
| | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2021 Ltd (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 14.87% | | | | 5/28/2021 | | 7/18/2034 | | 8,630 | | | 7,052 | | | 5,594 | | | 2.9 | |
| | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2022-1A (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 13.36% | | | | 4/28/2022 | | 4/22/2033 | | 10,726 | | | 8,694 | | | 8,694 | | | 4.4 | |
| | | | | | | | | | | | | | | | | | |
| Ares L CLO | | | | | | | | | | | | | | | | | | |
| Mezzanine debt - Class E | | | | 6.69% | | (L +5.65%) | | 2/17/2022 | | 1/15/2032 | | 6,000 | | | 5,708 | | | 5,329 | | | 2.7 | |
| | | | | | | | | | | | | | | | | | |
| Barings CLO 2019-I Ltd. | | | | | | | | | | | | | | | | | | |
| Mezzanine debt - Class E | | | | 7.90% | | (L +6.86%) | | 2/23/2022 | | 4/15/2035 | | 8,000 | | | 7,889 | | | 7,348 | | | 3.8 | |
| | | | | | | | | | | | | | | | | | |
| Battalion CLO XI, Ltd. | | | | | | | | | | | | | | | | | | |
| Mezzanine debt - Class E | | | | 8.03% | | (L +6.85%) | | 4/25/2022 | | 4/24/2034 | | 6,000 | | | 5,824 | | | 5,478 | | | 2.8 | |
| | | | | | | | | | | | | | | | | | |
| Dryden 53 CLO, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes - Income | | | | 21.46% | | | | 10/26/2020 | | 1/15/2031 | | 2,700 | | | 1,507 | | | 1,162 | | | 0.6 | |
| Subordinated Notes | | | | 21.43% | | | | 10/26/2020 | | 1/15/2031 | | 2,159 | | | 1,205 | | | 929 | | | 0.5 | |
| | | | | | | | | | | | 4,859 | | | 2,712 | | | 2,091 | | | 1.1 | |
| Dryden 76 CLO, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 19.10% | | | | 9/27/2019 | | 10/20/2032 | | 2,750 | | | 2,118 | | | 1,894 | | | 1.0 | |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
June 30, 20212022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Chemical Resources Holdings, Inc. (20) | | Custom Compounding of Purchased Resins | | | | | | | | | | | | | | | | |
| Senior Secured Loan (4) (8) | | | | 8.77% | | (L +7.27%) | | 1/25/2019 | | 1/25/2024 | | $ | 13,743 | | | $ | 13,648 | | | $ | 13,956 | | | 7.8 | % |
| Common Equity (1,832 Class A shares) (10) (13) | | | | | | | | 1/25/2019 | | | | | | 1,814 | | | 3,400 | | | 1.9 | |
| | | | | | | | | | | | 13,743 | | | 15,462 | | | 17,356 | | | 9.7 | |
| Contract Datascan Holdings, Inc. (4) (20) | | Office Machinery and Equipment Rental and Leasing | | | | | | | | | | | | | | | | |
| Preferred Equity (3,061 Series A shares), 10% PIK | | | | | | | | 8/5/2015 | | | | | | 5,849 | | | 2,787 | | | 1.5 | |
| Common Equity (11,273 shares) (10) | | | | | | | | 6/28/2016 | | | | | | 104 | | | 41 | | | — | |
| | | | | | | | | | | | | | 5,953 | | | 2,828 | | | 1.5 | |
| DRS Imaging Services, LLC (20) | | Data Processing, Hosting, and Related Services | | | | | | | | | | | | | | | | |
| Common Equity (1,135 units) (10) (13) | | | | | | | | 3/8/2018 | | | | | | 1,135 | | | 1,259 | | | 0.7 | |
| | | | | | | | | | | | | | | | | | |
| Master Cutlery, LLC (4) (10) (20) | | Sporting and Recreational Goods and Supplies Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Subordinated Loan (6) (11) | | | | 13.00% | | N/A | | 4/17/2015 | | 7/20/2022 | | 7,123 | | | 4,725 | | | 687 | | | 0.4 | |
| Preferred Equity (3,723 Series A units), 8% PIK | | | | | | | | 4/17/2015 | | | | | | 3,483 | | | — | | | — | |
| Common Equity (15,564 units) | | | | | | | | 4/17/2015 | | | | | | — | | | — | | | — | |
| | | | | | | | | | | | 7,123 | | | 8,208 | | | 687 | | | 0.4 | |
| NeoSystems Corp. (4) (20) | | Other Accounting Services | | | | | | | | | | | | | | | | |
| Preferred Equity (521,962 convertible shares), 10% PIK | | | | | | | | 8/14/2014 | | | | | | 1,985 | | | 3,255 | | | 1.8 | |
| | | | | | | | | | | | | | | | | | |
| Pfanstiehl Holdings, Inc. (4) (20) (21) | | Pharmaceutical Preparation Manufacturing | | | | | | | | | | | | | | | | |
| Common Equity (400 Class A shares) | | | | | | | | 1/1/2014 | | | | | | 217 | | | 49,236 | | | 27.4 | |
| | | | | | | | | | | | | | | | | | |
| Professional Pipe Holdings, LLC (19) | | Plumbing, Heating, and Air-Conditioning Contractors | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.75% cash / 1.50% PIK | | (L +10.25%) | | 3/23/2018 | | 3/23/2023 | | 5,742 | | | 5,692 | | | 5,518 | | | 3.1 | |
| Common Equity (1,414 Class A units) (10) | | | | | | | | 3/23/2018 | | | | | | 1,414 | | | 849 | | | 0.5 | |
| | | | | | | | | | | | 5,742 | | | 7,106 | | | 6,367 | | | 3.6 | |
| TalentSmart Holdings, LLC (20) | | Professional and Management Development Training | | | | | | | | | | | | | | | | |
| Common Equity (1,595 Class A shares) (10) (13) | | | | | | | | 10/11/2019 | | | | | | 1,595 | | | 1,011 | | | 0.6 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Elevation CLO 2017-7, Ltd. (7) (16) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 0.0% | | | | 2/6/2019 | | 7/15/2030 | | $ | 5,860 | | | $ | 1,722 | | | $ | 378 | | | 0.2 | % |
| | | | | | | | | | | | | | | | | | |
| Flatiron CLO 18, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 18.90% | | | | 1/2/2019 | | 4/17/2031 | | 9,680 | | | 6,748 | | | 5,615 | | | 2.9 | |
| | | | | | | | | | | | | | | | | | |
| Madison Park Funding XXIII, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 22.74% | | | | 1/8/2020 | | 7/27/2047 | | 10,000 | | | 6,106 | | | 5,393 | | | 2.8 | |
| | | | | | | | | | | | | | | | | | |
| Madison Park Funding XXIX, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 14.50% | | | | 12/22/2020 | | 10/18/2047 | | 9,500 | | | 6,532 | | | 5,596 | | | 2.9 | |
| | | | | | | | | | | | | | | | | | |
| Monroe Capital MML CLO X, Ltd. | | | | | | | | | | | | | | | | | | |
| Mezzanine debt - Class E-R | | | | 10.06% | | (SOFR +8.75%) | | 4/22/2022 | | 5/20/2034 | | 1,000 | | | 937 | | | 937 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
| Octagon Investment Partners 39, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 18.28% | | | | 1/23/2020 | | 10/20/2030 | | 7,000 | | | 4,484 | | | 3,450 | | | 1.8 | |
| | | | | | | | | | | | | | | | | | |
| Park Avenue Institutional Advisers CLO Ltd 2021-1 | | | | | | | | | | | | | | | | | | |
| Mezzanine debt - Class E | | | | 8.36% | | (L +7.30%) | | 1/26/2021 | | 1/20/2034 | | 1,000 | | | 976 | | | 905 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
| Redding Ridge 4 (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 14.47% | | | | 3/4/2021 | | 4/15/2030 | | 1,300 | | | 1,050 | | | 785 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | |
| Regatta II Funding | | | | | | | | | | | | | | | | | | |
| Mezzanine debt - Class DR2 | | | | 7.99% | | (L +6.95%) | | 6/5/2020 | | 1/15/2029 | | 800 | | | 757 | | | 738 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | |
| Regatta XXII Funding Ltd | | | | | | | | | | | | | | | | | | |
| Mezzanine debt - Class E | | | | 8.52% | | (L +7.19%) | | 5/6/2022 | | 6/16/2035 | | 3,000 | | | 2,970 | | | 2,970 | | | 1.5 | |
| | | | | | | | | | | | | | | | | | |
| THL Credit Wind River 2019‐3 CLO Ltd (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 14.48% | | | | 4/5/2019 | | 4/15/2031 | | 7,000 | | | 5,449 | | | 4,199 | | | 2.1 | |
| | | | | | | | | | | | | | | | | | |
| Trinitas CLO VIII (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 21.80% | | | | 3/4/2021 | | 7/20/2117 | | 5,200 | | | 3,023 | | | 2,374 | | | 1.2 | |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
June 30, 20212022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| TRS Services, LLC (4) (10) (20) | | Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | | | | | | | | | | | | | | | | |
| Preferred Equity (2,088,305 Class A units), 11% PIK | | | | | | | | 12/10/2014 | | | | | | $ | 572 | | | $ | 867 | | | 0.5 | % |
| Common Equity (3,000,000 units) (10) | | | | | | | | 12/10/2014 | | | | | | — | | | — | | | — | |
| | | | | | | | | | | | | | 572 | | | 867 | | | 0.5 | |
| TTG Healthcare, LLC (20) | | Diagnostic Imaging Centers | | | | | | | | | | | | | | | | |
| Senior Secured Loan (4) | | | | 8.50% | | (L +7.50%) | | 3/1/2019 | | 11/28/2025 | | 19,505 | | | 19,318 | | | 19,612 | | | 10.9 | |
| Preferred Equity ( 2,309 Class B units) (10) (13) | | | | | | | | 3/1/2019 | | | | | | 2,309 | | | 4,040 | | | 2.2 | |
| | | | | | | | | | | | 19,505 | | | 21,627 | | | 23,652 | | | 13.1 | |
| | | | | | | | | | | | | | | | | | |
| Total Affiliate Investments | | | | | | | | | | | | $ | 65,418 | | | $ | 83,740 | | | $ | 113,493 | | | 63.2 | % |
| Control Investment | | | | | | | | | | | | | | | | | | |
| MTE Holding Corp. (4) (19) | | Travel Trailer and Camper Manufacturing | | | | | | | | | | | | | | | | |
| Subordinated Loan (to Mirage Trailers, LLC, a controlled, consolidated subsidiary of MTE Holding Corp.) | | | | 11.00% cash / 5.00% PIK | | (L +15.00%) | | 11/25/2015 | | 11/25/2021 | | 7,988 | | | 7,988 | | | 7,988 | | | 4.4 | |
| Common Equity (554 shares) | | | | | | | | 11/25/2015 | | | | | | 3,069 | | | 4,074 | | | 2.3 | |
| | | | | | | | | | | | 7,988 | | | 11,057 | | | 12,062 | | | 6.7 | |
| Total Control Investment | | | | | | | | | | | | $ | 7,988 | | | $ | 11,057 | | | $ | 12,062 | | | 6.7 | % |
| | | | | | | | | | | | | | | | | | |
| Total Investments | | | | | | | | | | | | $ | 471,672 | | | $ | 468,577 | | | $ | 484,026 | | | 268.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Venture 45 CLO Ltd. | | | | | | | | | | | | | | | | | | |
| Mezzanine debt - Class E | | | | 8.57% | | (SOFR +7.70%) | | 4/18/2022 | | 7/20/2035 | | $ | 3,000 | | | $ | 2,926 | | | $ | 2,926 | | | 1.5 | % |
| | | | | | | | | | | | | | | | | | |
| Wellfleet CLO 2018-2 (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 21.70% | | | | 3/4/2021 | | 10/20/2031 | | 1,000 | | | 645 | | | 498 | | | 0.3 | |
| | | | | | | | | | | | | | | | | | |
| Total Subordinated Notes and Mezzanine Debt Investments | | | | | | | | | | | | $ | 123,385 | | | $ | 93,842 | | | $ | 81,378 | | | 41.9 | % |
| | | | | | | | | | | | | | | | | | |
| Loan Accumulation Facility (17) (22) | | | | | | | | | | | | | | | | | | |
| Brightwood Capital MM CLO 2022-1, LTD | | | | | | | | | | | | | | | | | | |
| Loan accumulation facility | | | | 14.50% | | | | 1/5/2022 | | 12/31/2032 | | $ | 8,500 | | | $ | 8,500 | | | $ | 8,500 | | | 4.3 | % |
| | | | | | | | | | | | | | | | | | |
| Total Loan Accumulation Facility Investment | | | | | | | | | | | | $ | 8,500 | | | $ | 8,500 | | | $ | 8,500 | | | 4.3 | % |
| | | | | | | | | | | | | | | | | | |
| Total Structured Finance Notes | | | | | | | | | | | | $ | 131,885 | | | $ | 102,342 | | | $ | 89,878 | | | 46.2 | % |
| | | | | | | | | | | | | | | | | | |
| Total Non-control/Non-affiliate Investments | | | | | | | | | | | | $ | 517,100 | | | $ | 489,849 | | | $ | 456,076 | | | 233.0 | % |
| Affiliate Investments | | | | | | | | | | | | | | | | | | |
| Contract Datascan Holdings, Inc. (4) (10) (20) | | Office Machinery and Equipment Rental and Leasing | | | | | | | | | | | | | | | | |
| Preferred Equity (3,061 Series A shares), 10% PIK | | | | | | | | 8/5/2015 | | | | | | $ | 5,849 | | | $ | 4,487 | | | 2.3 | % |
| Common Equity (11,273 shares) | | | | | | | | 6/28/2016 | | | | | | 104 | | | 134 | | | 0.1 | |
| | | | | | | | | | | | | | 5,953 | | | 4,621 | | | 2.4 | |
| DRS Imaging Services, LLC (10) (13) (20) | | Data Processing, Hosting, and Related Services | | | | | | | | | | | | | | | | |
| Common Equity (1,135 units) | | | | | | | | 3/8/2018 | | | | | | 1,135 | | | 1,269 | | | 0.6 | |
| | | | | | | | | | | | | | | | | | |
| Master Cutlery, LLC (4) (10) (20) | | Sporting and Recreational Goods and Supplies Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Subordinated Loan (6) (11) | | | | 13.00% | | N/A | | 4/17/2015 | | 7/20/2023 | | 8,046 | | | 4,680 | | | 161 | | | 0.1 | |
| Preferred Equity (3,723 Series A units), 8% PIK | | | | | | | | 4/17/2015 | | | | | | 3,483 | | | — | | | — | |
| Common Equity (15,564 units) | | | | | | | | 4/17/2015 | | | | | | — | | | — | | | — | |
| | | | | | | | | | | | 8,046 | | | 8,163 | | | 161 | | | 0.1 | |
| Pfanstiehl Holdings, Inc. (4) (20) (21) | | Pharmaceutical Preparation Manufacturing | | | | | | | | | | | | | | | | |
| Common Equity (400 Class A shares) | | | | | | | | 1/1/2014 | | | | | | 217 | | | 83,153 | | | 42.5 | |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
June 30, 2022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| TalentSmart Holdings, LLC (10) (13) (20) | | Professional and Management Development Training | | | | | | | | | | | | | | | | |
| Common Equity (1,595,238 Class A shares) | | | | | | | | 10/11/2019 | | | | | | $ | 1,595 | | | $ | 1,050 | | | 0.5 | % |
| | | | | | | | | | | | | | | | | | |
| TRS Services, LLC (4) (20) | | Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | | | | | | | | | | | | | | | | |
| Preferred Equity (1,937,191 Class A units), 11% PIK | | | | | | | | 12/10/2014 | | | | | | — | | | 1,347 | | | 0.7 | |
| Common Equity (3,000,000 units) (10) | | | | | | | | 12/10/2014 | | | | | | 572 | | | — | | | — | |
| | | | | | | | | | | | | | 572 | | | 1,347 | | | 0.7 | |
| | | | | | | | | | | | | | | | | | |
| Total Affiliate Investments | | | | | | | | | | | | $ | 8,046 | | | $ | 17,635 | | | $ | 91,601 | | | 46.8 | % |
| | | | | | | | | | | | | | | | | | |
| Total Investments | | | | | | | | | | | | $ | 525,146 | | | $ | 507,484 | | | $ | 547,677 | | | 279.8 | % |
(1)Equity ownership may be held in shares or units of companies affiliated with the portfolio company. The Company's investments are generally classified as "restricted securities"“restricted securities” as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144.
(2)Substantially allAt June 30, 2022, the Company held loans with an aggregate principal amount of $345,313, or 93% of the investmentstotal loan portfolio, that bear interest at a variable rate are indexed to LIBOR (L) at June 30, 2021,or SOFR, and reset monthly, quarterly, or semi-annually. Variable-rateAs of June 30, 2022, variable-rate loans with an aggregate costprincipal amount of $339,970 include LIBOR$42,778 were subject to reference rate floor provisions of generally 0.75% to 1.75%; at June 30, 2021, the reference rate on such instruments was generally below the stated floor provisions.1.00%. For each variable-rate investment, the Company has provided the spread over the reference rate and current interest rate in effect at June 30, 2021.2022. Unless otherwise noted, all investments with a stated PIK rate require interest payments with the issuance of additional securities as payment of the entire PIK provision.
(3)Unless otherwise noted withby footnote 14, fair value was determined using significant unobservable inputs for all of the Company's investments and are considered Level 3 under GAAP. See Note 5 for further details.
(4)Investments (or portion thereof) held by SBIC I LP. These assets are pledged as collateral of the SBA debentures and cannot be pledged under any debt obligation of the Company.
(5)Subject to unfunded commitments. See Note 6 for further details..
(6)Investment was on non-accrual status as of June 30, 2021,2022, meaning the Company has suspended recognition of all or a portion of income on the investment. See Note 4 for further details.
(7)Amortized cost reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO subordinated debt investments. CLO subordinated debt positions are entitled to recurring distributions which are generally equal to the remainingresidual cash flow of payments made byreceived on underlying securities less contractual payments to debt holders and fund expenses.
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
June 30, 2021
(Dollar amounts in thousands)
(8)The Company has entered into a contractual arrangement with co‑lenders whereby, subject to certain conditions, it has agreed to receive its payment after the repayment of certain co‑lenders pursuant to a payment waterfall. The table below provides additional details as of June 30, 2021:2022:
| | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | | Reported Interest Rate | | Interest Rate per Credit Agreement | | Additional Interest per Annum |
| Chemical Resources Holdings, Inc. | | 8.77% | | 7.50% | | 1.27% |
| Milrose Consultants, LLC | | 7.60% | | 7.00% | | 0.60% |
| | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | | Reported Interest Rate | | Interest Rate per Credit Agreement | | Additional Interest per Annum |
| SS Acquisition, LLC | | 7.87% | | 7.50% | | 0.37% |
(9)The rate disclosed on subordinated note investments is the estimated effective yield, generally established at purchase and re-evaluated upon receipt of distributions, and based upon projected amounts and timing of future distributions and the projected amount and timing of terminal principal payments at the time of estimation. The estimated yield and investment cost may ultimately not be realized. Maturity date represents the contractual maturity daterealized.
(10)Non-income producing.
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of the structured finance notes. Projected cash flows, including the projected amount and timing of terminal principal payments which may be projected to occur prior to the contractual maturity date, were utilizedInvestments - Continued (unaudited)
June 30, 2022
(Dollar amounts in deriving the effective yield of the investments.thousands)
(10)Non-income producing.
(11)The interest rate on these investments contains a PIK provision, whereby the issuer has the option to make interest payments in cash or with the issuance of additional securities as payment of the entire PIK provision. The interest rate in the schedule represents the current interest rate in effect for these investments. The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed as of June 30, 2021:2022: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | | Investment Type | | Range of PIK
Option | | Range of Cash
Option | | Maximum PIK
Rate Allowed |
| Eblens Holdings, Inc. | | Subordinated Loan | | 0% or 1.50% | | 12.50% or 14.00% | | 1.00% |
| Inergex Holdings, LLC | | Senior Loan | | 0% or 1.00% | | 13.00% or 12.00%9.25% to 10.25% | | 1.00% |
| Master Cutlery, LLC | | Subordinated Loan | | 0% to 13.00% | | 13.00%0% to 0%13.00% | | 13.00% |
(12)Represents expiration date of the warrants.
(13)All or portion of investment held by a wholly-owned subsidiary of the Company subject to income tax.
(14)Fair value was determined by reference to observable inputs other than quoted prices in active markets and are considered Level 2 under GAAP. See Note 5 for further details.
(15)Investments (or portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the BNP Facility and cannot be pledged under any debt obligation of the Company.Parent.
(16)Amortized cost reflects accretionAs of June 30, 2022, the effective accretable yield less any cash distributions received or entitledhas been estimated to be received from0%, as the aggregate amount of projected distributions, including projected distributions related to liquidation of the underlying portfolio upon the security's anticipated optional redemption, is less than current amortized cost. Projected distributions are periodically monitored and re-evaluated. All actual distributions will be recognized as reductions to amortized cost until such time, if and when occurring, a future aggregate amount of then-projected distributions exceeds the security's then-current amortized cost.
(17)Loan accumulation facilities are financing structures intended to aggregate loans that are expected to form part of the portfolio of a future CLO subordinated debt investments.vehicle. Reported yields represent an estimated yield to be earned on the investment. Income notes associated with loan accumulation facilities generally pay returns equal to the actual income earned on facility assets less costs of senior financing and manager costs. As of June 30, 2022, the fair value of loan accumulation facilities were determined by reference to Transaction Price as an approximation of fair value.
(17)Reserved.
(18)Not meaningful as there is no outstanding balance on the revolver.revolver or delayed draw facility. The Company earns unfunded commitment fees on undrawn revolving lines of credit balances, which are reported in fee income.
(19)The Company holds at least one seat on the portfolio company’s board of directors.
(20)The Company has an observer seat on the portfolio company’s board of directors.
(21)Portfolio company represents greater than 5% of total assets at June 30, 2021.2022.
(22)Non-qualifying assets under Section 55(a) of the 1940 Act. AsQualifying assets as defined underin Section 55 of the 1940 Act qualifying assets must represent at least 70% of the Company's assets atimmediately following the time of acquisition of any additional non-qualifying assets. As of June 30, 2021,2022, approximately 85%80% of the Company's assets were qualifying assets.
(23)Equity participation rights issued by unaffiliated third party fully covered with underlying positions in the portfolio company.
See Notes to Consolidated Financial Statements.Statements (unaudited).
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 20202021
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Non-control/Non-affiliate Investments | | | | | | | | | | | | | | |
| All Star Auto Lights, Inc. (4) | | Motor Vehicle Parts (Used) Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.50% | | (L +7.50%) | | 12/19/2019 | | 8/20/2024 | | $ | 14,293 | | | $ | 14,167 | | | $ | 13,581 | | | 8.5 | % |
| | | | | | | | | | | | | | | | | | |
| A&A Transfer, LLC | | Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 8.25% | | (L +6.50%) | | 2/7/2020 | | 2/7/2025 | | 16,632 | | | 16,427 | | | 16,798 | | | 10.6 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +6.50%) | | 2/7/2020 | | 2/7/2025 | | — | | | (35) | | | (21) | | | — | |
| | | | | | | | | | | | 16,632 | | | 16,392 | | | 16,777 | | | 10.6 | |
| Bass Pro Group, LLC (14) (15) | | Sporting Goods Stores | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.75% | | (L +5.00%) | | 6/24/2019 | | 9/25/2024 | | 2,954 | | | 2,907 | | | 2,968 | | | 1.9 | |
| | | | | | | | | | | | | | | | | | |
| BayMark Health Services, Inc. | | Outpatient Mental Health and Substance Abuse Centers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.25% | | (L +8.25%) | | 3/22/2018 | | 3/1/2025 | | 4,000 | | | 3,976 | | | 4,000 | | | 2.5 | |
| | | | | | | | | | | | | | | | | | |
| Community Intervention Services, Inc. (4) (6) (11) | | Outpatient Mental Health and Substance Abuse Centers | | | | | | | | | | | | | | | | |
| Subordinated Loan | | | | 7.00% cash / 6.00% PIK | | N/A | | 7/16/2015 | | 1/16/2021 | | 10,225 | | | 7,639 | | | 105 | | | 0.1 | |
| | | | | | | | | | | | | | | | | | |
| Confie Seguros Holdings II Co. | | Insurance Agencies and Brokerages | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.73% | | (L +8.50%) | | 7/7/2015 | | 11/1/2025 | | 9,678 | | | 9,544 | | | 9,302 | | | 5.9 | |
| | | | | | | | | | | | | | | | | | |
| Connect U.S. Finco LLC (14) (15) | | Taxi Service | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.50% | | (L +4.50%) | | 11/20/2019 | | 12/11/2026 | | 1,985 | | | 1,976 | | | 1,997 | | | 1.3 | |
| | | | | | | | | | | | | | | | | | |
| Constellis Holdings, LLC (10) | | Other Justice, Public Order, and Safety Activities | | | | | | | | | | | | | | | | |
| Common Equity (20,628 common shares) | | | | | | | | 3/27/2020 | | | | | | 703 | | | 676 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | |
| Convergint Technologies Holdings, LLC | | Security Systems Services (except Locksmiths) | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.50% | | (L +6.75%) | | 9/28/2018 | | 2/2/2026 | | 3,481 | | | 3,437 | | | 3,390 | | | 2.1 | |
| | | | | | | | | | | | | | | | | | |
| Custom Truck One Source (14) (15) | | Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.40% | | (L +4.25%) | | 9/30/2020 | | 4/18/2025 | | 497 | | | 496 | | | 499 | | | 0.3 | |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued
December 31, 2020
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Diamond Sports Group, LLC (14) (15) | | Television Broadcasting | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 3.40% | | (L +3.25%) | | 11/19/2019 | | 8/24/2026 | | $ | 1,975 | | | $ | 1,977 | | | $ | 1,758 | | | 1.1 | % |
| | | | | | | | | | | | | | | | | | |
| DuPage Medical Group (15) | | Offices of Physicians, Mental Health Specialists | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.75% | | (L +7.00%) | | 8/22/2017 | | 8/15/2025 | | 10,098 | | | 10,159 | | | 10,098 | | | 6.4 | |
| | | | | | | | | | | | | | | | | | |
| Eblens Holdings, Inc. (20) | | Shoe Store | | | | | | | | | | | | | | | | |
| Subordinated Loan (11) | | | | 12.00% cash / 1.00% PIK | | N/A | | 7/13/2017 | | 1/13/2023 | | 9,114 | | | 9,035 | | | 4,368 | | | 2.7 | |
| Common Equity (71,250 Class A units) (10) | | | | | | | | 7/13/2017 | | | | | | 713 | | | — | | | — | |
| | | | | | | | | | | | 9,114 | | | 9,748 | | | 4,368 | | | 2.7 | |
| Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4) | | Electrical Contractors and Other Wiring Installation Contractors | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.50% cash / 3.50% PIK | | (L +7.50%) | | 6/30/2017 | | 6/30/2022 | | 17,150 | | | 17,055 | | | 12,668 | | | 8.0 | |
| Preferred Equity (238,095 Series B units) (10) | | | | | | | | 6/30/2017 | | | | | | 300 | | | — | | | — | |
| Preferred Equity (13,315 Series C units) (10) | | | | | | | | 8/13/2018 | | | | | | 13 | | | — | | | — | |
| | | | | | | | | | | | 17,150 | | | 17,368 | | | 12,668 | | | 8.0 | |
| Excelin Home Health, LLC | | Home Health Care Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.50% | | (L +9.50%) | | 10/25/2018 | | 4/25/2024 | | 4,250 | | | 4,199 | | | 4,250 | | | 2.7 | |
| | | | | | | | | | | | | | | | | | |
| GGC Aerospace Topco L.P. | | Other Aircraft Parts and Auxiliary Equipment Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.75% | | (L +9.50%) | | 12/29/2017 | | 9/8/2024 | | 5,000 | | | 4,931 | | | 4,102 | | | 2.6 | |
| Common Equity (368,852 Class A units) (10) | | | | | | | | 12/29/2017 | | | | | | 450 | | | 166 | | | 0.1 | |
| Common Equity (40,984 Class B units) (10) | | | | | | | | 12/29/2017 | | | | | | 50 | | | 7 | | | — | |
| | | | | | | | | | | | 5,000 | | | 5,431 | | | 4,275 | | | 2.7 | |
| Inergex Holdings, LLC | | Other Computer Related Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.00% | | (L +7.00%) | | 10/1/2018 | | 10/1/2024 | | 16,422 | | | 16,265 | | | 15,913 | | | 9.9 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +7.00%) | | 10/1/2018 | | 10/1/2024 | | — | | | (18) | | | 87 | | | 0.1 | |
| | | | | | | | | | | | 16,422 | | | 16,247 | | | 16,000 | | | 10.0 | |
| Institutional Shareholder Services, Inc. | | Administrative Management and General Management Consulting Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.75% | | (L +8.50%) | | 3/4/2019 | | 3/5/2027 | | 6,244 | | | 6,099 | | | 6,244 | | | 3.9 | |
| | | | | | | | | | | | | | | | | | |
| Intouch Midco Inc. (15) | | All Other Professional, Scientific, and Technical Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.90% | | (L +4.75%) | | 12/20/2019 | | 8/24/2025 | | 1,980 | | | 1,921 | | | 1,905 | | | 1.2 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Non-control/Non-affiliate Investments | | | | | | | | | | | | | | |
| AAdvantage Loyalty IP Ltd. and American Airlines, Inc. (14) (15) (22) | | Scheduled Passenger Air Transportation | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.50% | | (L +4.75%) | | 3/10/2021 | | 4/20/2028 | | $ | 364 | | | $ | 360 | | | $ | 377 | | | 0.2 | % |
| | | | | | | | | | | | | | | | | | |
| Aegion Corporation (15) (22) | | Water and Sewer Line and Related Structures Construction | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.50% | | (L +4.75%) | | 4/1/2021 | | 5/17/2028 | | 630 | | | 627 | | | 628 | | | 0.3 | |
| | | | | | | | | | | | | | | | | | |
| Allen Media, LLC (14) (15) | | Cable and Other Subscription Programming | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.72% | | (L +5.50%) | | 3/2/2021 | | 2/10/2027 | | 3,807 | | | 3,801 | | | 3,810 | | | 1.8 | |
| | | | | | | | | | | | | | | | | | |
| All Star Auto Lights, Inc. (4) (15) | | Motor Vehicle Parts (Used) Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.25% | | (L +7.25%) | | 12/19/2019 | | 8/20/2025 | | 23,335 | | | 23,005 | | | 23,052 | | | 11.3 | |
| | | | | | | | | | | | | | | | | | |
| Autokiniton US Holdings, Inc. (14) (15) | | Automotive Parts and Accessories Stores | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.00% | | (L +4.50%) | | 3/26/2021 | | 4/6/2028 | | 2,696 | | | 2,688 | | | 2,704 | | | 1.3 | |
| | | | | | | | | | | | | | | | | | |
| Avison Young (15) | | Nonresidential Property Managers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.97% | | (L +5.75%) | | 11/25/2021 | | 1/31/2026 | | 2,987 | | | 2,972 | | | 2,972 | | | 1.5 | |
| | | | | | | | | | | | | | | | | | |
| Ball Metalpack | | Metal Can Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.75% | | (L +8.75%) | | 6/8/2021 | | 7/31/2026 | | 2,167 | | | 2,143 | | | 2,167 | | | 1.1 | |
| | | | | | | | | | | | | | | | | | |
| Bass Pro Group, LLC (14) (15) | | Sporting Goods Stores | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.50% | | (L +3.75%) | | 2/26/2021 | | 3/6/2028 | | 1,967 | | | 1,958 | | | 1,972 | | | 1.0 | |
| | | | | | | | | | | | | | | | | | |
| BayMark Health Services, Inc. (15) | | Outpatient Mental Health and Substance Abuse Centers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.50% | | (L +8.50%) | | 6/10/2021 | | 6/11/2028 | | 4,962 | | | 4,893 | | | 5,061 | | | 2.5 | |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | (L +8.50%) | | 6/10/2021 | | 6/11/2028 | | — | | | (124) | | | 170 | | | 0.1 | |
| | | | | | | | | | | | 4,962 | | | 4,769 | | | 5,231 | | | 2.6 | |
| Constellis Holdings, LLC (10) | | Other Justice, Public Order, and Safety Activities | | | | | | | | | | | | | | | | |
| Common Equity (20,628 common shares) | | | | | | | | 3/27/2020 | | | | | | 703 | | | 29 | | | — | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued
December 31, 20202021
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| I&I Sales Group, LLC | | Marketing Consulting Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 9.50% | | (L +8.50%) | | 12/30/2020 | | 7/10/2025 | | $ | 5,325 | | | $ | 5,232 | | | $ | 5,232 | | | 3.3 | % |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +8.50%) | | 12/30/2020 | | 7/10/2025 | | — | | | (3) | | | (3) | | | — | |
| | | | | | | | | | | | 5,325 | | | 5,229 | | | 5,229 | | | 3.3 | |
| Milrose Consultants, LLC (4) (8) | | Administrative Management and General Management Consulting Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.62% | | (L +6.62%) | | 7/16/2019 | | 7/16/2025 | | 22,574 | | | 22,404 | | | 22,485 | | | 14.0 | |
| | | | | | | | | | | | | | | | | | |
| My Alarm Center, LLC (10) | | Security Systems Services (except Locksmiths) | | | | | | | | | | | | | | | | |
| Preferred Equity (335 Class Z units) (13) | | | | | | | | 9/12/2018 | | | | | | 325 | | | 97 | | | 0.1 | |
| Preferred Equity (1,485 Class A units), 8% PIK (4) (13) | | | | | | | | 7/14/2017 | | | | | | 1,571 | | | — | | | — | |
| Preferred Equity (1,198 Class B units) (4) | | | | | | | | 7/14/2017 | | | | | | 1,198 | | | — | | | — | |
| Common Equity (64,149 units) (4) (13) | | | | | | | | 7/14/2017 | | | | | | — | | | — | | | — | |
| | | | | | | | | | | | | | 3,094 | | | 97 | | | 0.1 | |
| Online Tech Stores, LLC (4) (6) | | Stationery and Office Supplies Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Subordinated Loan | | | | 13.50% PIK | | N/A | | 2/1/2018 | | 8/1/2023 | | 18,360 | | | 16,129 | | | 2,426 | | | 1.5 | |
| | | | | | | | | | | | | | | | | | |
| Panther BF Aggregator 2 LP (14) (15) (19) | | Other Commercial and Service Industry Machinery Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 3.65% | | (L +3.50%) | | 11/19/2019 | | 4/30/2026 | | 1,939 | | | 1,925 | | | 1,936 | | | 1.2 | |
| | | | | | | | | | | | | | | | | | |
| Parfums Holding Company, Inc. | | Cosmetics, Beauty Supplies, and Perfume Stores | | | | | | | | | | | | | | | | |
| Senior Secured Loan (14) (15) | | | | 4.23% | | (L +4.00%) | | 6/25/2019 | | 6/30/2024 | | 1,537 | | | 1,536 | | | 1,530 | | | 1.0 | |
| Senior Secured Loan | | | | 9.75% | | (L +8.75%) | | 11/16/2017 | | 6/30/2025 | | 5,171 | | | 5,202 | | | 5,171 | | | 3.3 | |
| | | | | | | | | | | | 6,708 | | | 6,738 | | | 6,701 | | | 4.3 | |
| Pelican Products, Inc. | | Unlaminated Plastics Profile Shape Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.75% | | (L +7.75%) | | 9/24/2018 | | 5/1/2026 | | 6,055 | | | 6,059 | | | 5,994 | | | 3.8 | |
| | | | | | | | | | | | | | | | | | |
| Pike Corp. (14) (15) | | Electrical Contractors and Other Wiring Installation Contractors | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 3.14% | | (L +3.00%) | | 9/17/2020 | | 7/24/2026 | | 469 | | | 469 | | | 469 | | | 0.3 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| | | | | | | | | | | | | | | | | | |
| Convergint Technologies Holdings, LLC | | Security Systems Services (except Locksmiths) | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.50% | | (L +6.75%) | | 9/28/2018 | | 3/30/2029 | | $ | 4,838 | | | $ | 4,827 | | | $ | 4,887 | | | 2.4 | % |
| | | | | | | | | | | | | | | | | | |
| Corel Inc. (14) (15) | | Software Publishers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.18% | | (L +5.00%) | | 3/2/2021 | | 7/2/2026 | | 2,271 | | | 2,265 | | | 2,270 | | | 1.1 | |
| | | | | | | | | | | | | | | | | | |
| Creation Technologies (15) (22) | | Bare Printed Circuit Board Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 6.00% | | (L +5.50%) | | 9/24/2021 | | 10/5/2028 | | 2,000 | | | 1,985 | | | 1,977 | | | 1.0 | |
| | | | | | | | | | | | | | | | | | |
| DHX Media Ltd. (14) (15) (22) | | Motion Picture and Video Production | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.00% | | (L +4.25%) | | 3/19/2021 | | 3/18/2028 | | 3,974 | | | 3,929 | | | 3,970 | | | 1.9 | |
| | | | | | | | | | | | | | | | | | |
| Diamond Sports Group, LLC (14) (15) | | Television Broadcasting | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 3.36% | | (L +3.25%) | | 11/19/2019 | | 8/24/2026 | | 1,955 | | | 1,957 | | | 918 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
| DIRECTV Financing, LLC (14) (15) | | Wired Telecommunications Carriers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.75% | | (L +5.00%) | | 7/22/2021 | | 8/2/2027 | | 4,395 | | | 4,388 | | | 4,405 | | | 2.2 | |
| | | | | | | | | | | | | | | | | | |
| Eblens Holdings, Inc. (20) | | Shoe Store | | | | | | | | | | | | | | | | |
| Subordinated Loan (11) | | | | 12.00% cash / 1.00% PIK | | N/A | | 7/13/2017 | | 1/13/2023 | | 9,207 | | | 9,181 | | | 9,049 | | | 4.4 | |
| Common Equity (71,250 Class A units) (10) | | | | | | | | 7/13/2017 | | | | | | 713 | | | 292 | | | 0.1 | |
| | | | | | | | | | | | 9,207 | | | 9,894 | | | 9,341 | | | 4.5 | |
| Electrical Components International, Inc. | | Current-Carrying Wiring Device Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.60% | | (L +8.50%) | | 4/8/2021 | | 6/26/2026 | | 3,000 | | | 2,653 | | | 2,954 | | | 1.4 | |
| | | | | | | | | | | | | | | | | | |
| EnergySolutions, LLC (14) (15) | | Hazardous Waste Treatment and Disposal | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.75% | | (L +3.75%) | | 7/8/2021 | | 5/9/2025 | | 1,837 | | | 1,833 | | | 1,837 | | | 0.9 | |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued
December 31, 20202021
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| PM Acquisition LLC (20) | | All Other General Merchandise Stores | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.50% cash / 2.50% PIK | | N/A | | 9/30/2017 | | 10/29/2021 | | $ | 4,780 | | | $ | 4,753 | | | $ | 4,780 | | | 3.0 | % |
| Common Equity (499 units) (10) (13) | | | | | | | | 9/30/2017 | | | | | | 499 | | | 280 | | | 0.2 | |
| | | | | | | | | | | | 4,780 | | | 5,252 | | | 5,060 | | | 3.2 | |
| Quest Software US Holdings Inc. (14) (15) | | Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.46% | | (L +4.25%) | | 6/25/2019 | | 5/16/2025 | | 1,970 | | | 1,955 | | | 1,942 | | | 1.2 | |
| | | | | | | | | | | | | | | | | | |
| Resource Label Group, LLC | | Commercial Printing (except Screen and Books) | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.50% | | (L +8.50%) | | 6/7/2017 | | 11/26/2023 | | 4,821 | | | 4,789 | | | 4,812 | | | 3.0 | |
| | | | | | | | | | | | | | | | | | |
| Rocket Software, Inc. (15) | | Software Publishers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.46% | | (L +8.25%) | | 11/20/2018 | | 11/28/2026 | | 6,275 | | | 6,190 | | | 6,241 | | | 3.9 | |
| | | | | | | | | | | | | | | | | | |
| RPLF Holdings, LLC (10) (13) | | Software Publishers | | | | | | | | | | | | | | | | |
| Common Equity (254,110 Class A units) | | | | | | | | 1/17/2018 | | | | | | 492 | | | 605 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | |
| Sentry Centers Holdings, LLC (10) (13) | | Other Professional, Scientific, and Technical Services | | | | | | | | | | | | | | | | |
| Preferred Equity (2,248 Series A units) | | | | | | | | 9/4/2020 | | | | | | 51 | | | 47 | | | — | |
| Preferred Equity (1,603 Series B units) | | | | | | | | 9/4/2020 | | | | | | 160 | | | 160 | | | 0.1 | |
| Common Equity (269 units) | | | | | | | | 9/4/2020 | | | | | | 3 | | | 3 | | | — | |
| | | | | | | | | | | | | | 214 | | | 210 | | | 0.1 | |
| SkyMiles IP Ltd. and Delta Air Lines, Inc. (14) (15) | | Scheduled Passenger Air Transportation | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.75% | | (L +3.75%) | | 9/15/2020 | | 10/20/2027 | | 500 | | | 495 | | | 520 | | | 0.3 | |
| | | | | | | | | | | | | | | | | | |
| SourceHOV Tax, Inc. (4) (8) | | Other Accounting Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.61% | | (L +6.11%) | | 3/16/2020 | | 3/16/2025 | | 19,892 | | | 19,742 | | | 19,988 | | | 12.6 | |
| | | | | | | | | | | | | | | | | | |
| Southern Technical Institute, LLC (4) (10) | | Colleges, Universities, and Professional Schools | | | | | | | | | | | | | | | | |
| Equity appreciation rights | | | | | | | | 6/27/2018 | | | | | | — | | | 4,295 | | | 2.7 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4) | | Electrical Contractors and Other Wiring Installation Contractors | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.50% | | N/A | | 12/31/2021 | | 12/31/2025 | | $ | 6,424 | | | $ | 6,424 | | | $ | 6,424 | | | 3.2 | % |
| Senior Secured Loan | | | | 10.00% PIK | | N/A | | 12/31/2021 | | 12/31/2026 | | 6,424 | | | 6,424 | | | 4,645 | | | 2.3 | |
| Senior Secured Loan (Revolver) (5) | | | | 7.50% | | N/A | | 11/29/2021 | | 12/31/2025 | | 563 | | | 563 | | | 563 | | | 0.3 | |
| Equity Participation Rights (23) | | | | | | | | 12/31/2021 | | | | — | | | 4,722 | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 13,411 | | | 18,133 | | | 11,632 | | | 5.8 | |
| Excelin Home Health, LLC (4) | | Home Health Care Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.50% | | (L +9.50%) | | 10/25/2018 | | 9/30/2025 | | 4,250 | | | 4,182 | | | 4,250 | | | 2.1 | |
| | | | | | | | | | | | | | | | | | |
| GGC Aerospace Topco L.P. | | Other Aircraft Parts and Auxiliary Equipment Manufacturing | | | | | | | | | | | | | | | | |
| Common Equity (368,852 Class A units) (10) | | | | | | | | 12/29/2017 | | | | | | 450 | | | 77 | | | — | |
| Common Equity (40,984 Class B units) (10) | | | | | | | | 12/29/2017 | | | | | | 50 | | | 3 | | | — | |
| | | | | | | | | | | | | | 500 | | | 80 | | | — | |
| Honor HN Buyer Inc (15) | | Services for the Elderly and Persons with Disabilities | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.00% | | (L +6.00%) | | 10/15/2021 | | 10/15/2027 | | 6,598 | | | 6,471 | | | 6,471 | | | 3.2 | |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | (L +6.00%) | | 10/15/2021 | | 10/15/2027 | | — | | | (40) | | | (40) | | | — | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +6.00%) | | 10/15/2021 | | 10/15/2027 | | — | | | (15) | | | (15) | | | — | |
| | | | | | | | | | | | 6,598 | | | 6,416 | | | 6,416 | | | 3.2 | |
| Hunter Fan Company (14) (15) | | Small Electrical Appliance Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.75% | | (L +5.00%) | | 8/10/2021 | | 5/8/2028 | | 4,988 | | | 4,997 | | | 4,997 | | | 2.5 | |
| | | | | | | | | | | | | | | | | | |
| Inergex Holdings, LLC | | Other Computer Related Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.00% cash / 1.00% PIK | | (L +8.00%) | | 10/1/2018 | | 10/1/2024 | | 15,260 | | | 15,030 | | | 15,260 | | | 7.5 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +7.00%) | | 10/1/2018 | | 10/1/2024 | | — | | | (13) | | | — | | | — | |
| | | | | | | | | | | | 15,260 | | | 15,017 | | | 15,260 | | | 7.5 | |
| Intouch Midco Inc. (15) (22) | | All Other Professional, Scientific, and Technical Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.85% | | (L +4.75%) | | 12/20/2019 | | 8/24/2025 | | 2,909 | | | 2,872 | | | 2,865 | | | 1.4 | |
| | | | | | | | | | | | | | | | | | |
| Ivanti Software, Inc. (14) (15) | | Software Publishers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.00% | | (L +4.25%) | | 3/26/2021 | | 12/1/2027 | | 2,985 | | | 2,996 | | | 2,993 | | | 1.5 | |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued
December 31, 20202021
(Dollar amounts in thousands)
| Portfolio Company (1)
Investment Type | Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets | Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.) | | Child Day Care Services | | |
| JP Intermediate B, LLC (15) | | JP Intermediate B, LLC (15) | | Drugs and Druggists' Sundries Merchant Wholesalers | |
| Senior Secured Loan | Senior Secured Loan | | 8.50% | | (L +8.25%) | | 7/26/2018 | | 7/30/2026 | | $ | 5,216 | | | $ | 5,178 | | | $ | 4,656 | | | 2.9 | % | Senior Secured Loan | | 6.50% | | (L +5.50%) | | 1/14/2021 | | 11/15/2025 | | $ | 5,736 | | | $ | 5,529 | | | $ | 5,550 | | | 2.7 | % |
| | SSJA Bariatric Management LLC (15) | | Offices of Physicians, Mental Health Specialists | | |
| KNS Acquisition Corp. (14) (15) | | KNS Acquisition Corp. (14) (15) | | Electronic Shopping and Mail-Order Houses | |
| Senior Secured Loan | Senior Secured Loan | | 6.00% | | (L +5.00%) | | 8/26/2019 | | 8/26/2024 | | 9,875 | | | 9,803 | | | 9,647 | | | 6.1 | | Senior Secured Loan | | 7.00% | | (L +6.25%) | | 4/16/2021 | | 4/21/2027 | | 6,956 | | | 6,913 | | | 6,870 | | | 3.4 | |
| | Kreg LLC (15) | | Kreg LLC (15) | | Other Ambulatory Health Care Services | |
| Senior Secured Loan | Senior Secured Loan | | 6.25% | | (L +5.25%) | | 12/31/2020 | | 8/26/2024 | | 1,067 | | | 1,056 | | | 1,042 | | | 0.7 | | Senior Secured Loan | | 7.25% | | (L +6.25%) | | 12/20/2021 | | 12/20/2026 | | 20,500 | | | 20,347 | | | 20,347 | | | 10.0 | |
| Senior Secured Loan (Revolver) (5) | Senior Secured Loan (Revolver) (5) | | n/m (18) | | (L +5.00%) | | 8/26/2019 | | 8/26/2024 | | — | | | (5) | | | 15 | | | — | | Senior Secured Loan (Revolver) (5) | | n/m (18) | | (L +6.25%) | | 12/20/2021 | | 12/20/2026 | | — | | | (17) | | | (17) | | | — | |
| | 10,942 | | | 10,854 | | | 10,704 | | | 6.8 | | | 20,500 | | | 20,330 | | | 20,330 | | | 10.0 | |
| Stancor, L.P. (4) | | Pump and Pumping Equipment Manufacturing | | |
| Preferred Equity (1,250,000 Class A units), 8% PIK (10) | | 8/19/2014 | | 1,501 | | | 1,281 | | | 0.8 | | |
| | Staples, Inc. (14) (15) | | Business to Business Electronic Markets | | |
| LogMeIn, Inc. (14) (15) | | LogMeIn, Inc. (14) (15) | | Data Processing, Hosting, and Related Services | |
| Senior Secured Loan | Senior Secured Loan | | 5.21% | | (L +5.00%) | | 6/24/2019 | | 4/16/2026 | | 2,960 | | | 2,891 | | | 2,875 | | | 1.8 | | Senior Secured Loan | | 4.86% | | (L +4.75%) | | 3/26/2021 | | 8/31/2027 | | 2,979 | | | 2,977 | | | 2,966 | | | 1.5 | |
| | STS Operating, Inc. | | Industrial Machinery and Equipment Merchant Wholesalers | | |
| Senior Secured Loan (14) (15) | | 5.25% | | (L +4.25%) | | 5/16/2018 | | 12/11/2024 | | 625 | | | 626 | | | 601 | | | 0.4 | | |
| Magenta Buyer LLC (14) (15) | | Magenta Buyer LLC (14) (15) | | Software Publishers | |
| Senior Secured Loan | Senior Secured Loan | | 9.00% | | (L +8.00%) | | 5/15/2018 | | 4/30/2026 | | 9,073 | | | 9,070 | | | 8,578 | | | 5.4 | | Senior Secured Loan | | 5.75% | | (L +5.00%) | | 7/28/2021 | | 7/27/2028 | | 4,850 | | | 4,836 | | | 4,845 | | | 2.4 | |
| | 9,698 | | | 9,696 | | | 9,179 | | | 5.8 | | |
| Sunshine Luxembourg VII SARL (14) (15) | | Pharmaceutical Preparation Manufacturing | | |
| McGraw Hill Global Education Holdings, LLC (14) (15) | | McGraw Hill Global Education Holdings, LLC (14) (15) | | All Other Publishers | |
| Senior Secured Loan | Senior Secured Loan | | 5.00% | | (L +4.00%) | | 11/20/2019 | | 9/25/2026 | | 1,980 | | | 1,988 | | | 1,992 | | | 1.3 | | Senior Secured Loan | | 4.85% | | (L +4.75%) | | 4/1/2021 | | 7/28/2028 | | 2,310 | | | 2,288 | | | 2,303 | | | 1.1 | |
| | Tank Holding Corp. (15) | | Unlaminated Plastics Profile Shape Manufacturing | | |
| Senior Secured Loan (14) | | 5.50% | | (L +4.00%) | | 6/24/2019 | | 3/26/2026 | | 1,975 | | | 1,981 | | | 1,942 | | | 1.2 | | |
| Milrose Consultants, LLC (4) | | Milrose Consultants, LLC (4) | | Administrative Management and General Management Consulting Services | |
| Senior Secured Loan (15) | | Senior Secured Loan (15) | | 7.50% | | (L +6.50%) | | 7/16/2019 | | 7/16/2025 | | 22,364 | | | 22,364 | | | 22,024 | | | 10.8 | |
| Senior Secured Loan (Revolver) | | Senior Secured Loan (Revolver) | | 7.50% | | (L +6.50%) | | 7/16/2019 | | 7/16/2025 | | 634 | | | 626 | | | 610 | | | 0.3 | |
| | | 22,998 | | | 22,990 | | | 22,634 | | | 11.1 | |
| Molded Devices, Inc. (15) | | Molded Devices, Inc. (15) | | Other Industrial Machinery Manufacturing | |
| Senior Secured Loan | Senior Secured Loan | | 3.40% | | (L +3.25%) | | 12/18/2020 | | 3/26/2026 | | 896 | | | 882 | | | 882 | | | 0.6 | | Senior Secured Loan | | 8.25% | | (Prime + 5.00%) | | 11/1/2021 | | 11/1/2026 | | 8,069 | | | 7,991 | | | 7,991 | | | 3.9 | |
| Senior Secured Loan (Delayed Draw) (5) | | Senior Secured Loan (Delayed Draw) (5) | | n/m (18) | | (Prime + 5.00%) | | 11/1/2021 | | 11/1/2026 | | — | | | (7) | | | (7) | | | — | |
| Senior Secured Loan (Revolver) (5) | | Senior Secured Loan (Revolver) (5) | | n/m (18) | | (Prime + 5.00%) | | 11/1/2021 | | 11/1/2026 | | — | | | (9) | | | (9) | | | — | |
| | 2,871 | | | 2,863 | | | 2,824 | | | 1.8 | | | 8,069 | | | 7,975 | | | 7,975 | | | 3.9 | |
| The Escape Game, LLC (4) | | Other amusement and recreation industries | | |
| Senior Secured Loan | | 9.75% | | (L +8.75%) | | 7/18/2019 | | 12/22/2022 | | 7,000 | | | 6,973 | | | 6,647 | | | 4.2 | | |
| Senior Secured Loan | | 9.75% | | (L +8.75%) | | 12/22/2017 | | 12/31/2021 | | 2,333 | | | 2,329 | | | 2,216 | | | 1.4 | | |
| Senior Secured Loan | | 8.00% | | (L +7.00%) | | 7/20/2018 | | 12/31/2021 | | 4,667 | | | 4,665 | | | 4,463 | | | 2.8 | | |
| Senior Secured Loan (Delayed Draw) | | 9.75% | | (L +8.75%) | | 7/20/2018 | | 12/22/2022 | | 7,000 | | | 7,000 | | | 6,647 | | | 4.2 | | |
| 21,000 | | | 20,967 | | | 19,973 | | | 12.6 | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued
December 31, 20202021
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Truck Hero, Inc. (15) | | Truck Trailer Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.25% | | (L +8.25%) | | 5/30/2017 | | 4/21/2025 | | $ | 8,174 | | | $ | 8,118 | | | $ | 8,174 | | | 5.1 | % |
| | | | | | | | | | | | | | | | | | |
| United Biologics Holdings, LLC (4) (10) | | Medical Laboratories | | | | | | | | | | | | | | | | |
| Preferred Equity (151,787 units) | | | | | | | | 4/16/2013 | | | | | | 9 | | | 26 | | | — | |
| Warrants (29,374 units) | | | | | | | | 7/26/2012 | | 3/5/2022 (12) | | | | 82 | | | 12 | | | — | |
| | | | | | | | | | | | | | 91 | | | 38 | | | — | |
| United Natural Foods (14) (15) | | General Line Grocery Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.40% | | (L +4.25%) | | 6/9/2020 | | 10/22/2025 | | 286 | | | 275 | | | 284 | | | 0.2 | |
| | | | | | | | | | | | | | | | | | |
| Wastebuilt Environmental Solutions, LLC (4) | | Industrial Supplies Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.25% | | (L +8.75%) | | 10/11/2018 | | 10/11/2024 | | 7,000 | | | 6,908 | | | 5,476 | | | 3.4 | |
| | | | | | | | | | | | | | | | | | |
| Weight Watchers International, Inc. (14) (15) | | Diet and Weight Reducing Centers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.50% | | (L +4.75%) | | 6/10/2020 | | 11/29/2024 | | 477 | | | 477 | | | 479 | | | 0.3 | |
| | | | | | | | | | | | | | | | | | |
| Xperi (14) (15) | | Semiconductor and Related Device Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.15% | | (L +4.00%) | | 6/1/2020 | | 6/1/2025 | | 433 | | | 399 | | | 434 | | | 0.3 | |
| | | | | | | | | | | | | | | | | | |
| Total Debt and Equity Investments | | | | | | | | | | | | $ | 306,683 | | | $ | 307,768 | | | $ | 272,240 | | | 171.3 | % |
| | | | | | | | | | | | | | | | | | |
| Structured Finance Note Investments | | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2020 (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 14.16% (9) | | | | 11/16/2020 | | 11/19/2031 (17) | | 11,080 | | | 9,461 (16) | | 10,006 | | | 6.3 | |
| | | | | | | | | | | | | | | | | | |
| Dryden 53 CLO, LTD. (7) | | | | | | | | | | | | | | | | | | |
| Income Notes | | | | 16.68% (9) | | | | 10/26/2020 | | 1/15/2031 (17) | | 2,700 | | | 1,779 | | | 1,967 | | | 1.2 | |
| Subordinated Notes | | | | 16.68% (9) | | | | 10/26/2020 | | 1/15/2031 (17) | | 2,159 | | | 1,423 (16) | | 1,573 | | | 1.0 | |
| | | | | | | | | | | | 4,859 | | | 3,202 | | | 3,540 | | | 2.2 | |
| Dryden 76 CLO, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 18.68% (9) | | | | 9/27/2019 | | 10/20/2032 (17) | | 2,750 | | | 2,282 (16) | | 2,235 | | | 1.4 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Odyssey Logistics and Technology Corporation (14) (15) | | Freight Transportation Arrangement | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.00% | | (L +4.00%) | | 4/5/2021 | | 10/12/2024 | | $ | 1,985 | | | $ | 1,960 | | | $ | 1,970 | | | 1.0 | % |
| | | | | | | | | | | | | | | | | | |
| One GI LLC (15) | | Offices of Other Holding Companies | | | | | | | | | | | | | | | | |
| Senior Secured Loan (Delayed Draw) | | | | 7.75% | | (L +6.75%) | | 12/13/2021 | | 3/13/2022 | | 5,515 | | | 5,403 | | | 5,403 | | | 2.7 | |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | (L +6.75%) | | 12/13/2021 | | 12/13/2023 | | — | | | (39) | | | (39) | | | — | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +6.75%) | | 12/13/2021 | | 12/22/2025 | | — | | | (29) | | | (29) | | | — | |
| | | | | | | | | | | | 5,515 | | | 5,335 | | | 5,335 | | | 2.7 | |
| Parfums Holding Company, Inc. (14) (15) | | Cosmetics, Beauty Supplies, and Perfume Stores | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.10% | | (L +4.00%) | | 6/25/2019 | | 6/30/2024 | | 1,534 | | | 1,533 | | | 1,531 | | | 0.8 | |
| | | | | | | | | | | | | | | | | | |
| Peraton Inc. (14) (15) | | Management Consulting Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.50% | | (L +3.75%) | | 4/2/2021 | | 2/1/2028 | | 835 | | | 836 | | | 837 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | |
| Planet Bingo, LLC (F/K/A 3rd Rock Gaming Holdings, LLC (6) (10) | | Software Publishers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.00% | | N/A | | 3/13/2018 | | 3/12/2023 | | 16,728 | | | 14,358 | | | 7,027 | | | 3.3 | |
| | | | | | | | | | | | | | | | | | |
| PM Acquisition LLC (20) | | All Other General Merchandise Stores | | | | | | | | | | | | | | | | |
| Common Equity (499 units) (10) (13) | | | | | | | | 9/30/2017 | | | | | | 499 | | | 1,698 | | | 0.8 | |
| | | | | | | | | | | | | | | | | | |
| Professional Pipe Holdings, LLC | | Plumbing, Heating, and Air-Conditioning Contractors | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.75% cash / 1.00% PIK | | (L +9.75%) | | 3/23/2018 | | 3/24/2025 | | 5,367 | | | 5,344 | | | 5,378 | | | 2.6 | |
| | | | | | | | | | | | | | | | | | |
| Resource Label Group, LLC (14) (15) | | Commercial Printing (except Screen and Books) | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.00% | | (L +4.25%) | | 7/2/2021 | | 7/7/2028 | | 694 | | | 692 | | | 694 | | | 0.3 | |
| Senior Secured Loan (Delayed Draw) | | | | 5.00% | | (L +4.25%) | | 7/2/2021 | | 7/2/2028 | | 2,743 | | | 2,735 | | | 2,742 | | | 1.3 | |
| | | | | | | | | | | | 3,437 | | | 3,427 | | | 3,436 | | | 1.6 | |
| RPLF Holdings, LLC (10) (13) | | Software Publishers | | | | | | | | | | | | | | | | |
| Common Equity (345,339 Class A units) | | | | | | | | 1/17/2018 | | | | | | 492 | | | 794 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued
December 31, 20202021
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Elevation CLO 2017-7, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 12.32% (9) | | | | 2/6/2019 | | 7/15/2030 (17) | | $ | 10,000 | | | $ 6,955 (16) | | $ | 6,226 | | | 3.9 | % |
| | | | | | | | | | | | | | | | | | |
| Flatiron CLO 18, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 20.73% (9) | | | | 1/2/2019 | | 4/17/2031 (17) | | 9,680 | | | 7,265 (16) | | 7,702 | | | 4.8 | |
| | | | | | | | | | | | | | | | | | |
| Madison Park Funding XXIII, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 21.99% (9) | | | | 1/8/2020 | | 7/27/2047 (17) | | 10,000 | | | 6,654 (16) | | 7,129 | | | 4.5 | |
| | | | | | | | | | | | | | | | | | |
| Madison Park Funding XXIX, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 14.22% (9) | | | | 12/22/2020 | | 10/18/2047 (17) | | 9,500 | | | 7,529 (16) | | 7,569 | | | 4.8 | |
| | | | | | | | | | | | | | | | | | |
| Monroe Capital MML CLO X, LTD. | | | | | | | | | | | | | | | | | | |
| Mezzanine bond - Class E | | | | 9.08% | | (L +8.85%) | | 8/7/2020 | | 8/20/2031 (17) | | 863 | | | 802 | | | 838 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
| Octagon Investment Partners 39, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 20.81% (9) | | | | 1/23/2020 | | 10/20/2030 (17) | | 7,000 | | | 5,173 (16) | | 5,493 | | | 3.5 | |
| | | | | | | | | | | | | | | | | | |
| Park Avenue Institutional Advisers CLO 2017-1 | | | | | | | | | | | | | | | | | | |
| Mezzanine bond - Class D | | | | 6.44% | | (L +6.22%) | | 6/5/2020 | | 11/14/2029 (17) | | 100 | | | 83 | | | 95 | | | 0.1 | |
| | | | | | | | | | | | | | | | | | |
| Regatta II Funding | | | | | | | | | | | | | | | | | | |
| Mezzanine bond - Class DR2 | | | | 7.19% | | (L +6.95%) | | 6/5/2020 | | 1/15/2029 (17) | | 800 | | | 695 | | | 768 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
| THL Credit Wind River 2019‐3 CLO Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 14.69% (9) | | | | 4/5/2019 | | 4/15/2031 (17) | | 7,000 | | | 5,759 (16) | | 4,824 | | | 3.0 | |
| | | | | | | | | | | | | | | | | | |
| Total Structured Finance Note Investments | | | | | | | | | | | | $ | 73,632 | | | $ | 55,860 | | | $ | 56,425 | | | 35.5 | % |
| | | | | | | | | | | | | | | | | | |
| Total Non-control/Non-affiliate Investments | | | | | | | | | | | | $ | 380,315 | | | $ | 363,628 | | | $ | 328,665 | | | 206.8 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| RSA Security (15) | | Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Senior Secured Loan (14) | | | | 5.50% | | (L +4.75%) | | 4/16/2021 | | 4/27/2028 | | $ | 2,797 | | | $ | 2,782 | | | $ | 2,680 | | | 1.3 | % |
| Senior Secured Loan | | | | 8.50% | | (L +7.75%) | | 4/16/2021 | | 4/27/2029 | | 4,450 | | | 4,392 | | | 4,223 | | | 2.1 | |
| | | | | | | | | | | | 7,247 | | | 7,174 | | | 6,903 | | | 3.4 | |
| RumbleOn, Inc. (15) (22) | | Other Industrial Machinery Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.25% | | (L +8.25%) | | 8/31/2021 | | 8/31/2026 | | 4,190 | | | 3,964 | | | 4,006 | | | 2.0 | |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | (L +8.25%) | | 8/31/2021 | | 2/23/2023 | | — | | | (18) | | | (79) | | | — | |
| Warrants (warrants to purchase up to $600,000 in common stock) | | | | | | | | 8/31/2021 | | 2/28/2023 (12) | | — | | | 200 | | | 274 | | | 0.1 | |
| | | | | | | | | | | | 4,190 | | | 4,146 | | | 4,201 | | | 2.1 | |
| Sentry Centers Holdings, LLC (10) (13) | | Other Professional, Scientific, and Technical Services | | | | | | | | | | | | | | | | |
| Preferred Equity (2,248 Series A units) | | | | | | | | 9/4/2020 | | | | | | 51 | | | — | | | — | |
| Preferred Equity (1,603 Series B units) | | | | | | | | 9/4/2020 | | | | | | 160 | | | 12 | | | — | |
| Common Equity (269 units) | | | | | | | | 9/4/2020 | | | | | | 3 | | | — | | | — | |
| | | | | | | | | | | | | | 214 | | | 12 | | | — | |
| Signal Parent, Inc. (14) (15) | | New Single-Family Housing Construction (except For-Sale Builders) | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.25% | | (L +3.50%) | | 3/25/2021 | | 4/3/2028 | | 1,840 | | | 1,823 | | | 1,794 | | | 0.9 | |
| | | | | | | | | | | | | | | | | | |
| SourceHOV Tax, Inc. (4) | | Other Accounting Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.50% | | (L +6.50%) | | 3/16/2020 | | 3/16/2025 | | 19,790 | | | 19,648 | | | 19,935 | | | 9.8 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +6.50%) | | 5/17/2021 | | 3/17/2025 | | — | | | (15) | | | — | | | — | |
| | | | | | | | | | | | 19,790 | | | 19,633 | | | 19,935 | | | 9.8 | |
| Southern Technical Institute, LLC (4) (10)(23) | | Colleges, Universities, and Professional Schools | | | | | | | | | | | | | | | | |
| Equity Participation Rights | | | | | | | | 6/27/2018 | | | | | | — | | | 7,408 | | | 3.6 | |
| | | | | | | | | | | | | | | | | | |
| Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.) (15) | | Child Day Care Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.47% | | (L +8.25%) | | 7/26/2018 | | 7/30/2026 | | 6,399 | | | 6,336 | | | 5,916 | | | 2.9 | |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued
December 31, 20202021
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| | | | | | | | | | | | | | | | | | |
| Affiliate Investments | | | | | | | | | | | | | | | | | | |
| 3rd Rock Gaming Holdings, LLC (20) | | Software Publishers | | | | | | | | | | | | | | | | |
| Senior Secured Loan (6) | | | | 8.50% cash / 1.00% PIK | | (L +7.50%) | | 3/13/2018 | | 3/12/2023 | | $ | 20,858 | | | $ | 19,570 | | | $ | 9,258 | | | 5.8 | % |
| Common Equity (2,547,250 units) (10) (13) | | | | | | | | 3/13/2018 | | | | | | 2,547 | | | — | | | — | |
| | | | | | | | | | | | 20,858 | | | 22,117 | | | 9,258 | | | 5.8 | |
| Chemical Resources Holdings, Inc. (20) | | Custom Compounding of Purchased Resins | | | | | | | | | | | | | | | | |
| Senior Secured Loan (4)(8) | | | | 9.22% | | (L +7.72%) | | 1/25/2019 | | 1/25/2024 | | 13,743 | | | 13,630 | | | 13,744 | | | 8.6 | |
| Common Equity (1,832 Class A shares) (10) (13) | | | | | | | | 1/25/2019 | | | | | | 1,814 | | | 3,420 | | | 2.2 | |
| | | | | | | | | | | | 13,743 | | | 15,444 | | | 17,164 | | | 10.8 | |
| Contract Datascan Holdings, Inc. (4)(20) | | Office Machinery and Equipment Rental and Leasing | | | | | | | | | | | | | | | | |
| Preferred Equity (3,061 Series A shares) 10% PIK | | | | | | | | 8/5/2015 | | | | | | 5,849 | | | 2,690 | | | 1.7 | |
| Common Equity (11,273 shares) (10) | | | | | | | | 6/28/2016 | | | | | | 104 | | | 46 | | | — | |
| | | | | | | | | | | | | | 5,953 | | | 2,736 | | | 1.7 | |
| DRS Imaging Services, LLC (20) | | Data Processing, Hosting, and Related Services | | | | | | | | | | | | | | | | |
| Common Equity (1,135 units) (10) (13) | | | | | | | | 3/8/2018 | | | | | | 1,135 | | | 1,749 | | | 1.1 | |
| | | | | | | | | | | | | | | | | | |
| Master Cutlery, LLC (4) (10)(20) | | Sporting and Recreational Goods and Supplies Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Subordinated Loan (6) | | | | 13.00% (11) | | N/A | | 4/17/2015 | | 7/20/2022 | | 6,759 | | | 4,764 | | | 346 | | | 0.2 | |
| Preferred Equity (3,723 Series A units), 8% PIK | | | | | | | | 4/17/2015 | | | | | | 3,483 | | | — | | | — | |
| Common Equity (15,564 units) | | | | | | | | 4/17/2015 | | | | | | — | | | — | | | — | |
| | | | | | | | | | | | 6,759 | | | 8,247 | | | 346 | | | 0.2 | |
| NeoSystems Corp. (4)(20) | | Other Accounting Services | | | | | | | | | | | | | | | | |
| Preferred Equity (521,962 convertible shares) 10% PIK | | | | | | | | 8/14/2014 | | | | | | 1,879 | | | 2,250 | | | 1.4 | |
| | | | | | | | | | | | | | | | | | |
| Pfanstiehl Holdings, Inc. (4)(20)(21) | | Pharmaceutical Preparation Manufacturing | | | | | | | | | | | | | | | | |
| Common Equity (400 Class A shares) | | | | | | | | 1/1/2014 | | | | | | 217 | | | 36,221 | | | 22.8 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| SSJA Bariatric Management LLC (15) | | Offices of Physicians, Mental Health Specialists | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 6.00% | | (L +5.00%) | | 8/26/2019 | | 8/26/2024 | | $ | 9,775 | | | $ | 9,723 | | | $ | 9,775 | | | 4.8 | % |
| Senior Secured Loan | | | | 6.00% | | (L +5.00%) | | 12/31/2020 | | 8/26/2024 | | 1,056 | | | 1,048 | | | 1,056 | | | 0.5 | |
| Senior Secured Loan | | | | 6.00% | | (L +5.00%) | | 12/8/2021 | | 8/26/2024 | | 2,660 | | | 2,634 | | | 2,660 | | | 1.3 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +5.00%) | | 8/26/2019 | | 8/26/2024 | | — | | | (4) | | | — | | | — | |
| | | | | | | | | | | | 13,491 | | | 13,401 | | | 13,491 | | | 6.6 | |
| SS Acquisition, LLC (15) | | Sports and Recreation Instruction | | | | | | | | | | | | | | | | |
| Senior Secured Loan (8) | | | | 7.88% | | (L +6.88%) | | 12/30/2021 | | 12/30/2026 | | 3,042 | | | 3,011 | | | 3,011 | | | 1.5 | |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | (L +6.88%) | | 12/30/2021 | | 12/30/2026 | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | 3,042 | | | 3,011 | | | 3,011 | | | 1.5 | |
| Staples, Inc. (14) (15) (22) | | Business to Business Electronic Markets | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 5.13% | | (L +5.00%) | | 6/24/2019 | | 4/16/2026 | | 2,930 | | | 2,875 | | | 2,838 | | | 1.4 | |
| | | | | | | | | | | | | | | | | | |
| STS Operating, Inc. | | Industrial Machinery and Equipment Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.00% | | (L +8.00%) | | 5/15/2018 | | 4/30/2026 | | 9,073 | | | 9,071 | | | 9,073 | | | 4.5 | |
| | | | | | | | | | | | | | | | | | |
| Teneo Global LLC (14) (15) | | Management Consulting Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 6.25% | | (L +5.25%) | | 9/10/2021 | | 7/11/2025 | | 1,421 | | | 1,415 | | | 1,427 | | | 0.7 | |
| | | | | | | | | | | | | | | | | | |
| The Escape Game, LLC (4) | | Other amusement and recreation industries | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.00% | | (L +7.00%) | | 12/21/2021 | | 12/22/2024 | | 16,333 | | | 16,333 | | | 16,382 | | | 8.0 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | (L +7.00%) | | 12/21/2021 | | | | — | | | (46) | | | 14 | | | — | |
| | | | | | | | | | | | 16,333 | | | 16,287 | | | 16,396 | | | 8.0 | |
| Thryv, Inc. (14) (15) | | Directory and Mailing List Publishers | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.50% | | (L +8.50%) | | 2/18/2021 | | 3/1/2026 | | 2,050 | | | 2,004 | | | 2,085 | | | 1.0 | |
| | | | | | | | | | | | | | | | | | |
| Tolemar Acquisition, INC. (15) | | Motorcycle, Bicycle, and Parts Manufacturing | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.00% | | (L +6.00%) | | 10/14/2021 | | 10/14/2026 | | 14,889 | | | 14,818 | | | 14,818 | | | 7.3 | |
| Senior Secured Loan (Revolver) (5) | | | | 7.00% | | (L +6.00%) | | 10/14/2021 | | 10/14/2026 | | 360 | | | 348 | | | 348 | | | 0.2 | |
| | | | | | | | | | | | 15,249 | | | 15,166 | | | 15,166 | | | 7.5 | |
| TruGreen Limited Partnership | | Landscaping Services | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.25% | | (L +8.50%) | | 5/13/2021 | | 11/2/2028 | | 4,500 | | | 4,630 | | | 4,590 | | | 2.3 | |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued
December 31, 20202021
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| United Biologics Holdings, LLC (4) (10) | | Medical Laboratories | | | | | | | | | | | | | | | | |
| Preferred Equity (151,787 units) | | | | | | | | 4/16/2013 | | | | | | $ | 9 | | | $ | 17 | | | — | % |
| Warrants (29,374 units) | | | | | | | | 7/26/2012 | | 3/5/2022 (12) | | | | 82 | | | 8 | | | — | |
| | | | | | | | | | | | | | 91 | | | 25 | | | — | |
| West Corporation (14) (15) | | All Other Telecommunications | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.50% | | (L +3.50%) | | 2/26/2021 | | 10/10/2024 | | 887 | | | 874 | | | 838 | | | 0.4 | |
| Senior Secured Loan | | | | 5.00% | | (L +4.00%) | | 7/29/2021 | | 10/10/2024 | | 2,611 | | | 2,555 | | | 2,485 | | | 1.2 | |
| | | | | | | | | | | | 3,498 | | | 3,429 | | | 3,323 | | | 1.6 | |
| Yahoo / Verizon Media (14) (15) | | Internet Publishing and Broadcasting and Web Search Portals | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 6.25% | | (L +5.50%) | | 7/21/2021 | | 9/1/2027 | | 3,294 | | | 3,249 | | | 3,299 | | | 1.6 | |
| | | | | | | | | | | | | | | | | | |
| Total Debt and Equity Investments | | | | | | | | | | | | $ | 350,939 | | | $ | 353,447 | | | $ | 346,366 | | | 170.1 | % |
| | | | | | | | | | | | | | | | | | |
| Structured Finance Note Investments (22) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes and Mezzanine Debt (9) (16) | | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2020 (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 10.20% | | | | 11/16/2020 | | 10/20/2031 | | $ | 11,080 | | | $ | 9,297 | | | $ | 9,090 | | | 4.5 | % |
| | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2021 Ltd (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 14.53% | | | | 5/28/2021 | | 7/18/2034 | | 8,630 | | | 7,797 | | | 7,442 | | | 3.7 | |
| | | | | | | | | | | | | | | | | | |
| Dryden 53 CLO, LTD. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes - Income | | | | 23.72% | | | | 10/26/2020 | | 1/15/2031 | | 2,700 | | | 1,611 | | | 1,672 | | | 0.8 | |
| Subordinated Notes | | | | 23.69% | | | | 10/26/2020 | | 1/15/2031 | | 2,159 | | | 1,289 | | | 1,337 | | | 0.7 | |
| | | | | | | | | | | | 4,859 | | | 2,900 | | | 3,009 | | | 1.5 | |
| Dryden 76 CLO, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 15.73% | | | | 9/27/2019 | | 10/20/2032 | | 2,750 | | | 2,119 | | | 2,374 | | | 1.2 | |
| | | | | | | | | | | | | | | | | | |
| Elevation CLO 2017-7, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 11.96% | | | | 2/6/2019 | | 7/15/2030 | | 10,000 | | | 6,137 | | | 5,357 | | | 2.6 | |
| | | | | | | | | | | | | | | | | | |
| Flatiron CLO 18, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 19.09% | | | | 1/2/2019 | | 4/17/2031 | | 9,680 | | | 6,942 | | | 7,331 | | | 3.6 | |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2021
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Professional Pipe Holdings, LLC (19) | | Plumbing, Heating, and Air-Conditioning Contractors | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.75% cash / 1.50% PIK | | (L +8.75%) | | 3/23/2018 | | 3/23/2023 | | $ | 6,263 | | | $ | 6,193 | | | $ | 6,086 | | | 3.8 | % |
| Common Equity (1,414 Class A units) (10) | | | | | | | | 3/23/2018 | | | | | | 1,414 | | | 1,208 | | | 0.8 | |
| | | | | | | | | | | | 6,263 | | | 7,607 | | | 7,294 | | | 4.6 | |
| TalentSmart Holdings, LLC (20) | | Professional and Management Development Training | | | | | | | | | | | | | | | | |
| Common Equity (1,595,238 Class A shares) (10) (13) | | | | | | | | 10/11/2019 | | | | | | 1,595 | | | 1,306 | | | 0.8 | |
| | | | | | | | | | | | | | | | | | |
| TRS Services, LLC (4)(20) | | Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | | | | | | | | | | | | | | | | |
| Preferred Equity (1,937,191 Class A units), 11% PIK | | | | | | | | 12/10/2014 | | | | | | — | | | 915 | | | 0.6 | |
| Common Equity (3,000,000 units) (10) | | | | | | | | 12/10/2014 | | | | | | 572 | | | — | | | — | |
| | | | | | | | | | | | | | 572 | | | 915 | | | 0.6 | |
| TTG Healthcare, LLC (20) | | Diagnostic Imaging Centers | | | | | | | | | | | | | | | | |
| Senior Secured Loan (4) | | | | 8.50% | | (L +7.50%) | | 3/1/2019 | | 11/28/2025 | | 19,603 | | | 19,409 | | | 19,530 | | | 12.3 | |
| Preferred Equity ( 2,309 Class B units) (10) (13) | | | | | | | | 3/1/2019 | | | | | | 2,309 | | | 4,077 | | | 2.6 | |
| | | | | | | | | | | | 19,603 | | | 21,718 | | | 23,607 | | | 14.9 | |
| | | | | | | | | | | | | | | | | | |
| Total Affiliate Investments | | | | | | | | | | | | $ | 67,226 | | | $ | 86,484 | | | $ | 102,846 | | | 64.7 | % |
| | | | | | | | | | | | | | | | | | |
| Control Investment | | | | | | | | | | | | | | | | | | |
| MTE Holding Corp. (4)(19) | | Travel Trailer and Camper Manufacturing | | | | | | | | | | | | | | | | |
| Subordinated Loan (to Mirage Trailers, LLC, a controlled, consolidated subsidiary of MTE Holding Corp.) | | | | 11.00% cash / 5.00% PIK | | (L +10.00%) | | 11/25/2015 | | 11/25/2021 | | 7,842 | | | 7,842 | | | 7,822 | | | 4.9 | |
| Common Equity (554 shares) (10) | | | | | | | | 11/25/2015 | | | | | | 3,069 | | | 2,990 | | | 1.9 | |
| | | | | | | | | | | | 7,842 | | | 10,911 | | | 10,812 | | | 6.8 | |
| Total Control Investment | | | | | | | | | | | | $ | 7,842 | | | $ | 10,911 | | | $ | 10,812 | | | 6.8 | % |
| | | | | | | | | | | | | | | | | | |
| Total Investments | | | | | | | | | | | | $ | 455,383 | | | $ | 461,023 | | | $ | 442,323 | | | 278.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Madison Park Funding XXIII, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 24.21% | | | | 1/8/2020 | | 7/27/2047 | | $ | 10,000 | | | $ | 6,370 | | | $ | 7,211 | | | 3.5 | % |
| | | | | | | | | | | | | | | | | | |
| Madison Park Funding XXIX, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 15.88% | | | | 12/22/2020 | | 10/18/2047 | | 9,500 | | | 6,899 | | | 7,001 | | | 3.4 | |
| | | | | | | | | | | | | | | | | | |
| Monroe Capital MML CLO X, LTD. | | | | | | | | | | | | | | | | | | |
| Mezzanine debt - Class E | | | | 10.92% | | (L +8.85%) | | 8/7/2020 | | 8/20/2031 | | 1,000 | | | 949 | | | 996 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
| Octagon Investment Partners 39, Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 17.69% | | | | 1/23/2020 | | 10/20/2030 | | 7,000 | | | 4,733 | | | 4,845 | | | 2.4 | |
| | | | | | | | | | | | | | | | | | |
| Park Avenue Institutional Advisers CLO Ltd 2021-1 | | | | | | | | | | | | | | | | | | |
| Mezzanine debt - Class E | | | | 8.63% | | (L +7.30%) | | 1/26/2021 | | 1/20/2034 | | 1,000 | | | 974 | | | 988 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
| Redding Ridge 4 (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 18.02 | | | | 3/4/2021 | | 4/15/2030 | | 1,300 | | | 1,104 | | | 1,106 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
| Regatta II Funding | | | | | | | | | | | | | | | | | | |
| Mezzanine debt - Class DR2 | | | | 13.42% | | (L +6.95%) | | 6/5/2020 | | 1/15/2029 | | 800 | | | 737 | | | 795 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | |
| THL Credit Wind River 2019‐3 CLO Ltd. (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 13.09% | | | | 4/5/2019 | | 4/15/2031 | | 7,000 | | | 5,710 | | | 5,231 | | | 2.6 | |
| | | | | | | | | | | | | | | | | | |
| Trinitas CLO VIII (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 21.34% | | | | 3/4/2021 | | 7/20/2117 | | 5,200 | | | 3,128 | | | 3,229 | | | 1.6 | |
| | | | | | | | | | | | | | | | | | |
| Wellfleet CLO 2018-2 (7) | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 19.74% | | | | 3/4/2021 | | 10/20/2031 | | 1,000 | | | 655 | | | 696 | | | 0.3 | |
| | | | | | | | | | | | | | | | | | |
| Total Subordinated Notes and Mezzanine Debt Investments | | | | | | | | | | | | $ | 90,799 | | | $ | 66,451 | | | $ | 66,701 | | | 32.8 | % |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2021
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Loan Accumulation Facility (17) (22) | | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2021-II Ltd | | | | | | | | | | | | | | | | | | |
| Loan accumulation facility | | | | 13.50% | | | | 7/14/2021 | | 7/14/2022 | | $ | 8,500 | | | $ | 8,500 | | | $ | 8,500 | | | 4.2 | % |
| | | | | | | | | | | | | | | | | | |
| Total Structured Finance Notes | | | | | | | | | | | | $ | 99,299 | | | $ | 74,951 | | | $ | 75,201 | | | 37.0 | % |
| | | | | | | | | | | | | | | | | | |
| Total Non-control/Non-affiliate Investments | | | | | | | | | | | | $ | 450,238 | | | $ | 428,398 | | | $ | 421,567 | | | 207.1 | % |
| | | | | | | | | | | | | | | | | | |
| Affiliate Investments | | | | | | | | | | | | | | | | | | |
| Contract Datascan Holdings, Inc. (4) (10) (20) | | Office Machinery and Equipment Rental and Leasing | | | | | | | | | | | | | | | | |
| Preferred Equity (3,061 Series A shares) 10% PIK | | | | | | | | 8/5/2015 | | | | | | $ | 5,849 | | | $ | 2,748 | | | 1.3 | % |
| Common Equity (11,273 shares) | | | | | | | | 6/28/2016 | | | | | | 104 | | | 25 | | | — | |
| | | | | | | | | | | | | | 5,953 | | | 2,773 | | | 1.3 | |
| DRS Imaging Services, LLC (20) | | Data Processing, Hosting, and Related Services | | | | | | | | | | | | | | | | |
| Common Equity (1,135 units) (10) (13) | | | | | | | | 3/8/2018 | | | | | | 1,135 | | | 1,289 | | | 0.6 | |
| | | | | | | | | | | | | | | | | | |
| Master Cutlery, LLC (4) (10)(20) | | Sporting and Recreational Goods and Supplies Merchant Wholesalers | | | | | | | | | | | | | | | | |
| Subordinated Loan (6) (11) | | | | 13.00% (11) | | N/A | | 4/17/2015 | | 7/20/2022 | | 7,563 | | | 4,696 | | | 699 | | | 0.3 | |
| Preferred Equity (3,723 Series A units), 8% PIK | | | | | | | | 4/17/2015 | | | | | | 3,483 | | | — | | | — | |
| Common Equity (15,564 units) | | | | | | | | 4/17/2015 | | | | | | — | | | — | | | — | |
| | | | | | | | | | | | 7,563 | | | 8,179 | | | 699 | | | 0.3 | |
| Pfanstiehl Holdings, Inc. (4) (20) (21) | | Pharmaceutical Preparation Manufacturing | | | | | | | | | | | | | | | | |
| Common Equity (400 Class A shares) | | | | | | | | 1/1/2014 | | | | | | 217 | | | 65,740 | | | 32.3 | |
| | | | | | | | | | | | | | | | | | |
| TalentSmart Holdings, LLC (20) | | Professional and Management Development Training | | | | | | | | | | | | | | | | |
| Common Equity (1,595,238 Class A shares) (10) (13) | | | | | | | | 10/11/2019 | | | | | | 1,595 | | | 1,095 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2021
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| TRS Services, LLC (4) (10) (20) | | Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | | | | | | | | | | | | | | | | |
| Preferred Equity (1,937,191 Class A units), 11% PIK | | | | | | | | 12/10/2014 | | | | | | $ | — | | | $ | 988 | | | 0.5 | % |
| Common Equity (3,000,000 units) | | | | | | | | 12/10/2014 | | | | | | 572 | | | — | | | — | |
| | | | | | | | | | | | | | 572 | | | 988 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | |
| Total Affiliate Investments | | | | | | | | | | | | $ | 7,563 | | | $ | 17,650 | | | $ | 72,584 | | | 35.5 | % |
| | | | | | | | | | | | | | | | | | |
| Control Investment | | | | | | | | | | | | | | | | | | |
| MTE Holding Corp. (4) (19) | | Travel Trailer and Camper Manufacturing | | | | | | | | | | | | | | | | |
| Subordinated Loan (to Mirage Trailers, LLC, a controlled, consolidated subsidiary of MTE Holding Corp.) | | | | 11.00% cash / 5.00% PIK | | (L +15.00%) | | 11/25/2015 | | 4/30/2022 | | $ | 8,195 | | | $ | 8,195 | | | $ | 8,195 | | | 4.0 | % |
| Common Equity (554 shares) | | | | | | | | 11/25/2015 | | | | | | 3,069 | | | 4,753 | | | 2.3 | |
| | | | | | | | | | | | 8,195 | | | 11,264 | | | 12,948 | | | 6.3 | |
| Total Control Investment | | | | | | | | | | | | $ | 8,195 | | | $ | 11,264 | | | $ | 12,948 | | | 6.3 | % |
| | | | | | | | | | | | | | | | | | |
| Total Investments | | | | | | | | | | | | $ | 465,995 | | | $ | 457,312 | | | $ | 507,099 | | | 248.9 | % |
(1)Equity ownership may be held in shares or units of companies affiliated with the portfolio company. The Company's investments are generally classified as "restricted securities" as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144.
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued
December 31, 2020
(Dollar amounts in thousands)
(2)Substantially all of the investments that bear interest at a variable rate are indexed to LIBOR (L), generally between 0.75% and 1.0%1.00% at December 31, 2020,2021, and reset monthly, quarterly, or semi-annually. Variable-rate loans with an aggregate cost of $328,736$316,558 include LIBOR reference rate floor provisions of generally 0.75% to 1.0%1.00% at December 31, 2020,2021, the reference raterates on such instruments waswere generally below the stated floor provisions. For each investment, the Company has provided the spread over the reference rate and current interest rate in effect at December 31, 2020.2021. Unless otherwise noted, all investments with a stated PIK rate require interest payments with the issuance of additional securities as payment of the entire PIK provision.
(3)Unless otherwise noted with footnote 14, fair value was determined using significant unobservable inputs for all of the Company's investments and are considered Level 3 under GAAP. See Note 5 for further details.
(4)Investments (or portion thereof) held by SBIC I LP. These assets are pledged as collateral of the SBA debentures and cannot be pledged under any debt obligation of the Company.
(5)Subject to unfunded commitments. See Note 6 for further details.6.
(6)Investment was on non-accrual status as of December 31, 2020,2021, meaning the Company has suspended recognition of all or a portion of income on the investment. See Note 4 for further details.
(7)CLO subordinated debt positions are entitled to recurring distributions which are generally equal to the remainingresidual cash flow of payments made byreceived on underlying securities less contractual payments to debt holders and fund expenses.
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2021
(Dollar amounts in thousands)
(8)The Company has entered into a contractual arrangement with co‑lenders whereby, subject to certain conditions, it has agreed to receive its payment after the repayment of certain co‑lenders pursuant to a payment waterfall. The table below provides additional details as of December 31, 2020: | | | | | | | | | | | | | | | | | |
| Portfolio Company | Reported Interest Rate | | Interest Rate per Credit Agreement | | Additional Interest per Annum |
| Chemical Resources Holdings, Inc. | 9.17% | | 7.50% | | 1.67% |
| Milrose Consultants, LLC | 7.62% | | 7.00% | | 0.62% |
| SourceHOV Tax, Inc. | 7.61% | | 7.00% | | 0.61% |
| | | | | | | | | | | | | | | | | |
| Portfolio Company | Reported Interest Rate | | Interest Rate per Credit Agreement | | Additional Interest per Annum |
| SS Acquisition, LLC | 7.88% | | 7.50% | | 0.38% |
(9)The rate disclosed is the estimated effective yield, generally established at purchase and re-evaluated upon receipt of distributions, and based upon projected amounts and timing of future distributions and the projected amount and timing of terminal principal payments at the time of estimation. The estimated yield and investment cost may ultimately not be realized.
(10)Non-income producing.
(11)The interest rate on these investments contains a PIK provision, whereby the issuer has the option to make interest payments in cash or with the issuance of additional securities as payment of the entire PIK provision. The interest rate in the schedule represents the current interest rate in effect for these investments. The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed as of December 31, 2020:2021: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | | Investment Type | | Range of PIK
Option | | Range of Cash
Option | | Maximum PIK
Rate Allowed |
Community Intervention Services, Inc. | | Subordinated Loan | | 0% or 6.00% | | 13.00% or 7.00% | | 6.00% |
| Eblens Holdings, Inc. | | Subordinated Loan | | 0% or 1.00% | | 13.00% or 12.00% | | 1.00% |
| Master Cutlery, LLC | | SubordinatedSenior Secured Loan | | 0% to 13.00% | | 13.00% to 0% | | 13.00% |
(12)Represents expiration date of the warrants.
(13)All or portion of investment held by a wholly-ownedwholly owned subsidiary of the Company subject to income tax.
(14)Fair value was determined by reference to observable inputs other than quoted prices in active markets and are considered Level 2 under GAAP. See Note 5 for further details.
(15)Investments (or portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the BNP Facility and cannot be pledged under any other debt obligation of the Company.
(16)Amortized cost reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO subordinated debt investments.
(17)Maturity date represents the contractual maturity date of the Structured Finance Notes. Projected cash flows, including the projected amount and timing of terminal principal payments whichLoan accumulation facilities are financing structures intended to aggregate loans that may be projectedused to occur priorform the basis of a CLO vehicle. Reported yields represent the realized yield since acquisition. Income notes associated with loan accumulation facilities generally pay returns equal to the contractual maturity date,actual income earned on facility assets less costs of senior financing. As of December 31, 2021, the fair value of loan accumulation facilities were utilized in deriving the effective yield of the investments.determined by reference to Transaction Price.
(18)Not meaningful as there is no outstanding balance on the revolver.revolver or delayed draw loan. The Company earns unfunded commitment fees on undrawn revolving lines of credit balances, which are reported in fee income.
(19)The Company holds at least one seat on the portfolio company’s board of directors.
(20)The Company has an observer seat on the portfolio company’s board of directors.
(21)Portfolio company at fair value represents greater than 5% of total assets at December 31, 2020.2021.
(22)Non-qualifying assets under Section 55(a) of the 1940 Act. Qualifying assets as defined in Section 55 of the 1940 Act must represent at least 70% of the Company's assets immediately following the acquisition of any additional non-qualifying assets. As of December 31, 2021, approximately 85% of the Company's assets were qualifying assets.
(23)Equity participation rights issued by unaffiliated third party fully covered with underlying positions in the portfolio company.
See Notes to Consolidated Financial Statements.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Note 1. Organization
OFS Capital Corporation, a Delaware corporation, is an externally managed, closed-end, non-diversified management investment company. The Company has elected to be regulated as a BDC under the 1940 Act. In addition, for income tax purposes, the Company has elected to be treated as a RIC under Subchapter M of the Code.
The Company’s investment objective is to provide stockholders with both current income and capital appreciation primarily through debt investments and, to a lesser extent, equity investments.
OFS Advisor manages the day-to-day operations of, and provides investment advisory services to, the Company.
In addition, OFS Advisor serves as the investment adviser for HPCI, a non-traded BDC with an investment strategy and objective similar to that of the Company. OFS Advisor also serves as the investment adviser for OCCI, a non-diversified, externally managed, closed-end management investment company that has registered as an investment company under the 1940 Act and that primarily invests in Structured Finance Notes. Additionally, OFS Advisor provides sub-advisory servicesserves as the collateral manager to CMFT Securities Investments, LLC, a wholly owned subsidiary of CIM Real Estate Finance Trust, Inc., a corporation that qualifies as a real estateCLOs, adviser to separately-managed accounts and sub-advisor to investment trust and CIM Real Assets & Credit Fund,companies managed by an externally managed registered investment company that operates as an interval fund that invests primarily in a combination of real estate, credit and related investments.affiliate.
The Company may make investments directly or through one or more of its subsidiaries: SBIC I LP, OFSCC-FS or OFSCC-MB.
SBIC I LP is an investment company subsidiary licensed under the SBA'sSBA’s small business investment company program. The Company is limited to follow-on investments in current portfolio companies held through SBIC I LP. SBIC I LP is subject to SBA regulatory requirements, including: limitations onregulations and policies, including periodic examinations by the businesses and industries in which it can invest; requirements to invest at least 25% of its regulatory capital in eligible smaller businesses, as defined under the SBIC Act; limitations on the financing terms of investments; and capitalization thresholds that may limit distributions to the Company.SBA. Over time, SBIC I LP is subjectintends to periodic audits and examinations of its financial statements. SBIC I LP is repaying over timerepay its outstanding SBA debentures prior to their scheduled maturity dates.
OFSCC-FS, an indirect wholly owned and consolidated subsidiary of the Company, is a special-purpose vehicle formed in April 2019 for the purpose of acquiring senior secured loan investments. OFSCC-FS has debt financing through its BNP Facility, which provides OFSCC-FS with borrowing capacity of up to $150,000.
OFSCC-MB is a wholly-owned and consolidated subsidiary taxed under subchapter C of the Code andthat generally holds the Company'sCompany’s equity investments in portfolio companies that are taxed as pass-through entities.
Note 2. Summary of Significant Accounting Policies
Basis of presentation: The Company is an investment company as defined in the accounting and reporting guidance under ASC Topic 946, Financial Services–Investment Companies. The accompanying interim consolidated financial statements of the Company and related financial information have been prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q, and Articles 6, 10 and 12 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. However, in the opinion of management, the consolidated financial statements include all adjustments, consisting only of normal and recurring accruals and adjustments, necessary for fair presentation as of and for the periods presented. These consolidated financial statements and notes theretohereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.2021, filed on March 4, 2022. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.
Significant Accounting Policies:The following information supplements the description of significant accounting policies contained in Note 2 to the Company's consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Reclassifications: Certain prior period amounts have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes thereto. Reclassifications did not impact net increase in net assets resulting from operations, total assets, total liabilities or total net assets, or consolidated statements of changes in net assets and consolidated statements of cash flows classifications.
Use of estimates:The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.
Intangible asset: On December 4, 2013, in connection with the SBIC Acquisition, the Company recorded an intangible asset of $2,500 attributable to the SBIC license. The Company amortizes this intangible asset on a straight-line basis over its estimated
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
useful life. During the first quarter of 2022, the Company changed its estimate of the useful life to terminate on March 1, 2024 due to continued early redemptions of SBA debentures.
Concentration of credit risk: Aside from its debt instruments, includingthe Company’s investments, in Structured Finance Notes of CLOs, financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits at financial institutions. At various times during the year, the Company may exceed the federally insured limits. The Company places cash deposits only with high credit quality institutions which OFS Advisor believes will mitigate the risk of loss due to credit risk. The amount of loss due to credit risk from debtits investments, if borrowers completely fail to perform according to the terms of the contracts, and the collateral or other security for those instruments proved to be of no value to the Company, is equal to the sum of the Company'sCompany’s recorded investment in debt instrumentsinvestments and the unfunded loan commitments disclosed in Note 6.6.
Valuation of Portfolio Investments: In December 2020, the SEC issued a final rule adopting Rule 2a-5 under the 1940 Act to establish requirements for determining fair value in good faith for purposes of the 1940 Act. The Company is evaluating the impact of adopting Rule 2a-5 on the consolidated financial statements and intends to comply with the new rule’s mandatory requirements on or before the compliance date in September 2022.
Note 3. Related Party Transactions
Investment Advisory and Management Agreement: OFS Advisor manages the day-to-day operations of, and provides investment advisory services to, the Company pursuant to the Investment Advisory Agreement. The continuation of the Investment Advisory Agreement was most recently approved by the Board on April 1, 2021.5, 2022. Under the terms of the Investment Advisory Agreement, which are in accordance with the 1940 Act and subject to the overall supervision of the Board, OFS Advisor is responsible for sourcing potential investments, conducting research and diligence on potential investments and equity sponsors, analyzing investment opportunities, structuring investments, and monitoring investments and portfolio companies on an ongoing basis.
OFS Advisor’s services under the Investment Advisory Agreement are not exclusive to the Company, and OFS Advisor is free to furnish similar services to other entities, including other funds affiliated with OFS Advisor, so long as its services to the Company are not impaired. OFS Advisor also serves as the investment adviser or collateral manager to CLO funds and other companies, including HPCI and OCCI.
OFS Advisor receives fees for providing services to the Company, consisting of two components: a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 1.75% and based on the average value of the Company’s total assets (other than cash, but including assets purchased with borrowed amounts and assets owned by any consolidated entity) at the end of the two most recently completed calendar quarters, adjusted for any share issuances or repurchases during the quarter. OFS Advisor has elected to exclude the value of the intangible asset and goodwill resulting from the SBIC Acquisition from the base management fee calculation.
Effective January 1, 2020,2022, OFS Advisor agreed to further reduce theits base management fee attributable to all of the OFSCC-FS Assets without regard to the Company’s asset coverage. The agreement reduced the base management fee to 0.25% per quarter (1.00% annualized) of the average value of the OFSCC-FS Assets (excluding cash) at the end of the two most recently completed calendar quarters. OFS Advisor’s base management fee reduction is renewable on an annual basis, and OFS Advisor is not entitled to recoup the amount of the base management fee reduced with respect to the OFSCC-FS Assets. ThisOFS Advisor most recently renewed the agreement was renewed for the 2021 calendar year 2022 on February 16, 2021.4, 2022.
The incentive fee has two parts. The first part ("of the incentive fee (“Income Incentive Fee"Fee”) is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination and sourcing, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies, but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest or dividend feature (such as OID, debt instruments with PIK interest, equity investments with accruing or PIK dividend and zero coupon securities), accrued income that the Company has not yet received in cash.
Pre-incentive fee net investment income is expressed as a rate of return on the value of the Company’s net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter and adjusted for any share issuances or repurchases during such quarter.
The incentive fee with respect to pre-incentive fee net income is 20.0% of the amount, if any, by which the pre-incentive fee net investment income for the immediately preceding calendar quarter exceeds a 2.0% hurdle rate (which is 8.0% annualized) and a “catch-up”
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
“catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, OFS Advisor receives no incentive fee until the net investment income equals the hurdle rate of 2.0%, but then receives, as a “catch-
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
up,“catch-up,” 100.0% of the pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, OFS Advisor will receive 20.0% of the pre-incentive fee net investment income.
Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Because of the structure of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter in which the Company incurs a loss. For example, if the Company receives pre-incentive fee net investment income in excess of the quarterly minimum hurdle rate, the Company will pay the applicable incentive fee even if the Company has incurred a loss in that quarter due to realized and unrealized capital losses. The Company’s net investment income used to calculate this part of the incentive fee is also included in the amount of the Company’s gross assets used to calculate the base management fee. These calculations are appropriately prorated for any period of less than three months.
The second part of the incentive fee (the “Capital GainGains Fee”) is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20.0% of the Company’s aggregate realized capital gains, if any, on a cumulative basis from the date of the election to be a BDC through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation throughat the end of such year, less all previous amounts paid in respect of the Capital GainGains Fee. Since inception through June 30, 2022, the Company has not made a Capital Gains Fee payment.
The Company accrues the Capital GainGains Fee if, on a cumulative basis, the sum of net realized capital gains and (losses) plus net unrealized appreciation and (depreciation) is positive. An accrued Capital Gains Fee relating to net unrealized appreciation is deferred, and not due to OFS Advisor, until the close of the year in which such gains are realized. If, on a cumulative basis, the sum of net realized capital gains (losses) plus net unrealized appreciation (depreciation) decreases during a period, the Company will reverse any excess Capital GainGains Fee previously accrued such that the amount of Capital Gains Fee accrued is no more than 20% of the sum of net realized capital gains (losses) plus net unrealized appreciation (depreciation). As of June 30, 2022 and December 31, 2021, Capital Gains Fees of $-0- and $1,916, respectively, were accrued and are included in the amounts payable to the investment adviser and affiliates as listed on the consolidated statements of assets and liabilities.
On May 4, 2020, OFS Advisor agreed to irrevocably waive the receipt of $441 in Income Incentive Fees (based on net investment income) related to net investment income, that it would otherwise be entitled to receive under the Investment Advisory Agreement for the three months ended March 31, 2020. As a result of the voluntary fee waiver, the Company incurred Income Incentive Fee expense of $442 for the three months ended March 31, 2020, which is equal to half the Income Incentive Fee expense the Company would have incurred for the three months ended March 31, 2020. The voluntary fee waiver did not include Capital Gain Fees, which was $0 for the three months ended March 31, 2020.
License Agreement: The Company is party to a license agreement with OFSAM under which OFSAM has granted the Company a non-exclusive, royalty-free license to use the name “OFS.”
Administration Agreement: OFS Services furnishes the Company with office facilities and equipment, necessary software licenses and subscriptions, and clerical, bookkeeping and record keeping services at such facilities pursuant to the Administration Agreement. The Administration Agreement was most recently approved by the Board on April 5, 2022. Under the Administration Agreement, OFS Services performs, or oversees the performance of, the Company’s required administrative services, which include being responsible for the financial records that the Company is required to maintain and preparing reports to its stockholders and all other reports and materials required to be filed with the SEC or any other regulatory authority. In addition, OFS Services assists the Company in determining and publishing its net asset value, oversees the preparation and filing of its tax returns and the printing and dissemination of reports to its stockholders, and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. Under the Administration Agreement, OFS Services also provides managerial assistance on the Company’s behalf to those portfolio companies that have accepted the Company’s offer to provide such assistance. Payment under the Administration Agreement is equal to an amount based upon the Company’s allocable portion of OFS Services’s overhead in performing its obligations under the Administration Agreement, including, but not limited to, rent, information technology services and the Company’s allocable portion of the cost of its officers, including its chief executive officer, chief financial officer, chief compliance officer, chief accounting officer and their respective staffs. To the extent that OFS Services outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis without profit to OFS Services.
Equity Ownership: As of June 30, 2021,2022, affiliates of OFS Advisor held 3,037,349approximately 3,019,694 shares of common stock, which is approximately 23%22.5% of the Company's outstanding shares of common stock.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Expenses recognized under agreements with OFS Advisor and OFS Services and distributions paid to affiliates for the three and six months ended June 30, 20212022 and 2020,2021, are presented below:
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| Base management fees | Base management fees | $ | 1,876 | | | $ | 1,869 | | | $ | 3,710 | | | $ | 3,888 | | Base management fees | $ | 2,056 | | | $ | 1,876 | | | $ | 4,076 | | | $ | 3,710 | |
| Incentive fees: | Incentive fees: | | Incentive fees: | |
| Income Incentive Fee | Income Incentive Fee | 809 | | | 215 | | | 809 | | | 1,098 | | Income Incentive Fee | — | | | 809 | | | — | | | 809 | |
| | Incentive fee waiver | — | | | — | | | — | | | (441) | | |
| Capital Gains Fee | | Capital Gains Fee | (2,988) | | | — | | | (1,916) | | | — | |
| Administration fee expense | Administration fee expense | 439 | | | 500 | | | 1,007 | | | 1,020 | | Administration fee expense | 423 | | | 439 | | | 874 | | | 1,007 | |
| Distributions paid to affiliates | Distributions paid to affiliates | 668 | | | 503 | | | 1,276 | | | 1,510 | | Distributions paid to affiliates | 876 | | | 668 | | | 1,721 | | | 1,276 | |
For the three and six months ended June 30, 2022, the negative Capital Gains Fee is due to the reversal of previously accrued Capital Gains Fees from the reduction in net unrealized appreciation on the investment portfolio during the three and six months ended June 30, 2022.
Note 4. Investments
As of June 30, 2022, the Company had loans to 66 portfolio companies, of which 98% were senior secured loans and 2% were subordinated loans, at fair value, as well as equity investments in five of these portfolio companies. The Company also held equity investments in 12 portfolio companies in which it did not hold a debt investment and 23 investments in Structured Finance Notes. At June 30, 2022, the Company’s investments consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Percentage of Total | | | | Percentage of Total |
| Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Senior secured debt investments | $ | 369,001 | | | 72.7 | % | | 188.4 | % | | $ | 348,676 | | | 63.7 | % | | 178.2 | % |
| Subordinated debt investments | 13,890 | | | 2.7 | | | 7.1 | | | 7,303 | | | 1.3 | | | 3.7 | |
| Preferred equity | 9,501 | | | 1.9 | | | 4.9 | | | 5,951 | | | 1.1 | | | 3.0 | |
Common equity, warrants and other(1) | 12,750 | | | 2.5 | | | 6.5 | | | 95,869 | | | 17.5 | | | 49.0 | |
| Total Portfolio Company Investments | 405,142 | | | 79.8 | | | 206.9 | | | 457,799 | | | 83.6 | | | 233.9 | |
| Structured Finance Notes | 102,342 | | | 20.2 | | | 52.3 | | | 89,878 | | | 16.4 | | | 45.9 | |
| Total investments | $ | 507,484 | | | 100.0 | % | | 259.2 | % | | $ | 547,677 | | | 100.0 | % | | 279.8 | % |
(1) Includes the Company’s investment in Pfanstiehl Holdings, Inc. See “Note 4 — Portfolio Concentration” for additional information.
Geographic composition is determined by the location of the corporate headquarters of the portfolio company. All international investments are denominated in US dollars. As of June 30, 2022 and December 31, 2021, the Company's investment portfolio was domiciled as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| United States | $ | 402,281 | | | $ | 455,162 | | | $ | 378,823 | | | $ | 428,321 | |
| Canada | 11,361 | | | 11,137 | | | 12,038 | | | 12,077 | |
Cayman Islands1 | 93,842 | | | 81,378 | | | 66,451 | | | 66,701 | |
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| Total investments | $ | 507,484 | | | $ | 547,677 | | | $ | 457,312 | | | $ | 507,099 | |
(1) Investments domiciled in the Cayman Islands represent certain Structured Finance Note securities held by the Company. These investments generally represent beneficial interests in underlying portfolios of debt investments in companies domiciled in the United States.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
As of June 30, 2022, the industry composition of the Company’s investment portfolio was as follows:
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| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Administrative and Support and Waste Management and Remediation Services | | | | | | | | | | | | |
| All Other Business Support Services | | $ | 2,755 | | | 0.5 | % | | 1.4 | % | | $ | 2,755 | | | 0.5 | % | | 1.4 | % |
| Convention and Trade Show Organizers | | 160 | | | — | | | 0.1 | | | 101 | | | — | | | 0.1 | |
| Hazardous Waste Treatment and Disposal | | 1,775 | | | 0.3 | | | 0.9 | | | 1,663 | | | 0.3 | | | 0.8 | |
| Landscaping Services | | 4,620 | | | 0.9 | | | 2.4 | | | 4,498 | | | 0.8 | | | 2.3 | |
| | | | | | | | | | | | |
| Security Systems Services (except Locksmiths) | | 4,827 | | | 1.0 | | | 2.5 | | | 4,795 | | | 0.9 | | | 2.5 | |
| Temporary Help Services | | 8,893 | | | 1.8 | | | 4.5 | | | 8,861 | | | 1.6 | | | 4.5 | |
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| Arts, Entertainment, and Recreation | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Other Amusement and Recreation Industries | | 16,295 | | | 3.2 | | | 8.3 | | | 16,206 | | | 3.0 | | | 8.3 | |
| Construction | | | | | | | | | | | | |
| Electrical Contractors and Other Wiring Installation Contractors | | 18,468 | | | 3.6 | | | 9.4 | | | 10,383 | | | 1.9 | | | 5.3 | |
| New Single-Family Housing Construction (except For-Sale Builders) | | 1,815 | | | 0.4 | | | 0.9 | | | 1,611 | | | 0.3 | | | 0.8 | |
| Plumbing, Heating, and Air-Conditioning Contractors | | 2,550 | | | 0.5 | | | 1.3 | | | 2,584 | | | 0.5 | | | 1.3 | |
| Water and Sewer Line and Related Structures Construction | | 2,395 | | | 0.5 | | | 1.2 | | | 2,250 | | | 0.4 | | | 1.1 | |
| Education Services | | | | | | | | | | | | |
| Colleges, Universities, and Professional Schools | | — | | | — | | | — | | | 7,192 | | | 1.3 | | | 3.7 | |
| Professional and Management Development Training | | 1,595 | | | 0.3 | | | 0.8 | | | 1,050 | | | 0.2 | | | 0.5 | |
| Sports and Recreation Instruction | | 3,014 | | | 0.6 | | | 1.5 | | | 3,001 | | | 0.5 | | | 1.5 | |
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| Health Care and Social Assistance | | | | | | | | | | | | |
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| Child Day Care Services | | 6,355 | | | 1.3 | | | 3.2 | | | 6,034 | | | 1.1 | | | 3.1 | |
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| Home Health Care Services | | 4,172 | | | 0.8 | | | 2.1 | | | 4,208 | | | 0.8 | | | 2.2 | |
| Medical Laboratories | | 17 | | | — | | | — | | | 24 | | | — | | | — | |
| Offices of Physicians, Mental Health Specialists | | 13,350 | | | 2.6 | | | 6.8 | | | 13,356 | | | 2.4 | | | 6.8 | |
| Other Ambulatory Health Care Services | | 20,093 | | | 4.0 | | | 10.3 | | | 19,850 | | | 3.6 | | | 10.1 | |
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| Outpatient Mental Health and Substance Abuse Centers | | 7,543 | | | 1.5 | | | 3.9 | | | 7,815 | | | 1.4 | | | 4.0 | |
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| Services for the Elderly and Persons with Disabilities | | 19,152 | | | 3.8 | | | 9.8 | | | 18,672 | | | 3.4 | | | 9.5 | |
| Information | | | | | | | | | | | | |
| All Other Publishers | | 2,278 | | | 0.4 | | | 1.2 | | | 2,088 | | | 0.4 | | | 1.1 | |
| All Other Telecommunications | | 3,380 | | | 0.7 | | | 1.7 | | | 2,938 | | | 0.5 | | | 1.5 | |
| Cable and Other Subscription Programming | | 3,782 | | | 0.7 | | | 1.9 | | | 3,393 | | | 0.6 | | | 1.7 | |
| Data Processing, Hosting, and Related Services | | 4,095 | | | 0.8 | | | 2.1 | | | 3,556 | | | 0.6 | | | 1.8 | |
| Directory and Mailing List Publishers | | 2,835 | | | 0.6 | | | 1.4 | | | 2,832 | | | 0.5 | | | 1.4 | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Internet Publishing and Broadcasting and Web Search Portals | | $ | 3,179 | | | 0.6 | % | | 1.6 | % | | $ | 3,053 | | | 0.6 | % | | 1.6 | % |
| Motion Picture and Video Production | | 3,913 | | | 0.8 | | | 2.0 | | | 3,741 | | | 0.7 | | | 1.9 | |
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| Software Publishers | | 23,132 | | | 4.5 | | | 11.8 | | | 15,584 | | | 2.8 | | | 8.0 | |
| Television Broadcasting | | 2,192 | | | 0.4 | | | 1.1 | | | 726 | | | 0.1 | | | 0.4 | |
| Wired Telecommunications Carriers | | 2,093 | | | 0.4 | | | 1.1 | | | 1,936 | | | 0.4 | | | 1.0 | |
| Management of Companies and Enterprises | | | | | | | | | | | | |
| Offices of Other Holding Companies | | 7,360 | | | 1.5 | | | 3.8 | | | 6,988 | | | 1.3 | | | 3.6 | |
| Manufacturing | | | | | | | | | | | | |
| Bare Printed Circuit Board Manufacturing | | 1,986 | | | 0.4 | | | 1.0 | | | 1,761 | | | 0.3 | | | 0.9 | |
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| Commercial Printing (except Screen and Books) | | 3,411 | | | 0.7 | | | 1.7 | | | 3,207 | | | 0.6 | | | 1.6 | |
| Current-Carrying Wiring Device Manufacturing | | 3,314 | | | 0.7 | | | 1.7 | | | 3,471 | | | 0.6 | | | 1.8 | |
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| Other Aircraft Parts and Auxiliary Equipment Manufacturing | | 500 | | | 0.1 | | | 0.3 | | | — | | | — | | | — | |
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| Fluid Power Pump and Motor Manufacturing | | 1,938 | | | 0.4 | | | 1.0 | | | 1,881 | | | 0.3 | | | 1.0 | |
| Ice Cream and Frozen Dessert Manufacturing | | 1,639 | | | 0.3 | | | 0.8 | | | 1,593 | | | 0.3 | | | 0.8 | |
| Motorcycle, Bicycle, and Parts Manufacturing | | 16,251 | | | 3.2 | | | 8.3 | | | 16,301 | | | 3.0 | | | 8.3 | |
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| Other Industrial Machinery Manufacturing | | 13,964 | | | 2.8 | | | 7.1 | | | 13,356 | | | 2.4 | | | 6.8 | |
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| Pharmaceutical Preparation Manufacturing | | 217 | | | — | | | 0.1 | | | 83,153 | | | 15.1 | | | 42.5 | |
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| Other Services (except Public Administration) | | | | | | | | | | | | |
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| Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | | 572 | | | 0.1 | | | 0.3 | | | 1,347 | | | 0.2 | | | 0.7 | |
| Communication Equipment Repair and Maintenance | | 1,745 | | | 0.3 | | | 0.9 | | | 1,718 | | | 0.3 | | | 0.9 | |
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| Other Automotive Mechanical and Electrical Repair and Maintenance | | 1,080 | | | 0.2 | | | 0.6 | | | 1,080 | | | 0.2 | | | 0.6 | |
| Professional, Scientific, and Technical Services | | | | | | | | | | | | |
| Administrative Management and General Management Consulting Services | | 22,719 | | | 4.4 | | | 11.6 | | | 22,247 | | | 4.1 | | | 11.4 | |
| Advertising Agencies | | 2,264 | | | 0.4 | | | 1.2 | | | 2,119 | | | 0.4 | | | 1.1 | |
| All Other Professional, Scientific, and Technical Services | | 2,862 | | | 0.6 | | | 1.5 | | | 2,846 | | | 0.5 | | | 1.5 | |
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| Management Consulting Services | | 408 | | | 0.1 | | | 0.2 | | | 384 | | | 0.1 | | | 0.2 | |
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| Other Computer Related Services | | 14,990 | | | 3.0 | | | 7.7 | | | 15,260 | | | 2.8 | | | 7.8 | |
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| Public Administration | | | | | | | | | | | | |
| Other Justice, Public Order, and Safety Activities | | 703 | | | 0.1 | | | 0.4 | | | 29 | | | — | | | — | |
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| Real Estate and Rental and Leasing | | | | | | | | | | | | |
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| Nonresidential Property Managers | | 3,951 | | | 0.8 | | | 2.0 | | | 3,940 | | | 0.7 | | | 2.0 | |
| Office Machinery and Equipment Rental and Leasing | | 5,953 | | | 1.2 | | | 3.0 | | | 4,621 | | | 0.8 | | | 2.4 | |
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OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
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| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Retail Trade | | | | | | | | | | | | |
| Automotive Parts and Accessories Stores | | $ | 2,675 | | | 0.5 | % | | 1.4 | % | | $ | 2,488 | | | 0.5 | % | | 1.3 | % |
| Cosmetics, Beauty Supplies, and Perfume Stores | | 1,462 | | | 0.3 | | | 0.7 | | | 1,384 | | | 0.3 | | | 0.7 | |
| Electronics and Appliance Stores | | 8,116 | | | 1.6 | | | 4.1 | | | 7,716 | | | 1.4 | | | 3.9 | |
| Electronic Shopping and Mail-Order Houses | | 6,830 | | | 1.3 | | | 3.5 | | | 6,635 | | | 1.2 | | | 3.4 | |
| Shoe store | | 9,923 | | | 2.0 | | | 5.1 | | | 7,142 | | | 1.3 | | | 3.6 | |
| Sporting Goods Stores | | 974 | | | 0.2 | | | 0.5 | | | 895 | | | 0.2 | | | 0.5 | |
| Supermarkets and Other Grocery (except Convenience) Stores | | 7,867 | | | 1.6 | | | 4.0 | | | 7,867 | | | 1.4 | | | 4.0 | |
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| All Other General Merchandise Stores | | 499 | | | 0.1 | | | 0.3 | | | 1,119 | | | 0.2 | | | 0.6 | |
| Transportation and Warehousing | | | | | | | | | | | | |
| Freight Transportation Arrangement | | 977 | | | 0.2 | | | 0.5 | | | 950 | | | 0.2 | | | 0.5 | |
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| Transportation and Warehousing | | 5,034 | | | 1.0 | | | 2.6 | | | 5,034 | | | 0.9 | | | 2.6 | |
| Wholesale Trade | | | | | | | | | | | | |
| Business to Business Electronic Markets | | 2,866 | | | 0.6 | | | 1.5 | | | 2,548 | | | 0.5 | | | 1.3 | |
| Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | 11,165 | | | 2.2 | | | 5.7 | | | 10,205 | | | 1.9 | | | 5.2 | |
| | | | | | | | | | | | |
| Drugs and Druggists' Sundries Merchant Wholesalers | | 5,379 | | | 1.1 | | | 2.7 | | | 4,859 | | | 0.9 | | | 2.5 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Industrial Machinery and Equipment Merchant Wholesalers | | 9,071 | | | 1.8 | | | 4.6 | | | 9,035 | | | 1.6 | | | 4.6 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Motor Vehicle Parts (Used) Merchant Wholesalers | | 22,935 | | | 4.5 | | | 11.7 | | | 23,217 | | | 4.2 | | | 11.9 | |
| | | | | | | | | | | | |
| Other Miscellaneous Nondurable Goods Merchant Wholesalers | | 2,656 | | | 0.5 | | | 1.4 | | | 2,486 | | | 0.5 | | | 1.3 | |
| Sporting and Recreational Goods and Supplies Merchant Wholesalers | | 8,163 | | | 1.6 | | | 4.2 | | | 161 | | | — | | | 0.1 | |
| | | | | | | | | | | | |
| Total Portfolio Company Investments | | $ | 405,142 | | | 79.9 | % | | 207.0 | % | | $ | 457,799 | | | 83.4 | % | | 233.9 | % |
| Structured Finance Notes | | 102,342 | | | 20.1 | | | 52.3 | | | 89,878 | | | 16.6 | | | 45.9 | |
| Total investments | | $ | 507,484 | | | 100.0 | % | | 259.3 | % | | $ | 547,677 | | | 100.0 | % | | 279.8 | % |
As of December 31, 2021, the Company had loans to 6158 portfolio companies, of which 95% were senior secured loans and 5% were subordinated loans, at fair value, as well as equity investments in 8 of these portfolio companies. The Company also held equity investments in 14 portfolio companies in which it did not hold a debt investment and 16 investments in Structured Finance Notes. At June 30, 2021, the Company's investments consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Percentage of Total | | | | Percentage of Total |
| Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
Senior secured debt investments (1) | $ | 331,982 | | | 70.8 | % | | 184.4 | % | | $ | 317,648 | | | 65.6 | % | | 176.5 | % |
| Subordinated debt investments | 37,944 | | | 8.1 | | | 21.1 | | | 17,207 | | | 3.6 | | | 9.6 | |
| Preferred equity | 16,232 | | | 3.5 | | | 9.0 | | | 12,289 | | | 2.5 | | | 6.8 | |
| Common equity, warrants and other | 14,887 | | | 3.2 | | | 8.3 | | | 68,637 | | | 14.2 | | | 38.1 | |
| Total debt and equity investments | 401,045 | | | 85.6 | | | 222.8 | | | 415,781 | | | 85.9 | | | 231.0 | |
| Structured Finance Notes | 67,532 | | | 14.4 | | | 37.5 | | | 68,245 | | | 14.1 | | | 37.9 | |
| Total investments | $ | 468,577 | | | 100.0 | % | | 260.3 | % | | $ | 484,026 | | | 100.0 | % | | 268.9 | % |
(1) Includes debt investments, typically referred to as unitranche, in which the Company has entered into contractual arrangements with co‑lenders whereby, subject to certain conditions, the Company has agreed to receive its principal payments after the repayment of certain co‑lenders pursuant to a payment waterfall. Amortized cost and fair value of these investments were $36,036 and $36,982, respectively.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Geographic composition is determined by the location of the corporate headquarters of the portfolio company. As of June 30, 2021 and December 31, 2020, the Company's investment portfolio was domiciled as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| United States of America | $ | 390,122 | | | $ | 404,749 | | | $ | 399,278 | | | $ | 380,004 | |
| Canada | 5,980 | | | 6,072 | | | 1,921 | | | 1,905 | |
Cayman Islands1 | 67,532 | | | 68,245 | | | 55,860 | | | 56,425 | |
| France | 993 | | | 995 | | | — | | | — | |
| | | | | | | |
| Luxembourg | 1,975 | | | 1,980 | | | 1,976 | | | 1,997 | |
| Switzerland | 1,975 | | | 1,985 | | | 1,988 | | | 1,992 | |
| Total investments | $ | 468,577 | | | $ | 484,026 | | | $ | 461,023 | | | $ | 442,323 | |
(1) Cayman Island investments represent Structured Finance Notes held by the Company. These investments generally represent beneficial interests in underlying portfolios of debt investments in companies domiciled in the United States of America.
As of June 30, 2021, the industry composition of the Company’s investment portfolio was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Administrative and Support and Waste Management and Remediation Services | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Convention and Trade Show Organizers | | $ | 214 | | | — | % | | 0.1 | % | | $ | 28 | | | — | % | | — | % |
| Landscaping Services | | 4,639 | | | 1.0 | | | 2.6 | | | 4,639 | | | 1.0 | | | 2.6 | |
| | | | | | | | | | | | |
| Security Systems Services (except Locksmiths) | | 9,799 | | | 2.1 | % | | 5.4 | | | 9,945 | | | 2.1 | | | 5.6 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Arts, Entertainment, and Recreation | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Other Amusement and Recreation Industries | | 20,973 | | | 4.5 | | | 11.7 | | | 20,992 | | | 4.3 | | | 11.7 | |
| Construction | | | | | | | | | | | | |
| Electrical Contractors and Other Wiring Installation Contractors | | 17,793 | | | 3.8 | | | 9.9 | | | 12,563 | | | 2.6 | | | 7.0 | |
| New Single-Family Housing Construction (except For-Sale Builders) | | 842 | | | 0.2 | | | 0.5 | | | 835 | | | 0.2 | | | 0.5 | |
| Plumbing, Heating, and Air-Conditioning Contractors | | 7,106 | | | 1.5 | | | 3.9 | | | 6,367 | | | 1.3 | | | 3.5 | |
| Water and Sewer Line and Related Structures Construction | | 628 | | | 0.1 | | | 0.3 | | | 628 | | | 0.1 | | | 0.3 | |
| Education Services | | | | | | | | | | | | |
| Colleges, Universities, and Professional Schools | | — | | | — | | | — | | | 6,120 | | | 1.3 | | | 3.4 | |
| Professional and Management Development Training | | 1,595 | | | 0.3 | | | 0.9 | | | 1,011 | | | 0.2 | | | 0.6 | |
| Finance and Insurance | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Health Care and Social Assistance | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Child Day Care Services | | 6,318 | | | 1.3 | | | 3.5 | | | 5,823 | | | 1.2 | | | 3.2 | |
| Diagnostic Imaging Centers | | 21,627 | | | 4.6 | | | 12.0 | | | 23,652 | | | 4.8 | | | 13.1 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Home Health Care Services | | 4,206 | | | 0.9 | | | 2.3 | | | 4,250 | | | 0.9 | | | 2.3 | |
| Medical Laboratories | | 91 | | | — | | | 0.1 | | | 17 | | | — | | | — | |
| Offices of Physicians, Mental Health Specialists | | 10,810 | | | 2.3 | | | 6.0 | | | 10,886 | | | 2.2 | | | 6.0 | |
| | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Outpatient Mental Health and Substance Abuse Centers | | $ | 4,851 | | | 1.0 | % | | 2.7 | % | | $ | 4,829 | | | 1.0 | % | | 2.7 | % |
| | | | | | | | | | | | |
| Information | | | | | | | | | | | | |
| All Other Publishers | | 1,994 | | | 0.4 | | | 1.1 | | | 2,001 | | | 0.4 | | | 1.1 | |
| All Other Telecommunications | | 872 | | | 0.2 | | | 0.5 | | | 862 | | | 0.2 | | | 0.5 | |
| Cable and Other Subscription Programming | | 2,922 | | | 0.6 | | | 1.6 | | | 2,926 | | | 0.6 | | | 1.6 | |
| Data Processing, Hosting, and Related Services | | 6,126 | | | 1.3 | | | 3.4 | | | 6,251 | | | 1.3 | | | 3.5 | |
| Directory and Mailing List Publishers | | 2,257 | | | 0.5 | | | 1.3 | | | 2,351 | | | 0.5 | | | 1.3 | |
| Internet Publishing and Broadcasting and Web Search Portals | | 2,003 | | | 0.4 | | | 1.1 | | | 2,007 | | | 0.4 | | | 1.1 | |
| Motion Picture and Video Production | | 3,439 | | | 0.7 | | | 1.9 | | | 3,483 | | | 0.7 | | | 1.9 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Software Publishers | | 27,687 | | | 5.9 | | | 15.4 | | | 15,054 | | | 3.1 | | | 8.4 | |
| Television Broadcasting | | 1,967 | | | 0.4 | | | 1.1 | | | 1,199 | | | 0.2 | | | 0.7 | |
| | | | | | | | | | | | |
| Manufacturing | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Commercial Printing (except Screen and Books) | | 4,795 | | | 1.0 | | | 2.7 | | | 4,821 | | | 1.0 | | | 2.7 | |
| Current-Carrying Wiring Device Manufacturing | | 5,526 | | | 1.2 | | | 3.1 | | | 5,537 | | | 1.1 | | | 3.1 | |
| Custom Compounding of Purchased Resins | | 15,462 | | | 3.3 | | | 8.6 | | | 17,356 | | | 3.6 | | | 9.6 | |
| Other Aircraft Parts and Auxiliary Equipment Manufacturing | | 500 | | | 0.1 | | | 0.3 | | | 87 | | | — | | | — | |
| Fabricated Pipe and Pipe Fitting Manufacturing | | 2,544 | | | 0.5 | | | 1.4 | | | 2,584 | | | 0.5 | | | 1.4 | |
| Metal Can Manufacturing | | 1,225 | | | 0.3 | | | 0.7 | | | 1,225 | | | 0.3 | | | 0.7 | |
| Motor Vehicle Body Manufacturing | | 1,465 | | | 0.3 | | | 0.8 | | | 1,460 | | | 0.3 | | | 0.8 | |
| | | | | | | | | | | | |
| Other Commercial and Service Industry Machinery Manufacturing | | 1,817 | | | 0.4 | | | 1.0 | | | 1,803 | | | 0.4 | | | 1.0 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Pharmaceutical Preparation Manufacturing | | 2,192 | | | 0.5 | | | 1.2 | | | 51,221 | | | 10.5 | | | 28.5 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Pump and Pumping Equipment Manufacturing | | 1,501 | | | 0.3 | | | 0.8 | | | 1,300 | | | 0.3 | | | 0.7 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Travel Trailer and Camper Manufacturing | | 11,057 | | | 2.4 | | | 6.1 | | | 12,062 | | | 2.5 | | | 6.7 | |
| Truck Trailer Manufacturing | | 747 | | | 0.2 | | | 0.4 | | | 749 | | | 0.2 | | | 0.4 | |
| Unlaminated Plastics Profile Shape Manufacturing | | 9,099 | | | 1.9 | | | 5.1 | | | 9,099 | | | 1.9 | | | 5.1 | |
| Other Services (except Public Administration) | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | | 572 | | | 0.1 | | | 0.3 | | | 867 | | | 0.2 | | | 0.5 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Professional, Scientific, and Technical Services | | | | | | | | | | | | |
| Administrative Management and General Management Consulting Services | | 22,388 | | | 4.8 | | | 12.4 | | | 23,026 | | | 4.7 | | | 12.8 | |
| | | | | | | | | | | | |
| All Other Professional, Scientific, and Technical Services | | 2,241 | | | 0.5 | | | 1.2 | | | 2,297 | | | 0.5 | | | 1.3 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Management Consulting Services | | 749 | | | 0.2 | | | 0.4 | | | 752 | | | 0.2 | | | 0.4 | |
| Marketing Consulting Services | | 5,201 | | | 1.1 | | | 2.9 | | | 5,286 | | | 1.1 | | | 2.9 | |
| Other Accounting Services | | 21,699 | | | 4.6 | | | 12.1 | | | 22,979 | | | 4.7 | | | 12.8 | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Other Computer Related Services | | $ | 15,076 | | | 3.2 | % | | 8.4 | % | | $ | 15,260 | | | 3.2 | % | | 8.5 | % |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Public Administration | | | | | | | | | | | | |
| Other Justice, Public Order, and Safety Activities | | 703 | | | 0.2 | | | 0.4 | | | 342 | | | 0.1 | | | 0.2 | |
| | | | | | | | | | | | |
| Real Estate and Rental and Leasing | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Office Machinery and Equipment Rental and Leasing | | 5,953 | | | 1.3 | | | 3.3 | | | 2,828 | | | 0.6 | | | 1.6 | |
| | | | | | | | | | | | |
| Retail Trade | | | | | | | | | | | | |
| Automotive Parts and Accessories Stores | | 1,710 | | | 0.4 | | | 1.0 | | | 1,730 | | | 0.4 | | | 1.0 | |
| Cosmetics, Beauty Supplies, and Perfume Stores | | 1,533 | | | 0.3 | | | 0.9 | | | 1,530 | | | 0.3 | | | 0.9 | |
| Electronic Shopping and Mail-Order Houses | | 4,958 | | | 1.1 | | | 2.8 | | | 4,998 | | | 1.0 | | | 2.8 | |
| Shoe store | | 9,784 | | | 2.1 | | | 5.4 | | | 8,552 | | | 1.8 | | | 4.8 | |
| Sporting Goods Stores | | 5,709 | | | 1.2 | | | 3.2 | | | 5,746 | | | 1.2 | | | 3.2 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| All Other General Merchandise Stores | | 499 | | | 0.1 | | | 0.3 | | | 1,308 | | | 0.3 | | | 0.7 | |
| Transportation and Warehousing | | | | | | | | | | | | |
| Freight Transportation Arrangement | | 1,966 | | | 0.4 | | | 1.1 | | | 1,972 | | | 0.4 | | | 1.1 | |
| | | | | | | | | | | | |
| Scheduled Passenger Air Transportation | | 360 | | | 0.1 | | | 0.2 | | | 380 | | | 0.1 | | | 0.2 | |
| Taxi Service | | 1,975 | | | 0.4 | | | 1.1 | | | 1,980 | | | 0.4 | | | 1.1 | |
| Wholesale Trade | | | | | | | | | | | | |
| Business to Business Electronic Markets | | 2,883 | | | 0.6 | | | 1.6 | | | 2,875 | | | 0.6 | | | 1.6 | |
| Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | 4,706 | | | 1.0 | | | 2.6 | | | 4,698 | | | 1.0 | | | 2.6 | |
| Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers | | 16,424 | | | 3.5 | | | 9.1 | | | 16,566 | | | 3.4 | | | 9.2 | |
| Drugs and Druggists' Sundries Merchant Wholesalers | | 5,675 | | | 1.2 | | | 3.2 | | | 5,736 | | | 1.2 | | | 3.2 | |
| | | | | | | | | | | | |
| General Line Grocery Merchant Wholesalers | | 273 | | | 0.1 | | | 0.2 | | | 283 | | | 0.1 | | | 0.2 | |
| Industrial Machinery and Equipment Merchant Wholesalers | | 9,691 | | | 2.1 | | | 5.4 | | | 9,549 | | | 2.0 | | | 5.3 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Motor Vehicle Parts (Used) Merchant Wholesalers | | 15,260 | | | 3.3 | | | 8.5 | | | 15,437 | | | 3.2 | | | 8.6 | |
| | | | | | | | | | | | |
| Sporting and Recreational Goods and Supplies Merchant Wholesalers | | 8,208 | | | 1.8 | | | 4.6 | | | 687 | | | 0.1 | | | 0.4 | |
| Stationary & Office Supply Merchant Wholesaler | | 16,160 | | | 3.4 | | | 9.0 | | | 94 | | | — | | | 0.1 | |
| Total debt and equity investments | | $ | 401,045 | | | 85.5 | % | | 222.8 | % | | $ | 415,781 | | | 85.9 | % | | 231.0 | % |
| Structured Finance Notes | | 67,532 | | | 14.5 | | | 37.5 | | | 68,245 | | | 14.1 | | | 37.9 | |
| Total investments | | $ | 468,577 | | | 100.0 | % | | 260.3 | % | | $ | 484,026 | | | 100.0 | % | | 268.9 | % |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
As of December 31, 2020, the Company had loans to 49 portfolio companies, of which 95% were senior secured loans and 5% were subordinated loans, at fair value, as well as equity investments in 10five of these portfolio companies. The Company also held an equity investment in
1312 portfolio companies in which it did not hold a debt investment, as well as
1217 investments in Structured Finance Notes. At December 31,
2020,2021, investments consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Percentage of Total | | | | Percentage of Total |
| Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Senior secured debt investments | $ | 336,132 | | | 73.3 | % | | 165.0 | % | | $ | 326,704 | | | 64.9 | % | | 160.4 | % |
| Subordinated debt investments | 22,071 | | | 4.8 | | | 10.8 | | | 17,943 | | | 3.5 | | | 8.8 | |
| Preferred equity | 9,552 | | | 2.1 | | | 4.7 | | | 3,765 | | | 0.7 | | | 1.8 | |
| Common equity, warrants and other | 14,606 | | | 3.2 | | | 7.2 | | | 83,486 | | | 16.5 | | | 41.0 | |
| Total debt and equity investments | $ | 382,361 | | | 83.4 | % | | 187.7 | % | | $ | 431,898 | | | 85.6 | % | | 212.0 | % |
| Structured Finance Notes | 74,951 | | | 16.6 | | | 36.8 | | | 75,201 | | | 14.4 | | | 36.9 | |
| Total | $ | 457,312 | | | 100.0 | % | | 224.5 | % | | $ | 507,099 | | | 100.0 | % | | 248.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Percentage of Total | | | | Percentage of Total |
| Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Senior secured debt investments | $ | 325,647 | | | 70.6 | % | | 204.9 | % | | $ | 306,304 | | | 69.2 | % | | 192.7 | % |
| Subordinated debt investments | 45,409 | | | 9.8 | | | 28.6 | | | 15,067 | | | 3.4 | | | 9.5 | |
| Preferred equity | 18,648 | | | 4.0 | | | 11.7 | | | 11,543 | | | 2.6 | | | 7.3 | |
| Common equity, warrants and other | 15,459 | | | 3.4 | | | 9.7 | | | 52,984 | | | 12.0 | | | 33.3 | |
| Total debt and equity investments | 405,163 | | | 87.8 | % | | 254.9 | % | | 385,898 | | | 87.2 | % | | 242.8 | % |
| Structured Finance Notes | 55,860 | | | 12.2 | | | 35.1 | | | 56,425 | | | 12.8 | | | 35.5 | |
| Total | $ | 461,023 | | | 100.0 | % | | 290.0 | % | | $ | 442,323 | | | 100.0 | % | | 278.3 | % |
Geographic composition is determined by the location of the corporate headquarters of the portfolio company.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
As of December 31, 2020,2021, the industry compositions of the Company’s debt and equity investments were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Administrative and Support and Waste Management and Remediation Services | | | | | | | | | | | | |
| Convention and Trade Show Organizers | | $ | 214 | | | — | % | | 0.1 | % | | $ | 210 | | | — | % | | 0.1 | % |
| Security Systems Services (except Locksmiths) | | 6,531 | | | 1.4 | | | 4.1 | | | 3,487 | | | 0.8 | | | 2.2 | |
| | | | | | | | | | | | |
| Arts, Entertainment, and Recreation | | | | | | | | | | | | |
| Other Amusement and Recreation Industries | | 20,967 | | | 4.5 | | | 13.3 | | | 19,973 | | | 4.5 | | | 12.6 | |
| Construction | | | | | | | | | | | | |
| Electrical Contractors and Other Wiring Installation Contractors | | 17,837 | | | 3.9 | | | 11.2 | | | 13,137 | | | 3.0 | | | 8.3 | |
| Plumbing, Heating, and Air-Conditioning Contractors | | 7,607 | | | 1.7 | | | 4.8 | | | 7,294 | | | 1.6 | | | 4.6 | |
| Education Services | | | | | | | | | | | | |
| Colleges, Universities, and Professional Schools | | — | | | — | | | — | | | 4,295 | | | 1.0 | | | 2.7 | |
| Professional and Management Development Training | | 1,595 | | | 0.3 | | | 1.0 | | | 1,306 | | | 0.3 | | | 0.8 | |
| Finance and Insurance | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Insurance Agencies and Brokerages | | 9,544 | | | 2.1 | | | 6.0 | | | 9,302 | | | 2.1 | | | 5.9 | |
| Health Care and Social Assistance | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Child Day Care Services | | 5,178 | | | 1.1 | | | 3.3 | | | 4,656 | | | 1.1 | | | 2.9 | |
| Diagnostic Imaging Centers | | 21,718 | | | 4.8 | | | 13.8 | | | 23,607 | | | 5.3 | | | 14.9 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Home Health Care Services | | 4,199 | | | 0.9 | | | 2.6 | | | 4,250 | | | 1.0 | | | 2.7 | |
| Medical Laboratories | | 91 | | | — | | | 0.1 | | | 38 | | | — | | | — | |
| Offices of Physicians, Mental Health Specialists | | 21,013 | | | 4.6 | | | 13.2 | | | 20,802 | | | 4.7 | | | 13.1 | |
| Outpatient Mental Health and Substance Abuse Centers | | 11,615 | | | 2.5 | | | 7.3 | | | 4,105 | | | 0.9 | | | 2.6 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Administrative and Support and Waste Management and Remediation Services | | | | | | | | | | | | |
| Convention and Trade Show Organizers | | $ | 214 | | | — | % | | 0.1 | % | | $ | 12 | | | — | % | | — | % |
| Hazardous Waste Treatment and Disposal | | 1,833 | | | 0.4 | | | 0.9 | | | 1,837 | | | 0.4 | | | 0.9 | |
| Landscaping Services | | 4,630 | | | 1.0 | | | 2.3 | | | 4,590 | | | 0.9 | | | 2.3 | |
| | | | | | | | | | | | |
| Security Systems Services (except Locksmiths) | | 4,827 | | | 1.1 | | | 2.4 | | | 4,887 | | | 1.0 | | | 2.4 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Arts, Entertainment, and Recreation | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Other Amusement and Recreation Industries | | 16,287 | | | 3.6 | | | 8.0 | | | 16,396 | | | 3.2 | | | 8.0 | |
| Construction | | | | | | | | | | | | |
| Electrical Contractors and Other Wiring Installation Contractors | | 18,132 | | | 4.0 | | | 8.9 | | | 11,632 | | | 2.3 | | | 5.7 | |
| New Single-Family Housing Construction (except For-Sale Builders) | | 1,823 | | | 0.4 | | | 0.9 | | | 1,794 | | | 0.4 | | | 0.9 | |
| Plumbing, Heating, and Air-Conditioning Contractors | | 5,344 | | | 1.2 | | | 2.6 | | | 5,378 | | | 1.1 | | | 2.6 | |
| Water and Sewer Line and Related Structures Construction | | 627 | | | 0.1 | | | 0.3 | | | 628 | | | 0.1 | | | 0.3 | |
| Education Services | | | | | | | | | | | | |
| Colleges, Universities, and Professional Schools | | — | | | — | | | — | | | 7,408 | | | 1.5 | | | 3.6 | |
| Professional and Management Development Training | | 1,595 | | | 0.3 | | | 0.8 | | | 1,095 | | | 0.2 | | | 0.5 | |
| Sports and Recreation Instruction | | 3,011 | | | 0.7 | | | 1.5 | | | 3,011 | | | 0.6 | | | 1.5 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Health Care and Social Assistance | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Child Day Care Services | | 6,336 | | | 1.4 | | | 3.1 | | | 5,916 | | | 1.2 | | | 2.9 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Home Health Care Services | | 4,182 | | | 0.9 | | | 2.1 | | | 4,250 | | | 0.8 | | | 2.1 | |
| Medical Laboratories | | 92 | | | — | | | — | | | 25 | | | — | | | — | |
| Offices of Physicians, Mental Health Specialists | | 13,402 | | | 2.9 | | | 6.6 | | | 13,491 | | | 2.7 | | | 6.6 | |
| Other Ambulatory Health Care Services | | 20,331 | | | 4.4 | | | 10.0 | | | 20,331 | | | 4.0 | | | 10.0 | |
| | | | | | | | | | | | |
| Outpatient Mental Health and Substance Abuse Centers | | 4,770 | | | 1.0 | | | 2.3 | | | 5,231 | | | 1.0 | | | 2.6 | |
| | | | | | | | | | | | |
| Services for the Elderly and Persons with Disabilities | | 6,416 | | | 1.4 | | | 3.1 | | | 6,416 | | | 1.3 | | | 3.1 | |
| Information | | | | | | | | | | | | |
| All Other Publishers | | 2,288 | | | 0.5 | | | 1.1 | | | 2,303 | | | 0.5 | | | 1.1 | |
| All Other Telecommunications | | 3,429 | | | 0.7 | | | 1.7 | | | 3,323 | | | 0.7 | | | 1.6 | |
| Cable and Other Subscription Programming | | 3,801 | | | 0.8 | | | 1.9 | | | 3,810 | | | 0.8 | | | 1.9 | |
| Data Processing, Hosting, and Related Services | | 4,112 | | | 0.9 | | | 2.0 | | | 4,255 | | | 0.8 | | | 2.1 | |
| Directory and Mailing List Publishers | | 2,004 | | | 0.4 | | | 1.0 | | | 2,085 | | | 0.4 | | | 1.0 | |
| Internet Publishing and Broadcasting and Web Search Portals | | 3,249 | | | 0.7 | | | 1.6 | | | 3,299 | | | 0.7 | | | 1.6 | |
| Motion Picture and Video Production | | 3,929 | | | 0.9 | | | 1.9 | | | 3,970 | | | 0.8 | | | 1.9 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Software Publishers | | 24,948 | | | 5.5 | | | 12.2 | | | 17,929 | | | 3.5 | | | 8.8 | |
| Television Broadcasting | | 1,957 | | | 0.4 | | | 1.0 | | | 918 | | | 0.2 | | | 0.5 | |
| Wired Telecommunications Carriers | | 4,388 | | | 1.0 | | | 2.2 | | | 4,405 | | | 0.9 | | | 2.2 | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | Percentage of Total | | Percentage of Total | | Percentage of Total | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets | | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Information | | |
| Data Processing, Hosting, and Related Services | | $ | 1,135 | | | 0.2 | % | | 0.7 | % | | $ | 1,749 | | | 0.4 | % | | 1.1 | % | |
| | Software Publishers | | 28,799 | | | 6.3 | | | 18.2 | | | 16,104 | | | 3.6 | | | 10.0 | | |
| Television Broadcasting | | 1,977 | | | 0.4 | | | 1.2 | | | 1,758 | | | 0.4 | | | 1.1 | | |
| | Management of Companies and Enterprises | | Management of Companies and Enterprises | |
| Offices of Other Holding Companies | | Offices of Other Holding Companies | | $ | 5,336 | | | 1.2 | % | | 2.6 | % | | $ | 5,336 | | | 1.1 | % | | 2.6 | % |
| Manufacturing | Manufacturing | | Manufacturing | |
| Bare Printed Circuit Board Manufacturing | | Bare Printed Circuit Board Manufacturing | | 1,985 | | | 0.4 | | | 1.0 | | | 1,977 | | | 0.4 | | | 1.0 | |
| | Commercial Printing (except Screen and Books) | Commercial Printing (except Screen and Books) | | 4,789 | | | 1.0 | | | 3.0 | | | 4,812 | | | 1.1 | | | 3.0 | | Commercial Printing (except Screen and Books) | | 3,427 | | | 0.7 | | | 1.7 | | | 3,436 | | | 0.7 | | | 1.7 | |
| Custom Compounding of Purchased Resins | | 15,444 | | | 3.3 | | | 9.7 | | | 17,164 | | | 3.9 | | | 10.8 | | |
| Current-Carrying Wiring Device Manufacturing | | Current-Carrying Wiring Device Manufacturing | | 2,653 | | | 0.6 | | | 1.3 | | | 2,954 | | | 0.6 | | | 1.4 | |
| | Motorcycle, Bicycle, and Parts Manufacturing | | Motorcycle, Bicycle, and Parts Manufacturing | | 15,166 | | | 3.3 | | | 7.4 | | | 15,166 | | | 3.0 | | | 7.4 | |
| Metal Can Manufacturing | | Metal Can Manufacturing | | 2,143 | | | 0.5 | | | 1.1 | | | 2,167 | | | 0.4 | | | 1.1 | |
| | Other Aircraft Parts and Auxiliary Equipment Manufacturing | Other Aircraft Parts and Auxiliary Equipment Manufacturing | | 5,431 | | | 1.2 | | | 3.4 | | | 4,275 | | | 1.0 | | | 2.7 | | Other Aircraft Parts and Auxiliary Equipment Manufacturing | | 500 | | | 0.1 | | | 0.2 | | | 80 | | | — | | | — | |
| Other Commercial and Service Industry Machinery Manufacturing | | 1,925 | | | 0.4 | | | 1.2 | | | 1,936 | | | 0.4 | | | 1.2 | | |
| | Other Industrial Machinery Manufacturing | | Other Industrial Machinery Manufacturing | | 12,121 | | | 2.7 | | | 5.9 | | | 12,176 | | | 2.4 | | | 6.0 | |
| | | Pharmaceutical Preparation Manufacturing | Pharmaceutical Preparation Manufacturing | | 2,205 | | | 0.5 | | | 1.4 | | | 38,213 | | | 8.7 | | | 24.1 | | Pharmaceutical Preparation Manufacturing | | 217 | | | — | | | 0.1 | | | 65,740 | | | 13.0 | | | 32.3 | |
| | Pump and Pumping Equipment Manufacturing | | 1,501 | | | 0.3 | | | 0.9 | | | 1,281 | | | 0.3 | | | 0.8 | | |
| Semiconductor and Related Device Manufacturing | | 399 | | | 0.1 | | | 0.3 | | | 434 | | | 0.1 | | | 0.3 | | |
| | Small Electrical Appliance Manufacturing | | Small Electrical Appliance Manufacturing | | 4,997 | | | 1.1 | | | 2.5 | | | 4,997 | | | 1.0 | | | 2.5 | |
| | Travel Trailer and Camper Manufacturing | Travel Trailer and Camper Manufacturing | | 10,911 | | | 2.4 | | | 6.9 | | | 10,812 | | | 2.4 | | | 6.8 | | Travel Trailer and Camper Manufacturing | | 11,264 | | | 2.5 | | | 5.5 | | | 12,948 | | | 2.6 | | | 6.4 | |
| Truck Trailer Manufacturing | | 8,118 | | | 1.8 | | | 5.1 | | | 8,174 | | | 1.8 | | | 5.1 | | |
| Unlaminated Plastics Profile Shape Manufacturing | | 8,922 | | | 1.9 | | | 5.6 | | | 8,818 | | | 2.0 | | | 5.5 | | |
| | Other Services (except Public Administration) | Other Services (except Public Administration) | | Other Services (except Public Administration) | |
| | Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | | 572 | | | 0.1 | | | 0.4 | | | 915 | | | 0.2 | | | 0.6 | | Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | | 572 | | | 0.1 | | | 0.3 | | | 988 | | | 0.2 | | | 0.5 | |
| | Diet and Weight Reducing Centers | | 477 | | | 0.1 | | | 0.3 | | | 479 | | | 0.1 | | | 0.3 | | |
| | Professional, Scientific, and Technical Services | Professional, Scientific, and Technical Services | | Professional, Scientific, and Technical Services | |
| Administrative Management and General Management Consulting Services | Administrative Management and General Management Consulting Services | | 28,503 | | | 6.3 | | | 18.0 | | | 28,729 | | | 6.6 | | | 18.2 | | Administrative Management and General Management Consulting Services | | 22,990 | | | 5.0 | | | 11.3 | | | 22,634 | | | 4.5 | | | 11.1 | |
| | All Other Professional, Scientific, and Technical Services | All Other Professional, Scientific, and Technical Services | | 1,921 | | | 0.4 | | | 1.2 | | | 1,905 | | | 0.4 | | | 1.2 | | All Other Professional, Scientific, and Technical Services | | 2,872 | | | 0.6 | | | 1.4 | | | 2,865 | | | 0.6 | | | 1.4 | |
| Marketing Consulting Services | | 5,229 | | | 1.1 | | | 3.3 | | | 5,229 | | | 1.2 | | | 3.3 | | |
| | Management Consulting Services | | Management Consulting Services | | 2,251 | | | 0.5 | | | 1.1 | | | 2,264 | | | 0.4 | | | 1.1 | |
| | Other Accounting Services | Other Accounting Services | | 21,621 | | | 4.7 | | | 13.7 | | | 22,238 | | | 5.0 | | | 14.0 | | Other Accounting Services | | 19,631 | | | 4.3 | | | 9.6 | | | 19,927 | | | 3.9 | | | 9.8 | |
| Other Computer Related Services | Other Computer Related Services | | 16,247 | | | 3.5 | | | 10.2 | | | 16,000 | | | 3.6 | | | 10.1 | | Other Computer Related Services | | 15,017 | | | 3.3 | | | 7.4 | | | 15,260 | | | 3.0 | | | 7.5 | |
| | | Public Administration | Public Administration | | Public Administration | |
| Other Justice, Public Order, and Safety Activities | Other Justice, Public Order, and Safety Activities | | 703 | | | 0.2 | | | 0.4 | | | 676 | | | 0.2 | | | 0.4 | | Other Justice, Public Order, and Safety Activities | | 703 | | | 0.2 | | | 0.3 | | | 29 | | | — | | | — | |
| | Real Estate and Rental and Leasing | Real Estate and Rental and Leasing | | Real Estate and Rental and Leasing | |
| Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing | | 496 | | | 0.1 | | | 0.3 | | | 499 | | | 0.1 | | | 0.3 | | |
| | | Nonresidential Property Managers | | Nonresidential Property Managers | | 2,972 | | | 0.6 | | | 1.5 | | | 2,972 | | | 0.6 | | | 1.5 | |
| Office Machinery and Equipment Rental and Leasing | Office Machinery and Equipment Rental and Leasing | | 5,953 | | | 1.3 | | | 3.7 | | | 2,736 | | | 0.6 | | | 1.7 | | Office Machinery and Equipment Rental and Leasing | | 5,952 | | | 1.3 | | | 2.9 | | | 2,774 | | | 0.5 | | | 1.4 | |
| | Retail Trade | Retail Trade | | Retail Trade | |
| Automotive Parts and Accessories Stores | | Automotive Parts and Accessories Stores | | 2,688 | | | 0.6 | | | 1.3 | | | 2,704 | | | 0.5 | | | 1.3 | |
| Cosmetics, Beauty Supplies, and Perfume Stores | Cosmetics, Beauty Supplies, and Perfume Stores | | 6,738 | | | 1.5 | | | 4.2 | | | 6,701 | | | 1.5 | | | 4.2 | | Cosmetics, Beauty Supplies, and Perfume Stores | | 1,533 | | | 0.3 | | | 0.8 | | | 1,531 | | | 0.3 | | | 0.8 | |
| Electronic Shopping and Mail-Order Houses | | Electronic Shopping and Mail-Order Houses | | 6,913 | | | 1.5 | | | 3.4 | | | 6,870 | | | 1.4 | | | 3.4 | |
| Shoe Store | | Shoe Store | | 9,893 | | | 2.2 | | | 4.9 | | | 9,342 | | | 1.8 | | | 4.6 | |
| Sporting Goods Stores | | Sporting Goods Stores | | 1,958 | | | 0.4 | | | 1.0 | | | 1,972 | | | 0.4 | | | 1.0 | |
| | All Other General Merchandise Stores | | All Other General Merchandise Stores | | 499 | | | 0.1 | | | 0.2 | | | 1,698 | | | 0.3 | | | 0.8 | |
| Transportation and Warehousing | | Transportation and Warehousing | |
| Freight Transportation Arrangement | | Freight Transportation Arrangement | | 1,960 | | | 0.4 | | | 1.0 | | | 1,970 | | | 0.4 | | | 1.0 | |
| | Scheduled Passenger Air Transportation | | Scheduled Passenger Air Transportation | | 360 | | | 0.1 | | | 0.2 | | | 377 | | | 0.1 | | | 0.2 | |
|
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Shoe Store | | 9,748 | | | 2.1 | | | 6.1 | | | 4,368 | | | 1.0 | | | 2.7 | |
| Sporting Goods Stores | | $ | 2,907 | | | 0.6 | % | | 1.8 | % | | $ | 2,968 | | | 0.7 | % | | 1.9 | % |
| | | | | | | | | | | | |
| All Other General Merchandise Stores | | 5,252 | | | 1.1 | | | 3.3 | | | 5,060 | | | 1.1 | | | 3.2 | |
| Transportation and Warehousing | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Scheduled Passenger Air Transportation | | 495 | | | 0.1 | | | 0.3 | | | 520 | | | 0.1 | | | 0.3 | |
| Taxi Service | | 1,976 | | | 0.4 | | | 1.2 | | | 1,997 | | | 0.5 | | | 1.3 | |
| Wholesale Trade | | | | | | | | | | | | |
| Business to Business Electronic Markets | | 2,891 | | | 0.6 | | | 1.8 | | | 2,875 | | | 0.6 | | | 1.8 | |
| Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | 1,955 | | | 0.4 | | | 1.2 | | | 1,942 | | | 0.4 | | | 1.2 | |
| Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers | | 16,392 | | | 3.6 | | | 10.3 | | | 16,777 | | | 3.8 | | | 10.6 | |
| General Line Grocery Merchant Wholesalers | | 275 | | | 0.1 | | | 0.2 | | | 284 | | | 0.1 | | | 0.2 | |
| Industrial Machinery and Equipment Merchant Wholesalers | | 9,696 | | | 2.1 | | | 6.1 | | | 9,179 | | | 2.1 | | | 5.8 | |
| Industrial Supplies Merchant Wholesalers | | 6,908 | | | 1.5 | | | 4.3 | | | 5,476 | | | 1.2 | | | 3.4 | |
| Motor Vehicle Parts (Used) Merchant Wholesalers | | 14,167 | | | 3.1 | | | 8.9 | | | 13,581 | | | 3.1 | | | 8.5 | |
| | | | | | | | | | | | |
| Sporting and Recreational Goods and Supplies Merchant Wholesalers | | 8,247 | | | 1.8 | | | 5.2 | | | 346 | | | 0.1 | | | 0.2 | |
| Stationery and Office Supplies Merchant Wholesalers | | 16,129 | | | 3.5 | | | 10.1 | | | 2,426 | | | 0.5 | | | 1.5 | |
| Total debt and equity investments | | $ | 405,163 | | | 87.9 | % | | 254.9 | % | | $ | 385,898 | | | 87.2 | % | | 242.8 | % |
| Structured Finance Notes | | 55,860 | | | 12.1 | | | 35.1 | | | 56,425 | | | 12.8 | | | 35.5 | |
| Total investments | | $ | 461,023 | | | 100.0 | % | | 290.0 | % | | $ | 442,323 | | | 100.0 | % | | 278.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Wholesale Trade | | | | | | | | | | | | |
| Business to Business Electronic Markets | | $ | 2,875 | | | 0.6 | % | | 1.4 | % | | $ | 2,838 | | | 0.6 | % | | 1.4 | % |
| Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | 7,173 | | | 1.6 | | | 3.5 | | | 6,903 | | | 1.4 | | | 3.4 | |
| | | | | | | | | | | | |
| Drugs and Druggists' Sundries Merchant Wholesalers | | 5,529 | | | 1.2 | | | 2.7 | | | 5,550 | | | 1.1 | | | 2.7 | |
| | | | | | | | | | | | |
| Industrial Machinery and Equipment Merchant Wholesalers | | 9,071 | | | 2.0 | | | 4.5 | | | 9,073 | | | 1.8 | | | 4.5 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Motor Vehicle Parts (Used) Merchant Wholesalers | | 23,005 | | | 5.0 | | | 11.3 | | | 23,052 | | | 4.5 | | | 11.3 | |
| | | | | | | | | | | | |
| Sporting and Recreational Goods and Supplies Merchant Wholesalers | | 8,179 | | | 1.8 | | | 3.9 | | | 699 | | | 0.1 | | | 0.2 | |
| | | | | | | | | | | | |
| Total debt and equity investments | | $ | 382,361 | | | 83.4 | % | | 187.7 | % | | $ | 431,898 | | | 85.6 | % | | 212.0 | % |
| Structured Finance Notes | | 74,951 | | | 16.6 | | | 36.8 | | | 75,201 | | | 14.4 | | | 36.9 | |
| Total investments | | $ | 457,312 | | | 100.0 | % | | 224.5 | % | | $ | 507,099 | | | 100.0 | % | | 248.9 | % |
WhenNon-Accrual Loans: Management reviews all loans that become past due on principal and interest, and/or when there is reasonable doubt that principal, cash interest, or PIK interest will be collected, for placement on non-accrual status. When a loan investments areis placed on non-accrual status, unpaid interest is credited to income and the Company will generally cease recognizing cash interest, PIK interest, oris reversed. Additionally, Net Loan Fee amortization,Fees are no longer accreted to interest income as applicable.of the date the loan is placed on non-accrual status. Interest payments subsequently received on non-accrual investments may be recognized as income or applied to principal depending upon management’s judgment. Interest accruals and Net Loan Fee amortization are resumed on non-accrual investments only when they are brought current with respect to principal, interest and when, in the judgment of management, the investments are estimated to be fully collectible as to all principal.principal and interest. The aggregate amortized cost and fair value of loans on non-accrual status with respect to all interest and Net Loan Fee amortization was $38,218$34,666 and $7,756,$17,827, respectively, at June 30, 2021,2022, and $48,102$19,054 and $12,135$7,726 respectively, at December 31, 2020.2021.
On April 5, 2021, the Company sold its subordinated debtPortfolio Concentration: The Company’s common equity investment in Community Intervention Services,Pfanstiehl Holdings, Inc., a global manufacturer of high-purity pharmaceutical ingredients, accounts for $91. During15.2% and 42.5% of its total portfolio at fair value and its total net assets, respectively, as of June 30, 2022. Due to continued strong operating performance, the fair value of the Company’s investment in the common equity of Pfanstiehl Holdings, Inc. has increased by $17,413, to $83,153, during the six months ended June 30, 2021, the Company recognized a realized loss of $7,548, of which $7,534 was recognized as an unrealized loss as of December 31, 2020.
On June 11, 2021, My Alarm Center, LLC’s bankruptcy plan became effective and our equity interests were cancelled. For the six months ended June 30, 2021, the Company recognized a realized loss of $3,094, of which $2,997 was recognized as an unrealized loss as of December 31, 2020.
On March 27, 2020, the Company's debt investment in Constellis Holdings, LLC was restructured, pursuant to which the Company converted its non-accrual debt investment into 20,628 shares of common equity. The cost and fair value of the common shares received were $703 and $703, respectively, as of March 31, 2020. The Company recognized a realized loss on the restructuring of $9,145 for the six months ended June 30, 2020, which was fully recognized as an unrealized loss as of December 31, 2019.2022.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Note 5. Fair Value of Financial Instruments
The Company’s investments are carried at fair value as determined by the Board. These fair values are determined in accordance with a documented valuation policy and a consistently applied valuation process.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair values are determined with models or other valuation techniques, valuation inputs, and assumptions that market participants would use in pricing the subject asset or liability. Valuation inputs are organized in a hierarchy that gives the highest priority to prices for identical assets or liabilities quoted in active markets (Level 1) and the lowest priority to fair values based on unobservable inputs (Level 3). The three levels of inputs in the fair value hierarchy are described below:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
Level 2: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include: (i) quoted prices for similar assets or liabilities in active markets,markets; (ii) quoted prices for identical or similar assets or liabilities in markets that are not active,active; (iii) inputs other than quoted prices that are observable for the asset or liability,liability; and (iv) inputs that are derived principally from or corroborated by observable market data.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Level 3: Unobservable inputs for the asset or liability, and situations where there is little, if any, market activity for the asset or liability at the measurement date.
The inputs into the determination of fair value are based upon the best information under the circumstances and may require significant judgment or estimation by management. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company'sCompany’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. The Company generally categorizes its investment portfolio into Level 23, and to a lesser extent Level 32, of the hierarchy.
The Company assesses the levels of the investments at each measurement date, and transfers between levels are recognized on the measurement date. Senior securities with a fair value of $8,246 and $1,611 were transferred from Level 2 to Level 3 during the three and six months ended June 30, 2022, respectively. Senior securities with a fair value of $6,562 and $895 were transferred from Level 3 to Level 2 during the three and six months ended June 30, 2021, respectively. Senior securities with a fair value of $5,736 and $-0- were transferred from Level 2 to Level 3 during the three and six months ended June 30, 2021, respectively. Senior2021. No senior securities with a fair value of $-0- and $2,915 were transferred from Level 2 to Level 3 during the three and six months ended June 30, 2020, respectively, while senior securities with a fair value of $4,256 and $-0- were transferred from Level 3 to Level 22021. Transfers between levels during the three and six months ended June 30, 2020, respectively.reporting periods were due to availability of reliable Indicative Prices in those periods.
Due to the inherent uncertainty of determining the fair value of Level 3 investments, the fair value of the investments may differ significantly from the values that would have been used had a ready market or observable inputs existed for such investments and may differ materially from the values that may ultimately be received or settled. Further, such investments are generally subject to legal and other restrictions, or otherwise are less liquid than publicly traded instruments. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, the Company might realize significantly less than the value at which such investment had previously been recorded. The Company’s investments are subject to market risk which isas a result of economic and political developments, including impacts from the potential for changes inCOVID-19 pandemic, the value due toongoing conflict between Russia and Ukraine, rising interest and inflation rates and related market changes.volatility. Market risk is directly impacted by the volatility and liquidity in the markets in which thecertain investments are traded.traded and can affect the fair value of our investments.
The following tables present the Company's investment portfolio measured at fair value on a recurring basis as of June 30, 2021,2022, and December 31, 2020.2021:
| | Security | Security | | Level 1 | | Level 2 | | Level 3 | | Fair Value at June 30, 2021 | Security | | Level 1 | | Level 2 | | Level 3 | | Fair Value at June 30, 2022 |
| Debt investments | Debt investments | | $ | — | | | $ | 66,139 | | | $ | 268,716 | | | $ | 334,855 | | Debt investments | | $ | — | | | $ | 50,308 | | | $ | 305,671 | | | $ | 355,979 | |
| Equity investments | Equity investments | | — | | | — | | | 80,926 | | | 80,926 | | Equity investments | | — | | | — | | | 101,820 | | | 101,820 | |
| Structured Finance Notes | Structured Finance Notes | | — | | | — | | | 68,245 | | | 68,245 | | Structured Finance Notes | | — | | | — | | | 89,878 | | | 89,878 | |
| | $ | — | | | $ | 66,139 | | | $ | 417,887 | | | $ | 484,026 | | | $ | — | | | $ | 50,308 | | | $ | 497,369 | | | $ | 547,677 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Security | | Level 1 | | Level 2 | | Level 3 | | Fair Value at December 31, 2021 |
| Debt investments | | $ | — | | | $ | 65,591 | | | $ | 279,056 | | | $ | 344,647 | |
| Equity investments | | — | | | — | | | 87,251 | | | 87,251 | |
| Structured Finance Notes | | — | | | — | | | 75,201 | | | 75,201 | |
| | $ | — | | | $ | 65,591 | | | $ | 441,508 | | | $ | 507,099 | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Security | | Level 1 | | Level 2 | | Level 3 | | Fair Value at December 31, 2020 |
| Debt investments | | $ | — | | | $ | 22,226 | | | $ | 299,145 | | | $ | 321,371 | |
| Equity investments | | — | | | — | | | 64,527 | | | 64,527 | |
| Structured Finance Notes | | — | | | — | | | 56,425 | | | 56,425 | |
| | $ | — | | | $ | 22,226 | | | $ | 420,097 | | | $ | 442,323 | |
The following tables provide quantitative information about valuation techniques and the Company’s significant inputs to the Company’s Level 3 fair value measurements as of June 30, 20212022 and December 31, 2020.2021. In addition to the techniques and inputs noted in the tables below, according to the Company’s valuation policy, the Company may also use other valuation techniques and methodologies when determining the Company’s fair value measurements. The table below provides information on the significant Level 3 inputs as they relate to the Company’s fair value measurements.
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value at June 30, 20212022 | | Valuation technique | | Unobservable inputs | | Range
(Weighted average) |
| Debt investments: | | | | | | | |
| Senior secured | $ | 220,384 252,220 | | | Discounted cash flow | | Discount rates | | 5.27%9.05% - 14.74% (9.18%16.98% (11.19%) |
| Senior secured | 19,407 10,383 | | | Market approach | | RevenueEBITDA multiples | | 0.52x7.02x - 0.70x (0.58x)7.02x (7.02x) |
| Senior secured | 11,718 7,303 | | | Market approach | | Revenue multiples | | 0.70x - 0.70x (0.70x) |
| Senior secured | 28,462 | | | Market approach | | Transaction Price | | |
| | | | | | | |
| Subordinated | 16,426 7,142 | | | Discounted cash flowMarket approach | | Discount ratesEBITDA multiples | | 17.49%4.75x - 20.69% (19.13%)4.75x (4.75x) |
| Subordinated | 94 161 | | | Market approach | | EBITDARevenue multiples | | 3.86x0.24x - 3.86x (3.86x) |
Subordinated | 687 | | | Market approach | | Revenue multiples | | 0.27x - 0.27x (0.27x)0.24x (0.24x) |
| | | | | | | |
| | | | | | | |
| Structured Finance Notes | | | | | | | |
Subordinated notes (3)(1) | 65,452 45,675 | | | Discounted cash flow | | Discount rates | | 8.00%20.00% - 17.50% (13.41%36.00% (24.45%) |
| | | | | Constant Default Rate(1) default rate | | 0.00%2.00% - 2.00% (1.78%(2.00%) |
| | | | | Recovery rate | | 65.00% - 65.00% (65.00%) |
| Subordinated notes | 378 | | | Market approach | | Constant Default RateNet asset value liquidation(2)
| | 2.00% |
| Subordinated notes | 8,694 | | | Market approach | | Transaction Price | | |
| Mezzanine debt | 19,798 | | | Discounted cash flow | | Discount margin | | 8.15% - 2.00% (2.00%9.20% (8.42%) |
| | | | | RecoveryConstant default rate | | 60.00%2.00% - 60.00% (60.00%2.00% (2.00%) |
| | | | | Recovery rate | | 65.00% - 65.00% (65.00%) |
| Mezzanine debt | 6,833 | | | Market approach | | Transaction Price | | |
| Loan Accumulation Facility | 8,500 | | | Market approach | | Transaction Price | | |
| | | | | | | |
Mezzanine debtEquity investments: | 2,793 | | | Discounted cash flow | | Discount Margin | | 7.25% - 8.70% (7.81%) |
| | | | | Constant Default Rate(1)
| | 0.00% - 3.00% (1.65%) |
| Preferred equity | 4,503 | | | Market approach | | Constant Default Rate(2)
EBITDA multiples | | 2.00%7.28x - 3.00% (2.36%)7.28x (7.28x) |
| Preferred equity | 1,448 | | | Market approach | | Recovery rateRevenue multiples | | 60.00%0.24x - 60.00% (60.00%)3.00x (0.97x) |
| | | | | | | |
Equity investments: | | | | | | | |
Preferred equity | 11,382 | | | Market approach | | EBITDA multiples | | 6.50x - 8.00x (7.30x) |
Preferred equity | 907 | | | Market approach | | Revenue multiples | | 0.15x - 3.00x (0.95x) |
| | | | | | | |
| Common equity, warrants and other | 68,545 95,869 | | | Market approach | | EBITDA multiples | | 3.75x4.13x - 12.27x (8.11x) |
Common equity, warrants and other | 92 | | | Market approach | | Revenue multiples | | 0.15x - 3.25x (3.08x)11.50x (8.62x) |
| | | | | | | |
| $ | 417,887 | | | | | |
| $ | 497,369 | | | | | | | |
(1) Constant default rates for the next six months.
(2) Constant default rates following the next six months.
(3) The cash flows utilized in the discounted cash flow calculations assumeassume: (i) liquidation of (a) certain distressed investments and (b) all investments currently in default held by the issuing CLO at their current market prices,prices; and (ii) redeployment of proceeds at the issuing CLO'sCLO’s assumed reinvestment rate.
(2) Net asset value liquidation represents the fair value, or estimated expected residual value, of the subordinated note that has been optionally redeemed.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value at December 31, 20202021 | | Valuation technique | | Unobservable inputs | | Range
(Weighted average) |
| Debt investments: | | | | | | | |
| Senior secured | $ | 256,042 178,382 | | | Discounted cash flow | | Discount rates | | 6.30%6.47% - 24.43% (10.18%12.32% (9.25%) |
| Senior secured | 12,668 11,632 | | | Market approach | | EBITDA multiples | | 8.50x7.09x - 8.50x (8.50x)7.09x (7.09x) |
| Senior secured | 9,257 7,027 | | | Market approach | | Revenue multiples | | 0.86x0.74x - 0.86x (0.86x)0.74x (0.74x) |
| Senior secured | 6,111 64,072 | | | Market approach | | Transaction Price | | |
| Subordinated | 7,822 17,244 | | | Discounted cash flow | | Discount rates | | 17.83%15.90% - 17.83% (17.83%17.49% (16.65%) |
Subordinated | 6,794 | | | Market approach | | EBITDA multiples | | 7.05x - 9.10x (7.78x) |
Subordinated | 451 | | | Market approach | | Revenue multiples | | 0.10x - 0.20x (0.18x) |
| | | | | | | |
Structured Finance Notes:Subordinated | 699 | | | Market approach | | Revenue multiples | | |
Subordinated notes(1)
| 54,724 | | | Discounted cash flow | | Discount rates | | 15.00%0.28x - 19.50% (17.79%) |
| | | | | Constant default rate | | 0.00% - 2.00% (1.63%) |
| | | | | Constant default rate after 6 months | | 2.00% - 2.00% (2.00%) |
| | | | | Recovery rate | | 60.00% - 60.00% (60.00%)0.28x (0.28x) |
| | | | | | | |
Mezzanine debt | 1,701 Structured Finance Notes: | | | | | | | |
Subordinated notes(1) | 63,922 | | | Discounted cash flow | | Discount Marginrates | | 7.25%8.00% - 9.45% (8.58%16.00% (12.39%) |
| | | | | Constant default rate(2) | | 0.00% - 2.00% (1.01%(1.77%) |
| | | | | Constant default rate after 9 months(3) | | 2.00% - 3.00% (2.49%2.00% (2.00%) |
| | | | | Recovery rate | | 60.00% - 60.00% (60.00%) |
| | | | | | | |
Equity investments:Mezzanine debt | 2,779 | | | Discounted cash flow | | Discount margin | | 7.10% - 8.95% (7.91%) |
| | | | | Constant default rate(2) | | 2.00% - 3.00% (2.36%) |
Preferred equity | 10,395 | | | Market approach | | EBITDA multiplesConstant default rate(3) | | 4.73x2.00% - 8.50x (7.37x)3.00% (2.36%) |
Preferred equity | 1,148 | | | Market approach | | Revenue multiplesRecovery rate | | 0.20x60.00% - 1.56x (0.96x)60.00% (60.00%) |
| | | | | | | |
Common equity and warrantsLoan accumulation facility | 52,969 8,500 | | | Market approach | | EBITDA multiplesTransaction Price | | 3.75x - 11.50x (8.10x) |
Common equity and warrants | 15 | | | Market approach | | Revenue multiples | | 0.20x |
| Equity investments: | | | | | | | |
| Preferred equity | 2,748 | | | Market approach | | EBITDA multiples | | 7.80x - 1.56x (0.47x)7.80x (7.80x) |
| Preferred equity | 1,017 | | | Market approach | | Revenue multiples | | 0.15x - 3.00x (0.91x) |
| | | | | | | |
| Common equity, warrants and other | 83,478 | | | Market approach | | EBITDA multiples | | 4.50x - 12.00x (8.10x) |
| Common equity, warrants and other | 8 | | | Market approach | | Revenue multiples | | 0.15x - 3.00x (0.15x) |
| | | | | | | |
| $ | 420,097 441,508 | | | | | | | |
(1) The cash flows utilized in the discounted cash flow calculations assumeassume: (i) liquidation of (a) certain distressed investments and (b) all investments currently in default held by the issuing CLO at their current market pricesprices; and (ii) redeployment of proceeds on all assets currently inat the issuing CLO's assumed reinvestment rate.
(2) Constant default rates for the six months ending June 30, 2022.
(3) Constant default rates for the period between June 30, 2022 and all assets below specified fair value thresholds.the assumed optional redemptions of the instruments.
Averages in the preceding two tables were weighted by the fair value of the related instruments.
Changes in market credit spreads or events impacting the credit quality of the underlying portfolio company (both of which could impact the discount rate), as well as changes in EBITDA and/or EBITDA multiples, among other things, could have a significant impact on fair values, with the fair value of a particular debt investment susceptible to change in inverse relation to the changes in the discount rate. Changes in EBITDA and/or EBITDA multiples, as well as changes in the discount rate, could have a significant impact on fair values, with the fair value of an equity investment susceptible to change in tandem with the changes in EBITDA and/or EBITDA multiples, and in inverse relation to changes in the discount rate. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
The following tables present changes in investments measured at fair value using Level 3 inputs for the six months ended June 30, 20212022 and June 30, 2020.2021:
| | | Six Months Ended June 30, 2021 | | Six Months Ended June 30, 2022 |
| | Senior
Secured Debt
Investments | | Subordinated
Debt
Investments | | Preferred Equity | | Common Equity, Warrants and Other | | Structured Finance Notes | | Total | | Senior
Secured Debt
Investments | | Subordinated
Debt
Investments | | Preferred Equity | | Common Equity, Warrants and Other | | Structured Finance Notes | | Total |
| Level 3 assets, January 1, 2021 | $ | 284,078 | | | $ | 15,067 | | | $ | 11,543 | | | $ | 52,984 | | | $ | 56,425 | | | $ | 420,097 | | |
| Level 3 assets, December 31, 2021 | | Level 3 assets, December 31, 2021 | $ | 261,113 | | | $ | 17,943 | | | $ | 3,765 | | | $ | 83,486 | | | $ | 75,201 | | | $ | 441,508 | |
| | Net realized loss on investments | Net realized loss on investments | (321) | | | (7,548) | | | (3,093) | | | — | | | — | | | (10,962) | | Net realized loss on investments | (51) | | | — | | | (51) | | | (6) | | | — | | | (108) | |
| Net unrealized appreciation on investments | 3,672 | | | 9,605 | | | 3,734 | | | 15,653 | | | 148 | | | 32,812 | | |
| Net unrealized appreciation (depreciation) on investments | | Net unrealized appreciation (depreciation) on investments | (5,626) | | | (2,459) | | | 2,237 | | | 14,240 | | | (12,716) | | | (4,324) | |
| Amortization of Net Loan Fees | Amortization of Net Loan Fees | 1,061 | | | 43 | | | — | | | — | | | 46 | | | 1,150 | | Amortization of Net Loan Fees | 612 | | | 6 | | | — | | | — | | | 124 | | | 742 | |
| Accretion of interest income on structured-finance notes | — | | | — | | | — | | | — | | | 4,670 | | | 4,670 | | |
| Accretion of interest income on Structured Finance Notes | | Accretion of interest income on Structured Finance Notes | — | | | — | | | — | | | — | | | 4,785 | | | 4,785 | |
| Capitalized PIK interest and dividends | Capitalized PIK interest and dividends | 679 | | | 222 | | | 105 | | | — | | | — | | | 1,006 | | Capitalized PIK interest and dividends | 258 | | | 58 | | | — | | | — | | | — | | | 316 | |
| Amendment fees | Amendment fees | (97) | | | — | | | — | | | — | | | — | | | (97) | | Amendment fees | (112) | | | — | | | — | | | — | | | — | | | (112) | |
| Purchase and origination of portfolio investments | Purchase and origination of portfolio investments | 53,718 | | | — | | | — | | | — | | | 21,912 | | | 75,630 | | Purchase and origination of portfolio investments | 72,397 | | | — | | | — | | | 1,290 | | | 43,198 | | | 116,885 | |
| Proceeds from principal payments on portfolio investments | Proceeds from principal payments on portfolio investments | (81,523) | | | (91) | | | — | | | — | | | (8,600) | | | (90,214) | | Proceeds from principal payments on portfolio investments | (30,926) | | | (8,245) | | | — | | | — | | | (9,500) | | | (48,671) | |
| Sale and redemption of portfolio investments | Sale and redemption of portfolio investments | (8,863) | | | (91) | | | — | | | — | | | — | | | (8,954) | | Sale and redemption of portfolio investments | (908) | | | — | | | — | | | (3,141) | | | — | | | (4,049) | |
| Proceeds from distributions received from portfolio investments | Proceeds from distributions received from portfolio investments | — | | | — | | | — | | | — | | | (6,356) | | | (6,356) | | Proceeds from distributions received from portfolio investments | — | | | — | | | — | | | — | | | (11,214) | | | (11,214) | |
| | Transfers out of Level 3 | (895) | | | — | | | — | | | — | | | — | | | (895) | | |
| Level 3 assets, June 30, 2021 | $ | 251,509 | | | $ | 17,207 | | | $ | 12,289 | | | $ | 68,637 | | | $ | 68,245 | | | $ | 417,887 | | |
| Transfers in to Level 3 | | Transfers in to Level 3 | 1,611 | | | — | | | — | | | — | | | — | | | 1,611 | |
| Level 3 assets, June 30, 2022 | | Level 3 assets, June 30, 2022 | $ | 298,368 | | | $ | 7,303 | | | $ | 5,951 | | | $ | 95,869 | | | $ | 89,878 | | | $ | 497,369 | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | Six Months Ended June 30, 2020 | | Six Months Ended June 30, 2021 |
| | Senior
Secured Debt
Investments | | Subordinated
Debt
Investments | | Preferred Equity | | Common Equity, Warrants and Other | | Structured Finance Notes | | Total | | Senior
Secured Debt
Investments | | Subordinated
Debt
Investments | | Preferred Equity | | Common Equity, Warrants and Other | | Structured Finance Notes | | Total |
| Level 3 assets, January 1, 2020 | $ | 334,059 | | | $ | 43,090 | | | $ | 17,729 | | | $ | 25,777 | | | $ | 21,610 | | | $ | 442,265 | | |
| | Level 3 assets, December 31, 2020 | | Level 3 assets, December 31, 2020 | $ | 284,078 | | | $ | 15,067 | | | $ | 11,543 | | | $ | 52,984 | | | $ | 56,425 | | | $ | 420,097 | |
| Net realized loss on investments | Net realized loss on investments | (9,217) | | | — | | | — | | | — | | | — | | | (9,217) | | Net realized loss on investments | (321) | | | (7,548) | | | (3,093) | | | — | | | — | | | (10,962) | |
| Net unrealized appreciation (depreciation) on investments | (10,855) | | | (7,590) | | | (2,668) | | | 5,986 | | | (3,707) | | | (18,834) | | |
| Net unrealized appreciation on investments | | Net unrealized appreciation on investments | 3,672 | | | 9,605 | | | 3,734 | | | 15,653 | | | 148 | | | 32,812 | |
| Amortization of Net Loan Fees | Amortization of Net Loan Fees | 642 | | | — | | | — | | | — | | | — | | | 642 | | Amortization of Net Loan Fees | 1,061 | | | 43 | | | — | | | — | | | 46 | | | 1,150 | |
| Accretion of interest income on structured-finance notes | — | | | — | | | — | | | — | | | 2,626 | | | 2,626 | | |
| Accretion of interest income on Structured Finance Notes | | Accretion of interest income on Structured Finance Notes | — | | | — | | | — | | | — | | | 4,670 | | | 4,670 | |
| Capitalized PIK interest and dividends | Capitalized PIK interest and dividends | 586 | | | 255 | | | 341 | | | — | | | — | | | 1,182 | | Capitalized PIK interest and dividends | 679 | | | 222 | | | 105 | | | — | | | — | | | 1,006 | |
| Amendment fees | | Amendment fees | (97) | | | — | | | — | | | — | | | — | | | (97) | |
| Purchase and origination of portfolio investments | Purchase and origination of portfolio investments | 48,678 | | | — | | | — | | | 95 | | | 12,791 | | | 61,564 | | Purchase and origination of portfolio investments | 53,718 | | | — | | | — | | | — | | | 21,912 | | | 75,630 | |
| Proceeds from principal payments on portfolio investments | Proceeds from principal payments on portfolio investments | (50,158) | | | — | | | — | | | — | | | — | | | (50,158) | | Proceeds from principal payments on portfolio investments | (81,523) | | | (91) | | | — | | | — | | | (8,600) | | | (90,214) | |
| Sale and redemption of portfolio investments | Sale and redemption of portfolio investments | (9,696) | | | — | | | (3,645) | | | — | | | — | | | (13,341) | | Sale and redemption of portfolio investments | (8,863) | | | (91) | | | — | | | — | | | — | | | (8,954) | |
| Proceeds from distributions received from portfolio investments | Proceeds from distributions received from portfolio investments | — | | | — | | | — | | | — | | | (3,290) | | | (3,290) | | Proceeds from distributions received from portfolio investments | — | | | — | | | — | | | — | | | (6,356) | | | (6,356) | |
| Conversion from debt investment to equity investment (Note 4) | (703) | | | — | | | — | | | 703 | | | — | | | — | | |
| Transfers in to Level 3 | 2,915 | | | — | | | — | | | — | | | — | | | 2,915 | | |
| Level 3 assets, June 30, 2020 | $ | 306,251 | | | $ | 35,755 | | | $ | 11,757 | | | $ | 32,561 | | | $ | 30,030 | | | $ | 416,354 | | |
| | Transfers out of Level 3 | | Transfers out of Level 3 | (895) | | | — | | | — | | | — | | | — | | | (895) | |
| Level 3 assets, June 30, 2021 | | Level 3 assets, June 30, 2021 | $ | 251,509 | | | $ | 17,207 | | | $ | 12,289 | | | $ | 68,637 | | | $ | 68,245 | | | $ | 417,887 | |
The net unrealized appreciation (depreciation) reported in the Company’s consolidated statements of operations for the six months ended June 30, 20212022 and 2020,2021, attributable to the Company’s Level 3 assets still held at those respective period ends was as follows:
| | | Six Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| Senior secured debt investments | Senior secured debt investments | $ | 2,796 | | | $ | (22,112) | | Senior secured debt investments | $ | (5,490) | | | $ | 2,796 | |
| Subordinated debt investments | Subordinated debt investments | 2,071 | | | (7,590) | | Subordinated debt investments | (2,458) | | | 2,071 | |
| Preferred equity | Preferred equity | 737 | | | (2,666) | | Preferred equity | 2,186 | | | 737 | |
| Common equity, warrants and other | Common equity, warrants and other | 15,653 | | | 5,986 | | Common equity, warrants and other | 15,846 | | | 15,653 | |
| Structured Finance Notes | Structured Finance Notes | 160 | | | (3,707) | | Structured Finance Notes | (12,668) | | | 160 | |
| Net unrealized appreciation (depreciation) on investments held | Net unrealized appreciation (depreciation) on investments held | $ | 21,417 | | | $ | (30,089) | | Net unrealized appreciation (depreciation) on investments held | $ | (2,584) | | | $ | 21,417 | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Other Financial Assets and Liabilities
The Company provides disclosure of the fair value of financial instruments for which it is practical to estimate such value. The Company believes that the carrying amounts of its other financial instruments, such as cash, receivables and payables approximate the fair value of such items due to the short maturity of such financial instruments. The PWB Credit Facility and BNP Facility are variable rate instruments and fair value is approximately bookestimated to approximate carrying value.
The following table sets forth carrying values and fair values of the Company’s debt as of June 30, 20212022 and December 31, 2020:2021:
| | | As of June 30, 2021 | | As of December 31, 2020 | | As of June 30, 2022 | | As of December 31, 2021 |
| Description | Description | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | Description | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
| PWB Credit Facility | PWB Credit Facility | $ | — | | | $ | — | | | $ | 600 | | | $ | 600 | | PWB Credit Facility | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| BNP Facility | BNP Facility | 24,050 | | | 24,050 | | | 31,450 | | | 31,450 | | BNP Facility | 134,100 | | | 134,100 | | | 100,000 | | | 100,000 | |
| Unsecured Notes Due September 2023 | 24,269 | | | 25,500 | | | 24,106 | | | 25,100 | | |
| Unsecured Notes Due April 2025 | — | | | — | | | 48,891 | | | 48,800 | | |
| Unsecured Notes Due October 2025 | — | | | — | | | 47,339 | | | 47,069 | | |
| Unsecured Notes Due February 2026 | Unsecured Notes Due February 2026 | 121,685 | | | 123,149 | | | — | | | — | | Unsecured Notes Due February 2026 | 122,142 | | | 110,843 | | | 121,774 | | | 123,130 | |
| Unsecured Notes Due October 2026 | 52,764 | | | 54,977 | | | 52,617 | | | 51,066 | | |
| Unsecured Notes Due October 2028 | | Unsecured Notes Due October 2028 | 53,703 | | | 52,536 | | | 53,672 | | | 56,430 | |
| SBA-guaranteed debentures | SBA-guaranteed debentures | 94,640 | | | 99,857 | | | 104,182 | | | 116,172 | | SBA-guaranteed debentures | 50,601 | | | 50,642 | | | 69,365 | | | 73,011 | |
| Total debt, at fair value | $ | 317,408 | | | $ | 327,533 | | | $ | 309,185 | | | $ | 320,257 | | |
| Total debt | | Total debt | $ | 360,546 | | | $ | 348,121 | | | $ | 344,811 | | | $ | 352,571 | |
The following tables present the fair value measurements of the Company's debt and indicate the fair value hierarchy of the significant unobservable inputs utilized by the Company to determine such fair values as of June 30, 20212022 and December 31, 2020:2021:
| | | June 30, 2021 | | June 30, 2022 |
| Description | Description | Level 1 | | Level 2 | | Level 3 (1) | | Total | Description | Level 1 | | Level 2 | | Level 3 (1) | | Total |
| PWB Credit Facility | PWB Credit Facility | $ | — | | | $ | — | | | $ | — | | | $ | — | | PWB Credit Facility | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| BNP Facility | BNP Facility | — | | | — | | | 24,050 | | | 24,050 | | BNP Facility | — | | | — | | | 134,100 | | | 134,100 | |
| Unsecured Notes Due September 2023 | 25,500 | | | — | | | — | | | 25,500 | | |
| Unsecured Notes Due February 2026 | Unsecured Notes Due February 2026 | — | | | — | | | 123,149 | | | 123,149 | | Unsecured Notes Due February 2026 | — | | | — | | | 110,843 | | | 110,843 | |
| Unsecured Notes Due October 2026 | 54,977 | | | — | | | — | | | 54,977 | | |
| Unsecured Notes Due October 2028 | | Unsecured Notes Due October 2028 | 52,536 | | | — | | | — | | | 52,536 | |
| SBA-guaranteed debentures | SBA-guaranteed debentures | — | | | — | | | 99,857 | | | 99,857 | | SBA-guaranteed debentures | — | | | — | | | 50,642 | | | 50,642 | |
| Total debt, at fair value | Total debt, at fair value | $ | 80,477 | | | $ | — | | | $ | 247,056 | | | $ | 327,533 | | Total debt, at fair value | $ | 52,536 | | | $ | — | | | $ | 295,585 | | | $ | 348,121 | |
| | | December 31, 2020 | | December 31, 2021 |
| Description | Description | Level 1 | | Level 2 | | Level 3 (1) | | Total | Description | Level 1 | | Level 2 | | Level 3 (1) | | Total |
| PWB Credit Facility | PWB Credit Facility | $ | — | | | $ | — | | | $ | 600 | | | $ | 600 | | PWB Credit Facility | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| BNP Facility | BNP Facility | — | | | — | | | 31,450 | | | 31,450 | | BNP Facility | — | | | — | | | 100,000 | | | 100,000 | |
| Unsecured Notes Due September 2023 | 25,100 | | | — | | | — | | | 25,100 | | |
| Unsecured Notes Due April 2025 | 48,800 | | | — | | | — | | | 48,800 | | |
| Unsecured Notes Due October 2025 | 47,069 | | | — | | | — | | | 47,069 | | |
| Unsecured Notes Due October 2026 | 51,066 | | | — | | | — | | | 51,066 | | |
| Unsecured Notes Due February 2026 | | Unsecured Notes Due February 2026 | — | | | — | | | 123,130 | | | 123,130 | |
| Unsecured Notes Due October 2028 | | Unsecured Notes Due October 2028 | 56,430 | | | — | | | — | | | 56,430 | |
| SBA-guaranteed debentures | SBA-guaranteed debentures | — | | | — | | | 116,172 | | | 116,172 | | SBA-guaranteed debentures | — | | | — | | | 73,011 | | | 73,011 | |
| Total debt, at fair value | Total debt, at fair value | $ | 172,035 | | | $ | — | | | $ | 148,222 | | | $ | 320,257 | | Total debt, at fair value | $ | 56,430 | | | $ | — | | | $ | 296,141 | | | $ | 352,571 | |
(1) For Level 3 measurements, fair value is estimated by discounting remaining payments at current market rates for similar instruments at the measurement date and considering such factors as the legal maturity date.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Note 6. Commitments and Contingencies
The Company has the following unfunded commitments to portfolio companies asAs of June 30, 2021: | | | | | | | | | | | | | | |
Name of Portfolio Company | | Investment Type | | Commitment |
A&A Transfer, LLC | | Senior Secured Loan (Revolver) | | $ | 1,709 | |
Convergint Technologies | | Senior Secured Loan (Delayed Draw) | | 101 | |
I&I Sales Group, LLC | | Senior Secured Loan (Revolver) | | 156 | |
Inergex Holdings, LLC | | Senior Secured Loan (Revolver) | | 2,813 | |
Baymark Health Services, Inc. | | Senior Secured Loan (Delayed Draw) | | 2,481 | |
RSA Security | | Senior Secured Loan (Delayed Draw) | | 1,898 | |
SourceHOV Tax, Inc. | | Senior Secured Loan (Revolver) | | 1,196 | |
SSJA Bariatric Management LLC | | Senior Secured Loan (Revolver) | | 667 | |
| | | | $ | 11,021 | |
2022, the Company has outstanding commitments to fund investments totaling $37,261 under various undrawn revolvers and other credit facilities.Legal and regulatory proceedings: From time to time, the Company is involved in legal proceedings in the normal course of its business. Although the outcome of such litigation cannot be predicted with any certainty, management is of the opinion, based on the advice of legal counsel, that final disposition of any litigation should not have a material adverse effect on the financial position of the Company as of June 30, 2021.2022.
Additionally, the Company is subject to periodic inspection by regulators to assess compliance with applicable BDC regulations and SBIC I LP is subject to periodic inspections by the SBA.
Indemnifications: In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties that provide for general indemnification. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. The Company believes the risk of any material obligation under these indemnifications to be low.
Note 7. Borrowings
SBA Debentures: The SBA debentures issued by SBIC I LP and other SBA regulations generally restrict assets held by SBIC I LP. On a stand-alone basis, SBIC I LP held $219,541$175,942 and $223,795$195,502 in assets at June 30, 20212022 and December 31, 2020,2021, respectively, which accounted for approximately 42%31% and 46%34% of the Company’s total consolidated assets, respectively. These assets cannot be pledged under any debt obligation of the Company.
On February 28, 2022, SBIC I LP redeemed $19,000 of SBA debentures that were contractually due March 1, 2025 and September 1, 2025. As of June 30, 2021,2022, SBIC I LP had outstanding debentures totaling $95,505.$50,920, which bear a fixed interest rate of 2.87% and mature on March 1, 2025.
For the three and six months ended June 30, 2022 and 2021, the components of interest expense, cash paid for interest, effective interest rates and average outstanding balances for the SBA debentures were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Stated interest expense | $ | 364 | | | $ | 703 | | | $ | 815 | | | $ | 1,472 | |
| Amortization of debt issuance costs | 48 | | | 58 | | | 92 | | | 122 | |
| Total interest and debt financing costs | $ | 412 | | | $ | 761 | | | $ | 907 | | | $ | 1,594 | |
| Cash paid for interest expense | $ | — | | | $ | — | | | $ | 1,002 | | | $ | 1,553 | |
| Effective interest rate | 3.23 | % | | 3.19 | % | | 3.17 | % | | 3.33 | % |
| Average outstanding balance | $ | 50,920 | | | $ | 95,505 | | | $ | 57,113 | | | $ | 95,721 | |
BNP Facility: UnderOn June 20, 2019, OFSCC-FS entered into the BNP Facility, maturing onwhich provides for borrowings in an aggregate principal amount up to $150,000. On June 24, 2022, OFSCC-FS amended the BNP facility to, among other things: (i) extend the reinvestment period under the BNP Facility for three years from June 20, 2022 to June 20, 2025; (ii) extend the maturity date under the BNP Facility from June 20, 2024 to June 20, 2027; (iii) convert the benchmark interest rate from LIBOR to SOFR; (iv) increase the applicable margin by 0.40% on all classes of loans; and (v) increase the applicable margin floor from 1.925% to 2.65%. OFSCC-FS has upalso pays a non-usage fee depending on the size of the unused portion of the BNP Facility. Fees and legal costs incurred in connection with the BNP Facility are amortized over the life of the facility.
The BNP Facility is collateralized by all the assets held by OFSCC-FS. OFSCC-FS and the Company have each made customary representations and warranties and are required to $150,000 of availablecomply with various covenants, reporting requirements and other customary requirements for similar credit subject to borrowing base requirements, of which $24,050 was drawn asfacilities.
As of June 30, 2021. The effective interest rate on the BNP Facility was 6.06% at2022 and December 31, 2021, OFSCC-FS had outstanding debt of $134,100 and $100,000, respectively. As of June 30, 2021. The2022, the unused commitment under the BNP Facility was $125,950 as of$15,900.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
For the three and six months ended June 30, 2021.2022 and 2021, the components of interest expense, cash paid for interest, average interest rates and average outstanding balances for the BNP Facility were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Stated interest expense | $ | 1,005 | | | $ | 385 | | | $ | 1,621 | | | $ | 780 | |
| Amortization of debt issuance costs | 69 | | | 57 | | | 136 | | | 112 | |
| Total interest and debt financing costs | $ | 1,074 | | | $ | 442 | | | $ | 1,757 | | | $ | 892 | |
| Cash paid for interest expense | $ | 801 | | | $ | 360 | | | $ | 1,386 | | | $ | 757 | |
| Effective interest rate | 3.21 | % | | 4.76 | % | | 2.92 | % | | 5.22 | % |
| Average outstanding balance | $ | 133,876 | | | $ | 37,099 | | | $ | 120,438 | | | $ | 34,158 | |
PWB Credit Facility: Under its PWB Credit Facility maturing February 28, 2023, On March 7, 2018, the Company has up to $25,000 of available credit, subject to borrowing base requirements, of which $-0- was drawn as of June 30, 2021. The effective interest rate onentered into the PWB Credit Facility was 5.02% at June 30, 2021. As of June 30, 2021 the unused commitment under the PWB Credit Facility was $25,000.
Facility. On February 17, 2021, the Company amended the BLAPWB Credit Facility to among other things: (i) increase the maximum amount available from $20,000 to $25,000; (ii) decrease the interest rate floor from 5.25% per annum to 5.00% per annum; (iii) modify certain financial performance covenants; and (iv) extend the maturity date from February 28, 2021 to February 28, 2023. On April 22, 2022, the Company amended the PWB Credit Facility to: (i) increase the maximum amount available under the PWB Credit Facility from $25,000 to $35,000; and (ii) extend the maturity date of the PWB Credit Facility from February 28, 2023 to February 28, 2024. On November 15, 2021, the Company amended the BLA to decrease the interest rate floor from 5.0% to 4.0%, effective as of November 1, 2021. Fees and legal costs incurred in connection with the PWB Credit Facility are amortized over the life of the facility.
Unsecured Notes: The maximum availability of the PWB Credit Facility is equal to 50% of the aggregate outstanding principal amount of eligible loans included in the borrowing base as specified in the BLA. The PWB Credit Facility is guaranteed by OFSCC-MB and secured by all of our current and future assets, excluding assets held by SBIC I LP, OFSCC-FS, and the Company’s partnership interests in SBIC I LP and SBIC I GP. The Company has made customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.
As of June 30, 2022 and December 31, 2021, the Company had $-0- and $-0-, respectively, of outstanding debt under the PWB Credit Facility. As of June 30, 2022, the unused commitment under the PWB Credit Facility was $35,000.
For the three and six months ended June 30, 2022 and 2021, the components of interest expense, cash paid for interest, average interest rates and average outstanding balances for the PWB Credit Facility were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Stated interest expense(1) | $ | 29 | | | $ | 12 | | | $ | 47 | | | $ | 52 | |
| | | | | | | |
| | | | | | | |
| Cash paid for interest expense | $ | 28 | | | $ | 16 | | | $ | 46 | | | $ | 46 | |
Effective interest rate(2) | n/m | | n/m | | n/m | | n/m |
| Average outstanding balance | $ | 250 | | | $ | — | | | $ | 377 | | | $ | 1,118 | |
(1) Stated interest expense includes unused fees.
(2) Not meaningful due to a considerable amount of unused fees in stated interest expense.
Unsecured Notes: As of June 30, 2022 and December 31, 2021, the Company had the following Unsecured Notes with anoutstanding:
Unsecured Notes Due February 2026: On February 10, 2021 and March 18, 2021, the Company issued $125,000 in aggregate outstanding principal of $204,325.unsecured notes. The weighted average effectiveUnsecured Notes Due February 2026 bear interest at a rate of 4.75% per year payable semi-annually and mature on February 10, 2026. The Company may redeem the Unsecured Notes was 5.90%Due February 2026 in whole or in part at June 30, 2021.any time, or from time to time, at its option at par plus a “make-whole” premium, if applicable.
Unsecured Notes Due October 2028: On October 28, 2021 and November 1, 2021, the Company issued $55,000 in aggregate principal of unsecured notes. The Unsecured Notes Due October 2028 bear interest at a rate of 4.95% per year payable semi-annually and mature on October 31, 2028. The Company may redeem the Unsecured Notes Due October 2028 in whole or in part at any time, or from time to time, at its option on or after October 31, 2023.
The Unsecured Notes are direct unsecured obligations and rank equal in right of payment with all current and future unsecured indebtedness of the Company. Because the Unsecured Notes are not secured by any of the Company's assets, they are
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
effectively subordinated to all existing and future secured unsubordinated indebtedness (or any indebtedness that is initially
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
unsecured as to which the Company subsequently grants a security interest), to the extent of the value of the assets securing such indebtedness, including, without limitation, borrowings under the PWB Credit Facility.
Interest expenseThe indenture governing the Unsecured Notes contains certain covenants, including: (i) prohibiting additional borrowings, including through the issuance of additional debt securities, unless the Company's asset coverage, as defined in the 1940 Act, after giving effect to any exemptive relief granted to the Company by the SEC, equals at least 150% after such borrowings; and (ii) prohibiting (a) the declaration of any cash dividend or distribution upon any class of the Company’s capital stock (except to the extent necessary for the Company to maintain its treatment as a RIC under Subchapter M of the Code), or (b) the purchase of any capital stock unless the Company’s asset coverage, as defined in the 1940 Act, is at least 150% at the time of such capital transaction and after deducting the amount of such transaction.
For the three and six months ended June 30, 2022 and 2021, the components of interest expense, cash paid for interest, average interest rates and 2020 onaverage outstanding balances for the Company's outstanding borrowings is presented below:Unsecured Notes were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| SBA Debentures | $ | 761 | | | $ | 1,114 | | | $ | 1,595 | | | $ | 2,338 | |
| PWB Credit Facility | 13 | | | 702 | | | 53 | | | 991 | |
| Unsecured Notes | 3,024 | | | 2,590 | | | 6,526 | | | 5,205 | |
| BNP Facility | 443 | | | 525 | | | 892 | | | 1,319 | |
| Total interest expense | $ | 4,241 | | | $ | 4,931 | | | $ | 9,066 | | | $ | 9,853 | |
| | | | | | | |
| Average dollar borrowings | $ | 336,929 | | | $ | 359,640 | | | $ | 344,005 | | | $ | 364,867 | |
| Weighted average interest rate | 5.05 | % | | 5.26 | % | | 5.31 | % | | 5.23 | % |
Interest expense includes the stated interest on the outstanding balance, commitment fees on undrawn amounts, and the amortization of deferred financing costs. | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Stated interest expense | $ | 2,165 | | | $ | 2,699 | | | $ | 4,330 | | | $ | 5,874 | |
| Amortization of debt issuance costs | 261 | | | 327 | | | 523 | | | 654 | |
| Total interest and debt financing costs | $ | 2,426 | | | $ | 3,026 | | | $ | 4,853 | | | $ | 6,528 | |
| Cash paid for interest expense | $ | 681 | | | $ | 1,195 | | | $ | 4,353 | | | $ | 4,910 | |
| Effective interest rate | 5.39 | % | | 5.92 | % | | 5.39 | % | | 6.13 | % |
| Average outstanding balance | $ | 180,000 | | | $ | 204,325 | | | $ | 180,000 | | | $ | 213,009 | |
The following table shows the scheduled maturities of the principal balances of the Company'sCompany’s outstanding borrowings as of June 30, 2021:2022:
| | | | | Payments due by period | | | Payments due by period |
| | Total | | Less than
year | | 1-3 years (1) | | 4-5 years (1) | | After 5
years (1) | | Total | | Less than
year | | 1-3 years | | 4-5 years | | After 5 years |
| PWB Credit Facility | PWB Credit Facility | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | PWB Credit Facility | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Unsecured Notes | Unsecured Notes | | 204,325 | | | — | | | 25,000 | | | 125,000 | | | 54,325 | | Unsecured Notes | | 180,000 | | | — | | | — | | | 125,000 | | | 55,000 | |
| SBA Debentures | SBA Debentures | | 95,505 | | | — | | | 7,000 | | | 88,505 | | | — | | SBA Debentures | | 50,920 | | | — | | | 50,920 | | | — | | | — | |
| BNP Facility | BNP Facility | | 24,050 | | | — | | | — | | | 24,050 | | | — | | BNP Facility | | 134,100 | | | — | | | — | | | 134,100 | | | — | |
| Total | Total | | $ | 323,880 | | | $ | — | | | $ | 32,000 | | | $ | 237,555 | | | $ | 54,325 | | Total | | $ | 365,020 | | | $ | — | | | $ | 50,920 | | | $ | 259,100 | | | $ | 55,000 | |
(1)The SBA debentures are scheduled to mature between SeptemberFor the three and six months ended June 30, 2022 and September 2025. The Unsecured Notes are scheduled to mature between September 20232021, the average dollar borrowings and October 2026.weighted average effective interest rate on the Company’s outstanding borrowings were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Average dollar borrowings | $ | 365,046 | | | $ | 336,929 | | | $ | 357,928 | | | $ | 344,005 | |
| Weighted average effective interest rate | 4.32 | % | | 5.05 | % | | 4.23 | % | | 5.31 | % |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Note 8. Financial Highlights
The following is a schedule of financial highlights for the three and six months ended June 30, 20212022 and 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended
June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Per share operating performance: | | | | | | | |
| Net asset value per share at beginning of period | $ | 11.96 | | | $ | 9.71 | | | $ | 11.85 | | | $ | 12.46 | |
Net investment income (4) | 0.24 | | | 0.19 | | | 0.43 | | | 0.49 | |
Net realized loss on non-control/non-affiliate investments (4) | (0.81) | | | (0.08) | | | (0.80) | | | (0.75) | |
| | | | | | | |
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments, net of taxes (4) | 1.34 | | | 0.52 | | | 1.44 | | | (1.17) | |
Net unrealized appreciation (depreciation) on affiliate investments (4) | 0.85 | | | (0.07) | | | 1.00 | | | (0.28) | |
Net unrealized appreciation (depreciation) on control investment (4) | 0.05 | | | 0.01 | | | 0.08 | | | (0.11) | |
Loss on extinguishment of debt (4) | — | | | — | | | (0.17) | | | (0.01) | |
| | | | | | | |
| Total from operations | 1.67 | | | 0.57 | | | 1.98 | | | (1.83) | |
| Distributions | (0.22) | | | (0.17) | | | (0.42) | | | (0.51) | |
Issuance of common stock (10) | 0.01 | | | (0.01) | | | 0.01 | | | (0.02) | |
| Net asset value per share at end of period | $ | 13.42 | | | $ | 10.10 | | | $ | 13.42 | | | $ | 10.10 | |
| | | | | | | |
| Per share market value, end of period | $ | 9.96 | | | $ | 4.52 | | | $ | 9.96 | | | $ | 4.52 | |
Total return based on market value (1)(9) | 15.9 | % | | 15.2 | % | | 45.6 | % | | (54.5) | % |
Total return based on net asset value (2)(9) | 14.7 | % | | 7.9 | % | | 18.4 | % | | (8.9) | % |
| Shares outstanding at end of period | 13,415,235 | | | 13,399,694 | | | 13,415,235 | | | 13,399,694 | |
| Weighted average shares outstanding | 13,411,998 | | | 13,392,608 | | | 13,410,524 | | | 13,384,808 | |
| Ratio/Supplemental Data (in thousands except ratios) | | | | | | | |
Average net asset value (3) | $ | 170,232 | | | $ | 132,690 | | | $ | 166,473 | | | $ | 144,002 | |
| Net asset value at end of period | $ | 179,993 | | | $ | 135,397 | | | $ | 179,993 | | | $ | 135,397 | |
| Net investment income | $ | 3,235 | | | $ | 2,607 | | | $ | 5,785 | | | $ | 6,579 | |
Ratio of total expenses, net to average net assets (5)(7) | 19.2 | % | | 25.2 | % | | 19.4 | % | | 24.0 | % |
Ratio of total expenses and loss on extinguishment of debt to average net assets(5)(11) | 19.2 | % | | 25.2 | % | | 20.7 | % | | 24.1 | % |
Ratio of net investment income to average net assets (5)(8) | 7.6 | % | | 7.9 | % | | 7.0 | % | | 9.1 | % |
| | | | | | | |
Ratio of loss on extinguishment of debt to average net assets(9) | — | % | | — | % | | 1.4 | % | | 0.1 | % |
Portfolio turnover (6) | 12.7 | % | | 1.6 | % | | 25.3 | % | | 15.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended
June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Per share operating performance: | | | | | | | |
| Net asset value per share at beginning of period | $ | 15.52 | | | $ | 11.96 | | | $ | 15.18 | | | $ | 11.85 | |
Net investment income(4) | 0.47 | | | 0.24 | | | 0.69 | | | 0.43 | |
Net realized loss on investments, net of taxes(4) | (0.01) | | | (0.81) | | | — | | | (0.80) | |
Net unrealized appreciation (depreciation) on investments, net of taxes(4) | (1.12) | | | 2.24 | | | (0.71) | | | 2.52 | |
Loss on extinguishment of debt(4) | — | | | — | | | (0.01) | | | (0.17) | |
| Total income (loss) from operations | (0.66) | | | 1.67 | | | (0.03) | | | 1.98 | |
| Distributions | (0.29) | | | (0.22) | | | (0.57) | | | (0.42) | |
Issuance of common stock (8) | — | | | 0.01 | | | (0.01) | | | 0.01 | |
| Net asset value per share at end of period | $ | 14.57 | | | $ | 13.42 | | | $ | 14.57 | | | $ | 13.42 | |
| | | | | | | |
| Per share market value, end of period | $ | 9.92 | | | $ | 9.96 | | | $ | 9.92 | | | $ | 9.96 | |
Total return based on market value(1)(7) | (21.5) | % | | 15.9 | % | | (4.3) | % | | 45.6 | % |
Total return based on net asset value(2)(7) | (3.4) | % | | 14.7 | % | | 0.9 | % | | 18.4 | % |
| Shares outstanding at end of period | 13,429,777 | | | 13,415,235 | | | 13,429,777 | | | 13,415,235 | |
| Weighted average shares outstanding | 13,425,477 | | | 13,411,998 | | | 13,423,970 | | | 13,410,524 | |
| Ratio/Supplemental Data (dollar amounts in thousands) | | | | | | | |
Average net asset value(3) | $ | 202,049 | | | $ | 170,232 | | | $ | 202,614 | | | $ | 166,473 | |
| Net asset value at end of period | $ | 195,712 | | | $ | 179,993 | | | $ | 195,712 | | | $ | 179,993 | |
| Net investment income | $ | 6,248 | | | $ | 3,235 | | | $ | 9,253 | | | $ | 5,785 | |
Ratio of total expenses to average net assets(5) | 8.3 | % | | 19.2 | % | | 12.0 | % | | 19.4 | % |
Ratio of total expenses and loss on extinguishment of debt to average net assets(5) | 8.3 | % | | 19.2 | % | | 12.0 | % | | 20.7 | % |
Ratio of net investment income to average net assets(5) | 12.4 | % | | 7.6 | % | | 9.1 | % | | 7.0 | % |
Ratio of loss on extinguishment of debt to average net assets(7) | — | % | | — | % | | 0.1 | % | | 1.4 | % |
Portfolio turnover (6) | 8.9 | % | | 12.7 | % | | 14.5 | % | | 25.3 | % |
(1)Calculated as ending market value less beginning market value, adjusted for distributions reinvested at prices based on the Company’s dividend reinvestment plan for the respective distributions.
(2)Calculated as ending net asset value less beginning net asset value, adjusted for distributions reinvested at the Company’s dividend reinvestment plan for the respective distributions.
(3)Based on the average of the net asset value at the beginning and end of the indicated period and if applicable the preceding calendar quarters.
(4)Calculated on the average share method.
(5)Annualized.
(6)Portfolio turnover rate is calculated using the lesser of period-to-date sales, Structured Finance Note distributions and principal payments or period-to-date purchases over the average of the invested assets at fair value.
(7)Ratio of total expenses before incentive fee waiver to average net assets was 24.6% for the six months ended June 30, 2020.Not annualized.
(8)Ratio of net investment income before incentive fee waiver to average net assets was 8.5% for the six months ended June 30, 2020.Common stock issued through DRIP.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
(9)Not annualized.
(10)Common stock issued through DRIP.
(11)Ratio of total expenses and loss on extinguishment of debt before incentive fee waiver to average net assets was 24.7% for the six months ended June 30, 2020.
Note 9. Capital Transactions
Distributions: The Company intends to distribute to stockholders, on a quarterly basis, substantially all of its net investment income. In addition, although the Company intends to distribute at least annually net realized capital gains, net of taxes if any, out of assets legally available for such distribution, the Company may also retain such capital gains for investment through a deemed distribution.
The Company may be limited in its ability to make distributions due to the BDC asset coverage requirements of the 1940 Act. The Company’s ability to make distributions may be affected by SBIC I LP'sLP’s distributions to the Company, which are governed by SBA regulations and currentlymay require the prior approval of the SBA. In addition, distributions from OFSCC-FS to the Company are restricted by the terms and conditions of the BNP Facility. Net assets of SBIC I LP were $123,913,$124,765, and consolidated cash at June 30, 20212022 includes $15,747$7,460 held by SBIC I LP, of which $12,078$3,474 was available for distribution to the Company with the prior consent of the SBA.Parent. Net Assets of OFSCC-FS were $89,133,$73,442, and consolidated cash at June 30, 20212022 includes $5,875$2,906 held by OFSCC-FS, of which $-0- was available for distribution to the Company.Parent.
The following table summarizes distributions declared and paid for the six months ended June 30, 20212022 and 2020:2021:
| | Date Declared | Date Declared | | Record Date | | Payment Date | | Amount
Per Share | | Cash
Distribution | | DRIP Shares
Issued | | DRIP Shares
Value | Date Declared | | Record Date | | Payment Date | | Amount
Per Share | | Cash
Distribution | | DRIP Shares
Issued | | DRIP Shares
Value |
| Six Months Ended June 30, 2020 | | | | | | | | | | | |
| March 11, 2020 | | March 24, 2020 | | March 31, 2020 | | $ | 0.34 | | | $ | 4,484 | | | 15,693 | | | $ | 64 | | |
| May 4, 2020 | | June 23, 2020 | | June 30, 2020 | | 0.17 | | | 2,244 | | | 7,165 | | | 32 | | |
| | $ | 0.51 | | | $ | 6,728 | | | $ | 22,858 | | | $ | 96 | | |
| Six Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | | | | | | | | | Six Months Ended June 30, 2021 | | | | | | | | | | |
| March 2, 2021 | March 2, 2021 | | March 24, 2021 | | March 31, 2021 | | $ | 0.20 | | | $ | 2,655 | | | 3,103 | | | $ | 27 | | March 2, 2021 | | March 24, 2021 | | March 31, 2021 | | $ | 0.20 | | | $ | 2,655 | | | 3,103 | | | $ | 27 | |
| May 11, 2021 | May 11, 2021 | | June 23, 2021 | | June 30, 2021 | | 0.22 | | | 2,918 | | | 3,273 | | | 33 | | May 11, 2021 | | June 23, 2021 | | June 30, 2021 | | 0.22 | | | 2,918 | | | 3,273 | | | 33 | |
| | | $ | 0.42 | | | $ | 5,573 | | | $ | 6,376 | | | $ | 60 | | |
| | | $ | 0.42 | | | $ | 5,573 | | | 6,376 | | | $ | 60 | |
| Six Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 | | | | | | | | |
| March 1, 2022 | | March 1, 2022 | | March 24, 2022 | | March 31, 2022 | | $ | 0.28 | | | $ | 3,719 | | | 3,016 | | | $ | 39 | |
| May 3, 2022 | | May 3, 2022 | | June 23, 2022 | | June 30, 2022 | | 0.29 | | | 3,850 | | | 4,348 | | | 43 | |
| | | | $ | 0.57 | | | $ | 7,569 | | | 7,364 | | | $ | 82 | |
Distributions in excess of the Company’s current and accumulated ICTI would be treated first as a return of capital to the extent of the stockholder’s adjusted tax basis, and any remaining distributions would be treated as a capital gain. The determination of the tax attributes of the Company’s distributions is made annually as of the end of its fiscal year based upon its estimated ICTI for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Company’s distributions for a full year. Each year, a statement on Form 1099-DIV identifying the tax character of distributions is mailed to the Company’s stockholders.
Stock repurchase program:Repurchase Program:
The Company maintains a Stock Repurchase Program under which the Company may acquire up to $10.0 million of its outstanding common stock. On May 4, 2020,3, 2022, the Board extended the Stock Repurchase Program for an additional two-year period ending May 22, 2022,2024, or until the approved dollar amount has been used to repurchase shares.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
The following table summarizes shares of common stock repurchased under the Stock Repurchase Program during the six months ended June 30, 20212022 and 2020,2021, respectively.
| | Period | Period | | Total Number of Shares Purchased | | Cost of Shares Purchased | | Average Price Paid Per Share | Period | | Total Number of Shares Purchased | | Cost of Shares Purchased | | Average Price Paid Per Share |
| Six Months Ended June 30, 2020 | | | | | | | |
| January 1, 2020 through March 31, 2020 | | — | | | $ | — | | | $ | — | | |
| April 1, 2020 through June 30, 2020 | | — | | | $ | — | | | $ | — | | |
| | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | | Six Months Ended June 30, 2021 | | | | | | |
| January 1, 2021 through March 31, 2021 | January 1, 2021 through March 31, 2021 | | 700 | | | $ | 5 | | | $ | 6.70 | | January 1, 2021 through March 31, 2021 | | 700 | | | $ | 5 | | | $ | 6.70 | |
| April 1, 2021 through June 30, 2021 | April 1, 2021 through June 30, 2021 | | — | | | $ | — | | | $ | — | | April 1, 2021 through June 30, 2021 | | — | | | $ | — | | | $ | — | |
| | | Six Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 | |
| January 1, 2022 through March 31, 2022 | | January 1, 2022 through March 31, 2022 | | — | | | $ | — | | | $ | — | |
| April 1, 2022 through June 30, 2022 | | April 1, 2022 through June 30, 2022 | | — | | | $ | — | | | $ | — | |
|
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Note 10. Consolidated Schedule of Investments In and Advances To Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Period Ended June 30, 2021 | | | | | | | | |
| Name of Portfolio Company | | Investment Type (1) | | Net Realized Gain (Loss) | | Net change in unrealized appreciation/(depreciation) | | Interest & PIK Interest | | Dividends | | Fees | | Total Income (2) | | December 31, 2020, Fair Value | | Gross
Additions (3) | | Gross
Reductions (4) | | June 30, 2021, Fair Value (5) |
| Control Investment | | | | | | | | | | | | | | | | | | | | | | |
| MTE Holding Corp. | | Subordinated Loan | | $ | — | | | $ | 20 | | | $ | 689 | | | $ | — | | | $ | — | | | $ | 689 | | | $ | 7,822 | | | $ | 218 | | | $ | (52) | | | $ | 7,988 | |
| | Common Equity | | — | | | 1,084 | | | — | | | 136 | | | — | | | 136 | | | 2,990 | | | 1,084 | | | — | | | 4,074 | |
| | | | — | | | 1,104 | | | 689 | | | 136 | | | — | | | 825 | | | 10,812 | | | 1,302 | | | (52) | | | 12,062 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Total Control Investment | | | | — | | | 1,104 | | | 689 | | | 136 | | | — | | | 825 | | | 10,812 | | | 1,302 | | | (52) | | | 12,062 | |
| Affiliate Investments | | | | | | | | | | | | | | | | | | | | | | |
| 3rd Rock Gaming Holdings, LLC | | Senior Secured Loan | | — | | | (46) | | | 14 | | | — | | | — | | | 14 | | | 9,258 | | | 13 | | | (2,296) | | | 6,975 | |
| | Common Equity (6) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | — | | | (46) | | | 14 | | | — | | | — | | | 14 | | | 9,258 | | | 13 | | | (2,296) | | | 6,975 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Chemical Resources Holdings, Inc. | | Senior Secured Loan | | — | | | 194 | | | 644 | | | — | | | — | | | 644 | | | 13,744 | | | 212 | | | | | 13,956 | |
| | Common Equity (6) | | — | | | (20) | | | — | | | — | | | — | | | — | | | 3,420 | | | — | | | (20) | | | 3,400 | |
| | | | — | | | 174 | | | 644 | | | — | | | — | | | 644 | | | 17,164 | | | 212 | | | (20) | | | 17,356 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Contract Datascan Holdings, Inc. | | Preferred Equity (7) | | — | | | 97 | | | — | | | — | | | — | | | — | | | 2,690 | | | 97 | | | — | | | 2,787 | |
| | Common Equity (6) | | — | | | (5) | | | — | | | — | | | — | | | — | | | 46 | | | — | | | (5) | | | 41 | |
| | | | — | | | 92 | | | — | | | — | | | — | | | — | | | 2,736 | | | 97 | | | (5) | | | 2,828 | |
| | | | | | | | | | | | | | | | | | | | | | |
| DRS Imaging Services, LLC | | Common Equity (6) | | — | | | (490) | | | — | | | — | | | — | | | — | | | 1,749 | | | — | | | (490) | | | 1,259 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Master Cutlery, LLC | | Subordinated Loan (6) | | — | | | 380 | | | — | | | — | | | — | | | — | | | 346 | | | 380 | | | (39) | | | 687 | |
| | Preferred Equity (6) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Common Equity (6) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | — | | | 380 | | | — | | | — | | | — | | | — | | | 346 | | | 380 | | | (39) | | | 687 | |
| | | | | | | | | | | | | | | | | | | | | | |
| NeoSystems Corp. | | Preferred Equity (7) | | — | | | 899 | | | — | | | 106 | | | — | | | 106 | | | 2,250 | | | 1,005 | | | — | | | 3,255 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Pfanstiehl Holdings, Inc | | Common Equity | | — | | | 13,015 | | | — | | | — | | | — | | | — | | | 36,221 | | | 13,015 | | | — | | | 49,236 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Six Month Period Ended June 30, 2022 | | | | | | | | |
| Name of Portfolio Company | | Investment Type (1) | | Net Realized Gain (Loss) | | Net change in unrealized appreciation/(depreciation) | | Interest & PIK Interest | | Dividends | | Fees | | Total Income (2) | | December 31, 2021, Fair Value | | Gross
Additions (3) | | Gross
Reductions (4) | | June 30, 2022, Fair Value (5) |
| Control Investment | | | | | | | | | | | | | | | | | | | | | | |
| MTE Holding Corp. | | Subordinated Loan | | $ | — | | | $ | — | | | $ | 141 | | | $ | — | | | $ | 6 | | | $ | 147 | | | $ | 8,195 | | | $ | 35 | | | $ | (8,230) | | | $ | — | |
| | Common Equity | | 278 | | | (1,684) | | | — | | | 45 | | | — | | | 45 | | | 4,753 | | | — | | | (4,753) | | | — | |
| | | | 278 | | | (1,684) | | | 141 | | | 45 | | | 6 | | | 192 | | | 12,948 | | | 35 | | | (12,983) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | |
| Total Control Investment | | | | 278 | | | (1,684) | | | 141 | | | 45 | | | 6 | | | 192 | | | 12,948 | | | 35 | | | (12,983) | | | — | |
| Affiliate Investments | | | | | | | | | | | | | | | | | | | | | | |
| Contract Datascan Holdings, Inc. | | Preferred Equity (6) | | — | | | 1,739 | | | — | | | — | | | — | | | — | | | 2,748 | | | 1,739 | | | — | | | 4,487 | |
| | Common Equity (6) | | — | | | 109 | | | — | | | — | | | — | | | — | | | 25 | | | 109 | | | — | | | 134 | |
| | | | — | | | 1,848 | | | — | | | — | | | — | | | — | | | 2,773 | | | 1,848 | | | — | | | 4,621 | |
| | | | | | | | | | | | | | | | | | | | | | |
| DRS Imaging Services, LLC | | Common Equity (6) | | — | | | (20) | | | — | | | — | | | — | | | — | | | 1,289 | | | — | | | (20) | | | 1,269 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Master Cutlery, LLC | | Subordinated Loan (6) | | — | | | (522) | | | — | | | — | | | — | | | — | | | 699 | | | — | | | (538) | | | 161 | |
| | Preferred Equity (6) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Common Equity (6) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | — | | | (522) | | | — | | | — | | | — | | | — | | | 699 | | | — | | | (538) | | | 161 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Pfanstiehl Holdings, Inc | | Common Equity | | — | | | 17,413 | | | — | | | — | | | — | | | — | | | 65,740 | | | 17,413 | | | — | | | 83,153 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| TalentSmart Holdings, LLC | | Common Equity (6) | | — | | | (45) | | | — | | | — | | | — | | | — | | | 1,095 | | | (45) | | | — | | | 1,050 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| TRS Services, Inc. | | Preferred Equity | | — | | | 359 | | | — | | | 5 | | | — | | | 5 | | | 988 | | | 359 | | | — | | | 1,347 | |
| | Common Equity (6) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | | | — | |
| | | | — | | | 359 | | | — | | | 5 | | | — | | | 5 | | | 988 | | | 359 | | | — | | | 1,347 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Total Affiliate Investments | | | | — | | | 19,033 | | | — | | | 5 | | | — | | | 5 | | | 72,584 | | | 19,575 | | | (558) | | | 91,601 | |
| Total Control and Affiliate Investments | | | | $ | 278 | | | $ | 17,349 | | | $ | 141 | | | $ | 50 | | | $ | 6 | | | $ | 197 | | | $ | 85,532 | | | $ | 19,610 | | | $ | (13,541) | | | $ | 91,601 | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Period Ended June 30, 2021 | | | | | | | | |
| Name of Portfolio Company | | Investment Type (1) | | Net Realized Gain (Loss) | | Net change in unrealized appreciation/(depreciation) | | Interest & PIK Interest | | Dividends | | Fees | | Total Income (2) | | December 31, 2020, Fair Value | | Gross
Additions (3) | | Gross
Reductions (4) | | June 30, 2021, Fair Value (5) |
| | | | | | | | | | | | | | | | | | | | | | |
| Professional Pipe Holdings, LLC | | Senior Secured Loan | | $ | — | | | $ | (67) | | | $ | 358 | | | $ | — | | | $ | — | | | $ | 358 | | | $ | 6,086 | | | $ | 65 | | | $ | (633) | | | $ | 5,518 | |
| | Common Equity (6) | | — | | | (359) | | | — | | | — | | | — | | | — | | | 1,208 | | | — | | | (359) | | | 849 | |
| | | | — | | | (426) | | | 358 | | | — | | | — | | | 358 | | | 7,294 | | | 65 | | | (992) | | | 6,367 | |
| | | | | | | | | | | | | | | | | | | | | | |
| TalentSmart Holdings, LLC | | Common Equity (6) | | — | | | (295) | | | — | | | — | | | — | | | — | | | 1,306 | | | — | | | (295) | | | 1,011 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| TRS Services, Inc. | | Preferred Equity (6) | | — | | | (48) | | | — | | | — | | | — | | | — | | | 915 | | | — | | | (48) | | | 867 | |
| | Common Equity (6) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | — | | | (48) | | | — | | | — | | | — | | | — | | | 915 | | | — | | | (48) | | | 867 | |
| | | | | | | | | | | | | | | | | | | | | | |
| TTG Healthcare, LLC | | Senior Secured Loan | | — | | | 173 | | | 844 | | | — | | | 37 | | | 881 | | | 19,530 | | | 180 | | | (98) | | | 19,612 | |
| | Preferred Equity (6) | | — | | | (37) | | | — | | | — | | | — | | | — | | | 4,077 | | | — | | | (37) | | | 4,040 | |
| | | | — | | | 136 | | | 844 | | | — | | | 37 | | | 881 | | | 23,607 | | | 180 | | | (135) | | | 23,652 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Total Affiliate Investments | | | | — | | | 13,391 | | | 1,860 | | | 106 | | | 37 | | | 2,003 | | | 102,846 | | | 14,967 | | | (4,320) | | | 113,493 | |
| Total Control and Affiliate Investments | | | | $ | — | | | $ | 14,495 | | | $ | 2,549 | | | $ | 242 | | | $ | 37 | | | $ | 2,828 | | | $ | 113,658 | | | $ | 16,269 | | | $ | (4,372) | | | $ | 125,555 | |
(1)Principal balance, interest rate and maturity of debt investments, and ownership detail for equity investments are presented in the consolidated schedule of investments. The Company's investments are generally classified as "restricted securities"“restricted securities” as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144.
(2)Represents the total amount of interest, fees or dividends included in income for the six months ended June 30, 2021,2022, during which an investment was included in the Control Investment or Affiliate Investment categories.
(3)Gross additions include increases in cost basis of investments resulting from a new portfolio investment, PIK interest, fees and dividends; accretion of OID, and net increases in unrealized appreciation or decreases in net depreciation.
(4)Gross reductions include decreases in the cost basis of investments resulting from principal repayments and sales, if any, and net decreases in net unrealized appreciation or net increases in net depreciation.
(5)Fair value was determined using significant unobservable inputs. See Note 5 for further details.
(6)Non-income producing.
(7)Dividends credited to income include dividends contractually earned but not declared.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Note 11. Subsequent Events Not Disclosed Elsewhere
On August 3, 2021,2, 2022, the Board declared a distribution of $0.24$0.29 per share for the third quarter of 2021,2022, payable on September 30, 20212022 to stockholders of record as of September 23, 2021.
COVID-19
The Company evaluated events subsequent to June 30, 2021 through August 5, 2021. The Company is continuing to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it impacts its portfolio companies, employees, due diligence and underwriting processes, and financial markets. The U.S. capital markets experienced extreme volatility and disruption following the outbreak of the COVID-19 pandemic, which appear to have subsided and returned to pre-COVID-19 levels. Nonetheless, certain economists and major investment banks have expressed concern that the continued spread of the virus globally could lead to a prolonged period of world-wide economic downturn.
On March 27, 2020, the U.S. government enacted the CARES Act, which contains provisions intended to mitigate the adverse economic effects of the coronavirus pandemic. On December 27, 2020, the U.S. government enacted the December 2020 COVID Relief Package. Additionally, on March 11, 2021, the U.S. government enacted the American Rescue Plan, which included additional funding to mitigate the adverse economic effects of the COVID-19 pandemic. It is uncertain whether, or to what extent, our portfolio companies will be able to benefit from the CARES Act, the December 2020 COVID Relief Package, the American Rescue Plan, or any other subsequent legislation intended to provide financial relief or assistance. As a result of this disruption and the pressures on their liquidity, certain of its portfolio companies have been, or may continue to be, incentivized to draw on most, if not all, of the unfunded portion of any revolving or delayed draw term loans made by the Company, subject to availability under the terms of such loans.
The extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend to a large extent on future developments regarding the duration and severity of the coronavirus, effectiveness of vaccination deployment and the actions taken by governments (including stimulus measures or the lack thereof) and their citizens to contain the coronavirus or treat its impact, all of which are beyond our control. An extended period of global supply chain and economic disruption could materially affect its business, results of operations, access to sources of liquidity and financial condition. Given the fluidity of the situation, the Company cannot estimate the long-term impact of COVID-19 on its business, future results of operations, financial position, or cash flows at this time.2022.
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. For additional overview information on the Company, see "Item“Item 1. Business"Business” in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Overview
Key performance metrics are presented below:
| | | | | | | | | | | | | | |
| | June 30, 2021 | | March 31, 2021 |
| Net asset value per common share | | $ | 13.42 | | | $ | 11.96 | |
| | | | | | | | | | | | | | |
| | June 30, 2022 | | March 31, 2022 |
| Net asset value per common share | | $ | 14.57 | | | $ | 15.52 | |
| | | Three Months Ended | | Six Months Ended June 30, | | Three Months Ended | |
| | June 30, 2021 | | March 31, 2021 | | 2021 | | 2020 | | June 30, 2022 | | March 31, 2022 | |
| Net investment income per common share | Net investment income per common share | | $ | 0.24 | | | $ | 0.19 | | | $ | 0.43 | | | $ | 0.49 | | Net investment income per common share | | $ | 0.47 | | | $ | 0.22 | | |
| Net increase (decrease) in net assets resulting from operations per common share | Net increase (decrease) in net assets resulting from operations per common share | | 1.67 | | | 0.31 | | | 1.98 | | | (1.83) | | Net increase (decrease) in net assets resulting from operations per common share | | (0.66) | | | 0.62 | | |
| Distributions paid per common share | Distributions paid per common share | | 0.22 | | | 0.2 | | | 0.42 | | | 0.51 | | Distributions paid per common share | | 0.29 | | | 0.28 | | |
| Adjusted NII Per Common Share(1) — Non-GAAP | | Adjusted NII Per Common Share(1) — Non-GAAP | | |
| Net investment income per common share | | Net investment income per common share | | $ | 0.47 | | | $ | 0.22 | | |
| Capital gain incentive fee accrual per common share | | Capital gain incentive fee accrual per common share | | (0.23) | | | 0.08 | | |
| Adjusted NII per common share — Non-GAAP | | Adjusted NII per common share — Non-GAAP | | $ | 0.24 | | | $ | 0.30 | | |
(1) Adjusted NII is a financial measure calculated and presented on a basis other than in accordance with GAAP. For additional information regarding Adjusted NII, see “Results of Operations—Non-GAAP Financial Measure—Adjusted Net Investment Income”.
Our NAV per common share decreased 6.1% from $15.52 at March 31, 2022 to $14.57 at June 30, 2022, primarily due to net losses on our investment portfolio of $15.1 million, or $1.12 per common share. For the quarter ended June 30, 2022, net losses were primarily related to unrealized depreciation on our Structured Finance Notes and broadly syndicated loan investments due to widening of liquid credit market spreads.
For the quarter ended June 30, 2022, net investment income increased $0.25 per share to $0.47 per share primarily due to a $3.0 million, or $0.23 per share, reversal of previously accrued Capital Gains Fee. The reversal of previously accrued Capital Gains Fee was due to aggregate net unrealized depreciation recognized during the quarter ended June 30, 2022 due to widening of liquid credit market spreads. Total interest income increased $0.05 from$0.5 million compared to the prior quarter, primarily duerelated to an approximate $0.08 increase in net interest margin—total interest income less interest expense—per share due to higher interest income, which accounted for $0.03 of the increase, and lower interest expense, which accounted for $0.05 of the increase. The growth in interest income was principally attributable to our investments in Structured Finance Notes, which contributed $0.03 to the increase in net interest margin per share, resulting from the deployment of $21.9 million into these investments in the first half of the year. The remainder of the increase in interest income is attributable toon our Structured Finance Notes, accelerations of Net Loan Fees from loan prepayments. Our prior quarter net investment income includedprepayments, rising interest costs of approximately $564,000, or $0.04 per share, incurred for both the newly issued $125.0 million of Unsecured Notes Due February 2026rates and the $98.5 million of redeemed Unsecured Notes Due April 2025 and October 2025. The increase in net interest margin duringhigher average invested asset balances. For the quarter ended June 30, 20212022, dividend and fee income decreased $1.0 million compared to the prior quarter, primarily due to a decrease in non-recurring cash dividends and syndication fees.
For the quarter ended June 30, 2022, our weighted-average debt interest costs increased to 4.3% compared to 4.2% for the quarter ended March 31, 2022, primarily due to an increase in the cost of debt on our BNP Facility resulting from LIBOR rate increases. As of June 30, 2022, approximately 63% of our outstanding debt was partially offset by increasesfixed rate and 100% of our outstanding debt matures in management2025 and incentive feesbeyond.
On August 2, 2022, the Board declared a distribution of $0.04$0.29 per share.share for the third quarter of 2022, payable on September 30, 2022 to stockholders of record as of September 23, 2022.
As of June 30, 20212022 and DecemberMarch 31, 2020,2022, floating rate loans at fair value, excluding Structured Finance Notes, were 97% and 96%comprised 93% of our debt portfolio, respectively, and fixed rate loans at fair value were 3% and 4% of this portfolio, respectively.portfolio. Structured Finance Notes generally do not carry a stated rate of interest, but the loan portfolios underlying these investments are generally variable rate debt. The weighted average yield on debt and Structured Finance Notes investments, declined to 8.91% as of June 30, 2021 from 9.01% as of March 31, 2021, due to our continued focus on lower-yielding, first lien senior secured loans to larger borrowers, which we believe will improve our overall risk profile. As of June 30, 2021, approximately 93% of our debt is fixed rate and bears a weighted-average interest cost of 5.07%.
During the three monthsquarter ended June 30, 2021,2022, our portfolioStructured Finance Note and broadly syndicated loan investments experienced net gainslosses of $19.2$9.3 million or $1.43 per share, principallyand $7.0 million, respectively, largely related to widening of liquid credit market spreads. Our directly originated investments experienced a net gain of $1.1 million primarily due to a $18.3$7.8 million or a6.8%, improvementincrease in the fair valuesvalue of our directly originated debt and equity investments. The net appreciation in our directly originated investments was primarily attributable to a $12.1 million improvement on our common equity in Pfanstiehl Holdings, Inc., as well as a $3.5 million improvement on our subordinated debt investment in Eblens Holdings, Inc., in each case, as a result of improvedpositive financial operating results. Pfanstiehl Holdings, Inc., a a global manufacturer of high-purity pharmaceutical ingredients, accounted for 10.2%15.2% of our portfolio at fair value, and 27.4%
42.5% of our consolidated net assets as of June 30, 2021. We also experienced net appreciation of $0.7 million in our Structured Finance Note investments, due to the increase in the value of our Apex Credit CLO 2020 Ltd. and Madison Park Funding XXIII, Ltd. investments. The fair value of our investments in broadly syndicated loans were relatively unchanged, consistent with major syndicated loan indices.
Since OFS Advisor implemented its business continuity plan in mid-March 2020, OFS Advisor's entire team has effectively transitioned to remote work and we are currently capable of maintaining our normal functionality to complete our operational requirements.
OFS Advisor has actively monitored our portfolio companies throughout this period of economic uncertainty, which has included assessments of our portfolio companies' operational and liquidity outlook.2022. During the three monthsquarter ended June 30, 2021, we provided revolving2022, our subordinated loan in Eblens Holdings, Inc. and delayed draw term facilities with total commitments of $6.0 million to four portfolio
companies and amended aour second lien senior secured loan which resulted in an increased spread.Envocore Holdings, LLC, were placed on non-accrual status. The Envocore Holdings, LLC second lien senior secured loan is a PIK loan where we stopped accruing our PIK coupon due to a decline in its fair value; however, that portfolio company remains current on another debt tranche that requires cash interest payments. As of June 30, 2021,2022, our loan portfolio had four non-accrual loans with an aggregate fair value of $17.8 million, or 3.3% of our total investments at fair value, compared to two non-accrual loans with an aggregate fair value of $7.8 million, or 1.4% of our total investments at fair value, at March 31, 2022.
As of June 30, 2022, we havehad unfunded commitments of $11.0$37.3 million to eight17 portfolio companies. During the three monthsquarter ended June 30, 2021,2022, we purchased Structured Finance Notes for an aggregatea cost of $15.7$21.1 million and completed $44.6funded $31.3 million in new and existing Portfolio Company Investments.
At June 30, 2021,2022, our asset coverage ratio of 179% was within162% exceeded the minimum asset coverage requirementsrequirement of 150% under the 1940 Act, and we remained in compliance with all applicable financial thresholdscovenants under our outstanding debt.debt facilities. As of June 30, 2021,2022, we had an unused commitment of $25.0$35.0 million under our PWB Credit Facility, as well as an unused commitment of $125.9$15.9 million under our BNP Facility, botheach of which are subject to a borrowing base and other covenants. Based on our portfolio's fair value and our equity capital at June 30, 2021,2022, we could access these available lines ofall unused commitments under our credit for $129.0 millionfacilities and remain in compliance with our asset coverage requirements.
On April 22, 2022, we amended the PWB Credit Facility to, among other things, increase the maximum amount available under the PWB Credit Facility from $25.0 million to $35.0 million. On June 24, 2022, we amended the BNP Facility to, among other things: (i) extend the reinvestment period under the BNP Facility for three years from June 20, 2022 to June 20, 2025; and (ii) extend the maturity date under the BNP Facility from June 20, 2024 to June 20, 2027. We continue to believe that we have sufficient levels of liquidity to support our existing portfolio companies and expect to continue to selectively deploy capital in new investment opportunities in this challenging environment.
On August 3, 2021, the Board declared a distribution of $0.24 per share for the third quarter of 2021, payable on September 30, 2021 to stockholders of record as of September 23, 2021.
We cannot predict the full impact of the COVID-19 pandemic, including its duration in the United States and worldwide, and the magnitude of the economic impact of the outbreak, including the impact of travel 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. As such, we are unable to predict the duration of any business and supply-chain disruptions, the extent to which the COVID-19 pandemic will negatively affect our portfolio companies’ operating results, or the impact that such disruptions may have on our results of operations and financial 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 possibly default on their financial obligations to us and their other capital providers. We also expect that some of our portfolio companies 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 permanent basis. These developments would likely result in a decrease in the value of our investment in any such portfolio company.
We will continue to monitor the rapidly evolving situation relating to the COVID-19 pandemic and guidance 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 the COVID-19 pandemic on ourOur financial condition, results of operations or cash flows in the future. However, to the extent our portfolio companies continue to be adversely impacted by the COVID-19 pandemic, our future net investment income, financial condition, results of operations andincluding the fair value of our portfolio investments, and results of operations may be materially impacted after June 30, 2022 by circumstances and events that are not yet known. To the extent our portfolio investments are adversely impacted.impacted by the COVID-19 pandemic, the ongoing conflict between Russia and Ukraine, rising interest rates, inflationary pressures, or by other factors, we may experience a material adverse impact on our future net investment income, the underlying value of our investments, our financial condition and the financial condition of our portfolio investments.
We are also subject to financial risks, including changes in market interest rates. As of June 30, 2021,2022, approximately $345$331.0 million (principal amount)(aggregate fair value), or 93%, of our debt investments bore interest at variable rates, which are generally LIBOR-based, and many of which 83% are subjectLIBOR-based. We have prepared and planned for the transition away from LIBOR by incorporating alternate reference rates to reference-rate floors. In connection withbe used in our credit agreements and making other preparations, and believe the COVID-19 pandemic,impact of the transition will be minimal. However, it is not possible to predict the effect of these developments, and any future initiatives to regulate, reform or change the manner of administration of LIBOR could result in adverse consequences to the rate of interest payable and receivable on, market value of and market liquidity for LIBOR-based financial instruments. Additionally, on March 16, 2022, May 4, 2022, June 15, 2022 and July 27, 2022, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased, primarily in the second quarter of 2020. 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 our portfolio investments, a decrease in our operating expenses, including with respect to our Income Incentive Fee, or a decrease in theapproved interest rate of our floating interest rate liabilities indexedincreases and signaled that additional increases may be likely to LIBOR. As of June 30, 2021, the majority of our variable rate debt investments are subject to the base rate floor, partially mitigating the impact of the recent decrease in LIBOR on our gross investment income.combat inflation.
Critical Accounting Policies and Significant Estimates
Our critical accounting policies and estimates are those relating to revenue recognition and fair value estimates. Management has discussed the development and selection of each critical accounting policy and estimate with the Audit Committee of the Board. For descriptions of our revenue recognition and fair value policies, see "Item“Item 8. Financial Statements - Notes to Financial Statements - Note 2"2” and "Management's“Management's Discussion and Analysis - Critical Accounting Policies and Significant Estimates"Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Fair value estimates. Our approach to fair value estimates was significantly adjusted in response to In December 2020, the economic uncertainty associated with the spread of the COVID-19 pandemic, principally through adjustments to the weights given the various methodologies we utilize to estimate discount rates, greater use of pandemic-adjusted forward-looking information, and shortening the evaluation periods used to assess the market depth and liquidity associated with Indicative Prices. These adjustments resulted from observed decreases in the historic correlation between observable inputs utilized on our valuation
models. However, as of December 31, 2020, we had reverted all of our methodologies to their pre-pandemic weightings as financial markets stabilized and the correlations between observable market factors returned.
The following table illustrates the impact of our fair value measures if we selected the low or high end of the range of values for all investments at June 30, 2021 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | |
| Investment Type | | Fair Value at June 30, 2021 | | Range of Fair Value |
| | Low-end | | High-end |
| Debt investments: | | | | | | |
| Senior secured | | $ | 305,930 | | | $ | 302,945 | | | $ | 309,024 | |
| Senior secured (valued at Transaction Prices) | | 11,718 | | | 11,718 | | | 11,718 | |
| Subordinated | | 17,207 | | | 16,701 | | | 17,713 | |
| | | | | | |
| Structured Finance Notes: | | | | | | |
| Subordinated notes | | 65,452 | | | $ | 63,588 | | | 67,318 | |
| Mezzanine debt | | 2,793 | | | 2,746 | | | 2,840 | |
| | | | | | |
| Equity investments: | | | | | | |
| Preferred equity | | 12,289 | | | 10,877 | | | 13,648 | |
| Common equity, warrants and other | | 68,637 | | | 64,369 | | | 74,436 | |
| | $ | 484,026 | | | $ | 472,944 | | | $ | 496,697 | |
The SEC issued a final rule in 2020 modifyingadopting Rule 2a-5 under the 1940 Act to establish requirements for determining fair value in good faith for purposes of the 1940 Act. We are evaluating the impact of adopting Rule 2a-5 on the consolidated financial statements and intend to comply with the new rule’s mandatory requirements on or before the compliance date in September 2022.
The following table illustrates the impact of our fair value measures if we selected the low or high end of the range of values for all investments at June 30, 2022 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | |
| Investment Type | | Fair Value at June 30, 2022 | | Range of Fair Value |
| | Low-end | | High-end |
| Debt investments: | | | | | | |
| Senior secured | | $ | 348,676 | | | $ | 344,259 | | | $ | 353,293 | |
| Subordinated | | 7,303 | | | 5,015 | | | 9,663 | |
| | | | | | |
| Structured Finance Notes: | | | | | | |
| Subordinated notes | | 54,747 | | | 52,392 | | | 57,099 | |
| Mezzanine debt | | 26,631 | | | 26,371 | | | 26,887 | |
| Loan accumulation facilities | | 8,500 | | | 8,500 | | | 8,500 | |
| | | | | | |
| Equity investments: | | | | | | |
| Preferred equity | | 5,951 | | | 5,392 | | | 6,452 | |
| Common equity, warrants and other | | 95,869 | | | 89,990 | | | 101,772 | |
| | $ | 547,677 | | | $ | 531,919 | | | $ | 563,666 | |
Related Party Transactions
We have entered into a number of business relationships with affiliated or related parties, including the following:
•The Investment Advisory Agreement with OFS Advisor to manage our operating and investment activities. Under the Investment Advisory Agreement we have agreed to pay OFS Advisor an annual base management fee based on the average value of our total assets (other than cash but including assets purchased with borrowed amounts and including assets owned by any consolidated entity) as well as an incentive fee based on our investment performance. See “Item 1–Financial Statements–Note 3”3”.
•The Administration Agreement with OFS Services, an affiliate of OFS Advisor, to provide us with the office facilities and administrative services necessary to conduct our operations. See “Item 1–Financial Statements–Note 3.3”.
•A license agreement with OFSAM, the parent company of OFS Advisor, under which OFSAM has agreed to grant us a non-exclusive, royalty-free license to use the name “OFS.” Under this agreement, we have a right to use the “OFS” name for so long as OFS Advisor or one of its affiliates remains our investment adviser. Other than with respect to this limited license, we have no legal right to the “OFS” name. This license agreement will remain in effect for so long as the Investment Advisory Agreement with OFS Advisor is in effect.
OFS Advisor’s services under the Investment Advisory Agreement are not exclusive to us and OFS Advisor is free to furnish similar services to other entities, including other funds affiliated with OFS Advisor, so long as its services to us are not impaired. OFS Advisor also serves as the investment adviser to CLO funds and other assets, including HPCI and OCCI. Additionally, OFS Advisor provides sub-advisory services to CMFT Securities Investments, LLC, a wholly owned subsidiary of CIM Real Estate Finance Trust, Inc., a corporation that qualifies as a real estate investment trust. Additionally, OFS Advisor serves as sub-adviser to CIM Real Assets & Credit Fund, an externally managed registered investment company that operates as an interval fund that invests primarily in a combination of real estate, credit and related investments.
Effective January 1, 2020,2022, OFS Advisor agreed to further reduce theits base management fee attributable to all of the OFSCC-FS Assets without regard to the Company’s asset coverage. The agreement reduced the base management fee to 0.25% per quarter (1.00% annualized) of the average value of the OFSCC-FS Assets (excluding cash) at the end of the two most recently completed calendar quarters. OFS Advisor’s base management fee reduction is renewable on an annual basis and OFS Advisor is not entitled to recoup the amount of the base management fee reduced with respect to the OFSCC-FS Assets. ThisOFS Advisor most recently renewed the agreement was renewed for the 2021 calendar year 2022 on February 16, 2021.
The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with certain affiliates absent an order from the SEC permitting the BDC to do so. On August 4, 2020, we received the Order, which superseded a previous order we received on October 12, 2016, and provides us with greater flexibility to enter into co-investment transactions with Affiliated Funds. We are generally permitted to co-invest with Affiliated Funds if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our
stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.
In addition, pursuantwe may file an application for an amendment to an exemptive order issued by the SEC on April 8, 2020 and applicableour existing Order to all BDCs, through December 31, 2020, we were permitted, subjectpermit us to the satisfaction of certain conditions,continue to co-invest in our existing portfolio companies with certain affiliates that are private funds even if such other funds had not previously invested in such existing portfolio company. Without this order, affiliated funds would notcompany, subject to certain conditions. However, if filed, there is no guarantee that such application will be able to participate in such co-investments with us unless the affiliated funds had previously acquired securities of the portfolio company in a co-investment transaction with us. Although the conditional exemptive order expired on December 31, 2020, the SEC’s Division of Investment Management has indicated that until March 31, 2022, it will not recommend enforcement action, to the extent that any BDC with an existing co-investment order continues to engage in certain transactions described in the conditional exemptive order, pursuant to the same terms and conditions described therein.granted.
Conflicts may arise when we make an investment in conjunction with an investment being made by an Affiliated Account, or in a transaction where an Affiliated Account has already made an investment. Investment opportunities are, from time to time, appropriate for more than one account in the same, different or overlapping securities of a portfolio company’s capital structure. Conflicts arise in determining the terms of investments, particularly where these accounts may invest in different types of securities in a single portfolio company. Potential conflicts arise when addressing, among other things, questions as to whether payment obligations and covenants should be enforced, modified or waived, or whether debt should be restructured, modified or refinanced. For a discussion of the risks associated with conflicts of interest, see "Item 1A.“Item 1. Business — Conflicts of Interest"Interest”, "Item“Item 1A. Risk Factors — Risks Related to OFS Advisor and its Affiliates —We have potential conflicts of interest related to the purchases and sales that OFS Advisor makes on our behalf and/or on behalf of Affiliated Accounts"Accounts” and "Item“Item 1A. Risk Factors — Regulations — Conflicts of Interest - Conflicts Related to Portfolio Investments"Investments” in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Portfolio Composition and Investment Activity
Portfolio Composition
As of June 30, 2021,2022, the fair value of our debt investment portfolio totaled $334.9$356.0 million in 6166 portfolio companies, of which 95%98% and 5%2% were senior secured loans and subordinated loans, respectively. As of June 30, 2021,2022, we had equity investments in 2217 portfolio companies with a fair value of approximately $80.9$101.8 million. We also have sixteen23 investments in Structured Finance Notes with a fair value of $68.2$89.9 million. We had unfunded commitments of $11.0$37.3 million to eight17 portfolio companies at June 30, 2021.2022. Set forth in the tables and charts below is selected information with respect to our portfolio as of June 30, 20212022 and December 31, 2020.2021.
The following table presents our investment portfolio by each wholly owned legal entity within the consolidated group as of June 30, 2021,2022 and December 31, 20202021 (dollar amounts in thousands):
| | | June 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
| | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| OFS Capital Corporation (Parent) | OFS Capital Corporation (Parent) | $ | 172,281 | | | $ | 160,426 | | | $ | 190,627 | | | $ | 172,249 | | OFS Capital Corporation (Parent) | $ | 197,195 | | | $ | 173,722 | | | $ | 157,190 | | | $ | 150,254 | |
| SBIC I LP | SBIC I LP | 176,405 | | | 203,295 | | | 191,192 | | | 190,573 | | SBIC I LP | 94,533 | | | 167,825 | | | 125,584 | | | 183,524 | |
| OFSCC-FS | OFSCC-FS | 109,785 | | | 109,776 | | | 67,781 | | | 68,037 | | OFSCC-FS | 212,374 | | | 202,975 | | | 171,101 | | | 170,132 | |
| OFSCC-MB | OFSCC-MB | 10,106 | | | 10,529 | | | 11,423 | | | 11,464 | | OFSCC-MB | 3,382 | | | 3,155 | | | 3,437 | | | 3,189 | |
| Total investments | Total investments | $ | 468,577 | | | $ | 484,026 | | | $ | 461,023 | | | $ | 442,323 | | Total investments | $ | 507,484 | | | $ | 547,677 | | | $ | 457,312 | | | $ | 507,099 | |
Portfolio Yields
The weighted average yield on total investments(1) was 8.36% and 8.56% at June 30, 2021 and December 31, 2020, respectively. The following table displays the composition ofpresents our performingten largest debt investment and Structured Finance Noteequity investments by portfolio by yield range and its weighted average yieldscompany based on fair value as of June 30, 2021,2022 (dollar amounts in thousands): | | | | | | | | | | | | | | | | | |
| Amortized Cost | | Fair Value | | % of Total Portfolio, at Fair Value |
| Pfanstiehl Holdings, Inc. | $ | 217 | | | $ | 83,153 | | | 15.2 | % |
| All Star Auto Lights, Inc. | 22,935 | | | 23,217 | | | 4.2 | % |
| Milrose Consultants, LLC | 22,719 | | | 22,247 | | | 4.1 | % |
| Kreg LLC | 20,093 | | | 19,850 | | | 3.6 | % |
| Tolemar Acquisition, Inc. | 16,251 | | | 16,301 | | | 3.0 | % |
| The Escape Game, LLC | 16,295 | | | 16,206 | | | 3.0 | % |
| Inergex Holdings, LLC | 14,990 | | | 15,260 | | | 2.8 | % |
| SSJA Bariatric Management, LLC | 13,350 | | | 13,356 | | | 2.4 | % |
| Boca Home Care Holdings, Inc. | 10,857 | | | 10,566 | | | 1.9 | % |
| Envocore Holding, LLC (F/K/A LRI Holding, LLC) | 18,468 | | | 10,383 | | | 1.9 | % |
| Total | $ | 156,175 | | | $ | 230,539 | | | 42.1 | % |
As of June 30, 2022 and December 31, 2020:2021, approximately 4.1% and 11.5% of our total portfolio at fair value and net assets, respectively, were comprised of Structured Finance Notes managed by a single adviser.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 |
| Yield Range | | Senior
Secured | | Subordinated | | Structured Finance | | | | Senior
Secured | | Subordinated | | Structured Finance | | |
| Debt | | Debt | | Notes | | Total | | Debt | | Debt | | Notes | | Total |
| Less than 8% | | 45.5 | % | | — | % | | — | % | | 35.8 | % | | 29.5 | % | | — | % | | 1.4 | % | | 24.0 | % |
| 8% - 10% | | 40.9 | | | — | | | 1.4 | | | 32.5 | | | 52.0 | | | — | | | 1.4 | | | 42.2 | |
| 10% - 12% | | 10.5 | | | — | | | 9.8 | | | 9.9 | | | 13.5 | | | — | | | — | | | 10.9 | |
| 12% - 14% | | 3.1 | | | 53.2 | | | 24.5 | | | 8.9 | | | 3.4 | | | 53.6 | | | 12.5 | | | 7.0 | |
| Greater than 14% | | — | | | 46.8 | | | 64.3 | | | 12.9 | | | 1.6 | | | 46.4 | | | 84.7 | | | 15.9 | |
| Total | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % |
Weighted average yield - performing debt and Structured Finance Note investments (2) | | 8.08 | % | | 14.06 | % | | 16.52 | % | | 9.77 | % | | 8.92 | % | | 14.88 | % | | 16.56 | % | | 10.27 | % |
Weighted average yield - total debt and Structured Finance Note investments (3) | | 7.66 | % | | 6.32 | % | | 16.52 | % | | 8.91 | % | | 8.38 | % | | 5.53 | % | | 16.56 | % | | 9.15 | % |
The following table presents weighted-average yields metrics for our portfolio as of June 30, 2022 and March 31, 2022:
| | | | | | | | | | | |
| |
| For the Three Months Ended |
| June 30, 2022 | | March 31, 2022 |
Weighted-average performing current yield(1): | | | |
| Debt investments | 7.4 | % | | 7.5 | % |
| Structured Finance Notes | 13.1 | % | | 14.2 | % |
| Interest-bearing investments | 8.6 | % | | 8.8 | % |
| | | |
Weighted-average performing income yield(2): | | | |
| Debt investments | 7.9 | % | | 7.7 | % |
| Structured Finance Notes | 13.5 | % | | 14.3 | % |
| Interest-bearing investments | 9.1 | % | | 9.0 | % |
| | | |
Weighted-average realized yield: | | | |
Interest-bearing investments(3) | 8.6 | % | | 8.6 | % |
Total portfolio(4) | 8.2 | % | | 8.2 | % |
(1) Weighted averageCurrent yield on total investments is computedcalculated as (a) the sum of (i) the annual stated accruingactual amount earned on performing investments, including interest on our debt investments at the balance sheet date plus the annualized accretionand prepayment fees but excluding amortization of Net Loan Fees, (ii) the effective yield on our performing preferred equity investments, and (iii) the annual effective yield on Structured Finance Notes, divided by (b) the weighted-average of total performing investments amortized cost.
(2) Income yield is calculated as (a) the actual amount earned on performing investments, including interest and prepayment fees and amortization of Net Loan Fees, divided by (b) the weighted-average of total performing investment amortized cost of our total investment portfolio, including assets in non-accrual status as of the balance sheet date..
(2) The weighted average(3) Realized yield on our performing debt and Structured Finance Note investments is computed as (a)(a) the sum of (i) the annual stated accruingactual amount earned on interest-bearing investments, including interest, on debt investments plus the annualized accretion ofprepayment fees and Net Loan Fees; and (ii) the annual effective yield on Structured Finance NotesFees, divided by (b) the weighted-average of total interest-bearing investments amortized cost of our, in each case, including debt investments on non-accrual status and non-income producing Structured Finance Note investments, excluding debt investments in non-accrual status as of the balance sheet date.Notes.
(3) The weighted average(4) Realized yield on our total debt and Structured Finance Note investments is computed as (a)(a) the sum of (i) the annual stated accruingactual amount earned on all investments including interest, plus the annualized accretiondividends and prepayment fees, amortization of Net Loan Fees, and (ii) plus the annual effective yield on Structured Finance Notesdividends received divided by (b) the weighted-average of total investments amortized cost of our debt and Structured Finance Note investments, including debt investments in non-accrual status as ofor cost.
For the balance sheet date.
Thequarter ended June 30, 2022, the weighted average realized yield on performing portfolio company debt securities, including Structured Finance Notes, decreasedremained stable compared to 9.77% at June 30, 2021 from 10.27% at December 31, 2020,the prior quarter, primarily due to LIBOR rate increases, offset by two loans being placed on non-accrual status during the 8.0% weighted average yield on new debt investments and Structured Finance Notes. During the six months ended June 30, 2021, we purchased approximately $75.3 million in debt securities, primarily in lower-yielding, first lien senior secured loans to larger borrowers, with a weighted average yield of 6.4%. The weighted average yield on total debt, including Structured Finance Notes, decreased to 8.91% at June 30, 2021 from 9.15% at December 31, 2020.quarter.
As of June 30, 2021 and December 31, 2020, floating rate loans at fair value, excluding Structured Finance Notes, were 97% and 96% of our debt portfolio, respectively, and fixed rate loans at fair value were 3% and 4% of this portfolio, respectively.
The weighted average yieldWeighted-average yields of our investments isare not the same as a return on investment for our stockholders, but rather the gross investment income from our investment portfolio before the payment of all of our fees and expenses. There can be no assurance that the weighted average yieldyields will remain at itstheir current level.levels.
Portfolio Company Investments
The following table summarizes the composition of our Portfolio Company Investments as of June 30, 20212022 and December 31, 20202021 (dollar amounts in thousands):
| | | June 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
| | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
Senior secured debt investments (1) | Senior secured debt investments (1) | $ | 331,982 | | | $ | 317,648 | | | $ | 325,647 | | | $ | 306,304 | | Senior secured debt investments (1) | $ | 369,001 | | | $ | 348,676 | | | $ | 336,132 | | | $ | 326,704 | |
| Subordinated debt investments | Subordinated debt investments | 37,944 | | | 17,207 | | | 45,409 | | | 15,067 | | Subordinated debt investments | 13,890 | | | 7,303 | | | 22,071 | | | 17,943 | |
| Preferred equity | Preferred equity | 16,232 | | | 12,289 | | | 18,648 | | | 11,543 | | Preferred equity | 9,501 | | | 5,951 | | | 9,552 | | | 3,765 | |
Common equity, warrants and other | Common equity, warrants and other | 14,887 | | | 68,637 | | | 15,459 | | | 52,984 | | Common equity, warrants and other | 12,750 | | | 95,869 | | | 14,606 | | | 83,486 | |
| Total Portfolio Company Investments | Total Portfolio Company Investments | $ | 401,045 | | | $ | 415,781 | | | $ | 405,163 | | | $ | 385,898 | | Total Portfolio Company Investments | $ | 405,142 | | | $ | 457,799 | | | $ | 382,361 | | | $ | 431,898 | |
| Total number of portfolio companies | 75 | | | 75 | | | 62 | | | 62 | | |
| Number of portfolio companies | | Number of portfolio companies | 78 | | | 78 | | | 70 | | | 70 | |
(1) Includes debtAs of June 30, 2022, other investments in which we have entered into contractual arrangementsrepresent equity participation right investments with co‑lenders whereby, subject to certain conditions, we have agreed to receive our principal payments after the repayment of certain co‑lenders pursuant to a payment waterfall. Thean aggregate amortized cost and fair value of these investments was $36,036$4.7 million and $36,982, respectively, at June 30, 2021, and $55,776 and $56,217, respectively, at$7.2 million, respectively. As of December 31, 2020.2021, other investments represent equity participation right investments with an aggregate cost and fair value of $4.7 million and $7.4 million, respectively.
At June 30, 2021, 95%2022, 98% and 66%64% of our loan portfolio and total portfolio, respectively, consisted of senior secured loans, based on fair value. Approximately 76% of our Portfolio Company Investments at fair value are senior securities of the borrower, rather than in the subordinated securities, preferred equity or common equity. We believe the seniority of our debt investments in the borrowers'borrowers’ capital structures may provide greater downside protection against adverse economic changes, including those caused by the impacts of the COVID-19 pandemic.pandemic, the ongoing conflict between Russia and Ukraine, rising interest and inflation rates and related market volatility.
As of June 30, 2021,2022, the three largest industries of our Portfolio Company Investments by fair value, were (1) Manufacturing (26.3%(27.2%), (2) Health Care and Social Assistance (15.3%) and (3) Professional, Scientific, and Technical Services (16.7%), and (3) Wholesale Trade (13.5%Services(9.4%), totaling approximately 56.5%51.9% of our Portfolio Company Investment portfolio. For a full summary of our investment portfolio by industry, see “Item 1–Financial Statements–Note 4.”
As of June 30, 2021,2022, our common equity investment in Pfanstiehl Holdings, Inc. based on its fair value of $49.2 million, $49.0 million of which representing an unrealized gain, accounts for 10.2% of our total portfolio at fair value, or 27.4% of total net assets. Since December 31, 2020 and December 31, 2019, Pfanstiehl Holdings, Inc., a global manufacturer of high-purity pharmaceutical ingredients, has appreciated $13.0 millionaccounted for 15.2% and $37.3 million, respectively, primarily due42.5% of our total portfolio at fair value and our total net assets, respectively. Due to improvedincreased financial operating results, as well as multiple expansionthe fair value of our investment in the pharmaceutical industry.common equity of Pfanstiehl Holdings, Inc. has increased by $17.4 million, to $83.2 million, during the six months ended June 30, 2022. The value of this investment is substantially comprised of unrealized appreciation of $82.9 million. A deterioration in the operating performance of the company or other factors underlying the valuation of this investment could have a material impact on our NAV.
Structured Finance Notes
The following table presentssummarizes the composition of our debt investment portfolio by investment sizeStructured Finance Notes as of June 30, 20212022, and December 31, 2020 (dollar amounts in2021 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amortized Cost | | Fair Value |
| June 30, 2021 | | December 31, 2020 | | June 30, 2021 | | December 31, 2020 |
| Up to $4,000 | $ | 49,367 | | | 13.3 | % | | $ | 30,427 | | | 8.2 | % | | $ | 49,644 | | | 14.8 | % | | $ | 33,149 | | | 10.3 | % |
| $4,001 to $7,000 | 79,557 | | | 21.5 | | | 72,030 | | | 19.4 | | | 81,400 | | | 24.3 | | | 68,939 | | | 21.5 | |
| $7,001 to $10,000 | 36,549 | | | 9.9 | | | 51,874 | | | 14.0 | | | 35,920 | | | 10.7 | | | 43,735 | | | 13.6 | |
| $10,001 to $13,000 | 10,810 | | | 2.9 | | | 21,013 | | | 5.7 | | | 23,318 | | | 7.0 | | | 33,470 | | | 10.4 | |
| Greater than $13,000 | 193,643 | | | 52.4 | | | 195,711 | | | 52.7 | | | 144,573 | | | 43.2 | | | 142,078 | | | 44.2 | |
| Total | $ | 369,926 | | | 100.0 | % | | $ | 371,055 | | | 100.0 | % | | $ | 334,855 | | | 100.0 | % | | $ | 321,371 | | | 100.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| Subordinated notes | $ | 65,855 | | | $ | 54,747 | | | $ | 63,791 | | | $ | 63,922 | |
| Mezzanine debt | 27,987 | | | 26,631 | | | 2,660 | | | 2,779 | |
| Loan accumulation facilities | 8,500 | | | 8,500 | | | 8,500 | | | 8,500 | |
| Total Structured Finance Notes | $ | 102,342 | | | $ | 89,878 | | | $ | 74,951 | | | $ | 75,201 | |
Investment Activity
The following is a summary of our Portfolio Company Investmentour investment activity for the three and six months ended June 30, 2022 (dollar amounts in millions):
| | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, 2022 | | Six Months Ended June 30, 2022 |
| Investments in new Portfolio Companies | | $ | 26.9 | | | $ | 59.8 | |
| Investments in existing Portfolio Companies | | 4.4 | | | 19.6 | |
| Investments in Structured Finance Notes | | 21.1 | | | 43.2 | |
| Total investment purchases and originations | | $ | 52.4 | | | $ | 122.6 | |
| | | | |
| Proceeds from principal payments and equity distributions | | $ | 34.9 | | | $ | 54.5 | |
| Proceeds from investments sold or redeemed | | 9.1 | | | 12.2 | |
| Proceeds from distributions received from Structured Finance Notes | | 5.5 | | | 11.2 | |
| Total proceeds from principal payments, equity distributions and investments sold | | $ | 49.5 | | | $ | 77.9 | |
During the six months ended June 30, 2022, notable investments in new portfolio companies, included 24 Seven Holdco, LLC ($8.9 million senior secured loan), Atlantis Holding, LLC ($8.1 million senior secured loan), Tony's Finer Foods Enterprises, LLC ($7.9 million senior secured loan) and Boca Home Care Holdings, Inc. ($9.6 million senior secured loan).
During the six months ended June 30, 2022, notable principal payments included SourceHOV Tax, Inc. ($19.8 million senior secured loan).
The following is a summary of our investment activity for the three and six months ended June 30, 2021 (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, 2021 | | Six Months Ended June 30, 2021 |
| | | Debt
Investments | | Equity
Investments | | Debt
Investments | | Equity
Investments |
| Investments in new portfolio companies | | $ | 26.5 | | | $ | — | | | $ | 62.8 | | | $ | — | |
| Investments in existing portfolio companies | | | | | | | | |
| Follow-on investments | | 18.0 | | | — | | | 44.2 | | | — | |
| Restructured investments | | — | | | — | | | — | | | — | |
| Delayed draw and revolver funding | | — | | | — | | | — | | | — | |
| Total investments in existing portfolio companies | | 18.0 | | | — | | | 44.2 | | | — | |
Total investments in new and existing portfolio companies | | $ | 44.5 | | | $ | — | | | $ | 107.0 | | | $ | — | |
| Number of new portfolio company investments | | 13 | | | — | | | 31 | | | — | |
Number of existing portfolio company investments | | 8 | | | — | | | 17 | | | — | |
| | | | | | | | |
Proceeds/redemptions from principal payments/ equity investments | | 52.2 | | | — | | | 100.8 | | | — | |
| Proceeds from investments sold or redeemed | | 9.7 | | | — | | | 10.3 | | | — | |
Total proceeds from principal payments, equity distributions and investments sold | | $ | 61.9 | | | $ | — | | | $ | 111.1 | | | $ | — | |
| | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, 2021 | | Six Months Ended
June 30, 2021 |
| Investments in new Portfolio Companies | | $ | 26.5 | | | $ | 62.8 | |
| Investments in existing Portfolio Companies | | 18.0 | | | 44.2 | |
| Investments in Structured Finance Notes | | 15.7 | | | 21.9 | |
| Total investment purchases and originations | | $ | 60.2 | | | $ | 128.9 | |
| | | | |
| Proceeds from principal payments and equity distributions | | $ | 52.2 | | | $ | 100.8 | |
| Proceeds from investments sold or redeemed | | 9.7 | | | 10.3 | |
| Proceeds from distributions received from Structured Finance Notes | | 3.7 | | | 6.4 | |
| Total proceeds from principal payments, equity distributions and investments sold | | $ | 65.6 | | | $ | 117.5 | |
Notable investments in new portfolio companies during the six months ended June 30, 2021, includeincluded KNS Acquisition Corp. ($5.0 million senior secured loan), Baymark Health Services, Inc. ($4.9 million senior secured loan), Electrical Components International, Inc. ($5.6 million senior secured loan), and TruGreen Limited Partnership ($4.7 million senior secured loan).
During the six months ended June 30, 2021, the weighted-average yield of new debt in Portfolio Company Investment companies was 6.4%.
During the six months ended June 30, 2021, we also invested $21.9 million in Structured Finance Notes with a weighted average annual effective yield of 16.8%.
The following is a summary of our Portfolio Company Investment activity for the three and six months ended June 30, 2020 (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, 2020 | | Six Months Ended
June 30, 2020 |
| | | Debt
Investments | | Equity
Investments | | Debt
Investments | | Equity
Investments |
| Investments in new portfolio companies | | $ | 2.4 | | | $ | — | | | $ | 42.3 | | | $ | — | |
| Investments in existing portfolio companies | | | | | | | | |
| Follow-on investments | | 0.5 | | | — | | | 10.1 | | | 0.1 | |
| Restructured investments | | — | | | — | | | — | | | 0.7 | |
| Delayed draw and revolver funding | | 4.3 | | | — | | | 5.7 | | | — | |
| Total investments in existing portfolio companies | | 4.8 | | | — | | | 15.8 | | | 0.8 | |
Total investments in new and existing portfolio companies | | $ | 7.2 | | | $ | — | | | $ | 58.1 | | | $ | 0.8 | |
| Number of new portfolio company investments | | 5 | | | — | | | 10 | | | — | |
Number of existing portfolio company investments | | 4 | | | 1 | | | 15 | | | 3 | |
| | | | | | | | |
Proceeds/distributions from principal payments/ equity investments | | 19.1 | | | — | | | 56.3 | | | — | |
| Proceeds from investments sold or redeemed | | 23.4 | | | — | | | 61.9 | | | 3.6 | |
Total proceeds from principal payments, equity distributions and investments sold | | $ | 42.5 | | | $ | — | | | $ | 118.2 | | | $ | 3.6 | |
Notable investments in new portfolio companies during the six months ended June 30, 2020, include A&A Transfer, LLC ($23.7 million senior secured loan and $1.6 million revolver) and SourceHOV Tax, Inc. ($12.8 million senior secured loan).
During the six months ended June 30, 2020, the weighted-average yield of direct debt investments in new portfolio companies was 8.5%.
During the six months ended June 30, 2020, we also invested $12.8 million in Structure Finance Notes with a weighted average annual effective yield of 19.6%.
Non-cash investment activity
On June 11, 2021, My Alarm Center, LLC’s bankruptcy plan became effective and our equity interests were cancelled. For the six months ended June 30, 2021, the Company recognized a realized loss of $3.1 million, of which $3.0 million was recognized as an unrealized loss as of December 31, 2020.
On March 27, 2020, our debt investment in Constellis Holdings, LLC was restructured. We converted our non-accrual debt investment into 20,628 shares of common equity. The fair value of the 20,628 shares of common equity received was $0.7 million, which we recognized as the investment's cost.
Risk Monitoring
We categorize direct investments in the debt securities of portfolio companies into seven risk categories based on relevant information about the ability of borrowers to service their debt. For additional information regarding our risk categories, see “Item 1. Business–Portfolio Review/Risk Monitoring” in our Annual Report on Form 10-K for the year ended December 31, 2020.2021, filed on March 4, 2022. The following table shows the classification of our debt securities of portfolio companies, excluding Structured Finance Notes, by credit risk rating as of June 30, 20212022 and December 31, 20202021 (dollar amounts in thousands):
| | | Debt Investments, at Fair Value | | Debt Investments, at Fair Value |
| Risk Category | Risk Category | | June 30, 2021 | | December 31, 2020 | Risk Category | | June 30, 2022 | | December 31, 2021 |
| 1 (Low Risk) | 1 (Low Risk) | | $ | — | | | — | % | | $ | — | | | — | % | 1 (Low Risk) | | $ | — | | | — | % | | $ | — | | | — | % |
| 2 (Below Average Risk) | 2 (Below Average Risk) | | — | | | — | | | — | | | — | | 2 (Below Average Risk) | | — | | | — | | | — | | | — | |
| 3 (Average) | 3 (Average) | | 309,149 | | | 92.3 | | | 263,934 | | | 82.2 | | 3 (Average) | | 330,264 | | | 92.9 | | | 324,370 | | | 94.2 | |
| 4 (Special Mention) | 4 (Special Mention) | | 17,950 | | | 5.4 | | | 45,302 | | | 14.1 | | 4 (Special Mention) | | 18,251 | | | 5.1 | | | 12,550 | | | 3.6 | |
| 5 (Substandard) | 5 (Substandard) | | 6,975 | | | 2.1 | | | 11,684 | | | 3.6 | | 5 (Substandard) | | 7,303 | | | 2.1 | | | 7,027 | | | 2.0 | |
| 6 (Doubtful) | 6 (Doubtful) | | 781 | | | 0.2 | | | 451 | | | 0.1 | | 6 (Doubtful) | | 161 | | | — | | | 699 | | | 0.2 | |
| 7 (Loss) | 7 (Loss) | | — | | | — | | | — | | | — | | 7 (Loss) | | — | | | — | | | — | | | — | |
| | $ | 334,855 | | | 100.0 | % | | $ | 321,371 | | | 100.0 | % | | $ | 355,979 | | | 100.1 | % | | $ | 344,646 | | | 100.0 | % |
Changes in the distributionAs of June 30, 2022, our debt investments across risk categories were a result of new debt investments, the receipt of amortization payments on existing debt investments, repayment of certain debt investments in full, changes in the fair value of our existing debt investments, realized gains on the sale of investments, as well as changes in risk categories.ratings remained stable compared to December 31, 2021. During the six months ended June 30, 2021,2022, a debt investmentsinvestment with an aggregateamortized cost and fair value of $17.1$9.2 million and $16.4 million, respectively, had risk rating upgrades from risk category 4 to risk category 3, and a debt investment with a cost and fair value of $16.1 million and $0.1$7.1 million, respectively, had a risk rating downgrade from risk category 53 to risk category 6.4.
Non-Accrual Loans
WhenManagement reviews all loans that become past due on principal and interest, and/or when there is reasonable doubt that principal, cash interest, or PIK interest will be collected, for placement on non-accrual status. When a loan investments areis placed on non-accrual status, unpaid interest is credited to income and the Company will generally cease recognizing cash interest, PIK interest, oris reversed. Additionally, Net Loan Fee amortization,Fees are no longer accreted to interest income as applicable.of the date the loan is placed on non-accrual status. Interest payments subsequently received on non-accrual investments may be recognized as income or applied to principal depending upon management’s judgment. Interest accruals and Net Loan Fee amortization are resumed on non-accrual investments only when they are brought current with respect to principal, interest and when, in the judgment of management, the investments are estimated to be fully collectible as to all principal. No newprincipal and interest. During the quarter ended June 30, 2022, two loans with an aggregate amortized cost and fair value of $15.8 million and $10.4 million, respectively, were placed on non-accrual status during the six months ended June 30, 2021. status. The aggregate amortized cost and fair value of loans on non-accrualnon-accrual status with respect to all interest and Net Loan Fee amortization was $38.2$34.7 million and $7.8$17.8 million, respectively, at June 30, 2021,2022, and $48.1$19.1 million and $12.1$7.7 million, respectively, at December 31, 2020. During the six months ended June 30, 2021, Community Intervention Services, Inc., a non-accrual loan since September 30, 2016 with a cost of $7.6 million was sold for $0.1 million.
Structured Finance Notes
The following table summarizes the composition of our Structured Finance Notes as of June 30, 2021, and December 31, 2020 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| Subordinated notes | $ | 64,901 | | | $ | 65,452 | | | $ | 54,280 | | | $ | 54,724 | |
| Mezzanine bonds | 2,631 | | | 2,793 | | | 1,580 | | | 1,701 | |
| Total Structured Finance Notes | $ | 67,532 | | | $ | 68,245 | | | $ | 55,860 | | | $ | 56,425 | |
As of June 30, 2021, the weighted average yield on Structured Finance Notes remained stable at 16.52%, compared to 16.56% at December 31, 2020.2021.
Results of Operations
Our key financial measures are described in "Item“Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations–Results of Operations–Key Financial Measures"Measures” in our Annual Report on Form 10-K for the year ended December 31, 2020.2021, filed on March 4, 2022. The following is a discussion of the key financial measures that management employs in reviewing the performance of our operations.
We do not believe that our historical operating performance is necessarily indicative of our future results of operations. We are primarily focused on debt investments in middle-market and larger companies in the United States and, to a lesser extent, equity investments, including warrants and other minority equity securities, and Structured Finance Notes, which differs to some degree from our historical investment concentration, in that we now also focus on the debt of larger U.S. companies and Structured Finance Notes. Moreover, as a BDC and a RIC, we will also beare subject to certain constraints on our operations, including, but not limited to, limitations imposed by the 1940 Act and the Code. In addition, SBIC I LP is subject to regulation and oversight by the SBA. For the reasons described above, the results of operations described below may not necessarily be indicative of the results we expect to report in future periods.
Net increase (decrease) in net assets resulting from operations can vary substantially from period to period for various reasons, including the recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, annual comparisons of net increase (decrease) in net assets resulting from operations may not be meaningful.
The following analysis compares our quarterly results of operations to the preceding quarter, as well as our year-to-date results of operations to the corresponding period in the prior year. We believe a comparison of our current quarterly results
to the preceding quarter is more meaningful and transparent than a comparison to the corresponding prior-year quarter as our results of operations are not influenced by seasonal factors the latter comparison is designed to elicit and highlight.
Comparison of the three months ended June 30, 20212022 and March 31, 20212022 and comparison of the six months ended June 30, 20212022 and 20202021
Consolidated operating results for the three months ended June 30, 20212022 and March 31, 20212022 and the six months ended June 30, 20212022 and 20202021 are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended June 30, |
| June 30, 2021 | | March 31, 2021 | | 2021 | | 2020 |
| Investment income | | | | | | | |
| Interest income: | | | | | | | |
| Cash interest income | $ | 6,972 | | | $ | 6,837 | | | $ | 13,809 | | | $ | 18,299 | |
| Net Loan Fee amortization | 857 | | | 573 | | | 1430 | | | 817 | |
| Accretion of interest income on Structured Finance Notes | 2,392 | | | 2,278 | | | 4,670 | | | 2,626 | |
| Other interest income | — | | | 12 | | | 12 | | | 54 | |
| Total interest income | 10,221 | | | 9,700 | | | 19,921 | | | 21,796 | |
| PIK income: | | | | | | | |
| PIK interest income | 397 | | | 440 | | | 837 | | | 829 | |
| Preferred equity PIK dividends | 59 | | | 47 | | | 106 | | | 343 | |
| Total PIK income | 456 | | | 487 | | | 943 | | | 1,172 | |
| Dividend income: | | | | | | | |
| | | | | | | |
| Common and preferred equity cash dividends | 136 | | | — | | | 136 | | | 100 | |
| Total dividend income | 136 | | | — | | | 136 | | | 100 | |
| Fee income: | | | | | | | |
| Syndication fees | 439 | | | 217 | | | 656 | | | 378 | |
| Prepayment and other fees | 164 | | | 86 | | | 251 | | | 405 | |
| Total fee income | 603 | | | 304 | | | 907 | | | 783 | |
| Total investment income | 11,416 | | | 10,491 | | | 21,907 | | | 23,851 | |
| Total expenses, net | 8,181 | | | 7,941 | | | 16,122 | | | 17,272 | |
| Net investment income | 3,235 | | | 2,550 | | | 5,785 | | | 6,579 | |
| Net gain (loss) on investments | 19,206 | | | 3,923 | | | 23,129 | | | (30,932) | |
| Loss on extinguishment of debt | — | | | (2,299) | | | (2,299) | | | (149) | |
| Net increase (decrease) in net assets resulting from operations | $ | 22,441 | | | $ | 4,174 | | | $ | 26,615 | | | $ | (24,502) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended June 30, |
| June 30, 2022 | | March 31, 2022 | | 2022 | | 2021 |
| Investment income | | | | | | | |
| Interest income: | | | | | | | |
| Cash interest income | $ | 7,283 | | | $ | 7,013 | | | $ | 14,296 | | | $ | 13,809 | |
| PIK interest income | 49 | | | 278 | | | 327 | | | 837 | |
| Net Loan Fee amortization | 509 | | | 267 | | | 777 | | | 1,466 | |
| Accretion of interest income on Structured Finance Notes | 2,503 | | | 2,282 | | | 4,785 | | | 4,670 | |
| Other interest income | 1 | | | 2 | | | 3 | | | 12 | |
| Total interest income | 10,345 | | | 9,842 | | | 20,188 | | | 20,794 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Dividend income: | | | | | | | |
| Preferred equity PIK dividends | — | | | — | | | — | | | 106 | |
| Cash dividends | 5 | | | 758 | | | 763 | | | 136 | |
| Total dividend income | 5 | | | 758 | | | 763 | | | 242 | |
| Fee income: | | | | | | | |
| Syndication fees | — | | | 257 | | | 257 | | | 656 | |
| Prepayment and other fees | 82 | | | 89 | | | 170 | | | 215 | |
| Total fee income | 82 | | | 346 | | | 427 | | | 871 | |
| Total investment income | 10,432 | | | 10,946 | | | 21,378 | | | 21,907 | |
| Total expenses | 4,184 | | | 7,941 | | | 12,125 | | | 16,122 | |
| Net investment income | 6,248 | | | 3,005 | | | 9,253 | | | 5,785 | |
| Net gain (loss) on investments | (15,072) | | | 5,500 | | | (9,572) | | | 23,129 | |
| Loss on extinguishment of debt | — | | | (144) | | | (144) | | | (2,299) | |
| Net increase (decrease) in net assets resulting from operations | $ | (8,824) | | | $ | 8,361 | | | $ | (463) | | | $ | 26,615 | |
Interest and PIK income by debt investment type for the three months ended June 30, 20212022 and March 31, 20212022 and six months ended June 30, 20212022 and 2020,2021, is summarized below (in thousands):
| | | Three Months Ended | | Six Months Ended June 30, | | Three Months Ended | | Six Months Ended June 30, |
| | June 30, 2021 | | March 31, 2021 | | 2021 | | 2020 | | June 30, 2022 | | March 31, 2022 | | 2022 | | 2021 |
| Interest income and PIK interest income: | | | | | | | | |
| Interest income: | | Interest income: | | | | | | | |
| Senior secured debt investments | Senior secured debt investments | $ | 7,580 | | | $ | 7,202 | | | $ | 14,782 | | | $ | 18,084 | | Senior secured debt investments | $ | 7,021 | | | $ | 6,416 | | | $ | 13,438 | | | $ | 14,818 | |
| Subordinated debt investments | Subordinated debt investments | 646 | | | 660 | | | 1,306 | | | 1,911 | | Subordinated debt investments | — | | | 444 | | | 444 | | | 1,306 | |
| Structured Finance Notes | Structured Finance Notes | 2,392 | | | 2,278 | | | 4,670 | | | 2,630 | | Structured Finance Notes | 3,324 | | | 2,982 | | | 6,306 | | | 4,670 | |
| Total interest income and PIK interest income | 10,618 | | | 10,140 | | | 20,758 | | | 22,625 | | |
| Total interest income | | Total interest income | 10,345 | | | 9,842 | | | 20,188 | | | 20,794 | |
| Less Net Loan Fees accelerations | Less Net Loan Fees accelerations | (551) | | | (342) | | | (893) | | | (235) | | Less Net Loan Fees accelerations | (221) | | | (40) | | | (261) | | | (893) | |
| Recurring interest income and PIK interest income | $ | 10,067 | | | $ | 9,798 | | | $ | 19,865 | | | $ | 22,390 | | |
| Recurring interest income | | Recurring interest income | $ | 10,124 | | | $ | 9,802 | | | $ | 19,927 | | | $ | 19,900 | |
Investment Income
Other than accelerationFor the quarter ended June 30, 2022, total investment income of Net Loan Fees (PIK$10.4 million decreased by $0.5 million compared to the quarter ended March 31, 2022, primarily due to a decrease of $1.0 million in dividend and fee income, offset by an increase of $0.5 million in interest income and the accretable yield on Structured Finance Notes) recognized upon the repayment of a loan, we consider our interest income on direct debt investments to portfolio companies to be recurring in nature. Such recurring interest income and PIK interestincome.
Interest income increased $0.3$0.5 million during the three months ended June 30, 20212022 compared to the prior quarter primarily due to a $10.9 millionan increase in our portfolio’s weighted-average performing income yield to 9.1% for the average outstanding performing loan balance. Recurring interest income decreased $2.5 million during the six monthsquarter ended June 30, 2021 compared to the corresponding period2022 from 9.0% in the prior year,quarter, primarily due to a $3.1 million decreaseincreases in the average outstanding performing loan balance, partly offset by a $0.6 million increase from a 30 basis point increase in the recurring earned yield.
During the three months ended June 30, 2021, dividend income increased $0.1 million due to a distribution from our equity investment in MTE Holding Corp.LIBOR and SOFR rates.
Syndication fees, prepayment fees and the acceleration of Net Loan Fees are considered non-recurring and generally result from periodic transactions rather than from holding portfolio investments. Syndication fees, which are recognized when OFS Advisor sources, structures, and arranges the lending group, and for which we are additionally compensated, increaseddecreased to $0.4 million$-0- for the three monthsquarter ended June 30, 2021 compared to $0.22022 from $0.3 million forin the three months ended March 31, 2021. Total fee income forprior quarter.
For the six months ended June 30, 2021 compared to the corresponding period in the prior year, increased from $0.82022, total investment income of $21.4 million to $0.9 million primarily due to an increase in syndication fees.
Expenses
Operating expenses for the three months ended June 30, 2021 and March 31, 2021 and six months ended June 30, 2021 and 2020, are presented below (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended June 30, |
| June 30, 2021 | | March 31, 2021 | | 2021 | | 2020 |
| Interest expense | $ | 4,241 | | | $ | 4,825 | | | $ | 9,066 | | | $ | 9,853 | |
| Management fee | 1,876 | | | 1,834 | | | 3,710 | | | 3,888 | |
| Incentive fee | 809 | | | — | | | 809 | | | 1,098 | |
| Professional fees | 489 | | | 387 | | | 876 | | | 1,108 | |
| Administration fee | 439 | | | 568 | | | 1,007 | | | 1,020 | |
| General and administrative expenses | 327 | | | 327 | | | 654 | | | 746 | |
| Total expenses before incentive fee waiver | 8,181 | | | 7,941 | | | 16,122 | | | 17,713 | |
| Incentive fee waiver | — | | | — | | | — | | | (441) | |
| Total expenses, net of incentive fee waiver | $ | 8,181 | | | $ | 7,941 | | | $ | 16,122 | | | $ | 17,272 | |
Interest expense for the three months ended June 30, 2021 decreased $0.6 million compared to the preceding quarter, primarily due to interest costs of approximately $564,000 incurred for both the newly issued $125.0 million of Unsecured Notes Due February 2026 and the $98.5 million of redeemed Unsecured Notes Due April 2025 and October 2025. Interest expense for
the six months ended June 30, 2021 decreased $0.8by $0.5 million compared to the corresponding period in the prior year, primarily due to a $20.9 million decrease of interest and fee income, offset by an increase in the weighted average debt balance.dividend income.
Management fee expenseExpenses
Operating expenses for the three months ended June 30, 2022 and March 31, 2022 and six months ended June 30, 2022 and 2021, are presented below (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended June 30, |
| June 30, 2022 | | March 31, 2022 | | 2022 | | 2021 |
| Interest expense | $ | 3,943 | | | $ | 3,624 | | | $ | 7,567 | | | $ | 9,066 | |
| Management fee | 2,056 | | | 2,020 | | | 4,076 | | | 3,710 | |
| Income Incentive Fee | — | | | — | | | — | | | 809 | |
| Capital Gains Fee | (2,988) | | | 1,072 | | | (1,916) | | | — | |
| Professional fees | 352 | | | 407 | | | 759 | | | 876 | |
| Administration fee | 423 | | | 451 | | | 874 | | | 1,007 | |
| Other expenses | 398 | | | 367 | | | 765 | | | 654 | |
| Total expenses | $ | 4,184 | | | $ | 7,941 | | | $ | 12,125 | | | $ | 16,122 | |
Comparison of the three months ended June 30, 2022 and March 31, 2022
Interest expense for the quarter ended June 30, 2022 increased $0.3 million compared to the prior quarter primarily due to the increase in the weighted average balance on our BNP Facility from $106.9 million to $133.9 million.
Management fee expense for the quarter ended June 30, 2022 remained stable compared to the prior quarter consistent with changes in total assets. Management fee expense for the six months ended June 30, 2021 decreased $0.2 million compared to the corresponding period in the prior year consistent with changes in total assets.quarter.
The incentive fees earned by OFS Advisor for the three monthsquarter ended June 30, 2021 increased $0.82022 decreased $4.1 million compared to the prior quarter, primarily due to an increasea decrease of $3.0 million in net interest margin. Pre-incentive fee net investment income did not exceed the performance hurdle for incentives inaccrued Capital Gains Fee. As of March 31, 2022 and December 31, 2021, we had accrued a Capital Gains Fee of $3.0 million and $1.9 million, respectively. During the three months ended March 31, 2021. Incentive feeJune 30, 2022, a full reversal of the previously accrued $3.0 million Capital Gains Fee was recognized as a result of the reduction in net unrealized appreciation on the investment portfolio. As of June 30, 2022, there is no accrued Capital Gains Fee included in the amounts payable to investment adviser and affiliates as listed on the consolidated statements of assets and liabilities.
For the quarter ended June 30, 2022, professional fees, administration fees and other expenses remained stable compared to the prior quarter.
Comparison of the six months ended June 30, 2022 and 2021
Interest expense for the six months ended June 30, 2021 before taking into account the incentive fee waiver during the three months ended March 31, 2020,2022 decreased $0.3$1.5 million compared to the corresponding period in the prior year, primarily due to the decrease in netthe weighted average effective interest marginrate on our total outstanding debt from 5.31% to 4.23% during the first quarter of 2021.
Professional fees for the threesix months ended June 30, 2021 increased $0.1 million compared to the prior quarter. Professional fees2021.
Management fee expense for the six months ended June 30, 2021 decreased $0.22022 increased $0.4 million compared to the corresponding period in the prior year, primarily due to a decreasean increase in valuation services.
Administration fee expense for the three months ended June 30, 2021 decreased $0.1average portfolio fair value to $507.1 million compared to the prior quarter due to allocations related to year-end administrative services, including audit support during the first quarter of 2021. Administration fee expense$464.1 million for the six months ended June 30, 20212021.
The incentive fees earned by OFS Advisor for the six months ended June 30, 2022 decreased $2.7 million compared to the corresponding period in the prior year, primarily due to pre-incentive fee net investment income not exceeding the performance hurdle for incentives during the quarter ended March 31, 2022 and June 30, 2022, as well as the full reversal of a previously accrued Capital Gains Fee of $1.9 million.
For the six months ended June 30, 2022, professional fees, administration fees and other expenses remained stable withcompared to the corresponding period in the prior year.
General and administrative expenses for the three months ended June 30, 2021 remained stable with the prior quarter. General and administrative expenses decreased $0.1 million over the prior year primarily due to tax expenses in the corresponding period in the prior year.
Net realized and unrealized gain (loss) on investments
Net gain (loss), inclusive of realized and unrealized gains (losses), by investment type for the three months ended June 30, 20212022 and March 31, 20212022 and six months ended June 30, 20212022 and 2020,2021, were as follows (in thousands):
| | | Three Months Ended | | Six Months Ended June 30, | | Three Months Ended | | Six Months Ended June 30, |
| | June 30, 2021 | | March 31, 2021 | | 2021 | | 2020 | | June 30, 2022 | | March 31, 2022 | | 2022 | | 2021 |
| Senior secured debt | Senior secured debt | $ | 918 | | | $ | 3,880 | | | 4,796 | | | $ | (23,368) | | Senior secured debt | $ | (9,945) | | | $ | (1,198) | | | $ | (11,141) | | | $ | 4,796 | |
| Subordinated debt | Subordinated debt | 3,513 | | | (1,442) | | | 2,071 | | | (7,590) | | Subordinated debt | (2,034) | | | (424) | | | (2,458) | | | 2,071 | |
| Preferred equity | Preferred equity | (81) | | | 721 | | | 640 | | | (2,669) | | Preferred equity | (244) | | | 2,391 | | | 2,186 | | | 640 | |
| Common equity, warrants and other | Common equity, warrants and other | 14,371 | | | 1,373 | | | 15,744 | | | 5,986 | | Common equity, warrants and other | 6,380 | | | 8,269 | | | 14,610 | | | 15,744 | |
| Structured Finance Notes | Structured Finance Notes | 690 | | | (543) | | | 147 | | | (3,707) | | Structured Finance Notes | (9,266) | | | (3,449) | | | (12,715) | | | 147 | |
| Deferred income tax benefit (expense) | (205) | | | (66) | | | (269) | | | 416 | | |
| Income tax expense on net realized investment gains | | Income tax expense on net realized investment gains | — | | | (48) | | | (48) | | | — | |
| Deferred tax benefit (expense) | | Deferred tax benefit (expense) | 35 | | | (41) | | | (6) | | | (269) | |
| Total net gain (loss) on investments | Total net gain (loss) on investments | $ | 19,206 | | | $ | 3,923 | | | $ | 23,129 | | | $ | (30,932) | | Total net gain (loss) on investments | $ | (15,074) | | | $ | 5,500 | | | $ | (9,572) | | | $ | 23,129 | |
Net gain (loss) on investments for the three months ended June 30, 20212022 and March 31, 20212022
Three months ended June 30, 20212022
Our portfolio experienced net losses of $15.1 million in the second quarter of 2022, primarily as a result of unrealized depreciation of $9.3 million and $6.7 million on our Structured Finance Notes and broadly syndicated loan investments, respectively, attributable to widening of liquid credit market spreads. These losses were partially offset by net gains, primarily consisting of unrealized appreciation on our common equity investments that were primarily attributable to an increase in fair value of $7.8 million on our equity investment in Pfanstiehl Holdings, Inc.
Three months ended March 31, 2022
Our portfolio experienced net gains of $19.2$5.5 million in the secondfirst quarter of 2021,2022, principally due to a $18.3$10.0 million, or 6.8%3.1%, improvementincrease in the fair values of our directly originated debt and equity investments. Net gains forDuring the first quarter include realizedof 2022, we experienced unrealized losses of $10.8$1.0 million primarily on the sale of our subordinated debt investment in Community Intervention Services, LLC and the write-off of equity interests in My Alarm Center, LLC, which were substantially recognized as unrealized losses in prior fiscal years.
During the three months ended June 30, 2021, our senior secured debt remained stable with the prior quarter and experienced net gains of $0.9 million.
The net appreciation of $3.5$3.4 million on our subordinated debt investments in the second quarterbroadly syndicated loans and Structured Finance Notes primarily, respectively, primarily due to widening of 2021 was primarily attributable to a $3.5 million improvement on our debt investment in Eblens Holdings, Inc. .liquid credit market spreads.
The netNet gains on our common equity in the second quarter of 2021 wasinvestments were primarily attributable to the $12.1$9.6 million improvement in Pfanstiehl Holdings, Inc.
Three months ended March 31, 2021
In the first quarter of 2021, our portfolio experienced net gains of $3.9 million, primarily as a result of performance improvements in our directly originated debt and equity investments, resulting in net unrealized appreciation.
In the first quarter of 2021, the net appreciation on our senior secured debt investments was primarily attributable to a $1.5 million improvement on our debt investment in Wastebuilt Environmental Solutions LLC. We also experienced general appreciation in our senior secured investments as a result of credit spread tightening observed in the market, leading to a 31 basis point reduction in the weighted average discount rates utilized in our discounted cash flow fair value models.
First quarter 2021 net losses in our subordinated debt investments was principally due to a decrease of $2.3 million in the fair value of our subordinated debt investment in Online Tech Stores LLC, resulting from further degradation of performance at that company.
Net gain (loss) on investments for the six months ended June 30, 20212022 and 2020June 30, 2021
Six months ended June 30, 2022
During the six months ended June 30, 2022, our portfolio experienced net losses of $13.1 million and $12.7 million on our debt investments and Structured Finance Notes, respectively, primarily due to widening of liquid credit market spreads. These net losses were partially offset by a net gain of $17.4 million on our common equity investment in Pfanstiehl Holdings, Inc.
Six months ended June 30, 2021
Our portfolio experienced net gains of $23.1 million during the six months ended June 30, 2021, principally due to a $22.6 million net gain on our directly originated debt and equity investments. During the six months ended June 30, 2021, our common equity investment in Pfanstiehl Holdings, Inc. and our subordinated debt investment in Eblens Holdings, Inc. had unrealized appreciation of $13.0 million and $4.0 million, respectively.
Six months ended June 30, 2020
Our portfolio experienced net unrealized losses of $20.9 million during the six months ended June 30, 2020, primarily due to the adverse economic effects of the COVID-19 pandemic on market conditions and the overall economy, and the related declines in quoted loan prices. Additionally, we incurred realized losses of $10.0 million, primarily due to the loss of $9.1 million on the restructuring of our debt investment in Constellis Holdings, LLC, which was fully recognized as an unrealized loss as of December 31, 2019.
Loss on Extinguishment of Debt
Six months ended June 30, 2022
During the six months ended June 30, 2022, we redeemed $19.0 million of SBA debentures and, as a result, we recognized losses on extinguishment of debt of $0.1 million related to the charge-off of unamortized deferred borrowing costs on the redeemed debentures.
Six months ended June 30, 2021
During the six months ended June 30, 2021, we prepaidredeemed $9.8 million of SBA debentures and redeemed $98.5 million of unsecured notes, and, as a result, we recognized losses on extinguishment of debt of $2.3 million related to the charge-off of deferred borrowing costs on these instruments.
Non-GAAP Financial Measure – Adjusted Net Investment Income
On a supplemental basis, we disclose adjusted net investment income (“Adjusted NII”) (including on a per share basis), which is a financial measure calculated and presented on basis other than in accordance with GAAP. Adjusted NII represents net investment income, excluding the capital gains incentive fee, in periods in which such expense occurs. GAAP requires recognition of a capital gains incentive fee in our financial statements when aggregate net realized and unrealized capital gains, if any, on a cumulative basis from the date of the election to be a BDC through the reporting date is positive. Such fees are subject to further conditions specified in the Investment Advisory Agreement, principally related to the realization of such net gains, before OFS Advisor is entitled to payment, and such recognized fees are subject to the risk of reversal should unrealized gains diminish to become losses. Management believes that Adjusted NII is a useful indicator of operations exclusive of any net capital gains incentive fee, as net investment income does not include the net gains, realized or unrealized, associated with the capital gains incentive fee.
Management believes Adjusted NII facilitates analysis of our results of operations and provides greater transparency into the determination of incentive fees. Adjusted NII is not meant as a substitute for net investment income determined in accordance with GAAP and should be considered in the context of the entirety of our reported results of operations, financial position and cash flows determined in accordance with GAAP.
The following table provides a reconciliation from net investment income (the most comparable GAAP measure) to Adjusted NII for the three months ended June 30, 2022 and March 31, 2022 and six months ended June 30, 2020, we prepaid $16.12022 and June 30, 2021, respectively (dollar amounts in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended June 30, |
| June 30, 2022 | | March 31, 2022 | | 2022 | | 2021 |
| (000's) | | Per Share | | (000's) | | Per Share | | (000's) | | Per Share | | (000's) | | Per Share |
| Net investment income | $ | 6,248 | | | $ | 0.47 | | | $ | 3,005 | | | $ | 0.22 | | | $ | 9,253 | | | $ | 0.69 | | | $ | 5,785 | | | $ | 0.43 | |
| Capital Gains Fee | (2,988) | | | (0.23) | | | 1,072 | | | 0.08 | | | (1,916) | | | (0.15) | | | — | | | — | |
| Adjusted NII | $ | 3,260 | | | $ | 0.24 | | | $ | 4,077 | | | $ | 0.30 | | | $ | 7,337 | | | $ | 0.54 | | | $ | 5,785 | | | $ | 0.43 | |
For the quarter ended June 30, 2022, there was a reversal of previously accrued Capital Gains Fees of $3.0 million due to a $14.9 million reduction in net unrealized appreciation on the investment portfolio.
For the quarter ended March 31, 2022, the Capital Gains Fee of SBA debentures,$1.1 million was primarily due to net unrealized appreciation of $55.0 million on the investment portfolio, partially offset by cumulative net realized losses of $40.1 million.
Although these non-GAAP financial measures are intended to enhance investors’ understanding of our business and recognized losses on extinguishment of debt of $0.1 million relatedperformance, these non-GAAP financial measures should not be considered an alternative to the charge-off of deferred borrowing costs.GAAP.
Liquidity and Capital Resources
At June 30, 2021,2022, we held cash of $35.2$14.8 million, which includes $15.7$7.5 million held by SBIC I LP, our wholly owned SBIC, and $5.9$2.9 million held by OFSCC-FS. Our use of cash held by SBIC I LP may be restricted by SBA regulation, including limitations on the amount of cash SBIC I LP can distribute to the Parent. Any such distributions to the Parent from SBIC I LP are generally restricted under SBA regulations to a statutory measure of undistributed accumulated earnings (“READ”) or regulatory capital of SBIC I LP, and require the prior approval of the SBA.LP. During the six months ended June 30, 2021,2022, the Parent received aREAD and return of capital distribution of $19.1 milliondistributions from SBIC I LP. The Company is limited to follow-on investments in current portfolio companies held through SBIC I LP.LP of $10.0 million and $9.5 million, respectively. Distributions from OFSCC-FS to the Parent are restricted by the terms and conditions of the BNP Facility. During the six months ended June 30, 2021,2022, the Parent received $1.9$4.6 million in cash distributions from OFSCC-FS. As of June 30, 2021,2022, cash available to be distributed from SBIC I LP and OFSCC-FS were $12.1$3.5 million and $-0-, respectively.
At June 30, 2021,2022, we had an unused commitment of $25.0$35.0 million under our PWB Credit Facility, as well as an unused commitment of $125.9$15.9 million under our BNP Facility, both subject to a borrowing base requirements and other covenants. Based on fair values and equity capital at June 30, 2021,2022, we could access available lines ofall unused commitments under our credit for $129.0 millionfacilities and remain in compliance with our asset coverage requirements. As of August 2, 2021,On April 22, 2022, we had cash on hand of approximately $29.6amended the PWB Credit Facility to, among other things, increase the maximum amount available from $25.0 million to $35.0 million. We continueOn June 24, 2022, we amended the BNP Facility to, believe that we have sufficient levels of liquidityamong other things: (i) extend the reinvestment period under the BNP Facility for three years from June 20, 2022 to support our existing portfolio companiesJune 20, 2025; and selectively deploy capital in new investment opportunities in this challenging environment.(ii) extend the maturity date under the BNP Facility from June 20, 2024 to June 20, 2027.
The Parent may make unsecured loans to SBIC I LP, the aggregate which cannot exceed $35 million at any given time, and no interest may be charged on the unpaid principal balance. There were no intercompany loans between the Parent and SBIC I LP as of June 30, 2021.2022.
Sources and Uses of Cash
We generate operating cash flows from net investment income and the net liquidation of portfolio investments, and use cash in our operations in the net purchase of portfolio investments and payment of expenses. Significant variations may exist between net investment income and cash from net investment income, primarily due to the recognition of non-cash investment income, including certain Net Loan Fee amortization, PIK interest and PIK dividends, which generally will not be fully realized in cash until we exit the investment, as well as accreted interest income on Structured Finance Notes, which may not coincide with cash distributions from these investments. As discussed in "Item“Item 1.–Financial Statements–Note 3,"” we pay OFS Advisor a quarterly incentive fee with respect to our pre-incentive fee net investment income, which may include investment income that we have not received in cash. In addition, we must distribute substantially all of our taxable income, which approximates, but will not always equal, the cash we generate from net investment income to maintain our RIC tax treatment. We also obtain cash to fund investments or general corporate activities from the issuance of securities and our revolving line of credit. These principal sources and uses of cash and liquidity are presented below (in thousands):
| | | | | Six Months Ended June 30, | | | Six Months Ended June 30, |
| | | | 2021 | | 2020 | | | 2022 | | 2021 |
Cash from net investment income(1) | Cash from net investment income(1) | | $ | 5,925 | | | $ | 4,245 | | Cash from net investment income(1) | | $ | 4,752 | | | $ | 5,925 | |
Net (purchases and originations)/repayments and sales of portfolio investments(1) | Net (purchases and originations)/repayments and sales of portfolio investments(1) | | (8,099) | | | 41,627 | | Net (purchases and originations)/repayments and sales of portfolio investments(1) | | (39,465) | | | (8,099) | |
| Net cash provided by (used in) operating activities | | (2,174) | | | 45,872 | | |
| Net cash used in operating activities | | Net cash used in operating activities | | (34,713) | | | (2,174) | |
| Distributions paid to stockholders(2) | Distributions paid to stockholders(2) | | (5,573) | | | (6,728) | | Distributions paid to stockholders(2) | | (7,569) | | | (5,573) | |
| Net payments under lines of credit | | (8,000) | | | (4,700) | | |
| Net borrowings (payments) under lines of credit | | Net borrowings (payments) under lines of credit | | 34,100 | | | (8,000) | |
| Repayment of SBA debentures | Repayment of SBA debentures | | (9,765) | | | (16,110) | | Repayment of SBA debentures | | (19,000) | | | (9,765) | |
| Proceeds from unsecured notes offering, net of discounts | Proceeds from unsecured notes offering, net of discounts | | 121,791 | | | — | | Proceeds from unsecured notes offering, net of discounts | | — | | | 121,791 | |
| Redemption of unsecured notes | Redemption of unsecured notes | | (98,525) | | | — | | Redemption of unsecured notes | | — | | | (98,525) | |
| Other financing activities | Other financing activities | | (303) | | | — | | Other financing activities | | (1,022) | | | (303) | |
| Net cash used in financing activities | | (375) | | | (27,538) | | |
| Increase (decrease) in cash | | $ | (2,549) | | | $ | 18,334 | | |
| Net cash provided by (used in) financing activities | | Net cash provided by (used in) financing activities | | 6,509 | | | (375) | |
| Decrease in cash | | Decrease in cash | | $ | (28,204) | | | $ | (2,549) | |
(1) Net (purchasespurchases and originations)/originations/repayments and sales of portfolio investments includes purchase and origination of portfolio investments, proceeds from principal payments on portfolio investments, proceeds from sale or redemption of portfolio investments, changes in receivable for investments sold, payable formfrom investments purchased as reported in our statements of cash flows, as well as the excess of proceeds from distributions received from structured finance notesStructured Finance Notes over accretion of interest income on structured finance notes.Structured Finance Notes. Cash from net investment income includes all other cash flows from operating activities reported in our statements of cash flows. Certain amounts in the prior year have been reclassified to conform with the current year presentation.
(2) The determination of the tax attributes of our distributions is made annually as of the end of our fiscal year based upon our ICTI for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of our distributions for a full year.
Cash from net investment income
Cash from net investment income increased $1.7decreased $1.2 million for the six months ended June 30, 2021,2022 compared to the six months ended June 30, 2020, principally due to a $1.0 million increase in the excess distributions received from our investments in Structured Finance Notes over the accretion of interest income on such Structured Finance Note investments.2021.
Net (purchases and originations)/repayments and sales of portfolio investments
During the six months ended June 30, 2022, net purchases and originations of portfolio investments of $39.5 million were primarily due to $127.5 million of cash we used to purchase portfolio investments, offset by $88.0 million of cash we received from amortized cost repayments, sales on our portfolio investments and the net proceeds from distributions received from Structured Finance Notes and accretion of interest income on Structured Finance Notes. During the six months ended June 30, 2021, net purchases and originations of portfolio investments of 8.1$8.1 million were primarily due to $120.9 million of cash we used to purchase portfolio investments, offset by $117.5$112.8 million of cash we received from amortized cost repayments, and sales on our portfolio investments. Duringinvestments and the six months ended June 30, 2020, net purchases and originations of portfolio investments of $41.6 million were primarily due to $80.2 million of cash we used to purchase portfolio investments, offset by $124.5 million of cash weproceeds from distributions received from amortized cost repaymentsStructured Finance Notes and salesaccretion of interest income on our portfolio investments.Structured Finance Notes. See "—“—Portfolio Composition and Investment Activity–Investment Activity."”
Borrowings
SBA Debentures
SBIC I LP’s SBIC license allowed it to obtain leverage by issuing SBA-guaranteed debentures, subject to issuance of a capital commitment by the SBA and customary procedures. These debentures are non-recourse to us, and bear interest payable
semi-annually, and each debenture has a maturity date that is ten years following issuance. The interest rate was fixed at the first pooling date after issuance, which was March and September of each year, at a market-driven spread over U.S. Treasury Notes with ten-year maturities. As of June 30, 20212022 and 2020,December 31, 2021, SBIC I LP had outstanding debentures of $95.5$50.9 million and $133.8$69.9 million, respectively.
On a stand-alone basis, SBIC I LP held $219.5$175.9 million and $223.8$195.5 million in total assets at June 30, 20212022 and December 31, 2020,2021, respectively, which accounted for approximately 42%31% and 46%34% of the Company’s total consolidated assets, respectively.
As part of our plans to focus on lower-yielding, first lien senior secured loans to larger borrowers, which we believe will improve our overall risk profile, SBIC I LP intends, over time, to pay its outstanding SBA debentures prior to their scheduled maturity dates. Under a plan approved by the SBA, we will only make follow-on investments in current portfolio companies held by SBIC I LP. We believe that investing in more senior loans to larger borrowers is consistent with our view of the private loan market and will reduce our overall leverage on a consolidated basis. During the six months ended June 30, 2021,2022, SBIC I LP prepaid $9.8redeemed $19.0 million of SBA debentures that were contractually due SeptemberMarch 1, 20222025 and September 1, 2024. We2025. During the six months ended June 30, 2022, we recognized a loss on extinguishment of debt of $0.1 million related to the charge-off of unamortized deferred borrowing costs on the prepaidredeemed debentures.
SBIC I LP is periodically examined and audited by the SBA’s staff to determine its compliance with SBA regulations. If SBIC I LP fails to comply with applicable SBA regulations, the SBA could, depending on the severity of the violation, limit or prohibit SBIC I LP’s use of debentures, declare outstanding debentures immediately due and payable, and/or limit SBIC I LP from making distributions.
We have received exemptive relief from the SEC effective November 26, 2013, which permits us to exclude SBA guaranteed debentures from the definition of senior securities in the statutory 150% asset coverage ratio under the 1940 Act.
PWB Credit Facility
We are party to a BLA with Pacific Western Bank, as lender, to provide us with a senior secured revolving credit facility, or the PWB Credit Facility, which is available for general corporate purposes including investment funding. The maximum availability of the PWB Credit Facility is equal to 50% of the aggregate outstanding principal amount of eligible loans included in the borrowing base, which excludes subordinated loan investments (as defined in the BLA) and as otherwise specified in the BLA. The PWB Credit Facility is guaranteed by OFSCC-MB, Inc. and secured by all of our current and future assets, excluding assets held by SBIC I LP, OFSCC-FS and the Company’s partnership interests in SBIC I LP and OFS SBIC I, GP.
On February 17, 2021,April 22, 2022, we amended the BLA to among other things:to: (i) increase the maximum amount available under the PWB Credit Facility from $20.0$25.0 million to $25.0$35.0 million; (ii) decrease the interest rate floor from 5.25% per annum to 5.00% per annum; (iii) modify certain financial performance covenants; and (iv)(ii) extend the maturity date of the PWB Credit Facility from February 28, 20212023 to February 28, 2023.2024.
As of June 30, 2021,2022, we had no$-0- outstanding balance and an unused commitment of $25.0$35.0 million under the PWB Credit Facility, subject to a borrowing base and other covenants.
The BLA contains customary terms and conditions, including, without limitation, affirmative and negative covenants, such as information reporting requirements, a minimum tangible net asset value, a minimum quarterly net investment income after incentive fees, a debt/worth ratio and a net loss restriction. The BLA also contains customary events of default, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, change in investment advisor, and the occurrence of a material adverse change in our financial condition. As of June 30, 2021,2022, we were in compliance with the applicable covenants under the PWB Credit Facility.
Unsecured Notes
On February 10, 2021, we closed the public offering of $100.0 million aggregate principal amount of our 4.75% notes due 2026, and on March 18, 2021, we closed an additional public offering of $25.0 million aggregate principal amount of our 4.75% notes due 2026 (the "Unsecured Notes Due February 2026"). The total net proceeds to us from the Unsecured Notes Due February 2026, after deducting underwriting fees of $3.2 million and offering expenses of $0.3 million, was approximately $121.5 million. The Unsecured Notes Due February 2026 bear an effective interest rate, including amortization of deferred debt issuance costs, of 5.32%. The Unsecured Notes Due February 2026 will mature on February 10, 2026, and we may redeem the Unsecured Notes Due February 2026 in whole or in part at any time, or from time to time, at our option at par plus a "make-whole" premium, if applicable. The Unsecured Notes Due February 2026 bear interest at a rate of 4.75% per year payable semi-annually in arrears on February 10 and August 10 of each year, commencing on August 10, 2021.
In connection with, and using the proceeds from, the issuance of the Unsecured Notes Due February 2026, on March 12, 2021, we redeemed all $50.0 million in aggregate principal amount of the Unsecured Notes Due April 2025 and all
$48.5 million in aggregate principal amount of the Unsecured Notes Due October 2025. The Unsecured Notes Due April 2025 and the Unsecured Notes Due October 2025 were redeemed at 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon from January 31, 2021, through, but excluding, March 12, 2021. We recognized a loss on extinguishment of debt of $2.2 million related to the charge-off of deferred borrowing costs on the redemption of the notes.
The Unsecured Notes are direct unsecured obligations and rank equal in right of payment with all of our current and future unsecured indebtedness. Because the Unsecured Notes are not secured by any of our assets, they are effectively subordinated to all existing and future secured unsubordinated indebtedness (or any indebtedness that is initially unsecured as to which we subsequently grant a security interest), to the extent of the value of the assets securing such indebtedness, including, without limitation, borrowings under the PWB Credit Facility. As of June 30, 2022, we had $180.0 million in Unsecured Notes.
In order to, among other things, reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may, from time to time, purchase the Unsecured Notes for cash in open market purchases and/or privately negotiated transactions. We will evaluate any such transactions in light of then-existing market conditions, taking into account our current liquidity, prospects for future access to capital, contractual restrictions and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material.
BNP Facility
On June 20, 2019, OFSCC-FS entered into the BNP Facility, as amended, which provides for borrowings in an aggregate principal amount up to $150.0 million, of which $24.1$134.1 million was drawn as of June 30, 2021.2022. Borrowings under the BNP Facility bear interest based on LIBORSOFR for the relevant interest period, plus an applicable spread.spread (subject to an effective floor of 2.65%). The effective interest rate on the BNP Facility was 6.06%4.67% at June 30, 2021.2022. The BNP Facility will mature on the earlier of June 20, 20242027 or upon certain other events defined in the credit agreement which may result in accelerated maturity. Borrowings under the BNP Facility are secured by substantially all of the assets held by OFSCC-FS. The unused commitment under the BNP Facility was $125.9$15.9 million as of June 30, 2021.2022. As of June 30, 2021,2022, we were in compliance with the applicable covenants.covenants under the BNP Facility.
On a stand-alone basis, OFSCC-FS held approximately $116.9$208.0 million and $72.4$185.1 million in total assets at June 30, 20212022 and December 31, 2020,2021, respectively, which accounted for approximately 22%37% and 15%33% of our total consolidated assets, respectively.
On June 24, 2022, we amended the BNP Facility to, among other things: (i) extend the reinvestment period under the BNP Facility for three years from June 20, 2022 to June 20, 2025; (ii) extend the maturity date under the BNP Facility from June 20, 2024 to June 20, 2027; (iii) convert the benchmark interest rate from LIBOR to SOFR; (iv) increase the top two Moody’s Industry concentrations from 15% to 17.5% and 20%; (v) increase the applicable margin by 0.40% on all classes of loans; and (vi) increase the applicable margin floor from 1.925% to 2.65%.
Other Liquidity Matters
We expect to fund the growth of our investment portfolio utilizing our current borrowings, follow-on equity offerings, and issuances of senior securities or future borrowings to the extent permitted by the 1940 Act. We cannot assure stockholders that our plans to raise capital will be successful. In addition, we intend to distribute to our stockholders substantially all of our taxable income in order to satisfy the requirements applicable to RICs under Subchapter M of the Code. Consequently, we may not have the funds or the ability to fund new investments or make additional investments in our portfolio companies. The illiquidity of our portfolio investments may make it difficult for us to sell these investments when desired and, if we are required to sell these investments, we may realize significantly less than their recorded value.
As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our assets, as defined by the 1940 Act, are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules, the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case organized in the United States. Conversely, we may invest up to 30% of our portfolio in opportunistic investments not otherwise eligible under BDC regulations. Specifically, as part of this 30% basket, we may consider investments in investment funds that are operating pursuant to certain exceptions to the 1940 Act and in advisers to similar investment funds, as well as in debt or equity of middle-market portfolio companies located outside of the United States and debt and equity of public companies that do not meet the definition of eligible portfolio companies because their market capitalization of publicly traded equity securities exceeds the levels provided for in the 1940 Act. We have, and may continue to, make opportunistic investments in Structured Finance Notes and other non-qualifying assets, consistent with our investment strategy. As of June 30, 2021,2022, approximately 85%80% of our investments were qualifying assets.
BDCs generally are required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities to total senior securities, which include all of our borrowings and any outstanding preferred stock, of at least 200% (150% if certain requirements are met).securities. We received an exemptive order from the SEC to permit us to exclude the debt of SBIC I LP guaranteed by the SBA from the definition of Senior Securities in the statutory asset coverage ratio under the 1940 Act. This requirementAct, which limits the amount that we may borrow. To fund growth in our investment portfolio in the future, we anticipate the need to raise additional capital from various sources, including the equity markets and the securitization or other debt-related markets, which may or may not be available on favorable terms, if at all.
On May 3, 2018, our Board, including a required majority (as such term is defined in Section 57(o) of the 1940 Act) thereof, approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, our minimum required asset coverage ratio decreased from 200% to 150%, effective May 3, 2019.
On May 22, 2018, the Board authorized the Stock Repurchase Program under which we could acquire up to $10.0 million of our outstanding common stock through the two-year period ending May 22, 2020. On May 4, 2020 and May 3, 2022, the Board extended the Stock Repurchase Program for an additional two-year period.periods. Under the extended Stock Repurchase Program, we are authorized to repurchase shares in open-market transactions, including through block purchases, depending on prevailing market conditions and other factors. We expect the Stock Repurchase Program to be in place through May 22, 2022,2024, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not obligate us to acquire any specific number of shares, and all repurchases will be made in accordance with SEC Rule 10b-18, which sets
certain restrictions on the method, timing, price and volume of stock repurchases. The Stock Repurchase Program may be extended, modified or discontinued at any time for any reason. We have provided our stockholders with notice of our intention to repurchase shares of our common stock in accordance with 1940 Act requirements. We retire all shares of common stock that we purchased in connection with the Stock Repurchase Program.
The following table summarizes No shares of common stock were repurchased under the Stock Repurchase Program during the six months ended June 30, 2021 (in thousands).
| | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of Shares Purchased | | Cost of Shares Purchased | | Average Price Paid Per Share |
| January 1, 2021 through March 31, 2021 | | 700 | | | $ | 5 | | | $ | 6.70 | |
| April 1, 2021 through June 30, 2021 | | — | | | $ | — | | | $ | — | |
As of June 30, 2021,2022, the aggregate amount outstanding of the senior securities issued by us was $228.4$365.0 million, for which our asset coverage was 179%162%. The Small Business Administration Debenturesdebentures are not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC effective November 26, 2013. The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness.
As a BDC, we are generally not permitted to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if the Board determines that such sale is in the best interests of us and our stockholders, and if our stockholders approve such sale. On June 15, 2021,July 13, 2022, our stockholders approved a proposal to authorize us, with approval of our Board, to sell or otherwise issue shares of our common stock (during a twelve-month period) at a price below our then-current net asset value per share in one or more offerings, subject to certain limitations (including that the cumulative number of shares sold pursuant to such authority does not exceed 25% of our then outstanding common stock immediately prior to each such sale). We have not sold any shares below net asset value pursuant to the proposal approved by our stockholders.
Contractual Obligations and Off-Balance Sheet Arrangements
The following table showsAt June 30, 2022, we had $14.8 million of cash and cash equivalents, as well as $35.0 million and $15.9 million of unfunded commitments under our PWB Credit Facility and BNP Facility, respectively, to meet our short-term contractual obligations. At June 30, 2022, we had $37.3 million in outstanding commitments to fund portfolio investments under various undrawn revolvers and other credit facilities. Long-term contractual obligations, such as our BNP Facility that matures in 2027 and has $134.1 million outstanding at June 30, 2022, can be repaid by selling OFSCC-FS portfolio investments that have a fair value of $203.0 million at June 30, 2022. We cannot, however, be certain that this source of funds will be available and upon terms acceptable to us in sufficient amounts in the future.
At June 30, 2022, we have $50.9 million of outstanding SBA debentures that mature in 2025, which we may repay prior to their maturity dates by using proceeds from investment repayments. The SBIC I LP investment portfolio had a fair value of $167.8 million at June 30, 2022.
As of June 30, 2021 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Payments due by period |
Contractual Obligation (1) | | Total | | Less than
year | | 1-3 years (2) | | 4-5 years (2) | | After 5
years (2) |
| PWB Credit Facility | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Unsecured Notes | | 204,325 | | | — | | | 25,000 | | | 125,000 | | | 54,325 | |
| SBA Debentures | | 95,505 | | | — | | | 7,000 | | | 88,505 | | | — | |
| BNP Facility | | 24,050 | | | — | | | — | | | 24,050 | | | — | |
Total(3) | | $ | 323,880 | | | $ | — | | | $ | 32,000 | | | $ | 237,555 | | | $ | 54,325 | |
(1)Excludes commitments to extend credit to our portfolio companies.
(2)The PWB Credit Facility is scheduled to mature on February 28, 2023. The SBA debentures are scheduled to mature between September 2022, and September 2025. SBIC I LP is repaying over time its outstanding SBA debentures prior to the scheduled maturity dates of its debentures. The Unsecured Notes are scheduled to mature between September 2023 and October 2026. The BNP Facility is scheduled to mature on June 20, 2024.
(3)63% of the outstanding debt is unsecured.
Wewe continue to believe our long-dated financing, with approximately 90%100% of our total outstanding debt, contractually maturing in 20242025 and beyond, affords us operational flexibility.
We have entered into contracts with third parties under which we have material future commitments—the Investment Advisory Agreement, pursuant to which OFS Advisor has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to which OFS Services has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations.
We may become a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. At June 30, 2021, we had $11.0 millionThere is no guarantee that these amounts will be funded to the borrowing party now or in unfunded commitments to eight portfolio companies.the future. We continue to believe that we have sufficient levels of liquidity to support our existing portfolio companies and will meet these unfunded commitments by using our cash on hand or utilizing our available borrowings under the PWB Credit Facility and BNP Facility. In addition, we generally hold broadly syndicated loans in larger portfolio companies that can be sold over a relatively short period to generate cash.
Distributions
We are taxed as a RIC under the Code. In order to maintain our tax treatment as a RIC, we are required to distribute annually to our stockholders at least 90% of our ICTI, as defined by the Code. Additionally, to avoid a 4% excise tax on undistributed earnings we are required to distribute each calendar year the sum ofof: (i) 98% of our ordinary income for such calendar yearyear; (ii) 98.2% of our net capital gains for the one-year period ending October 31 of that calendar yearyear; and (iii) any income recognized, but not distributed, in preceding years and on which we paid no federal income tax. Maintenance of our RIC status requires adherence to certain source of income and asset diversification requirements. Generally, a RIC is entitled to deduct dividends it pays to its stockholders from its income to determine “taxable income.” Taxable income includes our taxable interest, dividend and fee income, and taxable net capital gains. Taxable income generally differs from net income for
financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation, as gains or losses are not included in taxable income until they are realized. In addition, gains realized for financial reporting purposes may differ from gains included in taxable income as a result of our election to recognize gains using installment sale treatment, which generally results in the deferment of gains for tax purposes until notes or other amounts, including amounts held in escrow received as consideration from the sale of investments, are collected in cash. Taxable income includes non-cash income, such as changes in accrued and reinvested interest and dividends, which includes contractual PIK interest, and the amortization of discounts and fees. Cash collections of income resulting from contractual PIK interest and dividends or the amortization of discounts and fees generally occur upon the repayment of the loans or debt securities that include such items. Non-cash taxable income is reduced by non-cash expenses, such as realized losses and depreciation, and amortization expense.
Our Board maintains a variable dividend policy with the objective of distributing four quarterly distributions in an amount not less than 90-100% of our taxable quarterly income or potential annual income for a particular year. In addition, at the end of the year, we may also pay an additional special dividend, or fifth dividend, such that we may distribute approximately all of our annual taxable income in the year it was earned, while maintaining the option to spill over our excess taxable income to a following year. Each year, a statement on Form 1099-DIV identifying the source of the distribution is mailed to the Company’s stockholders. Generally, a RIC is entitled to deduct dividends it pays to its stockholders from its income to determine “taxable income.” Taxable income includes our taxable interest, dividend and fee income, and taxable net capital gains. Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation, as gains or losses are not included in taxable income until they are realized. In addition, gains realized for financial reporting purposes may differ from gains included in taxable income as a result of our election to recognize gains using installment sale treatment, which generally results in the deferment of gains for tax purposes until notes or other amounts, including amounts held in escrow received as consideration from the sale of investments, are collected in cash. Taxable income includes non-cash income, such as changes in accrued and reinvested interest and dividends, which includes contractual PIK interest, and the amortization of discounts and fees. Cash collections of income resulting from contractual PIK interest and dividends or the amortization of discounts and fees generally occur upon the repayment of the loans or debt securities that include such items. Non-cash taxable income is reduced by non-cash expenses, such as realized losses and depreciation, and amortization expense.
Recent Developments
On August 3, 2021,2, 2022, our Board declared a distribution of $0.24$0.29 per share for the third quarter of 2021,2022, payable on September 30, 20212022 to stockholders of record as of September 23, 2021.
We evaluated events subsequent to June 30, 2021 through August 5, 2021. We are continuing to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it impacts our portfolio companies, employees, due diligence and underwriting processes, and financial markets. The U.S. capital markets experienced extreme volatility and disruption following the outbreak of the COVID-19 pandemic, which appear to have subsided and returned to
pre-COVID-19 levels. Nonetheless, certain economists and major investment banks have expressed concern that the continued spread of the virus globally could lead to a prolonged period of world-wide economic downturn.
On March 27, 2020, the U.S. government enacted the CARES Act, which contains provisions intended to mitigate the adverse economic effects of the coronavirus pandemic. On December 27, 2020, the U.S. government enacted the December 2020 COVID Relief Package. Additionally, on March 11, 2021, the U.S. government enacted the American Rescue Plan, which included additional funding to mitigate the adverse economic effects of the COVID-19 pandemic. It is uncertain whether, or to what extent, our portfolio companies will be able to benefit from the CARES Act, the December 2020 COVID Relief Package, the American Rescue Plan, or any other subsequent legislation intended to provide financial relief or assistance. As a result of this disruption and the pressures on their liquidity, certain of our portfolio companies have been, or may continue to be, incentivized to draw on most, if not all, of the unfunded portion of any revolving or delayed draw term loans made by us, subject to availability under the terms of such loans.
The extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend to a large extent on future developments regarding the duration and severity of the coronavirus, effectiveness of vaccination deployment and the actions taken by governments (including stimulus measures or the lack thereof) and their citizens to contain the coronavirus or treat its impact, all of which are beyond our control. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition. Given the fluidity of the situation, we cannot estimate the long-term impact of COVID-19 on our business, future results of operations, financial position, or cash flows at this time.2022.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including changes in interest rates and the valuations of our investment portfolio. The economic effects of the ongoing conflict between Russia and Ukraine and the COVID-19 pandemic hashave introduced significant volatility in the financial markets. The U.S. Federal Reservemarkets and other central banksglobal supply chain disruptions, and the effects of this volatility and these disruptions have reduced certain interest ratesimpacted and LIBOR has decreased. In addition, in a prolonged low interest rate environment, including a reduction of LIBORcould continue to zero,impact our net interest margin will be compressed and adversely affect our operating results.market risks. For additional information concerning the COVID-19 pandemicrisks and itstheir potential impact on our business and our operating results, see" “Part I, Item 1A. Risk Factors”Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.2021, filed on March 4, 2022.
Investment Valuation Risk
Because there is not a readily available market value for most of the investments in our portfolio, we value a significant portion of our portfolio investments at fair value as determined in good faith by our Board based, in part, on independent third-party valuation firms that have been engaged at the direction of our Board to assist in the valuation of each portfolio investment without a readily available market quotation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, some investments may be subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than its current fair value. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Estimates” as well as Notes 2 and 5 to our consolidated financial statements for the six months ended June 30, 2022 for more information relating to our investment valuation.
Interest Rate Risk
Changes in interest rates, including any further interest rate increases approved by the U.S. Federal Reserve, and rising inflation rates may affect both our cost of funding and the valuation of our investment portfolio. As of June 30, 2021, 97%2022, 93% of
our debt investments, at fair value, bore interest at floating interest rates, at fair value. Therates. Historically, the interest rates on our debt investments bearing floating interest rates are usuallyhave been based on a floating LIBOR, but will transition away from LIBOR to SOFR, and the debt investments typically contain interest rate re-set provisions that adjust applicable interest rates to current market rates on a periodic basis. A significant portionAt June 30, 2022, we held variable-rate loans with an aggregate principal amount of our loans$345.3 million that are subjectbore interest at a variable rate indexed to the floating LIBOR rates are also subject to a minimum base rate, or floor, that we charge on our loans if the current market rates are below the respective floors.SOFR, and reset monthly, quarterly, or semi-annually. As of June 30, 2021, a majority2022, 3-month LIBOR was 2.29%, and we had variable-rate loans with an aggregate principal amount of our floating rate loans were based on a floating LIBOR,$42.8 million subject to its floor.reference rate floor provisions of 1.00%.
Our outstanding SBA debentures and Unsecured Notes bear interest at fixed rates. OurAs of June 30, 2022, our PWB Credit Facility and BNP Facility have floating interest rate provisions based on the Prime Rate and LIBOR,SOFR, respectively, with effective interest rates of 5.02%5.29% and 6.06%4.67%, respectively, asrespectively.
Interest rate sensitivity refers to the change in our earnings that may result from changes in the level of interest rates. As of June 30, 2021.
2022, 3-month LIBOR was 2.29% and certain loan contracts have not reset to the current market rate. Assuming that the interim and unaudited consolidated balance sheet as of June 30,
20212022 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following tables show the annualized impact of hypothetical changes in interest rate indices (in thousands).
| | | | | | | | | | | | | | | | | | | | |
| Basis point increase | | Interest income | | Interest expense | | Net change |
| 25 | | $ | 2,516 | | | $ | (252) | | | $ | 2,264 | |
| 50 | | 3,454 | | | (587) | | | 2,867 | |
| 75 | | 4,391 | | | (923) | | | 3,468 | |
| 100 | | 5,329 | | | (1,258) | | | 4,071 | |
| 125 | | 6,267 | | | (1,593) | | | 4,674 | |
| | Basis point increase | | Interest income | | Interest expense | | Net change | |
| Basis point decrease | | Basis point decrease | | Interest income | | Interest expense | | Net change |
| 25 | 25 | | $ | 48 | | | $ | (64) | | | $ | (16) | | 25 | | $ | (378) | | | $ | 418 | | | $ | 40 | |
| 50 | 50 | | 121 | | | (125) | | | (4) | | 50 | | (979) | | | 754 | | | (225) | |
| 75 | 75 | | 231 | | | (186) | | | 45 | | 75 | | (1,868) | | | 1,089 | | | (779) | |
| 100 | 100 | | 609 | | | (247) | | | 362 | | 100 | | (2,410) | | | 1,424 | | | (986) | |
| 125 | 125 | | 1,254 | | | (308) | | | 946 | | 125 | | (2,920) | | | 1,759 | | | (1161) | |
| | | | | | | | | | | | | | | | | | | | |
Basis point decrease(1) | | Interest income | | Interest expense | | Net change |
| 25 | | $ | (65) | | | $ | 41 | | | $ | (24) | |
| | | | | | |
| | | | | | |
| | | | | | |
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(1) Decreases in LIBOR beyond that presented would not result in a changeInflation and Supply Chain Risk
Economic activity has continued to interest income or interest expenseaccelerate across sectors and regions. Nevertheless, due to current LIBOR ratesglobal supply chain issues, geopolitical events, a rise in energy prices and a minimum base rate, or floor,strong consumer demand as economies continue to reopen, inflation is showing signs of acceleration in the U.S. and globally. Inflation is likely to continue in the near to medium-term, particularly in the U.S., with the possibility that monetary policy may tighten in response. Persistent inflationary pressures could affect our debt investments and the PWB Credit Facility contain.
portfolio companies’ profit margins.Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021.2022. The term “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the foregoing evaluation of our disclosure controls and procedures as of June 30, 2021,2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended June 30, 2021,2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
We, OFS Advisor and OFS Services, are not currently subject to any material pending legal proceedings threatened against us as of June 30, 2021.2022. From time to time, we may be a party to certain legal proceedings incidental to the normal course of our business, including the enforcement of our rights under contracts with our portfolio companies. Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our business, financial condition, results of operations or cash flows.
Item 1A. Risk Factors
Investing in our common stock may be speculative and involves a high degree of risk. In addition to the other information contained in this Quarterly Report on Form 10-Q, including our financial statements, and the related notes, schedules and exhibits, you should carefully consider the risk factors described in "Part“Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2021, filed on March 4, 2022, and in "Part“Part II, Item 1A. Risk Factors"Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021,2022 (the “First Quarter 10-Q”), filed on May 6, 2022, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K and Quarterly Report on Formthe First Quarter 10-Q are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
Other than the risk described below, thereThere have been no material changes fromto the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 20202021, filed on March 4, 2022 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.First Quarter 10-Q. The risks previously disclosed in our Annual Report on Form 10-K and Quarterly Report on Formthe First Quarter 10-Q should be read together with the other information disclosed elsewhere in this Quarterly Report on Form 10-Q and the First Quarter 10-Q and our other reports filed with the SEC.
The interest rates of our loans to our portfolio companies that extend beyond 2021 might be subject to change based on recent regulatory changes, including the decommissioning of LIBOR.
LIBOR is the basic rate of interest used in lending transactions between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. We typically use LIBOR as a reference rate in loans we extend to portfolio companies such that the interest due to us pursuant to a loan extended to a portfolio company is calculated using LIBOR. The terms of our debt investments generally include minimum interest rate floors which are calculated based on LIBOR.
On March 5, 2021, the United Kingdom's Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it will not compel panel banks to contribute to the overnight 1, 3, 6 and 12 months U.S. LIBOR tenors after June 30, 2023 and all other tenors after December 31, 2021. It is unclear if at that time LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. Central banks and regulators in a number of major jurisdictions (for example, United States, United Kingdom, European Union, Switzerland and Japan) have convened working groups to find, and implement the transition to, suitable replacements for interbank offered rates (“IBORs”). To identify a successor rate for U.S. dollar LIBOR, the Alternative Reference Rates Committee (“ARRC”), a U.S.-based group convened by the U.S. Federal Reserve Board and the Federal Reserve Bank of New York, was formed. The ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. Although SOFR appears to be the preferred replacement rate for U.S. dollar LIBOR, at this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or other reforms to LIBOR that may be enacted in the United States, United Kingdom or elsewhere or, whether the COVID-19 outbreak will have further effect on LIBOR transition plans.
The elimination of LIBOR or any other changes or reforms to the determination or supervision of LIBOR could have an adverse impact on the market value of and/or transferability of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us or on our overall financial condition or results of operations.
Recently, the CLOs we have invested in have included, or have been amended to include, language permitting the CLO investment manager to implement a market replacement rate (like those proposed by the ARRC of the Federal Reserve Board and the Federal Reserve Bank of New York) upon the occurrence of certain material disruption events. However, we cannot ensure that all CLOs in which we are invested will have such provisions, nor can we ensure the CLO investment managers will undertake the suggested amendments when able. We believe that because CLO managers and other CLO market participants have been preparing for an eventual transition away from LIBOR, we do not anticipate such a transition to have a material impact on the liquidity or value of any of our LIBOR-referenced CLO investments. However, because the future of LIBOR at this time is uncertain and the specific effects of a transition away from LIBOR cannot be determined with certainty as of the date of this filing, a transition away from LIBOR could:
• adversely impact the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any LIBOR-linked CLO investments;
• require extensive changes to documentation that governs or references LIBOR or LIBOR-based products, including, for example, pursuant to time-consuming renegotiations of existing documentation to modify the terms of outstanding investments;
• result in inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with one or more alternative reference rates;
• result in disputes, litigation or other actions with CLO investment managers, regarding the interpretation and enforceability of provisions in our LIBOR-based CLO investments, such as fallback language or other related provisions, including, in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between LIBOR and the various alternative reference rates;
• require the transition and/or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products to those based on one or more alternative reference rates, which may prove challenging given the limited history of the proposed alternative reference rates; and
• cause us to incur additional costs in relation to any of the above factors.
In addition, the effect of a phase out of LIBOR on U.S. senior secured loans, the underlying assets of the CLOs in which we invest, is currently unclear. To the extent that any replacement rate utilized for senior secured loans differs from that utilized for a CLO that holds those loans, the CLO would experience an interest rate mismatch between its assets and liabilities which could have an adverse impact on our net investment income and portfolio returns.
Many underlying corporate borrowers can elect to pay interest based on 1-month LIBOR, 3-month LIBOR and/or other rates in respect of the loans held by CLOs in which we are invested, in each case plus an applicable spread, whereas CLOs generally pay interest to holders of the CLO’s debt tranches based on 3-month LIBOR plus a spread. The 3-month LIBOR currently exceeds the 1-month LIBOR by a historically high amount, which may result in many underlying corporate borrowers electing to pay interest based on 1-month LIBOR. This mismatch in the rate at which CLOs earn interest and the rate at which they pay interest on their debt tranches negatively impacts the cash flows on a CLO’s equity tranche, which may in turn adversely affect our cash flows and results of operations. Unless spreads are adjusted to account for such increases, these negative impacts may worsen as the amount by which the 3-month LIBOR exceeds the 1-month LIBOR increases.
The senior secured loans underlying the CLOs in which we invest typically have floating interest rates. A rising interest rate environment may increase loan defaults, resulting in losses for the CLOs in which we invest. In addition, increasing interest rates may lead to higher prepayment rates, as corporate borrowers look to avoid escalating interest payments or refinance floating rate loans. Further, a general rise in interest rates will increase the financing costs of the CLOs. However, since many of the senior secured loans within CLOs have LIBOR floors, if LIBOR is below the average LIBOR floor, there may not be corresponding increases in investment income resulting in smaller distributions to equity investors in these CLOs.
We cannot predict how new tax legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business.
Legislative or other actions relating to taxes could have a negative effect on us. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. The Biden Administration has proposed significant changes to the existing U.S. tax rules, and there are a number of proposals in Congress that would similarly modify the existing U.S. tax rules. The likelihood of any such legislation being enacted is uncertain, but new legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation could significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to us and our investors of such qualification, or could have other adverse consequences. Investors are urged to consult with their tax advisor regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three month period ended June 30, 2021,2022, we issued 3,2734,348 shares of common stock to stockholders in connection with our DRIP. These issuances were not subject to the registration requirements of the Securities Act. The aggregate value of the shares of our common stock issued under our distribution reinvestment plan was approximately $32,596.$43,127.
Issuer Purchases of Equity Securities
On May 22, 2018, the Board authorized the Company to initiate the Stock Repurchase Program under which the Company could acquire up to $10.0 million of its outstanding common stock through the two-year period ending May 22, 2020.
On May 4, 2020 and May 3, 2022, the Board extended the Stock Repurchase Program for an additional two-year period.periods. Under the extended Stock Repurchase Program, the Company is authorized to repurchase shares in open-market transactions, including through block purchases, depending on prevailing market conditions and other factors. The Company expects the Stock Repurchase Program to be in place through May 22, 2022,2024, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not obligate the Company to acquire any specific number of shares, and all repurchases will be made in accordance with SEC Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases. The Stock Repurchase Program may be extended, modified or discontinued at any time for any reason. The Company retires all shares of common stock that it purchases in connection with the Stock Repurchase Program.
During the three months ended June 30, 2021,2022, no shares of common stock were repurchased on the open market under the Stock Repurchase Program. The following table provides information regarding the Stock Repurchase Program (amount in thousands except shares and per share amounts):
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| Period | | Total Number of Shares Purchased (1) | | Cost of Shares Purchased | | Average Price Paid Per Share | | Maximum Number (or Appropriate Dollar Value) of Shares that May Yet Be Purchased Under the Stock Repurchase Program |
| May 22, 2018 through June 30, 2018 | | — | | | $ | — | | | $ | — | | | $ | 10,000 | |
| July 1, 2018 through September 30, 2018 | | — | | | — | | | — | | | 10,000 | |
| October 1, 2018 through December 31, 2018 | | 300 | | | 3 | | | 10.29 | | | 9,997 | |
| January 1, 2019 through March 31, 2019 | | — | | | — | | | — | | | 9,997 | |
| April 1, 2019 through June 30, 2019 | | — | | | — | | | — | | | 9,997 | |
| July 1, 2019 through September 30, 2019 | | — | | | — | | | — | | | 9,997 | |
| October 1, 2019 through December 31, 2019 | | — | | | — | | | — | | | 9,997 | |
| January 1, 2020 through March 31, 2020 | | — | | | — | | | — | | | 9,997 | |
| April 1, 2020 through June 30, 2020 | | — | | | — | | | — | | | 9,997 | |
| July 1, 2020 through September 30, 2020 | | — | | | — | | | — | | | 9,997 | |
| October 1, 2020 through December 31, 2020 | | — | | | — | | | — | | | 9,997 | |
| January 1, 2021 through March 31, 2021 | | 700 | | | 5 | | | 6.70 | | | 9,992 | |
| April 1, 2021 through June 30, 2021 | | — | | | — | | | — | | | 9,992 | |
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| Period | | Total Number of Shares Purchased | | Cost of Shares Purchased | | Average Price Paid Per Share | | Maximum Number (or Appropriate Dollar Value) of Shares that May Yet Be Purchased Under the Stock Repurchase Program |
| May 22, 2018 through December 31, 2018 | | 300 | | | $ | 3 | | | $ | 10.29 | | | $ | 9,997 | |
| January 1, 2019 through December 31, 2019 | | — | | | — | | | — | | | 9,997 | |
| January 1, 2020 through December 31, 2020 | | — | | | — | | | — | | | 9,997 | |
| January 1, 2021 through December 31, 2021 | | 700 | | | 5 | | | 6.70 | | | 9,992 | |
| January 1, 2022 through March 31, 2022 | | — | | | — | | | — | | | 9,992 | |
| April 1, 2022 through June 30, 2022 | | — | | | — | | | — | | | 9,992 | |
(1) Excludes shares purchased on the open market and reissued in order to satisfy the DRIP obligation.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
Listed below are the exhibits that are filed as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):
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| | | Incorporated by Reference | |
Exhibit
Number | | Description | Form and SEC File No. | Filing Date with SEC | Filed with this 10-Q |
| 3.1 | | | Form N-2/A
(333-166363) | March 18, 2011 | |
| 3.2 | | | Form 10-K | March 26, 2013 | |
| 3.3 | | | Form N-2/A
(333-166363) | March 18, 2011 | |
31.110.1 | | | Form 8-K | April 25, 2022 | |
| 10.2 | | | Form 8-K | April 25, 2022 | |
| 10.3 | | First Amendment to the Revolving Credit and Security Agreement by and among OFSCC-FS, LLC, as borrower, the lenders from time to time parties thereto, BNP Paribas, as administrative agent, OFSCC-FS Holdings, LLC, as equityholder, OFS Capital Corporation, LLC, as servicer, and Citibank, N.A., as collateral agent, dated June 24, 2022 | Form 8-K | June 27, 2022 | |
| 31.1 | | | | | * |
| 31.2 | | | | | * |
| 32.1 | | | | | † |
| 32.2 | | | | | † |
| | | | | |
| * | Filed herewith |
| † | Furnished herewith |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Dated: August 6, 20215, 2022 | OFS CAPITAL CORPORATION |
| | |
| By: | /s/ Bilal Rashid |
| Name: | Bilal Rashid |
| Title: | Chief Executive Officer |
| | |
| By: | /s/ Jeffrey A. Cerny |
| Name: | Jeffrey A. Cerny |
| Title: | Chief Financial Officer |