Business Development Corp of America - FORM 10-K - March 20, 2020

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EX-99.1 - EXHIBIT 99.1 - Business Development Corp of Americakahalairelandopcoconsolida.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 814-00821
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
(Exact Name of Registrant as Specified in its Charter)

Maryland
 
27-2614444
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
9 West 57th Street, 49th Floor, Suite 4920
New York, New York
 
10019
(Address of Principal Executive Office)
 
(Zip Code)

(212) 588-6770
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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 x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).   Yes o No o

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



Large accelerated filer o
 
Accelerated filer o
 
 
 
Non-accelerated filer x
 
Smaller reporting company o
 
 
 
 
 
Emerging growth company o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The number of shares of the registrant's common stock, $0.001 par value, outstanding as of March 18, 2020 was 189,119,931.
Documents Incorporated by Reference
Portions of the registrant’s definitive Proxy Statement relating to the registrant’s 2020 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company’s fiscal year, are incorporated by reference in Part III of this Annual Report on Form 10-K as indicated herein.



BUSINESS DEVELOPMENT CORPORATION OF AMERICA
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2019

TABLE OF CONTENTS
 
 
 
 
Page
PART I
  
PART II
  
PART III
  
PART IV
  


PART I
ITEM 1. BUSINESS
GENERAL     
Business Development Corporation of America (“BDCA,” or the “Company,” which may also be referred to as “we,” “us,” or “our”) is an externally managed, non-diversified closed-end management investment company. We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, we have elected to be treated for United States ("U.S.") federal income tax purposes, and intend to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
We were incorporated in Maryland in May 2010 and commenced our initial public offering (the “IPO”) on January 25, 2011. As of December 31, 2019, we had approximately $2.6 billion of total assets.
We are externally managed by our investment adviser, BDCA Adviser, LLC (the “Adviser”), a subsidiary of Benefit Street Partners LLC (“BSP”), a leading credit-focused alternative asset management firm. We believe we benefit from the significant investment platform, personnel, scale, and resources of our Adviser and BSP. Our investment activities are managed by the Adviser, and supervised by our Board of Directors ("Board"), a majority of whom are independent of the Adviser and its affiliates. As a BDC, we are required to comply with certain regulatory requirements. See “Regulation” for discussion of BDC regulation and other regulatory considerations.
Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in senior secured loans, and to a lesser extent, mezzanine loans, unsecured loans and equity of predominantly private U.S. middle-market companies. We define middle market companies as those with annual revenues up to $1 billion, although we may invest in larger or smaller companies. We also purchase interests in loans or corporate bonds through secondary market transactions. As of December 31, 2019, 81.3% of our portfolio was invested in senior secured loans.
Senior secured loans generally are senior debt instruments that rank ahead of subordinated debt and equity in priority of payments and are generally secured by liens on the operating assets of a borrower which may include inventory, receivables, plant, property, and equipment. Mezzanine debt is subordinated to senior loans and is generally unsecured. We may also invest in the equity and junior debt tranches of collateralized loan obligation investment vehicles (“Collateralized Securities” or “CLOs”). For a discussion of the risks inherent in our portfolio investments, please see the discussion under Part I, Item 1A. “Risk Factors”.
We co-invest, subject to the conditions included in the exemptive order we received from the U.S. Securities and Exchange Commission (the “SEC”), with certain of our affiliates. See “Material Conflicts of Interests” below. We believe that such co-investments afford us additional investment opportunities and an ability to achieve greater diversification.
ABOUT OUR ADVISER AND BSP
BDCA Adviser, LLC, our investment adviser, is served by BSP’s origination, investment, and portfolio management team. In total, BSP consists of over 100 investment professionals and over 200 total employees as of February 29, 2020. The Adviser, a Delaware limited liability company, is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The Adviser is a subsidiary of BSP, which is also registered as an investment adviser under the Advisers Act.
BSP is a leading credit-focused alternative asset management firm with over $27 billion in assets under management as of January 31, 2020. Established in 2008, the BSP platform manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies, including private/opportunistic debt, structured credit, high yield, special situations, long-short liquid credit, and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass BSP’s robust platform.
Our investment committee consists of Thomas Gahan, Chief Executive Officer of BSP, Michael Paasche, Senior Managing Director of BSP, and Blair D. Faulstich, Senior Portfolio Manager for Private Debt, each with over 20 years of experience in the financial services industry and substantial experience in originating, underwriting and structuring credit investments.
MARKET OPPORTUNITY
We believe that there exists a unique opportunity for BDCs with experience in investing in middle market companies. In our view, middle market companies provide attractive current yields and significant downside protection.
Our current opportunity is highlighted by the following factors:
•
Large pool of uninvested private equity capital likely to seek additional capital to support private investments. We believe there remains a large pool of uninvested private equity capital available to middle market companies. We expect that private equity firms will remain active investors in middle market companies and that these private equity firms will

1


seek to supplement their equity investments with senior secured and mezzanine debt and equity co-investments from other sources, such as us.
•
Consolidation among commercial banks has reduced their focus on middle market businesses. The commercial banks in the United States, which have traditionally been the primary source of capital to middle market companies, have experienced consolidation, loan losses, and stricter regulatory scrutiny, which has led to a significant tightening of credit standards and substantially reduced loan volume to the middle market. Many financial institutions that have historically loaned to middle market companies have failed or been acquired, and we believe that larger financial institutions are now more focused on syndicated lending to larger corporations and are allocating capital to business lines that generate fee income and involve less balance sheet risk. We believe this market dynamic provides us with numerous opportunities to originate new debt and equity investments in middle market companies.
•
Refinancing activities will provide continued opportunities to extend capital to middle market companies. A significant volume of senior secured and mezzanine debt is expected to come due over the next several years. As companies seek to refinance their debt, we believe this will create new financing opportunities for us.
•
Lower default rates and higher recovery rates in the middle market. Default rates remain relatively low, with generally higher recovery rates in the middle market. Middle market companies are generally over-equitized as compared to large cap companies.
•
Favorable Pricing Environment in the Loan Market. Lower valuation levels in certain situations, combined with reduced liquidity in the secondary loan market, have created opportunities to acquire relatively high yielding senior and subordinated debt, both secured and unsecured, at potentially attractive prices.
BUSINESS STRATEGY
Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first and second lien senior secured debt investments and mezzanine debt issued by middle market companies.
We have adopted the following business strategy to achieve our investment objectives:
•
Utilize the experience and expertise of the principals of our Adviser and BSP. Certain principals of our Adviser and BSP have a broad network of contacts with financial sponsors, commercial and investment banks, and leaders within a number of industries that we believe produce significant proprietary investment opportunities outside the normal banking auction process.
•
Focus on middle market companies with stable cash flow. We believe that middle market lending is less competitive than the broadly syndicated loan market, and this is one factor that allows us to negotiate favorable investment terms. Such favorable terms include higher debt yields, more significant covenant protection and greater equity participation than typical of transactions involving larger companies. We generally invest in established companies with positive cash flow. We believe these companies possess better risk-adjusted return profiles than newer companies that are building management expertise or in the early stages of building a revenue base. These middle market companies represent a significant portion of the U.S. economy and often require substantial capital investment to grow their businesses.
•
Employ disciplined underwriting policies and rigorous portfolio management. We employ an extensive underwriting process that includes a review of a prospective portfolio company's competitive position, financial performance, and industry dynamics. We prepare a detailed investment memo and, in addition, we perform substantial due diligence on potential investments, and seek to invest with management teams and/or private equity sponsors who have proven capabilities in building value. As part of the monitoring process for portfolio companies, our Adviser analyzes monthly (if available), quarterly, and annual financial statements versus the previous periods and year, reviews financial projections, and may perform other procedures including meeting with management, attending board meetings and reviewing compliance certificates and covenants.
•
Focus on long-term credit performance and principal protection. We structure our customized loan investments on a relatively conservative basis with high cash yields, security interests (preferably first lien) where possible, cash origination fees, and appropriate leverage levels. We seek strong deal protection for our customized debt investments, including default penalties, information rights, board observation rights, and affirmative, negative and financial covenants, such as lien protection and prohibitions against change of control. We believe these protections reduce our risk of capital loss.
•
Diversification. We seek to diversify our portfolio broadly among companies in a multitude of different industries, thereby reducing the concentration of credit risk in any one company or sector of the economy. We cannot guarantee that we will be successful in this effort.

2


DEAL ORIGINATION
Our Adviser and BSP have extensive relationships with private equity firms, competing lenders, loan syndication and trading desks, management teams, investment bankers, and other persons who we believe will continue to provide us with significant investment opportunities. We believe these relationships provide us with competitive advantages over other BDCs.
From time to time, we may receive referrals for new prospective investments from our portfolio companies as well as other participants in the capital markets.
INVESTMENT SELECTION
We strive to structure our debt investments with the maximum seniority and collateral that we can reasonably obtain while seeking to achieve our expectations for total returns on investments. We seek to structure our debt investments so that they often are collateralized by a first or second lien on the assets of the portfolio company. We seek to tailor the terms of our debt investments to the facts and circumstances of the transaction and prospective portfolio company, negotiating a structure that seeks to protect our rights and manage our risk while creating incentives for the portfolio company to achieve its business plan. A substantial source of our return is monthly or quarterly cash interest that we collect on our debt investments.
Our investment philosophy and portfolio construction involves:
•
Company-specific research and analysis; and
•
An emphasis on capital preservation, low volatility, diversification, and minimization of downside risk.
The foundation of our investment philosophy is intensive credit investment analysis. We follow a rigorous selection process based on:
•
A comprehensive analysis of company creditworthiness, including a quantitative and qualitative assessment of the company’s business;
•
An evaluation of the management team and support from equity investors;
•
An assessment of the competitive landscape;
•
An analysis of business strategy and long-term industry trends; and
•
An in-depth examination of capital structure, financial results, and financial projections.
We seek to identify those companies exhibiting superior fundamental risk-return profiles with a particular focus on investments with the following characteristics:
•
Established companies with a history of positive and stable operating cash flows. We seek to invest in established companies with sound historical financial performance. We typically focus on companies with a history of profitability.
•
Ability to exert meaningful influence. We target investment opportunities in which we will be the lead investor where we can add value through active participation. Our focus is typically on first lien investments.
•
Experienced management team. We will require that our portfolio companies have an experienced management team. We also seek to invest in companies that have a strong equity incentive program in place that properly aligns the interests of management with such company’s investors.
•
Strong franchises and sustainable competitive advantages. We seek to invest in companies with proven products and/ or services and strong regional or national operations.
•
Diverse customer bases and product offerings. We seek to invest in companies with diverse customer bases and product offerings.
While we believe that the criteria listed above are important in identifying and investing in companies, not all of these criteria will be met by each company in which we invest.
INVESTMENT STRUCTURE
Once we have determined that a company is suitable for investment, we work with its management and its other capital providers to structure our investment in the company. We negotiate among these parties to agree on how our investment is expected to perform relative to the other capital in the company’s capital structure. We structure our investments as described below.
First Lien Loans.  When we structure investments in secured first lien loans, we obtain security interests in the assets of the company as collateral in support of the repayment of such loans. This collateral may take the form of first-priority liens on the assets of the company.
Second Lien Loans.  When we structure investments in secured second lien loans, we obtain security interests in the assets of the company as collateral in support of the repayment of such loans. This collateral may take the form of second priority liens on the assets of the company.

3


Subordinated Loans.  We structure these investments as unsecured subordinated loans that provide for relatively high fixed interest rates that provide us with current interest income. Subordinated loans rank senior only to a company’s equity securities and rank junior to all of such company’s other indebtedness in priority of payment. These loans typically have interest-only payments (often representing a combination of cash pay and payment-in-kind (“PIK”) interest) in the early years. Subordinated loan investments are generally more volatile than secured loans and may involve a greater risk of loss of principal. In addition, the PIK feature of many subordinated loans, which effectively operates as negative amortization of loan principal, increases credit risk exposure over the life of the loan.
Warrants and Minority Equity Securities.  In some cases, we may purchase minority equity interests or receive nominally priced warrants or options to buy a minority equity interest in the company in connection with a loan. This can allow us to achieve additional investment return from an equity interest. We may structure such warrants to include provisions protecting our rights as a minority-interest holder, as well as a “put,” or right to sell such securities back to the company, upon the occurrence of specified events.
INTENSIVE CREDIT ANALYSIS/DUE DILIGENCE
The disciplined process through which we make investment decisions with respect to a customized financing transaction involves extensive research into the target company, its industry, its growth prospects and its ability to withstand adverse conditions. If the investment team responsible for the transaction determines that an investment opportunity should be pursued, we engage in an intensive due diligence process. Though each transaction involves a somewhat different approach, the regular due diligence steps generally to be undertaken may include:
•
Meeting with senior management to understand the business more fully and evaluate the ability of the senior management team;
•
Checking management backgrounds and references;
•
Performing a detailed review of financial performance, earnings, and potential for earnings growth;
•
Commissioning a quality of earnings report;
•
Visiting the headquarters and conducting other on site diligence;
•
Contacting customers and vendors to assess both business prospects and industry practices;
•
Conducting a competitive analysis and comparing the company to its main competitors;
•
Researching industry and relevant publications to understand industry wide growth trends;
•
Assessing asset value and the ability of physical infrastructure and information systems to handle anticipated growth;
•
Investigating legal risks and financial and accounting systems;
•
Engaging third party experts and consultants to assist in the due diligence process; and
•
Building detailed projected financial models with an emphasis on downside scenarios.
PORTFOLIO MONITORING
Our Adviser continually monitors each of our portfolio companies to determine if each company is meeting its business plan and to assess the appropriate course of action for each company.
We employ several methods of evaluating and monitoring the performance and value of our investments, which may include, but are not limited to, the following:
•
Assessment of success in adhering to the portfolio company’s business plan and compliance with covenants;
•
Regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements, and accomplishments;
•
Attendance at and participation in board meetings of the portfolio company (if available); and
•
Review of monthly (if available), quarterly, and annual financial statements and financial projections for the portfolio company.
PORTFOLIO ASSET QUALITY
Our Adviser employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Adviser grades the credit risk of all debt investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio debt investment relative to the inherent risk at the time the original debt investment was made (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors.

4


 Loan Rating
 
Summary Description
1
  
Debt investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since the time of investment are favorable.
 
 
2
  
Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable. All investments are initially rated a “2”.
 
 
3
  
Performing debt investment requiring closer monitoring. Trends and risk factors show some deterioration.
 
 
4
  
Underperforming debt investment. Some loss of interest or dividend expected, but still expecting a positive return on investment. Trends and risk factors are negative.
 
 
5
  
Underperforming debt investment with expected loss of interest and some principal.
Our internal performance ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments.
The weighted average risk rating of our investments based on fair value was 2.37 and 2.50 as of December 31, 2019 and December 31, 2018, respectively. As of December 31, 2019, we had eight portfolio companies, which represented twelve portfolio investments, on non-accrual status with a total principal amount of $85.0 million, amortized cost of $62.8 million, and fair value of $22.5 million. These amounts represented 2.8%, 2.4%, and 0.9% of our investment portfolio's total principal, amortized cost, and fair value, respectively. We are currently evaluating potential value recovery alternatives for these investments. As of December 31, 2018, we had eight portfolio companies, which represented fourteen portfolio investments, on non-accrual status with a total principal amount of $171.4 million, amortized cost of $117.4 million, and fair value of $43.8 million. These amounts represented 5.7%, 4.7%, and 1.9% of our investment portfolio's total principal, amortized cost, and fair value, respectively.
The following table shows the distribution of our investments on the 1 to 5 internal performance rating scale at fair value as of December 31, 2019 and 2018:
 
 
December 31, 2019
 
December 31, 2018
Internal Performance Rating
 
Investments at Fair Value
(in thousands)
 
Percentage of Total Investments
 
Investments at Fair Value
(in thousands)
 
Percentage of Total Investments
1
 
$
79,597

 
3.1
%
 
$
79,674

 
3.4
%
2
 
1,420,445

 
55.8
%
 
1,140,960

 
48.9
%
3
 
697,714

 
27.4
%
 
767,671

 
32.9
%
4
 
49,804

 
2.0
%
 
62,346

 
2.7
%
5
 
40,288

 
1.6
%
 
84,267

 
3.6
%
Not rated
 
258,336

 
10.1
%
 
199,796

 
8.5
%
Total
 
$
2,546,184

 
100.0
%
 
$
2,334,714

 
100.0
%
DETERMINATION OF NET ASSET VALUE
The Adviser, acting pursuant to delegated authority from, and under the oversight of our Board of Directors, assists the Board of Directors in its determination of the net asset value (“NAV”) of our investment portfolio each quarter and at such other times as required by law. The NAV per share of our outstanding shares of common stock is determined quarterly by dividing the value of total assets minus liabilities by the total number of shares outstanding. Securities for which market quotations are readily available are valued at the reported closing price on the valuation date. Securities for which market quotations are not readily available are valued at fair value as determined by our Board of Directors. In connection with that determination, our Adviser facilitates the preparation, through the use each quarter of independent valuation firms, portfolio company valuations using relevant inputs, including but not limited to, indicative dealer quotes, values of like securities, the most recent portfolio company financial statements, and forecasts.
We classify the fair value measurements of our assets and liabilities into a fair value hierarchy in accordance with Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The guidance defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

5


With respect to investments for which market quotations are not readily available, the Adviser undertakes a multi-step valuation process each quarter, as described below:
•
Each portfolio company or investment will be valued by the Adviser, with assistance from one or more independent valuation firms engaged by our Board of Directors or as noted below, with respect to investments in an investment fund;
•
The independent valuation firm(s) conduct independent appraisals and make an independent assessment of the value of each investment; and
•
The Board of Directors determines the fair value of each investment, in good faith, based on the input of the Adviser and independent valuation firm (to the extent applicable).
Determination of fair values involves subjective judgments and estimates. Accordingly, the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K (the “Annual Report”) refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations on our consolidated financial statements. Below is a description of factors that our Board of Directors may consider when valuing our debt and equity investments.
Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets. When doing so, we determine whether the quote obtained is readily available according to U.S. generally accepted accounting principles (“U.S. GAAP”) to determine the fair value of the security. If determined to be readily available, we use the quote obtained.
Investments without a readily available market quotation are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.
For an investment in an investment fund that does not have a readily determinable fair value, we measure the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of ASC Topic 946, Financial Services - Investment Companies, as of our measurement date.
For investments in Collateralized Securities, the Adviser models both the assets and liabilities of each Collateralized Securities' capital structure. The model uses a waterfall engine to store the collateral data, generate cash flows from the assets, and distribute the cash flows to the liability structure based on the contractual priority of payments. The cash flows are discounted using rates that incorporate risk factors such as default risk, interest rate risk, downgrade risk, and credit spread risk, among others. In addition, the Adviser considers broker quotations and/or comparable trade activity is considered as an input to determining fair value when available.
DETERMINATIONS IN CONNECTION WITH OFFERINGS
Although we are no longer offering shares of our common stock in a continuous public offering, we may, from time to time, elect to issue shares of our common stock in private placements. We are prohibited under the 1940 Act from selling our shares of common stock at an offering price, after deducting selling commissions and dealer manager fees, that is below our net asset value per share unless we obtain prior Board of Directors and stockholder approval. On May 30, 2019, we received stockholder approval to sell shares of our common stock in an amount not to exceed 25% of our then-outstanding common stock immediately prior to each such sale at a price below our then-current NAV, subject to certain conditions. In connection with any issuance of our common stock, our Board of Directors or a committee thereof review the then current offering price per share, if available, against the current estimated net asset value per share to ensure that we are not selling shares of our common stock at a price that, after deducting selling commissions and dealer manager fees, was below our net asset value per share. If shares are to be sold at a price below our net asset value per share pursuant to shareholder approval thereof, then a majority of our directors who have no financial interest in the sale and a majority of such directors who are not interested persons of us or the Adviser must determine that such sale would be in our best interests and those of our stockholders.

6


In reviewing our offering price in connection with any closing, the Board of Directors or a committee thereof expects to consider the following factors, among others, in making such determination:
•
the net asset value of our common stock disclosed in the most recent periodic report we filed with the SEC;
•
our Adviser’s assessment of whether any material change in the net asset value of our common stock has occurred (including through the realization of net gains on the sale of our portfolio investments) from the period beginning on the date of the most recently disclosed net asset value to the period ending two days prior to the date of the closing on and sale of our common stock; and
•
the magnitude of the difference between the net asset value disclosed in the most recent periodic report we filed with the SEC and our Adviser’s assessment of any material change in the net asset value since the date of the most recently disclosed net asset value, and the offering price of the shares of our common stock at the date of closing.
Importantly, this determination requires that we calculate net asset value per share within 48 hours of each closing. In addition, it involves a determination by the Board of Directors or a committee thereof that we are not selling shares at a price that, after deducting selling commissions and dealer manager fees, is below the then current net asset value per share at the time at which the sale of shares is made. To the extent that there is even a remote possibility that we may issue shares of our common stock at a price which, after deducting selling commissions and dealer manager fees, is below the then current net asset value per share, the Board of Directors or a committee thereof will elect either to postpone the closing until such time that there is no longer the possibility of the occurrence of such event or to undertake to change the offer price.
These processes and procedures are part of our compliance policies and procedures. We record all determinations described in this section, and these records are maintained with other records we are required to maintain under the 1940 Act.
INVESTMENT ADVISORY AND MANAGEMENT SERVICES AGREEMENT
Pursuant to the Investment Advisory and Management Services Agreement, as amended (the “Investment Advisory Agreement”), our Adviser oversees the management of our activities and is responsible for making investment decisions with respect to our portfolio.
Prior to February 1, 2019, our Adviser provided investment advisory and management services under the investment advisory and management services agreement, effective November 1, 2016, (the “Prior Investment Advisory Agreement”) and most recently re-approved by the Board in August 2018. The terms of the Prior Investment Advisory Agreement were materially identical to the Investment Advisory Agreement. The Prior Investment Advisory Agreement automatically terminated on February 1, 2019 upon the indirect change of control of the Adviser on the consummation of Franklin Resources, Inc.’s (“FRI”) and Templeton International, Inc.’s (collectively with FRI, “Franklin Templeton”) acquisition of BSP (the “FT Transaction”). The Investment Advisory Agreement was approved by the Board, including a majority of independent directors, on October 22, 2018, and by stockholders at a special meeting held on January 11, 2019 and took effect February 1, 2019. For additional information regarding the FT Transaction, please see the section entitled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Related Party Transactions and Agreements”.
Responsibilities of the Adviser
Subject to the overall supervision of our Board of Directors, our Adviser manages our day-to-day operations and provides investment advisory and management services to us. Under the terms of our Investment Advisory Agreement, our Adviser, among other things:
•
Determines the composition and allocation of our portfolio, the nature and timing of the changes in our portfolio, and the manner of implementing such changes;
•
Identifies, evaluates, and negotiates the structure of the investments we make;
•
Executes, monitors, and services our investments;
•
Determines the securities and other assets that we will purchase, retain, or sell;
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Performs due diligence on prospective portfolio companies; and
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Provides us with such other investment advisory, research and related services as we may, from time to time, reasonably require for the investment of our funds.
Our Adviser’s services under the Investment Advisory Agreement are not exclusive, and they are free to furnish similar services to other entities so long as their services to us are not impaired.
Compensation of the Adviser
Pursuant to the Investment Advisory Agreement and for the investment advisory and management services provided thereunder, we pay our Adviser a base management fee and an incentive fee.

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Base Management Fee
The base management fee is calculated at an annual rate of 1.5% of our average gross assets. The Company's gross assets increase or decrease with any appreciation or depreciation associated with a derivative contract. The base management fee is payable quarterly in arrears. Average gross assets are calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters. All or any part of the base management fee not taken as to any quarter is deferred without interest and may be taken in such other quarter as the Adviser will determine. However, any deferred base management fee must be taken within three calendar years of the date on which such fee was first payable by us. The base management fee for any partial month or quarter is appropriately pro-rated.
Incentive Fees
The incentive fee consists of two parts. The first part is referred to as the incentive fee on income and it is calculated and payable quarterly in arrears based on our “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter. “Pre-Incentive Fee Net Investment Income” means interest income, dividend income, and any other income (including any other fees, other than fees for providing managerial assistance, such as commitment, origination, structuring, diligence and consulting fees, or other fees that the we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the administration agreement with BSP, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses, or unrealized capital appreciation or depreciation. The payment of the incentive fee on income is subject to payment of a preferred return to investors each quarter, expressed as a quarterly rate of return on the value of our net assets at the end of the most recently completed calendar quarter, of 1.75% (7.00% annualized), subject to a “catch up” feature (as described below). The calculation of the incentive fee on income for each quarter is as follows:
•
No incentive fee on income is payable to the Adviser in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the preferred return rate of 1.75%, or 7.00% annualized (the “Preferred Return”), on net assets;
•
100% of our Pre-Incentive Fee Net Investment Income, if any, that exceeds the preferred return but is less than or equal to 2.1875% in any calendar quarter (8.75% annualized) is payable to the Adviser. This portion of our incentive fee on income is referred to as the “catch up” and is intended to provide the Adviser with an incentive fee of 20% on all of our Pre-Incentive Fee Net Investment Income when our Pre-Incentive Fee Net Investment Income reaches 2.1875% (8.75% annualized) in any calendar quarter; and
•
For any quarter in which our Pre-Incentive Fee Net Investment Income exceeds 2.1875% (8.75% annualized), the incentive fee on income equals 20% of the amount of our Pre-Incentive Fee Net Investment Income, as the Preferred Return and catch-up will have been achieved.
The second part of the incentive fee, referred to as the “incentive fee on capital gains during operations,” is an incentive fee on capital gains earned on liquidated investments from the portfolio during operations prior to our liquidation and is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, if earlier). This fee equals 20% of our incentive fee capital gains, which equals our realized capital gains on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.
Payment of our expenses
All investment professionals and staff of the Adviser and BSP, when and to the extent engaged in providing investment advisory and management services to us, and the compensation and routine overhead expenses of such personnel allocable to such services (including health insurance, 401(k) plan benefits, payroll taxes and other compensation related matters), are provided and paid for by the Adviser. We bear all other costs and expenses of our operations and transactions, including (without limitation) fees and expenses relating to:
•
expenses deemed to be “organization and offering expenses” of the Company for purposes of Conduct Rule 2310(a)(12) of the Financial Industry Regulatory Authority, or FINRA;
•
amounts paid to third parties for administrative services;
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amounts paid to third party experts relating to the investigation and monitoring of our investments;
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the cost of calculating our net asset value;
•
the cost of effecting sales and repurchases of shares of our common stock and other securities;
•
management and incentive fees payable pursuant to the Investment Advisory Agreement;

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•
fees payable to third parties relating to, or associated with, making investments and valuing investments (including third-party valuation firms);
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transfer agent and custodial fees;
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fees and expenses associated with marketing efforts (including attendance at investment conferences and similar events);
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federal and state registration fees;
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any exchange listing fees;
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federal, state, and local taxes;
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independent directors’ fees and expenses;
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brokerage commissions;
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costs of proxy statements;
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stockholders’ reports and notices;
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costs of preparing government filings, including periodic and current reports with the SEC;
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fidelity bond, liability insurance, and other insurance premiums;
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printing and mailing; and
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independent accountants and outside legal costs.
We reimburse the Adviser for all of our expenses incurred by the Adviser as well as the actual cost of goods and services used for or by us and obtained from entities not affiliated with the Adviser. The Adviser may be reimbursed for the administrative services performed by it on our behalf. However, such reimbursement is limited to be an amount equal to the lower of the Adviser’s actual cost or the amount we would be required to pay third parties for the provision of comparable administrative services in the same geographic location; and provided, further, that such costs are reasonably allocated to us on the basis of assets, revenues, time records, or other method conforming with generally accepted accounting principles. No reimbursement shall be permitted for services for which the Adviser is entitled to compensation by way of a separate fee.
Duration and termination
The Adviser serves as our investment adviser pursuant to the Investment Advisory Agreement, which was approved by our shareholders effective February 1, 2019. Unless terminated earlier, it will remain in effect until February 2021 and then continue in effect from year to year if approved annually by our Board of Directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by us without penalty upon not less than 60 days’ written notice and by the Adviser upon not less than 120 days' written notice. Any termination by us must be authorized either by our Board of Directors or by vote of our stockholders.
In determining to approve the Investment Advisory Agreement, our Board of Directors requested information from the Adviser that enabled it to evaluate a number of factors relevant to its determination. These factors included the nature, quality, and extent of services performed by the Adviser, the Adviser’s ability to manage conflicts of interest effectively, our short and long-term performance, our costs, including as compared to comparable BDCs that engage in similar investing activities, the Adviser’s profitability, any economies of scale, and any other benefits of the relationship for the Adviser. Based on the information reviewed and the considerations detailed above, our Board of Directors, including all of our directors who are not interested persons of us or the Adviser, concluded that the investment advisory fee rates and terms are fair and reasonable in relation to the services provided and approved the Investment Advisory Agreement as being in the best interests of our stockholders.
Indemnification
The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of the reckless disregard of its duties and obligations, the Adviser and its officers, managers, partners, members (and their members, including the owners of their members), agents, employees, controlling persons, and any other person or entity affiliated with it are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of the Adviser’s services under the Investment Advisory Agreement or otherwise as our investment adviser.
ADMINISTRATION AGREEMENTS
On March 18, 2011, we entered into a fund administration servicing agreement and a fund accounting servicing agreement with U.S. Bancorp Fund Services, LLC (the “Administrator”). Our Administrator provides the administrative services, such as accounting, financial reporting, legal and compliance support, and investor relations support, necessary for us to operate.

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On November 1, 2016, we entered into an administration agreement with BSP (the “Administration Agreement”), pursuant to which BSP provides us with office facilities and administrative services. The Administration Agreement may be terminated by either party without penalty upon not less than 60 days’ written notice to the other. As of December 31, 2019 and December 31, 2018, $0.6 million and $0.7 million was payable to BSP under the Administration Agreement, respectively.
These agreements were not affected by the FT Transaction.
COMPLIANCE
We, along with our Adviser, have adopted and implemented written policies and procedures reasonably designed to prevent violations of the federal securities laws, and our Board of Directors is required to review these compliance policies and procedures annually to assess their adequacy and the effectiveness of their implementation. Guy Talarico, our Chief Compliance Officer, is the Chief Executive Officer of Alaric Compliance Services, LLC, and serves as our Chief Compliance Officer under the terms of an agreement between BDCA and Alaric Compliance Services, LLC.
COMPETITION
Our primary competition in providing financing for acquisitions, buyouts and recapitalizations of middle market companies include other BDCs, public and private buyout and other private equity funds, commercial and investment banks, commercial financing companies, and, to the extent they provide an alternative form of financing, hedge funds. Many of our competitors are substantially larger and have considerably greater financial, technical, and marketing resources than we do. For example, some competitors may have a lower cost of funds as well as access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC. We use the industry information of the Adviser’s investment professionals, to which we have access, to assess investment risks and determine appropriate pricing for our investments in portfolio companies. In addition, we believe that our relationships and those of the Adviser and BSP will enable us to discover, and compete effectively for, financing opportunities with attractive middle market companies in the industries in which we seek to invest.
STAFFING
We do not currently have any employees and do not expect to have any employees in the foreseeable future. The services necessary for the operation of our business are provided to us by our officers and the employees of our Adviser and BSP and our Administrator pursuant to the terms of the Investment Advisory Agreement and the servicing agreements that we have entered into with our Administrator.
REGULATION
We have elected to be regulated as a BDC under the 1940 Act. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates, principal underwriters, and the affiliates of those affiliates or underwriters. The 1940 Act also requires that a majority of the directors be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities. The 1940 Act defines “a majority of the outstanding voting securities” as the lesser of (i) 67% or more of the voting securities present at a meeting if the holders of more than 50% of our outstanding voting securities are present or represented by proxy or (ii) 50% of our voting securities.
We are generally not able to issue and sell our common stock at a price below net asset value per share. See “Item 1A. Risk Factors - Risks Related to Business Development Companies - Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.” We may, however, sell our common stock, or warrants, options, or rights to acquire our common stock, at a price below the then current net asset value of our common stock if our Board of Directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders approve such sale. In addition, we may generally issue new shares of our common stock at a price below net asset value in rights offerings to existing stockholders, in payment of dividends and in certain other limited circumstances.
As a BDC, we may be examined periodically by the SEC for compliance with the 1940 Act. Our Adviser is a registered investment adviser and is also subject to examination by the SEC.
We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misconduct, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of such person’s office.

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Asset Coverage
We are only allowed to borrow money such that our asset coverage, which, as defined in the 1940 Act, measures the ratio of total assets less total liabilities not represented by senior securities to total borrowings, equals at least 200% after such borrowing, with certain limited exceptions. Although the Small Business Credit Availability Act of 2018 (the “SBCAA”) amended the 1940 Act to permit BDCs to incur increased leverage if certain conditions are met, we do not presently intend to avail ourselves of the increased leverage limits permitted by the SBCAA. If we were to avail ourselves of the increased leverage permitted by the SBCAA, this would effectively allow us to double our leverage, which would increase leverage risk and expenses. We may use borrowed funds, known as “leverage,” to make investments and to attempt to increase returns to our stockholders by reducing our overall cost of capital. We currently have credit facilities with Wells Fargo and Citi and have sold $410.0 million in aggregate principal of unsecured notes.
Qualifying assets
As a BDC, we are required to comply with certain regulatory requirements. For instance, we have to invest at least 70% of our total assets in “qualifying assets,” including securities of U.S. operating companies whose securities are not listed on a national securities exchange, U.S. operating companies with listed securities that have equity market capitalizations of less than $250 million, cash, cash equivalents, U.S. Government securities, and high-quality debt investments that mature in one year or less.
Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The principal categories of qualifying assets relevant to our business are any of the following:
1.Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:
a.
is organized under the laws of, and has its principal place of business in, the United States;
b.
is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and
c.
satisfies any of the following:
i.
does not have any class of securities that is traded on a national securities exchange;
ii.
has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million;
iii.
is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the eligible portfolio company; or
iv.
is a small and solvent company having total assets of not more than $4.0 million and capital and surplus of not less than $2.0 million
2.Securities of any eligible portfolio company that we control.
3.Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.
4.Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.
5.Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.
6.Cash, cash equivalents, U.S. Government securities, or high-quality debt securities maturing in one year or less from the time of investment.
In addition, a BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2), or (3) above.

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Temporary investments
Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S. Government securities, or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets. Typically, we will invest in U.S. Treasury bills or in repurchase agreements; provided that such agreements are fully collateralized by cash or securities issued by the U.S. Government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price that is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we would not meet the diversification tests in order to qualify as a RIC for federal income tax purposes. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our Adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.
Significant managerial assistance to portfolio companies
A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in “Regulation-Qualifying assets” above. BDCs generally must offer to make available to the issuer of the securities significant managerial assistance, except in circumstances where either (i) the BDC controls such issuer of securities or (ii) the BDC purchases such securities in conjunction with one or more other persons acting together and one of the other persons in the group makes available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers, or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio company.
Indebtedness and Senior Securities
We are permitted, under specified conditions, to issue multiple classes of debt and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 200% immediately after each such issuance. In addition, while any senior securities remain outstanding, we must make provision to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks associated with leverage, See “Item 1A. Risk Factors - Risks Related to Business Development Companies - Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.”
Code of Ethics
We have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to the code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements.
Our code of ethics is posted on our website at http://www.bdcofamerica.com and was filed with the SEC as an exhibit to our registration statement. In addition, the code of ethics is available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov.
Election to be Taxed as a RIC
We have elected to be treated as a RIC under Subchapter M of the Code commencing with our taxable year ended December 31, 2011, and intend to qualify annually thereafter as a RIC. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any income that we distribute to our stockholders from our taxable earnings and profits. To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, in order to obtain RIC tax treatment, we must distribute to our stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gain over realized net long-term capital loss, (the “Annual Distribution Requirement”). Even if we qualify as a RIC, we generally will be subject to corporate-level U.S. federal income tax on our undistributed taxable income and could be subject to U.S. federal excise, state, local, and foreign taxes.
In order to qualify to be treated as a RIC for U.S. federal income tax purposes, we must, among other things: qualify to be treated as a BDC or be registered as a management investment company under the 1940 Act at all times during each taxable year; meet the Annual Distribution Requirement; derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock or other securities or currencies, or other income derived with respect to our business of investing in such stock, securities, or currencies and net income

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derived from an interest in a “qualified publicly traded partnership” as defined in the Code (the “90% Income Test”); and diversify our holdings so that at the end of each quarter of the taxable year: (i) at least 50% of the value of our assets consists of cash, cash equivalents, U.S. Government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer (which for these purposes includes the equity securities of a “qualified publicly traded partnership”); and (ii) no more than 25% of the value of our assets is invested in the securities, other than U.S. Government securities or securities of other RICs, (i) of one issuer (ii) of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or (iii) of one or more “qualified publicly traded partnerships,” or the Diversification Tests.
Provided that we continue to qualify as a RIC and satisfy the Annual Distribution Requirement, we will not be subject to U.S. federal income tax on the portion of our investment company taxable income and net capital gain (which generally is defined as net long-term capital gain in excess of net short-term capital loss) that we timely distribute to stockholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gain not distributed (or deemed distributed) to our stockholders.
We will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income of RICs unless we distribute in a timely manner an amount at least equal to the sum of: (1) 98% of our ordinary income for each calendar year; (2) 98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year; and (3) any income recognized, but not distributed, in preceding years and on which we paid no U.S. federal income tax.
We have also formed and expect to continue to form consolidated subsidiaries (the “Consolidated Holding Companies”). These Consolidated Holding Companies enable us to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the requirements of a RIC under the Code. See “Regulation” for discussion of BDC regulation and other regulatory considerations.
Proxy Voting Policies and Procedures
We delegate our proxy voting responsibility to our Adviser. The proxy voting policies and procedures that our Adviser follows are set forth below and are intended to comply with Section 206 of, and Rule 206(4)-6 under the Advisers Act. The guidelines will be reviewed periodically by our Adviser and our non-interested directors, and, accordingly, are subject to change.
As an investment adviser registered under the Advisers Act, our Adviser has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, it recognizes that it must vote client securities in a timely manner free of conflicts of interest and in the best interests of its clients.
Our Adviser will vote proxies relating to our securities in the best interest of its clients’ stockholders. It will review on a case-by-case basis each proposal submitted for a stockholder vote to determine its impact on the portfolio securities held by its clients. Although our Adviser will generally vote against proposals that may have a negative impact on its clients’ portfolio securities, it may vote for such a proposal if there exists compelling long-term reasons to do so.
The proxy voting decisions of our Adviser are made by the senior officers who are responsible for monitoring each of its clients’ investments. To ensure that its vote is not the product of a conflict of interest, it will require that: (a) anyone involved in the decision-making process disclose to its chief compliance officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (b) employees involved in the decision making process or vote administration are prohibited from revealing how our Adviser intends to vote on a proposal in order to reduce any attempted influence from interested parties.
You may obtain information, without charge, regarding how we voted proxies with respect to our portfolio securities by making a written request for proxy voting information to: Chief Financial Officer, 9 West 57th Street, 49th Floor, Suite 4920, New York, NY 10019.

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MATERIAL CONFLICTS OF INTEREST
Investment Advisory Agreement
We entered into the Investment Advisory Agreement on February 1, 2019 under which the Adviser, subject to the overall supervision of our Board of Directors manages the day-to-day operations of, and provides investment advisory services to us. The Adviser and its affiliates also provide investment advisory services to other funds that have investment mandates that are similar, in whole and in part, with ours. The Adviser and its affiliates serve as investment adviser or sub-adviser to private funds and registered open-end funds, and serves as an investment adviser to a public real estate investment trust. The Adviser’s policies are designed to manage and mitigate the conflicts of interest associated with the allocation of investment opportunities pursuant to the SEC exemptive order. See “Co-Investment Relief”. In addition, any affiliated fund currently formed or formed in the future and managed by the Adviser or its affiliates may have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. However, in certain instances due to regulatory, tax, investment, or other restrictions, certain investment opportunities may not be appropriate for either us or other funds managed by the Adviser or its affiliates.
Prior to February 1, 2019, our Adviser provided investment advisory services to us pursuant to the Prior Investment Advisory Agreement, which was terminated in connection with the FT Transaction. For additional information regarding the Investment Advisory Agreement and the Prior Investment Advisory Agreement, please see the section entitled “Item 1. Business - Investment Advisory and Management Services Agreement.”
Administration Agreement
In connection with the Administration Agreement effective November 1, 2016, BSP provides us with office facilities and administrative services. The Administration Agreement was not affected by the FT Transaction.
Co-Investment Relief
The 1940 Act generally prohibits BDCs from entering into negotiated co-investments with affiliates absent an order from the SEC. The SEC staff has granted us exemptive relief that allows us to enter into certain negotiated co-investment transactions alongside other funds managed by the Adviser or its affiliates (“Affiliated Funds”) in a manner consistent with our investment objective, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.
Private Placement in connection with FT Transaction
In connection with the FT Transaction, on November 1, 2018, we issued approximately 6.1 million and 4.9 million shares of our common stock to FRI and BSP, respectively, at a purchase price of $8.20 per share in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933 (the "Securities Act"). For additional information regarding the FT Transaction, please see the section entitled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Related Party Transactions and Agreements”.
AVAILABLE INFORMATION
We file with or submit to the SEC annual, quarterly, and current periodic reports, proxy statements and other information meeting the informational requirements of the Exchange Act. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information filed electronically by us with the SEC at http://www.sec.gov. Our Internet address is http://www.bdcofamerica.com. We make available free of charge on our Internet website our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

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ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. Before making an investment in the Company, you should carefully consider the following risk factors. The risks and uncertainties set forth below are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently deem to be immaterial may also impair our business operations. If any of the following risks were to occur, our business or financial condition could be materially adversely affected. In such case, the net asset value of our common stock could decline, and you may lose all or part of your investment.
Risks Relating to Our Business and Structure
Global economic, political, and market conditions may adversely affect our business, results of operations, and financial condition, including our revenue growth and profitability.
The current worldwide financial market situation, as well as various social and political tensions in the United States (“U.S.”) and around the world, may contribute to increased market volatility, may have long-term effects on the U.S. and worldwide financial markets, and may cause economic uncertainties or deterioration in the U.S. and worldwide. The U.S. and global capital markets experienced extreme volatility and disruption during the economic downturn that began in mid-2007, and the U.S. economy was in a recession for several consecutive calendar quarters during the same period. In 2010, a financial crisis emerged in Europe, triggered by high budget deficits and rising direct and contingent sovereign debt, which created concerns about the ability of certain nations to continue to service their sovereign debt obligations. Risks resulting from such debt crisis, including any austerity measures taken in exchange for bailout of certain nations, and any future debt crisis in Europe or any similar crisis elsewhere could have a detrimental impact on the global economic recovery, sovereign, and non-sovereign debt in certain countries and the financial condition of financial institutions generally. There is continued concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union member countries. In addition, the fiscal and monetary policies of foreign nations, such as Russia and China, and volatility in the Chinese stock markets and global markets for commodities may have a severe impact on the worldwide and U.S. financial markets.
The current U.S. presidential administration has called for major changes to U.S. trade, healthcare, immigration, and foreign policy, as well as other domestic U.S. regulatory policy. Accordingly, there is significant uncertainty with respect to regulation, legislation, and government policy at the federal, state, and local levels. There has been a corresponding significant increase in the uncertainty surrounding interest rates, inflation, foreign exchange rates, trade volumes, and fiscal and monetary policy. To the extent that changes to U.S. policy are implemented, those changes may impact, among other things, the U.S. and global economy, international trade and relations, unemployment, immigration, corporate taxes, healthcare, the U.S. regulatory environment, inflation, and other areas. Although we cannot predict the impact, if any, that these changes will have to our business, they could adversely affect our business, financial condition, operating results, and cash flows.
Global markets could enter a period of severe disruption and instability due to catastrophic events, such as terrorist attacks, acts of war, natural disasters, and outbreaks of epidemic, pandemic or contagious diseases, which could impair our portfolio companies’ financial positions and operating results and affect the industries in which we invest and, in turn, harm our operating results
The U.S. and global markets have, from time to time, experienced periods of disruption due to events such as terrorist attacks; acts of war; natural disasters, such as earthquakes, tsunamis, fires, floods or hurricanes; and outbreaks of epidemic, pandemic or contagious diseases. Such events have created, and continue to create, economic and political uncertainties and have contributed to recent global economic instability. In particular, outbreaks of epidemic, pandemic or contagious diseases may cause serious harm to our business, operating results and financial condition. Historically, disease pandemics such as the Ebola virus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome or the H1N1 virus, have diverted resources and priorities towards the treatment of such diseases. In December 2019, a strain of novel coronavirus causing respiratory illness emerged in the city of Wuhan in the Hubei province of China (the “Wuhan Coronavirus”). We are closely monitoring the developments in China and continually assessing the potential impact on our business and the business of our portfolio companies, including the effects described below.  However, the full impact of this outbreak is unknown as of the date of this report.
Any prolonged disruptions in the business of our portfolio companies, including a disruption in their supply chains may adversely affect their ability to obtain the necessary raw materials or components to make their products or cause a decline in the demand for their products or services, leading to a negative impact on their operating results. In addition, such events may lead to restrictions on travel to and from the affected areas, making it more difficult for our portfolio companies to conduct their businesses. As a result of pandemic outbreaks, including the Wuhan Coronavirus, businesses can be shut down, supply chains can be interrupted, slowed, or rendered inoperable, and individuals can become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Governmental mandates may require forced shutdowns of our portfolio companies’ facilities for extended or indefinite periods. In addition, these widespread outbreaks of illness, particularly in China, North America,

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Europe, or other locations significant to the operations of our portfolio companies, could adversely affect their workforce, resulting in serious health issues and absenteeism, and may cause serious harm to our results of operations, business, or prospects.
Furthermore, future terrorist activities, military or security operations, natural disasters, disease outbreaks, pandemics or other similar events could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact our portfolio companies. During these periods of disruption, general economic conditions may deteriorate with material and adverse consequences for the broader financial and credit markets, and the availability of debt and equity capital for the market as a whole, and financial services firms in particular. Such economic adversity could impair our portfolio companies’ financial positions and operating results and affect the industries in which we invest, which could, in turn, harm our operating results. These conditions may reoccur for a prolonged period of time or materially worsen in the future.
The United Kingdom referendum decision to leave the European Union may create significant risks and uncertainty for global markets and our investments.
The decision made in the United Kingdom referendum in June 2016 to leave the European Union (commonly known as “Brexit”) has led to volatility in global financial markets, and in particular in the markets of the United Kingdom and across Europe, and may also lead to weakening in political, regulatory, consumer, corporate and financial confidence in the United Kingdom and Europe. The United Kingdom left the European Union on January 31, 2020, governed by transitional terms that will expire on December 31, 2020. During this transition phase, the United Kingdom and the EU will seek to negotiate and finalize a new, more permanent trade deal. Due to political uncertainty, it is not possible to anticipate whether the United Kingdom and the EU will be able to agree on and implement a new trade agreement or what the nature of such trade arrangement will be. In the absence of such an agreement there would be no transitional provisions the relationship between the United Kingdom and the European Union would be based on the World Trade Organization rules. The process for the United Kingdom to exit the European Union, and the longer term economic, legal, political, regulatory and social framework to be put in place between the United Kingdom and the European Union remain unclear and may lead to ongoing political and economic uncertainty and periods of exacerbated volatility in both the United Kingdom and in wider European markets for some time. The mid-to-long term uncertainty may have a negative effect on the performance of any investments located or with operations in the United Kingdom or Europe. Additionally, the decision made in the United Kingdom referendum may lead to a call for similar referenda in other European jurisdictions which may cause increased economic volatility and uncertainty in the European and global markets. This volatility and uncertainty may have an adverse effect on the economy generally and on the ability of us and our portfolio companies to execute our respective strategies and to receive attractive returns.
In particular, currency volatility may mean that the returns of us and our portfolio companies are adversely affected by market movements and may make it more difficult, or more expensive, for us to implement appropriate currency hedging. Fluctuations in the value of the British Pound and/or the euro along with the potential downgrading of the United Kingdom’s sovereign credit rating, may also have an impact on the performance of our portfolio companies located in the United Kingdom or Europe.
Future disruptions or instability in capital markets could negatively impact our ability to raise capital, and have a material adverse effect on our business, financial condition, and results of operations.
From time to time, the global capital markets may experience periods of disruption and instability, which could materially and adversely impact the broader financial and credit markets and reduce the availability to us of debt and equity capital. For example, between 2008 and 2009, instability in the global capital markets resulted in disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the repricing of credit risk in the broadly syndicated credit market, and the failure of major domestic and international financial institutions. In particular, the financial services sector was negatively impacted by significant write-offs as the value of the assets held by financial firms declined, impairing their capital positions and abilities to lend and invest. We believe that such value declines were exacerbated by widespread forced liquidations as leveraged holders of financial assets, faced with declining prices, were compelled to sell to meet margin requirements and maintain compliance with applicable capital standards. Such forced liquidations also impaired or eliminated many investors and investment vehicles, leading to a decline in the supply of capital for investment and depressed pricing levels for many assets. These events significantly diminished overall confidence in the debt and equity markets, engendered unprecedented declines in the values of certain assets, caused extreme economic uncertainty and significantly reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. While market conditions have experienced relative stability in recent years, there have been continuing periods of volatility and there can be no assurance that adverse market conditions will not repeat themselves in the future.

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Future volatility and dislocation in the capital markets could create a challenging environment in which to raise or access capital. For example, the re-appearance of market conditions similar to those experienced from 2008 through 2009 for any substantial length of time could make it difficult to extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms. Significant changes or volatility in the capital markets may also have a negative effect on the valuations of our investments. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity) and impairments of the market values or fair market values of our investments, even if unrealized, must be reflected in our consolidated financial statements for the applicable period, which could result in significant reductions to our net asset value for the period. With certain limited exceptions, we are only allowed to borrow amounts or issue debt securities if our asset coverage, complies with the threshold set forth in the 1940 Act (currently at least 200% immediately after such borrowing). Equity capital may also be difficult to raise during periods of adverse or volatile market conditions because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than net asset value without first obtaining approval for such issuance from our stockholders and our independent directors. If we are unable to raise capital or refinance existing debt on acceptable terms, then we may be limited in our ability to make new commitments or to fund existing commitments to our portfolio companies. Significant changes in the capital markets may also affect the pace of our investment activity and the potential for liquidity events involving our investments. Thus, the illiquidity of our investments may make it difficult for us to sell such investments to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes.
Uncertainty with respect to the financial stability of the United States and several countries in the European Union (“EU”) could have a significant adverse effect on our business, financial condition, and results of operations.
Recent U.S. debt ceiling and budget deficit concerns have increased the possibility of a downgrade of the U.S. long-term sovereign debt credit rating or a recession or economic slowdown in the U.S. In the future, the U.S. Government may not be able to meet its debt payments unless the federal debt ceiling is raised. On August 2, 2019, the federal debt limit was suspended until July 2021. If, prior to such date, legislation increasing the debt ceiling is not enacted and the debt ceiling is reached, the U.S. federal government may stop or delay making payments on its obligations, which could negatively impact the U.S. economy and our portfolio companies. In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time. Continued adverse political and economic conditions, further downgrades or warnings by The Standard & Poor Financial Services LLC's Rating Service or other rating agencies, and the U.S. Government’s credit and deficit concerns in general, including issues around the federal debt ceiling, could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our debt portfolio and our ability to access the debt markets on favorable terms.
The discontinuation of LIBOR and the transition to any new reference rates may affect the value of our LIBOR-indexed portfolio investments and may increase the cost of borrowing under our credit facilities, which in each case could affect our results of operations or financial condition.
On July 27, 2017, the U.K. Financial Conduct Authority (“FCA”) announced that LIBOR would be phased out of use after the 2021 calendar year, and the FCA has determined not to compel participant banks to submit LIBOR information after 2021. In response to the expected discontinuation of LIBOR, the Federal Reserve Board and the Federal Reserve Bank of New York formed the Alternative Reference Rates Committee (“ARRC”), a U.S. working group of private-sector representatives and financial regulators, to recommend an alternative reference rate to U.S. dollar LIBOR. Similarly, financial regulators in the UK, the European Union, Japan, and Switzerland formed working groups with the aim of recommending alternatives to LIBOR denominated in their local currencies. The ARRC has recommended the Secured Overnight Financing Rate (“SOFR”) together with a spread adjustment, as appropriate in the particular market, as its preferred alternative reference rate for U.S. dollar LIBOR. SOFR represents the average interest rate to borrow cash overnight collateralized by U.S. Treasury securities, and is based primarily on recent U.S. Treasury-backed repurchase transactions.
At this time, it is not possible to predict how the discontinuation of LIBOR will affect financial instruments that utilize LIBOR, whether SOFR or any other alternative reference rates will be established, or will attain general acceptance in the financial markets, or the pace at which any such transition away from LIBOR and to any other reference rate may occur. The process of phasing out LIBOR or any further changes or reforms to the determination or supervision of LIBOR or alternative reference rates, may result in a sudden or prolonged increase or decrease in reported LIBOR or alternative reference rates, which could have an adverse impact on the market for or value of any securities, loans, derivatives, and other financial obligations or extensions of credit indexed to LIBOR or such alternative reference rate that may be held by or due to us or on our overall financial condition or results of operations.
Additionally, the effect of changes or reforms to LIBOR may require us to engage in time-consuming renegotiations of any credit or similar agreements with our portfolio companies that utilize LIBOR as a factor in determining the interest rate and extend beyond 2021. We may need to renegotiate, among other provisions, the new reference rates to be used, the timing and frequency of determining rates and making interest payments and the methods for calculating or determining the interest rate

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adjustment. If agreements with portfolio companies are unable to be renegotiated, our investments may bear interest at a lower rate, which would decrease investment income and potentially the value and liquidity of such investments. This could have an adverse effect on our overall financial condition or results of operations. Moreover, any such reforms to LIBOR or the establishment or adoption of other reference rates may require us to renegotiate certain terms of the Wells Fargo Credit Facility and the Citi Credit Facility. If we are unable to do so, amounts drawn under such credit facilities may bear interest at a higher rate, which would increase our cost of borrowing and, in turn, affect our results of operations.
The amount of any distributions we pay is uncertain. Our distributions to our stockholders may exceed our earnings. Therefore, portions of the distributions that we pay may represent a return of capital to you which will lower your tax basis in your shares and reduce the amount of funds we have for investment in targeted assets. We may not be able to pay you distributions, and our distributions may not grow over time.
We intend to declare distributions quarterly and pay distributions on a monthly basis. We will pay these distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a targeted level of distributions or year-to-year increases in distributions. Our ability to pay distributions might be adversely affected by the impact of one or more of the risk factors described in this Annual Report. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC can limit our ability to pay distributions. All distributions will be paid at the discretion of our Board of Directors and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations, and such other factors as our Board of Directors may deem relevant from time-to-time. We cannot assure you that we will pay distributions to our stockholders in the future. In the event that we encounter delays in locating suitable investment opportunities, we may pay all or a substantial portion of our distributions from the proceeds of our offerings of our common stock or from borrowings in anticipation of future cash flow, which may constitute a return of your capital and will lower your tax basis in your shares. Distributions from the proceeds of our offerings of common stock or from borrowings also could reduce the amount of capital we ultimately invest in interests of portfolio companies. We have not established any limit on the extent to which we may use borrowings, if any, or proceeds from our public offering to fund distributions (which may reduce the amount of capital we ultimately invest in assets). There can be no assurance that we will be able to sustain distributions at any particular level or at all. A return of capital is a return of your initial investment in the Company rather than earnings or gains derived from our investment activities. We have not paid a distribution that represented a return of capital since November 2, 2015.
Price declines in the large corporate leveraged loan market may adversely affect the fair value of debt securities we hold, reducing our net asset value through increased net unrealized depreciation.
Prior to the onset of the financial crisis, CLOs, a type of leveraged investment vehicle holding corporate loans, hedge funds, and other highly leveraged investment vehicles, comprised a substantial portion of the market for purchasing and holding senior secured and second lien secured loans. As the secondary market pricing of the loans underlying these portfolios deteriorated during the fourth quarter of 2008, it is our understanding that many investors, as a result of their generally high degrees of leverage, were forced to raise cash by selling their interests in performing loans in order to satisfy margin requirements or the equivalent of margin requirements imposed by their lenders. This resulted in a forced deleveraging cycle of price declines, compulsory sales, and further price declines, with widespread redemption requests and other constraints resulting from the credit crisis generating further selling pressure. While prices have appreciated measurably in recent years, conditions in the large corporate leveraged loan market may experience similar disruptions or distortions in the future, which may cause pricing levels to decline similarly or be volatile. As a result, we may suffer unrealized depreciation and could incur realized losses in connection with the sale of debt securities we hold, which could have a material adverse impact on our business, financial condition, and results of operations.
Our ability to achieve our investment objective depends on our Adviser’s and its affiliates’ ability to manage and support our investment process. If our Adviser were to lose any members of its senior management team, our ability to achieve our investment objective could be significantly harmed.
We are externally managed and depend upon the investment expertise, diligence, skill, and network of business contacts of our Adviser. We also depend, to a significant extent, on our Adviser’s access to the investment professionals and the information and deal flow generated by such investment professionals in the course of its investment and portfolio management activities. Our Adviser evaluates, negotiates, structures, closes, monitors, and services our investments. Our success depends to a significant extent on the continued service and coordination of our Adviser, including its key professionals. The departure of a significant number of our Adviser’s or its affiliates’ key professionals could have a materially adverse effect on our ability to achieve our investment objective. Additionally, changes in ownership or management practices, the occurrence of adverse events affecting our Adviser or its affiliates or other companies advised by our Adviser and its affiliates could create adverse publicity and adversely affect us and our relationship with investment banks, business brokers, loan syndication and trading desks, and other investment counterparties. In addition, we can offer no assurance that our Adviser will remain our investment adviser or that we will continue to have access to our Adviser’s or its affiliates’ investment professionals or their information and deal flow.

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Because our business model depends to a significant extent upon relationships with investment banks, business brokers, loan syndication and trading desks, and commercial banks, the inability of our Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
Our Adviser depends on its relationship with private equity firms, investment banks, business brokers, loan syndication and trading desks, and commercial banks, and we will rely to a significant extent upon these relationships to provide us with potential investment opportunities. If our Adviser fails to maintain its existing relationships or develop new relationships with other sponsors or sources of investment opportunities, we will not be able to grow our investment portfolio. In addition, individuals with whom our Adviser’s professionals have relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us.
We may face increasing competition for investment opportunities, which could delay deployment of our capital, reduce returns, and result in losses.
We will compete for investments with other BDCs and investment funds (including private equity funds and mezzanine funds), as well as traditional financial services companies such as commercial banks and other sources of funding. Moreover, alternative investment vehicles, such as hedge funds, also make investments in middle market private U.S. companies. As a result of these new entrants, competition for investment opportunities in private U.S. companies may intensify. Many of our competitors are substantially larger and have considerably greater financial, technical, and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to do. We may lose investment opportunities if we do not match our competitors’ pricing, terms, and structure. If we are forced to match our competitors’ pricing, terms, and structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. We believe a significant part of our competitive advantage stems from the fact that the market for investments in private U.S. companies is underserved by traditional commercial banks and other financial sources. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience operating under, or are not subject to, the regulatory restrictions that the 1940 Act imposes on us as a BDC.
Our business and operations could be negatively affected if we become subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of investment strategy, and impact our stock price.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Stockholder activism, which could take many forms or arise in a variety of situations, has been increasing in the BDC space recently. While we are currently not subject to any securities litigation or stockholder activism, due to the potential volatility of our stock price and for a variety of other reasons, we may in the future become the target of securities litigation or stockholder activism. Securities litigation and stockholder activism, including potential proxy contests, could result in substantial costs and divert the attention of management and our Board of Directors’ attention and resources from our business. Additionally, such securities litigation and stockholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and stockholder activism matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks, and uncertainties of any securities litigation and stockholder activism.
A significant portion of our investment portfolio is recorded at fair value as determined in good faith by our Board of Directors and, as a result, there is and will be uncertainty as to the value of our portfolio investments.
Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there are no readily available market quotations, at fair value, as determined by our Board of Directors. However, the majority of our investments are not publicly traded or actively traded on a secondary market. As a result, we value these securities quarterly at fair value as determined in good faith by our Board of Directors.
The determination of fair value, and thus the amount of unrealized losses we may incur in any year, is to a degree subjective, and our Adviser has a conflict of interest in providing input to the Board of Directors in making this determination. We expect to value our securities quarterly at fair value as determined in good faith by our Board of Directors based on input from our Adviser and at such other times as may be required to comply with the requirements of the 1940 Act. Our Board of Directors may utilize the services of an independent third-party valuation firm to aid it in determining the fair value of any securities. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments on indebtedness and its earnings, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow, current market interest rates, and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, the valuations may fluctuate significantly over short periods of time due to changes in current market conditions. The determinations

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of fair value by our Board of Directors may differ materially from the values that would have been used if an active market and market quotations existed for these investments. Our net asset value could be adversely affected if the determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such investments. See “Item 1. Business - Determination of Net Asset Value.”
Our Board of Directors may change our operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.
Our Board of Directors has the authority to modify or waive our current operating policies, investment criteria, and strategies without prior notice and without stockholder approval if it determines that doing so will be in the best interests of stockholders. We cannot predict the effect any changes to our current operating policies, investment criteria, and strategies would have on our business, net asset value, operating results, and value of our stock. However, the effects might be adverse, which could negatively impact our ability to pay you distributions and cause you to lose all or part of your investment. Moreover, we have significant flexibility in investing the net proceeds of our offering and may use the net proceeds from our offering in ways with which our stockholders may not agree or for purposes other than those contemplated at the time of our offering.
If we internalize our management functions, your interest in us could be diluted, and we could incur other significant costs and face other significant risks associated with being self-managed.
Our Board of Directors may decide in the future to internalize our management functions. If we do so, we may elect to negotiate to acquire our Adviser’s assets and personnel. At this time, we cannot anticipate the form or amount of consideration or other terms relating to any such internalization transaction. Such consideration could take many forms, including cash payments, promissory notes, and shares of our common stock. The payment of such consideration could result in dilution of your interests as a stockholder and could reduce the earnings per share attributable to your investment.
In addition, while we would no longer bear the costs of the various fees and expenses we expect to pay to our Adviser under the Investment Advisory Agreement, we would incur the compensation and benefits costs of our officers and other employees and consultants that we now expect will be paid by our Adviser or its affiliates. We cannot reasonably estimate the amount of fees we would save or the costs we would incur if we became self-managed. If the expenses we assume as a result of an internalization are higher than the expenses we avoid paying to our Adviser, our earnings per share would be lower as a result of the internalization than they otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders and the value of our shares. As currently organized, we will not have any employees. If we elect to internalize our operations, we would employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes, and other employee-related liabilities and grievances.
New or modified laws or regulations governing our operations may adversely affect our business.
We and our portfolio companies are subject to regulation at the U.S. local, state and federal level. We are also subject to federal, state and local laws and are subject to judicial and administrative decisions that affect our operations, including maximum interest rates, fees and other charges, disclosures to portfolio companies, the terms of secured transactions, collection and foreclosure proceedings and other trade practices. If these laws, regulations or decisions change, or if we expand our business into additional jurisdictions, we may have to incur significant expenses in order to comply or we might have to restrict our operations. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we or our portfolio companies are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect. In particular, the impact of the Dodd-Frank Act, and any amendments thereto that may be enacted, on us and our portfolio companies is subject to continuing uncertainty. The Dodd-Frank Act, including future rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals directed at the financial services industry or affecting taxation that are proposed or pending in the U.S. Congress, may negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies, intensify the regulatory supervision of us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies. President Trump and certain members of Congress have indicated they will seek to amend or repeal portions of the Dodd-Frank Act, among other federal laws. We cannot predict the ultimate effect on us or our portfolio companies that changes in the laws and regulations would have as a result of the Dodd-Frank Act, or whether and the extent to which the Dodd-Frank Act may remain in its current form. In addition, uncertainty regarding legislation and regulations affecting the financial services industry or taxation could also adversely impact our business or the business of our portfolio companies. If we do not comply with applicable laws and regulations, we could lose any licenses that we then hold for the conduct of our business and may be subject to civil fines and criminal penalties.
Changes to or repeal of the laws and regulations governing our operations related to permitted investments may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities. Such changes could result in material differences to our strategies and plans and may shift our investment focus from the areas of expertise of our Advisor to other types of investments in which our Advisor may have little or no expertise or experience. Any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.

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Additionally, on February 3, 2017, President Trump signed Executive Order 13772 announcing the Administration's policy to regulate the U.S. financial system in a manner consistent with certain "Core Principles," including regulation that is efficient, effective and appropriately tailored. The Executive Order directed the Secretary of the Treasury, in consultation with the heads of the member agencies of the Financial Stability Oversight Council, to report to the President on the extent to which existing laws, regulations and other government policies promote the Core Principles and to identify any laws, regulations or other government policies that inhibit federal regulation of the U.S. financial system. On June 12, 2017, the U.S. Department of the Treasury published the first of several reports in response to the Executive Order on the depository system covering banks and other savings institutions. On October 6, 2017, the Treasury released a second report outlining ways to streamline and reform the U.S. regulatory system for capital markets, followed by a third report, on October 26, 2017, examining the current regulatory framework for the asset management and insurance industries. The Treasury released a fourth report on July 31, 2018 describing recommendations relating to non-bank financial institutions, financial technology and innovation. Subsequent reports are expected to address retail and institutional investment products and vehicles.
On May 24, 2018, President Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act, which increased from $50 billion to $250 billion the asset threshold for designation of "systemically important financial institutions" or "SIFIs" subject to enhanced prudential standards set by the Federal Reserve Board, staggering application of this change based on the size and risk of the covered bank holding company. On January 30, 2020, the Federal Reserve Board released proposed changes to the Volcker Rule that would loosen compliance requirements for all banks. The effect of these change and any further rules or regulations are and could be complex and far-reaching, and the change and any future laws or regulations or changes thereto could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business, financial condition and results of operations.
Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business, financial condition and results of operations.
Efforts to comply with the Sarbanes-Oxley Act will involve significant expenditures, and non-compliance with the Sarbanes-Oxley Act may adversely affect us.
We are subject to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) and the related rules and regulations promulgated by the SEC. Under current SEC rules, our management is required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and rules and regulations of the SEC thereunder. We are required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting. This process requires us to incur significant additional expenses and diverts management’s time and attention. We cannot be certain as to the timing of completion of our evaluation, testing and remediation actions, or the impact of the same on our operations and we may not be able to ensure that the process is effective or that our internal control over financial reporting is or will be effective in a timely manner. In the event that we are unable to maintain or achieve compliance with the Sarbanes-Oxley Act and related rules, we may be adversely affected.
We may experience fluctuations in our quarterly results.
We may experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, variations in the interest rates on the debt securities we acquire, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods.
Terrorist attacks, acts of war, natural disasters, disease outbreaks or pandemics may impact our portfolio companies and harm our business, operating results and financial condition.
Terrorist acts, acts of war, natural disasters, disease outbreaks, pandemics, or other similar events may disrupt our operations, as well as the operations of our portfolio companies. Such acts have created, and continue to create, economic and political uncertainties and have contributed to recent global economic instability. Future terrorist activities, military or security operations, natural disasters, disease outbreaks, pandemics, or other similar events could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact our portfolio companies and, in turn, could have a material adverse impact on our business, operating results, and financial condition. Losses from terrorist attacks and natural disasters are generally uninsurable.

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We depend upon information systems, and systems failures could significantly disrupt our business, which may, in turn, negatively affect the value of our common stock and our ability to pay distributions.
We depend upon the communications and information systems of the Adviser and its affiliates as well as certain other third-party service providers. We, and our third-party service providers, are susceptible to operational and information security risks. While our third-party service providers have procedures in place with respect to information security, their technologies may become the target of cyber attacks or information security breaches that could result in the unauthorized gathering, monitoring, release, misuse, loss or destruction of our and/or our stockholders’ confidential and other information, or otherwise disrupt our operations or those of our third-party service providers. Disruptions or failures in the physical infrastructure or operating systems that our third-party service providers, cyber attacks or security breaches of the networks, systems or devices that our third-party service providers use to service our operations, or disruption or failures in the movement of information between service providers could disrupt and impact the service providers’ and our operations, potentially resulting in financial losses, the inability of our stockholders to transact business and of us to process transactions, inability to calculate our NAV, misstated or unreliable financial data, violations of applicable privacy and other laws, regulatory fines, penalties, litigation costs, increased insurance premiums, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs. Our third-party service providers’ policies and procedures with respect to information security have been established to seek to identify and mitigate the types of risk to which we and our third-party service providers are subject. As with any risk management system, there are inherent limitations to these policies and procedures as there may exist, or develop in the future, risks that have not been anticipated or identified. There can be no assurance that we or our third-party service providers will not suffer losses relating to information security breaches (including cyber attacks) or other disruptions to information systems in the future.
Our business could suffer in the event our Adviser or any other party that provides us with services essential to our operations experiences system failures or cyber-incidents or a deficiency in cybersecurity.
Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for the internal information technology systems of our Adviser and other parties that provide us with services essential to our operations, these systems are vulnerable to damage from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war, and telecommunication failures. Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business.
A cyber-incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of information resources. More specifically, a cyber-incident is an intentional attack or an unintentional event that can result in third parties gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information. As reliance on technology in our industry has increased, so have the risks posed to the systems of our Adviser and other parties that provide us with services essential to our operations, both internal and those that have been outsourced. In addition, the risk of a cyber-incident, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Even the most well protected information, networks, systems, and facilities remain potentially vulnerable because the techniques used in such attempted attacks and intrusions evolve and generally are not recognized until launched against a target. In some cases such attacks and intrusions are designed not to be detected and, in fact, may not be detected.
The remediation costs and lost revenues experienced by a victim of a cyber-incident may be significant and significant resources may be required to repair system damage, protect against the threat of future security breaches, or to alleviate problems caused by any breaches, including reputational harm, loss of revenues, and litigation. In addition, a security breach or other significant disruption involving the information technology networks and related systems of our Adviser or any other party that provides us with services essential to our operations could:
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result in misstated financial reports, violations of loan covenants, missed reporting deadlines;
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affect our ability to properly monitor our compliance with the rules and regulations regarding our qualification as a RIC;
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result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive, or otherwise valuable information, which others could use to compete against us or for disruptive, destructive, or otherwise harmful purposes and outcomes;
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result in liability to us for claims by stockholders and third-parties;
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require significant management attention and resources to remedy any damages that result; or
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adversely impact our reputation among investors.
Although our Adviser and other parties that provide us with services essential to our operations intend to continue to implement industry-standard security measures, there can be no assurance that those measures will be sufficient, and any material adverse effect experienced by our Adviser and other parties that provide us with services essential to our operations could, in turn, have an adverse impact on us.

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To the extent that our Adviser serves as a “joint bookrunner” in connection with the underwriting of a loan or other security to be acquired, it may be subject to underwriter liability under the federal securities laws. This liability can be managed principally through the exercise of due diligence regarding any such offering. In addition, if it acts as joint bookrunner for a loan or other securities offering and is not successful in syndicating the loan or offering, our Adviser may acquire a larger amount of the subject securities than it had planned, and it may be required to hold such loan or security for a longer period than it had anticipated.
It could be determined that our Adviser is serving as a joint bookrunner in connection with offerings of loans or other securities in connection with providing investment advisory services to us in connection with our ongoing operations and the management of our portfolio. A joint bookrunner is one of multiple lead managers of a securities issuance which syndicates the issuance of securities with other bookrunners and syndicate firms to lower the risk of selling the security for each syndicate member. In acting as a joint bookrunner, our Adviser may be required to perform due diligence on certain offerings before they are syndicated and sold, subjecting our Adviser to underwriter liabilities under federal securities laws in connection with the offer and sale of such securities. Furthermore, in leading an underwriting syndicate, our Adviser, in acting as a joint bookrunner, could be obligated to sell a large portion of an offering of securities should it be unable to put together a substantial enough underwriting syndicate, perhaps obligating it to hold such security for a longer period of time than it had originally anticipated. By being deemed a joint bookrunner, our Adviser would be obligated to perform duties for other lenders or investors while still managing our portfolio, thus reducing the amount of time it allocates to us and subjecting it to potential liabilities and financial obligations.
We could potentially be involved in litigation arising out of our operations in the normal course of business.
We may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise. Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, we do not expect any current matters will materially affect our financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on our financial condition or results of operations in any future reporting period.
Risks Related to our Adviser and its Affiliates
We may be obligated to pay our Adviser incentive compensation even if we incur a net loss due to a decline in the value of our portfolio.
The Investment Advisory Agreement entitles our Adviser to receive incentive compensation on income regardless of any capital losses. In such case, we may be required to pay our Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter.
We expect that any incentive fee payable by us that relates to our net investment income may be computed and paid on income that may include interest that has been accrued but not yet received. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the incentive fee will become uncollectible. Pursuant to the Investment Advisory Agreement, our Adviser will not be under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never received as a result of a default by an entity on the debt instrument that resulted in the accrual of such income, and such circumstances would result in our paying an incentive fee on income we never received.
Moreover, to the extent that we are required to recognize in our taxable income such interest income that has been accrued but not yet paid, our payment of incentive fees to the Adviser on such income may make it difficult to meet (or may further amplify existing difficulties in meeting) the Annual Distribution Requirement necessary to maintain RIC tax treatment under the Code. As a result, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital, or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. Federal income tax. For additional discussion regarding the tax implications of a RIC, see “Risk Factors - Federal Income Tax Risks - We may be subject to corporate-level U.S. federal taxes if we fail to maintain our qualification as a RIC.”
The time and resources that individuals and the executive officers of our Adviser devote to us may be diverted, and we may face additional competition due to the fact that neither our Adviser, nor its affiliates, is prohibited from raising money for or managing another entity that makes the same types of investments that we target.
Affiliates and executive officers of the Adviser currently manage other investment entities and are not prohibited from raising money for and managing future investment entities that make the same types of investments as those we target. As a result, the time and resources that the executive officers and individuals employed by the Adviser and its affiliates devote to us may be diverted, and during times of intense activity in other areas of business, they may devote less time and resources to our business than is necessary or appropriate.

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There are significant potential conflicts of interest that could impact our investment returns.
We pay management and incentive fees to our Adviser and reimburse our Adviser for certain expenses it incurs on our behalf. In addition, investors in our common stock invest on a gross basis and receive distributions on a net basis after expenses, resulting in a lower rate of return than one might achieve through direct investments.
The part of the incentive fee payable by us that relates to our pre-incentive fee net investment income is computed and paid on income that may include interest that is accrued but not yet received in cash. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become uncollectible.
Our fee structure may induce our Adviser to make speculative investments or incur debt.
The incentive fee payable by us to our Adviser may create an incentive for it to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which this incentive fee is determined may encourage the Adviser to use leverage to increase the return on our investments. In addition, the fact that our management fee is payable based upon our gross assets, which would include any borrowings for investment purposes, may encourage our Adviser to use leverage to make additional investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would disfavor holders of our common stock. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during cyclical economic downturns.
In selecting and structuring investments appropriate for us, our Adviser will consider our investment and tax objectives and those of our stockholders as a whole, not the investment, tax or other objectives of any stockholder individually.
Our stockholders may have conflicting investment, tax, and other objectives with respect to their investments in us. The conflicting interests of individual stockholders may relate to or arise from, among other things, the nature of our investments, the structure or the acquisition of our investments, and the timing of the disposition of our investments. As a consequence, conflicts of interest may arise in connection with decisions made by our Adviser, including with respect to the nature or structuring of our investments, that may be more beneficial for one stockholder than for another stockholder, especially with respect to stockholders’ individual tax situations.
Our Adviser can resign on 120 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business, and results of operations.
Our Adviser has the right to resign under the Investment Advisory Agreement at any time upon not less than 120 days’ written notice, whether we have found a replacement or not. If our Adviser were to resign, we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 120 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our business, financial condition, results of operations, and cash flows as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our Adviser and its affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our business, financial condition, results of operations, and cash flows.

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Our Administrator can resign on 60 days’ notice, and we may not be able to find a suitable replacement, resulting in a disruption in our operations that could adversely affect our financial condition, business, and results of operations.
Our Administrator has the right to resign under the Administration Agreement at any time upon not less than 60 days’ written notice, whether we have found a replacement or not. If our Administrator resigns, we may not be able to find a new administrator or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business, and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and administrative activities is likely to suffer if we are unable to identify and reach an agreement with a service provider or individuals with the expertise possessed by our Administrator. Even if we are able to retain a comparable service provider or individuals to perform such services, whether internal or external, their integration into our business and lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our business, financial condition, results of operations and cash flows.
Risks Related to Business Development Companies
Our failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a BDC.
As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. See “Item 1. Business - Regulation.” Therefore, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets. We may also be required to re-classify investments previously identified as qualifying assets as non-qualifying assets due to a change in the underlying business, a change in law or regulation, or for other reasons. Similarly, these rules could prevent us from making additional investments in existing portfolio companies, which could result in the dilution of our position, or could require us either to dispose of investments at an inopportune time or to refrain from making additional investments to comply with the 1940 Act. If we were forced to sell non-qualifying investments in our portfolio for compliance purposes, the proceeds from such sales could be significantly less than the current value of such investments.
Failure to maintain our status as a BDC would reduce our operating flexibility.
If we do not remain a BDC, we might be regulated as a registered closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility.
Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.
We may need to access the capital markets periodically to raise cash to fund new investments. We may also issue “senior securities,” including borrowing money from banks or other financial institutions, in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after such incurrence or issuance. Our ability to issue different types of securities is also limited. Compliance with these requirements may unfavorably limit our investment opportunities and reduce our ability compared to other companies to profit from favorable spreads between the rates at which we can borrow and the rates at which we can lend. As a BDC, therefore, we intend to continuously issue equity at a rate more frequent than our privately owned competitors, which may lead to greater stockholder dilution.
Although Congress passed the SBCAA, which amended the 1940 Act to permit BDCs to incur increased leverage if certain conditions are met, we are currently prevented from availing ourselves of the increased leverage by covenants contained in the indenture governing our outstanding notes. If we were to avail ourselves of the increased leverage permitted by the SBCAA, this would effectively allow us to double our leverage, which would increase leverage risk and expenses.
We have incurred leverage to generate capital to make additional investments. If the value of our assets declines, we may be unable to satisfy the asset coverage test under the 1940 Act, which could prohibit us from paying distributions and could prevent us from being subject to tax as a RIC. If we cannot satisfy the asset coverage test, we may be required to sell a portion of our investments and, depending on the nature of our debt financing, repay a portion of our indebtedness at a time when such sales and repayments may be disadvantageous.
Under the 1940 Act, we generally are prohibited from issuing or selling our common stock at a price per share, after deducting selling commissions and dealer manager fees, that is below net asset value per share, which may be a disadvantage as compared to other public companies. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value of our common stock if (1) our Board of Directors and independent directors determine that such sale is in our best interests and the best interests of our stockholders, and (2) our stockholders in general, as well as those stockholders that are not affiliated with us approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board of Directors, closely approximates the fair value of such securities.

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Our ability to enter into transactions with our affiliates is restricted.
The 1940 Act generally prohibits BDCs from entering into negotiated co-investments with affiliates absent an order from the SEC. Unless otherwise provided in the allocation policy, if an investment opportunity is appropriate for both us and other investment funds, the investment opportunity requires more than the price to be negotiated and cannot be effected pursuant to the terms of our Order, the investment opportunity will be made available to the other investment fund or us on an alternating basis based on the date of closing of each such investment opportunity and each fund’s available capital. As a result, the Adviser and/or its affiliates may face conflicts in allocating investment opportunities between us and such other entities. Although the Adviser and its affiliates will endeavor to allocate investment opportunities in a fair and equitable manner and consistent with applicable allocation procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by the Adviser or its affiliates.
On August 5, 2015, we received exemptive relief from the SEC that permits us greater flexibility to negotiate the terms of co-investments if our Board of Directors determines that it would be advantageous for us to co-invest with other accounts sponsored or managed by the Adviser or its affiliates in a manner consistent with our investment objectives, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors. Under the terms of this exemptive relief, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors is required to make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment strategies and policies. We believe that co-investment by us and accounts sponsored or managed by the Adviser and its affiliates affords us additional investment opportunities and an ability to achieve greater diversification.
We are uncertain of our sources for funding our future capital needs; if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected.
The net proceeds from the sale of shares of our common stock will be used for our investment opportunities, operating expenses, and for payment of various fees and expenses such as management fees, incentive fees, and other fees. Any working capital reserves we maintain may not be sufficient for investment purposes, and we may require debt or equity financing to operate. In order to maintain our RIC tax treatment we must distribute to our stockholders on a timely basis generally an amount equal to at least 90% of our investment company taxable income, determined without regard to any deduction for dividends paid, and the amounts of such distributions will therefore not be available to fund investment originations or to repay maturing debt. In addition, with certain limited exceptions, we are only allowed to borrow amounts or issue debt securities or preferred stock, which we refer to collectively as “senior securities,” such that our asset coverage, as calculated pursuant to the 1940 Act, equals at least 200% immediately after such borrowing, which, in certain circumstances, may restrict our ability to borrow or issue debt securities or preferred stock. Accordingly, in the event that we develop a need for additional capital in the future for investments or for any other reason, these sources of funding may not be available to us. Consequently, if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected. As a result, we would be less able to achieve portfolio diversification and our investment objective, which may negatively impact our results of operations and reduce our ability to pay distributions to our stockholders.
Risks Related to Our Investments
Our investments in portfolio companies may be risky, and we could lose all or part of our investment.
We invest primarily in first and second lien senior secured loans and mezzanine debt and selected equity investments issued by middle market companies.
First and Second Lien Senior Secured Loans. When we make senior secured loans, we will generally take a security interest in the available assets of these portfolio companies, including the equity interests of their subsidiaries. We expect this security interest to help mitigate the risk that we will not be repaid. However, there is a risk that the collateral securing our loans may decrease in value over time or lose its entire value, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. Also, in some circumstances, our lien could be subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the loan. Finally, applicable bankruptcy laws may adversely impact the timing and methods used by us to liquidate collateral securing our loans, which could adversely affect the collectability of such loans. Consequently, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the loan’s terms, or at all, or that we will be able to collect on the loan should we be forced to enforce our remedies.
Mezzanine Debt. Our mezzanine debt investments will generally be subordinated to senior loans and will generally be unsecured. This may result in a heightened level of risk and volatility or a loss of principal which could lead to the loss of our entire investment.

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These investments may involve additional risks that could adversely affect our investment returns. To the extent interest payments associated with such debt are deferred, such debt may be subject to greater fluctuations in valuations, and such debt could subject us and our stockholders to non-cash income. Since we will not receive any principal repayments prior to the maturity of some of our mezzanine debt investments, such investments will be of greater risk than amortizing loans.
Equity Investments. We expect to make selected equity investments, such as direct equity investments, including controlling investments, warrants, or other equity securities. In addition, when we invest in first and second lien senior loans or mezzanine debt, we may acquire warrants to purchase equity securities. Our goal is ultimately to dispose of these equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization, or public offering, which would allow us to sell the underlying equity interests. We intend to seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer. We may be unable to exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress.
More generally, investing in private companies involves a number of significant risks, including that they: may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment; have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and changing market conditions, as well as general economic downturns; are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation, or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us; generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion, or maintain their competitive position. In addition, our executive officers and directors and employees of our Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity.
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
We invest primarily in first and second lien senior secured loans, mezzanine debt, preferred equity, and common equity issued by middle market companies. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization, or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization, or bankruptcy of the relevant portfolio company.
There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
Even though we intend to generally structure our directly-originated investments as senior loans, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt investment and subordinate all or a portion of our claim to that of other creditors. In situations where a bankruptcy carries a high degree of political significance, our legal rights may be subordinated to other creditors. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower.
Second priority liens on collateral securing our loans may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
A portion of our loans are secured on a second priority basis by the same collateral securing senior secured debt of such companies. The first priority liens on the collateral secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by us under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before we receive anything. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers, and other factors.

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There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the loan obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against our remaining assets, if any.
The rights we may have with respect to the collateral securing the loans we make to our portfolio companies with more senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.
We generally will not control our portfolio companies.
We generally will not control our portfolio companies, even though we may have board representation or board observation rights, and our debt agreements may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of their common equity, may take risks or otherwise act in ways that do not serve our interests as debt investors. Due to the lack of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.
Our investments in a portfolio company, whether debt, equity, or a combination thereof, may lead to our receiving material non-public information (“MNPI”) or obtaining ‘control’ of the target company. Our ability to exit an investment where we have MNPI or control could be limited and could result in a realized loss on the investment.
If we receive MNPI, or a controlling interest in a portfolio company, our ability to divest ourselves from a debt or equity investment could be restricted. Causes of such restriction could include market factors, such as liquidity in a private stock, or limited trading volume in a public company’s securities, or regulatory factors, such as the receipt of MNPI or insider blackout periods, where we are under legal obligation not to sell. Additionally, we may choose not to take certain actions to protect a debt investment in a control investment portfolio company. As a result, we could experience a decrease in the value of our portfolio company holdings and potentially incur a realized loss on the investment.
Economic recessions or downturns could impair our portfolio companies and harm our operating results.
Many of the portfolio companies in which we may invest may be susceptible to economic slowdowns or recessions and may be unable to repay our debt investments during these periods. Therefore, our non-performing assets are likely to increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may also decrease the value of any collateral securing our senior secured or second lien secured loans. A prolonged recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income, assets, and net worth. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable. These events could prevent us from increasing investments and harm our operating results.
In addition, while we believe that these conditions also afford attractive opportunities to make investments, future financial market uncertainty could lead to further financial market disruptions and could further adversely impact our ability to obtain financing and the value of our investments.
The effect of global climate change may impact the operations of our portfolio companies.
There may be evidence of global climate change. Climate change creates physical and financial risk and some of our portfolio companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature, and humidity. To the extent weather conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increases in the cost of energy could adversely affect the cost of operations of our portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect some of our portfolio companies’ financial condition, through decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions. Energy companies could also be affected by the potential for lawsuits against or taxes or other regulatory costs imposed on greenhouse gas emitters, based on links drawn between greenhouse gas emissions and climate change.

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In December 2015 the United Nations, of which the U.S. is a member, adopted a climate accord (the “Paris Agreement”) with the long-term goal of limiting global warming and the short-term goal of significantly reducing greenhouse gas emissions. The U.S. subsequently ratified the Paris Agreement, and it entered into force on November 4, 2016. In June 2017, the U.S. announced an intention to withdraw from the agreement, but the earliest effective withdrawal date for the U.S. under the Paris Agreement is November 2020. As a result, some of our portfolio companies may become subject to new or strengthened regulations or legislation which could increase their operating costs and/or decrease their revenues. Increased environmental regulation and the resulting regulatory compliance costs may also make it difficult for our portfolio companies to expand their businesses into non-U.S. countries, which could result in decreased capital resources and financial outlook for our portfolio companies.
Defaults by our portfolio companies will harm our operating results.
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company.
An investment strategy focused primarily on privately-held companies presents certain challenges, including the lack of available information about these companies.
We intend to invest in corporate debt of middle market companies, including privately-held companies. Investments in private companies pose certain incremental risks as compared to investments in public companies. First, private companies have reduced access to the capital markets, resulting in diminished capital resources and ability to withstand financial distress. Second, the investments themselves tend to be less liquid. As such, we may have difficulty exiting an investment promptly or at a desired price prior to maturity or outside of a normal amortization schedule. Finally, little public information generally exists about private companies. Further, these companies may not have third-party debt ratings or audited financial statements. We must therefore rely on the ability of our Adviser to obtain adequate information through due diligence to evaluate the creditworthiness and potential returns from investing in these companies. These companies and their financial information will generally not be subject to the Sarbanes-Oxley Act and other rules that govern public companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments. As a result, the relative lack of liquidity and the potential diminished capital resources of our target portfolio companies may affect our investment returns.
The disposition of our investments may result in contingent liabilities.
A significant portion of our investments involve private securities. In connection with the disposition of an investment in private securities, we may be required to make representations about the business and financial affairs of the portfolio company typical of those made in connection with the sale of a business. We may also be required to indemnify the purchasers of such investment to the extent that any such representations turn out to be inaccurate or with respect to potential liabilities. These arrangements may result in contingent liabilities that ultimately result in funding obligations that we must satisfy through our return of payments previously paid to us.
The lack of liquidity in our investments may adversely affect our business.
We invest in companies whose securities are typically not publicly traded, and whose securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of these investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. As a result, we do not expect to achieve liquidity in our investments in the near-term. We expect that our investments will generally be subject to contractual or legal restrictions on resale or are otherwise illiquid because there is usually no established trading market for such investments. The illiquidity of most of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses. With respect to our investments in investment funds that calculate a net asset value per share, there can be no assurance that we will be able to sell such investments at a price equal to its net asset value per share and we may ultimately sell such investments at discount to its net asset value per share.

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Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.
We are subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity. When this occurs, we will generally reinvest these proceeds in temporary investments, pending their future investment in new portfolio companies. These temporary investments will typically have substantially lower yields than the debt being prepaid, and we could experience significant delays in reinvesting these amounts. Alternative future investments in new portfolio companies may also be at lower yields than the debt that was repaid and will, in any case, require additional Adviser time. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments, net of prepayment fees, could negatively impact our return on equity.
We may not have the funds or ability to make additional investments in our portfolio companies.
We may not have the funds or ability to make additional investments in our portfolio companies. After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to increase our investment through the exercise of a warrant to purchase common stock. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation or may reduce the expected return on the investment.
We may concentrate our investments in companies in a particular industry or industries.
In the event we concentrate our investments in companies in a particular industry or industries, any adverse conditions that disproportionately impact that industry or industries may have a magnified adverse effect on our operating results.
We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.
We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. To the extent that we assume large positions in the securities of a small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond our asset diversification requirements as a RIC under the Code, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies.
Our financial results may be affected adversely if one or more of our significant equity or junior debt investments in a CLO vehicle defaults on its payment obligations or fails to perform as we expect.
We expect that a portion of its portfolio will consist of equity and junior debt investments in CLOs, which involve a number of significant risks. CLOs are typically highly leveraged up to approximately 10 times, and therefore the junior debt and equity tranches in which we will invest in are subject to a higher risk of total loss. In particular, investors in CLOs indirectly bear risks of the underlying debt investments held by such CLOs. We may have the right to receive payments only from the CLOs, and do not have direct rights against the issuer or the entity that sold the assets to be securitized. Although it is difficult to predict whether the prices of indices and securities underlying CLOs will rise or fall, these prices, and therefore, the prices of the CLOs, will be influenced by the same types of political and economic events that affect issuers of securities and capital markets generally.
The investments we make in CLOs are thinly traded or have only a limited trading market. CLO securities are typically privately offered and sold, in the primary and secondary markets. As a result, investments in CLOs may be characterized as illiquid securities. In addition to the general risks associated with investing in debt securities, CLOs carry additional risks, including, but not limited to: (i) the possibility that distributions from the underlying loans will not be adequate to make interest or other payments; (ii) the quality of the underlying loans may decline in value or default; and (iii) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO or unexpected investment results. Further, our investments in equity and junior debt tranches of CLOs are subordinate to the senior debt tranches thereof.
Investments in structured vehicles, including equity and junior debt instruments issued by CLOs, involve risks, including credit risk and market risk. Changes in interest rates and credit quality may cause significant price fluctuations. Additionally, changes in the underlying loans held by a CLO may cause payments on the instruments we hold to be reduced, either temporarily or permanently. Structured investments, particularly the subordinated interests in which we invest, are less liquid than many other types of securities and may be more volatile than the loans underlying the CLOs in which we invest.
CLO investments are subject to interest rate risk.
A majority of the assets in a CLO’s portfolio are floating rate loans which are sensitive to interest rate levels and volatility. Although CLOs are generally structured to mitigate the risk of interest rate mismatch, there may be some difference between the

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timing of interest rate resets on these floating rate loans and liabilities of a CLO. Such a mismatch in timing could have a negative effect on the amount of funds distributed to CLO equity. In addition, CLOs may not be able to enter into hedge agreements, even if it may otherwise be in the best interests of the CLO to hedge such interest rate risk. Furthermore, in the event of a significant rising interest rate environment and/or economic downturn, loan defaults may increase and result in credit losses that may adversely affect the CLO investments held by the Company.
CLOs typically will have no significant assets other than their underlying loans; payments on CLO investments are and will be payable solely from the cash flows from such loans.
CLOs typically will have no significant assets other than their underlying loans. Accordingly, payments on Collateralized Securities are and will be payable solely from the cash flows from such underlying loans, net of all management fees and other expenses. Payments to us as a holder of Collateralized Securities are subject to payments received on the underlying loans. This means that relatively small numbers of defaults of underlying loans may adversely impact our returns.
Collateralized Securities are exposed to leveraged credit risk.
We may be in a subordinated position with respect to realized losses on the loans in CLOs. The leveraged nature of CLOs, in particular, magnifies the adverse impact of loan defaults. Collateralized Securities represent a leveraged investment with respect to the underlying loans. Therefore, changes in the market value of Collateralized Securities could be greater than the change in the market value of the underlying loans, which are subject to credit, liquidity, and interest rate risk.
There is the potential for interruption and deferral of cash flow from CLO investments.
If certain minimum collateral value ratios and/or interest coverage ratios are not met by a CLO, primarily due to loan defaults, then cash flow that otherwise would have been available to pay distributions to us on our CLO investments may instead be used to redeem any senior notes or to purchase additional loans, until the ratios again exceed the minimum required levels or any senior notes are repaid in full. This could result in an elimination, reduction, or deferral in the distribution and/or principal paid to the holders of such Collateralized Securities, which would adversely impact our returns.
Loans of CLOs may be sold and replaced, resulting in a loss to us.
The loans underlying Collateralized Securities may be sold and replacement collateral purchased within the parameters set out in the relevant CLO indenture between the CLO and the CLO trustee and those parameters may typically only be amended, modified or waived by the agreement of a majority of the holders of the senior notes and/or the junior secured notes and/or the equity tranche once the CLO has been established. If these transactions result in a net loss, the magnitude of the loss from the perspective of the equity tranche would be increased by the leveraged nature of the investment.
Risks Relating to Debt Financing
We have sold unsecured notes and have entered into revolving credit facilities with Citi and Wells Fargo that contain various covenants which, if not complied with, could accelerate repayment under the Credit Facilities, thereby materially and adversely affecting our liquidity, financial condition, results of operations, and our ability to pay distributions to our stockholders.
The agreements governing certain of our and our special purpose financing subsidiaries’ financing arrangements require us and our subsidiaries to comply with certain financial and operational covenants. These covenants require us and our subsidiaries to, among other things, maintain certain financial ratios, including asset coverage and minimum stockholders’ equity. Compliance with these covenants depends on many factors, some of which are beyond our and their control. In the event of deterioration in the capital markets and pricing levels subsequent to this period, net unrealized depreciation in our and our subsidiaries’ portfolios may increase in the future and could result in non-compliance with certain covenants, or our taking actions which could disrupt our business and impact our ability to meet our investment objective. For example, the agreements governing one or more of our credit facilities require applicable special purpose vehicles (“SPVs”) to comply with certain operational covenants, including maintaining eligible assets with an aggregate value equal to or exceeding a specified multiple of the borrowings under the credit facility, and a decline in the value of assets owned by the SPV could result in our being required to contribute additional assets to the SPV.
There can be no assurance that we and our subsidiaries will continue to comply with the covenants under our financing arrangements. Failure to comply with these covenants could result in a default. If we and our subsidiaries were unable to obtain a waiver from the debt holders, such a default could accelerate repayment under any or all of our and their debt instruments and thereby force us to liquidate investments at a disadvantageous time and/or at a price which could result in losses, or allow our lenders to sell assets pledged as collateral under our financing arrangements in order to satisfy amounts due thereunder. These occurrences could have a material adverse impact on our liquidity, financial condition, results of operations and ability to pay distributions. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Borrowings” for a more detailed discussion of the terms of debt financings.

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Because we borrow money, the potential for gain or loss on amounts invested in us will be magnified and may increase the risk of investing in us.
At December 31, 2019, we had approximately $1.1 billion of debt financing. The use of borrowings, also known as leverage, increases the volatility of investments by magnifying the potential for gain or loss on invested equity capital. Because we use leverage to partially finance our investments, through borrowing from banks and other lenders, you will experience increased risks of investing in our common stock. If the value of our assets increases, leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause our net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net income to increase more than it would without the leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make common stock distribution payments. Leverage is generally considered a speculative investment technique.
Illustration. The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below. The calculation assumes (i) $2.9 billion in total assets, (ii) a weighted average cost of funds of 4.57%, (iii) $1.4 billion in debt outstanding (i.e., assumes that the $410.0 million principal amount of 2020 Notes, 2022 Notes, 2023 Notes and 2024 Notes sold and the full $1.0 billion available to us under the revolving credit facilities we have with Wells Fargo and Citi is outstanding) and (iv) $1.5 billion in stockholders’ equity. In order to compute the “Corresponding return to stockholders,” the “Assumed Return on Our Portfolio (net of expenses)” is multiplied by the assumed total assets to obtain an assumed return to us. From this amount, the interest expense is calculated by multiplying the assumed weighted average cost of funds by the assumed debt outstanding, and the product is subtracted from the assumed return to us in order to determine the return available to stockholders. The return available to stockholders is then divided by our stockholders’ equity to determine the “Corresponding return to stockholders.” Actual interest payments may be different.
Assumed Return on Our Portfolio (net of expenses)
 
(10)%
 
(5)%
 
—%
 
5%
 
10%
Corresponding return to stockholders (1)
 
(24.28)%
 
(14.34)%
 
(4.41)%
 
5.53%
 
15.47%
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(1) In order for us to cover our hypothetical annual interest payments on indebtedness, we would need to achieve annual returns on our December 31, 2019 total assets of at least 2.22%.
As of December 31, 2019, the Wells Fargo Facility provided for borrowings in an aggregate principal amount of up to $600.0 million on a committed basis, due May 9, 2023; the Citi Credit Facility provided for borrowings in an aggregate principal amount of up to $400.0 million on a committed basis, due May 31, 2022; the 2020 Notes provided borrowings in an aggregate principal amount of $100.0 million, due September 1, 2020; the 2022 Notes provided borrowings in an aggregate principal amount of $150.0 million, due December 30, 2022; the 2023 Notes provided borrowings in an aggregate principal amount of $60.0 million, due May 30, 2023; and the 2024 Notes provided borrowings in an aggregate principal amount of $100.0 million, due December 15, 2024. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Borrowings” for more information about these financing arrangements.
Changes in interest rates may affect our cost of capital and net investment income.
General interest rate fluctuations and changes in credit spreads on floating rate loans may have a substantial negative impact on our investments and investment opportunities and, accordingly, may have a material adverse effect on our rate of return on invested capital, our net investment income, our net asset value, and the market price of our common stock.
The majority of our debt investments have, and are expected to have, variable interest rates that reset periodically based on benchmarks such as LIBOR, so an increase in interest rates from their historically low present levels may make it more difficult for our portfolio companies to service their obligations under our debt investments and increase defaults even where our investment income increases. In addition, any such increase in interest rates would make it more expensive to use debt to finance our investments. Any decrease in credit spreads on debt that pays a floating rate of return would have an impact on the income generation of our floating rate assets. Trading prices for debt that pays a fixed rate of return tend to fall as interest rates rise. Trading prices tend to fluctuate more for fixed rate securities that have longer maturities. Although we have no policy governing the maturities of our investments, under current market conditions we expect that we will invest in a portfolio of debt generally having maturities of up to seven years. This means that we will be subject to greater risk (other things being equal) than an entity investing solely in shorter-term securities.

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In addition, because we borrow to fund a portion of our investments, a portion of our net investment income will depend upon the difference between the interest rate at which we borrow funds and the interest rate at which we invest these funds. Portions of our investment portfolio and our borrowings have floating rate components. As a result, a significant change in market interest rates could have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds could increase, which would reduce our net investment income. We may hedge against such interest rate fluctuations by using standard hedging instruments such as interest rate swap agreements, futures, options and forward contracts, subject to applicable legal requirements, including all necessary registrations (or exemptions from registration) with the Commodity Futures Trading Commission. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged borrowings. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition, and results of operations.
Risks Relating to Our Corporate Structure and Common Stock
As a result of certain limitations in our share repurchase program, you will have limited opportunities to sell your shares and, to the extent you are able to sell your shares under the program, you may not be able to recover the amount of your investment in our shares.
We intend to conduct tender offers pursuant to our share repurchase program on a semi-annual basis. The share repurchase program includes numerous restrictions that limit your ability to sell your shares and should not be relied upon as a method to sell your shares promptly or at a desired price. We intend to limit the number of shares repurchased pursuant to our proposed share repurchase program as follows: (1) we currently intend to limit the number of shares to be repurchased during any calendar year to the number of shares we can repurchase with the proceeds we receive from the sale of shares of our common stock under our distribution reinvestment plan; at the discretion of our Board of Directors, we may also use cash on hand, cash available from borrowings, and cash from liquidation of securities investments as of the end of the applicable period to repurchase shares; (2) we will not repurchase shares in any calendar year in excess of 10% of the weighted average number of shares outstanding in the prior calendar year; (3) unless you tender all of your shares, you must tender at least 25% of the amount of shares you have purchased in the offering and must maintain a minimum balance of $1,000 subsequent to submitting a portion of your shares for repurchase by us; and (4) to the extent that the number of shares put to us for repurchase exceeds the number of shares that we are able to purchase, we will repurchase shares on a pro rata basis, not on a first-come, first-served basis. Further, we will have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under federal law or Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. These limits may prevent us from accommodating all repurchase requests made in any year.
Our Board of Directors may amend, suspend, or terminate the repurchase program upon 30 days’ notice. We will notify you of such developments (1) in the quarterly reports mentioned above or (2) by means of a separate mailing to you, accompanied by disclosure in a current or periodic report under the Exchange Act.
The timing of our repurchase offers pursuant to our share repurchase program may be at a time that is disadvantageous to our stockholders.
When we make semi-annual repurchase offers pursuant to the share repurchase program, we may offer to repurchase shares at a price that is lower than the price you paid for shares in our offering. As a result, to the extent you have the ability to sell your shares to us as part of our share repurchase program, the price at which you may sell your shares, may be lower than what you paid in connection with your purchase of shares in our offering.
In addition, in the event you choose to participate in our share repurchase program, you will be required to provide us with notice of your intent to participate prior to knowing what the repurchase price per share will be on the repurchase date. Although you will have the ability to withdraw your repurchase request prior to the repurchase date, to the extent you seek to sell your shares to us as part of our periodic share repurchase program, you will be required to do so without knowledge of what the repurchase price of our shares will be on the repurchase date.
Under the terms of our charter, our Board of Directors is authorized to issue shares of preferred stock with rights and privileges superior to common stockholders without common stockholder approval.
Under the terms of our charter, our Board of Directors is authorized to issue shares of preferred stock in one or more series without stockholder approval. The Board of Directors has discretion to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications, and terms or conditions of redemption for each class or series of preferred stock.
Every issuance of preferred stock will be required to comply with the requirements of the 1940 Act, including among other things, that (1) immediately after issuance and before any distribution is made with respect to our common stock and before any purchase of common stock is made, such preferred stock together with all other senior securities must not exceed an amount equal to 50% of our total assets after deducting the amount of such distribution or purchase price, as the case may be, and (2) the holders of shares of preferred stock, if any are issued, must be entitled as a class to elect two directors at all times and to elect a

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majority of the directors if distributions on such preferred stock are in arrears by two years or more. Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock.
Your interest in us will be diluted if we issue additional shares, which could reduce the overall value of your investment.
Potential investors in this offering do not have preemptive rights to any shares we issue in the future. Our charter authorizes us to issue shares of common stock. Pursuant to our charter, a majority of our entire Board of Directors may amend our charter from time to time to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series without stockholder approval. After your purchase in this offering, our Board of Directors may elect to sell additional shares in this or any follow-on public offerings, issue equity interests in private offerings or issue share-based awards to our independent directors or employees of our Adviser. To the extent we issue additional equity interests after your purchase in this offering, your percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your shares.
Certain provisions of our charter and bylaws as well as provisions of the Maryland General Corporation Law could deter takeover attempts and have an adverse impact on the value of our common stock.
Our charter and bylaws, as well as certain statutory and regulatory requirements, contain certain provisions that may have the effect of discouraging a third party from attempting to acquire us. Under the Maryland General Corporation Law, “control shares” acquired in a “control share acquisition” have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares owned by the acquiror, by officers, or by employees who are directors of the corporation. Our bylaws contain a provision exempting us from the Maryland Control Share Acquisition Act under the Maryland General Corporation Law any and all acquisitions by any person of our shares of stock. Our Board of Directors may amend the bylaws to remove that exemption in whole or in part without stockholder approval. The Maryland Control Share Acquisition Act (if we amend our bylaws to be subject to that Act) may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. Under the Maryland General Corporation Law, specified “business combinations,” including mergers, consolidations, share exchanges, or, in circumstances specified in the statute, asset transfers or issuances or reclassifications of equity securities, between a Maryland corporation and any person who owns 10% or more of the voting power of the corporation’s outstanding voting stock, and certain other parties (each an “interested stockholder”), or an affiliate of the interested stockholder, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Thereafter any of the specified business combinations must be approved by two super majority votes of the stockholders unless, among other conditions, the corporation’s common stockholders receive a minimum price for their shares.
Under the Maryland General Corporation Law, certain statutory provisions permit a corporation that is subject to the Exchange Act and that has at least three independent directors to be subject to certain corporate governance provisions notwithstanding any contrary provision in the corporation’s charter and bylaws. Among other provisions, a Board of Directors may classify itself without the vote of stockholders. Further, the Board of Directors, by electing into certain statutory provisions and notwithstanding any contrary provision in the charter or bylaws, may (i) provide that a special meeting of stockholders will be called only at the request of stockholders entitled to cast at least a majority of the votes entitled to be cast at the meeting, (ii) reserve for itself the right to fix the number of directors, and (iii) retain for itself the exclusive power to fill vacancies created by the death, removal, or resignation of a director. A corporation may be prohibited by its charter or by resolution of its Board of Directors from electing to be subject to any of the provisions of the statute. We are not prohibited from implementing any or all of the provisions.
Additionally, our Board of Directors may, without stockholder action, authorize the issuance of shares of stock in one or more classes or series, including preferred stock; and our Board of Directors may, without stockholder action, amend our charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue. These provisions may inhibit a change of control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the value of our common stock.
We are not obligated to complete a liquidity event by a specified date; therefore, it will be difficult for you to sell your shares.
We intend to explore a potential liquidity event for our stockholders between five to seven years following the completion of our offering stage. We expect that our Board of Directors, in the exercise of the requisite standard of care applicable to directors under Maryland law, will determine to pursue a liquidity event when it believes that then-current market conditions are favorable for a liquidity event, and that such a transaction is in our best interests. A liquidity event could include (1) the sale of all or substantially all of our assets either on a complete portfolio basis or individually followed by a liquidation, (2) a listing of our shares on a national securities exchange, or (3) a merger or another transaction approved by our Board of Directors in which our stockholders will receive cash or shares of a publicly traded company. However, there can be no assurance that we will complete a liquidity event within such time or at all. If we do not successfully complete a liquidity event, liquidity for your shares will be limited to our share repurchase program which we have no obligation to maintain.

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Our shares will not be listed on an exchange or quoted through a quotation system for the foreseeable future, if ever. Therefore, you will have limited liquidity and may not receive a full return of your invested capital if you sell your shares.
Our shares are illiquid assets for which there is not expected to be any secondary market nor is it expected that any will develop in the future. We intend to explore a potential liquidity event for our stockholders between five and seven years following the completion of our offering stage, which may include further follow-on offerings. However, there can be no assurance that we will complete a liquidity event within such time or at all. We expect that our Board of Directors, in the exercise of its duties to us, will determine to pursue a liquidity event when it believes that then-current market conditions are favorable for a liquidity event, and that such an event is in our best interests. A liquidity event could include (1) the sale of all or substantially all of our assets either on a complete portfolio basis or individually followed by a liquidation, (2) a listing of our shares on a national securities exchange, or (3) a merger or another transaction approved by our board in which our stockholders will receive cash or shares of a publicly traded company.
In making the decision to apply for listing of our shares, our directors will try to determine whether listing our shares or liquidating our assets will result in greater value for our stockholders. In making a determination of what type of liquidity event is in our best interests, our Board of Directors, including our independent directors, may consider a variety of criteria, including, but not limited to, market conditions, portfolio diversification, portfolio performance, our financial condition, potential access to capital as a listed company, market conditions for the sale of our assets or listing of our common stock, internal management requirements to become a perpetual life company, and the potential for stockholder liquidity. If our shares are listed, we cannot assure you a public trading market will develop.
You should also be aware that shares of publicly traded closed-end investment companies frequently trade at a discount to their NAV. If our shares are eventually listed on a national exchange, we would not be able to predict whether our common stock would trade above, at or below NAV. This risk is separate and distinct from the risk that our NAV may decline.
We may limit the number of shares to be repurchased during any redemption period to the number of shares of common stock we are able to repurchase with the proceeds received from the sale of shares of common stock under the DRIP during such redemption period.
As discussed above, we intend to conduct tender offers pursuant to our share repurchase program on a semi-annual basis. We may limit the number of shares to be repurchased during any redemption period to the number of shares of common stock we are able to repurchase with the proceeds received from the sale of shares of common stock under the DRIP during such redemption period. Our eight most recent tender offers were oversubscribed.
Federal Income Tax Risks
We may be subject to corporate-level U.S. federal taxes if we fail to maintain our qualification as a RIC.
To maintain RIC tax treatment under the Code, we must meet the following annual distribution, income source, and asset diversification requirements.
•
The Annual Distribution Requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our net ordinary income and net short-term capital gain in excess of net long-term capital loss, if any. We may be subject to corporate-level U.S. federal income tax on any of our undistributed income or gain. Additionally, we will be subject to a 4% nondeductible federal excise tax to the extent that we do not satisfy certain additional minimum distribution requirements on a calendar-year basis. Because we use debt financing, we are subject to an asset coverage ratio requirement under the 1940 Act and may in the future become subject to certain financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution requirements. If we are unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.
•
The income source requirement will be satisfied if we obtain at least 90% of our gross income for each year from dividends, interest, gains from the sale of stock or securities, or similar sources.
•
The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. To satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash equivalents, U.S. Government securities, securities of other RICs, and other acceptable securities; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. Government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly traded partnerships.” Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.

35


If we fail to maintain RIC tax treatment for any reason and are subject to corporate-level U.S. federal income tax on all of our income, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Even if we qualify as a RIC, we will be required to pay corporate-level U.S. federal income taxes on any income or capital gains that we do not distribute (or deemed to be distributed) to stockholders. We may also be subject to certain U.S. federal excise taxes, as well as state, local and foreign taxes.
We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
For U.S. federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Further, we have elected to amortize market discounts and include such amounts, if any, in our annual taxable income, instead of upon disposition, as electing not to do so could potentially limit our ability to deduct interest expenses for tax purposes.  
Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of the accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the Annual Distribution Requirement necessary to maintain RIC tax treatment under the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.
You may receive shares of our common stock as distributions which could result in adverse tax consequences to you.
In order to satisfy the Annual Distribution Requirement applicable to RICs, we may have the ability to declare a large portion of a distribution in shares of our common stock instead of in cash, provided that stockholders have the right to elect to receive their distribution in cash. As long as a portion of such distribution is payable in cash (which portion can be as low as 20% based on certain rulings by the IRS) and certain requirements are met, the entire distribution to the extent of our current and accumulated earnings and profits would be a dividend for U.S. federal income tax purposes. If too many stockholders elect to receive their distributions in cash, each stockholder electing to receive his/her distribution in cash would receive a pro rata portion of his/her distribution in cash and the remaining portion of the distribution would be paid in shares of our common stock. As a result, a stockholder would be taxed on the entire distribution in the same manner as a cash distribution, even though a portion of the distribution was paid in shares of our common stock, and a stockholder may be required to pay tax with respect to such dividends in excess of any cash received. If a stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, then such sales may put downward pressure on the trading price of our stock.
You may have current tax liability on distributions you elect to reinvest in our common stock but would not receive cash from such distributions to pay such tax liability.
If you participate in our distribution reinvestment plan, you will be deemed to have received, and for U.S. federal income tax purposes will be taxed on, the fair market value of our common stock that you received to the extent such amount was not a tax-free return of capital. As a result, unless you are a tax-exempt entity, you may have to use funds from other sources to pay your tax liability on the value of our common stock received from the distribution.

36


If we do not qualify as a “publicly offered regulated investment company,” as defined in the Code, you will be taxed as though you received a distribution of some of our expenses and may be limited in your ability to deduct such expenses.
A “publicly offered regulated investment company” is a regulated investment company whose shares are either (i) continuously offered pursuant to a public offering, (ii) regularly traded on an established securities market, or (iii) held by at least 500 persons at all times during the taxable year. If we are not a publicly offered regulated investment company for any period, a non-corporate stockholder’s pro rata portion of our affected expenses, including our management fees, will be treated as an additional distribution to the stockholder and will be deductible by such stockholder only to the extent permitted under the limitations described below. For non-corporate stockholders, including individuals, trusts, and estates, significant limitations generally apply to the deductibility of certain expenses of a non-publicly offered regulated investment company, including advisory fees. In particular, these expenses, referred to as miscellaneous itemized deductions, are not deductible by individuals, trusts, or estates for taxable years beginning before 2026. For taxable years beginning in 2026 or later, such expenses may be deductible only to the extent they exceed 2% of such a stockholder’s adjusted gross income. Such expenses are not deductible by an individual for alternative minimum tax purposes. While we anticipate that we will constitute a publicly offered regulated investment company for our current tax year, there can be no assurance that we will in fact so qualify for any of our taxable years.
An investment in the shares by a Non-U.S. stockholder may have adverse tax consequences.
Whether an investment in the shares is appropriate for a Non-U.S. stockholder will depend upon that person’s particular circumstances. A “Non-U.S. stockholder” is a beneficial owner of shares of our common stock that is neither a U.S. stockholder nor a partnership (including an entity treated as a partnership for U.S. federal income tax purposes). Among other things, a Non-U.S. stockholder, under certain circumstances, may be subject to withholding of U.S. federal income tax at a rate of 30.0% (or lower rate provided by an applicable treaty); required to file U.S. income taxes to receive a tax credit or tax refund of overpayments of taxes; subject to U.S. income tax at graduated rates or to a branch profits on our distributions; subject to certain reporting requirements, disclosure requirements, and withholding taxes under the Foreign Account Tax Compliance Act and other laws; and subject to certain rules regarding foreign tax credits. Non-U.S. persons should consult their tax advisors with respect to U.S. federal income tax and withholding tax, and state, local, and foreign tax consequences of an investment in our shares.
Our investments in CLOs may be subject to special anti-deferral provisions that could result in us incurring tax or recognizing income prior to receiving cash distributions related to such income.
We may in the future purchase residual or subordinated interests in CLOs or certain other non-U.S. equity investments that are treated for U.S. federal income tax purposes as shares in a “passive foreign investment company” (a “PFIC”). If we acquire shares in a PFIC (including equity tranche investments in CLOs that are PFICs), we may be subject to U.S. federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such income is distributed as a taxable distribution by us to our stockholders. Certain elections may be available to mitigate or eliminate such tax on excess distributions. If we make a QEF election, we generally would be required to include in our gross income our share of the earnings of a PFIC on a current basis, regardless of whether any distributions are received from such PFIC in a given taxable year. If this election were made, the special rules discussed above, relating to the taxation of excess distributions, would not apply. Alternatively, we may elect to mark-to-market our PFIC shares at the end of each taxable year, with the result that unrealized gains would be treated as though they were realized and reported as ordinary income. Any mark-to-market losses would be deductible as ordinary losses to the extent of any net mark-to-market gains included in income in prior taxable years.
If we hold more than 10% of the shares in a foreign corporation that is treated as a controlled foreign corporation (“CFC”) (including equity tranche investments in a CLO treated as CFC), we may be treated as receiving a deemed distribution (taxable as ordinary income) each year from such foreign corporation in an amount equal to our pro rata share of the corporation’s income for the tax year (including both ordinary earnings and capital gains). In general, a foreign corporation will be considered a CFC if greater than 50% of the shares of the corporation, measured by reference to combined voting power or value, if owned (directly, indirectly, or by attribution) by U.S. Shareholders. A “U.S. Shareholder,” for this purpose, is any U.S. person that possesses (actually or constructively) 10% or more of the combined voting power or value of all classes of shares of a corporation. If we are treated as having received such deemed distributions from a CFC, we will be required to include such distribution in our investment company taxable income regardless of whether we receive any distributions from such CFC, and we would be required to distribute such income to satisfy the distribution requirements applicable to RICs.
If we are required to include amounts in our taxable income prior to receiving distributions representing such income, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital, or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax.

37


The Collateralized Securities in which we invest may be subject to U.S. withholding tax if they fail to comply with certain reporting requirements.
The “Foreign Account Tax Compliance Act,” or FATCA, imposes a withholding tax of 30% on payments of U.S. source interest and dividends paid to certain non-U.S. entities, including certain non U.S. financial institutions and investment funds, unless such non-U.S. entity complies with certain reporting requirements regarding its U.S. account holders and its U.S. owners. Most CLO vehicles in which we invest will be treated as non-U.S. financial entities for this purpose, and therefore will be required to comply with these reporting requirements to avoid the 30% withholding. If a CLO vehicle in which we invest fails to properly comply with these reporting requirements, it could reduce the amounts available to distribute to equity and junior debt holders in such CLO vehicle, which could materially and adversely affect our operating results and cash flows.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We do not own any real estate or other physical properties materially important to our operation. Our executive offices are located at 9 West 57th Street, 49th Floor, Suite 4920, New York, NY 10019. We believe that our current office facilities are adequate for our business as we intend to conduct it.
ITEM 3. LEGAL PROCEEDINGS
As of December 31, 2019, we were not defendants in any material pending legal proceeding, and no such material proceedings are known to be contemplated. However, from time to time, we may be party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under the contracts with our portfolio companies. Third parties may also seek to impose liability on us in connection with the activities of our portfolio companies.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

38


PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
There is currently no market for our common stock, and we do not expect that a market for our shares will develop in the future. We closed the Offering to new investments on April 30, 2015, and no stock has been authorized for issuance under any equity compensation plans. We are prohibited under the 1940 Act from selling our shares of common stock at an offering price, after deducting selling commissions and dealer manager fees, that is below our net asset value per share unless we obtain stockholder approval. In connection with any issuance of shares of our common stock, our Board of Directors or a committee thereof will review the then current offering price per share against the current estimated net asset value per share to ensure that we were not selling shares of our common stock at a price which, after deducting selling commissions and dealer manager fees, was below our net asset value per share.
Set forth below is a chart describing the classes of our securities outstanding as of December 31, 2019:
Title of Class
 
Amount Authorized
 
Amount Issued
Common Stock, par value $0.001 per share
 
450,000,000
 
215,850,546
As of December 31, 2019, we had issued 215.9 million shares of common stock for gross proceeds of $2.3 billion, including the shares purchased by affiliates and shares issued under our DRIP. As of December 31, 2019, we had repurchased 25.6 million shares of common stock for payments of $222.2 million through our share purchase program. As of December 31, 2019, we had 35,428 record holders of our common stock.
Distributions
We declared our first distribution on June 23, 2011 and have declared and paid cash distributions to our stockholders on a monthly basis since such time. We calculate each stockholder’s specific distribution amount for the month using record and declaration dates, and the stockholder's distributions begin to accrue on the date we accepted their subscription for shares of our common stock. From time-to-time, we may also pay interim distributions at the discretion of our Board of Directors. Each year a statement on Internal Revenue Service Form 1099-DIV (or such successor form) identifying the source of the distribution (i.e., paid from ordinary income, paid from net capital gain on the sale of securities, and/or a return of paid-in capital surplus which is a nontaxable distribution) will be mailed to our stockholders. Our distributions may exceed our earnings, and, as a result, a portion of the distributions we make may represent a return of capital for tax purposes.
We have not established any limit on the extent to which we may use borrowings, if any, or proceeds from any future offering to fund distributions. There can be no assurance that we will be able to sustain distributions at any particular level.
From time-to-time and not less than quarterly, our Adviser will be required to review our accounts to determine whether distributions are appropriate. We shall distribute pro rata to our stockholders funds received by us which our Adviser deems unnecessary for us to retain.
To maintain our RIC qualification, we must, among other things, distribute at least 90% of our net ordinary income and net short-term capital gain in excess of net long-term capital loss, if any, to our stockholders. In order to avoid certain excise taxes imposed on RICs, we currently intend to distribute, or be deemed to distribute, during each calendar year an amount at least equal to the sum of: (1) 98% of our net ordinary income for the calendar year; (2) 98.2% of our capital gain in excess of capital loss for the calendar year; and (3) any net ordinary income and net capital gain for preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. We can offer no assurance that we will achieve results that will permit the payment of any distributions and, if we issue senior securities, we will be prohibited from paying distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.
We have a distribution reinvestment plan (the “DRIP”) pursuant to which we reinvest all cash dividends or distributions (“Distributions”) declared by our Board of Directors on behalf of investors who do not elect to receive their Distributions in cash as described below (the “Participants”). As a result, if our Board of Directors declares a Distribution, then stockholders who have not elected to “opt out” of the DRIP will have their Distributions automatically reinvested in additional shares of our common stock at a price equal to NAV per share as estimated in good faith by us on the payment date. The timing and amount of any future Distributions to stockholders are subject to applicable legal restrictions and the sole discretion of our Board of Directors.
We have not established limits on the amount of funds we may use from available sources to fund distributions. We may have distributions which could be characterized as a return of capital for tax purposes. During the years ended December 31, 2019, 2018, and 2017 no portion of our distributions were characterized as return of capital for tax purposes, respectively.

39


Sales of Unregistered Securities
In connection with the FT Transaction, on November 1, 2018, we issued approximately 6.1 million and 4.9 million shares of our common stock to FRI and BSP, respectively, at a purchase price of $8.20 per share in a private placement in reliance on Section 4(a)(2) of the Securities Act. For additional information regarding the FT Transaction, please see the section entitled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Related Party Transactions and Agreements”.
Issuer Purchases of Equity Securities
The table below provides information concerning our repurchases of shares of our common stock during the year ended December 31, 2019, pursuant to our share repurchase program.
Period
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as
Part of Publicly Announced Plans or
Programs
 
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs. (in millions)
January 1, 2019 to March 31, 2019
 
2,241,000

 
$
8.20

 
2,241,000

 
—

April 1, 2019 to June 30, 2019
 
—

 
$
—

 
—

 
—

July 1, 2019 to September 30, 2019
 
2,199,337

 
$
7.96

 
2,199,337

 
—

October 1, 2019 to December 31, 2019
 
—

 
$
—

 
—

 
—

Total
 
4,440,337

 
 
 
4,440,337

 
 
See Note 10 to our consolidated financial statements contained in this Annual Report on Form 10-K for a more detailed discussion of the terms of our share repurchase program.


40



ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statements of operations data, consolidated per share data, and consolidated statements of assets and liabilities data for each of the five years in the period ended December 31, 2019 are derived from our audited consolidated financial statements which are filed with the SEC. This selected financial data should be read in conjunction with our consolidated financial statements and related notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report.
 
As of and For the Year Ended December 31,
 
2019
 
2018
 
2017
 
2016
 
2015
 
(Dollars in thousands, except per share data)
Consolidated Statements of Operations Data:
 
 
 
 
 
 
 
 
 
Total investment income
$
244,505

 
$
237,012

 
$
223,820

 
$
229,658

 
$
195,846

Total expenses net of expense waivers (1)
134,477

 
131,997

 
116,161

 
108,521

 
81,690

Income tax expense, including excise tax
1,771

 
1,605

 
1,619

 
1,140

 
—

Net investment gain attributable to non-controlling interests
9

 
25

 
29

 
19

 
—

Net investment income
108,248

 
103,385

 
106,011

 
119,978

 
114,156

Net realized and unrealized loss on investments, net of deferred taxes
(11,378
)
 
(75,292
)
 
(27,651
)
 
(26,892
)
 
(103,576
)
Net change in unrealized appreciation (depreciation) attributable to non-controlling interests
(3,017
)
 
(840
)
 
29

 
1,316

 
(2,527
)
Net change in unrealized appreciation (depreciation) from forward currency exchange contracts
(1,381
)
 
993

 
—

 
—

 
—

Net increase in net assets resulting from operations
$
92,472

 
$
28,246

 
$
78,389

 
$
94,402

 
$
8,053

Consolidated Per Share Data:
 
 
 
 
 
 
 
 
 
Net investment income
$
0.57

 
$
0.57

 
$
0.59

 
$
0.67

 
$
0.66

Net realized and unrealized loss on investments, net of deferred taxes
$
(0.07
)
 
$
(0.41
)
 
$
(0.15
)
 
$
(0.14
)
 
$
(0.60
)
Net increase in net assets resulting from operations
$
0.49

 
$
0.16

 
$
0.44

 
$
0.52

 
$
0.05

Distributions declared
$
0.65

 
$
0.65

 
$
0.76

 
$
0.87

 
$
0.87

Consolidated Statements of Assets and Liabilities Data:
 
 
 
 
 
 
 
 
 
Total assets
$
2,640,530

 
$
2,463,324

 
$
2,652,514

 
$
2,616,306

 
$
2,490,755

Borrowings outstanding
$
1,095,042

 
$
896,678

 
$
1,041,149

 
$
915,497

 
$
842,238

Total net assets
$
1,462,683

 
$
1,492,719

 
$
1,494,516

 
$
1,529,734

 
$
1,610,485

Other data:
 
 
 
 
 
 
 
 
 
Total return (2)
6.60
%
 
1.96
%
 
5.24
%
 
6.02
%
 
0.67
%
Number of portfolio company investments at year end
227

 
204

 
157

 
135

 
125

Value of investments at year end
$
2,546,184

 
$
2,334,714

 
$
2,503,523

 
$
2,394,083

 
$
2,311,281

Weighted average yield on investments at year end
8.9
%
 
9.8
%
 
8.5
%
 
9.7
%
 
9.5
%

41


______________
(1) Expenses are net of expense waivers for the year ended December 31, 2015; the amount waived was $3,534. No expenses were waived for the years ended December 31, 2019, 2018, 2017, and 2016.
(2) Total return is calculated assuming a purchase of shares of common stock at the current net asset value on the first day and a sale at the current net asset value on the last day of the periods reported. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the DRIP. The total return based on net asset value for the years ended December 31, 2019, 2018, 2017, 2016 and 2015, includes the effect of expense waivers and reimbursements which equaled 0.00%, 0.00%, 0.00%, 0.00%, and 0.22%, respectively.


42


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Business Development Corporation of America (the "Company," "BDCA," "we," or "our") and the notes thereto and other financial information included elsewhere in this Annual Report on Form 10-K. We are externally managed by our adviser, BDCA Adviser, LLC (the “Adviser”).
Forward Looking Statements
This report, and other statements that we may make, may contain forward-looking statements with respect to future financial or business performance, strategies, or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “potential,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future conditional verbs such as “will,” “would,” “should,” “could,” “may,” or similar expressions.
Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to and do not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.
In addition to factors previously disclosed in our U.S. Securities and Exchange Commission (“SEC”) reports and those identified elsewhere in this report, including the “Risk Factors” section, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:
•
our future operating results;
•
our business prospects and the prospects of our portfolio companies;
•
the impact of the investments that we expect to make;
•
the ability of our portfolio companies to achieve their objectives;
•
our contractual arrangements and relationships with third parties;
•
our expected financings and investments;
•
the adequacy of our cash resources and working capital;
•
the timing of cash flows, if any, from the operations of our portfolio companies;
•
our repurchase of shares;
•
actual and potential conflicts of interest with our Adviser and its affiliates;
•
the dependence of our future success on the general economy and its effect on the industries in which we invest;
•
the ability to qualify and maintain our qualifications as a regulated investment company (“RIC”) and a business development company (“BDC”);
•
the timing, form, and amount of any distributions;
•
the impact of fluctuations in interest rates on our business;
•
the valuation of any investments in portfolio companies, particularly those having no liquid trading market;
•
the impact of changes to generally accepted accounting principles, and the impact to BDCA; and
•
the impact of changes to tax legislation and, generally, our tax position.
Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Item 1A. Risk Factors” and elsewhere in this Annual Report.
Overview
We are an externally managed, non-diversified closed-end management investment company incorporated in Maryland in May 2010 that has elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (“the 1940 Act”). In addition, we have elected to be treated for tax purposes as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Our investment activities are managed by the Adviser, a subsidiary of Benefit Street Partners L.L.C. (“BSP”) and supervised by our Board of Directors, a majority of whom are independent of the Adviser and its affiliates. As a BDC, we are required to comply with certain regulatory requirements. See “Item 1. Business - Regulation” for discussion of BDC regulation and other regulatory considerations.

43


Our investment objective is to generate both current income and to a lesser extent long-term capital appreciation through debt and equity investments. We invest primarily in senior secured loans, and to a lesser extent, mezzanine loans, unsecured loans, and equity of predominantly private U.S. middle-market companies. We define middle market companies as those with annual revenues of less than $1 billion, although we may invest in larger or smaller companies. We may also purchase interests in loans or corporate bonds through secondary market transactions. We expect that each investment generally will range between approximately 0.5% and 3.0% of our total assets. As of December 31, 2019, 81.3% of our portfolio was invested in senior secured loans.
Senior secured loans generally are senior debt instruments that rank ahead of subordinated debt and equity in priority of payments and are generally secured by liens on the operating assets of a borrower which may include inventory, receivables, plant, property, and equipment. Mezzanine debt is subordinated to senior loans and is generally unsecured. We may also invest in the equity and junior debt tranches of collateralized loan obligation investment vehicles (“Collateralized Securities” or “CLO's”).
Financial and Operating Highlights
(Dollars in millions, except per share amounts)
 
At December 31, 2019:
 
 
Investment Portfolio
$
2,546.2

 
Net assets
1,462.7

 
Debt (net of deferred financing costs)
1,083.8

 
Net asset value per share
7.69

 
 
 
Portfolio Activity for the Year Ended December 31, 2019:
 
 
Cost of investments purchased during period, including PIK
1,002.2

 
Sales, repayments, and other exits during the period
786.8

 
Number of portfolio companies at end of period
227

 
 
 
Operating results for the Year Ended December 31, 2019:
 
 
Net investment income per share
0.57

 
Distributions declared per share
0.65

 
Net increase in net assets resulting from operations per share
0.49

 
Net investment income
108.2

 
Net realized and unrealized loss, net of deferred taxes
(15.8
)
 
Net increase in net assets resulting from operations
92.5

Portfolio and Investment Activity
During the year ended December 31, 2019, we made $997.0 million of investments in new and existing portfolio companies and had $786.8 million in aggregate amount of sales and repayments, resulting in net investments of $210.2 million for the period. The total portfolio of debt investments at fair value consisted of 90.5% bearing variable interest rates and 9.5% bearing fixed interest rates.

44


Our portfolio composition, based on fair value at December 31, 2019 was as follows:
 
December 31, 2019
 
Percentage of
Total Portfolio
 
Weighted Average Current Yield for Total Portfolio (1)
Senior Secured First Lien Debt
69.3
%
 
8.5
%
Senior Secured Second Lien Debt
12.0

 
12.3

Subordinated Debt
4.2

 
11.3

Collateralized Securities (2)
4.3

 
10.1

Equity/Other (3)
10.2

 
6.3

Total
100.0
%
 
8.9
%
______________
(1) Includes the effect of the amortization or accretion of loan premiums or discounts.
(2) Weighted average current yield for Collateralized Securities is based on the estimation of effective yield to expected maturity for each security as calculated in accordance with Accounting Standards Codification ("ASC") Topic 325-40-35, Beneficial Interests in Securitized Financial Assets (see Note 2 - Summary of Significant Accounting Policies).
(3) Weighted average current yield for Equity/Other may be based on actual or annualized income, where applicable.
During the year ended December 31, 2018, we made $1,102.5 million of investments in new and existing portfolio companies and had $1,211.1 million in aggregate amount of sales and repayments, resulting in net sales and repayments of $(108.6) million for the period. The total portfolio of debt investments at fair value consisted of 86.8% bearing variable interest rates and 13.2% bearing fixed interest rates.
Our portfolio composition, based on fair value at December 31, 2018 was as follows:
 
December 31, 2018
 
Percentage of
Total Portfolio
 
Weighted Average Current Yield for Total Portfolio (1)
Senior Secured First Lien Debt
68.3
%
 
9.6
%
Senior Secured Second Lien Debt
11.8

 
12.3

Subordinated Debt
5.9

 
10.8

Collateralized Securities (2)
5.4

 
10.3

Equity/Other (3)
8.6

 
6.6

Total
100.0
%
 
9.8
%
______________
(1) Includes the effect of the amortization or accretion of loan premiums or discounts.
(2) Weighted average current yield for Collateralized Securities is based on the estimation of effective yield to expected maturity for each security as calculated in accordance with ASC Topic 325-40-35, Beneficial Interests in Securitized Financial Assets (see Note 2 - Summary of Significant Accounting Policies).
(3) Weighted average current yield for Equity/Other may be based on actual or annualized income, where applicable.
Portfolio Asset Quality
Our Adviser employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Adviser grades the credit risk of all debt investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio debt investment relative to the inherent risk at the time the original debt investment was made (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company's business, the collateral coverage of the investment and other relevant factors.

45


 Loan Rating
 
Summary Description
1
  
Debt investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since the time of investment are favorable.
 
 
2
  
Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable. All investments are initially rated a “2”.
 
 
3
  
Performing debt investment requiring closer monitoring. Trends and risk factors show some deterioration.
 
 
4
  
Underperforming debt investment. Some loss of interest or dividend expected, but still expecting a positive return on investment. Trends and risk factors are negative.
 
 
5
  
Underperforming debt investment with expected loss of interest and some principal.
The weighted average risk rating of our investments based on fair value was 2.37 and 2.50 as of December 31, 2019 and December 31, 2018, respectively. As of December 31, 2019, we had eight portfolio companies, which represented twelve investments, on non-accrual status with a total principal amount of $85.0 million, amortized cost of $62.8 million, and fair value of $22.5 million which represented 2.8%, 2.4%, and 0.9% of the investment portfolio's total principal, amortized cost, and fair value, respectively. As of December 31, 2018, we had eight portfolio companies, which represented fourteen portfolio investments, on non-accrual status with a total principal amount of $171.4 million, amortized cost of $117.4 million, and fair value of $43.8 million, which represented 5.7%, 4.7%, and 1.9% of the investment portfolio's total principal, amortized cost, and fair value, respectively. Refer to Note 2 - Summary of Significant Accounting Policies - in our consolidated financial statements included in this report for additional details regarding our non-accrual policy.
RESULTS OF OPERATIONS
Operating results for the years ended December 31, 2019, 2018, and 2017 were as follows (dollars in thousands):
 
For the years ended December 31,
 
2019
 
2018
 
2017
Total investment income
$
244,505

 
$
237,012

 
$
223,820

Total expenses
134,477

 
131,997

 
116,161

Income tax expense, including excise tax
1,771

 
1,605

 
1,619

Net investment gain attributable to non-controlling interests
9

 
25

 
29

Net investment income
$
108,248

 
$
103,385

 
$
106,011


 Investment Income
For the year ended December 31, 2019, total investment income was $244.5 million and was primarily attributable to interest income from investments in portfolio companies with an average portfolio fair value of $2.4 billion and a weighted average current yield of 8.9%. Included within total investment income was $3.6 million of fee income for the year ended December 31, 2019. Fee income consists primarily of prepayment and amendment fees. For the year ended December 31, 2018, total investment income was $237.0 million, and was primarily attributable to interest income from investments in portfolio companies with an average portfolio fair value of $2.4 billion and a weighted average current yield of 9.8%. Included within total investment income was $4.8 million of fee income for the year ended December 31, 2018. Fee income consists primarily of prepayment and amendment fees. For the year ended December 31, 2017, total investment income was $223.8 million and was primarily attributable to interest income from investments in portfolio companies with an average portfolio fair value of $2.4 billion and a weighted average current yield of 8.5%. Included within total investment income was $6.7 million of fee income for the year ended December 31, 2017. Fee income consists primarily of prepayment and amendment fees.

46


Operating Expenses
The composition of our operating expenses for the years ended December 31, 2019, 2018, and 2017 was as follows (dollars in thousands):
 
For the years ended December 31,
 
2019
 
2018
 
2017
Management fees
$
39,837

 
$
39,828

 
$
39,068

Incentive fee on income
27,062

 
21,681

 
19,707

Interest and debt fees
55,312

 
55,270

 
43,851

Professional fees
3,553

 
6,048

 
4,726

Other general and administrative
6,911

 
7,256

 
7,047

Administrative services
788

 
789

 
807

Insurance
105

 
108

 
11

Directors' fees
909

 
1,017

 
944

Total operating expenses
$
134,477

 
$
131,997

 
$
116,161


For the years ended December 31, 2019, 2018 and 2017, we incurred management fees of $39.8 million, $39.8 million and $39.1 million. For the years ended December 31, 2019, 2018 and 2017, we incurred incentive fees on income of $27.1 million,$21.7 million and $19.7 million.
For the years ended December 31, 2019, 2018, and 2017, we incurred interest and debt fees of $55.3 million, $55.3 million, and $43.9 million, respectively. Interest and debt fees are comprised of interest expense, non-usage fees, trustee fees, amortization of deferred financing costs, and amortization of discount if applicable related to the Wells Fargo Credit Facility, Citi Credit Facility, UBS Credit Facility, 2024 Notes, 2023 Notes, 2022 Notes, 2020 Notes, and the JPMC PB Account, each as defined herein in the section entitled "Borrowings". The interest and debt fees for the year ended December 31, 2019 were in line with the interest and debt fees from the same period in 2018. The increase in debt fees for the year ended December 31, 2018 as compared to the same period in 2017 is a result of the issuance of the 2023 Notes, an increase in average debt outstanding under the Company's credit facilities and an increase in LIBOR rates.
 

47


Net Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) on Investments, foreign currency transactions, and forward currency exchange contracts
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and foreign currency transactions, net of deferred taxes for the years ended December 31, 2019, 2018, and 2017 were as follows (dollars in thousands):
 
For the years ended December 31,
 
2019
 
2018
 
2017
Net realized gain (loss)
 
 
 
 
 
   Control investments
$
(41,367
)
 
$
460

 
$
(1,702
)
   Affiliate investments
(21,341
)
 
(39,852
)
 
(20,019
)
   Non-affiliate investments
(2,534
)
 
15,458

 
(31,414
)
   Net realized gain (loss) on foreign currency transactions
717

 
(376
)
 
—

Total net realized loss
(64,525
)
 
(24,310
)
 
(53,135
)
Net change in unrealized appreciation (depreciation) on investments
 
 
 
 
 
   Control investments
68,265

 
8,897

 
(1,033
)
   Affiliate investments
7,652

 
5,538

 
75

   Non-affiliate investments
(23,757
)
 
(64,948
)
 
27,308

Net change in deferred taxes
987

 
(469
)
 
(866
)
Total net change in unrealized appreciation (depreciation) on investments, net of deferred taxes
53,147

 
(50,982
)
 
25,484

Net change in unrealized appreciation (depreciation) attributable to non-controlling interests
(3,017
)
 
(840
)
 
29

Net change in unrealized appreciation (depreciation) from forward currency exchange contracts
(1,381
)
 
993

 
—

Net realized and unrealized loss
$
(15,776
)
 
$
(75,139
)
 
$
(27,622
)

Net realized and unrealized loss on investments and foreign currency transactions, net of deferred taxes, resulted in a net loss of $(15.8) million for the year ended December 31, 2019 compared to net losses of $(75.1) million and $(27.6) million, respectively, for the same periods in 2018 and 2017. We look at net realized gain (loss) and change in unrealized appreciation (depreciation) together, as movement in unrealized appreciation or depreciation can be the result of realizations.
The net realized and unrealized loss for the year ended December 31, 2019 was primarily driven by realized losses on Senior Secured Investment sales, which were partially offset by unrealized gains on Senior Secured Investments and equity positions.
The net realized and unrealized loss for the year ended December 31, 2018 were the result of approximately $30.0 million of realized loss on CLOs as a result of the Company's assessment for other than temporary impairment ("OTTI") in accordance with ASC 325-40. As this OTTI was previously reserved for as part of unrealized depreciation on CLOs, the movement between unrealized and realized gain (loss) during the period relates to the approximately $30.0 million realization and the offsetting reversal of approximately $30.0 million of previously reported unrealized depreciation of approximately $30.0 million. The remaining realized and unrealized losses were the result of realized losses on equity positions and additional unrealized losses on CLOs.
The net realized and unrealized loss for the year ended December 31, 2017 was primarily driven by realized losses on Senior Secured Investment restructurings and sales of Collateralized Securities and unrealized losses in Senior Secured Investments.
Changes in Net Assets from Operations
For the year ended December 31, 2019, we recorded a net increase in net assets resulting from operations of $92.5 million versus a net increase in net assets resulting from operations of $28.2 million for the year ended December 31, 2018. The increase is primarily attributable to greater unrealized appreciation on our investments. Based on the weighted average shares of common stock outstanding for the years ended December 31, 2019 and 2018, respectively, our per share net increase in net assets resulting from operations was $0.49 for the year ended December 31, 2019, versus a net increase in net assets resulting from operations of $0.16 for the year ended December 31, 2018.
For the year ended December 31, 2018, we recorded a net increase in net assets resulting from operations of $28.2 million versus a net increase in net assets resulting from operations of $78.4 million for the year ended December 31, 2017. The decrease is primarily attributable to greater unrealized losses on our investments. Based on the weighted average shares of common stock

48


outstanding for the years ended December 31, 2018 and 2017, respectively, our per share net increase in net assets resulting from operations was $0.16 for the year ended December 31, 2018, versus a net increase in net assets resulting from operations of $0.44 for the year ended December 31, 2017.
Cash Flows
For the year ended December 31, 2019, net cash used in operating activities was $123.5 million. The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions, and sales of portfolio investments. The increase in cash flows used in operating activities for the year ended December 31, 2019 was primarily a result of purchases of investments of $997.0 million, offset by sales and repayments of investments of $786.8 million.
Net cash provided by financing activities of $72.6 million during the year ended December 31, 2019 primarily related to proceeds from debt of $408.8 million, which was partially offset by repurchases of common stock of $36.3 million, payments of stockholder distributions of $88.6 million, and payments on debt of $211.0 million.
For the year ended December 31, 2018, net cash provided by operating activities was $176.2 million. The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions, and sales of portfolio investments. The increase in cash flows provided by operating activities for the year ended December 31, 2018 was primarily result of sales and repayments of investments of $1,211.1 million, offset by purchases of investments of $1,102.5 million.
Net cash used in financing activities of $178.9 million during the year ended December 31, 2018 primarily related to net repurchases of common stock of $42.3 million, payments of stockholder distributions of $78.0 million, and net payments on the Wells Fargo Credit Facility, Citi Credit Facility, UBS Credit Facility, and the JPMC PB Account of $145.0 million, which were partially offset by proceeds from issuance of common stock of $90.0 million.
For the year ended December 31, 2017, net cash used in operating activities was $31.5 million. The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions and sales of portfolio investments. The decrease in cash flows used in operating activities for the year ended December 31, 2017 was primarily result of purchases of investments of $1,102.0 million, offset by sales and repayments of investments of $980.9 million.
Net cash used in financing activities of $58.0 million during the year ended December 31, 2017 primarily related to net repurchases of common stock of $87.9 million and payments of stockholder distributions of $87.0 million, partially offset by net proceeds from the Wells Fargo Credit Facility, Citi Credit Facility, and the JPMC PB Account of $125.3 million.
Recent Developments
Distribution Reinvestment Plan (“DRIP”) Sales
From January 1, 2020 through the filing of this Form 10-K, we issued 1.0 million shares of common stock including shares issued pursuant to the DRIP. Total gross proceeds from these issuances including proceeds from shares issued pursuant to the DRIP were $8.1 million.
Share Repurchase Program
On December 17, 2019, the Company offered to purchase no less than 2,000,000 and up to approximately 2,500,000 shares of its common stock pursuant to its SRP at a price equal to $7.75 per share. The offer expired on January 27, 2020 (the "Expiration Date"). On the Expiration Date, the Company purchased 2,115,276 shares of its common stock for aggregate consideration of $16.7 million pursuant to the limitations of the SRP as detailed in Note 10.
COVID-19
As the global spread of COVID-19 continues, we have experienced increased market volatility and economic uncertainties which may materially impact the valuation of portfolio investments and in turn, the net asset value of the Company. There may be other financial or operational impact, though the extent of such impact is unpredictable at this time.
Liquidity and Capital Resources
We generate cash flows from fees, interest, and dividends earned from our investments, as well as proceeds from sales of our investments and, previously, from the net proceeds of our Offering. As of December 31, 2019, we had issued 215.9 million shares of our common stock for gross proceeds of $2.3 billion, including the shares purchased by affiliates and shares issued pursuant to the DRIP. As of December 31, 2019, we had $410.0 million of senior unsecured notes outstanding.
Our principal demands for funds in both the short-term and long-term are for portfolio investments, for the payment of operating expenses, distributions to our investors, repurchases under our share repurchase program, and for the payment of principal and interest on our outstanding indebtedness. We may also from time to time enter into other agreements with third parties whereby third parties will contribute to specific investment opportunities. Other potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from private offerings, proceeds from the sale of investments, and undistributed funds from operations. However, our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets, and borrowing restrictions that may be imposed by lenders.

49


We intend to conduct semi-annual tender offers pursuant to our share repurchase program. Our Board of Directors will consider the following factors, among others, in making its determination regarding whether to cause us to offer to repurchase shares and under what terms:
•
the effect of such repurchases on our qualification as a RIC (including the consequences of any necessary asset sales);
•
the liquidity of our assets (including fees and costs associated with disposing of assets);
•
our investment plans and working capital requirements;
•
the relative economies of scale with respect to our size;
•
our history in repurchasing shares or portions thereof; and
•
the condition of the securities markets.
We intend to conduct tender offers on a semi-annual basis. We intend to continue to limit the number of shares to be repurchased in any calendar year to 10% of the weighted average number of shares outstanding in the prior calendar year, or 5.0% at each semi-annual tender offer. In addition, in the event of a stockholder’s death or disability, any repurchases of shares made in connection with a stockholder’s death or disability may be included within the overall limitation imposed on tender offers during the relevant redemption period, which provides that we may limit the number of shares to be repurchased during any redemption period to the number of shares of common stock we are able to repurchase with the proceeds received from the sale of shares of common stock under the DRIP during such redemption period.
Distributions
Our Board of Directors has authorized, and has declared, cash distributions payable on a monthly basis to stockholders of record on each day since it commenced operations. From November 2013 until July 2017, the distribution rate has been $0.002378082 per day, which is equivalent to $0.868 per annum, per share of common stock, except for 2016, where the daily distribution rate was $0.002371585 per day to accurately reflect 2016 being a leap year. In July 2017, the Board of Directors reduced the distribution rate with respect to our cash distributions to $0.00178082 per day, which is equivalent to approximately $0.65 annually, per share of common stock.
The amount of each such distribution is subject to the discretion of our Board of Directors and applicable legal restrictions related to the payment of distributions. We calculate each stockholder’s specific distribution amount for the month using record and declaration dates and accrue distributions on the date we accept a subscription for shares of our common stock. The distributions are payable by the fifth day following each month end to stockholders of record at the close of business each day during the prior month.
From time to time, we may also pay interim distributions at the discretion of our Board of Directors. Our distributions may exceed our earnings, and as a result, a portion of the distributions we make may represent a return of capital for tax purposes.
The table below shows the components of the distributions we have declared and/or paid during the years ended December 31, 2019, 2018, and 2017 (dollars in thousands).
 
For the years ended December 31,
 
2019
 
2018
 
2017
Distributions declared
$
123,465

 
$
117,578

 
$
135,850

Distributions paid
$
123,468

 
$
116,995

 
$
139,443

Portion of distributions paid in cash
$
88,563

 
$
78,012

 
$
86,988

Portion of distributions paid in DRIP shares
$
34,905

 
$
38,983

 
$
52,455

As of December 31, 2019, we had $10.5 million of distributions accrued and unpaid. As of December 31, 2018, we had $10.5 million of distributions accrued and unpaid.
We may fund our cash distributions to stockholders from any sources of funds available to us, including offering proceeds, borrowings, net investment income from operations, capital gain proceeds from the sale of assets, and non-capital gain proceeds from the sale of assets. We have not established limits on the amount of funds we may use from available sources to make distributions. We may have distributions which could be characterized as a return of capital for tax purposes. During the years ended December 31, 2019, 2018, and 2017, no portion of our distributions was characterized as return of capital for tax purposes. The specific tax characteristics of our distributions made in respect of our anticipated fiscal year ending December 31, 2019 will be reported to stockholders shortly after the end of the calendar year 2019 as well as in our periodic reports with the SEC. Stockholders should read any written disclosure accompanying a distribution payment carefully and should not assume that the source of any distribution is our ordinary income or gain. Moreover, you should understand that any such distributions were not based on our investment performance and can only be sustained if we achieve positive investment performance in future periods

50


and/or our Adviser continues to make such reimbursements. There can be no assurance that we will achieve the performance necessary to sustain our distributions or that we will be able to pay distributions at all.
The following table sets forth the distributions declared during the years ended December 31, 2019, 2018, and 2017 (dollars in thousands):
 
For the years ended December 31,
 
2019
 
2018
 
2017
Monthly distributions
$
123,465

 
$
117,578

 
$
135,850

Total distributions
$
123,465

 
$
117,578

 
$
135,850

Taxation as a RIC
We have elected to be treated as a RIC under Subchapter M of the Code commencing with our tax year ended December 31, 2011 and intend to maintain our qualification as a RIC thereafter. As a RIC, we generally will not be subject to corporate-level U.S. federal income taxes on any income that we distribute as dividends for U.S. federal income tax purposes to our stockholders. To maintain our qualification as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements. In addition, in order to maintain RIC tax treatment, we must distribute to our stockholders, for each tax year, an amount equal to at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gain over realized net long-term capital loss and determined without regard to any deduction for dividends paid, or the annual distribution requirement. Even if we qualify as a RIC, we generally will be subject to corporate-level U.S. federal income tax on our undistributed taxable income and could be subject to state, local, and foreign taxes.
Additionally, in order to avoid the imposition of a U.S. federal excise tax, we are required to distribute, in respect of each calendar year, dividends to our stockholders of an amount at least equal to the sum of 98% of our calendar year net ordinary income (taking into account certain deferrals and elections); 98.2% of our capital gain net income (adjusted for certain ordinary losses) for the one year period ending on October 31 of such calendar year; and any net ordinary income and capital gain net income for preceding calendar years that were not distributed during such calendar years and on which we previously did not incur any U.S. federal income tax. If we fail to qualify as a RIC for any reason and become subject to corporate tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure would have a material adverse effect on us and our stockholders. In addition, we could be required to recognize unrealized gains, incur substantial taxes and interest and make substantial distributions in order to re-qualify as a RIC. We cannot assure stockholders that they will receive any distributions.
Related Party Transactions and Agreements
Private Placement in connection with FT Transaction
On February 1, 2019, Franklin Templeton acquired BSP, including BSP’s 100% ownership interest in our Adviser (the “FT Transaction”). All investment professionals currently managing the Company and its investments, and all members of the BSP’s Investment Committee have maintained their current responsibilities after the FT Transaction.
In connection with the FT Transaction, on November 1, 2018, we issued approximately 6.1 million and 4.9 million shares of our common stock to Franklin Resources, Inc. and BSP, respectively, at a purchase price of $8.20 per share in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933. As a result of this issuance, the Company received aggregate cash proceeds of $90.0 million.
Investment Advisory Agreement
We entered into an Investment Advisory Agreement as of February 1, 2019, which was approved by the Board of Directors for a two year term, under which the Adviser, subject to the overall supervision of our Board of Directors manages the day-to-day operations of, and provides investment advisory services to us. The Adviser and its affiliates also provide investment advisory services to other funds that have investment mandates that are similar, in whole and in part, with ours. The Adviser and its affiliates serve as investment adviser or sub-adviser to private funds and registered open-end funds, and serves as an investment adviser to a public real estate investment trust. The Adviser’s policies are designed to manage and mitigate the conflicts of interest associated with the allocation of investment opportunities. In addition, any affiliated fund currently formed or formed in the future and managed by the Adviser or its affiliates may have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. However, in certain instances due to regulatory, tax, investment, or other restrictions, certain investment opportunities may not be appropriate for either us or other funds managed by the Adviser or its affiliates.
Prior to February 1, 2019, our Adviser provided investment advisory and management services under the Prior Investment Advisory Agreement, effective November 1, 2016, and most recently re-approved by the Board in August 2018. The terms of the Prior Investment Advisory Agreement were materially identical to the Investment Advisory Agreement. The Prior Investment Advisory Agreement automatically terminated upon the indirect change of control of the Adviser on the consummation of the FT Transaction.

51


Administration Agreement
On November 1, 2016, we entered into the Administration Agreement with BSP, pursuant to which BSP provides us with office facilities and administrative services. The Administration Agreement may be terminated by either party without penalty upon not less than 60 days’ written notice to the other. For the years ended December 31, 2019 and December 31, 2018, the Company incurred $2.4 million and $2.5 million, respectively, in administrative service fees under the Administration Agreement.
Co-Investment Relief
The 1940 Act generally prohibits BDCs from entering into negotiated co-investments with affiliates absent an order from the SEC permitting the BDC to do so. The SEC staff has granted us exemptive relief that allows it to enter into certain negotiated co-investment transactions alongside other funds managed by the Adviser or its affiliates (“Affiliated Funds”) in a manner consistent with our investment objective, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.
Borrowings
We are only allowed to borrow money such that our asset coverage, which, as defined in the 1940 Act, measures the ratio of total assets less total liabilities not represented by senior securities to total borrowings, equals at least 200% after such borrowing, with certain limited exceptions. We are continually exploring additional forms of alternative debt financing which could include new or expanded credit facilities or the issuance of debt securities. We may use borrowed funds, known as “leverage,” to make investments and to attempt to increase returns to our stockholders by reducing our overall cost of capital. We currently have credit facilities with Wells Fargo and Citi and have sold $410.0 million in aggregate principal of unsecured notes.
Wells Fargo Credit Facility
On July 24, 2012, the Company, through a wholly-owned, consolidated special purpose financing subsidiary, Funding I, entered into a revolving credit facility with Wells Fargo and U.S. Bank as collateral agent, account bank, and collateral custodian (as amended from time to time, the “Wells Fargo Credit Facility”). The Wells Fargo Credit Facility, which has been amended from time to time, was last amended on March 15, 2019 and provides for borrowings in an aggregate principal amount of up to $600.0 million on a committed basis subject to compliance with a borrowing base. The Wells Fargo Credit Facility has a maturity date of May 9, 2023.
The Wells Fargo Credit Facility is priced at the one-month maturity LIBOR, with no LIBOR floor, plus a spread ranging between 1.65% and 2.50% per annum, depending on the composition of the portfolio of loans owned by Funding I for the relevant period. Interest is payable quarterly in arrears. Funding I is subject to a non-usage fee to the extent the aggregate principal amount available under the Wells Fargo Credit Facility has not been borrowed. The non-usage fee for the three months from the most recent amendment is 0.50% on any principal amount unused. After the three months from the most recent amendment, the non-usage fee per annum is 0.50% for the first 25% of the unused balance and 2.0% for the portion of the unused balance that exceeds 25%.
In connection with the Wells Fargo Credit Facility, Funding I has made certain representations and warranties, is required to comply with various covenants, reporting requirements, and other customary requirements for similar facilities, and is subject to certain customary events of default. Upon the occurrence and during the continuation of an event of default, Wells Fargo may declare the outstanding advances and all other obligations under the Wells Fargo Credit Facility immediately due and payable. During the continuation of an event of default, Funding I must pay interest at a default rate.
On November 8, 2018, the Company entered into an amendment to the Wells Fargo Credit Facility to permit the inclusion of Second Lien Loans as part of the borrowing base, which are not to exceed 10% of the outstanding balance of all Loan Assets (as defined in the Amendment).
On March 15, 2019, the Company entered into an amendment to the Wells Fargo Credit Facility to increase the size of the Wells Fargo Credit Facility from $545.0 to $600.0 million (as defined in the Amendment).

52


Citi Credit Facility
On June 27, 2014, the Company, through a wholly-owned, special purpose financing subsidiary, CB Funding, entered into a credit facility as amended from time to time, (the “Citi Credit Facility”) with Citibank, N.A. as administrative agent and U.S. Bank as collateral agent, account bank, and collateral custodian. The Citi Credit Facility, which was subsequently amended on October 14, 2015, provides for borrowings in an aggregate principal amount of up to $400.0 million on a committed basis, subject to the administrative agent’s right to approve the assets acquired by CB Funding and pledged as collateral under the Citi Credit Facility. On June 27, 2019, the Company, through a wholly-owned, consolidated special purpose financing subsidiary, BDCA-CB Funding LLC, entered into an amendment (the "Amendment") to its Credit and Security Agreement with Citibank, N.A., dated as of June 27, 2014 (as amended from time to time, the "Credit Agreement"). The Amendment, among other things, (i) extends the end of the reinvestment period from July 1, 2019 to May 31, 2021 and (ii) extends the maturity date of the Credit Agreement from May 28, 2020 to May 31, 2022.
The Citi Credit Facility is priced at three month LIBOR, with no LIBOR floor, plus a spread of 1.60% per annum through and including the last day of the investment period and 2.00% per annum thereafter. Interest is payable quarterly in arrears. CB Funding is subject to a non-usage fee to the extent the aggregate principal amount available under the Citi Credit Facility has not been borrowed. The non-usage fee per annum is 0.50%. Any amounts borrowed under the Citi Credit Facility along with any accrued and unpaid interest thereunder will mature, and will be due and payable, in three years.
UBS Credit Facility
On April 7, 2015, the Company, through a wholly-owned, special-purpose, bankruptcy-remote subsidiary, Helvetica Funding, entered into a debt financing facility with UBS AG, London Branch (“UBS”), pursuant to which $150.0 million was made available to the Company to fund investments in new securities and for other general corporate purposes (as amended from time to time, the “UBS Credit Facility”). The UBS Credit Facility was subsequently amended on July 10, 2015 to increase the amount of debt available to the Company under the facility from $150.0 million to $210.0 million. On June 6, 2016, the UBS credit facility was again amended to increase the amount of debt available from $210.0 million to $232.5 million. In addition, the amended facility increased the applicable spread over a three-month LIBOR from 3.90% to 4.05% per annum for the relevant period and increased the permissible percentage of second lien loans from 60% to 70%. Pricing under the transaction is based on three-month LIBOR plus a spread of 4.05% per annum for the relevant period. The maturity date of the UBS Credit Facility was April 7, 2018.
On April 6, 2018, the Company repaid the UBS Credit Facility and all related liens were released.
2020 Notes
On August 26, 2015, the Company entered into a Purchase Agreement relating to the Company’s sale of $100.0 million aggregate principal amount of its 6.00% fixed rate senior notes due September 1, 2020 (the “2020 Notes”). The 2020 Notes are subject to customary indemnification provisions and representations, warranties, and covenants. The net proceeds from the sale of the 2020 Notes were approximately $97.9 million. The 2020 Notes bear interest at a rate of 6.00% per year payable semi-annually.
2022 Notes
On December 14, 2017, the Company entered into a Purchase Agreement relating to the Company's sale of $150.0 million aggregate principal amount of its 4.75% fixed rate notes due December 30, 2022 (the “2022 Notes”). The 2022 Notes are subject to customary indemnification provisions and representations, warranties, and covenants. The net proceeds from the sale of the 2022 Notes were approximately $147.0 million. The 2022 Notes bear interest at a rate of 4.75% per year payable semi-annually.
2023 Notes
On May 11, 2018, the Company entered into a Purchase Agreement relating to the Company's sale of $60.0 million aggregate principal amount of its 5.375% fixed rate notes due May 30, 2023 (the “2023 Notes”). The 2023 Notes are subject to customary indemnification provisions and representations, warranties, and covenants. The net proceeds from the sale of the 2023 Notes were approximately $58.7 million. The 2023 Notes bear interest at a rate of 5.375% per year payable semi-annually.
2024 Notes
On December 3, 2019, the Company entered into a Purchase Agreement relating to the Company's sale of $100.0 million aggregate principal amount of its 4.85% fixed rate notes due December 15, 2024 (the “2024 Notes”). The 2024 Notes are subject to customary indemnification provisions and representations, warranties, and covenants. The net proceeds from the sale of the 2024 Notes were approximately $98.4 million. The 2024 Notes bear interest at a rate of 4.85% per year payable semi-annually.
JP Morgan Securities LLC Prime Brokerage Account
On January 20, 2017, the Company entered into a prime brokerage account agreement with JP Morgan Securities LLC (the “JPMC PB Account”). The JPMC PB Account provides a full suite of services around the custody of bonds and equities and

53


also access to leverage, which is dependent on the price, credit quality, and diversity of the pool of assets held within the account. The borrowing availability is recalculated daily based on changes to the assets, with margin calls issued in the morning as appropriate. The cost to borrow is one week LIBOR + 90 bps and there is no mandatory usage or period wherein the debt needs to be repaid.
On May 8, 2018 the Company fully repaid its borrowings under the JPMC PB Account and closed the account.
See Note 5 to our consolidated financial statements contained in this Annual Report on Form 10-K for a more detailed discussion of our borrowings.
Contractual Obligations
The following table shows our payment obligations for repayment of debt and other contractual obligations at December 31, 2019 (dollars in thousands):
 
 
 
Payment Due by Period
 
Total
 
Less than 1 year
 
1 - 3 years
 
3- 5 years
 
More than 5 years
Wells Fargo Credit Facility (1)
$
436,652

 
$
—

 
$
—

 
$
436,652

 
$
—

Citi Credit Facility (2)
250,500

 
—

 
250,500

 
—

 
—

2024 Notes (3)
98,818

 
—

 
—

 
98,818

 
—

2023 Notes (4)
59,778

 
—

 
—

 
59,778

 
—

2022 Notes (5)
149,505

 
—

 
149,505

 
—

 
—

2020 Notes (6)
99,789

 
99,789

 
—

 
—

 
—

Total contractual obligations
$
1,095,042

 
$
99,789

 
$
400,005

 
$
595,248

 
$
—

______________
(1) 
As of December 31, 2019, we had $163.3 million of unused borrowing capacity under the Wells Fargo Credit Facility, subject to borrowing base limits.
(2) 
As of December 31, 2019, we had $149.5 million of unused borrowing capacity under the Citi Credit Facility, subject to borrowing base limits.
(3) 
As of December 31, 2019, we had no unused borrowing capacity under the 2024 Notes.
(4) 
As of December 31, 2019, we had no unused borrowing capacity under the 2023 Notes.
(5) 
As of December 31, 2019, we had no unused borrowing capacity under the 2022 Notes.
(6) 
As of December 31, 2019, we had no unused borrowing capacity under the 2020 Notes.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Commitments
In the ordinary course of business, we may enter into future funding commitments. As of December 31, 2019, the Company had unfunded commitments on delayed draw term loans of $24.9 million (including $21.8 million of non-discretionary commitments and $3.1 million of discretionary commitments), unfunded commitments on revolver term loans of $28.0 million, and unfunded equity capital discretionary commitments of $21.4 million. As of December 31, 2018, we had unfunded commitments on delayed draw term loans of $15.2 million, unfunded commitments on revolver term loans of $21.1 million and unfunded equity capital commitments of $0.5 million. Please refer to Note 7 - Commitments and Contingencies for further detail of these unfunded commitments. We maintain sufficient cash on hand and available borrowing capacity to fund such unfunded commitments.
Significant Accounting Estimates and Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based on our consolidated 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 financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

54


While our significant accounting policies are more fully described in Note 2 - Summary of Significant Accounting Policies appearing elsewhere in this report, we believe the following accounting policies require the most significant judgment in the preparation of our consolidated financial statements.
Valuation of Portfolio Investments
Portfolio investments are reported on the consolidated statements of assets and liabilities at fair value. On a quarterly basis we perform an analysis of each investment to determine fair value as follows:
Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets. When doing so, we determine whether the quote obtained is readily available according to U.S. GAAP to determine the fair value of the security. If determined readily available, we use the quote obtained.
Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.
For an investment in an investment fund that does not have a readily determinable fair value, we measure the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of ASC 946, as of our measurement date.
For investments in Collateralized Securities, both the assets and liabilities of each Collateralized Securities' capital structure are modeled. The model uses a waterfall engine to store the collateral data, generate collateral cash flows from the assets and distribute the cash flows to the liability structure based on the priority of payments. The waterfall cash flows are discounted using rates that incorporate risk factors such as default risk, interest rate risk, downgrade risk, and credit spread risk, among others. In addition, broker quotations and/or comparable trade activity is considered as an input to determining fair value when available.
As part of our quarterly valuation process the Adviser may be assisted by one or more independent valuation firms engaged by us. The Board of Directors determines the fair value of each investment, in good faith, based on the input of the Adviser and the independent valuation firm(s) (to the extent applicable).
With respect to investments for which market quotations are not readily available, the Adviser undertakes a multi-step valuation process each quarter, as described below:
•
Each portfolio company or investment will be valued by the Adviser, potentially with assistance from one or more independent valuation firms engaged by our Board of Directors;
•
The independent valuation firm(s), if involved, will conduct independent appraisals and make an independent assessment of the value of each investment; and
•
The Board of Directors determines the fair value of each investment, in good faith, based on the input of the Adviser, independent valuation firm (to the extent applicable) and the audit committee of the Board of Directors.
Because there is not a readily available market value for most of the investments in its portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by our Board of Directors, as described herein. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

55


Revenue Recognition
Interest Income
Investment transactions are accounted for on the trade date. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discount and premium on investments purchased are accreted/amortized over the expected life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discount and amortization of premium on investments.
The Company has a number of investments in Collateralized Securities. Interest income from investments in the “equity” class of these Collateralized Securities (in the Company's case, preferred shares, or subordinated notes) is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC 325-40-35, Beneficial Interests in Securitized Financial Assets ("ASC 325-40-35"). The Company monitors the expected cash inflows from its equity investments in Collateralized Securities, including the expected principal repayments. The effective yield is determined and updated quarterly. In accordance with ASC 325-40, investments in CLOs are periodically assessed for other-than-temporary impairment ("OTTI"). When the Company determines that a CLO has OTTI, the amortized cost basis of the CLO is written down as of the date of the determination based on events and information evaluated and that write-down is recognized as a realized loss.
Fee Income
Fee income, such as structuring fees, origination, closing, amendment fees, commitment, and other upfront fees are generally non-recurring and are recognized as revenue when earned, either upfront or amortized into income. Upon the payment of a loan or debt security, any prepayment penalties and unamortized loan origination, structuring, closing, commitment, and other upfront fees are recorded as income.
Payment-in-Kind Interest/Dividends
We hold debt and equity investments in our portfolio that contain PIK interest and dividend provisions. The PIK interest and PIK dividend, which represent contractually deferred interest or dividends that add to the investment balance that is generally due at maturity, are generally recorded on the accrual basis.
Non-accrual Income
Investments are placed on non-accrual status when principal or interest/dividend payments are past due 30 days or more and/or when there is reasonable doubt that principal or interest will be collected. Accrued cash and un-capitalized PIK interest is generally reversed when an investment is placed on non-accrual status. Previously capitalized PIK interest is not reversed when an investment is placed on non-accrual status. Interest payments received on non-accrual investments may be recognized as income or applied to principal depending upon management's judgment of the ultimate outcome. Non-accrual investments are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current.
Net Realized Gain or Loss and Net Change in Unrealized Appreciation or Depreciation
Gain or loss on the sale of investments is calculated using the specific identification method. We measure realized gain or loss by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when a gain or loss is realized.
See Note 2 - Summary of Significant Accounting Policies to the consolidated financial statements for a description of other accounting policies and recently issued accounting pronouncements.
ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from interest rate risk relating to interest rate fluctuations. Many factors including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control contribute to interest rate risk. To meet our short and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars, and treasury lock agreements, subject to the requirements of the 1940 Act, in order to mitigate our interest rate risk with respect to various debt instruments. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. During the periods covered by this report, we did not engage in interest rate hedging activities. We would not hold or issue these derivative contracts for trading or speculative purposes.

56


As of December 31, 2019, our debt included variable-rate debt, bearing a weighted average interest rate of LIBOR plus 1.99% and fixed rate debt, bearing a weighted average interest rate of 5.17% with a total carrying value (net of deferred financing costs) of $1,083.8 million. The following table quantifies the potential changes in interest income net of interest expense should interest rates increase or decrease by 100 or 200 basis points assuming that our current consolidated statement of assets and liabilities was to remain constant and no actions were taken to alter our existing interest rate sensitivity. Interest rate floors, if applicable, are not reflected in the sensitivity analysis below.
Change in Interest Rates
 
Estimated Percentage Change in Interest Income net of Interest Expense
(-) 200 Basis Points
 
(16.37
)%
(-) 100 Basis Points
 
(8.19
)%
Base Interest Rate
 
—
 %
(+) 100 Basis Points
 
8.19
 %
(+) 200 Basis Points
 
16.37
 %
Because we may borrow money to make investments, our net investment income may be dependent on the difference between the rate at which we borrow funds and the rate at which we invest these funds. In periods of increasing interest rates, our cost of funds would increase, which may reduce our net investment income. 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.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements are annexed to this Annual Report beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.  CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were (a) designed to ensure that the information we are required to disclose in our reports under the Exchange Act is recorded, processed, and reported in an accurate manner and on a timely basis and the information that we are required to disclose in our Exchange Act reports is accumulated and communicated to management to permit timely decisions with respect to required disclosure and (b) operating in an effective manner.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP.
Our internal control over financial reporting includes those policies and procedures that:
1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and our dispositions of assets;
2. Provide reasonable assurance that our transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors; and
3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also,

57


projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of our Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making that assessment, management used the criteria based on the framework set forth in Internal Control-Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Based on its assessment, our management concluded that, as of December 31, 2019, our internal control over financial reporting was effective.
The rules of the SEC do not require, and this annual report does not include, an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.
Change in Internal Control Over Financial Reporting
No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the year ended December 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.

58


PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2020 Annual Meeting of Stockholders to be filed with the SEC within 120 days following the end of our fiscal year.
We have adopted a Code of Business Conduct and Ethics which contains a Statement on the Prohibition of Insider Trading that applies to directors, officers, and employees. The Code of Business Conduct and Ethics is available on our website at http://www.bdcofamerica.com. We will report any amendments to or waivers of a required provision of the Code of Business Conduct and Ethics on our website or in a Form 8-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2020 Annual Meeting of Stockholders to be filed with the SEC within 120 days following the end of our fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2020 Annual Meeting of Stockholders to be filed with the SEC within 120 days following the end of our fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2020 Annual Meeting of Stockholders to be filed with the SEC within 120 days following the end of our fiscal year.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2020 Annual Meeting of Stockholders to be filed with the SEC within 120 days following the end of our fiscal year.

59


PART IV
ITEM 15. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K for the year ended December 31, 2019 (and are numbered in accordance with Item 601 of Regulation S-K).
a. Consolidated Financial Statements
See the Index to the Consolidated Financial Statements at page F-1 of this report.
b. Exhibits
Exhibit No.
Description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

60


Exhibit No.
Description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

61


Exhibit No.
Description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


62


ITEM 16. FORM 10-K SUMMARY
None.

63


SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 20th day of March 2020.
 
 
 
 
 
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 
By:
/s/ Richard J. Byrne
Name: Richard J. Byrne
Title: Chief Executive Officer, President and Chairman of the Board of Directors
* * * * *
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
 
 
 
 
 
Signature
 
Title
 
Date
 
 
 
 
 
/s/ Richard J. Byrne   
Richard J. Byrne
 
Chief Executive Officer, President, and Chairman of the Board of Directors
(Principal Executive Officer)
 
March 20, 2020
/s/ Nina Kang Baryski         
Nina Kang Baryski
 
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
 
March 20, 2020
/s/ Lee S. Hillman    
Lee S. Hillman
 
Independent Director
 
March 20, 2020
/s/ Ronald J. Kramer    
Ronald J. Kramer
 
Independent Director
 
March 20, 2020
/s/ Leslie D. Michelson    
Leslie D. Michelson
 
Independent Director
 
March 20, 2020
/s/ Edward G. Rendell     
Edward G. Rendell
 
Independent Director
 
March 20, 2020
/s/ Dennis M. Schaney
Dennis M. Schaney
 
Independent Director
 
March 20, 2020



64


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



F- 1

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. In connection with the preparation of our annual consolidated financial statements, management has conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control-Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management's assessment included an evaluation of the design of our internal control over financial reporting. Based on this evaluation, we have concluded that, as of December 31, 2019, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

F- 2



Report of Independent Registered Public Accounting Firm


To the Shareholders and the Board of Directors of
Business Development Corporation of America


Opinion on the Financial Statements

We have audited the accompanying consolidated statements of assets and liabilities of Business Development Corporation of America (the Company), including the consolidated schedules of investments, as of December 31, 2019 and 2018, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of their operations, changes in their net assets, and their cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of December 31, 2019 and 2018, by correspondence with the custodian, brokers or the underlying investee or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2017.

New York, NY
March 20, 2020


F- 3



BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(dollars in thousands except share and per share data)
 
December 31,
 
2019
 
2018
ASSETS
 
 
 
Investments, at fair value:
 
 
 
Control Investments, at fair value (amortized cost of $358,570 and $323,392, respectively)
$
406,517

 
$
307,680

Affiliate Investments, at fair value (amortized cost of $175,470 and $231,107, respectively)
129,526

 
176,560

Non-affiliate Investments, at fair value (amortized cost of $2,105,602 and $1,925,833, respectively)
2,010,141

 
1,850,474

Investments, at fair value (amortized cost of $2,639,642 and $2,480,332, respectively)
2,546,184

 
2,334,714

Cash and cash equivalents
46,470

 
96,692

Interest and dividends receivable
17,047

 
22,203

Receivable for unsettled trades
27,895

 
6,208

Prepaid expenses and other assets
2,934

 
2,514

Unrealized appreciation on forward currency exchange contracts
—

 
993

Total assets
$
2,640,530

 
$
2,463,324

 
 
 
 
LIABILITIES
 
 
 

Debt (net of deferred financing costs of $11,288 and $12,156, respectively)
$
1,083,754

 
$
884,522

Stockholder distributions payable
10,503

 
10,506

Management fees payable
10,098

 
9,711

Incentive fee on income payable
6,513

 
5,690

Accounts payable and accrued expenses
14,765

 
15,153

Payable for unsettled trades
40,347

 
32,921

Interest and debt fees payable
11,425

 
12,008

Payable for common stock repurchases
—

 
5

Directors' fees payable
54

 
89

Unrealized depreciation on forward currency exchange contracts
388

 
—

Total liabilities
1,177,847

 
970,605

Commitments and contingencies (Note 7)
 
 
 
 
 
 
 
NET ASSETS
 
 
 
Preferred stock, $.001 par value, 50,000,000 shares authorized, none issued and outstanding
—

 
—

Common stock, $.001 par value, 450,000,000 shares authorized;
215,850,546 issued and 190,207,517 outstanding at December 31, 2019,
and 211,476,760 issued and 190,324,059 outstanding at December 31, 2018
190

 
190

Additional paid in capital
1,847,312

 
1,811,970

Total distributable loss
(384,819
)
 
(323,127
)
Total net assets attributable to Business Development Corporation of America
1,462,683

 
1,489,033

Net assets attributable to non-controlling interest
—

 
3,686

Total net assets
1,462,683

 
1,492,719

 
 
 
 
Total liabilities and net assets
$
2,640,530

 
$
2,463,324

 
 
 
 
Net asset value per share attributable to Business Development Corporation of America
$
7.69

 
$
7.82


F- 4

BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands except share and per share data)

 
For the years ended December 31,
 
2019
 
2018
 
2017
Investment income:
 
 
 
 
 
From control investments
 
 
 
 
 
Interest income
$
22,817

 
$
22,349

 
$
24,648

Dividend income
14,850

 
10,263

 
11,938

Fee and other income
5

 
20

 
—

Total investment income from control investments
37,672

 
32,632

 
36,586

From affiliate investments
 
 
 
 
 
Interest income
12,765

 
18,714

 
18,015

Dividend income
4,482

 
3,566

 
2,932

Fee and other income
35

 
10

 
116

Total investment income from affiliate investments
17,282

 
22,290

 
21,063

From non-affiliate investments
 
 
 
 
 
Interest income
182,885

 
175,196

 
158,626

Dividend income
1,773

 
1,161

 
639

Fee and other income
3,602

 
4,772

 
6,544

Total investment income from non-affiliate investments
188,260

 
181,129

 
165,809

Interest from cash and cash equivalents
1,291

 
961

 
362

Total investment income
244,505

 
237,012

 
223,820

Operating expenses:
 

 
 

 
 
Management fees
39,837

 
39,828

 
39,068

Incentive fee on income
27,062

 
21,681

 
19,707

Interest and debt fees
55,312

 
55,270

 
43,851

Professional fees
3,553

 
6,048

 
4,726

Other general and administrative
6,911

 
7,256

 
7,047

Administrative services
788

 
789

 
807

Insurance
105

 
108

 
11

Directors' fees
909

 
1,017

 
944

Total expenses
134,477

 
131,997

 
116,161

 
 
 
 
 
 
Income tax expense, including excise tax
1,771

 
1,605

 
1,619

Net investment gain attributable to non-controlling interests
9

 
25

 
29

Net investment income
108,248

 
103,385

 
106,011

 
 
 
 
 
 
Realized and unrealized gain (loss):
 
 
 
 
 
Net realized gain (loss)
 
 
 
 
 
   Control investments
(41,367
)
 
460

 
(1,702
)
   Affiliate investments
(21,341
)
 
(39,852
)
 
(20,019
)
   Non-affiliate investments
(2,534
)
 
15,458

 
(31,414
)
   Net realized gain (loss) on foreign currency transactions
717

 
(376
)
 
—

Total net realized loss
(64,525
)
 
(24,310
)
 
(53,135
)

The accompanying notes are an integral part of these consolidated financial statements.
F- 5
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands except share and per share data)

 
For the years ended December 31,
 
2019
 
2018
 
2017
Net change in unrealized appreciation (depreciation) on investments
 
 
 
 
 
   Control investments
68,265

 
8,897

 
(1,033
)
   Affiliate investments
7,652

 
5,538

 
75

   Non-affiliate investments
(23,757
)
 
(64,948
)
 
27,308

Net change in deferred taxes
987

 
(469
)
 
(866
)
Total net change in unrealized appreciation (depreciation) on investments, net of deferred taxes
53,147

 
(50,982
)
 
25,484

Net change in unrealized appreciation (depreciation) attributable to non-controlling interests
(3,017
)
 
(840
)
 
29

Net change in unrealized appreciation (depreciation) from forward currency exchange contracts
(1,381
)
 
993

 
—

Net realized and unrealized loss
(15,776
)
 
(75,139
)
 
(27,622
)
Net increase in net assets resulting from operations
$
92,472

 
$
28,246

 
$
78,389

 
 
 
 
 
 
Per share information - basic and diluted
 
 
 
 
 
Net investment income
$
0.57

 
$
0.57

 
$
0.59

Net increase in net assets resulting from operations
$
0.49

 
$
0.16

 
$
0.44

Weighted average shares outstanding
189,940,267

 
180,861,382

 
179,179,656




The accompanying notes are an integral part of these consolidated financial statements.
F- 6

BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(dollars in thousands except share and per share data)

 
For the years ended December 31,
 
2019
 
2018
 
2017
Operations:
 
 
 
 
 
Net investment income
$
108,248

 
$
103,385

 
$
106,011

Net realized loss from investments
(65,242
)
 
(23,934
)
 
(53,135
)
Net realized gain (loss) on foreign currency transactions
717

 
(376
)
 
—

Net change in unrealized appreciation (depreciation) on investments
52,160

 
(50,513
)
 
26,350

Net change in deferred taxes
987

 
(469
)
 
(866
)
Net change in unrealized appreciation (depreciation) attributable to non-controlling interests
(3,017
)
 
(840
)
 
29

Net change in unrealized appreciation (depreciation) from forward currency exchange contracts
(1,381
)
 
993

 
—

Net increase in net assets resulting from operations
92,472

 
28,246

 
78,389

Stockholder distributions:
 
 
 

 
 
Distributions
(123,465
)
 
(117,578
)
 
(135,850
)
Net decrease in net assets from stockholder distributions
(123,465
)
 
(117,578
)
 
(135,850
)
Capital share transactions:
 
 
 

 
 
Issuance of common stock, net of issuance costs
—

 
90,000

 
—

Acquisition of non-controlling interest
6,024

 
—

 
—

Reinvestment of stockholder distributions
34,905

 
38,983

 
52,455

Repurchases of common stock
(36,286
)
 
(42,313
)
 
(30,212
)
Net increase in net assets from capital share transactions
4,643

 
86,670

 
22,243

Total decrease in net assets, before non-controlling interest
(26,350
)
 
(2,662
)
 
(35,218
)
Increase (decrease) in non-controlling interest
(3,686
)
 
865

 
—

Total decrease in net assets
(30,036
)
 
(1,797
)
 
(35,218
)
Net assets at beginning of year
1,492,719

 
1,494,516

 
1,529,734

Net assets at end of year
$
1,462,683

 
$
1,492,719

 
$
1,494,516

 
 
 
 
 
 
Net asset value per common share attributable to Business Development Corporation of America
$
7.69

 
$
7.82

 
$
8.30

Common shares outstanding at end of year
190,207,517

 
190,324,059

 
179,733,998



The accompanying notes are an integral part of these consolidated financial statements.
F- 7
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)

 
For the years ended December 31,
 
2019
 
2018
 
2017
Operating activities:
 
 
 
 
 
Net increase in net assets resulting from operations
$
92,472

 
$
28,246

 
$
78,389

Adjustments to reconcile net increase in net assets from operations to net cash provided by (used in) operating activities:
 
 
 
 
 
Payment-in-kind interest income
(5,209
)
 
(5,516
)
 
(6,963
)
Net accretion of discount on investments
(9,210
)
 
(8,685
)
 
(8,237
)
Amortization of deferred financing costs
3,586

 
3,265

 
2,525

Amortization of discount on unsecured notes
563

 
522

 
321

Sales and repayments of investments
786,830

 
1,211,102

 
980,929

Purchases of investments
(996,963
)
 
(1,102,539
)
 
(1,101,954
)
Net realized loss from investments
65,242

 
23,934

 
53,135

Net realized (gain) loss on foreign currency transactions
(717
)
 
376

 
—

Net change in unrealized (appreciation) depreciation on investments
(52,160
)
 
50,513

 
(26,350
)
Net change in unrealized (appreciation) depreciation from forward currency exchange contracts
1,381

 
(993
)
 
—

(Increase) decrease in operating assets:
 
 
 
 
 
Interest and dividends receivable
5,156

 
(661
)
 
7,066

Receivable for unsettled trades
(21,687
)
 
15,201

 
(17,116
)
Prepaid expenses and other assets
(420
)
 
3,704

 
(6,166
)
Increase (decrease) in operating liabilities:
 
 
 
 
 
Management fees payable
387

 
(221
)
 
361

Incentive fee on income payable
823

 
1,132

 
1,421

Accounts payable and accrued expenses
(388
)
 
4,016

 
2,683

Payable for unsettled trades
7,426

 
(47,626
)
 
6,527

Interest and debt fees payable
(583
)
 
397

 
2,005

Directors' fees payable
(35
)
 
22

 
(66
)
Net cash provided by (used in) operating activities
(123,506
)
 
176,189

 
(31,490
)
 
 
 
 
 
 
Financing activities:
 
 
 

 
 
Proceeds from issuance of shares of common stock, net
—

 
90,000

 
—

Acquisition of non-controlling interest
6,024

 
—

 
—

Repurchases of common stock
(36,291
)
 
(42,308
)
 
(87,863
)
Proceeds from debt
408,800

 
634,298

 
347,331

Payments on debt
(211,000
)
 
(779,291
)
 
(222,000
)
Payments of financing costs
(2,717
)
 
(4,495
)
 
(8,438
)
Stockholder distributions
(88,563
)
 
(78,012
)
 
(86,988
)
Increase (decrease) in non-controlling interest
(3,686
)
 
865

 
—

Net cash provided by (used in) financing activities
72,567

 
(178,943
)
 
(57,958
)
 
 
 
 
 
 
Net decrease in cash and cash equivalents
(50,939
)
 
(2,754
)
 
(89,448
)
Effect of foreign currency exchange rates
717

 
(376
)
 
—

Cash and cash equivalents, beginning of year
96,692

 
99,822

 
189,270

Cash and cash equivalents, end of year
$
46,470

 
$
96,692

 
$
99,822

Supplemental information:
 
 
 

 
 
Interest paid during the year
$
51,506

 
$
50,983

 
$
38,764

Taxes, including excise tax, paid during the year
$
1,533

 
$
956

 
$
1,063

Distributions reinvested
$
34,905

 
$
38,983

 
$
52,455


The accompanying notes are an integral part of these consolidated financial statements.
F- 8
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2019
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Secured First Lien Debt - 120.6% (b)
 
 
 
 
 
 
 
 
 
 
Abaco Systems Holding Corp. (c) (i)
 
Industrials
 
L+6.00% (8.01%), 12/7/2021
 
$
23,215

 
$
23,032

 
$
23,215

 
1.6
%
ABC Financial Intermediate, LLC (j)
 
Technology
 
L+4.25% (5.99%), 1/2/2025
 
14,603

 
14,550

 
14,493

 
1.0
%
Accentcare, Inc. (c) (j)
 
Healthcare
 
L+5.00% (6.95%), 6/22/2026
 
13,472

 
13,347

 
13,346

 
0.9
%
Acrisure, LLC (i) (j)
 
Financials
 
L+4.25% (6.19%), 11/22/2023
 
20,263

 
20,255

 
20,288

 
1.4
%
AHP Health Partners, Inc. (i)
 
Healthcare
 
L+4.50% (6.30%), 6/30/2025
 
19,886

 
19,739

 
20,016

 
1.4
%
Aldevron, LLC (i)
 
Healthcare
 
L+4.25% (6.19%), 10/13/2026
 
11,370

 
11,260

 
11,484

 
0.8
%
Aleris International, Inc. (j)
 
Industrials
 
L+4.75% (6.55%), 2/27/2023
 
21,095

 
20,987

 
21,085

 
1.4
%
Allied Universal Security Services, LLC (j)
 
Business Services
 
L+4.25% (6.05%), 7/10/2026
 
6,066

 
6,010

 
6,097

 
0.4
%
Allied Universal Security Services, LLC (j)
 
Business Services
 
L+4.25% (6.05%), 7/10/2026
 
601

 
601

 
604

 
0.0
%
Alvogen Pharma US, Inc. (j)
 
Healthcare
 
L+4.75% (6.55%), 12/31/2023
 
12,818

 
12,767

 
10,871

 
0.7
%
AM General, LLC (c) (i)
 
Industrials
 
L+7.25% (9.31%), 12/28/2021
 
1,626

 
1,626

 
1,626

 
0.1
%
American Greetings Corp. (j)
 
Consumer
 
L+4.50% (6.30%), 4/5/2024
 
1,723

 
1,698

 
1,690

 
0.1
%
AMI Entertainment Network, LLC (c) (i)
 
Media/Entertainment
 
L+6.00% (7.94%), 7/21/2022
 
3,667

 
3,618

 
3,618

 
0.3
%
AMI Entertainment Network, LLC (c) (i)
 
Media/Entertainment
 
L+6.00% (7.94%), 7/21/2022
 
12,983

 
12,851

 
12,809

 
0.9
%
AP Gaming I, LLC (a) (j)
 
Gaming/Lodging
 
L+3.50% (5.30%), 2/15/2024
 
7,621

 
7,616

 
7,640

 
0.5
%
AP NMT Acquisition B.V. (a) (j)
 
Media/Entertainment
 
L+5.75% (7.84%), 8/13/2021
 
5,831

 
5,839

 
5,842

 
0.4
%
Aq Carver Buyer, Inc. (c) (i)
 
Business Services
 
L+5.00% (6.94%), 9/23/2025
 
9,391

 
8,656

 
9,298

 
0.6
%
AqGen Ascensus, Inc. (j)
 
Business Services
 
L+4.00% (5.94%), 12/5/2022
 
9,392

 
9,383

 
9,398

 
0.6
%
AqGen Ascensus, Inc. (j)
 
Business Services
 
L+4.25% (6.05%), 12/5/2022
 
7,980

 
7,923

 
8,020

 
0.6
%
Arch Global Precision, LLC (c) (i)
 
Industrials
 
L+4.75% (6.55%), 4/1/2026
 
8,660

 
8,591

 
8,626

 
0.6
%
Athenahealth, Inc. (j)
 
Healthcare
 
L+4.50% (6.40%), 2/11/2026
 
12,792

 
12,632

 
12,840

 
0.9
%
Avaya Holdings Corp. (a) (j)
 
Technology
 
L+4.25% (5.99%), 12/16/2024
 
20,906

 
20,763

 
20,477

 
1.4
%
Aveanna Healthcare, LLC (c) (j)
 
Healthcare
 
L+5.50% (7.30%), 3/18/2024
 
6,021

 
5,807

 
5,648

 
0.4
%
Aveanna Healthcare, LLC (c) (j)
 
Healthcare
 
L+4.25% (6.05%), 3/18/2024
 
784

 
746

 
721

 
0.0
%
Axiom Global, Inc. (c) (i)
 
Business Services
 
L+4.75% (6.85%), 10/1/2026
 
10,974

 
10,868

 
10,869

 
0.7
%
BBB Industries, LLC (j)
 
Transportation
 
L+4.50% (6.30%), 8/1/2025
 
11,142

 
11,100

 
10,826

 
0.7
%
BCP Raptor, LLC (j)
 
Energy
 
L+4.25% (6.05%), 6/24/2024
 
19,033

 
18,903

 
17,511

 
1.2
%
BCP Renaissance, LLC (j)
 
Energy
 
L+3.50% (5.44%), 10/31/2024
 
3,420

 
3,408

 
3,022

 
0.2
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 9
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2019
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Black Mountain Sand, LLC (c)
 
Energy
 
L+9.00% (10.91%), 11/30/2021
 
$
13,050

 
$
12,946

 
$
12,854

 
0.9
%
Black Mountain Sand, LLC (c)
 
Energy
 
L+9.00% (11.10%), 11/30/2021
 
12,606

 
12,516

 
12,417

 
0.9
%
BMC Software Finance, Inc. (j)
 
Technology
 
L+4.25% (6.05%), 10/2/2025
 
22,013

 
21,831

 
21,741

 
1.5
%
Bomgar Corp. (j)
 
Technology
 
L+4.00% (5.93%), 4/18/2025
 
1,962

 
1,955

 
1,911

 
0.1
%
BrightSpring Health Holdings Corp. (j)
 
Healthcare
 
L+4.50% (6.21%), 3/5/2026
 
4,975

 
4,939

 
4,997

 
0.3
%
California Resources Corp. (a) (j)
 
Energy
 
L+4.75% (6.55%), 12/30/2022
 
12,259

 
12,110

 
10,926

 
0.7
%
CareCentrix, Inc. (i) (j)
 
Healthcare
 
L+4.50% (6.44%), 4/3/2025
 
19,856

 
19,783

 
19,807

 
1.4
%
CCW, LLC (c)
 
Food & Beverage
 
L+7.00% (8.81%), 3/22/2021
 
1,300

 
1,300

 
1,235

 
0.1
%
CCW, LLC (c) (i)
 
Food & Beverage
 
L+7.00% (8.81%), 3/22/2021
 
26,725

 
26,608

 
25,389

 
1.7
%
CDHA Holdings, LLC (c)
 
Healthcare
 
L+6.00% (7.95%), 8/24/2023
 
430

 
430

 
430

 
0.0
%
CDHA Holdings, LLC (c)
 
Healthcare
 
L+6.00% (7.95%), 8/24/2023
 
553

 
546

 
553

 
0.0
%
CDHA Holdings, LLC (c) (i)
 
Healthcare
 
L+6.00% (7.95%), 8/24/2023
 
15,601

 
15,430

 
15,601

 
1.1
%
CDS U.S. Intermediate Holdings, Inc. (a) (i) (j)
 
Media/Entertainment
 
L+3.75% (5.69%), 7/8/2022
 
3,980

 
3,905

 
3,775

 
0.3
%
Chloe Ox Parent, LLC (i)
 
Healthcare
 
L+4.50% (6.44%), 12/23/2024
 
11,478

 
11,394

 
11,406

 
0.8
%
Clarion Events, Ltd. (a) (j)
 
Business Services
 
L+5.00% (6.91%), 9/30/2024
 
10,393

 
10,233

 
10,172

 
0.7
%
Clover Technologies Group, LLC (c) (j)
 
Industrials
 
L+6.50% (8.30%), 5/8/2020
 
8,603

 
8,598

 
2,882

 
0.2
%
CLP Health Services, Inc. (i)
 
Healthcare
 
L+5.00% (6.80%), 12/31/2026
 
9,480

 
9,338

 
9,409

 
0.6
%
Cold Spring Brewing, Co. (c) (i)
 
Food & Beverage
 
L+4.75% (6.55%), 12/19/2025
 
9,888

 
9,789

 
9,789

 
0.7
%
Community Care Health Network, LLC (j)
 
Healthcare
 
L+4.75% (6.55%), 2/17/2025
 
5,076

 
5,062

 
4,999

 
0.3
%
CONSOL Energy, Inc. (a) (c) (j)
 
Industrials
 
L+4.50% (6.30%), 9/27/2024
 
4,120

 
4,102

 
3,794

 
0.3
%
Conterra Ultra Broadband, LLC (c) (j)
 
Telecom
 
L+4.50% (6.30%), 4/30/2026
 
5,009

 
4,987

 
5,009

 
0.3
%
Corfin Industries, LLC (c) (i)
 
Industrials
 
L+5.50% (7.43%), 2/15/2024
 
8,486

 
8,369

 
8,486

 
0.6
%
Crown Subsea Communications Holding, Inc. (c) (j)
 
Industrials
 
L+6.00% (7.69%), 11/3/2025
 
3,328

 
3,300

 
3,328

 
0.2
%
CRS-SPV, Inc. (c) (o)
 
Industrials
 
L+4.50% (6.30%), 3/8/2020
 
62

 
62

 
62

 
0.0
%
Digicel Group, Ltd. (a)
 
Telecom
 
8.75%, 5/25/2024
 
10,607

 
10,556

 
10,342

 
0.7
%
Dynasty Acqusition Co., Inc. (j)
 
Industrials
 
L+4.00% (5.94%), 4/6/2026
 
3,871

 
3,857

 
3,895

 
0.3
%
Dynasty Acqusition Co., Inc. (j)
 
Industrials
 
L+4.00% (5.94%), 4/6/2026
 
2,081

 
2,074

 
2,094

 
0.1
%
Eagle Rx, LLC (c) (i)
 
Healthcare
 
L+4.75% (6.44%), 12/31/2021
 
26,438

 
26,435

 
26,438

 
1.8
%
Envision Healthcare Corp. (j)
 
Healthcare
 
L+3.75% (5.55%), 10/10/2025
 
3,970

 
3,806

 
3,376

 
0.2
%
Florida Food Products, LLC (c)
 
Food & Beverage
 
L+6.75% (8.55%), 9/6/2023
 
1,416

 
1,416

 
1,399

 
0.1
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 10
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2019
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Florida Food Products, LLC (c) (i)
 
Food & Beverage
 
L+6.75% (8.55%), 9/6/2025
 
$
22,114

 
$
21,666

 
$
21,849

 
1.5
%
Foresight Energy, LLC (c) (j)
 
Industrials
 
L+5.75% (7.66%), 3/28/2022
 
5,919

 
5,888

 
2,721

 
0.2
%
Frontier Communications Corp.
 
Telecom
 
8.00%, 4/1/2027
 
15,332

 
15,341

 
16,054

 
1.1
%
Frontier Communications Corp. (j)
 
Telecom
 
L+3.75% (5.55%), 6/17/2024
 
9,819

 
9,643

 
9,853

 
0.7
%
Gold Standard Baking, Inc. (c) (l)
 
Food & Beverage
 
L+6.50% (8.50%), 7/25/2022
 
3,049

 
2,273

 
1,220

 
0.1
%
Green Energy Partners/Stonewall, LLC (c) (j)
 
Energy
 
L+5.50% (7.44%), 11/15/2021
 
1,000

 
998

 
922

 
0.1
%
Green Energy Partners/Stonewall, LLC (j)
 
Energy
 
L+5.50% (7.44%), 11/15/2021
 
1,324

 
1,322

 
1,221

 
0.1
%
HC2 Holdings, Inc. (c)
 
Industrials
 
11.50%, 12/1/2021
 
10,796

 
10,706

 
10,353

 
0.7
%
HireRight, Inc. (i)
 
Business Services
 
L+3.75% (5.55%), 7/11/2025
 
2,955

 
2,933

 
2,927

 
0.2
%
ICR Operations, LLC (c)
 
Business Services
 
L+5.00% (6.94%), 3/26/2024
 
98

 
96

 
98

 
0.0
%
ICR Operations, LLC (c) (i)
 
Business Services
 
L+5.00% (6.94%), 3/26/2025
 
17,321

 
17,055

 
17,321

 
1.2
%
Ideal Tridon Holdings, Inc. (c)
 
Industrials
 
L+5.75% (7.68%), 7/31/2024
 
46

 
46

 
45

 
0.0
%
Ideal Tridon Holdings, Inc. (c)
 
Industrials
 
L+5.75% (7.54%), 7/31/2023
 
161

 
161

 
158

 
0.0
%
Ideal Tridon Holdings, Inc. (c) (i)
 
Industrials
 
L+5.75% (7.70%), 7/31/2024
 
837

 
822

 
822

 
0.1
%
Ideal Tridon Holdings, Inc. (c) (i)
 
Industrials
 
L+5.75% (7.68%), 7/31/2023
 
28,549

 
28,216

 
28,036

 
1.9
%
IDERA, Inc. (j)
 
Technology
 
L+4.50% (6.30%), 6/28/2024
 
2,095

 
2,089

 
2,099

 
0.1
%
Integral Ad Science, Inc. (c) (l)
 
Software/Services
 
L+7.25% (9.05%), 7/19/2024
 
15,302

 
15,070

 
15,302

 
1.1
%
Integrated Efficiency Solutions, Inc. (c)
 
Industrials
 
L+10.25% (12.19%), 6/30/2022
 
3,658

 
3,658

 
3,344

 
0.2
%
Intelsat Jackson Holdings, SA (a) (j)
 
Telecom
 
L+4.50% (6.43%), 1/2/2024
 
10,000

 
10,178

 
10,070

 
0.7
%
Internap Corp. (c) (i) (l)
 
Business Services
 
L+7.00% (8.79%), 4/6/2022
 
11,789

 
11,779

 
7,533

 
0.5
%
International Cruise & Excursions, Inc. (c) (i)
 
Business Services
 
L+5.25% (7.05%), 6/6/2025
 
5,001

 
4,958

 
5,002

 
0.3
%
IPC Corp. (c) (j)
 
Software/Services
 
L+4.50% (6.43%), 8/6/2021
 
3,784

 
3,757

 
3,126

 
0.2
%
Iri Holdings, Inc. (c) (j)
 
Business Services
 
L+4.50% (6.30%), 12/1/2025
 
4,950

 
4,908

 
4,826

 
0.3
%
K2 Intelligence Holdings, Inc. (c) (i)
 
Business Services
 
L+4.75% (6.69%), 9/23/2024
 
11,667

 
11,446

 
11,445

 
0.8
%
Kahala Ireland OpCo Designated Activity Company (a) (c) (l) (o)
 
Transportation
 
L+8.00% (13.00%), 12/22/2028
 
105,549

 
105,549

 
105,549

 
7.2
%
Kaman Distribution Corp. (c) (i)
 
Industrials
 
L+5.00% (6.94%), 8/26/2026
 
21,498

 
19,650

 
20,853

 
1.4
%
Kissner Milling Co., Ltd. (a)
 
Industrials
 
8.38%, 12/1/2022
 
11,294

 
11,514

 
11,802

 
0.8
%
Lakeland Tours, LLC (i) (j)
 
Education
 
L+4.25% (6.15%), 12/16/2024
 
10,210

 
10,148

 
10,171

 
0.7
%
Lakeview Health Holdings, Inc. (c) (l) (t)
 
Healthcare
 
9.75%, 12/15/2021
 
129

 
124

 
54

 
0.0
%
Lakeview Health Holdings, Inc. (c) (l) (t)
 
Healthcare
 
9.75%, 12/15/2021
 
3,756

 
2,671

 
1,582

 
0.1
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 11
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2019
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
LightSquared, LP (l)
 
Telecom
 
L+8.75% (10.85%), 12/7/2020
 
$
12,376

 
$
11,812

 
$
7,921

 
0.5
%
Lionbridge Technologies, Inc. (c) (i)
 
Business Services
 
L+6.25% (8.04%), 12/20/2025
 
10,344

 
10,241

 
10,241

 
0.7
%
MCS Acquisition Corp. (c)
 
Business Services
 
L+4.75% (6.64%), 5/20/2024
 
14,009

 
13,971

 
6,024

 
0.4
%
MED Parentco, LP (j)
 
Healthcare
 
L+4.25% (6.05%), 8/31/2026
 
306

 
306

 
305

 
0.0
%
MED Parentco, LP (j)
 
Healthcare
 
L+4.25% (6.05%), 8/31/2026
 
5,745

 
5,690

 
5,736

 
0.4
%
Medallion Midland Acquisition, LP (j)
 
Energy
 
L+3.25% (5.05%), 10/30/2024
 
4,361

 
4,353

 
4,306

 
0.3
%
Medical Depot Holdings, Inc. (c) (i) (l)
 
Healthcare
 
L+7.50% (9.44%), 1/3/2023
 
18,850

 
17,981

 
14,175

 
1.0
%
MGTF Radio Company, LLC (c) (o)
 
Media/Entertainment
 
L+6.00% (7.80%), 4/1/2024
 
57,974

 
57,831

 
54,171

 
3.7
%
Micross Solutions, LLC (c)
 
Software/Services
 
L+5.00% (6.72%), 8/7/2023
 
3,065

 
2,955

 
3,065

 
0.2
%
Midwest Can Company, LLC (c) (i)
 
Paper & Packaging
 
L+5.00% (6.81%), 4/11/2024
 
4,622

 
4,589

 
4,622

 
0.3
%
Miller Environmental Group, Inc. (c) (i)
 
Business Services
 
P+5.50% (10.25%), 3/15/2024
 
10,589

 
10,378

 
10,377

 
0.7
%
Miller Environmental Group, Inc. (c) (i)
 
Business Services
 
L+6.50% (8.63%), 3/15/2024
 
11,579

 
11,385

 
11,371

 
0.8
%
MLN US Holdco, LLC (a) (j)
 
Technology
 
L+4.50% (6.19%), 11/28/2025
 
10,675

 
10,645

 
10,061

 
0.7
%
Monitronics International, Inc. (c)
 
Business Services
 
L+6.50% (8.30%), 3/29/2024
 
7,575

 
7,589

 
6,541

 
0.5
%
Montreign Operating Company, LLC (c)
 
Gaming/Lodging
 
L+8.25% (10.16%), 1/24/2023
 
26,681

 
26,425

 
23,559

 
1.6
%
Mood Media Corp. (c)
 
Media/Entertainment
 
L+7.25% (9.19%), 6/28/2022
 
704

 
691

 
662

 
0.0
%
Mood Media Corp. (c) (i)
 
Media/Entertainment
 
L+7.25% (9.19%), 6/28/2022
 
13,168

 
13,025

 
12,378

 
0.9
%
Murray Energy Holdings, Co. (c)
 
Industrials
 
L+11.00% (13.00%), 7/31/2020
 
1,671

 
1,631

 
1,667

 
0.1
%
Murray Energy Holdings, Co. (j) (t)
 
Industrials
 
L+7.25% (9.19%), 10/17/2022
 
9,184

 
9,071

 
1,870

 
0.1
%
Muth Mirror Systems, LLC (c) (i)
 
Technology
 
L+5.25% (7.39%), 4/23/2025
 
15,778

 
15,498

 
15,509

 
1.1
%
National Technical Systems, Inc. (c) (i)
 
Business Services
 
L+6.25% (7.94%), 6/14/2021
 
17,469

 
17,422

 
16,770

 
1.1
%
Navitas Midstream Midland Basin, LLC (c) (j)
 
Energy
 
L+4.50% (6.30%), 12/13/2024
 
13,326

 
13,305

 
12,977

 
0.9
%
New Amsterdam Software Bidco, LLC (c) (i)
 
Technology
 
L+5.00% (6.80%), 5/1/2026
 
6,134

 
6,023

 
6,023

 
0.4
%
New Star Metals, Inc. (c) (i)
 
Industrials
 
L+6.00% (7.95%), 6/29/2023
 
22,692

 
22,284

 
22,692

 
1.6
%
NexSteppe, Inc. (c) (l) (o) (t)
 
Chemicals
 
12.00%, 3/31/2020
 
15,285

 
10,453

 
—

 
—
%
NexSteppe, Inc. (c) (l) (o) (t)
 
Chemicals
 
12.00%, 3/31/2020
 
2,269

 
1,750

 
—

 
—
%
NN, Inc. (a) (j)
 
Industrials
 
L+5.25% (7.05%), 10/19/2022
 
9,889

 
9,394

 
9,691

 
0.7
%
Norvax, LLC (c)
 
Business Services
 
L+6.50% (8.41%), 9/12/2025
 
11,489

 
11,212

 
11,214

 
0.8
%
NTM Acquisition Corp. (c) (i)
 
Media/Entertainment
 
L+6.25% (8.05%), 6/7/2022
 
22,999

 
22,861

 
22,999

 
1.6
%
Office Depot, Inc. (a) (j)
 
Retail
 
L+5.25% (7.04%), 11/8/2022
 
4,947

 
4,889

 
4,984

 
0.3
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 12
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2019
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
ORG Chemical Holdings, LLC (c) (g) (l)
 
Chemicals
 
L+7.75% (9.70%), 6/30/2022
 
$
3,420

 
$
3,420

 
$
3,420

 
0.2
%
ORG Chemical Holdings, LLC (c) (i) (l)
 
Chemicals
 
L+7.75% (9.70%), 6/30/2022
 
3,730

 
3,695

 
3,730

 
0.3
%
ORG GC Holdings, LLC (c) (i)
 
Business Services
 
L+6.75% (8.70%), 7/31/2022
 
21,624

 
21,457

 
20,932

 
1.4
%
PeopLease Holdings, LLC (c) (i)
 
Business Services
 
L+9.62% (11.57%), 2/26/2021
 
20,000

 
19,953

 
19,800

 
1.4
%
PGX Holdings, Inc. (c) (j)
 
Consumer
 
L+5.25% (7.05%), 9/29/2020
 
11,820

 
11,807

 
8,416

 
0.6
%
Planet Equity Group, LLC (c) (i)
 
Business Services
 
L+5.25% (7.18%), 11/18/2025
 
14,941

 
14,721

 
14,717

 
1.0
%
PlayPower, Inc. (c) (i)
 
Industrials
 
L+5.50% (7.46%), 5/8/2026
 
26,385

 
26,025

 
26,385

 
1.8
%
Premier Dental Services, Inc. (i) (j)
 
Healthcare
 
L+5.25% (7.05%), 6/30/2023
 
32,354

 
32,196

 
32,313

 
2.2
%
Premier Global Services, Inc. (c) (j)
 
Telecom
 
L+6.50% (8.40%), 6/8/2023
 
8,578

 
8,382

 
5,284

 
0.4
%
PSKW, LLC (c)
 
Healthcare
 
L+7.68% (9.63%), 11/26/2021
 
17,750

 
17,637

 
17,750

 
1.2
%
PSKW, LLC (c)
 
Healthcare
 
L+7.68% (9.63%), 11/25/2021
 
1,972

 
1,954

 
1,972

 
0.1
%
PSKW, LLC (c)
 
Healthcare
 
L+7.68% (9.63%), 11/25/2021
 
1,930

 
1,919

 
1,930

 
0.1
%
PSKW, LLC (c) (i)
 
Healthcare
 
L+4.25% (6.19%), 11/26/2021
 
1,162

 
1,159

 
1,162

 
0.1
%
PT Network, LLC (c) (i) (l)
 
Healthcare
 
L+7.50% (9.44%), 11/30/2023
 
16,780

 
16,702

 
15,052

 
1.0
%
Questex, Inc. (c)
 
Media/Entertainment
 
L+5.00% (6.91%), 9/9/2024
 
689

 
689

 
689

 
0.0
%
Questex, Inc. (c) (i)
 
Media/Entertainment
 
L+5.00% (6.89%), 9/9/2024
 
15,989

 
15,739

 
15,989

 
1.1
%
Red River Technology, LLC (c) (i)
 
Business Services
 
L+5.00% (6.94%), 8/30/2024
 
23,669

 
23,340

 
23,337

 
1.6
%
Reddy Ice Corp. (c) (i)
 
Food & Beverage
 
L+5.50% (7.60%), 7/1/2025
 
19,540

 
19,003

 
19,003

 
1.3
%
Regionalcare Hospital Partners Holdings, Inc. (j)
 
Healthcare
 
L+4.50% (6.30%), 11/14/2025
 
19,850

 
19,521

 
19,994

 
1.4
%
Resco Products, Inc. (c)
 
Industrials
 
L+6.25% (8.05%), 3/7/2020
 
10,000

 
10,000

 
9,200

 
0.6
%
Safety Products/JHC Acquisition Corp. (c) (j)
 
Industrials
 
L+4.50% (6.30%), 6/28/2026
 
958

 
958

 
937

 
0.1
%
Safety Products/JHC Acquisition Corp. (c) (j)
 
Industrials
 
L+4.50% (6.30%), 6/28/2026
 
17,717

 
17,564

 
17,341

 
1.2
%
Schenectady International Group, Inc. (j)
 
Chemicals
 
L+4.75% (6.79%), 10/15/2025
 
19,593

 
19,164

 
19,446

 
1.3
%
SFR Group, SA (a) (i)
 
Telecom
 
L+3.69% (5.43%), 2/2/2026
 
14,962

 
14,926

 
14,962

 
1.0
%
SFR Group, SA (a) (i) (j)
 
Telecom
 
L+4.00% (5.74%), 8/14/2026
 
12,967

 
12,862

 
12,978

 
0.9
%
Shields Health Solutions Holdings, LLC (c) (i)
 
Healthcare
 
L+5.00% (6.80%), 8/19/2026
 
6,963

 
6,896

 
6,897

 
0.5
%
SitusAMC Holdings Corp. (c) (i)
 
Financials
 
L+4.75% (6.55%), 6/30/2025
 
8,486

 
8,369

 
8,371

 
0.6
%
Skillsoft Corp. (j)
 
Technology
 
L+4.75% (6.95%), 4/28/2021
 
15,001

 
14,378

 
11,469

 
0.8
%
Squan Holding Corp. (c) (l)
 
Telecom
 
L+7.00% (8.95%), 6/30/2020
 
16,276

 
16,123

 
13,835

 
1.0
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 13
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2019
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
SSH Group Holdings, Inc. (j)
 
Education
 
L+4.25% (6.19%), 7/30/2025
 
$
10,736

 
$
10,704

 
$
10,776

 
0.7
%
Subsea Global Solutions, LLC (c)
 
Business Services
 
L+7.00% (9.06%), 3/29/2023
 
388

 
388

 
381

 
0.0
%
Subsea Global Solutions, LLC (c) (i)
 
Business Services
 
L+7.00% (9.00%), 3/29/2023
 
2,392

 
2,302

 
2,344

 
0.2
%
Subsea Global Solutions, LLC (c) (i)
 
Business Services
 
L+7.00% (9.00%), 3/29/2023
 
8,327

 
8,219

 
8,168

 
0.6
%
Tax Defense Network, LLC (c) (l) (p) (t)
 
Consumer
 
L+6.00% (10.00%), 4/30/2020
 
5,257

 
3,833

 
1,262

 
0.1
%
Tax Defense Network, LLC (c) (l) (p) (t)
 
Consumer
 
L+6.00% (10.00%), 4/30/2020
 
29,616

 
21,646

 
7,108

 
0.5
%
Tax Defense Network, LLC (c) (l) (p) (t)
 
Consumer
 
L+10.00% (10.00%), 4/30/2020
 
2,357

 
2,357

 
2,357

 
0.2
%
The Dun & Bradstreet Corp. (j)
 
Business Services
 
L+5.00% (6.79%), 2/6/2026
 
10,000

 
9,825

 
10,079

 
0.7
%
TIBCO Software, Inc. (j)
 
Technology
 
L+4.00% (5.71%), 6/30/2026
 
4,988

 
4,988

 
5,005

 
0.3
%
Tillamook Country Smoker, LLC (c)
 
Food & Beverage
 
L+5.75% (7.85%), 5/19/2022
 
1,078

 
1,078

 
1,054

 
0.1
%
Tillamook Country Smoker, LLC (c) (i)
 
Food & Beverage
 
L+5.75% (7.65%), 5/19/2022
 
10,090

 
10,018

 
9,858

 
0.7
%
Tivity Health, Inc. (a) (j)
 
Healthcare
 
L+5.25% (7.05%), 3/6/2026
 
4,396

 
4,299

 
4,396

 
0.3
%
Tivity Health, Inc. (a) (j)
 
Healthcare
 
L+4.25% (6.05%), 3/8/2024
 
1,641

 
1,627

 
1,641

 
0.1
%
Trademark Global, LLC (c)
 
Consumer
 
L+6.00% (7.80%), 4/28/2023
 
2,067

 
2,067

 
2,067

 
0.1
%
Traverse Midstream Partners, LLC (j)
 
Energy
 
L+4.00% (5.80%), 9/27/2024
 
16,222

 
15,847

 
14,568

 
1.0
%
Trilogy International Partners, LLC (a)
 
Telecom
 
8.88%, 5/1/2022
 
14,875

 
14,837

 
13,983

 
1.0
%
University of St. Augustine Acquisition Corp. (c) (i)
 
Education
 
L+4.25% (6.05%), 2/2/2026
 
24,004

 
23,482

 
23,524

 
1.6
%
Veritext Corp. (i)
 
Business Services
 
L+3.75% (5.69%), 8/1/2025
 
4,975

 
4,975

 
4,955

 
0.3
%
Vertex Aerospace Services Corp. (i)
 
Industrials
 
L+4.50% (6.30%), 6/30/2025
 
8,726

 
8,692

 
8,753

 
0.6
%
Von Drehle Corp. (c) (i) (l)
 
Paper & Packaging
 
L+11.50% (13.44%), 3/6/2023
 
26,856

 
26,595

 
25,164

 
1.7
%
Vyaire Medical, Inc. (c) (j)
 
Healthcare
 
L+4.75% (6.84%), 4/16/2025
 
8,850

 
8,580

 
7,611

 
0.5
%
WaterBridge Midstream Operating, LLC (j)
 
Energy
 
L+5.75% (7.83%), 6/22/2026
 
11,834

 
11,572

 
11,613

 
0.8
%
WMK, LLC (c)
 
Business Services
 
L+5.75% (7.49%), 9/5/2025
 
1,910

 
1,903

 
1,910

 
0.1
%
WMK, LLC (c)
 
Business Services
 
L+5.75% (7.44%), 9/5/2024
 
1,134

 
1,134

 
1,134

 
0.1
%
WMK, LLC (c) (i)
 
Business Services
 
L+5.75% (7.49%), 9/5/2025
 
20,180

 
19,853

 
20,180

 
1.4
%
Xplornet Communications, Inc. (a) (i) (j)
 
Telecom
 
L+4.00% (5.94%), 9/9/2021
 
15,679

 
15,645

 
15,699

 
1.1
%
YummyEarth, Inc. (c)
 
Food & Beverage
 
L+7.00% (8.91%), 8/1/2025
 
2,626

 
2,625

 
2,626

 
0.2
%
Sub Total Senior Secured First Lien Debt
 
 
 
 
 
$
1,862,228

 
$
1,764,292

 
120.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.
F- 14
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2019
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Senior Secured Second Lien Debt - 21.0% (b)
 
 
 
 
 
 
 
 
 
 
Accentcare, Inc. (c) (i)
 
Healthcare
 
L+8.75% (10.70%), 6/21/2027
 
$
17,795

 
$
17,380

 
$
17,366

 
1.2
%
Anchor Glass Container Corp. (c)
 
Paper & Packaging
 
L+7.75% (9.46%), 12/6/2024
 
20,000

 
19,845

 
10,400

 
0.7
%
Astro AB Merger Sub, Inc. (a) (i)
 
Financials
 
L+7.50% (9.43%), 4/28/2023
 
7,758

 
7,758

 
7,719

 
0.5
%
Asurion Corp. (i) (j)
 
Business Services
 
L+6.50% (8.30%), 8/4/2025
 
18,734

 
18,866

 
18,949

 
1.3
%
Avatar Purchaser, Inc. (c) (j)
 
Software/Services
 
L+7.50% (9.49%), 11/17/2025
 
11,716

 
11,458

 
11,716

 
0.8
%
Aveanna Healthcare, LLC (c)
 
Healthcare
 
L+8.00% (9.80%), 3/17/2025
 
15,000

 
14,852

 
13,650

 
0.9
%
Baker Hill Acquisition, LLC (c)
 
Financials
 
L+11.00% (13.09%), 3/22/2021
 
3,017

 
1,508

 
1,584

 
0.1
%
Baker Hill Acquisition, LLC (c)
 
Financials
 
L+11.00% (13.09%), 3/22/2021
 
447

 
416

 
447

 
0.0
%
Boston Market Corp. (c)
 
Food & Beverage
 
L+4.50% (6.51%), 1/9/2021
 
3,691

 
3,691

 
3,691

 
0.3
%
Boston Market Corp. (c)
 
Food & Beverage
 
L+8.25% (10.19%), 1/18/2021
 
26,259

 
24,260

 
8,534

 
0.6
%
Boston Market Corp. (c)
 
Food & Beverage
 
L+4.50% (6.59%), 1/9/2021
 
923

 
923

 
923

 
0.1
%
BrandMuscle Holdings, Inc. (c)
 
Business Services
 
L+8.50% (10.60%), 6/1/2022
 
24,500

 
24,317

 
24,500

 
1.7
%
Carlisle FoodService Products, Inc. (c) (i)
 
Consumer
 
L+7.75% (9.55%), 3/20/2026
 
10,719

 
10,552

 
10,719

 
0.7
%
CDS U.S. Intermediate Holdings, Inc. (a) (c)
 
Media/Entertainment
 
L+8.25% (10.19%), 7/10/2023
 
9,177

 
8,946

 
7,846

 
0.5
%
Constellis Holdings, LLC (c) (t)
 
Business Services
 
L+9.00% (10.93%), 4/21/2025
 
1,117

 
1,117

 
56

 
0.0
%
Dentalcorp Perfect Smile, ULC (a) (c)
 
Healthcare
 
L+7.50% (9.30%), 6/8/2026
 
10,139

 
10,056

 
10,139

 
0.7
%
Dimora Brands, Inc. (c)
 
Consumer
 
L+8.50% (10.30%), 8/25/2025
 
4,464

 
4,463

 
4,464

 
0.3
%
Edelman Financial Services, LLC (a) (j)
 
Financials
 
L+6.75% (8.54%), 7/20/2026
 
6,764

 
6,736

 
6,730

 
0.5
%
Hyland Software, Inc. (c) (i)
 
Technology
 
L+7.00% (8.80%), 7/7/2025
 
6,904

 
6,930

 
6,904

 
0.5
%
ICP Industrial, Inc. (c)
 
Chemicals
 
L+8.25% (10.04%), 5/3/2024
 
5,588

 
5,587

 
5,588

 
0.4
%
KidKraft, Inc. (c) (l)
 
Consumer
 
12.00%, 3/31/2022
 
6,373

 
6,316

 
5,149

 
0.4
%
MLN US Holdco, LLC (a) (c) (i)
 
Technology
 
L+8.75% (10.44%), 11/30/2026
 
3,000

 
2,948

 
2,452

 
0.2
%
Northstar Financial Services Group, LLC (c)
 
Financials
 
L+7.50% (9.30%), 5/25/2026
 
2,666

 
2,656

 
2,666

 
0.2
%
PetVet Care Centers, LLC (c)
 
Healthcare
 
L+6.25% (8.05%), 2/13/2026
 
3,539

 
3,525

 
3,539

 
0.2
%
PI US Holdco III, Ltd. (a) (c)
 
Financials
 
L+7.25% (9.05%), 12/22/2025
 
6,696

 
6,645

 
6,562

 
0.5
%
ProAmpac, LLC (c)
 
Paper & Packaging
 
L+8.50% (10.40%), 11/18/2024
 
3,352

 
3,351

 
3,352

 
0.2
%
Project Boost Purchaser, LLC
 
Business Services
 
L+8.00% (9.80%), 5/31/2027
 
1,848

 
1,848

 
1,848

 
0.1
%
QuickBase, Inc. (c)
 
Technology
 
L+8.00% (9.71%), 4/2/2027
 
7,484

 
7,348

 
7,349

 
0.5
%
Recess Holdings, Inc. (c) (i)
 
Industrials
 
L+7.75% (9.55%), 9/29/2025
 
15,008

 
14,841

 
15,008

 
1.0
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 15
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2019
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Renaissance Holding Corp. (c)
 
Software/Services
 
L+7.00% (8.80%), 5/29/2026
 
$
8,456

 
$
8,320

 
$
8,123

 
0.6
%
River Cree Enterprises, LP (a) (c) (m)
 
Gaming/Lodging
 
10.00%, 5/17/2025
 
CAD
21,275

 
16,427

 
16,378

 
1.1
%
SCA Pharmaceuticals, LLC (c)
 
Healthcare
 
L+9.00% (10.94%), 12/16/2020
 
2,235

 
2,194

 
2,056

 
0.1
%
SSH Group Holdings, Inc. (c) (i)
 
Education
 
L+8.25% (10.19%), 7/30/2026
 
10,122

 
10,039

 
10,122

 
0.7
%
St. Croix Hospice Acquisition Corp. (c)
 
Healthcare
 
L+8.75% (10.55%), 3/29/2024
 
2,056

 
1,983

 
2,056

 
0.1
%
TierPoint, LLC (c)
 
Business Services
 
L+7.25% (9.05%), 5/5/2025
 
5,334

 
5,298

 
5,014

 
0.3
%
Travelpro Products, Inc. (a) (c) (l)
 
Consumer
 
13.00%, 11/1/2022
 
2,405

 
2,404

 
2,405

 
0.2
%
Travelpro Products, Inc. (a) (c) (l) (m)
 
Consumer
 
13.00%, 11/21/2022
 
CAD
2,786

 
2,137

 
2,145

 
0.1
%
US Salt, LLC (c) (i)
 
Industrials
 
L+8.63% (10.42%), 1/18/2027
 
26,968

 
26,197

 
26,968

 
1.9
%
Vantage Mobility International, LLC (c) (l) (p) (t)
 
Transportation
 
L+6.00% (7.80%), 6/30/2023
 
2,883

 
2,743

 
2,883

 
0.2
%
Vital Proteins, LLC (c) (l)
 
Consumer
 
12.00%, 5/16/2022
 
8,628

 
8,485

 
8,478

 
0.6
%
Sub Total Senior Secured Second Lien Debt
 
 
 
 
 
$
335,366

 
$
306,478

 
21.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Subordinated Debt - 7.4% (b)
 
 
 
 
 
 
 
 
 
 
AHP Health Partners, Inc.
 
Healthcare
 
9.75%, 7/15/2026
 
$
6,589

 
$
6,511

 
$
7,257

 
0.5
%
Captek Softgel International, Inc. (c) (l) (t)
 
Health/Fitness
 
11.50%, 1/30/2023
 
7,099

 
7,071

 
5,324

 
0.4
%
Community Intervention Services, Inc. (c) (l) (t)
 
Healthcare
 
13.00%, 1/29/2021
 
6,074

 
—

 
—

 
—
%
Del Real, LLC (c)
 
Food & Beverage
 
11.00%, 4/1/2023
 
3,129

 
2,998

 
2,641

 
0.2
%
Dyno Acquiror, Inc. (c) (l)
 
Consumer
 
12.00%, 8/1/2020
 
1,074

 
1,074

 
1,074

 
0.1
%
HemaSource, Inc. (c) (x)
 
Healthcare
 
11.00%, 1/1/2024
 
2,235

 
2,152

 
2,156

 
0.1
%
HTC Borrower, LLC (c) (l)
 
Consumer
 
13.00%, 9/1/2020
 
5,410

 
5,326

 
5,410

 
0.4
%
Iridium Communications, Inc.
 
Telecom
 
10.25%, 4/15/2023
 
3,536

 
3,536

 
3,794

 
0.3
%
Park Ave RE Holdings, LLC (c) (l) (o) (w)
 
Financials
 
13.00%, 12/31/2021
 
37,237

 
37,237

 
37,237

 
2.5
%
PCX Aerostructures, LLC (c) (l) (p)
 
Industrials
 
6.00%, 8/9/2021
 
7,878

 
6,065

 
5,908

 
0.4
%
RMP Group, Inc. (c) (l)
 
Financials
 
11.50%, 9/1/2022
 
2,299

 
2,240

 
2,300

 
0.2
%
Siena Capital Finance, LLC (c) (o)
 
Financials
 
12.50%, 8/16/2021
 
22,500

 
22,492

 
22,500

 
1.5
%
Xplornet Communications, Inc. (a) (c)
 
Telecom
 
9.63%, 6/1/2022
 
12,304

 
12,304

 
12,550

 
0.8
%
Sub Total Subordinated Debt
 
 
 
 
 
$
109,006

 
$
108,151

 
7.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Collateralized Securities - 7.4% (b)
 
 
 
 
 
 
 
 
 
 
Collateralized Securities - Debt Investment
 
 
 
 
 
 
 
 
 
 
Anchorage Credit Opportunities CLO, LLC 19-1A D (a) (c)
 
Diversified Investment Vehicles
 
L+5.10% (7.01%), 1/20/2032
 
$
3,000

 
$
2,885

 
$
2,885

 
0.2
%
Avery Point CLO, Ltd. 15-6A E1 (a) (c)
 
Diversified Investment Vehicles
 
L+5.50% (7.39%), 8/6/2027
 
3,500

 
3,156

 
3,156

 
0.2
%
Babson CLO, Ltd. 19-4A E (a) (c)
 
Diversified Investment Vehicles
 
L+7.39% (9.29%), 1/15/2033
 
1,500

 
1,395

 
1,395

 
0.1
%
Crown Point CLO, Ltd. 2019-8A E (a) (c)
 
Diversified Investment Vehicles
 
L+7.10% (9.12%), 10/20/2032
 
6,000

 
5,708

 
5,853

 
0.4
%
Dryden Senior Loan Fund 17-49A E (a) (c)
 
Diversified Investment Vehicles
 
L+6.30% (8.30%), 7/18/2030
 
3,000

 
2,890

 
2,890

 
0.2
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 16
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2019
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Dryden Senior Loan Fund 2014-36A ER2 (a) (c)
 
Diversified Investment Vehicles
 
L+6.88% (8.87%), 4/15/2029
 
$
2,000

 
$
1,947

 
$
1,975

 
0.1
%
KKR Financial CLO, Ltd. 27A E (a) (c)
 
Diversified Investment Vehicles
 
L+6.90% (8.82%), 10/15/2032
 
1,250

 
1,189

 
1,211

 
0.1
%
LCM, Ltd. Partnership 16A ER2 (a) (c)
 
Diversified Investment Vehicles
 
L+6.38% (8.38%), 10/15/2031
 
2,500

 
2,307

 
2,307

 
0.2
%
Madison Park Funding, Ltd. 16-21A DR (a) (c)
 
Diversified Investment Vehicles
 
L+7.56% (9.39%), 10/15/2032
 
2,000

 
1,881

 
1,881

 
0.1
%
Madison Park Funding, Ltd. 19-35A E (a) (c)
 
Diversified Investment Vehicles
 
L+6.75% (8.72%), 4/20/2031
 
2,000

 
1,945

 
1,945

 
0.1
%
NewStar Arlington Senior Loan Program, LLC 14-1A FR (a) (c) (p)
 
Diversified Investment Vehicles
 
L+11.00% (12.94%), 4/25/2031
 
4,750

 
4,550

 
4,612

 
0.3
%
Newstar Fairfield Fund CLO, Ltd. 2015-1RA F (a) (c) (p)
 
Diversified Investment Vehicles
 
L+7.50% (9.47%), 1/20/2027
 
10,728

 
9,586

 
9,209

 
0.6
%
OCP CLO, Ltd. 14-5A DR (a) (c)
 
Diversified Investment Vehicles
 
L+5.70% (7.64%), 4/26/2031
 
2,200

 
2,060

 
2,060

 
0.1
%
OCP CLO, Ltd. 2019-17A E (a) (c)
 
Diversified Investment Vehicles
 
L+6.66% (8.79%), 7/20/2032
 
3,000

 
2,913

 
2,946

 
0.2
%
Pikes Peak CLO 19-3A E (a) (c)
 
Diversified Investment Vehicles
 
L+6.86% (8.80%), 4/25/2030
 
3,000

 
2,849

 
2,849

 
0.2
%
Sound Point CLO, Ltd. 19-3A E (a) (c)
 
Diversified Investment Vehicles
 
L+7.31% (9.41%), 10/25/2032
 
3,000

 
2,912

 
2,972

 
0.2
%
Sound Point CLO, Ltd. 2015-3A ER (a) (c)
 
Diversified Investment Vehicles
 
L+5.25% (7.22%), 1/20/2028
 
2,000

 
1,881

 
1,915

 
0.1
%
Symphony CLO, Ltd. 2012-9A ER2 (a) (c)
 
Diversified Investment Vehicles
 
L+6.95% (8.95%), 7/16/2032
 
3,000

 
2,942

 
2,972

 
0.2
%
TCW CLO 2019-1 AMR, Ltd. 19-1A F (a) (c)
 
Diversified Investment Vehicles
 
L+8.67% (10.58%), 2/15/2029
 
2,500

 
2,396

 
2,396

 
0.2
%
Vibrant CLO, Ltd. 2016-4A DR (a) (c)
 
Diversified Investment Vehicles
 
L+4.33% (6.30%), 7/20/2032
 
3,000

 
2,913

 
2,947

 
0.2
%
Whitehorse, Ltd. 2014-1A E (a) (c) (p)
 
Diversified Investment Vehicles
 
L+4.55% (6.46%), 5/1/2026
 
8,000

 
7,717

 
7,054

 
0.5
%
Zais CLO 13, Ltd. 19-13A D1 (a) (c)
 
Diversified Investment Vehicles
 
L+4.52% (6.60%), 7/15/2032
 
3,000

 
2,854

 
2,908

 
0.2
%
Collateralized Securities - Equity Investment (n)
 
 
 
 
 
 
 
 
 
 
CVP Cascade CLO, Ltd. 2013-CLO1 Side Letter (a) (c)
 
Diversified Investment Vehicles
 
0.00%, 1/16/2026
 
$
3,243

 
$
106

 
$
24

 
0.0
%
CVP Cascade CLO, Ltd. 2014-2A Side Letter (a) (c)
 
Diversified Investment Vehicles
 
0.00%, 7/18/2026
 
3,755

 
463

 
38

 
0.0
%
Figueroa CLO, Ltd. 2014-1A Side Letter (a) (c)
 
Diversified Investment Vehicles
 
0.00%, 1/15/2027
 
2,986

 
597

 
67

 
0.0
%
MidOcean Credit CLO 2013-2A INC (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
0.76%, 1/29/2025
 
37,600

 
16,815

 
11,835

 
0.8
%
NewStar Arlington Senior Loan Program, LLC 14-1A SUB (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
16.56%, 7/25/2025
 
31,603

 
19,353

 
19,697

 
1.4
%
Newstar Fairfield Fund CLO, Ltd. 2015-1RA SUB (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
21.81%, 1/20/2027
 
31,575

 
7,298

 
6,607

 
0.5
%
OFSI Fund, Ltd. 2014-6A Side Letter (a) (c)
 
Diversified Investment Vehicles
 
0.00%, 3/20/2025
 
1,970

 
263

 
—

 
—
%
Whitehorse, Ltd. 2014-1A Side Letter (a) (c) (p)
 
Diversified Investment Vehicles
 
10.44%, 5/1/2026
 
1,886

 
134

 
35

 
0.0
%
Whitehorse, Ltd. 2014-1A SUB (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
0.00%, 5/1/2026
 
36,000

 
6,965

 
286

 
0.0
%
Sub Total Collateralized Securities
 
 
 
 
 
$
122,870

 
$
108,927

 
7.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity/Other - 17.7% (b) (d)
 
 
 
 
 
 
 
 
 
 
Aden & Anais Holdings, Inc. (c) (e) (x)
 
Retail
 
 
 
4,470

 
$
—

 
$
—

 
—
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 17
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2019
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Answers Corp. (c) (p)
 
Media/Entertainment
 
 
 
908,911

 
$
11,361

 
$
727

 
0.0
%
Avaya Holdings Corp. (a) (e) (s)
 
Technology
 
 
 
187,660

 
2,979

 
2,533

 
0.2
%
Baker Hill Acquisition, LLC (c) (e)
 
Financials
 
 
 
22,653

 
—

 
—

 
—
%
Boston Market Corp. (c) (e) (u)
 
Food & Beverage
 
 
 
160,327

 
—

 
—

 
—
%
Capstone Nutrition Development, LLC (c) (e) (p) (u)
 
Consumer
 
 
 
47,883

 
4,788

 
4,788

 
0.3
%
Captek Softgel International, Inc. (c) (e) (x)
 
Health/Fitness
 
 
 
8,498

 
942

 
—

 
—
%
CRD Holdings, LLC (a) (c) (o) (u)
 
Energy
 
9.00
%
 
52,285,603

 
28,066

 
28,943

 
2.0
%
CRS-SPV, Inc. (c) (e) (o)
 
Industrials
 
 
 
246

 
2,219

 
2,221

 
0.2
%
Danish CRJ, Ltd. (a) (c) (e) (p) (r)
 
Transportation
 
 
 
5,002

 
—

 
—

 
—
%
Data Source Holdings, LLC (c) (e)
 
Business Services
 
 
 
10,617

 
140

 
93

 
0.0
%
Del Real, LLC (c) (e) (u)
 
Food & Beverage
 
 
 
670,510

 
382

 
—

 
—
%
Dyno Acquiror, Inc. (c) (e)
 
Consumer
 
 
 
134,102

 
58

 
80

 
0.0
%
HemaSource, Inc. (c) (e) (x)
 
Healthcare
 
 
 
223,503

 
168

 
101

 
0.0
%
ICP Industrial, Inc. (c) (e)
 
Chemicals
 
 
 
288

 
279

 
380

 
0.0
%
Integrated Efficiency Solutions, Inc. (c) (e)
 
Industrials
 
 
 
53,215

 
56

 
—

 
—
%
Integrated Efficiency Solutions, Inc. (c) (e)
 
Industrials
 
 
 
2,975

 
3

 
—

 
—
%
Kahala Ireland OpCo Designated Activity Company (a) (c) (e) (h) (o)
 
Transportation
 
 
 
1

 
—

 
57,226

 
3.9
%
Kahala Ireland OpCo Designated Activity Company (a) (c) (e) (h) (o)
 
Transportation
 
 
 
3,250,000

 
2,795

 
3,250

 
0.2
%
Kahala US OpCo, LLC (a) (c) (e) (k) (o)
 
Transportation
 
13.00
%
 
4,413,472

 
—

 
—

 
—
%
K-Square Restaurant Partners, LP (c) (e) (x)
 
Food & Beverage
 
 
 
447

 
175

 
—

 
—
%
Lakeview Health Holdings, Inc. (c) (e)
 
Healthcare
 
 
 
447

 
—

 
—

 
—
%
MGTF Holdco, LLC (c) (e) (o) (u)
 
Media/Entertainment
 
 
 
330,000

 
—

 
—

 
—
%
MIC Holding, LLC (c) (e)
 
Consumer
 
 
 
30,000

 
3,750

 
3,822

 
0.3
%
MIC Holding, LLC (c) (e)
 
Consumer
 
 
 
1,470

 
3,687

 
4,520

 
0.3
%
Micross Solutions, LLC (c) (e)
 
Software/Services
 
 
 
442,430

 
223

 
1,040

 
0.1
%
Mood Media Corp. (c) (e)
 
Media/Entertainment
 
 
 
121,021

 
27

 
—

 
—
%
Motor Vehicle Software Corp. (c) (e) (x)
 
Business Services
 
 
 
223,503

 
318

 
268

 
0.0
%
NexSteppe, Inc. (c) (e) (o)
 
Chemicals
 
 
 
237,239,694

 
737

 
—

 
—
%
NMFC Senior Loan Program I, LLC (a) (o)
 
Diversified Investment Vehicles
 
 
 
50,000

 
50,000

 
47,310

 
3.2
%
Nomacorc, LLC (c) (e) (u)
 
Industrials
 
 
 
356,816

 
56

 
143

 
0.0
%
Park Ave RE Holdings, LLC (c) (e) (o) (w)
 
Financials
 
 
 
719

 
2,842

 
11,133

 
0.8
%
PCX Aerostructures, LLC (c) (e) (p)
 
Industrials
 
 
 
27,250

 
—

 
—

 
—
%
PCX Aerostructures, LLC (c) (e) (p)
 
Industrials
 
 
 
315

 
—

 
—

 
—
%
PCX Aerostructures, LLC (c) (e) (p)
 
Industrials
 
 
 
1,356

 
—

 
—

 
—
%
PennantPark Credit Opportunities Fund II, LP (a) (p)
 
Diversified Investment Vehicles
 
 
 
8,739

 
8,739

 
8,707

 
0.6
%
PT Network, LLC (c) (e) (u)
 
Healthcare
 
 
 
3

 
—

 
—

 
—
%
RMP Group, Inc. (c) (e) (u)
 
Financials
 
 
 
223

 
164

 
274

 
0.0
%
RockYou, Inc. (c) (e)
 
Media/Entertainment
 
 
 
15,105

 
—

 
—

 
—
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 18
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2019
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Schweiger Dermatology Group, LLC (c) (e) (u)
 
Healthcare
 
 
 
265,024

 
$
—

 
$
—

 
—
%
Siena Capital Finance, LLC (c) (o)
 
Financials
 
 
 
35,839,400

 
36,537

 
36,915

 
2.5
%
Smile Brands, Inc. (c) (e)
 
Healthcare
 
 
 
712

 
815

 
1,101

 
0.1
%
Squan Holding Corp. (c) (e)
 
Telecom
 
 
 
180,835

 
—

 
—

 
—
%
Squan Holding Corp. (c) (e)
 
Telecom
 
 
 
8,962

 
—

 
—

 
—
%
St. Croix Hospice Acquisition Corp. (c) (e)
 
Healthcare
 
 
 
112

 
—

 
31

 
0.0
%
St. Croix Hospice Acquisition Corp. (c) (e)
 
Healthcare
 
 
 
112

 
64

 
134

 
0.0
%
SYNACOR, Inc. (e) (s)
 
Technology
 
 
 
59,785

 
—

 
91

 
0.0
%
Tap Rock Resources, LLC (c) (e) (g) (p) (u)
 
Energy
 
 
 
20,672,210

 
20,672

 
20,879

 
1.4
%
Tax Advisors Group, LLC (c) (e) (u)
 
Financials
 
 
 
86

 
609

 
755

 
0.1
%
Tax Defense Network, LLC (c) (e) (p)
 
Consumer
 
 
 
633,382

 
—

 
—

 
—
%
Tax Defense Network, LLC (c) (e) (p)
 
Consumer
 
 
 
147,099

 
425

 
—

 
—
%
Team Waste, LLC (c) (e) (p) (u)
 
Industrials
 
 
 
111,752

 
2,235

 
2,235

 
0.2
%
Tennenbaum Waterman Fund, LP (a) (p)
 
Diversified Investment Vehicles
 
 
 
10,000

 
10,000

 
9,841

 
0.7
%
THL Credit Greenway Fund II, LLC (a) (p)
 
Diversified Investment Vehicles
 
 
 
5,048

 
5,048

 
2,554

 
0.2
%
Travelpro Products, Inc. (a) (c) (e)
 
Consumer
 
 
 
447,007

 
506

 
581

 
0.0
%
United Biologics, LLC (c) (e) (u)
 
Healthcare
 
 
 
39,769

 
132

 
21

 
0.0
%
United Biologics, LLC (c) (e) (u)
 
Healthcare
 
 
 
99,236

 
—

 
—

 
—
%
United Biologics, LLC (c) (e) (u)
 
Healthcare
 
 
 
3,155

 
—

 
—

 
—
%
United Biologics, LLC (c) (e) (u)
 
Healthcare
 
 
 
223

 
35

 
9

 
0.0
%
United Biologics, LLC (c) (e) (u)
 
Healthcare
 
 
 
4,206

 
31

 
15

 
0.0
%
USASF Holdco, LLC (c) (e) (u)
 
Financials
 
 
 
10,000

 
10

 
—

 
—
%
USASF Holdco, LLC (c) (e) (u)
 
Financials
 
 
 
490

 
490

 
640

 
0.0
%
USASF Holdco, LLC (c) (e) (u)
 
Financials
 
 
 
139

 
139

 
278

 
0.0
%
Vantage Mobility International, LLC (c) (e) (p)
 
Transportation
 
 
 
1,468,221

 
—

 
—

 
—
%
Vantage Mobility International, LLC (c) (e) (p)
 
Transportation
 
 
 
391,131

 
—

 
—

 
—
%
Vantage Mobility International, LLC (c) (e) (p)
 
Transportation
 
 
 
3,139,625

 
3,140

 
942

 
0.1
%
Women's Marketing, Inc. (c) (e)
 
Media/Entertainment
 
 
 
3,643

 
—

 
—

 
—
%
World Business Lenders, LLC (c) (e)
 
Financials
 
 
 
922,669

 
3,750

 
3,755

 
0.3
%
WPNT, LLC (c) (e) (o) (u)
 
Media/Entertainment
 
 
 
330,000

 
—

 
—

 
—
%
WSO Holdings, LP (c) (e)
 
Food & Beverage
 
 
 
698

 
279

 
—

 
—
%
Wythe Will Tzetzo, LLC (c) (e) (u)
 
Food & Beverage
 
 
 
22,312

 
301

 
—

 
—
%
YummyEarth, Inc. (c) (e)
 
Food & Beverage
 
 
 
223

 
—

 
—

 
—
%
Sub Total Equity/Other
 
 
 
 
 
$
210,172

 
$
258,336

 
17.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL INVESTMENTS - 174.1% (b)
 
 
 
 
 
$
2,639,642

 
$
2,546,184

 
174.1
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 19
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

Forward foreign currency contracts:
Counterparty
 
Contract to Deliver
 
In Exchange For
 
Maturity Date
 
Unrealized Depreciation
Goldman Sachs International
 
CAD 21,807
 
$
16,359

 
1/10/2020
 
$
(388
)
_____________
(a)
All of the Company's investments, except the investments noted by this footnote, are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act"). Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. Qualifying assets represent 75.9% of the Company's total assets. The significant majority of all investments held are deemed to be illiquid.
(b)
Percentages are based on net assets as of December 31, 2019.
(c)
The fair value of investments with respect to securities for which market quotations are not readily available is determined in good faith by the Company's Board of Directors as required by the 1940 Act. Such investments are valued using significant unobservable inputs (See Note 3 to the consolidated financial statements).
(d)
All amounts are in thousands except share amounts.
(e)
Non-income producing at December 31, 2019.
(f)
The Company has various unfunded commitments to portfolio companies. Please refer to Note 7 - Commitments and Contingencies for details of these unfunded commitments.
(g)
The commitment related to this investment is discretionary.
(h)
The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala LuxCo S.A.R.L, which own 100% of the equity of the operating company, Kahala Ireland OpCo Designated Activity Company.
(i)
The Company's investment or a portion thereof is pledged as collateral under the Wells Fargo Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.
(j)
The Company's investment or a portion thereof is pledged as collateral under the Citi Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.
(k)
The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala Aviation US, Inc. which own 100% of the equity of the operating company, Kahala US OpCo LLC.

The accompanying notes are an integral part of these consolidated financial statements.
F- 20
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

(l)
For the year ended December 31, 2019, the following investments paid or have the option to pay all or a portion of interest and dividends via payment-in-kind (“PIK”):
December 31, 2019
Portfolio Company
 
Investment Type
 
Cash
 
PIK
 
All-in Rate
 
PIK earned for the year ended December 31, 2019
Gold Standard Baking, Inc.
 
Senior Secured First Lien Debt
 
6.50
%
 
2.00
%
 
8.50
%
 
$
81

Integral Ad Science, Inc.
 
Senior Secured First Lien Debt
 
7.80
%
 
1.25
%
 
9.05
%
 
182

Internap Corp.
 
Senior Secured First Lien Debt
 
8.04
%
 
0.75
%
 
8.79
%
 
56

Kahala Ireland OpCo Designated Activity Company
 
Senior Secured First Lien Debt
 
13.00
%
 
—
%
 
13.00
%
 
—

Lakeview Health Holdings, Inc.
 
Senior Secured First Lien Debt
 
—
%
 
9.75
%
 
9.75
%
 
—

Lakeview Health Holdings, Inc.
 
Senior Secured First Lien Debt
 
—
%
 
9.75
%
 
9.75
%
 
—

LightSquared, LP
 
Senior Secured First Lien Debt
 
—
%
 
10.85
%
 
10.85
%
 
1,478

Medical Depot Holdings, Inc.
 
Senior Secured First Lien Debt
 
7.44
%
 
2.00
%
 
9.44
%
 
93

NexSteppe, Inc.
 
Senior Secured First Lien Debt
 
—
%
 
12.00
%
 
12.00
%
 
—

NexSteppe, Inc.
 
Senior Secured First Lien Debt
 
—
%
 
12.00
%
 
12.00
%
 
—

ORG Chemical Holdings, LLC
 
Senior Secured First Lien Debt
 
9.70
%
 
—
%
 
9.70
%
 
14

ORG Chemical Holdings, LLC
 
Senior Secured First Lien Debt
 
9.70
%
 
—
%
 
9.70
%
 
269

PT Network, LLC
 
Senior Secured First Lien Debt
 
7.44
%
 
2.00
%
 
9.44
%
 
101

Squan Holding Corp.
 
Senior Secured First Lien Debt
 
7.95
%
 
1.00
%
 
8.95
%
 
169

Tax Defense Network, LLC
 
Senior Secured First Lien Debt
 
—
%
 
10.00
%
 
10.00
%
 
—

Tax Defense Network, LLC
 
Senior Secured First Lien Debt
 
4.47
%
 
5.53
%
 
10.00
%
 
—

Tax Defense Network, LLC
 
Senior Secured First Lien Debt
 
4.47
%
 
5.53
%
 
10.00
%
 
—

TwentyEighty, Inc.
 
Senior Secured First Lien Debt
 
4.00
%
 
4.00
%
 
8.00
%
 
201

TwentyEighty, Inc.
 
Senior Secured First Lien Debt
 
0.25
%
 
8.75
%
 
9.00
%
 
426

Von Drehle Corp.
 
Senior Secured First Lien Debt
 
9.44
%
 
4.00
%
 
13.44
%
 
1,068

KidKraft, Inc.
 
Senior Secured Second Lien Debt
 
11.00
%
 
1.00
%
 
12.00
%
 
63

Travelpro Products, Inc.
 
Senior Secured Second Lien Debt
 
11.00
%
 
2.00
%
 
13.00
%
 
48

Travelpro Products, Inc.
 
Senior Secured Second Lien Debt
 
11.00
%
 
2.00
%
 
13.00
%
 
42

Vantage Mobility International, LLC
 
Senior Secured Second Lien Debt
 
—
%
 
7.80
%
 
7.80
%
 
—

Vital Proteins, LLC
 
Senior Secured Second Lien Debt
 
7.50
%
 
4.50
%
 
12.00
%
 
168

Captek Softgel International, Inc.
 
Subordinated Debt
 
10.00
%
 
1.50
%
 
11.50
%
 
80

Community Intervention Services, Inc.
 
Subordinated Debt
 
—
%
 
13.00
%
 
13.00
%
 
—

Dyno Acquiror, Inc.
 
Subordinated Debt
 
10.50
%
 
1.50
%
 
12.00
%
 
16

HTC Borrower, LLC
 
Subordinated Debt
 
10.00
%
 
3.00
%
 
13.00
%
 
169

Park Ave RE Holdings, LLC
 
Subordinated Debt
 
13.00
%
 
—
%
 
13.00
%
 
—

PCX Aerostructures, LLC
 
Subordinated Debt
 
—
%
 
6.00
%
 
6.00
%
 
462

RMP Group, Inc.
 
Subordinated Debt
 
10.50
%
 
1.00
%
 
11.50
%
 
23

Total
 
 
 
 
 
 
 
 
 
$
5,209

(m)
The principal amount (par amount) is denominated in Canadian Dollars or CAD.
(n)
For equity investments in Collateralized Securities, the effective yield is presented in place of the investment coupon rate for each investment. Refer to footnote (v) for a further description of an equity investment in a Collateralized Security.
(o)
The provisions of the 1940 Act classify investments based on the level of control that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be "non-controlled" when the Company owns 25% or less of the portfolio company's voting securities and "controlled" when the Company owns more than 25% of the portfolio company's voting securities. The Company classifies this investment as "controlled".
(p)
The provisions of the 1940 Act classify investments further based on the level of ownership that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as "non-affiliated" when the Company owns less than 5% of a portfolio company's voting securities and "affiliated" when the Company owns 5% or more of a portfolio company's voting securities. The Company classifies this investment as "affiliated".
(q)
Unless otherwise indicated, all investments in the consolidated schedule of investments are non-affiliated, non-controlled investments.
(r)
The Company's investment is held through the Consolidated Holding Company, Kahala Aviation Holdings, LLC, which owns 49% of the operating company, Danish CRJ LTD.

The accompanying notes are an integral part of these consolidated financial statements.
F- 21
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

(s)
The investment is not a restricted security. All other securities are restricted securities.
(t)
The investment is on non-accrual status as of December 31, 2019.
(u)
Investments are held in the taxable wholly-owned, consolidated subsidiary, 54th Street Equity Holdings, Inc.
(v)
The Collateralized Securities - subordinated notes are treated as equity investments and are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s securities less contractual payments to debt holders and fund expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.
(w)
The Company's investment is held through the consolidated subsidiary, Park Ave RE, Inc., which owns 100% of the equity of the operating company, Park Ave RE Holdings, LLC.
(x)
The investment is held through BSP TCAP Acquisition Holdings LP which, as further outlined in Note 1, is an affiliated acquisition entity utilized for the Triangle Transaction. Due to certain restrictions, such as limits on the number of partners allowable within the equity structures of the newly acquired investments, these investments are still held within the acquisition entity as of December 31, 2019. 
(y)
The majority of the investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate ("LIBOR" or "L") or Prime ("P") and which reset daily, monthly, quarterly, or semiannually. For each, the Company has provided the spread over LIBOR or Prime and the current interest rate in effect at December 31, 2019. Certain investments are subject to a LIBOR or Prime interest rate floor. For fixed rate loans, a spread above a reference rate is not applicable.




    

The accompanying notes are an integral part of these consolidated financial statements.
F- 22
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2019
The following table shows the portfolio composition by industry grouping based on fair value at December 31, 2019:
 
At December 31, 2019
 
Investments at
Fair Value
 
Percentage of
Total Portfolio
Healthcare
$
364,143

 
14.3
%
Business Services
354,813

 
13.9
%
Industrials
308,246

 
12.1
%
Transportation
180,676

 
7.1
%
Diversified Investment Vehicles
177,339

 
7.0
%
Financials
170,154

 
6.7
%
Telecom
152,334

 
6.0
%
Energy
152,159

 
6.0
%
Media/Entertainment
141,505

 
5.5
%
Technology
128,117

 
5.0
%
Food & Beverage
109,211

 
4.3
%
Consumer
76,535

 
3.0
%
Education
54,593

 
2.1
%
Gaming/Lodging
47,577

 
1.9
%
Paper & Packaging
43,538

 
1.7
%
Software/Services
42,372

 
1.7
%
Chemicals
32,564

 
1.3
%
Health/Fitness
5,324

 
0.2
%
Retail
4,984

 
0.2
%
Total
$
2,546,184

 
100.0
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 23
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2018
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Secured First Lien Debt - 106.8% (b)
 
 
 
 
 
 
 
 
 
 
Abaco Systems Holding Corp. (c) (i)
 
Industrials
 
L+6.00% (8.41%), 12/7/2021
 
$
23,456

 
$
23,177

 
$
22,980

 
1.5
%
ABC Financial Intermediate, LLC (c) (j)
 
Technology
 
L+4.25% (6.64%), 1/2/2025
 
7,681

 
7,648

 
7,681

 
0.5
%
AccentCare, Inc. (c)
 
Healthcare
 
L+4.50% (7.04%), 4/2/2019
 
3,353

 
3,349

 
3,323

 
0.2
%
AccentCare, Inc. (c) (i)
 
Healthcare
 
L+4.50% (7.30%), 4/3/2024
 
28,646

 
28,390

 
28,388

 
1.9
%
AHP Health Partners, Inc. (i)
 
Healthcare
 
L+4.50% (7.02%), 6/30/2025
 
18,888

 
18,711

 
18,558

 
1.2
%
Aleris International, Inc. (j)
 
Industrials
 
L+4.75% (7.25%), 2/27/2023
 
18,294

 
18,151

 
18,100

 
1.2
%
Altice France SA (a)
 
Telecom
 
8.13%, 2/1/2027
 
15,000

 
14,816

 
14,172

 
0.9
%
Alvogen Pharma US, Inc. (j)
 
Healthcare
 
L+4.75% (7.27%), 4/1/2022
 
13,511

 
13,433

 
13,207

 
0.9
%
AM General, LLC (c) (i)
 
Industrials
 
L+7.25% (9.77%), 12/28/2021
 
1,781

 
1,780

 
1,781

 
0.1
%
American Greetings Corp. (j)
 
Consumer
 
L+4.50% (7.00%), 4/6/2024
 
1,755

 
1,724

 
1,722

 
0.1
%
AMI Entertainment Network, LLC (c) (i)
 
Media/Entertainment
 
L+6.00% (8.80%), 7/21/2022
 
13,397

 
13,207

 
13,157

 
0.9
%
AP Gaming I, LLC (a) (j)
 
Gaming/Lodging
 
L+3.50% (6.02%), 2/15/2024
 
18,726

 
18,698

 
18,305

 
1.2
%
AP NMT Acquisition B.V. (a) (j)
 
Media/Entertainment
 
L+5.75% (8.15%), 8/13/2021
 
6,568

 
6,583

 
6,283

 
0.4
%
AqGen Ascensus, Inc. (j)
 
Business Services
 
L+3.50% (6.12%), 12/3/2022
 
8,472

 
8,465

 
8,239

 
0.6
%
Avantor Performance Materials, Inc.
 
Healthcare
 
9.00%, 10/1/2025
 
13,000

 
13,326

 
13,000

 
0.9
%
Avaya Holdings Corp. (a) (j)
 
Technology
 
L+4.25% (6.69%), 12/15/2024
 
26,382

 
26,164

 
25,425

 
1.7
%
Aveanna Healthcare, LLC (c)
 
Healthcare
 
L+5.50% (8.02%), 3/18/2024
 
4,694

 
4,428

 
4,569

 
0.3
%
Aveanna Healthcare, LLC (c) (j)
 
Healthcare
 
L+4.25% (6.77%), 3/18/2024
 
792

 
742

 
743

 
0.0
%
BCP Raptor, LLC (j)
 
Energy
 
L+4.25% (6.87%), 6/24/2024
 
19,229

 
19,068

 
17,907

 
1.2
%
BCP Renaissance, LLC (j)
 
Energy
 
L+3.50% (6.03%), 10/31/2024
 
3,455

 
3,440

 
3,355

 
0.2
%
BDS Solutions Group, LLC (c)
 
Business Services
 
L+8.75% (11.56%), 6/1/2021
 
7,033

 
6,953

 
6,646

 
0.4
%
BDS Solutions Group, LLC (c) (i)
 
Business Services
 
L+8.75% (11.56%), 6/1/2021
 
26,098

 
25,813

 
24,662

 
1.7
%
Beaver-Visitec International Holdings, Inc. (j)
 
Healthcare
 
L+4.00% (6.62%), 8/21/2023
 
6,514

 
6,514

 
6,449

 
0.4
%
Black Mountain Sand, LLC (c)
 
Energy
 
L+9.00% (11.40%), 11/30/2021
 
13,050

 
12,907

 
12,742

 
0.9
%
Black Mountain Sand, LLC (c)
 
Energy
 
L+9.00% (11.40%), 11/30/2021
 
13,050

 
12,892

 
12,742

 
0.9
%
BMC Software Finance, Inc. (j)
 
Technology
 
L+4.25% (7.05%), 10/2/2025
 
23,309

 
23,083

 
22,428

 
1.5
%
Bomgar Corp. (j)
 
Technology
 
L+4.00% (6.55%), 4/18/2025
 
1,982

 
1,974

 
1,907

 
0.1
%
California Resources Corp. (a) (j)
 
Energy
 
L+4.75% (7.26%), 12/31/2022
 
12,259

 
12,060

 
11,850

 
0.8
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 24
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2018
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Capstone Nutrition (fka Integrity Nutraceuticals) (c) (l) (o) (t)
 
Consumer
 
L+12.50% (15.03%), 9/25/2020
 
$
24,706

 
$
16,406

 
$
3,459

 
0.2
%
Capstone Nutrition (fka Integrity Nutraceuticals) (c) (l) (o) (t)
 
Consumer
 
L+12.50% (15.03%), 9/25/2020
 
54,940

 
33,647

 
7,692

 
0.5
%
Capstone Nutrition (fka Integrity Nutraceuticals) (c) (l) (o) (t)
 
Consumer
 
L+12.50% (15.03%), 9/25/2020
 
3,285

 
2,829

 
3,219

 
0.2
%
CareCentrix, Inc. (j)
 
Healthcare
 
L+4.50% (7.30%), 4/3/2025
 
9,604

 
9,561

 
9,412

 
0.6
%
CCW, LLC (c)
 
Food & Beverage
 
L+7.00% (9.56%), 3/21/2021
 
1,300

 
1,300

 
1,235

 
0.1
%
CCW, LLC (c) (i)
 
Food & Beverage
 
L+7.00% (9.56%), 3/21/2021
 
27,300

 
27,088

 
25,935

 
1.7
%
CDHA Holdings, LLC (c)
 
Healthcare
 
L+6.00% (8.80%), 8/24/2023
 
430

 
430

 
424

 
0.0
%
CDHA Holdings, LLC (c) (i)
 
Healthcare
 
L+6.00% (8.80%), 8/24/2023
 
15,759

 
15,539

 
15,546

 
1.0
%
Chloe Ox Parent, LLC (c) (i)
 
Healthcare
 
L+4.50% (7.30%), 12/23/2024
 
10,687

 
10,595

 
10,701

 
0.7
%
Clarion Events, Ltd. (a) (c) (j)
 
Business Services
 
L+5.00% (7.71%), 9/29/2024
 
10,497

 
10,301

 
10,268

 
0.7
%
Clover Technologies Group, LLC (j)
 
Industrials
 
L+4.50% (7.02%), 5/8/2020
 
13,178

 
13,149

 
12,437

 
0.8
%
Cold Spring Brewing, Co. (c) (i)
 
Food & Beverage
 
L+5.25% (7.71%), 5/15/2024
 
3,352

 
3,292

 
3,286

 
0.2
%
Community Care Health Network, LLC (j)
 
Healthcare
 
L+4.75% (7.27%), 2/16/2025
 
2,672

 
2,666

 
2,592

 
0.2
%
CONSOL Energy Inc. (c) (j)
 
Industrials
 
L+6.00% (8.53%), 11/28/2022
 
3,208

 
3,157

 
3,220

 
0.2
%
Contura Energy Inc. (a) (c) (j)
 
Industrials
 
L+5.00% (7.52%), 3/18/2024
 
6,448

 
6,195

 
6,432

 
0.4
%
Corfin Industries, LLC (c)
 
Industrials
 
L+6.50% (8.95%), 2/15/2024
 
574

 
574

 
563

 
0.0
%
Corfin Industries, LLC (c) (i)
 
Industrials
 
L+6.50% (9.00%), 2/15/2024
 
8,572

 
8,426

 
8,420

 
0.6
%
Crown Subsea Communications Holding, Inc. (j)
 
Industrials
 
L+6.00% (8.35%), 11/2/2025
 
10,020

 
9,922

 
9,607

 
0.7
%
Deva Holdings, Inc. (c) (i)
 
Consumer
 
L+6.25% (8.77%), 10/31/2023
 
7,191

 
7,256

 
7,263

 
0.5
%
DLC Acquisition, LLC (c)
 
Business Services
 
L+8.00% (10.80%), 12/30/2020
 
4,340

 
4,340

 
4,340

 
0.3
%
DLC Acquisition, LLC (c) (l)
 
Business Services
 
12.00%, 12/1/2020
 
3,325

 
3,325

 
3,325

 
0.2
%
Eagle Rx, LLC (c) (i)
 
Healthcare
 
L+4.25% (6.60%), 8/15/2019
 
26,790

 
26,752

 
26,589

 
1.8
%
Florida Food Products, LLC (c)
 
Food & Beverage
 
L+6.75% (9.27%), 9/6/2023
 
1,021

 
1,021

 
997

 
0.1
%
Florida Food Products, LLC (c) (i)
 
Food & Beverage
 
L+6.75% (9.27%), 9/6/2025
 
22,338

 
21,805

 
21,780

 
1.5
%
Frank Entertainment Group, LLC (c) (p) (t)
 
Media/Entertainment
 
6.00%, 6/30/2019
 
3,014

 
1,836

 
1,441

 
0.1
%
Frontier Communications Corp. (a) (j)
 
Telecom
 
L+3.75% (6.28%), 6/17/2024
 
9,919

 
9,702

 
9,182

 
0.6
%
Gold Standard Baking, Inc.
 
Food & Beverage
 
L+4.50% (7.31%), 4/23/2021
 
2,977

 
1,812

 
1,786

 
0.1
%
Green Energy Partners/Stonewall, LLC (j)
 
Energy
 
L+5.50% (8.30%), 11/13/2021
 
1,010

 
1,008

 
999

 
0.1
%
Green Energy Partners/Stonewall, LLC (j)
 
Energy
 
L+5.50% (8.30%), 11/13/2021
 
1,337

 
1,335

 
1,323

 
0.1
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 25
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2018
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
HC Group Holdings III, Inc. (c) (j)
 
Healthcare
 
L+3.75% (6.27%), 4/7/2022
 
$
14,630

 
$
14,467

 
$
14,630

 
1.0
%
Hexion Inc.
 
Chemicals
 
10.38%, 2/1/2022
 
5,000

 
4,944

 
4,013

 
0.3
%
Hexion Inc.
 
Chemicals
 
6.63%, 4/15/2020
 
5,000

 
4,675

 
3,988

 
0.3
%
Hexion Inc.
 
Chemicals
 
10.00%, 4/15/2020
 
10,000

 
9,363

 
8,270

 
0.6
%
ICR Operations, LLC (c)
 
Business Services
 
L+5.50% (8.31%), 3/26/2024
 
111

 
109

 
109

 
0.0
%
ICR Operations, LLC (c) (i)
 
Business Services
 
L+5.50% (8.31%), 3/26/2025
 
13,567

 
13,326

 
13,337

 
0.9
%
Ideal Tridon Holdings, Inc. (c)
 
Industrials
 
L+6.50% (9.02%), 7/31/2022
 
2,021

 
1,996

 
1,993

 
0.1
%
Ideal Tridon Holdings, Inc. (c) (i)
 
Industrials
 
L+6.50% (9.02%), 7/31/2023
 
5,185

 
5,116

 
5,111

 
0.3
%
Ideal Tridon Holdings, Inc. (c) (i)
 
Industrials
 
L+6.50% (9.02%), 7/31/2023
 
23,663

 
23,302

 
23,324

 
1.6
%
Integral Ad Science, Inc. (c) (l)
 
Software/Services
 
L+6.00% (8.53%), 7/19/2024
 
14,198

 
13,937

 
13,914

 
0.9
%
Integrated Efficiency Solutions, Inc. (c) (l)
 
Industrials
 
L+9.25% (12.05%), 6/1/2022
 
3,876

 
3,875

 
3,760

 
0.3
%
Intelsat Jackson Holdings, SA (a) (j)
 
Telecom
 
L+4.50% (7.01%), 1/2/2024
 
10,000

 
10,222

 
9,910

 
0.7
%
Internap Corp. (a) (c) (i)
 
Business Services
 
L+5.75% (8.19%), 4/6/2022
 
11,880

 
11,865

 
11,648

 
0.8
%
IPC Corp. (j)
 
Software/Services
 
L+4.50% (7.03%), 8/6/2021
 
3,784

 
3,742

 
3,235

 
0.2
%
Iri Holdings, Inc. (j)
 
Business Services
 
L+4.50% (7.02%), 11/30/2025
 
5,000

 
4,950

 
4,863

 
0.3
%
Kahala Ireland OpCo Designated Activity Company (a) (c) (l) (o)
 
Transportation
 
L+8.00% (13.00%), 12/23/2028
 
111,549

 
111,549

 
111,549

 
7.5
%
Kissner Milling Co. Ltd. (a)
 
Industrials
 
8.38%, 12/1/2022
 
21,199

 
21,472

 
21,345

 
1.4
%
Lakeland Tours, LLC (i)
 
Education
 
L+4.00% (6.79%), 12/15/2024
 
6,052

 
6,040

 
5,881

 
0.4
%
Lakeview Health Holdings, Inc. (c)
 
Healthcare
 
L+8.75% (11.55%), 12/15/2021
 
4,077

 
3,057

 
3,262

 
0.2
%
LightSquared, LP (l)
 
Telecom
 
L+8.75% (11.52%), 12/7/2020
 
12,606

 
12,017

 
8,667

 
0.6
%
Lionbridge Technologies, Inc. (i) (j)
 
Business Services
 
L+5.50% (8.02%), 2/28/2024
 
16,166

 
16,090

 
16,024

 
1.1
%
Loparex International Holding B.V. (j)
 
Paper & Packaging
 
L+4.25% (7.05%), 4/11/2025
 
1,993

 
1,984

 
1,953

 
0.1
%
McDermott Technology, B.V. (a) (j)
 
Industrials
 
L+5.00% (7.52%), 5/10/2025
 
9,975

 
9,877

 
9,285

 
0.6
%
MCS Acquisition Corp. (c) (j)
 
Business Services
 
L+4.75% (7.27%), 5/18/2024
 
14,153

 
14,105

 
11,464

 
0.8
%
Medallion Midland Acquisition, LP (j)
 
Energy
 
L+3.25% (5.77%), 10/30/2024
 
4,406

 
4,396

 
4,147

 
0.3
%
Medical Depot Holdings, Inc. (c) (i)
 
Healthcare
 
L+5.50% (8.30%), 1/3/2023
 
19,264

 
18,084

 
17,492

 
1.2
%
MGTF Radio Company, LLC (c)
 
Media/Entertainment
 
P+3.50% (9.00%), 3/29/2020
 
37,956

 
37,956

 
37,576

 
2.5
%
Micross Solutions, LLC (c)
 
Software/Services
 
L+5.50% (8.27%), 8/7/2023
 
3,163

 
3,017

 
3,084

 
0.2
%
Midwest Can Company, LLC (c) (i)
 
Paper & Packaging
 
L+5.00% (7.56%), 4/11/2024
 
4,669

 
4,627

 
4,604

 
0.3
%
MLN US Holdco, LLC (a) (j)
 
Technology
 
L+4.50% (7.02%), 11/30/2025
 
13,455

 
13,414

 
13,009

 
0.9
%
MMM Holdings, LLC (c)
 
Healthcare
 
L+6.25% (8.68%), 3/15/2023
 
3,500

 
3,432

 
3,472

 
0.2
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 26
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2018
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
MMM Holdings, LLC (c) (i)
 
Healthcare
 
L+6.25% (8.71%), 3/15/2023
 
$
20,449

 
$
20,106

 
$
20,288

 
1.4
%
Monitronics International, Inc. (j)
 
Business Services
 
L+5.50% (8.30%), 9/30/2022
 
10,072

 
10,095

 
8,901

 
0.6
%
Montreign Operating Company, LLC (j)
 
Gaming/Lodging
 
L+8.25% (10.96%), 1/24/2023
 
26,957

 
26,615

 
24,900

 
1.7
%
Mood Media Corp. (c) (i) (l)
 
Media/Entertainment
 
L+7.25% (10.05%), 6/28/2022
 
14,318

 
14,092

 
13,817

 
0.9
%
Murray Energy Holdings Co. (j)
 
Industrials
 
L+7.25% (9.78%), 10/17/2022
 
9,231

 
9,089

 
7,777

 
0.5
%
National Technical Systems, Inc. (c) (i)
 
Business Services
 
L+6.25% (8.60%), 6/12/2021
 
17,648

 
17,569

 
16,589

 
1.1
%
Navitas Midstream Midland Basin, LLC (c) (j)
 
Energy
 
L+4.50% (7.00%), 12/13/2024
 
13,462

 
13,436

 
13,387

 
0.9
%
New Star Metals, Inc. (c) (i)
 
Industrials
 
L+6.00% (8.80%), 7/9/2023
 
22,934

 
22,615

 
22,714

 
1.5
%
NexSteppe, Inc. (c) (l) (o) (t)
 
Chemicals
 
12.00%, 3/31/2019
 
2,010

 
1,750

 
—

 
—
%
NexSteppe, Inc. (c) (l) (o) (t)
 
Chemicals
 
12.00%, 3/31/2019
 
13,542

 
10,453

 
—

 
—
%
NTM Acquisition Corp. (c) (i)
 
Media/Entertainment
 
L+6.25% (8.96%), 6/7/2022
 
17,692

 
17,552

 
17,427

 
1.2
%
Office Depot, Inc. (a) (j)
 
Retail
 
L+5.25% (7.71%), 11/8/2022
 
5,860

 
5,768

 
5,894

 
0.4
%
ORG Chemical Holdings, LLC (c) (i)
 
Chemicals
 
L+5.75% (8.55%), 6/30/2022
 
27,543

 
27,158

 
26,741

 
1.8
%
ORG GC Holdings, LLC (c) (i)
 
Business Services
 
L+6.00% (8.80%), 7/31/2022
 
25,291

 
25,019

 
24,942

 
1.7
%
Passport Food Group, LLC (c)
 
Food & Beverage
 
L+9.00% (11.40%), 3/1/2022
 
4,470

 
2,905

 
2,682

 
0.2
%
Peabody Energy Corp
 
Industrials
 
6.38%, 3/31/2025
 
5,000

 
4,821

 
4,692

 
0.3
%
PeopLease Holdings, LLC (c) (i)
 
Business Services
 
L+9.00% (11.81%), 2/26/2021
 
20,000

 
19,913

 
17,500

 
1.2
%
PGX Holdings, Inc. (c) (j)
 
Consumer
 
L+5.25% (7.78%), 9/29/2020
 
12,183

 
12,154

 
11,940

 
0.8
%
Premier Dental Services, Inc. (i) (j)
 
Healthcare
 
L+5.25% (7.75%), 6/30/2023
 
32,686

 
32,480

 
30,725

 
2.1
%
Premier Global Services, Inc. (c) (j)
 
Telecom
 
L+6.25% (8.84%), 12/8/2021
 
8,843

 
8,640

 
7,511

 
0.5
%
Pride Plating, Inc. (c) (i)
 
Industrials
 
L+5.50% (8.02%), 6/13/2019
 
12,222

 
12,215

 
12,222

 
0.8
%
PSKW, LLC (c) (i)
 
Healthcare
 
L+4.25% (7.05%), 11/25/2021
 
1,392

 
1,385

 
1,392

 
0.1
%
PSKW, LLC (c)
 
Healthcare
 
L+8.25% (11.05%), 11/25/2021
 
17,750

 
17,578

 
17,750

 
1.2
%
PSKW, LLC (c)
 
Healthcare
 
L+8.25% (11.05%), 11/25/2021
 
1,972

 
1,944

 
1,972

 
0.1
%
PSKW, LLC (c)
 
Healthcare
 
L+8.25% (11.05%), 11/25/2021
 
1,930

 
1,914

 
1,930

 
0.1
%
PT Network, LLC (c)
 
Healthcare
 
P+4.50% (10.00%), 11/30/2021
 
658

 
658

 
609

 
0.0
%
PT Network, LLC (c) (i)
 
Healthcare
 
L+5.50% (7.93%), 11/30/2021
 
16,679

 
16,582

 
15,448

 
1.0
%
Questex, Inc. (c)
 
Media/Entertainment
 
L+6.25% (9.02%), 9/7/2024
 
431

 
431

 
423

 
0.0
%
Questex, Inc. (c) (i)
 
Media/Entertainment
 
L+6.25% (9.02%), 9/7/2024
 
16,151

 
15,845

 
15,858

 
1.1
%
Quorum Health Corporation (j)
 
Healthcare
 
L+6.75% (9.27%), 4/29/2022
 
5,212

 
5,282

 
5,149

 
0.4
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 27
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2018
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Regionalcare Hospital Partners Holdings, Inc. (a) (j)
 
Healthcare
 
L+4.50% (7.13%), 11/16/2025
 
$
20,000

 
$
19,618

 
$
18,925

 
1.3
%
Resco Products, Inc. (c)
 
Industrials
 
L+4.50% (7.02%), 3/7/2020
 
10,000

 
10,000

 
9,850

 
0.7
%
RR Donnelley & Sons Co (a) (j)
 
Publishing
 
L+5.00% (7.51%), 1/15/2024
 
10,000

 
9,925

 
9,775

 
0.7
%
Schenectady International Group, Inc. (j)
 
Chemicals
 
L+4.75% (7.19%), 10/15/2025
 
19,791

 
19,283

 
18,999

 
1.3
%
SCUF Gaming, Inc. (c)
 
Consumer
 
L+9.50% (12.01%), 12/1/2021
 
5,434

 
4,483

 
4,619

 
0.3
%
SCUF Gaming, Inc. (c)
 
Consumer
 
L+9.50% (12.01%), 3/1/2019
 
335

 
335

 
285

 
0.0
%
Skillsoft Corp. (j)
 
Technology
 
L+4.75% (7.27%), 4/28/2021
 
24,779

 
23,349

 
19,968

 
1.3
%
Squan Holding Corp. (c) (l)
 
Telecom
 
L+7.00% (9.40%), 10/10/2019
 
16,804

 
15,718

 
12,099

 
0.8
%
SSH Group Holdings, Inc. (j)
 
Education
 
L+4.25% (6.77%), 7/30/2025
 
6,043

 
6,029

 
5,786

 
0.4
%
Subsea Global Solutions, LLC (c)
 
Business Services
 
L+7.00% (9.78%), 3/28/2023
 
215

 
215

 
208

 
0.0
%
Subsea Global Solutions, LLC (c) (i)
 
Business Services
 
L+7.00% (9.80%), 3/28/2023
 
8,411

 
8,269

 
8,137

 
0.6
%
Sutherland Global
 
Business Services
 
L+5.38% (8.18%), 4/23/2021
 
488

 
460

 
458

 
0.0
%
Sutherland Global
 
Business Services
 
L+5.38% (8.18%), 4/23/2021
 
2,097

 
1,976

 
1,966

 
0.1
%
Tax Defense Network, LLC (c) (l) (p) (t)
 
Consumer
 
L+6.00% (10.00%), 4/30/2020
 
33,028

 
26,218

 
7,927

 
0.5
%
Tillamook Country Smoker, LLC (c)
 
Food & Beverage
 
L+5.75% (8.57%), 5/19/2022
 
3,235

 
3,235

 
3,154

 
0.2
%
Tillamook Country Smoker, LLC (c) (i)
 
Food & Beverage
 
L+5.75% (8.40%), 5/19/2022
 
10,193

 
10,089

 
9,942

 
0.7
%
Trademark Global, LLC (c)
 
Consumer
 
L+5.50% (8.02%), 10/1/2022
 
2,188

 
2,187

 
2,171

 
0.1
%
Transperfect Global, Inc. (c) (i)
 
Business Services
 
L+6.75% (9.25%), 5/7/2024
 
6,808

 
6,686

 
6,709

 
0.5
%
Traverse Midstream Partners, LLC (j)
 
Energy
 
L+4.00% (6.60%), 9/27/2024
 
6,352

 
6,326

 
6,082

 
0.4
%
Trilogy International Partners, LLC (a)
 
Telecom
 
8.88%, 5/1/2022
 
14,875

 
14,822

 
14,257

 
1.0
%
TwentyEighty, Inc. (c) (l) (p)
 
Business Services
 
8.00%, 3/31/2020
 
6,553

 
5,460

 
6,422

 
0.4
%
TwentyEighty, Inc. (c) (l) (p)
 
Business Services
 
L+8.00% (10.80%), 3/31/2020
 
304

 
274

 
300

 
0.0
%
TwentyEighty, Inc. (c) (l) (p)
 
Business Services
 
8.75%, 3/31/2020
 
6,283

 
5,289

 
6,158

 
0.4
%
US Salt, LLC (c)
 
Industrials
 
L+4.75% (7.27%), 12/1/2023
 
1,244

 
1,244

 
1,244

 
0.1
%
US Salt, LLC (c) (i)
 
Industrials
 
L+4.75% (7.27%), 12/1/2023
 
5,150

 
5,107

 
5,150

 
0.3
%
USF S&H Holdco, LLC (c)
 
Health/Fitness
 
L+5.75% (8.17%), 3/16/2023
 
485

 
485

 
478

 
0.0
%
USF S&H Holdco, LLC (c) (i)
 
Health/Fitness
 
L+5.75% (8.54%), 3/19/2024
 
24,245

 
23,929

 
23,896

 
1.6
%
Veritas US, Inc.
 
Technology
 
10.50%, 2/1/2024
 
7,289

 
7,144

 
4,701

 
0.3
%
Veritas US, Inc. (j)
 
Technology
 
L+4.50% (7.30%), 1/27/2023
 
7,550

 
7,568

 
6,412

 
0.4
%
Vertex Aerospace Services Corp. (i)
 
Industrials
 
L+4.75% (7.27%), 6/16/2025
 
8,815

 
8,774

 
8,705

 
0.6
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 28
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2018
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Von Drehle Corp. (c) (i) (l)
 
Paper & Packaging
 
L+11.50% (14.30%), 3/6/2023
 
$
26,176

 
$
25,855

 
$
23,373

 
1.6
%
Vyaire Medical, Inc. (c) (j)
 
Healthcare
 
L+4.75% (7.14%), 4/16/2025
 
8,940

 
8,616

 
8,270

 
0.6
%
WMK, LLC (c) (i)
 
Business Services
 
L+5.75% (8.29%), 9/5/2025
 
20,609

 
20,216

 
20,210

 
1.4
%
Xplornet Communications, Inc. (a) (j)
 
Telecom
 
L+4.00% (6.80%), 9/9/2021
 
12,996

 
12,939

 
12,833

 
0.9
%
YummyEarth, Inc. (c)
 
Food & Beverage
 
L+8.50% (11.31%), 8/1/2023
 
2,626

 
1,917

 
2,626

 
0.2
%
YummyEarth, Inc. (c)
 
Food & Beverage
 
L+8.50% (11.31%), 8/1/2023
 
4,150

 
3,029

 
2,075

 
0.1
%
Sub Total Senior Secured First Lien Debt
 
 
 
 
 
$
1,712,904

 
$
1,594,063

 
106.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Secured Second Lien Debt - 18.5% (b)
 
 
 
 
 
 
 
 
 
 
Anchor Glass Container Corp. (c)
 
Paper & Packaging
 
L+7.75% (10.22%), 12/7/2024
 
$
20,000

 
$
19,845

 
$
11,600

 
0.8
%
Astro AB Merger Sub, Inc. (a) (c)
 
Financials
 
L+7.50% (10.03%), 4/30/2023
 
7,758

 
7,758

 
7,758

 
0.5
%
Avatar Purchaser, Inc. (c) (j)
 
Software/Services
 
L+7.50% (10.16%), 11/17/2025
 
11,716

 
11,414

 
11,229

 
0.8
%
Aveanna Healthcare, LLC (c) (j)
 
Healthcare
 
L+8.00% (10.52%), 3/17/2025
 
15,000

 
14,824

 
14,321

 
1.0
%
Baker Hill Acquisition, LLC (c)
 
Financials
 
L+11.00% (13.40%), 3/1/2021
 
3,017

 
1,508

 
1,500

 
0.1
%
Baker Hill Acquisition, LLC (c)
 
Financials
 
L+11.00% (13.40%), 3/1/2021
 
447

 
391

 
447

 
0.0
%
Boston Market Corp. (c)
 
Food & Beverage
 
L+8.25% (10.96%), 1/16/2021
 
23,851

 
23,828

 
19,916

 
1.3
%
BrandMuscle Holdings Inc. (c)
 
Business Services
 
L+8.50% (10.90%), 6/1/2022
 
24,500

 
24,241

 
24,010

 
1.6
%
Cafe Enterprises, Inc. (c) (t)
 
Food & Beverage
 
14.00%, 3/31/2019
 
475

 
—

 
—

 
—
%
Carlisle FoodService Products, Inc. (c)
 
Consumer
 
L+7.75% (10.26%), 3/20/2026
 
10,719

 
10,526

 
10,515

 
0.7
%
CDS U.S. Intermediate Holdings, Inc. (a) (c)
 
Media/Entertainment
 
L+8.25% (11.05%), 7/8/2023
 
7,927

 
7,830

 
6,983

 
0.5
%
Constellis Holdings, LLC (c)
 
Business Services
 
L+9.00% (11.52%), 4/21/2025
 
1,117

 
1,117

 
1,061

 
0.1
%
Dentalcorp Perfect Smile, ULC (a) (c)
 
Healthcare
 
L+7.50% (10.02%), 6/1/2026
 
8,111

 
8,035

 
8,030

 
0.5
%
Dentalcorp Perfect Smile, ULC (a) (c)
 
Healthcare
 
L+7.50% (10.02%), 6/1/2026
 
1,156

 
1,145

 
1,144

 
0.1
%
Dimora Brands, Inc. (c)
 
Consumer
 
L+8.50% (11.02%), 8/25/2025
 
4,470

 
4,469

 
4,470

 
0.3
%
Edelman Financial Services, LLC (a) (j)
 
Financials
 
L+6.75% (9.19%), 7/20/2026
 
6,764

 
6,732

 
6,426

 
0.4
%
Frank Entertainment Group, LLC (c) (p) (t)
 
Media/Entertainment
 
10.00%, 6/30/2019
 
724

 
—

 
—

 
—
%
Hyland Software, Inc.
 
Technology
 
L+7.00% (9.52%), 7/7/2025
 
5,837

 
5,874

 
5,728

 
0.4
%
ICP Industrial, Inc. (c)
 
Chemicals
 
L+8.25% (10.68%), 5/3/2024
 
5,588

 
5,587

 
5,504

 
0.4
%
IDERA, Inc. (c)
 
Technology
 
L+4.50% (7.03%), 6/1/2025
 
1,788

 
1,788

 
1,788

 
0.1
%
KidKraft, Inc. (c) (l)
 
Consumer
 
12.00%, 3/30/2022
 
6,309

 
6,228

 
6,215

 
0.4
%
MLN US Holdco, LLC (a)
 
Technology
 
L+8.75% (11.27%), 11/30/2026
 
3,000

 
2,941

 
2,918

 
0.2
%
Navicure, Inc. (c)
 
Healthcare
 
L+7.50% (10.02%), 10/31/2025
 
1,341

 
1,341

 
1,321

 
0.1
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 29
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2018
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Northstar Financial Services Group, LLC (c)
 
Financials
 
L+7.50% (10.12%), 5/25/2026
 
$
3,381

 
$
3,365

 
$
3,381

 
0.2
%
Oxbow Carbon LLC (c)
 
Industrials
 
L+7.50% (10.02%), 1/4/2024
 
1,395

 
1,430

 
1,409

 
0.1
%
PetVet Care Centers, LLC (c)
 
Healthcare
 
L+6.25% (8.75%), 2/13/2026
 
3,539

 
3,523

 
3,449

 
0.2
%
PI US Holdco III, Ltd. (a) (c)
 
Financials
 
L+7.25% (9.77%), 12/20/2025
 
6,696

 
6,637

 
6,661

 
0.5
%
ProAmpac, LLC (c)
 
Paper & Packaging
 
L+8.50% (11.14%), 11/18/2024
 
3,352

 
3,351

 
3,352

 
0.2
%
Recess Holdings, Inc. (c)
 
Industrials
 
L+7.75% (10.55%), 9/29/2025
 
15,008

 
14,812

 
14,783

 
1.0
%
Renaissance Holding Corp. (j)
 
Software/Services
 
L+7.00% (9.50%), 5/29/2026
 
8,456

 
8,298

 
7,751

 
0.5
%
River Cree Enterprises, LP (a) (c) (z)
 
Gaming/Lodging
 
10.00%, 5/17/2025
 
21,275

 
16,399

 
15,367

 
1.0
%
SCA Pharmaceuticals, LLC (c)
 
Healthcare
 
L+9.00% (11.80%), 12/16/2020
 
2,235

 
2,152

 
2,051

 
0.1
%
SSH Group Holdings, Inc. (c) (j)
 
Education
 
L+8.25% (10.77%), 7/30/2026
 
10,122

 
10,026

 
10,021

 
0.7
%
St. Croix Hospice Acquisition Corp. (c)
 
Healthcare
 
L+8.75% (11.27%), 3/1/2024
 
2,056

 
1,965

 
2,056

 
0.1
%
TierPoint, LLC (c)
 
Business Services
 
L+7.25% (9.77%), 5/5/2025
 
5,334

 
5,292

 
5,227

 
0.4
%
Travelpro Products, Inc. (a) (c) (l)
 
Consumer
 
13.00%, 11/1/2022
 
2,357

 
2,356

 
2,357

 
0.2
%
Travelpro Products, Inc. (a) (c) (l) (z)
 
Consumer
 
13.00%, 11/1/2022
 
CAD
2,731

 
2,088

 
2,003

 
0.1
%
U.S. Auto (c)
 
Financials
 
L+10.50% (12.85%), 6/8/2020
 
30,000

 
29,849

 
29,850

 
2.0
%
US Salt, LLC (c)
 
Industrials
 
L+8.75% (11.14%), 12/1/2024
 
12,872

 
12,709

 
12,872

 
0.9
%
Sub Total Senior Secured Second Lien Debt
 
 
 
 
 
$
291,674

 
$
275,474

 
18.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Subordinated Debt - 9.3% (b)
 
 
 
 
 
 
 
 
 
 
AHP Health Partners, Inc.
 
Healthcare
 
9.75%, 7/15/2026
 
$
6,589

 
$
6,503

 
$
6,725

 
0.4
%
BMC Software Finance, Inc.
 
Technology
 
9.75%, 9/1/2026
 
5,000

 
4,691

 
4,575

 
0.3
%
Cafe Enterprises, Inc. (c) (t)
 
Food & Beverage
 
14.00%, 9/30/2019
 
3,681

 
—

 
—

 
—
%
Capital Contractors, Inc. (c) (t)
 
Business Services
 
16.00%, 6/30/2020
 
2,200

 
—

 
—

 
—
%
Captek Softgel International, Inc. (c) (l)
 
Health/Fitness
 
11.50%, 1/1/2023
 
6,992

 
6,991

 
6,625

 
0.4
%
Community Intervention Services, Inc. (c) (l) (t)
 
Healthcare
 
13.00%, 1/31/2021
 
5,335

 
—

 
—

 
—
%
Del Real, LLC (c)
 
Food & Beverage
 
11.00%, 4/1/2023
 
3,129

 
2,958

 
2,926

 
0.2
%
Dyno Acquiror, Inc. (c) (l)
 
Consumer
 
12.00%, 2/1/2020
 
1,058

 
1,058

 
1,058

 
0.1
%
Frontier Communications Corp. (a)
 
Telecom
 
8.50%, 4/15/2020
 
10,000

 
9,490

 
8,888

 
0.6
%
Frontstreet Facility Solutions, Inc. (c) (p)
 
Business Services
 
13.00%, 3/1/2021
 
1,891

 
227

 
189

 
0.0
%
HC2 Holdings, Inc.
 
Industrials
 
11.50%, 12/1/2021
 
10,796

 
10,666

 
10,067

 
0.7
%
HemaSource, Inc. (c) (ac)
 
Healthcare
 
11.00%, 1/1/2024
 
2,235

 
2,131

 
2,168

 
0.1
%
HTC Borrower, LLC (c) (l)
 
Consumer
 
13.00%, 9/1/2020
 
5,633

 
5,409

 
5,604

 
0.4
%
Iridium Communications, Inc.
 
Telecom
 
10.25%, 4/15/2023
 
3,536

 
3,536

 
3,753

 
0.3
%
MGTF Radio Company, LLC (c) (l) (t)
 
Media/Entertainment
 
16.00%, 3/30/2020
 
24,490

 
24,309

 
20,082

 
1.3
%
Park Ave RE Holdings, LLC (c) (d) (l) (o)
 
Financials
 
13.00%, 12/31/2021
 
37,192

 
37,192

 
37,192

 
2.5
%
PCX Aerostructures, LLC (c) (l)
 
Industrials
 
6.00%, 8/9/2021
 
7,414

 
5,601

 
5,560

 
0.4
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 30
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2018
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
RMP Group, Inc. (c) (l)
 
Financials
 
11.50%, 9/1/2022
 
$
2,277

 
$
2,195

 
$
2,254

 
0.2
%
Trademark Global, LLC (c)
 
Consumer
 
11.25%, 4/1/2023
 
3,308

 
3,310

 
3,241

 
0.2
%
Vantage Mobility International, LLC (c)
 
Transportation
 
L+7.75% (10.28%), 9/1/2021
 
6,863

 
5,853

 
5,696

 
0.4
%
Xplornet Communications, Inc. (a) (l)
 
Telecom
 
9.63%, 6/1/2022
 
11,683

 
11,683

 
11,566

 
0.8
%
Sub Total Subordinated Debt
 
 
 
 
 
$
143,803

 
$
138,169

 
9.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Collateralized Securities - 8.5% (b)
 
 
 
 
 
 
 
 
 
 
Collateralized Securities - Debt Investment
 
 
 
 
 
 
 
 
 
 
Figueroa - Class F Notes (a) (c) (p)
 
Diversified Investment Vehicles
 
12.79%, 1/15/2027
 
$
8,000

 
$
8,000

 
$
7,508

 
0.5
%
NewStar Arlington Senior Loan Program, LLC 14-1A FR (a) (c) (p)
 
Diversified Investment Vehicles
 
13.77%, 4/25/2031
 
4,750

 
4,532

 
4,425

 
0.3
%
Newstar Fairfield Fund CLO, Ltd. 2015-1RA F (a) (c) (p)
 
Diversified Investment Vehicles
 
10.26%, 1/20/2027
 
10,728

 
9,424

 
8,580

 
0.6
%
Whitehorse, Ltd. 2014-1A E (a) (c) (p)
 
Diversified Investment Vehicles
 
7.29%, 5/1/2026
 
8,000

 
7,673

 
7,269

 
0.5
%
Collateralized Securities - Equity Investment (n)
 
 
 
 
 
 
 
 
 
 
B&M CLO, Ltd. 2014-1A SUB (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
0.00%, 4/16/2026
 
$
40,250

 
$
10,524

 
$
6,029

 
0.4
%
CVP Cascade CLO, Ltd. 2013-CLO1 Side Letter (a) (c) (p) (s)
 
Diversified Investment Vehicles
 
 
 
3,243

 
535

 
68

 
0.0
%
CVP Cascade CLO, Ltd. 2013-CLO1 SUB (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
0.00%, 1/16/2026
 
31,000

 
974

 
1,166

 
0.1
%
CVP Cascade CLO, Ltd. 2014-2A Side Letter (a) (c) (p) (s)
 
Diversified Investment Vehicles
 
 
 
3,755

 
1,022

 
274

 
0.0
%
Figueroa CLO, Ltd. 2014-1A Side Letter (a) (c) (p) (s)
 
Diversified Investment Vehicles
 
 
 
2,986

 
1,244

 
483

 
0.1
%
Figueroa CLO, Ltd. 2014-1A SUB (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
0.00%, 1/15/2027
 
35,057

 
11,568

 
7,468

 
0.5
%
MidOcean Credit CLO 2013-2A INC (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
12.07%, 1/29/2025
 
37,600

 
20,445

 
16,534

 
1.1
%
MidOcean Credit CLO 2014-3A SUB (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
14.97%, 7/21/2026
 
43,300

 
16,915

 
14,651

 
1.0
%
MidOcean Credit CLO 2015-4A INC (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
0.00%, 4/15/2027
 
21,500

 
12,105

 
8,595

 
0.6
%
NewStar Arlington Senior Loan Program, LLC 14-1A SUB (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
17.51%, 7/25/2025
 
31,603

 
19,799

 
24,788

 
1.6
%
Newstar Fairfield Fund CLO, Ltd. 2015-1RA SUB (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
12.31%, 1/19/2027
 
31,575

 
10,329

 
11,895

 
0.8
%
OFSI Fund, Ltd. 2014-6A Side Letter (a) (c) (p) (s)
 
Diversified Investment Vehicles
 
 
 
1,970

 
501

 
199

 
0.0
%
OFSI Fund, Ltd. 2014-6A SUB (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
0.00%, 3/20/2025
 
38,000

 
10,003

 
3,008

 
0.2
%
Whitehorse, Ltd. 2014-1A Side Letter (a) (c) (p) (s)
 
Diversified Investment Vehicles
 
 
 
1,886

 
477

 
297

 
0.0
%
Whitehorse, Ltd. 2014-1A SUB (a) (c) (p) (v)
 
Diversified Investment Vehicles
 
0.00%, 5/1/2026
 
36,000

 
8,860

 
3,975

 
0.2
%
Sub Total Collateralized Securities
 
 
 
 
 
$
154,930

 
$
127,212

 
8.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity/Other - 13.3% (b) (ad)
 
 
 
 
 
 
 
 
 
 
Aden & Anais Holdings, Inc. (c) (e) (ac)
 
Retail
 
 
 
4,470

 
$
—

 
$
—

 
—
%
Answers Corp. (c) (p)
 
Media/Entertainment
 
 
 
908,911

 
11,361

 
1,909

 
0.1
%
Avaya Holdings Corp. (a) (e) (aa)
 
Technology
 
 
 
207,310

 
3,292

 
3,018

 
0.2
%
Baker Hill Acquisition, LLC (c) (e)
 
Financials
 
 
 
22,653

 
—

 
—

 
—
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 31
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2018
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Cafe Enterprises, Inc. (c) (e)
 
Food & Beverage
 
 
 
2,235

 
$
—

 
$
—

 
—
%
Capital Contractors, Inc. (c) (e)
 
Business Services
 
 
 
45

 
—

 
—

 
—
%
Capital Contractors, Inc. (c) (e)
 
Business Services
 
 
 
4,470

 
—

 
—

 
—
%
Capstone Nutrition Class B and C Common Stock (fka Integrity Nutraceuticals) (c) (e) (o) (u)
 
Consumer
 
 
 
24,656

 
—

 
—

 
—
%
Capstone Nutrition Common Stock (fka Integrity Nutraceuticals) (c) (e) (o) (u)
 
Consumer
 
 
 
6,023

 
1,630

 
—

 
—
%
Captek Softgel International, Inc. (c) (e) (ac)
 
Health/Fitness
 
 
 
8,498

 
942

 
712

 
0.1
%
Centerfield Media Holdings, LLC (c) (e)
 
Media/Entertainment
 
 
 
112

 
245

 
263

 
0.0
%
CRD Holdings, LLC (a) (c) (o) (u)
 
Energy
 
9.00%
 
38,858,603

 
28,402

 
28,973

 
2.0
%
CRS-SPV, Inc. (c) (e) (o)
 
Industrials
 
 
 
246

 
2,219

 
2,221

 
0.2
%
CWS Holding Company, LLC (c) (e)
 
Consumer
 
 
 
335,255

 
—

 
—

 
—
%
Danish CRJ, Ltd. (a) (c) (e) (p) (r)
 
Transportation
 
 
 
5,002

 
—

 
—

 
—
%
Data Source Holdings, LLC (c) (e)
 
Business Services
 
 
 
10,617

 
140

 
124

 
0.0
%
Del Real, LLC (c) (e) (u)
 
Food & Beverage
 
 
 
670,510

 
382

 
297

 
0.0
%
Dyno Acquiror, Inc. (c) (e)
 
Consumer
 
 
 
134,102

 
58

 
64

 
0.0
%
Frank Entertainment Group, LLC (c) (e) (p) (u)
 
Media/Entertainment
 
 
 
135,566

 
—

 
—

 
—
%
Frank Entertainment Group, LLC (c) (e) (p) (u)
 
Media/Entertainment
 
 
 
625,810

 
—

 
—

 
—
%
Frank Entertainment Group, LLC (c) (e) (p) (u)
 
Media/Entertainment
 
 
 
625,810

 
—

 
—

 
—
%
Frontstreet Facility Solutions, Inc. (c) (e) (p)
 
Business Services
 
 
 
24,114

 
—

 
—

 
—
%
HemaSource, Inc. (c) (e) (ac)
 
Healthcare
 
 
 
223,503

 
168

 
185

 
0.0
%
ICP Industrial, Inc. (c) (e)
 
Chemicals
 
 
 
288

 
279

 
301

 
0.0
%
Integrated Efficiency Solutions, Inc. (c) (e)
 
Industrials
 
 
 
53,215

 
56

 
67

 
0.0
%
Integrated Efficiency Solutions, Inc. (c) (e)
 
Industrials
 
 
 
2,975

 
3

 
3

 
0.0
%
Kahala Ireland OpCo Designated Activity Company (a) (c) (e) (h) (o)
 
Transportation
 
 
 
—

 
—

 
20,329

 
1.4
%
Kahala Ireland OpCo Designated Activity Company (a) (c) (e) (h) (o)
 
Transportation
 
 
 
3,250,000

 
2,831

 
3,250

 
0.2
%
Kahala US OpCo, LLC (a) (c) (e) (k) (o)
 
Transportation
 
13.00%
 
4,413,472

 
—

 
—

 
—
%
K-Square Restaurant Partners, LP (c) (e) (ac)
 
Food & Beverage
 
 
 
447

 
175

 
16

 
0.0
%
Lakeview Health Holdings, Inc. (c) (e)
 
Healthcare
 
 
 
447

 
—

 
—

 
—
%
MIC Holding, LLC (c) (e)
 
Consumer
 
 
 
1,470

 
3,686

 
3,947

 
0.3
%
MIC Holding, LLC (c) (e)
 
Consumer
 
 
 
30,000

 
4,916

 
4,798

 
0.3
%
Micross Solutions, LLC (c) (e)
 
Software/Services
 
 
 
442,430

 
223

 
310

 
0.0
%
Mood Media Corp. (c) (e)
 
Media/Entertainment
 
 
 
121,021

 
27

 
11

 
0.0
%
Motor Vehicle Software Corp. (c) (e) (ab)
 
Business Services
 
 
 
223,503

 
318

 
260

 
0.0
%
New Star Metals, Inc. (c) (e)
 
Industrials
 
Expire 12/22/2036
 
100,216

 
151

 
702

 
0.0
%
NexSteppe, Inc. (c) (e) (o)
 
Chemicals
 
 
 
237,240

 
737

 
—

 
—
%
NMFC Senior Loan Program I, LLC (a) (o)
 
Diversified Investment Vehicles
 
 
 
50,000

 
50,000

 
50,573

 
3.4
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 32
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2018
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Nomacorc, LLC (c) (e) (u) (ab)
 
Industrials
 
 
 
356,816

 
$
56

 
$
68

 
0.0
%
Park Ave RE Holdings, LLC (c) (e) (o) (w)
 
Financials
 
 
 
1,000

 
102

 
15,578

 
1.0
%
Park Ave RE Holdings, LLC (c) (e) (o) (w)
 
Financials
 
8.00%
 
47,290

 
23,645

 
23,645

 
1.6
%
Passport Food Group, LLC (c) (e) (ac)
 
Food & Beverage
 
 
 
4,470

 
—

 
—

 
—
%
PCX Aerostructures, LLC (c) (e)
 
Industrials
 
 
 
27,250

 
—

 
—

 
—
%
PCX Aerostructures, LLC (c) (e)
 
Industrials
 
 
 
1,356

 
—

 
—

 
—
%
PCX Aerostructures, LLC (c) (e)
 
Industrials
 
 
 
315

 
—

 
—

 
—
%
PennantPark Credit Opportunities Fund II, LP (a) (g) (p)
 
Diversified Investment Vehicles
 
 
 
8,436

 
8,436

 
8,705

 
0.6
%
RMP Group, Inc. (c) (e) (u)
 
Financials
 
 
 
223

 
164

 
191

 
0.0
%
RockYou, Inc. (c) (e)
 
Media/Entertainment
 
 
 
15,105

 
—

 
—

 
—
%
Schweiger Dermatology Group, LLC (c) (e) (u)
 
Healthcare
 
 
 
265,024

 
—

 
—

 
—
%
SCUF Gaming, Inc. (c) (e)
 
Consumer
 
 
 
6,060

 
21

 
49

 
0.0
%
Smile Brands, Inc. (c) (e)
 
Healthcare
 
 
 
669

 
747

 
658

 
0.0
%
Squan Holding Corp. (c) (e)
 
Telecom
 
 
 
180,835

 
—

 
—

 
—
%
Squan Holding Corp. (c) (e)
 
Telecom
 
 
 
8,962

 
—

 
—

 
—
%
St. Croix Hospice Acquisition Corp. (c) (e)
 
Healthcare
 
 
 
112

 
—

 
—

 
—
%
St. Croix Hospice Acquisition Corp. (c) (e)
 
Healthcare
 
 
 
112

 
64

 
100

 
0.0
%
SYNACOR, Inc. (e) (aa)
 
Technology
 
 
 
59,785

 
—

 
88

 
0.0
%
Tax Advisors Group, LLC (c) (e) (u)
 
Financials
 
 
 
86

 
609

 
638

 
0.0
%
Tax Defense Network, LLC (c) (e) (p)
 
Consumer
 
 
 
351,944

 
—

 
—

 
—
%
Tax Defense Network, LLC (c) (e) (p)
 
Consumer
 
 
 
147,099

 
425

 
—

 
—
%
TCG BDC, Inc. - Common Stock (fka Carlyle GMS Finance, Inc.) (a)
 
Financials
 
 
 
226

 
4,336

 
2,733

 
0.2
%
Team Waste, LLC (c) (e) (p) (u)
 
Industrials
 
 
 
111,752

 
2,235

 
2,235

 
0.2
%
Tennenbaum Waterman Fund, LP (a) (c) (p)
 
Diversified Investment Vehicles
 
 
 
10,000

 
10,000

 
10,137

 
0.7
%
THL Credit Greenway Fund II, LLC (a) (p)
 
Diversified Investment Vehicles
 
 
 
8,339

 
8,339

 
7,435

 
0.5
%
Travelpro Products, Inc. (a)
 
Consumer
 
 
 
447,007

 
506

 
541

 
0.0
%
TwentyEighty, Inc. (c) (p)
 
Business Services
 
 
 
54,586

 
—

 
—

 
—
%
TZ Holdings, Inc. - Preferred Shares (fka Zimbra, Inc.) (c) (e)
 
Technology
 
Expire 10/25/2023
 
1,000,000

 
10

 
179

 
0.0
%
United Biologics, LLC (c) (e) (u)
 
Healthcare
 
 
 
39,769

 
132

 
18

 
0.0
%
United Biologics, LLC (c) (e) (u)
 
Healthcare
 
 
 
3,155

 
—

 
—

 
—
%
United Biologics, LLC (c) (e) (u)
 
Healthcare
 
 
 
4,206

 
31

 
15

 
0.0
%
United Biologics, LLC (c) (e) (u)
 
Healthcare
 
 
 
99,236

 
—

 
—

 
—
%
United Biologics, LLC (c) (e) (u)
 
Healthcare
 
 
 
223

 
35

 
9

 
0.0
%
USASF Holdco, LLC (c) (e) (u)
 
Financials
 
 
 
10,000

 
10

 
—

 
—
%
USASF Holdco, LLC (c) (e) (u)
 
Financials
 
 
 
490

 
490

 
571

 
0.0
%
USASF Holdco, LLC (c) (e) (u)
 
Financials
 
 
 
56

 
56

 
111

 
0.0
%
Vantage Mobility International, LLC (c) (e)
 
Transportation
 
 
 
391,131

 
—

 
—

 
—
%
Women's Marketing, Inc. (c) (e)
 
Media/Entertainment
 
 
 
3,643

 
—

 
—

 
—
%

The accompanying notes are an integral part of these consolidated financial statements.
F- 33
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2018
Portfolio Company (f) (q)
 
Industry
 
Investment Coupon Rate / Maturity (y)
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value
 
% of Net Assets (b)
Women's Marketing, Inc. (c) (e)
 
Media/Entertainment
 
 
 
2,235

 
$
—

 
$
—

 
—
%
World Business Lenders, LLC (c) (e) (p)
 
Financials
 
 
 
922,669

 
3,750

 
3,759

 
0.3
%
WSO Holdings, LP (c) (e)
 
Food & Beverage
 
 
 
698

 
279

 
—

 
—
%
Wythe Will Tzetzo, LLC (c) (e) (u)
 
Food & Beverage
 
 
 
22,312

 
302

 
—

 
—
%
YummyEarth, Inc. (c) (e)
 
Food & Beverage
 
 
 
223

 
—

 
—

 
—
%
Sub Total Equity/Other
 
 
 
 
 
$
177,021

 
$
199,796

 
13.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL INVESTMENTS - 156.4% (b)
 
 
 
 
 
$
2,480,332

 
$
2,334,714

 
156.4
%
Forward foreign currency contracts:
Counterparty
 
Contract to Deliver
 
In Exchange For
 
Maturity Date
 
Unrealized Appreciation/(Depreciation)
Goldman Sachs International
 
CAD 21,275
 
$
16,597

 
1/7/2019
 
$
993

_____________
(a)
All of the Company's investments, except the investments noted by this footnote, are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act"). Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. Qualifying assets represent 71.9% of the Company's total assets. The significant majority of all investments held are deemed to be illiquid.
(b)
Percentages are based on net assets of $1,492,719 as of December 31, 2018.
(c)
The fair value of investments with respect to securities for which market quotations are not readily available is determined in good faith by the Company's Board of Directors as required by the 1940 Act. Such investments are valued using significant unobservable inputs (See Note 3 to the consolidated financial statements).
(d)
As of the date of election, the portfolio company elected to pay cash interest, noting the company has the option to elect a portion of the interest to be payment-in-kind (“PIK”).
(e)
Non-income producing at December 31, 2018.
(f)
The Company has various unfunded commitments to portfolio companies. Please refer to Note 7 - Commitments and Contingencies for details of these unfunded commitments.
(g)
The investment is subject to a three year lock-up restriction on withdrawals. The lock-up expires on March 31, 2019.
(h)
The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala LuxCo, which own 100% of the equity of the operating company, Kahala Ireland OpCo Designated Activity Company.
(i)
The Company's investment or a portion thereof is pledged as collateral under the Wells Fargo Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.
(j)
The Company's investment or a portion thereof is pledged as collateral under the Citi Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.
(k)
The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala Aviation US, Inc. which own 100% of the equity of the operating company, Kahala US OpCo LLC.

The accompanying notes are an integral part of these consolidated financial statements.
F- 34
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

(l)
For the year ended December 31, 2018, the following investments paid or have the option to pay all or a portion of interest and dividends via payment-in-kind (“PIK”):
December 31, 2018
Portfolio Company
 
Investment Type
 
Cash
 
PIK
 
All-in Rate
 
PIK Earned for the year ended December 31, 2018
Capstone Nutrition (fka Integrity Nutraceuticals)
 
Senior Secured First Lien Debt
 
—
%
 
15.03
%
 
15.03
%
 
$
—

Capstone Nutrition (fka Integrity Nutraceuticals)
 
Senior Secured First Lien Debt
 
—
%
 
15.03
%
 
15.03
%
 
—

Capstone Nutrition (fka Integrity Nutraceuticals)
 
Senior Secured First Lien Debt
 
—
%
 
15.03
%
 
15.03
%
 
—

DLC Acquisition, LLC
 
Senior Secured First Lien Debt
 
10.00
%
 
2.00
%
 
12.00
%
 
29

Greenwave Holdings, Inc. (s)
 
Senior Secured First Lien Debt
 
10.00
%
 
3.00
%
 
13.00
%
 
271

Integral Ad Science, Inc.
 
Senior Secured First Lien Debt
 
7.28
%
 
1.25
%
 
8.53
%
 
81

Integrated Efficiency Solutions, Inc.
 
Senior Secured First Lien Debt
 
12.05
%
 
—
%
 
12.05
%
 
—

Kahala Ireland OpCo Designated Activity Company
 
Senior Secured First Lien Debt
 
13.00
%
 
—
%
 
13.00
%
 
—

LightSquared, LP
 
Senior Secured First Lien Debt
 
—
%
 
11.52
%
 
11.52
%
 
1,291

Mood Media Corp.
 
Senior Secured First Lien Debt
 
10.05
%
 
—
%
 
10.05
%
 
103

NexSteppe, Inc.
 
Senior Secured First Lien Debt
 
—
%
 
12.00
%
 
12.00
%
 
—

NexSteppe, Inc.
 
Senior Secured First Lien Debt
 
—
%
 
12.00
%
 
12.00
%
 
—

Pure Barre, LLC (s)
 
Senior Secured First Lien Debt
 
—
%
 
9.08
%
 
9.08
%
 
162

Pure Barre, LLC (s)
 
Senior Secured First Lien Debt
 
7.99
%
 
1.25
%
 
9.24
%
 
3

Squan Holding Corp.
 
Senior Secured First Lien Debt
 
8.40
%
 
1.00
%
 
9.40
%
 
163

Tax Defense Network, LLC
 
Senior Secured First Lien Debt
 
—
%
 
10.00
%
 
10.00
%
 
—

TwentyEighty, Inc.
 
Senior Secured First Lien Debt
 
10.80
%
 
—
%
 
10.80
%
 
12

TwentyEighty, Inc.
 
Senior Secured First Lien Debt
 
4.00
%
 
4.00
%
 
8.00
%
 
262

TwentyEighty, Inc.
 
Senior Secured First Lien Debt
 
—
%
 
8.75
%
 
8.75
%
 
531

United Central Industrial Supply Company, LLC (s)
 
Senior Secured First Lien Debt
 
9.35
%
 
—
%
 
9.35
%
 
85

Von Drehle Corp.
 
Senior Secured First Lien Debt
 
14.03
%
 
—
%
 
14.03
%
 
131

KidKraft, Inc.
 
Senior Secured Second Lien Debt
 
11.00
%
 
1.00
%
 
12.00
%
 
26

Travelpro Products, Inc.
 
Senior Secured Second Lien Debt
 
11.00
%
 
2.00
%
 
13.00
%
 
7

Travelpro Products, Inc.
 
Senior Secured Second Lien Debt
 
11.00
%
 
2.00
%
 
13.00
%
 
20

Captek Softgel International, Inc.
 
Subordinated Debt
 
10.00
%
 
1.50
%
 
11.50
%
 
45

Community Intervention Services, Inc.
 
Subordinated Debt
 
—
%
 
13.00
%
 
13.00
%
 
—

Dyno Acquiror, Inc.
 
Subordinated Debt
 
10.50
%
 
1.50
%
 
12.00
%
 
7

Frozen Specialties, Inc. (s)
 
Subordinated Debt
 
10.00
%
 
4.00
%
 
14.00
%
 
22

HTC Borrower, LLC
 
Subordinated Debt
 
10.00
%
 
3.00
%
 
13.00
%
 
71

Orchid Underwriters Agency, LLC (s)
 
Subordinated Debt
 
—
%
 
11.50
%
 
11.50
%
 
1

Orchid Underwriters Agency, LLC (s)
 
Subordinated Debt
 
—
%
 
13.50
%
 
13.50
%
 
5

Park Ave RE Holdings, LLC
 
Subordinated Debt
 
13.00
%
 
—
%
 
13.00
%
 
—

PCX Aerostructures, LLC
 
Subordinated Debt
 
—
%
 
6.00
%
 
6.00
%
 
170

RMP Group, Inc.
 
Subordinated Debt
 
10.50
%
 
1.00
%
 
11.50
%
 
10

Rotolo Consultants, Inc. (s)
 
Subordinated Debt
 
11.00
%
 
3.00
%
 
14.00
%
 
13

Smile Brands, Inc. (s)
 
Subordinated Debt
 
10.00
%
 
2.00
%
 
12.00
%
 
17

Steel City Media
 
Subordinated Debt
 
9.00
%
 
7.00
%
 
16.00
%
 
829

Xplornet Communications, Inc.
 
Subordinated Debt
 
8.63
%
 
1.00
%
 
9.63
%
 
1,149

Total
 
 
 
 
 
 
 
 
 
$
5,516

(m)
The Company's investment or a portion thereof is pledged as collateral under the UBS Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.
(n)
For equity investments in Collateralized Securities, the effective yield is presented in place of the investment coupon rate for each investment. Refer to footnote (v) for a further description of an equity investment in a Collateralized Security.

The accompanying notes are an integral part of these consolidated financial statements.
F- 35
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

(o)
The provisions of the 1940 Act classify investments based on the level of control that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be "non-controlled" when the Company owns 25% or less of the portfolio company's voting securities and "controlled" when the Company owns more than 25% of the portfolio company's voting securities. The Company classifies this investment as "controlled".
(p)
The provisions of the 1940 Act classify investments further based on the level of ownership that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as "non-affiliated" when the Company owns less than 5% of a portfolio company's voting securities and "affiliated" when the Company owns 5% or more of a portfolio company's voting securities. The Company classifies this investment as "affiliated".
(q)
Unless otherwise indicated, all investments in the consolidated schedule of investments are non-affiliated, non-controlled investments.
(r)
The Company's investment is held through the Consolidated Holding Company, Kahala Aviation Holdings, LLC, which owns 49% of the operating company, Danish CRJ LTD.
(s)
Investment sold during the year ended December 31, 2018.
(t)
The investment is on non-accrual status as of December 31, 2018.
(u)
Investments are held in the taxable wholly-owned, consolidated subsidiary, 54th Street Equity Holdings, Inc.
(v)
The Collateralized Securities - subordinated notes are treated as equity investments and are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s securities less contractual payments to debt holders and fund expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.
(w)
The Company's investment is held through the consolidated subsidiary, Park Ave RE, Inc., which owns 100% of the equity of the operating company, Park Ave RE Holdings, LLC.
(x)
The Company's investment or a portion thereof is pledged as collateral under the JPMC PB Account. Individual investments can be divided into parts which are pledged to separate credit facilities.
(y)
The majority of the investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate ("LIBOR" or "L") or Prime ("P") and which reset daily, monthly, quarterly, or semiannually. For each, the Company has provided the spread over LIBOR or Prime and the current interest rate in effect at December 31, 2018. Certain investments are subject to a LIBOR or Prime interest rate floor. For fixed rate loans, a spread above a reference rate is not applicable.
(z)
The principal amount (par amount) is denominated in Canadian Dollars or CAD.
(aa)
The investment is not a restricted security. All other securities are restricted securities.
(ab)
The investment is held through a participation interest in which the Company has a contractual relationship only with the loan transferor, not the underlying borrower. The Company may be subject to the credit risk of the loan transferor as well as of the borrower.
(ac)
The investment is held through BSP TCAP Acquisition Holdings LP which, as further outlined in Note 1, is an affiliated acquisition entity utilized for the Triangle Transaction.  Due to certain restrictions, such as limits on the number of partners allowable within the equity structures of the newly acquired investments, these investments are still held within the acquisition entity as of December 31, 2018. 
(ad)
All amounts are in thousands except share amounts.

        















The accompanying notes are an integral part of these consolidated financial statements.
F- 36
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

CONSOLIDATED SCHEDULES OF INVESTMENTS
(dollars in thousands)

December 31, 2018
The following table shows the portfolio composition by industry grouping based on fair value at December 31, 2018:
 
At December 31, 2018
 
Investments at
Fair Value
 
Percentage of
Total Portfolio
Healthcare
$
357,065

 
15.3
%
Industrials
270,699

 
11.6
%
Business Services
264,296

 
11.3
%
Diversified Investment Vehicles
204,062

 
8.8
%
Financials
142,695

 
6.1
%
Transportation
140,824

 
6.0
%
Media/Entertainment
135,230

 
5.8
%
Technology
119,825

 
5.1
%
Energy
113,507

 
4.9
%
Telecom
112,838

 
4.8
%
Food & Beverage
98,653

 
4.2
%
Consumer
95,159

 
4.1
%
Chemicals
67,816

 
2.9
%
Gaming/Lodging
58,572

 
2.5
%
Paper & Packaging
44,882

 
1.9
%
Software/Services
39,523

 
1.7
%
Health/Fitness
31,711

 
1.4
%
Education
21,688

 
0.9
%
Publishing
9,775

 
0.4
%
Retail
5,894

 
0.3
%
Total
$
2,334,714

 
100.0
%


The accompanying notes are an integral part of these consolidated financial statements.
F- 37
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019


Note 1 — Organization and Basis of Presentation
Business Development Corporation of America (the “Company” or "BDCA") is an externally managed, non-diversified closed-end management investment company incorporated in Maryland in May 2010 that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (“the 1940 Act”). In addition, the Company has elected to be treated for tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s investment activities are managed by BDCA Adviser, LLC (the “Adviser”), a subsidiary of Benefit Street Partners L.L.C. (“BSP”) and supervised by the Company’s Board of Directors ("Board"), a majority of whom are independent of the Adviser and its affiliates. As a BDC, the Company is required to comply with certain regulatory requirements.
The Company’s investment objective is to generate both current income and to a lesser extent long-term capital appreciation through debt and equity investments. The Company invests primarily in first and second lien senior secured loans and mezzanine debt issued by middle market companies. The Company defines middle market companies as those with annual revenues up to $1 billion. The Company also purchases interests in loans through secondary market transactions. First and second lien secured loans generally are senior debt instruments that rank ahead of subordinated debt and equity in bankruptcy priority and are generally secured by liens on the operating assets of a borrower, which may include inventory, receivables, plant, property, and equipment. Mezzanine debt is subordinated to senior loans and is generally unsecured. The Company may invest in the equity and junior debt tranches of collateralized loan obligation investment vehicles (“Collateralized Securities” or "CLOs"). CLOs are entities that are formed to manage a portfolio of senior secured loans made to companies whose debt is typically rated below investment grade or, in limited circumstances, unrated. The senior secured loans within these Collateralized Securities meet specified credit and diversity criteria and are subject to concentration limitations in order to create a diverse investment portfolio. In most cases, companies to whom the Company provides customized financing solutions will be privately held at the time the Company invests in them.
On April 3, 2018, BSP, through its affiliate BSP TCAP Acquisition Holdings LP (the “Acquisition Entity”), entered into an Asset Purchase Agreement (the “APA”) with Triangle Capital Corporation (“Triangle”) under which certain funds advised by BSP agreed to acquire Triangle’s Investment Portfolio (the “Triangle Portfolio”) for $981.2 million in cash, as adjusted in accordance with the terms of the APA (the “Triangle Transaction”). The Company’s Adviser is an affiliate of BSP, and the Company participated in the Triangle Transaction by purchasing a portion of the Triangle Portfolio, facilitated through the Acquisition Entity.
On July 31, 2018, BSP completed the Triangle Transaction. The gross cash proceeds paid to Triangle were approximately $793.3 million, after adjustments to take into account portfolio activity and other matters occurring since December 31, 2017. In accordance with BSP’s allocation policy, the Company acquired approximately 24% of the assets in the Triangle Portfolio for an aggregate purchase price of $188.1 million. The final allocation of the investments in the Triangle Portfolio by BSP was based on a number of factors, including, among others, the Company's available capital at the time of allocation, changes in the composition of the Triangle Portfolio between the signing of the APA and the closing of the Triangle Transaction, the suitability of the investments in Triangle’s Portfolio for the Company as compared to the other funds managed by BSP, regulatory guidance regarding the allocation of certain Triangle Portfolio assets between funds managed by BSP, and changes in the relative size of the funds managed by BSP.
The Company accounted for the Triangle Transaction under the accounting and reporting guidance within Accounting Standards Codification ("ASC") Topic 805, Business Combinations (“ASC 805”). The Company concluded that the Triangle Transaction should be accounted for as an asset acquisition and no further considerations or disclosures required for a business combination under ASC 805 are warranted.
On February 1, 2019, Franklin Templeton acquired BSP, including BSP’s 100% ownership interest in the Company's Adviser (the “FT Transaction”).
During the year ended December 31, 2019, the Company invested approximately $997.0 million to portfolio companies to contribute to the support of their business objectives of which some were contractually obligated. See Note 7 - Commitments and Contingencies. As of December 31, 2019, the Company held investments in loans it made to investee companies with aggregate principal amounts of $2,364.2 million. The details of such investments have been disclosed on the consolidated schedule of investments as well as in Note 3 - Fair Value of Financial Instruments. In addition to providing loans to investee companies, from time to time the Company may assist investee companies in securing financing from other sources by introducing such investee companies to sponsors or other lending institutions.

F- 38
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

While the structure of the Company’s investments is likely to vary, the Company may invest in senior secured debt, senior unsecured debt, subordinated secured debt, subordinated unsecured debt, mezzanine debt, convertible debt, convertible preferred equity, preferred equity, common equity, warrants, CLOs, and other instruments, many of which generate current yields. If the Adviser deems appropriate, the Company may invest in more liquid senior secured and second lien debt securities, some of which may be traded. The Company will make such investments to the extent allowed by the 1940 Act and consistent with its continued qualification as a RIC for federal income tax purposes.
On January 25, 2011, the Company commenced its initial public offering (the “IPO”) on a “reasonable best efforts basis” of up to 150.0 million shares of common stock, $0.001 par value per share, and subsequently amended the offering to issue up to an additional 101.1 million shares of its common stock (the “Offering”). The Company closed the Offering to new investments on April 30, 2015. As of December 31, 2019, the Company had issued 215.9 million shares of common stock for gross proceeds of $2.3 billion including the shares purchased by affiliates and shares issued under the Company's distribution reinvestment plan (“DRIP”). As of December 31, 2019, the Company had repurchased a cumulative 25.6 million shares of common stock through its share repurchase program for payments of $222.2 million.
The Company intends to co-invest, subject to the conditions included in the exemptive order the Company received from the Securities and Exchange Commission ("SEC"), with certain of its affiliates. The Company believes that such co-investments may afford it additional investment opportunities and an ability to achieve greater diversification.
As a BDC, the Company is generally required to invest at least 70% of its total assets primarily in securities of private and certain U.S. public companies (other than certain financial institutions), cash, cash equivalents and U.S. Government securities, and other high-quality debt investments that mature in one year or less.
The Company is permitted to borrow money from time to time within the levels permitted by the 1940 Act (which generally currently allows it to incur leverage for up to one half of its total assets). The Company has used, and expects to continue to use, its credit facilities and other borrowings, along with proceeds from the rotation of its portfolio and proceeds from private securities offerings to finance its investment objectives.
Although Congress passed the Small Business Credit Availability Act (the “SBCAA”) on March 23, 2018, which amended the 1940 Act to permit BDCs to incur increased leverage if certain conditions are met, the Company does not presently intend to avail itself of the increased leverage limits permitted by the SBCAA. If the Company were to avail itself of the increased leverage permitted by the SBCAA, this would effectively allow the Company to double its leverage, which would increase leverage risk and expenses.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The consolidated financial statements reflect all adjustments, both normal and recurring which, in the opinion of management, are necessary of the fair presentation of the Company’s results of operations and financial condition for the periods presented. The Company is an investment company and follows accounting and reporting guidance in ASC Topic 946 - Financial Services - Investment Companies ("ASC 946").
We have also formed and expect to continue to form consolidated subsidiaries (the “Consolidated Holding Companies”). The Company consolidates the following subsidiaries for accounting purposes: BDCA Funding I, LLC (“Funding I”), BDCA-CB Funding, LLC (“CB Funding”), BDCA Helvetica Funding, Ltd. (“Helvetica Funding”), 54th Street Equity Holdings, Inc. and the Consolidated Holding Companies. All significant intercompany balances and transactions have been eliminated in consolidation. 
Prior to September 30, 2019, in conjunction with the consolidation of subsidiaries, the Company had recognized non-controlling interests attributable to third party ownership in the following Consolidated Holding Companies: Kahala Aviation Holdings, LLC, Kahala Aviation US, Inc., and Kahala LuxCo S.A.R.L. On September 30, 2019, the Company entered an agreement to purchase the third party ownership of Kahala Aviation Holdings LLC, which in turn owns 100% of the equity of Kahala Aviation US, Inc. and Kahala LuxCo S.A.R.L. As a result of this agreement, the company owns 100% of the equity of Kahala Aviation Holdings LLC, Kahala Aviation US, Inc, and Kahala LuxCo S.A.R.L, and therefore no longer recognizes a non-controlling interest in these Consolidated Holding Companies. See Note 9 - Common Stock for detail of the activity attributable to non-controlling interests.

F- 39
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Consolidation
As provided under ASC 946, the Company will generally not consolidate its investment in a company other than a substantially or wholly-owned investment company or controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the accounts of the Company's substantially wholly-owned subsidiaries in its consolidated financial statements.
Valuation of Portfolio Investments
Portfolio investments are reported on the consolidated statements of assets and liabilities at fair value. On a quarterly basis, the Company performs an analysis of each investment to determine fair value as follows:
Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. The Company may also obtain quotes with respect to certain of the Company's investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is readily available according to U.S. GAAP to determine the fair value of the security. If determined to be readily available, the Company uses the quote obtained.
Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that the Company may take into account in fair value pricing the Company's investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.
With respect to investments for which market quotations are not readily available, the Adviser undertakes a multi-step valuation process each quarter, as described below:
•
Each portfolio company or investment will be valued by the Adviser, with assistance from one or more independent valuation firms engaged by the Company's Board of Directors or as noted below, with respect to investments in an investment fund;
•
The independent valuation firm(s) conduct independent appraisals and make an independent assessment of the value of each investment; and
•
The Board of Directors determines the fair value of each investment, in good faith, based on the input of the Adviser and independent valuation firm (to the extent applicable).
For an investment in an investment fund that does not have a readily determinable fair value, the Company measures the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of ASC 946, as of the Company's measurement date. However, there can be no assurance that the Company will be able to sell such investment at a price equal to its net asset value per share and the Company may ultimately sell such investment at a discount to its net asset value per share.
The Company’s investments in funds that offer periodic liquidity have redemption frequencies which range from monthly to quarterly and redemption notice periods which range from 30 to 90 days. Investments in private equity typically do not offer liquidity and instead, capital is returned through periodic distributions.

F- 40
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Because there is not a readily available market value for most of the investments in its portfolio, the Company values substantially all of its portfolio investments at fair value as determined in good faith by its Board of Directors, as described herein. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company's investments may fluctuate from period to period. Additionally, the fair value of the Company's investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate a portfolio investment in a forced or liquidation sale, the Company could realize significantly less than the value at which the Company has recorded it.
Investment Classification
The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control” is defined as the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. In addition, any person “who owns beneficially, either directly or through one or more controlled companies, more than 25% of the voting securities of a company shall be presumed to control such company. Typically, any person who does not so own more than 25% of the voting securities of any company shall be presumed not to control such company.” Consistent with the 1940 Act, “Affiliated Investments” are defined as those investments in companies in which the Company owns 5% or more of the voting securities. Consistent with the 1940 Act, “Non-affiliated Investments” are defined as investments that are neither Control Investments nor Affiliated Investments.
Where appropriate, certain current year industry classifications may have been revised to more precisely reflect the business of the Company's investments. Further, prior year classifications have been revised in a consistent manner with the current year.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, liquid investments in a money market deposit account. Cash and cash equivalents are carried at cost which approximates fair value.
Offering Costs
The Company incurs certain costs in connection with the registration of shares of its common stock. Offering costs principally relate to professional fees, printing costs, direct marketing expenses, due diligence costs, fees paid to regulators, and other expenses, including the salaries and/or expenses of the Adviser and its affiliates engaged in registering and marketing the Company’s common stock. Such allocated expenses of the Adviser and its affiliates may include the development of marketing materials and presentations, training and educational meetings, and generally coordinating the marketing process for the Company.
Pursuant to the Investment Advisory Agreement, the Company and the Adviser have agreed that the Company will not be liable for organization and offering costs, including transfer agent fees, in excess of 1.5% of the aggregate gross proceeds from the Company’s on-going offering. Should the Company resume continually offering its shares, any offering costs incurred will be capitalized and amortized as an expense on a straight-line basis over a 12-month period. For the years ended December 31, 2019, 2018, and 2017, the Company did not incur any offering costs.
Deferred Financing Costs
Financing costs incurred in connection with the Company’s unsecured notes and revolving credit facilities with Wells Fargo, Citi, and UBS are capitalized and amortized into expense using the straight-line method, which approximates the effective yield method over the life of the respective facility. See Note 5 - Borrowings for details on the credit facilities and unsecured notes.

F- 41
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Distributions
The Company’s Board of Directors has authorized, and has declared, cash distributions payable on a monthly basis to stockholders of record on each day since it commenced operations. The amount of each such distribution is subject to the discretion of the Board of Directors and applicable legal restrictions related to the payment of distributions. The Company calculates each stockholder’s specific distribution amount for the month using record and declaration dates and accrues distributions on the date the Company accepts a subscription for shares of the Company’s common stock. The distributions are payable by the fifth day following each month end to stockholders of record at the close of business each day during the prior month. From time to time, the Company may also pay interim distributions, including capital gains distributions, at the discretion of the Company’s Board of Directors. The Company’s distributions may exceed earnings, especially during the period before it has substantially invested the proceeds from the offering. As a result, a portion of the distributions made by the Company may represent a return of capital for U.S. federal income tax purposes. A return of capital is a return of each stockholder’s investment rather than earnings or gains derived from the Company’s investment activities.
The Company may fund cash distributions to stockholders from any sources of funds available to the Company, including advances from the Adviser that are subject to reimbursement, as well as offering proceeds, borrowings, net investment income from operations, capital gain proceeds from the sale of assets, and non-capital gain proceeds from the sale of assets. The Company has not established limits on the amount of funds it may use from available sources to make distributions. See Note 13 - Income Tax Information and Distributions to Stockholders for additional information.
Revenue Recognition
Interest Income
Investment transactions are accounted for on the trade date. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discount and premium on investments purchased are accreted/amortized over the expected life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discount and amortization of premium on investments.
The Company has a number of investments in Collateralized Securities. Interest income from investments in the “equity” class of these Collateralized Securities (in the Company's case, preferred shares or subordinated notes) is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC 325-40-35, Beneficial Interests in Securitized Financial Assets ("ASC 325-40-35"). The Company monitors the expected cash inflows from its equity investments in Collateralized Securities, including the expected principal repayments. The effective yield is determined and updated quarterly. In accordance with ASC 325-40, investments in CLOs are periodically assessed for other-than-temporary impairment ("OTTI"). When the Company determines that a CLO has OTTI, the amortized cost basis of the CLO is written down as of the date of the determination based on events and information evaluated and that write-down is recognized as a realized loss.
Fee Income
Fee income, such as structuring fees, origination, closing, amendment fees, commitment, termination, and other upfront fees are generally non-recurring and are recognized as revenue when earned, either upon receipt or amortized into income. Upon the re-payment of a loan or debt security, any prepayment penalties and unamortized loan origination, structuring, closing, commitment, and other upfront fees are recorded as income.
Payment-in-Kind Interest/Dividends
The Company holds debt and equity investments in its portfolio that contain payment-in-kind (“PIK”) interest and dividend provisions. The PIK interest and PIK dividend, which represent contractually deferred interest or dividends that add to the investment balance that is generally due at maturity, are generally recorded on the accrual basis.
Non-accrual Income
Investments may be placed on non-accrual status when principal or interest payments are past due 30 days or more and/or when there is reasonable doubt that principal or interest will be collected. Accrued interest which may include un-capitalized PIK interest is generally reversed when an investment is placed on non-accrual status. Previously capitalized PIK interest is not reversed when an investment is placed on non-accrual status. Interest payments received on non-accrual investments may be recognized as income or applied to principal depending upon management's judgment of the ultimate outcome. Non- accrual investments are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current.

F- 42
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Net Realized Gain or Loss and Net Change in Unrealized Appreciation or Depreciation
Gain or loss on the sale of investments is calculated using the specific identification method. The Company measures realized gain or loss by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when a gain or loss is realized.
Income Taxes
The Company has elected to be treated for federal income tax purposes as a RIC under Subchapter M of the Code. Generally, a RIC is not subject to federal income taxes in respect of each taxable year if it distributes dividends for federal income tax purposes to stockholders of an amount generally equal to at least 90% of ‘‘investment company taxable income,’’ as defined in the Code, and determined without regard to any deduction for dividends paid. Distributions declared prior to the filing of the previous year's tax return and paid up to twelve months after the previous tax year can be carried back to the prior tax year in determining the distributions paid in such tax year. The Company intends to make sufficient distributions to maintain its ability to be subject to be taxed as a RIC each year. The Company may be subject to federal excise tax imposed at a rate of 4% on certain undistributed amounts. See Note 13 - Income Tax Information and Distributions to Stockholders for additional information.
New Accounting Pronouncements
Adopted
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820) – Disclosures Framework –Changes to Disclosure Requirements of Fair Value Measurement (“ASU 2018-13”) which introduces new fair value disclosure requirements as well as eliminates and modifies certain existing fair value disclosure requirements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years; however, the Company has elected to early adopt ASU 2018-13 effective with the current reporting period as permitted by the standard. The impact of the Company's adoption was limited to changes in the consolidated financial statement disclosures regarding fair value, primarily those disclosures related to the timing of transfers between levels of the fair value hierarchy and transfers between level 1 and level 2 of the fair value hierarchy.     
Note 3 — Fair Value of Financial Instruments
The Company’s fair value measurements are classified into a fair value hierarchy in accordance with ASC Topic 820, Fair Value Measurement, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. This alternative approach also reflects the contractual terms of the derivatives, if any, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The guidance defines three levels of inputs that may be used to measure fair value:
•
Level 1—Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
•
Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
•
Level 3—Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
The determination of where an asset or liability falls in the above hierarchy requires significant judgment and factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy

F- 43
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.
For investments for which Level 1 inputs, such as quoted prices, were not available at December 31, 2019 and 2018, the investments were valued at fair value as determined in good faith using the valuation policy approved by the Board of Directors using Level 2 and Level 3 inputs. The Company evaluates the source of inputs, including any markets in which the Company's investments are trading, in determining fair value. Due to the inherent uncertainty in the valuation process, the estimate of fair value of the Company’s investment portfolio at December 31, 2019 and 2018 may differ materially from values that would have been used had a ready market for the securities existed.
In addition to using the above inputs in investment valuations, the Company continues to employ the valuation policy approved by the Board of Directors. Portfolio investments are reported on the consolidated statements of assets and liabilities at fair value. On a quarterly basis the Company performs an analysis of each investment to determine fair value as described below.
Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. The Company may also obtain quotes with respect to certain of the Company's investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is readily available according to U.S. GAAP to determine the fair value of the security. If determined readily available, the Company uses the quote obtained.
Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that the Company may take into account in fair value pricing the Company's investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.
For an investment in an investment fund that does not have a readily determinable fair value, the Company measures the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of ASC Topic 946, as of the Company's measurement date.
For investments in Collateralized Securities, the Adviser models both the assets and liabilities of each Collateralized Securities' capital structure. The model uses a waterfall engine to store the collateral data, generate cash flows from the assets, and distribute the cash flows to the liability structure based on priority of payments. The cash flows are discounted using rates that incorporate risk factors such as default risk, interest rate risk, downgrade risk, and credit spread risk, among others. In addition, the Adviser considers broker quotations and/or comparable trade activity is considered as an input to determining fair value when available.
As part of the Company's quarterly valuation process, the Adviser may be assisted by one or more independent valuation firms engaged by the Company. The Board of Directors determines the fair value of each investment, in good faith, based on the input of the Adviser and the independent valuation firm(s) (to the extent applicable).
Determination of fair values involves subjective judgments and estimates. Accordingly, the notes to the consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations on the consolidated financial statements.
For discussion of the fair value measurement of the Company's borrowings, refer to Note 5 - Borrowings.
For discussion of the fair value measurement of the Company's foreign currency contracts, refer to Note 6 - Derivatives.

F- 44
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

The following table presents fair value measurements of investments, by major class, as of December 31, 2019, according to the fair value hierarchy:
 
Fair Value Measurements
 
Level 1
 
Level 2
 
Level 3
 
Measured at Net Asset Value (1)
 
Total
Senior Secured First Lien Debt
$
—

 
$
642,755

 
$
1,121,537

 
$
—

 
$
1,764,292

Senior Secured Second Lien Debt
—

 
35,246

 
271,232

 
—

 
306,478

Subordinated Debt
—

 
11,051

 
97,100

 
—

 
108,151

Collateralized Securities
—

 
—

 
108,927

 
—

 
108,927

Equity/Other
2,624

 
—

 
187,300

 
68,412

 
258,336

Total
$
2,624

 
$
689,052

 
$
1,786,096

 
$
68,412

 
$
2,546,184

______________
(1) In accordance with ASC Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient election have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated statements of assets and liabilities.
The following table presents fair value measurements of investments, by major class, as of December 31, 2018, according to the fair value hierarchy:
 
Fair Value Measurements
 
Level 1
 
Level 2
 
Level 3
 
Measured at Net Asset Value (1)
 
Total
Senior Secured First Lien Debt
$
—

 
$
554,840

 
$
1,039,223

 
$
—

 
$
1,594,063

Senior Secured Second Lien Debt
—

 
22,823

 
252,651

 
—

 
275,474

Subordinated Debt
—

 
45,574

 
92,595

 
—

 
138,169

Collateralized Securities
—

 
—

 
127,212

 
—

 
127,212

Equity/Other
3,106

 
2,733

 
117,107

 
76,850

 
199,796

Total
$
3,106

 
$
625,970

 
$
1,628,788

 
$
76,850

 
$
2,334,714

______________
(1) In accordance with ASC Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient election have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated statements of assets and liabilities.

F- 45
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended December 31, 2019:
 
Senior Secured First Lien Debt
 
Senior Secured Second Lien Debt
 
Subordinated Debt
 
Collateralized Securities
 
Equity/Other
 
Total
Balance as of December 31, 2018
$
1,039,223

 
$
252,651

 
$
92,595

 
$
127,212

 
$
117,107

 
$
1,628,788

Net change in unrealized appreciation (depreciation) on investments
11,310

 
(13,032
)
 
2,896

 
13,773

 
29,402

 
44,349

Purchases and other adjustments to cost
399,096

 
95,904

 
25,976

 
54,094

 
76,674

 
651,744

Sales and repayments
(287,445
)
 
(73,393
)
 
(35,326
)
 
(60,418
)
 
(48,014
)
 
(504,596
)
Net realized gain (loss)
(45,639
)
 
464

 
(607
)
 
(25,734
)
 
12,131

 
(59,385
)
Transfers in
55,783

 
16,396

 
11,566

 
—

 
—

 
83,745

Transfers out
(50,791
)
 
(7,758
)
 
—

 
—

 
—

 
(58,549
)
Balance as of December 31, 2019
$
1,121,537

 
$
271,232

 
$
97,100

 
$
108,927

 
$
187,300

 
$
1,786,096

Net change in unrealized appreciation (depreciation) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:
$
(29,473
)
 
$
(12,908
)
 
$
(1,595
)
 
$
(7,891
)
 
$
29,109

 
$
(22,758
)
Purchases represent the acquisition of new investments at cost. Sales and repayments represent principal payments received during the period.
For the year ended December 31, 2019, investments in twelve companies were transferred out of Level 2 to Level 3 as the number of observable market quotes decreased. For the year ended December 31, 2019, investments in six companies were transferred from Level 3 to Level 2 as the number of observable market quotes increased.
The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended December 31, 2018:
 
Senior Secured First Lien Debt
 
Senior Secured Second Lien Debt
 
Subordinated Debt
 
Collateralized Securities
 
Equity/Other
 
Total
Balance as of December 31, 2017
$
1,242,983

 
$
215,401

 
$
61,089

 
$
160,195

 
$
103,738

 
$
1,783,406

Net change in unrealized appreciation (depreciation) on investments
(1,768
)
 
(15,159
)
 
(1,404
)
 
5,618

 
(5,362
)
 
(18,075
)
Purchases and other adjustments to cost
452,140

 
102,561

 
57,183

 
22,103

 
49,838

 
683,825

Sales and repayments
(669,650
)
 
(58,890
)
 
(24,407
)
 
(29,822
)
 
(37,962
)
 
(820,731
)
Net realized gain (loss)
(3,876
)
 
961

 
134

 
(30,882
)
 
6,855

 
(26,808
)
Transfers in
110,613

 
7,777

 
—

 
—

 
—

 
118,390

Transfers out
(91,219
)
 
—

 
—

 
—

 
—

 
(91,219
)
Balance as of December 31, 2018
$
1,039,223

 
$
252,651

 
$
92,595

 
$
127,212

 
$
117,107

 
$
1,628,788

Net change in unrealized appreciation (depreciation) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:
$
(18,535
)
 
$
(14,850
)
 
$
(1,763
)
 
$
859

 
$
(2,169
)
 
$
(36,458
)
Purchases represent the acquisition of new investments at cost. Sales and repayments represent principal payments received during the period.

F- 46
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

For the year ended December 31, 2018, there were no transfers out of Level 1 to Level 2. For the year ended December 31, 2018, investments in thirteen companies were transferred out of Level 2 to Level 3 as the number of observable market quotes decreased. For the year ended December 31, 2018, investments in eight companies were transferred from Level 3 to Level 2 as the number of observable market quotes increased.
The composition of the Company’s investments as of December 31, 2019, at amortized cost and fair value, were as follows:
 
Investments at
Amortized Cost
 
Investments at
Fair Value
 
Fair Value
Percentage of
Total Portfolio
Senior Secured First Lien Debt
$
1,862,228

 
$
1,764,292

 
69.3
%
Senior Secured Second Lien Debt
335,366

 
306,478

 
12.0

Subordinated Debt
109,006

 
108,151

 
4.2

Collateralized Securities
122,870

 
108,927

 
4.3

Equity/Other
210,172

 
258,336

 
10.2

Total
$
2,639,642

 
$
2,546,184

 
100.0
%
The composition of the Company’s investments as of December 31, 2018, at amortized cost and fair value, were as follows:
 
Investments at
Amortized Cost
 
Investments at
Fair Value
 
Fair Value
Percentage of
Total Portfolio
Senior Secured First Lien Debt
$
1,712,904

 
$
1,594,063

 
68.3
%
Senior Secured Second Lien Debt
291,674

 
275,474

 
11.8

Subordinated Debt
143,803

 
138,169

 
5.9

Collateralized Securities
154,930

 
127,212

 
5.4

Equity/Other
177,021

 
199,796

 
8.6

Total
$
2,480,332

 
$
2,334,714

 
100.0
%


F- 47
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Significant Unobservable Inputs
The following table summarizes the significant unobservable inputs used to value the majority of the Level 3 investments as of December 31, 2019. The table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of fair values.
 
 
 
 
Range
 
 
Asset Category
 
Fair Value
 
Primary Valuation Technique
 
Unobservable Inputs
 
Minimum
 
Maximum
 
Weighted Average (a)
Senior Secured First Lien Debt
 
$
858,510

 
Discounted Cash Flow
 
Market Yield
 
6.50%
 
57.85%
 
10.00%
Senior Secured First Lien Debt
 
$
119,724

 
Waterfall Analysis
 
Discount Rate
 
13.00%
 
19.39%
 
13.76%
Senior Secured First Lien Debt (c)
 
$
51,492

 
N/A
 
N/A
 
N/A
 
N/A
 
N/A
Senior Secured First Lien Debt
 
$
48,582

 
Yield Analysis
 
Market Yield
 
6.15%
 
15.65%
 
10.72%
Senior Secured First Lien Debt
 
$
40,373

 
Waterfall Analysis
 
EBITDA Multiple
 
3.00x
 
5.50x
 
3.86x
Senior Secured First Lien Debt
 
$
2,856

 
Waterfall Analysis
 
Revenue Multiple
 
0.42x
 
0.92x
 
0.71x
Senior Secured Second Lien Debt
 
$
201,399

 
Discounted Cash Flow
 
Market Yield
 
6.17%
 
28.00%
 
11.40%
Senior Secured Second Lien Debt
 
$
46,566

 
Yield Analysis
 
Market Yield
 
10.43%
 
19.73%
 
11.38%
Senior Secured Second Lien Debt
 
$
18,353

 
Waterfall Analysis
 
EBITDA Multiple
 
4.85x
 
7.86x
 
5.16x
Senior Secured Second Lien Debt
 
$
4,914

 
Waterfall Analysis
 
Revenue Multiple
 
0.48x
 
1.59x
 
0.94x
Subordinated Debt (b)
 
$
37,237

 
Discounted Cash Flow
 
Discount Rate
 
8.50%
 
8.50%
 
8.50%
Subordinated Debt (b)
 
$
22,500

 
Waterfall Analysis
 
Tangible Net Asset Value Multiple
 
1.70x
 
1.70x
 
1.70x
Subordinated Debt
 
$
13,581

 
Yield Analysis
 
Market Yield
 
12.18%
 
19.59%
 
14.45%
Subordinated Debt (b)
 
$
12,550

 
Discounted Cash Flow
 
Market Yield
 
9.00%
 
9.00%
 
9.00%
Subordinated Debt
 
$
11,232

 
Waterfall Analysis
 
EBITDA Multiple
 
5.69x
 
7.94x
 
6.76x
Collateralized Securities
 
$
85,163

 
Discounted Cash Flow
 
Discount Rate
 
4.60%
 
22.50%
 
12.51%
Collateralized Securities (c)
 
$
23,764

 
N/A
 
N/A
 
N/A
 
N/A
 
N/A
Equity/Other
 
$
81,355

 
Waterfall Analysis
 
Discount Rate
 
12.50%
 
13.00%
 
12.87%
Equity/Other
 
$
37,833

 
Waterfall Analysis
 
Tangible Net Asset Value Multiple
 
1.70x
 
1.94x
 
1.71x
Equity/Other
 
$
28,943

 
Discounted Cash Flow
 
Market Yield
 
6.66%
 
13.75%
 
10.11%
Equity/Other
 
$
20,332

 
Waterfall Analysis
 
EBITDA Multiple
 
3.30x
 
12.06x
 
7.62x
Equity/Other (b)
 
$
11,133

 
Discounted Cash Flow
 
Discount Rate
 
8.50%
 
8.50%
 
8.50%

F- 48
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Equity/Other
 
$
3,949

 
Waterfall Analysis
 
Revenue Multiple
 
0.16x
 
2.50x
 
1.56x
Equity/Other (b)
 
$
3,755

 
Waterfall Analysis
 
TBV Multiple
 
4.30x
 
4.30x
 
4.30x
Total
 
$
1,786,096

 
 
 
 
 
 
 
 
 
 
______________
(a) 
Weighted averages are calculated based on fair value of investments.
(b) 
This asset category contains one investment.
(c) 
This instrument(s) was held at cost.
There were no significant changes in valuation approach or technique as of December 31, 2019.
Level 3 Inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include investments in privately held entities where the fair value is based on unobservable inputs.
The income and market approaches were used in the determination of fair value of certain Level 3 assets as of December 31, 2019 and December 31, 2018. The significant unobservable inputs used in the income approach are the discount rate or market yield used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. An increase in the discount rate or market yield would result in a decrease in the fair value. Included in the consideration and selection of discount rates is risk of default, rating of the investment, call provisions and comparable company investments. The significant unobservable inputs used in the market approach are based on market comparable transactions and market multiples of publicly traded comparable companies. Increases or decreases in market comparable transactions or market multiples would result in an increase or decrease, respectively, in the fair value.
Valuations of loans, corporate debt, and other debt obligations are generally based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, market yields and recovery assumptions. The significant inputs are generally determined based on relative value analysis, which incorporate comparisons to other debt instruments for which observable prices or broker quotes are available. Other valuation methodologies are used as appropriate including market comparables, transactions in similar instruments and recovery/liquidation analysis. The Company also considers the use of EBITDA multiples, revenue multiples, tangible net asset value multiples, and TBV multiples, on its debt and equity investments to determine any credit gains or losses in certain instances. Increases or decreases in either of these inputs in isolation may result in a significantly lower or higher fair value measurement of the respective subject instrument.

F- 49
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

The following table summarizes the significant unobservable inputs used to value the majority of the Level 3 investments as of December 31, 2018. The table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of fair values.
 
 
 
 
Range
 
 
Asset Category
 
Fair Value
 
Primary Valuation Technique
 
Unobservable Inputs
 
Minimum
 
Maximum
 
Weighted Average (a)
Senior Secured First Lien Debt (b)
 
$
555,066

 
Discounted Cash Flow
 
Market Yield
 
6.98%
 
18.95%
 
10.42%
Senior Secured First Lien Debt (b)
 
$
288,547

 
Yield Analysis
 
Market Yield
 
6.50%
 
19.43%
 
11.50%
Senior Secured First Lien Debt (b)
 
$
111,549

 
Waterfall Analysis
 
Discount Rate
 
17.00%
 
19.00%
 
18.00%
Senior Secured First Lien Debt (b)
 
$
6,142

 
Waterfall Analysis
 
Revenue Multiple
 
0.38x
 
0.89x
 
0.77x
Senior Secured First Lien Debt (b)
 
$
5,944

 
Waterfall Analysis
 
EBITDA Multiple
 
0.29x
 
6.05x
 
3.45x
Senior Secured Second Lien Debt (d)
 
$
171,022

 
Yield Analysis
 
Market Yield
 
10.00%
 
23.04%
 
13.39%
Senior Secured Second Lien Debt (d)
 
$
66,029

 
Discounted Cash Flow
 
Market Yield
 
10.05%
 
15.44%
 
12.21%
Senior Secured Second Lien Debt (d)
 
$
1,947

 
Waterfall Analysis
 
Revenue Multiple
 
 1.6x
 
1.7x
 
1.65x
Subordinated Debt (c) (e)
 
$
37,192

 
Waterfall Analysis
 
Discount Rate
 
8.00%
 
9.00%
 
N/A
Subordinated Debt (e)
 
$
31,623

 
Yield Analysis
 
Market Yield
 
11.63%
 
21.84%
 
15.32%
Subordinated Debt (c) (e)
 
$
5,560

 
Waterfall Analysis
 
EBITDA Multiple
 
9.54x
 
9.54x
 
N/A
Subordinated Debt (c) (e)
 
$
189

 
Asset Recovery / Take Out
 
Asset Recovery Percentage
 
36.96%
 
36.96%
 
N/A
Collateralized Securities
 
$
127,212

 
Discounted Cash Flow
 
Discount Rate
 
7.50%
 
33.00%
 
17.85%
Equity/Other (f)
 
$
28,973

 
Discounted Cash Flow
 
Market Yield
 
11.07%
 
12.07%
 
11.57%
Equity/Other (f)
 
$
23,579

 
Waterfall Analysis
 
Discount Rate
 
17.00%
 
19.00%
 
18.00%
Equity/Other (f)
 
$
15,819

 
Waterfall Analysis
 
EBITDA Multiple
 
 4.25x
 
 12.0x
 
 6.47x
Equity/Other (f)
 
$
2,235

 
Waterfall Analysis
 
Appraisal Value
 
21,923.96
 
21,923.96
 
 N/A
Equity/Other (f)
 
$
682

 
Waterfall Analysis
 
TBV Multiple
 
 1.45x
 
 1.45x
 
 1.45x
Equity/Other (f)
 
$
42

 
Waterfall Analysis
 
Revenue Multiple
 
 0.12x
 
 0.12x
 
 0.12x
Equity/Other (f)
 
$
11

 
Option Pricing Method
 
Volatility
 
50.00%
 
70.00%
 
60.00%

______________
(a) 
Weighted averages are calculated based on fair value of investments.
(b) 
The remaining $72.0 million of senior secured first lien debt was valued using a Scenario-Based analysis technique factoring in various unobservable inputs.

F- 50
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

(c) 
Weighted average not applicable as this asset category contains one investment.
(d) 
The remaining $13.7 million of senior secured second lien debt was valued using a Scenario-Based analysis technique factoring in various unobservable inputs.
(e) 
The remaining $18.0 million of subordinated debt was valued using a Scenario-Based analysis technique factoring in various unobservable inputs.
(f) 
The remaining $45.8 million of equity/other investments was valued using the Current Method.
There were no significant changes in valuation approach or technique as of December 31, 2018.
Increases or decreases in any of the above unobservable inputs in isolation would result in a lower or higher fair value measurement for such assets.
As of December 31, 2019, the Company had eight portfolio companies, which represented twelve investments, on non-accrual status with a total principal amount of $85.0 million, amortized cost of $62.8 million, and fair value of $22.5 million which represented 2.8%, 2.4%, and 0.9% of the investment portfolio's total principal, amortized cost, and fair value, respectively. As of December 31, 2018, the Company had eight portfolio companies, which represented fourteen portfolio investments, on non-accrual status with a total principal amount of $171.4 million, amortized cost of $117.4 million, and fair value of $43.8 million, which represented 5.7%, 4.7%, and 1.9% of the investment portfolio's total principal, amortized cost, and fair value, respectively. Refer to Note 2 - Summary of Significant Accounting Policies - for additional details regarding the Company’s non-accrual policy.
Note 4 — Related Party Transactions and Arrangements
Investment Advisory Agreement
Pursuant to the Investment Advisory Agreement and for the investment advisory and management services provided thereunder, the Company pays the Adviser a base management fee and an incentive fee.
Prior to February 1, 2019, the Company's Adviser provided investment advisory and management services under the investment advisory and management services agreement, effective November 1, 2016 (the “Prior Investment Advisory Agreement”), and most recently re-approved by the Board in August 2018. The terms of the Prior Investment Advisory Agreement were materially identical to the Investment Advisory Agreement. The Prior Investment Advisory Agreement automatically terminated on February 1, 2019 upon the indirect change of control of the Adviser on the consummation of Franklin Resources, Inc.’s (“FRI”) and Templeton International, Inc.’s (collectively with FRI, “Franklin Templeton”) acquisition of BSP (the “FT Transaction”). The Investment Advisory Agreement was approved by the Board, including a majority of independent directors, on October 22, 2018, and by stockholders at a special meeting held on January 11, 2019 and took effect February 1, 2019.
Base Management Fee
The base management fee is calculated at an annual rate of 1.5% of the Company’s average gross assets. The Company's gross assets increase or decrease with any appreciation or depreciation associated with a derivative contract. Average gross assets is calculated based on the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters. The base management fee is payable quarterly in arrears and is appropriately pro-rated for any partial month or quarter. All or any part of the base management fee not taken as to any quarter may be deferred without interest and may be taken in such other quarter as the Adviser will determine within three years.
As of December 31, 2019 and December 31, 2018, $10.1 million and $9.7 million was payable to the Adviser for base management fees, respectively.
For the years ended December 31, 2019, 2018, and 2017, the Company incurred $39.8 million, $39.8 million, and $39.1 million, respectively, in base management fees under the Investment Advisory Agreement.
.

F- 51
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Incentive Fees
The incentive fee consists of two parts. The first part is referred to as the incentive fee on income and it is calculated and payable quarterly in arrears based on the Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter. “Pre-Incentive Fee Net Investment Income” means interest income, dividend income, and any other income (including any other fees, other than fees for providing managerial assistance, such as commitment, origination, structuring, diligence, and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the administration agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount debt instruments with payment-in-kind interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains or losses, or unrealized capital appreciation or depreciation. The payment of the incentive fee on income shall be subject to payment of a preferred return to investors each quarter, expressed as a quarterly rate of return on the value of the Company's net assets at the end of the most recently completed calendar quarter, of 1.75% (7.00% annualized), subject to a “catch up” feature (as described below). The calculation of the incentive fee on income for each quarter is as follows:
•
No incentive fee on income shall be payable to the Adviser in any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income does not exceed the preferred return rate of 1.75% or 7.00% annualized (the “Preferred Return”) on net assets;
•
100% of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds the preferred return but is less than or equal to 2.1875% in any calendar quarter (8.75% annualized) shall be payable to the Adviser. This portion of the Company’s incentive fee on income is referred to as the “catch up” and is intended to provide the Adviser with an incentive fee of 20% on all of the Company’s Pre-Incentive Fee Net Investment Income when the Company’s Pre-Incentive Fee Net Investment Income reaches 2.1875% (8.75% annualized) in any calendar quarter; and
•
For any quarter in which the Company's Pre-Incentive Fee Net Investment Income exceeds 2.1875% (8.75% annualized), the incentive fee on income shall equal 20% of the amount of the Company’s Pre-Incentive Fee Net Investment Income, as the Preferred Return and catch-up will have been achieved.
As of December 31, 2019 and December 31, 2018, $6.5 million and $5.7 million was payable to the Adviser for the incentive fee on income, respectively.
For the years ended December 31, 2019, 2018, and 2017, the Company incurred $27.1 million, $21.7 million, and $19.7 million, respectively, in incentive fees on income under the Investment Advisory Agreement.
The second part of the incentive fee, referred to as the “incentive fee on capital gains during operations,” shall be an incentive fee on capital gains earned on liquidated investments from the portfolio during operations prior to the Company’s liquidation and shall be determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, if earlier). This fee shall equal 20.0% of the Company’s incentive fee capital gains, which shall equal the Company’s realized capital gains on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. For the years ended December 31, 2019, 2018, and 2017, the Company did not incur incentive fees on capital gains during operations under the Investment Advisory Agreement.
Administration Agreement
In connection with the Administration Agreement, BSP provides the Company with office facilities and administrative services. As of December 31, 2019 and December 31, 2018, $0.6 million and $0.7 million was payable to BSP under the Administration Agreement, respectively.
For the years ended December 31, 2019, 2018, and 2017, the Company incurred $2.4 million, $2.5 million, and $2.6 million, respectively, in administrative service fees under the Administration Agreement.

F- 52
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Co-Investment Relief
The 1940 Act generally prohibits BDCs from entering into negotiated co-investments with affiliates absent an order from the SEC. The SEC staff has granted the Company exemptive relief that allows it to enter into certain negotiated co-investment transactions alongside with other funds managed by the Adviser or its affiliates (“Affiliated Funds”) in a manner consistent with its investment objective, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, the Company is permitted to co-invest with its affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of its eligible directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to the Company and the Company's stockholders and do not involve overreaching in respect of the Company or the Company's stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of the Company’s stockholders and is consistent with the Company’s investment objective and strategies.    
Triangle Transaction
On April 3, 2018, BSP, through the Acquisition Entity, entered into the APA with Triangle under which certain funds advised by BSP agreed to acquire the Triangle Portfolio for $981.2 million in cash, as adjusted in accordance with the terms of the APA. The Adviser is an affiliate of BSP, and the Company participated in the Triangle Transaction by purchasing a portion of the Triangle Portfolio, facilitated through the Acquisition Entity.
On July 31, 2018, BSP completed the Triangle Transaction. The gross cash proceeds paid to Triangle were approximately $793.3 million, after adjustments to take into account portfolio activity and other matters occurring since December 31, 2017. In accordance with BSP’s allocation policy, the Company acquired approximately 24% of the assets in the Triangle Portfolio for an aggregate purchase price of $188.1 million. The final allocation of the investments in the Triangle Portfolio by BSP was based on a number of factors, including, among others, the Company’s available capital at the time of allocation, changes in the composition of the Triangle Portfolio between the signing of the APA and the closing of the Triangle Transaction, the suitability of the investments in Triangle’s Portfolio for the Company as compared to the other funds managed by BSP, regulatory guidance regarding the allocation of certain Triangle Portfolio assets between funds managed by BSP, and changes in the relative size of the funds managed by BSP.
Private Placement in connection with FT Transaction
In connection with the FT Transaction, on November 1, 2018, the Company issued approximately 6.1 million and 4.9 million shares of the Company's common stock to FRI and BSP, respectively, at a purchase price of $8.20 per share in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).
Offering Costs
The Company incurs certain costs in connection with the registration of shares of its common stock. Offering costs principally relate to professional fees, printing costs, direct marketing expenses, due diligence costs, fees paid to regulators, and other expenses, including the salaries and/or expenses of the Adviser and its affiliates engaged in registering and marketing the Company’s common stock. Such allocated expenses of the Adviser and its affiliates may include the development of marketing materials and presentations, training and educational meetings, and generally coordinating the marketing process for the Company. The Company incurred no offering costs for the years ended December 31, 2019, 2018, and 2017, respectively.
Other Affiliated Parties
The Adviser is the investment adviser of BDCA. The Adviser is an affiliate of BSP, an SEC registered investment adviser. The Adviser and BSP are under common control. Prior to the consummation of the FT Transaction on February 1, 2019, the Adviser was affiliated and under common control with Providence Equity Capital Markets L.L.C. (“PECM”), an SEC registered investment adviser on the BSP platform. The Adviser was affiliated and under common control with Providence Equity Partners L.L.C. (“PEP”), an SEC registered investment adviser. PEP is a global private equity investment adviser and maintained an information barrier between itself and the Adviser, BSP and PECM. The Adviser was affiliated and under common control with Merganser Capital Management, LLC (“Merganser”), an SEC registered investment adviser. BSP, the Adviser, PECM, Merganser and PEP’s respective Form ADV’s are publicly available for review on the SEC Investment Adviser Public Disclosure website.

F- 53
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Note 5 — Borrowings
Wells Fargo Credit Facility
On July 24, 2012, the Company, through a wholly-owned, consolidated special purpose financing subsidiary, Funding I, entered into a revolving credit facility with Wells Fargo and U.S. Bank as collateral agent, account bank, and collateral custodian (as amended from time to time, the “Wells Fargo Credit Facility”). The Wells Fargo Credit Facility, which has been amended from time to time, was last amended on March 15, 2019 and provides for borrowings in an aggregate principal amount of up to $600.0 million on a committed basis. The Wells Fargo Credit Facility has a maturity date of May 9, 2023.
The Wells Fargo Credit Facility is priced at the one-month maturity LIBOR, with no LIBOR floor, plus a spread ranging between 1.65% and 2.50% per annum, depending on the composition of the portfolio of loans owned by Funding I for the relevant period. Interest is payable quarterly in arrears. Funding I is subject to a non-usage fee to the extent the aggregate principal amount available under the Wells Fargo Credit Facility has not been borrowed. The non-usage fee for the three months from the most recent amendment is 0.50% on any principal amount unused. After the three months from the most recent amendment, the non-usage fee per annum is 0.50% for the first 25% of the unused balance and 2.0% for the portion of the unused balance that exceeds 25%.
Borrowings under the Wells Fargo Credit Facility are subject to compliance with a borrowing base, pursuant to which the amount of funds advanced to Funding I varies depending upon the types of loans in Funding I's portfolio. The Wells Fargo Credit Facility may be prepaid in whole or in part, subject to customary breakage costs.
The Wells Fargo Credit Facility contains customary default provisions for facilities of this type pursuant to which Wells Fargo may terminate the rights, obligations, power, and authority of the Company, in its capacity as servicer of the portfolio assets under the Wells Fargo Credit Facility, including, but not limited to, non-performance of Wells Fargo Credit Facility obligations, insolvency, defaults of certain financial covenants, and other events with respect to the Company that may be adverse to Wells Fargo and the secured parties under the Wells Fargo Credit Facility.
In connection with the Wells Fargo Credit Facility, Funding I has made certain representations and warranties, is required to comply with various covenants, reporting requirements, and other customary requirements for similar facilities and is subject to certain customary events of default. Upon the occurrence and during the continuation of an event of default, Wells Fargo may declare the outstanding advances and all other obligations under the Wells Fargo Credit Facility immediately due and payable. During the continuation of an event of default, Funding I must pay interest at a default rate.
On April 6, 2018, the Company borrowed $90.6 million under the Wells Fargo Credit Facility and used such proceeds, together with cash on hand, to repay at maturity the debt financing facility that it had entered into with UBS AG, London Branch through a wholly-owned special-purpose, bankruptcy-remote subsidiary, BDCA Helvetica Funding, Ltd.
Citi Credit Facility
On June 27, 2014, the Company, through a wholly-owned, special purpose financing subsidiary, CB Funding, entered into a credit facility (as amended from time to time, the “Citi Credit Facility”) with Citibank, N.A. ("Citi") as administrative agent and U.S. Bank as collateral agent, account bank, and collateral custodian. The Citi Credit Facility, which was subsequently amended on October 14, 2015, provides for borrowings in an aggregate principal amount of up to $400.0 million on a committed basis, subject to the administrative agent’s right to approve the assets acquired by CB Funding and pledged as collateral under the Citi Credit Facility. On June 27, 2019, the Company, through a wholly-owned, consolidated special purpose financing subsidiary, BDCA-CB Funding LLC, entered into an amendment (the "Amendment") to its Credit and Security Agreement with Citibank, N.A., dated as of June 27, 2014 (as amended from time to time, the "Credit Agreement"). The Amendment, among other things, (i) extends the end of the reinvestment period from July 1, 2019 to May 31, 2021 and (ii) extends the maturity date of the Credit Agreement from May 28, 2020 to May 31, 2022.
The Citi Credit Facility is priced at three-month LIBOR, with no LIBOR floor, plus a spread of 1.60% per annum through and including the last day of the investment period and 2.00% per annum thereafter. Interest is payable quarterly in arrears. CB Funding is subject to a non-usage fee to the extent the aggregate principal amount available under the Citi Credit Facility has not been borrowed. The non-usage fee per annum is 0.50%. Any amounts borrowed under the Citi Credit Facility along with any accrued and unpaid interest thereunder will mature, and will be due and payable, in three years.

F- 54
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

UBS Credit Facility
On April 7, 2015, the Company, through a wholly-owned, special-purpose, bankruptcy-remote subsidiary, Helvetica Funding, entered into a debt financing facility with UBS AG, London Branch (“UBS”), pursuant to which $150.0 million was made available to the Company to fund investments in new securities and for other general corporate purposes (as amended from time to time, the “UBS Credit Facility”). The UBS Credit Facility was subsequently amended on July 10, 2015 to increase the amount of debt available to the Company under the facility from $150.0 million to $210.0 million. On June 6, 2016, the UBS Credit Facility was again amended to increase the amount of debt available from $210.0 million to $232.5 million. In addition, the amended facility increased the applicable spread over a three-month LIBOR from 3.90% to 4.05% per annum for the relevant period and increased the permissible percentage of second lien loans from 60% to 70%. Pricing under the UBS Credit Facility was based on three-month LIBOR plus a spread of 4.05% per annum for the relevant period. The maturity date of the UBS Credit Facility was April 7, 2018.
On April 6, 2018, the Company repaid the UBS Credit Facility and all related liens were released.
2020 Notes
On August 26, 2015, the Company entered into a Purchase Agreement with Sandler O’Neill & Partners, L.P (the “Initial Purchaser”), relating to the Company’s sale of $100.0 million aggregate principal amount of its 6.00% fixed rate senior notes due 2020 (the “2020 Notes”) to the Initial Purchaser in a private placement in reliance on Section 4(a)(2) of the Securities Act and for initial resale by the Initial Purchaser to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act. The Company relied upon these exemptions from registration based in part on representations made by the Initial Purchaser. The Purchase Agreement includes customary representations, warranties, and covenants by the Company. Under the terms of the Purchase Agreement, the Company has agreed to indemnify the Initial Purchaser against certain liabilities under the Securities Act. The 2020 Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The net proceeds from the sale of the 2020 Notes was approximately $97.9 million, after deducting Initial Purchaser's discounts and commissions of approximately $1.6 million payable by the Company and estimated offering expenses of approximately $0.5 million payable by the Company. The Company used the net proceeds to make investments in accordance with the Company’s investment objectives and for general corporate purposes.
The 2020 Notes were issued pursuant to an Indenture, dated as of August 31, 2015 (the “2015 Indenture”), between the Company and U.S. Bank National Association, trustee (the “Trustee”). The 2020 Notes will mature on September 1, 2020 and may be redeemed in whole or in part at the Company’s option at any time, or from time to time, at the redemption prices set forth in the 2015 Indenture. The 2020 Notes bear interest at a rate of 6.00% per year payable semi-annually on March 1 and September 1 of each year, commencing on March 1, 2016. The 2020 Notes will be general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2020 Notes. The 2020 Notes will rank equally in right of payment with all of the Company’s existing and future senior liabilities that are not so subordinated, effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and structurally junior to all existing and future indebtedness incurred by the Company’s subsidiaries, financing vehicles or similar facilities, including credit facilities held by the Company’s wholly owned, special purpose financing subsidiaries.
The 2015 Indenture contains certain covenants, including covenants requiring the Company to: (i) comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act as in effect immediately prior to the issuance of the 2020 Notes, whether or not the Company is subject to such provisions; (ii) provide financial information to the holders of the 2020 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended; and (iii) maintain total unencumbered assets, as defined in the 2015 Indenture, of at least 175% of the aggregate principal amount of all of the Company and the Company’s consolidated subsidiaries’ outstanding unsecured debt determined on a consolidated basis in accordance with U.S. GAAP. These covenants are subject to important limitations and exceptions that are described in the 2015 Indenture.

F- 55
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

2022 Notes
On December 14, 2017, the Company entered into a Purchase Agreement (the “2022 Notes Purchase Agreement”) with the Initial Purchaser relating to the Company's sale of $150.0 million aggregate principal amount of its 4.75% fixed rate notes due 2022 (the “2022 Notes”) to the Initial Purchaser in a private placement in reliance on Section 4(a)(2) of the Securities Act and for initial resale by the Initial Purchaser to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act and to institutional accredited investors under Rule 501(a)(1), (2), (3), or (7) under the Securities Act. The Company relied upon these exemptions from registration based in part on representations made by the Initial Purchaser. The 2022 Notes Purchase Agreement also includes customary representations, warranties, and covenants by the Company. Under the terms of the 2022 Notes Purchase Agreement, the Company has agreed to indemnify the Initial Purchaser against certain liabilities under the Securities Act. The 2022 Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration. The net proceeds from the sale of the 2022 Notes was approximately $147.0 million, after deducting an offering price discount of approximately $0.8 million, as well as Initial Purchaser’s discounts and commissions of approximately $1.7 million and offering expenses of approximately $0.6 million, each payable by the Company. The Company used the net proceeds to repay outstanding indebtedness, to make investments in portfolio companies in accordance with its investment objectives, and for general corporate purposes.
The 2022 Notes were issued pursuant to the Indenture dated as of December 19, 2017 (the “2017 Indenture”), between the Company and the Trustee, and a Supplemental Indenture, dated as of December 19, 2017 (the “Supplemental Indenture”), between the Company and the Trustee. The 2022 Notes will mature on December 30, 2022, unless repurchased or redeemed in accordance with their terms prior to such date. The 2022 Notes bear interest at a rate of 4.75% per year payable semi-annually on June 30 and December 30 of each year, commencing on June 30, 2018. The 2022 Notes will be general unsecured obligations of the Company that rank senior in right of payment to all of the Company's existing and future indebtedness that is expressly subordinated in right of payment to the 2022 Notes. The 2022 Notes will rank equally in right of payment with all of the Company's existing and future senior liabilities that are not so subordinated, effectively junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and structurally junior to all existing and future indebtedness incurred by the Company's subsidiaries, financing vehicles, or similar facilities, including credit facilities entered into by the Company's wholly owned, special purpose financing subsidiaries.
The 2017 Indenture contains certain covenants, including covenants requiring the Company to (i) comply with the asset coverage requirements of the 1940 Act, whether or not it is subject to those requirements, and (ii) provide financial information to the holders of the 2022 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. These covenants are subject to important limitations and exceptions that are described in the 2017 Indenture.
In addition, if a change of control repurchase event, as defined in the 2017 Indenture, occurs prior to maturity, holders of the 2022 Notes will have the right, at their option, to require the Company to repurchase for cash some or all of the 2022 Notes at a repurchase price equal to 100% of the principal amount of the 2022 Notes being repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

F- 56
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

2023 Notes
On May 11, 2018, the Company entered into a Purchase Agreement (the “2023 Notes Purchase Agreement”) with the Initial Purchaser relating to the Company’s sale of $60.0 million aggregate principal amount of its 5.375% fixed rate notes due 2023 (the “2023 Notes”) to the Initial Purchaser in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, and for initial resale by the Initial Purchaser to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act and to institutional accredited investors under Rule 501 (a)(1), (2), (3), or (7) under the Securities Act. The Company relied upon these exemptions from registration based in part on representations made by the Initial Purchaser. The 2023 Notes Purchase Agreement also includes customary representations, warranties, and covenants by the Company. Under the terms of the 2023 Notes Purchase Agreement, the Company has agreed to indemnify the Initial Purchaser against certain liabilities under the Securities Act. The 2023 Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration. The net proceeds from the sale of the 2023 Notes were approximately $58.7 million, after deducting an offering price discount of approximately $0.3 million, as well as Initial Purchaser’s discounts and commissions of approximately $0.6 million and estimated offering expenses of approximately $0.4 million, each payable by the Company. The Company used the net proceeds to repay outstanding indebtedness, to make investments in portfolio companies in accordance with its investment objectives, and for general corporate purposes. The 2023 Notes were issued pursuant to the 2017 Indenture between the Company and The Trustee, and a Second Supplemental Indenture, dated as of May 16, 2018, between the Company and the Trustee. The 2023 Notes will mature on May 30, 2023, unless repurchased or redeemed in accordance with their terms prior to such date. The 2023 Notes bear interest at a rate of 5.375% per year payable semi-annually on May 30 and November 30 of each year, commencing on November 30, 2018. The 2023 Notes will be general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2023 Notes. The 2023 Notes will rank equally in right of payment with all of the Company’s existing and future senior liabilities that are not so subordinated, effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and structurally junior to all existing and future indebtedness incurred by the Company’s subsidiaries, financing vehicles, or similar facilities, including credit facilities entered into by the Company’s wholly owned, special purpose financing subsidiaries. The 2017 Indenture contains certain covenants, including covenants requiring the Company to (i) comply with the asset coverage requirements of the 1940 Act, whether or not it is subject to those requirements, and (ii) provide financial information to the holders of the 2023 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. These covenants are subject to important limitations and exceptions that are described in the 2017 Indenture. In addition, if a change of control repurchase event, as defined in the 2017 Indenture, occurs prior to maturity, holders of the 2023 Notes will have the right, at their option, to require the Company to repurchase for cash some or all of the 2023 Notes at a repurchase price equal to 100% of the principal amount of the 2023 Notes being repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.
2024 Notes
On December 3, 2019, the Company entered into a Purchase Agreement (the “2024 Notes Purchase Agreement”) with the Initial Purchaser relating to the Company’s sale of $100.0 million aggregate principal amount of its 4.85% fixed rate notes due 2024 (the “2024 Notes”) to the Initial Purchaser in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, and for initial resale by the Initial Purchaser to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act and to institutional accredited investors under Rule 501 (a)(1), (2), (3), or (7) under the Securities Act. The Company relied upon these exemptions from registration based in part on representations made by the Initial Purchaser. The 2024 Notes Purchase Agreement also includes customary representations, warranties, and covenants by the Company. Under the terms of the 2024 Notes Purchase Agreement, the Company has agreed to indemnify the Initial Purchaser against certain liabilities under the Securities Act. The 2024 Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration. The net proceeds from the sale of the 2024 Notes were approximately $98.4 million, after deducting the Initial Purchaser’s discounts and commissions of approximately $1.2 million and estimated offering expenses of approximately $0.4 million, each payable by the Company. The Company used the net proceeds to repay outstanding indebtedness, to make investments in portfolio companies in accordance with its investment objectives, and for general corporate purposes. The 2024 Notes were issued pursuant to the 2017 Indenture between the Company and The Trustee, and a Third Supplemental Indenture, dated as of December 5, 2019, between the Company and the Trustee. The 2024 Notes will mature on December 15, 2024, unless repurchased or redeemed in accordance with their terms prior to such date. The 2024 Notes bear interest at a rate of 4.85% per year payable semi-annually on June 15 and December 15 of each year, commencing on June 15, 2020. The 2024 Notes will be general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of

F- 57
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

payment to the 2024 Notes. The 2024 Notes will rank equally in right of payment with all of the Company’s existing and future senior liabilities that are not so subordinated, effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and structurally junior to all existing and future indebtedness incurred by the Company’s subsidiaries, financing vehicles, or similar facilities, including credit facilities entered into by the Company’s wholly owned, special purpose financing subsidiaries. The 2017 Indenture contains certain covenants, including covenants requiring the Company to (i) comply with the asset coverage requirements of the 1940 Act, whether or not it is subject to those requirements, and (ii) provide financial information to the holders of the 2024 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. These covenants are subject to important limitations and exceptions that are described in the 2017 Indenture. In addition, if a change of control repurchase event, as defined in the 2017 Indenture, occurs prior to maturity, holders of the 2024 Notes will have the right, at their option, to require the Company to repurchase for cash some or all of the 2024 Notes at a repurchase price equal to 100% of the principal amount of the 2024 Notes being repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.
JP Morgan Securities LLC Prime Brokerage Account
On January 20, 2017, the Company entered into a prime brokerage account agreement with JP Morgan Securities LLC (the “JPMC PB Account”). The JPMC PB Account provided a full suite of services around the custody of bonds and equities and also access to leverage, which is dependent on the price, credit quality, and diversity of the pool of assets held within the account. The borrowing availability is recalculated daily based on changes to the assets, with margin calls issued in the morning as appropriate. The cost to borrow is 1 week LIBOR + 90 bps and there is no mandatory usage or period wherein the debt needs to be repaid.
On May 8, 2018 the Company fully repaid its borrowings under the JPMC PB Account and closed the account.
The weighted average annualized interest cost for all borrowings for the years ended December 31, 2019, 2018, and 2017 was 4.57%, 4.49%, and 3.96%, respectively. The average daily debt outstanding for the years ended December 31, 2019, 2018, and 2017 was $1.1 billion, $1.3 billion, and $1.0 billion, respectively. The maximum debt outstanding for the years ended December 31, 2019, 2018, and 2017 was $1.3 billion, $1.5 billion, and $1.2 billion, respectively.
The following table represents borrowings as of December 31, 2019:
 
 
Maturity Date
 
Total Aggregate Borrowing Capacity
 
Total Principal Outstanding
 
Less Deferred Financing Costs
 
Amount per Consolidated Statements of Assets and Liabilities
Wells Fargo Credit Facility
 
5/9/2023
 
$
600,000

 
$
436,652

 
$
(6,738
)
 
$
429,914

Citi Credit Facility
 
5/31/2022
 
400,000

 
250,500

 
(2,271
)
 
248,229

2024 Notes
 
12/15/2024
 
100,000

 
98,818

 
(184
)
 
98,634

2023 Notes
 
5/30/2023
 
60,000

 
59,778

 
(644
)
 
59,134

2022 Notes
 
12/30/2022
 
150,000

 
149,505

 
(1,367
)
 
148,138

2020 Notes
 
9/1/2020
 
100,000

 
99,789

 
(84
)
 
99,705

Totals
 
 
 
$
1,410,000

 
$
1,095,042

 
$
(11,288
)
 
$
1,083,754


F- 58
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

    
The following table represents borrowings as of December 31, 2018:
 
 
Maturity Date
 
Total Aggregate Borrowing Capacity
 
Total Principal Outstanding
 
Less Deferred Financing Costs
 
Amount per Consolidated Statements of Assets and Liabilities
Wells Fargo Credit Facility
 
5/9/2023
 
$
545,000

 
$
294,651

 
$
(8,163
)
 
$
286,488

Citi Credit Facility
 
5/28/2020
 
400,000

 
293,500

 
(1,127
)
 
292,373

2023 Notes
 
5/30/2023
 
60,000

 
59,713

 
(833
)
 
58,880

2022 Notes
 
12/30/2022
 
150,000

 
149,340

 
(1,824
)
 
147,516

2020 Notes
 
9/1/2020
 
100,000

 
99,474

 
(209
)
 
99,265

Totals
 
 
 
$
1,255,000

 
$
896,678

 
$
(12,156
)
 
$
884,522


The following table represents interest and debt fees for the year ended December 31, 2019:
 
Year ended December 31, 2019
 
Interest Rate
 
Non-Usage Rate
 
Interest Expense
 
Deferred Financing Costs (3)
 
Other Fees (4)
Wells Fargo Credit Facility
(1) 
 
(2) 
 
$
19,628

 
$
1,955

 
$
1,142

Citi Credit Facility
L+1.60%
 
0.50%
 
13,163

 
858

 
487

2024 Notes
4.85%
 
n/a
 
368

 
3

 
—

2023 Notes
5.38%
 
n/a
 
3,290

 
189

 
9

2022 Notes
4.75%
 
n/a
 
7,290

 
456

 
9

2020 Notes
6.00%
 
n/a
 
6,332

 
125

 
8

Totals
 
 
 
 
$
50,071

 
$
3,586

 
$
1,655

______________
(1) Interest rate is priced at one month's LIBOR with no LIBOR floor, plus a spread ranging between 1.65% and 2.50% per annum, depending on the composition of the portfolio of loans owned.
(2) Prior to the most recent amendment (March 15, 2019), the non-usage fee per annum is 0.50% for the first 25% of the unused balance and 2.0% for the portion of the unused balance that exceeds 25%. The non-usage fee for the three months from the most recent amendment is 0.50% on any principal amount unused. After the three months from the most recent amendment, the non-usage fee per annum is 0.50% for the first 25% of the unused balance and 2.0% for the portion of the unused balance that exceeds 25%.
(3) Amortization of deferred financing costs.
(4) Includes non-usage fees and custody fees.

F- 59
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

The following table represents interest and debt fees for the year ended December 31, 2018:
 
Year ended December 31, 2018
 
Interest Rate
 
Non-Usage Rate
 
Interest Expense
 
Deferred Financing Costs (3)
 
Other Fees (4)
Wells Fargo Credit Facility
(1) 
 
(2) 
 
$
17,106

 
$
1,659

 
$
912

Citi Credit Facility
L+1.60%
 
0.50%
 
13,690

 
799

 
299

UBS Credit Facility
L+4.05%
 
n/a
 
3,696

 
110

 
57

2023 Notes
5.38%
 
n/a
 
2,057

 
115

 
—

2022 Notes
4.75%
 
n/a
 
7,290

 
456

 
12

2020 Notes
6.00%
 
n/a
 
6,316

 
126

 
—

JPMC PB Account
L+0.90%
 
n/a
 
570

 
—

 
—

Totals
 
 
 
 
$
50,725

 
$
3,265

 
$
1,280

_____________
(1) Interest rate is priced at one month's LIBOR with no LIBOR floor, plus a spread ranging between 1.65% and 2.50% per annum, depending on the composition of the portfolio of loans owned.
(2) The non-usage fee per annum is 0.50% for the first 25% of the unused balance and 2.0% for the portion of the unused balance that exceeds 25%.
(3) Amortization of deferred financing costs.
(4) Includes non-usage fees, custody fees, and trustee fees.    
The following table represents interest and debt fees for the year ended December 31, 2017:
 
Year ended December 31, 2017
 
Interest Rate
 
Non-Usage Rate
 
Interest Expense
 
Deferred Financing Costs (3)
 
Other Fees (4)
Wells Fargo Credit Facility
(1) 
 
(2) 
 
$
11,678

 
$
1,224

 
$
749

Citi Credit Facility
L+1.60%
 
0.50%
 
8,958

 
745

 
538

UBS Credit Facility
L+4.05%
 
n/a
 
12,361

 
415

 
106

2022 Notes
4.75%
 
n/a
 
243

 
16

 
—

2020 Notes
6.00%
 
n/a
 
6,316

 
125

 
15

JPMC PB Account
L+0.90%
 
n/a
 
362

 
—

 
—

Totals
 
 
 
 
$
39,918

 
$
2,525

 
$
1,408

_____________
(1) Interest rate is priced at one month's LIBOR with no LIBOR floor, plus a spread ranging between 1.65% and 2.50% per annum, depending on the composition of the portfolio of loans owned.
(2) The non-usage fee per annum is 0.50% for the first 25% of the unused balance and 2.0% for the portion of the unused balance that exceeds 25%.
(3) Amortization of deferred financing costs.
(4) Includes non-usage fees, custody fees, and trustee fees.
The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate fair value. The fair value of short-term financial instruments such as cash and cash equivalents, due to affiliates, and accounts payable approximate their carrying value on the accompanying consolidated statements of assets and liabilities due to their short-term nature. The fair value of the Company's 2020 Notes, 2022 Notes, 2023 Notes, and 2024 Notes are derived from market indications provided by Bloomberg Finance L.P. at December 31, 2019. The fair value of the Company's 2020 Notes, 2022 Notes, and 2023 Notes are derived from market indications provided by Bloomberg Finance L.P. at December 31, 2018.

F- 60
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

At December 31, 2019, the carrying amount of the Company's secured borrowings approximated their fair value. The fair values of the Company's debt obligations are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Company's borrowings is estimated based upon market interest rates for the Company's own borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any. As of December 31, 2019 and December 31, 2018, the Company's borrowings would be deemed to be Level 3, as defined in Note 3 - Fair Value of Financial Instruments.
The fair values of the Company’s remaining financial instruments that are not reported at fair value on the accompanying consolidated statements of assets and liabilities are reported below (amounts in thousands):
 
Level
 
Carrying Amount at December 31, 2019
 
Fair Value at
December 31, 2019
Wells Fargo Credit Facility
3
 
$
436,652

 
$
436,652

Citi Credit Facility
3
 
250,500

 
250,500

2024 Notes
3
 
98,818

 
99,722

2023 Notes
3
 
59,778

 
60,721

2022 Notes
3
 
149,505

 
151,937

2020 Notes
3
 
99,789

 
101,389

 
 
 
$
1,095,042

 
$
1,100,921

 
Level
 
Carrying Amount at December 31, 2018
 
Fair Value at
December 31, 2018
Wells Fargo Credit Facility
3
 
$
294,651

 
$
294,651

Citi Credit Facility
3
 
293,500

 
293,500

2023 Notes
3
 
59,713

 
59,820

2022 Notes
3
 
149,340

 
147,717

2020 Notes
3
 
99,474

 
102,287

 
 
 
$
896,678

 
$
897,975


Note 6 — Derivatives
Foreign Currency
The Company may enter into forward foreign currency contracts from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies or to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Company's investments denominated in foreign currencies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date (usually the security transaction settlement date) at a negotiated forward rate. These contracts are marked-to-market by recognizing the difference between the contract exchange rate and the current market rate as unrealized appreciation or depreciation. Realized gains or losses are recognized when contracts are settled. The Company's forward foreign currency contracts generally have terms of approximately three months. The volume of open contracts at the end of each reporting period is reflective of the typical volume of transactions during each calendar quarter. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contracts. The Company attempts to limit this risk by dealing with creditworthy counterparties.
At December 31, 2019 and 2018, the forward foreign currency contracts were classified within Level 2 of the fair value hierarchy. The foreign currency forward contract held as of December 31, 2019, was subject to ISDA Master Agreements or similar agreements. The foreign currency forward contract held as of December 31, 2018, was not subject to a master netting arrangement or other similar agreement.
The Company is operated by a person who has claimed an exclusion from the definition of the "commodity pool operator" under the Commodity Exchange Act, and, therefore, who is not subject to registration or regulation as a pool operator under such Act.

F- 61
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Note 7 — Commitments and Contingencies
Commitments
In the ordinary course of business, the Company may enter into future funding commitments. As of December 31, 2019, the Company had unfunded commitments on delayed draw term loans of $24.9 million (including $21.8 million of non-discretionary commitments and $3.1 million of discretionary commitments), unfunded commitments on revolver term loans of $28.0 million, and unfunded equity capital discretionary commitments of $21.4 million. As of December 31, 2018, the Company had unfunded commitments on delayed draw term loans of $15.2 million, unfunded commitments on revolver term loans of $21.1 million, and unfunded equity capital commitments of $0.5 million. The Company maintains sufficient cash on hand and available borrowings to fund such unfunded commitments.



F- 62
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

As of December 31, 2019 the Company's unfunded commitments consisted of the following:
December 31, 2019
Portfolio Company Name
 
Investment Type
 
Commitment Type
 
Total Commitment
 
Remaining Commitment
AMI Entertainment Network, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
$
1,234

 
$
1,234

Arch Global Precision, LLC
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
1,071

 
1,071

Arch Global Precision, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,008

 
1,008

CCW, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,500

 
200

CDHA Holdings, LLC
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
7,580

 
7,027

CDHA Holdings, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,264

 
834

Corfin Industries, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
956

 
956

CRS-SPV, Inc.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
224

 
162

Florida Food Products, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,647

 
231

ICR Operations, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
2,753

 
2,655

Ideal Tridon Holdings, Inc.
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
80

 
34

Ideal Tridon Holdings, Inc.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
2,810

 
2,649

Integral Ad Science, Inc.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,085

 
1,085

Lakeview Health Holdings, Inc.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
315

 
186

MED Parentco, LP
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
1,437

 
1,131

Midwest Can Company, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
547

 
547

Miller Environmental Group, Inc.
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
1,131

 
1,131

Miller Environmental Group, Inc.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,324

 
1,324

Muth Mirror Systems, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,299

 
1,299

New Amsterdam Software Bidco, LLC
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
1,790

 
1,790

Norvax, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,152

 
1,152

ORG Chemical Holdings, LLC
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
6,503

 
3,083

Planet Equity Group, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
2,325

 
2,325

PT Network, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,316

 
1,316

Questex, Inc.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
2,584

 
1,895

Reddy Ice Corp.
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
2,518

 
2,518

Reddy Ice Corp.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,762

 
1,762

Safety Products/JHC Acquisition Corp.
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
2,171

 
1,214

SitusAMC Holdings Corp.
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
752

 
752

Subsea Global Solutions, LLC
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
4,744

 
2,352

Subsea Global Solutions, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
963

 
575

Tap Rock Resources, LLC
 
Equity/Other
 
Equity
 
42,100

 
21,428

Tillamook Country Smoker, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,618

 
539

University of St. Augustine Acquisition Corp.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
2,615

 
2,615

Vantage Mobility International, LLC
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
196

 
196

WMK, LLC
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
4,528

 
2,618

WMK, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
2,618

 
1,484

Total
 
 
 
 
 
$
111,520

 
$
74,378



F- 63
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

As of December 31, 2018 the Company's unfunded commitments consisted of the following:
December 31, 2018
Portfolio Company Name
 
Investment Type
 
Commitment Type
 
Total Commitment
 
Remaining Commitment
AccentCare, Inc.
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
$
4,301

 
$
948

AMI Entertainment Network, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,234

 
1,234

Aveanna Healthcare, LLC
 
Senior Secured Second Lien Debt
 
Delayed draw term loan
 
1,373

 
1,373

Capstone Nutrition (fka Integrity Nutraceuticals)
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
5,089

 
1,804

CCW, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
3,000

 
1,700

CDHA Holdings, LLC
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
7,583

 
7,583

CDHA Holdings, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,264

 
834

Cold Spring Brewing, Co.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
238

 
238

Corfin Industries, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
956

 
382

Dentalcorp Perfect Smile, ULC
 
Senior Secured Second Lien Debt
 
Delayed draw term loan
 
2,028

 
872

Deva Holdings, Inc.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
559

 
559

DLC Acquisition, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
694

 
694

Florida Food Products, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,647

 
626

ICR Operations, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
2,753

 
2,642

Ideal Tridon Holdings, Inc.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
2,731

 
710

Integral Ad Science, Inc.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,085

 
1,085

Lakeview Health Holdings, Inc.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
310

 
310

Midwest Can Company, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
547

 
547

MMM Holdings, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,761

 
1,761

PennantPark Credit Opportunities Fund II, LP
 
Equity/Other
 
Equity
 
10,764

 
538

PT Network, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,316

 
658

Questex, Inc.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
2,584

 
2,153

Subsea Global Solutions, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
963

 
748

TwentyEighty, Inc.
 
Senior Secured First Lien Debt
 
Revolver term loan
 
443

 
443

USF S&H Holdco, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
1,616

 
1,131

WMK, LLC
 
Senior Secured First Lien Debt
 
Delayed draw term loan
 
2,618

 
2,618

WMK, LLC
 
Senior Secured First Lien Debt
 
Revolver term loan
 
2,618

 
2,618

Total
 
 
 
 
 
$
62,075

 
$
36,809

Litigation and Regulatory Matters
In the ordinary course of business, the Company may become subject to litigation, claims, and regulatory matters. The Company has no knowledge of material legal or regulatory proceedings pending or known to be contemplated against the Company at this time.
Indemnifications
In the ordinary course of its business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on its history and experience, management feels that the likelihood of such an event is remote.

F- 64
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Guarantees
Park Ave RE, Inc. through its wholly-owned subsidiaries (including Park Ave RE Holdings, LLC), is in the business of purchasing commercial properties from owner-operators and leasing the properties back to the original owners under long term leasing arrangements. The Company has provided a non-recourse carveout guarantee to its controlled portfolio company, Park Ave RE Holdings, LLC, in connection with a secured loan. Although the loan is generally non-recourse in nature, the Company will nevertheless be responsible for liabilities of the portfolio company upon the occurrence of certain events deemed carveouts to such non-recourse nature (including fraud or misrepresentation, bankruptcy, misapplication of funds, and distributions or incurrence of additional indebtedness in violation of the terms of the loan). This guarantee no longer exists as of December 31, 2019.
Note 8 — Economic Dependency
Under various agreements, the Company has engaged or will engage the Adviser and its affiliates to provide certain services that are essential to the Company, including asset management services, asset acquisition, and disposition decisions, the sale of shares of the Company’s common stock available for issuance, as well as other administrative responsibilities for the Company including accounting services and investor relations.
As a result of these relationships, the Company is dependent upon the Adviser and its affiliates. In the event that these companies were unable to provide the Company with the respective services, the Company would be required to find alternative providers of these services.
Note 9 — Common Stock
On August 25, 2011, the Company had raised sufficient funds to break escrow on its IPO. On July 1, 2014, the Company's registration statement on Form N-2 (File No.333-193241) for its Follow-on was declared effective by the SEC. Simultaneously with the effectiveness of the registration statement of the Follow-on, the Company's IPO terminated. Through December 31, 2019, the Company issued 215.9 million shares of common stock for gross proceeds of $2.3 billion, including the shares purchased by an affiliate of BSP and shares issued under the Company's DRIP. Following the time the Company's updated registration statement was declared effective on June 30, 2015, the Company issued shares for subscription agreements that had been accepted through that date. From inception of the Company's DRIP plan to December 31, 2019, the Company had repurchased 25.6 million shares of common stock through its share repurchase program for payments of $222.2 million. As of December 31, 2018, the Company had repurchased 21.2 million shares of common stock for payments of $185.9 million. Amounts include additional shares tendered for death and disability as permitted.
The following table reflects the common stock activity for the year ended December 31, 2019:
 
 
Shares
 
Value
Shares Sold
 
—

 
$
—

Shares Issued through DRIP
 
4,373,786

 
34,905

Share Repurchases
 
(4,490,328
)
 
(36,286
)
 
 
(116,542
)
 
$
(1,381
)
    
The following table reflects the common stock activity for the year ended December 31, 2018:
 
 
Shares
 
Value
Shares Sold
 
10,975,610

 
$
90,000

Shares Issued through DRIP
 
4,720,005

 
38,983

Share Repurchases
 
(5,105,554
)
 
(42,313
)
 
 
10,590,061

 
$
86,670



F- 65
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

The following table reflects the stockholders' equity activity for the years ended December 31, 2019, 2018, and 2017:
 
Common stock - shares
 
Common stock - par
 
Additional paid in capital
 
Total distributable earnings (loss)
 
Net assets attributable to non-controlling interest
 
Total Stockholders' Equity
Balance as of December 31, 2016
177,120,791

 
$
177

 
$
1,729,865

 
$
(203,129
)
 
$
2,821

 
$
1,529,734

Net investment income
—

 
—

 
—

 
106,011

 
29

 
106,040

Net realized loss from investment transactions
—

 
—

 
—

 
(53,135
)
 
—

 
(53,135
)
Net change in unrealized appreciation (depreciation) on investments, and foreign exchange currency contracts, net of deferred taxes
—

 
—

 
—

 
25,513

 
(29
)
 
25,484

Repurchases
(3,548,885
)
 
(3
)
 
(30,209
)
 
—

 
—

 
(30,212
)
Distributions to stockholders
—

 
—

 
—

 
(135,850
)
 
—

 
(135,850
)
Reinvested dividends
6,162,092

 
6

 
52,449

 
—

 
—

 
52,455

Tax adjustment
—

 
—

 
688

 
(688
)
 
—

 
—

Balance as of December 31, 2017
179,733,998

 
$
180

 
$
1,752,793

 
$
(261,278
)
 
$
2,821

 
$
1,494,516

Net investment income
—

 
—

 
—


103,385

 
25

 
103,410

Net realized loss from investment transactions
—

 
—

 
—

 
(24,310
)
 
—

 
(24,310
)
Net change in unrealized appreciation (depreciation) on investments, and foreign exchange currency contracts, net of deferred taxes
—

 
—

 
—

 
(50,829
)
 
840

 
(49,989
)
Issuance of common stock, net of issuance costs
10,975,610

 
11

 
89,989

 
—

 
—

 
90,000

Repurchases
(5,105,554
)
 
(5
)
 
(42,308
)
 
—

 
—

 
(42,313
)
Distributions to stockholders
—

 
—

 
—

 
(117,578
)
 
—

 
(117,578
)
Reinvested dividends
4,720,005

 
4

 
38,979

 
—

 
—

 
38,983

Tax adjustment
—

 
—

 
(27,483
)
 
27,483

 
—

 
—

Balance as of December 31, 2018
190,324,059

 
$
190

 
$
1,811,970

 
$
(323,127
)
 
$
3,686

 
$
1,492,719

Net investment income
—

 
—

 
—

 
108,248

 
9

 
108,257

Net realized loss from investment transactions
—

 
—

 
—

 
(64,525
)
 
—

 
(64,525
)
Net change in unrealized appreciation on investments and foreign exchange currency contracts, net of deferred taxes
—

 
—

 
—

 
48,749

 
3,017

 
51,766

Acquisition of non-controlling interest
—

 
—

 
6,024

 
—

 
(6,712
)
 
(688
)
Repurchases
(4,490,328
)
 
(4
)
 
(36,282
)
 
—

 
—

 
(36,286
)
Distributions to stockholders
—

 
—

 
—

 
(123,465
)
 
—

 
(123,465
)
Reinvested dividends
4,373,786

 
4

 
34,901

 
—

 
—

 
34,905

Tax adjustment
—

 
—

 
30,699

 
(30,699
)
 
—

 
—

Balance as of December 31, 2019
190,207,517

 
$
190

 
$
1,847,312

 
$
(384,819
)
 
$
—

 
$
1,462,683


F- 66
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Note 10 — Share Repurchase Program
The Company intends to conduct semi-annual tender offers pursuant to its share repurchase program (“SRP”). The Company’s Board of Directors considers the following factors in making its determination regarding whether to cause the Company to offer to repurchase shares and under what terms:
•the effect of such repurchases on the Company's qualification as a RIC (including the consequences of any necessary asset sales);
•the liquidity of the Company's assets (including fees and costs associated with disposing of assets);
•the Company's investment plans and working capital requirements;
•the relative economies of scale with respect to the Company's size;
•the Company's history in repurchasing shares or portions thereof;
•the condition of the securities markets.
On March 8, 2016, the Company's Board of Directors amended the Company's SRP. The Company intends to conduct tender offers on a semi-annual basis, instead of on a quarterly basis as was done previously. The Company intends to continue to limit the number of shares to be repurchased in any calendar year to 10% of the weighted average number of shares outstanding in the prior calendar year, or 5.0% at each semi-annual tender offer. In addition, in the event of a stockholder’s death or disability, the Company may, in its sole discretion, accept up to the full amount tendered by such stockholder of the current net asset value per share. Any repurchases of shares made in connection with a stockholder’s death or disability may be included within the overall limitation imposed on tender offers during the relevant redemption period, which provides that the Company may limit the number of shares to be repurchased during any redemption period to the number of shares of common stock the Company is able to repurchase with the proceeds received from the sale of shares of common stock under the DRIP during such redemption period. The Company's eight most recent tender offers were oversubscribed.
Offer Date
 
Repurchase Date
 
Shares Tendered
 
Shares Repurchased
 
Repurchase Price Per Share
 
Aggregate Consideration for Repurchased Shares (in thousands)
September 12, 2012
 
October 8, 2012
 
—

 
—

 
$
9.71

 
$
—

December 13, 2012
 
January 15, 2013
 
46,975

 
10,732

 
$
9.90

 
$
106.22

March 27, 2013
 
April 25, 2013
 
29,625

 
29,625

 
$
10.18

 
$
301.58

July 15, 2013
 
August 13, 2013
 
30,365

 
30,365

 
$
10.18

 
$
308.97

October 22, 2013
 
November 21, 2013
 
55,255

 
55,255

 
$
10.36

 
$
572.44

February 4, 2014
 
March 6, 2014
 
68,969

 
68,969

 
$
10.36

 
$
714.52

June 6, 2014
 
July 11, 2014
 
117,425

 
117,425

 
$
10.36

 
$
1,216.38

August 7, 2014
 
September 10, 2014
 
111,854

 
111,854

 
$
10.36

 
$
1,158.80

December 19, 2014
 
January 23, 2015
 
313,101

 
313,101

 
$
10.36

 
$
3,243.73

March 16, 2015
 
April 15, 2015
 
162,688

 
162,688

 
$
10.36

 
$
1,685.45

June 26, 2015
 
July 31, 2015
 
533,527

 
533,527

 
$
9.72

 
$
5,185.88

September 18, 2015
 
October 20, 2015
 
728,874

 
728,874

 
$
9.53

 
$
6,946.17

December 23, 2015
 
January 25, 2016
 
7,375,871

 
3,053,869

 
$
9.22

 
$
28,156.67

July 26, 2016
 
December 31, 2016
 
17,004,354

 
6,715,864

 
$
8.58

 
$
57,622.10

June 8, 2017
 
July 6, 2017
 
11,747,753

 
3,433,482

 
$
8.52

 
$
28,576.26

December 19, 2017
 
January 19, 2018
 
21,521,235

 
2,547,524

 
$
8.31

 
$
21,350.21

June 15, 2018
 
July 16, 2018
 
20,864,620

 
2,348,835

 
$
8.26

 
$
19,401.38

December 14, 2018
 
January 18, 2019
 
21,586,074

 
2,241,000

 
$
8.20

 
$
18,376.18

June 18, 2019
 
July 23, 2019
 
31,263,410

 
2,199,337

 
$
7.96

 
$
17,506.70

Share amounts in the table above represent amounts filed in the tender offer.

F- 67
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Note 11 — Earnings Per Share
Basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of shares outstanding during the period. Other potentially dilutive shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. The Company had no potentially dilutive securities as of December 31, 2019, 2018, and 2017.
The following information sets forth the computation of the weighted average basic and diluted net increase in net assets per share resulting from operations for the years ended December 31, 2019, 2018, and 2017.
 
For the years ended December 31,
 
2019
 
2018
 
2017
Basic and diluted
 
 
 
 
 
Net increase in net assets resulting from operations
$
92,472

 
$
28,246

 
$
78,389

Weighted average common shares outstanding
189,940,267

 
180,861,382

 
179,179,656

Net increase in net assets resulting from operations per share
$
0.49

 
$
0.16

 
$
0.44

Note 12 — Distributions
The Company’s Board of Directors has authorized, and has declared, cash distributions payable on a monthly basis to stockholders of record on each day since it commenced operations. From November 2013 until July 2017, the distribution rate has been $0.002378082 per day, which is equivalent to $0.868 per annum, per share of common stock, except for 2016 where the daily distribution rate was $0.002371585 per day to accurately reflect 2016 being a leap year. In July 2017, the Board of Directors reduced the distribution rate with respect to the Company's cash distributions to $0.00178082 per day, which is equivalent to approximately $0.65 annually, per share of common stock.
The amount of each such distribution is subject to the discretion of the Board of Directors and applicable legal restrictions related to the payment of distributions. The Company calculates each stockholder’s specific distribution amount for the month using record and declaration dates and accrues distributions on the date the Company accepts a subscription for shares of the Company’s common stock. The distributions are payable by the fifth day following each month end to stockholders of record at the close of business each day during the prior month.
From time to time, the Company may also pay interim distributions at the discretion of its Board of Directors. The Company may fund its cash distributions to stockholders from any sources of funds available to it, including offering proceeds, borrowings, net investment income from operations, capital gain proceeds from the sale of assets and non-capital gain proceeds from the sale of assets. The Company’s distributions may exceed its earnings, and as a result, a portion of the distributions the Company will make may represent a return of capital for tax purposes. As of December 31, 2019, the Company had accrued $10.5 million in stockholder distributions that were unpaid. As of December 31, 2018, the Company had accrued $10.5 million in stockholder distributions that were unpaid.
Note 13 — Income Tax Information and Distributions to Stockholders
The Company has elected to be treated for federal income tax purposes as a RIC under the Code. Generally, a RIC is exempt from federal income taxes if it meets, certain quarterly asset diversification requirements, annual income tests, and distributes to stockholders its ‘‘investment company taxable income,’’ as defined in the Code, each taxable year. Distributions declared prior to the filing of the previous year's tax return and paid up to one year after the previous tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. The Company intends to make sufficient distributions to maintain its RIC status each year. The Company may also be subject to federal excise taxes of 4%.

F- 68
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

A RIC is limited in its ability to deduct expenses in excess of its “investment company taxable income” (which is, generally, ordinary income plus net realized short-term capital gains in excess of net realized long-term capital losses). If the Company's expenses in a given taxable year exceed gross taxable income (e.g., as the result of large amounts of equity-based compensation), it would incur a net operating loss for that year. However, a RIC is not permitted to carry forward net operating losses to subsequent taxable years and such net operating losses do not pass through to the RIC’s stockholders. In addition, deductible expenses can be used only to offset investment company taxable income, not net capital gain. A RIC may not use any net capital losses (that is, realized capital losses in excess of realized capital gains) to offset the RIC’s investment company taxable income, but may carry forward such net capital losses, and use them to offset capital gains indefinitely. Due to these limits on the deductibility of expenses and net capital losses, the Company may for tax purposes have aggregate taxable income for several taxable years that it is required to distribute and that is taxable to stockholders even if such taxable income is greater than the aggregate net income the Company actually earned during those taxable years. Such required distributions may be made from the Company cash assets or by liquidation of investments, if necessary. The Company may realize gains or losses from such liquidations. In the event the Company realizes net capital gains from such transactions, the Company may make a larger capital gain distribution than it would have made in the absence of such transactions.
The tax character of distributions for the fiscal years ended December 31, 2019, 2018 and 2017 were as follows (dollars in thousands):
 
 
For the years ended December 31,
 
 
2019
 
2018
 
2017
Ordinary income distributions
 
$
123,465

 
100.0
%
 
$
117,578

 
100.0
%
 
$
135,850

 
100.0
%
Capital gains distributions
 
—

 
—

 
—

 
—

 
—

 
—

Return of capital
 
—

 
—

 
—

 
—

 
—

 
—

Total distributions
 
$
123,465

 
100.0
%
 
$
117,578

 
100.0
%
 
$
135,850

 
100.0
%
For the years ended December 31, 2019, 2018 and 2017, the reconciliation of net increase in net assets resulting from operations to taxable income is as follows (dollars in thousands):
 
 
For the years ended December 31,
 
 
2019
 
2018
 
2017
Book income from operating activities
 
$
92,472

 
$
28,246

 
$
78,389

Net unrealized (gain) loss on investments
 
517

 
135

 
(25,512
)
Nondeductible expenses
 
1,771

 
1,605

 
1,619

Temporary differences
 
36,875

 
91,232

 
91,787

Taxable income before deductions for distributions paid
 
$
131,635

 
$
121,218

 
$
146,283

For the years ended December 31, 2019, 2018 and 2017, the components of accumulated gain and losses on a tax basis were as follows:
 
 
For the years ended December 31,
 
 
2019
 
2018
 
2017
Undistributed ordinary income
 
$
31,010

 
$
19,831

 
$
33,312

Undistributed long-term capital loss carryforward
 
(206,292
)
 
(82,139
)
 
(75,415
)
Total undistributed net earnings (loss carryforward)
 
(175,282
)
 
(62,308
)
 
(42,103
)
Net unrealized loss on investments
 
(204,294
)
 
(287,449
)
 
(216,881
)
Total undistributed taxable income
 
$
(379,576
)
 
$
(349,757
)
 
$
(258,984
)
As of December 31, 2019, the Company had long term capital loss carryforwards, with no expirations of $206.3 million available to offset future realized capital gains.

F- 69

BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

At December 31, 2019, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes are as follows:
 
 
December 31, 2019
Tax cost
 
$
2,749,721

Gross unrealized appreciation
 
84,961

Gross unrealized depreciation
 
(289,255
)
During the year ended December 31, 2019, as a result of permanent book-to-tax differences, the Company made reclassifications among components of net assets as follows:
 
 
Total distributable loss
 
Paid in capital
2019
 
$
(466
)
 
$
466

The differences were attributable to non-deductible expenses, investments in partnerships, controlled foreign corporations, certain debt investments and subsidiaries. Aggregate stockholders’ equity was not affected by this reclassification.
Tax information for the fiscal year ended December 31, 2019 is an estimate and will not be finally determined until the Company files its 2019 tax return.
The Company did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes (“ASC Topic 740”), nor did the Company have any unrecognized tax benefits as of the periods presented herein. The Company's current tax year, 2018, 2017, and 2016 federal tax returns remain subject to examination by the Internal Revenue Service.
As of December 31, 2019, the Company had a deferred tax asset of $1.5 million and a deferred tax liability of $(3.1) million. Given the losses generated by certain entities, deferred tax assets have been offset by valuation allowances of $1.5 million. As of December 31, 2018, the Company had a deferred tax asset of $1.3 million and a deferred tax liability of $(4.1) million. Given the losses generated by certain entities, deferred tax assets have been offset by valuation allowances of $1.3 million. As of December 31, 2017, the Company had a deferred tax asset of $1.6 million and a deferred tax liability of $(3.6) million. Given the losses generated by certain entities, deferred tax assets have been offset by valuation allowances of $1.6 million.  
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“the Tax Act”) was signed into law. The Tax Act reduced the statutory income tax rate applicable to corporations from 35 percent to 21 percent. Additionally, the Tax Act makes changes regarding the use of net operating losses, repeals the corporate alternative minimum tax, restricts corporate deductibility of interest expense, and makes significant changes to the U.S. international tax rules. These changes affect the Company’s estimates of the current income tax expense and the deferred tax asset and liability balances used in the calculation of its net asset value.
The Company has assessed that the reduction in the corporate tax rate which did not have a significant impact on the Company’s net asset value. The Company will continue to assess the effects of the Tax Act on the deferred tax asset and liability balances and valuation allowances and continually assess the recoverability of their deferred tax assets based upon the weight of available evidence.
The deferred tax asset valuation allowance has been determined pursuant to the provisions of ASC Topic 740, including the Company's estimation of future taxable income, if necessary, and is adequate to reduce the total deferred tax asset to an amount that will more likely than not be realized.
As of December 31, 2019, the Company had differences between book basis and tax basis cost of investments of $108.6 million from investments classified as partnerships, certain debt investments, and controlled foreign corporations for U.S. tax purposes and $1.4 million from amortization of market discount. As of December 31, 2018, the Company had differences between book basis and tax basis cost of investments of $140.7 million from investments classified as partnerships, passive foreign investment companies, or controlled foreign corporations for U.S. tax purposes and $(1.1) million from amortization of market discount. As of December 31, 2017, the Company had differences between book basis and tax basis cost of investments of $121.9 million from investments classified as partnerships, passive foreign investment companies, or controlled foreign corporations for U.S. tax purposes and $(0.2) million from amortization of market discount.

F- 70

BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Note 14 — Financial Highlights
The following is a schedule of financial highlights for the years ended December 31, 2019, 2018, 2017, 2016, and 2015:
 
For the years ended December 31,
 
2019
 
2018
 
2017
 
2016 (9)
 
2015
Per share data:
 
 
 
 
 
 
 
 
 
Net asset value, beginning of period
$
7.82

 
$
8.30

 
$
8.62

 
$
8.97

 
$
9.74

Results of operations (1)
 
 
 
 
 
 
 
 
 
       Net investment income
0.57

 
0.57

 
0.59

 
0.67

 
0.66

Net realized and unrealized gain (loss), net of deferred taxes
(0.07
)
 
(0.41
)
 
(0.15
)
 
(0.14
)
 
(0.60
)
Net change in unrealized depreciation attributable to non-controlling interests
(0.01
)
 
—

 
—

 
(0.01
)
 
(0.01
)
Net increase in net assets resulting from operations
0.49

 
0.16

 
0.44

 
0.52

 
0.05

Stockholder distributions (2)
 
 
 
 
 
 
 
 
 
Distributions from net investment income
(0.65
)
 
(0.65
)
 
(0.76
)
 
(0.87
)
 
(0.77
)
Distributions from net realized gain on investments
—

 
—

 
—

 
—

 
(0.01
)
Return of capital
—

 
—

 
—

 
—

 
(0.09
)
Net decrease in net assets resulting from stockholder distributions
(0.65
)
 
(0.65
)
 
(0.76
)
 
(0.87
)
 
(0.87
)
Capital share transactions
 
 
 
 
 
 
 
 
 
      Issuance of common stock (3)
—

 
0.01

 
—

 
—

 
0.18

Acquisition of non-controlling interest
0.03

 
—

 
—

 
—

 
—

Repurchases of common stock
—

 
—

 
—

 
—

 
(0.12
)
Offering costs
—

 
—

 
—

 
—

 
(0.01
)
Net increase in net assets resulting from capital share transactions
0.03

 
0.01

 
—

 
—

 
0.05

Net asset value, end of period
$
7.69

 
$
7.82

 
$
8.30

 
$
8.62

 
$
8.97

Shares outstanding at end of period
190,207,517

 
190,324,059

 
179,733,998

 
177,120,791

 
179,142,028

Total return (5)
6.60
%
 
1.96
%
 
5.24
%
 
6.02
%
 
0.67
%
Ratio/Supplemental data:
 
 
 
 
 
 
 
 
 
Net assets attributable to BDCA, end of period (in thousands)
$
1,462,683

 
$
1,489,033

 
$
1,491,695

 
$
1,526,913

 
$
1,606,366

Total net assets, end of period (in thousands)
$
1,462,683

 
$
1,492,719

 
$
1,494,516

 
$
1,529,734

 
$
1,610,485

Ratio of net investment income to average net assets (4)(7)
7.26
%
 
6.92
%
 
7.01
%
 
7.64
%
 
7.11
%
Ratio of total expenses to average net assets (4)(7)(8)
9.14
%
 
8.94
%
 
7.79
%
 
6.98
%
 
5.08
%
Ratio of incentive fees to average net assets (4)
1.82
%
 
1.45
%
 
1.30
%
 
1.14
%
 
0.41
%
Ratio of debt related expenses to average net assets
3.71
%
 
3.70
%
 
2.90
%
 
2.38
%
 
1.65
%
Portfolio turnover rate (6)
32.24
%
 
45.58
%
 
40.06
%
 
24.99
%
 
32.21
%






F- 71
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

______________
(1) 
The per share data was derived by using the weighted average shares outstanding during the period. For the years ended December 31, 2019, 2018, 2017, and 2016 net investment income per share was $0.57, $0.57, $0.59, and $0.67. Net investment income per share excluding the expense waiver and reimbursements equals $0.64 for the year ended December 31, 2015.
(2) 
The per share data for distributions reflects the actual amount of distributions declared per share during the period.
(3) 
The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of shares of common stock.
(4) 
For the years ended December 31, 2019, 2018, 2017 and 2016 there was no expense waiver. For the year ended December 31, 2015, excluding the expense waiver and reimbursement, the ratio of net investment income, total expenses, and incentive fees to average net assets is 6.89%, 5.30%, and 0.63%, respectively.
(5) 
Total return is calculated assuming a purchase of shares of common stock at the current net asset value on the first day and a sale at the current net asset value on the last day of the periods reported. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the DRIP. The total return based on net asset value for the years ended December 31, 2019, 2018, 2017, 2016, and 2015, includes the effect of expense waivers and reimbursements which equaled 0.00%, 0.00%, 0.00%, 0.00%, and 0.22%, respectively.
(6) 
Portfolio turnover rate is calculated using the lesser of year-to-date purchases or sales over the average of the invested assets at fair value.
(7) 
Offering costs are not included as an expense in the calculation of this ratio.
(8) 
Ratio of total expenses to average net assets is calculated using total operating expenses, including income tax expense over average net assets.
(9) 
Effective November 1, 2016, the investment advisor of the Company changed.
Note 15 – Selected Quarterly Data (Unaudited)
The following are the quarterly results of operations for the years ended December 31, 2019 and 2018. The operating results for any quarter are not necessarily indicative of results for any future period:
Quarter Ended
 
Total Investment Income
 
Net Investment Income
 
Net Realized and Unrealized Gain (Loss)
 
Net Increase (Decrease) In Net Assets Resulting from Operations
 
Net Investment Income per Share
 
Net Increase (Decrease) in Net Assets Resulting from Operations per Share
 
Net Asset Value per Common Share at End of Quarter
December 31, 2019
 
$
58,160

 
$
26,052

 
$
(10,526
)
 
$
15,526

 
$
0.14

 
$
0.08

 
$
7.69

September 30, 2019
 
63,192

 
27,940

 
(39,990
)
 
(12,050
)
 
0.15

 
(0.06
)
 
7.75

June 30, 2019
 
62,052

 
27,092

 
6,072

 
33,164

 
0.14

 
0.17

 
7.97

March 31, 2019
 
61,101

 
27,164

 
28,668

 
55,832

 
0.14

 
0.29

 
7.96

December 31, 2018
 
60,404

 
25,617

 
(66,043
)
 
(40,426
)
 
0.14

 
(0.22
)
 
7.82

September 30, 2018
 
59,182

 
25,799

 
2,684

 
28,483

 
0.14

 
0.16

 
8.20

June 30, 2018
 
58,922

 
25,815

 
(7,602
)
 
18,213

 
0.14

 
0.10

 
8.20

March 31, 2018
 
58,504

 
26,154

 
(4,178
)
 
21,976

 
0.15

 
0.12

 
8.26

Note 16 – Senior Securities
Information about our senior securities (including debt securities and other indebtedness) is shown in the following tables as of the years ended December 31, 2019, 2018, 2017, 2016, and 2015.

F- 72
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

The following is a summary of the senior securities as of December 31, 2019 (dollars in thousands):
 
 
Total Amount Outstanding Exclusive of Treasury Securities
 
Asset Coverage Ratio Per Unit (1)
 
Involuntary Liquidation Preference Per Unit (2)
 
Asset Market Value Per Unit (3)
Wells Fargo Credit Facility
 
$
436,652

 
$
—

 
$
—

 
N/A
Citi Credit Facility
 
250,500

 
—

 
—

 
N/A
2024 Notes
 
98,818

 
—

 
—

 
N/A
2023 Notes
 
59,778

 
—

 
—

 
N/A
2022 Notes
 
149,505

 
—

 
—

 
N/A
2020 Notes
 
99,789

 
—

 
—

 
N/A
 
 
$
1,095,042

 
$
2,336

 
$
—

 
N/A
The following is a summary of the senior securities as of December 31, 2018 (dollars in thousands):
 
 
Total Amount Outstanding Exclusive of Treasury Securities
 
Asset Coverage Ratio Per Unit (1)
 
Involuntary Liquidation Preference Per Unit (2)
 
Asset Market Value Per Unit (3)
Wells Fargo Credit Facility
 
$
294,651

 
$
—

 
$
—

 
N/A
Citi Credit Facility
 
293,500

 
—

 
—

 
N/A
2023 Notes
 
59,713

 
—

 
—

 
N/A
2022 Notes
 
149,340

 
—

 
—

 
N/A
2020 Notes
 
99,474

 
—

 
—

 
N/A
 
 
$
896,678

 
$
2,688

 
$
—

 
N/A
The following is a summary of the senior securities as of December 31, 2017 (dollars in thousands):
 
 
Total Amount Outstanding Exclusive of Treasury Securities
 
Asset Coverage Ratio Per Unit (1)
 
Involuntary Liquidation Preference Per Unit (2)
 
Asset Market Value Per Unit (3)
Wells Fargo Credit Facility
 
$
188,051

 
$
—

 
$
—

 
N/A
Citi Credit Facility
 
336,003

 
—

 
—

 
N/A
UBS Credit Facility
 
232,500

 
—

 
—

 
N/A
2022 Notes
 
149,175

 
—

 
—

 
N/A
2020 Notes
 
99,158

 
—

 
—

 
N/A
JPMC PB Account
 
36,262

 
—

 
—

 
N/A
 
 
$
1,041,149

 
$
2,435

 
$
—

 
N/A
The following is a summary of the senior securities as of December 31, 2016 (dollars in thousands):
 
 
Total Amount Outstanding Exclusive of Treasury Securities
 
Asset Coverage Ratio Per Unit (1)
 
Involuntary Liquidation Preference Per Unit (2)
 
Asset Market Value Per Unit (3)
Wells Fargo Credit Facility
 
$
298,152

 
$
—

 
$
—

 
N/A
Citi Credit Facility
 
286,003

 
—

 
—

 
N/A
UBS Credit Facility
 
232,500

 
—

 
—

 
N/A
2020 Notes
 
98,842

 
—

 
—

 
N/A
 
 
$
915,497

 
$
2,671

 
$
—

 
N/A

F- 73
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

The following is a summary of the senior securities as of December 31, 2015 (dollars in thousands):
 
 
Total Amount Outstanding Exclusive of Treasury Securities
 
Asset Coverage Ratio Per Unit (1)
 
Involuntary Liquidation Preference Per Unit (2)
 
Asset Market Value Per Unit (3)
Wells Fargo Credit Facility
 
$
263,087

 
$
—

 
$
—

 
N/A
Citi Credit Facility
 
270,625

 
—

 
—

 
N/A
UBS Credit Facility
 
210,000

 
—

 
—

 
N/A
2020 Notes
 
98,526

 
—

 
—

 
N/A
 
 
$
842,238

 
$
2,912

 
$
—

 
N/A
______________
(1)
Asset coverage per unit is the ratio of the carrying value of the Company's total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness.
(2)
The amount to which such class of senior security would be entitled upon the voluntary liquidation of the issuer in preference to any security junior to it. The “—” in this column indicates that the SEC expressly does not require this information to be disclosed for certain types of senior securities.
(3)
Not applicable because senior securities are not registered for public trading.
Note 17 – Schedules of Investments and Advances to Affiliates
The following table presents the Schedule of Investments and Advances to Affiliates as of December 31, 2019:
Portfolio Company (1)
 
Type of Asset
 
Industry
 
Amount of dividends and interest included in income
 
Beginning Fair Value at December 31, 2018
 
Gross additions*
 
Gross reductions**
 
Realized Gain/(Loss)
 
Change in Unrealized Gain (Loss) (4)
 
Fair Value at December 31, 2019
Control Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
California Resources Development JV, LLC (2) (5) (7)
 
Equity/Other
 
Energy
 
$
887

 
$
28,973

 
$
—

 
$
(28,402
)
 
$
—

 
$
(571
)
 
$
—

Capstone Nutrition Common Stock (fka Integrity Nutraceuticals, Inc.) (2) (5) (7) (8)
 
Equity/Other
 
Consumer
 
—

 
—

 
—

 
(159
)
 
(1,471
)
 
1,630

 
—

Capstone Nutrition (fka Integrity Nutraceuticals, Inc.) - L+12.50% (15.08%), 9/25/2020 (2) (5) (6) (7)
 
Senior Secured First Lien Debt
 
Consumer
 
—

 
3,219

 
1,804

 
(5,471
)
 
838

 
(390
)
 
—

Capstone Nutrition (fka Integrity Nutraceuticals, Inc.) - L+12.50% (15.08%), 9/19/2020 (2) (5) (6) (7)
 
Senior Secured First Lien Debt
 
Consumer
 
(12
)
 
3,459

 
—

 
(1,612
)
 
(14,794
)
 
12,947

 
—

Capstone Nutrition (fka Integrity Nutraceuticals, Inc.) - L+12.50% (15.08%), 9/25/2020 (2) (5) (6) (7)
 
Senior Secured First Lien Debt
 
Consumer
 
—

 
7,692

 
—

 
(3,282
)
 
(30,365
)
 
25,955

 
—

Capstone Nutrition Class B and C Common Stock (fka Integrity Nutraceuticals, Inc.) (2) (5) (7) (8)
 
Equity/Other
 
Consumer
 
—

 
—

 
—

 
—

 
—

 
—

 
—

CRD Holdings, LLC - 9.00% (2) (7)
 
Equity/Other
 
Energy
 
3,341

 
—

 
41,560

 
(13,494
)
 
—

 
877

 
28,943

CRS-SPV, Inc. (2) (7) (8)
 
Equity/Other
 
Industrials
 
26

 
2,221

 
—

 
—

 
—

 
—

 
2,221

CRS-SPV, Inc. - L+4.50% (6.30%), 3/8/2020 (2) (7)
 
Senior Secured First Lien Debt
 
Industrials
 
2

 
—

 
67

 
(5
)
 
—

 
—

 
62

Kahala Ireland OpCo Designated Activity Company - L+8.00% (13.00%), 12/22/2028 (2) (3) (6) (7)
 
Senior Secured First Lien Debt
 
Transportation
 
11,695

 
111,549

 
38,000

 
(44,000
)
 
—

 
—

 
105,549

Kahala Ireland OpCo Designated Activity Company (2) (3) (7) (8)
 
Equity/Other
 
Transportation
 
—

 
20,329

 
—

 
—

 
—

 
36,897

 
57,226


F- 74
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Portfolio Company (1)
 
Type of Asset
 
Industry
 
Amount of dividends and interest included in income
 
Beginning Fair Value at December 31, 2018
 
Gross additions*
 
Gross reductions**
 
Realized Gain/(Loss)
 
Change in Unrealized Gain (Loss) (4)
 
Fair Value at December 31, 2019
Kahala Ireland OpCo Designated Activity Company (2) (3) (7) (8)
 
Equity/Other
 
Transportation
 
$
—

 
$
3,250

 
$
—

 
$
(36
)
 
$
—

 
$
36

 
$
3,250

Kahala US OpCo, LLC - 13.00% (2) (3) (7) (8)
 
Equity/Other
 
Transportation
 
—

 
—

 
—

 
—

 
—

 
—

 
—

MGTF Holdco, LLC (2) (7) (8)
 
Equity/Other
 
Media/Entertainment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

MGTF Radio Company, LLC - L+6.00% (7.80%), 4/1/2024 (2) (7)
 
Senior Secured First Lien Debt
 
Media/Entertainment
 
3,754

 
—

 
62,291

 
(4,472
)
 
12

 
(3,660
)
 
54,171

MGTF Radio Company, LLC - P+3.50% (9.00%), 3/29/2020 (2) (5) (7)
 
Senior Secured First Lien Debt
 
Media/Entertainment
 
(9
)
 
—

 
37,577

 
(37,977
)
 
21

 
379

 
—

MGTF Radio Company, LLC - 16.00%, 3/30/2020 (2) (5) (7)
 
Subordinated Debt
 
Media/Entertainment
 
188

 
—

 
20,082

 
(24,309
)
 
—

 
4,227

 
—

NexSteppe, Inc. (2) (7) (8)
 
Equity/Other
 
Chemicals
 
—

 
—

 
—

 
—

 
—

 
—

 
—

NexSteppe, Inc. - 12.00% 3/31/2020 (2) (6) (7)
 
Senior Secured First Lien Debt
 
Chemicals
 
—

 
—

 
—

 
—

 
—

 
—

 
—

NexSteppe, Inc. - 12.00% 3/31/2020 (2) (6) (7)
 
Senior Secured First Lien Debt
 
Chemicals
 
—

 
—

 
—

 
—

 
—

 
—

 
—

NMFC Senior Loan Program I, LLC (2)
 
Equity/Other
 
Diversified Investment Vehicles
 
5,864

 
50,573

 
—

 
—

 
—

 
(3,263
)
 
47,310

Park Ave RE Holdings, LLC - 13.00% 12/31/2021 (2) (6) (7)
 
Subordinated Debt
 
Financials
 
4,858

 
37,192

 
1,750

 
(1,705
)
 
—

 
—

 
37,237

Park Ave RE Holdings, LLC (2) (7) (8)
 
Equity/Other
 
Financials
 
—

 
15,578

 
2,500

 
(4,246
)
 
4,486

 
(7,185
)
 
11,133

Park Ave RE Holdings, LLC (2) (5) (7) (8)
 
Equity/Other
 
Financials
 
—

 
23,645

 
—

 
(23,645
)
 
—

 
—

 
—

Siena Capital Finance, LLC - 12.50% 8/16/2021 (2) (7)
 
Subordinated Debt
 
Financials
 
2,346

 
—

 
22,492

 
—

 
—

 
8

 
22,500

Siena Capital Finance, LLC (2) (7)
 
Equity/Other
 
Financials
 
4,732

 
—

 
36,631

 
—

 
(94
)
 
378

 
36,915

WPNT, LLC (2) (7) (8)
 
Equity/Other
 
Media/Entertainment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

  Total Control Investments
 
 
 
 
 
$
37,672

 
$
307,680

 
$
264,754

 
$
(192,815
)
 
$
(41,367
)
 
$
68,265

 
$
406,517

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Answers Corp. (7)
 
Equity/Other
 
Media/Entertainment
 
$
818

 
$
1,909

 
$
—

 
$
—

 
$
—

 
$
(1,182
)
 
$
727

B&M CLO, Ltd. 2014-1A SUB - 0.00%, 4/16/2026 (5) (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
46

 
6,029

 
—

 
(5,839
)
 
(4,685
)
 
4,495

 
—

Capstone Nutrition Development, LLC (7) (8)
 
Equity/Other
 
Consumer
 
—

 
—

 
4,788

 
—

 
—

 
—

 
4,788

CVP Cascade CLO, Ltd. 2013-CLO1 SUB - 0.00%, 1/16/2026 (5) (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
221

 
1,166

 
—

 
(539
)
 
(435
)
 
(192
)
 
—

CVP Cascade CLO, Ltd. 2013-CLO1 Side Letter - 0.00%, 1/16/2026 (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
12

 
68

 
—

 
(405
)
 
—

 
337

 
—

CVP Cascade CLO, Ltd. 2014-2A Side Letter - 0.00%, 7/18/2026 (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
43

 
274

 
—

 
(550
)
 
—

 
276

 
—

Danish CRJ, Ltd. (7) (8)
 
Equity/Other
 
Transportation
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Figueroa CLO, Ltd. 2014-1A FR - L+10.00% (12.30%), 1/15/2027 (5) (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
857

 
7,508

 
—

 
(5,730
)
 
(2,270
)
 
492

 
—

Figueroa CLO, Ltd. 2014-1A SUB - 0.00%, 1/15/2027 (5) (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
324

 
7,468

 
—

 
(6,289
)
 
(5,280
)
 
4,101

 
—


F- 75
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Portfolio Company (1)
 
Type of Asset
 
Industry
 
Amount of dividends and interest included in income
 
Beginning Fair Value at December 31, 2018
 
Gross additions*
 
Gross reductions**
 
Realized Gain/(Loss)
 
Change in Unrealized Gain (Loss) (4)
 
Fair Value at December 31, 2019
Figueroa CLO, Ltd. 2014-1A Side Letter - 0.00%, 1/15/2027 (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
$
37

 
$
483

 
$
—

 
$
(550
)
 
$
—

 
$
67

 
$
—

Frank Entertainment Group, LLC - 6.00% 12/31/2019 (5) (7)
 
Senior Secured First Lien Debt
 
Media/Entertainment
 
—

 
1,441

 
—

 
(347
)
 
(1,489
)
 
395

 
—

Frank Entertainment Group, LLC - L+9.00% (11.03%), 12/31/2019 (5) (6) (7)
 
Senior Secured First Lien Debt
 
Media/Entertainment
 
—

 
—

 
867

 
—

 
(867
)
 
—

 
—

Frank Entertainment Group, LLC - 12.00% 12/31/2019 (5) (6) (7)
 
Senior Secured Second Lien Debt
 
Media/Entertainment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Frank Entertainment Group, LLC (5) (7) (8)
 
Equity/Other
 
Media/Entertainment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Frank Entertainment Group, LLC (5) (7) (8)
 
Equity/Other
 
Media/Entertainment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Frank Entertainment Group, LLC (5) (7) (8)
 
Equity/Other
 
Media/Entertainment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Frontstreet Facility Solutions, Inc. - 13.00%, 3/1/2021 (5) (7)
 
Subordinated Debt
 
Telcom
 
26

 
189

 
—

 
(123
)
 
(104
)
 
38

 
—

Frontstreet Facility Solutions, Inc. (5) (7) (8)
 
Equity/Other
 
Telcom
 
—

 
—

 
—

 
(128
)
 
128

 
—

 
—

MidOcean Credit CLO 2013-2A INC - 0.76%, 1/29/2025 (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
432

 
16,534

 
—

 
(3,630
)
 
—

 
(1,069
)
 
11,835

MidOcean Credit CLO III, LLC - 13.99%, 7/21/2026 (5) (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
431

 
14,651

 
—

 
(17,458
)
 
544

 
2,263

 
—

MidOcean Credit CLO 2015-4A INC - 0.00%, 4/15/2027 (5) (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
—

 
8,595

 
—

 
(6,795
)
 
(5,310
)
 
3,510

 
—

NewStar Arlington Senior Loan Program, LLC 14-1A SUB - 16.56%, 7/25/2025 (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
3,546

 
24,788

 
—

 
(447
)
 
—

 
(4,644
)
 
19,697

NewStar Arlington Senior Loan Program, LLC 14-1A FR - L+11.00% (12.94%), 4/25/2031 (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
664

 
4,425

 
18

 
—

 
—

 
169

 
4,612

Newstar Fairfield Fund CLO, Ltd. 2015-1RA F - L+7.50% (9.47%), 1/20/2027 (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
1,244

 
8,580

 
162

 
—

 
—

 
467

 
9,209

Newstar Fairfield Fund CLO, Ltd. 2015-1RA SUB - 21.81%, 1/20/2027 (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
1,639

 
11,895

 
—

 
(3,032
)
 
—

 
(2,256
)
 
6,607

OFSI Fund, Ltd. 2014-6A SUB - 0.00%, 3/20/2025 (5) (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
—

 
3,008

 
—

 
(1,535
)
 
(8,468
)
 
6,995

 
—

OFSI Fund, Ltd. 2014-6A Side Letter - 0.00%, 3/20/2025 (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
—

 
199

 
—

 
(238
)
 
—

 
39

 
—

PCX Aerostructures, LLC - 6.00%, 8/9/2021 (6) (7)
 
Subordinated Debt
 
Industrials
 
464

 
—

 
6,023

 
—

 
—

 
(115
)
 
5,908

PCX Aerostructures, LLC (7) (8)
 
Equity/Other
 
Industrials
 
—

 
—

 
—

 
—

 
—

 
—

 
—

PCX Aerostructures, LLC (7) (8)
 
Equity/Other
 
Industrials
 
—

 
—

 
—

 
—

 
—

 
—

 
—

PCX Aerostructures, LLC (7) (8)
 
Equity/Other
 
Industrials
 
—

 
—

 
—

 
—

 
—

 
—

 
—

PennantPark Credit Opportunities Fund II, LP
 
Equity/Other
 
Diversified Investment Vehicles
 
647

 
8,705

 
304

 
—

 
—

 
(302
)
 
8,707


F- 76
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Portfolio Company (1)
 
Type of Asset
 
Industry
 
Amount of dividends and interest included in income
 
Beginning Fair Value at December 31, 2018
 
Gross additions*
 
Gross reductions**
 
Realized Gain/(Loss)
 
Change in Unrealized Gain (Loss) (4)
 
Fair Value at December 31, 2019
Tap Rock Resources, LLC (7) (8)
 
Equity/Other
 
Energy
 
$
—

 
$
—

 
$
20,672

 
$
—

 
$
—

 
$
207

 
$
20,879

Tax Defense Network, LLC - L+6.00% (10.00%), 4/30/2020 (6) (7)
 
Senior Secured First Lien Debt
 
Consumer
 
(4
)
 
1,195

 
—

 
(111
)
 
—

 
178

 
1,262

Tax Defense Network, LLC - L+6.00% (10.00%), 4/30/2020 (6) (7)
 
Senior Secured First Lien Debt
 
Consumer
 
(30
)
 
6,732

 
—

 
(631
)
 
3

 
1,004

 
7,108

Tax Defense Network, LLC - L+10.00% (10.00%), 4/30/2020 (6) (7)
 
Senior Secured First Lien Debt
 
Consumer
 
—

 
—

 
2,357

 
—

 
—

 
—

 
2,357

Tax Defense Network, LLC (7) (8)
 
Equity/Other
 
Consumer
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Tax Defense Network, LLC (7) (8)
 
Equity/Other
 
Consumer
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Team Waste, LLC (7) (8)
 
Equity/Other
 
Industrials
 
—

 
2,235

 
—

 
—

 
—

 
—

 
2,235

Tennenbaum Waterman Fund, LP
 
Equity/Other
 
Diversified Investment Vehicles
 
1,381

 
10,137

 
—

 
—

 
—

 
(296
)
 
9,841

THL Credit Greenway Fund II, LLC
 
Equity/Other
 
Diversified Investment Vehicles
 
1,636

 
7,435

 
—

 
(3,290
)
 
—

 
(1,591
)
 
2,554

TwentyEighty, Inc. (5) (7) (8)
 
Equity/Other
 
Business Services
 
—

 
—

 
—

 
(6,465
)
 
6,465

 
—

 
—

TwentyEighty, Inc. - L+8.00% (10.33%), 3/31/2020 (5) (6) (7)
 
Senior Secured First Lien Debt
 
Business Services
 
40

 
300

 
13

 
(304
)
 
17

 
(26
)
 
—

TwentyEighty, Inc. - 8.00%, 3/31/2020 (5) (6) (7)
 
Senior Secured First Lien Debt
 
Business Services
 
1,013

 
6,422

 
813

 
(6,754
)
 
481

 
(962
)
 
—

TwentyEighty, Inc. - 9.00%, 3/31/2020 (5) (6) (7)
 
Senior Secured First Lien Debt
 
Business Services
 
992

 
6,158

 
981

 
(6,709
)
 
438

 
(868
)
 
—

Vantage Mobility International, LLC - L+6.00% (7.80%), 6/30/2023 (6) (7)
 
Senior Secured Second Lien Debt
 
Transportation
 
—

 
—

 
2,742

 
—

 
—

 
141

 
2,883

Vantage Mobility International, LLC - L+6.00% (8.44%), 6/30/2023 (5)
 
Senior Secured First Lien Debt
 
Transportation
 
—

 
—

 
2,351

 
(2,351
)
 
—

 
—

 
—

Vantage Mobility International, LLC - L+7.75% (10.26%), 9/1/2021 (5) (7)
 
Subordinated Debt
 
Transportation
 
480

 
—

 
5,842

 
(5,490
)
 
(509
)
 
157

 
—

Vantage Mobility International, LLC (7) (8)
 
Equity/Other
 
Transportation
 
—

 
—

 
3,140

 
—

 
—

 
(2,198
)
 
942

Vantage Mobility International, LLC (7) (8)
 
Equity/Other
 
Transportation
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Vantage Mobility International, LLC (7) (8)
 
Equity/Other
 
Transportation
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Whitehorse, Ltd. 2014-1A SUB - 0.00%, 5/1/2026 (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
18

 
3,975

 
—

 
(1,895
)
 
—

 
(1,794
)
 
286

Whitehorse, Ltd. 2014-1A Side Letter - 10.44%, 5/1/2026 (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
8

 
297

 
—

 
(342
)
 
—

 
80

 
35

Whitehorse, Ltd. 2014-1A E - L+4.55% (6.46%), 5/1/2026 (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
297

 
—

 
7,314

 
—

 
—

 
(260
)
 
7,054

World Business Lenders, LLC (7) (8)
 
Equity/Other
 
Financials
 
—

 
3,759

 
—

 
(3,755
)
 
—

 
(4
)
 
—

Total Affiliate Investments
 
 
 
 
 
$
17,282

 
$
176,560

 
$
58,387

 
$
(91,732
)
 
$
(21,341
)
 
$
7,652

 
$
129,526

Total Control & Affiliate Investments
 
 
 
 
 
$
54,954

 
$
484,240

 
$
323,141

 
$
(284,547
)
 
$
(62,708
)
 
$
75,917

 
$
536,043


F- 77
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

______________________________________________________
*     Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities, and the movement of an existing portfolio company into this category from a different category.
**     Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities, and the movement of an existing portfolio company out of this category into a different category.
(1) 
The principal amount and ownership detail are shown in the consolidated schedules of investments.
(2) 
This investment was not deemed significant under Regulation S-X as of December 31, 2019.
(3) 
For the year ended December 31, 2019, the Company had determined that it must include audited financial statements of Kahala Ireland Opco Designated Activity Company because it was a controlled investment and was required to do so under SEC Rule 3-09. The audited financial statements were attached as Exhibit 99.1 in the Company's 2019 Form 10-K.
(4) 
Gross of deferred taxes in the amount of $1.0 million.
(5) 
Investment no longer held as of December 31, 2019.
(6) 
Investment paid or has the option to pay all or a portion of interest and dividends via payment-in-kind.
(7) 
The fair value of investments with respect to securities for which market quotations are not readily available is determined in good faith by the Company's Board of Directors as required by the 1940 Act. Such investments are valued using significant unobservable inputs (See Note 3 to the consolidated financial statements).
(8) 
Investment is non-income producing at December 31, 2019.
Dividends and interest for the year ended December 31, 2019 attributable to Controlled and Affiliated investments no longer held as of December 31, 2019 were $5.5 million.
Realized loss for the year ended December 31, 2019 attributable to Controlled and Affiliated investments no longer held as of December 31, 2019 was $67.1 million.
Change in unrealized gain for the year ended December 31, 2019 attributable to Controlled and Affiliated investments no longer held as of December 31, 2019 was $64.6 million.
The following table presents the Schedule of Investments and Advances to Affiliates as of December 31, 2018:
Portfolio Company (1)
 
Type of Asset
 
Industry
 
Amount of dividends and interest included in income
 
Beginning Fair Value at December 31, 2017
 
Gross additions*
 
Gross reductions**
 
Realized Gain/(Loss)
 
Change in Unrealized Gain (Loss) (6)
 
Fair Value at December 31, 2018
Control Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capstone Nutrition Common Stock (fka Integrity Nutraceuticals) (4) (5) (10)
 
Equity/Other
 
Consumer
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Capstone Nutrition (fka Integrity Nutraceuticals) - L+12.50% (15.03%), 9/25/2020 (4) (5) (8)
 
Senior Secured First Lien Debt
 
Consumer
 
—

 
—

 
2,829

 
—

 
—

 
390

 
3,219

Capstone Nutrition (fka Integrity Nutraceuticals) - L+12.50% (15.03%), 9/25/2020 (4) (5) (8)
 
Senior Secured First Lien Debt
 
Consumer
 
—

 
4,096

 
—

 
—

 
—

 
(637
)
 
3,459

Capstone Nutrition (fka Integrity Nutraceuticals) - L+12.50% (15.03%), 9/25/2020 (4) (5) (8)
 
Senior Secured First Lien Debt
 
Consumer
 
—

 
9,467

 
—

 
—

 
—

 
(1,775
)
 
7,692

Capstone Nutrition Class B and C Common Stock (fka Integrity Nutraceuticals) (4) (5) (10)
 
Equity/Other
 
Consumer
 
—

 
—

 
—

 
—

 
—

 
—

 
—

CRD Holdings, LLC - 9.00% (5)
 
Equity/Other
 
Energy
 
4,132

 
26,984

 
11,899

 
(9,680
)
 
—

 
(230
)
 
28,973

CRS-SPV, Inc. (5) (10)
 
Equity/Other
 
Industrials
 
—

 
—

 
2,219

 
—

 
—

 
2

 
2,221

Kahala Ireland OpCo Designated Activity Company - L+8.00% (13.00%), 12/23/2028 (3) (5) (8)
 
Senior Secured First Lien Debt
 
Transportation
 
17,447

 
141,549

 
—

 
(30,000
)
 
—

 
—

 
111,549


F- 78
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Portfolio Company (1)
 
Type of Asset
 
Industry
 
Amount of dividends and interest included in income
 
Beginning Fair Value at December 31, 2017
 
Gross additions*
 
Gross reductions**
 
Realized Gain/(Loss)
 
Change in Unrealized Gain (Loss) (6)
 
Fair Value at December 31, 2018
Kahala Ireland OpCo Designated Activity Company (3) (5) (10)
 
Equity/Other
 
Transportation
 
$
—

 
$
11,709

 
$
—

 
$
—

 
$
—

 
$
8,620

 
$
20,329

Kahala Ireland OpCo Designated Activity Company (3) (5) (10)
 
Equity/Other
 
Transportation
 
—

 
3,250

 
—

 
(20
)
 
—

 
20

 
3,250

Kahala US OpCo, LLC - 13.00% (3) (5) (10)
 
Equity/Other
 
Transportation
 
—

 
—

 
—

 
—

 
—

 
—

 
—

NexSteppe, Inc. (5) (10)
 
Equity/Other
 
Chemicals
 
—

 
—

 
—

 
—

 
—

 
—

 
—

NexSteppe, Inc. - 12.00%, 3/31/2019 (5) (8)
 
Senior Secured First Lien Debt
 
Chemicals
 
—

 
—

 
250

 
—

 
—

 
(250
)
 
—

NexSteppe, Inc. - 12.00%, 3/31/2019 (5) (8)
 
Senior Secured First Lien Debt
 
Chemicals
 
—

 
—

 
—

 
—

 
—

 
—

 
—

NMFC Senior Loan Program I, LLC
 
Equity/Other
 
Diversified Investment Vehicles
 
6,051

 
50,805

 
—

 
—

 
—

 
(232
)
 
50,573

Park Ave RE Holdings, LLC - 13.00%, 12/31/2021 (2) (5) (8) (9)
 
Subordinated Debt
 
Financials
 
4,902

 
37,192

 
—

 
—

 
—

 
—

 
37,192

Park Ave RE Holdings, LLC (2) (5) (10)
 
Equity/Other
 
Financials
 
—

 
12,678

 
102

 
—

 
—

 
2,798

 
15,578

Park Ave RE Holdings, LLC - 8.00% (2) (5) (10)
 
Equity/Other
 
Financials
 
—

 
23,645

 
—

 
—

 
—

 
—

 
23,645

South Grand MM CLO I, LLC (7)
 
Equity/Other
 
Diversified Investment Vehicles
 
100

 
28,904

 
—

 
(29,555
)
 
460

 
191

 
—

  Total Control Investments
 
 
 
 
 
$
32,632

 
$
350,279

 
$
17,299

 
$
(69,255
)
 
$
460

 
$
8,897

 
$
307,680

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Answers Corp. (5)
 
Equity/Other
 
Media/Entertainment
 
$
—

 
$
14,231

 
$
—

 
$
—

 
$
—

 
$
(12,322
)
 
$
1,909

Answers Corp. (5) (7)
 
Senior Secured First Lien Debt
 
Media/Entertainment
 
82

 
2,916

 
7

 
(3,007
)
 
55

 
29

 
—

Answers Corp. - L+7.90% (9.00%), 9/15/2021 (5) (7)
 
Senior Secured Second Lien Debt
 
Media/Entertainment
 
557

 
4,371

 
153

 
(4,675
)
 
435

 
(284
)
 
—

B&M CLO, Ltd. 2014-1A SUB - 0.00%, 4/16/2026 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
767

 
12,804

 
—

 
(3,003
)
 
(1,857
)
 
(1,915
)
 
6,029

Basho Technologies, Inc. (7)
 
Senior Secured First Lien Debt
 
Software
 
—

 
—

 
—

 
(1,238
)
 
(5,247
)
 
6,485

 
—

Basho Technologies, Inc. (7) 
 
Senior Secured First Lien Debt
 
Software
 
—

 
—

 
—

 
—

 
(2,550
)
 
2,550

 
—

Basho Technologies, Inc. (7)
 
Equity/Other
 
Software
 
—

 
—

 
—

 
—

 
(2,000
)
 
2,000

 
—

CVP Cascade CLO, Ltd. 2013-CLO1 SUB - 0.00%, 1/16/2026 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
633

 
4,121

 
—

 
(1,143
)
 
(5,500
)
 
3,688

 
1,166

CVP Cascade CLO, Ltd. 2013-CLO1 Side Letter (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
15

 
602

 
—

 
(629
)
 
(343
)
 
438

 
68

CVP Cascade CLO, Ltd. 2014-2A Side Letter (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
19

 
1,101

 
—

 
(701
)
 
—

 
(126
)
 
274

Danish CRJ, Ltd. (5) (10)
 
Equity/Other
 
Transportation
 
—

 
605

 
—

 
(1
)
 
—

 
(604
)
 
—

Figueora - Class F Notes - 12.79%, 1/15/2027 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
465

 
—

 
8,000

 
—

 
—

 
(492
)
 
7,508

Figueroa CLO, Ltd. 2014-1A Side Letter (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
44

 
895

 
—

 
(617
)
 
—

 
205

 
483


F- 79
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Portfolio Company (1)
 
Type of Asset
 
Industry
 
Amount of dividends and interest included in income
 
Beginning Fair Value at December 31, 2017
 
Gross additions*
 
Gross reductions**
 
Realized Gain/(Loss)
 
Change in Unrealized Gain (Loss) (6)
 
Fair Value at December 31, 2018
Figueroa CLO, Ltd. 2014-1A SUB - 0.00%, 1/15/2027 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
$
882

 
$
12,508

 
$
—

 
$
(852
)
 
$
(4,000
)
 
$
(188
)
 
$
7,468

Frank Entertainment Group, LLC - 6.00%, 6/30/2019 (5)
 
Senior Secured First Lien Debt
 
Media/Entertainment
 
—

 
—

 
1,836

 
—

 
—

 
(395
)
 
1,441

Frank Entertainment Group, LLC - 10.00%, 6/30/2019 (5)
 
Senior Secured Second Lien Debt
 
Media/Entertainment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Frank Entertainment Group, LLC (5) (10)
 
Equity/Other
 
Media/Entertainment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Frank Entertainment Group, LLC (5) (10) 
 
Equity/Other
 
Media/Entertainment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Frank Entertainment Group, LLC (5) (10) 
 
Equity/Other
 
Media/Entertainment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Frontstreet Facility Solutions, Inc. (5) (10)
 
Equity/Other
 
Business Services
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Frontstreet Facility Solutions, Inc. - 13.00%, 3/1/2021 (5)
 
Subordinated Debt
 
Business Services
 
126

 
—

 
227

 
—

 
—

 
(38
)
 
189

MidOcean Credit CLO 2013-2A INC - 12.07%, 1/29/2025 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
2,130

 
20,651

 
—

 
(431
)
 
—

 
(3,686
)
 
16,534

MidOcean Credit CLO 2014-3A SUB - 14.97%, 7/21/2026 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
2,398

 
17,508

 
1,738

 
(1,847
)
 
(3,300
)
 
552

 
14,651

MidOcean Credit CLO 2015-4A INC - 0.00%, 4/15/2027 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
1,128

 
12,212

 
—

 
(1,184
)
 
—

 
(2,433
)
 
8,595

NewStar Arlington Senior Loan Program, LLC 14-1A FR - 13.77%, 4/25/2031 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
455

 
—

 
4,532

 
—

 
—

 
(107
)
 
4,425

NewStar Arlington Senior Loan Program, LLC 14-1A SUB - 17.51%, 7/25/2025 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
3,973

 
25,439

 
—

 
(2,050
)
 
—

 
1,399

 
24,788

Newstar Fairfield Fund CLO, Ltd. 2015-1RA F - 10.26%, 1/20/2027 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
1,212

 
8,660

 
161

 
—

 
—

 
(241
)
 
8,580

Newstar Fairfield Fund CLO, Ltd. 2015-1RA SUB - 12.31%, 1/19/2027 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
517

 
13,089

 
—

 
(2,141
)
 
(7,000
)
 
7,947

 
11,895

OFSI Fund, Ltd. 2014-6A Side Letter (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
(25
)
 
680

 
—

 
(485
)
 
—

 
4

 
199

OFSI Fund, Ltd. 2014-6A SUB - 0.00%, 3/20/2025 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
183

 
10,162

 
—

 
(3,003
)
 
(1,000
)
 
(3,151
)
 
3,008

PennantPark Credit Opportunities Fund II, LP
 
Equity/Other
 
Diversified Investment Vehicles
 
1,264

 
10,136

 
—

 
(1,518
)
 
—

 
87

 
8,705

Silver Spring CLO, Ltd. - 4.84%, 10/16/2026 (5) (7)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
370

 
10,363

 
—

 
(8,241
)
 
(6,882
)
 
4,760

 
—

Tax Defense Network, LLC - L+6.00% (10.00%), 4/30/2020 (5) (8)
 
Senior Secured First Lien Debt
 
Consumer
 
157

 
7,477

 
—

 
(314
)
 
—

 
764

 
7,927

Tax Defense Network, LLC (5) (10)
 
Equity/Other
 
Consumer
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Tax Defense Network, LLC (5) (10)
 
Equity/Other
 
Consumer
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Team Waste, LLC (5) (10)
 
Equity/Other
 
Industrials
 
—

 
—

 
2,234

 
—

 
—

 
1

 
2,235

Tennenbaum Waterman Fund, LP (5)
 
Equity/Other
 
Diversified Investment Vehicles
 
1,254

 
10,427

 
—

 
—

 
—

 
(290
)
 
10,137


F- 80
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Portfolio Company (1)
 
Type of Asset
 
Industry
 
Amount of dividends and interest included in income
 
Beginning Fair Value at December 31, 2017
 
Gross additions*
 
Gross reductions**
 
Realized Gain/(Loss)
 
Change in Unrealized Gain (Loss) (6)
 
Fair Value at December 31, 2018
THL Credit Greenway Fund II, LLC
 
Equity/Other
 
Diversified Investment Vehicles
 
$
1,048

 
$
11,373

 
$
856

 
$
(4,659
)
 
$
—

 
$
(135
)
 
$
7,435

TwentyEighty, Inc. (5)
 
Equity/Other
 
Business Services
 
—

 
—

 
—

 
—

 
—

 
—

 
—

TwentyEighty, Inc. - L+8.00% (10.80%), 3/31/2020 (5) (8)
 
Senior Secured First Lien Debt
 
Business Services
 
307

 
2,853

 
131

 
(2,620
)
 
337

 
(401
)
 
300

TwentyEighty, Inc. - 8.00%, 3/31/2020 (5) (8)
 
Senior Secured First Lien Debt
 
Business Services
 
1,183

 
4,719

 
925

 
—

 
—

 
778

 
6,422

TwentyEighty, Inc. - 8.75%, 3/31/2020 (5) (8)
 
Senior Secured First Lien Debt
 
Business Services
 
1,137

 
3,739

 
1,125

 
—

 
—

 
1,294

 
6,158

Whitehorse, Ltd. 2014-1A Side Letter (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
39

 
639

 
—

 
(406
)
 
—

 
64

 
297

Whitehorse, Ltd. 2014-1A SUB - 0.00%, 5/1/2026 (5)
 
Collateralized Securities
 
Diversified Investment Vehicles
 
(30
)
 
8,761

 
—

 
(3,087
)
 
(1,000
)
 
(699
)
 
3,975

World Business Lenders, LLC (5) (10)
 
Equity/Other
 
Financials
 
—

 
3,759

 
—

 
—

 
—

 
—

 
3,759

Total Affiliate Investments
 
 
 
 
 
$
22,290

 
$
236,801

 
$
21,925

 
$
(47,852
)
 
$
(39,852
)
 
$
5,538

 
$
176,560

Total Control & Affiliate Investments
 
 
 
 
 
$
54,922

 
$
587,080

 
$
39,224

 
$
(117,107
)
 
$
(39,392
)
 
$
14,435

 
$
484,240

_____________________________________________________
*     Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities, and the movement of an existing portfolio company into this category from a different category.
**     Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities, and the movement of an existing portfolio company out of this category into a different category.
(1) 
The principal amount and ownership detail are shown in the consolidated schedules of investments.
(2) 
This investment was not deemed significant under Regulation S-X as of December 31, 2018.
(3) 
For the year ended December 31, 2018, the Company had determined that it must include audited financial statements of Kahala Ireland Opco Designated Activity Company because it was a controlled investment and was required to do so under SEC Rule 3-09. The audited financial statements were attached as Exhibit 99.1 in the Company's 2018 Form 10-K.
(4) 
This investment was not deemed significant under Regulation S-X as of December 31, 2018.
(5) 
The fair value of investments with respect to securities for which market quotations are not readily available is determined in good faith by the Company's Board of Directors as required by the 1940 Act. Such investments are valued using significant unobservable inputs (See Note 3 to the consolidated financial statements).
(6) 
Gross of deferred taxes in the amount of $0.5 million.
(7) 
Investment no longer held as of December 31, 2018.
(8) 
Investment paid or has the option to pay all or a portion of interest and dividends via payment-in-kind.
(9) 
Portfolio company elected to pay cash interest, noting the company has the option to elect a portion of the interest to be payment-in-kind.
(10) 
Investment is non-income producing at December 31, 2018.
Dividends and interest for the year ended December 31, 2018 attributable to Controlled and Affiliated investments no longer held as of December 31, 2018 were $1.1 million.
Realized loss for the year ended December 31, 2018 attributable to Controlled and Affiliated investments no longer held as of December 31, 2018 was $15.7 million.

F- 81
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the year ended December 31, 2019

Change in unrealized gain for the year ended December 31, 2018 attributable to Controlled and Affiliated investments no longer held as of December 31, 2018 was $15.7 million.
Note 18 – Subsequent Events
The Company has evaluated subsequent events through the filing of this Form 10-K and has determined that there have been no events that have occurred that would require adjustments to the Company’s disclosures in the consolidated financial statements except for the following:
DRIP Sales
From January 1, 2020 through the filing of this Form 10-K, the Company has issued 1.0 million shares of common stock including shares issued pursuant to the DRIP. Total gross proceeds from these issuances, including proceeds from shares issued pursuant to the DRIP were $8.1 million.
Share Repurchase Program
On December 17, 2019, the Company offered to purchase no less than 2,000,000 and up to approximately 2,500,000 shares of its common stock pursuant to its SRP at a price equal to $7.75 per share. The offer expired on January 27, 2020 (the "Expiration Date"). On the Expiration Date, the Company purchased 2,115,276 shares of its common stock for aggregate consideration of $16.7 million pursuant to the limitations of the SRP as detailed in Note 10.
COVID-19
As the global spread of COVID-19 continues, we have experienced increased market volatility and economic uncertainties which may materially impact the valuation of portfolio investments and in turn, the net asset value of the Company. There may be other financial or operational impact, though the extent of such impact is unpredictable at this time.


F- 82

Business Development Corp of America Reports