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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 June 30, 2014

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 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 August 8, 2014 was 186,067,219.

 

 

 


Table of Contents

CORPORATE CAPITAL TRUST, INC.

INDEX

 

          PAGE  
PART I. FINANCIAL INFORMATION   

Item 1.

  

Financial Statements:

  
  

Condensed Consolidated Statements of Assets and Liabilities (unaudited)

     2   
  

Condensed Consolidated Statements of Operations (unaudited)

     3   
  

Condensed Consolidated Statements of Changes in Net Assets (unaudited)

     4   
  

Condensed Consolidated Statements of Cash Flows (unaudited)

     5   
  

Condensed Consolidated Schedules of Investments (unaudited)

     6   
  

Notes to Condensed Consolidated Financial Statements (unaudited)

     26   

Item 2.

  

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

     52   

Item 3.

  

Quantitative and Qualitative Disclosures about Market Risk

     75   

Item 4.

  

Controls and Procedures

     77   

PART II. OTHER INFORMATION

  

Item 1.

  

Legal Proceedings

     77   

Item 1A.

  

Risk Factors

     77   

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

     78   

Item 3.

  

Defaults Upon Senior Securities

     78   

Item 4.

  

Mine Safety Disclosures

     78   

Item 5.

  

Other Information

     78   

Item 6.

  

Exhibits

     78   

Signatures

     79   

Exhibit Index

     80   


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Assets and Liabilities (unaudited)

(in thousands, except share and per share amounts)

 

     June 30, 2014     December 31, 2013  

Assets

    

Investments at fair value:

    

Non-controlled, non-affiliated investments (amortized cost of $1,980,495 and $2,013,530) – including $249,907 and $244,981 of investments pledged to creditors (Note 11)

   $ 2,033,118      $ 2,050,791   

Non-controlled, affiliated investments (amortized cost of $126,285 and $21,474)

     135,077        21,481   

Controlled investments (amortized cost of $2,500 and $2,500)

     2,500        2,500   
  

 

 

   

 

 

 

Total investments, at fair value (amortized cost of $2,109,280 and $2,037,504)

     2,170,695        2,074,772   

Cash

     122,887        85,987   

Cash denominated in foreign currency (cost $- and $218, respectively)

     —          218   

Collateral on deposit with custodian

     59,550        37,501   

Dividends and interest receivable

     28,822        25,613   

Receivable for investments sold

     —          46,469   

Principal receivable

     808        795   

Unrealized appreciation on derivative instruments

     1,273        1,861   

Deferred offering expense

     3,096        3,394   

Prepaid and deferred expenses

     10,534        4,576   
  

 

 

   

 

 

 

Total assets

     2,397,665        2,281,186   
  

 

 

   

 

 

 

Liabilities

    

Term loan, net of discount

     397,038        —     

Revolving credit facilities

     100,450        707,389   

Payable for investments purchased

     83,174        101,014   

Accrued performance-based incentive fees

     15,245        16,412   

Shareholders’ distributions payable

     —          14,923   

Unrealized depreciation on derivative instruments

     5,894        3,181   

Accrued investment advisory fees

     3,822        3,825   

Accrued reimbursement of expense support

     —          1,136   

Accrued directors’ fees

     51        74   

Other accrued expenses and liabilities

     2,546        2,798   
  

 

 

   

 

 

 

Total liabilities

     608,220        850,752   
  

 

 

   

 

 

 

Commitments and contingencies (Note 12)

    

Net Assets

    

Common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 176,261,546 and 143,024,102 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively

     176        143   

Paid-in capital in excess of par value

     1,739,830        1,401,767   

Distributions in excess of net investment income

     (7,378     (5,896

Accumulated net unrealized appreciation on investments, derivative instruments and foreign currency translation

     56,817        34,420   
  

 

 

   

 

 

 

Net assets

   $ 1,789,445      $ 1,430,434   
  

 

 

   

 

 

 

Net asset value per share

   $ 10.15      $ 10.00   
  

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

2


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except share and per share amounts)

 

     Three Months Ended     Six Months Ended  
     June 30, 2014     June 30, 2013     June 30, 2014     June 30, 2013  

Investment income

        

Interest income:

    

Non-controlled, non-affiliated investments

   $ 43,683      $ 19,502      $ 93,336      $ 34,741   

Non-controlled, affiliated investments

     4,006        —          4,006        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     47,689        19,502        97,342        34,741   

Fee income

     1,086        934        1,362        946   

Dividend income:

    

Non-controlled, non-affiliated investments

     6        99        10        197   

Non-controlled, affiliated investments

     577        —          577        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total dividend income

     583        99        587        197   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

     49,358        20,535        99,291        35,884   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Investment advisory fees

     11,264        6,490        21,945        11,351   

Performance-based incentive fees

     1,817        (4,068     11,603        137   

Interest expense

     5,730        1,538        10,211        2,855   

Offering expense

     1,799        1,553        3,674        2,647   

Administrative services

     708        477        1,392        900   

Professional services

     531        320        1,050        668   

Custodian and accounting fees

     182        127        378        215   

Director fees and expenses

     124        82        291        150   

Other

     670        449        1,503        855   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     22,825        6,968        52,047        19,778   

Reimbursement of expense support

     —          —          —          1,136   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net expenses

     22,825        6,968        52,047        20,914   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

     26,533        13,567        47,244        14,970   
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss):

        

Net realized gain on investments

     2,133        3,584        14,331        4,591   

Net realized gain (loss) on derivative instruments

     (587     1,782        (778     2,650   

Net realized loss on foreign currency transactions

     (1,324     (408     (2,346     (397

Net change in unrealized appreciation (depreciation) on:

    

Non-controlled, non-affiliated investments

     6,264        (14,475     15,362        (971

Non-controlled, affiliated investments

     3,301        —          8,785        —     

Derivative instruments

     (3,128     (635     (3,301     6,006   

Foreign currency translation

     3,164        (21     1,551        (12
  

 

 

   

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation)

     9,601        (15,131     22,397        5,023   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     9,823        (10,173     33,604        11,867   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in net assets resulting from operations

   $ 36,356      $ 3,394      $ 80,848      $ 26,837   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Investment Income Per Share

   $ 0.16      $ 0.15      $ 0.30      $ 0.18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted and Basic Earnings Per Share

   $ 0.22      $ 0.04      $ 0.51      $ 0.33   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Shares Outstanding

     165,959,193        92,302,446        157,531,139        81,887,209   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends Declared Per Share

   $ 0.20      $ 0.19      $ 0.38      $ 0.39   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

3


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Net Assets (unaudited)

(in thousands, except share amounts)

 

     Six Months Ended June 30,  
     2014     2013  

Operations

    

Net investment income

   $ 47,244      $ 14,970   

Net realized gain on investments, derivative instruments and foreign currency transactions

     11,207        6,844   

Net change in unrealized appreciation on investments, derivative instruments and foreign currency translation

     22,397        5,023   
  

 

 

   

 

 

 

Net increase in net assets resulting from operations

     80,848        26,837   
  

 

 

   

 

 

 

Distributions to shareholders from

    

Net investment income

     (47,244     (14,970

Realized gains

     (11,207     (6,844

Distributions in excess of net investment income (Note 8)

     (1,482     (9,729
  

 

 

   

 

 

 

Net decrease in net assets resulting from shareholders distributions

     (59,933     (31,543
  

 

 

   

 

 

 

Capital share transactions

    

Issuance of shares of common stock

     306,156        390,879   

Reinvestment of shareholders distributions

     38,289        15,865   

Repurchase of shares of common stock

     (6,349     (1,500
  

 

 

   

 

 

 

Net increase in net assets resulting from capital share transactions

     338,096        405,244   
  

 

 

   

 

 

 

Total increase in net assets

     359,011        400,538   

Net assets at beginning of period

     1,430,434        611,484   
  

 

 

   

 

 

 

Net assets at end of period

   $ 1,789,445      $ 1,012,022   
  

 

 

   

 

 

 

Capital share activity

    

Shares issued from subscriptions

     30,103,786        39,284,016   

Shares issued from reinvestment of distributions

     3,764,891        1,592,660   

Shares repurchased

     (631,233     (152,862
  

 

 

   

 

 

 

Net increase in shares outstanding

     33,237,444        40,723,814   
  

 

 

   

 

 

 

Distributions in excess of net investment income at end of period

   $ (7,378   $ (13,104
  

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

4


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

     For the Six Months Ended  
     June 30, 2014     June 30, 2013  

Operating Activities:

    

Net increase in net assets resulting from operations

   $ 80,848      $ 26,837   

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

  

Purchases of investments

     (811,400     (785,208

Increase (decrease) in payable for investments purchased

     (17,863     148,192   

Paid-in-kind interest

     (15,497     (585

Proceeds from sales of investments

     394,557        288,502   

Proceeds from principal payments

     249,471        59,696   

Net realized gain on investments

     (14,331     (4,591

Net change in unrealized (appreciation) depreciation on investments

     (24,147     971   

Net change in unrealized (appreciation) depreciation on derivative instruments

     3,301        (6,006

Net change in unrealized (appreciation) depreciation on foreign currency translation

     (1,551     12   

Amortization of premium/discount – net

     (3,051     (240

Amortization of deferred financing costs

     1,250        364   

Accretion of discount on term loan

     38        —     

Decrease (increase) in short-term investments, net

     128,475        (30,692

Increase in cash collateral for total return swap

     (22,049     (19,974

Increase in dividend and interest receivable

     (3,228     (5,393

Decrease (increase) in receivable for investments sold

     46,453        (51,960

Increase in principal receivable

     (13     (1,052

Increase in receivable from advisors

     —          (935

Decrease (increase) in other assets

     19        (1,465

Increase (decrease) in accrued investment advisory fees

     (3     868   

Increase (decrease) in accrued performance-based incentive fees

     (1,167     137   

Increase (decrease) in other accrued expenses and liabilities

     (1,411     78   
  

 

 

   

 

 

 

Net cash used in operating activities

     (11,299     (382,444
  

 

 

   

 

 

 

Financing Activities:

    

Proceeds from issuance of shares of common stock

     306,156        390,879   

Payment on repurchase of shares of common stock

     (6,349     (1,500

Distributions paid

     (36,567     (15,678

Borrowings under credit facilities and term loan

     539,000        159,820   

Repayments of credit facilities and term loan

     (747,330     (150,000

Deferred financing costs paid

     (6,929     (1,383
  

 

 

   

 

 

 

Net cash provided by financing activities

     47,981        382,138   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     36,682        (306

Cash and cash denominated in foreign currency, beginning of period

     86,205        306   
  

 

 

   

 

 

 

Cash and cash denominated in foreign currency, end of period

   $ 122,887      $ —     
  

 

 

   

 

 

 

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

  

Cash paid for interest

   $ 9,640      $ 2,499   

Distributions reinvested

   $ 38,289      $ 15,865   

See notes to condensed consolidated financial statements.

 

5


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited)

As of June 30, 2014

(in thousands, except share amounts)

 

Company (a)(b)    Footnotes   Industry   

Interest

Rate

    

Base Rate

Floor

    

Maturity

Date

    

No. Shares/
Principal
Amount (c)

          Cost (d)     Fair Value  

Senior Secured Loans—First Lien—42.6%

  

         

 

 

ABILITY Network, Inc.

   (e)(s)   Health Care Equipment & Services      L + 500         1.00%         5/14/2021       $         12,725      $         12,474      $         12,709   

 

 

Algeco/Scotsman (LU)

   (e)(f)(g)(q)   Consumer Durables & Apparel      15.75% PIK            5/1/2018         28,560        28,680        31,059   

 

 

Aspen Dental Management, Inc.

   (e)(s)   Health Care Equipment & Services      L + 550         1.50%         10/6/2016         6,023        5,982        6,056   

 

 

Bluestem Brands, Inc.

   (e)(s)   Consumer Durables & Apparel      L + 650         1.00%         12/6/2018         37,601        36,194        37,883   

 

 

BRG Sports, Inc.

   (e)(r)   Consumer Durables & Apparel      L + 550         1.00%         4/15/2021         4,670        4,579        4,723   

 

 

California Pizza Kitchen, Inc.

   (e)(h)(s)   Food & Staples Retailing      L + 425         1.00%         3/29/2018         13,606        12,925        13,028   

 

 

Charlotte Russe, Inc.

   (s)   Retailing      L + 550         1.25%         5/22/2019         13,352        13,170        13,285   
   (e)(s)        L + 550         1.25%         5/22/2019         4,739        4,710        4,721   

 

 

Data Device Corp.

   (e)(s)   Capital Goods      L + 650         1.50%         7/11/2018         10,394        10,235        10,420   

 

 

Distribution International, Inc.

   (s)   Retailing      L + 650         1.00%         7/16/2019         48,144        47,723        48,264   

 

 

Flagstone Foods Holding Corp.

   (i)(s)   Food & Staples Retailing      L + 575         1.25%         4/15/2018         20,002        19,827        19,982   

 

 

Football Association of Ireland (IE)        

   (f)(g)(i)(EUR)   Consumer Durables & Apparel      6.20%            12/20/2020       44,615        59,675        60,969   

 

 

Greenway Medical Technologies

   (e)(s)   Health Care Equipment & Services      L + 500         1.00%         11/4/2020       $ 1,772        1,763        1,777   

 

 

Greystone & Co., Inc.

   (i)(s)   Diversified Financials      L + 800         1.00%         3/26/2021         34,089        33,508        34,191   

 

 

Gymboree Corp.

   (e)(s)   Retailing      L + 350         1.50%         2/23/2018         14,197        12,524        12,215   

 

 

Internet Brands, Inc.

   (e)(u)   Media      P + 400         3.25%         3/18/2019         788        794        789   

 

 

See notes to condensed consolidated financial statements.

 

6


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

Company (a)(b)    Footnotes   Industry  

Interest

Rate

   

Base Rate

Floor

 

Maturity

Date

   

No. Shares/
Principal
Amount (c)

          Cost (d)     Fair Value  

iPayment, Inc.

   (e)(h)(s)   Software & Services     L + 525      1.50%     5/8/2017      $ 36,163      $ 35,858      $ 35,835   

 

 

J. Jill

   (i)(s)   Retailing     L + 850      1.50%     4/29/2017        7,125        7,125        7,107   

 

 

Jacuzzi Brands, Inc. (LU)

   (f)(i)(s)   Capital Goods     L + 650      1.25%     7/3/2019        41,421        40,698        40,965   

 

 

KeyPoint Government Solutions, Inc.

   (i)(s)   Capital Goods     L + 600      1.25%     11/13/2017        30,508        30,052        30,508   

 

 

Kurt Geiger Ltd. (UK)

   (f)(g)(i)(q)(GBP)   Consumer Durables & Apparel    
 
10.00%, 1.00%
PIK
  
  
  1.00%     4/8/2019      £ 46,625        76,571        80,194   

 

 

MCS AMS Sub-Holdings, LLC (s)

     Commercial & Professional Services     L + 600      1.00%     10/15/2019      $         47,417        46,177        46,113   

 

 

New Enterprise Stone & Lime Co., Inc.

   (i)(s)   Capital Goods     L + 700      1.00%     2/12/2019        56,298        56,298        56,495   

 

 

OpenLink Financial, Inc.

   (s)   Software & Services     L + 500      1.25%     10/30/2017        46        46        46   

 

 

Pacific Union Financial, LLC

   (g)(i)(o)(r)   Diversified Financials     L + 800      1.00%     5/31/2019        26,998        26,598        26,838   

 

 

RedPrairie Corp.

   (e)(h)(s)   Software & Services     L + 500      1.00%     12/21/2018        4,006        4,005        4,013   

 

 

Sportsman’s Warehouse, Inc.

   (g)(i)(s)   Retailing     L + 1075      1.25%     8/20/2019        16,139        15,822        16,219   
   (g)(i)(s)       L + 600      1.25%     8/20/2019        27,436        27,192        27,532   

 

 

Travelport, LLC

   (e)(s)   Software & Services     L + 500      1.25%     6/26/2019        5,389        5,318        5,521   

 

 

Tweddle Group, Inc.

   (i)(s)   Automobiles & Components     L + 650      1.00%     4/7/2020        37,639        36,726        37,564   

 

 

Willbros United States Holding, Inc.

   (e)(g)(r)   Energy     L + 975      1.25%     8/5/2019        29,768        29,205        30,327   

 

 

Wilton Brands, LLC

   (e)(s)   Materials     L + 625      1.25%     8/30/2018        5,288        5,203        5,118   

 

 

Total Senior Secured Loans—First Lien

               $     747,657      $     762,466   
              

 

 

   

 

 

 

 

See notes to condensed consolidated financial statements

 

7


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

Company (a)(b)    Footnotes   Industry  

Interest

Rate

   

Base Rate

Floor

   

Maturity

Date

   

No. Shares/
Principal
Amount (c)

          Cost (d)     Fair Value  

Senior Secured Loans—Second Lien—42.0%

  

       

 

 

ABILITY Network, Inc.

   (s)   Health Care Equipment & Services     L + 825        1.00%        5/16/2022      $ 8,230      $ 8,149      $ 8,271   

 

 

American Casino & Entertainment Properties, LLC

   (s)   Consumer Services     L + 1000        1.25%        1/3/2020        1,832        1,893        1,947   

 

 

Angelica Corp.

   (i)(s)   Health Care Equipment & Services     L + 875        1.25%        7/15/2019        50,869        50,869        49,495   

 

 

Applied Systems, Inc.

   (e)(h)(s)   Software & Services     L + 650        1.00%        1/24/2022        10,446        10,691        10,678   

 

 

Arysta Lifescience SPC, LLC

   (e)(g)(s)   Food, Beverage & Tobacco     L + 700        1.25%        11/30/2020        16,305        16,158        16,631   

 

 

AssuredPartners, Inc.

   (h)(s)   Insurance     L + 675        1.00%        4/2/2022        7,115        7,109        7,146   

 

 

Brake Bros Ltd. (UK)

   (f)(g)(q)(v)(GBP)   Food & Staples Retailing    
 
L + 325, 3.00%
PIK
  
  
      3/12/2017      £ 8,756        12,423        14,648   

 

 

BRG Sports, Inc.

   (r)   Consumer Durables & Apparel     L + 925        1.00%        4/15/2022      $         23,855        23,653        24,093   

 

 

Catalina Marketing Corp.

   (r)   Media     L + 675        1.00%        4/11/2022        6,020        5,976        6,035   

 

 

CHG Companies, Inc.

   (e)(r)   Health Care Equipment & Services     L + 775        1.25%        11/19/2020        10,485        10,369        10,699   

 

 

CRC Health Group, Inc.

   (h)(s)   Health Care Equipment & Services     L + 800        1.00%        9/28/2021        30,526        30,153        30,699   

 

 

CTI Foods Holding Co., LLC

   (s)   Food, Beverage & Tobacco     L + 725        1.00%        6/28/2021        23,219        22,901        23,538   

 

 

Data Device Corp.

   (r)   Capital Goods     L + 1000        1.50%        7/11/2019        8,000        7,873        7,880   

 

 

Excelitas Technologies Corp.

   (i)(q)(s)   Technology Hardware & Equipment    
 
L + 975, 1.50%
PIK
  
  
    1.00%        4/29/2021        108,167            108,167            110,222   

 

 

Greenway Medical Technologies

   (s)   Health Care Equipment & Services     L + 825        1.00%        11/4/2021        26,396        26,015        26,627   

 

 

 

See notes to condensed consolidated financial statements

 

8


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

Company (a)(b)

   Footnotes   Industry  

Interest

Rate

   

Base Rate

Floor

   

Maturity

Date

   

No. Shares/
Principal
Amount (c)

          Cost (d)     Fair Value  

Gruppo Argenta S.p.A. (LU)

   (f)(g)(i)(q)(EUR)   Retailing     12.00% PIK          1/31/2019              21,459      $         23,119      $         24,624   

 

 

Gypsum Management & Supply, Inc.

   (s)   Capital Goods     L + 675        1.00%        4/1/2022      $ 13,207        13,078        13,389   

 

 

Integra Telecom Holdings, Inc.

   (s)   Telecommunication Services     L + 850        1.25%        2/21/2020        3,000        3,064        3,065   

 

 

Learfield Communications, Inc.

   (h)(s)   Media     L + 775        1.00%        10/8/2021        10,815        10,897        11,038   

 

 

Liberty Cablevision of Puerto Rico, LLC

   (h)(s)   Media     L + 675        1.00%        6/26/2023        3,721        3,703        3,748   

 

 

Lightower Fiber, LLC

   (e)(h)(s)   Telecommunication Services     L + 675        1.25%        4/12/2021        5,282        5,318        5,357   

 

 

Maxim Crane, LP

   (e)(s)   Capital Goods     L + 925        1.00%        11/26/2018        5,168        5,304        5,293   

 

 

Misys Ltd. (UK)

   (e)(f)(g)   Software & Services     12.00%          6/12/2019        3,000        3,332        3,455   

 

 

Monarch (LU)

   (e)(f)(g)(s)   Materials     L + 700        1.25%        4/3/2020        1,558        1,551        1,603   

 

 

NewWave Communications, Inc.

   (s)   Media     L + 800        1.00%        10/30/2020        13,712        13,670        13,867   

 

 

P2 Energy Solutions, Inc.

   (t)   Software & Services     L + 800        1.00%        4/30/2021        9,283        9,195        9,465   

 

 

Packaging Coordinators, Inc.

   (i)(s)   Materials     L + 825        1.25%        10/31/2020        11,827        11,722        11,626   

 

 

Polyconcept Finance BV (NL)

   (f)(g)(i)(s)   Consumer Durables & Apparel     L + 875        1.25%        6/28/2020        46,727        46,727        45,512   

 

 

Progressive Solutions

   (h)(r)   Health Care Equipment & Services     L + 850        1.00%        10/22/2021        21,145        20,983        21,251   

 

 

RedPrairie Corp.

   (e)(s)   Software & Services     L + 1000        1.25%        12/21/2019        18,150        18,167        18,354   

 

 

Sabine Oil & Gas, LLC

   (e)(g)(s)   Energy     L + 750        1.25%        12/31/2018        14,527        14,410        14,817   

 

 

SafeNet, Inc.

   (i)(r)   Software & Services     L + 750        1.00%        3/5/2021        20,829        20,528        20,663   

 

 

 

See notes to condensed consolidated financial statements

 

9


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

Company (a)(b)   Footnotes   Industry  

Interest

Rate

   

Base Rate

Floor

   

Maturity

Date

   

No. Shares/
Principal
Amount (c)

          Cost (d)     Fair Value  

Safety Technology Holdings, Inc.

  (i)(s)   Technology Hardware & Equipment     L + 825        1.00%        6/2/2020      $         30,402      $         29,693      $         30,691   

 

 

Sheridan Holdings, Inc.

  (e)(r)   Health Care Equipment & Services     L + 725        1.00%        12/13/2021        13,899        13,833        14,247   

 

 

SI Organization, Inc.

  (s)   Capital Goods     L + 800        1.00%        5/23/2020        56,000        55,447        56,175   

 

 

StoneRiver Holdings, Inc.

  (r)   Insurance     L + 725        1.25%        5/30/2020        6,746        6,724        6,792   

 

 

Talbots, Inc.

  (h)(s)   Retailing     L + 725        1.00%        3/19/2021        15,074        14,970        14,924   

 

 

The TelX Group, Inc.

  (h)(s)   Telecommunication Services     L + 650        1.00%        4/9/2021        11,696        11,681        11,742   

 

 

Travelport, LLC

  (e)(t)   Software & Services     L + 800        1.50%        1/31/2016        18,868        18,593        19,481   

 

 

Websense, Inc.

  (s)   Technology Hardware & Equipment     L + 725        1.00%        12/24/2020        22,131        22,031        22,325   

 

 

Total Senior Secured Loans—Second Lien

              $         740,139      $         752,113   
             

 

 

   

 

 

 

Senior Secured Bonds—7.3%

               

 

 

Artesyn Technologies, Inc.

  (h)(j)(k)   Technology Hardware & Equipment     9.75%          10/15/2020        6,954        6,905        6,832   

 

 

Essar Steel Algoma, Inc. (CA)

  (f)(g)(j)(k)   Materials     9.38%          3/15/2015        339        340        338   

 

 

Guitar Center, Inc.

  (j)(k)   Retailing     6.50%          4/15/2019        21,542        21,322        21,326   

 

 

Hot Topic, Inc.

  (j)(k)   Consumer Durables & Apparel     9.25%          6/15/2021        2,419        2,399        2,685   

 

 

Louisiana Public Facilities Authority

  (i)   Energy     11.50%          1/1/2020        50,580        49,190        51,086   

 

 

New Enterprise Stone & Lime Co., Inc.

  (k)(q)   Capital Goods    
 
5.00%, 8.00%
PIK
  
  
      3/15/2018        10,474        10,556        11,784   

 

 

OAG Holdings, LLC

  (i)(q)   Energy    
 
8.00%, 2.00%
PIK
  
  
      12/20/2020        20,210        17,493        19,018   

 

 

 

See notes to condensed consolidated financial statements

 

10


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

Company (a)(b)    Footnotes   Industry  

Interest

Rate

   

Base Rate

Floor

 

Maturity

Date

   

No. Shares/
Principal
Amount (c)

          Cost (d)     Fair Value  

Ryerson, Inc.

   (e)   Materials     9.00%          10/15/2017      $ 5,814      $             5,814      $             6,221   

 

 

SquareTwo Financial Corp.

   (k)   Banks     11.63%          4/1/2017        11,802        11,767        11,389   

 

 

Total Senior Secured Bonds

               $         125,786      $         130,679   
              

 

 

   

 

 

 

Total Senior Debt—91.9%

               $     1,613,582      $     1,645,258   
              

 

 

   

 

 

 

Subordinated Debt—22.3%

                

 

 

Cemex Materials, LLC

   (h)(j)(k)   Materials     7.70%          7/21/2025        25,312        25,261        29,235   

 

 

Ceridian Corp.

   (j)(k)   Commercial & Professional Services     8.13%          11/15/2017        6,246        6,230        6,308   
   (k)       11.00%          3/15/2021        16,201        17,505        18,712   

 

 

CHS/Community Health Systems, Inc.

   (g)(j)(k)   Health Care Equipment & Services     6.88%          2/1/2022        114        114        121   

 

 

CommScope, Inc.

   (g)(j)(k)   Technology Hardware & Equipment     5.00%          6/15/2021        11,784        11,784        12,020   
   (g)(j)(k)       5.50%          6/15/2024        10,219        10,219        10,385   

 

 

Datatel, Inc.

   (e)(j)(q)   Software & Services     9.63%          12/1/2018        9,287        9,207        9,659   

 

 

Education Management, LLC

   (g)(k)(q)   Consumer Services    

 

15.00%,

1.00% PIK

  

  

      7/1/2018        1,299        1,306        649   

 

 

Essar Steel Algoma, Inc. (CA)

   (f)(g)(j)(k)   Materials     9.88%          6/15/2015        6,973        5,404        4,463   

 

 

GCI, Inc.

   (k)   Telecommunication Services     8.63%          11/15/2019        41,782        44,276        44,132   
   (k)       6.75%          6/1/2021        158        151        160   

 

 

Global Closure Systems (FR)

   (f)(g)(i)(q)(EUR)   Materials     13.00% PIK          11/15/2019              18,987        25,031        25,791   

 

 

 

See notes to condensed consolidated financial statements

 

11


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

Company (a)(b)   Footnotes   Industry  

Interest

Rate

   

Base Rate

Floor

 

Maturity

Date

   

No. Shares/
Principal

Amount (c)

          Cost (d)     Fair Value  
Griffins Foods, Ltd. (NZ)   (f)(g)(i)(q)(NZD)   Food, Beverage & Tobacco     13.75% PIK          1/31/2019      N$ 50,650        39,819        44,746   

 

 
Gruppo Argenta S.p.A. (LU)   (f)(g)(i)(q)(EUR)   Retailing     15.00% PIK          11/11/2018        € 635      $ 876      $ 693   

 

 
Gymboree Corp.   (k)   Retailing     9.13%          12/1/2018        $ 3,335        3,210        2,226   

 

 
Hilding Anders (SE)   (f)(g)(i)(q)(s)(EUR)   Consumer Durables & Apparel     13.00% PIK          6/30/2021        € 86,803        103,350        106,736   
  (f)(g)(i)(q)(s)(EUR)       12.00% PIK          12/31/2023        15,739        1,004        1,050   
  (f)(g)(i)(q)(s)(EUR)       18.00% PIK          12/31/2024        7,046        6,786        7,973   

 

 
Hot Topic, Inc.   (j)(k)(q)   Consumer Durables & Apparel     12.00%          5/15/2019        $ 8,113        7,962        8,640   

 

 
iPayment, Inc.   (k)   Software & Services     10.25%          5/15/2018        12,066        9,799        10,920   

 

 
JC Penney Corp., Inc.   (g)(k)   Retailing     5.65%          6/1/2020        11,803        8,957        10,328   

 

 
Men’s Wearhouse, Inc.   (g)(j)(k)   Retailing     7.00%          7/1/2022        5,285        5,285        5,470   

 

 
Summit Materials, LLC   (k)   Materials     10.50%          1/31/2020        9,711        10,536        10,925   

 

 
The TelX Group, Inc.   (i)(q)   Telecommunication Services     13.50% PIK          7/9/2021        3,239        3,472        3,232   

 

 
Towergate Finance PLC (UK)   (f)(g)(j)(k)(GBP)   Insurance     10.50%          2/15/2019        £ 14,608        23,298        24,130   

 

 
Total Subordinated Debt             $     380,842      $     398,704   
             

 

 

   

 

 

 
Structured Products—2.0%   
KKR BPT Holdings Aggregator, LLC   (g)(i)(l)*   Diversified Financials           N/A        2,500        2,500   

 

 
Trade Finance Funding I, Ltd. 2013-1A Class B (KY)   (f)(g)(i)(j)   Diversified Financials     10.75%          11/13/2018        $     28,221        28,221        28,278   

 

 

 

 

See notes to condensed consolidated financial statements

 

12


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

Company (a)(b)   Footnotes   Industry   Interest
Rate
    Base Rate
Floor
  Maturity
Date
    No. Shares/
Principal
Amount (c)
          Cost (d)     Fair Value  

VSK Holdings, Ltd. (KY)

  (f)(g)(i)(m)(EUR)   Diversified Financials           620,377      $      $ 5,275   

 

 

Total Structured Products

  

  $       30,721      $       36,053   
             

 

 

   

 

 

 
Equity / Other—3.9%                

Ally Financial, Inc., Preferred Stock

  (g)(j)(k)   Banks     7.00         230        229        232   

 

 

Cengage Learning Holdings II, LP , Common Stock

  (e)*   Media           227,802        7,529        7,973   

 

 

Excelitas Technologies Corp., Class A Membership Interest

  (i)*   Technology Hardware & Equipment           N/A        5,636        5,631   

 

 

Genesys Telecommunications Laboratories, Inc., Common Stock

  (i)*   Software & Services           5,775        449        742   

 

 

Global Closure Systems (FR), Limited Partnership Interest

  (f)(g)(i)*(EUR)   Materials           N/A        823        1,186   

 

 

Gruppo Argenta S.p.A. (LU) ,Warrants

  (f)(g)(i)*(EUR)   Retailing           225,289        5,342        5,285   

 

 

Hilding Anders (SE), Class A Common Stock

  (f)(g)(i)*(SEK)   Consumer Durables & Apparel           1,394,288        132        128   

 

 

Hilding Anders (SE), Class B Common Stock

  (f)(g)(i)*(SEK)   Consumer Durables & Apparel           260,253        25        24   

 

 

Hilding Anders (SE), Equity Options

  (f)(g)(i)*(SEK)   Consumer Durables & Apparel         12/31/2020        236,160,807        14,988        13,891   

 

 

Jasper Parent, LLC, Common Stock

  (i)*   Consumer Durables & Apparel           5,451        1,090        4,334   

 

 

Jones Apparel Group Holdings, Inc., Common Stock

  (i)*   Consumer Durables & Apparel           5,451        1,090        1,304   

 

 

Nine West Holdings, Inc., Common Stock

  (i)*   Consumer Durables & Apparel           5,451        6,542        6,100   

 

 

OAG Holdings, LLC, Overriding Royalty Interest

  (i)   Energy           N/A        2,354        2,182   

 

 

Star Mountain SMB Multi-Manager Credit Platform, LP, Limited Partnership Interest

  (g)(i)   Diversified Financials           N/A        9,119        7,751   

 

 

 

 

See notes to condensed consolidated financial statements

 

13


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

Company (a)(b)   Footnotes   Industry   Interest
Rate
    Base Rate
Floor
 

Maturity

Date

    No. Shares/
Principal
Amount (c)
    Cost (d)     Fair Value  

Stuart Weitzman, Inc., Common Stock

  (i)*   Consumer Durables & Apparel           5,451      $ 7,359      $ 12,489   

 

 

Total Equity / Other

  

    $ 62,707      $ 69,252   
             

 

 

   

 

 

 

Total Investments, excluding Short Term Investments—120.1%

  

    $     2,087,852      $     2,149,267   
             

 

 

   

 

 

 

Short Term Investments—1.2%

  

 

Goldman Sachs Financial Square Funds—Prime Obligations Fund, FST Preferred Shares (e)(n)

        0.01%            21,363,007        21,363        21,363   

State Street Institutional Liquid Reserves Fund, Institutional Class

  (n)       0.06%            64,930        65        65   

 

 

Total Short Term Investments

  

    $ 21,428      $ 21,428   
             

 

 

   

 

 

 

TOTAL INVESTMENTS—121.3%(p)

      $ 2,109,280      $ 2,170,695   
             

 

 

   

 

 

 

LIABILITIES IN EXCESS OF OTHER ASSETS—(21.3%)

          (381,250)   
               

 

 

 

NET ASSETS—100.0%

        $     1,789,445   
               

 

 

 

Collateral on Deposit with Custodian—3.3%

  

 

 

 

Bank of Nova Scotia—Certificate of Deposit

        0.14%          9/30/2014        59,550      $ 59,550        59,550   

Total Collateral on Deposit with Custodian

      $ 59,550      $ 59,550   
             

 

 

   

 

 

 

Derivative Instruments—(0.3%) (Note 4)

       

Foreign currency forward contracts

  (g)       N/A         
 
7/2014-
4/2017
 
  
    $        (5,112)   

Total return swaps

  (g)(i)       N/A          1/15/2016        $      $ 491   

 

 

Total Derivative Instruments

              $      $     (4,621)   
             

 

 

   

 

 

 

 

See notes to condensed consolidated financial statements.

 

14


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

* Non-income producing security.

 

(a) Security may be an obligation of one or more entities affiliated with the named company.

 

(b) Non-Controlled/Non-Affiliate investments as defined by the Investment Company Act of 1940, as amended (“1940 Act”), unless otherwise indicated. Non-controlled/Non-Affiliate Investments are investments that are neither Controlled Investments nor Affiliate Investments.

 

(c) Denominated in U.S. Dollars unless otherwise noted.

 

(d) Represents amortized cost for debt securities and cost for common stocks translated to U.S. dollars.

 

(e) Security or portion thereof is held within CCT Funding, LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Deutsche Bank.

 

(f) A portfolio company domiciled in a foreign country. The jurisdiction of the security issuer may be a different country than the domicile of the portfolio company.

 

(g) The investment is not a qualifying asset as defined in Section 55(a) under the Investment Company Act of 1940, as amended, or the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The Company calculates its compliance with the qualifying assets test on a “look through” basis by disregarding the value of the Company’s total return swaps and treating each loan underlying the total return swaps as either a qualifying asset or non-qualifying asset based on whether the obligor is an eligible portfolio company. On this basis, 70.2% of the Company’s total assets represented qualifying assets as of June 30, 2014.

 

(h) Position or portion thereof unsettled as of June 30, 2014.

 

(i) Investments classified as Level 3 whereby fair value was determined by the Company’s Board of Directors (see Note 2).

 

(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) Security or portion thereof is held within Paris Funding, LLC and is pledged as collateral supporting the amounts outstanding under the committed facility agreement with BNP Paribas Prime Brokerage, Inc. and eligible to be hypothecated as allowed under Rule 15c2-1(a)(1) of the Exchange Act subject to the limits of the Rehypothecation Agreement.

 

See notes to condensed consolidated financial statements

 

15


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

(l)   Affiliated investment as defined by the 1940 Act, whereby the Company owns between 5% and 25% of the portfolio company’s outstanding voting securities and the investments are not classified as Controlled investments. The aggregate fair value of non-controlled, affiliated investments at June 30, 2014 represents 7.5% of the Company’s net assets. Fair value as of December 31, 2013 and June 30, 2014 along with transactions during the six months ended June 30, 2014 in these Affiliated investments are as follows (amounts in thousands):

 

                Gross                 Six Months Ended June 30, 2014  

Non-controlled, Affiliated Investments

  Fair Value at
December 31, 2013
    Gross Additions
(Cost)*
    Reductions
(Cost)**
    Net Unrealized
Gain (Loss)
    Fair Value at
June 30, 2014
    Net Realized
Gain (Loss)
    Interest Income     Fee Income     Dividend Income  

Hilding Anders

                 

Subordinated Debt

  $      $ 111,140      $      $ 4,619      $ 115,759      $      $ 4,006      $      $   

Class A Common Stock

           132               (4     128                               

Class B Common Stock

           25               (1     24                               

Equity Options

           14,988               (1,097     13,891                               

VSK Holdings, Ltd.

                           

Structured Product

    21,481               (21,474     5,268        5,275                             577   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $ 21,481      $ 126,285      $ (21,474   $ 8,785      $ 135,077      $      $ 4,006      $      $ 577   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

* Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.

 

** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.

 

See notes to condensed consolidated financial statements

 

16


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

(m)   Controlled investment as defined by the 1940 Act, whereby the Company owns more than 25% of the portfolio company’s outstanding voting securities or maintains the ability to nominate greater than 50% of the board representation. The aggregate fair value of controlled investments at June 30, 2014 represents 0.1% of the Company’s net assets. Fair value as of December 31, 2013 and June 30, 2014 along with transactions during the six months ended June 30, 2014 in these controlled investments are as follows (amounts in thousands):

 

    Fair Value at     Gross     Gross                 Six Months Ended June 30, 2014  

Controlled Investments

  December 31,
2013
    Additions
(Cost)*
    Reductions
(Cost)**
    Net Unrealized
Gain (Loss)
    Fair Value at
June 30, 2014
    Net Realized Gain
(Loss)
    Interest Income     Fee Income     Dividend Income  

KKR BPT Holdings Aggregator, LLC

                 

Structured Product

  $ 2,500      $      $      $      $ 2,500      $      $      $      $   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $ 2,500      $      $      $      $ 2,500      $      $      $      $   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  * Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.

 

  ** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.

(n)   7-day effective yield as of June 30, 2014.

(o)   The value of this investment is net of unfunded delayed draw loan commitments of $33,652.

(p)   As of June 30, 2014, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $71,420; the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $10,005; the net unrealized appreciation was $61,415; the aggregate cost of securities for Federal income tax purposes was $2,109,780.

(q)   The interest rate on these investments contains a PIK provision, whereby the issuer has either the option or the obligation to make interest payments with the issuance of additional securities. The interest rate in the schedule represents the current interest rate in effect for these investments. The following table provides additional details on these PIK investments, including the maximum PIK interest rate allowed under the existing credit agreements.

 

See notes to condensed consolidated financial statements

 

17


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

PIK Security Name

  Local
Currency
  12/31/2013
Local Par
    Six Months
Ended 6/30/2014
Local Par
Additions
    Six Months
Ended 6/30/2014
Local Par
Capitalized PIK
    6/30/2014
Local Par
    Total Current
Interest Rate
    Current
PIK Rate
    Maximum
PIK Rate
 

Algeco/Scotsman - 15.75% PIK

  USD     26,464        -        2,096        28,560        15.75     15.75     15.75

Brake Bros Ltd. - L + 325, 3.00% PIK

  GBP     8,650        -        106        8,756        L+625        3.00     3.00

Datatel, Inc. - 9.63%

  USD     9,287        -        -        9,287        9.63     0.00     10.38

Education Management, LLC - 15.00%, 1.00% PIK

  USD     1,299        -        -        1,299        16.00     1.00     1.00

Excelitas Technologies Corp. - L + 975, 1.50% PIK

  USD     107,355        -        812        108,167        L+1125        1.50     1.50

Global Closure Systems - 13.00% PIK

  EUR     17,828        -        1,159        18,987        13.00     13.00     13.00

Griffins Foods, Ltd. - 13.75% PIK

  NZD     47,417        -        3,233        50,650        13.75     13.75     13.75

Gruppo Argenta S.p.A. - 15.00% PIK

  EUR     -        635        -        635        15.00     15.00     15.00

Gruppo Argenta S.p.A. - 12.00% PIK

  EUR     -        21,459        -        21,459        12.00     12.00     12.00

Hilding Anders - 18.00% PIK

  EUR     -        7,046        -        7,046        18.00     18.00     18.00

Hilding Anders - 13.00% PIK

  EUR     81,478        -        5,325        86,803        13.00     13.00     13.00

Hilding Anders - 12.00% PIK

  EUR     -        15,739        -        15,739        12.00     12.00     12.00

Hot Topic, Inc. - 12.00%

  USD     8,113        -        -        8,113        12.00     0.00     12.75

Kurt Geiger Ltd. - 10.00%, 1.00% PIK

  GBP     -        46,625        -        46,625        11.00     1.00     1.00

New Enterprise Stone & Lime Co., Inc. - 5.00%, 8.00% PIK

  USD     10,071        -        403        10,474        13.00     8.00     10.00

OAG Holdings, LLC - 8.00%, 2.00% PIK

  USD     20,008        -        202        20,210        10.00     2.00     2.00

The TelX Group, Inc. - 13.50% PIK

  USD     -        3,142        97        3,239        13.50     13.50     13.50

 

See notes to condensed consolidated financial statements

 

18


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Condensed Consolidated Schedule of Investments (unaudited) (continued)

As of June 30, 2014

(in thousands, except share amounts)

 

(r) The interest rate on these investments is subject to a base rate of 1-Month LIBOR, which at June 30, 2014 was 0.15%. The base rate for each investment may be different from the reference rate on June 30, 2014.

 

(s) The interest rate on these investments is subject to a base rate of 3-Month LIBOR, which at June 30, 2014 was 0.23%. The base rate for each investment may be different from the reference rate on June 30, 2014.

 

(t) The interest rate on these investments is subject to a base rate of 6-Month LIBOR, which at June 30, 2014 was 0.33%. The base rate for each investment may be different from the reference rate on June 30, 2014.

 

(u) The interest rate on these investments is subject to a base rate of U.S. Prime Rate, which at June 30, 2014 was 3.25%. The base rate for each investment may be different from the reference rate on June 30, 2014.

 

(v) The interest rate on these investments is subject to a base rate of GBP LIBOR, which at June 30, 2014 was 0.47%. The base rate for each investment may be different from the reference rate on June 30, 2014.

Abbreviations:

EUR - Euro; local currency investment amount is denominated in Euros. €1 / US $1.365 as of June 30, 2014.

GBP - British Pound Sterling; local currency investment amount is denominated in Pound Sterling. £1 / US $1.703 as of June 30, 2014.

NZD - New Zealand Dollar; local currency investment amount is denominated in New Zealand Dollars. N$1 / US $0.876 as of June 30, 2014.

SEK - Swedish Krona; local currency investment amount is denominated in Swedish Kronas. SEK1 / US $0.148 as of June 30, 2014.

CA - Canada

FR - France

IE - Ireland

KY - Cayman Islands

LU - Luxembourg

NL - The Netherlands

NZ - New Zealand

SE - Sweden

UK - United Kingdom

E = EURIBOR - Euro Interbank Offered Rate

L = LIBOR - London Interbank Offered Rate, typically 3-Month

P - U.S. Prime Rate

PIK - Payment-in-kind; the issuance of additional securities by the borrower to settle interest payment obligations.

 

See notes to condensed consolidated financial statements

 

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Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments

As of December 31, 2013

(in thousands, except share amounts)

 

Company (a)(b)

   Footnotes    Industry    Interest
Rate
    

EURIBOR

/LIBOR
Floor

   Maturity
Date
     No. Shares/
Principal
Amount (c)
     Cost (d)     

Fair Value  

 

 

 

Senior Secured Loans - First Lien—44.7%

                 

 

 

Algeco/Scotsman (LU)

   (e)(f)    Consumer Durables & Apparel      15.75% PIK            5/1/2018         $        26,464         $        26,243         $        27,787   

 

 

Aspen Dental Management, Inc.

   (g)    Health Care Equipment & Services      L + 550       1.50%      10/6/2016         6,053         6,005         6,008   

 

 

Avaya, Inc.

   (g)    Technology Hardware & Equipment      L + 675       1.25%      3/31/2018         33,909         33,105         34,468   

 

 

Bluestem Brands, Inc.

   (g)(h)    Consumer Durables & Apparel      L + 650       1.00%      12/6/2018         57,731         55,422         57,154   

 

 

Catalina Marketing Corp.

   (g)    Media      L + 425       1.00%      10/12/2020         5,215         5,273         5,295   

 

 

Cemex S.A.B. de C.V. (MX)

   (e)(f)    Materials      L + 450            2/14/2017         3,441         3,222         3,411   

 

 

Cengage Learning Acquisitions, Inc.

   (g)(i)    Media      L + 550            7/5/2017         2,701         2,036         2,119   

 

 

Continental Building Products, LLC

   (g)    Materials      L + 375       1.00%      8/28/2020         9,203         9,159         9,221   

 

 

Data Device Corp.

   (g)    Capital Goods      L + 650       1.50%      7/11/2018         10,873         10,683         10,900   

 

 

Distribution International, Inc.

      Retailing      L + 650       1.00%      7/16/2019         48,387         47,932         48,174   

 

 

Easton-Bell Sports, Inc.

   (j)    Consumer Durables & Apparel      11.50%            12/31/2015         24,247         24,259         24,247   

 

 

Flagstone Foods Holding Corp.

   (j)    Food & Staples Retailing      L + 575       1.25%      4/15/2018         20,103         19,916         20,017   

 

 

Football Association of Ireland (IE)

   (e)(f)(j)(EUR)    Consumer Durables & Apparel      6.20%            12/20/2020         €        44,390         59,588         59,843   

 

 

Greenway Medical Technologies

      Health Care Equipment & Services      L + 500       1.00%      11/4/2020         $        20,413         20,182         20,413   

 

 

Guitar Center, Inc.

   (g)    Retailing      L + 600            4/9/2017         19,523         19,111         19,096   

 

 

Internet Brands, Inc.

      Media      L + 500       1.25%      3/18/2019         31,792         30,254         31,991   

 

 

iPayment, Inc.

   (g)    Software & Services      L + 525       1.50%      5/8/2017         3,186         3,134         3,107   

 

 

IPC Systems, Inc.

   (g)    Technology Hardware & Equipment      L + 650       1.25%      7/31/2017         1,487         1,455         1,492   
   (g)         L + 650       1.25%      7/31/2017         6,372         6,270         6,352   

 

 

J. Jill

   (j)    Retailing      L + 850       1.50%      4/29/2017         7,954         7,954         7,954   

 

 

Jacuzzi Brands, Inc. (LU)

   (f)(j)    Capital Goods      L + 650       1.25%      7/3/2019         41,938         41,151         41,854   

 

 

KeyPoint Government Solutions, Inc.

   (j)    Capital Goods      L + 600       1.25%      11/13/2017         31,383         30,871         31,383   

 

 

MCS AMS Sub-Holdings, LLC

      Commercial & Professional Services      L + 600       1.00%      10/15/2019         50,455         48,973         48,879   

 

 

North American Breweries Holdings, LLC

      Food, Beverage & Tobacco      L + 625       1.25%      12/11/2018         4,920         4,836         4,821   

 

 

OpenLink Financial, Inc.

      Software & Services      L + 625       1.50%      10/30/2017         46         46         46   

 

 

Sportsman’s Warehouse, Inc.

   (j)    Retailing      L + 1075       1.25%      8/20/2019         23,654         23,159         23,760   
   (j)         L + 600       1.25%      8/20/2019         40,211         39,830         40,593   

 

 

Travelport, LLC

   (g)    Software & Services      L + 500       1.25%      6/26/2019         5,416         5,338         5,565   

 

 

Willbros United States Holding, Inc.

   (e)    Energy      L + 975       1.25%      8/5/2019         33,614         32,477         34,118   

 

 

Wilton Brands, LLC

   (g)    Materials      L + 625       1.25%      8/30/2018         8,720         8,573         8,335   

 

 

Total Senior Secured Loans - First Lien

                     $

 

        626,457

 

  

 

   $

 

        638,403

 

  

 

                    

 

 

    

 

 

 

See notes to consolidated financial statements.

 

20


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)

 

Company (a)(b)

   Footnotes    Industry   

Interest

Rate

    

EURIBOR

/LIBOR
Floor

   Maturity
Date
     No. Shares/
Principal
Amount (c)
     Cost (d)      Fair Value    

 

 

Senior Secured Loans - Second Lien—46.9%

                 

 

 

American Casino & Entertainment Properties, LLC

      Consumer Services      L + 1000       1.25%      1/3/2020         1,832         1,897         1,915   

 

 

Angelica Corp.

   (j)    Health Care Equipment & Services      L + 875       1.25%      7/15/2019         50,869         50,869         50,512   

 

 

Applied Systems, Inc.

   (g)    Software & Services      L + 725       1.00%      6/8/2017         5,895         5,969         5,932   

 

 

Arysta Lifescience SPC, LLC

   (e)(g)    Food, Beverage & Tobacco      L + 700       1.25%      11/30/2020         16,305         16,150         16,606   

 

 

Brake Bros Ltd. (UK)

   (e)(f)(GBP)    Food & Staples Retailing     
 
L + 325, 3.00%
PIK
  
  
        3/12/2017         £          8,650         $        12,049         $        13,661   

 

 

CHG Companies, Inc.

   (g)    Health Care Equipment & Services      L + 775       1.25%      11/19/2020         $        10,485         10,363         10,669   

 

 

Continental Building Products, LLC

   (g)(h)    Materials      L + 775       1.00%      2/26/2021         19,378         19,509         19,475   

 

 

CSM Bakery Products

   (e)    Food, Beverage & Tobacco      L + 750       1.00%      7/3/2021         15,175         15,322         15,336   

 

 

CTI Foods Holding Co., LLC

      Food, Beverage & Tobacco      L + 725       1.00%      6/28/2021         23,219         22,884         23,451   

 

 

Data Device Corp.

      Capital Goods      L + 1000       1.50%      7/11/2019         8,000         7,864         7,680   

 

 

Excelitas Technologies Corp.

   (j)    Technology Hardware & Equipment     
 
L + 975, 1.50%
PIK
  
  
   1.00%      4/29/2021         107,355         107,355         107,033   

 

 

EZE Castle Software, Inc.

   (g)    Software & Services      L + 725       1.25%      4/5/2021         12,962         12,922         13,210   

 

 

GENEX Services, Inc.

   (g)    Health Care Equipment & Services      L + 825       1.00%      1/26/2019         21,029         20,828         21,266   

 

 

Greenway Medical Technologies

      Health Care Equipment & Services      L + 825       1.00%      11/4/2021         26,396         25,998         26,660   

 

 

Hudson’s Bay Co. (CA)

   (e)(f)    Retailing      L + 725       1.00%      11/4/2021         2,933         2,904         3,039   

 

 

Learfield Communications, Inc.

      Media      L + 775       1.00%      10/8/2021         4,743         4,696         4,861   

 

 

Lightower Fiber, LLC

   (g)    Telecommunication Services      L + 675       1.25%      4/12/2021         3,381         3,349         3,420   

 

 

Misys Ltd. (UK)

   (e)(f)(g)    Software & Services      12.00%            6/12/2019         3,000         3,367         3,463   

 

 

Monarch (LU)

   (e)(f)(g)    Materials      L + 700       1.25%      4/3/2020         5,416         5,392         5,576   

 

 

NewWave Communications, Inc.

      Media      L + 800       1.00%      10/30/2020         8,339         8,264         8,506   

 

 

P2 Energy Solutions, Inc.

      Software & Services      L + 800       1.00%      4/30/2021         9,283         9,191         9,469   

 

 

Packaging Coordinators, Inc.

   (j)    Materials      L + 825       1.25%      10/31/2020         11,827         11,716         11,886   

 

 

Polyconcept Finance BV (NL)

   (e)(f)(j)    Consumer Durables & Apparel      L + 875       1.25%      6/28/2020         $        46,727         $        46,727         $        45,886   

 

 

Progressive Solutions

   (h)    Health Care Equipment & Services      L + 850       1.00%      10/22/2021         19,903         19,704         20,002   

 

 

RedPrairie Corp.

   (g)    Software & Services      L + 1000       1.25%      12/21/2019         18,150         18,169         18,691   

 

 

Sabine Oil & Gas, LLC

   (e)(g)    Energy      L + 750       1.25%      12/31/2018         14,527         14,400         14,708   

 

 

Safety Technology Holdings, Inc.

   (j)    Technology Hardware & Equipment      L + 825       1.25%      6/2/2020         30,402         29,651         29,642   

 

 

Sedgwick Claims Management Services Holdings, Inc.

      Insurance      L + 700       1.00%      12/15/2018         25,735         25,615         26,217   

 

 

 

See notes to consolidated financial statements.

 

21


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)

 

Company (a)(b)    Footnotes    Industry   

Interest

Rate

    

EURIBOR

/LIBOR
Floor

   Maturity
Date
     No. Shares/
Principal
Amount (c)
     Cost (d)      Fair Value    

 

 

Sheridan Holdings, Inc.

   (h)    Health Care Equipment & Services      L + 725       1.00%      12/13/2021         13,899         13,830         14,030   

 

 

StoneRiver Holdings, Inc.

      Insurance      L + 725       1.25%      5/30/2020         15,860         15,782         16,029   

 

 

Talbots, Inc.

   (j)    Retailing      L + 800       1.25%      8/30/2018         50,000         50,000         50,450   

 

 

Travelport, LLC

   (g)    Software & Services      L + 800       1.50%      1/31/2016         18,868         18,533         19,582   

 

 

Websense, Inc.

      Technology Hardware & Equipment      L + 725       1.00%      12/24/2020         32,018         31,866         32,098   

 

 

Total Senior Secured Loans - Second Lien

               $

 

        663,135

 

  

 

   $

 

        670,961

 

  

 

                    

 

 

    

 

 

 

Senior Secured Bonds—11.5%

                 

 

 

Allen Systems Group, Inc.

   (k)(l)    Software & Services      10.50%            11/15/2016         106         73         57   

 

 

American Rock Salt Co., LLC

   (k)(l)    Materials      8.25%            5/1/2018         9,690         9,051         9,763   

 

 

Artesyn Technologies, Inc.

   (e)(k)    Technology Hardware & Equipment      9.75%            10/15/2020         3,567         3,567         3,745   

 

 

Avaya, Inc.

   (g)(k)    Technology Hardware & Equipment      7.00%            4/1/2019         3,722         3,436         3,648   
   (k)         9.00%            4/1/2019         7,048         7,035         7,365   

 

 

Cengage Learning Acquisitions, Inc.

   (i)(k)(l)    Media      11.50%            4/15/2020         $        12,154         $        12,398         $          9,738   

 

 

Hot Topic, Inc.

   (k)(l)    Consumer Durables & Apparel      9.25%            6/15/2021         27,300         27,464         28,597   

 

 

Louisiana Public Facilities Authority

   (j)    Energy      11.50%            1/1/2020         50,580         49,070         49,063   

 

 

New Enterprise Stone & Lime Co., Inc.

   (l)    Capital Goods     
 
5.00%, 8.00%
PIK
  
  
        3/15/2018         10,071         10,162         11,381   

 

 

OAG Holdings, LLC

   (e)(j)    Energy     
 
8.00%, 2.00%
PIK
  
  
        12/20/2020         20,008         17,163         17,153   

 

 

Pinnacle Agriculture Holdings, LLC

   (k)(l)    Materials      9.00%            11/15/2020         2,193         2,193         2,327   

 

 

Ryerson, Inc.

   (g)    Materials      9.00%            10/15/2017         5,814         5,814         6,163   

 

 

SquareTwo Financial Corp.

   (l)    Banks      11.63%            4/1/2017         6,309         6,566         6,522   

 

 

Wise Metals Group, LLC

   (k)(l)    Materials      8.75%            12/15/2018         2,148         2,148         2,261   

 

 

Xella Holdco Finance SA (LU)

   (e)(f)(k)(l)(EUR)    Materials     
 
9.13% or
9.88% PIK
  
  
        9/15/2018         €          5,097         6,860         7,345   

 

 

Total Senior Secured Bonds

               $

 

        163,000

 

  

 

   $

 

        165,128

 

  

 

                    

 

 

    

 

 

 

Total Senior Debt—103.1%

               $

 

    1,452,592

 

  

 

   $

 

    1,474,492

 

  

 

                    

 

 

    

 

 

 

Subordinated Debt—25.9%

                 

 

 

Algeco/Scotsman (LU)

   (e)(f)(k)(l)    Consumer Durables & Apparel      10.75%            10/15/2019         $              179         181         189   

 

 

CDW Corp.

   (e)    Technology Hardware & Equipment      12.54%            10/12/2017         1,879         1,986         1,964   

 

 

Cemex Materials, LLC

   (k)(l)    Materials      7.70%            7/21/2025         23,312         22,941         24,128   

 

 

Cequel Communications Holdings, LLC

   (k)(l)    Media      5.13%            12/15/2021         5,000         4,834         4,688   

 

 

 

See notes to consolidated financial statements.

 

22


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)

 

Company (a)(b)    Footnotes    Industry   

Interest

Rate

    

EURIBOR

/LIBOR
Floor

   Maturity
Date
     No. Shares/
Principal
Amount (c)
     Cost (d)      Fair Value    

 

 

Ceridian Corp.

   (l)    Commercial & Professional Services      11.00%            3/15/2021         $        16,201         $        17,574         $        18,672   

 

 

Commscope, Inc.

   (k)(l)    Technology Hardware & Equipment     
 
6.63% or
7.38% PIK
  
  
        6/1/2020         5,000         4,976         5,200   

 

 

CompuCom Systems, Inc.

   (k)(l)    Software & Services      7.00%            5/1/2021         9,847         9,566         9,773   

 

 

ConvaTec Healthcare E SA (LU)

   (e)(f)(k)(l)    Health Care Equipment & Services     

 

8.25% or

9.00% PIK

  

  

        1/15/2019         2,545         2,521         2,605   

 

 

CRC Health Group, Inc.

   (l)    Health Care Equipment & Services      10.75%            2/1/2016         6,021         6,047         6,036   

 

 

Datatel, Inc.

   (g)(k)    Software & Services     
 
9.63% or 9.63%
PIK
  
  
        12/1/2018         9,287         9,195         9,566   

 

 

Education Management, LLC

   (e)    Consumer Services      15.00%            7/1/2018         1,299         1,307         1,409   

 

 

Epicor Software Corp.

   (k)(l)    Software & Services     

 

9.00% or

9.75% PIK

  

  

        6/15/2018         39,815         39,090         41,507   

 

 

GCI, Inc.

   (l)    Telecommunication Services      8.63%            11/15/2019         8,575         9,041         9,111   
   (l)         6.75%            6/1/2021         14,381         13,737         13,770   

 

 

Genesys Telecommunications Laboratories, Inc.

   (j)(EUR)    Software & Services      12.50%            1/31/2020         €          2,044         2,637         2,924   

 

 

Global Closure Systems (FR)

   (e)(f)(j)(EUR)    Materials     
 
12.00% or
13.00% PIK
  
  
        11/15/2019         17,828         23,443         25,140   

 

 

Griffins Foods, Ltd. (NZ)

   (e)(f)(j)(NZD)    Food, Beverage & Tobacco      13.75% PIK            1/31/2019         N$        47,417         36,916         39,035   

 

 

Gymboree Corp.

   (l)    Retailing      9.13%            12/1/2018         $          3,335         3,199         3,072   

 

 

Hilding Anders (SE)

   (e)(f)(j)(EUR)    Consumer Durables & Apparel     
 
12.00% or
13.00% PIK
  
  
        6/30/2021         €        81,478         95,634         98,974   

 

 

Hot Topic, Inc.

   (k)(l)    Consumer Durables & Apparel     
 
12.00% or
12.75% PIK
  
  
        5/15/2019         $        8,113         $          7,951         $          8,032   

 

 

iPayment, Inc.

      Software & Services      10.25%            5/15/2018         4,634         4,289         3,800   

 

 

JC Penney Corp., Inc.

   (e)    Retailing      5.65%            6/1/2020         11,139         8,338         8,744   

 

 

Summit Materials, LLC

   (l)    Materials      10.50%            1/31/2020         462         518         508   

 

 

The TelX Group, Inc.

   (j)(k)    Telecommunication Services     
 
 
12.00% or
10.00%, 2.00%
PIK
  
  
  
        9/26/2019         5,517         5,952         5,848   

 

 

Towergate Finance PLC (UK)

   (e)(f)(k)(l)(GBP)    Insurance      10.50%            2/15/2019         £        14,608         23,366         25,436   

 

 

Total Subordinated Debt

                

 

$        355,239

 

  

 

    

 

$        370,131

 

  

 

                    

 

 

    

 

 

 

Structured Products—3.9%

                 

 

 

KKR BPT Holdings Aggregator, LLC

   (e)(j)(q)*    Diversified Financials               $          2,500         2,500         2,500   

 

 

Start CLO Ltd. 2010-6A Class A (KY)

   (e)(f)(j)(k)(m)    Diversified Financials      L + 1600            4/1/2014         3,310         3,325         3,359   

 

 

Trade Finance Funding I, Ltd. 2013-1A Class B

   (e)(j)(k)    Diversified Financials      10.75%            11/13/2018         28,221         28,221         28,235   

 

 

VSK Holdings, Ltd. (KY)

   (e)(f)(j)(p)*    Diversified Financials               620         21,474         21,481   

 

 

Total Structured Products

                      

 

$        55,520

 

  

 

    

 

$        55,575

 

  

 

                    

 

 

    

 

 

 

 

See notes to consolidated financial statements.

 

23


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)

 

Company (a)(b)    Footnotes    Industry   

Interest

Rate

    

EURIBOR

/LIBOR
Floor

   Maturity
Date
     No. Shares/
Principal
Amount (c)
     Cost (d)      Fair Value    

 

 

Equity / Other—1.7%

                 

 

 

Excelitas Technologies Corp., Common Stock

   (j)*    Technology Hardware & Equipment               5,636,153         5,636         5,566   

 

 

Genesys Telecommunications Laboratories, Inc., Common Stock

   (j)*    Software & Services               448,908         449         672   

 

 

Global Closure Systems (FR), Common Stock

   (e)(f)(j)*    Materials               597,989       $ 823       $ 823   

 

 

Hilding Anders (SE), Equity Options

   (e)(f)(j)*    Consumer Durables & Apparel            12/31/2020         236,160,807         14,988         15,256   

 

 

OAG Holdings, LLC, Overriding Royalty Interest

   (e)(j)*    Energy               2,353,940         2,354         2,354   

 

 

Total Equity / Other

                  $

 

        24,250

 

  

 

   $

 

        24,671

 

  

 

                    

 

 

    

 

 

 

Total Investments, excluding Short Term Investments – 134.6%

               $

 

        1,887,601

 

  

 

   $

 

    1,924,869

 

  

 

                    

 

 

    

 

 

 

Short Term Investments—10.5%

                 

 

 

Goldman Sachs Financial Square Funds - Prime Obligations Fund, FST Preferred Shares

   (g)(n)         0.01%               149,800,957       $         149,801       $ 149,801   

State Street Institutional Liquid Reserves Fund, Institutional Class

   (n)         0.06%               102,061         102         102   

 

 

Total Short Term Investments

               $

 

        149,903

 

  

 

   $

 

        149,903

 

  

 

                    

 

 

    

 

 

 

TOTAL INVESTMENTS — 145.1%(o)

                     $

 

    2,037,504

 

  

 

    

 

    2,074,772

 

  

 

                    

 

 

    

 

 

 

LIABILITIES IN EXCESS OF OTHER ASSETS—(45.1%)

                         

 

(644,338

 

 

                       

 

 

 

NET ASSETS—100.0%

                        $

 

1,430,434

 

  

 

                       

 

 

 

Collateral on Deposit with Custodian—2.6%

                 

 

 

Bank of Nova Scotia - Certificate of Deposit

           0.16%            3/31/2014         $            37,501       $         37,501       $ 37,501   

 

 

Total Collateral on Deposit with Custodian

               $

 

        37,501

 

  

 

   $

 

        37,501

 

  

 

                    

 

 

    

 

 

 

Derivative Instruments—(0.1%)

                 

 

 

Foreign currency forward contracts

   (e)         N/A           
 
1/2014 -
1/2015
  
  
      $                 —       $ (3,181

Total return swaps

   (e)(j)         N/A            1/15/2016                    1,861   

 

 

Total Derivative Instruments

               $

 

                —

 

  

 

   $

 

(1,320

 

 

                    

 

 

    

 

 

 

 

* Non-income producing security.
(a) Security may be an obligation of one or more entities affiliated with the named company.

 

See notes to consolidated financial statements.

 

24


Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)

 

(b) Non-Controlled/Non-Affiliate investments as defined by the Investment Company Act of 1940, as amended (“1940 Act”), unless otherwise indicated. Non-Controlled/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.
(c) Denominated in U.S. Dollars unless otherwise noted.
(d) Represents amortized cost for debt securities and cost for common stocks translated to U.S. dollars.
(e) The investment is not a qualifying asset as defined in Section 55(a) under the Investment Company Act of 1940, as amended, or the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The Company calculates its compliance with the qualifying assets test on a “look through” basis by disregarding the value of the Company’s total return swaps and treating each loan underlying the total return swaps as either a qualifying asset or non-qualifying asset based on whether the obligor is an eligible portfolio company. On this basis, 75.8% of the Company’s total assets represented qualifying assets as of December 31, 2013.
(f) A portfolio company domiciled in a foreign country. The jurisdiction of the security issuer may be in a different country than the domicile of the portfolio company.
(g) Security or portion thereof is held within CCT Funding, LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Deutsche Bank.
(h) Position or portion thereof unsettled as of December 31, 2013.
(i) Investment was on non-accrual status as of December 31, 2013.
(j) Investments classified as Level 3 whereby fair value was determined by the Company’s Board of Directors (see Note 2).
(k) 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.
(l) Security or portion thereof is held within Paris Funding, LLC and is pledged as collateral supporting the amounts outstanding under the committed facility agreement with BNP Paribas Prime Brokerage, Inc. and eligible to be hypothecated as allowed under Rule 15c2-1(a)(1) of the Exchange Act subject to the limits of the Rehypothecation Agreement.
(m) A portfolio company investment structured as a credit-linked floating rate note.
(n) 7-day effective yield as of December 31, 2013.
(o) As of December 31, 2013, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $43,062; the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $5,918; the net unrealized appreciation was $37,144; the aggregate cost of securities for Federal income tax purposes was $2,037,628.
(p) Affiliated investment as defined by the 1940 Act, whereby the Company owns between 5% and 25% of the portfolio company’s outstanding voting securities and the investments are not classified as Controlled investments. The aggregate fair value of non-controlled, affiliated investments at December 31, 2013 represents 1.5% of the Company’s net assets. Fair value as of December 31, 2012 and 2013 along with transactions during the year ended December 31, 2013 in these Affiliated investments are as follows (amounts in thousands):

 

    Fair Value at     Gross     Gross           Fair Value at     Year Ended December 31, 2013  

Non-controlled, Affiliated Investments

  December 31,
2012
    Additions
(Cost)*
    Reductions
(Cost)**
    Net Unrealized
Gain (Loss)
    December 31,
2013
    Net Realized
Gain (Loss)
    Interest Income     Fee Income     Dividend Income  

VSK Holdings, Ltd. Structured Product

  $      $ 21,474      $      $ 7      $ 21,481      $      $      $

  
  $   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $      $ 21,474      $      $ 7      $ 21,481      $      $      $      $   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  * Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.

 

  ** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
(q) Controlled investment as defined by the 1940 Act, whereby the Company owns more than 25% of the portfolio company’s outstanding voting securities or maintains the ability to nominate greater than 50% of the board representation. The aggregate fair value of controlled at December 31, 2013 represents 0.2% of the Company’s net assets. Fair value as of December 31, 2012 and 2013 along with transactions during the year ended December 31, 2013 in these Controlled investments are as follows (amounts in thousands):

 

    Fair Value at     Gross     Gross                 Year Ended December 31, 2013  

Controlled Investments

  December 31,
2012
    Additions
(Cost)*
    Reductions
(Cost)**
    Net Unrealized
Gain (Loss)
    Fair Value at
June 30, 2014
    Net Realized
Gain (Loss)
    Interest Income     Fee Income     Dividend Income  

KKR BPT Holdings Aggregator, LLC Structured Product

  $      $ 2,500      $      $      $ 2,500      $      $      $      $   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $      $ 2,500      $      $      $ 2,500      $      $      $      $   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  * Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.

 

  ** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.

Abbreviations:

EUR - Euro; loan principal amount is denominated in Euros currency. €1 / US $1.377 as of December 31, 2013.

GBP - British Pound Sterling; loan principal amount is denominated in Pound Sterling. £1 / US $1.649 as of December 31, 2013.

NZD - New Zealand Dollar; loan principal amount is denominated in New Zealand Dollars. N$1 / US $0.816 as of December 31, 2013.

CA - Canada

FR - France

IE - Ireland

KY - Cayman Islands

LU - Luxembourg

MX - Mexico

NL - The Netherlands

NZ - New Zealand

SE - Sweden

SG - Singapore

UK - United Kingdom

L = LIBOR - London Interbank Offered Rate, typically 3-Month

PIK - Payment-in-kind; the issuance of additional securities by the borrowers to settle interest payment obligations.

 

See notes to consolidated financial statements.

 

25


Table of Contents

CORPORATE CAPITAL TRUST, INC. AND SUBSIDIARIES

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 commenced business operations on June 17, 2011 and it commenced investment operations on July 1, 2011. The Company has elected to be treated as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”) and operates in a manner so as to qualify for the tax treatment applicable to RICs.

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, analyzing and conducting due diligence on prospective 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 offering and selling shares of its common stock pursuant to a registration statement on Form N-2 (Registration No. 333-189544) (the “Follow-On Registration Statement”) covering its follow-on continuous public offering of up to 209 million shares of common stock for an approximate maximum offering amount of $2.3 billion (the “Follow-On Offering”). Immediately prior to the commencement of the Follow-On Offering in November 2013, the Company terminated its initial continuous public offering (the “Initial Offering”). Through the termination date of the Initial Offering, the Company sold approximately 141 million shares of common stock, including reinvestment of distributions, for total gross proceeds of approximately $1.5 billion. The Initial Offering and Follow-On Offering are collectively referred to as the “Offerings.”

As of June 30, 2014, the Company had three wholly owned financing subsidiaries. CCT Funding LLC (“CCT Funding”) and Paris Funding LLC (“Paris Funding”) were established on July 15, 2011 and August 13, 2013, respectively, both for the purpose of arranging secured, revolving credit facilities with banks and to borrow money to invest in portfolio companies. Halifax Funding LLC (“Halifax Funding”) was established on October 11, 2012 for the purpose of entering into total return swaps (“TRS”). The Company has also formed FCF LLC, a taxable subsidiary (the “Taxable Subsidiary”), which is taxed as a corporation for federal income tax purposes. The purpose of the Taxable Subsidiary is to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the RIC requirements.

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 material 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, 2013, which was filed with the SEC on March 20, 2014. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

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, foreign currency, and highly liquid investments with original maturities of three months or less.

 

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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.

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 the hierarchical levels are described as follows:

Level 1 – Quoted prices are available in active markets for identical investments as of the reporting date. Publicly listed equities and debt securities, publicly listed derivatives, money market fund/ short term investment funds and foreign currency are generally included in Level 1. The Company does 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, independent 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, foreign currency forward contracts 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 generally included in this category are total return swap agreements, illiquid corporate bonds and loans, common and preferred stock investments and equity options that lack observable market pricing.

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.

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 the Company’s portfolio investments for which market quotations are not readily available, the Company’s board of directors is responsible for determining in good faith the fair value in accordance with the valuation policy approved by the board of directors, based on, among other things, the input of the Company’s Advisors, audit committee and independent third-party valuation firms under a valuation policy and a consistently applied valuation process.

The board of directors makes this fair value determination on a quarterly basis and any other time when a 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. Further, such investments are generally less liquid than publicly traded securities. If the Company was required to liquidate a portfolio investment that does not have a readily available market value in a forced or liquidation sale, the Company could realize significantly less than the value recorded by Company.

The Company and its Advisors undertake a multi-step valuation process each quarter for debt and equity securities whose market prices are not otherwise readily available, as described below:

 

  The quarterly valuation process initially begins with each portfolio company or investment being initially valued by KKR (internal valuation) and/or the Company’s independent third party valuation firm (external valuation), which provides a valuation range.

 

  Valuation recommendations are formulated and documented by KKR and reviewed by KKR’s valuation committee. The KKR valuation committee then provides its valuation recommendation for each investment, along with supporting documentation, to CNL and the Company where the valuation recommendations and internal/external valuation documentation are reviewed by CNL and the Company’s management.

 

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  The Company’s audit committee then reviews the valuation recommendations and supporting documentation.

 

  The Company’s board of directors then discusses the investment valuation recommendations with the Advisors and determines the fair value of these investments in good faith.

Depending on the relative liquidity in the markets for certain assets, the Company may transfer assets to Level 3 if it determines that observable quoted prices, obtained directly or indirectly, are not available. The valuation techniques used for the assets and liabilities that are valued using Level 3 of the fair value hierarchy are described below.

 

  Corporate Debt Securities and Corporate Loans, at Estimated Fair Value: Corporate debt securities and corporate loans, at estimated fair value are initially valued at (i) transaction price and are subsequently valued using market data for similar instruments (e.g., recent transactions or indicative broker quotes), (ii) comparisons to benchmark derivative indices or (iii) valuation models. Valuation models are based on yield analysis and discounted cash flow techniques, where the key inputs are based on relative value analyses and the assignment of risk-adjusted discounted rates, based on the analysis of similar instruments from similar issuers. In addition, an illiquidity discount is applied where appropriate.

 

  Equity Investments, at Estimated Fair Value: Equity investments, at estimated fair value, are initially valued at transaction price and are subsequently valued using observable market prices, if available, or internally developed models in the absence of readily observable market prices. Valuation models are generally based on market and income (discounted cash flow) approaches, in which various internal and external factors are considered. Factors include key financial inputs and recent public and private transactions for comparable investments. Key inputs used for the discounted cash flow approach include the weighted average cost of capital and assumed inputs used to calculate terminal values, such as earnings before interest, taxes, depreciation and amortization (“EBITDA”) exit multiples. The fair value recorded for a particular investment will generally be within the range suggested by the two approaches. Upon completion of the valuations conducted, an illiquidity discount is applied where appropriate.

 

  Total Return Swaps, at Estimated Fair Value: The Company values its TRS in accordance with the TRS agreements between the Company (or its wholly owned subsidiary) and the TRS counter-party, which collectively established the TRS. Pursuant to the TRS agreements, the value of the TRS is based on (i) the increase or decrease in the value of the TRS assets relative to the notional amounts, together with (ii) accrued interest income and fee income, (iii) TRS financing costs on the TRS settled notional amount, and (iv) certain other expenses incurred under the TRS. The TRS assets are valued pursuant to the valuation algorithm specified in the TRS agreements, including reliance on indicative bid prices provided by independent third-party pricing services. Bid prices reflect the highest price that market participants may be willing to pay. On a quarterly basis, the Company’s management reviews, tests and compares (i) the indicative bid prices assigned to each TRS asset by the TRS counter-party, based on the inputs provided by third-party pricing services with (ii) pricing inputs that are independently sourced by the Company’s management and/or its Advisors from third-party pricing services. Additionally, the Company’s management reviews the calculations of both collected and accrued interest, TRS financing costs, and realized gains and losses that also determine the aggregate fair value of the TRS. For additional disclosures on the Company’s TRS, including quantitative disclosures of the current period conclusions of the fair value components, refer to Note 4.

Key unobservable inputs that have a significant impact on the Company’s Level 3 valuations as described above are included in Note 5. The Company utilizes several unobservable pricing inputs and assumptions in determining the fair value of its Level 3 investments. These unobservable pricing inputs and assumptions may differ by asset and in the application of the Company’s valuation methodologies. The reported fair value estimates could vary materially if the Company had chosen to incorporate different unobservable pricing inputs and other assumptions.

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 includes (i) the original cost and (ii) adjustments for the accretion/amortization of market discounts and premiums, original issue discount and loan origination fees. The Company reports changes in fair value of investments as a component of net change in unrealized appreciation (depreciation) on investments in the condensed consolidated statements of operations.

 

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Interest income is recorded on an accrual basis and includes amortization of premiums to par value and accretion of discounts to par value. Discounts and premiums to par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. Premiums and discounts are determined based on the cash flows expected to be collected for a particular investment.

In its role as the Company’s investment adviser, KKR may provide assistance to portfolio companies and in return may receive fees for capital structuring services. KKR is obligated to remit to the Company any earned capital structuring fees based on the pro-rata portion of the Company’s investment. These fees are generally non-recurring and are recognized as earned revenue by the Company upon closing of the associated investment. Loan origination, closing, commitment and other fees received directly from borrowers in connection with the closing of investments are accreted over the contractual life of the loan based on the effective interest method as interest income. Upon prepayment of a debt investment, any prepayment penalties and unamortized loan fees and discounts are recorded as interest income.

The Company has investments in debt securities which contain a contractual payment-in-kind (“PIK”) interest provision. PIK interest computed at the contractual rate specified in the investment’s credit agreement is accrued into income and reflected as interest receivable up to the interest payment date. PIK investments offer issuers either the option or the obligation at each interest payment date of making interest payments with the issuance of additional securities. When additional securities are received by the Company, they typically have the same terms, including maturity dates and interest rates as the original securities issued. On the interest payment dates the Company capitalizes the accrued interest receivable as additional principal due from the borrower. PIK generally becomes due at maturity of the investment or upon the investment being called by the issuer. If the portfolio company valuation indicates a value of the PIK investment that is not sufficient to cover the contractual PIK interest, the Company will not accrue PIK interest income and will record an allowance for any accrued PIK interest receivable as a reduction of interest income in the period the Company determines it is not collectible. To maintain the Company’s status as a RIC, PIK interest income, which is considered taxable income, could create an additional distribution requirement to the Company’s shareholders.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Debt securities are placed on non-accrual status when principal or interest payments are at least 90 days past due or when there is reasonable doubt that principal or interest will be collected. Generally, accrued interest is reversed when a debt security is placed on non-accrual status. Interest payments received on non-accrual debt securities may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual 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 on interest payment obligations. The Company may make exceptions to this treatment if the debt security has sufficient collateral value and is in the process of collection. The contractual interest associated with a debt security that has been placed on non-accrual status might increase taxable income, which could create an additional distribution requirement to the Company’s shareholders to maintain the Company’s status as a RIC.

Derivative Instruments - The Company’s derivative instruments include foreign currency forward contracts and total return swaps. The Company marks the value of its derivative instruments to market value through net change in unrealized appreciation (depreciation) on derivative instruments in the condensed consolidated statements of operations. TRS unrealized appreciation (depreciation) is composed of the net accrued interest income and accrued TRS financing charges owed and the overall change in fair value of the TRS assets. Realized gains and losses that occur upon the cash settlement of the derivative instruments are included in net realized gain (loss) on derivative instruments in the condensed consolidated statements of operations. TRS realized gains and losses are composed of any realized gains or losses on the TRS assets and the net interest received or paid on the quarterly TRS settlement date.

Deferred Financing Costs - Financing costs, including upfront fees, commitment fees and legal fees, related to the Company’s credit facilities, term loan and total return swaps are deferred and amortized over the life of the related debt facility or total return swaps using either the effective interest method or straight-line method. Deferred financing costs are included in prepaid and deferred expenses in the condensed consolidated statements of assets and liabilities.

Paid In Capital - The Company records the proceeds from the sale of its common stock on a net basis to (i) capital stock and (ii) paid in capital in excess of par value, excluding all commissions and marketing support fees.

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 reporting period for the fair value of investment securities, other assets and liabilities; and (ii) at the prevailing exchange rate on the respective recording dates for the purchase and sale of investment securities, income, expenses, gains and losses.

Net assets and fair values are presented based on the applicable foreign exchange rates described above and 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; therefore the fluctuations related to foreign exchange rate conversion are included with the net realized gain (loss) and unrealized appreciation (depreciation) on investments.

 

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Net realized foreign exchange gains or losses arise from activity in foreign currency forward 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. Unrealized appreciation (depreciation) from currency translation for foreign currency forward contracts is included in net change in unrealized appreciation (depreciation) in derivative instruments on the condensed consolidated statements of operations and is included with unrealized appreciation (depreciation) on derivative instruments in the condensed consolidated statements of assets and liabilities. Unrealized appreciation (depreciation) from foreign currency translation for other receivables or payables is presented as net change in unrealized appreciation (depreciation) in foreign currency translation in the condensed consolidated statements of operations.

Management Fees - The Company accrues for the base management fee (recorded as investment advisory fees) 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 realized gains. Additionally the determination of whether the accrued incentive fee on capital gains is earned and payable to the Advisors can only be made at the end of the calendar year. The two components of performance-based incentive fees are combined and expensed in the condensed consolidated statements of operations and accrued in the condensed consolidated statements of assets and liabilities as accrued performance-based incentive fees.

Organization and Offering Expenses - Organization expenses, including reimbursement payments to Advisors, are expensed on the Company’s condensed consolidated statements of operations. Continuous offering expenses, including reimbursement payments to Advisors, but excluding commission and marketing support fees, are accumulated monthly and capitalized in the condensed consolidated statements of assets and liabilities as deferred offering expenses and then subsequently 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.

Distributions – Weekly distributions are generally declared by the Company’s board of directors each calendar quarter and recognized as distribution liabilities on the record date. Distributions are paid monthly. The Company has adopted a distribution reinvestment plan that provides for reinvestment of distributions on behalf of shareholders. 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 per share equivalent to the public offering price on the distribution payment date, net of commissions and marketing support fees.

Federal Income Taxes - The Company has elected to be treated for federal income tax purposes, and intends to maintain its qualification as a RIC under Subchapter M of 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 a material level of federal income taxes.

The Company is also generally subject to nondeductible federal excise taxes if it does not distribute an amount at least equal to the sum of (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 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% non-deductible federal excise tax on this excess taxable income.

 

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The Taxable Subsidiary holds certain portfolio investments of the Company. The Taxable Subsidiary is consolidated for GAAP reporting purposes, and the portfolio investments held by it are included in the condensed consolidated financial statements. The Taxable Subsidiary is not consolidated with the Company for income tax purposes and may generate income tax expense or benefit, and the related tax assets and liabilities. This income tax expense, or benefit, if any, and the related tax assets and liabilities are recorded in the Company’s condensed consolidated financial statements. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company recognizes in its condensed consolidated financial statements the effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. The Company did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes – Overall –Recognition, nor did it have any unrecognized tax benefits as of the periods presented herein. Although the Company and the Taxable Subsidiary file federal and state tax returns, their major tax jurisdiction is federal.

Permanent book and tax basis differences are reclassified among the Company’s capital accounts, as appropriate. Additionally, the tax character of distributions is determined in accordance with the Code which differs from GAAP.

Reclassifications - Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform to the current period presentation.

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 securities and (ii) subordinated debt securities. The Company’s investments may, in some cases, be accompanied by warrants, options or other forms of equity participation. The Company may separately purchase common or preferred equity interests or limited partnership interests in transactions. The Company may also invest in structured products such as collateralized loan obligations. The fair value of the Company’s investments will generally fluctuate with, among other things, changes in prevailing interest rates, the general supply of, and demand for, debt capital among private and public companies, general domestic and global 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 each security’s issuer.

Investment purchases, sales and principal payments/paydowns are summarized below for the three and six months ended June 30, 2014 and 2013. These purchase and sale amounts exclude short-term investments (i.e. money market fund investments) and derivative instruments (amounts in thousands).

 

     Three Months Ended      Six Months Ended  
     June 30, 2014      June 30, 2013      June 30, 2014      June 30, 2013  

Investment purchases, at cost

     $         525,349          $         549,049          $         811,400          $         785,208    

Investment sales, proceeds

     90,048          238,983          394,557          288,502    

Principal payments/paydown proceeds

     126,571          17,678          249,471          59,696    

As of June 30, 2014, there were no debt investments on non-accrual status. As of December 31, 2013, debt investments on non-accrual status represented 0.7% and 0.6% of total investments on a cost and fair value basis, respectively.

As of June 30, 2014 and December 31, 2013, the Company’s investment portfolio consisted of the following (amounts in thousands):

 

     As of June 30, 2014  
Asset Category    Cost      Fair Value      Percentage of
Investment
Portfolio
     Percentage of
Net Assets
 

Senior debt

     $ 1,613,582        $ 1,645,258          76.5%           91.9%     

Subordinated debt

     380,842          398,704          18.6              22.3        

Structured products

     30,721          36,053          1.7            2.0        

Equity/Other

     62,707          69,252          3.2              3.9        
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal

     2,087,852          2,149,267          100.0%          120.1        
        

 

 

    

Short term investments

     21,428          21,428             1.2        
  

 

 

    

 

 

       

 

 

 

Total investments

     $ 2,109,280        $ 2,170,695             121.3%    
  

 

 

    

 

 

       

 

 

 

 

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     As of December 31, 2013  
Asset Category    Cost     Fair Value      Percentage of
Investment
Portfolio
     Percentage of
Net Assets
 

Senior debt

     $     1,452,592         $     1,474,492          76.6%          103.1%     

Subordinated debt

     355,239 (1)      370,131          19.2              25.9        

Structured products

     55,520         55,575          2.9              3.9        

Equity/Other

     24,250         24,671          1.3              1.7        
  

 

 

   

 

 

    

 

 

    

 

 

 

Subtotal

     1,887,601         1,924,869                      100.0%                      134.6        
       

 

 

    

Short term investments

     149,903         149,903             10.5        
  

 

 

   

 

 

       

 

 

 

Total investments

     $       2,037,504       $ 2,074,772             145.1%    
  

 

 

   

 

 

       

 

 

 

 

(1)  This number has been corrected for a typographical error in the Company’s Form 10-K for the year ended December 31, 2013, as filed with the SEC on March 20, 2014, wherein it had been incorrectly reported as $305,239.

The industry composition, geographic dispersion, and local currencies of the Company’s investment portfolio at fair value, excluding short-term investments and derivative instruments, as of June 30, 2014 and December 31, 2013 was as follows:

 

Industry Composition

   June 30, 2014      December 31, 2013  

Consumer Durables & Apparel

     20.9%            19.0%      

Capital Goods

     10.8               5.4         

Retailing

     10.0               10.6         

Technology Hardware & Equipment

     9.2               12.4         

Health Care Equipment & Services

     8.5               9.3         

Software & Services

     6.9               7.7         

Energy

     5.5               6.1         

Diversified Financials

     4.9               2.9         

Materials

     4.5               7.1         

Food, Beverage & Tobacco

     4.0               5.2         

Commercial & Professional Services

     3.3               3.5         

Telecommunication Services

     3.1               1.7         

Food & Staples Retailing

     2.2               1.7         

Media

     2.0               3.5         

Insurance

     1.8               3.5         

Remaining Industries

     2.4               0.4         
  

 

 

    

 

 

 

Total

                                              100.0%                                                    100.0%     
  

 

 

    

 

 

 

Geographic Dispersion (1)

     

United States

     73.2%           76.9%      

Sweden

     6.0               5.9         

United Kingdom

     5.7               2.2         

Luxembourg

     4.8               4.4         

Ireland

     2.8               3.1         

Netherlands

     2.1               2.4         

New Zealand

     2.1               2.0         

Cayman Islands

     1.6               1.3         

France

     1.3               1.3         

Remaining Countries

     0.4               0.5         
  

 

 

    

 

 

 

Total

     100.0%           100.0%     
  

 

 

    

 

 

 

Local Currency

     

U.S. Dollar

     80.6%            84.0%      

Euro

     11.1               11.2         

British Pound Sterling

     5.5               2.0         

New Zealand Dollar

     2.1               2.0         

Swedish Krona

     0.7               0.8         
  

 

 

    

 

 

 

Total

     100.0%           100.0%     
  

 

 

    

 

 

 

 

(1)  The geographic dispersion is determined by the portfolio company’s country of domicile or the jurisdiction of the security issuer.

 

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4. Derivative Instruments

The following is a summary of the fair value and location of the Company’s derivative instruments in the condensed consolidated statements of assets and liabilities (amounts in thousands):

 

          Fair Value  

Derivative Instrument                     

  

Statement Location                

   June 30, 2014      December 31, 2013  

Foreign currency forward contracts

   Unrealized depreciation on derivative instruments    $ (5,894)       $ (3,181)   
   Unrealized appreciation on derivative instruments      782         -   

TRS

   Unrealized appreciation on derivative instruments      491         1,861   
     

 

 

    

 

 

 

Total

        $     (4,621)         $         (1,320)   
     

 

 

    

 

 

 

Realized and unrealized gains and losses on derivative instruments recorded by the Company for the three and six months ended June 30, 2014 and 2013 are in the following location in the condensed consolidated statements of operations (amounts in thousands):

 

          Realized Gain (Loss)  
          Three Months Ended      Six Months Ended  

Derivative Instrument

  

Statement Location

   June 30, 2014      June 30, 2013      June 30, 2014      June 30, 2013  

Foreign currency forward contracts

  

Net realized gain (loss) on derivative instruments

   $ (1,119)       $ (515)       $ (3,172)       $ 125   

TRS

  

Net realized gain (loss) on derivative instruments

     532         2,297         2,394         2,525   
     

 

 

    

 

 

    

 

 

    

 

 

 

Total

      $ (587)       $ 1,782       $ (778)       $ 2,650   
     

 

 

    

 

 

    

 

 

    

 

 

 
          Unrealized Gain (Loss)  
          Three Months Ended      Six Months Ended  

Derivative Instrument

  

Statement Location

   June 30, 2014      June 30, 2013      June 30, 2014      June 30, 2013  

Foreign currency forward contracts

  

Net change in unrealized appreciation (depreciation) on derivative instruments

   $ (2,850)       $ 1,238       $ (1,931)       $ 1,397   

TRS

  

Net change in unrealized appreciation (depreciation) on derivative instruments

     (278)         (1,873)         (1,370)         4,609   
     

 

 

    

 

 

    

 

 

    

 

 

 

Total

        $         (3,128)         $         (635)         $         (3,301)         $         6,006   
     

 

 

    

 

 

    

 

 

    

 

 

 

Foreign Currency Forward Contracts:

The Company may enter into foreign currency forward contracts from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies and to economically hedge the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies. A foreign currency forward contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. These contracts are marked-to-market by recognizing the difference between the contract exchange rate and the current market exchange rate as unrealized appreciation or depreciation. Realized gains or losses are recognized when forward contracts are settled. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contracts; the Company attempts to limit counterparty risk by only dealing with well-known counterparties. The foreign currency forward contracts outstanding at the end of the period are indicative of the volume of activity during the period.

 

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As of June 30, 2014 and December 31, 2013, the details of the Company’s open foreign currency forward contracts were as follows (amounts in thousands):

 

June 30, 2014  

Foreign Currency

 

Settlement Date

 

Counterparty

  Amount and
Transaction
    US$ Value at
Settlement Date
    US$ Value at
June 30, 2014
    Unrealized
Appreciation
(Depreciation)
 

EUR

  Jul. 23, 2014   State Street Bank and Trust   16,000 Bought         $ 21,643        $ 21,910         $ 267    

EUR

  Jul. 23, 2014   State Street Bank and Trust   8,100 Sold         11,005        11,092         (87)   

EUR

  Jul. 23, 2014   State Street Bank and Trust   19,575 Sold         27,011        26,806         205    

EUR

  Jan. 8, 2015   State Street Bank and Trust   17,000 Sold         22,919        23,296         (377)   

EUR

  Jan. 8, 2015   State Street Bank and Trust   43,500 Sold         59,608        59,609         (1)   

EUR

  Jan. 8, 2015   State Street Bank and Trust   16,904 Sold         22,845        23,164         (319)   

EUR

  Jan. 8, 2015   State Street Bank and Trust   1,153 Sold        1,559        1,581         (22)   

EUR

  Jan. 8, 2015   State Street Bank and Trust   16,000 Sold         22,235        21,925         310    

EUR

  Jan. 11,2016   J.P. Morgan Chase Bank   5,400 Sold         7,413        7,438         (25)   

EUR

  Jan. 11,2016   J.P. Morgan Chase Bank   61,000 Sold         83,435        84,011         (576)   

GBP

  Jul. 23, 2014   State Street Bank and Trust   £ 23,598 Sold         39,469        40,379         (910)   

GBP

  Apr. 17, 2017   J.P. Morgan Chase Bank   £ 45,700 Sold         74,738        77, 045         (2,307)   

NZD

  Jul. 03, 2014   State Street Bank and Trust   N$ 43,400 Sold         36,986        37,995         (1,009)   

NZD

  Jul. 23, 2014   State Street Bank and Trust   N$ 4,000 Sold         3,235        3,496         (261)   
       

 

 

   

 

 

   

 

 

 

Total

          $ 434,101        $ 439,747         $ (5,112)   
       

 

 

   

 

 

   

 

 

 

 

December 31, 2013  

Foreign Currency

 

Settlement Date

 

Counterparty

  Amount and
Transaction
    US$ Value at
Settlement Date
    US$ Value at
December 31, 2013
    Unrealized
Appreciation
(Depreciation)
 

EUR

  Jan. 3, 2014   State Street Bank and Trust   2,100 Sold         $ 2,745        $ 2,889         $ (144)   

EUR

  Jan. 10, 2014   State Street Bank and Trust   8,100 Sold         10,747        11,143         (396)   

EUR

  Jan. 8, 2015   State Street Bank and Trust   17,000 Sold         22,919        23,402         (483)   

EUR

  Jan. 8, 2015   State Street Bank and Trust   43,500 Sold         59,608        59,882         (274)   

EUR

  Jan. 8, 2015   State Street Bank and Trust   2,100 Sold         2,899        2,891           

GBP

  Jan. 10, 2014   State Street Bank and Trust   £ 15,100 Sold         23,701        25,004         (1,303)   

GBP

  Jan. 10, 2014   State Street Bank and Trust   £ 8,498 Sold         13,484        14,071         (587)   

NZD

  Jul. 23, 2014   State Street Bank and Trust   N$ 4,000 Sold         3,235        3,237         (2)   
       

 

 

   

 

 

   

 

 

 

Total

          $ 139,338        $ 142,519         $ (3,181)   
       

 

 

   

 

 

   

 

 

 

Equity Options:

The Company holds equity options in certain portfolio companies to enhance investment returns in connection with its primary lending activities. In purchasing options, the Company bears the risk of an unfavorable change in the value of the underlying equity interest. The equity options are recorded as investments in the condensed consolidated statements of assets and liabilities. The aggregate fair value of options as of June 30, 2014 and December 31, 2013 represented 0.8% and 1.1% of the Company’s net assets, respectively.

Total Return Swaps:

On November 15, 2012, Halifax Funding entered into the TRS with the Bank of Nova Scotia (“BNS” or “counterparty”). The TRS arrangement with BNS consists of a set of TRS agreements. Pursuant to the TRS agreements, Halifax Funding may select a portfolio of single-name corporate loans and/or bonds (each a “TRS asset” and together the “TRS assets”) with a maximum aggregate notional amount of $500 million. Under the terms of the TRS agreements, each TRS asset included in the TRS portfolio constitutes a separate total return swap transaction, although all calculations, payments and transfers required to be made under the TRS agreements are calculated and treated on an aggregate basis, based upon all such transactions.

Halifax Funding receives quarterly from BNS (i) all collected interest and fees generated by TRS assets and (ii) realized gains from the sale or repayment of TRS assets, if any. Halifax Funding pays to BNS (i) a financing charge on the TRS settled notional amount at a rate equal to the three-month LIBOR+0.80% per annum if the initial investment amount (i.e. posted collateral) equals or exceeds 50% of the TRS trade basis notional amount, or three-month LIBOR+1.00% if the initial investment amount is less than 50% of the TRS trade basis notional amount and (ii) realized losses, if any. In addition, upon the termination of the TRS arrangement, Halifax Funding will either receive from BNS any net realized gain, or pay to BNS any net realized loss, on the liquidation of TRS assets.

 

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Halifax Funding posts collateral in the form of certificates of deposit held by a custodian. Generally, the required collateral amount is at least 40% of the notional amount of each TRS asset at the time that such TRS asset is confirmed for acquisition by the counterparty. Halifax Funding may be required to post additional collateral in the event of depreciation in the value of TRS assets after such value decreases below a specified amount. Halifax Funding is required to post additional collateral to ensure that the collateral market value, as solely determined by BNS, is at least equal to 25% of the value of the TRS portfolio.

The obligations of Halifax Funding under the TRS agreements are non-recourse to the Company and the Company’s exposure to the TRS is limited to the amount of collateral that is posted pursuant to the terms of the TRS agreements. The Company has no contractual obligation to post any collateral or to pay any financing charges to BNS. The Company may, but is not obligated to, increase its equity investment in Halifax Funding for the purpose of funding additional collateral or payment obligations for which Halifax Funding may become obligated during the term of the TRS agreements. If the Company does not make any such additional equity investment in Halifax Funding and Halifax Funding fails to meet its obligations under the TRS agreements, then BNS will have the right to terminate the TRS and use the collateral posted by Halifax Funding with the custodian to offset any amount owed to BNS. Halifax Funding may terminate the TRS at any time upon providing at least 30 days’ notice prior to the proposed settlement date of the TRS assets related to such termination. In the absence of an early termination as just described, the TRS will terminate on January 15, 2016. In the event of an early termination of the TRS, Halifax Funding may be required to pay a make-whole fee based on a minimum spread amount to be earned by BNS over the life of the TRS agreements. Halifax Funding would have been required to pay an early termination fee of $5.34 million if the TRS had been terminated as of June 30, 2014.

As of June 30, 2014 and December 31, 2013, Halifax Funding had selected 37 and 20 underlying debt positions, respectively, and had posted $59.55 million and $37.50 million in collateral, respectively, which is recorded as collateral on deposit with custodian in the condensed consolidated statements of assets and liabilities. The following table reconciles the TRS settled notional amount, upon which the financing charge to BNS is based, to the total, or trade basis, notional amount as of June 30, 2014 and December 31, 2013 (amounts in thousands).

 

     June 30, 2014      December 31, 2013  

Settled notional amount

     $ 59,942          $ 54,829   

Unsettled additions

     58,997          23,759   

Unsettled deletions

             (18,677
  

 

 

    

 

 

 

Total notional amount

     $ 118,939          $ 59,911   
  

 

 

    

 

 

 

The following table summarizes the fair value components of the TRS portfolio as of June 30, 2014 and December 31, 2013 (amounts in thousands):

 

     June 30, 2014      December 31, 2013  

Interest and fee income

   $ 988        $ 1,806    

Financing charge

     (66)         (103)   

Net realized gain (loss)

     108          (27)   

Net unrealized appreciation of TRS assets

     (539)         185    
  

 

 

    

 

 

 

TRS Total fair value

     $ 491          $ 1,861    
  

 

 

    

 

 

 

The following table summarizes the components of TRS realized gains (amounts in thousands).

 

     Three Months Ended      Six Months Ended  
     June 30, 2014      June 30 2013      June 30, 2014      June 30 2013  

Interest and fee income

     $ 750          $ 4,936          $ 2,432          $ 5,719    

Financing charge

     (93)         (510)         (245)         (719)   

Net realized gain (loss)

     (125)         2,846          207          2,501    
  

 

 

    

 

 

    

 

 

    

 

 

 

TRS Total realized gains

     $ 532          $ 7,272          $ 2,394          $ 7,501    
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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The following is a summary of the TRS assets as of June 30, 2014 (amounts in thousands):

 

Company (a)                Industry                    Interest
    Rate
       LIBOR    
Floor
  Maturity
Date
         Notional    
Amount
     Fair Value        Unrealized      
Appreciation      
(Depreciation)      
 

Senior Secured Loans - First Lien

                   

Applied Systems, Inc. (c)

   Software & Services    L+325    1.00%     1/25/2021       $        2,825    $ 2,815       $ (10

AssuredPartners, Inc. (c)

   Insurance    L+350    1.00%     4/2/2021       4,000      3,976         (24

BJ’s Wholesale Club, Inc.

   Food & Staples Retailing    L+350    1.00%     9/26/2019       3,995      3,983         (12

California Pizza Kitchen, Inc. (c)

   Food & Staples Retailing    L+425    1.00%     3/29/2018       3,995      3,798         (197

Catalina Marketing Corp.

   Media    L+350    1.00%     4/9/2021       4,022      4,004         (18

Ceridian Corp. (c)

   Commercial & Professional Services    L+425    0.00%     5/9/2017       4,025      4,009         (16

CHG Companies, Inc. (c)

   Health Care Equipment & Services    L+325    1.00%     11/19/2019       3,005      2,993         (12

CityCenter Holdings, LLC (c)

   Real Estate    L+400    1.00%     10/16/2020       3,739      3,719         (20

CTI Foods Holding Co., LLC (c)

   Food, Beverage & Tobacco    L+350    1.00%     6/28/2020       4,018      3,993         (25

Data Device Corp.

   Capital Goods    L+650    1.50%     7/11/2018       2,531      2,529         (2

Emerald Expositions Holding, Inc. (c)

   Media    L+425    1.25%     6/17/2020       3,813      3,793         (20)   

First American Payment Systems, L.P. (c)

   Software & Services    L+450    1.25%     10/12/2018       2,712      2,694         (18

Gymboree Corp.

   Retailing    L+350    1.50%     2/23/2018       2,834      2,685         (149

Gypsum Management & Supply, Inc.

   Capital Goods    L+375