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Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

x

 

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

 

 

 

For the quarterly period ended March 31, 2010

 

 

 

OR

 

 

 

o

 

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

 

For the transition period                   to                  

 

Commission File No. 000-50697

 

ARES CAPITAL CORPORATION

(Exact name of Registrant as specified in its charter)

 

Maryland

 

33-1089684

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification Number)

 

280 Park Avenue, 22nd Floor, Building East, New York, NY 10017

(Address of principal executive office)   (Zip Code)

 

(212) 750-7300

(Registrant’s telephone number, including area code)

 


 

N/A

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

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:   Yes  x    No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes o  No o

 

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

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at May 7, 2010

Common stock, $0.001 par value

 

191,688,014

 

 

 



Table of Contents

 

ARES CAPITAL CORPORATION

 

INDEX

 

Part I.

Financial Information

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Balance Sheet as of March 31, 2010 (unaudited) and December 31, 2009

1

 

 

 

 

Consolidated Statement of Operations for the three months ended March 31, 2010 (unaudited) and March 31, 2009 (unaudited)

2

 

 

 

 

Consolidated Schedule of Investments as of March 31, 2010 (unaudited) and December 31, 2009

4

 

 

 

 

Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2010 (unaudited)

28

 

 

 

 

Consolidated Statement of Cash Flows for the three months ended March 31, 2010 (unaudited) and March 31, 2009 (unaudited)

29

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

30

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

49

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

61

 

 

 

Item 4.

Controls and Procedures

62

 

 

 

Part II.

Other Information

 

 

 

 

Item 1.

Legal Proceedings

62

 

 

 

Item 1A.

Risk Factors

63

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

63

 

 

 

Item 3.

Defaults Upon Senior Securities

63

 

 

 

Item 4.

Submission of Matters to a Vote of Security Holders

63

 

 

 

Item 5.

Other Information

63

 

 

 

Item 6.

Exhibits

64

 



Table of Contents

 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(dollar amounts in thousands, except per share data)

 

 

 

As of

 

 

 

March 31, 2010

 

December 31, 2009

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Investments at fair value (amortized cost of $2,374,092 and $2,376,384, respectively)

 

 

 

 

 

Non-controlled/non-affiliate company investments

 

$

1,533,470

 

$

1,568,423

 

Non-controlled affiliate company investments

 

250,761

 

276,351

 

Controlled affiliate company investments

 

435,998

 

327,040

 

Total investments at fair value

 

2,220,229

 

2,171,814

 

Cash and cash equivalents

 

83,813

 

99,227

 

Receivable for open trades

 

19,288

 

 

Interest receivable

 

26,155

 

28,019

 

Other assets

 

29,862

 

14,455

 

Total assets

 

$

2,379,347

 

$

2,313,515

 

LIABILITIES

 

 

 

 

 

Debt

 

$

771,358

 

$

969,465

 

Management and incentive fees payable

 

16,600

 

66,495

 

Accounts payable and accrued expenses

 

19,241

 

16,533

 

Interest and facility fees payable

 

3,166

 

2,645

 

Payable for open trades

 

 

489

 

Total liabilities

 

810,365

 

1,055,627

 

Commitments and contingencies (Note 6)

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Common stock, par value $.001 per share, 300,000,000 common shares authorized, 133,195,477 and 109,944,674 common shares issued and outstanding, respectively

 

133

 

110

 

Capital in excess of par value

 

1,771,630

 

1,490,458

 

Accumulated undistributed (overdistributed) net investment income

 

(11,668

)

3,143

 

Accumulated net realized loss on investments, foreign currency transactions and extinguishment of debt

 

(35,996

)

(31,115

)

Net unrealized loss on investments and foreign currency transactions

 

(155,117

)

(204,708

)

Total stockholders’ equity

 

1,568,982

 

1,257,888

 

Total liabilities and stockholders’ equity

 

$

2,379,347

 

$

2,313,515

 

NET ASSETS PER SHARE

 

$

11.78

 

$

11.44

 

 

See accompanying notes to consolidated financial statements.

 

1



Table of Contents

 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(dollar amounts in thousands, except per share data)

 

 

 

For the three months ended

 

 

 

March 31, 2010

 

March 31, 2009

 

 

 

(unaudited)

 

(unaudited)

 

INVESTMENT INCOME:

 

 

 

 

 

From non-controlled/non-affiliate company investments:

 

 

 

 

 

Interest from investments

 

$

46,075

 

$

43,831

 

Capital structuring service fees

 

1,350

 

1,050

 

Interest from cash & cash equivalents

 

11

 

153

 

Management fees

 

328

 

 

Dividend income

 

 

426

 

Other income

 

795

 

949

 

Total investment income from non-controlled/non-affiliate company investments

 

48,559

 

46,409

 

 

 

 

 

 

 

From non-controlled affiliate company investments:

 

 

 

 

 

Interest from investments

 

4,620

 

5,575

 

Management fees

 

138

 

125

 

Dividend income

 

103

 

14

 

Other income

 

58

 

90

 

Total investment income from non-controlled affiliate company investments

 

4,919

 

5,804

 

 

 

 

 

 

 

From controlled affiliate company investments:

 

 

 

 

 

Interest from investments

 

10,841

 

2,938

 

Capital structuring service fees

 

751

 

194

 

Management fees

 

1,021

 

591

 

Dividend income

 

378

 

 

Other income

 

41

 

80

 

Total investment income from controlled affiliate company investments

 

13,032

 

3,803

 

 

 

 

 

 

 

Total investment income

 

66,510

 

56,016

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

Interest and credit facility fees

 

8,588

 

6,581

 

Base management fees

 

8,456

 

7,498

 

Incentive management fees

 

8,144

 

7,550

 

Professional fees related to the acquisition of Allied Capital Corporation

 

3,789

 

 

Professional fees

 

2,504

 

1,397

 

Insurance

 

359

 

334

 

Administrative

 

1,231

 

1,004

 

Depreciation

 

163

 

173

 

Directors fees

 

134

 

102

 

Other

 

1,599

 

1,146

 

Total expenses

 

34,967

 

25,785

 

 

 

 

 

 

 

NET INVESTMENT INCOME BEFORE INCOME TAXES

 

31,543

 

30,231

 

 

 

 

 

 

 

Income tax expense (benefit), including excise tax

 

(162

)

31

 

 

 

 

 

 

 

NET INVESTMENT INCOME

 

31,705

 

30,200

 

 

2



Table of Contents

 

 

 

For the three months ended

 

 

 

March 31, 2010

 

March 31, 2009

 

 

 

(unaudited)

 

(unaudited)

 

REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:

 

 

 

 

 

Net realized gains (losses):

 

 

 

 

 

Non-controlled/non-affiliate company investments

 

2,261

 

(1,305

)

Non-controlled affiliate company investments

 

(7,659

)

(482

)

Controlled affiliate company investments

 

432

 

 

Foreign currency transactions

 

85

 

(48

)

Net realized gains (losses)

 

(4,881

)

(1,835

)

 

 

 

 

 

 

Net unrealized gains (losses):

 

 

 

 

 

Non-controlled/non-affiliate company investments

 

30,974

 

(8,559

)

Non-controlled affiliate company investments

 

11,845

 

(2,006

)

Controlled affiliate company investments

 

6,924

 

(9,324

)

Foreign currency transactions

 

(152

)

15

 

Net unrealized gains (losses)

 

49,591

 

(19,874

)

 

 

 

 

 

 

Net realized and unrealized gains (losses) from investments and foreign currency transactions

 

44,710

 

(21,709

)

 

 

 

 

 

 

REALIZED GAIN ON EXTINGUISHMENT OF DEBT

 

 

26,543

 

 

 

 

 

 

 

NET INCREASE IN STOCKHOLDERS’ EQUITY RESULTING FROM OPERATIONS

 

$

76,415

 

$

35,034

 

 

 

 

 

 

 

BASIC AND DILUTED EARNINGS PER COMMON SHARE (Note 4)

 

$

0.61

 

$

0.36

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING — BASIC AND DILUTED (Note 4)

 

124,544,026

 

97,152,820

 

 

See accompanying notes to consolidated financial statements.

 

3



Table of Contents

 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of March 31, 2010 (unaudited)

(dollar amounts in thousands, except per unit data)

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net Assets

 

Financial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carador PLC(6)(8)(9)

 

Investment company

 

Ordinary shares (7,110,525 shares)

 

 

 

12/15/2006

 

$

9,033

 

$

2,915

 

$

0.41

 

 

 

CIC Flex, LP(9)

 

Investment partnership

 

Limited partnership units (0.94 unit)

 

 

 

9/7/2007

 

47

 

 

$

 

 

 

Covestia Capital Partners, LP(9)

 

Investment partnership

 

Limited partnership interest (47% interest)

 

 

 

6/17/2008

 

1,059

 

1,006

 

 

 

 

 

Firstlight Financial Corporation(6)(9)

 

Investment company

 

Senior subordinated loan ($73,258 par due 12/2016)

 

1.00% PIK

 

12/31/2006

 

73,185

 

51,280

 

$

0.70

(4)

 

 

 

 

 

 

Common stock (10,000 shares)

 

 

 

12/31/2006

 

10,000

 

 

$

 

 

 

 

 

 

 

Common stock (30,000 shares)

 

 

 

12/31/2006

 

30,000

 

 

$

 

 

 

Imperial Capital Group, LLC and Imperial Capital Private Opportunities, LP(9)

 

Investment banking services

 

Common units (2,526 units)

 

 

 

5/10/2007

 

3

 

 

$

 

 

 

 

 

 

 

Common units (315 units)

 

 

 

5/10/2007

 

 

 

$

 

 

 

 

 

 

 

Common units (7,710 units)

 

 

 

5/10/2007

 

14,997

 

18,750

 

$

2,431.91

 

 

 

 

 

 

 

Limited partnership interest (80% interest)

 

 

 

5/10/2007

 

6,794

 

6,233

 

 

 

 

 

Ivy Hill Asset Management, LP (7)

 

Investment manager

 

Member interest

 

 

 

6/15/2009

 

85,424

 

99,123

 

 

 

 

 

Ivy Hill Middle Market Credit Fund, Ltd.(7)(8)(9)

 

Investment company

 

Class B deferrable interest notes ($40,000 par due 11/2018)

 

6.28% (Libor+ 6.00%/Q)

 

11/20/2007

 

40,000

 

37,600

 

$

0.94

 

 

 

 

 

 

 

Subordinated notes ($15,681 par due 11/2018)

 

15.50%

 

11/20/2007

 

15,681

 

15,053

 

$

0.96

 

 

 

Knightsbridge CLO 2007-1 Ltd. (7)

 

Investment company

 

Class E interest notes ($20,350 par due 1/2022)

 

9.29% (Libor+ 9.00%/Q)

 

3/24/2010

 

14,852

 

14,852

 

$

0.73

 

 

 

Knightsbridge CLO 2008-1 Ltd. (7)

 

Investment company

 

Class C interest notes ($14,400 par due 6/2018)

 

7.79% (Libor+ 7.50%/Q)

 

3/24/2010

 

14,400

 

14,400

 

$

1.00

 

 

 

 

 

 

 

Class D interest notes ($9,000 par due 6/2018)

 

8.79% (Libor+ 8.50%/Q)

 

3/24/2010

 

9,000

 

9,000

 

$

1.00

 

 

 

 

 

 

 

Class E interest notes ($14,850 par due 6/2018)

 

5.29% (Libor+ 5.00%/Q)

 

3/24/2010

 

13,596

 

13,596

 

$

0.92

 

 

 

Partnership Capital Growth Fund I, LP(9)

 

Investment partnership

 

Limited partnership interest (25% interest)

 

 

 

6/16/2006

 

3,017

 

3,017

 

 

 

 

 

Senior Secured Loan Fund LLC (7)

 

Investment company

 

Subordinated certificates ($175,378 par due 12/2015)

 

16.13%

 

10/30/2009

 

166,414

 

170,000

 

$

0.97

 

 

 

Trivergance Capital Partners, LP(9)

 

Investment partnership

 

Limited partnership interest (100% interest)

 

 

 

6/5/2008

 

2,216

 

 

 

 

 

 

VSC Investors LLC(9)

 

Investment company

 

Membership interest (4.63% interest)

 

 

 

1/24/2008

 

648

 

648

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

510,366

 

457,473

 

 

 

29.16

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

American Renal Associates, Inc.

 

Dialysis provider

 

Senior secured loan ($721 par due 12/2010)

 

8.50% (Base Rate+ 5.00%/D)

 

12/14/2005

 

721

 

721

 

$

1.00

(3)(14)

 

 

 

 

 

 

Senior secured loan ($10,377 par due 12/2011)

 

8.50% (Base Rate+ 5.00%/Q)

 

12/14/2005

 

10,377

 

10,377

 

$

1.00

(3)(14)

 

 

Capella Healthcare, Inc.

 

Acute care hospital operator

 

Junior secured loan ($10,000 par due 2/2016)

 

13.00%

 

2/29/2008

 

10,000

 

10,000

 

$

1.00

 

 

 

 

 

 

 

Junior secured loan ($30,000 par due 2/2016)

 

13.00%

 

2/29/2008

 

30,000

 

30,000

 

$

1.00

(2)

 

 

 

4



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net Assets

 

CT Technologies Intermediate Holdings, Inc. and CT Technologies Holdings, LLC(6)

 

Healthcare analysis services

 

Preferred stock (7,427 shares)

 

14.00% PIK

 

6/15/2007

 

8,763

 

7,887

 

$

1,061.91

(4)

 

 

 

 

 

 

Common stock (9,679 shares)

 

 

 

6/15/2007

 

4,000

 

7,411

 

$

765.69

 

 

 

 

 

 

 

Common stock (1,546 shares)

 

 

 

6/15/2007

 

 

1,184

 

$

765.69

 

 

 

DSI Renal, Inc.

 

Dialysis provider

 

Senior secured loan ($19,514 par due 3/2013)

 

9.00% (Libor+ 7.00%/Q)

 

4/4/2006

 

15,795

 

19,515

 

$

1.00

(14)

 

 

 

 

 

 

Senior subordinated loan ($63,679 par due 4/2014)

 

6% Cash, 11.00% PIK

 

4/4/2006

 

63,197

 

61,769

 

$

0.97

(4)

 

 

 

 

 

 

Common stock (20,726 shares)

 

 

 

4/4/2006

 

20,684

 

20,684

 

$

997.97

 

 

 

GG Merger Sub I, Inc.

 

Drug testing services

 

Senior secured loan ($11,330 par due 12/2014)

 

4.26% (Libor+ 4.00%/Q)

 

12/14/2007

 

10,941

 

10,424

 

$

0.92

(2)

 

 

 

 

 

 

Senior secured loan ($12,000 par due 12/2014)

 

4.26% (Libor+ 4.00%/Q)

 

12/14/2007

 

11,460

 

11,040

 

$

0.92

(3)

 

 

HCP Acquisition Holdings, LLC(7)

 

Healthcare compliance advisory services

 

Class A units (10,044,176 units)

 

 

 

6/26/2008

 

10,044

 

4,249

 

$

0.42

 

 

 

Heartland Dental Care, Inc.

 

Dental services

 

Senior subordinated loan ($27,717 par due 7/2014)

 

14.25%

 

7/31/2008

 

27,717

 

27,717

 

$

1.00

 

 

 

Magnacare Holdings, Inc., Magnacare Administrative Services, LLC, and Magnacare, LLC

 

Healthcare professional provider

 

Senior secured loan ($4,372 par due 1/2012)

 

7.50% (Libor+ 5.50%/M)

 

2/26/2010

 

4,328

 

4,372

 

$

1.00

(14)

 

 

 

 

 

 

Senior subordinated loan ($54,000 par due 3/2015)

 

15.00% (Libor+ 10.00% Cash, 3.00%PIK/Q)

 

3/26/2010

 

54,000

 

54,000

 

$

1.00

(3)(4)(14)

 

 

MWD Acquisition Sub, Inc.

 

Dental services

 

Junior secured loan ($5,000 par due 5/2013)

 

6.50% (Libor+ 6.25%/M)

 

5/3/2007

 

5,000

 

4,450

 

$

0.89

(3)

 

 

MPBP Holdings, Inc., Cohr Holdings, Inc. and MPBP Acquisition Co., Inc.

 

Healthcare equipment services

 

Junior secured loan ($19,748 par due 1/2014)

 

 

 

1/31/2007

 

19,748

 

1,975

 

$

0.10

(13)

 

 

 

 

 

 

Junior secured loan ($11,849 par due 1/2014)

 

 

 

1/31/2007

 

11,849

 

1,185

 

$

0.10

(3)(13)

 

 

 

 

 

 

Common stock (50,000 shares)

 

 

 

1/31/2007

 

5,000

 

 

$

 

 

 

OnCURE Medical Corp.

 

Radiation oncology care provider

 

Senior secured loan ($3,060 par due 2/2012)

 

3.75% (Libor+ 3.50%/M)

 

8/18/2006

 

3,060

 

2,754

 

$

0.90

(3)

 

 

 

 

 

 

Senior subordinated loan ($32,765 par due 8/2013)

 

11.00% Cash, 1.50% PIK

 

8/18/2006

 

32,786

 

30,799

 

$

0.94

(4)

 

 

 

 

 

 

Common stock (857,143 shares)

 

 

 

8/18/2006

 

3,000

 

3,000

 

$

3.50

 

 

 

Passport Health Communications, Inc., Passport Holding Corp. and Prism Holding Corp.

 

Healthcare technology provider

 

Senior secured loan ($490 par due 5/2014)

 

10.50% (Libor+ 7.50%/M)

 

5/9/2008

 

490

 

490

 

$

1.00

(2)(14)

 

 

 

 

 

 

Senior secured loan ($11,570 par due 5/2014)

 

10.50% (Libor+ 7.50%/M)

 

5/9/2008

 

11,570

 

11,570

 

$

1.00

(2)(14)

 

 

 

 

 

 

Senior secured loan ($452 par due 5/2014)

 

10.50% (Libor+ 7.50%/M)

 

5/9/2008

 

452

 

452

 

$

1.00

(3)(14)

 

 

 

 

 

 

Senior secured loan ($10,680 par due 5/2014)

 

10.50% (Libor+ 7.50%/M)

 

5/9/2008

 

10,680

 

10,680

 

$

1.00

(3)(14)

 

 

 

 

 

 

Series A preferred stock (1,594,457 shares)

 

 

 

7/30/2008

 

9,900

 

9,900

 

$

6.21

 

 

 

 

 

 

 

Common stock (16,106 shares)

 

 

 

7/30/2008

 

100

 

100

 

$

6.21

 

 

 

PG Mergersub, Inc.

 

Provider of patient surveys, management reports and national databases for the integrated healthcare delivery system

 

Senior subordinated loan ($4,000 par due 3/2016)

 

12.50%

 

3/12/2008

 

3,940

 

4,000

 

$

1.00

 

 

 

 

 

 

 

Common stock (16,667 shares)

 

 

 

3/12/2008

 

167

 

167

 

$

10.00

 

 

 

 

 

 

 

Preferred stock (333 shares)

 

 

 

3/12/2008

 

333

 

333

 

$

1,000.01

 

 

 

The Schumacher Group of Delaware, Inc.

 

Outsourced physician service provider

 

Junior secured loan ($30,909 par due 7/2013)

 

11.13% Cash, 1.00% PIK

 

7/18/2008

 

30,909

 

30,909

 

$

1.00

(2)(4)

 

 

Univita Health, Inc.

 

Outsourced services provider

 

Senior subordinated loan ($20,618 par due 12/2014)

 

15.00%

 

12/22/2009

 

20,618

 

20,618

 

$

1.00

 

 

 

 

5



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net Assets

 

VOTC Acquisition Corp.

 

Radiation oncology care provider

 

Senior secured loan ($7,465 par due 7/2012)

 

11.00% Cash, 2.00% PIK

 

6/30/2008

 

7,465

 

7,465

 

$

1.00

(4)

 

 

 

 

 

 

Preferred stock (3,888,222 shares)

 

 

 

7/14/2008

 

8,748

 

7,511

 

$

1.93

 

 

 

 

 

 

 

 

 

 

 

 

 

467,842

 

429,708

 

 

 

27.39

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services-Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

American Residential Services, LLC

 

Plumbing, heating and air-conditioning services

 

Junior secured loan ($20,711 par due 4/2015)

 

10.00% Cash, 2.00% PIK

 

4/17/2007

 

20,711

 

20,711

 

$

1.00

(2)(4)

 

 

Diversified Collection Services, Inc.

 

Collections services

 

Senior secured loan ($10,205 par due 2/2011)

 

9.50% (Libor+ 6.75%/Q)

 

2/2/2005

 

9,043

 

10,205

 

$

1.00

(2)(14)

 

 

 

 

 

 

Senior secured loan ($3,632 par due 2/2011)

 

9.50% (Libor+ 6.75%/Q)

 

2/2/2005

 

3,632

 

3,632

 

$

1.00

(3)(14)

 

 

 

 

 

 

Senior secured loan ($1,931 par due 8/2011)

 

13.75% (Libor+ 11.00%/Q)

 

2/2/2005

 

1,931

 

1,931

 

$

1.00

(2)(14)

 

 

 

 

 

 

Senior secured loan ($7,492 par due 8/2011)

 

13.75% (Libor+ 11.00%/Q)

 

2/2/2005

 

7,492

 

7,492

 

$

1.00

(3)(14)

 

 

 

 

 

 

Preferred stock (14,927 shares)

 

 

 

5/18/2006

 

169

 

274

 

$

18.33

 

 

 

 

 

 

 

Common stock (114,004 shares)

 

 

 

2/2/2005

 

295

 

438

 

$

3.84

 

 

 

Driven Brands, Inc.

 

Automotive aftermarket car care franchisor

 

Senior subordinated loan ($41,524 par due 7/2015)

 

15.00%

 

1/28/2010

 

41,524

 

41,524

 

$

1.00

 

 

 

GCA Services Group, Inc.

 

Custodial services

 

Senior secured loan ($2,771 par due 12/2011)

 

12.00%

 

12/15/2006

 

2,688

 

2,771

 

$

1.00

 

 

 

 

 

 

 

Senior secured loan ($14,229 par due 12/2011)

 

12.00%

 

12/15/2006

 

14,256

 

14,229

 

$

1.00

(2)

 

 

 

 

 

 

Senior secured loan ($9,506 par due 12/2011)

 

12.00%

 

12/15/2006

 

9,506

 

9,506

 

$

1.00

(3)

 

 

Growing Family, Inc. and GFH Holdings, LLC (6)

 

Photography services

 

Senior secured revolving loan ($108 par due 3/2013)

 

9.00% (Libor+ 6.00%/Q) 5.00% Cash, 4.00% PIK

 

3/16/2007

 

108

 

48

 

$

0.44

(4)(14)

 

 

 

 

 

 

Senior secured revolving loan ($2,252 par due 3/2013)

 

9.00% (Libor+ 6.00%/Q) 5.00% Cash, 4.00% PIK

 

3/16/2007

 

2,244

 

1,002

 

$

0.44

(4)(14)

 

 

 

 

 

 

Senior secured loan ($6,811 par due 3/2013)

 

9.00% (Libor+ 6.00%/Q) 5.00% Cash, 4.00% PIK

 

3/16/2007

 

6,799

 

3,031

 

$

0.44

(4)(14)

 

 

 

 

 

 

Preferred stock (8,750 shares)

 

 

 

3/16/2007

 

 

 

$

 

 

 

 

 

 

 

Common stock (552,430 shares)

 

 

 

3/16/2007

 

872

 

 

$

 

 

 

 

 

 

 

Warrants to purchase up to 11,313,678 Class B units

 

 

 

3/16/2007

 

 

 

$

 

 

 

NPA Acquisition, LLC

 

Powersport vehicle auction operator

 

Junior secured loan ($12,000 par due 2/2013)

 

6.99% (Libor+ 6.75%/M)

 

8/23/2006

 

12,000

 

12,000

 

$

1.00

(3)

 

 

 

 

 

 

Common units (1,709 units)

 

 

 

8/23/2006

 

1,000

 

2,915

 

$

1,705.68

 

 

 

PODS Funding Corp.

 

Storage and warehousing

 

Senior subordinated loan ($25,125 par due 6/2015)

 

15.00%

 

12/23/2009

 

25,125

 

25,125

 

$

1.00

 

 

 

 

 

 

 

Subordinated loan ($6,500 par due 12/2015)

 

16.64% PIK

 

12/23/2009

 

5,114

 

5,070

 

$

0.78

(4)

 

 

Service Champ Inc.

 

Automotive maintenance and repair parts distributor

 

Senior subordinated loan ($26,425 par due 4/2012)

 

13.00% Cash, 2.50% PIK

 

1/28/2010

 

26,425

 

26,425

 

$

1.00

(4)

 

 

Web Services Company, LLC

 

Laundry service and equipment provider

 

Senior secured loan ($4,925 par due 8/2014)

 

7.00% (Base Rate+ 3.75%/Q)

 

6/15/2009

 

4,633

 

4,925

 

$

1.00

(3)

 

 

 

 

 

 

Senior subordinated loan ($13,308 par due 8/2016)

 

11.50% Cash, 2.50% PIK

 

8/29/2008

 

13,308

 

12,909

 

$

0.97

(4)

 

 

 

 

 

 

Senior subordinated loan ($25,965 par due 8/2016)

 

11.50% Cash, 2.50% PIK

 

8/29/2008

 

25,965

 

25,186

 

$

0.97

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

234,840

 

231,349

 

 

 

14.75

%

 

6



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net Assets

 

Education

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Campus Management Corp. and Campus Management Acquisition Corp.(6)

 

Education software developer

 

Senior secured loan ($3,281 par due 8/2013)

 

10.00% Cash, 3.00% PIK

 

2/8/2008

 

3,281

 

3,281

 

$

1.00

(4)(15)

 

 

 

 

 

 

Senior secured loan ($30,502 par due 8/2013)

 

10.00% Cash, 3.00% PIK

 

2/8/2008

 

30,502

 

30,502

 

$

1.00

(2)(4)(15)

 

 

 

 

 

 

Senior secured loan ($9,030 par due 8/2013)

 

10.00% Cash, 3.00% PIK

 

2/8/2008

 

9,030

 

9,030

 

$

1.00

(4)(15)

 

 

 

 

 

 

Preferred stock (493,147 shares)

 

8.00% PIK

 

2/8/2008

 

9,949

 

17,100

 

$

34.68

(4)

 

 

ELC Acquisition Corporation

 

Developer, manufacturer and retailer of educational products

 

Senior secured loan ($161 par due 11/2012)

 

3.50% (Libor+ 3.25%/M)

 

11/30/2006

 

161

 

156

 

$

0.97

(3)

 

 

 

 

 

 

Junior secured loan ($8,333 par due 11/2013)

 

7.25% (Libor+ 7.00%/M)

 

11/30/2006

 

8,333

 

8,333

 

$

1.00

(3)

 

 

Instituto de Banca y Comercio, Inc. & Leeds IV Advisors, Inc.(8)

 

Private school operator

 

Senior secured loan ($11,670 par due 3/2014)

 

8.50% (Libor+ 6.00%/Q)

 

3/15/2007

 

11,670

 

11,670

 

$

1.00

(3)(14)

 

 

 

 

 

 

Senior subordinated loan ($19,101 par due 6/2014)

 

13.00% Cash, 3.00% PIK

 

6/4/2008

 

19,101

 

19,101

 

$

1.00

(4)

 

 

 

 

 

 

Preferred stock (165,811 shares)

 

 

 

6/4/2008

 

978

 

2,470

 

$

14.90

 

 

 

 

 

 

 

Preferred stock (140,577 shares)

 

 

 

3/31/2009

 

755

 

2,094

 

$

14.90

 

 

 

 

 

 

 

Common stock (214,286 shares)

 

 

 

6/4/2008

 

54

 

3,192

 

$

14.90

 

 

 

 

 

 

 

Common stock (140,577 shares)

 

 

 

3/31/2009

 

35

 

2,094

 

$

14.90

 

 

 

JTC Education Holdings, Inc.

 

Postsecondary school operator

 

Senior secured loan ($20,250 par due 12/2014)

 

12.50% (Libor+ 9.50%/M)

 

12/31/2009

 

20,250

 

20,250

 

$

1.00

(14)

 

 

 

 

 

 

Senior secured loan ($11,000 par due 12/2014)

 

12.50% (Libor+ 9.50%/M)

 

12/31/2009

 

11,000

 

11,000

 

$

1.00

(3)(14)

 

 

Lakeland Finance, LLC

 

Private school operator

 

Junior secured loan ($2,423 par due 12/2012)

 

11.50%

 

12/13/2005

 

2,423

 

2,423

 

$

1.00

 

 

 

 

 

 

 

Junior secured loan ($24,231 par due 12/2012)

 

11.50%

 

12/13/2005

 

24,231

 

24,231

 

$

1.00

(2)

 

 

R3 Education, Inc. (formerly known as Equinox EIC Partners, LLC and MUA Management Company) and EIC Acquisitions Corp. (8)

 

Medical school operator

 

Senior secured loan ($7,275 par due 4/2013)

 

9.00% (Libor+ 6.00%/Q)

 

4/3/2007

 

7,275

 

10,691

 

$

1.47

(3)(14)

 

 

 

 

 

 

Senior secured loan ($10,113 par due 4/2013)

 

9.00% (Libor+ 6.00%/Q)

 

9/21/2007

 

10,113

 

14,860

 

$

1.47

(14)

 

 

 

 

 

 

Senior secured loan ($4,000 par due 4/2013)

 

9.00% (Libor+ 6.00%/Q)

 

9/21/2007

 

4,000

 

5,878

 

$

1.47

(3)(14)

 

 

 

 

 

 

Senior secured loan ($395 par due 6/2010)

 

9.00% (Libor+ 6.00%/Q)

 

4/24/2009

 

395

 

581

 

$

1.47

(14)

 

 

 

 

 

 

Senior secured loan ($5,203 par due 4/2013)

 

13.00% PIK

 

12/8/2009

 

1,483

 

7,645

 

$

1.47

(4)

 

 

 

 

 

 

Preferred stock (8,800 shares)

 

 

 

7/30/2008

 

2,200

 

1,100

 

$

125.00

 

 

 

 

 

 

 

Warrants to purchase up to 27,890 shares

 

 

 

12/8/2009

 

 

 

$

 

 

 

 

 

 

 

Common membership interest (26.27% interest)

 

 

 

9/21/2007

 

15,800

 

20,072

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

193,019

 

227,754

 

 

 

14.52

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADF Capital, Inc. & ADF Restaurant Group, LLC

 

Restaurant owner and operator

 

Senior secured revolving loan ($2,010 par due 11/2012)

 

6.50% (Libor+ 3.50%/Q)

 

11/27/2006

 

2,010

 

2,010

 

$

1.00

(14)

 

 

 

 

 

 

Senior secured revolving loan ($283 par due 11/2012)

 

6.50% (Base Rate+ 2.50%/Q)

 

11/27/2006

 

283

 

283

 

$

1.00

(14)

 

 

 

 

 

 

Senior secured loan ($23,464 par due 11/2013)

 

12.50% (Libor+ 6.50% Cash, 3.00% PIK/Q)

 

11/27/2006

 

23,470

 

23,464

 

$

1.00

(2)(4)(14)

 

 

 

 

 

 

Senior secured loan ($10,998 par due 11/2013)

 

12.50% (Libor+ 6.50% Cash, 3.00% PIK/Q)

 

11/27/2006

 

10,998

 

10,998

 

$

1.00

(3)(4)(14)

 

 

 

 

 

 

Promissory note ($13,105 par due 11/2016)

 

12.00% PIK

 

6/1/2006

 

13,093

 

13,105

 

$

1.00

(4)

 

 

 

 

 

 

Warrants to purchase up

 

 

 

6/1/2006

 

 

 

 

 

 

 

 

7



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net Assets

 

 

 

 

 

to 0.61 shares

 

 

 

 

 

 

 

 

 

 

 

 

 

Encanto Restaurants, Inc.(8)

 

Restaurant owner and operator

 

Junior secured loan ($20,997 par due 8/2013)

 

11.00%

 

8/16/2006

 

20,997

 

19,947

 

$

0.95

(2)

 

 

 

 

 

 

Junior secured loan ($3,999 par due 8/2013)

 

11.00%

 

8/16/2006

 

3,999

 

3,799

 

$

0.95

(3)

 

 

OTG Management, Inc.

 

Airport restaurant operator

 

Junior secured loan ($24,070 par due 6/2013)

 

20.50% (Libor+ 17.50%/M), 14.00% Cash, 6.50% PIK

 

6/19/2008

 

24,070

 

24,070

 

$

1.00

(4)(14)

 

 

 

 

 

 

Warrants to purchase up to 100,857 shares of common stock

 

 

 

 

 

100

 

3,112

 

$

30.85

 

 

 

 

 

 

 

Warrants to purchase up to 9 shares of common stock

 

 

 

 

 

 

 

$

 

 

 

Vistar Corporation and Wellspring Distribution Corp.

 

Food service distributor

 

Senior subordinated loan ($31,625 par due 5/2015)

 

13.50%

 

5/23/2008

 

31,625

 

30,676

 

$

0.97

 

 

 

 

 

 

 

Senior subordinated loan ($30,000 par due 5/2015)

 

13.50%

 

5/23/2008

 

30,000

 

29,100

 

$

0.97

(2)

 

 

 

 

 

 

Class A non-voting common stock (1,366,120 shares)

 

 

 

5/23/2008

 

7,500

 

4,050

 

$

2.96

 

 

 

 

 

 

 

 

 

 

 

 

 

168,145

 

164,614

 

 

 

10.49

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Booz Allen Hamilton, Inc.

 

Strategy and technology consulting services

 

Senior secured loan ($739 par due 7/2015)

 

7.50% (Libor+ 4.50%/S)

 

7/31/2008

 

727

 

739

 

$

1.00

(3)

 

 

 

 

 

 

Senior subordinated loan ($250 par due 7/2016)

 

13.00%

 

7/31/2008

 

219

 

250

 

$

1.00

 

 

 

 

 

 

 

Senior subordinated loan ($12,400 par due 7/2016)

 

13.00%

 

7/31/2008

 

12,309

 

12,400

 

$

1.00

(2)

 

 

Investor Group Services, LLC(6)

 

Financial services

 

Limited liability company membership interest (10.00% interest)

 

 

 

6/22/2006

 

 

500

 

 

 

 

 

Pillar Holdings LLC and PHL Holding Co.(6)

 

Mortgage services

 

Senior secured loan ($15,351 par due 11/2013)

 

5.78% (Base Rate+ 5.50%/B)

 

11/20/2007

 

15,351

 

15,351

 

$

1.00

(2)

 

 

 

 

 

 

Senior secured loan ($9,582 par due 11/2013)

 

5.78% (Base Rate+ 5.50%/B)

 

11/20/2007

 

9,582

 

9,582

 

$

1.00

(3)

 

 

 

 

 

 

Senior secured loan ($1,875 par due 5/2014)

 

14.50%

 

7/31/2008

 

1,875

 

1,875

 

$

1.00

 

 

 

 

 

 

 

Senior secured loan ($5,500 par due 5/2014)

 

14.50%

 

7/31/2008

 

5,500

 

5,500

 

$

1.00

(2)

 

 

 

 

 

 

Common stock (84.78 shares)

 

 

 

11/20/2007

 

3,768

 

8,873

 

$

104,654.16

 

 

 

Primis Marketing Group, Inc. and Primis Holdings, LLC(6)

 

Database marketing services

 

Senior subordinated loan ($10,222 par due 2/2013)

 

 

 

8/24/2006

 

10,222

 

102

 

$

0.01

(13)

 

 

 

 

 

 

Preferred units (4,000 units)

 

 

 

8/24/2006

 

3,600

 

 

$

 

 

 

 

 

 

 

Common units (4,000,000 units)

 

 

 

8/24/2006

 

400

 

 

$

 

 

 

Prommis Solutions, LLC, E-Default Services, LLC, Statewide Tax and Title Services, LLC & Statewide Publishing Services, LLC (formerly known as MR Processing Holding Corp.)

 

Bankruptcy and foreclosure processing services

 

Senior subordinated loan ($16,621 par due 2/2014)

 

11.50% Cash, 2.00% PIK

 

2/8/2007

 

16,621

 

16,621

 

$

1.00

(4)

 

 

 

 

 

 

Senior subordinated loan ($26,763 par due 2/2014)

 

11.50% Cash, 2.00% PIK

 

2/8/2007

 

26,763

 

26,763

 

$

1.00

(2)(4)

 

 

 

 

 

 

Preferred units (30,000 units)

 

 

 

4/11/2006

 

3,000

 

6,221

 

$

207.35

 

 

 

R2 Acquisition Corp.

 

Marketing services

 

Common stock (250,000 shares)

 

 

 

5/29/2007

 

250

 

250

 

$

1.00

 

 

 

Summit Business Media, LLC

 

Business media consulting services

 

Junior secured loan ($11,494 par due 7/2014)

 

 

 

8/3/2007

 

10,276

 

575

 

$

0.05

(3)(13)

 

 

VSS-Tranzact Holdings, LLC(6)

 

Management consulting services

 

Common membership interest (8.51% interest)

 

 

 

10/26/2007

 

10,204

 

8,163

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

130,667

 

113,765

 

 

 

7.25

%

 

8



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net Assets

 

Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Apogee Retail, LLC

 

For-profit thrift retailer

 

Senior secured loan ($26,047 par due 3/2012)

 

5.50% (Libor + 5.25%/M)

 

3/27/2007

 

26,047

 

24,744

 

$

0.95

(2)

 

 

 

 

 

 

Senior secured loan ($11,397 par due 3/2012)

 

5.50% (Libor + 5.25%/M)

 

3/27/2007

 

11,397

 

10,827

 

$

0.95

(3)

 

 

 

 

 

 

Senior secured loan ($2,962 par due 3/2012)

 

5.48% (Libor + 5.25%/M)

 

3/27/2007

 

2,962

 

2,813

 

$

0.95

(2)

 

 

 

 

 

 

Senior secured loan ($3,318 par due 9/2012)

 

12.00% Cash, 4.00% PIK

 

5/28/2008

 

3,318

 

3,318

 

$

1.00

(4)

 

 

 

 

 

 

Senior secured loan ($11,180 par due 9/2012)

 

12.00% Cash, 4.00% PIK

 

5/28/2008

 

11,180

 

11,180

 

$

1.00

(4)

 

 

Savers, Inc. and SAI Acquisition Corporation

 

For-profit thrift retailer

 

Common stock (1,170,182 shares)

 

 

 

8/8/2006

 

4,500

 

5,902

 

$

5.04

 

 

 

Things Remembered, Inc. and TRM Holdings Corporation

 

Personalized gifts retailer

 

Senior secured loan ($20 par due 9/2012)

 

6.50% (Base Rate + 2.25%), 5.50% Cash, 1.00% PIK

 

9/28/2006

 

19

 

19

 

$

0.91

(3)(4)(14)

 

 

 

 

 

 

Senior secured loan ($3,626 par due 9/2012)

 

6.50% (Base Rate + 2.25%), 5.50% Cash, 1.00% PIK

 

9/28/2006

 

3,624

 

3,300

 

$

0.91

(3)(4)(14)

 

 

 

 

 

 

Senior secured loan ($138 par due 9/2012)

 

6.50% (Base Rate + 2.25%), 5.50% Cash, 1.00% PIK

 

9/28/2006

 

137

 

126

 

$

0.91

(4)(14)

 

 

 

 

 

 

Senior secured loan ($36 par due 9/2012)

 

6.50% (Base Rate + 2.25%), 5.50% Cash, 1.00% PIK

 

9/28/2006

 

36

 

32

 

$

0.91

(3)(4)(14)

 

 

 

 

 

 

Senior secured loan ($28,402 par due 9/2012)

 

6.50% (Base Rate + 2.25%), 5.50% Cash, 1.00% PIK

 

9/28/2006

 

28,382

 

25,846

 

$

0.91

(4)(14)

 

 

 

 

 

 

Senior secured loan ($7,303 par due 9/2012)