TCW Direct Lending LLC - FORM 10-Q

TCW Direct Lending LLC - FORM 10-Q - May 15, 2017

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TCW Direct Lending LLC Reports

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EX-99.1 - EX-99.1 - TCW Direct Lending LLC	d394681dex991.htm
EX-32.2 - EX-32.2 - TCW Direct Lending LLC	d394681dex322.htm
EX-32.1 - EX-32.1 - TCW Direct Lending LLC	d394681dex321.htm
EX-31.2 - EX-31.2 - TCW Direct Lending LLC	d394681dex312.htm
EX-31.1 - EX-31.1 - TCW Direct Lending LLC	d394681dex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2017

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

For the transition period from to

Commission file number 814-01069

TCW DIRECT LENDING LLC

(Exact Name of Registrant as Specified in Its Charter)


Delaware		46-5327366
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

200 Clarendon Street, Boston, MA		02116
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (617) 936-2275

Not applicable

Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ☐ No ☒

The number of the Registrant’s common units outstanding at May 15, 2017 was 20,134,698.

TCW DIRECT LENDING LLC

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

Table of Contents


	INDEX	PAGE NO.

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Schedules of Investments as of March 31, 2017 (unaudited) and December 31, 2016		2

	Consolidated Statements of Assets and Liabilities as of March 31, 2017 (unaudited) and December 31, 2016		10

	Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016 (unaudited)		11

	Consolidated Statements of Changes in Members’ Capital for the three months ended March 31, 2017 and 2016 (unaudited)		12

	Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 (unaudited)		13

	Notes to Consolidated Financial Statements (unaudited)		14

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		36

Item 4.	Controls and Procedures		36

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		37

Item 1A.	Risk Factors		37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		37

Item 3.	Defaults Upon Senior Securities		37

Item 4.	Mine Safety Disclosures		37

Item 5.	Other Information		37

Item 6.	Exhibits		38

SIGNATURES			39

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited)

As of March 31, 2017


Industry	Issuer	Acquisition Date	Investment	% of Net Assets		Par Amount		Maturity Date		Amortized Cost		Fair Value
	Non-Controlled/Non-Affiliated Investments Debt
Chemicals
	GSE Environmental, Inc.	09/26/16	First Lien Term Loan - 11.00% (LIBOR + 10.00%, 1.00% Floor)		0.9%	$	12,106,276		08/11/21	$	12,106,276	$	12,227,339

					0.9%		12,106,276				12,106,276		12,227,339

Computers & Peripherals
	Quantum Corporation(1)	10/21/16	First Lien Term Loan - 8.55% (LIBOR + 7.50%, 1.00% Floor)		3.0%		40,928,571		10/21/21		40,123,761		41,419,714

					3.0%		40,928,571				40,123,761		41,419,714

Distributors
	ASC Acquisition Holdings, LLC(2)	12/16/16	First Lien Term Loan - 8.50% (LIBOR + 7.50%, 1.00% Floor)		2.4%		33,203,145		12/15/21		32,577,631		33,070,332

					2.4%		33,203,145				32,577,631		33,070,332

Diversified Consumer Services
	Pre-Paid Legal Services, Inc.	05/21/15	First Lien Term Loan - 6.50% (LIBOR + 5.25%, 1.25% Floor)		1.3%		18,237,809		07/01/19		18,194,222		18,237,809

					1.3%		18,237,809				18,194,222		18,237,809

Diversified Financial Services
	Patriot National, Inc.(3)	11/09/16	First Lien Term Loan - 8.25% (LIBOR + 7.25%, 1.00% Floor)		3.2%		45,572,518		11/09/21		45,227,349		44,661,068
	Verus Financial, LLC	04/12/16	First Lien Term Loan - 8.40% (LIBOR + 7.25%, 0.75% Floor)		1.2%		17,062,500		04/12/21		16,787,845		17,028,375

					4.4%		62,635,018				62,015,194		61,689,443

Diversified Telecommunication Services
	Alaska Communications Systems Holdings, Inc.	03/28/17	First Lien Term Loan - 8.00% (LIBOR + 7.00%, 1.00% Floor)		1.0%		13,800,000		03/13/23		13,558,944		13,620,600

					1.0%		13,800,000				13,558,944		13,620,600

Food Products
	AmeriQual Group, LLC	03/31/16	First Lien Term Loan - 8.77% (LIBOR + 7.75%, 0.75% Floor)		1.0%		13,652,100		01/20/21		13,490,001		13,720,361
	Harvest Hill Beverage Company	01/20/16	First Lien, First Out Term Loan - 5.00% (LIBOR + 4.00%, 1.00% Floor)		0.3%		3,932,778		01/19/21		3,887,905		3,905,249
	Harvest Hill Beverage Company(4)	01/20/16	First Lien, Last Out Term Loan - 7.25% (LIBOR + 6.25%, 1.00% Floor)		6.4%		89,764,022		01/19/21		88,739,798		89,764,022

					6.7%		93,696,800				92,627,703		93,669,271

					7.7%		107,348,900				106,117,704		107,389,632

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of March 31, 2017


Industry	Issuer	Acquisition Date	Investment	% of Net Assets		Par Amount		Maturity Date		Amortized Cost		Fair Value
Health Care Providers & Services
	Help at Home, LLC(4)(5)	08/03/15	Term Loan B - 8.75% (LIBOR + 7.50%, 1.25% Floor)		3.4%	$	47,027,027		08/03/20	$	46,546,783	$	47,497,297

					3.4%		47,027,027				46,546,783		47,497,297

Hotels, Restaurants & Leisure
	Controladora Dolphin Discovery, S.A De C.V. Mexico(6)	10/09/15	Senior Secured Notes - 11.15% (LIBOR + 10.00%, 1.00% Floor)		2.8%		39,041,292		10/09/20		38,492,650		39,158,416
	FQSR, LLC(7)	03/23/17	Term Loan - 7.69% (LIBOR + 6.25%, 1.00% Floor)		0.5%		6,900,000		03/24/22		6,762,681		6,893,100
	OTG Management, LLC(8)	06/30/16	First Lien Term Loan - 9.55% (LIBOR + 8.50%, 1.00% Floor)		5.5%		77,071,064		08/26/21		75,749,919		77,687,633

					8.8%		123,012,356				121,005,250		123,739,149

Household Durables
	Cedar Electronics Holdings, Corp.(4)	07/01/15	Senior Term Loan - 7.05% (LIBOR + 6.00%, 0.50% Floor)		1.4%		21,427,500		06/26/20		21,101,016		19,734,728
	Robertshaw US Holding Corp.	06/15/16	Term Loan B - 8.50% (LIBOR + 7.00%, 1.50% Floor)		4.5%		62,367,420		06/18/19		62,073,183		62,242,685
	Robertshaw US Holding Corp.	06/15/16	Term Loan C - 8.50% (LIBOR + 7.00%, 1.50% Floor)		0.3%		4,750,013		06/18/19		4,750,013		4,740,513
	Robertshaw US Holding Corp.	08/29/16	Term Loan D - 8.50% (LIBOR + 7.00%, 1.50% Floor)		0.7%		9,806,996		06/18/19		9,710,172		9,787,382

					5.5%		76,924,429				76,533,368		76,770,580

					6.9%		98,351,929				97,634,384		96,505,308

Industrial Conglomerates
	H-D Advanced Manufacturing Company	06/30/15	First Lien First Out Term Loan - 5.15% not inc PIK (LIBOR + 4.00%, 1.00% Floor, 0.50% PIK)		2.2%		32,595,568		06/30/20		32,279,325		30,346,474
	H-D Advanced Manufacturing Company(4)	06/30/15	First Lien Last Out Term Loan - 8.15% not inc PIK (LIBOR + 7.00%, 1.00% Floor, 5.80% PIK)		5.7%		112,028,020		06/30/20		110,980,353		80,660,175

					7.9%		144,623,588				143,259,678		111,006,649

Information Technology Services
	ENA Holding Corporation(9)	05/06/16	First Lien Term Loan - 8.15% (LIBOR + 7.00%, 1.00% Floor)		2.2%		30,787,918		05/06/21		30,352,860		30,356,887

					2.2%		30,787,918				30,352,860		30,356,887

Metals & Mining
	Pace Industries, Inc.	06/30/15	Senior Secured Notes - 9.25% (LIBOR + 8.25%, 1.00% Floor)		5.9%		88,425,000		06/30/20		87,563,981		83,119,500

					5.9%		88,425,000				87,563,981		83,119,500

Pharmaceuticals
	Noramco, LLC(4)	07/01/16	Senior Term Loan - 9.00% (LIBOR + 8.00%, 1.00% Floor)		4.3%		60,454,161		07/01/21		60,049,359		60,695,977

					4.3%		60,454,161				60,049,359		60,695,977

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of March 31, 2017


Industry	Issuer	Acquisition Date		Investment	% of Net Assets		Par Amount		Maturity Date		Amortized Cost		Fair Value
Road & Rail
	Total Military Management, Inc.(4)		04/14/15	Second Out Term Loan - 7.79% (LIBOR + 6.75%, 1.00% Floor)		5.8%	$	81,523,810		10/14/20	$	80,277,140	$	81,360,762

						5.8%		81,523,810				80,277,140		81,360,762

Software
	Quicken Parent Corp.(10)		04/01/16	First Lien Term Loan - 9.50% (LIBOR + 8.50%, 1.00% Floor)		1.7%		24,322,500		04/01/21		24,166,813		24,444,112
	Sierra Private Holdings II Ltd.(6)		08/19/16	UK Term Loan - 9.50% not inc PIK (LIBOR + 8.50%, 1.00% Floor, 1.00% PIK)		1.9%		26,306,816		08/19/22		25,673,545		25,859,600
	Xura, Inc. - US		08/19/16	First Lien Term Loan - 9.50% not inc PIK (LIBOR + 8.50%, 1.00% Floor, 1.00% PIK)		4.8%		68,218,200		08/19/22		66,419,373		67,058,491

						8.4%		118,847,516				116,259,731		117,362,203

Textiles, Apparel & Luxury Goods
	Differential Brands Group, Inc.		01/28/16	Term Loan - 10.90% (LIBOR + 9.75%, 0.50% Floor)		1.9%		28,233,625		01/28/21		27,855,554		26,821,944
	Frontier Spinning Mills, Inc.(4)		05/19/15	Last Out Term Loan B - 9.50% (LIBOR + 8.50%, 1.00% Floor)		0.7%		13,262,927		04/30/20		13,181,691		10,331,820

						2.6%		41,496,552				41,037,245		37,153,764


							Shares				Cost
	Equity
	Verus Financial, LLC(11)		05/20/16	Common Stock		0.6%		8,750			$	8,159,913	$	8,081,879

	Total Non-Controlled/Non-Affiliated Investments					77.5%					$	1,116,840,056	$	1,084,534,244


	Controlled/Affiliated Investments
Investment Funds & Vehicles
	TCW Direct Lending Strategic Ventures LLC(6)(12)		06/05/15	Preferred membership interests		21.2%		278,056			$	278,055,573	$	297,382,837
				Common membership interests		0.0%		800				—		—

	Total Controlled/Affiliated Investments					21.2%						278,055,573		297,382,837

	Cash Equivalents
	Blackrock Liquidity Funds, Yield 1.00%					12.0%		167,507,934				167,507,934		167,507,934


	Total Investments 110.7%										$	1,562,403,563	$	1,549,425,015

	Net unrealized depreciation on unfunded commitments (0.0%)												$	(498,284)

	Liabilities in Excess of Other Assets (10.7%)												$	(149,881,668)

	Net Assets 100.0%												$	1,399,045,063

(1)

Excluded from the investment total above is an unfunded delayed draw term loan commitment in an amount not to exceed $16,371,429, at an interest rate of LIBOR plus 7.50%, with a LIBOR Floor of 1.00%, and a maturity of October 11, 2021. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(229,200) as of March 31, 2017.

(2)

Excluded from the investment total above is an unfunded delayed draw term loan commitment in an amount not to exceed $ 11,207,812, at an interest rate of LIBOR plus 7.50%, with a LIBOR Floor of 1.00%, and a maturity of December 15, 2021. This investment is accruing an unused commitment fee of 0.38% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(74,719) as of March 31, 2017.

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of March 31, 2017

(3)

(4)

In addition to the interest earned based on the stated interest rate of this loan, the Company is entitled to receive an additional interest amount on the “first out” tranche of the portfolio company’s first lien senior secured loans.

(5)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $6,756,757, at an interest rate of LIBOR plus 7.50%, with a LIBOR Floor of 1.25%, and a maturity of August 03, 2020. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(60,811) as of March 31, 2017.

(6)

The investment is not a qualifying asset as defined in Section 55(a) under the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets.

(7)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $16,100,000, at an interest rate of LIBOR plus 6.25%, with a LIBOR Floor of 1.00%, and a maturity of March 24, 2022. This investment is accruing an unused commitment fee of 1.00% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(96,600) as of March 31, 2017.

(8)

Excluded from the investment total above is an unfunded delayed draw term loan commitment in an amount not to exceed $8,233,241, at an interest rate of LIBOR plus 8.50%, with a LIBOR Floor of 1.00%, and a maturity of August 26, 2021. This investment is accruing an unused commitment fee of 1.00% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(111,149) as of March 31, 2017.

(9)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $4,804,290, at an interest rate of LIBOR plus 7.00%, with a LIBOR Floor of 1.00%, and a maturity of May 06, 2021. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(72,064) as of March 31, 2017.

(10)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $1,293,750, at an interest rate of LIBOR plus 8.50%, with a LIBOR Floor of 1.00%, and a maturity of April 01, 2021. This investment is accruing an unused commitment fee of 1.00% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(28,894) as of March 31, 2017.

(11)

Holdings of Verus Financial LLC common stock are through Verus Holdings LLC, a special purpose vehicle.

(12)

As defined in the Investment Company Act of 1940, the investment is deemed to be a “controlled affiliated person” of the Company because the Company owns, either directly or indirectly, 25% or more of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company.

LIBOR - London Interbank Offered Rate, generally 1-Month or 3-Month


Country Breakdown of Portfolio
United States		95.8%
Mexico		2.5%
United Kingdom		1.7%

See Notes to Consolidated Financial Statements

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments

As of December 31, 2016


Industry	Issuer	Acquisition Date	Investment	% of Net Assets		Par Amount		Maturity Date		Amortized Cost		Fair Value
	Non-Controlled/Non-Affiliated Investments Debt
Chemicals
	GSE Environmental, Inc.	09/26/16	First Lien Term Loan - 11.00% (LIBOR + 10.00%, 1.00% Floor)		1.3%	$	12,106,276		08/11/21	$	12,106,276	$	12,227,339

					1.3%		12,106,276				12,106,276		12,227,339

Computers & Peripherals
	Quantum Corporation(1)	10/21/16	Term Loan - 8.50% (LIBOR + 7.50%, 1.00% Floor)		4.3%		40,928,571		10/21/21		40,093,378		41,378,786

					4.3%		40,928,571				40,093,378		41,378,786

Distributors
	ASC Acquisition Holdings, LLC(2)	12/16/16	Term Loan - 8.50% (LIBOR + 7.50%, 1.00% Floor)		4.1%		39,227,344		12/15/21		38,449,671		39,148,889

					4.1%		39,227,344				38,449,671		39,148,889

Diversified Consumer Services
	Pre-Paid Legal Services, Inc.	05/21/15	First Lien Term Loan - 6.50% (LIBOR + 5.25%, 1.25% Floor)		1.9%		18,667,515		07/01/19		18,618,087		18,760,853

					1.9%		18,667,515				18,618,087		18,760,853

Diversified Financial Services
	Patriot National, Inc.(3)	11/09/16	Term Loan - 8.25% (LIBOR + 7.25%, 1.00% Floor)		5.6%		53,571,429		11/09/21		53,137,809		54,053,572
	Verus Financial, LLC	04/12/16	First Lien Term Loan - 8.13% (LIBOR + 7.25%, 0.75% Floor)		1.8%		17,171,875		04/12/21		16,878,420		17,257,734

					7.4%		70,743,304				70,016,229		71,311,306

Food Products
	AmeriQual Group, LLC	03/31/16	First Lien Term Loan - 8.63% (LIBOR + 7.75%, 0.75% Floor)		1.4%		13,686,575		01/20/21		13,513,544		13,755,008
	Harvest Hill Beverage Company	01/20/16	First Lien, First Out Term Loan - 5.00% (LIBOR + 4.00%, 1.00% Floor)		1.4%		13,785,149		01/19/21		13,617,666		13,674,867
	Harvest Hill Beverage Company(4)	01/20/16	First Lien, Last Out Term Loan - 7.25% (LIBOR + 6.25%, 1.00% Floor)		10.8%		103,961,373		01/19/21		102,698,294		103,961,373

					12.2%		117,746,522				116,315,960		117,636,240

					13.6%		131,433,097				129,829,504		131,391,248

Health Care Providers & Services
	Help at Home, LLC(4)(5)	08/03/15	Term Loan B - 8.75% (LIBOR + 7.50%, 1.25% Floor)		4.5%		42,837,838		08/03/20		42,442,790		43,223,378

					4.5%		42,837,838				42,442,790		43,223,378

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2016


Industry	Issuer	Acquisition Date	Investment	% of Net Assets		Par Amount		Maturity Date	Amortized Cost		Fair Value
Hotels, Restaurants & Leisure
	Controladora Dolphin Discovery, S.A De C.V. Mexico(6)	10/09/15	Senior Secured Notes - 11.00% (LIBOR + 10.00%, 1.00% Floor)		4.1%	$	39,572,542	10/09/20	$	38,977,211	$	39,414,252
	OTG Management, LLC(7)	06/30/16	First Lien Term Loan - 9.50% (LIBOR + 8.50%, 1.00% Floor)		7.8%		75,012,754	08/26/21		73,617,664		75,462,830

					11.9%		114,585,296			112,594,875		114,877,082

Household Durables
	Cedar Electronics Holdings, Corp.(4)	07/01/15	Senior Term Loan - 6.94% (LIBOR + 6.00%, 0.50% Floor)		2.2%		21,427,500	06/26/20		21,076,157		20,784,675
	Robertshaw US Holding Corp.	06/15/16	Term Loan B - 8.50% (LIBOR + 7.00%, 1.50% Floor)		6.4%		62,523,495	06/18/19		62,196,483		61,773,213
	Robertshaw US Holding Corp.	06/15/16	Term Loan C - 8.50% (LIBOR + 7.00%, 1.50% Floor)		0.5%		4,750,013	06/18/19		4,750,013		4,693,013
	Robertshaw US Holding Corp.	08/29/16	Term Loan D - 8.50% (LIBOR + 7.00%, 1.50% Floor)		1.0%		9,831,637	06/18/19		9,723,758		9,713,657

					7.9%		77,105,145			76,670,254		76,179,883

					10.1%		98,532,645			97,746,411		96,964,558

Industrial Conglomerates
	H-D Advanced Manufacturing Company	06/30/15	First Lien First Out Term Loan - 5.50% inc PIK (LIBOR + 4.50%, 1.00% Floor, 0.50% PIK)		3.2%		32,914,262	06/30/20		32,570,243		30,346,950
	H-D Advanced Manufacturing Company(4)	06/30/15	First Lien Last Out Term Loan - 13.80% inc PIK (LIBOR + 7.00%, 1.00% Floor, 5.80% PIK)		8.4%		110,785,456	06/30/20		109,043,607		80,873,383

					11.6%		143,699,718			141,613,850		111,220,333

Information Technology Services
	ENA Holding Corporation(8)	05/06/16	First Lien Term Loan - 8.00% (LIBOR + 7.00%, 1.00% Floor)		3.3%		31,628,680	05/06/21		31,154,835		31,660,309

					3.3%		31,628,680			31,154,835		31,660,309

Metals & Mining
	Pace Industries, Inc.	06/30/15	Senior Secured Notes - 9.25% (LIBOR + 8.25%, 1.00% Floor)		9.0%		88,875,000	06/30/20		87,943,929		86,742,000

					9.0%		88,875,000			87,943,929		86,742,000

Pharmaceuticals
	Noramco, LLC(4)	07/01/16	Senior Term Loan - 9.00% (LIBOR + 8.00%, 1.00% Floor)		6.4%		61,177,080	07/01/21		60,751,282		61,972,382

					6.4%		61,177,080			60,751,282		61,972,382

Road & Rail
	Total Military Management, Inc.(4)	04/14/15	Second Out Term Loan - 7.75% (LIBOR + 6.75%, 1.00% Floor)		8.4%		81,523,810	10/14/20		80,216,095		81,279,238

					8.4%		81,523,810			80,216,095		81,279,238

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2016


Industry	Issuer	Acquisition Date		Investment	% of Net Assets		Par Amount		Maturity Date		Amortized Cost		Fair Value
Software
	Quicken Parent Corp.(9)		04/01/16	First Lien Term Loan - 9.50% (LIBOR + 8.50%, 1.00% Floor)		2.6%	$	24,710,625		04/01/21	$	24,542,712	$	25,031,863
	Sierra Private Holdings II Ltd.(6)(10)		08/19/16	UK Term Loan - 9.50% (LIBOR + 8.50%, 1.00% Floor)		2.9%		27,477,510		08/19/22		26,785,778		27,559,943
	Xura, Inc. - US(6)(11)		08/19/16	First Lien Term Loan - 9.50% (LIBOR + 8.50%, 1.00% Floor)		4.3%		41,216,265		08/19/22		40,178,666		41,339,914

						9.8%		93,404,400				91,507,156		93,931,720

Textiles, Apparel & Luxury Goods
	Differential Brands Group, Inc.		01/28/16	Term Loan - 10.00% (LIBOR + 9.00%, 0.50% Floor)		2.9%		28,413,000		01/28/21		28,008,033		27,702,675
	Frontier Spinning Mills, Inc.(4)		05/19/15	Last Out Term Loan B - 9.25% (LIBOR + 8.25%, 1.00% Floor)		1.1%		13,611,553		04/30/20		13,522,149		10,807,573

						4.0%		42,024,553				41,530,182		38,510,248


							Shares				Cost
	Equity
	Verus Financial, LLC(12)		05/20/16	Common Stock		0.9%		8,750			$	8,368,247	$	8,626,399

	Total Non-Controlled/Non-Affiliated Investments					112.5%					$	1,104,982,797	$	1,083,226,068


	Controlled/Affiliated Investments
Investment Funds & Vehicles
	TCW Direct Lending Strategic Ventures LLC(6)(13)		06/05/15	Preferred membership interests		25.7%		227,896			$	227,895,573	$	247,164,240
				Common membership interests		0.0%		800				—		—

	Total Controlled/Affiliated Investments					25.7%						227,895,573		247,164,240

	Cash Equivalents
	Blackrock Liquidity Funds, Yield 1.00%					20.4%		197,000,436				197,000,436		197,000,436


	Total Investments 158.6%										$	1,529,878,806	$	1,527,390,744

	Net unrealized appreciation on unfunded commitments (0.0%)												$	376,683

	Liabilities in Excess of Other Assets (58.6%)												$	(564,663,883	)

	Net Assets 100.0%												$	963,103,544

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2016

(1)

(2)

Excluded from the investment total above is an unfunded delayed draw term loan commitment in an amount not to exceed $13,075,781, at an interest rate of LIBOR plus 7.50%, with a LIBOR Floor of 1.00%, and a maturity of December 15, 2021. This investment is accruing an unused commitment fee of 0.38% per annum. The change in unrealized appreciation (depreciation) on this commitment is $(26,152) as of December 31, 2016.

(3)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $6,428,571, at an interest rate of LIBOR plus 7.25%, with a LIBOR Floor of 1.00%, and a maturity of November 09, 2021. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $57,857 as of December 31, 2016. In addition to the interest earned based on the stated interest rate of this loan, the Company is entitled to receive an additional interest amount on the “first out” tranche of the portfolio company’s first lien senior secured loans.

(5)

(6)

(7)

Excluded from the investment total above is an unfunded delayed draw term loan commitment in an amount not to exceed $10,291,552, at an interest rate of LIBOR plus 8.50%, with a LIBOR Floor of 1.00%, and a maturity of August 26, 2021. This investment is accruing an unused commitment fee of 1.00% per annum. The change in unrealized appreciation (depreciation) on this commitment is $61,749 as of December 31, 2016.

(8)

(9)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $1,725,000, at an interest rate of LIBOR plus 8.5%, with a LIBOR Floor of 1.00%, and a maturity of April 01, 2021. This investment is accruing an unused commitment fee of 1.00% per annum. The change in unrealized appreciation (depreciation) on this commitment is $22,425 as of December 31, 2016.

(10)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $2,013,624, at an interest rate of LIBOR plus 8.5%, with a LIBOR Floor of 1.00%, and a maturity of August 19, 2022. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $6,041 as of December 31, 2016.

(11)

Excluded from the investment total above is an unfunded revolving credit facility commitment in an amount not to exceed $3,020,436, at an interest rate of LIBOR plus 8.5%, with a LIBOR Floor of 1.00%, and a maturity of August 19, 2022. This investment is accruing an unused commitment fee of 0.50% per annum. The change in unrealized appreciation (depreciation) on this commitment is $9,061 as of December 31, 2016.

(12)

Holdings of Verus Financial LLC common stock are through Verus Holdings LLC, a special purpose vehicle

(13)

LIBOR - London Interbank Offered Rate, generally 1-Month or 3-Month

Prime - Prime Rate


Country Breakdown of Portfolio
United States		95.6%
Mexico		2.6%
United Kingdom		1.8%

See Notes to Consolidated Financial Statements

TCW DIRECT LENDING LLC

Consolidated Statements of Assets and Liabilities

(Dollar amounts in thousands, except unit data)


	As of March 31, 2017 (unaudited)			As of December 31, 2016
Assets
Investments, at fair value
Non controlled/non-affiliated investments (amortized cost of $1,116,840 and $1,104,983, respectively)	$	1,084,534		$	1,083,226
Controlled affiliated investments (cost of $278,056 and $227,896, respectively)		297,383			247,164
Cash and cash equivalents		313,931			214,913
Interest receivable		10,321			9,738
Deferred financing costs		1,409			1,972
Receivable from Investment Adviser		477			578
Unrealized appreciation on unfunded commitments		—			403
Prepaid and other assets		3,136			107

Total Assets	$	1,711,191		$	1,558,101

Liabilities
Credit facility payable	$	303,304		$	590,000
Management fees payable		7,551			—
Unrealized depreciation on unfunded commitments		498			26
Interest and credit facility expense payable		191			260
Directors’ fees payable		63			3
Payable for investments purchased		—			3,840
Other accrued expenses and other liabilities		539			868

Total Liabilities	$	312,146		$	594,997

Commitments and Contingencies (Note 5)

Members’ Capital
Common Unitholders’ commitment: (20,134,698 units issued and outstanding)	$	2,013,470		$	2,013,470
Common Unitholders’ undrawn commitment: (20,134,698 units issued and outstanding)		(379,097	)		(920,589	)
Common Unitholders’ return of capital		(199,452	)		(102,960	)
Common Unitholders’ offering costs		(853	)		(853	)
Accumulated Common Unitholders’ tax reclassification		(9,596	)		(9,596	)

Common Unitholders’ capital		1,424,472			979,472
Accumulated net realized loss		(13,451	)		(13,710	)
Accumulated net investment income (loss)		1,501			(546	)
Net unrealized depreciation on investments		(13,477	)		(2,112	)

Total Members’ Capital	$	1,399,045		$	963,104

Total Liabilities and Members’ Capital	$	1,711,191		$	1,558,101

Net Asset Value Per Unit (accrual base) (Note 9)	$	88.31		$	93.55

See Notes to Consolidated Financial Statements

TCW DIRECT LENDING LLC

Consolidated Statements of Operations (Unaudited)

(Dollar amounts in thousands, except unit data)


	For the three months ended March 31, 2017			For the three months ended March 31, 2016
Investment Income:
Interest income from non-controlled/non-affiliated investments	$	29,114		$	18,672
Dividend income from controlled affiliated investments		4,850			1,643

Total investment income	$	33,964		$	20,315

Expenses:
Management fees		7,551			7,551
Interest and credit facility expenses		3,789			2,853
Administrative fees		308			261
Professional fees		126			146
Directors’ fees		77			71
Other expenses		66			96

Total expenses		11,917			10,978

Net investment income	$	22,047		$	9,337

Net realized and unrealized gain (loss) on investments
Net realized gain on non-controlled/non-affiliated investments	$	259		$	—
Net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments		(11,424	)		(10,259	)
Net change in unrealized appreciation/depreciation on controlled affiliated investments		59			4,829

Net realized and unrealized loss on investments	$	(11,106	)	$	(5,430	)

Net increase in Members’ Capital from operations	$	10,941		$	3,907

Basic and diluted:

Income per unit	$	0.54		$	0.19

See Notes to Consolidated Financial Statements

TCW DIRECT LENDING LLC

Consolidated Statements of Changes in Members’ Capital (Unaudited)

(Dollar amounts in thousands, except unit data)


	For the three months ended March 31, 2017			For the three months ended March 31, 2016
Net Increase (Decrease) in Members’ Capital Resulting from Operations:
Net investment income	$	22,047		$	9,337
Net realized gain on investments		259			—
Net change in unrealized appreciation/depreciation on investments		(11,365	)		(5,430	)

Net Increase in Members’ Capital from Operations		10,941			3,907

Distributions to Members’ from:
Net investment income		(20,000	)		—
Return of capital		(96,492	)		—

Total distributions to Members’		(116,492	)		—

Increase in Members’ Capital Resulting from Capital Activity
Contributions		541,492			—

Total Increase in Members’ Capital Resulting from Capital Activity		541,492			—

Total Increase in Members’ Capital		435,941			3,907

Members’ Capital, beginning of period		963,104			651,303

Members’ Capital, end of period	$	1,399,045		$	655,210

Accumulated net investment gain	$	1,501		$	8,746

See Notes to Consolidated Financial Statements

TCW DIRECT LENDING LLC

Consolidated Statements of Cash Flows (Unaudited)

(Dollar amounts in thousands, except unit data)


	For the three months ended March 31, 2017			For the three months ended March 31, 2016
Cash Flows from Operating Activities
Net increase in net assets resulting from operations	$	10,941		$	3,907
Adjustments to reconcile the net increase in net assets resulting from operations to net cash used in operating activities:
Purchases of investments		(104,578	)		(240,575	)
Interest income paid in-kind		(2,240	)		—
Proceeds from sales and paydowns of investments		46,078			16,014
Net realized (gain) loss on investments		(259	)		—
Change in net unrealized/appreciation depreciation on investments		11,365			5,430
Accretion of discount		(1,018	)		(730	)
Amortization of deferred financing costs		563			569
Increase (decrease) in operating assets and liabilities:
(Increase) decrease in interest receivable		(583	)		(2,338	)
(Increase) decrease in receivable from Investment Adviser		101			—
(Increase) decrease in receivable for investments sold		—			27,098
(Increase) decrease in prepaid and other assets		(3,029	)		89
Increase (decrease) in investments purchased payable		(3,840	)		—
Increase (decrease) in interest and credit facility expense payable		(69	)		(140	)
Increase (decrease) in directors’ fees payable		60			61
Increase (decrease) in management fees payable		7,551			(6,449	)
Increase (decrease) in other accrued expenses and liabilities		(329	)		(26	)

Net cash used in operating activities	$	(39,286	)	$	(197,090	)

Cash Flows from Financing Activities
Contributions from Members’	$	425,000		$	—
Capital call due from Members’, net		—			933
Proceeds from credit facility		158,000			333,000
Repayments of credit facility		(444,696	)		(190,000	)

Net cash provided by financing activities	$	138,304		$	143,933

Net increase (decrease) in cash and cash equivalents	$	99,018		$	(53,157	)
Cash and cash equivalents, beginning of period	$	214,913		$	180,436

Cash and cash equivalents, end of period	$	313,931		$	127,279

Supplemental and non-cash financing activities
Interest expense paid	$	3,094		$	1,916
Deemed purchase and return of capital from Investment Funds & Vehicles	$	—		$	26,068
Deemed distribution/re-contribution from Members’ (Note 9)	$	(116,492	)	$	—

See Notes to Consolidated Financial Statements

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited)

(dollar amount in thousands, except for unit data)

March 31, 2017

1. Organization and Basis of Presentation

Organization: TCW Direct Lending LLC (“Company”), was formed as a Delaware corporation on March 20, 2014 and converted to a Delaware limited liability company on April 1, 2014. The Company conducted a private offering of its limited liability company units (the “Common Units”) to investors in reliance on exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”). In addition, the Company may issue preferred units, though it currently has no intention to do so. The Company has engaged TCW Asset Management Company LLC (“TAMCO”), an affiliate of The TCW Group, Inc. (“TCW”) to be its adviser (the “Adviser”). On May 13, 2014 (“Inception Date”), the Company sold and issued 10 Common Units at an aggregate purchase price of $1 to TAMCO.

The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company has also elected to be treated for U.S. federal income tax purposes as a Regulated Investment Company (a “RIC”) under Subchapter M of the U.S Internal Revenue Code of 1986, as amended (the “Code”) for the taxable year ending December 31, 2015 and subsequent years. The Company is required to meet the minimum distribution and other requirements for RIC qualification and as a BDC and a RIC, the Company is required to comply with certain regulatory requirements.

On May 16, 2016, the Company established a wholly owned subsidiary, TCW-DL VF Holdings, Inc., structured as a Delaware entity to hold an equity investment in a portfolio company organized as a limited liability company.

On September 19, 2016, the Company formed TCW Direct Lending Luxembourg VI S.à.r.l., (“TCW Direct Lending Luxembourg”) a private limited liability company under the laws of Luxembourg, of which the Company owns 100% of the membership interests. The Company incurred $0.2 million in professional fees in connection with the formation of TCW Direct Lending Luxembourg, all of which were expensed as incurred.

On March 24, 2017, the Company entered into a limited liability company agreement with TCW DL VI Funding I, LLC (“TCW DL VI”) to act as its managing member. Currently, the Company is the sole member of TCW DL VI.

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Term: The term of the Company will continue until the sixth anniversary of the Initial Closing Date (as defined below), September 14, 2020 unless extended or sooner dissolved as provided in the limited liability agreement or by operation of law. The Company may extend the term for two additional one-year periods upon written notice to the holders of the Common Units and holders of preferred units, if any, (collectively the “Unitholders” or “Members”) at least 90 days prior to the expiration of the term or the end of the first one-year period. Thereafter, the term may be extended for successive one-year periods, with the vote or consent of a supermajority in interest of the holders of the Common Units.

Commitment Period: The Commitment Period commenced on September 19, 2014 (the “Initial Closing Date”) and will end on the third anniversary of the Initial Closing Date.

Capital Commitments: On September 19, 2014 (the “Initial Closing Date”), the Company began accepting subscription agreements from investors for the private sale of its Common Units. On March 19, 2015, the Company completed its final private placement of its Common Units. Subscription agreements with commitments (“Commitments”) from investors (each a “Common Unitholder”) totaling $2,013,470 for the purchase of Common Units were accepted. Each Common Unitholder is obligated to contribute capital equal to their Commitment and each Unit’s Commitment obligation is $100.00 per unit. The amount of capital that remains to be drawn down and contributed is referred to as an “Undrawn Commitment.”

The commitment amount funded does not include amounts contributed in anticipation of a potential investment that the Company did not consummate and therefore returned to the Members’ as unused capital. As of March 31, 2017 aggregate Commitments, Undrawn Commitments and subscribed for Units of the Company were as follows:

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

1. Organization and Basis of Presentation (continued)


	Commitments		Undrawn Commitments		% of Commitments Funded			Units
Common Unitholder	$	2,013,470	$	379,097		81.2	%		20,134,698

Recallable Amount: A Common Unitholder may be required to re-contribute amounts distributed equal to 75% of the principal amount or the cost portion of any Portfolio Investment that is fully repaid to or otherwise fully recouped by the Company within one year of the Company’s investment. The Recallable Amount is excluded from the calculation of the accrual based net asset value.

The Recallable Amount as of March 31, 2017 was $100,875.

2. Significant Accounting Policies

Basis of Presentation: The consolidated financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Company is an investment company following accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies (“ASC Topic 946”). The Company has consolidated the results of its wholly owned subsidiary in its consolidated financial statements in accordance with ASC Topic 946.

Reclassifications: Certain prior period amounts in the Consolidated Statements of Assets and Liabilities relating to net unrealized appreciation/depreciation on unfunded commitments have been reclassified to separately present gross balances of net unrealized appreciation and net unrealized depreciation on unfunded commitments. These reclassifications have been made to conform to the current period presentation.

Use of Estimates: The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the financial statements, (ii) the reported amounts of income and expenses during the years presented and (iii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates, and such differences could be material.

Investments: The Company measures the value of its investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosure (“ASC Topic 820”). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC Topic 820, the Company considers its principal market to be the market that has the greatest volume and level of activity.

Transactions: The Company records investment transactions on the trade date. The Company considers trade date for investments not traded on a recognizable exchange, or traded in the over-the-counter markets, to be the date on which the Company receives legal or contractual title to the asset and bears the risk of loss.

Income Recognition: Interest income is recorded on an accrual basis unless doubtful of collection or the related investment is in default. Realized gains and losses on investments are recorded on a specific identification basis. The Company typically receives a fee in the form of a discount to the purchase price at the time it funds an investment in a loan. The discount is accreted to interest income over the life of the respective loan, using the effective-interest method assuming there are no questions as to collectability, and reflected in the amortized cost basis of the investment. Discounts associated with a revolver are treated as a discount to the issuers’ term loan. In the event there is a fee associated with a delayed draw that remains unfunded, the Company will recognize the fee as fee income immediately. Ongoing facility, commitment or other additional fees including, prepayment fees, consent fees and forbearance fees are recognized immediately when earned as income.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

2. Significant Accounting Policies (continued)

Deferred Financing Costs: Deferred financing costs incurred by the Company in connection with the revolving credit facility, including arrangement fees, upfront fees and legal fees, are amortized on a straight-line basis over the term of the revolving credit facility.

Organization and Offering Costs: Costs incurred to organize the Company totaling $665 were expensed as incurred. Offering costs totaling $853 were accumulated and charged directly to Members’ Capital on March 19, 2015, the end of the period during which Common Units were offered (the “Closing Period”). The Company did not bear more than an amount equal to 10 basis points of the aggregate capital commitments of the Company for organization and offering expenses.

Cash and Cash Equivalents: The Company considers all investments with a maturity of three months or less at the time of acquisition to be cash equivalents. At March 31, 2017 cash and cash equivalents is comprised of demand deposits and highly liquid investments with maturities of three months or less, which approximate fair value.

Income Taxes: So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. Federal income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. Rather, any tax liability related to income earned and distributed by the Company represents obligations of the Company’s investors and will not be reflected in the consolidated financial statements of the Company.

Accounting Pronouncements Recently Adopted: In February 2015, the FASB issued Accounting Standard Update (“ASU”) 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”), which amends the consolidation requirements in ASC 810, Consolidation, and significantly changes the consolidation analysis required under GAAP. The FASB’s focus during deliberations was largely on the investment management industry. The key amendments that had a significant impact on Company’s consolidation conclusion included:

•

Limited partnerships will be variable interest entities (VIEs), unless the limited partners have either substantive kick-out or participating rights. Although more partnerships will be VIEs, it is less likely that a general partner will consolidate a limited partnership.

•

The ASU changes the effect that fees paid to a decision maker or service provider have on the consolidation analysis. Specifically, it is less likely that the fees themselves will be considered a variable interest, that an entity will be a VIE, or that consolidation will result.

•

The deferral of ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, for investments in certain investment funds has been eliminated. Therefore, investment managers, general partners, and investors in these investment funds will need to perform a drastically different consolidation evaluation.

•

For entities other than limited partnerships, ASU 2015-02 clarified how to determine whether the equity holders (as a group) have power over the entity (this will most likely result in a change to current practice). The clarification could affect whether the entity is a VIE.

ASU 2015-02 became effective for the Company on January 1, 2016. The adoption of ASU 2015-02 had no material impact on the Company’s consolidated financial statements.

In May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. ASU 2015-07 is effective for annual reporting periods, and the interim periods within those periods, beginning after December 15, 2015. The adoption of ASU No. 2015-07 had no material impact on the Company’s consolidated financial statements.

Accounting Pronouncements Not Yet Adopted: In January 2016, the FASB issued ASU 2016-01, Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities. The amendments in this update makes improvements to the requirements for accounting for equity investments and simplify the impairment assessment of equity investments. For public entities this update will be effective for fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of this new guidance on its financial statement presentation.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

2. Significant Accounting Policies (continued)

In December 2016, the FASB issued ASU 2016-19, Technical Corrections and Improvements. The amendments in this update include an amendment to FASB ASC Topic 820, Fair Value Measurement and Disclosures to clarify the difference between a valuation approach and a valuation technique. The amendment also requires an entity to disclose when there has been a change in either or both a valuation approach and/or a valuation technique. For public entities, this update will be effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. The Company is currently evaluating the impact of this new guidance on its financial statement presentation.

3. Investment Valuations and Fair Value Measurements

Investments at Fair Value: Investments held by the Company are valued at fair value. Fair value is generally determined on the basis of last reported sales prices or official closing prices on the primary exchange in which each security trades, or if no sales are reported, based on the midpoint of the valuation range obtained for debt investments from a quotation reporting system, established market makers or pricing service.

Investments for which market quotes are not readily available or are not considered reliable are valued at fair value and approved by the Board of Directors (the “Board”) based on similar instruments, internal assumptions and the weighting of the best available pricing inputs.

Fair Value Hierarchy: Assets and liabilities are classified by the Company based on valuation inputs used to determine fair value into three levels:

Level 1 values are based on unadjusted quoted market prices in active markets for identical assets.

Level 2 values are based on significant observable market inputs, such as quoted prices for similar assets and quoted prices in inactive markets or other market observable inputs.

Level 3 values are based on significant unobservable inputs that reflect the Company’s determination of assumptions that market participants might reasonably use in valuing the assets.

Categorization within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation levels are not necessarily an indication of the risk associated with investing in those securities.

Level 1 Assets (Investments): The valuation techniques and significant inputs used to determine fair value are as follows:

Registered Investment Companies, (Level 1), include registered open-end investment companies that are valued based upon the reported net asset value of such investment.

Level 3 Assets (Investments): The following valuation techniques and significant inputs are used to determine fair value of investments in private debt and equity for which reliable market quotations are not available. Some of the inputs are independently observable however, a significant portion of the inputs and the internal assumptions applied are unobservable.

Debt, (Level 3), include investments in privately originated senior secured debt. Such securities are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. A discounted cash flow approach incorporating a weighted average cost of capital is generally used to determine fair value or in some cases, an enterprise value waterfall method. Valuation may also include a shadow rating method. Standard pricing inputs include but are not limited to the financial health of the issuer, place in the capital structure, value of other issuer debt, credit, industry, and market risk and events.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

3. Investment Valuations and Fair Value Measurements (continued)

Equity, (Level 3), include common stock. Such securities are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. A market approach is generally used to determine fair value. Pricing inputs include, but are not limited to, financial health, and relevant business developments of the issuer; EBITDA, market multiples of comparable companies, comparable market transactions and recent trades or transactions; issuer, industry and market events; contractual or legal restrictions on the sale of the security. A liquidity discount based on current market expectations, future events, minority ownership position and the period management reasonably expects to hold the investment may be applied.

Pricing inputs and weightings applied to determine value require subjective determination. Accordingly, valuations do not necessarily represent the amounts that may eventually be realized from sales or other dispositions of investments.

Net Asset Value (“NAV”) (Investment Funds and Vehicles): Equity investments in affiliated investment fund (Strategic Ventures) are valued based on the NAV reported by the investment fund. Investments held by the affiliated fund include debt investments in privately originated senior secured debt. Such investments held by the affiliated fund are valued using the same methods, approach and standards applied above to debt investments held by the Company. The Company’s ability to withdraw from the fund is subject to restrictions. The term of the fund will continue until June 5, 2021 unless dissolved earlier or extended for two additional one-year periods by the Company, in its full discretion. The Company can further extend the term of the fund for additional one-year periods, upon notice to and consent from the funds management committee. The Company is entitled to income and principal distributed by the fund.

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Consolidated Schedule of Investments as of March 31, 2017:


Investments	Level 1		Level 2		Level 3		NAV		Total
Debt	$	—	$	—	$	1,076,452	$	—	$	1,076,452
Equity		—		—		8,082		—		8,082
Investment Funds & Vehicles ⁽¹⁾		—		—		—		297,383		297,383
Cash equivalents		167,508		—		—		—		167,508

Total Assets	$	167,508	$	—	$	1,084,534	$	297,383	$	1,549,425

⁽¹⁾

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

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Schedule of Investments as of December 31, 2016:


Investments	Level 1		Level 2		Level 3		NAV		Total
Debt	$	—	$	—	$	1,074,600	$	—	$	1,074,600
Equity		—		—		8,626		—		8,626
Investment Funds & Vehicles ⁽¹⁾		—		—		—		247,164		247,164
Cash equivalents		197,001		—		—		—		197,001

Total Assets	$	197,001	$	—	$	1,083,226	$	247,164	$	1,527,391

⁽¹⁾

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

3. Investment Valuations and Fair Value Measurements (continued)

The following table provides a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three months ended March 31, 2017:


	Debt			Equity			Total
Balance, January 1, 2017	$	1,074,600		$	8,626		$	1,083,226
Purchases^*		56,658			—			56,658
Sales and paydowns of investments		(45,870	)		(208	)		(46,078	)
Accretion of original issue discounts		1,018			—			1,018
Net realized gains		259			—			259
Net change in unrealized appreciation/depreciation		(10,213	)		(336	)		(10,549	)

Balance, March 31, 2017	$	1,076,452		$	8,082		$	1,084,534

Change in net unrealized appreciation (depreciation) in investments held as of March 31, 2017	$	(10,198	)	$	(336	)	$	(10,534	)

*	Includes payments received in-kind

The following table provides a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three months ended March 31, 2016:


	Debt
Balance, January 1, 2016	$	586,626
Purchases		225,332
Sales and paydowns of investments		(9,808	)
Accretion of original issue discounts		730
Net realized gains (losses)		—
Net change in unrealized appreciation/depreciation		(10,244	)

Balance, March 31, 2016	$	792,636

Change in net unrealized appreciation (depreciation) in investments held as of March 31, 2016	$	(10,289	)

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. During the three months ended March 31, 2017 and 2016, the Company did not have any transfers between levels.

Level 3 Valuation and Quantitative Information: The following table summarizes the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of March 31, 2017.

Investment
Type

Fair Value

Valuation
Technique

Unobservable
Input

Range

Weighted
Average

Impact to
Valuation
from an
Increase
in Input

Debt

$985,460

Income Method

Weighted Average Cost of Capital

Shadow Credit Rating

6.0% - 15.1%

CCC+ to BB-

10.7%

N/A

Decrease

Increase

Debt

$80,660

Market Method

EV Implied Multiple

9.8x to 10.8x

N/A

Increase

Debt

$10,332

Income/Market
Method

Weighted Average Cost of Capital

Shadow Credit Rating

20.0% - 25.0%

CCC- to CCC

22.5%

N/A

Decrease

Increase

EV Implied Multiple

7.0x to 8.0x

N/A

Increase

Equity

$8,082

Market Method

EV Implied Multiple

10.8x to 11.8x

N/A

Increase

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

3. Investment Valuations and Fair Value Measurements (continued)

Investment Type

Fair Value

Valuation
Technique

Unobservable
Input

Range

Weighted
Average

Impact to
Valuation
from an
Increase
in Input

Debt

982,919

Income Method

Weighted Average Cost of Capital

Shadow Credit Rating

6.0% - 13.4%

CCC+ to BB

10.0%

N/A

Decrease

Increase

Debt

80,873

Market Method

EV Implied Multiple

10.0x to 11.0x

N/A

Increase

Debt

10,808

Income/Market Method

Weighted Average Cost of Capital

Shadow Credit Rating

EV Implied Multiple

19.6% - 24.1%

CC to CCC-

7.0x to 8.0x

21.9%

N/A

Decrease

Increase

Equity

8,626

Market Method

EV Implied Multiple

10.8x to 11.8x

N/A

Increase

Valuation Process: Oversight for determining fair value is the responsibility of the Board of the Company (with input from the Adviser and an external, independent valuation firm retained by the Company). The Company and the Adviser value the investments at fair value on a quarterly basis and whenever required by the Company’s operating agreement. The Company has engaged an external, independent valuation firm to assist the Board in determining the fair market value of the Company’s investments for which market quotations are not readily available.

Unless noted, the Company is utilizing the midpoint of a valuation range provided by an external, independent valuation firm. Based on its review of the external, independent valuation firm’s range and related documentation, the Adviser documents the valuation recommendations. The Adviser provides the valuation recommendation for each investment to the Company’s audit committee, based on / along with the independent valuation report. After the Company’s audit committee reviews the valuation recommendations, the Board discusses the portfolio company and investment valuations with the Adviser and determines the fair value of these investments in good faith. The Board may approve a value other than the midpoint if it believes that is the fair value.

The Adviser uses all relevant factors in recommending fair value including, without limitation, any of the following factors as may be deemed relevant by the Board: current financial position and current and historical operating results of the issuer; sales prices of recent public or private transactions in the same or similar securities, including transactions on any securities exchange on which such securities are listed or in the over-the-counter market; general level of interest rates; recent trading volume of the security; restrictions on transfer including the Company’s right, if any, to require registration of its securities by the issuer under the securities laws; any liquidation preference or other special feature or term of the security; significant recent events affecting the portfolio company, including any pending private placement, public offering, merger, or acquisition; the price paid by the Company to acquire the asset; the percentage of the issuer’s outstanding securities that is owned by the Company and all other factors affecting value.

4. Agreements and Related Party Transactions

Advisory Agreement: On September 15, 2014, the Company entered into an Investment Advisory and Management Agreement (the “Advisory Agreement”) with the Adviser, its registered investment adviser under the Investment Advisers Act of 1940, as amended. The Advisory Agreement was approved by the Board at an in-person meeting. Unless earlier terminated, the Advisory Agreement will remain in effect for a period of two years and will remain in effect from year to year thereafter if approved annually by (i) the vote of the Board, or by the vote of a majority of our outstanding voting securities, and (ii) the vote of a majority of the independent directors of the Board.

Management Fee: Pursuant to the Advisory Agreement, and subject to the overall supervision of the Board, the Adviser will manage the Company’s day-to-day operations and provide investment advisory services to the Company. The Company will pay to the Adviser, quarterly in advance, a management fee (the “Management Fee”) calculated as follows: (i) for the period starting on the initial closing date and ending on the earlier of (A) the last day of the calendar quarter during which the Commitment Period (as defined below) ends or (B) the last day of the calendar quarter during which the Adviser or an affiliate thereof begins to accrue a management fee with respect to a successor fund, 0.375% (i.e., 1.50% per annum) of the aggregate commitments determined as of the end of the Closing Period, and (ii) for each calendar quarter thereafter during the term of the Company (but not beyond the tenth

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

4. Agreements and Related Party Transactions (continued)

anniversary of the initial closing date), 0.1875% (i.e., 0.75% per annum) of the aggregate cost basis (whether acquired by the Company with contributions from members, other Company funds or borrowings) of all portfolio investments that have not been sold, distributed to the members, or written off for tax purposes (but reduced by any portion of such cost basis that has been written down to reflect a permanent impairment of value of any portfolio investment), determined in each case as of the first day of such calendar quarter. The Management Fee in respect of the Closing Period will be calculated as if all capital commitments of the Company were made on the initial closing date, regardless of when Common Units were actually funded. The actual payment of the Management Fee with respect to the Closing Period will not be made prior to the first day of the first full calendar quarter following the end of the Closing Period. The “Commitment Period” of the Company will begin on the initial closing date and end on the earlier of (a) three years from the initial closing date and (b) the date on which the undrawn Commitment of each Common Unit has been reduced to zero. While the Management Fee will accrue from the initial closing date, the Adviser intends to defer payment of such fees to the extent that such fees cannot be paid from interest and fee income generated by our investments.

For the three months ended March 31, 2017 and 2016, Management Fees incurred amounted to $7,551 and $7,551, respectively, of which $7,551 and $21,288 remained payable at March 31, 2017 and March 31, 2016, respectively.

Transaction and Offset Fees: Any (i) transaction, advisory, consulting, management, monitoring, directors’ or similar fees, (ii) closing, investment banking, finders’, transaction or similar fees, (iii) commitment, breakup or topping fees or litigation proceeds and (iv) other fee or payment of services performed or to be performed with respect to an investment or proposed investment received from or with respect to Portfolio Companies or prospective Portfolio Companies in connection with the Company’s activities will be will be the property of the Company. Notwithstanding the foregoing, for administrative or other reasons, certain fees described in clauses (i) through (iv) above (including any fees for administrative agent services provided by the Adviser or an affiliate with respect to a particular loan or portfolio of loans made by the Company) may be paid to the Adviser or the affiliate (rather than directly to the Company), in which case the amount of such fees (net of any related expenses associated with the generation of such fees borne by the Adviser or such affiliate that have not been and will not be reimbursed by the Portfolio Company) shall be paid to the Company or shall offset amounts (including the Management Fee) otherwise payable by the Company to the Adviser.

Since inception of the Company the Adviser was paid $652 in such fees. In accordance with the limited liability company agreement, as of December 31, 2016 all of the $652 of such fees had been recorded as fee income. During the three months ended March 31, 2017 and 2016, no such fees were paid to the Advisor.

Incentive Fee: In addition, the Adviser will receive an incentive fee (the “Incentive Fee”) as follows:

(a) First, no Incentive Fee will be owed until the Common Unitholders have collectively received cumulative distributions pursuant to this clause (a) equal to their aggregate capital contributions in respect of all Common Units;

(b) Second, no Incentive Fee will be owed until the Common Unitholders have collectively received cumulative distributions equal to a 9% internal rate of return on their aggregate capital contributions in respect of all Common Units (the “Hurdle”);

(c) Third, the Adviser will be entitled to an Incentive Fee out of 100% of additional amounts otherwise distributable to Unitholders until such time as the cumulative Incentive Fee paid to the Adviser is equal to 20% of the sum of (i) the amount by which the Hurdle exceeds the aggregate capital contributions of the Common Unitholders in respect of all Common Units and (ii) the amount of Incentive Fee being paid to the Adviser pursuant to this clause (c); and

(d) Thereafter, the Adviser will be entitled to an Incentive Fee equal to 20% of additional amounts otherwise distributable to Unitholders, with the remaining 80% distributed to the Unitholders.

The Incentive Fee will be calculated on a cumulative basis and the amount of the Incentive Fee payable in connection with any distribution (or deemed distribution) will be determined and, if applicable, paid in accordance with the foregoing formula each time amounts are to be distributed to the Unitholders.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

4. Agreements and Related Party Transactions (continued)

If the Advisory Agreement terminates early for any reason other than (i) the Adviser voluntarily terminating the agreement or (ii) our terminating the agreement for cause (as set out in the Advisory Agreement), we will be required to pay the Adviser a final incentive fee payment (the “Final Incentive Fee Payment”). The Final Incentive Fee Payment will be calculated as of the date the Advisory Agreement is so terminated and will equal the amount of Incentive Fee that would be payable to the Adviser if (A) all our investments were liquidated for their current value (but without taking into account any unrealized appreciation of any portfolio investment), and any unamortized deferred portfolio investment-related fees would be deemed accelerated, (B) the proceeds from such liquidation were used to pay all our outstanding liabilities, and (C) the remainder were distributed to Unitholders and paid as Incentive Fee in accordance with the “waterfall” (i.e., clauses (a) through (d)) described above for determining the amount of the Incentive Fee. We will make the Final Incentive Fee Payment in cash on or immediately following the date the Advisory Agreement is so terminated. The Adviser Return Obligation (defined below) will not apply in connection with a Final Incentive Fee Payment.

For the three months ended March 31, 2017 and 2016, no Incentive Fees were incurred.

Administration Agreement: On September 15, 2014, the Company entered into the Administration Agreement with the Adviser under which the Adviser (or one or more delegated service providers) will oversee the maintenance of our financial records and otherwise assist on the Company’s compliance with regulations applicable to a BDC under the 1940 Act, and a RIC under the Code, to prepare reports to our Members, monitor the payment of our expenses and the performance of other administrative or professional service providers, and generally provide us with administrative and back office support. The Company will reimburse the Administrator for expenses incurred by it on behalf of the Company in performing its obligations under the Administration Agreement. Amounts paid pursuant to the Administration Agreement are subject to the annual cap on Company Expenses (as defined below), as described more fully below.

The Company, and indirectly the Unitholders, will bear (including by reimbursing the Adviser or Administrator) all other costs and expenses of its operations, administration and transactions, including, without limitation, organizational and offering expenses, management fees, costs of reporting required under applicable securities laws, legal fees of the Company’s counsel and accounting fees. However, the Company will not bear (a) more than an amount equal to 10 basis points of the aggregate capital commitments of the Company for organization and offering expenses in connection with the offering of Common Units through the Closing Period and (b) more than an amount equal to 12.5 basis points of the aggregate Commitments of the Company per annum (pro-rated for partial years) for its costs and expenses other than ordinary operating expenses (“Company Expenses”), including amounts paid to the Administrator under the Administration Agreement and reimbursement of expenses to the Adviser. All expenses that the Company will not bear will be borne by the Adviser or its affiliates. Notwithstanding the foregoing, the cap on Company Expenses does not apply to payments of the Management Fee, Incentive Fee, organizational and offering expenses (which are subject to the separate cap), amounts payable in connection with the Company’s borrowings (including interest, bank fees, legal fees and other transactional expenses related to any borrowing or borrowing facility and similar costs), costs and expenses relating to the liquidation of the Company, taxes, or extraordinary expenses (such as litigation expenses and indemnification payments).

TCW Direct Lending Strategic Ventures LLC: On June 5, 2015, the Company, together with an affiliate of Security Benefit Corporation and accounts managed by Oak Hill Advisors, L.P., entered into an Amended and Restated Limited Liability Company Agreement (the “Agreement”) to become members of TCW Direct Lending Strategic Ventures LLC (“Strategic Ventures”). Strategic Ventures focuses primarily on making senior secured floating rate loans to middle-market borrowers. The Agreement was effective June 5, 2015.

The Company’s capital commitment is $481,600, representing approximately 80% of the preferred and common equity ownership of Strategic Ventures, with the third-party investors representing the remaining capital commitments and preferred and common equity ownership. A portion of the Company’s capital commitment was satisfied by the contribution of two loans to Strategic Ventures. Strategic Ventures also entered into a revolving credit facility to finance a portion of certain eligible investments on June 5, 2015.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

4. Agreements and Related Party Transactions (continued)

Effective August 21, 2015, the revolving credit facility increased to $600 million from $500 million. Strategic Ventures is managed by a management committee comprised of two members, one appointed by the Company and one appointed by Oak Hill Advisors, L.P. All decisions of the management committee require unanimous approval of its members. Neither the Company, nor the Adviser will receive management fees from this entity. Although the Company owns more than 25% of the voting securities of Strategic Ventures, the Company does not believe that it has control over Strategic Ventures (other than for purposes of the Investment Company Act).

The Company’s investments in affiliated investments for the three months ended March 31, 2017 were as follows:


	Fair Value as of January 1, 2017		Purchases		Sales		Change in Unrealized Gains and (Losses)		Fair Value as of March 31, 2017		Dividend Income
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	247,164	$	50,160	$	—	$	59	$	297,383	$	4,850

Total Controlled Affiliates	$	247,164	$	50,160	$	—	$	59	$	297,383	$	4,850

The Company’s investments in affiliated investments for the year ended December 31, 2016 were as follows:


	Fair Value as of January 1, 2016		Purchases		Sales			Change in Unrealized Gains and (Losses)		Fair Value as of December 31, 2016		Dividend Income
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	206,635	$	104,337	$	(77,001	)	$	13,193	$	247,164	$	14,797

Total Controlled Affiliates	$	206,635	$	104,337	$	(77,001	)	$	13,193	$	247,164	$	14,797

5. Commitments and Contingencies

The Company had the following unfunded commitments and unrealized gain/(loss) by investment as of March 31, 2017 and December 31, 2016.


			March 31, 2017					December 31, 2016
Unfunded Commitments	Maturity		Amount		Unrealized Losses⁽¹⁾			Amount		Unrealized Gains(Losses)
ASC Acquisition Holdings LLC		December 2021	$	11,208	$	(101	)	$	13,076	$	(26	)
ENA Holdings Corporation		May 2021		4,804		(67	)		4,804		5
FSQR, LLC		March 2022		16,100		(97	)		N/A		N/A
Help At Home, Inc.		August 2020		6,757		—			6,757		61
OTG Management LLC		August 2021		8,233		(49	)		10,291		62
Patriot National, Inc.		November 2021		6,429		(129	)		6,429		58
Quantum Corporation		October 2021		16,371		(49	)		16,371		180
Quicken Parent Corp.		April 2021		1,294		(6	)		1,725		22
Sierra Private Holdings II Ltd.		August 2022		—		—			2,014		6
Xura, Inc.		August 2022		—		—			3,020		9

Total Unfunded Commitments			$	71,196	$	(498	)	$	64,487	$	377

⁽¹⁾	As of January 1, 2017, the Company changed its valuation policy to cap fair values of unfunded commitments at par, thereby eliminating unrealized gains on unfunded commitments.

The Company’s total capital commitment to its underlying investment in Strategic Ventures is $481,600. As of March 31, 2017, the Company’s unfunded commitment to Strategic Ventures is $202,744.

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of March 31, 2017, management is not aware of any pending or threatened litigation.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

5. Commitments and Contingencies (continued)

In the normal course of business, the Company enters into contracts which provide a variety of representations and warranties, and that provide general indemnifications. Such contracts include those with certain service providers, brokers and trading counterparties. Any exposure to the Company under these arrangements is unknown as it would involve future claims that may be made against the Company; however, based on the Company’s experience, the risk of loss is remote and no such claims are expected to occur. As such, the Company has not accrued any liability in connection with such indemnifications.

6. Members’ Capital

During the three months ended March 31, 2017 and 2016, the Company did not sell or issue any Common Units. The activity for the three months ended March 31, 2017 and 2016 is a follows:


	Three Months Ended March 31,
	2017		2016
Units at beginning of period		20,134,698		20,134,698
Units issued and committed		—		—

Units issued and committed at end of period		20,134,698		20,134,698

For the three months ended March 31, 2017, the Company processed $116,492 of deemed distributions and re-contributions.

7. Credit Facility

On November 12, 2014, the Company entered into a senior secured revolving credit agreement, by and between the Company, as borrower, and Natixis, New York Branch, as administrative agent and committed lender (“Natixis”). That agreement was subsequently amended pursuant to an amended and restated credit agreement, dated as of December 22, 2014, by and among the Company, Natixis, and various lenders party thereto, which was then further amended pursuant to a second amended and restated credit agreement, dated as of July 1, 2015 (as so amended and restated, the “Credit Agreement”).

The Credit Agreement provides for a revolving credit line of up to $750 million (the “Maximum Commitment”) (with sublimits for letters of credit of up to $50 million and short-term “swingline” loans of up to $10 million) (the “Credit Facility”), subject to an available borrowing base which is generally, a percentage of remaining unfunded commitments from certain eligible Members, (the “Borrowing Base” or “Available Amount”), and is secured by the undrawn commitments together with the recallable amounts of the Company’s Members generally. The initial lender commitment was $250 million which periodically increased up to an aggregate amount of $750 million. The stated maturity date of the Credit Agreement is November 10, 2017, unless such date is extended at the Company’s option no more than two times for a term of up to twelve months per such extension. Borrowings under the Credit Agreement bear interest at a rate equal to either (a) adjusted eurodollar rate calculated in a customary manner plus 1.70%, (b) commercial paper rate plus 1.70%, or (c) a base rate calculated in a customary manner (which will never be less than the adjusted eurodollar rate plus 1.00%) plus 0.70%. The Credit Facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Company fail to satisfy certain covenants. As of March 31, 2017, the Company was in compliance with such covenants.

As of March 31, 2017 and December 31, 2016, the Maximum Commitment was $750 million. As of March 31, 2017 and December 31, 2016, the Available Amount was $303 million and $622 million, respectively under the Credit Facility Borrowing Base. The Available Amount decreased from $622 million to $303 million as of March 29, 2017 and decreased from $750 million to $622 million as of August 30, 2016 in conjunction with capital activity that decreased the remaining Undrawn Commitments together with the Recallable Amount of the Company’s Members. As of March 31, 2017 and December 31, 2016, the amounts outstanding under the Credit Facility were $303 million and $590 million, respectively. The carrying amount of the amount outstanding under the Credit Facility, which is categorized as Level 2 within the fair value hierarchy as of March 31, 2017 and December 31, 2016, approximates its fair value. Valuation techniques and significant inputs used to determine fair value include Company details, credit, market and liquidity risk and events, financial health of the Company, place in the capital structure, interest rate and terms and condition. The Company incurred $6,415 in connection with obtaining the Credit Facility, which the Company has recorded as deferred financing costs on its Consolidated Statements of Asset and Liabilities and is amortizing these fees over the life of the Credit Facility. As of March 31, 2017 and December 31, 2016, $1,409 and $1,972, respectively, of such prepaid deferred financing costs had yet to be amortized.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

7. Credit Facility (continued)

The summary information regarding the Credit Facility for the three months ended March 31, 2017 and 2016 were as follows:


	Three Months Ended March 31,
	2017			2016
Credit facility interest expense	$	3,037		$	1925
Unused fees		170			340
Administrative fees		19			19
Amortization of deferred financing costs		563			569

Total	$	3,789		$	2,853

Weighted average interest rate		2.57	%		2.17	%
Average outstanding balance	$	479,570		$	356,154

8. Income Taxes

The Company has elected to be treated as a BDC under the 1940 Act and has elected to be treated as a RIC under the Code. So long as the Company maintains its status as a RIC, it will generally not pay corporate-level U.S. Federal income or excise taxes on any ordinary income or capital gains that it distributes at least annually to its common unitholders as dividends. The Company elected to be taxed as a RIC in 2015. The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.

Federal Income Taxes: It is the policy of the Company to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and distribute all of its net taxable income and any net realized gains on investments to its shareholders. Therefore, no federal income tax provision is required.

As of March 31, 2017 and December 31, 2016, the Company’s aggregate investment unrealized appreciation and depreciation for federal income tax purposes were as follows:


	March 31, 2017		December 31, 2016
Cost of investments for federal income tax purposes	$	1,394,896	$	1,346,589
Unrealized appreciation	$	29,622	$	32,909
Unrealized depreciation	$	42,601	$	49,108
Net unrealized depreciation on investments	$	12,979	$	16,199

The Company did not have any unrecognized tax benefits at December 31, 2016, nor were there any increases or decreases in unrecognized tax benefits for the period then ended; and therefore no interest or penalties were accrued. The Company is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three and four fiscal years, respectively.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

9. Financial Highlights

Selected data for a unit outstanding throughout the three months ended March 31, 2017 and 2016 is presented below. The accrual base Net Asset Value is calculated by subtracting the per unit loss from investment operations from the beginning Net Asset Value per unit and reflects all units issued and outstanding.


	For the Three Months Ended March 31,
	2017			2016
Net Asset Value Per Unit (accrual base), Beginning of Period	$	93.55		$	99.35
Income from Investment Operations:
Net investment income⁽¹⁾		1.09			0.46
Net realized and unrealized (loss)		(0.55	)		(0.27	)

Total from investment operations		0.54			0.19
Less Distributions:
From net investment income		(0.99	)		0.00
Return of capital⁽²⁾		(4.79	)		0.00

Total distributions		(5.78	)		—

Net Asset Value Per Unit (accrual base), End of Period	$	88.31		$	99.54

Common Unitholder Total Return⁽³⁾⁽⁴⁾		1.2	%		0.6	%

Common Unitholder IRR⁽⁵⁾		4.5	%		(1.9	)%

Ratios and Supplemental Data
Members’ Capital, end of period	$	1,399,045		$	655,210
Units outstanding, end of period		20,134,698			20,134,698
Ratios based on average net assets of Member’s Capital:
Ratio of total expenses to average net assets⁽⁶⁾		4.49	%		6.74	%
Ratio of net expenses to average net assets⁽⁶⁾		4.49	%		6.74	%
Ratio of financing cost to average net assets⁽⁴⁾		0.35	%		0.44	%
Ratio of net investment income before expense recapture to average net assets⁽⁶⁾		8.30	%		5.74	%
Ratio of net investment income to average net assets⁽⁶⁾		8.30	%		5.74	%
Credit facility payable		303,304			472,000
Asset coverage ratio		5.6			2.4
Portfolio turnover rate⁽⁴⁾		3.0	%		2.0	%

⁽¹⁾	Per unit data was calculated using the number of common units issued and outstanding as of March 31, 2017 and 2016.

⁽²⁾	Includes distributions which have an offsetting capital re-contribution (“deemed distributions”).

⁽³⁾	The Total Return for the three months ended March 31, 2017 and 2016 were calculated by taking the net income (loss) of the Company for the period divided by the weighted average capital contributions from the members during the period. The return is net of management fees and expenses.

⁽⁴⁾	Not annualized.

⁽⁵⁾

The Internal Rate of Return (IRR) since inception for the Common Unitholders, after management fees, financing costs and operating expenses is 4.5% through March 31, 2017. The IRR is computed based on cash flow due dates contained in notices to Member’s (contributions from and distributions to the Common Unitholders) and the net assets (residual value) of the Members’ capital account at period end. The IRR is calculated based on the fair value of investments using principles and methods in accordance with GAAP and does not necessarily represent the amounts that may be realized from sales or other dispositions. Accordingly, the return may vary significantly upon realization.

⁽⁶⁾	Annualized except for organizational costs.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2017

10. Subsequent Events

On April 10, 2017, the Company entered into a Third Amended and Restated Revolving Credit Agreement, by and among the Company, as borrower, and Natixis, New York Branch, as administrative agent and the lenders party thereto, which amends that certain Revolving Credit Agreement, dated as of November 12, 2014, that was subsequently amended by an Amended and Restated Revolving Credit Agreement, dated as of December 22, 2014, and a Second Amended and Restated Revolving Credit Agreement, dated as of July 1, 2015.

The Credit Agreement provides for a revolving credit line of up to $750 million, subject to the available borrowing base, which is generally the sum of (a) a percentage of certain eligible investments, (b) a percentage of remaining unfunded commitments from certain eligible investors in the Company and (c) cash in a controlled account. The Credit Agreement is generally secured by the unfunded commitments (together with the recallable amounts) of the Company’s investors, portfolio investment and substantially all other assets of the Company. The stated maturity date of the Credit Agreement is April 10, 2020. Borrowings under the Credit Agreement bear interest at a rate equal to either (a) adjusted eurodollar rate calculated in a customary manner plus 2.35%, (b) commercial paper rate plus 2.35%, or (c) a base rate calculated in a customary manner (which will never be less than the adjusted eurodollar rate plus 1.00%) plus 1.35%.

Item 2.

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

The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. This discussion also should be read in conjunction with the “Cautionary Statement Regarding Forward Looking Statements” set forth on page 3 of this quarterly report. For simplicity, this report uses the terms For simplicity, this report uses the terms “Company,” “we,” “us,” and “our” to include TCW Direct Lending LLC and where appropriate in the context, its wholly-owned subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve substantial risks and uncertainties. These forward- looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and are difficult to predict, that could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements including, without limitation:

•

an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

•

a contraction of available credit could impair our lending and investment activities;

•

interest rate volatility, could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy;

•

our future operating results;

•

our business prospects and the prospects of our portfolio companies;

•

our contractual arrangements and relationships with third parties;

•

the ability of our portfolio companies to achieve their objectives;

•

competition with other entities and our affiliates for investment opportunities;

•

an inability to replicate the historical success of any previously launched fund managed by the direct lending team of our investment adviser, TCW Asset Management Company LLC (the “Adviser”);

•

the speculative and illiquid nature of our investments;

•

the use of borrowed money to finance a portion of our investments;

•

the adequacy of our financing sources and working capital;

•

the costs associated with being an entity registered with the Securities Exchange Commission (“SEC”);

•

the loss of key personnel;

•

the timing of cash flows, if any, from the operations of our portfolio companies;

•

the ability of the Adviser to locate suitable investments for us and to monitor and administer our investments;

•

the ability of The TCW Group, Inc. to attract and retain highly talented professionals that can provide services to the Adviser in its capacity as our investment adviser and administrator;

•

our ability to qualify and maintain our qualification as a regulated investment company, or “RIC,” under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended, or the “Code,” and as a business development company (“BDC”) under the Investment Company Act of 1940;

•

the effect of legal, tax and regulatory changes; and

•

the other risks, uncertainties and other factors we identify under “Part I—Item 1A. Risk Factors” in the Form 10-K that we filed with the SEC on March 28, 2017 and in this report.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, some of those assumptions are based on the work of third parties and any of those assumptions could prove to be inaccurate; as a result, the forward-looking statements based on those assumptions also could prove to be inaccurate. In light of these and other uncertainties, the

inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans and objectives will be achieved. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this report. We do not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law. The safe harbor provisions of Section 21E of the 1934 Act, which preclude civil liability for certain forward-looking statements, do not apply to the forward- looking statements in this report because we are an investment company.

Overview

We were formed on April 1, 2014 as a limited liability company under the laws of the State of Delaware. We have filed an election to be regulated as a BDC under the 1940 Act. We have also elected to be treated for U.S. federal income tax purposes as a RIC under the Code for the taxable year ending December 31, 2015 and subsequent years. We are required to continue to meet the minimum distribution and other requirements for RIC qualification. As such, we will be required to comply with various regulatory requirements, such as the requirement to invest at least 70% of our assets in “qualifying assets,” source of income limitations, asset diversification requirements, and the requirement to distribute annually at least 90% of our taxable income and tax-exempt interest.

Each investor was required to enter into a subscription agreement in connection with its Commitment (a “Subscription Agreement”). Under the terms of the subscription agreements, the Company may generally draw down all or any portion of the undrawn commitment with respect to each Common Unit upon at least ten business days’ prior written notice to the Common Unitholders. Investors have entered into subscription agreements for 20,134,698 Common Units of the Company issued and outstanding representing a total of $2.013 billion of committed capital.

On May 16, 2016, we established a wholly owned subsidiary, TCW-DL VF Holdings, Inc., structured as a Delaware entity to hold an equity investment in a portfolio company organized as a limited liability company.

On September 19, 2016, we formed TCW Direct Lending Luxembourg VI S.à.r.l., (“TCW Direct Lending Luxembourg”) a private limited liability company under the laws of Luxembourg, of which we own 100% of the membership interests.

On March 24, 2017, we entered into a limited liability company agreement with TCW DL VI Funding I, LLC (“TCW DL VI”) to act as its managing member. Currently, we are the sole member of TCW DL VI.

Revenues

We generate revenues in the form of interest income and capital appreciation by providing private capital to middle market companies operating in a broad range of industries primarily in the United States. In general, we do not expect the Direct Lending Team to originate a significant amount of investments for us with PIK interest features although, we may have investments with payment-in-kind (“PIK”) interest features in limited circumstances involving debt restructurings or work-outs of current investments. Our highly negotiated private investments may include senior secured loans, unsecured senior loans, subordinated and mezzanine loans, convertible securities, equity securities, and equity-linked securities such as options and warrants. However, our investment bias will be towards adjustable-rate, senior secured loans. We do not anticipate a secondary market developing for our private investments.

We are primarily focused on investing in senior secured debt obligations, although there may be occasions where the investment may be unsecured. We also consider an equity investment as the primary security, in combination with a debt obligation, or as a part of total return strategy. Our investments are mostly in corporations, partnerships or other business entities. Additionally, in certain circumstances, we may co-invest with other investors and/or strategic partners through indirect investments in portfolio companies through a joint venture vehicle, partnership or other special purpose vehicle (each, an “Investment Vehicle”). While we invest primarily in U.S. companies, there may be certain instances where we will invest in companies domiciled elsewhere.

Expenses

We do not currently have any employees and do not expect to have any employees. Services necessary for our business are provided through the Administration Agreement and the Advisory Agreement.

We will bear (including by reimbursing the Adviser or Administrator) all costs and expenses of our operations, administration and transactions, including, without limitation, organizational and offering expenses, management fees, costs of reporting required under applicable securities laws, legal fees of our counsel and accounting fees. However, we will not bear (a) more than an amount equal to 10 basis points of the aggregate Commitments for organization and offering expenses in connection with the offering of Common Units through the Closing Period and (b) more than an amount equal to 12.5 basis points of the aggregate Commitments per annum

(pro-rated for partial years) for our Operating Expenses, including amounts paid to the Administrator under the Administration Agreement and reimbursement of expenses to the Adviser and its affiliates. Notwithstanding the foregoing, the cap on Operating Expenses does not apply to payments of the Management Fee, Incentive Fee, organizational and offering expenses (which are subject to the separate cap described above), amounts payable in connection with our borrowings (including interest, bank fees, legal fees and other transactional expenses related to any borrowing or borrowing facility and similar costs), costs and expenses relating to our liquidation of the Company, taxes, or extraordinary expenses (such as litigation expenses and indemnification payments to either the Adviser or the Administrator). All expenses that we will not bear will be borne by the Adviser or its affiliates.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ.

In addition to the discussion below, our critical accounting policies are further described in Note 2 to the consolidated financial statements. We consider these accounting policies to be critical because they involve management judgments and assumptions, require estimates about matters that are inherently uncertain and are important for understanding and evaluating our reported financial results. These judgments will affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. The critical accounting policies should be read in connection with our risk factors as disclosed in “Item 1A. Risk Factors.”

Investments at Fair Value

Investments which we hold for which market quotes are not readily available or are not considered reliable are valued at fair value and approved by our Board of Directors based on similar instruments, internal assumptions and the weighting of the best available pricing inputs.

Fair Value Hierarchy: Assets and liabilities are classified by us based on valuation inputs used to determine fair value into three levels.

Level 1 values are based on unadjusted quoted market prices in active markets for identical assets.

Level 2 values are based on significant observable market inputs, such as quoted prices for similar assets and quoted prices in inactive markets or other market observable inputs.

Level 3 values are based on significant unobservable inputs that reflect our determination of assumptions that market participants might reasonably use in valuing the assets.

Level 1 Assets (Investments): The valuation techniques and significant inputs used to determine fair value are as follows:

Registered Investment Companies, (Level 1), include registered open-end investment companies that are valued based upon the reported net asset value of such investment.

Level 3 Assets (Investments): The following valuation techniques and significant inputs are used to determine fair value of investments in private debt for which reliable market quotations are not available. Some of the inputs are independently observable however, a significant portion of the inputs and the internal assumptions applied are unobservable.

include, but are not limited to, financial health, and relevant business developments of the issuer; EBITDA, market multiples of comparable companies, comparable market transactions and recent trades or transactions; issuer, industry and market events; contractual or legal restrictions on the sale of the security. A liquidity discount based on current market expectations, future events, minority ownership position and the period management reasonably expects to hold the investment may be applied.

Net Asset Value (“NAV”) (Investment Funds and Vehicles): Equity investments in affiliated investment fund (TCW Strategic Ventures) are valued based on the net asset value reported by the investment fund. Investments held by the affiliated fund include debt investments in privately originated senior secured debt. Such investments held by the affiliated fund are valued using the same methods, approach and standards applied above to debt investments held by the Company. The Company’s ability to withdraw from the fund is subject to restrictions. The term of the fund will continue until June 5, 2021 unless dissolved earlier or extended for two additional one-year periods by the Company, in its full discretion. The Company can further extend the term of the fund for additional one-year periods, upon notice to and consent from the funds management committee. The Company is entitled to income and principal distributed by the fund.

Investment Activity

Based on fair value as of March 31, 2017, our non-controlled/non-affiliated portfolio consisted of 25 debt investments and one equity investment. Of these investments, 99.3% were debt investments which were primarily senior secured, first lien or term loans and 0.7% was common stock. Based on fair value as of December 31, 2016, our non-controlled/non-affiliated portfolio consisted of 23 debt investments and one equity investment. Of these investments, 99.2% were debt investments which were primarily senior secured, first lien or term loans and 0.8% was common stock.

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in industries as of March 31, 2017:


Industry	Percent of Total Investments
Hotels, Restaurants & Leisure		11	%
Software		11	%
Industrial Conglomerates		10	%
Food Products		10	%
Household Durables		9	%
Metals & Mining		8	%
Road & Rail		8	%
Diversified Financial Services		6	%
Pharmaceuticals		6	%
Health Care Providers & Services		4	%
Computers & Peripherals		4	%
Textiles, Apparel & Luxury Goods		3	%
Distributors		3	%
Information Technology Services		3	%
Diversified Consumer Services		2	%
Diversified Telecommunication Services		1	%
Chemicals		1	%

Total		100	%

Interest income from non-controlled/non-affiliated investments was $29.1 million and $18.7 million for the three months ended March 31, 2017 and 2016, respectively.

Results of Operations

Our operating results for the three months ended March 31, 2017 and 2016 were as follows (dollar amounts in thousands):


	Three Months Ended March 31,
	2017			2016
Total investment income	$	33,964		$	20,315
Net expenses		11,917			10,978

Net investment income (loss)		22,047			9,337
Net realized gain on non-controlled/non-affiliated investments		259			—
Net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments		(11,424	)		(10,259	)
Net change in unrealized appreciation/depreciation on controlled affiliated investments		59			4,829

Net increase in Members’ Capital from operations	$	10,941		$	3,907

Total investment income

Total investment income for the three months ended March 31, 2017 and 2016 was $34.0 million and $20.3 million, respectively, and included interest income from non-controlled/non-affiliated investments of $29.1 million and $18.7 million, respectively, as well as dividend income of $4.9 million and $1.6 million, respectively, from TCW Strategic Ventures, a controlled affiliated investment which commenced operations in 2015.

Net investment income

Our net investment income for the three months ended March 31, 2017 and 2016 was $22.0 million and $9.3 million, respectively. The net investment income for the three months ended March 31, 2017 is primarily attributable to current operations and the increase in the number of debt investments as of March 31, 2017 (25 debt investments) compared to March 31, 2016 (14 debt investments). Our net investment income for the three months ended March 31, 2016 was primarily attributable to current operations and the increase in number of debt investments to 14 compared to 2 during the three months ended March 31, 2015.

Operating expenses for the three months ended March 31, 2017 and 2016 were as follows (dollar amounts in thousands):


	Three Months Ended March 31,
	2017		2016
Expenses
Management fees	$	7,551	$	7,551
Interest and credit facility expenses		3,789		2,853
Administrative fees		308		261
Professional fees		126		146
Directors’ fees		77		71
Other expenses		66		96

Total expenses	$	11,917	$	10,978

Our total operating expenses were $11.9 million and $11.0 million for the three months ended March 31, 2017 and 2016, respectively. Our operating expenses include management fees attributed to the Adviser of $7.6 million for the three months ended March 31, 2017 and 2016. Operating expenses in all categories except for management fees and other expenses increased during the three months ended March 31, 2017 versus the three months ended March 31, 2016 primarily due to increase in our investment portfolio. Management fees are based on total commitments and therefore, was consistent between the three months ended March 31, 2017 and 2016.

Net realized gain on non-controlled/non-affiliated investments

Our net realized gain on non-controlled/non-affiliated investments for the three months ended March 31, 2017 and 2016 were $0.3 million and $0.0 million, respectively. Our net realized gain on non-controlled/non-affiliated investments during the three months ended March 31, 2017 was primarily due to the realization of gains related to our term loans to Harvest Hill Beverage Company.

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

Our net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments for the three months ended March 31, 2017 and 2016 were ($11.4) million and ($10.3) million, respectively. Our net change in unrealized appreciation/depreciation for the three months ended March 31, 2017 was primarily due to our term loans to Pace Industries, H-D Manufacturing, Patriot National, Inc., and Cedar Electronics Holdings, Corp, which recorded decreases in fair value of $3.2 million, $2.1 million, $1.5 million and $1.1 million, respectively, as well as other mark to market adjustments resulting from market yield spreads during the period. Our net change in unrealized appreciation/ depreciation for the three months ended March 31, 2016 was primarily attributable to our investment in H-D Advanced Manufacturing which recorded a $10.9 million decrease in fair value during the three months ended March 31, 2016. Our remaining investments recorded unrealized appreciation of $0.6 million.

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

Our net change in unrealized appreciation/depreciation on controlled/affiliated investments were $0.1 million and $4.8 million for the three months ended March 31, 2017 and 2016, respectively. The net change in unrealized appreciation/depreciation on controlled/affiliated investments during the three months ended March 31, 2017 and 2016 is primarily attributable to loans originated in 2017 and 2016, respectively, as well as undistributed profits from TCW Strategic Ventures.

Net increase in members’ capital from operations

Our net increase in members’ capital from operations during the three months ended March 31, 2017 and 2016 was $10.9 million and $3.9 million, respectively. The increase during the three months ended March 31, 2017 is primarily attributable to higher investment income from a larger investment portfolio, compared to the three months ended March 31, 2016.

Direct Lending Strategic Ventures LLC

On June 5, 2015, the Company, together with an affiliate of Security Benefit Corporation and accounts managed by Oak Hill Advisors, L.P., entered into an Amended and Restated Limited Liability Company Agreement (the “Agreement”) to become members of TCW Strategic Ventures. TCW Strategic Ventures will focus primarily on making senior secured floating rate loans to middle-market borrowers. The Agreement is effective June 5, 2015.

The Company’s capital commitment is $481.6 million, representing approximately 80% of the preferred and common equity ownership of TCW Strategic Ventures, with the third-party investors representing the remaining capital commitments and preferred and common equity ownership. A portion of the Company’s capital commitment was satisfied by the contribution of two loans to TCW Strategic Ventures. TCW Strategic Ventures also entered into a revolving credit facility to finance a portion of certain eligible investments on June 5, 2015. Effective August 21, 2015, the revolving credit facility increased to $600 million from $500 million. TCW Strategic Ventures is managed by a management committee comprised of two members, one appointed by the Company and one appointed by Oak Hill Advisors, L.P. All decisions of the management committee require unanimous approval of its members. Neither the Company, nor the Adviser will receive management fees from this entity. Although the Company owns more than 25% of the voting securities of TCW Strategic Ventures, the Company does not believe that it has control over TCW Strategic Ventures (other than for purposes of the 1940 Act).

The Company’s investments in controlled affiliated investments for the three months ended March 31, 2017 and year ended December 31, 2016 were as follows (dollar amounts in thousands):


	Fair Value as of January 1, 2017		Purchases		Sales		Change in Unrealized Gains and (Losses)		Fair Value as of March 31, 2017		Dividend Income
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	247,164	$	50,160	$	—	$	59	$	297,383	$	4,850

Total Controlled Affiliates	$	247,164	$	50,160	$	—	$	59	$	297,383	$	4,850


	Fair Value as of January 1, 2016		Purchases		Sales			Change in Unrealized Gains and (Losses)		Fair Value as of December 31, 2016		Dividend Income
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	206,635	$	104,337	$	(77,001	)	$	13,193	$	247,164	$	14,797

Total Controlled Affiliates	$	206,635	$	104,337	$	(77,001	)	$	13,193	$	247,164	$	14,797

Financial Condition, Liquidity and Capital Resources

On March 19, 2015 we completed the final private placement of Common Units. We generate cash from (1) drawing down capital in respect of Common Units, (2) cash flows from investments and operations and (3) borrowings from banks or other lenders.

Our primary use of cash is for (1) investments in portfolio companies and other investments to comply with certain portfolio diversification requirements, (2) the cost of operations (including expenses, management fees, incentive fees, and any indemnification obligations), (3) debt service of any borrowings and (4) cash distributions to the Common Unitholders.

As of March 31, 2017 and December 31, 2016, aggregate Commitments, Undrawn Commitments and subscribed for Units of the Company are as follows (dollar amounts in thousands):


	March 31, 2017			December 31, 2016
Commitments	$	2,013,470		$	2,013,470
Undrawn commitments	$	379,097		$	920,589
Percentage of commitments funded		81.2	%		54.3	%
Units		20,134,698			20,134,698

Natixis Credit Agreement

On November 12, 2014, we entered into a senior secured revolving credit agreement, with us as borrower, and Natixis, New York Branch, as administrative agent and committed lender (“Natixis”). That agreement was subsequently amended pursuant to an amended and restated credit agreement, dated as of December 22, 2014, by and among us, Natixis, and various lenders party thereto, which was then further amended pursuant to a second amended and restated credit agreement, dated as of July 1, 2015 (as so amended and restated, the “Credit Agreement”).

The Credit Agreement provides for a revolving credit line of up to $750 million (the “Maximum Commitment) (with sublimits for letters of credit of up to $50 million and short-term “swingline” loans of up to $10 million) (the “Credit Facility”), subject to an available borrowing base which is generally, a percentage of remaining unfunded commitments from certain eligible Members, (the “Borrowing Base” or “Available Amount”), and is secured by the undrawn commitments together with the recallable amounts from our Members generally. The initial lender commitment was $250 million which periodically increased up to an aggregate amount of $750 million. The stated maturity date of the Credit Agreement is November 10, 2017, unless such date is extended at our option no more than two times for a term of up to twelve months per such extension. Borrowings under the Credit Agreement bear interest at a rate equal to either (a) adjusted eurodollar rate calculated in a customary manner plus 1.70%, (b) commercial paper rate plus 1.70%, or (c) a base rate calculated in a customary manner (which will never be less than the adjusted eurodollar rate plus 1.00%) plus 0.70%. The Credit Facility may be terminated, and any outstanding amounts thereunder may become due and payable, should we fail to satisfy certain covenants. As of March 31, 2017, we were in compliance with such covenants.

As of March 31, 2017 and December 31, 2016, the Maximum Commitment was $750.0 million. As of March 31, 2017 and December 31, 2016, the Available Amount was $303.3 million and $622.0 million, respectively, under the Credit Facility Borrowing Base. The Available Amount decreased from $622.0 million to $303.3 million as of March 29, 2017 and decreased from $750.0 million to $622.0 million as of August 30, 2016, in conjunction with capital activity that deceased the remaining Undrawn Commitments together with the Recallable Amount of our Members.

As of March 31, 2017 and December 31, 2016 and, the amounts outstanding under the Credit Facility were $303.3 million and $590.0 million, respectively. The carrying amount of the amount outstanding under the Credit Facility, which is categorized as Level 2 within the fair value hierarchy as of March 31, 2017 and December 31, 2016, approximates its fair value. Valuation techniques and significant inputs used to determine fair value include Company details, credit, market and liquidity risk and events, financial health of

the Company, place in the capital structure, interest rate and terms and condition. We incurred $6,415 in connection with obtaining the Credit Facility, which we have recorded as deferred financing costs on our Consolidated Statements of Asset and Liabilities and is amortizing these fees over the life of the Credit Facility. As of March 31, 2017 and December 31, 2016, $1,409 and $1,972 respectively, of such prepaid deferred financing costs had yet to be amortized.

The summary information regarding the Credit Facility for the three months ended March 31, 2017 and 2016 is as follows (dollar amounts in thousands):


	Three Months Ended March 31,
	2017			2016
Borrowing interest expense	$	3,037		$	1,925
Unused fees		170			340
Administrative fees		19			19
Amortization of financing costs		563			569

Total	$	3,789		$	2,853

Weighted average interest rate		2.57	%		2.17	%
Average outstanding balance	$	479,570		$	356,154

Contractual Obligations

A summary of our contractual payment obligations as of March 31, 2017 and December 31, 2016 is as follows (dollar amounts in thousands):


Revolving Credit Agreement	Total Facility Commitment		Available Amount⁽¹⁾		Borrowings Outstanding		Undrawn Amount
Total Debt Obligations – March 31, 2017	$	750,000	$	303,304	$	303,304	$	—
Total Debt Obligations – December 31, 2016	$	750,000	$	622,000	$	590,000	$	32,000

(1)	The amount available considers any limitations related to the debt facility borrowing.

The Company had the following unfunded commitments and unrealized gains/(losses) as of March 31, 2017 and December 31, 2016 by investment type (dollar amounts in thousands):


		March 31, 2017					December 31, 2016
Unfunded Commitments	Maturity	Amount		Unrealized Losses⁽¹⁾			Amount		Unrealized Gains(Losses)
ASC Acquisition Holdings LLC	December 2021	$	11,208	$	(101	)	$	13,076	$	(26	)
ENA Holdings Corporation	May 2021		4,804		(67	)		4,804		5
FSQR, LLC	March 2022		16,100		(97	)		N/A		N/A
Help At Home, Inc.	August 2020		6,757		—			6,757		61
OTG Management LLC	August 2021		8,233		(49	)		10,291		62
Patriot National, Inc.	November 2021		6,429		(129	)		6,429		58
Quantum Corporation	October 2021		16,371		(49	)		16,371		180
Quicken Parent Corp.	April 2021		1,294		(6	)		1,725		22
Sierra Private Holdings II Ltd.	August 2022		—		—			2,014		6
Xura, Inc.	August 2022		—		—			3,020		9

Total Unfunded Commitments		$	71,196	$	(498	)	$	64,487	$	377

⁽¹⁾	As of January 1, 2017, the Company changed its valuation policy to cap fair values of unfunded commitments at par, thereby eliminating unrealized gains on unfunded commitments.

The Company’s total capital commitment to its underlying investment in TCW Direct Lending Strategic Ventures LLC is $481.6 million. As of March 31, 2017 and December 31, 2016, the Company’s unfunded commitment to TCW Strategic Ventures was $202.7 million and $252.9 million, respectively.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to financial market risks, including changes in interest rates. At December 31, 2016, 100.0% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate. The interest rates on such investments generally reset by reference to the current market index after one to six months. At December 31, 2016, the percentage of our floating rate debt investments that bore interest based on an interest rate floor was 100.0%. Floating rate investments subject to a floor generally reset by reference to the current market index after one to six months only if the index exceeds the floor.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We assess our portfolio companies periodically to determine whether such companies will be able to continue making interest payments in the event that interest rates increase. There can be no assurances that the portfolio companies will be able to meet their contractual obligations at any or all levels of increases in interest rates.

Based on our March 31, 2017 consolidated balance sheet, the following table shows the annual impact on net income (excluding the related incentive compensation impact) of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure (dollar amounts in thousands):


Basis Point Change	Interest Income			Interest Expense			Net Income
Up 300 basis points	$	44,879		$	9,225		$	35,654
Up 200 basis points		30,111			6,150			23,961
Up 100 basis points		15,342			3,076			12,266
Down 100+ basis points		(704	)		(3,094	)		2,390

Item 4.

CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934). Based on that evaluation, our President and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them to material information relating to us that is required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934.

There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter 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

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 1A.

Risk Factors

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Sales of unregistered securities

On September 19, 2014, the Company began accepting subscription agreements from investors for the private sale of its Common Units. The Company continued to enter into subscription agreements through the final closing date of March 19, 2015. Under the terms of the subscription agreements, the Company may generally draw down all or any portion of the undrawn commitment with respect to each Common Unit upon at least ten business days’ prior written notice to the unitholders. The issuance of the Common Units pursuant to these subscription agreements and any draw by the Company under the related commitments is expected to be exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, and Rule 506(c) of Regulation D thereunder.

Issuer purchases of equity securities

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

None.

Item 6.

Exhibits.

(a)

Exhibits



3.1		Certificate of Formation (incorporated by reference to Exhibit 3.1 to a registration on Form 10 filed on April 18, 2014)

3.4		Second Amended and Restated Limited Liability Company Agreement, dated September 19, 2014 (incorporated by reference to Exhibit 3.4 to a filing on Form 10-Q filed on November 7, 2014)

31.1*		Certification of President Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

31.2*		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

32.1*		Certification of President Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

32.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

99.1*		Financial Statements of TCW Direct Lending Strategic Ventures LLC for the three months end March 31, 2017 (Unaudited)

*	Filed herewith

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	TCW DIRECT LENDING LLC

Date: May 15, 2017	By:	/s/ Richard T. Miller
		Richard T. Miller
		President

Date: May 15, 2017	By:	/s/ James G. Krause
		James G. Krause
		Chief Financial Officer

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