Attached files
| file | filename |
|---|---|
| EX-32.1 - EXHIBIT 32.1 - Special Value Continuation Partners, LP | svcp9302017exhibit321.htm |
| EX-31.2 - EXHIBIT 31.2 - Special Value Continuation Partners, LP | svcp9302017exhibit312.htm |
| EX-31.1 - EXHIBIT 31.1 - Special Value Continuation Partners, LP | svcp9302017exhibit311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________________
FORM 10-Q
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Quarter Ended September 30, 2017 | |
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 814-00897
______________________
SPECIAL VALUE CONTINUATION
PARTNERS, LP
(Exact Name of Registrant as Specified in Charter)
______________________
Delaware | 68-0631675 |
(State or Other Jurisdiction of Incorporation) | (IRS Employer Identification No.) |
2951 28th Street, Suite 1000 | |
Santa Monica, California | 90405 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code (310) 566-1000
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Common Limited Partner Interests
(Title of class)
______________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☒ | Smaller Reporting company ☐ |
Emerging growth company ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with a new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of the Registrant’s common limited partner interests outstanding as of September 30, 2017 was $1,243,969,860.
SPECIAL VALUE CONTINUATION PARTNERS, LP
FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
TABLE OF CONTENTS
Part I. | Financial Information | |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II. | Other Information | |
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
1
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Statements of Assets and Liabilities
September 30, 2017 | December 31, 2016 | ||||||
(unaudited) | |||||||
Assets | |||||||
Investments, at fair value: | |||||||
Companies less than 5% owned (cost of $1,378,833,997 and $1,174,421,611, respectively) | $ | 1,389,967,667 | $ | 1,175,097,468 | |||
Companies 5% to 25% owned (cost of $86,080,592 and $75,508,585, respectively) | 74,735,725 | 69,355,808 | |||||
Companies more than 25% owned (cost of $95,435,060 and $96,135,623, respectively) | 64,047,095 | 70,516,594 | |||||
Total investments (cost of $1,560,349,649 and $1,346,065,819, respectively) | 1,528,750,487 | 1,314,969,870 | |||||
Cash and cash equivalents | 71,929,885 | 53,579,868 | |||||
Accrued interest income: | |||||||
Companies less than 5% owned | 17,600,493 | 12,713,025 | |||||
Companies 5% to 25% owned | 2,237,834 | 953,561 | |||||
Companies more than 25% owned | 11,763 | 25,608 | |||||
Receivable for investments sold | 13,414,257 | — | |||||
Deferred debt issuance costs | 3,664,315 | 3,828,784 | |||||
Prepaid expenses and other assets | 3,993,300 | 1,156,279 | |||||
Total assets | 1,641,602,334 | 1,387,226,995 | |||||
Liabilities | |||||||
Debt, net of unamortized issuance costs of $2,750,014 and $2,712,574, respectively | 302,249,986 | 333,787,426 | |||||
Payable for investments purchased | 85,545,089 | 12,348,925 | |||||
Incentive allocation payable | 5,513,546 | 4,716,834 | |||||
Interest payable | 1,605,509 | 2,715,380 | |||||
Payable to the Advisor | 669,307 | 325,790 | |||||
Unrealized depreciation on swaps | 470,202 | — | |||||
Accrued expenses and other liabilities | 1,578,835 | 1,623,003 | |||||
Total liabilities | 397,632,474 | 355,517,358 | |||||
Commitments and contingencies (Note 5) | |||||||
Net assets applicable to common limited and general partners | $ | 1,243,969,860 | $ | 1,031,709,637 | |||
Composition of net assets applicable to common limited and general partners | |||||||
Paid-in capital in excess of par | $ | 1,397,310,567 | $ | 1,180,024,317 | |||
Accumulated net investment income | 25,246,361 | 17,764,674 | |||||
Accumulated net realized losses | (146,503,089 | ) | (134,962,632 | ) | |||
Accumulated net unrealized depreciation | (32,083,979 | ) | (31,116,722 | ) | |||
Net assets applicable to common limited and general partners | $ | 1,243,969,860 | $ | 1,031,709,637 | |||
See accompanying notes to the consolidated financial statements.
2
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Unaudited)
September 30, 2017
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Principal | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||||||
Debt Investments (A) | ||||||||||||||||||||||||||||||||
Advertising, Public Relations and Marketing | ||||||||||||||||||||||||||||||||
Foursquare Labs, Inc. | First Lien Delayed Draw Term Loan (5.0% Exit Fee) | LIBOR (M) | — | 8.81 | % | 10.19 | % | 6/1/2020 | $ | 18,750,000 | $ | 18,383,852 | $ | 18,334,875 | 1.15 | % | L/N | |||||||||||||||
InMobi, Inc. (Singapore) | First Lien Delayed Draw Tranche 1 Term Loan (4.00% Exit Fee) | LIBOR (M) | 1.37 | % | 8.13 | % | 9.50 | % | 12/31/2019 | $ | 24,897,542 | 24,372,226 | 24,353,215 | 1.52 | % | H/L/N | ||||||||||||||||
Videology Media Technologies, LLC | First Lien UK Revolver (2.0% Exit Fee) | LIBOR (M) | 1.00 | % | 10.00 | % | 11.32 | % | 1/10/2020 | $ | 8,170,996 | 8,170,996 | 8,170,996 | 0.51 | % | L/N | ||||||||||||||||
Videology Media Technologies, LLC | First Lien US Revolver (2.0% Exit Fee) | LIBOR (M) | 1.00 | % | 8.50 | % | 9.82 | % | 1/10/2020 | $ | 2,647,385 | 2,647,385 | 2,647,385 | 0.17 | % | L/N | ||||||||||||||||
53,574,459 | 53,506,471 | 3.35 | % | |||||||||||||||||||||||||||||
Air Transportation | ||||||||||||||||||||||||||||||||
Mesa Air Group, Inc. | Acquisition Loan | LIBOR (M) | — | 7.25 | % | 8.63 | % | 7/15/2022 | $ | 12,478,783 | 12,326,601 | 12,728,359 | 0.80 | % | N | |||||||||||||||||
Mesa Airlines, Inc. | Engine Acquisition Delayed Draw Term Loan A | LIBOR (M) | — | 7.25 | % | 8.50 | % | 12/14/2021 | $ | 15,025,436 | 14,800,541 | 15,029,944 | 0.94 | % | N | |||||||||||||||||
Mesa Airlines, Inc. | Engine Acquisition Delayed Draw Term Loan B | LIBOR (M) | — | 7.25 | % | 8.50 | % | 2/28/2022 | $ | 8,723,671 | 8,589,297 | 8,680,488 | 0.54 | % | N | |||||||||||||||||
Mesa Airlines, Inc. | Engine Acquisition Delayed Draw Term Loan C | LIBOR (M) | — | 7.25 | % | 8.50 | % | 7/31/2022 | $ | 3,621,731 | 3,566,306 | 3,578,814 | 0.22 | % | N | |||||||||||||||||
Mesa Airlines, Inc. | Engine Acquisition Delayed Draw Term Loan C-1 | LIBOR (M) | — | 7.25 | % | 8.50 | % | 9/30/2022 | $ | 5,560,909 | 5,463,631 | 5,466,652 | 0.34 | % | N | |||||||||||||||||
44,746,376 | 45,484,257 | 2.84 | % | |||||||||||||||||||||||||||||
Amusement and Recreation | ||||||||||||||||||||||||||||||||
VSS-Southern Holdings, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 6.50% Cash+2.00% PIK | 9.83 | % | 11/3/2020 | $ | 24,342,738 | 23,968,373 | 24,707,879 | 1.54 | % | N | |||||||||||||||||
VSS-Southern Holdings, LLC | Sr Secured Revolver | LIBOR (Q) | 1.00 | % | 6.50% Cash+2.00% PIK | N/A | 11/3/2020 | $ | — | (13,214 | ) | 12,842 | — | K/N | ||||||||||||||||||
23,955,159 | 24,720,721 | 1.54 | % | |||||||||||||||||||||||||||||
Apparel Manufacturing | ||||||||||||||||||||||||||||||||
Broder Bros., Co. | First Lien Term Loan (First Out) | LIBOR (Q) | 1.25 | % | 5.75 | % | 7.05 | % | 6/3/2021 | $ | 8,957,976 | 8,836,152 | 9,047,555 | 0.57 | % | N | ||||||||||||||||
Broder Bros., Co. | First Lien Term Loan B (Last Out) | LIBOR (Q) | 1.25 | % | 12.25 | % | 13.55 | % | 6/3/2021 | $ | 9,305,317 | 9,190,600 | 9,463,507 | 0.59 | % | N | ||||||||||||||||
18,026,752 | 18,511,062 | 1.16 | % | |||||||||||||||||||||||||||||
Building Equipment Contractors | ||||||||||||||||||||||||||||||||
Hylan Datacom & Electrical, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 7.50 | % | 8.74 | % | 7/25/2021 | $ | 13,805,441 | 13,635,230 | 13,915,884 | 0.87 | % | N | ||||||||||||||||
Business Support Services | ||||||||||||||||||||||||||||||||
Enerwise Global Technologies, Inc. | Sr Secured Revolving Loan | LIBOR (Q) | 0.23 | % | 8.52 | % | N/A | 11/30/2018 | $ | — | (3,251 | ) | (18,600 | ) | — | K/N | ||||||||||||||||
Enerwise Global Technologies, Inc. | Sr Secured Term Loan (3.77% Exit Fee) | LIBOR (Q) | 0.23 | % | 9.27 | % | 10.57 | % | 11/30/2019 | $ | 23,000,000 | 22,776,712 | 22,893,050 | 1.43 | % | L/N | ||||||||||||||||
STG-Fairway Acquisitions, Inc. (First Advantage) | Second Lien Term Loan | LIBOR (Q) | 1.00 | % | 9.25 | % | 10.57 | % | 6/30/2023 | $ | 31,000,000 | 30,624,810 | 29,267,100 | 1.83 | % | N | ||||||||||||||||
53,398,271 | 52,141,550 | 3.26 | % | |||||||||||||||||||||||||||||
Chemicals | ||||||||||||||||||||||||||||||||
Anuvia Plant Nutrients Holdings, LLC | Sr Secured Term Loan (8.0% Exit Fee) | LIBOR (M) | — | 10.63 | % | 12.00 | % | 2/1/2018 | $ | 2,824,919 | 2,829,948 | 2,824,919 | 0.18 | % | L/N | |||||||||||||||||
Green Biologics, Inc. | Convertible Note | Fixed | — | 10.00% PIK | 10.00 | % | 6/30/2019 | $ | 7,500,000 | 7,355,902 | 5,853,750 | 0.37 | % | E/N | ||||||||||||||||||
Green Biologics, Inc. | Sr Secured Term Loan (12.4 % Exit Fee) | Fixed | — | 10.00% PIK | 10.00 | % | 12/31/2020 | $ | 8,106,004 | 7,940,893 | 6,376,993 | 0.40 | % | L/N | ||||||||||||||||||
iGM RFE1 B.V. (Netherlands) | First Lien Delayed Draw Term Loan | LIBOR (Q) | — | 8.00 | % | 9.33 | % | 10/12/2021 | $ | 877,431 | 872,110 | 927,444 | 0.06 | % | H/N | |||||||||||||||||
iGM RFE1 B.V. (Netherlands) | First Lien Term Loan | LIBOR (Q) | — | 8.00 | % | 9.33 | % | 10/12/2021 | $ | 3,792,122 | 3,768,558 | 4,008,273 | 0.25 | % | H/N | |||||||||||||||||
iGM RFE1 B.V. (Netherlands) | First Lien Term Loan | EURIBOR (Q) | — | 8.00 | % | 8.00 | % | 10/12/2021 | € | 6,418,239 | 7,011,284 | 8,014,710 | 0.50 | % | D/H/N | |||||||||||||||||
Nanosys, Inc. | First Lien Delayed Draw Term Loan (3.5% Exit Fee) | LIBOR (Q) | — | 9.81 | % | 11.19 | % | 4/1/2019 | $ | 10,000,000 | 9,604,298 | 9,828,000 | 0.61 | % | L/N | |||||||||||||||||
39,382,993 | 37,834,089 | 2.37 | % | |||||||||||||||||||||||||||||
Communications Equipment Manufacturing | ||||||||||||||||||||||||||||||||
Globecomm Systems, Inc. | First Lien Term Loan | LIBOR (Q) | 1.25 | % | 7.63 | % | 9.05 | % | 12/11/2018 | $ | 14,442,682 | 14,298,255 | 13,409,308 | 0.84 | % | B/N | ||||||||||||||||
3
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Unaudited) (Continued)
September 30, 2017
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Principal | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||||||
Debt Investments (continued) | ||||||||||||||||||||||||||||||||
Computer Systems Design and Related Services | ||||||||||||||||||||||||||||||||
Aptos Inc. (Canada) | First Lien Incremental Term Loan | LIBOR (Q) | 1.00 | % | 6.75 | % | 8.08 | % | 9/1/2022 | $ | 7,969,241 | $ | 7,849,702 | $ | 7,849,702 | 0.49 | % | H/N | ||||||||||||||
Aptos Inc. (Canada) | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 6.75 | % | 8.08 | % | 9/1/2022 | $ | 9,900,000 | 9,731,240 | 9,751,500 | 0.61 | % | H/N | ||||||||||||||||
Bracket Intermediate Holding Corp. | Second Lien Term Loan | LIBOR (Q) | 1.00 | % | 9.00 | % | 10.32 | % | 3/14/2024 | $ | 10,925,551 | 10,612,225 | 10,696,115 | 0.67 | % | N | ||||||||||||||||
Dealersocket, Inc. | First Lien Term Loan | LIBOR (M) | 1.00 | % | 10.00 | % | 11.37 | % | 2/10/2021 | $ | 15,750,000 | 15,285,565 | 15,750,000 | 0.98 | % | N | ||||||||||||||||
Fidelis Acquisitionco, LLC | First Lien Bridge Term Loan | LIBOR (M) | 1.00 | % | 6.00% Cash+2.00% PIK | 9.38 | % | 10/13/2017 | $ | 3,182,143 | 3,163,821 | 3,182,143 | 0.20 | % | N | |||||||||||||||||
Fidelis Acquisitionco, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 6.00% Cash+2.00% PIK | 9.32 | % | 11/4/2019 | $ | 43,214,417 | 42,779,942 | 39,178,191 | 2.45 | % | N | |||||||||||||||||
Fidelis Acquisitionco, LLC | Sr Secured Revolver | LIBOR (Q) | 1.00 | % | 8.00 | % | 9.32 | % | 11/4/2019 | $ | 3,182,143 | 3,182,143 | 2,884,931 | 0.18 | % | N | ||||||||||||||||
Marketo, Inc. | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 9.50 | % | 10.83 | % | 8/16/2021 | $ | 23,295,455 | 22,722,018 | 23,295,455 | 1.46 | % | N | ||||||||||||||||
Marketo, Inc. | Senior Secured Revolver | LIBOR (Q) | 1.00 | % | 9.50 | % | N/A | 8/16/2021 | $ | — | (39,766 | ) | — | — | K/N | |||||||||||||||||
OnX Enterprise Solutions, Ltd. (Canada) | First Lien Term Loan B | LIBOR (Q) | — | 8.00 | % | 9.32 | % | 9/3/2018 | $ | 2,296,200 | 2,296,200 | 2,296,200 | 0.14 | % | H/N | |||||||||||||||||
OnX Enterprise Solutions, Ltd. (Canada) | First Lien Term Loan | LIBOR (Q) | — | 8.00 | % | 9.32 | % | 9/3/2018 | $ | 10,240,000 | 10,210,950 | 10,240,000 | 0.64 | % | H/N | |||||||||||||||||
OnX USA, LLC | First Lien Term Loan B | LIBOR (Q) | — | 8.00 | % | 9.32 | % | 9/3/2018 | $ | 3,702,400 | 3,702,400 | 3,702,400 | 0.23 | % | N | |||||||||||||||||
OnX USA, LLC | First Lien Term Loan | LIBOR (Q) | — | 8.00 | % | 9.32 | % | 9/3/2018 | $ | 3,120,000 | 3,121,990 | 3,120,000 | 0.19 | % | N | |||||||||||||||||
134,618,430 | 131,946,637 | 8.24 | % | |||||||||||||||||||||||||||||
Credit (Nondepository) | ||||||||||||||||||||||||||||||||
Auto Trakk SPV, LLC | First Lien Delayed Draw Term Loan | LIBOR (M) | 0.50 | % | 9.50 | % | 10.73 | % | 12/21/2021 | $ | 32,392,942 | 31,954,106 | 32,602,257 | 2.04 | % | N | ||||||||||||||||
Caliber Home Loans, Inc. | First Lien Delayed Draw Term Loan | LIBOR (M) | 1.00 | % | 6.50 | % | 7.74 | % | 6/30/2020 | $ | 15,555,556 | 15,399,451 | 15,735,556 | 0.98 | % | N | ||||||||||||||||
Caribbean Financial Group (Cayman Islands) | Sr Secured Notes | Fixed | — | 11.50 | % | 11.50 | % | 11/15/2019 | $ | 28,678,000 | 28,593,384 | 29,538,340 | 1.85 | % | E/G/H/N | |||||||||||||||||
75,946,941 | 77,876,153 | 4.87 | % | |||||||||||||||||||||||||||||
Credit Related Activities | ||||||||||||||||||||||||||||||||
Pacific Union Financials, LLC | First Lien Term Loan | LIBOR (M) | 1.00 | % | 7.50 | % | 8.74 | % | 4/21/2022 | $ | 25,000,000 | 24,765,887 | 25,108,750 | 1.57 | % | N | ||||||||||||||||
Pegasus Business Intelligence, LP (Onyx Centersource) | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 6.75 | % | 8.09 | % | 12/20/2021 | $ | 14,659,047 | 14,532,703 | 14,644,388 | 0.91 | % | N | ||||||||||||||||
Pegasus Business Intelligence, LP (Onyx Centersource) | Revolver | LIBOR (Q) | 1.00 | % | 6.75 | % | 8.09 | % | 12/20/2021 | $ | 89,514 | 83,765 | 88,843 | 0.01 | % | N | ||||||||||||||||
39,382,355 | 39,841,981 | 2.49 | % | |||||||||||||||||||||||||||||
Data Processing and Hosting Services | ||||||||||||||||||||||||||||||||
Applause App Quality, Inc. | First Lien Term Loan | LIBOR (M) | 1.00 | % | 6.50 | % | 7.74 | % | 9/20/2022 | $ | 22,647,306 | 22,197,368 | 22,194,361 | 1.39 | % | N | ||||||||||||||||
Applause App Quality, Inc. | First Revolver | LIBOR (M) | 1.00 | % | 6.50 | % | N/A | 9/20/2022 | $ | — | (30,014 | ) | — | — | K/N | |||||||||||||||||
DigiCert Holdings, Inc. | Second Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.00 | % | 9.00 | % | 9/20/2025 | $ | 10,578,112 | 10,525,221 | 10,694,947 | 0.67 | % | |||||||||||||||||
Internap Corporation | First Lien Term Loan | LIBOR (M) | 1.00 | % | 7.00 | % | 8.24 | % | 4/3/2022 | $ | 8,184,324 | 8,069,799 | 8,286,628 | 0.52 | % | J | ||||||||||||||||
IO Data Centers, USA, LLC | First Lien Term Loan | Fixed | — | 9.00 | % | 9.00 | % | 1/15/2020 | $ | 15,000,000 | 15,000,000 | 15,000,000 | 0.94 | % | N | |||||||||||||||||
Pulse Secure, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 7.00 | % | 8.30 | % | 5/1/2022 | $ | 12,022,227 | 11,852,990 | 11,895,993 | 0.74 | % | N | ||||||||||||||||
Pulse Secure, LLC | Revolver | LIBOR (Q) | 1.00 | % | 7.00 | % | N/A | 5/1/2022 | $ | — | (18,491 | ) | (14,096 | ) | — | K/N | ||||||||||||||||
TierPoint, LLC | Second Lien Term Loan | LIBOR (M) | 1.00 | % | 7.25 | % | 8.49 | % | 5/5/2025 | $ | 9,675,000 | 9,608,020 | 9,872,564 | 0.62 | % | |||||||||||||||||
77,204,893 | 77,930,397 | 4.88 | % | |||||||||||||||||||||||||||||
Educational Support Services | ||||||||||||||||||||||||||||||||
Edmentum, Inc. | Jr Revolving Facility | Fixed | — | 5.00 | % | 5.00 | % | 6/9/2020 | $ | — | — | — | — | B/N | ||||||||||||||||||
Edmentum Ultimate Holdings, LLC | Sr PIK Notes | Fixed | — | 8.50 | % | 8.50 | % | 6/9/2020 | $ | 3,033,675 | 3,033,675 | 3,033,675 | 0.19 | % | B/N | |||||||||||||||||
Edmentum Ultimate Holdings, LLC | Jr PIK Notes | Fixed | — | 10.00 | % | 10.00 | % | 6/9/2020 | $ | 14,054,482 | 13,646,311 | 11,173,317 | 0.70 | % | B/N | |||||||||||||||||
16,679,986 | 14,206,992 | 0.89 | % | |||||||||||||||||||||||||||||
Electronic Component Manufacturing | ||||||||||||||||||||||||||||||||
Soraa, Inc. | Tranche A Term Loan (3.0% Exit Fee) | LIBOR (M) | 0.44 | % | 9.33 | % | 10.71 | % | 3/1/2018 | $ | 7,570,571 | 7,488,052 | 7,394,555 | 0.46 | % | L/N | ||||||||||||||||
Soraa, Inc. | Tranche B Term Loan | LIBOR (M) | 0.44 | % | 9.33 | % | 10.71 | % | 3/1/2018 | $ | 1,603,779 | 1,579,327 | 1,567,373 | 0.10 | % | N | ||||||||||||||||
9,067,379 | 8,961,928 | 0.56 | % | |||||||||||||||||||||||||||||
Equipment Leasing | ||||||||||||||||||||||||||||||||
36th Street Capital Partners Holdings, LLC | Senior Note | Fixed | — | 12.00 | % | 12.00 | % | 11/1/2020 | $ | 21,696,871 | 21,696,871 | 21,696,871 | 1.36 | % | E/F/N | |||||||||||||||||
Essex Ocean, LLC (Solexel) | Sr Secured Term Loan | Fixed | — | 8.00 | % | 8.00 | % | 8/15/2018 | $ | 1,696,898 | 1,696,898 | — | — | C/N | ||||||||||||||||||
23,393,769 | 21,696,871 | 1.36 | % | |||||||||||||||||||||||||||||
4
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Unaudited) (Continued)
September 30, 2017
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Principal | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||||||
Debt Investments (continued) | ||||||||||||||||||||||||||||||||
Facilities Support Services | ||||||||||||||||||||||||||||||||
NANA Development Corp. | First Lien Term Loan B | LIBOR (Q) | 1.25 | % | 6.75 | % | 8.08 | % | 3/15/2018 | $ | 233,324 | $ | 230,588 | $ | 230,990 | 0.01 | % | N | ||||||||||||||
Grocery Stores | ||||||||||||||||||||||||||||||||
Bashas, Inc. | First Lien FILO Term Loan | LIBOR (M) | 1.50 | % | 8.80 | % | 10.30 | % | 10/8/2019 | $ | 5,727,386 | 5,705,475 | 5,727,386 | 0.36 | % | N | ||||||||||||||||
Hospitals | ||||||||||||||||||||||||||||||||
KPC Healthcare, Inc. | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 9.00 | % | 10.45 | % | 2/6/2020 | $ | 14,792,003 | 14,707,122 | 14,939,923 | 0.93 | % | N | ||||||||||||||||
Pacific Coast Holdings Investment, LLC (KPC Healthcare) | First Lien Term Loan | LIBOR (M) | 1.00 | % | 7.50 | % | 8.74 | % | 2/14/2021 | $ | 29,288,064 | 28,909,527 | 29,280,742 | 1.83 | % | N | ||||||||||||||||
43,616,649 | 44,220,665 | 2.76 | % | |||||||||||||||||||||||||||||
Insurance | ||||||||||||||||||||||||||||||||
Alera Group Intermediate Holdings, Inc. | First Lien Delayed Draw Term Loan | LIBOR (Q) | 1.00 | % | 5.50 | % | 6.74 | % | 12/30/2022 | $ | 124,583 | 116,283 | 126,249 | 0.01 | % | N | ||||||||||||||||
Alera Group Intermediate Holdings, Inc. | First Lien Revolver | LIBOR (Q) | 1.00 | % | 5.50 | % | N/A | 12/30/2021 | $ | — | (7,558 | ) | — | — | K/N | |||||||||||||||||
Alera Group Intermediate Holdings, Inc. | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 5.50 | % | 6.74 | % | 12/30/2022 | $ | 3,390,085 | 3,360,563 | 3,396,866 | 0.21 | % | N | ||||||||||||||||
Association Member Benefits Advisors, LLC | Second Lien Term Loan | LIBOR (M) | 1.00 | % | 8.75 | % | 9.99 | % | 6/8/2023 | $ | 8,277,983 | 8,130,115 | 8,257,288 | 0.52 | % | N | ||||||||||||||||
US Apple Holdco, LLC (Ventiv Technology) | First Lien FILO Term Loan | LIBOR (Q) | 0.50 | % | 13.62 | % | 14.91 | % | 8/29/2019 | $ | 20,060,606 | 19,698,428 | 20,060,606 | 1.25 | % | N | ||||||||||||||||
US Apple Holdco, LLC (Ventiv Technology) | First Lien Incremental Tranche B FILO Term Loan | LIBOR (Q) | 0.50 | % | 13.62 | % | 14.97 | % | 8/29/2019 | $ | 4,320,000 | 4,245,257 | 4,320,000 | 0.27 | % | N | ||||||||||||||||
35,543,088 | 36,161,009 | 2.26 | % | |||||||||||||||||||||||||||||
Lessors of Nonfinancial Licenses | ||||||||||||||||||||||||||||||||
ABG Intermediate Holdings 2, LLC | Second Lien Term Loan | LIBOR (M) | 1.00 | % | 7.75 | % | 8.99 | % | 9/29/2025 | $ | 15,000,000 | 14,887,500 | 15,150,000 | 0.95 | % | |||||||||||||||||
Kenneth Cole Productions, Inc. | First Lien FILO Term Loan | LIBOR (M) | 1.00 | % | 9.65 | % | 10.90 | % | 3/21/2022 | $ | 33,544,709 | 33,232,910 | 33,199,199 | 2.07 | % | N | ||||||||||||||||
48,120,410 | 48,349,199 | 3.02 | % | |||||||||||||||||||||||||||||
Management, Scientific, and Technical Consulting Services | ||||||||||||||||||||||||||||||||
Asentinel, LLC (Tangoe) | First Lien Last Out Term Loan | LIBOR (M) | 1.00 | % | 10.77%Cash+0.50%PIK | 12.60 | % | 6/16/2022 | $ | 24,259,932 | 23,339,619 | 23,495,744 | 1.47 | % | N | |||||||||||||||||
Dodge Data & Analytics, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.75 | % | 10.06 | % | 10/31/2019 | $ | 23,297,434 | 23,037,915 | 23,297,434 | 1.45 | % | N | ||||||||||||||||
46,377,534 | 46,793,178 | 2.92 | % | |||||||||||||||||||||||||||||
Motion Picture and Video Industries | ||||||||||||||||||||||||||||||||
NEG Holdings, LLC (CORE Entertainment) | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.00% PIK | 9.33 | % | 10/17/2022 | $ | 1,548,210 | 1,548,210 | 1,548,210 | 0.10 | % | N | |||||||||||||||||
Other Information Services | ||||||||||||||||||||||||||||||||
Asset International, Inc. | Delayed Draw Term Loan | LIBOR (Q) | 1.00 | % | 8.50 | % | 9.84 | % | 7/31/2020 | $ | 1,251,626 | 1,231,645 | 1,246,933 | 0.08 | % | N | ||||||||||||||||
Asset International, Inc. | Revolver Loan | LIBOR (Q) | 1.00 | % | 8.50 | % | 9.84 | % | 7/31/2020 | $ | 491,303 | 482,070 | 489,092 | 0.03 | % | N | ||||||||||||||||
Asset International, Inc. | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.50 | % | 9.83 | % | 7/31/2020 | $ | 15,213,518 | 15,042,452 | 15,179,287 | 0.95 | % | N | ||||||||||||||||
Discoverorg, LLC | Second Lien Term Loan | LIBOR (M) | 1.00 | % | 8.50 | % | 9.74 | % | 2/26/2024 | $ | 12,839,252 | 12,712,038 | 12,710,859 | 0.79 | % | N | ||||||||||||||||
29,468,205 | 29,626,171 | 1.85 | % | |||||||||||||||||||||||||||||
Other Manufacturing | ||||||||||||||||||||||||||||||||
AGY Holding Corp. | Sr Secured Term Loan | Fixed | — | 12.00 | % | 12.00 | % | 9/15/2018 | $ | 4,869,577 | 4,869,577 | 4,869,577 | 0.30 | % | B/N | |||||||||||||||||
AGY Holding Corp. | Second Lien Notes | Fixed | — | 11.00 | % | 11.00 | % | 11/15/2018 | $ | 9,268,000 | 7,586,317 | 9,268,000 | 0.58 | % | B/E/N | |||||||||||||||||
AGY Holding Corp. | Delayed Draw Term Loan | Fixed | — | 12.00 | % | 12.00 | % | 9/15/2018 | $ | 1,049,146 | 1,049,146 | 1,049,146 | 0.06 | % | B/N | |||||||||||||||||
13,505,040 | 15,186,723 | 0.94 | % | |||||||||||||||||||||||||||||
Other Publishing | ||||||||||||||||||||||||||||||||
Bisnow, LLC | First Lien Revolver | LIBOR (Q) | — | 9.00 | % | N/A | 4/29/2021 | $ | — | (24,000 | ) | — | — | K/N | ||||||||||||||||||
Bisnow, LLC | First Lien Term Loan | LIBOR (Q) | — | 9.00 | % | 10.31 | % | 4/29/2021 | $ | 8,247,890 | 8,121,791 | 8,313,875 | 0.52 | % | N | |||||||||||||||||
Contextmedia Health, LLC | First Lien Term Loan B | LIBOR (M) | 1.00 | % | 6.50 | % | 7.75 | % | 12/23/2021 | $ | 13,125,000 | 11,957,589 | 13,075,781 | 0.82 | % | |||||||||||||||||
Patient Point Network Solutions, LLC | First Lien Second Out Term Loan | LIBOR (M) | 1.00 | % | 7.50 | % | 8.74 | % | 6/26/2022 | $ | 7,003,544 | 6,916,582 | 6,916,000 | 0.43 | % | N | ||||||||||||||||
Patient Point Network Solutions, LLC | Revolver | LIBOR (M) | 1.00 | % | 7.50 | % | N/A | 6/26/2022 | $ | — | (5,366 | ) | (5,506 | ) | — | K/N | ||||||||||||||||
26,966,596 | 28,300,150 | 1.77 | % | |||||||||||||||||||||||||||||
5
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Unaudited) (Continued)
September 30, 2017
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Principal | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||||||
Debt Investments (continued) | ||||||||||||||||||||||||||||||||
Pharmaceuticals | ||||||||||||||||||||||||||||||||
Nephron Pharmaceuticals Corporation | First Lien FILO Term Loan | LIBOR (M) | 1.00 | % | 8.75 | % | 9.99 | % | 8/7/2019 | $ | 44,047,447 | $ | 42,913,836 | $ | 43,122,451 | 2.69 | % | N | ||||||||||||||
Other Real Estate Activities | ||||||||||||||||||||||||||||||||
Associations, Inc. | First Lien FILO Term Loan | LIBOR (Q) | 1.00 | % | 8.96 | % | 10.29 | % | 12/23/2019 | $ | 12,794,670 | 12,703,330 | 12,794,670 | 0.80 | % | N | ||||||||||||||||
Greystone Select Holdings, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.00 | % | 9.26 | % | 4/17/2024 | $ | 25,202,549 | 24,954,120 | 25,782,207 | 1.61 | % | N | ||||||||||||||||
37,657,450 | 38,576,877 | 2.41 | % | |||||||||||||||||||||||||||||
Other Telecommunications | ||||||||||||||||||||||||||||||||
Securus Technologies, Inc. | Second Lien Term Loan | LIBOR (M) | 1.25 | % | 7.75 | % | 9.00 | % | 4/30/2021 | $ | 4,516,129 | 4,470,968 | 4,542,458 | 0.28 | % | |||||||||||||||||
Securus Technologies, Inc. | Second Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.25 | % | 9.25 | % | 6/20/2025 | $ | 25,846,154 | 25,620,000 | 26,120,769 | 1.63 | % | |||||||||||||||||
30,090,968 | 30,663,227 | 1.91 | % | |||||||||||||||||||||||||||||
Plastics Manufacturing | ||||||||||||||||||||||||||||||||
Iracore International, Inc. | First Lien Term Loan | LIBOR (M) | 1.00 | % | 9.00 | % | 10.25 | % | 4/13/2021 | $ | 1,900,733 | 1,900,733 | 1,900,733 | 0.12 | % | B/N | ||||||||||||||||
Radio and Television Broadcasting | ||||||||||||||||||||||||||||||||
NEP/NCP Holdco, Inc. | Second Lien Term Loan | LIBOR (M) | 1.00 | % | 7.00 | % | 8.23 | % | 1/23/2023 | $ | 11,536,391 | 11,508,154 | 11,644,545 | 0.73 | % | G | ||||||||||||||||
Real Estate Leasing | ||||||||||||||||||||||||||||||||
Daymark Financial Acceptance, LLC | First Lien Delayed Draw Term Loan | LIBOR (Q) | — | 9.50 | % | 10.74 | % | 1/12/2020 | $ | 14,000,000 | 13,879,590 | 13,748,000 | 0.86 | % | N | |||||||||||||||||
Home Partners of America, Inc. | First Lien Term Loan | LIBOR (M) | 1.00 | % | 7.00 | % | 8.23 | % | 10/13/2022 | $ | 5,000,000 | 4,913,427 | 5,100,000 | 0.32 | % | N | ||||||||||||||||
18,793,017 | 18,848,000 | 1.18 | % | |||||||||||||||||||||||||||||
Restaurants | ||||||||||||||||||||||||||||||||
RM OpCo, LLC (Real Mex) | Convertible Second Lien Term Loan Tranche B-1 | Fixed | — | 8.50 | % | 8.50 | % | 3/30/2018 | $ | 2,072,771 | 2,072,771 | 1,705,683 | 0.11 | % | B/N | |||||||||||||||||
RM OpCo, LLC (Real Mex) | First Lien Term Loan Tranche A | Fixed | — | 7.00 | % | 7.00 | % | 3/30/2018 | $ | 4,892,097 | 4,608,710 | 4,892,097 | 0.30 | % | B/N | |||||||||||||||||
RM OpCo, LLC (Real Mex) | Second Lien Term Loan Tranche B | Fixed | — | 8.50 | % | 8.50 | % | 3/30/2018 | $ | 10,327,904 | 10,327,904 | — | — | B/C/N | ||||||||||||||||||
RM OpCo, LLC (Real Mex) | Second Lien Term Loan Tranche B-1 | Fixed | — | 8.50 | % | 8.50 | % | 3/30/2018 | $ | 3,252,610 | 3,237,187 | 2,676,572 | 0.17 | % | B/N | |||||||||||||||||
RM OpCo, LLC (Real Mex) | Sr Convertible Second Lien Term Loan B | Fixed | — | 8.50 | % | 8.50 | % | 3/30/2018 | $ | 6,490,093 | 6,490,093 | 6,490,103 | 0.40 | % | B/N | |||||||||||||||||
26,736,665 | 15,764,455 | 0.98 | % | |||||||||||||||||||||||||||||
Retail | ||||||||||||||||||||||||||||||||
Bon-Ton, Inc. | First Lien Tranche A-1 Revolver | LIBOR (Q) | 1.00 | % | 9.50 | % | 10.81 | % | 3/15/2021 | $ | 4,432,934 | 4,361,693 | 4,399,687 | 0.27 | % | N | ||||||||||||||||
USR Parent, Inc. (Staples) | First Lien FILO Term Loan | LIBOR (M) | 1.00 | % | 8.84 | % | 10.07 | % | 9/12/2022 | $ | 11,149,443 | 10,871,171 | 10,870,707 | 0.68 | % | N | ||||||||||||||||
15,232,864 | 15,270,394 | 0.95 | % | |||||||||||||||||||||||||||||
Satellite Telecommunications | ||||||||||||||||||||||||||||||||
Avanti Communications Group, PLC (United Kingdom) | Sr New Money Initial Note | Fixed | — | 10.00 | % | 10.00 | % | 10/1/2021 | $ | 1,273,204 | 1,240,014 | 1,062,330 | 0.07 | % | E/G/H/N | |||||||||||||||||
Avanti Communications Group, PLC (United Kingdom) | Sr Second-Priority PIK Toggle Note | Fixed | — | 10.00 | % | 10.00 | % | 10/1/2021 | $ | 3,248,857 | 3,166,787 | 2,710,765 | 0.17 | % | E/G/H/N | |||||||||||||||||
Avanti Communications Group, PLC (United Kingdom) | Sr Secured Third-Priority Note | Fixed | — | 12.00 | % | 12.00 | % | 10/1/2023 | $ | 6,729,804 | 3,428,151 | 1,716,100 | 0.11 | % | E/G/H/N | |||||||||||||||||
7,834,952 | 5,489,195 | 0.35 | % | |||||||||||||||||||||||||||||
Scientific Research and Development Services | ||||||||||||||||||||||||||||||||
Envigo Holdings, Inc. (BPA Laboratories, Inc.) | First Lien Term Loan | LIBOR (Q) | — | 2.50 | % | 3.81 | % | 4/29/2020 | $ | 1,857,267 | 1,671,540 | 1,798,456 | 0.11 | % | ||||||||||||||||||
Envigo Holdings, Inc. (BPA Laboratories, Inc.) | Second Lien Term Loan | LIBOR (Q) | — | 2.50 | % | 3.81 | % | 4/29/2020 | $ | 4,189,589 | 2,787,440 | 4,084,849 | 0.25 | % | ||||||||||||||||||
Envigo Holdings, Inc. (BPA Laboratories, Inc.) | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.50 | % | 9.80 | % | 11/3/2021 | $ | 34,930,560 | 34,339,828 | 35,017,889 | 2.19 | % | G | ||||||||||||||||
38,798,808 | 40,901,194 | 2.55 | % | |||||||||||||||||||||||||||||
Textile Furnishings Mills | ||||||||||||||||||||||||||||||||
Lexmark Carpet Mills, Inc. | First Lien Term Loan (1.5% Exit Fee) | LIBOR (Q) | 1.00 | % | 10.00%Cash+1.00% PIK | 12.3 | % | 12/19/2019 | $ | 21,061,727 | 21,061,727 | 20,988,011 | 1.31 | % | L/N | |||||||||||||||||
Lexmark Carpet Mills, Inc. | First Lien Term Loan B (1.5% Exit Fee) | LIBOR (Q) | 1.00 | % | 10.00%Cash+1.00% PIK | 12.3 | % | 12/19/2019 | $ | 7,224,662 | 7,124,139 | 7,199,375 | 0.45 | % | L/N | |||||||||||||||||
28,185,866 | 28,187,386 | 1.76 | % | |||||||||||||||||||||||||||||
6
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Unaudited) (Continued)
September 30, 2017
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Principal or Shares | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||||||
Debt Investments (continued) | ||||||||||||||||||||||||||||||||
Traveler Arrangement | ||||||||||||||||||||||||||||||||
CIBT Solutions, Inc. | Second Lien Term Loan | LIBOR (Q) | 1.00 | % | 7.75 | % | 9.08 | % | 6/1/2025 | $ | 7,611,914 | $ | 7,536,412 | $ | 7,726,092 | 0.48 | % | N | ||||||||||||||
Software Publishing | ||||||||||||||||||||||||||||||||
Acronis International GmbH (Switzerland) | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 13.00%Cash+2.00%PIK | 16.31 | % | 7/16/2018 | $ | 17,446,997 | 17,452,145 | 17,446,997 | 1.09 | % | H/N | |||||||||||||||||
Actifio, Inc. | First Lien Term Loan (2.0% Exit Fee) | LIBOR (M) | 1.00 | % | 7.50% Cash+1.00% PIK | 9.88 | % | 11/1/2020 | $ | 35,204,503 | 34,711,491 | 34,708,120 | 2.17 | % | L/N | |||||||||||||||||
ArcServe (USA), LLC | Second Lien Term Loan | LIBOR (Q) | 0.50 | % | 8.50% Cash+1.25% PIK | 11.00 | % | 1/31/2020 | $ | 30,534,114 | 30,242,898 | 30,089,843 | 1.88 | % | N | |||||||||||||||||
Autoalert, LLC | First Lien Term Loan | LIBOR (Q) | 0.25 | % | 5.75% Cash+3.00% PIK | 10.06 | % | 3/31/2019 | $ | 36,505,910 | 36,256,859 | 36,816,210 | 2.30 | % | N | |||||||||||||||||
Bond International Software, Inc. (United Kingdom) | First Lien Term Loan | LIBOR (M) | 1.00 | % | 10.00 | % | 11.24 | % | 11/4/2021 | $ | 26,358,696 | 25,825,375 | 25,939,592 | 1.62 | % | H/N | ||||||||||||||||
ECI Macola/Max Holding, LLC | Second Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.00 | % | 9.33 | % | 9/19/2025 | $ | 24,325,623 | 24,082,367 | 24,386,437 | 1.52 | % | N | ||||||||||||||||
Fishbowl, Inc. | First Lien Term Loan | LIBOR (Q) | — | 2.80% Cash+8.45% PIK | 12.63 | % | 1/26/2022 | $ | 19,316,029 | 18,756,824 | 18,947,092 | 1.18 | % | N | ||||||||||||||||||
Mapp Digital US, LLC | First Lien Term Loan | LIBOR (Q) | — | 9.50 | % | 10.80 | % | 12/31/2017 | $ | 5,621,605 | 5,607,200 | 5,613,173 | 0.35 | % | N | |||||||||||||||||
Newscycle Solutions, Inc. | Second Lien Term Loan | LIBOR (Q) | — | 13.00 | % | 14.32 | % | 9/10/2021 | $ | 11,513,362 | 11,235,273 | 11,789,683 | 0.74 | % | N | |||||||||||||||||
Newscycle Solutions AB (Sweden) | Second Lien Term Loan B | LIBOR (Q) | — | 13.00 | % | 14.32 | % | 9/10/2021 | $ | 11,513,362 | 11,235,273 | 11,789,683 | 0.74 | % | H/N | |||||||||||||||||
Tradeshift Holdings, Inc. | First Lien Delayed Draw Term Loan (7.0% Exit Fee) | LIBOR (M) | — | 8.88 | % | 10.25 | % | 9/1/2020 | $ | 14,529,322 | 13,826,524 | 13,876,940 | 0.87 | % | L/N | |||||||||||||||||
Utilidata, Inc. | First Lien Delayed Draw Term Loan (1.0% Exit Fee) | LIBOR (M) | 0.62 | % | 9.88 | % | 11.25 | % | 1/1/2019 | $ | 2,255,976 | 2,210,023 | 2,224,505 | 0.14 | % | L/N | ||||||||||||||||
Xactly Corporation | First Lien Term Loan | LIBOR (M) | 1.00 | % | 7.25 | % | 8.49 | % | 7/31/2022 | $ | 16,397,517 | 16,077,665 | 16,069,567 | 1.00 | % | N | ||||||||||||||||
Xactly Corporation | Revolver | LIBOR (M) | 1.00 | % | 7.25 | % | N/A | 7/31/2022 | $ | — | (27,167 | ) | (28,110 | ) | — | K/N | ||||||||||||||||
247,492,750 | 249,669,732 | 15.6 | % | |||||||||||||||||||||||||||||
Utility System Construction | ||||||||||||||||||||||||||||||||
GlassPoint Solar, Inc. | First Lien Term Loan (5.0% Exit Fee) | LIBOR (M) | — | 11.44 | % | 12.81 | % | 8/1/2020 | $ | 3,912,604 | 3,585,789 | 3,804,828 | 0.24 | % | L/N | |||||||||||||||||
GlassPoint Solar, Inc. | First Lien Delay Draw Term Loan A | LIBOR (M) | — | 11.44 | % | N/A | 8/1/2020 | $ | — | — | — | — | N | |||||||||||||||||||
GlassPoint Solar, Inc. | First Lien Delay Draw Term Loan B | LIBOR (M) | — | 11.44 | % | N/A | 8/1/2020 | $ | — | — | — | — | N | |||||||||||||||||||
Kawa Solar Holdings Limited (Conergy) (Cayman Islands) | Bank Guarantee Credit Facility | Fixed | — | 8.00% PIK | 9.34 | % | 7/2/2018 | $ | 17,471,897 | 17,471,897 | 16,700,513 | 1.04 | % | F/H/N | ||||||||||||||||||
Kawa Solar Holdings Limited (Conergy) (Cayman Islands) | Revolving Credit Facility | LIBOR (Q) | — | — | — | 7/2/2018 | $ | 6,072,441 | 6,072,441 | 6,072,441 | 0.38 | % | C/F/H/N | |||||||||||||||||||
27,130,127 | 26,577,782 | 1.66 | % | |||||||||||||||||||||||||||||
Wholesalers | ||||||||||||||||||||||||||||||||
NILCO, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 9.5 | % | 10.74 | % | 9/1/2021 | $ | 20,224,763 | 19,723,119 | 20,629,259 | 1.29 | % | N | ||||||||||||||||
Wired Telecommunications Carriers | ||||||||||||||||||||||||||||||||
Alpheus Communications, LLC | First Lien Delayed Draw FILO Term Loan | LIBOR (M) | 1.00 | % | 7.42 | % | 8.73 | % | 5/31/2018 | $ | 325,447 | 322,212 | 325,252 | 0.02 | % | N | ||||||||||||||||
Alpheus Communications, LLC | First Lien Delayed Draw FILO Term Loan | LIBOR (M) | 1.00 | % | 7.42 | % | 8.51 | % | 5/31/2018 | $ | 1,321,328 | 1,315,866 | 1,320,321 | 0.08 | % | N | ||||||||||||||||
Alpheus Communications, LLC | First Lien FILO Term Loan | LIBOR (M) | 1.00 | % | 7.42 | % | 8.72 | % | 5/31/2018 | $ | 7,110,607 | 7,039,918 | 7,106,340 | 0.44 | % | N | ||||||||||||||||
8,677,996 | 8,751,913 | 0.54 | % | |||||||||||||||||||||||||||||
Wireless Telecommunications Carriers | ||||||||||||||||||||||||||||||||
Gogo, LLC | Sr Secured Notes | Fixed | — | 12.50 | % | 12.50 | % | 7/1/2022 | $ | 10,000,000 | 10,000,000 | 11,443,750 | 0.71 | % | E/G | |||||||||||||||||
Total Debt Investments | 1,468,606,760 | 1,463,294,967 | 91.42 | % | ||||||||||||||||||||||||||||
Equity Securities | ||||||||||||||||||||||||||||||||
Advertising, Public Relations and Marketing | ||||||||||||||||||||||||||||||||
Foursquare Labs, Inc. | Warrants to Purchase Series E Preferred Stock | 1,125,000 | 185,450 | 177,750 | 0.01 | % | C/E/N | |||||||||||||||||||||||||
InMobi, Inc. (Singapore) | Warrants to Purchase Common Stock | 995,902 | 159,270 | 159,245 | 0.01 | % | C/E/H/N | |||||||||||||||||||||||||
InMobi, Inc. (Singapore) | Warrants to Purchase Series E Preferred Stock | 1,049,996 | 276,492 | 486,148 | 0.03 | % | C/E/H/N | |||||||||||||||||||||||||
621,212 | 823,143 | 0.05 | % | |||||||||||||||||||||||||||||
7
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Unaudited) (Continued)
September 30, 2017
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Shares | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||||||
Equity Securities (continued) | ||||||||||||||||||||||||||||||||
Air Transportation | ||||||||||||||||||||||||||||||||
Aircraft Leased to United Airlines, Inc. | ||||||||||||||||||||||||||||||||
United N659UA-767, LLC (N659UA) | Trust Beneficial Interests | 683 | $ | 2,979,575 | $ | 2,983,358 | 0.19 | % | E/F/N | |||||||||||||||||||||||
United N661UA-767, LLC (N661UA) | Trust Beneficial Interests | 688 | 3,088,529 | 3,057,259 | 0.19 | % | E/F/N | |||||||||||||||||||||||||
Epic Aero, Inc. (One Sky) | Warrants to Purchase Common Stock | 1,843 | 855,313 | 3,451,916 | 0.22 | % | C/E/N | |||||||||||||||||||||||||
6,923,417 | 9,492,533 | 0.60 | % | |||||||||||||||||||||||||||||
Business Support Services | ||||||||||||||||||||||||||||||||
Findly Talent, LLC | Membership Units | 708,229 | 230,938 | 143,133 | 0.01 | % | C/E/N | |||||||||||||||||||||||||
STG-Fairway Holdings, LLC (First Advantage) | Class A Units | 803,961 | 325,432 | 604,016 | 0.04 | % | C/E/N | |||||||||||||||||||||||||
556,370 | 747,149 | 0.05 | % | |||||||||||||||||||||||||||||
Chemicals | ||||||||||||||||||||||||||||||||
Green Biologics, Inc. | Warrants to Purchase Stock | 909,300 | 272,807 | 1,546 | — | C/E/N | ||||||||||||||||||||||||||
Nanosys, Inc. | Warrants to Purchase Preferred Stock | 800,000 | 605,266 | 806,400 | 0.05 | % | C/E/N | |||||||||||||||||||||||||
878,073 | 807,946 | 0.05 | % | |||||||||||||||||||||||||||||
Communications Equipment Manufacturing | ||||||||||||||||||||||||||||||||
Wasserstein Cosmos Co-Invest, L.P. (Globecomm) | Limited Partnership Units | 5,000,000 | 5,000,000 | 500 | — | B/C/E/N | ||||||||||||||||||||||||||
Data Processing and Hosting Services | ||||||||||||||||||||||||||||||||
Anacomp, Inc. | Class A Common Stock | 1,255,527 | 26,711,049 | 1,255,527 | 0.08 | % | C/E/F/N | |||||||||||||||||||||||||
Educational Support Services | ||||||||||||||||||||||||||||||||
Edmentum Ultimate Holdings, LLC | Class A Common Units | 159,515 | 680,226 | 1,595 | — | B/C/E/N | ||||||||||||||||||||||||||
Electrical Equipment Manufacturing | ||||||||||||||||||||||||||||||||
NEXTracker, Inc. | Series B Preferred Stock | 558,884 | — | 480,640 | 0.03 | % | E/N | |||||||||||||||||||||||||
NEXTracker, Inc. | Series C Preferred Stock | 17,640 | — | 15,170 | — | E/N | ||||||||||||||||||||||||||
— | 495,810 | 0.03 | % | |||||||||||||||||||||||||||||
Electronic Component Manufacturing | ||||||||||||||||||||||||||||||||
Soraa, Inc. | Warrants to Purchase Common Stock | 3,071,860 | 478,899 | 1,843 | — | C/E/N | ||||||||||||||||||||||||||
Equipment Leasing | ||||||||||||||||||||||||||||||||
36th Street Capital Partners Holdings, LLC | Membership Units | 7,082,618 | 7,082,618 | 9,445,380 | 0.59 | % | C/E/F/N | |||||||||||||||||||||||||
Essex Ocean II, LLC | Membership Units | 199,430 | 103,398 | — | — | C/E/F/N | ||||||||||||||||||||||||||
7,186,016 | 9,445,380 | 0.59 | % | |||||||||||||||||||||||||||||
Financial Investment Activities | ||||||||||||||||||||||||||||||||
GACP I, LP | Membership Units | 16,607,783 | 16,697,588 | 17,159,258 | 1.07 | % | E/I/N | |||||||||||||||||||||||||
Metal and Mineral Mining | ||||||||||||||||||||||||||||||||
EPMC HoldCo, LLC | Membership Units | 1,312,720 | — | 210,035 | 0.01 | % | B/E/N | |||||||||||||||||||||||||
Motion Picture and Video Industries | ||||||||||||||||||||||||||||||||
NEG Parent, LLC (Core Entertainment, Inc.) | Class A Units | 2,720,392 | 2,772,807 | 3,319,966 | 0.21 | % | C/E/N | |||||||||||||||||||||||||
NEG Parent, LLC (Core Entertainment, Inc.) | Class A Warrants to Purchase Class A Units | 343,387 | 196,086 | 51,714 | — | C/E/N | ||||||||||||||||||||||||||
NEG Parent, LLC (Core Entertainment, Inc.) | Class B Warrants to Purchase Class A Units | 346,794 | 198,032 | 52,227 | — | C/E/N | ||||||||||||||||||||||||||
NEG Parent, LLC (Core Entertainment, Inc.) | Litigation Trust Units | 407 | — | 1,201,138 | 0.08 | % | C/N | |||||||||||||||||||||||||
3,166,925 | 4,625,045 | 0.29 | % | |||||||||||||||||||||||||||||
Other Information Services | ||||||||||||||||||||||||||||||||
SoundCloud, Ltd. (United Kingdom) | Warrants to Purchase Preferred Stock | 946,498 | 79,082 | 45,621 | — | C/E/H/N | ||||||||||||||||||||||||||
8
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Unaudited) (Continued)
September 30, 2017
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Shares | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||
Equity Securities (continued) | ||||||||||||||||||||||||||||
Other Manufacturing | ||||||||||||||||||||||||||||
AGY Holding Corp. | Common Stock | 1,333,527 | $ | — | $ | — | — | B/C/E/N | ||||||||||||||||||||
KAGY Holding Company, Inc. | Series A Preferred Stock | 9,778 | 1,091,200 | 11,021,542 | 0.69 | % | B/C/E/N | |||||||||||||||||||||
1,091,200 | 11,021,542 | 0.69 | % | |||||||||||||||||||||||||
Plastics Manufacturing | ||||||||||||||||||||||||||||
Iracore Investments Holdings, Inc. | Class A Common Stock | 16,207 | 4,177,710 | 3,033,842 | 0.19 | % | B/C/E/N | |||||||||||||||||||||
Radio and Television Broadcasting | ||||||||||||||||||||||||||||
Fuse Media, LLC | Warrants to Purchase Common Stock | 233,470 | 300,322 | — | — | C/E/N | ||||||||||||||||||||||
Restaurants | ||||||||||||||||||||||||||||
RM Holdco, LLC (Real Mex) | Equity Participation | 24 | — | — | — | B/C/E/N | ||||||||||||||||||||||
RM Holdco, LLC (Real Mex) | Membership Units | 13,161,000 | 2,010,777 | — | — | B/C/E/N | ||||||||||||||||||||||
2,010,777 | — | — | ||||||||||||||||||||||||||
Retail | ||||||||||||||||||||||||||||
Shop Holding, LLC (Connexity) | Class A Units | 507,167 | 480,048 | — | — | C/E/N | ||||||||||||||||||||||
Satellite Telecommunications | ||||||||||||||||||||||||||||
Avanti Communications Group, PLC (United Kingdom) | Common Stock | 245,368 | 3,086 | 26,300 | — | C/D/H | ||||||||||||||||||||||
Scientific Research and Development Services | ||||||||||||||||||||||||||||
Lions Holdings, Inc. (BPA) | Series A Warrants to Purchase Common Stock | 10,287 | — | — | — | C/E/N | ||||||||||||||||||||||
Lions Holdings, Inc. (BPA) | Series B Warrants to Purchase Common Stock | 16,494 | — | — | — | C/E/N | ||||||||||||||||||||||
— | — | — | ||||||||||||||||||||||||||
Software Publishing | ||||||||||||||||||||||||||||
Actifio, Inc. | Warrants to Purchase Series F Preferred Stock | 1,052,651 | 188,770 | 196,319 | 0.01 | % | C/E/N | |||||||||||||||||||||
Blackline, Inc. | Common Stock | 1,797 | 4,449 | 61,313 | — | C/J | ||||||||||||||||||||||
Tradeshift, Inc. | Warrants to Purchase Series D Preferred Stock | 1,712,930 | 577,842 | 528,097 | 0.03 | % | C/E/N | |||||||||||||||||||||
Utilidata, Inc. | Warrants to Purchase Preferred Stock | 719,998 | 216,335 | 373,319 | 0.02 | % | C/E/N | |||||||||||||||||||||
987,396 | 1,159,048 | 0.06 | % | |||||||||||||||||||||||||
Utility System Construction | ||||||||||||||||||||||||||||
Conergy Asia Holdings Limited (United Kingdom) | Class B Shares | 1,000,000 | 1,000,000 | 1,007,900 | 0.06 | % | C/E/F/H/N | |||||||||||||||||||||
Conergy Asia Holdings Limited (United Kingdom) | Ordinary Shares | 3,333 | 7,833,333 | 1,827,603 | 0.12 | % | C/E/F/H/N | |||||||||||||||||||||
GlassPoint Solar, Inc. | Warrants to Purchase Series C-1 Preferred Stock | 1,100,000 | 248,555 | 290,730 | 0.02 | % | C/E/N | |||||||||||||||||||||
Kawa Solar Holdings Limited (Cayman Islands) | Ordinary Shares | 2,332,594 | — | — | — | C/E/F/H/N | ||||||||||||||||||||||
Kawa Solar Holdings Limited (Cayman Islands) | Series B Preferred Shares | 93,023 | 1,395,349 | 243 | — | C/E/F/H/N | ||||||||||||||||||||||
10,477,237 | 3,126,476 | 0.20 | % | |||||||||||||||||||||||||
Wired Telecommunications Carriers | ||||||||||||||||||||||||||||
V Telecom Investment S.C.A. (Vivacom) (Luxembourg) | Common Shares | 1,393 | 3,236,256 | 1,976,927 | 0.12 | % | C/D/E/H/N | |||||||||||||||||||||
Total Equity Securities | 91,742,889 | 65,455,520 | 4.08 | % | ||||||||||||||||||||||||
Total Investments | $ | 1,560,349,649 | $ | 1,528,750,487 | ||||||||||||||||||||||||
9
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Unaudited) (Continued)
September 30, 2017
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Shares | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||
Cash and Cash Equivalents | ||||||||||||||||||||||||||||
Cash Held on Account at Various Institutions | $ | 64,929,885 | 4.06 | % | ||||||||||||||||||||||||
Wells Fargo Government Money Market Fund | 4,000,000 | 0.25 | % | |||||||||||||||||||||||||
Wells Fargo Treasury Plus Government Money Market Fund | 3,000,000 | 0.19 | % | |||||||||||||||||||||||||
Cash and Cash Equivalents | 71,929,885 | 4.50 | % | |||||||||||||||||||||||||
Total Cash and Investments | $ | 1,600,680,372 | 100 | % | M | |||||||||||||||||||||||
Notes to Consolidated Schedule of Investments:
(A) | Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933. Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower. |
(B) | Non-controlled affiliate – as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates. |
(C) | Non-income producing security. |
(D) | Investment denominated in foreign currency. Amortized cost and fair value converted from foreign currency to US dollars. Foreign currency denominated investments are generally hedged for currency exposure. |
(E) | Restricted security. (See Note 2) |
(F) | Controlled issuer – as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer). Investment is not more than 50% of the outstanding voting securities of the issuer nor deemed to be a significant subsidiary. See Consolidated Schedule of Changes in Investments in Affiliates. |
(G) | Investment has been segregated to collateralize certain unfunded commitments. |
(H) | Non-U.S. company or principal place of business outside the U.S. and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership's total assets. |
(I) | Deemed an investment company under Section 3(c) of the Investment Company Act and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership's total assets. |
(J) | Publicly traded company with a market capitalization greater than $250 million and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership's total assets. |
(K) | Negative balances relate to an unfunded commitment that was acquired and/or valued at a discount. |
(L) | In addition to the stated coupon, investment has an exit fee payable upon repayment of the loan in an amount equal to the percentage of the original principal amount shown. |
(M) | All cash and investments, except those referenced in Notes G above, are pledged as collateral under certain debt as described in Note 4 to the Consolidated Financial Statements. |
(N) | Inputs in the valuation of this investment included certain unobservable inputs that were significant to the valuation as a whole. |
LIBOR or EURIBOR resets monthly (M), quarterly (Q), semiannually (S), or annually (A).
Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $652,394,259 and $434,061,754, respectively, for the nine months ended September 30, 2017. Aggregate acquisitions includes investment assets received as payment in kind. Aggregate dispositions includes principal paydowns on and maturities of debt investments. The total value of restricted securities and bank debt as of September 30, 2017 was $1,527,461,735 or 95.4% of total cash and investments of the Partnership. As of September 30, 2017, approximately 12.6% of the total assets of the Partnership were not qualifying assets under Section 55(a) of the 1940 Act.
Options and Swaps at September 30, 2017 were as follows: | ||||||||||||||||||||
Receive | Pay | Counter Party | Maturity | Notional Amount | Fair Value | Upfront payments/receipts | Unrealized appreciation/depreciation | |||||||||||||
Interest at LIBOR plus 8.68% on USD 7,270,250 | Interest at 8.00% on EUR 6,500,000 | Wells Fargo Bank, N.A. | 5/31/2019 | USD 7,270,250/ EUR 6,500,000 | $ | (470,202 | ) | $ | — | $ | (470,202 | ) | ||||||||
See accompanying notes to the consolidated financial statements.
10
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments
December 31, 2016
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Principal | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||||||
Debt Investments (A) | ||||||||||||||||||||||||||||||||
Activities Related to Credit Intermediation | ||||||||||||||||||||||||||||||||
Pegasus Business Intelligence, LP (Onyx Centersource) | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 6.75 | % | 7.75 | % | 12/20/2021 | $ | 14,769,821 | $ | 14,623,499 | $ | 14,622,123 | 1.07 | % | M | ||||||||||||||
Pegasus Business Intelligence, LP (Onyx Centersource) | Revolver | LIBOR (Q) | 1.00 | % | 6.75 | % | N/A | 12/20/2021 | $ | — | (6,669 | ) | (6,713 | ) | — | J/M | ||||||||||||||||
iPayment, Inc. | First Lien Term Loan B2 | LIBOR (Q) | 1.50 | % | 5.25 | % | 6.75 | % | 5/8/2017 | $ | 11,289,051 | 11,134,310 | 10,893,934 | 0.80 | % | M | ||||||||||||||||
25,751,140 | 25,509,344 | 1.87 | % | |||||||||||||||||||||||||||||
Activities Related to Real Estate | ||||||||||||||||||||||||||||||||
Associations, Inc. | First Lien FILO Term Loan | LIBOR (Q) | 1.00 | % | 8.96 | % | 9.96 | % | 12/23/2019 | $ | 12,891,845 | 12,773,127 | 12,898,291 | 0.94 | % | M | ||||||||||||||||
Advertising and Public Relations Services | ||||||||||||||||||||||||||||||||
InMobi, Inc. (Singapore) | First Lien Delayed Draw Tranche 1 Term Loan (1.25% Exit Fee) | LIBOR (M) | 0.33 | % | 10.17 | % | 10.98 | % | 9/1/2018 | $ | 15,000,000 | 14,772,946 | 14,704,508 | 1.07 | % | H/K/M | ||||||||||||||||
InMobi, Inc. (Singapore) | First Lien Delayed Draw Tranche 2 Term Loan | LIBOR (M) | 0.33 | % | 10.17 | % | N/A | 9/1/2018 | $ | — | — | — | — | H/M | ||||||||||||||||||
InMobi, Inc. (Singapore) | First Lien Delayed Draw Tranche 3 Term Loan | LIBOR (M) | 0.33 | % | 10.17 | % | N/A | 9/1/2018 | $ | — | — | — | — | H/M | ||||||||||||||||||
14,772,946 | 14,704,508 | 1.07 | % | |||||||||||||||||||||||||||||
Air Transportation | ||||||||||||||||||||||||||||||||
Mesa Air Group, Inc. | Acquisition Loan | LIBOR (M) | — | 7.25 | % | 8.00 | % | 7/15/2022 | $ | 14,042,971 | 13,839,296 | 14,323,830 | 1.05 | % | M | |||||||||||||||||
Mesa Airlines, Inc. | Engine Acquisition Delayed Draw Term Loan A | LIBOR (M) | — | 7.25 | % | 8.00 | % | 12/14/2021 | $ | 16,546,652 | 16,259,013 | 16,257,105 | 1.19 | % | M | |||||||||||||||||
Mesa Airlines, Inc. | Engine Acquisition Delayed Draw Term Loan B | LIBOR (M) | — | 7.25 | % | N/A | 2/28/2022 | $ | — | — | — | — | M | |||||||||||||||||||
Mesa Airlines, Inc. | Engine Acquisition Delayed Draw Term Loan C | LIBOR (M) | — | 7.25 | % | N/A | 12/31/2022 | $ | — | — | — | — | M | |||||||||||||||||||
30,098,309 | 30,580,935 | 2.24 | % | |||||||||||||||||||||||||||||
Amusement and Recreation | ||||||||||||||||||||||||||||||||
AP Gaming I, LLC | First Lien Revolver | LIBOR (M) | — | 8.25 | % | N/A | 12/20/2018 | $ | — | (1,655,756 | ) | (937,500 | ) | (0.07 | )% | J/M | ||||||||||||||||
VSS-Southern Holdings, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 6.50% Cash+2.00% PIK | 9.50 | % | 11/3/2020 | $ | 24,220,291 | 23,755,180 | 23,735,885 | 1.73 | % | M | |||||||||||||||||
VSS-Southern Holdings, LLC | Sr Secured Revolver | LIBOR (Q) | 1.00 | % | 6.50% Cash+2.00% PIK | N/A | 11/3/2020 | $ | — | (16,444 | ) | (17,123 | ) | — | J/M | |||||||||||||||||
22,082,980 | 22,781,262 | 1.66 | % | |||||||||||||||||||||||||||||
Apparel Manufacturing | ||||||||||||||||||||||||||||||||
Broder Bros., Co. | First Lien Term Loan (First Out) | LIBOR (Q) | 1.25 | % | 5.75 | % | 7.00 | % | 6/3/2021 | $ | 9,700,000 | 9,541,402 | 9,700,000 | 0.71 | % | M | ||||||||||||||||
Broder Bros., Co. | First Lien Term Loan B (Last Out) | LIBOR (Q) | 1.25 | % | 12.25 | % | 13.50 | % | 6/3/2021 | $ | 9,800,000 | 9,646,339 | 9,800,000 | 0.72 | % | M | ||||||||||||||||
JH Apparel Holdings, LLC | First Lien FILO Term Loan | LIBOR (M) | 1.00 | % | 9.60 | % | 10.60 | % | 4/8/2019 | $ | 2,714,632 | 2,705,143 | 2,741,779 | 0.20 | % | M | ||||||||||||||||
21,892,884 | 22,241,779 | 1.63 | % | |||||||||||||||||||||||||||||
Building Equipment Contractors | ||||||||||||||||||||||||||||||||
Hylan Datacom & Electrical, LLC | First Lien Delayed Draw Term Loan | LIBOR (Q) | 1.00 | % | 7.50 | % | 8.50 | % | 7/25/2021 | $ | — | — | — | — | M | |||||||||||||||||
Hylan Datacom & Electrical, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 7.50 | % | 8.50 | % | 7/25/2021 | $ | 14,295,589 | 14,092,734 | 14,188,374 | 1.04 | % | M | ||||||||||||||||
14,092,734 | 14,188,374 | 1.04 | % | |||||||||||||||||||||||||||||
Business Support Services | ||||||||||||||||||||||||||||||||
Enerwise Global Technologies, Inc. | Sr Secured Revolving Loan | LIBOR (Q) | 0.23 | % | 8.52 | % | N/A | 11/30/2018 | $ | — | (17,798 | ) | 70,000 | 0.01 | % | J/M | ||||||||||||||||
Enerwise Global Technologies, Inc. | Sr Secured Term Loan (1.0% Exit Fee) | LIBOR (Q) | 0.23 | % | 9.27 | % | 10.12 | % | 11/30/2019 | $ | 23,937,500 | 23,867,666 | 24,356,406 | 1.78 | % | K/M | ||||||||||||||||
STG-Fairway Acquisitions, Inc. (First Advantage) | Second Lien Term Loan | LIBOR (Q) | 1.00 | % | 9.25 | % | 10.25 | % | 6/30/2023 | $ | 31,000,000 | 30,588,757 | 30,336,600 | 2.22 | % | M | ||||||||||||||||
54,438,625 | 54,763,006 | 4.01 | % | |||||||||||||||||||||||||||||
11
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Continued)
December 31, 2016
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Principal | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||||||
Debt Investments (continued) | ||||||||||||||||||||||||||||||||
Chemicals | ||||||||||||||||||||||||||||||||
Anuvia Plant Nutrients Holdings, LLC | Sr Secured Term Loan (8.0% Exit Fee) | LIBOR (Q) | — | 10.63 | % | 11.63 | % | 2/1/2018 | $ | 7,563,676 | $ | 7,995,360 | $ | 8,250,457 | 0.60 | % | K/M | |||||||||||||||
Green Biologics, Inc. | Sr Secured Delayed Draw Term Loan (12.4% Exit Fee) | Prime Rate | — | 7.75 | % | 11.50 | % | 6/30/2019 | $ | 15,000,000 | 15,468,439 | 14,905,500 | 1.09 | % | K/M | |||||||||||||||||
iGM RFE1 B.V. (Netherlands) | First Lien Delayed Draw Term Loan | LIBOR (Q) | — | 8.00 | % | 9.00 | % | 10/12/2021 | $ | 253,581 | 245,565 | 251,684 | 0.02 | % | H/M | |||||||||||||||||
iGM RFE1 B.V. (Netherlands) | First Lien Term Loan | LIBOR (Q) | — | 8.00 | % | 9.00 | % | 10/12/2021 | $ | 3,864,583 | 3,836,083 | 3,835,599 | 0.28 | % | H/M | |||||||||||||||||
Nanosys, Inc. | First Lien Delayed Draw Term Loan (3.5% Exit Fees) | LIBOR (Q) | — | 9.81 | % | 10.75 | % | 4/1/2019 | $ | 10,000,000 | 9,526,456 | 9,712,000 | 0.71 | % | K/M | |||||||||||||||||
37,071,903 | 36,955,240 | 2.70 | % | |||||||||||||||||||||||||||||
Communications Equipment Manufacturing | ||||||||||||||||||||||||||||||||
Globecomm Systems, Inc. | First Lien Term Loan | LIBOR (Q) | 1.25 | % | 7.63 | % | 8.88 | % | 12/11/2018 | $ | 14,480,001 | 14,335,200 | 14,480,002 | 1.06 | % | B/M | ||||||||||||||||
Triangle Acquisition Co. (Polycom) | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 6.50 | % | 7.50 | % | 9/27/2023 | $ | 4,835,417 | 4,646,389 | 4,877,727 | 0.36 | % | M | ||||||||||||||||
18,981,589 | 19,357,729 | 1.42 | % | |||||||||||||||||||||||||||||
Computer Systems Design and Related Services | ||||||||||||||||||||||||||||||||
Aptos Inc. (Canada) | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 6.75 | % | 7.75 | % | 9/1/2022 | $ | 9,975,000 | 9,784,353 | 9,875,250 | 0.72 | % | HM | ||||||||||||||||
Dealersocket, Inc. | Senior Secured 1st Lien Term Loan | LIBOR (M) | 1.00 | % | 10.00 | % | 11.00 | % | 2/10/2021 | $ | 17,500,000 | 16,884,459 | 17,291,750 | 1.26 | % | M | ||||||||||||||||
MSC Software Corporation | Second Lien Term Loan | LIBOR (M) | 1.00 | % | 7.50 | % | 8.50 | % | 5/29/2021 | $ | 6,993,035 | 6,953,617 | 7,001,777 | 0.51 | % | M | ||||||||||||||||
Marketo, Inc. | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 9.50 | % | 10.50 | % | 8/16/2021 | $ | 23,295,455 | 22,630,922 | 22,887,784 | 1.67 | % | M | ||||||||||||||||
Marketo, Inc. | Senior Secured Revolver | LIBOR (Q) | 1.00 | % | 9.50 | % | 10.50 | % | 8/16/2021 | $ | — | (47,341 | ) | 21,307 | — | J/M | ||||||||||||||||
OnX Enterprise Solutions, Ltd. (Canada) | First Lien Term Loan B | LIBOR (Q) | — | 8.00 | % | 8.90 | % | 9/3/2018 | $ | 2,314,000 | 2,314,000 | 2,314,000 | 0.17 | % | H/M | |||||||||||||||||
OnX Enterprise Solutions, Ltd. (Canada) | First Lien Term Loan | LIBOR (Q) | — | 8.00 | % | 8.90 | % | 9/3/2018 | $ | 10,320,000 | 10,268,787 | 10,320,000 | 0.75 | % | H/M | |||||||||||||||||
OnX USA, LLC | First Lien Term Loan B | LIBOR (Q) | — | 8.00 | % | 8.90 | % | 9/3/2018 | $ | 3,738,000 | 3,738,000 | 3,738,000 | 0.27 | % | M | |||||||||||||||||
OnX USA, LLC | First Lien Term Loan | LIBOR (Q) | — | 8.00 | % | 8.90 | % | 9/3/2018 | $ | 3,160,000 | 3,151,013 | 3,160,000 | 0.23 | % | M | |||||||||||||||||
Waterfall International, Inc. | First Lien Delayed Draw Term Loan (3.0% Exit Fee) | LIBOR (Q) | — | 11.67 | % | 12.48 | % | 9/1/2018 | $ | 4,800,000 | 4,827,231 | 4,970,640 | 0.36 | % | K/M | |||||||||||||||||
80,505,041 | 81,580,508 | 5.94 | % | |||||||||||||||||||||||||||||
Data Processing and Hosting Services | ||||||||||||||||||||||||||||||||
IO Data Centers, USA, LLC | First Lien Term Loan | Fixed | — | 9.00 | % | 9.00 | % | 1/15/2020 | $ | 6,876,756 | 6,876,756 | 6,876,756 | 0.50 | % | M | |||||||||||||||||
Electric Power Generation, Transmission and Distribution | ||||||||||||||||||||||||||||||||
Holocene Renewable Energy Fund 3, LLC (Conergy) | First Lien Term Loan | Fixed | — | 9.00% Cash+1.00% PIK | 10.00 | % | 9/10/2017 | $ | 7,518,173 | 7,491,471 | 7,442,991 | 0.54 | % | M | ||||||||||||||||||
Electronic Component Manufacturing | ||||||||||||||||||||||||||||||||
Soraa, Inc. | Tranche A Term Loan (3.0% Exit Fee) | LIBOR (Q) | 0.44 | % | 9.33 | % | 10.15 | % | 3/1/2018 | $ | 15,666,296 | 15,483,478 | 15,471,251 | 1.13 | % | K/M | ||||||||||||||||
Soraa, Inc. | Tranche B Term Loan | LIBOR (Q) | 0.44 | % | 9.33 | % | 10.15 | % | 9/1/2017 | $ | 1,603,779 | 1,556,152 | 1,563,204 | 0.11 | % | M | ||||||||||||||||
17,039,630 | 17,034,455 | 1.24 | % | |||||||||||||||||||||||||||||
Equipment Leasing | ||||||||||||||||||||||||||||||||
36th Street Capital Partners Holdings, LLC | Senior Note | Fixed | — | 12.00 | % | 12.00 | % | 11/1/2020 | $ | 29,203,304 | 29,203,304 | 29,203,304 | 2.13 | % | E/F/M | |||||||||||||||||
Essex Ocean, LLC (Solexel) | Sr Secured Term Loan | Fixed | — | 8.00 | % | 8.00 | % | 8/15/2018 | $ | 1,685,289 | 1,685,289 | 1,718,994 | 0.13 | % | M | |||||||||||||||||
30,888,593 | 30,922,298 | 2.26 | % | |||||||||||||||||||||||||||||
Facilities Support Services | ||||||||||||||||||||||||||||||||
NANA Development Corp. | First Lien Term Loan B | LIBOR (M) | 1.25 | % | 6.75 | % | 8.00 | % | 3/15/2018 | $ | 879,513 | 834,963 | 853,128 | 0.06 | % | M | ||||||||||||||||
Financial Investment Activities | ||||||||||||||||||||||||||||||||
Magnolia Finance V plc (Cayman Islands) | Asset-Backed Credit Linked Notes | Fixed | — | 13.13 | % | 13.13 | % | 8/2/2021 | $ | 15,000,000 | 15,000,000 | 14,994,000 | 1.10 | % | E/H/M | |||||||||||||||||
Grocery Stores | ||||||||||||||||||||||||||||||||
Bashas, Inc. | First Lien FILO Term Loan | LIBOR (M) | 1.50 | % | 8.80 | % | 10.30 | % | 10/8/2019 | $ | 9,333,235 | 9,297,529 | 9,426,567 | 0.69 | % | M | ||||||||||||||||
12
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Continued)
December 31, 2016
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Principal | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||||||
Debt Investments (continued) | ||||||||||||||||||||||||||||||||
Hospitals | ||||||||||||||||||||||||||||||||
KPC Healthcare, Inc. | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 9.25 | % | 10.51 | % | 8/28/2020 | $ | 12,071,083 | $ | 11,857,665 | $ | 12,375,878 | 0.90 | % | M | ||||||||||||||
Pacific Coast Holdings Investment, LLC | Senior Secured 1st Lien Delayed Draw Term Loan | LIBOR (M) | 2.00 | % | 9.70 | % | 11.70 | % | 10/23/2019 | $ | 10,828,233 | 10,806,929 | 10,828,233 | 0.79 | % | M | ||||||||||||||||
22,664,594 | 23,204,111 | 1.69 | % | |||||||||||||||||||||||||||||
Insurance | ||||||||||||||||||||||||||||||||
Alera Group Intermediate Holdings, Inc. | First Lien Delayed Draw Term Loan | Prime | — | 4.50 | % | 8.25 | % | 12/30/2022 | $ | — | (8,333 | ) | — | — | J/M | |||||||||||||||||
Alera Group Intermediate Holdings, Inc. | First Lien Revolver | Prime | — | 4.50 | % | 8.25 | % | 12/30/2021 | $ | — | (7,595 | ) | — | — | J/M | |||||||||||||||||
Alera Group Intermediate Holdings, Inc. | First Lien Term Loan | Prime | — | 4.50 | % | 8.25 | % | 12/30/2022 | $ | 3,407,121 | 3,373,050 | 3,373,050 | 0.25 | % | M | |||||||||||||||||
Association Member Benefits Advisors, LLC | Second Lien Term Loan | LIBOR (M) | 1.00 | % | 8.75 | % | 9.75 | % | 6/8/2023 | $ | 8,277,983 | 8,112,882 | 8,112,423 | 0.59 | % | M | ||||||||||||||||
JSS Holdings, Inc. | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 6.50 | % | 7.50 | % | 8/31/2021 | $ | 3,750,000 | 3,689,740 | 3,731,250 | 0.27 | % | M | ||||||||||||||||
US Apple Holdco, LLC (Ventiv Technology) | First Lien Term Loan | LIBOR (Q) | 0.50 | % | 13.62 | % | 14.49 | % | 8/29/2019 | $ | 20,015,152 | 19,533,393 | 20,015,152 | 1.46 | % | M | ||||||||||||||||
34,693,137 | 35,231,875 | 2.57 | % | |||||||||||||||||||||||||||||
Lessors of Nonfinancial Licenses | ||||||||||||||||||||||||||||||||
ABG Intermediate Holdings 2, LLC | Second Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.50 | % | 9.50 | % | 5/27/2022 | $ | 16,573,588 | 16,434,441 | 16,739,324 | 1.22 | % | M | ||||||||||||||||
ABG Intermediate Holdings 2, LLC | Second Lien Incremental Term Loan | LIBOR (Q) | 1.00 | % | 8.50 | % | 9.50 | % | 5/27/2022 | $ | 3,426,412 | 3,396,918 | 3,460,676 | 0.25 | % | M | ||||||||||||||||
19,831,359 | 20,200,000 | 1.47 | % | |||||||||||||||||||||||||||||
Management, Scientific, and Technical Consulting Services | ||||||||||||||||||||||||||||||||
Dodge Data & Analytics, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.75 | % | 9.75 | % | 10/31/2019 | $ | 23,995,511 | 23,613,049 | 23,699,166 | 1.73 | % | M | ||||||||||||||||
Motion Picture and Video Industries | ||||||||||||||||||||||||||||||||
NEG Holdings, LLC (CORE Entertainment) | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.00% PIK | 9.00 | % | 10/17/2022 | $ | 1,445,592 | 1,445,592 | 1,387,712 | 0.10 | % | M | |||||||||||||||||
Nondepository Credit Intermediation | ||||||||||||||||||||||||||||||||
Auto Trakk SPV, LLC | First Lien Delayed Draw Term Loan | LIBOR (M) | 0.50 | % | 9.50 | % | 10.24 | % | 12/21/2021 | $ | 32,392,942 | 31,888,166 | 31,939,467 | 2.33 | % | M | ||||||||||||||||
Caliber Home Loans, Inc. | First Lien Delayed Draw Term Loan | LIBOR (M) | 1.00 | % | 6.50 | % | 7.50 | % | 6/30/2020 | $ | 13,333,333 | 13,136,017 | 13,133,333 | 0.96 | % | M | ||||||||||||||||
Caribbean Financial Group (Cayman Islands) | Sr Secured Notes | Fixed | — | 11.50 | % | 11.50 | % | 11/15/2019 | $ | 28,678,000 | 28,568,148 | 29,108,170 | 2.13 | % | E/G/H/M | |||||||||||||||||
Daymark Financial Acceptance, LLC | First Lien Delayed Draw Term Loan | LIBOR (M) | — | 9.50 | % | 10.27 | % | 1/12/2020 | $ | 17,500,000 | 17,300,337 | 16,992,500 | 1.24 | % | M | |||||||||||||||||
Greystone Select Holdings, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.00 | % | 9.00 | % | 3/26/2021 | $ | 16,062,731 | 15,912,928 | 16,207,296 | 1.18 | % | M | ||||||||||||||||
Trade Finance Funding I, Ltd. (Cayman Islands) | Secured Class B Notes | Fixed | — | 10.75 | % | 10.75 | % | 11/13/2018 | $ | 15,084,000 | 15,084,000 | 14,857,740 | 1.09 | % | E/H/M | |||||||||||||||||
121,889,596 | 122,238,506 | 8.93 | % | |||||||||||||||||||||||||||||
Other Information Services | ||||||||||||||||||||||||||||||||
Asset International, Inc. | Delayed Draw Term Loan | LIBOR (M) | 1.00 | % | 8.50 | % | 9.50 | % | 7/31/2020 | $ | 1,251,626 | 1,227,886 | 1,231,183 | 0.09 | % | M | ||||||||||||||||
Asset International, Inc. | Revolver Loan | LIBOR (M) | 1.00 | % | 8.50 | % | 9.50 | % | 7/31/2020 | $ | 491,303 | 480,225 | 481,674 | 0.04 | % | M | ||||||||||||||||
Asset International, Inc. | First Lien Term Loan | LIBOR (M) | 1.00 | % | 8.50 | % | 9.50 | % | 7/31/2020 | $ | 15,408,563 | 15,204,465 | 15,257,559 | 1.11 | % | M | ||||||||||||||||
Simmons Research, LLC | First Lien Term Loan | LIBOR (Q) | 0.50 | % | 10.50 | % | 11.38 | % | 12/11/2020 | $ | 4,936,601 | 4,853,985 | 4,973,625 | 0.36 | % | M | ||||||||||||||||
SoundCloud Ltd. (United Kingdom) | Sr Secured Term Loan (2.0% Exit Fee) | LIBOR (M) | 0.28 | % | 10.72 | % | 11.60 | % | 10/1/2018 | $ | 31,550,000 | 31,632,236 | 32,510,698 | 2.38 | % | H/K/M | ||||||||||||||||
TCH-2 Holdings, LLC (TravelClick) | Second Lien Term Loan | LIBOR (M) | 1.00 | % | 7.75 | % | 8.75 | % | 11/6/2021 | $ | 19,988,392 | 19,769,829 | 19,663,581 | 1.44 | % | G/M | ||||||||||||||||
73,168,626 | 74,118,320 | 5.42 | % | |||||||||||||||||||||||||||||
Other Manufacturing | ||||||||||||||||||||||||||||||||
AGY Holding Corp. | Sr Secured Term Loan | Fixed | — | 12.00 | % | 12.00 | % | 9/15/2018 | $ | 4,869,577 | 4,869,577 | 4,869,710 | 0.36 | % | B/M | |||||||||||||||||
AGY Holding Corp. | Second Lien Notes | Fixed | — | 11.00 | % | 11.00 | % | 11/15/2018 | $ | 9,268,000 | 7,586,317 | 9,268,000 | 0.68 | % | B/E/M | |||||||||||||||||
AGY Holding Corp. | Delayed Draw Term Loan | Fixed | — | 12.00 | % | 12.00 | % | 9/15/2018 | $ | 1,049,146 | 1,049,146 | 1,049,147 | 0.08 | % | B/M | |||||||||||||||||
Bioventus, LLC | Second Lien Term Loan | LIBOR (M) | 1.00 | % | 6.25 | % | 7.25 | % | 11/15/2021 | $ | 5,000,000 | 4,900,613 | 5,000,000 | 0.37 | % | M | ||||||||||||||||
Boomerang Tube, LLC | Subordinated Notes | LIBOR (M) | — | 17.50 | % | N/A | 2/1/2021 | $ | 1,030,741 | 1,030,740 | 107,200 | 0.01 | % | C/M | ||||||||||||||||||
19,436,393 | 20,294,057 | 1.50 | % | |||||||||||||||||||||||||||||
13
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Continued)
December 31, 2016
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Principal | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||||||
Debt Investments (continued) | ||||||||||||||||||||||||||||||||
Other Publishing | ||||||||||||||||||||||||||||||||
Bisnow, LLC | First Lien Revolver | LIBOR (Q) | — | 9.00 | % | N/A | 4/29/2021 | $ | — | $ | (24,000 | ) | $ | 15,000 | — | J/M | ||||||||||||||||
Bisnow, LLC | First Lien Term Loan | LIBOR (Q) | — | 9.00 | % | 9.88 | % | 4/29/2021 | $ | 8,614,356 | 8,459,058 | 8,549,749 | 0.62 | % | M | |||||||||||||||||
Contextmedia Health, LLC | First Lien Term Loan B | LIBOR (M) | 1.00 | % | 6.50 | % | 7.50 | % | 12/23/2021 | $ | 13,636,364 | 12,272,727 | 12,477,273 | 0.91 | % | |||||||||||||||||
20,707,785 | 21,042,022 | 1.53 | % | |||||||||||||||||||||||||||||
Other Telecommunications | ||||||||||||||||||||||||||||||||
Securus Technologies, Inc. | Second Lien Term Loan | LIBOR (Q) | 1.25 | % | 7.75 | % | 9.00 | % | 4/30/2021 | $ | 4,516,129 | 4,470,968 | 4,407,177 | 0.32 | % | |||||||||||||||||
Pharmaceuticals | ||||||||||||||||||||||||||||||||
Lantheus Medical Imaging, Inc. | First Lien Term Loan | LIBOR (M) | 1.00 | % | 6.00 | % | 7.00 | % | 6/30/2022 | $ | 8,642,604 | 8,199,514 | 8,664,210 | 0.63 | % | |||||||||||||||||
Plastics Manufacturing | ||||||||||||||||||||||||||||||||
Iracore International, Inc. | Sr Secured Notes | Fixed | — | 9.50 | % | 9.50 | % | 6/1/2018 | $ | 13,600,000 | 14,246,000 | 4,503,640 | 0.33 | % | C/E/G/M | |||||||||||||||||
Radio and Television Broadcasting | ||||||||||||||||||||||||||||||||
Fuse, LLC | Sr Secured Notes | Fixed | — | 10.38 | % | 10.38 | % | 7/1/2019 | $ | 7,312,000 | 7,312,000 | 4,435,972 | 0.32 | % | E/G | |||||||||||||||||
NEP/NCP Holdco, Inc. | Second Lien Term Loan | LIBOR (M) | 1.25 | % | 8.75 | % | 10.00 | % | 7/22/2020 | $ | 15,981,496 | 15,727,220 | 16,141,311 | 1.18 | % | |||||||||||||||||
23,039,220 | 20,577,283 | 1.50 | % | |||||||||||||||||||||||||||||
Real Estate Leasing | ||||||||||||||||||||||||||||||||
Home Partners of America, Inc. | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 7.00 | % | 8.00 | % | 10/13/2022 | $ | 5,000,000 | 4,902,332 | 5,000,000 | 0.37 | % | M | ||||||||||||||||
Restaurants | ||||||||||||||||||||||||||||||||
RM OpCo, LLC (Real Mex) | Convertible Second Lien Term Loan Tranche B-1 | Fixed | — | 8.50 | % | 8.50 | % | 3/30/2018 | $ | 1,943,371 | 1,943,371 | 1,943,371 | 0.14 | % | B/M | |||||||||||||||||
RM OpCo, LLC (Real Mex) | First Lien Term Loan Tranche A | Fixed | — | 7.00 | % | 7.00 | % | 3/30/2018 | $ | 4,871,284 | 4,587,898 | 4,871,284 | 0.36 | % | B/M | |||||||||||||||||
RM OpCo, LLC (Real Mex) | Second Lien Term Loan Tranche B | Fixed | — | 8.50 | % | 8.50 | % | 3/30/2018 | $ | 9,683,150 | 9,683,150 | 3,154,770 | 0.23 | % | B/M | |||||||||||||||||
RM OpCo, LLC (Real Mex) | Second Lien Term Loan Tranche B-1 | Fixed | — | 8.50 | % | 8.50 | % | 3/30/2018 | $ | 3,049,554 | 3,034,132 | 3,049,555 | 0.22 | % | B/M | |||||||||||||||||
RM OpCo, LLC (Real Mex) | Sr Convertible Second Lien Term Loan B | Fixed | — | 8.50 | % | 8.50 | % | 3/30/2018 | $ | 4,251,368 | 4,251,368 | 4,251,368 | 0.31 | % | B/M | |||||||||||||||||
23,499,919 | 17,270,348 | 1.26 | % | |||||||||||||||||||||||||||||
Retail | ||||||||||||||||||||||||||||||||
Bon-Ton, Inc. | First Lien Tranche A-1 Revolver | LIBOR (Q) | 1.00 | % | 9.50 | % | 10.50 | % | 3/15/2021 | $ | 4,432,934 | 4,348,162 | 4,388,605 | 0.32 | % | M | ||||||||||||||||
Gander Mountain Company | Second Lien Term Loan | LIBOR (M) | — | 9.50 | % | 10.44 | % | 6/15/2018 | $ | 14,740,910 | 14,618,096 | 14,749,754 | 1.08 | % | M | |||||||||||||||||
The Gymboree Corporation | First Lien Term Loan | LIBOR (Q) | — | 10.25 | % | 11.18 | % | 9/24/2020 | $ | 12,857,349 | 12,618,039 | 13,050,209 | 0.95 | % | M | |||||||||||||||||
Kenneth Cole Productions, Inc. | First Lien FILO Term Loan | LIBOR (M) | 1.00 | % | 8.50 | % | 9.50 | % | 9/25/2020 | $ | 20,672,789 | 20,491,699 | 20,879,517 | 1.53 | % | M | ||||||||||||||||
52,075,996 | 53,068,085 | 3.88 | % | |||||||||||||||||||||||||||||
Satellite Telecommunications | ||||||||||||||||||||||||||||||||
Avanti Communications Group, PLC (United Kingdom) | Sr Secured Notes | Fixed | — | 10.00 | % | 10.00 | % | 10/1/2019 | $ | 9,393,000 | 9,393,000 | 5,665,153 | 0.41 | % | E/G/H | |||||||||||||||||
Scientific Research and Development Services | ||||||||||||||||||||||||||||||||
Envigo Holdings, Inc. | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 8.50 | % | 9.50 | % | 11/3/2021 | $ | 35,192,124 | 34,499,517 | 34,796,212 | 2.54 | % | |||||||||||||||||
14
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Continued)
December 31, 2016
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Principal | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||||||
Debt Investments (continued) | ||||||||||||||||||||||||||||||||
Software Publishing | ||||||||||||||||||||||||||||||||
Acronis International GmbH (Switzerland) | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 11.50 | % | 12.50 | % | 6/9/2017 | $ | 28,336,513 | $ | 28,329,478 | $ | 28,165,077 | 2.06 | % | H/M | ||||||||||||||
ArcServe (USA), LLC | Second Lien Term Loan | LIBOR (Q) | 0.50 | % | 8.50% Cash+1.25% PIK | 10.75 | % | 1/31/2020 | $ | 30,222,833 | 29,851,330 | 28,893,029 | 2.11 | % | M | |||||||||||||||||
Autoalert, LLC | First Lien Term Loan | LIBOR (Q) | 0.25 | % | 5.75% Cash+3.00% PIK | 9.63 | % | 3/31/2019 | $ | 35,627,947 | 35,263,561 | 35,538,877 | 2.60 | % | M | |||||||||||||||||
Mapp Digital US, LLC | First Lien Term Loan | LIBOR (Q) | — | 9.50 | % | 10.35 | % | 12/31/2017 | $ | 5,837,798 | 5,754,455 | 5,823,203 | 0.43 | % | M | |||||||||||||||||
Edmentum, Inc. | Jr Revolving Facility | Fixed | — | 5.00 | % | 5.00 | % | 6/9/2020 | $ | — | — | — | — | B/M | ||||||||||||||||||
Edmentum Ultimate Holdings, LLC | Sr PIK Notes | Fixed | — | 8.50 | % | 8.50 | % | 6/9/2020 | $ | 2,846,243 | 2,846,243 | 2,846,246 | 0.21 | % | B/M | |||||||||||||||||
Edmentum Ultimate Holdings, LLC | Jr PIK Notes | Fixed | — | 10.00 | % | 10.00 | % | 6/9/2020 | $ | 13,040,391 | 12,539,980 | 12,101,483 | 0.88 | % | B/M | |||||||||||||||||
Fidelis Acquisitionco, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 6.00% Cash+2.00% PIK | 9.00 | % | 11/4/2019 | $ | 42,565,572 | 41,986,034 | 42,991,228 | 3.14 | % | M | |||||||||||||||||
Fidelis Acquisitionco, LLC | Sr Secured Revolver | LIBOR (Q) | 1.00 | % | 8.00 | % | 9.00 | % | 11/4/2019 | $ | 3,182,143 | 3,182,143 | 3,213,964 | 0.24 | % | M | ||||||||||||||||
Newscycle Solutions, Inc. | Second Lien Term Loan | LIBOR (Q) | — | 13.00 | % | 13.95 | % | 9/10/2021 | $ | 11,513,361 | 11,196,782 | 11,334,905 | 0.83 | % | M | |||||||||||||||||
Newscycle Solutions AB (Sweden) | Second Lien Term Loan B | LIBOR (Q) | — | 13.00 | % | 13.95 | % | 9/10/2021 | $ | 11,513,362 | 11,196,782 | 11,334,905 | 0.83 | % | H/M | |||||||||||||||||
Soasta, Inc. | Senior Secured 1st Lien Term Loan (4.0% Exit Fee) | LIBOR (M) | — | 9.56 | % | 10.50 | % | 4/1/2019 | $ | 17,880,435 | 17,783,558 | 19,037,299 | 1.39 | % | K/M | |||||||||||||||||
Soasta, Inc. | Convertible Promissory Note | Fixed | — | 10.00 | % | 10.00 | % | 12/16/2017 | $ | 2,282,609 | 2,282,609 | 5,504,054 | 0.40 | % | M | |||||||||||||||||
Utilidata, Inc. | First Lien Delayed Draw Term Loan (1.0% Exit Fee) | LIBOR (M) | 0.62 | % | 9.88 | % | 10.69 | % | 1/1/2019 | $ | 3,200,000 | 3,135,670 | 3,080,000 | 0.23 | % | K/M | ||||||||||||||||
205,348,625 | 209,864,270 | 15.35 | % | |||||||||||||||||||||||||||||
Textile Furnishings Mills | ||||||||||||||||||||||||||||||||
Lexmark Carpet Mills, Inc. | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 10.00 | % | 11.00 | % | 12/19/2019 | $ | 22,804,525 | 22,804,525 | 22,827,329 | 1.67 | % | M | ||||||||||||||||
Lexmark Carpet Mills, Inc. | First Lien Term Loan B | LIBOR (Q) | 1.00 | % | 10.00 | % | 11.00 | % | 12/19/2019 | $ | 7,822,482 | 7,681,925 | 7,830,304 | 0.57 | % | M | ||||||||||||||||
30,486,450 | 30,657,633 | 2.24 | % | |||||||||||||||||||||||||||||
Utility System Construction | ||||||||||||||||||||||||||||||||
Kawa Solar Holdings Limited (Cayman Islands) | Bank Guarantee Credit Facility | Fixed | — | 8.20% Cash+3.50% PIK | 11.70 | % | 7/2/2017 | $ | 21,276,420 | 21,276,420 | 21,276,653 | 1.56 | % | F/H/M | ||||||||||||||||||
Kawa Solar Holdings Limited (Cayman Islands) | Revolving Credit Facility | Fixed | — | 8.20 | % | 8.20 | % | 7/2/2017 | $ | 4,000,000 | 4,000,000 | 4,000,000 | 0.29 | % | F/H/M | |||||||||||||||||
25,276,420 | 25,276,653 | 1.85 | % | |||||||||||||||||||||||||||||
Wholesalers | ||||||||||||||||||||||||||||||||
NILCO, LLC | First Lien Term Loan | LIBOR (Q) | 1.00 | % | 9.50 | % | 10.50 | % | 9/1/2021 | $ | 21,023,109 | 20,424,799 | 21,601,245 | 1.58 | % | M | ||||||||||||||||
Wired Telecommunications Carriers | ||||||||||||||||||||||||||||||||
Alpheus Communications, LLC | First Lien Delayed Draw FILO Term Loan | LIBOR (M) | 1.00 | % | 7.42 | % | 8.53 | % | 5/31/2018 | $ | 332,044 | 328,743 | 326,682 | 0.02 | % | M | ||||||||||||||||
Alpheus Communications, LLC | First Lien Delayed Draw FILO Term Loan | LIBOR (M) | 1.00 | % | 7.42 | % | 8.66 | % | 5/31/2018 | $ | 1,355,968 | 1,346,859 | 1,328,296 | 0.10 | % | M | ||||||||||||||||
Alpheus Communications, LLC | First Lien FILO Term Loan | LIBOR (M) | 1.00 | % | 7.42 | % | 8.42 | % | 5/31/2018 | $ | 7,255,721 | 7,183,589 | 7,139,992 | 0.52 | % | M | ||||||||||||||||
Integra Telecom Holdings, Inc. | Second Lien Term Loan | LIBOR (Q) | 1.25 | % | 8.50 | % | 9.75 | % | 2/22/2020 | $ | 13,231,193 | 13,084,285 | 13,313,989 | 0.97 | % | G | ||||||||||||||||
U.S. TelePacific Corp. | First Lien Notes | LIBOR (Q) | 1.00 | % | 8.50 | % | 9.50 | % | 2/24/2021 | $ | 10,000,000 | 9,715,362 | 10,000,000 | 0.73 | % | M | ||||||||||||||||
31,658,838 | 32,108,959 | 2.34 | % | |||||||||||||||||||||||||||||
Wireless Telecommunications Carriers | ||||||||||||||||||||||||||||||||
Gogo, LLC | Sr Secured Notes | Fixed | — | 12.50 | % | 12.50 | % | 7/1/2022 | $ | 10,000,000 | 10,000,000 | 10,900,000 | 0.80 | % | E/G | |||||||||||||||||
Total Debt Investments | 1,254,861,949 | 1,248,887,808 | 91.25 | % | ||||||||||||||||||||||||||||
15
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Continued)
December 31, 2016
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Shares | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||
Equity Securities | ||||||||||||||||||||||||||||
Advertising and Public Relations Services | ||||||||||||||||||||||||||||
InMobi, Inc. (Singapore) | Warrants to Purchase Stock | 562,496 | $ | 230,569 | $ | 87,356 | 0.01 | % | C/E/H/M | |||||||||||||||||||
Air Transportation | ||||||||||||||||||||||||||||
Aircraft Leased to United Airlines, Inc. | ||||||||||||||||||||||||||||
United N659UA-767, LLC (N659UA) | Trust Beneficial Interests | 683 | 3,250,956 | 3,191,938 | 0.23 | % | E/F/M | |||||||||||||||||||||
United N661UA-767, LLC (N661UA) | Trust Beneficial Interests | 688 | 3,376,251 | 3,266,101 | 0.24 | % | E/F/M | |||||||||||||||||||||
Epic Aero, Inc. (One Sky) | Warrants to Purchase Common Stock | 1,843 | 855,313 | 1,909,600 | 0.14 | % | C/E/M | |||||||||||||||||||||
7,482,520 | 8,367,639 | 0.61 | % | |||||||||||||||||||||||||
Business Support Services | ||||||||||||||||||||||||||||
Findly Talent, LLC | Membership Units | 708,229 | 230,938 | 143,133 | 0.01 | % | C/E/M | |||||||||||||||||||||
STG-Fairway Holdings, LLC (First Advantage) | Class A Units | 841,479 | 325,432 | 1,112,351 | 0.08 | % | C/E/M | |||||||||||||||||||||
556,370 | 1,255,484 | 0.09 | % | |||||||||||||||||||||||||
Chemicals | ||||||||||||||||||||||||||||
Green Biologics, Inc. | Warrants to Purchase Stock | 909,300 | 274,213 | 875 | — | C/E/M | ||||||||||||||||||||||
Nanosys, Inc. | Warrants to Purchase Common Stock | 800,000 | 605,266 | 611,920 | 0.05 | % | C/E/M | |||||||||||||||||||||
879,479 | 612,795 | 0.05 | % | |||||||||||||||||||||||||
Communications Equipment Manufacturing | ||||||||||||||||||||||||||||
Wasserstein Cosmos Co-Invest, L.P. (Globecomm) | Limited Partnership Units | 5,000,000 | 5,000,000 | 1,530,000 | 0.11 | % | B/C/E/M | |||||||||||||||||||||
Computer Systems Design and Related Services | ||||||||||||||||||||||||||||
Waterfall International, Inc. | Series B Preferred Stock | 1,428,571 | 1,000,000 | 1,145,286 | 0.08 | % | C/E/M | |||||||||||||||||||||
Waterfall International, Inc. | Warrants to Purchase Stock | 920,000 | 89,847 | 175,168 | 0.01 | % | C/E/M | |||||||||||||||||||||
1,089,847 | 1,320,454 | 0.09 | % | |||||||||||||||||||||||||
Data Processing and Hosting Services | ||||||||||||||||||||||||||||
Anacomp, Inc. | Class A Common Stock | 1,255,527 | 26,711,048 | 1,205,306 | 0.09 | % | C/E/F/M | |||||||||||||||||||||
Rightside Group, Ltd. | Warrants | 498,855 | 2,778,622 | 366,489 | 0.03 | % | C/E/M | |||||||||||||||||||||
29,489,670 | 1,571,795 | 0.12 | % | |||||||||||||||||||||||||
Electrical Equipment Manufacturing | ||||||||||||||||||||||||||||
NEXTracker, Inc. | Series B Preferred Stock | 558,884 | — | 1,727,622 | 0.13 | % | E/M | |||||||||||||||||||||
NEXTracker, Inc. | Series C Preferred Stock | 17,640 | — | 54,525 | — | E/M | ||||||||||||||||||||||
— | 1,782,147 | 0.13 | % | |||||||||||||||||||||||||
Electronic Component Manufacturing | ||||||||||||||||||||||||||||
Soraa, Inc. | Warrants to Purchase Common Stock | 3,071,860 | 478,899 | 5,222 | — | C/E/M | ||||||||||||||||||||||
Equipment Leasing | ||||||||||||||||||||||||||||
36th Street Capital Partners Holdings, LLC | Membership Units | 6,818,897 | 6,818,897 | 6,818,897 | 0.50 | % | C/E/F/M | |||||||||||||||||||||
Essex Ocean II, LLC | Membership Units | 199,430 | 103,398 | 159,045 | 0.01 | % | C/E/F/M | |||||||||||||||||||||
6,922,295 | 6,977,942 | 0.51 | % | |||||||||||||||||||||||||
Financial Investment Activities | ||||||||||||||||||||||||||||
GACP I, LP | Membership Units | 16,615,951 | 16,735,088 | 16,866,903 | 1.23 | % | C/E/I/M | |||||||||||||||||||||
Marsico Holdings, LLC | Common Interest Units | 168,698 | 172,694 | 1,687 | — | C/E/I/M | ||||||||||||||||||||||
16,907,782 | 16,868,590 | 1.23 | % | |||||||||||||||||||||||||
Metal and Mineral Mining | ||||||||||||||||||||||||||||
EPMC HoldCo, LLC | Membership Units | 1,312,720 | — | 210,035 | 0.02 | % | B/E/M | |||||||||||||||||||||
16
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Continued)
December 31, 2016
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Shares | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||
Equity Securities (continued) | ||||||||||||||||||||||||||||
Motion Picture and Video Industries | ||||||||||||||||||||||||||||
NEG Parent, LLC | Class A Units | 1,182,779 | $ | 1,235,194 | $ | 1,292,023 | 0.09 | % | C/E/M | |||||||||||||||||||
NEG Parent, LLC | Class P Units | 1,537,613 | 1,537,613 | 1,551,056 | 0.11 | % | C/E/M | |||||||||||||||||||||
NEG Parent, LLC | Class A Warrants to Purchase Class A Units | 343,387 | 196,086 | 196,086 | 0.01 | % | C/E/M | |||||||||||||||||||||
NEG Parent, LLC | Class B Warrants to Purchase Class A Units | 346,794 | 198,032 | 198,032 | 0.02 | % | C/E/M | |||||||||||||||||||||
3,166,925 | 3,237,197 | 0.23 | % | |||||||||||||||||||||||||
Other Information Services | ||||||||||||||||||||||||||||
SoundCloud, Ltd. (United Kingdom) | Warrants to Purchase Preferred Stock | 946,498 | 79,082 | 95,502 | 0.01 | % | C/E/H/M | |||||||||||||||||||||
Other Manufacturing | ||||||||||||||||||||||||||||
AGY Holding Corp. | Common Stock | 1,333,527 | — | — | — | B/C/E/M | ||||||||||||||||||||||
Boomerang Tube Holdings, Inc. | Common Stock | 24,288 | 243 | — | — | C/E/M | ||||||||||||||||||||||
KAGY Holding Company, Inc. | Series A Preferred Stock | 9,778 | 1,091,200 | 4,607,246 | 0.34 | % | B/C/E/M | |||||||||||||||||||||
1,091,443 | 4,607,246 | 0.34 | % | |||||||||||||||||||||||||
Radio and Television Broadcasting | ||||||||||||||||||||||||||||
Fuse Media, LLC | Warrants to Purchase Common Stock | 233,470 | 300,322 | — | — | C/E/M | ||||||||||||||||||||||
Restaurants | ||||||||||||||||||||||||||||
RM Holdco, LLC (Real Mex) | Equity Participation | 24 | — | — | — | B/C/E/M | ||||||||||||||||||||||
RM Holdco, LLC (Real Mex) | Membership Units | 13,161,000 | 2,010,777 | — | — | B/C/E/M | ||||||||||||||||||||||
2,010,777 | — | — | ||||||||||||||||||||||||||
Retail | ||||||||||||||||||||||||||||
Shop Holding, LLC (Connexity) | Class A Units | 507,167 | 480,049 | — | — | C/E/M | ||||||||||||||||||||||
Software Publishing | ||||||||||||||||||||||||||||
Blackline Intermediate, Inc. | Warrants to Purchase Common Stock | 246,546 | 522,678 | 5,300,373 | 0.39 | % | C/E/M | |||||||||||||||||||||
Edmentum Ultimate Holdings, LLC | Class A Common Units | 159,515 | 680,226 | 1,123,591 | 0.08 | % | B/C/E/M | |||||||||||||||||||||
Soasta, Inc. | Warrants to Purchase Series F Preferred Stock | 1,251,630 | 533,192 | 794,535 | 0.06 | % | C/E/M | |||||||||||||||||||||
Utilidata, Inc. | Warrants to Purchase Stock | 719,998 | 216,336 | 204,983 | 0.01 | % | C/E/M | |||||||||||||||||||||
1,952,432 | 7,423,482 | 0.54 | % | |||||||||||||||||||||||||
Utility System Construction | ||||||||||||||||||||||||||||
Kawa Solar Holdings Limited (Cayman Islands) | Ordinary Shares | 2,332,594 | — | — | — | C/E/F/H/M | ||||||||||||||||||||||
Kawa Solar Holdings Limited (Cayman Islands) | Series B Preferred Shares | 93,023 | 1,395,349 | 1,395,350 | 0.10 | % | C/E/F/H/M | |||||||||||||||||||||
1,395,349 | 1,395,350 | 0.10 | % | |||||||||||||||||||||||||
17
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Investments (Continued)
December 31, 2016
Issuer | Instrument | Ref | Floor | Spread | Total Coupon | Maturity | Shares | Cost | Fair Value | % of Total Cash and Investments | Notes | |||||||||||||||||
Equity Securities (continued) | ||||||||||||||||||||||||||||
Wired Telecommunications Carriers | ||||||||||||||||||||||||||||
Integra Telecom, Inc. | Common Stock | 1,274,522 | $ | 8,433,884 | $ | 6,533,964 | 0.48 | % | C/E/M | |||||||||||||||||||
Integra Telecom, Inc. | Warrants | 346,939 | 19,920 | — | — | C/E/M | ||||||||||||||||||||||
V Telecom Investment S.C.A. (Vivacom) (Luxembourg) | Common Shares | 1,393 | 3,236,256 | 2,199,862 | 0.16 | % | C/D/E/H/M | |||||||||||||||||||||
11,690,060 | 8,733,826 | 0.64 | % | |||||||||||||||||||||||||
Total Equity Securities | 91,203,870 | 66,082,062 | 4.83 | % | ||||||||||||||||||||||||
Total Investments | $ | 1,346,065,819 | $ | 1,314,969,870 | ||||||||||||||||||||||||
Cash and Cash Equivalents | ||||||||||||||||||||||||||||
Cash Held on Account at Various Institutions | 53,579,868 | 3.92 | % | |||||||||||||||||||||||||
Cash and Cash Equivalents | 53,579,868 | 3.92 | % | |||||||||||||||||||||||||
Total Cash and Investments | $ | 1,368,549,738 | 100.00 | % | L | |||||||||||||||||||||||
Notes to Consolidated Schedule of Investments:
(A) | Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933. Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower. |
(B) | Non-controlled affiliate – as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates. |
(C) | Non-income producing security. |
(D) | Investment denominated in foreign currency. Amortized cost and fair value converted from foreign currency to US dollars. Foreign currency denominated investments are generally hedged for currency exposure. |
(E) | Restricted security. (See Note 2) |
(F) | Controlled issuer – as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer). Investment is not more than 50% of the outstanding voting securities of the issuer nor deemed to be a significant subsidiary. See Consolidated Schedule of Changes in Investments in Affiliates. |
(G) | Investment has been segregated to collateralize certain unfunded commitments. |
(H) | Non-U.S. company or principal place of business outside the U.S. and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership's total assets. |
(I) | Deemed an investment company under Section 3(c) of the Investment Company Act and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership's total assets. |
(J) | Negative balances relate to an unfunded commitment that was acquired and/or valued at a discount. |
(K) | In addition to the stated coupon, investment has an exit fee payable upon repayment of the loan in an amount equal to the percentage of the original principal amount shown. |
(L) | All cash and investments, except those referenced in Notes G above, are pledged as collateral under certain debt as described in Note 4 to the Consolidated Financial Statements. |
(M) | Inputs in the valuation of this investment included certain unobservable inputs that were significant to the valuation as a whole. |
LIBOR or EURIBOR resets monthly (M), quarterly (Q), semiannually (S), or annually (A).
Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $587,219,129 and $473,457,512, respectively, for the year ended December 31, 2016. Aggregate acquisitions includes investment assets received as payment in kind. Aggregate dispositions includes principal paydowns on and maturities of debt investments. The total value of restricted securities and bank debt as of December 31, 2016 was $1,311,625,473 or 96.1% of total cash and investments of the Partnership. As of December 31, 2016, approximately 16.4% of the total assets of the Partnership were not qualifying assets under Section 55(a) of the 1940 Act.
See accompanying notes to the consolidated financial statements.
18
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Statements of Operations (Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Investment income | |||||||||||||||
Interest income: | |||||||||||||||
Companies less than 5% owned | $ | 39,120,645 | $ | 35,115,862 | $ | 117,016,921 | $ | 99,016,633 | |||||||
Companies 5% to 25% owned | 1,856,712 | 1,848,171 | 5,365,553 | 4,982,075 | |||||||||||
Companies more than 25% owned | 1,363,740 | 1,313,034 | 4,720,816 | 1,915,981 | |||||||||||
Dividend income: | |||||||||||||||
Companies less than 5% owned | — | — | 16,627 | — | |||||||||||
Lease income: | |||||||||||||||
Companies more than 25% owned | 74,457 | 71,013 | 223,370 | 1,496,869 | |||||||||||
Other income: | |||||||||||||||
Companies less than 5% owned | 841,895 | 120,910 | 1,424,831 | 1,241,885 | |||||||||||
Companies 5% to 25% owned | 31,486 | — | 94,458 | — | |||||||||||
Total investment income | 43,288,935 | 38,468,990 | 128,862,576 | 108,653,443 | |||||||||||
Operating expenses | |||||||||||||||
Management and advisory fees | 5,611,249 | 4,816,043 | 15,624,277 | 13,976,545 | |||||||||||
Interest and other debt expenses | 3,802,170 | 3,991,357 | 12,152,883 | 11,758,525 | |||||||||||
Administrative expenses | 597,232 | 429,867 | 1,730,638 | 1,267,815 | |||||||||||
Legal fees, professional fees and due diligence expenses | 175,002 | 267,294 | 692,722 | 811,002 | |||||||||||
Director fees | 77,445 | 65,251 | 281,816 | 198,191 | |||||||||||
Custody fees | 84,160 | 75,120 | 241,801 | 229,221 | |||||||||||
Insurance expense | 74,571 | 53,328 | 218,667 | 190,230 | |||||||||||
Other operating expenses | 375,650 | 265,612 | 1,306,669 | 861,548 | |||||||||||
Total operating expenses | 10,797,479 | 9,963,872 | 32,249,473 | 29,293,077 | |||||||||||
Net investment income | 32,491,456 | 28,505,118 | 96,613,103 | 79,360,366 | |||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency | |||||||||||||||
Net realized gain (loss): | |||||||||||||||
Investments in companies less than 5% owned | (4,663,896 | ) | (763,617 | ) | (11,540,457 | ) | (4,490,140 | ) | |||||||
Investments in companies 5% to 25% owned | — | 102,392 | — | 417,446 | |||||||||||
Investments in companies more than 25% owned | — | — | — | 79,742 | |||||||||||
Net realized loss | (4,663,896 | ) | (661,225 | ) | (11,540,457 | ) | (3,992,952 | ) | |||||||
Change in net unrealized appreciation/depreciation | (2,772,338 | ) | 869,981 | (967,257 | ) | 53,816 | |||||||||
Net realized and unrealized gain (loss) | (7,436,234 | ) | 208,756 | (12,507,714 | ) | (3,939,136 | ) | ||||||||
Net increase in net assets applicable to common limited and general partners resulting from operations | $ | 25,055,222 | $ | 28,713,874 | $ | 84,105,389 | $ | 75,421,230 | |||||||
See accompanying notes to the consolidated financial statements.
19
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Net Assets (Unaudited)
Nine Months Ended September 30, 2017 (Unaudited) | ||||||||||||
Total | Common Limited Partner | General Partner | ||||||||||
Net assets applicable to common limited and general partners, beginning of period | $ | 1,031,709,637 | $ | 1,031,709,637 | $ | — | ||||||
Contributions from common limited partner | 217,286,250 | 217,286,250 | — | |||||||||
Net investment income | 96,613,103 | 79,915,915 | 16,697,188 | |||||||||
Net realized loss | (11,540,457 | ) | (11,540,457 | ) | — | |||||||
Change in unrealized appreciation/depreciation | (967,257 | ) | (967,257 | ) | — | |||||||
Net increase in net assets applicable to common limited and general partners resulting from operations | 84,105,389 | 67,408,201 | 16,697,188 | |||||||||
Distributions to common limited and general partners from: | ||||||||||||
Net investment income | (89,131,416 | ) | (72,434,228 | ) | (16,697,188 | ) | ||||||
Net assets applicable to common limited and general partners, end of period (including accumulated net investment income of $25,246,361 in the account of the Common Limited Partner) | $ | 1,243,969,860 | $ | 1,243,969,860 | $ | — | ||||||
Year Ended December 31, 2016 | ||||||||||||
Total | Common Limited Partner | General Partner | ||||||||||
Net assets applicable to common limited and general partners, beginning of year | $ | 827,455,601 | $ | 827,455,601 | $ | — | ||||||
Contributions from common limited partner | 200,870,570 | 200,870,570 | — | |||||||||
Net investment income | 106,953,875 | 87,903,210 | 19,050,665 | |||||||||
Net realized loss | (15,002,148 | ) | (15,002,148 | ) | — | |||||||
Change in unrealized appreciation/depreciation | 15,116,650 | 15,116,650 | — | |||||||||
Net increase in net assets applicable to common limited and general partners resulting from operations | 107,068,377 | 88,017,712 | 19,050,665 | |||||||||
Distributions to common limited and general partners from: | ||||||||||||
Net investment income | (101,805,363 | ) | (82,754,698 | ) | (19,050,665 | ) | ||||||
Returns of capital | (1,879,548 | ) | (1,879,548 | ) | — | |||||||
Total distributions to common limited and general partners | (103,684,911 | ) | (84,634,246 | ) | (19,050,665 | ) | ||||||
Net assets applicable to common limited and general partners, end of year (including accumulated net investment income of $17,764,674 in the account of the Common Limited Partner) | $ | 1,031,709,637 | $ | 1,031,709,637 | $ | — | ||||||
See accompanying notes to the consolidated financial statements.
20
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Operating activities | |||||||
Net increase in net assets applicable to common limited and general partners resulting from operations | $ | 84,105,389 | $ | 75,421,230 | |||
Adjustments to reconcile net increase in net assets applicable to common limited and general partners resulting from operations to net cash used in operating activities: | |||||||
Net realized loss | 11,540,457 | 3,992,952 | |||||
Change in net unrealized appreciation/depreciation of investments | 973,413 | 121,178 | |||||
Net amortization of investment discounts and premiums | (10,569,705 | ) | (9,263,325 | ) | |||
Interest and dividend income paid in kind | (10,130,140 | ) | (5,209,391 | ) | |||
Amortization of deferred debt issuance costs | 1,541,529 | 1,392,804 | |||||
Changes in assets and liabilities: | |||||||
Purchases of investment securities | (642,264,119 | ) | (374,607,255 | ) | |||
Proceeds from sales, maturities and pay downs of investments | 434,061,754 | 294,224,143 | |||||
Increase in accrued interest income - companies less than 5% owned | (1,809,544 | ) | (2,224,606 | ) | |||
Increase in accrued interest income - companies 5% to 25% owned | (1,284,273 | ) | (295,458 | ) | |||
Decrease in accrued interest income - companies more than 25% owned | 13,845 | 13,311 | |||||
Increase in receivable for investments sold | (13,414,257 | ) | (6,306,581 | ) | |||
Decrease (increase) in prepaid expenses and other assets | (2,837,021 | ) | 1,286,678 | ||||
Increase in payable for investments purchased | 73,196,164 | 2,725,929 | |||||
Decrease in interest payable | (1,109,871 | ) | (240,203 | ) | |||
Increase in payable to the Advisor | 343,517 | 205,118 | |||||
Increase (decrease) in accrued expenses and other liabilities | (44,168 | ) | 314,062 | ||||
Net cash used in operating activities | (77,687,030 | ) | (18,449,414 | ) | |||
Financing activities | |||||||
Borrowings | 321,000,000 | 473,700,000 | |||||
Repayments of debt | (352,500,000 | ) | (473,500,000 | ) | |||
Payments of debt issuance costs | (1,414,500 | ) | (441,350 | ) | |||
Distributions paid to the common limited partner | (72,434,228 | ) | (62,527,287 | ) | |||
Distributions of incentive allocation to the General Partner | (15,900,475 | ) | (14,408,427 | ) | |||
Contributions from the common limited partner | 217,286,250 | 200,870,570 | |||||
Net cash provided by financing activities | 96,037,047 | 123,693,506 | |||||
Net increase in cash and cash equivalents | 18,350,017 | 105,244,092 | |||||
Cash and cash equivalents at beginning of period | 53,579,868 | 35,629,435 | |||||
Cash and cash equivalents at end of period | $ | 71,929,885 | $ | 140,873,527 | |||
Supplemental cash flow information | |||||||
Interest payments | $ | 10,525,996 | $ | 9,714,732 | |||
21
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2017
1. Organization and Nature of Operations
Special Value Continuation Partners, LP (the “Partnership”), a Delaware limited partnership, commenced operations on July 31, 2006 as an externally managed, closed-end, non-diversified management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). On April 2, 2012, the Partnership elected to be treated as a business development company (“BDC”) under the 1940 Act. The Partnership’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection.
Investment operations are conducted either directly in the Partnership or in one of the Partnership’s wholly owned subsidiaries, TCPC Funding I, LLC, a Delaware limited liability company (“TCPC Funding”), and TCPC SBIC, LP, a Delaware limited partnership (the “SBIC”). The SBIC was organized in June 2013, and, on April 22, 2014, received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958. The Partnership, TCPC Funding, and the SBIC invest primarily in the debt of middle-market companies, including senior secured loans, junior loans, mezzanine debt and bonds. Such investments may include an equity component, and, to a lesser extent, the Partnership, TCPC Funding, and the SBIC may make equity investments directly. The Partnership, TCPC Funding, and the SBIC have elected to be treated as partnerships for U.S. federal income tax purposes. TCP Capital Corp. (“TCPC”) owns the entire common limited partner interest in the Partnership. TCPC has also elected to be treated as a business development company under the 1940 Act.
The general partner of the Partnership is Series H of SVOF/MM, LLC, which also serves as the administrator of both TCPC and the Partnership (the “Administrator” or the “General Partner”). The managing member of the General Partner is Tennenbaum Capital Partners, LLC, which serves as the Advisor to TCPC, the Partnership, TCPC Funding and the SBIC. All of the equity interests in the General Partner are owned directly by the Advisor.
Partnership management consists of the General Partner and the board of directors. The General Partner directs and executes the day-to-day operations of the Partnership subject to oversight from the board of directors, which performs certain functions required by the 1940 Act. The board of directors has delegated investment management of the Partnership’s assets to the Advisor. The board of directors consists of seven persons, five of whom are independent.
2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements of the Partnership include the accounts of the Partnership, TCPC Funding and the SBIC and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Partnership is an investment company following accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946, Financial Services - Investment Companies. The Partnership has consolidated the results of its wholly owned subsidiaries in its consolidated financial statements in accordance with ASC Topic 946. All intercompany account balances and transactions have been eliminated in consolidation. The following is a summary of the significant accounting policies of the Partnership.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well the reported amounts of revenues and expenses during the reporting periods presented. Although management believes these estimates and assumptions to be reasonable, actual results could differ from those estimates and such differences could be material.
22
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
2. Summary of Significant Accounting Policies — (continued)
Investment Valuation
Management values investments at fair value in accordance with GAAP, based upon the principles and methods of valuation set forth in policies adopted by the board of directors. Fair value is generally defined as the amount for which an investment would be sold in an orderly transaction between market participants at the measurement date.
All investments are valued at least quarterly based on quotations or other affirmative pricing from independent third-party sources, with the exception of investments priced directly by the Advisor which in the aggregate comprise less than 5% of the capitalization of the Partnership. Investments listed on a recognized exchange or market quotation system, whether U.S. or foreign, are valued using the closing price on the date of valuation.
Investments not listed on a recognized exchange or market quotation system, but for which reliable market quotations are readily available are valued using prices provided by a nationally recognized pricing service or by using quotations from broker-dealers.
Investments for which market quotations are either not readily available or are determined to be unreliable are priced at fair value using affirmative valuations performed by independent valuation services approved by the board of directors or, for investments aggregating less than 5% of the total capitalization of the Partnership, using valuations determined directly by the Advisor. Such valuations are determined under a documented valuation policy that has been reviewed and approved by the board of directors.
Pursuant to this policy, the Advisor provides recent portfolio company financial statements and other reporting materials to independent valuation firms as applicable, which firms evaluate such materials along with relevant observable market data to conduct independent appraisals each quarter, and their preliminary valuation conclusions are documented and discussed with senior management of the Advisor. The audit committee of the board of directors discusses the valuations, and the board of directors approves the fair value of the investments in good faith based on the input of the Advisor, the respective independent valuation firms as applicable, and the audit committee of the board of directors.
Generally, to increase objectivity in valuing the investments, the Advisor will utilize external measures of value, such as public markets or third-party transactions, whenever possible. The Advisor’s valuation is not based on long-term work-out value, immediate liquidation value, nor incremental value for potential changes that may take place in the future. The values assigned to investments are based on available information and do not necessarily represent amounts that might ultimately be realized, as these amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated. The foregoing policies apply to all investments, including any in companies and groups of affiliated companies aggregating more than 5% of the Partnership’s assets.
Fair valuations of investments in each asset class are determined using one or more methodologies including the market approach, income approach, or, in the case of recent investments, the cost approach, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. Such information may include observed multiples of earnings and/or revenues at which transactions in securities of comparable companies occur, with appropriate adjustments for differences in company size, operations or other factors affecting comparability.
The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present value amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. The discount rates used for such analyses reflect market yields for comparable investments, considering such factors as relative credit quality, capital structure, and other factors.
In following these approaches, the types of factors that may be taken into account also include, as relevant: available
23
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
2. Summary of Significant Accounting Policies — (continued)
current market data, including relevant and applicable market trading and transaction comparables, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables, comparable costs of capital, the principal market in which the investment trades and enterprise values, among other factors.
Investments may be categorized based on the types of inputs used in valuing such investments. The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Transfers between levels are recognized as of the beginning of the reporting period.
At September 30, 2017, the Partnership’s investments were categorized as follows:
Level | Basis for Determining Fair Value | Bank Debt | Other Corporate Debt | Equity Securities | ||||||||||
1 | Quoted prices in active markets for identical assets | $ | — | $ | — | $ | 87,613 | |||||||
2 | Other direct and indirect observable market inputs * | 140,288,886 | 11,443,750 | — | ||||||||||
3 | Independent third-party valuation sources that employ significant unobservable inputs | 1,239,716,175 | 71,846,156 | 63,217,780 | ||||||||||
3 | Advisor valuations with significant unobservable inputs | — | — | 2,150,127 | ||||||||||
$ | 1,380,005,061 | $ | 83,289,906 | $ | 65,455,520 | |||||||||
______________
* | For example, quoted prices in inactive markets or quotes for comparable investments |
Unobservable inputs used in the fair value measurement of Level 3 investments as of September 30, 2017 included the following:
Asset Type | Fair Value | Valuation Technique | Unobservable Input | Range (Weighted Avg.) | ||||||
Bank Debt | $ | 1,116,767,255 | Income approach | Discount rate | 5.8% - 27.5% (11.9%) | |||||
66,626,635 | Market quotations | Indicative bid/ask quotes | 1 (1) | |||||||
22,867,951 | Market comparable companies | Revenue multiples | 0.4x - 2.9x (1.1x) | |||||||
33,454,334 | Market comparable companies | EBITDA multiples | 3.4x - 9.5x (6.9x) | |||||||
Other Corporate Debt | 56,724,406 | Market quotations | Indicative bid/ask quotes | 1 - 11 (7) | ||||||
5,853,750 | Market comparable companies | Revenue multiples | 2.0x (2.0x) | |||||||
9,268,000 | Market comparable companies | EBITDA multiples | 8.0x (8.0x) | |||||||
Equity | 7,557,538 | Income approach | Discount rate | 4.0% - 19.5% (7.1%) | ||||||
30,631,924 | Market quotations | Indicative bid/ask quotes | 1 (1) | |||||||
3,516,942 | Market comparable companies | Revenue multiples | 0.3x - 4.4x (2.1x) | |||||||
23,661,503 | Market comparable companies | EBITDA multiples | 3.4x - 18.0x (9.0x) | |||||||
$ | 1,376,930,238 | |||||||||
24
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
2. Summary of Significant Accounting Policies — (continued)
Generally, a change in an unobservable input may result in a change to the value of an investment as follows:
Input | Impact to Value if Input Increases | Impact to Value if Input Decreases | ||
Discount rate | Decrease | Increase | ||
Revenue multiples | Increase | Decrease | ||
EBITDA multiples | Increase | Decrease | ||
Changes in investments categorized as Level 3 during the three months ended September 30, 2017 were as follows:
Independent Third-Party Valuation | |||||||||||
Bank Debt | Other Corporate Debt | Equity Securities | |||||||||
Beginning balance | $ | 1,131,662,534 | $ | 95,645,627 | $ | 65,359,889 | |||||
Net realized and unrealized gains (losses) | (1,698,366 | ) | (2,413,331 | ) | (539,557 | ) | |||||
Acquisitions * | 219,258,618 | 10,349,086 | 11,837,810 | ||||||||
Dispositions | (109,506,611 | ) | (31,735,226 | ) | (13,440,362 | ) | |||||
Ending balance | $ | 1,239,716,175 | $ | 71,846,156 | $ | 63,217,780 | |||||
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above) | $ | (1,940,418 | ) | $ | (2,413,332 | ) | $ | (2,625,120 | ) | ||
______________
* | Includes payments received in kind and accretion of original issue and market discounts |
Advisor Valuation | |||||||||||
Bank Debt | Other Corporate Debt | Equity Securities | |||||||||
Beginning balance | $ | — | $ | — | $ | 2,221,444 | |||||
Net realized and unrealized gains (losses) | — | — | (69,630 | ) | |||||||
Dispositions | — | — | (1,687 | ) | |||||||
Ending balance | $ | — | $ | — | $ | 2,150,127 | |||||
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above) | $ | — | $ | — | $ | (69,630 | ) | ||||
There were no transfers between Level 1 and 2 during the three months ended September 30, 2017.
25
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
2. Summary of Significant Accounting Policies — (continued)
Changes in investments categorized as Level 3 during the nine months ended September 30, 2017 were as follows:
Independent Third-Party Valuation | |||||||||||
Bank Debt | Other Corporate Debt | Equity Securities | |||||||||
Beginning balance | $ | 1,036,044,457 | $ | 101,934,853 | $ | 64,521,901 | |||||
Net realized and unrealized gains (losses) | (17,582,409 | ) | (3,758,757 | ) | 34,522 | ||||||
Acquisitions * | 559,544,251 | 25,582,996 | 28,384,223 | ||||||||
Dispositions | (307,732,609 | ) | (51,912,936 | ) | (27,845,217 | ) | |||||
Transfers out of Level 3 † | (30,557,515 | ) | — | — | |||||||
Reclassifications within Level 3 ‡ | — | — | (1,877,649 | ) | |||||||
Ending balance | $ | 1,239,716,175 | $ | 71,846,156 | $ | 63,217,780 | |||||
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above) | $ | (9,121,109 | ) | $ | (3,393,578 | ) | $ | 819,830 | |||
______________
* | Includes payments received in kind and accretion of original issue and market discounts |
† | Comprised of two investments that were transferred to Level 2 due to increased observable market activity |
‡ | Comprised of three investments that were reclassified to Advisor Valuation |
Advisor Valuation | |||||||||||
Bank Debt | Other Corporate Debt | Equity Securities | |||||||||
Beginning balance | $ | 107,199 | $ | — | $ | 1,560,161 | |||||
Net realized and unrealized gains (losses) | 65,797 | — | (1,285,996 | ) | |||||||
Acquisitions * | (20,962 | ) | — | — | |||||||
Dispositions | (152,034 | ) | — | (1,687 | ) | ||||||
Reclassifications within Level 3 † | — | — | 1,877,649 | ||||||||
Ending balance | $ | — | $ | — | $ | 2,150,127 | |||||
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above) | $ | — | $ | — | $ | (1,285,996 | ) | ||||
______________
* | Includes payments received in kind and accretion of original issue and market discounts |
† | Comprised of three investments that were reclassified from Independent Third-Party Valuation |
There were no transfers between Level 1 and 2 during the nine months ended September 30, 2017.
26
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
2. Summary of Significant Accounting Policies — (continued)
At December 31, 2016, the Partnership’s investments were categorized as follows:
Level | Basis for Determining Fair Value | Bank Debt | Other Corporate Debt | Equity Securities | ||||||||||
1 | Quoted prices in active markets for identical assets | $ | — | $ | — | $ | — | |||||||
2 | Other direct and indirect observable market inputs * | 89,800,173 | 21,001,126 | — | ||||||||||
3 | Independent third-party valuation sources that employ significant unobservable inputs | 1,036,044,457 | 101,934,853 | 64,521,901 | ||||||||||
3 | Advisor valuations with significant unobservable inputs | 107,199 | — | 1,560,161 | ||||||||||
Total | $ | 1,125,951,829 | $ | 122,935,979 | $ | 66,082,062 | ||||||||
______________
* | For example, quoted prices in inactive markets or quotes for comparable investments |
Unobservable inputs used in the fair value measurement of Level 3 investments as of December 31, 2016 included the following:
Asset Type | Fair Value | Valuation Technique | Unobservable Input | Range (Weighted Avg.) | ||||||
Bank Debt | $ | 847,311,244 | Income approach | Discount rate | 6.9% – 19.4% (12.1%) | |||||
136,116,277 | Market quotations | Indicative bid/ask quotes | 1 – 2 (1) | |||||||
24,851,412 | Market comparable companies | Revenue multiples | 0.4x – 2.6x (1.0x) | |||||||
27,872,723 | Market comparable companies | EBITDA multiples | 7.3x – 11.0x (8.4x) | |||||||
Other Corporate Debt | 88,163,213 | Market quotations | Indicative bid/ask quotes | 1(1) | ||||||
13,771,640 | Market comparable companies | EBITDA multiples | 7.6x – 7.8x (7.7x) | |||||||
Equity | 6,617,084 | Income approach | Discount rate | 7.3% – 26.2% (7.7%) | ||||||
41,442,919 | Market quotations | Indicative bid/ask quotes | 1(1) | |||||||
1,767,102 | Market comparable companies | Revenue multiples | 0.3x – 2.6x (1.6x) | |||||||
16,254,957 | Market comparable companies | EBITDA multiples | 5.0x – 11.0x (7.7x) | |||||||
$ | 1,204,168,571 | |||||||||
27
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
2. Summary of Significant Accounting Policies — (continued)
Changes in investments categorized as Level 3 during the three months ended September 30, 2016 were as follows:
Independent Third-Party Valuation | |||||||||||
Bank Debt | Other Corporate Debt | Equity Securities | |||||||||
Beginning balance | $ | 986,374,365 | $ | 108,247,783 | $ | 53,064,896 | |||||
Net realized and unrealized gains (losses) | 185,985 | 1,148,520 | (1,782,745 | ) | |||||||
Acquisitions * | 143,164,985 | 7,310,415 | 5,540,103 | ||||||||
Dispositions | (102,376,236 | ) | — | (3,007,459 | ) | ||||||
Transfers out of Level 3 † | — | (46,265,760 | ) | — | |||||||
Transfers into Level 3 ‡ | 6,502,839 | — | — | ||||||||
Reclassifications within Level 3 § | — | — | (320,682 | ) | |||||||
Ending balance | $ | 1,033,851,938 | $ | 70,440,958 | $ | 53,494,113 | |||||
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above) | $ | 2,587,265 | $ | 1,148,520 | $ | (1,782,745 | ) | ||||
______________
* | Includes payments received in kind and accretion of original issue and market discounts |
† | Comprised of two investments that transferred to Level 2 due to increased observable market activity |
‡ | Comprised of one investment that transferred from Level 2 due to reduced trading volumes |
§ | Comprised of one investment that reclassified to Advisor Valuation |
Advisor Valuation | |||||||||||
Bank Debt | Other Corporate Debt | Equity Securities | |||||||||
Beginning balance | $ | 146,365 | $ | — | $ | 1,855,336 | |||||
Net realized and unrealized gains (losses) | 3,093 | — | (319,764 | ) | |||||||
Dispositions | — | — | (102,763 | ) | |||||||
Reclassifications within Level 3 * | — | — | 320,682 | ||||||||
Ending balance | $ | 149,458 | $ | — | $ | 1,753,491 | |||||
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above) | $ | 3,093 | $ | — | $ | (420,896 | ) | ||||
______________
* | Comprised of one investment that reclassified from Independent Third-Party Valuation |
There were no transfers between Level 1 and 2 during the three months ended September 30, 2016.
28
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
2. Summary of Significant Accounting Policies — (continued)
Changes in investments categorized as Level 3 during the nine months ended September 30, 2016 were as follows:
Independent Third-Party Valuation | |||||||||||
Bank Debt | Other Corporate Debt | Equity Securities | |||||||||
Beginning balance | $ | 907,967,337 | $ | 89,314,530 | $ | 49,956,123 | |||||
Net realized and unrealized gains (losses) | 4,677,005 | (1,665,010 | ) | (5,662,544 | ) | ||||||
Acquisitions * | 324,878,794 | 23,280,718 | 19,764,729 | ||||||||
Dispositions | (249,281,514 | ) | — | (10,238,452 | ) | ||||||
Transfers out of Level 3 † | (5,492,400 | ) | (46,265,760 | ) | — | ||||||
Transfers into Level 3 ‡ | 51,102,716 | 5,776,480 | — | ||||||||
Reclassifications within Level 3 § | — | — | (325,743 | ) | |||||||
Ending balance | $ | 1,033,851,938 | $ | 70,440,958 | $ | 53,494,113 | |||||
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above) | $ | 7,944,054 | $ | (1,665,010 | ) | $ | (5,637,217 | ) | |||
______________
* | Includes payments received in kind and accretion of original issue and market discounts |
† | Comprised of three investments that transferred to Level 2 due to increased observable market activity |
‡ | Comprised of six investments that transferred from Level 2 due to reduced trading volumes |
§ | Comprised of two investments that reclassified to Advisor Valuation |
Advisor Valuation | |||||||||||
Bank Debt | Other Corporate Debt | Equity Securities | |||||||||
Beginning balance | $ | 1,124,504 | $ | — | $ | 2,428,217 | |||||
Net realized and unrealized losses | (923,349 | ) | — | (582,896 | ) | ||||||
Acquisitions * | 1,050,297 | — | 243 | ||||||||
Dispositions | (1,101,994 | ) | — | (417,816 | ) | ||||||
Reclassifications within Level 3 † | — | — | 325,743 | ||||||||
Ending balance | $ | 149,458 | $ | — | $ | 1,753,491 | |||||
Net change in unrealized appreciation/depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above) | $ | (881,282 | ) | $ | — | $ | (999,280 | ) | |||
______________
* | Includes payments received in kind and accretion of original issue and market discounts |
† | Comprised of two investments that reclassified from Independent Third-Party Valuation |
29
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
2. Summary of Significant Accounting Policies — (continued)
There were no transfers between Level 1 and 2 during the nine months ended September 30, 2016.
Investment Transactions
Investment transactions are recorded on the trade date, except for private transactions that have conditions to closing, which are recorded on the closing date. The cost of investments purchased is based upon the purchase price plus those professional fees which are specifically identifiable to the investment transaction. Realized gains and losses on investments are recorded based on the specific identification method, which typically allocates the highest cost inventory to the basis of investments sold.
Cash and Cash Equivalents
Cash consists of amounts held in accounts with brokerage firms and the custodian bank. Cash equivalents consist of highly liquid investments with an original maturity of generally three months or less. Cash equivalents are carried at amortized cost which approximates fair value. Cash equivalents are classified as Level 1 in the GAAP valuation hierarchy.
Restricted Investments
The Partnership may invest without limitation in instruments that are subject to legal or contractual restrictions on resale. These instruments generally may be resold to institutional investors in transactions exempt from registration or to the public if the securities are registered. Disposal of these investments may involve time-consuming negotiations and additional expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted investments is included at the end of the Consolidated Schedule of Investments. Restricted investments, including any restricted investments in affiliates, are valued in accordance with the investment valuation policies discussed above.
Foreign Investments
The Partnership may invest in instruments traded in foreign countries and denominated in foreign currencies. Foreign currency denominated investments comprised approximately 0.7% and 0.2% of total investments at September 30, 2017 and December 31, 2016, respectively. Such positions were converted at the respective closing foreign exchange rates in effect at September 30, 2017 and December 31, 2016 and reported in U.S. dollars. Purchases and sales of investments and income and expense items denominated in foreign currencies, when they occur, are translated into U.S. dollars based on the foreign exchange rates in effect on the respective dates of such transactions. The portion of gains and losses on foreign investments resulting from fluctuations in foreign currencies is included in net realized and unrealized gain or loss from investments.
Investments in foreign companies and securities of foreign governments may involve special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government. These risks include, among other things, revaluation of currencies, less reliable information about issuers, different transaction clearance and settlement practices, and potential future adverse political and economic developments. Moreover, investments in foreign companies and securities of foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies and the U.S. government.
Derivatives
In order to mitigate certain currency exchange and interest rate risks, the Partnership may enter into certain derivative transactions. All derivatives are subject to a master netting agreement and are reported at their gross amounts as either assets or liabilities in the Consolidated Statements of Assets and Liabilities. Transactions entered into are accounted
30
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
2. Summary of Significant Accounting Policies — (continued)
for using the mark-to-market method with the resulting change in fair value recognized in earnings for the current period. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in interest rates and the value of foreign currencies relative to the U.S. dollar. Certain derivatives may also require the Partnership to pledge assets as collateral to secure its obligations. The Partnership was required under the terms of its swap agreement to pledge assets as collateral to secure its obligation. As of September 30, 2017, $0.8 million of cash was held as collateral and was included in cash and cash equivalents in the Consolidated Statements of Assets and Liabilities.
During the nine months ended September 30, 2017, the Partnership entered into a cross currency basis swap with a notional amount of $7.2 million. The cross currency basis swap is reported in the Consolidated Statements of Assets and Liabilities as unrealized depreciation on swaps. Gains and losses from derivatives during the nine months ended September 30, 2017 were included in net realized and unrealized loss on investments in the Consolidated Statements of Operations as follows:
Instrument | Realized Gains (Losses) | Unrealized Gains (Losses) | ||||||
Cross currency basis swap | $ | — | $ | (470,202 | ) | |||
During the nine months ended September 30, 2016, the Partnership entered into a GBP put option with a notional amount of £2.7 million. During the nine months ended September 30, 2016, the Partnership's interest rate cap with a notional amount of $25.0 million expired and the Partnership exited a cross currency swap with a notional amount of $16.4 million. Gains and losses from derivatives during the nine months ended September 30, 2016 were included in net realized and unrealized loss on investments in the Consolidated Statements of Operations as follows:
Instrument | Realized Gains (Losses) | Unrealized Gains (Losses) | ||||||
Put option | $ | — | $ | 460,972 | ||||
Cross currency basis swap | 2,746,072 | (3,229,442 | ) | |||||
Interest rate cap | (51,750 | ) | 51,750 | |||||
Valuations of derivatives are determined using observable market inputs other than quoted prices in active markets for identical assets and, accordingly, are classified as Level 2 in the GAAP valuation hierarchy.
Deferred Debt Issuance Costs
Costs of approximately $1.1 million were incurred during 2017 in connection with extending the TCPC Funding Facility (see Note 4). Costs of approximately $0.4 million and $1.2 million were incurred during 2017 and 2016, respectively, in connection with placing the SBA Debentures (see Note 4). These costs were deferred and are being amortized on a straight-line basis over the estimated life of the respective instruments. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Partnership.
31
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
2. Summary of Significant Accounting Policies — (continued)
Revenue Recognition
Interest and dividend income, including income paid in kind, is recorded on an accrual basis. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts, earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment, as are end-of-term or exit fees receivable upon repayment of a debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income due upon the early repayment of a loan or debt security are recognized when earned and are included in interest income.
Certain debt investments are purchased at a discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. Discounts on the acquisition of corporate bonds are generally amortized using the effective-interest or constant-yield method assuming there are no questions as to collectability. When principal payments on a loan are received in an amount in excess of the loan’s amortized cost, the excess principal payments are recorded as interest income.
Income Taxes
The income or loss of the Partnership, TCPC Funding and the SBIC is reported in the respective partners’ income tax returns. Consequently, no income taxes are paid at the partnership level or reflected in the Partnership’s financial statements. In accordance with ASC Topic 740 - Income Taxes, the Partnership recognizes in its consolidated financial statements the effect of a tax position when it is determined that such position is more likely than not, based on the technical merits, to be sustained upon examination. The tax returns of the Partnership, TCPC Funding and the SBIC remain open for examination by tax authorities for a period of three years from the date they are filed. No such examinations are currently pending.
Cost and unrealized appreciation and depreciation of the Partnership’s investments (including derivatives) for U.S. federal income tax purposes at September 30, 2017 and December 31, 2016 were as follows:
September 30, 2017 | December 31, 2016 | ||||||
Unrealized appreciation | $ | 41,846,827 | $ | 33,945,996 | |||
Unrealized depreciation | (73,916,191 | ) | (65,041,945 | ) | |||
Net unrealized depreciation | $ | (32,069,364 | ) | $ | (31,095,949 | ) | |
Cost | $ | 1,560,349,649 | $ | 1,346,065,819 | |||
Recent Accounting Pronouncements
During the first quarter of 2016, the Partnership adopted Financial Accounting Standards Board (the “FASB”) Accounting Standards Update (“ASU”) 2015-02, Amendments to the Consolidation Analysis. In particular, the new pronouncement changed the manner in which a reporting entity evaluates whether 1) an entity is a variable interest entity (“VIE”), 2) fees paid to decision makers or service providers are variable interests in a VIE, and 3) variable interests in a VIE held by related parties require the reporting entity to consolidate the VIE. The pronouncement also introduced a separate consolidation analysis specific to limited partnerships and similar entities. ASU 2015-02 also eliminated the VIE consolidation model based on majority exposure to variability that applied to certain investment
32
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
2. Summary of Significant Accounting Policies — (continued)
companies and similar entities. The adoption of this pronouncement did not have a material impact on the Partnership’s consolidated financial statements.
The Partnership also adopted ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs as well as ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015. Together, these ASUs required, in most cases, that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. Debt issuance costs incurred in connection with line-of-credit arrangements, however, may continue to be presented as an asset in the balance sheet. The adoption of these ASUs resulted in the reclassification of certain debt issuance costs related to the Term Loan and SBA Debentures (as defined in Note 4) from deferred debt issuance costs to debt in the Consolidated Statements of Assets and Liabilities. As of September 30, 2017 and December 31, 2016, $2.8 million and $2.7 million in debt issuance costs, respectively, were included in debt in the Consolidated Statements of Assets and Liabilities.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. Under this new pronouncement, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 applies to all entities and, for public entities, is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early application is permitted, but no earlier than annual periods beginning after December 15, 2016 and interim periods within that reporting period. The Partnership does not expect adoption of this pronouncement to have a material impact on its consolidated financial statements.
On January 5, 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The more significant changes to the current GAAP model resulting from ASU 2016-01 include 1) elimination of the requirement to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost, 2) requiring public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and 3) requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. ASU 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early application is permitted. The Partnership does not expect adoption of this pronouncement to have a material impact on its consolidated financial statements.
On March 30, 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain callable debt securities purchased at a premium, shortening the period to the earliest call date. ASU 2017-08 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Partnership does not expect the adoption of this pronouncement to have a material impact on the Partnership’s consolidated financial statements.
In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, the “Final Rules”) intended to modernize the reporting and disclosure of information by registered investment companies and business development companies. In part, the Final Rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X was August 1, 2017, and the Company has implemented the applicable requirements into this report, namely the standardized reporting of derivatives in the consolidated schedule of investments, disclosure of investments that had valuations which included certain unobservable inputs that were significant to the valuation as a whole and disclosure of realized gains/(losses) on controlled affiliated investments.
33
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
3. Management Fees, Incentive Compensation and Other Expenses
The Partnership’s management fee is calculated at an annual rate of 1.5% of total assets (excluding cash and cash equivalents) of TCPC on a consolidated basis as of the beginning of each quarter and is payable to the Advisor quarterly in arrears.
Incentive compensation is only paid to the extent that TCPC's total performance exceeds a cumulative 8% annual return since January 1, 2013 (the “Total Return Hurdle”). The incentive compensation equals 20% of net investment income (reduced by preferred dividends) and 20% of net realized gains (reduced by any net unrealized losses), subject to the Total Return Hurdle. The incentive compensation is payable quarterly in arrears as an allocation and distribution to the General Partner and is calculated as the difference between cumulative incentive compensation earned since January
1, 2013 and cumulative incentive compensation paid since January 1, 2013. A reserve for incentive compensation is allocated to the account of the General Partner based on the amount of additional incentive compensation that would have been distributable to the General Partner assuming a hypothetical liquidation of TCPC and the Partnership at net asset value on the balance sheet date. The General Partner’s equity interest in the Partnership is comprised entirely of such reserve amount, if any. As of September 30, 2017 and December 31, 2016, no such reserve was allocated.
The Partnership bears all expenses incurred in connection with its business, including fees and expenses of outside contracted services, such as custodian, administrative, legal, audit and tax preparation fees, costs of valuing investments, insurance costs, brokers’ and finders’ fees relating to investments, and any other transaction costs associated with the purchase and sale of investments.
4. Leverage
Leverage is comprised of amounts outstanding under a term loan issued by the Partnership (the “Term Loan”) prior to its full repayment on August 9, 2017, amounts outstanding under a senior secured revolving credit facility issued by the Partnership (the “SVCP Revolver” and together with the Term Loan prior to its full repayment on August 9, 2017, the “SVCP Facility”), amounts outstanding under a senior secured revolving credit facility issued by TCPC Funding (the “TCPC Funding Facility”), and debentures guaranteed by the SBA (the “SBA Debentures”).
Total leverage outstanding and available at September 30, 2017 was as follows:
Maturity | Rate | Carrying Value | Available | Total Capacity | |||||||||||
SVCP Revolver | 2018 | L+2.50%* | $ | 30,000,000 | $ | 86,000,000 | $ | 116,000,000 | |||||||
TCPC Funding Facility | 2021 | L+2.50%† | 200,000,000 | 150,000,000 | 350,000,000 | ||||||||||
SBA Debentures | 2024−2027 | 2.57%‡ | 75,000,000 | 75,000,000 | 150,000,000 | ||||||||||
Total leverage | 305,000,000 | $ | 311,000,000 | $ | 616,000,000 | ||||||||||
Unamortized issuance costs | (2,750,014 | ) | |||||||||||||
Debt, net of unamortized issuance costs | $ | 302,249,986 | |||||||||||||
______________
* | Based on either LIBOR or the lender’s cost of funds, subject to certain limitations |
† | Or L+2.25% subject to certain funding requirements |
‡ | Weighted-average interest rate, excluding fees of 0.36%. |
34
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
4. Leverage — (continued)
Total leverage outstanding and available at December 31, 2016 was as follows:
Maturity | Rate | Carrying Value | Available | Total Capacity | |||||||||||
SVCP Facility | |||||||||||||||
SVCP Revolver | 2018 | L+2.50%* | $ | — | $ | 116,000,000 | $ | 116,000,000 | |||||||
Term Loan | 2018 | L+2.50%* | 100,500,000 | — | 100,500,000 | ||||||||||
TCPC Funding Facility | 2020 | L+2.50%† | 175,000,000 | 175,000,000 | 350,000,000 | ||||||||||
SBA Debentures | 2024−2026 | 2.58%‡ | 61,000,000 | 89,000,000 | 150,000,000 | ||||||||||
Total leverage | 336,500,000 | $ | 380,000,000 | $ | 716,500,000 | ||||||||||
Unamortized issuance costs | (2,712,574 | ) | |||||||||||||
Debt, net of unamortized issuance costs | $ | 333,787,426 | |||||||||||||
______________
* | Based on either LIBOR or the lender’s cost of funds, subject to certain limitations |
† | Or L+2.25% subject to certain funding requirements |
‡ | Weighted-average interest rate, excluding fees of 0.36% |
The combined weighted-average interest rates on total leverage outstanding at September 30, 2017 and December 31, 2016 were 3.49% and 3.23%, respectively.
Total expenses related to debt include:
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Interest expense | $ | 9,416,125 | $ | 9,474,529 | |||
Amortization of deferred debt issuance costs | 1,541,529 | 1,392,804 | |||||
Commitment fees | 1,195,229 | 891,192 | |||||
Total | $ | 12,152,883 | $ | 11,758,525 | |||
Outstanding leverage is carried at amortized cost in the Consolidated Statements of Assets and Liabilities. As of September 30, 2017, the estimated fair values of the SVCP Revolver, the TCPC Funding Facility and the SBA Debentures approximated their carrying values. The estimated fair values of the SVCP Revolver, the TCPC Funding Facility and the SBA Debentures are determined by discounting projected remaining payments using market interest rates for borrowings of the Partnership and entities with similar credit risks at the measurement date. At September 30, 2017, the estimated fair values of the SVCP Revolver, the TCPC Funding Facility and the SBA Debentures as prepared for disclosure purposes were deemed to be Level 3 in the GAAP valuation hierarchy.
35
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
4. Leverage — (continued)
SVCP Facility
The SVCP Facility consists of a senior secured revolving credit facility which provides for amounts to be drawn up to $116.0 million, subject to certain collateral and other restrictions (the "SVCP Revolver") and, prior to its full repayment on August 9, 2017, a $100.5 million senior secured term loan. The SVCP Revolver matures on July 31, 2018. Most of the cash and investments held directly by the Operating Company, as well as the net assets of TCPC Funding and the SBIC, are included in the collateral for the facility.
Advances under the SVCP Revolver bear interest at an annual rate of 2.50% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). In addition to amounts due on outstanding debt, the SVCP Revolver accrues commitment fees of 0.20% per annum on the unused portion of the facility, or 0.25% per annum when less than $46.4 million in borrowings are outstanding. The SVCP Revolver may be terminated, and any outstanding amounts thereunder may become due and payable, should the Partnership fail to satisfy certain financial or other covenants. As of September 30, 2017, the Partnership was in full compliance with such covenants.
SBA Debentures
As of September 30, 2017, the SBIC is able to issue up to $150.0 million in SBA Debentures, subject to funded regulatory capital and other customary regulatory requirements. As of September 30, 2017, the Partnership had committed $75.0 million of regulatory capital to the SBIC, all of which had been funded. SBA Debentures are non-recourse and may be prepaid at any time without penalty. Once drawn, the SBIC debentures bear an interim interest rate of LIBOR plus 30 basis points. The rate then becomes fixed at the time of SBA pooling, which occurs twice each year, and is set to the then-current 10-year treasury rate plus a spread and an annual SBA charge.
SBA Debentures outstanding as of September 30, 2017 were as follows:
Issuance Date | Maturity | Debenture Amount | Fixed Interest Rate | SBA Annual Charge | ||||||||
September 24, 2014 | September 1, 2024 | $ | 18,500,000 | 3.02 | % | 0.36 | % | |||||
March 25, 2015 | March 1, 2025 | 9,500,000 | 2.52 | % | 0.36 | % | ||||||
September 23, 2015 | September 1, 2025 | 10,800,000 | 2.83 | % | 0.36 | % | ||||||
March 23, 2016 | March 1, 2026 | 4,000,000 | 2.51 | % | 0.36 | % | ||||||
September 21, 2016 | September 1, 2026 | 18,200,000 | 2.05 | % | 0.36 | % | ||||||
September 20, 2017 | September 1, 2027 | $ | 14,000,000 | 2.52 | % | 0.36 | % | |||||
$ | 75,000,000 | 2.57 | % | * | ||||||||
_____________
* | Weighted-average interest rate |
SBA Debentures outstanding as of December 31, 2016 were as follows:
36
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
4. Leverage — (continued)
Issuance Date | Maturity | Debenture Amount | Fixed Interest Rate | SBA Annual Charge | ||||||||
September 24, 2014 | September 1, 2024 | $ | 18,500,000 | 3.02 | % | 0.36 | % | |||||
March 25, 2015 | March 1, 2025 | 9,500,000 | 2.52 | % | 0.36 | % | ||||||
September 23, 2015 | September 1, 2025 | 10,800,000 | 2.83 | % | 0.36 | % | ||||||
March 23, 2016 | March 1, 2026 | 4,000,000 | 2.51 | % | 0.36 | % | ||||||
September 21, 2016 | September 1, 2026 | 18,200,000 | 2.05 | % | 0.36 | % | ||||||
$ | 61,000,000 | 2.58 | % | * | ||||||||
______________
* | Weighted-average interest rate |
TCPC Funding Facility
The TCPC Funding Facility is a senior secured revolving credit facility which provides for amounts to be drawn up to $350.0 million, subject to certain collateral and other restrictions. The facility matures on April 26, 2021, subject to extension by the lender at the request of TCPC Funding. The facility contains an accordion feature which allows for expansion of the facility to up to $400.0 million subject to consent from the lender and other customary conditions. The cash and investments of TCPC Funding are included in the collateral for the facility.
Borrowings under the TCPC Funding Facility bear interest at a rate of LIBOR plus either 2.25% or 2.50% per annum, subject to certain funding requirements, plus an administrative fee of 0.25% per annum. In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.50% per annum on the unused portion of the facility, or 0.75% per annum when the unused portion is greater than 33% of the total facility, plus an administrative fee of 0.25% per annum. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should TCPC Funding fail to satisfy certain financial or other covenants. As of September 30, 2017, TCPC Funding was in full compliance with such covenants.
5. Commitments, Contingencies, Concentration of Credit Risk and Off-Balance Sheet Risk
The Partnership, TCPC Funding and the SBIC conduct business with brokers and dealers that are primarily headquartered in New York and Los Angeles and are members of the major securities exchanges. Banking activities are conducted with a firm headquartered in the San Francisco area.
In the normal course of business, investment activities involve executions, settlement and financing of various transactions resulting in receivables from, and payables to, brokers, dealers and the custodian. These activities may expose the Partnership to risk in the event that such parties are unable to fulfill contractual obligations. Management does not anticipate any material losses from counterparties with whom it conducts business. Consistent with standard business practice, the Partnership, TCPC Funding and the SBIC enter into contracts that contain a variety of indemnifications, and are engaged from time to time in various legal actions. The maximum exposure under these arrangements and activities is unknown. However, management expects the risk of material loss to be remote.
37
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
5. Commitments, Contingencies, Concentration of Credit Risk and Off-Balance Sheet Risk — (continued)
The Consolidated Schedules of Investments include certain revolving loan facilities and other commitments with unfunded balances at September 30, 2017 and December 31, 2016 as follows:
Unfunded Balances | ||||||||||
Issuer | Maturity | September 30, 2017 | December 31, 2016 | |||||||
Alera Group Intermediate Holdings, Inc. | 12/30/2021 | $ | 708,333 | $ | 833,333 | |||||
Alera Group Intermediate Holdings, Inc. | 12/30/2022 | 759,546 | 759,547 | |||||||
Alpheus Communications, LLC | 5/31/2018 | 357,419 | 357,419 | |||||||
AP Gaming I, LLC | 12/20/2018 | N/A | 12,500,000 | |||||||
Applause App Quality, Inc. | 9/20/2022 | 1,509,820 | N/A | |||||||
Asset International, Inc. | 7/1/2021 | 1,325,721 | 1,325,721 | |||||||
Auto Trakk SPV, LLC | 12/21/2021 | 3,827,058 | 3,827,058 | |||||||
Bisnow, LLC | 4/29/2021 | 1,200,000 | 1,200,000 | |||||||
Caliber Home Loans, Inc. | 6/30/2020 | 4,444,444 | 6,666,667 | |||||||
Edmentum, Inc. | 6/9/2020 | 3,368,586 | 3,368,586 | |||||||
Enerwise Global Technologies, Inc. | 11/30/2017 | 4,000,000 | 4,000,000 | |||||||
Foursquare Labs, Inc. | 6/1/2020 | 3,750,000 | N/A | |||||||
GlassPoint Solar, Inc. | 8/1/2020 | 16,000,000 | N/A | |||||||
Hylan Datacom & Electrical, LLC | 7/25/2016 | N/A | 1,247,989 | |||||||
iGM RFE1 B.V. | 10/12/2021 | N/A | 855,935 | |||||||
InMobi, Inc. | 12/31/2019 | 8,299,181 | 7,500,000 | |||||||
Marketo, Inc. | 8/16/2021 | 1,704,545 | 1,704,545 | |||||||
Mesa Airlines, Inc. | 2/28/2022 | N/A | 9,268,182 | |||||||
Mesa Airlines, Inc. | 12/31/2022 | N/A | 9,731,591 | |||||||
Patient Point Network Solutions, LLC | 6/26/2022 | 440,474 | N/A | |||||||
Pegasus Business Intelligence, LP (Onyx Centersource) | 12/20/2021 | 581,841 | 671,356 | |||||||
Pulse Secure, LLC | 5/1/2022 | 1,342,516 | N/A | |||||||
RM OpCo, LLC (Real Mex) | 3/30/2018 | 188,903 | N/A | |||||||
Tradeshift Holdings, Inc. | 9/1/2020 | 9,941,115 | N/A | |||||||
VSS-Southern Holdings, LLC | 11/3/2020 | 856,164 | 856,164 | |||||||
Videology Tech Technologies, LLC | 1/10/2020 | 9,202,379 | N/A | |||||||
Xactly Corporation | 7/31/2022 | 1,405,501 | N/A | |||||||
Total Unfunded Balances | $ | 75,213,546 | $ | 66,674,093 | ||||||
38
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
6. Related Party Transactions
TCPC, the Partnership, TCPC Funding, the SBIC, the Advisor, the General Partner and their members and affiliates may be considered related parties. From time to time, the Partnership advances payments to third parties on behalf of TCPC which are reimbursable through deductions from distributions to TCPC. At September 30, 2017 and December 31, 2016, no such amounts were outstanding. From time to time, the Advisor advances payments to third parties on behalf of the Partnership and receives reimbursement from the Partnership. At September 30, 2017 and December 31, 2016, amounts reimbursable to the Advisor totaled 0.7 million and 0.3 million, respectively, as reflected in the Consolidated Statements of Assets and Liabilities.
Pursuant to an administration agreements between the Administrator and the Partnership (the “Administration Agreement”), the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to the Partnership, as well as costs and expenses incurred by the Administrator or its affiliates relating to any administrative, operating, or other non-investment advisory services provided by the Administrator or its affiliates to the Partnership. For the nine months ended September 30, 2017 and 2016, expenses allocated pursuant to the Administration Agreements totaled $1.7 million and $1.3 million, respectively.
7. Distributions
The Partnership’s distributions are recorded on the record date. The timing of distributions is determined by the General Partner, which has provided the Advisor with certain criteria for such distributions.
8. Subsequent Events
On November 7, 2017, TCPC’s board of directors declared a fourth quarter regular dividend of $0.36 per share payable on December 29, 2017 to stockholders of record as of the close of business on December 15, 2017.
39
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (Unaudited) (Continued)
September 30, 2017
9. Financial Highlights
The financial highlights with respect to the common limited partner are as follows:
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Return on invested assets (1), (2) | 8.7 | % | 8.7 | % | |||
Gross return to common limited partner (1) | 7.9 | % | 9.0 | % | |||
Less: General Partner incentive allocation (1) | (1.6 | )% | (1.8 | )% | |||
Return to common limited partner (1), (3) | 6.3 | % | 7.2 | % | |||
Ratios to average common equity: (4) | |||||||
Net investment income | 9.5 | % | 10.0 | % | |||
Expenses | 3.9 | % | 4.5 | % | |||
Expenses and General Partner allocation | 5.3 | % | 6.1 | % | |||
Ending net assets attributable to common limited partner | $ | 1,243,969,860 | $ | 1,026,886,283 | |||
Portfolio turnover rate (1) | 31.1 | % | 23.8 | % | |||
Weighted-average leverage outstanding | $ | 332,714,286 | $ | 404,391,241 | |||
Weighted-average interest rate on leverage | 3.8 | % | 3.1 | % | |||
______________
(1) | Not annualized. |
(2) | Return on invested assets is a time-weighted, geometrically linked rate of return and excludes cash and cash equivalents. |
(3) | Returns (net of allocations to General Partner and Partnership expenses, including financing costs and management fees) are calculated on a monthly geometrically linked, time-weighted basis. |
(4) | Net investment income and expenses annualized. General Partner allocation not annualized. |
40
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Changes in Investments in Affiliates(1) (Unaudited)
Nine months ended September 30, 2017
Security | Dividends or Interest (2) | Fair Value at December 31, 2016 | Net realized gain or loss | Net increase or decrease in unrealized appreciation or depreciation | Acquisitions (3) | Dispositions (4) | Fair Value at September 30, 2017 | |||||||||||||||||||||
36th Street Capital Partners Holdings, LLC, Membership Units | $ | — | $ | 6,818,897 | $ | — | $ | 2,362,761 | $ | 1,876,574 | $ | (1,612,852 | ) | $ | 9,445,380 | |||||||||||||
36th Street Capital Partners Holdings, LLC, Senior Note, 12%, due 11/1/20 | 2,814,491 | 29,203,304 | — | — | 10,323,288 | (17,829,721 | ) | 21,696,871 | ||||||||||||||||||||
AGY Holding Corp., Common Stock | — | — | — | — | — | — | — | |||||||||||||||||||||
AGY Holding Corp., Senior Secured 2nd Lien Notes, 11%, due 11/15/16 | 764,610 | 9,268,000 | — | — | — | — | 9,268,000 | |||||||||||||||||||||
AGY Holding Corp., Senior Secured Delayed Draw Term Loan, 12%, due 9/15/18 | 95,472 | 1,049,147 | — | (1 | ) | — | — | 1,049,146 | ||||||||||||||||||||
AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16 | 443,133 | 4,869,710 | — | (133 | ) | — | — | 4,869,577 | ||||||||||||||||||||
Anacomp, Inc., Class A Common Stock | — | 1,205,306 | — | 50,221 | — | — | 1,255,527 | |||||||||||||||||||||
Conergy Asia Holdings Limited, Class B Shares | — | — | — | 7,900 | 1,000,000 | 1,007,900 | ||||||||||||||||||||||
Conergy Asia Holdings Limited, Ordinary Shares | — | — | — | — | 7,833,333 | (6,005,729 | ) | 1,827,604 | ||||||||||||||||||||
Edmentum Ultimate Holdings, LLC, Junior PIK Notes, 10%, due 6/9/20 | 1,123,796 | 12,101,483 | — | (2,034,497 | ) | 1,106,331 | — | 11,173,317 | ||||||||||||||||||||
Edmentum Ultimate Holdings, LLC, Senior PIK Notes, 8.5%, due 6/9/20 | 190,177 | 2,846,246 | — | — | 187,429 | — | 3,033,675 | |||||||||||||||||||||
Edmentum, Inc., Junior Revolving Facility, 5%, due 6/9/20 | 78,261 | — | — | — | 3,368,589 | (3,368,589 | ) | — | ||||||||||||||||||||
Edmentum Ultimate Holdings, LLC, Class A Common Units | — | 1,123,591 | — | (1,121,996 | ) | — | — | 1,595 | ||||||||||||||||||||
EPMC HoldCo, LLC, Membership Units | — | 210,035 | — | — | — | — | 210,035 | |||||||||||||||||||||
Essex Ocean II, LLC, Membership Units | — | 159,045 | — | (159,045 | ) | — | — | — | ||||||||||||||||||||
Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18 | 973,215 | 14,480,002 | — | (1,033,747 | ) | 373 | (37,320 | ) | 13,409,308 | |||||||||||||||||||
Iracore International Holdings, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 9%, 1% LIBOR Floor, due 4/13/21 | 91,711 | — | — | — | 1,900,733 | — | 1,900,733 | |||||||||||||||||||||
Iracore Investments Holdings, Inc., Class A Common Stock | — | — | — | (1,143,868 | ) | 4,177,710 | — | 3,033,842 | ||||||||||||||||||||
KAGY Holding Company, Inc., Series A Preferred Stock | — | 4,607,246 | — | 6,414,295 | — | 11,021,541 | ||||||||||||||||||||||
Kawa Solar Holdings Limited, Bank Guarantee Credit Facility, 8.2% Cash + 3.5% PIK, due 7/2/17 | 1,614,803 | 21,276,653 | — | (771,618 | ) | 267,919 | (4,072,441 | ) | 16,700,513 | |||||||||||||||||||
Kawa Solar Holdings Limited, Revolving Credit Facility, 8.2%, due 7/2/17 | 291,522 | 4,000,000 | — | — | 2,072,441 | — | 6,072,441 | |||||||||||||||||||||
Kawa Solar Holdings Limited, Ordinary Shares | — | — | — | — | — | — | — | |||||||||||||||||||||
Kawa Solar Holdings Limited, Series B Preferred Shares | — | 1,395,350 | — | (1,395,340 | ) | 233 | — | 243 | ||||||||||||||||||||
RM Holdco, LLC, Equity Participation | — | — | — | — | — | — | — | |||||||||||||||||||||
RM Holdco, LLC, Membership Units | 94,458 | — | — | — | — | — | — | |||||||||||||||||||||
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 7%, due 3/21/16 | 259,194 | 4,871,284 | — | — | 20,813 | — | 4,892,097 | |||||||||||||||||||||
RM OpCo, LLC, Senior Secured 2nd Lien Term Loan Tranche B, 8.5%, due 3/30/18 | 644,597 | 3,154,770 | — | (3,799,525 | ) | 644,755 | — | — | ||||||||||||||||||||
RM OpCo, LLC, Senior Secured 2nd Lien Term Loan Tranche B-1, 8.5%, due 3/30/18 | 203,774 | 3,049,555 | — | (576,038 | ) | 203,055 | — | 2,676,572 | ||||||||||||||||||||
RM OpCo, LLC, Convertible 2nd Lien Term Loan Tranche B-1, 8.5%, due 3/30/18 | 129,857 | 1,943,371 | — | (367,088 | ) | 129,400 | — | 1,705,683 | ||||||||||||||||||||
RM OpCo, LLC, Senior Convertible 2nd Lien Term Loan B, 8.5%, due 3/30/18 | 367,755 | 4,251,368 | — | — | 2,238,735 | — | 6,490,103 | |||||||||||||||||||||
United N659UA-767, LLC (N659UA) | 119,856 | 3,191,938 | — | 62,801 | (271,381 | ) | 2,983,358 | |||||||||||||||||||||
United N661UA-767, LLC (N661UA) | 103,515 | 3,266,101 | — | 78,880 | (287,722 | ) | 3,057,259 | |||||||||||||||||||||
Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units | — | 1,530,000 | — | (1,529,500 | ) | — | — | 500 | ||||||||||||||||||||
______________
Notes to Consolidated Schedule of Changes in Investments in Affiliates:
(1) | The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Partnership of 5% or more of the issuers’ voting securities. |
(2) | Also includes fee and lease income as applicable. |
(3) | Acquisitions include new purchases, PIK income and amortization of original issue and market discounts. |
(4) | Dispositions include decreases in the cost basis from sales, paydowns, mortgage amortizations and aircraft depreciation. |
41
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Changes in Investments in Affiliates(1)
Year Ended December 31, 2016
Security | Dividends or Interest(2) | Fair Value at December 31, 2015 | Net realized gain or loss | Net increase or decrease in unrealized appreciation or depreciation | Acquisitions(3) | Dispositions(4) | Fair Value at December 31, 2016 | |||||||||||||||||||||
36th Street Capital Partners Holdings, LLC, Membership Units | $ | — | $ | 225,000 | $ | — | $ | — | $ | 6,593,897 | $ | — | $ | 6,818,897 | ||||||||||||||
36th Street Capital Partners Holdings, LLC, Subordinated Promissory Note, 12%, due 11/1/20 | 1,921,851 | 900,000 | — | — | 28,303,304 | — | 29,203,304 | |||||||||||||||||||||
AGY Holding Corp., Senior Secured 2nd Lien Notes, 11%, due 11/15/16 | 1,019,480 | 9,268,000 | — | — | — | — | 9,268,000 | |||||||||||||||||||||
AGY Holding Corp., Senior Secured Delayed Draw Term Loan, 12%, due 9/15/18 | 20,074 | — | — | — | 1,049,147 | — | 1,049,147 | |||||||||||||||||||||
AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16 | 594,088 | 4,869,577 | — | — | 133 | — | 4,869,710 | |||||||||||||||||||||
Anacomp, Inc., Class A Common Stock | — | 1,581,964 | — | (376,658 | ) | — | — | 1,205,306 | ||||||||||||||||||||
Edmentum Ultimate Holdings, LLC, Junior PIK Notes, 10%, due 6/9/20 | 1,381,227 | 11,343,490 | — | (605,002 | ) | 1,362,995 | — | 12,101,483 | ||||||||||||||||||||
Edmentum Ultimate Holdings, LLC, Senior PIK Notes, 8.5%, due 6/9/20 | 236,640 | 2,612,408 | — | — | 233,838 | — | 2,846,246 | |||||||||||||||||||||
Edmentum, Inc., Junior Revolving Facility, 5%, due 6/9/20 | 51,210 | — | — | — | 2,762,241 | (2,762,241 | ) | — | ||||||||||||||||||||
Edmentum Ultimate Holdings, LLC, Class A Common Units | — | 680,218 | — | — | 443,373 | — | 1,123,591 | |||||||||||||||||||||
EPMC HoldCo, LLC, Membership Units | — | 682,614 | 417,445 | (472,579 | ) | — | (417,445 | ) | 210,035 | |||||||||||||||||||
Essex Ocean II, LLC, Membership Units | — | 200,686 | — | 54,390 | — | (96,031 | ) | 159,045 | ||||||||||||||||||||
Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18 | 1,316,646 | 14,256,233 | — | 371,555 | 1,493 | (149,279 | ) | 14,480,002 | ||||||||||||||||||||
KAGY Holding Company, Inc., Series A Preferred Stock | — | 6,118,515 | — | (1,511,269 | ) | — | — | 4,607,246 | ||||||||||||||||||||
Kawa Solar Holdings Limited, Bank Guarantee Credit Facility, 8.2% Cash + 3.5% PIK, due 7/2/17 | 2,475,897 | 25,000,000 | — | — | (3,723,347 | ) | — | 21,276,653 | ||||||||||||||||||||
Kawa Solar Holdings Limited, Revolving Credit Facility, 8.2%, due 7/2/17 | 93,425 | — | — | — | 4,000,000 | — | 4,000,000 | |||||||||||||||||||||
Kawa Solar Holdings Limited, Ordinary Shares | — | — | — | — | — | — | — | |||||||||||||||||||||
Kawa Solar Holdings Limited, Series B Preferred Shares | — | — | — | — | 1,395,350 | — | 1,395,350 | |||||||||||||||||||||
N659UA Aircraft Secured Mortgage, 12%, due 2/28/16 | 4,554 | 318,980 | — | (5,665 | ) | — | (313,315 | ) | — | |||||||||||||||||||
N661UA Aircraft Secured Mortgage, 12%, due 5/4/16 | 11,822 | 570,303 | — | (12,619 | ) | — | (557,684 | ) | — | |||||||||||||||||||
N913DL Aircraft Secured Mortgage, 8%, due 3/15/17 | 2,322 | 115,617 | — | (1,421 | ) | — | (114,196 | ) | — | |||||||||||||||||||
N918DL Aircraft Secured Mortgage, 8%, due 8/15/18 | 5,109 | 237,494 | — | (4,275 | ) | — | (233,219 | ) | — | |||||||||||||||||||
N954DL Aircraft Secured Mortgage, 8%, due 3/20/19 | 7,829 | 342,734 | — | (6,180 | ) | — | (336,554 | ) | — | |||||||||||||||||||
N955DL Aircraft Secured Mortgage, 8%, due 6/20/19 | 8,463 | 369,162 | — | (6,930 | ) | — | (362,232 | ) | — | |||||||||||||||||||
N956DL Aircraft Secured Mortgage, 8%, due 5/20/19 | 8,365 | 365,197 | — | (6,817 | ) | — | (358,380 | ) | — | |||||||||||||||||||
N957DL Aircraft Secured Mortgage, 8%, due 6/20/19 | 8,537 | 372,392 | — | (6,991 | ) | — | (365,401 | ) | — | |||||||||||||||||||
N959DL Aircraft Secured Mortgage, 8%, due 7/20/19 | 8,708 | 379,522 | — | (7,161 | ) | — | (372,361 | ) | — | |||||||||||||||||||
N960DL Aircraft Secured Mortgage, 8%, due 10/20/19 | 9,289 | 403,869 | — | (7,700 | ) | — | (396,169 | ) | — | |||||||||||||||||||
N961DL Aircraft Secured Mortgage, 8%, due 8/20/19 | 9,028 | 393,115 | — | (7,448 | ) | — | (385,667 | ) | — | |||||||||||||||||||
N976DL Aircraft Secured Mortgage, 8%, due 2/15/18 | 4,636 | 218,321 | — | (3,635 | ) | — | (214,686 | ) | — | |||||||||||||||||||
N913DL Equipment Trust Beneficial Interests | 491,371 | 107,501 | 211,982 | (23,336 | ) | — | (296,147 | ) | — | |||||||||||||||||||
N918DL Equipment Trust Beneficial Interests | 8,483 | 127,662 | 89,515 | (41,618 | ) | — | (175,559 | ) | — | |||||||||||||||||||
N954DL Equipment Trust Beneficial Interests | 8,743 | 77,850 | (17,833 | ) | 17,495 | — | (77,512 | ) | — | |||||||||||||||||||
N955DL Equipment Trust Beneficial Interests | 8,278 | 108,100 | (40,649 | ) | (16,055 | ) | — | (51,396 | ) | — | ||||||||||||||||||
N956DL Equipment Trust Beneficial Interests | 8,362 | 104,478 | (36,257 | ) | (12,484 | ) | — | (55,737 | ) | — | ||||||||||||||||||
N957DL Equipment Trust Beneficial Interests | 8,249 | 105,329 | (43,849 | ) | (12,913 | ) | — | (48,567 | ) | — | ||||||||||||||||||
N959DL Equipment Trust Beneficial Interests | 8,139 | 106,203 | (51,380 | ) | (13,363 | ) | — | (41,460 | ) | — | ||||||||||||||||||
N960DL Equipment Trust Beneficial Interests | 7,785 | 105,937 | (76,964 | ) | (11,434 | ) | — | (17,539 | ) | — | ||||||||||||||||||
N961DL Equipment Trust Beneficial Interests | 7,976 | 101,487 | (65,354 | ) | (7,469 | ) | — | (28,664 | ) | — | ||||||||||||||||||
N976DL Equipment Trust Beneficial Interests | 8,635 | 100,793 | 110,531 | (12,825 | ) | — | (198,499 | ) | — | |||||||||||||||||||
RM Holdco, LLC, Equity Participation | — | — | — | — | — | — | — | |||||||||||||||||||||
RM Holdco, LLC, Membership Units | 251,887 | — | — | — | — | — | — | |||||||||||||||||||||
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 7%, due 3/21/16 | 328,902 | 3,719,155 | — | 281,896 | 870,233 | — | 4,871,284 | |||||||||||||||||||||
RM OpCo, LLC, Senior Secured 2nd Lien Term Loan Tranche B, 8.5%, due 3/30/18 | 804,739 | 4,490,993 | — | (2,135,114 | ) | 798,891 | — | 3,154,770 | ||||||||||||||||||||
RM OpCo, LLC, Senior Secured 2nd Lien Term Loan Tranche B-1, 8.5%, due 3/30/18 | 253,440 | 2,797,956 | — | — | 251,599 | — | 3,049,555 | |||||||||||||||||||||
RM OpCo, LLC, Convertible 2nd Lien Term Loan Tranche B-1, 8.5%, due 3/30/18 | 165,193 | 1,783,036 | — | (3,685 | ) | 164,020 | — | 1,943,371 | ||||||||||||||||||||
RM OpCo, LLC, Senior Convertible 2nd Lien Term Loan B, 8.5%, due 3/30/18 | 248,959 | 2,188,233 | — | — | 2,063,135 | — | 4,251,368 | |||||||||||||||||||||
United N659UA-767, LLC (N659UA) | 456,168 | 3,368,599 | — | (284,572 | ) | — | 107,911 | 3,191,938 | ||||||||||||||||||||
United N661UA-767, LLC (N661UA) | 549,091 | 3,294,024 | — | (341,679 | ) | — | 313,756 | 3,266,101 | ||||||||||||||||||||
Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units | — | 4,198,500 | — | (2,668,500 | ) | — | — | 1,530,000 | ||||||||||||||||||||
______________
Notes to Consolidated Schedule of Changes in Investments in Affiliates:
(1) |
(1) | The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Partnership of 5% or more of the issuers’ voting securities. |
(2) | Also includes fee and lease income as applicable. |
(3) | Acquisitions include new purchases, PIK income and amortization of original issue and market discounts. |
(4) | Dispositions include decreases in the cost basis from sales, paydowns, mortgage amortizations and aircraft depreciation. |
42
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Restricted Securities of Unaffiliated Issuers (Unaudited)
September 30, 2017
Investment | Acquisition Date | |
Actifio, Inc., Warrants to Purchase Series F Preferred Stock | 5/5/17 | |
Avanti Communications Group, PLC (144A), Senior New Money Initial Note, 10%, due 10/1/21 | 1/26/17 | |
Avanti Communications Group, PLC (144A), Senior Second-Priority PIK Toggle Note, 10%, due 10/1/21 | 1/26/17 | |
Avanti Communications Group, PLC (144A), Senior Secured Third-Priority Note, 12%, due 10/1/23 | 1/26/17 | |
Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19 | 10/19/12 | |
Epic Aero, Inc. (One Sky), Warrants to Purchase Common Stock | 12/4/13 | |
Findly Talent, LLC, Membership Units | 1/1/14 | |
Foursquare Labs, Inc., Warrants to Purchase Series E Preferred Stock | 5/4/17 | |
Fuse Media, LLC, Warrants to Purchase Common Stock | 8/3/12 | |
GACP I, LP, Membership Units | 10/1/15 | |
GlassPoint Solar, Inc., Warrants to Purchase Series C-1 Preferred Stock | 2/7/17 | |
Gogo Intermediate Holdings, LLC, Senior Secured Notes, 12.5%, due 7/1/22 | 6/9/16 | |
Green Biologics, Inc., Convertible Note, 10% PIK, due 6/30/19 | 7/12/17 | |
Green Biologics, Inc., Warrants to Purchase Stock | 12/22/14 | |
InMobi, Inc., Warrants to Purchase Common Stock | 8/22/17 | |
InMobi, Inc., Warrants to Purchase Series E Preferred Stock | 9/18/15 | |
Lions Holdings, Inc., (BPA), Series A Warrants to Purchase Common Stock | 7/14/17 | |
Lions Holdings, Inc., (BPA), Series B Warrants to Purchase Common Stock | 7/14/17 | |
Nanosys, Inc., Warrants to Purchase Common Stock | 3/29/16 | |
NEG Parent, LLC (CORE Entertainment, Inc.), Class A Units | 10/17/16 | |
NEG Parent, LLC (CORE Entertainment, Inc.), Class A Warrants to Purchase Class A Units | 10/17/16 | |
NEG Parent, LLC (CORE Entertainment, Inc.), Class B Warrants to Purchase Class A Units | 10/17/16 | |
NEXTracker, Inc., Series B Preferred Stock | 12/17/14 | |
NEXTracker, Inc., Series C Preferred Stock | 6/12/15 | |
Shop Holding, LLC (Connexity), Class A Units | 6/2/11 | |
Soraa, Inc., Warrants to Purchase Common Stock | 8/29/14 | |
SoundCloud, Ltd., Warrants to Purchase Preferred Stock | 4/30/15 | |
STG-Fairway Holdings, LLC (First Advantage), Class A Units | 12/30/10 | |
Tradeshift, Inc., Warrants to Purchase Series D Preferred Stock | 3/9/17 | |
Utilidata, Inc., Warrants to Purchase Stock | 12/22/15 | |
V Telecom Investment S.C.A. (Vivacom), Common Shares | 11/9/12 | |
43
Special Value Continuation Partners, LP
(A Delaware Limited Partnership)
Consolidated Schedule of Restricted Securities of Unaffiliated Issuers
December 31, 2016
Investment | Acquisition Date | |
Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19 | 9/26/13 | |
BlackLine Intermediate, Inc., Warrants to Purchase Common Stock | 9/25/13 | |
Boomerang Tube Holdings, Inc., Common Stock | 2/2/16 | |
Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19 | 10/19/12 | |
Epic Aero, Inc. (One Sky), Warrants to Purchase Common Stock | 12/4/13 | |
Findly Talent, LLC, Membership Units | 1/1/14 | |
Fuse Media, LLC, Warrants to Purchase Common Stock | 8/3/12 | |
Fuse, LLC, Senior Secured Notes, 10.375%, due 7/1/19 | 6/18/14 | |
GACP I, LP, Membership Units | 10/1/15 | |
Gogo Intermediate Holdings, LLC, Senior Secured Notes, 12.5%, due 7/1/22 | 6/9/16 | |
Green Biologics, Inc., Warrants to Purchase Stock | 12/22/14 | |
InMobi, Inc., Warrants to Purchase Stock | 9/18/15 | |
Integra Telecom, Inc., Common Stock | 11/19/09 | |
Integra Telecom, Inc., Warrants | 11/19/09 | |
Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18 | 5/8/13 | |
Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21 | 8/1/13 | |
Marsico Holdings, LLC, Common Interest Units | 9/10/12 | |
Nanosys, Inc., Warrants to Purchase Common Stock | 3/29/16 | |
NEG Parent, LLC, Class A Units | 10/17/16 | |
NEG Parent, LLC, Class A Warrants to Purchase Class A Units | 10/17/16 | |
NEG Parent, LLC, Class B Warrants to Purchase Class A Units | 10/17/16 | |
NEG Parent, LLC, Class P Units | 10/17/16 | |
NEXTracker, Inc., Series B Preferred Stock | 12/17/14 | |
NEXTracker, Inc., Series C Preferred Stock | 6/12/15 | |
Rightside Group, Ltd., Warrants | 8/6/14 | |
Shop Holding, LLC (Connexity), Class A Units | 6/2/11 | |
Soasta, Inc., Warrants to Purchase Series F Preferred Stock | 3/4/16 | |
Soraa, Inc., Warrants to Purchase Common Stock | 8/29/14 | |
SoundCloud, Ltd., Warrants to Purchase Preferred Stock | 4/30/15 | |
STG-Fairway Holdings, LLC (First Advantage), Class A Units | 12/30/10 | |
Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18 | 11/13/13 | |
Utilidata, Inc., Warrants to Purchase Stock | 12/22/15 | |
V Telecom Investment S.C.A. (Vivacom), Common Shares | 11/9/12 | |
Waterfall International, Inc., Series B Preferred Stock | 9/16/15 | |
Waterfall International, Inc., Warrants to Purchase Stock | 9/16/15 | |
44
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 our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. Some of the statements in this report (including in the following discussion) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or the future performance or financial condition of Special Value Continuation Partners, LP (the “Partnership,” “we,” “us,” or “our”). The forward-looking statements contained in this report involve a number of risks and uncertainties, including statements concerning:
• | our, or our portfolio companies’, future business, operations, operating results or prospects; |
• | the return or impact of current and future investments; |
• | the impact of a protracted decline in the liquidity of credit markets on our business; |
• | the impact of fluctuations in interest rates on our business; |
• | the impact of changes in laws or regulations governing our operations or the operations of our portfolio companies; |
• | our contractual arrangements and relationships with third parties; |
• | the general economy and its impact on the industries in which we invest; |
• | the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives; |
• | our expected financings and investments; |
• | the adequacy of our financing resources and working capital; |
• | the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments; |
• | the timing of cash flows, if any, from the operations of our portfolio companies; |
• | the timing, form and amount of any dividend distributions; and |
• | our ability to maintain our qualification as a regulated investment company and as a business development company. |
• |
We use words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “could,” “may,” “plan” and similar words to identify forward-looking statements. The forward looking statements contained in this annual report involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth as “Risk Factors” in this report.
We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.
45
Overview
The Partnership is a Delaware limited partnership formed on July 31, 2006 and is an externally managed, closed-end, non-diversified management investment company. On April 2, 2012, we elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Partnership’s investment objective is to seek to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. The Partnership invests primarily in the debt of middle-market companies and small businesses, including senior secured loans, junior loans, mezzanine debt and bonds, either directly or in one of its wholly-owned subsidiaries, TCPC Funding I, LLC (“TCPC Funding”) and TCPC SBIC, LP (the “SBIC”). Such investments may include an equity component, and, to a lesser extent, the Partnership may make equity investments directly. TCP Capital Corp. (“TCPC”) owns 100% of the common limited partner interests of the Partnership. TCPC has also elected to be treated as a BDC under the 1940 Act. The General Partner of the Partnership is Series H of SVOF/MM, LLC (“SVOF/MM”), which also serves as the administrator (the “Administrator”) of TCPC and the Partnership. The managing member of SVOF/MM is Tennenbaum Capital Partners, LLC (the “Advisor”), which serves as the investment manager to both TCPC and the Partnership. The equity interests in the General Partner are owned directly by the Advisor. The Partnership has elected to be treated as a partnership for U.S. federal income tax purposes.
The SBIC was organized as a Delaware limited partnership in June 2013. On April 22, 2014, the SBIC received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958.
Our leverage program is comprised of $116.0 million in available debt under a senior secured revolving credit facility issued by the Partnership (the “SVCP Revolver”), $350.0 million in available debt under a senior secured revolving credit facility issued by TCPC Funding (the “TCPC Funding Facility”) and $150.0 million in committed leverage from the SBA (the “SBA Program” and, together with the SVCP Revolver and the TCPC Funding Facility, the “Leverage Program”).
Investments
Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity, the general economic environment and the competitive environment for the types of investments we make.
As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities and indebtedness of private U.S. companies, public U.S. operating companies whose securities are not listed on a national securities exchange or registered under the Securities Exchange Act of 1934, as amended, public domestic operating companies having a market capitalization of less than $250.0 million, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. We are also permitted to make certain follow-on investments in companies that were eligible portfolio companies at the time of initial investment but that no longer meet the definition. As of September 30, 2017, 87.4% of our total assets were invested in qualifying assets.
Revenues
We generate revenues primarily in the form of interest on the debt we hold. We also generate revenue from dividends on our equity interests, capital gains on the disposition of investments, and certain lease, fee, and other income. Our investments in fixed income instruments generally have an expected maturity of three to five years, although we have no lower or upper constraint on maturity. Interest on our debt investments is generally payable quarterly or semi-annually. Payments of principal of our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some cases, our debt investments and preferred stock investments may defer payments of cash interest or dividends or PIK. Any outstanding principal amount of our debt investments and any accrued but unpaid interest will generally become due at the maturity date.
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In addition, we may generate revenue in the form of prepayment fees, commitment, origination, structuring or due diligence fees, end-of-term or exit fees, fees for providing significant managerial assistance, consulting fees and other investment related income.
Expenses
Our primary operating expenses include the payment of a base management fee and, depending on our operating results, incentive compensation, expenses reimbursable under the management agreement, administration fees and the allocable portion of overhead under the administration agreement. The base management fee and incentive compensation remunerates the Advisor for work in identifying, evaluating, negotiating, closing and monitoring our investments. Our administration agreement with Series H of SVOF/MM, LLC (the “Administrator”) provides that the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to us under the administration agreement, as well as any costs and expenses incurred by the Administrator or its affiliates relating to any non-investment advisory, administrative or operating services provided by the Administrator or its affiliates to us. We also bear all other costs and expenses of our operations and transactions, which may include those relating to:
• | our organization; |
• | calculating our net asset value (including the cost and expenses of any independent valuation firms); |
• | interest payable on debt, if any, incurred to finance our investments; |
• | the base management fee and any incentive compensation; |
• | dividends and distributions on our preferred shares, if any; |
• | administration fees payable under the administration agreement; |
• | fees payable to third parties relating to, or associated with, making investments; |
• | transfer agent and custodial fees; |
• | registration fees; |
• | director fees and expenses; |
• | costs of preparing and filing reports or other documents with the SEC; |
• | costs of any reports, proxy statements or other notices to our common limited partner, including printing costs; |
• | our fidelity bond; |
• | directors and officers/errors and omissions liability insurance, and any other insurance premiums; |
• | indemnification payments; |
• | direct costs and expenses of administration, including audit and legal costs; and |
• | all other expenses reasonably incurred by us and the Administrator in connection with administering our business, such as the allocable portion of overhead under the administration agreement, including rent and other allocable portions of the cost of certain of our officers and their respective staffs. |
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The investment management agreement provides that the base management fee be calculated at an annual rate of 1.5% of our total assets (excluding cash and cash equivalents) payable quarterly in arrears. For purposes of calculating the base management fee, “total assets” is determined without deduction for any borrowings or other liabilities. The base management fee is calculated based on the value of our total assets (excluding cash and cash equivalents) at the end of the most recently completed calendar quarter.
Additionally, the investment management agreement and the Amended and Restated Limited Partnership Agreement provide that the Advisor or its affiliates may be entitled to incentive compensation under certain circumstances. According to the terms of such agreements, no incentive compensation was incurred prior to January 1, 2013. Beginning January 1, 2013, the incentive compensation equals the sum of (1) 20% of all of the ordinary income of TCPC since January 1, 2013 and (2) 20% of all net realized capital gains (net of any net unrealized capital depreciation) since January 1, 2013, with each component being subject to a total return requirement of 8% of TCPC's contributed common equity annually. The incentive compensation is payable to the General Partner by the Partnership pursuant to the Amended and Restated Limited Partnership Agreement. The determination of incentive compensation is subject to limitations under the 1940 Act and the Advisers Act.
Critical accounting policies
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 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. Management considers the following critical accounting policies important to understanding the financial statements. In addition to the discussion below, our critical accounting policies are further described in the notes to our financial statements.
Valuation of portfolio investments
We value our portfolio investments at fair value based upon the principles and methods of valuation set forth in policies adopted by our board of directors. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Market participants are buyers and sellers in the principal (or most advantageous) market for the asset that (i) are independent of us, (ii) are knowledgeable, having a reasonable understanding about the asset based on all available information (including information that might be obtained through due diligence efforts that are usual and customary), (iii) are able to transact for the asset, and (iv) are willing to transact for the asset or liability (that is, they are motivated but not forced or otherwise compelled to do so).
Investments for which market quotations are readily available are valued at such market quotations unless the quotations are deemed not to represent fair value. We generally obtain market quotations from recognized exchanges, market quotation systems, independent pricing services or one or more broker-dealers or market makers. However, short term debt investments with remaining maturities within 90 days are generally valued at amortized cost, which approximates fair value. Debt and equity securities for which market quotations are not readily available, which is the case for many of our investments, or for which market quotations are deemed not to represent fair value, are valued at fair value using a consistently applied valuation process in accordance with our documented valuation policy that has been reviewed and approved by our board of directors, who also approve in good faith the valuation of such securities as of the end of each quarter. Due to the inherent uncertainty and subjectivity of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments and may differ materially from the values that we may ultimately realize. In addition, changes in the market environment and other events may have differing impacts on the market quotations used to value some of our investments than on the fair values of our investments for which market quotations are not readily available. Market quotations may be deemed not to represent fair value in certain circumstances where we believe that facts and circumstances applicable to an issuer, a seller or purchaser, or the market for a particular security cause current market quotations to not reflect the fair value of the security. Examples of these events could include
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cases where a security trades infrequently causing a quoted purchase or sale price to become stale, where there is a “forced” sale by a distressed seller, where market quotations vary substantially among market makers, or where there is a wide bid-ask spread or significant increase in the bid-ask spread.
The valuation process approved by our board of directors with respect to investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value is as follows:
• | The investment professionals of the Advisor provide recent portfolio company financial statements and other reporting materials to independent valuation firms approved by our board of directors. |
• | Such firms evaluate this information along with relevant observable market data to conduct independent appraisals each quarter, and their preliminary valuation conclusions are documented and discussed with senior management of the Advisor. |
• | The fair value of smaller investments comprising in the aggregate less than 5% of our total capitalization may be determined by the Advisor in good faith in accordance with our valuation policy without the employment of an independent valuation firm. |
• | The audit committee of the board of directors discusses the valuations, and the board of directors approves the fair value of the investments in our portfolio in good faith based on the input of the Advisor, the respective independent valuation firms (to the extent applicable) and the audit committee of the board of directors. |
Those investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in determining the fair value of our investments include, as relevant and among other factors: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables, our principal market (as the reporting entity) and enterprise values.
When valuing all of our investments, we strive to maximize the use of observable inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances.
Our investments may be categorized based on the types of inputs used in their valuation. The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Investments are classified by GAAP into the three broad levels as follows:
Level 1 — Investments valued using unadjusted quoted prices in active markets for identical assets.
Level 2 — Investments valued using other unadjusted observable market inputs, e.g. quoted prices in markets that are not active or quotes for comparable instruments.
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Level 3 — Investments that are valued using quotes and other observable market data to the extent available, but which also take into consideration one or more unobservable inputs that are significant to the valuation taken as a whole.
As of September 30, 2017, less than 0.1% of our investments were categorized as Level 1, 9.9% were categorized as Level 2, 89.9% were Level 3 investments valued based on valuations by independent third party sources, and 0.1% were Level 3 investments valued based on valuations by the Advisor.
As of December 31, 2016, none of our investments were categorized as Level 1, 8.4% were categorized as Level 2, 91.5% were Level 3 investments valued based on valuations by independent third party sources, and 0.1% were Level 3 investments valued based on valuations by the Advisor.
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the financial statements.
Revenue recognition
Interest and dividend income, including income paid in kind, is recorded on an accrual basis. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts, earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment, as are end-of-term or exit fees receivable upon repayment of a debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income due upon the early repayment of a loan or debt security are recognized when earned and are included in interest income.
Certain of our debt investments are purchased at a discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. Discounts on the acquisition of corporate bonds are generally amortized using the effective-interest or constant-yield method assuming there are no questions as to collectability. When principal payments on a loan are received in an amount in excess of the loan’s amortized cost, the excess principal payments are recorded as interest income.
Net realized gains or losses and net change in unrealized appreciation or depreciation
We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Realized gains and losses are computed using the specific identification method. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
Portfolio and investment activity
During the three months ended September 30, 2017, we invested approximately $245.7 million, comprised of new investments in nine new and seven existing portfolio companies, as well as draws made on existing commitments and PIK received on prior investments. Of these investments, 97.6% were in senior secured debt comprised of senior secured loans ($236.3 million, or 96.2% of total acquisitions) and senior secured notes ($3.4 million, or 1.4% of total acquisitions). The remaining $6.0 million (2.4% of total acquisitions) were comprised of equity investments including $2.8 million in equity interests in two portfolios of debt and lease assets and warrants received in connection with a debt investment. Additionally, we received approximately $158.1 million in proceeds from sales or repayments of investments during the three months ended September 30, 2017.
During the three months ended September 30, 2016, we invested approximately $146.6 million, comprised of new investments in eight new and five existing portfolio companies, as well as draws made on existing
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commitments and PIK received on prior investments. Of these investments, 96.2% were in senior secured debt comprised of senior secured loans ($133.4 million, or 91.0% of total acquisitions) and senior secured notes ($7.7 million, or 5.2% of total acquisitions). The remaining $5.5 million (3.8% of total acquisitions) were comprised of equity interests in two portfolios of debt and lease assets. Additionally, we received approximately $108.2 million in proceeds from sales or repayments of investments during the three months ended September 30, 2016.
During the nine months ended September 30, 2017, we invested approximately $652.4 million, comprised of new investments in 22 new and 17 existing portfolio companies, as well as draws made on existing commitments and PIK received on prior investments. Of these investments, 97.2% were in senior secured debt comprised of senior secured loans ($613.5 million, or 94.0% of total acquisitions) and senior secured notes ($20.8 million, or 3.2% of total acquisitions). The remaining $18.1 million (2.8% of total acquisitions) were comprised of equity investments including $13.9 million in equity interests in two portfolios of debt and lease assets, and warrants received in connection with five debt investments. Additionally, we received approximately $434.1 million in proceeds from sales or repayments of investments during the nine months ended September 30, 2017.
During the nine months ended September 30, 2016, we invested approximately $379.8 million, comprised of new investments in 17 new and 11 existing portfolio companies, as well as draws made on existing commitments and PIK received on prior investments. Of these investments, 95.1% were in senior secured debt comprised of senior secured loans ($313.7 million, or 82.6% of total acquisitions) and senior secured notes ($47.3 million, or 12.5% of total acquisitions). The remaining $18.7 million (4.9% of total acquisitions) were comprised of $17.8 million in equity interests in two portfolios of debt and lease assets, as well as $0.9 million in two warrant positions received in connection with debt investments. Additionally, we received approximately $294.2 million in proceeds from sales or repayments of investments during the nine months ended September 30, 2016.
At September 30, 2017, our investment portfolio of $1,528.8 million (at fair value) consisted of 97 portfolio companies and was invested 95.7% in debt investments, substantially all of which was in senior secured debt. In aggregate, our investment portfolio was invested 89.7% in senior secured loans, 6.0% in senior secured notes and 4.3% in equity investments. Our average portfolio company investment at fair value was approximately $15.8 million. Our largest portfolio company investment by value was approximately $45.5 million and our five largest portfolio company investments by value comprised approximately 13.6% of our portfolio at September 30, 2017.
At December 31, 2016, our investment portfolio of $1,315.0 million (at fair value) consisted of 90 portfolio companies and was invested 95.0% in debt investments, substantially all of which was in senior secured debt. In aggregate, our investment portfolio was invested 83.7% in senior secured loans, 11.3% in senior secured notes and 5.0% in equity investments. Our average portfolio company investment at fair value was approximately $14.6 million. Our largest portfolio company investment by value was approximately $46.2 million and our five largest portfolio company investments by value comprised approximately 14.1% of our portfolio at December 31, 2016.
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The industry composition of our portfolio at fair value at September 30, 2017 was as follows:
Industry | Percent of Total Investments | ||
Software Publishing | 16.4 | % | |
Computer Systems Design and Related Services | 8.6 | % | |
Data Processing and Hosting Services | 5.2 | % | |
Credit (Nondepository) | 5.1 | % | |
Air Transportation | 3.6 | % | |
Advertising, Public Relations and Marketing | 3.6 | % | |
Business Support Services | 3.5 | % | |
Lessors of Nonfinancial Licenses | 3.2 | % | |
Management, Scientific, and Technical Consulting Services | 3.1 | % | |
Hospitals | 2.9 | % | |
Pharmaceuticals | 2.8 | % | |
Scientific Research and Development Services | 2.7 | % | |
Credit Related Activities | 2.6 | % | |
Chemicals | 2.5 | % | |
Other Real Estate Activities | 2.5 | % | |
Insurance | 2.4 | % | |
Equipment Leasing | 2.0 | % | |
Other Telecommunications | 2.0 | % | |
Utility System Construction | 1.9 | % | |
Other Information Services | 1.9 | % | |
Other Publishing | 1.9 | % | |
Textile Furnishings Mills | 1.8 | % | |
Other Manufacturing | 1.7 | % | |
Amusement and Recreation | 1.6 | % | |
Wholesalers | 1.4 | % | |
Real Estate Leasing | 1.2 | % | |
Apparel Manufacturing | 1.2 | % | |
Financial Investment Activities | 1.1 | % | |
Restaurants | 1.0 | % | |
Retail | 1.0 | % | |
Educational Support Services | 0.9 | % | |
Building Equipment Contractors | 0.9 | % | |
Communications Equipment Manufacturing | 0.9 | % | |
Other | 4.9 | % | |
Total | 100.0 | % | |
The weighted average effective yield of the debt securities in our portfolio was 10.95% at September 30, 2017 and 10.92% at December 31, 2016. At September 30, 2017, 88.8% of debt investments in our portfolio bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate, and 11.2% bore interest at fixed rates. The percentage of floating rate debt investments in our portfolio that bore interest based on an interest rate floor was 81.3% at September 30, 2017. At December 31, 2016, 80.5% of debt investments in our portfolio bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime
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Rate, and 19.5% bore interest at fixed rates. The percentage of floating rate debt investments in our portfolio that bore interest based on an interest rate floor was 77.0% at December 31, 2016.
Results of operations
Investment income
Investment income totaled $43.3 million and $38.5 million, respectively, for the three months ended September 30, 2017 and 2016, of which $42.3 million and $38.3 million were attributable to interest and fees on our debt investments, $0.1 million and $0.1 million to lease income and $0.9 million and $0.1 million to other income, respectively. Included in interest and fees on our debt investments were $1.8 million and $3.0 million of income related to prepayments for the three months ended September 30, 2017 and 2016, respectively. The increase in investment income in the three months ended September 30, 2017 compared to the three months ended September 30, 2016 reflects an an increase in interest income due to the larger portfolio size during the three months ended September 30, 2017 compared to the three months ended September 30, 2016, and an increase in other income partially offset by a decrease in prepayment income.
Investment income totaled $128.9 million and $108.7 million, respectively, for the nine months ended September 30, 2017 and 2016, of which $127.1 million and $105.9 million were attributable to interest and fees on our debt investments, $0.2 million and $1.5 million to lease income and $1.5 million and $1.3 million to other income, respectively. Included in interest and fees on our debt investments were $13.5 million and $5.9 million of non-recurring income related to prepayments for the nine months ended September 30, 2017 and 2016, respectively. The increase in investment income in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 reflects an increase in interest income due to the increase in prepayment income and the larger portfolio size during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, partially offset by a decrease in lease income.
Expenses
Total operating expenses for the three months ended September 30, 2017 and 2016 were $10.8 million and $10.0 million, respectively, comprised of $5.6 million and $4.8 million in base management fees, $3.8 million and $4.0 million in interest expense and related fees, $0.6 million and $0.4 million in administrative expenses, $0.2 million and $0.3 million in legal and professional fees, and $0.6 million and $0.5 million in other expenses, respectively. The increase in expenses in the three months ended September 30, 2017 compared to the three months ended September 30, 2016 primarily reflects the increase in management and advisory fees, partially offset by the decrease in interest expense and other costs as a result of the full repayment of the Term Loan on August 9, 2017.
Total operating expenses for the nine months ended September 30, 2017 and 2016 were $32.2 million and $29.3 million, respectively, comprised of $15.6 million and $14.0 million in base management fees, $12.2 million and $11.8 million in interest expense and related fees, $1.7 million and $1.3 million in administrative expenses, $0.7 million and $0.8 million in legal and professional fees, and $2.0 million and $1.5 million in other expenses, respectively. The increase in expenses in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily reflects the increase in management and advisory fees and the increase in interest expense and other costs related to the increase in outstanding debt, as well as the increase in LIBOR rates during the period.
Net investment income
Net investment income was $32.5 million and $28.5 million, respectively, for the three months ended September 30, 2017 and 2016. The increase in net investment income in the three months ended September 30, 2017 compared to the three months ended September 30, 2016 primarily reflects the increase in investment income, partially offset by the increase in expenses in the three months ended September 30, 2017.
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Net investment income was $96.6 million and $79.4 million, respectively, for the nine months ended September 30, 2017 and 2016. The increase in net investment income in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily reflects the increase in investment income, partially offset by the increase in expenses in the nine months ended September 30, 2017.
Net realized and unrealized gain or loss
Net realized losses for the three months ended September 30, 2017 and 2016 were $4.7 million and $0.7 million, respectively. Net realized losses during the three months ended September 30, 2017 were comprised primarily of $2.8 million on the expiration of our Rightside warrants and $1.9 million on the disposition of our Fuse notes, respectively. Both positions have generated significant interest and other income. The Rightside warrants were allocated value at acquisition in connection with our funding of loans to Rightside at a significant discount to par. The Rightside loans were repaid in full during 2016.
Net realized losses for the nine months ended September 30, 2017 and 2016 were $11.5 million and $4.0 million, respectively. Net realized losses during the nine months ended September 30, 2017 were comprised primarily of a $10.1 million loss realization on the restructuring of our loan to Iracore, a $3.5 million loss realization on the restructuring of our loan to Avanti Communications Group, the realized losses on Rightside and Fuse Media and a $1.5 million loss on the disposition of our investment in Integra Telecom Holdings, partially offset by a $7.0 million gain on the sale of our equity in Blackline and $1.7 million gain on the sale of our equity in Soasta. The net realized loss during the nine months ended September 30, 2016 was primarily due to the taxable reorganization of our investment in Boomerang Tube, LLC.
For the three months ended September 30, 2017 and 2016, the change in net unrealized appreciation/depreciation was $(2.8) million and $0.9 million, respectively. The change in net unrealized appreciation/depreciation for the three months ended September 30, 2017 was primarily due to a $2.3 million markdown on Edmentum, $2.0 million markdown of Kawa, and $2.1 million markdown of Real Mex, partially offset by the reversal of previously recognized unrealized losses and various net unrealized gains. The change in net unrealized appreciation/depreciation for the three months ended September 30, 2016 was comprised primarily of mark-to-market adjustments resulting from narrower market yield spreads during the quarter.
For the nine months ended September 30, 2017 and 2016, the change in net unrealized appreciation/depreciation was $(1.0) million and $0.0 million, respectively. The change in net unrealized appreciation/depreciation for the nine months ended September 30, 2017 was comprised primarily of a $8.1 million markdown of Kawa as well as a $4.6 million markdown of Real Mex in line with industry comparables, partially offset by the reversal of previously recognized unrealized losses as well as various market gains resulting from generally tighter spreads.
Net increase in net assets applicable to common limited and general partners resulting from operations
The net increase in net assets applicable to common limited and general partners resulting from operations was $25.1 million and $28.7 million for the three months ended September 30, 2017 and 2016, respectively. The lower net increase in net assets applicable to common limited and general partners resulting from operations during the three months ended September 30, 2017 is primarily due to the net realized and unrealized loss during the three months ended September 30, 2017 compared to the net realized and unrealized gain during the three months ended September 30, 2016, partially offset by the increase in net investment income.
The net increase in net assets applicable to common limited and general partners resulting from operations was $84.1million and $75.4 million for the nine months ended September 30, 2017 and 2016, respectively. The higher net increase in net assets applicable to common limited and general partners resulting from operations during the nine months ended September 30, 2017 is primarily due to the higher net investment income during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 partially offset by the larger net realized and unrealized loss during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.
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Liquidity and capital resources
Since our inception, our liquidity and capital resources have been generated primarily through contributions from the common limited partner of the Partnership (which came from the initial private placement of common shares of Special Value Continuation Fund, LLC (TCPC’s predecessor entity) which were subsequently converted to common stock of TCPC), the net proceeds from the initial and secondary public offerings of TCPC, amounts outstanding under our Leverage Program, and cash flows from operations, including investments sales and repayments and income earned from investments and cash equivalents. The primary uses of cash have been investments in portfolio companies, cash distributions to our equity holders, payments to service our Leverage Program and other general corporate purposes.
Total leverage outstanding and available under the combined Leverage Program at September 30, 2017 were as follows:
Maturity | Rate | Carrying Value | Available | Total Capacity | |||||||||||
SVCP Revolver | 2018 | L+2.50%* | 30,000,000 | 86,000,000 | 116,000,000 | ||||||||||
TCPC Funding Facility | 2021 | L+2.50%† | 200,000,000 | 150,000,000 | 350,000,000 | ||||||||||
SBA Debentures | 2024−2027 | 2.57%‡ | 75,000,000 | 75,000,000 | 150,000,000 | ||||||||||
Total leverage | 305,000,000 | $ | 311,000,000 | $ | 616,000,000 | ||||||||||
Unamortized issuance costs | (2,750,014 | ) | |||||||||||||
Debt, net of unamortized issuance costs | $ | 302,249,986 | |||||||||||||
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* | Based on either LIBOR or the lender’s cost of funds, subject to certain limitations |
† | Or L+2.25% subject to certain funding requirements |
‡ | Weighted-average interest rate, excluding fees of 0.36%. |
On July 13, 2015, we obtained exemptive relief from the SEC to permit us to exclude debt outstanding under the SBA Program from our 200% asset coverage test under the 1940 Act. The exemptive relief provides us with increased flexibility under the 200% asset coverage test by permitting the SBIC to borrow up to $150.0 million more than it would otherwise be able to absent the receipt of this exemptive relief.
Net cash used in operating activities during the nine months ended September 30, 2017 was $77.7 million. Our primary use of cash in operating activities during this period consisted of the settlement of acquisitions of investments (net of dispositions) of $208.2 million, partially offset by net investment income less incentive allocation (net of non-cash income and expenses) of approximately $130.5 million.
Net cash provided by financing activities was $96.0 million during the nine months ended September 30, 2017, consisting primarily of $217.3 million of contributions from the common limited partner reduced by $72.5 million in distributions to TCPC, $31.5 million of net repayments of debt, $15.9 million in distributions of incentive compensation to the General Partner, and payment of $1.4 million in debt issuance costs.
At September 30, 2017, we had $71.9 million in cash and cash equivalents.
The SVCP Revolver and the TCPC Funding Facility are secured by substantially all of the assets in our portfolio, including cash and cash equivalents, and are subject to compliance with customary affirmative and negative covenants, including the maintenance of a minimum shareholders’ equity, the maintenance of a ratio of not less than 200% of total assets (less total liabilities other than indebtedness) to total indebtedness, and restrictions on certain payments and issuance of debt. Unfavorable economic conditions may result in a decrease in the value of our investments, which would affect both the asset coverage ratios and the value of the collateral securing the SVCP Revolver and the TCPC Funding Facility, and may therefore impact our ability to borrow under the SVCP Revolver
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and the TCPC Funding Facility. In addition to regulatory restrictions that restrict our ability to raise capital, the Leverage Program contains various covenants which, if not complied with, could accelerate repayment of debt, thereby materially and adversely affecting our liquidity, financial condition and results of operations. At September 30, 2017, we were in compliance with all financial and operational covenants required by the Leverage Program.
Unfavorable economic conditions, while potentially creating attractive opportunities for us, may decrease liquidity and raise the cost of capital generally, which could limit our ability to renew, extend or replace the Leverage Program on terms as favorable as are currently included therein. If we are unable to renew, extend or replace the Leverage Program upon the various dates of maturity, we expect to have sufficient funds to repay the outstanding balances in full from our net investment income and sales of, and repayments of principal from, our portfolio company investments, as well as from anticipated debt and equity capital raises, among other sources. Unfavorable economic conditions may limit our ability to raise capital or the ability of the companies in which we invest to repay our loans or engage in a liquidity event, such as a sale, recapitalization or initial public offering. The SVCP Facility and the TCPC Funding Facility mature in July 2018 and April 2021, respectively. Any inability to renew, extend or replace the Leverage Program could adversely impact our liquidity and ability to find new investments or maintain distributions to our common limited partner.
Contractual obligations
In addition to obligations under our Leverage Program, we have entered into several contracts under which we have future commitments. Pursuant to an investment management agreement, the Advisor manages our day-to-day operations and provides investment advisory services to us. Payments under the investment management agreement are equal to a percentage of the value of our gross assets (excluding cash and cash equivalents) and an incentive compensation, plus reimbursement of certain expenses incurred by the Advisor. Under our administration agreement, the Administrator provides us with administrative services, facilities and personnel. Payments under the administration agreement are equal to an allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations to us, and may include rent and our allocable portion of the cost of certain of our officers and their respective staffs. We are responsible for reimbursing the Advisor for due diligence and negotiation expenses, fees and expenses of custodians, administrators, transfer and distribution agents, counsel and directors, insurance, filings and registrations, proxy expenses, expenses of communications to investors, compliance expenses, interest, taxes, portfolio transaction expenses, costs of responding to regulatory inquiries and reporting to regulatory authorities, costs and expenses of preparing and maintaining our books and records, indemnification, litigation and other extraordinary expenses and such other expenses as are approved by the directors as being reasonably related to our organization, offering, capitalization, operation or administration and any portfolio investments, as applicable. The Advisor is not responsible for any of the foregoing expenses and such services are not investment advisory services under the 1940 Act. Either party may terminate each of the investment management agreement and administration agreement without penalty upon not less than 60 days’ written notice to the other.
Distributions
Distribution to the common limited partner
Our quarterly distributions to our common limited partner are recorded on the record date. Distributions are declared considering our estimate of annual taxable income available for distribution and the amount of taxable income carried over from the prior year for distribution in the current year. We do not have a policy to pay distributions at a specific level and expect to continue to distribute substantially all of our taxable income. We cannot assure the common limited partner that it will receive any distributions or distributions at a particular level.
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The following table summarizes our distributions to our common limited partner for the nine months ended September 30, 2017 and 2016:
Date Declared | Total Amount | |||
February 22, 2017 | $ | 23,007,950 | ||
May 9, 2017 | 24,239,365 | |||
August 3, 2017 | 25,186,913 | |||
$ | 72,434,228 | |||
February 24, 2016 | $ | 20,893,214 | ||
May 10, 2016 | 21,972,039 | |||
August 9, 2016 | 19,662,034 | |||
$ | 62,527,287 | |||
Distributions to the General Partner
TCPC’s performance during the nine months ended September 30, 2017 and 2016 exceeded the total return threshold; accordingly, incentive compensation of $16.7 million and $14.3 million for the nine months ended September 30, 2017 and 2016, respectively, was distributable to the General Partner.
Related Parties
We have entered into a number of business relationships with affiliated or related parties, including the following:
• | Each of the Partnership, TCPC, TCPC Funding, and the SBIC has entered into an investment management agreement with the Advisor. |
• | The Administrator provides us with administrative services necessary to conduct our day-to-day operations. For providing these services, facilities and personnel, the Administrator may be reimbursed by us for expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our officers and the Administrator’s administrative staff and providing, at our request and on our behalf, significant managerial assistance to our portfolio companies to which we are required to provide such assistance. |
• | Pursuant to its limited partnership agreement, the general partner of the Partnership is Series H of SVOF/MM, LLC. SVOF/MM, LLC is an affiliate of the Advisor and certain other series and classes of SVOF/MM, LLC serve as the general partner or managing member of certain other funds managed by the Advisor. |
The Advisor and its affiliates, employees and associates currently do and in the future may manage other funds and accounts. The Advisor and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds or accounts. Accordingly, conflicts may arise regarding the allocation of investments or opportunities among us and those accounts. In general, the Advisor will allocate investment opportunities pro rata among us and the other funds and accounts (assuming the investment satisfies the objectives of each) based on the amount of committed capital each then has available. The allocation of certain investment opportunities in private placements is subject to independent director approval pursuant to the terms of the co-investment exemptive order applicable to us. In certain cases, investment opportunities may be made other than on a pro rata basis. For example, we may desire to retain an asset at the same time that one or more other funds or accounts desire to sell it or we may not have additional capital to invest at a time the other funds or accounts do. If the Advisor is unable to manage our investments effectively, we may be unable to achieve our investment objective. In addition, the Advisor may face
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conflicts in allocating investment opportunities between us and certain other entities that could impact our investment returns. While our ability to enter into transactions with our affiliates is restricted under the 1940 Act, we have received an exemptive order from the SEC permitting certain affiliated investments subject to certain conditions. As a result, we may face conflict of interests and investments made pursuant to the exemptive order conditions which could in certain circumstances affect adversely the price paid or received by us or the availability or size of the position purchased or sold by us.
Recent Developments
From October 1, 2017 through November 3, 2017, we have invested approximately $68.1 million primarily in four senior secured loans with a combined effective yield of approximately 10.0%.
On November 7, 2017, TCPC’s board of directors declared a fourth quarter regular dividend of $0.36 per share payable on December 29, 2017 to stockholders of record as of the close of business on December 15, 2017.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including changes in interest rates. At September 30, 2017, 88.8% of debt investments in our portfolio 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 September 30, 2017, the percentage of floating rate debt investments in our portfolio that bore interest based on an interest rate floor was 81.3%. 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 September 30, 2017 balance sheet, the following table shows the annual impact on net investment 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:
Basis Point Change | Interest income | Interest Expense | Net Investment Income | |||||||||
Up 300 basis points | $ | 45,988,135 | $ | (9,150,000 | ) | $ | 36,838,135 | |||||
Up 200 basis points | 32,119,293 | (6,100,000 | ) | 26,019,293 | ||||||||
Up 100 basis points | 18,250,452 | (3,050,000 | ) | 15,200,452 | ||||||||
Down 100 basis points | (7,085,379 | ) | 3,050,000 | (4,035,379 | ) | |||||||
Down 200 basis points | (8,033,856 | ) | 4,036,065 | (3,997,791 | ) | |||||||
Down 300 basis points | (8,033,856 | ) | 4,036,065 | (3,997,791 | ) | |||||||
Item 4. Controls and Procedures
As of the period covered by this report, we, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on our evaluation, our management, including the chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were effective in timely alerting management, including the chief executive officer and chief financial officer, of material information about us required to be included in our periodic SEC filings. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, are based upon certain assumptions about the likelihood of future events and can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. There has not been any change in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings
Although we may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise, as of September 30, 2017, we are currently not a party to any pending material legal proceedings.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in our most recent annual report on Form 10-K, as filed with the Securities and Exchange Commission on February 28, 2017.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4: Mine Safety Disclosures.
None.
Item 5: Other Information.
None.
Item 6. Exhibits
Number | Description | |
3.1 | ||
3.2 | ||
31.1 | ||
31.2 | ||
32.1 | ||
______________
* Filed herewith.
(1) | Incorporated by reference to Exhibit (a)(2) to the Registrant’s Registration Statement under the Securities Act of 1933 (File No. 333-172669), on Form N-2, filed on May 13, 2011 |
(2) | Incorporated by reference to Exhibit (b)(2) to the Registrant’s Registration Statement under the Securities Act of 1933 (File No. 333-172669), on Form N-2, filed on May 13, 2011 |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
SPECIAL VALUE CONTINUATION PARTNERS, LP
Date: November 7, 2017 | ||
By: | /s/ Howard M. Levkowitz | |
Name: | Howard M. Levkowitz | |
Title: | Chief Executive Officer | |
Date: November 7, 2017 | ||
By: | /s/ Paul L. Davis | |
Name: | Paul L. Davis | |
Title: | Chief Financial Officer | |
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