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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended March 31, 2017

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 814-00849

 

 

SOLAR SENIOR CAPITAL LTD.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   27-4288022
(State of Incorporation)  

(I.R.S. Employer

Identification No.)

500 Park Avenue

New York, N.Y.

  10022
(Address of principal executive offices)   (Zip Code)

(212) 993-1670

(Registrant’s telephone number, including area code)

 

 

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 and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    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 an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller Reporting Company  
Emerging growth company       

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

The number of shares of the registrant’s Common Stock, $.01 par value, outstanding as of May 1, 2017 was 16,028,819.

 

 

 


Table of Contents

SOLAR SENIOR CAPITAL LTD.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2017

TABLE OF CONTENTS

 

 

     PAGE  
PART I. FINANCIAL INFORMATION       

Item 1.

   Financial Statements   
  

Consolidated Statements of Assets and Liabilities as of March  31, 2017 (unaudited) and December 31, 2016

     3  
  

Consolidated Statements of Operations for the three months ended March  31, 2017 (unaudited) and March 31, 2016 (unaudited)

     4  
  

Consolidated Statements of Changes in Net Assets for the three months ended March  31, 2017 (unaudited) and the year ended December 31, 2016

     5  
  

Consolidated Statements of Cash Flows for the three months ended March  31, 2017 (unaudited) and March 31, 2016 (unaudited)

     6  
  

Consolidated Schedule of Investments as of March 31, 2017 (unaudited)

     7  
  

Consolidated Schedule of Investments as of December 31, 2016

     10  
  

Notes to Consolidated Financial Statements (unaudited)

     13  
  

Report of Independent Registered Public Accounting Firm

     34  

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      35  

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk      53  

Item 4.

   Controls and Procedures      53  
PART II. OTHER INFORMATION   

Item 1.

   Legal Proceedings      55  

Item 1A.

   Risk Factors      55  

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      55  

Item 3.

   Defaults Upon Senior Securities      55  

Item 4.

   Mine Safety Disclosures      55  

Item 5.

   Other Information      55  

Item 6.

   Exhibits      56  
   Signatures      58  

 

2


Table of Contents

PART I. FINANCIAL INFORMATION

In this Quarterly Report, “Solar Senior”, “Company”, “Fund”, “we”, “us”, and “our” refer to Solar Senior Capital Ltd. unless the context states otherwise.

 

Item 1. Financial Statements

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except share amounts)

 

    March 31,
2017
(unaudited)
    December 31,
2016
 

Assets

   

Investments at fair value:

   

Companies less than 5% owned (cost: $302,284 and $295,037, respectively)

  $ 296,604     $ 289,399  

Companies 5% to 25% owned (cost: $3,884 and $3,710, respectively)

    2,069       1,825  

Companies more than 25% owned (cost: $74,026 and $74,026, respectively)

    74,441       74,310  
 

 

 

   

 

 

 

Total investments (cost: $380,194 and $372,773, respectively)

    373,114       365,534  

Cash

    11,056       11,876  

Cash equivalents (cost: $124,940 and $139,952, respectively)

    124,940       139,952  

Dividends receivable

    1,547       1,422  

Interest receivable

    1,092       1,463  

Other receivable

    19       19  

Receivable for investments sold

    17       1,450  

Prepaid expenses and other assets

    417       273  
 

 

 

   

 

 

 

Total assets

  $ 512,202     $ 521,989  
 

 

 

   

 

 

 

Liabilities

   

Credit facility payable (see notes 6 and 7)

  $ 86,800     $ 98,300  

Payable for investments and cash equivalents purchased

    153,031       151,312  

Distributions payable

    1,883       1,883  

Management fee payable (see note 3)

    159       104  

Interest payable (see note 7)

    252       241  

Administrative services expense payable (see note 3)

    215       621  

Other liabilities and accrued expenses

    409       383  
 

 

 

   

 

 

 

Total liabilities

  $ 242,749     $ 252,844  
 

 

 

   

 

 

 

Commitments and contingencies (see notes 12 and 13)

   

Net Assets

   

Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 16,027,687 and 16,025,011 issued and outstanding, respectively

  $ 160     $ 160  

Paid-in capital in excess of par

    287,561       287,515  

Distributions in excess of net investment income

    (5,342     (5,342

Accumulated net realized loss

    (5,846     (5,949

Net unrealized depreciation

    (7,080     (7,239
 

 

 

   

 

 

 

Total net assets

  $ 269,453     $ 269,145  
 

 

 

   

 

 

 

Net Asset Value Per Share

  $ 16.81     $ 16.80  
 

 

 

   

 

 

 

See notes to consolidated financial statements.

 

3


Table of Contents

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except share amounts)

 

     Three months ended  
     March 31,
2017
    March 31,
2016
 

INVESTMENT INCOME:

    

Interest:

    

Companies less than 5% owned

   $ 5,256     $ 4,424  

Companies 5% to 25% owned

     49       50  

Dividends:

    

Companies more than 25% owned

     1,924       1,808  

Other income:

    

Companies less than 5% owned

     247       53  

Companies more than 25% owned

     20       14  
  

 

 

   

 

 

 

Total investment income

     7,496       6,349  
  

 

 

   

 

 

 

EXPENSES:

    

Management fees (see note 3)

   $ 948     $ 797  

Performance-based incentive fees (see note 3)

     75       385  

Interest and other credit facility expenses (see note 7)

     844       851  

Administrative services expense (see note 3)

     368       295  

Other general and administrative expenses

     476       341  
  

 

 

   

 

 

 

Total expenses

     2,711       2,669  
  

 

 

   

 

 

 

Management fees waived (see note 3)

     (789     —    

Performance-based incentive fees waived (see note 3)

     (75     (385
  

 

 

   

 

 

 

Net expenses

     1,847       2,284  
  

 

 

   

 

 

 

Net investment income

   $ 5,649     $ 4,065  
  

 

 

   

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS:

    

Net realized gain on investments and cash equivalents (companies less than 5% owned):

   $ 103     $ 9  

Net change in unrealized gain (loss) on investments and cash equivalents

     159       4,340  
  

 

 

   

 

 

 

Net realized and unrealized gain (loss) on investments and cash equivalents

     262       4,349  
  

 

 

   

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

   $ 5,911     $ 8,414  
  

 

 

   

 

 

 

EARNINGS PER SHARE (see note 5)

   $ 0.37     $ 0.73  
  

 

 

   

 

 

 

See notes to consolidated financial statements.

 

4


Table of Contents

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(in thousands, except share amounts)

 

     Three months ended
March 31,

2017 (unaudited)
    Year ended
December 31, 2016
 

Increase in net assets resulting from operations:

    

Net investment income

   $ 5,649     $ 18,316  

Net realized gain

     103       81  

Net change in unrealized gain (loss)

     159       5,855  
  

 

 

   

 

 

 

Net increase in net assets resulting from operations

     5,911       24,252  
  

 

 

   

 

 

 

Distributions to stockholders:

    

From net investment income

     (5,649     (18,316
  

 

 

   

 

 

 

Capital transactions (see note 13):

    

Net proceeds from shares sold

     —         75,255  

Less common stock offering costs

     —         (376

Reinvestment of distributions

     46       26  
  

 

 

   

 

 

 

Net increase in net assets resulting from capital transactions

     46       74,905  
  

 

 

   

 

 

 

Total increase in net assets

     308       80,841  

Net assets at beginning of period

     269,145       188,304  
  

 

 

   

 

 

 

Net assets at end of period(1)

   $ 269,453     $ 269,145  
  

 

 

   

 

 

 

Capital share activity:

    

Common stock sold

     —         4,490,152  

Common stock issued from reinvestment of distributions

     2,676       1,544  
  

 

 

   

 

 

 

Net increase from capital share activity

     2,676       4,491,696  
  

 

 

   

 

 

 

 

(1) Includes overdistributed net investment income of ($5,342) and ($5,342), respectively.

See notes to consolidated financial statements.

 

5


Table of Contents

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)

 

     Three months ended  
     March 31,
2017
    March 31,
2016
 

Cash Flows from Operating Activities:

    

Net increase in net assets resulting from operations

   $ 5,911     $ 8,414  

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

    

Net realized gain on investments and cash equivalents

     (103     (9

Net change in unrealized (gain) loss on investments and cash equivalents

     (159     (4,340

(Increase) decrease in operating assets:

    

Purchase of investments

     (62,819     (19,089

Proceeds from disposition of investments

     55,627       17,724  

Capitalization of payment-in-kind interest

     (126     —    

Receivable for investments sold

     1,433       (4,903

Interest receivable

     371       815  

Dividends receivable

     (125     (891

Other receivable

     —         (2

Prepaid expenses and other assets

     (144     (129

Increase (decrease) in operating liabilities:

    

Payable for investments and cash equivalents purchased

     1,719       (11,125

Management fee payable

     55       (34

Administrative services expense payable

     (406     (446

Interest payable

     11       29  

Other liabilities and accrued expenses

     26       146  
  

 

 

   

 

 

 

Net Cash Provided by (Used in) Operating Activities

     1,271       (13,840
  

 

 

   

 

 

 

Cash Flows from Financing Activities:

    

Cash distributions paid

     (5,603     (4,065

Proceeds from borrowings

     29,500       22,000  

Repayments of borrowings

     (41,000     (9,100
  

 

 

   

 

 

 

Net Cash Provided by (Used in) Financing Activities

     (17,103     8,835  
  

 

 

   

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

     (15,832     (5,005

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

     151,828       53,067  
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

   $ 135,996     $ 48,062  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash paid for interest

   $ 833     $ 822  
  

 

 

   

 

 

 

Non-cash financing activities consist of the reinvestment of dividends of $46 and $0 for the three months ended March 31, 2017 and March 31, 2016, respectively.

See notes to consolidated financial statements.

 

6


Table of Contents

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited)

March 31, 2017

(in thousands, except share/unit amounts)

 

Description

 

Industry

  Spread
above
Index(3)
    Libor
Floor
    Interest
Rate(1)
    Acquisition
Date
    Maturity
Date
    Par
Amount
    Cost     Fair
Value
 

Bank Debt/Senior Secured Loans — 110.8%

                 

ABB/Con-Cise Optical Group LLC(2)

  Health Care Equipment & Supplies     L+500       1.00     6.10     6/14/2016       6/15/2023     $             11,940     $ 11,892     $ 12,074  

Advantage Sales and Marketing, Inc

  Professional Services     L+650       1.00     7.50     2/14/2013       7/25/2022       8,000       7,956       7,804  

Aegis Toxicology Sciences Corporation

  Health Care Providers & Services     L+850       1.00     9.66     2/20/2014       8/24/2021       4,000       3,960       3,600  

Alera Group Intermediate Holdings, Inc.(2).

  Insurance     L+550       1.00     6.50     11/28/2016       12/30/2022       3,456       3,423       3,422  

American Seafoods Group LLC(2)

  Food Products     L+500       1.00     6.00     8/10/2015       8/19/2021       4,605       4,587       4,582  

American Teleconferencing Services, Ltd. (PGI)(2)

  Communications Equipment     L+650       1.00     7.50     5/5/2016       12/8/2021       15,549       14,730       15,471  

Anesthesia Consulting & Management, LP(2)

  Health Care Providers & Services     L+500       1.00     6.04     10/20/2016       10/31/2022       4,988       4,941       4,938  

Capstone Logistics Acquisition, Inc.(2)

  Professional Services     L+450       1.00     5.50     10/3/2014       10/7/2021       8,278       8,221       8,216  

CIBT Holdings, Inc.(2)

  Professional Services     L+525       1.00     6.40     6/28/2016       6/28/2022       2,607       2,584       2,594  

Confie Seguros Holding II Co.(2)

  Insurance     L+475       1.00     5.75     10/13/2016       4/19/2022       9,975       9,882       10,039  

CT Technologies Intermediate Holdings(2)

  Health Care Technology     L+425       1.00     5.25     12/1/2014       12/1/2021       3,384       3,369       3,212  

DB Datacenter Holdings, Inc.(2)

  IT Services     L+475       1.00     5.75     12/28/2016       7/13/2021       5,000       4,926       4,925  

Empower Payments Acquisition, Inc.(2)

  Professional Services     L+550       1.00     6.65     11/28/2016       11/30/2023       4,613       4,524       4,521  

Engineering Solutions & Products, LLC(6)

  Aerospace & Defense     L+600       2.00     8.00     11/5/2013       5/4/2018       174       174       174  

Engineering Solutions & Products, LLC(6)

  Aerospace & Defense     L+600       2.00     8.00     11/5/2013       11/5/2018       2,343       2,343       1,827  

Falmouth Group Holdings Corp. (AMPAC)(2)

  Chemicals     L+675       1.00     7.75     12/15/2016       12/14/2021       9,452       9,452       9,452  

GenMark Diagnostics, Inc(2)(4)

  Health Care Providers & Services     —         —         6.90     4/22/2016       1/12/2019       9,643       9,608       9,763  

Global Holdings LLC & Payment Concepts LLC(2)

  Consumer Finance     L+650       1.00     7.50     3/31/2017       5/3/2022       8,750       8,575       8,575  

Global Tel*Link Corporation(2)

  Communications Equipment     L+375       1.25     5.00     11/6/2015       5/23/2020       3,417       3,097       3,416  

Global Tel*Link Corporation

  Communications Equipment     L+775       1.25     9.00     5/21/2013       11/23/2020       3,000       2,966       2,992  

HC Group Holdings III, Inc. (Walgreens)(2)

  Health Care Providers & Services     L+500       1.00     6.00     3/25/2015       4/7/2022       4,925       4,906       4,876  

Hostway Corporation(2)

  Internet Software & Services     L+475       1.25     8.00     6/27/2014       12/13/2019       8,651       8,630       8,132  

Island Medical Management Holdings, LLC(2)

  Health Care Providers & Services     L+550       1.00     6.50     3/31/2017       9/1/2022       6,872       6,803       6,803  

Kellermeyer Bergensons Services, LLC (KBS)(2)

  Commercial Services & Supplies     L+500       1.00     6.04     10/31/2014       10/29/2021       4,875       4,841       4,827  

Lumeris Solutions Company, LLC(2)

  Health Care Technology     L+860       0.25     9.58     3/22/2017       2/1/2020       4,000       3,971       3,968  

Metamorph US 3, LLC (Metalogix)(2)††

  Software     L+750 (7)      1.00     8.50     12/1/2014       12/1/2020       8,019       7,888       5,132  

MHE Intermediate Holdings, LLC(2)

  Air Freight & Logistics     L+500       1.00     6.00     3/8/2017       3/10/2024       5,083       5,033       5,033  

Ministry Brands, LLC(2)

  Software     L+500       1.00     6.00     11/21/2016       12/2/2022       8,305       8,224       8,222  

MYI Acquiror Corp. (McLarens Young)(2)

  Insurance     L+450       1.25     5.75     5/21/2014       5/28/2019       3,356       3,341       3,323  

MYI Acquiror Ltd. (McLarens Young)(2)(4)

  Insurance     L+450       1.25     5.75     5/21/2014       5/28/2019       4,282       4,262       4,240  

nThrive, Inc. (Precyse)(2)

  Health Care Providers & Services     L+550       1.00     6.50     4/19/2016       10/20/2022       5,962       5,889       5,962  

Pearl Merger Sub LLC (PetVet)(2)

  Health Care Facilities     L+475       1.00     5.90     1/29/2015       12/17/2020       4,399       4,339       4,355  

Polycom, Inc.(2)

  Communications Equipment     L+525       1.00     6.25     9/29/2016       9/27/2023       13,813       13,288       13,813  

PPT Management Holdings, LLC(2)

  Health Care Providers & Services     L+600       1.00     7.15     12/15/2016       12/16/2022       7,980       7,903       7,900  

Professional DataSolutions, Inc.(2)

  Software     L+550       1.00     6.50     3/23/2017       5/20/2022       11,525       11,352       11,352  

PSP Group, LLC (Pet Supplies Plus)(2)(8)

  Specialty Retail     L+475       1.00     5.90     4/2/2015       4/6/2021       485       482       484  

QBS Holding Company, Inc. (Quorum)(2)

  Software     L+475       1.00     5.79     8/1/2014       8/7/2021       6,354       6,311       6,131  

Richelieu Foods, Inc.(2)

  Food Products     L+475       1.00     5.91     11/21/2014       5/21/2020       6,423       6,364       6,423  

Salient Partners, L.P.(2)

  Asset Management     L+850       1.00     9.52     6/10/2015       6/9/2021       4,101       4,039       4,039  

Securus Technologies, Inc

  Communications Equipment     L+775       1.25     9.00     4/17/2013       4/30/2021       10,000       9,949       10,025  

SHO Holding I Corporation (Shoes for Crews)(2)

  Footwear     L+500       1.00     6.00     11/20/2015       10/27/2022       5,925       5,877       5,895  

Stratose Intermediate Holdings II, LLC(2)

  Health Care Services     L+500       1.00     6.15     1/25/2016       1/26/2022       4,938       4,896       4,962  

Suburban Broadband, LLC (Jab Wireless, Inc.)(2)

  Wireless Telecommunication Services     L+450       1.00     5.54     11/29/2016       3/26/2019       4,975       4,932       4,925  

The Edelman Financial Center, LLC(2)

  Diversified Financial Services     L+550       1.00     6.51     12/16/2015       12/18/2022       4,938       4,853       4,938  

The Hilb Group, LLC & Gencorp Insurance Group, Inc.(2).

  Insurance     L+475       1.00     5.90     3/16/2016       6/24/2021       3,801       3,737       3,763  

Trident USA Health Services(2)

  Health Care Providers & Services     L+575       1.25     7.00     7/29/2013       7/31/2019       8,768       8,734       7,935  

TwentyEighty, Inc.††

  Professional Services     L+800 (9)      1.00     9.00     1/31/2017       3/31/2020       884       845       884  

TwentyEighty, Inc.††

  Professional Services     —         —         8.00 %(10)      1/31/2017       3/31/2020       1,882       1,766       1,751  

TwentyEighty, Inc.††

  Professional Services     —         —         9.00 %(11)      1/31/2017       3/31/2020       1,699       1,594       1,546  

U.S. Acute Care Solutions, LLC(2)

  Health Care Providers & Services     L+500       1.00     6.15     12/22/2016       5/15/2021       6,484       6,422       6,419  

VT Buyer Acquisition Corp. (Veritext)(2)

  Professional Services     L+475       1.00     5.75     2/17/2017       1/29/2022       4,481       4,459       4,459  

WIRB-Copernicus Group, Inc.(2)

  Professional Services     L+500       1.00     6.15     3/27/2017       8/12/2022       4,500       4,478       4,477  
               

 

 

   

 

 

 

                Total Bank Debt/Senior Secured Loans

 

  $ 301,618     $ 298,591  
   

 

 

   

 

 

 

Common Equity/Equity Interests/Warrants — 27.7%

                Shares/Units      
             

 

 

     

Engineering Solutions & Products, LLC(6)(12)

  Aerospace & Defense           11/5/2013         133,668     $ 1,367     $ 68  

Essence Group Holdings Corporation (Lumeris) Warrants†.

  Health Care Technology           3/22/2017         52,000       16       14  

First Lien Loan Program LLC(4)(5)

  Asset Management           2/13/2015         —         41,187       38,791  

Gemino Healthcare Finance, LLC(4)(5)

  Diversified Financial Services           9/30/2013         32,839       32,839       35,650  

TwentyEighty Investors, LLC†.

  Professional Services           1/31/2017         17,214       3,167       —    
               

 

 

   

 

 

 

        Total Common Equity/Equity Interests/Warrants

 

  $ 78,576     $ 74,523  
   

 

 

   

 

 

 

        Total Investments(13) — 138.5%

 

  $ 380,194     $ 373,114  

Cash Equivalents — 46.3%

                Par Amount      
             

 

 

     

U.S. Treasury Bill

  Government           3/30/2017       4/27/2017       125,000     $ 124,940     $ 124,940  
               

 

 

   

 

 

 

        Total Investments & Cash Equivalents — 184.8%

 

  $ 505,134     $ 498,054  

        Liabilities in Excess of Other Assets (84.8%)

 

      (228,601
                 

 

 

 

        Net Assets — 100.0%

 

    $ 269,453  
                 

 

 

 

See notes to consolidated financial statements.

 

7


Table of Contents

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued)

March 31, 2017

(in thousands)

 

(1) Floating rate debt investments typically bear interest at a rate determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) index rate or the prime index rate (PRIME or “P”), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of March 31, 2017.
(2) Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned financing subsidiary SUNS SPV LLC. Such investments are pledged as collateral under the Senior Secured Revolving Credit Facility (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of Solar Senior Capital Ltd. The respective par amount for the two investments partially held through SUNS SPV LLC is $4,821 for Genmark Diagnostics, Inc. and $6,525 for Professional DataSolutions, Inc. The par balance in excess of this stated amount is held directly by Solar Senior Capital Ltd.
(3) Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor.
(4) Indicates assets that the Company believes may not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940 (“1940 Act”), as amended. If we fail to invest a sufficient portion of our assets in qualifying assets, we could be prevented from making follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order to comply with the 1940 Act. As of March 31, 2017, on a fair value basis, non-qualifying assets in the portfolio represented 17.3% of the total assets of the Company.
(5) Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the three months ended March 31, 2017 in these controlled investments are as follows:

 

Name of Issuer

   Fair Value at
December 31, 2016
     Gross
Additions
     Gross
Reductions
     Realized Gain
(Loss)
     Dividend/Other
         Income        
     Fair Value at
March 31,
2017
 

First Lien Loan Program LLC

   $ 38,810      $ —        $ —        $ —        $ 1,020      $ 38,791  

Gemino Healthcare Finance, LLC

     35,500        —          —          —          924        35,650  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 74,310      $ —        $ —        $ —        $ 1,944      $ 74,441  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(6) Denotes investments in which we are an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the three months ended March 31, 2017 in these affiliated investments are as follows:

 

Name of Issuer

   Fair Value at
December 31,
2016
     Gross
Additions
     Gross
Reductions
     Realized Gain
(Loss)
     Interest
Income
     Fair Value at
March 31,
2017
 

Engineering Solutions & Products, LLC (1st lien)

   $ —        $ 781      $ 607      $ —        $ 2      $ 174  

Engineering Solutions & Products, LLC (2nd lien)

     1,757        —          —          —          47        1,827  

Engineering Solutions & Products, LLC (equity interests)

     68        —          —          —          —          68  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,825      $ 781      $ 607      $ —        $ 49      $ 2,069  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(7) Spread is 5.50% Cash / 2.00% PIK.
(8) PSP Group, LLC, PSP Service Newco, Inc., PSP Subco, LLC, PSP Stores, LLC, and PSP Distribution, LLC are co-borrowers.
(9) Spread is 3.50% Cash / 4.50% PIK.
(10) Coupon is 1.00% Cash / 7.00% PIK.
(11) Coupon is 0.25% Cash / 8.75% PIK.
(12) Our equity investment in Engineering Solutions & Products, LLC is held through ESP SSC Corp., a taxable consolidated subsidiary.
(13) Aggregate net unrealized depreciation for federal income tax purposes is $10,923; aggregate gross unrealized appreciation and depreciation for federal tax purposes is $3,534 and $14,457, respectively, based on a tax cost of $384,037.
Non-income producing security.
†† Investment contains a payment-in-kind (“PIK”) feature.

 

See notes to consolidated financial statements.

 

8


Table of Contents

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued)

March 31, 2017

 

Industry Classification

   Percentage of Total
Investments (at
fair value) as of
March 31,

2017
 

Health Care Providers & Services

     16.9

Communications Equipment

     12.3

Asset Management

     11.6

Diversified Financial Services

     10.9

Professional Services

     9.7

Software

     8.3

Insurance

     6.6

Health Care Equipment & Supplies

     3.2

Food Products

     2.9

Chemicals

     2.5

Consumer Finance

     2.3

Internet Software & Services

     2.2

Health Care Technology

     1.9

Footwear

     1.6

Air Freight & Logistics

     1.3

Wireless Telecommunication Services

     1.3

IT Services

     1.3

Commercial Services & Supplies

     1.3

Health Care Facilities

     1.2

Aerospace & Defense

     0.6

Specialty Retail

     0.1
  

 

 

 

Total Investments

     100.0
  

 

 

 

See notes to consolidated financial statements.

 

9


Table of Contents

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2016

(in thousands, except share/unit amounts)

 

Description

 

Industry

  Spread
above
Index(3)
    Libor
Floor
    Interest
Rate(1)
    Acquisition
Date
    Maturity
Date
    Par
Amount
    Cost     Fair
Value
 

Bank Debt/Senior Secured Loans — 108.2%

                 

ABB/Con-Cise Optical Group LLC(2)

  Health Care Equipment & Supplies     L+500       1.00     6.00     6/14/2016       6/15/2023     $             11,970     $ 11,920     $ 12,135  

Advantage Sales and Marketing, Inc.

  Professional Services     L+650       1.00     7.50     2/14/2013       7/25/2022       8,000       7,955       7,835  

Aegis Toxicology Sciences Corporation

  Health Care Providers & Services     L+850       1.00     9.50     2/20/2014       8/24/2021       4,000       3,958       3,740  

Alera Group Intermediate Holdings, Inc.(2)

  Insurance     L+550       1.00     6.50     11/28/2016       12/30/2022       8,640       8,554       8,554  

ALG B.V. (Apple Leisure) (2)(4)

  Hotels, Restaurants & Leisure     L+575       1.25     7.00     2/28/2013       2/28/2019       2,692       2,681       2,692  

ALG USA Holdings, LLC (Apple Leisure)(2)

  Hotels, Restaurants & Leisure     L+575       1.25     7.00     2/28/2013       2/28/2019       3,568       3,553       3,568  

American Seafoods Group LLC(2)

  Food Products     L+500       1.00     6.00     8/10/2015       8/19/2021       4,817       4,798       4,781  

American Teleconferencing Services, Ltd. (PGI)(2)

  Communications Equipment     L+650       1.00     7.50     5/5/2016       12/8/2021       8,662       7,871       8,423  

Anesthesia Consulting & Management, LP(2)

  Health Care Providers & Services     L+500       1.00     6.00     10/20/2016       10/31/2022       5,000       4,951       4,950  

Asurion, LLC

  Insurance     L+750       1.00     8.50     2/27/2014       3/3/2021       840       785       855  

Capstone Logistics Acquisition, Inc.(2)

  Professional Services     L+450       1.00     5.50     10/3/2014       10/7/2021       8,278       8,218       8,196  

CIBT Holdings, Inc.(2)

  Professional Services     L+525       1.00     6.25     6/28/2016       6/28/2022       2,620       2,596       2,594  

Confie Seguros Holding II Co.(2)

  Insurance     L+475       1.00     5.75     10/13/2016       4/19/2022       10,000       9,903       10,067  

ConvergeOne Holdings Corp.(2)

  Communications Equipment     L+538       1.00     6.38     6/16/2014       6/17/2020       4,830       4,800       4,806  

CT Technologies Intermediate Holdings(2)

  Health Care Technology     L+425       1.00     5.25     12/1/2014       12/1/2021       3,393       3,377       3,253  

DB Datacenter Holdings, Inc.(2)

  IT Services     L+475       1.00     5.75     12/28/2016       7/13/2021       5,000       4,925       4,925  

Empower Payments Acquisition, Inc.(2)

  Professional Services     L+550       1.00     6.50     11/28/2016       11/30/2023       4,625       4,533       4,532  

Engineering Solutions & Products, LLC(6)

  Aerospace & Defense     L+600       2.00     8.00     11/5/2013       11/5/2018       2,343       2,343       1,757  

Epic Health Services, Inc.(2)

  Health Care Providers & Services     L+475       1.00     5.75     2/20/2015       2/17/2021       4,798       4,770       4,798  

Falmouth Group Holdings Corp. (AMPAC)(2)

  Chemicals     L+675       1.00     7.75     12/15/2016       12/14/2021       9,476       9,476       9,476  

GenMark Diagnostics, Inc(2)(4)

  Health Care Providers & Services     —         —         6.90     4/22/2016       1/12/2019       9,643       9,538       9,739  

Global Tel*Link Corporation(2)

  Communications Equipment     L+375       1.25     5.00     11/6/2015       5/23/2020       3,426       3,083       3,418  

Global Tel*Link Corporation

  Communications Equipment     L+775       1.25     9.00     5/21/2013       11/23/2020       3,000       2,964       2,921  

HC Group Holdings III, Inc. (Walgreens)(2)

  Health Care Providers & Services     L+500       1.00     6.00     3/25/2015       4/7/2022       4,938       4,918       4,765  

Hostway Corporation(2)

  Internet Software & Services     L+475       1.25     8.00     6/27/2014       12/13/2019       8,776       8,753       8,162  

Kellermeyer Bergensons Services, LLC (KBS)(2)

  Commercial Services & Supplies     L+500       1.00     6.00     10/31/2014       10/29/2021       4,875       4,840       4,778  

Lumeris Solutions Company, LLC(2)

  Health Care Technology     —         —         9.42     4/22/2016       12/27/2017       2,074       2,115       2,095  

Material Handling Services, LLC (TFS)(2)

  Air Freight & Logistics     L+500       1.00     6.00     3/3/2014       3/26/2020       11,056       10,991       10,946  

Mediware Information Systems, Inc.(2)

  Health Care Technology     L+475       1.00     5.75     9/26/2016       9/28/2023       4,988       4,939       4,988  

Metamorph US 3, LLC (Metalogix)(2)

  Software     L+650       1.00     7.50     12/1/2014       12/1/2020       8,000       7,860       5,720  

Ministry Brands, LLC(2)

  Software     L+500       1.00     6.00     11/21/2016       12/2/2022       5,493       5,438       5,438  

MYI Acquiror Corp. (McLarens Young)(2)

  Insurance     L+450       1.25     5.75     5/21/2014       5/28/2019       3,356       3,339       3,298  

MYI Acquiror Ltd. (McLarens Young)(2)(4)

  Insurance     L+450       1.25     5.75     5/21/2014       5/28/2019       4,282       4,260       4,208  

nThrive, Inc. (Precyse)(2)

  Health Care Providers & Services     L+550       1.00     6.50     4/19/2016       10/20/2022       5,977       5,901       6,067  

Pearl Merger Sub LLC (PetVet)(2)

  Health Care Facilities     L+475       1.00     5.75     1/29/2015       12/17/2020       4,410       4,347       4,360  

Polycom, Inc.(2)

  Communications Equipment     L+650       1.00     7.50     9/29/2016       9/27/2023       14,506       13,940       14,434  

PPT Management Holdings, LLC(2)

  Health Care Providers & Services     L+600       1.00     7.00     12/15/2016       12/16/2022       8,000       7,920       7,920  

PSP Group, LLC (Pet Supplies Plus)(2)(7)

  Specialty Retail     L+475       1.00     5.75     4/2/2015       4/6/2021       487       483       484  

QBS Holding Company, Inc. (Quorum)(2)

  Software     L+475       1.00     5.75     8/1/2014       8/7/2021       6,370       6,325       6,115  

Richelieu Foods, Inc.(2)

  Food Products     L+475       1.00     5.75     11/21/2014       5/21/2020       6,510       6,446       6,510  

Salient Partners, L.P.(2)

  Asset Management     L+850       1.00     9.50     6/10/2015       6/9/2021       4,217       4,150       4,111  

Securus Technologies, Inc.

  Communications Equipment     L+775       1.25     9.00     4/17/2013       4/30/2021       10,000       9,946       9,759  

SHO Holding I Corporation (Shoes for Crews)(2)

  Footwear     L+500       1.00     6.00     11/20/2015       10/27/2022       5,940       5,890       5,940  

Strategic Partners Acquisition Corp.(2)

  Textiles, Apparel & Luxury Goods     L+525       1.00     6.25     6/24/2016       6/30/2023       1,995       1,976       2,015  

Stratose Intermediate Holdings II, LLC(2)

  Health Care Services     L+500       1.00     6.00     1/25/2016       1/26/2022       4,950       4,907       4,962  

Suburban Broadband, LLC (Jab Wireless, Inc.)(2)

  Wireless Telecommunication Services     L+450       1.00     5.50     11/29/2016       3/26/2019       5,000       4,952       4,950  

The Edelman Financial Center, LLC(2)

  Diversified Financial Services     L+550       1.00     6.50     12/16/2015       12/18/2022       4,950       4,862       4,950  

The Hilb Group, LLC & Gencorp Insurance Group, Inc.(2)

  Insurance     L+500       1.00     6.00     3/16/2016       6/24/2021       3,814       3,747       3,776  

Trident USA Health Services(2)

  Health Care Providers & Services     L+575       1.25     7.00     7/29/2013       7/31/2019       8,793       8,755       8,001  

TwentyEighty, Inc. (fka Miller Heiman)(2)*

  Professional Services     L+600       1.00     7.00     9/30/2013       9/30/2019       6,991       6,950       3,495  

U.S. Acute Care Solutions, LLC(2)

  Health Care Providers & Services     L+500       1.00     6.00     12/22/2016       5/15/2021       6,500       6,435       6,435  

VT Buyer Acquisition Corp. (Veritext)(2)

  Professional Services     L+500       1.00     6.00     1/29/2016       1/29/2022       4,481       4,443       4,459  
               

 

 

   

 

 

 

                Total Bank Debt/Senior Secured Loans

 

  $ 297,380     $ 291,156  
               

 

 

   

 

 

 

Common Equity/Equity Interests — 27.6%

                Shares/Units      
             

 

 

     

Engineering Solutions & Products, LLC(6)(8)

  Aerospace & Defense           11/5/2013         133,668     $ 1,367     $ 68  

First Lien Loan Program LLC(4)(5)

  Asset Management           2/13/2015         —         41,187       38,810  

Gemino Healthcare Finance, LLC(4)(5)

  Diversified Financial Services           9/30/2013         32,839       32,839       35,500  
               

 

 

   

 

 

 

        Total Common Equity/Equity Interests

 

  $ 75,393     $ 74,378  
   

 

 

   

 

 

 

        Total Investments(9) — 135.8%

 

  $ 372,773     $ 365,534  

Cash Equivalents — 52.0%

                Par Amount      
             

 

 

     

U.S. Treasury Bill

  Government           12/29/2016       2/2/2017       140,000     $ 139,952     $ 139,952  
               

 

 

   

 

 

 

        Total Investments & Cash Equivalents — 187.8%

 

  $ 512,725     $ 505,486  

        Liabilities in Excess of Other Assets (87.8%)

 

      (236,341
                 

 

 

 

        Net Assets — 100.0%

 

    $ 269,145  
                 

 

 

 

See notes to consolidated financial statements.

 

10


Table of Contents

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

December 31, 2016

(in thousands)

 

(1) Floating rate debt investments typically bear interest at a rate determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) index rate or the prime index rate (PRIME or “P”), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of December 31, 2016.
(2) Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned financing subsidiary SUNS SPV LLC. Such investments are pledged as collateral under the Senior Secured Revolving Credit Facility (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of Solar Senior Capital Ltd. The respective par amount for the investment that is partially held through SUNS SPV LLC is $4,821 for Genmark Diagnostics, Inc. The par balance in excess of this stated amount is held directly by Solar Senior Capital Ltd.
(3) Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor.
(4) Indicates assets that the Company believes may not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940 (“1940 Act”), as amended. If we fail to invest a sufficient portion of our assets in qualifying assets, we could be prevented from making follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order to comply with the 1940 Act. As of December 31, 2016, on a fair value basis, non-qualifying assets in the portfolio represented 17.4% of the total assets of the Company.
(5) Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2016 in these controlled investments are as follows:

 

Name of Issuer

   Fair Value at
December 31, 2015
     Gross
Additions
     Gross
Reductions
     Realized Gain
(Loss)
     Dividend/Other
        Income         
     Fair Value at
December 31,
2016
 

First Lien Loan Program LLC

   $ 27,593      $ 11,603      $ —        $ —        $ 3,264      $ 38,810  

Gemino Healthcare Finance, LLC

     34,000        —          —          —          3,878        35,500  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 61,593      $ 11,603      $ —        $ —        $ 7,142      $ 74,310  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(6) Denotes investments in which we are an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2016 in these affiliated investments are as follows:

 

Name of Issuer

   Fair Value at
December 31, 2015
     Gross
Additions
     Gross
Reductions
     Realized Gain
(Loss)
     Interest
Income
     Fair Value at
December 31,
2016
 

Engineering Solutions & Products, LLC
(1st lien)

   $ 106      $ 376      $ 482      $ —        $ 11      $ —    

Engineering Solutions & Products, LLC
(2nd lien)

     2,249        —          —          —          190        1,757  

Engineering Solutions & Products, LLC
(equity interests)

     68        —          —          —          —          68  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,423      $ 376      $ 482      $ —        $ 201      $ 1,825  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(7) PSP Group, LLC, PSP Service Newco, Inc., PSP Subco, LLC, PSP Stores, LLC, and PSP Distribution, LLC are co-borrowers.
(8) Our equity investment in Engineering Solutions & Products, LLC is held through ESP SSC Corp., a taxable consolidated subsidiary.
(9) Aggregate net unrealized depreciation for federal income tax purposes is $10,676; aggregate gross unrealized appreciation and depreciation for federal tax purposes is $3,649 and $14,325, respectively, based on a tax cost of $376,210.
* Investment is on non-accrual status.
Non-income producing security.

 

See notes to consolidated financial statements.

 

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SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

December 31, 2016

 

 

Industry Classification

   Percentage of Total
Investments (at
fair value) as of
December 31,
2016
 

Health Care Providers & Services

     16.8

Communications Equipment

     12.0

Asset Management

     11.7

Diversified Financial Services

     11.1

Professional Services

     8.5

Insurance

     8.4

Software

     4.7

Health Care Equipment & Supplies

     3.3

Food Products

     3.1

Air Freight & Logistics

     3.0

Health Care Technology

     2.8

Chemicals

     2.6

Internet Software & Services

     2.2

Hotels, Restaurants & Leisure

     1.7

Footwear

     1.6

Wireless Telecommunication Services

     1.4

IT Services

     1.4

Commercial Services & Supplies

     1.3

Health Care Facilities

     1.2

Textile, Apparel & Luxury Goods

     0.6

Aerospace & Defense

     0.5

Specialty Retail

     0.1
  

 

 

 

Total Investments

     100.0
  

 

 

 

See notes to consolidated financial statements.

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

March 31, 2017

(in thousands, except share amounts)

Note 1. Organization

Solar Senior Capital Ltd. (“Solar Senior”, the “Company”, “SUNS”, “we”, “us”, or “our”), a Maryland corporation formed on December 16, 2010, is a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). Furthermore, as the Company is an investment company, it continues to apply the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. In addition, for tax purposes, we have elected to be treated as a regulated investment company (“RIC”), under the Internal Revenue Code of 1986, as amended (“the Code”).

On January 28, 2011, Solar Senior was capitalized with initial equity of $2 and commenced operations. On February 24, 2011, Solar Senior priced its initial public offering, selling 9.0 million shares, including the underwriters’ over-allotment, raising approximately $168,000 of net proceeds. Concurrent with this offering, our senior management team purchased an additional 500,000 shares through a private placement, raising another $10,000.

The Company’s investment objective is to seek to maximize current income consistent with the preservation of capital. We seek to achieve our investment objective by investing directly or indirectly in senior secured loans, including first lien and second lien debt instruments, made primarily to leveraged private middle-market companies whose debt is rated below investment grade, which the Company refers to collectively as “senior loans.” From time to time, we may also invest in public companies that are thinly traded. Under normal market conditions, at least 80% of the value of the Company’s net assets (including the amount of any borrowings for investment purposes) will be invested in senior loans.

Note 2. Significant Accounting Policies

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”), and include the accounts of the Company and its wholly-owned subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts may have been reclassified to conform to current period presentation.

Interim consolidated financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. Accordingly, they may not include all of the information and notes required by GAAP for annual consolidated financial statements. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported periods. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending on December 31, 2017.

In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for the fair presentation of financial statements, have been included.

The significant accounting policies consistently followed by the Company are:

 

  (a) Investment transactions are accounted for on the trade date;

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

  (b) The Company conducts the valuation of its assets in accordance with GAAP and the 1940 Act. The Company generally values its assets on a quarterly basis, or more frequently if required. Investments for which market quotations are readily available on an exchange are valued at the closing price on the date of valuation. The Company may also obtain quotes with respect to certain of its investments from pricing services or brokers or dealers in order to value assets. When doing so, management determines whether the quote obtained is sufficient according to GAAP to determine the fair value of the investment. If determined adequate, the Company uses the quote obtained. Debt investments with maturities of 60 days or less shall each be valued at cost plus accreted discount, or minus amortized premium, which is expected to approximate fair value, unless such valuation, in the judgment of Solar Capital Partners, LLC (the “Investment Adviser”), does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or under the direction of the Company’s board of directors (the “Board”).

Investments for which reliable market quotations are not readily available or for which the pricing sources do not provide a valuation or methodology or provide a valuation or methodology that, in the judgment of the Investment Adviser or the Board does not represent fair value, shall be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuations are discussed with senior management of the Investment Adviser; (iii) independent valuation firms engaged by, or on behalf of, the Board will conduct independent appraisals and review the Investment Adviser’s preliminary valuations and make their own independent assessment for (a) each portfolio investment that, when taken together with all other investments in the same portfolio company, exceeds 10% of estimated total assets, plus available borrowings, as of the end of the most recently completed fiscal quarter, and (b) each portfolio investment that is presently in payment default; (iv) the Board will discuss the valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser and, where appropriate, the respective independent valuation firm.

The recommendation of fair value generally considers the following factors among others, as relevant: applicable market yields; the nature and realizable value of any collateral; the portfolio company’s ability to make payments; the portfolio company’s earnings and discounted cash flow; the markets in which the issuer does business; and comparisons to publicly traded securities, among others.

When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider the pricing indicated by the external event to corroborate the valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net asset value as a practical expedient for fair value. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation approaches to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables,

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

applicable market yields and multiples, security covenants, call protection provisions, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. For the three months ended March 31, 2017, there has been no change to the Company’s valuation approaches or techniques and the nature of the related inputs considered in the valuation process.

ASC Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.

Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

Level 3: Unobservable inputs for the asset or liability.

In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The exercise of judgment is based in part on our knowledge of the asset class and our prior experience.

 

  (c) Gains or losses on investments are calculated by using the specific identification method.

 

  (d) The Company records dividend income and interest, adjusted for amortization of premium and accretion of discount, on an accrual basis. Loan origination fees, original issue discount, and market discounts are capitalized and we amortize such amounts into income using the effective interest method or on a straight-line basis, as applicable. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record call premiums on loans repaid as interest income when we receive such amounts. Capital structuring fees, amendment fees, consent fees, and any other non-recurring fee income as well as management fee and other fee income for services rendered, if any, are recorded as other income when earned.

 

  (e) The Company intends to comply with the applicable provisions of the Internal Revenue Code pertaining to regulated investment companies to make distributions of taxable income sufficient to relieve it of substantially all U.S. federal income taxes. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. The Company will accrue excise tax on such estimated excess taxable income as appropriate.

 

  (f) Book and tax basis differences relating to stockholder distributions and other permanent book and tax differences are typically reclassified among the Company’s capital accounts annually. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP.

 

  (g) Distributions to common stockholders are recorded as of the record date. The amount to be paid out as a distribution is determined by the Board. Net realized capital gains, if any, are generally distributed or deemed distributed at least annually.

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

  (h) In accordance with Regulation S-X and ASC Topic 810—Consolidation, the Company consolidates its interest in investment company subsidiaries, financing subsidiaries and certain wholly-owned holding companies that serve to facilitate investment in portfolio companies. In addition, the Company may also consolidate any controlled operating companies substantially all of whose business consists of providing services to the Company.

 

  (i) The accounting records of the Company are maintained in U.S. dollars. Any assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against the U.S. dollar on the date of valuation. The Company will not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations would be included with the net unrealized gain or loss from investments. The Company’s investments in foreign securities, if any, may involve certain risks, including without limitation: foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments in terms of U.S. dollars and therefore the earnings of the Company.

 

  (j) The Company has made an irrevocable election to apply the fair value option of accounting to its senior secured revolving credit facility (the “Credit Facility”), in accordance with ASC 825-10. The Company uses an independent third-party valuation firm to assist in measuring its fair value.

 

  (k) In accordance with ASC 835-30, the Company records origination and other expenses related to certain debt issuances, if any, as a direct deduction from the carrying amount of the debt liability. These expenses are deferred and amortized using either the effective interest method or the straight-line method over the stated life. The straight-line method may be used on revolving facilities and when it approximates the effective yield method.

 

  (l) The Company records expenses related to shelf registration statements and applicable equity offering costs as prepaid assets. These expenses are typically charged as a reduction of capital upon utilization, in accordance with ASC 946-20-25. Certain subsequent costs are expensed per the AICPA Audit & Accounting Guide for Investment Companies.

 

  (m) Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when principal or interest cash payments are past due 30 days or more and/or when it is no longer probable that principal or interest cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest are paid in cash, and in management’s judgment, are likely to continue timely payment of their remaining principal and interest obligations. Cash interest payments received on such investments may be recognized as income or applied to principal depending on management’s judgment.

 

  (n) The Company defines cash equivalents as securities that are readily convertible into known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only securities with a maturity of three months or less would qualify, with limited exceptions. The Company believes that certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities would qualify as cash equivalents.

Recent Accounting Pronouncements

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended rules (together, “final rules”) interned to modernize the reporting and disclosure of information by registered

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. The Company is currently evaluating the impact that the adoption of the amendments to Regulation S-X will have on its consolidated financial statements and disclosures.

In November 2016, FASB issued ASU 2016-18, Statement of Cash Flows, which will amend FASB ASC 230. The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is evaluating the impact of ASU 2016-18 on its consolidated financial statements and disclosures.

In December 2016, the FASB issued ASU 2016-19, Technical Corrections and Improvements. As part of this guidance, ASU 2016-19 amends FASB ASC 820 to clarify the difference between a valuation approach and a valuation technique. The amendment also requires an entity to disclose when there has been a change in either or both a valuation approach and/or a valuation technique. ASU 2016-19 is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016 on a prospective basis. The Company has evaluated the impact of ASU 2016-19 on its consolidated financial statements and disclosures and determined that the adoption of ASU 2016-19 has not had a material impact on its consolidated financial statements.

Note 3. Agreements

Solar Senior has an Advisory Agreement with the Investment Adviser, under which the Investment Adviser manages the day-to-day operations of, and provides investment advisory services to, Solar Senior. For providing these services, the Investment Adviser receives a fee from Solar Senior, consisting of two components—a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 1.00% of gross assets. For services rendered under the Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters. Base management fees for any partial month or quarter will be appropriately pro-rated. For purposes of computing the base management fee, gross assets exclude temporary assets acquired at the end of each fiscal quarter for purposes of preserving investment flexibility in the next fiscal quarter. Temporary assets include, but are not limited to, U.S. treasury bills, other short-term U.S. government or government agency securities, repurchase agreements or cash borrowings.

The incentive fee has two parts, as follows: one is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (other than fees for providing managerial assistance) accrued during the calendar quarter, minus our operating expenses for the quarter (excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

investments, if any, with a deferred interest feature (such as original issue discount, debt instruments with pay-in-kind interest and zero-coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains or losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized). The Company pays the Investment Adviser an incentive fee with respect to pre-incentive fee net investment income for each calendar quarter as follows:

 

   

no incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle of 1.75%;

 

   

50% of pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle but is less than 2.9167% in any calendar quarter (11.67% annualized);

and

 

   

20% of the amount of pre-incentive fee net investment income, if any, that exceeds 2.9167% in any calendar quarter (11.67% annualized) will be payable to the Investment Adviser.

The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date) and will equal 20% of the Company’s cumulative realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year) and all net capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the Investment Adviser. For financial statement purposes, the second part of the incentive fee is accrued based upon 20% of cumulative net realized gains and net unrealized capital appreciation. No accrual was required for the three months ended March 31, 2017 and 2016.

For the three months ended March 31, 2017 and 2016 the Company recognized $948 and $797, respectively, in gross base management fees and $75 and $385, respectively, in gross performance-based incentive fees. For the three months ended March 31, 2017 and 2016, $789 and $0, respectively, of such base management fees were waived. For the three months ended March 31, 2017 and 2016, $75 and $385, respectively, of such performance-based incentive fees were waived. For the quarterly periods ended September 30, 2016 to June 30, 2017 (the “Waiver Period”), the Investment Adviser has agreed to voluntarily waive a portion or all of the incentive fees, and to the extent necessary a portion or all of the base management fees, that the Investment Adviser would otherwise be entitled to receive pursuant to our investment advisory and management agreement with the Investment Adviser to the extent required in order for the Company to earn net investment income (exclusive of costs related to the expansion, extension and/or amendments of our credit facilities), as determined in accordance with GAAP, sufficient to maintain the Company’s current level of distributions. A portion or all of the voluntary fee waivers made during the Waiver Period are made at the Investment Adviser’s discretion and are subject to recapture by the Investment Adviser and reimbursement by the Company through June 30, 2018 to the extent GAAP net investment income equals or exceeds the current level of distributions. The amount to be waived or recaptured will be determined after the end of each quarter during the Waiver Period, with such amounts being accrued on a quarterly basis. For the three months ended March 31, 2017, there were no fees recaptured by the Investment Adviser. The voluntary fee waiver for the three months ended March 31, 2016 was made at the Investment Adviser’s discretion and was subject to recapture by the Investment Adviser and reimbursement by the Company if net investment income during and/or for fiscal 2016 equaled or exceeded distributions declared in fiscal 2016. For fiscal 2016, there were no fees recaptured by the Investment Adviser.

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

Solar Senior has also entered into an Administration Agreement with Solar Capital Management, LLC (the “Administrator”) under which the Administrator provides administrative services for Solar Senior. For providing these services, facilities and personnel, Solar Senior reimburses the Administrator for Solar Senior’s allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent. The Administrator will also provide, on Solar Senior’s behalf, managerial assistance to those portfolio companies to which Solar Senior is required to provide such assistance. The Company typically reimburses the Administrator on a quarterly basis.

For the three months ended March 31, 2017 and 2016, the Company recognized expenses under the Administration Agreement of $368 and $295, respectively. No managerial assistance fees were accrued or collected for the three months ended March 31, 2017 and 2016.

Note 4. Net Asset Value Per Share

At March 31, 2017, the Company’s total net assets and net asset value per share were $269,453 and $16.81, respectively. This compares to total net assets and net asset value per share at December 31, 2016 of $269,145 and $16.80, respectively.

Note 5. Earnings Per Share

The following table sets forth the computation of basic and diluted net increase in net assets per share resulting from operations, pursuant to ASC 260-10, for the three months ended March 31, 2017 and 2016:

 

     Three months ended March 31,  
     2017      2016  

Earnings per share (basic & diluted)

     

Numerator — net increase in net assets resulting from operations:

   $ 5,911      $ 8,414  

Denominator — weighted average shares:

     16,026,312        11,533,315  

Earnings per share:

   $ 0.37      $ 0.73  

Note 6. Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access.

Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

 

  a) Quoted prices for similar assets or liabilities in active markets;

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

  b) Quoted prices for identical or similar assets or liabilities in non-active markets;

 

  c) Pricing models whose inputs are observable for substantially the full term of the asset or liability; and

 

  d) Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.

Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party valuation firm’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3).

Gains and losses for assets and liabilities categorized within the Level 3 table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Such reclassifications are reported as transfers in/out of the appropriate category as of the end of the quarter in which the reclassifications occur.

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis, as of March 31, 2017 and December 31, 2016:

Fair Value Measurements

As of March 31, 2017

 

     Level 1      Level 2      Level 3      Measured at
Net  Asset Value*
     Total  

Assets:

              

Bank Debt/Senior Secured Loans

   $ —        $ 32,325      $ 266,266      $ —        $ 298,591  

Common Equity/Equity Interests/Warrants

     —          —          35,732        38,791        74,523  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments

   $ —        $ 32,325      $ 301,998      $ 38,791      $ 373,114  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

              

Credit Facility

   $ —        $ —        $ 86,800      $ —        $ 86,800  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

* In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities. The portfolio investment in this category is First Lien Loan Program, LLC (“FLLP”). See Note 11 for more information on this investment, including its investment strategy and the Company’s unfunded equity commitment to FLLP. This investment is is not redeemable by the Company absent an election by the members of the entity to liquidate all investments and distribute the proceeds to the members.

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

Fair Value Measurements

As of December 31, 2016

 

     Level 1      Level 2      Level 3      Measured at
Net Asset Value*
     Total  

Assets:

              

Bank Debt/Senior Secured Loans

   $ —        $ 40,888      $ 250,268      $ —        $ 291,156  

Common Equity/Equity Interests

     —          —          35,568        38,810        74,378  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments

   $ —        $ 40,888      $ 285,836      $ 38,810      $ 365,534  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

              

Credit Facility

   $ —        $ —        $ 98,300      $ —        $ 98,300  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

* In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.

The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the three months ended March 31, 2017, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at March 31, 2017:

Fair Value Measurements Using Level 3 Inputs

 

     Bank Debt/Senior
Secured Loans
    Common
Equity/Equity
Interests/
Warrants
 

Fair value, December 31, 2016

   $ 250,268     $ 35,568  

Total gains or losses included in earnings:

    

Net realized gain (loss)

     53       —    

Net change in unrealized gain (loss)

     2,931       (3,018

Purchase of investment securities

     59,720       3,182  

Proceeds from dispositions of investment securities

     (52,773     —    

Transfers in/out of Level 3

     6,067       —    
  

 

 

   

 

 

 

Fair value, March 31, 2017

   $ 266,266     $ 35,732  
  

 

 

   

 

 

 

Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:

    

Net change in unrealized gain (loss):

   $ 3,023     $ (3,018
  

 

 

   

 

 

 

During the three months ended March 31, 2017, nThrive, Inc. was transferred from Level 2 to Level 3. At March 31, 2017, the Investment Adviser had information that nThrive, Inc. was possibly going to be prepaid in the near future. As such, the Investment Adviser felt that it was more representative of fair value to price the position at par, matching the price we would receive if the investment was prepaid, than to value the position using the public quote, which was above par.

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

The following table shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significant unobservable inputs (Level 3) for the three months ended March 31, 2017:

 

Beginning fair value at December 31, 2016

   $ 98,300  

Borrowings

     29,500  

Repayments

     (41,000

Transfers in/out of Level 3

     —    
  

 

 

 

Ending fair value at March 31, 2017

   $ 86,800  
  

 

 

 

The Company has made an irrevocable election to apply the fair value option of accounting to the Credit Facility, in accordance with ASC 825-10. On March 31, 2017, there were borrowings of $86,800 on the Credit Facility. For the three months ended March 31, 2017, the Credit Facility had no net change in unrealized (appreciation) depreciation. The Company used an independent third-party valuation firm to assist in measuring the fair value of the Credit Facility.

The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the year ended December 31, 2016, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at December 31, 2016:

Fair Value Measurements Using Level 3 Inputs

 

     Bank Debt/Senior
Secured Loans
    Unsecured
Notes
    Common
Equity/Equity
Interests
 

Fair value, December 31, 2015

   $ 198,836     $ 3,650     $ 34,068  

Total gains or losses included in earnings:

      

Net realized gain (loss)

     6       —         —    

Net change in unrealized gain (loss)

     (1,812     (6     1,500  

Purchase of investment securities

     136,331       —         —    

Proceeds from dispositions of investment securities

     (83,093     (3,644     —    

Transfers in/out of Level 3

     —         —         —    
  

 

 

   

 

 

   

 

 

 

Fair value, December 31, 2016

   $ 250,268     $ —       $ 35,568  
  

 

 

   

 

 

   

 

 

 

Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:

      

Net change in unrealized gain (loss):

   $ (2,857   $ —       $ 1,500  
  

 

 

   

 

 

   

 

 

 

During the year ended December 31, 2016, there were no transfers in and out of Levels 1 and 2.

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

The following table shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significant unobservable inputs (Level 3) for the year ended December 31, 2016:

 

Beginning fair value at December 31, 2015

   $ 116,200  

Borrowings

     136,800  

Repayments

     (154,700

Transfers in/out of Level 3

     —    
  

 

 

 

Ending fair value at December 31, 2016

   $ 98,300  
  

 

 

 

The Company has made an irrevocable election to apply the fair value option of accounting to the Credit Facility, in accordance with ASC 825-10. On December 31, 2016, there were borrowings of $98,300 on the Credit Facility. For the year ended December 31, 2016, the Credit Facility had no net change in unrealized (appreciation) depreciation. The Company used an independent third-party valuation firm to assist in measuring the fair value of the Credit Facility.

Quantitative Information about Level 3 Fair Value Measurements

The Company typically determines the fair value of its performing debt investments utilizing a yield analysis. In a yield analysis, a price is ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to current contractual interest rates, relative maturities and other key terms and risks associated with an investment. Among other factors, a significant determinant of risk is the amount of leverage used by the portfolio company relative to the total enterprise value of the company, and the rights and remedies of our investment within each portfolio company.

Significant unobservable quantitative inputs typically used in the fair value measurement of the Company’s Level 3 assets and liabilities primarily reflect current market yields, including indices, and readily available quotes from brokers, dealers, and pricing services as indicated by comparable assets and liabilities, as well as enterprise values, returns on equity and earnings before income taxes, depreciation and amortization (“EBITDA”) multiples of similar companies, and comparable market transactions for equity securities.

Quantitative information about the Company’s Level 3 asset and liability fair value measurements as of March 31, 2017 is summarized in the table below:

 

    Asset or
Liability
  Fair Value at
March 31, 2017
    Principal  Valuation
Technique/Methodology
  Unobservable Input   Range (Weighted
Average)
Bank Debt / Senior Secured Loans   Asset   $ 266,266     Yield Analysis   Market Yield   5.7% – 25.2% (7.7%)

Common Equity/Equity Interests/Warrants

  Asset   $

$

82

35,650

 

 

  Enterprise Value

Enterprise Value

  EBITDA Multiple

Return on Equity

  8.7x-23.8x (23.8x)

4.3% – 22.5% (11.3%)

Credit Facility

  Liability   $ 86,800     Yield Analysis   Market Yield   L+1.4% – L+4.8%

(L+2.0%)

Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in deriving bid-ask spreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets and liabilities.

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

Quantitative information about the Company’s Level 3 asset and liability fair value measurements as of December 31, 2016 is summarized in the table below:

 

    Asset or
Liability
  Fair Value at
December 31, 2016
    Principal  Valuation
Technique/Methodology
  Unobservable Input   Range (Weighted
Average)

Bank Debt / Senior Secured Loans

  Asset   $ 250,268     Yield Analysis   Market Yield   5.7% – 37.3% (8.0%)

Common Equity/Equity Interests

  Asset   $

$

68

35,500

 

 

  Enterprise Value

Enterprise Value

  EBITDA Multiple

Return on Equity

  9.3x-27.0x (27.0x)

3.0% - 21.7% (15.0%)

Credit Facility

  Liability   $ 98,300     Yield Analysis   Market Yield   L+1.4% – L+4.8%

(L+2.0%)

Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in deriving bid-ask spreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets and liabilities.

Note 7. Debt

Senior Secured Revolving Credit Facility—On August 26, 2011, the Company established the SPV which entered into the Credit Facility with Citigroup Global Markets Inc. acting as administrative agent. On January 10, 2017, commitments to the Credit Facility, as amended, were increased from $175,000 to $200,000 by utilizing the accordion feature. It can also be expanded up to $600,000. The stated interest rate on the Credit Facility is LIBOR plus 2.00% with no LIBOR floor requirement and the current final maturity date is June 30, 2020. The Credit Facility is secured by all of the assets held by the SPV. Under the terms of the Credit Facility, Solar Senior Capital and the SPV, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The Credit Facility also includes usual and customary events of default for credit facilities of this nature. The Credit Facility was amended on November 7, 2012, June 30, 2014 and May 29, 2015 to extend maturities and add greater investment flexibility, among other changes.

The Company has made an irrevocable election to apply the fair value option of accounting to the Credit Facility, in accordance with ASC 825-10. We believe accounting for the Credit Facility at fair value better aligns the measurement methodologies of assets and liabilities, which may mitigate certain earnings volatility. ASC 825-10 requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facility are reported in the Consolidated Statements of Operations.

The average annualized interest cost for all borrowings for the three months ended March 31, 2017 and the year ended December 31, 2016 was 2.89% and 2.59%, respectively. These costs are exclusive of other credit facility expenses such as unused fees and fees paid to the back-up servicer, if any. The maximum amount borrowed on the Credit Facility during the three months ended March 31, 2017 and the year ended December 31, 2016, was $98,300 and $141,600, respectively.

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

Note 8. Financial Highlights and Senior Securities Table

The following is a schedule of financial highlights for the three months ended March 31, 2017 and for the year ended December 31, 2016:

 

     Three months ended
March 31, 2017
(unaudited)
    Year ended
December 31,
2016
 

Per Share Data: (a)

    

Net asset value, beginning of year

   $ 16.80     $ 16.33  
  

 

 

   

 

 

 

Net investment income

     0.35       1.42  

Net realized and unrealized gain (loss)

     0.01       0.50  
  

 

 

   

 

 

 

Net increase in net assets resulting from operations

     0.36       1.92  

Distributions to stockholders:

    

From net investment income

     (0.35     (1.42

Offering costs and other

     —         (0.03
  

 

 

   

 

 

 

Net asset value, end of period

   $ 16.81     $ 16.80  
  

 

 

   

 

 

 

Per share market value, end of period

   $ 17.98     $ 16.44  

Total Return(b)

     11.59     20.70

Net assets, end of period

   $ 269,453     $ 269,145  

Shares outstanding, end of period

     16,027,687       16,025,011  
  

 

 

   

 

 

 

Ratios to average net assets(c):

    

Net investment income

     2.10     8.68
  

 

 

   

 

 

 

Operating expenses

     0.38 %*      2.65 %* 

Interest and other credit facility expenses

     0.31     1.56
  

 

 

   

 

 

 

Total expenses

     0.69 %*      4.21 %* 
  

 

 

   

 

 

 

Average debt outstanding

   $ 85,681     $ 109,938  

Portfolio turnover ratio

     15.4     38.4

 

(a) Calculated using the average shares outstanding method.
(b) Total return is based on the change in market price per share during the period and takes into account distributions, if any, reinvested in accordance with the dividend reinvestment plan. Total return does not include a sales load.
(c) Not annualized for periods less than one year.
* The ratio of operating expenses to average net assets and the ratio of total expenses to average net assets is shown net of voluntary management and incentive fee waivers (see note 3). For the three months ended March 31, 2017, the ratios of operating expenses to average net assets and total expenses to average net assets would be 0.70% and 1.01%, respectively, without the voluntary management and incentive fee waivers. For the year ended December 31, 2016, the ratios of operating expenses to average net assets and total expenses to average net assets would be 3.60% and 5.15%, respectively, without the voluntary management and incentive fee waivers.

 

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SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

Information about our senior securities is shown in the following table as of each year ended December 31 since the Company commenced operations, unless otherwise noted. The “—” indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities.

 

Class and Year

   Total Amount
Outstanding(1)
     Asset
Coverage
Per Unit(2)
     Involuntary
Liquidating
Preference
Per Unit(3)
     Average
Market Value
Per Unit(4)
 

Revolving Credit Facility

           

Fiscal 2017 (through March 31, 2017)

   $ 86,800      $ 4,104      $ —          N/A  

Fiscal 2016

     98,300        3,738        —          N/A  

Fiscal 2015

     116,200        2,621        —          N/A  

Fiscal 2014

     143,200        2,421        —          N/A  

Fiscal 2013

     61,400        4,388        —          N/A  

Fiscal 2012

     39,100        5,453        —          N/A  

Fiscal 2011

     8,600        21,051        —          N/A  

 

(1) Total amount of each class of senior securities outstanding at the end of the period presented.
(2) The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by one thousand to determine the Asset Coverage Per Unit. In order to determine the specific Asset Coverage Per Unit for each class of debt, the total Asset Coverage Per Unit was divided based on the amount outstanding at the end of the period for each. As of March 31, 2017, asset coverage was 410.4%.
(3) The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it.
(4) Not applicable, we do not have senior securities that are registered for public trading.

Note 9. Gemino Healthcare Finance, LLC

We acquired Gemino Healthcare Finance, LLC (d/b/a Gemino Senior Secured Healthcare Finance) (“Gemino”) on September 30, 2013. Gemino is a commercial finance company that originates, underwrites, and manages primarily secured, asset-based loans for small and mid-sized companies operating in the healthcare industry. Our initial investment in Gemino was $32,839. The management team of Gemino co-invested in the transaction and continues to lead Gemino.

Concurrent with the closing of the transaction, Gemino entered into a new, four-year, non-recourse, $100,000 credit facility with non-affiliates, which was expandable to $150,000 under its accordion feature. Effective March 31, 2014, the credit facility was expanded to $105,000 and again on June 27, 2014 to $110,000. On May 27, 2016, Gemino entered into a new $125,000 credit facility which replaced the previously existing facility. The new facility has similar terms as compared to the previous facility and includes an accordion feature increase to $200,000 and has a maturity date of May 27, 2020.

On December 31, 2013, we contributed our 32,839 units in Gemino to Gemino Senior Secured Healthcare LLC (“Gemino Senior Secured Healthcare”). In exchange for this contribution, we received 19,839 units of equity interests and $13,000 in floating rate secured notes of Gemino Senior Secured Healthcare bearing interest at LIBOR plus 7.50%, maturing on December 31, 2018. However, our financial statements, including our schedule of investments, reflected our investments in Gemino Senior Secured Healthcare on a consolidated basis. On October 28, 2016, Gemino Senior Secured Healthcare was dissolved. Gemino’s management team and Solar Senior own approximately 6% and 94% of the equity in Gemino, respectively.

 

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Table of Contents

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

Gemino currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of March 31, 2017, the portfolio totaled approximately $185,353 of commitments, of which $107,657 were funded, on total assets of $109,823. As of December 31, 2016, the portfolio totaled approximately $186,360 of commitments, of which $114,386 were funded, on total assets of $118,490. At March 31, 2017, the portfolio consisted of 33 issuers with an average balance of approximately $3,262 versus 35 issuers with an average balance of approximately $3,268 at December 31, 2016. All of the commitments in Gemino’s portfolio are floating-rate, senior-secured, cash-pay loans. Gemino’s credit facility, which is non-recourse to us, had approximately $75,000 and $83,000 of borrowings outstanding at March 31, 2017 and December 31, 2016, respectively. For the three months ended March 31, 2017 and 2016, Gemino had net income of $767 and $1,426, respectively, on gross income of $2,852 and $3,819, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions.

Note 10. Commitments and Contingencies

The Company had unfunded debt and equity commitments to delayed draw and revolving loans, as well as to Gemino. The total amount of these unfunded commitments as of March 31, 2017 and December 31, 2016 is $14,078 and $13,073, respectively, comprised of the following:

 

     March 31,
2017
     December 31,
2016
 

Gemino Healthcare Finance, LLC

   $ 5,000      $ 5,000  

Engineering Solutions & Products, LLC

     1,562        1,736  

Alera Group Intermediate Holdings, Inc

     1,544        3,860  

MHE Intermediate Holdings, LLC

     1,417        —    

Professional DataSolutions, Inc

     1,148        —    

The Hilb Group, LLC & Gencorp Insurance Group, Inc.

     1,007        —    

Ministry Brands, LLC

     699        1,507  

Island Medical Management Holdings, LLC

     591        —    

VT Buyer Acquisition Corp. (Veritext)

     486        486  

CIBT Holdings, Inc

     484        484  

TwentyEighty, Inc

     140        —    
  

 

 

    

 

 

 

Total Commitments*

   $ 14,078      $ 13,073  
  

 

 

    

 

 

 

 

* The Company controls the funding of the Gemino Healthcare Finance, LLC commitment and may cancel it at its discretion.

As of March 31, 2017 and December 31, 2016, the Company had sufficient cash available and/or liquid securities available to fund its commitments as well as the commitments to FLLP disclosed in Note 11 and Solar Life Science Program LLC (“LSJV”) disclosed in Note 12.

Note 11. First Lien Loan Program LLC

On September 10, 2014, the Company entered into a limited liability company agreement to create FLLP with Voya Investment Management LLC (“Voya”). Voya acts as the investment advisor for several wholly-owned insurance subsidiaries of Voya Financial, Inc. (NYSE: VOYA). The joint venture vehicle, structured as an unconsolidated Delaware limited liability company, is expected to invest primarily in senior secured floating rate term loans to middle market companies predominantly owned by private equity sponsors or entrepreneurs. Solar Senior and Voya have committed to provide $50,750 and $7,250, respectively, of capital to the joint venture. All

 

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Table of Contents

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

portfolio decisions and generally all other decisions in respect of the FLLP must be approved by an investment committee of the FLLP consisting of representatives of the Company and Voya (with approval from a representative of each required). On February 13, 2015, FLLP commenced operations. On February 13, 2015, FLLP as transferor and FLLP 2015-1, LLC, a newly formed wholly owned subsidiary of FLLP, as borrower entered into a $75,000 senior secured revolving credit facility (the “FLLP Facility”) with Wells Fargo Securities, LLC acting as administrative agent. Solar Senior Capital Ltd. acts as servicer under the FLLP Facility. The FLLP Facility was scheduled to mature on February 13, 2020. The FLLP Facility generally bears interest at a rate of LIBOR plus a range of 2.25%-2.50%. FLLP and FLLP 2015-1, LLC, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The FLLP Facility also includes usual and customary events of default for credit facilities of this nature. On August 15, 2016, the FLLP Facility was amended, expanding commitments to $100,000 and extending the maturity date to August 16, 2021. There were $75,165 and $75,941 of borrowings outstanding as of March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017 and December 31, 2016, Solar Senior and Voya contributed combined equity capital in the amount of $47,071 and $47,071, respectively. Of the $47,071 of contributed equity capital at March 31, 2017, the Company contributed $29,584 in the form of investments and $11,603 in the form of cash and Voya contributed $5,884 in the form of cash. As of March 31, 2017, Solar Senior and Voya’s remaining commitments totaled $9,563 and $1,366, respectively. The Company, along with Voya, controls the funding of FLLP and FLLP may not call the unfunded commitments without approval of both the Company and Voya.

As of March 31, 2017 and December 31, 2016, FLLP had total assets of $127,193 and $122,225, respectively. For the same periods, FLLP’s portfolio consisted of first lien floating rate senior secured loans to 26 and 25 different borrowers, respectively. For the three months ended March 31, 2017, FLLP invested $12,010 across 6 portfolio companies. For the three months ended March 31, 2016, FLLP invested $17,071 across 4 portfolio companies. Investments prepaid totaled $4,970 for the three months ended March 31, 2017 and $1,013 for the three months ended March 31, 2016. At March 31, 2017 and December 31, 2016, the weighted average yield of FLLP’s portfolio was 6.6% and 6.6%, respectively, measured at fair value and 6.6% and 6.5%, respectively, measured at cost.

 

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Table of Contents

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

FLLP Portfolio as of March 31, 2017

 

Description

  Industry     Spread
Above
Index(1)
    LIBOR
Floor
    Interest
Rate(2)
    Maturity
Date
    Par
Amount
    Cost     Fair
Value(3)
 

1A Smart Start LLC

   
Electronic Equipment,
Instruments & Components
 
 
    L+475       1.00     5.90     2/21/22     $ 7,900     $ 7,838     $ 7,900  

Alera Group Intermediate Holdings, Inc.(4)

    Insurance       L+550       1.00     6.50     12/30/22       3,456       3,423       3,422  

Anesthesia Consulting & Management, LP(4)

 

 

Health Care Providers &
Services

 
 

    L+500       1.00     6.04     10/31/22       4,988       4,941       4,938  

Capstone Logistics Acquisition, Inc.(4)

    Professional Services       L+450       1.00     5.50     10/7/21       5,361       5,322       5,321  

CIBT Holdings, Inc.(4)

    Professional Services       L+525       1.00     6.40     6/28/22       2,607       2,584       2,594  

Confie Seguros Holding II Co.(4)

    Insurance       L+475       1.00     5.75     4/19/22       5,486       5,435       5,522  

DB Datacenter Holdings, Inc.(4)

    IT Services       L+475       1.00     5.75     7/13/21       5,500       5,453       5,417  

Empower Payments Acquisition, Inc. (RevSpring)(4)

    Professional Services       L+550       1.00     6.65     11/30/23       4,613       4,524       4,521  

Falmouth Group Holdings Corp. (AMPAC)(4)

    Chemicals       L+675       1.00     7.75     12/14/21       5,472       5,472       5,472  

Island Medical Management Holdings, LLC(4)

 

 

Health Care Providers &
Services

 
 

    L+550       1.00     6.50     9/1/22       4,604       4,558       4,558  

Kellermeyer Bergensons Services, LLC (KBS)(4)

 

 

Commercial Services &
Supplies

 
 

    L+500       1.00     6.04     10/29/21       2,438       2,420       2,413  

MedRisk, LLC

   
Health Care Providers &
Services
 
 
    L+525       1.00     6.35     3/1/23       3,960       3,925       3,960  

Metamorph US 3, LLC (Metalogix)(4)

    Software       L+750 (5)      1.00     8.50     12/1/20       4,009       3,941       2,566  

Ministry Brands, LLC(4)

    Software       L+500       1.00     6.00     12/2/22       4,152       4,112       4,111  

Pearl Merger Sub, LLC (PetVet)(4)

    Health Care Facilities       L+475       1.00     5.90     12/17/20       5,376       5,304       5,322  

Pet Holdings ULC & Pet Supermarket, Inc.

    Specialty Retail       L+550       1.00     6.50     7/5/22       4,630       4,567       4,572  

PSP Group, LLC (Pet Supplies Plus)(4)

    Specialty Retail       L+475       1.00     5.90     4/6/21       5,340       5,304       5,326  

QBS Holding Company, Inc. (Quorum)(4)

    Software       L+475       1.00     5.79     8/7/21       3,421       3,396       3,301  

Salient Partners, L.P.(4)

    Asset Management       L+850       1.00     9.52     6/9/21       5,012       4,937       4,937  

Sarnova HC, LLC

   
Trading Companies and
Distributors
 
 
    L+475       1.00     5.75     1/28/22       4,950       4,909       4,950  

Suburban Broadband, LLC (Jab Wireless, Inc.) (4)

 

 

Wireless Telecommunication
Services

 
 

    L+450       1.00     5.54     3/26/19       8,126       8,031       8,045  

Telular Corporation

   
Wireless Telecommunication
Services
 
 
    L+425       1.25     5.50     6/24/19       4,991       4,976       4,991  

The Hilb Group, LLC & Gencorp Insurance Group, Inc.(4)

    Insurance       L+475       1.00     5.90     6/24/21       3,885       3,820       3,846  

Tronair Parent Inc.

    Aerospace & Defense       L+475       1.00     5.86     9/8/23       4,975       4,928       4,950  

VT Buyer Acquisition Corp. (Veritext)(4)

    Professional Services       L+475       1.00     5.75     1/29/22       5,398       5,372       5,371  

Wirb-Copernicus Group, Inc.(4)

    Professional Services       L+500       1.00     6.15     8/12/22       5,973       5,920       5,943  
             

 

 

   

 

 

 
              $ 125,412     $ 124,269  
             

 

 

   

 

 

 

 

(1) Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor.

 

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Table of Contents

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

(2) Floating rate debt investments typically bear interest at a rate determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) index rate or the prime index rate (PRIME or “P”), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of March 31, 2017.
(3) Represents the fair value in accordance with ASC Topic 820. The determination of such fair value is not included in the Board’s valuation process described elsewhere herein.
(4) The Company also holds this security on its Consolidated Statements of Assets and Liabilities.
(5) Spread is 5.50% Cash / 2.0% PIK.

 

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Table of Contents

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

March 31, 2017

(in thousands, except share amounts)

 

FLLP Portfolio as of December 31, 2016 (audited)

 

Description

 

Industry

  Spread
Above
Index(1)
    LIBOR
Floor
    Interest
Rate(2)
    Maturity
Date
    Par
Amount
    Cost     Fair
Value(3)
 

1A Smart Start LLC

  Electronic Equipment, Instruments & Components     L+475       1.00     5.75     2/21/22     $ 7,920     $ 7,855     $ 7,920  

Alera Group Intermediate Holdings, Inc.(4)

  Insurance     L+550       1.00     6.50     12/30/22       3,456       3,422       3,422  

Anesthesia Consulting & Management, LP(4)

 

Health Care Providers & Services

    L+500       1.00     6.00     10/31/22       5,000       4,951       4,950  

Capstone Logistics Acquisition, Inc.(4)

  Professional Services     L+450       1.00     5.50     10/7/21       5,361       5,320       5,308  

CIBT Holdings, Inc.(4)

  Professional Services     L+525       1.00     6.25     6/28/22       2,620       2,596       2,594  

Confie Seguros Holding II Co.(4)

  Insurance     L+475       1.00     5.75     4/19/22       5,500       5,447       5,537  

DB Datacenter Holdings, Inc.(4)

  IT Services     L+475       1.00     5.75     7/13/21       5,500       5,450       5,417  

Empower Payments Acquisition, Inc. (RevSpring)(4)

  Professional Ser