UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q
_______________________
(Mark One) | ||||||
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBERJune 30, 20172022
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) |
COMMISSION FILE NUMBER: 0-50398814-00638
_______________________
TICCOXFORD SQUARE CAPITAL CORP.
(Exact name of registrant as specified in its charter)
_______________________
MARYLAND | 20-0188736 | |||||
(State or other jurisdiction of | (I.R.S. Employer |
8 SOUND SHORE DRIVE, SUITE 255
GREENWICH, CONNECTICUT 06830
(Address of principal executive office)
(203) 983-5275983
-5275
(Registrant’s telephone number, including area code)
_______________________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, par value $0.01 per share | OXSQ | NASDAQ Global Select Market LLC | ||
6.50% Notes due 2024 | OXSQL | NASDAQ Global Select Market LLC | ||
6.25% Notes due 2026 | OXSQZ | NASDAQ Global Select Market LLC | ||
5.50% Notes due 2028 | OXSQG | NASDAQ Global Select Market LLC |
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 (the “Exchange Act”) 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. Yesx☒ No¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-TS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes¨☐ No¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-acceleratednon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”,filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-212b-2 of the Exchange Act. (Check one):
Large accelerated filer |
| Accelerated filer |
| |||||
| Non | 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-212b-2 of the Exchange Act). Yes¨☐ Nox☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares of the issuer’s common stock, $0.01 par value, outstanding as of November 1, 2017July 28, 2022, was 51,479,409.49,761,360.
TICCOXFORD SQUARE CAPITAL CORP.
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19 | |||||
Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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i
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
TICCOXFORD SQUARE CAPITAL CORP.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES(unaudited)
June 30, | December 31, 2021 | ||||||||||||||
|
| September 30, 2017 |
| December 31, 2016 | (unaudited) | ||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
| ||||
| $ | 406,516,270 |
|
| $ | 578,297,069 | |||||||||
|
| 15,214,283 |
|
|
| 11,626,007 | |||||||||
Non-affiliated/non-control investments (cost: $503,581,956 and $495,212,632, respectively) | $ | 367,872,204 |
| $ | 420,038,717 |
| |||||||||
Affiliated investments (cost: $16,836,822 and $16,836,822, respectively) |
| 1,575,591 |
|
| 772,491 |
| |||||||||
|
| 119,601,494 |
|
|
| 8,261,698 |
| 23,207,660 |
|
| 9,015,700 |
| |||
|
| — |
|
|
| 3,451,636 | |||||||||
|
| 4,562,096 |
|
|
| 9,682,672 |
| 3,139,770 |
|
| 3,064,477 |
| |||
|
| 2,950,000 |
|
|
| 7,406 | |||||||||
|
| 1,516,032 |
|
|
| 1,130,018 |
| 912,298 |
|
| 615,109 |
| |||
| $ | 550,360,175 |
|
| $ | 612,456,506 | $ | 396,707,523 |
| $ | 433,506,494 |
| |||
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
| ||||
Notes payable – 6.50% Unsecured Notes, net of deferred issuance costs of $569,344 and $730,361, respectively | $ | 63,800,881 |
| $ | 63,639,864 |
| |||||||||
Notes payable – 6.25% Unsecured Notes, net of deferred issuance costs of $894,303 and $1,009,924, respectively |
| 43,896,447 |
|
| 43,780,826 |
| |||||||||
Notes payable – 5.50% Unsecured Notes, net of deferred issuance costs of $2,348,118 and $2,539,305 respectively |
| 78,151,882 |
|
| 77,960,695 |
| |||||||||
Securities purchased not settled |
| 24,702,896 |
|
| — |
| |||||||||
Base Fee and Net Investment Income Incentive Fee payable to affiliate |
| 1,565,181 |
|
| 1,688,712 |
| |||||||||
| $ | 2,966,060 |
|
| $ | 1,731,111 |
| 1,216,109 |
|
| 1,216,109 |
| |||
|
| 2,571,494 |
|
|
| 3,673,381 | |||||||||
|
| 5,015,000 |
|
|
| — | |||||||||
|
| 759,194 |
|
|
| 1,089,043 |
| 581,625 |
|
| 625,163 |
| |||
|
| — |
|
|
| 125,853,720 | |||||||||
|
| 94,497,384 |
|
|
| 94,116,753 | |||||||||
|
| 62,258,316 |
|
|
| — | |||||||||
|
| 168,067,448 |
|
|
| 226,464,008 |
| 213,915,021 |
|
| 188,911,369 |
| |||
COMMITMENTS AND CONTINGENCIES (Note 13) |
|
|
|
|
|
|
|
|
|
|
| ||||
NET ASSETS |
|
|
|
|
|
|
|
|
|
|
| ||||
|
| 514,794 |
|
|
| 514,794 | |||||||||
Common stock, $0.01 par value, 100,000,000 shares authorized; 49,761,360 and 49,690,059 shares issued and outstanding, respectively |
| 497,613 |
|
| 496,900 |
| |||||||||
|
| 558,822,643 |
|
|
| 558,822,643 |
| 432,748,626 |
|
| 434,462,322 |
| |||
|
| (20,885,344 | ) |
|
| (34,116,765) | |||||||||
|
| (107,505,733 | ) |
|
| (98,364,284) | |||||||||
|
| (48,653,633 | ) |
|
| (40,863,890) | |||||||||
Total distributable earnings/(accumulated losses) |
| (250,453,737 | ) |
| (190,364,097 | ) | |||||||||
|
| 382,292,727 |
|
|
| 385,992,498 |
| 182,792,502 |
|
| 244,595,125 |
| |||
| $ | 550,360,175 |
|
| $ | 612,456,506 | $ | 396,707,523 |
| $ | 433,506,494 |
| |||
| $ | 7.43 |
|
| $ | 7.50 | $ | 3.67 |
| $ | 4.92 |
|
See Accompanying Notes.
1
TICCOXFORD SQUARE CAPITAL CORP.CONSOLIDATED
SCHEDULE OF INVESTMENTS (unaudited)SeptemberJune 30, 2017(unaudited)2022
COMPANY/INVESTMENT(1) |
| PRINCIPAL |
| COST |
| FAIR |
| % of Net | ||||
Senior Secured Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 5,600,250 |
| $ | 5,548,448 |
| $ | 5,397,241 |
|
|
| |
|
|
|
| $ | 5,548,448 |
| $ | 5,397,241 |
| 1.4 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 15,000,000 |
| $ | 14,851,246 |
| $ | 14,700,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 13,000,000 |
|
| 12,756,478 |
|
| 13,000,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiere Global Services, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15,819,410 |
|
| 14,607,301 |
|
| 15,305,279 |
|
|
| |
|
| 10,000,000 |
|
| 9,728,198 |
|
| 9,875,000 |
|
|
| |
|
|
|
| $ | 51,943,223 |
| $ | 52,880,279 |
| 13.8 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 19,601,471 |
| $ | 19,296,154 |
| $ | 18,817,412 |
|
|
| |
|
|
|
| $ | 19,296,154 |
| $ | 18,817,412 |
| 4.9 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 15,447,791 |
| $ | 15,329,320 |
| $ | 15,196,764 |
|
|
| |
|
|
|
| $ | 15,329,320 |
| $ | 15,196,764 |
| 4.0 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 6,013,256 |
| $ | 5,989,356 |
| $ | 4,517,459 |
|
|
| |
|
|
|
| $ | 5,989,356 |
| $ | 4,517,459 |
| 1.2 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 1,500,000 |
| $ | 1,457,823 |
| $ | 1,477,500 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 12,000,000 |
|
| 11,793,754 |
|
| 12,000,000 |
|
|
| |
|
|
|
| $ | 13,251,577 |
| $ | 13,477,500 |
| 3.5 | % |
COMPANY/INVESTMENT(1)(20) | ACQUISITION | PRINCIPAL | COST | FAIR | % OF | |||||||||
Senior Secured Notes |
|
|
|
| ||||||||||
Business Services |
|
|
|
| ||||||||||
Access CIG, LLC |
|
|
|
| ||||||||||
second lien senior secured notes, 9.32% (LIBOR + 7.75%), (0.00% floor) due February 27, 2026(4)(5)(14)(16) | February 14, 2018 | $ | 16,754,000 | $ | 16,812,391 | $ | 15,832,530 |
| ||||||
|
|
|
| |||||||||||
ConvergeOne Holdings, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 6.67% (LIBOR + 5.00%), (0.00% floor) due | June 4, 2021 |
| 5,322,148 |
| 5,274,154 |
| 4,527,179 |
| ||||||
second lien senior secured notes, 10.17% | June 3, 2021 |
| 15,000,000 |
| 14,423,986 |
| 13,125,000 |
| ||||||
|
|
|
| |||||||||||
Convergint Technologies, LLC |
|
|
|
| ||||||||||
second lien senior secured notes, 8.42% (LIBOR + 6.75%), (0.75% floor) due | March 18, 2021 |
| 11,000,000 |
| 10,954,390 |
| 10,560,000 |
| ||||||
|
|
|
| |||||||||||
OMNIA Partners, Inc. |
|
|
|
| ||||||||||
second lien senior secured notes, 9.75% (LIBOR + 7.50%), (0.00% floor) due | May 17, 2018 |
| 13,812,665 |
| 13,776,193 |
| 13,329,222 |
| ||||||
|
|
|
| |||||||||||
Premiere Global Services, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 8.75% (Prime Rate + 5.50%), (1.00% floor) due | October 1, 2019 |
| 11,821,914 |
| 11,469,896 |
| — |
| ||||||
replacement revolver, 8.75% | October 1, 2019 |
| 2,452,012 |
| 2,378,999 |
| 539,443 |
| ||||||
second lien senior secured notes, 0.50% Cash, 10.00% PIK (LIBOR + 9.00%) (1.00% floor) due June 6, 2024(3)(4)(5) (10) (17) | October 1, 2019 |
| 13,225,849 |
| 9,817,795 |
| — |
| ||||||
|
|
|
| |||||||||||
RSA Security, LLC |
|
|
|
| ||||||||||
second lien senior secured notes, 8.97% (LIBOR + 7.75%), (0.75% floor) due | April 16, 2021 |
| 15,000,000 |
| 14,764,277 |
| 12,840,000 |
| ||||||
|
|
|
| |||||||||||
Verifone Systems, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 5.52% (LIBOR + 4.00%), (0.00% floor) due | June 17, 2020 |
| 12,633,018 |
| 12,107,132 |
| 11,369,716 |
| ||||||
Total Business Services |
| $ | 111,779,213 | $ | 82,123,090 | 44.9 | % | |||||||
|
|
|
| |||||||||||
Diversified Insurance |
|
|
|
| ||||||||||
Affinion Insurance Solutions, Inc. (f/k/a AIS Intermediate, LLC) |
|
|
|
| ||||||||||
first lien senior secured notes, 6.24% | January 7, 2021 | $ | 15,209,069 | $ | 14,852,496 | $ | 14,676,752 |
| ||||||
|
|
|
| |||||||||||
AmeriLife Group LLC |
|
|
|
| ||||||||||
second lien senior secured notes, 9.56% | March 18, 2020 |
| 11,000,000 |
| 10,823,599 |
| 10,573,750 |
| ||||||
Total Diversified Insurance |
| $ | 25,676,095 | $ | 25,250,502 | 13.8 | % |
(continued(continued on next page)
See Accompanying Notes.
2
TICCOXFORD SQUARE CAPITAL CORP.CONSOLIDATED
SCHEDULE OF INVESTMENTS (unaudited) — (continued)SeptemberJune 30, 2017(unaudited)2022
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT |
| COST |
| FAIR |
| % of Net | ||||
Senior Secured Notes – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 3,000,000 |
| $ | 2,941,950 |
| $ | 2,996,250 |
|
|
| |
|
| 10,000,000 |
|
| 9,803,106 |
|
| 9,887,500 |
|
|
| |
|
|
|
| $ | 12,745,056 |
| $ | 12,883,750 |
| 3.4 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 2,638,748 |
| $ | 2,624,774 |
| $ | 2,665,135 |
|
|
| |
|
|
|
| $ | 2,624,774 |
| $ | 2,665,135 |
| 0.7 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 10,573,496 |
| $ | 10,554,997 |
| $ | 10,467,761 |
|
|
| |
|
|
|
| $ | 10,554,997 |
| $ | 10,467,761 |
| 2.7 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 12,730,561 |
| $ | 12,638,574 |
| $ | 12,794,214 |
|
|
| |
|
|
|
| $ | 12,638,574 |
| $ | 12,794,214 |
| 3.3 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 15,000,000 |
| $ | 14,895,056 |
| $ | 14,962,500 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 10,000,000 |
|
| 9,707,916 |
|
| 9,791,700 |
|
|
| |
|
|
|
| $ | 24,602,972 |
| $ | 24,754,200 |
| 6.5 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 14,000,000 |
| $ | 14,008,377 |
| $ | 14,052,500 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 21,475,095 |
|
| 20,826,313 |
|
| 18,253,831 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 13,000,000 |
|
| 12,919,938 |
|
| 12,935,000 |
|
|
|
COMPANY/INVESTMENT(1)(20) | ACQUISITION | PRINCIPAL | COST | FAIR | % OF | |||||||||
Senior Secured Notes – (continued) |
|
|
|
| ||||||||||
Healthcare |
|
|
|
| ||||||||||
Careismatic Brands, Inc. (f/k/a New Trojan Parent, Inc.) |
|
|
|
| ||||||||||
second lien senior secured notes, 8.92% | January 22, 2021 | $ | 12,000,000 | $ | 11,942,934 | $ | 10,800,000 |
| ||||||
|
|
|
| |||||||||||
HealthChannels, Inc. (f/k/a ScribeAmerica, LLC) |
|
|
|
| ||||||||||
first lien senior secured notes, 6.17% | October 31, 2018 |
| 19,120,808 |
| 18,810,200 |
| 16,189,015 |
| ||||||
|
|
|
| |||||||||||
Viant Medical Holdings, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 5.42% | June 26, 2018 |
| 9,625,000 |
| 9,623,866 |
| 8,818,906 |
| ||||||
second lien senior secured notes, 9.42% | June 26, 2018 |
| 5,000,000 |
| 4,971,654 |
| 4,612,500 |
| ||||||
Total Healthcare |
| $ | 45,348,654 | $ | 40,420,421 | 22.1 | % | |||||||
|
|
|
| |||||||||||
Plastics Manufacturing |
|
|
|
| ||||||||||
Spectrum Holdings III Corp. (f/k/a KPEX Holdings, Inc.) |
|
|
|
| ||||||||||
first lien senior secured notes, 4.92% | June 24, 2020 | $ | 12,903,726 | $ | 12,341,162 | $ | 11,852,588 |
| ||||||
Total Plastics Manufacturing |
| $ | 12,341,162 | $ | 11,852,588 | 6.5 | % | |||||||
|
|
|
| |||||||||||
Software |
|
|
|
| ||||||||||
Aspect Software, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 6.62% | May 18, 2021 | $ | 7,920,000 | $ | 7,808,277 | $ | 6,494,400 |
| ||||||
second lien senior secured notes, 11.19% | May 3, 2021 |
| 7,000,000 |
| 6,808,879 |
| 5,600,000 |
| ||||||
|
|
|
| |||||||||||
Dodge Data & Analytics, LLC |
|
|
|
| ||||||||||
first lien senior secured notes, 7.58% | February 10, 2022 |
| 5,000,000 |
| 4,926,768 |
| 4,462,500 |
| ||||||
second lien senior secured notes, 10.45% | February 10, 2022 |
| 15,000,000 |
| 14,787,024 |
| 12,600,000 |
| ||||||
|
|
|
| |||||||||||
Help/Systems Holdings, Inc. |
|
|
|
| ||||||||||
second lien senior secured notes, 7.56% | October 14, 2021 |
| 8,000,000 |
| 8,011,390 |
| 7,620,000 |
| ||||||
|
|
|
| |||||||||||
Magenta Buyer LLC (f/k/a McAfee Enterprise) |
|
|
|
| ||||||||||
first lien senior secured notes, 5.98% | May 17, 2022 |
| 2,000,000 |
| 1,890,332 |
| 1,800,000 |
| ||||||
second lien senior secured notes, 9.48% | October 20, 2021 |
| 14,968,714 |
| 14,924,486 |
| 13,621,530 |
|
(continued(continued on next page)
See Accompanying Notes.
3
TICCOXFORD SQUARE CAPITAL CORP.CONSOLIDATED
SCHEDULE OF INVESTMENTS (unaudited) — (continued)SeptemberJune 30, 2017(unaudited)2022
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT |
| COST |
| FAIR VALUE(2) |
| % of Net Assets | ||||
Senior Secured Notes – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications Services – (continued) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 5,638,392 |
| $ | 5,614,900 |
| $ | 5,638,392 |
|
|
| |
|
| 6,400,000 |
|
| 6,382,803 |
|
| 6,405,312 |
|
|
| |
|
|
|
| $ | 59,752,331 |
| $ | 57,285,035 |
| 15.0 | % | |
|
|
|
| $ | 234,276,782 |
| $ | 231,136,750 |
| 60.4 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 750,317 |
| $ | 748,183 |
| $ | 757,820 |
|
|
| |
|
|
|
| $ | 748,183 |
| $ | 757,820 |
| 0.2 | % | |
|
|
|
| $ | 748,183 |
| $ | 757,820 |
| 0.2 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Loan Obligation – Debt Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 1,250,000 |
| $ | 1,182,662 |
| $ | 1,218,750 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 4,000,000 |
|
| 3,288,787 |
|
| 3,262,800 |
|
|
| |
|
|
|
| $ | 4,471,449 |
| $ | 4,481,550 |
| 1.2 | % | |
|
|
|
| $ | 4,471,449 |
| $ | 4,481,550 |
| 1.2 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Loan Obligation – Equity Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 6,000,000 |
| $ | 3,766,347 |
| $ | 3,000,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 12,921,429 |
|
| 6,678,484 |
|
| 5,427,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 5,000,000 |
|
| 3,366,362 |
|
| 3,256,696 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 15,500,000 |
|
| 317,125 |
|
| — |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 17,630,000 |
|
| 8,496,368 |
|
| 6,701,691 |
|
|
|
COMPANY/INVESTMENT(1)(20) | ACQUISITION | PRINCIPAL | COST | FAIR | % OF | |||||||||
Senior Secured Notes – (continued) |
|
|
|
| ||||||||||
Software – (continued) |
|
|
|
| ||||||||||
Quest Software, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 5.47% | January 20, 2022 | $ | 3,000,000 | $ | 2,972,021 | $ | 2,659,680 |
| ||||||
second lien senior secured notes, 8.72% | January 20, 2022 |
| 20,000,000 |
| 19,719,189 |
| 17,825,000 |
| ||||||
|
|
|
| |||||||||||
Veritas USA, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 7.25% | June 24, 2022 |
| 2,000,000 |
| 1,700,000 |
| 1,631,660 |
| ||||||
Total Software |
| $ | 83,548,366 | $ | 74,314,770 | 40.7 | % | |||||||
|
|
|
| |||||||||||
Telecommunications Services |
|
|
|
| ||||||||||
Global Tel Link Corp. |
|
|
|
| ||||||||||
second lien senior secured notes, 11.63% (SOFR + 10.00%), (0.00% floor) due November 29, 2026(4)(5)(14)(31) | November 20, 2018 | $ | 17,000,000 | $ | 16,805,686 | $ | 14,938,750 |
| ||||||
Total Telecommunication Services |
| $ | 16,805,686 | $ | 14,938,750 | 8.2 | % | |||||||
|
|
|
| |||||||||||
Utilities |
|
|
|
| ||||||||||
CLEAResult Consulting, Inc. |
|
|
|
| ||||||||||
second lien senior secured notes, 8.87% (LIBOR + 7.25%), (0.00% floor) due | August 3, 2018 | $ | 7,650,000 | $ | 7,663,780 | $ | 7,210,125 |
| ||||||
Total Utilities |
| $ | 7,663,780 | $ | 7,210,125 | 3.9 | % | |||||||
Total Senior Secured Notes |
| $ | 303,162,956 | $ | 256,110,246 | 140.1 | % | |||||||
|
|
|
| |||||||||||
Collateralized Loan Obligation – Equity Investments |
|
|
|
| ||||||||||
Structured Finance |
|
|
|
| ||||||||||
Atlas Senior Loan Fund XI, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due July 26, 2031(9)(11)(12)(18)(24) | April 5, 2019 | $ | 5,725,000 | $ | 3,161,455 | $ | 1,660,250 |
| ||||||
|
|
|
| |||||||||||
Babson CLO Ltd. 2015-I |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 15.07% | July 26, 2018 |
| 8,512,727 |
| 2,686,396 |
| 1,702,545 |
| ||||||
|
|
|
| |||||||||||
BlueMountain CLO 2014-2 Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 5.99% due October 20, 2030(9)(11)(12)(18) | April 3, 2019 |
| 6,374,000 |
| 2,164,134 |
| 1,019,840 |
| ||||||
|
|
|
| |||||||||||
Carlyle Global Market Strategies CLO 2013-2, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due January 18, 2029(9)(11)(12)(18)(24) | March 19, 2013 |
| 6,250,000 |
| 704,481 |
| 193,750 |
| ||||||
|
|
|
| |||||||||||
Carlyle Global Market Strategies CLO 2021-6, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 15.08% due July 17, 2034(9)(11)(12)(14) (18) | June 30, 2021 |
| 29,600,000 |
| 22,089,361 |
| 17,760,000 |
| ||||||
|
|
|
| |||||||||||
Cedar Funding II CLO, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 12.45% due April 20, 2034(9)(11)(12)(13) (18)(26) | October 23, 2013 |
| 18,000,000 |
| 11,638,307 |
| 9,069,233 |
|
(continued(continued on next page)
See Accompanying Notes.
4
TICCOXFORD SQUARE CAPITAL CORP.CONSOLIDATED
SCHEDULE OF INVESTMENTS (unaudited) — (continued)SeptemberJune 30, 2017(unaudited)2022
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT |
| COST |
| FAIR VALUE(2) |
| % of Net Assets | |||
Collateralized Loan Obligation — Equity Investments – (continued) |
|
|
|
|
|
|
|
|
|
|
|
Structured Finance – (continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| |
| $ | 9,250,000 |
| $ | 5,932,670 |
| $ | 5,593,861 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 23,000,000 |
|
| 9,521,922 |
|
| 4,140,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 18,000,000 |
|
| 13,658,689 |
|
| 13,140,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 7,700,000 |
|
| 7,008,964 |
|
| 7,007,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 12,750,000 |
|
| 213,307 |
|
| 133,875 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 10,000,000 |
|
| 6,996,163 |
|
| 6,400,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 7,500,000 |
|
| 5,109,292 |
|
| 5,475,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 2,000,000 |
|
| 900,698 |
|
| 860,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 4,670,000 |
|
| 2,621,693 |
|
| 2,568,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 5,000,000 |
|
| 2,941,954 |
|
| 1,350,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 14,000,000 |
|
| 11,434,840 |
|
| 10,151,717 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 8,000,000 |
|
| 4,933,371 |
|
| 3,200,000 |
|
|
COMPANY/INVESTMENT(1)(20) | ACQUISITION | PRINCIPAL | COST | FAIR | % OF | ||||||||
Collateralized Loan Obligation – Equity |
|
|
| ||||||||||
Structured Finance – (continued) |
|
|
| ||||||||||
Cedar Funding VI CLO, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 12.65% due April 20, 2034(9)(11)(12)(18) | May 15, 2017 | $ | 7,700,000 | $ | 6,783,386 | $ | 5,236,000 | ||||||
|
|
| |||||||||||
CIFC Funding 2014-3, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due October 22, 2031(9)(11)(12)(18) (24) | January 24, 2017 |
| 10,000,000 |
| 4,315,478 |
| 2,200,000 | ||||||
|
|
| |||||||||||
Dryden 43 Senior Loan Fund |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 21.11% due April 20, 2034(9)(11)(12)(14)(18) | June 1, 2021 |
| 50,263,000 |
| 30,170,814 |
| 28,147,280 | ||||||
|
|
| |||||||||||
Madison Park Funding XVIII, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 28.26% due October 21, 2030(9)(11)(12)(18) (24) | May 22, 2020 |
| 12,500,000 |
| 5,029,843 |
| 5,125,000 | ||||||
|
|
| |||||||||||
Madison Park Funding XIX, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 11.84% due January 22, 2028(9)(11)(12)(18) (24) | May 11, 2016 |
| 5,422,500 |
| 3,304,826 |
| 2,331,675 | ||||||
|
|
| |||||||||||
Nassau 2019-I Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due April 15, 2031(9)(11)(12)(18) | April 11, 2019 |
| 23,500,000 |
| 13,654,498 |
| 5,875,000 | ||||||
|
|
| |||||||||||
Octagon Investment Partners 49, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 18.67% due January 18, 2033(9)(11)(12)(13)(14)(18)(26) | December 11, 2020 |
| 28,875,000 |
| 21,297,055 |
| 14,637,257 | ||||||
|
|
| |||||||||||
Sound Point CLO XVI, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due July 25, 2030(9)(11)(12) (18) | August 1, 2018 |
| 45,500,000 |
| 25,788,389 |
| 7,735,000 | ||||||
|
|
| |||||||||||
Telos CLO 2013-3, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due July 17, 2026(9)(11)(12)(18) (24) | January 25, 2013 |
| 14,447,790 |
| 6,207,075 |
| 288,956 | ||||||
|
|
| |||||||||||
Telos CLO 2013-4, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due January 17, 2030(9)(11)(12)(18) (24) | May 20, 2015 |
| 11,350,000 |
| 5,348,802 |
| 463,759 | ||||||
|
|
| |||||||||||
Telos CLO 2014-5, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due April 17, 2028(9)(11)(12)(18) | April 11, 2014 |
| 28,500,000 |
| 18,179,226 |
| 1,425,000 | ||||||
|
|
| |||||||||||
THL Credit Wind River 2012-1 CLO, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due January 15, 2026(9)(11)(12)(18) | June 11, 2015 |
| 7,500,000 |
| 2,904,463 |
| �� | ||||||
|
|
| |||||||||||
Venture XVII, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due April 15, 2027(9)(11)(12)(18)(24) | January 27, 2017 |
| 6,200,000 |
| 2,449,513 |
| 347,071 | ||||||
|
|
| |||||||||||
Venture XX, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due April 15, 2027(9)(11)(12)(18)(24) | July 27, 2018 |
| 3,000,000 |
| 332,779 |
| — | ||||||
|
|
| |||||||||||
Venture 35 CLO, Limited |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 20.70% due October 22, 2031(9)(11)(12)(18) | December 7, 2020 |
| 5,000,000 |
| 2,274,537 |
| 2,000,000 |
(continued(continued on next page)
See Accompanying Notes.
5
TICCOXFORD SQUARE CAPITAL CORP.CONSOLIDATED
SCHEDULE OF INVESTMENTS (unaudited) — (continued)SeptemberJune 30, 2017(unaudited)2022
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT |
| COST |
| FAIR VALUE(2) |
| % of Net Assets | |||
Collateralized Loan Obligation — Equity Investments – (continued) |
|
|
|
|
|
|
|
|
|
|
|
Structured Finance – (continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| |
| $ | 14,200,000 |
| $ | 6,739,198 |
| $ | 5,467,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 5,422,500 |
|
| 5,315,388 |
|
| 5,585,175 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 16,217,000 |
|
| 2,664,610 |
|
| — |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
| 2,389,676 |
|
| — |
|
| 109,020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 3,000,000 |
|
| 1,826,552 |
|
| 1,800,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 6,000,000 |
|
| 4,294,553 |
|
| 4,320,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 14,447,790 |
|
| 9,146,221 |
|
| 7,946,285 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 11,350,000 |
|
| 6,941,608 |
|
| 6,578,091 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 28,500,000 |
|
| 18,448,186 |
|
| 16,898,211 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 5,250,000 |
|
| 3,214,363 |
|
| 2,835,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 6,200,000 |
|
| 4,219,279 |
|
| 3,728,873 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 3,750,000 |
|
| 3,346,166 |
|
| 3,262,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 13,475,000 |
|
| 11,990,357 |
|
| 11,588,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
COMPANY/INVESTMENT(1)(20) | ACQUISITION | PRINCIPAL | COST | FAIR | % OF | |||||||||
Collateralized Loan Obligation – Equity |
|
|
|
| ||||||||||
Structured Finance – (continued) |
|
|
|
| ||||||||||
Venture 39 CLO, Limited |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 23.61% due April 15, 2033(9)(11)(12)(13)(18)(24)(26) | May 8, 2020 | $ | 5,150,000 | $ | 3,076,698 | $ | 3,014,342 |
| ||||||
|
|
|
| |||||||||||
West CLO 2014-1, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due July 18, 2026(9)(11)(12)(18) (24) | May 12, 2017 |
| 9,250,000 |
| 1,198,727 |
| 185,000 |
| ||||||
|
|
|
| |||||||||||
Westcott Park CLO, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due July 20, 2028(9)(11)(12) (18) | September 16, 2020 |
| 19,000,000 |
| — |
| 190,000 |
| ||||||
|
|
|
| |||||||||||
Zais CLO 6, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due July 15, 2029(9)(11)(12) (18) | May 3, 2017 |
| 10,500,000 |
| 5,658,757 |
| 1,155,000 |
| ||||||
Total Structured Finance |
| $ | 200,419,000 | $ | 111,761,958 | 61.1 | % | |||||||
Total Collateralized Loan Obligation – Equity Investments |
| $ | 200,419,000 | $ | 111,761,958 | 61.1 | % | |||||||
|
|
|
| |||||||||||
Common Stock |
|
|
|
| ||||||||||
IT Consulting |
|
|
|
| ||||||||||
Unitek Global Services, Inc. |
|
|
|
| ||||||||||
common equity(7)(27) | January 13, 2015 |
| 1,244,188 | $ | 684,960 | $ | — |
| ||||||
Total IT Consulting |
| $ | 684,960 | $ | — | 0.0 | % | |||||||
Total Common Stock |
| $ | 684,960 | $ | — | 0.0 | % | |||||||
|
|
|
| |||||||||||
Preferred Stock |
|
|
|
| ||||||||||
IT Consulting |
|
|
|
| ||||||||||
Unitek Global Services, Inc. |
|
|
|
| ||||||||||
Series B Preferred Stock(3)(17)(21) (27) | June 26, 2019 |
| 15,374,834 | $ | 9,002,159 | $ | — |
| ||||||
Series B Senior Preferred Stock(3)(17)(22) (27) | June 26, 2019 |
| 7,595,512 |
| 4,535,443 |
| — |
| ||||||
Series B Super Senior Preferred Stock(3)(17)(23) (27) | June 26, 2019 |
| 4,258,354 |
| 2,614,260 |
| 1,575,591 |
| ||||||
Total IT Consulting |
| $ | 16,151,862 | $ | 1,575,591 | 0.9 | % | |||||||
Total Preferred Equity |
| $ | 16,151,862 | $ | 1,575,591 | 0.9 | % | |||||||
Total Investments in Securities(8) |
| $ | 520,418,778 | $ | 369,447,795 | 202.1 | % | |||||||
|
|
|
| |||||||||||
Cash Equivalents |
|
|
|
| ||||||||||
First American Government Obligations |
| 22,300,717 | $ | 22,300,717 | $ | 22,300,717 |
| |||||||
Total Cash Equivalents |
| $ | 22,300,717 | $ | 22,300,717 | 12.2 | % | |||||||
Total Investments in Securities and |
| $ | 542,719,495 | $ | 391,748,512 | 214.3 | % |
(continued____________
(1) The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). These investments are generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.
(2) Fair value is determined in good faith by the Board of Directors of the Company.
(3) As of June 30, 2022, the portfolio includes $13,225,849 principal amount of debt investments and 27,228,700 shares of preferred stock investments which contain a PIK provision.
(4) Notes bear interest at variable rates and are subject to an interest rate floor where disclosed. The rate disclosed is as of June 30, 2022.
(continued on next page)
See Accompanying Notes.
6
TICCOXFORD SQUARE CAPITAL CORP.CONSOLIDATED
SCHEDULE OF INVESTMENTS (unaudited) — (continued)SeptemberJune 30, 2017(unaudited)2022
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT/SHARES |
| COST |
| FAIR VALUE(2) |
| % of Net Assets | ||||
Collateralized Loan Obligation — Equity Investments – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
Structured Finance – (continued) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 13,500,000 |
| $ | 9,068,058 |
| $ | 9,180,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 7,500,000 |
|
| 4,831,741 |
|
| 4,057,494 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 10,500,000 |
|
| 9,425,570 |
|
| 10,185,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 125,000 |
|
| 1,616,116 |
|
|
| |
|
|
|
| $ | 195,495,102 |
| $ | 173,562,605 |
| 45.4 | % | |
|
|
|
| $ | 195,495,102 |
| $ | 173,562,605 |
| 45.4 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1,244,188 |
| $ | 684,960 |
| $ | 622,094 |
|
|
| |
|
|
|
| $ | 684,960 |
| $ | 622,094 |
| 0.2 | % | |
|
|
|
| $ | 684,960 |
| $ | 622,094 |
| 0.2 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 3,002,455 |
| $ | 2,762,421 |
| $ | 3,122,553 |
|
|
| |
|
| 5,706,866 |
|
| 3,677,000 |
|
| 8,046,681 |
|
|
| |
|
|
|
| $ | 6,439,421 |
| $ | 11,169,234 |
| 2.9 | % | |
|
|
|
| $ | 6,439,421 |
| $ | 11,169,234 |
| 2.9 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 159,795 |
| $ | — |
| $ | — |
|
|
| |
|
|
|
| $ | — |
| $ | — |
| 0.0 | % | |
|
|
|
| $ | — |
| $ | — |
| 0.0 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| $ | 500,000 |
| $ | 500 |
|
|
| |
|
|
|
| $ | 500,000 |
| $ | 500 |
| 0.0 | % | |
|
|
|
| $ | 500,000 |
| $ | 500 |
| 0.0 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in Securities(8) |
|
|
|
| $ | 442,615,897 |
| $ | 421,730,553 |
| 110.3 | % |
(continued(5) Cost value reflects accretion of original issue discount or market discount, or amortization of premium.
(6) Cost value reflects repayment of principal
(7) Common stock investments were non-income producing at the relevant period end.
(8) Aggregate gross unrealized appreciation for U.S. federal income tax purposes is $282,569; aggregate gross unrealized depreciation for U.S. federal income tax purposes is $172,013,562. Net unrealized depreciation is $171,730,993 based upon an estimated tax cost basis of $541,178,788 as of June 30, 2022.
(9) Cost reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO equity investments.
(10) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 180-day LIBOR.
(11) Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets. As of June 30, 2022, the Company held qualifying assets that represented 69.9% of its total assets.
(12) Investment not domiciled in the United States.
(13) Fair value includes the Company’s interest in subordinated fee notes, and represents discounted cash flows associated with fees earned from CLO equity investments.
(14) Aggregate investments represent greater than 5% of net assets.
(15) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 30-day LIBOR.
(16) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 90-day LIBOR.
(17) As of June 30, 2022, this debt or preferred equity investment was on non-accrual status. The aggregate fair value of these investments was approximately $2.1 million.
(18) The CLO subordinated notes and income notes are considered equity positions in CLO vehicles. Equity investments are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s securities less contractual payments to debt holders and fund expenses. The estimated yield indicated is based on the prior quarters ending investment cost (for previously existing portfolio investments) or the original cost for those investments made during the current quarter, as well as, a current projection of the future cash flows. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.
(19) Represents cash equivalents held in money market accounts as of June 30, 2022.
(20) The fair value of the investment was determined using significant unobservable inputs. See “Note 4. Fair Value.”
(21) The Company holds preferred stock in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 13.5% per annum payable in additional shares.
(22) The Company holds preferred stock in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 19.0% per annum payable in additional shares.
(23) The Company holds preferred stock in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 20.0% per annum payable in additional shares.
(24) The investment is co-invested with the Company’s affiliates. See “Note 7. Related Party Transactions.”
(25) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 180-day SOFR.
(26) Cost value reflects amortization.
(continued on next page)
See Accompanying Notes.
7
TICCOXFORD SQUARE CAPITAL CORP.CONSOLIDATED
SCHEDULE OF INVESTMENTS (unaudited) — (continued)SeptemberJune 30, 2017(unaudited)2022
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT |
| COST |
| FAIR VALUE(2) |
| % of Net Assets | |||
Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 119,601,494 |
| $ | 119,601,494 |
|
|
| |
|
|
| $ | 119,601,494 |
| $ | 119,601,494 |
| 31.3 | % | |
Total Investments in Securities and Cash Equivalents |
|
|
| $ | 562,217,391 |
| $ | 541,332,047 |
| 141.6 | % |
____________
(1) Other than Unitek Global Services, Inc., of which we(27) These investments are deemed to be an “affiliate,” we do not “control” and are not an “affiliate” of any of our portfolio companies, each as defined in the Investment Company Act of 1940 (the “1940 Act”). In general, under the 1940 Act, we would be presumed to “control” a portfolio company if we owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company if we owned between 5% or moreand 25% of its voting securities. We do not “control” any of our portfolio companies. Fair value as of December 31, 2021 and June 30, 2022 along with transactions during the six months ended June 30, 2022 in these affiliated investments are as follows:
Name of Issuer | Title of Issue | Amount of Interest or Dividends Credited to Income(a) | Fair Value | Gross | Gross | Net | Fair Value | |||||||||||||||
AFFILIATED INVESTMENT: |
|
|
|
|
|
| ||||||||||||||||
Unitek Global Systems, Inc | Common Stock | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Series B Preferred Stock |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||
Series B Senior |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||
Series B Super |
| — |
| 772,491 |
| — |
| — |
| 803,100 |
| 1,575,591 | ||||||||||
Total Affiliated Investment |
| — |
| 772,491 |
| — |
| — |
| 803,100 |
| 1,575,591 | ||||||||||
Total Control Investment |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||
TOTAL CONTROL AND AFFILIATED INVESTMENTS | $ | — | $ | 772,491 | $ | — | $ | — | $ | 803,100 | $ | 1,575,591 |
____________ (a) Represents the total amount of interest or distributions credited to income for the portion of the year an investment was an affiliate investment. (b) Gross additions include increases in investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and fees. For the six months ended June 30, 2022, a total of approximately $2.1 million of paid-in-kind dividends were entitled to be received yet deemed uncollectible. (c) Gross reductions include decreases in investments resulting from principal collections related to investment repayments or sales, the amortization of premiums and acquisition costs. |
(28) As part of a restructuring completed on September 17, 2021, a portion of the Company’s investment in the first lien senior secured notes of Premiere Global Services, Inc. was converted into a like amount of a new revolving credit facility (the “Replacement Revolver”). On June 30, 2022 the maturity date of the Replacement Revolver was amended from June 30, 2022 to September 30, 2022, compared to the maturity date of first lien senior secured notes of June 8, 2023. The cost basis of the Replacement Revolver was established by allocating a portion of the cost basis from the first lien senior secured notes pro-rata based on the amount of principal that was converted from the first lien senior secured notes to the Replacement Revolver. The Replacement Revolver has no unfunded commitment and is on non-accrual status as of June 30, 2022.
(29) Note bears interest at 5.50%, plus the greater of: the Wall Street Journal quoted Prime Rate, Federal Funds effective rate plus 1.00%, or the one-month reserve adjusted Eurodollar Base Rate plus 1.00%. The rate disclosed is as of June 30, 2022.
(30) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 90-day SOFR.
(31) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 30-day SOFR.
See Accompanying Notes.
8
SCHEDULE OF INVESTMENTS
December 31, 2021
COMPANY/INVESTMENT(1)(20) | ACQUISITION | PRINCIPAL | COST | FAIR | % OF | |||||||||
Senior Secured Notes |
|
|
|
| ||||||||||
Business Services |
|
|
|
| ||||||||||
Access CIG, LLC |
|
|
|
| ||||||||||
second lien senior secured notes, 7.84% (LIBOR + 7.75%), (0.00% floor) due February 27, 2026(4)(5)(14)(15) | February 14, 2018 | $ | 16,754,000 | $ | 16,818,779 | $ | 16,696,366 |
| ||||||
|
|
|
| |||||||||||
ConvergeOne Holdings, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 5.10% (LIBOR + 5.00%), (0.00% floor) due January 4, 2026(4)(5)(6)(14)(15) | June 4, 2021 |
| 5,349,653 |
| 5,294,704 |
| 5,230,142 |
| ||||||
second lien senior secured notes, 8.60% (LIBOR + 8.50%), (0.00% floor) due January 4, 2027(4)(5)(14)(15) | June 3, 2021 |
| 15,000,000 |
| 14,370,373 |
| 14,400,000 |
| ||||||
|
|
|
| |||||||||||
Convergint Technologies, LLC |
|
|
|
| ||||||||||
second lien senior secured notes, 7.50% (LIBOR + 6.75%), (0.75% floor) due March 29, 2029(4)(5)(15) | March 18, 2021 |
| 11,000,000 |
| 10,948,877 |
| 11,027,500 |
| ||||||
|
|
|
| |||||||||||
OMNIA Partners, Inc. |
|
|
|
| ||||||||||
second lien senior secured notes, 7.72% (LIBOR + 7.50%), (0.00% floor) due May 22, 2026(4)(5)(6)(14)(16) | May 17, 2018 |
| 13,813,403 |
| 13,770,324 |
| 13,744,336 |
| ||||||
|
|
|
| |||||||||||
Premiere Global Services, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 8.75% (Prime Rate + 5.50%) due | October 1, 2019 |
| 11,821,914 |
| 11,469,896 |
| — |
| ||||||
replacement revolver, 8.75% | October 1, 2019 |
| 2,452,012 |
| 2,378,999 |
| 1,324,086 |
| ||||||
second lien senior secured notes, 0.50% Cash, 10.00% PIK (LIBOR + 9.00%) (1.00% floor) due June 6, 2024(3)(4)(5)(10)(17) | October 1, 2019 |
| 12,581,734 |
| 9,817,795 |
| — |
| ||||||
|
|
|
| |||||||||||
RSA Security, LLC |
|
|
|
| ||||||||||
second lien senior secured notes, 8.50% (LIBOR + 7.75%), (0.75% floor) due April 27, 2029(4)(5)(14)(16) | April 16,2021 |
| 15,000,000 |
| 14,747,914 |
| 13,774,950 |
| ||||||
|
|
|
| |||||||||||
Verifone Systems, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 4.18% (LIBOR + 4.00%), (0.00% floor) due August 20, 2025(4)(5)(6)(14)(16) | June 17, 2020 |
| 12,698,474 |
| 12,092,596 |
| 12,507,997 |
| ||||||
Total Business Services |
| $ | 111,710,257 | $ | 88,705,377 | 36.3 | % | |||||||
|
|
|
| |||||||||||
Diversified Insurance |
|
|
|
| ||||||||||
Affinion Insurance Solutions, Inc. (f/k/a AIS Intermediate, LLC) |
|
|
|
| ||||||||||
first lien senior secured notes, 5.13% (LIBOR + 5.00%), (0.00% floor) due August 15, 2025(4)(5)(6)(14)(16) | January 7, 2021 | $ | 15,209,069 | $ | 14,799,137 | $ | 14,904,888 |
|
(continued on next page)
See Accompanying Notes.
9
OXFORD SQUARE CAPITAL CORP.
SCHEDULE OF INVESTMENTS — (continued)
December 31, 2021
COMPANY/INVESTMENT(1)(20) | ACQUISITION DATE | PRINCIPAL AMOUNT | COST | FAIR | % OF | |||||||||
Senior Secured Notes – (continued) |
|
|
|
| ||||||||||
Diversified Insurance – (continued) |
|
|
|
| ||||||||||
AmeriLife Group LLC |
|
|
|
| ||||||||||
second lien senior secured notes, 9.50% (LIBOR + 8.50%), (1.00% floor) due March 20, 2028(4)(5)(16) | March 18, 2020 | $ | 11,000,000 | $ | 10,814,660 | $ | 11,000,000 |
| ||||||
Total Diversified Insurance |
| $ | 25,613,797 | $ | 25,904,888 | 10.6 | % | |||||||
|
|
|
| |||||||||||
Healthcare |
|
|
|
| ||||||||||
Careismatic Brands, Inc. (f/k/a New Trojan Parent, Inc.) |
|
|
|
| ||||||||||
second lien senior secured notes, 7.75% (LIBOR + 7.25%), (0.50% floor) due January 5, 2029(4)(5)(16) | January 22, 2021 | $ | 12,000,000 | $ | 11,937,974 | $ | 11,880,000 |
| ||||||
|
|
|
| |||||||||||
HealthChannels, Inc. (f/k/a ScribeAmerica, LLC) |
|
|
|
| ||||||||||
first lien senior secured notes, 4.60% (LIBOR + 4.50%), (0.00% floor) due April 3, 2025(4)(5)(6)(14)(15) | October 31, 2018 |
| 19,223,362 |
| 18,857,030 |
| 17,493,259 |
| ||||||
|
|
|
| |||||||||||
Keystone Acquisition Corp. |
|
|
|
| ||||||||||
first lien senior secured notes, 6.25% (LIBOR + 5.25%), (1.00% floor) due May 1, 2024(4)(5)(6)(14)(15) | May 10, 2017 |
| 7,305,279 |
| 7,291,908 |
| 7,232,226 |
| ||||||
second lien senior secured notes, 10.25% (LIBOR + 9.25%), (1.00% floor) due May 1, 2025(4)(5)(14)(15) | May 10, 2017 |
| 13,000,000 |
| 12,914,004 |
| 12,480,000 |
| ||||||
|
|
|
| |||||||||||
Viant Medical Holdings, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 3.85% (LIBOR + 3.75%), (0.00% floor) due July 2, 2025(4)(5)(6)(14)(15) | June 26, 2018 |
| 9,675,000 |
| 9,673,178 |
| 9,142,875 |
| ||||||
second lien senior secured notes, 7.85% (LIBOR + 7.75%), (0.00% floor) due July 2, 2026(4)(5)(14)(15) | June 26, 2018 |
| 5,000,000 |
| 4,966,563 |
| 4,747,500 |
| ||||||
Total Healthcare |
| $ | 65,640,657 | $ | 62,975,860 | 25.7 | % | |||||||
|
|
|
| |||||||||||
Plastics Manufacturing |
|
|
|
| ||||||||||
Spectrum Holdings III Corp. (f/k/a KPEX Holdings, Inc.) |
|
|
|
| ||||||||||
first lien senior secured notes, 4.25% (LIBOR + 3.25%), (1.00% floor) due January 31, 2025(4)(5)(6)(10)(14) | June 24, 2020 | $ | 12,971,109 | $ | 12,301,815 | $ | 12,659,024 |
| ||||||
Total Plastics Manufacturing |
| $ | 12,301,815 | $ | 12,659,024 | 5.2 | % | |||||||
|
|
|
| |||||||||||
Software |
|
|
|
| ||||||||||
Aspect Software, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 6.00% (LIBOR + 5.25%), (0.75% floor) due May 8, 2028(4)(5)(6)(14)(16) | May 18, 2021 | $ | 7,960,000 | $ | 7,837,526 | $ | 7,800,800 |
| ||||||
second lien senior secured notes, 9.75% (LIBOR + 9.00%), (0.75% floor) due May 7, 2029(4)(5)(14)(16) | May 3, 2021 |
| 7,000,000 |
| 6,798,492 |
| 6,877,500 |
|
(continued on next page)
See Accompanying Notes.
10
OXFORD SQUARE CAPITAL CORP.
SCHEDULE OF INVESTMENTS — (continued)
December 31, 2021
COMPANY/INVESTMENT(1)(20) | ACQUISITION | PRINCIPAL | COST | FAIR | % OF | |||||||||
Senior Secured Notes – (continued) |
|
|
|
| ||||||||||
Software – (continued) |
|
|
|
| ||||||||||
Help/Systems Holdings, Inc. |
|
|
|
| ||||||||||
second lien senior secured notes, 7.50% (LIBOR + 6.75%), (0.75% floor) due November 19, 2027(4)(5)(16) | October 14, 2021 | $ | 8,000,000 | $ | 8,011,787 | $ | 7,973,360 |
| ||||||
|
|
|
| |||||||||||
Magenta Buyer LLC (f/k/a McAfee Enterprise) |
|
|
|
| ||||||||||
second lien senior secured notes, 9.00% (LIBOR + 8.25%), (0.75% floor) due July 27, 2029(4)(5)(16) | October 20, 2021 |
| 10,000,000 |
| 9,937,500 |
| 9,909,400 |
| ||||||
|
|
|
| |||||||||||
Quest Software, Inc. |
|
|
|
| ||||||||||
first lien senior secured notes, 4.38% (LIBOR + 4.25%), (0.00% floor) due May 16, 2025(4)(5)(6)(14)(16) | August 17, 2021 |
| 4,987,147 |
| 4,987,147 |
| 4,977,821 |
| ||||||
second lien senior secured notes, 8.38% (LIBOR + 8.25%), (0.00% floor) due May 18, 2026(4)(5)(14)(16) | May 17, 2018 |
| 13,353,672 |
| 13,244,239 |
| 13,325,896 |
| ||||||
Total Software |
| $ | 50,816,691 | $ | 50,864,777 | 20.8 | % | |||||||
|
|
|
| |||||||||||
Telecommunications Services |
|
|
|
| ||||||||||
Global Tel Link Corp. |
|
|
|
| ||||||||||
second lien senior secured notes, 8.35% (LIBOR + 8.25%), (0.00% floor) due November 29, 2026(4)(5)(14)(15) | November 20, 2018 | $ | 17,000,000 | $ | 16,786,527 | $ | 15,810,000 |
| ||||||
Total Telecommunication Services |
| $ | 16,786,527 | $ | 15,810,000 | 6.5 | % | |||||||
|
|
|
| |||||||||||
Utilities |
|
|
|
| ||||||||||
CLEAResult Consulting, Inc. |
|
|
|
| ||||||||||
second lien senior secured notes, 7.35% (LIBOR + 7.25%), (0.00% floor) due August 10, 2026(4)(5)(15) | August 3, 2018 | $ | 7,650,000 | $ | 7,664,823 | $ | 7,535,250 |
| ||||||
Total Utilities |
| $ | 7,664,823 | $ | 7,535,250 | 3.1 | % | |||||||
Total Senior Secured Notes |
| $ | 290,534,567 | $ | 264,455,176 | 108.1 | % | |||||||
|
|
|
| |||||||||||
Collateralized Loan Obligation – Equity Investments |
|
|
|
| ||||||||||
Structured Finance |
|
|
|
| ||||||||||
Atlas Senior Loan Fund XI, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 5.65% due July 26, 2031(9)(11)(12)(18)(24) | April 5, 2019 | $ | 5,725,000 | $ | 3,520,119 | $ | 2,519,000 |
| ||||||
|
|
|
| |||||||||||
Babson CLO Ltd. 2015-I |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 16.59% due January 21, 2031(9)(11)(12)(18) | July 26, 2018 |
| 8,512,727 |
| 3,105,278 |
| 2,894,327 |
| ||||||
|
|
|
| |||||||||||
BlueMountain CLO 2014-2 Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 6.80% due October 20, 2030(9)(11)(12)(18) | April 3, 2019 |
| 6,374,000 |
| 2,456,332 |
| 1,912,200 |
| ||||||
|
|
|
| |||||||||||
Carlyle Global Market Strategies CLO 2013 -2, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due January 18, 2029(9)(11)(12)(18)(24) | March 19, 2013 |
| 6,250,000 |
| 893,030 |
| 362,500 |
| ||||||
|
|
|
| |||||||||||
Carlyle Global Market Strategies CLO 2021 -6, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 15.69% due July 17, 2034(9)(11)(12)(14)(18) | June 30, 2021 |
| 44,600,000 |
| 36,247,915 |
| 33,896,000 |
|
(continued on next page)
See Accompanying Notes.
11
OXFORD SQUARE CAPITAL CORP.
SCHEDULE OF INVESTMENTS — (continued)
December 31, 2021
COMPANY/INVESTMENT(1)(20) | ACQUISITION | PRINCIPAL | COST | FAIR | % OF | ||||||||
Collateralized Loan Obligation – Equity Investments – (continued) |
|
|
| ||||||||||
Structured Finance – (continued) |
|
|
| ||||||||||
Cedar Funding II CLO, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 11.40% due April 20, 2034(9)(11)(12)(18) | October 23, 2013 | $ | 18,000,000 | $ | 11,676,216 | $ | 10,260,000 | ||||||
|
|
| |||||||||||
Cedar Funding VI CLO, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 12.33% due April 20, 2034(9)(11)(12)(18) | May 15, 2017 |
| 7,700,000 |
| 7,009,789 |
| 6,391,000 | ||||||
|
|
| |||||||||||
CIFC Funding 2014-3, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 4.63% due October 22, 2031(9)(11)(12)(18)(24) | January 24, 2017 |
| 10,000,000 |
| 4,850,026 |
| 3,700,000 | ||||||
|
|
| |||||||||||
Dryden 43 Senior Loan Fund |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 16.53% due April 20, 2034(9)(11)(12)(18) | June 1, 2021 |
| 10,000,000 |
| 6,859,319 |
| 6,700,000 | ||||||
|
|
| |||||||||||
Madison Park Funding XVIII, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 33.51% due October 21, 2030(9)(11)(12)(18)(24) | May 22, 2020 |
| 12,500,000 |
| 5,250,699 |
| 7,250,000 | ||||||
|
|
| |||||||||||
Madison Park Funding XIX, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 13.93% due January 22, 2028(9)(11)(12)(18)(24) | May 11, 2016 |
| 5,422,500 |
| 3,613,896 |
| 3,416,175 | ||||||
|
|
| |||||||||||
Nassau 2019-I Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 10.07% due April 15, 2031(9)(11)(12)(18) | April 11, 2019 |
| 23,500,000 |
| 15,446,642 |
| 11,515,000 | ||||||
|
|
| |||||||||||
Octagon Investment Partners 45, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 36.89% due October 15, 2032(9)(11)(12)(18) | May 13, 2020 |
| 3,750,000 |
| 2,358,736 |
| 3,377,590 | ||||||
|
|
| |||||||||||
Octagon Investment Partners 49, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 15.28% due January 18, 2033(9)(11)(12)(14)(18) | December 11, 2020 |
| 28,875,000 |
| 21,171,591 |
| 21,152,987 | ||||||
|
|
| |||||||||||
Sound Point CLO XVI, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due July 25, 2030(9)(11)(12)(14)(18) | August 1, 2018 |
| 45,500,000 |
| 29,498,848 |
| 19,110,000 | ||||||
|
|
| |||||||||||
Telos CLO 2013-3, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due July 17, 2026(9)(11)(12)(18)(24) | January 25, 2013 |
| 14,447,790 |
| 6,237,524 |
| 1,256,958 | ||||||
|
|
| |||||||||||
Telos CLO 2013-4, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due January 17, 2030(9)(11)(12)(18)(24) | May 20, 2015 |
| 11,350,000 |
| 5,860,520 |
| 1,974,793 | ||||||
|
|
| |||||||||||
Telos CLO 2014-5, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due April 17, 2028(9)(11)(12)(18) | April 11, 2014 |
| 28,500,000 |
| 18,179,226 |
| 3,990,000 | ||||||
|
|
| |||||||||||
THL Credit Wind River 2012-1 CLO, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due January 15, 2026(9)(11)(12)(18) | June 11, 2015 |
| 7,500,000 |
| 2,904,463 |
| 22,500 | ||||||
|
|
| |||||||||||
Venture XVII, Ltd. |
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due April 15, 2027(9)(11)(12)(18)(24) | January 27, 2017 |
| 6,200,000 |
| 2,701,926 |
| 952,250 |
(continued on next page)
See Accompanying Notes.
12
OXFORD SQUARE CAPITAL CORP.
SCHEDULE OF INVESTMENTS — (continued)
December 31, 2021
COMPANY/INVESTMENT(1)(20) | ACQUISITION | PRINCIPAL | COST | FAIR | % OF | |||||||||
Collateralized Loan Obligation – Equity Investments – (continued) |
|
|
|
| ||||||||||
Structured Finance – (continued) |
|
|
|
| ||||||||||
Venture XX, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due April 15, 2027(9)(11)(12)(18)(24) | July 27, 2018 | $ | 3,000,000 | $ | 1,145,750 | $ | 690,000 |
| ||||||
|
|
|
| |||||||||||
Venture 35 CLO, Limited |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 17.90% due October 22, 2031(9)(11)(12)(18) | December 7, 2020 |
| 5,000,000 |
| 2,422,726 |
| 2,600,000 |
| ||||||
|
|
|
| |||||||||||
Venture 39 CLO, Limited |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 20.76% due April 15, 2033(9)(11)(12)(18) | May 8, 2020 |
| 5,150,000 |
| 3,016,229 |
| 3,914,000 |
| ||||||
|
|
|
| |||||||||||
West CLO 2014-1, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due July 18, 2026(9)(11)(12)(18)(24) | May 12, 2017 |
| 9,250,000 |
| 1,359,343 |
| 231,250 |
| ||||||
|
|
|
| |||||||||||
Westcott Park CLO, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due July 20, 2028(9)(11)(12)(18) | September 16, 2020 |
| 19,000,000 |
| — |
| 665,000 |
| ||||||
|
|
|
| |||||||||||
Zais CLO 6, Ltd. |
|
|
|
| ||||||||||
CLO subordinated notes, estimated yield 0.00% due July 15, 2029(9)(11)(12)(18) | May 3, 2017 |
| 10,500,000 |
| 6,391,137 |
| 3,045,000 |
| ||||||
|
|
|
| |||||||||||
CLO Equity Side Letter Related Investments(11)(12)(13)(25)(26) |
|
| 500,785 |
| 1,785,011 |
| ||||||||
Total Structured Finance |
| $ | 204,678,065 | $ | 155,583,541 | 63.6 | % | |||||||
Total Collateralized Loan Obligation – Equity Investments |
| $ | 204,678,065 | $ | 155,583,541 | 63.6 | % | |||||||
|
|
|
| |||||||||||
Common Stock |
|
|
|
| ||||||||||
IT Consulting |
|
|
|
| ||||||||||
Unitek Global Services, Inc. |
|
|
|
| ||||||||||
Common equity(7)(27) | January 13, 2015 |
| 1,244,188 | $ | 684,960 | $ | — |
| ||||||
Total IT Consulting |
| $ | 684,960 | $ | — | 0.0 | % | |||||||
Total Common Stock |
| $ | 684,960 | $ | — | 0.0 | % | |||||||
|
|
|
| |||||||||||
Preferred Stock |
|
|
|
| ||||||||||
IT Consulting |
|
|
|
| ||||||||||
Unitek Global Services, Inc. |
|
|
|
| ||||||||||
Series B Preferred Stock(3) (17) (21) (27) | June 26, 2019 |
| 14,387,303 | $ | 9,002,159 | $ | — |
| ||||||
Series B Senior Preferred Stock(3) (17) (22) (27) | June 26, 2019 |
| 6,922,278 |
| 4,535,443 |
| — |
| ||||||
Series B Super Senior Preferred Stock(3) (17) (23) (27) | June 26, 2019 |
| 3,862,453 |
| 2,614,260 |
| 772,491 |
| ||||||
Total IT Consulting |
| $ | 16,151,862 | $ | 772,491 | 0.3 | % | |||||||
Total Preferred Equity |
| $ | 16,151,862 | $ | 772,491 | 0.3 | % | |||||||
Total Investments in Securities(8) |
| $ | 512,049,454 | $ | 420,811,208 | 172.0 | % | |||||||
|
|
|
| |||||||||||
Cash Equivalents |
|
|
|
| ||||||||||
First American Government Obligations Fund(19) |
| $ | 8,398,154 | $ | 8,398,154 |
| ||||||||
Total Cash Equivalents |
| $ | 8,398,154 | $ | 8,398,154 | 3.4 | % | |||||||
Total Investments in Securities and Cash |
| $ | 520,447,608 | $ | 429,209,362 | 175.4 | % |
____________
(1) The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). These investments are generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.
(2) Fair value is determined in good faith by the Board of Directors of the Company.
(continued on next page)
See Accompanying Notes.
13
OXFORD SQUARE CAPITAL CORP.
SCHEDULE OF INVESTMENTS — (continued)
December 31, 2021
(3) PortfolioAs of December 31, 2021, the portfolio includes $6,763,573 of$12,581,734 principal amount of debt investments and 25,172,034 shares of preferred stock investments which contain a PIK provision at September 30, 2017.provision.
(4) Notes bear interest at variable rates.rates and are subject to an interest rate floor where disclosed. The rate disclosed is as of December 31, 2021.
(5) Cost value reflects accretion of original issue discount or market discount.discount, or amortization of premium.
(6) Cost value reflects repayment of principal.
(7) Non-incomeNon-income producing at the relevant period end.
(8) Aggregate gross unrealized appreciation for U.S. federal income tax purposes is $12,832,544;$8,904,045; aggregate gross unrealized depreciation for U.S. federal income tax purposes is $76,038,143.$115,478,576. Net unrealized depreciation is $63,205,599$106,574,531 based upon aan estimated tax cost basis of $484,936,152.$527,385,739 as of December 31, 2021.
(9) Cost value reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO equity investments.
(10) The CLO equityprincipal balance outstanding for this debt investment, was optionally redeemed. Referin whole or in part, is indexed to “Note 3. Summary of Significant Accounting Policies.”180-day LIBOR.
(11) Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the 1940 ActAct. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifyingnon-qualifying assets. As of September 30, 2017,December 31, 2021, the Company held qualifying assets that represented 67.3%64.1% of its total assetsassets.
(12) Investment not domiciled in the United States.
(13) Fair value represents discounted cash flows associated with fees earned from CLO equity investmentsinvestments.
(14) Aggregate investments represent greater than 5% of net assets.
(15) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 90-day30-day LIBOR.
(16) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 1-year90-day LIBOR.
(17) The principal balance outstanding forAs of December 31, 2021, this debt or preferred equity investment in whole or in part, is indexed to 30-day LIBOR.was on non-accrual status. The aggregate fair value of these investments was approximately $2.1 million.
(18) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 180-day LIBOR.
(19) The CLO subordinated notes and income notes are considered equity positions in the CLO funds.vehicles. Equity investments are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s securities less contractual payments to debt holders and fund expenses. The estimated yield indicated is based uponon the prior quarters ending investment cost (for previously existing portfolio investments) or the original cost for those investments made during the current quarter, as well as, a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon expected redemption.future cash flows. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.
(20) Represents the earnout payments related to the sale of Algorithmic Implementations, Inc. (d/b/a “Ai Squared”).
(21)(19) Represents cash equivalents held in money market accounts as of September 30, 2017.December 31, 2021.
(20) The fair value of the investment was determined using significant unobservable inputs. See “Note 3. Fair Value.”
(21) The Company holds preferred stock in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 13.5% per annum payable in additional shares.
(22) The Company holds preferred stock in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 19.0% per annum payable in additional shares.
(23) The Company holds preferred stock in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 20.0% per annum payable in additional shares.
(24) The investment is co-invested with the Company’s affiliates. See “Note 7. Related Party Transactions.”
(25) The CLO equity side letter related investments have acquisition dates from October 2013 through December 2021.
(26) Cost value reflects amortization.
(continued on next page)
See Accompanying Notes.
814
OXFORD SQUARE CAPITAL CORP.
TICC CAPITAL CORP.CONSOLIDATED SCHEDULE OF INVESTMENTSDECEMBER 31, 2016
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT |
| COST |
| FAIR VALUE(2) |
| % of Net | ||||
Senior Secured Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 5,643,000 |
| $ | 5,586,051 |
| $ | 5,466,656 |
|
|
| |
|
|
|
| $ | 5,586,051 |
| $ | 5,466,656 |
| 1.4 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 4,676,389 |
| $ | 4,687,172 |
| $ | 4,664,698 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 9,609,828 |
|
| 9,609,610 |
|
| 9,561,779 |
|
|
| |
|
| 3,000,000 |
|
| 2,978,478 |
|
| 2,940,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 6,769,583 |
|
| 6,497,271 |
|
| 6,803,431 |
|
|
| |
|
| 13,000,000 |
|
| 12,744,436 |
|
| 12,870,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 14,436,090 |
|
| 13,060,236 |
|
| 14,048,192 |
|
|
| |
|
| 5,000,000 |
|
| 4,804,450 |
|
| 4,800,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 16,537,500 |
|
| 16,195,897 |
|
| 14,883,750 |
|
|
| |
|
| 15,000,000 |
|
| 14,586,122 |
|
| 9,723,750 |
|
|
| |
|
|
|
| $ | 85,163,672 |
| $ | 80,295,600 |
| 20.8 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 7,975,000 |
| $ | 7,911,297 |
| $ | 7,855,375 |
|
|
| |
|
|
|
| $ | 7,911,297 |
| $ | 7,855,375 |
| 2.0 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 17,640,000 |
| $ | 17,387,178 |
| $ | 16,912,350 |
|
|
| |
|
|
|
| $ | 17,387,178 |
| $ | 16,912,350 |
| 4.4 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
(continued on next page)
See Accompanying Notes.
9
TICC CAPITAL CORP.CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)DECEMBERDecember 31, 20162021
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT |
| COST |
| FAIR VALUE(2) |
| % of Net | ||||
Senior Secured Notes – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 15,620,604 |
| $ | 15,486,217 |
| $ | 15,151,986 |
|
|
| |
|
|
|
| $ | 15,486,217 |
| $ | 15,151,986 |
| 3.9 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 5,966,443 |
| $ | 5,931,165 |
| $ | 4,285,875 |
|
|
| |
|
|
|
| $ | 5,931,165 |
| $ | 4,285,875 |
| 1.1 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 13,982,241 |
| $ | 13,870,396 |
| $ | 13,982,241 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 12,000,000 |
|
| 11,777,359 |
|
| 11,820,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 9,262,559 |
|
| 9,214,580 |
|
| 9,262,559 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 12,224,081 |
|
| 12,135,248 |
|
| 11,888,285 |
|
|
| |
|
|
|
| $ | 46,997,583 |
| $ | 46,953,085 |
| 12.2 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 2,638,748 |
| $ | 2,617,067 |
| $ | 2,665,135 |
|
|
| |
|
|
|
| $ | 2,617,067 |
| $ | 2,665,135 |
| 0.7 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 10,727,817 |
| $ | 10,704,694 |
| $ | 10,584,815 |
|
|
| |
|
|
|
| $ | 10,704,694 |
| $ | 10,584,815 |
| 2.7 | % |
(continued on next page)
See Accompanying Notes.
10
TICC CAPITAL CORP.CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)DECEMBER 31, 2016
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT |
| COST |
| FAIR VALUE(2) |
| % of Net Assets | ||||
Senior Secured Notes – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 4,694,081 |
| $ | 4,621,686 |
| $ | 4,647,140 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 23,682,442 |
|
| 23,447,282 |
|
| 23,504,824 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 15,165,400 |
|
| 15,098,034 |
|
| 14,520,871 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 11,839,379 |
|
| 11,578,162 |
|
| 11,602,591 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 8,720,058 |
|
| 8,684,453 |
|
| 8,632,857 |
|
|
| |
|
|
|
| $ | 63,429,617 |
| $ | 62,908,283 |
| 16.3 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 8,910,000 |
| $ | 8,760,042 |
| $ | 8,887,725 |
|
|
| |
|
| 10,000,000 |
|
| 9,676,019 |
|
| 9,500,000 |
|
|
| |
|
|
|
| $ | 18,436,061 |
| $ | 18,387,725 |
| 4.8 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 8,775,262 |
| $ | 8,731,896 |
| $ | 8,533,942 |
|
|
| |
|
| 14,000,000 |
|
| 14,008,442 |
|
| 12,040,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 22,386,525 |
|
| 21,592,757 |
|
| 19,700,142 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1,983,163 |
|
| 1,975,704 |
|
| 1,969,539 |
|
|
| |
|
| 13,000,000 |
|
| 12,903,392 |
|
| 12,593,750 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
(continued on next page)
See Accompanying Notes.
11
TICC CAPITAL CORP.CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)DECEMBER 31, 2016
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT |
| COST |
| FAIR VALUE(2) |
| % of Net Assets | ||||
Senior Secured Notes – (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications Services – (continued) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 5,180,526 |
| $ | 5,159,932 |
| $ | 5,189,592 |
|
|
| |
|
| 10,806,404 |
|
| 10,857,480 |
|
| 10,786,196 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 5,824,573 |
|
| 5,792,824 |
|
| 5,795,450 |
|
|
| |
|
| 6,400,000 |
|
| 6,379,907 |
|
| 6,256,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 9,778,733 |
|
| 9,708,848 |
|
| 9,756,340 |
|
|
| |
|
|
|
| $ | 97,111,182 |
| $ | 92,620,951 |
| 24.0 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 8,926,197 |
| $ | 8,790,059 |
| $ | 8,926,197 |
|
|
| |
|
|
|
| $ | 8,790,059 |
| $ | 8,926,197 |
| 2.3 | % | |
|
|
|
| $ | 385,551,843 |
| $ | 373,014,033 |
| 96.6 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 671,053 |
| $ | 668,162 |
| $ | 677,764 |
|
|
| |
|
|
|
| $ | 668,162 |
| $ | 677,764 |
| 0.2 | % | |
|
|
|
| $ | 668,162 |
| $ | 677,764 |
| 0.2 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Loan Obligation – Debt Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 3,000,000 |
| $ | 2,804,247 |
| $ | 2,700,000 |
|
|
| |
|
|
|
| $ | 2,804,247 |
| $ | 2,700,000 |
| 0.7 | % | |
|
|
|
| $ | 2,804,247 |
| $ | 2,700,000 |
| 0.7 | % |
(continued on next page)
See Accompanying Notes.
12
TICC CAPITAL CORP.CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)DECEMBER 31, 2016
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT |
| COST |
| FAIR VALUE(2) |
| % of Net Assets | |||
Collateralized Loan Obligation – Equity Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| |
| $ | 6,000,000 |
| $ | 2,993,455 |
| $ | 3,240,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 3,801,000 |
|
| 2,503,234 |
|
| 2,599,034 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 6,000,000 |
|
| 3,698,795 |
|
| 3,600,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 12,921,429 |
|
| 7,298,625 |
|
| 5,943,857 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 15,500,000 |
|
| 9,799,870 |
|
| 8,370,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 17,630,000 |
|
| 9,247,832 |
|
| 7,833,790 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 12,750,000 |
|
| 8,897,649 |
|
| 7,355,511 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 8,000,000 |
|
| 4,295,766 |
|
| 4,540,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 23,450,000 |
|
| 19,654,575 |
|
| 16,855,411 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 9,250,000 |
|
| 6,122,479 |
|
| 5,599,429 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 23,000,000 |
|
| 11,239,113 |
|
| 5,750,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 18,750,000 |
|
| 13,853,409 |
|
| 13,125,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(continued on next page)
See Accompanying Notes.
13
TICC CAPITAL CORP.CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)DECEMBER 31, 2016
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT |
| COST |
| FAIR VALUE(2) |
| % of Net Assets | |||
Collateralized Loan Obligation – Equity Investments –(continued) |
|
|
|
|
|
|
|
|
|
|
|
Structured Finance – (continued) | |||||||||||
|
|
|
|
|
|
|
|
|
|
| |
| $ | 12,750,000 |
| $ | 7,066,122 |
| $ | 6,757,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 4,670,000 |
|
| 2,749,405 |
|
| 3,269,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 8,000,000 |
|
| 5,020,677 |
|
| 3,700,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 5,000,000 |
|
| 3,218,541 |
|
| 2,400,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 14,000,000 |
|
| 11,572,127 |
|
| 10,590,431 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 8,000,000 |
|
| 4,890,961 |
|
| 4,000,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 5,000,000 |
|
| 1,949,974 |
|
| 2,250,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 14,000,000 |
|
| 5,725,139 |
|
| 6,160,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 5,422,500 |
|
| 5,417,070 |
|
| 5,856,300 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 16,217,000 |
|
| 10,050,816 |
|
| 6,109,956 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 17,200,000 |
|
| 10,236,812 |
|
| 6,657,469 |
|
| |
|
| 2,389,676 |
|
| — |
|
| 288,747 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 3,000,000 |
|
| 1,745,162 |
|
| 1,830,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(continued on next page)
See Accompanying Notes.
14
TICC CAPITAL CORP.CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)DECEMBER 31, 2016
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT/SHARES |
| COST |
| FAIR VALUE(2) |
| % of Net Assets | ||||
Collateralized Loan Obligation – Equity Investments –(continued) |
|
|
|
|
|
|
|
|
|
|
|
|
Structured Finance – (continued) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |
| $ | 24,400,000 |
| $ | 16,014,950 |
| $ | 12,503,876 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 10,416,666 |
|
| 7,191,952 |
|
| 5,572,916 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 11,350,000 |
|
| 7,010,740 |
|
| 6,881,917 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 10,500,000 |
|
| 7,454,218 |
|
| 6,286,825 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 7,500,000 |
|
| 4,929,958 |
|
| 5,257,464 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 22,850,000 |
|
| 16,741,765 |
|
| 18,051,500 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
| 1,588,172 |
|
|
| |
|
|
|
| $ | 228,591,191 |
| $ | 200,824,105 |
| 52.0 | % | |
|
|
|
| $ | 228,591,191 |
| $ | 200,824,105 |
| 52.0 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 815,266 |
|
| 535,000 |
|
| 864,182 |
|
|
| |
|
|
|
| $ | 535,000 |
| $ | 864,182 |
| 0.2 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 775,846 |
|
| 1,712,398 |
|
| 4,150,776 |
|
|
| |
|
|
|
| $ | 1,712,398 |
| $ | 4,150,776 |
| 1.1 | % | |
|
|
|
| $ | 2,247,398 |
| $ | 5,014,958 |
| 1.3 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 5,706,866 |
|
| 3,677,000 |
|
| 7,418,926 |
|
|
| |
|
|
|
| $ | 3,677,000 |
| $ | 7,418,926 |
| 1.9 | % | |
|
|
|
| $ | 3,677,000 |
| $ | 7,418,926 |
| 1.9 | % |
(continued on next page)
See Accompanying Notes.
15
TICC CAPITAL CORP.CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)DECEMBER 31, 2016
COMPANY/INVESTMENT(1) |
| PRINCIPAL AMOUNT |
| COST |
| FAIR VALUE(2) |
| % of Net Assets | |||
Other Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
| $ | 500,000 |
| $ | 273,290 |
|
|
| |
|
|
| $ | 500,000 |
| $ | 273,290 |
| 0.1 | % | |
|
|
| $ | 500,000 |
| $ | 273,290 |
| 0.1 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in Securities(8) |
|
|
| $ | 624,039,841 |
| $ | 589,923,076 |
| 152.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 8,261,698 |
| $ | 8,261,698 |
|
|
| |
|
|
| $ | 8,261,698 |
| $ | 8,261,698 |
| 2.2 | % | |
Total Investments in Securities and Cash Equivalents |
|
|
| $ | 632,301,539 |
| $ | 598,184,774 |
| 155.0 | % |
____________
(1) Other than Unitek Global Services, Inc., of which we(27) These investments are deemed to be an “affiliate,” we do not “control” and are not an “affiliate” of any of our portfolio companies, each as defined in the Investment Company Act of 1940 (the “1940 Act”). In general, under the 1940 Act, we would be presumed to “control” a portfolio company if we owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company if we owned between 5% or moreand 25% of its voting securities.
(2) The Company does not “control” any of its portfolio companies. Fair value is determined in good faith by the Board of Directors of the Company.
(3)Portfolio includes $6,637,496 of principal amount of debt investments which contain a PIK provision at December 31, 2016.
(4) Notes bear interest at variable rates.
(5) Cost value reflects accretion of original issue discount or market discount.
(6) Cost value reflects repayment of principal.
(7) Non-income producing at the relevant period end.
(8) Aggregate gross unrealized appreciation for federal income tax purposes is $16,039,914; aggregate gross unrealized depreciation for federal income tax purposes is $93,938,149. Net unrealized depreciation is $77,903,235 based upon a tax cost basis of $667,826,311.
(9) Cost value reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO equity investments.
(10) All or a portion of this investment represents TICC CLO 2012-1 LLC collateral.
(11) Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the 1940 Act Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets. As of December 31, 2016, the Company held qualifying assets that represented 65.9% of its total assets
(12) Investment not domiciled in the United States.
(13) Fair value represents discounted cash flows associated with fees earned from CLO equity investments
(14) Aggregate investments represent greater than 5% of net assets.
(15) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 90-day LIBOR.
(16) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 1-year LIBOR.
(17) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 30-day LIBOR.
(18) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 180-day LIBOR.
(19) The CLO subordinated notes and income notes are considered equity positions in the CLO funds. Equity investments are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s securities less contractual payments to debt holders and fund expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon expected redemption. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.
(20) Represents the earnout payments related to the sale of Algorithmic Implementations, Inc. (d/b/a “Ai Squared”).
(21) Represents cash equivalents held in a money market account as of December 31, 2016.2020 and December 31, 2021 along with transactions during the year ended December 31, 2021 in the Company’s affiliated investment are as follows:
Name of Issuer | Title of Issue | Amount of | Fair Value | Gross | Gross | Net | Fair Value | |||||||||||||||
AFFILIATED INVESTMENT: |
|
|
|
|
|
| ||||||||||||||||
Unitek Global Systems, Inc | Common Stock | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Series B Preferred Stock |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||
Series B Senior Preferred Stock |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||
Series B Super Senior Preferred Stock |
| — |
| — |
| — |
| — |
| 772,491 |
| 772,491 | ||||||||||
Total Affiliated Investment |
| — |
| — |
| — |
| — |
| 772,491 |
| 772,491 | ||||||||||
Total Control Investment |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||
TOTAL CONTROL AND AFFILIATED INVESTMENTS | $ | — | $ | — | $ | — | $ | — | $ | 772,491 | $ | 772,491 |
____________ (a) Represents the total amount of interest or distributions credited to income for the portion of the year an investment was an affiliate investment. During the year ended December31, 2021, these securities were on non-accrual status, due to declining performance. (b) Gross additions include increases in investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and fees. For the year ended December31, 2021, a total of approximately $3.6million of paid-in-kind dividends were entitled to be received yet deemed uncollectible. (c) Gross reductions include decreases in investments resulting from principal collections related to investment repayments or sales, the amortization of premiums and acquisition costs. |
(28) As part of a restructuring completed on September 17, 2021, a portion of the Company’s investment in the first lien senior secured notes of Premiere Global Services, Inc. was converted into a like amount of a new revolving credit facility (the “Replacement Revolver”). On December 7, 2021 the maturity date of the Replacement Revolver was amended from December 7, 2021 to March 31, 2022, compared to the maturity date of first lien senior secured notes of June 8, 2023. The cost basis of the Replacement Revolver was established by allocating a portion of the cost basis from the first lien senior secured notes pro-rata based on the amount of principal that was converted from the first lien senior secured notes to the Replacement Revolver. The Replacement Revolver has no unfunded commitment and is on non-accrual status as of December 31, 2021.
(29) Note bears interest at 5.50%, plus the greater of: the Wall Street Journal quoted Prime Rate, Federal Funds effective rate plus 1.00%, or the one-month reserve adjusted Eurodollar Base Rate plus 1.00%. The rate disclosed is as of December 31, 2021.
See Accompanying Notes.
15
TICCOXFORD SQUARE CAPITAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
| Three Months Ended |
| Three Months |
| Nine Months |
| Nine Months | ||||||||
INVESTMENT INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From non-affiliated/non-control investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 5,306,698 |
|
| $ | 8,570,131 |
|
| $ | 19,096,102 |
|
| $ | 25,405,967 |
| |
|
| 8,086,059 |
|
|
| 8,635,834 |
|
|
| 26,081,676 |
|
|
| 22,538,250 |
| |
|
| 1,007,230 |
|
|
| 805,128 |
|
|
| 2,517,401 |
|
|
| 1,654,954 |
| |
|
| 14,399,987 |
|
|
| 18,011,093 |
|
|
| 47,695,179 |
|
|
| 49,599,171 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From affiliated investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 97,710 |
|
|
| 84,699 |
|
|
| 280,151 |
|
|
| 244,411 |
| |
|
| 97,710 |
|
|
| 84,699 |
|
|
| 280,151 |
|
|
| 244,411 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From control investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 567,219 |
| |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 567,219 |
| |
|
| 14,497,697 |
|
|
| 18,095,792 |
|
|
| 47,975,330 |
|
|
| 50,410,801 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 237,686 |
|
|
| 189,205 |
|
|
| 676,059 |
|
|
| 609,345 |
| |
|
| 2,004,391 |
|
|
| 2,630,334 |
|
|
| 6,456,566 |
|
|
| 8,747,819 |
| |
|
| 720,500 |
|
|
| 2,157,751 |
|
|
| 2,062,734 |
|
|
| 5,365,284 |
| |
|
| 3,701,533 |
|
|
| 4,407,246 |
|
|
| 11,135,451 |
|
|
| 13,200,127 |
| |
|
| 501,464 |
|
|
| 1,749,408 |
|
|
| 1,718,627 |
|
|
| 3,439,292 |
| |
|
| 7,165,574 |
|
|
| 11,133,944 |
|
|
| 22,049,437 |
|
|
| 31,361,867 |
| |
|
| 564,370 |
|
|
| 422,828 |
|
|
| 2,827,991 |
|
|
| 1,666,594 |
| |
|
| 7,729,944 |
|
|
| 11,556,772 |
|
|
| 24,877,428 |
|
|
| 33,028,461 |
| |
Net investment income |
|
| 6,767,753 |
|
|
| 6,539,020 |
|
|
| 23,097,902 |
|
|
| 17,382,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized appreciation/(depreciation) on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,884,023 |
|
|
| 39,813,458 |
|
|
| 12,643,254 |
|
|
| 60,144,518 |
| |
|
| 666,278 |
|
|
| 2,520,646 |
|
|
| 588,167 |
|
|
| 4,623,812 |
| |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,750,000 |
| |
|
| 2,550,301 |
|
|
| 42,334,104 |
|
|
| 13,231,421 |
|
|
| 70,518,330 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,066,399 | ) |
|
| (5,312,519 | ) |
|
| (5,992,111 | ) |
|
| (10,190,122 | ) | |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,000,000 | ) | |
|
| (2,235,636 | ) |
|
| (647,842 | ) |
|
| (3,149,338 | ) |
|
| (647,842 | ) | |
|
| (3,302,035 | ) |
|
| (5,960,361 | ) |
|
| (9,141,449 | ) |
|
| (13,837,964 | ) | |
Net increase in net assets resulting from operations |
| $ | 6,016,019 |
|
| $ | 42,912,763 |
|
| $ | 27,187,874 |
|
| $ | 74,062,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets resulting from net investment income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 0.13 |
|
| $ | 0.13 |
|
| $ | 0.45 |
|
| $ | 0.33 |
| |
| $ | 0.13 |
|
| $ | 0.13 |
|
| $ | 0.45 |
|
| $ | 0.33 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets resulting from operations per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 0.12 |
|
| $ | 0.83 |
|
| $ | 0.53 |
|
| $ | 1.42 |
| |
| $ | 0.12 |
|
| $ | 0.72 |
|
| $ | 0.53 |
|
| $ | 1.28 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 51,479,409 |
|
|
| 51,479,409 |
|
|
| 51,479,409 |
|
|
| 51,985,537 |
| |
|
| 59,727,707 |
|
|
| 61,512,561 |
|
|
| 59,727,707 |
|
|
| 62,018,689 |
| |
Distributions per share |
| $ | 0.20 |
|
| $ | 0.29 |
|
| $ | 0.60 |
|
| $ | 0.87 |
|
Three Months | Three Months | Six Months | Six Months Ended | ||||||||||||
INVESTMENT INCOME |
|
|
|
|
|
|
| ||||||||
From non-affiliated/non-control investments: |
|
|
|
|
|
|
| ||||||||
Interest income – debt investments | $ | 5,674,538 |
| $ | 3,602,389 | $ | 10,924,687 |
| $ | 7,824,426 |
| ||||
Income from securitization vehicles and investments |
| 4,062,469 |
|
| 4,096,145 |
| 8,503,664 |
|
| 8,777,445 |
| ||||
Other income |
| 202,544 |
|
| 143,472 |
| 377,070 |
|
| 599,825 |
| ||||
Total investment income from |
| 9,939,551 |
|
| 7,842,006 |
| 19,805,421 |
|
| 17,201,696 |
| ||||
Total investment income |
| 9,939,551 |
|
| 7,842,006 |
| 19,805,421 |
|
| 17,201,696 |
| ||||
|
|
|
|
|
|
| |||||||||
EXPENSES |
|
|
|
|
|
|
| ||||||||
Interest expense |
| 3,087,952 |
|
| 2,431,398 |
| 6,173,318 |
|
| 4,314,823 |
| ||||
Base Fee |
| 1,565,181 |
|
| 1,434,484 |
| 3,171,684 |
|
| 2,823,734 |
| ||||
Professional fees |
| 310,931 |
|
| 570,265 |
| 655,453 |
|
| 1,255,219 |
| ||||
Compensation expense |
| 219,830 |
|
| 192,875 |
| 454,833 |
|
| 365,597 |
| ||||
General and administrative |
| 412,129 |
|
| 428,515 |
| 756,231 |
|
| 843,690 |
| ||||
Total expenses before incentive fees |
| 5,596,023 |
|
| 5,057,537 |
| 11,211,519 |
|
| 9,603,063 |
| ||||
Net Investment Income Incentive Fees |
| — |
|
| — |
| — |
|
| — |
| ||||
Total expenses |
| 5,596,023 |
|
| 5,057,537 |
| 11,211,519 |
|
| 9,603,063 |
| ||||
Net investment income |
| 4,343,528 |
|
| 2,784,469 |
| 8,593,902 |
|
| 7,598,633 |
| ||||
Net change in unrealized (depreciation)/appreciation on investments: |
|
|
|
|
|
|
| ||||||||
Non-Affiliate/non-control |
| (46,845,141 | ) |
| 2,537,168 |
| (60,535,837 | ) |
| 33,583,290 |
| ||||
Affiliated investments |
| 602,253 |
|
| — |
| 803,100 |
|
| — |
| ||||
Total net change in unrealized (depreciation)/appreciation on investments |
| (46,242,888 | ) |
| 2,537,168 |
| (59,732,737 | ) |
| 33,583,290 |
| ||||
Net realized (losses)/gains: |
|
|
|
|
|
|
| ||||||||
Non-affiliated/non-control |
| (1,536,051 | ) |
| 1,180,480 |
| (493,765 | ) |
| (12,890,651 | ) | ||||
Total net realized (losses)/gains |
| (1,536,051 | ) |
| 1,180,480 |
| (493,765 | ) |
| (12,890,651 | ) | ||||
Net (decrease)/increase in net assets resulting from operations | $ | (43,435,411 | ) | $ | 6,502,117 | $ | (51,632,600 | ) | $ | 28,291,272 |
| ||||
Net increase in net assets resulting from net investment income per common share (Basic and Diluted): | $ | 0.09 |
| $ | 0.06 | $ | 0.17 |
| $ | 0.15 |
| ||||
Net (decrease)/increase in net assets resulting from operations per common share (Basic and Diluted): | $ | (0.87 | ) | $ | 0.13 | $ | (1.04 | ) | $ | 0.57 |
| ||||
Weighted average shares of common stock outstanding (Basic and Diluted): |
| 49,736,300 |
|
| 49,607,474 |
| 49,718,630 |
|
| 49,598,636 |
| ||||
Distributions per share | $ | 0.105 |
| $ | 0.105 | $ | 0.210 |
| $ | 0.210 |
|
See Accompanying Notes.
1716
TICCOXFORD SQUARE CAPITAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
|
| Nine Months |
| Year Ended | |||
Increase in net assets from operations: |
|
|
|
|
|
|
|
| $ | 23,097,902 |
|
| $ | 26,778,293 | |
|
| (9,141,449 | ) |
|
| (17,022,170) | |
|
| 13,231,421 |
|
|
| 100,605,640 | |
|
| 27,187,874 |
|
|
| 110,361,763 | |
|
|
|
|
|
|
|
|
Distributions to shareholders |
|
|
|
|
|
|
|
|
| (30,887,645 | ) |
|
| (54,740,084) | |
|
| — |
|
|
| (4,976,030) | |
Total distributions to shareholders |
|
| (30,887,645 | ) |
|
| (59,716,114) |
|
|
|
|
|
|
|
|
Capital share transactions: |
|
|
|
|
|
|
|
|
| — |
|
|
| (25,587,862) | |
|
| — |
|
|
| (25,587,862) | |
Total increase in net assets |
|
| (3,699,771 | ) |
|
| 25,057,787 |
Net assets at beginning of period |
|
| 385,992,498 |
|
|
| 360,934,711 |
Net assets at end of period (including over distributed net investment income of $48,653,633 and $40,863,890, respectively) |
| $ | 382,292,727 |
|
| $ | 385,992,498 |
|
|
|
|
|
|
|
|
Capital share activity: |
|
|
|
|
|
|
|
|
| — |
|
|
| (4,917,026) | |
|
| — |
|
|
| (4,917,026) |
Three Months | Three Months | Six Months | Six Months | |||||||||||||
(Decrease)/increase in net assets from operations: |
|
|
|
|
|
|
|
| ||||||||
Net investment income | $ | 4,343,528 |
| $ | 2,784,469 |
| $ | 8,593,902 |
| $ | 7,598,633 |
| ||||
Net change in unrealized (depreciation)/appreciation on investments |
| (46,242,888 | ) |
| 2,537,168 |
|
| (59,732,737 | ) |
| 33,583,290 |
| ||||
Net realized (losses)/gains |
| (1,536,051 | ) |
| 1,180,480 |
|
| (493,765 | ) |
| (12,890,651 | ) | ||||
Net (decrease)/increase in net assets resulting from operations |
| (43,435,411 | ) |
| 6,502,117 |
|
| (51,632,600 | ) |
| 28,291,272 |
| ||||
Distributions to stockholders |
|
|
|
|
|
|
|
| ||||||||
Distributions from net investment |
| (4,230,020 | ) |
| (4,323,240 | ) |
| (8,457,040 | ) |
| (8,644,975 | ) | ||||
Tax return of capital distributions |
| (992,227 | ) |
| (885,483 | ) |
| (1,983,750 | ) |
| (1,770,657 | ) | ||||
Total distributions to stockholders |
| (5,222,247 | ) |
| (5,208,723 | ) |
| (10,440,790 | ) |
| (10,415,632 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Capital share transactions: |
|
|
|
|
|
|
|
| ||||||||
Reinvestment of distributions |
| 146,033 |
|
| 123,929 |
|
| 270,767 |
|
| 160,770 |
| ||||
Net increase in net assets from capital share transactions |
| 146,033 |
|
| 123,929 |
|
| 270,767 |
|
| 160,770 |
| ||||
Total (decrease)/increase in net assets |
| (48,511,625 | ) |
| 1,417,323 |
|
| (61,802,623 | ) |
| 18,036,410 |
| ||||
Net assets at beginning of period |
| 231,304,127 |
|
| 242,045,613 |
|
| 244,595,125 |
|
| 225,426,526 |
| ||||
Net assets at end of period | $ | 182,792,502 |
| $ | 243,462,936 |
| $ | 182,792,502 |
| $ | 243,462,936 |
| ||||
Capital share activity: |
|
|
|
|
|
|
|
| ||||||||
Shares issued from reinvestment of distributions |
| 39,718 |
|
| 26,458 |
|
| 71,301 |
|
| 34,815 |
| ||||
Net increase in capital share activity |
| 39,718 |
|
| 26,458 |
|
| 71,301 |
|
| 34,815 |
|
See Accompanying Notes.
1817
TICCOXFORD SQUARE CAPITAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
| Nine Months |
| Nine Months | ||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
| $ | 27,187,874 |
|
| $ | 74,062,706 |
| |
|
|
|
|
|
|
|
| |
|
| (827,744 | ) |
|
| (801,620 | ) | |
|
| 811,412 |
|
|
| 1,048,149 |
| |
|
| (169,989 | ) |
|
| (160,574 | ) | |
|
| (3,575,888 | ) |
|
| (446,479 | ) | |
|
| (163,032,724 | ) |
|
| (126,274,776 | ) | |
|
| 158,996,792 |
|
|
| 101,641,129 |
| |
|
| 151,193,037 |
|
|
| 98,789,204 |
| |
|
| 9,141,449 |
|
|
| 13,837,964 |
| |
|
| 31,344,870 |
|
|
| 30,289,507 |
| |
|
| (13,231,421 | ) |
|
| (70,518,330 | ) | |
|
| 5,120,576 |
|
|
| 2,120,070 |
| |
|
| (386,014 | ) |
|
| (780,551 | ) | |
|
| 1,234,949 |
|
|
| 2,187,090 |
| |
|
| (1,101,887 | ) |
|
| (1,142,739 | ) | |
|
| (329,849 | ) |
|
| (356,147 | ) | |
Net cash provided by operating activities |
|
| 202,375,443 |
|
|
| 123,494,603 |
|
|
|
|
|
| ||||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
| 3,451,636 |
|
|
| (6,030,598 | ) | |
|
| 3,451,636 |
|
|
| (6,030,598 | ) | |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
| (30,887,645 | ) |
|
| (44,787,083 | ) | |
|
| (125,705,930 | ) |
|
| (35,553,521 | ) | |
|
| 64,370,225 |
|
|
| — |
| |
|
| (2,263,933 | ) |
|
| — |
| |
|
| — |
|
|
| (25,587,862 | ) | |
|
| (94,487,283 | ) |
|
| (105,928,466 | ) | |
Net increase in cash and cash equivalents |
|
| 111,339,796 |
|
|
| 11,535,539 |
|
Cash and cash equivalents, beginning of period |
|
| 8,261,698 |
|
|
| 23,181,677 |
|
Cash and cash equivalents, end of period |
| $ | 119,601,494 |
|
| $ | 34,717,216 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES |
|
|
|
|
|
|
|
|
| $ | 9,089,091 |
|
| $ | 9,964,889 |
| |
|
|
|
|
|
|
|
|
|
NON-CASH ACTIVITIES |
|
|
|
|
|
|
|
|
| $ | 2,950,000 |
|
| $ | 34,224,734 |
| |
| $ | 5,015,000 |
|
| $ | 6,720,000 |
| |
| $ | — |
|
| $ | 11,613,301 |
|
Six Months | Six Months | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
| ||||
Net (decrease)/increase in net assets resulting from operations | $ | (51,632,600 | ) | $ | 28,291,272 |
| ||
Adjustments to reconcile net (decrease)/increase in net assets resulting |
|
|
|
| ||||
from operations to net cash provided by/(used in) operating activities: |
|
|
|
| ||||
Accretion of discounts on investments |
| (472,683 | ) |
| (365,303 | ) | ||
Amortization of discount on notes payable and deferred debt issuance costs |
| 467,826 |
|
| 318,838 |
| ||
Purchases of investments |
| (49,517,388 | ) |
| (114,770,681 | ) | ||
Repayments of principal |
| 38,785,427 |
|
| 17,053,265 |
| ||
Proceeds from the sale of investments |
| 12,825,000 |
|
| 5,819,281 |
| ||
Net realized losses on investments |
| 493,765 |
|
| 12,890,651 |
| ||
Reductions to CLO equity cost value |
| 14,219,450 |
|
| 21,404,640 |
| ||
Net change in unrealized depreciation/(appreciation) on investments |
| 59,732,737 |
|
| (33,583,290 | ) | ||
Increase in interest and distributions receivable |
| (75,293 | ) |
| (1,208,543 | ) | ||
(Increase)/decrease in other assets |
| (297,189 | ) |
| 48,519 |
| ||
Increase in accrued interest payable |
| — |
|
| 504,244 |
| ||
(Decrease)/increase in Base Fee and Net Investment Income Incentive Fee payable |
| (123,531 | ) |
| 274,781 |
| ||
(Decrease)/increase in accrued expenses |
| (43,538 | ) |
| 237,856 |
| ||
Net cash provided by/(used in) operating activities |
| 24,361,983 |
|
| (63,084,470 | ) | ||
|
|
|
| |||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
| ||||
Distributions paid (net of stock issued under distribution reinvestment |
|
|
|
| ||||
plan of $270,767 and $160,770, respectively) |
| (10,170,023 | ) |
| (10,254,862 | ) | ||
Proceeds from issuance of 5.50% Unsecured Notes |
| — |
|
| 80,500,000 |
| ||
Deferred debt issuance costs paid |
| — |
|
| (2,705,860 | ) | ||
Net cash (used in)/provided by financing activities |
| (10,170,023 | ) |
| 67,539,278 |
| ||
Net increase in cash and cash equivalents |
| 14,191,960 |
|
| 4,454,808 |
| ||
Cash and cash equivalents, beginning of period |
| 9,015,700 |
|
| 59,137,284 |
| ||
Cash and cash equivalents, end of period | $ | 23,207,660 |
| $ | 63,592,092 |
| ||
|
|
|
| |||||
NON-CASH FINANCING ACTIVITIES |
|
|
|
| ||||
Value of shares issued in connection with distribution reinvestment plan | $ | 270,767 |
| $ | 160,770 |
| ||
|
|
|
| |||||
SUPPLEMENTAL DISCLOSURES |
|
|
|
| ||||
Cash paid for interest | $ | 5,705,493 |
| $ | 3,491,743 |
| ||
Securities purchased not settled | $ | 24,702,896 |
| $ | 40,803,008 |
|
See Accompanying Notes.
1918
TICCOXFORD SQUARE CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBERJune 30, 20172022
(unaudited)
NOTE 1. UNAUDITED INTERIM FINANCIAL STATEMENTS
Interim consolidated financial statements of TICCOxford Square Capital Corp. (“TICC” and, together with its subsidiaries,OXSQ”, or the “Company”), are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q10-Q and ArticleArticles 6, 10 and 12 of Regulation S-X.S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, the unaudited financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair statement of consolidated financialthe results for the interim periods have been included.period included herein. The current period’s consolidated results of operations are not necessarily indicative of results that may be achieved for the year. The interim consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K10-K for the year ended December 31, 2016,2021, as filed with the Securities and Exchange Commission (“SEC”).
NOTE 2. ORGANIZATION
TICCOXSQ was incorporated under the General Corporation Laws of the State of Maryland (“MGCL”) on July 21, 2003 and is a non-diversified, closed-endclosed-end investment company. TICCOXSQ has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, TICCOXSQ has elected to be treated for tax purposes as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). beginning with its 2003 taxable year. The Company’s investment objective is to maximize its total return, by investing primarily in corporate debt securities and collateralized loan obligation (“CLO”) structured finance investments that own corporate debt securities.
TICC’sOXSQ’s investment activities are managed by TICCOxford Square Management, LLC (“TICCOxford Square Management”). TICCOxford Square Management is an investment adviser registered under the Investment Advisers Act of 1940, as amended. TICCamended (the “Advisers Act”). Oxford Square Management is owned by BDC Partners,Oxford Funds, LLC (“BDC Partners”Oxford Funds”), its managing member, and a related party, and Charles M. Royce, a member of ourOXSQ’s Board of Directors (the “Board”) who holds a minority, non-controllingnon-controlling interest in TICCOxford Square Management. Under the investment advisory agreement with TICCOxford Square Management (the “Investment Advisory Agreement”), TICCOXSQ has agreed to pay TICCOxford Square Management an annual base managementinvestment advisory fee (the “Base Fee”) based on its gross assets as well as an incentive fee based on its performance. For further details, please refer to “Note 8.7. Related Party Transactions.”
The Company’s consolidated operations include the activities of its wholly-owned subsidiary, TICC CLO 2012-1 LLC (“2012 Securitization Issuer” or “TICC CLO 2012-1”). TICC CLO 2012-1 was formed for the purpose of enabling the Company to obtain debt financing and is operated solely for the investment activities of the Company. TICC CLO 2012-1 effectively ceased operations on August 25, 2017, as the notes payable by TICC CLO 2012-1 were repaid in full. Refer to “Note 6. Borrowings” for additional information on the Company’s borrowings and TICC CLO 2012-1.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, TICC CLO 2012-1. All inter-company accounts and transactions have been eliminated in consolidation.
The Company follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946,Financial Services — Investment Companies. Certain prior period figures have been reclassified from those originally published in quarterly and annual reports to conform to the current period presentation for comparative purposes.
20
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
USE OF ESTIMATES
The consolidated financial statements have been prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates.
In the normal course of business, the Company may enter into contracts that contain a variety of representations and provide indemnifications. 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. However, based upon experience, the Company expects the risk of loss to be remote.
CONSOLIDATION
As provided under Regulation S-X and ASC Topic 946-810,Consolidation, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or a controlled operating company whose business consists of providing services to the Company. TICC CLO 2012-1 would be considered an investment company but for the exceptions under Sections 3(c)(1) and 3(c)(7) under the 1940 Act, and was established solely for the purpose of allowing the Company to borrow funds for the purpose of making investments. The Company owns all of the equity in this entity and controls the decision making power that drives its economic performance. Accordingly, the Company consolidates its wholly-owned subsidiary in its financial statements, and follows the accounting and reporting guidance in ASC 946-810.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents consist of demand deposits and cash held in a money market fund which contain investments with original maturities of three months or less. The Company places its cash and cash equivalents with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation insured limit. Cash equivalents are classified as Level 1 assets and are included on the Company’s Consolidated Schedule of Investments. Cash equivalents are carried at cost or amortized cost which approximates fair value.
As of December 31, 2016, restricted cash represents the cash held by the trustee of the 2012 Securitization Issuer. The amounts are held by the trustee for payment of interest expense and operating expenses of the entity, principal repayments on borrowings, or new investments, based upon the terms of the respective indenture, and are not available for general corporate purposes. There was no restricted cash as of September 30, 2017 as TICC CLO 2012-1 effectively ceased operations on August 25, 2017.
INVESTMENT VALUATIONINCOME
The Company fair values its
From non-affiliated/non-control investments:
Interest income – debt investments
$
5,674,538
$
3,602,389
$
10,924,687
$
7,824,426
Income from securitization vehicles and investments
4,062,469
4,096,145
8,503,664
8,777,445
Other income
202,544
143,472
377,070
599,825
Total investment portfolio in accordance with the provisions of ASC 820,income from
non-affiliated/non-control investments
9,939,551
7,842,006
19,805,421
17,201,696
Total investment income
9,939,551
7,842,006
19,805,421
17,201,696
Fair Value MeasurementEXPENSES
Interest expense
3,087,952
2,431,398
6,173,318
4,314,823
Base Fee
1,565,181
1,434,484
3,171,684
2,823,734
Professional fees
310,931
570,265
655,453
1,255,219
Compensation expense
219,830
192,875
454,833
365,597
General and Disclosure. Estimates made in the preparation of TICC’s consolidated financial statements include the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. TICC believes that there is no single definitive method for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolioadministrative
412,129
428,515
756,231
843,690
Total expenses before incentive fees
5,596,023
5,057,537
11,211,519
9,603,063
Net Investment Income Incentive Fees
—
—
—
—
Total expenses
5,596,023
5,057,537
11,211,519
9,603,063
Net investment while employing a consistently applied valuation process for the types of investments TICC makes.income
ASC 820-10 clarified the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted
214,343,528
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2,784,469
prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities in markets that are not active; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. TICC considers the attributes of current market conditions on an on-going basis and has determined that due to the general illiquidity of the market for its investment portfolio, whereby little or no market data exists, all of TICC’s investments are based upon “Level 3” inputs as of September 30, 2017.
TICC’s Board of Directors determines the value of its investment portfolio each quarter. In connection with that determination, members of TICC Management’s portfolio management team prepare a quarterly analysis of each portfolio investment using the most recent portfolio company financial statements, forecasts and other relevant financial and operational information. Since March 2004, TICC has engaged third-party valuation firms to provide assistance in valuing certain of its syndicated loans and bilateral investments, including related equity investments, although TICC’s Board of Directors ultimately determines the appropriate valuation of each such investment. Changes in fair value, as described above, are recorded in the Consolidated Statement of Operations as 8,593,902
7,598,633
Net change in unrealized appreciation/(depreciation)./appreciation on investments:
Syndicated Loans
In accordance with ASC 820-10, TICC’s valuation procedures specifically provide for the review of indicative quotes supplied by the large agent banks that make a market for each security. However, the marketplace from which TICC obtains indicative bid quotes for purposes of determining the fair value of its syndicated loan
Non-Affiliate/non-control
investments has shown attributes of illiquidity as described by ASC 820-10. During such periods of illiquidity, when TICC believes that the non-binding indicative bids received from agent banks for certain syndicated
(46,845,141
)
2,537,168
(60,535,837
)
33,583,290
Affiliated investments that we own may not be determinative of their fair value or when no market indicative quote is available, TICC may engage third-party valuation firms to provide assistance
602,253
—
803,100
—
Total net change in valuing certain syndicatedunrealized (depreciation)/appreciation on investments that TICC owns. In addition, TICC Management prepares an analysis of each syndicated loan, including a financial summary, covenant compliance review, recent trading activity
(46,242,888
)
2,537,168
(59,732,737
)
33,583,290
Net realized (losses)/gains:
Non-affiliated/non-control
investments
(1,536,051
)
1,180,480
(493,765
)
(12,890,651
)
Total net realized (losses)/gains
(1,536,051
)
1,180,480
(493,765
)
(12,890,651
)
Net (decrease)/increase in the security, if known, and other business developments related to the portfolio company. All available information, including non-binding indicative bids which may not be determinative of fair value, is presented to the Valuation Committee to consider in its determination of fair value. In some instances, there may be limited trading activity in a security even though the market for the security is considered not active. In such cases the Valuation Committee will consider the number of trades, the size and timing of each trade, and other circumstances around such trades, to the extent such information is available, in its determination of fair value. The Valuation Committee will evaluate the impact of such additional information, and factor it into its consideration of the fair value that is indicated by the analysis provided by third-party valuation firms, if any.
Collateralized Loan Obligations — Debt and Equity
TICC has acquired a number of debt and equity positions in collateralized loan obligation (“CLO”) investment vehicles and CLO warehouse investments. These investments are special purpose financing vehicles. In valuing such investments, TICC considers the indicative prices provided by a recognized industry pricing service as a primary source, and the implied yield of such prices, supplemented by actual trades executed in the market at or around period-end, as well as the indicative prices provided by the broker who arranges transactions in such investment vehicles. TICC also considers those instances in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require a downward adjustment to the indicative price representing substantially all of the pending distribution. Additional factors include any available information on other relevant transactions including firm bids and offers in the market and informationnet assets resulting from bids-wanted-in-competition. In addition, TICC considers the operating metricsoperations
$
(43,435,411
)
$
6,502,117
$
(51,632,600
)
$
28,291,272
Net increase in net assets resulting from net investment income per common share (Basic and Diluted):
$
0.09
$
0.06
$
0.17
$
0.15
Net (decrease)/increase in net assets resulting from operations per common share (Basic and Diluted):
$
(0.87
)
$
0.13
$
(1.04
)
$
0.57
Weighted average shares of the specific investment vehicle, including compliance with collateralization tests, defaultedcommon stock outstanding (Basic and restructured securities, and payment defaults, if any. TICC Management or the Valuation Committee may request an additional analysis by a third-party firm to assist in the valuation process of CLO investment vehicles. All information is presented to TICC’s Board of Directors for its determination of fair value of these investments.Diluted):
22
TICC49,736,300
49,607,474
49,718,630
49,598,636
Distributions per share
$
0.105
$
0.105
$
0.210
$
0.210
See Accompanying Notes.
16
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
Three Months | Three Months | Six Months | Six Months | |||||||||||||
(Decrease)/increase in net assets from operations: |
|
|
|
|
|
|
|
| ||||||||
Net investment income | $ | 4,343,528 |
| $ | 2,784,469 |
| $ | 8,593,902 |
| $ | 7,598,633 |
| ||||
Net change in unrealized (depreciation)/appreciation on investments |
| (46,242,888 | ) |
| 2,537,168 |
|
| (59,732,737 | ) |
| 33,583,290 |
| ||||
Net realized (losses)/gains |
| (1,536,051 | ) |
| 1,180,480 |
|
| (493,765 | ) |
| (12,890,651 | ) | ||||
Net (decrease)/increase in net assets resulting from operations |
| (43,435,411 | ) |
| 6,502,117 |
|
| (51,632,600 | ) |
| 28,291,272 |
| ||||
Distributions to stockholders |
|
|
|
|
|
|
|
| ||||||||
Distributions from net investment |
| (4,230,020 | ) |
| (4,323,240 | ) |
| (8,457,040 | ) |
| (8,644,975 | ) | ||||
Tax return of capital distributions |
| (992,227 | ) |
| (885,483 | ) |
| (1,983,750 | ) |
| (1,770,657 | ) | ||||
Total distributions to stockholders |
| (5,222,247 | ) |
| (5,208,723 | ) |
| (10,440,790 | ) |
| (10,415,632 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Capital share transactions: |
|
|
|
|
|
|
|
| ||||||||
Reinvestment of distributions |
| 146,033 |
|
| 123,929 |
|
| 270,767 |
|
| 160,770 |
| ||||
Net increase in net assets from capital share transactions |
| 146,033 |
|
| 123,929 |
|
| 270,767 |
|
| 160,770 |
| ||||
Total (decrease)/increase in net assets |
| (48,511,625 | ) |
| 1,417,323 |
|
| (61,802,623 | ) |
| 18,036,410 |
| ||||
Net assets at beginning of period |
| 231,304,127 |
|
| 242,045,613 |
|
| 244,595,125 |
|
| 225,426,526 |
| ||||
Net assets at end of period | $ | 182,792,502 |
| $ | 243,462,936 |
| $ | 182,792,502 |
| $ | 243,462,936 |
| ||||
Capital share activity: |
|
|
|
|
|
|
|
| ||||||||
Shares issued from reinvestment of distributions |
| 39,718 |
|
| 26,458 |
|
| 71,301 |
|
| 34,815 |
| ||||
Net increase in capital share activity |
| 39,718 |
|
| 26,458 |
|
| 71,301 |
|
| 34,815 |
|
See Accompanying Notes.
17
STATEMENTS OF CASH FLOWS
(unaudited)
Six Months | Six Months | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
| ||||
Net (decrease)/increase in net assets resulting from operations | $ | (51,632,600 | ) | $ | 28,291,272 |
| ||
Adjustments to reconcile net (decrease)/increase in net assets resulting |
|
|
|
| ||||
from operations to net cash provided by/(used in) operating activities: |
|
|
|
| ||||
Accretion of discounts on investments |
| (472,683 | ) |
| (365,303 | ) | ||
Amortization of discount on notes payable and deferred debt issuance costs |
| 467,826 |
|
| 318,838 |
| ||
Purchases of investments |
| (49,517,388 | ) |
| (114,770,681 | ) | ||
Repayments of principal |
| 38,785,427 |
|
| 17,053,265 |
| ||
Proceeds from the sale of investments |
| 12,825,000 |
|
| 5,819,281 |
| ||
Net realized losses on investments |
| 493,765 |
|
| 12,890,651 |
| ||
Reductions to CLO equity cost value |
| 14,219,450 |
|
| 21,404,640 |
| ||
Net change in unrealized depreciation/(appreciation) on investments |
| 59,732,737 |
|
| (33,583,290 | ) | ||
Increase in interest and distributions receivable |
| (75,293 | ) |
| (1,208,543 | ) | ||
(Increase)/decrease in other assets |
| (297,189 | ) |
| 48,519 |
| ||
Increase in accrued interest payable |
| — |
|
| 504,244 |
| ||
(Decrease)/increase in Base Fee and Net Investment Income Incentive Fee payable |
| (123,531 | ) |
| 274,781 |
| ||
(Decrease)/increase in accrued expenses |
| (43,538 | ) |
| 237,856 |
| ||
Net cash provided by/(used in) operating activities |
| 24,361,983 |
|
| (63,084,470 | ) | ||
|
|
|
| |||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
| ||||
Distributions paid (net of stock issued under distribution reinvestment |
|
|
|
| ||||
plan of $270,767 and $160,770, respectively) |
| (10,170,023 | ) |
| (10,254,862 | ) | ||
Proceeds from issuance of 5.50% Unsecured Notes |
| — |
|
| 80,500,000 |
| ||
Deferred debt issuance costs paid |
| — |
|
| (2,705,860 | ) | ||
Net cash (used in)/provided by financing activities |
| (10,170,023 | ) |
| 67,539,278 |
| ||
Net increase in cash and cash equivalents |
| 14,191,960 |
|
| 4,454,808 |
| ||
Cash and cash equivalents, beginning of period |
| 9,015,700 |
|
| 59,137,284 |
| ||
Cash and cash equivalents, end of period | $ | 23,207,660 |
| $ | 63,592,092 |
| ||
|
|
|
| |||||
NON-CASH FINANCING ACTIVITIES |
|
|
|
| ||||
Value of shares issued in connection with distribution reinvestment plan | $ | 270,767 |
| $ | 160,770 |
| ||
|
|
|
| |||||
SUPPLEMENTAL DISCLOSURES |
|
|
|
| ||||
Cash paid for interest | $ | 5,705,493 |
| $ | 3,491,743 |
| ||
Securities purchased not settled | $ | 24,702,896 |
| $ | 40,803,008 |
|
See Accompanying Notes.
18
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 1. UNAUDITED INTERIM FINANCIAL STATEMENTS
Interim financial statements of Oxford Square Capital Corp. (“OXSQ”, or the “Company”), are prepared in accordance with generally accepted accounting principles in the United States of America (“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, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, the unaudited financial results included herein contain all adjustments, consisting solely of normal accruals, considered necessary for the fair statement of the results for the interim period included herein. The current period’s results of operations are not necessarily indicative of results that may be achieved for the year. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”).
NOTE 2. ORGANIZATION
OXSQ was incorporated under the General Corporation Laws of the State of Maryland (“MGCL”) on July 21, 2003 and is a closed-end investment company. OXSQ has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, OXSQ has elected to be treated for tax purposes as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) beginning with its 2003 taxable year. The Company’s investment objective is to maximize its total return, by investing primarily in corporate debt securities and collateralized loan obligation (“CLO”) structured finance investments that own corporate debt securities.
OXSQ’s investment activities are managed by Oxford Square Management, LLC (“Oxford Square Management”). Oxford Square Management is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Oxford Square Management is owned by Oxford Funds, LLC (“Oxford Funds”), its managing member, and Charles M. Royce, a member of OXSQ’s Board of Directors (the “Board”) who holds a minority, non-controlling interest in Oxford Square Management. Under the investment advisory agreement with Oxford Square Management (the “Investment Advisory Agreement”), OXSQ has agreed to pay Oxford Square Management an annual base investment advisory fee (the “Base Fee”) based on its gross assets as well as an incentive fee based on its performance. For further details, please refer to “Note 7. Related Party Transactions.”
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Bilateral Investments (Including Equity)
Bilateral investments for which market quotations are readily available are valued by an independent pricing agent or market maker. If such market quotations are not readily available, under the valuation procedures approved by TICC’s Board of Directors, upon the recommendation of the Valuation Committee, a third-party valuation firm will prepare valuations for each of TICC’s bilateral investments that, when combined with all other investments in the same portfolio company, (i) have a value as of the previous quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, and (ii) have a value as of the current quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, after taking into account any repayment of principal during the current quarter. In addition, in those instances where a third-party valuation is prepared for a portfolio investment which meets the parameters noted in (i) and (ii) above, the frequency of those third-party valuations is based upon the grade assigned to each such security under its credit grading system as follows: Grade 1, at least annually; Grade 2, at least semi-annually; Grades 3, 4, and 5, at least quarterly. Bilateral investments which do not meet the parameters in (i) and (ii) above are not required to have a third-party valuation and, in those instances, a valuation analysis will be prepared by TICC Management. TICC Management also retains the authority to seek, on TICC’s behalf, additional third party valuations with respect to TICC’s bilateral portfolio securities, TICC’s syndicated loan investments, and CLO investment vehicles. TICC’s Board of Directors retains ultimate authority as to the third-party review cycle as well as the appropriate valuation of each investment.
INVESTMENT INCOME
Interest Income
From non-affiliated/non-control investments:
Interest income is recorded on an accrual basis using the contractual rate applicable to each– debt investment and includes the accretion of market discounts and/or original issue discount (“OID”) and amortization of market premiums. Discounts from and premiums to par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums, if any.
Generally, when interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to restructuring such that the interest income is deemed to be collectible. The Company generally restores non-accrual loans to accrual status when past due principal and interest is paid and, in the Company’s judgment, is likely to remain current. As of September 30, 2017 and as of December 31, 2016, the Company had no investments that were on non-accrual status.$
Interest income also includes a payment-in-kind (“PIK”) provision on certain investments in TICC’s portfolio. Refer to the section below, “Payment-In-Kind,” for a description of the PIK provision and its impact on interest income.5,674,538
Payment-In-Kind
TICC has debt investments in its portfolio which contain a contractual PIK provision. Certain PIK investments offer issuers the option at each payment date of making payments in cash or additional securities. PIK interest computed at the contractual rate is accrued into income and added to the principal balance on the capitalization date. Upon capitalization, PIK investments are subject to the fair value estimates associated with their respective related investments. A PIK investment on non-accrual status is restored to accrual status once it becomes probable that PIK will be realized. To maintain its status as a RIC, at least 90% of this income must be paid out to stockholders in the form of distributions, even though TICC has not collected any cash. Amounts necessary to pay these distributions may come from available cash or the liquidation of certain investments.$
233,602,389
TICC CAPITAL CORP.$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)10,924,687
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income from Securitization Vehicles and Investments$
7,824,426
Income from investments in the equity class securities of CLOsecuritization vehicles (typicallyand investments
4,062,469
4,096,145
8,503,664
8,777,445
Other income notes or subordinated notes) is recorded using the effective interest method in accordance with the provisions of ASC 325-40, based upon an effective yield to the expected redemption utilizing estimated cash flows, including those CLO equity investments that have not made their inaugural distribution for the relevant period end. The Company monitors the expected residual payments, and effective yield is determined and updated periodically, as needed. Accordingly,
202,544
143,472
377,070
599,825
Total investment income recognizedfrom
non-affiliated/non-control investments
9,939,551
7,842,006
19,805,421
17,201,696
Total investment income
9,939,551
7,842,006
19,805,421
17,201,696
EXPENSES
Interest expense
3,087,952
2,431,398
6,173,318
4,314,823
Base Fee
1,565,181
1,434,484
3,171,684
2,823,734
Professional fees
310,931
570,265
655,453
1,255,219
Compensation expense
219,830
192,875
454,833
365,597
General and administrative
412,129
428,515
756,231
843,690
Total expenses before incentive fees
5,596,023
5,057,537
11,211,519
9,603,063
Net Investment Income Incentive Fees
—
—
—
—
Total expenses
5,596,023
5,057,537
11,211,519
9,603,063
Net investment income
4,343,528
2,784,469
8,593,902
7,598,633
Net change in unrealized (depreciation)/appreciation on CLO equity securitiesinvestments:
Non-Affiliate/non-control
investments
(46,845,141
)
2,537,168
(60,535,837
)
33,583,290
Affiliated investments
602,253
—
803,100
—
Total net change in the GAAP Consolidated Statement of Operations differsunrealized (depreciation)/appreciation on investments
(46,242,888
)
2,537,168
(59,732,737
)
33,583,290
Net realized (losses)/gains:
Non-affiliated/non-control
investments
(1,536,051
)
1,180,480
(493,765
)
(12,890,651
)
Total net realized (losses)/gains
(1,536,051
)
1,180,480
(493,765
)
(12,890,651
)
Net (decrease)/increase in net assets resulting from both the tax-basisoperations
$
(43,435,411
)
$
6,502,117
$
(51,632,600
)
$
28,291,272
Net increase in net assets resulting from net investment income per common share (Basic and Diluted):
$
0.09
$
0.06
$
0.17
$
0.15
Net (decrease)/increase in net assets resulting from the cash distributions actually received by the Company during the period.
Commitment, Amendment Fee Incomeoperations per common share (Basic and Other IncomeDiluted):
Commitment, amendment fee income and other income includes prepayment, amendment, and other fees earned by the Company’s loan investments, distributions from fee letters and success fees associated with portfolio investments. Distributions from fee letters are based upon a percentage$
(0.87
)
$
0.13
$
(1.04
)
$
0.57
Weighted average shares of the collateral manager’s fees, and are recorded as other income when earned. The Company may also earn success fees associated with its investments in certain securitization vehicles or “CLO warehouse facilities,” which are contingent upon a repayment of the warehouse by a permanent CLO securitization structure; such fees are earned and recognized when the repayment is completed.
DEFERRED DEBT ISSUANCE COSTS
Deferred debt issuance costs consist of fees and expenses incurred in connection with the closing or amending of credit facilities and debt offerings, and are capitalized at the time of payment. These costs are amortized using the straight line method over the terms of the respective credit facilities and debt securities. This amortization expense is included in Interest expense in the Company’s Consolidated Statement of Operations. Upon early termination of debt, or a credit facility, the remaining balance of unamortized fees related to such debt is accelerated into Realized Losses on Extinguishment of Debt on the Company’s Consolidated Statement of Operations. Deferred offering costs are presented on the balance sheet as a direct deduction from the related debt liability.
EQUITY OFFERING COSTS
Equity offering costs consist of fees and expenses incurred in connection with the registration and public offer and sale of the Company’s common stock including legal, accountingoutstanding (Basic and printing fees. These costs are deferred at the time of incurrence and are subsequently charged as a reduction to capital when the offering takes place or as shares are issued. Deferred costs are periodically reviewed and expensed if the related registration is no longer active.Diluted):
SHARE REPURCHASES
From time to time, the Company’s Board of Directors may authorize a49,736,300
49,607,474
49,718,630
49,598,636
Distributions per share repurchase program under which shares are purchased in open market transactions. Since the Company is incorporated in the State of Maryland, state law
$
0.105
$
0.105
$
0.210
$
0.210
See Accompanying Notes.
16
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
Three Months | Three Months | Six Months | Six Months | |||||||||||||
(Decrease)/increase in net assets from operations: |
|
|
|
|
|
|
|
| ||||||||
Net investment income | $ | 4,343,528 |
| $ | 2,784,469 |
| $ | 8,593,902 |
| $ | 7,598,633 |
| ||||
Net change in unrealized (depreciation)/appreciation on investments |
| (46,242,888 | ) |
| 2,537,168 |
|
| (59,732,737 | ) |
| 33,583,290 |
| ||||
Net realized (losses)/gains |
| (1,536,051 | ) |
| 1,180,480 |
|
| (493,765 | ) |
| (12,890,651 | ) | ||||
Net (decrease)/increase in net assets resulting from operations |
| (43,435,411 | ) |
| 6,502,117 |
|
| (51,632,600 | ) |
| 28,291,272 |
| ||||
Distributions to stockholders |
|
|
|
|
|
|
|
| ||||||||
Distributions from net investment |
| (4,230,020 | ) |
| (4,323,240 | ) |
| (8,457,040 | ) |
| (8,644,975 | ) | ||||
Tax return of capital distributions |
| (992,227 | ) |
| (885,483 | ) |
| (1,983,750 | ) |
| (1,770,657 | ) | ||||
Total distributions to stockholders |
| (5,222,247 | ) |
| (5,208,723 | ) |
| (10,440,790 | ) |
| (10,415,632 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Capital share transactions: |
|
|
|
|
|
|
|
| ||||||||
Reinvestment of distributions |
| 146,033 |
|
| 123,929 |
|
| 270,767 |
|
| 160,770 |
| ||||
Net increase in net assets from capital share transactions |
| 146,033 |
|
| 123,929 |
|
| 270,767 |
|
| 160,770 |
| ||||
Total (decrease)/increase in net assets |
| (48,511,625 | ) |
| 1,417,323 |
|
| (61,802,623 | ) |
| 18,036,410 |
| ||||
Net assets at beginning of period |
| 231,304,127 |
|
| 242,045,613 |
|
| 244,595,125 |
|
| 225,426,526 |
| ||||
Net assets at end of period | $ | 182,792,502 |
| $ | 243,462,936 |
| $ | 182,792,502 |
| $ | 243,462,936 |
| ||||
Capital share activity: |
|
|
|
|
|
|
|
| ||||||||
Shares issued from reinvestment of distributions |
| 39,718 |
|
| 26,458 |
|
| 71,301 |
|
| 34,815 |
| ||||
Net increase in capital share activity |
| 39,718 |
|
| 26,458 |
|
| 71,301 |
|
| 34,815 |
|
See Accompanying Notes.
17
STATEMENTS OF CASH FLOWS
(unaudited)
Six Months | Six Months | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
| ||||
Net (decrease)/increase in net assets resulting from operations | $ | (51,632,600 | ) | $ | 28,291,272 |
| ||
Adjustments to reconcile net (decrease)/increase in net assets resulting |
|
|
|
| ||||
from operations to net cash provided by/(used in) operating activities: |
|
|
|
| ||||
Accretion of discounts on investments |
| (472,683 | ) |
| (365,303 | ) | ||
Amortization of discount on notes payable and deferred debt issuance costs |
| 467,826 |
|
| 318,838 |
| ||
Purchases of investments |
| (49,517,388 | ) |
| (114,770,681 | ) | ||
Repayments of principal |
| 38,785,427 |
|
| 17,053,265 |
| ||
Proceeds from the sale of investments |
| 12,825,000 |
|
| 5,819,281 |
| ||
Net realized losses on investments |
| 493,765 |
|
| 12,890,651 |
| ||
Reductions to CLO equity cost value |
| 14,219,450 |
|
| 21,404,640 |
| ||
Net change in unrealized depreciation/(appreciation) on investments |
| 59,732,737 |
|
| (33,583,290 | ) | ||
Increase in interest and distributions receivable |
| (75,293 | ) |
| (1,208,543 | ) | ||
(Increase)/decrease in other assets |
| (297,189 | ) |
| 48,519 |
| ||
Increase in accrued interest payable |
| — |
|
| 504,244 |
| ||
(Decrease)/increase in Base Fee and Net Investment Income Incentive Fee payable |
| (123,531 | ) |
| 274,781 |
| ||
(Decrease)/increase in accrued expenses |
| (43,538 | ) |
| 237,856 |
| ||
Net cash provided by/(used in) operating activities |
| 24,361,983 |
|
| (63,084,470 | ) | ||
|
|
|
| |||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
| ||||
Distributions paid (net of stock issued under distribution reinvestment |
|
|
|
| ||||
plan of $270,767 and $160,770, respectively) |
| (10,170,023 | ) |
| (10,254,862 | ) | ||
Proceeds from issuance of 5.50% Unsecured Notes |
| — |
|
| 80,500,000 |
| ||
Deferred debt issuance costs paid |
| — |
|
| (2,705,860 | ) | ||
Net cash (used in)/provided by financing activities |
| (10,170,023 | ) |
| 67,539,278 |
| ||
Net increase in cash and cash equivalents |
| 14,191,960 |
|
| 4,454,808 |
| ||
Cash and cash equivalents, beginning of period |
| 9,015,700 |
|
| 59,137,284 |
| ||
Cash and cash equivalents, end of period | $ | 23,207,660 |
| $ | 63,592,092 |
| ||
|
|
|
| |||||
NON-CASH FINANCING ACTIVITIES |
|
|
|
| ||||
Value of shares issued in connection with distribution reinvestment plan | $ | 270,767 |
| $ | 160,770 |
| ||
|
|
|
| |||||
SUPPLEMENTAL DISCLOSURES |
|
|
|
| ||||
Cash paid for interest | $ | 5,705,493 |
| $ | 3,491,743 |
| ||
Securities purchased not settled | $ | 24,702,896 |
| $ | 40,803,008 |
|
See Accompanying Notes.
18
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 1. UNAUDITED INTERIM FINANCIAL STATEMENTS
Interim financial statements of Oxford Square Capital Corp. (“OXSQ”, or the “Company”), are prepared in accordance with generally accepted accounting principles in the United States of America (“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, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, the unaudited financial results included herein contain all adjustments, consisting solely of normal accruals, considered necessary for the fair statement of the results for the interim period included herein. The current period’s results of operations are not necessarily indicative of results that may be achieved for the year. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”).
NOTE 2. ORGANIZATION
OXSQ was incorporated under the General Corporation Laws of the State of Maryland (“MGCL”) on July 21, 2003 and is a closed-end investment company. OXSQ has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, OXSQ has elected to be treated for tax purposes as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) beginning with its 2003 taxable year. The Company’s investment objective is to maximize its total return, by investing primarily in corporate debt securities and collateralized loan obligation (“CLO”) structured finance investments that own corporate debt securities.
OXSQ’s investment activities are managed by Oxford Square Management, LLC (“Oxford Square Management”). Oxford Square Management is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Oxford Square Management is owned by Oxford Funds, LLC (“Oxford Funds”), its managing member, and Charles M. Royce, a member of OXSQ’s Board of Directors (the “Board”) who holds a minority, non-controlling interest in Oxford Square Management. Under the investment advisory agreement with Oxford Square Management (the “Investment Advisory Agreement”), OXSQ has agreed to pay Oxford Square Management an annual base investment advisory fee (the “Base Fee”) based on its gross assets as well as an incentive fee based on its performance. For further details, please refer to “Note 7. Related Party Transactions.”
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services — Investment Companies.
In the normal course of business, the Company enters into a variety of undertakings containing a variety of warranties and indemnifications that may expose the Company to some risk of loss. The risk of future loss arising from such undertakings, while not quantifiable, is expected to be remote.
USE OF ESTIMATES
The financial statements have been prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates, and these differences could be material.
19
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
CONSOLIDATION
As provided under Regulation S-X and ASC Topic 946-810, Consolidation (“ASC 946-810”), the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or a controlled operating company whose business consists of providing services to the Company for the periods during which it was held. The Company previously consolidated OXSQ Funding 2018, LLC (“Oxford Funding”) in its financial statements in accordance with ASC 946-810 until Oxford Funding was dissolved in June 2020.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of deposits held at custodian banks, and highly liquid investments, such as money market funds, with original maturities of three months or less. The Company places its cash equivalents with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation insured limit. Cash equivalents are classified as Level 1 assets and are included on the Company’s schedule of investments. Certain cash equivalents are carried at cost or amortized cost, which approximates fair value, and investments held in money market funds are valued at NAV per share.
INVESTMENT VALUATION
The Company determines its investment portfolio at fair value in accordance with the provisions of ASC 820, Fair Value Measurement (“ASC 820”). Estimates made in the preparation of the Company’s financial statements include the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. The Company believes that there is no single definitive method for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments the Company makes. The Company is required to specifically fair value each individual investment on a quarterly basis.
ASC 820-10 clarified the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities in markets that are not active; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company considers the attributes of current market conditions on an on-going basis and has determined that due to the general illiquidity of the market for its investment portfolio, whereby little or no market data exists, all of OXSQ’s investments are based upon Level 3 inputs as of June 30, 2022.
The Board determines the value of its investment portfolio each quarter. In connection with that determination, members of Oxford Square Management’s portfolio management team prepare a quarterly analysis of each portfolio investment using the most recent portfolio company financial statements, forecasts and other relevant financial and operational information. The Company has and may continue to engage third-party valuation firms to provide assistance in valuing certain of its syndicated loans and bilateral investments, including related equity investments, although the Board ultimately determines the appropriate valuation of each such investment. Changes in fair value, as described above, are recorded in the statements of operations as net change in unrealized appreciation/depreciation on investments.
20
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Good Faith Determinations of Fair Value, Rule 2a-5 under the 1940 Act (“Rule 2a-5”) was adopted by the SEC in December 2020 and establishes 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 financial statements and intends to comply with the new rule’s requirements on or before the compliance date in September 2022.
Syndicated Loans (Including Senior Secured Notes)
In accordance with ASC 820-10, the Company’s valuation procedures specifically provide for the review of indicative quotes supplied by the large agent banks that make a market for each security. However, the marketplace from which the Company obtains indicative bid quotes for purposes of determining the fair value of its syndicated loan investments has shown attributes of illiquidity as described by ASC 820-10. During such periods of illiquidity, when the Company believes that the non-binding indicative bids received from agent banks for certain syndicated loan investments that it owns may not be determinative of their fair value, or when no market indicative quote is available, the Company has and may continue to engage third-party valuation firms to provide assistance in valuing certain syndicated investments that the Company owns. The third-party valuation firms may use the income or market approach in arriving at a valuation. Unobservable inputs utilized could include discount rates derived from estimated credit spreads and earnings before interest, taxes, depreciation, and amortization (“EBITDA”) multiples. In addition, Oxford Square Management analyzes each syndicated loan by reviewing the portfolio company’s financial statements, covenant compliance and recent trading activity in the security, if known, and other business developments related to the portfolio company. All available information, including non-binding indicative bids which may not be determinative of fair value, is presented to the Valuation Committee to consider in its determination of fair value. In some instances, there may be limited trading activity in a security even though the market for the security is considered not active. In such cases, the Valuation Committee will consider the number of trades, the size and timing of each trade, and other circumstances around such trades, to the extent such information is available, in its determination of fair value. The Valuation Committee will evaluate the impact of such additional information, and factor it into its consideration of the fair value that is indicated by the analysis provided by third-party valuation firms, if any. All information is presented to the Board for its determination of fair value of these investments.
Collateralized Loan Obligations — Debt and Equity
The Company has acquired debt and equity positions in CLO investment vehicles and can purchase CLO warehouse facilities. These investments are special purpose financing vehicles. In valuing such investments, the Company considers the indicative prices provided by a recognized industry pricing service as a primary source, and the implied yield of such prices, supplemented by actual trades executed in the market at or around period-end, as well as the indicative prices provided by the broker who arranges transactions in such investment vehicles. The Company also considers those instances in which the record date for an equity distribution payment falls on or before the last day of the period, and the likelihood that a prospective purchaser would require a downward adjustment to the indicative price representing substantially all of the pending distribution. Additional factors include any available information on other relevant transactions including firm bids and offers in the market and information resulting from bids-wanted-in-competition. In addition, the Company considers the operating metrics of the specific investment vehicle, including compliance with collateralization tests, defaulted and restructured securities, and payment defaults, if any. In periods of illiquidity and volatility, the Company may rely more heavily on other qualities and metrics, including but not limited to, the collateral manager, time left in the reinvestment period, expected cash flows and overcollateralization ratios, instead of the Company’s generated valuation yields. Oxford Square Management or the Valuation Committee may request an additional analysis by a third-party firm to assist in the valuation process of CLO investment vehicles. All information is presented to the Board for its determination of fair value of these investments.
21
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Bilateral Investments (Including Equity)
Bilateral investments (as defined below) for which market quotations are readily available are valued by an independent pricing agent or market maker. If such market quotations are not readily available, under the valuation procedures approved by the Board, upon the recommendation of the Valuation Committee, a third-party valuation firm will prepare valuations for each of OXSQ’s bilateral investments that, when combined with all other investments in the same portfolio company, (i) have a value as of the previous quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, and (ii) have a value as of the current quarter of greater than or equal to 2.5% of its total assets as of the current quarter, after taking into account any repayment of principal during the current quarter. In addition, in those instances where a third-party valuation is prepared for a portfolio investment which meets the parameters noted in (i) and (ii) above, the frequency of those third-party valuations is based upon the grade assigned to each such security under its credit grading system as follows: Grade 1, at least annually; Grade 2, at least semi-annually; Grades 3, 4, and 5, at least quarterly. Bilateral investments which do not meet the parameters in (i) and (ii) above are not required to have a third-party valuation and, in those instances, a valuation analysis will be prepared by Oxford Square Management. All information is presented to the Board for its determination of fair value of these investments.
The term “Bilateral investments” means debt and equity investments directly negotiated between the Company and a portfolio company, but excludes syndicated loans (i.e., corporate loans arranged by an agent on behalf of a company, portions of which are held by multiple investors in addition to OXSQ).
Refer to “Note 4. Fair Value” in the notes to the Company’s financial statements for more information on investment valuation and the Company’s portfolio of investments.
INVESTMENT INCOME
Interest Income
Interest income is recorded on an accrual basis using the contractual rate applicable to each debt investment and includes the accretion of market discounts and/or original issue discount (“OID”) and amortization of market premiums. Discounts from and premiums to par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums, if any.
Generally, when interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to restructuring such that the interest income is deemed to be collectible. The Company generally restores non-accrual loans to accrual status when past due principal and interest is paid and, in the Company’s judgment, is likely to remain current. As of June 30, 2022 and December 31, 2021, the Company had three debt investments that were on non-accrual status.
Interest income also includes a payment-in-kind (“PIK”) component on certain investments in the Company’s portfolio. Refer to the section below, “Payment-In-Kind,” for a description of PIK income and its impact on interest income.
22
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Payment-In-Kind
The Company has debt and preferred stock investments in its portfolio that contain contractual PIK provisions. PIK interest and preferred stock dividends are computed at their contractual rates and are accrued into income and recorded as interest and dividend income, respectively. The PIK amounts are added to the principal balances on the capitalization dates. Upon capitalization, the PIK portions of the investments are valued at their respective fair values. If the Company believes that a PIK is not fully expected to be realized, the PIK investment would be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends would be reversed from the related receivable through interest or dividend income, respectively. PIK investments on non-accrual status are restored to accrual status once it becomes probable that such PIK will be ultimately collectible in cash. For the three and six months ended June 30, 2022 and 2021, no PIK interest was recognized as interest income. For the three and six months ended June 30, 2022 and 2021, the Company did not recognize dividend income due to PIK on its preferred stock investments.
Income from Securitization Vehicles and Investments
Income from investments in the equity class securities of CLO vehicles (typically income notes or subordinated notes) is recorded using the effective interest method in accordance with the provisions of ASC 325-40, Beneficial Interests in Securitized Financial Assets, based upon estimated cash flows, amounts and timing, including those CLO equity investments that have not made their inaugural distribution for the relevant period end. We monitor the expected residual payments, and effective yield is determined and updated periodically, as needed. Accordingly, investment income recognized on CLO equity securities in the statement of operations differs from both the tax-basis investment income and from the cash distributions actually received by the Company during the period.
The Company also records income on its investments in CLO warehouse facilities based on a stated rate per the underlying note purchase agreement or, if there is no stated rate, then an estimated rate is calculated using a base case model projecting the timing of the ramp-up of the CLO warehouse facility.
Other Income
Other income includes prepayment, amendment, and other fees earned by the Company’s loan investments, distributions from fee letters and success fees associated with portfolio investments. Distributions from fee letters are an enhancement to the return on a CLO equity investment and are based upon a percentage of the collateral manager’s fees above the amortized cost, and are recorded as other income when earned. The Company may also earn success fees associated with its investments in certain securitization vehicles or CLO warehouse facilities, which are contingent upon a repayment of the warehouse by a permanent CLO securitization structure; such fees are earned and recognized when the repayment is completed.
Preferred Stock Dividends
The Company holds preferred stock investments in its portfolio that contain cumulative preferred dividends that accumulate quarterly. The Company will generally record cumulative preferred dividends as investment income when they are received or declared by the portfolio company’s board of directors or upon any voluntary or involuntary liquidation, dissolution or winding up of the portfolio company, and are collectible. There were no cumulative preferred dividends recorded as dividend income during the three and six months ended June 30, 2022 and 2021, as the Company deemed them to be uncollectible.
23
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
DEFERRED DEBT ISSUANCE COSTS
Deferred debt issuance costs consist of fees and expenses incurred in connection with the closing or amending of credit facilities and debt offerings, and are capitalized at the time of payment. These costs are amortized using the straight line method over the terms of the respective credit facilities and debt securities. The amortized expenses are included in interest expense in the Company’s financial statements. The unamortized deferred debt issuance costs are included on the Company’s statement of assets and liabilities as a direct deduction from the related debt liability. Upon early termination or partial principal pay down of debt, or a credit facility, the unamortized costs related to such debt are accelerated into realized losses on extinguishment of debt on the Company’s statement of operations.
EQUITY OFFERING COSTS
Equity offering costs consist of fees and expenses incurred in connection with the registration and public offer and sale of the Company’s common stock, including legal, accounting and printing fees. These costs are deferred at the time of incurrence and are subsequently charged as a reduction to capital when the offering takes place or as shares are issued. Deferred costs are periodically reviewed and expensed if the related registration is no longer active.
SHARE REPURCHASES
From time to time, the Board may authorize a share repurchase program under which shares are purchased in open market transactions. Since the Company is incorporated in Maryland, MGCL requires share repurchases to be accounted for as a share retirement. The cost of repurchased shares is charged against capital on the settlement date.
OTHER ASSETS
Other assets consist of funds held in escrow from sales of investments, prepaid expenses associated primarily with insurance costs, other receivables and deferred equity offering costs. At September 30, 2017, funds held in escrow totaled approximately $739,000, related to the sale of the Company’s investment in Ai Squared during the quarter ended June 30, 2016. The funds are expected to be released from escrow to the company during the fourth quarter of 2017, net of settlement
24
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
of any indemnity claims and expenses related to the transaction. Prepaid expenses, other receivables and deferred equity offering costs totaled approximately $777,000 as of September 30, 2017.
U.S. FEDERAL INCOME TAXES
The Company intends to operate so as to qualify to be taxed as a RIC under Subchapter M of the Code and, as such, to not be subject to U.S. federal income tax on the portion of its taxable income and gains distributed to stockholders. To qualify for RIC tax treatment, TICC is required to distribute at least 90% of its investment company taxable income annually, meet diversification requirements quarterly and file Form 1120-RIC, as defined by the Code.
Because U.S. federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
The Company recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained, assuming examination by tax authorities. Through September 30, 2017, management has analyzed the Company’s tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions expected to be taken in the Company’s 2017 tax returns. The Company identifies its major tax jurisdictions as U.S Federal and Connecticut State; however, the Company is not aware of any tax position for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
For tax purposes, the cost basis of the portfolio investments at September 30, 2017 and December 31, 2016 was approximately $484,936,152 and $667,826,311, respectively.
SECURITIES TRANSACTIONS
Securities transactions are recorded on the trade date. Realized gains and losses on investments sold are recorded on the basis of specific identification.
An optional redemption (“optionally redeemed”) feature of a CLO allows a majority of the holders of the equity securities issued by the CLO issuer, after the end of a specified non-call period, to cause the redemption of the secured notes issued by the CLO with proceeds paid either through the liquidation of the CLO’s assets or through a refinancing with new debt. The optional redemption is effectively a voluntary prepayment of the secured debt issued by the CLO prior to the stated maturity of such debt. Distributions received on CLO equity investments which were optionally redeemed for whichwhere the optional redemption feature has been exercised are first applied to the remaining cost basis has beenuntil it is reduced to zero, after which distributions are recorded as realized gains.
25U.S. FEDERAL INCOME TAXES
The Company intends to operate so as to qualify to be taxed as a RIC under Subchapter M of the Code and, as such, to not be subject to U.S. federal income tax on the portion of its taxable income and gains timely distributed to stockholders. To qualify for RIC tax treatment, OXSQ is required to distribute at least 90% of its investment company taxable income annually, meet diversification requirements quarterly and file Form 1120TICC-RIC, as defined by the Code.
Because U.S. federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
24
OXFORD SQUARE CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBERJune 30, 20172022
(unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The Company recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained, assuming examination by tax authorities. Through June 30, 2022, management has analyzed the Company’s tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions expected to be taken in the Company’s 2021 tax returns. The Company identifies its major tax jurisdictions as U.S Federal and Connecticut State. The Company did not have any uncertain tax positions that met the recognition measurement criteria of ASC 740-10-25, Income Taxes, nor did the Company have any unrecognized tax benefits as of the periods presented herein. The Company’s current tax year, 2021, 2020 and 2019 federal tax returns remain subject to examination by the Internal Revenue Service.
For tax purposes, the cost basis of the portfolio investments as of June 30, 2022 and December 31, 2021, was approximately $541,178,788 and $527,385,739, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848),” which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. ASU 2020-04 and ASU 2021-01 are effective as of March 12, 2020 through December 31, 2022. ASU No. 2021-01 provides increased clarity as the Company continues to evaluate the transition of reference rates and is currently evaluating the impact of adopting ASU No. 2020-04 and 2021-01 on the financial statements.
Other than the aforementioned guidance, the Company’s management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.
NOTE 4. FAIR VALUE
The Company’s assets measured at fair value by investment type on a recurring basis as of SeptemberJune 30, 20172022 were as follows:
|
| Fair Value Measurements as of Reporting Date Using |
|
| ||||||||
Assets ($ in millions) |
| Quoted Prices in Active Markets for Identical Assets |
| Significant Other Observable Inputs |
| Significant Unobservable Inputs |
| Total | ||||
Senior Secured Notes |
| $ | — |
| $ | — |
| $ | 231.1 |
| $ | 231.1 |
Subordinated Debt |
|
| — |
|
| — |
|
| 0.8 |
|
| 0.8 |
CLO Debt |
|
| — |
|
| — |
|
| 4.5 |
|
| 4.5 |
CLO Equity |
|
| — |
|
| — |
|
| 173.6 |
|
| 173.6 |
Equity and Other Investments |
|
| — |
|
| — |
|
| 11.8 |
|
| 11.8 |
Total Investments at fair value |
|
| — |
|
| — |
|
| 421.7 |
|
| 421.7 |
Cash and cash equivalents |
|
| 119.6 |
|
| — |
|
| — |
|
| 119.6 |
Total assets at fair value(1) |
| $ | 119.6 |
| $ | — |
| $ | 421.7 |
| $ | 541.3 |
Fair Value Measurements at Reporting Date Using | ||||||||||||
Assets ($ in millions) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs | Significant Unobservable Inputs | Total | ||||||||
Senior Secured Notes | $ | — | $ | — | $ | 256.1 | $ | 256.1 | ||||
CLO Equity |
| — |
| — |
| 111.8 |
| 111.8 | ||||
Equity and Other Investments |
| — |
| — |
| 1.6 |
| 1.6 | ||||
Total Investments at fair value(1) |
| — |
| — |
| 369.4 |
| 369.4 | ||||
Cash equivalents |
| 22.3 |
| — |
| — |
| 22.3 | ||||
Total assets at fair value | $ | 22.3 | $ | — | $ | 369.4 | $ | 391.7 |
____________
(1) Totals may not sum due to rounding.
25
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 4. FAIR VALUE (cont.)
The Company’s assets measured at fair value by investment type on a recurring basis as of December 31, 20162021 were as follows:
|
| Fair Value Measurements as of Reporting Date Using |
|
| Fair Value Measurements at Reporting Date Using | |||||||||||||||||||
Assets ($ in millions) |
| Quoted Prices in Active Markets for Identical Assets |
| Significant Other Observable Inputs |
| Significant Unobservable Inputs |
| Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs | Significant Unobservable Inputs | Total | ||||||||||||
Senior Secured Notes |
| $ | — |
| $ | 4.7 |
| $ | 368.3 |
| $ | 373.0 | $ | — | $ | — | $ | 264.5 | $ | 264.5 | ||||
Subordinated Debt |
|
| — |
|
| — |
|
| 0.7 |
|
| 0.7 | ||||||||||||
CLO Debt |
|
| — |
|
| — |
|
| 2.7 |
|
| 2.7 | ||||||||||||
CLO Equity |
|
| — |
|
| — |
|
| 200.8 |
|
| 200.8 |
| — |
| — |
| 155.6 |
| 155.6 | ||||
Equity and Other Investments |
|
| — |
|
| — |
|
| 12.7 |
|
| 12.7 |
| — |
| — |
| 0.8 |
| 0.8 | ||||
Total Investments at fair value |
|
| — |
|
| 4.7 |
|
| 585.2 |
|
| 589.9 | ||||||||||||
Cash and cash equivalents |
|
| 8.3 |
|
| — |
|
| — |
|
| 8.3 | ||||||||||||
Total Investments at fair value(1) |
| — |
| — |
| 420.8 |
| 420.8 | ||||||||||||||||
Cash equivalents |
| 8.4 |
| — |
| — |
| 8.4 | ||||||||||||||||
Total assets at fair value |
| $ | 8.3 |
| $ | 4.7 |
| $ | 585.2 |
| $ | 598.2 | $ | 8.4 | $ | — | $ | 420.8 | $ | 429.2 |
____________
(1) Totals may not sum due to rounding.
Significant Unobservable Inputs for Level 3 Investments
The following tables provide quantitative information about the Company’s Level 3 fair value measurements as of SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively. The Company’s valuation policy, as described above,earlier, establishes parameters for the sources and types of valuation analysis, as well as the methodologies and inputs that the Company uses in determining fair value. If the Valuation Committee or TICCOxford Square Management determines that additional techniques, sources or inputs are appropriate or necessary in a given situation, such additional work will be undertaken. The tables, therefore,
26
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 4. FAIR VALUE (continued)
are not all-inclusive,all-inclusive, but provide information on the significant Level 3 inputs that are pertinent to the Company’s fair value measurements. The weighted average calculations in the tabletables below are based on principal balancesfair values for all debt related calculations and CLO equity.
|
| Quantitative Information about Level 3 |
|
|
| |||||||
Assets ($ in millions) |
| Fair Value |
| Valuation |
| Unobservable |
| Range/Weighted | Impact to | |||
Senior Secured Notes |
| $ | 181.8 |
| Market quotes |
| NBIB(1) |
| 75.1% – 100.5%/98.1% | NA | ||
|
|
| 46.6 |
| Recent transactions |
| Actual trade/payoff(6) |
| 85.0% – 100.0%/92.6% | NA | ||
|
|
| 2.7 |
| Enterprise value(7)/ |
| Market multiples(2) |
| 5.5x – 6.0x/ncm(4) | Increase | ||
|
|
|
|
| Discounted cash flow(5) |
| Discount rate(3) |
| 6.2% – 7.8%/ncm(4) | Decrease | ||
Subordinated Debt |
|
| 0.8 |
| Enterprise value(7)/ |
| Market multiples(2) |
| 5.5x – 6.0x/ncm(4) | Increase | ||
|
|
|
|
| Discounted cash flow(5) |
| Discount rate(3) |
| 6.3% – 10.0%/ncm(4) | Decrease | ||
CLO Debt |
|
| 4.5 |
| Market quotes |
| NBIB(1) |
| 81.6% – 97.5% /85.4(4) | NA | ||
CLO Equity |
|
| 147.5 |
| Market quotes |
| NBIB(1) |
| 1.1% – 103.0%/48.6% | NA | ||
|
|
| 17.3 |
| Discounted cash flow(5) |
| Discount rate(3)(5) |
| 10.6% – 17.5%/12.7% | Decrease | ||
|
|
| 8.7 |
| Recent transactions |
| Actual trade/payoff(6) |
| 38.5% – 87.0%/48.6% | NA | ||
Equity Shares |
|
| 11.8 |
| Enterprise value(7)/ |
| EBITDA(2) |
| $35.5/ncm(4) | Increase | ||
|
|
|
|
| Discounted cash flow(5) |
| Market multiples(2) |
| 5.5x – 6.0x/ncm(4) | Increase | ||
Other investments |
|
| — |
| Other |
| Discount rate(3) |
| 10.9%/ncm(4) | Decrease | ||
Total Fair Value for Level 3 Investments(9) |
| $ | 421.7 |
|
|
|
|
|
|
|
Quantitative Information about Level 3 Fair Value Measurements | Impact to | |||||||||||
Assets ($ in millions) | Fair Value | Valuation Techniques/ | Unobservable Input | Range/Weighted | ||||||||
Senior Secured Notes | $ | 242.4 | Market quotes | NBIB(3) |
| 80.0% – 96.5%/90.0% | NA | |||||
| 13.2 | �� | Recent transactions | Actualtrade/payoff(4) |
| 90.0% – 90.0%/90.0% | NA | |||||
| 0.5 | Enterprise value(8) | NCY EBITDA(9) | $ | 13.2 million/ncm(5) | Increase | ||||||
| Market multiples(9) |
| 3.5x – 4.5x/ncm(5) | Increase | ||||||||
CLO equity |
| 101.9 | Market quotes | NBIB(3) |
| 2.0% – 68.0%/35.4% | NA | |||||
| 7.7 | Yield Analysis | Yield |
| 23.8%/ncm(5) | Decrease | ||||||
| 1.5 | Discounted cash flow(6) | Discount rate(7) |
| 15.1% – 19.7%/16.0% | Decrease | ||||||
| 0.6 | Liquidation Net Asset Value(10) | NBIB(3) |
| 0.0% – 3.1%/1.3% | NA | ||||||
Equity/Other Investments |
| 1.6 | Enterprise value(8) | LTM EBITDA(9) | $ | 20.3 million/ncm(5) | Increase | |||||
| NCY EBITDA(9) | $ | 25.0 million/ncm(5) | Increase | ||||||||
|
| Market multiples(9) |
| 6.00x – 8.25x/7.1x | Increase | |||||||
Total Fair Value for Level 3 Investments | $ | 369.4 |
|
____________
(1) Weighted averages are calculated based on fair value of investments.
26
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 4. FAIR VALUE (cont.)
(2) The impact on the fair value measurement of an increase in each unobservable input is in isolation. The discount rate is the rate used to discount future cash flows in a discounted cash flow calculation. An increase in the discount rate, in isolation, would result in a decrease in the fair value measurement. Market Multiples/EBITDA refer to the input (often derived from the value of a comparable company) that is multiplied by the historic and/or expected EBITDA of a company in order to estimate the company’s value. An increase in the Market Multiples/EBITDA, in isolation, would result in an increase in the fair value measurement.
(3) The Company generally uses prices provided by an independent pricing service, or broker or agent bank non-bindingnon-binding indicative bid prices (“NBIB”), on or near the valuation date as the primary basis for the fair value determinations for syndicated notes, and CLO debt and equity investments, which may be adjusted for pending equity distributions as of valuation date. These bid prices are non-binding,non-binding, and may not be determinative of fair value. Each bid price is evaluated by the Valuation Committee in conjunction with additional information compiled by TICCOxford Square Management, including financial performance, recent business developments, and, in the case of CLO debt and equity investments, performance and covenant compliance information as provided by the independent trustee.
(2) EBITDA, or earnings before interest expense, taxes, depreciation and amortization, is an unobservable input which is generally based on most recently available twelve month financial statements provided by the portfolio company. Market multiples, also an unobservable input, represent an estimation of where market participants might value an enterprise based upon information available for comparable companies in the market.
(3) Discount rate represents the rate at which future cash flows are discounted to calculate a present value, reflecting market assumptions for risk.
(4) The calculation of weighted average for a range of values, for multiple investments within a given asset category, is not considered to provide a meaningful representation (“ncm”).
(5) The Company will calculate the fair value of certain CLO equity investments based upon the net present value of expected contractual payment streams discounted using estimated market yields for the equity tranche of the respective CLO vehicle. TICC will also consider those investments in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require an adjustment to the transaction price representing substantially all of the pending distribution.
(6) Prices provided by independent pricing services are evaluated in conjunction with actual trades and payoffs and, in certain cases, the value represented by actual trades or payoffs may be more representative of fair value as determined by the Valuation Committee.
27(5) The calculation of weighted average for a range of values, for a single investment within a given asset category, is not considered to provide a meaningful representation (“ncm”).
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 4. FAIR VALUE (continued)(6) The Company calculates the fair value of certain CLO equity investments based upon the net present value of expected contractual payment streams discounted using estimated market yields for the equity tranche of the respective CLO vehicle. The Company also considers those investments in which the record date for an equity distribution payment falls on or before the last day of the period, and the likelihood that a prospective purchaser would require an adjustment to the transaction price representing substantially all of the pending distribution.
(7) Discount rate represents the rate at which future cash flows are discounted to calculate a present value, reflecting market assumptions for risk.
(8) For the corporate debt investmentssenior secured notes and equity investments, third-partythird-party valuation firms evaluate the financial and operational information of the portfolio companies that the Company provides to them, as well as independent market and industry information that they consider appropriate in forming an opinion as to the fair value of the Company’s securities. In those instances where the carrying value and/or internal credit rating of the investment does not require the use of a third-partythird-party valuation firm, a valuation is prepared by TICCOxford Square Management, which may include liquidation analysis or which may utilize a subsequent transaction to provide an indication of fair value.
(8)(9) EBITDA, or earnings before interest expense, taxes, depreciation and amortization, is an unobservable input which is generally based on the most recently available twelve month financial statements provided by the portfolio company. Market multiples, also an unobservable input, represent an estimation of where market participants might value an enterprise based upon information available for comparable companies in the market. “NCY” refers to “next calendar year.”
(10) The fair value of those CLO equity positions which have been optionally redeemed are generally valued using a liquidation net asset value basis which represents the estimated expected residual value of the CLO as of the end of the period.
27
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 4. FAIR VALUE (cont.)
Quantitative Information about Level 3 Fair Value Measurements | Range/Weighted | Impact to Fair Value from an Increase in Input(2) | ||||||||||
Assets ($ in millions) | Fair Value | Valuation Techniques/ | Unobservable Input | |||||||||
Senior Secured | $ | 230.5 | Market quotes | NBIB(3) |
| 91.0% – 100.0%/97.0% | NA | |||||
| 32.7 | Recent transactions | Actual trade/payoff(4) |
| 94.5% – 100.3%/97.9% | NA | ||||||
| 1.3 | Enterprise value(8) | NCY+1 EBITDA(9) | $ | 12.3 million/ncm(5) | Increase | ||||||
| Market multiples(9) |
| 5.5x – 6.5x/ncm(5) | Increase | ||||||||
CLO equity |
| 149.1 | Market quotes | NBIB(3) |
| 8.7% – 83.0%/48.0% | NA | |||||
| 3.4 | Recent transactions | Actual trade/payoff(4) |
| 90.1%/ncm(5) | NA | ||||||
| 1.8 | Discounted cash flow(6) | Discount rate(7) |
| 10.8% – 12.9%/12.5% | Decrease | ||||||
| 1.3 | Liquidation Net Asset Value(11) | NBIB(3) |
| 0.3% – 5.8%/3.1% | NA | ||||||
Equity/Other Investments |
| 0.8 | Enterprise value(8) | NCY EBITDA(9) | $ | 18.1 million/ncm(5) | Increase | |||||
| NCY+1 EBITDA(9) | $ | 25.0 million/ncm(5) | Increase | ||||||||
|
| Market multiples(9) |
| 5.75x – 9.0x/7.4x | Increase | |||||||
Total Fair Value for Level 3 Investments(10) | $ | 420.8 |
|
____________
(1) Weighted averages are calculated based on fair value of investments.
(9) Totals may not sum due to rounding.
(10)(2) The impact on the fair value measurement of an increase in each unobservable input is in isolation. The discount rate is the rate used to discount future cash flows in a discounted cash flow calculation. An increase in the discount rate, in isolation, would result in a decrease in athe fair value measurement. Market/Market Multiples/EBITDA multiples refer to the input (often derived from the value of a comparable company) that is multiplied by the historic and/or expected EBITDA of a company in order to estimate the company’s value. An increase in the Market/Market Multiples/EBITDA, multiple, in isolation, net of adjustments, would result in an increase in athe fair value measurement.
|
| Quantitative Information about Level 3 |
|
|
| |||||||
Assets ($ in millions) |
| Fair Value |
| Valuation |
| Unobservable |
| Range/Weighted | Impact to | |||
Senior Secured Notes |
| $ | 309.5 |
| Market quotes |
| NBIB(1) |
| 64.8% – 100.5%/94.5% | NA | ||
|
|
| 11.8 |
| Yield Analysis |
| NBIB(1) |
| 97.3%/ncm(4) | NA | ||
|
|
|
|
|
|
| Discount Margin |
| 6.4%/ncm(4) | Decrease | ||
|
|
| 32.7 |
| Recent transactions |
| Actual trade/payoff(6) |
| 96.0% – 100.0%/99.3% | NA | ||
|
|
| 14.3 |
| Market quotes/ |
| NBIB(1) |
| 98.0% – 101.0%/98.5% | NA | ||
|
|
|
|
| Enterprise value(7) |
| EBITDA multiples(2) |
| 4.5x – 6.25x/ncm(4) | Increase | ||
Subordinated Debt |
|
| 0.7 |
| Market quotes/ |
| NBIB(1) |
| 101.0%/ncm(4) | NA | ||
|
|
|
|
| Enterprise value(7) |
| EBITDA multiples(2) |
| 4.5x – 5.0x/ncm(4) | Increase | ||
CLO Debt |
|
| 2.7 |
| Market quotes |
| NBIB(1) |
| 90.0%/ncm(4) | NA | ||
CLO Equity |
|
| 155.8 |
| Market quotes |
| NBIB(1) |
| 25.0% – 108.0%/55.7% | NA | ||
|
|
| 1.9 |
| Discounted cash flow(5) |
| Discount rate(3)(5) |
| 13.1% – 16.0%/13.9% | Decrease | ||
|
|
| 43.1 |
| Recent transactions |
| Actual trade/payoff(6) |
| 38.7% – 71.9%/56.2% | NA | ||
Equity Shares |
|
| 12.4 |
| Enterprise value(7)/ |
| EBITDA(2) |
| $35. 2 – 170.7/ncm(4) | Increase | ||
|
|
|
|
| Discounted cash flow(5) |
| Market multiples(2) |
| 4.5x – 9.5x/ncm(4) | Increase | ||
|
|
|
|
|
|
| Discount rates(3) |
| 20.0%/ncm(4) | Decrease | ||
Other investments |
|
| 0.3 |
| Other |
| Discount rates(3) |
| 10.9%/ncm(4) | Decrease | ||
Total Fair Value for Level 3 Investments |
| $ | 585.2 |
|
|
|
|
|
|
|
____________
(1)(3) The Company generally uses prices provided by an independent pricing service, or broker or agent bank non-bindingnon-binding indicative bid prices (“NBIB”), on or near the valuation date as the primary basis for the fair value determinations for syndicated notes, and CLO debt and equity investments, which may be adjusted for pending equity distributions as of valuation date. These bid prices are non-binding,non-binding, and may not be determinative of fair value. Each bid price is evaluated by the Valuation Committee in conjunction with additional information compiled by TICCOxford Square Management, including financial performance, recent business developments, and, in the case of CLO debt and equity investments, performance and covenant compliance information as provided by the independent trustee.
28
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 4. FAIR VALUE (continued)
(2) EBITDA is an unobservable input which is generally based on most recently available twelve month financial statements provided by the portfolio company. Market multiples, also an unobservable input, represent an estimation of where market participants might value an enterprise based upon information available for comparable companies in the market.
(3) Discount rate represents the rate at which future cash flows are discounted to calculate a present value, reflecting market assumptions for risk.
(4) The calculation of weighted average for a range of values, for multiple investments within a given asset category, is not considered to provide a meaningful representation (“ncm”).
(5) The Company will calculate the fair value of certain CLO equity investments based upon the net present value of expected contractual payment streams discounted using estimated market yields for the equity tranche of the respective CLO vehicle. TICC will also consider those investments in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require an adjustment to the transaction price representing substantially all of the pending distribution.
(6) Prices provided by independent pricing services are evaluated in conjunction with actual trades and payoffs and, in certain cases, the value represented by actual trades or payoffs may be more representative of fair value as determined by the Valuation Committee.
(5) The calculation of weighted average for a range of values, for a single investment within a given asset category, is not considered to provide a meaningful representation (“ncm”).
(6) The Company calculates the fair value of certain CLO equity investments based upon the net present value of expected contractual payment streams discounted using estimated market yields for the equity tranche of the respective CLO vehicle. The Company also considers those investments in which the record date for an equity distribution payment falls on or before the last day of the period, and the likelihood that a prospective purchaser would require an adjustment to the transaction price representing substantially all of the pending distribution.
(7) Discount rate represents the rate at which future cash flows are discounted to calculate a present value, reflecting market assumptions for risk.
(8) For the corporate debt investmentssenior secured notes and equity investments, third-partythird-party valuation firms evaluate the financial and operational information of the portfolio companies that the Company provides to them, as well as independent market and industry information that they consider appropriate in forming an opinion as to the fair value of the Company’s securities. In those instances where the carrying value and/or internal credit rating of the investment does not require the use of a third-partythird-party valuation firm, a valuation is prepared by TICCOxford Square Management, which may include liquidation analysis or which may utilize a subsequent transaction to provide an indication of fair value.
(8) Weighted averages are calculated28
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 4. FAIR VALUE (cont.)
(9) EBITDA, or earnings before interest expense, taxes, depreciation and amortization, is an unobservable input which is generally based on the most recently available twelve month financial statements provided by the portfolio company. Market multiples, also an unobservable input, represent an estimation of where market participants might value an enterprise based upon information available for comparable companies in the market. “NCY” refers to “next calendar year.”
(10) Totals may not sum due to rounding.
(11) The fair value of investments.
(9) The impact onthose CLO equity positions which have been optionally redeemed are generally valued using a liquidation net asset value basis which represents the fair value measurement of an increase in each unobservable input is in isolation. The discount rate is the rate used to discount future cash flows in a discounted cash flow calculation. An increase in the discount rate, in isolation, would result in a decrease in a fair value measurement. Market/EBITDA multiples refer to the input (often derived from theestimated expected residual value of a comparable company) that is multiplied by the historic and/or expected EBITDACLO as of a company in order to estimate the company’s value. An increase inend of the Market/EBITDA multiple, in isolation, net of adjustments, would result in an increase in a fair value measurement.period.
Financial Instruments Disclosed, But Not Carried, At Fair Value
The following table presents the carrying value and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of SeptemberJune 30, 20172022, and the level of each financial liability within the fair value hierarchy:
($ in thousands) |
| Carrying |
| Fair |
| Level 1 |
| Level 2 |
| Level 3 | |||||
2017 Convertible Notes(1) |
|
| 94,497 |
|
| 94,956 |
|
| — |
|
| — |
|
| 94,956 |
6.50% Unsecured Notes(1) |
|
| 62,258 |
|
| 66,791 |
|
| — |
|
| 66,791 |
|
| — |
Total(4) |
| $ | 156,756 |
| $ | 161,747 |
| $ | — |
| $ | 66,791 |
| $ | 94,956 |
($ in millions) | Carrying Value(1) | Fair | Level 1 | Level 2 | Level 3 | ||||||||||
6.50% Unsecured Notes | $ | 63.8 | $ | 64.4 | $ | — | $ | 64.4 | $ | — | |||||
6.25% Unsecured Notes |
| 43.9 |
| 45.5 |
| — |
| 45.5 |
| — | |||||
5.50% Unsecured Notes |
| 78.2 |
| 74.1 |
| — |
| 74.1 |
| — | |||||
Total(3) | $ | 185.8 | $ | 183.9 | $ | — | $ | 183.9 | $ | — |
____________
(1) Carrying value is net of unamortized deferred debt issuance costs. Deferred debt issuance costs associated with the 2017 Convertible Notes (the “Convertible Notes”) totaled $45 at September 30, 2017. DeferredUnamortized deferred debt issuance costs associated with the 6.50% Unsecured Notes totaled approximately $2,112 at September$0.6 million as of June 30, 2017.2022. Unamortized deferred debt issuance costs associated with the 6.25% Unsecured Notes totaled approximately $0.9 million as of June 30, 2022. Unamortized deferred debt issuance costs associated with the 5.50% Unsecured Notes totaled approximately $2.3 million as of June 30, 2022.
(2) For the Convertible Notes, fair value is based upon the mid-point between the bid and ask prices.
(3) For the 6.50% Unsecured Notes, due 2024 (the “6.50%6.25% Unsecured Notes”), theNotes and 5.50% Unsecured Notes, fair value is based upon the closing price on the last day of the quarter.period. The 6.50% Unsecured Notes, 6.25% Unsecured Notes and 5.50% Unsecured Notes are listed on the NASDAQ Global Select Market (trading symbol TICCL)“OXSQL”, “OXSQZ”, and “OXSQG”, respectively).
(4)(3) Totals may not sum due to rounding.
29
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 4. FAIR VALUE (continued)
The following table presents the carrying value and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of December 31, 20162021 and the level of each financial liability within the fair value hierarchy:
($ in thousands) |
| Carrying |
| Fair |
| Level 1 |
| Level 2 |
| Level 3 | ||||||
TICC CLO 2012-1 LLC Class A-1 Notes, net of discount(1) |
| $ | 64,788 |
|
| $ | 65,282 |
| $ | — |
| $ | — |
| $ | 65,282 |
TICC CLO 2012-1 LLC Class B-1 Notes, net of discount(1) |
|
| 19,633 |
|
|
| 20,025 |
|
| — |
|
| — |
|
| 20,025 |
TICC CLO 2012-1 LLC Class C-1 Notes, net of discount(1) |
|
| 22,375 |
|
|
| 23,058 |
|
| — |
|
| — |
|
| 23,058 |
TICC CLO 2012-1 LLC Class D-1 Notes, net of discount(1) |
|
| 20,290 |
|
|
| 21,210 |
|
| — |
|
| — |
|
| 21,210 |
TICC CLO 2012-1 LLC deferred debt issuance costs(2) |
|
| (1,232 | ) |
|
| — |
|
| — |
|
| — |
|
| — |
Sub-total TICC CLO 2012-1, LLC Notes(1)(2) |
|
| 125,854 |
|
|
| 129,575 |
|
| — |
|
| — |
|
| 129,575 |
2017 Convertible Notes(2)(4) |
|
| 94,117 |
|
|
| 96,906 |
|
| — |
|
| — |
|
| 96,906 |
Total |
| $ | 219,971 |
|
| $ | 226,481 |
| $ | — |
| $ | — |
| $ | 226,481 |
($ in millions) | Carrying Value(1) | Fair | Level 1 | Level 2 | Level 3 | ||||||||||
6.50% Unsecured Notes | $ | 63.6 | $ | 65.1 | $ | — | $ | 65.1 | $ | — | |||||
6.25% Unsecured Notes |
| 43.8 |
| 45.5 |
| — |
| 45.5 |
| — | |||||
5.50% Unsecured Notes |
| 78.0 |
| 80.7 |
| — |
| 80.7 |
| — | |||||
Total | $ | 185.4 | $ | 191.3 | $ | — | $ | 191.3 | $ | — |
____________
(1) Carrying value is net of discount.
(2) Carrying value is net ofunamortized deferred debt issuance costs. DeferredUnamortized deferred debt issuance costs associated with the outstanding TICC CLO 2012-1 notes are aggregated at the CLO level, and not by class. Deferred6.50% Unsecured Notes totaled approximately $0.7 million as of December 31, 2021. Unamortized deferred debt issuance costs associated with the Convertible6.25% Unsecured Notes totaled $425 atapproximately $1.0 million as of December 31, 2016.2021. Unamortized deferred debt issuance costs associated with the 5.50% Unsecured Notes totaled approximately $2.5 million as of December 31, 2021.
(3)(2) For the TICC CLO 2012-1 notes, fair value is based upon the bid price provided by the placement agent at the measurement date; for the Convertible6.50% Unsecured Notes, 6.25% Unsecured Notes and 5.50% Unsecured Notes, fair value is based upon the mid-point betweenclosing price on the bidlast day of the period. The 6.50% Unsecured Notes, 6.25% Unsecured Notes and ask prices.5.50% Unsecured Notes are listed on the NASDAQ Global Select Market (trading symbol “OXSQL”, “OXSQZ”, and “OXSQG”, respectively).
29
(4) Includes rounding adjustments to reconcile period balances.Table of Contents
30
TICCOXFORD SQUARE CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBERJune 30, 20172022
(unaudited)
NOTE 4. FAIR VALUE (continued) (cont.)
A reconciliation of the fair value of investments for the three months ended SeptemberJune 30, 2017,2022, utilizing significant unobservable inputs, is as follows:
($ in millions) |
| Senior Secured Notes |
| Subordinated Debt |
| CLO |
| CLO |
| Equity/ Other Investments |
| Total(3) | Senior | CLO | Equity and | Total(2) | |||||||||||||||||||||
Balance as of June 30, 2017 |
| $ | 258.8 |
|
| $ | 0.7 |
| $ | 4.2 |
|
| $ | 179.6 |
|
| $ | 11.4 |
| $ | 454.8 |
| |||||||||||||||
Realized gains/(losses) on investments included in |
|
| 0.7 |
|
|
| — |
|
| 0.2 |
|
|
| (2.0 | ) |
|
| — |
|
| (1.1 | ) | |||||||||||||||
Unrealized (depreciation)/appreciation included in earnings |
|
| 1.7 |
|
|
| 0.1 |
|
| (0.2 | ) |
|
| 0.6 |
|
|
| 0.4 |
|
| 2.6 |
| |||||||||||||||
Balance at March 31, 2022 | $ | 269.7 |
| $ | 135.5 |
| $ | 1.0 | $ | 406.2 |
| ||||||||||||||||||||||||||
Net realized losses included in earnings |
| — |
|
| (1.5 | ) |
| — |
| (1.5 | ) | ||||||||||||||||||||||||||
Net unrealized (depreciation)/appreciation included in earnings |
| (17.2 | ) |
| (29.6 | ) |
| 0.6 |
| (46.2 | ) | ||||||||||||||||||||||||||
Accretion of discount |
|
| 0.2 |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
| 0.2 |
|
| 0.2 |
|
| — |
|
| — |
| 0.2 |
| ||||
Purchases |
|
| 16.9 |
|
|
| — |
|
| 3.3 |
|
|
| 11.0 |
|
|
| — |
|
| 31.2 |
|
| 3.6 |
|
| 23.3 |
|
| — |
| 26.9 |
| ||||
Repayments and Sales |
|
| (47.3 | ) |
|
| — |
|
| (3.0 | ) |
|
| (12.6 | ) |
|
| — |
|
| (62.9 | ) |
| (0.2 | ) |
| (9.5 | ) |
| — |
| (9.6 | ) | ||||
Reductions to CLO Equity cost value |
|
| — |
|
|
| — |
|
| — |
|
|
| (3.2 | ) |
|
| — |
|
| (3.2) |
|
| — |
|
| (6.4 | ) |
| — |
| (6.4 | ) | ||||
Payment in Kind income(1) |
|
| 0.1 |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
| 0.1 |
| |||||||||||||||
Transfers in and/or (out) of level 3 |
|
| — |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
| ||||
Balance as of September 30, 2017(3) |
| $ | 231.1 |
|
| $ | 0.7 |
| $ | 4.5 |
|
| $ | 173.6 |
|
| $ | 11.8 |
| $ | 421.7 |
| |||||||||||||||
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to TICC’s Level 3 assets still held at the reporting date and reported within the net change in unrealized gains or losses on investments in the Company’s Statement of Operations(1) |
| $ | 2.8 |
|
| $ | — |
| $ | (0.2 | ) |
| $ | (2.1 | ) |
| $ | 0.4 |
| $ | 0.9 |
| |||||||||||||||
Balance at June 30, 2022(2) | $ | 256.1 |
| $ | 111.8 |
| $ | 1.6 | $ | 369.4 |
| ||||||||||||||||||||||||||
Net change in unrealized depreciation on Level 3 investments still held as of June 30, 2022 | $ | (17.2 | ) | $ | (30.4 | ) | $ | 0.6 | $ | (47.0 | ) |
____________
(1) Includes rounding adjustments to reconcile period balances.
(2) Reduction to CLO equity cost value on TICC’s CLO equity investments representsof approximately $6.4 million represented the difference between distributions received, or entitled to be received, foron the quarter ended September 30, 2017,Company’s investments held in CLO equity subordinated and income notes of approximately $11.3$10.5 million, andplus the amortization of cost of the Company’s CLO fee notes of approximately $30,000, less the effective yield interest income recognized on the Company’s CLO equity subordinated and income notes of approximately $8.1$4.1 million.
(3)(2) Totals may not sum due to rounding.
31
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 4. FAIR VALUE (continued)
A reconciliation of the fair value of investments for the ninesix months ended SeptemberJune 30, 2017,2022, utilizing significant unobservable inputs, is as follows:
($ in millions) |
| Senior Secured Notes |
| Subordinated Debt |
| CLO |
| CLO |
| Equity/ Other Investments |
| Total | Senior | CLO | Equity and | Total(2) | ||||||||||||||||||||||
Balance as of December 31, 2016 |
| $ | 368.3 |
|
| $ | 0.7 |
| $ | 2.7 |
|
| $ | 200.8 |
|
| $ | 12.7 |
|
| $ | 585.2 |
| |||||||||||||||
Realized gains/(losses) on investments included in |
|
| 2.1 |
|
|
| — |
|
| 0.2 |
|
|
| (10.8 | ) |
|
| 2.5 |
|
|
| (6.0 | ) | |||||||||||||||
Unrealized (depreciation)/appreciation included in earnings |
|
| 9.3 |
|
|
| 0.1 |
|
| 0.1 |
|
|
| 5.9 |
|
|
| (2.2 | ) |
|
| 13.2 |
| |||||||||||||||
Balance at December 31, 2021 | $ | 264.5 |
| $ | 155.6 |
| $ | 0.8 | $ | 420.8 |
| |||||||||||||||||||||||||||
Net realized losses included in earnings |
| — |
|
| (0.5 | ) |
| — |
| (0.5 | ) | |||||||||||||||||||||||||||
Net unrealized (depreciation)/appreciation included |
| (21.0 | ) |
| (39.6 | ) |
| 0.8 |
| (59.7 | ) | |||||||||||||||||||||||||||
Accretion of discount |
|
| 0.8 |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.8 |
|
| 0.5 |
|
| — |
|
| — |
| 0.5 |
| ||||
Purchases |
|
| 53.6 |
|
|
| — |
|
| 4.5 |
|
|
| 107.0 |
|
|
| 3.0 |
|
|
| 168.1 |
|
| 50.9 |
|
| 23.3 |
|
| — |
| 74.2 |
| ||||
Repayments and Sales |
|
| (203.2 | ) |
|
| — |
|
| (3.0 | ) |
|
| (98.0 | ) |
|
| (4.2 | ) |
|
| (308.4 | ) |
| (38.8 | ) |
| (12.8 | ) |
| — |
| (51.6 | ) | ||||
Reductions to CLO Equity cost value |
|
| — |
|
|
| — |
|
| — |
|
|
| (31.4 | ) |
|
| — |
|
|
| (31.4) |
|
| — |
|
| (14.2 | ) |
| — |
| (14.2 | ) | ||||
Payment in Kind income(1) |
|
| 0.2 |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.2 |
| |||||||||||||||
Transfers in and/or (out) of level 3 |
|
| — |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
| — |
| ||||
Balance as of September 30, 2017(3) |
| $ | 231.1 |
|
| $ | 0.8 |
| $ | 4.5 |
|
| $ | 173.6 |
|
| $ | 11.8 |
|
| $ | 421.7 |
| |||||||||||||||
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to TICC’s Level 3 assets still held at the reporting date and reported within the net change in unrealized gains or losses on investments in the Company’s Statement of Operations(1) |
| $ | 2.6 |
|
| $ | — |
| $ | 0.1 |
| $ | (4.7 | ) |
| $ | 0.3 |
|
| $ | (1.7 | ) | ||||||||||||||||
Balance at June 30, 2022(2) | $ | 256.1 |
| $ | 111.8 |
| $ | 1.6 | $ | 369.4 |
| |||||||||||||||||||||||||||
Net change in unrealized depreciation on Level 3 investments still held as of June 30, 2022 | $ | (21.4 | ) | $ | (39.3 | ) | $ | 0.8 | $ | (59.9 | ) |
____________
(1) Includes rounding adjustments to reconcile period balances.
(2) Reduction to CLO equity cost value on TICC’s CLO equity investments representsof approximately $14.2 million represented the difference between distributions received, or entitled to be received, foron the nine months ended September 30, 2017,Company’s investments held in CLO equity subordinated and income notes of approximately $57.5$22.7 million, andplus the amortization of cost of the Company’s CLO fee notes of approximately $63,000, less the effective yield interest income recognized on the Company’s CLO equity subordinated and income notes of approximately $26.1$8.5 million.
(3)(2) Totals may not sum due to rounding.
3230
TICCOXFORD SQUARE CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBERJune 30, 20172022
(unaudited)
NOTE 4. FAIR VALUE (continued) (cont.)
A reconciliation of the fair value of investments for the year ended December 31, 2016,2021, utilizing significant unobservable inputs, is as follows:
($ in millions) |
| Senior Secured Notes |
| Subordinated Debt |
| CLO |
| CLO |
| Equity/ Other Investments |
| Total | |||||||||||
Balance as of December 31, 2015 |
| $ | 444.5 |
|
| $ | 0.6 |
| $ | 2.1 |
|
| $ | 179.0 |
|
| $ | 8.8 |
|
| $ | 635.0 |
|
Realized (losses)/gains included in |
|
| (3.7 | ) |
|
| — |
|
| 1.7 |
|
|
| (9.2 | ) |
|
| (3.0 | ) |
|
| (14.2 | ) |
Unrealized appreciation included in earnings(1) |
|
| 19.0 |
|
|
| — |
|
| 0.5 |
|
|
| 73.6 |
|
|
| 6.4 |
|
|
| 99.5 |
|
Accretion of discount |
|
| 0.8 |
|
|
| — |
|
| 0.3 |
|
|
| — |
|
|
| — |
|
|
| 1.1 |
|
Purchases |
|
| 95.7 |
|
|
| — |
|
| 6.7 |
|
|
| 68.6 |
|
|
| 0.5 |
|
|
| 171.5 |
|
Repayments and Sales(1) |
|
| (188.2 | ) |
|
| — |
|
| (8.6 | ) |
|
| (77.0 | ) |
|
| — |
|
|
| (273.8 | ) |
Reductions to CLO Equity Cost Value(2) |
|
| — |
|
|
| — |
|
| — |
|
|
| (34.2 | ) |
|
| — |
|
|
| (34.2 | ) |
Payment in Kind income |
|
| 0.2 |
|
|
| 0.1 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.3 |
|
Transfers in and/or (out) of level 3 |
|
| — |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance as of December 31, 2016 |
| $ | 368.3 |
|
| $ | 0.7 |
| $ | 2.7 |
|
| $ | 200.8 |
|
| $ | 12.7 |
|
| $ | 585.2 |
|
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to our Level 3 assets still held at the reporting date and reported within the net change in unrealized gains or losses on investments in our Statement of Operations(1) |
| $ | 9.9 |
|
| $ | — |
| $ | 0.5 |
|
| $ | 50.7 |
|
| $ | 3.5 |
|
| $ | 64.6 |
|
($ in millions) | Senior | CLO | CLO | Equity and | Total(2) | |||||||||||||
Balance at December 31, 2020 | $ | 172.2 |
| $ | — | $ | 122.5 |
| $ | — | $ | 294.7 |
| |||||
Net realized losses included in earnings |
| (13.4 | ) |
| — |
| (1.5 | ) |
| — |
| (15.0 | ) | |||||
Net unrealized appreciation included in earnings |
| 4.2 |
|
| — |
| 33.5 |
|
| 0.8 |
| 38.5 |
| |||||
Accretion of discount |
| 0.7 |
|
| — |
| — |
|
| — |
| 0.7 |
| |||||
Purchases |
| 135.3 |
|
| — |
| 43.5 |
|
| — |
| 178.9 |
| |||||
Repayments and Sales |
| (34.6 | ) |
| — |
| (4.9 | ) |
| — |
| (39.5 | ) | |||||
Reductions to CLO equity cost value(1) |
| — |
|
| — |
| (37.5 | ) |
| — |
| (37.5 | ) | |||||
Non-cash interest and dividend income due to PIK |
| — |
|
| — |
| — |
|
| — |
| — |
| |||||
Transfers in and/or (out) of level 3 |
| — |
|
| — |
| — |
|
| — |
| — |
| |||||
Balance at December 31, 2021(2) | $ | 264.5 |
| $ | — | $ | 155.6 |
| $ | 0.8 | $ | 420.8 |
| |||||
Net change in unrealized depreciation on Level 3 investments still held as of December 31, 2021 | $ | (9.0 | ) | $ | — | $ | 27.8 |
| $ | 0.8 | $ | 19.6 |
|
____________
(1) Includes rounding adjustmentsReductions to reconcile period balances.
(2) Reduction toCLO equity cost value onof approximately $37.5 million represented the Company’s CLO equity investments represents the difference between distributions received, or entitled to be received, on the Company’s investments held in CLO equity subordinated and income notes of approximately $66.7$55.8 million, andplus the amortization of cost of the Company’s CLO fee notes of approximately $0.4 million, less the effective yield interest income recognized on the Company’s CLO equity subordinated and income notes of approximately $32.5$18.7 million.
(2) Totals may not sum due to rounding.
The following table shows the fair value of ourthe Company’s portfolio of investments by asset class as of SeptemberJune 30, 20172022 and December 31, 2016:2021:
|
| September 30, 2017 |
| December 31, 2016 | June 30, 2022 | December 31, 2021 | ||||||||||||||||||
($ in millions) |
| Investments at Fair Value |
| Percentage of Total Portfolio |
| Investments at Fair Value |
| Percentage of Total Portfolio | Investments at | Percentage of Total Portfolio | Investments at Fair Value | Percentage of Total Portfolio | ||||||||||||
Senior Secured Notes |
| $ | 231.1 |
| 54.7 | % |
| $ | 373.0 |
| 63.2 | % | $ | 256.1 | 69.3 | % | $ | 264.5 | 62.8 | % | ||||
Subordinated Debt |
|
| 0.8 |
| 0.2 | % |
|
| 0.7 |
| 0.1 | % | ||||||||||||
CLO Debt |
|
| 4.5 |
| 1.1 | % |
|
| 2.7 |
| 0.5 | % | ||||||||||||
CLO Equity |
|
| 173.6 |
| 41.2 | % |
|
| 200.8 |
| 34.0 | % |
| 111.8 | 30.3 | % |
| 155.6 | 37.0 | % | ||||
Equity and Other Investments |
|
| 11.8 |
| 2.8 | % |
|
| 12.7 |
| 2.2 | % |
| 1.6 | 0.4 | % |
| 0.8 | 0.2 | % | ||||
Total(1) |
| $ | 421.7 |
| 100.0 | % |
| $ | 589.9 |
| 100.0 | % | $ | 369.4 | 100.0 | % | $ | 420.8 | 100.0 | % |
____________
(1) Totals may not sum due to rounding.
33
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 5. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
At SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively, cash and cash equivalents and restricted cash were as follows:
|
| September 30, 2017 |
| December 31, 2016 | June 30, | December 31, 2021 | ||||||
Cash |
| $ | — |
| $ | — | $ | 906,943 | $ | 617,546 | ||
Cash Equivalents |
|
| 119,601,494 |
|
| 8,261,698 |
| 22,300,717 |
| 8,398,154 | ||
Total Cash and Cash Equivalents |
| $ | 119,601,494 |
| $ | 8,261,698 | $ | 23,207,660 | $ | 9,015,700 | ||
Restricted Cash |
| $ | — |
| $ | 3,451,636 |
For further details regarding the composition of cash, cash equivalents and restricted cash refer to “Note 3. Summary of Significant Accounting Policies.”
31
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 6. BORROWINGS
In accordance with the 1940 Act, with certain limited exceptions, the Company is only allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 200%150%, immediately after such borrowing. As of SeptemberJune 30, 2017,2022 and December 31, 2021, the Company’s asset coverage for borrowed amounts was 504.2%.194% and 227%, respectively.
The following are the Company’s outstanding principal amounts, carrying values and fair values of the Company’s borrowings as of SeptemberJune 30, 20172022 and December 31, 2016. Fair values2021. The fair value of the Company’s notes payable are6.50% Unsecured Notes is based upon the bidclosing price provided byon the placement agent atlast day of the measurement date:period. The 6.50% Unsecured Notes are listed on the NASDAQ Global Select Market (trading symbol “OXSQL”). The fair value of the 6.25% Unsecured Notes is based upon the closing price on the last day of the period. The 6.25% Unsecured Notes are listed on the NASDAQ Global Select Market (trading symbol “OXSQZ”). The fair value of the 5.50% Unsecured Notes is based upon the closing price on the last day of the period. The 5.50% Unsecured Notes are listed on the NASDAQ Global Select Market (trading symbol “OXSQG”).
|
| September 30, 2017 |
| December 31, 2016 | ||||||||||||||||
($ in thousands) |
| Principal Amount |
| Carrying Value |
| Fair |
| Principal Amount |
| Carrying Value |
| Fair | ||||||||
TICC CLO 2012-1 LLC Class A-1 Notes |
| $ | — |
| $ | — |
|
| $ | — |
| $ | 65,282 |
| $ | 64,788 | (1) |
| $ | 65,282 |
TICC CLO 2012-1 LLC Class B-1 Notes |
|
| — |
|
| — |
|
|
| — |
|
| 20,000 |
|
| 19,633 | (1) |
|
| 20,025 |
TICC CLO 2012-1 LLC Class C-1 Notes |
|
| — |
|
| — |
|
|
| — |
|
| 23,000 |
|
| 22,375 | (1) |
|
| 23,058 |
TICC CLO 2012-1 LLC Class D-1 Notes |
|
| — |
|
| — |
|
|
| — |
|
| 21,000 |
|
| 20,290 | (1) |
|
| 21,210 |
TICC CLO 2012-1 LLC deferred issuance costs |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
| (1,232 | ) |
|
| — |
Sub-total TICC CLO 2012-1, LLC Notes |
|
| — |
|
| — |
|
|
| — |
|
| 129,282 |
|
| 125,854 |
|
|
| 129,575 |
2017 Convertible Notes |
|
| 94,542 |
|
| 94,497 | (2) |
|
| 94,956 |
|
| 94,542 |
|
| 94,117 | (2) |
|
| 96,906 |
6.50% Unsecured Notes |
|
| 64,370 |
|
| 62,258 | (2) |
|
| 66,791 |
|
| — |
|
| — |
|
|
| — |
Total(3) |
| $ | 158,912 |
| $ | 156,756 |
|
| $ | 161,747 |
| $ | 223,824 |
| $ | 219,971 |
|
| $ | 226,481 |
As of | ||||||||||||||||||
June 30, 2022 | December 31, 2021 | |||||||||||||||||
($ in millions) | Principal Amount | Carrying Value(1) | Fair Value | Principal Amount | Carrying Value(1) | Fair Value | ||||||||||||
6.50% Unsecured Notes | $ | 64.4 | $ | 63.8 | $ | 64.4 | $ | 64.4 | $ | 63.6 | $ | 65.1 | ||||||
6.25% Unsecured Notes |
| 44.8 |
| 43.9 |
| 45.5 |
| 44.8 |
| 43.8 |
| 45.5 | ||||||
5.50% Unsecured Notes |
| 80.5 |
| 78.2 |
| 74.1 |
| 80.5 |
| 78.0 |
| 80.7 | ||||||
Total(2) | $ | 189.7 | $ | 185.8 | $ | 183.9 | $ | 189.7 | $ | 185.4 | $ | 191.3 |
____________
(1) Represents the aggregate principal amount outstanding less the unaccreted discount. As of December 31, 2016, the total unaccreted discount for the 2023 Class A Notes, the 2023 Class B Notes, the 2023 Class C Notes and the 2023 Class D Notes was approximately $494, $367, $625 and $710, respectively.
(2) RepresentsThe Carrying Value represents the aggregate principal amount outstanding less the unamortized deferred issuance costs. As of SeptemberJune 30, 2017,2022, the total unamortized deferred issuance costs for the Convertible6.50% Unsecured Notes, 6.25% Unsecured Notes, and 6.50%5.50% Unsecured Notes was approximately $45$0.6 million, $0.9 million, and $2,112,$2.3 million, respectively. As of December 31, 2016,2021, the total unamortized deferred issuance costs for the Convertible6.50% Unsecured Notes, 6.25% Unsecured Notes, and 5.50% Unsecured Notes was approximately $425.$0.7 million, $1.0 million, and $2.5 million, respectively.
(3)(2) Totals may not sum due to rounding.
The weighted average stated interest rate and weighted average maturity on all of the Company’s debt outstandingborrowings as of SeptemberJune 30, 20172022 were 7.09%6.02% and 2.74.1 years, respectively, and as of December 31, 20162021 were 5.56%6.02% and 4.24.6 years, respectively.
34
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 6. BORROWINGS (continued)
The tabletables below summarizessummarize the components of interest expense for the three and six months ended SeptemberJune 30, 20172022 and 2016:June 30, 2021, respectively:
|
| Three Months Ended September 30, 2017 |
| Three Months Ended September 30, 2016 | ||||||||||||||||||||
($ in thousands) |
| Stated Interest Expense |
| Note Discount |
| Amortization of Deferred Debt Issuance Costs |
| Total |
| Stated Interest Expense |
| Note Discount |
| Amortization of Deferred Debt Issuance Costs |
| Total | ||||||||
TICC CLO 2012-1 LLC Class A-1 Notes |
| $ | 42.1 |
| $ | 1.6 |
| $ | — |
| $ | 43.7 |
| $ | 1,019.2 |
| $ | 46.0 |
| $ | — |
| $ | 1,065.2 |
TICC CLO 2012-1 LLC Class B-1 Notes |
|
| 143.3 |
|
| 8.4 |
|
| — |
|
| 151.7 |
|
| 216.1 |
|
| 13.7 |
|
| — |
|
| 229.8 |
TICC CLO 2012-1 LLC Class C-1 Notes |
|
| 208.7 |
|
| 14.1 |
|
| — |
|
| 222.8 |
|
| 322.0 |
|
| 22.9 |
|
| — |
|
| 344.9 |
TICC CLO 2012-1 LLC Class D-1 Notes |
|
| 222.6 |
|
| 15.9 |
|
| — |
|
| 238.5 |
|
| 347.6 |
|
| 25.8 |
|
| — |
|
| 373.4 |
TICC CLO 2012-1 amortization of deferred debt |
|
| — |
|
| — |
|
| 16.1 |
|
| 16.1 |
|
| — |
|
| — |
|
| 81.6 |
|
| 81.6 |
Convertible Notes |
|
| 1,772.7 |
|
| — |
|
| 128.2 |
|
| 1,900.9 |
|
| 2,156.3 |
|
| — |
|
| 156.0 |
|
| 2,312.3 |
6.50% Unsecured Notes |
|
| 1,046.0 |
|
| — |
|
| 81.8 |
|
| 1,127.8 |
|
| — |
|
| — |
|
| — |
|
| — |
Total |
| $ | 3,435.4 |
| $ | 40.0 |
| $ | 226.1 |
| $ | 3,701.5 |
| $ | 4,061.2 |
| $ | 108.4 |
| $ | 237.6 |
| $ | 4,407.2 |
Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | |||||||||||||||||
($ in thousands) | Stated Interest Expense | Amortization of | Total | Stated Interest Expense | Amortization of Deferred Debt Issuance Costs | Total(1) | ||||||||||||
6.50% Unsecured Notes | $ | 1,046.0 | $ | 81.0 | $ | 1,127.0 | $ | 2,092.0 | $ | 161.0 | $ | 2,253.0 | ||||||
6.25% Unsecured Notes |
| 699.9 |
| 58.1 |
| 758.0 |
| 1,399.7 |
| 115.6 |
| 1,515.3 | ||||||
5.50% Unsecured Notes |
| 1,106.9 |
| 96.1 |
| 1,203.0 |
| 2,213.8 |
| 191.2 |
| 2,404.9 | ||||||
Total(1) | $ | 2,852.7 | $ | 235.2 | $ | 3,088.0 | $ | 5,705.5 | $ | 467.8 | $ | 6,173.3 |
The table below summarizes the components____________
(1) Totals may not sum due to rounding.
32
Table of interest expense for the nine months ended September 30, 2017 and 2016:Contents
|
| Nine Months Ended September 30, 2017 |
| Nine Months Ended September 30, 2016 | ||||||||||||||||||||
($ in thousands) |
| Stated Interest Expense |
| Note Discount |
| Amortization of Deferred Debt Issuance Costs |
| Total |
| Stated Interest Expense |
| Note Discount |
| Amortization of Deferred Debt Issuance Costs |
| Total | ||||||||
TICC CLO 2012-1 LLC Class A-1 Notes |
| $ | 623.8 |
| $ | 25.4 |
| $ | — |
| $ | 649.2 |
| $ | 3,089.1 |
| $ | 145.3 |
| $ | — |
| $ | 3,234.4 |
TICC CLO 2012-1 LLC Class B-1 Notes |
|
| 600.0 |
|
| 35.4 |
|
| — |
|
| 635.4 |
|
| 629.2 |
|
| 40.7 |
|
| — |
|
| 669.9 |
TICC CLO 2012-1 LLC Class C-1 Notes |
|
| 878.4 |
|
| 59.4 |
|
| — |
|
| 937.8 |
|
| 943.2 |
|
| 68.1 |
|
| — |
|
| 1,011.3 |
TICC CLO 2012-1 LLC Class D-1 Notes |
|
| 939.7 |
|
| 67.0 |
|
| — |
|
| 1,006.7 |
|
| 1,021.5 |
|
| 76.5 |
|
| — |
|
| 1,098.0 |
TICC CLO 2012-1 amortization of deferred debt |
|
| — |
|
| — |
|
| 91.7 |
|
| 91.7 |
|
| — |
|
| — |
|
| 253.0 |
|
| 253.0 |
Convertible Notes |
|
| 5,318.0 |
|
| — |
|
| 380.5 |
|
| 5,698.5 |
|
| 6,468.9 |
|
| — |
|
| 464.6 |
|
| 6,933.5 |
6.50% Unsecured Notes |
|
| 1,964.2 |
|
| — |
|
| 152.0 |
|
| 2,116.2 |
|
| — |
|
| — |
|
| — |
|
| — |
Total |
| $ | 10,324.1 |
| $ | 187.2 |
| $ | 624.2 |
| $ | 11,135.5 |
| $ | 12,151.9 |
| $ | 330.6 |
| $ | 717.6 |
| $ | 13,200.1 |
The aggregate accrued interest which remained payable as of September 30, 2017 and December 31, 2016 was approximately $3.0 million and $1.7 million, respectively.
TICC CLO 2012-1 LLC
On August 23, 2012, the Company completed a $160 million debt securitization financing transaction, consisting of $120 million in secured notes and $40 million of the 2012 subordinated notes. On February 25, 2013 and May 28, 2013, TICC CLO 2012-1 issued additional secured notes totaling an aggregate of $120 million and 2012 subordinated notes totaling
35
TICCOXFORD SQUARE CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBERJune 30, 20172022
(unaudited)
NOTE 6. BORROWINGS (continued) (cont.)
an aggregate of $40 million, which 2012 subordinated notes were purchased by TICC under the “accordion” feature of the debt securitization which allowed, under certain circumstances and subject to the satisfaction of certain conditions, for an increase in the amount of secured and subordinated notes. It is not necessary that the Company own all or any of the notes permitted by this feature, which may affect the accounting treatment of the debt securitization financing transaction. On August 25, 2016, November 25, 2016, February 27, 2017, and May 25, 2017, the Securitization Issuer repaid approximately $36.0 million, approximately $74.7 million, approximately $24.5 million, and approximately $31.4 million of the class A-1 notes, respectively. On August 25, 2017, the Securitization Issuer repaid, in full, the remaining secured notes (classes A-1, B-1, C-1 and D-1) outstanding of approximately $73.4 million. Management is in the process of winding down TICC CLO 2012-1.
In connection with the August 25, 2016 repayment of approximately $36.0 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $648,000, which consisted of approximately $287,000 in accelerated note discount expense and approximately $361,000 in accelerated deferred debt issuance costs.
In connection with the November 25, 2016 repayment of approximately $74.7 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $1,296,000, which consisted of approximately $574,000 in accelerated note discount expense and approximately $722,000 in accelerated deferred debt issuance costs.
In connection with the February 27, 2017 repayment of approximately $24.5 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $409,000, which consisted of approximately $181,000 in accelerated note discount expense and approximately $228,000 in accelerated deferred debt issuance costs.
In connection with the May 25, 2017 repayment of approximately $31.4 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $505,000, which consisted of approximately $224,000 in accelerated note discount expense and approximately $281,000 in accelerated deferred debt issuance costs.
In connection with the August 25, 2017 repayment of approximately $73.4 million of the Class A-1, B-1, C-1 and D-1 notes, the Company incurred debt extinguishment costs of approximately $2.2 million, which consisted of approximately $1.6 million in accelerated note discount expense and approximately $0.6 million in accelerated deferred debt issuance costs.
The accelerated note discount expense and accelerated deferred debt issuance costs are recorded within Realized Losses on Extinguishment of Debt in the Consolidated Statement of Operations.
The following table sets forth the components of interest expense, effective annualized average interest rates, and cash paid for interest of the Class A-1, B-1, C-1 and D-1 for the three and nine months ended September 30, 2017 and 2016, respectively:
TICC CLO 2012-1 LLC ($ in thousands) |
| Three Months Ended September 30, 2017 |
| Three Months Ended September 30, 2016 |
| Nine Months Ended September 30, 2017 |
| Nine Months Ended September 30, 2016 | ||||||||
Stated interest expense |
| $ | 616.7 |
|
| $ | 1,904.9 |
|
| $ | 3,041.9 |
|
| $ | 5,683.0 |
|
Amortization of deferred issuance costs |
|
| 16.1 |
|
|
| 81.6 |
|
|
| 91.7 |
|
|
| 253.0 |
|
Note discount expense |
|
| 40.0 |
|
|
| 108.4 |
|
|
| 187.2 |
|
|
| 330.6 |
|
Total interest expense |
| $ | 672.8 |
|
| $ | 2,094.9 |
|
| $ | 3,320.8 |
|
| $ | 6,266.6 |
|
Effective annualized average interest rate |
|
| 5.98 | % |
|
| 3.70 | % |
|
| 5.33 | % |
|
| 3.56 | % |
Cash paid for interest |
| $ | 1,031.6 |
|
| $ | 1,960.0 |
|
| $ | 3,591.2 |
|
| $ | 5,652.4 |
|
Effective January 1, 2017 and through February 27, 2017, the interest charged under the securitization was based on three-month LIBOR, which was 0.930%. Effective February 28, 2017 and through May 25, 2017, the interest charged under the securitization was based on three-month LIBOR, which was approximately 1.052%. Effective May 26, 2017 and through August 25, 2017, the interest charged under the securitization was based on three-month LIBOR, which was approximately 1.189%.
36
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 6. BORROWINGS (continued)
Effective January 1, 2016 and through February 24, 2016, the interest charged under the securitization was based on three-month LIBOR, which was 0.393%. Effective February 25, 2016 and through May 25, 2016, the interest charged under the securitization was based on three-month LIBOR, which was approximately 0.629%. Effective May 26, 2016 and through August 25, 2016, the interest charged under the securitization was based on three-month LIBOR, which was approximately 0.662%. Effective August 26, 2016 and through September 30, 2016, the interest charged under the securitization was based on three-month LIBOR, which was approximately 0.825%.
The interest rate, spread over LIBOR, cash paid for interest and stated interest expense of each of the Class A-1, B-1, C-1 and D-1 Notes for the three and nine months ended September 30, 2017, respectively, are as follows:
|
|
|
|
|
| Three Months Ended September 30, 2017 |
| Nine Months Ended September 30, 2017 | |||||||||
TICC CLO 2012-1 LLC ($ in thousands) |
| Stated Interest Rate |
| LIBOR Spread (basis points) |
| Cash Paid for Interest |
| Stated Interest Expense |
| Cash Paid for Interest |
| Stated Interest Expense | |||||
Class A-1 Notes |
| 2.93867 | % |
| 175 |
| $ | 70.5 |
| $ | 42.1 |
| $ | 803.6 |
| $ | 623.8 |
Class B-1 Notes |
| 4.68867 | % |
| 350 |
|
| 239.6 |
|
| 143.3 |
|
| 691.0 |
|
| 600.0 |
Class C-1 Notes |
| 5.93867 | % |
| 475 |
|
| 349.1 |
|
| 208.7 |
|
| 1,012.7 |
|
| 878.4 |
Class D-1 Notes |
| 6.93867 | % |
| 575 |
|
| 372.4 |
|
| 222.6 |
|
| 1,083.9 |
|
| 939.7 |
Total(1) |
|
|
|
|
|
| $ | 1,031.6 |
| $ | 616.7 |
| $ | 3,591.2 |
| $ | 3,041.9 |
Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | |||||||||||||||||
($ in thousands) | Stated Interest Expense | Amortization of Deferred Debt Issuance Costs | Total | Stated Interest Expense | Amortization of Deferred Debt Issuance Costs | Total | ||||||||||||
6.50% Unsecured Notes | $ | 1,046.0 | $ | 81.0 | $ | 1,127.0 | $ | 2,092.0 | $ | 161.0 | $ | 2,253.0 | ||||||
6.25% Unsecured Notes |
| 699.9 |
| 58.1 |
| 758.0 |
| 1,399.7 |
| 115.6 |
| 1,515.3 | ||||||
5.50% Unsecured Notes |
| 504.2 |
| 42.2 |
| 546.4 |
| 504.2 |
| 42.2 |
| 546.4 | ||||||
Total(1) | $ | 2,250.1 | $ | 181.3 | $ | 2,431.4 | $ | 3,996.0 | $ | 318.8 | $ | 4,314.8 |
____________
(1) Totals may not sum due to rounding.
The interest rate, spread over LIBOR, cash paid for interest and stated interest expense of each of the Class A-1, B-1, C-1 and D-1 Notes for the three and nine months ended September 30, 2016, respectively, are as follows:
|
|
|
|
|
| Three Months Ended September 30, 2016 |
| Nine Months Ended September 30, 2016 | |||||||||
TICC CLO 2012-1 LLC ($ in thousands) |
| Stated Interest Rate |
| LIBOR Spread (basis points) |
| Cash Paid for Interest |
| Stated Interest Expense |
| Cash Paid for Interest |
| Stated Interest Expense | |||||
Class A-1 Notes |
| 2.57544 | % |
| 175 |
| $ | 1,085.0 |
| $ | 1,019.2 |
| $ | 3,095.8 |
| $ | 3,089.1 |
Class B-1 Notes |
| 4.32544 | % |
| 350 |
|
| 212.7 |
|
| 216.1 |
|
| 618.2 |
|
| 629.2 |
Class C-1 Notes |
| 5.57544 | % |
| 475 |
|
| 318.1 |
|
| 322.0 |
|
| 929.8 |
|
| 943.2 |
Class D-1 Notes |
| 6.57544 | % |
| 575 |
|
| 344.1 |
|
| 347.6 |
|
| 1,008.7 |
|
| 1,021.6 |
Total(1) |
|
|
|
|
|
| $ | 1,960.0 |
| $ | 1,904.9 |
| $ | 5,652.4 |
| $ | 5,683.2 |
____________
(1) Totals may not sum due to rounding.
TICC serves as collateral manager to the 2012 Securitization Issuer under a collateral management agreement. TICC is entitled to a deferred fee for its services as collateral manager. The deferred fee is eliminated in consolidation.
Payable — 6.50% Unsecured Notes Due 2024 (the “6.50% Unsecured Notes”)
On April 12, 2017, the Company completed an underwritten public offering of approximately $64.4 million in aggregate principal amount of the 6.50% unsecured notes due 2024.Unsecured Notes. The 6.50% Unsecured Notes will mature on March 30, 2024, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after March 30, 2020. The
37
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 6. BORROWINGS (continued)
6.50% Unsecured Notes will bear interest at a rate of 6.50% per year, payable quarterly on March 30, June 30, September 30, and December 30 of each year, commencing June 30, 2017.year.
The aggregate accrued interest payable on the 6.50% Unsecured Notes at Septemberas of June 30, 20172022 was approximately $11,600.$12,000. As of SeptemberJune 30, 2017,2022, the Company had unamortized deferred debt issuance costs relating to the 6.50% Unsecured Notes of approximately $569,000. The deferred debt issuance costs are being amortized over the term of the 6.50% Unsecured Notes and are included in interest expense in the statements of operations.
The cash paid and the effective annualized interest rate for three months ended June 30, 2022 were approximately $1.0 million and 7.02%, respectively. The cash paid and the effective annualized interest rate for the six months ended June 30, 2022 were approximately $2.1 million and 7.06%, respectively. The cash paid and the effective annualized interest rate for the three months ended June 30, 2021 were approximately $1.0 million and 7.02%, respectively. The cash paid and the effective annualized interest rate for the six months ended June 30, 2021 were approximately $2.1 million and 7.06%, respectively.
Notes Payable — 6.25% Unsecured Notes Due 2026 (the “6.25% Unsecured Notes”)
On April 3, 2019, the Company completed an underwritten public offering of approximately $44.8 million in aggregate principal amount of 6.25% Unsecured Notes. The 6.25% Unsecured Notes will mature on April 30, 2026, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after April 30, 2022. The 6.25% Unsecured Notes bear interest at a rate of 6.25% per year payable quarterly on January 31, April 30, July 31, and October 31, of each year.
The aggregate accrued interest payable on the 6.25% Unsecured Notes as of June 30, 2022 was approximately $467,000. As of June 30, 2022, the Company had unamortized deferred debt issuance costs of approximately $2.1 million$894,000 relating to these notes. This amount isthe 6.25% Unsecured Notes. The deferred debt issuance costs are being amortized and is included in Interest expense in the Consolidated Statements of Operations over the term of the 6.50%6.25% Unsecured Notes.Notes and are included in interest expense in the statements of operations.
The following table sets forthcash paid and the components of interest expense, effective annualized average interest rates and cash paid for interest of the 6.50% Unsecured Notesrate for the three and nine months ended SeptemberJune 30, 2017:
6.50% Unsecured Notes ($ in thousands) |
| Three Months Ended September 30, 2017 |
| Nine Months Ended September 30, 2017 | |||
Stated interest expense |
| $ | 1,046.0 |
|
| $ | 1,964.2 |
Amortization of deferred issuance costs |
|
| 81.8 |
|
|
| 152.0 |
Total interest expense |
| $ | 1,127.8 |
|
| $ | 2,116.2 |
Effective annualized average interest rate |
|
| 6.95 | % |
|
| 6.98% |
Cash paid for interest |
| $ | 1,046.0 |
|
| $ | 1,952.6 |
2022 were approximately $700,000 and 6.79%, respectively. The 6.50%cash paid and the effective annualized interest rate for the six months ended June 30, 2022 were approximately $1.4 million and 6.82%, respectively. The cash paid and the effective annualized interest rate for the three months ended June 30, 2021 were approximately $700,000 and 6.79%, respectively. The cash paid and the effective annualized interest rate for the six months ended June 30, 2021 were approximately $1.4 million and 6.82%, respectively.
33
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 6. BORROWINGS (cont.)
Notes Payable — 5.50% Unsecured Notes are TICC’s general, unsecured obligations and rank equal in right of payment with all of TICC’s existing and future senior, unsecured indebtedness and senior in right of payment to any of its subordinated indebtedness. As a result, the 6.50%Due 2028 (the “5.50% Unsecured Notes will be effectively subordinated to TICC’s existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to any existing and future liabilities and other indebtedness of its subsidiary.
Convertible NotesNotes”)
On September 26, 2012,May 20, 2021, the Company issued $105.0completed an underwritten public offering of approximately $80.5 million in aggregate principal amount of senior unsecured notes due November 2017,5.50% Unsecured Notes. The 5.50% Unsecured Notes will mature on July 31, 2028, and an additional $10.0 million aggregate principal amount ofmay be redeemed in whole or in part at any time or from time to time at the Convertible Notes was issuedCompany’s option on October 22, 2012 pursuant to the exercise of the initial purchasers’ option to purchase additional Convertible Notes. On December 2, 2016 and December 16, 2016, the Company repurchased $12.0 million and approximately $8.5 million of the Convertible Notes, respectively. At September 30, 2017, approximately $94.5 million aggregate principal amount of the Convertible Notes remained outstanding.or after May 31, 2024. The Convertible5.50% Unsecured Notes bear interest at a rate of 7.50%5.50% per year payable semi-annually in arrearsquarterly on May 1January 31, April 30, July 31, and November 1October 31, of each year. The Convertible Notes are convertible into shares of TICC’s common stock based on an initial conversion rate of 87.2448 shares of its common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $11.46 per share of common stock. The conversion price for the Convertible Notes will be reduced for quarterly cash distributions paid to common shares to the extent that the quarterly distribution exceeds $0.29 per share, subject to adjustment. TICC does not have the right to redeem the Convertible Notes prior to maturity.
The aggregate accrued interest payable on the Convertible5.50% Unsecured Notes as of SeptemberJune 30, 20172022 was approximately $3.0 million. Deferred debt issuance costs represent fees and other direct incremental costs incurred in connection with the Convertible Notes.$738,000. As of SeptemberJune 30, 2017,2022, the Company had unamortized deferred debt issuance costs of approximately $45,000$2.3 million relating to these notes. This amount isthe 5.50% Unsecured Notes. The deferred debt issuance costs are being amortized and is included in Interest expense in the Consolidated Statements of Operations over the term of the Convertible Notes.
38
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 6. BORROWINGS (continued)
The following table sets forth the components of5.50% Unsecured Notes and are included in interest expense in the statements of operations. The cash paid and the effective annualized average interest rates and cash paid for interest of the Convertible Notes for the three and nine months ended September 30, 2017 and 2016, respectively:
2017 Convertible Notes ($ in thousands) |
| Three Months Ended September 30, 2017 |
| Three Months Ended September 30, 2016 |
| Nine Months Ended September 30, 2017 |
| Nine Months Ended September 30, 2016 | ||||||||
Stated interest expense |
| $ | 1,772.7 |
|
| $ | 2,156.3 |
|
| $ | 5,318.0 |
|
| $ | 6,468.8 |
|
Amortization of deferred issuance costs |
|
| 128.2 |
|
|
| 156.0 |
|
|
| 380.5 |
|
|
| 464.7 |
|
Total interest expense |
| $ | 1,900.9 |
|
| $ | 2,312.3 |
|
| $ | 5,698.5 |
|
| $ | 6,933.5 |
|
Effective annualized average interest rate |
|
| 7.98 | % |
|
| 7.98 | % |
|
| 8.06 | % |
|
| 8.03 | % |
Cash paid for interest |
| $ | — |
|
| $ | — |
|
| $ | 3,545.3 |
|
| $ | 4,312.5 |
|
The Convertible Notes are TICC’s general, unsecured obligations and rank equal in right of payment with all of TICC’s existing and future senior, unsecured indebtedness and senior in right of payment to any of its subordinated indebtedness. As a result, the Convertible Notes are effectively subordinated to TICC’s existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to any existing and future liabilities and other indebtedness of its subsidiary. For details regarding the maturity of the Convertible Notes refer to “Note 18. Subsequent Events.”
The following table sets forth the computation of basic and diluted net increase in net assets resulting from investment income per share for the three and nine months ended September 30, 2017 and 2016, respectively:
|
| Three Months Ended September 30, 2017 |
| Three Months Ended September 30, 2016 |
| Nine Months Ended September 30, 2017 |
| Nine Months Ended September 30, 2016 | ||||
Net increase in net assets resulting from net investment income per common share – basic: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
| $ | 6,767,753 |
| $ | 6,539,020 |
| $ | 23,097,902 |
| $ | 17,382,340 |
Weighted average common shares outstanding – basic |
|
| 51,479,409 |
|
| 51,479,409 |
|
| 51,479,409 |
|
| 51,985,537 |
Net increase in net assets resulting from net investment income per common share – basic |
| $ | 0.13 |
| $ | 0.13 |
| $ | 0.45 |
| $ | 0.33 |
Net increase in net assets resulting from net investment income per common share – diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income, before adjustments |
| $ | 6,767,753 |
| $ | 6,539,020 |
| $ | 23,097,902 |
| $ | 17,382,340 |
Adjustments for interest on convertible notes, deferred issuance costs, and related impact on base management fees and incentive fees(1) |
|
| — |
|
| — |
|
| — |
|
| — |
Net investment income, as adjusted(1) |
| $ | 6,767,753 |
| $ | 6,539,020 |
| $ | 23,097,902 |
| $ | 17,382,340 |
Weighted average common shares outstanding – basic |
|
| 51,479,409 |
|
| 51,479,409 |
|
| 51,479,409 |
|
| 51,985,537 |
Share adjustments for dilutive effect of |
|
| — |
|
| — |
|
| — |
|
| — |
Weighted average common shares |
|
| 51,479,409 |
|
| 51,479,409 |
|
| 51,479,409 |
|
| 51,985,537 |
Net increase in net assets resulting from net investment income per common share – diluted(1) |
| $ | 0.13 |
| $ | 0.13 |
| $ | 0.45 |
| $ | 0.33 |
39
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 7. EARNINGS PER SHARE (continued)
The following table sets forth the computation of basic and diluted net increase in net assets resulting from operations per share for the three and nine months ended September 30, 2017 and 2016:
|
| Three Months Ended September 30, 2017 |
| Three Months Ended September 30, 2016 |
| Nine Months Ended September 30, 2017 |
| Nine Months Ended September 30, 2016 | ||||
Net increase in net assets resulting from operations per common share – basic: |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets resulting from operations |
| $ | 6,016,019 |
| $ | 42,912,763 |
| $ | 27,187,874 |
| $ | 74,062,706 |
Weighted average common shares outstanding – basic |
|
| 51,479,409 |
|
| 51,479,409 |
|
| 51,479,409 |
|
| 51,985,537 |
Net increase in net assets resulting from operations per common share – basic |
| $ | 0.12 |
| $ | 0.83 |
| $ | 0.53 |
| $ | 1.42 |
Net increase in net assets resulting from operations per common share – diluted |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets resulting from operations, before adjustments |
| $ | 6,016,019 |
| $ | 42,912,763 |
| $ | 27,187,874 |
| $ | 74,062,706 |
Adjustments for interest on convertible senior notes, base management fees, deferred issuance costs and incentive fees(1) |
|
| — |
|
| 1,446,266 |
|
| 4,215,831 |
|
| 5,555,309 |
Net increase in net assets resulting from operations, as adjusted(1) |
| $ | 6,016,019 |
| $ | 44,359,029 |
| $ | 31,403,705 |
| $ | 79,618,015 |
Weighted average common shares outstanding – basic |
|
| 51,479,409 |
|
| 51,479,409 |
|
| 51,479,409 |
|
| 51,985,537 |
Adjustments for dilutive effect of convertible notes(1) |
|
| — |
|
| 10,033,152 |
|
| 8,248,298 |
|
| 10,033,152 |
Weighted average common shares outstanding – diluted(1) |
|
| 51,479,409 |
|
| 61,512,561 |
|
| 59,727,707 |
|
| 62,018,689 |
Net increase in net assets resulting from operations per common share – diluted(1)(2) |
| $ | 0.12 |
| $ | 0.72 |
| $ | 0.53 |
| $ | 1.28 |
____________
(1) Due to the anti-dilutive effect on the computation of diluted earnings per share for the three and nine months ended September 30, 2017 and 2016 for net increase in net assets resulting from net investment income andrate for the three months ended SeptemberJune 30, 2017 for net increase in net assets resulting from operations, the adjustments for interest on the Convertible Notes, base management fees, deferred issuance costs2022 were approximately $1.1 million and net investment income incentive fees, as well as share adjustments for dilutive effect of the Convertible Notes, were excluded from the respective period’s diluted earnings per share computation.5.99%, respectively. The following table represents the respective adjustments which were not made due to the anti-dilutive effect on the computation of diluted change in net assets resulting from net investment income per common sharecash paid and the diluted change in net assets resulting from operations per common shareeffective annualized interest rate for the six months ended June 30, 2022 were approximately $2.2 million and 6.02%, respectively. The effective annualized interest rate for both the three and six months ended June 30, 2021 was approximately 5.90%. There was no cash paid for the three and ninesix months ended SeptemberJune 30, 2017 and 2016:
(2) Net increase in net assets resulting from operations per share for the nine months ended September 30, 2017 resulted in a diluted effect before rounding adjustments.
40
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)2021.
NOTE 7. EARNINGS PER SHARE (continued)
|
| Three Months Ended September 30, 2017 |
| Three Months Ended September 30, 2016 |
| Nine Months Ended September 30, 2017 |
| Nine Months Ended September 30, 2016 | ||||
Net increase in net assets resulting from net investment income per common share – diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for interest on convertible notes, deferred issuance costs, and related impact on base management fees and incentive fees |
| $ | 1,177,683 |
| $ | 1,446,266 |
| $ | 4,215,831 |
| $ | 5,555,309 |
Share adjustments for dilutive effect of convertible notes |
|
| 8,248,298 |
|
| 10,033,152 |
|
| 8,248,298 |
|
| 10,033,152 |
Net increase in net assets resulting from operations per common share – diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for interest on convertible notes, deferred issuance costs, and related impact on base management fees and incentive fees |
| $ | 1,177,683 |
| $ | — |
| $ | — |
| $ | — |
Share adjustments for dilutive effect of convertible notes |
|
| 8,248,298 |
|
| — |
|
| — |
|
| — |
NOTE 8. RELATED PARTY TRANSACTIONS
TICCThe Company pays TICCOxford Square Management a fee for its services under the Investment Advisory Agreement consisting of two components — a base managementinvestment advisory fee (the “Base Fee”) based on its gross assets, as described below, and antwo types of incentive fee.fees. The cost of both the Base Fee payable to TICC Management and any incentive fees earned by TICCOxford Square Management are ultimately borne by TICC’sthe Company’s common stockholders.
As described in greater detail under Base ManagementItem 1. Business — Investment Advisory Agreement — Advisory Fee
Through March in its Annual Report on Form 10-K for the year ended December 31, 2016,2021, the Company first calculates the Base Fee was calculated at an annual rateand any incentive fee under the terms of 2.00%. Effectivethe Investment Advisory Agreement, then calculates the Base Fee and any incentive fee under the terms of the fee waiver letter unilaterally adopted by Oxford Square Management, effective April 1, 2016 (the “2016 Fee Waiver”), and, finally, adopts the lower of two combined results as the total fees payable to Oxford Square Management.
Base Fee is calculated at an annual rate of 1.50%.
The Base Fee is payable quarterly in arrears, and is calculated based on a percentage of the average value of TICC’sthe Company’s gross assets at the end of the two most recently completed calendar quarters, and appropriately prorated for any partial quarter. Accordingly, the Base Fee will be payable regardless of whether the value of the Company’s gross assets has decreased during the quarter.
Under the terms of the Investment Advisory Agreement, the Base Fee is calculated at an annual rate of 2.00%, and appropriately adjusted for any equity or debt capital raises, repurchases, or redemptions during the current calendar quarter.
Under the terms of the 2016 Fee Waiver, for the purpose of calculating the amount of total advisory fees (if any) to be waived during a particular calendar quarter, (however,the Base Fee (as a portion of the total calculation) is calculated at an annual rate of 1.50%, and adjusted pro rata for any share issuances, debt issuances, repurchases or redemptions during the current calendar quarter; provided, however, that no Base Fee will beis payable on the cash proceeds received by the Company in connection with any share or debt issuances until such proceeds have been invested in accordance with TICC’s investment objective). Accordingly, the Base Fee will be payable regardless of whether the value of the Company’s gross assets has decreased during the quarter. The Base Fee for any partial quarter will be appropriately prorated.investment objectives.
34
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 7. RELATED PARTY TRANSACTIONS (cont.)
The following table represents the portion of the total advisory fee ascribed to the Base Fee (pursuant to the 2016 Fee Waiver calculation) for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively:
|
| Three Months Ended September 30, 2017 |
| Three Months Ended September 30, 2016 |
| Nine Months Ended September 30, 2017 |
| Nine Months Ended September 30, 2016 | ||||
Base management fee |
| $ | 2,004,391 |
| $ | 2,630,334 |
| $ | 6,456,566 |
| $ | 8,747,819 |
($ in millions) | Three months | Three months | Six months | Six months | ||||||||
Base Fee | $ | 1.6 | $ | 1.4 | $ | 3.2 | $ | 2.8 |
The Base management feeFee payable to TICCOxford Square Management as of SeptemberJune 30, 20172022 and December 31, 20162021 was $2,004,391$1,565,181 and $2,544,576,$1,688,712, respectively.
41
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 8. RELATED PARTY TRANSACTIONS (continued)
Incentive Fee
The incentive fee has two parts:fees are commonly referred to as the “Net Investment Income“Income Incentive Fee” and the “Capital Gains Incentive Fee”. The Fee,” with the first fee payable quarterly in arrears and the second fee payable in arrears at the end of each calendar year.
Net Investment Income Incentive Fee
The first fee (the “Net Investment Income Incentive Fee”), is determined by reference to the Company’s “Pre-Incentive Fee Net Investment Income” (as defined below). Given that this incentive fee is calculated and payable quarterlywithout regard to any gain, loss or unrealized depreciation that may occur during the quarter, Oxford Square Management’s incentive fee may be payable notwithstanding a decline in arrearsnet asset value that quarter.
Under the terms of the Investment Advisory Agreement, the Net Investment Income Incentive Fee is calculated based on the amount by which (x) the “Pre-IncentiveCompany’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding calendar quarter exceeds (y) the “Preferred Return Amount” for the current calendar quarter.
• For this purpose, “Pre-Incentive“Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any accrued income that we have not yet received in cash and any other fees, such as commitment, origination, structuring, diligence and consulting fees or other fees that we receivethe Company receives from portfolio companies) accrued during the calendar quarter minus TICC’sthe Company’s operating expenses accrued duringfor the calendar quarter (including the Base Fee, expenses payable under a separatethe administration agreement, with BDC Partners (the “Administration Agreement”), and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). “Pre-IncentivePre-Incentive Fee Net Investment Income”Income includes, in the case of investments with a deferred interest feature (such as OID,original issue discount, debt instruments with PIK interest, and zero coupon securities), accrued income that the Company haswe have not yet received in cash. TICC Management is not under any obligation to reimburse TICC for any part of the incentive fee it received that was based on accrued income that it never received as a result of a default by an entity on the obligation that resulted in the accrual of such income. “Pre-IncentivePre-Incentive Fee Net Investment Income”Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciationdepreciation.
• Pre-Incentive Fee Net Investment Income, expressed as a rate of return on investments, or gain/lossthe value of the Company’s net assets at the end of the immediately preceding calendar quarter, is compared to one-fourth of an annual “hurdle rate.” The annual hurdle rate is determined as of the immediately preceding December 31st by adding 5.0% to the interest rate then payable on extinguishmentthe most recently issued five-year U.S. Treasury Notes, up to a maximum annual hurdle rate of debt. Given that this portion10.0%. The annual hurdle rates for the 2022 and 2021 calendar years, calculated as of the immediately preceding December 31st, were 6.26%
35
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 7. RELATED PARTY TRANSACTIONS (cont.)
and 5.36% respectively, under the terms of the Investment Advisory Agreement. The Company’s net investment income (to the extent not distributed to shareholders) used to calculate the Net Investment Income Incentive Fee was also included in the amount of gross assets used to calculate the 2% Base Fee.
a. The operation of the incentive fee with respect to the Company’s Pre-Incentive Fee Net Investment Income for each quarter is as follows:
i. no incentive fee is payable without regard to Oxford Square Management in any gain, loss or unrealized depreciation on investments or gain/loss on extinguishmentcalendar quarter in which the Pre-Incentive Fee Net Investment Income does not exceed one fourth of debtthe annual hurdle rate (6.26% for the 2022 calendar year).
ii. 20% of the amount of the Pre-Incentive Fee Net Investment Income, if any, that may occurexceeds one-fourth of the annual hurdle rate (6.26% for the 2022 calendar year) in any calendar quarter is payable to Oxford Square Management (i.e., once the hurdle rate is reached, 20% of all Pre-Incentive Fee Net Investment Income thereafter will be allocated to Oxford Square Management).
Under the terms of the 2016 Fee Waiver, for the purpose of calculating the amount of total advisory fees (if any) to be waived during a particular calendar quarter, the quarter, thisIncome Incentive Fee (as a portion of TICC Management’s incentive fee may also be payable notwithstanding a decline in net asset value thatthe total calculation) is calculated based on the amount by which (x) the “Pre-Incentive Fee Net Investment Income” (as defined below) for the calendar quarter exceeds (y) the “Preferred Return Amount” (as defined below) for the calendar quarter.
Effective April 1, 2016, aa. A “Preferred Return Amount” is calculated on a quarterly basis by multiplying 1.75% by the Company’s net asset value at the end of the immediately preceding calendar quarter.
b. The Net Investment Income Incentive feeFee is then calculated as follows:
(a) no Net Investment Income Incentive Fee is payable to TICCOxford Square Management in any calendar quarter in which the “Pre-Incentive“Pre-Incentive Fee Net Investment Income” does not exceed the “Preferred Return Amount”;
(b) 100% of the “Pre-Incentive“Pre-Incentive Fee Net Investment Income” for such quarter, if any, that exceeds the “Preferred Return Amount” but is less than or equal to a “Catch-Up“Catch-Up Amount” determined on a quarterly basis by multiplying 2.1875% by TICC’sOXSQ’s net asset value at the end of such calendar quarter; and
(c) for any quarter in which the “Pre-Incentive“Pre-Incentive Fee Net Investment Income” exceeds the “Catch-Up“Catch-Up Amount,” the Net Investment Income Incentive feeFee will be 20% of the amount of the “Pre-Incentive“Pre-Incentive Fee Net Investment Income” for such quarter.
c. There is no accumulation of amounts from quarter to quarter for the “Preferred Return Amount,” and accordingly there is no claw back of amounts previously paid to TICCOxford Square Management if the “Pre-Incentive“Pre-Incentive Fee Net Investment Income” for subsequent quarters is below the quarterly “Preferred Return Amount,” and there is no delay of payment of incentive fees to TICCOxford Square Management if the “Pre-Incentive“Pre-Incentive Fee Net Investment Income” for prior quarters is below the quarterly “Preferred Return Amount” for the quarter for which the calculation is being made.
In addition, effective April 1, 2016, thed. The calculation of the Company’s Net Investment Income Incentive Fee is subject to a total return requirement whichthat provides that a Net Investment Income Incentive Fee will not be payable to TICCOxford Square Management except to the extent 20% of the “cumulative net increase in net assets resulting from operations” (which is the amount, if positive, of the sum of the “Pre-Incentive“Pre-Incentive Fee Net Investment Income,” realized gains and losses and unrealized appreciation and depreciation on investments)depreciation) during the calendar
36
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 7. RELATED PARTY TRANSACTIONS (cont.)
quarter for which such fees are being calculated and the eleven (11) preceding quarters (or if shorter, the number of quarters since April 1, 2016) exceeds the cumulative Net Investment Income Incentive Fees accrued and/or paid for such eleven (11) preceding quarters (or if shorter,quarters.
In the number of quarters since April 1, 2016). Underevent that the revisedadvisory fee structure,calculations under no circumstances will the aggregate fees earned from April 1, 2016 by TICC Management in any quarterly period beFee Waiver produce a higher than the aggregate fees that would have been earned prior to the adoption of these changes.
From January 1, 2005 through March 31, 2016, the “Pre-Incentivecombined Base Fee Net Investment Income,” which was expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, was compared to one-fourth of an annual hurdle rate that was determined as of the immediately preceding December 31st by adding 5.00% to
42
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 8. RELATED PARTY TRANSACTIONS (continued)
the interest rate then payable on the most recently issued five-year U.S. Treasury Notes, up to a maximum annual hurdle rate of 10.00%. The annual hurdle rate used to calculate the “Pre-Incentive Fee Net Investment Income” for the quarters ended September 30, 2017 and September 30, 2016 was 6.93% and 6.76%, respectively.
The following table represents the Net Investment Income Incentive fees for each of the quarters ended September 30, 2017 and 2016, respectively:
|
| Three Months |
| Three Months |
| Nine Months |
| Nine Months | ||||
Net investment income incentive fee |
| $ | 564,370 |
| $ | 422,828 |
| $ | 2,827,991 |
| $ | 1,666,594 |
The Net Investment Income Incentive Fee for any quarterly period, the combined fees are set to the original (lower) level, calculated pursuant to the Investment Advisory Agreement. In the event that advisory fee calculations under the 2016 Fee Wavier produce a lower combined Base Fee and Net Investment Income Incentive Fee for that quarterly period, those lower combined fees are adopted for that quarterly period. In either case, the lower level of combined fees is used for that quarter, and, accordingly, the advisory fee payable to TICCOxford Square Management can only be reduced, and never increased, as a result of the 2016 Fee Waiver.
There were no Net Investment Income Incentive Fees for the three and six months ended June 30, 2022 and 2021.
There were no Net Investment Income Incentive Fees payable to Oxford Square Management as of SeptemberJune 30, 20172022 and December 31, 2016 was approximately $567,103 and $1,128,805, respectively.2021.
Capital Gains Incentive Fee
The Capital Gains Incentive Fee, which is calculated identically under the Investment Advisory Agreement and under the 2016 Fee Waiver, 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% of the Company’s “Incentive Fee Capital Gains,” which consists of its realized capital gains for each calendar year, computed net of all realized capital losses and unrealized capital depreciation on investments for that calendar year. For accounting purposes only, in order to reflect the theoretical capital gains incentive feeCapital Gains Incentive Fee that would be payable for a given period as if all unrealized gains on investments were realized, the Company will accrue a Capital Gains Incentive Fee based upon net realized gains on investments (excluding gains/losses on extinguishment of debt) and unrealized depreciation on investments for that calendar year (in accordance with the terms of the Investment Advisory Agreement), plus unrealized appreciation on investments held at the end of the period. It should be noted that a fee so calculated and accrued would not necessarily be payable under the Investment Advisory Agreement, and may never be paid based upon the computation of Capital Gains Incentive Fees in subsequent periods. Amounts paid under the Investment Advisory Agreement will be consistent with the formula reflected in the Investment Advisory Agreement.
The amount of Capital Gains Incentive Fee expense related to the hypothetical liquidation of the portfolio (and assuming no other changes in realized or unrealized gains and losses) would only become payable to TICCOxford Square Management in the event of a complete liquidation of the Company’s portfolio as of period end and the termination of the Investment Advisory Agreement on such date. Also, it should be noted that the Capital Gains Incentive Fee expense fluctuates with the Company’s overall investment results.
There were no Capital Gains Incentive Fees incurred duringbased on hypothetical liquidation for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.2021. There werewas no accruedliability for Capital Gains Incentive Fees payable to TICC Managementbased on hypothetical liquidation as of SeptemberJune 30, 20172022 and December 31, 2016.2021.
Administration Agreement
The Company has also entered into the Administration Agreement with BDC PartnersOxford Funds under which BDC PartnersOxford Funds provides administrative services for TICC.the Company. The Company pays BDC PartnersOxford Funds an allocable portion of overhead and other expenses incurred by BDC Partners in performingOxford Funds on its obligationsbehalf under the Administration Agreement, including a portion of the rent and the compensation of the Chief Financial Officer,chief financial officer, accounting staff and other administrative support personnel, which creates potential conflicts of interest that the Board of Directors must monitor. The Company also
37
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 7. RELATED PARTY TRANSACTIONS (cont.)
reimburses BDC PartnersOxford Funds for the costs associated with the functions performed by TICC’sOXSQ’s Chief Compliance Officer that BDC PartnersOxford Funds pays on the Company’s behalf pursuant to the terms of an agreement between the Company and Alaric Compliance Services, LLC.Foreside.
43
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 8. RELATED PARTY TRANSACTIONS (continued)
TICCOxford Square Management is controlled by BDC Partners,Oxford Funds, its managing member. Charles M. Royce, a member of the Company’s Board, of Directors, holds a minority, non-controllingnon-controlling interest in TICCOxford Square Management. BDC PartnersOxford Funds manages the business and internal affairs of TICCOxford Square Management. Jonathan H. Cohen, the Company’s Chief Executive Officer, as well as a Director, is the managing member of BDC Partners.Oxford Funds. Saul B. Rosenthal, the Company’s President and Chief Operating Officer, is also the President and Chief Operating Officer of TICCOxford Square Management and a member of BDC Partners.Oxford Funds. Messrs. Cohen and Rosenthal have an equaltogether control the equity interestinterests in BDC Partners. Mr. Royce does not take part in the management or participate in the operations of TICC Management.Oxford Funds.
For the three months ended SeptemberJune 30, 20172022 and 2016, TICC2021, the Company incurred approximately $237,700$220,000 and $189,200,$193,000, respectively, in compensation expenses for the services of employees allocated to the administrative activities of TICC,the Company, pursuant to the Administration Agreement with BDC Partners; forOxford Funds. For the ninesix months ended SeptemberJune 30, 20172022 and 2016, TICC2021, the Company incurred approximately $676,000$455,000 and $609,300, respectively. Further, TICC$366,000, respectively, in compensation expenses. In addition, the Company incurred approximately $24,000$15,000 and $27,700$13,000 for facility costs allocated under the Administration Agreement for the three months ended SeptemberJune 30, 20172022 and 2016, respectively;2021, respectively. The Company incurred approximately $30,000 and $26,000 for facility costs for the ninesix months ended SeptemberJune 30, 20172022 and 2016, TICC incurred $57,000 and $83,200,2021, respectively. As of SeptemberJune 30, 20172022 and December 31, 2016, aggregate amounts2021, there were accrued compensation expenses of approximately $31,000 and $73,000, respectively, payable under the Administration Agreement were approximately $66,000 and $0, respectively.Agreement.
Co-Investment Exemptive Relief
On June 14, 2017, the SEC issued an order permitting TICCthe Company and certain of its affiliates to complete negotiated co-investmentco-investment transactions in portfolio companies, subject to certain conditions (the “Order”). Subject to satisfaction of certain conditions to the Order, TICCthe Company and certain of its affiliates are now permitted, together with any future BDCs, registered closed-endclosed-end funds and certain private funds, each of whose investment adviser is TICC’sthe Company’s investment adviser or an investment adviser controlling, controlled by, or under common control with TICC’sthe Company’s investment adviser, to co-investco-invest in negotiated investment opportunities where doing so would otherwise be prohibited under the 1940 Act, providing TICC’sthe Company’s stockholders with access to a broader array of investment opportunities.
Pursuant to the Order, TICCthe Company is permitted to co-investco-invest in such investment opportunities with its affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of its independent directors make certain conclusions in connection with a co-investmentco-investment transaction, including, but not limited to, that (1) the terms of the potential co-investmentco-investment transaction, including the consideration to be paid, are reasonable and fair to TICCthe Company and its stockholders and do not involve overreaching in respect of TICCthe Company or its stockholders on the part of any person concerned, and (2) the potential co-investmentco-investment transaction is consistent with the interests of TICC’sthe Company’s stockholders and is consistent with TICC’s then-currentthe Company’s then-current investment objective and strategies.
In addition, pursuant to an exemptive order issued by the SEC on April 8, 2020 and applicable to all BDCs, through December 31, 2020, the Company was permitted, subject to the satisfaction of certain conditions, to complete follow-on investments in its existing portfolio companies with certain private funds managed by the Company’s investment adviser or its affiliates and covered by the Order, even if such private funds had not previously invested in such existing portfolio company. Without this order, private funds would generally not be able to participate in such follow-on investments with the Company unless the private funds had previously acquired securities of the portfolio company in a co-investment transaction with the Company. Although the conditional exemptive order expired on December 31, 2021, the SEC’s Division of Investment Management indicated that until
38
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 7. RELATED PARTY TRANSACTIONS (cont.)
March 31, 2022, it would not recommend enforcement action to the extent 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. In connection with the expiration of the conditional exemptive order, the Division of Investment Management indicated that, although BDCs would not be able to rely on the conditional exemptive order subsequent to March 31, 2022, BDCs can apply to amend their existing orders to permanently implement the relief. The Company had not filed an application to amend the Order as of June 30, 2022.
NOTE 8. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net increase/(decrease) in net assets resulting from net investment income and operations per share for the three and six months ended June 30, 2022 and 2021, respectively:
Three months | Three months | Six months | Six months | |||||||||||
Net investment income | $ | 4,343,528 |
| $ | 2,784,469 | $ | 8,593,902 |
| $ | 7,598,633 | ||||
Weighted average common shares outstanding |
| 49,736,300 |
|
| 49,607,474 |
| 49,718,630 |
|
| 49,598,636 | ||||
Net increase in net assets resulting from net investment income per common share | $ | 0.09 |
| $ | 0.06 | $ | 0.17 |
| $ | 0.15 | ||||
Net (decrease)/increase in net assets resulting from operations | $ | (43,435,411 | ) | $ | 6,502,117 | $ | (51,632,600 | ) | $ | 28,291,272 | ||||
Net (decrease)/increase in net assets resulting from operations per common share | $ | (0.87 | ) | $ | 0.13 | $ | (1.04 | ) | $ | 0.57 |
NOTE 9. DISTRIBUTIONS
The Company intends to continue to operate so as to qualify to be taxed as a RIC under the Code and, as such, the Company would not be subject to federal income tax on the portion of its taxable income and gains distributed to stockholders. To qualify to be taxed as a RIC, the Company is required, among other requirements, to distribute at least 90% of its annual investment company taxable income, as defined by the Code. The amount to be paid out each quarter as a distribution each quarter is determined by the Board of Directors and is based upon the annual taxable income estimated by the management of the Company. Income calculated in accordance with U.S. federal income tax regulations differs substantially from GAAP income. To the extent that the Company’s cumulative undistributed taxable earnings fall below the amount of distributions declared, however, a portion of the total amount of the Company’s distributions for the fiscal year may be deemed a return of capital for tax purposes to the Company’s stockholders.
The Company intends to comply with the applicable provisions of the Code pertaining to RICs to make distributions of taxable income sufficient to relieve it of substantially all federal income taxes. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on such income. The Company will accrue excise tax on estimated excess taxable income, if any, as required.
44
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 9. DISTRIBUTIONS (continued)
The Company has adopted an “opt out” distribution reinvestment plan for ourits common stockholders. As a result, if we makethe Company makes a cash distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of ourthe Company’s common stock, unless they specifically “opt out” of the distribution reinvestment plan so as to receive cash distributions. During the three and nine months ended SeptemberJune 30, 20172022 and 2016,2021, the Company did not issue anyissued 39,718 and 26,458 shares, respectively, of common stock for approximately $146,000 and $124,000, respectively, to stockholders in connection with the distribution reinvestment plan. During the six months ended June 30, 2022 and 2021, the Company issued 71,301 and 34,815 shares, respectively, of common stock for
39
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 9. DISTRIBUTIONS (cont.)
approximately $271,000 and $161,000, respectively, to stockholders in connection with the distribution reinvestment plan. During the three months and six months ended SeptemberJune 30, 2017 and September 30, 2016,2022 as part of ourthe Company’s dividend reinvestment plan for ourits common stockholders, ourthe Company’s dividend reinvestment administrator purchased 45,183did not purchase any shares and 73,401 shares, respectively, of our common stock for $0.3 million and $0.4 million, respectively, in the open market to satisfy the reinvestment portion of ourthe Company’s dividends. During the three months ended June 30, 2021, as part of the Company’s dividend reinvestment plan for its common stockholders, the Company’s dividend reinvestment administrator did not purchase any shares of common stock in the open market to satisfy the reinvestment portion of the Company’s dividends. During the six months ended June 30, 2021, the Company’s dividend reinvestment administrator purchased 23,202 shares of common stock for approximately $91,000 in the open market to satisfy the reinvestment portion of the Company’s dividends. On Septembereach of January 31, February 28, March 31, April 29, 2017,May 31, and June 30, 2022, the Company paid a distributionmonthly distributions of $0.20approximately $1.7 million, or $0.035 per share.
On December 22, 2010,Under the Regulated Investment Company Modernization Act of 2010, (the “Act”) was enacted which changed various technical rules governing the tax treatment of RICs. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the Company will beis permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactmentpre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactmentpre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactmentpost-enactment capital losses that are carried forward will retain their character as either short-termshort-term or long-termlong-term losses rather than being considered all short-termshort-term as under previous law.
The tax character of distributions for the six months ended June 30, 2022, represented, on an estimated basis, $0.17 per share from ordinary income and $0.04 per share as a tax return of capital. For the six months ended June 30, 2022, the amounts and sources of distributions reported are only estimates (based on an average of the reported tax character historically) and are not being provided for U.S. federal income tax reporting purposes. Because the Company believes the historical tax characteristics of distributions is the most useful information which is readily available, the Company has used the average of all years from inception of the Company in providing the estimates herein. However, the timing and character of distributions for U.S. federal income tax purposes (which are determined in accordance with the U.S. federal tax rules which may differ from GAAP) may be materially different than the historical information the Company used in providing the estimates herein. The final determination of the source of all distributions in 2022 will be made after year-end and the amounts represented may be materially different from the amounts disclosed in the final Form 1099-DIV notice. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Company’s investment performance and may be subject to change based on tax regulations.
NOTE 10. NET ASSET VALUE PER SHARE
The Company’s net asset value per share at Septemberas of June 30, 2017 was $7.43,2022, and at December 31, 20162021, was $7.50.$3.67 and $4.92, respectively. In determining the Company’s net asset value per share, the Board of Directors determined in good faith the fair value of the Company’s portfolio investments for which reliable market quotations are not readily available.
NOTE 11. SHARE ISSUANCE AND REPURCHASE PROGRAMS
On August 1, 2019, the Company entered into an Equity Distribution Agreement with Ladenburg Thalmann & Co. through which the Company may offer for sale, from time to time, up to $150.0 million of the Company’s common stock through an At-the-Market (“ATM”) offering. For the three and six months ended June 30, 2022 and 2021, the Company did not sell any shares of common stock pursuant to the ATM offering.
40
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 11. SHARE ISSUANCE AND REPURCHASE PROGRAMS (cont.)
From time to time, the Board may authorize a share repurchase program under which shares are purchased in open market transactions. Since the Company is incorporated in Maryland, MGCL requires share repurchases to be accounted for as a share retirement. The cost of repurchased shares is charged against capital on the settlement date. During the three and six months ended June 30, 2022 and 2021, the Company was not authorized to repurchase any shares of outstanding common stock.
NOTE 12. INVESTMENT INCOME
The following table sets forth the components of investment income for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively:
|
| Three Months Ended September 30, 2017 |
| Three Months Ended September 30, 2016 |
| Nine Months Ended September 30, 2017 |
| Nine Months Ended September 30, 2016 | ||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 5,091,751 |
| $ | 8,251,446 |
| $ | 18,337,423 |
| $ | 25,231,480 | |
|
| 244,751 |
|
| 344,332 |
|
| 827,746 |
|
| 801,621 | |
|
| 59,446 |
|
| 55,898 |
|
| 173,347 |
|
| 163,922 | |
|
| 8,460 |
|
| 3,154 |
|
| 37,737 |
|
| 20,574 | |
| $ | 5,404,408 |
| $ | 8,654,830 |
| $ | 19,376,253 |
| $ | 26,217,597 | |
Income from securitization vehicles |
| $ | 8,086,059 |
| $ | 8,635,834 |
| $ | 26,081,676 |
| $ | 22,538,250 |
Commitment, amendment and other fee income |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 314,007 |
| $ | 339,005 |
| $ | 1,051,207 |
| $ | 1,014,785 | |
|
| 300,000 |
|
| 330,000 |
|
| 570,212 |
|
| 358,381 | |
|
| 393,223 |
|
| 136,123 |
|
| 895,982 |
|
| 281,788 | |
Total commitment, amendment and other fee income |
| $ | 1,007,230 |
| $ | 805,128 |
| $ | 2,517,401 |
| $ | 1,654,954 |
Total investment income |
| $ | 14,497,697 |
| $ | 18,095,792 |
| $ | 47,975,330 |
| $ | 50,410,801 |
45
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 11. INVESTMENT INCOME (continued)
Three months | Three months | |||||
Interest Income |
|
| ||||
Stated interest income | $ | 5,450,976 | $ | 3,435,957 | ||
Original issue discount and market discount income |
| 219,416 |
| 154,721 | ||
Discount income derived from unscheduled remittances at par |
| 4,146 |
| 11,711 | ||
Total interest income | $ | 5,674,538 | $ | 3,602,389 | ||
Income from securitization vehicles and investments | $ | 4,062,469 | $ | 4,096,145 | ||
Other income |
|
| ||||
Fee letters |
| 123,797 |
| 112,909 | ||
Loan prepayment and bond call fees |
| — |
| — | ||
All other fees |
| 78,747 |
| 30,563 | ||
Total other income | $ | 202,544 | $ | 143,472 | ||
Total investment income | $ | 9,939,551 | $ | 7,842,006 |
Six months | Six months | |||||
Interest Income |
|
| ||||
Stated interest income | $ | 10,237,699 | $ | 6,972,153 | ||
Original issue discount and market discount income |
| 472,683 |
| 365,302 | ||
Discount income derived from unscheduled remittances at par |
| 214,305 |
| 486,971 | ||
Total interest income | $ | 10,924,687 | $ | 7,824,426 | ||
Income from securitization vehicles and investments | $ | 8,503,664 | $ | 8,777,445 | ||
Other income |
|
| ||||
Fee letters |
| 290,421 |
| 220,870 | ||
Loan prepayment and bond call fees |
| — |
| 300,000 | ||
All other fees |
| 86,649 |
| 78,955 | ||
Total other income | $ | 377,070 | $ | 599,825 | ||
Total investment income | $ | 19,805,421 | $ | 17,201,696 |
The 1940 Act requires that a BDC offer significant managerial assistance to its portfolio companies. The Company may receive fee income for managerial assistance it renders to portfolio companies in connection with its investments. For the three and ninesix months ended SeptemberJune 30, 20172022 and 2016, respectively,2021, the Company received no fee income for managerial assistance.
41
NOTE 12. SHARE REPURCHASE PROGRAM
On November 5, 2015, the Board of Directors authorized a program for the purpose of repurchasing up to $75 million worth of the Company’s common stock. Under that repurchase program, the Company was authorized, but was not obligated, to repurchase outstanding common stock in the open market from time to time through September 30, 2016, provided that repurchases comply with the prohibitions under the Company’s Insider Trading Policies and Procedures and the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. Further, any repurchases were to be conducted in accordance with the 1940 Act. Additionally, the Company entered into a Rule 10b5-1 trading plan to undertake accretive share repurchasing on a non-discretionary basis of up to $50 million until March 4, 2016. During the year ended December 31, 2016, under that repurchase program, the Company repurchased 4,917,026 shares of outstanding common stock for approximately $25.6 million at the average weighted price of $5.20 per share, inclusive of commission, while complying with the prohibitions under TICC’s Insider Trading Policies and Procedures and the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. In addition, repurchases were conducted in accordance with the 1940 Act. The Company did not repurchase shares of its common stock during the three and nine months ended September 30, 2017, as the program to repurchase up to $75 million worth of the Company’s common stock expired on June 30, 2016. The Company did not repurchase shares of its common stock during the three months ended September 30, 2016.
Period |
| Total Number of Shares Purchased |
| Average Price Paid Per Share |
| Total Number of Shares Purchased as Part of Publicly Announced Program |
| Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program |
January 1, 2016 – January 31, 2016 |
| 2,155,303 |
| 5.48 |
| 2,155,303 |
| 39.5 million |
February 1, 2016 – February 29, 2016 |
| 2,562,494 |
| 4.97 |
| 2,562,494 |
| 26.8 million |
March 1, 2016 – March 31, 2016 |
| 199,229 |
| 5.17 |
| 199,229 |
| 25.8 million |
April 1, 2016 – April 30, 2016 |
| — |
|
|
| — |
| 25.8 million |
May 1, 2016 – May 31, 2016 |
| — |
|
|
| — |
| 25.8 million |
June 1, 2016 – June 30, 2016 |
| — |
|
|
| — |
| — |
July 1, 2016 – July 30, 2016 |
| — |
|
|
| — |
| — |
August 1, 2016 – August 31, 2016 |
| — |
|
|
| — |
| — |
September 1, 2016 – September 30, 2016 |
| — |
|
|
| — |
| — |
| 4,917,026 |
|
|
| 4,917,026 |
|
|
46
TICCOXFORD SQUARE CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBERJune 30, 20172022
(unaudited)
NOTE 13. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company enters into a variety of undertakings containing a variety of warranties and indemnifications that may expose the Company to some risk of loss. The risk of future loss arising from such undertakings, while not quantifiable, is expected to be remote.
As of SeptemberJune 30, 2017,2022, the Company haddid not have any commitments to purchase additional debt investments totaling approximately $5.0 million.investments.
The Company is not currently subject to any material legal proceedings. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. While the outcome of these legal proceedings, if any, cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon its consolidated results of operations and financial condition.
NOTE 14. FINANCIAL HIGHLIGHTS
Financial highlights for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, are as follows:
Per Share Data |
| Three Months Ended September 30, 2017 |
| Three Months Ended September 30, 2016 |
| Nine Months Ended September 30, 2017 |
| Nine Months Ended September 30, 2016 | ||||||||
Net asset value as of beginning of period |
| $ | 7.51 |
|
| $ | 6.54 |
|
| $ | 7.50 |
|
| $ | 6.40 |
|
Net investment income(1) |
|
| 0.13 |
|
|
| 0.13 |
|
|
| 0.45 |
|
|
| 0.33 |
|
Net realized and unrealized (losses) gains(2) |
|
| (0.01 | ) |
|
| 0.70 |
|
|
| 0.08 |
|
|
| 1.10 |
|
Net change in net asset value from operations(2) |
|
| 0.12 |
|
|
| 0.83 |
|
|
| 0.53 |
|
|
| 1.43 |
|
Distributions per share from net investment income |
|
| (0.20 | ) |
|
| (0.29 | ) |
|
| (0.60 | ) |
|
| (0.87 | ) |
Distributions based on weighted average share impact |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.01 |
|
Total distributions(3) |
|
| (0.20 | ) |
|
| (0.29 | ) |
|
| (0.60 | ) |
|
| (0.86 | ) |
Effect of shares repurchased, gross |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.11 |
|
Net asset value at end of period |
| $ | 7.43 |
|
| $ | 7.08 |
|
| $ | 7.43 |
|
| $ | 7.08 |
|
Per share market value at beginning of period |
| $ | 6.34 |
|
| $ | 5.27 |
|
| $ | 6.61 |
|
| $ | 6.08 |
|
Per share market value at end of period |
| $ | 6.85 |
|
| $ | 5.82 |
|
| $ | 6.85 |
|
| $ | 5.82 |
|
Total return(4) |
|
| 11.20 | % |
|
| 15.94 | % |
|
| 13.00 | % |
|
| 12.43 | % |
Shares outstanding at end of period |
|
| 51,479,409 |
|
|
| 51,479,409 |
|
|
| 51,479,409 |
|
|
| 51,479,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets at end of period (000’s) |
| $ | 382,293 |
|
| $ | 364,622 |
|
| $ | 382,293 |
|
| $ | 364,622 |
|
Average net assets (000’s) |
|
| 384,433 |
|
|
| 350,631 |
|
|
| 386,146 |
|
|
| 332,591 |
|
Ratio of operating expenses to average net assets(5) |
|
| 8.04 | % |
|
| 13.18 | % |
|
| 8.59 | % |
|
| 13.24 | % |
Ratio of net investment income to average net assets(5) |
|
| 7.04 | % |
|
| 7.46 | % |
|
| 7.98 | % |
|
| 6.97 | % |
Portfolio turnover rate(6) |
|
| 6.52 | % |
|
| 9.42 | % |
|
| 32.3 | % |
|
| 22.92 | % |
Three Months | Three Months | Six Months | Six Months | |||||||||||||
Per Share Data |
|
|
|
|
|
|
|
| ||||||||
Net asset value at beginning of period | $ | 4.65 |
| $ | 4.88 |
| $ | 4.92 |
| $ | 4.55 |
| ||||
Net investment income(1) |
| 0.09 |
|
| 0.06 |
|
| 0.17 |
|
| 0.15 |
| ||||
Net realized and unrealized (losses)/gains(2) |
| (0.96 | ) |
| 0.08 |
|
| (1.21 | ) |
| 0.42 |
| ||||
Net (decrease)/increase in net asset value from operations |
| (0.87 | ) |
| 0.14 |
|
| (1.04 | ) |
| 0.57 |
| ||||
Distributions per share from net investment income |
| (0.09 | ) |
| (0.09 | ) |
| (0.17 | ) |
| (0.17 | ) | ||||
Tax return of capital distributions(3) |
| (0.02 | ) |
| (0.02 | ) |
| (0.04 | ) |
| (0.04 | ) | ||||
Total distributions |
| (0.11 | ) |
| (0.11 | ) |
| (0.21 | ) |
| (0.21 | ) | ||||
Effect of shares issued/repurchased, gross |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Net asset value at end of period | $ | 3.67 |
| $ | 4.91 |
| $ | 3.67 |
| $ | 4.91 |
| ||||
Per share market value at beginning of period | $ | 4.19 |
| $ | 4.64 |
| $ | 4.08 |
| $ | 3.05 |
| ||||
Per share market value at end of period | $ | 3.64 |
| $ | 4.91 |
| $ | 3.64 |
| $ | 4.91 |
| ||||
Total return based on Market Value(4) |
| (10.75 | )% |
| 8.09 | % |
| (6.00 | )% |
| 68.85 | % | ||||
Total return based on Net Asset Value(5) |
| (18.82 | )% |
| 2.69 | % |
| (21.14 | )% |
| 12.44 | % | ||||
Shares outstanding at end of period |
| 49,761,360 |
|
| 49,624,422 |
|
| 49,761,360 |
|
| 49,624,422 |
| ||||
|
|
|
|
|
|
|
| |||||||||
Ratios/Supplemental Data(8) |
|
|
|
|
|
|
|
| ||||||||
Net assets at end of period (000’s) | $ | 182,793 |
| $ | 243,463 |
| $ | 182,793 |
| $ | 243,463 |
| ||||
Average net assets (000’s) | $ | 207,048 |
| $ | 242,754 |
| $ | 222,414 |
| $ | 238,270 |
| ||||
Ratio of expenses to average net assets(6) |
| 10.81 | % |
| 8.33 | % |
| 10.08 | % |
| 8.06 | % | ||||
Ratio of net investment income to average net assets(6) |
| 8.39 | % |
| 4.59 | % |
| 7.73 | % |
| 6.38 | % | ||||
Portfolio turnover rate(7) |
| 1.79 | % |
| 1.07 | % |
| 12.19 | % |
| 7.11 | % |
____________
(1) Represents per share net investment income for the period, based upon weighted average shares outstanding.
(2) Net realized and unrealized capital gainsgains/(losses) include rounding adjustments to reconcile change in net asset value per share.
47
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)
NOTE 14. FINANCIAL HIGHLIGHTS (continued)
(3) Management monitors available taxable earnings, including net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent the Company’s taxable earnings fall below the total amount of the Company’s distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to the
42
OXFORD SQUARE CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
NOTE 14. FINANCIAL HIGHLIGHTS (cont.)
Company’s stockholders. The ultimate tax character of the Company’s earnings cannot be determined until tax returns are prepared after the end of the fiscal year. The amounts and sources of distributions reported are only estimates (based on an average of the reported tax character historically) and are not being provided for U.S. tax reporting purposes.
(4) Total return based on market value equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming distribution reinvestment prices obtained under the Company’s distribution reinvestment plan, excluding any discounts. Total return is not annualized.
(5) Total return based on net asset value equals the increase or decrease of ending net asset value over beginning net asset value, plus distributions, divided by the beginning net asset value. Total return is not annualized.
(6) Annualized.
(6)(7) Portfolio turnover rate is calculated using the lesser of year-to-datethe year-to-date cash investment sales and debt repayments or year-to-dateyear-to-date cash investment purchases over the average of the total investments at fair value.
(8) The following table provides supplemental performance ratios (annualized) measured for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016:2021:
|
| Three Months Ended September 30, 2017 |
| Three Months Ended September 30, 2016 |
| Nine Months Ended September 30, 2017 |
| Nine Months Ended September 30, 2016 | Three Months | Three Months | Six Months | Six Months | ||||||||||||
Ratio of operating expenses to average net assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Ratio of expenses to average net assets: |
|
|
|
| ||||||||||||||||||||
Operating expenses before incentive fees |
| 7.46 | % |
| 12.70 | % |
| 7.61 | % |
| 12.57 | % | 10.81 | % | 8.33 | % | 10.08 | % | 8.06 | % | ||||
Net investment income incentive fees |
| 0.59 | % |
| 0.48 | % |
| 0.98 | % |
| 0.67 | % | — | % | — | % | — | % | — | % | ||||
Ratio of expenses, excluding interest expense |
| 4.19 | % |
| 8.16 | % |
| 4.74 | % |
| 7.95 | % | ||||||||||||
Ratio of expenses, excluding interest expense to average net assets | 4.85 | % | 4.33 | % | 4.53 | % | 4.44 | % |
NOTE 15. RECENT ACCOUNTING PRONOUNCEMENTSRISKS AND UNCERTAINTIES
In August 2016,The effect on the FASB issued ASU 2016-15,Classification of Certain Cash ReceiptsU.S. and Cash Payments (a Consensusglobal economy of the Emerging Issues Task Force) (“ASU 2016-15”), which is intendedongoing Coronavirus (also referred to reduce diversity in practice in how certain transactions are classifiedas “COVID-19” or “Coronavirus”) pandemic, uncertainty relating to new variants of the Coronavirus that have emerged in the statementUnited States and globally, vaccine hesitancy and efficacy, the length of cash flows. The Companyeconomic recovery, and policies of the U.S. presidential administration have created stress on the market and could affect our portfolio companies. In addition, government spending, government policies, including recent increases in certain interest rates by the U.S. Federal Reserve, and disruptions in supply chains in the United States and elsewhere in response to the Coronavirus pandemic and otherwise, in conjunction with other factors, including those described above, have led and could continue to lead to inflationary economic environments that could affect the Company’s portfolio companies, the Company’s financial condition and the Company’s results of operations.
Although it is currently assessingdifficult to predict the extent of the impact of ASU 2016-15the Coronavirus pandemic and does not anticipateother economic disruptions on the underlying CLO vehicles the Company invests in, the failure by a material impact onCLO vehicle to satisfy certain financial covenants, including with respect to adequate collateralization and/or interest coverage tests, could lead to a reduction in its consolidated financial statements. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. Thepayments to us. In the event that a CLO vehicle fails certain tests, holders of debt senior to us may be entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to receive. Separately, the Company is assessing the impact of ASU 2016-15.
In October 2016, the SEC adopted significant reforms under the 1940 Act that impose extensive new disclosure and reporting obligations on most 1940 Act funds (collectively, the “Reporting Rules”). The Reporting Rules expand the volume of information regarding fund portfolio holdings and investment practices that must be disclosed. The adopted amendments to Regulation S-X for 1940 Act funds and BDCs include an updatemay incur expenses to the disclosures forextent necessary to seek recovery upon default or to negotiate new terms with a defaulting CLO vehicle or any other investment we may make. If any of these occur, it could materially and adversely affect the Company’s operating results and cash flows.
The interests the Company has acquired in CLO vehicles are generally thinly traded or have only a limited trading market. CLO vehicles are typically privately offered and sold, even in the secondary market. As a result, investments in and advancesCLO vehicles may be characterized as illiquid securities. In addition to affiliates, and the requirementgeneral risks associated with investing in debt securities, CLO vehicles carry additional risks, including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to include in their financial statements a standardized schedule containing detailed information about derivative investments (amongmake interest or other changes). The amendments to Regulation S-X were effective August 1, 2017. The Company has adopted these amendments as of September 30, 2017 andpayments; (ii) the adoption has not had a material impact on its consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18,Statement of Cash Flows (Topic 230): Restricted Cash (a Consensusquality of the Emerging Issues Task Force) (“ASU 2016-18”), which requirescollateral may decline in value or default; (iii) the fact that the statementCompany’s investments in CLO tranches will
43
48
TICCOXFORD SQUARE CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBERJune 30, 20172022
(unaudited)
NOTE 15. RECENT ACCOUNTING PRONOUNCEMENTS (continued)RISKS AND UNCERTAINTIES (cont.)
upon adoptionlikely be subordinate to other senior classes of note tranches thereof; and (iv) the complex structure of the standard, restricted cash willsecurity may not be included as partfully understood at the time of beginninginvestment and ending cash and cash equivalents onmay produce disputes with the consolidated statement of cash flows.
In December 2016,CLO vehicle or unexpected investment results. The Company’s net asset value may also decline over time if the FASB issued ASU 2016-19, Technical Corrections and Improvements. As part of this guidance, ASU 2016-19 amends FASB ASC 820Company’s principal recovery with respect to clarifyCLO equity investments is less than the difference between a valuation approach and a valuation technique. The amendment also requires an entity to disclose when there has been a change in either or both a valuation approach and/or a valuation technique. ASU 2016-19 is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016 on a prospective basis. Theprice that the Company has adopted ASU 2016-19 on its consolidated financial statements and disclosures and the adoption of ASU 2016-19 has not had a material impact on its consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09,Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements inRevenue Recognition (Topic 605). Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchangepaid for those goods or services. In May 2016, ASU 2016-12 amended ASU 2014-09 and deferred the effective period to December 15, 2017. Management has concluded that its revenues associated with financial instruments are scoped out of ASC 606. The adoption of the requirements is not expected to have a significant impact on the consolidated financial statements.
NOTE 16. CONCENTRATION OF CREDIT RISKinvestments.
The Company places its cash in an overnight money market account and, at times, cash and cash equivalents may exceed the Federal Deposit Insurance Corporation insured limit. In addition, the Company’s portfolio may be concentrated in a limited number of portfolio companies, or sectors, which will subject the Company to a risk of significant loss if any of these companies defaults on its obligations under any of its debt securities that the Company holds or if those sectors experience a market downturn.
NOTE 17. RISKS AND UNCERTAINTIES
TheVarious social and political circumstances in the U.S. and around the world (including wars and other forms of conflict, including rising trade tensions between the United States capital markets haveand China, and other uncertainties regarding actual and potential shifts in the past experienced periods of extremeU.S. and foreign, trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and disruption. Disruptionseconomic uncertainties or deterioration in the capital markets tendU.S. and worldwide. Specifically, the conflict between Russia and Ukraine, and resulting market volatility could adversely affect the Company’s business, financial condition or results of operations. In response to increase the spreadconflict between Russia and Ukraine, the yields realized on risk-freeUnited States and higher risk securities, resulting in illiquidity in partsother countries have imposed sanctions or other restrictive actions against Russia. Any of the capital markets. The Company believes these conditions may reoccur in the future. A prolonged period of market illiquidity mayabove factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have ana material adverse effect on the Company’s business, financial condition, cash flows and results of operations. Adverseoperations and could cause the market value of Oxford Square’s common shares and/or debt securities to decline. These market and economic conditionsdisruptions could also increase the Company’s funding costs, limit the Company’s access to the capital markets or result in a decision by lenders not to extend credit to the Company. These events could limit the Company’s investment originations, limit the Company’s ability to grow and negatively impact the Company’s operating results.
Many of the companies in which the Company has made or will make investments may be susceptible to adverse economic conditions, which may affect the ability of a company to repay TICC’s loans or engage in a liquidity event such as a sale, recapitalization, or initial public offering. Therefore, the Company’s nonperforming assets may increase, and the valueresults of the Company’s portfolio may decrease during this period.
Adverse economic conditions also may decrease the value of any collateral securing some of the Company’s loans and the value of its equity investments. Adverse economic conditions could lead to financial losses in the Company’s portfolio and a decrease in its revenues, net income, and the value of the Company’s assets.
A portfolio company’s failure to satisfy financial or operating covenants imposed by the Company or other lenders could lead to defaults and, potentially, termination of the portfolio company’s loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize the portfolio company’s ability to meet its obligations
49
TICC CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(unaudited)companies.
NOTE 17. RISKS AND UNCERTAINTIES (continued)
under the debt securities that the Company holds. The Company may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if a portfolio company goes bankrupt, even though the Company may have structured its investment as senior debt or secured debt, depending on the facts and circumstances, including the extent to which the Company actually provided significant managerial assistance, if any, to that portfolio company, a bankruptcy court might re-characterize the Company’s debt holding and subordinate all or a portion of the Company’s claim to that of other creditors. These events could harm the Company’s financial condition and operating results.
As a BDC, the Company is required to carry its investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by or under the direction of its Board of Directors. Decreases in the market values or fair values of the Company’s investments are recorded as unrealized depreciation. Depending on market conditions, the Company could incur substantial losses in future periods, which could have a material adverse impact on its business, financial condition and results of operations.
NOTE 18.16. SUBSEQUENT EVENTS
On October 27, 2017,The following distributions payable to stockholders are shown below:
Date Declared | Record Date | Payable Date | Per Share Distribution | |||
April 21, 2022 | July 15, 2022 | July 29, 2022 | $0.035 | |||
April 21, 2022 | August 17, 2022 | August 31, 2022 | $0.035 | |||
April 21, 2022 | September 16, 2022 | September 30, 2022 | $0.035 | |||
July 21, 2022 | October 17, 2022 | October 31, 2022 | $0.035 | |||
July 21, 2022 | November 16, 2022 | November 30, 2022 | $0.035 | |||
July 21, 2022 | December 16, 2022 | December 30, 2022 | $0.035 |
The Company’s management evaluated subsequent events through the Boarddate of Directors declared a distributionissuance of $0.20 per share forthese financial statements and noted no other events that necessitate adjustments to or disclosure in the fourth quarter, payable on December 29, 2017 to shareholdersfinancial statements.
44
Table of record as of December 15, 2017.Contents
On November 1, 2017, the Convertible Notes matured and were repaid in full (approximately $94.5 million) in accordance with their terms.
50
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q10-Q contains forward-lookingforward-looking statements that involve substantial risks and uncertainties. These forward-lookingforward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about TICCOxford Square Capital Corp., our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-lookingforward-looking statements. The forward-lookingforward-looking statements contained in this Quarterly Report on Form 10-Q10-Q involve risks and uncertainties, including statements as to:
•our future operating results;results, including our and our portfolio companies’ ability to achieve our respective objectives;
•our business prospects and the prospects of our portfolio companies;
•the impact of investments that we expect to make;
•our contractual arrangements and relationships with third parties;
•the dependence of our future success on the general economy and its impact on the industries in which we invest;
•the ability of our portfolio companies and CLO investments to achieve their objectives;
•the valuation of our investments in portfolio companies and CLOs, particularly those having no liquid trading market;
• market conditions and our ability to access alternative debt markets and additional debt and equity capital;
• our expected financings and investments;
•the adequacy of our cash resources and working capital; and
•the timing of cash flows, if any, from the operations of our portfolio companies.companies and CLO investments; and
• our regulatory structure and tax treatment, including our ability to operate as a business development company (“BDC”), and to continue to qualify to be taxed as a regulated investment company (“RIC”);
•the ability of our investment adviser to locate suitable investments for us and to monitor and effectively administer our investments.
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-lookingforward-looking statements, including without limitation:
•an economic downturn could impair our portfolio companies’ and CLO investments’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;companies and CLO investments;
•the length and duration of the COVID-19 outbreak in the United States as well as worldwide, and the magnitude of its impact and time required for economic recovery;
• the impact of the elimination of the London Interbank Offered Rate (“LIBOR”) and implementation of alternatives to LIBOR on our operating results;
• a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;
•interest rate volatility could adversely affect our results, particularly because we use leverage as part of our investment strategy;
45
•the elevating levels of inflation and its impact on our investment activities and the industries in which we invest;
• currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars;
• the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions and cybersecurity attacks; and
•the risks, uncertainties and other factors we identify inItem 1A. — Risk Factors contained in our Annual Report on Form 10-K10-K for the year ended December 31, 2016,2021, elsewhere in this Quarterly Report on Form 10-Q10-Q and in our other filings with the SEC.
51
Although we believe that the assumptions on which these forward-lookingforward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-lookingforward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-lookingforward-looking statement in this Quarterly Report on Form 10-Q10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified inItem 1A. — Risk Factors contained in our Annual Report on Form 10-K10-K for the year ended December 31, 2016,2021, and elsewhere in this Quarterly Report on Form 10-Q.10-Q. You should not place undue reliance on these forward-lookingforward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.10-Q.
Except where the context requires otherwise, the terms “TICC,“OXSQ,” “Company,” “we,” “us” and “our” refer to TICCOxford Square Capital Corp. together with its subsidiary, TICC CLO 2012-1 LLC (“2012 Securitization Issuer” or “TICC CLO 2012-1”); “TICC“Oxford Square Management” refers to TICCOxford Square Management, LLC; and “BDC Partners”“Oxford Funds” refers to BDC Partners,Oxford Funds, LLC.
The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this Quarterly Report on Form 10-Q.
5210-Q.
OVERVIEW
Our investment objective is to maximize our portfolio’s total return. Our primary current focus is to seek an attractive risk-adjustedrisk-adjusted total return by investing primarily in corporate debt securities and in collateralized loan obligationobligations (“CLO”), which are structured finance investments that own corporate debt securities. CLO investments may also include warehouse facilities, which are financing structuresearly-stage CLO vehicles intended to aggregate loans that may be used to form the basis of a traditional CLO vehicle. We operate as a closed-end, non-diversifiedclosed-end management investment company and have elected to be regulated as a business development company (“BDC”)BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). We have elected to be treated for tax purposes as a regulated investment company (“RIC”),RIC, under the Internal Revenue Code of 1986, as amended (the “Code”), beginning with our 2003 taxable year.Code.
Our investment activities are managed by TICCOxford Square Management, LLC (“TICCOxford Square Management”), a registered investment adviser under the Investment Advisers Act of 1940, as amended. TICCOxford Square Management is owned by BDC Partners,Oxford Funds, LLC (“BDC Partners”Oxford Funds”), its managing member, and a related party, and Charles M. Royce, a member of our Board of Directors who holds a minority, non-controllingnon-controlling interest in TICCOxford Square Management. Jonathan H. Cohen, our Chief Executive Officer, and Saul B. Rosenthal, our President, and Chief Operating Officer, are the controlling members of BDC Partners.Oxford Funds. Under an investment advisory agreement (the “Investment Advisory Agreement”), we have agreed to pay TICCOxford Square Management an annual base feeBase Fee calculated on gross assets, and an incentive fee based upon our performance. Under an amended and restated administration agreement (the “Administration Agreement”), we have agreed to pay or reimburse BDC Partners,Oxford Funds, as administrator, for certain expenses incurred in operating TICC.the Company. Our executive officers and directors, and the executive officers of TICCOxford Square Management and BDC Partners,Oxford Funds, serve or may serve as officers and directors of entities that operate in a line of business similar to our own. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders.
We generally expect to invest between $5 million and $50 million in each of our portfolio companies, although this investment size may vary proportionately as the size of our capital base changes and market conditions warrant, and accrue interest at fixed or variable rates.warrant. We expect that our investment portfolio will be diversified among a large number of investments with
46
few investments, if any, exceeding 5.0% of the total portfolio. As of SeptemberJune 30, 2017,2022, our debt investments had stated interest rates of between 4.75%4.92% and 15.00%11.63% and maturity dates of between 153 and 11292 months. In addition, our total portfolio had a weighted average annualized yield on debt investments of approximately 9.5%.9.01% as of June 30, 2022.
The weighted average yield and the weighted average annualized yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of all of our fees and expenses. The weighted average annualized yield was computed using the effective interest rates as of SeptemberJune 30, 2017,2022, including accretion of original issue discount (“OID”). There can be no assurance that the weighted average annualized yield will remain at its current level.
We have historically borrowed funds to make investments and may continue to borrow funds to make investments. As a result, we are exposed to the risks of leverage, which may be considered a speculative investment technique. Borrowings, also known as leverage, magnify the potential for gain and loss on amounts invested and therefore increase the risks associated with investing in our securities. In addition, the costs associated with our borrowings, including any increase in the management fee payable to TICCOxford Square Management, will be borne by our common stockholders.
In addition, as a BDC under the 1940 Act, we are required to make available significant managerial assistance, for which we may receive fees, to our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. These fees would be generally non-recurring,non-recurring, however in some instances they may have a recurring component. We have received no fee income for managerial assistance to date.
Prior to making an investment, we may enter into a non-binding term sheet with the potential portfolio company. These term sheets are generally subject to a number of conditions, including but not limited to the satisfactory completion of our due diligence investigations of the company’s business and legal documentation for the loan.
To the extent possible, we will generally seek to invest in loans that are collateralized by a security interest in the borrower’s assets or guaranteed by a principal to the transaction. Interest payments, if not deferred, are normally payable quarterly with most debt investments having scheduled principal payments on a monthly or quarterly basis. When we receive a warrant to purchase stock in a portfolio company, the warrant will typically have a nominal strike price, and will entitle us to purchase a modest percentage of the borrower’s stock.
53During the three months ended June 30, 2022, the U.S. loan market exhibited weakness versus the three months ended March 31, 2022. U.S. loan prices, as defined by the S&P/LSTA Leveraged Loan Index, decreased from 97.60% of par as of March 31, 2022 to 92.16% of par as of June 30, 2022. As of June 30, 2022, the Company’s Board of Directors approved the fair value of the Company’s investment portfolio of approximately $369.4 million in good faith in accordance with the Company’s valuation procedures.
As of June 30, 2022, the Company’s Board of Directors approved the fair value of the Company’s investment portfolio of approximately $369.4 million in good faith in accordance with the Company’s valuation procedures.
CRITICAL ACCOUNTING POLICIES
The preparation of consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified investment valuation and investment income as critical accounting policies.
Investment Valuation
We fair value our investment portfolio in accordance with the provisions of ASC 820,Fair Value Measurement and Disclosure (“ASC 820”). Estimates made in the preparation of our consolidated financial statements include the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We believe that there is no single definitive method for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make.
ASC 820-10820-10 clarified the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC 820-10820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an
47
orderly transaction between market participants at the measurement date. ASC 820-10820-10 also establishes a three-tierthree-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities in markets that are not active; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. We consider the attributes of current market conditions on an ongoingon-going basis and have determined that due to the general illiquidity of the market for ourits investment portfolio, whereby little or no market data exists, substantially all of our fair valued investments are measured based upon “Level 3”Level 3 inputs as of SeptemberJune 30, 2017.2022 and December 31, 2021.
Our Board of Directors determines the value of our investment portfolio each quarter. In connection with that determination, members of TICCOxford Square Management’s portfolio management team prepare a quarterly analysis of each portfolio investment using the most recent portfolio company financial statements, forecasts and other relevant financial and operational information. Since March 2004, we have engaged third-partyWe also engage third-party valuation firms to provide assistance in valuing certain of its syndicated loans and bilateral investments, including related equity investments, although our Board of Directors ultimately determines the appropriate valuation of each such investment. Changes in fair value, as described above, are recorded in the statement of operations as net change in unrealized appreciation/(depreciation).depreciation.
Good Faith Determinations of Fair Value, Rule 2a-5 under the 1940 Act (“Rule 2a-5”) was adopted by the SEC in December 2020 and establishes 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 financial statements and intends to comply with the new rule’s requirements on or before the compliance date in September 2022.
Syndicated Loans (Including Senior Secured Notes)
In accordance with ASC 820-10,820-10, our valuation procedures specifically provide for the review of indicative quotes supplied by the large agent banks that make a market for each security. However, the marketplace from which we obtain indicative bid quotes for purposes of determining the fair value of itsour syndicated loan investments has shown attributes of illiquidity as described by ASC-820-10.ASC-820-10. During such periods of illiquidity, when we believe that the non-bindingnon-binding indicative bids received from agent banks for certain syndicated investments that it ownswe own may not be determinative of their fair value or when no market indicative quote is available, we may engage third-partythird-party valuation firms to provide assistance in valuing certain syndicated investments that we own. The third-party valuation firms may use the income or market approach in arriving at a valuation. Unobservable inputs utilized could include discount rates derived from estimated credit spreads and earnings before interest, taxes, depreciation, and amortization multiples. In addition, TICCOxford Square Management prepares an analysis ofanalyzes each syndicated loan by reviewing the company’s financial summary,statements, covenant compliance review,and recent trading activity in the security if known,(if known), and other business developments related to the portfolio company. All available information, including non-bindingnon-binding indicative bids which may not be determinative of fair value, is presented to the Valuation Committee to consider in its determination of fair value. In some instances, there may be limited trading activity in a security even though the market for the security is considered not active. In such cases the Valuation Committee will consider the number of trades, the size and timing of each trade, and other circumstances around such trades, to the extent such information is available, in its determination of fair value. The Valuation Committee will evaluate the impact of such additional information, and factor it into its consideration of the fair value that is indicated by the analysis provided by third-partythird-party valuation firms, if any.
54
Collateralized Loan Obligations — Debt and Equity
We have acquired a number of debt and equity positions in CLO investment vehicles and CLO warehouse investments. These investments are special purpose financing vehicles. In valuing such investments, we consider the indicative prices provided by a recognized industry pricing service as a primary source, and the implied yield of such prices, supplemented by actual trades executed in the market at or around period-end,period-end, as well as the indicative prices provided by the broker who arranges transactions in such investment vehicles. We also consider those instances in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require a downward adjustment to the indicative price representing substantially all of the pending distribution. Additional factors include any available information on other relevant transactions including firm bids and offers in the market and information resulting from bids-wanted-in-competition.bids-wanted-in-competition. In addition, we consider the operating metrics of the specific investment vehicle, including compliance with collateralization tests, defaulted and restructured securities, and payment defaults, if any. TICCOxford Square Management or the Valuation Committee may request an additional analysis by a third-partythird-party firm to assist in the valuation process of CLO investment vehicles. All information is presented to our Board of Directors for its determination of fair value of these investments.
48
Bilateral Investments (Including Equity)
Bilateral investments (as defined below) for which market quotations are readily available are valued by an independent pricing agent or market maker. If such market quotations are not readily available, under the valuation procedures approved by our Board of Directors, upon the recommendation of the Valuation Committee, a third-partythird-party valuation firm will prepare valuations for each of our bilateral investments that, when combined with all other investments in the same portfolio company, (i) have a value as of the previous quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, and (ii) have a value as of the current quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, after taking into account any repayment of principal during the current quarter. In addition, in those instances where a third-partythird-party valuation is prepared for a portfolio investment which meets the parameters noted in (i) and (ii) above, the frequency of those third-partythird-party valuations is based upon the grade assigned to each such security under its credit grading system as follows: Grade 1, at least annually; Grade 2, at least semi-annually;semi-annually; Grades 3, 4, and 5, at least quarterly. Bilateral investments which do not meet the parameters in (i) and (ii) above are not required to have a third-partythird-party valuation and, in those instances, a valuation analysis will be prepared by TICCOxford Square Management. TICCOxford Square Management also retains the authority to seek, on our behalf, additional third party valuations with respect to both our bilateral portfolio securities and our syndicated loan investments, and CLO investment vehicles.investments. Our Board of Directors retainretains ultimate authority as to the third-partythird-party review cycle as well as the appropriate valuation of each investment.
The term “Bilateral investments” means debt and equity investments directly negotiated between the Company and a portfolio company, but excludes syndicated loans (i.e., corporate loans arranged by an agent on behalf of a company, portions of which are held by multiple investors in addition to OXSQ).
Refer to “Note 4. Fair Value” in the notes to our consolidated financial statements for more information on investment valuation and our portfolio of investments.
Investment IncomeINVESTMENT INCOME:
Interest Income
Interest income is recorded on an accrual basis using the contractual rate applicable to each debt investment and includes the accretion of market discounts and/or OIDoriginal issue discount (“OID”) and amortization of market premiums. Discounts from and premiums to par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums, if any.
Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrualnon-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to restructuring such that the interest income is deemed to be collectible. We generally restore non-accrualnon-accrual loans to accrual status when past due principal and interest is paid and, in our judgment, is likely to remain current. As of SeptemberJune 30, 2017 and December 31, 2016,2022, we had nothree debt investments that were on non-accrualnon-accrual status. As of June 30, 2021, we had two debt investments that were on non-accrual status.
Interest income also includes a payment-in-kindpayment-in-kind (“PIK”) provisioncomponent on certain investments in our portfolio. SeeRefer to the section below, “Payment-In-Kind,“Payment-In-Kind,” for a description of the PIK provisionincome and its impact on interest income.
55
Payment-In-Kind
We have debt and preferred stock investments in our portfolio whichthat contain a contractual PIK provision. Certain PIK investments offer issuers the option at each payment date of making payments in cash or additional securities.provisions. PIK interest and preferred stock dividends are computed at thetheir contractual rate isrates and are accrued into income and added to the principal balancebalances on the capitalization date.dates. Upon capitalization, the PIK portions of the investments are valued at their respective fair values. If we believe that a PIK is not fully expected to be realized, the PIK investment would be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends would be reversed from the related receivable through interest or dividend income, respectively. PIK investments are subject to the fair value estimates associated with their respective related investments. A PIK investment on non-accrualnon-accrual status isare restored to accrual status once it becomes probable that such PIK will be realized. To qualify for tax treatmentultimately collectible in cash. For the three and six months ended June 30, 2022 and 2021, no PIK preferred stock dividends were recognized as a RIC, this income must be paid out to stockholders individend income. For the formthree and six months ended June 30, 2022 and 2021, no PIK interest was recognized as interest income.
49
Income from Securitization Vehicles and Equity Investments
Income from investments in the equity class securities of CLO vehicles (typically income notes or subordinated notes) is recorded using the effective interestyield method in accordance with the provisions of ASC 325-40,325-40, Beneficial Interests in Securitized Financial Assets, based upon an effective yield to the expected redemption utilizing estimated cash flows, amounts and timing including those CLO equity investments that have not made their inaugural distribution for the relevant period end. We monitor the expected residual payments, and effective yield is determined and updated periodically, as needed. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from both the tax-basistax-basis investment income and from the cash distributions actually received by us during the period.
We also record income on our investments in certain securitization vehicles (or “CLO warehouse facilities”) based on a stated rate per the underlying note purchase agreement or, if there is no stated rate, then an estimated rate is calculated using a base case model projecting the timing of the rampCommitment, Amendment Fee Income-up of the CLO warehouse facility. As of June 30, 2022 and 2021, we had no investments in CLO warehouse facilities.
Other Income
Commitment, amendment fee income and otherOther income includes prepayment, amendment, and other fees earned by our loan investments, distributions from fee letters and success fees associated with portfolio investments. Distributions from fee letters are an enhancement to the return on a CLO equity investment and are based upon a percentage of the collateral manager’s fees above the amortized cost, and are recorded as other income when earned. We may also earn success fees associated with our investments in certain securitization vehicles or “CLOCLO warehouse facilities,” which are contingent upon a repayment of the warehouse by a permanent CLO securitization structure; such fees are earned and recognized when the repayment is completed.
Recently Issued Accounting Standards
ReferSee “Note 3. Summary of Significant Accounting Policies” to “Note 15. Recent Accounting Pronouncements” in our consolidated financial statements for a description of recent accounting pronouncements, including the impact on our consolidated financial statements.
56
PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY
The total fair value of our investment portfolio was approximately $421.7$369.4 million and $589.9$420.8 million as of SeptemberJune 30, 20172022, and December 31, 2016,2021, respectively. The decrease in the value of investments during the ninesix month period ended SeptemberJune 30, 20172022, was due primarily to debt repayments and sales of securities totaling approximately $313.1 million and realized losses of approximately $6.0 million, partially offset by purchases of investments of approximately $168.1 million and net unrealized appreciationdepreciation on our investment portfolio of approximately $13.2$59.7 million (which incorporates reductions to CLO equity cost value of $31.3$14.2 million). Refer to the table below,, $38.8 million of debt repayments, and $12.8 million of sales of investments, which reconcileswere partially offset by approximately $74.2 million of investments acquired and realized losses of $0.5 million.
A reconciliation of the investment portfolio for the ninesix months ended SeptemberJune 30, 20172022 and the year ended December 31, 2016.2021 follows:
($ in millions) | June 30, | December 31, | ||||||
Beginning investment portfolio | $ | 420.8 |
| $ | 294.7 |
| ||
Portfolio investments acquired |
| 74.2 |
|
| 178.9 |
| ||
Debt repayments |
| (38.8 | ) |
| (24.3 | ) | ||
Sales of securities |
| (12.8 | ) |
| (15.2 | ) | ||
Reductions to CLO equity cost value(1) |
| (14.2 | ) |
| (37.5 | ) | ||
Accretion of discounts on investments |
| 0.5 |
|
| 0.7 |
| ||
Net change in unrealized (depreciation)/appreciation on investments |
| (59.7 | ) |
| 38.5 |
| ||
Net realized losses on investments |
| (0.5 | ) |
| (15.0 | ) | ||
Ending investment portfolio(2) | $ | 369.4 |
| $ | 420.8 |
|
____________
(1) For the six months ended June 30, 2022, the reductions to CLO equity cost value of approximately $14.2 million represented the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes of approximately $22.7 million, plus the amortization of cost on our CLO fee notes of approximately $63,000, less the effective yield interest income recognized on our CLO equity subordinated and income notes of approximately $8.5 million. For the year ended December 31, 2021, the reductions to CLO equity cost value of
50
approximately $37.5 million represented the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes of approximately $55.8 million, plus the amortization of cost on our CLO fee notes of approximately $0.4 million, less the effective yield interest income recognized on our CLO equity subordinated and income notes of approximately $18.7 million.
(2) Totals may not sum due to rounding.
During the quartersix months ended SeptemberJune 30, 2017,2022 we closedpurchased approximately $31.2$74.2 million in portfolio investments, which includes additional investments of approximately $52.8 million in existing portfolio companies and approximately $21.4 million in new portfolio companies. During the year ended December 31, 2021, we purchased approximately $178.9 million in portfolio investments, including additional investments of approximately $12.1$65.4 million in existing portfolio companies and approximately $19.1 million in new portfolio companies. For the year ended December 31, 2016, we closed approximately $171.6 million in portfolio investments, including additional investments of approximately $71.3 million in existing portfolio companies and approximately $100.3$113.5 million in new portfolio companies.
In certain instances, we receive paymentsinvestment proceeds based on the scheduled amortization of the outstanding loan balances and from the sales of portfolio investments. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period.
For the quartersix months ended SeptemberJune 30, 2017,2022 and the year ended December 31, 2021, we recordedrecognized proceeds from the sales of securities of approximately $12.5$12.8 million and for$15.2 million, respectively. Also, during the six months ended June 30, 2022 and the year ended December 31, 2016,2021, we recorded sales of securitieshad loan principal repayments of approximately $176.8 million. Also, during the quarter ended September 30, 2017, we had repayments and amortization of principal payments of approximately $50.3$38.8 million and for the year ended December 31, 2016, we had repayments and amortization of principal payments of approximately $115.1 million.$24.3 million, respectively.
As of SeptemberJune 30, 2017,2022, we had investments in debt securities of, or loans to, 21 portfolio companies, with a fair value of approximately $236.4$256.1 million, andCLO equity investments of approximately $185.3$111.8 million, and other equity investments of approximately $1.6 million. These debt investments included approximately $0.2 million in capitalized PIK interest, which, as described in “— Overview” above, is added to the carrying value of our investments, reduced by repayments of principal.
As of December 31, 2016,2021, we had investments in debt securities of, or loans to, 3020 portfolio companies, with a fair value of approximately $376.4$264.5 million, andCLO equity investments of approximately $213.5 million. These debt investments included approximately $0.3$155.6 million in capitalized PIK interest.
A reconciliation of the investment portfolio for the nine months ended September 30, 2017 and the year ended December 31, 2016 follows:
($ in millions) |
| September 30, 2017 |
| December 31, 2016 | ||||
Beginning investment portfolio |
| $ | 589.9 |
|
| $ | 656.7 |
|
Portfolio investments acquired |
|
| 168.1 |
|
|
| 171.6 |
|
Debt repayments |
|
| (159.0 | ) |
|
| (115.1 | ) |
Sales of securities |
|
| (154.1 | ) |
|
| (176.8 | ) |
Reductions to CLO equity cost value(1) |
|
| (31.3 | ) |
|
| (34.2 | ) |
Payment in kind(2) |
|
| 0.1 |
|
|
| 0.3 |
|
Accretion of discounts on investments |
|
| 0.8 |
|
|
| 1.1 |
|
Net unrealized appreciation |
|
| 13.2 |
|
|
| 100.6 |
|
Net realized losses |
|
| (6.0 | ) |
|
| (14.3 | ) |
Ending investment portfolio |
| $ | 421.7 |
|
| $ | 589.9 |
|
____________
(1) For the nine months ended September 30, 2017, reduction to cost value on our CLOother equity investments represents the difference between distributions received, or entitled to be received for the nine months ended September 30, 2017, of approximately $57.4 million and the effective yield interest income of approximately $26.1 million. For the year ended December 31, 2016, reduction to cost value on our CLO equity investments represents the difference between distributions received, or entitled to be received for the year ended December 31, 2016, of approximately $66.7 million and the effective yield interest income of approximately $32.5 million.
(2) Includes rounding adjustment to reconcile ending investment portfolio at September 30, 2017 and December 31, 2016.
57$772,000.
The following table indicates the quarterly portfolio investment activity for the past sevensix quarters:
($ in millions) |
| New |
| Debt |
| Reductions to |
| Sales of | ||||
Quarter ended |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
| $ | 31.2 |
| $ | 50.3 |
| $ | 3.2 |
| $ | 12.5 |
June 30, 2017 |
| 89.3 |
| 57.1 |
| 16.1 |
| 60.4 | ||||
March 31, 2017 |
|
| 47.6 |
|
| 51.6 |
|
| 12.1 |
|
| 81.2 |
Total(2) |
| $ | 168.1 |
| $ | 159.0 |
| $ | 31.3 |
| $ | 154.1 |
December 31, 2016 |
| $ | 27.0 |
| $ | 1.9 |
| $ | 3.9 |
| $ | 51.6 |
September 31, 2016 |
|
| 58.4 |
|
| 50.5 |
|
| 9.4 |
|
| 74.7 |
June 30, 2016 |
|
| 73.4 |
|
| 60.0 |
|
| 9.5 |
|
| 36.0 |
March 31, 2016 |
|
| 12.8 |
|
| 2.7 |
|
| 11.4 |
|
| 14.5 |
Total(2) |
| $ | 171.6 |
| $ | 115.1 |
| $ | 34.2 |
| $ | 176.8 |
Three Months Ended ($ in millions) | Purchases of | Debt | Sales of | Reductions to | ||||||||
June 30, 2022 | $ | 26.9 | $ | 0.2 | $ | 9.5 | $ | 6.4 | ||||
March 31, 2022 |
| 47.4 |
| 38.6 |
| 3.4 |
| 7.8 | ||||
Total 2022 to date(2) | $ | 74.2 | $ | 38.8 | $ | 12.8 | $ | 14.2 | ||||
|
|
|
| |||||||||
December 31, 2021 | $ | 23.3 | $ | 1.6 | $ | 10.3 | $ | 7.4 | ||||
September 30, 2021 |
| 23.1 |
| 5.7 |
| — |
| 8.6 | ||||
June 30, 2021 |
| 99.5 |
| 0.6 |
| 3.0 |
| 15.5 | ||||
March 31, 2021 |
| 32.9 |
| 16.4 |
| 1.8 |
| 6.0 | ||||
Total 2021(2) | $ | 178.9 | $ | 24.3 | $ | 15.2 | $ | 37.5 |
____________
(1) Represents reductionsReductions to CLO equity cost value (representingrepresent the distributions received, or entitled to be received, on our investments held in excessCLO equity subordinated and income notes, plus the amortization of cost of our CLO fee notes, less the effective yield interest income).income recognized on our CLO equity subordinated and income notes.
(2) Totals may not sum due to roundingrounding.
The following table shows the fair value of our portfolio of investments by asset class as of SeptemberJune 30, 20172022 and December 31, 2016:2021:
($ in millions) |
| September 30, 2017 |
| December 31, 2016 | ||||||||||||||||||||
June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||
($ in millions) |
| Investments at |
| Percentage of |
| Investments at |
| Percentage of | Investments at | Percentage of | Investments at | Percentage of | ||||||||||||
| $ | 231.1 |
| 54.7 | % |
| $ | 373.0 |
| 63.2 | % | $ | 256.1 | 69.3 | % | $ | 264.5 | 62.8 | % | |||||
Subordinated Debt |
|
| 0.8 |
| 0.2 | % |
|
| 0.7 |
| 0.1 | % | ||||||||||||
CLO Debt |
|
| 4.5 |
| 1.1 | % |
|
| 2.7 |
| 0.5 | % | ||||||||||||
CLO Equity |
|
| 173.6 |
| 41.2 | % |
|
| 200.8 |
| 34.0 | % |
| 111.8 | 30.3 | % |
| 155.6 | 37.0 | % | ||||
Equity and Other Investments |
|
| 11.8 |
| 2.8 | % |
|
| 12.7 |
| 2.2 | % |
| 1.6 | 0.4 | % |
| 0.8 | 0.2 | % | ||||
Total(1) |
| $ | 421.7 |
| 100.0 | % |
| $ | 589.9 |
| 100.0 | % | $ | 369.4 | 100.0 | % | $ | 420.8 | 100.0 | % |
____________
(1) TotalTotals may not sum due to rounding.
51
Qualifying assets must represent at least 70%70.0% of the Company’s total assets at the time of acquisition of any additional non-qualifyingnon-qualifying assets. As of SeptemberJune 30, 2017,2022 and December 31, 2021, we held qualifying assets that represented 67.3%69.9% and 64.1%, respectively, of ourthe total assets.
58 No additional non-qualifying assets were acquired during the periods when qualifying assets were less than 70.0% of the total assets.
The following table shows our portfolio of investments by industry at fair value, as of SeptemberJune 30, 20172022 and December 31, 2016:2021:
|
| September 30, 2017 |
| December 31, 2016 | |||||||
|
| Investments at |
| Percentage of |
| Investments at |
| Percentage of | |||
|
| ($ in millions) |
|
|
|
| ($ in millions) |
|
| ||
Structured finance(1) |
| $ | 178.0 |
| 42.1 | % |
| $ | 203.5 |
| 34.5% |
Telecommunication services |
|
| 57.3 |
| 13.6 | % |
|
| 96.7 |
| 16.4% |
Business services |
|
| 52.9 |
| 12.5 | % |
|
| 80.3 |
| 13.6% |
Software |
|
| 24.7 |
| 5.9 | % |
|
| 18.7 |
| 3.2% |
Consumer services |
|
| 18.8 |
| 4.5 | % |
|
| 16.9 |
| 2.9% |
IT consulting |
|
| 15.2 |
| 3.6 | % |
|
| 11.6 |
| 2.0% |
Diversified insurance |
|
| 15.2 |
| 3.6 | % |
|
| 15.1 |
| 2.5% |
Financial intermediaries |
|
| 13.5 |
| 3.2 | % |
|
| 47.0 |
| 8.0% |
Healthcare |
|
| 12.9 |
| 3.1 | % |
|
| — |
| 0.0% |
Printing and publishing |
|
| 12.8 |
| 3.0 | % |
|
| 62.9 |
| 10.7% |
Logistics |
|
| 10.5 |
| 2.5 | % |
|
| 10.6 |
| 1.8% |
Aerospace and defense |
|
| 5.4 |
| 1.3 | % |
|
| 5.5 |
| 0.9% |
Education |
|
| 4.5 |
| 1.1 | % |
|
| 4.3 |
| 0.7% |
Travel |
|
| — |
| — |
|
|
| 8.9 |
| 1.5% |
Computer hardware |
|
| — |
| — |
|
|
| 7.9 |
| 1.3% |
Total |
| $ | 421.7 |
| 100.0 | % |
| $ | 589.9 |
| 100.0% |
June 30, 2022 | December 31, 2021 | |||||||||||
Investments at | Percentage of | Investments at | Percentage of | |||||||||
($ in millions) | ($ in millions) | |||||||||||
Structured finance(1) | $ | 111.8 | 30.3 | % | $ | 155.6 | 36.9 | % | ||||
Business services |
| 82.1 | 22.2 | % |
| 88.7 | 21.0 | % | ||||
Software |
| 74.3 | 20.1 | % |
| 50.9 | 12.1 | % | ||||
Healthcare |
| 40.4 | 10.9 | % |
| 63.0 | 15.0 | % | ||||
Diversified insurance |
| 25.3 | 6.8 | % |
| 25.9 | 6.2 | % | ||||
Telecommunication services |
| 14.9 | 4.0 | % |
| 15.8 | 3.8 | % | ||||
Plastics Manufacturing |
| 11.9 | 3.2 | % |
| 12.7 | 3.0 | % | ||||
Utilities |
| 7.2 | 1.9 | % |
| 7.5 | 1.8 | % | ||||
IT consulting |
| 1.6 | 0.4 | % |
| 0.8 | 0.2 | % | ||||
Total(2) | $ | 369.4 | 100.0 | % | $ | 420.8 | 100.0 | % |
____________
(1) Reflects our debt and equity investments in CLOs as of SeptemberJune 30, 20172022, and December 31, 2016,2021, respectively.
(2) Totals may not sum due to rounding.
PORTFOLIO GRADING
We have adopted a credit grading system to monitor the quality of our debt investment portfolio. As of SeptemberJune 30, 20172022 and December 31, 2016,2021, our portfolio had a weighted average grade of 2.22.1 and 2.2,2.1, respectively, based upon the fair value of the debt investments in the portfolio. Equity securities and investments in CLOs are not graded.
As of SeptemberJune 30, 20172022 and December 31, 2016,2021, our debt investment portfolio was graded as follows:
($ in millions) | ($ in millions) | June 30, 2022 | ||||||||||||||||||||||||||
Grade |
| Summary Description |
| September 30, 2017 | Summary Description | Principal | Percentage | Portfolio at | Percentage | |||||||||||||||||||
| Principal |
| Percentage of |
| Portfolio at |
| Percentage of | |||||||||||||||||||||
|
|
|
|
| ($ in millions) |
|
|
|
|
| ($ in millions) |
|
|
| ||||||||||||||
1 |
| Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue. |
| $ | — |
| — |
|
| $ | — |
| — |
| Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue | $ | — | — | % | $ | — | — | % | |||||
2 |
| Full repayment of the outstanding amount of TICC’s cost basis and interest is expected for the specific tranche. |
|
| 193.9 |
| 79.3 | % |
|
| 190.7 |
| 80.7 | % | Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche |
| 269.3 | 86.5 | % |
| 242.1 | 94.6 | % | |||||
3 |
| Closer monitoring is required. Full repayment of the outstanding amount of TICC’s cost basis and interest is expected for the specific tranche |
|
| 50.5 |
| 20.7 | % |
|
| 45.6 |
| 19.3 | % | Closer monitoring is required. Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche |
| 14.6 | 4.7 | % |
| 13.4 | 5.2 | % | |||||
4 |
| A loss of interest income has occurred or is expected to occur and in most cases, the investment is placed on non-accrual status. Full repayment of the outstanding amount of TICC’s cost basis is expected for the specific tranche. |
|
| — |
| — |
|
|
| — |
| — |
| A loss of interest income has occurred or is expected to occur and, in most cases, the investment is placed on non-accrual status. Full repayment of the outstanding amount of OXSQ’s cost basis is expected for the specific tranche |
| — | — | % |
| — | — | % | |||||
5 |
| Full repayment of the outstanding amount of TICC’s cost basis is not expected for the specific tranche and the investment is placed on non-accrual status. |
|
| — |
| — |
|
|
| — |
| — |
| Full repayment of the outstanding amount of OXSQ’s cost basis is not expected for the specific tranche and the investment is placed on non-accrual status |
| 27.5 | 8.8 | % |
| 0.5 | 0.2 | % | |||||
|
|
|
| $ | 244.4 |
| 100.0 | % |
| $ | 236.4 |
| 100.0 | % | Total(1) | $ | 311.4 | 100.0 | % | $ | 256.1 | 100.0 | % |
____________
(1) Totals may not sum due to rounding.
5952
Grade |
| Summary Description |
| December 31, 2016 | ||||||||||
| Principal |
| Percentage of |
| Portfolio at |
| Percentage of | |||||||
|
|
|
|
| ($ in millions) |
|
|
|
|
| ($ in millions) |
|
|
|
1 |
| Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue. |
| $ | — |
| — |
|
| $ | — |
| — |
|
2 |
| Full repayment of the outstanding amount of TICC’s cost basis and interest is expected, for the specific tranche. |
|
| 309.7 |
| 78.3 | % |
|
| 301.9 |
| 80.2 | % |
3 |
| Closer monitoring is required. Full repayment of the outstanding amount of TICC’s cost basis and interest is expected for the specific tranche. |
|
| 85.8 |
| 21.7 | % |
|
| 74.5 |
| 19.8 | % |
4 |
| A loss of interest income has occurred or is expected to occur and, in most cases, the investment is placed on non-accrual status. Full repayment of the outstanding amount of TICC’s cost basis is expected for the specific tranche. |
|
| — |
| — |
|
|
| — |
| — |
|
5 |
| Full repayment of the outstanding amount of TICC’s cost basis is not expected for the specific tranche and the investment is placed on non-accrual status. |
|
| — |
| — |
|
|
| — |
| — |
|
|
|
|
| $ | 395.5 |
| 100.0 | % |
| $ | 376.4 |
| 100.0 | % |
($ in millions) | December 31, 2021 | |||||||||||||
Grade | Summary Description | Principal | Percentage | Portfolio at | Percentage | |||||||||
1 | Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue | $ | — | — | % | $ | — | — | % | |||||
2 | Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche |
| 256.3 | 86.1 | % |
| 249.2 | 94.2 | % | |||||
3 | Closer monitoring is required. Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche |
| 14.7 | 4.9 | % |
| 13.9 | 5.3 | % | |||||
4 | A loss of interest income has occurred or is expected to occur and, in most cases, the investment is placed on non-accrual status. Full repayment of the outstanding amount of OXSQ’s cost basis is expected for the specific tranche |
| — | — | % |
| — | — | % | |||||
5 | Full repayment of the outstanding amount of OXSQ’s cost basis is not expected for the specific tranche and the investment is placed on non-accrual status |
| 26.9 | 9.0 | % |
| 1.3 | 0.5 | % | |||||
Total(1) | $ | 297.8 | 100.0 | % | $ | 264.5 | 100.0 | % |
____________
(1) Totals may not sum due to rounding.
We expect that a portion of our investments will be in the grades 3, 4 or 5 categories from time to time, and, as such, we will be required to work with troubled portfolio companies to improve their business and protect our investment. The number and amount of investments included in grades 3, 4 or 5 may fluctuate from period to period. Refer to our consolidated financial statements for more information on our investment portfolio.
60
RESULTS OF OPERATIONS
Set forth below is a comparison of our results of operations for the three and ninesix months ended SeptemberJune 30, 20172022 to the three and ninesix months ended SeptemberJune 30, 2016.2021.
Investment Income
Investment income for the three months ended SeptemberJune 30, 20172022 and SeptemberJune 30, 20162021 was approximately $14.5$9.9 million and $18.1$7.8 million, respectively. Investment income for the ninesix months ended SeptemberJune 30, 20172022 and SeptemberJune 30, 2016,2021 was approximately $48.0$19.8 million and $50.4$17.2 million, respectively. The following tables set forth the components of investment income for the three and ninesix months ended SeptemberJune 30, 20172022 and SeptemberJune 30, 2016:2021:
|
| Three Months |
| Three Months |
| Nine Months |
| Nine Months | Three months | Three months | ||||||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest Income |
|
| ||||||||||||||||
| $ | 5,091,751 |
| $ | 8,251,446 |
| $ | 18,337,423 |
| $ | 25,231,480 | $ | 5,450,976 | $ | 3,435,957 | |||
|
| 244,751 |
|
| 344,332 |
|
| 827,746 |
|
| 801,621 |
| 219,416 |
| 154,721 | |||
|
| 59,446 |
|
| 55,898 |
|
| 173,347 |
|
| 163,922 | |||||||
|
| 8,460 |
|
| 3,154 |
|
| 37,737 |
|
| 20,574 |
| 4,146 |
| 11,711 | |||
| $ | 5,404,408 |
| $ | 8,654,830 |
| $ | 19,376,253 |
| $ | 26,217,597 | $ | 5,674,538 | $ | 3,602,389 | |||
Income from securitization vehicles |
| $ | 8,086,059 |
| $ | 8,635,834 |
| $ | 26,081,676 |
| $ | 22,538,250 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commitment, amendment and other fee income |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Income from securitization vehicles and investments | $ | 4,062,469 | $ | 4,096,145 | ||||||||||||||
Other income |
|
| ||||||||||||||||
| $ | 314,007 |
| $ | 339,005 |
| $ | 1,051,207 |
| $ | 1,014,785 |
| 123,797 |
| 112,909 | |||
|
| 300,000 |
|
| 330,000 |
|
| 570,212 |
|
| 358,381 |
| — |
| — | |||
|
| 393,223 |
|
| 136,123 |
|
| 895,982 |
|
| 281,788 |
| 78,747 |
| 30,563 | |||
| $ | 1,007,230 |
| $ | 805,128 |
| $ | 2,517,401 |
| $ | 1,654,954 | |||||||
Total other income | $ | 202,544 | $ | 143,472 | ||||||||||||||
Total investment income |
| $ | 14,497,697 |
| $ | 18,095,792 |
| $ | 47,975,330 |
| $ | 50,410,801 | $ | 9,939,551 | $ | 7,842,006 |
Total53
Six months | Six months | |||||
Interest Income |
|
| ||||
Stated interest income | $ | 10,237,699 | $ | 6,972,153 | ||
Original issue discount and market discount income |
| 472,683 |
| 365,302 | ||
Discount income derived from unscheduled remittances at par |
| 214,305 |
| 486,971 | ||
Total interest income | $ | 10,924,687 | $ | 7,824,426 | ||
Income from securitization vehicles and investments | $ | 8,503,664 | $ | 8,777,445 | ||
Other income |
|
| ||||
Fee letters |
| 290,421 |
| 220,870 | ||
Loan prepayment and bond call fees |
| — |
| 300,000 | ||
All other fees |
| 86,649 |
| 78,955 | ||
Total other income | $ | 377,070 | $ | 599,825 | ||
Total investment income | $ | 19,805,421 | $ | 17,201,696 |
The increase in total investment income for the three and six months ended SeptemberJune 30, 2017 reflected a decrease of approximately $3.6 million. That decrease2022 was comprised of lower interest income of approximately $3.3 million which was largely attributable to a smaller corporate loan portfolioprimarily due to loan sale activity. Income from securitization vehicles reflected a decrease of approximately $0.5 million which was partially offset by an increase in commitment, amendment and other fee incomeinterest income.
The total principal value of $0.2 million.
Total investment income for the nine months ended September 30, 2017 reflected a decrease of approximately $2.4 million. That decrease was comprised of lower interest income of approximately $6.8 million which was largely attributable to a smaller corporate loan portfolio due to loan sale activity. Total principal outstanding on income producing debt investments excluding non-accrualas of SeptemberJune 30, 20172022 and SeptemberJune 30, 2016 were2021 was approximately $244.4$283.9 million and $416.6$241.8 million, respectively. The decrease in interest income was partially offset by an increase in income from securitization vehicles of approximately $3.5 million due largely to an increased weighted average effective yield on our CLO equity portfolio.
As of SeptemberJune 30, 2017,2022, our debt investments had a range of stated interest rates of 4.92% and 11.63% and maturity dates of between 4.75%3 and 15.00%92 months compared to a range of stated interest rates of 3.85% to 10.25% and maturity dates between 1516 and 112 months compared to stated interest rates of 4.75% to 15.00% and maturity dates between 24 and 10494 months as of SeptemberJune 30, 2016.2021. In addition, our total debt portfolio had a weighted average yield on debt investments of approximately 9.5%9.01% as of SeptemberJune 30, 2017,2022, compared to approximately 8.0%7.65% as of SeptemberJune 30, 2016.2021. As of June 30, 2022, three debt investments were on non-accrual status with a combined fair value of approximately $0.5 million and total principal value of approximately $27.5 million. As of June 30, 2021, two debt investments were on non-accrual status with a combined fair value of approximately $7.8 million and total principal value of approximately $26.2 million.
Income from securitization vehicles for the three months ended June 30, 2022 and June 30, 2021, was approximately $4.1 million and $4.1 million, respectively. Income from securitization vehicles for the six months ended June 30, 2022 and June 30, 2021, was approximately $8.5 million and $8.8 million, respectively. The increasetotal principal outstanding on our investments in theCLOs as of June 30, 2022 and June 30, 2021, was approximately $378.1 million and $370.1 million, respectively. The weighted average yield on our debt portfolio over the past twelve months is primarily due to our ongoing strategyCLO equity investments as of rotating the corporate loan portfolio into higher-yielding, less liquid loans.June 30, 2022 and June 30, 2021, was approximately 9.5% and 10.4%, respectively.
61
Operating Expenses
Total operating expenses for the three months ended SeptemberJune 30, 20172022 and September 30, 20162021, were approximately $7.7$5.6 million and $11.6$5.1 million, respectively. Total operating expenses for the ninesix months ended SeptemberJune 30, 20172022 and September 30, 20162021, were approximately $24.9$11.2 million and $33.0$9.6 million, respectively. The decreases during those periods were largely attributable to lower professional fees,These amounts consisted of base management fees, andinterest expense, professional fees, compensation expense, general and administrative expenses.
Expenses before net investment incomeexpenses, and incentive feesfees. That increase for the three and six months ended SeptemberJune 30, 20172022 was primarily due to higher interest expense and September 30, 2016 were approximately $7.2 million and $11.1 million, respectively. Operating expenses before incentivebase management fees, for the nine months ended September 30, 2017 and September 30, 2016 were approximately $22.0 million and $31.4 million, respectively. The decreases during those periods were largely attributable to lowerpartially offset by a decrease in professional fees, base management fees and general and administrative expenses.
The investment advisory base management fee for the three months ended SeptemberJune 30, 2017 and September 30, 20162022 was approximately $2.0$1.6 million and $2.6compared with $1.4 million respectively.for the three months ended June 30, 2021. The investment advisory base management fee for the ninesix months ended SeptemberJune 30, 2017 and September 30, 20162022 was approximately $6.5$3.2 million compared with $2.8 million for the six months ended June 30, 2021. That increase for the three and $8.7 million, respectively. Those decreases weresix months ended June 30, 2022 was due largely to the previously announced fee reduction from 2.00% to 1.50% of gross assets (refer to “Incentive Fees,” below, for discussion of ongoing fee waivers), as well as a declinean increase in the weighted average gross assets due to the sale of certain assets to fund the voluntary partial repayment of the TICC CLO 2012-1 LLC class A-1 notes and partial repurchase of outstanding shares of Convertible Notes (refer to the discussion in the Liquidity and Capital Resources section below). At September 30, 2017 and December 31, 2016, approximately $2.0 million and $2.5 million, respectively, of investment advisory base management fees remained payable to TICC Management.assets.
Interest expensesexpense for the three and six months ended SeptemberJune 30, 20172022, was approximately $3.1 and September 30, 2016 were$6.2 million, respectively, which primarily relates to our 5.50% unsecured notes due 2028 (the “5.50% Unsecured Notes”), 6.25% unsecured notes due 2026 (the “6.25% Unsecured Notes”) and 6.50% unsecured notes due 2024 (the “6.50% Unsecured Notes”), compared to interest expense of approximately $3.7$2.4 million and $4.4$4.3 million respectively. The decrease in interest expense is due primarily to lower weighted average debt outstanding overfor the three month period. Interest expensesand six months ended June 30, 2021, respectively, which relates to our 5.50% Unsecured Notes, 6.25% Unsecured Notes and 6.50% Unsecured Notes. That increase for the ninethree and six months ended SeptemberJune 30, 2017 and September 30, 2016 were approximately $11.1 million and $13.2 million, respectively. The decrease over the nine month period2022 was primarily driven by the lower weighted average debt outstanding dueattributable to the previously stated note repayment and repurchases. The aggregate accrued interest which remained payable at September 30, 2017 and December 31, 2016 was approximately $3.0 million and $1.7 million, respectively.fact that the 5.50% Unsecured Notes were not outstanding prior to May 20, 2021.
54
Professional fees, consisting of legal, financial advisory,consulting, valuation, audit and tax fees, were approximately $0.7 million and $2.2 million$311,000 for the three months ended SeptemberJune 30, 2017 and September 30, 2016, respectively. Professional fees were2022, compared to approximately $2.1 million and $5.4 million for the nine months ended September 30, 2017 and September 30, 2016, respectively. Those decreases in professional fees are primarily attributable to the discontinuation of services related to the engagement of legal and financial advisors.
Compensation expenses$570,000 for the three months ended SeptemberJune 30, 2017 and September 30, 20162021. Professional fees were approximately $0.2$655,000 for the six months ended June 30, 2022, compared to approximately $1.3 million reflectingfor the six months ended June 30, 2021. That decrease for the three and six months ended June 30, 2022 was primarily due to lower legal fees.
Compensation expense was approximately $220,000 for the three months ended June 30, 2022, compared to approximately $193,000 for the three months ended June 30, 2021. Compensation expense was approximately $455,000 for the six months ended June 30, 2022, compared to approximately $366,000 for the six months ended June 30, 2021. Compensation expense reflects the allocation of compensation expenses for the services of our chief financial officer,Chief Financial Officer, accounting personnel, and other administrative support staff. Compensation expenses for the nine months ended September 30, 2017 and September 30, 2016 were $0.7 million and $0.6 million, respectively. At September 30, 2017 and December 31, 2016, respectively, approximately $66,000 and $0 of compensation expense remained payable.
General and administrative expenses, consisting primarily of directors’ fees, insurance, listing fees, transfer agent and custodian fees, office supplies, facilities costs and other expenses, were approximately $0.5 million and $1.7 million$412,000 for the three and nine months ended SeptemberJune 30, 2017,2022, compared to approximately $1.7 million and $3.4 million$429,000 for the three and nine months ended SeptemberJune 30, 2016.2021. General and administrative expenses were approximately $756,000 for the six months ended June 30, 2022, compared to approximately $844,000 for the six months ended June 30, 2021. Office supplies, facilities costs and other expenses are allocated to the Companyus under the terms of the Administration Agreement.
Incentive Fees
TheThere was no net investment income incentive fee (“Net Investment Income Incentive Fee”) recorded for the three and ninesix months ended SeptemberJune 30, 2017 was approximately $0.6 million2022 and $2.8 million, respectively, compared2021 due to approximately $0.4 million and $1.7 million for both the three and nine months ended September 30, 2016.
62
total return requirement. The net investment income incentive feeNet Investment Income Incentive Fee is calculated and payable quarterly in arrears based on the amount by which (x) the “Pre-Incentive“Pre-Incentive Fee Net Investment Income” for the immediately preceding calendar quarter exceeds (y) the “Preferred Return Amount” for the calendar quarter (see “Note 8. Related Party Transactions” in the notes to our consolidated financial statements).quarter. For this purpose, “Pre-Incentive“Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income accrued during the calendar quarter minus our operating expenses for the quarter (including the base fee,Base Fee, expenses payable under the Administration Agreement with BDC Partners,Oxford Funds, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Refer to “Note 7. Related Party Transactions” in the notes to our financial statements.
The expense attributable to the capital gains incentive fee expense,(the “Capital Gains Incentive Fee”), as reported under GAAP, is calculated as if the Company’s entire portfolio had been liquidated at period end, and therefore is calculated on the basis of net realized and unrealized gains and losses at the end of each period. TheThat expense (or the reversal of such an expense) related to thethat hypothetical liquidation of the portfolio (and assuming no other changes in realized or unrealized gains and losses) would only become payable to TICC Managementour investment adviser in the event of a complete liquidation of our portfolio as of period end and the termination of the Investment Advisory Agreement on such date. For the three and ninesix months ended SeptemberJune 30, 2017 and September 30, 2016,2022, no accrual was required as a result of the impact of accumulated net unrealized depreciation and net realized losses on our portfolio.
The actual amount of the capital gains incentive feeCapital Gains Incentive Fee which will actually be payable is determined in accordance with the terms of the Investment Advisory Agreement and is calculated as of the end of each calendar year (or upon termination of the Investment Advisory Agreement). The terms of the Investment Advisory Agreement state that the capital gains incentive feeCapital Gains Incentive Fee calculation is based on net realized gains, if any, offset by gross unrealized depreciation for the calendar year. No effect is given to gross unrealized appreciation in this calculation. For the three and ninesix months ended SeptemberJune 30, 20172022 and September 30, 2016,2021, such an accrual was not required under the terms of the Investment Advisory Agreement.
Realized and Unrealized Gains/Losses on Investments
For the three months ended SeptemberJune 30, 2017,2022, we recognized net realized losses on investments of approximately $1.1 million. For the nine months ended September 30, 2017, we recognized net realized losses on investments of approximately $6.0$1.5 million, which primarily reflects the losses from the sale of a CLO equity investments, partially offset by the gains realized from the sale and repayment of certain senior secured notes.investment.
Based upon the fair value determinations made in good faith by the Board of Directors, forFor the three months ended SeptemberJune 30, 2017,2022, our net change in unrealized appreciation/(depreciation)depreciation was approximately $2.6$46.2 million, primarily due to improvements in the corporate loan market, composed of $7.8$0.7 million in gross unrealized appreciation, $6.9$47.7 million in gross unrealized depreciation and approximately $1.7$0.8 million relating to the reversal of prior period net unrealized depreciation as investment gains and losses were realized. The net change in unrealized appreciationThis includes net unrealized appreciation of approximately $3.2$6.4 million as a result ofresulting from reductions to the cost value of our CLO equity investments underrepresenting the difference between
55
distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $10.5 million and the effective yield accounting methodology, wherebyinterest income recognized on our CLO equity subordinated notes and the amortized cost valueadjusted income on our CLO equity fee notes of the respective investments are reduced by the excess of actual cash received (and record date distributions to be received) over the calculated income using the effective yield.
approximately $4.0 million. The most significant components of the net change in unrealized appreciation and depreciation during the three months ended SeptemberJune 30, 20172022, were as follows (in millions):
Portfolio Company |
| Change in | ||
Birch Communications, Inc. |
|
| 3.0 |
|
Ares XXIX CLO Ltd. |
| $ | 2.3 |
|
Net all other(1) |
|
| (2.7 | ) |
Total |
| $ | 2.6 |
|
Portfolio Company | Changes in | |||
Sound Point CLO XVI, Ltd. | $ | (6.4 | ) | |
Octagon Investment Partners 49, Ltd. |
| (4.7 | ) | |
Nassau 2019-I Ltd. |
| (3.4 | ) | |
Carlyle Global Market Strategies CLO 2021-6, Ltd. |
| (2.0 | ) | |
Cedar Funding II CLO, Ltd. |
| (1.8 | ) | |
Net all other |
| (28.0 | ) | |
Total(1) | $ | (46.2 | ) |
____________
(1) Unrealized gains and losses of less than $1.0 million have been combined.Totals may not sum due to rounding.
Based uponFor the fair value determinations made in good faith by the Board of Directors, during the ninesix months ended SeptemberJune 30, 2017,2022, we hadrecognized net realized losses on investments of approximately $0.5 million, which reflects the sale of multiple CLO equity investments.
For the six months ended June 30, 2022, our net change in unrealized appreciation/(depreciation) of $13.2depreciation was approximately $59.7 million, composed of $10.4$1.1 million in gross unrealized appreciation, $12.0$61.0 million in gross unrealized depreciation and approximately $14.8$0.2 million relating to the reversal of prior period net unrealized depreciation as investment gains and losses were realized. The net change in unrealized appreciation
63
This includes net unrealized appreciation of approximately $31.3$14.2 million as a result ofresulting from reductions to the cost value of our CLO equity investments underrepresenting the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $22.7 million and the effective yield accounting methodology, wherebyinterest income recognized on our CLO equity subordinated notes and the amortized cost valueadjusted income on our CLO equity fee notes of the respective investments are reduced by the excess of actual cash received (and record date distributions to be received) over the calculated income using the effective yield.
approximately $8.4 million. The most significant components of the net change in unrealized appreciation and depreciation during the ninesix months ended SeptemberJune 30, 20172022, were as follows (in millions):
Portfolio Company |
| Change in | ||
Source Hov, LLC |
| $ | 6.2 | |
Mountain Hawk III CLO, Ltd. |
|
| 3.6 | |
Shackleton 2013-IV CLO, Ltd. |
|
| 3.5 | |
Benefit Street 2013 CLO Equity |
|
| 2.8 | |
Aricent Technologies, Inc. |
|
| 2.0 | |
Ares XXIX CLO Ltd. | 1.5 | |||
Marea CLO Equity |
|
| 1.3 | |
Halcyon Loan Advisors Funding 2012-4 Ltd. |
|
| 1.3 | |
Ares XXV CLO Ltd. | 1.1 | |||
Windriver 2012-1 CLO Equity, Ltd. |
|
| (1.1 | ) |
York 2014-1A CLO Equity |
|
| (1.3 | ) |
KVK CLO 2013-2, Ltd. |
|
| (1.6 | ) |
Electric Lightwave Holdings, Inc. (F/K/A “Integra Telecom Holdings, Inc.”) |
|
| (2.4 | ) |
Net all other(1) |
|
| (3.7 | ) |
Total |
| $ | 13.2 |
____________
(1) Unrealized gains and losses of less than $1.0 million have been combined.
Realized loss on extinguishment of debt
On August 25, 2016, November 25, 2016, February 27, 2017, and May 25, 2017, the 2012 Securitization Issuer repaid approximately $36.0 million, approximately $74.7 million, approximately $24.5 million, and approximately $31.4 million of the Class A-1 notes, respectively. On August 25, 2017, the 2012 Securitization Issuer repaid in full the remaining secured notes (Classes A-1, B-1, C-1 and D-1) outstanding of approximately $73.4 million.
In connection with the August 25, 2016 repayment of approximately $36.0 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $648,000, which consisted of approximately $287,000 in accelerated note discount expense and approximately $361,000 in accelerated deferred debt issuance costs. In connection with the November 25, 2016 repayment of approximately $74.7 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $1,296,000, which consisted of approximately $574,000 in accelerated note discount expense and approximately $722,000 in accelerated deferred debt issuance costs. In connection with the February 27, 2017 repayment of approximately $24.5 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $409,000, which consisted of approximately $181,000 in accelerated note discount expense and approximately $228,000 in accelerated deferred debt issuance costs. In connection with the May 25, 2017 repayment of approximately $31.4 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $505,000, which consisted of approximately $224,000 in accelerated note discount expense and approximately $281,000 in accelerated deferred debt issuance costs. In connection with the August 25, 2017 repayment of approximately $73.4 million of the Class A-1, B-1, C-1 and D-1 notes, the Company incurred debt extinguishment costs of approximately $2.2 million, which consisted of approximately $1.6 million in accelerated note discount expense and approximately $0.6 million in accelerated deferred debt issuance costs. The debt extinguishment costs in connection with the August 25, 2016, November 25, 2016, February 27, 2017, May 25, 2017 and August 25, 2017 are recorded within Realized Loss on Extinguishment of Debt in the Consolidated Statement of Operations.
64
Portfolio Company | Changes in | |||
Sound Point CLO XVI, Ltd. | $ | (7.7 | ) | |
Octagon Investment Partners 49, Ltd. |
| (6.6 | ) | |
Nassau 2019-I Ltd. |
| (3.8 | ) | |
Telos CLO 2014-5, Ltd. |
| (2.6 | ) | |
Cedar Funding II CLO, Ltd. |
| (2.2 | ) | |
Net all other |
| (36.8 | ) | |
Total | $ | (59.7 | ) |
Net Increase in Net Assets Resulting from Net Investment Income
Net investment income for the three and nine months ended SeptemberJune 30, 20172022 and June 30, 2021 was approximately $6.8$4.3 million and $23.1$2.8 million, respectively, as compared withrespectively. Net investment income for the three and ninesix months ended SeptemberJune 30, 2016 of2022 and June 30, 2021 was approximately $6.5$8.6 million and $17.4$7.6 million, respectively. TheThat increase in net increases for both the threeinvestment income was primarily due to an increase in interest income, partially offset by an increase in operating expenses and nine month periods were primarily the result of highera decrease in income from securitization vehicles and lower total expenses, partially offset by lower interest income on debt investments.
For the three months and ninesix months ended SeptemberJune 30, 2017,2022, the net increase in net assets resulting from net investment income per common share was $0.13$0.09 and $0.17 (basic and diluted) and $0.45 (basic and diluted), respectively, based on 51,479,409 weighted average common shares outstanding as of September 30, 2017, compared to the net increase in net assets resulting from net investment income per share of $0.13 (basic$0.06 and diluted) and $0.33$0.15 (basic and diluted) for the three and ninesix months ended SeptemberJune 30, 2016, respectively, based on 51,479,409 and 51,985,537 weighted average common shares outstanding for the three and nine months ended September 30, 2016, respectively. Due to the anti-dilutive effect on the computation of diluted earnings2021. The per share for the three and nine months ended September 30, 2017 and September 30, 2016, the adjustments for interest on Convertible Notes, base management fees, deferred issuance costs and net investment income incentive fees as well as adjustments for dilutive effect of Convertible Notes were excluded from the respective period’s diluted earnings per share computation.
For the three and nine months ended September 30, 2017, the netincrease was primarily due to an increase in the net assets resultinginterest income, partially offset by an increase in operating expenses and a decrease in income from core net investment income per common share was $0.13 (basicsecuritization vehicles and diluted) and $0.53 (basic and diluted), based on 51,479,409 weighted average common shares asinvestments.
56
Please see “— Supplemental Information Regarding Core Net Investment Income” below for more information.
Net (Decrease)/Increase in Net Assets Resulting from Operations
Net increasedecrease in net assets resulting from operations for the three and nine months ended SeptemberJune 30, 20172022 was approximately $6.0$43.4 million and $27.2 million, respectively, compared with a net increase in net assets resulting from operations of approximately $42.9 million and $74.1$6.5 million for the three and nine months ended SeptemberJune 30, 2016, respectively. This2021.
Net decrease in net assets resulting from operations for the six months ended June 30, 2022 was largely due to lowerapproximately $51.6 million compared with a net unrealized appreciation on investmentsincrease in net assets resulting from operations of $39.8approximately $28.3 million and $57.3 million, respectively.for the six months ended June 30, 2021.
For the three and nine months ended SeptemberJune 30, 2017, respectively,2022, the net increasedecrease in net assets resulting from operations per common share was $0.12 (basic and diluted) and $0.53$0.87 (basic and diluted), compared to a net increase in net assets resulting from operations per share of approximately $0.83 (basic)$0.13 (basic and $0.72 (diluted)diluted) for the three months ended SeptemberJune 30, 20162021. For the six months ended June 30, 2022, the net decrease in net assets resulting from operations per common share was $1.04 (basic and diluted), compared to a net increase in net assets resulting from operations per share of approximately $1.42 (basic)$0.57 (basic and $1.28 (diluted)diluted) for the ninesix months ended SeptemberJune 30, 2016. Due to the anti-dilutive effect on the computation of diluted earnings per share for the three months ended September 30, 2017, the adjustments for interest on Convertible Notes, base management fee, deferred issuance costs and net investment income incentive fees as well as adjustments for dilutive effect of Convertible Notes were excluded from the respective period’s diluted earnings per share computation.
Supplemental Information Regarding Core Net Investment Income
On a supplemental basis, we provide information relating to 1) core net investment income and 2) the ratio of core net investment income to net assets, which are non-GAAP measures. These measures are provided in addition to, but not as a substitute for, net investment income. Our non-GAAP measures may differ from similar measures by other companies, even if similar terms are used to identify such measures. Core net investment income represents net investment income adjusted for additional cash distributions received, or entitled to be received (if any, in either case), on our CLO equity investments (excluding those cash distributions believed to represent a return of capital) and also excludes any capital gains incentive fees we recognize but have no obligation to pay in any period. The Company did not recognize any capital gains incentive fees for the quarter ended September 30, 2017.
65
Income from investments in the “equity” class securities of CLO vehicles, for GAAP purposes, is recorded using the effective interest method based upon an effective yield to the expected redemption utilizing estimated cash flows, compared to the cost resulting in an effective yield for the investment; the difference between the actual cash received or distributions entitled to be received and the effective yield calculation is an adjustment to cost. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from the cash distributions actually received by us during the period (referred to below as “CLO equity additional distributions”).
Further, in order to continue to qualify to be taxed as a RIC, we are required, among other things, to distribute at least 90% of our investment company taxable income annually. Therefore, core net investment income may provide a better indication of estimated taxable income for a reporting period than does GAAP net investment income, although we can offer no assurance that will be the case as the ultimate tax character of our earnings cannot be determined until tax returns are prepared after the end of a fiscal year. We note that these non-GAAP measures may not be useful indicators of taxable earnings, particularly during periods of market disruption and volatility.
The following tables provide a reconciliation of net investment income to core net investment income for the three and nine months ended September 30, 2017 and 2016, respectively:
|
| Three Months Ended |
| Three Months Ended | ||||||||
|
| Amount |
| Per Share |
| Amount |
| Per Share | ||||
Net investment income |
| $ | 6,767,753 |
| $ | 0.131 |
| $ | 6,539,020 |
| $ | 0.127 |
CLO equity additional distributions |
|
| 47,456 |
|
| 0.001 |
|
| 9,359,695 |
|
| 0.182 |
Core net investment income |
| $ | 6,815,209 |
| $ | 0.132 |
| $ | 15,898,715 |
| $ | 0.309 |
|
| Nine Months Ended |
| Nine Months Ended | ||||||||
|
| Amount |
| Per Share |
| Amount |
| Per Share | ||||
Net investment income |
| $ | 23,097,902 |
| $ | 0.449 |
| $ | 17,382,340 |
| $ | 0.334 |
CLO equity additional distributions |
|
| 4,333,407 |
|
| 0.084 |
|
| 30,289,507 |
|
| 0.583 |
Core net investment income |
| $ | 27,431,309 |
| $ | 0.533 |
| $ | 47,671,847 |
| $ | 0.917 |
In addition, the following ratio is presented to supplement the financial highlights included in “Note 14. Financial Highlights” in the notes to our consolidated financial statements:
|
| Three Months |
| Three Months |
| Nine Months |
| Nine Months | ||||
Ratio of core net investment income to average net assets |
| 7.09 | % |
| 18.14 | % |
| 9.48 | % |
| 19.11 | % |
The following table provides a reconciliation of the ratio of net investment income to average net assets to the ratio of core net investment income to average net assets for the three and nine months ended September 30, 2017 and 2016, respectively:
|
| Three Months |
| Three Months |
| Nine Months |
| Nine Months | ||||
Ratio of net investment income to average net |
| 7.04 | % |
| 7.46 | % |
| 7.98 | % |
| 6.97 | % |
Ratio of CLO equity additional estimated taxable income to average net assets |
| 0.05 | % |
| 10.68 | % |
| 1.50 | % |
| 12.14 | % |
Ratio of core net investment income to average net assets |
| 7.09 | % |
| 18.14 | % |
| 9.48 | % |
| 19.11 | % |
662021.
LIQUIDITY AND CAPITAL RESOURCES
As of SeptemberJune 30, 2017,2022, cash and cash equivalents were approximately $119.6$23.2 million as compared to approximately $8.3$9.0 million atas of December 31, 2016.2021. For the ninesix months ended SeptemberJune 30, 2017,2022, net cash provided by operating activities for the period, consisting primarily of the items described in “— Results of Operations,” was approximately $202.4$24.4 million, largely reflecting purchases of investments of approximately $49.5 million, partially offset by proceeds from principal repayments and reductions to debt cost and sales of investments of approximately $310.2 million and reductions to CLO equity cost value of approximately $31.3 million, partially offset by purchases of new investments of approximately $163.0$51.6 million and net change in unrealized appreciation/(depreciation)depreciation of $13.2approximately $59.7 million. For the ninesix months ended SeptemberJune 30, 2017, net cash provided by investing activities of approximately $3.5 million reflects the change in restricted cash in the 2012 Securitization Issuer. For the nine months ended September 30, 2017,2022, net cash used in financing activities was approximately $94.5$10.2 million, reflecting the distributionpayment of dividends and repayment of TICC CLO 2012-1 LLC notes and partially offset by the proceeds from the issuance of the 6.50% Unsecured Notes.distributions.
From time to time, we may seek to retire, repurchase, or exchange debt securities in open market purchases or by other means dependent on market conditions, liquidity, contractual obligations, and other matters.
On April 12, 2017, we completed an underwritten public offering of approximately $64.4 million in principal amount of 6.50% unsecured notes due 2024 and intend to use the net proceeds from this offering to repay or repurchase a portion of the outstanding indebtedness under the 7.50% convertible notes due 2017, which currently amounts to approximately $94.5 million plus accrued interest as of September 30, 2017.
Contractual Obligations
A summary of our significant contractual payment obligations as of SeptemberJune 30, 20172022, is as follows:
Contractual obligations |
|
|
| Payments Due by Period |
|
| |||||||||
| Total |
| Less than |
| 1 – 3 |
| 3 – 5 |
| More than | ||||||
Long-term debt obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Notes(1) |
| $ | 94,542,000 |
| $ | 94,542,000 |
| $ | — |
| $ | — |
| $ | — |
6.50% Unsecured Notes |
|
| 64,370,225 |
|
| — |
|
| — |
|
| — |
|
| 64,370,225 |
Total |
| $ | 158,912,225 |
| $ | 94,542,000 |
| $ | — |
| $ | — |
| $ | 64,370,225 |
Contractual obligations (in millions) | Payments Due by Period | ||||||||||||||
Principal | Less than | 1 – 3 years | 3 – 5 years | More than | |||||||||||
Long-term debt obligations: |
|
|
|
|
| ||||||||||
6.50% Unsecured Notes | $ | 64.4 | $ | — | $ | 64.4 | $ | — | $ | — | |||||
6.25% Unsecured Notes |
| 44.8 |
| — |
| — |
| 44.8 |
| — | |||||
5.50% Unsecured Notes |
| 80.5 |
| — |
| — |
| — |
| 80.5 | |||||
$ | 189.7 | $ | — | $ | 64.4 | $ | 44.8 | $ | 80.5 |
____________
(1) On November 1, 2017, the Convertible Notes matured and were repaid in full in accordance with their terms.
See alsoRefer to “Note 6. Borrowings” in the notes to our consolidated financial statements.
Off-Balance Sheet Arrangements
In the normal course of business, we enter into a variety of undertakings containing a variety of warranties and indemnifications that may expose us to some risk of loss. The risk of future loss arising from such undertakings, while not quantifiable, is expected to be remote. As of SeptemberJune 30, 2017,2022, we had no off-balance sheet arrangements, includingdid not have any risk managementcommitments to purchase additional investments.
Share Issuance Program
On August 1, 2019, we entered into an Equity Distribution Agreement with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $150.0 million of commodity pricing or other hedging practices.the Company’s common stock through an At-the-Market (“ATM”) offering. For the three and six months ended June 30, 2022 and 2021, we did not sell any shares of common stock pursuant to the ATM offering.
57
Borrowings
In accordance with the 1940 Act, with certain limited exceptions, as of June 30, 2022, we arewere only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, iswas at least 200%150%, immediately after such borrowing. As of SeptemberJune 30, 2017,2022 and December 31, 2021, our asset coverage for borrowed amounts was 504.2%.approximately 194% and 227%, respectively.
On April 6, 2018, the Board, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Small Business Credit Availability Act. As a result, the Company’s asset coverage requirements for senior securities was changed from 200% to 150%, effective as of April 6, 2019.
The weighted average stated interest rate and weighted average maturity on all of ourthe Company’s debt outstanding as of SeptemberJune 30, 20172022, were 7.09%6.02% and 2.74.1 years, respectively, and as of December 31, 20162021, were 5.56%6.02% and 4.24.6 years, respectively.
67
TICC CLO 2012-1 LLC
On August 23, 2012, we completed a $160 million debt securitization financing transaction, consisting of $120 million in secured notes and $40 million of the 2012 subordinated notes. On February 25, 2013 and May 28, 2013, TICC CLO 2012-1 issued additional secured notes totaling an aggregate of $120 million and 2012 subordinated notes totaling an aggregate of $40 million, which 2012 subordinated notes were purchased by us under the “accordion” feature of the debt securitization which allowed, under certain circumstances and subject to the satisfaction of certain conditions, for an increase in the amount of secured and subordinated notes. It is not necessary that we own all or any of the notes permitted by this feature, which may affect the accounting treatment of the debt securitization financing transaction. On August 25, 2016, November 25, 2016, February 27, 2017, and May 25, 2017, we repaid approximately $36.0 million, approximately $74.7 million, approximately $24.5 million, and approximately $31.4 million of the Class A-1 notes, respectively. On August 25, 2017, the 2012 Securitization Issuer repaid, in full, the remaining secured notes (Classes A-1, B-1, C-1 and D-1) outstanding of approximately $73.4 million.
In connection with the February 27, 2017 repayment of approximately $24.5 million of the Class A-1 notes, the Company incurred debt extinguishment costs of approximately $409,000, which consisted of approximately $181,000 in accelerated note discount expense and approximately $228,000 in accelerated deferred debt issuance costs.
In connection with the May 25, 2017 repayment of approximately $31.4 million of the Class A-1 notes, we incurred debt extinguishment costs of approximately $505,000, which consisted of approximately $224,000 in accelerated note discount expense and approximately $281,000 in accelerated deferred debt issuance costs.
In connection with the August 25, 2017 repayment of approximately $73.4 million of the Class A-1, B-1, C-1 and D-1 notes, the Company incurred debt extinguishment costs of approximately $2.2 million, which consisted of approximately $1.6 million in accelerated note discount expense and approximately $0.6 million in accelerated deferred debt issuance costs.
The accelerated note discount expense and accelerated deferred debt issuance costs are recorded within Realized Loss on Extinguishment of Debt in the Consolidated Statement of Operations.
The following table sets forth the components of interest expense, effective annualized average interest rates, and cash paid for interest of the Class A-1, B-1, C-1 and D-1 for the three and nine months ended September 30, 2017 and 2016, respectively:
TICC CLO 2012-1 LLC ($ in thousands) |
| Three Months |
| Three Months |
| Nine Months |
| Nine Months | ||||||||
Stated interest expense |
| $ | 616.7 |
|
| $ | 1,904.9 |
|
| $ | 3,041.9 |
|
| $ | 5,683.0 |
|
Amortization of deferred issuance costs |
|
| 16.1 |
|
|
| 81.6 |
|
|
| 91.7 |
|
|
| 253.0 |
|
Note discount expense |
|
| 40.0 |
|
|
| 108.4 |
|
|
| 187.2 |
|
|
| 330.6 |
|
Total interest expense |
| $ | 672.8 |
|
| $ | 2,094.9 |
|
| $ | 3,320.8 |
|
| $ | 6,266.6 |
|
Effective annualized average interest rate |
|
| 5.98 | % |
|
| 3.70 | % |
|
| 5.33 | % |
|
| 3.56 | % |
Cash paid for interest |
| $ | 1,031.6 |
|
| $ | 1,960.0 |
|
| $ | 3,591.2 |
|
| $ | 5,652.4 |
|
Effective January 1, 2017 and through February 27, 2017, the interest charged under the securitization was based on three-month LIBOR, which was 0.930%. Effective February 28, 2017 and through May 25, 2017, the interest charged under the securitization was based on three-month LIBOR, which was approximately 1.052%. Effective May 26, 2017 and through August 25, 2017, the interest charged under the securitization was based on three-month LIBOR, which wasapproximately 1.189%.
Effective January 1, 2016 and through February 24, 2016, the interest charged under the securitization was based on three-month LIBOR, which was 0.393%. Effective February 25, 2016 and through May 25, 2016, the interest charged under the securitization was based on three-month LIBOR, which was approximately 0.629%. Effective May 26, 2016 and through August 25, 2016, the interest charged under the securitization was based on three-month LIBOR, which was approximately 0.662%. Effective August 26, 2016 and through September 30, 2016, the interest charged under the securitization was based on three-month LIBOR, which was approximately 0.825%
68
The classes, interest rates, spread over LIBOR, cash paid for interest and stated interest expense of each of the Class A-1, B-1, C-1 and D-1 for the three and nine months ended September 30, 2017, respectively, are as follows:
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | |||||||||
TICC CLO 2012-1 LLC |
| Stated |
| LIBOR |
| Cash |
| Stated |
| Cash |
| Stated | |||||
Class A-1 Notes |
| 2.93867 | % |
| 175 |
| $ | 70.5 |
| $ | 42.1 |
| $ | 803.6 |
| $ | 623.8 |
Class B-1 Notes |
| 4.68867 | % |
| 350 |
|
| 239.6 |
|
| 143.3 |
|
| 691.0 |
|
| 600.0 |
Class C-1 Notes |
| 5.93867 | % |
| 475 |
|
| 349.1 |
|
| 208.7 |
|
| 1,012.7 |
|
| 878.4 |
Class D-1 Notes |
| 6.93867 | % |
| 575 |
|
| 372.4 |
|
| 222.6 |
|
| 1,083.9 |
|
| 939.7 |
Total(1) |
|
|
|
|
|
| $ | 1,031.6 |
| $ | 616.7 |
| $ | 3,591.2 |
| $ | 3,041.9 |
____________
(1) Totals may not sum due to rounding.
The classes, interest rates, spread over LIBOR, cash paid for interest and stated interest expense of each of the Class A-1, B-1, C-1 and D-1 for the three and nine months ended September 30, 2016, respectively, are as follows:
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | |||||||||
TICC CLO 2012-1 LLC |
| Stated |
| LIBOR |
| Cash |
| Stated |
| Cash |
| Stated | |||||
Class A-1 Notes |
| 2.57544 | % |
| 175 |
| $ | 1,085.0 |
| $ | 1,019.2 |
| $ | 3,095.8 |
| $ | 3,089.1 |
Class B-1 Notes |
| 4.32544 | % |
| 350 |
|
| 212.7 |
|
| 216.1 |
|
| 618.2 |
|
| 629.2 |
Class C-1 Notes |
| 5.57544 | % |
| 475 |
|
| 318.1 |
|
| 322.0 |
|
| 929.8 |
|
| 943.2 |
Class D-1 Notes |
| 6.57544 | % |
| 575 |
|
| 344.1 |
|
| 347.6 |
|
| 1,008.7 |
|
| 1,021.6 |
Total(1) |
|
|
|
|
|
| $ | 1,960.0 |
| $ | 1,904.9 |
| $ | 5,652.4 |
| $ | 5,683.2 |
____________
(1) Totals may not sum due to rounding.
TICC serves as collateral manager to the 2012 Securitization Issuer under a collateral management agreement. TICC is entitled to a deferred fee for its services as collateral manager. The deferred fee is eliminated in consolidation.
6.50% Unsecured Notes
On April 12, 2017, we completed an underwritten public offering of approximately $64.4 million in aggregate principal amount of the 6.50% unsecured notes due 2024.Unsecured Notes. The 6.50% Unsecured Notes will mature on March 30, 2024, and may be redeemed in whole or in part at any time or from time to time at ourthe Company’s option on or after March 30, 2020. The 6.50% Unsecured Notes will bear interest at a rate of 6.50% per year payable quarterly on March 30, June 30, September 30, and December 30 of each year, commencing June 30, 2017.
The aggregate accrued interest payable on the 6.50% Unsecured Notes at September 30, 2017 was approximately $11,600. Deferred debt issuance costs represent fees and other direct incremental costs incurred in connection with the 6.50% Unsecured Notes. As of September 30, 2017, we had a deferred debt issuance balance of approximately $2.1 million. This amount is being amortized and is included in interest expense in the consolidated statements of operations over the term of the 6.50% Unsecured Notes.
69
The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest of the 6.50% Unsecured Notes for the three and nine months ended September 30, 2017:
6.50% Unsecured Notes ($ in thousands) |
| Three Months |
| Nine Months | |||
Stated interest expense |
| $ | 1,046.0 |
|
| $ | 1,964.2 |
Amortization of deferred issuance costs |
|
| 81.8 |
|
|
| 152.0 |
Total interest expense |
| $ | 1,127.8 |
|
| $ | 2,116.2 |
Effective annualized average interest rate |
|
| 6.95 | % |
|
| 6.98% |
Cash paid for interest |
| $ | 1,046.0 |
|
| $ | 1,952.6 |
year. The 6.50% Unsecured Notes are TICC’s general, unsecured obligations and rank equal in right of payment with all of TICC’s existing and future senior, unsecured indebtedness and senior in right of payment to any of its subordinated indebtedness. As a result,listed on the 6.50% Unsecured Notes will be effectively subordinated to TICC’s existing and future secured indebtedness toNASDAQ Global Select Market under the extent of the value of the assets securing such indebtedness and structurally subordinated to any existing and future liabilities and other indebtedness of its subsidiary.
Convertible Notestrading symbol “OXSQL.”
On September 26, 2012,April 3, 2019, we issued $105.0completed an underwritten public offering of approximately $44.8 million in aggregate principal amount of the Convertible6.25% Unsecured Notes. The 6.25% Unsecured Notes will mature on April 30, 2026, and an additional $10.0 million aggregate principal amount of the Convertible Notes was issuedmay be redeemed in whole or in part at any time or from time to time at our option on October 22, 2012 pursuant to the exercise of the initial purchasers’ option to purchase additional Convertible Notes. On December 2, 2016 and December 16, 2016, we repurchased $12.0 million and approximately $8.5 million of the Convertible Notes, respectively. At Septemberor after April 30, 2017, approximately $94.5 million aggregate principal amount of the Convertible Notes remained outstanding.2022. The Convertible6.25% Unsecured Notes bear interest at a rate of 7.50%6.25% per year payable semi-annually in arrearsquarterly on May 1January 31, April 30, July 31, and November 1October 31 of each year, commencing on May 1, 2013.year. The Convertible6.25% Unsecured Notes are convertible into shareslisted on the NASDAQ Global Select Market under the trading symbol “OXSQZ.”
On May 20, 2021, we completed an underwritten public offering of our common stock based on an initial conversion rate of 87.2448 shares of its common stock per $1,000approximately $80.5 million in aggregate principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $11.46 per share of common stock.the 5.50% Unsecured Notes. The conversion price for the Convertible5.50% Unsecured Notes will be reduced for quarterly cash distributions paid to common shares to the extent that the quarterly distribution exceeds $0.29 per share, subject to adjustment. The Convertible Notes mature on November 1, 2017, unless previously convertedJuly 31, 2028, and may be redeemed in accordance with their terms. We do not have the rightwhole or in part at any time or from time to redeem the Convertibletime at our option (on or after May 31, 2024). The 5.50% Unsecured Notes prior to maturity.bear interest at a rate of 5.50% per year payable quarterly on January 31, April 30, July 31, and October 31, of each year. The aggregate accrued interest payable5.50% Unsecured Notes are listed on the Convertible Notes at September 30, 2017 was approximately $3.0 million. Deferred debt issuance costs represent fees and other direct incremental costs incurred in connection withNASDAQ Global Select Market under the Convertible Notes. As of September 30, 2017, we had a deferred debt issuance balance of approximately $45,000. This amount is being amortized and is included in interest expensetrading symbol “OXSQG.”
Refer to “Note 6. Borrowings” in the consolidated statements of operations over the term of the Convertible Notes.
The following table sets forth the components of interest expense, effective annualized average interest rates and cash paid for interest of the Convertible Notes for the three and nine months ended September 30, 2017 and 2016, respectively:
2017 Convertible Notes ($ in thousands) |
| Three Months |
| Three Months |
| Nine Months |
| Nine Months | ||||||||
Stated interest expense |
| $ | 1,772.7 |
|
| $ | 2,156.3 |
|
| $ | 5,318.0 |
|
| $ | 6,468.8 |
|
Amortization of deferred issuance costs |
|
| 128.2 |
|
|
| 156.0 |
|
|
| 380.5 |
|
|
| 464.7 |
|
Total interest expense |
| $ | 1,900.9 |
|
| $ | 2,312.3 |
|
| $ | 5,698.5 |
|
| $ | 6,933.5 |
|
Effective annualized average interest rate |
|
| 7.98 | % |
|
| 7.98 | % |
|
| 8.06 | % |
|
| 8.03 | % |
Cash paid for interest |
| $ | — |
|
| $ | — |
|
| $ | 3,545.3 |
|
| $ | 4,312.5 |
|
70notes to our financial statements.
Distributions
In order to qualify for tax treatment as a RIC, and to avoid corporate level tax on the income we distribute to our stockholders, we are required, under Subchapter M of the Code, to distribute at least 90% of our ordinary income and short-termshort-term capital gains to our stockholders on an annual basis.
Effective January 1, 2015, we recorded interest fromTo the extent our investments intaxable earnings fall below the equity class securitiestotal amount of CLO vehicles usingour distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to our stockholders. Thus, the effective interest method in accordance withsource of a distribution to our stockholders may be the provisionsoriginal capital invested by the stockholder rather than our taxable ordinary income or capital gains. Stockholders should read any written disclosure accompanying a distribution payment carefully and should not assume that the source of ASC 325-40,Beneficial Interests in Securitized Financial Assets, based upon an estimationany distribution is taxable ordinary income or capital gains. The final determination of an effective yield to the expected redemption utilizing estimated cash flows, including those CLO equity investments that have notnature of our distributions can only be made their inaugural distribution for the relevant period end. We monitor the expected residual payments, and effective yield is determined and updated periodically, as needed. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from both the tax-basis investment income and from the cash distributions we actually received during the period. CLO entities generally constitute “passive foreign investment companies” and are subject to complex tax rules; the calculation of taxable income attributed to a CLO equity investment can be dramatically different from the calculation of income for financial reporting purposes. Taxable income is based upon the distributable sharefiling of earnings as determined underour tax regulations for each CLO equity investment, while accountingreturn. We have until October 15, 2023, to file our federal income is recorded using the effective yield method. This method requires the calculation of an effective yield to expected redemption based upon an estimation of the amount and timing of future cash flows, including recurring cash flows as well as future principal repayments; the difference between the actual cash received (and record date distributions to be received) and the effective yield income calculation is an adjustment to cost. The effective yield is reviewed quarterly and adjusted as appropriate. Our final taxable earningstax return for the year ended December 31, 2016 resulted in2022.
For the quarter ended June 30, 2022, management estimated that a 50.7% non-taxabletax return of capital. While GAAP accounting incomecapital occurred of approximately $0.02 per share. We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our CLO equity class investments forability to make distributions due to the three months ended September 30, 2017 was approximately $8.1 million,asset coverage requirements applicable to us as a BDC under the 1940 Act. If we received or were entitled to receive approximately $11.3 million in distributions. Our distribution policy is based upon our estimatedo not distribute a certain percentage of our taxable netincome annually, we will suffer adverse tax consequences, including possible loss of favorable regulated investment income, which includes actual distributions from our CLO equity class investments, with further consideration given to our realized gains or losses on a taxable basis.company tax treatment. We cannot assure stockholders that they will receive any distributions.
58
The following table reflects the cash distributions, including dividends and returns of capital,distributions reinvested, if any, per share that our Board of Directors has declared on our common stock since the beginning of 2015:2021:
Date Declared |
| Record Date |
| Payment Date |
| Amount | ||
Fiscal 2017 |
|
|
|
|
|
|
|
|
October 27, 2017 |
| December 15, 2017 |
| December 29, 2017 |
| $ | 0.20 |
|
February 27, 2017 |
| September 15, 2017 |
| September 29, 2017 |
| 0.20 |
| |
February 27, 2017 |
| June 16, 2017 |
| June 30, 2017 |
|
| 0.20 |
|
February 27, 2017 |
| March 16, 2017 |
| March 31, 2017 |
|
| 0.20 |
|
Total (2017) |
|
|
|
|
| $ | 0.80 |
|
|
|
|
|
|
|
|
|
|
Fiscal 2016 |
|
|
|
|
|
|
|
|
October 26, 2016 |
| December 16, 2016 |
| December 30, 2016 |
| $ | 0.29 |
|
July 28, 2016 |
| September 16, 2016 |
| September 30, 2016 |
|
| 0.29 |
|
April 28, 2016 |
| June 16, 2016 |
| June 30, 2016 |
|
| 0.29 |
|
February 15, 2016 |
| March 17, 2016 |
| March 31, 2016 |
|
| 0.29 |
|
Total (2016) |
|
|
|
|
| $ | 1.16 | (1) |
|
|
|
|
|
|
|
|
|
Fiscal 2015 |
|
|
|
|
|
|
|
|
November 2, 2015 |
| December 16, 2015 |
| December 31, 2015 |
| $ | 0.29 |
|
July 30, 2015 |
| September 16, 2015 |
| September 30, 2015 |
|
| 0.29 |
|
April 27, 2015 |
| June 16, 2015 |
| June 30, 2015 |
|
| 0.29 |
|
February 19, 2015 |
| March 17, 2015 |
| March 31, 2015 |
|
| 0.27 |
|
Total (2015) |
|
|
|
|
| $ | 1.14 | (2) |
Date Declared | Record Date | Payment Date | Total | GAAP net | Distributions in | ||||||||||
Fiscal 2022(1) |
|
|
|
|
| ||||||||||
July 21, 2022 | December 16, 2022 | December 30, 2022 | $ | 0.035 | $ | N/A |
| $ | — |
| |||||
July 21, 2022 | November 16, 2022 | November 30, 2022 |
| 0.035 |
| N/A |
|
| — |
| |||||
July 21, 2022 | October 17, 2022 | October 31, 2022 |
| 0.035 |
| N/A |
|
| — |
| |||||
Total (Fourth Quarter 2022) |
| 0.105 |
| —(3) |
|
| — |
| |||||||
|
|
|
|
| |||||||||||
April 21, 2022 | September 16, 2022 | September 30, 2022 |
| 0.035 |
| N/A |
|
| — |
| |||||
April 21, 2022 | August 17, 2022 | August 31, 2022 |
| 0.035 |
| N/A |
|
| — |
| |||||
April 21, 2022 | July 15, 2022 | July 29, 2022 |
| 0.035 |
| N/A |
|
| — |
| |||||
Total (Third Quarter 2022) |
| 0.105 |
| —(3) |
|
| — |
| |||||||
|
|
|
|
| |||||||||||
March 1, 2022 | June 16, 2022 | June 30, 2022 |
| 0.035 |
| N/A |
|
| — |
| |||||
March 1, 2022 | May 17, 2022 | May 31, 2022 |
| 0.035 |
| N/A |
|
| — |
| |||||
March 1, 2022 | April 15, 2022 | April 29, 2022 |
| 0.035 |
| N/A |
|
| — |
| |||||
Total (Second Quarter 2022) |
| 0.105 |
| 0.09 |
|
| 0.02 |
| |||||||
|
|
|
|
| |||||||||||
October 22, 2021 | March 17, 2022 | March 31, 2022 |
| 0.035 |
| N/A |
|
| — |
| |||||
October 22, 2021 | February 14, 2022 | February 28, 2022 |
| 0.035 |
| N/A |
|
| — |
| |||||
October 22, 2021 | January 17, 2022 | January 31, 2022 |
| 0.035 |
| N/A |
|
| — |
| |||||
Total (First Quarter 2022) |
| 0.105 |
| 0.09 |
|
| 0.02 |
| |||||||
|
|
|
|
| |||||||||||
Fiscal 2021(1) |
|
|
|
|
| ||||||||||
July 22,2021 | December 17, 2021 | December 31, 2021 | $ | 0.035 | $ | N/A |
| $ | — |
| |||||
July 22,2021 | November 16, 2021 | November 30, 2021 |
| 0.035 |
| N/A |
|
| — |
| |||||
July 22,2021 | October 15, 2021 | October 29, 2021 |
| 0.035 |
| N/A |
|
| — |
| |||||
Total (Fourth Quarter 2021) |
| 0.105 |
| 0.09 |
|
| 0.02 |
| |||||||
|
|
|
|
| |||||||||||
April 22, 2021 | September 16, 2021 | September 30, 2021 |
| 0.035 |
| N/A |
|
| — |
| |||||
April 22, 2021 | August 17, 2021 | August 31, 2021 |
| 0.035 |
| N/A |
|
| — |
| |||||
April 22, 2021 | July 16, 2021 | July 30, 2021 |
| 0.035 |
| N/A |
|
| — |
| |||||
Total (Third Quarter 2021) |
| 0.105 |
| 0.08 |
|
| 0.02 |
| |||||||
|
|
|
|
| |||||||||||
February 23, 2021 | June 16, 2021 | June 30, 2021 |
| 0.035 |
| N/A |
|
| — |
| |||||
February 23, 2021 | May 14, 2021 | May 28, 2021 |
| 0.035 |
| N/A |
|
| — |
| |||||
February 23, 2021 | April 16, 2021 | April 30, 2021 |
| 0.035 |
| N/A |
|
| — |
| |||||
Total (Second Quarter 2021) |
| 0.105 |
| 0.06 |
|
| 0.05 |
| |||||||
|
|
|
|
| |||||||||||
October 22, 2020 | March 17, 2021 | March 31, 2021 |
| 0.035 |
| N/A |
|
| — |
| |||||
October 22, 2020 | February 12, 2021 | February 26, 2021 |
| 0.035 |
| N/A |
|
| — |
| |||||
October 22, 2020 | January 15, 2021 | January 29, 2021 |
| 0.035 |
| N/A |
|
| — |
| |||||
Total (First Quarter 2021) |
| 0.105 |
| 0.10 |
|
| — |
| |||||||
Total (2021) | $ | 0.42 | $ | 0.32 | (2) | $ | 0.10 | (2) |
____________
(1) Includes a taxableThe tax characterization of cash distributions for the year ending December 31, 2022 and year ended December 31, 2021 will not be known until the tax return for such years are finalized. For the year ending December 31, 2022 and year ended December 31, 2021, the amounts and sources of capitaldistributions reported are only estimates and are not being provided for U.S. tax reporting purposes. The final determination of approximately $0.59 per sharethe source of all distributions in 2022 and 2021 will be made after year-end and the amounts represented may be materially different from the amounts disclosed in the final Form 1099-DIV notice. The actual amounts and sources of the amounts for tax purposes.reporting purposes will depend upon the Company’s investment performance and may be subject to change based on tax regulations.
(2) Includes a taxable returnTotals may not sum due to rounding.
(3) We have not yet reported investment income for this period.
59
Table of capital of approximately $0.08 per share for tax purposes.Contents
71
Related Parties
We have a number of business relationships with affiliated or related parties, including the following:
• We have entered into the Investment Advisory Agreement with TICCOxford Square Management. TICCOxford Square Management is controlled by BDC Partners,Oxford Funds, its managing member. BDC Partners,In addition to Oxford Funds, Oxford Square Management is owned by Charles M. Royce, a member of our Board, who holds a minority, non-controlling interest in Oxford Square Management as the non-managing member. Oxford Funds, as the managing member of TICCOxford Square Management, manages the business and internal affairs of TICCOxford Square Management. In addition, BDC PartnersOxford Funds provides us with office facilities and administrative services pursuant to the Administration Agreement. Jonathan H. Cohen is the managing member of and controls BDC Partners. Saul B. Rosenthal is also the President of TICC Management and a member of BDC Partners.
Charles M. Royce has a minority, non-controlling interest in TICC Management, but he does not take part in the management or participate in the operations of TICC Management.
• Messrs. Cohen and Rosenthal also currently serve as Chief Executive Officer and President, respectively, at Oxford BridgeGate Management, LLC, the investment adviser to the Oxford Gate Funds and Oxford Bridge LLC, a private fund that invests principally in the equity of CLOs. BDC PartnersII, LLC. Oxford Funds is the managing member of Oxford BridgeGate Management, LLC. In addition, Bruce L. Rubin serves as the Chief Financial Officer and Secretary, and Gerald Cummins serves as the Chief Compliance Officer, respectively, of Oxford BridgeGate Management, LLC.
• Messrs. Cohen and Rosenthal currently serve as Chief Executive Officer and President, respectively, of Oxford Lane Capital Corp., a non-diversified closed-endclosed-end management investment company that invests primarily in equity and junior debt tranches of CLO vehicles, and its investment adviser, Oxford Lane Management, LLC. BDC PartnersOxford Funds provides Oxford Lane Capital Corp. with office facilities and administrative services pursuant to an administration agreement and also serves as the managing member of Oxford Lane Management, LLC. In addition, Bruce L. Rubin serves as the Chief Financial Officer, Treasurer and Corporate Secretary of Oxford Lane Capital Corp. and Chief Financial Officer and Treasurer of Oxford Lane Management, LLC, and Mr. Cummins serves as the Chief Compliance Officer of Oxford Lane Capital Corp. and Oxford Lane Management, LLC.
As a result, certain conflicts of interest may arise with respect to the management of our portfolio by Messrs. Cohen and Rosenthal on the one hand, and the obligations of Messrs. Cohen and Rosenthal to manage Oxford Lane Capital Corp. and, Oxford Bridge II, LLC and the Oxford Gate Funds, respectively, on the other hand.
TICCOxford Square Management, Oxford Lane Management, LLC and Oxford BridgeGate Management, LLC are subject to a written policy with respect to the allocation of investment opportunities among TICC,the Company, Oxford Lane Capital Corp. and, Oxford Bridge LLC.II, LLC and the Oxford Gate Funds. Where investments are suitable for more than one entity, the allocation policy generally provides that, depending on size and subject to current and anticipated cash availability, the absolute size of the investment as well as its relative size compared to the total assets of each entity, current and anticipated weighted average costs of capital, among other factors, an investment amount will be determined by the adviser to each entity. If the investment opportunity is sufficient for each entity to receive its investment amount, then each entity receives the investment amount; otherwise, the investment amount is reduced pro rata. On June 14, 2017, the Securities and Exchange Commission issued an order permitting TICCthe Company and certain of its affiliates to complete negotiated co-investmentco-investment transactions in portfolio companies, subject to certain conditions (the “Order”). Subject to satisfaction of certain conditions to the Order, TICCthe Company and certain of its affiliates are now permitted, together with any future BDCs, registered closed-endclosed-end funds and certain private funds, each of whose investment adviser is TICC’sthe Company’s investment adviser or an investment adviser controlling, controlled by, or under common control with TICC’sthe Company’s investment adviser, to co-investco-invest in negotiated investment opportunities where doing so would otherwise be prohibited under the 1940 Act, providing TICC’sthe Company’s stockholders with access to a broader array of investment opportunities. Pursuant to the Order, we are permitted to co-investco-invest in such investment opportunities with our affiliates 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-investmentco-investment transaction, including, but not limited to, that (1) the terms of the potential co-investmentco-investment transaction, 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 potential co-investmentco-investment transaction is consistent with the interests of our stockholders and is consistent with our then-currentthen-current investment objective and strategies.
60
In the ordinary course of business, we may enter into transactions with portfolio companies that may be considered related party transactions. In order to ensure that we do not engage in any prohibited transactions with any persons affiliated with us, we have implemented certain policies and procedures whereby our executive officers screen each of our transactions for any possible affiliations between the proposed portfolio investment, us, companies controlled by us and our employees and directors. We will not enter into any agreements unless and until we are satisfied that doing so will not raise concerns under
72
the 1940 Act or, if such concerns exist, we have taken appropriate actions to seek board review and approval or exemptive relief for such transaction. Our Board of Directors reviews these procedures on an annual basis.
We have also adopted a Code of Business Conduct and Ethics which applies to among others, our senior officers, including our Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Business Conduct and Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Code of Business Conduct and Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict. Our Audit Committee is charged with approving any waivers under our Code of Business Conduct and Ethics. As required by the NASDAQ Global Select Market corporate governance listing standards, the Audit Committee of our Board of Directors is also required to review and approve any transactions with related parties (as such term is defined in Item 404 of Regulation S-K)S-K).
Information concerning related party transactions is included in the consolidated financial statements and related notes, appearing elsewhere in this quarterly report on Form 10-Q.10-Q.
73
RECENT DEVELOPMENTS
On October 27, 2017, the BoardThe following distributions payable to stockholders are shown below:
Date Declared | Record Date | Payable Dates | Per Share | |||
April 21, 2022 | July 15, 2022 | July 29, 2022 | $0.035 | |||
April 21, 2022 | August 17, 2022 | August 31, 2022 | $0.035 | |||
April 21, 2022 | September 16, 2022 | September 30, 2022 | $0.035 | |||
July 21, 2022 | October 17, 2022 | October 31, 2022 | $0.035 | |||
July 21, 2022 | November 16, 2022 | November 30, 2022 | $0.035 | |||
July 21, 2022 | December 16, 2022 | December 30, 2022 | $0.035 |
61
On November 1, 2017, the Convertible Notes matured and were repaid in full (approximately $94.5 million) in accordance with their terms.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are subject to financial market risks, including changes in interest rates. As of SeptemberJune 30, 2017, one2022, all debt investmentinvestments in our portfolio was at a fixed rate, and the remaining 25 debt investments were at variable interest rates, representing approximately $0.8 million and $243.6$311.4 million in principal debt, respectively. At Septemberdebt. As of June 30, 2017, all2022, three of our variable rate investments were income producing.on non-accrual status, all of which are invested in the same portfolio company. The variable rates are generally based upon the five-yearfive-year U.S. Department of Treasury note, the Prime rate, SOFR, or LIBOR, and, in the case of our bilateral investments, are generally reset annually, whereas our non-bilateralnon-bilateral investments generally reset quarterly. We expect that future debt investments will generally be made at variable rates. Many of the variable rate investments contain interest rate floors.
To illustrate the potential impact of a changeWe may in the underlyingfuture hedge against interest rate onfluctuations by using standard hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our net investment income as it pertainsability to our debt portfolio, we have assumed a 1% increaseparticipate in the underlying five-year Treasury note, the Prime rate or LIBOR, and no other change in our portfolio asbenefits of September 30, 2017. We have also assumed no outstanding variable rate borrowings duelower interest rates with respect to the repayment of the TICC CLO 2012-1 secured notes. Under this analysis, net investment income would increase by $2.4 million on an annualized basis, reflecting the amount of investments in our portfolio with fixed interest rates.
On March 5, 2021, the United Kingdom’s Financial Conduct Authority (the “FCA”), which have impliedregulates LIBOR, announced that (i) 24 LIBOR settings would cease to exist immediately after December 31, 2021 (all seven euro LIBOR settings; all seven Swiss franc LIBOR settings; the Spot Next, 1-week, 2-month, and 12-month Japanese yen LIBOR settings; the overnight, 1-week, 2-month, and 12-month sterling LIBOR settings; and the 1-week and 2-month US dollar LIBOR settings) and (ii) the overnight and 1, 3, 6 and 12-month US LIBOR settings would cease to exist after June 30, 2023; and (iii) the FCA would consult on whether the remaining LIBOR settings should continue to be published on a synthetic basis for a certain period using the FCA’s proposed new powers that the UK government is legislating to grant to them. Additionally, on March 15, 2022, President Biden signed into law the Consolidated Appropriations Act of 2022, which among other things, provides for the use of interest rates based on SOFR in certain contracts currently based on LIBOR and a safe harbor from liability for utilizing SOFR-based interest rates as a replacement for LIBOR.
Based on our Statements of Assets and Liabilities as of June 30, 2022, the following table shows the annualized impact on net investment income of hypothetical base rate changes in interest rates for our settled investments (considering interest rate floors that would be unaffected byfor floating rate instruments), excluding CLO equity investments. The base interest rate case assumes the rates on our portfolio investments remain unchanged from the actual effective interest rates as of June 30, 2022. These hypothetical calculations are based on a 1% changemodel of the investments in our portfolio, held as of June 30, 2022, and are only adjusted for assumed changes in the underlying base interest rate.rates. Although management believes that this analysis is indicative of our existing interest rate sensitivity, it does not adjust for changes in the credit quality, size and composition of our portfolio, and other business developments, including a change in the level of our borrowings, that could affect the net increase (or decrease) in net assets resulting from operations. Accordingly, no assurances can be given that actual results would not differ materially from the results under this hypothetical analysis.
Hypothetical Change in Base Rates | Estimated Percentage change in Investment Income | ||
Up 300 basis points | 21.4 | % | |
Up 200 basis points | 14.3 | % | |
Up 100 basis points | 7.1 | % | |
Down 25 basis points | (1.7 | )% | |
Down 50 basis points | (3.4 | )% | |
Down 100 basis points | (6.0 | )% |
We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits62
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
As of SeptemberJune 30, 20172022 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e)13a-15(e) of the Securities Exchange Act of 1934, as amended). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefitcost-benefit relationship of such possible controls and procedures.
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(b) Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f)13a-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during the quarter ended SeptemberJune 30, 20172022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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We are not currently subject to any material legal proceedings. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings, if any, cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Item 1A. Risk Factors1A (Risk Factors) in our Annual Report on Form 10-K10-K for the fiscal year ended December 31, 2016, which could materially affect our business, financial condition and/or operating results.2021. The risks described in our Annual Report on Form 10-K10-K are not the only risks facing our company.us. 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. ThereOther than the risk factors set forth below, there have been no material changes known to us during the ninesix months ended SeptemberJune 30, 20172022, to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K10-K for the year ended December 31, 2016.2021.
The Russian invasion of Ukraine may have a material adverse impact on us and our portfolio companies.
On February 24, 2022, the President of Russia, Vladimir Putin, announced a military invasion of Ukraine. In response, countries worldwide, including the United States, have imposed sanctions against Russia on certain businesses and individuals, including, but not limited to, those in the banking, import and export sectors. This invasion has led, is currently leading, and for an unknown period of time will continue to lead to disruptions in local, regional, national, and global markets and economies affected thereby. These disruptions caused by the invasion have included, and may continue to include, political, social, and economic disruptions and uncertainties that may affect our business operations or the business operations of our portfolio companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Sales of Unregistered Equity Securities
WeWhile we did not engage in unregistered sales of equity securities during the three months ended SeptemberJune 30, 2017, and2022, we did not issueissued 39,718 shares of common stock under our distribution reinvestment plan. This issuance was not subject to the registration requirements of the Securities Act of 1933, as amended. The aggregate value for the shares of common stock issued under the distribution reinvestment plan during the three months ended June 30, 2022 was approximately $146,000.
Issuer Purchases of Equity Securities
During the quarterthree months ended SeptemberJune 30, 2017, as part of our dividend reinvestment plan for our common stockholders, our dividend reinvestment administrator purchased 45,183 shares of our2022, no common stock for $0.3 million inwas repurchased by the open market to satisfy the reinvestment portion of our dividends.Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
None.
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The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:
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* Filed herewith
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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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