UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2016
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
COMMISSION FILE NUMBER: 1-36447
ALCENTRA CAPITAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Maryland | 46-2961489 | |
(State or other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
200 Park Avenue, 7th Floor
New York, NY 10166
(Address of Principal Executive Offices) (Zip Code)
(212) 922-8240
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | x | |||
Non-accelerated filer | ¨ (do not check if a smaller reporting company) | Smaller reporting company | ¨ | |||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
There were 13,490,636 shares of the Registrant’s common stock outstanding as of August 4, 2016.
ALCENTRA CAPITAL CORPORATION
TABLE OF CONTENTS
2 |
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Alcentra Capital Corporation and Subsidiary
Consolidated Statements of Assets and Liabilities
As of June 30, 2016 (Unaudited) | As of December 31, 2015 | |||||||
Assets | ||||||||
Portfolio investments, at fair value | ||||||||
Non-controlled, non-affiliated investments, at fair value (cost of $236,246,942 and $219,715,263, respectively) | $ | 228,320,326 | $ | 221,349,073 | ||||
Non-controlled, affiliated investments, at fair value (cost of $47,758,791 and $56,426,475, respectively) | 50,927,904 | 59,243,999 | ||||||
Controlled, affiliated investments, at fair value (cost $14,788,295 and $27,289,995, respectively) | 14,390,754 | 15,748,539 | ||||||
Total of portfolio investments, at fair value (cost $298,794,028 and $303,431,733, respectively) | 293,638,984 | 296,341,611 | ||||||
Cash | 5,038,752 | 4,866,972 | ||||||
Dividends and interest receivable | 1,517,925 | 2,607,205 | ||||||
Receivable for investments sold | 1,364,550 | — | ||||||
Deferred financing costs | 1,801,484 | 2,183,881 | ||||||
Deferred tax asset | 927,632 | 1,382,408 | ||||||
Prepaid expenses and other assets | 249,005 | 113,730 | ||||||
Total Assets | $ | 304,538,332 | $ | 307,495,807 | ||||
Liabilities | ||||||||
Credit facility payable | $ | 51,685,846 | $ | 63,504,738 | ||||
Notes payable (net of deferred note offering costs of $1,413,937 and $1,156,622, respectively) | 50,130,063 | 38,843,378 | ||||||
Other accrued expenses and liabilities | 278,021 | 271,801 | ||||||
Directors’ fees payable | 72,500 | 37,025 | ||||||
Professional fees payable | 235,067 | 481,333 | ||||||
Interest and credit facility expense payable | 974,292 | 813,222 | ||||||
Management fee payable | 1,283,763 | 1,302,213 | ||||||
Income-based incentive fees payable | 2,023,682 | 1,081,797 | ||||||
Distributions payable | 4,586,816 | 4,595,700 | ||||||
Unearned structuring fee revenue | 1,354,846 | 689,577 | ||||||
Income tax liability | 825,900 | 842,812 | ||||||
Total Liabilities | 113,450,796 | 112,463,596 | ||||||
Commitments and Contingencies (Note 12) | ||||||||
Net Assets | ||||||||
Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,490,636 and 13,516,766 shares issued and outstanding, respectively) | 13,491 | 13,517 | ||||||
Additional paid-in capital | 197,181,027 | 197,652,086 | ||||||
Accumulated net realized gain (loss) | (4,440,768 | ) | 2,791,590 | |||||
Undistributed net investment income | 3,451,048 | 1,130,327 | ||||||
Net unrealized appreciation (depreciation) on investments, net of benefit/(provision) for taxes of $37,782 and $534,813 as of June 30, 2016 and December 31, 2015, respectively | (5,117,262 | ) | (6,555,309 | ) | ||||
Total Net Assets | 191,087,536 | 195,032,211 | ||||||
Total Liabilities and Net Assets | $ | 304,538,332 | $ | 307,495,807 | ||||
Net Asset Value Per Share | $ | 14.16 | $ | 14.43 |
See notes to unaudited consolidated financial statements
3 |
Alcentra Capital Corporation and Subsidiary
Consolidated Statements of Operations
For the three months ended June 30, 2016 (Unaudited) | For the three months ended June 30, 2015 (Unaudited) | For the six months ended June 30, 2016 (Unaudited) | For the six months ended June 30, 2015 (Unaudited) | |||||||||||||
Investment Income: | ||||||||||||||||
From non-controlled, non-affiliated investments: | ||||||||||||||||
Interest income from portfolio investments | $ | 5,169,619 | $ | 4,286,969 | $ | 10,437,162 | $ | 8,444,528 | ||||||||
Paid-in-kind interest income from portfolio investments | 1,008,525 | 1,166,440 | 2,359,613 | 1,902,164 | ||||||||||||
Other income from portfolio investments | 652,786 | 295,386 | 1,571,450 | 955,282 | ||||||||||||
Dividend income from portfolio investments | — | 302,874 | — | 302,874 | ||||||||||||
From non-controlled, affiliated investments: | ||||||||||||||||
Interest income from portfolio investments | 785,044 | 988,949 | 1,695,367 | 2,208,005 | ||||||||||||
Paid in-kind income from portfolio investments | 634,025 | 631,046 | 1,485,164 | 1,242,545 | ||||||||||||
Other income from portfolio investments | 1,845,055 | 20,527 | 1,950,937 | 48,885 | ||||||||||||
From controlled, affiliated investments: | ||||||||||||||||
Interest income from portfolio investments | 382,888 | 582,229 | 764,635 | 1,158,209 | ||||||||||||
Paid in-kind income from portfolio investments | 162,027 | 206,077 | 322,032 | 404,858 | ||||||||||||
Other income from portfolio investments | — | 27,043 | — | 64,843 | ||||||||||||
Total investment income | 10,639,969 | 8,507,540 | 20,586,360 | 16,732,193 | ||||||||||||
Expenses: | ||||||||||||||||
Management fees | 1,283,763 | 1,219,963 | 2,572,799 | 2,367,968 | ||||||||||||
Income-based incentive fees | 926,158 | 397,028 | 1,716,885 | 1,203,128 | ||||||||||||
Capital gains incentive fees | — | 434,217 | — | 1,435,684 | ||||||||||||
Professional fees | 372,535 | 170,549 | 726,537 | 359,935 | ||||||||||||
Valuation services | 71,061 | 100,010 | 142,047 | 222,915 | ||||||||||||
Interest and credit facility expense | 1,334,510 | 1,067,118 | 2,643,454 | 1,673,006 | ||||||||||||
Amortization of deferred financing costs | 283,805 | 195,770 | 548,435 | 379,257 | ||||||||||||
Directors’ fees | 84,372 | 76,191 | 149,295 | 114,191 | ||||||||||||
Insurance expense | 65,771 | 68,006 | 132,381 | 137,541 | ||||||||||||
Other expenses | 319,648 | 129,339 | 451,289 | 213,512 | ||||||||||||
Total expenses | 4,741,623 | 3,858,191 | 9,083,122 | 8,107,137 | ||||||||||||
Waiver of capital gains incentive fees | — | — | — | (1,001,467 | ) | |||||||||||
Net expenses | 4,741,623 | 3,858,191 | 9,083,122 | 7,105,670 | ||||||||||||
Net investment income | 5,898,346 | 4,649,349 | 11,503,238 | 9,626,523 | ||||||||||||
Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) From Portfolio Investments | ||||||||||||||||
Net realized gain (loss) on: | ||||||||||||||||
Non-controlled, non-affiliated investments | 23,802 | (146,703 | ) | 1,900,440 | (146,449 | ) | ||||||||||
Non-controlled, affiliated investments | 1,626,964 | — | 2,021,697 | — | ||||||||||||
Controlled, affiliated investments | — | — | (11,154,495 | ) | — | |||||||||||
Net realized gain (loss) from portfolio investments | 1,650,766 | (146,703 | ) | (7,232,358 | ) | (146,449 | ) | |||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Non-controlled, non-affiliated investments | (3,575,425 | ) | 587,925 | (9,560,426 | ) | (535,989 | ) | |||||||||
Non-controlled, affiliated investments | (2,228,352 | ) | 2,016,324 | 351,589 | 3,412,598 | |||||||||||
Controlled, affiliated investments | (62,999 | ) | (286,458 | ) | 11,143,915 | (382,031 | ) | |||||||||
Net change in unrealized appreciation (depreciation) from portfolio investments | (5,866,776 | ) | 2,317,791 | 1,935,078 | 2,494,578 | |||||||||||
Benefit/(Provision) for taxes on unrealized gain on investments | (287,167 | ) | (406,781 | ) | (497,031 | ) | (569,105 | ) | ||||||||
Net realized gain (loss) and net change in unrealized appreciation (depreciation) from portfolio investments | (4,503,171 | ) | 1,764,307 | (5,794,311 | ) | 1,779,024 | ||||||||||
Net Increase in Net Assets Resulting from Operations | $ | 1,395,169 | $ | 6,413,656 | $ | 5,708,927 | $ | 11,405,547 | ||||||||
Basic and diluted: | ||||||||||||||||
Net investment income per share | $ | 0.44 | $ | 0.34 | $ | 0.85 | $ | 0.71 | ||||||||
Earnings per share | $ | 0.10 | $ | 0.47 | $ | 0.42 | $ | 0.84 | ||||||||
Weighted Average Shares of Common Stock Outstanding | 13,500,429 | 13,516,766 | 13,507,973 | 13,516,766 | ||||||||||||
Dividends declared per common share | $ | 0.340 | $ | 0.340 | $ | 0.680 | $ | 0.680 |
See notes to unaudited consolidated financial statements
4 |
Alcentra Capital Corporation and Subsidiary
Consolidated Statements of Changes in Net Assets
For the six months ended June 30, 2016 (Unaudited) | For the six months ended June 30, 2015 (Unaudited) | |||||||
Increase (decrease) in net assets resulting from operations | ||||||||
Net investment income | $ | 11,503,238 | $ | 9,626,523 | ||||
Net realized loss on investments | (7,232,358 | ) | (146,449 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 1,935,078 | 2,494,578 | ||||||
Benefits/(Provision) for taxes on unrealized gain on investments | (497,031 | ) | (569,105 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 5,708,927 | 11,405,547 | ||||||
Capital transactions | ||||||||
Offering costs | (165,635 | ) | (72,397 | ) | ||||
Repurchase of common stock (26,130 and 0 shares, respectively) | (305,450 | ) | — | |||||
Net increase (decrease) in net assets resulting from capital transactions | (471,085 | ) | (72,397 | ) | ||||
Distributions to shareholders from: | ||||||||
Net investment income | (9,182,517 | ) | (9,191,401 | ) | ||||
Realized gains | — | — | ||||||
Total distributions to shareholders | (9,182,517 | ) | (9,191,401 | ) | ||||
Total increase (decrease) in net assets | (3,944,675 | ) | 2,141,749 | |||||
Net assets at beginning of period | 195,032,211 | 200,989,308 | ||||||
Net assets at end of period [including Accumulated net investment income of $3,451,048 and $646,968, respectively] | $ | 191,087,536 | $ | 203,131,057 |
See notes to unaudited consolidated financial statements
5 |
Alcentra Capital Corporation and Subsidiary
Consolidated Statements of Cash Flows
For the six months ended June 30, 2016 (Unaudited) | For the six months ended June 30, 2015 (Unaudited) | |||||||
Cash Flows from Operating Activities | ||||||||
Net increase in net assets resulting from operations | $ | 5,708,927 | $ | 11,405,547 | ||||
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities: | ||||||||
Net realized loss from portfolio investments | 7,232,358 | 146,449 | ||||||
Net change in unrealized (appreciation) depreciation of portfolio investments | (1,935,078 | ) | (2,494,578 | ) | ||||
Deferred tax asset | 454,776 | — | ||||||
Deferred tax liability | — | 381,367 | ||||||
Paid in-kind interest income from portfolio investments | (4,166,809 | ) | (3,549,567 | ) | ||||
Accretion of discount on debt securities | (203,639 | ) | (276,958 | ) | ||||
Purchases of portfolio investments | (69,555,393 | ) | (52,542,290 | ) | ||||
Net proceeds from sales/return of capital of portfolio investments | 71,331,188 | 32,061,599 | ||||||
Amortization of deferred financing costs | 548,435 | 379,257 | ||||||
(Increase) decrease in operating assets: | ||||||||
Dividends and interest receivable | 1,089,280 | 168,275 | ||||||
Receivable for investments sold | (1,364,550 | ) | 4,753 | |||||
Prepaid expenses and other assets | (135,275 | ) | 91,944 | |||||
Increase (decrease) in operating liabilities: | ||||||||
Payable for investments purchased | — | (8,717 | ) | |||||
Other accrued expenses and liabilities | 6,220 | (252,373 | ) | |||||
Directors’ fees payable | 35,475 | (10,442 | ) | |||||
Professional fees payable | (246,266 | ) | 108,633 | |||||
Interest and credit facility expense payable | 161,070 | 564,046 | ||||||
Management fee payable | (18,450 | ) | 604,295 | |||||
Income-based incentive fees payable | 941,885 | 1,203,128 | ||||||
Capital gains incentive fees payable | — | 434,217 | ||||||
Unearned structuring fee revenue | 665,269 | 58,420 | ||||||
Income tax | (16,912 | ) | 142,466 | |||||
Net cash provided by (used in) operating activities | 10,532,511 | (11,380,529 | ) | |||||
Cash Flows from Financing Activities | ||||||||
Financing costs paid | (166,038 | ) | (112,501 | ) | ||||
Offering costs paid | (422,950 | ) | (1,087,164 | ) | ||||
Proceeds from credit facility payable | 51,500,000 | 102,452,027 | ||||||
Repayments of credit facility payable | (63,318,892 | ) | (126,896,443 | ) | ||||
Proceeds from notes payable | 11,544,000 | 40,000,000 | ||||||
Distributions paid to shareholders | (9,191,401 | ) | (9,191,401 | ) | ||||
Repurchase of common stock | (305,450 | ) | — | |||||
Net cash used in financing activities | (10,360,731 | ) | 5,164,518 | |||||
Increase/(Decrease) in cash and cash equivalents | 171,780 | (6,216,011 | ) | |||||
Cash at beginning of period | 4,866,972 | 10,022,617 | ||||||
Cash and Cash Equivalents at End of Period | $ | 5,038,752 | $ | 3,806,606 | ||||
Supplemental and non-cash financing activities: | ||||||||
Cash paid during the period for interest | $ | 2,482,384 | $ | 1,857,795 | ||||
Accrued offering costs | $ | 2,485 | $ | 2,485 | ||||
Accrued distributions payable | $ | 4,586,816 | $ | 4,595,700 |
See notes to unaudited consolidated financial statements
6 |
Alcentra Capital Corporation and Subsidiary
Consolidated Schedule of Investments
As of June 30, 2016
(Unaudited)
Company*** | Industry | Interest Rate | Base Rate Floor | Maturity Date | No. Shares/ Principal Amount | Cost(1) | Fair Value | % of Net Assets | ||||||||||||||||
Investments in Non-Controlled, Non-Affiliated Portfolio Companies — 119.49% | ||||||||||||||||||||||||
Senior Secured - First Lien — 33.75% | ||||||||||||||||||||||||
A2Z Wireless Holdings, Inc.(2) | Telecommunications | LIBOR + 9.0% Cash | 1.00% | 1/15/2021 | 14,812,500 | $ | 14,664,375 | $ | 14,812,500 | 7.75 | % | |||||||||||||
Aphena Pharma Solutions(3) | Packaging | 8.50% Cash, 2.0% PIK | 3/3/2019 | 1,828,584 | 1,828,584 | 1,828,584 | 0.96 | % | ||||||||||||||||
Black Diamond Rentals | Oil & Gas Services | 12% Cash, 5.0% PIK | 7/9/2018 | 5,785,712 | 5,785,712 | 5,785,712 | 3.03 | % | ||||||||||||||||
IGT(2),(4) | Industrial Services | LIBOR + 8.75% Cash, 1.5% PIK | 1.00% | 12/10/2019 | 8,041,749 | 7,974,266 | 8,041,749 | 4.21 | % | |||||||||||||||
NTI Holdings, LLC(2) | Telecommunications | LIBOR + 8.0% Cash | 1.00% | 3/30/2021 | 11,936,269 | 11,734,391 | 11,734,391 | 6.14 | % | |||||||||||||||
NWN Corporation(2) | Technology & IT | LIBOR + 9.0% Cash | 1.00% | 10/16/2020 | 4,906,250 | 4,808,125 | 4,906,250 | 2.57 | % | |||||||||||||||
Stancor, Inc.(2) | Wholesale/Distribution | LIBOR + 8.0% | 0.75% | 8/19/2019 | 5,981,818 | 5,981,818 | 5,981,818 | 3.13 | % | |||||||||||||||
Superior Controls, Inc.(2),(4) | High Tech Industries | LIBOR + 8.75% | 1.00% | 3/22/2021 | 10,200,000 | 10,200,000 | 10,200,000 | 5.33 | % | |||||||||||||||
Triton Technologies(3) | Call Center Services | 8.50% Cash, 2.0% PIK | 10/23/2018 | 1,200,000 | 1,189,891 | 1,200,000 | 0.63 | % | ||||||||||||||||
Total Senior Secured - First Lien | 64,167,162 | 64,491,004 | 33.75 | % | ||||||||||||||||||||
Senior Secured - Second Lien — 44.45% | ||||||||||||||||||||||||
Alpine Waste(2) | Waste Services | LIBOR + 9.0% Cash, 2.0% PIK | 1.00% | 12/30/2020 | 11,117,571 | $ | 11,117,571 | $ | 11,117,571 | 5.82 | % | |||||||||||||
Bioventus(2) | Healthcare Services | LIBOR + 10.0% Cash | 1.00% | 4/10/2020 | 12,000,000 | 11,831,706 | 12,000,000 | 6.28 | % | |||||||||||||||
Conisus LLC(2) | Media: Advertising, Printing & Publishing | LIBOR + 8.75% Cash | 1.00% | 6/23/2021 | 11,750,000 | 11,750,000 | 11,750,000 | 6.15 | % | |||||||||||||||
Duke Finance, LLC(2) | Industrial Manufacturing | LIBOR + 9.75% Cash | 1.00% | 10/28/2022 | 7,500,000 | 6,681,562 | 6,675,000 | 3.49 | % | |||||||||||||||
Graco Supply Company | Aerospace | 12% Cash | 3/17/2021 | 4,000,000 | 4,000,000 | 4,000,000 | 2.09 | % | ||||||||||||||||
Healthcare Associates of Texas, LLC(4) | Healthcare Services | 12.25% Cash | 4/30/2022 | 8,500,000 | 8,500,000 | 8,500,000 | 4.45 | % | ||||||||||||||||
Medsurant Holdings, LLC | Healthcare Services | 12.25% Cash | 6/18/2021 | 6,200,000 | 6,138,000 | 6,200,000 | 3.25 | % | ||||||||||||||||
My Alarm Center, LLC(2) | Security | LIBOR + 11.0% Cash | 1.00% | 7/9/2019 | 9,500,000 | 9,500,000 | 9,500,000 | 4.97 | % | |||||||||||||||
Nation Safe Drivers (NSD)(2) | Automotive Business Services | LIBOR + 8.0% Cash | 2.00% | 9/29/2020 | 11,721,154 | 11,721,154 | 11,883,000 | 6.22 | % | |||||||||||||||
Xpress Global Systems, LLC(2) | Transportation Logistics | LIBOR + 10.5%, 2% PIK | 1.00% | 4/10/2020 | 5,440,973 | 5,033,152 | 3,304,000 | 1.73 | % | |||||||||||||||
Total Senior Secured - Second Lien | 86,273,145 | 84,929,571 | 44.45 | % | ||||||||||||||||||||
Senior Subordinated — 26.16% | ||||||||||||||||||||||||
Black Diamond Rentals | Oil & Gas Services | 4.0% Cash | 7/9/2018 | 7,968,642 | $ | 7,968,642 | $ | 3,758,000 | 1.97 | % | ||||||||||||||
GST Autoleather | Automotive Business Services | 11% Cash, 2.0% PIK | 1/11/2021 | 8,326,382 | 8,326,382 | 8,326,382 | 4.36 | % | ||||||||||||||||
Media Storm, LLC | Media & Entertainment | 10% Cash | 8/28/2019 | 2,454,545 | 2,454,545 | 2,454,545 | 1.28 | % |
See notes to unaudited consolidated financial statements
7 |
Alcentra Capital Corporation and Subsidiary
Consolidated Schedule of Investments (continued)
As of June 30, 2016
(Unaudited)
Company*** | Industry | Interest Rate | Base Rate Floor | Maturity Date | No. Shares/ Principal Amount | Cost(1) | Fair Value | % of Net Assets | ||||||||||||||||
Metal Powder Products LLC(2) | Industrial Manufacturing | LIBOR + 12.25% Cash | 0.75% | 11/5/2021 | 8,250,000 | $ | 8,250,000 | $ | 8,250,000 | 4.32 | % | |||||||||||||
Pharmalogic Holdings Corp. | Healthcare Services | 12% Cash | 9/1/2021 | 17,200,000 | 17,200,000 | 17,200,000 | 9.00 | % | ||||||||||||||||
QRC Holdings, LLC | High Tech Industries | 12.25% Cash | 11/19/2021 | 10,000,000 | 10,000,000 | 10,000,000 | 5.23 | % | ||||||||||||||||
Total Senior Subordinated | 54,199,569 | 49,988,927 | 26.16 | % | ||||||||||||||||||||
Equity/Other — 15.13% | ||||||||||||||||||||||||
Dentistry For Children, Inc., Class A-1 Units(5) | Healthcare Services | 2,000,000 | $ | 2,203,001 | $ | 4,246,000 | 2.22 | % | ||||||||||||||||
IGT, Preferred Shares | Industrial Services | 11% PIK | 1,110,922 | 1,110,922 | — | — | ||||||||||||||||||
Common Shares(5) | 44,000 | 44,000 | — | — | ||||||||||||||||||||
Preferred AA Shares(5) | 270,734 | 270,734 | 270,734 | 0.14 | % | |||||||||||||||||||
1,425,656 | 270,734 | 0.14 | % | |||||||||||||||||||||
Media Storm, LLC, Preferred Shares(5) | Media & Entertainment | 1,216,204 | 2,346,964 | 1,037,000 | 0.54 | % | ||||||||||||||||||
Metal Powder Products, LLC Common Shares(5) | Industrial Manufacturing | 500,000 | 500,000 | 614,000 | 0.32 | % | ||||||||||||||||||
NTI Holdings, LLC Common Shares(5) | Telecommunications | 376,515 | 403,030 | 682,000 | 0.36 | % | ||||||||||||||||||
Warrants(5) | 417,823 | 224,689 | 389,000 | 0.20 | % | |||||||||||||||||||
627,719 | 1,071,000 | 0.56 | % | |||||||||||||||||||||
Response Team Holdings LLC, Preferred Shares | Restoration Services | 12% PIK | 3/28/2019 | 3,108,790 | 3,108,790 | 4,722,000 | 2.47 | % | ||||||||||||||||
Warrants(5) | 5 | — | — | — | ||||||||||||||||||||
3,108,790 | 4,722,000 | 2.47 | % | |||||||||||||||||||||
Superior Controls, Inc., Preferred Shares(5) | High Tech Industries | 400,000 | 400,000 | 464,000 | 0.24 | % | ||||||||||||||||||
Tunnel Hill(5)(6) | Waste Services | 588,570 | 15,505,936 | 12,502,090 | 6.55 | % | ||||||||||||||||||
Wholesome Sweeteners, Inc., Common Shares(5) | Food & Beverage | 5,000 | 5,000,000 | 3,984,000 | 2.09 | % | ||||||||||||||||||
Xpress Global Systems, LLC, Warrants(5) | Transportation Logistics | 489,000 | 489,000 | — | — | |||||||||||||||||||
Total Equity/Other | 31,607,066 | 28,910,824 | 15.13 | % | ||||||||||||||||||||
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies | 236,246,942 | 228,320,326 | 119.49 | % | ||||||||||||||||||||
Investments in Non-Controlled, Affiliated Portfolio Companies — 26.65%* | ||||||||||||||||||||||||
Senior Secured - First Lien — 1.69% | ||||||||||||||||||||||||
Show Media, Inc. | Media & Entertainment | 5.5% Cash, 5.5% PIK | 8/10/2017 | 4,070,295 | $ | 3,915,251 | $ | 3,231,000 | 1.69 | % | ||||||||||||||
Total Senior Secured - First Lien | 3,915,251 | 3,231,000 | 1.69 | % |
See notes to unaudited consolidated financial statements
8 |
Alcentra Capital Corporation and Subsidiary
Consolidated Schedule of Investments (continued)
As of June 30, 2016
(Unaudited)
Company*** | Industry | Interest Rate | Base Rate Floor | Maturity Date | No. Shares/ Principal Amount | Cost(1) | Fair Value | % of Net Assets | ||||||||||||||||
Senior Secured - Second Lien — 4.22% | ||||||||||||||||||||||||
Southern Technical Institute, Inc.(2) | Education | LIBOR + 8.0% Cash, 4% PIK | 1.00% | 12/2/2020 | 8,073,730 | $ | 8,073,730 | $ | 8,074,000 | 4.22 | % | |||||||||||||
Total Senior Secured - Second Lien | 8,073,730 | 8,074,000 | 4.22 | % | ||||||||||||||||||||
Senior Subordinated — 10.61% | ||||||||||||||||||||||||
Battery Solutions, Inc. | Environmental/Recycling Services | 6% Cash, 8% PIK | 11/6/2021 | 2,129,303 | $ | 2,129,303 | $ | 2,129,303 | 1.11 | % | ||||||||||||||
DBI Holding, LLC | Infrastructure Maintenance | 12% Cash, 1% PIK | 9/6/2019 | 9,194,317 | 9,194,317 | 9,470,146 | 4.96 | % | ||||||||||||||||
13% PIK | 9/6/2019 | 9,119,984 | 8,775,430 | 8,666,800 | 4.54 | % | ||||||||||||||||||
17,969,747 | 18,136,946 | 9.50 | % | |||||||||||||||||||||
Total Senior Subordinated | 20,099,050 | 20,266,249 | 10.61 | % | ||||||||||||||||||||
Equity/Other — 10.13% | ||||||||||||||||||||||||
Battery Solutions, Inc., Class A Units(5) | Environmental/Recycling Services | 5,000,000 | $ | 1,058,000 | $ | 365,000 | 0.19 | % | ||||||||||||||||
Class E Units | 8% PIK | 11/6/2021 | 3,664,757 | 3,664,757 | 3,664,757 | 1.92 | % | |||||||||||||||||
4,722,757 | 4,029,757 | 2.11 | % | |||||||||||||||||||||
DBI Holding, LLC, Warrants(5) | Infrastructure Maintenance | 3/6/2024 | 519,412 | 519,412 | 9,203,000 | 4.82 | % | |||||||||||||||||
Show Media, Inc., Units(5) | Media & Entertainment | 4,092,210 | 3,747,428 | — | — | |||||||||||||||||||
Southern Technical Institute, Inc., Class A Units(5) | Education | 3,164,063 | 2,167,000 | 1,594,001 | 0.83 | % | ||||||||||||||||||
Preferred Shares | 15.75% PIK | 4,403,897 | 4,292,897 | 4,403,897 | 2.30 | % | ||||||||||||||||||
Warrants(5) | 3/30/2026 | 221,267 | 221,266 | 126,000 | 0.07 | % | ||||||||||||||||||
6,681,163 | 6,123,898 | 3.20 | % | |||||||||||||||||||||
Total Equity/Other | 15,670,760 | 19,356,655 | 10.13 | % | ||||||||||||||||||||
Total Investments in Non-Controlled, Affiliated Portfolio Companies | 47,758,791 | 50,927,904 | 26.65 | % | ||||||||||||||||||||
Investments in Controlled, Affiliated Portfolio Companies — 7.53%** | ||||||||||||||||||||||||
Senior Secured - First Lien — 6.79% | ||||||||||||||||||||||||
FST Technical Services, LLC | Technology & Telecom | 12% Cash, 5% PIK | 11/18/2018 | 12,981,754 | $ | 12,981,754 | $ | 12,981,754 | 6.79 | % | ||||||||||||||
Total Senior Secured - First Lien | 12,981,754 | 12,981,754 | 6.79 | % | ||||||||||||||||||||
Equity/Other — 0.74% | ||||||||||||||||||||||||
FST Technical Services, LLC, Common Shares | Technology & Telecom | 9% PIK | 1,750,000 | $ | 1,806,541 | $ | 1,409,000 | 0.74 | % | |||||||||||||||
Total Equity/Other | 1,806,541 | 1,409,000 | 0.74 | % | ||||||||||||||||||||
Total Investments in Controlled, Affiliated Portfolio Companies | 14,788,295 | 14,390,754 | 7.53 | % | ||||||||||||||||||||
Total Investments | 298,794,028 | 293,638,984 | 153.67 | % | ||||||||||||||||||||
Liabilities In Excess Of Other Assets | (102,551,448 | ) | (53.67 | %) | ||||||||||||||||||||
Net Assets | $ | 191,087,536 | 100.00 | % |
See notes to unaudited consolidated financial statements
9 |
Alcentra Capital Corporation and Subsidiary
Consolidated Schedule of Investments (continued)
As of June 30, 2016
(Unaudited)
* | Denotes investments in which Alcentra Capital Corporation (the “Company”) is an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the six months ended June 30, 2016 in these affiliated investments are as follows: |
Fair Value at | Interest/ | Fair Value at | ||||||||||||||||||
December 31, | Gross | Gross | Dividend/ | June 30, | ||||||||||||||||
Name of Issuers | 2015 | Addition | Reductions | Other Income | 2016 | |||||||||||||||
ACT Lighting | $ | 12,753,733 | $ | - | $ | 12,053,793 | $ | 2,097,105 | $ | - | ||||||||||
Battery Solutions, Inc. | 6,095,154 | - | - | 291,247 | 6,159,060 | |||||||||||||||
DBI Holding, LLC | 22,894,780 | - | - | 1,421,045 | 27,339,946 | |||||||||||||||
Net Access Corporation | - | - | - | 109,642 | - | |||||||||||||||
Show Media, Inc. | 3,610,000 | - | - | 276,094 | 3,231,000 | |||||||||||||||
Southern Technical Institute, Inc. | 13,890,332 | - | - | 936,336 | 14,197,898 | |||||||||||||||
$ | 59,243,999 | $ | - | $ | 12,053,793 | $ | 5,131,469 | $ | 50,927,904 |
** | Denotes investments in which the Company is an “Affiliate Person” and exceeding a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the six months ended June 30, 2016 in these affiliated and controlled investments are as follows: |
Fair value at | Interest/ | Fair Value at | ||||||||||||||||||
December 31, | Gross | Gross | Dividend/ | June 30, | ||||||||||||||||
Name of Issuers | 2015 | Addition | Reductions | Other income | 2016 | |||||||||||||||
The DRC Group | $ | 1,804,817 | $ | 133,333 | $ | 6,333,226 | $ | (4,526 | ) | $ | - | |||||||||
FST Technical Services, LLC | 13,943,722 | - | - | 1,091,192 | 14,390,754 | |||||||||||||||
$ | 15,748,539 | $ | 133,333 | $ | 6,333,226 | $ | 1,086,666 | $ | 14,390,754 |
*** | Pledged as collateral under the Credit Facility with ING Capital LLC. | |
(1) | The cost of debt securities is adjusted for accretion of discount/amortization of premium and interest paid-in-kind on such securities. | |
(2) | The principal balance outstanding for all floating rate loans is indexed to LIBOR or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower’s option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR based on each respective credit agreement. | |
(3) | The investments are portfolio companies of Enhanced Equity Fund, L.P. (“EEF”). EEF has guaranteed the portfolio company’s obligations to the company pursuant to this investment. | |
(4) | The investment has an unfunded commitment as of June 30, 2016 which is excluded from the presentation (see Note 12). | |
(5) | Non-income producing security. | |
(6) | This investment was formerly known as City Carting Holding Company, Inc. On June 3, 2016, City Carting combined with Tunnel Hill Partners, L.P. |
Abbreviation Legend
PIK - Payment-In-Kind
See notes to unaudited consolidated financial statements
10 |
Alcentra Capital Corporation and Subsidiary
Consolidated Schedule of Investments
As of December 31, 2015
Company*** | Industry | Interest Rate | Base Rate Floor | Maturity Date | No. Shares/ Principal Amount | Cost(1) | Fair Value | % of Net Assets | ||||||||||||||||||||||||
Investments in Non-Controlled, Non-Affiliated Portfolio Companies — 113.49% | ||||||||||||||||||||||||||||||||
Senior Secured – First Lien — 36.58% | ||||||||||||||||||||||||||||||||
A2Z Wireless Holdings, Inc.(2),(3) | Telecommunications | LIBOR + 11.75 | % | 3/31/2018 | 9,885,542 | $ | 9,722,622 | $ | 10,379,594 | 5.32 | % | |||||||||||||||||||||
Aphena Pharma Solutions(4) | Packaging | 8.50% Cash, 2.0% PIK | 3/3/2019 | 3,792,657 | 3,792,657 | 3,792,657 | 1.94 | % | ||||||||||||||||||||||||
Black Diamond Rentals | Oil & Gas Services | 12% Cash, 5.0% PIK | 7/8/2018 | 13,127,489 | 13,127,489 | 13,127,489 | 6.73 | % | ||||||||||||||||||||||||
HealthFusion, Inc. | High Tech Industries | 13% Cash | 10/7/2018 | 4,750,000 | 4,750,000 | 4,892,913 | 2.51 | % | ||||||||||||||||||||||||
IGT(3) | Industrial Services | LIBOR + 9.25% Cash | 1.00 | % | 12/10/2019 | 9,168,757 | 9,080,156 | 9,168,757 | 4.70 | % | ||||||||||||||||||||||
NTI Holding, LLC(3) | Telecommunications | LIBOR + 8.0% Cash | 1.00 | % | 3/30/2021 | 7,835,625 | 7,757,269 | 7,835,625 | 4.02 | % | ||||||||||||||||||||||
NWN Corporation(3) | Technology & IT | LIBOR + 9.0% Cash | 1.00 | % | 10/16/2020 | 4,968,750 | 4,869,375 | 4,968,750 | 2.55 | % | ||||||||||||||||||||||
Response Team Holdings LLC(3) | Restoration Services | LIBOR + 8.50% Cash, 1.00% PIK | 2.00 | % | 3/28/2019 | 9,902,334 | 9,902,334 | 10,001,000 | 5.13 | % | ||||||||||||||||||||||
Stancor, Inc.(3) | Wholesale/Distribution | LIBOR + 8.0 | % | 0.75 | % | 8/19/2019 | 5,981,818 | 5,981,818 | 5,981,818 | 3.07 | % | |||||||||||||||||||||
Triton Technologies(4) | Call Center Services | 8.50% Cash, 2.0% PIK | 10/23/2018 | 1,200,000 | 1,188,731 | 1,200,000 | 0.61 | % | ||||||||||||||||||||||||
Total Senior Secured – First Lien | 70,172,451 | 71,348,603 | 36.58 | % | ||||||||||||||||||||||||||||
Senior Secured – Second Lien — 36.51% | ||||||||||||||||||||||||||||||||
Alpine Waste(3) | Waste Services | LIBOR + 9.0% Cash, 0.5% PIK | 1.00 | % | 12/30/2020 | 11,047,685 | $ | 11,047,685 | $ | 11,047,685 | 5.66 | % | ||||||||||||||||||||
Bioventus(3) | Healthcare: Orthopedic Products | LIBOR + 10.0% Cash | 1.00 | % | 4/10/2020 | 12,000,000 | 11,810,851 | 12,000,000 | 6.15 | % | ||||||||||||||||||||||
Conisus LLC(3) | Media: Advertising, Printing & Publishing | LIBOR + 10.25% Cash | 1.00 | % | 6/23/2021 | 11,750,000 | 11,750,000 | 11,750,000 | 6.03 | % | ||||||||||||||||||||||
Graco Supply Company | Aerospace | 12% Cash | 3/17/2021 | 4,000,000 | 4,000,000 | 4,000,000 | 2.05 | % | ||||||||||||||||||||||||
Medsurant Holdings, LLC | Healthcare Services | 12.25% Cash | 6/18/2021 | 6,200,000 | 6,138,000 | 6,200,000 | 3.18 | % | ||||||||||||||||||||||||
My Alarm Center, LLC(3) | Security | LIBOR + 11.0% Cash | 1.00 | % | 7/9/2019 | 9,500,000 | 9,500,000 | 9,500,000 | 4.87 | % | ||||||||||||||||||||||
Nation Safe Drivers (NSD)(3) | Automotive Business Services | LIBOR + 8.0 | % | 2.00 | % | 9/29/2020 | 11,721,154 | 11,721,154 | 11,721,154 | 6.01 | % | |||||||||||||||||||||
Xpress Global Systems, LLC(3) | Transportation Logistics | LIBOR + 10.5%, 2% PIK | 1.00 | % | 4/10/2020 | 5,454,778 | 4,986,386 | 4,986,386 | 2.56 | % | ||||||||||||||||||||||
Total Senior Secured – Second Lien | 70,954,076 | 71,205,225 | 36.51 | % | ||||||||||||||||||||||||||||
Senior Subordinated — 26.17% | �� | |||||||||||||||||||||||||||||||
Dentistry For Children, Inc. | Healthcare Services | 11% Cash, 2.25% PIK | 9/1/2017 | 14,836,488 | $ | 14,836,488 | $ | 14,836,488 | 7.61 | % | ||||||||||||||||||||||
GST Autoleather | Automotive Business Services | 11% Cash, 2.0% PIK | 1/11/2021 | 8,242,827 | 8,242,827 | 8,242,827 | 4.22 | % | ||||||||||||||||||||||||
Media Storm, LLC | Media & Entertainment | 10% Cash | 8/28/2019 | 2,454,545 | 2,454,545 | 2,454,545 | 1.26 | % | ||||||||||||||||||||||||
Pharmalogic Holdings Corp. | Healthcare Services | 12% Cash | 9/1/2021 | 15,500,000 | 15,500,000 | 15,500,000 | 7.95 | % | ||||||||||||||||||||||||
Radiant Logistics(3) | Transportation Logistics | LIBOR + 11% Cash | 1.00 | % | 4/2/2021 | 10,000,000 | $ | 10,000,000 | $ | 10,000,000 | 5.13 | % | ||||||||||||||||||||
Total Senior Subordinated | 51,033,860 | 51,033,860 | 26.17 | % | ||||||||||||||||||||||||||||
Equity/Other — 14.23% | ||||||||||||||||||||||||||||||||
City Carting Holding Company, Inc., Series A Preferred Shares(5) | Waste Services | 22% PIK | 4/30/2016 | 8,542,950 | $ | 8,542,950 | $ | 8,542,950 | 4.38 | % | ||||||||||||||||||||||
Series B Preferred Shares(5) | 18% PIK | 4/30/2016 | 4,152,842 | 4,152,841 | 3,152,999 | 1.62 | % | |||||||||||||||||||||||||
12,695,791 | 11,695,949 | 6.00 | % | |||||||||||||||||||||||||||||
Dentistry For Children, Inc., Class A-1 Units(6) | Healthcare Services | 2,000,000 | 2,203,000 | 4,136,000 | 2.12 | % | ||||||||||||||||||||||||||
HealthFusion, Inc., Warrants(6) | High Tech Industries | 418,000 | 418,000 | 2,115,000 | 1.08 | % | ||||||||||||||||||||||||||
IGT, Preferred Shares(6) | Industrial Services | 1,079,684 | 1,079,684 | 900,000 | 0.46 | % | ||||||||||||||||||||||||||
Common Shares(6) | 44,000 | 44,000 | — | — | ||||||||||||||||||||||||||||
1,123,684 | 900,000 | 0.46 | % |
See notes to consolidated financial statements
11 |
Alcentra Capital Corporation and Subsidiary
Consolidated Schedule of Investments – (continued)
As of December 31, 2015
Company*** | Industry | Interest Rate | Base Rate Floor | Maturity Date | No. Shares/ Principal Amount | Cost(1) | Fair Value | % of Net Assets | ||||||||||||||||||||||||
Media Storm, LLC, Preferred Shares(6) | Media & Entertainment | 1,216,204 | 2,346,964 | 795,999 | 0.41 | % | ||||||||||||||||||||||||||
NTI Holding, LLC Common Shares(6) | Telecommunications | 350,000 | 350,000 | 610,000 | 0.31 | % | ||||||||||||||||||||||||||
Response Team Holdings LLC, Preferred Shares | Restoration Services | 12% PIK | 3/28/2019 | 2,928,437 | 2,928,437 | 2,928,437 | 1.50 | % | ||||||||||||||||||||||||
Warrants(6) | 5 | — | 303,000 | 0.16 | % | |||||||||||||||||||||||||||
2,928,437 | 3,231,437 | 1.66 | % | |||||||||||||||||||||||||||||
Wholesome Sweeteners, Inc., Common Shares(6) | Food & Beverage | 5,000 | 5,000,000 | 3,788,000 | 1.94 | % | ||||||||||||||||||||||||||
Xpress Global Systems, LLC, Warrants(6) | Transportation Logistics | 489,000 | 489,000 | 489,000 | 0.25 | % | ||||||||||||||||||||||||||
Total Equity/Other | 27,554,876 | 27,761,385 | 14.23 | % | ||||||||||||||||||||||||||||
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies | 219,715,263 | 221,349,073 | 113.49 | % | ||||||||||||||||||||||||||||
Investments in Non-Controlled, Affiliated Portfolio Companies — 30.38%* | ||||||||||||||||||||||||||||||||
Senior Secured – First Lien — 1.85% | ||||||||||||||||||||||||||||||||
Show Media, Inc. | Media & Entertainment | 5.5% Cash, 5.5% PIK | 8/10/2017 | 3,984,269 | $ | 3,775,048 | $ | 3,610,000 | 1.85 | % | ||||||||||||||||||||||
Total Senior Secured – First Lien | 3,775,048 | 3,610,000 | 1.85 | % | ||||||||||||||||||||||||||||
Senior Secured – Second Lien — 6.19% | ||||||||||||||||||||||||||||||||
Southern Technical Institute, Inc.(3) | Education | LIBOR + 9.75% | 1.00 | % | 12/2/2020 | 12,061,333 | $ | 12,061,333 | $ | 12,061,333 | 6.19 | % | ||||||||||||||||||||
Total Senior Secured – Second Lien | Cash, 2% PIK | 12,061,333 | 12,061,333 | 6.19 | % | |||||||||||||||||||||||||||
Senior Subordinated — 15.09% | ||||||||||||||||||||||||||||||||
ACT Lighting | Wholesale | 12% Cash, 2% PIK | 7/24/2019 | 8,506,733 | $ | 8,372,671 | $ | 8,506,733 | 4.36 | % | ||||||||||||||||||||||
8% PIK | 7/24/2020 | 1,964,331 | 1,815,097 | 1,860,000 | 0.96 | % | ||||||||||||||||||||||||||
10,187,768 | 10,366,733 | 5.32 | % | |||||||||||||||||||||||||||||
Battery Solutions, Inc. | Environmental/ Recycling Services | 6% Cash, 8% PIK | 12/20/2018 | 2,045,181 | $ | 2,045,181 | $ | 2,045,181 | 1.05 | % | ||||||||||||||||||||||
DBI Holding, LLC | Infrastructure Maintenance | 12% Cash, 4% PIK | 9/6/2019 | 9,032,780 | 9,032,780 | 9,032,780 | 4.63 | % | ||||||||||||||||||||||||
16% PIK | 9/6/2019 | 8,444,350 | 8,059,285 | 7,980,000 | 4.09 | % | ||||||||||||||||||||||||||
17,092,065 | 17,012,780 | 8.72 | % | |||||||||||||||||||||||||||||
Total Senior Subordinated | 29,325,014 | 29,424,694 | 15.09 | % | ||||||||||||||||||||||||||||
Equity/Other — 7.25% | ||||||||||||||||||||||||||||||||
ACT Lighting, Warrants(6) | Wholesale | 7/24/2019 | 143,000 | $ | 143,000 | $ | 2,387,000 | 1.22 | % | |||||||||||||||||||||||
Battery Solutions, Inc., Class A Units(6) | Environmental/ Recycling Services | 5,000,000 | 1,058,000 | 530,000 | 0.27 | % | ||||||||||||||||||||||||||
Class E Units | 8% PIK | 12/20/2018 | 3,519,973 | 3,519,973 | 3,519,973 | 1.80 | % | |||||||||||||||||||||||||
4,577,973 | 4,049,973 | 2.07 | % | |||||||||||||||||||||||||||||
DBI Holding, LLC, Warrants(6) | Infrastructure Maintenance | 3/6/2024 | 519,412 | 519,412 | 5,882,000 | 3.02 | % | |||||||||||||||||||||||||
Show Media, Inc., Units(6) | Media & Entertainment | 4,092,210 | 3,747,428 | — | — | |||||||||||||||||||||||||||
Warrants(6) | — | — | — | — | ||||||||||||||||||||||||||||
3,747,428 | — | — | ||||||||||||||||||||||||||||||
Southern Technical Institute, Inc., Class A Units(6) | Education | 3,164,063 | 2,167,000 | 1,828,999 | 0.94 | % | ||||||||||||||||||||||||||
Warrants(6) | 110,267 | 110,267 | — | — | ||||||||||||||||||||||||||||
2,277,267 | 1,828,999 | 0.94 | % | |||||||||||||||||||||||||||||
Total Equity/Other | 11,265,080 | 14,147,972 | 7.25 | % | ||||||||||||||||||||||||||||
Total Investments in Non-Controlled, Affiliated Portfolio Companies | 56,426,475 | 59,243,999 | 30.38% |
See notes to consolidated financial statements
12 |
Alcentra Capital Corporation and Subsidiary
Consolidated Schedule of Investments – (continued)
As of December 31, 2015
Company*** | Industry | Interest Rate | Base Rate Floor | Maturity Date | No. Shares/ Principal Amount | Cost(1) | Fair Value | % of Net Assets | ||||||||||||||||||||||||
Investments in Controlled, Affiliated Portfolio Companies — 8.07%** | ||||||||||||||||||||||||||||||||
Senior Secured – First Lien — 6.92% | ||||||||||||||||||||||||||||||||
DRC Emergency Services | Disaster Recovery Services | 10% Cash | 1/11/2020 | 5,000,000 | $ | 5,000,000 | $ | — | — | |||||||||||||||||||||||
8% Cash | 6/30/2016 | 1,199,893 | 1,199,893 | 835,000 | 0.43 | % | ||||||||||||||||||||||||||
6,199,893 | 835,000 | 0.43 | % | |||||||||||||||||||||||||||||
FST Technical Services, LLC | Technology & Telecom | 12% Cash, 5.0% PIK | 11/18/2018 | 12,659,722 | 12,659,722 | 12,659,722 | 6.49 | % | ||||||||||||||||||||||||
Total Senior Secured – First Lien | 18,859,615 | 13,494,722 | 6.92 | % | ||||||||||||||||||||||||||||
Equity/Other — 1.15% | ||||||||||||||||||||||||||||||||
DRC Emergency Services, Preferred Shares | Disaster Recovery Services | 10% PIK | 7,885,459 | $ | 6,623,838 | $ | 969,817 | 0.49 | % | |||||||||||||||||||||||
FST Technical Services, LLC, Common Shares | Technology & Telecom | 9% PIK | 1,750,000 | 1,806,542 | 1,284,000 | 0.66 | % | |||||||||||||||||||||||||
Total Equity/Other | 8,430,380 | 2,253,817 | 1.15 | % | ||||||||||||||||||||||||||||
Total Investments in Controlled, Affiliated Portfolio Companies | 27,289,995 | 15,748,539 | 8.07 | % | ||||||||||||||||||||||||||||
Total Investments | 303,431,733 | 296,341,611 | 151.94 | % | ||||||||||||||||||||||||||||
Liabilities In Excess Of Other Assets | (101,309,400 | ) | (51.94 | )% | ||||||||||||||||||||||||||||
Net Assets | $ | 195,032,211 | 100.00 | % |
* | Denotes investments in which the Company is an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2015 in these affiliated investments are as follows: |
Name of Issuers | Fair Value at December 31, 2014 | Gross Addition | Gross Reductions | Interest/ Dividend/ Other income | Fair Value at December 31, 2015 | |||||||||||||||
ACT Lighting | $ | 10,849,399 | $ | 321,902 | $ | — | $ | 1,393,060 | $ | 12,753,733 | ||||||||||
Battery Solutions, Inc. | 4,576,000 | 3,688,255 | 3,333,333 | 617,795 | 6,095,154 | |||||||||||||||
DBI Holding, LLC | 16,102,785 | 1,677,744 | — | 2,866,050 | 22,894,780 | |||||||||||||||
Net Access Corporation | 9,412,000 | — | 10,729,267 | 34,748 | — | |||||||||||||||
Show Media, Inc. | 4,596,000 | 3,639,487 | 3,423,107 | 651,883 | 3,610,000 | |||||||||||||||
Southern Technical Institute, Inc. | 15,717,008 | 61,333 | — | 1,372,069 | 13,890,332 | |||||||||||||||
$ | 61,253,192 | $ | 9,388,721 | $ | 17,485,707 | $ | 6,935,605 | $ | 59,243,999 |
** | Denotes investments in which the Company is an “Affiliate Person” and exceeding a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2015 in these affiliated and controlled investments are as follows: |
Name of Issuers | Fair value at December 31, 2014 | Gross Addition | Gross Reductions | Interest/ Dividend/ Other income | Fair Value at December 31, 2015 | |||||||||||||||
The DRC Group | $ | 12,596,562 | $ | 533,333 | $ | — | $ | 564,704 | $ | 1,804,817 | ||||||||||
FST Technical Services, LLC | 17,459,000 | 159,722 | — | 1,939,967 | 13,943,722 | |||||||||||||||
$ | 30,055,562 | $ | 693,055 | $ | — | $ | 2,504,671 | $ | 15,748,539 |
*** | Pledged as collateral under the Credit Facility with ING Capital LLC. |
See notes to consolidated financial statements
13 |
Alcentra Capital Corporation and Subsidiary
Consolidated Schedule of Investments – (continued)
As of December 31, 2015
(1) | The cost of debt securities is adjusted for accretion of discount/amortization of premium and interest paid-in-kind on such securities. |
(2) | The investment has an unfunded commitment as of December 31, 2015 which is excluded from the presentation (see Note 13). |
(3) | The principal balance outstanding for all floating rate loans is indexed to LIBOR or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR based on each respective credit agreement. |
(4) | The investments are portfolio companies of Enhanced Equity Fund, L.P. (“EEF”). EEF has guaranteed the portfolio company's obligations to the company pursuant to this investment. |
(5) | City Carting Holding Company, Inc. is in the process of exploring strategic alternatives. As a result, maturity dates of Preferred Shares have been extended to 4/30/16. |
(6) | Non-income producing security. |
Abbreviation Legend
PIK — Payment-In-Kind
See notes to consolidated financial statements
14 |
ALCENTRA CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
1. | Organization and Purpose |
Alcentra Capital Corporation (the “Company”, “Alcentra”, “we”, “us” or “our”) was formed as a Maryland corporation on June 6, 2013 as an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”) and is applying the guidance of Accounting Standards Codification (“ASC”) Topic 946,Financial Services Investment Companies. Alcentra is managed by Alcentra NY, LLC (the “Adviser” or “Alcentra NY”), a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). In addition, for U.S. federal income tax purposes, Alcentra has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its tax year ending December 31, 2014.
The Company was formed for the purpose of acquiring certain assets held by BNY Mellon-Alcentra Mezzanine III, L.P. (the “Partnership”). The Partnership is a Delaware limited partnership, which commenced operations on May 14, 2010 (the “Commencement Date”). BNY Mellon-Alcentra Mezzanine III (GP), L.P. (the “General Partner”), a Delaware limited liability company, is the General Partner of the Partnership. BNY Mellon-Alcentra Mezzanine Partners (the “Manager”), a division of Alcentra NY and an affiliate of the General Partner, manages the investment activities of the Partnership. Alcentra NY is wholly-owned by BNY Alcentra Group Holdings, Inc. (“Alcentra Group”), which is wholly-owned by The Bank of New York Mellon Corporation.
On May 8, 2014 (commencement of operations), the Company acquired all of the assets of the Partnership other than its investment in the shares of common stock and warrants to purchase common stock of GTT Communications (the “Fund III Acquired Assets”) for $64.4 million in cash and $91.5 million in shares of Alcentra’s common stock. Concurrent with Alcentra’s acquisition of the Fund III Acquired Assets from the Partnership, Alcentra also purchased for $29 million in cash certain debt investments (the “Warehouse Portfolio”) from Alcentra Group. The Warehouse Portfolio debt investments were originated by the investment professionals of the Adviser and purchased by Alcentra Group using funds under a warehouse credit facility provided by The Bank of New York Mellon Corporation in anticipation of the initial public offering of Alcentra’s shares of common stock. Except for the $1,500 seed capital, the Company had no assets or operations prior to the acquisition of the investment portfolios of the Partnership and as a result, the Partnership is considered a predecessor entity of the Company.
On May 14, 2014, Alcentra completed its initial public offering (the “Offering”), at a price of $15.00 per share. Through its initial public offering the Company sold 6,666,666 shares for gross proceeds of approximately $100 million. Alcentra used $94.2 million of the proceeds from the Offering to fund the purchase of the warehouse portfolio, and the cash portion of the consideration paid to Fund III. On June 6, 2014, Alcentra sold 750,000 shares through the underwriters’ exercise of the overallotment option for gross proceeds of $11,250,000.
On April 8, 2014, the Company formed Alcentra BDC Equity Holdings, LLC, a wholly-owned subsidiary for tax purposes. This subsidiary allows us to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the requirements of a RIC under the Code. The financial statements of this entity are consolidated into the financial statements of Alcentra. All intercompany balances and transactions have been eliminated.
The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through debt and related equity investments in middle-market companies. The Company seeks to achieve its investment objective by originating and investing primarily in private U.S. middle-market companies (typically those with $5.0 million to $15.0 million of EBITDA (earnings before interest, taxes, depreciation and amortization) through first lien, second lien, unitranche and mezzanine debt financing, with corresponding equity co-investments. It sources investments primarily through the network of relationships that the principals of its investment adviser have developed with financial sponsor firms, financial institutions, middle-market companies, management teams and other professional intermediaries.
Upon commencement of operations, the Company also entered into an administration and custodian agreement (the “Agreement”) with State Street Bank and Trust Company (the “Administrator”).
15 |
2. | Summary of Significant Accounting Policies |
Basis of Presentation– The accompanying financial statements of the Company have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain financial information that is normally included in annual financial statements, including certain financial statement notes, prepared in accordance with GAAP, is not required for interim reporting purposes and have been omitted. In the opinion of management, the unaudited financial results included herein contain all adjustments considered necessary for the fair presentation of financial statements for the interim periods included herein. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2016.
The accounting records of the Company are maintained in United States dollars.
Alcentra NY purchased the initial 100 shares for $1,500 on March 12, 2014.
Use of Estimates–The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material. The most significant estimates relate to the valuation of the Company’s portfolio investments.
Consolidation–In accordance with Regulation S-X Article 6.03 and ASC Topic 810 - Consolidation, the Company generally will not consolidate its interest in any operating company other than in investment company subsidiaries, certain financing subsidiaries, and controlled operating companies substantially all of whose business consists of providing services to the Company.
Portfolio Investment Classification–The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in which the Company owns more than 25% of the voting securities or has rights to maintain greater than 50% of the board representation. Under the 1940 Act, “Affiliate Investments” are defined as investments in which the Company owns between 5% and 25% of the voting securities and does not have rights to maintain greater than 50% of the board representation. “Non-controlled, non-affiliate investments” are defined as investments that are neither Control Investments or Affiliate Investments.
Cash–At June 30, 2016, cash balances totaling $5.0 million exceeded FDIC insurance protection levels, subjecting the Company to risk related to the uninsured balance. All of the Company’s cash deposits are held by the Administrator and management believes that the risk of loss associated with any uninsured balance is remote.
Deferred Financing Costs–Deferred financing costs consist of fees and expenses paid in connection with the credit facility (as defined in Note 10) and are capitalized at the time of payment. These costs are amortized using the straight line method, which approximate the effective interest method over the term of the Credit Facility.
Deferred Note Offering Costs–Deferred Note Offering costs consist of fees and expenses paid in connection with the series of Senior Securities issued (as defined in Note 9) and are capitalized at this time as these fees and expenses were incurred before the issuance commenced. These costs are amortized using the straight line method, which approximate the effective interest method over the term of the Notes.
Valuation of Portfolio Investments– Portfolio investments are carried at fair value as determined by theBoard of Directors (the “Board’’) of Alcentra.
The methodologies used in determining these valuations include:
(1) Preferred shares/membership units and common shares/membership units
In determining estimated fair value for common shares/membership units and preferred shares, the Company makes assessments of the methodologies and value measurements which market participants would use in pricing comparable investments, based on market data obtained from independent sources as well as from the Company’s own assumptions and taking into account all material events and circumstance which would affect the estimated fair value of such investments. Several types of factors, circumstances and events could affect the estimated fair value of the investments. These include but are not limited to the following:
(i) Any material changes in the (a) competitive position of the portfolio investment, (b) legal and regulatory environment within which the portfolio investment operates, (c) management or key managers of the portfolio investment, (d) terms and/or cost of financing available to the portfolio investment, and (e) financial position or operating results of the investment; (ii) pending disposition by the Company of all or a major portfolio investments; and (iii) sales prices of recent public or private transactions in identical or comparable investments.
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One or a combination of the following valuation techniques are used to fair value these investments: Market Approach and Income Approach. The Market Approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The Income Approach uses valuation techniques to convert future amounts to a present amount (i.e., discounting estimated future cash flows to a net present value amount).
(2) Debt
The yield to maturity analysis is used to estimate the fair value of debt, including the unitranche facilities, which are a combination of senior and subordinated debt in one debt instrument. The calculation of yield to maturity takes into account the current market price, par value, coupon interest rate and time to maturity.
(3) Warrants
Where warrants are considered to be in the money, their incremental value is included within the valuation of the investments.
Valuation techniques are applied consistently from period to period, except when circumstances warrant a change to a different valuation technique that will provide a better estimate of fair value. The valuation process begins with each investment being initially valued by the investment professionals of the Company or its Adviser. Preliminary valuation conclusions are then documented and discussed with senior investment professional of the Company, its Adviser. The Investment Committee reviews the valuation of the investment professionals and then determines the fair value of each investment in good faith based on the input of the investment professionals.
With respect to the Company’s valuation process, the Board undertakes a similar multi-step valuation process each quarter, as described below:
• | Alcentra’s quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Adviser responsible for the portfolio investment; |
• | preliminary valuation conclusions will then be documented and discussed with Alcentra’s senior management and the Adviser; |
• | the audit committee of the Board then reviews these preliminary valuations; |
• | at least once quarterly, independent valuation firms engaged by the Board prepare preliminary valuations on a selected basis and submit the reports to the Board; and |
• | the Board then discusses valuations and determine the fair value of each investment in Alcentra’s portfolio in good faith, based on the input of the Adviser, the independent valuation firms and the audit committee. |
The Board has authorized the engagement of independent valuation firms to provide Alcentra with valuation assistance. Alcentra intends to have independent valuation firms provide it with valuation assistance on a portion of its portfolio on a quarterly basis and its entire portfolio will be reviewed at least annually by independent valuation firms; however, the Board is ultimately and solely responsible for the valuation of its portfolio investments at fair value as determined in good faith pursuant to its valuation policy and a consistently applied valuation process.
Because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a readily available market for the securities existed or from those which will ultimately be realized.
Organizational and Offering Costs–Organization expenses, including reimbursement payments to the Adviser, are expensed on the Company’s Consolidated Statements of Operations. These expenses consist principally of legal and accounting fees incurred in connection with the organization of the Company and have been expensed as incurred. Offering expenses consist principally of underwriter’s fee, legal, accounting, printing fees and other related expenses associated with the filing of a registration statement. Offering costs are offset against proceeds of the offering in paid-in capital in excess of par in the Consolidated Statements of Changes in Net Assets.
17 |
Paid-In-Capital–The Company records the proceeds from the sale of its common stock on a net basis to (i) capital stock and (ii) paid in capital in excess of par value, excluding all commissions.
Earnings and Net Asset Value Per Share – Earnings per share is calculated based upon the weighted average number of shares of common stock outstanding during the reported period. Net Asset Value per share is calculated using the number of shares outstanding as of the end of the period.
Investments – Investment security transactions are accounted for on a trade date basis. Cost of portfolio investments represents the actual purchase price of the securities acquired including capitalized legal, brokerage and other fees as well as the value of interest and dividends received in-kind and the accretion of original issue discounts. Fees may be charged to the issuer by the Company in connection with the origination of a debt security financing. Such fees are reflected as a discount to the cost of the portfolio security and the discount is accreted into income over the life of the related debt security.
Original Issue Discount – When the Company receives warrants with a nominal or discounted exercise price upon origination of a debt or preferred stock investment, a portion of the cost basis is allocated to the warrants. When the investment is made concurrently with the sale of a substantial amount of equity, the value of the warrants is based on the sales price. The value of the warrants is recorded as original issue discount (“OID”) to the value of the debt or preferred stock investment and the OID is amortized over the life of the investment.
Interest and Dividend Income – Interest is recorded on the accrual basis to the extent that the Company expects to collect such amounts. The Company accrues paid in-kind interest (“PIK”) by recording income and an increase to the cost basis of the related investments. Dividend income is recorded on ex-dividend date. Dividends in-kind are recorded as an increase in cost basis of investments and as income.
Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when principal or interest cash payments are past due 30 days or more and/or when it is no longer probable that principal or interest cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest are paid in cash, and in management’s judgment, are likely to continue timely payment of their remaining principal and interest obligations. Cash interest payments received on non-accrual designated investments may be recognized as income or applied to principal depending on management’s judgment. There were no non-accrual investments as of June 30, 2016 and December 31, 2015.
Other Income – The Company may also receive structuring or closing fees in connection with its investments. Such upfront fees are accreted into income over the life of the investment.
Prepayment penalties received by the Company for debt instruments paid back to the Company prior to the maturity date are recorded as income upon receipt.
Income Taxes – The Company has elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code, and to operate in a manner so as to qualify for the tax treatment applicable to RIC’s. To obtain and maintain our qualification for taxation as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, the Company must distribute to our stockholders, for each taxable year, at least 90% of “investment company taxable income,’’ which is generally net ordinary taxable income plus the excess of realized net short-term capital gains over realized net long-term capital losses, or the Annual Distribution Requirement. As a RIC, the Company generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that are timely distributed to stockholders as dividends.
Alcentra BDC Equity Holdings LLC has elected to be a taxable entity (the “Taxable Subsidiary”). The Taxable Subsidiary permits the Company to hold equity investments in portfolio companies which are “pass through” entities for tax purposes and continue to comply with the “source income” requirements contained in RIC tax provisions of the Code. The Taxable Subsidiary is not consolidated with the Company for income tax purposes and may generate income tax expense, benefit, and the related tax assets and liabilities, as a result of its ownership of certain portfolio investments. The income tax expense, or benefit, if any, and related tax assets and liabilities are reflected in the Company’s consolidated financial statements. For the three and six months ended June 30, 2016, we recognized a provision for income tax on unrealized gain on investments of ($0.3) million and ($0.5) million for the Taxable Subsidiaries, respectively. For the three and six months ended June 30, 2015, we recognized a provision for income tax on unrealized gain on investments of $0.4 million and $0.6 million for the Taxable Subsidiaries, respectively. As of June 30, 2016 and December 31, 2015, $0.9 million and $1.4 million was included in the deferred tax asset on the Consolidated Statements of Assets and Liabilities, respectively.
Indemnification – In the normal course of business, the Company enters into contractual agreements that provide general indemnifications against losses, costs, claims and liabilities arising from the performance of individual obligations under such agreements. The Company has had no prior claims or payments pursuant to such agreements. The Company’s individual 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 on management’s experience, the Company expects the risk of loss to be remote.
18 |
Recently Issued Accounting Standards - In April 2015, FASB issued ASU 2015-03,Interest – Imputation of interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. This guidance is effective for annual and interim periods beginning after December 15, 2015. The Company adopted this guidance as of January 1, 2016. The new guidance will be applied retrospectively to each prior period presented.
In May 2015, the FASB issued ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The update eliminates the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value (NAV) per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. Public companies are required to apply ASU 2015-07 retrospectively for interim and annual reporting periods beginning after December 15, 2015. Accordingly, the Company has evaluated the impact of ASU 2015-07 on its consolidated financial statements and determined that the adoption of ASU 2015-07 has not had a material impact on our consolidated financial statements.
3. | Fair Value of Portfolio Investments |
The Company accounts for its investments in accordance with FASB Accounting Standards Codification Topic 820 (“ASC Topic 820”),Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value. ASC Topic 820 established a fair value hierarchy which prioritizes and ranks the level of market price observability used in measuring investments at fair value.
Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily-available actively quoted prices or for which fair value can be measured from actively-quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories (from highest to lowest) based on inputs:
Level 1 – Quoted prices (unadjusted) are available in active markets for identical investments that the Company has the ability to access as of the reporting date. The type of investments which would generally be included in Level 1 includes listed equity securities and listed derivatives. As required by ASC Topic 820, the Company, to the extent that it holds such investments, does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.
Level 2 – Pricing inputs are observable for the investments, either directly or indirectly, as of the reporting date, but are not the same as those used in Level 1. Fair value is determined through the use of models or other valuation methodologies.
Level 3 – Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant judgment or estimation by the Company. The types of investments which would generally be included in this category include debt and equity securities issued by private entities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The following tables summarize the levels in the fair value hierarchy into which the Company’s financial instruments are categorized as of June 30, 2016 and December 31, 2015:
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The fair values of our investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of June 30, 2016 are as follows:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Senior Secured - First Lien | $ | — | $ | — | $ | 80,703,758 | $ | 80,703,758 | ||||||||
Senior Secured - Second Lien | — | — | 93,003,571 | 93,003,571 | ||||||||||||
Subordinated Debt | — | — | 70,255,176 | 70,255,176 | ||||||||||||
Equity/Other | — | — | 49,676,479 | 49,676,479 | ||||||||||||
Total Investments | $ | — | $ | — | $ | 293,638,984 | $ | 293,638,984 |
The fair values of our investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of December 31, 2015 are as follows:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Senior Secured - First Lien | $ | — | $ | — | $ | 88,453,325 | $ | 88,453,325 | ||||||||
Senior Secured - Second Lien | — | — | 83,266,558 | 83,266,558 | ||||||||||||
Subordinated Debt | — | — | 80,458,554 | 80,458,554 | ||||||||||||
Equity/Other | — | — | 44,163,174 | 44,163,174 | ||||||||||||
Total Investments | $ | — | $ | — | $ | 296,341,611 | $ | 296,341,611 |
The changes in investments classified as Level 3 are as follows for the six months ended June 30, 2016 and June 30, 2015.
As of June 30, 2016:
Senior | Senior | |||||||||||||||||||
Secured - | Secured - | Senior | Equity/ | |||||||||||||||||
First Lien | Second Lien | Subordinated | Other | Total | ||||||||||||||||
Balance as of January 1, 2016 | $ | 88,453,325 | $ | 83,266,558 | $ | 80,458,554 | $ | 44,163,174 | $ | 296,341,611 | ||||||||||
Amortized discounts/premiums | 73,466 | 76,331 | 53,842 | - | 203,639 | |||||||||||||||
Paid in-kind interest | 1,165,969 | 207,009 | 1,130,887 | 1,662,944 | 4,166,809 | |||||||||||||||
Net realized gain (loss) | (5,309,022 | ) | 11,658 | 269,964 | (2,204,958 | ) | (7,232,358 | ) | ||||||||||||
Net change in unrealized appreciation (depreciation) | 3,993,380 | (1,594,453 | ) | (4,143,123 | ) | 3,679,274 | 1,935,078 | |||||||||||||
Purchases | 30,984,253 | 15,340,499 | 27,918,637 | 7,355,926 | 81,599,315 | |||||||||||||||
Sales/Return of capital | (38,657,613 | ) | (4,304,031 | ) | (35,433,585 | ) | (4,979,881 | ) | (83,375,110 | ) | ||||||||||
Balance as of June 30, 2016 | $ | 80,703,758 | $ | 93,003,571 | $ | 70,225,176 | $ | 49,676,479 | $ | 293,638,984 | ||||||||||
Net change in unrealized appreciation (depreciation) from investments still held as of June 30, 2016 | $ | (462,764 | ) | $ | (1,594,452 | ) | $ | (3,964,158 | ) | $ | 973,410 | $ | (5,049,964 | ) |
As of June 30, 2015:
Senior | Senior | |||||||||||||||||||
Secured - | Secured - | Senior | Equity/ | |||||||||||||||||
First Lien | Second Lien | Subordinated | Other | Total | ||||||||||||||||
Balance as of January 1, 2015 | $ | 97,395,708 | $ | 46,748,798 | $ | 54,986,207 | $ | 51,343,141 | $ | 250,473,854 | ||||||||||
Amortized discounts/premiums | 180,877 | 37,952 | 58,129 | - | 276,958 | |||||||||||||||
Paid in-kind interest | 356,063 | 22,890 | 1,388,337 | 1,782,277 | 3,549,567 | |||||||||||||||
Net realized gain (loss) | 2,876 | 94,675 | - | (244,000 | ) | (146,449 | ) | |||||||||||||
Net change in unrealized appreciation (depreciation) | 3,346,883 | (207,627 | ) | 676,804 | (1,161,482 | ) | 2,654,578 | |||||||||||||
Purchases | 8,988,494 | 17,297,356 | 19,500,000 | 6,756,440 | 52,542,290 | |||||||||||||||
Sales/Return of capital | (13,228,266 | ) | (7,500,000 | ) | (3,333,333 | ) | - | (24,061,599 | ) | |||||||||||
Balance as of June 30, 2015 | $ | 97,042,635 | $ | 56,494,044 | $ | 73,276,144 | $ | 58,476,376 | $ | 285,289,199 | ||||||||||
Net change in unrealized appreciation (depreciation) from investments still held as of June 30, 2015 | $ | 3,346,883 | $ | (207,627 | ) | $ | 676,804 | $ | (1,161,482 | ) | $ | 2,654,578 |
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The following is a summary of the quantitative inputs and assumptions used for items categorized in Level 3 of the fair value hierarchy as of June 30, 2016 and December 31, 2015, respectively.
As of June 30, 2016:
Fair Value at | Range | |||||||||||||||
Assets at Fair Value | June 30, 2016 | Valuation Technique | Unobservable Input | of Inputs | Weighted Average | |||||||||||
Senior Secured - First Lien | $ | 80,703,758 | Yield to Maturity | Comparable Market Rate | 8.75% - 17.0 | % | 11.32 | % | ||||||||
Senior Secured - Second Lien | $ | 93,003,571 | Yield to Maturity | Comparable Market Rate | 9.6% - 19.7 | % | 12.57 | % | ||||||||
Senior Subordinated | $ | 70,255,176 | Yield to Maturity | Comparable Market Rate | 4.0% - 16.0 | % | 12.84 | % | ||||||||
Preferred Ownership | $ | 14,562,388 | Market Approach | Enterprise Value/LTM EBITDA Multiple | 4.00x - 13.00 | x | 7.88 | x | ||||||||
Common Ownership/Common Warrants | $ | 35,114,091 | Market Approach | Enterprise Value/LTM EBITDA Multiple | 4.00x - 15.00 | x | 13.40 | x | ||||||||
Total | $ | 293,638,984 |
As of December 31, 2015:
Fair Value at | Range | |||||||||||||||
Assets at Fair Value | December 31, 2015 | Valuation Technique | Unobservable Input | of Inputs | Weighted Average | |||||||||||
Senior Secured - First Lien | $ | 88,453,325 | Yield to Maturity | Comparable Market Rate | 8.75% - 17.0 | % | 12.29 | % | ||||||||
Senior Secured - Second Lien | $ | 83,266,558 | Yield to Maturity | Comparable Market Rate | 10.0% - 13.5 | % | 11.28 | % | ||||||||
Senior Subordinated | $ | 80,458,554 | Yield to Maturity | Comparable Market Rate | 8.0% - 26.2 | % | 13.80 | % | ||||||||
Preferred Ownership | $ | 20,810,175 | Market Approach | Enterprise Value/LTM EBITDA Multiple | 6.84x - 8.06 | x | 7.45 | x | ||||||||
Common Ownership/Common Warrants | $ | 23,352,999 | Market Approach | Enterprise Value/LTM EBITDA Multiple | 8.97x - 9.14 | x | 9.05 | x | ||||||||
Total | $ | 296,341,611 |
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4. | Share Transactions |
On January 18, 2016, the Board of Directors approved a $5.0 million open market stock repurchase program. Pursuant to the program, we are authorized to repurchase up to $5.0 million in the aggregate of our outstanding common stock in the open market. The timing, manner, price and amount of any share repurchases will be determined by our management, in its discretion, based upon the evaluation of economic conditions, stock price, applicable legal and regulatory requirements and other factors. The open market stock repurchase program will be in effect until the earlier of (i) January 18, 2017 or (ii) the repurchase of $5.0 million of the Company’s common stock. The program does not require us to repurchase any specific number of shares and we cannot assure that any shares will be repurchased under the program. The program may be suspended, extended, modified or discontinued at any time.
The following table sets forth the number of shares of common stock repurchased by the Company under its share repurchase program for the six months ended June 30, 2016:
Month Ended | Shares Repurchased | Repurchase Price Per Share | Aggregate Consideration for Repurchased Shares | |||||||||||
March 31, 2016 | 10,509 | $10.7700 - $11.2444 | $ | 115,828 | ||||||||||
May 31, 2016 | 9,547 | $11.5596 - $12.3333 | 114,762 | |||||||||||
June 30, 2016 | 6,074 | $12.2335 - $12.3586 | 74,860 | |||||||||||
26,130 | $ | 305,450 |
For the six months ended June 30, 2015 there was no common stock repurchased.
5. Distributions
The Company intends to make quarterly distributions of available net investment income determined on a tax basis to its stockholders. Distributions to stockholders are recorded on the record date. The amount, if any, to be distributed to stockholders is determined by the Board each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, will be distributed at least annually. If we do not distribute (or are not deemed to have distributed) at least 98% of our annual ordinary income in the calendar year earned, we will generally be required to pay an excise tax equal to 4% of the amount by which 98% of our annual ordinary income exceed the distributions from such taxable income for the year. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, we accrue excise taxes, if any, on estimated excess taxable income. As of June 30, 2016 and June 30, 2015, we accrued $75,000 and $0, respectively, for any unpaid potential excise tax liability and have included these amounts within income tax liability on the accompanying Consolidated Statements of Assets and Liabilities.
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The following table reflects the Company’s dividends declared and paid on its common stock for the six months ended June 30, 2016:
Date Declared | Record Date | Payment Date | Amount Per Share | |||||
March 7, 2016 | March 31, 2016 | April 7, 2016 | $ | 0.340 | ||||
May 5, 2016 | June 30, 2016 | July 7, 2016 | $ | 0.340 |
The following table reflects the Company’s dividends declared and paid on its common stock for the six months ended June 30, 2015:
Date Declared | Record Date | Payment Date | Amount Per Share | |||||
March 10, 2015 | March 31, 2015 | April 6, 2015 | $ | 0.340 | ||||
May 11, 2015 | June 30, 2015 | July 6, 2015 | $ | 0.340 |
The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if the Company declares a cash dividend, the stockholders who have not “opted out” of the DRIP no later than the record date will have their cash dividend automatically reinvested into additional shares of the Company’s common stock. The Company has the option to satisfy the share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases of common stock by the DRIP plan administrator. Newly issued shares are valued based upon the final closing price of the common stock on the NASDAQ Global Select Market on the dividend payment date. Shares purchased in the open market to satisfy the DRIP requirements will be valued upon the average price of the applicable shares purchased by the Plan Administrator, before any associated brokerage or other costs.
6. | Related Party Transactions |
Management Fee
Under the Investment Advisory Agreement, the Company has agreed to pay Alcentra NY an annual base management fee based on its gross assets as well as an incentive fee based on its performance. The base management fee is calculated at an annual rate as follows: 1.75% of its gross assets (i.e., total assets held before deduction of any liabilities), including assets purchased with borrowed funds or other forms of leverage and excluding cash and cash equivalents (such as investments in U.S. Treasury Bills), if its gross assets are below $625 million; 1.625% if its gross assets are between $625 million and $750 million; and 1.5% if its gross assets are greater than $750 million. The various management fee percentages (i.e. 1.75%, 1.625% and 1.5%) would apply to the Company’s entire gross assets in the event its gross assets exceed the various gross asset thresholds. The base management fee will be payable quarterly in arrears and shall be calculated based on the average value of the Company’s gross assets, excluding cash and cash equivalents, at the end of the two most recently completed calendar quarters.
The incentive fee consists of two parts. The first part, which is calculated and payable quarterly in arrears, equals 20% of the Company’s “pre-incentive fee net investment income’’ for the immediately preceding quarter, subject to a hurdle rate of 2% per quarter (8% annualized), and is subject to a “catch-up’’ feature. The second part is calculated 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 our aggregate cumulative realized capital gains from inception through the end of each calendar year, computed net of aggregate cumulative realized capital losses and aggregate cumulative unrealized capital depreciation through the end of such year, less the aggregate amount of any previously paid capital gain incentive fees. Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence, managerial assistance and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable for administrative services under the Investment Advisory Agreement, and any interest expense and any distributions paid on any issued and outstanding preferred stock, but excluding the incentive fee and any offering expenses and other expenses not charged to operations but excluding certain reversals to the extent such reversals have the effect of reducing previously accrued incentive fees based on the deferral of non-cash interest). Pre-incentive fee net investment income excludes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income until the Company has received such income in cash.
For the three and six months ended June 30, 2016, the Company recorded expenses for base management fees of $1,283,763 and $2,572,799, respectively, of which $0 and $0, respectively, was waived by the Adviser and $1,283,763 was payable at June 30, 2016. For the three and six months ended June 30, 2015, the Company recorded expenses for base management fees of $1,219,963 and $2,367,968, respectively, of which $0 and $0, respectively, was waived by the Adviser and $1,219,963 was payable at June 30, 2015.
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The Adviser agreed to waive its fees (base management and incentive fee), without recourse against or reimbursement by the Company, through the quarter ended June 30, 2015 and to the extent required in order for us to earn a quarterly net investment income to maintain a targeted dividend payment on shares of common stock outstanding on the relevant dividend payment dates of 9.0% (to be paid on a quarterly basis). For the three and six months ended June 30, 2016, the Company incurred income-based incentive fees of $926,158 and $1,716,885, respectively, of which none was waived by the Adviser. For the three and six months ended June 30, 2015, the Company incurred income-based incentive fees of $397,028 and $1,203,128, respectively, of which none was waived by the Adviser. For the three and six months ended June 30, 2016, the Company incurred capital gains incentive fees of $0 and $0, respectively, of which $0 and $0, respectively, was waived by the Adviser. For the three and six months ended June 30, 2015, the Company incurred capital gains incentive fees of $434,217 and $1,435,684, respectively, of which $0 and $1,001,467, respectively, was waived by the Adviser.
7. | Directors’ Fees |
The independent directors of the Company each receive an annual fee of $40,000. They also receive $2,500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending in person each board of directors meeting and $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting telephonically. They also receive $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with each committee meeting attended in person and each telephonic committee meeting. The chairman of the audit committee, the nominating and corporate governance committee and the compensation committee will receive an annual fee of $10,000, $5,000 and $5,000, respectively. The Company has obtained directors’ and officers’ liability insurance on behalf of its directors and officers.
For the three and six months ended June 30, 2016 the Company recorded directors’ fee expense of $84,372 and $149,295, respectively, of which $72,500 was payable at June 30, 2016. For the three and six months ended June 30, 2015 the Company recorded directors’ fee expense of $76,191 and $114,191, respectively, of which $75,250 was payable at June 30, 2015.
8. | Purchases and Sales (Investment Transactions) |
Investment purchases, sales and principal payments/paydowns are summarized below for the six months ended June 30, 2016 and June 30, 2015.
For the six months ended June 30, | ||||||||
2016 | 2015 | |||||||
Investment purchases, at cost (including PIK interest and dividends) | $ | 73,722,202 | $ | 44,542,290 | ||||
Investment sales, proceeds (including Principal payments/paydown proceeds) | 71,331,188 | 24,061,599 |
9. | Alcentra Capital InterNotes® |
On January 30, 2015, the Company entered into a Selling Agent Agreement with Incapital LLC, as purchasing agent for our issuance of $40.0 million of Alcentra Capital InterNotes®. On January 25, 2016, the Company entered into an additional Selling Agent Agreement with Incapital LLC, as purchasing agent for the Company’s issuance of up to $15 million of Alcentra Capital InterNotes®.
These notes are direct unsecured obligations and each series of notes will be issued by a separate trust (administered by U.S. Bank). These notes bear interest at fixed interest rates and offer a variety of maturities no less than twelve months from the original date of issuance.
During the six months ended June 30, 2016, the Company issued $11.5 million in aggregate principal amount of the Alcentra Capital InterNotes® for net proceeds of $11.3 million. These notes were issued with a stated interest rate ranging from 6.375% to 6.50%. These notes mature between February 15, 2021 and June 15, 2021. For the three and six months ended June 30, 2016, the Company borrowed an average of $46.1 and $44.6 million with a weighted average interest rate of 6.43% and 6.43%, respectively.
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The following table summarizes the Alcentra Capital InterNotes® issued and outstanding during the six months ended June 30, 2016.
Tenor at | Principal | Interest | ||||||||||||
Origination | Amount | Rate | Weighted Average | |||||||||||
(in years) | (000’s omitted) | Range | Interest Rate | Maturity Date Range | ||||||||||
5 | $ | 50,126 | 6.25% - 6.50% | 6.39 | % | February 15, 2020 - June 15, 2021 | ||||||||
7 | 1,418 | 6.50% - 6.75% | 6.63 | % | January 15, 2022 - April 15, 2022 | |||||||||
$ | 51,544 |
During the six months ended June 30, 2016, we redeemed $0 aggregate principal amount of our Alcentra Capital InterNotes®. The net proceeds of this offering were used to repay outstanding indebtedness under the Credit Facility.
In connection with the issuance of the Alcentra Capital InterNotes®, we incurred $1.01 million of fees which are being amortized over the term of the notes and are included within deferred financing costs on the Consolidated Statements of Assets and Liabilities as of June 30, 2016. During the six months ended June 30, 2016 the Company recorded $1.59 million of interest costs and amortization of offering costs on the Alcentra Capital InterNotes® as interest expense.
10. | Credit Facility/Line of Credit |
On May 8, 2014, the Company entered into a senior secured revolving credit agreement (the “Credit Facility”) with ING Capital LLC (“ING”), as administrative agent, collateral agent and lender to provide liquidity in support of its investment and operational activities. The Credit Facility has an initial commitment of $80 million with an accordion feature that allows for an increase in the total commitments up to $160 million, subject to certain conditions and the satisfaction of specified financial covenants. The Credit Facility was amended on August 11, 2015 to increase the accordion feature to allow for a future increase of the total commitments up to $250 million, subject to satisfaction of certain conditions at the time of any such future increase. As amended, the Credit Facility has a maturity date of August 11, 2020 and bears interest, at our election, at a rate per annum equal to (i) 2.25% plus the highest of a prime rate, the Federal Funds rate plus 0.5%, three month LIBOR plus 1%, and zero or (ii) 3.25% plus the one, three or six month LIBOR rate, as applicable.
On March 2, 2016, we amended certain provisions of the Credit Facility relating to the treatment of approximately $38.6 million in aggregate principal amount of outstanding InterNotes that mature prior to the Credit Facility. Among other things, the amendments to the Credit Facility provide that, in the nine-month period prior to the maturity of these particular InterNotes, which mature between February 15 and April 15, 2020, our ability to borrow under the Credit Facility will be reduced by and in the amount of such InterNotes still outstanding during such time. The Credit Facility is secured primarily by the Company’s assets. Costs of $3.5 were incurred in connection with obtaining and amending the Credit Facility, which have been recorded as deferred financing costs on the Consolidated Statements of Assets and Liabilities and are being amortized over the life of the Credit Facility.
Amounts available to borrow under the Credit Facility are subject to a minimum borrowing /collateral base that applies an advance rate to certain investments held by the Company. The Company is subject to limitations with respect to the investments securing the Credit Facility, including, but not limited to, restrictions on sector concentrations, loan size, portfolio company leverage which may affect the borrowing base and therefore amounts available to borrow.
The Company pays a commitment fee between 0.5% and 1.0% per annum based on the size of the unused portion of the Credit Facility. This fee is included in interest expense on the Company’s Consolidated Statements of Operations.
The Company has made customary representations and warranties and is required to comply with various covenants and reporting requirements. These covenants are subject to important limitations and exceptions that are described in the documents governing the Credit Facility. As of June 30, 2016, the Company was in compliance in all material respects with the terms of the Credit Facility.
As of June 30, 2016 and December 31, 2015 the Company had United States dollar borrowings of $51.7 million and $63.5 million outstanding under the Credit Facility, respectively. For the three and six months ended June 30, 2016, the Company borrowed an average of $43.4 million and $49.3 million with a weighted average interest rate of 3.83% and 3.79%, respectively. For the three and six months ended June 30, 2015, the Company borrowed an average of $43.4 million and $49.6 million with a weighted average interest rate of 3.53% and 3.51%, respectively.
11. | Market and Other Risk Factors |
At June 30, 2016, the Company’s portfolio investments are comprised of non-publicly-traded securities. The non-publicly-traded securities trade in an illiquid marketplace. The portfolio is concentrated in the twenty-three industries listed in Note 13. Risks affecting these industries include, but are not limited to, increasing competition, rapid changes in technology, government actions and changes in economic conditions. These risk factors could have a material effect on the ultimate realizable value of the Company’s investments.
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Economic conditions in 2016 continued to impact revenues and operating cash flows for most businesses and continued to impact the lending markets, leaving many businesses unable to borrow or refinance debt obligations. These restrictions on obtaining available financing, coupled with the continuing economic slowdown, have resulted in a low volume of purchase and sale transactions across all industries, which have limited the amount of observable inputs available to the Company in estimating the fair value of the Company’s investments. The Company estimates the fair value of investments for which observable market prices in active markets do not exist based on the best information available, which may differ significantly from values that would have otherwise been used had a ready market for the investments existed and the differences could be material.
Market conditions may deteriorate, which may negatively impact the estimated fair value of the Company’s investments or the amounts which are ultimately realized for such investments.
The above events are beyond the control of the Company and cannot be predicted. Furthermore, the ability to liquidate investments and realize value is subject to significant limitations and uncertainties. There may also be risk associated with the concentration of investments in one geographic region or in certain industries.
12. | Commitments and Contingencies |
In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. In addition, the Company has agreed to indemnify its officers, directors, employees, agents or any person who serves on behalf of the Company from any loss, claim, damage, or liability which such person incurs by reason of his performance of activities of the Company, provided they acted in good faith. The Company expects the risk of loss related to its indemnifications to be remote.
The Company’s investment portfolio may contain debt investments that are in the form of lines of credit and unfunded delayed draw commitments, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As of June 30, 2016 and December 31, 2015, the Company had $4.1 million and $1.0 million in unfunded commitments under loan and financing agreements, respectively. As of June 30, 2016 and December 31, 2015, the Company’s unfunded commitment under loan and financing agreements are presented below.
As of | ||||||||
June 30, 2016 | December 31, 2015 | |||||||
A2Z Wireless Holdings, Inc. | $ | - | $ | 1,004,270 | ||||
Superior Controls, Inc. | 2,300,000 | - | ||||||
Healthcare Associates of Texas, LLC | 1,300,000 | - | ||||||
IGT | 500,000 | - | ||||||
Total | $ | 4,100,000 | $ | 1,004,270 |
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13. | Classification of Portfolio Investments |
As of June 30, 2016, the Company’s portfolio investments were categorized as follows:
Industry | Cost | Fair Value | % of Net Assets* | |||||||||
Healthcare Services | $ | 45,872,707 | $ | 48,146,000 | 25.20 | % | ||||||
Telecommunications | 27,026,485 | 27,617,891 | 14.46 | % | ||||||||
Infrastructure Maintenance | 18,489,159 | 27,339,946 | 14.31 | % | ||||||||
Waste Services | 26,623,507 | 23,619,661 | 12.36 | % | ||||||||
High Tech Industries | 20,600,000 | 20,664,000 | 10.81 | % | ||||||||
Automotive Business Services | 20,047,536 | 20,209,382 | 10.58 | % | ||||||||
Industrial Manufacturing | 15,431,562 | 15,539,000 | 8.13 | % | ||||||||
Technology & Telecom | 14,788,295 | 14,390,754 | 7.53 | % | ||||||||
Education | 14,754,893 | 14,197,898 | 7.43 | % | ||||||||
Media: Advertising, Printing & Publishing | 11,750,000 | 11,750,000 | 6.15 | % | ||||||||
Oil & Gas Services | 13,754,354 | 9,543,712 | 4.99 | % | ||||||||
Security | 9,500,000 | 9,500,000 | 4.97 | % | ||||||||
Industrial Services | 9,399,922 | 8,312,483 | 4.35 | % | ||||||||
Media & Entertainment | 12,464,188 | 6,722,545 | 3.52 | % | ||||||||
Environmental/Recycling Services | 6,852,060 | 6,159,060 | 3.22 | % | ||||||||
Wholesale/Distribution | 5,981,818 | 5,981,818 | 3.13 | % | ||||||||
Technology & IT | 4,808,125 | 4,906,250 | 2.57 | % | ||||||||
Restoration Services | 3,108,790 | 4,722,000 | 2.47 | % | ||||||||
Aerospace | 4,000,000 | 4,000,000 | 2.09 | % | ||||||||
Food & Beverage | 5,000,000 | 3,984,000 | 2.08 | % | ||||||||
Transportation Logistics | 5,522,152 | 3,304,000 | 1.73 | % | ||||||||
Packaging | 1,828,584 | 1,828,584 | 0.96 | % | ||||||||
Call Center Services | 1,189,891 | 1,200,000 | 0.63 | % | ||||||||
Total | $ | 298,794,028 | $ | 293,638,984 | 153.67 | % | ||||||
Geographic Region | ||||||||||||
South | $ | 84,330,323 | $ | 77,621,093 | 40.62 | % | ||||||
Eastern | 69,166,422 | 73,879,399 | 38.66 | % | ||||||||
Mid West | 48,886,489 | 48,778,333 | 25.53 | % | ||||||||
South East | 46,244,233 | 47,850,584 | 25.04 | % | ||||||||
North East | 16,598,016 | 16,770,250 | 8.78 | % | ||||||||
South West | 14,788,295 | 14,390,754 | 7.53 | % | ||||||||
West | 18,780,250 | 14,348,571 | 7.51 | % | ||||||||
Total | $ | 298,794,028 | $ | 293,638,984 | 153.67 | % | ||||||
Investment Type | ||||||||||||
Senior Secured - Second Lien | $ | 94,346,875 | $ | 93,003,571 | 48.67 | % | ||||||
Senior Secured - First Lien | 81,064,167 | 80,703,758 | 42.23 | % | ||||||||
Senior Subordinated | 74,298,619 | 70,255,176 | 36.77 | % | ||||||||
Equity/Other | 49,084,367 | 49,676,479 | 26.00 | % | ||||||||
Total | $ | 298,794,028 | $ | 293,638,984 | 153.67 | % |
*Fair value as a percentage of Net Assets
27 |
As of December 31, 2015, the Company’s portfolio investments were categorized as follows:
Industry | Cost | Fair Value | % of Net Assets* | |||||||||
Healthcare Services | $ | 38,677,488 | $ | 40,672,488 | 20.85 | % | ||||||
Infrastructure Maintenance | 17,611,477 | 22,894,780 | 11.74 | % | ||||||||
Waste Services | 23,743,476 | 22,743,634 | 11.66 | % | ||||||||
Automotive Business Services | 19,963,981 | 19,963,981 | 10.24 | % | ||||||||
Telecommunications | 17,829,891 | 18,825,219 | 9.65 | % | ||||||||
Transportation Logistics | 15,475,386 | 15,475,386 | 7.93 | % | ||||||||
Technology & Telecom | 14,466,264 | 13,943,722 | 7.15 | % | ||||||||
Education | 14,338,600 | 13,890,332 | 7.12 | % | ||||||||
Restoration Services | 12,830,771 | 13,232,437 | 6.78 | % | ||||||||
Oil & Gas Services | 13,127,489 | 13,127,489 | 6.73 | % | ||||||||
Wholesale | 10,330,768 | 12,753,733 | 6.54 | % | ||||||||
Healthcare: Orthopedic Products | 11,810,851 | 12,000,000 | 6.15 | % | ||||||||
Media: Advertising, Printing & Publishing | 11,750,000 | 11,750,000 | 6.02 | % | ||||||||
Industrial Services | 10,203,840 | 10,068,757 | 5.16 | % | ||||||||
Security | 9,500,000 | 9,500,000 | 4.87 | % | ||||||||
High Tech Industries | 5,168,000 | 7,007,913 | 3.59 | % | ||||||||
Media & Entertainment | 12,323,985 | 6,860,544 | 3.53 | % | ||||||||
Environmental/Recycling Services | 6,623,154 | 6,095,154 | 3.13 | % | ||||||||
Wholesale/Distribution | 5,981,818 | 5,981,818 | 3.07 | % | ||||||||
Technology & IT | 4,869,375 | 4,968,750 | 2.55 | % | ||||||||
Aerospace | 4,000,000 | 4,000,000 | 2.05 | % | ||||||||
Packaging | 3,792,657 | 3,792,657 | 1.94 | % | ||||||||
Food & Beverage | 5,000,000 | 3,788,000 | 1.94 | % | ||||||||
Disaster Recovery Services | 12,823,731 | 1,804,817 | 0.93 | % | ||||||||
Call Center Services | 1,188,731 | 1,200,000 | 0.62 | % | ||||||||
Total | $ | 303,431,733 | $ | 296,341,611 | 151.94 | % | ||||||
Geographic Region | ||||||||||||
South East | $ | 78,199,153 | $ | 80,722,968 | 41.39 | % | ||||||
Eastern | 51,779,326 | 54,523,091 | 27.95 | % | ||||||||
South | 67,214,814 | 54,400,549 | 27.89 | % | ||||||||
West | 34,068,929 | 34,419,331 | 17.65 | % | ||||||||
Mid West | 32,695,872 | 33,163,200 | 17.00 | % | ||||||||
South West | 18,466,264 | 17,943,722 | 9.20 | % | ||||||||
North East | 11,007,375 | 11,168,750 | 5.73 | % | ||||||||
North West | 10,000,000 | 10,000,000 | 5.13 | % | ||||||||
Total | $ | 303,431,733 | $ | 296,341,611 | 151.94 | % | ||||||
Investment Type | ||||||||||||
Senior Secured - First Lien | $ | 92,807,114 | $ | 88,453,325 | 45.35 | % | ||||||
Senior Secured - Second Lien | 83,015,409 | 83,266,558 | 42.69 | % | ||||||||
Senior Subordinated | 80,358,874 | 80,458,554 | 41.26 | % | ||||||||
Equity/Other | 47,250,336 | 44,163,174 | 22.64 | % | ||||||||
Total | $ | 303,431,733 | $ | 296,341,611 | 151.94 | % |
*Fair value as a percentage of Net Assets
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14. | Financial Highlights |
The following per share data and financial ratios have been derived from information provided in the consolidated financial statements of the Company. The following is a schedule of financial highlights for one share of common stock for the six months ended June 30, 2016 and June 30, 2015.
For the six months ended | For the six months ended | |||||||
June 30, 2016 | June 30, 2015 | |||||||
(Unaudited) | (Unaudited) | |||||||
Per share data(1) | ||||||||
Net asset value, beginning of period | $ | 14.43 | $ | 14.87 | ||||
Net investment income (loss) | 0.85 | 0.71 | ||||||
Net realized and unrealized gains (losses) | (0.40 | ) | 0.17 | |||||
Provision for taxes on unrealized appreciation on investments | (0.04 | ) | (0.04 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 0.41 | 0.84 | ||||||
Distributions to shareholders:(2) | ||||||||
From net investment income | (0.68 | ) | (0.68 | ) | ||||
Net asset value, end of period | $ | 14.16 | $ | 15.03 | ||||
Market value per share, end of period | $ | 12.15 | $ | 12.70 | ||||
Total return based on net asset value(3)(4) | 2.8 | % | 5.6 | % | ||||
Total return based on market value(3)(4) | 10.6 | % | 7.0 | % | ||||
Shares outstanding at end of period | 13,490,636 | 13,516,766 | ||||||
Ratio/Supplemental Data: | ||||||||
Net assets, at end of period | $ | 191,087,536 | $ | 203,131,057 | ||||
Ratio of total expenses before waiver to average net assets(5) | 9.44 | % | 8.10 | % | ||||
Ratio of interest expenses to average net assets(5) | 3.32 | % | 2.05 | % | ||||
Ratio of incentive fees to average net assets(5) | 1.78 | % | 2.64 | % | ||||
Ratio of waiver of management and incentive fees to average net assets(5) | —% | 1.00 | % | |||||
Ratio of net expenses to average net assets(5) | 9.44 | % | 7.10 | % | ||||
Ratio of net investment income (loss) before waiver to average net assets(5) | 11.95 | % | 8.62 | % | ||||
Ratio of net investment income (loss) after waiver to average net assets(5) | 11.95 | % | 9.62 | % | ||||
Total Credit Facility payable outstanding | $ | 51,685,846 | $ | 38,054,738 | ||||
Total Notes payable outstanding | $ | 51,544,000 | $ | 40,000,000 | ||||
Asset coverage ratio(6) | 2.9 | 3.6 | ||||||
Portfolio turnover rate(4) | 25 | % | 12 | % |
(1) | The per share data was derived by using the average shares outstanding during the period. |
(2) | The per share data for distributions is the actual amount of distributions paid or payable per share of common stock outstanding during the entire period. |
(3) | Returns are historical and are calculated by determining the percentage change in net asset value or market value with all distributions reinvested. Distributions are assumed to be reinvested at prices obtained under the Company’s dividend reinvestment plan. |
(4) | Not Annualized. |
(5) | Annualized. |
(6) | Asset coverage ratio is equal to (i) the sum of (A) net assets at the end of the period and (B) debt outstanding at the end of the period, divided by (ii) total debt outstanding at the end of the period. |
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15. | Unconsolidated Significant Subsidiaries |
In accordance with the SEC’s Regulation S-X and GAAP, we have subsidiaries that are not required to be consolidated. We have certain unconsolidated significant subsidiaries that pursuant to Rule 4-08(g) of Regulation S-X, summarized financial information is presented below in aggregate as of and for the six months ended June 30, 2016 and as of and for the year ended December 31, 2015.
As of | For the six months ended | |||||||||
Balance Sheet | June 30, 2016 | Income Statement | June 30, 2016 | |||||||
Current Assets | 4,511,901 | Net Sales | 6,973,906 | |||||||
Noncurrent Assets | 18,483,000 | Gross Profit | 2,372,543 | |||||||
Current Liabilities | 939,688 | Net Income/EBITDA | 1,674,723 | |||||||
Noncurrent Liabilities | 12,981,754 | |||||||||
As of | For the year ended | |||||||||
Balance Sheet | December 31, 2015 | Income Statement | December 31, 2015 | |||||||
Current Assets | 9,799,192 | Net Sales | 26,808,399 | |||||||
Noncurrent Assets | 25,016,525 | Gross Profit | 4,817,956 | |||||||
Current Liabilities | 3,982,975 | Net Income (Loss) | (8,829,955 | ) | ||||||
Noncurrent Liabilities | 20,000,000 |
In addition to the risks associated with our investments in general, there are unique risks associated with our investments in each of these entities.
For example, the business and growth of FST Technical Services, LLC (“FST”) depends in large part on the continued trend toward outsourcing of certain services in the semiconductor and biopharmaceutical industries. There can be no assurance that this trend in outsourcing will continue, as companies may elect to perform such services internally. A significant change in the direction of this trend generally, or a trend in the semiconductor and biopharmaceutical industry not to use, or to reduce the use of, outsourced services such as those provided by it, could significantly decrease its revenues and such decreased revenues could have a material adverse effect on it or its results of operations or financial condition.
DRC Emergency Services, LLC (“DRC”) was sold to a third party on January 19, 2016. As such, summary financial information for DRC is included for the year ended December 31, 2015 and is not included for the six months ended June 30, 2016.
16. | Subsequent Events |
The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued.
Subsequent to June 30, 2016, the following activity occurred:
On July 7, 2016, a $0.34 per share dividend was paid to shareholders of record as of June 30, 2016.
Through July 14, 2016, Alcentra sold an additional $3.5 million in aggregate principal amount of Alcentra Capital InterNotes 6.25% notes due 2021.
On July 20, 2016, Alcentra invested $13.0 million in Limbach Facilities Services (13% Cash/3% PIK Subordinated Note).
On August 1, 2016, DBI Holding LLC repaid our senior subordinated notes ($9.6 million), senior PIK notes ($9.2 million) and warrants ($9.7 million) for total proceeds of $28.5 million.
On August 4, 2016, a $0.34 dividend was declared for shareholders of record September 30, 2016 to be paid on October 6, 2016.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties, including statements as to:
• | our future operating results; |
• | our business prospects and the prospects of our portfolio companies; |
• | the effect of investments that we expect to make; |
• | our contractual arrangements and relationships with third parties; |
• | actual and potential conflicts of interest with Alcentra NY, LLC; |
• | the dependence of our future success on the general economy and its effect on the industries in which we invest; |
• | the ability of our portfolio companies to achieve their objectives; |
• | the use of borrowed money to finance a portion of our investments; |
• | the adequacy of our financing sources and working capital; |
• | the timing of cash flows, if any, from the operations of our portfolio companies; |
• | our ability to maintain our qualification as a business development company; and |
• | the effect of future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to business development companies. |
Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “predict,” “potential,” “plan” or similar words.
We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. Actual results could differ materially from those anticipated in our forward-looking statements, and future results could differ materially from historical performance. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law or SEC rule or regulation. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained in this quarterly report on Form 10-Q.
Overview
Alcentra Capital Corporation (the “Company”, “Alcentra”, “ACC”, “we”, “us” or “our”) was formed as a Maryland corporation on June 4, 2013 as an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”). Alcentra is managed by Alcentra NY, LLC (the “Adviser”, or “Alcentra NY”), registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). State Street Bank and Trust Company (“State Street”) provides us with financial reporting, post-trade compliance, and treasury services. In addition, for U.S. federal income tax purposes, Alcentra has elected to be treated as a regulated investment company (“RIC”), commencing with tax year ended December 31, 2014, under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
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BNY Mellon-Alcentra Mezzanine III, L.P. (the “Partnership” or “Fund III”) is a Delaware limited partnership, which commenced operations on May 14, 2010. The Partnership was formed for the purpose of seeking current income and long-term capital appreciation by making investments in senior debt securities, subordinated debt securities, and common and preferred equity securities with equity rights or participations in U.S.-based middle market companies. BNY Mellon-Alcentra Mezzanine III (GP), L.P. (the “General Partner”), a Delaware limited liability company, is the General Partner of the Partnership. BNY Mellon-Alcentra Mezzanine Partners (the “Manager”), a division of Alcentra NY, LLC (“Alcentra Group”) and an affiliate of the General Partner, manages the investment activities of the Partnership. Alcentra NY, LLC is wholly owned by BNY Alcentra Group Holdings, Inc. which is wholly owned by The Bank of New York Mellon Corporation.
On May 14, 2014, Alcentra completed its initial public offering (the “Offering”), at a price of $15.00 per share. Through its initial public offering the Company sold 6,666,666 shares for gross proceeds of approximately $100,000,000. On June 6, 2014, Alcentra sold 750,000 shares through the underwriters' exercise of the overallotment option for gross proceeds of $11,250,000.
Immediately prior to the Offering, Fund III sold all of its assets other than its investment in the shares of common stock and warrants to purchase common stock of GTT Communications (the “Fund III Acquired Assets”) to the Company for $64.4 million in cash and $91.5 million in shares of the Company's common stock. Concurrent with the acquisition of the Fund III Acquired Assets from Fund III, the Company also purchased for $29 million in cash certain additional investments (the “Warehouse Portfolio”) from Alcentra Group. The Warehouse Portfolio consisted of approximately $29 million in debt investments originated by the investment professionals of the Manager and purchased by Alcentra Group using funds under a warehouse credit facility provided by The Bank of New York Mellon Corporation in anticipation of the Offering.
The Company entered into a senior secured term loan agreement (the “Bridge Facility”) with ING Capital LLC as lender that it used to fund the purchase of the Warehouse Portfolio and to fund the cash portion of the consideration paid to Fund III. In May 2014, the Company used $94.2 million of the proceeds from the Offering to repay the Bridge Facility in full.
The Company's investment objective is to generate both current income and capital appreciation through debt and equity investments by targeting investment opportunities with favorable risk-adjusted returns. The Company invests primarily in middle-market companies in the form of mezzanine and senior secured loans, each of which may include an equity component, and, to a lesser extent, by making direct equity investments in such companies.
The Company is required to comply with certain regulatory requirements such as not acquiring any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets. Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules, the term “eligible portfolio company” includes all private operating companies, operating companies whose securities are not listed on a national securities exchange, and certain public operating companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case organized and with their principal of business in the United States.
Portfolio Composition and Investment Activity
Portfolio Composition
We originate and invest primarily in middle-market companies (typically those with $5.0 million to $15.0 million of EBITDA) through first lien, second lien, unitranche and mezzanine debt financing, often times with a corresponding equity investment.
During the three months ended June 30, 2016, we invested $39.3 million in debt and equity investments in four new portfolio companies and one add on investment. These investments consisted of senior secured loans ($4.55 million, or 11.6%), second lien notes ($16.0 million, or 40.7%), subordinated notes ($18.25 million, or 46.4%), and equity securities ($0.5 million, or 1.27%). During the three months ended June 30, 2016 we received proceeds from sales or repayments, including principal, return of capital dividends and net realized gains (losses), of $26.46 million. During the three months ended June 30, 2015, we invested $31.25 million in debt, including three new portfolio companies. These investments consisted of second lien notes ($11.75 million, or 37.6%) and subordinated notes($19.5 million, or 62.4%). During the three months ended June 30, 2015, we received proceeds from repayments of principal, including return of capital dividends and realized gains, of $16.5 million.
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As of June 30, 2016, the fair value of our investment portfolio totaled $293.6 million and consisted of 33 portfolio companies. As of June 30, 2016, 57% of our debt investments bore interest based on floating rates (subject to interest rate floors), such as LIBOR, and 43% bore interest at fixed rates. Our average portfolio company investment at amortized cost and fair value was approximately $9.0 million and $8.9 million, respectively, and our largest portfolio company investment by amortized cost and fair value was approximately $18.5 million and $27.3 million, respectively.
As of December 31, 2015, the fair value of our investment portfolio totaled $296.3 million and consisted of 32 portfolio companies. As of December 31, 2015, 52% of our debt investments bore interest based on floating rates (subject to interest rate floors), such as LIBOR, and 47% bore interest at fixed rates. Our average portfolio company investment at amortized cost and fair value was approximately $9.6 million and $9.3 million, respectively, and our largest portfolio company investment by amortized cost and fair value was approximately $17.1 million and $22.8 million, respectively.
The weighted average yield on debt investments as of June 30, 2016 and December 31, 2015 was 11.7% and 12.4%, respectively. The weighted average yields were computed using the effective interest rates for debt investments as of June 30, 2016 and December 31, 2015, including the accretion of original issue discount.
The following table shows the portfolio composition by investment type at fair value and cost with the corresponding percentage of total investments:
Fair Value | Cost | |||||||||||||||||||||||||||||||
June 30, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | |||||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||
Senior Secured - First Lien | $ | 80,704 | 27.5 | % | $ | 88,453 | 29.9 | % | $ | 81,064 | 27.1 | % | $ | 92,807 | 30.6 | % | ||||||||||||||||
Senior Secured - Second Lien | 93,004 | 31.7 | % | 83,267 | 28.1 | % | 94,347 | 31.6 | % | 83,015 | 27.4 | % | ||||||||||||||||||||
Senior Subordinated | 70,255 | 23.9 | % | 80,459 | 27.1 | % | 74,299 | 24.9 | % | 80,360 | 26.5 | % | ||||||||||||||||||||
Equity/Other | 49,676 | 16.9 | % | 44,163 | 14.9 | % | 49,084 | 16.4 | % | 47,250 | 15.6 | % | ||||||||||||||||||||
Total | $ | 293,639 | 100.0 | % | $ | 296,342 | 100.0 | % | $ | 298,794 | 100.0 | % | $ | 303,432 | 100.0 | % |
The following table shows portfolio composition by geographic region at fair value and cost with the corresponding percentage of total investments. The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company’s business.
Fair Value | Cost | |||||||||||||||||||||||||||||||
June 30, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | |||||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||
South | $ | 77,621 | 26.4 | % | $ | 54,401 | 18.4 | % | $ | 84,330 | 28.2 | % | $ | 67,215 | 22.2 | % | ||||||||||||||||
South Eastern | 47,851 | 16.3 | % | 80,723 | 27.2 | % | $ | 46,244 | 15.5 | % | 78,199 | 25.8 | % | |||||||||||||||||||
Eastern | 90,650 | 30.9 | % | 65,692 | 22.2 | % | $ | 85,766 | 28.7 | % | 62,787 | 20.7 | % | |||||||||||||||||||
West | 14,349 | 4.9 | % | 44,419 | 15.0 | % | $ | 18,780 | 6.3 | % | 44,069 | 14.5 | % | |||||||||||||||||||
South West | 14,391 | 4.9 | % | 17,944 | 6.1 | % | $ | 14,788 | 4.9 | % | 18,466 | 6.1 | % | |||||||||||||||||||
Mid West | 48,778 | 16.6 | % | 33,163 | 11.2 | % | $ | 48,886 | 16.4 | % | 32,696 | 10.8 | % | |||||||||||||||||||
Total | $ | 293,639 | 100.0 | % | $ | 296,342 | 100.0 | % | $ | 298,794 | 100.0 | % | $ | 303,432 | 100.0 | % |
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The following table shows the detailed industry composition of our portfolio at fair value and cost as a percentage of total investments:
Fair Value | Cost | |||||||||||||||
June 30, 2016 | December 31, 2015 | June 30, 2016 | December 31, 2015 | |||||||||||||
Healthcare Services | 16.40 | % | 17.77 | % | 16.64 | % | 15.35 | % | ||||||||
Telecommunications | 9.41 | % | 6.35 | % | 5.88 | % | 9.05 | % | ||||||||
Infrastructure Maintenance | 9.31 | % | 7.73 | % | 5.80 | % | 6.19 | % | ||||||||
Waste Services | 8.04 | % | 7.67 | % | 7.82 | % | 8.91 | % | ||||||||
High Tech Industries | 7.04 | % | 2.36 | % | 1.70 | % | 6.89 | % | ||||||||
Automotive Business Services | 6.88 | % | 6.74 | % | 6.58 | % | 6.71 | % | ||||||||
Industrial Manufacturing | 5.29 | % | 0.00 | % | 0.00 | % | 5.16 | % | ||||||||
Technology & Telecom | 4.90 | % | 4.71 | % | 4.77 | % | 4.95 | % | ||||||||
Education | 4.84 | % | 4.69 | % | 4.73 | % | 4.94 | % | ||||||||
Media: Advertising, Printing & Publishing | 4.00 | % | 3.97 | % | 3.87 | % | 3.93 | % | ||||||||
Oil & Gas Services | 3.25 | % | 4.43 | % | 4.33 | % | 4.60 | % | ||||||||
Security | 3.24 | % | 3.21 | % | 3.13 | % | 3.18 | % | ||||||||
Industrial Services | 2.83 | % | 3.40 | % | 3.36 | % | 3.15 | % | ||||||||
Media & Entertainment | 2.29 | % | 2.32 | % | 4.06 | % | 4.17 | % | ||||||||
Environmental/Recycling Services | 2.10 | % | 2.06 | % | 2.18 | % | 2.29 | % | ||||||||
Wholesale/Distribution | 2.04 | % | 6.32 | % | 5.38 | % | 2.00 | % | ||||||||
Technology & IT | 1.67 | % | 1.67 | % | 1.60 | % | 1.61 | % | ||||||||
Restoration Services | 1.61 | % | 4.47 | % | 4.23 | % | 1.04 | % | ||||||||
Aerospace | 1.36 | % | 1.35 | % | 1.32 | % | 1.34 | % | ||||||||
Food & Beverage | 1.35 | % | 1.28 | % | 1.65 | % | 1.67 | % | ||||||||
Transportation Logistics | 1.13 | % | 5.22 | % | 5.10 | % | 1.85 | % | ||||||||
Packaging | 0.61 | % | 1.27 | % | 1.25 | % | 0.61 | % | ||||||||
Call Center Services | 0.41 | % | 0.40 | % | 0.39 | % | 0.41 | % | ||||||||
Disaster Recovery Services | 0.00 | % | 0.61 | % | 4.23 | % | 0.00 | % | ||||||||
Grand Total | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % |
$91.8 million of the portfolio (32%) had a first credit exposure at 0.0x – 1.0x EBITDA; $128.0 million of the portfolio (44%) had a first credit exposure at 1.0x – 3.0x EBITDA; $52.4 million of the portfolio (18%) had a first credit exposure at 3.0x – 4.0x EBITDA; $3.8 million of (1%) had a first credit exposure at 4.0x – 4.5x EBITDA; and $14.6 million of the portfolio (5%) had a first credit exposure at >4.5x EBITDA.
Portfolio Asset Quality
We currently do not use a rating system to monitor portfolio performance. As the portfolio grows in size, we would expect to implement a portfolio rating system.
Non-Accrual
We will generally not accrue interest on loans and debt securities if principal or interest cash payments are past due 30 days or we have reason to doubt our ability to collect such interest.
As of June 30, 2016 and December 31, 2015, we had no loans on non-accrual status.
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Discussion and Analysis of Results of Operations
Comparison of three months ended June 30, 2016 and June 30, 2015
Investment Income
For the three months ended June 30, 2016, total investment income was $10.6 million, an increase of $2.1 million, or 24.7% over the $8.5 million of total investment income for the three months ended June 30, 2015. This increase was primarily attributable to an increase in interest income with the addition of 2 portfolio companies, and $1.7 million in prepayment penalties .
We generate revenue in the form of interest income on debt investments and capital gains and distributions, if any, on investment securities that we may acquire in portfolio companies. Our debt investments typically have a term of five to seven years and bear interest at a fixed or floating rate. Interest on our debt securities is payable both quarterly and monthly. Payments of principal on our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some cases, our debt investments may pay interest in-kind, or PIK. Any outstanding principal amount of our debt securities and any accrued but unpaid interest will generally become due at the maturity date. The level of interest income we receive is directly related to the balance of interest-bearing investments multiplied by the weighted average yield of our investments. We expect the total dollar amount of interest and any dividend income that we earn to increase as the size of our investment portfolio increases.
We may also generate revenue in the form of prepayment fees, commitment, loan origination, structuring or due diligence fees, fees for providing significant managerial assistance, consulting fees and the secondary sale of certain of our investments. We are exploring the secondary sale of select equity interests in certain portfolio companies. We believe that the sale of these equity interests would allow us to rotate a portion of our non-incoming producing equity investment portfolio into income generating debt investments. There can be no assurances that these negotiations will result in a sale of any or all of the equity interests or if a sale transaction is undertaken as to its terms or timing.
Expenses
For the three months ended June 30, 2016, total expenses were $4.7 million, which was an increase of $0.883 million, or 22.9%, over the $3.8 million for the three months ended June 30, 2015. Interest and financing expenses for the three months ended June 30, 2016 were $1.62 million, an increase of $0.355 million from $1.26 million for the three months ended June 30, 2015. This is largely due to the additional issuance of $11.5 million in Alcentra Capital Internotes® . The base management fee increased $0.060 million, or 5.2%, to $1.283 million for the three months ended June 30, 2016 due to higher average total assets less cash and cash equivalents than the comparable period in 2015. The income-based incentive fee for the three months ended June 30, 2016 was $0.926, a 133.3% increase from the comparable period in 2015. The capital gains incentive fee was $0 for the period ending June 30, 2016, a decrease of $0.434 million from comparable period in 2015. The administrative service fee, professional fees and other general and administrative expenses totaled $0.913 million for the three months ended June 30, 2016 compared to a total of $0.544 million for the three months ended June 30, 2015.
Net Investment Income
Net investment income for the three months ended June 30, 2016 was $5.9 million, an increase of $1.329 million, or 28.6%, compared to net investment income of $4.6 million during the three months ended June 30, 2015 as a result of the $2.1 million increase in total investment income and the $0.8 million increase in total expenses.
Net Increase in Net Assets Resulting From Operations
For the three months ended June 30, 2016, the net realized gain from portfolio investments was $1.7 million.
During the three months ended June 30, 2016, we recorded a net change in unrealized depreciation from portfolio investments of $5.8 million attributable to depreciation on debt and equity investments. During the three months ended June 30, 2015, the net change in unrealized appreciation was $2.3 million.
As a result of these events, our net increase in net assets resulting from operations during the three months ended June 30, 2016 was $1.4 million, a decrease of $5.0 million, or 78.2%, compared to a net increase in net assets resulting from operations of $6.4 million during the three months ended June 30, 2015.
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Provision for Taxes on Unrealized Appreciation on Investments
We have direct wholly owned subsidiaries that have elected to be taxable entities (the "Taxable Subsidiaries"). The Taxable Subsidiaries permit us to hold equity investments in portfolio companies which are "pass through" entities for tax purposes and continue to comply with the "source income" requirements contained in RIC tax provisions of the Code. The Taxable Subsidiaries are not consolidated with us for income tax purposes and may generate income tax expense, benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. The income tax expense, or benefit, if any, and related tax assets and liabilities are reflected in our consolidated financial statements. For the three months ended June 30, 2016, we recognized a provision for income tax on unrealized gains on investments of $0.3 million.
Comparison of six months ended June 30, 2016 and June 30, 2015
Investment Income
For the six months ended June 30, 2016, total investment income was $20.6 million, an increase of $3.85million, or 23.0%, over the $16.7 million of total investment income for the six months ended June 30, 2015. The increase was primarily attributable to a $1.7 million increase in income resulting largely from an increase in the size of the portfolio, as well as fee income of $2.2 million.
Expenses
For the six months ended June 30, 2016, total expenses, including income tax provision, were $9.1 million, an increase of $1.9 million or 27.8%, over the $7.1 million of total expenses after the waiver of capital gains incentive fees for the six months ended June 30, 2015. Interest and financing expenses for the six months ended June 30, 2016 were $3.2 million, an increase of $1.3 million or 55.5%, compared to $2.1 million for the six months ended June 30, 2015 as a result of interest and commitment fees related to the Credit Facility as well as the additional cost from the issuance of $15 million of InterNotes. The base management fee increased $0.2 million, or 8.6%, to $2.6 million for the six months ended June 30, 2016 due to higher average total assets less cash and cash equivalents than the comparable period in 2015. The incentive fee for the six months ended June 30, 2016 was $1.7 million, a $0.07 million, or 4.5%, increase from the $1.6 million incentive fee for the six months ended June 30, 2015 which was the result of an increase of $0.5 million in the income incentive fee to $1.7 million and a decrease in the capital gains incentive fee accrual of $0.4 million during the 2016 period. The administrative service fee, professional fees and other general and administrative expenses totaled $1.6 million for the six months ended June 30, 2016 compared to $1.0 million for the six months ended June 30, 2015.
Net Investment Income
Net investment income for the six months ended June 30, 2016 was $11.5 million, which was an increase of $1.9 million, or 19.5%, compared to net investment income of $9.6 million during the six months ended June 30, 2015 as a result of the $3.8 million increase in total investment income and the $1.9 million increase in total expenses, including income tax provision.
Net Increase in Net Assets Resulting From Operations
For the six months ended June 30, 2016, the total net realized losses on investments were $7.2 million and were comprised of $11.1 million in gross realized losses and and $3.9 million in realized gains. Significant realized gains (losses) for the six months ended June 30, 2016 are summarized as follows:
Portfolio Company | Realization Event | Net Realized Gain/(Loss) (in millions) | ||||
DRC Emergency Services | Sale of Portfolio Company | $ | (11.1 | ) | ||
Health Fusion | Exit of Portfolio Company | 1.7 | ||||
ACT Lighting | Exit of Portfolio Company | 1.7 | ||||
Net Access Systems | Exit of Portfolio Company | 0.3 | ||||
Response Team | Exit of Portfolio Company | 0.2 | ||||
$ | (7.2 | ) |
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For the six months ended June 30, 2015, the total realized loss on investments was $0.1 million.
During the six months ended June 30, 2016, we recorded a net change in unrealized appreciation on investments of $1.9 million attributable to (i) the reversal of net unrealized depreciation on investments of $11.1 million related to the exit or sale of investments (ii) net unrealized depreciation of $9.2 million on debt investments. During the six months ended June 30, 2015, we recorded a net change in unrealized appreciation on investments of $2.5 million attributable to (i) net unrealized depreciation of $0.9 million on debt investments and (ii) net unrealized appreciation of $3.4 million on debt and equity investments. As a result of these events, our net increase in net assets resulting from operations during the six months ended June 30, 2016, after provision for taxes, was $5.7 million, or a decrease of $5.7 million, compared to a net increase in net assets resulting from operations of $11.4 million during the prior year period.
Liquidity and Capital Resources
As of June 30, 2016, we had $5.0 million in cash and cash equivalents and our net assets totaled $191.5 million. We believe that our current cash and cash equivalents on hand, our credit facility and our anticipated cash flows from operations will provide adequate capital resources with which to operate and finance our investment business and make distributions to our stockholders for at least the next 12 months. We intend to generate additional cash primarily from future debt offerings and future borrowings, as well as cash flows from operations, including income earned from investments in our portfolio companies. On both a short-term and long-term basis, our primary use of funds will be investments in portfolio companies and cash distributions to our stockholders.
Cash Flows
For the three months ended June 30, 2016, we experienced a net increase in cash and cash equivalents in the amount of $0.171 million. During that period, we received $10.5 million in cash from operating activities, primarily from the return of capital from portfolio investments of approximately $71.3 million and $4.1 of paid in kind income. This was partially offset by the investment in new portfolio companies of approximately $69.5 million. During the same period, financing activities reduced cash by $10.4 million primarily due to the repayment of the credit facility.
For the three months ended June 30, 2015, we experienced a decrease in cash and cash equivalents in the amount of $6.2 million. During that period, our operating activities used $11.3 million in cash, primarily in connection with the purchase/repayments of investments.. In addition, financing activities increased cash by $5.2 million primarily from the issuance of the InterNotes. As of June 30, 2015, we had $3.8 million of cash on hand.
Capital Resources
Our liquidity and capital resources are derived from the capital contributions and cash flows from operations, including investment sales and repayments, and income earned. Our primary use of funds from operations includes investments in portfolio companies and other operating expenses we incur, as well as distributions to our stockholders. We expect to use these capital resources as well as proceeds from turnover within our portfolio, borrowings under the Credit Facility and from public and private offerings of securities to finance our investment activities.
In May 2014, Alcentra entered into a senior secured revolving credit agreement (“Credit Facility”) with ING Capital LLC, as administrative agent and lender. The Credit Facility had an initial commitment of $80 million with an accordion feature that allows for an increase in total commitments to $160 million. The Credit Facility was amended on August 11, 2015 to increase the accordion feature to allow for a future increase of the total commitments up to $250.0 million, subject to satisfaction of certain conditions at the time of any such future increase. As amended, the Credit Facility has a maturity date of August 11, 2020 and bears interest, at our election, at a rate per annum equal to (i) 2.25% plus the highest of a prime rate, the Federal Funds rate plus 0.5%, three month LIBOR plus 1.0% and zero or (ii) 3.00% plus the one, three or six month LIBOR rate, as applicable.
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On March 2, 2016, we amended certain provisions of the Credit Facility relating to the treatment of approximately $38.6 million in aggregate principal amount of outstanding InterNotes that mature prior to the Credit Facility. Among other things, the amendments to the Credit Facility provide that, in the nine-month period prior to the maturity of these particular InterNotes, which mature between February 15 and April 15, 2020, our ability to borrow under the Credit Facility will be reduced by and in the amount of such InterNotes still outstanding during such time. The Credit Facility is secured by a first priority security interest in all of our portfolio investments, the equity interests in certain of its direct and indirect subsidiaries and substantially all of its other assets. We are also subject to customary covenants and events of default typical of a facility of this type.
As of June 30, 2016, we are in compliance with all covenants of the Credit Facility and there was $51.7 million outstanding.
Also, as a business development company, we generally are required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, to total senior securities, which include all of our borrowings and any outstanding preferred stock, of at least 200%. We were in compliance with the asset coverage ratios at all times. As of June 30, 2016 our asset coverage ratio was 285%.
Recently Issued Accounting Standards
In April 2015, FASB issued ASU 2015-03, Interest – Imputation of interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs , which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. This guidance is effective for annual and interim periods beginning after December 15, 2015. We have adopted this guidance as of March 31, 2016. The new guidance will be applied retrospectively to each prior period presented.
In May 2015, the FASB issued ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The update eliminates the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value (NAV) per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. Public companies are required to apply ASU 2015-07 retrospectively for interim and annual reporting periods beginning after December 15, 2015. Accordingly, the Company has evaluated the impact of ASU 2015-07 on its consolidated financial statements and determined that the adoption of ASU 2015-07 has not had a material impact on our consolidated financial statements.
Regulated Investment Company Status and Distributions
We have elected to be treated as a RIC under Subchapter M of the Code beginning the fiscal year ending December 31, 2014. If we qualify as a RIC, we will not be taxed on our investment company taxable income or realized net capital gains, to the extent that such taxable income or gains are distributed, or deemed to be distributed, to stockholders on a timely basis.
Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation until realized. Dividends declared and paid by us in a year may differ from taxable income for that year as such dividends may include the distribution of current year taxable income or the distribution of prior year taxable income carried forward into and distributed in the current year. Distributions also may include returns of capital.
To qualify for RIC tax treatment, we must, among other things, distribute, with respect to each taxable year, at least 90% of our investment company net taxable income (i.e., our net ordinary income and our realized net short-term capital gains in excess of realized net long-term capital losses, if any). If we qualify as a RIC, we will also be subject to a federal excise tax, based on distributive requirements of our taxable income on a calendar year basis.
We intend to distribute to our stockholders between 90% and 100% of our annual taxable income (which includes our taxable interest and fee income).
Investment Advisory Agreement
Under the Advisory Agreement, Alcentra pays Alcentra NY, LLC (the "Adviser") a base management fee calculated at an annual rate as follows: 1.75% of its gross assets (i.e., total assets held before deduction of any liabilities), including assets purchased with borrowed funds or other forms of leverage and excluding cash and cash equivalents (such as investments in U.S. Treasury Bills), if its gross assets are below $625 million; 1.625% of its total gross assets if our gross assets are between $625 million and $750 million; and 1.5% of its gross assets if its assets are greater than $750 million. These various management fee percentages (i.e. 1.75%, 1.625% and 1.5%) would apply to ACC's entire gross assets in the event its gross assets exceed the various gross asset thresholds.
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In addition, Alcentra pays the Adviser an incentive fee under the Advisory Agreement which consists of two parts. The first part, which is calculated and payable quarterly in arrears, equals 20% of our "pre-incentive fee net investment income" for the immediately preceding quarter, subject to a hurdle rate of 2% per quarter (8% annualized), and is subject to a "catch-up" feature. The second part is calculated and payable in arrears as of the end of each calendar year (or, upon termination of the Advisory Agreement, as of the termination date) and equals 20% of ACC's aggregate cumulative realized capital gains from inception through the end of each calendar year, computed net of aggregate cumulative realized capital losses and aggregate cumulative unrealized capital depreciation through the end of such year, less the aggregate amount of any previously paid capital gain incentive fees. See Note 6.
The Adviser agreed to waive its fees (base management and incentive fee), without recourse against or reimbursement by us, through the quarter ended June 30, 2015 and to the extent required in order for us to earn a quarterly net investment income to maintain a targeted dividend payment on shares of common stock outstanding on the relevant dividend payment dates of 9.0% (to be paid on a quarterly basis).
Critical Accounting Policies
The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ.
Valuation of Portfolio Investments
We generally invest in illiquid loans and securities including debt and equity securities of middle-market companies. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by ACC's board of directors. Such determination of fair values may involve subjective judgments and estimates, although we engage independent valuation providers to review the valuation of each portfolio investment that does not have a readily available market quotation at least once annually. With respect to unquoted securities, we value each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies and other factors.
Because there is not a readily available market for substantially all of the investments in our portfolio, we value most of our portfolio investments at fair value as determined in good faith by ACC's board of directors using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
With respect to investments for which market quotations are not readily available, ACC's board of directors undertakes a multi-step valuation process each quarter, as described below:
• | Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Adviser responsible for the portfolio investment; |
• | Preliminary valuation conclusions are then documented and discussed with our senior management and the Adviser committee; |
�� | • | The audit committee of ACC's board of directors then reviews these preliminary valuations; |
• | At least once quarterly, independent valuation firms engaged by ACC's board of directors will prepare valuations on a selected basis and submit reports to the board of directors; and |
• | The board of directors then discusses valuations and determines the fair value of each investment in our portfolio in good faith, based the input of Adviser, the independent valuation firm and the audit committee. |
Revenue Recognition
We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the loan balance that generally becomes due at maturity, we do not accrue PIK interest if the portfolio company valuation indicates that such PIK interest is not collectible. We will not accrue interest on loans and debt securities if principal or interest cash payments are past due 30 days or more and/or we have reason to doubt our ability to collect such interest.
Loan origination fees, original issue discount and market discount or premium are capitalized, and we then accrete or amortize such amounts using the effective interest method as interest income. Upon the prepayment of a loan or debt security, any unamortized loan origination is recorded as interest income. We record prepayment premiums on loans and debt securities as interest income.
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Off-Balance Sheet Arrangements
We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. As of June 30, 2016, we had off-balance sheet arrangements consisting of three unfunded commitments totaling $4.1 million. As of December 31, 2015, we had one unfunded commitment totaling $1.0 million.
Recent Developments
Subsequent to June 30, 2016, the following activity occurred:
On July 7, 2016, a $0.34 per share dividend was paid to shareholders of record as of June 30, 2016.
Through July 14, 2016, Alcentra sold an additional $3.5 million in aggregate principal amount of Alcentra Capital InterNotes 6.25% notes due 2021.
On July 20, 2016, Alcentra invested $13.0 million in Limbach Facilities Services (13% Cash/3% PIK Subordinated Note).
On August 1, 2016, DBI Holding LLC repaid our senior subordinated notes ($9.6 million), senior PIK notes ($9.2 million) and warrants ($9.7 million) for total proceeds of $28.5 million.
On August 4, 2016, the Board of Directors approved the 2016 third quarter dividend of $0.34 per share for shareholders of record date September 30, 2016 and payable October 6, 2016.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including changes in interest rates. All of the floating rate loans in the portfolio have interest rate floors, which have effectively converted the loans to fixed rate loans in the current interest rate environment. For the three months ended June 30, 2016, 15 loans in the portfolio bore interest at floating rates, or 57% of the fair value of our portfolio. For the year ended December 31, 2015, 14 of the loans in the portfolio bore interest at floating rates, or 52% of the fair value of our portfolio. In the future, we expect other loans in our portfolio will have floating rates. Assuming that the Statement of Assets and Liabilities as of June 30, 2016, were to remain constant and no actions were taken to alter the existing interest rate sensitivity, a hypothetical one or two percent increase in LIBOR would have less than a 2.5% effect on our portfolio’s income. Although we believe that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the balance sheet and other business developments that could affect net increase in net assets resulting from operations, or net income. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by this estimate. We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contacts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio of investments. As of June 30, 2016 and June 30, 2015, we did not engage in hedging activities.
Changes in interest rates will affect our cost of funding. Our interest expense will be affected by changes in certain published indices such as the LIBOR rate in connection with the Credit Facility.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Company’s management, under the supervision and with the participation of various members of management, including its Chief Executive Officer (“CEO”) and its Chief Accounting Officer (“CAO”), has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CAO have concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report.
(b) Changes in Internal Control Over Financial Reporting
Management did not identify any change in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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The Company is not currently subject to any material legal proceedings, nor, to its knowledge, is any material legal proceeding threatened against it. 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 its rights under contracts with its portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon its financial condition or results of operations.
There has been no material change in the information provided under the heading “Risk Factors” in the Company’s annual report on Form 10-K filed with the SEC on March 9, 2016. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial may materially affect its business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Stock Repurchase Program
On January 18, 2016, our board of directors authorized a $5.0 million stock repurchase program that was put into effect in March 2016. The timing and amount of any stock repurchases will depend on the terms and conditions of the repurchase program and no assurances can be given that any common stock, or any particular amount, will be purchased. Unless extended by our board of directors, the stock repurchase program will terminate on the earlier of (i) one year from the date of its approval or (ii) the repurchase of $5.0 million of the Company’s common stock and may be modified or terminated at any time for any reason without prior notice. We have provided our stockholders with notice of our intention to repurchase shares of our common stock in accordance with 1940 Act requirements. We will retire immediately all such shares of common stock that we purchase in connection with the stock repurchase program.
The following table summarizes our share repurchases under our stock repurchase program for the six months ended June 30, 2016:
Jan | Feb | March | April | May | June | |||||||||||||||||||
2016 | 2016 | 2016 | 2016 | 2016 | 2016 | |||||||||||||||||||
Dollar amount repurchased | — | — | $ | 115,408 | $ | - | $ | 114,762 | $ | 102,966 | ||||||||||||||
Shares repurchased | — | — | 10,509 | - | 9,547 | 8,364 | ||||||||||||||||||
Average price per share (including commission) | N/A | N/A | $ | 11.26 | $ | N/A | $ | 11.98 | $ | 12.27 | ||||||||||||||
Weighted average discount to net asset value | N/A | N/A | 21.84 | % | N/A | 15.10 | % | 13.37 | % |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Not applicable.
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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:
Exhibit Number | Description | |
11.1 | Computation of Per Share Earnings(1) | |
31.1 | Chief Executive Officer Certification Pursuant to Exchange Act Rule 13a-14 (a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
31.2 | Chief Accounting Officer Certification Pursuant to Exchange Act Rule 13a-14 (a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
32.1 | Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |
32.2 | Chief Accounting Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
* | Filed herewith. |
(1) | Included in the notes to the consolidated financial statements contained in this report |
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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.
Dated: August 4, 2016
By: | /s/ Paul J. Echausse | |
Name: Paul J. Echausse | ||
Title: Chief Executive Officer and President | ||
By: | /s/ Ellida McMillan | |
Name: Ellida McMillan | ||
Title: Chief Accounting Officer, Secretary, and Treasurer |
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