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Table of Contents

 

 

 

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington D.C.  20549

 

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

 

For the quarterly period ended January 31, 2016 or

 

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

 

Commission File Number 814-00201

 

MVC CAPITAL, INC.

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

 

DELAWARE
(State or other jurisdiction of
incorporation or organization)

 

94-3346760
(I.R.S. Employer
Identification No.)

 

287 Bowman Avenue

 

 

2nd Floor

 

 

Purchase, New York

 

10577

(Address of principal

 

(Zip Code)

executive offices)

 

 

 

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

 

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

 

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

 

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

 

Large accelerated filer   o  Accelerated filer   x  Non-accelerated filer   o  Smaller reporting company   o

 

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

 

There were 22,702,821 shares of the registrant’s common stock, $.01 par value, outstanding as of May 16, 2016.

 

 

 



 

MVC Capital, Inc.

(A Delaware Corporation)

Index

 

 

 

Page

Part I. Consolidated Financial Information

 

 

 

 

Item 1.

Consolidated Financial Statements

 

 

Consolidated Balance Sheets

 

 

-                              January 31, 2016 (Unaudited) and October 31, 2015

3

 

Consolidated Statements of Operations

 

 

-                              For the Quarter Ended January 31, 2016 (Unaudited) and

 

 

-                              For the Quarter Ended January 31, 2015 (Unaudited)

4

 

Consolidated Statements of Cash Flows

 

 

-                              For the Quarter Ended January 31, 2016 (Unaudited) and

 

 

-                              For the Quarter Ended January 31, 2015 (Unaudited)

5

 

Consolidated Statements of Changes in Net Assets

 

 

-                              For the Quarter Ended January 31, 2016 (Unaudited),

 

 

-                              For the Quarter Ended January 31, 2015 (Unaudited) and

 

 

-                              For the Year ended October 31, 2015

6

 

Consolidated Selected Per Share Data and Ratios

 

 

-                              For the Quarter Ended January 31, 2016 (Unaudited),

 

 

-                              For the Quarter Ended January 31, 2015 (Unaudited) and

 

 

-                              For the Year ended October 31, 2015

7

 

Consolidated Schedules of Investments

 

 

-                              January 31, 2016 (Unaudited)

 

 

-                              October 31, 2015

8

 

Notes to Consolidated Financial Statements

12

Item 2.

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

38

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

65

Item 4.

Controls and Procedures

79

 

 

 

Part II. Other Information

80

 

 

 

Item 1. Legal Proceedings

80

Item 1A.Risk Factors

80

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

81

Item 3.Defaults Upon Senior Securities

81

Item 4.Mine Safety Disclosures

81

Item 5.Other Information

81

Item 6.Exhibits

81

 

 

SIGNATURE

82

 

2



Table of Contents

 

CONSOLIDATED FINANCIAL STATEMENTS

 

MVC Capital, Inc.

Consolidated Balance Sheets

 

 

 

January 31,

 

October 31,

 

 

 

2016

 

2015

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Assets

 

 

 

 

 

Cash

 

$

24,551,195

 

$

7,753,901

 

Restricted cash (cost $500,000 and $1,000,034)

 

500,000

 

1,000,034

 

Restricted cash equivalents (cost $0 and $5,503,000)

 

 

5,503,000

 

Cash equivalents (cost $2,144,764 and $2,557,666)

 

2,144,764

 

2,557,666

 

Investments at fair value

 

 

 

 

 

U.S. Treasury obligations (cost $0 and $89,820,800)

 

 

89,681,535

 

Non-control/Non-affiliated investments (cost $149,756,999 and $165,626,784)

 

121,526,005

 

131,351,403

 

Affiliate investments (cost $131,124,364 and $121,962,460)

 

171,290,131

 

170,189,927

 

Control investments (cost $90,990,863 and $156,127,715)

 

65,660,459

 

99,334,391

 

Total investments at fair value (cost $371,872,226 and $533,537,759)

 

358,476,595

 

490,557,256

 

Receivable on sale of U.S. Treasury obligations

 

50,130,858

 

 

Escrow receivables, net of reserves

 

10,021,678

 

292,744

 

Deferred financing fees

 

4,012,863

 

2,467,305

 

Fee and other receivables

 

1,857,018

 

1,696,280

 

Dividends and interest receivables, net of reserves

 

1,706,870

 

4,404,600

 

Prepaid expenses

 

646,866

 

609,517

 

 

 

 

 

 

 

Total assets

 

$

454,048,707

 

$

516,842,303

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Senior notes

 

$

114,408,750

 

$

114,408,750

 

Revolving credit facility

 

50,000,000

 

90,000,000

 

Provision for incentive compensation (Note 11)

 

2,746,779

 

4,976,767

 

Management fee payable

 

1,468,265

 

1,527,930

 

Professional fees payable

 

1,379,896

 

1,820,416

 

Accrued expenses and liabilities

 

729,528

 

622,446

 

Interest payable

 

432,803

 

359,866

 

Management fee payable - Asset Management

 

296,812

 

296,812

 

Portfolio fees payable - Asset Management

 

287,689

 

250,846

 

Consulting fees payable

 

138,054

 

272,880

 

Taxes payable

 

213

 

1,152

 

Bridge Loan

 

 

8,000,000

 

Liability for share exchange

 

 

228,851

 

 

 

 

 

 

 

Total liabilities

 

171,888,789

 

222,766,716

 

 

 

 

 

 

 

Commitments and Contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock, $0.01 par value; 150,000,000 shares authorized; 28,304,448 shares issued and 22,702,821 shares outstanding as of January 31, 2016 and October 31, 2015

 

283,044

 

283,044

 

Additional paid-in-capital

 

418,298,784

 

418,298,784

 

Accumulated earnings

 

107,418,389

 

102,420,976

 

Dividends paid to stockholders

 

(135,937,262

)

(129,012,902

)

Accumulated net realized gain (loss)

 

(39,556,328

)

2,189

 

Net unrealized (depreciation) appreciation

 

(13,050,503

)

(42,620,298

)

Treasury stock, at cost, 5,601,627 and 5,601,627 shares held, respectively

 

(55,296,206

)

(55,296,206

)

 

 

 

 

 

 

Total shareholders’ equity

 

282,159,918

 

294,075,587

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

454,048,707

 

$

516,842,303

 

 

 

 

 

 

 

Net asset value per share

 

$

12.43

 

$

12.95

 

 

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

 

3



Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Operations

(Unaudited)

 

 

 

For the Quarter Ended

 

For the Quarter Ended

 

 

 

January 31, 2016

 

January 31, 2015

 

Operating Income:

 

 

 

 

 

Dividend income

 

 

 

 

 

Non-control/Non-affiliated investments

 

$

97,385

 

$

260

 

 

 

 

 

 

 

Total dividend income

 

97,385

 

260

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

Non-control/Non-affiliated investments

 

2,988,786

 

2,967,671

 

Affiliate investments

 

573,373

 

327,429

 

Control investments

 

79,699

 

87,128

 

 

 

 

 

 

 

Total interest income

 

3,641,858

 

3,382,228

 

 

 

 

 

 

 

Payment-in-kind/Deferred interest income

 

 

 

 

 

Non-control/Non-affiliated investments

 

1,259,420

 

833,724

 

Affiliate investments

 

90,297

 

31,305

 

Control investments

 

39,272

 

39,272

 

 

 

 

 

 

 

Total payment-in-kind/Deferred interest income

 

1,388,989

 

904,301

 

 

 

 

 

 

 

Fee income

 

 

 

 

 

Non-control/Non-affiliated investments

 

52,259

 

 

Affiliate investments

 

181,500

 

183,000

 

Control investments

 

2,343,750

 

80,750

 

 

 

 

 

 

 

Total fee income

 

2,577,509

 

263,750

 

 

 

 

 

 

 

Fee income - Asset Management 1

 

 

 

 

 

Portfolio fees

 

249,408

 

271,475

 

Management fees

 

134,362

 

33,629

 

 

 

 

 

 

 

Total fee income - Asset Management

 

383,770

 

305,104

 

 

 

 

 

 

 

Total operating income

 

8,089,511

 

4,855,643

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

Interest and other borrowing costs

 

2,628,786

 

2,455,010

 

Management fee

 

1,979,291

 

1,979,805

 

Consulting fees

 

222,351

 

115,851

 

Portfolio fees - Asset Management 1

 

187,056

 

203,606

 

Legal fees

 

164,000

 

409,000

 

Audit & tax preparation fees

 

135,600

 

162,000

 

Other expenses

 

122,185

 

150,072

 

Directors’ fees

 

110,000

 

105,000

 

Management fee - Asset Management 1

 

100,772

 

16,307

 

Insurance

 

79,917

 

85,920

 

Administration

 

61,318

 

61,613

 

Public relations fees

 

48,000

 

46,500

 

Printing and postage

 

14,694

 

22,431

 

Net Incentive compensation (Note 11)

 

(2,229,988

)

(2,119,568

)

 

 

 

 

 

 

Total operating expenses

 

3,623,982

 

3,693,547

 

 

 

 

 

 

 

Less: Voluntary Expense Waiver by Adviser 2

 

(37,500

)

(37,500

)

Less: Voluntary Management Fee Waiver by Adviser 3

 

(494,823

)

 

 

 

 

 

 

 

Total waivers

 

(532,323

)

(37,500

)

 

 

 

 

 

 

Net operating income before taxes

 

4,997,852

 

1,199,596

 

 

 

 

 

 

 

Tax Expenses:

 

 

 

 

 

Current tax expense

 

439

 

439

 

 

 

 

 

 

 

Total tax expense

 

439

 

439

 

 

 

 

 

 

 

Net operating income

 

4,997,413

 

1,199,157

 

 

 

 

 

 

 

Net Realized and Unrealized (Loss) Gain on Investments:

 

 

 

 

 

 

 

 

 

 

 

Net realized loss on investments

 

 

 

 

 

Short term investments

 

(90,427

)

(137,754

)

Non-control/Non-affiliated investments

 

(7,636,535

)

 

Affiliate investments

 

(71,268

)

 

Control investments

 

(31,760,287

)

 

 

 

 

 

 

 

Total net realized loss on investments

 

(39,558,517

)

(137,754

)

 

 

 

 

 

 

Net unrealized appreciation (depreciation) on investments

 

29,569,795

 

(10,804,604

)

 

 

 

 

 

 

Net realized and unrealized loss on investments

 

(9,988,722

)

(10,942,358

)

 

 

 

 

 

 

Net decrease in net assets resulting from operations

 

$

(4,991,309

)

$

(9,743,201

)

 

 

 

 

 

 

Net decrease in net assets per share resulting from operations

 

$

(0.21

)

$

(0.43

)

 

 

 

 

 

 

Dividends declared per share

 

$

0.305

 

$

0.135

 

 

 

 

 

 

 

Weighted average number of shares outstanding 4

 

22,702,821

 

22,702,821

 

 


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

 

2 Reflects the quarterly portion of the TTG Advisers’ voluntary waiver of $150,000 of expenses for the 2016 and 2015 fiscal years, that the Company would otherwise be obligated to reimburse TTG Advisers under the Advisory Agreement (the “Voluntary Waiver”).  Please see Note 10 “Management” for more information.

 

3 Reflects the quarterly portion of the TTG Advisers’ voluntary waiver of .50% of the management fee for the 2016 fiscal year.

Please see Note 10 “Management” for more information.

 

4 Please see Note 13 “Dividends and Distributions to Shareholders and Share Repurchase Program” for more information.

 

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

 

4



Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the Quarter Ended

 

For the Quarter Ended

 

 

 

January 31, 2016

 

January 31, 2015

 

Cash flows from Operating Activities:

 

 

 

 

 

Net decrease in net assets resulting from operations

 

$

(4,991,309

)

$

(9,743,201

)

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

 

 

 

 

 

Net realized loss

 

39,558,517

 

137,754

 

Net change in unrealized (appreciation) depreciation

 

(29,569,795

)

10,804,604

 

Amortization of premiums (discounts) and fees

 

5,314

 

(37,725

)

Increase in accrued payment-in-kind dividends and interest

 

(3,337,651

)

(436,878

)

Amortization of deferred financing fees

 

(241,013

)

(160,005

)

Changes in operating assets and liabilities:

 

 

 

 

 

Restricted cash

 

500,034

 

617,000

 

Restricted cash equivalents

 

5,503,000

 

617,000

 

Dividends, interest and fees receivable

 

2,697,730

 

(406,356

)

Fee and other receivables

 

(160,738

)

1,168,736

 

Escrow receivables, net of reserves

 

(9,728,934

)

 

Prepaid expenses

 

(37,349

)

151,178

 

U.S. Treasury obligations receivable

 

(50,130,858

)

(100,185,061

)

Incentive compensation (Note 11)

 

(2,229,988

)

(2,119,568

)

Other liabilities

 

(647,939

)

(567,464

)

Purchases of equity investments

 

(1,599,450

)

 

Purchases of debt instruments

 

(8,280,800

)

(39,853,543

)

Purchases of U.S. Treasury obligations

 

(49,931,003

)

(99,323,398

)

Proceeds from equity investments (1)

 

36,621,814

 

388,406

 

Proceeds from debt instruments

 

8,951,299

 

27,637,376

 

Sales/maturities of U.S. Treasury obligations

 

139,662,416

 

199,186,185

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

72,613,297

 

(12,124,960

)

 

 

 

 

 

 

Cash flows from Financing Activities:

 

 

 

 

 

Borrowings from revolving credit facility

 

63,200,000

 

100,000,000

 

Repayments from revolving credit facility

 

(103,200,000

)

(100,000,000

)

Borrowings from bridge loan

 

 

15,882,481

 

Repayments from bridge loan

 

(8,000,000

)

(1,000,000

)

Share exchange

 

 

(1,857

)

Financing fees paid

 

(1,304,545

)

 

Distributions paid to shareholders

 

(6,924,360

)

(3,064,881

)

 

 

 

 

 

 

Net cash (used in) provided by financing activities

 

(56,228,905

)

11,815,743

 

 

 

 

 

 

 

Net change in cash and cash equivalents for the period

 

16,384,392

 

(309,217

)

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

$

10,311,567

 

$

17,172,464

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

26,695,959

 

$

16,863,247

 

 

During the quarters ended January 31, 2016 and 2015 MVC Capital, Inc. paid $2,340,892 and $2,272,426 in interest expense, respectively.

 

During the quarters ended January 31, 2016 and 2015 MVC Capital, Inc. paid $0 and $1,420 in income taxes, respectively.

 

Non-cash activity:

 

During the quarters ended January 31, 2016 and 2015, MVC Capital, Inc. recorded payment in-kind dividend and interest of $3,337,651 and $436,878, respectively. This amount was added to the principal balance of the investments and recorded as dividend/interest income.

 

On December 24, 2015, as part of Inland’s restructuring, the Company received a $6.0 million senior secured loan in MVC Environmental, Inc. and received 950 common shares in MVC Environmental, Inc. 

 

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

 

5



Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Changes in Net Assets

 

 

 

For the Quarter Ended

 

For the Quarter Ended

 

For the Year Ended

 

 

 

January 31, 2016

 

January 31, 2015

 

October 31, 2015

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

Operations:

 

 

 

 

 

 

 

Net operating gain

 

$

4,997,413

 

$

1,199,157

 

$

9,296,816

 

Net realized (loss) gain on investments

 

(39,558,517

)

(137,754

)

3,700,260

 

Net change in appreciation (depreciation) unrealized appreciation on investments

 

29,569,795

 

(10,804,604

)

(50,557,496

)

 

 

 

 

 

 

 

 

Net decrease in net assets from operations

 

(4,991,309

)

(9,743,201

)

(37,560,420

)

 

 

 

 

 

 

 

 

Shareholder Distributions from:

 

 

 

 

 

 

 

Income

 

(4,997,852

)

(1,199,157

)

(9,296,816

)

Realized gain

 

 

 

(2,962,708

)

Return of capital

 

(1,926,508

)

(1,865,724

)

 

 

 

 

 

 

 

 

 

Net decrease in net assets from shareholder distributions

 

(6,924,360

)

(3,064,881

)

(12,259,524

)

 

 

 

 

 

 

 

 

Capital Share Transactions:

 

 

 

 

 

 

 

Reissuance of treasury stock for share exchange

 

 

 

 

Provision for share exchange

 

 

(1,857

)

(7,427

)

Offering expenses

 

 

 

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

Net decrease in net assets from capital share transactions

 

 

(1,857

)

(7,427

)

 

 

 

 

 

 

 

 

Total decrease in net assets

 

(11,915,669

)

(12,809,939

)

(49,827,371

)

 

 

 

 

 

 

 

 

Net assets, beginning of period/year

 

294,075,587

 

343,902,958

 

343,902,958

 

 

 

 

 

 

 

 

 

Net assets, end of period/year

 

$

282,159,918

 

$

331,093,019

 

$

294,075,587

 

 

 

 

 

 

 

 

 

Common shares outstanding, end of period/year

 

22,702,821

 

22,702,821

 

22,702,821

 

 

 

 

 

 

 

 

 

Undistributed net operating income

 

$

 

$

 

$

 

 

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

 

6



Table of Contents

 

MVC Capital, Inc.

Consolidated Selected Per Share Data and Ratios

 

 

 

For the

 

For the

 

For the

 

 

 

Quarter Ended

 

Quarter Ended

 

Year Ended

 

 

 

January 31, 2016

 

January 31, 2015

 

October 31, 2015

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period/year

 

$

12.95

 

$

15.15

 

$

15.15

 

 

 

 

 

 

 

 

 

(Loss) Gain from operations:

 

 

 

 

 

 

 

Net operating gain

 

0.22

 

0.05

 

0.41

 

Net realized and unrealized loss on investments

 

(0.43

)

(0.48

)

(2.07

)

 

 

 

 

 

 

 

 

Total loss from investment operations

 

(0.21

)

(0.43

)

(1.66

)

 

 

 

 

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

Income

 

(0.22

)

(0.05

)

(0.41

)

Realized gain

 

 

 

(0.13

)

Return of capital

 

(0.09

)

(0.09

)

 

 

 

 

 

 

 

 

 

Total distributions

 

(0.31

)

(0.14

)

(0.54

)

 

 

 

 

 

 

 

 

Capital share transactions

 

 

 

 

 

 

 

Dilutive effect of share issuance

 

 

 

 

Anti-dilutive effect of share repurchase program

 

 

 

 

 

 

 

 

 

 

 

 

Total capital share transactions

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period/year

 

$

12.43

 

$

14.58

 

$

12.95

 

 

 

 

 

 

 

 

 

Market value, end of period/year

 

$

7.40

 

$

9.48

 

$

8.32

 

 

 

 

 

 

 

 

 

Market discount

 

(40.47

)%

(34.98

)%

(35.75

)%

 

 

 

 

 

 

 

 

Total Return - At NAV (a)

 

(1.66

)%

(2.87

)%

(11.08

)%

 

 

 

 

 

 

 

 

Total Return - At Market (a)

 

(7.40

)%

(14.69

)%

(21.85

)%

 

 

 

 

 

 

 

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio turnover ratio

 

2.60

%

6.25

%

15.19

%

 

 

 

 

 

 

 

 

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

 

$

282,160

 

$

331,093

 

$

294,076

 

 

 

 

 

 

 

 

 

Ratios to average net assets:

 

 

 

 

 

 

 

Expenses including tax expense

 

4.26

% (c)

4.30

% (c)

4.54

%

Expenses excluding tax expense

 

4.26

% (c)

4.30

% (c)

4.54

%

 

 

 

 

 

 

 

 

Net operating income before tax expense

 

6.88

% (c)

1.41

% (c)

2.93

%

Net operating income after tax expense

 

6.88

% (c)

1.41

% (c)

2.93

%

 

 

 

 

 

 

 

 

Ratios to average net assets excluding waivers:

 

 

 

 

 

 

 

Expenses including tax expense

 

4.99

% (c)

4.34

% (c)

4.59

%

Expenses excluding tax expense

 

4.99

% (c)

4.34

% (c)

4.59

%

 

 

 

 

 

 

 

 

Net operating income before tax expense

 

6.15

% (c)

1.37

% (c)

2.89

%

Net operating income after tax expense

 

6.15

% (c)

1.37

% (c)

2.89

%

 


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

(b) Supplemental Ratio information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to average net assets: (b)

 

 

 

 

 

 

 

Expenses excluding incentive compensation

 

7.33

% (c)

6.79

% (c)

7.62

%

Expenses excluding incentive compensation, interest and other borrowing costs

 

3.71

% (c)

3.90

% (c)

4.39

%

 

 

 

 

 

 

 

 

Net operating income (loss) before incentive compensation

 

3.81

% (c)

(1.08

)% (c)

(0.15

)%

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

 

7.43

% (c)

1.81

% (c)

3.08

%

 

 

 

 

 

 

 

 

Ratios to average net assets excluding waivers: (b)

 

 

 

 

 

 

 

Expenses excluding incentive compensation

 

8.06

% (c)

6.84

% (c)

7.67

%

Expenses excluding incentive compensation, interest and other borrowing costs

 

4.44

% (c)

3.95

% (c)

4.44

%

 

 

 

 

 

 

 

 

Net operating income (loss) before incentive compensation

 

3.08

% (c)

(1.13

)% (c)

(0.19

)%

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

 

6.70

% (c)

1.76

% (c)

3.04

%

 


(c) Annualized.

(d) Non- Annualized.

 

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

 

7



Table of Contents

 

 

MVC Capital, Inc.

Consolidated Schedule of Investments

January 31, 2016

(Unaudited)

 

Company

 

Industry

 

Investment

 

Principal

 

Cost

 

Fair Value/Market Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-control/Non-affiliated investments- 43.07% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Actelis Networks, Inc.

 

Technology Investment

 

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

 

 

 

$

5,000,003

 

 

Agri-Carriers Group, Inc.

 

Transportation

 

Senior Subordinated Debt 12.0000% Cash, 3.0000% Deferred, 07/20/2017 (l)

 

$

11,774,486

 

12,798,890

 

$

12,895,709

 

Biogenic Reagents

 

Renewable energy

 

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

 

5,518,846

 

5,518,846

 

5,518,846

 

 

 

 

 

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

 

4,966,962

 

4,966,962

 

5,027,270

 

 

 

 

 

Senior Note 12.0000% Cash, 4.0000% PIK, 02/29/2016 (b), (l)

 

4,207,746

 

4,207,746

 

4,207,746

 

 

 

 

 

Senior Subordinated Debt 12.0000% Cash, 4.0000% PIK, 02/29/2016 (b), (l)

 

1,019,875

 

1,019,875

 

1,019,875

 

 

 

 

 

Warrants (d)

 

2

 

620,077

 

1,631,698

 

 

 

 

 

 

 

 

 

16,333,506

 

17,405,435

 

Biovation Acquisition Co.

 

Manufacturer of Laminate Material and Composites

 

Common Stock (90 shares) (d)

 

 

 

784,622

 

517,984

 

Custom Alloy Corporation

 

Manufacturer of Pipe Fittings

 

Second Lien Loan 8.3000% Cash, 1.7000% PIK, 04/30/2020 (b), (l)

 

23,931,433

 

23,931,433

 

21,877,783

 

 

 

 

 

Unsecured Subordinated Loan 12.0000% Cash, 09/04/2016 (l)

 

3,000,000

 

3,000,000

 

2,460,630

 

 

 

 

 

 

 

 

 

26,931,433

 

24,338,413

 

FOLIOfn, Inc.

 

Technology Investment - Financial Services

 

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

 

 

 

15,000,000

 

5,630,000

 

G3K Display, Inc.

 

Retail Store Fixtures

 

Senior Lien Loan 13.0000% Cash, 04/11/2019 (h)

 

5,625,000

 

5,625,000

 

 

 

 

 

 

Warrants (d)

 

1

 

 

 

 

 

 

 

 

 

 

 

5,625,000

 

 

Initials, Inc.

 

Consumer Products

 

Senior Subordinated Debt 12.0000% Cash, 3.0000% PIK, 06/22/2020 (b), (l)

 

4,750,000

 

4,750,000

 

4,750,000

 

Legal Solutions Holdings, Inc.

 

Business Services

 

Senior Subordinated Debt 12.0000% Cash, 2.0000% Deferred, 09/12/2018 (l)

 

10,205,000

 

10,600,943

 

10,278,617

 

MainStream Data, Inc.

 

Technology Investment

 

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

 

 

 

3,750,000

 

 

Morey’s Seafood International, LLC

 

Food Services

 

Second Lien Loan 6.0000% Cash, 9.0000% PIK, 08/12/2018 (b), (l)

 

16,412,410

 

16,412,410

 

13,589,426

 

NPWT Corporation

 

Medical Device Manufacturer

 

Series B Common Stock (281 shares) (d)

 

 

 

1,231,638

 

2,000

 

 

 

 

 

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

 

 

 

 

40,000

 

 

 

 

 

 

 

 

 

1,231,638

 

42,000

 

Pride Engineering, LLC

 

Manufacturer of Equipment Components

 

Second Lien Note 12.0000% Cash, 05/08/2021 (l)

 

5,135,000

 

5,135,000

 

5,135,000

 

RX Innovation, Inc.

 

Software

 

Senior Subordinated Debt 12.0000% Cash, 4.0000% Deferred, 03/01/2017 (l)

 

10,300,000

 

11,501,351

 

11,904,218

 

Thunderdome Restaurants, LLC

 

Restaurants

 

Second Lien Loan 12.0000% Cash, 06/10/2020 (l)

 

1,914,203

 

1,914,203

 

1,914,203

 

U.S. Spray Drying Holding Company

 

Specialty Chemicals

 

Class B Common Stock (784 shares) (d)

 

 

 

5,488,000

 

6,625,000

 

 

 

 

 

Secured Loan 12.0000% Cash, 05/02/2019 (l)

 

1,500,000

 

1,500,000

 

1,500,000

 

 

 

 

 

 

 

 

 

6,988,000

 

8,125,000

 

United States Technologies, Inc.

 

Electronics Manufacturing and Repair

 

Senior Lien Loan 10.5000% Cash, 07/17/2020

 

5,000,000

 

5,000,000

 

5,000,000

 

Sub Total Non-control/Non-affiliated investments

 

 

 

 

 

 

 

149,756,999

 

121,526,005

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate investments - 60.71% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Advantage Insurance Holdings LTD

 

Insurance

 

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

 

 

 

7,500,000

 

8,015,164

 

Centile Holdings B.V.

 

Software

 

Common Equity Interest (d), (e)

 

 

 

3,524,376

 

5,165,000

 

JSC Tekers Holdings

 

Real Estate Management

 

Common Stock (3,201 shares) (d), (e)

 

 

 

4,500

 

 

 

 

 

 

Preferred Stock (9,159,085 shares) (d), (e)

 

 

 

11,810,188

 

4,306,000

 

 

 

 

 

 

 

 

 

11,814,688

 

4,306,000

 

MVC Environmental, Inc.

 

Environmental Services

 

Senior Secured Loan 9.0000% PIK, 12/22/2020 (b), (l)

 

6,000,000

 

6,000,000

 

6,000,000

 

 

 

 

 

Common Stock (950 shares) (d)

 

 

 

3,081,000

 

3,081,000

 

 

 

 

 

 

 

 

 

9,081,000

 

9,081,000

 

Security Holdings B.V.

 

Electrical Engineering

 

Common Equity Interest (d), (e)

 

 

 

52,846,140

 

40,660,000

 

SGDA Europe B.V.

 

Environmental Services

 

Common Equity Interest (d), (e)

 

 

 

28,544,800

 

3,082,000

 

U.S. Gas & Electric, Inc.

 

Energy Services

 

Second Lien Loan 13.0000% Cash, 07/01/2019 (l)

 

7,500,000

 

7,500,000

 

7,500,000

 

 

 

 

 

Unsecured Loan 10.0000% Cash, 4.0000% PIK, 07/01/2018 (b), (l)

 

3,199,707

 

3,199,707

 

3,199,707

 

 

 

 

 

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

 

 

 

500,000

 

83,667,607

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

11,199,707

 

94,367,314

 

Vestal Manufacturing Enterprises, Inc.

 

Iron Foundries

 

Senior Subordinated Debt 12.0000% Cash, 3.0000% PIK, 11/28/2021 (b), (l)

 

6,363,653

 

6,363,653

 

6,363,653

 

 

 

 

 

Common Stock (5,610 shares) (d)

 

 

 

250,000

 

250,000

 

 

 

 

 

Warrants (d)

 

5,303

 

 

 

 

 

 

 

 

 

 

 

6,613,653

 

6,613,653

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Affiliate investments

 

 

 

 

 

 

 

131,124,364

 

171,290,131

 

 

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

 

8



Table of Contents

 

MVC Capital, Inc.

Consolidated Schedule of Investments - (Continued)

January 31, 2016

(Unaudited)

 

Company

 

Industry

 

Investment

 

Principal

 

Cost

 

Fair Value/Market Value

 

Control Investments - 23.27% (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Equus Total Return, Inc.

 

Regulated Investment Company

 

Common Stock (4,444,644 shares) (d)

 

 

 

$

10,030,272

 

$

7,555,895

 

MVC Automotive Group GmbH

 

Automotive Dealerships

 

Common Equity Interest (a), (d), (e)

 

 

 

50,057,288

 

15,024,000

 

MVC Private Equity Fund LP

 

Private Equity

 

Limited Partnership Interest (a), (d), (j)

 

 

 

13,838,539

 

22,864,046

 

 

 

 

 

General Partnership Interest (a), (d), (j)

 

 

 

353,024

 

574,652

 

 

 

 

 

 

 

 

 

14,191,563

 

23,438,698

 

RuMe Inc.

 

Consumer Products

 

Common Stock (5,297,548 shares) (a), (d)

 

 

 

924,475

 

924,475

 

 

 

 

 

Series C Preferred Stock (23,896,634 shares) (a), (d)

 

 

 

3,410,694

 

7,097,772

 

 

 

 

 

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

 

 

 

999,815

 

1,827,753

 

 

 

 

 

 

 

 

 

5,334,984

 

9,850,000

 

SIA Tekers Invest

 

Port Facilities

 

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

 

 

 

2,300,000

 

307,000

 

Somotra NV

 

Automotive Dealerships

 

Bridge Loan 5.0000% Cash, 03/14/2016 (e), (l), (m)

 

1,645,800

 

1,645,800

 

1,645,800

 

Turf Products, LLC

 

Distributor - Landscaping and

 

Senior Subordinated Debt 7.0000% Cash, 4.0000% PIK, 11/01/2018 (a), (b), (l)

 

$

3,895,262

 

3,895,262

 

3,881,774

 

 

 

Irrigation Equipment

 

Limited Liability Company Interest (a), (d)

 

 

 

3,535,694

 

3,991,794

 

 

 

 

 

Guarantee (a), (d)

 

1

 

 

(34,502

)

 

 

 

 

Warrants (a), (d)

 

150

 

 

 

 

 

 

 

 

 

 

 

7,430,956

 

7,839,066

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Control Investments

 

 

 

 

 

 

 

90,990,863

 

65,660,459

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL PORTFOLIO INVESTMENTS - 127.05% (f)

 

 

 

 

 

 

 

$

371,872,226

 

$

358,476,595

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Equivalents - 0.76% (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Fidelity Institutional Government Money Market Fund

 

Money Market Fund

 

Beneficial Shares (2,144,764 shares)

 

 

 

2,144,764

 

2,144,764

 

Total Cash Equivalents

 

 

 

 

 

 

 

2,144,764

 

2,144,764

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS - 127.81% (f)

 

 

 

 

 

 

 

$

374,016,990

 

$

360,621,359

 

 


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

 

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

 

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

 

(d) Non-income producing assets.

 

(e) The principal operations of these portfolio companies are located in Europe and Cayman Islands which represents approximately 28% of the net assets.  The remaining portfolio companies are located in North America which represents approximately 99% of the net assets.

 

(f) Percentages are based on net assets of $282,159,918 as of January 31, 2016.

 

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

 

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

 

(i) Legacy Investments.

 

(j) MVC Private Equity Fund, LP is a private equity fund focused on control equity investments in the lower middle market.  The fund currently holds five investments, four located in the United States and one in Gibraltar, the investments are in the energy, services, contract manufacturing, and industrial sectors.  The Company’s proportional share of the AccuMed Corp. preferred stock, Plymouth Rock Energy membership interest and loan and the Gibdock Limited equity interest is $5,623,533, $7,195.877 and $5,554,203, respectively.

 

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

 

(l) All or a portion of these securities may serve as collateral for the Santander Credit Facility.

 

(m) A wholly-owned subsidiary  of MVC Automotive Group GmbH.

 

(o) All or a portion of these securities may serve as collateral for the Macquarie Energy trade supple credit facility

 

PIK - Payment-in-kind

 

- Denotes zero cost or fair value.

 

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

 

9



Table of Contents

 

MVC Capital, Inc.

Consolidated Schedule of Investments

October 31, 2015

 

Company

 

Industry

 

Investment

 

Principal

 

Cost

 

Fair Value/Market Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-control/Non-affiliated investments- 44.67% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Actelis Networks, Inc.

 

Technology Investment

 

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

 

 

 

$

5,000,003

 

 

Agri-Carriers Group, Inc.

 

Transportation

 

Senior Subordinated Debt 12.0000% Cash, 3.0000% Deferred, 07/20/2017 (l), (m)

 

$

11,774,486

 

11,787,114

 

$

11,774,486

 

Biogenic Reagents

 

Renewable energy

 

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

 

5,463,002

 

5,463,002

 

5,463,002

 

 

 

 

 

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

 

4,916,702

 

4,916,702

 

4,983,082

 

 

 

 

 

Senior Note 12.0000% Cash, 4.0000% PIK, 02/29/2016 (b), (l)

 

4,165,169

 

4,165,169

 

4,165,169

 

 

 

 

 

Senior Subordinated Debt 12.0000% Cash, 4.0000% PIK, 02/29/2016 (b), (l)

 

1,009,556

 

1,009,556

 

1,009,556

 

 

 

 

 

Warrants (d)

 

2

 

620,077

 

1,660,689

 

 

 

 

 

 

 

 

 

16,174,506

 

17,281,498

 

Biovation Acquisition Co.

 

Manufacturer of Laminate Material and Composites

 

Common Stock (90 shares) (d)

 

 

 

784,622

 

555,869

 

Biovation Holdings, Inc.

 

Manufacturer of Laminate Material and Composites

 

Bridge Loan 6.0000% Cash, 6.0000% PIK, 10/31/2014 (b), (h)

 

1,079,325

 

1,079,325

 

 

 

 

 

 

Warrants (d)

 

3

 

397,677

 

 

 

 

 

 

 

 

 

 

1,477,002

 

 

Custom Alloy Corporation

 

Manufacturer of Pipe Fittings

 

Second Lien Loan 7.3000% Cash, 3.7000% PIK, 04/30/2020 (b), (l)

 

23,791,903

 

23,791,903

 

23,638,469

 

 

 

 

 

Unsecured Subordinated Loan 12.0000% Cash, 09/04/2016 (l)

 

3,000,000

 

3,000,000

 

3,000,000

 

 

 

 

 

 

 

 

 

26,791,903

 

26,638,469

 

FOLIOfn, Inc.

 

Technology Investment - Financial Services

 

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

 

 

 

15,000,000

 

5,596,000

 

G3K Display, Inc.

 

Retail Store Fixtures

 

Senior Lien Loan 13.0000% Cash, 04/11/2019 (h)

 

5,625,000

 

5,625,000

 

 

 

 

 

 

Warrants (d)

 

1

 

 

 

 

 

 

 

 

 

 

 

5,625,000

 

 

Initials, Inc.

 

Consumer Products

 

Senior Subordinated Debt 12.0000% Cash, 3.0000% PIK, 06/22/2020 (b), (l)

 

4,750,000

 

4,750,000

 

4,750,000

 

Inland Environmental & Remediation LP

 

Environmental Services

 

Senior Secured Loan 12.0000% Cash, 04/17/2019 (h), (l)

 

15,000,000

 

14,506,835

 

8,000,000

 

 

 

 

 

Warrants (d)

 

1

 

713,000

 

 

 

 

 

 

 

 

 

 

15,219,835

 

8,000,000

 

Legal Solutions Holdings, Inc.

 

Business Services

 

Senior Subordinated Debt 12.0000% Cash, 2.0000% Deferred, 09/12/2018 (l), (m)

 

8,705,000

 

8,718,402

 

8,705,000

 

MainStream Data, Inc.

 

Technology Investment

 

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

 

 

 

3,750,000

 

 

Morey’s Seafood International, LLC

 

Food Services

 

Second Lien Loan 6.0000% Cash, 9.0000% PIK, 08/12/2018 (b), (l)

 

16,047,333

 

16,047,333

 

14,371,830

 

NPWT Corporation

 

Medical Device Manufacturer

 

Series B Common Stock (281 shares) (d)

 

 

 

1,231,638

 

2,000

 

 

 

 

 

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

 

 

 

 

36,000

 

 

 

 

 

 

 

 

 

1,231,638

 

38,000

 

The Results Companies, LLC

 

Business Services

 

Senior Subordinated Debt 13.0000% Cash, 2.5000% Deferred, 07/01/2016 (l), (m)

 

9,000,000

 

9,008,330

 

9,000,000

 

RX Innovation, Inc.

 

Software

 

Senior Subordinated Debt 12.0000% Cash, 4.0000% Deferred, 03/01/2017 (l), (m)

 

10,300,000

 

10,307,845

 

10,300,000

 

Thunderdome Restaurants, LLC

 

Restaurants

 

Second Lien Loan 12.0000% Cash, 06/10/2020

 

1,965,251

 

1,965,251

 

1,965,251

 

U.S. Spray Drying Holding Company

 

Specialty Chemicals

 

Class B Common Stock (784 shares) (d)

 

 

 

5,488,000

 

5,875,000

 

 

 

 

 

Secured Loan 12.0000% Cash, 05/02/2019

 

1,500,000

 

1,500,000

 

1,500,000

 

 

 

 

 

 

 

 

 

6,988,000

 

7,375,000

 

United States Technologies, Inc.

 

Electronics Manufacturing and Repair

 

Senior Lien Loan 10.5000% Cash, 07/17/2020 (l)

 

5,000,000

 

5,000,000

 

5,000,000

 

Sub Total Non-control/Non-affiliated investments

 

 

 

 

 

 

 

165,626,784

 

131,351,403

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate investments - 57.87% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Advantage Insurance Holdings LTD

 

Insurance

 

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

 

 

 

7,500,000

 

8,015,164

 

Centile Holdings B.V.

 

Software

 

Common Equity Interest (d), (e)

 

 

 

3,524,376

 

4,905,000

 

JSC Tekers Holdings

 

Real Estate Management

 

Common Stock (3,201 shares) (d), (e)

 

 

 

4,500

 

4,000

 

 

 

 

 

Preferred Stock (9,159,085 shares) (d), (e)

 

 

 

11,810,188

 

5,045,700

 

 

 

 

 

 

 

 

 

11,814,688

 

5,049,700

 

Security Holdings B.V.

 

Electrical Engineering

 

Common Equity Interest (d), (e)

 

 

 

52,846,140

 

45,300,000

 

SGDA Europe B.V.

 

Environmental Services

 

Common Equity Interest (d), (e)

 

 

 

28,544,800

 

6,020,000

 

U.S. Gas & Electric, Inc.

 

Energy Services

 

Second Lien Loan 13.0000% Cash, 07/01/2019 (l)

 

7,500,000

 

7,500,000

 

7,500,000

 

 

 

 

 

Unsecured Loan 10.0000% Cash, 4.0000% PIK , 07/01/2018 (b), (l)

 

3,167,220

 

3,167,220

 

3,167,220

 

 

 

 

 

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

 

 

 

500,000

 

83,667,607

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

11,167,220

 

94,334,827

 

Vestal Manufacturing Enterprises, Inc.

 

Iron Foundries

 

Senior Subordinated Debt 12.0000% Cash, 3.0000% PIK , 11/28/2021 (b), (l)

 

6,315,236

 

6,315,236

 

6,315,236

 

 

 

 

 

Common Stock (5,610 shares) (d)

 

 

 

250,000

 

250,000

 

 

 

 

 

Warrants (d)

 

5,303

 

 

 

 

 

 

 

 

 

 

 

6,565,236