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EX-32.2 - EXHIBIT 32.2 - Griffin Capital BDC Corp.a10qgb-bdc3312017exhibit322.htm
EX-32.1 - EXHIBIT 32.1 - Griffin Capital BDC Corp.a10qgb-bdc3312017exhibit321.htm
EX-31.2 - EXHIBIT 31.2 - Griffin Capital BDC Corp.a10qgb-bdc3312017exhibit312.htm
EX-31.1 - EXHIBIT 31.1 - Griffin Capital BDC Corp.a10qgb-bdc3312017exhibit311.htm
EX-10.14 - EXHIBIT 10.14 - Griffin Capital BDC Corp.a10qgb-bdc33117exhibit1014.htm
EX-10.13 - EXHIBIT 10.13 - Griffin Capital BDC Corp.a10qgb-bdc33117exhibit1013.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 000-55351
Griffin-Benefit Street Partners BDC Corp.
(Exact name of Registrant as specified in its charter)
Maryland
47-0995168
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
Griffin Capital Plaza, 1520 E. Grand Avenue, El Segundo, California 90245
(Address of principal executive offices)
(310) 469-6100
(Registrant’s telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   ¨    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer” “smaller reporting company,” and "E-G-C" or an emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer
¨
Accelerated Filer
¨
Non-Accelerated Filer
ý  (Do not check if a smaller reporting company)
Smaller reporting company
¨
Emerging Growth Company
ý
 
 
    



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  ý
As of May 10, 2017, the Registrant had 4,563,196 shares of common stock, $0.001 par value, outstanding.





GRIFFIN-BENEFIT STREET PARTNERS BDC CORP.
TABLE OF CONTENTS
 
 
Page No.
PART I. FINANCIAL INFORMATION
 
PART II. OTHER INFORMATION
 
Item 3. Defaults Upon Senior Securities





PART I. FINANCIAL INFORMATION
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-Q of Griffin-Benefit Street Partners BDC Corp., other than historical facts, may be considered forward-looking statements. Such forward-looking statements include, in particular, statements about our plans, strategies, and prospects and are subject to risks, uncertainties, and other factors. Such statements are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations and provide distributions to stockholders, and our ability to find suitable investments, may be significantly hindered. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the Securities and Exchange Commission ("SEC"). We cannot guarantee the accuracy of any such forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws and regulations.
See the risk factors identified in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the SEC on March 31, 2017 for a discussion of some, although not all, of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements.


1



Item 1. Financial Statements

GRIFFIN-BENEFIT STREET PARTNERS BDC CORP.
STATEMENTS OF ASSETS AND LIABILITIES
 
March 31, 2017
 
December 31, 2016
ASSETS
(Unaudited)
 
 
Investments at fair value (amortized cost of $35,098,087 and $36,194,877, respectively)
$
35,458,409

 
$
36,642,373

Cash and cash equivalents
6,071,293

 
7,451,353

Interest receivable from investments
296,067

 
393,183

Prepaid expenses
110,785

 
155,533

Due from affiliates
240,208

 
127,354

Receivable for unsettled trades
25,707

 

Accounts receivable
20,136

 
64,219

   Total assets
$
42,222,605

 
$
44,834,015

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Accounts payable and accrued liabilities
$
120,583

 
$
213,210

Management and incentive fees payable to affiliate
334,761

 
267,690

Due to affiliates
1,188,248

 
1,187,149

Distributions payable
290,704

 
289,852

Directors fees payable
42,000

 
153,000

Unsettled trades payable
980,000

 
3,440,000

Discount for unfunded commitments

 
14,160

   Total liabilities
2,956,296

 
5,565,061

Commitments and contingencies (Note 6)
 
 
 
Stockholders' equity:
 
 
 
Preferred stock $0.001 par value; 50,000,000 shares authorized; no shares issued or outstanding as of March 31, 2017 and December 31, 2016, respectively
$

 
$

Common stock $0.001 par value; 450,000,000 shares authorized; 4,563,196 and 4,563,196 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively
4,563

 
4,563

Capital in excess of par value
41,548,641

 
41,548,641

Distributions
(4,699,289
)
 
(3,855,311
)
Accumulated net investment income
1,633,088

 
888,806

Accumulated net realized gain from investments
396,983

 
226,597

Accumulated net unrealized appreciation on investments
360,322

 
447,496

Accumulated net unrealized appreciation on unfunded investments
22,001

 
8,162

   Total stockholders' equity
39,266,309

 
39,268,954

   Total liabilities and stockholders' equity
$
42,222,605

 
$
44,834,015

Net asset value per share
$
8.61

 
$
8.61

The accompanying notes are an integral part of these statements.

2


GRIFFIN-BENEFIT STREET PARTNERS BDC CORP.
STATEMENTS OF OPERATIONS
(Unaudited)
 
For the Three Months Ended March 31,
 
2017
 
2016
Investment income:
 
 
 
Interest from investments
$
914,696

 
$
503,403

Total investment income
914,696

 
503,403

Operating expenses:
 
 
 
Base management fees
177,783

 
103,108

Incentive fees
16,642

 

Organizational costs

 
7,322

General & administrative
73,439

 
78,452

Amortization of offering costs

 
1,288,646

Professional fees
53,937

 
109,469

Insurance expense
43,321

 
49,091

Directors fees
45,500

 
43,470

   Total expenses before reimbursement
410,622

 
1,679,558

Expense reimbursement (Note 5)
(240,208
)
 
(1,343,307
)
   Total expenses, net of reimbursement
170,414

 
336,251

Net investment income
744,282

 
167,152

Realized and unrealized gain on investments:
 
 
 
Net realized gain from investments
170,386

 
29,322

Net change in unrealized appreciation (depreciation) on investments
(87,174
)
 
16,980

Net change in unrealized appreciation on unfunded investments
13,839

 

Net gain on investments
97,051

 
46,302

Net increase in net assets resulting from operations
$
841,333

 
$
213,454

Per share information - basic and diluted
 
 
 
Net increase in net assets per share resulting from operations - basic and diluted
$
0.18

 
$
0.05

Weighted average common stock outstanding - basic and diluted
4,563,196

 
3,927,271

The accompanying notes are an integral part of these statements.



3


GRIFFIN-BENEFIT STREET PARTNERS BDC CORP.
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
 
For the Three Months Ended March 31,
 
2017
 
2016
Operations:
 
 
 
Net investment income
$
744,282

 
$
167,152

Net realized gain from investments
170,386

 
29,322

Net unrealized appreciation (depreciation) on investments
(87,174
)
 
16,980

Net change in unrealized appreciation on unfunded investments
13,839

 

Net increase in net assets resulting from operations
841,333

 
213,454

Stockholder distributions:
 
 
 
Distributions reinvested

 
(228,346
)
Distributions from investment income and realized gains
(843,978
)
 
(504,184
)
Net decrease in net assets resulting from stockholder distributions

(843,978
)
 
(732,530
)
Capital share transactions:
 
 
 
Issuance of common stock, net of discounts and offering costs

 
13,178,673

Distribution support contribution

 
199,806

Reinvestment of stockholder distributions

 
228,346

Net increase in net assets from capital share transactions

 
13,606,825

Total increase (decrease) in net assets
(2,645
)
 
13,087,749

Net assets at beginning of period
39,268,954

 
26,201,365

Net assets at end of period
$
39,266,309

 
$
39,289,114

Net asset value per common share
$
8.61

 
$
8.61

Common stock outstanding at end of period
4,563,196

 
4,563,196

Distributions in excess of net investment income at end of period
$
(3,066,201
)
 
$
(1,283,490
)

The accompanying notes are an integral part of these statements.



4


GRIFFIN-BENEFIT STREET PARTNERS BDC CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
 
For the Three Months Ended March 31,
 
2017
 
2016
Operating Activities:
 
 
 
Net increase in net assets resulting from operations
$
841,333

 
$
213,454

Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
 
 
 
Paid-in-kind interest income
(51,328
)
 
(5,499
)
Net accretion of discount on investments
(56,602
)
 
(27,228
)
Principal repayments of investments
4,824,601

 
1,875,090

Purchase of investments
(3,449,495
)
 
(6,920,120
)
Net realized loss from investments
(170,386
)
 
(29,322
)
Net change in unrealized (appreciation) depreciation on investments
87,174

 
(16,980
)
Amortization of offering costs

 
1,288,646

   (Increase) decrease in operating assets:
 
 
 
Interest receivable from investments
97,116

 
(73,658
)
Prepaid expenses
44,748

 
45,203

Due from affiliates
(112,854
)
 
(513,580
)
Accounts receivable
44,083

 

Receivable for unsettled trades
(25,707
)
 

 
 
 
 
   Increase (decrease) in operating liabilities:
 
 
 
Accounts payable and accrued liabilities
(92,627
)
 
(29,803
)
Management and incentive fees payable to affiliate
67,071

 
8,784

Due to affiliates
1,099

 
(781,374
)
Directors fees payable
(111,000
)
 
3,962

Unsettled trades payable
(2,460,000
)
 
(943,000
)
Discount for unfunded commitments
(14,160
)
 

Net cash used in operating activities
(536,934
)
 
(5,905,425
)
Financing activities:
 
 
 
            Issuance of common stock, net of discounts and offering costs

 
13,133,476

Distribution support contribution

 
199,806

Distributions paid to stockholders
(843,126
)
 
(297,976
)
Offering costs paid

 
(285,637
)
Net cash provided by (used in) financing activities
(843,126
)
 
12,749,669

Net increase (decrease) in cash and cash equivalents
(1,380,060
)
 
6,844,244

Cash and cash equivalents, beginning of period
7,451,353

 
9,577,910

Cash and cash equivalents, end of period
$
6,071,293

 
$
16,422,154

Supplemental disclosure of non-cash operating transactions:
 
 
 
Paid-in-kind interest income
$
51,328

 
$
5,499

Supplemental disclosure of non-cash financing transactions:
 
 
 
Distributions declared and payable
$
290,704

 
$
288,199

Distribution paid through DRP share issuances
$

 
$
228,346


The accompanying notes are an integral part of these statements.


5


GRIFFIN-BENEFIT STREET PARTNERS BDC CORP.
SCHEDULE OF INVESTMENTS

As of March 31, 2017
(Unaudited)
 
 
 
Portfolio Company (g)
 
Footnotes
 
Industry
 
Rate (b)
 
Index Rate (b)
 
LIBOR Floor
 
Maturity
 
Principal
 
Amortized Cost
 
Fair Value
 
% of Net Assets (e)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Secured Loans - First Lien
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affinion Group
 
 
 
Business Services
 
L+525

 
3 Month LIBOR
 
1.50
%
 
4/30/2018
 
$
2,970,686

 
$
2,844,178

 
$
2,958,625

 
7.5
%
Alvogen Pharma US, Inc.
 
 
 
Pharmaceuticals
 
L+500

 
3 Month LIBOR
 
1.00
%
 
4/1/2022
 
1,823,112

 
1,785,823

 
1,807,925

 
4.6
%
Ardent Legacy
 
 
 
Health Facilities
 
L+550

 
3 Month LIBOR
 
1.00
%
 
8/4/2021
 
246,250

 
244,355

 
245,634

 
0.6
%
Asset International - TL
 
(d)
 
Business Services
 
L+850

 
3 Month LIBOR
 
1.00
%
 
5/15/2021
 
2,479,619

 
2,436,633

 
2,447,508

 
6.2
%
Asset International - DDTL
 
(d) (h)
 
Business Services
 
L+850

 
3 Month LIBOR
 
1.00
%
 
5/15/2021
 
338,000

 
202,800

 
201,508

 
0.5
%
Asset International - Revolver
 
(d) (h)
 
Business Services
 
L+850

 
3 Month LIBOR
 
1.00
%
 
5/15/2021
 
135,000

 
67,500

 
66,998

 
0.2
%
Bahakel Communications, Ltd.
 
(d) (h)
 
Media - Broadcast
 
L+750

 
1 Month LIBOR
 
1.00
%
 
7/29/2020
 
270,848

 
235,489

 
235,549

 
0.6
%
Bahakel Communications, Ltd. - Revolver
 
(d) (h)
 
Media - Broadcast
 
L+750

 
Unfunded
 
1.00
%
 
7/29/2020
 
14,000

 

 

 
%
Beaver Visitec International, Inc.
 
 
 
Healthcare - Products
 
L+500

 
3 Month LIBOR
 
1.00
%
 
8/21/2023
 
1,990,000

 
1,971,483

 
1,985,025

 
5.1
%
Centric Group
 

 
Business Services
 
L+675

 
1 Month LIBOR
 
1.00
%
 
1/31/2023
 
3,000,000

 
2,985,296

 
3,027,511

 
7.7
%
Deep Gulf Energy II, LLC
 
(d)
 
Energy - Exploration & Production
 
L+1300

 
1,2,3,6 Month LIBOR
 
1.50
%
 
9/30/2018
 
100,000

 
98,810

 
95,110

 
0.2
%
Inventure Foods, Inc.
 
(d)
 
Food - Wholesale
 
L+800

 
3 Month LIBOR
 
1.00
%
 
11/17/2020
 
829,065

 
812,570

 
831,751

 
2.1
%
Lightsquared
 
(c)
 
Telecom
 
L+875

 
3 Month LIBOR
 
1.00
%
 
6/15/2020
 
112,886

 
110,643

 
110,007

 
0.3
%
MyEyeDr
 
(d)
 
Health Facilities
 
L+625

 
3 Month LIBOR
 
1.00
%
 
8/14/2021
 
796,000

 
785,417

 
787,459

 
2.0
%
MyEyeDr - Term Loan
 
(d)
 
Health Facilities
 
L+625

 
3 Month LIBOR
 
1.00
%
 
8/14/2021
 
253,261

 
248,777

 
250,597

 
0.6
%
MyEyeDr - Delayed Draw
 
(d) (h)
 
Health Facilities
 
L+625

 
Unfunded
 
1.00
%
 
8/14/2021
 
1,200,000

 

 

 
%
MyEyeDr - Revolver
 
(d) (h)
 
Health Facilities
 
L+625

 
Unfunded
 
1.00
%
 
8/14/2021
 
43,000

 

 

 
%
Plano Molding Company, LLC
 
(d)
 
Consumer Products
 
L+750

 
3 Month LIBOR
 
1.00
%
 
5/12/2021
 
80,165

 
79,386

 
71,572

 
0.2
%
Premiere Global Services Inc.
 
(a) (f)
 
Telecom
 
L+650

 
1 Month LIBOR
 
1.00
%
 
12/8/2021
 
2,874,042

 
2,685,340

 
2,858,465

 
7.3
%
Rue21, Inc.
 
 
 
Retail
 
L+463

 
3 Month LIBOR
 
1.00
%
 
10/9/2020
 
788,541

 
726,908

 
148,246

 
0.4
%
Santek Waste Services, Inc. - Term Loan
 
(c) (d)
 
Environmental
 
L+1000

 
1 Month LIBOR
 
1.00
%
 
12/4/2020
 
708,748

 
691,163

 
701,654

 
1.8
%
Santek Waste Services, Inc. - DDTL
 
(c) (d) (h)
 
Environmental
 
L+1000

 
1 Month LIBOR
 
1.00
%
 
12/4/2020
 
252,187

 
150,699

 
154,161

 
0.4
%
Santek Waste Services, Inc. - Revolver
 
(d) (h)
 
Environmental
 
L+1000

 
Unfunded
 
1.00
%
 
12/4/2020
 
66,000

 

 

 
%
Solarwinds, Inc.
 
(a)
 
Technology
 
L+350

 
1 Month LIBOR
 
1.00
%
 
2/3/2023
 
1,082,831

 
1,029,496

 
1,082,290

 
2.8
%
TaxAct, Inc.
 
(a)
 
Software/Services
 
L+600

 
1 Month LIBOR
 
1.00
%
 
1/3/2023
 
520,984

 
487,352

 
522,938

 
1.3
%

6


GRIFFIN-BENEFIT STREET PARTNERS BDC CORP.
SCHEDULE OF INVESTMENTS (Continued)

As of March 31, 2017
(Unaudited)

 
 
 
Portfolio Company (g)
 
Footnotes
 
Industry
 
Rate (b)
 
Index Rate (b)
 
LIBOR Floor
 
Maturity
 
Principal
 
Amortized Cost
 
Fair Value
 
% of Net Assets (e)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tribune Publishing Company
 
 
 
Newspaper
 
L+475

 
1 Month LIBOR
 
1.00
%
 
8/4/2021
 
53,110

 
52,518

 
53,110

 
0.1
%
Veritas
 
 
 
Software/Services
 
L+562.5

 
3 Month LIBOR
 
1.00
%
 
1/27/2023
 
483,016

 
416,623

 
478,388

 
1.2
%
Victory Capital Management
 
(a)
 
Financial Services
 
L+750

 
3 Month LIBOR
 
1.00
%
 
10/29/2021
 
1,678,082

 
1,627,766

 
1,693,470

 
4.3
%
Vizient, Inc.
 
 
 
Healthcare
 
L+400

 
1 Month LIBOR
 
1.00
%
 
2/13/2023
 
1,319,779

 
1,282,954

 
1,329,678

 
3.4
%
Walgreens Infusion
 
 
 
Healthcare
 
L+500

 
2 Month LIBOR
 
1.00
%
 
4/7/2022
 
589,030

 
589,805

 
578,722

 
1.5
%
   Total Senior Secured Loans - First Lien
 
 
 
 
 
 
 
 
 
 
 
$
24,649,784

 
$
24,723,901

 
62.9
%
Senior Secured Loans - Second Lien
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asurion Corporation
 
 
 
Business Services
 
L+750

 
1 Month LIBOR
 
1.00
%
 
3/3/2021
 
$
2,000,000

 
$
1,996,101

 
$
2,022,500

 
5.1
%
Cast & Crew Payroll, LLC
 
 
 
Business Services
 
L+775

 
3 Month LIBOR
 
1.00
%
 
8/12/2023
 
222,316

 
220,883

 
220,093

 
0.6
%
Cirque Du Soleil
 
(a) (g)
 
Entertainment
 
L+825

 
3 Month LIBOR
 
1.00
%
 
6/23/2023
 
1,817,918

 
1,791,552

 
1,799,739

 
4.6
%
Lightsquared
 
(c)
 
Telecom
 
L+1250

 
3 Month LIBOR
 
1.00
%
 
12/7/2020
 
1,292,282

 
1,201,800

 
1,012,025

 
2.6
%
   Total Senior Secured Loans - Second Lien
 
 
 
 
 
 
 
 
 
 
 
$
5,210,336

 
$
5,054,357

 
12.9
%
Senior Secured Bonds
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Covenant Surgical Partners
 
 
 
Health Facilities
 
8.75
%
 
 
 
 
 
8/1/2019
 
$
400,000

 
$
401,432

 
$
383,625

 
1.0
%
Hexion Inc.
 
 
 
Chemicals
 
10.00
%
 
 
 
 
 
4/15/2020
 
900,000

 
837,338

 
896,365

 
2.3
%
Radio One Inc.
 
 
 
Media - Broadcast
 
7.38
%
 
 
 
 
 
4/15/2022
 
500,000

 
484,300

 
522,500

 
1.3
%
   Total Senior Secured Bonds
 
 
 
 
 
 
 
 
 
 
 
$
1,723,070

 
$
1,802,490

 
4.6
%
Senior Unsecured Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cablevision
 
(a)
 
Cable
 
10.88
%
 
 
 
 
 
10/15/2025
 
$
1,000,000

 
$
1,033,129

 
$
1,197,500

 
3.0
%
Frontier Communications, Corp.
 
(a)
 
Telecom
 
8.88
%
 
 
 
 
 
9/15/2020
 
77,000

 
77,000

 
81,235

 
0.2
%
Frontier Communications, Corp.
 
(a)
 
Telecom
 
11.00
%
 
 
 
 
 
9/15/2025
 
494,000

 
482,396

 
477,945

 
1.2
%
Frontier Communications, Corp.
 
(a)
 
Telecom
 
10.50
%
 
 
 
 
 
9/15/2022
 
116,000

 
116,000

 
117,450

 
0.3
%
Monitronics International, Inc.
 
(a)
 
Business Services
 
9.13
%
 
 
 
 
 
4/1/2020
 
800,000

 
754,736

 
773,000

 
2.0
%
Presidio Holdings, Inc.
 
 
 
Technology
 
10.25
%
 
 
 
 
 
2/15/2023
 
1,095,000

 
1,043,139

 
1,209,975

 
3.1
%
   Total Senior Unsecured Debt
 
 
 
 
 
 
 
 
 
 
 
$
3,506,400

 
$
3,857,105

 
9.8
%
Equity/Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Santek Waste Services, Inc.
 
(d)
 
Environmental
 
 
 
 
 
 
 
N/A
 
 NM*

 
$
8,497

 
$
20,556

 
0.1
%
Total Equity/Other
 
 
 
 
 
 
 
 
 
 
 
$
8,497

 
$
20,556

 
0.1
%
TOTAL INVESTMENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
35,098,087

 
$
35,458,409

 
90.3
%

7


____________________

(a) Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets. As of March 31, 2017, 25.18% of the Company’s total assets were non-qualifying assets.
(b) The majority of the investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”) which reset daily, monthly, quarterly, or semiannually. For each investment the Company has provided the spread over LIBOR. The 1, 2, 3, and 6 month LIBOR rates were 0.98%, 1.03%, 1.15%, and 1.42% respectively, as of March 31, 2017. Certain investments are subject to a LIBOR interest rate floor.
(c) Represents investments with payment-in-kind interest.
(d) As there is no readily available market value for these investments, the fair value of these investments is determined in good faith by the Company's board of directors as required by the Investment Company Act of 1940, in conjunction with a nationally recognized valuation firm. (See Note 4, Fair Value of Financial Instruments, in the accompanying notes to the financial statements.)
(e) Percentages are based on the Company's net assets of $39,266,309 as of March 31, 2017.
(f) Position or portion thereof was unsettled as of March 31, 2017.
(g) All of the Company's investments are domiciled in the United States except for Cirque Du Soleil which is domiciled in Canada.
(h) All or a portion of this commitment was unfunded at March 31, 2017. As such, interest is earned only on the funded portion of this commitment. Refer to Note 6, Commitments and Contingencies, of the notes to the financial statements for additional detail.


The accompanying notes are an integral part of these statements.

GRIFFIN-BENEFIT STREET PARTNERS BDC CORP.
SCHEDULE OF INVESTMENTS

As of December 31, 2016

 
 
 
Portfolio Company (g)
 
Footnotes
 
Industry
 
Rate (b)
 
Index Rate (b)
 
LIBOR Floor
 
Maturity
 
Principal
 
Amortized Cost
 
Fair Value
 
% of Net Assets (e)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Secured Loans - First Lien
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AccentCare, Inc.
 
 
 
Healthcare
 
L+575

 
3 Month LIBOR
 
1.00
%
 
9/3/2021
 
$
195,000

 
$
191,814

 
$
189,150

 
0.5
%
Affinion Group
 
(f)
 
Business Services
 
L+525

 
3 Month LIBOR
 
1.50
%
 
4/30/2018
 
2,978,342

 
2,824,193

 
2,958,983

 
7.5
%
Alvogen Pharma US, Inc.
 
(f)
 
Pharmaceuticals
 
L+500

 
3 Month LIBOR
 
1.00
%
 
4/1/2022
 
1,848,317

 
1,809,270

 
1,783,626

 
4.6
%
Ardent Legacy
 
 
 
Health Facilities
 
L+550

 
3 Month LIBOR
 
1.00
%
 
8/4/2021
 
246,875

 
244,822

 
245,023

 
0.6
%
Asset International
 
(d)
 
Business Services
 
L+850

 
3 Month LIBOR
 
1.00
%
 
5/15/2021
 
2,495,413

 
2,449,904

 
2,461,550

 
6.3
%
Asset International - Delayed Draw
 
(d) (h)
 
Business Services
 
L+850

 
2 Month LIBOR
 
1.00
%
 
5/15/2021
 
338,000

 
202,800

 
201,433

 
0.5
%
Asset International - Revolver
 
(d) (h)
 
Business Services
 
P+775

 
Prime
 
 
 
5/15/2021
 
135,000

 
67,500

 
66,973

 
0.2
%
Bahakel Communications, Ltd.
 
(d) (h)
 
Media - Broadcast
 
L+750

 
1 Month LIBOR
 
1.00
%
 
7/29/2020
 
278,085

 
242,613

 
244,459

 
0.6
%

8


GRIFFIN-BENEFIT STREET PARTNERS BDC CORP.
SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2016


 
 
 
Portfolio Company (g)
 
Footnotes
 
Industry
 
Rate (b)
 
Index Rate (b)
 
LIBOR Floor
 
Maturity
 
Principal
 
Amortized Cost
 
Fair Value
 
% of Net Assets (e)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bahakel Communications, Ltd. - Revolver
 
(d) (h)
 
Media - Broadcast
 
L+750

 
Unfunded
 
1.00
%
 
7/29/2020
 
14,000

 

 

 
%
Beaver Visitec International, Inc.
 
 
 
Healthcare - Products
 
L+500

 
1 Month LIBOR
 
1.00
%
 
8/21/2023
 
1,995,000

 
1,975,531

 
1,990,013

 
5.1
%
Centric Group
 
(d)
 
Business Services
 
L+675

 
1 Month LIBOR
 
1.00
%
 
10/14/2022
 
3,000,000

 
2,941,802

 
3,071,160

 
7.8
%
Deep Gulf Energy II, LLC
 
(d)
 
Energy - Exploration & Production
 
L+1300

 
1,2,5,6 Month LIBOR
 
1.50
%
 
9/30/2018
 
100,000

 
98,592

 
95,320

 
0.2
%
Inventure Foods, Inc.
 
(d)
 
Food - Wholesale
 
L+800

 
3 Month LIBOR
 
1.00
%
 
11/17/2020
 
990,000

 
972,998

 
992,930

 
2.5
%
Lightsquared
 
(c)
 
Telecom
 
L+875

 
3 Month LIBOR
 
1.00
%
 
6/15/2020
 
110,200

 
107,787

 
102,486

 
0.3
%
MyEyeDr
 
(d)
 
Health Facilities
 
L+625

 
1 Month LIBOR
 
1.00
%
 
8/14/2021
 
798,000

 
786,902

 
789,038

 
2.0
%
MyEyeDr
 
(d)
 
Health Facilities
 
L+625

 
3 Month LIBOR
 
1.00
%
 
8/14/2021
 
253,904

 
249,184

 
251,108

 
0.6
%
MyEyeDr - Delayed Draw
 
(d) (h)
 
Health Facilities
 
L+625

 
Unfunded
 
1.00
%
 
8/14/2021
 
1,200,000

 

 

 
%
MyEyeDr - Revolver
 
(d) (h)
 
Health Facilities
 
L+625

 
Unfunded
 
1.00
%
 
8/14/2021
 
43,000

 

 

 
%
Plano Molding Company, LLC
 
(d)
 
Consumer Products
 
L+700

 
3 Month LIBOR
 
1.00
%
 
5/12/2021
 
80,367

 
79,685

 
78,076

 
0.2
%
Premiere Global Services Inc.
 
(a) (f)
 
Telecom
 
L+650

 
3 Month LIBOR
 
1.00
%
 
12/8/2021
 
2,911,959

 
2,714,248

 
2,833,714

 
7.2
%
Rue21, Inc.
 
 
 
Retail
 
L+463

 
3 Month LIBOR
 
1.00
%
 
10/9/2020
 
788,541

 
723,021

 
302,871

 
0.8
%
Santek Waste Services, Inc.
 
(c) (d)
 
Environmental
 
L+1000

 
3 Month LIBOR
 
1.00
%
 
12/4/2020
 
707,663

 
688,976

 
694,996

 
1.8
%
Santek Waste Services, Inc. - Delayed Draw
 
(c) (d) (h)
 
Environmental
 
L+1000

 
1 and 3 Month LIBOR
 
1.00
%
 
12/4/2020
 
251,102

 
130,735

 
132,849

 
0.3
%
Santek Waste Services, Inc. - Revolver
 
(d) (h)
 
Environmental
 
L+1000

 
Unfunded
 
1.00
%
 
12/4/2020
 
66,000

 

 

 
%
Solarwinds, Inc.
 
(a)
 
Technology
 
L+450

 
3 Month LIBOR
 
1.00
%
 
2/3/2023
 
1,085,545

 
1,036,668

 
1,097,953

 
2.8
%
TaxAct, Inc.
 
(a)
 
Software/Services
 
L+600

 
1 Month LIBOR
 
1.00
%
 
1/3/2023
 
610,161

 
569,292

 
611,687

 
1.6
%
Tribune Publishing Company
 
 
 
Newspaper
 
L+475

 
1 Month LIBOR
 
1.00
%
 
8/4/2021
 
61,869

 
61,131

 
61,637

 
0.2
%
Veritas
 
 
 
Software/Services
 
L+562.5

 
3 Month LIBOR
 
1.00
%
 
1/27/2023
 
484,235

 
415,482

 
446,707

 
1.1
%
Victory Capital Management
 
(a)
 
Financial Services
 
L+750

 
3 Month LIBOR
 
1.00
%
 
10/29/2021
 
1,702,055

 
1,653,705

 
1,722,275

 
4.4
%
Vizient, Inc.
 
 
 
Healthcare
 
L+400

 
1 Month LIBOR
 
1.00
%
 
2/13/2023
 
1,319,779

 
1,281,421

 
1,337,517

 
3.4
%
Walgreens Infusion
 
 
 
Healthcare
 
L+500

 
3 Month LIBOR
 
1.00
%
 
4/7/2022
 
590,525

 
591,334

 
565,428

 
1.4
%
   Total Senior Secured Loans - First Lien
 
 
 
 
 
 
 
 
 
 
 
$
25,111,410

 
$
25,328,962

 
64.5
%
Senior Secured Loans - Second Lien
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AccentCare, Inc.
 
 
 
Healthcare
 
L+950

 
3 Month LIBOR
 
1.00
%
 
9/3/2022
 
$
200,000

 
$
196,966

 
$
194,000

 
0.5
%

9


GRIFFIN-BENEFIT STREET PARTNERS BDC CORP.
SCHEDULE OF INVESTMENTS (Continued)

As of December 31, 2016


 
 
 
Portfolio Company (g)
 
Footnotes
 
Industry
 
Rate (b)
 
Index Rate (b)
 
LIBOR Floor
 
Maturity
 
Principal
 
Amortized Cost
 
Fair Value
 
% of Net Assets (e)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asurion Corporation
 
 
 
Business Services
 
L+750

 
1 Month LIBOR
 
1.00
%
 
3/3/2021
 
2,000,000

 
1,995,413

 
2,031,260

 
5.2
%
Cast & Crew Payroll, LLC
 
 
 
Business Services
 
L+775

 
3 Month LIBOR
 
1.00
%
 
8/12/2023
 
300,000

 
297,923

 
283,500

 
0.7
%
Cirque Du Soleil
 
(a) (g)
 
Entertainment
 
L+825

 
3 Month LIBOR
 
1.00
%
 
6/23/2023
 
1,369,918

 
1,344,565

 
1,332,246

 
3.4
%
Lightsquared
 
(c)
 
Telecom
 
L+1250

 
3 Month LIBOR
 
1.00
%
 
12/7/2020
 
1,276,092

 
1,178,587

 
881,307

 
2.2
%
   Total Senior Secured Loans - Second Lien
 
 
 
 
 
 
 
 
 
 
 
$
5,013,454

 
$
4,722,313

 
12.0
%
Senior Secured Bonds
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Covenant Surgical Partners
 
 
 
Health Facilities
 
8.75
%
 
 
 
 
 
8/1/2019
 
$
400,000

 
$
401,569

 
$
387,000

 
1.0
%
Hexion, Inc.
 
 
 
Chemicals
 
10.00
%
 
 
 
 
 
4/15/2020
 
900,000

 
833,561

 
886,500

 
2.2
%
Radio One, Inc.
 
 
 
Media - Broadcast
 
7.38
%
 
 
 
 
 
4/15/2022
 
500,000

 
483,689

 
493,750

 
1.3
%
   Total Senior Secured Bonds
 
 
 
 
 
 
 
 
 
 
 
$
1,718,819

 
$
1,767,250

 
4.5
%
Senior Unsecured Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cablevision
 
(a)
 
Cable
 
10.88
%
 
 
 
 
 
10/15/2025
 
$
1,000,000

 
$
1,033,729

 
$
1,186,250

 
3.0
%
Frontier Communications, Corp.
 
(a)
 
Telecom
 
8.88
%
 
 
 
 
 
9/15/2020
 
77,000

 
77,000

 
82,005

 
0.2
%
Frontier Communications, Corp.
 
(a)
 
Telecom
 
10.50
%
 
 
 
 
 
9/15/2022
 
116,000

 
116,000

 
121,480

 
0.3
%
Frontier Communications, Corp.
 
(a)
 
Telecom
 
11.00
%
 
 
 
 
 
9/15/2025
 
494,000

 
482,198

 
508,820

 
1.3
%
Monitronics International, Inc.
 
(a)
 
Business Services
 
9.13
%
 
 
 
 
 
4/1/2020
 
800,000

 
751,708

 
755,410

 
1.9
%
Presidio Holdings, Inc.
 
 
 
Technology
 
10.25
%
 
 
 
 
 
2/15/2023
 
1,950,000

 
1,882,062

 
2,149,875

 
5.5
%
   Total Senior Unsecured Debt
 
 
 
 
 
 
 
 
 
 
 
$
4,342,697

 
$
4,803,840

 
12.2
%
Equity/Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Santek Waste Services, Inc.
 
(d)
 
Environmental
 
0.00%

 
 
 
 
 
N/A
 
 NM*

 
$
8,497

 
$
20,008

 
0.1
%
Total Equity/Other
 
 
 
 
 
 
 
 
 
 
 
$
8,497

 
$
20,008

 
0.1
%
TOTAL INVESTMENTS
 
(e)
 
 
 
 
 
 
 
 
 
 
 
 
 
$
36,194,877

 
$
36,642,373

 
93.3
%
____________________


10


(a) Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets. As of December 31, 2016, 22.95% of the Company’s total assets were non-qualifying assets.
(b) The majority of the investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”), or Prime Rate ("Prime" or "P") which reset daily, monthly, quarterly, or semiannually. For each investment the Company has provided the spread over LIBOR and Prime. The 1, 2, 3, 5, 6 month LIBOR rates and Prime rate were 0.77%, 0.82%, 1.00%, 0.37%, 1.32% and 3.75%, respectively, as of December 31, 2016. Certain investments are subject to a LIBOR or Prime interest rate floor.
(c) Represents investments with payment-in-kind interest.
(d) As there is no readily available market value for these investments, the fair value of these investments is determined in good faith by the Company's board of directors as required by the Investment Company Act of 1940, in conjunction with a nationally recognized valuation firm. (See Note 4, Fair Value of Financial Instruments, in the accompanying notes to the financial statements.)
(e) Percentages are based on the Company's net assets of $39,268,954 as of December 31, 2016.
(f) Position or portion thereof was unsettled as of December 31, 2016.
(g) All of the Company's investments are domiciled in the United States except for Cirque Du Soleil which is domiciled in Canada.
(h) All or a portion of this commitment was unfunded at December 31, 2016. As such, interest is earned only on the funded portion of this commitment. Refer to Note 6, Commitments and Contingencies, of the notes to the financial statements for additional detail.
*Not meaningful




The accompanying notes are an integral part of these statements.


11


GRIFFIN-BENEFIT STREET PARTNERS BDC CORP.
NOTES TO FINANCIAL STATEMENTS
As of March 31, 2017
(Unaudited)
Note 1. Organization
Griffin-Benefit Street Partners BDC Corp., a Maryland corporation (the "Company"), was formed on May 27, 2014 under the Maryland General Corporation Law. The Company was organized as an externally managed, non-diversified closed-end management investment company and has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. The Company has elected to be treated for federal income tax purposes as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986. The Company's year-end is December 31.
The Company has invested substantially all of the proceeds the Company raised from the offering of its shares, net of expenses, in private U.S. middle-market companies in accordance with the Company's investment objectives.
The Company is externally managed by Griffin Capital BDC Advisor, LLC ("GBA" or "Adviser"), a Delaware limited liability company. GBA is indirectly owned by Griffin Capital Company, LLC ("Griffin Capital") and Randy Anderson, the Company's Executive Vice President who directly holds a 5% interest in GBA. Kevin A. Shields, Chairman of the Board of Directors and President of the Company, controls the sole stockholder of Griffin Capital. GBA is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). GBA oversees the management of the Company's activities and is responsible for making investment decisions with respect to, and providing day-to-day management and administration of, the Company's investment portfolio under the terms of an advisory agreement between the Company and GBA. The Company and GBA have engaged Benefit Street Partners L.L.C. ("Benefit Street" or "Sub-Adviser"), a Delaware limited liability company and an affiliate of Providence Equity Partners L.L.C. ("Providence"), to act as the Company's Sub-Adviser. Benefit Street is a registered investment adviser under the Advisers Act and assists GBA with the management of the activities and operations of the Company pursuant to a sub-advisory agreement by and among the Company, GBA, and Benefit Street.
The Company entered into a dealer manager agreement with Griffin Capital Securities, LLC, formerly Griffin Capital Securities, Inc. ("GCS" or the "Dealer Manager"), and an administration agreement with Griffin Capital BDC Administrator, LLC ("Griffin Capital BDC Administrator"), both of which are indirect subsidiaries of Griffin Capital.
On January 20, 2015, the Company began offering on a continuous basis up to $1.5 billion in shares of common stock at an initial offering price of $10.00 per share (the "Offering"). On May 1, 2015, the Company raised the minimum offering requirement of $2.5 million as a result of separate investments of $1.25 million from an affiliate of Griffin Capital and from Benefit Street. As a result of achieving the minimum offering requirement, the Company commenced operations. On July 25, 2014 and July 28, 2014, pursuant to a private placement, each of GBA and Benefit Street, respectively, contributed $100,000 to purchase 11,111 shares of the Company's common stock at $9.00 per share, which represents the initial public offering price of $10.00 per share, net of selling commissions and dealer manager fees. Neither GBA nor Benefit Street will tender these shares for repurchase as long as it remains the Adviser or Sub-Adviser, respectively. On December 23, 2015, the Company decreased its public offering price from $10.00 per share to $9.80 per share, in accordance with its pricing policy.
On March 15, 2016, the Company's board of directors determined that it is in the Company's and the stockholders’ best interest to suspend the Offering. The board of directors’ determination was based on the Adviser's belief that market conditions and the Company's current structure are not conducive to continuing the Offering, and that the board of directors consider an alternative fund structure to reduce the Company's exposure to potential federal and state regulatory challenges and unfavorable market conditions that non-traded BDCs faced in the fourth quarter of 2015 and first quarter of 2016.
On March 29, 2017, the Company's board of directors approved the entry into the Agreement and Plan of Reorganization (the “Agreement”) with Griffin Institutional Access Credit Fund, a Delaware statutory trust (“GIA Credit Fund”), pursuant to which, subject to shareholder approval and the satisfaction or waiver of certain conditions, the Company will transfer all of its assets to GIA Credit Fund in exchange for shares of GIA Credit Fund (“Reorganization Shares”) and the assumption by GIA Credit Fund of all of the Company's liabilities (the “Reorganization”). The Company executed the Agreement on May 5, 2017.
Pursuant to the terms and subject to the conditions set forth in the Agreement, GIA Credit Fund will issue Reorganization Shares with an aggregate net asset value equal to the aggregate value of the assets that it receives from the Company, less the liabilities it assumes from the Company. Shareholders will exchange the shares of the Company for Reorganization Shares, which will be distributed to our stockholders in proportion to their holdings.

12



    The Company and GIA Credit Fund have similar investment objectives, strategies, and restrictions. The Company's investment objective is to generate both current income and capital appreciation, while GIA Credit Fund’s investment objective is to generate a return comprised of both current income and capital appreciation with an emphasis on current income with low volatility and low correlation to the broader markets.
The consummation of the Reorganization is subject to certain customary closing conditions, including, among others, the approval of the Reorganization by the Company's stockholders, the absence of legal impediments to the consummation of the Reorganization, the absence of a material adverse effect on either the Company or GIA Credit Fund, and compliance by the Company and GIA Credit Fund with federal and state legal and regulatory requirements, including the effectiveness of the registration statement on Form N-14 that will be filed with the SEC and the receipt of tax opinions related to the tax-free nature of the transaction. In addition, the Reorganization Shares will be subject to an expense limitation agreement that will limit the total annual operating expenses of the Reorganization shares.
The Agreement may be terminated and abandoned with respect to the Reorganization by mutual agreement by the Company and GIA Credit Fund, or by either the Company or GIA Credit Fund in the event of a material breach of the Agreement or a failure of any conditions precedent. In the event of a termination, GIA Credit Fund’s adviser will bear all costs associated with the Reorganization.
Subject to stockholder approval, the Company's board of directors also approved the proposal to authorize the Company (as part of the Reorganization process) to withdraw the Company's election to be treated as a BDC under the 1940 Act. Once the BDC election is withdrawn, the Company will no longer be subject to the limitations imposed on BDCs under the 1940 Act.
There is no guarantee that the Reorganization will be consummated.
The Company will continue to operate as a non-traded BDC unless and until the stockholders approve the proposed plan of Reorganization.
As of March 15, 2016, the date the offering was suspended, the Company had issued 4,563,196 shares of common stock for gross proceeds of approximately $44.8 million, including shares purchased in the private placement and shares issued pursuant to the Company's DRP, which amounts remained unchanged as of March 31, 2017.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
The accompanying financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial reporting. The accompanying interim financial statements of the Company and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X of the Securities Act of 1933. The Company has determined it meets the definition of an investment company and follows the accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 — Financial Services — Investment Companies ("ASC Topic 946").
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could materially differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term, highly liquid investments that are readily convertible to cash with a maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value. There are no restrictions on the use of the Company's cash balance, as of March 31, 2017.
The Company maintains its cash accounts with major financial institutions. The cash balances consist of business checking accounts. These accounts are insured by the Federal Deposit Insurance Corporation up to $250,000 at each institution. The Company has not experienced any losses with respect to cash balances in excess of government provided insurance. Management believes there was no significant concentration of credit risk with respect to the cash balances as of March 31, 2017.

13


Valuation of Portfolio Investments
Portfolio investments are reported on the statements of assets and liabilities at fair value. The Company performs an analysis of each investment to determine fair value in accordance with ASC Topic 820 - Fair Value Measurements and Disclosures ("ASC Topic 820").
ASC Topic 820 clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include in summarized form:
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.
There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each asset while employing a valuation process that is consistently followed.
In making fair value determinations, the following guidelines are used:
Valuation Methods
The Company has established a valuation and pricing committee (the "Valuation and Pricing Committee"), which is responsible for determining the value of the assets on a quarterly basis, based upon inputs established by the Adviser. The Valuation and Pricing Committee is also responsible for engaging a third-party valuation specialist to provide value determinations for Level 3 assets. Values determined by a third-party valuation specialist must be reviewed and approved by the Valuation and Pricing Committee. If any of the Company's Level 3 designated assets are deemed to require additional monitoring, the independent third-party valuation specialist will assist in reviewing these assets.
The Company values all Level 2 assets by using inputs from an independent third-party pricing service that provide prevailing bid and ask prices that are screened for validity by the service from dealers on the date of the relevant period end. For investments for which the third-party pricing service is unable to obtain quoted prices, the Company intends to obtain bid and ask prices directly from dealers that make a market in such investments. To the extent that the Company holds investments for which no active secondary market exists, i.e. Level 3 assets, and, therefore, no bid and ask prices can be readily obtained, the independent third-party valuation service will be utilized to value such investments. The Company periodically benchmarks the bid and ask prices received from the third-party pricing service and valuations received from the third-party valuation service, as applicable, against the actual prices at which the Company purchases and sells investments. The Company believes that these prices are reliable indicators of fair value.
Investments where a market price is readily available:
Generally, the value of the Company's equity interests in public companies for which market quotations are readily available will be based upon the most recent closing public market price. If no sales of such interests occurred on the determination date, such interests shall be valued at the bid quote for long investments, and the last ask quote for investments sold but not yet purchased, obtained from third-party pricing services, including, where appropriate, multiple broker dealers, as determined by the Adviser.
Notwithstanding the foregoing, if in the reasonable judgment of the Adviser and Sub-Adviser, the price for any securities held by the Company and determined in the manner described above does not accurately reflect the fair value of such security, the Adviser and Sub-Adviser will value such security at the applicable bid or ask quotes obtained by broker dealers that make a market in the security, and report such change in the valuation to the board of directors or its designee as soon as practicable.

14


Investments where a market price is not readily available:
Any securities or other assets that are not publicly traded or for which a market price is not otherwise readily available are valued at a price that reflects each such security's fair value. With respect to such investments, the investments will be reviewed and valued using one or more of the following types of analyses:
(i)
Market comparable statistics and public trading multiples discounted for illiquidity, minority ownership and other factors for companies with similar characteristics.
(ii)
Valuations implied by third-party investments in the applicable portfolio companies.
(iii)
Discounted cash flow analysis, including a terminal value or exit multiple.
Below is a description of factors that the Valuation and Pricing Committee, with the assistance of an independent third-party valuation specialist in certain circumstances, may consider when valuing the Company's equity and debt investments where a market price is not readily available:
the size and scope of a portfolio company and its specific strengths and weaknesses;
prevailing interest rates for like securities;
expected volatility in future interest rates;
leverage;
call features, put features and other relevant terms of the debt;
the borrower's ability to adequately service its debt;
the fair market value of the portfolio company in relation to the face amount of its outstanding debt;
the quality of collateral securing the Company's debt investments;
multiples of earnings before interest, tax, depreciation and amortization ("EBITDA"), cash flows, net income, revenues or, in some cases, book value or liquidation value;
the liquidity of the investment as determined by a pricing service; and
other factors deemed applicable.
All of these factors may be subject to adjustments based upon the particular circumstances of a portfolio company or the Company's actual investment position.
Credit default swaps and interest rate swaps will be valued at estimated fair value based on a pricing model that utilizes quoted inputs, including among other things, yield curves.
Unrealized appreciation and depreciation on total return swaps represents the change in fair value plus net accrued interest of the underlying reference assets.
Valuation Process
With respect to investments for which market quotations are not readily available, the Company will undertake a multi-step valuation process each quarter, as described below:
the quarterly valuation process will begin with each portfolio company or investment being identified by the investment professionals of the Adviser and Sub-Adviser and members of the Company's senior management team as investments that require the assistance of the independent third-party valuation specialist;

preliminary valuation calculations and conclusions will then be documented by the independent third-party valuation specialist and discussed with the investment professionals of the Adviser and Sub-Adviser and the relevant investment professionals of GBA, Benefit Street and the Company's senior management team;
designated members of the Valuation and Pricing Committee, or as delegated to the Adviser and Sub-Adviser, will review and comment on the preliminary valuation provided by the independent third-party valuation firm;

15


the Valuation and Pricing Committee will meet with members of the Adviser's and Sub-Adviser's management teams and the independent third-party valuation specialist to discuss the results provided by the independent valuation firm; and
the board of directors will discuss the valuation and will determine the fair value of each investment in the Company's portfolio in good faith based on various statistical and other factors, including the input and recommendation of the Adviser and Sub-Adviser, the Valuation and Pricing Committee, and the third-party valuation specialist.
The board of directors is responsible for the valuation of the Company's portfolio investments at fair value as determined in good faith pursuant to consistently applied valuation procedures and valuation process.
Revenue Recognition
The Company records interest income on an accrual basis to the extent that the Company expects to collect such amounts. For loans and debt investments with contractual payment-in-kind, or PIK, interest that represents contractual interest accrued and added to the loan balance that generally becomes due at maturity, the Company does not accrue PIK interest if the portfolio company valuation indicates that such PIK interest is not collectible. The Company does not accrue a receivable for interest on loans and debt investments if it is determined that interest for such loans and debt investments is not collectible. Loans will be placed on non-accrual status when principal or interest payments are past due 30 days or more and/or when there is reasonable doubt that principal or interest will be collected. Upfront loan origination fees, original issue discount and market discount or premium are capitalized, and amortized as interest income using the effective yield method. Prepayment premiums on loans and debt investments are recorded as interest income.
Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation
The Company will measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, but considering unamortized upfront loan origination fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.
Organizational Costs
Organizational costs include, among other things, the cost of organizing as a Maryland corporation, including the cost of legal services and other fees pertaining to the organization of the Company. Until the Company achieved the minimum offering requirement in the Offering, all organizational costs were funded by Griffin Capital and its affiliates. On May 1, 2015, the Company raised the minimum offering requirement and became liable for the advanced organizational costs, subject to the terms of the expense support and conditional reimbursement agreement, as discussed in Note 5. Related Party Transactions. Organizational costs were expensed when the Company became liable, and are included on the statements of assets and liabilities as a component of due to affiliates. For the three months ended March 31, 2016 Griffin Capital and its affiliates incurred $7,322 of organizational costs. No organizational costs were incurred for the three months ended March 31, 2017.
Offering Costs
Offering costs include, among other things, legal fees and other costs pertaining to the preparation of the Company's registration statement in connection with the Offering. Until the Company achieved the minimum offering requirement, all offering costs were funded by Griffin Capital and its affiliates. On May 1, 2015, the Company raised the minimum offering requirement and became liable for the advanced offering costs, subject to the terms of the expense support and conditional reimbursement agreement, as discussed in Note 5. Related Party Transactions. Offering costs are capitalized and amortized over a twelve month period as an expense. The offering costs are subject to reimbursement by the Company and are included within due to affiliates on the statements of assets and liabilities. As a result of the suspension of the Offering, the Company wrote off approximately $0.7 million of unamortized deferred offering costs, as of March 15, 2016.
Income Taxes

16


The Company has elected to be treated, for tax purposes, as a RIC, which requires it, among other obligations, in each fiscal year, to distribute at least 90% of the sum of (i) investment company taxable income, which is generally the Company's ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses, determined without regard to the deduction for dividends and distributions paid and (ii) net tax exempt interest income, which is the excess of the Company's gross tax exempt interest income over certain disallowed deductions, (the "Annual Distribution Requirement"). If the Company qualifies as a RIC and meets the Annual Distribution Requirement, the Company generally will not be subject to U.S. federal income tax on investment company taxable income and net capital gains that are distributed to the Company's stockholders as dividends. To the extent that the Company retains net capital gains or any investment company taxable income, the Company will be subject to U.S. federal income tax. The Company may choose to retain net capital gains or any investment company taxable income, and pay the associated federal corporate income tax, including the federal excise tax described below.
Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4.0% U.S. federal excise tax payable by the Company. To avoid this tax, the Company must distribute (or be deemed to have distributed) during each calendar year an amount equal to the sum of: (1) at least 98.0% of the Company's ordinary income (not taking into account any capital gains or losses) for the calendar year; (2) at least 98.2% of the amount by which the Company's capital gains exceed capital losses (adjusted for certain ordinary losses) for a one-year period generally ending on October 31 of the calendar year (unless an election is made to use the Company's taxable year); and (3) income realized, but not distributed, in preceding years (the "Excise Tax Avoidance Requirement").
While the Company intends to distribute any income and capital gains in the manner necessary to minimize imposition of the 4.0% federal excise tax, sufficient amounts of taxable income and capital gains may not be distributed to avoid entirely the imposition of the tax. In that event, the Company will be liable for the tax only on the amount by which the Company did not meet the foregoing distribution requirement.
Because federal income tax regulations differ from U.S. GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
Beginning with the taxable year ended December 31, 2015, the Company has elected to be taxed as a RIC. The determination of any permanent or temporary differences, as well as the tax basis of distributable earnings/(deficit), tax character of distributions paid, and tax basis of investments cost and unrealized appreciation/depreciation will not be known until the completion of the tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statements of operations. There were no interest or penalties due to material uncertain income tax positions at March 31, 2017 or December 31, 2016.
Recently Issued Accounting Pronouncements
In August 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-15, Statement of Cash Flows (“ASU No. 2016-15”), intended to reduce diversity in practice in certain classifications on the statement of cash flows. This guidance addresses eight types of cash flows, including clarifying how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows, as well as requiring an accounting policy election for classification of distributions received from equity method investees using either the cumulative earnings or nature of distributions approach, among others. Transition will generally be on a retrospective basis. ASU No. 2016-15 is effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted, provided that all amendments within the guidance are adopted in the same period. The Company is currently evaluating the impact of adopting this new guidance on its financial statements.


17


 In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 retains many current requirements for the classification and measurement of financial instruments; however, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted for public business entities. The Company is currently evaluating the impact these changes will have on the Company’s financial statements and disclosures.
In August, 2014, the FASB released ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40) (“ASU 2014-15”). ASU 2014-15 requires the Company to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within the one year period subsequent to the date that the financial statements are issued or within the one year period subsequent the date that the financial statements are available to be issued. ASU 2014-15 becomes effective for fiscal periods ending after December 15, 2016; however, early adoption is permitted. The Company adopted ASU 2014-15 as of December 31, 2016. The adoption did not have an impact on the Company’s financial position or result of operations.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU No. 2014-09"). ASU No. 2014-09 replaces substantially all industry-specific revenue recognition requirements and converges areas under this topic with International Financial Reporting Standards. ASU No. 2014-09 implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. ASU No. 2014-09 also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. Other major provisions in ASU No. 2014-09 include capitalizing and amortizing certain contract costs, ensuring the time value of money is considered in the applicable transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. ASU No. 2014-09 was originally effective for reporting periods beginning after December 31, 2016. On April 1, 2015, the FASB voted to defer the effective date of ASU No. 2014-09 by one year, to annual reporting periods beginning after December 15, 2017. On July 9, 2015, the FASB affirmed its proposal to defer the effective date to annual reporting periods beginning after December 15, 2017, although entities may elect to adopt the standard as of the original effective date. The Company is currently evaluating the impact these changes will have on the Company’s financial statements and disclosures.
Note 3. Investments
The following table shows the composition of the investment portfolio, at amortized cost and fair value as of March 31, 2017 (with corresponding percentage of total portfolio investments):
 
As of March 31, 2017
 
Investments at Amortized Cost
 
Percentage of Amortized Cost
 
Investments at Fair Value
 
Percentage of Fair Value
Senior Secured Loans - First Lien
$
24,649,784

 
70.2
%
 
$
24,723,901

 
69.7
%
Senior Secured Loans - Second Lien
5,210,336

 
14.8

 
5,054,357

 
14.3

Senior Secured Bonds
1,723,070

 
5.0

 
1,802,490

 
5.1

Senior Unsecured Debt
3,506,400

 
10.0

 
3,857,105

 
10.8

Equity/Other
8,497

 
NM (1)

 
20,556

 
0.1

Total
$
35,098,087

 
100.0
%
 
$
35,458,409

 
100.0
%
__________________
(1) Not meaningful.

18


The following table shows the composition of the investment portfolio, at amortized cost and fair value as of December 31, 2016 (with corresponding percentage of total portfolio investments):
 
As of December 31, 2016
 
Investments at Amortized Cost
 
Percentage of Amortized Cost
 
Investments at Fair Value
 
Percentage of Fair Value
Senior Secured Loans - First Lien
$
25,111,410

 
69.4
%
 
$
25,328,962

 
69.1
%
Senior Secured Loans - Second Lien
5,013,454

 
13.9

 
4,722,313

 
12.9

Senior Secured Bonds
1,718,819

 
4.7

 
1,767,250

 
4.8

Senior Unsecured Debt
4,342,697

 
12.0

 
4,803,840

 
13.1

Equity/Other
8,497

 
NM (1)

 
20,008

 
0.1

Total
$
36,194,877

 
100.0
%
 
$
36,642,373

 
100.0
%
__________________
(1) Not meaningful.
The following table shows the composition by industry grouping based on fair value as of March 31, 2017:
 
 
As of March 31, 2017
 
 
Investments at Fair Value
 
Percentage of Total Portfolio
Business Services
 
$
11,717,743

 
33.0
%
Telecom
 
4,657,127

 
13.1

Technology
 
2,292,265

 
6.5

Healthcare - Products
 
1,985,025

 
5.6

Healthcare
 
1,908,400

 
5.4

Pharmaceuticals
 
1,807,925

 
5.1

Entertainment
 
1,799,739

 
5.1

Financial Services
 
1,693,470

 
4.8

Health Facilities
 
1,667,315

 
4.7

Cable
 
1,197,500

 
3.4

Software/Services
 
1,001,326

 
2.8

Chemicals
 
896,365

 
2.5

Environmental
 
876,371

 
2.5

Food - Wholesale
 
831,751

 
2.3

Media - Broadcast
 
758,049

 
2.1

Retail
 
148,246

 
0.4

Energy - Exploration & Production
 
95,110

 
0.3

Consumer Products
 
71,572

 
0.2

Newspaper
 
53,110

 
0.2

Total
 
$
35,458,409

 
100.0
%


19


The following table shows the composition by industry grouping based on fair value as of December 31, 2016:
 
 
As of December 31, 2016
 
 
Investments at Fair Value
 
Percentage of Total Portfolio
Business Services
 
$
11,830,269

 
32.3
%
Healthcare
 
4,529,812

 
12.4

Food - Wholesale
 
3,247,828

 
8.9

Telecom
 
2,286,095

 
6.2

Entertainment
 
1,990,013

 
5.4

Cable
 
1,783,626

 
4.9

Software/Services
 
1,722,275

 
4.7

Health Facilities
 
1,672,169

 
4.6

Directories & Publishing
 
1,332,246

 
3.6

Chemicals
 
1,186,250

 
3.2

Media - Broadcast
 
1,058,394

 
2.9

Environmental
 
992,930

 
2.7

Retail
 
886,500

 
2.4

Railroads
 
847,853

 
2.3

Technology
 
738,209

 
2.0

Pharmaceuticals
 
302,871

 
0.8

Consumer Products
 
95,320

 
0.3

Energy - Exploration & Production
 
78,076

 
0.2

Newspaper
 
61,637

 
0.2

Total
 
$
36,642,373

 
100.0
%
The Company does not "control" and is not an "affiliate" of any of its portfolio companies, each as defined in the 1940 Act. In general, under the 1940 Act, the Company would be presumed to "control" a portfolio company or issuer if the Company owned more than 25% of its voting securities and would be an "affiliate" of a portfolio company or issuer if the Company owned between 5% and 25% of its voting securities.
As of March 31, 2017 and December 31, 2016, there were no delinquent investments or investments on non-accrual status.
Note 4. Fair Value of Financial Instruments
Accounting guidance establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. This alternative approach also reflects the contractual terms of the derivatives, if any, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The guidance defines three levels of inputs that may be used to measure fair value:
Level 1—Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

20


Level 3—Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The Company evaluates the source of inputs, including any markets in which the Company's investments are trading, in determining fair value. Due to the inherent uncertainty in the valuation process, the estimate of fair value of the Company’s investment portfolio as of March 31, 2017 may differ significantly from values that would have been used had a readily available market for the securities existed.
The following table presents fair value measurements of investments, by major class, as of March 31, 2017, according to the fair value hierarchy:
 
Fair Value Measurements
 
Level 1
 
Level 2
 
Level 3
 
Total
Senior Secured Loans - First Lien
$

 
$
18,880,034

 
$
5,843,867

 
$
24,723,901

Senior Secured Loans - Second Lien

 
5,054,357

 

 
5,054,357

Senior Secured Bonds

 
1,802,490

 

 
1,802,490

Senior Unsecured Debt

 
3,857,105

 

 
3,857,105

Equity/Other

 

 
20,556

 
20,556

Total
$

 
$
29,593,986

 
$
5,864,423

 
$
35,458,409


The following table presents fair value measurements of investments, by major class, as of December 31, 2016, according to the fair value hierarchy:
 
Fair Value Measurements
 
Level 1
 
Level 2
 
Level 3
 
Total
Senior Secured Loans - First Lien
$

 
$
16,249,070

 
$
9,079,892

 
$
25,328,962

Senior Secured Loans - Second Lien

 
4,722,313

 

 
4,722,313

Senior Secured Bonds

 
1,767,250

 

 
1,767,250

Senior Unsecured Debt

 
4,803,840

 

 
4,803,840

Equity/Other

 

 
20,008

 
20,008

Total
$

 
$
27,542,473

 
$
9,099,900

 
$
36,642,373




21


The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the three months ended March 31, 2017:
 
Senior Secured Loans - First Lien
 
Senior Secured Loans - Second Lien
 
Senior Secured Bonds
 
Equity/Other
 
Total
Balance as of December 31, 2016
$
9,079,892

 
$

 
$

 
$
20,008

 
$
9,099,900

Net change in unrealized appreciation (depreciation) on investments
(4,220
)
 

 

 
548

 
(3,672
)
Purchases and other adjustments to cost (1)
26,776

 

 

 

 
26,776

Sales and repayments (1)
(3,262,249
)
 

 

 

 
(3,262,249
)
Net realized gain from investments
3,668

 

 

 

 
3,668

Balance as of March 31, 2017
$
5,843,867

 
$

 
$

 
$
20,556

 
$
5,864,423

_______________________
(1) Purchases represent the acquisition of new investments at cost. Sales and repayments represent principal payments received during the year.
Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period of which they occur. During the three months ended March 31, 2017, the Company recorded no transfers from Level 3 to Level 2 or from Level 2 to Level 3.
The net change in unrealized depreciation for the three months ended March 31, 2017 attributable to Level 3 investments still held at March 31, 2017 is $3,672 and is included in net change in unrealized appreciation (depreciation) on investments on the statements of operations.
The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended December 31, 2016:
 
Senior Secured Loans - First Lien
 
Senior Secured Loans - Second Lien
 
Senior Secured Bonds
 
Equity/Other
 
Total
Balance as of December 31, 2015
$
3,536,724

 
$
1,139,783

 
$
397,916

 
$
8,497

 
$
5,082,920

Net change in unrealized appreciation on investments
176,407

 

 

 
11,511

 
187,918

Purchases and other adjustments to cost(1)
6,618,961

 

 

 

 
6,618,961

Sales and repayments (1)
(96,620
)
 

 

 

 
(96,620
)
Net realized gain from investments
1,309

 

 

 

 
1,309

Net transfers in and/or out
(1,156,889
)
 
(1,139,783
)
 
(397,916
)
 

 
(2,694,588
)
Balance as of December 31, 2016
$
9,079,892

 
$

 
$

 
$
20,008

 
$
9,099,900

_______________________
(1) Purchases represent the acquisition of new investments at cost. Sales and repayments represent principal payments received during the year.
Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period of which they occur. For the year ended December 31, 2016, the Company recorded $2.7 million in transfers from Level 3 to Level 2 due to an increase in observable inputs in market data. During the year ended December 31, 2016 the Company recorded no transfers from Level 2 to Level 3.
The net change in unrealized appreciation for the year ended December 31, 2016 attributable to Level 3 investments still held at December 31, 2016 is $0.9 million and is included in net change in unrealized appreciation (depreciation) on investments on the statements of operations.   

    

22


Significant Unobservable Inputs

The following table summarizes the significant unobservable inputs used by the Company's independent third-party valuation specialist to value the Level 3 investments as of March 31, 2017, which consisted of fifteen senior secured first lien loans and one equity investment. The table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of fair values.
 
 
 
 
 
 
 
 
Range
 
 
Asset Category
 
Fair Value
 
Primary Valuation Technique
 
Unobservable Inputs
 
Minimum
 
Maximum
 
Weighted Average
Senior Secured Loans - First Lien
 
$
5,843,867

 
Discounted Cash Flow Approach
 
Discount Rate
 
8.79
%
 
21.93
%
 
11.02
%
Equity/Other
 
$
20,556

 
Discounted Cash Flow Approach
 
Discount Rate
 
12.22
%
 
12.22
%
 
12.22
%
Significant increases or decreases in any of the above unobservable inputs in isolation would result in a significantly lower or higher fair value measurement for such assets.
The following table summarizes the significant unobservable inputs used by the Company's independent third-party valuation specialist to value the Level 3 investments as of December 31, 2016, which consisted of sixteen senior secured first lien loans and one equity investment. The table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of fair values.
 
 
 
 
 
 
 
 
Range
 
 
Asset Category
 
Fair Value
 
Primary Valuation Technique
 
Unobservable Inputs
 
Minimum
 
Maximum
 
Weighted Average
Senior Secured Loans - First Lien
 
$
9,079,892

 
Discounted Cash Flow Approach
 
Discount Rate
 
8.57
%
 
21.01
%
 
10.14
%
Equity/Other
 
$
20,008

 
Discounted Cash Flow Approach
 
Discount Rate
 
12.49
%
 
12.49
%
 
12.49
%
Significant increases or decreases in any of the above unobservable inputs in isolation would result in a significantly lower or higher fair value measurement for such assets.
Note 5. Related Party Transactions
The following table summarizes the offering, organizational, and operating costs incurred by, and fees earned by, the Adviser as of March 31, 2017 and December 31, 2016. These amounts are included in due to affiliates on the statements of assets and liabilities, net of certain due to affiliate amounts that were otherwise used as an offset against expense support amounts computed pursuant to the expense support and conditional reimbursement agreement, as discussed below.
 
As of March 31, 2017
 
As of December 31, 2016
Organizational costs
$
451,428

 
$
451,428

Offering costs
2,144,372

 
2,144,372

General & administrative
163,967

 
163,792

Directors fees
117,192

 
117,192

Professional fees
222,909

 
221,985

Insurance and technology expenses
355,322

 
355,322

Base management fees earned
360,388

 
233,034

Total due to affiliates, before expense reimbursement
3,815,578

 
3,687,125

Expense reimbursement
(2,627,330
)
 
(2,499,976
)
Total due to affiliates, net of reimbursement
$
1,188,248

 
$
1,187,149


23


The Company entered into an investment advisory agreement, dated January 16, 2015, with GBA (the "Investment Advisory Agreement"). Pursuant to the Investment Advisory Agreement, GBA will be paid a base management fee and certain incentive fees, if applicable. Additionally, GBA and the Company entered into an Investment Sub-Advisory Agreement, dated January 16, 2015, with Benefit Street (the "Investment Sub-Advisory Agreement"). The Investment Sub-Advisory Agreement provides, among other things, that Benefit Street shall receive 50.0% of all management and incentive fees payable to GBA under the Investment Advisory Agreement. The Company re-approved the Investment Advisory Agreement and the Investment Sub-Advisory Agreement on May 4, 2017 for a one-year term until May 7, 2018. See Note 11, Subsequent Events.
The Company also entered into an administration agreement, dated January 16, 2015, with Griffin Capital BDC Administrator (the "Administration Agreement") pursuant to which Griffin Capital BDC Administrator will be reimbursed for expenses necessary for the performance of services related to the Company's administration and operation, provided that such reimbursement will be the lower of Griffin Capital BDC Administrator's actual costs or the amount that the Company would be required to pay third-party service providers for comparable administrative services in the same geographic location, and provided further that such costs will be reasonably allocated to the Company on the basis of assets, revenues, time records or other reasonable methods. See Administrative Services section below.
The Company will settle the amounts due from affiliates, net of offsetting amounts due to affiliates, including management fees on a quarterly basis, in cash. See Expense Support and Conditional Reimbursement Agreement section below.
Base Management Fee
The base management fee will be calculated at an annual rate of 2.0% of the Company's gross assets, excluding cash and cash equivalents and other non-investment assets, and payable quarterly in arrears. The base management fee may or may not be taken in whole or in part at the discretion of GBA. All or any part of the base management fee not taken as to any quarter will be deferred without interest and may be taken in any such other quarter prior to the occurrence of a liquidity event as GBA may determine. Further, GBA may apply the management fee against any amount due from affiliates. For the three months ended March 31, 2017 and 2016 the Company incurred $0.2 million and $0.1 million in base management fees, respectively.
Incentive Fees on Income
The incentive fee on income is calculated and payable quarterly in arrears based upon the Company's "pre-incentive fee net investment income" for the immediately preceding quarter, and subject to a hurdle rate, measured quarterly and expressed as a rate of return on adjusted capital at the beginning of the most recently completed calendar quarter, of 1.75% (7.0% annualized), subject to a "catch up" feature, as defined. Incentive fee on income is payable in any calendar quarter in which pre-incentive fee net investment income does not exceed the hurdle rate of 1.75% on adjusted capital. For any calendar quarter in which pre-incentive fee net investment income is greater than the quarterly hurdle rate, but less than or equal to 2.1875%, the incentive fee on income will equal the amount of pre-incentive fee net investment income in excess of the quarterly hurdle rate. This portion of the incentive fee is referred to as the catch-up and provides an increasing fee, equal to 100% of the pre-incentive fee net investment income, between a 1.75% to a 2.1875% quarterly return on adjusted capital. For any calendar quarter in which the pre-incentive fee net investment income exceeds 2.1875% of adjusted capital, the incentive fee on income will equal 20.0% of pre-incentive fee net investment income. For purposes of this fee, adjusted capital will mean cumulative gross proceeds generated from issuances of the Company's common stock, including its DRP, reduced for distributions to investors that represent a return of capital and amounts paid for share repurchases pursuant to the Company's share repurchase program, if any. No incentive fees on income were incurred for the three months ended March 31, 2017 and March 31, 2016.
Incentive Fee on Capital Gains
An incentive fee on capital gains is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement) and will equal 20.0% of the Company's realized capital gains on a cumulative basis from inception, calculated as of the application period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees on capital gains. For the three months ended March 31, 2017, the Company accrued an incentive fee, based on net realized and unrealized gains, of approximately $0.1 million. No incentive fees on capital gains were incurred for the three months ended March 31, 2016.
In accordance with U.S. GAAP, the Company is required to include the aggregate unrealized appreciation on investments in the calculation and accrue a capital gains incentive fee as if such unrealized appreciation were realized, even though such unrealized appreciation is not permitted to be considered in calculating the fee actually payable under the Investment Advisory Agreement. As of both March 31, 2017 and December 31, 2016, a payable for incentive fees of $0.1

24


million was included as a liability under the management and incentive fees payable to affiliate, on the statements of assets and liabilities. No accrual was recorded for the three months ended March 31, 2016.
Organizational and Offering Costs
The Company incurred organizational and offering costs (including reimbursement of costs incurred by Griffin Capital and its affiliates) of approximately 1.5% of the gross proceeds from the Offering. Until the Company achieved the minimum offering requirement in the Offering, all offering costs were funded by Griffin Capital and its affiliates. On May 1, 2015, the Company raised the minimum offering requirement and became liable, subject to the expense support and conditional reimbursement agreement, to reimburse Griffin Capital and its affiliates for these costs, if and when Griffin Capital and its affiliates submit such costs for reimbursement. From inception through March 31, 2017, Griffin Capital and its affiliates incurred offering and organizational costs of approximately $2.1 million and $0.5 million, respectively.
The decision to fund the organizational and offering costs and the decision to seek reimbursement for such costs is solely at the discretion of Griffin Capital. These costs are included as a component of due to affiliates on the statements of assets and liabilities and have been applied against amounts due from Griffin Capital and affiliates pursuant to the expense support and conditional reimbursement agreement. As a result, the Company may or may not be requested to reimburse any remaining costs funded by Griffin Capital.
Expense Support and Conditional Reimbursement Agreement
On March 25, 2015, the Company and GBA entered into an expense support and conditional reimbursement agreement (as amended, the "ESA"). On March 23, 2016, the Company and the Adviser executed the Amendment to the Expense Support and Conditional Reimbursement Agreement (the “Amended ESA”), which is effective for all reimbursement payments from the Company to the Adviser made on or after December 31, 2015. Pursuant to the Amended ESA, GBA has agreed to reimburse, or offset such reimbursement against amounts due to GBA, the Company for expenses in an amount that is sufficient to: (i) ensure that no portion of the Company’s distributions to stockholders will be paid from the Company’s Offering proceeds or borrowings, and/or (ii) reduce the Company’s operating expenses until the Company has achieved economies of scale sufficient to ensure that the Company bears a reasonable level of expense in relation to the Company’s investment income. Pursuant to the Amended ESA, the Company may have a conditional obligation to reimburse GBA for any amounts funded by GBA under such agreement, including certain organizational and offering costs that have been included in operating expense, if certain conditions are met. First, GBA will be entitled to receive reimbursement payments if, during any fiscal quarter occurring within three years of the date on which GBA funded such amount, the sum of the Company's net investment income for tax purposes, net capital gains and the amount of any dividends and other distributions paid to the Company on account of investments in portfolio companies (to the extent not included in net investment income or net capital gains for tax purposes) exceeds the distributions paid by the Company to stockholders. Second, the Company and GBA have agreed that the Company will make reimbursement payments only if: (i) the Company's current "operating expense ratio" is equal to or less than its operating expense ratio at the time the corresponding expense payment obligation was incurred by GBA, and (ii) the annualized rate of the Company's regular cash distributions to the Company's stockholders is equal to or greater than the annualized rate of the Company's regular cash distributions to the Company's stockholders at the time the corresponding expense payment was incurred by GBA. For this purpose, the “operating expense ratio” is defined as all expenses borne by the Company, except for organizational and offering expenses, base management and incentive fees owed to GBA, and interest expense, as a percentage of net assets. Finally, for organizational and offering costs that have been included in operating expenses, the Company will limit reimbursement of such expenses to the sum of: (i) all expense payments paid by GBA to the Company in cash and not previously reimbursed; (ii) non-organizational and offering costs included in operating expenses incurred by GBA and its affiliates and accrued as payables by the Company; and (iii) organizational and offering costs incurred by GBA and its affiliates and accrued as payables by the Company, up to a limit of 1.5% of gross proceeds raised. The Company will not record expense support payments as liabilities on the statements of assets and liabilities until the above conditions are met.
On March 6, 2017, GBA and Benefit Street entered into a letter agreement which revised the terms between the Adviser and Sub-Adviser. Under the letter agreement, Benefit Street will no longer have any obligation to share the expense or distribution support obligations pursuant to the Amended ESA. On March 29, 2017, the Company and the Adviser executed a Second Amendment to the Expense Support and Conditional Reimbursement Agreement (the "Second Amended ESA”, collectively with the agreements above, the "Amended ESA"), which is effective for all reimbursement payments from the Company to the Adviser on or after March 23, 2017.


25


The Company or GBA may terminate the Amended ESA at any time. If the Company terminates the Investment Advisory Agreement with GBA, the Company will be required to repay GBA all reimbursements funded by GBA within three years of the date of termination, subject to the limitation that organizational and offering costs will only be 1.5% of gross proceeds. The specific amount of expenses reimbursed by GBA, if any, will be determined at the end of each quarter. The following table provides information regarding costs incurred by the Adviser pursuant to the Amended ESA as well as other information relating to the Company's ability to reimburse the Adviser for such costs:
Quarter Ended
 
Amount of Expense Payment Support
 
Amount Repaid to GBA
 
Operating Expense Ratio (1)
 
Annualized Distribution Rate (2)
 
Eligible to be Repaid Through (3)
June 30, 2015
 
                                 815,023

 

 
6.87
%
 
7.50
%
 
June 30, 2018
September 30, 2015
 
726,058

 

 
4.23
%
 
7.50
%
 
September 30, 2018
December 31, 2015
 
                                 530,618

 

 
3.61
%
 
7.50
%
 
December 31, 2018
March 31, 2016 (4)
 
1,543,113

 

 
0.71
%
 
7.65
%
 
March 31, 2019
June 30, 2016 (4)
 
455,606

 

 
0.74
%
 
7.65
%
 
June 30, 2019
September 30, 2016 (4)
 
35,603

 

 
0.62
%
 
7.65
%
 
September 30, 2019
December 31, 2016(4)
 
127,354

 

 
1.21
%
 
7.65
%
 
December 31, 2019
March 31, 2017(5)
 
240,208

 

 
0.55
%
 
7.65
%
 
March 31, 2020
________________________
(1) 
"Operating Expense Ratio” is as of the date the expense support payment obligation was incurred by GBA and includes all expenses borne by the Company, except for organizational and offering expenses, base management and incentive fees owed to the Adviser, and interest expense, as a percentage of net assets.
(2) 
"Annualized Distribution Rate" equals the annualized rate of distributions paid to the Company's stockholders based on the amount of the regular cash distribution paid immediately prior to the date the expense support payment obligation was incurred by GBA. “Annualized Distribution Rate” does not include special cash or stock distributions paid to stockholders.
(3) 
If an expense support payment has not been reimbursed to the Adviser within three years of the end of the calendar quarter following the date such expense support payment was incurred, the Company’s obligation to pay such Expense Support Payment shall automatically terminate and be of no further effect.
(4) 
Effective March 15, 2016, the Company's board of directors determined that it was in the Company's and stockholders' best interests to suspend the Offering and DRP. However, in the months of March through December, the board of directors maintained the amount of daily cash distributions payable to stockholders at $0.002049 per share (representing an annualized distribution rate of 7.5% based on share price of $10.00, or an annualized distribution rate of 7.65% based on a share price of $9.80).
(5) 
In the months of January through March, the board of directors maintained the amount of daily cash distributions payable to stockholders at $0.002055 per share (representing an annualized distribution rate of 7.5% based on share price of $10.00, or an annualized distribution rate of 7.65% based on a share price of $9.80).
There can be no assurance that the Amended ESA will remain in effect or that GBA will reimburse any portion of the Company’s expenses in future quarters. Since inception, GBA has supported approximately $3.8 million of the Company's operating expenses, including organizational and offering expenses, and approximately $0.7 million of distribution support pursuant to the Amended ESA, as well as other additional support. For the three months ended March 31, 2017 and March 31, 2016, total support of $0.2 million and $1.3 million, respectively, is included on the statements of operations as an expense reimbursement. Approximately $0.2 million is reflected as a capital contribution on the statements of changes in net assets as distribution support for the three months ended March 31, 2016. No distribution support was contributed for the three months ended March 31, 2017. As of March 31, 2017, the Company does not believe it is probable that it will generate sufficient excess cash to reimburse GBA for these advances over the next three years, pursuant to the terms of the Amended ESA. 


26


Administrative Services
Griffin Capital BDC Administrator will provide the Company with general ledger accounting, fund accounting and investor relations and other administrative services pursuant to the Administration Agreement, under which the Griffin Capital BDC Administrator will also furnish the Company with administrative services necessary to conduct its day-to-day operations. The Griffin Capital BDC Administrator will be reimbursed for administrative expenses it incurs on the Company's behalf in performing its obligations. Such costs will be reasonably allocated to the Company on the basis of assets, revenues, time records or other reasonable methods. The Company will not reimburse the Griffin Capital BDC Administrator for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a person with a controlling interest in the Griffin Capital BDC Administrator. Pursuant to the Administration Agreement, the Griffin Capital BDC Administrator at its sole discretion, may contract with third-party service providers. The cost of the third-party service providers will be an obligation of the Griffin Capital BDC Administrator. The Company will not incur the costs from the Griffin Capital BDC Administrator and the third-party provider for similar services. As of March 31, 2017 and December 31, 2016, the Griffin Capital BDC Administrator waived reimbursement for the cost of any administrative services provided.
As of March 31, 2017 and March 31, 2016, GBA and Benefit Street had incurred certain expenses on behalf of the Company, including directors fees, insurance and technology expenses, professional fees and other general and administrative expenses, of approximately $0.9 million and $0.8 million, respectively. GBA and Benefit Street are entitled to reimbursement of these expenses, subject to the limitations imposed under the Amended ESA described above.
Dealer Manager Agreement
The Company executed a dealer manager agreement with the Dealer Manager on December 11, 2014, which entitled the Dealer Manager to receive a sales commission based upon gross proceeds from shares sold in the Offering, which was a 7.0% commission of gross proceeds. In addition, the Dealer Manager received a dealer manager fee up to 3.0% of gross proceeds from shares sold in the Offering. The Dealer Manager entered into participating dealer agreements with certain other broker-dealers authorizing them to sell shares of the Company in the Offering. Upon sale of shares of the Company by such broker-dealers, the Dealer Manager re-allowed all of the sales commissions paid in connection with sales made by these broker-dealers. The Dealer Manager may also re-allow to these broker-dealers a portion of the 3.0% dealer manager fee as marketing fees, reimbursement of certain costs and expenses of attending training and education meetings sponsored by the Dealer Manager, payment of attendance fees required for employees of the Dealer Manager or other affiliates to attend retail seminars and public seminars sponsored by these broker-dealers, or to defray other distribution-related expenses. From January 1, 2016 to March 15, 2016 (the date of the suspension of the Offering), the Company paid dealer manager fees of $0.4 million and sales commissions of $1.0 million. No other dealer manager fees were paid subsequent to the suspension of the Offering.
License Agreements
The Company has entered into a license agreement with Griffin Capital under which Griffin Capital has granted the Company a non-exclusive, royalty-free license to use the name "Griffin." The Company has also entered into a license agreement with Benefit Street under which Benefit Street has granted the Company a non-exclusive, royalty-free license to use the name "Benefit Street Partners." Under these agreements, the Company has a right to use the "Griffin" name for so long as GBA or one of its affiliates remains the Company's investment adviser and the "Benefit Street Partners" name for so long as Benefit Street or one of its affiliates remains the Company's investment Sub-Adviser. Other than with respect to these limited licenses, the Company has no legal right to the "Griffin" or "Benefit Street Partners" names.
Conflicts of Interest
The Company's executive officers and certain of the Company's directors and other finance professionals of Griffin Capital and their affiliates also serve as executives of GBA and Benefit Street. Mr. Shields controls the trust that is the sole member of Griffin Capital. In addition, the Company's executive officers and directors and the members of GBA and members of the investment committee of GBA serve or may serve as officers, directors or principals of entities that operate in the same, or related, line of business as the Company or of investment funds, accounts or other investment vehicles managed by the Company's affiliates. These investment funds, accounts or other investment vehicles may have investment objectives similar to the Company's investment objective. The Company may compete with entities managed by GBA and its affiliates for capital and investment opportunities. As a result, the Company may not be given the opportunity to participate in certain investments made by investment funds, accounts or other investment vehicles managed by GBA or its affiliates or by members of the investment committee. However, in order to fulfill its fiduciary duties to each of its clients, GBA intends to allocate investment opportunities in a manner that is fair and equitable over time and is consistent with GBA's allocation policy, investment objective and strategies so that the Company is not disadvantaged in relation to any other client.

27


Benefit Street and its affiliates currently manage a number of investment accounts and private investment funds, including an adviser to a non-traded BDC, hedge funds, single investor funds, sector specific, asset class specific or geographically specific private investment funds with investment guidelines substantially similar in whole or in part to the Company's investment guidelines and intends to manage additional investment accounts and private investment funds. Certain funds managed by Providence may pursue investment opportunities similar to those that the Company intends to pursue. As a result, the Company may not be provided with the opportunity to fully invest in all investment opportunities available to Providence, Benefit Street, and the Company that would be suitable for the Company. To the extent that Providence or Benefit Street is presented with an investment opportunity that would be appropriate for the Company and another fund sub-advised or managed by Providence or Benefit Street, Benefit Street and/or Providence may be faced with a conflict.
As a result of the potential overlap in investment objectives between the Company and certain investment accounts and funds managed by Benefit Street and its affiliates, Benefit Street has adopted an allocation policy governing how such investment opportunities will be allocated. However, to the extent any funds managed by Providence or Benefit Street seek investment opportunities similar to the opportunities the Company seeks, the scope of opportunities otherwise available to the Company may be reduced or otherwise adversely affected.
Some of the material conflicts that GBA, Benefit Street or the Dealer Manager or its affiliates may face are (1) competing demand for time of GBA and Benefit Street's executive officers and other key personnel and affiliated entities; and (2) influence of the fee structure under GBA's agreement that could result in actions not necessarily in the long-term best interest of the stockholders.
In an order dated June 23, 2015, the SEC granted exemptive relief permitting the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions with certain affiliates of the Sub-Adviser. Among other things, the relief requires that our independent directors review and approve each initial co-investment.  The Company believes this relief may also allow it to participate in larger investments, together with the Sub-Adviser’s co-investment affiliates, than would be available to it if it had not obtained such relief. 
Note 6. Commitments and Contingencies
The Company’s investment portfolio may contain debt investments that are in the form of lines of credit and unfunded delayed draw commitments, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. The par amounts of the unfunded commitments are not recognized by the Company until the commitment is funded. As of March 31, 2017 and December 31, 2016, the Company had approximately $1.7 million and $1.7 million, respectively, of unfunded commitments under loan and financing agreements as follows:
 
March 31, 2017
 
December 31, 2016
MyEyeDr - Delayed Draw

$
1,200,000

 
$
1,200,000

MyEyeDr - Revolver
43,000

 
43,000

Santek Waste Services - Delayed Draw

98,869

 
117,987

Santek Waste Services - Revolver

66,000

 
66,000

Asset International - Delayed Draw

135,200

 
135,200

Asset International - Revolver

67,500

 
67,500

Bahakel Communications, Ltd.

34,500

 
34,500

Bahakel Communications, Ltd. - Revolver

14,000

 
14,000

Total Unfunded Commitments

1,659,069

 
1,678,187

The unrealized gain or loss on the discount associated with the unfunded commitments is recorded on the statements of assets and liabilities as discount for unfunded commitments and on the statements of operations as net change in unrealized appreciation on unfunded investments. As of and for the three months ended March 31, 2017, the discount for unfunded commitments and net change in unrealized appreciation on unfunded investments was $(61), which is reflected in accounts receivable on the statements of assets and liabilities, and $13,839, respectively.

28


Distribution Reinvestment Plan
The Company had implemented a DRP that allowed stockholders to have distributions otherwise distributable to them invested in additional shares of common stock at up to 95.0% of the price that common stock is sold in the Offering at the weekly closing immediately following the distribution payment date. The plan became effective on April 1, 2015. On November 11, 2015, the Company’s board of directors voted to amend and restate the DRP such that the purchase price for shares of common stock pursuant to the DRP shall be 90% of the price that common stock is sold in the Offering at the weekly closing immediately following the distribution payment date. The amended and restated DRP became effective as of November 26, 2015. No sales commission or dealer manager fee was paid on shares sold through the DRP. For the three months ended March 31, 2016, the Company issued 25,951 shares under the DRP. Effective March 15, 2016, the Company suspended purchases pursuant to the DRP, in conjunction with the suspension of the Offering.
Share Repurchase Program
Although it has not made any determination at this time, the Company maintains the right to initiate a share repurchase program in the future which would offer to repurchase common stock on such terms as may be determined by the board of directors in its complete and absolute discretion unless, in the judgment of the independent directors of the board of directors, such repurchases would not be in the best interests of our stockholders or would violate applicable law. There can be no assurance that the Company will implement a share repurchase program.
Note 7. Common Stock
As of March 15, 2016, the Company had issued 4,563,196 shares of common stock outstanding which represents gross offering proceeds of approximately $44.8 million, including shares issued in the private placement and 60,369 shares issued pursuant to the DRP, which amount remained unchanged as of March 31, 2017.
On March 15, 2016, the Company’s board of directors determined that it is in the Company’s and its stockholders’ best interest to suspend the Offering. The board of directors’ determination was based on the Adviser's belief that market conditions, at the time, and the Company’s current structure are not conducive to continuing the Offering.
The Company's transfer agent ceased accepting subscriptions received on or after March 15, 2016, and issued refunds for all subscriptions received on or after March 4, 2016. The Company also sent written notification to its stockholders that the DRP was suspended, effective March 15, 2016.
Note 8. Per Share Information
Basic increase (decrease) in net assets resulting from operations per share is computed by dividing earnings available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Other potentially dilutive shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. The Company had no potentially dilutive securities as of March 31, 2017 and March 31, 2016.
The following information sets forth the computation of the weighted average basic and diluted net increase (decrease) in net assets per share resulting from operations for the three months ended March 31, 2017 and March 31, 2016.
 
For the Three Months Ended March 31,
 
2017
 
2016
Basic and diluted
 
 
 
Net increase in net assets resulting from operations
$
841,333

 
$
213,454

Weighted average common stock outstanding
4,563,196

 
3,927,271

Net increase in net assets per share resulting from operations
$
0.18

 
$
0.05

    

29


The table below shows changes in the Company's offering price and distribution rates since the commencement of the public offering.
Declaration Date
 
 
Public Offering Price
 
Effective Date
 
Daily Distribution Amount per Share
 
Annualized Distribution Rate
 
May 7, 2015
 
$
10.00
 
May 7, 2015
 
$
0.002055

 
7.50
%
 
May 27, 2015
 
$
10.00
 
June 1, 2015
 
$
0.002055

 
7.50
%
 
June 26, 2015
 
$
10.00
 
July 1, 2015
 
$
0.002055

 
7.50
%
 
July 29, 2015
 
$
10.00
 
August 1, 2015
 
$
0.002055

 
7.50
%
 
August 12, 2015
 
$
10.00
 
September 1, 2015
 
$
0.002055

 
7.50
%
 
September 28, 2015
 
$
10.00
 
October 1, 2015
 
$
0.002055

 
7.50
%
 
October 27, 2015
 
$
10.00
 
November 1, 2015
 
$
0.002055

 
7.50
%
 
November 11, 2015
 
$
10.00
 
December 1, 2015
 
$
0.002055

 
7.50
%
(1) 
December 21, 2015
 
$
9.80
 
January 1, 2016
 
$
0.002049

 
7.65
%
 
January 22, 2016
 
$
9.80
 
February 1, 2016
 
$
0.002049

 
7.65
%
 
February 29, 2016
 
$
9.80
 
March 1, 2016
 
$
0.002049

 
7.65
%
(2) 
March 23, 2016
 
$
N/A
 
April 1, 2016
 
$
0.002049

 
7.65
%
(2) 
April 28, 2016
 
$
N/A
 
May 1, 2016
 
$
0.002049

 
7.65
%
(2) 
May 11, 2016
 
$
N/A
 
June 1, 2016
 
$
0.002049

 
7.65
%
(2) 
June 27, 2016
 
$
N/A
 
July 1, 2016
 
$
0.002049

 
7.65
%
(2) 
July 29, 2016
 
$
N/A
 
August 1, 2016
 
$
0.002049

 
7.65
%
(2) 
August 11, 2016
 
$
N/A
 
September 1, 2016
 
$
0.002049

 
7.65
%
(2) 
September 28, 2016
 
$
N/A
 
October 1, 2016
 
$
0.002049

 
7.65
%
(2) 
October 28, 2016
 
$
N/A
 
November 1, 2016
 
$
0.002049

 
7.65
%
(2) 
November 9, 2016
 
$
N/A
 
December 1, 2016
 
$
0.002049

 
7.65
%
(2) 
December 13, 2016
 
$
N/A
 
January 1, 2017
 
$
0.002055

 
7.65
%
(3) 
January 27, 2017
 
$
N/A
 
February 1, 2017
 
$
0.002055

 
7.65
%
(3) 
February 27, 2017
 
$
N/A
 
March 1, 2017
 
$
0.002055

 
7.65
%
(3) 
March 29, 2017
 
$
N/A
 
April 1, 2017
 
$
0.002055

 
7.65
%
(3) 
__________________
(1) Effective December 23, 2015, the Company's board of directors determined to decrease the Company's public offering price from $10.00 per share to $9.80 per share. For the remainder of the month of December, the board of directors determined to maintain the amount of daily cash distributions payable to stockholders of $0.002055 per share (representing an annualized distribution rate of 7.5% based on a share price of $10.00, or an annualized distribution rate of 7.65% based on a share price of $9.80).
(2) Effective March 15, 2016, the Company's board of directors determined that it was in the Company's and stockholders' best interests to suspend the offering and DRP. In the months of March through December, the board of directors maintained the amount of daily cash distributions payable to stockholders at $0.002049 per share (representing an annualized distribution rate of 7.5% based on a share price of $10.00, or an annualized distribution rate of 7.65% based on a share price of $9.80).
(3) Effective January 1, 2017, the board of directors declared the amount of daily cash distributions payable to stockholders to be $0.002055 per share (representing an annualized distribution rate of 7.5% based on a share price of $10.00, or an annualized distribution rate of 7.65% based on a share price of $9.80). The board of directors maintained such rate through March 31, 2017.

30


Note 9. Distributions
For the three months ended March 31, 2017, the Company had declared approximately $0.8 million in stockholder distributions. Approximately $0.8 million of these distributions were declared and paid or payable in cash and none were in shares issued pursuant to the DRP.
Record Date
 
Payment Date
 
Distributions Paid in Cash Accrued
January 31, 2017
 
February 1, 2017
 
$
290,703

February 28, 2017
 
March 1, 2017
 
262,571

March 31, 2017
 
April 1, 2017
 
290,704

 
 
 
 
$
843,978

For the three months ended March 31, 2016, the Company had declared approximately $0.7 million in stockholder distributions. Approximately $0.5 million of these distributions were declared and paid or payable in cash and $0.2 million in shares issued pursuant to the DRP.
Record Date
 
Payment Date
 
Distributions Paid in Cash/Accrued
 
Distributions Paid Through the DRP
 
Total Distributions Paid/ Accrued
January 31, 2016
 
February 1, 2016
 
$
103,281

 
$
108,650

 
$
211,931

February 29, 2016
 
March 1, 2016
 
112,704

 
119,696

 
232,400

March 31, 2016
 
April 1, 2016
 
288,199

 

(1) 
288,199

 
 
 
 
$
504,184

 
$
228,346

 
$
732,530

_____________________
(1) Effective March 15, 2016, the Company's board of directors determined that it was in the Company's and its stockholders' best interest to suspend the offering and the DRP. Beginning with the month of March, all distributions were paid in cash.
Distributions in excess of the Company's current and accumulated earnings and profits would generally be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. The determination of the tax attributes of the Company's distributions is made annually as of the end of the Company's fiscal year based upon the Company's taxable income for the full year and distributions paid for the full year. Of the dividends declared during the three months ended March 31, 2017, 100% were distributions derived from the Company's current and accumulated earnings and profits, on a U.S. GAAP basis and not considered a return on capital. Of the dividends declared during the three months ended March 31. 2016, 100% were distributions derived from the Company's current and accumulated earnings and profits, on a U.S. GAAP basis and were not considered a return on capital. There can be no certainty to stockholders that this determination is representative of the tax attributes of our 2017 distributions to stockholders.
Shortly after the close of each calendar year, a statement on Form 1099-DIV identifying the source of the distribution (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of paid-in-capital surplus which is a nontaxable distribution) is mailed to the Company's stockholders subject to information reporting. To the extent the Company's taxable earnings fall below the total amount of the Company's distributions for any taxable year, a portion of those distributions may be deemed a return of capital to the Company's stockholders.

31


Note 10. Financial Highlights
The following is a schedule of financial highlights for the three months ended March 31, 2017 and 2016.
 
For the Three Months Ended March 31,
 
2017
 
2016
Per share data: (1)
 
 
 
Net asset value, beginning of period
$
8.61

 
$
8.61

 
 
 
 
Results of operations
 
 
 
Net investment income
0.16

 
0.04

Net realized gain from investments
0.04

 
0.01

Net change in unrealized appreciation (depreciation) on investments
(0.02
)
 

Net increase in net assets resulting from operations
0.18

 
0.05

 
 
 
 
Stockholder distributions (2)
 
 
 
Distributions from investment income and realized gains
(0.18
)
 
(0.19
)
Net decrease in net assets resulting from stockholder distributions
(0.18
)
 
(0.19
)
 
 
 
 
Capital share transactions
 
 
 
Issuance of common stock (3)

 
0.11

Net increase in net assets resulting from capital share transactions

 
0.11

Other (4)

 
0.03

Net asset value, end of period
$
8.61

 
$
8.61

 
 
 
 
Shares outstanding at end of period
4,563,196

 
4,563,196

Weighted average shares at end of period
4,563,196

 
3,927,271

Total return (9)
2.16
%
 
2.14
%
Ratio/Supplemental data:
 
 
 
Net assets, end of period
39,266,309

 
39,289,114

Ratio of net investment income (loss) to average net assets (5)(7)(8)
7.82
%
 
2.05
%
Ratio of operating expenses to average net assets (5)(7)(8)
1.63
%
 
4.06
%
Portfolio turnover rate (6)
9.57
%
 
9.04
%
_____________________
(1) The per share data was derived by using the weighted average shares outstanding during the period.
(2) Distributions are determined based on taxable income calculated in accordance with income tax regulations, which may differ from amounts determined under U.S. GAAP due to (i) changes in unrealized appreciation and depreciation, (ii) temporary and permanent differences in income and expense recognition, and (iii) the amount of spillover income carried over from a given year for distribution in the following year. The final determination of taxable income for each tax year, as well as the tax attributes for distributions in such tax year, will be made after the close of the tax year.
(3) The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of shares of common stock in the Company's continuous offering.
(4)Includes the impact of different share amounts used in calculating per share data as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of a period end or transaction date. The issuance of common stock at an offering price, net of selling commissions and dealer manager fees, that is greater than the net asset value per share results in an increase in net asset value per share.
(5) For the three months ended March 31, 2017, excluding the expense support and conditional reimbursement and the incentive fee waiver, the ratio of net investment income and operating expenses to average net assets was 5.34% and 4.11%, respectively. For the three months ended March 31, 2016, excluding the expense support and conditional reimbursement, the ratio of net investment income and operating expenses to average net assets is (14.45)% and 20.56%, respectively.

32


(6) Portfolio turnover rate is calculated using the lesser of year-to-date purchases or sales over the average of the invested assets at fair value.
(7)The Company's ratio of net investment income to average net assets and ratio of total expenses to average net assets have been annualized for the three months ended March 31, 2017 and March 31, 2016.
(8)Organizational expenses, offering costs and incentive fees included within the ratio are not annualized.
(9)Total investment return is calculated assuming a purchase of common shares at the current market value on the first day and a sale at the current market value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at the current net asset value per share. Total investment return does not reflect brokerage commissions. Total investment returns covering less than a full period are not annualized.
Note 11. Subsequent Events
The Company has evaluated subsequent events through the filing of this Form 10-Q and determined that there have been no events that have occurred that would require adjustments to the Company's disclosures in the financial statements except for the following:
Renewal of Investment Advisory Agreement and Investment Sub-Advisory Agreement
On May 4, 2017, the board of directors, including a majority of directors who are considered independent under the rules promulgated by the NYSE and is not an “interested person,” as that term is defined by the 1940 Act, present at an in-person meeting, approved an additional one year extension of the Investment Advisory Agreement between the Company and Adviser, and the Investment Sub-Advisory Agreement by and among the Company, the Adviser, and the Sub-Adviser.
Distribution Rate
On May 4, 2017, the Company's board of directors declared a distribution rate for the month of June of $0.002055 per day per share on the outstanding shares of common stock, representing an annual distribution rate of 7.65% based on a share price of $9.80 (7.5% based on a share price of $10.00), payable to stockholders of record of such shares as shown on the Company's books on each day commencing on June 1, 2017 and continuing through June 30, 2017.
Agreement and Plan of Reorganization
On May 5, 2017, the Company and GIA Credit Fund entered into the Agreement, pursuant to which the Company will transfer all of its assets to GIA Credit Fund in exchange for Reorganization Shares, GIA Credit Fund's assumption of all of the Company's liabilities, and the distribution of Reorganization Shares to the Company's stockholders in proportion to their holdings.
Pursuant to the terms and conditions of the Agreement, the Reorganization Shares will have an aggregate net asset value equal to the aggregate value of the assets that GIA Credit Fund receives from the Company, less the liabilities it assumes from the Company. The GIA Credit Fund’s adviser will also bear all costs related to the Reorganization, whether the Reorganization is consummated or not.
The Agreement, the Reorganization, and the other transactions contemplated in the Agreement were unanimously approved by the Company's board of directors on March 29, 2017.
The parties' obligations in connection with the Reorganization are subject to certain mutual conditions, including, without limitation, (i) the affirmative vote of a majority of the outstanding shares of common stock entitled to vote on the Agreement at a special meeting of the Company's stockholders, (ii) the declaration and payment of one or more dividends that, together with all previous dividends, will distribute all of the Company's investment company taxable income (computed without regard to the deduction for dividends paid), net tax-exempt income, if any, and net realized capital gains, if any, to the Company's stockholders for the taxable period ended prior to the closing date of the Reorganization, and for prior tax years to the extent such dividends are eligible to be treated as paid in respect of such prior tax years, (iii) the approval, consent, or exemption from the SEC or any other regulatory body necessary to carry out the Reorganization, (iv) the effectiveness of the registration statement on Form N-14 to be filed with the SEC, and (v) the receipt of opinions that the Company's stockholders will not recognize gain or loss for U.S. federal income tax purposes upon the exchange of shares in the Company for the Reorganization Shares and that the Company will not recognize gain or loss as a direct result of the Reorganization. In addition, each party's obligation to consummate the Reorganization is subject to certain other conditions, including, without limitation, (a) the accuracy of the other party's representations and warranties, and (b) the receipt of opinions that the Reorganization will qualify as a tax-free reorganization described in Section 368(a) of the Internal Revenue Code of 1986, as amended.

33


The Company and GIA Credit Fund each made certain customary representations, warranties, and covenants in the Agreement, including, among others, covenants by each party to conduct its business in all material respects in the ordinary course of business, subject to certain exceptions, during the period between the execution of the Agreement and the consummation of the Reorganization.
The Agreement and the transactions contemplated by it may be terminated and abandoned with respect to the Reorganization by mutual agreement of the Company and GIA Credit Fund at any time prior to the closing date thereof, or by either the Company or GIA Credit Fund in the event of a material breach of the Agreement by the other party or a failure of any condition precedent to the terminating party's obligations under the Agreement, among other events. In the event of a termination, GIA Credit Fund's adviser will bear all costs associated with the Reorganization.
The foregoing descriptions of the Agreement and the transactions contemplated thereby are not complete and are subject to and qualified in their entirety by reference to the Agreement, a copy of which is filed as Exhibit 10.14 to this Quarterly Report and is incorporated herein by reference.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. Except as otherwise specified, references to "we," "us,", "our," or the "Company," refer to Griffin-Benefit Street Partners BDC Corp.
OVERVIEW
We are a recently organized, externally managed, non-diversified closed-end management investment company. We are managed by Griffin Capital BDC Advisor, LLC ("GBA" or "Adviser"), an affiliate of Griffin Capital Company, LLC ("Griffin Capital"). GBA is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act").
We have invested substantially all proceeds raised in the Offering, net of expenses, in private U.S. middle-market companies in accordance with our investment objectives.
We and GBA oversee the management of our activities and are responsible for making investment decisions for our portfolio. We and GBA have engaged Benefit Street Partners L.L.C. ("Benefit Street" or "Sub-Adviser"), which is a registered investment adviser under the Advisers Act and an affiliate of Providence. Benefit Street assists GBA with the management of our activities and operations. All of our investment decisions will be the sole responsibility of, and will be made at the sole discretion of, GBA, subject to ultimate oversight by our board of directors. We elected to be treated for federal income tax purposes as a regulated investment company, or RIC, under Subchapter M of the Code beginning with the taxable year ended December 31, 2015.
Our investment objective is to generate both current income and capital appreciation. We seek to achieve our investment objective by investing in secured debt (including senior secured, unitranche and second lien debt) and unsecured debt (including senior unsecured and subordinated debt), as well as equity and equity related securities issued by private U.S. companies primarily in the middle market or public U.S. companies with market equity capitalization of less than $250.0 million. We intend to generally focus our investment activities on companies that our Adviser believes have leading market positions, significant asset or franchise values, strong free cash flow, experienced senior management teams and high-quality sponsors (if the company is externally sponsored). We may also make investments in syndicated debt opportunities.

34


We primarily invest in private U.S. companies in the middle market with EBITDA of approximately $5 million to $100 million. However, we may invest in larger companies if an attractive opportunity presents itself, especially when there are dislocations in the capital markets, including the high yield and large syndicated loan markets. We expect that our investments will generally range between $5 million and $50 million, although the size of our initial investments may be smaller. Under our investment strategy, we intend to maintain a strong focus on credit quality, including a high level of investment discipline and selectivity. We believe that investing in the debt of private companies generally provides a more attractive relative value proposition than investing in broadly syndicated debt due to the conservative capital structures and superior default and loss characteristics typically associated with these companies. Because private companies have limited access to capital providers, debt investments in such companies typically carry above market interest rates and include better-than-market terms. As a result, we believe investments in private companies result in attractive risk-adjusted returns.
As a business development company, or BDC, we are required to comply with certain regulatory requirements. For instance, we have to invest at least 70.0% of our total assets in "qualifying assets," including securities of private or thinly traded public U.S. companies and cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, we may from time to time invest up to 30.0% of our assets opportunistically in other types of investments, including the securities of larger public companies and foreign securities.
As a BDC, we are subject to certain regulatory restrictions in negotiating certain investments with certain entities under the 1940 Act, such as GBA, Benefit Street and their respective affiliates, unless we obtain an exemptive order from the Securities and Exchange Commission ("SEC"). In an order dated June 23, 2015, the SEC granted exemptive relief permitting us, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions with certain affiliates of Benefit Street. Among other things, the relief requires that our independent directors review and approve each initial co-investment. We believe this relief may also allow us to participate in larger investments, together with Benefit Street’s co-investment affiliates, than would be available to us if we had not obtained such relief.
On July 25, 2014 and July 28, 2014, pursuant to a private placement, GBA and Benefit Street, respectively, each contributed $100,000 to purchase 11,111 shares of our common stock at $9.00 per share, for an aggregate of $0.2 million and 22,222 shares. Neither GBA nor Benefit Street will tender these shares for repurchase as long as it remains the investment adviser or sub-adviser, respectively. On January 20, 2015, we began offering on a continuous basis up to $1.5 billion in shares of common stock, which we began offering at an initial offering price of $10.00 per share (the "Offering"). On December 23, 2015, we decreased our public offering price from $10.00 per share to $9.80 per share, in accordance with our pricing policy.
On March 15, 2016, our board of directors determined that it is in our and the stockholders’ best interest to suspend the Offering. The board of directors’ determination was based on the Adviser's belief that market conditions and our current structure are not conducive to continuing the Offering, and that the board of directors consider an alternative fund structure to reduce our exposure to potential federal and state regulatory challenges and unfavorable market conditions that non-traded BDCs faced in the fourth quarter of 2015 and first quarter of 2016.

On March 29, 2017, our board of directors approved the entry into the Agreement and Plan of Reorganization (the “Agreement”) with Griffin Institutional Access Credit Fund, a Delaware statutory trust (“GIA Credit Fund”), pursuant to which, subject to shareholder approval and the satisfaction or waiver of certain conditions, we will transfer all of our assets to GIA Credit Fund in exchange for shares of GIA Credit Fund (“Reorganization Shares”) and the assumption by GIA Credit Fund of all of our liabilities (the “Reorganization”). We executed the Agreement on May 5, 2017.
Pursuant to the terms and subject to the conditions set forth in the Agreement, GIA Credit Fund will issue Reorganization Shares with an aggregate net asset value equal to the aggregate value of the assets that it receives from us, less the liabilities it assumes from us. Shareholders will exchange our shares for Reorganization Shares, which will be distributed to our stockholders in proportion to their holdings.
We and GIA Credit Fund have similar investment objectives, strategies, and restrictions. Our investment objective is to generate both current income and capital appreciation, while GIA Credit Fund’s investment objective is to generate a return comprised of both current income and capital appreciation with an emphasis on current income with low volatility and low correlation to the broader markets.
The consummation of the Reorganization is subject to certain customary closing conditions, including, among others, the approval of the Reorganization by our stockholders, the absence of legal impediments to the consummation of the Reorganization, the absence of a material adverse effect on either us or GIA Credit Fund, and compliance by us and GIA Credit Fund, including the effectiveness of the registration statement on Form N-14 that will be filed with the SEC and the receipt of tax opinions related to the tax-free nature of the transaction. In addition, the Reorganization Shares will be subject to an expense limitation agreement that will limit the total annual operating expenses of the Reorganization shares.

35


The Agreement may be terminated and abandoned with respect to the Reorganization by mutual agreement by us and GIA Credit Fund, or by either us or GIA Credit Fund in the event of a material breach of the Agreement or a failure of any conditions precedent. In the event of a termination, GIA Credit Fund’s adviser will bear all costs associated with the Reorganization.
Subject to stockholder approval, our board of directors also approved the proposal to authorize us (as part of the Reorganization process) to withdraw our election to be treated as a BDC under the 1940 Act. Once the BDC election is withdrawn, we will no longer be subject to the limitations imposed on BDCs under the 1940 Act.
There is no guarantee that the Reorganization will be consummated.
We will continue to operate as a non-traded BDC unless and until the stockholders approve the proposed plan of Reorganization.
Our transfer agent ceased accepting subscriptions received on or after March 15, 2016, and issued refunds for all subscriptions received on or after March 4, 2016. We also sent written notification to our stockholders on March 15, 2016 announcing that we suspended the distribution reinvestment plan ("DRP"), effective March 15, 2016.
Emerging Growth Company
We are an "emerging growth company" under the federal securities laws and are subject to reduced public company reporting requirements. Specifically, under the Jumpstart Our Business Startups Act ("JOBS Act"), emerging growth companies are not required to (1) provide an auditor's attestation report on management's assessment of the effectiveness of internal control over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act, (2) comply with new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, which require mandatory audit firm rotation or a supplement to the auditor's report in which the auditor must provide additional information about the audit and the issuer's financial statements, (3) comply with new audit rules adopted by the PCAOB after April 5, 2012 (unless the SEC determines otherwise), (4) provide certain disclosures relating to executive compensation generally required for larger public companies or (5) hold stockholder advisory votes on executive compensation. In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, pursuant to Section 107 of the JOBS Act, we have chosen to "opt out" of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

36


Portfolio and Investment Activity
During the three months ended March 31, 2017, we made approximately $3.4 million of investments in portfolio companies and had approximately $4.8 million of repayments, resulting in net repayments at amortized cost of approximately $1.4 million for the period. During the three months ended March 31, 2016, we made approximately $6.9 million of investments in portfolio companies and had approximately $1.9 million of repayments, resulting in net investments at amortized cost of approximately $5.0 million for the period. See Note 3, Investments, to the financial statements.
Our portfolio composition, based on fair value at March 31, 2017, was as follows:
 
 
Investments at Fair Value
 
Percentage of Total Portfolio
 
Weighted Average Current Yield for Total Portfolio (1)
Senior Secured Loans - First Lien
 
$
24,723,901

 
69.7
%
 
7.4
%
Senior Secured Loans - Second Lien
 
5,054,357

 
14.3

 
10.0

Senior Secured Bonds
 
1,802,490

 
5.1

 
9.0

Senior Unsecured Debt
 
3,857,105

 
10.8

 
10.3

Equity/Other
 
20,556

 
0.1

 
N/A

Total
 
$
35,458,409

 
100.0
%
 
8.2
%
_________________
(1) Excludes the effect of the amortization or accretion of loan premiums or discounts.
Our portfolio composition, based on fair value at December 31, 2016, was as follows:
 
 
Investments at Fair Value
 
Percentage of Total Portfolio
 
Weighted Average Current Yield for Total Portfolio (1)
Senior Secured Loans - First Lien
 
$
25,328,962

 
69.1
%
 
7.4
%
Senior Secured Loans - Second Lien
 
4,722,313

 
12.9

 
10.0

Senior Secured Bonds
 
1,767,250

 
4.8

 
9.0

Senior Unsecured Debt
 
4,803,840

 
13.1

 
10.3

Equity/Other
 
20,008

 
0.1

 
N/A

Total
 
$
36,642,373

 
100.0
%
 
8.2
%
_________________
(1) Excludes the effect of the amortization or accretion of loan premiums or discounts.


37


The following table shows the composition by industry grouping based on fair value as of March 31, 2017:
 
 
As of March 31, 2017
 
 
Investments at Fair Value
 
Percentage of Total Portfolio
Business Services
 
$
11,717,743

 
33.0
%
Telecom
 
4,657,127

 
13.1

Technology
 
2,292,265

 
6.5

Healthcare - Products
 
1,985,025

 
5.6

Healthcare
 
1,908,400

 
5.4

Pharmaceuticals
 
1,807,925

 
5.1

Entertainment
 
1,799,739

 
5.1

Financial Services
 
1,693,470

 
4.8

Health Facilities
 
1,667,315

 
4.7

Cable
 
1,197,500

 
3.4

Software/Services
 
1,001,326

 
2.8

Chemicals
 
896,365

 
2.5

Environmental
 
876,371

 
2.5

Food - Wholesale
 
831,751

 
2.3

Media - Broadcast
 
758,049

 
2.1

Retail
 
148,246

 
0.4

Energy - Exploration & Production
 
95,110

 
0.3

Consumer Products
 
71,572

 
0.2

Newspaper
 
53,110

 
0.2

Total
 
$
35,458,409

 
100.0
%


38


The following table shows the composition by industry grouping based on fair value as of December 31, 2016:
 
 
As of December 31, 2016
 
 
Investments at Fair Value
 
Percentage of Total Portfolio
Business Services
 
$
11,830,269

 
32.3
%
Telecom
 
4,529,812

 
12.4

Technology
 
3,247,828

 
8.9

Healthcare
 
2,286,095

 
6.2

Healthcare - Products
 
1,990,013

 
5.4

Pharmaceuticals
 
1,783,626

 
4.9

Financial Services
 
1,722,275

 
4.7

Health Facilities
 
1,672,169

 
4.6

Entertainment
 
1,332,246

 
3.6

Cable
 
1,186,250

 
3.2

Software/Services
 
1,058,394

 
2.9

Food - Wholesale
 
992,930

 
2.7

Chemicals
 
886,500

 
2.4

Environmental
 
847,853

 
2.3

Media - Broadcast
 
738,209

 
2.0

Retail
 
302,871

 
0.8

Energy - Exploration & Production
 
95,320

 
0.3

Consumer Products
 
78,076

 
0.2

Newspaper
 
61,637

 
0.2

Total
 
$
36,642,373

 
100.0
%
Results of Operations
Operating results for the three months ended March 31, 2017 and March 31, 2016 were as follows:
 
For the Three Months Ended March 31,
 
For the Three Months Ended March 31,
 
2017
 
2016
Total investment income
$
914,696

 
$
503,403

Total expenses, net of reimbursement
170,414

 
336,251

Net investment income
$
744,282

 
$
167,152

Investment Income
We generate revenue primarily in the form of interest income and capital gains, if any, on the debt instruments in which we invest. We may also generate revenue from capital gains on direct equity investments we make, if any, or on warrants or other equity interests that we may acquire in portfolio companies. In some cases, the interest on our investments may accrue or be paid in the form of additional debt. The principal amount of the debt instruments and any accrued but unpaid interest will generally become due at the maturity date of such debt instruments. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance or consulting fees. Any such fees will be generated in connection with our investments and recognized as earned.
For the three months ended March 31, 2017, total investment income was $0.9 million and was attributable to interest income from investments in portfolio companies. For the three months ended March 31, 2017, the average portfolio fair value was approximately $36.1 million, with a 8.2% weighted average current yield. For the three months ended March 31, 2016, total investment income was $0.5 million and was attributable to interest income from investments in portfolio companies. During the three months ended March 31, 2016, the average portfolio fair value was approximately $20.7 million, with a 8.6% weighted average current yield. The average portfolio fair value was calculated based on average investments at fair value using current quarter's and prior year's investments at fair value.

39



Operating Expenses
The composition of our operating expenses for the three months ended March 31, 2017 and March 31, 2016 was as follows:
 
For the Three Months Ended March 31,
 
For the Three Months Ended March 31,
 
2017
 
2016
Base management fees
$
177,783

 
$
103,108

Incentive fees
16,642

 

Organizational costs

 
7,322

General & administrative
73,439

 
78,452

Amortization of offering costs

 
1,288,646

Professional fees
53,937

 
109,469

Insurance expense
43,321

 
49,091

Directors fees
45,500

 
43,470

  Total expenses before reimbursement
410,622

 
1,679,558

Expense reimbursement
(240,208
)
 
(1,343,307
)
  Total expenses, net of reimbursement
$
170,414

 
$
336,251

Our primary operating expenses include the costs associated with: (i) investment advisory fees, including base management fees and incentive fees, if any, to the Adviser, pursuant to our Investment Advisory Agreement; (ii) our allocable portion of overhead and other expenses incurred by the Adviser and Sub-Adviser in performing their respective administrative obligations under the Investment Advisory Agreement and Investment Sub-Advisory Agreement, respectively; and (iii) other operating expenses as detailed below. Our investment advisory fees compensate the Adviser for its work in identifying, evaluating, negotiating, closing, monitoring and servicing our investments. See Note 5, Related Party Transactions of notes to the financial statements. GBA will be responsible for compensating Benefit Street for Benefit Street's services pursuant to the Investment Sub-Advisory Agreement. We will bear all other expenses of our operations and transactions, including (without limitation):
the cost of our organization and our Offering;
the cost of calculating our net asset value, including the cost of any third-party valuation services;
the cost of effecting sales and repurchases of our shares and other securities;
interest payable on debt, if any, to finance our investments;
fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence reviews of prospective investments and advisory fees;
transfer agent and custodial fees;
fees and expenses associated with marketing efforts;
federal and state registration fees, any stock exchange listing fees;
federal, state and local taxes;
independent directors' fees and expenses;
brokerage commissions;
fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums;
direct costs and expenses of administration and sub-administration, including printing, mailing, long distance telephone and staff;

40


fees and expenses associated with independent audits and outside legal costs;
costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws; and
all other expenses incurred by GBA or us in connection with administering our business, including all expenses incurred by GBA or Benefit Street in performing their respective obligations under the Investment Advisory Agreement and Investment Sub-Advisory Agreement, respectively, and the reimbursement of the compensation of our chief financial officer and chief compliance officer and their respective staffs paid by GBA, to the extent they are not controlling persons of GBA or any of its affiliates, subject to the limitations included in the Investment Advisory Agreement and Administration Agreement, as applicable.
For the three months ended March 31, 2017, we did not incur any organizational costs or amortization of offering costs. For the three months ended March 31, 2016, we incurred organization costs of approximately $7,322 and amortization of offering costs of approximately $1.3 million. As a result of raising the minimum offering proceeds on May 1, 2015, we became liable, subject to the expense support and conditional reimbursement agreement (as amended, the "ESA"), to reimburse Griffin Capital and its affiliates for these costs, if and when Griffin Capital and its affiliates submit such costs for reimbursement. These organizational and offering costs included, among other items, the cost of legal services pertaining to our organization and incorporation of our business and incorporation fees as well as the legal fees and other costs pertaining to the preparation of our registration statement in connection with the Offering. Our management is not aware of any material trends or uncertainties, favorable or unfavorable, other than regulatory pressures and national economic conditions affecting our portfolio, the debt and equity of middle market companies, which may be reasonably anticipated to have a material impact on the portfolio and the revenue or income to be derived from the operation of our assets.
Net Realized Gain from Investments
For the three months ended March 31, 2017, we had $4.8 million of principal repayments, resulting in $0.2 million in realized gains. For the three months ended March 31, 2016, we had $1.9 million of principal repayments, resulting in $0.03 million of realized gains.
Net Change in Unrealized Appreciation (Depreciation) on Investments
For the three months ended March 31, 2017, our investments had $0.1 million of unrealized depreciation as a result of changes in market conditions. For the three months ended March 31, 2016, our investments had $0.02 million of unrealized appreciation as a result of changes in market conditions.
Changes in Net Assets from Operations
For the three months ended March 31, 2017, we recorded a net increase in net assets resulting from operations of $0.8 million. Based on the weighted average shares of common stock outstanding for the three months ended March 31, 2017, our per share net increase in net assets resulting from operations was $0.18. For the three months ended March 31, 2016, we recorded a net increase in net assets resulting from operations of $0.2 million. Based on the weighted average shares of common stock outstanding for the three months ended March 31, 2016, our per share net increase in net assets resulting from operations was $0.05.
Cash Flows for the Three Months Ended March 31, 2017
For the three months ended March 31, 2017, net cash used in operating activities was approximately $0.5 million. The level of cash flows used in or provided by operating activities is affected by the timing of purchases and repayments of portfolio investments, among other factors. Cash flows used in operating activities for the three months ended March 31, 2017 were primarily related to purchases of investments totaling approximately $3.4 million and a decrease in unsettled purchases of approximately $2.5 million, partially offset by repayments of $4.8 million.
Net cash used in financing activities of approximately $0.8 million for the three months ended March 31, 2017 was related to distributions paid to stockholders of $0.8 million.


41


Cash Flows for the Three Months Ended March 31, 2016
For the three months ended March 31, 2016, net cash used in operating activities was approximately $5.9 million. The level of cash flows used in or provided by operating activities is affected by the timing of purchases, repayments and sales of portfolio investments, among other factors. Cash flows used in operating activities for the three months ended March 31, 2016 were primarily related to purchases of investments totaling approximately $6.9 million, offset mostly by repayments of $1.9 million.
Net cash provided by financing activities of approximately $12.7 million during the three months ended March 31, 2016 was primarily related to net proceeds from the issuance of common stock of approximately $13.1 million.
Expense Support and Conditional Reimbursement Agreement
On March 25, 2015, we and GBA entered in to the ESA. On March 23, 2016, the Company and the Adviser executed the Amendment to the Expense Support and Conditional Reimbursement Agreement (the “Amended ESA”), which is effective for all reimbursement payments from the Company to the Adviser made on or after December 31, 2015. Pursuant to the Amended ESA, GBA has agreed to reimburse us for expenses in an amount that is sufficient to: (i) ensure that no portion of our distributions to stockholders will be paid from our offering proceeds or borrowings, and/or (ii) reduce our operating expenses until we have achieved economies of scale sufficient to ensure that we bear a reasonable level of expense in relation to our investment income. Pursuant to the Amended ESA, we will have a conditional obligation to reimburse GBA for any amounts funded by GBA under such agreement, including certain organizational and offering costs that have been included in operating expenses, if certain conditions are met. First, GBA will be entitled to receive reimbursement payments if, during any fiscal quarter occurring within three years of the date on which GBA funded such amount, the sum of our net investment income for tax purposes, net capital gains and the amount of any dividends and other distributions paid to us on account of investments in portfolio companies (to the extent not included in net investment income or net capital gains for tax purposes) exceeds the distributions paid by us to stockholders. Second, we and GBA have agreed that we will make reimbursement payments only if: (i) our current “operating expense ratio” is equal to or less than its operating expense ratio at the time the corresponding expense payment obligation was incurred by GBA, and (ii) the annualized rate of our regular cash distributions to our stockholders is equal to or greater than the annualized rate of our regular cash distributions to our stockholders at the time the corresponding expense payment was incurred by GBA. For this purpose, the “operating expense ratio” is defined as all expenses borne by us, except for organizational and offering expenses, base management and incentive fees owed to GBA, and interest expense, as a percentage of net assets. Finally, for organizational and offering costs that have been included in operating expenses, we will limit reimbursement of such expenses to the sum of: (i) all expense payments paid by GBA to us in cash and not previously reimbursed; (ii) non-organizational and offering costs included in operating expenses incurred by GBA and its affiliates and accrued as payables by us; and (iii) organizational and offering costs incurred by GBA and its affiliates and accrued as payables by us, up to a limit of 1.5% of gross proceeds raised. We will not record expense support payments as liabilities on the statements of assets and liabilities until the above conditions are met.
On March 6, 2017, GBA and Benefit Street entered into a letter agreement which revised the terms between the Adviser and Sub-Adviser. Under the letter agreement, Benefit Street will no longer have any obligation to share the expense or distribution support obligations pursuant to the Amended ESA. On March 29, 2017, we and the Adviser executed a Second Amendment to the Expense Support and Conditional Reimbursement Agreement (the "Second Amended ESA”, collectively with the agreements above, the "Amended ESA"), which is effective for all reimbursement payments from us to the Adviser on or after March 23, 2017.


42


We or GBA may terminate the Amended ESA at any time. If we terminate the Investment Advisory Agreement with GBA, we will be required to repay GBA all reimbursements funded by GBA within three years of the date of termination, subject to the limitation that organizational and offering costs will only be repaid up to 1.5% of gross proceeds. The specific amount of expenses reimbursed by GBA, if any, will be determined at the end of each quarter. The following table provides information regarding costs incurred by the Adviser pursuant to the expense support and conditional reimbursement agreement as well as other information relating to our ability to reimburse the Adviser for such costs:
Quarter Ended
 
Amount of Expense Payment Support
 
Amount Repaid to GBA
 
Operating Expense Ratio (1)
 
Annualized Distribution Rate (2)
 
Eligible to be Repaid Through (3)
June 30, 2015
 
                                 815,023

 

 
6.87
%
 
7.50
%
 
June 30, 2018
September 30, 2015
 
726,058

 

 
4.23
%
 
7.50
%
 
September 30, 2018
December 31, 2015
 
                                 530,618

 

 
3.61
%
 
7.50
%
 
December 31, 2018
March 31, 2016(4)
 
1,543,113

 

 
0.71
%
 
7.65
%
 
March 31, 2019
June 30, 2016(4)
 
455,606

 

 
0.74
%
 
7.65
%
 
June 30, 2019
September 30, 2016(4)
 
35,603

 

 
0.62
%
 
7.65
%
 
September 30, 2019
December 31, 2016(4)
 
127,354

 

 
1.21
%
 
7.65
%
 
December 31, 2019
March 31, 2017(5)
 
240,208

 

 
0.55
%
 
7.65
%
 
March 31, 2020
________________________
(1) 
"Operating Expense Ratio” is as of the date the expense support payment obligation was incurred by GBA and includes all expenses borne by us, except for organizational and offering expenses, base management and incentive fees owed to the Adviser, and interest expense, as a percentage of net assets.
(2) 
"Annualized Distribution Rate" equals the annualized rate of distributions paid to our stockholders based on the amount of the regular cash distribution paid immediately prior to the date the expense support payment obligation was incurred by GBA. “Annualized Distribution Rate” does not include special cash or stock distributions paid to stockholders.
(3) 
If an expense support payment has not been reimbursed to the Adviser within three years of the end of the calendar quarter following the date such expense support payment was incurred, our obligation to pay such Expense Support Payment shall automatically terminate and be of no further effect.
(4) 
Effective March 15, 2016, our board of directors determined that it was in our and the stockholders' best interests to suspend the Offering and DRP. However, in the months of March through December, the board of directors maintained the amount of daily cash distributions payable to stockholders at $0.002049 per share (representing an annualized distribution rate of 7.5% based on share price of $10.00, or an annualized distribution rate of 7.65% based on a share price of $9.80).
(5) 
In the months of January through March, the board of directors maintained the amount of daily cash distributions payable to stockholders at $0.002055 per share (representing an annualized distribution rate of 7.5% based on share price of $10.00, or an annualized distribution rate of 7.65% based on a share price of $9.80).
There can be no assurance that the Amended ESA will remain in effect or that GBA will reimburse any portion of our expenses in future quarters. Since inception, GBA has supported approximately $3.8 million of our operating expenses, including organizational and offering expenses, and approximately $0.7 million of distribution support pursuant to the Amended ESA, as well as other additional support. For the three months ended March 31, 2017 and for the three months ended March 31, 2016, total support of $0.2 million and $1.3 million, respectively, is included on the statements of operations as an expense reimbursement. Approximately $0.0 million $0.2 million, respectively, is reflected as a capital contribution on the statements of changes in net assets as distribution support for the three months ended March 31, 2017 and for the three months ended March 31, 2016. As of March 31, 2017, the Company does not believe it is probable that it will generate sufficient excess cash to reimburse GBA for these advances over the next three years, pursuant to the terms of the Amended ESA. 

43


Administrative Services
Griffin Capital BDC Administrator, LLC (our "Administrator") will provide us with general ledger accounting, fund accounting and investor relations and other administrative services pursuant to the Administration Agreement, under which our Administrator will also furnish us with administrative services necessary to conduct our day-to-day operations. Our Administrator will be reimbursed for administrative expenses it incurs on our behalf in performing its obligations. Such costs will be reasonably allocated to us on the basis of assets, revenues, time records or other reasonable methods. We will not reimburse our Administrator for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a person with a controlling interest in our Administrator. Pursuant to the Administration Agreement, our Administrator at its sole discretion, may contract with a third-party service providers. The cost of the third-party service providers will be an obligation of our Administrator. We will not incur the costs from both our Administrator and the third-party provider for similar services. As of March 31, 2017 and December 31, 2016, our Administrator waived reimbursement for the cost of any administrative services provided.
For the three months ended March 31, 2017 and 2016, GBA and Benefit Street had incurred certain expenses related to us, including directors fees, insurance and technology expenses, professional fees and other general and administrative expenses, of approximately $1,000 and $30,000, respectively. GBA and Benefit Street are entitled to reimbursement of these expenses, subject to the limitations imposed under the ESA described above.
Hedging
To the extent that any of our senior loans and other investments are denominated in a currency other than U.S. dollars, we may enter into currency hedging contracts to reduce our exposure to fluctuations in currency exchange rates. We may also enter into interest rate hedging agreements. Such hedging activities, which will be subject to compliance with applicable legal requirements, may include the use of futures, options, swaps and forward contracts. Costs incurred in entering into such contracts or in connection with settling them will be borne by us. Our ability to engage in hedging transactions may be adversely affected by recent rules adopted by the Commodity Futures Trading Commission ("CFTC").
Financial Condition, Liquidity and Capital Resources
On July 25, 2014 and July 28, 2014, pursuant to a private placement, each of GBA and Benefit Street, respectively, contributed an aggregate of $100,000 to purchase 11,111 shares of our common stock at $9.00 per share, which represents the initial public offering price of $10.00 per share net of selling commissions and dealer manager fees. Neither GBA nor Benefit Street will tender these shares for repurchase as long as it remains the investment adviser or investment sub-adviser, respectively. In connection with the private placement, we issued an aggregate of 22,222 shares of common stock for aggregate proceeds of approximately $0.2 million. On May 1, 2015, we achieved the minimum offering requirement and commenced operations. As of March 31, 2017, we have raised total gross proceeds of approximately $44.8 million pursuant to the Offering plus the proceeds from the private placement, which have remained unchanged since March 15, 2016.
On March 15, 2016, our board of directors determined that it is in our and the stockholders’ best interest to suspend the Offering. The board of directors’ determination was based on the Adviser's belief that market conditions and our current structure are not conducive to continuing the Offering, and that the board of directors consider an alternative fund structure to reduce our exposure to potential federal and state regulatory challenges and unfavorable market conditions that non-traded BDCs faced in the fourth quarter of 2015 and first quarter of 2016.
On March 29, 2017, our board of directors approved the entry into the Agreement and Plan of Reorganization with Griffin Institutional Access Credit Fund, a Delaware statutory trust, pursuant to which, subject to shareholder approval and the satisfaction or waiver of certain conditions, we will transfer all of our assets to GIA Credit Fund in exchange for shares of GIA Credit Fund and the assumption by GIA Credit Fund of all of our liabilities. We executed the Agreement on May 5, 2017.
Pursuant to the terms and subject to the conditions set forth in the Agreement, GIA Credit Fund will issue Reorganization Shares with an aggregate net asset value equal to the aggregate value of the assets that it receives from us, less the liabilities it assumes from us. Shareholders will exchange our shares for Reorganization Shares, which will be distributed to our stockholders in proportion to their holdings.
    We and GIA Credit Fund have similar investment objectives, strategies, and restrictions. Our investment objective is to generate both current income and capital appreciation, while GIA Credit Fund’s investment objective is to generate a return comprised of both current income and capital appreciation with an emphasis on current income with low volatility and low correlation to the broader markets.


44


The consummation of the Reorganization is subject to certain customary closing conditions, including, among others, the approval of the Reorganization by our stockholders, the absence of legal impediments to the consummation of the Reorganization, the absence of a material adverse effect on either us or GIA Credit Fund, and compliance by us and GIA Credit Fund, including the effectiveness of the registration statement on Form N-14 that will be filed with the SEC and the receipt of tax opinions related to the tax-free nature of the transaction. In addition, the Reorganization Shares will be subject to an expense limitation agreement that will limit the total annual operating expenses of the Reorganization shares.
The Agreement and plan of Reorganization may be terminated and abandoned with respect to the Reorganization by mutual agreement by us and GIA Credit Fund, or by either us or GIA Credit Fund in the event of a material breach of the Agreement or a failure of any conditions precedent. In the event of a termination, GIA Credit Fund’s adviser will bear all costs associated with the Reorganization.
Subject to stockholder approval, our board of directors also approved the proposal to authorize us (as part of the Reorganization process) to withdraw our election to be treated as a BDC under the 1940 Act. Once the BDC election is withdrawn, we will no longer be subject to the limitations imposed on BDCs under the 1940 Act.
There is no guarantee that the Reorganization will be consummated.
We will continue to operate as a non-traded BDC unless and until the stockholders approve the proposed plan of reorganization.
Prior to investing in debt securities, we invest the net proceeds we already have received from the Offering primarily in cash, cash equivalents, U.S. government securities, and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our BDC election and our election to be taxed as a RIC beginning with our tax year ended December 31, 2015.
We have invested substantially all proceeds raised in the Offering, net of expenses, in private U.S. middle-market companies in accordance with our investment objectives. We will, however, continue to monitor our cash position in order to maintain an amount sufficient to pay operating expenses and distributions to our stockholders. We will continue to consider investments as proceeds from sales and repayments are available.
RIC Status and Distributions
We have elected to be treated for federal income tax purposes as a RIC under Subchapter M of the Code. Generally, a RIC is entitled to a deduction for federal income tax purposes for distributions paid to stockholders if it distributes at least 90% of its "Investment Company Taxable Income," as defined by the Code, each year. To qualify for and maintain RIC tax treatment, we must, among other things, distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. In order to avoid certain excise taxes imposed on RICs, a RIC would need to distribute during each calendar year an amount at least equal to the sum of (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (3) any ordinary income and net capital gains for preceding years that were not distributed during such years and on which we paid no federal income tax.
Subject to our board of directors' discretion and applicable legal restrictions, we intend to authorize and declare cash distributions on a monthly basis and pay distributions on a monthly basis. Net capital gains, if any, will be distributed or deemed distributed at least annually. We will then calculate each stockholder's specific distribution amount for the period using record and declaration dates and a stockholder's distributions will begin to accrue on the date we accept their subscription for our common stock. From time to time, we may also pay interim distributions at the discretion of our board of directors. Each distribution will be accompanied by an estimate of the tax attributes of the distribution.
Each year, a statement on Form 1099-DIV identifying the source of the distribution (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of paid-in capital surplus which is a nontaxable distribution) will be mailed to our stockholders. Our distributions may exceed our earnings. As a result, a portion of the distributions we make may represent a return of capital for tax purposes. The tax basis of shares must be reduced by the amount of any return of capital distributions, which will result in an increase in the amount of any taxable gain (or a reduction in any deductible loss) on the sale of shares. There can be no assurance that we will be able to sustain distributions at any particular level.

45


We intend to make any distributions in the form of cash out of assets legally available for such purpose. Before March 15, 2016, a stockholder could have elected to receive his, her or its distributions in additional common stock pursuant to our DRP. Effective March 15, 2016, we suspended our DRP, and stockholders may not elect to receive distributions in the form of any additional common stock.Any distributions reinvested under the plan, prior to the suspension of the DRP, will remain taxable to U.S. stockholders.
We have adopted an "opt in" DRP for our stockholders. As a result, if the DRP is resumed, our stockholders will receive their distributions in cash unless they specifically "opt in" to the distribution reinvestment plan so as to have their cash distributions reinvested in additional common stock.
We may fund our cash distributions to stockholders from any sources of funds available to us, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets and expense reimbursements from GBA or its affiliates.
Distributions in excess of our current and accumulated profits and earnings would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. The determination of the tax attributes of our distributions will be made annually as of the end of our fiscal year based upon our taxable income for the full year and distributions paid for the full year. Therefore, the estimates that accompany our monthly distributions may not be representative of the actual tax attributes of our distributions for a full year. Each year, a statement on Form 1099-DIV identifying the source of the distribution will be mailed to our stockholders.
Critical Accounting Policies
Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management's most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the financial statements, management will make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management also will utilize available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. As our expected operating results occur, we will describe additional critical accounting policies in the notes to our financial statements. The following are our most critical account policies, see Note 2, Basis of Presentation and Summary of Significant Accounting Policies:
Valuation of Portfolio Investments, Valuation Methods and Valuations Process;
Revenue Recognition;
Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation;
Organizational and Offering Costs; and
Income Taxes.

46



Recently Issued Accounting Pronouncements

See Note 2, Basis of Presentation and Summary of Significant Accounting Policies, of the notes to the financial statements.
Distributions
The table below shows our distribution declarations since the commencement of the public offering.
Declaration Date
 
 
Public Offering Price
 
Effective Date
 
Daily Distribution Amount per Share
 
Annualized Distribution Rate
 
May 7, 2015
 
$
10.00
 
May 7, 2015
 
$
0.002055

 
7.50
%
 
May 27, 2015
 
$
10.00
 
June 1, 2015
 
$
0.002055

 
7.50
%
 
June 26, 2015
 
$
10.00
 
July 1, 2015
 
$
0.002055

 
7.50
%
 
July 29, 2015
 
$
10.00
 
August 1, 2015
 
$
0.002055

 
7.50
%
 
August 12, 2015
 
$
10.00
 
September 1, 2015
 
$
0.002055

 
7.50
%
 
September 28, 2015
 
$
10.00
 
October 1, 2015
 
$
0.002055

 
7.50
%
 
October 27, 2015
 
$
10.00
 
November 1, 2015
 
$
0.002055

 
7.50
%
 
November 11, 2015
 
$
10.00
 
December 1, 2015
 
$
0.002055

 
7.50
%
(1) 
December 21, 2015
 
$
9.80
 
January 1, 2016
 
$
0.002049

 
7.65
%
 
January 22, 2016
 
$
9.80
 
February 1, 2016
 
$
0.002049

 
7.65
%
 
February 29, 2016
 
$
9.80
 
March 1, 2016
 
$
0.002049

 
7.65
%
(2) 
March 23, 2016
 
$
N/A
 
April 1, 2016
 
$
0.002049

 
7.65
%
(2) 
April 28, 2016
 
$
N/A
 
May 1, 2016
 
$
0.002049

 
7.65
%
(2) 
May 11, 2016
 
$
N/A
 
June 1, 2016
 
$
0.002049

 
7.65
%
(2) 
June 27, 2016
 
$
N/A
 
July 1, 2016
 
$
0.002049

 
7.65
%
(2) 
July 29, 2016
 
$
N/A
 
August 1, 2016
 
$
0.002049

 
7.65
%
(2) 
August 11, 2016
 
$
N/A
 
September 1, 2016
 
$
0.002049

 
7.65
%
(2) 
September 28, 2016
 
$
N/A
 
October 1, 2016
 
$
0.002049

 
7.65
%
(2) 
October 28, 2016
 
$
N/A
 
November 1, 2016
 
$
0.002049

 
7.65
%
(2) 
November 9, 2016
 
$
N/A
 
December 1, 2016
 
$
0.002049

 
7.65
%
(2) 
December 13, 2016
 
$
N/A
 
January 1, 2017
 
$
0.002055

 
7.65
%
(3) 
January 27, 2017
 
$
N/A
 
February 1, 2017
 
$
0.002055

 
7.65
%
(3) 
February 27, 2017
 
$
N/A
 
March 1, 2017
 
$
0.002055

 
7.65
%
(3) 
March 29, 2017
 
$
N/A
 
April 1, 2017
 
$
0.002055

 
7.65
%
(3) 
__________________
(1) Effective December 23, 2015, our board of directors determined to decrease our public offering price from $10.00 per share to $9.80 per share. For the remainder of the month of December, the board of directors determined to maintain the amount of daily cash distributions payable to stockholders of $0.002055 per share (representing an annualized distribution rate of 7.5% based on a share price of $10.00, or an annualized distribution rate of 7.65% based on a share price of $9.80).
(2) Effective March 15, 2016, the Company's board of directors determined that it was in the Company's and stockholders' best interests to suspend the offering and DRP. In the months of March through December, the board of directors maintained the amount of daily cash distributions payable to stockholders at $0.002049 per share (representing an annualized distribution rate of 7.5% based on a share price of $10.00, or an annualized distribution rate of 7.65% based on a share price of $9.80).
(3) Effective January 1, 2017, the board of directors declared the amount of daily cash distributions payable to stockholders to be $0.002055 per share (representing an annualized distribution rate of 7.5% based on a share price of $10.00, or an annualized distribution rate of 7.65% based on a share price of $9.80). The board of directors maintained such rate through March 31, 2017.

47


Of the dividends declared during the three months ended March 31. 2017, 100% were distributions derived from the Company's current and accumulated earnings and profits, on a U.S. GAAP basis and were not considered a return on capital.
See Note 9, Distributions, of the notes to the financial statements for additional information.
Contractual Obligations
We have entered into an agreement with GBA to provide us with investment advisory services. Payments for investment advisory services under the Investment Advisory Agreement in future periods will be equal to (a) an annual base management fee of 2.0% of our gross assets, excluding cash and cash equivalents, and (b) an incentive fee based on our performance. Our Administrator, and to the extent requested to provide such services and such services are so provided, GBA, Benefit Street and their respective affiliates, may be reimbursed for administrative expenses incurred on our behalf.
The incentive fee consists of two parts. The first part, which we refer to as the incentive fee on income, is calculated and payable quarterly in arrears based upon our "pre-incentive fee net investment income" for the immediately preceding quarter and will be subject to a hurdle rate, measured quarterly and expressed as a rate of return on adjusted capital, as defined in our Investment Advisory Agreement, equal to 1.75% per quarter, or an annualized rate of 7.0%. The second part of the incentive fee, which we refer to as the incentive fee on capital gains, will be determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement). This fee will equal 20.0% of our realized capital gains on a cumulative basis from inception, calculated as of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive fees.
We and GBA have engaged Benefit Street to act as our investment sub-adviser, as Benefit Street possesses skills that we believe will aid us in achieving our investment objective. Benefit Street will assist GBA with the management of our activities and operations.
Our Administrator provides us with general ledger accounting, fund accounting and investor relations and other administrative services. We entered into an administration agreement with our Administrator pursuant to which our Administrator, furnishes us with administrative services necessary to conduct our day-to-day operations. Our Administrator will be reimbursed for administrative expenses it incurs on our behalf in performing its obligations. Such costs are reasonably allocated to us on the basis of assets, revenues, time records or other reasonable methods. We have not reimbursed our Administrator for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a person with a controlling interest in our Administrator.
If any of our contractual obligations discussed above are terminated, our costs may increase under any new agreements that we enter into as replacements. We would also likely incur expenses in locating alternative parties to provide the services that we receive in accordance with our Investment Advisory Agreement and Administration Agreement. Any new Investment Advisory Agreement would also be subject to approval by our stockholders.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.
Related Party Transactions
We have entered into an Investment Advisory Agreement with GBA. Pursuant to the Investment Advisory Agreement, GBA is paid a base management fee and certain incentive fees, if applicable. We have also entered into an Administration Agreement with our Administrator, pursuant to which we reimburse our Administrator for expenses necessary for the performance of services related to our administration and operation, provided that such reimbursement will be the lower of our Administrator's actual costs or the amount that we would be required to pay third-party service providers for comparable administrative services in the same geographic location, and provided further that such costs will be reasonably allocated to us on the basis of assets, revenues, time records or other reasonable methods. Pursuant to the Administration Agreement, our Administrator at its sole discretion, may contract with a third-party service provider to provide certain of our accounting and administrative services. The cost of the third-party service providers will be an obligation of our Administrator. We will not incur the costs from both our Administrator and the third-party providers for similar services.

48


The Dealer Manager is an indirect subsidiary of Griffin Capital. Under the Dealer Manager Agreement, the Dealer Manager is entitled to receive sales commissions and dealer manager fees in connection with the shares sold in the Offering, all or a portion of which may be re-allowed to participating broker-dealers. Since the suspension of the Offering no sales commissions or dealer manager fees have been paid to the Dealer Manager.
Because GBA's senior management team includes members of the senior management team of Griffin Capital, which is the sponsor of four non-traded REITs, such members provide management services to both us and the four non-traded Griffin REITs. In the event that GBA undertakes to provide investment advisory services to other clients in the future, it will strive to allocate investment opportunities in a fair and equitable manner consistent with our investment objective and strategies so that we will not be disadvantaged in relation to any other client of our investment adviser or its senior management team. In addition, as noted above, GBA's senior management team consists of substantially the same management team that operates Griffin Capital.
See Note 5, Related Party Transactions, to our financial statements contained in this Quarterly Report on Form 10-Q for additional information regarding our related party transactions and relationships.
Staffing
We do not currently have any employees and we do not currently intend to hire any in the future. The compensation of our chief financial officer and our chief compliance officer will be paid by GBA. We will reimburse GBA for the compensation paid to our chief financial officer and his staff and our chief compliance officer and his staff. Each of our executive officers is a principal or officer of GBA, which manages and oversees our investment operations. In the future, GBA may retain additional investment personnel based upon its needs.
Recent Developments
See Note 11, Subsequent Events, to the financial statements.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to financial market risks, including changes in interest rates. Our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we would be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we have debt outstanding, our cost of funds would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments. We expect that our long-term investments will be financed primarily with equity and long-term debt. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a materially adverse effect on our business, financial condition and results of operations. For the three months ended March 31, 2017, we did not engage in hedging activities.
A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments, especially to the extent that we hold variable rate investments, and to declines in the value of any fixed rate investments we hold. To the extent that a majority of our investments may be in variable rate investments, an increase in interest rates could make it easier for us to meet or exceed our incentive fee hurdle rate, as defined in our investment advisory agreement, and may result in a substantial increase in our net investment income, and also to the amount of incentive fees payable to GBA with respect to our increasing pre-incentive fee net investment income.

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Assuming that the statement of assets and liabilities as of March 31, 2017 remains constant and that we take no actions to alter our existing interest rate sensitivity, the following table shows the impact to interest income and net investment income as the result of changes in variable interest rates:
Basis point increase:
 
Interest Income
 
Interest Expense
 
Net Increase
100
 
$
317,799

 
$

 
$
317,799

200
 
625,516

 

 
625,516

300
 
933,233

 

 
933,233

400
 
1,240,950

 

 
1,240,950

500
 
1,548,667

 

 
1,548,667

ITEM 4.     CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial
Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e)
and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and
determined that our disclosure controls and procedures are effective as of the end of the period covered by the Quarterly Report on Form 10-Q.

(b) Changes in Internal Controls Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS
Neither GBA nor Benefit Street nor we are currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, GBA or Benefit Street. From time to time, we and individuals employed by GBA and Benefit Street may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies.
ITEM 1A.    RISK FACTORS
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 which could materially affect our business, financial condition or future results. There have been no material changes in the risk factors set forth in such Annual Report. However, the risks and uncertainties that the Company faces are not limited to those set forth in such Annual Report.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.

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ITEM 5.    OTHER INFORMATION
(a)    During the quarter ended March 31, 2017, there was no information required to be disclosed in a report on Form 8-K which was not disclosed on Form 8-K.
(b)    During the quarter ended March 31, 2017, there were no material changes to the procedures by which security holders may recommend nominees to our board of directors.

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ITEM 6.    EXHIBITS
The following exhibits are included in this Quarterly Report on Form 10-Q for the three months ended March 31, 2017 (and are numbered in accordance with Item 601 of Regulation S-K).

 
 
3.1
Articles of Incorporation of the Registrant, incorporated by reference to Exhibit (a)(1) to the Registrant's Registration Statement on Form N-2 filed with the SEC on June 6, 2014, SEC File No. 333-196520.
 
 
3.2
Articles of Amendment and Restatement of the Registrant, incorporated by reference to Exhibit (a)(2) to Pre-Effective Amendment No. 4 to the Registrant's Registration Statement on Form N-2 filed with the SEC on December 23, 2014, SEC File No. 333-196520.
 
 
3.3
Bylaws of the Registrant, incorporated by reference to Exhibit (b) to Pre-Effective Amendment No. 4 to the Registrant's Registration Statement on Form N-2 filed with the SEC on December 23, 2014, SEC File No. 333-196520.
 
 
4.1
Form of Subscription Agreement, incorporated by reference to the Registrant's final prospectus, filed with the SEC on January 22, 2015, SEC File No. 333-196520.
 
 
4.2
Amended and Restated Distribution Reinvestment Plan, incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K, filed with the SEC on November 16, 2015, SEC File No. 814-01080.
 
 
10.12
Letter Agreement, incorporated by reference to exhibit 10.12 to Registrant's Form 10-K for the year ended December 31, 2016, filed with the SEC on March 31, 2017, SEC File no. 814-01080.
 
 
10.13*
Second Amendment to Expense Support and Conditional Reimbursement Agreement dated March 23, 2017.
 
 
10.14*
The Agreement and Plan of Reorganization dated May 5, 2017.
 
 
11.1
Computation of Per Share Earnings (included in the notes to the financial statements contained in this report),
 
 
31.1*
Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
31.2*
Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
32.1**
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
 
 
32.2**
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

*    Filed herewith.
**    Furnished herewith.


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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 10th day of May 2017.
GRIFFIN-BENEFIT STREET PARTNERS BDC CORP.
 
 
By:
/s/ Joseph E. Miller
Name:
Joseph E. Miller
On behalf of Registrant as Chief Financial Officer and Treasurer (Principal Financial Officer and Accounting Officer)


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