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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, 2016

OR

 

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

For the transition period from                      to                     

Commission File Number 814-00924

 

 

Sierra Income Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   45-2544432

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

280 Park Avenue, 6th Floor East

New York, NY 10017

(Address of principal executive offices)

(212) 759-0777

(Registrant’s telephone number, including area code)

 

 

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

 

 

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

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 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

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

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

As of August 4, 2016, the Registrant had 92,105,559 shares of common stock, $0.001 par value, outstanding.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

          Page  

Part I.      Financial Information

  

Item 1.      Financial Statements

     F-1   
  

Consolidated Statements of Assets and Liabilities as of June 30, 2016 (unaudited) and December 31, 2015

     F-1   
  

Consolidated Statements of Operations for the three months and six months ended June 30,  2016 (unaudited) and 2015 (unaudited)

     F-2   
  

Consolidated Statements of Changes in Net Assets for the six months ended June 30, 2016 (unaudited) and 2015 (unaudited)

     F-3   
  

Consolidated Statements of Cash Flows for the six months ended June 30, 2016 (unaudited) and 2015 (unaudited)

     F-4   
  

Consolidated Schedule of Investments as of June 30, 2016 (unaudited)

     F-5   
  

Consolidated Schedule of Investments as of December 31, 2015

     F-15   
  

Notes to Consolidated Financial Statements (unaudited)

     F-24   

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

     1   

Item 3.       Quantitative and Qualitative Disclosures About Market Risk

     19   

Item 4.      Controls and Procedures

     20   

Part II.    Other Information

  

Item 1.      Legal Proceedings

     20   

Item 1A.  Risk Factors

     20   

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

     20   

Item 3.      Defaults Upon Senior Securities

     21   

Item 4.      Mine Safety Disclosures

     21   

Item 5.      Other Information

     21   

Item 6.      Exhibits

     22   

SIGNATURES

     23   


Table of Contents

Sierra Income Corporation

Consolidated Statements of Assets and Liabilities

 

     As of  
     June 30, 2016     December 31, 2015  
     (unaudited)        

ASSETS

    

Investments at fair value

    

Non-controlled/non-affiliated investments (amortized cost of $941,804,086 and $911,640,087, respectively)

   $ 881,936,697      $ 859,500,211   

Controlled/affiliated investments (amortized cost of $58,535,000 and $47,772,500, respectively)

     58,467,375        47,862,233   
  

 

 

   

 

 

 

Total investments at fair value

     940,404,072        907,362,444   

Cash and cash equivalents

     116,434,068        93,658,142   

Cash collateral on total return swap (Note 5)

     79,010,146        77,029,970   

Due from affiliate (Note 7)

     9,454,153        7,314,867   

Dividends and interest receivable from non-controlled/non-affiliated investments

     5,018,675        7,354,828   

Receivable due on total return swap (Note 5)

     1,606,716        1,493,253   

Prepaid expenses and other assets

     409,927        121,098   

Unsettled trades receivable

     294,388        270,936   

Interest receivable from controlled/affiliated investments

     71,999        101,250   
  

 

 

   

 

 

 

Total assets

   $ 1,152,704,144      $ 1,094,706,788   
  

 

 

   

 

 

 

LIABILITIES

    

Revolving credit facilities payable (net of deferred financing costs of $2,650,105 and $3,239,404, respectively)

   $ 357,349,895      $ 381,760,596   

Unsettled trades payable

     25,093,037        —     

Unrealized depreciation on total return swap (Note 5)

     23,336,588        27,365,819   

Management fee payable

     4,952,577        4,686,096   

Incentive fees

     3,231,942        1,795,268   

Accounts payable and accrued expenses

     1,684,365        2,181,149   

Interest payable

     1,203,031        1,281,471   

Administrator fees payable

     633,696        517,930   

Due to affiliate (Note 7)

     135,784        695,533   

Deferred tax liability

     378,460        298,827   
  

 

 

   

 

 

 

Total liabilities

   $ 417,999,375      $ 420,582,689   
  

 

 

   

 

 

 

Commitments (Note 11)

    

NET ASSETS

    

Common shares, par value $0.001 per share, 250,000,000 common shares authorized, 90,539,160 and 82,623,649 common shares issued and outstanding, respectively

   $ 90,539      $ 82,624   

Capital in excess of par value

     797,001,142        732,493,115   

Accumulated distribution in excess of net realized gain/(loss) from investments and total return swap

     4,247,569        (1,797

Accumulated undistributed net investment income

     16,928,981        21,178,346   

Net unrealized appreciation/(depreciation) on investments and total return swap, net of provision for taxes of $291,860 and $212,227, respectively

     (83,563,462     (79,628,189
  

 

 

   

 

 

 

Total net assets

     734,704,769        674,124,099   
  

 

 

   

 

 

 

Total liabilities and net assets

   $ 1,152,704,144      $ 1,094,706,788   
  

 

 

   

 

 

 

NET ASSET VALUE PER SHARE

   $ 8.11      $ 8.16   
  

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

F-1


Table of Contents

Sierra Income Corporation

Consolidated Statements of Operations

 

     For the three months ended
June 30,
    For the six months ended
June 30,
 
     2016     2015     2016     2015  
     (unaudited)     (unaudited)     (unaudited)     (unaudited)  

INVESTMENT INCOME

        

Interest from investments

        

Non-controlled/non-affiliated investments:

        

Cash

   $ 19,917,280      $ 16,956,876      $ 39,237,601      $ 31,289,217   

Payment-in-kind

     1,913,901        323,005        3,486,531        670,158   

Controlled/affiliated investments:

        

Cash

     1,652,999        —          2,583,999        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     23,484,180        17,279,881        45,308,131        31,959,375   

Fee income

     1,298,541        5,020,430        2,693,753        6,347,504   

Interest from cash

     14,328        136        21,670        387   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

     24,797,049        22,300,447        48,023,554        38,307,266   
  

 

 

   

 

 

   

 

 

   

 

 

 

EXPENSES

        

Base management fee

     4,952,577        4,243,146        9,750,206        7,963,543   

Interest and financing expenses

     3,221,892        2,125,092        6,662,609        3,957,723   

Incentive fee

     3,231,942        2,122,395        5,503,705        2,392,892   

General and administrative expenses

     1,185,743        801,786        2,675,706        2,137,101   

Offering costs

     607,761        1,674,904        1,370,960        2,067,657   

Administrator expenses

     633,695        538,692        1,216,901        1,094,441   

Professional fees

     302,334        623,994        865,554        1,173,975   

Organizational and offering costs reimbursed to SIC Advisors (Note 7)

     —          —          —          443,687   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total gross expenses

     14,135,944        12,130,009        28,045,641        21,231,019   

Net expense support reimbursement (Note 7)

     (5,498,606     (1,941,494     (10,703,502     (3,935,012
  

 

 

   

 

 

   

 

 

   

 

 

 

Net expenses

     8,637,338        10,188,515        17,342,139        17,296,007   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INVESTMENT INCOME

     16,159,711        12,111,932        30,681,415        21,011,259   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain/(loss) from non-controlled/non-affiliated investments

     94,789        412,436        164,727        (333,229

Net realized gain on total return swap (Note 5)

     1,654,727        2,720,032        4,084,639        5,620,349   

Net change in unrealized appreciation/(depreciation) on non-controlled/non-affiliated investments

     244,327        (1,274,336     (7,727,513     (3,137,452

Net change in unrealized appreciation/(depreciation) on controlled/affiliated investments

     (130,260     —          (157,358     —     

Net change in unrealized appreciation/(depreciation) on total return swap (Note 5)

     6,704,542        (2,115,849     4,029,231        691,168   

Change in provision for deferred taxes on unrealized gain on investments

     (7,048     (284,849     (79,633     (284,849
  

 

 

   

 

 

   

 

 

   

 

 

 

Net gain/(loss) on investments and total return swap

     8,561,077        (542,566     314,093        2,555,987   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

   $ 24,720,788      $ 11,569,366      $ 30,995,508      $ 23,567,246   
  

 

 

   

 

 

   

 

 

   

 

 

 

WEIGHTED AVERAGE — BASIC AND DILUTED EARNINGS PER COMMON SHARE

   $ 0.28      $ 0.17      $ 0.36      $ 0.37   

WEIGHTED AVERAGE — BASIC AND DILUTED NET INVESTMENT INCOME PER COMMON SHARE

   $ 0.18      $ 0.18      $ 0.35      $ 0.33   

WEIGHTED AVERAGE COMMON STOCK OUTSTANDING — BASIC AND DILUTED (Note 10)

     89,644,821        67,418,067        87,245,126        62,912,383   

DIVIDENDS DECLARED PER COMMON SHARE

   $ 0.20      $ 0.20      $ 0.40      $ 0.40   

See accompanying notes to the consolidated financial statements.

 

F-2


Table of Contents

Sierra Income Corporation

Consolidated Statements of Changes in Net Assets

 

     For the six months ended June 30,  
             2016                     2015          
     (unaudited)     (unaudited)  

INCREASE/(DECREASE) FROM OPERATIONS

  

Net investment income

   $ 30,681,415      $ 21,011,259   

Net realized gain/(loss) on investments

     164,727        (333,229

Net realized gain on total return swap (Note 5)

     4,084,639        5,620,349   

Net change in unrealized appreciation/(depreciation) on investments

     (7,884,871     (3,137,452

Net change in unrealized appreciation/(depreciation) on total return swap (Note 5)

     4,029,231        691,168   

Change in provision for deferred taxes on unrealized gain on investments

     (79,633     (284,849
  

 

 

   

 

 

 

Net increase in net assets resulting from operations

     30,995,508        23,567,246   
  

 

 

   

 

 

 

SHAREHOLDER DISTRIBUTIONS

    

Distributions from net investment income (Note 2)

     (34,930,780     (25,374,463
  

 

 

   

 

 

 

Net decrease in net assets from shareholder distributions

     (34,930,780     (25,374,463
  

 

 

   

 

 

 

COMMON SHARE TRANSACTIONS

    

Issuance of common shares, net of underwriting costs

     62,783,775        143,906,427   

Issuance of common shares pursuant to distribution reinvestment plan

     16,586,426        12,091,162   

Repurchase of common shares

     (14,854,259     (1,686,151
  

 

 

   

 

 

 

Net increase in net assets resulting from common share transactions

     64,515,942        154,311,438   
  

 

 

   

 

 

 

Total increase in net assets

     60,580,670        152,504,221   

Net assets at beginning of period

     674,124,099        486,519,913   
  

 

 

   

 

 

 

Net assets at end of period (including accumulated undistributed net investment income of $16,928,981 and $5,155,137, respectively)

   $ 734,704,769      $ 639,024,134   
  

 

 

   

 

 

 

Net asset value per common share

   $ 8.11      $ 8.96   

Common shares outstanding, beginning of period

     82,623,649        54,260,324   

Issuance of common shares

     7,690,755        15,923,836   

Issuance of common shares pursuant to distribution reinvestment plan

     2,040,376        1,356,925   

Repurchase of common shares

     1,815,640        (187,846
  

 

 

   

 

 

 

Common shares outstanding, end of period

     90,539,160        71,353,239   
  

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

F-3


Table of Contents

Sierra Income Corporation

Consolidated Statements of Cash Flows

 

     For the six months ended
June 30,
 
     2016     2015  
     (unaudited)     (unaudited)  

Cash flows from operating activities

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

   $ 30,995,508      $ 23,567,246   

ADJUSTMENT TO RECONCILE NET INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS TO NET CASH USED IN OPERATING ACTIVITIES

    

Payment-in-kind interest income

     (3,486,531     (670,158

Net amortization of premium on investments

     (399,569     (369,238

Amortization of deferred financing costs

     626,800        610,714   

Net realized (gain)/loss on investments

     (164,727     333,229   

Net change in unrealized (appreciation)/depreciation on investments

     7,884,871        3,137,452   

Net change in unrealized (appreciation)/depreciation on total return swap (Note 5)

     (4,029,231     (691,168

Purchases and Originations

     (133,789,231     (325,397,031

Proceeds from sale of investments and principal repayments

     96,913,559        68,736,720   

(Increase)/decrease in operating assets:

    

Cash collateral on total return swap (Note 5)

     (1,980,176     (4,580,838

Unsettled trades receivable

     (23,452     (261,095

Due from affiliate

     (2,139,286     617,065   

Interest receivable

     2,365,404        (1,958,775

Receivable due on total return swap (Note 5)

     (113,463     (1,300,408

Prepaid expenses and other assets

     (288,829     (216,576

Increase/(decrease) in operating liabilities:

    

Unsettled trades payable

     25,093,037        (16,935,000

Management fee payable

     266,481        971,760   

Accounts payable and accrued expenses

     (496,784     (85,454

Incentive fee payable

     1,436,674        2,122,394   

Administrator fees payable

     115,766        88,634   

Interest payable

     (78,440     426,877   

Deferred tax liability

     79,633        284,849   

Due to affiliate

     (559,749     (1,367,769
  

 

 

   

 

 

 

NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES

     18,228,265        (252,936,570
  

 

 

   

 

 

 

Cash flows from financing activities

    

Borrowings under revolving credit facility

     35,000,000        234,000,000   

Repayments of revolving credit facility

     (60,000,000     (150,000,000

Proceeds from issuance of common stock, net of underwriting costs

     62,783,775        143,906,427   

Payment of cash dividends

     (18,344,354     (13,283,301

Financing costs paid

     (37,501     (1,617,773

Repurchase of common shares

     (14,854,259     (1,686,151
  

 

 

   

 

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

     4,547,661        211,319,202   
  

 

 

   

 

 

 

TOTAL INCREASE/(DECREASE) IN CASH

     22,775,926        (41,617,368

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     93,658,142        65,749,154   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 116,434,068      $ 24,131,786   
  

 

 

   

 

 

 

Supplemental Information

    

Cash paid during the period for interest

   $ 6,741,049      $ 3,530,846   

Supplemental non-cash information

    

Payment-in-kind interest income

   $ 3,486,531      $ 670,158   

Amortization of deferred financing costs

   $ 626,800      $ 610,714   

Net amortization of premium on investments

   $ 399,569      $ 369,238   

Issuance of common shares in connection with distribution reinvestment plan

   $ 16,586,426      $ 12,091,162   

See accompanying notes to the consolidated financial statements.

 

F-4


Table of Contents

Sierra Income Corporation

Consolidated Schedule of Investments

As of June 30, 2016

(unaudited)

 

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
   
Cost
    Fair Value     % of
Net  Assets(2)
 

Non-controlled/non-affiliated
investments – 120.0%

           

AAR Intermediate Holdings, LLC

  Energy: Oil & Gas   Senior Secured First Lien Term Loans LIBOR + 14.000% PIK, 1.000% Floor(3)(4)(5)     3/30/2019      $ 11,665,022      $ 11,223,897      $ 6,823,221        0.9
    Warrants to purchase 0.871% of outstanding company equity(4)(6)     3/30/2019        —          790,778        —          0.0
       

 

 

   

 

 

   

 

 

   
          11,665,022        12,014,675        6,823,221     

Access Media Holding LLC

  Media: Broadcasting
& Subscription
  Common Stock(4)(6)       —          —          —          0.0
    Preferred Equity Series A (12.000%)(4)       1,536,442        1,536,442        71,137        0.0
    Preferred Equity Series AA (12.000%)(4)       418,613        418,613        418,613        0.1
    Senior Secured First Lien Term Loans 5.000%, 5.000% PIK(4)     7/22/2020        6,850,054        6,850,054        6,850,054        0.9
       

 

 

   

 

 

   

 

 

   
          8,805,109        8,805,109        7,339,804     

Advanced Diagnostic Holdings LLC

  Healthcare &
Pharmaceuticals
 

Senior Secured First Lien Term Loans

LIBOR + 8.750%,

0.875% Floor(4)(7)

    12/11/2020        15,359,822        15,359,822        15,561,496        2.1
       

 

 

   

 

 

   

 

 

   
          15,359,822        15,359,822        15,561,496     

Alpha Media LLC

  Media: Broadcasting
& Subscription
  Senior Secured First Lien Term Loans LIBOR + 6.000%, 1.000% Floor(3)     2/25/2022        9,628,125        9,210,649        9,194,859        1.3
       

 

 

   

 

 

   

 

 

   
          9,628,125        9,210,649        9,194,859     

American Beacon Advisors, Inc.(8)

  Banking, Finance,
Insurance & Real
Estate
  Senior Secured Second Lien Term Loans LIBOR + 8.750%, 1.000% Floor(7)     4/30/2023        6,000,000        5,897,007        5,877,000        0.8
       

 

 

   

 

 

   

 

 

   
          6,000,000        5,897,007        5,877,000     

AMMC CLO 17, Limited Series 2015-17A(9)

  Multi-Sector
Holdings
  Subordinated Notes 17.374% estimated yield(10)     11/15/2027        5,000,000        3,643,323        4,000,000        0.5
       

 

 

   

 

 

   

 

 

   
          5,000,000        3,643,323        4,000,000     

Anaren, Inc.

  Aerospace &
Defense
  Senior Secured Second Lien Term Loans LIBOR + 8.250%, 1.000% Floor(7)     8/18/2021        10,000,000        9,923,923        9,554,200        1.3
       

 

 

   

 

 

   

 

 

   
          10,000,000        9,923,923        9,554,200     

APCO Holdings, Inc.

  Automotive  

Senior Secured First Lien Term Loans LIBOR + 6.000%,

1.000% Floor(3)(4)

    1/31/2022        4,471,875        4,346,339        4,337,719        0.6
       

 

 

   

 

 

   

 

 

   
          4,471,875        4,346,339        4,337,719     

 

See accompanying notes to consolidated financial statements.

 

F-5


Table of Contents

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
   
Cost
    Fair Value     % of
Net  Assets(2)
 

Aperture Group, LLC

  Banking, Finance,
Insurance & Real
Estate
  Senior Secured First Lien Term Loans LIBOR + 6.250%, 1.000% Floor(7)     8/29/2019      $ 2,309,881      $ 2,302,039      $ 2,309,881        0.3
       

 

 

   

 

 

   

 

 

   
          2,309,881        2,302,039        2,309,881     

Associated Asphalt Partners, LLC

  Chemicals, Plastics
& Rubber
  Senior Secured First Lien Notes 8.500%(11)     2/15/2018        1,778,000        1,784,190        1,801,807        0.2
       

 

 

   

 

 

   

 

 

   
          1,778,000        1,784,190        1,801,807     

Asurion Corp.

  Banking, Finance,
Insurance & Real
Estate
  Senior Secured Second Lien Term Loans LIBOR + 7.500%, 1.000% Floor(7)     3/3/2021        7,000,000        6,946,815        6,702,500        0.9
       

 

 

   

 

 

   

 

 

   
    7,000,000        6,946,815        6,702,500     

Atrium Innovations, Inc.(9)

  Healthcare &
Pharmaceuticals
  Senior Secured Second Lien Term Loans LIBOR + 6.750%, 1.000% Floor(7)     8/13/2021        5,000,000        4,981,363        4,229,700        0.6
       

 

 

   

 

 

   

 

 

   
          5,000,000        4,981,363        4,229,700     

Aviation Technical Services, Inc.

  Aerospace &
Defense
 

Senior Secured Second Lien Term Loans LIBOR + 8.500%,

1.000% Floor(4)(7)

    3/31/2022        22,500,000        22,500,000        22,637,250        3.1
       

 

 

   

 

 

   

 

 

   
          22,500,000        22,500,000        22,637,250     

Backcountry.com, LLC

  Retail   Senior Secured First Lien Term Loans LIBOR + 7.250%, 1.000% Floor(4)(7)     6/30/2020        34,809,461        34,809,461        35,157,556        4.8
       

 

 

   

 

 

   

 

 

   
          34,809,461        34,809,461        35,157,556     

Bennu Oil & Gas, LLC

  Energy: Oil & Gas   Senior Secured Second Lien Term Loans LIBOR + 8.500%, 1.250% Floor, 2.500% PIK(7)     11/1/2018        5,645,335        5,642,465        1,721,771        0.2
       

 

 

   

 

 

   

 

 

   
          5,645,335        5,642,465        1,721,771     

Birch Communications, Inc.

  Telecommunications  

Senior Secured First Lien Term Loans

LIBOR + 6.750%,

1.000% Floor(3)(4)

    7/17/2020        14,003,612        13,809,617        13,687,550        1.9
       

 

 

   

 

 

   

 

 

   
          14,003,612        13,809,617        13,687,550     

Black Angus Steakhouses LLC

  Hotel, Gaming &
Leisure
 

Revolver

LIBOR + 9.000%,

1.000% Floor(4)(7)(12)

    4/24/2020        334,822        334,822        323,527        0.0
   

Senior Secured First Lien Delayed Draw

LIBOR + 9.000%,

1.000% Floor(4)(12)

    4/24/2020        —          —          —          0.0
   

Senior Secured First Lien Term loans

LIBOR + 9.000%, 1.000% Floor(4)(7)

    4/24/2020        19,893,973        19,893,973        19,405,649        2.7
       

 

 

   

 

 

   

 

 

   
          20,228,795        20,228,795        19,729,176     

Brundage-Bone Concrete Pumping, Inc.

  Construction &
Building
  Senior Secured First Lien Notes 10.375%(11)     9/1/2021        7,500,000        7,616,494        7,640,625        1.0
       

 

 

   

 

 

   

 

 

   
          7,500,000        7,616,494        7,640,625     

 

See accompanying notes to consolidated financial statements.

 

F-6


Table of Contents

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
   
Cost
    Fair Value     % of
Net  Assets(2)
 

Capstone Nutrition

  Healthcare &
Pharmaceuticals
  Common Stock(4)(6)     $ —        $ 300,002      $ —          0.0
   

Common Stock,

Class B(4)(6)

      —          9        —          0.0
   

Common Stock,

Class C(4)(6)

      —          —          —          0.0
   

Senior Secured First Lien Term Loans

LIBOR + 12.500%, 1.000% Floor, PIK(3)(4)(5)

    4/28/2019        23,657,270        23,657,270        14,585,180        2.0
       

 

 

   

 

 

   

 

 

   
          23,657,270        23,957,281        14,585,180     

Charming Charlie LLC

  Retail   Senior Secured First Lien Term Loans LIBOR + 8.000%, 1.000% Floor(7)     12/24/2019        8,209,193        8,222,998        7,705,313        1.1
       

 

 

   

 

 

   

 

 

   
          8,209,193        8,222,998        7,705,313     

ContMid Intermediate, Inc.

  Automotive  

Senior Secured Second Lien Term Loans

LIBOR + 9.000%,

1.000% Floor(3)(4)

    10/25/2019        27,908,193        27,908,193        28,030,710        3.8
       

 

 

   

 

 

   

 

 

   
          27,908,193        27,908,193        28,030,710     

ConvergeOne Holdings Corp.

  Telecommunications  

Senior Secured Second Lien Term Loans

LIBOR + 8.000%, 1.000% Floor(4)(7)

    6/17/2021        12,500,000        12,402,941        12,330,125        1.7
       

 

 

   

 

 

   

 

 

   
          12,500,000        12,402,941        12,330,125     

Cornerstone Chemical Company

  Chemicals, Plastics
& Rubber
  Senior Secured First Lien Notes 9.375%(11)(13)     3/15/2018        4,970,000        4,839,947        4,684,225        0.6
       

 

 

   

 

 

   

 

 

   
          4,970,000        4,839,947        4,684,225     

CP OpCo, LLC

  Services: Consumer  

Senior Secured First Lien Term Loans

LIBOR + 6.750%, 1.000% Floor(4)(7)

    9/30/2020        3,000,000        3,000,000        2,880,960        0.4
       

 

 

   

 

 

   

 

 

   
          3,000,000        3,000,000        2,880,960     

CRGT, Inc.

  High Tech
Industries
 

Senior Secured First Lien Term Loans

LIBOR + 6.500%, 1.000% Floor(4)(7)

    12/19/2020        4,689,873        4,689,874        4,654,371        0.6
       

 

 

   

 

 

   

 

 

   
          4,689,873        4,689,874        4,654,371     

DHISCO Electronic Distribution, Inc.

  Hotel, Gaming &
Leisure
 

Revolver LIBOR + 9.000%, 1.500%

Floor(4)(7)(12)

    5/10/2017        —          —          —          0.0
    Senior Secured First Lien Term loans LIBOR + 9.000% PIK, 1.500% Floor(4)(7)     2/10/2018        4,248,736        4,248,736        4,134,954        0.6
    Senior Secured First Lien Term loans LIBOR + 9.000%, 1.500% Floor(4)(7)     11/10/2019        19,523,810        19,523,810        19,033,176        2.6
    Warrants to purchase 4.2% of the outstanding equity(4)(6)     2/10/2018        —          769,231        853,869        0.1
       

 

 

   

 

 

   

 

 

   
          23,772,546        24,541,777        24,021,999     

 

See accompanying notes to consolidated financial statements.

 

F-7


Table of Contents

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
   
Cost
    Fair Value     % of
Net  Assets(2)
 

Drew Marine Partners, LP

  Transportation: Cargo   Senior Secured Second Lien Term Loans LIBOR + 7.000%, 1.000% Floor(7)     5/19/2021      $ 10,000,000      $ 10,060,614      $ 9,455,700        1.3
       

 

 

   

 

 

   

 

 

   
          10,000,000        10,060,614        9,455,700     

Dryden Senior Loan Fund — 37 Series 2015-37A(9)

  Multi-Sector
Holdings
  Subordinated Notes 22.698% estimated yield(10)     4/15/2027        4,000,000        2,800,000        2,800,000        0.4
       

 

 

   

 

 

   

 

 

   
          4,000,000        2,800,000        2,800,000     

Dryden Senior Loan Fund — 38 Series 2015-38A(9)

  Multi-Sector
Holdings
  Subordinated Notes 17.689% estimated yield(10)     7/15/2027        7,000,000        5,162,500        5,162,500        0.7
       

 

 

   

 

 

   

 

 

   
          7,000,000        5,162,500        5,162,500     

Dynamic Energy Services International LLC

  Energy: Oil & Gas   Senior Secured First Lien Term Loans LIBOR + 8.500%, 1.000% Floor, 1.5% PIK(3)(4)     3/6/2018        8,541,760        8,541,760        8,194,538        1.1
       

 

 

   

 

 

   

 

 

   
          8,541,760        8,541,760        8,194,538     

EarthLink, Inc.(9)

  Telecommunications   Senior Secured First Lien Notes 7.375%(11)(13)     6/1/2020        2,450,000        2,441,697        2,554,125        0.3
       

 

 

   

 

 

   

 

 

   
          2,450,000        2,441,697        2,554,125     

Elite Comfort Solutions LLC

  Chemicals, Plastics
& Rubber
 

Senior Secured First Lien Term Loans

LIBOR + 6.500%, 1.000% Floor(3)(12)

    1/15/2021        7,422,987        7,422,987        7,422,987        1.0
       

 

 

   

 

 

   

 

 

   
          7,422,987        7,422,987        7,422,987     

First Boston Construction Holdings, LLC

  Banking, Finance,
Insurance & Real
Estate
  Preferred Equity(4)(6)(12)       1,300,781        1,300,781        1,300,781        0.2
    Senior Secured First Lien Notes 12.000%(4)(12)     12/31/2020        5,203,125        5,203,125        5,232,713        0.7
       

 

 

   

 

 

   

 

 

   
          6,503,906        6,503,906        6,533,494     

FKI Security Group LLC

  Capital Equipment  

Senior Secured First Lien Term Loans

LIBOR + 8.500%,

1.000% Floor(4)(7)

    3/30/2020        14,625,000        14,625,000        14,232,611        1.9
       

 

 

   

 

 

   

 

 

   
          14,625,000        14,625,000        14,232,611     

Frontier Communications Corp.(9)

  Telecommunications   Senior Secured First Lien Notes 10.250%(11)(13)     9/15/2022        2,000,000        2,000,000        2,020,000        0.3
       

 

 

   

 

 

   

 

 

   
          2,000,000        2,000,000        2,020,000     

Gastar Exploration USA, Inc.

  Energy: Oil & Gas   Senior Secured First Lien Notes 8.625%(11)(13)     5/15/2018        5,400,000        5,407,859        4,522,500        0.6
       

 

 

   

 

 

   

 

 

   
          5,400,000        5,407,859        4,522,500     

Genex Holdings, Inc.(8)

  Banking, Finance,
Insurance & Real
Estate
  Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.000% Floor(7)     5/30/2022        9,500,000        9,526,867        9,194,765        1.3
       

 

 

   

 

 

   

 

 

   
          9,500,000        9,526,867        9,194,765     

GK Holdings, Inc.

  Services: Business   Senior Secured Second Lien Term Loans LIBOR + 9.500%, 1.000% Floor(3)     1/30/2022        10,000,000        10,000,000        9,654,600        1.3
       

 

 

   

 

 

   

 

 

   
          10,000,000        10,000,000        9,654,600     

 

See accompanying notes to consolidated financial statements.

 

F-8


Table of Contents

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
   
Cost
    Fair Value     % of
Net  Assets(2)
 

Green Field Energy Services, Inc.

  Energy: Oil & Gas   Senior Secured First Lien Notes 13.000%(4)(5)(11)     11/15/2016      $ 766,616      $ 754,300      $ 157,156        0.0
   

Warrants/Equity(4)(6)

      —          29,000        —          0.0
       

 

 

   

 

 

   

 

 

   
          766,616        783,300        157,156     

HBC Holdings LLC

  Wholesale  

Senior Secured First Lien Term Loans

LIBOR + 5.750%,

1.000% Floor(4)(7)

    3/30/2020        14,737,500        14,737,500        13,753,625        1.9
       

 

 

   

 

 

   

 

 

   
          14,737,500        14,737,500        13,753,625     

Heligear Acquisition Co.

  Aerospace &
Defense
  Senior Secured First Lien Notes 10.250%(4)(11)     10/15/2019        15,000,000        15,000,000        15,672,000        2.1
       

 

 

   

 

 

   

 

 

   
          15,000,000        15,000,000        15,672,000     

Hill International, Inc.(9)

  Construction &
Building
 

Senior Secured First Lien Term Loans

LIBOR + 6.750%,

1.000% Floor(4)(7)

    9/28/2020        16,702,500        16,702,500        16,345,234        2.2
       

 

 

   

 

 

   

 

 

   
          16,702,500        16,702,500        16,345,234     

Holland Acquisition Corp.

  Energy: Oil & Gas   Senior Secured First Lien Term Loans LIBOR + 9.000%, 1.000% Floor(7)     5/29/2018        4,515,605        4,472,159        4,044,808        0.6
       

 

 

   

 

 

   

 

 

   
          4,515,605        4,472,159        4,044,808     

Ignite Restaurant Group, Inc.

  Hotel, Gaming &
Leisure
  Senior Secured First Lien Term Loans LIBOR + 7.000%, 1.000% Floor(7)     2/13/2019        8,901,116        8,813,567        8,752,289        1.2
       

 

 

   

 

 

   

 

 

   
          8,901,116        8,813,567        8,752,289     

IHS Intermediate, Inc.

  Services: Business   Senior Secured Second Lien Term Loans LIBOR + 8.250%, 1.000% Floor(7)     7/20/2022        25,000,000        25,000,000        24,785,250        3.4
       

 

 

   

 

 

   

 

 

   
          25,000,000        25,000,000        24,785,250     

Imagine! Print Solutions, LLC(9)

  Media: Advertising,
Printing &
Publishing
  Senior Secured First Lien Term Loans LIBOR + 6.000%, 1.000% Floor(7)     3/30/2022        4,114,688        4,055,303        4,052,967        0.6
       

 

 

   

 

 

   

 

 

   
          4,114,688        4,055,303        4,052,967     

Interface Security Systems Holdings, Inc.

  Services: Consumer   Senior Secured First Lien Notes 9.250%(11)(13)     1/15/2018        3,417,000        3,442,167        3,280,320        0.4
       

 

 

   

 

 

   

 

 

   
          3,417,000        3,442,167        3,280,320     

Invision Diversified, LLC

  Services: Business  

Senior Secured First Lien Term Loans

LIBOR + 9.000%,

1.000% Floor(4)(7)

    6/30/2020        24,647,685        24,647,685        24,574,482        3.3
       

 

 

   

 

 

   

 

 

   
          24,647,685        24,647,685        24,574,482     

IPS Corporation

  Wholesale   Senior Secured First Lien Term Loans LIBOR + 6.250%, 1.000% Floor(3)     2/5/2021        9,850,205        9,850,205        9,623,355        1.3
       

 

 

   

 

 

   

 

 

   
          9,850,205        9,850,205        9,623,355     

IronGate Energy Services, LLC

  Energy: Oil & Gas   Senior Secured First Lien Notes 11.000%(11)     7/1/2018        3,000,000        2,973,811        568,320        0.1
       

 

 

   

 

 

   

 

 

   
          3,000,000        2,973,811        568,320     

 

See accompanying notes to consolidated financial statements.

 

F-9


Table of Contents

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
   
Cost
    Fair Value     % of
Net  Assets(2)
 

Isola USA Corp.(8)

  High Tech
Industries
  Senior Secured First Lien Term Loans LIBOR + 8.250%, 1.000% Floor(7)     11/29/2018      $ 5,609,163      $ 5,683,191      $ 5,041,684        0.7
       

 

 

   

 

 

   

 

 

   
          5,609,163        5,683,191        5,041,684     

JAC Holding Corp.

  Automotive   Senior Secured First Lien Notes 11.500%(4)(11)     10/1/2019        11,473,000        11,473,000        12,132,698        1.7
       

 

 

   

 

 

   

 

 

   
          11,473,000        11,473,000        12,132,698     

Jordan Reses Supply Company, LLC

  Healthcare &
Pharmaceuticals
 

Senior Secured Second Lien Term Loans

LIBOR + 11.000%, 1.000% Floor(4)(7)

    4/24/2020        5,000,000        5,000,000        5,048,350        0.7
       

 

 

   

 

 

   

 

 

   
          5,000,000        5,000,000        5,048,350     

Liquidnet Holdings, Inc.

  Banking, Finance,
Insurance & Real
Estate
  Senior Secured First Lien Term Loans LIBOR + 6.750%, 1.000% Floor(7)     5/22/2019        6,300,000        6,239,826        6,075,468        0.8
       

 

 

   

 

 

   

 

 

   
          6,300,000        6,239,826        6,075,468     

Livingston International, Inc.(8)(9)

  Transportation: Cargo   Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.250% Floor(7)     4/17/2020        2,658,504        2,655,187        2,534,937        0.3
       

 

 

   

 

 

   

 

 

   
          2,658,504        2,655,187        2,534,937     

Loar Group, Inc.

  Aerospace &
Defense
  Senior Secured Second Lien Term Loans LIBOR + 9.250%, 1.000% Floor(3)     7/12/2022        15,000,000        15,000,000        15,000,000        2.0
       

 

 

   

 

 

   

 

 

   
          15,000,000        15,000,000        15,000,000     

LSF9 Atlantis Holdings, LLC

  Retail  

Senior Secured First Lien Term Loans

LIBOR + 9.000%,

1.000% Floor(4)(7)

    1/15/2021        9,875,000        9,784,894        9,776,250        1.3
       

 

 

   

 

 

   

 

 

   
          9,875,000        9,784,894        9,776,250     

LTCG Holdings Corp.

  Banking, Finance,
Insurance & Real
Estate
  Senior Secured First Lien Term Loans LIBOR + 5.000%, 1.000% Floor(7)     6/6/2020        2,838,571        2,828,654        2,632,463        0.4
       

 

 

   

 

 

   

 

 

   
          2,838,571        2,828,654        2,632,463     

Maxim Crane Works LP

  Capital Equipment   Senior Secured Second Lien Term Loans LIBOR + 9.250%, 1.000% Floor(7)     11/26/2018        6,500,000        6,303,594        6,456,645        0.9
       

 

 

   

 

 

   

 

 

   
          6,500,000        6,303,594        6,456,645     

Miller Heiman, Inc.

  Services: Business   Senior Secured First Lien Term Loans LIBOR + 6.000%, 1.000% Floor(7)     9/30/2019        23,750,000        23,750,000        19,803,938        2.7
       

 

 

   

 

 

   

 

 

   
          23,750,000        23,750,000        19,803,938     

Nathan’s Famous, Inc.

  Beverage & Food   Senior Secured First Lien Notes 10.000%(13)     3/15/2020        7,000,000        7,000,000        7,472,500        1.0
       

 

 

   

 

 

   

 

 

   
          7,000,000        7,000,000        7,472,500     

Nation Safe Drivers Holdings, Inc.

  Banking, Finance,
Insurance & Real
Estate
 

Senior Secured Second Lien Term Loans

LIBOR + 8.000%, 2.000% Floor(4)(7)

    9/29/2020        20,676,479        20,676,479        21,053,618        2.9
       

 

 

   

 

 

   

 

 

   
          20,676,479        20,676,479        21,053,618     

 

See accompanying notes to consolidated financial statements.

 

F-10


Table of Contents

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
   
Cost
    Fair Value     % of
Net  Assets(2)
 

New Media Holdings II, LLC

  Media: Advertising,
Printing &
Publishing
  Senior Secured First Lien Term Loans LIBOR + 6.250%, 1.000% Floor(7)     6/4/2020      $ 18,135,983      $ 18,119,882      $ 17,802,462        2.5
       

 

 

   

 

 

   

 

 

   
          18,135,983        18,119,882        17,802,462     

Newpage Corp.

  Media: Advertising,
Printing &
Publishing
  Senior Secured First Lien Term Loans LIBOR + 9.500%, 1.500% Floor(3)     7/26/2017        1,633,333        1,633,333        1,633,333        0.2
    Senior Secured First Lien Term Loans LIBOR + 9.500%, 1.500% Floor PIK(3)     7/26/2017        1,679,248        1,658,775        1,679,248        0.2
   

Senior Secured First Lien Term Loans

LIBOR + 8.250%,

1.250% Floor(3)(5)

    2/11/2021        8,116,667        8,046,658        1,004,438        0.1
       

 

 

   

 

 

   

 

 

   
          11,429,248        11,338,766        4,317,019     

Novetta Solutions, LLC

  High Tech
Industries
  Senior Secured Second Lien Term Loans LIBOR + 8.500%, 1.000% Floor(7)     10/16/2023        11,000,000        10,899,291        10,644,810        1.5
       

 

 

   

 

 

   

 

 

   
          11,000,000        10,899,291        10,644,810     

Omnitracs, Inc.

  High Tech
Industries
  Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.000% Floor(7)     5/25/2021        7,000,000        7,012,121        6,273,750        0.9
       

 

 

   

 

 

   

 

 

   
          7,000,000        7,012,121        6,273,750     

Oxford Mining Company, LLC

  Metals & Mining  

Senior Secured First Lien Term Loans LIBOR + 8.500%, 0.750% Floor,

3.000% PIK(4)(7)

    12/31/2018        20,562,776        20,562,776        19,693,999        2.7
       

 

 

   

 

 

   

 

 

   
          20,562,776        20,562,776        19,693,999     

Payless Inc.(8)

  Retail   Senior Secured Second Lien Term Loans LIBOR + 7.500%, 1.000% Floor(7)     3/11/2022        6,000,000        6,015,666        2,744,760        0.4
       

 

 

   

 

 

   

 

 

   
          6,000,000        6,015,666        2,744,760     

RealD, Inc.

  Media: Diversified
& Production
  Equity/Warrants(4)(6)       —          297,962        3,162,793        0.4
   

Equity/Warrants 10.000% PIK(4)

      —          7,449,038        4,584,213        0.6
       

 

 

   

 

 

   

 

 

   
          —          7,747,000        7,747,006     

Reddy Ice Corporation

  Beverage & Food   Senior Secured Second Lien Term Loans LIBOR + 9.500%, 1.250% Floor(3)(4)     11/1/2019        2,000,000        2,000,000        1,595,320        0.2
       

 

 

   

 

 

   

 

 

   
          2,000,000        2,000,000        1,595,320     

Research Now Group, Inc.

  Services: Business   Senior Secured Second Lien Term Loans LIBOR + 8.750%, 1.000% Floor(7)     3/18/2022        15,000,000        15,000,000        14,141,700        1.9
       

 

 

   

 

 

   

 

 

   
          15,000,000        15,000,000        14,141,700     

 

See accompanying notes to consolidated financial statements.

 

F-11


Table of Contents

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
   
Cost
    Fair Value     % of
Net  Assets(2)
 

Response Team Holdings, LLC

  Construction &
Building
  Preferred Equity 12% PIK(4)     $ 3,642,142      $ 3,384,734      $ 3,681,185        0.5
    Warrants to purchase 3.70% of the outstanding common units(4)(6)       —          257,407        912,382        0.1
       

 

 

   

 

 

   

 

 

   
          3,642,142        3,642,141        4,593,567     

School Specialty, Inc.

  Wholesale   Senior Secured First Lien Term Loans LIBOR + 8.500%, 1.000% Floor(7)     6/11/2019        9,948,280        9,905,632        9,757,770        1.3
       

 

 

   

 

 

   

 

 

   
          9,948,280        9,905,632        9,757,770     

Ship Supply Acquisition Corporation

  Services: Business   Senior Secured First Lien Term Loans LIBOR + 8.000%, 1.000% Floor(4)(7)     7/31/2020        24,062,500        24,062,500        23,924,381        3.3
       

 

 

   

 

 

   

 

 

   
          24,062,500        24,062,500        23,924,381     

Sizzling Platter, LLC

  Hotel, Gaming &
Leisure
  Senior Secured First Lien Term Loans LIBOR + 7.500%, 1.000% Floor(7)     4/29/2019        15,000,000        15,000,000        14,803,950        2.0
       

 

 

   

 

 

   

 

 

   
          15,000,000        15,000,000        14,803,950     

Southwest Dealer Services, Inc.

  Automotive   Senior Secured First Lien Term Loans LIBOR + 6.000%, 1.000% Floor(4)(7)     3/16/2020        2,608,280        2,608,280        2,560,445        0.4
       

 

 

   

 

 

   

 

 

   
          2,608,280        2,608,280        2,560,445     

Survey Sampling International, LLC

  Services: Business   Senior Secured Second Lien Term Loans LIBOR + 9.000%, 1.000% Floor(7)     12/16/2021        24,000,000        24,000,000        23,777,280        3.2
       

 

 

   

 

 

   

 

 

   
          24,000,000        24,000,000        23,777,280     

Techniplas LLC

  Automotive  

Senior Secured First Lien Notes

10.000%(11)(13)

    5/1/2020        6,000,000        6,000,000        4,470,000        0.6
       

 

 

   

 

 

   

 

 

   
          6,000,000        6,000,000        4,470,000     

The Garretson Resolution Group, Inc.

  Services: Business   Senior Secured First Lien Term Loans LIBOR + 6.500%, 1.000% Floor(7)     5/22/2021        9,750,000        9,708,623        9,722,310        1.3
       

 

 

   

 

 

   

 

 

   
          9,750,000        9,708,623        9,722,310     

Touchtunes Interactive Networks, Inc.

  Media: Diversified
& Production
  Senior Secured Second Lien Term Loans LIBOR + 8.250%, 1.000% Floor(7)     5/27/2022        7,500,000        7,500,000        7,185,075        1.0
       

 

 

   

 

 

   

 

 

   
          7,500,000        7,500,000        7,185,075     

TravelCLICK, Inc.(8)

  Hotel, Gaming &
Leisure
  Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.000% Floor(7)     11/6/2021        6,000,000        5,929,122        5,610,600        0.8
       

 

 

   

 

 

   

 

 

   
          6,000,000        5,929,122        5,610,600     

True Religion Apparel, Inc.

  Retail   Senior Secured Second Lien Term Loans LIBOR + 10.000%, 1.000% Floor(14)     1/30/2020        4,000,000        3,886,782        —          0.0
       

 

 

   

 

 

   

 

 

   
          4,000,000        3,886,782        —       

 

See accompanying notes to consolidated financial statements.

 

F-12


Table of Contents

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
   
Cost
    Fair Value     % of
Net  Assets(2)
 

U.S. Auto Sales, Inc.

  Banking, Finance,
Insurance & Real
Estate
  Senior Secured Second Lien Term Loans LIBOR + 10.500%, 1.000% Floor(3)(4)     6/5/2020      $ 5,500,000      $ 5,500,000      $ 5,366,350        0.7
       

 

 

   

 

 

   

 

 

   
          5,500,000        5,500,000        5,366,350     

U.S. Well Services, LLC

  Energy: Oil &
Gas
  Equity/Warrants(6)       —          173        —          0.0
       

 

 

   

 

 

   

 

 

   
          —          173        —       

Upland CLO, Ltd.(9)

  Multi-Sector
Holdings
  Subordinated Notes 17.390% estimated yield(10)     4/20/2028        10,000,000        6,950,000        6,950,000        0.9
       

 

 

   

 

 

   

 

 

   
          10,000,000        6,950,000        6,950,000     

Valence Surface Technologies, Inc.

  Aerospace &
Defense
  Senior Secured First Lien Term Loans LIBOR + 5.500%, 1.000% Floor(3)     6/13/2019        4,621,984        4,601,294        4,456,379        0.6
       

 

 

   

 

 

   

 

 

   
          4,621,984        4,601,294        4,456,379     

Velocity Pooling Vehicle, LLC

  Automotive   Senior Secured Second Lien Term Loans LIBOR + 7.250%, 1.000% Floor(4)(7)     5/13/2022        20,625,000        18,418,140        10,996,425        1.5
       

 

 

   

 

 

   

 

 

   
          20,625,000        18,418,140        10,996,425     

Vestcom International, Inc.

  Services: Business   Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.000% Floor(3)     9/30/2022        5,000,000        5,000,000        4,900,300        0.7
       

 

 

   

 

 

   

 

 

   
          5,000,000        5,000,000        4,900,300     

VOYA CLO 2016-2, LTD.(9)

  Multi-Sector
Holdings
  Subordinated Notes 16.185% estimated yield(10)     7/19/2028        22,842,661        19,918,800        19,918,800        2.7
       

 

 

   

 

 

   

 

 

   
          22,842,661        19,918,800        19,918,800     

Watermill-QMC Midco, Inc.

  Automotive  

 

Equity(4)(6)

      —          514,195        675,883        0.1
    Senior Secured First Lien Term loans 13.000%(4)     6/30/2020        31,398,034        31,398,034        31,982,979        4.4
       

 

 

   

 

 

   

 

 

   
          31,398,034        31,912,229        32,658,862     

YP Holdings LLC(8)

  Media:
Advertising,
Printing &
Publishing
  Senior Secured First Lien Term Loans LIBOR + 6.750%, 1.250% Floor(7)     6/4/2018        3,130,435        3,148,647        3,102,887        0.4
       

 

 

   

 

 

   

 

 

   
          3,130,435        3,148,647        3,102,887     

Z Gallerie, LLC

  Retail   Senior Secured First Lien Term Loans LIBOR + 6.500%, 1.000% Floor(3)     10/8/2020        4,706,477        4,664,912        4,635,315        0.6
       

 

 

   

 

 

   

 

 

   
          4,706,477        4,664,912        4,635,315     

Total non-controlled/non-affiliated investments

        $ 941,804,086      $ 881,936,697        120.0
         

 

 

   

 

 

   

Controlled/affiliated investments – 8.0%(15)

         

Nomida LLC

  Construction &
Building
 

 

Equity(6)(9)

      —          5,400,000        5,400,000        0.8
    Senior Secured First Lien Term Loans 10.000%     12/1/2020        8,100,000        8,100,000        8,114,742        1.1
       

 

 

   

 

 

   

 

 

   
          8,100,000        13,500,000        13,514,742     

 

See accompanying notes to consolidated financial statements.

 

F-13


Table of Contents

Company(1)

  Industry    

Type of Investment

  Maturity     Par
Amount
   
Cost
    Fair Value     % of
Net  Assets(2)
 

Sierra Senior Loan Strategy JV I LLC(9)(12)

   
 
Multi-Sector
Holdings
  
  
  Equity     $ 45,035,000      $ 45,035,000      $ 44,952,633        6.1
       

 

 

   

 

 

   

 

 

   
          45,035,000        45,035,000        44,952,633     
         

 

 

   

 

 

   

Total controlled/affiliated investments

  

        $ 58,535,000      $ 58,467,375        8.0
         

 

 

   

 

 

   

Money market fund – 6.4%

  

           

Federated Prime Obligations Fund

    Money Market 0.02%     $ 46,822,912      $ 46,822,912      $ 46,822,912        6.4
         

 

 

   

 

 

   

Total money market fund

          $ 46,822,912      $ 46,822,912        6.4
         

 

 

   

 

 

   
Derivative Instrument — Long Exposure               Notional
Amount
    Unrealized
Appreciation
(Depreciation)
       

Total return swap with Citibank, N.A. (Note 5)

    Total Return Swap       $ 217,759,501      $ (23,336,588  
         

 

 

   

 

 

   
          $ 217,759,501      $ (23,336,588  
         

 

 

   

 

 

   

 

(1) All of the Company’s investments are domiciled in the United States except for Atrium Innovations, Inc. and Livingston International, Inc., which are domiciled in Canada.
(2) Percentage is based on net assets of $734,704,769 as of June 30, 2016.
(3) The interest rate on these loans is subject to a base rate plus 1M LIBOR, which at June 30, 2016 was 0.47%. As the interest rate is subject to a minimum LIBOR floor which was greater than the 1M LIBOR rate at June 30, 2016, the prevailing rate in effect at June 30, 2016 was the base rate plus the LIBOR floor.
(4) An affiliated fund that is managed by an affiliate of SIC Advisors LLC also holds an investment in this security.
(5) The investment was on non-accrual status as of June 30, 2016.
(6) Security is non-income producing.
(7) The interest rate on these loans is subject to a base rate plus 3M LIBOR, which at June 30, 2016 was 0.65%. As the interest rate is subject to a minimum LIBOR floor which was greater than the 3M LIBOR rate at June 30, 2016, the prevailing rate in effect at June 30, 2016 was the base rate plus the LIBOR floor.
(8) Security is also held in the underlying portfolio of the total return swap with Citibank, N.A. (see Note 5). The Company’s total exposure to American Beacon Advisors, Inc., Payless, Inc., Genex Holdings, Inc., Isola USA Corp., Livingston International, Inc., TravelCLICK, Inc., and YP Holdings LLC is $6,842,907 or 0.9%, $8,602,710 or 1.2%, $12,137,402 or 1.7%, $8,735,434 or 1.2%, $4,504,381 or 0.6%, $15,281,725 or 2.1%, and $6,256,800 or 0.9%, respectively, of Net Assets as of June 30, 2016.
(9) The investment is not a qualifying asset under Section 55 of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 10.6% of the Company’s portfolio at fair value.
(10) This investment is in the equity class of a CLO security. The CLO equity investments are entitled to recurring distributions which are generally equal to the excess cash flow generated from the underlying investments after payment of the contractual payments to debt holders and fund expenses. The current estimated yield is based on the current projections of this excess cash flow taking into account assumptions which have been made regarding expected prepayments, losses and future reinvestment rates. These assumptions are periodically reviewed and adjusted. Ultimately, the actual yield may be higher or lower than the estimated yield if actual results differ from those used for the assumptions.
(11) Securities are exempt from registration under Rule 144A of the Securities Act of 1933. These securities represent a fair value of $59,503,776 and 8.1% of net assets as of June 30, 2016 and are considered restricted.
(12) The investment has an unfunded commitment as of June 30, 2016. For further details see Note 11. Fair value includes an analysis of the unfunded commitment.
(13) Represents securities in Level 2 in the ASC 820 table (see Note 4).
(14) The interest rate on these loans is subject to a base rate plus 6M LIBOR, which at June 30, 2016 was 0.92%. As the interest rate is subject to a minimum LIBOR floor which was greater than the 6M LIBOR rate at June 30, 2016, the prevailing rate in effect at June 30, 2016 was the base rate plus the LIBOR floor.
(15) Control Investments are defined by the Investment Company Act of 1940 (“1940 Act”) as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.

 

1M 1 Month
3M 3 Month
6M 6 Month

 

See accompanying notes to consolidated financial statements.

 

F-14


Table of Contents

Sierra Income Corporation

Consolidated Schedule of Investments

As of December 31, 2015

 

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
    Cost     Fair
Value
    % of
Net Assets(2)
 

Non-controlled/non-affiliated
investments – 127.5%

   

       

AAR Intermediate Holdings, LLC

 

Energy: Oil & Gas

  Senior Secured First Lien Term Loans LIBOR + 14.000%, 1.000% Floor(3)(4)(5)     3/30/2019      $ 11,622,797      $ 11,082,071      $ 6,241,367        0.9
    Warrants to purchase 0.625% of outstanding company equity(4)(6)     3/30/2019               790,778               0.0
       

 

 

   

 

 

   

 

 

   
    11,622,797        11,872,849        6,241,367     

Access Media Holding LLC

 

Media: Broadcasting
& Subscription

  Common Stock(4)(6)                            0.0
    Preferred Equity 12.000%(4)       1,432,412        1,432,413        500,893        0.1
    Senior Secured First Lien Term Loans 5.000%, 5.000% PIK(4)     7/22/2020        6,678,501        6,678,501        6,678,501        1.0
       

 

 

   

 

 

   

 

 

   
    8,110,927        8,110,914        7,179,394     

Advanced Diagnostic Holdings LLC

 

Healthcare &
Pharmaceuticals

  Senior Secured First Lien Term Loans LIBOR + 8.750%, 0.875% Floor(3)(4)     12/11/2020        15,554,250        15,554,250        15,554,250        2.3
       

 

 

   

 

 

   

 

 

   
    15,554,250        15,554,250        15,554,250     

AESC Holding Corp., Inc.

 

Retail

  Senior Secured Second Lien Term Loans LIBOR + 9.000%, 1.000% Floor(3)(4)     5/27/2019        7,000,000        7,000,000        7,000,000        1.0
       

 

 

   

 

 

   

 

 

   
    7,000,000        7,000,000        7,000,000     

Alpha Media LLC

  Media: Broadcasting
& Subscription
  Senior Secured First Lien Term Loans LIBOR + 6.500%, 1.000% Floor(8)(9)     4/30/2021        9,179,127        9,179,127        9,179,127        1.4
       

 

 

   

 

 

   

 

 

   
    9,179,127        9,179,127        9,179,127     

American Beacon Advisors, Inc.(10)

 

Banking, Finance,
Insurance & Real
Estate

  Senior Secured Second Lien Term Loans LIBOR + 8.750%, 1.000% Floor(9)     4/30/2023        6,000,000        5,886,884        5,937,982        0.9
       

 

 

   

 

 

   

 

 

   
    6,000,000        5,886,884        5,937,982     

Anaren, Inc.

  Aerospace &
Defense
  Senior Secured Second Lien Term Loans LIBOR + 8.250%, 1.000% Floor(9)     8/18/2021        10,000,000        9,918,443        9,642,999        1.4
       

 

 

   

 

 

   

 

 

   
    10,000,000        9,918,443        9,642,999     

Aperture Group, LLC

 

Banking, Finance,
Insurance & Real
Estate

  Senior Secured First Lien Term Loans LIBOR + 6.250%, 1.000% Floor(3)     8/29/2019        2,431,439        2,422,081        2,431,439        0.4
       

 

 

   

 

 

   

 

 

   
    2,431,439        2,422,081        2,431,439     

Associated Asphalt Partners, LLC

 

Chemicals, Plastics
& Rubber

  Senior Secured First Lien Notes 8.500%(7)(11)     2/15/2018        1,778,000        1,785,989        1,786,890        0.3
       

 

 

   

 

 

   

 

 

   
    1,778,000        1,785,989        1,786,890     

Asurion Corp.(10)

  Banking, Finance,
Insurance & Real
Estate
  Senior Secured Second Lien Term Loans LIBOR + 7.500%, 1.000% Floor(9)     3/3/2021        7,000,000        6,942,069        6,100,440        0.9
       

 

 

   

 

 

   

 

 

   
    7,000,000        6,942,069        6,100,440     

 

See accompanying notes to consolidated financial statements.

 

F-15


Table of Contents

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
    Cost     Fair
Value
    % of
Net Assets(2)
 

Atrium Innovations, Inc.(12)

 

Healthcare &
Pharmaceuticals

  Senior Secured Second Lien Term Loans LIBOR + 6.750%, 1.000% Floor(9)     8/13/2021      $ 5,000,000      $ 4,979,955      $ 4,256,250        0.6
       

 

 

   

 

 

   

 

 

   
    5,000,000        4,979,955        4,256,250     

Aviation Technical Services, Inc.

 

Aerospace &
Defense

  Senior Secured Second Lien Term Loans LIBOR + 8.500%, 1.000% Floor(3)(4)     3/31/2022        22,500,000        22,500,000        22,500,000        3.3
       

 

 

   

 

 

   

 

 

   
    22,500,000        22,500,000        22,500,000     

Backcountry.com, LLC

 

Retail

  Senior Secured First Lien Term Loans LIBOR + 7.250%, 1.000% Floor(3)(4)     6/30/2020        35,029,079        35,029,079        34,971,465        5.2
       

 

 

   

 

 

   

 

 

   
    35,029,079        35,029,079        34,971,465     

Bennu Oil & Gas, LLC

 

Energy: Oil & Gas

  Senior Secured Second Lien Term Loans LIBOR + 8.500%, 1.250% Floor, 2.500% PIK(9)     11/1/2018        5,574,581        5,571,210        1,700,247        0.3
       

 

 

   

 

 

   

 

 

   
    5,574,581        5,571,210        1,700,247     

Birch Communications, Inc.

 

Telecommunications

  Senior Secured First Lien Term Loans LIBOR + 6.750%, 1.000% Floor(4)(9)     7/18/2020        14,531,250        14,306,446        14,089,203        2.1
       

 

 

   

 

 

   

 

 

   
    14,531,250        14,306,446        14,089,203     

Black Angus Steakhouses LLC

 

Hotel, Gaming &
Leisure

  Senior Secured First Lien Term Loans LIBOR + 9.000%, 1.000% Floor(3)(4)(8)     4/24/2020        21,043,527        21,043,527        20,959,730        3.1
       

 

 

   

 

 

   

 

 

   
    21,043,527        21,043,527        20,959,730     

Brundage-Bone Concrete Pumping, Inc.

 

Construction &
Building

  Senior Secured First Lien Notes 10.375%(7)     9/1/2021        7,500,000        7,625,073        7,428,542        1.1
       

 

 

   

 

 

   

 

 

   
    7,500,000        7,625,073        7,428,542     

Capstone Nutrition

  Healthcare &
Pharmaceuticals
  Common Stock(4)(6)              300,000               0.0
    Common Stock, Class B(4)(6)              9        9        0.0
    Common Stock, Class C(4)(6)                            0.0
    Senior Secured First Lien Term Loans LIBOR + 11.500%, 1.000% Floor, 1.000% PIK(4)(9)     4/28/2019        18,702,625        18,702,625        13,839,943        2.1
       

 

 

   

 

 

   

 

 

   
    18,702,625        19,002,634        13,839,952     

Charming Charlie, Inc.

 

Retail

  Senior Secured First Lien Term Loans LIBOR + 8.000%, 1.000% Floor(9)     12/24/2019        8,855,113        8,870,568        8,323,648        1.2
       

 

 

   

 

 

   

 

 

   
    8,855,113        8,870,568        8,323,648     

Collective Brands Finance, Inc.(10)

 

Retail

  Senior Secured Second Lien Term Loans LIBOR + 7.500%, 1.000% Floor(9)     3/11/2022        6,000,000        6,016,708        2,517,288        0.4
       

 

 

   

 

 

   

 

 

   
    6,000,000        6,016,708        2,517,288     

ContMid Intermediate, Inc.

 

Automotive

  Senior Secured Second Lien Term Loans LIBOR + 9.000%, 1.000% Floor(3)(4)     10/25/2019        27,908,193        27,908,193        27,648,200        4.1
       

 

 

   

 

 

   

 

 

   
    27,908,193        27,908,193        27,648,200     

 

See accompanying notes to consolidated financial statements.

 

F-16


Table of Contents

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
    Cost     Fair
Value
    % of
Net Assets(2)
 

ConvergeOne Holdings Corp.

 

Telecommunications

  Senior Secured Second Lien Term Loans LIBOR + 8.000%, 1.000% Floor(3)(4)     6/17/2021      $ 12,500,000      $ 12,395,454      $ 12,109,427        1.8
       

 

 

   

 

 

   

 

 

   
    12,500,000        12,395,454        12,109,427     

Cornerstone Chemical Company

 

Chemicals, Plastics
& Rubber

  Senior Secured First Lien Notes 9.375%(7)(11)     3/15/2018        2,500,000        2,562,636        2,253,125        0.3
       

 

 

   

 

 

   

 

 

   
    2,500,000        2,562,636        2,253,125     

CP OpCo, LLC

  Services: Consumer   Senior Secured First Lien Term Loans LIBOR + 6.750%, 1.000% Floor(4)(9)     9/30/2020        3,000,000        3,000,000        3,000,000        0.4
       

 

 

   

 

 

   

 

 

   
    3,000,000        3,000,000        3,000,000     

CRGT, Inc.

  High Tech
Industries
  Senior Secured First Lien Term Loans LIBOR + 6.500%, 1.000% Floor(4)(9)     12/19/2020        4,813,291        4,813,291        4,791,015        0.7
       

 

 

   

 

 

   

 

 

   
    4,813,291        4,813,291        4,791,015     

DHISCO Electronic Distribution, Inc.

 

Hotel, Gaming &
Leisure

  Senior Secured First Lien Term Loans LIBOR + 9.000% PIK, 1.500% Floor(3)(4)     2/10/2018        4,030,023        4,030,023        4,022,550        0.6
    Senior Secured First Lien Term Loans LIBOR + 9.000%, 1.500% Floor(3)(4) 8)     11/10/2019        19,523,810        19,523,810        19,569,138        2.9
    Warrants to purchase 4.2% of the outstanding equity(4) 6)     2/10/2018               769,231        1,640,082        0.2
       

 

 

   

 

 

   

 

 

   
    23,553,833        24,323,064        25,231,770     

Drew Marine Partners, LP

 

Transportation:
Cargo

  Senior Secured Second Lien Term Loans LIBOR + 7.000%, 1.000% Floor(9)     5/19/2021        10,000,000        10,066,712        9,539,857        1.4
       

 

 

   

 

 

   

 

 

   
    10,000,000        10,066,712        9,539,857     

Dynamic Energy Services International LLC

 

Energy: Oil & Gas

  Senior Secured First Lien Term Loans LIBOR + 8.500%, 1.000% Floor(4)(13)     3/6/2018        9,125,000        9,125,000        8,841,760        1.3
       

 

 

   

 

 

   

 

 

   
    9,125,000        9,125,000        8,841,760     

EarthLink, Inc.(12)

  Telecommunications   Senior Secured First Lien Notes 7.375%(7)(11)     6/1/2020        2,450,000        2,440,823        2,495,937        0.4
       

 

 

   

 

 

   

 

 

   
    2,450,000        2,440,823        2,495,937     

First Boston Construction Holdings, LLC

  Banking, Finance,   Preferred Equity(4)(6)              878,907        878,907        0.1
  Insurance & Real
Estate
  Senior Secured First Lien Notes 12.000%(4)(8)     12/31/2020        3,515,625        3,515,625        3,515,629        0.5
       

 

 

   

 

 

   

 

 

   
    3,515,625        4,394,532        4,394,536     

FKI Security Group LLC

 

Capital Equipment

  Senior Secured First Lien Term Loans LIBOR + 8.500%, 1.000% Floor(3)(4)     3/30/2020        14,812,500        14,812,500        14,479,785        2.1
       

 

 

   

 

 

   

 

 

   
    14,812,500        14,812,500        14,479,785     

Frontier Communications Corp.(12)

 

Telecommunications

  Senior Secured First Lien Notes 10.250%(7)(11)     9/15/2022        2,000,000        2,000,000        1,992,500        0.3
       

 

 

   

 

 

   

 

 

   
    2,000,000        2,000,000        1,992,500     

 

See accompanying notes to consolidated financial statements.

 

F-17


Table of Contents

Company(1)

  Industry  

Type of Investment

  Maturity     Par
Amount
    Cost     Fair
Value
    % of
Net Assets(2)
 

Gastar Exploration USA, Inc.

 

Energy: Oil & Gas

  Senior Secured First Lien Notes 8.625%(7)(11)     5/15/2018      $ 5,400,000      $ 5,409,861      $ 2,828,250        0.4
       

 

 

   

 

 

   

 

 

   
    5,400,000        5,409,861        2,828,250     

Genex Holdings, Inc.(10)

 

Banking, Finance,
Insurance & Real
Estate

  Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.000% Floor(9)     5/30/2022        9,500,000        9,528,566        9,269,729        1.4
       

 

 

   

 

 

   

 

 

   
    9,500,000        9,528,566        9,269,729     

GK Holdings, Inc.

  Services: Business   Senior Secured Second Lien Term Loans LIBOR + 9.500%, 1.000% Floor(3)     1/20/2022        10,000,000        10,000,000        9,505,351        1.4
       

 

 

   

 

 

   

 

 

   
    10,000,000        10,000,000        9,505,351     

Green Field Energy Services, Inc.

 

Energy: Oil & Gas

  Senior Secured First Lien Notes 13.000%(4)(5)(7)     11/15/2016        766,616        754,768        157,156        0.0
    Warrants/Equity(4)(6)              29,000               0.0
       

 

 

   

 

 

   

 

 

   
    766,616        783,768        157,156     

GTCR Valor Companies, Inc.

 

High Tech
Industries

  Senior Secured First Lien Term Loans LIBOR + 5.000%, 1.000% Floor(9)     5/30/2021        2,913,869        2,889,196        2,893,847        0.4
    Senior Secured Second Lien Term Loans LIBOR + 8.500%, 1.000% Floor(9)     11/30/2021        4,000,000        3,965,863        3,876,807        0.6
       

 

 

   

 

 

   

 

 

   
    6,913,869        6,855,059        6,770,654     

HBC Holdings, LLC

 

Wholesale

  Senior Secured First Lien Term Loans LIBOR + 5.750%, 1.000% Floor(4)(9)     3/30/2020        14,812,500        14,812,500        14,025,813        2.1
       

 

 

   

 

 

   

 

 

   
    14,812,500        14,812,500        14,025,813     

Heligear Acquisition Co.

 

Aerospace &
Defense

  Senior Secured First Lien Notes 10.250%(4)(7)     10/15/2019        15,000,000        15,000,000        15,209,164        2.3
       

 

 

   

 

 

   

 

 

   
    15,000,000        15,000,000        15,209,164     

Hill International, Inc.(12)

 

Construction &
Building

  Senior Secured First Lien Term Loans LIBOR + 6.750%, 1.000% Floor(4)(9)     9/26/2020        16,787,500        16,787,500        16,524,481        2.5
       

 

 

   

 

 

   

 

 

   
    16,787,500        16,787,500        16,524,481     

Holland Acquisition Corp.

 

Energy: Oil & Gas

  Senior Secured First Lien Term Loans LIBOR + 9.000%, 1.000% Floor(9)     5/29/2018        4,550,691        4,497,331        3,952,221        0.6
       

 

 

   

 

 

   

 

 

   
    4,550,691        4,497,331        3,952,221     

Ignite Restaurant Group, Inc.

 

Hotel, Gaming &
Leisure

  Senior Secured First Lien Term Loans LIBOR + 7.000%, 1.000% Floor(9)     2/13/2019        9,310,973        9,204,898        9,192,804        1.4
       

 

 

   

 

 

   

 

 

   
    9,310,973        9,204,898        9,192,804     

IHS Intermediate, Inc.

 

Services: Business

  Senior Secured Second Lien Term Loans LIBOR + 8.250%, 1.000% Floor(9)     7/20/2022