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EX-10.2 - EXHIBIT 10.2 DEF COMP PLAN - Barings BDC, Inc.ex102deferredcompplanamend.htm
EX-32.2 - EXHIBIT 32.2 - Barings BDC, Inc.tcap-9302016xq3ex322.htm
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EX-31.2 - EXHIBIT 31.2 - Barings BDC, Inc.tcap-9302016xq3ex312.htm
EX-31.1 - EXHIBIT 31.1 - Barings BDC, Inc.tcap-9302016xq3ex311.htm
EX-10.1 - EXHIBIT 10.1 EQUITY INCENTIVE PLAN - Barings BDC, Inc.ex101equityincentiveplanam.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
__________________________________________________________
Form 10-Q
__________________________________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 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 814-00733 
__________________________________________________________
Triangle Capital Corporation
(Exact name of registrant as specified in its charter)
__________________________________________________________
Maryland
 
06-1798488
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
3700 Glenwood Avenue, Suite 530
Raleigh, North Carolina
 
27612
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (919) 719-4770
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A 
__________________________________________________________
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  ý    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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
ý
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨  (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  ý
The number of shares outstanding of the registrant’s Common Stock on November 2, 2016 was 40,360,906.




TRIANGLE CAPITAL CORPORATION
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q

 
 
Page
PART I – FINANCIAL INFORMATION
Item 1.
 
 
 
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 


2



PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.
TRIANGLE CAPITAL CORPORATION
Consolidated Balance Sheets
 
September 30, 2016
 
December 31, 2015
 
(Unaudited)
 
 
Assets:
 
 
 
Investments at fair value:
 
 
 
Non-Control / Non-Affiliate investments (cost of $771,052,767 and $795,244,907 as of September 30, 2016 and December 31, 2015, respectively)
$
748,363,034

 
$
774,238,518

Affiliate investments (cost of $163,759,331 and $171,486,103 as of September 30, 2016 and December 31, 2015, respectively)
170,111,172

 
177,581,965

Control investments (cost of $52,518,113 and $40,618,113 as of September 30, 2016 and December 31, 2015, respectively)
29,257,769

 
25,456,233

Total investments at fair value
947,731,975

 
977,276,716

Cash and cash equivalents
168,336,823

 
52,615,418

Interest, fees and other receivables
6,966,478

 
4,892,146

Prepaid expenses and other current assets
1,690,182

 
947,068

Deferred financing fees
2,897,224

 
3,480,444

Property and equipment, net
122,506

 
105,698

Total assets
$
1,127,745,188

 
$
1,039,317,490

Liabilities:
 
 
 
Accounts payable and accrued liabilities
$
4,636,217

 
$
7,463,514

Interest payable
1,537,490

 
3,714,470

Taxes payable

 
735,498

Deferred income taxes
3,027,000

 
4,988,317

Borrowings under credit facility
91,427,900

 
131,256,669

Notes
162,598,503

 
162,142,478

SBA-guaranteed debentures payable
245,162,869

 
220,648,789

Total liabilities
508,389,979

 
530,949,735

Commitments and contingencies (Note 7)
 
 
 
Net Assets:
 
 
 
Common stock, $0.001 par value per share (150,000,000 shares authorized, 40,405,403 and 33,375,126 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively)
40,405

 
33,375

Additional paid-in capital
684,618,304

 
549,242,439

Investment income in excess of distributions
6,553,437

 
16,127,141

Accumulated realized losses
(32,501,174
)
 
(25,813,329
)
Net unrealized depreciation
(39,355,763
)
 
(31,221,871
)
Total net assets
619,355,209

 
508,367,755

Total liabilities and net assets
$
1,127,745,188

 
$
1,039,317,490

Net asset value per share
$
15.33

 
$
15.23


See accompanying notes.


3



TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Operations
 
Three Months
Ended
 
Three Months
Ended
 
Nine Months Ended
 
Nine Months Ended
 
September 30,
2016
 
September 30,
2015
 
September 30,
2016
 
September 30,
2015
Investment income:
 
 
 
 
 
 
 
Interest income:
 
 
 
 
 
 
 
Non-Control / Non-Affiliate investments
$
17,270,300

 
$
18,051,486

 
$
52,938,976

 
$
51,993,071

Affiliate investments
3,380,867

 
4,294,512

 
10,121,974

 
12,685,241

Control investments
303,708

 
248,609

 
764,622

 
298,090

Total interest income
20,954,875

 
22,594,607

 
63,825,572

 
64,976,402

Dividend income:
 
 
 
 
 
 
 
Non-Control / Non-Affiliate investments
167,468

 
259,431

 
(1,030,703
)
 
1,893,825

Affiliate investments
244,233

 
323,291

 
706,495

 
860,913

Control investments

 

 
300,000

 

Total dividend income
411,701

 
582,722

 
(24,208
)
 
2,754,738

Fee and other income:
 
 
 
 
 
 
 
Non-Control / Non-Affiliate investments
1,585,403

 
3,308,427

 
5,662,081

 
7,380,865

Affiliate investments
319,289

 
337,343

 
855,855

 
2,334,396

Control investments
110,000

 
100,000

 
310,000

 
300,000

Total fee and other income
2,014,692

 
3,745,770

 
6,827,936

 
10,015,261

Payment-in-kind interest income:
 
 
 
 
 
 
 
Non-Control / Non-Affiliate investments
2,719,831

 
2,735,701

 
8,373,124

 
8,077,552

Affiliate investments
1,175,899

 
1,126,244

 
3,259,634

 
3,445,253

Total payment-in-kind interest income
3,895,730

 
3,861,945

 
11,632,758

 
11,522,805

Interest income from cash and cash equivalents
135,459

 
58,401

 
228,129

 
178,713

Total investment income
27,412,457

 
30,843,445

 
82,490,187

 
89,447,919

Operating expenses:
 
 
 
 
 
 
 
Interest and other financing fees
6,757,718

 
6,561,298

 
20,040,942

 
20,319,093

Compensation expenses
3,963,797

 
4,951,026

 
17,510,762

 
13,876,141

General and administrative expenses
859,785

 
813,125

 
3,170,330

 
2,798,925

Total operating expenses
11,581,300

 
12,325,449

 
40,722,034

 
36,994,159

Net investment income
15,831,157

 
18,517,996

 
41,768,153

 
52,453,760

Realized and unrealized gains (losses) on investments and foreign currency borrowings:
 
 
 
 
 
 
 
Net realized gains (losses):
 
 
 
 
 
 
 
Non-Control / Non-Affiliate investments
(11,213,561
)
 
2,331,742

 
(5,007,647
)
 
8,746,844

Affiliate investments
2,106

 
(503,907
)
 
(1,680,198
)
 
(237,399
)
Control investments

 
(18,323,508
)
 

 
(38,807,152
)
Net realized gains (losses)
(11,211,455
)
 
(16,495,673
)
 
(6,687,845
)
 
(30,297,707
)
Net unrealized appreciation (depreciation):
 
 
 
 
 
 
 
Investments
2,881,131

 
14,375,221

 
(7,564,510
)
 
15,441,528

Foreign currency borrowings
342,409

 
1,081,391

 
(569,382
)
 
1,942,776

Net unrealized appreciation (depreciation)
3,223,540

 
15,456,612

 
(8,133,892
)
 
17,384,304

Net realized and unrealized losses on investments and foreign currency borrowings
(7,987,915
)
 
(1,039,061
)
 
(14,821,737
)
 
(12,913,403
)
Loss on extinguishment of debt

 

 

 
(1,394,017
)
Tax benefit
36,431

 
393,437

 
47,342

 
255,562

Net increase in net assets resulting from operations
$
7,879,673

 
$
17,872,372

 
$
26,993,758

 
$
38,401,902

Net investment income per share—basic and diluted
$
0.42

 
$
0.56

 
$
1.19

 
$
1.58

Net increase in net assets resulting from operations per share—basic and diluted
$
0.21

 
$
0.54

 
$
0.77

 
$
1.16

Dividends/distributions per share:
 
 
 
 
 
 
 
Regular quarterly dividends/distributions
$
0.45

 
$
0.54

 
$
1.44

 
$
1.62

Supplemental dividends/distributions

 
0.05

 

 
0.15

Total dividends/distributions per share
$
0.45

 
$
0.59

 
$
1.44

 
$
1.77

Weighted average shares outstanding—basic and diluted
38,115,449

 
33,274,586

 
35,199,704

 
33,203,414

See accompanying notes.

4



TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Changes in Net Assets
 
 
Common Stock
 
Additional
Paid-In
Capital
 
Investment
Income
in Excess of
Distributions
 
Accumulated
Realized
Gains (Losses) on Investments
 
Net
Unrealized
Appreciation(Depreciation)
 
Total
Net
Assets
 
Number
of Shares
 
Par
Value
 
 
 
 
 
Balance, December 31, 2014
32,950,288

 
$
32,950

 
$
542,119,994

 
$
12,926,514

 
$
12,464,699

 
$
(36,717,528
)
 
$
530,826,629

Net investment income

 

 

 
52,453,760

 

 

 
52,453,760

Stock-based compensation

 

 
5,200,761

 

 

 

 
5,200,761

Realized gain (loss) on investments

 

 

 

 
(30,297,707
)
 
29,641,715

 
(655,992
)
Net unrealized loss on investments / foreign currency

 

 

 

 

 
(12,257,411
)
 
(12,257,411
)
Loss on extinguishment of debt

 

 

 
(1,394,017
)
 

 

 
(1,394,017
)
Tax Benefit

 

 

 
255,562

 

 

 
255,562

Dividends / distributions
125,298

 
125

 
2,676,308

 
(50,576,458
)
 
(8,242,911
)
 

 
(56,142,936
)
Expenses related to public offering of common stock

 

 
(54,967
)
 

 

 

 
(54,967
)
Issuance of restricted stock
360,840

 
361

 
(361
)
 

 

 

 

Common stock withheld for payroll taxes upon vesting of restricted stock
(115,077
)
 
(115
)
 
(2,497,597
)
 

 

 

 
(2,497,712
)
Balance, September 30, 2015
33,321,349

 
$
33,321

 
$
547,444,138

 
$
13,665,361

 
$
(26,075,919
)
 
$
(19,333,224
)
 
$
515,733,677

 
 
Common Stock
 
Additional
Paid-In
Capital
 
Investment
Income
in Excess of
Distributions
 
Accumulated
Realized
Losses on Investments
 
Net
Unrealized
Appreciation (Depreciation)
 
Total
Net
Assets
 
Number
of Shares
 
Par
Value
 
 
 
 
 
Balance, December 31, 2015
33,375,126

 
$
33,375

 
$
549,242,439

 
$
16,127,141

 
$
(25,813,329
)
 
$
(31,221,871
)
 
$
508,367,755

Net investment income

 

 

 
41,768,153

 

 

 
41,768,153

Stock-based compensation

 

 
7,502,500

 

 

 

 
7,502,500

Realized gain (loss) on investments

 

 

 

 
(6,687,845
)
 
7,532,502

 
844,657

Net unrealized loss on investments / foreign currency

 

 

 

 

 
(15,666,394
)
 
(15,666,394
)
Tax benefit

 

 

 
47,342

 

 

 
47,342

Dividends / distributions
120,562

 
120

 
2,325,851

 
(51,389,199
)
 

 

 
(49,063,228
)
Public offering of common stock
6,742,362

 
6,742

 
129,129,554

 

 

 

 
129,136,296

Issuance of restricted stock
364,605

 
365

 
(365
)
 

 

 

 

Common stock withheld for payroll taxes upon vesting of restricted stock
(197,252
)
 
(197
)
 
(3,581,675
)
 

 

 

 
(3,581,872
)
Balance, September 30, 2016
40,405,403

 
$
40,405

 
$
684,618,304

 
$
6,553,437

 
$
(32,501,174
)
 
$
(39,355,763
)
 
$
619,355,209


See accompanying notes.


5



TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Cash Flows 
 
Nine Months Ended
 
Nine Months Ended
 
September 30, 2016
 
September 30, 2015
Cash flows from operating activities:
 
 
 
Net increase in net assets resulting from operations
$
26,993,758

 
$
38,401,902

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities:
 
 
 
Purchases of portfolio investments
(163,867,651
)
 
(352,445,028
)
Repayments received/sales of portfolio investments
182,153,894

 
261,002,599

Loan origination and other fees received
3,205,460

 
5,741,331

Net realized loss on investments
6,687,845

 
30,297,707

Net unrealized depreciation (appreciation) on investments
9,525,827

 
(18,127,974
)
Net unrealized depreciation (appreciation) on foreign currency borrowings
569,382

 
(1,942,776
)
Deferred income taxes
(1,961,317
)
 
2,686,444

Payment-in-kind interest accrued, net of payments received
(4,177,550
)
 
(2,084,305
)
Amortization of deferred financing fees
1,644,826

 
1,636,224

Loss on extinguishment of debt

 
1,394,017

Accretion of loan origination and other fees
(3,676,003
)
 
(4,897,834
)
Accretion of loan discounts
(307,081
)
 
(362,424
)
Accretion of discount on SBA-guaranteed debentures payable
31,899

 
140,185

Depreciation expense
52,369

 
44,552

Stock-based compensation
7,502,500

 
5,200,761

Changes in operating assets and liabilities:
 
 
 
Interest, fees and other receivables
(2,074,332
)
 
1,823,785

Prepaid expenses and other current assets
(743,114
)
 
(538,708
)
Accounts payable and accrued liabilities
(2,827,297
)
 
(1,847,069
)
Interest payable
(2,176,980
)
 
(2,098,783
)
Taxes payable
(735,498
)
 
(2,451,879
)
Net cash provided by (used in) operating activities
55,820,937

 
(38,427,273
)
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(69,177
)
 
(55,035
)
Net cash used in investing activities
(69,177
)
 
(55,035
)
Cash flows from financing activities:
 
 
 
Borrowings under SBA-guaranteed debentures payable
32,800,000

 

Repayments of SBA-guaranteed debentures payable
(7,800,000
)
 

Borrowings under credit facility
68,901,849

 
174,000,000

Repayments of credit facility
(109,300,000
)
 
(114,000,000
)
Proceeds from notes

 
83,372,640

Redemption of notes

 
(69,000,000
)
Financing fees paid
(1,123,400
)
 
(2,919,436
)
Net proceeds (expenses) related to public offering of common stock
129,136,296

 
(54,967
)
Common stock withheld for payroll taxes upon vesting of restricted stock
(3,581,872
)
 
(2,497,712
)
Cash dividends/distributions paid
(49,063,228
)
 
(56,142,936
)
Net cash provided by financing activities
59,969,645

 
12,757,589

Net increase (decrease) in cash and cash equivalents
115,721,405

 
(25,724,719
)
Cash and cash equivalents, beginning of period
52,615,418

 
78,759,026

Cash and cash equivalents, end of period
$
168,336,823

 
$
53,034,307

Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
19,929,857

 
$
19,798,265

Summary of non-cash financing transactions:
 
 
 
Dividends/distributions paid through DRIP share issuances
$
2,325,971

 
$
2,676,433


See accompanying notes.


6



TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments
September 30, 2016
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Non–Control / Non–Affiliate Investments:
 
 
 
 
 
 
ACA Holdings LLC (F/K/A My Alarm Center, LLC) (0%)*
 
Security Company
 
Preferred Units (2,000,000 units)
 
 
 
$
2,000,000

 
$
1,339,000

 
 
 
 
 
 
2,000,000

 
1,339,000

 
 
 
 
 
 
 
 
 
 
 
Access Medical Acquisition, Inc. (3%)*
 
Operator of Primary Care Clinics
 
Subordinated Notes (10% Cash, 2% PIK, Due 01/22)
 
$
13,819,514

 
13,584,652

 
13,584,652

 
 
Class A Units (1,500,000 units)
 
 
 
1,500,000

 
4,678,000

 
 
 
 
13,819,514

 
15,084,652

 
18,262,652

 
 
 
 
 
 
 
 
 
 
 
Agilex Flavors & Fragrances, Inc. (2%)*
 
Custom Fragrance Producer
 
Subordinated Note (12% Cash, Due 11/21)
 
13,168,124

 
13,044,678

 
13,044,678

Common Units (1,250 units)
 
 
 
1,250,000

 
2,371,000

 
 
 
13,168,124

 
14,294,678

 
15,415,678

 
 
 
 
 
 
 
 
 
 
 
AGM Automotive, LLC (1%)*
 
Auto Industry Interior Components Supplier
 
Units (1,500,000 units)
 
 
 
630,134

 
4,128,000

 
 
 
 
 
630,134

 
4,128,000

 
 
 
 
 
 
 
 
 
 
 
All Metals Holding, LLC (1%)*
 
Steel Processor and Distributor
 
Subordinated Note (11% Cash, Due 03/21)
 
6,033,333

 
5,792,190

 
5,792,190

 
 
Bridge Note (14% PIK, Due 11/16)
 
617,153

 
612,231

 
906,000

 
 
Units (83,025 units)
 
 
 
253,000

 
269,000

 
 
 
 
6,650,486

 
6,657,421

 
6,967,190

 
 
 
 
 
 
 
 
 
 
 
Avkem International, LLC (1%)*
 
Flux and Foundry Manufacturer and Supplier
 
Subordinated Note (10% Cash, 4% PIK, Due 12/17)
 
4,112,935

 
4,066,306

 
4,066,306

 
 
 
 
4,112,935

 
4,066,306

 
4,066,306

 
 
 
 
 
 
 
 
 
 
 
AVL Holdings, Inc. (0%)*
 
Manufacturer and Distributor for Independent Artists and Authors
 
Common Stock (138 shares)
 
 
 
1,300,000

 
1,761,000

 
 
 
 


 
1,300,000

 
1,761,000

 
 
 
 
 
 
 
 
 
 
 
Baker Hill Acquisition, LLC (2%)*
 
Loan Origination Software Solutions Provider
 
Subordinated Notes (12% Cash, Due 03/21)
 
13,500,000

 
13,326,485

 
13,326,485

 
 
Limited Partnership Interest
 
 
 
1,498,500

 
1,056,000

 
 
 
 
13,500,000

 
14,824,985

 
14,382,485

 
 
 
 
 
 
 
 
 
 
 
Cafe Enterprises, Inc. (2%)*
 
Restaurant
 
Subordinated Note (7% Cash, 7% PIK, Due 06/19)
 
13,641,423

 
13,491,522

 
10,684,000

 
 
Series C Preferred Stock (10,000 shares)
 
 
 
1,000,000

 
169,000

 
 
 
 
13,641,423

 
14,491,522

 
10,853,000

 
 
 
 
 
 
 
 
 
 
 
Capital Contractors, Inc. (0%)*
 
Janitorial and Facilities Maintenance Services
 
Subordinated Notes (5% Cash, Due 6/20)
 
9,843,542

 
9,704,782

 
1,979,000

Series A Redeemable Preferred Stock (200 shares)
 
 
 
2,000,000

 

Common Stock Warrants (20 shares)
 
 
 
492,000

 

 
 
9,843,542

 
12,196,782

 
1,979,000

 
 
 
 
 
 
 
 
 
 
 
Captek Softgel International, Inc.
(3%)*
 
Nutraceutical Manufacturer
 
Subordinated Note (10% Cash, 2.5% PIK, Due 06/21)
 
15,290,087

 
15,022,055

 
15,022,055

Common Stock (15,000 shares)
 
 
 
1,500,000

 
1,446,000

 
 
 
15,290,087

 
16,522,055

 
16,468,055

 
 
 
 
 
 
 
 
 
 
 
Carolina Beverage Group, LLC (0%)*
 
Beverage Manufacturing
and Packaging
 
Class B Units (11,974 units)
 
 
 
119,735

 
116,000

 
 
 
 
 
119,735

 
116,000

 
 
 
 
 
 
 
 
 
 
 
Centerfield Media Holding Company (3%)*
 
Digital Marketing
 
Subordinated Note (10% Cash, 3.5% PIK, Due 03/21)
 
18,690,799

 
18,385,793

 
18,385,793

 
 
Common Shares (1,000 shares)
 
 
 
1,000,000

 
1,973,000

 
 
 
 
18,690,799

 
19,385,793

 
20,358,793

 
 
 
 
 
 
 
 
 
 
 
Chromaflo Technologies Parent LP (2%)*
 
Colorant Manufacturer and Distributor
 
Second Lien Term Loan (8.3% Cash, Due 06/20)
 
9,999,618

 
9,967,597

 
9,967,597

Class A Units (22,561 units)
 
 
 
906,604

 
2,437,000

 
 
 
9,999,618

 
10,874,201

 
12,404,597

 
 
 
 
 
 
 
 
 
 
 
Community Intervention Services, Inc. (2%)*
 
Provider of Behavioral Health Services
 
Subordinated Note (10% Cash, 3% PIK, Due 01/21) (6)
 
16,738,706

 
15,407,588

 
11,364,000

 
 
 
 
16,738,706

 
15,407,588

 
11,364,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

7



TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2016
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Comverge, Inc. (3%)*
 
Provider of Intelligent Energy Management Solutions
 
Senior Note (12% Cash, Due 05/18)
 
$
15,505,583

 
$
15,391,915

 
$
15,391,915

Preferred Stock (703 shares)
 
 
 
554,458

 
818,000

Common Stock (1,000,000 shares)
 
 
 
100,000

 
94,000

 
 
 
15,505,583

 
16,046,373

 
16,303,915

 
 
 
 
 
 
 
 
 
 
 
CPower Ultimate HoldCo, LLC (0%)*
 
Demand Response Business
 
Units (345,542 units)
 
 
 
345,542

 
345,542

 
 
 
 
 
 
345,542

 
345,542

 
 
 
 
 
 
 
 
 
 
 
CWS Holding Company, LLC (0%)*
 
Manufacturer of Custom Windows and Sliding Doors
 
Class A Units (1,500,000 units)
 
 
 
1,500,000

 
2,052,000

 
 
 
 
 
1,500,000

 
2,052,000

 
 
 
 
 
 
 
 
 
 
 
Data Source Holdings, LLC (0%)*
 
Print Supply Chain Management Services
 
Common Units (47,503 units)
 
 
 
1,000,000

 
795,000

 
 
 
 
 
1,000,000

 
795,000

 
 
 
 
 
 
 
 
 
 
 
DialogDirect, Inc. (3%)*
 
Business Process Outsourcing Provider
 
Subordinated Notes (12% Cash, 1.5% PIK, Due 04/20)
 
16,064,880

 
15,951,956

 
15,951,956

 
 
 
16,064,880

 
15,951,956

 
15,951,956

 
 
 
 
 
 
 
 
 
 
 
DLC Acquisition, LLC (6%)*
 
Staffing Firm
 
Senior Notes (10% Cash, Due 12/20)
 
21,400,000

 
21,112,007

 
21,112,007

 
Senior Note (10% Cash, 2% PIK, Due 12/20)
 
18,896,825

 
18,668,129

 
18,668,129

 
 
 
40,296,825

 
39,780,136

 
39,780,136

 
 
 
 
 
 
 
 
 
 
 
DLR Restaurants, LLC (0%)*
 
Restaurant
 
Royalty Rights
 
 
 

 

 
 
 
 
 

 

 
 
 
 
 
 
 
 
 
 
 
Dyno Acquiror, Inc. (1%)*
 
Sewing Products and Seasonal Decorative Products Supplier
 
Subordinated Note (12% Cash, 2% PIK, Due 11/19)
 
7,493,799

 
7,430,044

 
7,430,044

 
Series A Units (600,000 units)
 
 
 
600,000

 
438,000

 
 
 
7,493,799

 
8,030,044

 
7,868,044

 
 
 
 
 
 
 
 
 
 
 
Eckler's Holdings, Inc. (1%)*
 
Restoration Parts and Accessories for Classic Cars and Trucks
 
Subordinated Note (11% Cash, 4.5% PIK, Due 07/18)
 
9,828,535

 
9,762,022

 
8,216,000

 
Common Stock (18,029 shares)
 
 
 
183,562

 

 
Series A Preferred Stock (1,596 shares)
 
 
 
1,596,126

 

 
Series B Preferred Stock (185 shares)
 
 
 
185,127

 

 
 
 
9,828,535

 
11,726,837

 
8,216,000

 
 
 
 
 
 
 
 
 
 
 
Flowchem Holdings LLC (0%)*
 
Services to Crude Oil Pipeline Operators
 
Common Units (1,000,000 units)
 
 
 
782,356

 
2,322,000

 
 
 
 
 
782,356

 
2,322,000

 
 
 
 
 
 
 
 
 
 
 
FrontStream Holdings, LLC (2%)*
 
Payment and Donation Management Product Service Provider
 
Subordinated Note (12.5% Cash, Due 12/20)
 
13,375,000

 
13,248,898

 
13,248,898

 
 
Series C-2 Preferred Shares (500 shares)
 
 
 
500,000

 
500,000

 
 
 
 
13,375,000

 
13,748,898

 
13,748,898

 
 
 
 
 
 
 
 
 
 
 
Frontstreet Facility Solutions, Inc. (1%)*
 
Retail, Restaurant and Commercial Facilities Maintenance
 
Subordinated Note (11% Cash, 2% PIK, Due 07/18)
 
8,462,629

 
8,411,531

 
7,929,000

 
 
Series A Convertible Preferred Stock (2,500 shares)
 
 
 
250,000

 

 
 
Series B Convertible Preferred Stock (5,556 shares)
 
 
 
500,000

 

 
 
 
 
8,462,629

 
9,161,531

 
7,929,000

 
 
 
 
 
 
 
 
 
 
 
Frozen Specialties, Inc. (2%)*
 
Frozen Foods Manufacturer
 
Subordinated Note (10% Cash, 4% PIK, Due 12/17)
 
13,536,975

 
13,536,975

 
14,736,975

 
 
13,536,975

 
13,536,975

 
14,736,975

 
 
 
 
 
 
 
 
 
 
 
Garden Fresh Restaurant Holding, LLC (0%)*
 
Restaurant
 
Class A Units (5,000 units)
 
 
 
500,000

 

 
 
 
 
500,000

 

 
 
 
 
 
 
 
 
 
 
 
GST AutoLeather, Inc. (4%)*
 
Supplier of Automotive Interior Leather
 
Subordinated Note (11% Cash, 2% PIK, Due 01/21)
 
23,013,847

 
22,680,826

 
22,680,826

 
 
 
 
23,013,847

 
22,680,826

 
22,680,826

 
 
 
 
 
 
 
 
 
 
 
Halo Branded Solutions, Inc. (2%)*
 
Supply Chain Services
 
Subordinated Notes (11% Cash, 1% PIK, Due 10/22)
 
10,383,861

 
10,157,677

 
10,157,677

 
 
Class A1 Units (2,600 units)
 
 
 
2,600,000

 
2,600,000

 
 
 
 
10,383,861

 
12,757,677

 
12,757,677

 
 
 
 
 
 
 
 
 
 
 
HKW Capital Partners IV, L.P.
(0%)*(4)
 
Multi-Sector Holdings
 
0.6% Limited Partnership Interest
 
 
 
924,605

 
1,243,000

 
 
 
 
 
 
924,605

 
1,243,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

8



TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2016
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
HTC Borrower, LLC (4%)*
 
Hunting and Outdoor Products
 
Subordinated Notes (10% Cash, 3% PIK, Due 09/20)
 
$
25,932,888

 
$
25,640,882

 
$
25,640,882

 
 
 
 
25,932,888

 
25,640,882

 
25,640,882

 
 
 
 
 
 
 
 
 
 
 
ICP Industrial, Inc. (4%)*
 
Coatings Formulator and Manufacturer
 
Subordinated Note (9.5% Cash, Due 04/22)
 
7,500,000

 
7,433,344

 
7,433,344

 
 
Subordinated Notes (10% Cash, 1% PIK, Due 10/22)
 
8,067,729

 
7,921,494

 
7,921,494

 
 
Subordinated Notes (14% PIK, Due 10/22)
 
5,546,862

 
5,490,449

 
5,490,449

 
 
Class A Units (1,289 units)
 
 
 
1,751,483

 
1,697,000

 
 
 
 
21,114,591

 
22,596,770

 
22,542,287

 
 
 
 
 
 
 
 
 
 
 
Inland Pipe Rehabilitation Holding Company LLC (0%)*
 
Cleaning and Repair Services
 
Membership Interest Purchase Warrant (3%)
 
 
 
853,500

 
1,968,000

 
 


 
853,500

 
1,968,000

 
 
 
 
 
 
 
 
 
 
 
KidKraft, Inc. (4%)*
 
Children's Toy Manufacturer and Distributor
 
Second Lien Term Note (11% Cash, 1% PIK, Due 03/22)
 
27,600,767

 
27,048,767

 
27,048,767

 
 
 
 
27,600,767

 
27,048,767

 
27,048,767

 
 
 
 
 
 
 
 
 
 
 
K-Square Restaurant Partners, LP (F/K/A The Krystal Company) (1%)*
 
Restaurant
 
Class A Units of Limited Partnership (2,000 units)
 
 
 
638,260

 
3,707,000

 
 
 
 
 
 
638,260

 
3,707,000

 
 
 
 
 
 
 
 
 
 
 
Media Storm, LLC (1%)*
 
Marketing Services
 
Subordinated Note (10% Cash, Due 08/19)
 
6,545,455

 
6,530,280

 
6,230,000

Membership Units (1,216,204 units)
 
 
 
1,176,957

 
563,000

 
 
6,545,455

 
7,707,237

 
6,793,000

 
 
 
 
 
 
 
 
 
 
 
MIC Holding LLC (F/K/A Magpul Industries Corp.) (2%)*
 
Firearm Accessories Manufacturer and Distributor
 
Preferred Units (1,470 units)
 
 
 
1,470,000

 
2,911,000

 
 
Common Units (30,000 units)
 
 
 
30,000

 
7,620,000

 
 
 
 
 
 
1,500,000

 
10,531,000

 
 
 
 
 
 
 
 
 
 
 
Micross Solutions LLC (4%)*
 
Provider of Semiconductor Products and Services
 
Subordinated Note (12% Cash, 3% PIK, Due 06/18)
 
24,248,692

 
24,141,913

 
24,141,913

Class A-2 Common Units (1,979,524 units)
 
 
 
2,019,693

 
1,082,000

 
 
24,248,692

 
26,161,606

 
25,223,913

 
 
 
 
 
 
 
 
 
 
 
Motor Vehicle Software Corporation (3%)*
 
Provider of EVR Services
 
Subordinated Note (10% Cash, 1% PIK, Due 03/21)
 
20,219,264

 
19,876,812

 
19,876,812

 
 
Class A Units (1,000,000 units)
 
 
 
1,064,960

 
1,267,000

 
 
 
 
20,219,264

 
20,941,772

 
21,143,812

 
 
 
 
 
 
 
 
 
 
 
Nautic Partners VII, LP (0%)*(4)
 
Multi-Sector Holdings
 
0.4% Limited Partnership Interest
 
 
 
1,156,908

 
1,691,010

 
 
 
 
 
 
1,156,908

 
1,691,010

 
 
 
 
 
 
 
 
 
 
 
Nomacorc, LLC (3%)*
 
Synthetic Wine Cork Producer
 
Subordinated Note (10% Cash, 2.3% PIK, Due 07/21)
 
20,756,540

 
20,440,373

 
16,344,000

 
 
Limited Partnership Interest
 
 
 
2,150,637

 

 
 
 
 
20,756,540

 
22,591,010

 
16,344,000

 
 
 
 
 
 
 
 
 
 
 
Orchid Underwriters Agency, LLC (4%)*
 
Insurance Underwriter
 
Term B Note (10% Cash, Due 11/19)
 
22,644,852

 
22,325,682

 
22,325,682

Class A Preferred Units (15,000 units)
 
 
 
1,500,000

 
1,909,000

Class A Common Units (15,000 units)
 
 
 

 
996,000

 
 
22,644,852

 
23,825,682

 
25,230,682

 
 
 
 
 
 
 
 
 
 
 
PHW Equity Investors, L.P. (F/K/A Performance Health & Wellness Holdings, Inc.) (0%)*
 
Rehabilitation and Wellness Products
 
Class A Limited Partnership Units (15,000 units)
 
 
 

 
50,000

 
 
 
 
 

 
50,000

 
 
 
 
 
 
 
 
 
 
 
PowerDirect Marketing, LLC (0%)*
 
Marketing Services
 
Subordinated Note (13% Cash, 2% PIK, Due 12/16)(6)
 
9,083,704

 
5,927,482

 
1,700,000

Common Unit Purchase Warrants
 
 
 
590,200

 

 
 
9,083,704

 
6,517,682

 
1,700,000

 
 
 
 
 
 
 
 
 
 
 
RockYou, Inc. (0%)*
 
Mobile Game Advertising Network
 
Common Stock (67,585 shares)
 
 
 
111,000

 
111,000

 
 
 
 
 
 
111,000

 
111,000

 
 
 
 
 
 
 
 
 
 
 
Rotolo Consultants, Inc. (1%)*
 
Landscape Services
 
Subordinated Note (11% Cash, 3% PIK, Due 08/21)
 
6,851,547

 
6,735,597

 
6,735,597

 
 
Series A Preferred Units (39 units)
 
 
 
3,654,253

 
1,821,000

 
 
 
 
6,851,547

 
10,389,850

 
8,556,597

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

9



TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2016
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Smile Brands, Inc. (4%)*
 
Dental Service Organization
 
Subordinated Notes (10% Cash, 2.0% PIK, Due 02/23)
 
$
22,228,903

 
$
21,785,434

 
$
21,785,434

 
 
Class A Units (3,000 units)
 
 
 
3,000,000

 
3,000,000

 
 
 
 
22,228,903

 
24,785,434

 
24,785,434

 
 
 
 
 
 
 
 
 
 
 
SPC Partners V, LP (0%)*(4)
 
Multi-Sector Holdings
 
0.7% Limited Partnership Interest
 
 
 
1,777,882

 
1,893,000

 
 
 
 
 
 
1,777,882

 
1,893,000

 
 
 
 
 
 
 
 
 
 
 
Specialized Desanders, Inc. (3%)*(4)
 
Sand and Particulate Removal Equipment Provider for Oil and Gas Companies
 
Subordinated Note (12% Cash, 2% PIK, Due 03/20)
 
16,110,042

 
15,953,808

 
12,758,951

Class C Partnership Units (2,000,000 units)
 
 
 
1,937,421

 
2,708,000

 
 
 
16,110,042

 
17,891,229

 
15,466,951

 
 
 
 
 
 
 
 
 
 
 
Tate's Bake Shop (2%)*
 
Producer of Baked Goods
 
Subordinated Note (10% Cash, 3% PIK, Due 02/20)
 
10,655,757

 
10,516,293

 
10,516,293

 
 
Limited Partnership Interest
 
 
 
925,000

 
1,225,000

 
 
 
 
10,655,757

 
11,441,293

 
11,741,293

 
 
 
 
 
 
 
 
 
 
 
TCFI Merlin LLC (2%)*
 
Specialty Staffing Service Provider
 
Senior Note (10% Cash, 1% PIK, Due 09/19)
 
13,361,851

 
13,164,450

 
13,164,450

 
 
Limited Partnership Units (500,000 units)
 
 
 
500,000

 
500,000

 
 
 
 
13,361,851

 
13,664,450

 
13,664,450

 
 
 
 
 
 
 
 
 
 
 
The Cook & Boardman Group, LLC (3%)*
 
Distributor of Doors and Related Products
 
Subordinated Note (10% Cash, 2.5% PIK, Due 03/20)
 
14,746,109

 
14,550,859

 
14,550,859

 
 
Class A Units (1,400,000 units)
 
 
 
1,400,000

 
2,606,000

 
 
 
 
14,746,109

 
15,950,859

 
17,156,859

 
 
 
 
 
 
 
 
 
 
 
TK USA Enterprises, Inc. (2%)*
 
Hardware Designer and Distributor
 
Subordinated Note (11% Cash, Due 10/23)
 
12,500,000

 
12,261,531

 
12,261,531

 
 
 
12,500,000

 
12,261,531

 
12,261,531

 
 
 
 
 
 
 
 
 
 
 
Travelpro Products, Inc. ("Travelpro") and TP - Holiday Group Limited ("TP") (3%)*
 
Luggage and Travel Bag Supplier
 
Second Lien Term Note - Travelpro (11% Cash, 2% PIK, Due 11/22)
 
10,074,563

 
9,861,807

 
9,861,807

 
 
Second Lien Term Note - TP (11% Cash, 2% PIK, Due 11/22)(4)
 
8,926,530

 
8,735,050

 
8,683,187

 
 
Common Units - Travelpro (2,000,000 units)
 
 
 
2,000,000

 
2,000,000

 
 
 
 
19,001,093

 
20,596,857

 
20,544,994

 
 
 
 
 
 
 
 
 
 
 
United Biologics, LLC (2%)*
 
Allergy Immunotherapy
 
Subordinated Note (12% Cash, 2% PIK, Due 03/17)
 
12,693,170

 
12,550,040

 
12,550,040

 
Class A-1 Common Units (18,818 units)
 
 
 
137,324

 
137,000

 
Class A Common Units (177,935 units)
 
 
 
1,999,989

 
1,586,000

 
Class A-2 Common Kicker Units (444,003 units)
 
 
 

 

 
Class A-1 Common Kicker Units (14,114 units)
 
 
 

 

 
Class A, Class A-1, Class A-1 Kicker & Class B Unit Purchase Warrants
 
 
 
838,117

 
330,000

 
 
 
 
12,693,170

 
15,525,470

 
14,603,040

 
 
 
 
 
 
 
 
 
 
 
Vantage Mobility International, LLC (5%)*
 
Wheelchair Accessible Vehicle Manufacturer
 
Subordinated Notes (10.2% Cash, Due 09/21)
 
29,350,000

 
28,763,000

 
28,763,000

 
 
Class A Units (1,750,000 units)
 
 
 
1,750,000

 
1,750,000

 
 
 
 
29,350,000

 
30,513,000

 
30,513,000

 
 
 
 
 
 
 
 
 
 
 
Water Pik, Inc. (5%)*
 
Oral Health and Shower Head Supplier
 
Second Lien Term Loan (9.8% Cash, Due 01/21)
 
32,677,978

 
32,278,365

 
32,278,365

 
 
 
 
32,677,978

 
32,278,365

 
32,278,365

 
 
 
 
 
 
 
 
 
 
 
Wheel Pros Holdings, Inc. (2%)*
 
Wheel/Rim and Performance Tire Distributor
 
Subordinated Note (11% Cash, Due 06/20)
 
13,822,500

 
13,592,442

 
13,592,442

 
 
Class A Units (2,000 units)
 
 
 
1,954,144

 
1,846,000

 
 
 
 
13,822,500

 
15,546,586

 
15,438,442

 
 
 
 
 
 
 
 
 
 
 
Women's Marketing, Inc. (2%)*
 
Full-Service Media Organization
 
Subordinated Note (11% Cash, 1.5% PIK, Due 06/21)(5)
 
16,496,655

 
16,141,439

 
11,700,000

 
 
Class A Common Units (16,300 units)
 
 
 
1,630,000

 

 
 
 
 
16,496,655

 
17,771,439

 
11,700,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

10



TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2016
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
WSO Holdings, LP (0%)*
 
Organic/Fair Trade Sugar, Syrup, Nectar and Honey Producer
 
Common Points (3,000 points)
 
 
 
$
3,000,000

 
$
2,559,000

 
 
 
 
 
3,000,000

 
2,559,000

 
 
 
 
 
 
 
YummyEarth Inc. (3%)*
 
Organic Candy Manufacturer
 
Senior Notes (9.5% Cash, Due 08/20)
 
$
21,000,000

 
20,541,338

 
18,397,000

 
 
Limited Partnership Interest
 
 
 
3,496,500

 
481,000

 
 
 
 
21,000,000

 
24,037,838

 
18,878,000

 
 
 
 
 
 
 
Subtotal Non–Control / Non–Affiliate Investments
 
713,059,526

 
771,052,767

 
748,363,034

 
 
 
 
 
 
 
 
 
 
 
Affiliate Investments:
 
 
 
 
 
 
 
 
 
 
All Aboard America! Holdings Inc. (3%)*
 
Motor Coach Operator
 
Subordinated Note (12% Cash, 3% PIK, Due 12/17)
 
15,432,686

 
15,350,698

 
15,350,698

 
Membership Units in LLC
 
 
 
2,300,782

 
4,970,000

 
 
 
15,432,686

 
17,651,480

 
20,320,698

 
 
 
 
 
 
 
 
 
 
 
American De-Rosa Lamparts, LLC and Hallmark Lighting, LLC (1%)*
 
Lighting Wholesale and Distribution
 
Subordinated Note (12% Cash, 3% PIK, Due 01/21)
 
3,630,522

 
3,532,581

 
3,630,522

Membership Units (8,364 units)
 
 
 
620,653

 
4,176,000

 
 
 
3,630,522

 
4,153,234

 
7,806,522

 
 
 
 
 
 
 
 
 
 
 
CIS Secure Computing Inc. (2%)*
 
Secure Communications and Computing Solutions Provider
 
Subordinated Note (12% Cash, 3% PIK, Due 03/18)
 
11,581,689

 
11,581,688

 
11,581,688

Common Stock (84 shares)
 
 
 
502,320

 
1,842,000

 
 
11,581,689

 
12,084,008

 
13,423,688

 
 
 
 
 
 
 
 
 
 
 
Consolidated Lumber Company LLC (1%)*
 
Lumber Yard Operator
 
Subordinated Note (10% Cash, 2% PIK, Due 09/20)
 
5,443,221

 
5,343,622

 
5,343,622

 
 
Class A Units (15,000 units)
 
 
 
1,500,000

 
2,171,000

 
 
 
 
5,443,221

 
6,843,622

 
7,514,622

 
 
 
 
 
 
 
 
 
 
 
DPII Holdings, LLC (1%)*
 
Satellite Communication Business
 
Tranche I & II Subordinated Notes (12% Cash, 4% PIK, Due 07/17)(6)
 
3,706,688

 
3,341,061

 
2,597,000

 
 
Tranche III Subordinated Note (19% PIK, Due 07/17)(6)
 
1,732,858

 
1,583,077

 
500,000

 
 
Class A Membership Interest (17,308 units)
 
 
 
1,107,692

 

 
 
 
 
5,439,546

 
6,031,830

 
3,097,000

 
 
 
 
 
 
 
 
 
 
 
FCL Holding SPV, LLC (0%)*
 
Commercial Printing Services
 
Class A Interest (24,873 units)
 
 
 
292,000

 
645,000

 
 
Class B Interest (48,427 units)
 
 
 

 
35,000

 
 
Class C Interest (3,746 units)
 
 
 

 

 
 
 
 


 
292,000

 
680,000

 
 
 
 
 
 
 
 
 
 
 
Frank Entertainment Group, LLC
(3%)*
 
Movie Theatre and Family Entertainment Operator
 
Senior Note (10% Cash, 5.8% PIK, Due 06/18)
 
9,980,663

 
9,915,004

 
9,915,004

 
 
Class A Redeemable Preferred Units (10.5% Cash) (196,718 units)
 
 
 
3,934,666

 
4,566,904

 
 
Class B Redeemable Preferred Units (18,667 units)
 
 
 
433,334

 
1,660,810

 
 
Class C Redeemable Preferred Units (25,846 units)
 
 
 
600,000

 
600,000

 
 
Class A Common Units (43,077 units)
 
 
 
1,000,000

 

 
 
Class A Common Warrants
 
 
 
632,000

 

 
 
 
 
9,980,663

 
16,515,004

 
16,742,718

 
 
 
 
 
 
 
 
 
 
 
GenPref LLC (0%)*
 
Lab Testing Services
 
7.0% LLC Interest
 
 
 
23,162

 
16,400

 
 
 
 
 
23,162

 
16,400

 
 
 
 
 
 
 
 
 
 
 
MS Bakery Holdings, Inc. (F/K/A Main Street Gourmet, LLC) (1%)*
 
Baked Goods Provider
 
Preferred Units (233 units)
 
 
 
211,867

 
394,000

 
Common B Units (3,000 units)
 
 
 
23,140

 
2,000,000

 
Common A Units (1,652 units)
 
 
 
14,993

 
1,102,000

 
 
 
 
 
 
250,000

 
3,496,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

11



TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2016
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
NB Products, Inc. (8%)*
 
Distributor of Work Apparel and Accessories
 
Subordinated Note (12% Cash, 2% PIK, Due 02/20)
 
$
22,990,363

 
$
22,615,113

 
$
22,615,113

 
Jr. Subordinated Note (10% PIK, Due 02/20)
 
4,591,054

 
4,474,062

 
4,474,062

 
Jr. Subordinated Bridge Note (20% PIK, Due 05/21)
 
1,907,225

 
1,875,510

 
1,875,510

 
Series A Redeemable Senior Preferred Stock (7,839 shares)
 
 
 
7,621,648

 
9,181,000

 
Common Stock (1,668,691 shares)
 
 
 
333,738

 
8,903,000

 
 
 
29,488,642

 
36,920,071

 
47,048,685

 
 
 
 
 
 
 
 
 
 
 
PCX Aerostructures, LLC (3%)*
 
Aerospace Component Manufacturer
 
Subordinated Note (11% Cash, 4% PIK, Due 10/19)
 
24,255,406

 
23,978,357

 
18,999,000

 
Series A Preferred Stock (6,066 shares)
 
 
 
6,065,621

 

Series B Preferred Stock (164 shares)
 
 
 
164,368

 

Class A Common Stock (121,922 shares)
 
 
 
30,480

 

 
 
 
24,255,406

 
30,238,826

 
18,999,000

 
 
 
 
 
 
 
 
 
 
 
Technology Crops, LLC (2%)*
 
Supply Chain Management Services
 
Subordinated Notes (12% Cash, 5% PIK, Due 03/17)
 
11,687,643

 
11,687,643

 
11,687,643

Common Units (50 units)
 
 
 
500,000

 

 
 
 
11,687,643

 
12,187,643

 
11,687,643

 
 
 
 
 
 
 
 
 
 
 
TGaS Advisors, LLC (2%)*
 
Advisory Solutions to Pharmaceutical Companies
 
Senior Note (10% Cash, 1% PIK, Due 11/19)
 
9,711,679

 
9,545,196

 
9,545,196

 
Preferred Units (1,685,357 units)
 
 
 
1,556,069

 
1,564,000

 
 
 
9,711,679

 
11,101,265

 
11,109,196

 
 
 
 
 
 
 
 
 
 
 
Tulcan Fund IV, L.P. (F/K/A Dyson Corporation) (0%)*
 
Custom Forging and Fastener Supplies
 
Common Units (1,000,000 units)
 
 
 
1,000,000

 

 
 
 
 
 
 
1,000,000

 

 
 
 
 
 
 
 
 
 
 
 
UCS Super HoldCo LLC (0%)*
 
Squid and Wetfish Processor and Distributor
 
Membership Units (1,000 units)
 
 
 
776,437

 
63,000

 
 
 
 
 
776,437

 
63,000

 
 
 
 
 
 
 
 
 
 
 
United Retirement Plan Consultants, Inc. (0%)*
 
Retirement Plan Administrator
 
Series A Preferred Shares (9,400 shares)
 
 
 
205,748

 
233,000

 
 
Common Shares (100,000 shares)
 
 
 
1,000,000

 
136,000

 
 
 
 
 
 
1,205,748

 
369,000

 
 
 
 
 
 
 
 
 
 
 
Waste Recyclers Holdings, LLC (0%)*
 
Environmental and Facilities Services
 
Class A Preferred Units (280 units)
 
 
 
2,251,100

 

Class B Preferred Units (11,484,867 units)
 
 
 
3,304,218

 
629,000

Common Unit Purchase Warrant (1,170,083 units)
 
 
 
748,900

 

Common Units (153,219 units)
 
 
 
180,783

 

 
 
 
 
 
6,485,001

 
629,000

 
 
 
 
 
 
 
 
 
 
 
Wythe Will Tzetzo, LLC (1%)*
 
Confectionery Goods Distributor
 
Series A Preferred Units (99,829 units)
 
 
 

 
7,108,000

 
 
 
 
 
 

 
7,108,000

 
 
 
 
 
 
 
 
 
 
 
Subtotal Affiliate Investments
 
 
 
126,651,697

 
163,759,331

 
170,111,172

 
 
 
 
 
 
 
 
 
 
 
Control Investments:
 
 
 
 
 
 
 
 
 
 
CRS Reprocessing, LLC (2%)*
 
Fluid
Reprocessing
Services
 
Senior Notes (4.0% Cash, Due 12/16)
 
2,942,769

 
2,942,769

 
2,942,769

 
Split Collateral Term Loans (10.5% Cash, Due 12/16)
 
10,192,464

 
10,192,464

 
6,876,000

Series F Preferred Units (705,321 units)
 
 
 
9,134,807

 

 
Common Units (15,174 units)
 
 
 

 

 
 
 
13,135,233

 
22,270,040

 
9,818,769

 
 
 
 
 
 
 
 
 
 
 
DCWV Acquisition Corporation
(1%)*
 
Arts & Crafts and Home Decor Products Designer and Supplier
 
Senior Subordinated Note (15% PIK, Due 12/19)(6)
 
280,967

 
250,000

 
250,000

 
 
Subordinated Note (12% Cash, 3% PIK, Due 12/19)(6)
 
7,786,447

 
6,178,633

 
3,061,000

 
Jr. Subordinated Note (15% PIK, Due 12/19)(6)
 
2,349,604

 
2,000,000

 

 
Series A Preferred Equity (1,200 shares)
 
 
 
1,200,000

 

 
100% Common Shares
 
 
 

 

 
 
 
10,417,018

 
9,628,633

 
3,311,000

 
 
 
 
 
 
 
 
 
 
 

12



TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments — (Continued)
September 30, 2016
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Gerli & Company (0%)*
 
Specialty Woven Fabrics Manufacturer
 
Subordinated Note (13% Cash, Due 1/17)(6)
 
$
627,674

 
$
375,000

 
$

Subordinated Note (8.5% Cash, Due 1/17)(6)
 
4,796,649

 
3,000,000

 

Class A Preferred Shares (1,211 shares)
 
 
 
855,000

 

Class C Preferred Shares (744 shares)
 
 
 

 

Class E Preferred Shares (400 shares)
 
 
 
161,440

 

Common Stock (300 shares)
 
 
 
100,000

 

 
 
 
5,424,323

 
4,491,440

 

 
 
 
 
 
 
 
 
 
SRC Worldwide, Inc. (1%)*
 
Specialty Chemical Manufacturer
 
Common Stock (5,000 shares)
 
 
 
8,028,000

 
8,028,000

 
 
 
 
 
 
8,028,000

 
8,028,000

 
 
 
 
 
 
 
 
 
 
 
Team Waste, LLC (1%)*
 
Environmental and Facilities Services
 
Preferred Units (41 units)
 
 
 
8,100,000

 
8,100,000

 
 
 
 
 
 
 
8,100,000

 
8,100,000

 
 
 
 
 
 
 
 
 
 
 
Subtotal Control Investments
 
 
 
28,976,574

 
52,518,113

 
29,257,769

 
 
 
 
 
 
 
 
 
Total Investments, September 30, 2016 (153%)*
 
 
 
$
868,687,797

 
$
987,330,211

 
$
947,731,975


*    Fair value as a percent of net assets
(1)
All debt investments are income producing, unless otherwise noted. Equity and equity-linked investments are non-income producing, unless otherwise noted.
(2)
Disclosures of interest rates on notes include cash interest rates and payment-in-kind (“PIK”) interest rates.
(3)
All investments are restricted as to resale and were valued at fair value as determined in good faith by the Board of Directors.
(4)
Investment is not a qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 3.1% of total investments at fair value as of September 30, 2016. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets. If at any time qualifying assets do not represent at least 70% of the Company's total assets, the Company will be precluded from acquiring any additional non-qualifying asset until such time as it complies with the requirements of Section 55(a).
(5)
PIK non-accrual investment
(6)
Non-accrual investment
(7)
All of the Company's investments, unless otherwise noted, are encumbered either as security for the Company's senior secured credit facility or in support of the SBA-guaranteed debentures issued by Triangle Mezzanine Fund LLLP and Triangle Mezzanine Fund II LP.

See accompanying notes.

13



TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments
December 31, 2015
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Non–Control / Non–Affiliate Investments:
 
 
 
 
 
 
Access Medical Acquisition, Inc. (3%)*
 
Operator of Primary Care Clinics
 
Subordinated Notes (10% Cash, 2% PIK, Due 01/22)
 
$
13,819,514

 
$
13,559,977

 
$
13,559,977

 
 
Class A Units (1,500,000 units)
 
 
 
1,500,000

 
2,282,000

 
 
 
 
13,819,514

 
15,059,977

 
15,841,977

 
 
 
 
 
 
 
 
 
 
 
ADCS Clinics, LLC (2%)*
 
Operator of Dermatology Clinics
 
Subordinated Note (11% Cash, 2% PIK, Due 05/20)
 
10,042,719

 
9,848,836

 
9,848,836

 
 
 
 
10,042,719

 
9,848,836

 
9,848,836

 
 
 
 
 
 
 
 
 
 
 
Agilex Flavors & Fragrances, Inc. (3%)*
 
Custom Fragrance Producer
 
Subordinated Note (12% Cash, 1.5% PIK, Due 06/19)
 
13,089,478

 
12,931,506

 
12,931,506

Common Units (1,250 units)
 
 
 
1,250,000

 
2,527,000

 
 
 
13,089,478

 
14,181,506

 
15,458,506

 
 
 
 
 
 
 
 
 
 
 
AGM Automotive, LLC (1%)*
 
Auto Industry Interior Components Supplier
 
Units (1,500,000 units)
 
 
 
630,134

 
2,774,000

 
 
 
 
 
630,134

 
2,774,000

 
 
 
 
 
 
 
 
 
 
 
All Metals Holding, LLC (1%)*
 
Steel Processor and Distributor
 
Subordinated Note (10.5% Cash, Due 12/19)
 
4,950,000

 
4,832,848

 
4,832,848

 
 
Units (34,732 units)
 
 
 
122,000

 
122,000

 
 
 
 
4,950,000

 
4,954,848

 
4,954,848

 
 
 
 
 
 
 
 
 
 
 
All Metro Health Care Services, Inc. (3%)*
 
Home Care Service Provider
 
Subordinated Note (10% Cash, 2% PIK, Due 03/20)
 
17,350,000

 
16,998,931

 
17,350,000

 
 
 
 
17,350,000

 
16,998,931

 
17,350,000

 
 
 
 
 
 
 
 
 
 
 
Applied-Cleveland Holdings, Inc. (5%)*
 
Oil and Gas Pipeline Infrastructure Inspection Services
 
Subordinated Notes (10% Cash, 2% PIK, Due 06/19)
 
23,470,748

 
23,215,930

 
23,215,930

 
Class A Units (2,129,032 units)
 
 
 
2,129,032

 
2,398,000

 
 
 
23,470,748

 
25,344,962

 
25,613,930

 
 
 
 
 
 
 
 
 
 
 
Audio and Video Labs Holdings, Inc. (2%)*
 
Manufacturer and Distributor for Independent Artists and Authors
 
Subordinated Notes (12% Cash, 2% PIK, Due 06/18)
 
10,508,029

 
10,397,618

 
10,397,618

Common Stock (138 shares)
 
 
 
1,300,000

 
1,823,000

 
 
 
10,508,029

 
11,697,618

 
12,220,618

 
 
 
 
 
 
 
 
 
 
 
Avkem International, LLC (1%)*
 
Flux and Foundry Manufacturer and Supplier
 
Subordinated Note (10% Cash, 4% PIK, Due 12/17)
 
4,044,171

 
3,972,207

 
3,972,207

 
 
 
 
4,044,171

 
3,972,207

 
3,972,207

 
 
 
 
 
 
 
 
 
 
 
Baker Hill Acquisition, LLC (3%)*
 
Loan Origination Software Solutions Provider
 
Subordinated Notes (11.5% Cash, Due 03/21)
 
13,500,000

 
13,304,441

 
13,304,441

 
 
Limited Partner Interest
 
 
 
1,498,500

 
1,498,500

 
 
 
 
13,500,000

 
14,802,941

 
14,802,941

 
 
 
 
 
 
 
 
 
 
 
BFN Operations LLC (1%)*
 
Wholesale Grower and Distributor of Shrubs, Trees and Plants
 
First-Out Subordinated Note (3% Cash, 14% PIK, Due 06/18)(5)
 
15,473,803

 
14,162,530

 
2,162,000

 
Last-Out Subordinated Note (17% PIK, Due 06/18)(6)
 
2,107,700

 
1,957,027

 

 
 
 
17,581,503

 
16,119,557

 
2,162,000

 
 
 
 
 
 
 
 
 
 
 
Cafe Enterprises, Inc. (3%)*
 
Restaurant
 
Subordinated Note (12% Cash, 2% PIK, Due 09/19)
 
12,407,440

 
12,227,662

 
12,227,662

 
 
Series C Preferred Stock (10,000 shares)
 
 
 
1,000,000

 
1,354,000

 
 
 
 
12,407,440

 
13,227,662

 
13,581,662

 
 
 
 
 
 
 
 
 
 
 
Capital Contractors, Inc. (1%)*
 
Janitorial and Facilities Maintenance Services
 
Subordinated Notes (5% Cash, Due 12/16)
 
9,843,542

 
9,684,660

 
6,725,000

Series A Redeemable Preferred Stock (200 shares)
 
 
 
2,000,000

 

Common Stock Warrants (20 shares)
 
 
 
492,000

 

 
 
9,843,542

 
12,176,660

 
6,725,000

 
 
 
 
 
 
 
 
 
 
 
Captek Softgel International, Inc.
(3%)*
 
Nutraceutical Manufacturer
 
Subordinated Note (10% Cash, 2.5% PIK, Due 06/21)
 
15,021,875

 
14,721,875

 
14,721,875

Common Stock (15,000 shares)
 
 
 
1,500,000

 
1,500,000

 
 
 
15,021,875

 
16,221,875

 
16,221,875

 
 
 
 
 
 
 
 
 
 
 
Carolina Beverage Group, LLC (0%)*
 
Beverage Manufacturing
and Packaging
 
Class B Units (11,974 units)
 
 
 
119,735

 
644,000

 
 
 
 
 
119,735

 
644,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

14



TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments — (Continued)
December 31, 2015
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Centerfield Media Holding Company (4%)*
 
Digital Marketing
 
Subordinated Note (10% Cash, 3.5% PIK, Due 03/21)
 
$
18,201,610

 
$
17,854,853

 
$
17,854,853

 
 
Common Shares (1,000 shares)
 
 
 
1,000,000

 
1,000,000

 
 
 
 
18,201,610

 
18,854,853

 
18,854,853

 
 
 
 
 
 
 
 
 
 
 
Chromaflo Technologies Parent LP (2%)*
 
Colorant Manufacturer and Distributor
 
Second Lien Term Loan (8.3% Cash, Due 06/20)
 
9,999,618

 
9,962,287

 
9,336,000

Class A Units (22,561 units)
 
 
 
906,604

 
1,845,000

 
 
 
9,999,618

 
10,868,891

 
11,181,000

 
 
 
 
 
 
 
 
 
 
 
Community Intervention Services, Inc. (3%)*
 
Provider of Behavioral Health Services
 
Subordinated Note (10% Cash, 3% PIK, Due 01/21)
 
15,567,011

 
15,278,382

 
15,278,382

 
 
 
 
15,567,011

 
15,278,382

 
15,278,382

 
 
 
 
 
 
 
 
 
 
 
Comverge, Inc. (3%)*
 
Provider of Intelligent Energy Management Solutions
 
Senior Note (12% Cash, Due 05/18)
 
15,505,583

 
15,349,955

 
15,349,955

Preferred Stock (703 shares)
 
 
 
554,458

 
708,000

Common Stock (1,000,000 shares)
 
 
 
100,000

 
563,000

 
 
 
15,505,583

 
16,004,413

 
16,620,955

 
 
 
 
 
 
 
 
 
 
 
Continental Anesthesia Management, LLC (2%)*
 
Physicians Management
Services
 
Subordinated Note (10% Cash, 4% PIK, Due 04/16)
 
10,676,571

 
10,676,571

 
10,676,571

Warrant (263 shares)
 
 
 
276,100

 

 
 
10,676,571

 
10,952,671

 
10,676,571

 
 
 
 
 
 
 
 
 
 
 
CPower Ultimate HoldCo, LLC (0%)*
 
Demand Response Business
 
Units (345,542 units)
 
 
 
345,542

 
345,542

 
 
 
 
 
 
345,542

 
345,542

 
 
 
 
 
 
 
 
 
 
 
CPC Acquisition Corp. (3%)*
 
Coatings Formulator and Manufacturer
 
Subordinated Note (9.5% Cash, Due 04/22)
 
7,500,000

 
7,427,013

 
7,427,013

 
 
Subordinated Note (10% Cash, 1% PIK, Due 10/22)
 
3,757,187

 
3,720,583

 
3,720,583

 
 
Subordinated Note (14% PIK, Due 10/22)
 
3,850,625

 
3,814,021

 
3,814,021

 
 
Class A Units (1,081 units)
 
 
 
1,500,000

 
1,500,000

 
 
 
 
15,107,812

 
16,461,617

 
16,461,617

 
 
 
 
 
 
 
 
 
 
 
CWS Acquisition Corp. (0%)*
 
Manufacturer of Custom Windows and Sliding Doors
 
1,500,000 Class A Units
 
 
 
1,500,000

 
1,500,000

 
 
 
 
 
1,500,000

 
1,500,000

 
 
 
 
 
 
 
 
 
 
 
Danville Materials, LLC (4%)*
 
Manufacturer of Dental Products
 
Subordinated Note (10% Cash, Due 10/20)
 
7,237,000

 
7,159,943

 
7,237,000

Subordinated Note (10% Cash, 2% PIK, Due 10/20)
 
9,537,517

 
9,446,012

 
9,537,517

Common Units (45,492 units)
 
 
 
82,593

 
1,733,000

 
 
16,774,517

 
16,688,548

 
18,507,517

 
 
 
 
 
 
 
 
 
 
 
Data Source Holdings, LLC (0%)*
 
Print Supply Chain Management Services
 
Common Units (47,503 units)
 
 
 
1,000,000

 
792,000

 
 
 
 
 
1,000,000

 
792,000

 
 
 
 
 
 
 
 
 
 
 
DialogDirect, Inc. (5%)*
 
Business Process Outsourcing Provider
 
Subordinated Notes (12% Cash, 1.5% PIK, Due 04/20)
 
24,435,667

 
24,237,485

 
20,871,000

 
 
 
24,435,667

 
24,237,485

 
20,871,000

 
 
 
 
 
 
 
 
 
 
 
DLC Acquisition, LLC (8%)*
 
Staffing Firm
 
Senior Notes (10% Cash, Due 12/20)
 
21,614,062

 
21,260,181

 
21,260,181

 
Senior Note (10% Cash, 2% PIK, Due 12/20)
 
18,612,068

 
18,352,068

 
18,352,068

 
 
 
40,226,130

 
39,612,249

 
39,612,249

 
 
 
 
 
 
 
 
 
 
 
DLR Restaurants, LLC (0%)*
 
Restaurant
 
Royalty Rights
 
 
 

 

 
 
 
 
 

 

 
 
 
 
 
 
 
 
 
 
 
Dyno Acquiror, Inc. (2%)*
 
Sewing Products and Seasonal Decorative Products Supplier
 
Subordinated Note (12% Cash, 2% PIK, Due 11/18)
 
7,382,324

 
7,298,289

 
7,298,289

 
Series A Units (600,000 units)
 
 
 
600,000

 
523,000

 
 
 
7,382,324

 
7,898,289

 
7,821,289

 
 
 
 
 
 
 
 
 
 
 
Eckler's Holdings, Inc. (2%)*
 
Restoration Parts and Accessories for Classic Cars and Trucks
 
Subordinated Note (11% Cash, 4.5% PIK, Due 07/18)
 
9,499,451

 
9,411,489

 
9,065,000

 
Common Stock (18,029 shares)
 
 
 
183,562

 

 
Series A Preferred Stock (1,596 shares)
 
 
 
1,596,126

 

 
Series B Preferred Stock (185 shares)
 
 
 
185,127

 
149,000

 
 
 
9,499,451

 
11,376,304

 
9,214,000

 
 
 
 
 
 
 
 
 
 
 
Electronic Systems Protection, Inc. (0%)*
 
Power Protection Systems Manufacturing
 
Common Stock (570 shares)
 
 
 
285,000

 
680,000

 
 
 
 
 
285,000

 
680,000

 
 
 
 
 
 
 
 
 
 
 

15



TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments — (Continued)
December 31, 2015
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
FCL Graphics, Inc. (0%)*
 
Commercial Printing Services
 
Senior Note (5.2% Cash, Due 09/16)
 
$
1,030,253

 
$
1,030,253

 
$
677,000

 
 
Senior Note (8.0% Cash, 2% PIK, Due 09/16)(5)
 
1,244,804

 
1,207,439

 

 
 
 
 
2,275,057

 
2,237,692

 
677,000

 
 
 
 
 
 
 
 
 
 
 
Flowchem Ltd. (0%)*
 
Services to Crude Oil Pipeline Operators
 
Common Units (1,000,000 units)
 
 
 
782,356

 
1,968,000

 
 
 
 
 
782,356

 
1,968,000

 
 
 
 
 
 
 
 
 
 
 
FrontStream Holdings, LLC (3%)*
 
Payment and Donation Management Product Service Provider
 
Subordinated Note (13.0% Cash, Due 12/20)
 
13,375,000

 
13,232,718

 
13,232,718

 
 
Series C-2 Preferred Shares (500 shares)
 
 
 
500,000

 
500,000

 
 
 
 
13,375,000

 
13,732,718

 
13,732,718

 
 
 
 
 
 
 
 
 
 
 
Frontstreet Facility Solutions, Inc. (1%)*
 
Retail, Restaurant and Commercial Facilities Maintenance
 
Subordinated Note (13% Cash, Due 07/18)
 
8,462,629

 
8,392,051

 
6,603,000

 
 
Series A Convertible Preferred Stock (2,500 shares)
 
 
 
250,000

 

 
 
Series B Convertible Preferred Stock (5,556 shares)
 
 
 
500,000

 

 
 
 
 
8,462,629

 
9,142,051

 
6,603,000

 
 
 
 
 
 
 
 
 
 
 
Frozen Specialties, Inc. (3%)*
 
Frozen Foods Manufacturer
 
Subordinated Note (10% Cash, 4% PIK, Due 12/17)
 
13,133,074

 
13,133,074

 
14,333,074

 
 
13,133,074

 
13,133,074

 
14,333,074

 
 
 
 
 
 
 
 
 
 
 
Garden Fresh Restaurant Holding, LLC (0%)*
 
Restaurant
 
Class A Units (5,000 units)
 
 
 
500,000

 
26,000

 
 
 
 
500,000

 
26,000

 
 
 
 
 
 
 
 
 
 
 
GST AutoLeather, Inc. (4%)*
 
Supplier of Automotive Interior Leather
 
Subordinated Note (11% Cash, 2% PIK, Due 01/21)
 
22,667,050

 
22,295,430

 
22,295,430

 
 
 
 
22,667,050

 
22,295,430

 
22,295,430

 
 
 
 
 
 
 
 
 
 
 
Hatch Chile Co., LLC (0%)*
 
Food Products Distributor
 
Unit Purchase Warrant (7,817 units)
 
 
 
295,800

 
1,412,000

 
 
 
 
 
295,800

 
1,412,000

 
 
 
 
 
 
 
 
 
 
 
HKW Capital Partners IV, L.P.
(0%)*(4)
 
Multi-Sector Holdings
 
0.6% Limited Partnership Interest
 
 
 
1,148,222

 
1,286,000

 
 
 
 
 
 
1,148,222

 
1,286,000

 
 
 
 
 
 
 
 
 
 
 
HTC Borrower, LLC (5%)*
 
Hunting and Outdoor Products
 
Subordinated Notes (10% Cash, 3% PIK, Due 09/20)
 
25,349,458

 
25,014,420

 
25,014,420

 
 
 
 
25,349,458

 
25,014,420

 
25,014,420

 
 
 
 
 
 
 
 
 
 
 
Inland Pipe Rehabilitation Holding Company LLC (2%)*
 
Cleaning and Repair Services
 
Subordinated Notes (10% Cash, 5.5% PIK, Due 12/16)
 
9,644,469

 
9,620,276

 
9,620,276

Membership Interest Purchase Warrant (3%)
 
 
 
853,500

 

 
 
9,644,469

 
10,473,776

 
9,620,276

 
 
 
 
 
 
 
 
 
 
 
KT Capital Partners, L.P. (0%)*(4)
 
Multi-Sector Holdings
 
Subordinated Notes (10% PIK)
 
740,740

 
374,000

 
740,740

 
 
Subordinated Note (3.3% PIK)
 
160,044

 
81,000

 
160,044

 
 
4.2% Limited Partnership Interest
 
 
 
380,000

 
769,000

 
 
 
 
900,784

 
835,000

 
1,669,784

 
 
 
 
 
 
 
 
 
 
 
Magpul Industries Corp. (1%)*
 
Firearm Accessories Manufacturer and Distributor
 
Preferred Units (1,470 units)
 
 
 
1,470,000

 
2,630,000

 
Common Units (30,000 units)
 
 
 
30,000

 
2,461,000

 
 
 
 
 
1,500,000

 
5,091,000

 
 
 
 
 
 
 
 
 
 
 
Media Storm, LLC (1%)*
 
Marketing Services
 
Subordinated Note (10% Cash, Due 08/19)
 
6,545,455

 
6,519,844

 
6,519,844

Membership Units (1,216,204 units)
 
 
 
1,176,957

 
1,059,000

 
 
6,545,455

 
7,696,801

 
7,578,844

 
 
 
 
 
 
 
 
 
 
 
Micross Solutions LLC (5%)*
 
Provider of Semiconductor Products and Services
 
Subordinated Note (12% Cash, 3% PIK, Due 06/18)
 
23,701,971

 
23,555,773

 
23,555,773

Class A-2 Common Units (1,979,524 units)
 
 
 
2,019,693

 
1,264,000

 
 
23,701,971

 
25,575,466

 
24,819,773

 
 
 
 
 
 
 
 
 
 
 
Motor Vehicle Software Corporation (4%)*
 
Provider of EVR Services
 
Subordinated Note (10% Cash, 1% PIK, Due 03/21)
 
20,066,150

 
19,680,009

 
19,680,009

 
 
Class A Units (1,000,000 units)
 
 
 
1,064,960

 
1,064,960

 
 
 
 
20,066,150

 
20,744,969

 
20,744,969

 
 
 
 
 
 
 
 
 
 
 
My Alarm Center, LLC (0%)*
 
Security Company
 
Preferred Units (2,000,000 units)
 
 
 
2,000,000

 
1,563,000

 
 
 
 
 
2,000,000

 
1,563,000

 
 
 
 
 
 
 
 
 
 
 
Nautic Partners VII, LP (0%)*(4)
 
Multi-Sector Holdings
 
0.4% Limited Partnership Interest
 
 
 
727,348

 
1,163,000

 
 
 
 
 
 
727,348

 
1,163,000

 
 
 
 
 
 
 
 
 
 
 

16



TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments — (Continued)
December 31, 2015
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
Nomacorc, LLC (4%)*
 
Synthetic Wine Cork Producer
 
Subordinated Note (10% Cash, 2.25% PIK, Due 07/21)
 
$
20,405,104

 
$
20,051,228

 
$
18,346,000

 
 
Limited Partnership Interest
 
 
 
2,267,211

 
1,829,000

 
 
 
 
20,405,104

 
22,318,439

 
20,175,000

 
 
 
 
 
 
 
 
 
 
 
On Event Services, LLC (5%)*
 
Equipment Rentals
 
Subordinated Notes (10% Cash, 2% PIK, Due 06/20)
 
21,841,967

 
21,146,202

 
21,146,202

 
Warrant to Purchase Units (5.4%)
 
 
 
1,252,000

 
1,870,000

 
Option to Acquire Warrants
 
 
 

 
385,000

 
 
 
21,841,967

 
22,398,202

 
23,401,202

 
 
 
 
 
 
 
 
 
 
 
Orchid Underwriters Agency, LLC (5%)*
 
Insurance Underwriter
 
Term B Note (10% Cash, Due 11/19)
 
22,644,852

 
22,259,848

 
22,259,848

Class A Preferred Units (15,000 units)
 
 
 
1,500,000

 
1,735,000

Class A Common Units (15,000 units)
 
 
 

 
777,000

 
 
22,644,852

 
23,759,848

 
24,771,848

 
 
 
 
 
 
 
 
 
 
 
Performance Health & Wellness Holdings, Inc. (1%)*
 
Rehabilitation and Wellness Products
 
Class A Limited Partnership Units (15,000 units)
 
 
 
1,500,000

 
3,533,000

 
 
 
 
 
1,500,000

 
3,533,000

 
 
 
 
 
 
 
 
 
 
 
PowerDirect Marketing, LLC (1%)*
 
Marketing Services
 
Subordinated Note (13% Cash, 2% PIK, Due 12/16)(6)
 
8,766,784

 
6,627,482

 
2,728,000

Common Unit Purchase Warrants
 
 
 
590,200

 

 
 
8,766,784

 
7,217,682

 
2,728,000

 
 
 
 
 
 
 
 
 
 
 
Radiant Logistics, Inc. (3%)*
 
Freight Logistics
 
Subordinated Note (12% Cash, Due 04/21)
 
15,000,000

 
14,726,935

 
14,726,935

 
 
 
 
15,000,000

 
14,726,935

 
14,726,935

 
 
 
 
 
 
 
 
 
 
 
RockYou, Inc. (0%)*
 
Mobile Game Advertising Network
 
Common Stock (67,585 shares)
 
 
 
111,000

 
111,000

 
 
 
 
 
 
111,000

 
111,000

 
 
 
 
 
 
 
 
 
 
 
Rotolo Consultants, Inc. (2%)*
 
Landscape Services
 
Subordinated Note (11% Cash, 3% PIK, Due 08/21)
 
6,697,070

 
6,568,541

 
6,568,541

 
 
Series A Preferred Units (39 units)
 
 
 
3,654,253

 
3,654,253

 
 
 
 
6,697,070

 
10,222,794

 
10,222,794

 
 
 
 
 
 
 
 
 
 
 
SPC Partners V, LP (0%)*(4)
 
Multi-Sector Holdings
 
0.7% Limited Partnership Interest
 
 
 
1,296,140

 
1,241,000

 
 
 
 
 
 
1,296,140

 
1,241,000

 
 
 
 
 
 
 
 
 
 
 
Specialized Desanders, Inc. (3%)*(4)
 
Sand and Particulate Removal Equipment Provider for Oil and Gas Companies
 
Subordinated Note (12% Cash, 2% PIK, Due 03/20)
 
16,110,043

 
15,917,841

 
12,064,469

Class C Partnership Units (2,000,000 units)
 
 
 
1,937,421

 
2,954,000

 
 
 
16,110,043

 
17,855,262

 
15,018,469

 
 
 
 
 
 
 
 
 
 
 
Tate's Bake Shop (2%)*
 
Producer of Baked Goods
 
Subordinated Note (10% Cash, 3% PIK, Due 02/20)
 
10,416,107

 
10,252,530

 
10,252,530

 
 
Limited Partner Interest
 
 
 
925,000

 
1,207,000

 
 
 
 
10,416,107

 
11,177,530

 
11,459,530

 
 
 
 
 
 
 
 
 
 
 
TCFI Merlin LLC (3%)*
 
Specialty Staffing Service Provider
 
Senior Note (10% Cash, 1% PIK, Due 09/19)
 
14,495,790

 
14,257,521

 
14,257,521

 
 
Limited Partnership Units (500,000 units)
 
 
 
500,000

 
488,000

 
 
 
 
14,495,790

 
14,757,521

 
14,745,521

 
 
 
 
 
 
 
 
 
 
 
The Cook & Boardman Group, LLC (3%)*
 
Distributor of Doors and Related Products
 
Subordinated Note (10% Cash, 2.5% PIK, Due 03/20)
 
14,469,046

 
14,240,038

 
14,240,038

 
 
Class A Units (1,400,000 units)
 
 
 
1,400,000

 
1,823,000

 
 
 
 
14,469,046

 
15,640,038

 
16,063,038

 
 
 
 
 
 
 
 
 
 
 
The Krystal Company (1%)*
 
Restaurant
 
Class A Units of Limited Partnership (2,000 units)
 
 
 
638,260

 
2,753,000

 
 
 
 
 
 
638,260

 
2,753,000

 
 
 
 
 
 
 
 
 
 
 
Top Knobs USA, Inc. (0%)*
 
Hardware Designer and Distributor
 
Common Stock (26,593 shares)
 
 
 
333,994

 
2,654,000

 
 
 
 
 
333,994

 
2,654,000

 
 
 
 
 
 
 
 
 
 
 

17



TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments — (Continued)
December 31, 2015
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
United Biologics, LLC (2%)*
 
Allergy Immunotherapy
 
Subordinated Note (12% Cash, 2% PIK, Due 03/17)
 
$
12,626,565

 
$
12,283,998

 
$
11,143,000

 
Class A Common Units (177,935 units)
 
 
 
1,999,989

 

 
Class A-1 Common Units (18,818 units)
 
 
 
137,324

 

 
Class A-1 Common Kicker Units (14,114 units)
 
 
 

 

 
Class A, Class A-1, Class A-1 Kicker & Class B Unit Purchase Warrants
 
 
 
838,117

 

 
 
 
 
12,626,565

 
15,259,428

 
11,143,000

 
 
 
 
 
 
 
 
 
 
 
Water Pik, Inc. (6%)*
 
Oral Health and Shower Head Supplier
 
Second Lien Term Loan (9.8% Cash, Due 01/21)
 
33,288,781

 
32,836,296

 
32,836,296

 
 
 
 
33,288,781

 
32,836,296

 
32,836,296

 
 
 
 
 
 
 
 
 
 
 
Wheel Pros Holdings, Inc. (3%)*
 
Wheel/Rim and Performance Tire Distributor
 
Subordinated Note (11% Cash, Due 06/20)
 
13,822,500

 
13,556,636

 
13,556,636

 
 
Class A Units (2,000 units)
 
 
 
2,000,000

 
2,148,000

 
 
 
 
13,822,500

 
15,556,636

 
15,704,636

 
 
 
 
 
 
 
 
 
 
 
Women's Marketing, Inc. (3%)*
 
Full-Service Media Organization
 
Subordinated Note (11% Cash, 1.5% PIK, Due 06/21)
 
16,309,508

 
15,983,508

 
15,983,508

 
 
Class A Common Units (16,300 units)
 
 
 
1,630,000

 
1,630,000

 
 
 
 
16,309,508

 
17,613,508

 
17,613,508

 
 
 
 
 
 
 
 
 
 
 
WSO Holdings, LP (0%)*
 
Organic/Fair Trade Sugar, Syrup, Nectar and Honey Producer
 
Common Points (3,000 points)
 
 
 
3,000,000

 
1,975,000

 
 
 
 
 
3,000,000

 
1,975,000

 
 
 
 
 
 
 
YummyEarth Inc. (4%)*
 
Organic Candy Manufacturer
 
Senior Note (9% Cash, Due 08/20)
 
19,500,000

 
18,972,078

 
18,972,078

 
 
Limited Partner Interest
 
 
 
3,496,500

 
2,202,000

 
 
 
 
19,500,000

 
22,468,578

 
21,174,078

 
 
 
 
 
 
 
Subtotal Non–Control / Non–Affiliate Investments
 
741,520,527

 
795,244,907

 
774,238,518

 
 
 
 
 
 
 
 
 
 
 
Affiliate Investments:
 
 
 
 
 
 
 
 
 
 
All Aboard America! Holdings Inc. (4%)*
 
Motor Coach Operator
 
Subordinated Note (12% Cash, 3% PIK, Due 12/17)
 
15,084,735

 
14,953,191

 
14,953,191

 
Membership Units in LLC
 
 
 
2,300,782

 
5,024,000

 
 
 
15,084,735

 
17,253,973

 
19,977,191

 
 
 
 
 
 
 
 
 
 
 
American De-Rosa Lamparts, LLC and Hallmark Lighting, LLC (2%)*
 
Lighting Wholesale and Distribution
 
Subordinated Note (12% Cash, 2% PIK, Due 06/17)
 
7,229,980

 
7,186,235

 
7,186,235

Membership Units (8,364 units)
 
 
 
620,653

 
3,872,000

 
 
 
7,229,980

 
7,806,888

 
11,058,235

 
 
 
 
 
 
 
 
 
 
 
CIS Secure Computing Inc. (2%)*
 
Secure Communications and Computing Solutions Provider
 
Subordinated Note (12% Cash, 3% PIK, Due 06/17)
 
11,339,706

 
11,323,440

 
11,323,440

Common Stock (84 shares)
 
 
 
502,320

 
199,000

 
 
11,339,706

 
11,825,760

 
11,522,440

 
 
 
 
 
 
 
 
 
 
 
Consolidated Lumber Company LLC (3%)*
 
Lumber Yard Operator
 
Senior Note (10% Cash, 2% PIK, Due 09/20)
 
14,611,092

 
14,332,445

 
14,332,445

 
 
Class A Units (15,000 units)
 
 
 
1,500,000

 
1,500,000

 
 
 
 
14,611,092

 
15,832,445

 
15,832,445

 
 
 
 
 
 
 
 
 
 
 
DPII Holdings, LLC (1%)*
 
Satellite Communication Business
 
Senior Note (12% Cash, 4% PIK, Due 07/17)
 
3,595,727

 
3,558,804

 
3,558,804

 
 
Class A Membership Interest (17,308 units)
 
 
 
1,107,692

 
795,000

 
 
 
 
3,595,727

 
4,666,496

 
4,353,804

 
 
 
 
 
 
 
 
 
 
 
Dyson Corporation (0%)*
 
Custom Forging and Fastener Supplies
 
Common Units (1,000,000 units)
 
 
 
1,000,000

 
416,000

 
 
 
 
 
1,000,000

 
416,000

 
 
 
 
 
 
 
 
 
 
 
Frank Entertainment Group, LLC
(3%)*
 
Movie Theatre and Family Entertainment Operator
 
Senior Note (10% Cash, 5.8% PIK, Due 06/18)
 
9,683,049

 
9,592,545

 
9,592,545

 
 
Class A Redeemable Preferred Units (10.5% Cash) (196,718 units)
 
 
 
3,934,666

 
4,566,904

 
 
Class B Redeemable Preferred Units (18,667 units)
 
 
 
433,334

 
1,660,810

 
 
Class C Redeemable Preferred Units (25,846 units)
 
 
 
600,000

 
600,000

 
 
Class A Common Units (43,077 units)
 
 
 
1,000,000

 

 
 
Class A Common Warrants
 
 
 
632,000

 

 
 
 
 
9,683,049

 
16,192,545

 
16,420,259

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

18



TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments — (Continued)
December 31, 2015
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
GenPref LLC (0%)*
 
Lab Testing Services
 
7.0% LLC Interest
 
 
 
$
23,162

 
$
16,400

 
 
 
 
 
23,162

 
16,400

 
 
 
 
 
 
 
 
 
 
 
Main Street Gourmet, LLC (1%)*
 
Baked Goods Provider
 
Preferred Units (233 units)
 
 
 
211,867

 
367,000

 
Common B Units (3,000 units)
 
 
 
23,140

 
1,807,000

 
Common A Units (1,652 units)
 
 
 
14,993

 
995,000

 
 
 
 
 
 
250,000

 
3,169,000

 
 
 
 
 
 
 
 
 
 
 
NB Products, Inc. (7%)*
 
Distributor of Work Apparel and Accessories
 
Subordinated Note (12% Cash, 2% PIK, Due 02/20)
 
$
20,722,083

 
20,327,140

 
20,327,140

 
Jr. Subordinated Note (10% PIK, Due 02/20)
 
4,263,250

 
4,126,030

 
4,126,030

 
Series A Redeemable Senior Preferred Stock (7,839 shares)
 
 
 
7,621,648

 
8,525,000

 
Common Stock (1,668,691 shares)
 
 
 
333,738

 
3,997,000

 
 
 
24,985,333

 
32,408,556

 
36,975,170

 
 
 
 
 
 
 
 
 
 
 
PCX Aerostructures, LLC (4%)*
 
Aerospace Component Manufacturer
 
Subordinated Note (11% Cash, 4% PIK, Due 10/19)
 
20,075,580

 
19,799,092

 
18,612,000

 
Series A Preferred Stock (5,344 shares)
 
 
 
5,343,953

 
1,191,000

Class A Common Stock (107,416 shares)
 
 
 
26,854

 

 
 
 
20,075,580

 
25,169,899

 
19,803,000

 
 
 
 
 
 
 
 
 
 
 
Team Waste, LLC (1%)*
 
Environmental and Facilities Services
 
Preferred Units (28 units)
 
 
 
5,500,000

 
5,500,000

 
 
 
 
 
5,500,000

 
5,500,000

 
 
 
 
 
 
 
 
 
 
 
Technology Crops, LLC (2%)*
 
Supply Chain Management Services
 
Subordinated Notes (12% Cash, 5% PIK, Due 03/17)
 
11,252,123

 
11,252,123

 
11,252,123

Common Units (50 units)
 
 
 
500,000

 
400,000

 
 
 
11,252,123

 
11,752,123

 
11,652,123

 
 
 
 
 
 
 
 
 
 
 
TGaS Advisors, LLC (2%)*
 
Advisory Solutions to Pharmaceutical Companies
 
Senior Note (10% Cash, 1% PIK, Due 11/19)
 
9,823,862

 
9,633,898

 
9,633,898

 
Preferred Units (1,685,357 units)
 
 
 
1,685,357

 
1,427,000

 
 
 
9,823,862

 
11,319,255

 
11,060,898

 
 
 
 
 
 
 
 
 
 
 
UCS Super HoldCo LLC (0%)*
 
Squid and Wetfish Processor and Distributor
 
Membership Units (1,000 units)
 
 
 
1,000,000

 
300,000

 
Participation Interest
 
 
 
2,000,000

 

 
 
 
 
 
3,000,000

 
300,000

 
 
 
 
 
 
 
 
 
 
 
United Retirement Plan Consultants, Inc. (0%)*
 
Retirement Plan Administrator
 
Preferred A Shares (90,000 shares)
 
 
 
900,000

 
446,000

 
 
Common Shares (10,000 shares)
 
 
 
100,000

 

 
 
 
 
 
 
1,000,000

 
446,000

 
 
 
 
 
 
 
 
 
 
 
Waste Recyclers Holdings, LLC (0%)*
 
Environmental and Facilities Services
 
Class A Preferred Units (280 units)
 
 
 
2,251,100

 

Class B Preferred Units (11,484,867 units)
 
 
 
3,304,218

 
743,000

Common Unit Purchase Warrant (1,170,083 units)
 
 
 
748,900

 

Common Units (153,219 units)
 
 
 
180,783

 

 
 
 
 
 
6,485,001

 
743,000

 
 
 
 
 
 
 
 
 
 
 
Wythe Will Tzetzo, LLC (2%)*
 
Confectionery Goods Distributor
 
Series A Preferred Units (99,829 units)
 
 
 

 
8,336,000

 
 
 
 
 
 

 
8,336,000

 
 
 
 
 
 
 
 
 
 
 
Subtotal Affiliate Investments
 
 
 
127,681,187

 
171,486,103

 
177,581,965

 
 
 
 
 
 
 
 
 
 
 
Control Investments:
 
 
 
 
 
 
 
 
 
 
CRS Reprocessing, LLC (3%)*
 
Fluid
Reprocessing
Services
 
Senior Notes (3.9% Cash, Due 05/16)
 
2,942,769

 
2,942,769

 
2,942,769

 
Split Collateral Term Loans (10.5% Cash, Due 06/16)
 
6,192,464

 
6,192,464

 
6,192,464

Series F Preferred Units (705,321 units)
 
 
 
9,134,807

 
5,221,000

 
Common Units (15,174 units)
 
 
 

 

 
 
 
9,135,233

 
18,270,040

 
14,356,233

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

19



TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments — (Continued)
December 31, 2015
Portfolio Company
 
Industry
 
Type of Investment(1)(2)(7)
 
Principal
Amount
 
Cost
 
Fair
Value(3)
DCWV Acquisition Corporation
(1%)*
 
Arts & Crafts and Home Decor Products Designer and Supplier
 
Senior Subordinated Note (15% PIK, Due 09/17)(6)
 
$
250,833

 
$
250,000

 
$
250,000

 
 
Subordinated Note (12% Cash, 3% PIK, Due 09/17)(6)
 
6,945,991

 
6,178,633

 
3,117,000

 
Jr. Subordinated Note (15% PIK, Due 09/17)(6)
 
2,097,611

 
2,000,000

 

 
Series A Preferred Equity (1,200 shares)
 
 
 
1,200,000

 

 
100% Common Shares
 
 
 

 

 
 
 
9,294,435

 
9,628,633

 
3,367,000

 
 
 
 
 
 
 
 
 
 
 
Gerli & Company (0%)*
 
Specialty Woven Fabrics Manufacturer
 
Subordinated Note (13% Cash, Due 12/15)(6)
 
569,452

 
375,000

 
375,000

Subordinated Note (8.5% Cash, Due 12/15)(6)
 
4,499,250

 
3,000,000

 
437,000

Class A Preferred Shares (1,211 shares)
 
 
 
855,000

 

Class C Preferred Shares (744 shares)
 
 
 

 

Class E Preferred Shares (400 shares)
 
 
 
161,440

 

Common Stock (300 shares)
 
 
 
100,000

 

 
 
 
5,068,702

 
4,491,440

 
812,000

 
 
 
 
 
 
 
 
 
SRC Worldwide, Inc. (1%)*
 
Specialty Chemical Manufacturer
 
Common Stock (5,000 shares)
 
 
 
8,228,000

 
6,921,000

 
 
 
 
 
 
8,228,000

 
6,921,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subtotal Control Investments
 
 
 
23,498,370

 
40,618,113

 
25,456,233

 
 
 
 
 
 
 
 
 
Total Investments, December 31, 2015 (192%)*
 
 
 
$
892,700,084

 
$
1,007,349,123

 
$
977,276,716


*    Fair value as a percent of net assets
(1)
All debt investments are income producing, unless otherwise noted. Equity and equity-linked investments are non-income producing, unless otherwise noted.
(2)
Disclosures of interest rates on notes include cash interest rates and payment-in-kind (“PIK”) interest rates.
(3)
All investments are restricted as to resale and were valued at fair value as determined in good faith by the Board of Directors.
(4)
Investment is not a qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 2.1% of total investments at fair value as of December 31, 2015. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets. If at any time qualifying assets do not represent at least 70% of the Company's total assets, the Company will be precluded from acquiring any additional non-qualifying asset until such time as it complies with the requirements of Section 55(a).
(5)
PIK non-accrual investment
(6)
Non-accrual investment
(7)
All of the Company's investments, unless otherwise noted, are encumbered either as security for the Company's senior secured credit facility or in support of the SBA-guaranteed debentures issued by Triangle Mezzanine Fund LLLP and Triangle Mezzanine Fund II LP.



See accompanying notes.


20



TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements

1. ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
Organization and Business
Triangle Capital Corporation and its wholly owned subsidiaries, including Triangle Mezzanine Fund LLLP (“Triangle SBIC”) and Triangle Mezzanine Fund II LP (“Triangle SBIC II”) (collectively, the “Company”), are specialty finance companies. Triangle SBIC and Triangle SBIC II are specialty finance limited partnerships formed to make investments primarily in lower middle market companies located throughout the United States. On September 11, 2003, Triangle SBIC was licensed to operate as a Small Business Investment Company (“SBIC”) under the authority of the United States Small Business Administration (“SBA”). On May 26, 2010, Triangle SBIC II obtained its license to operate as an SBIC. As SBICs, both Triangle SBIC and Triangle SBIC II are subject to a variety of regulations concerning, among other things, the size and nature of the companies in which they may invest and the structure of those investments.
The Company currently operates as a closed-end, non-diversified investment company and has elected to be treated as a business development company ("BDC") under the Investment Company Act of 1940 (the "1940 Act"). The Company is internally managed by its executive officers under the supervision of its Board of Directors. The Company does not pay management or advisory fees, but instead incurs the operating costs associated with employing executive management and investment and portfolio management professionals. Triangle SBIC has also elected to be treated as a BDC under the 1940 Act.
Basis of Presentation
The financial statements of the Company include the accounts of Triangle Capital Corporation and its wholly-owned subsidiaries, including Triangle SBIC and Triangle SBIC II. The effects of all intercompany transactions between Triangle Capital Corporation and its subsidiaries have been eliminated in consolidation. Under the investment company rules and regulations pursuant to Article 6 of Regulation S-X and Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946, Financial Services - Investment Companies, the Company is precluded from consolidating portfolio company investments, including those in which it has a controlling interest, unless the portfolio company is another investment company. An exception to this general principle occurs if the Company holds a controlling interest in an operating company that provides all or substantially all of its services directly to the Company or to its portfolio companies. None of the portfolio investments made by the Company qualify for this exception. Therefore, the Company's investment portfolio is carried on the Consolidated Balance Sheets at fair value, as discussed further in Note 2, with any adjustments to fair value recognized as “Net unrealized appreciation (depreciation)” on the Unaudited Consolidated Statements of Operations.
The accompanying unaudited financial statements are presented in conformity with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments necessary for the fair presentation of financial statements for the interim period, have been reflected in the unaudited consolidated financial statements. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. Additionally, the unaudited financial statements and accompanying notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2015. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.
2. INVESTMENTS
Portfolio Composition
The Company primarily invests in subordinated debt securities of privately held companies, generally secured by second lien security interests in portfolio company assets. In addition, the Company generally invests in an equity instrument of the borrower, such as warrants to purchase common stock in the portfolio company or direct preferred or common equity interests. On a more limited basis, the Company also invests in senior debt securities secured by first lien security interests in portfolio companies. The Company's investments generally range from $5.0 million to $35.0 million per portfolio company.

21


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


The cost basis of the Company's debt investments includes any unamortized original issue discount, unamortized loan origination fees and payment-in-kind (“PIK”) interest, if any. Summaries of the composition of the Company’s investment portfolio at cost and fair value, and as a percentage of total investments, are shown in the following tables:
 
Cost
 
Percentage of
Total Portfolio
 
Fair Value
 
Percentage of
Total Portfolio
September 30, 2016:
 
 
 
 
 
 
 
Subordinated debt and 2nd lien notes
$
714,970,938

 
72
%
 
$
669,654,799

 
71
%
Senior debt and 1st lien notes
133,758,330

 
14

 
126,988,510

 
13

Equity shares
134,446,226

 
14

 
148,790,666

 
16

Equity warrants
4,154,717

 

 
2,298,000

 

Royalty rights

 

 

 

 
$
987,330,211

 
100
%
 
$
947,731,975

 
100
%
December 31, 2015:
 
 
 
 
 
 
 
Subordinated debt and 2nd lien notes
$
739,416,002

 
73
%
 
$
699,125,083

 
72
%
Senior debt and 1st lien notes
134,489,956

 
13

 
132,929,264

 
14

Equity shares
127,464,548

 
13

 
141,555,369

 
14

Equity warrants
5,978,617

 
1

 
3,667,000

 

Royalty rights

 

 

 

 
$
1,007,349,123

 
100
%
 
$
977,276,716

 
100
%
During the three months ended September 30, 2016, the Company made three new investments totaling approximately $83.9 million and investments in nine existing portfolio companies totaling approximately $4.5 million. During the nine months ended September 30, 2016, the Company made six new investments totaling approximately $130.2 million and investments in seventeen existing portfolio companies totaling approximately $33.7 million.
During the three months ended September 30, 2015, the Company made eleven new investments totaling approximately $157.9 million and investments in nine existing portfolio companies totaling approximately $31.3 million. During the nine months ended September 30, 2015, the Company made eighteen new investments totaling approximately $289.2 million and investments in fifteen existing portfolio companies totaling approximately $63.3 million.
Investment Valuation Process
The Company has established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring basis in accordance with the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”). Under ASC Topic 820, a financial instrument is categorized within the ASC Topic 820 valuation hierarchy based upon the lowest level of input to the valuation process that is significant to the fair value measurement. The three levels of valuation inputs established by ASC Topic 820 are as follows:
Level 1 Inputs – include quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Inputs – include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 Inputs – include inputs that are unobservable and significant to the fair value measurement.
The Company’s investment portfolio is comprised of debt and equity instruments of privately held companies for which quoted prices or other inputs falling within the categories of Level 1 and Level 2 are not available. Therefore, the Company determines the fair value of its investments in good faith using Level 3 inputs, pursuant to a valuation policy and process that is established by the management of the Company with the assistance of certain third-party advisors and subsequently approved by the Company’s Board of Directors. There is no single standard for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment. The recorded fair values of the Company’s investments may differ significantly from fair values that would have been used had an active market for the securities existed. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.

22


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


The Company’s valuation process is led by the Company’s executive officers. The Company’s valuation process begins with a quarterly review of each investment in the Company’s investment portfolio by the Company’s executive officers and investment committee. Valuations of each portfolio security are then prepared by the Company’s investment professionals, who have direct responsibility for the origination, management and monitoring of each investment. Under the Company’s valuation policy, each investment valuation is subject to (i) a review by the lead investment officer responsible for the portfolio company investment and (ii) a peer review by a second investment officer or executive officer of the Company. Generally, any investment that is valued below cost is subjected to review by one of the Company’s executive officers. After the peer review is complete, the Company engages two independent valuation firms, including Duff & Phelps, LLC (collectively, the “Valuation Firms”), to provide third-party reviews of certain investments, as described further below. Finally, the Board of Directors has the responsibility for reviewing and approving, in good faith, the fair value of the Company’s investments in accordance with the 1940 Act.
The Valuation Firms provide third-party valuation consulting services to the Company which consist of certain procedures that the Company identified and requested the Valuation Firms to perform (hereinafter referred to as the “Procedures”). The Procedures are performed with respect to each portfolio company at least once in every calendar year and for new portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In addition, the Procedures are generally performed with respect to a portfolio company when there has been a significant change in the fair value of the investment. In certain instances, the Company may determine that it is not cost-effective, and as a result is not in the Company’s stockholders’ best interest, to request the Valuation Firms to perform the Procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of the investment in the portfolio company is determined to be insignificant relative to the total investment portfolio.    
The total number of investments and the percentage of the investment portfolio on which the Procedures were performed are summarized below by period: 
For the quarter ended:
Total
companies
 
Percent of total
investments at
fair value(1)
March 31, 2015
16
 
28%
June 30, 2015
15
 
26%
September 30, 2015
22
 
34%
December 31, 2015
17
 
28%
March 31, 2016
18
 
27%
June 30, 2016
19
 
30%
September 30, 2016
19
 
33%

(1)
Exclusive of the fair value of new investments made during the quarter.
Upon completion of the Procedures, the Valuation Firms concluded that, with respect to each investment reviewed by each Valuation Firm, the fair value of those investments subjected to the Procedures appeared reasonable. The Company’s Board of Directors is ultimately responsible for determining the fair value of the Company’s investments in good faith.
Investment Valuation Inputs
Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date. For the Company’s portfolio securities, fair value is generally the amount that the Company might reasonably expect to receive upon the current sale of the security. Under ASC Topic 820, the fair value measurement assumes that the sale occurs in the principal market for the security, or in the absence of a principal market, in the most advantageous market for the security. Under ASC Topic 820, if no market for the security exists or if the Company does not have access to the principal market, the security should be valued based on the sale occurring in a hypothetical market. The securities in which the Company invests are generally only purchased and sold in merger and acquisition transactions, in which case the entire portfolio company is sold to a third-party purchaser. As a result, unless the Company has the ability to control such a transaction, the assumed principal market for the Company’s securities is a hypothetical secondary market. The Level 3 inputs to the Company’s valuation process reflect the Company’s best estimate of the assumptions that would be used by market participants in pricing the investment in a transaction in a hypothetical secondary market.

23


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


Enterprise Value Waterfall Approach
In valuing equity securities (including warrants), the Company estimates fair value using an “Enterprise Value Waterfall” valuation model. The Company estimates the enterprise value of a portfolio company and then allocates the enterprise value to the portfolio company’s securities in order of their relative liquidation preference. In addition, the Company assumes that any outstanding debt or other securities that are senior to the Company’s equity securities are required to be repaid at par. Additionally, the Company estimates the fair value of a limited number of its debt securities using the Enterprise Value Waterfall approach in cases where the Company does not expect to receive full repayment.
To estimate the enterprise value of the portfolio company, the Company primarily uses a valuation model based on a transaction multiple, which generally is the original transaction multiple, and measures of the portfolio company’s financial performance, which generally is either earnings before interest, taxes, depreciation and amortization, as adjusted (“Adjusted EBITDA”) or revenues. In addition, the Company considers other factors, including but not limited to (i) offers from third parties to purchase the portfolio company, (ii) the implied value of recent investments in the equity securities of the portfolio company, (iii) publicly available information regarding recent sales of private companies in comparable transactions and (iv) when the Company believes there are comparable companies that are publicly traded, the Company performs a review of these publicly traded companies and the market multiple of their equity securities. For certain non-performing assets, the Company may utilize the liquidation or collateral value of the portfolio company's assets in its estimation of enterprise value.
The significant Level 3 inputs to the Enterprise Value Waterfall model are (i) an appropriate transaction multiple and (ii) a measure of the portfolio company’s financial performance, which generally is either Adjusted EBITDA or revenues. Such inputs can be based on historical operating results, projections of future operating results or a combination thereof. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for certain non-recurring items. In determining the operating results input, the Company utilizes the most recent portfolio company financial statements and forecasts available as of the valuation date. The Company also consults with the portfolio company’s senior management to obtain updates on the portfolio company’s performance, including information such as industry trends, new product development, loss of customers and other operational issues. Fair value measurements using the Enterprise Value Waterfall model can be sensitive to changes in one or more of the inputs. Assuming all other inputs to the Enterprise Value Waterfall model remain constant, any increase (decrease) in either the transaction multiple, Adjusted EBITDA or revenues for a particular equity security would result in a higher (lower) fair value for that security.
Income Approach
In valuing debt securities, the Company utilizes an “Income Approach” model that considers factors including, but not limited to, (i) the stated yield on the debt security, (ii) the portfolio company’s current Adjusted EBITDA as compared to the portfolio company’s historical or projected Adjusted EBITDA as of the date the investment was made and the portfolio company’s anticipated Adjusted EBITDA for the next twelve months of operations, (iii) the portfolio company’s current Leverage Ratio (defined as the portfolio company’s total indebtedness divided by Adjusted EBITDA) as compared to its Leverage Ratio as of the date the investment was made, (iv) publicly available information regarding current pricing and credit metrics for similar proposed and executed investment transactions of private companies and (v) when the Company believes a relevant comparison exists, current pricing and credit metrics for similar proposed and executed investment transactions of publicly traded debt. In addition, the Company uses a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. This risk rating system covers both qualitative and quantitative aspects of the business and the securities held.
The Company considers the factors above, particularly any significant changes in the portfolio company’s results of operations and leverage, and develops an expectation of the yield that a hypothetical market participant would require when purchasing the debt investment (the “Required Rate of Return”). The Required Rate of Return, along with the Leverage Ratio and Adjusted EBITDA, are the significant Level 3 inputs to the Income Approach model. For investments where the Leverage Ratio and Adjusted EBITDA have not fluctuated significantly from the date the investment was made or have not fluctuated significantly from the Company’s expectations as of the date the investment was made, and where there have been no significant fluctuations in the market pricing for such investments, the Company may conclude that the Required Rate of Return is equal to the stated rate on the investment and therefore, the debt security is appropriately priced. In instances where the Company determines that the Required Rate of Return is different from the stated rate on the investment, the Company discounts the contractual cash flows on the debt instrument using the Required Rate of Return in order to estimate the fair value of the debt security.

24


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


Fair value measurements using the Income Approach model can be sensitive to changes in one or more of the inputs. Assuming all other inputs to the Income Approach model remain constant, any increase (decrease) in the Required Rate of Return or Leverage Ratio inputs for a particular debt security would result in a lower (higher) fair value for that security. Assuming all other inputs to the Income Approach model remain constant, any increase (decrease) in the Adjusted EBITDA input for a particular debt security would result in a higher (lower) fair value for that security.
The fair value of the Company’s royalty rights are calculated based on specific provisions contained in the pertinent operating or royalty agreements. The determination of the fair value of such royalty rights is not a significant component of the Company’s valuation process.
The ranges and weighted average values of the significant Level 3 inputs used in the valuation of the Company’s debt and equity securities at September 30, 2016 and December 31, 2015 are summarized as follows:
September 30, 2016:
Fair Value(1)
 
Valuation
Model
 
Level 3
Inputs
 
Range of
Inputs
 
Weighted
Average
Subordinated debt and 2nd lien notes
$
645,260,277

 
Income
Approach
 
Required Rate of Return
 
8.25% – 32.5%
 
13.9%
 
 
 
 
Leverage Ratio
 
1.5x – 8.3x
 
4.7x
 
 
 
 
Adjusted EBITDA
 
$1.6 million – $76.6 million
 
$23.1 million
Subordinated debt and 2nd lien notes
20,764,000

 
Enterprise
Value Waterfall
Approach
 
Adjusted EBITDA Multiple
 
5.0x – 7.6x
 
6.3x
 
 
 
 
Adjusted EBITDA
 
$2.0 million – $10.0 million
 
$5.7 million
Senior debt and 1st lien notes
126,988,510

 
Income
Approach
 
Required Rate of Return
 
4.0% – 20.0%
 
12.5%
 
 
 
 
Leverage Ratio
 
0.0x – 8.0x
 
3.2x
 
 
 
 
Adjusted EBITDA
 
$4.0 million – $10.6 million
 
$7.2 million
Equity shares and warrants
146,912,666

 
Enterprise
Value Waterfall
Approach
 
Adjusted EBITDA Multiple
 
3.3x – 14.9x
 
7.3x
 
 
 
 
Adjusted EBITDA
 
$(0.4) million – $76.6 million
 
$14.4 million
 
 
 
 
 
Revenue Multiple
 
4.0x – 4.0x
 
4.0x
 
 
 
 
 
Revenues
 
$84.8 million – $84.8 million
 
$84.8 million
(1)
Certain investments with a total fair value of $7,806,522 were repaid or redeemed subsequent to the end of the reporting period and were valued at their transaction price.
December 31, 2015:
Fair Value(1)
 
Valuation
Model
 
Level 3
Input
 
Range of
Inputs
 
Weighted
Average
Subordinated debt and 2nd lien notes
$
638,529,995

 
Income
Approach
 
Required Rate of Return
 
9.5% – 25.0%
 
13.5%
 
 
 
 
Leverage Ratio
 
1.5x – 7.2x
 
4.3x
 
 
 
 
Adjusted EBITDA
 
$1.6 million – $72.6 million
 
$20.7 million
Subordinated debt and 2nd lien notes
15,794,000

 
Enterprise
Value Waterfall
Approach
 
Adjusted EBITDA Multiple
 
3.0x – 5.5x
 
4.6x
 
 
 
 
Adjusted EBITDA
 
$0.9 million – $2.2 million
 
$1.7 million
Senior debt and 1st lien notes
132,929,264

 
Income
Approach
 
Required Rate of Return
 
3.8% – 16.0%
 
11.2%
 
 
 
 
Leverage Ratio
 
0.0x – 7.2x
 
3.4x
 
 
 
 
Adjusted EBITDA
 
$2.6 million – $10.1 million
 
$6.8 million
Equity shares and warrants
142,809,369

 
Enterprise
Value Waterfall
Approach
 
Adjusted EBITDA Multiple
 
3.0x – 14.9x
 
7.1x
 
 
 
 
Adjusted EBITDA
 
$0.9 million – $72.6 million
 
$12.8 million
 
 
 
 
 
Revenue Multiple
 
4.0x – 4.0x
 
4.0x
 
 
 
 
 
Revenues
 
$83.2 million – $83.2 million
 
$83.2 million
(1)
Certain investments with a total fair value of $47,214,088 were repaid or redeemed subsequent to the end of the reporting period and were valued at their transaction price.

25


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


The following table presents the Company’s investment portfolio at fair value as of September 30, 2016 and December 31, 2015, categorized by the ASC Topic 820 valuation hierarchy, as previously described:
 
Fair Value as of September 30, 2016
 
Level 1
 
Level 2
 
Level 3
 
Total
Subordinated debt and 2nd lien notes
$

 
$

 
$
669,654,799

 
$
669,654,799

Senior debt and 1st lien notes

 

 
126,988,510

 
126,988,510

Equity shares

 

 
148,790,666

 
148,790,666

Equity warrants

 

 
2,298,000

 
2,298,000

Royalty rights

 

 

 

 
$

 
$

 
$
947,731,975

 
$
947,731,975

 
 
 
 
 
 
 
 
 
Fair Value as of December 31, 2015
 
Level 1
 
Level 2
 
Level 3
 
Total
Subordinated debt and 2nd lien notes
$

 
$

 
$
699,125,083

 
$
699,125,083

Senior debt and 1st lien notes

 

 
132,929,264

 
132,929,264

Equity shares

 

 
141,555,369

 
141,555,369

Equity warrants

 

 
3,667,000

 
3,667,000

Royalty rights

 

 

 

 
$

 
$

 
$
977,276,716

 
$
977,276,716


The following tables reconcile the beginning and ending balances of the Company’s investment portfolio measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2016 and 2015:
Nine Months Ended
September 30, 2016:
Subordinated
Debt and 2nd
Lien Notes
 
Senior Debt
and 1st Lien
Notes
 
Equity
Shares
 
Equity
Warrants
 
Royalty
Rights
 
Total
Fair value, beginning of period
$
699,125,083

 
$
132,929,264

 
$
141,555,369

 
$
3,667,000

 
$

 
$
977,276,716

New investments
145,487,825

 
3,000,000

 
14,729,826

 
650,000

 

 
163,867,651

Reclassifications
4,020,247

 
(4,020,247
)
 

 

 

 

Proceeds from sales of investments

 

 
(14,838,506
)
 
(5,627,106
)
 

 
(20,465,612
)
Loan origination fees received
(3,165,460
)
 
(40,000
)
 

 

 

 
(3,205,460
)
Principal repayments received
(157,151,997
)
 
(4,536,285
)
 

 

 

 
(161,688,282
)
PIK interest earned
10,548,903

 
1,083,855

 

 

 

 
11,632,758

PIK interest payments received
(7,219,058
)
 
(236,150
)
 

 

 

 
(7,455,208
)
Accretion of loan discounts
156,879

 
150,202

 

 

 

 
307,081

Accretion of deferred loan origination revenue
3,289,162

 
386,841

 

 

 

 
3,676,003

Realized gain (loss)
(15,371,087
)
 
(1,560,322
)
 
7,090,358

 
3,153,206

 

 
(6,687,845
)
Unrealized gain (loss)
(10,065,698
)
 
(168,648
)
 
253,619

 
454,900

 

 
(9,525,827
)
Fair value, end of period
$
669,654,799

 
$
126,988,510

 
$
148,790,666

 
$
2,298,000

 
$

 
$
947,731,975



26


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


Nine Months Ended
September 30, 2015:
Subordinated
Debt and 2nd
Lien Notes
 
Senior Debt
and 1st Lien
Notes
 
Equity
Shares
 
Equity
Warrants
 
Royalty
Rights
 
Total
Fair value, beginning of period
$
660,377,024

 
$
115,252,247

 
$
103,132,851

 
$
8,461,000

 
$

 
$
887,223,122

New investments
267,008,061

 
48,946,253

 
35,238,714

 
1,252,000

 

 
352,445,028

Reclassifications
(8,707,740
)
 

 
8,707,740

 

 

 

Proceeds from sales of investments

 

 
(7,188,653
)
 
(7,376,089
)
 

 
(14,564,742
)
Loan origination fees received
(4,751,331
)
 
(990,000
)
 

 

 

 
(5,741,331
)
Principal repayments received
(210,917,936
)
 
(35,519,921
)
 

 

 

 
(246,437,857
)
PIK interest earned
10,197,528

 
1,325,277

 

 

 

 
11,522,805

PIK interest payments received
(8,232,467
)
 
(1,206,033
)
 

 

 

 
(9,438,500
)
Accretion of loan discounts
326,913

 
35,511

 

 

 

 
362,424

Accretion of deferred loan origination revenue
4,157,776

 
740,058

 

 

 

 
4,897,834

Realized gain (loss)
(28,793,224
)
 
804,802

 
(5,198,522
)
 
2,889,237

 

 
(30,297,707
)
Unrealized gain (loss)
10,250,693

 
(102,294
)
 
9,370,723

 
(1,391,148
)
 

 
18,127,974

Fair value, end of period
$
690,915,297

 
$
129,285,900

 
$
144,062,853

 
$
3,835,000

 
$

 
$
968,099,050


All realized and unrealized gains and losses are included in earnings (changes in net assets) and are reported on separate line items within the Company’s Unaudited Consolidated Statements of Operations. Pre-tax net unrealized losses on investments of $11.1 million and $17.2 million during the three and nine months ended September 30, 2016, respectively, were related to portfolio company investments that were still held by the Company as of September 30, 2016. Pre-tax net unrealized gains (losses) on investments of $1.0 million and $(3.4) million during the three and nine months ended September 30, 2015, respectively, were related to portfolio company investments that were still held by the Company as of September 30, 2015.
The Company’s primary investment objective is to generate current income and capital appreciation by investing directly in privately-held lower middle market companies to help these companies fund acquisitions, growth or refinancing. During the nine months ended September 30, 2016, the Company made investments of approximately $157.0 million in portfolio companies to which it was not previously contractually committed to provide such financing. During the nine months ended September 30, 2016, the Company made investments of $6.9 million in companies to which it was previously committed to provide such financing. During the nine months ended September 30, 2015, the Company made investments of approximately $348.3 million in portfolio companies to which it was not previously contractually committed to provide the financial support. During the nine months ended September 30, 2015, the Company made investments of $4.1 million in companies to which it was previously committed to provide such financing. The details of the Company’s investments have been disclosed on the Consolidated Schedules of Investments.
Warrants
When originating a debt security, the Company will sometimes receive warrants or other equity-related securities from the borrower. The Company determines the cost basis of the warrants or other equity-related securities received based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and warrants or other equity-related securities received. Any resulting difference between the face amount of the debt and its recorded fair value resulting from the assignment of value to the warrant or other equity instruments is treated as original issue discount and accreted into interest income over the life of the loan.
Realized Gain or Loss and Unrealized Appreciation or Depreciation of Portfolio Investments
Realized gains or losses are recorded upon the sale or liquidation of investments and are calculated as the difference between the net proceeds from the sale or liquidation, if any, and the cost basis of the investment using the specific identification method. Unrealized appreciation or depreciation reflects the difference between the fair value of the investments and the cost basis of the investments.

27


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


Investment Classification
In accordance with the provisions of the 1940 Act, the Company classifies investments by level of control. As defined in the 1940 Act, “Control Investments” are investments in those companies that the Company is deemed to “Control.” “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, other than Control Investments. “Non-Control / Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments. Generally, under the 1940 Act, the Company is deemed to control a company in which it has invested if the Company owns more than 25.0% of the voting securities of such company, has greater than 50.0% representation on its board or has the power to exercise control over management or policies of such portfolio company. The Company is deemed to be an affiliate of a company in which the Company has invested if it owns at least 5.0%, but no more than 25.0%, of the voting securities of such company.
Investment Income
Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes, until all principal and interest has been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Company writes off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. Dividend income is recorded on the ex-dividend date. The Company had negative dividend income of $24,208 during the nine months ended September 30, 2016, consisting of dividend income of approximately $1.3 million and a negative true-up adjustment of approximately $1.3 million related to a portfolio company distribution that was received in 2015. In 2015, the Company received information that indicated that the tax character of the distribution was 100% dividend income, but received updated information in the first quarter of 2016 indicating that only 14% of the distribution was dividend income and the remainder was a return of capital, which necessitated the adjustment.
Fee Income
Origination, facility, commitment, consent and other advance fees received in connection with loan agreements ("Loan Origination Fees") are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of its business, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and loan waiver and amendment fees, and are recorded as investment income when earned.
Fee income for the three and nine months ended September 30, 2016 and 2015 was as follows:
 
Three Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
September 30, 2016
 
September 30, 2015
Recurring Fee Income:
 
 
 
 
 
 
 
Amortization of loan origination fees
$
498,733

 
$
507,043

 
$
1,584,691

 
$
1,515,811

Management, valuation and other fees
298,033

 
233,044

 
716,328

 
619,930

Total Recurring Fee Income
796,766

 
740,087

 
2,301,019

 
2,135,741

Non-Recurring Fee Income:
 
 
 
 
 
 
 
Prepayment fees
374,778

 
1,423,218

 
1,863,135

 
3,313,201

Acceleration of unamortized loan origination fees
626,648

 
1,188,124

 
2,091,313

 
3,382,023

Advisory and structuring fees
200,000

 
287,500

 
200,000

 
828,162

Loan amendment fees

 
37,895

 
17,770

 
223,923

Other fees
16,500

 
68,946

 
354,699

 
132,211

Total Non-Recurring Fee Income
1,217,926

 
3,005,683

 
4,526,917

 
7,879,520

Total Fee Income
$
2,014,692

 
$
3,745,770

 
$
6,827,936

 
$
10,015,261


28


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


Payment-in-Kind Interest
The Company currently holds, and expects to hold in the future, some loans in its portfolio that contain PIK interest provisions. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan, rather than being paid to the Company in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.
PIK interest, which is a non-cash source of income at the time of recognition, is included in the Company’s taxable income and therefore affects the amount the Company is required to distribute to its stockholders to maintain its qualification as a regulated investment company ("RIC") for federal income tax purposes, even though the Company has not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Company writes off any accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.
Concentration of Credit Risk
The Company’s investments are generally in lower middle market companies in a variety of industries. As of both September 30, 2016 and December 31, 2015, there were no individual investments representing greater than 10% of the fair value of the Company’s portfolio. As of September 30, 2016 and December 31, 2015, the Company’s largest single portfolio company investment represented approximately 5.0% and 4.0%, respectively, of the fair value of the Company’s portfolio. Income, consisting of interest, dividends, fees, other investment income and realization of gains or losses on equity interests, can fluctuate dramatically upon repayment of an investment or sale of an equity interest and in any given year can be highly concentrated among several portfolio companies.
The Company’s investments carry a number of risks including, but not limited to: (i) investing in lower middle market companies which may have limited financial resources and may have limited operating histories, (ii) investing in senior subordinated debt which ranks equal to or lower than debt held by other investors and (iii) holding investments that are not publicly traded and are subject to legal and other restrictions on resale and other risks common to investing in below investment grade debt and equity instruments.
As of September 30, 2016, $746.2 million of the Company's assets were pledged as collateral for the Company's third amended and restated senior secured credit facility (the “Credit Facility”) and $381.5 million were subject to superior claim over the Company's shareholders by the SBA. If the Company defaults on its obligations under the Credit Facility or its SBA-guaranteed debentures, the lenders and/or the SBA may have the right to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interests or their superior claims.

Investments Denominated in Foreign Currency
As of September 30, 2016, the Company held investments in two portfolio companies that were denominated in Canadian dollars and as of December 31, 2015, the Company held investments in one portfolio company that were denominated in Canadian dollars.
At each balance sheet date, portfolio company investments denominated in foreign currencies are translated into United States dollars using the spot exchange rate on the last business day of the period. Purchases and sales of foreign portfolio company investments, and any income from such investments, are translated into United States dollars using the rates of exchange prevailing on the respective dates of such transactions.
Although the fair values of foreign portfolio company investments and the fluctuation in such fair values are translated into United States dollars using the applicable foreign exchange rates described above, the Company does not isolate that portion of the change in fair values resulting from foreign currency exchange rates fluctuations from the change in fair values of the underlying investment. All fluctuations in fair value are included in net unrealized appreciation (depreciation) of investments in the Company's Unaudited Consolidated Statements of Operations.
Investments denominated in foreign currencies and foreign currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the United States dollar.

29


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


3. INCOME TAXES
The Company elected for federal income tax purposes to be treated as a RIC under the Internal Revenue Code of 1986, as amended (the "Code") commencing with its taxable year ended December 31, 2007. In order to maintain its qualification as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute (actually or constructively) and certain built-in gains. The Company has historically met its minimum distribution requirements and continually monitors its distribution requirements with the goal of ensuring compliance with the Code.
The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% excise tax on such excess. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. The Company may be required to recognize ICTI in certain circumstances in which it does not receive cash. For example, if the Company holds debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), the Company must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by the Company in the same taxable year. The Company may also have to include in ICTI other amounts that it has not yet received in cash, such as (i) PIK interest income and (ii) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included in the Company’s ICTI for the year of accrual, the Company may be required to make a distribution to its stockholders in order to satisfy the minimum distribution requirements, even though the Company will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
The Company has certain wholly-owned taxable subsidiaries (the “Taxable Subsidiaries”), each of which holds one or more of its portfolio investments that are listed on the Consolidated Schedule of Investments. The Taxable Subsidiaries are consolidated for financial reporting purposes, such that the Company’s consolidated financial statements reflect the Company’s investments in the portfolio companies owned by the Taxable Subsidiaries. The purpose of the Taxable Subsidiaries is to permit the Company to hold certain portfolio companies that are organized as limited liability companies (“LLCs”) (or other forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of the RIC’s gross revenue for income tax purposes must consist of investment income. Absent the Taxable Subsidiaries, a proportionate amount of any gross income of an LLC (or other pass-through entity) portfolio investment would flow through directly to the RIC. To the extent that such income did not consist of investment income, it could jeopardize the Company’s ability to qualify as a RIC and therefore cause the Company to incur significant amounts of federal income taxes. When LLCs (or other pass-through entities) are owned by the Taxable Subsidiaries, their income is taxed to the Taxable Subsidiaries and does not flow through to the RIC, thereby helping the Company preserve its RIC status and resultant tax advantages. The Taxable Subsidiaries are not consolidated for income tax purposes and may generate income tax expense as a result of their ownership of the portfolio companies. This income tax expense is reflected in the Company’s Unaudited Consolidated Statements of Operations. Additionally, any unrealized appreciation related to portfolio investments held by Taxable Subsidiaries (net of unrealized depreciation related to portfolio investments held by the Taxable Subsidiaries) is reflected net of applicable federal and state income taxes in the Company's Unaudited Consolidated Statements of Operations, with the related deferred tax assets presented in the Company's Unaudited Balance Sheet.
For federal income tax purposes, the cost of investments owned as of September 30, 2016 and December 31, 2015 was approximately $991.8 million and $1,010.6 million, respectively.

30


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


4. BORROWINGS
The Company had the following borrowings outstanding as of September 30, 2016 and December 31, 2015: 
Issuance/Pooling Date
Maturity Date
 
Interest Rate as of September 30, 2016
 
September 30, 2016
 
December 31, 2015
SBA-Guaranteed Debentures:
 
 
 
 
 
 
 
March 25, 2009
March 1, 2019
 
5.337%
 
$
22,000,000

 
$
22,000,000

March 24, 2010
March 1, 2020
 
4.825%
 
6,800,000

 
6,800,000

September 22, 2010
September 1, 2020
 
3.687%
 
32,590,000

 
32,590,000

March 29, 2011
March 1, 2021
 
4.474%
 
75,400,000

 
75,400,000

September 21, 2011
September 1, 2021
 
3.392%
 
19,100,000

 
19,100,000

March 27, 2013
March 1, 2023
 
3.155%
 
30,000,000

 
30,000,000

September 24, 2014
September 1, 2024
 
3.790%
 
31,310,000

 
31,310,000

September 21, 2016
September 1, 2026
 
2.723%
 
32,800,000

 

September 14, 2010 (LMI Debenture)
March 1, 2016
 
N/A
 

 
7,768,101

Less: Deferred financing fees
 
 
 
 
(4,837,131
)
 
(4,319,312
)
Total SBA-Guaranteed Debentures
 
 
 
 
$
245,162,869

 
$
220,648,789

Credit Facility:
 
 
 
 
 
 
 
May 4, 2015
May 3, 2020
 
3.367%
 
$
91,427,900

 
$
131,256,669

Total Credit Facility
 
 
 
 
$
91,427,900

 
$
131,256,669

Notes:
 
 
 
 
 
 
 
October 19, 2012
December 15, 2022
 
6.375%
 
$
80,500,000

 
$
80,500,000

February 6, 2015
March 15, 2022
 
6.375%
 
86,250,000

 
86,250,000

Less: Deferred financing fees
 
 
 
 
(4,151,497
)
 
(4,607,522
)
Total Notes
 
 
 
 
$
162,598,503

 
$
162,142,478


SBA-Guaranteed Debentures
Interest payments on SBA-guaranteed debentures are payable semi-annually and there are no principal payments required on these debentures prior to maturity, nor do the debentures carry any prepayment penalties. The Company’s SBA-guaranteed Low or Moderate Income (“LMI”) debenture, which was repaid on March 1, 2016, was a five-year deferred interest debenture that was issued at a discount to par. The accretion of discount on the SBA-guaranteed LMI debenture is classified as interest expense in the Company’s consolidated financial statements.
Under the Small Business Investment Act of 1958 and current SBA policy applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding at any time, SBA-guaranteed debentures and SBA-guaranteed LMI debentures (collectively, SBA-guaranteed debentures) up to two times (and in certain cases, up to three times) the amount of its regulatory capital. As of September 30, 2016, the maximum statutory limit on the dollar amount of outstanding SBA-guaranteed debentures that can be issued by a single SBIC was $150.0 million and by a group of SBICs under common control was $350.0 million. As of September 30, 2016, Triangle SBIC had issued the maximum $150.0 million of SBA-guaranteed debentures and Triangle SBIC II had issued $100.0 million of SBA-guaranteed debentures. The weighted average interest rates for all SBA-guaranteed debentures as of September 30, 2016 and December 31, 2015 were 3.90% and 4.02%, respectively. In the nine months ended September 30, 2016, the Company repaid its $7.8 million SBA-guaranteed LMI debenture, which matured on March 1, 2016. As of both September 30, 2016 and December 31, 2015, all SBA-guaranteed debentures were pooled.
In addition to a one-time 1.0% fee on the total commitment from the SBA, the Company also pays a one-time 2.425% fee on the amount of each SBA-guaranteed debenture issued and a one-time 2.0% fee on the amount of each SBA-guaranteed LMI debenture issued. These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements using the effective interest method. Upon prepayment of an SBA-guaranteed debenture, any unamortized deferred financing

31


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


costs related to the SBA-guaranteed debenture are written off and recognized as a loss on extinguishment of debt in the Unaudited Consolidated Statements of Operations.
The fair values of the SBA-guaranteed debentures are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of September 30, 2016 and December 31, 2015, the carrying amounts of the SBA-guaranteed debentures was approximately $245.2 million and $220.6 million, respectively. As of September 30, 2016 and December 31, 2015, the fair values of the SBA-guaranteed debentures were $263.1 million and $230.2 million, respectively.
Credit Facility
In May 2015, the Company entered into the Credit Facility. The Credit Facility, which has a current commitment of $300.0 million supported by 13 financial institutions, replaced the Company's $165.0 million senior secured credit facility entered into in June 2013 (the "Prior Facility"). The revolving period of the Credit Facility ends May 3, 2019 followed by a one-year amortization period with a final maturity date of May 3, 2020. The Company has the ability to borrow foreign currencies under the Credit Facility.
The Credit Facility has an accordion feature that allows for an increase in the total borrowing size up to $350.0 million, subject to certain conditions and the satisfaction of specified financial covenants. The Credit Facility, which is structured to operate like a revolving credit facility, is secured primarily by the Company's assets, excluding the assets of the Company’s wholly-owned SBIC subsidiaries.
Borrowings under the Credit Facility bear interest, subject to the Company's election, on a per annum basis equal to (i) the applicable base rate plus 1.75% (or 1.50% if the Company receives an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.75% (or 2.50% if the Company receives an investment grade credit rating) or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75% (or 2.50% if the Company receives an investment grade credit rating). The applicable base rate is equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR plus 2.0%. The applicable LIBOR rate depends on the term of the draw under the Credit Facility. The Company pays a commitment fee of 1.00% per annum on undrawn amounts if the used portion of the Credit Facility is less than or equal to 25.0% of total commitments, or 0.375% per annum on undrawn amounts if the used portion of the Credit Facility is greater than 25.0% of total commitments. These commitment fees are included in interest and other financing fees on the Company's Unaudited Consolidated Statements of Operations. Borrowings under the Credit Facility are limited to a borrowing base, which includes certain cash and a portion of eligible debt investments.
Borrowings under the Prior Facility bore interest, subject to the Company's election, on a per annum basis equal to (i) the applicable base rate plus 1.75%, (ii) the applicable LIBOR rate plus 2.75% or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75%. The applicable base rate was equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR rate plus 2.0%. The applicable LIBOR rate depended upon the term of a draw under the Prior Facility. The Company paid a commitment fee of 0.375% per annum on undrawn amounts under the Prior Facility, which was included with interest and other financing fees on the Company's Unaudited Consolidated Statements of Operations. Borrowings under the Prior Facility were also limited to a borrowing base, which included certain cash and a portion of eligible debt investments. 
As of September 30, 2016, the Company had United States dollar borrowings of $69.7 million outstanding under the Credit Facility with an interest rate of 3.28% and non-United States dollar borrowings denominated in Canadian dollars of $28.6 million ($21.7 million in United States dollars) outstanding under the Credit Facility with a weighted average interest rate of 3.65%. The borrowings denominated in Canadian dollars are translated into United States dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign exchange rates on the Credit Facility borrowings is included in unrealized appreciation (depreciation) on foreign currency borrowings in the Company's Unaudited Consolidated Statements of Operations. The borrowings denominated in Canadian dollars may be positively or negatively affected by movements in the rate of exchange between the United States dollar and the Canadian dollar. This movement is beyond the control of the Company and cannot be predicted. As of December 31, 2015, the Company had United States dollar borrowings of $119.0 million outstanding under the Credit Facility with an interest rate of 3.00% and non-United States dollar borrowings denominated in Canadian dollars of $17.0 million ($12.3 million United States dollars) outstanding under the Credit Facility with an interest rate of 3.59%.
The fair value of the borrowings outstanding under the Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of September 30, 2016 and December 31, 2015, the fair values of the borrowings outstanding under the Credit Facility were $91.4 million and $131.3 million, respectively.

32


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


As with the Prior Facility, the Credit Facility contains certain affirmative and negative covenants, including but not limited to (i) maintaining a minimum interest coverage ratio, (ii) maintaining a minimum consolidated tangible net worth, (iii) maintaining a minimum asset coverage ratio and (iv) maintaining the Company's status as a RIC and as a BDC. The Credit Facility also contains customary events of default with customary cure and notice provisions, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, change of control, and material adverse effect. The Credit Facility also permits Branch Banking and Trust Company, the administrative agent, to select an independent third-party valuation firm to determine valuations of certain portfolio investments for purposes of borrowing base provisions. As of September 30, 2016 and December 31, 2015, the Company was in compliance with all covenants of the Credit Facility.
Notes
In March 2012, the Company issued $69.0 million of unsecured notes due 2019 (the “2019 Notes”). The 2019 Notes were redeemed in full on June 22, 2015 for a total redemption price of $69.0 million, which resulted in a loss on the extinguishment of debt of $1.4 million. Prior to the redemption, the 2019 Notes bore interest at a rate of 7.00% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning June 15, 2012.
In October 2012, the Company issued $70.0 million of unsecured notes due 2022 (the "December 2022 Notes") and in November 2012, issued $10.5 million of December 2022 Notes pursuant to the exercise of an over-allotment option. The December 2022 Notes mature on December 15, 2022, and may be redeemed in whole or in part at any time or from time to time at the Company's option on or after December 15, 2015. The December 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning December 15, 2012. The net proceeds to the Company from the sale of the December 2022 Notes, after underwriting discounts and offering expenses, were approximately $77.8 million. As of September 30, 2016 and December 31, 2015, the carrying amount of the December 2022 Notes was $78.6 million and $78.4 million, respectively. As of September 30, 2016 and December 31, 2015, the fair value of the December 2022 Notes was $83.2 million and $80.2 million, respectively.
In February 2015, the Company issued $86.3 million of unsecured notes due 2022 (the "March 2022 Notes"). The March 2022 Notes mature on March 15, 2022 and may be redeemed in whole or in part at any time or from time to time at the Company's option on or after March 15, 2018. The March 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning March 15, 2015. The net proceeds to the Company from the sale of the March 2022 Notes, after underwriting discounts and offering expenses, were approximately $83.4 million. As of September 30, 2016 and December 31, 2015, the carrying amount of the March 2022 Notes was $84.0 million and $83.7 million, respectively. As of September 30, 2016 and December 31, 2015, the fair value of the March 2022 Notes was $89.7 million and $88.0 million, respectively. The fair values of the December 2022 Notes and the March 2022 Notes are based on the closing prices of each respective security on the New York Stock Exchange, which are Level 1 inputs under ASC 820.
The indenture and supplements thereto relating to the December 2022 Notes and the March 2022 Notes contain certain covenants, including but not limited to (i) a requirement that the Company comply with the asset coverage requirement of the 1940 Act or any successor provisions and (ii) a requirement to provide financial information to the holders of the notes and the trustee under the indenture if the Company should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. As of September 30, 2016 and December 31, 2015, the Company was in compliance with all covenants of the December 2022 Notes and the March 2022 Notes.


33


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


5. EQUITY-BASED AND OTHER COMPENSATION PLANS
The Company’s Board of Directors and stockholders have approved the Triangle Capital Corporation Amended and Restated 2007 Equity Incentive Plan (the “Plan”), under which there are 2,400,000 shares of the Company’s Common Stock authorized for issuance. Under the Plan, the Board of Directors (or compensation committee, if delegated administrative authority by the Board of Directors) may award stock options, restricted stock or other stock-based incentive awards to executive officers, employees and directors. Equity-based awards granted under the Plan to independent directors generally will vest over a one-year period and equity-based awards granted under the Plan to executive officers and employees generally will vest ratably over a four-year period.
The Company accounts for its equity-based compensation plan using the fair value method, as prescribed by ASC Topic 718, Stock Compensation. Accordingly, for restricted stock awards, the Company measures the grant date fair value based upon the market price of the Company’s common stock on the date of the grant and amortizes this fair value to compensation expense ratably over the requisite service period or vesting term.
The following table presents information with respect to the Plan for the nine months ended September 30, 2016 and 2015:
 
Nine Months Ended
September 30, 2016
 
Nine Months Ended
September 30, 2015
 
Number of
Shares
 
Weighted Average
Grant Date Fair
Value per Share
 
Number of
Shares
 
Weighted Average
Grant Date Fair
Value per Share
Unvested shares, beginning of period
778,116

 
$24.10
 
662,965

 
$25.87
Shares granted during the period
364,605

 
$17.56
 
360,840

 
$21.82
Shares vested during the period
(417,815
)
 
$23.28
 
(245,689
)
 
$24.31
Unvested shares, end of period
724,906

 
$21.29
 
778,116

 
$24.10

In the three months ended September 30, 2016, the Company recognized equity-based compensation expense of approximately $1.6 million. In the nine months ended September 30, 2016, the Company recognized equity-based compensation expense of approximately $7.5 million, $2.7 million of which related to the accelerated vesting of outstanding shares of restricted stock of the Company's former Chief Executive Officer, Garland S. Tucker III, who retired from his officer positions in February 2016. In the three and nine months ended September 30, 2015, the Company recognized equity-based compensation expense of approximately $1.8 million and $5.2 million, respectively. This expense is included in compensation expenses in the Company’s Unaudited Consolidated Statements of Operations.
As of September 30, 2016, there was approximately $11.5 million of total unrecognized compensation cost related to the Company’s non-vested restricted shares. This cost is expected to be recognized over a weighted average period of approximately 1.9 years.
The Company’s Board of Directors has adopted a nonqualified deferred compensation plan covering the Company’s executive officers and key employees. Any compensation deferred and the Company’s contributions will earn a return based on the returns on certain investments designated by the Compensation Committee of the Company’s Board of Directors. Participants are 100% vested in amounts deferred under the deferred compensation plan and the earnings thereon. Contributions to the plan and earnings thereon generally vest ratably over a four-year period.
The Company maintains a 401(k) plan in which all full-time employees who are at least 21 years of age are eligible to participate and receive employer contributions. Eligible employees may contribute a portion of their compensation on a pretax basis into the 401(k) plan up to the maximum amount allowed under the Code, and direct the investment of their contributions.

34


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


6. TRANSACTIONS WITH CONTROLLED COMPANIES
During both the three months ended September 30, 2016 and 2015, the Company received management fees from SRC Worldwide, Inc., a 100%-owned portfolio company, of $100,000. During both the nine months ended September 30, 2016 and 2015, the Company received management fees from SRC Worldwide, Inc. of $300,000. These fees were recognized as fee income in the Company's Unaudited Consolidated Statements of Operations. In addition, during the nine months ended September 30, 2016, the Company recognized $300,000 as dividend income from SRC Worldwide, Inc.
7. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is party to financial instruments with off-balance sheet risk, consisting primarily of unused commitments to extend financing to the Company's portfolio companies. Since commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The balances of unused commitments to extend financing as of September 30, 2016 and December 31, 2015 were as follows:
Portfolio Company
Investment Type
September 30, 2016
 
December 31, 2015
DLC Acquisition, LLC
Revolver
$
3,000,000

 
$
3,000,000

Frank Entertainment Group, LLC
Equity Investment

 
200,000

Halo Branded Solutions, Inc.
Delayed Draw Term Loan
3,250,000

 

HKW Capital Partners IV, L.P.
Private Equity
530,032

 
856,874

Nautic Partners VII, LP
Private Equity
761,959

 
1,113,275

Nomacorc, LLC
Equity Investment
849,362

 
732,788

Orchid Underwriters Agency, LLC
Delayed Draw Term Loan
8,400,000

 
8,400,000

Orchid Underwriters Agency, LLC
Revolver
5,000,000

 
5,000,000

Smile Brands, Inc.
Equity Investment
1,000,000

 

Smile Brands, Inc.
Delayed Draw Term Loan
18,826,531

 

SPC Partners V, LP
Private Equity
731,728

 
1,213,477

SPC Partners VI, LP
Private Equity
3,000,000

 

Team Waste, LLC
Equity Investment
1,900,000

 
4,500,000

TGaS Advisors, LLC
Revolver
2,000,000

 
2,000,000

YummyEarth Inc.
Delayed Draw Term Loan
2,500,000

 

YummyEarth Inc.
Revolver

 
4,000,000

Total unused commitments to extend financing
 
$
51,749,612

 
$
31,016,414

The Company may, in the future, be involved in litigation arising out of its operations in the normal course of business or otherwise. Furthermore, third parties may try to seek to impose liability on the Company in connection with the activities of its portfolio companies. Since its inception, neither Triangle Capital Corporation nor any of its subsidiaries have been party to any material legal proceedings.


35


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


8. FINANCIAL HIGHLIGHTS
The following is a schedule of financial highlights for the nine months ended September 30, 2016 and 2015:
 
Nine Months Ended September 30,
 
2016
 
2015
Per share data:
 
 
 
Net asset value at beginning of period
$
15.23

 
$
16.11

Net investment income(1)
1.19

 
1.58

Net realized loss on investments(1)
(0.19
)
 
(0.91
)
Net unrealized appreciation (depreciation) on investments / foreign currency(1)
(0.23
)
 
0.52

Total increase from investment operations(1)
0.77

 
1.19

Dividends paid to stockholders from net investment income
(1.44
)
 
(1.52
)
Dividends paid to stockholders from realized gains

 
(0.25
)
Total dividends paid
(1.44
)
 
(1.77
)
Shares issued pursuant to Dividend Reinvestment Plan
0.03

 
0.03

Common stock offering
0.72

 

Stock-based compensation
0.03

 
(0.04
)
Loss on extinguishment of debt(1)

 
(0.04
)
Tax benefit(1)

 
0.01

Other(2)
(0.01
)
 
(0.01
)
Net asset value at end of period
$
15.33

 
$
15.48

Market value at end of period(3)
$
19.70

 
$
16.48

Shares outstanding at end of period
40,405,403

 
33,321,349

Net assets at end of period
$
619,355,209

 
$
515,733,677

Average net assets
$
534,714,702

 
$
526,287,938

Ratio of total expenses, including provision for taxes, to average net assets (annualized)
10.14
%
 
9.66
 %
Ratio of net investment income to average net assets (annualized)
10.42
%
 
13.29
 %
Portfolio turnover ratio
16.89
%
 
29.37
 %
Total return(4)
10.62
%
 
(10.05
)%
Supplemental Data:
 
 
 
Efficiency ratio(5)
25.07
%
 
18.64
 %
(1)
Weighted average basic per share data.
(2)
Represents the impact of the different share amounts used in calculating per share data as a result of calculating certain per share data based upon the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.
(3)
Represents the closing price of the Company’s common stock on the last day of the period.
(4)
Total return equals the change in the ending market value of the Company’s common stock during the period, plus dividends declared per share during the period, divided by the market value of the Company’s common stock on the first day of the period. Total return is not annualized.
(5)
Efficiency ratio equals the sum of (i) compensation and related expenses and (ii) general and administrative expenses divided by total investment income.

36


Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


9. SUBSEQUENT EVENTS
In October 2016, the Company invested $23.5 million in debt and equity securities of Fridababy, LLC. Under the terms of the investments, the debt securities bear interest at a rate of 10.0%.
In October 2016, the Company invested $17.0 million in debt and equity securities of Del Real, LLC. Under the terms of the investments, the debt securities bear interest at a rate of 11.0%.
In October 2016, the Company invested $16.3 million in debt and equity securities of TG MIDCO, LLC. Under the terms of the investments, the debt securities bear interest at a rate of 11.25%.
In October 2016, the Company’s Board of Directors approved the promotion of Jeffrey A. Dombcik, Cary B. Nordan and Douglas A. Vaughn to the role of Senior Managing Director. In addition, Messrs. Dombcik, Nordan and Vaughn were promoted to the positions of Chief Credit Officer, Chief Origination Officer and Chief Administrative Officer, respectively.

In October 2016, the Company’s Board of Directors accepted the resignation of Brent P.W. Burgess as the Company’s Chief Investment Officer and as a member of the Company’s Board of Directors. In connection with Mr. Burgess’s resignations, Mr. Burgess and the Company entered into an agreement (the “Agreement”), pursuant to which he will receive his unpaid salary and accrued but unused vacation leave through October 14, 2016; cash payments totaling $250,000; accelerated vesting of the 93,284 shares of the Company’s restricted stock held by him; and certain other benefits. Mr. Burgess also agreed to certain confidentiality, non-compete, non-solicitation and other covenants in the Agreement.



37



TRIANGLE CAPITAL CORPORATION
Unaudited Schedule of Investments in and Advances to Affiliates
Nine Months Ended September 30, 2016
Portfolio Company
 
Type of Investment
 Amount of Interest or Dividends Credited to Income(1)
 
December 31, 2015
Value
 
Gross Additions(2)
 
Gross Reductions(3)
 
September 30, 2016
Value
Control Investments:
 
 
 
 
 
 
 
 
 
 
 
CRS Reprocessing, LLC
 
Senior Notes (4.0% Cash)
$
88,908

 
$
2,942,769

 
$

 
$

 
$
2,942,769

 
Split Collateral Term Loans (10.5% Cash)
675,714

 
6,192,464

 
4,000,000

 
3,316,464

 
6,876,000

 
Series F Preferred Units (705,321 units)

 
5,221,000

 

 
5,221,000

 

 
Common Units (15,174 units)

 

 

 

 

 
 
764,622

 
14,356,233

 
4,000,000

 
8,537,464

 
9,818,769

 
 
 
 
 
 
 
 
 
 
 
 
DCWV Acquisition Corporation
 
Senior Subordinated Note (15% PIK)

 
250,000

 

 

 
250,000

 
Subordinated Note (12% Cash, 3% PIK)

 
3,117,000

 

 
56,000

 
3,061,000

 
Jr. Subordinated Note (15% PIK)

 

 

 

 

 
Series A Preferred Equity (1,200 shares)

 

 

 

 

 
100% Common Shares

 

 

 

 

 
 

 
3,367,000

 

 
56,000

 
3,311,000

 
 
 
 
 
 
 
 
 
 
 
 
Gerli & Company
 
Subordinated Note (13% Cash)

 
375,000

 

 
375,000

 

 
Subordinated Note (8.5% Cash)

 
437,000

 

 
437,000

 

 
Class A Preferred Shares (1,211 shares)

 

 

 

 

 
Class C Preferred Shares (744 shares)

 

 

 

 

 
Class E Preferred Shares (400 shares)

 

 

 

 

 
Common Stock (300 shares)

 

 

 

 

 
 

 
812,000

 

 
812,000

 

 
 
 
 
 
 
 
 
 
 
 
 
SRC, Inc.
 
Common Stock (5,000 shares)
600,000

 
6,921,000

 
1,307,000

 
200,000

 
8,028,000

 
600,000

 
6,921,000

 
1,307,000

 
200,000

 
8,028,000

 
 
 
 
 
 
 
 
 
 
 
 
Team Waste, LLC
 
Preferred Units (41 units)
10,000

 

 
8,100,000

 

 
8,100,000

 
 
10,000

 

 
8,100,000

 

 
8,100,000

 
 
 
 
 
 
 
 
 
 
 
 
Total Control Investments
1,374,622

 
25,456,233

 
13,407,000

 
9,605,464

 
29,257,769

 
 
 
 
 
 
 
 
 
 
 
 
Affiliate Investments:
 
 
 
 
 
 
 
 
 
 
 
All Aboard America! Holdings Inc.
 
Subordinated Note (12% Cash, 3% PIK)
1,848,060

 
14,953,191

 
397,507

 

 
15,350,698

 
Membership Units in LLC

 
5,024,000

 

 
54,000

 
4,970,000

 
 
1,848,060

 
19,977,191

 
397,507

 
54,000

 
20,320,698

 
 
 
 
 
 
 
 
 
 
 
 
American De-Rosa Lamparts, LLC and Hallmark Lighting, LLC
 
Subordinated Note (12% Cash, 3% PIK)
539,846

 
7,186,235

 
221,987

 
3,777,700

 
3,630,522

 
Membership Units (8,364 units)

 
3,872,000

 
304,000

 

 
4,176,000

 
 
539,846

 
11,058,235

 
525,987

 
3,777,700

 
7,806,522

 
 
 
 
 
 
 
 
 
 
 
 
CIS Secure Computing, Inc.
 
Subordinated Note (12% Cash, 3% PIK)
1,312,650

 
11,323,440

 
258,248

 

 
11,581,688

 
Common Stock (84 shares)

 
199,000

 
1,643,000

 

 
1,842,000

 
 
1,312,650

 
11,522,440

 
1,901,248

 

 
13,423,688

 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Lumber Company LLC
 
Subordinated Note (10% Cash, 2% PIK)
1,300,477

 
14,332,445

 
357,497

 
9,346,320

 
5,343,622

 
Class A Units (15,000 units)
152,503

 
1,500,000

 
671,000

 

 
2,171,000

 
 
1,452,980

 
15,832,445

 
1,028,497

 
9,346,320

 
7,514,622

 
 
 
 
 
 
 
 
 
 
 
 

38



TRIANGLE CAPITAL CORPORATION
Unaudited Schedule of Investments in and Advances to Affiliates — (Continued)
Nine Months Ended September 30, 2016
Portfolio Company
 
Type of Investment
 Amount of Interest or Dividends Credited to Income(1)
 
December 31, 2015
Value
 
Gross Additions(2)
 
Gross Reductions(3)
 
September 30, 2016
Value
DPII Holdings, LLC
 
Tranche I & II Subordinated Note (12% Cash, 4% PIK)
$
115,147

 
$
3,558,804

 
$
5,708

 
$
967,512

 
$
2,597,000

 
Tranche III Subordinated Note (19% PIK)

 

 
1,615,385

 
1,115,385

 
500,000

 
Class A Membership Interest (17,308 units)

 
795,000

 

 
795,000

 

 
 
115,147

 
4,353,804

 
1,621,093

 
2,877,897

 
3,097,000

 
 
 
 
 
 
 
 
 
 
 
 
FCL Holding SPV, LLC
 
Class A Interests (24,873 units)

 

 
645,000

 

 
645,000

 
 
Class B Interest (48,427 units)

 

 
35,000

 

 
35,000

 
 
Class B Interest (3,746 units)

 

 

 

 

 
 
 

 

 
680,000

 

 
680,000

 
 
 
 
 
 
 
 
 
 
 
 
Frank Entertainment Group, LLC
 
Senior Note (10% Cash, 5.8% PIK)
1,192,223

 
9,592,545

 
451,030

 
128,571

 
9,915,004

 
Class A Redeemable Preferred Units (10.5% Cash) (196,718 units)
324,995

 
4,566,904

 

 

 
4,566,904

 
Class B Redeemable Preferred Units (18,667 units)

 
1,660,810

 

 

 
1,660,810

 
Class C Redeemable Preferred Units (25,846 units)

 
600,000

 

 

 
600,000

 
Class A Common Units (43,077 units)

 

 

 

 

 
Class A Common Warrants

 

 

 

 

 
 
1,517,218

 
16,420,259

 
451,030

 
128,571

 
16,742,718

 
 
 
 
 
 
 
 
 
 
 
 
GenPref LLC 
 
7.0% LLC Interest

 
16,400

 

 

 
16,400

 
 

 
16,400

 

 

 
16,400

 
 
 
 
 
 
 
 
 
 
 
 
MS Bakery Holdings, Inc. (F/K/A Main Street Gourmet, LLC)
 
Preferred Units (233 units)

 
367,000

 
27,000

 

 
394,000

 
Common B Units (3,000 units)

 
1,807,000

 
193,000

 

 
2,000,000

 
Common A Units (1,652 units)

 
995,000

 
107,000

 

 
1,102,000

 
 

 
3,169,000

 
327,000

 

 
3,496,000

 
 
 
 
 
 
 
 
 
 
 
 
NB Products, Inc.
 
Subordinated Note (12% Cash, 2% PIK)
2,494,413

 
20,327,140

 
2,326,780

 
38,807

 
22,615,113

 
 
Jr. Subordinated Note (10% PIK)
344,594

 
4,126,030

 
348,032

 

 
4,474,062

 
 
Jr. Subordinated Bridge Note (20% PIK)
147,436

 

 
1,910,777

 
35,267

 
1,875,510

 
 
Series A Redeemable Senior Preferred Stock (7,839 shares)

 
8,525,000

 
656,000

 

 
9,181,000

 
 
Common Stock (1,668,691 shares)

 
3,997,000

 
4,906,000

 

 
8,903,000

 
 
 
2,986,443

 
36,975,170

 
10,147,589

 
74,074

 
47,048,685

 
 
 
 
 
 
 
 
 
 
 
 
PCX Aerostructures, LLC
 
Subordinated Note (11% Cash, 4% PIK)
2,608,787

 
18,612,000

 
4,239,265

 
3,852,265

 
18,999,000

 
Series A Preferred Stock (6,066 shares)

 
1,191,000

 
721,668

 
1,912,668

 

 
Series B Preferred Stock (164 shares)

 

 
164,368

 
164,368

 

 
Class A Common Stock (121,922 shares)

 

 
3,626

 
3,626

 

 
 
2,608,787

 
19,803,000

 
5,128,927

 
5,932,927

 
18,999,000

 
 
 
 
 
 
 
 
 
 
 
 
Team Waste, LLC
 
Preferred Units (36 units)
16,000

 
5,500,000

 
1,600,000

 
7,100,000

 

 
 
 
16,000

 
5,500,000

 
1,600,000

 
7,100,000

 

 
 
 
 
 
 
 
 
 
 
 
 
Technology Crops, LLC
 
Subordinated Notes (12% Cash, 5% PIK)
1,434,324

 
11,252,123

 
435,520

 

 
11,687,643

 
Common Units (50 units)

 
400,000

 

 
400,000

 

 
 
1,434,324

 
11,652,123

 
435,520

 
400,000

 
11,687,643

 
 
 
 
 
 
 
 
 
 
 
 

39



TRIANGLE CAPITAL CORPORATION
Unaudited Schedule of Investments in and Advances to Affiliates — (Continued)
Nine Months Ended September 30, 2016
Portfolio Company
 
Type of Investment
 Amount of Interest or Dividends Credited to Income(1)
 
December 31, 2015
Value
 
Gross Additions(2)
 
Gross Reductions(3)
 
September 30, 2016
Value
TGaS Advisors, LLC
 
Senior Note (10% Cash, 1% PIK)
$
883,506

 
$
9,633,898

 
$
138,028

 
$
226,730

 
$
9,545,196

 
Preferred Units (1,685,357 units)
33,000

 
1,427,000

 
266,288

 
129,288

 
1,564,000

 
 
916,506

 
11,060,898

 
404,316

 
356,018

 
11,109,196

 
 
 
 
 
 
 
 
 
 
 
 
Tulcan Fund IV, L.P. (F/K/A Dyson Corporation)
 
Common Units (1,000,000 units)

 
416,000

 

 
416,000

 

 
 

 
416,000

 

 
416,000

 

 
 
 
 
 
 
 
 
 
 
 
 
UCS Super HoldCo LLC
 
Membership Units (1,000 units)

 
300,000

 

 
237,000

 
63,000

 
Participation Interest

 

 
2,000,000

 
2,000,000

 

 
 

 
300,000

 
2,000,000

 
2,237,000

 
63,000

 
 
 
 
 
 
 
 
 
 
 
 
United Retirement Plan Consultants, Inc.
 
Series A Preferred Shares (9,400 shares)

 
446,000

 
241,000

 
454,000

 
233,000

 
Common Shares (100,000 shares)

 

 
446,000

 
310,000

 
136,000

 
 

 
446,000

 
687,000

 
764,000

 
369,000

 
 
 
 
 
 
 
 
 
 
 
 
Waste Recyclers Holdings, LLC
 
Class A Preferred Units (280 units)

 

 

 

 

 
Class B Preferred Units (11,484,867 units)

 
743,000

 

 
114,000

 
629,000

 
Common Unit Purchase Warrant (1,170,083 units)

 

 

 

 

 
Common Units (153,219 units)

 

 

 

 

 
 

 
743,000

 

 
114,000

 
629,000

 
 
 
 
 
 
 
 
 
 
 
 
Wythe Will Tzetzo, LLC
 
Series A Preferred Units (99,829 units)
195,997

 
8,336,000

 

 
1,228,000

 
7,108,000

 
 
195,997

 
8,336,000

 

 
1,228,000

 
7,108,000

 
 
 
 
 
 
 
 
 
 
 
 
Total Affiliate Investments
$
14,943,958

 
$
177,581,965

 
$
27,335,714

 
$
34,806,507

 
$
170,111,172


(1)
Represents the total amount of interest, fees or dividends credited to income for the portion of the year an investment was included in Control or Affiliate categories, respectively.
(2)
Gross additions include increase in the cost basis of investments resulting from new portfolio investment, follow-on investments, and accrued PIK interest, as well as transfers of investments into the affiliate or control categories. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation.
(3)
Gross reductions include decreases in the total cost basis of investments resulting from principal or PIK repayments or sales, as well as transfers of investments out of the affiliate or control categories. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.

This schedule should be read in conjunction with Triangle Capital Corporation's Unaudited Consolidated Financial Statements, including the Unaudited Consolidated Schedule of Investments.


40



TRIANGLE CAPITAL CORPORATION
Schedule of Investments in and Advances to Affiliates
Year Ended December 31, 2015
Portfolio Company
 
Type of Investment
 Amount of Interest or Dividends Credited to Income(1)
 
December 31, 2014
Value
 
Gross Additions(2)
 
Gross Reductions(3)
 
December 31, 2015
Value
Control Investments:
 
 
 
 
 
 
 
 
 
 
 
CRS Reprocessing, LLC
 
Senior Notes (3.9% Cash)
$
73,248

 
$

 
$
2,942,769

 
$

 
$
2,942,769

 
Split Collateral Term Loans (10.5% Cash)
237,971

 

 
6,192,464

 

 
6,192,464

 
Series F Preferred Units (705,321 units)

 

 
8,707,740

 
3,486,740

 
5,221,000

 
Common Units (15,174 units)

 

 

 

 

 
 
311,219

 

 
17,842,973

 
3,486,740

 
14,356,233

 
 
 
 
 
 
 
 
 
 
 
 
DCWV Acquisition Corporation
 
Senior Subordinated Note (15% PIK)

 

 
250,000

 

 
250,000

 
Subordinated Note (12% Cash, 3% PIK)
135,161

 

 
3,958,000

 
841,000

 
3,117,000

 
Jr. Subordinated Note (15% PIK)

 

 
2,000,000

 
2,000,000

 

 
Series A Preferred Equity (1,200 shares)

 

 

 

 

 
100% Common Shares

 

 

 

 

 
 
135,161

 

 
6,208,000

 
2,841,000

 
3,367,000

 
 
 
 
 
 
 
 
 
 
 
 
Gerli & Company
 
Subordinated Note (13% Cash)

 
375,000

 

 

 
375,000

 
Subordinated Note (8.5% Cash)

 
543,000

 

 
106,000

 
437,000

 
Class A Preferred Shares (1,211 shares)

 

 

 

 

 
Class C Preferred Shares (744 shares)

 

 

 

 

 
Class E Preferred Shares (400 shares)

 

 

 

 

 
Common Stock (300 shares)

 

 

 

 

 
 

 
918,000

 

 
106,000

 
812,000

 
 
 
 
 
 
 
 
 
 
 
 
PartsNow!, LLC
 
Subordinated Note (15% PIK)

 
6,233,000

 

 
6,233,000

 

 
Preferred Membership Units (5,650,000 units)

 

 
1,650,000

 
1,650,000

 

 
Common Member Units (1,500,000 units)

 

 

 

 

 
Royalty Rights

 

 

 

 

 
 

 
6,233,000

 
1,650,000

 
7,883,000

 

 
 
 
 
 
 
 
 
 
 
 
 
SRC, Inc.
 
Common Stock (5,000 shares)
400,000

 
7,824,000

 

 
903,000

 
6,921,000

 
400,000

 
7,824,000

 

 
903,000

 
6,921,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Control Investments
846,380

 
14,975,000

 
25,700,973

 
15,219,740

 
25,456,233

 
 
 
 
 
 
 
 
 
 
 
 
Affiliate Investments:
 
 
 
 
 
 
 
 
 
 
 
All Aboard America! Holdings Inc.
 
Subordinated Note (12% Cash, 3% PIK)
2,386,375

 
14,442,239

 
510,952

 

 
14,953,191

 
Membership Units in LLC

 
2,207,492

 
2,816,508

 

 
5,024,000

 
 
2,386,375

 
16,649,731

 
3,327,460

 

 
19,977,191

 
 
 
 
 
 
 
 
 
 
 
 
American De-Rosa Lamparts, LLC and Hallmark Lighting, LLC
 
Subordinated Note (12% Cash, 2% PIK)
1,086,318

 
7,069,614

 
216,258

 
99,637

 
7,186,235

 
Membership Units (8,364 units)

 
936,000

 
2,936,000

 

 
3,872,000

 
 
1,086,318

 
8,005,614

 
3,152,258

 
99,637

 
11,058,235

 
 
 
 
 
 
 
 
 
 
 
 
AP Services, Inc.
 
Class A Units (933 units)

 
2,394

 
27,702

 
30,096

 

 
Class B Units (496 units)

 
1,272

 

 
1,272

 

 
 

 
3,666

 
27,702

 
31,368

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

41



TRIANGLE CAPITAL CORPORATION
Schedule of Investments in and Advances to Affiliates — (Continued)
Year Ended December 31, 2015
Portfolio Company
 
Type of Investment
 Amount of Interest or Dividends Credited to Income(1)
 
December 31, 2014
Value
 
Gross Additions(2)
 
Gross Reductions(3)
 
December 31, 2015
Value
Asset Point, LLC
 
Senior Note (11.3% Cash, 4.8% PIK)
$
1,364,999

 
$
7,990,172

 
$
434,841

 
$
8,425,013

 
$

 
Subordinated Note (12% Cash, 2% PIK)
93,770

 
656,310

 
13,395

 
669,705

 

 
Membership Units (1,000,000 units)

 

 
1,084,714

 
1,084,714

 

 
Options to Purchase Membership Units (342,407 units)

 
204,000

 
296,000

 
500,000

 

 
Membership Unit Warrants (356,506 units)

 

 
99,450

 
99,450

 

 
 
1,458,769

 
8,850,482

 
1,928,400

 
10,778,882

 

 
 
 
 
 
 
 
 
 
 
 
 
Captek Softgel International, Inc. 
 
Subordinated Note (9.5% Cash)
2,040,295

 
16,715,906

 
156,729

 
16,872,635

 

 
Class A Units (80,000 units)

 
1,719,000

 
1,205,260

 
2,924,260

 

 
 
2,040,295

 
18,434,906

 
1,361,989

 
19,796,895

 

 
 
 
 
 
 
 
 
 
 
 
 
CIS Secure Computing, Inc.
 
Subordinated Note (12% Cash, 4% PIK)
1,870,228

 
10,035,000

 
1,288,440

 

 
11,323,440

 
Common Stock (84 shares)

 
40,000

 
159,000

 

 
199,000

 
 
1,870,228

 
10,075,000

 
1,447,440

 

 
11,522,440

 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Lumber Company LLC
 
Subordinated Note (10% Cash, 2% PIK)
837,903

 

 
21,682,445

 
7,350,000

 
14,332,445

 
Class A Units (15,000 units)

 

 
1,500,000

 

 
1,500,000

 
 
837,903

 

 
23,182,445

 
7,350,000

 
15,832,445

 
 
 
 
 
 
 
 
 
 
 
 
DPII Holdings, LLC
 
Senior Note (12% Cash, 4% PIK)
591,910

 
3,394,913

 
163,891

 

 
3,558,804

 
Class A Membership Interest (17,308 units)

 
1,107,692

 

 
312,692

 
795,000

 
 
591,910

 
4,502,605

 
163,891

 
312,692

 
4,353,804

 
 
 
 
 
 
 
 
 
 
 
 
Dyson Corporation
 
Common Units (1,000,000 units)

 
324,000

 
92,000

 

 
416,000

 
 

 
324,000

 
92,000

 

 
416,000

 
 
 
 
 
 
 
 
 
 
 
 
Frank Entertainment Group, LLC
 
Senior Note (10% Cash, 5.8% PIK)
1,512,152

 
8,513,033

 
1,122,369

 
42,857

 
9,592,545

 
Class A Redeemable Preferred Units (10.5% Cash) (196,718 units)
483,492

 
4,405,000

 
161,904

 

 
4,566,904

 
Class B Redeemable Preferred Units (18,667 units)

 
1,537,000

 
123,810

 

 
1,660,810

 
Class C Redeemable Preferred Units (25,846 units)
 
 

 
600,000

 

 
600,000

 
Class A Common Units (43,077 units)

 

 

 

 

 
Class A Common Warrants

 

 

 

 

 
 
1,995,644

 
14,455,033

 
2,008,083

 
42,857

 
16,420,259

 
 
 
 
 
 
 
 
 
 
 
 
GenPref LLC 
 
7.0% LLC Interest

 
470,000

 
147,840

 
601,440

 
16,400

 
 

 
470,000

 
147,840

 
601,440

 
16,400

 
 
 
 
 
 
 
 
 
 
 
 
Halcyon Healthcare, LLC
 
Subordinated Note (10% Cash)
1,292,495

 
11,278,779

 
221,221

 
11,500,000

 

 
Preferred Interests (2,000,000 interests)

 
2,000,000

 
259,413

 
2,259,413

 

 
 
1,292,495

 
13,278,779

 
480,634

 
13,759,413

 

 
 
 
 
 
 
 
 
 
 
 
 

42



TRIANGLE CAPITAL CORPORATION
Schedule of Investments in and Advances to Affiliates — (Continued)
Year Ended December 31, 2015
Portfolio Company
 
Type of Investment
 Amount of Interest or Dividends Credited to Income(1)
 
December 31, 2014
Value
 
Gross Additions(2)
 
Gross Reductions(3)
 
December 31, 2015
Value
Main Street Gourmet, LLC
 
Jr. Subordinated Note (8% Cash, 2% PIK)
$
82,261

 
$
754,197

 
$
23,357

 
$
777,554

 
$

 
Preferred Units (233 units)

 
333,000

 
34,000

 

 
367,000

 
Common B Units (3,000 units)

 
1,108,000

 
699,000

 

 
1,807,000

 
Common A Units (1,652 units)

 
610,000

 
385,000

 

 
995,000

 
 
82,261

 
2,805,197

 
1,141,357

 
777,554

 
3,169,000

 
 
 
 
 
 
 
 
 
 
 
 
Minco Technology Labs, LLC
 
Subordinated Note (6.5% Cash, 3.5% PIK)
180,818

 

 
5,665,445

 
5,665,445

 

 
Class A Units (5,000 HoldCo. units)

 

 

 

 

 
Class A Units (3,907 OpCo. units)

 

 

 

 

 
 
180,818

 

 
5,665,445

 
5,665,445

 

 
 
 
 
 
 
 
 
 
 
 
 
NB Products, Inc.
 
Subordinated Note (12% Cash, 2% PIK)
2,774,835

 

 
20,327,140

 

 
20,327,140

 
Jr. Subordinated Note (10% PIK)
362,550

 

 
4,126,030

 

 
4,126,030

 
Series A Redeemable Senior Preferred Stock (7,839 shares)
156,779

 

 
8,525,000

 

 
8,525,000

 
Common Stock (1,668,691 shares)

 

 
3,997,000

 

 
3,997,000

 
 
3,294,164

 

 
36,975,170

 

 
36,975,170

 
 
 
 
 
 
 
 
 
 
 
 
PCX Aerostructures, LLC
 
Subordinated Note (11% Cash, 4% PIK)
2,919,187

 
19,087,302

 
711,790

 
1,187,092

 
18,612,000

 
Series A Preferred Stock (5,344 shares)

 
5,343,953

 

 
4,152,953

 
1,191,000

 
Class A Common Stock (107,416 shares)

 
26,854

 

 
26,854

 

 
 
2,919,187

 
24,458,109

 
711,790

 
5,366,899

 
19,803,000

 
 
 
 
 
 
 
 
 
 
 
 
Playhaven, LLC
 
Senior Note (9.5% Cash, 2.5% PIK)
2,098,065

 
20,712,285

 
2,534,778

 
23,247,063

 

 
Class A Common Units (999,999 units)

 
869,999

 
464,000

 
1,333,999

 

 
Class C Common Units (1 unit)

 
5,001

 

 
5,001

 

 
 
2,098,065

 
21,587,285

 
2,998,778

 
24,586,063

 

 
 
 
 
 
 
 
 
 
 
 
 
Team Waste, LLC
 
Preferred Units (28 units)
55,000

 

 
5,500,000

 

 
5,500,000

 
 
 
55,000

 

 
5,500,000

 

 
5,500,000

 
 
 
 
 
 
 
 
 
 
 
 
Technology Crops, LLC
 
Subordinated Notes (12% Cash, 5% PIK)
1,914,191

 
10,670,076

 
582,047

 

 
11,252,123

 
Common Units (50 units)

 
162,000

 
238,000

 

 
400,000

 
 
1,914,191

 
10,832,076

 
820,047

 

 
11,652,123

 
 
 
 
 
 
 
 
 
 
 
 
TGaS Advisors, LLC
 
Subordinated Note (10% Cash, 1% PIK)
1,156,709

 
9,742,396

 
140,475

 
248,973

 
9,633,898

 
Preferred Units (1,685,357 units)

 
1,685,357

 

 
258,357

 
1,427,000

 
 
1,156,709

 
11,427,753

 
140,475

 
507,330

 
11,060,898

 
 
 
 
 
 
 
 
 
 
 
 
UCS Super HoldCo LLC
 
Membership Units (1,000 units)

 
1,000,000

 

 
700,000

 
300,000

 
Participation Interest

 
2,000,000

 

 
2,000,000

 

 
 

 
3,000,000

 

 
2,700,000

 
300,000

 
 
 
 
 
 
 
 
 
 
 
 
United Retirement Plan Consultants, Inc.
 
Preferred A Shares (90,000 shares)

 

 
1,215,000

 
769,000

 
446,000

 
Common Shares (10,000 shares)

 

 

 

 

 
 

 

 
1,215,000

 
769,000

 
446,000

 
 
 
 
 
 
 
 
 
 
 
 
Venture Technology Groups, Inc.
 
Subordinated Note (12.5% Cash, 4% PIK)
65,455

 
225,000

 
75,000

 
300,000

 

 
 
65,455

 
225,000

 
75,000

 
300,000

 

 
 
 
 
 
 
 
 
 
 
 
 

43



TRIANGLE CAPITAL CORPORATION
Schedule of Investments in and Advances to Affiliates — (Continued)
Year Ended December 31, 2015
Portfolio Company
 
Type of Investment
 Amount of Interest or Dividends Credited to Income(1)
 
December 31, 2014
Value
 
Gross Additions(2)
 
Gross Reductions(3)
 
December 31, 2015
Value
Waste Recyclers Holdings, LLC
 
Class A Preferred Units (280 units)
$

 
$

 
$

 
$

 
$

 
Class B Preferred Units (11,484,867 units)

 
1,727,000

 

 
984,000

 
743,000

 
Common Unit Purchase Warrant (1,170,083 units)

 

 

 

 

 
Common Units (153,219 units)

 

 

 

 

 
 

 
1,727,000

 

 
984,000

 
743,000

 
 
 
 
 
 
 
 
 
 
 
 
Wythe Will Tzetzo, LLC
 
Series A Preferred Units (99,829 units)
638,633

 
7,823,000

 
513,000

 

 
8,336,000

 
 
638,633

 
7,823,000

 
513,000

 

 
8,336,000

 
 
 
 
 
 
 
 
 
 
 
 
Total Affiliate Investments
$
25,964,420

 
$
178,935,236

 
$
93,076,204

 
$
94,429,475

 
$
177,581,965


(1)
Represents the total amount of interest, fees or dividends credited to income for the portion of the year an investment was included in Control or Affiliate categories, respectively.
(2)
Gross additions include increase in the cost basis of investments resulting from new portfolio investment, follow-on investments and accrued PIK interest. Gross Additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation.
(3)
Gross reductions include decreases in the total cost basis of investments resulting from principal or PIK repayments or sales. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.

This schedule should be read in conjunction with Triangle Capital Corporation's Consolidated Financial Statements for the year ended December 31, 2015, including the Consolidated Schedule of Investments as of December 31, 2015.


44



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion is designed to provide a better understanding of our unaudited consolidated financial statements for the three and nine months ended September 30, 2016, including a brief discussion of our business, key factors that impacted our performance and a summary of our operating results. The following discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2015. Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods.
Forward-Looking Statements
Some of the statements in this Quarterly Report constitute forward-looking statements because they relate to future events or our future performance or financial condition. Forward-looking statements may include, among other things, statements as to our future operating results, our business prospects and the prospects of our portfolio companies, the impact of the investments that we expect to make, the ability of our portfolio companies to achieve their objectives, our expected financings and investments, the adequacy of our cash resources and working capital, and the timing of cash flows, if any, from the operations of our portfolio companies. Words such as “expect,” “anticipate,” “target,” “goals,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “forecast,” “may,” “should,” “potential,” variations of such words, and similar expressions indicate a forward-looking statement, although not all forward-looking statements include these words. Readers are cautioned that the forward-looking statements contained in this Quarterly Report are only predictions, are not guarantees of future performance, and are subject to risks, events, uncertainties and assumptions that are difficult to predict. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors discussed herein and in Item 1A entitled “Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2015. Other factors that could cause actual results to differ materially include, but are not limited to, changes in the economy, risks associated with possible disruption due to terrorism in our operations or the economy generally, and future changes in laws or regulations and conditions in our operating areas. These statements are based on our current expectations, estimates, forecasts, information and projections about the industry in which we operate and the beliefs and assumptions of our management as of the date of this Quarterly Report. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless we are required to do so by law. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the Securities and Exchange Commission, or the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
Overview of Our Business
We are a Maryland corporation which has elected to be treated and operates as an internally managed business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. Our wholly-owned subsidiaries, Triangle Mezzanine Fund LLLP, or Triangle SBIC, and Triangle Mezzanine Fund II LP, or Triangle SBIC II, are licensed as small business investment companies, or SBICs, by the United States Small Business Administration, or SBA. In addition, Triangle SBIC has also elected to be treated as a BDC under the 1940 Act. We, Triangle SBIC and Triangle SBIC II invest primarily in debt instruments, equity investments, warrants and other securities of lower middle market privately-held companies located primarily in the United States.
Our business is to provide capital to lower middle market companies located primarily in the United States. We focus on investments in companies with a history of generating revenues and positive cash flows, an established market position and a proven management team with a strong operating discipline. Our target portfolio company has annual revenues between $20.0 million and $200.0 million and annual earnings before interest, taxes, depreciation and amortization, or EBITDA, between $3.0 million and $35.0 million.
We invest primarily in subordinated debt securities secured by second lien security interests in portfolio company assets, coupled with equity interests. On a more limited basis, we also invest in senior debt securities secured by first lien security interests in portfolio company assets. Our investments generally range from $5.0 million to $35.0 million per portfolio company. In certain situations, we have partnered with other funds to provide larger financing commitments.
We generate revenues in the form of interest income, primarily from our investments in debt securities, loan origination and other fees and dividend income. Fees generated in connection with our debt investments are recognized over the life of the loan using the effective interest method or, in some cases, recognized as earned. In addition, we generate revenue in the form of

45



capital gains, if any, on warrants or other equity-related securities that we acquire from our portfolio companies. Our debt investments generally have a term of between three and seven years and typically bear interest at fixed rates between 10.0% and 15.0% per annum. Certain of our debt investments have a form of interest, referred to as payment-in-kind, or PIK, interest, that is not paid currently but is instead accrued and added to the loan balance and paid at the end of the term. In our negotiations with potential portfolio companies, we generally seek to minimize PIK interest. Cash interest on our debt investments is generally payable monthly; however, some of our debt investments pay cash interest on a quarterly basis. As of September 30, 2016 and December 31, 2015, the weighted average yield on our outstanding debt investments other than non-accrual debt investments was approximately 12.3% and 12.2%, respectively. The weighted average yield on all of our outstanding investments (including equity and equity-linked investments but excluding non-accrual debt investments) was approximately 10.5% and 10.6% as of September 30, 2016 and December 31, 2015, respectively. The weighted average yield on all of our outstanding investments (including equity and equity-linked investments and non-accrual debt investments) was approximately 10.0% and 10.2% as of September 30, 2016 and December 31, 2015, respectively.
Triangle SBIC and Triangle SBIC II are eligible to issue debentures to the SBA, which pools these with debentures of other SBICs and sells them in the capital markets at favorable interest rates, in part as a result of the guarantee of payment from the SBA. Triangle SBIC and Triangle SBIC II invest these funds in portfolio companies. We intend to continue to operate Triangle SBIC and Triangle SBIC II as SBICs, subject to SBA approval, and to utilize the proceeds from the issuance of SBA-guaranteed debentures, referred to herein as SBA leverage, to enhance returns to our stockholders.
Portfolio Investment Composition
The total value of our investment portfolio was $947.7 million as of September 30, 2016, as compared to $977.3 million as of December 31, 2015. As of September 30, 2016, we had investments in 86 portfolio companies with an aggregate cost of $987.3 million. As of December 31, 2015, we had investments in 92 portfolio companies with an aggregate cost of $1.0 billion. As of both September 30, 2016 and December 31, 2015, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.
As of September 30, 2016 and December 31, 2015, our investment portfolio consisted of the following investments:
 
Cost
 
Percentage of
Total
Portfolio
 
Fair Value
 
Percentage of
Total
Portfolio
September 30, 2016:
 
 
 
 
 
 
 
Subordinated debt and 2nd lien notes
$
714,970,938

 
72
%
 
$
669,654,799

 
71
%
Senior debt and 1st lien notes
133,758,330

 
14

 
126,988,510

 
13

Equity shares
134,446,226

 
14

 
148,790,666

 
16

Equity warrants
4,154,717

 

 
2,298,000

 

Royalty rights

 

 

 

 
$
987,330,211

 
100
%
 
$
947,731,975

 
100
%
December 31, 2015:
 
 
 
 
 
 
 
Subordinated debt and 2nd lien notes
$
739,416,002

 
73
%
 
$
699,125,083

 
72
%
Senior debt and 1st lien notes
134,489,956

 
13

 
132,929,264

 
14

Equity shares
127,464,548

 
13

 
141,555,369

 
14

Equity warrants
5,978,617

 
1

 
3,667,000

 

Royalty rights

 

 

 

 
$
1,007,349,123

 
100
%
 
$
977,276,716

 
100
%

Investment Activity
During the nine months ended September 30, 2016, we made six new investments totaling $130.2 million, debt investments in ten existing portfolio companies totaling $27.8 million and equity investments in nine existing portfolio companies totaling $5.9 million. We had ten portfolio company loans repaid at par totaling $137.4 million resulting in realized gains totaling $0.7 million and received normal principal repayments and partial loan prepayments totaling $24.0 million in the nine months ended September 30, 2016. We converted subordinated debt investments in one portfolio company into an equity investment and recognized a realized loss on such conversion totaling $1.6 million. We wrote off an equity investment in one portfolio company and recognized a realized loss on the write-off of $2.0 million and wrote off a debt investment in one portfolio company and recognized a realized loss on the write-off of $16.1 million. In addition, we received proceeds related to

46



the sales of certain equity securities totaling $20.8 million and recognized net realized gains on such sales totaling $12.2 million in the nine months ended September 30, 2016.
During the nine months ended September 30, 2015, we made eighteen new investments totaling $289.2 million, debt investments in eight existing portfolio companies totaling $56.3 million and equity investments in ten existing portfolio companies totaling $7.0 million. We had seventeen portfolio company loans repaid totaling $236.9 million resulting in realized gains totaling $2.0 million and received normal principal repayments and partial loan prepayments totaling $9.5 million in the nine months ended September 30, 2015. We converted subordinated debt investments in one portfolio company into an equity investment and recognized a net realized loss on such conversion totaling $20.5 million. We wrote-off debt and equity investments in two portfolio companies and recognized realized losses on the write-offs of $18.8 million. In addition, we received proceeds related to the sales of certain equity securities totaling $14.6 million and recognized net realized gains on such sales totaling $7.0 million in the nine months ended September 30, 2015.
Total portfolio investment activity for the nine months ended September 30, 2016 and 2015 was as follows:
Nine Months Ended
September 30, 2016:
Subordinated
Debt and 2nd
Lien Notes
 
Senior Debt
and 1st Lien
Notes
 
Equity
Shares
 
Equity
Warrants
 
Royalty
Rights
 
Total
Fair value, beginning of period
$
699,125,083

 
$
132,929,264

 
$
141,555,369

 
$
3,667,000

 
$

 
$
977,276,716

New investments
145,487,825

 
3,000,000

 
14,729,826

 
650,000

 

 
163,867,651

Reclassifications
4,020,247

 
(4,020,247
)
 

 

 

 

Proceeds from sales of investments

 

 
(14,838,506
)
 
(5,627,106
)
 

 
(20,465,612
)
Loan origination fees received
(3,165,460
)
 
(40,000
)
 

 

 

 
(3,205,460
)
Principal repayments received
(157,151,997
)
 
(4,536,285
)
 

 

 

 
(161,688,282
)
PIK interest earned
10,548,903

 
1,083,855

 

 

 

 
11,632,758

PIK interest payments received
(7,219,058
)
 
(236,150
)
 

 

 

 
(7,455,208
)
Accretion of loan discounts
156,879

 
150,202

 

 

 

 
307,081

Accretion of deferred loan origination revenue
3,289,162

 
386,841

 

 

 

 
3,676,003

Realized gain (loss)
(15,371,087
)
 
(1,560,322
)
 
7,090,358

 
3,153,206

 

 
(6,687,845
)
Unrealized gain (loss)
(10,065,698
)
 
(168,648
)
 
253,619

 
454,900

 

 
(9,525,827
)
Fair value, end of period
$
669,654,799

 
$
126,988,510

 
$
148,790,666

 
$
2,298,000

 
$

 
$
947,731,975

Weighted average yield on debt investments at end of period(1)
 
 
 
 
 
12.3
%
Weighted average yield on total investments at end of period(1)
 
 
 
 
 
10.5
%
Weighted average yield on total investments at end of period
 
 
 
 
 
10.0
%
(1)
Excludes non-accrual debt investments


47



Nine Months Ended
September 30, 2015:
Subordinated
Debt and 2nd
Lien Notes
 
Senior Debt
and 1st Lien
Notes
 
Equity
Shares
 
Equity
Warrants
 
Royalty
Rights
 
Total
Fair value, beginning of period
$
660,377,024

 
$
115,252,247

 
$
103,132,851

 
$
8,461,000

 
$

 
$
887,223,122

New investments
267,008,061

 
48,946,253

 
35,238,714

 
1,252,000

 

 
352,445,028

Reclassifications
(8,707,740
)
 

 
8,707,740

 

 



Proceeds from sales of investments

 

 
(7,188,653
)
 
(7,376,089
)
 

 
(14,564,742
)
Loan origination fees received
(4,751,331
)
 
(990,000
)
 

 

 

 
(5,741,331
)
Principal repayments received
(210,917,936
)
 
(35,519,921
)
 

 

 

 
(246,437,857
)
PIK interest earned
10,197,528

 
1,325,277

 

 

 

 
11,522,805

PIK interest payments received
(8,232,467
)
 
(1,206,033
)
 

 

 

 
(9,438,500
)
Accretion of loan discounts
326,913

 
35,511

 

 

 

 
362,424

Accretion of deferred loan origination revenue
4,157,776

 
740,058

 

 

 

 
4,897,834

Realized gain (loss)
(28,793,224
)
 
804,802

 
(5,198,522
)
 
2,889,237

 

 
(30,297,707
)
Unrealized gain (loss)
10,250,693

 
(102,294
)
 
9,370,723

 
(1,391,148
)
 

 
18,127,974

Fair value, end of period
$
690,915,297

 
$
129,285,900

 
$
144,062,853

 
$
3,835,000

 
$

 
$
968,099,050

Weighted average yield on debt investments at end of period(1)
 
 
 
 
 
12.3
%
Weighted average yield on total investments at end of period(1)
 
 
 
 
 
10.7
%
Weighted average yield on total investments at end of period
 
 
 
 
 
10.4
%
(1)
Excludes non-accrual debt investments
Non-Accrual Assets
Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. As of September 30, 2016, the fair value of our non-accrual assets was $19.5 million, which comprised 2.1% of the total fair value of our portfolio, and the cost of our non-accrual assets was $38.1 million, which comprised 3.9% of the total cost of our portfolio. As of December 31, 2015, the fair value of our non-accrual assets was $6.9 million, which comprised 0.7% of the total fair value of our portfolio, and the cost of our non-accrual assets was $20.4 million, which comprised 2.0% of the total cost of our portfolio.
Our non-accrual assets as of September 30, 2016 were as follows:
Community Intervention Services, Inc.
In June 2016, we placed our debt investment in Community Intervention Services, Inc., or Community, on non-accrual status effective with the quarterly payment due June 30, 2016. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in Community for financial reporting purposes. As of September 30, 2016, the cost of our debt investment in Community was $15.4 million and the fair value of such investment was $11.4 million.
DCWV Acquisition Corporation
In September 2015, we placed our debt investments in DCWV Acquisition Corporation, or DCWV, on non-accrual status effective with the monthly payment due September 30, 2015. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investments in DCWV for financial reporting purposes. As of September 30, 2016, the cost of our debt investments in DCWV was $8.4 million and the fair value of such investments was $3.3 million.
DPII Holdings, LLC
During the three months ended March 31, 2016, we placed our Tranche I & II subordinated debt investments in DPII Holdings, LLC, or Datapath, on PIK non-accrual status. During the three months ended June 30, 2016, we invested approximately $1.6 million in a Tranche III subordinated debt investment in order to provide liquidity to support Datapath. This Tranche III subordinated debt investment bears interest at a rate of 0% Cash and 19% PIK. As a result, in the three months ended June 30, 2016, we placed both our Tranche I & II subordinated debt investments and our Tranche III subordinated debt

48



investment in Datapath on full non-accrual status. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investments in Datapath for financial reporting purposes. As of September 30, 2016, the cost of our debt investments in Datapath was $4.9 million and the fair value of such investments was $3.1 million.
Gerli and Company
In November 2008, we placed our debt investments in Gerli and Company, or Gerli, on non-accrual status. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investments in Gerli for financial reporting purposes. As of September 30, 2016, the cost of our debt investments in Gerli was $3.4 million and the fair value of such investments was zero.
PowerDirect Marketing, LLC
In August 2014, we placed our debt investment in PowerDirect Marketing, LLC, or PowerDirect, on non-accrual status effective with the monthly payment due July 31, 2014. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in PowerDirect for financial reporting purposes. As of September 30, 2016, the cost of our debt investment in PowerDirect was $5.9 million and the fair value of such investment was $1.7 million.
PIK Non-Accrual Assets
In addition to our non-accrual assets, as of September 30, 2016, we had a debt investment in one portfolio company (our subordinated debt in Women's Marketing, Inc.) that was on non-accrual only with respect to the PIK interest component of the loan. As of September 30, 2016, the fair value of this debt investment was $11.7 million, or 1.2% of the total fair value of our portfolio, and the cost of this debt investment was $16.1 million, or 1.6% of the total cost of our portfolio.

Results of Operations
Comparison of three months ended September 30, 2016 and September 30, 2015
Investment Income
For the three months ended September 30, 2016, total investment income was $27.4 million, a 11.1% decrease from $30.8 million of total investment income for the three months ended September 30, 2015. This decrease was primarily attributable to a $1.8 million decrease in non-recurring fee income, a $0.8 million decrease in investment income related to non-accrual assets, a $0.1 million decrease in non-recurring dividend income and a decrease in the weighted average yield on our debt investments from September 30, 2015 to September 30, 2016. Non-recurring fee income was $1.2 million for the three months ended September 30, 2016, as compared to $3.0 million for the three months ended September 30, 2015. Non-recurring dividend income was $0.3 million for the three months ended September 30, 2016, as compared to $0.5 million for the three months ended September 30, 2015.
Operating Expenses
For the three months ended September 30, 2016, operating expenses decreased by 6.0% to $11.6 million from $12.3 million for the three months ended September 30, 2015. Our operating expenses consist of interest and other financing fees, compensation expenses and general and administrative expenses.
For the three months ended September 30, 2016, interest and other financing fees increased by 3.0% to $6.8 million from $6.6 million for the three months ended September 30, 2015. The increase in interest and other financing fees was related primarily to the interest and fee amortization of $0.2 million on the incremental $25.0 million of borrowings outstanding under our SBA-guaranteed debentures.
Compensation expenses are primarily influenced by headcount and levels of business activity. Our compensation expenses include salaries, discretionary compensation, equity-based compensation and benefits. Discretionary compensation is significantly impacted by our level of total investment income, our investment results including investment realizations, prevailing labor markets and the external environment. As a result of these and other factors, our compensation expenses can fluctuate materially from period to period. Accordingly, the amount of compensation expenses recognized in any particular period may not be indicative of compensation expenses in a future period.
For the three months ended September 30, 2016, compensation expenses decreased by 19.9% to $4.0 million from $5.0 million for the three months ended September 30, 2015. This decrease in compensation expenses was primarily related to decreased discretionary compensation expenses.

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For the three months ended September 30, 2016, general and administrative expenses increased by 5.7% to $0.9 million from $0.8 million for the three months ended September 30, 2015.
In addition, our efficiency ratio (defined as the sum of compensation expenses and general and administrative expenses as a percentage of total investment income) decreased to 17.6% for the three months ended September 30, 2016 from 18.7% for the three months ended September 30, 2015.
Net Investment Income
As a result of the $3.4 million decrease in total investment income and the $0.7 million decrease in operating expenses, net investment income decreased by 14.5% to $15.8 million for the three months ended September 30, 2016 as compared to $18.5 million for the three months ended September 30, 2015.
Net Increase/Decrease in Net Assets Resulting from Operations
In the three months ended September 30, 2016, we recognized realized losses totaling $11.2 million, which consisted primarily of a net loss on the write-off of one non-control/non-affiliate investment totaling $16.1 million, partially offset by net gains on the sales of four non-control/non-affiliate investments totaling $4.9 million. In addition, during the three months ended September 30, 2016, we recorded net unrealized appreciation totaling $3.2 million, consisting of net unrealized depreciation on our current portfolio of $9.0 million and net unrealized appreciation reclassification adjustments of $12.2 million related to the realized gains and losses noted above.
In the three months ended September 30, 2015, we recognized realized losses totaling $16.5 million, which consisted of a loss on the write-off of one control investment totaling $18.3 million and a loss on the write-off of one affiliate investment totaling $0.5 million, partially offset by gains related to the sales/repayments of six non-control/non-affiliate investments totaling $2.3 million. In addition, during the three months ended September 30, 2015, we recorded net unrealized appreciation totaling $15.5 million, consisting of net unrealized appreciation on our current portfolio of $0.2 million and net unrealized appreciation reclassification adjustments of $15.3 million related to the realized gains and losses noted above.
As a result of these events, our net increase in net assets resulting from operations was $7.9 million for the three months ended September 30, 2016, as compared to a net increase in net assets resulting from operations of $17.9 million for the three months ended September 30, 2015.
Comparison of nine months ended September 30, 2016 and September 30, 2015
Investment Income
For the nine months ended September 30, 2016, total investment income was $82.5 million, a 7.8% decrease from $89.4 million of total investment income for the nine months ended September 30, 2015. This decrease was primarily attributable to a $3.4 million decrease in non-recurring fee income and a $2.7 million decrease in non-recurring dividend income, a $0.4 million decrease in investment income related to non-accrual assets and a decrease in the weighted average yield on our debt investments from September 30, 2015 to September 30, 2016. Non-recurring fee income was $4.5 million for the nine months ended September 30, 2016 as compared to $7.9 million for the nine months ended September 30, 2015. Net non-recurring dividend income was $(0.3) million for the nine months ended September 30, 2016 as compared to $2.4 million for the nine months ended September 30, 2015. Our net negative non-recurring dividend income during the nine months ended September 30, 2016 consisted of non-recurring dividend income of approximately $0.9 million and a negative true-up adjustment of $1.3 million related to a portfolio company distribution that was received in 2015. In 2015, we received information that indicated that the tax character of the distribution was 100% dividend income, but received updated information in 2016 indicating that only 14% of the distribution was dividend income and the remainder was a return of capital, which necessitated the adjustment.
Operating Expenses
For the nine months ended September 30, 2016, operating expenses increased by 10.1% to $40.7 million from $37.0 million for the nine months ended September 30, 2015. Our operating expenses consist of interest and other financing fees, compensation expenses and general and administrative expenses.
For the nine months ended September 30, 2016, interest and other financing fees decreased by 1.4% to $20.0 million from $20.3 million for the nine months ended September 30, 2015. The decrease in interest and other financing fees was related to $2.4 million of interest savings related to the redemption of our unsecured notes due in March 2019, or the 2019 Notes, partially offset by an increase in interest and other financing fees of $0.2 million on the $25.0 million of incremental outstanding borrowings under our SBA-guaranteed debentures, an increase in interest and other financing fees of $1.4 million

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related to increased borrowings under our third amended and restated senior secured credit facility, or the Credit Facility, and an increase of $0.5 million in interest and other financing fees from the February 2015 issuance of our unsecured notes due in March 2022, or the March 2022 Notes.
For the nine months ended September 30, 2016, compensation expenses increased by 26.2% to $17.5 million from $13.9 million for the nine months ended September 30, 2015. The increase in compensation expenses in the nine months ended September 30, 2016 was primarily related to one-time expenses associated with the retirement of our former Chief Executive Officer, Garland S. Tucker, III, from his officer positions in February 2016. Our Board of Directors awarded Mr. Tucker a $2.5 million cash bonus and accelerated the vesting of his outstanding shares of restricted stock, including 47,000 shares of restricted stock awarded to him in February 2016 based on his performance during 2015, and certain other compensation in connection with his retirement and in recognition of his long service. We recognized $5.5 million in one-time compensation expenses in the nine months ended September 30, 2016 associated with Mr. Tucker's retirement. This increase was partially offset by decreased discretionary compensation expenses.
For the nine months ended September 30, 2016, general and administrative expenses increased by 13.3% to $3.2 million from $2.8 million for the nine months ended September 30, 2015.
In addition, our efficiency ratio (defined as the sum of compensation expenses and general and administrative expenses as a percentage of total investment income) increased to 25.1% for the nine months ended September 30, 2016 from 18.6% for the nine months ended September 30, 2015.
Net Investment Income
As a result of the $7.0 million decrease in total investment income and the $3.7 million increase in operating expenses, net investment income decreased by 20.4% to $41.8 million for the nine months ended September 30, 2016 as compared to $52.5 million for the nine months ended September 30, 2015.
Net Increase/Decrease in Net Assets Resulting from Operations
In the nine months ended September 30, 2016, we recognized realized losses totaling $6.7 million, which consisted primarily of net losses on the the write-off/sales of four affiliate investments totaling $1.7 million, a loss on the restructuring of one non-control/non-affiliate investment totaling $1.6 million and a loss on the write-off of one non-control/non-affiliate investment totaling $16.1 million, partially off-set by net gains on the sales/repayments of fourteen non-control/non-affiliate investments totaling $12.7 million. In addition, during the nine months ended September 30, 2016, we recorded net unrealized depreciation totaling $8.1 million, consisting of net unrealized depreciation on our current portfolio of $15.7 million and net unrealized appreciation reclassification adjustments of $7.5 million related to the realized gains and losses noted above.
In the nine months ended September 30, 2015, we recognized realized losses totaling $30.3 million, which consisted of a loss on the restructuring of one control investment totaling $20.5 million, a loss on the write-off of one control investment totaling $18.3 million and a loss on the write- off of one affiliate investment totaling $0.5 million, partially offset by net gains related to the sale/repayments of four affiliate investments of $0.3 million and net gains on the sales/repayments of thirteen non- control/non- affiliate investments totaling $8.7 million. In addition, during the nine months ended September 30, 2015, we recorded net unrealized appreciation of investments totaling $17.4 million, consisting of net unrealized depreciation on our current portfolio of approximately $12.3 million and net unrealized appreciation reclassification adjustments of $29.6 million related to the realized gains and losses noted above.
During the nine months ended September 30, 2015, we recognized a loss on extinguishment of debt of approximately $1.4 million related to the redemption of the 2019 Notes.
As a result of these events, our net increase in net assets resulting from operations was $27.0 million for the nine months ended September 30, 2016, as compared to a net increase in net assets resulting from operations of $38.4 million for the nine months ended September 30, 2015.

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Liquidity and Capital Resources
We believe that our current cash and cash equivalents on hand, our available leverage under the Credit Facility, and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months.
In the future, depending on the valuation of Triangle SBIC’s assets and Triangle SBIC II’s assets pursuant to SBA guidelines, Triangle SBIC and Triangle SBIC II may be limited by provisions of the Small Business Investment Act of 1958, or the Small Business Investment Act, and SBA regulations governing SBICs, from making certain distributions to Triangle Capital Corporation that may be necessary to enable Triangle Capital Corporation to make the minimum required distributions to its stockholders and qualify as a RIC.
Cash Flows
For the nine months ended September 30, 2016, we experienced a net increase in cash and cash equivalents in the amount of $115.7 million. During that period, our operating activities provided $55.8 million in cash, consisting primarily of repayments received from portfolio companies and proceeds from sales of portfolio investments of approximately $182.2 million, partially offset by new portfolio investments of $163.9 million. In addition, our financing activities increased cash by $60.0 million, consisting primarily of proceeds from the public stock offering of $129.1 million and borrowings under SBA-guaranteed debentures of $32.8 million, partially offset by cash dividends paid in the amount of $49.1 million, net repayments under the Credit Facility of $40.4 million and the repayment of the SBA-guaranteed LMI debenture of $7.8 million. As of September 30, 2016, we had $168.3 million of cash and cash equivalents on hand.
For the nine months ended September 30, 2015, we experienced a net decrease in cash and cash equivalents in the amount of $25.7 million. During that period, our operating activities used $38.4 million in cash, consisting primarily of new portfolio investments of $352.4 million, partially offset by repayments received from portfolio companies and proceeds from sales of portfolio investments of approximately $261.0 million. In addition, our financing activities increased cash by $12.8 million, primarily due to net borrowings under the Credit Facility of $60.0 million and proceeds from the March 2022 Notes offering of $83.4 million, partially offset by redemption of the 2019 Notes of $69.0 million and cash dividends paid in the amount of $56.1 million. As of September 30, 2015, we had $53.0 million of cash and cash equivalents on hand.
Financing Transactions
Due to Triangle SBIC’s and Triangle SBIC II’s status as licensed SBICs, Triangle SBIC and Triangle SBIC II have the ability to issue debentures guaranteed by the SBA at favorable interest rates. Under the Small Business Investment Act and the SBA rules applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding at any time debentures guaranteed by the SBA up to two times (and in certain cases, up to three times) the amount of its regulatory capital, which generally is the amount raised from private investors. The maximum statutory limit on the dollar amount of outstanding debentures guaranteed by the SBA issued by a single SBIC is currently $150.0 million and by a group of SBICs under common control is $350.0 million. Debentures guaranteed by the SBA have a maturity of ten years, with interest payable semi-annually. The principal amount of the debentures is not required to be paid before maturity but may be prepaid at any time, without penalty. As a result of its guarantee of our SBA-guaranteed debentures, the SBA has fixed-dollar claims on the assets of Triangle SBIC and Triangle SBIC II that are superior to the claims of our security holders.
As of September 30, 2016, Triangle SBIC had issued the maximum $150.0 million of SBA-guaranteed debentures and Triangle SBIC II had issued $100.0 million of SBA-guaranteed debentures. In addition to the one-time 1.0% fee on the total commitment from the SBA, we also pay a one-time 2.425% fee on the amount of each debenture issued (2.0% for SBA LMI debentures). These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements using the effective interest method. The weighted average interest rate for all SBA-guaranteed debentures as of September 30, 2016 was 3.90%. In the nine months ended September 30, 2016, we repaid the $7.8 million SBA-guaranteed LMI debenture, which matured on March 1, 2016. As of both September 30, 2016 and December 31, 2015, all SBA-guaranteed debentures were pooled.
In May 2015, we entered the Credit Facility, which has a current commitment of $300.0 million supported by 13 financial institutions and replaced our $165.0 million senior secured credit facility entered into in June 2013, or the Prior Facility. The revolving period of the Credit Facility ends May 3, 2019 followed by a one-year amortization period with a final maturity date of May 3, 2020. We have the ability to borrow in both United States dollars as well as foreign currencies under the Credit Facility.
The Credit Facility has an accordion feature that allows for an increase in the total borrowing size up to $350.0 million, subject to certain conditions and the satisfaction of specified financial covenants. The Credit Facility, which is structured to

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operate like a revolving credit facility, is secured primarily by our assets, excluding the assets of our wholly-owned SBIC subsidiaries.
Borrowings under the Credit Facility bear interest, subject to our election, on a per annum basis equal to (i) the applicable base rate plus 1.75% (or 1.50% if we receive an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.75% (or 2.50% if we receive an investment grade credit rating) or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75% (or 2.50% if we receive an investment grade credit rating). The applicable base rate is equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR plus 2.0%. The applicable LIBOR rate depends on the term of the draw under the Credit Facility. We pay a commitment fee of 1.00% per annum on undrawn amounts if the used portion of the Credit Facility is less than or equal to 25.0% of total commitments, or 0.375% per annum on undrawn amounts if the used portion of the Credit Facility is greater than 25.0% of total commitments.
As of September 30, 2016, we had United States dollar borrowings of $69.7 million outstanding under the Credit Facility with an interest rate of 3.28% and non-United States dollar borrowings denominated in Canadian dollars of $28.6 million ($21.7 million in United States dollars) outstanding under the Credit Facility with a weighted average interest rate of 3.65%. The borrowings denominated in Canadian dollars are translated into United States dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign exchange rates on the Credit Facility borrowings is included in unrealized appreciation (depreciation) on foreign currency borrowings in our Unaudited Consolidated Statements of Operations. The borrowings denominated in Canadian dollars may be positively or negatively affected by movements in the rate of exchange between the United States dollar and the Canadian dollar. This movement is beyond our control and cannot be predicted.
As with the Prior Facility, the Credit Facility contains certain affirmative and negative covenants, including but not limited to (i) maintaining a minimum interest coverage ratio, (ii) maintaining a minimum consolidated tangible net worth, (iii) maintaining a minimum asset coverage ratio and (iv) maintaining our status as a regulated investment company, or RIC, and as a BDC. The Credit Facility also contains customary events of default with customary cure and notice provisions, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, change of control, and material adverse effect. The Credit Facility also permits Branch Banking and Trust Company, the administrative agent, to select an independent third-party valuation firm to determine valuations of certain portfolio investments for purposes of borrowing base provisions. In connection with the Credit Facility, we also entered into new collateral documents. As of September 30, 2016, we were in compliance with all covenants of the Credit Facility.
In March 2012, we issued $69.0 million of 2019 Notes. The 2019 Notes were redeemed in full on June 22, 2015 for a total redemption price of $69.0 million, which resulted in a loss on the extinguishment of debt of $1.4 million. Prior to the redemptions, the 2019 Notes bore interest at a rate of 7.00% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning June 15, 2012.
In October 2012, we issued $70.0 million of unsecured notes due December 2022, or the December 2022 Notes, and in November 2012, we issued $10.5 million of December 2022 Notes pursuant to the exercise of an over-allotment option. The December 2022 Notes mature on December 15, 2022, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 15, 2015. The December 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning December 15, 2012. The net proceeds from the sale of the December 2022 Notes, after underwriting discounts and offering expenses, were $77.8 million.
In February 2015, we issued $86.3 million of March 2022 Notes. The March 2022 Notes mature on March 15, 2022 and may be redeemed in whole or in part at any time or from time to time at our option on or after March 15, 2018. The March 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning March 15, 2015. The net proceeds from the sale of the March 2022 Notes, after underwriting discounts and offering expenses, were $83.4 million.
The indenture and related supplements thereto relating to the December 2022 Notes and the March 2022 Notes contain certain covenants, including but not limited to (i) a requirement that we comply with the asset coverage requirement of the 1940 Act or any successor provisions, after giving effect to any exemptive relief granted to us by the SEC, (ii) a requirement that we will not declare any cash dividend, or declare any other cash distribution, upon a class of our capital stock, or purchase any such capital stock, unless, in every such case, at the time of the declaration of any such dividend or distribution, or at the time of any such purchase, we have an asset coverage (as defined in the 1940 Act) of at least 200% after deducting the amount of such dividend, distribution or purchase price, as the case may be, giving effect to any exemptive relief granted to us by the SEC, and (iii) a requirement that we provide financial information to the holders of the notes and the trustee under the

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indenture if we should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, or the Exchange Act. As of September 30, 2016 and December 31, 2015, we were in compliance with all covenants of the December 2022 Notes and the March 2022 Notes.
Distributions to Stockholders
We elected to be treated as a RIC under the Internal Revenue Code of 1986, as amended, or the Code. In order to maintain our qualification as a RIC and to obtain RIC tax benefits, we must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then we are generally required to pay income taxes only on the portion of our taxable income and gains we do not distribute (actually or constructively) and certain built-in gains. We have historically met our minimum distribution requirements and continually monitor our distribution requirements with the goal of ensuring compliance with the Code. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and our ability to make distributions will be limited by the asset coverage requirement and related provisions under the 1940 Act and contained in the indenture and related supplements governing the December 2022 Notes and the March 2022 Notes.
The minimum distribution requirements applicable to RICs require us to distribute to our stockholders each year at least 90% of our investment company taxable income, or ICTI, as defined by the Code. Depending on the level of ICTI earned in a tax year, we may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% excise tax on such excess. Any such carryover ICTI must be distributed before the end of the next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. We may be required to recognize ICTI in certain circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), we must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in ICTI other amounts that we have not yet received in cash, such as (i) PIK interest income and (ii) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included in our ICTI for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
Recent Developments
In October 2016, we invested $23.5 million in debt and equity securities of Fridababy, LLC. Under the terms of the investments, the debt securities bear interest at a rate of 10.0%.
In October 2016, we invested $17.0 million in debt and equity securities of Del Real, LLC. Under the terms of the investments, the debt securities bear interest at a rate of 11.0%.
In October 2016, we invested $16.3 million in debt and equity securities of TG MIDCO, LLC. Under the terms of the investments, the debt securities bear interest at a rate of 11.25%.
In October 2016, our Board of Directors approved the promotion of Jeffrey A. Dombcik, Cary B. Nordan and Douglas A. Vaughn to the role of Senior Managing Director. In addition, Messrs. Dombcik, Nordan and Vaughn were promoted to the positions of Chief Credit Officer, Chief Origination Officer and Chief Administrative Officer, respectively.

In October 2016, our Board of Directors accepted the resignation of Brent P.W. Burgess as our Chief Investment Officer and as a member of our Board of Directors. In connection with Mr. Burgess’s resignations, we and Mr. Burgess entered into an agreement (the “Agreement”), pursuant to which he will receive his unpaid salary and accrued but unused vacation leave through October 14, 2016; cash payments totaling $250,000; accelerated vesting of the 93,284 shares of our restricted stock held by him; and certain other benefits. Mr. Burgess also agreed to certain confidentiality, non-compete, non-solicitation and other covenants in the Agreement.
Critical Accounting Policies and Use of Estimates
The preparation of our unaudited financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements

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and the reported amounts of revenues and expenses for the periods covered by such financial statements. We have identified investment valuation and revenue recognition as our most critical accounting estimates. On an on-going basis, we evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.
Investment Valuation
The most significant estimate inherent in the preparation of our financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We have established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring (quarterly) basis in accordance with the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820. Under ASC Topic 820, a financial instrument is categorized within the ASC Topic 820 valuation hierarchy based upon the lowest level of input to the valuation process that is significant to the fair value measurement. The three levels of valuation inputs established by ASC Topic 820 are as follows:
Level 1 Inputs – include quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Inputs – include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 Inputs – include inputs that are unobservable and significant to the fair value measurement.
Our investment portfolio is comprised of debt and equity instruments of privately held companies for which quoted prices or other inputs falling within the categories of Level 1 and Level 2 are not available. Therefore, we determine the fair value of our investments in good faith using Level 3 inputs, pursuant to a valuation policy and process that is established by our management with the assistance of certain third-party advisors and subsequently approved by our Board of Directors. There is no single standard for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment. The recorded fair values of our investments may differ significantly from fair values that would have been used had an active market for the securities existed. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.
Our valuation process is led by our executive officers. The valuation process begins with a quarterly review of each investment in our investment portfolio by our executive officers and our investment committee. Valuations of each portfolio security are then prepared by our investment professionals, who have direct responsibility for the origination, management and monitoring of each investment. Under our valuation policy, each investment valuation is subject to (i) a review by the lead investment officer responsible for the portfolio company investment and (ii) a peer review by a second investment officer or executive officer. Generally, any investment that is valued below cost is subjected to review by one of our executive officers. After the peer review is complete, we engage two independent valuation firms, including Duff & Phelps, LLC, collectively, the "Valuation Firms," to provide third-party reviews of certain investments, as described further below. Finally, the Board of Directors has the responsibility for reviewing and approving, in good faith, the fair value of our investments in accordance with the 1940 Act.
The Valuation Firms provide third-party valuation consulting services to us which consist of certain limited procedures that we identified and requested the Valuation Firms to perform, which we refer to herein as the Procedures. The Procedures are performed with respect to each portfolio company at least once in every calendar year and for new portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In addition, the Procedures are generally performed with respect to a portfolio company when there has been a significant change in the fair value of the investment. In certain instances, we may determine that it is not cost-effective, and as a result is not in our stockholders’ best interest, to request the Valuation Firms to perform the Procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of the investment in the portfolio company is determined to be insignificant relative to the total investment portfolio.

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The total number of investments and the percentage of our investment portfolio on which the Procedures were performed are summarized below by period:
For the quarter ended:
Total
companies
 
Percent of total
investments at
fair value(1)
March 31, 2015
16
 
28%
June 30, 2015
15
 
26%
September 30, 2015
22
 
34%
December 31, 2015
17
 
28%
March 31, 2016
18
 
27%
June 30, 2016
19
 
30%
September 30, 2016
19
 
33%
(1)
Exclusive of the fair value of new investments made during the quarter.
Upon completion of the Procedures, the Valuation Firms concluded that, with respect to each investment reviewed by each Valuation Firm, the fair value of those investments subjected to the Procedures appeared reasonable. Our Board of Directors is ultimately responsible for determining the fair value of our investments in good faith.
Investment Valuation Inputs
Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date. For our portfolio securities, fair value is generally the amount that we might reasonably expect to receive upon the current sale of the security. Under ASC Topic 820, the fair value measurement assumes that the sale occurs in the principal market for the security, or in the absence of a principal market, in the most advantageous market for the security. Under ASC Topic 820, if no market for the security exists or if we do not have access to the principal market, the security should be valued based on the sale occurring in a hypothetical market. The securities in which we invest are generally only purchased and sold in merger and acquisition transactions, in which case the entire portfolio company is sold to a third-party purchaser. As a result, unless we have the ability to control such a transaction, the assumed principal market for our securities is a hypothetical secondary market. The Level 3 inputs to our valuation process reflect management’s best estimate of the assumptions that would be used by market participants in pricing the investment in a transaction in a hypothetical secondary market.
Enterprise Value Waterfall Approach
In valuing equity securities (including warrants), we estimate fair value using an “Enterprise Value Waterfall” valuation model. We estimate the enterprise value of a portfolio company and then allocate the enterprise value to the portfolio company’s securities in order of their relative liquidation preference. In addition, the model assumes that any outstanding debt or other securities that are senior to our equity securities are required to be repaid at par. Additionally, we estimate the fair value of a limited number of our debt securities using the Enterprise Value Waterfall approach in cases where we do not expect to receive full repayment.
To estimate the enterprise value of the portfolio company, we primarily use a valuation model based on a transaction multiple, which generally is the original transaction multiple, and measures of the portfolio company’s financial performance, which generally is either earnings before interest, taxes, depreciation and amortization, as adjusted, or Adjusted EBITDA, or revenues. In addition, we consider other factors, including but not limited to (i) offers from third parties to purchase the portfolio company, (ii) the implied value of recent investments in the equity securities of the portfolio company, (iii) publicly available information regarding recent sales of private companies in comparable transactions and (iv) when management believes there are comparable companies that are publicly traded, we perform a review of these publicly traded companies and the market multiple of their equity securities. For certain non-performing assets, we may utilize the liquidation or collateral value of the portfolio company's assets in our estimation of enterprise value.
The significant Level 3 inputs to the Enterprise Value Waterfall model are (i) an appropriate transaction multiple and (ii) a measure of the portfolio company’s financial performance, which generally is either Adjusted EBITDA or revenues. Such inputs can be based on historical operating results, projections of future operating results or a combination thereof. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for certain non-recurring items. In determining the operating results input, we utilize the most recent portfolio company financial statements and forecasts available as of the valuation date. Management also consults with the portfolio company’s senior management to obtain updates on the portfolio company’s performance, including information such as

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industry trends, new product development, loss of customers and other operational issues. Additionally, we consider some or all of the following factors:
financial standing of the issuer of the security;
comparison of the business and financial plan of the issuer with actual results;
the size of the security held;
pending reorganization activity affecting the issuer, such as merger or debt restructuring;
ability of the issuer to obtain needed financing;
changes in the economy affecting the issuer;
financial statements and reports from portfolio company senior management and ownership;
the type of security, the security’s cost at the date of purchase and any contractual restrictions on the disposition of the security;
information as to any transactions or offers with respect to the security and/or sales to third parties of similar securities;
the issuer’s ability to make payments and the type of collateral;
the current and forecasted earnings of the issuer;
statistical ratios compared to lending standards and to other similar securities; 
pending public offering of common stock by the issuer of the security;
special reports prepared by analysts; and
any other factors we deem pertinent with respect to a particular investment.
Fair value measurements using the Enterprise Value Waterfall model can be sensitive to changes in one or more of the inputs. Assuming all other inputs to the Enterprise Value Waterfall model remain constant, any increase (decrease) in either the transaction multiple, Adjusted EBITDA or revenues for a particular equity security would result in a higher (lower) fair value for that security.
Income Approach
In valuing debt securities, we utilize an “Income Approach” model that considers factors including, but not limited to, (i) the stated yield on the debt security, (ii) the portfolio company’s current Adjusted EBITDA as compared to the portfolio company’s historical or projected Adjusted EBITDA as of the date the investment was made and the portfolio company’s anticipated Adjusted EBITDA for the next twelve months of operations, (iii) the portfolio company’s current Leverage Ratio (defined as the portfolio company’s total indebtedness divided by Adjusted EBITDA) as compared to its Leverage Ratio as of the date the investment was made, (iv) publicly available information regarding current pricing and credit metrics for similar proposed and executed investment transactions of private companies and (v) when management believes a relevant comparison exists, current pricing and credit metrics for similar proposed and executed investment transactions of publicly traded debt. In addition, we use a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. This risk rating system covers both qualitative and quantitative aspects of the business and the securities held.
We consider the factors above, particularly any significant changes in the portfolio company’s results of operations and leverage, and develop an expectation of the yield that a hypothetical market participant would require when purchasing the debt investment, which we refer to herein as the Required Rate of Return. The Required Rate of Return, along with the Leverage Ratio and Adjusted EBITDA, are the significant Level 3 inputs to the Income Approach model. For investments where the Leverage Ratio and Adjusted EBITDA have not fluctuated significantly from the date the investment was made or have not fluctuated significantly from management’s expectations as of the date the investment was made, and where there have been no significant fluctuations in the market pricing for such investments, we may conclude that the Required Rate of Return is equal to the stated rate on the investment and therefore, the debt security is appropriately priced. In instances where we determine that the Required Rate of Return is different from the stated rate on the investment, we discount the contractual cash flows on the debt instrument using the Required Rate of Return in order to estimate the fair value of the debt security.
Fair value measurements using the Income Approach model can be sensitive to changes in one or more of the inputs. Assuming all other inputs to the Income Approach model remain constant, any increase (decrease) in the Required Rate of Return or Leverage Ratio inputs for a particular debt security would result in a lower (higher) fair value for that security.

57



Assuming all other inputs to the Income Approach model remain constant, any increase (decrease) in the Adjusted EBITDA input for a particular debt security would result in a higher (lower) fair value for that security.
The fair value of our royalty rights are calculated based on specific provisions contained in the pertinent operating or royalty agreements. The determination of the fair value of such royalty rights is not a significant component of our valuation process.
Revenue Recognition
Interest and Dividend Income
Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The cessation of recognition of such interest will negatively impact the reported fair value of the investment. We write off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. Dividend income is recorded on the ex-dividend date.
We may have to include in our ICTI interest income, including OID income, from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements to maintain our RIC status, even though we will not have received and may not ever receive any corresponding cash amount. Additionally, any loss recognized by us for federal income tax purposes on previously accrued interest income will be treated as a capital loss.
Fee Income
Origination, facility, commitment, consent and other advance fees received in connection with the origination of a loan, or Loan Origination Fees, are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of our business, we receive certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, certain investment banking and structuring fees and loan waiver and amendment fees, and are recorded as investment income when earned.
Payment-in-Kind (PIK) Interest Income
We currently hold, and we expect to hold in the future, some loans in our portfolio that contain PIK interest provisions. The PIK interest, computed at the contractual rate specified in each loan agreement, is periodically added to the principal balance of the loan, rather than being paid to us in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.
PIK interest, which is a non-cash source of income until it is collected, is included in our taxable income and therefore affects the amount we are required to distribute to our stockholders to maintain our qualification as a RIC for federal income tax purposes, even though we have not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. We write off any previously accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.
We may have to include in our ICTI, PIK interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount.

58



Off-Balance Sheet Arrangements
In the normal course of business, we are party to financial instruments with off-balance sheet risk, consisting primarily of unused commitments to extend financing to our portfolio companies. Since commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The balances of unused commitments to extend financing as of September 30, 2016 and December 31, 2015 were as follows:
Portfolio Company
Investment Type
September 30, 2016
 
December 31, 2015
DLC Acquisition, LLC
Revolver
$
3,000,000

 
$
3,000,000

Frank Entertainment Group, LLC
Equity Investment

 
200,000

Halo Branded Solutions, Inc.
Delayed Draw Term Loan
3,250,000

 

HKW Capital Partners IV, L.P.
Private Equity
530,032

 
856,874

Nautic Partners VII, LP
Private Equity
761,959

 
1,113,275

Nomacorc, LLC
Equity Investment
849,362

 
732,788

Orchid Underwriters Agency, LLC
Delayed Draw Term Loan
8,400,000

 
8,400,000

Orchid Underwriters Agency, LLC
Revolver
5,000,000

 
5,000,000

Smile Brands, Inc.
Equity Investment
1,000,000

 

Smile Brands, Inc.
Delayed Draw Term Loan
18,826,531

 

SPC Partners V, LP
Private Equity
731,728

 
1,213,477

SPC Partners VI, LP
Private Equity
3,000,000

 

Team Waste, LLC
Equity Investment
1,900,000

 
4,500,000

TGaS Advisors, LLC
Revolver
2,000,000

 
2,000,000

YummyEarth Inc.
Delayed Draw Term Loan
2,500,000

 

YummyEarth Inc.
Revolver

 
4,000,000

Total Unused Commitments
 
$
51,749,612

 
$
31,016,414



59



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are subject to market risk. Market risk includes risks that arise from changes in interest rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. The prices of securities held by us may decline in response to certain events, including those directly involving the companies we invest in; conditions affecting the general economy; overall market changes; legislative reform; local, regional, national or global political, social or economic instability; and interest rate fluctuations.
In addition, we are subject to interest rate risk. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. Our net investment income is affected by fluctuations in various interest rates, including LIBOR, Canadian Dealer Offered Rate and prime rates. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks. We regularly measure exposure to interest rate risk and determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. As of September 30, 2016, we were not a party to any hedging arrangements.
As of September 30, 2016, 80.9%, or $686.9 million (at cost), of our debt portfolio investments bore interest at fixed rates and 19.1%, or $161.8 million (at cost), of our debt portfolio investments bore interest at variable rates, which are either prime-based or LIBOR-based, and many of which are subject to certain floors. A hypothetical 200 basis point increase or decrease in the interest rates on our variable-rate debt investments could increase or decrease, as applicable, our investment income by a maximum of $3.2 million on an annual basis. All of our SBA-guaranteed debentures, our December 2022 Notes and our March 2022 Notes bear interest at fixed rates. Our Credit Facility bears interest, subject to our election, on a per annum basis equal to (i) the applicable base rate plus 1.75% (or 1.50% if we receive an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.75% (or 2.50% if we receive an investment grade credit rating), or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75% (or 2.50% if we receive an investment grade credit rating). The applicable base rate is equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR plus 2.0%. The applicable LIBOR rate depends on the term of the draw under the Credit Facility. We pay a commitment fee of 1.00% per annum on undrawn amounts if the used portion of the facility is less than or equal to 25.0% of total commitments, or 0.375% per annum on undrawn amounts if the used portion of the facility is greater than 25.0% of total commitments.
Because we currently borrow, and plan to borrow in the future, money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest the funds borrowed. Accordingly, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income if there is not a corresponding increase in interest income generated by our investment portfolio.

We may also have exposure to foreign currencies (currently the Canadian dollar) related to certain investments. Such investments are translated into United States dollars based on the spot rate at each balance sheet date, exposing us to movements in the exchange rate. In order to reduce our exposure to fluctuations in exchange rates, we generally borrow in Canadian dollars under our Credit Facility to finance such investments. As of September 30, 2016, we had non-United States dollar borrowings denominated in Canadian dollars of $28.6 million ($21.7 million United States dollars) outstanding under the Credit Facility with a weighted average interest rate of 3.65%.

Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. It should be noted that any system of controls,

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however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the third quarter of 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
Neither Triangle Capital Corporation nor any of its subsidiaries is currently a party to any material pending legal proceedings.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on February 24, 2016, which could materially affect our business, financial condition or operating results. There have been no material changes during the nine months ended September 30, 2016 to the risk factors discussed in our Annual Report on Form 10-K. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Sales of Unregistered Securities
During the three months ended September 30, 2016, we issued 37,714 shares of our common stock under our dividend reinvestment plan. These issuances were not subject to the registration requirements of the Securities Act of 1933, as amended. The aggregate value for the shares of common stock issued during the three months ended September 30, 2016 under the dividend reinvestment plan was approximately $0.7 million.
Issuer Purchases of Equity Securities
During the three months ended September 30, 2016, 4,868 shares of our common stock were delivered to us at an average price per share of $20.09 in satisfaction of tax withholding obligations of holders of restricted shares issued under the Triangle Capital Corporation Amended and Restated 2007 Equity Incentive Plan that vested during the period. These shares are reflected in the following table:
Period
Total Number of Shares Purchased
 
Average Price Paid Per Share
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
 
Maximum Number
of Shares that
May Yet Be
Purchased Under the Plans or Programs
July 1 through July 31, 2016

 

 

 

August 1 through August 31, 2016
4,868

 
$
20.09

 

 

September 1 through September 30, 2016

 

 

 


Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.


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Item 6. Exhibits.
Number
Exhibit
 
 
3.1
Articles of Amendment and Restatement of the Registrant (Filed as Exhibit (a)(3) to the Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-138418) filed with the Securities and Exchange Commission on December 29, 2006 and incorporated herein by reference).
 
 
3.2
Fifth Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 9, 2015 and incorporated herein by reference).
 
 
4.1
Form of Common Stock Certificate (Filed as Exhibit (d) to the Registrant’s Post-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-138418) filed with the Securities and Exchange Commission on February 15, 2007 and incorporated herein by reference).
 
 
4.2
Dividend Reinvestment Plan of the Registrant (Filed as Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission on March 12, 2008 and incorporated herein by reference).
 
 
4.3
Agreement to Furnish Certain Instruments (Filed as Exhibit 4.19 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on February 25, 2009 and incorporated herein by reference).
 
 
4.4
Indenture, dated March 2, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit (d)(5) to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 (File No. 33-175160) filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).
 
 
4.5
Second Supplemental Indenture, dated October 19, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2012 and incorporated herein by reference).
 
 
4.6
Form of 6.375% Note due 2022 (Included as part of Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2012 and incorporated herein by reference).
 
 
4.7
Third Supplemental Indenture, dated February 6, 2015 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit (d)(12) to the Registrant's Post-Effective Amendment No. 1 on Form N-2 (File No. 333-199102) filed with the Securities and Exchange Commission on February 6, 2015 and incorporated herein by reference).
 
 
4.8
Form of 6.375% Note due 2022 (Included as part of Exhibit (d)(12) to the Registrant's Post-Effective Amendment No. 1 on Form N-2 (File No. 333-199102) filed with the Securities and Exchange Commission on February 6, 2015 and incorporated herein by reference).
 
 
10.1
Triangle Capital Corporation Amended and Restated 2007 Equity Incentive Plan.*
 
 
10.2
Triangle Capital Corporation Amended and Restated Executive Deferred Compensation Plan.*
 
 
11
Statement re computation of per share earnings (Included in the consolidated financial statements filed with this report).*
 
 
31.1
Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
 
 
31.2
Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
 
 
32.1
Chief Executive Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
 
 
32.2
Chief Financial Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
*
Filed Herewith.
**
Furnished Herewith.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
TRIANGLE CAPITAL CORPORATION
 
 
 
 
Date:
November 2, 2016
 
/s/    E. Ashton Poole
 
 
 
E. Ashton Poole
 
 
 
President and Chief Executive Officer
 
 
 
(Principal Executive Officer)
 
 
 
 
Date:
November 2, 2016
 
/s/    Steven C. Lilly
 
 
 
Steven C. Lilly
 
 
 
Chief Financial Officer and Secretary
 
 
 
(Principal Financial Officer)
 
 
 
 
Date:
November 2, 2016
 
/s/    C. Robert Knox, Jr.
 
 
 
C. Robert Knox, Jr.
 
 
 
Principal Accounting Officer


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EXHIBIT INDEX

Number
Exhibit
 
 
10.1
Triangle Capital Corporation Amended and Restated 2007 Equity Incentive Plan.*
 
 
10.2
Triangle Capital Corporation Amended and Restated Executive Deferred Compensation Plan.*
 
 
11
Statement re computation of per share earnings (Included in the consolidated financial statements filed with this report).*
 
 
31.1
Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
 
 
31.2
Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
 
 
32.1
Chief Executive Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
 
 
32.2
Chief Financial Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
*
Filed Herewith.
**
Furnished Herewith.