TCG BDC II 10Q 2021 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period to

Commission File No. 814-01248

TCG BDC II, INC.

(Exact name of Registrant as specified in its charter)


Maryland						81-5320146
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

One Vanderbilt Avenue, Suite 3400, New York, NY 10017						(212) 813-4900
(Address of principal executive office) (Zip Code)						(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
N/A	N/A	N/A

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of shares of the registrant’s common stock, $0.01 par value per share, outstanding at November 12, 2021 was 53,895,009.

TCG BDC II, INC.

INDEX



Part I.	Financial Information
Item 1.	Financial Statements
	Consolidated Statements of Assets and Liabilities as of September 30, 2021 (unaudited) and December 31, 2020	1
	Consolidated Statements of Operations for the three and nine month periods ended September 30, 2021 (unaudited) and September 30, 2020 (unaudited)	2
	Consolidated Statements of Changes in Net Assets for the nine month periods ended September 30, 2021 (unaudited) and September 30, 2020 (unaudited)	3
	Consolidated Statements of Cash Flows for the nine month periods ended September 30 , 2021 (unaudited) and S e ptember 30 , 2020 (unaudited)	4
	Consolidated Schedules of Investments as of September 30, 2021 (unaudited) and December 31, 2020	5
	Notes to Consolidated Financial Statements (unaudited)	25
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	61
Part II.	Other Information
Item 1.	Legal Proceedings	63
Item 1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	63
	Signatures	64

TCG BDC II, INC.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(dollar amounts in thousands, except per share data)


	September 30, 2021		December 31, 2020
ASSETS	(unaudited)
Investments—non-controlled/non-affiliated, at fair value (amortized cost of $2,077,244 and $1,833,385, respectively)	$	2,077,835	$	1,811,535
Cash, cash equivalents and restricted cash	36,983		50,217
Deferred financing costs	5,768		4,542
Receivable for investment sold/repaid	21,797		1,659
Interest receivable from non-controlled/non-affiliated investments	21,076		12,636
Receivable for issuance of common stock	1,015		1,962
Prepaid expenses and other assets	1,345		714
Total assets	$	2,165,819	$	1,883,265
LIABILITIES
Secured borrowings (Note 5)	$	1,025,826	$	880,956
Payable for investments purchased	92		273
Due to Investment Adviser	415		486
Interest and credit facility fees payable (Note 5)	6,295		5,470
Dividend payable (Note 7)	26,409		23,766
Management and incentive fees payable (Note 4)	7,803		7,437
Administrative service fees payable (Note 4)	291		60
Other accrued expenses and liabilities	1,747		1,681
Total liabilities	1,068,878		920,129
Commitments and contingencies (Notes 6 and 9)
NET ASSETS
Common stock, $0.01 par value; 200,000,000 shares authorized; 53,895,009 and 49,062,820 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	539		491
Paid-in capital in excess of par value	1,095,850		996,001


Total distributable earnings (loss)	552		(33,356)
Total net assets	$	1,096,941	$	963,136
NET ASSETS PER SHARE	$	20.35	$	19.63

The accompanying notes are an integral part of these consolidated financial statements.

TCG BDC II, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollar amounts in thousands, except per share data)

(unaudited)


	For the three month periods ended				For the nine month periods ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Investment income:
From non-controlled/non-affiliated investments:
Interest income	$	41,438	$	33,371	$	117,167	$	95,518
Other income	632		964		4,505		7,364
Total investment income from non-controlled/non-affiliated investments	42,070		34,335		121,672		102,882
Total investment income	42,070		34,335		121,672		102,882
Expenses:


Management fees (Note 4)	3,240		3,040		9,502		8,543
Net investment income incentive fees (Note 4)	4,559		3,693		13,287		10,910

Professional fees	479		495		1,317		1,047
Administrative service fees (Note 4)	275		86		598		334
Interest expense (Note 5)	6,757		4,793		18,907		16,747
Credit facility fees (Note 5)	422		804		1,176		2,053
Directors’ fees and expenses	96		55		237		178
Other general and administrative	462		400		1,374		1,188
Total expenses	16,290		13,366		46,398		41,000
Net investment income (loss) before taxes	25,780		20,969		75,274		61,882
Excise tax expense	—		—		100		—
Net investment income (loss)	25,780		20,969		75,174		61,882
Net realized gain (loss) and change in unrealized appreciation (depreciation):
Net realized gain (loss) on investments:
Non-controlled/non-affiliated investments	4,546		(1,208)		6,456		(3,374)
Currency gains (losses) on non-investment assets and liabilities	(44)		(2,251)		(85)		(1,789)
Net change in unrealized appreciation (depreciation) on investments:
Non-controlled/non-affiliated investments	(930)		17,739		22,441		(46,030)
Net change in unrealized currency gains (losses) on non-investment assets and liabilities	3,186		(926)		4,493		756
Net realized and unrealized gain (loss) on investments and non-investment assets and liabilities	6,758		13,354		33,305		(50,437)
Net increase (decrease) in net assets resulting from operations	$	32,538	$	34,323	$	108,479	$	11,445
Basic and diluted earnings per common share (Note 7)	$	0.63	$	0.72	$	2.17	$	0.26
Weighted-average shares of common stock outstanding—Basic and Diluted (Note 7)	51,725,278		47,532,983		49,977,840		43,203,882

The accompanying notes are an integral part of these consolidated financial statements.

TCG BDC II, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(dollar amounts in thousands)

(unaudited)


	For the nine month periods ended
	September 30, 2021		September 30, 2020
Increase (decrease) in net assets resulting from operations:
Net investment income (loss)	$	75,174	$	61,882
Net realized gain (loss) on investments and non-investment assets and liabilities	6,371		(5,163)
Net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	26,934		(45,274)
Net increase (decrease) in net assets resulting from operations	108,479		11,445
Capital transactions:
Common stock issued	100,000		229,820
Dividends declared (Note 10)	(74,674)		(62,213)
Net increase (decrease) in net assets resulting from capital share transactions	25,326		167,607
Net increase (decrease) in net assets	133,805		179,052
Net assets at beginning of period	963,136		737,109
Net assets at end of period	$	1,096,941	$	916,161

The accompanying notes are an integral part of these consolidated financial statements.

TCG BDC II, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollar amounts in thousands)

(unaudited)


	For the nine month periods ended
	September 30, 2021		September 30, 2020
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	108,479	$	11,445
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Amortization of deferred financing costs	936		1,234

Net accretion of discount on investments	(7,369)		(5,047)
Paid-in-kind interest	(5,136)		(4,197)
Net realized (gain) loss on investments and non-investment assets and liabilities	(6,371)		5,163
Net change in unrealized (appreciation) depreciation on investments	(22,441)		46,030
Net change in unrealized currency (gains) losses on non-investment assets and liabilities	(4,493)		(756)
Cost of investments purchased and change in payable for investments purchased	(542,910)		(470,139)
Proceeds from sales and repayments of investments and change in receivable for investments sold/repaid	297,693		133,798
Changes in operating assets:
Interest receivable	(8,440)		698
Prepaid expenses and other assets	(631)		1,190
Changes in operating liabilities:
Due to Investment Adviser	(71)		(51)
Interest and credit facility fees payable	825		212
Management and incentive fees payable	366		1,833
Administrative service fees payable	231		24

Other accrued expenses and liabilities	66		24
Net cash provided by (used in) operating activities	(189,266)		(278,539)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of change in receivable for issuance of common stock	100,947		229,820
Borrowings on the Credit Facilities	345,811		566,486
Repayments of the Credit Facilities	(196,533)		(447,985)
Dividends paid in cash	(72,031)		(57,623)
Debt issuance costs paid	(2,162)		(2,345)

Net cash provided by (used in) financing activities	176,032		288,353
Net increase (decrease) in cash, cash equivalents and restricted cash	(13,234)		9,814
Cash, cash equivalents and restricted cash, beginning of period	50,217		18,937
Cash, cash equivalents and restricted cash, end of period	$	36,983	$	28,751
Supplemental disclosures:

Interest paid during the period	$	18,796	$	16,649
Dividends declared during the period	$	74,674	$	62,213

The accompanying notes are an integral part of these consolidated financial statements.

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of September 30, 2021

(dollar amounts in thousands)

(unaudited)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
First Lien Debt (82.1% of fair value)
Advanced Web Technologies Holding Company	^+	(2)(3)(6)	Containers, Packaging & Glass	L + 5.75%	6.75%	12/17/2020	12/17/2026	$	11,891	$	11,567	$	12,073	1.10	%
Airnov, Inc.	^#	(2)(3)(6)	Containers, Packaging & Glass	L + 5.00%	6.00%	12/20/2019	12/19/2025	43,318		42,805		43,318		3.95
Allied Universal Holdco LLC	^	(2)(3)	Business Services	L + 4.25%	4.38%	2/17/2021	7/10/2026	499		501		499		0.05
Alpine SG, LLC	+#	(2)(3)	High Tech Industries	L + 5.75%	6.75%	2/2/2018	11/16/2022	15,301		15,255		15,137		1.38
Alpine SG, LLC	#	(2)(3)	High Tech Industries	L + 8.50%	9.50%	7/24/2020	11/16/2022	1,618		1,593		1,618		0.15
Alpine SG, LLC	+#	(2)(3)	High Tech Industries	L + 6.50%	7.50%	11/2/2020	11/16/2022	13,796		13,553		13,756		1.25
American Physician Partners, LLC	+#	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 6.75%, 1.50% PIK	9.25%	1/7/2019	12/21/2021	38,364		38,294		38,364		3.50
Analogic Corporation	^+#	(2)(3)(6)	Capital Equipment	L + 5.25%	6.25%	6/22/2018	6/22/2024	25,269		25,013		25,028		2.28
Applied Technical Services, LLC	^	(2)(3)(6)	Business Services	L + 5.75%	6.75%	12/29/2020	12/29/2026	392		381		392		0.04
Appriss Health, LLC	^+#	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 7.25%	8.25%	5/6/2021	5/6/2027	44,444		43,549		43,722		3.99
Apptio, Inc.	^+#	(2)(3)(6)	Software	L + 7.25%	8.25%	1/10/2019	1/10/2025	36,488		36,022		36,772		3.35
Ascend Buyer, LLC	#	(2)(3)(6)	Containers, Packaging & Glass	L + 5.75%	6.50%	9/30/2021	9/30/2028	12,624		12,345		12,345		1.13
Associations, Inc.	#	(2)(3)(6)	Construction & Building	L + 4.00%, 2.50% PIK	7.50%	7/2/2021	7/2/2027	7,301		7,183		7,346		0.67
Aurora Lux FinCo S.Á.R.L. (Luxembourg)	+#	(2)(3)(7)	Software	L + 6.00%	7.00%	12/24/2019	12/24/2026	36,938		36,205		33,550		3.06
Avenu Holdings, LLC	+#	(2)(3)	Sovereign & Public Finance	L + 5.25%	6.25%	9/28/2018	9/28/2024	37,980		37,682		37,980		3.46
Barnes & Noble, Inc.	+	(2)(3)(10)	Retail	L + 5.50%	6.50%	8/7/2019	8/7/2024	16,074		15,824		15,881		1.45
BlueCat Networks, Inc. (Canada)	+	(2)(3)(7)	High Tech Industries	L + 6.25%	7.25%	10/30/2020	10/30/2026	22,936		22,526		22,861		2.08
BMS Holdings III Corp.	+#	(2)(3)	Construction & Building	L + 5.50%	6.50%	9/30/2019	9/30/2026	29,432		28,876		29,130		2.66
Central Security Group, Inc.	#	(2)(3)	Consumer Services	L + 6.00%	7.00%	10/16/2020	10/16/2025	1,420		1,420		1,360		0.11
Chartis Holding, LLC	^+#	(2)(3)(6)	Business Services	L + 5.50%	6.50%	5/1/2019	5/1/2025	39,265		38,710		39,265		3.58
Chemical Computing Group ULC (Canada)	^+	(2)(3)(7)(6)	Software	L + 4.50%	5.50%	8/30/2018	8/30/2024	14,415		14,322		14,348		1.31
Chudy Group, LLC	#	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 5.75%	6.75%	6/30/2021	6/30/2027	828		814		823		0.08
CircusTrix Holdings, LLC	^+	(2)(3)	Hotel, Gaming & Leisure	L + 5.50%, 2.50% PIK	9.00%	2/2/2018	1/16/2024	10,485		10,445		9,037		0.82
CircusTrix Holdings, LLC	^	(2)(3)	Hotel, Gaming & Leisure	L + 5.50%, 2.50% PIK	9.00%	1/8/2021	7/16/2023	694		637		694		0.06
Cobblestone Intermediate Holdco LLC	#	(2)(3)	Consumer Services	L + 5.25%	6.25%	1/29/2020	1/29/2026	725		719		714		0.07
Comar Holding Company, LLC	+#	(2)(3)(6)	Containers, Packaging & Glass	L + 5.75%	6.75%	6/18/2018	6/18/2024	42,932		42,456		42,901		3.91
Cority Software Inc. (Canada)	^+#	(2)(3)(7)(6)	Software	L + 5.00%	6.00%	7/2/2019	7/2/2026	56,351		55,469		56,351		5.14

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2021

(dollar amounts in thousands)

(unaudited)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
Cority Software Inc. (Canada)	#	(2)(3)(7)	Software	L + 7.00%	8.00%	9/3/2020	7/2/2026	$	1,883	$	1,835	$	1,912	0.17	%
DCA Investment Holding LLC	+	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 6.25%	7.00%	3/11/2021	3/12/2027	10,390		10,219		10,387		0.95
Derm Growth Partners III, LLC	^	(2)(3)(9)	Healthcare & Pharmaceuticals	L + 6.25%	7.25%	2/15/2018	5/31/2022	16,172		15,089		10,078		0.92
Designer Brands Inc.	+#	(2)(3)(7)	Retail	L + 8.50%	9.75%	8/7/2020	8/7/2025	34,543		33,845		33,950		3.10
Diligent Corporation	^	(2)(3)(6)	Telecommunications	L + 6.25%	7.25%	8/4/2020	8/4/2025	604		588		620		0.06
DTI Holdco, Inc.	#	(2)(3)	High Tech Industries	L + 4.75%	5.75%	12/18/2018	9/30/2023	1,939		1,882		1,895		0.17
Dwyer Instruments, Inc	#	(2)(3)(6)	Capital Equipment	L + 5.50%	6.25%	7/21/2021	7/21/2027	12,248		11,980		12,127		1.12
Ellkay, LLC	#	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 5.75%	6.75%	9/14/2021	9/14/2027	14,285		13,967		13,964		1.27
EPS Nass Parent, Inc.	#	(2)(3)(6)	Utilities: Electric	L + 5.75%	6.75%	4/19/2021	4/19/2028	855		836		846		0.08
Ethos Veterinary Health LLC	+#	(2)(3)	Consumer Services	L + 4.75%	4.83%	5/17/2019	5/15/2026	10,738		10,667		10,738		0.98
Greenhouse Software, Inc.	^+#	(2)(3)(6)	Software	L + 6.50%	7.50%	3/1/2021	3/1/2027	15,196		14,847		14,992		1.37
Heartland Home Services, Inc.	+#	(2)(3)(6)	Consumer Services	L + 6.00%	7.00%	12/15/2020	12/15/2026	30,207		29,625		30,313		2.76
Hercules Borrower LLC	^+	(2)(3)(6)	Environmental Industries	L + 6.50%	7.50%	12/14/2020	12/14/2026	18,499		18,039		18,912		1.72
Higginbotham Insurance Agency, Inc.	+	(2)(3)(6)	Banking, Finance, Insurance & Real Estate	L + 5.50%	6.25%	11/25/2020	11/25/2026	19,104		18,842		19,303		1.76
iCIMS, Inc.	+#	(2)(3)	Software	L + 6.50%	7.50%	9/12/2018	9/12/2024	29,019		28,669		29,236		2.67
Individual FoodService Holdings, LLC	#	(2)(3)(6)	Wholesale	L + 6.25%	7.25%	2/21/2020	11/22/2025	18,081		17,734		18,217		1.66
Infront Luxembourg Finance S.À R.L. (Luxembourg)	+#	(2)(3)(7)	Hotel, Gaming & Leisure	L + 9.00%	9.00%	5/28/2021	5/28/2027	€	33,000	39,077		37,079		3.38
Integrity Marketing Acquisition, LLC	+#	(2)(3)	Banking, Finance, Insurance & Real Estate	L + 5.50%	6.50%	1/15/2020	8/27/2025	24,664		24,391		24,764		2.26
Integrity Marketing Acquisition, LLC	#	(2)(3)	Banking, Finance, Insurance & Real Estate	L + 5.50%	6.25%	8/7/2020	8/27/2025	7,933		7,861		7,912		0.72
K2 Insurance Services, LLC	^+#	(2)(3)(6)	Banking, Finance, Insurance & Real Estate	L + 5.00%	6.00%	7/3/2019	7/1/2026	25,368		25,045		24,997		2.28
Kaseya, Inc.	^+#	(2)(3)(6)	High Tech Industries	L + 4.00%, 3.00% PIK	8.00%	5/3/2019	5/3/2025	27,449		27,065		26,923		2.45
Lifelong Learner Holdings, LLC	^+#	(2)(3)(6)	Business Services	L + 5.75%	6.75%	10/18/2019	10/18/2026	50,028		49,220		46,454		4.23
LinQuest Corporation	#	(2)(3)	Aerospace & Defense	L + 5.75%	6.50%	7/28/2021	7/28/2028	10,000		9,804		9,908		0.90
Liqui-Box Holdings, Inc.	#	(2)(3)(6)	Containers, Packaging & Glass	L + 4.50%	5.50%	6/3/2019	6/3/2024	2,507		2,490		2,282		0.21
LVF Holdings, Inc.	^+#	(2)(3)(6)	Beverage, Food & Tobacco	L + 6.25%	7.25%	6/10/2021	6/10/2027	40,218		39,313		39,666		3.62
Mailgun Technologies, Inc.	^+#	(2)(3)(6)	High Tech Industries	L + 5.00%	6.00%	3/26/2019	3/26/2025	19,839		19,563		19,839		1.81
Material Holdings, LLC	#	(2)(3)(6)	Business Services	L + 5.75%	6.50%	8/19/2021	8/19/2027	14,770		14,422		14,417		1.31
Maverick Acquisition, Inc.	^+#	(2)(3)(6)	Aerospace & Defense	L + 6.00%	7.00%	6/1/2021	6/1/2027	35,892		34,964		35,287		3.21

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2021

(dollar amounts in thousands)

(unaudited)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
MMIT Holdings, LLC	#	(2)(3)(6)	High Tech Industries	L + 6.25%	7.25%	9/15/2021	9/15/2027	$	10,992	$	10,755	$	10,752	0.98	%
NES Global Talent Finance US, LLC (United Kingdom)	+#	(2)(3)(7)	Energy: Oil & Gas	L + 5.50%	6.50%	5/9/2018	5/11/2023	9,713		9,649		9,390		0.86
Performance Health Holdings, Inc.	#	(2)(3)	Healthcare & Pharmaceuticals	L + 6.00%	7.00%	7/12/2021	7/12/2027	7,200		7,060		7,098		0.65
PF Growth Partners, LLC	+	(2)(3)	Hotel, Gaming & Leisure	L + 5.00%	6.00%	7/1/2019	7/11/2025	8,060		7,978		7,875		0.72
Prophix Software Inc. (Canada)	^+	(2)(3)(7)(6)	Software	L + 6.50%	7.50%	2/1/2021	2/1/2026	14,618		14,302		15,137		1.38
Quantic Electronics, LLC	#	(2)(3)(6)	Aerospace & Defense	L + 6.25%	7.25%	11/19/2020	11/19/2026	14,662		14,355		14,463		1.32
Quantic Electronics, LLC	#	(2)(3)(6)	Aerospace & Defense	L + 6.25%	7.25%	3/1/2021	3/1/2027	8,916		8,686		8,767		0.80
Redwood Services Group, LLC	+#	(2)(3)	High Tech Industries	L + 6.00%	7.00%	11/13/2018	6/6/2023	16,824		16,624		16,823		1.53
Redwood Services Group, LLC	#	(2)(3)	High Tech Industries	L + 8.50%	9.50%	8/14/2020	6/6/2023	3,448		3,383		3,448		0.31
Redwood Services Group, LLC	#	(2)(3)	High Tech Industries	L + 7.25%	8.25%	10/19/2020	6/6/2023	20,686		20,398		20,686		1.89
Regency Entertainment, Inc.	+#	(2)(3)	Media: Diversified & Production	L + 6.75%	7.75%	5/22/2020	10/22/2025	70,000		68,892		68,832		6.27
Riveron Acquisition Holdings, Inc.	+#	(2)(3)	Banking, Finance, Insurance & Real Estate	L + 5.75%	6.75%	5/22/2019	5/22/2025	19,624		19,371		19,624		1.79
RSC Acquisition, Inc.	+#	(2)(3)(6)	Banking, Finance, Insurance & Real Estate	L + 5.50%	6.50%	11/1/2019	11/1/2026	33,986		33,446		33,986		3.10
Sapphire Convention, Inc.	^+#	(2)(3)(6)	Telecommunications	L + 6.25%	7.25%	11/20/2018	11/20/2025	30,045		29,643		26,208		2.39
Smile Doctors, LLC	+#	(2)(3)(6)	Healthcare & Pharmaceuticals	L + 6.00%	7.00%	10/6/2017	10/6/2022	23,262		23,213		23,262		2.11
Southern Graphics, Inc.	+	(2)(3)(10)	Media: Advertising, Printing & Publishing	L + 6.50%	7.50%	10/30/2020	10/23/2023	9,959		9,806		9,690		0.88
SPay, Inc.	^+	(2)(3)(6)	Hotel, Gaming & Leisure	L + 2.30%, 6.95% PIK	10.25%	6/15/2018	6/17/2024	22,570		22,356		19,848		1.81
Speedstar Holding LLC	+#	(2)(3)(6)	Automotive	L + 7.00%	8.00%	1/22/2021	1/22/2027	27,294		26,732		27,679		2.52
TCFI Aevex LLC	+#	(2)(3)(6)	Aerospace & Defense	L + 6.00%	7.00%	3/18/2020	3/18/2026	28,932		28,455		26,022		2.37
The Leaders Romans Bidco Limited (United Kingdom) Term Loan B	+	(2)(3)(7)	Banking, Finance, Insurance & Real Estate	L + 6.25%, 2.50% PIK	9.50%	7/23/2019	6/30/2024	£	21,033	25,934		28,271		2.58
The Leaders Romans Bidco Limited (United Kingdom) Term Loan C	+	(2)(3)(7)(6)	Banking, Finance, Insurance & Real Estate	L + 6.25%, 2.50% PIK	9.50%	7/23/2019	6/30/2024	£	6,089	7,663		9,330		0.85
Trafigura Trading LLC	^	(2)(3)(6)(12)	Metals & Mining	L + 8.40%	8.75%	7/26/2021	7/18/2022	6,223		6,073		6,073		0.55
Trump Card, LLC	^+#	(2)(3)(6)	Transportation: Cargo	L + 4.50%	5.50%	6/26/2018	4/21/2022	8,519		8,501		8,431		0.77
Turbo Buyer, Inc.	+#	(2)(3)(6)	Automotive	L + 5.75%	6.75%	12/2/2019	12/2/2025	42,537		41,715		41,643		3.80
Unifrutti Financing PLC (Cyprus)	+	(7)	Beverage, Food & Tobacco	7.50%, 1.00% PIK	8.50%	9/15/2019	9/15/2026	€	18,536	19,668		21,203		1.93

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2021

(dollar amounts in thousands)

(unaudited)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
Unifrutti Financing PLC (Cyprus)	^	(7)	Beverage, Food & Tobacco	11.00% PIK	11.00%	10/22/2020	9/15/2026	€	2,954	$	3,342	$	3,379	0.31	%
US INFRA SVCS Buyer, LLC	+#	(2)(3)(6)	Environmental Industries	L + 6.50%	7.50%	4/13/2020	4/13/2026	56,392		55,295		54,964		5.01
USLS Acquisition, Inc.	^+	(2)(3)(6)	Business Services	L + 5.75%	6.75%	11/30/2018	11/30/2024	21,283		21,021		20,634		1.88
Westfall Technik, Inc.	^+#	(2)(3)(6)	Chemicals, Plastics & Rubber	L + 5.75%	6.75%	9/13/2018	9/13/2024	27,743		27,475		27,002		2.46
Westfall Technik, Inc.	#	(2)(3)	Chemicals, Plastics & Rubber	L + 6.25%	7.25%	7/1/2021	9/13/2024	4,970		4,874		4,842		0.44
Yellowstone Buyer Acquisition, LLC	^	(2)(3)	Durable Consumer Goods	L + 5.75%	6.75%	9/13/2021	9/13/2027	450		441		441		0.04
YLG Holdings, Inc.	+	(2)(3)(6)	Consumer Services	L + 6.00%	7.00%	9/30/2020	11/1/2025	9,419		9,158		9,518		0.87
Zemax Software Holdings, LLC	^+#	(2)(3)(6)	Software	L + 5.75%	6.75%	6/25/2018	6/25/2024	10,580		10,466		10,580		0.96
Zenith Merger Sub, Inc.	+#	(2)(3)(6)	Business Services	L + 5.25%	6.25%	12/13/2017	12/13/2024	17,762		17,656		17,762		1.62


First Lien Debt Total										$	1,710,431	$	1,705,946	155.52	%
Second Lien Debt (16.2% of fair value)
11852604 Canada Inc. (Canada)	^	(2)(3)(7)	Healthcare & Pharmaceuticals	L + 9.50%	10.50%	9/30/2021	9/30/2028	$	6,590	$	6,425	$	6,425	0.58	%
AI Convoy S.A.R.L (United Kingdom)	+#	(2)(3)(7)	Aerospace & Defense	L + 8.25%	9.25%	1/17/2020	1/17/2028	30,327		29,754		31,465		2.87
Aimbridge Acquisition Co., Inc.	+	(2)(3)	Hotel, Gaming & Leisure	L + 7.50%	7.59%	2/1/2019	2/1/2027	21,047		20,631		19,511		1.78
AP Plastics Acquisition Holdings, LLC	+#	(2)(3)	Chemicals, Plastics & Rubber	L + 7.50%	8.25%	8/10/2021	8/10/2029	38,180		37,145		37,130		3.38
AQA Acquisition Holdings, Inc.	^	(2)(3)	High Tech Industries	L + 7.50%	8.00%	5/14/2021	3/3/2029	5,538		5,405		5,465		0.50
Brave Parent Holdings, Inc.	+	(2)(3)	Software	L + 7.50%	7.58%	10/3/2018	4/19/2026	18,197		17,909		18,197		1.66
Drilling Info Holdings, Inc.	^	(2)(3)	Energy: Oil & Gas	L + 8.25%	8.33%	2/11/2020	7/30/2026	18,600		18,195		18,786		1.71
Jazz Acquisition, Inc.	+	(2)(3)	Aerospace & Defense	L + 8.00%	8.08%	6/13/2019	6/18/2027	23,450		23,178		20,046		1.83
Outcomes Group Holdings, Inc.	#	(2)(3)	Business Services	L + 7.50%	7.63%	10/23/2018	10/26/2026	1,731		1,728		1,731		0.16
PAI Holdco, Inc.	+	(2)(3)	Automotive	L + 6.00%, 2.00% PIK	9.00%	10/28/2020	10/28/2028	13,738		13,368		13,738		1.25
Peraton Corp.	^	(2)(3)	Aerospace & Defense	L + 7.75%	8.50%	2/24/2021	2/1/2029	12,300		12,122		12,272		1.12
Quartz Holding Company	+	(2)(3)	Software	L + 8.00%	8.09%	4/2/2019	4/2/2027	11,900		11,721		11,900		1.08
Stonegate Pub Company Bidco Limited (United Kingdom)	^	(2)(3)(7)	Beverage, Food & Tobacco	L + 8.50%	8.61%	3/12/2020	3/12/2028	£	20,000	24,773		22,849		2.08
Tank Holding Corp.	+#	(2)(3)	Capital Equipment	L + 8.25%	8.33%	3/26/2019	3/26/2027	41,478		40,880		41,894		3.82
TruGreen Limited Partnership	^	(2)(3)	Consumer Services	L + 8.50%	9.25%	11/16/2020	11/2/2028	13,000		12,763		13,196		1.19

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2021

(dollar amounts in thousands)

(unaudited)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
World 50, Inc.	#	(11)	Business Services	11.50%	11.50%	1/10/2020	1/9/2027	$	24,017	$	23,579	$	23,536	2.15	%
WP CPP Holdings, LLC	+#	(2)(3)	Aerospace & Defense	L + 7.75%	8.75%	7/18/2019	4/30/2026	39,500		39,209		38,833		3.54


Second Lien Debt Total										$	338,785	$	336,974	30.70	%


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Acquisition Date	Shares/ Units	Cost		Fair Value (5)		Percentage of Net Assets
Equity Investments (1.7% of fair value)
ANLG Holdings, LLC	^	(8)	Capital Equipment	6/22/2018	592	$	592	$	758	0.07	%
Appriss Health, LLC	^	(8)	Healthcare & Pharmaceuticals	5/6/2021	—	433		435		0.04
Atlas Ontario LP (Canada)	^	(8)(7)	Business Services	4/7/2021	5,114	5,114		5,114		0.47
Avenu Holdings, LLC	^	(8)	Sovereign & Public Finance	9/28/2018	172	172		535		0.05
BK Intermediate Company, LLC	^	(8)	Healthcare & Pharmaceuticals	5/27/2020	288	288		390		0.04
Central Security Group, Inc.	^	(8)	Consumer Services	10/16/2020	68	—		—		—
Chartis Holding, LLC	^	(8)	Business Services	5/1/2019	433	433		738		0.07
Cority Software Inc. (Canada)	^	(8)	Software	7/2/2019	250	250		406		0.04
ECP Parent, LLC	^	(8)	Healthcare & Pharmaceuticals	3/29/2018	268	—		290		0.03
K2 Insurance Services, LLC	^	(8)	Banking, Finance, Insurance & Real Estate	7/3/2019	433	306		575		0.05
Mailgun Technologies, Inc.	^	(8)	High Tech Industries	3/26/2019	424	424		1,258		0.11
North Haven Goldfinch Topco, LLC	^	(8)	Containers, Packaging & Glass	6/18/2018	2,315	2,315		2,639		0.24
Pascal Ultimate Holdings, L.P	^	(8)	Capital Equipment	7/21/2021	36	363		363		0.03
Tank Holding Corp.	^	(8)	Capital Equipment	3/26/2019	849	482		1,027		0.09
Titan DI Preferred Holdings, Inc.	^	(8)	Energy: Oil & Gas	2/11/2020	12,407	12,144		12,531		1.13
Turbo Buyer, Inc.	^	(8)	Automotive	12/2/2019	1,925	933		2,977		0.27
Unifrutti Financing PLC (Cyprus)	^	(8)	Beverage, Food & Tobacco	10/22/2020	2	1,884		1,874		0.17
Unifrutti Financing PLC (Cyprus)	^	(8)	Beverage, Food & Tobacco	10/22/2020	1	532		365		0.03
USLS Acquisition, Inc.	^	(8)	Business Services	11/30/2018	641	641		796		0.07
W50 Parent LLC	^	(8)	Business Services	1/10/2020	500	190		720		0.07
Zenith American Holding, Inc.	^	(8)	Business Services	12/13/2017	440	220		436		0.04
Zillow Topco LP	^	(8)	Software	6/25/2018	313	312		688		0.06



Equity Investments Total						$	28,028	$	34,915	3.17	%
Total investments—non-controlled/non-affiliated						$	2,077,244	$	2,077,835	189.39	%
Total investments						$	2,077,244	$	2,077,835	189.39	%

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2021

(dollar amounts in thousands)

(unaudited)

^ Denotes that all or a portion of the assets are owned by TCG BDC II, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “BDC II” or the “Company”). Accordingly, such assets are not available to creditors of TCG BDC II SPV LLC (the “SPV”) of TCG BDC II SPV2 LLC ("SPV2").

+ Denotes that all or a portion of the assets are owned by the Company's wholly owned subsidiary, the SPV. The SPV has entered into a senior secured revolving credit facility (as amended, the “SPV Credit Facility”). The lenders of the SPV Credit Facility have a first lien security interest in substantially all of the assets of the SPV (see Note 5, Borrowings, to these consolidated financial statements). Accordingly, such assets are not available to creditors of the Company or SPV2.

# Denotes that all or a portion of the assets are owned by the Company's wholly owned subsidiary, SPV2. SPV2 has entered into a senior secured revolving credit facility (as amended, the “SPV2 Credit Facility”). The lenders of the SPV2 Credit Facility have a first lien security interest in substantially all of the assets of SPV2 (see Note 5, Borrowings, to these consolidated financial statements). Accordingly, such assets are not available to creditors of the Company or the SPV.

(1) Unless otherwise indicated, issuers of debt and equity investments held by the Company are domiciled in the United States. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of September 30, 2021, the Company does not “control” any of these portfolio companies. Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of September 30, 2021, the Company is not an “affiliated person” of any of these portfolio companies. Certain portfolio company investments are subject to contractual restrictions on sales.

(2)Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of September 30, 2021. As of September 30, 2021, the reference rates for all LIBOR loans were the 30-day LIBOR at 0.08%, the 90-day LIBOR at 0.13% and the 180-day LIBOR rate at 0.16%.

(3)Loan includes interest rate floor feature, generally 1.00%.

(4)Amortized cost represents original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion/amortization of discounts/premiums, as applicable, on debt investments using the effective interest method.

(5)Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2, Significant Accounting Policies, and Note 3, Fair Value Measurements, to these consolidated financial statements), pursuant to the Company’s valuation policy. The fair value of all first lien and second lien debt investments and equity investments was determined using significant unobservable inputs.

(6)As of September 30, 2021, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:


Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount		Fair Value
First and Second Lien Debt—unfunded delayed draw and revolving term loans commitments
Advanced Web Technologies Holding Company	Delayed Draw	1.00	%	$	4,597	$	46
Advanced Web Technologies Holding Company	Revolver	0.50		1,813		18
Airnov, Inc.	Revolver	0.50		2,917		—
American Physician Partners, LLC	Revolver	0.50		550		—
Analogic Corporation	Revolver	0.50		2,572		(22)
Applied Technical Services, LLC	Delayed Draw	1.00		132		—
Applied Technical Services, LLC	Revolver	0.50		53		—
Appriss Health, LLC	Revolver	0.50		2,963		(45)
Apptio, Inc.	Revolver	0.50		1,420		11
Ascend Buyer, LLC	Revolver	0.50		1,284		(26)
Associations, Inc.	Revolver	0.50		723		3
Associations, Inc.	Delayed Draw	1.00		1,753		6
Associations, Inc.	Delayed Draw	1.00		1,753		6
Associations, Inc.	Delayed Draw	2.50		715		3
Chartis Holding, LLC	Revolver	0.50		2,401		—
Chemical Computing Group ULC (Canada)	Revolver	0.50		903		(4)

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2021

(dollar amounts in thousands)

(unaudited)


Investments—non-controlled/non-affiliated	Type	Unused Fee		Par/ Principal Amount		Fair Value
Chudy Group, LLC	Delayed Draw	1.00	%	$	138	$	(1)
Chudy Group, LLC	Revolver	0.50		34		—
Comar Holding Company, LLC	Revolver	0.50		1,467		(1)
Cority Software Inc. (Canada)	Revolver	0.50		3,000		—
DCA Investment Holding, LLC	Delayed Draw	1.00		1,970		—
Diligent Corporation	Revolver	0.50		47		1
Diligent Corporation	Delayed Draw	1.00		110		2
Dwyer Instruments, Inc	Revolver	0.50		626		(5)
Dwyer Instruments, Inc	Delayed Draw	1.00		1,003		(9)
Ellkay, LLC	Revolver	0.50		1,786		(36)
EPS Nass Parent, Inc.	Revolver	0.50		59		(1)
EPS Nass Parent, Inc.	Delayed Draw	1.00		85		(1)
Greenhouse Software, Inc.	Revolver	0.50		1,471		(18)
Heartland Home Services, Inc.	Delayed Draw	—		4,257		13
Heartland Home Services, Inc.	Revolver	0.50		467		1
Hercules Borrower LLC	Revolver	0.50		2,160		43
Higginbotham Insurance Agency, Inc.	Delayed Draw	1.00		809		8
Individual FoodService Holdings, LLC	Delayed Draw	1.00		103		1
Individual FoodService Holdings, LLC	Delayed Draw	1.00		1,613		10
Individual FoodService Holdings, LLC	Revolver	0.50		2,426		15
K2 Insurance Services, LLC	Revolver	0.50		2,290		(31)
Kaseya, Inc.	Delayed Draw	1.00		1,008		(18)
Kaseya, Inc.	Revolver	0.50		1,543		(27)
Lifelong Learner Holdings, LLC	Revolver	0.50		4		—
Lifelong Learner Holdings, LLC	Delayed Draw	1.00		3,379		(226)
Liqui-Box Holdings, Inc.	Revolver	0.50		123		(11)
LVF Holdings, Inc.	Delayed Draw	1.00		4,670		(54)
LVF Holdings, Inc.	Revolver	0.50		2,568		(30)
Mailgun Technologies, Inc.	Revolver	0.50		1,342		—
Material Holdings, LLC	Revolver	1.00		959		(19)
Material Holdings, LLC	Delayed Draw	—		1,916		(38)
Maverick Acquisition, Inc.	Delayed Draw	1.00		12,818		(159)
MMIT Holdings, LLC	Revolver	0.50		980		(20)
Prophix Software Inc. (Canada)	Revolver	0.50		2,658		80
Quantic Electronics, LLC	Revolver	0.50		557		(7)
Quantic Electronics, LLC	Delayed Draw	1.00		3,164		(39)

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2021

(dollar amounts in thousands)

(unaudited)


Investments—non-controlled/non-affiliated	Type	Unused Fee	Par/ Principal Amount		Fair Value
Quantic Electronics, LLC	Revolver	0.50	$	824	$	(10)
RSC Acquisition, Inc.	Revolver	0.50	1,096		—
Sapphire Convention, Inc.	Revolver	0.50	2,422		(286)
Smile Doctors, LLC	Revolver	0.50	707		—
SPay, Inc.	Revolver	0.50	648		(76)
Speedstar Holding, LLC	Delayed Draw	1.00	3,775		47
TCFI Aevex LLC	Delayed Draw	1.00	521		(51)
TCFI Aevex LLC	Delayed Draw	1.00	417		(41)
The Leaders Romans Bidco Limited (United Kingdom)	Delayed Draw	1.56	£	1,927	322
Trafigura Trading LLC	Revolver	0.50	13,774		(103)
Trump Card, LLC	Revolver	0.50	199		(2)
Turbo Buyer, Inc.	Revolver	0.50	2,151		(43)


US INFRA SVCS Buyer, LLC	Revolver	0.50	2,975		(61)
US INFRA SVCS Buyer, LLC	Delayed Draw	1.00	9,972		(205)
USLS Acquisition, Inc.	Revolver	0.50	1,418		(41)
Westfall Technik, Inc.	Revolver	0.50	216		(6)
YLG Holdings, Inc.	Delayed Draw	1.00	507		5
Zemax Software Holdings, LLC	Revolver	0.50	642		—
Zenith Merger Sub, Inc.	Revolver	0.50	813		—
Total unfunded commitments			$	135,830	$	(1,132)

(7)The Company has determined the indicated investments are non-qualifying assets under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.

(8)Security acquired in transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act, unless otherwise noted. As of September 30, 2021, the aggregate fair value of these securities is $34,915, or 3.17% of the Company's net assets.

(9)Loan was on non-accrual status as of September 30, 2021.

(10)In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company is entitled to receive additional interest as a result of an agreement among lenders. Pursuant to the agreement among lenders in respect of this loan, this investment represents a first lien/last out loan, which has a secondary priority behind the first lien/first out loan with respect to principal, interest and other payments.

(11)Represents a corporate mezzanine loan, which is subordinated to senior secured term loans of the portfolio company.

(12)The investment is secured by receivables purchased from the portfolio company, with an implied discount of 8.75%. The investment was made via a tranched participation arrangement between the purchaser of such receivables and the Company. The investment has a secondary priority behind the rights of such purchaser.

As of September 30, 2021, investments at fair value consisted of the following:


Type	Amortized Cost		Fair Value		% of Fair Value


First Lien Debt	$	1,710,431	$	1,705,946	82.1	%
Second Lien Debt	338,785		336,974		16.2
Equity Investments	28,028		34,915		1.7
Total	$	2,077,244	$	2,077,835	100.0	%

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2021

(dollar amounts in thousands)

(unaudited)

The rate type of debt investments at fair value as of September 30, 2021 was as follows:


Rate Type	Amortized Cost		Fair Value		% of Fair Value of First and Second Lien Debt
Floating Rate	2,002,627		1,994,802		97.6	%
Fixed Rate	46,589		48,118		2.4	%
Total	$	2,049,216	$	2,042,920	100.0	%

The industry composition of investments at fair value as of September 30, 2021 was as follows:


Industry	Amortized Cost		Fair Value		% of Fair Value
Aerospace & Defense	$	200,527	$	197,063	9.5	%
Automotive	82,748		86,037		4.1
Banking, Finance, Insurance & Real Estate	162,859		168,762		8.0
Beverage, Food & Tobacco	89,512		89,336		4.3
Business Services	173,816		172,494		8.3
Capital Equipment	79,310		81,197		3.9
Chemicals, Plastics & Rubber	69,494		68,974		3.3
Construction & Building	36,059		36,476		1.8
Consumer Services	64,352		65,839		3.2
Containers, Packaging & Glass	113,978		115,558		5.6
Durable Consumer Goods	441		441		—
Energy: Oil & Gas	39,988		40,707		2.0
Environmental Industries	73,334		73,876		3.6
Healthcare & Pharmaceuticals	159,351		155,238		7.5
High Tech Industries	158,426		160,461		7.7
Hotel, Gaming & Leisure	101,124		94,044		4.5
Media: Advertising, Printing & Publishing	9,806		9,690		0.5
Media: Diversified & Production	68,892		68,832		3.3
Metals & Mining	6,073		6,073		0.3
Retail	49,669		49,831		2.4
Software	242,329		244,069		11.7
Sovereign & Public Finance	37,854		38,515		1.9
Telecommunications	30,231		26,828		1.3
Transportation: Cargo	8,501		8,431		0.4
Utilities: Electric	836		846		—
Wholesale	17,734		18,217		0.9
Total	$	2,077,244	$	2,077,835	100.0	%

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of September 30, 2021

(dollar amounts in thousands)

(unaudited)

The geographical composition of investments at fair value as of September 30, 2021 was as follows:


Geography	Amortized Cost		Fair Value		% of Fair Value
Canada	120,243		122,554		5.9	%
Cyprus	25,426		26,821		1.3

Luxembourg	75,282		70,629		3.4
United Kingdom	97,773		101,305		4.9
United States	1,758,520		1,756,526		84.5
Total	$	2,077,244	$	2,077,835	100.0	%

The accompanying notes are an integral part of these consolidated financial statements.

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of December 31, 2020

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
First Lien Debt (84.7%)
Advanced Web Technologies Holding Company	^+	(2) (3) (6)	Containers, Packaging & Glass	L + 6.00%	7.00%	12/17/2020	12/17/2026	$	12,084	$	11,719	$	11,716	1.22	%
Airnov, Inc.	^+#	(2) (3) (6)	Containers, Packaging & Glass	L + 5.25%	6.25%	12/20/2019	12/19/2025	42,388		41,794		42,407		4.40
Alpine SG, LLC	+#	(2) (3)	High Tech Industries	L + 5.75%	6.75%	2/2/2018	11/16/2022	15,301		15,224		15,186		1.58
Alpine SG, LLC	#	(2) (3)	High Tech Industries	L + 8.50%	9.50%	7/24/2020	11/16/2022	1,618		1,577		1,612		0.17
Alpine SG, LLC	+	(2) (3)	High Tech Industries	L + 6.50%	7.50%	11/2/2020	11/16/2022	10,750		10,453		10,698		1.11
American Physician Partners, LLC	+#	(2) (3) (6)	Healthcare & Pharmaceuticals	L + 6.75%	7.75%	1/7/2019	12/21/2021	39,412		39,101		37,302		3.88
Analogic Corporation	^+#	(2) (3) (6)	Capital Equipment	L + 5.25%	6.25%	6/22/2018	6/22/2024	25,462		25,140		25,462		2.64
Anchor Hocking, LLC	#	(2) (3)	Durable Consumer Goods	L + 11.75%	12.75%	1/25/2019	1/25/2024	9,758		9,548		9,358		0.97
Applied Technical Services, LLC	^	(2) (3) (6)	Business Services	L + 5.75%	6.75%	12/29/2020	12/29/2026	395		382		382		0.04
Apptio, Inc.	^+#	(2) (3) (6)	Software	L + 7.25%	8.25%	1/10/2019	1/10/2025	35,541		34,985		36,110		3.75
At Home Holding III, Inc.	+#	(2) (3) (7)	Retail	L + 9.00%	10.00%	6/12/2020	7/27/2022	17,500		17,167		17,411		1.81
Aurora Lux FinCo S.Á.R.L. (Luxembourg)	+#	(2) (3) (7)	Software	L + 5.75%	6.75%	12/24/2019	12/24/2026	37,219		36,395		33,988		3.53
Avenu Holdings, LLC	+#	(2) (3)	Sovereign & Public Finance	L + 5.25%	6.25%	9/28/2018	9/28/2024	38,273		37,871		38,273		3.97
Barnes & Noble, Inc.	+	(2) (3) (10)	Retail	L + 5.50%	6.50%	8/7/2019	8/7/2024	16,744		16,424		15,808		1.64
BlueCat Networks, Inc. (Canada)	+	(2) (3) (7)	High Tech Industries	L + 6.25%	7.25%	10/30/2020	10/30/2026	22,936		22,486		22,477		2.33
BMS Holdings III Corp.	+#	(2) (3)	Construction & Building	L + 5.25%	6.25%	9/30/2019	9/30/2026	29,658		29,027		29,317		3.04
Central Security Group, Inc.	^	(2) (3)	Consumer Services	L + 6.00%	7.00%	10/16/2020	10/16/2025	1,431		1,431		1,223		0.13
Chartis Holding, LLC	^+#	(2) (3) (6)	Business Services	L + 5.50%	6.50%	5/1/2019	5/1/2025	39,565		38,869		39,583		4.11
Chemical Computing Group ULC (Canada)	^+	(2) (3) (6) (7)	Software	L + 5.00%	6.00%	8/30/2018	8/30/2023	14,526		14,397		14,526		1.51
CircusTrix Holdings, LLC	^+	(2) (3)	Hotel, Gaming & Leisure	L + 6.75% (100% PIK)	7.75%	2/2/2018	12/6/2021	10,023		9,974		8,093		0.84
Cobblestone Intermediate Holdco LLC	^	(2) (3) (6)	Consumer Services	L + 4.75%	5.75%	1/29/2020	1/29/2026	719		713		724		0.08
Comar Holding Company, LLC	+#	(2) (3) (6)	Containers, Packaging & Glass	L + 5.50%	6.50%	6/18/2018	6/18/2024	39,657		39,061		39,823		4.13
Cority Software Inc. (Canada)	^+#	(2) (3) (6) (7)	Software	L + 5.25%	6.25%	7/2/2019	7/2/2026	56,778		55,771		57,202		5.94
Cority Software Inc. (Canada)	#	(2) (3) (7)	Software	L + 7.25%	8.25%	9/3/2020	7/2/2026	1,898		1,843		1,935		0.20
Derm Growth Partners III, LLC	^	(2) (3) (9)	Healthcare & Pharmaceuticals	L + 6.25% (100% PIK)	7.25%	2/15/2018	5/31/2022	16,271		16,175		8,151		0.85

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2020

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
Designer Brands Inc.	+#	(2) (3) (7)	Retail	L + 8.50%	9.75%	8/7/2020	8/7/2025	$	35,909	$	35,068	$	35,621	3.70	%
Diligent Corporation	^	(2) (3) (6)	Telecommunications	L + 6.25%	7.25%	8/4/2020	8/4/2025	579		561		589		0.06
DTI Holdco, Inc.	#	(2) (3)	High Tech Industries	L + 4.75%	5.75%	12/18/2018	9/30/2023	1,954		1,877		1,741		0.18
Ensono, LP	+#	(2) (3)	Telecommunications	L + 5.25%	5.40%	4/30/2018	6/27/2025	8,450		8,391		8,387		0.87
Ensono, LP	+	(2) (3)	Telecommunications	L + 5.75%	5.90%	6/25/2020	6/27/2025	18,131		18,007		17,995		1.87
Ethos Veterinary Health LLC	+#	(2) (3) (6)	Consumer Services	L + 4.75%	4.90%	5/17/2019	5/15/2026	10,794		10,691		10,609		1.10
Helios Buyer, Inc.	^+	(2) (3) (6)	Consumer Services	L + 6.00%	7.00%	12/15/2020	12/15/2026	17,499		16,912		16,908		1.76
Hercules Borrower LLC	^+	(2) (3) (6)	Environmental Industries	L + 6.50%	7.50%	12/14/2020	12/14/2026	18,592		18,076		18,073		1.88
Higginbotham Insurance Agency, Inc.	+	(2) (3) (6)	Banking, Finance, Insurance & Real Estate	L + 5.75%	6.50%	11/25/2020	11/25/2026	15,607		15,311		15,307		1.59
iCIMS, Inc.	^+#	(2) (3)	Software	L + 6.50%	7.50%	9/12/2018	9/12/2024	29,019		28,600		28,937		3.00
Individual FoodService Holdings, LLC	#	(2) (3) (6)	Wholesale	L + 6.25%	7.25%	2/21/2020	11/22/2025	15,439		15,095		14,943		1.55
Individual FoodService Holdings, LLC	#	(2) (3) (6)	Wholesale	L + 6.25%	7.25%	12/31/2020	11/22/2025	2,196		2,135		2,134		0.22
Innovative Business Services, LLC	+#	(2) (3) (6)	High Tech Industries	L + 5.50%	6.50%	4/5/2018	4/5/2023	15,979		15,674		15,644		1.62
Integrity Marketing Acquisition, LLC	+#	(2) (3)	Banking, Finance, Insurance & Real Estate	L + 5.75%	6.75%	1/15/2020	8/27/2025	24,851		24,535		25,053		2.60
Integrity Marketing Acquisition, LLC	^	(2) (3) (6)	Banking, Finance, Insurance & Real Estate	L + 6.25%	7.25%	8/7/2020	8/27/2025	5,224		5,136		5,304		0.55
K2 Insurance Services, LLC	^+#	(2) (3) (6)	Banking, Finance, Insurance & Real Estate	L + 5.00%	6.00%	7/3/2019	7/1/2024	25,577		25,148		25,581		2.66
Kaseya, Inc.	^+#	(2) (3) (6)	High Tech Industries	L + 4.00%, 3.00% PIK	8.00%	5/3/2019	5/2/2025	23,693		23,301		23,796		2.47
Lifelong Learner Holdings, LLC	^+#	(2) (3) (6)	Business Services	L + 5.75%	6.75%	10/18/2019	10/18/2026	47,627		46,712		43,160		4.48
Liqui-Box Holdings, Inc.	^	(2) (3) (6)	Containers, Packaging & Glass	L + 4.50%	5.50%	6/3/2019	6/3/2024	1,368		1,346		1,112		0.12
Mailgun Technologies, Inc.	^+#	(2) (3) (6)	High Tech Industries	L + 5.00%	6.00%	3/26/2019	3/26/2025	19,991		19,662		19,618		2.04
NES Global Talent Finance US, LLC (United Kingdom)	+#	(2) (3) (7)	Energy: Oil & Gas	L + 5.50%	6.50%	5/9/2018	5/11/2023	9,789		9,698		8,859		0.92
Paramit Corporation	+#	(2) (3)	Capital Equipment	L + 4.50%	5.50%	5/3/2019	5/3/2025	6,213		6,188		6,089		0.63
Paramit Corporation	#	(2) (3) (6)	Capital Equipment	L + 5.25%	6.25%	11/24/2020	5/3/2025	3,029		2,912		2,909		0.30
Park Place Technologies, LLC	+	(2) (3)	High Tech Industries	L + 5.00%	6.00%	11/19/2020	11/19/2027	20,000		19,211		19,150		1.99
PF Growth Partners, LLC	+	(2) (3) (6)	Hotel, Gaming & Leisure	L + 7.00%	8.00%	7/1/2019	7/11/2025	7,294		7,198		6,778		0.70
PPC Flexible Packaging, LLC	+#	(2) (3) (6)	Containers, Packaging & Glass	L + 6.00%	7.00%	11/23/2018	11/23/2024	17,696		17,501		17,638		1.83
Propel Insurance Agency, LLC	#	(2) (3)	Banking, Finance, Insurance & Real Estate	L + 5.00%	6.00%	4/30/2019	6/1/2024	2,339		2,327		2,316		0.24

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2020

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)	Fair Value (5)	Percentage of Net Assets
Redwood Services Group, LLC	+#	(2) (3)	High Tech Industries	L + 6.00%	7.00%	11/13/2018	6/6/2023	16,952		16,688	16,908	1.76	%
Redwood Services Group, LLC	#	(2) (3)	High Tech Industries	L + 8.50%	9.50%	8/14/2020	6/6/2023	3,474		3,383	3,494	0.36
Redwood Services Group, LLC	^#	(2) (3) (6)	High Tech Industries	L + 7.25%	8.25%	10/19/2020	6/6/2023	15,108		14,719	15,186	1.58
Regency Entertainment, Inc.	+#	(2) (3)	Media: Diversified & Production	L + 6.75%	7.75%	5/22/2020	10/22/2025	70,000		68,728	68,616	7.12
Riveron Acquisition Holdings, Inc.	+#	(2) (3)	Banking, Finance, Insurance & Real Estate	L + 5.75%	6.75%	5/22/2019	5/22/2025	19,774		19,474	19,907	2.07
RSC Acquisition, Inc.	^+#	(2) (3) (6)	Banking, Finance, Insurance & Real Estate	L + 5.50%	6.50%	11/1/2019	11/1/2026	57,386		56,366	57,978	6.02
Sapphire Convention, Inc.	^+#	(2) (3) (6)	Telecommunications	L + 6.25%	7.25%	11/20/2018	11/20/2025	28,812		28,340	23,999	2.49
Smile Doctors, LLC	+#	(2) (3) (6)	Healthcare & Pharmaceuticals	L + 6.00%	7.00%	10/6/2017	10/6/2022	23,439		23,356	22,956	2.38
Southern Graphics, Inc.	+	(2) (3) (10)	Media: Advertising, Printing & Publishing	L + 6.50%	7.50%	10/30/2020	10/23/2023	9,959		9,769	9,849	1.02
Sovos Brands Intermediate, Inc.	+#	(2) (3)	Beverage, Food & Tobacco	L + 4.75%	4.96%	11/16/2018	11/20/2025	19,698		19,551	19,529	2.03
SPay, Inc.	^+	(2) (3) (6)	Hotel, Gaming & Leisure	L + 5.75%, 2.00% PIK	8.75%	6/15/2018	6/17/2024	21,365		21,098	17,318	1.80
Tank Holding Corp.	^	(2) (3) (6)	Capital Equipment	L + 3.50%	3.74%	3/26/2019	3/26/2024	—		—	(1)	—
TCFI Aevex LLC	+#	(2) (3) (6)	Aerospace & Defense	L + 6.00%	7.00%	3/18/2020	3/18/2026	26,070		25,535	25,961	2.70
The Leaders Romans Bidco Limited (United Kingdom) Term Loan C	+	(2) (3) (6) (7)	Banking, Finance, Insurance & Real Estate	L + 6.50%, 3.00% PIK	10.25%	7/23/2019	6/30/2024	£	3,757	4,690	5,743	0.60
The Leaders Romans Bidco Limited (United Kingdom) Term Loan B	+	(2) (3) (7)	Banking, Finance, Insurance & Real Estate	L + 6.50%, 3.00% PIK	10.25%	7/23/2019	6/30/2024	£	20,740	25,411	28,078	2.92
Trump Card, LLC	^+#	(2) (3) (6)	Transportation: Cargo	L + 5.50%	6.50%	6/26/2018	4/21/2022	7,594		7,563	7,444	0.77
Turbo Buyer, Inc.	+#	(2) (3) (6)	Automotive	L + 5.25%	6.25%	12/2/2019	12/2/2025	32,497		31,765	32,816	3.41
Unifrutti Financing PLC (Cyprus)	+	(7)	Beverage, Food & Tobacco	7.50%, 1.00% PIK	8.50%	9/15/2019	9/15/2026	€	18,352	19,358	21,915	2.28
Unifrutti Financing PLC (Cyprus)	^	(7)	Beverage, Food & Tobacco	11.00% PIK	11.00%	10/22/2020	9/15/2026	€	2,596	2,904	3,025	0.31
US INFRA SVCS Buyer, LLC	^+#	(2) (3) (6)	Environmental Industries	L + 6.00%	7.00%	4/13/2020	4/13/2026	53,459		52,208	53,298	5.53
USLS Acquisition, Inc.	^+	(2) (3) (6)	Business Services	L + 5.75%	6.75%	11/30/2018	11/30/2024	21,447		21,128	19,981	2.07
USLS Acquisition, Inc.	^	(2) (3) (6)	Business Services	L + 5.75%	6.75%	9/3/2020	11/30/2024	—		(22)	—	—
VRC Companies, LLC	+#	(2) (3)	Business Services	L + 6.50%	7.5%	1/29/2019	3/31/2023	57,186		56,718	57,186	5.94
Westfall Technik, Inc.	^+#	(2) (3) (6)	Chemicals, Plastics & Rubber	L + 6.25%	7.25%	9/13/2018	9/13/2024	27,715		27,383	25,729	2.67
Wheel Pros, LLC	+	(2) (3)	Automotive	L + 5.25%	6.25%	11/18/2020	11/6/2027	18,750		18,286	18,390	1.91
YLG Holdings, Inc.	+	(2) (3) (6)	Consumer Services	L + 6.25%	7.25%	9/30/2020	11/1/2025	7,020		6,729	6,865	0.71
Zemax Software Holdings, LLC	^+#	(2) (3) (6)	Software	L + 5.75%	6.75%	6/25/2018	6/25/2024	10,685		10,542	10,413	1.08
Zenith Merger Sub, Inc.	+#	(2) (3) (6)	Business Services	L + 5.25%	6.25%	12/13/2017	12/13/2023	18,098		17,944	17,941	1.86

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2020

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated (1)		Footnotes	Industry	Reference Rate & Spread (2)	Interest Rate (2)	Acquisition Date	Maturity Date	Par/ Principal Amount		Amortized Cost (4)		Fair Value (5)		Percentage of Net Assets
First Lien Debt Total										$	1,534,414	$	1,523,542	158.19	%
Second Lien Debt (14.4%)
AI Convoy S.A.R.L (United Kingdom)	+#	(2) (3) (7)	Aerospace & Defense	L + 8.25%	9.25%	1/17/2020	1/17/2028	$	30,327	$	29,705	$	31,222	3.24	%
Aimbridge Acquisition Co., Inc.	+	(2) (3)	Hotel, Gaming & Leisure	L + 7.50%	7.65%	2/1/2019	2/1/2027	21,047		20,585		18,206		1.89
Brave Parent Holdings, Inc.	+	(2) (3)	Software	L + 7.50%	7.64%	10/3/2018	4/19/2026	19,062		18,721		19,062		1.98
Outcomes Group Holdings, Inc.	#	(2) (3)	Business Services	L + 7.50%	7.75%	10/23/2018	10/26/2026	3,461		3,455		3,461		0.36
Drilling Info Holdings, Inc.	^	(2) (3)	Energy: Oil & Gas	L + 8.25%	8.40%	2/11/2020	7/30/2026	18,600		18,145		18,228		1.89
Jazz Acquisition, Inc.	+	(2) (3)	Aerospace & Defense	L + 8.00%	8.15%	6/13/2019	6/18/2027	23,450		23,151		18,146		1.88
PAI Holdco, Inc.	+	(2) (3)	Automotive	L + 6.25%, 2.00% PIK	9.25%	10/28/2020	10/28/2028	13,530		13,132		13,328		1.38
Pharmalogic Holdings Corp.	^	(2) (3)	Healthcare & Pharmaceuticals	L + 8.00%	9.00%	6/7/2018	12/11/2023	800		797		782		0.08
Quartz Holding Company	+	(2) (3)	Software	L + 8.00%	8.15%	4/2/2019	4/2/2027	11,900		11,702		11,808		1.23
Stonegate Pub Company Bidco Limited (United Kingdom)	^	(2) (3) (7)	Beverage, Food & Tobacco	L + 8.50%	8.54%	3/12/2020	3/12/2028	£	20,000	24,729		21,902		2.27
Tank Holding Corp.	+#	(2) (3)	Capital Equipment	L + 8.25%	8.40%	3/26/2019	3/26/2027	41,479		40,819		40,583		4.22
TruGreen Limited Partnership	^	(2) (3)	Consumer Services	L + 8.50%	9.25%	11/16/2020	11/2/2028	13,000		12,743		13,000		1.35
Ultimate Baked Goods MIDCO, LLC	+	(2) (3)	Beverage, Food & Tobacco	L + 8.00%	9.00%	8/9/2018	8/9/2026	8,333		8,204		7,946		0.83
World 50, Inc.	^	(11)	Business Services	11.50%	11.50%	1/10/2020	1/9/2027	10,000		9,822		9,846		1.02
WP CPP Holdings, LLC	+#	(2) (3)	Aerospace & Defense	L + 7.75%	8.75%	7/18/2019	4/30/2026	39,500		39,172		32,738		3.40








Second Lien Debt Total										$	274,882	$	260,258	27.02	%

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2020

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated (1)			Footnotes	Industry	Acquisition Date	Shares/ Units	Cost		Fair Value (5)		Percentage of Net Assets
Equity Investment (0.9%)
ANLG Holdings, LLC	^		(8)	Capital Equipment	6/22/2018	592	$	592	$	865	0.09	%
Avenu Holdings, LLC	^		(8)	Sovereign & Public Finance	9/28/2018	172	172		345		0.04
BK Intermediate Company, LLC	^		(8)	Healthcare & Pharmaceuticals	5/27/2020	288	288		209		0.02
Central Security Group, Inc.	^		(8)	Consumer Services	10/16/2020	68	—		—		—
Chartis Holding, LLC	^		(8)	Business Services	5/1/2019	433	433		571		0.06
Cority Software Inc. (Canada)	^		(8)	Software	7/2/2019	250	250		295		0.03
GRO Sub Holdco, LLC	^		(8)	Healthcare & Pharmaceuticals	3/29/2018	500	—		—		—
K2 Insurance Services, LLC	^		(8)	Banking, Finance, Insurance & Real Estate	7/3/2019	433	433		676		0.07
Mailgun Technologies, Inc.	^		(8)	High Tech Industries	3/26/2019	424	424		784		0.08
North Haven Goldfinch Topco, LLC	^		(8)	Containers, Packaging & Glass	6/18/2018	2,315	2,315		3,043		0.32
Paramit Corporation	^		(8)	Capital Equipment	6/17/2019	150	500		758		0.08
PPC Flexible Packaging, LLC	^		(8)	Containers, Packaging & Glass	2/1/2019	965	965		1,302		0.14
SiteLock Group Holdings, LLC	^		(8)	High Tech Industries	4/5/2018	446	446		526		0.05
Tank Holding Corp.	^		(8)	Capital Equipment	3/26/2019	850	482		943		0.10
Titan DI Preferred Holdings, Inc.	^		(8)	Energy: Oil & Gas	2/11/2020	11,246	10,959		11,021		1.13
Turbo Buyer, Inc.	^		(8)	Automotive	12/2/2019	1,925	1,925		2,444		0.25
Unifrutti Financing PLC (Cyprus)	^		(8)	Beverage, Food & Tobacco	10/22/2020	2	2,232		2,307		0.24
Unifrutti Financing PLC (Cyprus)	^		(8)	Beverage, Food & Tobacco	10/22/2020	1	—		—		—
USLS Acquisition, Inc.	^		(8)	Business Services	11/30/2018	641	641		565		0.06
W50 Parent LLC	^	^	(8)	Business Services	1/10/2020	500	500		575		0.06
Zenith American Holding, Inc.	^	^	(8)	Business Services	12/13/2017	440	220		343		0.04
Zillow Topco LP	^		(8)	Software	6/25/2018	313	312		163		0.02
Equity Investments Total							$	24,089	$	27,735	2.88	%
Total investments—non-controlled/non-affiliated							$	1,833,385	$	1,811,535	188.09	%
Total investments							$	1,833,385	$	1,811,535	188.09	%

^ Denotes that all or a portion of the assets are owned by TCG BDC II, Inc. (together with its consolidated subsidiary, “we,” “us,” “our,” “BDC II” or the “Company”). Accordingly, such assets are not available to creditors of TCG BDC II SPV LLC (the “SPV”) or TCG BDC II SPV2 LLC ("SPV2").

+ Denotes that all or a portion of the assets are owned by the Company's wholly owned subsidiary, the SPV. The SPV has entered into a senior secured revolving credit facility (as amended, the “SPV Credit Facility”). The lenders of the SPV Credit Facility have a first lien security interest in substantially all of the assets of the SPV (see Note 5, Borrowings to these consolidated financial statements). Accordingly, such assets are not available to creditors of the Company.

# Denotes that all or a portion of the assets are owned by the Company's wholly-owned subsidiary, SPV2. SPV2 has entered into a senior secured revolving credit facility (the "SPV2 Credit Facility", and together with the Subscription Facility and the SPV Credit Facility, the "Credit Facilities"). The lenders of the SPV2 Credit Facility have a first lien security interest in substantially all of the assets of SPV2 (see Note 5, Borrowings, to these consolidated financial statements). Accordingly, such assets are not available to creditors of the Company or the SPV.

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2020

(dollar amounts in thousands)

Under the Investment Company Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2020, the Company is not an “affiliated person” of any of these portfolio companies. Certain portfolio company investments are subject to contractual restrictions on sales.

(2)Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate or the U.S. Prime Rate), which generally resets quarterly. For each such loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2020. As of December 31, 2020, the reference rates for all LIBOR loans were the 30-day LIBOR at 0.15%, the 90-day LIBOR at 0.25% and the 180-day LIBOR rate at 0.26%.

(3)Loan includes interest rate floor feature, which is generally 1.00%.

(6)As of December 31, 2020, the Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans:


Investments—non-controlled/non-affiliated	Type	Unused Fee	Par/ Principal Amount		Fair Value
First and Second Lien Debt—unfunded delayed draw and revolving term loans commitments
Advanced Web Technologies Holding Company	Revolver	0.50	$	1,708	$	(34)
Advanced Web Technologies Holding Company	Delayed Draw	1.00	4,597		(92)
Airnov, Inc. (Clariant)	Revolver	0.50	4,167		2
American Physician Partners, LLC	Revolver	0.50	550		(29)
Analogic Corporation	Revolver	0.50	2,572		—
Applied Technical Services	Delayed Draw	1.00	132		(3)
Applied Technical Services	Revolver	0.50	53		(1)
Apptio, Inc.	Revolver	0.50	2,367		36
Chartis Holding, LLC	Delayed Draw	1.00	4,406		2
Chartis Holding, LLC	Revolver	0.50	2,401		1
Chemical Computing Group ULC (Canada)	Revolver	0.50	903		—
Cobblestone Intermediate Holdco LLC	Delayed Draw	1.00	11		—
Comar Holding Company, LLC	Delayed Draw	1.00	2,110		8
Comar Holding Company, LLC	Revolver	0.50	2,935		11
Cority Software Inc. (Canada)	Revolver	0.50	3,000		21
Diligent Corporation	Delayed Draw	1.00	141		2
Lifelong Learner Holdings, LLC	Revolver	0.50	2,754		(229)
Diligent Corporation	Revolver	0.50	47		1
Ethos Veterinary Health LLC	Delayed Draw	1.00	2,696		(37)
Helios Buyer, Inc.	Delayed Draw	0.00	9,344		(187)
Helios Buyer, Inc.	Revolver	0.50	2,652		(53)
Hercules Borrower LLC	Revolver	0.50	2,160		(54)
Higginbotham Insurance Agency, Inc.	Delayed Draw	1.00	4,393		(66)
Individual FoodService Holdings, LLC	Revolver	0.50	139		(3)
Individual FoodService Holdings, LLC	Delayed Draw	1.00	2,580		(65)
Individual FoodService Holdings, LLC	Revolver	0.50	1,836		(46)

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2020

(dollar amounts in thousands)


Investments—non-controlled/non-affiliated	Type	Unused Fee	Par/ Principal Amount		Fair Value
Individual FoodService Holdings, LLC	Delayed Draw	1.00	$	165	$	(4)
Integrity Marketing Acquisition, LLC	Delayed Draw	1.00	2,763		28
K2 Insurance Services, LLC	Revolver	0.50	2,290		—
K2 Insurance Services, LLC	Delayed Draw	1.00	1,571		—
Kaseya, Inc.	Delayed Draw	1.00	1,852		7
Kaseya, Inc.	Revolver	0.50	787		3
Lifelong Learner Holdings, LLC	Delayed Draw	1.00	3,379		(281)
Liqui-Box Holdings, Inc.	Revolver	0.50	1,262		(123)
Mailgun Technologies, Inc.	Revolver	0.50	1,342		(23)
Paramit Corp.	Delayed Draw	0.00	2,931		(59)
PF Growth Partners, LLC	Delayed Draw	1.00	823		(52)
PPC Flexible Packaging, LLC	Revolver	0.50	881		(3)
Redwood Services Group, LLC	Delayed Draw	3.63	5,707		22
RSC Acquisition, Inc.	Revolver	0.50	1,824		18
Sapphire Convention, Inc. (Smart City)	Revolver	0.50	3,655		(542)
Sitelock, LLC	Revolver	0.50	2,232		(41)
Smile Doctor, LLC	Revolver	0.50	707		(14)
SPay, Inc.	Revolver	0.50	655		(120)
Tank Holding Corp.	Revolver	0.25	47		(1)
TCFI AEVEX, LLC	Delayed Draw	1.00	3,476		(13)
The Leaders Romans Bidco Limited (United Kingdom) Term Loan C	Delayed Draw	1.63	204		26
Trump Card, LLC	Revolver	0.50	635		(12)
Turbo Buyer, Inc.	Revolver	0.50	2,151		20
US INFRA SVCS Buyer, LLC (AIMS Companies)	Revolver	0.50	4,550		(10)
US INFRA SVCS Buyer, LLC (AIMS Companies)	Delayed Draw	1.00	11,728		(27)
USLS Acquisition, Inc.	Revolver	0.50	1,418		(91)
USLS Acquisition, Inc.	Delayed Draw	0.50	591		—
Westfall Technik, Inc.	Revolver	0.50	431		(30)
YLG Holdings, Inc.	Delayed Draw	1.00	2,965		(46)
Zemax Software Holdings, LLC	Revolver	0.50	642		(15)
Zenith Merger Sub, Inc.	Delayed Draw	1.00	2,996		(22)
Zenith Merger Sub, Inc.	Revolver	0.50	609		(4)

Total unfunded commitments			$	127,923	$	(2,224)

(8)Security acquired in transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act, unless otherwise noted. As of December 31, 2020, the aggregate fair value of these securities is $27,735, or 2.88% of the Company's net assets.

(9)Loan was on non-accrual status as of December 31, 2020.

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2020

(dollar amounts in thousands)

(11)Represents a corporate mezzanine loan, which is subordinated to senior secured term loans of the portfolio company.

As of December 31, 2020, investments at fair value consisted of the following:


Type	Amortized Cost		Fair Value		% of Fair Value


First Lien Debt	$	1,534,414	$	1,523,542	84.1	%
Second Lien Debt	274,882		260,258		14.4
Equity Investments	24,089		27,735		1.5
Total	$	1,833,385	$	1,811,535	100.0	%

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2020

(dollar amounts in thousands)

The rate type of debt investments at fair value as of December 31, 2020 was as follows:


Rate Type	Amortized Cost		Fair Value		% of Fair Value of First and Second Lien Debt
Floating Rate	$	1,777,212	$	1,749,014	98.1	%
Fixed Rate	32,084		34,786		1.9
Total	$	1,809,296	$	1,783,800	100.0	%

The industry composition of investments at fair value as of December 31, 2020 was as follows:


Industry	Amortized Cost		Fair Value		% of Fair Value
Aerospace & Defense	$	117,563	$	108,067	6.0	%
Automotive	65,108		66,978		3.7
Banking, Finance, Insurance & Real Estate	178,831		185,943		10.3
Beverage, Food & Tobacco	76,978		76,624		4.2
Business Services	196,802		193,594		10.7
Capital Equipment	76,633		77,608		4.3
Chemicals, Plastics & Rubber	27,383		25,729		1.4
Construction & Building	29,027		29,317		1.6
Consumer Services	49,219		49,329		2.7
Containers, Packaging & Glass	114,701		117,041		6.5
Durable Consumer Goods	9,548		9,358		0.5
Energy: Oil & Gas	38,802		38,108		2.1
Environmental Industries	70,284		71,371		4.0
Healthcare & Pharmaceuticals	79,717		69,400		3.8
High Tech Industries	165,125		166,820		9.2
Hotel, Gaming & Leisure	58,855		50,395		2.8
Media: Advertising, Printing & Publishing	9,769		9,849		0.5
Media: Diversified & Production	68,728		68,616		3.8
Retail	68,659		68,840		3.8
Software	213,518		214,439		11.9
Sovereign & Public Finance	38,043		38,618		2.1
Telecommunications	55,299		50,970		2.8
Transportation: Cargo	7,563		7,444		0.4
Wholesale	17,230		17,077		0.9
Total	$	1,833,385	$	1,811,535	100.0	%

TCG BDC II, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2020

(dollar amounts in thousands)

The geographical composition of investments at fair value as of December 31, 2020 was as follows:


Geography	Amortized Cost		Fair Value		% of Fair Value
Canada	$	94,747	$	96,435	5.3	%
Cyprus	24,494		27,247		1.5

Luxembourg	36,395		33,988		1.9
United Kingdom	94,233		95,804		5.3
United States	1,583,516		1,558,061		86.0
Total	$	1,833,385	$	1,811,535	100.0	%

The accompanying notes are an integral part of these consolidated financial statements.

TCG BDC II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As of September 30, 2021

(dollar amounts in thousands, except per share data)

1. ORGANIZATION

TCG BDC II, Inc. (together with its consolidated subsidiaries, “BDC II” or the “Company”) is a Maryland corporation formed on February 10, 2017 with the name Carlyle Private Credit, Inc., which was changed to TCG BDC II, Inc. on March 3, 2017. The Company is structured as an externally managed, non-diversified closed-end investment company. The Company is managed by its investment adviser, Carlyle Global Credit Investment Management L.L.C. (“CGCIM” or “Investment Adviser”), a wholly owned subsidiary of The Carlyle Group Inc. (formerly, The Carlyle Group L.P.). The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “Investment Company Act”). In addition, the Company has elected to be treated, and intends to continue to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”).

The Company’s investment objective is to generate attractive risk adjusted returns and current income primarily by investing in senior secured term loans to U.S. middle market companies in which private equity sponsors hold, directly or indirectly, a financial interest in the form of debt and/or equity. The Company's core investment strategy focuses on lending to U.S. middle market companies, which the Company defines as companies with approximately $25 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”), which the Company believes is a useful proxy for cash flow. The Company complements this core strategy with additive, diversifying assets including, but not limited to, specialty lending investments. The Company seeks to achieve its investment objective primarily through direct originations of secured debt instruments, including first lien senior secured loans (which may include stand-alone first lien loans, first lien/last out loans, and "unitranche" loans) and second lien senior secured loans (collectively, “Middle Market Senior Loans”), with the balance of its assets invested in higher yielding investments (which may include unsecured debt, mezzanine debt and investments in equities).

The Company invests primarily in loans to middle market companies whose debt, if rated, is rated below investment grade and, if not rated, would likely be rated below investment grade if it were rated (that is, below BBB- or Baa3, which is often referred to as "junk"). Exposure to below investment grade instruments involves certain risks, including speculation with respect to the borrower's capacity to pay interest and repay principal.

On September 11, 2017 ("Commencement"), the Company completed its initial closing of capital commitments (the “Initial Closing”) and subsequently commenced substantial investment operations.

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

The Company is externally managed by the Investment Adviser, an investment adviser registered under the Investment Advisers Act of 1940, as amended. Carlyle Global Credit Administration L.L.C. (“CGCA” or the “Administrator”) provides the administrative services necessary for the Company to operate. Both the Investment Adviser and the Administrator are wholly owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of The Carlyle Group Inc. “Carlyle” refers to The Carlyle Group Inc. and its affiliates and its consolidated subsidiaries (other than portfolio companies of its affiliated funds), a global investment firm publicly traded on the Nasdaq Global Select Market under the symbol “CG”. Refer to the sec.gov website for further information on Carlyle.

TCG BDC II SPV LLC (the “SPV”) is a Delaware limited liability company that was formed on January 28, 2019. The SPV invests in first and second lien senior secured loans. The SPV is a wholly owned subsidiary of the Company and is consolidated in these consolidated financial statements commencing from the date of its formation, January 28, 2019.

TCG BDC II SPV 2 LLC (“SPV2”, collectively with the SPV, the “SPVs”) is a Delaware limited liability company that was formed on March 10, 2020. SPV2 is a wholly owned subsidiary of the Company and is consolidated in these consolidated financial statements commencing from the date of its formation, March 10, 2020.

As a BDC, the Company is required to comply with certain regulatory requirements. As part of these requirements, the Company must not acquire any assets other than “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of its total assets are qualifying assets (with certain limited exceptions).

To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. Pursuant to this election, the Company generally does not have to pay corporate level taxes on any income that it distributes to stockholders, provided that the Company satisfies those requirements.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The Company is an investment company for the purposes of accounting and financial reporting in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies ("ASC 946"). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, the SPVs. All significant intercompany balances and transactions have been eliminated. U.S. GAAP for an investment company requires investments to be recorded at fair value. The carrying value for all other assets and liabilities approximates their fair value.

The interim consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X. Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, all adjustments considered necessary for the fair presentation of consolidated financial statements for the interim periods presented have been included. These adjustments are of a normal, recurring nature. This Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2020. The results of operations for the three month and nine month periods ended September 30, 2021 are not necessarily indicative of the operating results to be expected for the full year.

Certain reclassifications were made to prior year amounts to conform to the current period presentation. In 2021, the Company separately presents proceeds receivable from the issuance of common stock. Previously, these amounts were presented as a component of prepaid expenses and other assets. There was no change to total net assets as a result of this classification.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on management and incentive fees involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements. Actual results could differ from these estimates and such differences could be material.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the accompanying Consolidated Statements of Operations reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. See Note 3, Fair Value Measurements, for further information about fair value measurements.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash consist of demand deposits and highly liquid investments (e.g., money market funds, U.S. treasury notes) with original maturities of three months or less. Cash equivalents are carried at amortized cost, which approximates fair value. The Company’s cash, cash equivalents and restricted cash are held with two large financial institutions and cash held in such financial institutions may, at times, exceed the Federal Deposit Insurance Corporation insured

limit. As of September 30, 2021 and December 31, 2020, the Company had restricted cash balances of $28,531 and $25,844, respectively, which represent amounts that are collected by trustees who have been appointed as custodians of the assets securing certain of the Company's financing transactions, and held for payment of interest expense and principal on the outstanding borrowings, or reinvestment into new assets. As of September 30, 2021 and December 31, 2020, approximately $182 and $762, respectively, of the restricted cash balances were denominated in a foreign currency.

Revenue Recognition

Interest from Investments and Realized Gain/Loss on Investments

Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. At time of exit, the realized gain or loss on an investment is the difference between the amortized cost at time of exit and the cash received at exit using the specific identification method.

The Company may have loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in interest income in the Consolidated Statements of Operations. As of September 30, 2021 and December 31, 2020, the fair value of the loans in the portfolio with PIK provisions was $178,133 and $129,447, respectively, which represented approximately 8.6% and 7.1%, respectively, of total investments at fair value. For the three and nine month periods ended September 30, 2021, the Company earned $1,746 and $5,030, respectively, in PIK income, included in interest income in the Consolidated Statements of Operations. For the three and nine month periods ended September 30, 2020, the Company earned $1,353 and $2,496, respectively, in PIK income, included in interest income in the accompanying Consolidated Statements of Operations.

Other Income

Other income may include income such as consent, waiver, amendment, unused, underwriting, arranger and prepayment fees associated with the Company’s investment activities as well as any fees for managerial assistance services rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. The Company may receive fees for guaranteeing the outstanding debt of a portfolio company. Such fees are amortized into other income over the life of the guarantee. The unamortized amount, if any, is included in prepaid expenses and other assets in the accompanying Consolidated Statements of Assets and Liabilities. For the three and nine month periods ended September 30, 2021, the Company earned $632 and $4,505, respectively, in other income, primarily from amendment, underwriting, and prepayment fees. For the three and nine month periods ended September 30, 2020, the Company earned $964 and $7,364, respectively, in other income, primarily from amendment and underwriting fees.

Non-Accrual Income

Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in management’s judgment, are likely to remain current. Management may determine not to place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. As of September 30, 2021 and December 31, 2020, the fair value of loans on non-accrual status was $10,078 and $8,151, respectively, which represented approximately 0.5% and 0.4%, respectively, of the total investments at fair value. The remaining first and second lien debt investments were performing and current on their interest payments as of September 30, 2021 and December 31, 2020 and for the periods then ended.

Credit Facilities – Related Costs, Expenses and Deferred Financing Costs

The Company, the SPV and SPV2 have each entered into a senior secured revolving credit facility (as amended, the "Subscription Facility", "SPV Credit Facility" and "SPV2 Credit Facility", respectively, and together, the "Credit Facilities"). Interest expense and unused commitment fees on the Credit Facilities are recorded on an accrual basis. Unused commitment fees are included in credit facility fees in the accompanying Consolidated Statements of Operations.

The Credit Facilities are recorded at carrying value, which approximates fair value.

Deferred financing costs include capitalized expenses related to the closing or amendments of the Credit Facilities. Amortization of deferred financing costs for each credit facility is computed on the straight-line basis over the respective term of each credit facility. The unamortized balance of such costs is included in deferred financing costs in the accompanying Consolidated Statements of Assets and Liabilities. The amortization of such costs is included in credit facility fees in the accompanying Consolidated Statements of Operations.

Income Taxes

For federal income tax purposes, the Company has elected to be treated as a RIC under the Code, and intends to make the required distributions to its stockholders as specified therein. In order to qualify as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.

The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding years. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed. For the three and nine month periods ended September 30, 2021 the Company incurred $0 and $100, respectively, in excise tax. The Company did not incur excise tax for the three and nine month periods ended September 30, 2020.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more likely than not” to be sustained by the applicable tax authority. All penalties and interest associated with income taxes, if any, are included in income tax expense. The SPVs are disregarded entities for tax purposes and are consolidated with the tax return of the Company. All penalties and interest associated with income taxes, if any, are included in income tax expense.

Dividends and Distributions to Common Stockholders

To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its common stockholders. Dividends and distributions to common stockholders are recorded on the record date. The amount to be distributed is determined by the Board of Directors each quarter and is generally based upon the taxable earnings estimated by management and available cash. Net realized capital gains, if any, are generally distributed at least annually, although the Company may decide to retain such capital gains for investment.

Dividends and distributions, if any, are paid in cash to common stockholders.

Functional Currency

The functional currency of the Company is the U.S. Dollar. Investments are generally made in the local currency of the country in which the investments are domiciled and are translated into U.S. Dollars with foreign currency translation gains or losses recorded within net change in unrealized appreciation (depreciation) on investments in the accompanying Consolidated Statements of Operations. Foreign currency translation gains and losses on non-investment assets and liabilities are separately reflected in the accompanying Consolidated Statements of Operations.

Recent Accounting Standards Updates

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions

that reference London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is currently evaluating the impact of adopting ASU 2020-04 on its consolidated financial statements.

3. FAIR VALUE MEASUREMENTS

The Company applies fair value accounting in accordance with the terms of FASB ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.

Securities/instruments that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or the Company’s Board of Directors, does not represent fair value shall each be valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment and include comparable public market valuations, comparable precedent transaction valuations and/or discounted cash flow analyses. The process generally used to determine the applicable value is as follows: (i) the value of each portfolio company or investment is initially reviewed by the investment professionals responsible for such portfolio company or investment and, for non-traded investments, a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Directors engages a third-party valuation firm to provide positive assurance on portions of the Middle Market Senior Loans and equity investments portfolio each quarter (such that each non-traded investment is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Directors (the “Audit Committee”) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Directors with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.

All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:

•the nature and realizable value of any collateral;

•call features, put features and other relevant terms of debt;

•the portfolio company’s leverage and ability to make payments;

•the portfolio company’s public or private credit rating;

•the portfolio company’s actual and expected earnings and discounted cash flow;

•prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;

•the markets in which the portfolio company does business and recent economic and/or market events; and

•comparisons to comparable transactions and publicly traded securities.

Investment performance data utilized are the most recently available financial statements and compliance certificates received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.

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 the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements as of September 30, 2021 and December 31, 2020.

U.S. GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

Investments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:

•Level 1—inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date. Financial instruments in this category generally include unrestricted securities, including equities and derivatives, listed in active markets. The Company 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—inputs to the valuation methodology are either directly or indirectly observable as of the reporting date and are those other than quoted prices in active markets. Financial instruments in this category generally include less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

•Level 3—inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments in this category generally include investments in privately-held entities, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Investment Adviser’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.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur. For the three month and nine month periods ended September 30, 2021 and 2020, there were no transfers between levels.

The following tables summarize the Company’s investments measured at fair value on a recurring basis by the above fair value hierarchy levels as of September 30, 2021 and December 31, 2020:


	September 30, 2021
	Level 1		Level 2		Level 3		Total
Assets
First Lien Debt	$	—	$	—	$	1,705,946	$	1,705,946
Second Lien Debt	—		—		336,974		336,974
Equity Investments	—		—		34,915		34,915
Total	$	—	$	—	$	2,077,835	$	2,077,835


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets
First Lien Debt	$	—	$	—	$	1,523,542	$	1,523,542
Second Lien Debt	—		—		260,258		260,258
Equity Investments	—		—		27,735		27,735
Total	$	—	$	—	$	1,811,535	$	1,811,535

The changes in the Company’s investments at fair value for which the Company has used Level 3 inputs to determine fair value and net change in unrealized appreciation (depreciation) included in earnings for Level 3 investments still held are as follows:


	Financial Assets
	For the three month period ended September 30, 2021
	First Lien Debt		Second Lien Debt		Equity Investments		Total
Balance, beginning of period	$	1,588,370	$	300,212	$	35,231	$	1,923,813
Purchases	163,002		57,359		825		221,186
Sales	—		—		(6,010)		(6,010)
Paydowns	(46,196)		(20,643)		(429)		(67,268)
Accretion of discount	1,956		542		—		2,498
Net realized gains (losses)	—		—		4,546		4,546
Net change in unrealized appreciation (depreciation)	(1,186)		(496)		752		(930)
Balance, end of period	$	1,705,946	$	336,974	$	34,915	$	2,077,835
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held at the reporting date included in net change in unrealized appreciation (depreciation) on investments on the Consolidated Statements of Operations	$	(903)	$	(377)	$	1,602	$	322



	Financial Assets
	For the nine month period ended September 30, 2021
	First Lien Debt		Second Lien Debt		Equity Investments		Total
Balance, beginning of period	$	1,523,542	$	260,258	$	27,735	$	1,811,535
Purchases	453,537		87,076		7,253		547,866
Sales	(74,606)		—		(7,137)		(81,743)
Paydowns	(210,628)		(24,039)		(1,421)		(236,088)
Accretion of discount	6,485		866		17		7,368
Net realized gains (losses)	1,229		—		5,227		6,456
Net change in unrealized appreciation (depreciation)	6,387		12,813		3,241		22,441
Balance, end of period	$	1,705,946	$	336,974	$	34,915	$	2,077,835
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held at the reporting date included in net change in unrealized appreciation (depreciation) on investments on the Consolidated Statements of Operations	$	6,928	$	12,540	$	3,914	$	23,382


	Financial Assets
	For the three month period ended September 30, 2020
	First Lien Debt		Second Lien Debt		Equity Investments		Total
Balance, beginning of period	$	1,316,022	$	244,979	$	23,284	$	1,584,285
Purchases	82,827		—		357		83,184
Sales	(6,016)		—		—		(6,016)
Paydowns	(8,595)		—		—		(8,595)
Accretion of discount	1,335		156		6		1,497
Net realized gains (losses)	(1,208)		—		—		(1,208)
Net change in unrealized appreciation (depreciation)	8,951		7,955		833		17,739
Balance, end of period	$	1,393,316	$	253,090	$	24,480	$	1,670,886
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held at the reporting date included in net change in unrealized appreciation (depreciation) on investments on the Consolidated Statements of Operations	$	7,877	$	7,955	$	833	$	16,665



	Financial Assets
	For the nine month period ended September 30, 2020
	First Lien Debt		Second Lien Debt		Equity Investments		Total
Balance, beginning of period	$	1,159,906	$	197,732	$	12,510	$	1,370,148
Purchases	372,727		90,512		11,075		474,314
Sales	(24,295)		—		—		(24,295)
Paydowns	(89,692)		(15,232)		—		(104,924)
Accretion of discount	4,353		680		14		5,047
Net realized gains (losses)	(3,374)		—		—		(3,374)
Net change in unrealized appreciation (depreciation)	(26,309)		(20,602)		881		(46,030)
Balance, end of period	$	1,393,316	$	253,090	$	24,480	$	1,670,886
Net change in unrealized appreciation (depreciation) included in earnings related to investments still held at the reporting date included in net change in unrealized appreciation (depreciation) on investments on the Statements of Operations	$	(27,065)	$	(20,342)	$	881	$	(46,526)

The Company generally uses the following framework when determining the fair value of investments that are categorized as Level 3:

Investments in debt securities are initially evaluated to determine whether the enterprise value of the portfolio company is greater than the applicable debt. The enterprise value of the portfolio company is estimated using a market approach and an income approach. The market approach utilizes market value (EBITDA) multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The Company carefully considers numerous factors when selecting the appropriate companies whose multiples are used to value its portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. The income approach typically uses a discounted cash flow analysis of the portfolio company.

Investments in debt securities that do not have sufficient coverage through the enterprise value analysis are valued based on an expected probability of default and discount recovery analysis.

Investments in debt securities with sufficient coverage through the enterprise value analysis are generally valued using a discounted cash flow analysis of the underlying security. Projected cash flows in the discounted cash flow typically represent the relevant security’s contractual interest, fees and principal payments plus the assumption of full principal recovery at the security’s expected maturity date. The discount rate to be used is determined using an average of two market-based methodologies. Investments in debt securities may also be valued using consensus pricing.

Investments in equities are generally valued using a market approach and/or an income approach. The market approach utilizes EBITDA multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The income approach typically uses a discounted cash flow analysis of the portfolio company.

The following tables summarize the quantitative information related to the significant unobservable inputs for Level 3 instruments which are carried at fair value as of September 30, 2021 and December 31, 2020:


	Fair Value as of September 30, 2021		Valuation Techniques	Significant Unobservable Inputs	Range
					Low		High		Weighted Average
Investments in First Lien Debt	$	1,470,814	Discounted Cash Flow	Discount Rate	3.70	%	14.29	%	7.30	%
	225,054		Consensus Pricing	Indicative Quotes	95.75	%	100.00	%	98.23	%
	10,078		Income Approach	Discount Rate	11.27	%	11.27	%	11.27	%
			Market Approach	Comparable Multiple	8.32x		8.32x		8.32x
Total First Lien Debt	1,705,946
Investments in Second Lien Debt	231,050		Discounted Cash Flow	Discount Rate	7.18	%	14.44	%	9.37	%
	105,924		Consensus Pricing	Indicative Quotes	97.25	%	98.31	%	97.82	%
Total Second Lien Debt	336,974
Investments in Equity	34,915		Income Approach	Discount Rate	7.22	%	10.50	%	8.58	%
			Market Approach	Comparable Multiple	9.10x		16.43x		11.55x
Total Equity Investments	34,915
Total Level 3 Investments	$	2,077,835


	Fair Value as of December 31, 2020		Valuation Techniques	Significant Unobservable Inputs	Range
					Low		High		Weighted Average
Investments in First Lien Debt	$	1,154,102	Discounted Cash Flow	Discount Rate	4.36	%	16.60	%	7.52	%
	361,290		Consensus Pricing	Indicative Quotes	89.11	%	100.00	%	97.73	%
	8,150		Income Approach	Discount Rate	12.80	%	12.80	%	12.80	%

Total First Lien Debt	1,523,542
Investments in Second Lien Debt	214,520		Discounted Cash Flow	Discount Rate	7.14	%	15.27	%	9.96	%
	45,738		Consensus Pricing	Indicative Quotes	82.88	%	100.00	%	87.75	%
Total Second Lien Debt	260,258
Investments in Equity	27,735		Income Approach	Discount Rate	7.22	%	11.17	%	7.70	%
			Market Approach	Comparable Multiple	7.67x		16.43x		9.10x
Total Equity Investments	27,735
Total Level 3 Investments	$	1,811,535

The significant unobservable inputs used in the fair value measurement of the Company’s investments in first and second lien debt securities are discount rates, indicative quotes and comparable EBITDA multiples. Significant increases in discount rates in isolation would result in a significantly lower fair value measurement. Significant decreases in indicative quotes or comparable EBITDA multiples in isolation would result in a significantly lower fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Company’s investments in equities are discount rates and comparable EBITDA multiples. Significant increases in discount rates in isolation would result in a significantly lower fair value measurement. Significant decreases in comparable EBITDA multiples in isolation would result in a significantly lower fair value measurement.

Financial instruments disclosed but not carried at fair value

The following table presents the carrying value and fair value of the Company’s secured borrowings disclosed but not carried at fair value as of September 30, 2021 and December 31, 2020:


	September 30, 2021				December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
Secured borrowings	$	1,025,826	$	1,025,826	$	880,956	$	880,956
Total	$	1,025,826	$	1,025,826	$	880,956	$	880,956

The carrying values of the secured borrowings approximate their respective fair values and are categorized as Level 3 within the hierarchy. Secured borrowings are valued generally using discounted cash flow analysis. The significant unobservable inputs used in the fair value measurement of the Company’s secured borrowings are discount rates. Significant increases in discount rates would result in a significantly lower fair value measurement.

The carrying value of other financial assets and liabilities approximates their fair value based on the short term nature of these items.

4. RELATED PARTY TRANSACTIONS

Investment Advisory Agreement

On June 26, 2017, the Company entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Investment Adviser. The initial term of the Investment Advisory Agreement was two years from June 26, 2017 and, unless terminated earlier, the Investment Advisory Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the vote of the Board of Directors and by the vote of a majority of the directors who are not “interested persons” as defined in Section 2(a)(19) of the Investment Company Act (the “Independent Directors”). On May 26, 2021, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the Company’s Investment Advisory Agreement with the Adviser for an additional one year term. Pursuant to relief granted by the SEC in light of the COVID-19 pandemic (the "Order") and a determination by the Board of Directors that reliance on the order was appropriate due to circumstances related to the current or potential side-effects of COVID-19, the May 26 meeting was held by video- and telephone-conference. The Investment Advisory Agreement will automatically terminate in the event of an assignment and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party. Pursuant to the Investment Advisory Agreement and subject to the overall supervision of the Board of Directors, the Investment Adviser provides investment advisory services to the Company. For providing these services, the Investment Adviser receives fees from the Company consisting of two components—a management fee and an incentive fee.

The management fee has been calculated and payable quarterly in arrears at an annual rate of 1.00% of the Company’s average Capital Under Management (as defined below) at the end of the then-current quarter and the prior calendar quarter (and, in the case of the Company’s first quarter, the Company’s Capital Under Management as of such quarter-end). “Capital Under Management” means cumulative capital called, less cumulative distributions categorized as Returned Capital. “Returned Capital” means unused capital commitments increased by the aggregate amount of (i) any portion of distributions made by the Company to an investor during the Investment Period which represents (A) proceeds realized from the sale or repayment of any investment (as opposed to investment income) during the Investment Period (but not in excess of the cost of any such investment) or (B) a return of such investor’s capital contributions to the Company, as determined by the Board of Directors, and (ii) any amount drawn down by the Company from unused capital commitments to pay management fees, incentive fees, organizational expenses or Company expenses, to the extent such investor receives subsequent distributions. The “Investment Period” commenced on September 11, 2017 and was scheduled to expire September 11, 2021. On January 11, 2021, the Board of Directors extended the Investment Period for one additional one-year period through September 11, 2022. On January 11, 2021, the Company, in connection with the extension of the Investment Period to September 11, 2022, entered into a letter agreement with the Investment Adviser, under which the Adviser agreed that effective September 12, 2021 the annual rate of its management fee will decrease from a rate of 1.25% to 1.00% of the Company's average Capital Under Management. For the avoidance of doubt, Capital Under Management does not include capital acquired through the use of leverage, and Returned Capital does not include distributions of the Company’s investment income (i.e., proceeds received in respect of interest payments, dividends or fees, net of expenses) or net realized capital gains to the investors.

The incentive fee consists of two parts. The first part has been calculated and payable quarterly in arrears and equals 15% of pre-incentive fee net investment income for the immediately preceding calendar quarter, subject to a preferred return of 1.75% per quarter (7% annualized), or “hurdle rate,” and a “catch-up” feature. The second part is determined and payable in

arrears as of the end of each calendar year in an amount equal to 15% of realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation less the aggregate amount of any previously paid capital gain incentive fees, provided that no incentive fee on capital gains is payable to the Investment Adviser unless cumulative total return exceeds a 7% annual return on weighted average cumulative capital called less cumulative distributions categorized as Returned Capital.

Below is a summary of the base management fees and incentive fees incurred during the three month and nine month periods ended September 30, 2021 and 2020:


	For the three month periods ended				For the nine month periods ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Base management fees	$	3,240	$	3,040	$	9,502	$	8,543
Incentive fees on pre-incentive fee net investment income	4,559		3,693		13,287		10,910
Realized capital gains incentive fees	—		—		—		—
Accrued capital gains incentive fees	—		—		—		—
Total capital gains incentive fees	—		—		—		—
Total incentive fees	4,559		3,693		13,287		10,910
Total base management fees and incentive fees	$	7,799	$	6,733	$	22,789	$	19,453

Accrued capital gains incentive fees are based upon the cumulative net realized and unrealized appreciation (depreciation) from inception. Accordingly, the accrual for any capital gains incentive fee under U.S. GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual.

As of September 30, 2021 and December 31, 2020, $7,803 and $7,437, respectively, were included in management and incentive fees payable in the accompanying Consolidated Statements of Assets and Liabilities.

On June 26, 2017, the Investment Adviser entered into a personnel agreement with The Carlyle Group Employee Co., L.L.C. (“Carlyle Employee Co.”), an affiliate of the Investment Adviser, pursuant to which Carlyle Employee Co. provides the Investment Adviser with access to investment professionals.

Administration Agreement

On April 18, 2017, the Company entered into an administration agreement (the “Administration Agreement”) with the Administrator. Unless terminated earlier, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board of Directors or by a majority vote of the outstanding voting securities of the Company and (ii) the vote of a majority of the Company’s Independent Directors. The Administration Agreement may not be assigned by a party without the consent of the other party and may be terminated by either party without penalty upon at least 60 days’ written notice to the other party. On May 26, 2021, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the Company’s Administration Agreement with the Administrator for an additional one year term.

Pursuant to the Administration Agreement, the Administrator provides services and receives reimbursements equal to an amount that reimburses the Administrator for its costs and expenses and the Company's allocable portion of overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company's allocable portion of the compensation paid to or compensatory distributions received by the Company’s officers (including the Chief Compliance Officer and Chief Financial Officer) and respective staff who provide services to the Company, operations staff who provide services to the Company, and any internal audit staff, to the extent internal audit performs a role in the Company's internal control assessment under the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Reimbursement under the Administration Agreement occurs quarterly in arrears.

For the three and nine month periods ended September 30, 2021, the Company incurred $275 and $598, respectively, in fees under the Administration Agreement. For the three and nine month periods ended September 30, 2020, the Company incurred $86 and $334, respectively, in fees under the Administration Agreement. Fees incurred under the Administration Agreement are included in administrative service fees in the accompanying Consolidated Statements of Operations. As of

September 30, 2021 and December 31, 2020, $291 and $60, respectively, was unpaid and included in administrative service fees payable in the accompanying Consolidated Statements of Assets and Liabilities.

Sub-Administration Agreements

On June 26, 2017, the Administrator entered into sub-administration agreements with Carlyle Employee Co. (the “Carlyle Sub-Administration Agreement”). Pursuant to the Carlyle Sub-Administration Agreement, Carlyle Employee Co. provides the Administrator with access to personnel.

On June 22, 2017, the Administrator entered into a sub-administration agreement with State Street Bank and Trust Company (“State Street” and, such agreement, the “State Street Sub-Administration Agreement” and, together with the Carlyle Sub-Administration Agreements, the “Sub-Administration Agreements”).

On May 26, 2021, the Company’s Board of Directors, including a majority of the Independent Directors, approved the continuance of the Company’s Sub-Administration Agreements for an additional one year term.

For the three and nine month periods ended September 30, 2021, fees incurred in connection with the State Street Sub-Administration Agreement amounted to $192 and $556, respectively. For the three and nine month periods ended September 30, 2020, fees incurred in connection with the State Street Sub-Administration Agreement amounted to $174 and $520, respectively. These fees are included in other general and administrative expenses in the accompanying Consolidated Statements of Operations. As of September 30, 2021 and December 31, 2020, $488 and $1,000, respectively, was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities.

Placement Fees

On June 26, 2017, the Company entered into a placement fee arrangement with TCG Securities, L.L.C. (“TCG”), a licensed broker-dealer and an affiliate of the Investment Adviser, which may require stockholders to pay a placement fee to TCG for TCG’s services.

For the three and nine month periods ended September 30, 2021, TCG earned $687 and $2,039, respectively, in placement fees from the Company's stockholders in connection with the issuance or sale of the Company's common stock. For the three and nine month periods ended September 30, 2020, TCG earned $0 and $984, respectively, in placement fees from the Company's stockholders in connection with the issuance or sale of the Company's common stock. TCG paid these amounts as placement fees to sub-placement agents.

Board of Directors

The Company’s Board of Directors currently consists of seven members, five of whom are Independent Directors. The Board of Directors has established an audit committee and a pricing committee of the Board of Directors, and may establish additional committees in the future. For the three and nine month periods ended September 30, 2021, the Company incurred $96 and $237, respectively, in fees and expenses associated with its Independent Directors' services on the Company's Board of Directors and its committees. For the three and nine month periods ended September 30, 2020, the Company incurred $55 and $178, respectively, in fees and expenses associated with its Independent Directors' services on the Company's Board of Directors and its committees. As of September 30, 2021 and December 31, 2020, $94 and $60, respectively, was unpaid and included in other accrued expenses and liabilities in the accompanying Consolidated Statements of Assets and Liabilities.

5. BORROWINGS

The Company, the SPV and SPV2 are party to the Credit Facilities as described below. In accordance with the Investment Company Act, the Company is currently only allowed to borrow amounts such that its asset coverage, as defined in the Investment Company Act, is at least 200% after such borrowing. As of September 30, 2021 and December 31, 2020, asset coverage was 206.93% and 209.33%, respectively, and the Company and the SPVs were in compliance with all covenants and other requirements under the Credit Facilities as of September 30, 2021 and December 31, 2020. Below is a summary of the borrowings and repayments under the Credit Facilities for the three month and nine month periods ended September 30, 2021 and 2020.


	For the three month periods ended				For the nine month periods ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Outstanding borrowing, beginning of period	$	988,018	$	691,551	$	880,956	$	648,200
Borrowings	145,450		164,953		345,811		566,486
Repayments	(104,500)		(91,485)		(196,533)		(447,985)
Foreign currency translation	(3,142)		2,715		(4,408)		1,033
Outstanding borrowing, end of period	$	1,025,826	$	767,734	$	1,025,826	$	767,734

Subscription Facility

The Company entered into the Subscription Facility with a lender on October 3, 2017, which was subsequently amended on March 14, 2018, November 16, 2018, May 12, 2020 and October 2, 2020. The Subscription Facility provides for secured borrowings of $75,000. The maximum principal amount is subject to availability under the Subscription Facility, which is based on certain of the Company’s unfunded investor equity capital commitments, and restrictions imposed on borrowings under the Investment Company Act. The Subscription Facility has a maturity date of October 3, 2022. The Company may borrow amounts in U.S. Dollars or certain other permitted currencies. Borrowings under the Subscription Facility bear interest currently at LIBOR plus an applicable spread of 1.95% per year, subject to a 0.50% floor on LIBOR. The Company also pays a fee of 0.25% per year on undrawn amounts under the Subscription Facility.

Subject to certain exceptions, the Subscription Facility is secured by a first lien security interest in the Company’s unfunded investor equity capital commitments. The Subscription Facility includes customary covenants, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.

SPV Credit Facility

The SPV entered into the SPV Credit Facility with a lender on April 1, 2019, which was subsequently amended October 25, 2019, February 7, 2020, December 4, 2020, and June 2, 2021. The SPV Credit Facility provides for secured borrowings of $600,000, subject to availability under the SPV Credit Facility and restrictions imposed on borrowings under the Investment Company Act. The SPV Credit Facility has a revolving period through October 15, 2022, and a maturity date of April 1, 2025, with one one-year extension option, subject to the Company's and lender's consent. The SPV may borrow amounts in U.S. Dollars or certain other permitted currencies. Borrowings under the SPV Credit Facility bear interest initially at LIBOR (or, if applicable, a rate based on the prime rate or federal funds rate) plus 2.40% per year. The SPV also pays a fee of between 0.50% and 0.75% per year on undrawn amounts under the SPV Credit Facility. Payments under the SPV Credit Facility are made quarterly. The lender has a first lien security interest on substantially all of the assets of the SPV.

SPV2 Credit Facility

SPV2 entered into the SPV2 Credit Facility with a lender on May 13, 2020, which was subsequently amended on February 11, 2021 and August 13, 2021. The SPV2 Credit Facility provides for secured borrowings during the applicable revolving period up to a principal amount of $450,000, subject to availability under the SPV2 Credit Facility and restrictions imposed on borrowings under the Investment Company Act. The SPV2 Credit Facility has a revolving period through May 13, 2023, and a maturity date of May 13, 2028. Borrowings under the SPV2 Credit Facility bear interest initially at LIBOR (or, if applicable, a rate based on the prime rate or federal funds rate plus 0.50%) plus 2.66%. SPV2 pays a fee of 0.25% per year on undrawn amounts under the SPV2 Credit Facility. Payments under the SPV2 Credit Facility are made quarterly. The lender has a security interest on substantially all of the assets of SPV2.

Short Term Liabilities

In order to finance certain investment transactions, the Company may, from time to time, enter into repurchase agreements with Macquarie US Trading LLC (“Macquarie”), whereby the Company sells to Macquarie an investment that it holds and concurrently enters into an agreement to repurchase the same investment at an agreed-upon price at a future date, generally not to exceed 90-days from the date it was sold (the “Macquarie Transaction”).

In accordance with ASC 860, Transfers and Servicing, these Macquarie Transactions meet the criteria for secured borrowings. Accordingly, the investment financed by the Macquarie Transaction remains on the Company’s Consolidated Statements of Assets and Liabilities as an asset, and the Company records a liability to reflect its repurchase obligation to

Macquarie (the “Repurchase Obligation”). The Repurchase Obligation is secured by the respective investment that is the subject of the repurchase agreement. Interest expense associated with the Repurchase Obligation is reported on the Company’s Consolidated Statements of Operations within Other expenses.

As of September 30, 2021 and December 31, 2020, the Company had no outstanding Repurchase Obligations. For the three and nine month periods ended September 30, 2021, the Company entered into $35,500 and $58,921 of repurchase agreements, respectively, with a weighted average interest rate of 2.72% and 3.00%, respectively. The Company did not enter into any repurchase agreements for the three and nine month periods ended September 30, 2020.

Summary of Credit Facilities

The Credit Facilities consisted of the following as of September 30, 2021 and December 31, 2020:


	September 30, 2021
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
Subscription Facility	$	75,000	$	64,087	$	10,913	$	2,164
SPV Credit Facility	600,000		590,839		9,161		8,444
SPV2 Credit Facility	450,000		370,900		79,100		30,660
Total	$	1,125,000	$	1,025,826	$	99,174	$	41,268

	December 31, 2020
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
Subscription Facility	$	75,000	$	75,233	$	—	$	—
SPV Credit Facility	600,000		595,723		4,277		4,277
SPV2 Credit Facility	250,000		210,000		40,000		11,393
Total	$	925,000	$	880,956	$	44,277	$	15,670

(1)The unused portion is the amount upon which commitment fees are based.

(2)Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.

For the three and nine month periods ended September 30, 2021 and 2020, the components of interest expense and credit facility fees were as follows:


	For the three month periods ended						For the nine month periods ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Interest expense	$	6,757		$	4,793		$	18,907		$	16,747
Facility unused commitment fee	77			348			240			819
Amortization of deferred financing costs	345			456			936			1,234

Total interest expense and credit facility fees	$	7,179		$	5,597		$	20,083		$	18,800
Cash paid for interest expense	$	6,377		$	4,908		$	18,796		$	16,649

Average principal debt outstanding	$	990,672		$	732,764		$	936,405		$	695,356
Weighted average interest rate	2.67		%	2.56		%	2.66		%	3.16		%

As of September 30, 2021 and December 31, 2020, the components of interest and credit facility fees payable were as follows:


	As of
	September 30, 2021			December 31, 2020
Interest expense payable	$	6,187		$	5,384
Unused commitment fees payable	108			86
Total interest expense and credit facility fees payable	$	6,295		$	5,470
Weighted average interest rate (1)	2.69		%	2.63		%

(1) Based on floating LIBOR rates.

6. COMMITMENTS AND CONTINGENCIES

A summary of significant contractual payment obligations was as follows as of September 30, 2021 and December 31, 2020:


	As of
Payment Due by Period	September 30, 2021		December 31, 2020
Less than 1 Year	$	—	$	—
1-3 Years	64,087		75,233
3-5 Years	590,839		595,723
More than 5 Years	370,900		210,000
Total	$	1,025,826	$	880,956

In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnification or warranties. Future events could occur that lead to the execution of these provisions against the Company. The Company believes that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in the consolidated financial statements as of September 30, 2021 and December 31, 2020 for any such exposure.

The Company has in the past, currently are and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments. The Company had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:


	Par Value as of
	September 30, 2021		December 31, 2020
Unfunded delayed draw commitments	$	63,779	$	71,561
Unfunded revolving commitments	72,051		56,362
Total unfunded commitments	$	135,830	$	127,923

7. NET ASSETS

The Company has the authority to issue 200,000,000 shares of common stock, $0.01 per share par value.

The following table summarizes capital activity during the three month period ended September 30, 2021:


	Common Stock			Capital in Excess of Par Value		Accumulated Net Investment Income (Loss)		Accumulated Net Realized Gain (Loss)		Accumulated Net Unrealized Appreciation (Depreciation)		Total Net Assets
	Shares	Amount
Balance, beginning of period	51,490,006	$	515	$	1,045,874	$	2,349	$	(5,022)	$	(2,904)	$	1,040,812
Common stock issued	2,405,003	24		49,976		—		—		—		50,000
Net investment income (loss)	—	—		—		25,780		—		—		25,780
Net realized gain (loss)	—	—		—		—		4,502		—		4,502
Net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	—	—		—		—		—		2,256		2,256

Dividends declared	—	—		—		(26,409)		—		—		(26,409)

Balance, end of period	53,895,009	$	539	$	1,095,850	$	1,720	$	(520)	$	(648)	$	1,096,941

The following table summarizes capital activity during the nine month period ended September 30, 2021:



	Common Stock			Capital in Excess of Par Value		Accumulated Net Investment Income (Loss)		Accumulated Net Realized Gain (Loss)		Accumulated Net Unrealized Appreciation (Depreciation)		Total Net Assets
	Shares	Amount
Balance, beginning of period	49,062,820	$	491	$	996,001	$	1,117	$	(6,891)	$	(27,582)	$	963,136
Common stock issued	4,832,189	48		99,952		—		—		—		100,000
Net investment income (loss)	—	—		—		75,174		—		—		75,174
Net realized gain (loss)	—	—		—		—		6,371		—		6,371
Net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	—	—		—		—		—		26,934		26,934

Dividends declared	—	—		—		(74,674)		—		—		(74,674)
Tax reclassification of stockholders’ equity in accordance with U.S. GAAP	—	—		(103)		103				—		—
Balance, end of period	53,895,009	$	539	$	1,095,850	$	1,720	$	(520)	$	(648)	$	1,096,941

The following table summarizes capital activity during the three month period ended September 30, 2020:


	Common Stock			Capital in Excess of Par Value		Accumulated Net Investment Income (Loss)		Accumulated Net Realized Gain (Loss)		Accumulated Net Unrealized Appreciation (Depreciation)		Total Net Assets
	Shares	Amount
Balance, beginning of period	47,532,983	$	475	$	966,017	$	1,270	$	(1,555)	$	(62,504)	$	903,703
Common stock issued	—	—		—		—		—		—		—


Net investment income (loss)	—	—		—		20,969		—		—		20,969
Net realized gain (loss)	—	—		—		—		(3,459)		—		(3,459)
Net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	—	—		—		—		—		16,813		16,813

Dividends declared	—	—		—		(21,865)		—		—		(21,865)

Balance, end of period	47,532,983	$	475	$	966,017	$	374	$	(5,014)	$	(45,691)	$	916,161

The following table summarizes capital activity during the nine month period ended September 30, 2020:



	Common Stock			Capital in Excess of Par Value		Accumulated Net Investment Income (Loss)		Accumulated Net Realized Gain (Loss)		Accumulated Net Unrealized Appreciation (Depreciation)		Total Net Assets
	Shares	Amount
Balance, beginning of period	35,769,223	$	358	$	736,328	$	691	$	149	$	(417)	$	737,109
Common stock issued	11,763,760	117		229,703		—		—		—		229,820


Net investment income (loss)	—	—		—		61,882		—		—		61,882
Net realized gain (loss)	—	—		—		—		(5,163)		—		(5,163)
Net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	—	—		—		—		—		(45,274)		(45,274)

Dividends declared	—	—		—		(62,213)		—		—		(62,213)
Tax reclassification of stockholders’ equity in accordance with U.S. GAAP	—	—		(14)		14		—		—		—
Balance, end of period	47,532,983	$	475	$	966,017	$	374	$	(5,014)	$	(45,691)	$	916,161

The following table summarizes total shares issued and proceeds related to capital activity during the nine month period ended September 30, 2021.


	Shares Issued	Proceeds
June 29, 2021	2,427,186	$	50,000
September 22, 2021	2,405,003	50,000


Total	4,832,189	$	100,000

Subscription and share issuance transactions during the nine month period ended September 30, 2021 were executed at an offering price at a premium to net asset value in order to effect a reallocation of organizational costs to subsequent investors. For the nine month period ended September 30, 2021, there was no increase to net asset value per share resulting from such subscription.

The following table summarizes total shares issued and proceeds related to capital activity during the nine month period ended September 30, 2020.


	Shares Issued	Proceeds
March 18, 2020	1,959,038	$	40,004
March 31, 2020	7,168,466	140,000
May 28, 2020	2,636,256	49,816

Total	11,763,760	$	229,820

Subscription and share issuance transactions during the nine month period ended September 30, 2020 were executed at an offering price at a premium to net asset value in order to effect a reallocation of organizational costs to subsequent investors. For the nine month period ended September 30, 2020, such subscription transactions increased net asset value by $0.01 per share.

The Company computes earnings per common share in accordance with ASC 260, Earnings Per Share. Basic earnings per common share were calculated by dividing net increase (decrease) in net assets resulting from operations attributable to the Company by the weighted-average number of common shares outstanding for the period.

Basic and diluted earnings per common share were as follows:


	For the three month periods ended				For the nine month periods ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Net increase (decrease) in net assets resulting from operations	$	32,538	$	34,323	$	108,479	$	11,445
Weighted-average common shares outstanding	51,725,278		47,532,983		49,977,840		43,203,882
Basic and diluted earnings per common share	$	0.63	$	0.72	$	2.17	$	0.26

The following table summarizes the Company’s dividends declared during the two most recent fiscal years and the current fiscal year-to-date:

Date Declared

Record Date

Payment Date

Per Share Amount

March 12, 2019

April 18, 2019

0.47

June 11, 2019

July 18, 2019

0.51

September 10, 2019

October 18, 2019

0.50

December 10, 2019

January 17, 2020

0.50

March 4, 2020

April 17, 2020

0.53

June 30, 2020

July 17, 2020

0.45

September 28, 2020

October 16, 2020

0.46

December 14, 2020

January 15, 2021

0.50

March 30, 2021

April 16, 2021

0.48

June 29, 2021

July 16, 2021

0.48

September 24, 2021

October 15, 2021

0.49

8. CONSOLIDATED FINANCIAL HIGHLIGHTS

The following is a schedule of consolidated financial highlights for the nine month periods ended September 30, 2021 and 2020:


	For the nine month periods ended
	September 30, 2021			September 30, 2020
Per Share Data:
Net asset value per share, beginning of period	$	19.63		$	20.61
Net investment income (loss) (1)	1.50			1.43
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities	0.67			(1.34)
Net increase (decrease) in net assets resulting from operations	2.17			0.09
Dividends declared (2)	(1.45)			(1.44)
Other	—			—
Effect of offering price of subscriptions (3)	—			0.01
Net asset value per share, end of period	$	20.35		$	19.27

Number of shares outstanding, end of period	53,895,009			47,532,983
Total return based on net asset value (4)	11.05		%	0.49		%
Net assets, end of period	$	1,096,941		$	916,161
Ratio to average net assets (5):
Expenses before incentive fees	3.26		%	3.51		%
Expenses after incentive fees	4.56		%	4.78		%
Net investment income (loss)	7.37		%	7.22		%
Interest expense and credit facility fees	1.97		%	2.19		%
Ratios/Supplemental Data:
Asset coverage, end of period	206.93		%	219.33		%
Portfolio turnover	17.53		%	7.76		%
Total committed capital, end of period	$	1,227,312		$	1,227,312
Ratio of total contributed capital to total committed capital, end of period	89.43		%	78.84		%
Weighted-average shares outstanding	49,977,840			43,203,882

(1)Net investment income (loss) per share was calculated as net investment income (loss) for the period divided by the weighted average number of shares outstanding for the period.

(2)Dividends declared per share was calculated as the sum of dividends declared during the period divided by the number of shares outstanding at the quarter-end date (refer to Note 7, Net Assets to these consolidated financial statements).

(3)Increase (decrease) is due to the offering price of subscriptions during the period (refer to Note 7, Net Assets, to these consolidated financial statements).

(4)Total return based on net asset value (not annualized) is based on the change in net asset value per share during the period plus the declared dividends divided by the beginning net asset value for the period. Total return for the nine month periods ended September 30, 2021 and 2020 is inclusive of $0.00 and $0.01, respectively, per share increase (decrease) in net asset value for the period related to the offering price of subscriptions. Excluding the effects of these common stock issuances, total return (not annualized) would have been 11.05% and 0.44%, respectively, for the period (refer to Note 7, Net Assets, to these consolidated financial statements).

(5)These ratios to average net assets have not been annualized.

9. LITIGATION

The Company may become party to certain lawsuits in the ordinary course of business. The Company does not believe that the outcome of current matters, if any, will materially impact the Company or its consolidated financial statements. As of September 30, 2021 and December 31, 2020, the Company was not subject to any material legal proceedings, nor, to the Company’s knowledge, is any material legal proceeding threatened against the Company.

In addition, portfolio investments of the Company could be the subject of litigation or regulatory investigations in the ordinary course of business. The Company does not believe that the outcome of any current contingent liabilities of its portfolio investments, if any, will materially affect the Company or these consolidated financial statements.

10. TAX

The Company has not recorded a liability for any uncertain tax positions pursuant to the provisions of ASC 740, Income Taxes, as of September 30, 2021 and September 30, 2020.

In the normal course of business, the Company is subject to examination by federal and certain state, local and foreign tax regulators. The Company elected a tax year-end of June 30.

The Company's taxable income for each period is an estimate and will not be finally determined until the Company files its tax return for each year. Therefore, the final taxable income earned in each period and carried forward for distribution in the following period may be different than this estimate. The tax character of the distributions paid for the period from July 1, 2021 to September 30, 2021 and for the period from July 1, 2020 to September 30, 2020 was as follows:


	For the period from July 1, 2021 to September 30, 2021		For the period from July 1, 2020 to September 30, 2020
Ordinary income	$	26,409	$	20,969
Tax return of capital	—		—

11. SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date the consolidated financial statements were issued. There have been no subsequent events that require recognition or disclosure through the date the consolidated financial statements were issued.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(dollar amounts in thousands, except per share data, unless otherwise indicated)

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

We have included or incorporated by reference in this Form 10-Q, and from time to time our management may make, “forward-looking statements”. These forward-looking statements are not historical facts, but instead relate to future events or the future performance or financial condition of TCG BDC II, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “BDC II” or the “Company”). These statements are based on current expectations, estimates and projections about us, our current or prospective portfolio investments, our industry, our beliefs, and our assumptions. The forward-looking statements contained in this Form 10-Q involve a number of risks and uncertainties, including statements concerning:

•our, or our portfolio companies’, future business, operations, operating results or prospects, including our and their ability to achieve our respective objectives as a result of the COVID-19 pandemic;

•the return or impact of current and future investments;

•the general economy and its impact on the industries in which we invest, and the impact of the COVID-19 pandemic thereon;

•the impact of any protracted decline in the liquidity of credit markets on our business and the impact of the COVID-19 pandemic thereon;

•the impact of fluctuations in interest rates, including changes in or the discontinuation of LIBOR, on our business;

•the valuation of our investments in portfolio companies, particularly those having no liquid trading market, and the impact of the COVID-19 pandemic thereon;

•the impact of changes in laws, policies or regulations (including the interpretation thereof) affecting our operations or the operations of our portfolio companies;

•the valuation of our investments in portfolio companies, particularly those having no liquid trading market, and the impact of the COVID-19 pandemic thereon;

•our ability to recover unrealized losses;

•market conditions and our ability to access alternative debt markets and additional debt and equity capital, and the impact of the COVID-19 pandemic thereon;

•our contractual arrangements and relationships with third parties;

•uncertainty surrounding the financial stability of the United States, Europe and China;

•the social, geopolitical, financial, trade and legal implications of the exit of the United Kingdom from the European Union, or Brexit;

•competition with other entities and our affiliates for investment opportunities;

•the speculative and illiquid nature of our investments;

•the use of borrowed money to finance a portion of our investments;

•our expected financings and investments;

•the adequacy of our cash resources and working capital;

•the timing, form and amount of any dividend distributions;

•the timing of cash flows, if any, from the operations of our portfolio companies, and the impact of the COVID-19 pandemic thereon;

•the ability to consummate acquisitions;

•the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments, and the impact of the COVID-19 pandemic thereon;

•currency fluctuations could adversely affect on the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars;

•the ability of The Carlyle Group Employee Co., L.L.C. to attract and retain highly talented professionals that can provide services to our investment adviser and administrator;

•our ability to maintain our status as a business development company; and

•our intent to satisfy the requirements of a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended.

We use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may,” “plans,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2020 (our "2020 Form 10-K").

We have based the forward-looking statements included in this Form 10-Q on information available to us on the date of this Form 10-Q, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

OVERVIEW

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part I, Item 1 of this Form 10-Q “Financial Statements.” This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to those described in "Risk Factors" in Part I, Item 1A of our 2020 Form 10-K. Our actual results could differ materially from those anticipated by such forward-looking statements due to factors discussed under “Risk Factors” in our 2020 Form 10-K and “Cautionary Statements Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-Q.

We were incorporated on February 10, 2017 as a Maryland corporation with the name Carlyle Private Credit, Inc., and our name was changed to TCG BDC II, Inc. on March 3, 2017. We are structured as an externally managed, non-diversified closed-end investment company. We are conducting the private offering of our shares of common stock to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended. We have elected to be regulated as a BDC under the Investment Company Act. We have elected to be treated, and intend to continue to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code.

Our investment objective is to generate attractive risk adjusted returns and current income primarily by investing in senior secured term loans to U.S. middle market companies in which private equity sponsors hold, directly or indirectly, a financial interest in the form of debt and/or equity. Our core investment strategy focuses on lending to U.S. middle market companies supported by financial sponsors, which we define as companies with approximately $25 million to $100 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”), which we believe is a useful proxy for cash flow. This core strategy is supplemented with complementary specialty lending and opportunistic investing strategies, which take advantage of the broad capabilities of Carlyle's Global Credit platform while offering risk-diversifying portfolio benefits. We seek to achieve our investment objective primarily through direct origination of secured debt instruments, including first lien senior secured loans (which may include stand-alone first lien loans, first lien/last out loans and “unitranche” loans) and second lien senior secured loans (collectively, “Middle Market Senior Loans”), with a minority of our assets invested in investments that are typically higher yielding than Middle Market Senior Loans (which may include unsecured debt, mezzanine debt and investments in equities).

We invest primarily in loans to middle market companies whose debt, if rated, is rated below investment grade and, if not rated, would likely be rated below investment grade if it were rated (that is, below BBB- or Baa3, which is often referred to as "junk"). Exposure to below investment grade instruments involves certain risks, including speculation with respect to the borrower's capacity to pay interest and repay principal.

We are externally managed by our Investment Adviser, an investment adviser registered under the Advisers Act. Our Administrator provides the administrative services necessary for us to operate. Both our Investment Adviser and our Administrator are wholly owned subsidiaries of Carlyle Investment Management L.L.C., a subsidiary of Carlyle. Our Investment Adviser’s five-person investment committee is responsible for reviewing and approving our investment

opportunities. The members of the investment committee have experience investing through different credit cycles. Our Investment Adviser’s investment committee comprises five of the most senior credit professionals within the Carlyle Global Credit segment, with backgrounds and expertise across asset classes and over 26 years of average industry experience and 10 years of average tenure. In addition, our Investment Adviser and its investment team are supported by a team of finance, operations and administrative professionals currently employed by Carlyle Employee Co., a wholly owned subsidiary of Carlyle.

In conducting our investment activities, we believe that we benefit from the significant scale and resources of Carlyle, including our Investment Adviser and its affiliates.

KEY COMPONENTS OF OUR CONSOLIDATED RESULTS OF OPERATIONS

Investments

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt available to middle market companies, the general economic environment and the competitive environment for the type of investments we make.

Revenue

We generate revenue primarily in the form of interest income on debt investments we hold. In addition, we generate income from dividends on direct equity investments, capital gains on the sales of loans and debt and equity securities and various loan origination and other fees. Our debt investments generally have a stated term of five to eight years and generally bear interest at a floating rate usually determined on the basis of a benchmark such as LIBOR. Interest on these debt investments is generally paid quarterly. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. We may also generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees.

Expenses

Our primary operating expenses include the payment of: (i) investment advisory fees, including management fees and incentive fees, to our Investment Adviser pursuant to an investment advisory agreement (the “Investment Advisory Agreement”) between us and our Investment Adviser; (ii) costs and other expenses and our allocable portion of overhead incurred by our Administrator in performing its administrative obligations under an administration agreement (the “Administration Agreement”) between us and our Administrator; and (iii) other operating expenses as detailed below:

•our organization expenses and initial offering costs incurred prior to the filing of our election to be regulated as a BDC (the initial offering costs amortized over the 12 months beginning on the Initial Drawdown Date) in an amount of $1,500;

•administration fees payable under our Sub-Administration Agreements, including related expenses;

•the costs of any other offerings of our common stock and other securities, if any;

•calculating individual asset values and our net asset value (including the cost and expenses of any independent valuation firms);

•expenses, including travel expenses, incurred by our Investment Adviser, or members of our Investment Adviser team managing our investments, or payable to third parties, performing due diligence on prospective portfolio companies and, if necessary, expenses of enforcing our rights;

•certain costs and expenses relating to distributions paid on our shares;

•debt service and other costs of borrowings or other financing arrangements;

•the allocated costs incurred by our Investment Adviser in providing managerial assistance to those portfolio companies that request it;

•amounts payable to third parties relating to, or associated with, making or holding investments;

•the costs associated with subscriptions to data service, research-related subscriptions and expenses and quotation equipment and services used in making or holding investments;

•transfer agent and custodial fees;

•costs of hedging;

•commissions and other compensation payable to brokers or dealers;

•federal and state registration fees;

•any U.S. federal, state and local taxes, including any excise taxes;

•independent director fees and expenses;

•costs of preparing financial statements and maintaining books and records, costs of preparing tax returns, costs of Sarbanes-Oxley Act compliance and attestation and costs of filing reports or other documents with the SEC (or other regulatory bodies), and other reporting and compliance costs, including registration and listing fees, and the compensation of professionals responsible for the preparation or review of the foregoing;

•the costs of any reports, proxy statements or other notices to our stockholders (including printing and mailing costs), the costs of any stockholders’ meetings and the compensation of investor relations personnel responsible for the preparation of the foregoing and related matters;

•the costs of specialty and custom software for monitoring risk, compliance and overall portfolio, including any development costs incurred prior to the filing of our election to be regulated as a BDC;

•our fidelity bond;

•directors and officers/errors and omissions liability insurance, and any other insurance premiums;

•indemnification payments;

•direct fees and expenses associated with independent audits, agency, consulting and legal costs; and

•all other expenses incurred by us or our Administrator in connection with administering our business, including our allocable share of certain officers and their staff compensation.

We expect our general and administrative expenses to be relatively stable or to decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines.

PORTFOLIO AND INVESTMENT ACTIVITY

Below is a summary of certain characteristics of our investment portfolio as of September 30, 2021 and December 31, 2020.


	As of
	September 30, 2021		December 31, 2020
Number of investments	128		117
Number of portfolio companies	97		84
Number of industries	26		24

Percentage of total investment fair value:


First Lien Debt	82.1	%	84.1	%
Second Lien Debt	16.2	%	14.4	%
Total secured debt	98.3	%	98.5	%
Equity investments	1.7	%	1.5	%
Percentage of debt investment fair value:
Floating rate (1)	97.6	%	98.0	%
Fixed interest rate	2.4	%	2.0	%

(1) Primarily subject to interest rate floors.

Our investment activity for the three month periods ended September 30, 2021 and 2020 is presented below (information presented herein is at amortized cost unless otherwise indicated):


	For the three month periods ended
	September 30, 2021			September 30, 2020
Investments:
Total investments, beginning of period	$	1,922,292		$	1,646,337
New investments purchased	221,186			83,184
Net accretion of discount on investments	2,498			1,497
Net realized gain (loss) on investments	4,546			(1,208)
Investments sold or repaid	(73,278)			(14,611)
Total Investments, end of period	$	2,077,244		$	1,715,199
Principal amount of investments funded:


First Lien Debt	$	186,979		$	84,406
Second Lien Debt	77,457			—
Equity Investments	432			358
Total	$	264,868		$	84,764
Principal amount of investments sold or repaid:


First Lien Debt	$	(67,258)		$	(15,999)
Second Lien Debt	(39,243)			—
Equity Investments	(1,115)			—
Total	$	(107,616)		$	(15,999)
Number of new funded investments	15			7
Average amount of new funded investments	$	10,319		$	6,787
Percentage of new funded debt investments at floating interest rates	96		%	100		%
Percentage of new funded debt investments at fixed interest rates	4		%	—		%

As of September 30, 2021 and December 31, 2020, investments consisted of the following:


	September 30, 2021				December 31, 2020
	Amortized Cost		Fair Value		Amortized Cost		Fair Value


First Lien Debt	$	1,710,431	$	1,705,946	$	1,534,414	$	1,523,542
Second Lien Debt	338,785		336,974		274,882		260,258
Equity Investments	28,028		34,915		24,089		27,735
Total	$	2,077,244	$	2,077,835	$	1,833,385	$	1,811,535

The weighted average yields (1) for our first and second lien debt, based on the amortized cost and fair value as of September 30, 2021 and December 31, 2020, were as follows:


	September 30, 2021				December 31, 2020
	Amortized Cost		Fair Value		Amortized Cost		Fair Value


First Lien Debt Total	7.71	%	7.73	%	7.57	%	7.63	%
Second Lien Debt	9.13	%	9.18	%	9.04	%	9.55	%
First and Second Lien Debt Total	7.95	%	7.97	%	7.80	%	7.91	%

(1)Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of September 30, 2021 and December 31, 2020. Weighted average yield on debt and income producing securities at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount ("OID") and market discount earned on accruing debt included in such securities, divided by (b) total first lien and second lien debt at fair value included in such securities. Weighted average yield on debt and income producing securities at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt included in such securities, divided by

(b) total first lien and second lien debt at amortized cost included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.

Total weighted average yields (which includes the effect of accretion of discount and amortization of premiums) of our first and second lien debt investments as measured on an amortized cost basis increased slightly from 7.80% to 7.95% from December 31, 2020 to September 30, 2021, primarily due to new fundings yielding a higher rate than repayments.

As of September 30, 2021 and December 31, 2020, one and one of our debt investments was on non-accrual status, respectively. The remaining first and second lien debt investments were performing and current on their interest payments as of September 30, 2021 and December 31, 2020. The following table summarizes the fair value of our performing and non-accrual/non-performing investments as of September 30, 2021 and December 31, 2020:


	September 30, 2021				December 31, 2020
	Fair Value		Percentage		Fair Value		Percentage
Performing	$	2,067,757	99.5	%	$	1,803,384	99.6	%
Non-accrual (1)	10,078		0.5	%	8,151		0.4	%
Total	$	2,077,835	100.0	%	$	1,811,535	100.0	%

(1) For information regarding our non-accrual policy, see Note 2, Significant Accounting Policies, to our consolidated financial statements in Part I, Item 1 of this Form 10-Q.

See the Consolidated Schedules of Investments as of September 30, 2021 and December 31, 2020 in our consolidated financial statements in Part I, Item 1 of this Form 10-Q for more information on our investments, including a list of companies and type and amount of investments.

As part of the monitoring process, our Investment Adviser has developed risk policies pursuant to which it regularly assesses the risk profile of each of our debt investments and rates each of them based on the following categories, which we refer to as “Internal Risk Ratings”. Pursuant to these risk policies, an Internal Risk Rating of 1 – 5, which are defined below, is assigned to each debt investment in our portfolio. Key drivers of internal risk ratings include financial metrics, financial covenants, liquidity and enterprise value coverage.

Internal Risk Ratings Definitions


Rating						Definition
1						Borrower is operating above expectations, and the trends and risk factors are generally favorable.

2						Borrower is operating generally as expected or at an acceptable level of performance. The level of risk to our initial cost bases is similar to the risk to our initial cost basis at the time of origination. This is the initial risk rating assigned to all new borrowers.

3						Borrower is operating below expectations and level of risk to our cost basis has increased since the time of origination. The borrower may be out of compliance with debt covenants. Payments are generally current although there may be higher risk of payment default.

4						Borrower is operating materially below expectations and the loan’s risk has increased materially since origination. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due, but generally not by more than 120 days. It is anticipated that we may not recoup our initial cost basis and may realize a loss of our initial cost basis upon exit.

5						Borrower is operating substantially below expectations and the loan’s risk has increased substantially since origination. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. It is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit.

Our Investment Adviser monitors and, when appropriate, changes the investment ratings assigned to each debt investment in our portfolio. Our Investment Adviser reviews our investment ratings in connection with our quarterly valuation process. The below table summarizes the Internal Risk Ratings as of September 30, 2021 and December 31, 2020.


	September 30, 2021				December 31, 2020
	Fair Value		% of Fair Value		Fair Value		% of Fair Value
(dollar amounts in millions)
Internal Risk Rating 1	$	39.3	1.9	%	$	40.1	2.3	%
Internal Risk Rating 2	1,689.5		82.7		1,425.2		79.9
Internal Risk Rating 3	304.0		14.9		310.3		17.4
Internal Risk Rating 4	—		—		—		—
Internal Risk Rating 5	10.1		0.5		8.2		0.4
Total	$	2,042.9	100.0	%	$	1,783.8	100.0	%

As of September 30, 2021 and December 31, 2020, the weighted average Internal Risk Rating of our debt investment portfolio was 2.1 and 2.2, respectively. As of September 30, 2021 and December 31, 2020, one and one of our debt investments, with an aggregate fair value of $10.1 million and $8.2 million, respectively, was assigned an Internal Risk Rating of 5.

CONSOLIDATED RESULTS OF OPERATIONS

For the three month and nine month periods ended September 30, 2021 and 2020

The net increase or decrease in net assets from operations may vary substantially from period to period as a result of various factors, including the recognition of realized gains and losses and net change in unrealized appreciation and depreciation. As a result, quarterly comparisons may not be meaningful.

Investment Income

Investment income for the three and nine month periods ended September 30, 2021 and 2020 was as follows:


	For the three month periods ended				For the nine month periods ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
First Lien Debt	$	34,796	$	27,757	$	101,401	$	81,524
Second Lien Debt	7,273		6,217		19,362		20,426
Equity Investments	—		358		906		876
Cash	1		3		3		56
Total investment income	$	42,070	$	34,335	$	121,672	$	102,882

The increase in investment income for the three month and nine month periods ended September 30, 2021 from the comparable periods in 2020 was primarily driven by our higher average loan balance. The size of our portfolio increased to $2,077,244 as of September 30, 2021 from $1,715,199 as of September 30, 2020 at amortized cost. As of September 30, 2021, the weighted average yield of our first and second lien debt investments increased to 7.95% from 7.74% as of September 30, 2020, on amortized cost primarily due to new fundings being originated at a higher weighted average rate than that of those being repaid.

Interest income on our first and second lien debt investments is dependent on the composition and credit quality of the portfolio. Generally, we expect the portfolio to generate predictable quarterly interest income based on the terms stated in each loan’s credit agreement. As of September 30, 2021, 1 first lien debt investment was on non-accrual status. The fair value of the debt investment on non-accrual status was $10,078, which represents approximately 0.5% of total investments at fair value. The remaining first and second lien debt investments were performing and current on their interest payments. As of September 30, 2020, 2 first lien debt investments were on non-accrual status. The fair value of the debt investments on non-accrual status was $9,513, which represents approximately 0.6% of total investments at fair value. The remaining first and second lien debt investments were performing and current on their interest payments.

Net investment income for the three and nine month periods ended September 30, 2021 and 2020 was as follows:


	For the three month periods ended				For the nine month periods ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Total investment income	$	42,070	$	34,335	$	121,672	$	102,882
Total expenses (including excise tax expense)	16,290		13,366		46,498		41,000
Net investment income (loss)	$	25,780	$	20,969	$	75,174	$	61,882

Expenses

Expenses for the three and nine month periods ended September 30, 2021 and 2020 comprised the following:


	For the three month periods ended				For the nine month periods ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020


Management fees	$	3,240	$	3,040	9,502		8,543
Net investment income incentive fees	4,559		3,693		13,287		10,910

Professional fees	479		495		1,317		1,047
Administrative service fees	275		86		598		334
Interest expense	6,757		4,793		18,907		16,747
Credit facility fees	422		804		1,176		2,053
Directors’ fees and expenses	96		55		237		178
Other general and administrative	462		400		1,374		1,188
Excise tax expense	—		—		100		—
Total expenses	$	16,290	$	13,366	$	46,498	$	41,000

Interest expense and credit facility fees for the three and nine month periods ended September 30, 2021 and 2020 comprised the following:


	For the three month periods ended						For the nine month periods ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Interest expense	$	6,757		$	4,793		$	18,907		$	16,747
Facility unused commitment fee	77			348			240			819
Amortization of deferred financing costs	345			456			936			1,234

Total interest expense and credit facility fees	$	7,179		$	5,597		$	20,083		$	18,800
Cash paid for interest expense	$	6,377		$	4,908		$	18,796		$	16,649

Average principal debt outstanding	$	990,672		$	732,764		$	936,405		$	695,356
Average interest rate	2.67		%	2.56		%	2.66		%	3.16		%

The increase in interest expense for the three month period ended September 30, 2021 compared to the comparable period in 2020 was driven by higher average principal debt outstanding and higher weighted average interest rates. The increase in interest expense for the nine month period ended September 30, 2021 compared to the comparable period in 2020 was driven by higher average principal debt outstanding, partially offset by lower weighted average interest rates.

Below is a summary of the base management fees and incentive fees during the three and nine month periods ended September 30, 2021 and 2020:


	For the three month periods ended				For the nine month periods ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Base management fees	$	3,240	$	3,040	$	9,502	$	8,543
Incentive fees on pre-incentive fee net investment income	4,559		3,693		13,287		10,910
Realized capital gains incentive fees	—		—		—		—
Accrued capital gains incentive fees	—		—		—		—
Total capital gains incentive fees	—		—		—		—
Total incentive fees	4,559		3,693		13,287		10,910
Total base management fees and incentive fees	$	7,799	$	6,733	$	22,789	$	19,453

The increase in management fees and incentive fees for the three month and nine month periods ended September 30, 2021 from the comparable periods in 2020 was driven by our increased deployment of capital, as well as higher pre-incentive fee net investment income. The accrual for any capital gains incentive fee under U.S. GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. See Note 4, Related Party Transactions, to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for more information on the incentive and management fees.

Professional fees include legal, rating agencies, audit, tax, valuation, technology and other professional fees incurred related to the management of the Company. Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our executive officers and their respective staff. Other general and administrative expenses include insurance, filing, research, subscriptions, sub-administrative fees and other costs.

Net Change in Unrealized Appreciation (Depreciation) on Investments

During the three month period ended September 30, 2021, we recorded realized gain of approximately $4,546 on 2 investments and no realized losses. We recorded a change in unrealized appreciation on 60 investments totaling approximately $10,514 and a change in unrealized depreciation on 65 investments of approximately $11,444. During the three month period ended September 30, 2020, we recorded realized gain of approximately $25 on 2 investments and realized loss of approximately $1,233 on 1 investment. We recorded a change in unrealized appreciation on 82 investments totaling approximately $25,464 and a change in unrealized depreciation on 19 investments of approximately $7,725.

During the nine month period ended September 30, 2021, we recorded realized gain of approximately $6,456 on 8 investments and no realized losses. We recorded a change in unrealized appreciation on 213 investments totaling approximately $47,431 and a change in unrealized depreciation on 155 investments of approximately $24,990. During the nine month period ended September 30, 2020, we recorded realized gain of approximately $31 on 3 investments and realized loss of approximately $3,405 on 4 investments. We recorded a change in unrealized appreciation on 43 investments totaling approximately $12,344 and a change in unrealized depreciation on 61 investments of approximately $58,374.

Net realized gain (loss) and net change in unrealized appreciation (depreciation) for the three and nine month periods ended September 30, 2021 and 2020 were as follows:


	For the three month periods ended				For the nine month periods ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Net realized gain (loss) on investments	$	4,546	$	(1,208)	$	6,456	$	(3,374)
Net change in unrealized appreciation (depreciation) on investments	(930)		17,739		22,441		(46,030)
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments	$	3,616	$	16,531	$	28,897	$	(49,404)

Net realized gain (loss) and net change in unrealized appreciation (depreciation) by the type of investments for the three and nine month periods ended September 30, 2021 and 2020 were as follows:


	For the three month periods ended								For the nine month periods ended
	September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
	Net realized gain (loss)		Net change in unrealized appreciation (depreciation)		Net realized gain (loss)		Net change in unrealized appreciation (depreciation)		Net realized gain (loss)		Net change in unrealized appreciation (depreciation)		Net realized gain (loss)		Net change in unrealized appreciation (depreciation)
First Lien Debt	$	—	$	(1,186)	$	(1,208)	$	8,951	$	1,229	6,387		$	(3,374)	$	(26,309)
Second Lien Debt	—		(496)		—		7,955		—		12,813		—		(20,602)
Equity Investments	4,546		752		—		833		5,227		3,241		—		881
Total	$	4,546	$	(930)	$	(1,208)	$	17,739	$	6,456	$	22,441	$	(3,374)	$	(46,030)

Net change in unrealized depreciation in our investments for the three month period ended September 30, 2021 as compared to the comparable period in 2020 was primarily due to improving credit fundamentals of underlying borrowers in 2020. Net change in unrealized appreciation in our investments for the nine month period ended September 30, 2021 improved compared to the comparable period in 2020 primarily due to improving credit fundamentals and tightening market yields in 2021. Net change in unrealized appreciation (depreciation) is also driven by changes in other inputs utilized under our valuation methodology, including, but not limited to, enterprise value multiples, borrower leverage multiples and borrower ratings, and the impact of exits.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We generate cash from the net proceeds of offerings of our common stock and through cash flows from operations, including investment sales and repayments as well as income earned on investments and cash equivalents. We may also fund a portion of our investments through borrowings under the Credit Facilities, as well as through securitization of a portion of our existing investments. The primary use of existing funds and any funds raised in the future is expected to be for investments in portfolio companies, repayment of indebtedness, cash distributions to our stockholders and for other general corporate purposes. We believe our current cash position, available capacity on our revolving credit facilities and net cash provided by operating activities will provide us with sufficient resources to meet our obligations and continue to support our investment objectives, including reserving for the capital needs which may arise at our portfolio companies.

We entered into a senior secured revolving credit facility with a lender on October 3, 2017, which was subsequently amended on March 14, 2018, November 16, 2018, May 12, 2020 and October 2, 2020 (as amended, the “Subscription Facility”). As of September 30, 2021, the maximum principal amount of the Subscription Facility was $75,000 and is subject to availability under the Subscription Facility, which is based on certain of the Company's unfunded investor equity capital commitments, and restrictions imposed on borrowings under the Investment Company Act. The Subscription Facility has a maturity date of October 3, 2022. The Company may borrow amounts in U.S. Dollars or certain other permitted currencies. Borrowings under the Subscription Facility bear interest currently at LIBOR plus an applicable spread of 1.95% per year, subject to a 0.50% floor on LIBOR. The Company is also required to pay an undrawn commitment fee of 0.25% per year. Subject to certain exceptions, the Subscription Facility is secured by a first lien security interest in our equity investors’ unfunded capital commitments.

We entered into a senior secured revolving credit facility with a lender on April 1, 2019 (the “SPV Credit Facility”), which was subsequently amended on October 25, 2019, February 7, 2020, December 4, 2020, and June 2, 2021. As of September 30, 2021, the maximum principal amount of the SPV Credit Facility was $600,000, and is subject to availability under the SPV Credit Facility and restrictions imposed on borrowings under the Investment Company Act. The SPV Credit Facility has a maturity date of April 1, 2025, with one one-year extension option, subject to the SPV's and the lender's consent. The SPV may borrow amounts in U.S. Dollars or certain other permitted currencies. Borrowings under the SPV Credit Facility bear interest initially at LIBOR (or, if applicable, a rate based on the prime rate or federal funds rate) plus 2.40% per year with a step-up based on collateral coverage and asset mix. The SPV also pays a fee of between 0.50% and 0.75% per year on undrawn amounts under the SPV Credit Facility. Payments under the SPV Credit Facility are made quarterly. The SPV Credit Facility is secured by a first lien security interest on substantially all of the assets of the SPV.

We entered into a senior secured revolving credit facility with a lender on May 13, 2020 (the “SPV2 Credit Facility”, together with the Subscription Facility and SPV Credit Facility, the "Credit Facilities"), which was subsequently amended on February 11, 2021 and August 13, 2021. The SPV2 Credit Facility provides for secured borrowings during the applicable

revolving period up to a principal amount of $450,000, subject to availability under the SPV2 Credit Facility and restrictions imposed on borrowings under the Investment Company Act. The SPV2 Credit Facility has a revolving period through May 13, 2023, and a maturity date of May 13, 2028. Borrowings under the SPV2 Credit Facility bear interest initially at LIBOR (or, if applicable, a rate based on the prime rate or federal funds rate plus 0.50%) plus 2.66% per year. SPV2 is also required to pay an undrawn commitment fee of 0.25% per year. Payments under the SPV2 Credit Facility are made quarterly. The lenders have a security interest on substantially all of the assets of SPV2.

Although we believe that we, the SPV and SPV2 will remain in compliance, there are no assurances that we, the SPV and SPV2 will continue to comply with the covenants in the respective Credit Facilities, as applicable. Failure to comply with these covenants could result in a default under the Subscription Facility, the SPV Credit Facility and/or the SPV2 Credit Facility that, if we were unable to obtain a waiver from the applicable lenders, could result in the immediate acceleration of the amounts due under the respective facility, and thereby have a material adverse impact on our business, financial condition and results of operations. Moreover, to the extent that we cannot meet our financing obligations, we risk the loss of some or all of our assets to liquidation or sale to satisfy the obligations. In such an event, we may be forced to sell assets at significantly depressed prices due to market conditions or otherwise, which may result in losses.

For more information on the Credit Facilities, see Note 5, Borrowings, to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

As of September 30, 2021 and December 31, 2020, the Company had $36,983 and $50,217, respectively, in cash and cash equivalents. The Secured Borrowings consisted of the following as of September 30, 2021 and December 31, 2020:


	September 30, 2021
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
Subscription Facility	$	75,000	$	64,087	$	10,913	$	2,164
SPV Credit Facility	600,000		590,839		9,161		8,444
SPV2 Credit Facility	450,000		370,900		79,100		30,660
Total	$	1,125,000	$	1,025,826	$	99,174	$	41,268


	December 31, 2020
	Total Facility		Borrowings Outstanding		Unused Portion (1)		Amount Available (2)
Subscription Facility	$	75,000	$	75,233	$	—	$	—
SPV Credit Facility	600,000		595,723		4,277		4,277
SPV2 Credit Facility	250,000		210,000		40,000		11,393
Total	$	925,000	$	880,956	$	44,277	$	15,670

(1)The unused portion is the amount upon which commitment fees are based.

(2)Available for borrowing based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.

Equity Activity

Shares issued as of September 30, 2021 and December 31, 2020 were 53,895,009 and 49,062,820, respectively.

The following table summarizes activity in the number of shares of our common stock outstanding during the nine month periods ended September 30, 2021 and 2020:


	For the nine month periods ended
	September 30, 2021	September 30, 2020
Shares outstanding, beginning of period	49,062,820	35,769,223
Common stock issued	4,832,189	11,763,760
Shares outstanding, end of period	53,895,009	47,532,983

Contractual Obligations

A summary of our significant contractual payment obligations was as follows as of September 30, 2021 and December 31, 2020:


	As of
Payment Due by Period	September 30, 2021		December 31, 2020
Less than 1 Year	$	—	$	—
1-3 Years	64,087		75,233
3-5 Years	590,839		595,723
More than 5 Years	370,900		210,000
Total	$	1,025,826	$	880,956

As of September 30, 2021 and December 31, 2020, $1,025,826 and $880,956, respectively, of secured borrowings were outstanding under the Credit Facilities. For the three month periods ended September 30, 2021 and 2020, we incurred $6,757 and $4,793, respectively, of interest expense and $77 and $348, respectively, of unused commitment fees. For the nine month periods ended September 30, 2021 and 2020, we incurred $18,907 and $16,747, respectively, of interest expense and $240 and $819, respectively, of unused commitment fees.

OFF BALANCE SHEET ARRANGEMENTS

In the ordinary course of our business, we enter into contracts or agreements that contain indemnifications or warranties. Future events could occur which may give rise to liabilities arising from these provisions against us. We believe that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in these consolidated financial statements as of September 30, 2021 and December 31, 2020 included in Part I, Item 1 of this Form 10-Q for any such exposure.

We have in the past, currently are and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments.

We had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of the indicated dates:


	Par Value as of
	September 30, 2021		December 31, 2020
Unfunded delayed draw commitments	$	63,779	$	71,561
Unfunded revolving commitments	72,051		56,362
Total unfunded commitments	$	135,830	$	127,923

DIVIDENDS AND DISTRIBUTIONS TO COMMON STOCKHOLDERS

The following table summarizes our dividends declared during the two most recent fiscal years and the current fiscal year to date:


Date Declared	Record Date	Payment Date	Per Share Amount




2019
March 12, 2019	March 12, 2019	April 18, 2019	$	0.47
June 11, 2019	June 11, 2019	July 18, 2019	$	0.51
September 10, 2019	September 10, 2019	October 18, 2019	$	0.50
December 10, 2019	December 10, 2019	January 17, 2020	$	0.50
Total			$	1.98
2020
March 4, 2020	March 4, 2020	April 17, 2020	$	0.53
June 30, 2020	June 30, 2020	July 17, 2020	$	0.45
September 28, 2020	September 28, 2020	October 16, 2020	$	0.46
December 14, 2020	December 14, 2020	January 15, 2021	$	0.50
Total			$	1.94
2021
March 30, 2021	March 30, 2021	April 16, 2021	$	0.48
June 29, 2021	June 29, 2021	July 16, 2021	$	0.48
September 24, 2021	September 24, 2021	October 15, 2021	$	0.49

Total			$	1.45

CRITICAL ACCOUNTING POLICIES

The preparation of our consolidated financial statements requires us 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. Our critical accounting policies, including those relating to the valuation of our investment portfolio, are described below. The critical accounting policies should be read in connection with our consolidated financial statements in Part I, Item 1 of this Form 10-Q and in Part II, Item 8 of the Company’s annual report on Form 10-K for the year ended December 31, 2020.

Fair Value Measurements

The Company applies fair value accounting in accordance with the terms of Financial Accounting Standards Board ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date. The Company values securities/instruments traded in active markets on the measurement date by multiplying the closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments, such as its securities/instruments traded in active markets and its liquid securities/instruments that are not traded in active markets, from pricing services, brokers, or counterparties (i.e., “consensus pricing”). When doing so, the Company determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. The Company may use the quote obtained or alternative pricing sources may be utilized including valuation techniques typically utilized for illiquid securities/instruments.

and unobservable inputs is used to determine a preliminary value, which is also reviewed alongside consensus pricing, where available; (ii) preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of senior management; (iii) the Board of Directors engages a third-party valuation firm to provide positive assurance on portions of the Middle Market Senior Loans and equity investments portfolio each quarter (such that each non-traded investment is reviewed by a third-party valuation firm at least once on a rolling twelve month basis) including a review of management’s preliminary valuation and conclusion on fair value; (iv) the Audit Committee of the Board of Directors (the “Audit Committee”) reviews the assessments of the Investment Adviser and the third-party valuation firm and provides the Board of Directors with any recommendations with respect to changes to the fair value of each investment in the portfolio; and (v) the Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Investment Adviser and, where applicable, the third-party valuation firm.

All factors that might materially impact the value of an investment are considered, including, but not limited to the assessment of the following factors, as relevant:

•the nature and realizable value of any collateral;

•call features, put features and other relevant terms of debt;

•the portfolio company’s leverage and ability to make payments;

•the portfolio company’s public or private credit rating;

•the portfolio company’s actual and expected earnings and discounted cash flow;

•prevailing interest rates and spreads for similar securities and expected volatility in future interest rates;

•the markets in which the portfolio company does business and recent economic and/or market events; and

•comparisons to comparable transactions and publicly traded securities.

For further information on the fair value hierarchies, our framework for determining fair value and the composition of our portfolio, see Note 3, Fair Value Measurements, to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Use of Estimates

The preparation of consolidated financial statements in Part I, Item 1 of this Form 10-Q in conformity with U.S. GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on management and incentive fees involve a higher degree of judgment and

complexity and these assumptions and estimates may be significant to the consolidated financial statements in Part I, Item 1 of this Form 10-Q. Actual results could differ from these estimates and such differences could be material.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized appreciation or depreciation previously recognized, and includes investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation on investments as presented in the Consolidated Statements of Operations in Part I, Item 1 of this Form 10-Q reflects the net change in the fair value of investments, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Revenue Recognition

Interest from Investments and Realized Gain/Loss on Investments

Other Income

Non-Accrual Income

Income Taxes

year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.

The SPVs are disregarded entities for tax purposes and are consolidated with the tax return of the Company.

Dividends and Distributions to Common Stockholders

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in the valuations of our investment portfolio and interest rates.

Valuation Risk

Our investments generally do not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board of Directors in accordance with our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and it is possible that the difference could be material.

Interest Rate Risk

As of September 30, 2021, on a fair value basis, all of our debt investments bear interest at a floating rate, which primarily are subject to interest rate floors. Interest rates on the investments held within our portfolio of investments are typically based on floating LIBOR, with many of these investments also having a LIBOR floor. Additionally, our Credit Facilities are subject to floating interest rates and are currently paid based on floating LIBOR rates.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. There can be no assurance that a significant change in market interest rates will not have a material adverse effect on our income in the future.

The following table estimates the potential changes in net cash flow generated from interest income, should interest rates increase or decrease by 100, 200 or 300 basis points. These hypothetical interest income calculations are based on a model of the settled debt investments in our portfolio, held as of September 30, 2021 and December 31, 2020, and are only adjusted for assumed changes in the underlying base interest rates and the impact of that change on interest income. Interest expense is calculated based on outstanding secured borrowings as of September 30, 2021 and December 31, 2020 and based on the terms of our Credit Facilities. Interest expense on our Credit Facilities is calculated using the interest rate as of September 30, 2021 and 2020, adjusted for the hypothetical changes in rates, as shown below. We intend to continue to finance a portion of our investments with borrowings and the interest rates paid on our borrowings may impact significantly our net interest income.

We regularly measure exposure to interest rate risk. We assess interest rate risk and manage interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates.

Based on our Consolidated Statements of Assets and Liabilities as of September 30, 2021 and December 31, 2020, the following table shows the annual impact on net investment income of base rate changes in interest rates for our settled debt investments (considering interest rate floors for variable rate instruments) and outstanding secured borrowings assuming no changes in our investment and borrowing structure:


	September 30, 2021						December 31, 2020
Basis Point Change	Interest Income		Interest Expense		Net Investment Income		Interest Income		Interest Expense		Net Investment Income
Up 300 basis points	$	44,136	$	(29,297)	$	14,839	$	41,532	$	(26,429)	$	15,103
Up 200 basis points	$	24,337	$	(19,452)	$	4,885	$	23,732	$	(17,619)	$	6,113
Up 100 basis points	$	4,579	$	(9,606)	$	(5,027)	$	5,936	$	(8,810)	$	(2,874)
Down 100 basis points	$	(172)	$	1,192	$	1,020	$	(317)	$	1,766	$	1,449
Down 200 basis points	$	(172)	$	1,192	$	1,020	$	(317)	$	1,766	$	1,449
Down 300 basis points	$	(172)	$	1,192	$	1,020	$	(317)	$	1,766	$	1,449

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to the Company that is required to be disclosed by us in the reports we file or submit under the Exchange Act.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting during the three month period ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

The Company may become party to certain lawsuits in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. The Company is not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against the Company. See also Note 9, Litigation, to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors.

In addition to the other information set forth within this Form 10-Q, consideration should be given to the information disclosed in “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Except as previously reported by the Company on a Current Report on Form 8-K, we did not sell any equity securities during the period covered in this report that were not registered under the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.


31.1						Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*

31.2						Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*

32.1						Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2						Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

* Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	TCG BDC II, INC.

Dated: November 12, 2021	By	/s/ Thomas M. Hennigan
		Thomas M. Hennigan Chief Financial Officer (principal financial officer)

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TCG BDC II 10-Q2021 Q3 Quarterly report

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