TCW Direct Lending LLC - FORM 10-Q

TCW Direct Lending LLC - FORM 10-Q - May 8, 2018

Attached files

Attached files

TCW Direct Lending LLC Reports

file	filename
EX-99.1 - EX-99.1 - TCW Direct Lending LLC	d564873dex991.htm
EX-32.2 - EX-32.2 - TCW Direct Lending LLC	d564873dex322.htm
EX-32.1 - EX-32.1 - TCW Direct Lending LLC	d564873dex321.htm
EX-31.2 - EX-31.2 - TCW Direct Lending LLC	d564873dex312.htm
EX-31.1 - EX-31.1 - TCW Direct Lending LLC	d564873dex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2018

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

For the transition period from to

Commission file number 814-01069

TCW DIRECT LENDING LLC

(Exact Name of Registrant as Specified in Its Charter)


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

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

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

Not applicable

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☐

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

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

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

The number of the Registrant’s common units outstanding at May 8, 2018 was 20,134,698.

TCW DIRECT LENDING LLC

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2018

Table of Contents


	INDEX	PAGE NO.

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Schedules of Investments as of March 31, 2018 (unaudited) and December 31, 2017		2

	Consolidated Statements of Assets and Liabilities as of March 31, 2018 (unaudited) and December 31, 2017		12

	Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017 (unaudited)		13

	Consolidated Statements of Changes in Members’ Capital for the three months ended March 31, 2018 and 2017 (unaudited)		14

	Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited)		15

	Notes to Consolidated Financial Statements (unaudited)		16

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40

Item 4.	Controls and Procedures		40

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		41

Item 1A.	Risk Factors		41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		41

Item 3.	Defaults Upon Senior Securities		41

Item 4.	Mine Safety Disclosures		41

Item 5.	Other Information		41

Item 6.	Exhibits		42

SIGNATURES			43

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited)

As of March 31, 2018


Industry	Issuer	Acquisition Date		Investment	% of Net Assets		Par Amount		Maturity Date		Amortized Cost		Fair Value
	Non-Controlled/Non-Affiliated Investments Debt
Auto Components
	Challenge Manufacturing Company LLC		04/20/17	Term Loan - 8.38% (LIBOR + 6.50%, 1.00% Floor)		4.6%	$	54,112,000		04/20/22	$	53,125,182	$	54,382,560

						4.6%		54,112,000				53,125,182		54,382,560

Chemicals
	Vertellus Performance Chemicals LLC(1)		09/22/17	First Lien Term Loan - 8.63% (LIBOR + 6.75%, 1.25% Floor)		3.5%		41,970,909		09/22/22		41,078,366		41,928,938

						3.5%		41,970,909				41,078,366		41,928,938

Commercial Services & Supplies
	School Specialty, Inc.(1)		04/07/17	Delayed Draw Term Loan - 8.13% (LIBOR + 6.25%, 1.00% Floor)		0.5%		5,573,298		04/07/22		5,573,298		5,590,018
	School Specialty, Inc.		04/07/17	Term Loan - 8.04% (LIBOR + 6.25%, 1.00% Floor)		3.4%		40,091,230		04/07/22		39,329,931		40,211,504

						3.9%		45,664,528				44,903,229		45,801,522

Construction & Engineering
	Intren, LLC		07/18/17	Term Loan - 8.41% (LIBOR + 6.75%, 1.25% Floor)		1.2%		15,843,407		07/18/23		15,563,834		14,100,632

						1.2%		15,843,407				15,563,834		14,100,632

Distributors
	ASC Acquisition Holdings, LLC(1)		12/16/16	First Lien Term Loan - 9.28% (LIBOR + 7.50%, 1.00% Floor)		2.0%		24,096,797		12/15/21		23,739,227		23,928,119

						2.0%		24,096,797				23,739,227		23,928,119

Diversified Consumer Services
	Pre-Paid Legal Services, Inc.		05/21/15	First Lien Term Loan - 7.13% (LIBOR + 5.25%, 1.25% Floor)		1.3%		15,737,743		07/01/19		15,717,376		15,737,743

						1.3%		15,737,743				15,717,376		15,737,743

Diversified Financial Services
	Patriot National, Inc.(1)		03/06/18	DIP Term Loan - 12.25% (PRIME + 7.50%, 3.00% Floor)		0.1%		1,537,994		05/30/18		1,537,994		1,537,994
	Patriot National, Inc.(2)		11/09/16	First Lien Term Loan - 12.25% inc PIK (PRIME + 5.50%, 3.00% Floor, 2.00% PIK)		1.7%		47,215,669		11/09/21		46,950,315		19,641,718

						1.8%		48,753,663				48,488,309		21,179,712

	Verus Financial, LLC		04/11/16	First Lien Term Loan - 9.25% (PRIME + 4.50%, 3.50% Floor)		1.4%		16,625,000		04/12/21		16,423,750		16,625,000

						3.2%		65,378,663				64,912,059		37,804,712

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of March 31, 2018


Industry	Issuer	Acquisition Date		Investment	% of Net Assets		Par Amount		Maturity Date		Amortized Cost		Fair Value
Diversified Telecommunication Services
	Alaska Communications Systems Holdings, Inc.		03/28/17	First Lien Term Loan - 8.88% (LIBOR + 7.00%, 1.00% Floor)		1.2%	$	13,731,000		03/13/23	$	13,531,456	$	13,634,883

						1.2%		13,731,000				13,531,456		13,634,883

Food Products
	Bumble Bee Holdings, Inc.		08/15/17	Term Loan B1 - 9.87% (LIBOR + 8.00%, 1.00% Floor)		2.8%		33,163,646		08/15/23		32,567,248		33,462,119
	Connors Bros. Clover Leaf Seafoods Company (Canada) (an affiliate of Bumble Bee Holdings, Inc.)(3)		08/15/17	Term Loan B2 - 9.87% (LIBOR + 8.00%, 1.00% Floor)		0.8%		9,395,821		08/15/23		9,226,851		9,480,383
	Harvest Hill Beverage Company		01/20/16	First Out Term Loan - 8.38% (LIBOR + 6.50%, 1.00% Floor)		7.0%		83,014,566		01/19/21		82,316,261		83,014,566

						10.6%		125,574,033				124,110,360		125,957,068

Health Care Providers & Services
	Help at Home, LLC(1)(4)		08/03/15	Term Loan B - 8.44% (LIBOR + 6.75%, 1.25% Floor)		3.2%		38,211,099		08/03/20		37,928,560		38,402,154

						3.2%		38,211,099				37,928,560		38,402,154

Hotels, Restaurants & Leisure
	FQSR, LLC(1)		03/23/17	Delayed Draw Term Loan - 8.13% (LIBOR + 6.25%, 1.00% Floor)		1.3%		14,736,100		03/24/22		14,646,238		14,780,308
	FQSR, LLC		03/23/17	Term Loan - 8.13% (LIBOR + 6.25%, 1.00% Floor)		0.6%		6,831,000		03/24/22		6,466,917		6,851,493

						1.9%		21,567,100				21,113,155		21,631,801

	OTG Management, LLC		06/30/16	Term Loan - 10.27% (LIBOR + 9.00%, 1.00% Floor)		6.3%		75,012,754		08/26/21		73,991,495		75,162,779
	OTG Management, LLC(1)		06/30/16	Delayed Draw Term Loan - 10.98% (LIBOR + 9.00%, 1.00% Floor)		0.8%		10,291,552		08/26/21		10,291,552		10,312,135
	OTG Management, LLC		01/26/18	Incremental Delayed Draw Term Loan - 10.75% (LIBOR + 9.00%, 1.00% Floor)		0.2%		2,542,619		08/26/21		2,424,943		2,547,704

						7.3%		87,846,925				86,707,990		88,022,618

	Ruby Tuesday, Inc.(1)		12/21/17	Term Loan - 11.68% inc PIK (LIBOR + 8.00%, 1.00% Floor, 2.00% PIK)		3.5%		41,774,325		12/21/22		39,616,579		41,147,710

						12.7%		151,188,350				147,437,724		150,802,129

Household Durables
	Cedar Electronics Holdings, Corp.(4)		07/01/15	Senior Term Loan - 11.21% inc PIK (LIBOR + 6.00%, 0.50% Floor, 3.00% PIK)		1.7%		26,091,487		06/26/20		25,800,925		20,429,634

						1.7%		26,091,487				25,800,925		20,429,634

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of March 31, 2018


Industry	Issuer	Acquisition Date	Investment	% of Net Assets		Par Amount		Maturity Date		Amortized Cost		Fair Value
Industrial Conglomerates
	H-D Advanced Manufacturing Company	06/30/15	First Lien First Out Term Loan - 12.80% inc PIK (LIBOR + 7.00%, 1.00% Floor, 3.50% PIK)		2.6%	$	31,107,803		06/30/20	$	30,900,333	$	30,454,540
	H-D Advanced Manufacturing Company(4)	06/30/15	First Lien Last Out Term Loan - 12.80% inc PIK (LIBOR + 7.00%, 1.00% Floor, 3.50% PIK)		9.4%		116,409,108		06/30/20		115,697,137		111,054,289

					12.0%		147,516,911				146,597,470		141,508,829

Information Technology Services
	ENA Holding Corporation	05/06/16	First Lien Term Loan - 9.30% (LIBOR + 7.00%, 1.00% Floor)		3.9%		46,051,683		05/06/21		45,355,511		46,281,941
	ENA Holding Corporation(1)	05/06/16	Revolver - 8.88% (LIBOR + 7.00%, 1.00% Floor)		0.2%		2,242,002		05/06/21		2,242,002		2,253,212

					4.1%		48,293,685				47,597,513		48,535,153

Internet & Direct Marketing Retail
	Lulu’s Fashion Lounge, LLC	08/28/17	First Lien Term Loan - 8.88% (LIBOR + 7.00%, 1.00% Floor)		1.2%		14,232,969		08/28/22		13,854,848		14,375,298

					1.2%		14,232,969				13,854,848		14,375,298

Metals & Mining
	Pace Industries, Inc.	06/30/15	First Lien Term Loan - 12.45% inc PIK (LIBOR + 8.25%, 1.00% Floor, 2.50% PIK)		7.2%		85,707,462		06/30/20		85,148,930		85,450,339

					7.2%		85,707,462				85,148,930		85,450,339

Pharmaceuticals
	Noramco, LLC(4)	07/01/16	Senior Term Loan - 10.08% inc PIK (LIBOR + 8.00%, 1.00% Floor, 0.38% PIK)		4.4%		52,746,289		07/01/21		52,355,151		52,166,080

					4.4%		52,746,289				52,355,151		52,166,080

Software
	Mavenir Private Holdings II Ltd. (UK) (an affiliate of Mavenir, Inc.)(3)	08/19/16	First Lien Term Loan - 12.27% inc PIK (LIBOR + 9.50%, 1.00% Floor, 1.00% PIK)		2.2%		25,972,538		08/19/22		25,972,538		26,102,401
	Mavenir, Inc. (fka Xura, Inc.)	08/19/16	First Lien Term Loan - 12.27% inc PIK (LIBOR + 9.50%, 1.00% Floor, 1.00% PIK)		5.7%		67,429,936		08/19/22		65,992,959		67,767,086
	Quicken Parent Corp.(1)	04/01/16	First Lien Term Loan - 10.20% inc PIK (LIBOR + 8.50%, 1.00% Floor, 0.50% PIK)		1.9%		22,846,817		04/01/21		22,737,782		21,795,864

					9.8%		116,249,291				114,703,279		115,665,351

Technologies Hardware, Storage and Peripherals
	Quantum Corporation	10/21/16	Delayed Draw Term Loan - 12.56% inc PIK (LIBOR + 8.25%, 1.00% Floor, 2.00% PIK)		1.3%		16,205,895		10/21/21		16,023,977		15,395,600
	Quantum Corporation	11/06/17	Incremental Delayed Draw Term Loan - 12.05% inc PIK (LIBOR + 8.25%, 1.00% Floor, 2.00% PIK)		1.4%		16,371,429		06/30/20		14,709,110		15,847,543

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of March 31, 2018


Industry	Issuer	Acquisition Date		Investment	% of Net Assets		Par Amount		Maturity Date		Amortized Cost		Fair Value
Technologies Hardware, Storage and Peripherals (con’t)
	Quantum Corporation		10/21/16	Term Loan - 12.00% inc PIK (LIBOR + 8.25%, 1.00% Floor, 2.00% PIK)		3.3%	$	41,441,401		10/21/21	$	40,820,415	$	39,369,331

						6.0%		74,018,725				71,553,502		70,612,474

Textiles, Apparel & Luxury Goods
	Differential Brands Group, Inc.		01/28/16	Term Loan - 13.06% (LIBOR + 10.75%, 0.50% Floor)		2.2%		27,336,750		01/28/21		27,066,263		25,860,565
	Frontier Spinning Mills, Inc.(4)		05/19/15	Last Out Term Loan B - 10.06% (LIBOR + 8.25%, 1.00% Floor)		0.8%		12,993,421		04/30/20		12,939,700		9,069,408

						3.0%		40,330,171				40,005,963		34,929,973

	Total Debt Investments Equity					96.8%						1,179,664,954		1,146,153,591


							Shares
Diversified Financial Services
	Verus Financial, LLC(5)		05/20/16	Common Stock		0.9%		8,750				7,640,647		9,879,659

Hotels, Restaurants & Leisure
	RTI Holding Company, LLC (an affiliate of Ruby Tuesday, Inc.)		12/21/17	Warrant, expires 12/21/27		0.1%		1,470,632				1,379,747		1,344,575

Technologies Hardware, Storage and Peripherals
	Quantum Corporation		12/18/17	Common Stock		0.1%		330,814				1,417,922		1,204,163
	Quantum Corporation		12/14/17	Warrant, expires 12/14/22		0.0%		61,393				290,389		15,891

						0.1%		392,207				1,708,311		1,220,054

	Total Equity Investments					1.1%						10,728,705		12,444,288

	Total Non-Controlled/Non-Affiliated Investments*					97.9%						1,190,393,659		1,158,597,879


											Cost
	Controlled/Affiliated Investments
Investment Funds & Vehicles
	TCW Direct Lending Strategic Ventures LLC(3)(6)			Preferred membership interests		24.1%		261,154				261,153,674		285,629,564
				Common membership interests		0.0%		800				—		—

	Total Controlled/Affiliated Investments					24.1%						261,153,674		285,629,564

	Cash Equivalents
	Blackrock Liquidity Funds, Yield 1.55%					3.9%		45,625,398				45,625,398		45,625,398


	Total Investments 125.9%										$	1,497,172,731	$	1,489,852,841

	Net unrealized depreciation on unfunded commitments (0.0%)												$	(308,625	)
	Liabilities in Excess of Other Assets (25.9%)												$	(305,787,348	)

	Net Assets 100.0%												$	1,183,756,868

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Unaudited) (Continued)

As of March 31, 2018

The fair value of the Quantum Corporation Common Stock held by the Company represents the quoted market price as of March 31, 2018 and is considered to be a Level 1 security within the Fair Value Hierarchy. The fair value of each non-controlled/non-affiliated investment was determined using significant unobservable inputs and is considered to be Level 3 within the Fair Value Hierarchy. See Note 3 “Investment Valuations and Fair Value Measurements.”

(1)

Excluded from the investment above, is an unfunded loan commitment for a delayed draw term loan or revolving credit. The Company earns an unused fee on the unfunded commitment during the commitment period. The expiration date of the commitment period may be earlier then the maturity date of the investment stated above. See Note 5 - Commitments and Contingencies.

(2)

The 2% PIK is on accrual, the 10% portion is on non-accrual as of March 31, 2018.

(3)

The investment is not a qualifying asset as defined in Section 55(a) under the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of March 31, 2018, $321,846,793 or 21.0% of the Company’s total assets were represented by “non-qualifying assets.”

(4)

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

(5)

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

(6)

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

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

Prime - Prime Rate

See Notes to Consolidated Financial Statements

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments

As of December 31, 2017


Industry	Issuer	Acquisition Date		Investment	% of Net Assets		Par Amount		Maturity Date		Amortized Cost		Fair Value
	Non-Controlled/Non-Affiliated Investments Debt
Auto Components
	Challenge Manufacturing Company LLC		04/20/17	Term Loan - 8.57% (LIBOR + 7.00%, 1.00% Floor)		4.3%	$	54,824,000		04/20/22	$	53,763,399	$	55,372,240

						4.3%		54,824,000				53,763,399		55,372,240

Chemicals
	Vertellus Performance Chemicals LLC(1)		09/22/17	First Lien Term Loan - 8.32% (LIBOR + 6.75%, 1.25% Floor)		3.3%		42,076,364		09/22/22		41,132,324		41,655,600

						3.3%		42,076,364				41,132,324		41,655,600

Commercial Services & Supplies
	School Specialty, Inc.(1)		04/07/17	Delayed Draw Term Loan - 7.81% (LIBOR + 6.25%, 1.00% Floor)		0.5%		5,643,846		04/07/22		5,643,846		5,677,709
	School Specialty, Inc.		04/07/17	Term Loan - 7.71% (LIBOR + 6.25%, 1.00% Floor)		3.4%		43,513,046		04/07/22		42,636,070		43,774,125

						3.9%		49,156,892				48,279,916		49,451,834

Construction & Engineering
	Intren, LLC		07/18/17	Term Loan - 8.11% (LIBOR + 6.75%, 1.25% Floor)		1.2%		15,943,681		07/18/23		15,649,247		15,561,033

						1.2%		15,943,681				15,649,247		15,561,033

Distributors
	ASC Acquisition Holdings, LLC(1)		12/16/16	First Lien Term Loan - 8.89% (LIBOR + 7.50%, 1.00% Floor)		2.4%		31,942,266		12/15/21		31,436,772		31,015,940

						2.4%		31,942,266				31,436,772		31,015,940

Diversified Consumer Services
	Pre-Paid Legal Services, Inc.		05/21/15	First Lien Term Loan - 6.82% (LIBOR + 5.25%, 1.25% Floor)		1.4%		17,166,352		07/01/19		17,139,337		17,166,352

						1.4%		17,166,352				17,139,337		17,166,352

Diversified Financial Services
	Patriot National, Inc.		11/09/16	First Lien Term Loan - 12.00% inc PIK (PRIME + 5.50%, 3.00% Floor, 2.00% PIK)		0.1%		913,180		11/09/21		913,180		644,705
	Patriot National, Inc.		11/09/16	First Lien Term Loan - 12.00% inc PIK (PRIME + 5.50%, 3.00% Floor, 2.00% PIK)		2.5%		45,796,009		11/09/21		45,512,536		32,331,983

						2.6%		46,709,189				46,425,716		32,976,688

	Verus Financial, LLC		04/11/16	First Lien Term Loan - 8.95% (LIBOR + 7.25%, 0.75% Floor)		1.3%		16,734,375		04/12/21		16,515,332		16,684,172

						3.9%		63,443,564				62,941,048		49,660,860

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2017


Industry	Issuer	Acquisition Date	Investment	% of Net Assets		Par Amount		Maturity Date	Amortized Cost		Fair Value
Diversified Telecommunication Services
	Alaska Communications Systems Holdings, Inc.	03/28/17	First Lien Term Loan - 8.57% (LIBOR + 7.00%, 1.00% Floor)		1.1%	$	13,765,500	03/13/23	$	13,555,491	$	13,627,845

					1.1%		13,765,500			13,555,491		13,627,845

Food Products
	Bumble Bee Holdings, Inc.	08/15/17	Term Loan B1 - 9.44% (LIBOR + 8.00%, 1.00% Floor)		2.6%		33,246,972	08/15/23		32,621,648		32,881,255
	Connors Bros. Clover Leaf Seafoods Company (Canada) (an affiliate of Bumble Bee Holdings, Inc.)(2)	08/15/17	Term Loan B2 - 9.44% (LIBOR + 8.00%, 1.00% Floor)		0.7%		9,419,428	08/15/23		9,242,264		9,315,814
	Harvest Hill Beverage Company	01/20/16	First Out Term Loan - 8.07% (LIBOR + 6.50%, 1.00% Floor)		6.6%		84,157,361	01/19/21		83,387,224		83,820,732

					9.9%		126,823,761			125,251,136		126,017,801

Health Care Providers & Services
	Help at Home, LLC(1)(3)	08/03/15	Term Loan B - 8.84% (LIBOR + 7.50%, 1.25% Floor)		3.7%		46,554,054	08/03/20		46,184,725		46,786,824

					3.7%		46,554,054			46,184,725		46,786,824

Hotels, Restaurants & Leisure
	FQSR, LLC(1)	03/23/17	Delayed Draw Term Loan - 7.95% (LIBOR + 6.25%, 1.00% Floor)		1.0%		13,662,000	03/24/22		13,662,000		13,634,676
	FQSR, LLC	03/23/17	Term Loan - 7.95% (LIBOR + 6.25%, 1.00% Floor)		0.5%		6,848,250	03/24/22		6,460,623		6,834,553

					1.5%		20,510,250			20,122,623		20,469,229

	OTG Management, LLC(1)	06/30/16	Delayed Draw Term Loan - 9.98% (LIBOR + 8.50%, 1.00% Floor)		0.6%		7,286,419	08/26/21		7,286,419		7,279,132
	OTG Management, LLC	06/30/16	First Lien Term Loan - 9.88% (LIBOR + 8.50%, 1.00% Floor)		5.9%		75,012,754	08/26/21		73,917,551		74,937,741

					6.5%		82,299,173			81,203,970		82,216,873

	Ruby Tuesday, Inc.(1)	12/21/17	Term Loan - 11.64% inc PIK (LIBOR + 8.00%, 1.00% Floor, 2.00% PIK)		3.2%		42,090,000	12/21/22		39,790,887		40,574,760

					11.2%		144,899,423			141,117,480		143,260,862

Household Durables
	Cedar Electronics Holdings, Corp.(3)	07/01/15	Senior Term Loan - 10.67% inc PIK (LIBOR + 6.00%, 0.50% Floor, 3.00% PIK)		1.3%		23,103,293	06/26/20		22,839,243		17,119,540

					1.3%		23,103,293			22,839,243		17,119,540

Industrial Conglomerates
	H-D Advanced Manufacturing Company	06/30/15	First Lien First Out Term Loan - 12.19% inc PIK (LIBOR + 7.00%, 1.00% Floor, 3.50% PIK)		2.4%		31,019,030	06/30/20		30,788,816		30,491,706

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2017


Industry	Issuer	Acquisition Date	Investment	% of Net Assets		Par Amount		Maturity Date	Amortized Cost		Fair Value
Industrial Conglomerates (con’t)
	H-D Advanced Manufacturing Company(3)	06/30/15	First Lien Last Out Term Loan - 12.19% inc PIK (LIBOR + 7.00%, 1.00% Floor, 3.50% PIK)		8.5%	$	114,839,275	06/30/20	$	114,049,255	$	108,752,793

					10.9%		145,858,305			144,838,071		139,244,499

Information Technology Services
	ENA Holding Corporation(1)	05/06/16	First Lien Term Loan - 8.69% (LIBOR + 7.00%, 1.00% Floor)		2.2%		28,205,599	05/06/21		27,880,298		28,205,599

					2.2%		28,205,599			27,880,298		28,205,599

Internet & Direct Marketing Retail
	Lulu’s Fashion Lounge, LLC	08/28/17	First Lien Term Loan - 8.57% (LIBOR + 7.00%, 1.00% Floor)		1.2%		14,510,234	08/28/22		14,103,199		14,785,929

					1.2%		14,510,234			14,103,199		14,785,929

Metals & Mining
	Pace Industries, Inc.	06/30/15	First Lien Term Loan - 12.09% inc PIK (LIBOR + 8.25%, 1.00% Floor, 2.50% PIK)		6.9%		89,797,392	06/30/20		89,142,751		88,181,039

					6.9%		89,797,392			89,142,751		88,181,039

Pharmaceuticals
	Noramco, LLC(3)	07/01/16	Senior Term Loan - 9.72% inc PIK (LIBOR + 8.00%, 1.00% Floor, 0.38% PIK)		4.1%		53,784,989	07/01/21		53,355,500		52,655,505

					4.1%		53,784,989			53,355,500		52,655,505

Software
	Mavenir Private Holdings II Ltd. (UK) (an affiliate of Mavenir, Inc.)(2)	08/19/16	First Lien Term Loan - 11.89% inc PIK (LIBOR + 9.50%, 1.00% Floor, 1.00% PIK)		2.0%		25,974,225	08/19/22		25,974,225		25,792,405
	Mavenir, Inc. (fka Xura, Inc.)	08/19/16	First Lien Term Loan - 11.89% inc PIK (LIBOR + 9.50%, 1.00% Floor, 1.00% PIK)		5.3%		67,431,025	08/19/22		65,909,677		66,959,008
	Quicken Parent Corp.	04/01/16	First Lien Term Loan - 10.35% inc PIK (LIBOR + 8.50%, 1.00% Floor, 0.50% PIK)		1.8%		23,267,580	04/01/21		23,147,248		22,592,820
	Quicken Parent Corp.(1)	04/01/16	Revolver - 10.18% (LIBOR + 8.50%, 1.00% Floor)		0.0%		345,000	04/01/21		345,000		331,890

					1.8%		23,612,580			23,492,248		22,924,710

					9.1%		117,017,830			115,376,150		115,676,123

Technologies Hardware, Storage and Peripherals
	Quantum Corporation	10/21/16	Delayed Draw Term Loan - 9.65% (LIBOR + 8.25%, 1.00% Floor)		1.3%		16,371,429	10/21/21		16,174,444		16,093,114
	Quantum Corporation	10/21/16	Incremental Delayed Draw Term Loan - 9.65% (LIBOR + 8.25%, 1.00% Floor)		1.3%		16,371,429	06/30/20		15,038,649		16,174,972

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2017


Industry	Issuer	Acquisition Date	Investment	% of Net Assets		Par Amount		Maturity Date		Amortized Cost		Fair Value
Technologies Hardware, Storage and Peripherals (con’t)
	Quantum Corporation	10/21/16	Term Loan - 9.62% (LIBOR + 8.25%, 1.00% Floor)		3.1%	$	40,928,571		10/21/21	$	40,256,156	$	40,314,643

					5.7%		73,671,429				71,469,249		72,582,729

Textiles, Apparel & Luxury Goods
	Differential Brands Group, Inc.	01/28/16	Term Loan - 12.20% (LIBOR + 10.50%, 0.50% Floor)		2.0%		27,695,500		01/28/21		27,397,588		25,479,860
	Frontier Spinning Mills, Inc.(3)	05/19/15	Last Out Term Loan B - 9.57% (LIBOR + 8.25%, 1.00% Floor)		0.6%		13,004,548		04/30/20		12,944,409		8,023,806

					2.6%		40,700,048				40,341,997		33,503,666

	Total Debt Investments				90.3%						1,175,797,333		1,151,531,820


						Shares
	Equity
Diversified Financial Services
	Verus Financial, LLC(4)	05/20/16	Common Stock		0.7%		8,750				7,779,536		9,194,318
Hotels, Restaurants & Leisure
	RTI Holding Company, LLC (an affiliate of Ruby Tuesday, Inc.)	12/21/17	Warrant, expires 12/21/27		0.1%		1,470,632				1,379,747		1,345,231
Technologies Hardware, Storage and Peripherals
	Quantum Corporation	12/18/17	Common Stock		0.1%		161,784				871,974		910,844
	Quantum Corporation	12/14/17	Warrant, expires 12/14/22		0.0%		108,052				294,237		311,476

	Total Equity Investments				0.9%						10,325,494		11,761,869

	Total Non-Controlled/Non-Affiliated Investments^*				91.2%						1,186,122,827		1,163,293,689


										Cost
	Controlled/Affiliated Investments
Investment Funds & Vehicles
	TCW Direct Lending Strategic Ventures LLC(2)(5)		Preferred membership interests		20.4%		239,554				239,553,673		259,698,273
			Common membership interests		0.0%		800				—		—

	Total Controlled/Affiliated Investments				20.4%						239,553,673		259,698,273

	Cash Equivalents
	Blackrock Liquidity Funds, Yield 1.00%				0.0%		4,556				4,556		4,556


	Total Investments 111.6%									$	1,425,681,056	$	1,422,996,518

	Net unrealized depreciation on unfunded commitments ((0.0%))											$	(530,006	)

	Liabilities in Excess of Other Assets (11.6%)											$	(147,046,261	)

	Net Assets 100.0%											$	1,275,420,251

TCW DIRECT LENDING LLC

Consolidated Schedule of Investments (Continued)

As of December 31, 2017

The fair value of the Quantum Corporation Common Stock held by the Company represents the quoted market price as of December 31, 2017 and is considered to be a Level 1 security within the Fair Value Hierarchy. The fair value of the remaining non-controlled/non-affiliated investments were determined using significant unobservable inputs and are considered to be Level 3 investments within the Fair Value Hierarchy. See Note 3 “Investment Valuations and Fair Value Measurements.”

(1)

Excluded from the investment above is an unfunded loan commitment for a delayed draw term loan or revolving credit. The Company earns an unused fee on the unfunded commitment during the commitment period. The expiration date of the commitment period may be earlier then the maturity date of the investment stated above. See Note 5 - Commitments and Contingencies.

(2)

The investment is not a qualifying asset as defined in Section 55(a) under the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of December 31, 2017, $295,442,306 or 17.9% of the Company’s total assets were represented by “non-qualifying assets.”

(3)

(4)

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

(5)

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

PRIME - Prime Rate

See Notes to Consolidated Financial Statements

TCW DIRECT LENDING LLC

Consolidated Statements of Assets and Liabilities

(Dollar amounts in thousands, except unit data)


	As of March 31, 2018 (unaudited)			As of December 31, 2017
Assets
Investments, at fair value
Non controlled/non-affiliated investments (amortized cost of $1,190,394 and $1,186,123, respectively)	$	1,158,598		$	1,163,294
Controlled affiliated investments (cost of $261,154 and $239,554, respectively)		285,630			259,698
Cash and cash equivalents		74,210			209,784
Interest receivable		11,806			12,485
Deferred financing costs		7,754			8,698
Receivable from Investment Adviser		1,203			1,203
Prepaid and other assets		41			95

Total Assets	$	1,539,242		$	1,655,257

Liabilities
Credit facility payable	$	353,000		$	378,000
Unrealized depreciation on unfunded commitments		1,063			530
Interest and credit facility expense payable		309			418
Directors’ fees payable		61			—
Other accrued expenses and other liabilities		1,052			889

Total Liabilities	$	355,485		$	379,837

Commitments and Contingencies (Note 5)

Members’ Capital
Common Unitholders’ commitment: (20,134,698 units issued and outstanding)	$	2,013,470		$	2,013,470
Common Unitholders’ undrawn commitment: (20,134,698 units issued and outstanding)		(409,125	)		(309,125	)
Common Unitholders’ return of capital		(394,008	)		(394,008	)
Common Unitholders’ offering costs		(853	)		(853	)
Accumulated Common Unitholders’ tax reclassification		(9,215	)		(9,215	)

Common Unitholders’ capital		1,200,269			1,300,269
Accumulated net realized loss		(20,543	)		(20,543	)
Accumulated net investment income (loss)		11,660			(1,091	)
Net unrealized depreciation on investments		(7,629	)		(3,215	)

Total Members’ Capital	$	1,183,757		$	1,275,420

Total Liabilities and Members’ Capital	$	1,539,242		$	1,655,257

Net Asset Value Per Unit (accrual base) (Note 9)	$	79.11		$	78.70

See Notes to Consolidated Financial Statements

TCW DIRECT LENDING LLC

Consolidated Statements of Operations (Unaudited)

(Dollar amounts in thousands, except unit data)


	For the three months ended March 31, 2018			For the three months ended March 31, 2017
Investment Income:
Interest income from non-controlled/non-affiliated investments	$	30,014		$	26,874
Interest income from non-controlled/non-affiliated investments paid-in-kind		5,410			2,240
Dividend income from controlled affiliated investments		6,339			4,850

Total investment income	$	41,763		$	33,964

Expenses:
Interest and credit facility expenses		5,669			3,789
Management fees		2,673			7,551
Administrative fees		320			308
Professional fees		186			126
Directors’ fees		83			77
Other expenses		81			66

Total expenses		9,012			11,917

Net investment income	$	32,751		$	22,047

Net realized and unrealized gain (loss) on investments
Net realized gain on non-controlled/non-affiliated investments	$	—		$	259
Net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments		(8,746	)		(11,424	)
Net change in unrealized appreciation/depreciation on controlled affiliated investments		4,332			59

Net realized and unrealized loss on investments	$	(4,414	)	$	(11,106	)

Net increase in Members’ Capital from operations	$	28,337		$	10,941

Basic and diluted:

Income per unit	$	1.40		$	0.54

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING LLC

Consolidated Statements of Changes in Members’ Capital (Unaudited)

(Dollar amounts in thousands, except unit data)


	For the three months ended March 31, 2018			For the three months ended March 31, 2017
Net Increase (Decrease) in Members’ Capital Resulting from Operations:
Net investment income	$	32,751		$	22,047
Net realized gain on investments		—			259
Net change in unrealized appreciation/depreciation on investments		(4,414	)		(11,365	)

Net Increase in Members’ Capital from Operations		28,337			10,941

Distributions to Members from:
Net investment income		(20,000	)		(20,000	)
Return of capital		—			(96,492	)
Return of unused capital		(100,000	)		—

Total Distributions to Members		(120,000	)		(116,492	)

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

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

Total (Decrease) Increase in Members’ Capital		(91,663	)		435,941

Members’ Capital, beginning of period		1,275,420			963,104

Members’ Capital, end of period	$	1,183,757		$	1,399,045

Accumulated net investment gain	$	11,660		$	1,501

See Notes to Consolidated Financial Statements

TCW DIRECT LENDING LLC

Consolidated Statements of Cash Flows (Unaudited)

(Dollar amounts in thousands, except unit data)


	For the three months ended March 31, 2018			For the three months ended March 31, 2017
Cash Flows from Operating Activities
Net increase in net assets resulting from operations	$	28,337		$	10,941
Adjustments to reconcile the net increase in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments		(52,205	)		(104,578	)
Interest income paid in-kind		(5,410	)		(2,240	)
Proceeds from sales and paydowns of investments		33,407			46,078
Net realized (gain) loss on investments		—			(259	)
Change in net unrealized appreciation/depreciation on investments		4,414			11,365
Amortization of premium and accretion of discount, net		(1,663	)		(1,018	)
Amortization of deferred financing costs		944			563
Increase (decrease) in operating assets and liabilities:
(Increase) decrease in interest receivable		679			(583	)
(Increase) decrease in receivable from Investment Adviser		—			101
(Increase) decrease in prepaid and other assets		54			(3,029	)
Increase (decrease) in investments purchased payable		—			(3,840	)
Increase (decrease) in interest and credit facility expense payable		645			(69	)
Increase (decrease) in directors’ fees payable		61			60
Increase (decrease) in management fees payable		—			7,551
Increase (decrease) in other accrued expenses and liabilities		163			(329	)

Net cash provided by (used in) operating activities	$	9,426		$	(39,286	)

Cash Flows from Financing Activities
Contributions from Members	$	—		$	425,000
Unused contributions returned to Members		(100,000	)		—
Distributions to Members		(20,000	)		—
Proceeds from credit facility		—			158,000
Repayments of credit facility		(25,000	)		(444,696	)

Net cash (used in) provided by financing activities	$	(145,000	)	$	138,304

Net (decrease) increase in cash and cash equivalents	$	(135,574	)	$	99,018
Cash and cash equivalents, beginning of period	$	209,784		$	214,913

Cash and cash equivalents, end of period	$	74,210		$	313,931

Supplemental and non-cash financing activities
Interest expense paid	$	3,727		$	3,094
Deemed distribution/re-contribution from Members (Note 9)	$	—		$	(116,492	)

See Notes to Consolidated Financial Statements.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited)

(dollar amount in thousands, except for unit data)

March 31, 2018

1. Organization and Basis of Presentation

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

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

On May 18, 2016, the Company established a wholly owned subsidiary, TCW-DL VF Holdings, Inc., as a Delaware entity to hold an equity investment in a portfolio company organized as a limited liability company.

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

Throughout 2017, the Company formed several Delaware limited liability companies, all of which have a single member interest owned by the Company. In 2018, the Company cancelled all but one of its wholly-owned Delaware limited liability companies.

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

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

Commitment Period: The Commitment Period commenced on September 19, 2014 (the “Initial Closing Date”) and ended on September 19, 2017, the third anniversary of the Initial Closing Date. In accordance with the Company’s Limited Liability Company Agreement, the Company may complete investment transactions that were significantly in process as of the end of the Commitment Period and which the Company reasonably expects to be consummated prior to 90 days subsequent to the expiration date of the Commitment Period. The Company may also effect follow-on investments up to an aggregate maximum of 10% of Capital Commitments (as defined below), provided that any such follow-on investment to be made after the third anniversary of the expiration of the Commitment Period shall require the prior consent of a majority in interest of the Common Unitholders.

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

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

1. Organization and Basis of Presentation (continued)

The commitment amount funded does not include amounts contributed in anticipation of a potential investment that the Company did not consummate and therefore returned to the Members’ as unused capital. As of March 31, 2018, aggregate Commitments, Undrawn Commitments and subscribed for Units of the Company were as follows:


	Commitments		Undrawn Commitments		% of Commitments Funded			Units
Common Unitholder	$	2,013,470	$	409,125		79.7	%		20,134,698

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

The Recallable Amount as of March 31, 2018 was $100,875.

2. Significant Accounting Policies

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

Reclassifications: Certain prior period amounts in the Consolidated Statements of Operations relating to interest income paid-in-kind (“PIK”) have been reclassified out of interest income to disclose PIK interest income separately, in accordance with updated Regulation S-X. These reclassifications have been made to conform to the current period presentation.

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

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

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

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

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

2. Significant Accounting Policies (continued)

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

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

Cash and Cash Equivalents: The Company considers all investments with a maturity of three months or less at the time of acquisition to be cash equivalents. At March 31, 2018 cash and cash equivalents is comprised of demand deposits and highly liquid investments with maturities of three months or less, which approximate fair value.

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

Accounting Pronouncements Recently Adopted: 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 BDCs. In part, the Final Rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017, and the Company has implemented the applicable requirements into this report, namely the separate disclosure of PIK interest income on the Consolidated Statements of Operations and disclosure of realized gains/(losses) on controlled affiliated investments.

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance in this update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, this Update supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition–Construction-Type and Production-Type Contracts. This update is effective for fiscal years beginning after December 15, 2017. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities. The amendments in this update makes improvements to the requirements for accounting for equity investments and simplify the impairment assessment of equity investments. For public entities this update is effective for fiscal years beginning after December 15, 2017. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Accounting Pronouncements Not Yet Adopted: In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instrument —Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this update provide a variety of technical corrections and improvements to how entities should account for financial instruments and shorten the amortization period for certain callable debt securities held at premium. For public entities, this update is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years beginning after June 15, 2018. The Company is currently evaluating the impact of this new guidance on the Company’s consolidated financial statements.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

3. Investment Valuations and Fair Value Measurements

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

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

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

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

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

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

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

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

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

Equity, (Level 1), includes common stock valued at the closing price on the primary exchange in which the security trades.

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

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

Equity, (Level 3), include common stock and warrants. Such securities are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. A market approach is generally used to determine fair value. Pricing inputs include, but are not limited to, financial health, and relevant business developments of the issuer; EBITDA; market multiples of comparable companies; comparable market transactions and recent trades or transactions; issuer, industry and market events; and contractual or legal restrictions on the sale of the security. When a Black-Scholes pricing model is used it follows the income approach. The pricing model takes into account the contract terms as well as multiple inputs, including: time value, implied volatility, equity prices and interest rates. A liquidity discount based on current market expectations, future events, minority ownership position and the period management reasonably expects to hold the investment may be applied.

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

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

3. Investment Valuations and Fair Value Measurements (continued)

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

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Consolidated Schedule of Investments as of March 31, 2018:


Investments	Level 1		Level 2		Level 3		NAV		Total
Debt	$	—	$	—	$	1,146,154	$	—	$	1,146,154
Equity		1,204		—		11,240		—		12,444
Investment Funds & Vehicles (1)		—		—		—		285,630		285,630
Cash equivalents		45,625		—		—		—		45,625

Total Assets	$	46,829	$	—	$	1,157,394	$	285,630	$	1,489,853

⁽¹⁾

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

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


Investments	Level 1		Level 2		Level 3		NAV		Total
Debt	$	—	$	—	$	1,151,532	$	—	$	1,151,532
Equity		911		—		10,851		—		11,762
Investment Funds & Vehicles (1)		—		—		—		259,698		259,698
Cash equivalents		5		—		—		—		5

Total Assets	$	916	$	—	$	1,162,383	$	259,698	$	1,422,997

⁽¹⁾

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

3. Investment Valuations and Fair Value Measurements (continued)

The following table provides a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three months ended March 31, 2018:


	Debt			Equity			Total
Balance, January 1, 2018	$	1,151,532		$	10,851		$	1,162,383
Purchases*		34,927			542			35,469
Sales and paydowns of investments		(32,722	)		(685	)		(33,407	)
Accretion of original issue discounts		1,663			—			1,663
Net change in unrealized appreciation/depreciation		(9,246	)		532			(8,714	)

Balance, March 31, 2018	$	1,146,154		$	11,240		$	1,157,394

Change in net unrealized appreciation/depreciation in investments held as of March 31, 2018	$	(9,024	)	$	(532	)	$	(8,492	)

*	Includes payments received in-kind

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


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

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

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

*	Includes payments received in-kind

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. During the three months ended March 31, 2018 and 2017, the Company did not have any transfers between levels.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

3. Investment Valuations and Fair Value Measurements (continued)

Level 3 Valuation and Quantitative Information: The following table summarizes the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of March 31, 2018.

Investment

Type

Fair Value

Valuation
Technique

Unobservable

Input

Range

Weighted
Average

Impact to
Valuation
from an
Increase
in Input

Debt

772,674

Income Method

Weighted Average Cost of Capital

Shadow Credit Rating

6.9% to 22.8%

B+ to CCC-

12.0%

N/A

Decrease

Increase

Debt

322,802

Income Method

Shadow Credit Rating

BB- to CCC

N/A

Increase

Debt

41,609

Market/Waterfall

Method

EBITDA Multiple

Revenue Multiple

5.0x to 8.0x

1.0x to 1.2x

N/A

Increase

Debt

9,069

Income/Market/

Waterfall Method

Weighted Average Cost of Capital

Shadow Credit Rating

EBITDA Multiple

25.0% to 30.0%

CCC- to CC

7.0x to 8.0x

27.5%

N/A

Decrease

Increase

Equity

Income Method

Implied Volatility

Risk Free Rate

Expected Term

69.2%

1.92% to 2.08%

0.5 yrs. to 1.0 yrs.

N/A

0.75 yrs.

Increase

Equity

11,224

Market/Waterfall

Method

EBITDA Multiple

4.5x to 12.0x

N/A

Increase

Investment

Type

Fair Value

Valuation

Technique

Unobservable

Input

Range

Weighted
Average

Impact to
Valuation
from an
Increase
in Input

Debt

840,792

Income Method

Weighted Average Cost of Capital

Shadow Credit Rating

6.5% to 22.1%

B+ to CCC-

12.0%

N/A

Decrease

Increase

Debt

252,620

Income Method

Shadow Credit Rating

BB- to CCC

N/A

Increase

Debt

50,096

Income/Waterfall

Method

EBITDA Multiple

5.0x to 6.5x

N/A

Increase

Debt

8,024

Income/Market/

Waterfall Method

Weighted Average Cost of Capital

Shadow Credit Rating

EBITDA Multiple

Revenue Multiple

25.0% to 30.0%

CCC- to CC

6.5x to 7.5x

0.2x to 0.3x

27.5%

N/A

Decrease

Increase

Equity

311

Income Method

Implied Volatility

Risk Free Rate

Expected Term

70.8%

1.5%

0.5 yrs. to 1.0 yrs.

N/A

0.75 yrs.

Increase

Equity

10,540

Market/Waterfall

Method

EBITDA Multiple

4.5x to 12.0x

N/A

Increase

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

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

3. Investment Valuations and Fair Value Measurements (continued)

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

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

4. Agreements and Related Party Transactions

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

Management Fee: Pursuant to the Advisory Agreement, and subject to the overall supervision of the Board, the Adviser will manage the Company’s day-to-day operations and provide investment advisory services to the Company. The Company will pay to the Adviser, quarterly in advance, a management fee (the “Management Fee”) calculated as follows: (i) for the period starting on the initial closing date and ending on the earlier of (A) the last day of the calendar quarter during which the Commitment Period (as defined below) ends or (B) the last day of the calendar quarter during which the Adviser or an affiliate thereof begins to accrue a management fee with respect to a successor fund, 0.375% (i.e., 1.50% per annum) of the aggregate commitments determined as of the end of the Closing Period, and (ii) for each calendar quarter thereafter during the term of the Company (but not beyond the tenth anniversary of the initial closing date), 0.1875% (i.e., 0.75% per annum) of the aggregate cost basis (whether acquired by the Company with contributions from members, other Company funds or borrowings) of all portfolio investments that have not been sold, distributed to the members, or written off for tax purposes (but reduced by any portion of such cost basis that has been written down to reflect a permanent impairment of value of any portfolio investment), determined in each case as of the first day of such calendar quarter. The Management Fee in respect of the Closing Period will be calculated as if all capital commitments of the Company were made on the initial closing date, regardless of when Common Units were actually funded. The actual payment of the Management Fee with respect to the Closing Period will not be made prior to the first day of the first full calendar quarter following the end of the Closing Period. The “Commitment Period” of the Company will begin on the initial closing date and end on the earlier of (a) three years from the initial closing date and (b) the date on which the undrawn Commitment of each Common Unit has been reduced to zero. While the Management Fee will accrue from the initial closing date, the Adviser intends to defer payment of such fees to the extent that such fees cannot be paid from interest and fee income generated by the Company’s investments.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

4. Agreements and Related Party Transactions (continued)

For the three months ended March 31, 2018 and 2017, Management Fees incurred amounted to $2,673 and $7,551, respectively, of which $0 and $7,551 remained payable at March 31, 2018 and 2017, respectively.

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

Since inception of the Company, the Adviser was paid $827 in such fees, all of which were paid as of December 31, 2017. In accordance with the limited liability company agreement, $175 was applied towards management fees for the year ended December 31, 2017 and $652 of such fees had been recorded as fee income during the year ended December 31, 2016. No fees were paid to the Adviser during the three months ended March 31, 2018.

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

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

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

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

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

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

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

For the three months ended March 31, 2018 and 2017, no Incentive Fees were incurred.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

4. Agreements and Related Party Transactions (continued)

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

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

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

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

The Company’s investments in controlled affiliated investments as of March 31, 2018 along with the transactions during the three months ended March 31, 2018 were as follows:


	Fair Value as of January 1, 2018		Purchases		Sales		Change in Unrealized Gains and (Losses)		Fair Value as of March 31, 2018		Dividend Income		Realized Gain Distribution
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	259,698	$	21,600	$	—	$	4,332	$	285,630	$	6,339	$	—

Total Controlled Affiliates	$	259,698	$	21,600	$	—	$	4,332	$	285,630	$	6,339	$	—

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

4. Agreements and Related Party Transactions (continued)

The Company’s investments in controlled affiliated investments as of December 31, 2017 along with transactions during the year ended December 31, 2017 were as follows:


	Fair Value as of January 1, 2017		Purchases		Sales			Change in Unrealized Gains and (Losses)		Fair Value as of December 31, 2017		Dividend Income		Realized Gain Distribution
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	247,164	$	75,658	$	(64,000	)	$	876	$	259,698	$	22,618	$	1,432

Total Controlled Affiliates	$	247,164	$	75,658	$	(64,000	)	$	876	$	259,698	$	22,618	$	1,432

For the three months March 31, 2018 and the year ended December 31, 2017, the Company did not recognize any realized gains (losses) on controlled affiliated investments. During the three months ended March 31, 2018 and the year ended December 31, 2017, the Company recognized $0.0 million and $1.4 million of net realized gain distributions from TCW Strategic Ventures. The net realized gain during the year ended December 31, 2017 reflects a distribution from TCW Strategic Ventures during the period from its net short- and long-term gains.

5. Commitments and Contingencies

The Company had the following unfunded commitments and unrealized losses by investment as of March 31, 2018 and December 31, 2017:


		March 31, 2018				December 31, 2017
Unfunded Commitments	Maturity/ Expiration	Amount		Unrealized Losses		Amount		Unrealized Losses
ASC Acquisition Holdings, LLC	December 2021	$	11,208	$	79	$	11,207	$	326
ENA Holding Corporation	May 2021		5,765		—		4,804		19
FQSR, LLC	May 2022		7,362		7		2,415		17
Help At Home, LLC	August 2020		14,865		—		6,757		—
OTG Management, LLC	August 2021		5,713		46		3,005		30
Patriot National, Inc.	May 2018		1,783		—		N/A		N/A
Quicken Parent Corp.	April 2021		863		40		518		15
Ruby Tuesday, Inc.	December 2022		4,575		82		4,575		41
School Specialty, Inc.	April 2019		6,450		13		6,450		19
Vertellus Performance Chemicals LLC	September 2019		4,218		42		4,218		63

Total		$	62,802	$	309	$	43,949	$	530

The Company’s total capital commitment to its underlying investment in Strategic Ventures is $481,600. As of March 31, 2018, the Company’s unfunded commitment to Strategic Ventures is $219,646.

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of March 31, 2018, management is not aware of any pending or threatened litigation.

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

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

6. Members’ Capital

During the three months ended March 31, 2018 and 2017, the Company did not sell or issue any Common Units. The activity for the three months ended March 31, 2018 and 2017 is as follows:


	Three Months Ended March 31,
	2018		2017
Units at beginning of period		20,134,698		20,134,698

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

For the three months ended March 31, 2018 and 2017, the Company processed $0 and $116,492, respectively, of deemed distributions and re-contributions.

7. Credit Facility

The Company has a secured revolving credit agreement (the “Credit Agreement”) with Natixis, New York Branch (“Natixis”) as administrative agent and committed lender. The Credit Agreement provides for a revolving credit line of up to $750 million (the “Maximum Commitment”) (the “Credit Facility”), subject to the lesser of the “Borrowing Base” assets or the “Maximum Commitment (the “Available Commitment”). The Borrowing Base assets generally equal the sum of (a) a percentage of certain eligible investments in a controlled account, (b) a percentage of unfunded commitments from certain eligible investors in the Company and (c) cash in a controlled account. The Credit Agreement is generally secured by the Borrowing Base assets.

On April 10, 2017, the Company and Natixis entered into a Third Amended and Restated Revolving Credit Agreement. Under the Third Amended and Restated Revolving Credit Agreement borrowings bear interest at a rate equal to either the (a) adjusted eurodollar rate calculated in a customary manner plus 2.35%, (b) commercial paper rate plus 2.35%, or (c) a base rate calculated in a customary manner (using the higher of the Federal Funds Rate plus 0.50%, the Prime Rate and the Floating LIBOR Rate plus 1.00%) plus 1.35%. Moreover, the Credit Agreement’s stated maturity date was extended from November 10, 2017 to April 10, 2020. The Credit Facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Company fail to satisfy certain covenants. As of March 31, 2018, the Company was in compliance with such covenants.

As of March 31, 2018, the Available Commitment under the Third Amended and Restated Revolving Credit Agreement is $654 million. As of December 31, 2017, the Available Commitment was $727 million. Prior to the Third Amended and Restated Credit Agreement the Available Commitment decreased from $622 million to $303 million as of March 29, 2017 and decreased from $750 million to $622 million as of August 30, 2016 in conjunction with capital activity that decreased the remaining Undrawn Commitments together with the Recallable Amount of the Company’s Members. As of March 31, 2018 and December 31, 2017, the amounts outstanding under the Credit Facility were $353 million and $378 million, respectively. The carrying amount of the Credit Facility, which is categorized as Level 2 within the fair value hierarchy as of March 31, 2018 and December 31, 2017, approximates its fair value. Valuation techniques and significant inputs used to determine fair value include Company details, credit, market and liquidity risk and events, financial health of the Company, place in the capital structure, interest rate and terms and condition. The Company incurred financing costs of $10.1 million in connection with the April 10, 2017 Third Amended and Restated Revolving Credit Agreement. The Company recorded these costs as deferred financing costs on its Consolidated Statements of Asset and Liabilities and are being amortized over the life of the Credit Facility. As of March 31, 2018 and December 31, 2017, $7.8 million and $8.7 million, respectively, of such prepaid deferred financing costs had yet to be amortized.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

7. Credit Facility (continued)

The summary information regarding the Credit Facility for the three months ended March 31, 2018 and 2017 were as follows:


	Three Months Ended March 31,
	2018			2017
Credit facility interest expense	$	3,771		$	3,037
Unused fees		938			170
Administrative fees		16			19
Amortization of deferred financing costs		944			563

Total	$	5,669		$	3,789

Weighted average interest rate		4.07	%		2.53	%
Average outstanding balance	$	370,778		$	479,570

8. Income Taxes

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

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

As of March 31, 2018 and December 31, 2017, the Company’s aggregate investment unrealized appreciation and depreciation for federal income tax purposes were as follows:


	March 31, 2018			December 31, 2017
Cost of investments for federal income tax purposes	$	1,451,547		$	1,445,098
Unrealized appreciation	$	40,722		$	31,987
Unrealized depreciation	$	48,042		$	54,788
Net unrealized depreciation on investments	$	(7,320	)	$	(22,801	)

The Company did not have any unrecognized tax benefits at December 31, 2017, nor were there any increases or decreases in unrecognized tax benefits for the period then ended; and therefore no interest or penalties were accrued. The Company is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three and four years, respectively.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

9. Financial Highlights

Selected data for a unit outstanding throughout the three months ended March 31, 2018 and 2017 is presented below. The accrual base Net Asset Value is calculated by subtracting the per unit loss from investment operations from the beginning Net Asset Value per unit and reflects all units issued and outstanding.


	For the Three Months Ended March 31,
	2018			2017
Net Asset Value Per Unit (accrual base), Beginning of Period	$	78.70		$	93.55
Income from Investment Operations:
Net investment income⁽¹⁾		1.63			1.09
Net realized and unrealized (loss)		(0.23	)		(0.55	)

Total from investment operations		1.40			0.54
Less Distributions:
From net investment income		(0.99	)		(0.99	)
Return of capital		(0.00	)		(4.79	)

Total distributions⁽²⁾		(0.99	)		(5.78	)

Net Asset Value Per Unit (accrual base), End of Period	$	79.11		$	88.31

Common Unitholder Total Return⁽³⁾⁽⁴⁾		2.4	%		1.2	%

Common Unitholder IRR⁽⁵⁾		7.2	%		4.5	%

Ratios and Supplemental Data
Members’ Capital, end of period	$	1,183,757		$	1,399,045
Units outstanding, end of period		20,134,698			20,134,698
Ratios based on average net assets of Members’ Capital:
Ratio of total expenses to average net assets⁽⁶⁾		2.96	%		4.49	%
Ratio of net expenses to average net assets⁽⁶⁾		2.96	%		4.49	%
Ratio of financing cost to average net assets⁽⁴⁾		0.46	%		0.35	%
Ratio of net investment income before expense recapture to average net assets⁽⁶⁾		10.74	%		8.30	%
Ratio of net investment income to average net assets⁽⁶⁾		10.74	%		8.30	%
Credit facility payable	$	353,000		$	303,304
Asset coverage ratio		4.4			5.6
Portfolio turnover rate⁽⁴⁾		2.0	%		3.0	%

⁽¹⁾	Per unit data was calculated using the number of Common Units issued and outstanding as of March 31, 2018 and 2017.

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

⁽³⁾	The Total Return for the three months ended March 31, 2018 and 2017 was calculated by taking the net income (loss) of the Company for the period divided by the weighted average capital contributions from the Members during the period. The return is net of management fees and expenses.

⁽⁴⁾	Not annualized.

⁽⁵⁾

The Internal Rate of Return (IRR) since inception for the Common Unitholders, after management fees, financing costs and operating expenses is 7.2% through March 31, 2018. The IRR is computed based on cash flow due dates contained in notices to Members (contributions from and distributions to the Common Unitholders) and the net assets (residual value) of the Members’ Capital account at period end. The IRR is calculated based on the fair value of investments using principles and methods in accordance with GAAP and does not necessarily represent the amounts that may be realized from sales or other dispositions. Accordingly, the return may vary significantly upon realization.

⁽⁶⁾	Annualized except for organizational costs.

TCW DIRECT LENDING LLC

Notes to Consolidated Financial Statements (Unaudited) (Continued)

(dollar amount in thousands, except for unit data)

March 31, 2018

10. Subsequent Events

The Company has evaluated subsequent events through the date of issuance of the consolidated financial statements. There have been no subsequent events that require recognition or disclosure in these consolidated financial statements.

Item 2.

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

The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report 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 future performance or financial condition of TCW Direct Lending LLC. For simplicity, this report uses the terms “Company,” “we,” “us,” and “our” to include TCW Direct Lending LLC and where appropriate in the context, its wholly-owned subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

•

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

•

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

•

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

•

our future operating results;

•

our business prospects and the prospects of our portfolio companies;

•

our contractual arrangements and relationships with third parties;

•

the ability of our portfolio companies to achieve their objectives;

•

competition with other entities and our affiliates for investment opportunities;

•

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

•

the speculative and illiquid nature of our investments;

•

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

•

the adequacy of our financing sources and working capital;

•

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

•

the loss of key personnel;

•

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

•

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

•

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

•

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

•

the effect of legal, tax and regulatory changes; and

•

the other risks, uncertainties and other factors we identify under “Part I—Item 1A. Risk Factors” in the Form 10-K that we filed with the SEC on March 22, 2018 and elsewhere in this report.

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

Overview

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

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

On May 18, 2016, we established a wholly owned subsidiary, TCW-DL VF Holdings, Inc., as a Delaware entity to hold an equity investment in a portfolio company organized as a limited liability company.

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

Throughout 2017, the Company formed several Delaware limited liability companies, all of which have a single member interest owned by us. In 2018, we cancelled all but one of our wholly-owned Delaware limited liability companies.

Revenues

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

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

Expenses

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

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

Critical Accounting Policies and Estimates

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

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

Investments at Fair Value

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

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

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

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

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

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

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

Equity, (Level 1), includes common stock valued at the closing price on the primary exchange in which the security trades.

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

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

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

Investment Activity

As of March 31, 2018 and December 31, 2017, our non-controlled/non-affiliated portfolio consisted of 26 debt and three equity investments. Based on fair values as of March 31, 2018 and December 31, 2017, our non-controlled/non-affiliated portfolio was 99.0% invested in debt investments which were mostly senior secured, first lien term loans and 1.0% in equity investments comprised of common stock and warrants.

The table below describes our non-controlled/non-affiliated investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in industries as of March 31, 2018:


Industry	Percent of Total Investments
Hotels, Restaurants & Leisure		13	%
Industrial Conglomerates		12	%
Food Products		11	%
Software		10	%
Metals & Mining		7	%
Technologies Hardware, Storage and Peripherals		6	%
Auto Components		5	%
Pharmaceuticals		5	%
Information Technology Services		4	%
Diversified Financial Services		4	%
Commercial Services & Supplies		4	%
Chemicals		4	%
Health Care Providers & Services		3	%
Textiles, Apparel & Luxury Goods		3	%
Distributors		2	%
Household Durables		2	%
Diversified Consumer Services		2	%
Internet & Direct Marketing Retail		1	%
Construction & Engineering		1	%
Diversified Telecommunication Services		1	%
Computers & Peripherals		0	%

Total		100	%

Interest income from non-controlled/non-affiliated investments, including interest income paid-in-kind, was $35.4 million and $29.1 million for the three months ended March 31, 2018 and 2017, respectively.

Results of Operations

Our operating results for the three months ended March 31, 2018 and 2017 were as follows (dollar amounts in thousands):


	Three Months Ended March 31,
	2018			2017
Total investment income	$	41,763		$	33,964
Expenses		9,012			11,917

Net investment income		32,751			22,047
Net realized gain on non-controlled/non-affiliated investments		—			259
Net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments		(8,746	)		(11,424	)
Net change in unrealized appreciation/depreciation on controlled affiliated investments		4,332			59

Net increase in Members’ Capital from operations	$	28,337		$	10,941

Total investment income

Total investment income for the three months ended March 31, 2018 and 2017 was $41.8 million and $34.0 million, respectively, and included interest income from non-controlled/non-affiliated investments of $35.4 million and $29.1 million, respectively, as well as dividend income of $6.4 million and $4.9 million, respectively, from TCW Strategic Ventures, a controlled affiliated investment which commenced operations in 2015.

Net investment income

Net investment income for the three months ended March 31 2018 and 2017 was $32.8 million and $22.0 million, respectively. The net investment income for the three months ended March 31, 2018 is primarily attributable to the increase in investment yield. The net investment income for the three months ended March 31, 2017 is primarily attributable to current operations and the increase in the number of debt investments as of March 31, 2017 (25 debt investments) compared to March 31, 2016 (14 debt investments).

Operating expenses for the three months ended March 31, 2018 and 2017 were as follows (dollar amounts in thousands):


	Three Months Ended March 31,
	2018		2017
Expenses
Interest and credit facility expenses	$	5,669	$	3,789
Management fees		2,673		7,551
Administrative fees		320		308
Professional fees		186		126
Directors’ fees		83		77
Other expenses		81		66

Total expenses	$	9,012	$	11,917

Our total operating expenses were $9.0 million and $11.9 million for the three months ended March 31, 2018 and 2017, respectively. Our operating expenses include management fees attributed to the Adviser of $2.7 million and $7.6 million for the three months ended March 31, 2018 and 2017, respectively. The decrease in management fees during the current quarter compared to the three months ended March 31, 2017 is due to the expiration of the Commitment Period, which changed the quarterly calculation of management fees from 0.375% of aggregate commitments to 0.1875% of aggregate cost basis of investments. Interest and credit facility expenses increased during the quarter compared to the three months ended March 31, 2017 due to a higher weighted average interest rate during the three months ended March 31, 2018 compared to the three months ended March 31, 2017.

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

Our net realized gain on non-controlled/non-affiliated investments for the three months ended March 31, 2018 and 2017 was $0.0 million and $0.3 million, respectively. No realized gains or losses were recognized during the three months ended March 31, 2018 as none of our investments were sold during the quarter. All investment dispositions during the quarter were due to contractually scheduled paydowns. Our net realized gain on non-controlled/non-affiliated investments during the three months ended March 31, 2017 was primarily due to the realization of gains related to our term loans to Harvest Hill Beverage Company.

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

Our net change in unrealized appreciation/depreciation on non-controlled/non-affiliated investments for the three months ended March 31, 2018 and 2017 was ($8.7) million and ($11.4) million, respectively. Our net change in unrealized appreciation/depreciation for the three months ended March 31, 2018 was primarily due to our term loans to Patriot National. Inc., which recorded an unrealized depreciation of $14.1 million during the quarter. This was partially offset by our term loans to Pace Industries, Inc., and Frontier Spinning Mills, Inc. which recorded increases in fair value of $1.2 million and $1.1 million, respectively, as well as other mark to market adjustments. Our net change in unrealized appreciation/depreciation for the three months ended March 31, 2017 was primarily due to our term loans to Pace Industries, H-D Manufacturing, Patriot National, Inc., and Cedar Electronics Holdings, Corp, which recorded decreases in fair value of $3.2 million, $2.1 million, $1.5 million and $1.1 million, respectively, as well as other mark to market adjustments.

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

Our net change in unrealized appreciation/depreciation on controlled/affiliated investments was $4.3 million and $0.1 million for the three months ended March 31, 2018 and 2017, respectively. The net change in unrealized appreciation/depreciation on controlled/affiliated investments during the three months ended March 31, 2018 and 2017 is primarily attributable to loans originated in 2018 and 2017, respectively, as well as undistributed profits from TCW Strategic Ventures.

Net increase in members’ capital from operations

Our net increase in members’ capital from operations during the three months ended March 31, 2018 and 2017 was $28.3 million and $10.9 million, respectively. The increase during the three months ended March 31, 2018 is primarily attributable to higher investment income resulting from higher investment yields coupled with lower management fees. The increase during the three months ended March 31, 2017 is primarily attributable to higher investment income from a larger investment portfolio, compared to the three months ended March 31, 2016.

Direct Lending Strategic Ventures LLC

On June 5, 2015, the Company, together with an affiliate of Security Benefit Corporation and accounts managed by Oak Hill Advisors, L.P., entered into an Amended and Restated Limited Liability Company Agreement (the “Agreement”) to become members of TCW Strategic Ventures. TCW Strategic Ventures will focus primarily on making senior secured floating rate loans to middle-market borrowers. The Agreement is effective June 5, 2015. The Company’s capital commitment is $481.6 million, representing approximately 80% of the preferred and common equity ownership of TCW Strategic Ventures, with the third-party investors representing the remaining capital commitments and preferred and common equity ownership. A portion of the Company’s capital commitment was satisfied by the contribution of two loans to TCW Strategic Ventures. TCW Strategic Ventures also entered into a revolving credit facility to finance a portion of certain eligible investments on June 5, 2015. The revolving credit facility is for up to $600 million. TCW Strategic Ventures is managed by a management committee comprised of two members, one appointed by the Company and one appointed by Oak Hill Advisors, L.P. All decisions of the management committee require unanimous approval of its members. Neither the Company, nor the Adviser will receive management fees from this entity. Although the Company owns more than 25% of the voting securities of TCW Strategic Ventures, the Company does not believe that it has control over TCW Strategic Ventures (other than for purposes of the 1940 Act). The Company’s ability to withdraw from the fund is subject to restrictions.

The Company’s investments in controlled affiliated investments as of March 31, 2018 along with the transactions during the three months ended March 31, 2018 were as follows (dollar amounts in thousands):


	Fair Value as of January 1, 2018		Purchases		Sales			Change in Unrealized Gains and (Losses)		Fair Value as of March 31, 2018		Dividend Income		Realized Gain Distribution
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	259,698	$	21,600	$	—		$	4,332	$	285,630	$	6,339	$	—

Total Controlled Affiliates	$	259,698	$	21,600	$	—		$	4,332	$	285,630	$	6,339	$	—


The Company’s investments in controlled affiliated investments as of December 31, 2017 along with transactions during the year ended December 31, 2017 were as follows (dollar amounts in thousands):

	Fair Value as of January 1, 2017		Purchases		Sales			Change in Unrealized Gains and (Losses)		Fair Value as of December 31, 2017		Dividend Income		Realized Gain Distribution
Controlled Affiliates
TCW Direct Lending Strategic Ventures LLC	$	247,164	$	75,658	$	(64,000	)	$	876	$	259,698	$	22,618	$	1,432

Total Controlled Affiliates	$	247,164	$	75,658	$	(64,000	)	$	876	$	259,698	$	22,618	$	1,432

For the three months March 31, 2018 and the year ended December 31, 2017, we did not recognize any realized gains (losses) on controlled affiliated investments. During the three months ended March 31, 2018 and the year ended December 31, 2017, we recognized $0.0 million and $1.4 million of net realized gain distributions from TCW Strategic Ventures. The net realized gain during the year ended December 31, 2017 reflects a distribution from TCW Strategic Ventures during the period from its net short- and long-term gains.

Financial Condition, Liquidity and Capital Resources

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

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

As of March 31, 2018 and December 31, 2017, aggregate Commitments, Undrawn Commitments and subscribed for Units of the Company are as follows (dollar amounts in thousands):


	March 31, 2018			December 31, 2017
Commitments	$	2,013,470		$	2,013,470
Undrawn commitments	$	409,125		$	309,125
Percentage of commitments funded		79.7	%		84.6	%
Units		20,134,698			20,134,698

Natixis Credit Agreement

We have a secured revolving credit agreement (the “Credit Agreement”) with Natixis, New York Branch (“Natixis”) as administrative agent and committed lender. The Credit Agreement provides for a revolving credit line of up to $750 million (the “Maximum Commitment”) (the “Credit Facility”), subject to the lesser of the “Borrowing Base” assets or the Maximum Commitment (the “Available Commitment”). The Borrowing Base assets generally equal the sum of (a) a percentage of certain eligible investments in a controlled account, (b) a percentage of unfunded commitments from certain eligible investors in the Company and (c) cash in a controlled account. The Credit Agreement is generally secured by the Borrowing Base assets.

As of March 31, 2018, the Available Commitment under the Third Amended and Restated Revolving Credit Agreement is $654 million. As of December 31, 2017, the Available Commitment under the Third Amended and Restated Revolving Credit Agreement is $727 million. Prior to the Third Amended and Restated Credit Agreement the Available Commitment decreased from $622 million to $303 million as of March 29, 2017 in conjunction with capital activity that decreased the remaining Undrawn Commitments together with the Recallable Amount of our Members.

As of March 31, 2018 and December 31, 2017, the amounts outstanding under the Credit Facility were $353 million and $378 million, respectively. The carrying amount of the amount outstanding under the Credit Facility, which is categorized as Level 2 within the fair value hierarchy as of March 31, 2018 and December 31, 2017, approximates its fair value. Valuation techniques and significant inputs used to determine fair value include Company details, credit, market and liquidity risk and events, financial health of the Company, place in the capital structure, interest rate and terms and condition. We incurred financing costs of $10.1 million in connection with the April 10, 2017 Third Amended and Restated Revolving Credit Agreement. These costs have been recorded as deferred financing costs on our Consolidated Statements of Assets and Liabilities and are being amortized over the life of the Credit Facility. As of March 31, 2018 and December 31, 2017, $7.6 million and $8.7 million, respectively, of such prepaid deferred financing costs had yet to be amortized.

The summary information regarding the Credit Facility for the three months ended March 31, 2018 and 2017 is as follows (dollar amounts in thousands):


	Three Months Ended March 31,
	2018			2017
Borrowing interest expense	$	3,771		$	3,037
Unused fees		938			170
Administrative fees		16			19
Amortization of deferred financing costs		944			563

Total	$	5,669		$	3,789

Weighted average interest rate		4.07	%		2.53	%
Average outstanding balance	$	370,778		$	479,570

A summary of our contractual payment obligations as of March 31, 2018 and December 31, 2017 is as follows (dollar amounts in thousands):


Revolving Credit Agreement	Total Facility Commitment		Borrowings Outstanding		Available Amount⁽¹⁾
Total Debt Obligations – March 31, 2018	$	750,000	$	353,000	$	301,000
Total Debt Obligations – December 31, 2017	$	750,000	$	378,000	$	349,000

(1)

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

The Company had the following unfunded commitments and unrealized losses as of March 31, 2018 December 31, 2017 and by investment (dollar amounts in thousands):


		March 31, 2018				December 31, 2017
Unfunded Commitments	Maturity/ Expiration	Amount		Unrealized Losses		Amount		Unrealized Losses
ASC Acquisition Holdings, LLC	December 2021	$	11,208	$	79	$	11,207	$	326
ENA Holding Corporation	May 2021		5,765		—		4,804		19
FQSR, LLC	May 2022		7,362		7		2,415		17
Help At Home, LLC	August 2020		14,865		—		6,757		—
OTG Management, LLC	August 2021		5,713		46		3,005		30
Patriot National, Inc.	May 2018		1,783		—		N/A		N/A
Quicken Parent Corp.	April 2021		863		40		518		15
Ruby Tuesday, Inc.	December 2022		4,575		82		4,575		41
School Specialty, Inc.	April 2019		6,450		13		6,450		19
Vertellus Performance Chemicals LLC	September 2019		4,218		42		4,218		63

Total		$	62,802	$	309	$	43,949	$	530

The Company’s total capital commitment to its underlying investment in TCW Direct Lending Strategic Ventures LLC is $481.6 million. As of March 31, 2018 and December 31, 2017, the Company’s unfunded commitment to TCW Strategic Ventures was $219.6 million and $241.2 million, respectively.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to financial market risks, including changes in interest rates. At March 31, 2018, 100.0% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate. The interest rates on such investments generally reset by reference to the current market index after one to six months. At March 31, 2018, the percentage of our floating rate debt investments that bore interest based on an interest rate floor was 0.0%. Floating rate investments subject to a floor generally reset by reference to the current market index after one to six months only if the index exceeds the floor.

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

Based on our March 31, 2018 consolidated balance sheet, the following table shows the annual impact on net income (excluding the related incentive compensation impact) of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure (dollar amounts in thousands):


Basis Point Change	Interest Income			Interest Expense			Net Income
Up 300 basis points	$	45,246		$	10,737		$	34,509
Up 200 basis points		30,164			7,158			23,006
Up 100 basis points		15,082			3,579			11,503
Down 100 basis points		(2,069	)		(3,738	)		1,669
Down 200+ basis points		(707	)		(6,855	)		6,148

Item 4.

CONTROLS AND PROCEDURES

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

There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies.

Item 1A.

Risk Factors

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

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Sales of unregistered securities

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

Issuer purchases of equity securities

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

None.

Item 6.

Exhibits.

(a)

Exhibits


Exhibits

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

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

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

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

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

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

99.1*		Financial Statements of TCW Direct Lending Strategic Ventures LLC for the three months ended March 31, 2018 (Unaudited)

*	Filed herewith

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


	TCW DIRECT LENDING LLC

Date: May 8, 2018	By:	/s/ Richard T. Miller
		Richard T. Miller
		President

Date: May 8, 2018	By:	/s/ James G. Krause
		James G. Krause
		Chief Financial Officer

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