TCW Direct Lending VII 10Q 2020 Q2 Quarterly report

TCW Direct Lending VII 10-Q2020 Q2 Quarterly report

Content analysis

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2020

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

For the transition period from to

Commission file number 814-01246

TCW DIRECT LENDING VII LLC

(Exact Name of Registrant as Specified in Its Charter)


Delaware		82-2252672
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

200 Clarendon Street, Boston, MA		02116
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (617) 936-2275

Not applicable

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

None

Not applicable

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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ☐ No ☒

As of June 30, 2020, there was no established public market for the Registrant’s common units. The number of the Registrant’s common units outstanding at August 10, 2020 was 13,734,010.

TCW DIRECT LENDING VII LLC

FORM 10-Q FOR THE QUARTER ENDED June 30, 2020

Table of Contents


	INDEX	PAGE NO.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Schedule of Investments as of June 30, 2020 (unaudited) and December 31, 2019		2
	Consolidated Statements of Assets and Liabilities as of June 30, 2020 (unaudited) and December 31, 2019		14
	Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019 (unaudited)		15
	Consolidated Statements of Changes in Members’ Capital for the six months ended June 30, 2020 and 2019 (unaudited)		16
	Consolidated Statement of Cash Flows for the six months ended June 30, 2020 and 2019 (unaudited)		17
	Notes to Consolidated Financial Statements (unaudited)		18
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		49
Item 4.	Controls and Procedures		49
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		50
Item 1A.	Risk Factors		50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		51
Item 3.	Defaults Upon Senior Securities		51
Item 4.	Mine Safety Disclosures		51
Item 5.	Other Information		51
Item 6.	Exhibits		52
SIGNATURES			53

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Unaudited)

As of June 30, 2020


Industry	Issuer	Acquisition Date	Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
	Non-Controlled/Non-Affiliated Investments
	Debt(1)
Aerospace & Defense
	Cassavant Holdings, LLC	01/02/20	Revolver—8.00% (LIBOR + 6.50%, 1.50% Floor)		0.2	%	$	1,567,896		01/02/25	$	1,567,896	$	1,500,476
	Cassavant Holdings, LLC	01/02/20	Term Loan—8.00% (LIBOR + 6.50%, 1.50% Floor)		1.8	%		14,150,260		01/02/25		13,935,241		13,541,799

					2.0	%		15,718,156				15,503,137		15,042,275

	Columbia Helicopters, Inc.	08/20/19	Term Loan—9.22% (LIBOR + 7.50%, 1.50% Floor)		5.7	%		43,270,029		08/20/24		42,540,331		43,702,730
	DynCorp International Inc.	08/16/19	Term Loan B—7.00% (LIBOR + 6.00%, 1.00% Floor)		3.8	%		29,250,375		08/16/25		28,490,389		29,045,622
	Heligear Acquisition Co.	07/30/19	Term Loan—8.50% (LIBOR + 7.00%, 1.50% Floor)		7.6	%		59,006,337		07/30/24		58,023,447		57,767,204
	Navistar Defense, LLC	12/31/18	Term Loan B—7.75% (LIBOR + 6.25%, 1.50% Floor)		2.3	%		17,239,675		12/31/23		16,896,617		17,101,757
	Sparton Corporation	03/04/19	First Lien Term Loan—9.50% (PRIME + 6.25%, 0.00% Floor)		5.3	%		39,873,390		03/04/24		39,172,806		40,471,491

					26.7	%		204,357,962				200,626,727		203,131,079

Air Freight & Logistics
	Need It Now Delivers, LLC	12/23/19	Delayed Draw Term Loan—7.75% (LIBOR + 6.00%, 1.75% Floor)		0.1	%		814,579		12/23/24		814,579		734,750
	Need It Now Delivers, LLC	12/23/19	Last Out Term Loan—7.75% (LIBOR + 6.00% , 1.75% Floor)		1.7	%		14,428,672		12/23/24		14,125,218		13,014,663

					1.8	%		15,243,251				14,939,797		13,749,413

Auto Components
	Shipston Group U.S. Inc.	05/18/20	Term Loan C—9.00% inc. PIK (LIBOR + 7.75%, 1.25% Floor, 2% PIK)		0.2	%		1,728,725		09/28/23		1,728,725		1,625,002
	Shipston Group U.S. Inc.	09/28/18	Term Loan—9.00% inc. PIK (LIBOR + 7.75%, 1.25% Floor, 2% PIK)		3.3	%		26,626,706		09/28/23		26,348,051		25,029,103

					3.5	%		28,355,431				28,076,776		26,654,105

Beverages
	Caiman Merger Sub LLC	11/01/19	Term Loan—6.75% (LIBOR + 5.75%, 1.00% Floor)		1.9	%		14,107,919		11/01/25		13,972,056		14,192,567
	Westrock Coffee Company, LLC	02/28/20	Term Loan—8.10% (LIBOR + 6.50%, 1.50% Floor)		8.3	%		65,644,228		02/28/25		64,573,422		63,281,036

					10.2	%		79,752,147				78,545,478		77,473,603

Chemicals
	GEON Performance Solutions, LLC	10/25/19	Revolver—7.88% (LIBOR + 6.25%, 1.63% Floor)		0.1	%		499,393		10/25/24		499,393		492,402
	GEON Performance Solutions, LLC	10/25/19	Term Loan—7.88% (LIBOR + 6.25%, 1.63% Floor)		2.6	%		20,265,577		10/25/24		20,189,969		19,981,859

					2.7	%		20,764,970				20,689,362		20,474,261

	Verdesian Life Sciences, LLC	07/22/19	Term Loan—9.50% (LIBOR + 7.75%, 1.75% Floor)		6.5	%		51,357,064		06/27/24		50,519,128		49,816,352

					9.2	%		72,122,034				71,208,490		70,290,613

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of June 30, 2020


Industry	Issuer	Acquisition Date	Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
Commercial Services & Supplies
	Clover Imaging Group, LLC	12/16/19	Term Loan—9.00% (LIBOR + 7.50%, 1.50% Floor)		1.5	%	$	11,684,750		12/16/24	$	11,475,465	$	11,638,011
	Production Resource Group, LLC(2)	08/21/18	Term Loan—8.00% (LIBOR + 7.00%, 1.00% Floor)		1.7	%		29,989,286		08/21/24		29,369,010		12,655,479

					3.2	%		41,674,036				40,844,475		24,293,490

Construction & Engineering
	UniTek Acquisition, Inc.	08/20/18	Delayed Draw Term Loan B—7.50% inc. PIK (LIBOR + 6.50%, 1.00% Floor, 1.00% PIK)		0.4	%		3,648,003		08/20/24		3,648,003		2,819,906
	UniTek Acquisition, Inc.	08/20/18	Term Loan B—7.50% inc. PIK (LIBOR + 6.50%, 1.00% Floor, 1.00% PIK)		1.8	%		18,240,700		08/20/24		17,932,963		14,100,062

					2.2	%		21,888,703				21,580,966		16,919,968

Construction Materials
	United Poly Systems Holding, Inc.	07/24/19	Revolver—10.00% inc. PIK (LIBOR + 8.50%, 1.50% Floor, 2.00% PIK)		0.3	%		2,614,400		06/07/24		2,614,400		2,368,646
	United Poly Systems Holding, Inc.	07/24/19	Term Loan—10.00% inc. PIK (LIBOR + 8.50%, 1.50% Floor, 2.00% PIK)		3.5	%		29,421,272		06/07/24		28,800,021		26,655,673

					3.8	%		32,035,672				31,414,421		29,024,319

Electronic Equipment, Instruments & Components
	SMTC Corporation(3)	11/08/18	Term Loan A—10.50% (LIBOR + 8.75%, 1.75% Floor)		3.0	%		23,092,095		11/08/23		22,292,267		22,422,424

					3.0	%		23,092,095				22,292,267		22,422,424

Energy Equipment & Services
	Profrac Services, LLC	09/07/18	Term Loan B—8.75% (LIBOR + 7.50%, 1.25% Floor)		5.0	%		40,355,605		09/07/23		38,414,679		38,014,979
	PSS Industrial Group Corp.	04/12/19	Term Loan—7.50% (LIBOR + 6.00%, 1.50% Floor)		2.0	%		17,891,494		04/10/25		17,535,298		15,225,661
	WDE TorcSill Holdings LLC	10/22/19	Revolver—8.25% (LIBOR + 6.75%, 1.50% Floor)		0.8	%		6,085,294		10/22/24		6,085,294		5,987,930
	WDE TorcSill Holdings LLC	10/22/19	Term Loan—8.25% (LIBOR + 6.75%, 1.50% Floor)		3.9	%		30,434,077		10/22/24		29,761,272		29,947,132

					4.7	%		36,519,371				35,846,566		35,935,062

	Wellbore Integrity Solutions	12/31/19	First Out Term Loan—8.50% (LIBOR + 7.00%, 1.50% Floor)		1.2	%		9,133,233		12/31/24		9,051,049		9,114,967

					12.9	%		103,899,703				100,847,592		98,290,669

Food Products
	Hometown Food Company	08/31/18	Term Loan—6.25% (LIBOR + 5.00%, 1.25% Floor)		4.2	%		31,939,907		08/31/23		31,480,874		31,780,207

					4.2	%		31,939,907				31,480,874		31,780,207

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of June 30, 2020


Industry	Issuer	Acquisition Date	Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
Health Care Providers & Services
	Akumin Inc.	07/22/19	Term Loan B—9.00% (LIBOR + 8.00%, 1.00% Floor, 2% PIK)		7.0	%	$	55,093,500		05/31/24	$	54,205,796	$	52,889,760

					7.0	%		55,093,500				54,205,796		52,889,760

	Help at Home, LLC	05/06/20	Term Loan A—8.00% (LIBOR + 6.75%, 1.25% Floor)		0.6	%		4,543,799		08/03/22		4,529,696		4,543,799
	Help at Home, LLC	05/06/20	Term Loan B—8.00% (LIBOR + 6.75%, 1.25% Floor)		3.3	%		25,048,610		08/03/22		24,970,867		25,048,610

					3.9	%		29,592,409				29,500,563		29,592,409

					10.9	%		84,685,909				83,706,359		82,482,169

Health Care Technology
	American Academy Holdings, LLC	08/14/19	Term Loan—10.22% inc. PIK (LIBOR + 9.00%, 1.00% Floor, 3.75% PIK)		4.1	%		31,420,658		06/15/23		30,835,607		31,106,452

					4.1	%		31,420,658				30,835,607		31,106,452

Hotels, Restaurants & Leisure
	FM Restaurants Holdco, LLC	11/25/19	Revolver—9.75% (LIBOR + 8.00%, 1.75% Floor)		0.2	%		1,206,818		11/22/24		1,206,818		1,116,307
	FM Restaurants Holdco, LLC	11/25/19	Term Loan—9.75% (LIBOR + 8.00%, 1.75% Floor)		2.6	%		21,614,114		11/22/24		21,141,957		19,993,055

					2.8	%		22,820,932				22,348,775		21,109,362

Household Durables
	Hunter Fan Company	11/05/19	Additional Term Loan—7.63% (LIBOR + 6.63%, 1.00% Floor)		2.9	%		22,474,007		04/20/21		22,371,332		22,271,741
	SLogic Holding Corp.	06/29/18	Term Loan B—9.75% (PRIME + 6.50%, 1.00% Floor)		2.7	%		27,538,030		06/22/23		27,373,721		20,488,294

					5.6	%		50,012,037				49,745,053		42,760,035

Household Products
	Greenfield World Trade, Inc.	03/04/20	2nd Amendment Term Loan—14.83% inc. PIK (LIBOR + 13.33%, 1.50% Floor, 6.00% PIK)		0.3	%		2,356,714		03/04/24		2,356,714		2,019,704
	Greenfield World Trade, Inc.	03/04/19	Last Out Term Loan—14.83% inc. PIK (LIBOR + 13.33%, 1.50% Floor, 6.00% PIK)		5.0	%		44,608,723		03/04/24		43,044,056		38,229,675

					5.3	%		46,965,437				45,400,770		40,249,379

Information Technology Services
	Corcentric, Inc.	11/15/18	Delayed Draw Term Loan—7.75% (LIBOR + 6.25%, 1.50% Floor)		1.7	%		12,796,240		11/15/23		12,796,240		12,796,240
	Corcentric, Inc.	11/15/18	Term Loan—7.75% (LIBOR + 6.25%, 1.50% Floor)		2.5	%		19,194,360		11/15/23		18,870,784		19,194,360

					4.2	%		31,990,600				31,667,024		31,990,600

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of June 30, 2020


Industry	Issuer	Acquisition Date	Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
	Global Holdings, LLC	09/17/19	Term Loan—7.25% (LIBOR + 6.25%, 1.00% Floor)		3.8	%	$	28,529,578		09/17/23	$	28,186,225	$	28,672,226

					8.0	%		60,520,178				59,853,249		60,662,826

Media
	Encompass Digital Media, Inc.	10/01/18	First Lien Term Loan—8.75% inc. PIK (LIBOR + 7.50%, 1.25% Floor, 1.13% PIK)		3.7	%		29,836,133		09/28/23		29,578,368		28,314,490
	Encompass Digital Media, Inc.	10/01/18	Revolver—8.75% (LIBOR + 7.50%, 1.25% Floor)		0.3	%		2,094,261		09/28/23		2,094,261		1,987,454

					4.0	%		31,930,394				31,672,629		30,301,944

	Innerworkings, Inc.	07/23/19	Term Loan—8.00% (LIBOR + 6.25%, 1.75% Floor)		4.8	%		37,732,882		07/16/24		35,500,891		36,336,766
	Winsight, LLC	11/15/18	Revolver—8.00% (LIBOR + 7.00%, 1.00% Floor)		0.2	%		1,529,554		11/15/23		1,529,554		1,424,014
	Winsight, LLC	11/15/18	Term Loan —8.00% (LIBOR + 7.00%, 1.00% Floor)		3.5	%		28,949,729		11/15/23		28,429,941		26,952,198

					3.7	%		30,479,283				29,959,495		28,376,212

					12.5	%		100,142,559				97,133,015		95,014,922

Metals & Mining
	DBM Global, Inc.	11/30/18	Term Loan—7.60% (LIBOR + 5.85%, 1.75% Floor)		6.1	%		46,653,874		11/30/23		46,017,023		46,513,912

					6.1	%		46,653,874				46,017,023		46,513,912

Multiline Retail
	Torrid LLC	06/14/19	Term Loan—7.50% (LIBOR + 6.50%, 1.00% Floor)		4.3	%		34,759,900		12/16/24		34,126,681		32,987,145

					4.3	%		34,759,900				34,126,681		32,987,145

Personal Products
	VPI Aware Topco, LLC	11/13/18	First Out Term Loan—7.25% (LIBOR + 6.25%, 1.00% Floor)		5.0	%		38,542,138		11/13/23		37,893,455		38,387,969

					5.0	%		38,542,138				37,893,455		38,387,969

Software
	Mondee Holdings LLC	12/20/19	Term Loan—12.25% inc. PIK (LIBOR + 10.50%, 1.75% Floor, all PIK)		8.5	%		77,898,682		12/23/24		75,359,085		64,967,501

					8.5	%		77,898,682				75,359,085		64,967,501

Textiles, Apparel & Luxury Goods
	Centric Brands Inc.(3)	05/20/20	DIP Revolver—7.50% (LIBOR + 6.50%, 1.00% Floor)		0.3	%		2,338,109		05/18/21		2,338,109		2,338,109
	Centric Brands Inc.(3)	11/07/18	Term Loan—7.00% inc. PIK (LIBOR + 6.00%, 1.00% Floor, all PIK)		3.8	%		33,648,137		10/29/23		33,203,095		28,634,565
	Keeco Holdings, LLC	09/19/18	Term Loan—10.25% inc. PIK (LIBOR + 8.50%, 1.75% Floor, 0.75% PIK)		7.2	%		58,786,505		03/15/24		57,952,135		55,024,168

					11.3	%		94,772,751				93,493,339		85,996,842

	Total Debt Investments				165.1	%						1,317,770,274		1,256,268,404

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of June 30, 2020


Industry	Issuer	Investment	% of Net Assets			Shares		Maturity Date	Amortized Cost		Fair Value
Construction Materials
	United Poly System Holding, Inc.(2)(4)	Common Stock		0.0	%		7,550		$	755,000	$	126,840

				0.0	%		7,550			755,000		126,840

Electronic Equipment, Instruments & Components
	SMTC Corporation(2)(3)	Common Stock		0.0	%		48,036			150,833		145,549
	SMTC Corporation(2)(3)	Warrant, expires 11/08/25		0.2	%		399,529			1,532,279		1,210,573

				0.2	%		447,565			1,683,112		1,356,122

Household Products
	Greenfield World Trade, Inc.(2)(4)	Warrant, expires 03/25/27		0.2	%		6,594			1,250,498		1,699,102

				0.2	%		6,594			1,250,498		1,699,102

Media
	Innerworkings, Inc.(2)(4)	Warrant, expires 07/16/24		0.1	%		530,380			1,904,067		700,101

				0.1	%		530,380			1,904,067		700,101

Software
	Mondee Holdings LLC(2)(4)	Preferred Stock		0.2	%		1,226,708			1,226,708		1,226,708

				0.2	%		1,226,708			1,226,708		1,226,708

	Total Equity Investments			0.7	%					6,819,385		5,108,873

	Total Non-Controlled/Non-Affiliated Investments(5)			165.8	%				$	1,324,589,659	$	1,261,377,277


						Shares			Cost
	Cash Equivalents
	Blackrock Liquidity Funds, Yield 0.10%			7.1	%		53,936,991		$	53,936,991	$	53,936,991

	Total Investments 172.9%								$	1,378,526,650	$	1,315,314,268

	Net unrealized depreciation on unfunded commitments ((0.2%))										$	(1,472,795	)

	Liabilities in Excess of Other Assets (72.7%)										$	(553,022,857	)

	Net Assets 100.0%										$	760,818,616

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of June 30, 2020

(1)	Certain debt investments are subject to contractual restrictions on resale, such as approval of the agent or borrower.

(2)	Non-income producing.

(3)

The investment is not a qualifying asset as defined in Section 55(a) under the Investment Company Act of 1940, as amended. A business development company may not acquire an asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of June 30, 2020, $54,751,220 or 4.1% of the Company’s total assets were represented by “non-qualifying assets.”

(4)

All or a portion of such security was acquired in a transaction exempt from registration under the Securities Act of 1933, and may be deemed “restricted securities” under the Securities Act. As of June 30, 2020, the aggregate fair value of these securities was $3,752,751, or 0.3% of the Company’s total assets.

(5)

The fair value of the SMTC Corporation common stock is based on the quoted market price of the issuer’s common stock as of June 30, 2020. Such common stock is considered to be a Level 1 security within the Fair Value Hierarchy. The fair values of the SMTC Corporation warrants and Innerworkings, Inc. warrants are based on the quoted market price of the issuer’s stock as of June 30, 2020. Such warrants are considered to be Level 2 securities within the Fair Value Hierarchy. The fair value of each non-controlled/non-affiliated investment was determined using significant unobservable inputs and such investments are considered to be Level 3 within the Fair Value Hierarchy. See Note 3 “Investment Valuations and Fair Value Measurements.”

LIBOR—London Interbank Offered Rate, generally 1-Month or 3-Month

Prime—Prime Rate

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $270,115,451 and $305,671,635, respectively, for the six months ended June 30, 2020. Aggregate acquisitions includes investment assets received as payment in kind. Aggregate dispositions includes principal paydowns on and maturities of debt investments.


Country Breakdown Portfolio
United States	96.0	%
Canada	4.0	%

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments

As of December 31, 2019


Industry	Issuer	Acquisition Date	Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
	Non-Controlled/Non-Affiliated Investments Debt(1)
Aerospace & Defense
	Columbia Helicopters, Inc.	08/20/19	Term Loan—9.52% (LIBOR + 7.50%, 1.50% Floor)		7.4	%	$	60,300,000		08/20/24	$	59,160,626	$	60,842,700
	DynCorp International Inc.	08/16/19	Term Loan B—7.74% (LIBOR + 6.00%, 1.00% Floor)		3.7	%		30,010,125		08/16/25		29,154,160		30,100,155
	Heligear Acquisition Co.	07/30/19	Term Loan—8.95% (LIBOR + 7.00%, 1.50% Floor)		7.3	%		59,758,010		07/30/24		58,641,013		59,817,768
	Navistar Defense, LLC	12/31/18	Term Loan B—8.05% (LIBOR + 6.25%, 1.50% Floor)		2.7	%		21,775,648		12/29/23		21,280,522		21,840,975
	Sparton Corporation	03/04/19	First Lien Term Loan—9.16% (LIBOR + 7.25%, 1.50% Floor)		5.0	%		40,410,765		03/04/24		39,604,446		40,451,176

					26.1	%		212,254,548				207,840,767		213,052,774

Air Freight & Logistics
	Need It Now Delivers, LLC	12/23/19	Last Out Term Loan—7.79% (LIBOR + 6.00% , 1.75% Floor)		1.8	%		14,611,314		12/23/24		14,288,305		14,698,982

					1.8	%		14,611,314				14,288,305		14,698,982

Auto Components
	Shipston Group U.S. Inc.	09/28/18	Term Loan—9.85% (LIBOR + 7.75%, 1.25% Floor)		3.2	%		26,036,788		09/28/23		25,715,299		25,698,310

					3.2	%		26,036,788				25,715,299		25,698,310

Beverages
	Caiman Merger Sub LLC	11/01/19	Term Loan—7.44% (LIBOR + 5.75%, 1.00% Floor)		1.7	%		14,178,813		11/01/25		14,029,516		14,249,708

					1.7	%		14,178,813				14,029,516		14,249,708

Chemicals
	GEON Performance Solutions, LLC	10/25/19	Term Loan—7.96% (LIBOR + 6.25%, 1.63% Floor)		3.3	%		27,156,552		10/25/24		27,043,542		27,346,648
	Verdesian Life Sciences, LLC	07/22/19	Term Loan—9.30% (LIBOR + 7.50%, 1.75% Floor)		6.3	%		51,680,300		06/27/24		50,740,189		51,370,218

					9.6	%		78,836,852				77,783,731		78,716,866

Commercial Services & Supplies
	Clover Imaging Group, LLC	12/16/19	Term Loan—9.24% (LIBOR + 7.50%, 1.50% Floor)		1.5	%		12,140,000		12/16/24		11,898,268		12,212,840
	Production Resource Group, LLC	08/21/18	Term Loan—8.90% (LIBOR + 7.00%, 1.00% Floor)		3.2	%		29,989,286		08/21/24		29,294,347		26,480,539

					4.7	%		42,129,286				41,192,615		38,693,379

Communications Equipment
	AVI-SPL, Inc.	05/16/18	Third Additional Term Loan—7.58% (LIBOR + 5.88%, 1.00% Floor)		3.6	%		28,944,961		04/27/21		28,880,269		29,234,410

					3.6	%		28,944,961				28,880,269		29,234,410

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2019


Industry	Issuer	Acquisition Date	Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
Construction & Engineering
	Powerhouse Intermediate, LLC	10/15/19	Revolver—8.12% (LIBOR + 6.38%, 1.50% Floor)		0.1	%	$	330,436		10/07/24	$	330,436	$	331,428
	Powerhouse Intermediate, LLC	10/15/19	Term Loan—8.41% (LIBOR + 6.38%, 1.50% Floor)		3.4	%		27,536,364		10/07/24		27,310,013		27,618,973

					3.5	%		27,866,800				27,640,449		27,950,401

	UniTek Acquisition, Inc.	08/20/18	Delayed Draw Term Loan B—8.41% inc. PIK (LIBOR + 5.50%, 1.00% Floor, 1.00% PIK)		0.4	%		3,647,967		08/20/24		3,647,967		3,301,410
	UniTek Acquisition, Inc.	08/20/18	Term Loan B—8.41% inc. PIK (LIBOR + 5.50%, 1.00% Floor, 1.00% PIK)		2.0	%		18,239,837		08/20/24		17,893,291		16,507,052

					2.4	%		21,887,804				21,541,258		19,808,462

					5.9	%		49,754,604				49,181,707		47,758,863

Construction Materials
	United Poly Systems Holding, Inc.	07/24/19	Revolver—8.45% (LIBOR + 6.50%, 1.50% Floor)		0.3	%		2,614,400		06/07/24		2,614,400		2,528,125
	United Poly Systems Holding, Inc.	07/24/19	Term Loan—8.45% (LIBOR + 6.50%, 1.50% Floor)		3.5	%		29,640,000		06/07/24		28,930,976		28,661,880
					3.8	%		32,254,400				31,545,376		31,190,005

Diversified Consumer Services
	American Academy Holdings, LLC	08/14/19	Term Loan—10.80% inc. PIK (LIBOR + 5.25%, 1.00% Floor, 3.75% PIK)		3.8	%		30,959,464		06/15/23		30,272,830		30,897,545

					3.8	%		30,959,464				30,272,830		30,897,545

Electronic Equipment, Instruments & Components
	SMTC Corporation(2)	11/08/18	Term Loan A—10.70% (LIBOR + 8.75%, 1.75% Floor)		2.9	%		23,470,654		11/08/23		22,536,934		23,423,712

					2.9	%		23,470,654				22,536,934		23,423,712

Energy Equipment & Services
	Profrac Services, LLC	09/07/18	Term Loan B—8.14% (LIBOR + 6.25%, 1.25% Floor)		4.3	%		34,979,903		09/07/23		34,462,625		34,560,144
	PSS Industrial Group Corp.	04/12/19	Term Loan—7.94% (LIBOR + 6.00%, 1.50% Floor)		2.2	%		18,402,902		04/10/25		17,998,290		18,200,470
	WDE TorcSill Holdings LLC	10/22/19	Revolver—8.30% (LIBOR + 6.50%, 1.50% Floor)		0.2	%		1,825,588		10/22/24		1,825,588		1,825,588
	WDE TorcSill Holdings LLC	10/22/19	Term Loan—8.30% (LIBOR + 6.50%, 1.50% Floor)		3.8	%		31,240,379		10/22/24		30,470,804		31,240,379

					4.0	%		33,065,967				32,296,392		33,065,967

	Wellbore Integrity Solutions	12/02/19	First Out Term Loan—8.94% (LIBOR + 7.00%, 1.50% Floor)		1.2	%		9,367,418		12/02/24		9,273,797		9,423,623

					11.7	%		95,816,190				94,031,104		95,250,204

Food Distributor
	Gold Star Foods Inc.	10/15/19	Term Loan—7.56% (LIBOR + 5.75%, 1.00% Floor)		2.8	%		22,946,970		10/02/24		22,796,301		23,107,598

					2.8	%		22,946,970				22,796,301		23,107,598

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2019


Industry	Issuer	Acquisition Date	Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
Food Products
	Hometown Food Company	08/31/18	Term Loan—6.80% (LIBOR + 5.00%, 1.25% Floor)		4.8	%	$	40,027,178		08/31/23	$	39,361,349	$	39,466,798

					4.8	%		40,027,178				39,361,349		39,466,798

Health Care Providers & Services
	Akumin, Inc.	07/22/19	Term Loan B—7.80% (LIBOR + 6.00%, 1.00% Floor)		6.7	%		55,371,750		05/31/24		54,366,012		54,928,776

					6.7	%		55,371,750				54,366,012		54,928,776

Hotels, Restaurants & Leisure
	FM Restaurants Holdco, LLC	11/25/19	Term Loan—8.05% (LIBOR + 6.25%, 1.75% Floor)		2.7	%		21,722,727		11/22/24		21,194,388		21,701,005

					2.7	%		21,722,727				21,194,388		21,701,005

Household Durables
	Dura-Supreme Holdings, Inc	10/15/19	Term Loan—7.96% (LIBOR + 6.25%, 1.50% Floor)		1.6	%		13,626,000		10/10/24		13,513,033		13,639,626
	Hunter Fan Company	11/05/19	Additional Term Loan—8.53% (LIBOR + 6.63%, 1.00% Floor)		3.7	%		30,290,000		12/20/21		30,065,659		30,199,130
	SLogic Holding Corp.	06/29/18	Term Loan B—11.25% (PRIME + 6.50%, 1.00% Floor)		3.2	%		27,823,398		06/22/23		27,629,565		25,931,407

					8.5	%		71,739,398				71,208,257		69,770,163

Household Products
	Greenfield World Trade, Inc.	03/04/19	Last Out Term Loan—11.30% (LIBOR + 9.50%, 1.50% Floor)		5.0	%		42,546,666		03/04/24		41,807,281		41,057,532

					5.0	%		42,546,666				41,807,281		41,057,532

Information Technology Services
	AMCP Staffing Intermediate Holdings III, LLC	10/15/19	Add on Term Loan—8.84% (LIBOR + 6.75%, 1.50% Floor)		1.4	%		11,427,418		09/24/25		11,342,079		11,427,418
	AMCP Staffing Intermediate Holdings III, LLC	10/15/19	Revolver—8.74% (LIBOR + 6.75%, 1.50% Floor)		0.2	%		1,407,174		09/24/25		1,407,174		1,407,174
	AMCP Staffing Intermediate Holdings III, LLC	10/15/19	Term Loan—8.68% (LIBOR + 6.75%, 1.50% Floor)		1.8	%		14,688,763		09/24/25		14,547,899		14,688,763

					3.4	%		27,523,355				27,297,152		27,523,355

	Corcentric, Inc.	11/15/18	Delayed Draw Term Loan—8.80% (LIBOR + 7.00%, 1.50% Floor)		1.6	%		12,928,160		11/15/23		12,928,160		12,992,801
	Corcentric, Inc.	11/15/18	Term Loan—8.80% (LIBOR + 7.00%, 1.50% Floor)		2.4	%		19,392,240		11/15/23		19,017,035		19,489,201

					4.0	%		32,320,400				31,945,195		32,482,002

	Global Holdings, LLC	09/17/19	Term Loan—8.16% (LIBOR + 6.25%, 1.00% Floor)		3.6	%		29,270,605		09/17/23		28,863,489		29,475,500

					11.0	%		89,114,360				88,105,836		89,480,857

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2019


Industry	Issuer	Acquisition Date	Investment	% of Net Assets			Par Amount		Maturity Date		Amortized Cost		Fair Value
Media
	Encompass Digital Media, Inc.	10/01/18	First Lien Term Loan—9.43% inc. PIK (LIBOR + 6.38%, 1.25% Floor, 1.13% PIK)		3.5	%	$	29,667,001		09/28/23	$	29,369,614	$	29,014,328
	Encompass Digital Media, Inc.	10/01/18	Revolver—9.43% (LIBOR + 7.50%, 1.25% Floor)		0.2	%		1,733,182		09/28/23		1,733,182		1,695,052

					3.7	%		31,400,183				31,102,796		30,709,380

	Innerworkings, Inc.	07/23/19	Term Loan—11.50% (LIBOR + 9.75%, 1.75% Floor)		4.8	%		38,725,853		07/16/24		36,152,664		38,880,756
	Winsight, LLC	11/15/18	Term Loan—7.80% (LIBOR + 6.00%, 1.00% Floor)		3.6	%		29,096,430		11/15/23		28,496,501		29,067,333

					12.1	%		99,222,466				95,751,961		98,657,469

Metals & Mining
	DBM Global, Inc.	11/30/18	Term Loan—7.65% (LIBOR + 5.85%, 1.50% Floor)		5.9	%		48,193,817		11/30/23		47,439,928		48,338,398

					5.9	%		48,193,817				47,439,928		48,338,398

Multiline Retail
	Torrid LLC	06/14/19	Term Loan—8.69% (LIBOR + 6.75%, 1.00% Floor)		4.4	%		35,293,300		12/16/24		34,578,532		35,540,353

					4.4	%		35,293,300				34,578,532		35,540,353

Personal Products
	VPI Aware Topco, LLC	11/13/18	First Out Term Loan—8.20% (LIBOR + 6.25%, 1.00% Floor)		6.3	%		52,101,811		11/13/23		51,095,160		51,372,386

					6.3	%		52,101,811				51,095,160		51,372,386

Software
	Mondee Holdings LLC	12/20/19	Term Loan—11.43% inc. PIK (LIBOR + 7.00%, 1.75% Floor, 2.50% PIK)		6.7	%		54,549,938		12/20/24		53,292,220		54,440,838

					6.7	%		54,549,938				53,292,220		54,440,838

Textiles, Apparel & Luxury Goods
	Centric Brands Inc.(2)	11/07/18	Term Loan—7.93% (LIBOR + 6.00%, 1.50% Floor)		4.1	%		33,725,753		10/29/23		33,207,452		33,455,948
	Keeco Holdings, LLC	09/19/18	Term Loan—9.55% (LIBOR + 7.75%, 1.75% Floor)		6.9	%		58,730,405		03/15/24		57,772,101		56,322,458

					11.0	%		92,456,158				90,979,553		89,778,406

	Total Debt Investments				166.7	%						1,349,275,231		1,360,505,337

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2019


Industry	Issuer	Investment	% of Net Assets			Shares		Maturity Date	Amortized Cost/Cost			Fair Value
	Equity Investments
Construction Materials
	United Poly Systems Holding, Inc.(3)(4)	Common Stock		0.1	%		7,550		$	755,000		$	607,525

				0.1	%		7,550			755,000			607,525

Electronic Equipment, Instruments & Components
	SMTC Corporation(2)(3)	Common Stock		0.0	%		48,036			150,833			162,842
	SMTC Corporation(2)(3)	Warrant, expires 11/08/25		0.2	%		399,529			1,532,279			1,354,403

				0.2	%		447,565			1,683,112			1,517,245

Media
	Innerworkings, Inc.(3)(4)	Warrant, expires 07/16/24		0.3	%		530,380			1,904,067			2,922,394

				0.3	%		530,380			1,904,067			2,922,394

	Total Equity Investments			0.6	%					4,342,179			5,047,164

	Total Non-Controlled/Non-Affiliated Investments(5)			167.3	%				$	1,353,617,410		$	1,365,552,501

	Cash Equivalents
	Blackrock Liquidity Funds, Yield 1.52%			21.8	%		117,609,952		$	177,609,952		$	177,609,952

	Total Investments 189.1%								$	1,531,227,362	��	$	1,543,162,453

	Net unrealized depreciation on unfunded commitments ((0.1%))											$	(786,304	)

	Liabilities in Excess of Other Assets (89.0%)											$	(726,146,423	)

	Net Assets 100.0%											$	816,229,726

TCW DIRECT LENDING VII LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2019

(1)	Certain debt investments are subject to contractual restrictions on resale, such as approval of the agent or borrower.

(2)

The investment is not a qualifying asset as defined in Section 55(a) under the Investment Company Act of 1940, as amended. A business development company may not acquire an asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of December 31, 2019, $58,396,905 or 3.7% of the Company’s total assets were represented by “non-qualifying assets.”

(3)	Non-income producing.

(4)

All or a portion of such security was acquired in a transaction exempt from registration under the Securities Act of 1933, and may be deemed “restricted securities” under the Securities Act. As of December 31, 2019, the aggregate fair value of these securities was $3,529,919, or 0.2% of the Company’s total assets.

(5)

The fair value of the SMTC Corporation common stock is based on the quoted market price of the issuer’s common stock as of December 31, 2019. Such common stock is considered to be a Level 1 security within the Fair Value Hierarchy. The fair values of the SMTC Corporation warrants and Innerworkings, Inc. warrants are based on the quoted market price of the issuer’s stock as of December 31, 2019. Such warrants are considered to be Level 2 securities within the Fair Value Hierarchy. The fair value of each non-controlled/non-affiliated investment was determined using significant unobservable inputs and such investments are considered to be Level 3 within the Fair Value Hierarchy. See Note 3 “Investment Valuations and Fair Value Measurements.”

LIBOR—London Interbank Offered Rate, generally 1-Month or 3-Month

Prime—Prime Rate

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $922,656,646 and $111,490,592, respectively, for the year ended December 31, 2019. Aggregate acquisitions includes investment assets received as payment in kind. Aggregate dispositions includes principal paydowns on and maturities of debt investments.


Country Breakdown Portfolio
United States	96.4	%
Canada	3.6	%

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING VII LLC

Consolidated Statements of Assets and Liabilities

(Dollar amounts in thousands, except unit data)


	As of June 30, 2020 (unaudited)			As of December 31, 2019
Assets
Investments, at fair value
Non-controlled/non-affiliated investments (amortized cost of $1,324,590 and $1,353,617, respectively)	$	1,261,377		$	1,365,553
Cash and cash equivalents		80,468			220,074
Interest receivable		7,230			6,344
Deferred financing costs		5,592			5,574
Prepaid and other assets		162			57

Total Assets	$	1,354,829		$	1,597,602

Liabilities
Revolving credit facilities payable	$	337,500		$	577,000
Term loan (net of $1,906 and $1,613 in deferred financing costs, respectively)		245,594			178,387
Management fees payable		4,956			8,689
Interest and credit facilities expense payable		3,492			3,866
Unrealized depreciation on unfunded commitments		1,473			786
Directors’ fees payable		158			—
Incentive fee payable		—			12,148
Other accrued expenses and other liabilities		837			496

Total Liabilities	$	594,010		$	781,372

Commitments and Contingencies (Note 5)
Members’ Capital
Common Unitholders’ commitment (13,734,010 units issued and outstanding)	$	1,373,401		$	1,373,401
Common Unitholders’ undrawn commitment (13,734,010 units issued and outstanding)		(548,401	)		(548,401	)
Common Unitholders’ return of capital		(4,639	)		(4,639	)
Common Unitholders’ offering costs		(633	)		(633	)
Common Unitholders’ tax reclassification		(1,865	)		(1,865	)

Common Unitholders’ capital		817,863			817,863
Accumulated Loss		(57,044	)		(1,633	)

Total Members’ Capital	$	760,819		$	816,230

Total Liabilities and Members’ Capital	$	1,354,829		$	1,597,602

Net Asset Value Per Unit (Note 9)	$	95.33		$	99.36

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING VII LLC

Consolidated Statements of Operations (Unaudited)

(Dollar amounts in thousands, except unit data)


	For the three months ended June 30,						For the six months ended June 30,
	2020			2019			2020			2019
Investment Income:
Interest income from non-controlled/non-affiliated investments	$	26,819		$	17,108		$	60,113		$	31,602
Interest income from non-controlled/non-affiliated investments paid-in-kind		6,885			85			9,537			139
Other fee income from non-controlled/non-affiliated investments		124			71			230			71

Total investment income		33,828			17,264			69,880			31,812

Expenses:
Interest and credit facilities expenses		5,969			5,239			13,209			9,196
Management fees		4,955			2,536			9,910			4,641
Professional fees		594			366			789			686
Administrative fees		348			234			711			419
Directors’ fees		98			96			196			190
Incentive fees		—			112			(12,148	)		4,525
Other expenses		39			40			96			96

Total expenses		12,003			8,623			12,763			19,753

Net investment income	$	21,825		$	8,641		$	57,117		$	12,059

Net realized and unrealized gain (loss) on investments
Net realized gain on non-controlled/non-affiliated investments		—			31			1,943			449
Net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments		(9,606	)		(587	)		(75,836	)		4,324

Net realized and unrealized (loss) gain on investments	$	(9,606	)	$	(556	)	$	(73,893	)	$	4,773

Net increase (decrease) in Members’ Capital from operations	$	12,219		$	8,085		$	(16,776	)	$	16,832

Basic and diluted:
Income (Loss) per unit	$	0.89		$	0.59		$	(1.22	)	$	1.22

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING VII LLC

Consolidated Statements of Changes in Members’ Capital (Unaudited)

(Dollar amounts in thousands, except unit data)


	Common Unitholders’ Capital			Accumulated Earnings (Loss)			Total
Members’ Capital at December 31, 2018	$	398,367		$	3,037		$	401,404
Net Increase (Decrease) in Members’ Capital Resulting from Operations:
Net investment income		—			3,418			3,418
Net realized gain on investments		—			418			418
Net change in unrealized appreciation/depreciation on investments		—			4,911			4,911
Distributions to Members from:
Distributable earnings		—			(1,865	)		(1,865	)
Return of unused capital		(154,329	)		—			(154,329	)
Net Increase in Members’ Capital Resulting from Capital Activity:
Contributions		145,329			—			145,329

Total (Decrease) Increase in Members’ Capital for the three months ended March 31, 2019		(9,000	)		6,882			(2,118	)

Members’ Capital at March 31, 2019	$	389,367		$	9,919		$	399,286
Net Increase (Decrease) in Members’ Capital Resulting from Operations:
Net investment income		—			8,641			8,641
Net realized gain on investments		—			31			31
Net change in unrealized appreciation/depreciation on investments		—			(587	)		(587	)
Increase in Members’ Capital Resulting from Capital Activity:
Contributions		70,000			—			70,000
Total Increase in Members’ Capital for the three months ended June 30, 2019		70,000			8,085			78,085

Members’ Capital at June 30, 2019	$	459,367		$	18,004		$	477,371


Members’ Capital at December 31, 2019	$	817,863		$	(1,633	)	$	816,230
Net Increase (Decrease) in Members’ Capital Resulting from Operations:
Net investment income		—			35,292			35,292
Net realized gain on investments		—			1,943			1,943
Net change in unrealized appreciation/depreciation on investments		—			(66,230	)		(66,230	)

Total Decrease in Members’ Capital for the three months ended March 31, 2020		—			(28,995	)		(28,995	)

Members’ Capital at March 31, 2020	$	817,863		$	(30,628	)	$	787,235
Net Increase (Decrease) in Members’ Capital Resulting from Operations:
Net investment income		—			21,825			21,825
Net change in unrealized appreciation/depreciation on investments		—			(9,606	)		(9,606	)
Distributions to Members from:
Distributable earnings		—			(38,635	)		(38,635	)

Total Decrease in Members’ Capital for the three months ended June 30, 2020		—			(26,416	)		(26,416	)

Members’ Capital at June 30, 2020	$	817,863		$	(57,044	)	$	760,819

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING VII LLC

Consolidated Statements of Cash Flows (Unaudited)

(Dollar amounts in thousands, except unit data)


	For the six months ended June 30,
	2020			2019
Cash Flows from Operating Activities
Net (decrease) increase in net assets resulting from operations	$	(16,776	)	$	16,832
Adjustments to reconcile the net (decrease) increase in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments		(260,578	)		(184,111	)
Interest income paid-in-kind		(9,537	)		(139	)
Proceeds from sales and paydowns of investments		305,673			29,354
Net realized gain on investments		(1,943	)		(449	)
Net change in unrealized appreciation/depreciation on investments		75,836			(4,324	)
Amortization of premium and accretion of discount, net		(4,588	)		(1,707	)
Amortization of deferred financing costs		1,534			1,018
Increase (decrease) in operating assets and liabilities:
(Increase) decrease in interest receivable		(886	)		(762	)
(Increase) decrease in prepaid and other assets		(105	)		804
Increase (decrease) in interest and credit facilities expense payable		(374	)		1,647
Increase (decrease) in management fees payable		(3,733	)		157
Increase (decrease) in directors’ fees payable		158			135
Increase (decrease) in organization costs payable to Adviser		—			(741	)
Increase (decrease) in offering costs payable to Adviser		—			(633	)
Increase (decrease) in directors’ fees reimbursable to Adviser		—			(92	)
Increase (decrease) in incentive fees payable		(12,148	)		4,525
Increase (decrease) in other accrued expenses and liabilities		341			330

Net cash provided by (used in) operating activities	$	72,874		$	(138,156	)

Cash Flows from Financing Activities
Contributions	$	—		$	207,453
Distributions		(38,635	)		(1,865	)
Return of unused capital		—			(146,453	)
Deferred financing costs paid		(1,845	)		(6,542	)
Proceeds from credit facilities		48,000			128,000
Repayments of credit facilities		(220,000	)		(76,000	)

Net cash (used in) provided by financing activities	$	(212,480	)	$	104,593

Net decrease in cash and cash equivalents	$	(139,606	)	$	(33,563	)
Cash and cash equivalents, beginning of period	$	220,074		$	160,995

Cash and cash equivalents, end of period	$	80,468		$	127,432

Supplemental and non-cash financing activities
Interest expense paid	$	11,313		$	5,924
Deemed distribution of income/contribution from Members	$	—		$	1,865

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

1. Organization and Basis of Presentation

Organization: TCW Direct Lending VII LLC (the “Company”) was formed as a Delaware limited liability company on May 23, 2017. The Company engaged in a private offering of its common limited liability company units (the “Units”) to investors in reliance on exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”). In addition, the Company may issue preferred units (“Preferred Units”), though it currently has no intention to do so. On August 18, 2017, the Company sold and issued 10 Units at an aggregate purchase price of $1 to TCW Asset Management Company LLC (the “Adviser”), an affiliate of the TCW Group, Inc. The Company commenced operations during the second quarter of fiscal year 2018.

The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company has also elected to be treated for U.S. federal income tax purposes as a Regulated Investment Company (a “RIC”) under Subchapter M of the U.S Internal Revenue Code of 1986, as amended (the “Code”), beginning fiscal year 2018. The Company is required to meet the minimum distribution and other requirements for RIC qualification. As a BDC and a RIC, the Company is required to comply with certain regulatory requirements.

On February 12, 2020, the Company formed a wholly-owned subsidiary, TCW DLG Funding VII 2020-1 LLC, a single member Delaware limited liability company.

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant

intercompany transactions and balances have been eliminated in consolidation.

Term: The term of the Company will continue until the sixth anniversary of the Initial Closing Date (as defined below), April 13, 2024, unless extended or sooner dissolved as provided in the Company’s amended and restated limited liability agreement (the “LLC Agreement”) or by operation of law. The Company may extend the term for two additional one-year periods upon written notice to the holders of the Units (the “Unitholders) and holders of preferred units, if any, (together with the Unitholders, the “Members”) at least 90 days prior to the expiration of the term or the end of the first one-year period. Thereafter, the term may be extended for successive one-year periods, with the vote or consent of a supermajority in interest of the holders of the Units.

Commitment Period: The Commitment Period commenced on April 13, 2018 (the “Initial Closing Date”), the day on which the Company completed the first closing of the sale of its Units to persons not affiliated with the Adviser and will end on May 16, 2021, which is the later of (a) April 13, 2021, three years from the Initial Closing Date and (b) May 16, 2021, three years from the date in which the Company first completed an investment.

The Commitment Period is subject to termination upon the occurrence of a Key Person Event defined as follows: A “Key Person Event” will occur if, during the Commitment Period, (i) Richard T. Miller and one or more of Suzanne Grosso, Mark Gertzof or James S. Bold (each of such four persons, a “Key Person”) fail to devote substantially all of their business time to the investment activities of the Company, the prior funds, any successor funds and any fund(s) managed by the Adviser or an affiliate of the Adviser that co-invest or potentially co-invest with the Company, on a combined basis (together, the “Related Entities”); or (ii) Ms. Grosso, Mr. Gertzof and Mr. Bold all fail to devote substantially all of their business time to the investment activities of the Company and the Related Entities, in each case other than as a result of a temporary disability; provided, that, if a replacement has been approved as described in the paragraphs below, such replacement shall be specifically designated to take the place of one of the above-named individuals and the definition of “Key Person Event” will be amended to take into account such successor. Upon the occurrence of a Key Person Event, and in the event that the Adviser fails to replace the above-referenced individuals in the manner contemplated in this paragraph, the Commitment Period shall be automatically terminated upon such Key Person Event. The Commitment Period will be re-instated upon the vote or written consent of 66 2/3% in interest of the Unitholders. The Adviser is permitted at any time to replace any person designated above with a senior professional (including a Key Person) selected by the Adviser, provided that such replacement has been approved by a majority of the Unitholders (in which case, the approved substitute will be a Key Person in lieu of the person replaced). If such replacement(s) end the occurrence of a Key Person Event, the Commitment Period will automatically be reinstated.

If, during the Commitment Period, any Key Person shall fail to devote substantially all of his or her business time to the investment activities of the Company and the Related Entities other than as a result of a temporary disability (the occurrence of such event, a “Key Person Departure”), the Company shall provide written notice to Unitholders of such Key Person Departure within 30 days of the date of such Key Person Departure.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

1. Organization and Basis of Presentation (Continued)

If a Key Person Departure occurs during the Commitment Period and the Adviser determines to replace such Key Person, the Company shall obtain the approval of such replacement by a majority in interest of the Unitholders no later than the date of the Company’s next annual meeting; provided that the Company may, in its discretion, determine to obtain the approval of such replacement no later than 90 days after the date that the Adviser informs the Company of its proposed replacement of the Key Person.

If the Company fails to obtain approval of a replacement of a Key Person following a Key Person Departure as provided in the paragraph above, then the Key Person Departure shall be permanent and the Adviser shall not be permitted to replace such Key Person.

In accordance with the Company’s LLC Agreement, the Company may complete investment transactions that were significantly in process as of the end of the Commitment Period and which the Company reasonably expects to be consummated prior to 90 days subsequent to the expiration date of the Commitment Period. The Company may also effect follow-on investments up to an aggregate maximum of 10% of Capital Commitments (as defined below).

Capital Commitments: On the Initial Closing Date, the Company began accepting subscription agreements from investors for the private sale of its Units. On January 14, 2019, the Company completed its fourth and final closing sale of Units. The Company sold 13,734,010 Units for an aggregate offering price of $1,373,401. Each Unitholder is obligated to contribute capital equal to its respective capital commitment to the Company (the “Commitment”) and each Unit’s Commitment obligation is $100.00 per unit. The sale of the Units was made pursuant to subscription agreements entered into by the Company and each investor. Under the terms of the subscription agreements, the Company may draw down all or any portion of the undrawn commitment with respect to each Unit generally upon at least ten business days’ prior written notice to the unitholders. The amount of capital that remains to be drawn down and contributed is referred to as an “Undrawn Commitment”.

The commitment amount funded does not include amounts contributed in anticipation of a potential investment that the Company did not consummate and therefore returned to the Members as unused capital. As of June 30, 2020, aggregate Commitments, Undrawn Commitments, percentage of Commitments funded and the number of subscribed for Units of the Company were as follows:


	Commitments		Undrawn Commitments		% of Commitments Funded			Units
Unitholder	$	1,373,401	$	548,401		60.1	%		13,734,010

Recallable Amount: A Unitholder may be required to re-contribute amounts distributed equal to (a) such Unitholder’s share of all portfolio investments that are repaid to the Company, or otherwise recouped by the Company, and distributed to the Unitholder, in whole or in part, during or after the Commitment period, reduced by (b) all re-contributions made by such Unitholder. This amount, (the “Recallable Amount”) is excluded from the calculation of the accrual based net asset value.

The Recallable Amount as of June 30, 2020 was $4,639.

2. Significant Accounting Policies

Basis of Presentation: The Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Company is an investment company following accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies, (“ASC 946”). The Company has also consolidated the results of its wholly-owned subsidiaries in its consolidated financial statements in accordance with ASC 946.

Use of Estimates: The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the consolidated financial statements, (ii) the reported amounts of income and expenses during the years presented and (iii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates, and such differences could be material.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

2. Significant Accounting Policies

Investments: The Company measures the fair value of its investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosure (“ASC 820”). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, the Company considers the principal market of its investments to be the market in which the investment trades with the greatest volume and level of activity.

Transactions: The Company records investment transactions on the trade date. The Company considers the trade date for investments not traded on a recognizable exchange, or traded in the over-the-counter markets, to be the date on which the Company receives legal or contractual title to the asset and bears the risk of loss.

Income Recognition: Interest income is recorded on an accrual basis unless doubtful of collection or the related investment is in default. Realized gains and losses on investments are recorded on a specific identification basis. The Company typically receives a fee in the form of a discount to the purchase price at the time it funds an investment in a loan. The discount is accreted to interest income over the life of the respective loan, using the effective-interest method assuming there are no questions as to collectability, and reflected in the amortized cost basis of the investment. Discounts associated with a revolver as well as fees associated with a delayed draw that remains unfunded are treated as a discount to the issuer’s term loan. Ongoing facility, commitment or other additional fees including prepayment fees, consent fees and forbearance fees are recognized immediately when earned as income.

The Company has entered into certain intercreditor agreements that entitle the Company to the “last out” tranche of first lien secured loans, whereby the “first out” tranche will receive priority as to the “last out” tranche with respect to payments of principal, interest, and any other amounts due thereunder. In certain cases, the Company may receive a higher interest rate than the contractual stated interest rate as disclosed on the Company’s Consolidated Schedule of Investments.

Certain investments have an unfunded loan commitment for a delayed draw term loan or revolving credit. The Company earns an unused commitment fee on the unfunded commitment during the commitment period. The expiration date of the commitment period may be earlier than the maturity date of the investment stated above. See Note 5—Commitments and Contingencies.

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 is paid and, in management’s judgment, are likely to remain current. The Company may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection.

Deferred Financing Costs: Deferred financing costs incurred by the Company in connection with the Credit Facilities (as defined in Note 7 to the Consolidated Financial Statements), including arrangement fees, upfront fees and legal fees, are amortized on a straight-line basis over the term of the respective credit facility.

Organization and Offering Costs: The Company expensed organization costs totaling $740 (net of $380 in Adviser reimbursement) since its inception through December 31, 2018. Offering costs totaling $633 (net of $324 in Adviser reimbursement) was charged directly to Members’ Capital on December 31, 2018. No additional organization and offering costs were incurred subsequent to December 31, 2018. The Company did not bear more than an amount equal to 10 basis points of the aggregate capital commitments for organization and offering expenses.

Cash and Cash Equivalents: The Company considers all investments with a maturity of three months or less at the time of acquisition to be cash equivalents. As of June 30, 2020, cash and cash equivalents are comprised of demand deposits and highly liquid investments with maturities of three months or less. Cash equivalents are carried at amortized costs which approximates fair value, and are classified as Level 1 in the GAAP valuation hierarchy.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

2. Significant Accounting Policies (Continued)

Income Taxes: The Company has elected to be regulated as a BDC under the 1940 Act. The Company also elected to be treated as a RIC under the Code beginning with the taxable year ending December 31, 2018. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. Rather, any tax liability related to income earned and distributed by the Company represents obligations of the Company’s investors and will not be reflected in the consolidated financial statements of the Company.

Recent Accounting Pronouncements: On August 28, 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The updated guidance modifies the disclosure requirements on fair value measurements by (1) removing certain disclosure requirements including policies related to valuation processes and the timing of transfers between levels of the fair value hierarchy, (2) amending disclosure requirements related to measurement uncertainty from the use of significant unobservable inputs, and (3) adding certain new disclosure requirements including changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods therein, with early adoption permitted. As permitted by the ASU, the Company early adopted the following applicable provisions of the ASU:

•

removed the Company’s disclosure of policy for timing of transfers between levels;

•

removed the disclosure describing the Company’s valuation process for Level 3 fair value measurements;

•

for investments measured using net asset values, disclosed (1) the timing of liquidation of an investee’s assets and (2) the date when redemption restrictions will lapse, to the extent that such information has been publicly announced by the investee; and

•

disclosed information about the uncertainty of Level 3 fair value measurements as of the reporting date, rather than at a point in the future.

During the fourth quarter of 2019, the Company adopted the remaining provisions of the ASU which included adding the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The adoption of the ASU did not have a material impact on the Company’s consolidated financial statements.

3. Investment Valuations and Fair Value Measurements

Investments at Fair Value: Investments held by the Company are valued at fair value. Fair value is generally determined on the basis of last reported sales prices or official closing prices on the primary exchange in which each security trades, or if no sales are reported, based on the midpoint of the valuation range obtained for debt investments from a quotation reporting system, established market makers or pricing service.

Investments for which market quotes are not readily available or are not considered reliable are valued at fair value and approved by the Board of Directors (the “Board”) based on similar instruments, internal assumptions and the weighting of the best available pricing inputs.

Fair Value Hierarchy: Assets and liabilities are classified by the Company into three levels based on valuation inputs used to determine fair value:

Level 1 values are based on unadjusted quoted market prices in active markets for identical assets.

Level 2 values are based on significant observable market inputs, such as quoted prices for similar assets and quoted prices in inactive markets or other market observable inputs.

Level 3 values are based on significant unobservable inputs that reflect the Company’s determination of assumptions that market participants might reasonably use in valuing the assets.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

3. Investment Valuations and Fair Value Measurements (Continued)

Categorization within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation levels are not necessarily an indication of the risk associated with investing in those securities.

Level 1 Assets (Investments): The valuation techniques and significant inputs used to determine fair value are as follows:

Equity, (Level 1), includes common stock valued at the closing price on the primary exchange in which the security trades.

Level 2 Assets (Investments): The valuation techniques and significant inputs used to determine fair value are as follows:

Equity, (Level 2), includes warrants valued using quotes for comparable investments.

Level 3 Assets (Investments): The following valuation techniques and significant inputs are used to determine the fair value of investments in private debt and equity for which reliable market quotations are not available. Some of the inputs are independently observable however, a significant portion of the inputs and the internal assumptions applied are unobservable.

Debt, (Level 3), includes investments in privately originated senior secured debt. Such securities are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. A discounted cash flow approach incorporating a weighted average cost of capital is generally used to determine fair value or, in some cases, an enterprise value waterfall method. Valuation may also include a shadow rating method. Standard pricing inputs include but are not limited to the financial health of the issuer, place in the capital structure, value of other issuer debt, credit, industry, and market risk and events.

Equity, (Level 3), includes common stock, preferred stock and warrants. Such securities are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. A market approach is generally used to determine fair value. Pricing inputs include, but are not limited to, financial health and relevant business developments of the issuer; EBITDA; market multiples of comparable companies; comparable market transactions and recent trades or transactions; issuer, industry and market events; and contractual or legal restrictions on the sale of the security. When a Black-Scholes pricing model is used it follows the income approach. The pricing model takes into account the contract terms as well as multiple inputs, including: time value, implied volatility, equity prices and interest rates. A liquidity discount based on current market expectations, future events, minority ownership position and the period management reasonably expects to hold the investment may be applied.

Pricing inputs and weightings applied to determine value require subjective determination. Accordingly, valuations do not necessarily represent the amounts that may eventually be realized from sales or other dispositions of investments.

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Consolidated Schedule of Investments as of June 30, 2020:


Investments	Level 1		Level 2		Level 3		Total
Debt	$	—	$	—	$	1,256,268	$	1,256,268
Equity		145		1,911		3,053		5,109
Cash equivalents		53,937		—		—		53,937

Total Assets	$	54,082	$	1,911	$	1,259,321	$	1,315,314

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Consolidated Schedule of Investments as of December 31, 2019:


Investments	Level 1		Level 2		Level 3		Total
Debt	$	—	$	—	$	1,360,505	$	1,360,505
Equity		163		4,277		608		5,048
Cash equivalents		177,610		—		—		177,610

Total Assets	$	177,773	$	4,277	$	1,361,113	$	1,543,163

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

3. Investment Valuations and Fair Value Measurements (Continued)

The following tables provide a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three and six months ended June 30, 2020:


	Debt			Equity			Total
Balance, April 1, 2020	$	1,251,376		$	2,934		$	1,254,310
Purchases*		57,283			1,227			58,510
Sales and paydowns of investments		(44,828	)		—			(44,828	)
Amortization of premium and accretion of discount, net		2,102			—			2,102
Net change in unrealized appreciation/depreciation		(9,665	)		(1,108	)		(10,773	)

Balance, June 30, 2020	$	1,256,268		$	3,053		$	1,259,321

Net change in unrealized appreciation/depreciation in investments held as of June 30, 2020	$	(9,749	)	$	(1,108	)	$	(10,857	)

*	Includes payments received in-kind


	Debt			Equity			Total
Balance, January 1, 2020	$	1,360,505		$	608		$	1,361,113
Purchases*		267,638			2,477			270,115
Sales and paydowns of investments		(305,673	)		—			(305,673	)
Amortization of premium and accretion of discount, net		4,588			—			4,588
Net realized gains		1,943			—			1,943
Net change in unrealized appreciation/depreciation		(72,733	)		(32	)		(72,765	)

Balance, June 30, 2020	$	1,256,268		$	3,053		$	1,259,321

Net change in unrealized appreciation/depreciation in investments held as of June 30, 2020	$	(71,559	)	$	(32	)	$	(71,591	)

*	Includes payments received in-kind

The following tables provide a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three and six months ended June 30, 2019:


	Debt			Total
Balance, April 1, 2019	$	642,315		$	642,315
Purchases*		64,711			64,711
Sales and paydowns of investments		(7,121	)		(7,121	)
Amortization of premium and accretion of discount, net		855			855
Net realized gains		31			31
Net change in unrealized appreciation/depreciation		(796	)		(796	)

Balance, June 30, 2019	$	699,995		$	699,995

Change in net unrealized appreciation/depreciation in investments held as of June 30, 2019	$	(758	)	$	(758	)

*	Includes payments received in-kind

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

3. Investment Valuations and Fair Value Measurements (Continued)


	Debt			Total
Balance, January 1, 2019	$	538,926		$	538,926
Purchases*		184,099			184,099
Sales and paydowns of investments		(29,354	)		(29,354	)
Amortization of premium and accretion of discount, net		1,707			1,707
Net realized gains		449			449
Net change in unrealized appreciation/depreciation		4,168			4,168

Balance, June 30, 2019	$	699,995		$	699,995

Change in net unrealized appreciation/depreciation in investments held as of June 30, 2019	$	4,271		$	4,271

*	Includes payments received in-kind

The Company did not have any transfers between levels during the three and six months ended June 30, 2020 and 2019.

Level 3 Valuation and Quantitative Information: The following table summarizes the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of June 30, 2020:

Investment Type

Fair Value

Valuation
Technique

Unobservable
Input

Range

Weighted
Average*

Impact to
Valuation from an
Increase in Input

Debt

1,184,736

Income Method

Discount Rate

5.8% to 23.6%

11.0%

Decrease

Debt

38,388

Income Method

Discount Rate

9.8% to 10.6%

10.2%

Decrease

Take Out Indication

102.0% to 102.0%

102.0%

Increase

Debt

33,144

Market Method

EBITDA Multiple

6.3x to 9.0x

N/A

Increase

Revenue Multiple

0.6x to 2.0x

N/A

Increase

Equity

3,053

Market Method

EBITDA Multiple

5.5x to 10.0x

N/A

Increase

*	Weighted based on fair value

The following table summarizes the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of December 31, 2019:

Investment Type

Fair Value

Valuation
Technique

Unobservable
Input

Range

Weighted
Average*

Impact to
Valuation from an
Increase in Input

Debt

1,331,271

Income Method

Discount Rate

6.1% to 22.3%

9.5%

Decrease

Debt

29,234

Income Method

Discount Rate

6.2% to 7.4%

7.0%

Decrease

Take Out Indication

101.1% to 101.1%

101.1%

Increase

Equity

608

Market Method

EBITDA Multiple

4.3x to 5.3x

N/A

Increase

*	Weighted based on fair value

The Company utilizes the midpoint of a valuation range provided by an external, independent valuation firm in determining fair value.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

4. Agreements and Related Party Transactions

Advisory Agreement: On December 29, 2017, the Company entered into the Investment Advisory and Management Agreement (the “Advisory Agreement”) with the Adviser, its registered investment adviser under the Investment Advisers Act of 1940, as amended. The Advisory Agreement became effective upon its execution. Unless earlier terminated, the Advisory Agreement will remain in effect for a period of two years and will remain in effect from year to year thereafter if approved annually by (i) the vote of the Board, or by the vote of a majority of the Company’s outstanding voting securities, and (ii) the vote of a majority of the Board who are not “interested persons” (as defined in Section 2(a)(19) of the 1940 Act) of the Company, the Adviser or any of their respective affiliates (the “Independent Directors”). The Advisory Agreement will automatically terminate in the event of an assignment by the Adviser.

The Advisory Agreement may be terminated by either party, by vote of the Company’s Board, or by a vote of the majority of the Company’s outstanding voting units, without penalty upon not less than 60 days’ prior written notice to the applicable party. If the Advisory Agreement is terminated according to this paragraph, the Company will pay the Adviser a pro-rated portion of the Management Fee and Incentive Fee (each as defined below). The Advisory Agreement was reapproved by the Company’s Board on August 12, 2019.

Pursuant to the Advisory Agreement, the Adviser will:

•

determine the composition of the Company’s portfolio, the nature and timing of the changes to the Company’s portfolio and the manner of implementing such changes;

•

identify, evaluate and negotiate the structure of the investments the Company makes (including performing due diligence on the Company’s prospective portfolio companies);

•

determine the assets the Company will originate, purchase, retain or sell;

•

close, monitor and administer the investments the Company makes, including the exercise of any rights in the Company’s capacity as a lender; and

•

provide the Company such other investment advice, research and related services as the Company may, from time to time, require.

The Company pays to the Adviser, quarterly in arrears, a management fee in cash (the “Management Fee”) calculated as follows: 0.375% (i.e., 1.50% per annum) of the average gross assets of the Company on a consolidated basis, with the average determined based on the gross assets of the Company as of the end of the three most recently completed calendar months. “Gross assets” means the amortized cost of portfolio investments of the Company (including portfolio investments purchased with borrowed funds and other forms of leverage, such as Preferred Units, public and private debt issuances, derivative instruments, repurchase agreements and other similar instruments or arrangements) that have not been sold, distributed to the members, or written off for tax purposes (but reduced by any portion of such cost basis that has been written down to reflect a permanent impairment of value of any portfolio investment), and excluding cash and cash equivalents. The Management Fee payable for any partial month or quarter will be appropriately pro-rated. The Adviser may defer its right to receive current payment of such fee until the Company is notified otherwise.

In addition, the Adviser will receive an incentive fee (the “Incentive Fee”) as follows:

(a)

First, no Incentive Fee will be owed until the Unitholders have collectively received cumulative distributions pursuant to this clause equal to their aggregate contributions to the Company in respect of all Units;

(b)

Second, no Incentive Fee will be owed until the Unitholders have collectively received cumulative distributions equal to a 9% internal rate of return on their aggregate contributions to the Company in respect of all Units (the “Hurdle”);

(c)

Third, the Adviser will be entitled to an Incentive Fee out of 100% of additional amounts otherwise distributable to Unitholders until such time as the Incentive Fee paid to the Adviser is equal to 20% of the sum of (i) the amount by which the Hurdle exceeds the aggregate capital contributions of the Unitholders in respect of all Units and (ii) the amount of Incentive Fee being paid to the Adviser pursuant to this clause (c); and

(d)

Thereafter, the Adviser will be entitled to an Incentive Fee equal to 20% of additional amounts otherwise distributable to Unitholders in respect of all Units, with the remaining 80% distributed to the Unitholders.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

4. Agreements and Related Party Transactions (Continued)

The Incentive Fee is calculated on a cumulative basis and the amount of the Incentive Fee payable in connection with any distribution (or deemed distribution) will be determined in accordance with the foregoing formula each time amounts are to be distributed to the Unitholders.

For purposes of calculating the Incentive Fee, aggregate contributions shall not include Earnings Balancing Contributions or Late-Closer Contributions, and the distributions to Unitholders shall not include distributions attributable to Late-Closer Contributions. Earnings Balancing Contributions received by the Company will not be treated as amounts distributed to Unitholders for purposes of calculating the Incentive Fee. In addition, if distributions to which a Defaulting Member otherwise would have been entitled have been withheld pursuant to 6.2.4 of the TCW Direct Lending VII LLC Agreement (the “LLC Agreement”), the amounts so withheld shall be treated for such purposes as having been distributed to such Defaulting Member. The amount of any distribution of securities made in kind shall be equal to the fair market value of those securities at the time of distribution determined pursuant to 13.4 of the LLC Agreement.

If the Advisory Agreement terminates early for any reason other than (i) the Adviser voluntarily terminating the agreement or (ii) the Company terminating the agreement for cause (as set out in the Advisory Agreement), the Company will be required to pay the Adviser a final incentive fee payment (the “Final Incentive Fee Payment”). The Final Incentive Fee Payment will be calculated as of the date the Advisory Agreement is so terminated and will equal the amount of Incentive Fee that would be payable to the Adviser if (A) all of the Company’s investments were liquidated for their current value (but without taking into account any unrealized appreciation of any portfolio investment), and any unamortized deferred portfolio investment-related fees were deemed accelerated, (B) the proceeds from such liquidation were used to pay all of the Company’s outstanding liabilities, and (C) the remainder were distributed to Unitholders and paid as Incentive Fee in accordance with the “waterfall” (i.e., clauses (a) through (d)) described above for determining the amount of the Incentive Fee. The Company will make the Final Incentive Fee Payment in cash on or immediately following the date the Advisory Agreement is so terminated.

Adviser Return Obligation: After the Company has made its final distribution of assets in connection with its dissolution, if the Adviser has received aggregate payments of Incentive Fees in excess of the amount the Adviser was entitled to receive pursuant to “Incentive Fee” above, then the Adviser will return to the Company, on or before 90 days after such final distribution of assets, an amount equal to such excess (the “Adviser Return Obligation”). Notwithstanding the preceding sentence, in no event will the Adviser be required to return to the Company an amount greater than the aggregate Incentive Fees paid to the Adviser, reduced by the excess of (a) the aggregate federal, state and local income tax liability the Adviser incurred in connection with the payment of such Incentive Fees, over (b) an amount equal to the U.S. federal and state tax benefits available to the Adviser by virtue of the payment made by the Adviser pursuant to its Adviser Return Obligation.

Administration Agreement: On September 25, 2018, the Company entered into an Amended and Restated Administration Agreement (the “Administration Agreement”) with TCW Asset Management Company LLC (the “Administrator”), which amended and restated the Admiration Agreement between the Company and the Administrator entered into on April 16, 2018. Under the Administration Agreement, the Administrator (or one or more delegated service providers) will oversee the maintenance of the Company’s financial records and otherwise assist with the Company’s compliance with regulations applicable to a business development company under the Investment Company Act of 1940, as amended, and a regulated investment company under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended; monitor the payment of the Company’s expenses; oversee the performance of administrative and professional services rendered to the Company by others; be responsible for the financial and other records that the Company is required to maintain; prepare and disseminate reports to Unitholders and reports and other materials to be filed with the SEC or other regulators; assist the Company in determining and publishing (as necessary or appropriate) its net asset value; oversee the preparation and filing of tax returns; generally oversee the payment of expenses; and provide such other services as the Administrator, subject to review of the Company’s board of directors, shall from time to time determine to be necessary or useful to perform its obligations under the Administration Agreement. Payments under the Administration Agreement will be equal to an amount that reimburses the Administrator for the costs and expenses incurred by the Administrator in performing its obligations and providing personnel and facilities under the Administration Agreement. The Administrator shall seek such reimbursement from the Company no more than once during any calendar year and shall only seek such reimbursement when all Company Expenses (as defined below) for such calendar year have been paid or accrued. Amounts paid pursuant to the Administration Agreement are subject to the annual cap on Company Expenses (as defined below), as described more fully below.

The Company, and indirectly the Unitholders, will bear all costs, expenses and liabilities, other than Adviser Operating Expenses (as defined below) (which shall be borne by the Adviser), in connection with the organization, operations, administration and transactions

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

4. Agreements and Related Party Transactions (Continued)

of the Company (“Company Expenses”). Company Expenses shall include, without limitation: (a) organizational expenses and expenses associated with the issuance of the Units; (b) expenses of calculating the Company’s net asset value (including the cost and expenses of any independent valuation firm); (c) fees payable to third parties, including agents, consultants, attorneys or other advisors, relating to, or associated with, evaluating and making investments; (d) expenses incurred by the Adviser or the Administrator payable to third parties, including agents, consultants, attorneys or other advisors, relating to or associated with monitoring the financial and legal affairs for the Company, providing administrative services, monitoring or administering the Company’s investments and performing due diligence reviews of prospective investments and the corresponding portfolio companies; (e) costs associated with the Company’s reporting and compliance obligations under the Investment Company Act of 1940, the Securities Exchange Act of 1934, as amended, and other applicable federal or state securities laws; (f) fees and expenses incurred in connection with debt incurred to finance the Company’s investments or operations, and payment of interest and repayment of principal on such debt; (g) expenses related to sales and purchases of Units and other securities; (h) Management Fees and Incentive Fees; (i) administrator fees, if any, payable under the Administration Agreement; (j) transfer agent, sub-administrator and custodial fees; (k) expenses relating to the issue, repurchase and transfer of Units to the extent not borne by the relevant transferring Unitholders and/or assignees; (l) federal and state registration fees; (m) federal, state and local taxes and other governmental charges assessed against the Company; (n) independent directors’ fees and expenses and the costs associated with convening a meeting of the Company’s board of directors or any committee thereof; (o) fees and expenses and the costs associated with convening a meeting of the Unitholders or holders of any Preferred Units of the Company, as well as the compensation of an investor relations professional responsible for the coordination and administration of the foregoing; (p) costs of any reports, proxy statements or other notices to Unitholders, including printing and mailing costs; (q) costs and expenses related to the preparation of the Company’s consolidated financial statements and tax returns; (r) the Company’s allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums; (s) direct costs and expenses of administration, including printing, mailing, long distance telephone, and copying; (t) independent auditors and outside legal costs, including legal costs associated with any requests for exemptive relief, “no-action” positions or other guidance sought from a regulator, pertaining to the Company; (u) compensation of other third party professionals to the extent they are devoted to preparing the Company’s consolidated financial statements or tax returns or providing similar “back office” financial services to the Company; (v) Adviser costs and expenses (excluding travel) in connection with identifying and investigating investment opportunities for the Company, monitoring the investments of the Company and disposing of any such investments; (w) portfolio risk management costs; (x) commissions or brokerage fees or similar charges incurred in connection with the purchase or sale of securities (including merger fees); (y) costs and expenses attributable to normal and extraordinary investment banking, commercial banking, accounting, auditing, appraisal, valuation, administrative agent activities, custodial and registration services provided to the Company, including in each case services with respect to the proposed purchase or sale of securities by the Company that are not reimbursed by the issuer of such securities or others (whether or not such purchase or sale is consummated); (z) costs of amending, restating or modifying the LLC Agreement or Advisory Agreement or related documents of the Company or related entities; (aa) fees, costs, and expenses incurred in connection with the termination, liquidation or dissolution of the Company or related entities and (bb) all other properly and reasonably chargeable expenses incurred by the Company or the Administrator in connection with administering the Company’s business. Notwithstanding the foregoing, in the event of a Reorganization (as defined in the LLC Agreement) that results in a Public Company (as defined in the LLC Agreement) or an Extension Fund (as defined in the LLC Agreement), including a Reorganization (as defined in the LLC Agreement) pursuant to which the Company becomes the Public Company (as defined in the LLC Agreement) or the Extension Fund (as defined in the LLC Agreement), the fees, costs and expenses associated with any such restructuring, initial public offering, listing of equity securities or reorganization will be borne appropriately by the Public Company (as defined in the LLC Agreement) and the Extension Fund (as defined in the LLC Agreement) (and indirectly only by Unitholders that elect to become investors in the Public Company (as defined in the LLC Agreement) or the Extension Fund (as defined in the LLC Agreement)), as the case may be, and no others will directly or indirectly bear such fees, costs or expenses.

However, the Company will not bear (a) more than an amount equal to 10 basis points of investors’ aggregate Commitments for organizational expenses and offering expenses in connection with the offering of Units through the date that is six months after the Initial Closing Date, as it may be extended by the Adviser, and (b) more than an amount equal to 12.5 basis points of aggregate Commitments computed annually for Company Expenses; provided, that, any amount by which actual annual expenses in (b) exceed the 12.5 basis point limit shall be carried over to the next year, without limitation, as additional expense until the earlier of the Reorganization (as defined in the LLC Agreement) or the dissolution of the Company, with any partial year assessed on a pro rata basis; and provided, further, that in determining the Company Expenses subject to the 12.5 basis point limit in (b), the following expenses shall be excluded and shall be borne by the Company as incurred without regard to the 12.5 basis point limit in (b): the Management Fee, the Incentive Fee, organizational and offering expenses (which are subject to the separate cap), amounts incurred in connection with the Company’s borrowings (including interest, bank fees, legal fees and other transactional expenses arising out of or

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

4. Agreements and Related Party Transactions (Continued)

related to any borrowing or borrowing facility and similar costs), transfer agent fees, federal, state and local taxes and other governmental charges assessed against the Company, out-of-pocket expenses of calculating the Company’s net asset value (including the cost and expenses of any independent valuation firm engaged for that purpose and the costs and expenses of the valuation of the Company’s portfolio investments performed by the Company’s independent auditors in order to comply with applicable Public Company Accounting Oversight Board standards), out-of-pocket costs and expenses incurred in connection with arranging or structuring investments and their ongoing operations (including expenses and liabilities related to the formation and ongoing operations of any special purpose entity or entities in connection with an investment), out-of-pocket legal costs associated with any requests for exemptive relief, “no-action” positions or other guidance sought from a regulator pertaining to the Company, out-of-pocket costs and expenses relating to any Reorganization (as defined in the LLC Agreement) or liquidation of the Company, and any extraordinary expenses (such as litigation expenses and indemnification payments). Notwithstanding the foregoing, in no event will the Company carryforward to future periods the amount by which actual annual Company Expenses for a year exceed the 12.5 basis point limit for more than three years from the date on which such expenses were reimbursed.

“Adviser Operating Expenses” means overhead and operating and administrative expenses incurred by or on behalf of the Adviser or any of its affiliates, including the Company, in connection with maintaining and operating the Adviser’s office, including salaries and other compensation (including compensation due to its officers), rent, routine office equipment expense and liability and insurance premiums (other than those incurred in maintaining fidelity bonds and indemnitee insurance policies), in furtherance of providing supervisory investment management services for the Company. Adviser Operating Expenses also includes any expenses incurred by the Adviser or its Affiliates in connection with the Adviser’s registration as an investment adviser under the Investment Advisers Act of 1940, as amended, or with its compliance as a registered investment adviser thereunder.

All Adviser Operating Expenses and all expenses of the Company that the Company will not bear will, as set forth above, will be borne by the Adviser or its affiliates.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

5. Commitments and Contingencies

The Company had the following unfunded commitments and unrealized depreciation by investment as of June 30, 2020 and December 31, 2019:


	Maturity/ Expiration	June 30, 2020				December 31, 2019
Unfunded Commitments	Maturity/ Expiration	Amount		Unrealized Depreciation		Amount		Unrealized Depreciation
AMCP Staffing Intermediate Holdings III, LLC	September 2025	$	—	$	—	$	2,767	$	28
Caiman Merger Sub LLC	November 2024		1,031		—		1,031		8
Cassavant Holdings, LLC	December 2024		392		17		—		—
Cassavant Holdings, LLC	January 2025		1,960		84		—		—
Centric Brands Inc.	May 2021		2,359		—		—		—
DBM Global, Inc.	October 2020		7,805		23		—		—
Dura-Supreme Holdings, Inc.	October 2024		—		—		1,514		6
Encompass Digital Media, Inc.	September 2023		433		22		794		18
FM Restaurants Holdco, LLC	November 2024		—		—		1,062		6
FM Restaurants Holdco, LLC	November 2024		1,207		91		4,827		29
GEON Performance Solutions, LLC	October 2024		1,851		26		3,133		19
Gold Star Foods Inc.	April 2020		—		—		2,754		8
Gold Star Foods Inc.	October 2024		—		—		4,589		14
Help at Home, LLC	August 2020		9,784		—		—		—
Hometown Food Company	August 2023		5,881		29		5,881		82
Mondee Holdings LLC	December 2024		8,613		—		8,613		146
Need It Now Delivers, LLC	December 2020		5,200		510		6,025		24
Powerhouse Intermediate, LLC	October 2024		—		—		2,423		10
United Poly Systems Holding, Inc.	June 2024		6,506		612		6,506		215
WDE TorcSill Holdings LLC	October 2024		3,043		49		7,302		73
Wellbore Integrity Solutions	December 2020		953		10		953		4
Winsight, LLC	November 2023		—		—		13,887		83
Winsight, LLC	November 2021		—		—		2,217		13

Total		$	57,018	$	1,473	$	76,278	$	786

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of June 30, 2020, the Company is not aware of any pending or threatened litigation.

In the normal course of business, the Company enters into contracts which provide a variety of representations and warranties, and that provide general indemnifications. Such contracts include those with certain service providers, brokers and trading counterparties. Any exposure to the Company under these arrangements is unknown as it would involve future claims that may be made against the Company; however, based on the Company’s experience, the risk of loss is remote and no such claims are expected to occur. As such, the Company has not accrued any liability in connection with such indemnifications.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

6. Members’ Capital

The Company’s Unit activity for the three and six months ended June 30, 2020 and 2019, was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Units at beginning of period		13,734,010		13,734,010		13,734,010		10,672,260
Units issued and committed		—		—		—		3,061,750

Units issued and committed at end of period		13,734,010		13,734,010		13,734,010		13,734,010

No deemed distributions and contributions were processed during the three and six months ended June 30, 2020 and 2019.

7. Credit Facilities

On May 10, 2018, the Company entered into a Revolving Credit Agreement (the “Natixis Credit Agreement”) among the Company, as borrower, and Natixis, New York Branch (“Natixis”), as administrative agent and the committed lenders, conduit lenders and funding agents. The Natixis Credit Agreement provided for a revolving credit line (the “Natixis Revolving Credit Facility”) of up to $150,000 (the “Natixis Maximum Commitment”), subject to the lesser of the “Natixis Borrowing Base” assets or the Natixis Maximum Commitment. The Natixis Borrowing Base assets equal the sum of a percentage of unfunded commitments from certain classes of eligible investors in the Company (the “Natixis Available Commitment”). The Natixis Revolving Credit Facility is generally secured by the Natixis Borrowing Base assets.

The Natixis Maximum Commitment may be periodically increased in amounts designated by the Company, up to an aggregate amount of $1 billion. The maturity date of the Natixis Credit Agreement is May 10, 2021, unless such date is extended at the Company’s option no more than two times for a term of up to 364 days after the maturity date per such extension. Borrowings under the Natixis Credit Agreement bear interest at a rate equal to either (a) a base rate calculated in a customary manner plus 0.55% or (b) an adjusted eurodollar rate calculated in a customary manner plus 1.55%. As of December 31, 2019, the Natixis Maximum Commitment was $400,000. On April 21, 2020, the Natixis Maximum Commitment was reduced to $340,000.

The Natixis Revolving Credit Facility is secured by a first priority security interest, subject to customary exceptions, in (i) all of the capital commitments of the investors in the Company, (ii) the Company’s right to make capital calls, receive payment of capital contributions from the investors and enforce payment of the capital commitments and capital contributions under the Company’s operating agreement and (iii) a cash collateral account into which the capital contributions from the investors are made. The Natixis Revolving Credit Facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Company fail to satisfy certain covenants. As of June 30, 2020, the Company was in compliance with such covenants.

As of June 30, 2020 and December 31, 2019, the Natixis Borrowing Base assets were less than the Natixis Maximum Commitment. A summary of amounts outstanding and available under the Natixis Revolving Credit Facility as of June 30, 2020 and December 31, 2019 was as follows:


Natixis Revolving Credit Facility	Maximum Commitment		Borrowings Outstanding		Available Amount⁽¹⁾
As of June 30, 2020	$	340,000	$	172,000	$	110,866
As of December 31, 2019	$	400,000	$	252,000	$	30,866

(1)	The amount available considers any limitations related to the debt facility borrowing.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

7. Credit Facilities (Continued)

On January 29, 2019, TCW DL VII Financing LLC (the “Borrower” or “TCW DL VII Financing”), a newly-formed, wholly-owned, special purpose financing subsidiary of the Company, entered into a senior secured credit facility (the “PNC Credit Facility” and together with the Natixis Revolving Credit Facility, the “Credit Facilities”) pursuant to a credit and security agreement (the “PNC Credit Agreement”) with PNC Bank, National Association (“PNC”), as facility agent, the lenders from time to time party thereto, and State Street Bank and Trust Company, as collateral agent.

Under the PNC Credit Facility, the lenders have agreed to extend credit to the Borrower in an aggregate principal amount of up to $400,000 of revolving and term loans (the “PNC Maximum Commitment”), subject to compliance with a borrowing base (the “PNC Borrowing Base”). The PNC Maximum Commitment may be periodically increased in amounts designated by the Borrower up to an aggregate principal amount of $900,000, subject to lender consent and obtaining commitments for the increase. The Borrower may make borrowings of (i) a revolving loan (the “PNC Revolving Credit Facility” and together with the Natixis Revolving Credit Facility, the “Revolving Credit Facilities”) under the PNC Credit Facility during the period commencing January 29, 2019 and ending on January 29, 2022 and (ii) a term loan (the “PNC Term Loan”) under the PNC Credit Facility during the period which commenced on January 29, 2019 and ended on January 29, 2020, unless, there is an earlier termination of the PNC Credit Facility or event of default thereunder. The PNC Credit Facility will mature on January 29, 2024. Loans under the PNC Credit Facility bear interest at a fluctuating rate of interest per annum equal to, at the Borrower’s option, either (i) three-month LIBOR plus the facility margin of 2.30% per annum or (ii) the Base Rate plus the facility margin of 2.30% per annum.

On April 11, 2019, the Borrower amended and restated the PNC Credit Agreement (as amended, the “Amended PNC Credit Agreement”) for the PNC Credit Facility. The Amended PNC Credit Agreement, among other things, (a) increased the total commitments under the PNC Credit Facility from $400,000 to $600,000 (the “Amended PNC Maximum Commitment”) and (b) made certain modifications to the calculation of the borrowing base under the prior facility, including the eligibility requirements of collateral obligations pledged under the PNC Credit Facility and loan portfolio concentration limits.

On March 17, 2020, the Borrower amended and restated the Amended PNC Credit Agreement (as further amended the “Second Amended PNC Credit Agreement”). The Second Amended PNC Credit Agreement, among other things, increased the total commitments under the PNC Credit Facility from $600,000 to $795,000 (the “Second Amended PNC Maximum Commitment”). The Second Amended PNC Maximum Commitment may be periodically increased in amounts designated by the Borrower up to an aggregate principal amount of $900,000, subject to lender consent and obtaining commitments for the increase. The Borrower may make borrowings of (i) revolving loans under the PNC Credit Facility during the period commencing January 29, 2019 and ending on January 29, 2022 and (ii) term loans under the PNC Credit Facility during the period commencing January 29, 2019 and ending on March 17, 2020, unless, in the case of (i) and (ii), there is an earlier termination of the PNC Credit Facility or event of default thereunder. The PNC Credit Facility will mature on January 29, 2024. Loans under the PNC Credit Facility will bear interest at a fluctuating rate of interest per annum equal to, at the Borrower’s option, either (i) three-month LIBOR plus the facility margin of 2.30% per annum or (ii) the Base Rate plus the facility margin of 2.30% per annum. On June 19, 2020, the Second Amended PNC Maximum Commitment was increased from $795,000 to $825,000.

The Borrower’s obligations under the PNC Credit Facility are secured by a first priority security interest in all of the assets of the Borrower, including its portfolio of loans that has been contributed by the Company to the Borrower in exchange for 100% of the membership interests of the Borrower and any payments received in respect of such loans. The Company may contribute or sell to the Borrower additional loans from time to time after the closing date, which shall be pledged in favor of the lenders under the PNC Credit Facility.

Under the PNC Credit Facility, the Borrower has made customary representations and warranties and is required to comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar credit facilities. The PNC Credit Facility also includes events of default that are customary for similar credit facilities. As of June 30, 2020, the Borrower was in compliance with such covenants.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

7. Credit Facilities (Continued)

Borrowings of the Borrower are non-recourse to the Company but are considered borrowings of the Company for purposes of complying with the asset coverage requirements under the Investment Company Act of 1940, as amended.

As of June 30, 2020 and December 31, 2019, the PNC Borrowing Base assets were less than the Second Amended and Amended PNC Maximum Commitment, respectively. A summary of amounts outstanding and available under the PNC Credit Facility as of June 30, 2020 and December 31, 2019 is as follows:


PNC Credit Facility	Maximum Commitment		Borrowings Outstanding		Available Amount⁽¹⁾
As of June 30, 2020	$	825,000	$	413,000	$	238,349
As of December 31, 2019	$	600,000	$	505,000	$	95,000

(1)	The amount available considers any limitations related to the facility borrowing.

Borrowings under the PNC Credit Facility as of June 30, 2020 and December 31, 2019 consisted of $165,500 and $325,000, respectively, from the PNC Revolving Credit Facility (i.e., revolving line of credit) and $247,500 and $180,000, respectively, of PNC Term Loan.

The Company incurred financing costs of $3,463 and $4,433, in connection with the Natixis Credit Agreement and the PNC Credit Agreement, respectively. In addition, the Company incurred an additional $2,070 and $1,531 in financing costs in connection with the Amended and Second Amended PNC Credit Agreement, respectively. Lastly, the Company incurred $220 in financing costs associated with the June 19, 2020 upsize of the PNC Credit Facility.

Costs associated with the Revolving Credit Facilities were primarily recorded by the Company as deferred financing costs on its Consolidated Statements of Assets and Liabilities and the costs are being amortized over the respective lives of the Natixis Revolving Credit Facility and PNC Revolving Credit Facility. As of June 30, 2020 and December 31, 2019, $5,592 and $5,574, respectively, of such deferred financing costs had yet to be amortized. Costs associated with the PNC Term Loan are deferred and amortized over the term of the PNC Term Loan. Such deferred financing costs are netted against the carrying value of the PNC Term Loan on the Company’s Consolidated Statements of Assets and Liabilities.

A reconciliation of amounts presented on the Company’s Consolidated Statements of Assets and Liabilities versus amounts outstanding on the PNC Term Loan is as follows:


	As of June 30, 2020			As of December 31, 2019
Principal amount outstanding on PNC Term Loan	$	247,500		$	180,000
Deferred financing costs		(1,906	)		(1,613	)

PNC Term Loan (as presented on the Consolidated Statements of Assets and Liabilities)	$	245,594		$	178,387

The carrying amounts of the Credit Facilities, which are categorized as Level 2 within the fair value hierarchy as of June 30, 2020 and December 31, 2019, approximates their respective fair values. Valuation techniques and significant inputs used to determine fair value include Company details; credit, market and liquidity risk and events; financial health of the Company; place in the capital structure; interest rate; and the Credit Facilities’ terms and conditions.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

7. Credit Facilities (Continued)

The summary information regarding the Credit Facilities for the three and six months ended June 30, 2020 and 2019 was as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Credit Facilities interest expense	$	4,605		$	3,771		$	10,875		$	6,862
Unused commitment fees		447			818			700			1,266
Administrative fees		100			50			100			50
Amortization of deferred financing costs		817			600			1,534			1,018

Total	$	5,969		$	5,239		$	13,209		$	9,196

Weighted average interest rate		3.03	%		4.24	%		3.39	%		4.17	%
Average outstanding balance	$	602,044		$	351,703		$	634,467		$	327,033

8. Income Taxes

The Company has elected to be regulated as a BDC under the 1940 Act and has elected to be treated as a RIC under the Code. So long as the Company maintains its status as a RIC, it will generally not pay corporate-level U.S. Federal income or excise taxes on any ordinary income or capital gains that it distributes at least annually to its Unitholders as dividends. The Company elected to be taxed as a RIC in 2018. 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. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.

Federal Income Taxes: It is the policy of the Company to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and distribute all of its net taxable income and any net realized gains on investments to its shareholders. Therefore, no federal income tax provision is required.

As of June 30, 2020 and December 31, 2019, the Company’s aggregate investment unrealized appreciation and depreciation for federal income tax purposes were as follows:


	As of June 30, 2020			As of December 31, 2019
Cost of investments for federal income tax purposes	$	1,378,527		$	1,531,227
Unrealized appreciation	$	7,732		$	21,471
Unrealized depreciation	$	(70,944	)	$	(10,322	)
Net unrealized (depreciation) appreciation on investments	$	(63,212	)	$	11,149

The Company did not have any unrecognized tax benefits as of December 31, 2019, nor were there any increases or decreases in unrecognized tax benefits for the period then ended; therefore, no interest or penalties were accrued. The Company is subject to examination by the U.S federal and state tax authorities for returns filed for the prior two years.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

9. Financial Highlights

Selected data for a unit outstanding throughout the six months ended June 30, 2020 and 2019 is presented below.


	For the Six Months Ended June 30,
	2020⁽¹⁾			2019⁽¹⁾
Net Asset Value Per Unit (accrual base), Beginning of Period	$	99.36		$	100.23

Net Decrease in Common Unitholder NAV from Prior Period		—			(0.05	)

Income from Investment Operations:
Net investment income (loss)		4.16			0.88
Net realized and unrealized gain		(5.38	)		0.34

Total from investment operations		(1.22	)		1.22

Less Distributions:
From distributable earnings		(2.81	)		(0.14	)

Total distributions		(2.81	)		(0.14	)


Net Asset Value Per Unit (accrual base), End of Period	$	95.33		$	101.26

Unitholder Total Return⁽²⁾⁽³⁾		(2.03	)%		4.52	%

Unitholder IRR before incentive fees⁽⁴⁾		3.70	%		10.60	%

Unitholder IRR after all fees and expenses⁽⁴⁾		3.70	%		9.00	%


Ratios and Supplemental Data
Members’ Capital, end of period	$	760,819		$	477,371
Units outstanding, end of period		13,734,010			13,734,010

Ratios based on average net assets of Members’ Capital:
Ratio of total expenses to average net assets⁽⁵⁾⁽⁶⁾		3.20	%		10.33	%
Ratio of net expenses to average net assets⁽⁵⁾⁽⁶⁾		3.20	%		10.33	%
Ratio of financing cost to average net assets⁽³⁾		1.65	%		2.39	%
Ratio of net investment income before expense recapture to average net assets⁽⁵⁾⁽⁶⁾		14.33	%		6.31	%
Ratio of incentive fees to average net assets⁽⁵⁾⁽⁶⁾		(3.05	)%		2.37	%
Credit facilities payable		583,094			352,000
Asset coverage ratio		2.30			2.36
Portfolio turnover rate⁽³⁾		20.05	%		4.79	%

(1)	Per unit data was calculated using the number of Common Units issued and outstanding as of June 30, 2020 and 2019, respectively.

(2)	The Total Return for the six months ended June 30, 2020 and 2019 was calculated by taking the net investment income of the Company for the period divided by the weighted average capital contributions from the Members during the period. The return is net of management fees and expenses.

(3)	Not annualized.

(4)

The IRR since inception for the Common Unitholders, after management fees, financing costs and operating expenses, but before incentive fees is 3.70%. The IRR since inception for the Common Unitholders, after management fees, financing costs, operating expenses and Advisor incentive fees is 3.70%. The IRR is computed based on cash flow due dates contained in notices to Members (contributions from and distributions to the Unitholders) and the net assets (residual value) of the Members’ Capital account at period end. The IRR is calculated based on the fair value of investments using principles and methods in accordance with GAAP and does not necessarily represent the amounts that may be realized from sales or other dispositions. Accordingly, the actual return may vary significantly upon realization.

(5)	Annualized.

(5)	Expenses for the six months ended June 30, 2020 include the $12.1 million reversal of incentive fees.

TCW DIRECT LENDING VII LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(Dollar amounts in thousands, except for unit data)

June 30, 2020

10. Subsequent Events

The Company has evaluated subsequent events through the date of issuance of the consolidated financial statements. There have been no subsequent events that require recognition or disclosure in these consolidated financial statements.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information contained in this section should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report on Form 10-Q. Some of the statements in this report (including in the following discussion) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or future performance or financial condition of TCW Direct Lending VII LLC. For simplicity, this report uses the terms “Company,” “we,” “us,” and “our” to refer to TCW Direct Lending VII LLC.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and are difficult to predict, that could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements including, without limitation:

•

our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our objectives as a result of the current COVID-19 pandemic;

•

an economic downturn, including as a result of the current COVID-19 pandemic, could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

•

a contraction of available credit, including as a result of the current COVID-19 pandemic, could impair our lending and investment activities;

•

interest rate volatility could affect our results, particularly in light of our use of leverage as part of our investment strategy;

•

our future operating results;

•

our contractual arrangements and relationships with third parties;

•

the ability of our portfolio companies to achieve their financial and other business objectives;

•

competition with other entities and our affiliates for investment opportunities;

•

the impact of changing market conditions and lending standards on our ability to compete with other industry participants, including other business development companies, private and public funds, individual and institutional investors, and financial institutions for investment opportunities;

•

uncertainty surrounding the impact of the current COVID-19 pandemic on the financial stability of the United States and global economies;

•

the social, geopolitical, financial, trade and legal implications of Brexit, as well as the impact of COVID-19 on ongoing negotiations between the United Kingdom and various countries in the European Union;

•

pandemics or other serious public health events, such as the ongoing global outbreak of COVID-19;

•

an inability to replicate the historical success of any previously launched fund managed by the direct lending team of our investment adviser, TCW Asset Management Company LLC (the “Adviser”);

•

the speculative and illiquid nature of our investments;

•

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

•

the adequacy of our financing sources and working capital;

•

the costs associated with being an entity registered with the Securities Exchange Commission (“SEC”);

•

the loss of key personnel;

•

the timing of cash flows, if any, from the operations of our portfolio companies;

•

the ability of the Adviser to locate suitable investments for us and to monitor and administer our investments;

•

the ability of The TCW Group, Inc. and its subsidiaries to attract and retain highly talented professionals that can provide services to the Adviser in its capacity as our investment adviser and administrator;

•

our ability to qualify and maintain our qualification as a regulated investment company, or “RIC,” under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended, or the “Code,” and as a business development company (“BDC”) under the Investment Company Act of 1940 and the related tax implications;

•

the effect of legal, tax and regulatory changes; and

•

the other risks, uncertainties and other factors we identify under “Part I—Item 1A. Risk Factors” in our Form 10-K filed with the SEC on March 16, 2020 and in this report.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, some of those assumptions are based on the work of third parties and any of those assumptions could prove to be inaccurate; as a result, the forward-looking statements based on those assumptions also could prove to be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans and objectives will be achieved. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this report. We do not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law. The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 (as amended, the “1934 Act”), which preclude civil liability or certain forward-looking statements, do not apply to the forward-looking statements in this report because we are an investment company.

Overview

We were formed on May 23, 2017 as a limited liability company under the laws of the State of Delaware. We conducted a private offering of our common limited liability company units (the “Units”) to investors in reliance on exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”).

On August 18, 2017 (“Inception Date”), we sold and issued 10 Units at an aggregate purchase price of $1,000 to TCW Asset Management Company LLC (“TAMCO”), an affiliate of the TCW Group, Inc.

On December 29, 2017, we filed an election to be regulated as a BDC under the 1940 Act. We elected, and intend to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. As a BDC and a RIC, we are required to comply with certain regulatory requirements.

On April 13, 2018 (the “Initial Closing Date”), we began accepting subscription agreements from investors for the private sale of our Units and on January 14, 2019, we completed our fourth and final closing sale of our Units. We have sold 13,734,010 Units for an aggregate offering price of approximately $1.4 billion. Each Unitholder is obligated to contribute capital equal to their Commitment and each Unit’s Commitment obligation is $100.00 per Unit. The sale of the Units was made pursuant to subscription agreements entered into by us and each investor. Under the terms of the subscription agreements, we may draw down all or any portion of the undrawn commitment with respect to each Unit generally upon at least ten business days’ prior written notice to the unitholders. The amount of capital that remains to be drawn down and contributed is referred to as an “Undrawn Commitment.”

We commenced operations during the second quarter of fiscal year 2018.

On February 12, 2020, the Company formed a wholly-owned subsidiary, TCW DLG Funding VII 2020-1 LLC, a single member Delaware limited liability company.

Revenues

We generate revenues in the form of interest income and capital appreciation by providing private capital to middle market companies operating in a broad range of industries primarily in the United States. The historical investment philosophy, strategy and approach of the direct lending team of the Adviser (the “Direct Lending Team”) has generally not involved the use of payment-in-kind (“PIK”) interest, which represents contractual interest accrued and added to the loan balance that generally becomes due at maturity, or similar arrangements. Although we do not currently expect the Direct Lending Team to originate a significant amount of investments for us with PIK interest features, from time to time we may make, and currently have, investments that contain such features. We may have investments with PIK interest features in certain circumstances involving debt restructurings or work-outs of current investments. Our highly negotiated private investments may include senior secured loans, unsecured senior loans, subordinated and mezzanine loans, convertible securities, notes and other non-convertible debt securities, equity securities, and equity-linked securities such as options and warrants. However, our investment bias will be towards adjustable-rate, senior secured loans. We do not anticipate a secondary market developing for our private investments.

We are primarily focused on investing in senior secured debt obligations, although there may be occasions where the investment may be unsecured. We may also consider an equity investment as the primary security, in combination with a debt obligation, or as a part of total return strategy. Our investments will mostly be in corporations, partnerships or other business entities. Additionally, in certain circumstances, we may co-invest with other investors and/or strategic partners indirectly in a company through a joint venture partnership or other special purpose vehicle. While we intend to invest primarily in U.S. companies, there may be certain instances where we will invest in companies domiciled elsewhere.

Expenses

We do not currently have any employees and do not expect to have any employees. Services necessary for our business are provided through the Amended and Restated Administration Agreement, dated as of September 25, 2018 (the “Administration Agreement”) and the Investment Advisory Agreement, dated as of December 29, 2017, (the “Advisory Agreement”).

We, and indirectly our Unitholders, will bear all costs, expenses and liabilities, other than Adviser Operating Expenses (which shall be borne by the Adviser), in connection with our organization, operations, administration and transactions (“Company Expenses”). Company Expenses shall include, without limitation: (a) organizational expenses and expenses associated with the issuance of the Units; (b) expenses of calculating our net asset value (including the cost and expenses of any independent valuation firm); (c) fees payable to third parties, including agents, consultants, attorneys or other advisors, relating to, or associated with, evaluating and making investments; (d) expenses incurred by the Adviser or the Administrator payable to third parties, including agents, consultants, attorneys or other advisors, relating to or associated with monitoring our financial and legal affairs, providing administrative services, monitoring or administering our investments and performing due diligence reviews of prospective investments and the corresponding portfolio companies; (e) costs associated with our reporting and compliance obligations under the 1940 Act, the 1934 Act and other applicable federal or state securities laws; (f) fees and expenses incurred in connection with debt incurred to finance our investments or operations, and payment of interest and repayment of principal on such debt; (g) expenses related to sales and purchases of Units and other securities; (h) Management Fees and Incentive Fees; (i) administrator fees, if any, payable under the Administration Agreement; (j) transfer agent, sub-administrator and custodial fees; (k) expenses relating to the issue, repurchase and transfer of Units to the extent not borne by the relevant transferring Unitholders and/or assignees; (l) federal and state registration fees; (m) federal, state and local taxes and other governmental charges assessed against us; (n) independent directors’ fees and expenses and the costs associated with convening a meeting of our board of directors or any committee thereof; (o) fees and expenses and the costs associated with convening a meeting of the Unitholders or holders of any Preferred Units, as well as the compensation of an investor relations professional responsible for the coordination and administration of the foregoing; (p) costs of any reports, proxy statements or other notices to Unitholders, including printing and mailing costs; (q) costs and expenses related to the preparation of our consolidated financial statements and tax returns; (r) our allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums; (s) direct costs and expenses of administration, including printing, mailing, long distance telephone, and copying; (t) independent auditors and outside legal costs, including legal costs associated with any requests for exemptive relief, “no-action” positions or other guidance sought from a regulator, pertaining to us; (u) compensation of other personnel (including employees and secretarial and other staff of the Administrator) to the extent they are devoted to preparing our consolidated financial statements or tax returns or providing similar “back office” financial services to us; (v) Adviser costs and expenses (excluding travel) in connection with identifying and investigating investment opportunities for us, monitoring our investments and disposing of any such investments; (w) portfolio risk management costs; (x) commissions or brokerage fees or similar charges incurred in connection with the purchase or sale of securities (including merger fees); (y) costs and expenses attributable to normal and extraordinary investment banking, commercial banking, accounting, auditing, appraisal, valuation, administrative agent activities, custodial and registration services provided to us, including in each case services with respect to the proposed purchase or sale of securities by us that are not reimbursed by the issuer of such securities or others (whether or not such purchase or sale is consummated); (z) costs of amending, restating or modifying the LLC Agreement or Advisory Agreement or related documents of us or related entities; (aa) fees, costs, and expenses incurred in connection with the termination, liquidation or dissolution of the Company or related entities; and (bb) all other properly and reasonably chargeable expenses incurred by the Company or the Administrator in connection with administering our business. However, in the event of a Reorganization (as defined in the LLC Agreement) that results in a Public Fund (as defined in the LLC Agreement) or an Extension Fund (as defined in the LLC Agreement), including a Reorganization (as defined in the LLC Agreement) pursuant to which the Company becomes the Public Fund (as defined in the LLC Agreement) or the Extension Fund (as defined in the LLC Agreement), the fees, costs and expenses associated with any such restructuring, initial public offering, listing of equity securities or reorganization will be borne appropriately by the Public Fund (as defined in the LLC Agreement) and the Extension Fund (as defined in the LLC Agreement) (and indirectly only by Unitholders that elect to become investors in the Public Fund (as defined in the LLC Agreement) or the Extension Fund (as defined in the LLC Agreement)), as the case may be, and no others will directly or indirectly bear such fees, costs or expenses.

However, we will not bear (a) more than an amount equal to 10 basis points of our aggregate Commitments for organizational expenses and offering expenses in connection with the offering of Units through January 14, 2019 and (b) more than an amount equal to 12.5 basis points of our aggregate Commitments computed annually for Company Expenses; provided, that, any amount by which

actual annual expenses in (b) exceed the 12.5 basis point limit shall be carried over to the next year, without limitation, as additional expense until the earlier of the Reorganization (as defined in the LLC Agreement) or the dissolution of the Company, with any partial year assessed on a pro rata basis; and provided, further, that in determining the Company Expenses subject to the 12.5 basis point limit in (b), the following expenses shall be excluded and shall be borne by us as incurred without regard to the 12.5 basis point limit in (b): the Management Fee, the Incentive Fee, organizational and offering expenses (which are subject to the separate cap), amounts incurred in connection with our borrowings (including interest, bank fees, legal fees and other transactional expenses arising out of or related to any borrowing or borrowing facility and similar costs), transfer agent fees, federal, state and local taxes and other governmental charges assessed against us, expenses of calculating our net asset value (including the cost and expenses of any independent valuation firm engaged for that purpose and the costs and expenses of the valuation of our portfolio investments performed by our independent auditors in order to comply with applicable Public Company Accounting Oversight Board standards), costs and expenses incurred in connection with arranging or structuring investments and their ongoing operations (including expenses and liabilities related to the formation and ongoing operations of any special purpose entity or entities in connection with an investment), legal costs associated with any requests for exemptive relief, “no-action” positions or other guidance sought from a regulator pertaining to us, costs and expenses relating to any Reorganization (as defined in the LLC Agreement) or liquidation of the

Company and any extraordinary expenses (such as litigation expenses and indemnification payments). Notwithstanding the foregoing, in no event will the Company carryforward to future periods the amount by which actual annual Company Expenses for a year exceed the 12.5 basis point limit for more than three years from the date on which such expenses were reimbursed.

“Adviser Operating Expenses” means overhead and operating and administrative expenses incurred by or on behalf of the Adviser or any of its affiliates, including us, in connection with maintaining and operating the Adviser’s office, including salaries and other compensation (including compensation due to its officers), rent, routine office equipment expense and liability and insurance premiums (other than those incurred in maintaining fidelity bonds and Indemnitee insurance policies), in furtherance of providing supervisory investment management services for us. Adviser Operating Expenses include any expenses incurred by the Adviser or its affiliates in connection with the Adviser’s registration as an investment adviser under the Investment Advisers Act of 1940, as amended, or with its compliance as a registered investment adviser thereunder.

All Adviser Operating Expenses and all our expenses that we will not bear, as set forth above, will be borne by the Adviser or its affiliates.

In connection with borrowings, our lenders require us to pledge assets, Commitments and/or the right to draw down on Commitments. In this regard, the subscription agreement entered into with each of our investors contractually obligates each investor to fund its respective Commitments in order to pay amounts that may become due under any borrowings or other financings or similar obligations.

We expensed organization costs totaling $0.7 million (net of $0.4 million in Adviser reimbursement) since our inception through December 31, 2018. Offering costs totaling $0.6 million (net of $0.3 million in Adviser reimbursement) was charged directly to Members’ Capital on December 31, 2018. No additional organization and offering costs were incurred subsequent to December 31, 2018. We did not bear more than an amount equal to 10 basis points of the aggregate capital commitments for organization and offering expenses.

Critical Accounting Policies and Estimates

Investments at Fair Value

Investments which we hold for which market quotes are not readily available or are not considered reliable are valued at fair value and approved by the Board of Directors (the “Board”) based on similar instruments, internal assumptions and the weighting of the best available pricing inputs.

Fair Value Hierarchy: Assets and liabilities are classified by us into three levels based on valuation inputs used to determine fair value:

Level 1 values are based on unadjusted quoted market prices in active markets for identical assets.

Level 2 values are based on significant observable market inputs, such as quoted prices for similar assets and quoted prices in inactive markets or other market observable inputs.

Level 3 values are based on significant unobservable inputs that reflect our determination of assumptions that market participants might reasonably use in valuing the assets.

Level 1 Assets (Investments): The valuation techniques and significant inputs used to determine fair value are as follows:

Equity, (Level 1), includes common stock valued at the closing price on the primary exchange in which the security trades.

Level 2 Assets (Investments): The valuation techniques and significant inputs used to determine fair value are as follows:

Equity, (Level 2), includes warrants valued using quotes for comparable investments.

Investment Activity

As of June 30, 2020, our non-controlled/non-affiliated portfolio consisted of 54 debt investments and six equity investments. Based on fair values as of June 30, 2020, our non-controlled/non-affiliated portfolio was 99.6% invested in debt investments which were mostly senior secured, term loans. The remaining 0.4% represented our equity investments, which were comprised of common stock, preferred stock and warrants.

As of December 31, 2019, our non-controlled/non-affiliated portfolio consisted of 50 debt investments and four equity investments. Based on fair values as of December 31, 2019, our non-controlled/non-affiliated portfolio was 99.6% invested in debt investments which were mostly senior secured, term loans. The remaining 0.4% represented our equity investments, which were comprised of common stock and warrants.

The table below describes our non-controlled/non-affiliated investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in industries as June 30, 2020:


Industry	Percent of Total Investments
Aerospace & Defense		16	%
Energy Equipment and Services		8	%
Media		8	%
Textiles, Apparel & Luxury Goods		7	%
Health Care Providers & Services		7	%
Beverages		6	%
Chemicals		6	%
Software		5	%
Information Technology Services		5	%
Metals & Mining		4	%
Household Durables		3	%
Household Products		3	%
Personal Products		3	%
Multiline Retail		3	%
Food Products		2	%
Health Care Technology		2	%
Construction Materials		2	%
Auto Components		2	%
Commercial Services and Supplies		2	%
Electronic Equipment, Instrument & Components		2	%
Hotels, Restaurants & Leisure		2	%
Construction and Engineering		1	%
Air Freight & Logistics		1	%

Total		100	%

Interest income from non-controlled/non-affiliated investments, including interest income paid-in-kind, was $33.7 million and $17.2 million for the three months ended June 30, 2020 and 2019, respectively. Interest income from non-controlled/non-affiliated investments, including interest income paid-in-kind, was $69.7 million and $31.7 million for the six months ended June 30, 2020 and 2019, respectively.

During the three months ended June 30, 2020 and 2019, we earned $0.1 million in other fee income from our non-controlled/non-affiliated investments. During the six months ended June 30, 2020 and 2019, we earned $0.2 million and $0.1 million, respectively, in other fee income from our non-controlled/non-affiliated investments.

Results of Operations

Our operating results for the three and six months ended June 30, 2020 and 2019 were as follows (dollar amounts in thousands):


	For the three months ended June 30,						For the six months ended June 30,
	2020			2019			2020			2019
Total investment income	$	33,828		$	17,264		$	69,880		$	31,812
Net expenses		12,003			8,623			12,763			19,753

Net investment income		21,825			8,641			57,117			12,059

Net realized gain on non-controlled/non-affiliated investments		—			31			1,943			449
Net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments		(9,606	)		(587	)		(75,836	)		4,324

Net increase (decrease) in Members’ Capital from operations	$	12,219		$	8,085		$	(16,776	)	$	16,832

Total investment income

Total investment income for the three months ended June 30, 2020 and 2019 was $33.8 million and $17.3 million, respectively, and included $0.1 million of other fee income from our non-controlled/non-affiliated investments. The increase in our total investment income during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to the increase in our portfolio of debt investments, which increased to 54 debt investments as of June 30, 2020, compared to 24 as of June 30, 2019.

Total investment income for the six months ended June 30, 2020 and 2019 was $69.9 million and $31.8 million, respectively, and included $0.2 million and $0.1 million, respectively, of other fee income from our non-controlled/non-affiliated investments. Similar to the three months ended June 30, 2020, the increase in our total investment income during the six months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to the increase in our portfolio of debt investments.

Net investment income

Net investment income for the three months ended June 30, 2020 and 2019 was $21.8 million and $8.6 million, respectively. The increase in our net investment income during the three months ended June 30, 2020 compared to our net investment income during the three months ended June 30, 2019 is due to higher total investment income attributable to the larger size of our investment portfolio during the current quarter, partially offset by higher total expenses, particularly as it relates to our management fees and interest and credit facilities expenses.

Net investment income for the six months ended June 30, 2020 and 2019 was $57.1 million and $12.1 million, respectively. The increase in our net investment income during the six months ended June 30, 2020 compared to our net investment income during the six months ended June 30, 2019 is due to higher total investment income attributable to the larger size of our investment portfolio during the six months ended June 30, 2020 compared to the six months ended June 30, 2019. Further, total expenses decreased during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 due to a $12.1 million reversal of incentive fees previously accrued during prior periods. This reversal of incentive fees took place during the first quarter of fiscal year 2020 as a result of our internal rate of return (“IRR”) falling below the hurdle rate stipulated in our Advisory Agreement. Our IRR has been below the hurdle rate since the first quarter of fiscal year 2020 due to the negative net change in unrealized appreciation/depreciation on our non-controlled/non-affiliated investments, which resulted from the negative impact of COVID-19 on our portfolio companies.

Operating expenses for the three and six months ended June 30, 2020 and 2019 were as follows (dollar amounts in thousands):


	For the three months ended June 30,				For the six months ended June 30,
	2020		2019		2020			2019
Expenses:
Interest and credit facilities expenses	$	5,969	$	5,239	$	13,209		$	9,196
Management fees		4,955		2,536		9,910			4,641
Professional fees		594		366		789			686
Administrative fees		348		234		711			419
Directors’ fees		98		96		196			190
Incentive fees		—		112		(12,148	)		4,525
Other expenses		39		40		96			96

Total expenses	$	12,003	$	8,623	$	12,763		$	19,753

Our total expenses were $12.0 million and $8.6 million for the three months ended June 30, 2020 and 2019, respectively. Our total expenses included management fees attributed to the Adviser of $5.0 million and $2.5 million; and incentive fees attributed to the Adviser of $0 and $0.1 million, for the three months ended June 30, 2020 and 2019, respectively. The increase in operating expenses during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to higher management fees during the current quarter commensurate with the increase in our investment portfolio’s fair value to $1,261.4 million as of June 30, 2020 from $701.2 million as of June 30, 2019. Interest and credit facilities expenses also increased during the three months June 30, 2020 compared to the three months ended June 30, 2019 due higher average outstanding balances on our credit facilities during the current quarter.

Our total expenses were $12.8 million and $19.8 million for the six months ended June 30, 2020 and 2019, respectively. Our expenses included management fees attributed to the Adviser of $9.9 million and $4.6 million; and incentive fees attributed to the Adviser of ($12.1) million and $4.5 million, for the six months ended June 30, 2020 and 2019, respectively. The decrease in operating expenses during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to the reversal of previously accrued incentive fees which took place during the first quarter of fiscal year 2020, in conjunction with the decrease in our IRR. As of March 31, 2020 and June 30, 2020, our IRR fell below the hurdle rate specified in our Advisory Agreement. The reversal of incentive fees was partially offset by higher interest and credit facilities expenses resulting from a higher average debt outstanding balance during the six months ended June 30, 2020 compared to the six months ended June 30, 2019. Lastly, management fees attributed to our Adviser also increased, consistent with the overall increase in the size of our investment portfolio.

Net realized gain on non-controlled/non-affiliated investments

Our net realized gain on non-controlled/non-affiliated investments for the three months ended June 30, 2020 and 2019 was $0 and $31 thousand, respectively. Our net realized gain during the three months ended June 30, 2019 was primarily attributable to the partial dispositions of our term loans to SMTC Corporation. Our net realized gain on non-controlled/non-affiliated investments for the six months ended June 30, 2020 and 2019 was $1.9 million and $0.4 million, respectively. Our net realized gain during the six months ended June 30, 2020 was primarily attributable to our partial or full dispositions of the following investments (dollar amounts in thousands):


Issuer	Investment		Realized Gain
Powerhouse Intermediate, LLC		Term Loan	$	346
AVI-SPL, Inc.		Term Loan		331
Westrock Coffee Company, LLC		Term Loan		306
Gold Star Foods Inc.		Term Loan		270
AMCP Staffing Intermediate Holdings III, LLC		Term Loan		344
Dura-Supreme Holdings, Inc.		Term Loan		170
Hunter Fan Company		Term Loan		78
Geon Performance Solutions, LLC		Term Loan		53
Mondee Holdings, LLC		Term Loan		45

Total realized gain			$	1,943

Our net realized gain during the six months ended June 30, 2019 was primarily attributable to our partial disposition of our term loans to SMTC Corporation.

Net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments

Our net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments for the three months ended June 30, 2020 and 2019 was ($9.6) million and ($0.6) million, respectively. Our net change in unrealized appreciation/depreciation for the three months ended June 30, 2020 was due to the following investments (dollar amounts in thousands):


Issuer	Investment		Change��in Unrealized Appreciation/ Depreciation
Production Resource Group, LLC		Term Loan	$	(4,266	)
Mondee Holdings, LLC		Term Loan		(4,137	)
Greenfield World Trade, Inc.		Term Loan		(1,582	)
Greenfield World Trade, Inc.		Warrants		(1,032	)
Torrid LLC		Term Loan		(1,463	)
Need It Now Delivers, LLC		TermLoans		(1,199	)
PSS Industrial Group Corp.		Term Loan		(1,158	)
Sparton Corporation		Term Loan		1,509
Keeco Holdings, LLC		Term Loan		1,632
All others		Various		2,090

Net change in unrealized appreciation/depreciation			$	(9,606	)

Our net change in unrealized appreciation/depreciation during the three months ended June 30, 2020 was affected by significant business disruptions and various other consequences experienced by our portfolio companies due to the uncertainty and economic volatility caused by COVID-19, in addition to other business conditions unique to our respective issuers.

Our net change in unrealized appreciation/depreciation for the three months ended June 30, 2019 was largely due to our term loans to Centric Brands, Inc., Production Resource Group, LLC, and Keeco Holdings, LLC, which collectively recognized $2.4 million in unrealized depreciation during the three months ended June 30, 2019. These were partially offset by our term loans to PSS Industrial Group Corp. and Torrid LLC, which, together, recorded $1.7 million in unrealized appreciation during the quarter.

Our net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments for the six months ended June 30, 2020 and 2019 was ($75.8) million and $4.3 million, respectively. Our net change in unrealized appreciation/depreciation for the six months ended June 30, 2020 was due to the following investments (dollar amounts in thousands):


Issuer	Investment		Change in Unrealized Appreciation/ Depreciation
Production Resource Group, LLC		Term Loan	$	(13,890	)
Mondee Holdings, LLC		Term Loan		(11,540	)
Slogic Holdings Corp.		Term Loan		(5,187	)
Centric Brands Inc.		Term Loan		(4,817	)
Innerworkings, Inc.,		Warrants		(2,222	)
Innerworkings, Inc.,		Term Loan		(1,892	)
Greenfield World Trade, Inc.		Term Loan		(4,401	)
UniTek Acquisition, Inc.		TermLoans		(2,928	)
PSS Industrial Group Corp.		Term Loan		(2,512	)
Torrid LLC		Term Loan		(2,101	)
Need It Now Delivers, LLC		TermLoans		(2,087	)
Winsight, LLC		TermLoans		(1,965	)
Akumin, Inc.		Term Loan		(1,879	)
United Poly Systems Holding, Inc.		Term Loan		(1,875	)
FM Restaurants Holdco, LLC		Term Loan		(1,656	)
Keeco Holdings, LLC		Term Loan		(1,478	)
Heligear Acquisition Co.		Term Loan		(1,433	)
Shipston Group U.S. Inc.		TermLoans		(1,405	)
Verdesian Life Sciences, LLC		Term Loan		(1,333	)
Westrock Coffee Company, LLC		Term Loan		(1,292	)
All others		Various		(7,943	)

Net change in unrealized appreciation/depreciation			$	(75,836	)

Our net change in unrealized appreciation/depreciation during the six months ended June 30, 2020 was affected by significant business disruptions and various other consequences experienced by our portfolio companies due to the uncertainty and economic volatility caused by COVID-19, in addition to other business conditions unique to our respective issuers.

Our net change in unrealized appreciation/depreciation for the six months ended June 30, 2019 was largely due to our term loans to DBM Global, Inc. and Torrid LLC, which, together, recognized $2.1 million in unrealized gains. We also recognized unrealized gains from our term loans to PSS Industrial Group Corp.; AVI-SPL, Inc., Sparton Corporation, Greenfield World Trade Inc., and Centric Brands Inc., which collectively, recognized $3.3 million in unrealized appreciation during the six months ended June 30, 2019. These were partially offset by our term loan to Keeco Holdings, LLC, which recorded $1.1 million in unrealized depreciation during the period.

Net increase (decrease) in Members’ Capital from operations

Our net increase in members’ capital from operations during the three months ended June 30, 2020 and 2019 was $12.2 million and $8.1 million, respectively. The relative increase in members’ capital from operations during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to higher net investment income during the quarter, partially offset by higher net unrealized depreciation on our non-controlled/non-affiliated investments.

Our net (decrease) increase in members’ capital from operations during the six months ended June 30, 2020 and 2019 was ($16.8) million and $16.8 million, respectively. The decrease in members’ capital from operations during the six months ended June 30, 2020 compared to the increase in members’ capital during the six months ended June 30, 2019 was due to higher net unrealized depreciation on our non-controlled/non-affiliated investments, partially offset by higher net investment income during the six months ended June 30, 2020 versus the six months ended June 30, 2019.

Financial Condition, Liquidity and Capital Resources

On April 13, 2018, we completed the first closing of the sale of our Units to persons not affiliated with the Adviser. We also commenced operations during the second quarter of fiscal year 2018. On January 14, 2019, we completed our fourth and final closing sale of our Units. We generate cash from (1) drawing down capital in respect of Units, (2) cash flows from investments and operations and (3) borrowings from banks or other lenders.

Our primary use of cash is for (1) investments in portfolio companies and other investments to comply with certain portfolio diversification requirements, (2) the cost of operations (including expenses, the Management Fee, the Incentive Fee, and any indemnification obligations), (3) debt service of any borrowings and (4) cash distributions to the Unitholders.

As of June 30, 2020, aggregate Commitments, Undrawn Commitments, percentage of Commitments funded and the number of subscribed for Units of the Company were as follows (dollar amounts in thousands):


	June 30, 2020
Commitments	$	1,373,401
Undrawn commitments	$	548,401
Percentage of commitments funded		60.1	%
Units		13,734,010

On May 10, 2018, we entered into a Revolving Credit Agreement (the “Natixis Credit Agreement”) among the Company, as borrower, and Natixis, New York Branch (“Natixis”), as administrative agent and the committed lenders, conduit lenders and funding agents. The Natixis Credit Agreement provided for a revolving credit line (the “Natixis Credit Facility”) of up to $150.0 million (the “Natixis Maximum Commitment”), subject to the lesser of the “Natixis Borrowing Base” assets or the Natixis Maximum Commitment. The Natixis Borrowing Base assets equal the sum of a percentage of unfunded commitments from certain classes of eligible investors in the Company (the “Natixis Available Commitment”). The Natixis Credit Facility is generally secured by the Natixis Borrowing Base assets.

The Natixis Maximum Commitment may be periodically increased in amounts designated by us, up to an aggregate amount of $1 billion. The maturity date of the Natixis Credit Agreement is May 10, 2021, unless such date is extended at our option, no more than two times for a term of up to 364 days after the maturity date per such extension. Borrowings under the Natixis Credit Agreement bear interest at a rate equal to either (a) a base rate calculated in a customary manner plus 0.55% or (b) an adjusted eurodollar rate calculated in a customary manner plus 1.55%. As of December 31, 2019, the Natixis Maximum Commitment was $400.0 million. On April 21, 2020, the Natixis Maximum Commitment was reduced to $340.0 million.

The Natixis Revolving Credit Facility is secured by a first priority security interest, subject to customary exceptions, in (i) all of the capital commitments of the investors in the Company, (ii) our right to make capital calls, receive payment of capital contributions from the investors and enforce payment of the capital commitments and capital contributions under our operating agreement and (iii) a cash collateral account into which the capital contributions from the investors are made. The Natixis Credit Facility may be terminated, and any outstanding amounts thereunder may become due and payable, should we fail to satisfy certain covenants. As of June 30, 2020 we were in compliance with such covenants.

As of June 30, 2020 and December 31, 2019, the Natixis Borrowing Base assets were less than the Natixis Maximum Commitment. A summary of amounts outstanding and available under the Natixis Credit Facility as of June 30, 2020 and December 31, 2019 is as follows (dollar amounts in thousands):


Natixis Revolving Credit Facility	Maximum Commitment		Borrowings Outstanding		Available Amount⁽¹⁾
As of June 30, 2020	$	340,000	$	172,000	$	110,866
As of December 31, 2019	$	400,000	$	252,000	$	30,866

(1)	The amount available considers any limitations related to the debt facility borrowing.

On January 29, 2019, TCW DL VII Financing LLC (the “Borrower” or “TCW DL VII Financing”), a newly-formed, wholly-owned, special purpose financing subsidiary of ours, entered into a senior secured credit facility (the “PNC Credit Facility” and together with the Natixis Revolving Credit Facility, the “Credit Facilities”) pursuant to a credit and security agreement (the “PNC Credit Agreement”) with PNC Bank, National Association (“PNC”), as facility agent, the lenders from time to time party thereto, and State Street Bank and Trust Company, as collateral agent.

Under the PNC Credit Facility, the lenders have agreed to extend credit to the Borrower in an aggregate principal amount of up to $400.0 million of revolving and term loans (the “PNC Maximum Commitment”), subject to compliance with a borrowing base (the “PNC Borrowing Base”). The PNC Maximum Commitment may be periodically increased in amounts designated by the Borrower up to an aggregate principal amount of $900.0 million, subject to lender consent and obtaining commitments for the increase. The Borrower may make borrowings of (i) a revolving loan (the “PNC Revolving Credit Facility” and together with the Natixis Revolving Credit Facility, the “Revolving Credit Facilities”) under the PNC Credit Facility during the period commencing January 29, 2019 and ending on January 29, 2022 and (ii) a term loan (the “PNC Term Loan”) under the PNC Credit Facility during the period which commenced on January 29, 2019 and ended on January 29, 2020, unless, in the case of (i) and (ii), there is an earlier termination of the PNC Credit Facility or event of default thereunder. The PNC Credit Facility will mature on January 29, 2024. Loans under the PNC Credit Facility bear interest at a fluctuating rate of interest per annum equal to, at the Borrower’s option, either (i) three-month LIBOR plus the facility margin of 2.30% per annum or (ii) the Base Rate plus the facility margin of 2.30% per annum.

On April 11, 2019, the Borrower amended and restated the PNC Credit Agreement (as amended, the “Amended PNC Credit Agreement”) for the PNC Credit Facility. The Amended PNC Credit Agreement, among other things, (a) increased the total commitments under the PNC Credit Facility from $400.0 million to $600.0 million (the “Amended PNC Maximum Commitment”) and (b) made certain modifications to the calculation of the borrowing base under the prior facility, including the eligibility requirements of collateral obligations pledged under the PNC Credit Facility and loan portfolio concentration limits.

On March 17, 2020, the Borrower further amended and restated the Amended PNC Credit Agreement (as further amended the “Second Amended PNC Credit Agreement”). The Second Amended PNC Credit Agreement, among other things, increased the total commitments under the PNC Credit Facility from $600.0 million to $795.0 million (the “Second Amended PNC Maximum Commitment”). The Second Amended PNC Maximum Commitment may be periodically increased in amounts designated by the Borrower up to an aggregate principal amount of $900.0 million, subject to lender consent and obtaining commitments for the increase. The Borrower may make borrowings of (i) revolving loans under the PNC Credit Facility during the period commencing January 29, 2019 and ending on January 29, 2022 and (ii) term loans under the PNC Credit Facility during the period commencing January 29, 2019 and ended on March 17, 2020, unless, there is an earlier termination of the PNC Credit Facility or event of default thereunder. The PNC Credit Facility will mature on January 29, 2024. Loans under the PNC Credit Facility will bear interest at a fluctuating rate of interest per annum equal to, at the Borrower’s option, either (i) three-month LIBOR plus the facility margin of 2.30% per annum or (ii) the Base Rate plus the facility margin of 2.30% per annum. On June 19, 2020, the Second Amended PNC Maximum Commitment was increased from $795,000 to $825,000.

Borrower additional loans from time to time after the closing date, which shall be pledged in favor of the lenders under the PNC Credit Facility.

Borrowings of the Borrower are non-recourse to us but are considered our borrowings for purposes of complying with the asset coverage requirements under the Investment Company Act of 1940, as amended.

As of June 30, 2020 and December 31, 2019, the PNC Borrowing Base were less than the Second Amended and Amended PNC Maximum Commitment, respectively. A summary of amounts outstanding and available under the PNC Credit Facility as of June 30, 2020 and December 31, 2019 was as follows (dollar amounts in thousands):


PNC Credit Facility	Maximum Commitment		Borrowings Outstanding		Available Amount⁽¹⁾
As of June 30, 2020	$	825,000	$	413,000	$	238,349
As of December 31, 2019	$	600,000	$	505,000	$	95,000

(1)	The amount available considers any limitations related to the debt facility borrowing.

Borrowings under the PNC Credit Facility as of June 30, 2020 and December 31, 2019 consisted of $165.5 million and $325.0 million, respectively, from the PNC Revolving Credit Facility (i.e., revolving line of credit) and $247.5 million and $180.0 million, respectively, of PNC Term Loan.

We incurred financing costs of $3.4 million and $4.4 million, in connection with the Natixis Credit Agreement and the PNC Credit Agreement, respectively. In addition, we incurred an additional $2.1 million and $1.5 million in financing costs in connection with the Amended and Second Amended PNC Credit Agreement, respectively. Lastly, we incurred $0.2 million in financing costs associated with the June 19, 2020 upsize of the PNC Credit Facility.

We recorded most of the costs associated with the Revolving Credit Facilities as deferred financing costs on our Consolidated Statements of Assets and Liabilities and the costs are being amortized over the respective lives of the Natixis Revolving Credit Facility and PNC Revolving Credit Facility. As of June 30, 2020 and December 31, 2019, $5.6 million and $5.6 million, respectively, of such deferred financing costs had yet to be amortized. Costs associated with the PNC Term Loan are deferred and amortized over the term of the PNC Term Loan. Such deferred financing costs are netted against the carrying value of the PNC Term Loan on our Consolidated Statements of Assets and Liabilities. As of June 30, 2020 and December 31, 2019, $1.9 million and $1.6 million, respectively, of such deferred financing costs have yet to be amortized.

The summary information regarding the Credit Facilities for the three and six months ended June 30, 2020 and 2019 was as follows (dollar amounts in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Credit Facilities interest expense	$	4,605		$	3,771		$	10,875		$	6,862
Unused commitment fees		447			818			700			1,266
Administrative fees		100			50			100			50
Amortization of deferred financing costs		817			600			1,534			1,018

Total	$	5,969		$	5,239		$	13,209		$	9,196

Weighted average interest rate		3.03	%		4.24	%		3.39	%		4.17	%
Average outstanding balance	$	602,044		$	351,703		$	634,467		$	327,033

We had the following unfunded commitments and unrealized depreciation by investment as of June 30, 2020 and December 31, 2019 (dollar amounts in thousands):


Unfunded Commitments	Maturity / Expiration	June 30, 2020				December 31, 2019
Unfunded Commitments	Maturity / Expiration	Amount		Unrealized Depreciation		Amount		Unrealized Depreciation
AMCP Staffing Intermediate Holdings III, LLC	September 2025	$	—	$	—	$	2,767	$	28
Caiman Merger Sub LLC	November 2024		1,031		—		1,031		8
Cassavant Holdings, LLC	December 2024		392		17		—		—
Cassavant Holdings, LLC	January 2025		1,960		84		—		—
Centric Brands Inc.	May 2021		2,359		—		—		—
DBM Global, Inc.	October 2020		7,805		23		—		—
Dura-Supreme Holdings, Inc.	October 2024		—		—		1,514		6
Encompass Digital Media, Inc.	September 2023		433		22		794		18
FM Restaurants Holdco, LLC	November 2024		—		—		1,062		6
FM Restaurants Holdco, LLC	November 2024		1,207		91		4,827		29
GEON Performance Solutions, LLC	October 2024		1,851		26		3,133		19
Gold Star Foods Inc.	April 2020		—		—		2,754		8
Gold Star Foods Inc.	October 2024		—		—		4,589		14
Help at Home, LLC	August 2020		9,784		—		—		—
Hometown Food Company	August 2023		5,881		29		5,881		82
Mondee Holdings LLC	December 2024		8,613		—		8,613		146
Need It Now Delivers, LLC	December 2020		5,200		510		6,025		24
Powerhouse Intermediate, LLC	October 2024		—		—		2,423		10
United Poly Systems Holding, Inc.	June 2024		6,506		612		6,506		215
WDE TorcSill Holdings LLC	October 2024		3,043		49		7,302		73
Wellbore Integrity Solutions	December 2020		953		10		953		4
Winsight, LLC	November 2023		—		—		13,887		83
Winsight, LLC	November 2021		—		—		2,217		13

Total		$	57,018	$	1,473	$	76,278	$	786

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to financial market risks, including changes in interest rates. As of June 30, 2020, 100.0% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate. The interest rates on such investments generally reset by reference to the current market index after one to six months. As of June 30, 2020, the percentage of our floating rate debt investments that bore interest based on an interest rate floor was 95.1%. Floating rate investments subject to a floor generally reset by reference to the current market index after one to six months only if the index exceeds the floor.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We assess our portfolio companies periodically to determine whether such companies will be able to continue making interest payments in the event that interest rates increase. There can be no assurances that the portfolio companies will be able to meet their contractual obligations at any or all levels of increases in interest rates.

Based on our June 30, 2020 consolidated statement of assets and liabilities, the following table shows the annual impact on net investment income (excluding the related incentive compensation impact) of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure (dollar amounts in thousands):


Basis Point Change	Interest Income			Interest Expense			Net Investment Income
Up 300 basis points	$	27,189		$	17,795		$	9,394
Up 200 basis points		13,331			11,863			1,468
Up 100 basis points		2,220			5,931			(3,711	)
Down 100 basis points		(737	)		(1,535	)		798
Down 200 basis points		(1,421	)		(1,535	)		114
Down 300 basis points		(1,267	)		(1,535	)		268

ITEM 4.

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 President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934). Based on that evaluation, our President and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them to material information relating to us that is required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934.

There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter 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

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 1A.

Risk Factors

In addition to the other information set forth within the Form 10-Q, consideration should be given to the risk factors previously disclosed in our Annual Report on Form 10-K that we filed with the SEC on March 16, 2020, as amended by Form 10-K/A filed April 29, 2020, and the following risk factor regarding the impact of the COVID-19 pandemic.

The COVID-19 pandemic has materially and adversely affected certain of our portfolio companies, and could materially and adversely affect our business, financial condition, results of operations and cash flows.

In late 2019 and early 2020, a novel coronavirus (SARS-CoV-2) and related respiratory disease (“COVID-19”) was first reported in China and spread rapidly to across the world, including to the United States. This outbreak has led, and for an unknown period of time will continue to lead, to disruptions in local, regional, national and global markets and economies affected thereby. With respect to the United States credit markets (in particular for middle market loans), this outbreak has resulted in, and until fully resolved is likely to continue to result in, the following (among other things): (i) government imposition of various forms of “stay at home” orders and the closing or reduced operating capacity of “non-essential” businesses, resulting in significant disruption to the businesses of many middle-market loan borrowers including supply chains, demand and practical aspects of their operations, as well as in lay-offs of employees, and, while these effects are hoped to be temporary, some effects could be persistent or even permanent; (ii) increased draws by borrowers on revolving lines of credit; (iii) increased requests by borrowers for amendments and waivers of their credit agreements to avoid default, increased defaults by such borrowers and/or increased difficulty in obtaining refinancing at the maturity dates of their loans; (iv) volatility and disruption of these markets including greater volatility in pricing and spreads and difficulty in valuing loans during periods of increased volatility, and liquidity issues; and (v) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general which may not adequately address the problems facing the loan market and middle market businesses. This outbreak is having, and any future outbreaks could have, an adverse impact on our portfolio companies and on the markets and the economy in general, and that impact could be material. For example, if the temporary closure or reduced operating capacity of many corporate offices, retail stores, and manufacturing facilities and factories in the jurisdictions, including the United States, affected by the COVID-19 pandemic were to continue for an extended period of time it could result in further reduced cash flows to us from our existing portfolio companies, which could further reduce cash available for distribution to our Unitholders.

Further, from an operational perspective, many of our Adviser’s investment professionals are currently working remotely. An extended period of remote work arrangements could increase operational risks, including but not limited to cybersecurity risks and risks related to business continuity capacity, which may impair our ability to manage our business. In addition, we are highly dependent on third party services providers for certain communication and information systems. As a result, we rely upon the successful implementation and execution of the business continuity planning of such providers in the current environment. If one or more of these third parties to whom we outsource certain critical business activities experience operational failures as a result of the impacts from the spread of COVID-19, or claim that they cannot perform due to a force majeure, it may have a material adverse effect on our business, and its financial condition, results of operations, liquidity and cash flows.

In addition, the United States capital markets have experienced extreme volatility and disruption following the spread of COVID-19 in the United States. Some economists and major investment banks have expressed concern that the continued spread of the virus globally could lead to a world-wide economic downturn. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. These and future market disruptions and/or illiquidity may have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions may also increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have limited and could continue to limit our investment originations, and limit our ability to grow and could have a material negative impact on our operating results and the fair values of our debt and equity investments.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Sales of unregistered securities

None.

Issuer purchases of equity securities

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

None.

Item 6.

Exhibits.

(a) Exhibits


3.1		Certificate of Formation (incorporated by reference to Exhibit 3.1 to a registration on Form 10 filed on September 1, 2017)

3.2		Limited Liability Company Agreement, dated June 29, 2017 (incorporated by reference to Exhibit 3.2 to a registration on Form 10 filed on September 1, 2017)

3.3		Amended and Restated Limited Liability Company Agreement, dated October 2, 2017 (incorporated by reference to Exhibit 3.3 to a registration on Form 10 filed on October 16, 2017)

3.4		Third Amended and Restated Limited Liability Company Agreement, dated as of September 10, 2018 (incorporated by reference to Exhibit 3.6 to the registrant’s Quarterly Report on Form 10-Q filed November 6, 2018).

3.5		Fourth Amended and Restated Limited Liability Company Agreement, dated as of January 14, 2019 (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed on January 18, 2019).

10.1		Investment Advisory and Management Agreement dated December 29, 2017 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on January 3, 2018).

10.2		Administration Agreement dated December 29, 2017, by and between TCW Direct Lending VII LLC and TCW Asset Management Company LLC (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on January 3, 2018).

10.3		Amended and Restated Administration Agreement, dated as of September 25, 2018, between TCW Direct Lending VII LLC and TCW Asset Management Company LLC (incorporated by reference to Exhibit 3.7 to the registrant’s Quarterly Report on Form 10-Q filed November 6, 2018).

10.4		Revolving Credit Agreement, dated as of May 10, 2018, among TCW Direct Lending VII LLC, as borrower, and Natixis, New York Branch, as Administrative Agent and Committed Lender (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed on May 14, 2018).

10.5		Credit and Security Agreement, dated as of January 29, 2019, among TCW DL VII Financing LLC, as borrower, PNC Bank, National Association, as facility agent, and State Street Bank and Trust Company, as collateral agent (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on February 4, 2019).

10.6		First Amended and Restated Credit and Security Agreement, dated as of April 11, 2019, among TCW DL VII Financing LLC, as borrower, PNC Bank, National Association, as facility agent, the lenders from time to time party thereto, and State Street Bank and Trust Company, as collateral agent (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on April 16, 2019).

10.7		Second Amended and Restated Credit and Security Agreement, dated as of March 17, 2020, among TCW DL VII Financing LLC, as borrower, PNC Bank, National Association, as facility agent, the lenders from time to time party thereto, and State Street Bank and Trust Company, as collateral agent (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on March 20, 2020).

31.1^*		Certification of President Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

31.2^*		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

32.1^*		Certification of President Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

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

^*	Filed herewith

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


	TCW DIRECT LENDING VII LLC

Date: August 10, 2020	By:	/s/ Richard T. Miller
		Richard T. Miller
		President


Date: August 10, 2020	By:	/s/ James G. Krause
		James G. Krause
		Chief Financial Officer

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Smaller reporting company

Emerging growth company