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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, 2012

OR

 

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

Commission file number: 814-00827

Corporate Capital Trust, Inc.

(Exact name of registrant as specified in its charter)

 

Maryland   27-2857503
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)

CNL Center at City Commons

450 South Orange Avenue

Orlando, Florida

  32801
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code (866) 745-3797

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

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

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

 

Large accelerated filer               ¨    Accelerated filer               ¨
Non-accelerated filer               x  (Do not check if a smaller reporting company)    Smaller reporting company               ¨

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

The number of shares of common stock of the registrant outstanding as of May 4, 2012 was 20,581,218.


Table of Contents

CORPORATE CAPITAL TRUST, INC.

INDEX

 

PART I. FINANCIAL INFORMATION    PAGE  

    Item 1.

  Financial Statements:   
  Condensed Consolidated Statements of Assets and Liabilities (unaudited)      2   
  Condensed Consolidated Statement of Operations (unaudited)      3   
  Condensed Consolidated Statements of Changes in Net Assets (unaudited)      4   
  Condensed Consolidated Statement of Cash Flows (unaudited)      5   
  Condensed Consolidated Schedule of Investments as of March 31, 2012 (unaudited)      6   
  Condensed Consolidated Schedule of Investments as of December 31, 2011      13   
  Notes to Condensed Consolidated Financial Statements (unaudited)      19   

    Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      29   

    Item 3.

  Quantitative and Qualitative Disclosures about Market Risk      39   

    Item 4.

  Controls and Procedures      40   

PART II. OTHER INFORMATION

  

    Item 1.

  Legal Proceedings      40   

    Item 1A.

  Risk Factors      40   

    Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      40   

    Item 3.

  Defaults Upon Senior Securities      40   

    Item 4.

  (Removed and Reserved)      40   

    Item 5.

  Other Information      40   

    Item 6.

  Exhibits      40   

Signatures

       41   

Exhibit Index

     42   

 

1


Table of Contents
Item 1. Financial Statements

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Statements of Assets and Liabilities (unaudited)

 

         March 31, 2012              December 31, 2011      

Assets

     

Investments, at fair value (amortized cost of $228,288,185 and $113,825,998)

   $     232,389,145           $     114,304,509       

Cash denominated in foreign currency (cost of $2,349,925 and $—)

     2,362,769             —       

Dividends and interest receivable

     3,948,745             1,055,807       

Receivable for investments sold

     6,984,643             —       

Principal receivable

     251,004             59,399       

Receivable from advisors

     428,402             564,756       

Deferred financing costs

     204,548             203,275       

Prepaid expenses and other assets

     772             35,533       
  

 

 

    

 

 

 

Total assets

   $ 246,570,028           $ 116,223,279       
  

 

 

    

 

 

 

Liabilities

     

Revolving credit facility

   $ 63,740,000           $ 25,340,000       

Payable for investments purchased

     27,160,817             24,714,313       

Accrued performance-based incentive fees

     980,969             282,570       

Accrued investment advisory fees

     374,090             160,679       

Shareholders’ distributions payable

     —             398,637       

Accrued organization expense

     322,288             —       

Accrued administrative services

     45,594             56,390       

Accrued directors’ fees

     17,985             5,400       

Other accrued expenses and liabilities

     157,773             102,561       
  

 

 

    

 

 

 

Total liabilities

     92,799,516             51,060,550       
  

 

 

    

 

 

 

Net Assets

     

Common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 15,915,252 and 7,073,166 shares issued and outstanding

     15,915             7,073       

Paid-in capital in excess of par value

     149,736,314             64,626,198       

Undistributed (distributions in excess of) net investment income

     (117,020)            5,956       

Accumulated net unrealized appreciation on investments and foreign currency translation

     4,135,303             523,502       
  

 

 

    

 

 

 

Net assets

   $ 153,770,512           $ 65,162,729       
  

 

 

    

 

 

 

Net asset value per share

   $ 9.66           $ 9.21       
  

 

 

    

 

 

 

See notes to condensed consolidated financial statements.

 

2


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Statement of Operations (unaudited)

 

     For the three
months ended
    March 31, 2012    
 

Investment income

  

Interest income

   $     3,374,128       

Dividend income

     3,253       
  

 

 

 

Total investment income

     3,377,381       
  

 

 

 

Operating expenses

  

Investment advisory fees

     894,160       

Performance-based incentive fees

     875,246       

Organization expenses

     527,741       

Interest expense

     320,129       

Professional services

     208,541       

Administrative services

     169,132       

Director fees and expenses

     48,235       

Custodian and accounting fees

     40,477       

Other

     121,357       
  

 

 

 

Total operating expenses

     3,205,018       

Expense reimbursement

     (962,798)      
  

 

 

 

Net expenses

     2,242,220       
  

 

 

 

Net investment income

     1,135,161       
  

 

 

 

Realized and unrealized gain (loss):

  

Net realized gain on investments

     735,251       

Net realized loss on foreign currency transactions

     (6,285)      

Net change in unrealized appreciation on investments

     3,622,449       

Net change in unrealized depreciation on foreign currency translation

     (10,648)      
  

 

 

 

Net realized and unrealized gain

     4,340,767       
  

 

 

 

Net increase in net assets resulting from operations

   $ 5,475,928       
  

 

 

 

Net Investment Income Per Share

   $ 0.10       
  

 

 

 

Diluted and Basic Earnings Per Share

   $ 0.50       
  

 

 

 

Weighted Average Shares Outstanding

     10,949,283       

Dividends Declared Per Share

   $ 0.19       

See notes to condensed consolidated financial statements.

 

3


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Statements of Changes in Net Assets (unaudited)

 

     For the three
months ended
    March 31, 2012    
     For the three
months ended
     March 31, 2011    
 

Operations

     

Net investment income

   $ 1,135,161           $ —       

Net realized gain on investments and foreign currency transactions

     728,966             —       

Net change in unrealized appreciation on investments and foreign currency translation

     3,611,801             —       
  

 

 

    

 

 

 

Net increase in net assets resulting from operations

     5,475,928             —       
  

 

 

    

 

 

 

Distributions to shareholders from

     

Net investment income

     (1,141,117)            —       

Capital gains

     (728,966)         

Other sources

     (117,020)            —       
  

 

 

    

 

 

 

Net decrease in net assets resulting from shareholders distributions

     (1,987,103)            —       
  

 

 

    

 

 

 

Capital share transactions

     

Issuance of shares of common stock

     83,870,498             —       

Reinvestment of shareholders distributions

     1,248,460             —       
  

 

 

    

 

 

 

Net increase in net assets resulting from capital share transactions

     85,118,958             —       
  

 

 

    

 

 

 

Total increase in net assets

     88,607,783             —       

Net assets at beginning of period

     65,162,729             200,000       
  

 

 

    

 

 

 

Net assets at end of period

   $     153,770,512           $       200,000       
  

 

 

    

 

 

 

Capital share activity

     

Shares issued from subscriptions

     8,712,413             —       

Shares issued from reinvestment of distributions

     129,673             —       
  

 

 

    

 

 

 

Net increase in shares outstanding

     8,842,086             —       
  

 

 

    

 

 

 

Undistributed net investment income at end of period

   $ —           $ —       

See notes to condensed consolidated financial statements.

 

4


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Statement of Cash Flows (unaudited)

 

     For the three
months ended
    March 31, 2012    
 

Operating Activities:

  

Net increase in net assets resulting from operations

   $ 5,475,928       

Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:

  

Purchases of investments

     (135,291,836)      

Increase in payable for investments purchased, excluding mark to market

     2,422,631       

Proceeds from sales of investments

     21,546,060       

Net realized gain on investments

     (735,251)      

Net change in unrealized appreciation on investments

     (3,622,449)      

Net change in unrealized depreciation on foreign currency translation

     10,648       

Increase in short-term investments, net

     (2,261,866)      

Proceeds from principal payments

     2,372,642       

Net amortization/accretion

     (11,942)      

Increase in dividend and interest receivable, excluding mark to market

     (2,892,557)      

Increase in receivable for investments sold

     (6,984,643)      

Increase in principal receivable

     (191,605)      

Decrease in receivable from advisors

     136,354       

Decrease in prepaid expenses and other assets

     (391)      

Increase in accrued investment advisory fees

     213,411       

Increase in accrued performance-based incentive fees

     698,399       

Increase in accrued organization expenses

     322,288       

Increase in other accrued expenses and payables

     57,001       
  

 

 

 

Net cash used in operating activities

     (118,737,178)      
  

 

 

 

Financing Activities:

  

Net proceeds from issuance of shares of common stock

     83,870,498       

Distributions paid

     (1,137,280)      

Borrowings under credit facility

     38,400,000       

Deferred financing costs

     (46,115)      
  

 

 

 

Net cash provided by financing activities

     121,087,103       
  

 

 

 

Effect of exchange rate changes on cash

     12,844       
  

 

 

 

Net increase in cash

     2,362,769       

Cash, beginning of period

     —       
  

 

 

 

Cash, end of period

   $ 2,362,769       
  

 

 

 

Supplemental disclosure of cash flow information and non-cash financing activities:

  

Cash paid during period for:

  

Interest

   $ 261,538       

Dividend distributions reinvested

   $ 1,248,460       

See notes to condensed consolidated financial statements.

 

5


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments (unaudited)

As of March 31, 2012

 

Company (a)    Industry    Investments   

Interest

Rate

    

EURIBOR/

LIBOR

Floor

    

Maturity

Date

    

No.
Shares/

Principal
Amount

     Cost (c)      Fair Value     

% of Net  

Assets  

 

 

 

Non-Control/Non-Affiliate Investments(d)—144.6%

  

Alliant Holdings I, Inc.    Insurance    Senior Debt(e)      L + 300         —%         8/21/2014         84,076       $ 77,070       $ 83,340         0.1%     
      Subordinated Debt(e)(f)      11.00%         N/A         5/1/2015         6,872,000         7,228,425         7,207,010         4.7%     
                    

 

 

    

 

 

    

 

 

 
     7,305,495         7,290,350         4.8%     

 

 
Allison Transmission, Inc.    Automobiles & Components    Senior Debt(e)(g)      L + 350         —%         8/7/2017         7,545         7,191         7,513         0.0%     

 

 
American Rock Salt Company LLC    Materials    Senior Debt(e)(h)      L + 425         1.25%         4/25/2017         5,586,658         5,250,465         5,335,286         3.5%     

 

 
Amkor Technologies, Inc.    Semiconductors & Semiconductor Equipment    Subordinated Debt(e)(g)      7.38%         N/A         5/1/2018         208,000         205,495         222,820         0.1%     

 

 
Aramark Corp.    Commercial & Professional Services    Subordinated Debt(e)      8.50%         N/A         2/1/2015         2,863,000         2,944,674         2,934,604         1.9%     

 

 
Ardagh Packaging Holdings Ltd. (IE)(i)    Capital Goods    Senior Debt(e)(f)(g)      7.38%         N/A         10/15/2017         100,000         100,473         107,250         0.1%     

 

 
Aspect Software, Inc.    Technology Hardware & Equipment    Senior Debt(e)      10.63%         N/A         5/15/2017         1,484,000         1,527,728         1,584,170         1.0%     

 

 
Aspen Dental Management, Inc.    Health Care Equipment & Services    Senior Debt(e)      L + 550         1.50%         10/6/2016         5,354,712         5,272,642         5,326,252         3.5%     

 

 
Asset Acceptance Capital Corp.    Diversified Financials    Senior Debt(e)(g)      L + 725         1.50%         11/14/2017         474,177         444,845         473,584         0.3%     

 

 
Asurion, LLC    Software & Services    Senior Debt(e)      L + 400         1.50%         5/24/2018         3,285,425         3,236,536         3,261,162         2.1%     
      Senior Debt(e)      L + 750         1.50%         5/24/2019         998,480         998,480         1,013,457         0.7%     
                    

 

 

    

 

 

    

 

 

 
     4,235,016         4,274,619         2.8%     

 

 
Avaya, Inc.    Technology Hardware & Equipment    Senior Debt(e)(f)      7.00%         N/A         4/1/2019         2,617,000         2,566,327         2,623,542         1.7%     

 

 
Avis Budget Car Rental, LLC    Transportation    Senior Debt(e)(g)      L + 500         1.25%         9/22/2018         177,171         173,820         178,869         0.1%     

 

 
Bill Barrett Corporation    Energy    Subordinated Debt(e)(g)      7.63%         N/A         10/1/2019         251,000         257,218         254,765         0.2%     

 

 
BJ’s Wholesale Club, Inc.    Food & Staples Retailing    Senior Debt(e)      L + 400         1.25%         9/28/2018         1,110,516         1,058,858         1,118,278         0.7%     

 

 
BNY ConvergEX Group, LLC    Diversified Financials    Senior Debt(e)(g)      L + 350         1.50%         12/19/2016         110,424         109,068         110,148         0.1%     
      Senior Debt(e)(g)      L + 350         1.50%         12/19/2016         250,758         247,680         250,131         0.2%     
      Senior Debt(e)(g)      L + 700         1.75%         12/17/2017         1,260,169         1,253,618         1,253,868         0.8%     
      Senior Debt(e)(g)      L + 700         1.75%         12/17/2017         528,772         526,023         526,129         0.3%     
                    

 

 

    

 

 

    

 

 

 
     2,136,389         2,140,276         1.4%     

 

 
Boise Paper Holdings, LLC    Materials    Subordinated Debt(e)(g)      9.00%         N/A         11/1/2017         146,000         154,506         160,965         0.1%     

 

 
Building Materials Corporation of America    Capital Goods    Subordinated Debt(e)(f)      6.75%         N/A         5/1/2021         1,802,000       $     1,945,788       $     1,912,372         1.2%     

 

 
Cablevision Systems Corp.    Media    Subordinated Debt(e)(g) Subordinated Debt(e)(g)     
 
7.75%
8.63%
  
  
    
 
N/A
N/A
  
  
    
 
4/15/2018
9/15/2017
  
  
    
 
426,000
812,000
  
  
    
 
431,130
885,013
  
  
    
 
445,170
884,065
  
  
    
 
0.3%  
0.6%  
  
  
                    

 

 

    

 

 

    

 

 

 
                       1,316,143         1,329,235         0.9%     

 

 
Caesars Entertainment Operating Co., Inc.    Consumer Services    Senior Debt(e)(g)      L + 300         —%         1/28/2015         12,765         11,768         12,171         0.0%     
      Senior Debt(e)(g)      11.25%         N/A         6/1/2017         1,018,000         1,075,810         1,109,620         0.7%     
                    

 

 

    

 

 

    

 

 

 
     1,087,578         1,121,791         0.7%     

 

 

See notes to condensed consolidated financial statements.

 

6


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of March 31, 2012

 

Company (a)    Industry    Investments   

Interest

Rate

    

EURIBOR/

LIBOR

Floor

    

Maturity

Date

    

No.
Shares/

Principal
Amount

     Cost (c)      Fair Value     

% of Net  

Assets  

 

 

 
California Pizza Kitchen, Inc.    Food & Staples Retailing    Senior Debt(e)(h)      L + 550         1.25%         7/7/2017         4,338,424         4,291,267         4,316,731         2.8%     

 

 
Catalina Marketing Corporation    Media    Subordinated Debt(e)(f)      10.50%         N/A         10/1/2015         6,698,000         6,657,884         6,396,590         4.2%     

 

 
CDW, LLC    Technology Hardware & Equipment    Senior Debt(e)      L + 350         —%         10/10/2014         1,069,055         1,047,005         1,066,954         0.7%     

 

 
Cequel Communications, LLC    Media    Subordinated Debt(e)(f)      8.63%         N/A         11/15/2017         524,000         567,683         562,645         0.4%     

 

 
Charter Communications Operating Holdings, LLC    Media    Subordinated Debt(e)(g)      7.25%         N/A         10/30/2017         573,000         582,796         614,543         0.4%     

 

 
CHS / Community Health Systems, Inc.    Health Care Equipment & Services    Subordinated Debt(e)(f)(g) Subordinated Debt(e)(g)     
 
8.00%
8.88%
  
  
    
 
N/A
N/A
  
  
    
 
11/15/2019
7/15/2015
  
  
    
 
905,000
520,000
  
  
    
 
913,921
528,437
  
  
    
 
934,413
538,850
  
  
    
 
0.6%  
0.4%  
  
  
                    

 

 

    

 

 

    

 

 

 
                       1,442,358         1,473,263         1.0%     

 

 
Citco III, Ltd. (IE)(i)    Diversified Financials    Senior Debt(e)(g)      L + 425         1.25%         6/29/2018         17,264         17,304         16,908         0.0%     

 

 
ClubCorp Club Operations, Inc.    Consumer Services    Senior Debt(e)      L + 450         1.50%         11/30/2016         136,746         129,538         137,886         0.1%     

 

 
Continental Airlines, Inc.    Transportation    Senior Debt(e)(g)      7.34%         N/A         4/19/2014         448,573         454,736         448,012         0.3%     
      Senior Debt(e)(g)      8.31%         N/A         4/2/2018         752,446         747,693         761,852         0.5%     
                    

 

 

    

 

 

    

 

 

 
     1,202,429         1,209,864         0.8%     

 

 
CRC Health Corp.    Health Care Equipment & Services   

Senior Debt(e)

Subordinated Debt(e)

    
 
L + 450
10.75%
  
  
    
 
—%
N/A
  
  
    
 
11/16/2015
2/1/2016
  
  
    
 
957,169
1,114,000
  
  
    
 
912,314
1,067,440
  
  
    
 
871,024
1,027,665
  
  
    
 
0.6%  
0.7%  
  
  
                    

 

 

    

 

 

    

 

 

 
                       1,979,754         1,898,689         1.3%     

 

 
Cricket Communications, Inc.    Telecommunication Services    Senior Debt(e)(g)      7.75%         N/A         5/15/2016         1,529,000         1,540,550         1,613,095         1.1%     

 

 
DineEquity, Inc.    Consumer Services    Senior Debt(e)(g)      L + 300         1.25%         10/19/2017         67,867       $ 65,241       $ 68,003         0.0%     

 

 
DuPont Fabros Technology, LP    Real Estate    Subordinated Debt(e)(g)      8.50%         N/A         12/15/2017         100,000         106,378         110,000         0.1%     

 

 
E*Trade Financial Corp.    Diversified Financials    Subordinated Debt(e)(g)      6.75%         N/A         6/1/2016         11,000         11,080         11,248         0.0%     
      Subordinated Debt(e)(g)      7.88%         N/A         12/1/2015         1,269,000         1,264,712         1,289,621         0.8%     
      Subordinated Debt(e)(g)      12.50%         N/A         11/30/2017         839,000         955,642         976,386         0.6%     
                    

 

 

    

 

 

    

 

 

 
     2,231,434         2,277,255         1.4%     

 

 
Easton-Bell Sports, Inc.    Consumer Durables & Apparel    Senior Debt(e)      9.75%         N/A         12/1/2016         1,190,000         1,272,048         1,316,438         0.9%     

 

 
Education Management, LLC    Consumer Services    Senior Debt(e)(g)(h)      L + 700         1.25%         3/30/2018         7,136,303         6,922,214         7,136,303         4.6%     
      Subordinated Debt(e)(g)      8.75%         N/A         6/1/2014         3,344,000         3,360,047         3,210,240         2.1%     
                    

 

 

    

 

 

    

 

 

 
     10,282,261         10,346,543         6.7%     

 

 

See notes to condensed consolidated financial statements.

 

7


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of March 31, 2012

 

Company (a)    Industry    Investments   

Interest

Rate

    

EURIBOR/

LIBOR

Floor

    

Maturity

Date

    

No.
Shares/

Principal
Amount

     Cost (c)      Fair Value     

% of Net  

Assets  

 

 

 
Emergency Medical Services Corp.    Health Care Equipment & Services    Senior Debt(e)(h)      L + 375             1.50%         5/25/2018         1,542,374         1,533,109         1,545,960         1.0%     

 

 
Express, LLC / Express Finance Corp.    Retailing    Subordinated Debt(e)(g)      8.75%             N/A         3/1/2018         43,000         46,145         47,623         0.0%     

 

 
Fidelity National Information Services, Inc.    Software & Services    Subordinated Debt(e)(g) Subordinated Debt(e)(g)     

 

7.63%    

7.88%    

  

  

    
 
N/A
N/A
  
  
    
 
7/15/2017
7/15/2020
  
  
    
 
26,000
114,000
  
  
    
 
27,278
122,970
  
  
    
 
28,470
126,540
  
  
    
 
0.0%  
0.1%  
  
  
                    

 

 

    

 

 

    

 

 

 
                       150,248         155,010         0.1%     

 

 
FTI Consulting, Inc.    Diversified Financials    Subordinated Debt(e)(g)      6.75%             N/A         10/1/2020         87,000         86,833         93,199         0.1%     

 

 
GCI, Inc.    Telecommunication Services    Subordinated Debt(e)      8.63%             N/A         11/15/2019         4,303,000         4,598,841         4,684,891         3.0%     

 

 
General Nutrition Centers, Inc.    Retailing    Senior Debt(e)(g)      L + 300             1.25%         3/2/2018         23,369         23,370         23,360         0.0%     

 

 
Genesys Telecommunications Laboratories Inc.    Software & Services    Subordinated Debt (EUR)(l) Common Stock     

 

12.50%    

—%    

  

  

    
 
N/A
N/A
  
  
     1/31/2020        
 
2,044,000
448,908
  
  
    
 
2,627,122
448,908
  
  
    
 
2,726,082
448,908
  
  
    
 
1.8%  
0.3%  
  
  
                    

 

 

    

 

 

    

 

 

 
                       3,076,030         3,174,990         2.1%     

 

 
Good Sam Enterprises, LLC    Media    Senior Debt(e)      11.50%             N/A         12/1/2016         7,196,000         7,357,529         7,411,880         4.8%     

 

 
Goodman Global, Inc.    Capital Goods    Senior Debt(e)(h)      L + 700             2.00%         10/30/2017         1,246,673         1,254,091         1,271,868         0.8%     

 

 
Great Lakes Dredge & Dock Corp.    Capital Goods    Subordinated Debt(e)(g)      7.38%             N/A         2/1/2019         691,000         706,848         706,548         0.5%     

 

 
Guitar Center, Inc.    Retailing    Senior Debt(e)      L + 525             —%         4/9/2017         7,238,739         6,551,188         6,890,773         4.5%     

 

 

The Gymboree Corp.

   Retailing    Senior Debt(e)(h)      L + 350             1.50%         2/23/2018         6,938,890         $ 6,504,602       $ 6,591,113         4.3%       
     

Subordinated Debt(e)

     9.13%             N/A         12/1/2018         748,000           612,756         690,030         0.5%       
                    

 

 

    

 

 

    

 

 

 
                                                     7,117,358         7,281,143         4.8%       

HUB International, Ltd.

   Insurance    Subordinated Debt(e)(f)      9.00%             N/A         12/15/2014         8,674,000           8,877,613         8,890,850         5.8%       
     

Senior Debt(e)

     L + 250             —%         6/13/2014         1,159,613           1,115,636         1,144,306         0.7%       
     

Senior Debt(e)

     L + 475             2.00%         6/13/2014         331,500           331,500         332,675         0.2%       
                    

 

 

    

 

 

    

 

 

 
                                                     10,324,749         10,367,831         6.7%       

Hubbard Radio, LLC

   Media    Senior Debt(e)      L + 375             1.50%         4/28/2017         604,600           600,328         607,623         0.4%       
     

Senior Debt(e)

     L + 725             1.50%         4/30/2018         3,934,770           3,915,760         3,998,710         2.6%       
                    

 

 

    

 

 

    

 

 

 
                                                     4,516,088         4,606,333         3.0%       

Husky Injection Molding Systems, Ltd. (CA)(i)

   Capital Goods    Senior Debt(e)(g)      L + 525             1.25%         6/29/2018         1,156,732           1,146,723         1,165,616         0.8%       

Immucor, Inc.

   Health Care Equipment & Services    Senior Debt(e)      L + 575             1.50%         8/17/2018         2,522,420           2,526,679         2,554,744         1.6%       

Ineos Holdings, Ltd. (UK)(i)

   Materials    Subordinated Debt(g)(EUR)      E + 600 PIK             3.00%         6/16/2015         1,497,686           1,840,058         2,080,108         1.4%       

Infor Enterprise Solutions Holdings, Inc.

   Software & Services    Senior Debt(e)      L + 575             —%         7/28/2015         1,606,936           1,542,201         1,601,914         1.1%       

Interactive Data Corp.

   Diversified Financials    Senior Debt(e)      L + 325             1.25%         2/11/2018         17,629           17,275         17,649         0.0%       

See notes to condensed consolidated financial statements.

 

8


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of March 31, 2012

 

                    Company (a)    Industry    Investments   

Interest

Rate

    

EURIBOR/

LIBOR

Floor

    

Maturity

Date

    

No.
Shares/

Principal
Amount

     Cost (c)      Fair Value     

% of Net  

Assets  

 

 

 

iPayment, Inc.

   Software & Services    Senior Debt(e)      L + 425             1.50%         5/8/2017         1,910,441           1,889,233         1,912,915         1.2%       
     

Subordinated Debt(e)

     10.25%             N/A         5/15/2018         4,013,000           3,779,533         3,691,960         2.4%       
                    

 

 

    

 

 

    

 

 

 
                                                     5,668,766         5,604,875         3.6%       

IPC Systems, Inc.

   Technology Hardware & Equipment    Senior Debt(e)(h)      L + 525             —%         7/30/2017         3,896,512           3,832,945         3,847,806         2.5%       

J. Crew Group, Inc.

   Retailing    Subordinated Debt(e)      8.13%             N/A         3/1/2019         1,866,000           1,776,378         1,898,655         1.2%       

Jo-Ann Stores, Inc.

   Retailing    Senior Debt(e)      L + 350             1.25%         3/16/2018         22,942           22,729         22,860         0.0%       

Kerling PLC (UK)(i)

   Materials    Senior Debt(f)(g)(EUR)      10.63%             N/A         2/1/2017         1,745,000           2,326,927         2,315,669         1.5%       

Kinetic Concepts, Inc.

   Health Care Equipment & Services    Senior Debt(e)      L + 525             1.25%         11/4/2016         1,316,771         $ 1,311,083       $ 1,326,976         0.9%       
      Senior Debt(e)      L + 575             1.25%         5/4/2018         374,240           365,640         382,292         0.3%       
      Senior Debt(e)(f)      10.50%             N/A         11/1/2018         4,051,000           4,052,256         4,207,976         2.7%       
                    

 

 

    

 

 

    

 

 

 
         5,728,979         5,917,244         3.9%       

Lawson Software, Inc.

   Software & Services    Subordinated Debt(e)(f)      11.50%             N/A         7/15/2018         549,000           543,526         606,645         0.4%       

Liz Claiborne Inc

   Consumer Durables & Apparel    Senior Debt(e)(f)(g)      10.50%             N/A         4/15/2019         2,098,000           2,247,949         2,328,780         1.5%       

Local TV Finance, LLC

   Media    Senior Debt(e)      L + 400             —%         5/7/2015         370,225           355,417         369,570         0.2%       

Lord & Taylor Holdings, LLC

   Consumer Durables & Apparel    Senior Debt(e)      L + 450             1.25%         1/11/2019         93,389           94,089         94,089         0.1%       

McJunkin Red Man Corp.

   Energy    Senior Debt(e)      9.50%             N/A         12/15/2016         3,393,000           3,374,958         3,698,370         2.4%       

MedAssets, Inc.

   Health Care Equipment & Services    Subordinated Debt(e)(g)      8.00%             N/A         11/15/2018         489,000           490,361         513,450         0.3%       

MetroPCS Wireless, Inc.

   Telecommunication Services    Subordinated Debt(e)(g)      7.88%             N/A         9/1/2018         1,762,000           1,842,349         1,854,505         1.2%       

Michaels Stores, Inc.

   Retailing    Senior Debt(e)      L + 225             —%         10/31/2013         215,942           203,883         215,837         0.1%       
      Senior Debt(e)      L + 450             —%         7/31/2016         681,714           667,773         685,388         0.4%       
                    

 

 

    

 

 

    

 

 

 
         871,656         901,225         0.5%       

Momentive Performance Materials USA, Inc.

   Materials    Senior Debt(e)      L + 350             —%         5/5/2015         1,208,974           1,160,987         1,164,206         0.8%       

Mueller Water Products, Inc.

   Capital Goods    Subordinated Debt(e)(g) Subordinated Debt(e)(g)     
 
7.38%    
8.75%    
  
  
    
 
N/A
N/A
  
  
    
 
6/1/2017
9/1/2020
  
  
    
 
1,034,000  
250,000  
  
  
    
 
876,952
253,628
  
  
    
 
1,018,490
280,000
  
  
    
 
0.7%    
0.2%    
  
  
                    

 

 

    

 

 

    

 

 

 
         1,130,580         1,298,490         0.9%       

NBTY, Inc.

   Household & Personal Products    Senior Debt(e)      L + 325             1.00%         10/1/2017         26,355           26,043         26,418         0.0%       

The Neiman Marcus Group, Inc.

   Retailing    Senior Debt(e) Subordinated Debt(e)     
 
L + 350    
10.38%    
  
  
    
 
1.25%
N/A
  
  
    
 
5/16/2018
10/15/2015
  
  
    
 
188,713  
1,967,000  
  
  
    
 
181,887
2,036,609
  
  
    
 
188,757
2,048,158
  
  
    
 
0.1%    
1.3%    
  
  
                    

 

 

    

 

 

    

 

 

 
         2,218,496         2,236,915         1.4%       

New Enterprise Stone & Lime Co., Inc.

   Capital Goods    Senior Debt(e)(f)     
 
4% CASH +    
9% PIK    
  
  
     N/A         3/15/2018         6,002,000           6,002,000         6,197,065         4.0%       

See notes to condensed consolidated financial statements.

 

9


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of March 31, 2012

 

Company (a)    Industry    Investments   

Interest

Rate

    

EURIBOR/

LIBOR

Floor

    

Maturity

Date

    

No.
Shares/

Principal
Amount

     Cost (c)      Fair Value     

% of Net  

Assets  

 

 

 

Newport Television LLC

   Media    Senior Debt      L + 675             3.00%         9/14/2016         283,908           279,963         285,741         0.1%       

Nexstar Broadcasting, Inc.

   Media    Senior Debt(e)(g)      8.88%             N/A         4/15/2017         170,000           177,585         182,325         0.1%       

NPC International, Inc.

   Consumer Services    Senior Debt(e)      L + 525             1.50%         12/28/2018         1,515,463         $ 1,515,463       $ 1,524,934         1.0%       

NuSil Technology, LLC

   Materials    Senior Debt(e)      L + 400             1.25%         4/7/2017         24,612           24,612         24,653         0.0%       

Nuveen Investments, Inc.

   Diversified Financials    Senior Debt(e)(g)      L + 525             —%         5/13/2017         25,629           23,998         25,710         0.0%       
     

Senior Debt(e)(g)

     L + 600             1.25%         5/13/2017         282,184           276,742         284,770         0.2%       
     

Senior Debt(e)(g)

     L + 700             1.25%         2/28/2019         641,271           634,922         651,423         0.4%       
     

Subordinated Debt(e)(g)

     5.50%             N/A         9/15/2015         889,000           820,443         813,435         0.5%       
     

Subordinated Debt(e)(g)

     10.50%             N/A         11/15/2015         4,694,000           4,789,755         4,864,157         3.2%       
                    

 

 

    

 

 

    

 

 

 
                                                     6,545,860         6,639,495         4.3%       

Ocwen Financial Corp.

   Banks    Senior Debt(e)(g)      L + 550             1.50%         9/1/2016         357,946           353,706         359,885         0.2%       

Penn National Gaming, Inc.

   Consumer Services    Subordinated Debt(e)(g)      8.75%             N/A         8/15/2019         401,000           431,747         450,123         0.3%       

Petco Animal Supplies, Inc.

   Retailing    Senior Debt(e)      L + 325             1.25%         11/24/2017         118,888           113,186         118,985         0.1%       

Pharmaceutical Product Development, Inc.

   Pharmaceuticals, Biotechnology & Life Sciences    Senior Debt(e)      L + 500             1.25%         12/5/2018         806,641           796,490         817,671         0.5%       

Pinnacle Entertainment, Inc.

   Consumer Services    Subordinated Debt(e)(g)      8.63%             N/A         8/1/2017         4,215,000           4,495,343         4,594,350         3.0%       

Pinnacle Foods Finance, LLC

   Food & Staples Retailing    Senior Debt(e)      L + 250             —%         4/2/2014         546,314           530,761         546,109         0.4%       

Prestige Brands, Inc.

  

Pharmaceuticals, Biotechnology

& Life Sciences

   Senior Debt(e)(g)      L + 400             1.25%         1/31/2019         107,067           105,482         107,907         0.1%       
     

Subordinated Debt(e)(f)(g)

     8.13%             N/A         2/1/2020         227,000           227,000         246,011         0.2%       
                    

 

 

    

 

 

    

 

 

 
                                                     332,482         353,918         0.3%       

Roofing Supply Group LLC

   Retailing    Senior Debt(e)(f)      8.63%             N/A         12/1/2017         1,490,000           1,597,569         1,579,400         1.0%       

Roundy’s Supermarkets, Inc.

   Food & Staples Retailing    Senior Debt(e)(g)      L + 450             1.25%         2/13/2019         1,296,326           1,277,113         1,307,267         0.9%       

Ryerson, Inc.

   Materials    Senior Debt(e)      L + 737.5             —%         11/1/2014         98,000           97,397         92,120         0.1%       
     

Senior Debt(e)

     12.00%             N/A         11/1/2015         44,000           46,387         45,100         0.0%       
                    

 

 

    

 

 

    

 

 

 
                                                     143,784         137,220         0.1%       

Schaeffler AG (UK)(i)

   Automobiles & Components    Senior Debt(f)(g)(h)      L + 475             1.25%         1/27/2017         49,189           49,374         49,520         0.0%       

Scitor Corp.

   Capital Goods    Senior Debt(e)      L + 350             1.50%         2/15/2017         22,395           22,345         21,808         0.0%       

Sedgwick Claims Management Services Holdings, Inc.

   Insurance    Senior Debt(e)      L + 350             1.50%         12/31/2016         113,044       $ 107,560       $ 112,125         0.1%     
      Senior Debt(e)      L + 750             1.50%         5/30/2017         1,338,888         1,315,473         1,335,540         0.9%     
                    

 

 

    

 

 

    

 

 

 
     1,423,033         1,447,665         1.0%     

 

 

Sheridan Holdings, Inc.

   Health Care Equipment & Services    Senior Debt(e)      L + 225             —%         6/13/2014         347,264         322,998         340,537         0.2%     

 

 

The SI Organization, Inc.

   Capital Goods    Senior Debt(e)      L + 325             1.25%         11/22/2016         187,432         176,021         179,935         0.1%     

 

 

Sinclair Television Group, Inc.

   Media    Subordinated Debt(e)(g)      8.38%             N/A         10/15/2018         27,000         28,328         29,160         0.0%     

 

 

Skilled Healthcare Group, Inc.

   Health Care Equipment & Services    Senior Debt(e)(g)      L + 375             1.50%         4/9/2016         16,137         15,704         15,830         0.0%     

 

 

SNL Financial, LLC

   Commercial & Professional Services    Senior Debt(e)      L + 700             1.50%         8/17/2018         700,538         703,098         702,640         0.5%     

 

 

Softbrands, Inc.

   Software & Services    Senior Debt(e)      L + 525             1.50%         7/5/2017         1,762,019         1,732,520         1,769,234         1.2%     

 

 

Solutia, Inc.

   Materials    Subordinated Debt(e)(g)      7.88%             N/A         3/15/2020         120,000         126,223         140,700         0.1%     

 

 

Sophia, LP

   Software & Services    Senior Debt(e)      L + 500             1.25%         7/19/2018         406,204         400,242         412,976         0.3%     

 

 

Sports Authority, Inc.

   Retailing    Senior Debt(e)      L + 600             1.50%         11/16/2017         1,409,529         1,363,994         1,357,559         0.9%     

 

 

Springleaf Financial Funding Co.

   Diversified Financials    Senior Debt(e)(g)      L + 425             1.25%         5/10/2017         2,551,580         2,284,207         2,351,166         1.5%     

 

 

Sprint Nextel Corp.

   Telecommunication Services    Subordinated Debt(e)(g)      8.38%             N/A         8/15/2017         664,000         576,912         640,760         0.4%     

 

 

SSI Investments II, Ltd.

   Software & Services    Subordinated Debt(e)      11.13%             N/A         6/1/2018         1,422,000         1,510,093         1,578,420         1.0%     

 

 

Standard Chartered Bank (SG)(i)

   Banks    Subordinated Debt(f)(g)(m)      L + 1600             —%         4/1/2014         3,310,000         3,341,283         3,280,541         2.1%     

 

 

See notes to condensed consolidated financial statements.

 

 

10


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of March 31, 2012

 

Company (a)    Industry    Investments   

Interest

Rate

    

EURIBOR/

LIBOR

Floor

    

Maturity

Date

    

No.
Shares/

Principal
Amount

     Cost (c)      Fair Value     

% of Net  

Assets  

 

 

 

Symphony / IRI Group, Inc.

   Commercial & Professional Services    Senior Debt(e)      L + 375         1.25%         12/1/2017         19,972         19,575         19,988         0.0%     

 

 

TowerCo Finance LLC

   Real Estate    Senior Debt      L + 375         1.50%         2/2/2017         30,256         29,662         30,398         0.0%     

 

 

TransUnion, LLC

   Diversified Financials    Subordinated Debt(e)      11.38%         N/A         6/15/2018         1,403,000         1,555,039         1,645,018         1.1%     

 

 

Triple Point Technology, Inc.

   Software & Services    Senior Debt(e)      L + 650         1.50%         10/27/2017         200,064         192,465         202,065         0.1%     

 

 

Univar, Inc.

   Materials    Senior Debt(e)      L + 350         1.50%         6/30/2017         960,475         932,420         963,476         0.6%     

 

 

Vision Solutions, Inc.

   Commercial & Professional Services    Senior Debt(e)      L + 450         1.50%         7/23/2016         1,425,000         1,409,840         1,417,875         0.9%     

 

 

VWR Funding, Inc.

  

Pharmaceuticals, Biotechnology

& Life Sciences

   Senior Debt(e)      L + 250         —%         6/30/2014         147,212         $137,376         $146,415         0.1%     
      Subordinated Debt(e)     
 
10.25% CASH
or 11.25% PIK
  
  
     N/A         7/15/2015         4,506,000         4,662,059         4,663,710         3.0%     
                    

 

 

    

 

 

    

 

 

 
                       4,799,435         4,810,125         3.1%     

 

 

Warner Chilcott Co., LLC

  

Pharmaceuticals, Biotechnology

& Life Sciences

   Subordinated Debt(e)(g)      7.75%         N/A         9/15/2018         1,225,000         1,219,076         1,277,063         0.8%     

 

 

West Corp.

   Software & Services    Senior Debt      L + 425         —%         7/15/2016         4,987         4,841         5,003         0.0%     
      Subordinated Debt(e)      7.88%         N/A         1/15/2019         1,743,000         1,730,700         1,856,295         1.2%     
      Subordinated Debt(e)      8.63%         N/A         10/1/2018         2,600,000         2,645,367         2,853,500         1.9%     
                    

 

 

    

 

 

    

 

 

 
     4,380,908         4,714,798         3.1%     

 

 

Wm. Bolthouse Farms, Inc.

   Food, Beverage & Tobacco    Senior Debt(e)      L + 750         2.00%         8/11/2016         500,000         499,623         503,543         0.3%     

 

 

Zayo Group, LLC

   Telecommunication Services    Senior Debt(e)(h)      L + 550         1.50%         12/1/2016         2,932,908         2,900,200         2,946,839         1.9%     
      Senior Debt(e)      10.25%         N/A         3/15/2017         2,005,000         2,144,206         2,240,587         1.5%     
                    

 

 

    

 

 

    

 

 

 
     5,044,406         5,187,426         3.4%     

 

 

Total Non-Control/Non-Affiliate Investments

  

     218,311,567         222,412,527         144.6%     
                    

 

 

    

 

 

    

 

 

 

Short Term Investments—6.5%

                          
Goldman Sachs Financial Square Funds - Prime Obligations Fund       Short Term Investments(e)      0.15%(j)         N/A         N/A         8,400,710         8,400,710         8,400,710         5.5%     

 

 
State Street Institutional Liquid Reserves Fund       Short Term Investments      0.23%(j)         N/A         N/A         1,575,908         1,575,908         1,575,908         1.0%     

 

 

Total Short Term Investments

  

     9,976,618         9,976,618         6.5%     
                    

 

 

    

 

 

    

 

 

 

TOTAL INVESTMENTS—151.1%(k)

  

   $  228,288,185         232,389,145         151.10%     
                    

 

 

    

 

 

    

 

 

 

LIABILITIES IN EXCESS OF OTHER ASSETS—(51.1%)

  

        (78,618,633)         (51.10)%     
                       

 

 

    

 

 

 

NET ASSETS—100.0%

  

      $  153,770,512         100.00%     
                       

 

 

    

 

 

 
(a) Security may be an obligation of one or more entities affiliated with the named company.
(b) (Reserved).
(c) Represents amortized cost for debt securities and cost for common stock.

(d)   Non-Control/Non-Affiliate investments are defined by the Investment Company Act of 1940, as amended (“1940 Act”) as investments that are neither Control Investments nor Affiliate Investments. Controlled investments are defined by the 1940 Act as investments in which more than 25% of the voting securities are owned or where the ability to nominate greater than 50% of the board representation is maintained. Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% of the voting securities are owned and the investments are not classified as Controlled investments.

 

11


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of March 31, 2012

 

(e) Security or portion thereof held within CCT Funding, LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Deutsche Bank.
(f) 144A securities. Securities restricted for resale to Qualified Institutional Buyers.

(g)   The investment is not a qualifying asset under the Investment Company Act of 1940, as amended, or the 1940 Act. As of March 31, 2012 , the portfolio held 29.1% of non-qualifying assets under the 1940 Act, as a percentage of total assets, as defined in Section 55(a) of the 1940 Act.

(h) Position or portion thereof unsettled as of March 31, 2012.
(i) A portfolio company domiciled in a foreign country.
(j) 7-day effective yield as of March 31, 2012.

(k)   As of March 31, 2012, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $4,100,960; the aggregate gross unrealized appreciation for all securities in which there was an excess of tax cost over value was $4,872,640; the net unrealized depreciation was $771,680; the aggregate cost of securities for Federal income tax purposes was $228,288,185.

(l) A portfolio company investment that contains original issue discount.
(m) A portfolio company investment structured as a credit-linked floating rate note.

Abbreviations:

CA - Canada

EUR - Euros; principal amount is denominated in Euros currency.

E = EURIBOR – Euro Interbank Offered Rate

IE - Ireland

L = LIBOR – London Interbank Offered Rate, typically 3-month rate

PIK - Payment-in-kind

SG - Singapore

UK - United Kingdom

See notes to condensed consolidated financial statements.

 

12


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments

As of December 31, 2011

 

Company (b)   Industry (c)   Investments   Interest
Rate
 

EURIBOR/

LIBOR

Floor

  Maturity
Date
   

No.
Shares/

Principal
Amount

    Cost (d)     Fair Value    

% of Net  

Assets  

 

Non-Control/Non-Affiliate Investments(a)—163.6%                
Alliant Holdings I, Inc.  

Insurance

  Senior Debt(e)   L + 300   —%     8/21/2014        85,889      $ 78,083      $ 83,689      0.1%  

 

Allison Transmission, Inc.   Automobiles & Components   Senior Debt(e)   L + 250   —%     8/7/2014        7,564        7,018        7,389      0.0%  

 

Ally Financial, Inc.   Banks   Preferred Stocks(e)(f)           5,575        99,595        102,524      0.2%  

 

Amkor Technologies, Inc.   Semiconductors & Semiconductor Equipment   Subordinated Debt(e)(f)   7.38%   N/A     5/1/2018        208,000        205,404        212,680      0.3%  

 

Aramark Corp.   Commercial & Professional Services   Subordinated Debt(e)   8.50%   N/A     2/1/2015        1,187,000        1,222,134        1,216,675      1.9%  

 

Aspect Software, Inc.   Technology Hardware & Equipment   Subordinated Debt(e)   10.63%   N/A     5/15/2017        1,484,000        1,529,365        1,539,650      2.4%  

 

Aspen Dental Management, Inc.   Health Care Equipment & Services   Senior Debt(e)(g)  

L + 450

  1.50%     10/6/2016        155,886        150,857        151,989      0.2%  

 

Asset Acceptance Capital Corp.   Diversified Financials   Senior Debt(e)(f)(h)  

L + 725

  1.50%     11/14/2017        480,179        449,331        463,373      0.7%  

 

Associated Materials, LLC   Capital Goods   Senior Debt(e)   9.13%   N/A     11/1/2017        13,000        13,184        11,343      0.0%  

 

Avaya, Inc.   Technology Hardware & Equipment  

Senior Debt(e)(g)

Senior Debt(e)(g)

 

L + 275

L + 450

 

—%

—%

   
 
10/24/2014
10/26/2017
  
  
   
 
1,142,373
974,527
  
  
   
 
1,067,943
883,793
  
  
   
 
1,095,010
890,474
  
  
  1.7%   1.4%  
             

 

 

   

 

 

   

 

                1,951,736        1,985,484      3.0%  

 

Avis Budget Car Rental, LLC   Transportation   Senior Debt(e)(f)  

L + 500

  1.25%     9/22/2018        276,675        271,282        278,837      0.4%  

 

BJ’s Wholesale Club, Inc.   Food & Staples Retailing   Senior Debt(e)  

L + 575

  1.25%     9/28/2018        1,113,299        1,093,129        1,118,164      1.7%  

 

Boise Paper Holdings, LLC   Materials   Subordinated Debt(e)(f)   9.00%   N/A     11/1/2017        146,000        154,801        156,950      0.2%  

 

Cablevision Systems Corp.   Media   Subordinated Debt(e)(f)   7.75%   N/A     4/15/2018        426,000        431,245        451,560      0.7%  

 

Caesars Entertainment Operating Co., Inc.   Consumer Services   Senior Debt(e)(g)   L + 300   —%     1/28/2015        12,797        11,723        11,157      0.0%  
    Senior Debt(e)   11.25%   N/A     6/1/2017        1,070,000        1,135,422        1,135,537      1.7%  
             

 

 

   

 

 

   

 

                1,147,145        1,146,694      1.8%  

 

California Pizza Kitchen, Inc.   Food & Staples Retailing   Senior Debt(e)(g)(h)  

L + 550

  1.25%     7/7/2017        1,068,431        1,023,743        1,041,721      1.6%  

 

Calpine Corp.   Utilities   Senior Debt(e)(f)(g)  

L + 325

  1.25%     4/1/2018        68,276      $ 65,451      $ 67,090      0.1%  

 

CDW, LLC   Technology Hardware & Equipment  

Senior Debt(e)

Subordinated Debt(e)

  L + 350 11.50% CASH or 12.50% PIK  

—%

N/A

   
 
10/10/2014
10/12/2015
  
  
   
 
1,229,473
135,000
  
  
   
 
1,201,984
142,433
  
  
   
 
1,194,316
141,750
  
  
  1.8%   0.2%  
             

 

 

   

 

 

   

 

                1,344,417        1,336,066      2.1%  

 

Cengage Learning Acquisitions, Inc.   Media   Senior Debt(e)(g)   L + 225   —%     7/3/2014        1,954,781        1,624,504        1,670,243      2.6%  

 

Ceridian Corp.   Software & Services   Senior Debt(e)(g)   L + 300   —%     11/10/2014        1,793,378        1,652,772        1,621,330      2.5%  

 

Charter Communications Operating Holdings, LLC   Media   Subordinated Debt(e)(f)   7.25%   N/A     10/30/2017        573,000        583,128        603,799      0.9%  

 

CHS / Community Health Systems, Inc.   Health Care Equipment & Services   Subordinated Debt(e)(f)   8.88%   N/A     7/15/2015        433,565        439,405        447,656      0.7%  

 

Citco III, Ltd. IE(i)   Diversified Financials   Senior Debt(e)(f)(g)  

L + 500

  1.25%     6/29/2018        17,307        17,349        16,572      0.0%  

 

ClubCorp Club Operations, Inc.   Consumer Services   Senior Debt(e)(g)  

L + 450

  1.50%     11/30/2016        137,092        129,554        136,864      0.2%  

 

Continental Airlines, Inc.   Transportation   Senior Debt(e)(f)   8.31%   N/A     4/2/2018        691,761        686,329        672,738      1.0%  

 

CRC Health Corp.   Health Care Equipment & Services  

Senior Debt(e)

Subordinated Debt(e)

  L + 450 10.75%  

—%

N/A

   
 
11/16/2015
2/1/2016
  
  
   
 
973,846
1,114,000
  
  
   
 
926,057
1,065,237
  
  
   
 
883,766
1,058,300
  
  
  1.4%   1.6%  
             

 

 

   

 

 

   

 

                1,991,294        1,942,066      3.0%  

 

See notes to condensed consolidated financial statements.

 

13


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments (continued)

As of December 31, 2011

 

Company (b)   Industry (c)   Investments   Interest
Rate
 

EURIBOR/

LIBOR

Floor

  Maturity
Date
   

No.
Shares/

Principal
Amount

    Cost (d)     Fair
Value
   

% of Net  

Assets  

 

 

 

Cricket Communications, Inc.

 

Telecommunication Services

  Senior Debt(e)(f)   7.75%   N/A     5/15/2016        1,529,000        1,541,150        1,578,692        2.4%     

 

 

Datatel, Inc.

 

Software & Services

 

Senior Debt(e)

Senior Debt(e)

Senior Debt(e)(g)

 

L + 350

L + 725 L + 525

 

1.50%

1.50% 1.50%

   
 
 
2/20/2017
2/19/2018
9/15/2018
  
  
  
   
 
 
556,984
150,000
406,204
  
  
  
   
 
 
554,944
153,568
400,111
  
  
  
   
 
 
557,750
150,750
406,840
  
  
  
   
 
 
0.9%  
0.2%  
0.6%  
  
  
  
             

 

 

   

 

 

   

 

 

 
                1,108,623        1,115,340        1.7%     

 

 

DineEquity, Inc.

 

Consumer Services

  Senior Debt(e)(f)(g)  

L + 300

 

1.25%

    10/19/2017        75,685        72,728        74,791        0.1%     

 

 

DuPont Fabros Technology, LP

 

Real Estate

  Subordinated Debt(e)(f)   8.50%   N/A     12/15/2017        100,000        106,616        107,000        0.2%     

 

 

E*TRADE Financial Corp.

 

Diversified Financials

  Subordinated Debt(e)(f)   7.88%   N/A     12/1/2015        1,269,000      $ 1,264,604      $ 1,275,345        2.0%     

 

 

Easton-Bell Sports, Inc.

 

Consumer Durables & Apparel

  Senior Debt(e)   9.75%   N/A     12/1/2016        1,190,000        1,275,766        1,297,100        2.0%     

 

 

Education Management, LLC

 

Consumer Services

  Subordinated Debt(e)(f)   8.75%   N/A     6/1/2014        1,728,000        1,732,881        1,732,320        2.7%     

 

 

Emergency Medical Services Corp.

 

Health Care Equipment & Services

  Senior Debt(e)(g)  

L + 375

 

1.50%

    5/25/2018        216,967        205,433        211,814        0.3%     

 

 

Express, LLC / Express Finance Corp.

 

Retailing

  Subordinated Debt(e)(f)   8.75%   N/A     3/1/2018        43,000        46,248        46,547        0.1%     

 

 

Fidelity National Information Services, Inc.

 

Software & Services

  Subordinated Debt(e)(f) Subordinated Debt(e)(f)   7.63% 7.88%  

N/A

N/A

   
 
7/15/2017
7/15/2020
  
  
   
 
46,000
122,000
  
  
   
 
48,686
130,244
  
  
   
 
49,795
131,760
  
  
   
 
0.1%  
0.2%  
  
  
             

 

 

   

 

 

   

 

 

 
                178,930        181,555        0.3%     

 

 

Fifth Third Processing Solutions, LLC

 

Software & Services

  Senior Debt(e)(g)  

L + 325

 

1.25%

    11/3/2016        61,304        59,554        61,258        0.1%     

 

 

FTI Consulting, Inc.

 

Diversified Financials

  Subordinated Debt(e)(f)   6.75%   N/A     10/1/2020        87,000        86,817        89,827        0.1%     

 

 

GCI, Inc.

 

Telecommunication Services

  Subordinated Debt(e)   8.63%   N/A     11/15/2019        2,294,000        2,438,105        2,434,507        3.7%     

 

 

General Nutrition Centers, Inc.

 

Retailing

  Senior Debt(e)(f)  

L + 300

  1.25%     3/2/2018        23,369        23,370        23,029        0.0%     

 

 

Good Sam Enterprises, LLC

 

Media

  Senior Debt(e)   11.50%   N/A     12/1/2016        1,375,000        1,343,093        1,347,500        2.1%     

 

 

Goodman Global, Inc.

 

Capital Goods

  Senior Debt(e)(g)  

L + 700

 

2.00%

    10/30/2017        948,221        952,962        954,541        1.5%     

 

 

Great Lakes Dredge & Dock Corp.

 

Capital Goods

  Subordinated Debt(e)(f)   7.38%   N/A     2/1/2019        96,000        94,738        95,040        0.1%     

 

 

Guitar Center, Inc.

 

Retailing

  Senior Debt(e)(g)   L + 525   —%     4/9/2017        4,238,739        3,716,872        3,736,449        5.7%     

 

 

The Gymboree Corp.

 

Retailing

 

Senior Debt(e)(g)

Subordinated Debt(e)

 

L + 350

9.13%

 

1.50%

N/A

   
 
2/23/2018
12/1/2018
  
  
   
 
904,502
748,000
  
  
   
 
847,281
609,721
  
  
   
 
807,607
654,500
  
  
   
 
1.2%  
1.0%  
  
  
             

 

 

   

 

 

   

 

 

 
                1,457,002        1,462,107        2.2%     

 

 

High Plains Broadcasting Operating Co.

 

Media

  Senior Debt(g)  

L + 675

 

3.00%

    9/14/2016        351,687        347,295        349,561        0.5%     

 

 

HUB International, Ltd.

 

Insurance

  Senior Debt(e)(g)   L + 250   2.00%     6/13/2014        1,134,886        1,088,373        1,089,139        0.5%     
    Senior Debt(e)(g)  

L + 475

 

—%

    6/13/2014        332,350      $ 332,350      $ 331,283        1.7%     
             

 

 

   

 

 

   

 

 

 
                1,420,723        1,420,422        2.2%     

 

 

Hubbard Radio, LLC

 

Media

  Senior Debt(e)(g)  

L + 375

 

1.50%

    4/28/2017        606,123        601,661        598,359        0.9%     
    Senior Debt(e)(g)  

L + 725

 

1.50%

    4/30/2018        2,834,070        2,819,267        2,798,644        4.3%     
             

 

 

   

 

 

   

 

 

 
                3,420,928        3,397,003        5.2%     

 

 

 

See notes to condensed consolidated financial statements.

 

14


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments (continued)

As of December 31, 2011

 

Company (b)   Industry (c)   Investments   Interest
Rate
 

EURIBOR/

LIBOR

Floor

  Maturity
Date
   

No.
Shares/

Principal
Amount

    Cost (d)     Fair
Value
   

% of Net  

Assets  

 

 

 
Husky Injection Molding Systems, Ltd. CA(i)  

Capital Goods

  Senior Debt(e)(f)(g)  

L + 525

  1.25%     6/29/2018        1,159,646        1,149,330        1,159,194        1.8%     

 

 

Immucor, Inc.

  Health Care Equipment & Services   Senior Debt(e)(g)  

L + 575

  1.50%     8/19/2018        2,528,757        2,533,137        2,547,407        3.9%     

 

 

Ineos Holdings, Ltd. UK(i)

 

Materials

  Subordinated Debt(f)(g) (EUR)  

E + 600 PIK

  3.00%     6/16/2015        889,214        1,109,884        1,061,432        1.6%     

 

 
Infor Enterprise Solutions Holdings, Inc.  

Software & Services

  Senior Debt(e)(g)   L + 575   —%     7/28/2015        1,610,000        1,541,287        1,521,450        2.3%     

 

 

Interactive Data Corp.

 

Diversified Financials

  Senior Debt(e)(g)  

L + 325

 

1.25%

    2/11/2018        18,262        17,899        18,037        0.0%     

 

 

iPayment, Inc.

 

Software & Services

  Senior Debt(e)(g)  

L + 425

 

1.50%

    5/8/2017        1,953,798        1,931,324        1,932,629        3.0%     
    Subordinated Debt(e)(j)   10.25%   N/A     5/15/2018        415,000        375,604        390,100        0.6%     
             

 

 

   

 

 

   

 

 

 
                2,306,928        2,322,729        3.6%     

 

 

IPC Systems, Inc.

  Technology Hardware & Equipment   Senior Debt(e)(g)   L + 225   —%     6/2/2014        4,855        4,515        4,535        0.0%     

 

 

J. Crew Group, Inc.

 

Retailing

  Senior Debt(e)(g)  

L + 350

 

1.25%

    3/7/2018        2,765,351        2,588,677        2,604,366        4.0%     
    Subordinated Debt(e)   8.13%   N/A     3/1/2019        1,026,000        963,411        979,830        1.5%     
             

 

 

   

 

 

   

 

 

 
                3,552,088        3,584,196        5.5%     

 

 

Jo-Ann Stores, Inc.

 

Retailing

  Senior Debt(e)  

L + 350

 

1.25%

    3/16/2018        23,488        23,262        22,453        0.0%     

 

 

Kinetic Concepts, Inc.

  Health Care Equipment & Services   Senior Debt(e)(f)  

L + 525

  1.25%     11/4/2016        329,847        320,184        329,642        0.5%     
    Senior Debt(e)(f)(g)   L + 575   1.25%     5/4/2018        375,178      $ 366,342      $ 379,071        0.6%     
             

 

 

   

 

 

   

 

 

 
                686,526        708,713        1.1%     

 

 

Lamar Media Corp.

 

Media

  Subordinated Debt(e)(f)   6.63%   N/A     8/15/2015        206,000        206,000        210,120        0.3%     

 

 

Lawson Software, Inc.

 

Software & Services

  Senior Debt(e)  

L + 525

 

1.50%

    7/5/2017        1,766,446        1,735,811        1,726,542        2.6%     

 

 

Local TV Finance, LLC

 

Media

  Senior Debt(e)   L + 200   —%     5/7/2013        370,225        352,992        358,191        0.5%     

 

 

The Manitowoc Co., Inc.

 

Capital Goods

  Subordinated Debt(e)(f)   9.50%   N/A     2/15/2018        21,000        22,983        22,365        0.0%     

 

 

McJunkin Red Man Corp.

 

Energy

  Senior Debt(e)   9.50%   N/A     12/15/2016        3,393,000        3,374,953        3,443,895        5.3%     

 

 

MedAssets, Inc.

  Health Care Equipment & Services   Senior Debt(e)(f)(g)  

L + 375

  1.50%     11/16/2016        699,792        699,730        698,742        1.1%     
    Subordinated Debt(e)(f)   8.00%   N/A     11/15/2018        316,000        311,267        309,680        0.5%     
             

 

 

   

 

 

   

 

 

 
                1,010,997        1,008,422        1.5%     

 

 

MetroPCS Wireless, Inc.

  Telecommunication Services   Subordinated Debt(e)(f)   7.88%   N/A     9/1/2018        281,000        284,117        284,864        0.4%     

 

 

Michaels Stores, Inc.

 

Retailing

  Senior Debt(e)   L + 225   —%     10/31/2013        215,942        202,264        212,726        0.3%     
    Senior Debt(e)(g)   L + 450   —%     7/31/2016        681,714        667,113        671,659        1.0%     
             

 

 

   

 

 

   

 

 

 
                869,377        884,385        1.4%     

 

 
Momentive Performance Materials USA, Inc.  

Materials

  Senior Debt(e)(g)   L + 350   —%     5/5/2015        1,212,164        1,161,622        1,158,623        1.8%     

 

 
Mondrian Investment Partners, Ltd. UK(i)  

Diversified Financials

  Senior Debt(e)(f)(g)  

L + 425

  1.25%     7/12/2018        488,020        484,049        488,020        0.7%     

 

 

Mueller Water Products, Inc.

 

Capital Goods

  Subordinated Debt(e)(f)   7.38%   N/A     6/1/2017        1,034,000        871,542        940,940        1.4%     
    Subordinated Debt(e)(f)   8.75%   N/A     9/1/2020        250,000        253,683        271,562        0.4%     
             

 

 

   

 

 

   

 

 

 
                1,125,225        1,212,502        1.9%     

 

 

 

See notes to condensed consolidated financial statements.

 

15


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments (continued)

As of December 31, 2011

 

Company (b)   Industry (c)   Investments   Interest
Rate
 

EURIBOR/

LIBOR

Floor

  Maturity
Date
   

No.
Shares/

Principal
Amount

    Cost (d)     Fair
Value
   

% of Net  
Assets  

 

N.E.W. Holdings I, LLC

 

Software & Services

  Senior Debt(e)  

L + 425

  1.75%     3/23/2016        8,655        8,250        8,407      0.0%  
    Subordinated Debt(e)(h)  

L + 750

  2.00%     3/23/2017        998,480        986,123        963,533      1.5%  
             

 

 

   

 

 

   

 

                994,373        971,940      1.5%  

 

NBTY, Inc.

  Household & Personal Products  

Senior Debt(e)(g)

 

L + 325

  1.00%     10/1/2017        26,355      $ 26,031      $ 26,126      0.0%  

 

The Neiman Marcus Group, Inc.  

Retailing

 

Senior Debt(e)

 

L + 350

  1.25%     5/16/2018        188,713        181,660        182,344      0.3%  
   

Subordinated Debt(e)

  10.38%   N/A     10/15/2015        1,967,000        2,040,359        2,043,241      3.1%  
             

 

 

   

 

 

   

 

                2,222,019        2,225,585      3.4%  

 

Nexstar Broadcasting, Inc.

 

Media

 

Senior Debt(e)(f)

  8.88%   N/A     4/15/2017        170,000        177,868        174,250      0.3%  

 

NPC International, Inc.

 

Consumer Services

 

Senior Debt(e)(g)

 

L + 525

  1.50%     11/7/2018        1,515,463        1,519,252        1,521,146      2.3%  

 

NuSil Technology, LLC

 

Materials

 

Senior Debt(e)(g)

 

L + 400

  1.25%     4/7/2017        25,312        25,312        24,848      0.0%  

 

Nuveen Investments, Inc.

 

Diversified Financials

 

Senior Debt(e)(f)

  L + 300   —%     11/13/2014        25,629        25,290        24,556      0.0%  
   

Senior Debt(e)(f)

  L + 550   —%     5/13/2017        133,224        130,890        128,395      0.2%  
   

Senior Debt(e)(f)(g)

 

L + 600

  1.25%     5/13/2017        282,184        276,540        278,891      0.4%  
   

Subordinated Debt(e)(f)

  10.50%   N/A     11/15/2015        1,715,000        1,671,568        1,702,137      2.6%  
             

 

 

   

 

 

   

 

                2,104,288        2,133,979      3.3%  

 

Ocwen Financial Corp.

 

Banks

 

Senior Debt(e)(f)(g)

 

L + 550

  1.50%     9/1/2016        1,400,877        1,381,333        1,380,359      2.1%  

 

Penn National Gaming, Inc.

 

Consumer Services

 

Subordinated Debt(e)(f)

  8.75%   N/A     8/15/2019        401,000        432,531        436,087      0.7%  

 

Petco Animal Supplies, Inc.

 

Retailing

 

Senior Debt(e)

 

L + 325

  1.25%     11/24/2017        120,101        114,129        117,280      0.2%  

 

Pharmaceutical Product Development, Inc.   Pharmaceuticals, Biotechnology & Life Sciences  

Senior Debt(e)(f)(g)

 

L + 500

  1.25%     12/5/2018        808,662        798,202        804,938      1.2%  

 

Pinnacle Entertainment, Inc.

 

Consumer Services

 

Subordinated Debt(e)(f)

  8.63%   N/A     8/1/2017        167,000        176,491        176,602      0.3%  

 

Pinnacle Foods Finance, LLC

 

Food & Staples Retailing

 

Senior Debt(e)(g)

  L + 250   —%     4/2/2014        547,748        530,579        537,133      0.8%  

 

Realogy Corp.

 

Real Estate

 

Senior Debt(e)

  L + 425   —%     10/10/2016        1,566,113        1,379,558        1,403,269      2.2%  
   

Senior Debt(e)

  L - 15   —%     10/10/2016        123,163        108,445        110,357      0.2%  
             

 

 

   

 

 

   

 

                1,488,003        1,513,626      2.3%  

 

Ryerson, Inc.

 

Materials

 

Senior Debt(e)(f)

  L + 737.5   —%     11/1/2014        98,000        97,346        90,160      0.1%  
   

Senior Debt(e)(f)

  12.00%   N/A     11/1/2015        44,000      $ 46,519      $ 44,440      0.1%  
             

 

 

   

 

 

   

 

                143,865        134,600      0.2%  

 

Sabre, Inc.

 

Transportation

 

Senior Debt(e)(g)

  L + 200   —%     9/30/2014        3,257,513        2,788,750        2,704,632      4.2%  

 

SandRidge Energy, Inc.

 

Energy

 

Subordinated Debt(e)(f)

  L + 362.5   —%     4/1/2014        23,000        22,952        22,352      0.0%  

 

Scitor Corp.

 

Capital Goods

 

Senior Debt(e)(g)

 

L + 350

  1.50%     2/15/2017        23,310        23,255        22,203      0.0%  

 

Sedgwick Claims Management Services Holdings, Inc.  

Insurance

 

Senior Debt(e)(g)(h)

 

L + 350

  1.50%     12/31/2016        113,219        107,480        111,662      0.2%  
   

Senior Debt(e)(h)

 

L + 750

  1.50%     5/30/2017        907,195        882,412        898,123      1.4%  
             

 

 

   

 

 

   

 

                989,892        1,009,785      1.5%  

 

 

See notes to condensed consolidated financial statements.

 

16


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments (continued)

As of December 31, 2011

 

Company (b)   Industry (c)   Investments   Interest Rate  

EURIBOR/

LIBOR

Floor

  Maturity
Date
   

No.
Shares/

Principal
Amount

    Cost (d)     Fair
Value
    % of Net  
Assets  

 

Sheridan Holdings, Inc.

  Health Care Equipment & Services  

Senior Debt(e)(g)

  L + 225   —%     6/13/2014        348,178        321,180        329,899      0.5%  

 

The SI Organization, Inc.

  Capital Goods  

Senior Debt(e)(g)

 

L + 325

  1.25%     11/22/2016        187,907        175,980        177,572      0.3%  

 

Sinclair Television Group, Inc.

  Media  

Subordinated Debt(e)(f)

  8.38%   N/A     10/15/2018        27,000        28,364        27,877      0.0%  

 

Skilled Healthcare Group, Inc.

  Health Care Equipment & Services  

Senior Debt(e)(f)(g)

 

L + 375

  1.50%     4/9/2016        16,179        15,723        15,125      0.0%  

 

SNL Financial, LC

  Commercial & Professional Services  

Senior Debt(e)(g)(h)

 

L + 700

  1.50%     8/17/2018        709,520        712,180        707,746      1.1%  

 

Solutia, Inc.

  Materials  

Subordinated Debt(e)(f)

  7.88%   N/A     3/15/2020        120,000        126,355        130,500      0.2%  

 

The Sports Authority, Inc.

  Retailing  

Senior Debt(e)(g)

  L + 600   1.50%     11/16/2017        1,413,097        1,366,092        1,367,171      2.1%  

 

Springleaf Financial Funding Co.

  Diversified Financials  

Senior Debt(e)(f)(g)

 

L + 425

  1.25%     5/10/2017        2,551,580        2,275,043        2,230,502      3.4%  

 

Sprint Nextel Corp.

  Telecommunication Services  

Subordinated Debt(e)(f)

  8.38%   N/A     8/15/2017        664,000        574,028        595,110      0.9%  

 

SSI Investments II, Ltd.

  Software & Services  

Subordinated Debt(e)

  11.13%   N/A     6/1/2018        1,422,000        1,512,863        1,503,765      2.3%  

 

Symphony / IRI Group, Inc.

  Commercial & Professional Services  

Senior Debt(e)(g)

 

L + 375

  1.25%     12/1/2017        20,023        19,610        19,914      0.0%  

 

The TelX Group, Inc.

  Telecommunication Services  

Senior Debt(e)(g)

 

L + 650

  1.25%     9/25/2017        333,726      $ 314,266      $ 333,726      0.5%  

 

TowerCo Finance, LLC

  Real Estate  

Senior Debt

 

L + 375

  1.50%     2/2/2017        30,333        29,710        30,345      0.0%  

 

TransUnion, LLC

  Diversified Financials  

Subordinated Debt(e)

  11.38%   N/A     6/15/2018        1,403,000        1,559,885        1,602,927      2.5%  

 

Triple Point Technology, Inc.

  Software & Services  

Senior Debt(e)

 

L + 650

  1.50%     10/27/2017        200,566        192,696        201,067      0.3%  

 

Univar, Inc.

  Materials  

Senior Debt(e)(g)

 

L + 350

  1.50%     6/30/2017        962,906        933,677        931,010      1.4%  

 

Vision Solutions, Inc.

  Commercial & Professional Services  

Senior Debt(e)(h)

 

L + 450

  1.50%     7/23/2016        1,443,750        1,427,658        1,429,312      2.2%  

 

VWR Funding, Inc.

  Pharmaceuticals, Biotechnology & Life Sciences  

Senior Debt(e)(g)

Subordinated Debt(e)

 

L + 250

10.25% CASH or 11.25% PIK

 

—%

N/A

   
 
6/30/2014
7/15/2015
  
  
   
 
147,590
3,051,000
  
  
   
 
136,713
3,155,464
  
  
   
 
140,358
3,150,157
  
  
  0.2%   4.8%  
             

 

 

   

 

 

   

 

                3,292,177        3,290,515      5.0%  

 

Warner Chilcott Co., LLC

  Pharmaceuticals, Biotechnology & Life Sciences  

Subordinated Debt(e)(f)

  7.75%   N/A     9/15/2018        1,225,000        1,218,819        1,251,031      1.9%  

 

West Corp.

  Software & Services  

Senior Debt

  L + 425   —%     7/15/2016        5,000        4,846        4,979      0.0%  
   

Subordinated Debt(e)(g)

  7.88%   N/A     1/15/2019        1,743,000        1,730,393        1,729,927      2.7%  
   

Subordinated Debt(e)

  8.63%   N/A     10/1/2018        2,600,000        2,646,996        2,626,000      4.0%  
             

 

 

   

 

 

   

 

                4,382,235        4,360,906      6.7%  

 

Wm. Bolthouse Farms, Inc.

  Food, Beverage & Tobacco  

Senior Debt(e)

 

L + 750

  2.00%     8/11/2016        500,000        499,608        498,905      0.8%  

 

Zayo Group, LLC

  Telecommunication Services  

Senior Debt(e)(g)

 

L + 550

  1.50%     12/1/2016        2,749,427        2,715,285        2,740,835      4.2%  
   

Senior Debt(e)(g)

  10.25%   N/A     3/15/2017        1,549,000        1,649,012        1,653,557      2.5%  
             

 

 

   

 

 

   

 

                4,364,297        4,394,392      6.7%  

 

 

See notes to condensed consolidated financial statements.

 

17


Table of Contents

Corporate Capital Trust, Inc. and Subsidiary

Condensed Consolidated Schedule of Investments (continued)

As of December 31, 2011

 

Company (b)   Industry (c)   Investments   Interest
Rate
 

EURIBOR/

LIBOR

Floor

  Maturity
Date
   

No.
Shares/

Principal
Amount

    Cost (d)     Fair Value    

% of Net

Assets

 

 

 
Total Non-Control/Non-Affiliate Investments               $ 106,111,246      $ 106,589,757        163.6%   
             

 

 

   

 

 

   

 

 

 
Short Term Investments—11.8%                  
Goldman Sachs Financial Square Funds - Prime Obligations Fund    

Short Term Investments(e)

  0.11%(k)   N/A     NA        6,541,055        6,541,055        6,541,055        10.0%   

 

 
State Street Institutional Liquid Reserves Fund  

Short Term Investments

  0.15%(k)   N/A     NA        1,173,697        1,173,697        1,173,697        1.8%   
             

 

 

   

 

 

   

 

 

 
Total Short Term Investments                 7,714,752        7,714,752        11.8%   
             

 

 

   

 

 

   

 

 

 
TOTAL INVESTMENTS —175.4%(l)               $ 113,825,998        114,304,509        175.4%   
             

 

 

   

 

 

   

 

 

 
LIABILITIES IN EXCESS OF OTHER ASSETS—(75.4%)                 (49,141,780     -75.4%   
               

 

 

   

 

 

 
NET ASSETS—100.0%                 $ 65,162,729        100.0%   
               

 

 

   

 

 

 

 

(a) Non-Control/Non-Affiliate investments are defined by the Investment Company Act of 1940, as amended (“1940 Act”) as investments that are neither Control Investments nor Affiliate Investments. Controlled investments are defined by the 1940 Act as investments in which more than 25% of the voting securities are owned or where the ability to nominate greater than 50% of the board representation is maintained. Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% of the voting securities are owned and the investments are not classified as Controlled investments.
(b) Security may be an obligation of one or more entities affiliated with the named company.
(c) Unaudited.
(d) Represents amortized cost for debt securities and cost for preferred stock.
(e) Security or portion thereof held within CCT Funding, LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Deutsche Bank.
(f) The investment is not a qualifying asset under the Investment Company Act of 1940, as amended, or the 1940 Act.
(g) Position or portion thereof unsettled as of December 31, 2011.
(h) Fair value was determined by the Company’s Board of Directors (see Note 2).
(i) A portfolio company domiciled in a foreign country.
(j) This security was acquired in a transaction that was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Rule 144A thereunder. This security may be resold only in transactions that are exempt from the registration requirements of the Securities Act, normally to qualified institutional buyers.
(k) 7-day effective yield as of December 31, 2011.
(l) As of December 31, 2011, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $971,241; the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $492,730; the net unrealized appreciation was $478,511; the aggregate cost of securities for Federal income tax purposes was $113,825,998.

Abbreviations:

CA - Canada

EUR - Euros; principal amount is denominated in Euros currency

E = EURIBOR - Euro Interbank Offered Rate

IE - Ireland

L = LIBOR - London Interbank Offered Rate, typically 3-month rate

PIK - Payment-in-kind

UK - United Kingdom

 

See notes to condensed consolidated financial statements.

 

18


Table of Contents

CORPORATE CAPITAL TRUST, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

 

1. Principal Business and Organization

Corporate Capital Trust, Inc. (the “Company”) was incorporated under the general corporation laws of the State of Maryland on June 9, 2010. The Company is a non-diversified closed-end management investment company and it is regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “40 Act”). The Company’s investment objective is to provide its shareholders with current income and, to a lesser extent, long-term capital appreciation, by investing primarily in the debt of privately owned U.S. companies with a focus on originated transactions sourced through the networks of its advisors.

The Company is externally managed by CNL Fund Advisors Company (“CNL”) and KKR Asset Management LLC (“KKR”) (collectively the “Advisors”), which are responsible for sourcing potential investments, conducting due diligence on prospective investments, analyzing investment opportunities, structuring investments and monitoring the Company’s investment portfolio on an ongoing basis. Both Advisors are registered as investment advisers with the Securities and Exchange Commission (“SEC”). CNL also provides the administrative services necessary for the Company to operate.

The Company is currently selling shares of its common stock pursuant to a registration statement on Form N-2 (as amended and supplemented, the “Registration Statement”) and it is offering to sell, on a continuous basis, shares of common stock for approximately $1.6 billion (150 million shares at an initial offering price of $10.85 per share) (the “Offering”). The Registration Statement was declared effective by the SEC on April 4, 2011 and the Company commenced its Offering. The Company commenced business operations on June 17, 2011 and it commenced investment operations on July 1, 2011. As a result, there are no comparative financial statements for the three months ended March 31, 2011.

As of March 31, 2012, the Company had one wholly owned financing subsidiary, CCT Funding LLC (“CCT Funding”), which was established on July 15, 2011 for the purpose of arranging a secured, revolving credit facility with a bank and to borrow money for the primary purpose of investing in portfolio companies.

 

2. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation - The accompanying financial statements of the Company are prepared in accordance with the instructions to Form 10-Q and accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods, have been included. The results of operations for interim periods are not indicative of results to be expected for the full year.

Certain financial information that is normally included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. These financial statements should be read in conjunction with the Company’s financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the SEC on March 16, 2012. A comparative statement of operations for the three months ended March 31, 2011 and a comparative statement of cash flows for the three months ended March 31, 2011 have been omitted from these condensed consolidated financial statements since the Company had not commenced business operations prior to June 17, 2011. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany account balances and transactions have been eliminated in consolidation.

Use of Estimates - The preparation of condensed 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 condensed consolidated financial statements, (ii) the reported amounts of income and expenses during the reported period and (iii) disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. Actual results could differ from those estimates.

Cash and Cash Equivalents - Cash and cash equivalents consist of demand deposits, repurchase agreements, and highly liquid investments with original maturities of three months or less.

Valuation of Investments - The Company measures the value of its investments in accordance with Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure (“ASC Topic 820”), issued by the Financial Accounting Standards Board (“FASB”). 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.

Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from independent pricing services, broker-dealers or market makers. With respect to portfolio investments for which market quotations are not readily available, the Company’s board of directors, with the assistance of the Company’s Advisors, officers and independent valuation agents, is responsible for determining in good faith the fair value in accordance with the valuation policy approved by the board of directors. The board of directors will make this fair value determination on a quarterly basis and any other time when a

 

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decision regarding the fair value of the portfolio investments is required. A determination of fair value involves subjective judgments and estimates. Due to the inherent uncertainty of determining the fair value of portfolio investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

ASC Topic 820 also defines hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, and are described as follows:

Level 1 – Quoted prices are available in active markets for identical investments as of the reporting date. Publicly listed equities, debt securities and publicly listed derivatives are generally included in Level 1. The Company will not adjust the quoted price for these investments.

Level 2 – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. In certain cases, debt and equity securities are valued on the basis of prices from orderly transactions for similar investments in active markets between market participants and provided by reputable dealers or independent pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices, market transactions in comparable investments, and various relationships between investments. Investments generally included in this category are corporate bonds and loans, convertible debt indexed to publicly listed securities, and certain over-the-counter derivatives.

Level 3 – Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and it considers factors specific to the investment.

The Company has implemented ASU 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“ASU 2011-04”), which amends the existing fair value guidance within ASC Topic 820.

Security Transactions, Realized/Unrealized Gains or Losses, and Income Recognition - Security transactions are recorded on a trade-date basis. The Company measures realized gains or losses from the repayment or sale of investments using the specific identification method. The amortized cost basis of investments represents the original cost adjusted for the accretion/amortization of discounts and premiums and upfront loan origination fees. The Company reports changes in fair value of investments that are measured at fair value as a component of net change in unrealized appreciation (depreciation) on investments in the condensed consolidated statement of operations.

Interest income, adjusted for amortization of market premium and accretion of market discount, is recorded on an accrual basis to the extent that the Company expects to collect such amounts. Original issue discount, principally representing the estimated fair value of detachable equity or warrants obtained in conjunction with the acquisition of debt securities, and market discount or premium are capitalized and accreted or amortized into interest income over the life of the respective security using the effective interest method. Loan origination fees received in connection with the closing of investments are included in amortized cost of the investment and accreted over the contractual life of the loan based on the effective interest method as interest income. Upon prepayment of a loan or debt security, any prepayment penalties, unamortized loan origination fees, and unamortized market discounts are recorded as interest income.

The Company has investments in debt securities which contain a contractual payment-in-kind, or PIK, interest provision. If the borrower elects to pay, or is obligated to pay, interest under the optional PIK provision, and if deemed collectible in management’s judgment, then the interest is computed at the contractual rate specified in the investment’s credit agreement, the computed interest is added to the principal balance of the investment, and computed interest is recorded as interest income.

Loans or debt securities are placed on non-accrual status when principal or interest payments are past due 90 days or more or when there is reasonable doubt that principal or interest will be collected. Accrued interest generally is reversed when a loan or a debt security is placed on non-accrual status. Interest payments received on non-accrual loans or debt securities may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans and debt securities 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 treatment if the loan has sufficient collateral value and is in the process of collection.

Deferred Financing Costs - Deferred financing costs represent fees and other direct costs incurred in connection with arranging the Company’s borrowings. These amounts are capitalized and amortized over the contractual term of the credit facility as interest expense.

 

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Paid In Capital - The Company records the proceeds from the sale of its common stock on a net basis to capital stock and paid in capital in excess of par value, excluding all commissions and marketing support fees that are deducted from the gross sale proceeds and paid to the managing dealer.

Foreign Currency Translation, Transactions and Gains/Losses - Foreign currency amounts are translated into U.S. dollars on the following basis: (i) at the exchange rate on the last business day of the period for the fair value of investment securities, other assets and liabilities; and (ii) at the rates of exchange prevailing on the respective recording dates for the purchase and sale of investment securities, income, expenses, gains and losses.

Although net assets and fair values are presented based on the applicable foreign exchange rates described above, the Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in fair values of investments held; the fluctuations related to foreign exchange rate conversion are included with the net realized and unrealized gain or loss from investments. Unrealized appreciation (depreciation) from currency translation for other receivables or payables is presented as net change in unrealized appreciation (depreciation) on foreign currency translation on the condensed consolidated statements of operations.

Net realized foreign exchange gains or losses arise from activity in forward foreign currency exchange contracts, sales of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded by the Company and the U.S. dollar equivalent of the amounts actually received or paid by the Company.

Management Fees - The Company accrues for the base management fee and performance-based incentive fees, including (i) a subordinated incentive fee on income and (ii) an incentive fee on capital gains. The Company records the liability for the incentive fee on capital gains based on a hypothetical liquidation of its investment portfolio at the end of each reporting period. Therefore the accrual for incentive fee on capital gains includes the recognition of incentive fee on both net realized gains and net unrealized appreciation, if any, although any such incentive fee associated with net unrealized appreciation is neither earned nor payable to the Advisors until net unrealized appreciation is realized as net capital gains.

Organization and Offering Expenses - Organization expenses, including reimbursement payments to Advisors, are expensed on the Company’s condensed consolidated statement of operations. Continuous offering expenses, including reimbursement payments to Advisors and excluding commission and marketing support fees, will be capitalized on the condensed consolidated statements of assets and liabilities as deferred offering expenses and expensed over a 12-month period.

Earnings per Share - Earnings per share is calculated based upon the weighted average number of shares of common stock outstanding during the reporting period.

Dividends and Distributions - Dividends and distributions are declared by the Company’s board of directors each calendar quarter and are recognized as distribution liabilities on the ex-dividend date. The ex-dividend date for the Company’s common stock is the same as the record date. Net realized capital gains, if any, generally are distributed at least annually, although the Company may decide to retain such capital gains for investment.

The Company has adopted a distribution reinvestment plan that provides for reinvestment of distributions on behalf of shareholders. As a result, if the Company’s board of directors authorizes and declares a cash distribution, then shareholders who have elected to participate in the distribution reinvestment plan will have their cash distribution automatically reinvested in additional shares of common stock at a price equivalent to the public offering price, exclusive of commissions and marketing support fees, rather than receiving the cash distribution.

Federal Income Taxes - The Company intends to elect for the tax year ended December 31, 2011 to be treated for federal income tax purposes, and intends to qualify thereafter, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code (the “Code”). Generally, a RIC is not subject to federal income taxes on distributed income and gains if it distributes at least 90% of “Investment Company Taxable Income,” as defined in the Code. The Company intends to distribute sufficient dividends to maintain its RIC status each year and it does not anticipate paying any material level of federal income taxes in the future.

The Company is also generally subject to nondeductible federal excise taxes if it does not distribute an amount at least equal to the sum (i) 98% of net ordinary income for the calendar year, (ii) 98.2% of the Company’s capital gains in excess of capital losses for the one-year period generally ending on October 31 of the calendar year (unless an election is made by the Company to use its taxable year) and (iii) any ordinary income and net capital gains for preceding years that were not distributed during such years and on which the Company paid no federal income tax. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this excess taxable income. If the Company chooses to do so, all other things being equal, this federal excise tax would increase expenses and reduce the amount available to be distributed to shareholders.

Recently Issued Accounting Pronouncements –Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the Company’s financial position, results of operations or liquidity.

 

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3. Investments

The Company is engaged in a strategy to invest primarily in the debt of privately owned U.S. companies. The primary investment concentrations include (i) senior debt and (ii) subordinated debt securities. The value of debt investments will generally fluctuate with, among other things, changes in prevailing interest rates, general economic conditions, the condition of certain financial markets, developments or trends in any particular industry and changes in the financial condition and credit quality of the security’s issuer.

Purchases of investments for the three months ended March 31, 2012 and 2011 totaled $135,291,836 and $0, respectively. Sales of investments for the three months ended March 31, 2012 and 2011 totaled $21,546,060 and $0, respectively. Proceeds from principal payments for the three months ended March 31, 2012 and 2011 totaled $2,372,642 and $0, respectively. The amounts exclude consideration of the purchase and sale of short-term investments.

As of March 31, 2012, the Company’s investments consisted of the following:

 

Asset Category

   Cost      Fair Value      Percentage of
Portfolio
    Percentage of
Net Assets
 

Senior debt securities

   $ 128,489,222       $ 131,350,200         59.1     85.4

Subordinated debt securities

     89,373,437         90,613,419         40.7        58.9   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

     217,862,659         221,963,619         99.8        144.3   

Common stock

     448,908         448,908         0.2        0.3   
  

 

 

    

 

 

    

 

 

   

 

 

 

Subtotal

     218,311,567         222,412,527         100.0     144.6   
        

 

 

   

Short term investments

     9,976,618         9,976,618           6.5   
  

 

 

    

 

 

      

 

 

 

Total investments

   $ 228,288,185       $ 232,389,145           151.1 % 
  

 

 

    

 

 

      

 

 

 

At December 31, 2011, the Company’s investments consisted of the following:

 

Asset Category

   Cost      Fair Value      Percentage of
Portfolio
    Percentage of
Net Assets
 

Senior debt securities

   $ 71,398,157       $ 71,609,433         67.2     109.9

Subordinated debt securities

     34,613,494         34,877,800         32.7        53.5   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

     106,011,651         106,487,233         99.9        163.4   

Preferred stock

     99,595         102,524         0.1        0.2   
  

 

 

    

 

 

    

 

 

   

 

 

 

Subtotal

     106,111,246         106,589,757         100.0     163.6   
        

 

 

   

Short term investments

     7,714,752         7,714,752           11.8   
  

 

 

    

 

 

      

 

 

 

Total investments

   $ 113,825,998       $ 114,304,509           175.4
  

 

 

    

 

 

      

 

 

 

The industry composition of the portfolio, excluding short-term investments, at fair value at March 31, 2012 and December 31, 2011 was as follows:

 

Industry

   March 31, 2012     December 31, 2011  

Software & Services

     10.8     14.6

Retailing

     10.1        12.6   

Media

     9.8        8.1   

Health Care Equipment & Services

     8.8        6.9   

Insurance

     8.6        2.4   

Consumer Services

     8.2        4.9   

Diversified Financials

     7.0        7.8   

Telecommunication Services

     6.3        9.0   

Capital Goods

     5.8        3.4   

Materials

     5.5        3.4   

Remaining Industries

     19.1        26.9   
  

 

 

   

 

 

 

Total

     100.0     100.0
  

 

 

   

 

 

 

The portfolio’s geographic dispersion, excluding short-term investments, at fair value at March 31, 2012 was United States 96.0%, United Kingdom 2.0%, Singapore 1.5%, Canada 0.5%, and Ireland <0.1%. The geographic dispersion is determined by the portfolio company’s country of domicile. The portfolio’s currency denomination was 96.9% US dollars and 3.1% Euros at March 31, 2012.

The portfolio’s geographic dispersion, excluding short-term investments, at fair value at December 31, 2011 was United States 97.4%, Canada 1.1%, United Kingdom 1.5% and Ireland <0.1%. The geographic dispersion is determined by the portfolio company’s country of domicile. The portfolio’s currency denomination was 99.0% US dollars and 1.0% Euros at December 31, 2011.

 

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During the period ended March 31, 2012, the Company did not hold any non-controlled investments where it owned 5% or more of a portfolio company’s outstanding voting securities as investments in “affiliated” companies. In addition, the Company did not own more than 25% of a portfolio company’s outstanding voting securities as investments in “controlled” companies.

 

4. Fair Value of Financial Instruments

The carrying values of the Company’s financial instruments approximate fair value. The carrying values of receivables, other assets, accounts payable and accrued expenses approximate fair value due to their short maturities. The carrying and fair values of the revolving credit facility were $63,740,000 and $62,947,000 at March 31, 2012, respectively. The revolving credit facility would be classified as Level 2 with respect to the fair value hierarchy.

The Company’s investments were categorized in the fair value hierarchy as follows at March 31, 2012 and December 31, 2011:

 

     March 31, 2012  

Investment Type

   Level 1      Level 2      Level 3      Total  

Senior debt

   $ —         $ 122,789,640       $ 8,560,560       $ 131,350,200   

Subordinated debt

     —           84,606,796         6,006,623         90,613,419   

Common stock

     —           —           448,908         448,908   
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal

     —           207,396,436         15,016,091         222,412,527   

Short-term investments

     9,976,618         —           —           9,976,618   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,976,618       $ 207,396,436       $ 15,016,091       $ 232,389,145   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2011  

Investment Type

   Level 1      Level 2      Level 3      Total  

Senior debt

   $ —         $ 66,957,496       $ 4,651,937       $ 71,609,433   

Subordinated debt

     —           33,914,267         963,533         34,877,800   

Preferred stock

     102,524         —           —           102,524   
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal

     102,524         100,871,763         5,615,470         106,589,757   

Short-term investments

     7,714,752         —           —           7,714,752   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 7,817,276       $ 100,871,763       $ 5,615,470       $ 114,304,509   
  

 

 

    

 

 

    

 

 

    

 

 

 

At March 31, 2012, the Company held 10 distinct investment positions that were classified as Level 3, representing an aggregate fair value of $15.0 million and 6.5% of the total investment portfolio. The ranges of unobservable inputs used in the fair value measurement of the Company’s Level 3 investments as of March 31, 2012 were as follows:

 

    Asset Group   

Fair Value as of
March 31, 2012

     Valuation Techniques (1)    Unobservable Input (2)   

Range

(Weighted Average)

Senior Debt Securities

   $ 6,237,980       Broker quotes    Offered quotes    98-101 (99.6)
     2,322,580       Broker quotes    Offered quotes    99-101(99.9)
      Market Comparables    Yield    6%-9% (7%)
         Discount margin    504-694 bps (571 bps)
         Total leverage EBITDA multiple    3.6x – 5.2x (4.0x)
                   Illiquidity discount    1-3% (1%)

Subordinated Debt Securities

     6,006,623       Broker quotes    Offered quotes    99.11 – 100 (N/A)
      Market Comparables    Yield    17% (N/A)
         Discount margin    1650 bps (N/A)
               Total leverage EBITDA multiple    5.3x (N/A)

Common Stock

     448,908       Market Comparables    EBITDA multiple    5.8x (N/A)

Total

   $ 15,016,091                  

 

(1) For the assets and investment that have more than one valuation technique, the Company may rely on the stated techniques individually or in the aggregate based on a weight ascribed to each valuation technique, ranging from 0 – 100%. Broker quotes obtained for valuation purposes are reviewed by the Company relative to other valuation techniques when only one broker quote is available at the valuation measurement date.
(2) Weighted average amounts are based on the estimated fair values. If NA, then sample size is too small to compute the weighted average for the range.

 

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The more significant unobservable inputs used in the fair value measurement of the Company’s senior and subordinated loan investments are quotes obtained from unaffiliated brokers. In the event that there are limited broker quotes, then the valuation process will further rely on the inputs from comparable investments. Depending on the type of loan investment position held by the Company, the relative value analysis may rely on any of a) market yields, b) discount margin, c) illiquidity discount and d) leverage EBITDA multiples analysis to either confirm a single broker quote, or to generate a fair value in the absence of any broker quote. Other significant unobservable inputs used in the fair value measurement of the Company’s investments are also disclosed in the table above. Any significant increases or decreases in these unobservable inputs would result in significant increases or decreases in the fair value of the Company’s investments.

The following table presents a roll forward of the changes in fair value during the three months ended March 31, 2012 for investments classified within Level 3. There were no investments held for the three month period ending March 31, 2011. One senior debt security was transferred into the Level 3 hierarchy during the three months ended March 31, 2012. This investment was transferred at fair value as of the beginning of the period. This transfer from Level 2 to Level 3 was based on observed lack of liquidity (i.e. insufficient broker quotes) from information supplied by a third party pricing source, whereby such liquidity information is routinely reviewed no less frequently than monthly.

 

     Senior Debt     Subordinated
Debt
    Common Stock      Total  

Fair Value Balance as of January 1, 2012

   $ 4,651,937      $ 963,533      $       $ 5,615,470   

Purchases

     3,698,099        5,969,804        448,908         10,116,811   

Sales

     —          —                  —     

Net realized gain

     629        11,960                12,589   

Net change in unrealized appreciation*

     38,507        60,809                99,316   

Principal reduction

     (34,409     (998,479             (1,032,888

Net discount accretion

     4,730        (1,004             3,726   

Transfers into Level 3

     201,067        —                  201,067   
  

 

 

   

 

 

   

 

 

    

 

 

 

Fair Value Balance as of March 31, 2012

   $ 8,560,560      $ 6,006,623      $ 448,908       $ 15,016,091   
  

 

 

   

 

 

   

 

 

    

 

 

 

Change in net unrealized appreciation in investments still held as of March 31, 2012*

   $ 46,878      $ 38,209      $ —         $ 85,087   

 

  * Amount is included in the related amount on investments in the condensed consolidated statement of operations.

 

5. Agreements and Related Party Transactions

The Company entered into an investment advisory agreement with CNL (the “Investment Advisory Agreement”) for the overall management of the Company’s investment activities. The Company and CNL have entered into a sub-advisory agreement with KKR (the “Sub-Advisory Agreement”), under which KKR is responsible for the day-to-day management of the Company’s investment portfolio. CNL compensates KKR for advisory services that it provides to the Company with 50% of the fees that CNL receives under the Investment Advisory Agreement.

CNL earns a management fee equal to an annual rate of 2% of the Company’s average gross assets and an incentive fee based on the Company’s performance. The performance-based incentive fee is comprised of the following two parts: (i) a subordinated incentive fee on income, (ii) an incentive fee on capital gains. The subordinated incentive fee, paid quarterly, is computed as the sum of (A) 100% of quarterly pre-incentive fee net investment income in excess of 1.75% of average adjusted capital up to a limit of 0.4375% of average adjusted capital, and (B) 20% of pre-incentive net investment income in excess of 2.1875% of average adjusted capital. The incentive fee on capital gains, paid annually, is equal to 20% of realized capital gains on a cumulative basis from inception, net of (A) all realized capital losses and unrealized depreciation on a cumulative basis and (B) net of the aggregate amount of any previously paid incentive fee on capital gains.

The Company entered into a managing dealer agreement with CNL Securities Corp., an affiliate of CNL. CNL Securities Corp. serves as the managing dealer of the Offering and in connection therewith receives selling commissions of up to 7% of gross offering proceeds, a marketing support fee of up to 3% of gross offering proceeds, and reimbursement of due diligence and certain other expenses incurred in connection with the Offering. All or any portion of these fees and expense reimbursements may be re-allowed to participating brokers. The Company will pay a maximum sales load of 10% of gross offering proceeds for all combined selling commissions, marketing support fees and expense reimbursements.

The Company entered into an administrative services agreement with CNL (the “Administrative Services Agreement”) whereby CNL performs, and oversees the performance of, various administrative services on behalf of the Company. Administrative services may include investor services, general ledger accounting, fund accounting, maintaining required financial records, calculating the Company’s net asset value, filing tax returns, preparing and filing SEC reports, preparing, printing and disseminating shareholder reports, overseeing the payment of the Company’s expenses, oversight of services providers and the performance of administrative and professional services rendered to the Company by others. The Company reimburses CNL for the expenses it incurs in performing its administrative obligations on behalf of the Company.

 

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CNL, certain CNL affiliates, and KKR receive compensation and reimbursement of expenses in connection with (i) the performance and supervision of administrative services and (ii) the Offering. Related party fees, expenses and reimbursement of expenses incurred in the three-month period ended March 31, 2012 are summarized below:

 

Related Party

  

Description

   Amount  

CNL Securities Corp.

   Selling commissions and marketing support fees    $ 8,869,023   

CNL and KKR

   Investment advisory fees      894,160   

CNL and KKR

   Reimbursement of organization expenses      527,741   

CNL

   Administrative and Compliance services      118,818   

During the three months ended March 31, 2012, the Company recorded performance-based incentive fee expense of $875,246, including subordinated incentive fee on income of $0 and incentive fee on capital gains of $875,246. The incentive fee on capital gains was not earned by the Advisors or payable to the Advisors as of March 31, 2012.

The terms of the Investment Advisory Agreement entitle CNL (and indirectly KKR) to receive up to 5% of gross proceeds in connection with the Offering as reimbursement for organization and offering expenses incurred by the Advisors on behalf of the Company. The Advisors waived the requirement for the Company to reimburse them for organization and offering expenses for the period from June 17, 2011 through January 31, 2012. The waiver of the reimbursement requirements did not reduce the amount of organization and offering expenses incurred by the Advisors that is eligible for reimbursement in future periods. Beginning February 1, 2012, the Company implemented an expense accrual rate of 0.75% of gross offering proceeds to initiate the reimbursement of organization expenses incurred by the Advisors. Payments of organization expenses were made to the Advisors in the amount of $205,453 with a remaining payable due to the Advisors of $322,288 as of March 31, 2012. During the three months ended March 31, 2012, the Advisors incurred $0.7 million in additional offering costs. As of March 31, 2012, approximately $5.4 million was the net amount of organization and offering expenses incurred by the Advisors, net of both increases and reimbursements in the three months ended March 31, 2012. Approximately $368,000 was classified as organization expenses and the remainder was classified as offering expenses.

Beginning on June 7, 2011, the Company entered into an Expense Support and Conditional Reimbursement Agreement, and subsequently one amendment (the “Expense Support Agreement”) with CNL and KKR pursuant to which CNL and KKR jointly and severally agreed to pay to the Company all operating expenses (an “Expense Support Payment”) during the Expense Support Payment Period between June 17, 2011 to December 31, 2011. On December 16, 2011, the Company and the Advisors entered into an amendment to the Expense Support Agreement, effective January 1, 2012, that extended the terminal date of the Expense Support Payment Period to March 31, 2012 and reduced the Reimbursement Ratio from 100% to 65% of the Company’s Operating Expenses. The Amendment also redefined Operating Expenses as all costs and expenses paid or incurred by the Company, as determined under GAAP, including base advisory fees payable pursuant to the Advisory Agreements, and excluding (i) incentive advisory fees payable pursuant to the Advisory Agreements, (ii) offering and organization expenses, and (iii) all interest costs related to indebtedness for such period, if any. On March 16, 2012, the Company and the Advisors entered into an amendment and restatements of the Expense Support Agreement, effective April 1, 2012, that extended the terminal date of the Expense Support Payment Period to June 30, 2012 and reduced the Reimbursement Ratio from 65% to 25% of the Company’s Operating Expenses.

During the term of the Expense Support Agreement, the Advisors are entitled to an annual year-end reimbursement by the Company (a “Reimbursement Payment”) for unreimbursed Expense Support Payments made under the Agreement, but such Reimbursement Payments may only be made within three years after the year in which such Expense Support Payments are made. No Reimbursement Payment may be paid by the Company to the extent that it would cause the Company’s operating expenses (excluding investment advisory fees, organization and offering expenses and interest expenses) to exceed 1.91% of average net assets attributable to common shares as of the end of any such calendar year. The Agreement also states that in no event shall the Company be required to make any repayment of Expense Support Payments prior to January 1, 2013.

 

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Presented below is a summary of Expense Support Payments for the year ending December 31, 2011 and the three months ended March 31, 2012 as well as the terminal eligibility dates for Reimbursement Payments. Management believes that Reimbursement Payments are not probable as of March 31, 2012.

 

Period

   Expense  Support
Payments
     Other Expense
Ratio Cap
  Eligible for  Reimbursement
Payments through
 

Period ended December 31, 2011

   $ 1,375,592       1.91%     December 31, 2014   

Three months ended March 31, 2012

   $ 962,798       1.91%     December 31, 2015   
  

 

 

      

Total

     2,338,390        
  

 

 

      

 

6. Earnings Per Share

The following information sets forth the computation of basic and diluted net increase in net assets from operations per share (earnings per share).

 

     Three Months
Ended
March 31, 2012
 

Numerator for basic and diluted net increase in net assets per share

   $ 5,475,928   

Denominator for basic and diluted net increase in net assets per share: Weighted average shares outstanding

     10,949,283   

Basic/diluted net increase in net assets from operations per share

   $ 0.50   

Diluted net increase in net assets per share from operations equals basic net increase in net assets per share from operations for each period because there were no common stock equivalents outstanding during the above periods.

 

7. Distributions

The board of directors declared 13 distribution record dates in the three months ended March 31, 2012. Declared distributions are paid monthly. The total of declared distributions and the sources of distribution payments for the three months ended March 31, 2012 are presented in the table below. Distributions from Other Sources is the result of recording the incentive fee on capital gains on the condensed consolidated statement of operations, even though this incentive fee is not earned nor payable to the Advisors. Therefore unearned incentive fees represent a source of distributions declared and payable to common shareholders.

 

Total Distributions

   $ 1,987,103         100.0

From Net Investment Income

     1,141,117         57.4

From Capital Gains

     728,966         36.7

From Other Sources

     117,020         5.9

For federal income tax purposes, the distributions paid to shareholders for the three months ended March 31, 2012 are expected to be fully taxable as ordinary income and capital gains, if any; accordingly management does not expect any return of capital. The tax characteristics of the distributions will be reported to shareholders after the end of the calendar year.

 

8. Share Transactions

Transactions in shares of common stock were as follows for the three months ended March 31, 2012. The Company began investment operations on July 1, 2011 so there is no presentation of comparative three month period ending March 31, 2011.

 

     Three Months
Ended
March 31, 2012
 
     Shares      Amount  

Gross Proceeds from Offering

     8,712,413       $ 92,739,521   

Commissions and Marketing Support Fees

        (8,869,023

Reinvestment of Distributions

     129,673         1,248,460   
  

 

 

    

 

 

 

Net Proceeds

     8,842,086       $ 85,118,958   
  

 

 

    

 

 

 

Average Net Proceeds Per Share

     $9.63   

On January 4, 2012, January 23, 2012 and February 28, 2012, the Company’s board of directors increased the public offering price per share of common stock under the Offering to $10.40, $10.65 and $10.85, respectively, to ensure that the revised net price per share, excluding sales load ($9.360, $9.585 and $9.765, respectively) equaled or exceeded the net asset value per share on each subsequent subscription closing date.

 

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9. Financial Highlights

The following per share data and ratios have been derived from information provided in the financial statements. The following is a schedule of financial highlights for one share of common stock outstanding during the three months ended March 31, 2012. The Company began investment operations on July 1, 2011 so there is no presentation of comparative three month period ending March 31, 2011.

 

Per Share Operating Performance:

 

Net Asset Value, Beginning of Period

   $ 9.21   

Net Investment Income, Before Expense Reimbursement (1)

     0.01   

Expense Reimbursement (1)

     0.09   
  

 

 

 

Net Investment Income (1)

     0.10   

Net Realized and Unrealized Gain (1)(2)

     0.49   
  

 

 

 

Net Increase Resulting from Investment Operations

     0.59   

Distributions from Net Investment Income to Common Shareholders (3)

     (0.11

Distributions from Capital Gains

     (0.07

Distributions from Other Sources

     (0.01
  

 

 

 

Net Decrease Resulting from Distributions to Common Shareholders

     (0.19

Capital share transactions -Issuance of common stock above net asset value (4)

     0.05   

Net Increase Resulting from Capital Share Transactions

     0.05   
  

 

 

 

Net Asset Value, End of Period

   $ 9.66   
  

 

 

 

Total Investment Return (5)

     6.91

Ratios/Supplemental Data (amounts in thousands):

  

Net Assets, End of Period

   $ 153,771   

Average Net Assets(6)

   $ 104,551   

Average Credit Facility Borrowings

   $ 57,599   

Asset Coverage Ratio

     3.41   

Shares Outstanding, End of Period

     15,915   

Weighted Average Shares Outstanding

     10,949   

Ratios to Average Net Assets: (6)

  

Total Expenses Before Operating Expense Reimbursement

     3.07

Total Expenses After Operating Expense Reimbursement

     2.14

Net Investment Income

     1.09

Portfolio Turnover Rate

     13

 

(1) 

The per share data was derived by using the weighted average shares outstanding during the period.

(2) 

The amount shown at this caption is the balancing figure derived from the other figures in the schedule. The amount shown at this caption for a share outstanding throughout the period may not agree with the change in the aggregate gains and losses in portfolio securities for the period because of the timing of sales of the Company’s shares in relation to fluctuating market values for the portfolio.

(3) 

The per share data for distributions is the actual amount of paid or payable distributions per share of common stock during the period.

(4) 

The continuous issuance of shares of common stock may cause an incremental increase in net asset value per share due to the sale of shares at the then prevailing public offering price and the receipt of net proceeds per share in excess of net asset value per share. The per share data was derived by dividing (i) the sum of (A) the number of shares issued in connection with subscriptions and/or distribution reinvestment on each share transaction date times (B) the differences between the net proceeds per share to the Company and the net asset value per share on each share transaction date, divided by (ii) the total shares outstanding at the end of the period.

(5) 

Total investment return is based on (i) the purchase of one share at the initial public offering price, net of sales load, on the first day of the period, (ii) the sale at the net asset value per share, on the last day of the period, of (A) one share plus (B) any fractional shares issued in connection with the reinvestment of distributions, and (iii) the cash payment for any distributions payable on the last day of the period. The total return calculation assumes that (i) the cash distributions are reinvested in accordance with the Company’s distribution reinvestment plan and (ii) the shares issued pursuant to the distribution reinvestment plan are issued at the then public offering price, net of sales load, on each distribution payment date. Since there is no public market for the Company’s shares, then current market value is assumed to be equal to (i) the initial public offering price, net of sales load, on the first day of the period and (ii) net asset value per share on the last day of the period. Total investment return is not annualized.

(6) 

The computation of average net assets during the period is based on the daily value of net assets. Ratios are not annualized.

 

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10. Revolving Credit Facility and Borrowings

On August 22, 2011, CCT Funding entered into a revolving credit facility agreement (the “Credit Agreement”) with Deutsche Bank AG, New York Branch (“Deutsche Bank”). Deutsche Bank is the sole initial lender and serves as administrative agent under the Credit Agreement. The Credit Agreement currently provides for borrowings in an aggregate amount up to $175 million on a committed basis, with an accordion feature that can increase the aggregate maximum credit commitment up to $250 million, if exercised and under certain circumstances. On February 28, 2012, CCT Funding entered into an amendment (the “Amendment”) to the Credit Agreement to partially exercise the available accordion feature provided in the Credit Agreement. The Amendment provided for the extension of a new tranche of commitments (the “Tranche B Loans”) with borrowings in an aggregate amount up to $100 million, in addition to the initial $75 million of available borrowings, or Tranche A Loans. The Company has incurred costs of $278,920 in connection with obtaining and amending the credit facility, which the Company has recorded as prepaid expenses and other assets on its condensed consolidated statements of assets and liabilities and is amortizing to interest expense over the two year life of the credit facility.

Tranche A Loans under the Credit Agreement generally bear interest based on one-month adjusted London interbank offered rate for the relevant interest period, plus a spread of 1.70% per annum. Interest is payable monthly in arrears. Beginning on March 27, 2012, any unused commitment balance incurs a continuing commitment fee of 0.75% per annum. Tranche B Loans will generally bear interest based on a three-month adjusted London interbank offered rate for the relevant interest period, plus a spread of 2.35% per annum. Beginning on April 28, 2012, any unused Tranche B Loan commitment balances will be subject to a continuing commitment fee of 0.75% per annum. All amounts borrowed under the credit facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on August 22, 2013.

As of March 31, 2012, $63.74 million was borrowed and outstanding as Tranche A Loans under the Credit Agreement. The unused commitment amount was $11.26 million under the Tranche A Loan commitment and $100 million under the Trance B Loan commitment. The Company may further increase the aggregate maximum credit commitment in the future. The carrying amount of the outstanding borrowing approximates its fair value.

The effective interest rate under the Credit Agreement was 2.00% on March 31, 2012, exclusive of any commitment fees and of other deferred financing costs related to establishing the credit facility. The weighted average interest rate for the period ending March 31, 2012 was 1.97% per annum. The Company incurred interest expense, including loan commitment fees and amortization of deferred financing costs, of $320,129 for the period ended March 31, 2012.

Under the Credit Agreement, CCT Funding has made certain representations and warranties and it is required to comply with various covenants, reporting requirements and other customary requirements for Credit Agreement of this nature. As of March 31, 2012 management believes that the Company was in compliance with the covenants of the credit facility.

 

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

STATEMENT REGARDING FORWARD LOOKING INFORMATION

The following information contains statements that constitute forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements generally are characterized by the use of terms such as “may,” “should,” “plan,” “anticipate,” “estimate,” “intend,” “predict,” “believe” and “expect” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, our actual results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such a difference include the following: the current global economic downturn, increased direct competition, changes in government regulations or accounting rules, changes in local, national and global capital market conditions, our ability to obtain credit lines or credit facilities on satisfactory terms, changes in interest rates, availability of proceeds from our offering of shares, our ability to identify suitable investments, our ability to close on identified investments, inaccuracies of our accounting estimates, our ability to locate suitable borrowers for our loans and the ability of such borrowers to make payments under their respective loans. Given these uncertainties, we caution you not to place undue reliance on such statements, which apply only as of the date hereof. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances or to reflect the occurrence of unanticipated events. The forward-looking statements should be read in light of the risk factors identified in the “Risk Factors” section of our annual report on Form 10-K filing for the year ended December 31, 2011.

EXECUTIVE OVERVIEW

We are a non-diversified closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. Formed as a Maryland corporation on June 9, 2010, we are externally managed by CNL Fund Advisors Company (“CNL”) and KKR Asset Management LLC (“KKR”), collectively, the “Advisors”, which are responsible for sourcing potential investments, conducting due diligence on prospective investments, analyzing investment opportunities, structuring investments and monitoring our portfolio on an ongoing basis. Both Advisors are registered as investment advisers with the SEC.

Our investment objective is to provide our shareholders with current income and, to a lesser extent, long-term capital appreciation. We intend to meet our investment objective by investing primarily in the debt of privately owned U.S. companies (also referred to as “portfolio companies”) with a focus on originated transactions sourced through the networks of our Advisors. We anticipate that a substantial portion of our portfolio will consist of senior and subordinated debt, which we believe offer opportunities for superior risk-adjusted returns and income generation. Our debt investments may take the form of corporate loans or bonds, may be secured or unsecured and may, in some cases, be accompanied by warrants, options or other forms of equity participation. We may also potentially purchase common or preferred equity interests in portfolio companies.

The level of our investment activity depends on many factors, including: the amount of debt and equity capital available at large to finance the business activities of portfolio companies; the level of merger, acquisition and refinancing activity involving private companies; the availability of credit to finance transactions; and the general economic and competitive environment for the types of investments we intend to make.

 

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Financial and operating highlights

 

At March 31, 2012:

  

Investment Portfolio:

     $232.4 million   

Net Assets:

     $153.8 million   

Indebtedness (borrowings under credit facility):

     $63.7 million   

Net Asset Value per share:

     $9.66   

 Portfolio Activity for the Three Months Ended March 31, 2012:

        

Cost of investments during period:

     $135.3 million   

Sales, repayments and other exits during period:

     $23.9 million   

Number of portfolio companies at end of period:

     115   

 Operating Results for the Three Months Ended March 31, 2012:

        

Net investment income before incentive fees:

     $2.0 million   

Net investment income:

     $1.1 million   

Net realized gains:

     $0.7 million   

Net increase in net assets from operations:

     $5.5 million   

Net investment income before incentive fees per share:

     $0.18   

Net investment income per share:

     $0.10   

Dividends declared per share:

     $0.19   

Earnings per share:

     $0.50   

PORTFOLIO AND INVESTMENT ACTIVITY

Portfolio Investment Activity for the Three Months Ended March 31, 2012

Nine months ago on July 1, 2011, we commenced investment operations and began executing on our strategy of investing in the debt of privately owned U.S. companies. During the three months ended March 31, 2012, we acquired investments in portfolio companies totaling $135.3 million. During the same three-month period, we sold investment positions totaling $21.5 million and collected principal payments of $2.4 million. As of March 31, 2012, our investment portfolio consisted of investment interests in 115 portfolio companies, for a total fair value of $232.4 million, including our short term investments, with an associated cost of $228.3 million. During the three months ended March 31, 2012 we added 19 new portfolio companies with an aggregate investment of approximately $43.2 million; we completely exited from our investment positions in 14 portfolio companies that had been held in the investment portfolio at December 31, 2011.

As of December 31, 2011, the investment portfolio was valued at $114.3 million with an associated cost of $113.8 million; accordingly the +100% growth in the investment portfolio in the first quarter of 2012 accounted for much of the significant changes in investment income, expenses and net investment income during the same period, as discussed below in Results of Operations.

 

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The information below presents the segmentation and investment characteristics of our portfolio. However, our portfolio is not managed with any specific investment diversification or dispersion target goals. The following table summarizes the composition of our investment portfolio at cost and fair value as of March 31, 2012.

 

Asset Category    Cost      Fair Value      Percentage of
Portfolio
     Percentage of
Net Assets
 

 

  

 

 

    

 

 

 

Senior debt securities

     $     128,489,222       $     131,350,200         59.1%         85.4%        

Subordinated debt securities

     89,373,437         90,613,419         40.7             58.9           
  

 

 

    

 

 

 

Total debt securities

     217,862,659         221,963,619         99.8             144.3           

Common stock

     448,908         448,908         0.2             0.3           
  

 

 

    

 

 

 

Subtotal

     218,311,567         222,412,527         100.0%         144.6           
        

 

 

    

Short term investments

     9,976,618         9,976,618            6.5           
  

 

 

    

 

 

 

Total investments

     $     228,288,185       $     232,389,145            151.1%       
  

 

 

    

 

 

       

 

 

 

The primary investment concentrations include (i) senior debt and (ii) subordinated debt securities. The debt investments in our portfolio were purchased at an average price of 99.6% of par value.

At March 31, 2012, 43.7% of our debt investments, based on fair value, featured floating interest rates, generally based on London Interbank Offered Rate (“LIBOR”), and 56.3% of our debt investments featured fixed interest rates. Approximately 77% of our floating rate debt investments featured interest rate floors and the weighted average interest rate floor was 1.47%.

As of March 31, 2012 our investment portfolio of 115 portfolio companies was diversified across 23 industries, as compared to our investment portfolio as of December 31, 2011 that consisted of 110 portfolio companies with the presence of 24 different industry classifications. The table below presents an industry class diversification summary of our investments excluding our short term investments:

 

    Industry

   March 31, 2012   December 31, 2011

    Software & Services

   10.8%   14.6%

    Retailing

   10.1%   12.6%

    Media

   9.8%   8.1%

    Health Care Equipment & Services

   8.8%   6.9%

    Insurance

   8.6%   2.4%

    Consumer Services

   8.2%   4.9%

    Diversified Financials

   7.0%   7.8%

    Telecommunication Services

   6.3%   9.0%

    Capital Goods

   5.8%   3.4%

    Materials

   5.5%   3.4%

    Technology Hardware & Equipment

   4.1%   4.6%

    Food & Staples Retailing

   3.3%   2.5%

    Pharmaceuticals, Biotechnology & Life Sciences

   3.3%   5.0%

    Commercial & Professional Services

   2.3%   3.2%

    Energy

   1.8%   3.3%

    Consumer Durables & Apparel

   1.7%   1.2%

    Banks

   1.6%   1.4%

    Transportation

   0.6%   3.4%

    Food, Beverage & Tobacco

   0.2%   0.5%

    Semiconductors & Semiconductor Equipment

   0.1%   0.2%

    Real Estate

   0.1%   1.5%

    Automobiles & Components

   <.1%   <.1%

    Household & Personal Products

   <.1%   <.1%

    Utilities

   --   0.1%
  

 

 

 

    Grand Total

   100.0%   100.0%
  

 

 

 

 

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We neither “control” nor are we an “affiliated person” of any of our portfolio companies, each as defined in the 1940 Act. Under the 1940 Act, we generally would be presumed to “control” a portfolio company if we own beneficially, either directly or through one or more controlled companies, 25% or more of its voting securities; and generally would be an “affiliated person” of a portfolio company if we directly or indirectly own or otherwise control 5% or more of its voting securities.

LIQUIDITY AND CAPITAL RESOURCES

We generate cash primarily from (i) the net proceeds from our Offering, (ii) borrowing funds under a revolving credit facility, (iii) interest income, dividends, fees earned from our portfolio investments, and principal repayments and (iv) proceeds from sales of our portfolio investments.

Offering of Common Stock

On June 23, 2010, we filed a registration statement on SEC Form N-2 (as amended and supplemented, the “Registration Statement”) with the SEC to register the continuous offering and sale of our common stock. The Registration Statement offers for sale up to $1.6 billion of shares of common stock (150 million shares at an initial offering price of $10.85 per share, as amended) (the “Offering”), and it was declared effective on April 4, 2011, at which time our Offering commenced. We raised net proceeds of $85.1 million in the three months ended March 31, 2012 and $149.5 million since the start of our Offering, including the reinvestment of distributions.

Credit Facility

We borrow funds to invest alongside the proceeds of our Offering for the purpose of making investments that increase our investment amounts in current holdings and to increase the number of portfolio holdings. As we previously reported, on August 22, 2011, CCT Funding LLC (“CCT Funding”) entered into a revolving credit facility agreement (the “Credit Agreement”) with Deutsche Bank AG, New York Branch (“Deutsche Bank”). Deutsche Bank is the sole initial lender and serves as administrative agent under the Credit Agreement. The Credit Agreement currently provides for borrowings in an aggregate amount up to $175 million on a committed basis, with an accordion feature that can increase the aggregate maximum credit commitment up to $250 million, if exercised and under certain circumstances. On February 28, 2012, CCT Funding LLC entered into an amendment (the “Amendment”) to the Credit Agreement to partially exercise the available accordion feature provided in the Credit Agreement. The Amendment provided for the extension of a new tranche of commitments (the “Tranche B Loans”) with borrowings in an aggregate amount up to $100 million, in addition to the initial $75 million of available borrowings, or Tranche A Loans. We have incurred costs of $0.3 million in connection with obtaining and amending the credit facility, primarily consisting of legal fees.

Tranche A Loans under the Credit Agreement generally bear interest based on one-month adjusted London interbank offered rate for the relevant interest period, plus a spread of 1.70% per annum. Interest is payable monthly in arrears. Beginning on March 27, 2012, any unused commitment balance incurs a continuing commitment fee of 0.75% per annum. Tranche B Loans will generally bear interest based on a three-month adjusted London interbank offered rate for the relevant interest period, plus a spread of 2.35% per annum. Beginning on April 28, 2012, any unused Tranche B Loans commitment balances will be subject to a continuing commitment fee of 0.75% per annum. All amounts borrowed under the credit facility will mature, and all accrued and unpaid interest thereunder, will be due and payable on August 22, 2013.

CCT Funding has appointed us to manage its portfolio of investments pursuant to the terms of an investment management agreement. CCT Funding’s obligations to Deutsche Bank are secured by a first priority security interest in substantially all of the assets of CCT Funding, including its portfolio of investments. The obligations of CCT Funding under the credit facility are non-recourse to us.

As of March 31, 2012, $63.74 million was borrowed and outstanding as Tranche A Loans under the Credit Agreement. The unused commitment amount was $11.26 million under the Tranche A Loans commitment and $100 million under the Trance B Loans commitment. As of March 31, 2012, ratio of borrowings-to-net asset value was 41%, or an asset coverage ratio of 3.41. The Company may further increase the aggregate maximum credit commitment in the future.

 

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Organization and Offering Costs

The terms of the Investment Advisory Agreement entitle CNL (and indirectly KKR) to receive up to 5% of gross proceeds in connection with the Offering as reimbursement for organization and offering expenses incurred by the Advisors on behalf of the Company. The Advisors waived the requirement for the Company to reimburse them for organization and offering expenses for the period from June 17, 2011 through January 31, 2012. The waiver of the reimbursement requirements did not reduce the amount of organization and offering expenses incurred by the Advisors that is eligible for reimbursement in future periods. Beginning February 1, 2012, the Company implemented an expense accrual rate of 0.75% of gross offering proceeds to initiate the reimbursement of organization expenses incurred by the Advisors. Reimbursement payments of organization expenses were made to the Advisors in the amount of $0.2 million with a remaining payable due to the Advisors of $0.3 million as of March 31, 2012. During the three months ended March 31, 2012, the Advisors incurred $0.7 million in additional offering costs. As of March 31, 2012, approximately $5.4 million was the net amount of organization and offering expenses incurred by the Advisors, net of both expense increases and reimbursement payments in the three months ended March 31, 2012.

We will continue to reimburse the Advisors for the organization and offering expenses in connection with gross proceeds raised under the Offering only to the extent that the reimbursement payments would not cause the total organization and offering expenses (which excludes selling commissions and marketing support fees) borne by us to exceed 5% of the aggregate gross proceeds from our Offering. The Advisors continue to be responsible for the payment of our organization and offering expenses to the extent they exceed 5% of the aggregate gross proceeds from the Offering, without recourse against or reimbursement by us.

Expense Support Agreement

Beginning on June 7, 2011, we entered into an Expense Support and Conditional Reimbursement Agreement, and subsequently one amendment (the “Expense Support Agreement”) with CNL and KKR pursuant to which CNL and KKR jointly and severally agreed to pay to us all operating expenses (an “Expense Support Payment”) during the Expense Support Payment Period between June 17, 2011 to December 31, 2011. On December 16, 2011, the company and the Advisors entered into a second amendment to the Expense Support Agreement, effective January 1, 2012, that extended the terminal date of the Expense Support Payment Period to March 31, 2012 and reduced the Reimbursement Ratio from 100% to 65% of our Operating Expenses. The second amendment also redefined Operating Expenses as all costs and expenses paid or incurred by us, as determined under GAAP, including base advisory fees payable pursuant to the Advisory Agreements, and excluding (i) incentive advisory fees payable pursuant to the Advisory Agreements, (ii) offering and organization expenses, and (iii) all interest costs related to indebtedness for such period, if any. On March 16, 2012, the company and the Advisors entered into an amendment and restatement of the Expense Support Agreement, effective April 1, 2012, that extended the terminal date of the Expense Support Payment Period to June 30, 2012 and reduced the Reimbursement Ratio from 65% to 25% of our Operating Expenses.

During the term of the Expense Support Agreement, the Advisors are entitled to an annual year-end reimbursement by us (a “Reimbursement Payment”) for unreimbursed Expense Support Payments made under the Agreement, but such Reimbursement Payments may only be made within three years after the year in which such Expense Support Payments are made. No Reimbursement Payment may be paid by us to the extent that it would cause our operating expenses (excluding investment advisory fees, organization and offering expenses and interest expenses) to exceed 1.91% of average net assets attributable to common shares as of the end of any such calendar year. The Agreement also states that in no event shall we be required to make any repayment of Expense Support Payments prior to January 1, 2013. As of March 31, 2012, management believes that such Reimbursement Payment are not probable. Management will periodically assess the likelihood that Reimbursement Payments become probable. As of March 31, 2012, the amount of Expense Support Payment, received or receivable by us from the Advisors, is $2.3 million, including $1.0 million of Expense Support Payments received or receivable by us in the three months ended March 31, 2012.

 

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The Expense Support Agreement may be terminated by the Advisors acting jointly, without payment of any penalty, upon written notice to us, except the Advisors may not terminate their obligations to make Expense Support Payments. In addition, the Expense Support Agreement will automatically terminate in the event of (a) the termination by us of either our Investment Advisory Agreement or our Sub-Advisory Agreement, or (b) our dissolution or liquidation. If the Expense Support Agreement is terminated due to termination of the Investment Advisory Agreement or the Sub-Advisory Agreement, then we must make a Reimbursement Payment to the Advisors, pro rata based on the aggregate unreimbursed Expense Support Payments made by each Advisor.

Distributions Paid and Declared

We pay our ordinary monthly distributions in the form of cash, unless shareholders elect to receive their ordinary monthly distributions and/or long-term capital gains distributions in additional shares of our common stock pursuant to the terms our distribution reinvestment plan. Any distributions reinvested under our distribution reinvestment plan will nevertheless remain taxable for U.S. shareholders. For the three months ended March 31, 2012, we paid total distributions of $2.0 million, which consisted of distributions in the amounts of $1.1 million from net investment income, $0.7 million from capital gains, and $0.1 million from other sources. Overall, net investment income and capital gains represented 94% of total distributions as of March 31, 2012. Alternatively, our net investment income before incentive fees was $2.0 million which fully covered the total distributions in the three months ended March 31, 2012. Since the performance incentive fee incurred by us during the three months ended March 31, 2012 is neither earned nor payable to the Advisors, then we believe that net investment income before incentive fees is useful in evaluating the relationship between distributions and (i) investment income and (ii) capital gains.

Our shareholders who held our common stock during the entire three months ended March 31, 2012 received distributions of $0.1857 per share. The following table provides the details of the cash distributions per share that we have declared and paid on our common stock during the three months ended March 31, 2012.

 

Distribution Record

Date

  

Distribution Payment

Date

  

Distribution Amount

Per Share

January 3, 2012

   February 1, 2012    $ 0.013798

January 10, 2012

   February 1, 2012    0.013798

January 17, 2012

   February 1, 2012    0.014000

January 24, 2012

   February 1, 2012    0.014000

January 31, 2012

   February 1, 2012    0.014336

February 7, 2012

   February 29, 2012    0.014336

February 14, 2012

   February 29, 2012    0.014336

February 21, 2012

   February 29, 2012    0.014336

February 28, 2012

   February 29, 2012    0.014336

March 6, 2012

   March 28, 2012    0.014606

March 13, 2012

   March 28, 2012    0.014606

March 20, 2012

   March 28, 2012    0.014606

March 27, 2012

   March 28, 2012    0.014606

We anticipate that our distributions, in the aggregate, will be substantially supported by taxable ordinary income and, if any, realized capital gains.

 

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RESULTS OF OPERATIONS

Set forth below are our results of operations for the three months ended March 31, 2012; our business operations started on June 17, 2011 and our portfolio investment activity commenced on July 1, 2011. Therefore there are no results of operations for the three months ended March 31, 2011 to present for comparative purposes. It should be noted that our investment portfolio grew by approximately 100% in the first quarter of 2012 due to growth in capital available for investment, and this growth accounted for much of the significant changes in investment income, expenses and net investment income during the same period, as discussed below.

Operating Expenses and Net Investment Income

Investment income for the period ended March 31, 2012 was $3.4 million, consisting primarily of interest income in the amount of $3.4 million. Incremental amounts of investment capital were deployed throughout the three-month period ended March 31, 2012 in the acquisition of portfolio investments as we received net proceeds from our Offering on a weekly basis. The investment portfolio doubled in size during the three months ended March 31, 2012, and accordingly we believe that reported interest income for the three months ended March 31, 2012 is not completely representative of our stabilized performance or our future performance. We expect further increases in interest income in future periods due to i) an increasing proportion of investments held for the entire period relative to incremental net investment activity during each quarter, and ii) a growing base of portfolio company investments that we expect to result from the expected increase in investment capital available from our Offering.

Operating expenses were $3.2 million for the three months ended March 31, 2012. Investment advisory fees and performance-based incentive fees totaled $1.8 million, or 55% of total operating expenses. The performance-based incentive fee, consisting entirely of incentive fee on capital gains, in the amount of $0.9 million was neither earned by, nor payable to, the Advisors as of March 31, 2012. Furthermore, $1.0 million in operating expenses was offset by the Advisors’ Expense Support Payments, resulting in net expenses of $2.2 million for the three months ended March 31, 2012. The Expense Support Payments were based on 65% of operating expenses incurred during the three months ended March 31, 2012, excluding (i) incentive advisory fees payable pursuant to the Advisory Agreements, (ii) offering and organization expenses, and (iii) all interest costs related to indebtedness.

Beginning February 1, 2012, the Company implemented an expense accrual rate of 0.75% of gross offering proceeds to initiate the reimbursement of organization expenses incurred by the Advisors. Payments of organization expenses were made to the Advisors in the amount of $0.2 million with a remaining payable due to the Advisors of $0.3 million as of March 31, 2012.

The effective interest rate under the Credit Agreement for Tranche A Loans was 2.00% on March 31, 2012, exclusive of any commitment fees and of other deferred financing costs related to establishing the credit facility. The weighted average interest rate for the three months ended March 31, 2012 was 1.97% per annum. We incurred interest expense, including loan commitment fees and amortization of deferred financing costs, of $0.3 million for the period ended March 31, 2012 solely in connection with borrowing under the Tranche A Loans commitment.

We consider the following expense categories to be relatively fixed in the near term: administrative services, director’ fees and expenses, custodian and accounting fees, insurance, and a component of other operating expense related to compliance services and investor services. Variable operating expenses include professional services, investment advisory fees, performance-based incentive fees, interest expense, and a component of other operating expenses related to transfer agency services and shareholder services. We expect these variable operating expenses to continue to increase at a faster rate relative to fixed operating costs, either in connection with the growth in the asset base (investment advisory fees and interest expense), the number of shareholders and open accounts (transfer agency services and shareholder services) and the complexity of our investment processes and capital structure (professional services).

Net investment income was $1.1 million for the three months ended March 31, 2012, or approximately $0.10 per share. Net investment income before incentive fees was $2.0 million over the same period, or $0.18 per share.

 

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Net Assets, Net Asset Value per Share and Total Return

Net assets increased $88.6 million during the three-month period ended March 31, 2012. The most significant increase during the three months ended March 31, 2012 was attributable to the issuance of shares of common stock in the current Offering and reinvestment of distributions in the amount of $85.1 million. Net investment income contributed $1.1 million to the growth in net assets during the three months ended March 31, 2012. Other increases in net assets during the three months ended March 31, 2012 were attributable to (i) unrealized appreciation on investments of $3.6 million and (ii) realized gains of $0.7 million. Distributions to shareholders in the amount of $2.0 million contributed to a reduction in net assets in the three months ended March 31, 2012. Fluctuations in prevailing interest rates may cause further changes in unrealized appreciation and depreciation on investments. None of the portfolio investments were non-accrual or in default as of March 31, 2012.

Our net asset value per share was $9.21 on December 31, 2011 and $9.66 on March 31, 2012. After considering the changes in net asset value per share, distributions of approximately $0.19 per share, and assuming the reinvestment of those distributions at the prevailing offering price per share, net of sales load, then the total return (not annualized) was 6.91% over the three months ended March 31, 2012.

Capital Stock Activity

Shares of our common stock outstanding increased by 8,842,086 during the three months ended March 31, 2012, including shares sold in our Offering and shares issued in connection with our distribution reinvestment plan. The public offering price was increased three times and ranged between $10.25 per share to $10.85 per share during the three months ended March 31, 2012; the public offering price was $10.85 per share and the net price (net of sales load) was $9.765 per share as of March 31, 2012.

OFF-BALANCE SHEET ARRANGEMENTS

We had no off-balance sheet arrangements as of March 31, 2012.

CONTRACTUAL OBLIGATIONS

Investment Advisory Agreements–We have entered into the Investment Advisory Agreement with CNL for the overall management of our investment activities. CNL has also entered into the Sub-Advisory Agreement with KKR, under which KKR is responsible for the day-to-day management of our investment portfolio. Pursuant to the Investment Advisory Agreement, CNL will earn a management fee equal to an annual rate of 2% of our average gross assets, and an incentive fee based on our performance. The incentive fee is comprised of the following three parts: (i) a subordinated incentive fee on income, (ii) an incentive fee on capital gains and (iii) a subordinated listing incentive fee. CNL will compensate KKR for advisory services that it provides to us with 50% of the fees that CNL receives under the Investment Advisory Agreement. Under the terms of the Investment Advisory Agreement, CNL (and indirectly KKR) are also entitled to receive up to 5% of gross proceeds in connection with the Offering as reimbursement for organization and offering expenses incurred by the Advisors on our behalf.

On March 14, 2012, we and CNL agreed to two technical changes to the Investment Advisory Agreement, which will reduce the amount of performance-based incentive fees payable to CNL and KKR in the future. The changes (i) delete from any performance-based incentive fees payable to CNL and KKR any subordinated listing incentive fee (which, among other things and subject to certain conditions, as previously disclosed, would have been earned by CNL and KKR following a liquidity event involving a listing of our shares on a national securities exchange) and (ii) refine the previously disclosed definition of “pre-incentive net investment income,” to exclude from the calculation thereof any Expense Support Payments and any reimbursement payments by us of Expense Support Payments, effective from and after January 1, 2012.

Revolving Credit Facility–As discussed above under “Financial Condition, Liquidity and Capital Resources – Credit Facility,” CCT Funding has entered into a revolving credit facility with Deutsche Bank. The credit facility provides for borrowings in an aggregate amount up to $75 million on a committed basis (which we call the Tranche A Loans), with an accordion feature that can increase the aggregate maximum credit commitment up to $250 million, if exercised and under certain circumstances. On February 28, 2012, CCT Funding entered into an amendment to the credit facility to partially exercise the available accordion feature. The Amendment provides for the extension of a new tranche of commitments (which we call the Tranche B Loans) with borrowings in an aggregate amount up to $100 million, in addition to the aggregate Tranche A Loan commitment of up to $75 million. As of March 31, 2012, approximately $63.74 million was borrowed and outstanding under the credit facility. The Tranche A Loans generally bear interest based on a one-month adjusted London interbank offered rate (LIBOR) for the relevant interest period, plus a spread of 1.70% per annum. The Tranche B Loans will generally bear interest based on a three-month adjusted LIBOR for the relevant interest period, plus a spread of 2.35% per annum.

 

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A summary of our significant contractual payment obligations for the repayment of outstanding borrowings at March 31, 2012 is as follows:

 

     Payments Due By Period (dollars in millions)  
     Total      Less than 1 year      1-3 years      3-5 years      After 5 years  

Credit Facility(1)

   $ 63.74       $ —         $ 63.74       $ —         $ —     

Interest and Credit Facility Fees Payable

     0.29         0.29         —           —           —     

 

 

(1) At March 31, 2012, $111.26 million remained unused under our Credit Facility.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical Accounting Policies

Below is a discussion of the accounting policies that management believes are critical in connection with our investment operations. We consider these accounting policies critical because they will involve management judgments and assumptions, require estimates about matters that are inherently uncertain and because they will be important for understanding and evaluating our reported financial results. These judgments will affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may use different accounting policies and estimates that may impact the comparability of our results of operations to those of companies in similar businesses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we will describe and expand our critical accounting policies as they pertain to specific investment activities in the notes to our future financial statements.

Valuation of Investments

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. We measure the value of our investments in accordance with fair value accounting guidance promulgated under GAAP, which establishes a hierarchical disclosure framework that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available actively quoted prices or for which fair value can be measured from actively quoted prices, generally, will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. A determination of fair value involves subjective judgments and estimates. Due to the inherent uncertainty of determining the fair value of portfolio investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

 

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Investments measured and reported at fair value are classified and disclosed in one of the following categories:

 

   

Level 1—Quoted prices are available in active markets for identical investments as of the reporting date. Publicly listed equities, debt securities and publicly listed derivatives will be included in Level 1. In addition, securities sold, but not yet purchased, and call options will be included in Level 1. We will not adjust the quoted price for these investments, even in situations where we hold a large position and a sale could reasonably affect the quoted price.

 

   

Level 2—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. In certain cases, debt and equity securities are valued on the basis of prices from orderly transactions for similar investments in active markets between market participants and provided by reputable dealers or independent pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices, market transactions in comparable investments, and various relationships between investments. Investments which are generally expected to be included in this category include corporate bonds and loans, convertible debt indexed to publicly listed securities and certain over-the-counter derivatives.

 

   

Level 3—Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant judgment or estimation. Investments that are expected to be included in this category are our private portfolio companies.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and it considers factors specific to the investment.

Revenue Recognition

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual payment-in-kind (“PIK”) interest, which represents contractual interest accrued and added to the principal balance, we generally do not accrue PIK interest for accounting purposes if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities for accounting purposes if we have reason to doubt our ability to collect such interest. Original issue discounts, market discounts or premiums are accreted or amortized using the effective interest method as interest income. We record prepayment premiums on loans and debt securities as interest income. Dividend income, if any, is recognized on an accrual basis as of ex-dividend date.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

We measure net realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

Management Fees

We accrue for the base management fee and performance-based incentive fees, including (i) a subordinated incentive fee on income and (ii) an incentive fee on capital gains. We record the liability for the incentive fee on capital gains based on a hypothetical liquidation of the investment portfolio at the end of each reporting period. Therefore the accrual for incentive fee on capital gains includes the recognition of incentive fee on both net realized gains and net unrealized appreciation, if any, although any such incentive fee associated with net unrealized appreciation is neither earned nor payable to the Advisors until net unrealized appreciation is realized as net capital gains.

 

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Organization and Offering Expenses

Organization expenses, including reimbursement payments to Advisors, are expensed on our company’s statement of operations. Continuous offering expenses, including reimbursement payments to Advisors and excluding commission and marketing support fees, will be capitalized on the statements of assets and liabilities as deferred offering expenses and expensed over a 12-month period.

Federal Income Taxes

We intend to elect to be treated for federal income tax purposes, beginning with our taxable year ending December 31, 2011, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, we generally will not pay corporate-level federal income taxes on any ordinary income or capital gains that we distribute to our shareholders from our tax earnings and profits. To obtain and maintain our RIC tax treatment, we must meet specified source-of-income and asset diversification requirements and distribute annually at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any.

RECENT ACCOUNTING PRONOUNCEMENTS

We do not believe that any recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on our condensed consolidated financial statements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risks

We are subject to financial market risks, in particular changes in interest rates. Future changes in interest rates will likely have effects on the interest income we earn on our portfolio investments, the fair value of our fixed income investments, the interest rates and interest expenses associates with the money we borrow for investment purposes, and the fair value of loan balances.

Assets

As of March 31, 2012, approximately 43.7% of our portfolio of debt investments, or approximately $96.9 million measured at fair value, featured floating or variable interest rates. The variable interest rate investments are usually based on a floating LIBOR (the base rate) and typically have durations of three months after which the interest rates reset to current market interest rates. At March 31, 2012, approximately 33.6% of our portfolio of debt investments, or approximately $74.5 million measured at fair value, featured minimum base rates, or base rate floors, and the weighted average base rate floor for such investments was 1.47%. Variable interest rate investments that feature a base rate floor generally reset to the current base rate only if the rest interest rate exceeds the base rate floor on the applicable interest reset date, in which cases we may benefit through an increase in interest income from such investments after the interest reset date.

At March 31, 2012, we held an aggregate investment position of $22.4 million at fair value in the debt of portfolio companies that featured variable rates without any minimum base rates, or approximately 10% of our portfolio of debt investment. In the case of these investments held in our portfolio, we may benefit from increases in the base rates that may subsequently result in an increase in interest income from such investments after the interest reset date.

Assuming that the condensed consolidated schedule of investments as of March 31, 2012 was to remain constant with regards to the investment portfolio and no actions were taken to alter the existing interest rate sensitivity or investment portfolio allocations, then we estimate that a hypothetical immediate and persistent 100-basis-point increase in the base rates associated with our debt investments featuring variable rates and no minimum base rate would increase our interest income by approximately $216,000 over a 12-month forward measurement period starting April 1, 2012, depending on the timing of the actual interest reset dates. Additionally we estimate a hypothetical immediate and persistent 100-basis-point increase in the base rates associated with our minimum base rate debt investments would increase our interest income by approximately $54,000 over a 12-month measurement period starting April 1, 2012, depending on the timing of the actual interest reset dates. Although management believes that these measurements are indicative of our interest income sensitivity to interest rate changes in relation to our assets, it does not adjust for potential changes in the credit market, credit quality, size and composition of the assets on the consolidated statements of assets and liabilities and other business developments that could affect net increases in net assets resulting from operations, or net income. Accordingly, no assurances can be given that actual results would not differ materially from the estimates above. Additionally, an increase in interest rates and interest income should make it easier for us to meet or exceed our quarterly preferred return that triggers the quarterly subordinated incentive fee on income, as defined in our investment advisory agreement, and may result in a substantial increase in our net investment income and the amount of incentive fees payable to our Advisors with respect to an increase in pre-incentive fee net investment income.

In addition, any fluctuations in prevailing interest rates may affect the fair value of our fixed rate debt instruments and result in changes in unrealized gains and losses, and may affect a net increase or decrease in net assets resulting from operations. Such changes in unrealized appreciation and depreciation will materialize into realized gains and losses if we are compelled to sell our investments before the debt maturity date.

 

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Liabilities (Borrowings)

Because we borrow money to make investments, our net investment income is partially dependent upon the difference between the interest rate at which we borrow funds and the interest rate at which we invest these borrowed funds. In periods of rising interest rates and when we have outstanding borrowing balances, our interest expense would increase, which could increase our financing costs and reduce our net investment income, especially to the extent we acquire and continue to hold fixed-rate debt investments. 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. Pursuant to the terms of our revolving credit facility agreement as discussed above under “— Financial Condition, Liquidity and Capital Resources — Credit Facility”), as of March 31, 2012, CCT Funding borrows at a floating base rate of 30-day LIBOR plus 1.7% for Tranche A Loans ($63.74 million borrowing balance outstanding and $11.26 million unused commitment). When we borrow funds under the Tranche B Loans commitment ($100 million), then our marginal interest cost for borrowed funds will be based on a floating base rate of 90-day LIBOR plus 2.35%. Therefore we expect that our marginal interest cost will increase by approximately 90 basis points, or more, as compared to our current interest cost for borrowed funds. We expect that any expansion of the current revolving credit facility, or any future credit facilities that we or any subsidiary may enter into, will also be based on a floating base rate. As a result, we are subject to continuous risks relating to changes in market interest rates.

Subject to the requirements of the 1940 Act, we may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. Although hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates. During the period from January 1, 2012 to March 31, 2012, we did not engage in interest rate hedging activities.

 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Exchange Act of 1934, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report.

We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

In the most recent fiscal quarter, there was no change in our internal controls over financial reporting (as defined under Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings - None

 

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in our annual report on Form 10-K filing for the year ended December 31, 2011.

 

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

During the three months ended March 31, 2012, we issued 129,673 shares of common stock under our distribution reinvestment plan pursuant to an exemption from the registration requirements of the Securities Act.

 

Item 3. Defaults Upon Senior Securities - None

 

Item 4. (Removed and Reserved)

 

Item 5. Other Information - None

 

Item 6. Exhibits

The exhibits required by this item are set forth in the Exhibit Index attached hereto and are filed or incorporated as part of this report.

 

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SIGNATURES

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, on the 10th day of May, 2012.

 

CORPORATE CAPITAL TRUST, INC.

By:                       /s/ Andrew A. Hyltin
  ANDREW A. HYLTIN
  Chief Executive Officer
  (Principal Executive Officer)
 
By:   /s/ Paul S. Saint-Pierre
  PAUL S. SAINT-PIERRE
  Chief Financial Officer
  (Principal Financial Officer)

 

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EXHIBIT INDEX

The following exhibits are filed or incorporated as part of this report.

 

  3.1      Second Amended and Restated Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed on May 8, 2012.)
  3.2      Amended and Restated Bylaws of the Registrant. (Incorporated by reference to Exhibit 2(b) filed with Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on March 29, 2011.)
  10.1      Form of Managing Dealer Agreement by and between Registrant and CNL Securities Corp. (Incorporated by reference to Exhibit 2(h)(1) filed with Amendment No. 2 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on February 18, 2011.)
  10.2      Form of Participating Broker Agreement. (Incorporated by reference to Exhibit 2(h)(2) filed with Amendment No. 2 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on February 18, 2011.)
  10.3      Form of Distribution Reinvestment Plan. (Incorporated by reference to Exhibit 2(e) filed with Amendment No. 2 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on February 18, 2011.)
  10.4      Intellectual Property License Agreement by and between Registrant and CNL Intellectual Properties, Inc. (Incorporated by reference to Exhibit 2(k)(3) filed with Amendment No. 2 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on February 18, 2011.)
  10.5      Administrative Services Agreement by and between the Registrant and CNL Fund Advisors Company. (Incorporated by reference to Exhibit 2(k)(2) filed with Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on March 29, 2011.)
  10.6      Custodian Agreement. (Incorporated by reference to Exhibit 2(j) filed with Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on March 29, 2011.)
  10.7      Investment Advisory Agreement by and between Registrant and CNL Fund Advisors Company. (Incorporated by reference to Exhibit 2(g)(1) filed with Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on March 29, 2011.)
  10.8      Sub-Advisory Agreement by and among the Registrant, CNL Fund Advisors Company and KKR Asset Management LLC. (Incorporated by reference to Exhibit 2(g)(2) filed with Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on March 29, 2011.)
  10.9      Amended and Restated Escrow Agreement by and among Registrant, UMB Bank N.A., and CNL Securities Corp. (Incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed on August 12, 2011.)
  10.10      Selected Dealer Agreement among the Registrant, CNL Securities Corp., CNL Fund Advisors Company, CNL Financial Group, LLC, KKR Asset Management LLC and Ameriprise Financial Services, Inc. (Incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2011.) (Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC.)
  10.11      Limited Liability Company Agreement of CCT Funding LLC. (Incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2011.)
  10.12      Credit Agreement between CCT Funding LLC and Deutsche Bank AG, New York Branch. (Incorporated by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2011.) (Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC.)

 

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Table of Contents
  10.13      Custodial Agreement among the Registrant, CCT Funding LLC, Deutsche Bank AG, New York Branch and Deutsche Bank Trust Company Americas. (Incorporated by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2011.) (Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC.)
  10.14      Asset Contribution Agreement between the Registrant and CCT Funding LLC. (Incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2011.)
  10.15      Security Agreement between CCT Funding LLC and Deutsche Bank AG, New York Branch. (Incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2011.)
  10.16      Investment Management Agreement between the Registrant and CCT Funding LLC. (Incorporated by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2011.)
  10.17      First Amendment to Credit Agreement between CCT Funding LLC and Deutsche Bank AG, New York Branch. (Incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed on March 16, 2012.) (Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC.)
  10.18      Amended and Restated Expense Support and Conditional Reimbursement Agreement by and among the Registrant, CNL Fund Advisors Company and KKR Asset Management LLC. (Incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K filed on March 16, 2012.)
  10.19      Amendment No. 1 to Investment Advisory Agreement by and between Registrant and CNL Fund Advisors Company. (Incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K filed on March 16, 2012.)
  31.1      Certification of Chief Executive Officer of Corporate Capital Trust, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
  31.2      Certification of Chief Financial Officer of Corporate Capital Trust, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
  32.1      Certification of Chief Executive Officer and Chief Financial Officer of Corporate Capital Trust, Inc., Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

 

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