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Table of Contents

 

 

 

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington D.C.  20549

 

 

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

 

For the quarterly period ended January 31, 2014

 

or

 

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

 

Commission File Number 814-00201

 

MVC CAPITAL, INC.

(Exact name of the registrant as specified in its charter)

 

DELAWARE

 

94-3346760

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

287 Bowman Avenue

 

 

2nd Floor

 

 

Purchase, New York

 

10577

(Address of principal
executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (914) 701-0310

 

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 o No o

 

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

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

 

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

 

There were 22,617,688 shares of the registrant’s common stock, $.01 par value, outstanding as of March 12, 2014.

 

 

 



Table of Contents

 

MVC Capital, Inc.

(A Delaware Corporation)

Index

 

 

 

Page

Part I. Consolidated Financial Information

 

 

 

 

 

 

 

 

Item 1.

Consolidated Financial Statements

 

 

 

 

Consolidated Balance Sheets

 

 

 

 

-    January 31, 2014 and October 31, 2013

 

3

 

 

Consolidated Statements of Operations

 

 

 

 

-    For the Period November 1, 2013 to January 31, 2014 and

 

 

 

 

-    For the Period November 1, 2012 to January 31, 2013

 

4

 

 

Consolidated Statements of Cash Flows

 

 

 

 

-    For the Period November 1, 2013 to January 31, 2014 and

 

 

 

 

-    For the Period November 1, 2012 to January 31, 2013

 

5

 

 

Consolidated Statements of Changes in Net Assets

 

 

 

 

-    For the Period November 1, 2013 to January 31, 2014

 

 

 

 

-    For the Period November 1, 2012 to January 31, 2013 and

 

 

 

 

-    For the Year ended October 31, 2013

 

6

 

 

Consolidated Selected Per Share Data and Ratios

 

 

 

 

-    For the Period November 1, 2013 to January 31, 2014,

 

 

 

 

-    For the Period November 1, 2012 to January 31, 2013 and

 

 

 

 

-    For the Year ended October 31, 2013

 

7

 

 

Consolidated Schedules of Investments

 

 

 

 

-    January 31, 2014

 

8

 

 

-    October 31, 2013

 

10

 

 

Notes to Consolidated Financial Statements

 

12

 

 

 

 

 

 

Item 2.

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

 

34

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

57

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

66

 

 

 

 

 

Part II. Other Information

 

67

 

 

 

 

 

Exhibits

 

 

 

67

 

 

 

 

 

SIGNATURE

 

69

 



Table of Contents

 

Part I. Consolidated Financial Information

 

Item 1. Consolidated Financial Statements

 

CONSOLIDATED FINANCIAL STATEMENTS

 

MVC Capital, Inc.

Consolidated Balance Sheets

 

 

 

January 31,

 

October 31,

 

 

 

2014

 

2013

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

55,049,730

 

$

74,234,560

 

Restricted cash and cash equivalents

 

6,743,000

 

6,792,000

 

Investments at fair value

 

 

 

 

 

Short-term investments (cost $99,703,383 and $49,937,320)

 

99,777,105

 

49,826,893

 

Non-control/Non-affiliated investments (cost $99,750,278 and $92,139,375)

 

81,144,593

 

74,433,413

 

Affiliate investments (cost $137,224,491 and $136,499,386)

 

229,576,433

 

219,694,633

 

Control investments (cost $149,650,046 and $143,292,881)

 

148,078,601

 

146,169,917

 

Total investments at fair value (cost $486,328,198 and $421,868,962)

 

558,576,732

 

490,124,856

 

Escrow receivables, net of reserves

 

5,936,928

 

6,236,928

 

Dividends and interest receivables, net of reserves

 

3,909,563

 

3,528,899

 

Deferred financing fees

 

3,141,895

 

3,265,495

 

Fee and other receivables

 

2,607,037

 

2,109,538

 

Prepaid expenses

 

565,086

 

534,904

 

Prepaid taxes

 

 

336

 

 

 

 

 

 

 

Total assets

 

$

636,529,971

 

$

586,827,516

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Liabilities

 

 

 

 

 

Senior notes

 

$

114,408,750

 

$

114,408,750

 

Revolving credit facility

 

100,000,000

 

50,000,000

 

Provision for incentive compensation (Note 11)

 

24,513,050

 

23,959,109

 

Management fee payable

 

2,303,942

 

2,221,213

 

Management fee payable - Asset Management

 

838,347

 

606,766

 

Accrued expenses and liabilities

 

769,915

 

655,615

 

Professional fees payable

 

500,499

 

742,859

 

Interest payable

 

371,915

 

371,817

 

Portfolio fees payable - Asset Management

 

141,084

 

140,347

 

Consulting fees payable

 

135,511

 

167,968

 

Taxes payable

 

564

 

 

 

 

 

 

 

 

Total liabilities

 

243,983,577

 

193,274,444

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock, $0.01 par value; 150,000,000 shares authorized; 22,617,688 and 22,617,688 shares outstanding, respectively

 

283,044

 

283,044

 

Additional paid-in-capital

 

420,165,045

 

420,165,045

 

Accumulated earnings

 

64,321,684

 

66,030,475

 

Dividends paid to stockholders

 

(107,590,867

)

(104,537,479

)

Accumulated net realized loss

 

(2,438,594

)

(2,201,455

)

Net unrealized appreciation

 

72,248,534

 

68,255,894

 

Treasury stock, at cost, 5,686,760 and 5,686,760 shares held, respectively

 

(54,442,452

)

(54,442,452

)

Total shareholders’ equity

 

392,546,394

 

393,553,072

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

636,529,971

 

$

586,827,516

 

 

 

 

 

 

 

Net asset value per share

 

$

17.36

 

$

17.40

 

 

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

 

3



Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Operations

(Unaudited)

 

 

 

For the Quarter Ended

 

For the Quarter Ended

 

 

 

January 31, 2014

 

January 31, 2013

 

Operating Income:

 

 

 

 

 

Dividend income

 

 

 

 

 

Non-control/Non-affiliated investments

 

$

190

 

$

974

 

Affiliate investments

 

106,323

 

2,385,748

 

Control investments

 

 

426,300

 

Total dividend income

 

106,513

 

2,813,022

 

 

 

 

 

 

 

Payment-in-kind dividend income

 

 

 

 

 

Affiliate investments

 

 

65,484

 

Total payment-in-kind dividend income

 

 

65,484

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

Non-control/Non-affiliated investments

 

1,303,394

 

543,884

 

Affiliate investments

 

1,076,169

 

1,022,952

 

Control investments

 

95,305

 

581,774

 

Total interest income

 

2,474,868

 

2,148,610

 

 

 

 

 

 

 

Payment-in-kind interest income

 

 

 

 

 

Non-control/Non-affiliated investments

 

782,066

 

16,012

 

Affiliate investments

 

246,873

 

338,675

 

Control investments

 

39,272

 

213,574

 

Total payment-in-kind interest income

 

1,068,211

 

568,261

 

 

 

 

 

 

 

Fee income

 

 

 

 

 

Non-control/Non-affiliated investments

 

504

 

104

 

Affiliate investments

 

230,000

 

236,846

 

Control investments

 

80,750

 

133,800

 

Total fee income

 

311,254

 

370,750

 

 

 

 

 

 

 

Fee income - Asset Management(1)

 

 

 

 

 

Portfolio fees

 

141,435

 

140,613

 

Management Fees

 

308,775

 

308,841

 

Total fee income - Asset Management

 

450,210

 

449,454

 

 

 

 

 

 

 

Other income (loss)

 

202,198

 

(29,845

)

 

 

 

 

 

 

Total operating income

 

4,613,254

 

6,385,736

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

Management fee

 

2,303,942

 

2,080,237

 

Interest and other borrowing costs

 

2,255,510

 

937,043

 

Incentive compensation (Note 11)

 

553,941

 

1,174,661

 

Management fee - Asset Management(1)

 

231,581

 

231,631

 

Audit fees

 

162,400

 

158,300

 

Other expenses

 

140,738

 

133,553

 

Legal fees

 

138,000

 

136,000

 

Consulting fees

 

135,151

 

132,251

 

Portfolio fees - Asset Management(1)

 

106,076

 

105,460

 

Directors fees

 

103,125

 

103,125

 

Insurance

 

86,700

 

82,770

 

Administration

 

64,675

 

63,872

 

Public relations fees

 

51,000

 

49,500

 

Printing and postage

 

25,806

 

31,000

 

 

 

 

 

 

 

Total operating expenses

 

6,358,645

 

5,419,403

 

 

 

 

 

 

 

Less: Voluntary Expense Waiver by Adviser(2)

 

(37,500

)

(37,500

)

 

 

 

 

 

 

Total waivers

 

(37,500

)

(37,500

)

 

 

 

 

 

 

Net operating (loss) income before taxes

 

(1,707,891

)

1,003,833

 

 

 

 

 

 

 

Tax Expenses:

 

 

 

 

 

Current tax expense

 

900

 

733

 

 

 

 

 

 

 

Total tax expense

 

900

 

733

 

 

 

 

 

 

 

Net operating (loss) income

 

(1,708,791

)

1,003,100

 

 

 

 

 

 

 

Net Realized and Unrealized (Loss) Gain on Investments:

 

 

 

 

 

 

 

 

 

 

 

Net realized loss on investments

 

 

 

 

 

Non-control/Non-affiliated investments

 

(237,139

)

(1,922,539

)

 

 

 

 

 

 

Total net realized loss on investments

 

(237,139

)

(1,922,539

)

 

 

 

 

 

 

Net change in unrealized appreciation on investments

 

3,992,640

 

7,795,677

 

 

 

 

 

 

 

Net realized and unrealized gain on investments

 

3,755,501

 

5,873,138

 

 

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

2,046,710

 

$

6,876,238

 

 

 

 

 

 

 

Net increase in net assets per share resulting from operations

 

$

0.10

 

$

0.29

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.135

 

$

0.135

 

 


(1)These items are related to the management of the MVC Private Equity Fund, L.P. (“PE Fund”). Please see Note 10 “Management” for more information.

 

(2) Reflects the quarterly portion of the TTG Advisers’ voluntary waiver of $150,000 of expenses for the 2014 and 2013 fiscal years, that the Company would otherwise be obligated to reimburse TTG Advisers under the Advisory Agreement (the “Voluntary Waiver”).  Please see Note 10 “Management” for more information.

 

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

 

4



Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the Quarter Ended

 

For the Quarter Ended

 

 

 

January 31, 2014

 

January 31, 2013

 

Cash flows from Operating Activities:

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

2,046,710

 

$

6,876,238

 

Adjustments to reconcile net increase in net assets resulting from operations to net cash (used in) provided by operating activities:

 

 

 

 

 

Net realized loss

 

237,139

 

1,922,539

 

Net change in unrealized appreciation

 

(3,992,640

)

(7,795,677

)

Amortization of discounts and fees

 

(354,744

)

(11,964

)

Increase in accrued payment-in-kind dividends and interest

 

(1,008,665

)

(633,745

)

Amortization of deferred financing fees

 

123,600

 

 

Allocation of flow through (income) loss

 

(101,099

)

29,845

 

Changes in assets and liabilities:

 

 

 

 

 

Dividends, interest and fees receivable

 

(380,664

)

1,747,870

 

Fee and other receivables

 

(497,499

)

(415,744

)

Escrow receivables, net of reserves

 

300,000

 

496,736

 

Prepaid expenses

 

(30,182

)

(68,916

)

Prepaid taxes

 

336

 

176

 

Incentive compensation (Note 11)

 

553,941

 

1,174,661

 

Other liabilities

 

155,192

 

212,886

 

Purchases of equity investments

 

(5,258,643

)

 

Purchases of debt instruments

 

(14,250,000

)

(8,500,000

)

Purchases of short term investments

 

(99,703,473

)

 

Proceeds from equity investments (1)

 

107,673

 

 

Proceeds from debt instruments

 

6,100,000

 

2,682,555

 

Sales/maturities of short term investments

 

49,772,576

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

(66,180,442

)

(2,282,540

)

 

 

 

 

 

 

Cash flows from Financing Activities:

 

 

 

 

 

Net proceeds from revolving credit facility

 

50,000,000

 

 

Distributions paid to shareholders

 

(3,053,388

)

(3,228,793

)

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

46,946,612

 

(3,228,793

)

 

 

 

 

 

 

Net change in cash and cash equivalents for the period

 

(19,233,830

)

(5,511,333

)

 

 

 

 

 

 

Unrestricted and restricted cash and cash equivalents, beginning of period

 

$

81,026,560

 

$

42,640,558

 

 

 

 

 

 

 

Unrestricted and restricted cash and cash equivalents, end of period

 

$

61,792,730

 

$

37,129,225

 

 


(1) For the quarter ended January 31, 2014, proceeds from equity investments includes $107,673 in escrow receivables, net of reserves.

 

During the quarters ended January 31, 2014 and 2013 MVC Capital, Inc. paid $2,107,007 and $830,555 in interest expense, respectively.

 

During the quarters ended January 31, 2014 and 2013 MVC Capital, Inc. paid $300 and $857 in  income taxes, respectively.

 

Non-cash activity:

 

During the quarters ended January 31, 2014 and 2013, MVC Capital, Inc. recorded payment in-kind dividend and interest of $1,008,665 and $633,745, respectively. This amount was added to the principal balance of the investments and recorded as dividend/interest income.

 

During the quarters ended January 31, 2014 and 2013, MVC Capital, Inc. was allocated $202,198 and ($29,845), respectively, in flow-through income (losses) from its equity investment in Octagon Credit Investors, LLC.  Of these amounts, $101,099 and $0, respectively, was received in cash and the balance of $101,099 and ($29,845), respectively, was undistributed and therefore increased (decreased) the cost of the investment.  The fair value was then increased (decreased) by $202,198 and ($29,845), respectively, by the Company’s Valuation Committee.

 

On November 19, 2013, MVC Capital, Inc. converted the MVC Automotive Group B.V. bridge loan of approximately $1.6 million to addional common equity interest.

 

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

 

5



Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Changes in Net Assets

 

 

 

For the Quarter Ended

 

For the Quarter Ended

 

For the Year Ended

 

 

 

January 31, 2014

 

January 31, 2013

 

October 31, 2013

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

Operations:

 

 

 

 

 

 

 

Net operating (loss) income

 

$

(1,708,791

)

$

1,003,100

 

$

(3,445,195

)

Net realized (loss) gain on investments

 

(237,139

)

(1,922,539

)

43,664,918

 

Net change in unrealized appreciation (depreciation) on investments

 

3,992,640

 

7,795,677

 

(3,482,873

)

 

 

 

 

 

 

 

 

Net increase in net assets from operations

 

2,046,710

 

6,876,238

 

36,736,850

 

 

 

 

 

 

 

 

 

Shareholder Distributions:

 

 

 

 

 

 

 

Distributions to shareholders from income

 

 

(3,228,793

)

(5,837,868

)

Distributions to shareholders from return of capital

 

(3,053,388

)

 

(6,688,836

)

 

 

 

 

 

 

 

 

Net decrease in net assets from shareholder distributions

 

(3,053,388

)

(3,228,793

)

(12,526,704

)

 

 

 

 

 

 

 

 

Capital Share Transactions:

 

 

 

 

 

 

 

Repurchase of common stock

 

 

 

(16,673,207

)

 

 

 

 

 

 

 

 

Net decrease in net assets from capital share transactions

 

 

 

(16,673,207

)

 

 

 

 

 

 

 

 

Total (decrease) increase in net assets

 

(1,006,678

)

3,647,445

 

7,536,939

 

 

 

 

 

 

 

 

 

Net assets, beginning of period/year

 

393,553,072

 

386,016,133

 

386,016,133

 

 

 

 

 

 

 

 

 

Net assets, end of period/year

 

$

392,546,394

 

$

389,663,578

 

$

393,553,072

 

 

 

 

 

 

 

 

 

Common shares outstanding, end of period/year

 

22,617,688

 

23,916,982

 

22,617,688

 

 

 

 

 

 

 

 

 

Undistributed net operating income

 

$

 

$

7,057,502

 

$

 

 

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

 

6



Table of Contents

 

MVC Capital, Inc.

Consolidated Selected Per Share Data and Ratios

 

 

 

For the

 

For the

 

For the

 

 

 

Quarter Ended

 

Quarter Ended

 

Year Ended

 

 

 

January 31, 2014

 

January 31, 2013

 

October 31, 2013

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period/year

 

$

17.40

 

$

16.14

 

$

16.14

 

 

 

 

 

 

 

 

 

Gain from operations:

 

 

 

 

 

 

 

Net operating (loss) income

 

(0.08

)

0.04

 

(0.15

)

Net realized and unrealized gain on investments

 

0.18

 

0.25

 

1.74

 

 

 

 

 

 

 

 

 

Total gain from investment operations

 

0.10

 

0.29

 

1.59

 

 

 

 

 

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

Income

 

 

(0.14

)

(0.25

)

Return of capital

 

(0.14

)

 

(0.29

)

 

 

 

 

 

 

 

 

Total distributions

 

(0.14

)

(0.14

)

(0.54

)

 

 

 

 

 

 

 

 

Capital share transactions

 

 

 

 

 

 

 

Anti-dilutive effect of share repurchase program

 

 

 

0.21

 

 

 

 

 

 

 

 

 

Total capital share transactions

 

 

 

0.21

 

 

 

 

 

 

 

 

 

Net asset value, end of period/year

 

$

17.36

 

$

16.29

 

$

17.40

 

 

 

 

 

 

 

 

 

Market value, end of period/year

 

$

14.25

 

$

12.17

 

$

13.83

 

 

 

 

 

 

 

 

 

Market discount

 

(17.91

)%

(25.29

)%

(20.52

)%

 

 

 

 

 

 

 

 

Total Return - At NAV (a)

 

0.54

%(d)

1.77

%(d)

11.30

%

 

 

 

 

 

 

 

 

Total Return - At Market (a)

 

4.01

%(d)

(0.44

)%(d)

16.65

%

 

 

 

 

 

 

 

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio turnover ratio

 

1.36

%

0.63

%

24.40

%

 

 

 

 

 

 

 

 

Net assets, end of period/year (in thousands)

 

$

392,546

 

$

389,665

 

$

393,553

 

 

 

 

 

 

 

 

 

Ratios to average net assets:

 

 

 

 

 

 

 

Expenses excluding tax expense

 

6.39

%(c)

5.53

%(c)

7.26

%

Expenses including tax expense

 

6.39

%(c)

5.53

%(c)

7.26

%

 

 

 

 

 

 

 

 

Net operating (loss) income before tax expense

 

(1.73

)%(c)

1.03

%(c)

(0.89

)%

Net operating (loss) income after tax expense

 

(1.73

)%(c)

1.03

%(c)

(0.89

)%

 

 

 

 

 

 

 

 

Ratios to average net assets excluding waivers:

 

 

 

 

 

 

 

Expenses excluding tax expense

 

6.43

%(c)

5.57

%(c)

7.30

%

Expenses including tax expense

 

6.43

%(c)

5.57

%(c)

7.30

%

 

 

 

 

 

 

 

 

Net operating (loss) income before tax expense

 

(1.77

)%(c)

0.99

%(c)

(0.93

)%

Net operating (loss) income after tax expense

 

(1.77

)%(c)

0.99

%(c)

(0.93

)%

 

 

 

 

 

 

 

 


(a) Total annual return is historical and assumes changes in share price, reinvestments of all dividends and distributions, and no sales charge for the period/year.

 

(b) Supplemental Ratio information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to average net assets: (b)

 

 

 

 

 

 

 

Expenses excluding incentive compensation

 

5.83

%(c)

4.32

%(c)

5.12

%

Expenses excluding incentive compensation, interest and other borrowing costs

 

3.55

%(c)

3.36

%(c)

3.39

%

 

 

 

 

 

 

 

 

Net operating (loss) income before incentive compensation

 

(1.17

)%(c)

2.24

%(c)

1.25

%

Net operating income before incentive compensation, interest and other borrowing costs

 

1.11

%(c)

3.20

%(c)

2.98

%

 

 

 

 

 

 

 

 

Ratios to average net assets excluding waivers: (b)

 

 

 

 

 

 

 

Expenses excluding incentive compensation

 

5.87

%(c)

4.36

%(c)

5.16

%

Expenses excluding incentive compensation, interest and other borrowing costs

 

3.59

%(c)

3.40

%(c)

3.43

%

 

 

 

 

 

 

 

 

Net operating (loss) income before incentive compensation

 

(1.21

)%(c)

2.20

%(c)

1.21

%

Net operating income before incentive compensation, interest and other borrowing costs

 

1.07

%(c)

3.16

%(c)

2.94

%

 

(c) Annualized.

(d) Non- Annualized.

 

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

 

7



Table of Contents

 

MVC Capital, Inc.

Consolidated Schedules of Investments

January 31, 2014 (Unaudited)

 

Company

 

Industry

 

Investment

 

Principal

 

Cost

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-control/Non-affiliated investments - 20.67% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Actelis Networks, Inc.

 

Technology Investment

 

Preferred Stock (150,602 shares) (d), (i)

 

 

 

$

5,000,003

 

$

 

Biogenic Reagents

 

Renewable energy

 

Senior Note 12.0000% Cash, 4.0000% PIK, 07/21/2018 (b)

 

$

5,090,959

 

5,090,959

 

5,090,959

 

 

 

 

 

Senior Convertible Note 12.0000% Cash, 4.0000% PIK, 07/21/2018 (b)

 

4,581,863

 

4,581,863

 

4,581,863

 

 

 

 

 

 

 

 

 

9,672,822

 

9,672,822

 

Biovation Holdings, Inc.

 

Manufacturer of Laminate Material and Composites

 

Bridge Loan 6.0000% Cash, 6.0000% PIK, 08/31/2014 (b)

 

3,105,038

 

3,077,968

 

3,054,018

 

 

 

 

 

Warrants (d)

 

 

 

288,000

 

363,000

 

 

 

 

 

 

 

 

 

3,365,968

 

3,417,018

 

FOLIOfn, Inc.

 

Technology Investment

 

Preferred Stock (5,802,259 shares) (d), (i)

 

 

 

15,000,000

 

5,891,000

 

Freshii USA, Inc.

 

Food Services

 

Senior Secured Loan 6.0000% Cash, 6.0000% PIK, 01/11/2017 (b)

 

1,126,306

 

1,100,463

 

1,106,353

 

 

 

 

 

Warrants (d), (l)

 

 

 

33,873

 

33,254

 

 

 

 

 

 

 

 

 

1,134,336

 

1,139,607

 

MainStream Data, Inc.

 

Technology Investment

 

Common Stock (5,786 shares) (d), (i)

 

 

 

3,750,000

 

 

Morey’s Seafood International, LLC

 

Food Services

 

Second Lien Loan 10.0000% Cash, 3.0000% PIK, 08/12/2018

 

15,000,000

 

15,000,000

 

15,000,000

 

NPWT Corporation

 

Medical Device Manufacturer

 

Series B Common Stock (281 shares) (d)

 

 

 

1,231,638

 

15,000

 

 

 

 

 

Series A Convertible Preferred Stock (5,000 shares) (d)

 

 

 

 

275,000

 

 

 

 

 

 

 

 

 

1,231,638

 

290,000

 

Prepaid Legal Services, Inc.

 

Consumer Services

 

2nd Lien Term Loan , 9.7500% Cash, 07/01/2020

 

10,000,000

 

9,861,365

 

10,000,000

 

SGDA Sanierungsgesellschaft fur Deponien und Altlasten GmbH

 

Soil Remediation

 

Term Loan 7.0000% Cash, 08/31/2014 (e)

 

6,547,350

 

6,547,350

 

6,547,350

 

Summit Research Labs, Inc.

 

Specialty Chemicals

 

Second Lien Loan 4.2500% Cash, 9.7500% PIK , 10/01/2018 (b)

 

23,698,796

 

23,698,796

 

23,698,796

 

U.S. Spray Drying Holdging Company

 

Specialty Chemicals

 

Class B Common Stock (784 shares)

 

 

 

5,488,000

 

5,488,000

 

Sub Total Non-control/Non-affiliated investments

 

 

 

 

 

 

 

99,750,278

 

81,144,593

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate investments - 58.48% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Advantage Insurance Holdings LTD

 

Insurance

 

Preferred Stock (750,000 shares) (c), (d), (e)

 

 

 

7,500,000

 

7,500,000

 

Centile Holdings B.V.

 

Software

 

Common Equity Interest (d), (e)

 

 

 

3,274,376

 

4,848,000

 

Custom Alloy Corporation

 

Manufacturer of Pipe Fittings

 

Unsecured Subordinated Loan 12.0000% Cash, 09/04/2016

 

7,000,000

 

7,000,000

 

7,000,000

 

 

 

 

 

Convertible Series A Preferred Stock (9 shares) (d)

 

 

 

44,000

 

105,600

 

 

 

 

 

Convertible Series B Preferred Stock (1,991 shares) (d)

 

 

 

9,956,000

 

23,894,400

 

 

 

 

 

 

 

 

 

17,000,000

 

31,000,000

 

JSC Tekers Holdings

 

Real Estate Management

 

Common Stock (2,250 shares) (d), (e)

 

 

 

4,500

 

4,500

 

 

 

 

 

Secured Loan 8.0000% Cash, 12/31/2014 (e), (h)

 

12,000,000

 

12,000,000

 

11,000,000

 

 

 

 

 

 

 

 

 

12,004,500

 

11,004,500

 

Marine Exhibition Corporation

 

Theme Park

 

Senior Subordinated Debt 7.0000% Cash, 4.0000% PIK, 06/30/2017 (b)

 

11,431,969

 

11,431,969

 

11,431,969

 

 

 

 

 

Convertible Preferred Stock (20,000 shares) (b)

 

 

 

3,615,002

 

3,615,002

 

 

 

 

 

 

 

 

 

15,046,971

 

15,046,971

 

Octagon Credit Investors, LLC

 

Financial Services

 

Limited Liability Company Interest

 

 

 

2,712,598

 

5,866,343

 

RuMe Inc.

 

Consumer Products

 

Common Stock (999,999 shares) (d)

 

 

 

160,000

 

160,000

 

 

 

 

 

Senior Secured Loan 12.0000% Cash, 04/04/2014

 

3,250,000

 

2,784,867

 

2,784,867

 

 

 

 

 

Series B-1 Preferred Stock (4,999,076 shares) (d)

 

 

 

999,815

 

1,090,000

 

 

 

 

 

Warrants (d)

 

 

 

721,500

 

721,500

 

 

 

 

 

 

 

 

 

4,666,182

 

4,756,367

 

Security Holdings B.V.

 

Electrical Engineering

 

Common Equity Interest (d), (e)

 

 

 

40,186,620

 

35,954,000

 

 

 

 

 

Bridge Loan 5.0000% Cash, 2/15/2014 (e)

 

4,000,000

 

4,000,000

 

4,000,000

 

 

 

 

 

 

 

 

 

44,186,620

 

39,954,000

 

SGDA Europe B.V.

 

Soil Remediation

 

Common Equity Interest (d), (e)

 

 

 

20,084,599

 

6,684,000

 

U.S. Gas & Electric, Inc.

 

Energy Services

 

Second Lien Loan 9.0000% Cash, 5.0000% PIK , 07/25/2015 (b)

 

10,248,625

 

10,248,645

 

10,248,645

 

 

 

 

 

Convertible Series I Preferred Stock (32,200 shares) (k)

 

 

 

500,000

 

92,667,607

 

 

 

 

 

Convertible Series J Preferred Stock (8,216 shares) (d)

 

 

 

 

 

 

 

 

 

 

 

 

 

10,748,645

 

102,916,252

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Affiliate investments

 

 

 

 

 

 

 

137,224,491

 

229,576,433

 

 

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

 

8



Table of Contents

 

MVC Capital, Inc.

Consolidated Schedules of Investments - (Continued)

January 31, 2014 (Unaudited)

 

Company 

 

Industry

 

Investment

 

Principal

 

Cost

 

Fair Value

 

Control investments - 37.72% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Harmony Health & Beauty, Inc.

 

Health & Beauty - Retail

 

Common Stock (147,621 shares) (d)

 

 

 

$

6,700,000

 

$

 

MVC Automotive Group GmbH

 

Automotive Dealerships

 

Common Equity Interest (d), (e)

 

 

 

41,662,438

 

42,144,000

 

MVC Private Equity Fund LP

 

Private Equity

 

Limited Partnership Interest (d), (j)

 

 

 

9,097,164

 

13,535,928

 

 

 

 

 

General Partnership Interest (d), (j)

 

 

 

232,071

 

341,026

 

 

 

 

 

 

 

 

 

9,329,235

 

13,876,954

 

Ohio Medical Corporation

 

Medical Device Manufacturer

 

Common Stock (5,620 shares) (d)

 

 

 

15,763,636

 

 

 

 

 

 

Series A Convertible Preferred Stock (25,764 shares) (b)

 

 

 

30,000,000

 

24,600,000

 

 

 

 

 

Series C Convertible Preferred Stock (8,159 shares) (b)

 

 

 

22,618,466

 

24,681,591

 

 

 

 

 

 

 

 

 

68,382,102

 

49,281,591

 

SIA Tekers Invest

 

Port Facilities

 

Common Stock (68,800 shares) (d), (e)

 

 

 

2,300,000

 

1,465,000

 

Turf Products, LLC

 

Distributor - Landscaping and

 

Senior Subordinated Debt 7.0000% Cash, 4.0000% PIK , 11/1/2018 (b)

 

$

3,895,262

 

3,895,262

 

3,895,262

 

 

 

Irrigation Equipment

 

Limited Liability Company Interest (d)

 

 

 

3,535,694

 

3,466,794

 

 

 

 

 

Guarantee (d)

 

 

 

 

(92,000

)

 

 

 

 

Warrants (d)

 

 

 

 

 

 

 

 

 

 

 

 

 

7,430,956

 

7,270,056

 

Velocitius B.V.

 

Renewable Energy

 

Common Equity Interest (d), (e)

 

 

 

11,395,315

 

17,991,000

 

Vestal Manufacturing Enterprises, Inc.

 

Iron Foundries

 

Senior Subordinated Debt 12.0000% Cash, 04/29/2015

 

600,000

 

600,000

 

600,000

 

 

 

 

 

Common Stock (81,000 shares) (d)

 

 

 

1,850,000

 

15,450,000

 

 

 

 

 

 

 

 

 

2,450,000

 

16,050,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Control Investments

 

 

 

 

 

 

 

149,650,046

 

148,078,601

 

 

 

 

 

 

 

 

 

 

 

 

 

Short Term investments - 25.42% (f), (g)

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Note

 

U.S. Government & Agency Securities

 

2.7500%, 11/15/2023 (m)

 

49,330,000

 

49,730,717

 

49,773,199

 

U.S. Treasury Note

 

U.S. Government & Agency Securities

 

2.1250%, 01/31/2021 (m)

 

50,000,000

 

49,972,666

 

50,003,906

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Short Term Investments

 

 

 

 

 

 

 

99,703,383

 

99,777,105

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENT ASSETS - 142.29% (f) 

 

 

 

 

 

 

 

$

486,328,198

 

$

558,576,732

 

 


(a) These securities are restricted from public sale without prior registration under the Securities Act of 1933.  The Company negotiates certain aspects of the method and timing of the disposition of these investments, including registration rights and related costs.

 

(b) These securities accrue a portion of their interest/dividends in “payment in kind” interest/dividends which is capitalized to the investment.

 

(c) All of the Company’s equity and debt investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940, except MVC Automotive Group B.V., Security Holdings B.V., SGDA Europe B.V., SGDA Sanierungsgesellschaft fur Deponien und Altlasten mbH, SIA Tekers Invest, JSC Tekers Holdings, Centile Holdings B.V., Velocitius B.V., MVC Private Equity Fund L.P., Freshii USA, Inc., and Advantage Insurance Holdings LTD.  The Company makes available significant managerial assistance to all of the portfolio companies in which it has invested.

 

(d) Non-income producing assets.

 

(e) The principal operations of these portfolio companies are located outside of North America which represents approximately 22% of the total assets.  The remaining portfolio companies are located in North America which represents approximately 50% of the total assets.

 

(f) Percentages are based on net assets of $392,546,394 as of January 31, 2014.

 

(g) See Note 3 for further information regarding “Investment Classification.”

 

(h) All or a portion of the accrued interest on these securities have been reserved against.

 

(i) Legacy Investments.

 

(j) MVC Private Equity Fund, L.P. is a private equity fund focused on control equity investments in the lower middle market.  The fund currently holds three investments, two located in the United States and one in Gibraltar, which are in the energy, services, and industrial sectors, respectively.

 

(k) Upon a liquidity event, the Company may receive additional ownership in U.S. Gas & Electric, Inc.

 

(l) Includes a warrant in Freshii One LLC, an affiliate of Freshii USA, Inc.

 

(m) All or a portion of these securities may serve as collateral for the BB&T Credit Facility.

 

PIK - Payment-in-kind

 

- Denotes zero cost or fair value.

 

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

 

9



Table of Contents

 

MVC Capital, Inc.

Consolidated Schedules of Investments

October 31, 2013

 

Company

 

Industry

 

Investment

 

Principal

 

Cost

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-control/Non-affiliated investments - 18.91% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Actelis Networks, Inc.

 

Technology Investment

 

Preferred Stock (150,602 shares) (d), (i)

 

 

 

$

5,000,003

 

$

 

Biogenic Reagents

 

Manufacturer of Remediation Materials

 

Senior Note 12.0000% Cash, 4.0000% PIK, 07/21/2018 (b)

 

$

5,039,444

 

5,039,444

 

5,039,444

 

 

 

 

 

Senior Convertible Note 12.0000% Cash, 4.0000% PIK, 07/21/2018 (b)

 

4,535,500

 

4,535,500

 

4,535,500

 

 

 

 

 

 

 

 

 

9,574,944

 

9,574,944

 

Biovation Holdings, Inc.

 

Manufacturer of Laminate Material and Composites

 

Bridge Loan 6.0000% Cash, 6.0000% PIK, 08/31/2014 (b)

 

3,105,038

 

2,985,749

 

3,156,172

 

 

 

 

 

Warrants (d)

 

 

 

288,000

 

201,000

 

 

 

 

 

 

 

 

 

3,273,749

 

3,357,172

 

BPC II, LLC

 

Apparel

 

Limited Liability Company Interest (d)

 

 

 

180,000

 

 

FOLIOfn, Inc.

 

Technology Investment

 

Preferred Stock (5,802,259 shares) (d), (i)

 

 

 

15,000,000

 

6,982,000

 

Freshii USA, Inc.

 

Food Services

 

Senior Secured Loan 6.0000% Cash, 6.0000% PIK, 01/11/2017 (b)

 

1,109,296

 

1,081,242

 

1,087,636

 

 

 

 

 

Warrants (d), (l)

 

 

 

33,873

 

18,654

 

 

 

 

 

 

 

 

 

1,115,115

 

1,106,290

 

MainStream Data, Inc.

 

Technology Investment

 

Common Stock (5,786 shares) (d), (i)

 

 

 

3,750,000

 

 

Morey’s Seafood International, LLC

 

Food Services

 

Second Lien Loan 10.0000% Cash, 08/12/2018

 

8,000,000

 

8,000,000

 

8,000,000

 

NPWT Corporation

 

Medical Device Manufacturer

 

Series B Common Stock (281 shares) (d)

 

 

 

1,231,638

 

14,000

 

 

 

 

 

Series A Convertible Preferred Stock (5,000 shares) (d)

 

 

 

 

241,000

 

 

 

 

 

 

 

 

 

1,231,638

 

255,000

 

Prepaid Legal Services, Inc.

 

Consumer Services

 

2nd Lien Term Loan 9.7500% Cash, 07/01/2020

 

10,000,000

 

9,855,919

 

10,000,000

 

SGDA Sanierungsgesellschaft fur Deponien und Altlasten GmbH

 

Soil Remediation

 

Term Loan 7.0000% Cash, 08/31/2014 (e)

 

6,547,350

 

6,547,350

 

6,547,350

 

Summit Research Labs, Inc.

 

Specialty Chemicals

 

Second Lien Loan 4.2500% Cash, 9.7500% PIK , 10/01/2018 (b)

 

23,122,657

 

23,122,657

 

23,122,657

 

U.S. Spray Drying Holding Company

 

Specialty Chemicals

 

Class B Common Stock (784 shares)

 

 

 

5,488,000

 

5,488,000

 

Sub Total Non-control/Non-affiliated investments

 

 

 

 

 

 

 

92,139,375

 

74,433,413

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate investments - 55.83% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Advantage Insurance Holdings LTD

 

Insurance

 

Preferred Stock (750,000 shares) (c), (d), (e)

 

 

 

7,500,000

 

7,500,000

 

Centile Holdings B.V.

 

Software

 

Common Equity Interest (d), (e)

 

 

 

3,174,376

 

4,777,000

 

Custom Alloy Corporation

 

Manufacturer of Pipe Fittings

 

Unsecured Subordinated Loan 12.0000% Cash, 09/04/2016

 

7,500,000

 

7,500,000

 

7,500,000

 

 

 

 

 

Convertible Series A Preferred Stock (9 shares) (d)

 

 

 

44,000

 

88,000

 

 

 

 

 

Convertible Series B Preferred Stock (1,991 shares) (d)

 

 

 

9,956,000

 

19,912,000

 

 

 

 

 

 

 

 

 

17,500,000

 

27,500,000

 

Harmony Health & Beauty, Inc

.

Health & Beauty - Retail

 

Common Stock (147,621 shares) (d)

 

 

 

6,700,000

 

 

JSC Tekers Holdings

 

Real Estate Management

 

Common Stock (2,250 shares) (d), (e)

 

 

 

4,500

 

4,500

 

 

 

 

 

Secured Loan 8.0000% Cash, 12/31/2014 (e), (h)

 

12,000,000

 

12,000,000

 

11,000,000

 

 

 

 

 

 

 

 

 

12,004,500

 

11,004,500

 

Marine Exhibition Corporation

 

Theme Park

 

Senior Subordinated Debt 7.0000% Cash, 4.0000% PIK, 06/30/2017 (b)

 

11,415,060

 

11,415,060

 

11,415,060

 

 

 

 

 

Convertible Preferred Stock (20,000 shares) (b)

 

 

 

3,544,119

 

3,544,119

 

 

 

 

 

 

 

 

 

14,959,179

 

14,959,179

 

Octagon Credit Investors, LLC

 

Financial Services

 

Limited Liability Company Interest

 

 

 

2,611,499

 

6,918,549

 

RuMe Inc.

 

Consumer Products

 

Common Stock (999,999 shares) (d)

 

 

 

160,000

 

160,000

 

 

 

 

 

Series B-1 Preferred Stock (4,999,076 shares) (d)

 

 

 

999,815

 

1,090,000

 

 

 

 

 

 

 

 

 

1,159,815

 

1,250,000

 

Security Holdings B.V.

 

Electrical Engineering

 

Common Equity Interest (d), (e)

 

 

 

40,186,620

 

36,258,000

 

SGDA Europe B.V.

 

Soil Remediation

 

Common Equity Interest (d), (e)

 

 

 

20,084,599

 

6,741,000

 

U.S. Gas & Electric, Inc.

 

Energy Services

 

Second Lien Loan 9.0000% Cash, 5.0000% PIK , 07/25/2015 (b)

 

10,118,798

 

10,118,798

 

10,118,798

 

 

 

 

 

Convertible Series I Preferred Stock (32,200 shares) (k)

 

 

 

500,000

 

92,667,607

 

 

 

 

 

Convertible Series J Preferred Stock (8,216 shares) (d)

 

 

 

 

 

 

 

 

 

 

 

 

 

10,618,798

 

102,786,405

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Affiliate investments

 

 

 

 

 

 

 

136,499,386

 

219,694,633

 

 

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

 

10



Table of Contents

 

MVC Capital, Inc.

Consolidated Schedules of Investments - (Continued)

October 31, 2013

 

Company 

 

Industry

 

Investment

 

Principal

 

Cost

 

Fair Value

 

Control investments - 37.14% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

MVC Automotive Group B.V.

 

Automotive Dealerships

 

Common Equity Interest (d), (e)

 

 

 

$

34,870,029

 

$

37,276,000

 

 

 

 

 

Bridge Loan 10.0000% Cash, 12/31/2013 (e)

 

$

1,635,244

 

1,635,244

 

1,635,244

 

 

 

 

 

 

 

 

 

36,505,273

 

38,911,244

 

MVC Private Equity Fund LP

 

Private Equity

 

Limited Partnership Interest (d), (j)

 

 

 

9,097,164

 

11,384,168

 

 

 

 

 

General Partnership Interest (d), (j)

 

 

 

232,071

 

288,150

 

 

 

 

 

 

 

 

 

9,329,235

 

11,672,318

 

Ohio Medical Corporation

 

Medical Device Manufacturer

 

Common Stock (5,620 shares) (d)

 

 

 

15,763,636

 

 

 

 

 

 

Series A Convertible Preferred Stock (24,773 shares) (b)

 

 

 

30,000,000

 

24,600,000

 

 

 

 

 

Series C Convertible Preferred Stock (7,845 shares) (b)

 

 

 

22,618,466

 

23,732,299

 

 

 

 

 

 

 

 

 

68,382,102

 

48,332,299

 

SIA Tekers Invest

 

Port Facilities