Sixth Street Specialty Lending, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.2 - EX-31.2 - Sixth Street Specialty Lending, Inc.	tslx-ex312_8.htm
EX-31.1 - EX-31.1 - Sixth Street Specialty Lending, Inc.	tslx-ex311_6.htm
EX-32 - EX-32 - Sixth Street Specialty Lending, Inc.	tslx-ex32_7.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2018

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

For the transition period from to

Commission file number 001-36364

TPG Specialty Lending, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	27-3380000
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

301 Commerce Street, Suite 3300, Fort Worth, TX	76102
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (817) 871-4000

Not applicable

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

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

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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	☒	Accelerated filer	☐

Non-Accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☐

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

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

The number of shares of the Registrant’s common stock, $.01 par value per share, outstanding at July 31, 2018 was 65,127,082.

TPG SPECIALTY LENDING, INC.

	INDEX	PAGE NO.

PART I.	FINANCIAL INFORMATION	4

Item 1.	Financial Statements	4

	Consolidated Balance Sheets as of June 30, 2018 (Unaudited) and December 31, 2017	4

	Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017 (Unaudited)	5

	Consolidated Schedules of Investments as of June 30, 2018 (Unaudited) and December 31, 2017	6

	Consolidated Statements of Changes in Net Assets for the six months ended June 30, 2018 and 2017 (Unaudited)	17

	Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 (Unaudited)	18

	Notes to Consolidated Financial Statements (Unaudited)	19

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63

Item 4.	Controls and Procedures	64

PART II.	OTHER INFORMATION	65

Item 1.	Legal Proceedings	65

Item 1A.	Risk Factors	65

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69

Item 3.	Defaults Upon Senior Securities	69

Item 4.	Mine Safety Disclosures	69

Item 5.	Other Information	69

Item 6.	Exhibits	69

SIGNATURES		70

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict, that could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

In addition to factors previously identified elsewhere in the reports and other documents TPG Specialty Lending, Inc. has filed with the Securities and Exchange Commission, or SEC, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

•

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

•

such an economic downturn could disproportionately impact the companies in which we have invested and others that we intend to target for investment, potentially causing us to experience a decrease in investment opportunities and diminished demand for capital from these companies;

•

such an economic downturn could also impact availability and pricing of our financing;

•

an inability to access the capital markets could impair our ability to raise capital and our investment activities; and

•

the risks, uncertainties and other factors we identify in the section entitled “Risk Factors” in this report and in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 21, 2018, and elsewhere in our filings with the SEC.

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TPG Specialty Lending, Inc.

Consolidated Balance Sheets

(Amounts in thousands, except share and per share amounts)

(Unaudited)

	June 30,			December 31,
	2018			2017
Assets
Investments at fair value
Non-controlled, non-affiliated investments (amortized cost of $1,739,334 and $1,523,844, respectively)	$	1,776,358		$	1,557,803
Non-controlled, affiliated investments (amortized cost of $39,219 and $0, respectively)		39,210			—
Controlled, affiliated investments (amortized cost of $160,755 and $162,406, respectively)		139,514			135,920
Total investments at fair value (amortized cost of $1,939,308 and $1,686,250, respectively)		1,955,082			1,693,723
Cash and cash equivalents (restricted cash of $7,181 and $3,150, respectively)		10,308			6,665
Interest receivable		8,596			6,762
Prepaid expenses and other assets		4,493			13,088
Total Assets	$	1,978,479		$	1,720,238
Liabilities
Debt (net of deferred financing costs of $16,729 and $11,770, respectively)	$	858,186		$	703,428
Management fees payable to affiliate		7,322			6,219
Incentive fees payable to affiliate		7,700			5,628
Dividends payable		25,306			23,488
Other payables to affiliate		2,236			1,901
Other liabilities		15,687			10,290
Total Liabilities		916,437			750,954
Commitments and contingencies (Note 8)
Net Assets
Preferred stock, $0.01 par value; 100,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.01 par value; 400,000,000 shares authorized, 65,009,606 and 60,336,281 shares issued, respectively; and 64,920,526 and 60,247,201 shares outstanding, respectively		650			603
Additional paid-in capital		985,541			906,521
Treasury stock at cost; 89,080 and 89,080 shares held, respectively		(1,359	)		(1,359	)
Undistributed net investment income		72,068			61,790
Net unrealized gains		12,944			6,718
Undistributed net realized losses		(7,802	)		(4,989	)
Total Net Assets		1,062,042			969,284
Total Liabilities and Net Assets	$	1,978,479		$	1,720,238
Net Asset Value Per Share	$	16.36		$	16.09

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

TPG Specialty Lending, Inc.

Consolidated Statements of Operations

(Amounts in thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Income
Investment income from non-controlled, non-affiliated investments:
Interest from investments	$	58,640		$	54,900		$	106,607		$	102,670
Dividend income	—			—				196		—
Other income		3,035			2,353			8,854			4,479
Total investment income from non-controlled, non-affiliated investments		61,675			57,253			115,657			107,149
Investment income from non-controlled, affiliated investments:
Interest from investments		375		—				375		—
Other income		216		—				216		—
Total investment income from non-controlled, affiliated investments		591			—			591			—
Investment income from controlled, affiliated investments:
Interest from investments		4,084			1,516			7,818			2,516
Other income		51			50			103			102
Total investment income from controlled, affiliated investments		4,135			1,566			7,921			2,618
Total Investment Income		66,401			58,819			124,169			109,767
Expenses
Interest		11,161			7,655			20,231			14,520
Management fees		7,322			5,977			13,982			12,048
Incentive fees		7,700			7,197			14,309			13,247
Professional fees		1,621			1,771			3,732			3,057
Directors’ fees		98			96			204			201
Other general and administrative		1,297			1,311			2,535			2,613
Total expenses		29,199			24,007			54,993			45,686
Management and incentive fees waived (Note 3)		—			—			(63	)		—
Net Expenses		29,199			24,007			54,930			45,686
Net Investment Income Before Income Taxes		37,202			34,812			69,239			64,081
Income taxes, including excise taxes		900			880			1,750			1,630
Net Investment Income		36,302			33,932			67,489			62,451
Unrealized and Realized Gains (Losses)
Net change in unrealized gains (losses):
Non-controlled, non-affiliated investments		(5,274	)		(3,845	)		3,065			7,394
Non-controlled, affiliated investments		(9	)	—				(9	)	—
Controlled, affiliated investments		8,616			21,046			5,244			13,297
Translation of other assets and liabilities in foreign currencies		4,886			(2,864	)		3,905			(8,657	)
Interest rate swaps		(1,785	)		2,133			(5,979	)		2,287
Total net change in unrealized gains		6,434			16,470			6,226			14,321
Realized gains (losses):
Non-controlled, non-affiliated investments		448			3,272			3,093			4,595
Non-controlled, affiliated investments		—			—			—			—
Controlled, affiliated investments		(9,589	)		(21,776	)		(9,589	)		(21,776	)
Foreign currency transactions		(26	)		(72	)		186			513
Total net realized losses		(9,167	)		(18,576	)		(6,310	)		(16,668	)
Total Unrealized and Realized Gains (Losses)		(2,733	)		(2,106	)		(84	)		(2,347	)
Increase in Net Assets Resulting from Operations	$	33,569		$	31,826		$	67,405		$	60,104
Earnings per common share—basic and diluted	$	0.52		$	0.53		$	1.07		$	1.00
Weighted average shares of common stock outstanding—basic and diluted		64,758,752			59,912,804			62,810,429			59,855,088

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

TPG Specialty Lending, Inc.

Consolidated Schedule of Investments as of June 30, 2018

(Amounts in thousands, except share amounts)

(Unaudited)



Company ⁽¹⁾	Investment	Initial Acquisition Date	Reference Rate and Spread			Interest Rate			Amortized Cost ⁽²⁾⁽⁸⁾		Fair Value ⁽¹⁰⁾		Percentage of Net Assets
Debt Investments
Beverage, food and tobacco
AFS Technologies, Inc. ⁽³⁾⁽⁷⁾	Second-lien loan ($59,621 par, due 9/2021)	6/30/2017		L + 9.05	%		11.38	%	$	59,621	$	57,981		5.5	%
Business services
Jive Software, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($53,460 par, due 6/2022)	6/12/2017		L + 9.25	%		11.34	%		51,799		55,999		5.3	%
Motus, LLC ⁽³⁾	First-lien loan ($69,400 par, due 1/2024)	1/17/2018		L + 6.75	%		8.84	%		67,768		68,186		6.4	%
	First-lien revolving loan ($393 par, due 1/2023)	1/17/2018		L + 6.75	%		8.84	%		266		295		0.0	%
Nintex Global Limited⁽³⁾⁽⁵⁾	First-lien loan ($64,838 par, due 4/2024)	3/30/2018		L + 6.75	%		8.84	%		63,269		63,379		6.0	%
Riskonnect, Inc. ⁽³⁾	First-lien loan ($42,800 par, due 6/2022)	6/30/2017		L + 7.75	%		10.13	%		42,002		42,561		4.0	%
Sovos Compliance, LLC ⁽³⁾	First-lien loan ($34,149 par, due 3/2022)	7/1/2016		L + 6.00	%		8.09	%		33,738		34,246		3.2	%
Tangoe, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($49,933 par, due 6/2022)	6/16/2017		L + 8.50	%	11.01% (incl. 0.50% PIK)				48,323		49,309		4.6	%
Validity, Inc. ^(3)(5)(6)	First-lien loan ($36,000 par, due 5/2023)	5/31/2018		L + 6.50	%		8.81	%		35,379		35,370		3.3	%
										342,544		349,345		32.8	%
Chemicals
Vertellus Specialties, Inc. ⁽³⁾	First-lien loan ($4,967 par, due 8/2018)	10/31/2016		L + 9.00	%		10.99	%		4,966		4,967		0.5	%
	Second-lien loan ($3,341 par, due 10/2021)	10/31/2016		L + 12.00	%		13.99	%		3,341		3,350		0.3	%
										8,307		8,317		0.8	%
Education
Curriculum Associates, LLC ⁽³⁾⁽⁵⁾	First-lien loan ($50,000 par, due 2/2024)	2/28/2018		L + 7.50	%		8.20	%		48,515		48,625		4.6	%
Finalsite Holdings, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($45,000 par, due 8/2022)	8/31/2016		L + 7.00	%		9.33	%		44,129		45,788		4.3	%
Frontline Technologies Group, LLC ⁽³⁾	First-lien loan ($47,464 par, due 9/2023)	9/18/2017		L + 6.50	%		8.59	%		46,851		46,896		4.4	%
Illuminate Education, Inc.⁽³⁾⁽⁵⁾	First-lien loan ($65,000 par, due 8/2022)	8/25/2017		L + 7.25	%		9.56	%		63,804		64,025		6.0	%
										203,299		205,334		19.3	%
Financial services
AppStar Financial, LLC ⁽³⁾	First-lien loan ($19,406 par, due 8/2020)	8/18/2015		L + 7.50	%		9.59	%		19,175		19,674		1.9	%
AvidXchange, Inc. ⁽³⁾	First-lien loan ($54,449 par, due 8/2020)	8/7/2015		L + 9.50	%		11.63	%		53,977		55,402		5.2	%

Government Brands, LLC ⁽³⁾	First-lien loan ($45,285 par, due 3/2023)	3/15/2018		L + 9.25	%	11.38% (incl. 2.50% PIK)			44,329		44,405	4.2	%
PayLease, LLC ⁽³⁾	First-lien loan ($56,242 par, due 7/2022)	7/28/2017		L + 7.00	%		9.09	%	55,237		55,795	5.3	%
PaySimple, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($58,603 par, due 3/2022)	4/17/2018		L + 8.25	%	10.63% (incl. 1.75% PIK)			58,295		58,310	5.5	%
Swift Gift Limited ⁽³⁾⁽⁵⁾	First-lien loan ($29,021 par, due 1/2022)	7/31/2017		L + 6.50	%		8.63	%	28,402		29,964	2.8	%
G Treasury SS, LLC ⁽³⁾	First-lien loan ($30,075 par, due 4/2022)	4/9/2018		L + 9.25	%	11.62% (incl. 3.00% PIK)			29,372		29,426	2.8	%
									288,787		292,976	27.7	%
Healthcare
Integrated Practice Solutions, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($32,175 par, due 6/2022)	6/30/2017		L + 8.00	%		10.09	%	31,404		31,853	3.0	%
Helix Health, Ltd. ⁽³⁾⁽⁴⁾	First-lien loan (EUR 35,810 par, due 9/2018)	9/30/2014		E + 10.50	%		11.50	%	42,655	42,020 (EUR 35,989)		4.0	%
	First-lien revolving loan (EUR 300 par, due 9/2018)	9/30/2014		E + 10.50	%		11.50	%	349	374 (EUR 320)		0.0	%
MatrixCare, Inc.⁽³⁾⁽⁵⁾	First-lien loan ($56,869 par, due 12/2021)	12/17/2015		L + 5.25	%		7.34	%	56,116		57,580	5.4	%
MedeAnalytics, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($42,427 par, due 9/2020)	9/30/2015		L + 7.50	%		9.59	%	41,788		42,851	4.0	%
Quantros, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($28,715 par, due 2/2021)	2/29/2016		L + 7.75	%		10.08	%	28,120		29,288	2.8	%
									200,432		203,966	19.2	%
Hotel, gaming, and leisure
IRGSE Holding Corp. ⁽³⁾⁽⁷⁾	First-lien loan ($22,986 par, due 9/2019)	9/29/2015		L + 9.50	%	11.83% (incl. 5.00% PIK)			22,986		16,837	1.6	%
	First-lien revolving loan ($24,682 par, due 9/2019)	9/29/2015		L + 9.50	%	11.83% (incl. 5.00% PIK)			24,682		18,080	1.7	%
									47,668		34,917	3.3	%
Human resource support services
PageUp People Limited ⁽³⁾⁽⁴⁾	First-lien loan (AUD 46,354 par, due 12/2022)	1/11/2018	B + 7.25%			9.19% (incl. 2.25% PIK)			35,749	33,585 (AUD 45,455)		3.2	%
Insurance
Insurity, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($62,493 par, due 10/2020)	10/31/2014		L + 6.75	%		9.11	%	62,140		63,587	6.0	%
Internet services
Lithium Technologies, LLC ⁽³⁾	First-lien loan ($50,000 par, due 10/2022)	10/3/2017		L + 8.00	%		10.37	%	48,940		49,463	4.7	%
Higher Logic, LLC ⁽³⁾⁽⁵⁾	First-lien loan ($38,000 par, due 1/2022)	6/18/2018		L + 6.00	%		8.10	%	37,341		37,335	3.5	%
									86,281		86,798	8.2	%
Manufacturing

Industrial Physics, LLC ⁽³⁾	First-lien loan ($9,925 par, due 10/2022)	10/23/2017	L + 7.00	%	9.09	%	9,749		9,826	0.9	%
	First-lien loan (EUR 20,959 par, due 10/2022)	10/23/2017	E + 7.00	%	8.00	%	24,181	24,226 (EUR 20,749)		2.3	%
	First-lien revolving loan ($750 par, due 10/2022)	10/23/2017	L + 7.00	%	9.09	%	664		700	0.1	%
ScentAir Technologies, Inc. ⁽³⁾	First-lien loan ($19,986 par, due 12/2019)	12/30/2014	L + 7.25	%	9.34	%	19,856		19,986	1.9	%
	First-lien revolving loan ($1,393 par, due 12/2019)	12/30/2014	L + 7.25	%	9.34	%	1,381		1,393	0.1	%
							55,831		56,131	5.3	%
Marketing services
Bazaarvoice, Inc.⁽³⁾	First-lien loan ($39,900 par, due 2/2024)	2/1/2018	L + 8.00	%	10.09	%	39,550		39,601	3.7	%
	First-lien revolving loan ($1,000 par, due 2/2024)	2/1/2018	P + 7.00	%	12.00	%	926		970	0.1	%
Vivial Inc.⁽³⁾	First-lien loan ($31,641 par, due 9/2022)	9/29/2017	L + 8.00	%	10.09	%	31,159		31,403	3.0	%
							71,635		71,974	6.8	%
Office products
USR Parent Inc.⁽³⁾⁽⁵⁾	ABL FILO term loan ($20,000 par, due 9/2022)	9/12/2017	L + 7.75	%	9.72	%	19,590		19,800	1.9	%
Oil, gas and consumable fuels
Mississippi Resources, LLC ⁽³⁾⁽⁷⁾	First-lien loan ($17,429 par, due 6/2020)	6/29/2018	L + 9.00	%	11.09	%	17,429		17,429	1.6	%
Northern Oil and Gas, Inc. ⁽³⁾	First-lien loan ($58,500 par, due 11/2022)	11/1/2017	L + 7.75	%	10.13	%	57,181		59,475	5.6	%
Rex Energy Corporation ⁽³⁾	First-lien loan ($26,132 par, due 4/2021)	4/28/2017	L + 8.75	%	11.13	%	25,512		26,131	2.5	%
	DIP term loan ($3,500 par, due 11/2018)	5/23/2018	L + 8.75	%	11.13	%	3,207		3,500	0.3	%
							103,329		106,535	10.0	%
Pharmaceuticals
Ironwood Pharmaceuticals, Inc.^(4)(5)(9)	Secured note ($33,333 par, due 9/2026)	1/5/2017	8.38	%	8.38	%	33,196		34,000	3.2	%
Nektar Therapeutics ^(4)(5)(9)	Secured note ($74,950 par, due 10/2020)	10/5/2015	7.75	%	7.75	%	74,459		78,135	7.4	%
							107,655		112,135	10.6	%
Retail and consumer products
99 Cents Only Stores LLC ⁽³⁾	ABL FILO term loan ($25,000 par, due 4/2021)	9/6/2017	L + 7.75	%	10.06	%	24,700		25,063	2.4	%
American Achievement Corporation ⁽³⁾⁽⁵⁾	First-lien loan ($22,782 par, due 9/2020)	9/30/2015	L + 8.25	%	10.24	%	22,620		22,668	2.1	%
Eddie Bauer LLC ⁽³⁾	ABL FILO term loan ($28,500 par, due 6/2019)	3/31/2017	L + 9.25	%	11.58	%	28,232		29,070	2.7	%
PayLess Inc. ⁽³⁾⁽⁵⁾	ABL FILO term loan ($14,813 par, due 8/2022)	3/1/2018	L + 8.00	%	10.00	%	14,511		14,553	1.4	%
Sears ^(3)(4)(11)	First-lien ABL loan ($17,296 par, due 7/2020)	3/18/2016	L + 7.50	%	9.50	%	17,021		17,448	1.6	%
							107,084		108,802	10.2	%
Transportation
Ferrellgas, L.P. ^(3)(4)(5)	First-lien loan ($82,500 par, due 5/2023)	5/4/2018	L + 5.75	%	7.86	%	80,876		82,781	7.8	%

Total Debt Investments							1,880,828		1,894,964	178.6	%

Equity and Other Investments
Beverage, food and tobacco
AFS Technologies, Inc. ^(7)(13)(14)	Class A Preferred Units (128,000 units)	6/30/2017	12,800		15,680	1.5	%
	Class B Common Units (90,000 units)	6/30/2017	2		5,008	0.5	%
			12,802		20,688	2.0	%
Business Services
Motus, LLC ^(13)(14)	Class A Units (1,262 units)	1/17/2018	1,262		1,262	0.1	%
	Class B Units (517,020 units)	1/17/2018	—		—	0.0	%
Nintex Global Limited ^(13)(14)	Class A Shares (1,197 shares)	3/30/2018	1,197		1,197	0.1	%
	Class B Shares (398,557 shares)	3/30/2018	12		12	0.0	%
Riskonnect, Inc. ^(13)(14)	Preferred Class A Units (990 units)	6/30/2017	990		990	0.1	%
	Common Class B Units (959,018 units)	6/30/2017	10		10	0.0	%
Validity, Inc. ^(6)(13)(14)	Series A Preferred Shares (3,840,000 shares)	5/31/2018	3,840		3,840	0.4	%
			7,311		7,311	0.7	%
Chemicals
Vertellus Specialties, Inc. ⁽¹³⁾	Common Units (2,672,990 units)	10/31/2016	3,828		3,761	0.4	%
Financial services
AvidXchange, Inc. ⁽¹³⁾	Series E Preferred Shares (214,132 shares)	8/7/2015	3,846		7,481	0.7	%
Swift Gift Limited ^(13)(14)	Common Shares (35,000 shares)	7/31/2017	3,500		7,096	0.7	%
Oxford Square Capital Corp. ^(4)(12)	Common Shares (1,059 shares)	8/5/2015	7		7	0.0	%
			7,353		14,584	1.4	%
Healthcare
SRS Parent Corp. ⁽¹³⁾	Common Shares Class A (1,980 shares)	12/28/2012	1,980		1,168	0.1	%
	Common Shares Class B (2,953,020 shares)	12/28/2012	20		12	0.0	%
			2,000		1,180	0.1	%
Hotel, gaming, and leisure
IRGSE Holding Corp. ^(7)(13)	Class A Units (5,000,000 units)	9/29/2015	3,896		97	0.0	%
	Class C-1 Units (8,800,000 units)	9/29/2015	100		48	0.0	%
			3,996		145	0.0	%
Oil, gas and consumable fuels
Mississippi Resources, LLC ^(7)(13)(14)	Class A-1 Member Units (1,360 units)	5/3/2017	10,366		8,354	0.8	%
	Class A-2 Member Units (933 units)	6/4/2014	8,874	—		0.0	%
Northern Oil and Gas, Inc. ^(12)(13)	Common Shares (1,300,000 shares)	5/15/2018	1,950		4,095	0.4	%
			21,190		12,449	1.2	%

Total Equity and Other

Investments

58,480

60,118

5.8

Total Investments

1,939,308

1,955,082

184.4

	Interest Rate Swaps as of June 30, 2018
	Company Receives	Company Pays	Maturity Date	Notional Amount		Fair Market Value			Upfront Payments / Receipts		Change in Unrealized Gains / (Losses)
Interest rate swap ^(b)	L	1.16%	10/5/2018	$	92,500	$	526		$	—	$	46
Interest rate swap^(b)	4.50%	L + 2.86%	12/15/2019		115,000		(1,874	)		—		(850	)
Interest rate swap ^(a)(b)	L	1.72%	1/10/2020		33,333		559			—		267
Interest rate swap^(b)	4.50%	L + 2.37%	8/1/2022		115,000		(3,503	)		—		(2,793	)
Interest rate swap ^(b)	4.50%	L + 1.59%	8/1/2022		50,000		11			—		11
Interest rate swap ^(b)	4.50%	L + 1.60%	8/1/2022		7,500		(1	)		—		(1	)
Interest rate swap ^(b)	4.50%	L + 1.99%	1/22/2023		150,000		(2,659	)		—		(2,659	)
Cash collateral					—		6,941			—		—
Total				$	563,333	$	—		$	—	$	(5,979	)

(a)

Contract terms are shown net of Company receiving 6.65% and paying 8.38%.

(b)

Contains a variable rate structure. Interest rate determined by three-month LIBOR.

(1)	Certain portfolio company investments are subject to contractual restrictions on sales.

(2)	The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method.

(3)

Investment contains a variable rate structure, subject to an interest rate floor. Variable rate investments bear interest at a rate that may be determined by reference to either London Interbank Offered Rate (“LIBOR” or “L”) (which can include one-, two-, three- or six-month LIBOR), Euro Interbank Offered Rate (“EURIBOR” or “E”), Bank Bill Swap Bid Rate (“BBSY” or “B”) or an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate or “P”), at the borrower’s option, which reset periodically based on the terms of the credit agreement. For investments with multiple interest rate contracts, the interest rate shown is the weighted average interest rate in effect at June 30, 2018.

(4)

This portfolio company is not a qualifying asset 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 such acquisition is made, qualifying assets represent at least 70% of total assets. Non-qualifying assets represented 14.6% of total assets as of June 30, 2018.

(5)

In addition to the interest earned based on the stated interest rate of this investment, which is the amount reflected in this schedule, the Company may be entitled to receive additional interest as a result of an arrangement with other members in the syndicate to the extent an investment has been allocated to “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any amounts due thereunder and the Company hold the “last out” tranche.

(6)

Under the 1940 Act, the Company is deemed to be an “Affiliated Person” of, as defined in the 1940 Act, this portfolio company, as the Company owns more than 5% of the portfolio company’s outstanding voting securities. Transactions during the six months ended June 30, 2018 in which the issuer was an Affiliated Person of the portfolio company are as follows:

Non-controlled, Affiliated Investments during the six months ended June 30, 2018

Company

Fair

Value at

December 31, 2017

Gross

Additions (a)

Gross

Reductions

Net Change

In Unrealized

Gain/(Loss)

Realized

Gain/(Losses)

Fair

Value at

June 30, 2018

Other

Income

Interest

Income

Validity, Inc.

—

39,219

—

)

—

39,210

216

375

Total

—

39,219

—

)

—

39,210

216

375

(a)

Gross additions include increases in the cost basis of investments resulting from new investments, payment-in-kind interest or dividends, the amortization of any unearned income or discounts on debt investments, as applicable.

(7)

Under the 1940 Act, the Company is deemed to be both an “Affiliated Person” of and “Control,” as such terms are defined in the 1940 Act, this portfolio company, as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). Transactions during the six months ended June 30, 2018 in which the issuer was an Affiliated Person of and was deemed to Control a portfolio company are as follows:

Controlled, Affiliated Investments during the six months ended June 30, 2018

Company	Fair Value at December 31, 2017		Gross Additions (a)		Gross Reductions (b)			Net Change In Unrealized Gain/(Loss)			Realized Gain/(Losses)			Fair Value at June 30, 2018		Other Income		Interest Income
AFS Technologies, Inc.	$	75,780	$	300	$	—		$	2,589		$	—		$	78,669	$	—	$	3,315
IRGSE Holding Corp.		34,748		3,589	—				(3,275	)	—				35,062		3		2,652
Mississippi Resources, LLC		25,392		4,192		(142	)		5,930			(9,589	)		25,783		100		1,851
Total	$	135,920	$	8,081	$	(142	)	$	5,244		$	(9,589	)	$	139,514	$	103	$	7,818

(a)

(b)

Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, and the amortization of any premiums on debt investments, as applicable. When an investment is placed on non-accrual status, any cash flows received by the Company are applied to the outstanding principal balance.

(8)	As of June 30, 2018, the tax cost of the Company’s investments approximates the amortized cost.

(9)	These investments contain a fixed rate structure. The Company entered into an interest rate swap agreement to swap to a floating rate. Refer to Note 5 for further information related to the Company’s interest rate swaps on investments.

(10)

In accordance with Financial Accounting Standards Board Accounting Standards Codification 820, Fair Value Measurements (“ASC 820”), unless otherwise indicated, the fair values of all investments were determined using significant unobservable inputs and are considered Level 3 investments. See Note 6 for further information related to investments at fair value.

(11)	This investment is valued using observable inputs and is considered a Level 2 investment. See Note 6 for further information related to investments at fair value.

(12)	This investment is valued using observable inputs and is considered a Level 1 investment. See Note 6 for further information related to investments at fair value.

(13)	This equity investment is non-income producing.

(14)	Security acquired in transaction exempt from registration under the Securities Act of 1933, and may be deemed to be “restricted securities” under the Securities Act. As of June 30, 2018, the aggregate fair value of these securities is $43,449, or 4.1% of the Company’s net assets.

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

TPG Specialty Lending, Inc.

Consolidated Schedule of Investments as of December 31, 2017

(Amounts in thousands, except share amounts)



Company ⁽¹⁾	Investment	Initial Acquisition Date	Reference Rate and Spread			Interest Rate			Amortized Cost ⁽²⁾⁽⁷⁾		Fair Value ⁽⁹⁾		Percentage of Net Assets
Debt Investments
Automotive
Heartland Automotive Holdings, LLC ⁽³⁾	First-lien loan ($25,725 par, due 1/2018)	8/28/2012		L + 10.25	%		11.75	%	$	25,724	$	25,789		2.7	%
	First-lien revolving loan ($4,056 par, due 1/2018)	8/28/2012		P + 9.00	%		13.50	%		4,056		4,066		0.4	%
										29,780		29,855		3.1	%
Beverage, food and tobacco
AFS Technologies, Inc. ⁽³⁾⁽⁶⁾	Second-lien loan ($59,621 par, due 9/2021)	6/30/2017		L + 9.05	%		10.74	%		59,621		57,534		5.9	%
Business services
Jive Software, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($53,730 par, due 6/2022)	6/12/2017		L + 9.25	%		10.69	%		51,900		53,730		5.5	%
Leaf US Holdings, Inc. ⁽³⁾⁽⁴⁾	First-lien loan ($33,221 par, due 6/2020)	6/30/2014		L + 8.00	%		9.69	%		32,879		33,221		3.4	%
Motus, LLC ⁽³⁾	First-lien loan ($20,879 par, due 7/2021)	7/29/2016		L + 10.00	%	11.57% (incl. 3.00% PIK)				20,496		21,975		2.3	%
Riskonnect, Inc. ⁽³⁾	First-lien loan ($42,800 par, due 6/2022)	6/30/2017		L + 7.75	%		9.50	%		41,920		42,203		4.4	%
Sovos Compliance, LLC ⁽³⁾	First-lien loan ($34,323 par, due 3/2022)	7/1/2016		L + 6.00	%		7.57	%		33,862		34,421		3.6	%
Tangoe, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($49,975 par, due 6/2022)	6/16/2017		L + 8.50	%	10.20% (incl. 0.50% PIK)				48,196		48,725		5.0	%
										229,253		234,275		24.2	%
Chemicals
Vertellus Specialties, Inc. ⁽³⁾	First-lien loan ($4,967 par, due 4/2018)	10/31/2016		L + 9.00	%		10.57	%		4,959		4,967		0.5	%
	Second-lien loan ($3,341 par, due 10/2021)	10/31/2016		L + 12.00	%		13.57	%		3,341		3,366		0.3	%
										8,300		8,333		0.8	%
Communications
iHeart Communications ⁽³⁾⁽⁵⁾	ABL FILO term loan ($115,000 par, due 11/2020)	11/30/2017		L + 4.75	%		6.23	%		111,613		112,700		11.6	%
Education
Finalsite Holdings, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($45,000 par, due 8/2022)	8/31/2016		L + 7.00	%		8.69	%		44,029		45,450		4.7	%
Frontline Technologies Group, LLC ⁽³⁾	First-lien loan ($47,703 par, due 9/2023)	9/18/2017		L + 6.50	%		8.09	%		47,039		47,132		4.9	%
Illuminate Education, Inc.⁽³⁾	First-lien loan ($56,900 par, due 8/2022)	8/25/2017		L + 8.00	%		9.48	%		55,772		55,971		5.8	%
										146,840		148,553		15.4	%
Financial services
AppStar Financial, LLC ⁽³⁾	First-lien loan ($20,364 par, due 8/2020)	8/18/2015		L + 8.00	%		9.57	%		20,071		20,643		2.1	%

AvidXchange, Inc. ⁽³⁾	First-lien loan ($54,449 par, due 8/2020)	8/7/2015		L + 9.50	%		11.06	%	53,879		55,266	5.7	%
PayLease, LLC ⁽³⁾	First-lien loan ($56,525 par, due 7/2022)	7/28/2017		L + 7.00	%		8.57	%	55,413		55,627	5.7	%
PaySimple, Inc. ⁽³⁾	First-lien loan ($50,601 par, due 3/2022)	3/7/2017		L + 8.25	%	10.00% (incl. 1.75% PIK)			49,633		50,045	5.2	%
Swift Gift Limited⁽³⁾⁽⁵⁾	First-lien loan ($29,167 par, due 1/2022)	7/31/2017		L + 6.50	%		8.13	%	28,472		29,458	3.0	%
									207,468		211,039	21.7	%
Healthcare
Integrated Practice Solutions, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($32,338 par, due 6/2022)	6/30/2017		L + 8.00	%		9.57	%	31,486		31,691	3.3	%
Helix Health, Ltd. ⁽³⁾⁽⁴⁾	First-lien loan (EUR 38,019 par, due 9/2019)	9/30/2014		E + 10.50	%		11.50	%	45,164	47,366 (EUR 39,445)		4.9	%
	First-lien revolving loan (EUR 300 par, due 9/2019)	9/30/2014		E + 10.50	%		11.50	%	293	540 (EUR 450)		0.1	%
MatrixCare, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($57,305 par, due 12/2021)	12/17/2015		L + 5.25	%		6.94	%	56,455		58,021	6.0	%
MedeAnalytics, Inc.⁽³⁾⁽⁵⁾	First-lien loan ($43,262 par, due 9/2020)	9/30/2015		L + 8.50	%		10.19	%	42,483		43,478	4.5	%
Quantros, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($29,475 par, due 2/2021)	2/29/2016		L + 7.75	%		9.44	%	28,772		30,212	3.1	%
									204,653		211,308	21.9	%
Hotel, gaming, and leisure
IRGSE Holding Corp. ⁽³⁾⁽⁶⁾	First-lien loan ($22,414 par, due 9/2019)	9/29/2015		L + 9.50	%	11.19% (incl. 5.00% PIK)			22,414		17,596	1.8	%
	First-lien revolving loan ($21,665 par, due 9/2019)	9/29/2015		L + 9.50	%	11.06% (incl. 5.00% PIK)			21,665		17,007	1.8	%
									44,079		34,603	3.6	%
Insurance
Insurity, Inc. ⁽³⁾⁽⁵⁾	First-lien loan ($63,321 par, due 10/2020)	10/31/2014		L + 6.50	%		8.25	%	62,899		64,904	6.7	%
Internet services
Lithium Technologies, LLC ⁽³⁾	First-lien loan ($50,000 par, due 10/2022)	10/3/2017		L + 8.00	%		9.39	%	48,840		48,927	5.0	%
Manufacturing
Industrial Physics, LLC ⁽³⁾	First-lien loan ($9,975 par, due 10/2022)	10/23/2017		L + 7.00	%		8.55	%	9,686		9,750	1.0	%
	First-lien loan (EUR 21,065 par, due 10/2022)	10/23/2017		E + 7.00	%		8.00	%	24,260	24,915 (EUR 20,749)		2.6	%
ScentAir Technologies, Inc. ⁽³⁾	First-lien loan ($19,986 par, due 12/2019)	12/30/2014		L + 7.00	%		8.57	%	19,816		20,086	2.1	%
	First-lien revolving loan ($1,393 par, due 12/2019)	12/30/2014		L + 7.00	%		8.57	%	1,377		1,404	0.1	%
									55,139		56,155	5.8	%
Marketing services
Marketo, Inc. ⁽³⁾	First-lien loan ($28,125 par, due 8/2021)	8/16/2016		L + 9.50	%		11.19	%	27,428		29,025	3.0	%
Vivial Inc.⁽³⁾	First-lien loan ($32,463 par, due 9/2022)	9/29/2017	L + 8.00%				9.69	%	31,918		31,976	3.3	%
									59,346		61,001	6.3	%

Office products
USR Parent Inc. ⁽³⁾⁽⁵⁾	ABL FILO term loan ($20,000 par, due 9/2022)	9/12/2017		L + 7.75	%	8.99	%	19,553	19,600	2.0	%
Oil, gas and consumable fuels
Mississippi Resources, LLC ⁽³⁾⁽⁶⁾	First-lien loan ($25,229 par, due 6/2018)	5/3/2017		L + 10.50	%	12.07	%	25,180	25,229	2.6	%
Northern Oil and Gas, Inc. ⁽³⁾	First-lien loan ($48,750 par, due 11/2022)	11/1/2017		L + 7.75	%	9.50	%	47,563	47,450	4.9	%
Rex Energy Corporation ⁽³⁾	First-lien loan ($18,950 par, due 4/2021)	4/28/2017		L + 8.75	%	10.50	%	18,467	20,525	2.1	%
								91,210	93,204	9.6	%
Pharmaceuticals
Ironwood Pharmaceuticals, Inc.^(4)(5)(8)	Secured note ($33,333 par, due 9/2026)	1/5/2017		8.38	%	8.38	%	33,191	33,250	3.4	%
Model N, Inc. ⁽³⁾⁽⁴⁾	First-lien loan ($30,000 par, due 1/2022)	1/5/2017		L + 8.25	%	9.88	%	29,497	29,925	3.1	%
Nektar Therapeutics ^(4)(5)(8)	Secured note ($74,950 par, due 10/2020)	10/5/2015		7.75	%	7.75	%	74,363	76,449	7.9	%
								137,051	139,624	14.4	%
Retail and consumer products
99 Cents Only Stores LLC ⁽³⁾	ABL FILO term loan ($25,000 par, due 4/2021)	9/6/2017	L + 7.75%			9.26	%	24,654	24,875	2.6	%
American Achievement Corporation ⁽³⁾⁽⁵⁾	First-lien loan ($23,161 par, due 9/2020)	9/30/2015		L + 8.25	%	9.62	%	22,964	23,219	2.4	%
Destination Maternity Corporation ⁽³⁾⁽⁵⁾	ABL FILO term loan ($15,420 par, due 3/2021)	3/25/2016		L + 7.50	%	8.74	%	15,165	15,767	1.6	%
Eddie Bauer LLC ⁽³⁾	ABL FILO term loan ($29,250 par, due 6/2019)	3/31/2017		L + 9.25	%	10.94	%	28,847	29,396	3.0	%
Sears ^(3)(4)(10)	First-lien ABL loan ($17,296 par, due 7/2020)	3/18/2016		L + 7.50	%	8.89	%	16,962	17,383	1.8	%
								108,592	110,640	11.4	%

Total Debt Investments								1,624,237	1,642,255	169.4	%
Equity and Other Investments
Beverage, food and tobacco
AFS Technologies, Inc. ^(6)(12)(13)	Class A Preferred Units (125,000 units)	6/30/2017						12,500	14,031	1.4	%
	Class B Common Units (90,000 units)	6/30/2017						2	4,215	0.4	%
								12,502	18,246	1.8	%
Business Services
Riskonnect, Inc. ^(12)(13)	Preferred Class A Units (990 units)	6/30/2017						990	990	0.1	%
	Common Class B Units (959,018 units)	6/30/2017						10	10	0.0	%
								1,000	1,000	0.1	%
Chemicals
Vertellus Specialties, Inc. ⁽¹²⁾	Common Units (2,672,990 units)	10/31/2016						3,828	3,780	0.4	%
Financial services
AvidXchange, Inc. ⁽¹²⁾	Series E Preferred Equity (214,132 shares)	8/7/2015						3,846	7,481	0.8	%
Swift Gift Limited ^(12)(13)	Common Shares (35,000 shares)	7/31/2017						3,500	5,066	0.5	%

TICC Capital Corp. ^(4)(11)	Common Shares (1,059 shares)	8/5/2015		7		6	0.0	%
Triangle Capital Corp. ^(4)(11)	Common Shares (1,384,570 shares)	11/3/2017		13,428		13,140	1.4	%
				20,781		25,693	2.7	%
Healthcare
Helix Health, Ltd.^(4)(12)	Warrants	9/30/2014		877	1,336 (EUR 1,112)		0.1	%
SRS Parent Corp. ⁽¹²⁾	Common Shares Class A (1,980 shares)	12/28/2012		1,980		1,094	0.1	%
	Common Shares Class B (2,953,020 shares)	12/28/2012		20		11	0.0	%
				2,877		2,441	0.2	%
Hotel, gaming, and leisure
IRGSE Holding Corp. ^(6)(12)	Class A Units (5,000,000 units)	9/29/2015		3,896		97	0.0	%
	Class C-1 Units (8,800,000 units)	9/29/2015		100		48	0.0	%
				3,996		145	0.0	%
Oil, gas and consumable fuels
Mississippi Resources, LLC ^(6)(12)(13)	Class A-1 Member Units (1,000 units)	5/3/2017		8,155		163	0.0	%
	Class A-2 Member Units (933 units)	6/4/2014		8,874	—		0.0	%
				17,029		163	0.0	%
Total Equity and Other Investments				62,013		51,468	5.2	%
Total Investments			$	1,686,250	$	1,693,723	174.6	%

	Interest Rate Swaps as of December 31, 2017
	Company Receives	Company Pays	Maturity Date	Notional Amount				Fair Market Value					Upfront Payments / Receipts							Change in Unrealized Gains / (Losses)
Interest rate swap ^(b)	L	1.16%	10/5/2018	$	92,500			$		480			$		—			$			204
Interest rate swap ^(b)	4.50%	L + 2.86%	12/15/2019		115,000					(1,024		)			—						(817	)
Interest rate swap ^(a)(b)	L	1.72%	1/10/2020		33,333					292					—						292
Interest rate swap ^(b)	4.50%	L + 2.37%	8/1/2022		115,000					(710		)			—						(710	)
Cash collateral							—				962					—			—
Total						$	355,833		$		—			$		—	$		(1,031				)

(a)

Contract terms are shown net of Company receiving 6.65% and paying 8.38%.

(b)

Contains a variable rate structure. Interest rate determined by three-month LIBOR.

(1)	Certain portfolio company investments are subject to contractual restrictions on sales.

(2)	The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method.

(3)

Investment contains a variable rate structure, subject to an interest rate floor. Variable rate investments bear interest at a rate that may be determined by reference to either London Interbank Offered Rate (“LIBOR” or “L”) (which can include one-, two-, three- or six-month LIBOR) Euro Interbank Offered Rate ( “EURIBOR” or “E”) or an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate or “P”), at the borrower’s option, which reset periodically based on the terms of the credit agreement. For investments with multiple interest rate contracts, the interest rate shown is the weighted average interest rate in effect at December 31, 2017.

(4)

(5)

(6)

Under the 1940 Act, the Company is deemed to be both an “Affiliated Person” of and “Control,” as such terms are defined in the 1940 Act, this portfolio company, as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). Transactions during the year ended December 31, 2017 in which the issuer was an Affiliated Person of and was deemed to Control a portfolio company are as follows:

Controlled, Affiliated Investments during the year ended December 31, 2017

Company	Fair Value at December 31, 2016		Gross Additions (a)		Gross Reductions (b)			Net Change In Unrealized Gain/(Loss)			Realized Gain/(Losses)			Fair Value at December 31, 2017		Other Income		Interest Income
AFS Technologies, Inc.	$	—	$	72,122	$	—		$	3,658		$	—		$	75,780	$	—	$	3,178
IRGSE Holding Corp.		31,974		8,014	—				(5,240	)	—				34,748		4		4,302
Mississippi Resources, LLC		33,885		6,297		(2,264	)		9,250			(21,776	)		25,392		200		1,963
Total	$	65,859	$	86,433	$	(2,264	)	$	7,668		$	(21,776	)	$	135,920	$	204	$	9,443

(a)

(b)

(7)	As of December 31, 2017, the tax cost of the Company’s investments approximates the amortized cost.

(8)	These investments contain a fixed rate structure. The Company entered into an interest rate swap agreement to swap to a floating rate. Refer to Note 5 for further information related to the Company’s interest rate swaps on investments.

(9)

(10)	This investment is valued using observable inputs and is considered a Level 2 investment. See Note 6 for further information related to investments at fair value.

(11)	This investment is valued using observable inputs and is considered a Level 1 investment. See Note 6 for further information related to investments at fair value.

(12)	This equity investment is non-income producing.

(13)	Security acquired in transaction exempt from registration under the Securities Act of 1933, and may be deemed to be “restricted securities” under the Securities Act. As of December 31, 2017, the aggregate fair value of these securities is $24,475, or 2.5% of the Company’s net assets.

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

TPG Specialty Lending, Inc.

Consolidated Statements of Changes in Net Assets

(Amounts in thousands)

(Unaudited)

	Six Months Ended June 30, 2018			Six Months Ended June 30, 2017
Increase (Decrease) in Net Assets Resulting from Operations
Net investment income	$	67,489		$	62,451
Net change in unrealized gains		6,226			14,321
Net realized losses		(6,310	)		(16,668	)
Increase in Net Assets Resulting from Operations		67,405			60,104
Increase (Decrease) in Net Assets Resulting from Capital Share Transactions
Issuance of common shares, net of offering and underwriting costs		71,813		—
Issuance of convertible notes		1,010			356
Reinvestment of dividends		7,098			4,543
Dividends declared from net investment income		(54,568	)		(49,116	)
Increase (Decrease) in Net Assets Resulting from Capital Share Transactions		25,353			(44,217	)
Total Increase in Net Assets		92,758			15,887
Net assets, beginning of period		969,284			952,212
Net Assets, End of Period	$	1,062,042		$	968,099
Undistributed Net Investment Income Included in Net Assets at the End of the Period	$	72,068		$	56,722

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

TPG Specialty Lending, Inc.

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

	Six Months Ended			Six Months Ended
	June 30, 2018			June 30, 2017
Cash Flows from Operating Activities
Increase in net assets resulting from operations	$	67,405		$	60,104
Adjustments to reconcile increase in net assets resulting from operations to net cash provided by (used) in operating activities:
Net change in unrealized gains on investments		(8,300	)		(20,691	)
Net change in unrealized (gains) losses on foreign currency transactions		(3,905	)		8,657
Net change in unrealized (gains) losses on interest rate swaps		5,979			(2,287	)
Net realized losses on investments		6,496			17,181
Net realized gains on foreign currency transactions		(54	)		(292	)
Net amortization of discount on investments		(10,956	)		(18,254	)
Amortization of deferred financing costs		1,870			1,541
Amortization of discount on debt		701			330
Purchases and originations of investments, net		(552,960	)		(412,085	)
Proceeds from investments, net		17,340			80,149
Repayments on investments		289,618			455,265
Paid-in-kind interest		(2,578	)		(3,452	)
Changes in operating assets and liabilities:
Interest receivable		(1,602	)		1,309
Interest receivable paid-in-kind		(232	)		181
Prepaid expenses and other assets		8,595			(8,239	)
Management fees payable to affiliate		1,103			(292	)
Incentive fees payable to affiliate		2,072			1,309
Payable to affiliate		335			801
Other liabilities		(582	)		4,351
Net Cash Provided by (Used) in Operating Activities		(179,655	)		165,586
Cash Flows from Financing Activities
Borrowings on debt		860,240			539,500
Repayments on debt		(696,275	)		(649,275	)
Deferred financing costs		(6,829	)		(3,818	)
Proceeds from issuance of common stock, net of offering and underwriting costs		71,813		—
Dividends paid to stockholders		(45,651	)		(44,481	)
Net Cash Provided by (Used) in Financing Activities		183,298			(158,074	)
Net Increase in Cash, Cash Equivalents, and Restricted Cash		3,643			7,512
Cash, cash equivalents, and restricted cash, beginning of period		6,665			5,954
Cash, Cash Equivalents, and Restricted Cash, End of Period	$	10,308		$	13,466
Supplemental Information:
Interest paid during the period	$	14,154		$	8,139
Excise taxes paid during the period	$	2,500		$	2,100
Dividends declared during the period	$	54,568		$	49,116
Reinvestment of dividends during the period	$	7,098		$	4,543

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

TPG Specialty Lending, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, unless otherwise indicated)

1. Organization and Basis of Presentation

Organization

TPG Specialty Lending, Inc. (“TSLX” or the “Company”) is a Delaware corporation formed on July 21, 2010. The Company was formed primarily to lend to, and selectively invest in, middle-market companies in the United States. The Company has elected to be regulated as a business development company (“BDC”) under the 1940 Act. In addition, for tax purposes, the Company has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). TSLX is managed by TSL Advisers, LLC (the “Adviser”). On June 1, 2011, the Company formed a wholly-owned subsidiary, TC Lending, LLC, a Delaware limited liability company. On March 22, 2012, the Company formed a wholly-owned subsidiary, TPG SL SPV, LLC, a Delaware limited liability company (“TPG SL SPV”). On May 19, 2014, the Company formed a wholly-owned subsidiary, TSL MR, LLC, a Delaware limited liability company.

On March 21, 2014, the Company completed its initial public offering (“IPO”) and the Company’s shares began trading on the New York Stock Exchange (“NYSE”) under the symbol “TSLX.”

Basis of Presentation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and include the accounts of the Company and its subsidiaries. In the opinion of management, all adjustments considered necessary for the fair presentation of the consolidated financial statements for the periods presented, have been included. The results of operations for interim periods are not indicative of results to be expected for the full year. All intercompany balances and transactions have been eliminated in consolidation.

Certain financial information that is normally included in annual financial statements, including certain financial statement footnotes, prepared in accordance with U.S. GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the Securities and Exchange Commission (“SEC”), on February 21, 2018.

The Company is an investment company and, therefore, applies the specialized accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies.

Fiscal Year End

The Company’s fiscal year ends on December 31.

2. Significant Accounting Policies

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 consolidated financial statements. Actual amounts could differ from those estimates and such differences could be material.

Cash and Cash Equivalents

Cash and cash equivalents may consist of demand deposits, highly liquid investments (e.g., money market funds, U.S. Treasury notes, and similar type instruments) with original maturities of three months or less, and restricted cash pledged as collateral. Cash and cash equivalents denominated in U.S. dollars are carried at cost, which approximates fair value. The Company deposits its cash and cash equivalents with highly-rated banking corporations and, at times, cash deposits may exceed the insured limits under applicable law.

Investments at Fair Value

Loan originations are recorded on the date of the binding commitment, which is generally the funding date. Investment transactions purchased through the secondary markets are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses reflects the change in investment values and also includes the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.

Investments for which market quotations are readily available are typically valued at those market quotations. To validate market quotations, the Company utilizes a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available, as is the case for substantially all of our investments, are valued at fair value as determined in good faith by the Company’s Board of Directors (the “Board”), based on, among other things, the input of the Adviser, the Company’s Audit Committee and independent third-party valuation firms engaged at the direction of the Board.

As part of the valuation process, the Board takes into account relevant factors in determining the fair value of its investments, including and in combination of: the estimated enterprise value of a portfolio company (that is, the total value of the portfolio company’s net debt and equity), the nature and realizable value of any collateral, the portfolio company’s ability to make payments based on its earnings and cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company’s securities to any similar publicly traded securities, and overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Board considers whether the pricing indicated by the external event corroborates its valuation.

The Board undertakes a multi-step valuation process, which includes, among other procedures, the following:

•

The valuation process begins with each investment being initially valued by the investment professionals responsible for the portfolio investment in conjunction with the portfolio management team.

•

The Adviser’s management reviews the preliminary valuations with the investment professionals. Agreed upon valuation recommendations are presented to the Audit Committee.

•

The Audit Committee reviews the valuations presented and recommends values for each investment to the Board.

•

The Board reviews the recommended valuations and determines the fair value of each investment; valuations that are not based on readily available market quotations are valued in good faith based on, among other things, the input of the Adviser, Audit Committee and, where applicable, other third parties including independent third-party valuation firms engaged at the direction of the Board.

The Company conducts this valuation process on a quarterly basis.

The Board has engaged independent third-party valuation firms to perform certain limited procedures that the Board has identified and requested them to perform in connection with the valuation process. At June 30, 2018, the independent third-party valuation firms performed their procedures over substantially all of the Company’s investments. Upon completion of such limited procedures, the third-party valuation firms determined that the fair value, as determined by the Board, of those investments subjected to their limited procedures, appeared reasonable.

The Company applies Financial Accounting Standards Board Accounting Standards Codification 820, Fair Value Measurement “ASC 820”, as amended, which establishes a framework for measuring fair value in accordance with U.S. GAAP and required disclosures of fair value measurements. ASC 820 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, the Company considers its principal market to be the market that has the greatest volume and level of activity. ASC 820 specifies a fair value hierarchy that prioritizes and ranks the level of observability of inputs used in determination of fair value. In accordance with ASC 820, these levels are summarized below:

•

Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

•

Level 2—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

•

Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur. In addition to using the above inputs in investment valuations, the Company applies the valuation policy approved by its Board that is consistent with ASC 820. Consistent with the valuation policy, the Company evaluates the source of inputs, including any markets in which its investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. When a security is valued based on prices provided by reputable dealers or pricing services (that is, broker quotes), the Company subjects those prices to various additional criteria in making the determination as to whether a particular investment would qualify for treatment as a Level 2 or Level 3 investment. For example, the Company reviews pricing provided by dealers or pricing services in order to determine if observable market information is being used, versus unobservable inputs. Some additional factors considered include the number of prices obtained as well as an assessment as to their quality, such as the depth of the relevant market relative to the size of the Company’s position.

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 such 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 may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected herein.

Financial and Derivative Instruments

The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not designated as hedging instruments, and as a result the Company presents changes in fair value through current period earnings.

In the normal course of business, the Company has commitments and risks resulting from its investment transactions, which may include those involving derivative instruments. Derivative instruments are measured in terms of the notional contract amount and derive their value based upon one or more underlying instruments. While the notional amount gives some indication of the Company’s derivative activity, it generally is not exchanged, but is only used as the basis on which interest and other payments are exchanged. Derivative instruments are subject to various risks similar to non-derivative instruments including market, credit, liquidity, and operational risks. The Company manages these risks on an aggregate basis as part of its risk management process.

Derivatives, including the Company’s interest rate swaps, for which broker quotes are available are typically valued at those broker quotes.

Offsetting Assets and Liabilities

Foreign currency forward contract and interest rate swap receivables or payables pending settlement are offset, and the net amount is included with receivable or payable for foreign currency forward contracts or interest rate swaps in the consolidated balance sheets when, and only when, they are with the same counterparty, the Company has the legal right to offset the recognized amounts, and it intends to either settle on a net basis or realize the asset and settle the liability simultaneously.

Foreign Currency

Foreign currency amounts are translated into U.S. dollars on the following basis:

•

cash and cash equivalents, market value of investments, outstanding debt on revolving credit facilities, other assets and liabilities: at the spot exchange rate on the last business day of the period; and

•

purchases and sales of investments, borrowings and repayments of such borrowings, income and expenses: at the rates of exchange prevailing on the respective dates of such transactions.

Although net assets and fair values are presented based on the applicable foreign exchange rates described above, the Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in fair values of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. The Company’s current approach to hedging the foreign currency exposure in its non-U.S. dollar denominated investments is primarily to borrow the par amount in local currency under the Company’s Revolving Credit Facility to fund these investments. Fluctuations arising from the translation of foreign currency borrowings are included with the net change in unrealized gains (losses) on translation of assets and liabilities in foreign currencies on the consolidated statements of operations.

Investments denominated in foreign currencies and foreign currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. dollar.

Equity Offering Expenses

The Company records expenses related to equity offerings as a reduction of capital upon completion of an offering of registered securities. The costs associated with renewals of the Company’s shelf registration statement are expensed as incurred.

Debt Issuance Costs

The Company records origination and other expenses related to its debt obligations as deferred financing costs, which are presented as a direct deduction from the carrying value of the related debt liability. These expenses are deferred and amortized using the effective interest method, or straight-line method, over the stated maturity of the obligation.

Interest and Dividend Income Recognition

Interest income is recorded on an accrual basis and includes the amortization of discounts and premiums. Discounts and premiums to par value on securities purchased or originated are amortized into interest income over the contractual life of the respective security using the effective interest method. The amortized cost of investments represents the original cost adjusted for the amortization of discounts and premiums, if any.

Unless providing services in connection with an investment, such as syndication, structuring or diligence, all or a portion of any loan fees received by the Company will be deferred and amortized over the investment’s life using the effective interest method.

Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when management has reasonable doubt that the borrower will pay principal or interest in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest has been paid and, in management’s judgment, the borrower is likely to make principal and interest payments in the future. Management may determine to not place a loan on non-accrual status if, notwithstanding any failure to pay, the loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.

Other Income

From time to time, the Company may receive fees for services provided to portfolio companies by the Adviser. The services that the Adviser provides vary by investment, but may include syndication, structuring, diligence fees, or other service-based fees, and fees for providing managerial assistance to our portfolio companies and are recognized as revenue when earned.

Reimbursement of Transaction-Related Expenses

The Company may receive reimbursement for certain transaction-related expenses in pursuing investments. Transaction-related expenses, which are expected to be reimbursed by third parties, are typically deferred until the transaction is consummated and are recorded in Prepaid expenses and other assets on the date incurred. The transaction-related costs of pursuing investments not otherwise reimbursed are borne by the Company and for successfully completed investments included as a component of the investment’s cost basis. Subsequent to closing, investments are recorded at fair value at each reporting period.

Cash advances received in respect of transaction-related expenses are recorded as cash and cash equivalents with an offset to Other liabilities or Payables to affiliates. Other liabilities or Payables to affiliates are relieved as reimbursable expenses are incurred.

Income Taxes

The Company has elected to be treated as a BDC under the 1940 Act. The Company also has elected to be treated as a RIC under the Internal Revenue Code. So long as the Company maintains its status as a RIC, it will generally not pay corporate-level U.S. federal income or excise taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. As a result, any tax liability related to income earned and distributed by the Company represents obligations of the Company’s stockholders and will not be reflected in the consolidated financial statements of the Company.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.

Dividends to Common Stockholders

The amount to be paid out as a dividend is determined by the Board and is generally based upon the earnings estimated by the Adviser. Net realized long-term capital gains, if any, would generally be distributed at least annually, although the Company may decide to retain such capital gains.

The Company has adopted a dividend reinvestment plan that provides for reinvestment of any dividends declared in cash on behalf of stockholders, unless a stockholder elects to receive cash. As a result, if the Board authorizes, and it declares, a cash dividend, then the stockholders who have not “opted out” of the dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash dividend. The Company expects to use newly issued shares to satisfy the dividend reinvestment plan.

Accounting Standards Adopted in 2018

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09 (“ASU 2014-09”), “Revenue from Contracts with Customers (Topic 606).” The guidance in this ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2014-09 are effective for public companies for interim and annual periods in fiscal years beginning after December 15, 2017, with early adoption permitted for interim and annual periods in fiscal years beginning after December 15, 2016. The Company’s adoption of this guidance did not have a material impact on the Company’s financial position, results of operations, cash flows or notes to the consolidated financial statements.

3. Agreements and Related Party Transactions

Administration Agreement

On March 15, 2011, the Company entered into the Administration Agreement with the Adviser. Under the terms of the Administration Agreement, the Adviser provides administrative services to the Company. These services include providing office space, equipment and office services, maintaining financial records, preparing reports to stockholders and reports filed with the SEC, and managing the payment of expenses and the performance of administrative and professional services rendered by others. Certain of these services are reimbursable to the Adviser under the terms of the Administration Agreement. In addition, the Adviser is permitted to delegate its duties under the Administration Agreement to affiliates or third parties and the Company pays or reimburses the Adviser for certain expenses incurred by any such affiliates or third parties for work done on its behalf.

On February 22, 2017, the Board of Directors of the Company and the Adviser entered into an amended and restated administration agreement (the “Administration Agreement”) reflecting certain clarifications to the agreement to provide greater detail regarding the scope of the reimbursable costs and expenses of the Administrator’s services.

On November 7, 2017, the Board renewed the Administration Agreement. Unless earlier terminated as described below, the Administration Agreement will remain in effect until November 2018, and may be extended subject to required approvals. The Administration Agreement may be terminated by either party without penalty on 60 days’ written notice to the other party.

For the three and six months ended June 30, 2018, the Company incurred expenses of $1.0 million and $1.9 million, respectively, for administrative services payable to the Adviser under the terms of the Administration Agreement. For the three and six months ended June 30, 2017 the Company incurred expenses of $1.0 million and $2.0 million, respectively, for administrative services payable to the Adviser under the terms of the Administration Agreement.

No person who is an officer, director or employee of the Adviser or its affiliates and who serves as a director of the Company receives any compensation from the Company for his or her services as a director. However, the Company reimburses the Adviser (or its affiliates) for an allocable portion of the compensation paid by the Adviser or its affiliates to the Company’s Chief Compliance Officer, Chief Financial Officer, and other professionals who spend time on such related activities (based on the percentage of time those individuals devote, on an estimated basis, to the business and affairs of the Company). Directors who are not affiliated with the Adviser receive compensation for their services and reimbursement of expenses incurred to attend meetings.

Investment Advisory Agreement

On April 15, 2011, the Company entered into the Investment Advisory Agreement with the Adviser. The Investment Advisory Agreement was subsequently amended on December 12, 2011. Under the terms of the Investment Advisory Agreement, the Adviser provides investment advisory services to the Company. The Adviser’s services under the Investment Advisory Agreement are not exclusive, and the Adviser is free to furnish similar or other services to others so long as its services to the Company are not impaired. Under the terms of the Investment Advisory Agreement, the Company will pay the Adviser the Management Fee and may also pay certain Incentive Fees.

The Management Fee is calculated at an annual rate of 1.5% based on the average value of the Company’s gross assets calculated using the values at the end of the two most recently completed calendar quarters, adjusted for any share issuances or repurchases during the period. The Management Fee is payable quarterly in arrears.

For the three and six months ended June 30, 2018, Management Fees (gross of waivers) were $7.3 million and $14.0 million, respectively. For the three and six months ended June 30, 2017, Management Fees (gross of waivers) were $6.0 million and $12.0 million, respectively.

The Adviser has voluntarily waived the Management Fee on our ownership of shares of common stock in Triangle Capital Corp. (the “TCAP Shares”) for any period in which Triangle Capital Corp. remains our portfolio company. As of June 30, 2018, the

Company had fully exited its position in the TCAP Shares.

For the six months ended June 30, 2018, Management Fees of less than $0.1 million were waived consisting solely of Management Fees attributable to the Company’s ownership of the TCAP Shares. The Adviser did not waive any Management Fees for the three months ended June 30, 2018. The Adviser did not waive any Management Fees for the three and six months ended June 30, 2017.

Any waived Management Fees are not subject to recoupment by the Adviser.

The Incentive Fee consists of two parts, as follows:

(i)

The first component, payable at the end of each quarter in arrears, equals 100% of the pre-Incentive Fee net investment income in excess of a 1.5% quarterly “hurdle rate,” the calculation of which is further explained below, until the Adviser has received 17.5% of the total pre-Incentive Fee net investment income for that quarter and, for pre-Incentive Fee net investment income in excess of 1.82% quarterly, 17.5% of all remaining pre-Incentive Fee net investment income for that quarter. The 100% “catch-up” provision for pre-Incentive Fee net investment income in excess of the 1.5% “hurdle rate” is intended to provide the Adviser with an incentive fee of 17.5% on all pre-Incentive Fee net investment income when that amount equals 1.82% in a quarter (7.28% annualized), which is the rate at which catch-up is achieved. Once the “hurdle rate” is reached and catch-up is achieved, 17.5% of any pre-Incentive Fee net investment income in excess of 1.82% in any quarter is payable to the Adviser.

Pre-Incentive Fee net investment income means dividends, interest and fee income accrued by the Company during the calendar quarter, minus the Company’s operating expenses for the quarter (including the Management Fee, expenses payable under the Administration Agreement to the Administrator, 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 pay-in-kind interest and zero coupon securities), accrued income that the Company may not have received in cash. Pre-Incentive Fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital gains or losses.

(ii)

The second component, payable at the end of each fiscal year in arrears, equaled 15% through March 31, 2014 and, beginning April 1, 2014, equals a weighted percentage of cumulative realized capital gains from the Company’s inception to the end of

that fiscal year, less cumulative realized capital losses and unrealized capital losses. This component of the Incentive Fee is referred to as the Capital Gains Fee. Each year, the fee paid for this component of the Incentive Fee is net of the aggregate amount of any previously paid Capital Gains Fee for prior periods. For capital gains that accrue following March 31, 2014, the Incentive Fee rate is 17.5%. The Company accrues, but does not pay, a capital gains Incentive Fee with respect to unrealized capital gains because a capital gains Incentive Fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain. The weighted percentage is intended to ensure that for each fiscal year following the completion of the IPO, the portion of the Company’s realized capital gains that accrued prior to March 31, 2014, is subject to an incentive fee rate of 15% and the portion of the Company’s realized capital gains that accrued beginning April 1, 2014 is subject to an incentive fee rate of 17.5%.

For purposes of determining whether pre-Incentive Fee net investment income exceeds the hurdle rate, pre-Incentive Fee net investment income is expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter.

Section 205(b)(3) of the Investment Advisers Act of 1940, as amended, prohibits the Adviser from receiving the payment of fees on unrealized gains until those gains are realized, if ever. There can be no assurance that such unrealized gains will be realized in the future.

For the three and six months ended June 30, 2018, Incentive Fees (gross of waivers) were $7.7 million and $14.3 million, respectively, all of which were realized and payable to the Adviser. For the three and six months ended June 30, 2017 Incentive Fees (gross of waivers) were $7.2 million and $13.2 million, respectively, all of which were realized and payable to the Adviser.

The Adviser has voluntarily waived the Incentive Fees attributable to pre-Incentive Fee net investment income accrued by the Company as a result of its ownership of the TCAP Shares for any period in which Triangle Capital Corp. remains the Company’s portfolio company. The Adviser has not waived any part of the Capital Gains Fee attributable to the Company’s ownership of the TCAP Shares and, accordingly, any realized capital gains or losses and unrealized capital losses with respect to the TCAP Shares will be applied against the Company’s cumulative realized capital gains on which the Capital Gains Fee is calculated.

For the six months ended June 30, 2018, Incentive Fees of less than $0.1 million were waived, consisting solely of Incentive Fees attributable to the Company’s ownership of the TCAP Shares. The Adviser did not waive any Incentive Fees for the three months ended June 30, 2018. The Adviser did not waive any Incentive Fees for the three and six months ended June 30, 2017.

Any waived Incentive Fees are not subject to recoupment by the Adviser.

Since the Company’s IPO, with the exception of its waiver of Management Fees and certain Incentive Fees attributable to the Company’s ownership of certain investments, including the TCAP Shares, the Adviser has not waived its right to receive any Management Fees or Incentive Fees payable pursuant to the Investment Advisory Agreement.

In November 2017, the Board renewed the Investment Advisory Agreement. Unless earlier terminated as described below, the Investment Advisory Agreement will remain in effect until November 2018, and may be extended subject to required approvals. The Investment Advisory Agreement will automatically terminate in the event of an assignment and may be terminated by either party without penalty upon 60 days’ written notice to the other party.

From time to time, the Adviser may pay amounts owed by the Company to third-party providers of goods or services, including the Board, and the Company will subsequently reimburse the Adviser for such amounts paid on its behalf. Amounts payable to the Adviser are settled in the normal course of business without formal payment terms.

4. Investments at Fair Value

Under the 1940 Act, the Company is required to separately identify non-controlled investments where it owns 5% or more of a portfolio company’s outstanding voting securities as investments in “affiliated” companies. In addition, under the 1940 Act, the Company is required to separately identify investments where it owns more than 25% of a portfolio company’s outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company as investments in “controlled” companies. Detailed information with respect to the Company’s non-controlled, non-affiliated; non-controlled, affiliated; and controlled affiliated investments is contained in the accompanying consolidated financial statements, including the consolidated schedules of investments. The information in the tables below is presented on an aggregate portfolio basis, without regard to whether they are non-controlled non-affiliated, non-controlled affiliated or controlled affiliated investments.

Investments at fair value consisted of the following at June 30, 2018 and December 31, 2017:

	June 30, 2018
	Amortized Cost ⁽¹⁾		Fair Value		Net Unrealized Gain (Loss)
First-lien debt investments	$	1,817,866	$	1,833,633	$	15,767
Second-lien debt investments		62,962		61,331		(1,631	)
Equity and other investments		58,480		60,118		1,638
Total Investments	$	1,939,308	$	1,955,082	$	15,774

	December 31, 2017
	Amortized Cost ⁽¹⁾		Fair Value		Net Unrealized Gain (Loss)
First-lien debt investments	$	1,561,275	$	1,581,355	$	20,080
Second-lien debt investments		62,962		60,900		(2,062	)
Equity and other investments		62,013		51,468		(10,545	)
Total Investments	$	1,686,250	$	1,693,723	$	7,473

(1)	The amortized cost represents the original cost adjusted for the amortization of discounts or premiums, as applicable, on debt investments using the effective interest method.

The industry composition of investments at fair value at June 30, 2018 and December 31, 2017 is as follows:

	June 30, 2018			December 31, 2017
Automotive	—				1.8	%
Beverage, food and tobacco		4.0	%		4.5	%
Business services		18.3	%		13.8	%
Chemicals		0.6	%		0.7	%
Communications	—				6.7	%
Education		10.5	%		8.8	%
Financial services		15.7	%		14.0	%
Healthcare		10.5	%		12.6	%
Hotel, gaming, and leisure		1.8	%		2.1	%
Human resource support services		1.7	%	—
Insurance		3.3	%		3.8	%
Internet services		4.4	%		2.9	%
Manufacturing		2.9	%		3.3	%
Marketing services		3.7	%		3.6	%
Office products		1.0	%		1.2	%
Oil, gas and consumable fuels		6.1	%		5.5	%
Pharmaceuticals		5.7	%		8.2	%
Retail and consumer products		5.6	%		6.5	%
Transportation		4.2	%	—
Total		100.0	%		100.0	%

The geographic composition of Investments at fair value at June 30, 2018 and December 31, 2017 is as follows:

	June 30, 2018			December 31, 2017
United States
Midwest		16.1	%		10.0	%
Northeast		26.4	%		22.9	%
South		17.1	%		21.6	%
West		36.5	%		40.6	%
Canada		—			2.0	%
Europe		2.2	%		2.9	%
Australia		1.7	%		—
Total		100.0	%		100.0	%

5. Derivatives

Interest Rate Swaps

In January 2015, in connection with its 2019 Convertible Notes, the Company entered into two interest rate swap transactions, each with a $57.5 million notional amount. The Company receives fixed rate interest at 4.50% and pays variable rate interest based on the three-month LIBOR plus 2.86%. The swap transactions mature on December 15, 2019.

In November 2015, in connection with a fixed rate investment, the Company entered into two interest rate swap transactions, each with a $46.3 million notional amount. The Company receives three-month LIBOR and pays fixed rate interest at 1.16%. The swap transactions mature on October 5, 2018.

In January 2017, in connection with a fixed rate investment, the Company entered into an interest rate swap transaction with a $33.3 million notional amount. On a net basis, the Company receives three-month LIBOR and pays fixed rate interest at 1.72%. The swap transaction matures on January 10, 2020.

In February 2017, in connection with the issuance of the 2022 Convertible Notes, the Company entered into an interest rate swap transaction with a $115.0 million notional amount. The Company receives fixed rate interest at 4.50% and pays variable rate interest based on three-month LIBOR plus 2.37%. The swap transaction matures on August 1, 2022.

In January 2018, in connection with the issuance of the 2023 Notes, the Company entered into an interest rate swap transaction with a $150.0 million notional amount. The Company receives fixed rate interest at 4.50% and pays variable rate interest based on three-month LIBOR plus 1.99%. The swap transaction matures on January 22, 2023.

In June 2018, in connection with the reopening and issuance of additional 2022 Convertible Notes, the Company entered into two interest rate swap transactions with notional amounts of $50.0 million and $7.5 million, respectively. The Company receives fixed rate interest on each swap at 4.50%, and pays variable rate interest based on three-month LIBOR plus 1.59%, and 1.60%, respectively. The swap transactions mature on August 1, 2022.

The following tables present the gross and net information on the Company’s interest rate swap transactions that are eligible for offset in the Company’s consolidated balance sheets as of June 30, 2018 and December 31, 2017.

	June 30, 2018
	Maturity Date	Notional Amount		Gross Amount of Recognized Asset (Liability)			Gross Amount Offset in the Consolidated Balance Sheets			Net Amount of Assets in the Consolidated Balance Sheets
Interest rate swap ⁽¹⁾	10/5/2018	$	92,500	$	526		$	(526	)	$	—
Interest rate swap	12/15/2019		115,000		(1,874	)		1,874		—
Interest rate swap	1/10/2020		33,333		559			(559	)	—
Interest rate swap	8/1/2022		115,000		(3,503	)		3,503		—
Interest rate swap	8/1/2022		50,000		11			(11	)	—
Interest rate swap	8/1/2022		7,500		(1	)		1		—
Interest rate swap	1/22/2023		150,000		(2,659	)		2,659		—
Total		$	563,333	$	(6,941	)	$	6,941		$	—

	December 31, 2017
	Maturity Date	Notional Amount		Gross Amount of Recognized Assets			Gross Amount Offset in the Consolidated Balance Sheets			Net Amount of Assets in the Consolidated Balance Sheets
Interest rate swap ⁽¹⁾	10/5/2018	$	92,500	$	480		$	(480	)	$	—
Interest rate swap	12/15/2019		115,000		(1,024	)		1,024		—
Interest rate swap	1/10/2020		33,333		292			(292	)	—
Interest rate swap	8/1/2022		115,000		(710	)		710		—
Total		$	355,833	$	(962	)	$	962		$	—

(1)	The notional amount of certain interest rate swaps may exceed the Company’s investment in individual portfolio companies as a result of arrangements with other lenders in the syndicate.

The following tables present the amounts paid and received on the Company’s interest rate swap transactions for the three and six months ended June 30, 2018 and 2017.

				For the Three Months Ended June 30, 2018								For the Six Months Ended June 30, 2018
	Maturity Date	Notional Amount		Paid			Received		Net			Paid			Received		Net
Interest rate swap ⁽¹⁾	10/5/2018	$	92,500	$	(269	)	$	398	$	129		$	(544	)	$	719	$	175
Interest rate swap	12/15/2019		115,000		(1,465	)		1,294		(171	)		(2,744	)		2,588		(156	)
Interest rate swap	1/10/2020		33,333		(698	)		748		50			(1,396	)		1,434		38
Interest rate swap	8/1/2022		115,000		(1,374	)		1,294		(80	)		(2,542	)		2,588		46
Interest rate swap	8/1/2022		50,000		(50	)		63		13			(50	)		63		13
Interest rate swap	8/1/2022		7,500	—			—			—		—			—			—
Interest rate swap	1/22/2023		150,000		(1,647	)		1,688		41			(2,651	)		2,944		293
Total		$	563,333	$	(5,503	)	$	5,485	$	(18	)	$	(9,927	)	$	10,336	$	409

				For the Three Months Ended June 30, 2017								For the Six Months Ended June 30, 2017
	Maturity Date	Notional Amount		Paid			Received		Net			Paid			Received		Net
Interest rate swap ⁽¹⁾	10/5/2018	$	92,500	$	(269	)	$	237	$	(32	)	$	(538	)	$	439	$	(99	)
Interest rate swap	12/15/2019		115,000		(1,173	)		1,294		121			(2,272	)		2,588		316
Interest rate swap	1/10/2020		33,333		(698	)		663		(35	)		(1,202	)		1,107		(95	)
Interest rate swap	8/1/2022		115,000		(968	)	—			(968	)		(968	)	—			(968	)
Total		$	355,833	$	(3,108	)	$	2,194	$	(914	)	$	(4,980	)	$	4,134	$	(846	)

(1)	The notional amount of certain interest rate swaps may exceed the Company’s investment in individual portfolio companies as a result of arrangements with other lenders in the syndicate.

For the three and six months ended June 30, 2018, the Company recognized $1.8 million and $6.0 million of net change in unrealized losses, respectively, on interest rate swaps in the consolidated statement of operations related to the swap transactions. For the three and six months ended June 30, 2017 the Company recognized $2.1 million and $2.3 million, respectively, of net change in unrealized gains on interest rate swaps in the consolidated statement of operations related to the swap transactions.

As of June 30, 2018 and December 31, 2017, the swap transactions had a fair value of $(6.9) million and $(1.0) million, respectively, which is netted against restricted cash collateral on the Company’s consolidated balance sheet.

The Company is required under the terms of its derivatives agreements to pledge assets as collateral to secure its obligations under the derivatives. The amount of collateral required varies over time based on the mark-to-market value, notional amount and remaining term of the derivatives, and may exceed the amount owed by the Company on a mark-to-market basis. Any failure by the Company to fulfill any collateral requirement (e.g., a so-called “margin call”) may result in a default. In the event of a default by a counterparty, the Company would be an unsecured creditor to the extent of any such overcollateralization.

As of June 30, 2018, $14.1 million of cash is pledged as collateral under the Company’s derivative instruments and $7.2 million is included in restricted cash as a component of cash and cash equivalents on the Company’s consolidated balance sheet. The Company had $4.1 million of cash collateral posted as of December 31, 2017, of which $3.2 million is included in restricted cash as a component of cash and cash equivalents on the Company’s consolidated balance sheet.

The Company may enter into other derivative instruments and incur other exposures with the same or other counterparties in the future.

6. Fair Value of Financial Instruments

Investments

The following tables present fair value measurements of investments as of June 30, 2018 and December 31, 2017:

	Fair Value Hierarchy at June 30, 2018
	Level 1		Level 2			Level 3		Total
First-lien debt investments	$	—	$	17,448		$	1,816,185	$	1,833,633
Second-lien debt investments		—		—			61,331		61,331
Equity and other investments		4,102		—			56,016		60,118
Total investments at fair value	$	4,102	$	17,448		$	1,933,532	$	1,955,082
Interest rate swaps		—		(6,941	)		—		(6,941	)
Total	$	4,102	$	10,507		$	1,933,532	$	1,948,141

	Fair Value Hierarchy at December 31, 2017
	Level 1		Level 2			Level 3		Total
First-lien debt investments	$	—	$	17,383		$	1,563,972	$	1,581,355
Second-lien debt investments		—		—			60,900		60,900
Equity and other investments		13,146		—			38,322		51,468
Total investments at fair value	$	13,146	$	17,383		$	1,663,194	$	1,693,723
Interest rate swaps		—		(962	)		—		(962	)
Total	$	13,146	$	16,421		$	1,663,194	$	1,692,761

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur.

The following tables present the changes in the fair value of investments for which Level 3 inputs were used to determine the fair value as of and for the three and six months ended June 30, 2018:

	As of and for the Three Months Ended
	June 30, 2018
	First-lien debt investments			Second-lien debt investments			Equity and other investments		Total
Balance, beginning of period	$	1,785,527		$	61,364		$	42,555	$	1,889,446
Purchases or originations		227,627			—			4,140		231,767
Repayments / redemptions		(188,528	)		—			—		(188,528	)
Paid-in-kind interest		1,585			—			—		1,585
Net change in unrealized gains (losses)		(5,630	)		(33	)		7,110		1,447
Net realized losses		(9,572	)		—			—		(9,572	)
Net amortization of discount on securities		7,387			—			—		7,387
Transfers within Level 3		(2,211	)		—			2,211		—
Transfers into (out of) Level 3		—			—			—		—
Balance, End of Period	$	1,816,185		$	61,331		$	56,016	$	1,933,532

	As of and for the Six Months Ended
	June 30, 2018
	First-lien			Second-lien		Equity
	debt			debt		and other
	investments			investments		investments			Total
Balance, beginning of period	$	1,563,972		$	60,900	$	38,322		$	1,663,194
Purchases or originations		544,397			—		6,614			551,011
Repayments / redemptions		(289,617	)		—		(1,379	)		(290,996	)
Paid-in-kind interest		2,578			—		—			2,578
Net change in unrealized gains (losses)		(4,318	)		431		9,746			5,859
Net realized gains (losses)		(9,513	)		—		502			(9,011	)
Net amortization of discount on securities		10,897			—		—			10,897
Transfers within Level 3		(2,211	)		—		2,211			—
Transfers into (out of) Level 3		—			—		—			—
Balance, End of Period	$	1,816,185		$	61,331	$	56,016		$	1,933,532

The following tables present the changes in the fair value of investments for which Level 3 inputs were used to determine the fair value as of and for the three and six months ended June 30, 2017:

	As of and for the Three Months Ended
	June 30, 2017
	First-lien debt investments			Second-lien debt investments			Equity and other investments			Total
Balance, beginning of period	$	1,436,641		$	3,358		$	14,262		$	1,454,261
Purchases or originations		234,958			—			13,502			248,460
Repayments / redemptions		(214,977	)		—			(2,472	)		(217,449	)
Paid-in-kind interest		1,572			—			—			1,572
Net change in unrealized gains (losses)		21,066			(2,070	)		3,301			22,297
Net realized gains (losses)		(21,134	)		—			2,108			(19,026	)
Net amortization of discount on securities		3,831			—			—			3,831
Transfers within Level 3		(67,775	)		59,621			8,154			—
Transfers into (out of) Level 3		—			—			—			—
Balance, End of Period	$	1,394,182		$	60,909		$	38,855		$	1,493,946

	As of and for the Six Months Ended
	June 30, 2017
	First-lien			Second-lien			Equity
	debt			debt			and other
	investments			investments			investments			Total
Balance, beginning of period	$	1,454,087		$	3,350		$	12,465		$	1,469,902
Purchases or originations		398,584			—			13,501			412,085
Repayments / redemptions		(403,320	)		—			(2,472	)		(405,792	)
Paid-in-kind interest		3,452			—			—			3,452
Net change in unrealized gains (losses)		17,774			(2,062	)		5,098			20,810
Net realized gains (losses)		(21,207	)		—			2,109			(19,098	)
Net amortization of discount on securities		12,587			—			—			12,587
Transfers within Level 3		(67,775	)		59,621			8,154
Transfers into (out of) Level 3		—			—			—			—
Balance, End of Period	$	1,394,182		$	60,909		$	38,855		$	1,493,946

The following tables present information with respect to the net change in unrealized gains or losses on investments for which Level 3 inputs were used in determining fair value that are still held by the Company at June 30, 2018 and 2017:

	Net Change in Unrealized			Net Change in Unrealized
	Gains or (Losses)			Gains or (Losses)
	for the Three Months Ended			for the Three Months Ended
	June 30, 2018 on			June 30, 2017 on
	Investments Held at			Investments Held at
	June 30, 2018			June 30, 2017
First-lien debt investments	$	(2,037	)	$	1,513
Second-lien debt investments		(33	)		(2,070	)
Equity and other investments		7,109			(4,992	)
Total	$	5,039		$	(5,549	)

	Net Change in Unrealized		Net Change in Unrealized
	Gains or (Losses)		Gains or (Losses)
	for the Six Months Ended		for the Six Months Ended
	June 30, 2018 on		June 30, 2017 on
	Investments Held at		Investments Held at
	June 30, 2018		June 30, 2017
First-lien debt investments	$	2,732	$	8,846
Second-lien debt investments		430		(2,062	)
Equity and other investments		10,206		(3,255	)
Total	$	13,368	$	3,529

The following tables present the fair value of Level 3 Investments at fair value and the significant unobservable inputs used in the valuations as of June 30, 2018 and December 31, 2017. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values.

June 30, 2018

Valuation

Unobservable

Range (Weighted

Impact to Valuation from an

Fair Value

Technique

Input

Average)

Increase to Input

First-lien debt investments

1,816,185

Income approach ⁽¹⁾

Market yield

6.0% — 14.4% (10.5%)

Decrease

Second-lien debt investments

61,331

Income approach

Market yield

13.5% — 14.5% (13.6%)

Decrease

Equity and other investments

56,016

Market Multiple ⁽²⁾

Comparable multiple

4.6x — 13.2x (11.0x)

Increase

Total

1,933,532

(1)	Includes $34.9 million of first-lien debt investments which were valued using an enterprise valuation waterfall and $72.7 million of first-lien debt investments which, due to the proximity of the transactions relative to the measurement date, were valued using the cost of the investments.

(2)	Includes $29.2 million of equity investments which were valued using a weighted valuation approach and $3.8 million of equity investments which due to the proximity of the transactions relative to the measurement date were valued using the cost of the investments.

December 31, 2017

Valuation

Unobservable

Range (Weighted

Impact to Valuation from an

Fair Value

Technique

Input

Average)

Increase to Input

First-lien debt investments

1,563,972

Income approach ⁽¹⁾

Market yield

7.3% — 14.6% (10.2%)

Decrease

Second-lien debt investments

60,900

Income approach

Market yield

12.9% — 14.0% (13.0%)

Decrease

Equity and other investments

38,322

Market Multiple ⁽²⁾

Comparable multiple

4.6x — 13.2x (11.2x)

Increase

Total

1,663,194

(1)	Includes $34.6 million of first-lien debt investments which were valued using an asset valuation waterfall.

(2)	Includes $18.6 million of equity investments which were valued using a weighted valuation approach.

The Company typically determines the fair value of its performing Level 3 debt investments utilizing a yield analysis. In a yield analysis, a price is ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to the expected life, portfolio company performance since close, and other terms and risks associated with an investment. Among other factors, a determinant of risk is the amount of leverage used by the portfolio company relative to the total enterprise value of the company, and the rights and remedies of our investment within each portfolio company’s capital structure.

Significant unobservable quantitative inputs typically considered in the fair value measurement of the Company’s Level 3 debt investments primarily include current market yields, including relevant market indices, but may also include quotes from brokers, dealers, and pricing services as indicated by comparable investments. If debt investments are credit impaired, an enterprise value analysis may be used to value such debt investments; however, in addition to the methods outlined above, other methods such as a liquidation or wind-down analysis may be utilized to estimate enterprise value. For the Company’s Level 3 equity investments, multiples of similar companies’ revenues, earnings before income taxes, depreciation and amortization (“EBITDA”) or some combination thereof and comparable market transactions are typically used.

Financial Instruments Not Carried at Fair Value

Debt

The fair value of the Company’s Revolving Credit Facility, which is categorized as Level 3 within the fair value hierarchy, as of June 30, 2018, approximates its carrying value as the outstanding balance is callable at carrying value. The fair value of the Company’s Convertible Notes (consisting of the 2019 Convertible Notes and the 2022 Convertible Notes) and 2023 Notes, which are categorized as Level 2 within the fair value hierarchy, as of June 30, 2018, was $434.4 million, based on broker quotes received by the Company.

Other Financial Assets and Liabilities

The carrying amounts of the Company’s assets and liabilities, other than investments at fair value and Convertible Notes and 2023 Notes, approximate fair value due to their short maturities or their close proximity of the originations to the measurement date. Under the fair value hierarchy, cash and cash equivalents are classified as Level 1 while the Company’s other assets and liabilities, other than investments at fair value and Revolving Credit Facility, are classified as Level 2.

7. Debt

In accordance with the 1940 Act, with certain limitations, the Company is allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 200% after such borrowing. As of June 30, 2018 and December 31, 2017, the Company’s asset coverage was 221.4% and 235.5%, respectively.

Debt obligations consisted of the following as of June 30, 2018 and December 31, 2017:

	June 30, 2018
	Aggregate Principal Amount Committed		Outstanding Principal		Amount Available ⁽¹⁾		Carrying Value ⁽²⁾
Revolving Credit Facility	$	940,000	$	439,380	$	500,620	$	430,472
2019 Convertible Notes		115,000		115,000		—		112,887
2022 Convertible Notes		172,500		172,500		—		167,685
2023 Notes		150,000		150,000		—		147,142
Total Debt	$	1,377,500	$	876,880	$	500,620	$	858,186

(1)	The amount available reflects any limitations related to the respective debt facilities’ borrowing bases.

(2)	The carrying values of the Company’s Revolving Credit Facility, Convertible Notes, and 2023 Notes are presented net of deferred financing costs of $8.9 million, $5.0 million and $2.8 million, respectively.

	December 31, 2017
	Aggregate Principal Amount Committed		Outstanding Principal		Amount Available ⁽¹⁾		Carrying Value ⁽²⁾
Revolving Credit Facility	$	975,000	$	486,808	$	488,192	$	479,724
2019 Convertible Notes		115,000		115,000		—		112,182
2022 Convertible Notes		115,000		115,000		—		111,522
Total Debt	$	1,205,000	$	716,808	$	488,192	$	703,428

(1)	The amount available reflects any limitations related to the respective debt facilities’ borrowing bases.

(2)	The carrying values of the Company’s Revolving Credit Facility and Convertible Notes are presented net of deferred financing costs of $7.1 million and $4.7 million, respectively.

For the three and six months ended June 30, 2018 and 2017, the components of interest expense were as follows:

	Three Months Ended						Six Months Ended
	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Interest expense	$	9,379		$	5,336		$	17,337		$	11,024
Commitment fees		349			558			804			972
Amortization of deferred financing costs		999			806			1,870			1,541
Accretion of original issue discount		236			168			414			330
Swap settlement ⁽¹⁾		198			787			(194	)		653
Total Interest Expense	$	11,161		$	7,655		$	20,231		$	14,520
Average debt outstanding (in millions)	$	938.7		$	539.5		$	883.1		$	646.1
Weighted average interest rate		4.08	%		4.13	%		3.88	%		3.61	%
Average 1-month LIBOR rate		1.97	%		1.06	%		1.81	%		0.94	%

(1)	Includes the settlement of the interest rate swaps related to the Company’s Convertible Notes, and 2023 Notes.

Revolving Credit Facility

On August 23, 2012, the Company entered into a senior secured revolving credit agreement with SunTrust Bank, as administrative agent, and J.P. Morgan Chase Bank, N.A., as syndication agent, and certain other lenders (as amended and restated, the “Revolving Credit Facility”).

As of June 30, 2018, aggregate commitments under the facility were $940 million. The facility includes an uncommitted accordion feature that allows the Company, under certain circumstances, to increase the size of the facility to up to $1.25 billion.

The revolving period, during which period the Company, subject to certain conditions, may make borrowings under the facility, ends February 18, 2022 and the stated maturity date is February 17, 2023.

The Company may borrow amounts in U.S. dollars or certain other permitted currencies. As of June 30, 2018, the Company had outstanding debt denominated in Australian Dollars (AUD) of 46.4 million and Euro (EUR) of 57.1 million on its Revolving Credit Facility, included in the Outstanding Principal amount in the table above.

The Revolving Credit Facility also provides for the issuance of letters of credit up to an aggregate amount of $75 million. As of June 30, 2018 and December 31, 2017, the Company had no outstanding letters of credit issued through the Revolving Credit Facility. The amount available for borrowing under the Revolving Credit Facility is reduced by any letters of credit issued through the Revolving Credit Facility.

Amounts drawn under the Revolving Credit Facility, including amounts drawn in respect of letters of credit, bear interest at either LIBOR plus a margin of either 1.75% or 1.875%, or the base rate plus a margin of either 0.75% or 0.875%, in each case, based on the total amount of the borrowing base relative to the sum of the total commitments (or, if greater, the total exposure) under the Revolving Credit Facility plus certain other designated secured debt. The Company may elect either the LIBOR or base rate at the time of drawdown, and loans may be converted from one rate to another at any time, subject to certain conditions. The Company also pays a fee of 0.375% on undrawn amounts and, in respect of each undrawn letter of credit, a fee and interest rate equal to the then applicable margin while the letter of credit is outstanding.

The Revolving Credit Facility is guaranteed by TPG SL SPV, LLC, TC Lending, LLC and TSL MR, LLC and may be guaranteed by certain domestic subsidiaries in the future. The Revolving Credit Facility is secured by a perfected first-priority security interest in substantially all the portfolio investments held by the Company and each guarantor. Proceeds from borrowings may be used for general corporate purposes, including the funding of portfolio investments.

The Revolving Credit Facility includes customary events of default, as well as customary covenants, including restrictions on certain distributions and financial covenants requiring:

•

an asset coverage ratio of no less than 2 to 1 on the last day of any fiscal quarter;

•

a liquidity test under which the Company must not maintain cash and liquid investments of less than 10% of the covered debt amount for more than 30 consecutive business days under circumstances where the Company’s adjusted covered debt balance is greater than 90% of the Company’s adjusted borrowing base under the facility; and

•

stockholders’ equity of at least $500 million plus 25% of the net proceeds of the sale of equity interests after February 20, 2018.

Net proceeds received from the Company’s common stock issuance in March 2018 and net proceeds received from the issuance of the additional 2022 Convertible Notes and 2023 Notes were used to pay down borrowings on the Revolving Credit Facility.

2019 Convertible Notes

In June 2014, the Company issued in a private offering $115 million aggregate principal amount convertible notes due December 2019 (the “2019 Convertible Notes”). The 2019 Convertible Notes were issued in a private placement only to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2019 Convertible Notes are unsecured, and bear interest at a rate of 4.50% per year, payable semiannually. The 2019 Convertible Notes will mature on December 15, 2019. In certain circumstances, the 2019 Convertible Notes will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, at an initial conversion rate of 38.7162 shares of common stock per $1,000 principal amount of 2019 Convertible Notes, which is equivalent to an initial conversion price of approximately $25.83 per share of the Company’s common stock, subject to customary anti-dilution adjustments. As of June 30, 2018, the estimated adjusted conversion price was approximately $25.26 per share of the Company’s common stock. The sale of the 2019 Convertible Notes generated net proceeds of approximately $110.8 million. The Company used the net proceeds of the offering to pay down debt under the Revolving Credit Facility. In connection with the offering of 2019 Convertible Notes, the Company has entered into interest rate swaps to continue to align the interest rates of its liabilities with its investment portfolio, which consists of predominately floating rate loans. As a result of the swaps, the Company’s effective interest rate on the 2019 Convertible Notes is three-month LIBOR plus 2.86%. See Note 5 for further information related to the Company’s interest rate swaps.

Holders may convert their 2019 Convertible Notes at their option at any time prior to June 15, 2019 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2014 (and only during

such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the indenture governing the 2019 Convertible Notes) per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after June 15, 2019 until the close of business on the scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the occurrence or nonoccurrence of any of the foregoing circumstances.

2022 Convertible Notes

In February 2017, the Company issued in a private offering $115 million aggregate principal amount convertible notes due August 2022 (the “2022 Convertible Notes” and, together with the 2019 Convertible Notes, the “Convertible Notes”). The 2022 Convertible Notes were issued in a private placement only to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2022 Convertible Notes are unsecured, and bear interest at a rate of 4.50% per year, payable semiannually. The 2022 Convertible Notes will mature on August 1, 2022. In certain circumstances, the 2022 Convertible Notes will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, at an initial conversion rate of 46.8516 shares of common stock per $1,000 principal amount of 2022 Convertible Notes, which is equivalent to an initial conversion price of approximately $21.34 per share of the Company’s common stock, subject to customary anti-dilution adjustments. As of June 30, 2018, the estimated adjusted conversion price was approximately $21.05 per share of the Company’s common stock. The sale of the 2022 Convertible Notes generated net proceeds of approximately $111.2 million. The Company used the net proceeds of the offering to pay down debt under the Revolving Credit Facility. In connection with the offering of 2022 Convertible Notes, the Company has entered into an interest rate swap to continue to align the interest rates of its liabilities with its investment portfolio, which consists of predominately floating rate loans. As a result of the swap, the Company’s effective interest rate on the original issuance of 2022 Convertible Notes is three-month LIBOR plus 2.37%. See Note 5 for further information related to the Company’s interest rate swaps.

In June 2018, the Company issued an additional $57.5 million aggregate principal amount of 2022 Convertible Notes. The additional Convertible Notes were issued with identical terms, and are fungible with and are part of a single series with the previously outstanding $115 million aggregate principal amount of the Company’s existing 2022 Convertible Notes issued in February 2017. In connection with the reopening of the 2022 Convertible Notes, the Company has entered into interest rate swaps to continue to align the interest rates of its liabilities with its investment portfolio, which consists of predominantly floating rate loans. As a result of the additional swaps, the Company’s effective interest rate on the additional 2022 Convertible Notes is approximately three-month LIBOR plus 1.60%. See Note 5 for further information related to the Company’s interest rate swaps.

Holders may convert their 2022 Convertible Notes at their option at any time prior to February 1, 2022 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2017 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the indenture governing the 2022 Convertible Notes) per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after February 1, 2022 until the close of business on the scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the occurrence or nonoccurrence of any of the foregoing circumstances.

The Convertible Notes are the Company’s unsecured obligations and rank senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the Convertible Notes; equal in right of payment to the Company’s existing and future indebtedness that is not so subordinated; effectively junior in right of payment 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 (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

For the three and six months ended June 30, 2018 and 2017, the components of interest expense related to the Convertible Notes were as follows:

	Three Months Ended				Six Months Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Interest expense	$	2,657	$	2,587	$	5,245	$	4,744
Accretion of original issue discount		234		168		410		330
Amortization of deferred financing costs		373		367		734		669
Total Interest Expense	$	3,264	$	3,122	$	6,389	$	5,743

Total interest expense in the table above does not include the effect of the interest rate swaps related to the Convertible Notes. During the three and six months ended June 30, 2018, the Company received $2.6 million and $5.2 million, respectively, and paid $2.9 million and $5.3 million, respectively, related to the settlements of its interest rate swaps related to the Convertible Notes. During the three and six months ended June 30, 2017, the Company received $1.3 million and $2.6 million, respectively, and paid $2.1 million and $3.2 million, respectively, related to the settlements of its interest rate swaps related to the Convertible Notes. These net amounts are included in interest expense in the Company’s consolidated statements of operations. Please see Note 5 for further information about the Company’s interest rate swaps.

As of June 30, 2018, the principal amount of the Convertible Notes exceeded the value of the underlying shares multiplied by the per share closing price of the Company’s common stock.

As of June 30, 2018, the components of the carrying value of the Convertible Notes and the stated interest rate were as follows:

	June 30, 2018
	2019			2022
	Convertible Notes			Convertible Notes
Principal amount of debt	$	115,000		$	172,500
Original issue discount, net of accretion		(986	)		(936	)
Deferred financing costs		(1,127	)		(3,879	)
Carrying value of debt	$	112,887		$	167,685
Stated interest rate		4.50	%		4.50	%

	December 31, 2017
	2019			2022
	Convertible Notes			Convertible Notes
Principal amount of debt	$	115,000		$	115,000
Original issue discount, net of accretion		(1,308	)		(302	)
Deferred financing costs		(1,510	)		(3,176	)
Carrying value of debt	$	112,182		$	111,522
Stated interest rate		4.50	%		4.50	%

The stated interest rate in the table above does not include the effect of the interest rate swaps. The Company’s swap-adjusted interest rate on the Convertible Notes is three month LIBOR plus 2.86% for the 2019 Convertible Notes, and three month LIBOR plus 2.11% (on a weighted average basis) for the 2022 Convertible Notes. Please see Note 5 for further information about the Company’s interest rate swaps.

The indentures governing the Convertible Notes contain certain covenants, including covenants requiring the Company to comply with the applicable asset coverage ratio requirement under the 1940 Act and to provide financial information to the holders of the Convertible Notes under certain circumstances. These covenants are subject to important limitations and exceptions that are described in the indentures governing the Convertible Notes. As of June 30, 2018, the Company was in compliance with the terms of each of the indentures governing the Convertible Notes.

The Convertible Notes are accounted for in accordance with Accounting Standards Codification (“ASC”) 470-20. Upon conversion of any of the Convertible Notes, the Company intends to pay the outstanding principal amount in cash and, to the extent that the

conversion value exceeds the principal amount, the Company has the option to pay in cash or shares of the Company’s common stock (or a combination of cash and shares) in respect of the excess amount, subject to the requirements of the indentures governing the Convertible Notes. The Company has determined that the embedded conversion options in each series of Convertible Notes are not required to be separately accounted for as a derivative under U.S. GAAP. In accounting for the Convertible Notes, the Company estimated at the time of issuance separate debt and equity components of each series of Convertible Notes. An original issue discount equal to the equity components of each series of Convertible Notes was recorded in “additional paid-in capital” in the accompanying consolidated balance sheet. Additionally, the issuance costs associated with the Convertible Notes were allocated to the debt and equity components in proportion to the allocation of the proceeds and accounted for as deferred financing costs and equity issuance costs, respectively.

2023 Notes

In January 2018, the Company issued $150.0 million aggregate principal amount of unsecured notes that mature on January 22, 2023 (the “2023 Notes”). The principal amount of the 2023 Notes is payable at maturity. The 2023 Notes bear interest at a rate of 4.50% per year, payable semi-annually commencing on July 22, 2018, and may be redeemed in whole or in part at the Company’s option at any time at par plus a “make whole” premium. Total proceeds from the issuance of the 2023 Notes, net of underwriting discounts and offering costs, were $146.9 million. The Company used the net proceeds of the 2023 Notes to repay outstanding indebtedness under the Revolving Credit Facility.

In connection with the 2023 Notes offering, the Company entered into an interest rate swap to continue to align the interest rates of its liabilities with the Company’s investment portfolio, which consists of predominately floating rate loans. As a result of the swap, the Company’s effective interest rate on the 2023 Notes is three-month LIBOR plus 1.99%. Please see Note 5 for further information about the Company’s interest rate swaps.

For the three and six months ended June 30, 2018, the components of interest expense related to the 2023 Notes were as follows:

	Three Months Ended		Six Months Ended
	June 30, 2018		June 30, 2018
Interest expense	$	1,688	$	2,981
Accretion of original issue discount		2		4
Amortization of deferred financing costs		154		268
Total Interest Expense	$	1,844	$	3,253

Total interest expense in the table above does not include the effect of the interest rate swaps related to the 2023 Notes. During the three and six months ended June 30, 2018, the Company received $1.7 million and $2.9 million, respectively, and paid $1.6 million and $2.7 million, respectively, related to the settlements of its interest rate swaps related to the Notes. These net amounts are included in interest expense in the Company’s consolidated statements of operations. Please see Note 5 for further information about the Company’s interest rate swaps.

As of June 30, 2018, the components of the carrying value of the 2023 Notes and the stated interest rate were as follows:

	2023 Notes
Principal amount of debt	$	150,000
Original issue discount, net of accretion		(43	)
Deferred financing costs		(2,815	)
Carrying value of debt	$	147,142
Stated interest rate		4.50	%

The stated interest rate in the table above does not include the effect of the interest rate swaps. The Company’s swap-adjusted interest rate on the 2023 Notes is three month LIBOR plus 1.99%.

As of June 30, 2018 and December 31, 2017, the Company was in compliance with the terms of its debt obligations.

8. Commitments and Contingencies

Portfolio Company Commitments

From time to time, the Company may enter into commitments to fund investments; such commitments are incorporated into the Company’s assessment of its liquidity position. The Company’s senior secured revolving loan commitments are generally available on a borrower’s demand and may remain outstanding until the maturity date of the applicable loan. The Company’s senior secured term loan commitments are generally available on a borrower’s demand and, once drawn, generally have the same remaining term as the associated loan agreement. Undrawn senior secured term loan commitments generally have a shorter availability period than the term of the associated loan agreement.

As of June 30, 2018 and December 31, 2017, the Company had the following commitments to fund investments in current portfolio companies:

	June 30, 2018		December 31, 2017
AppStar Financial, LLC - Revolver	$	2,000	$	2,000
Bazaarvoice, Inc. - Revolver		3,000	—
Ferrellgas, L.P. - Revolver		30,000	—
Frontline Technologies Group, LLC - Delayed Draw		9,377		9,377
G Treasury SS, LLC - Delayed Draw		5,000	—
G Treasury SS, LLC - Revolver		2,000	—
Helix Health, Ltd. - Revolver		4,320		4,443
Illuminate Education, Inc. - Revolver	—			5,000
Industrial Physics, LLC - Revolver		4,250		5,000
IRGSE Holding Corp. - Revolver		318		335
Lithium Technologies, LLC - Revolver		3,659		3,659
Leaf US Holdings, Inc. - Revolver	—			2,000
Motus, LLC - Revolver		5,226	—
Government Brands, LLC - Revolver		5,000	—
Marketo, Inc. - Revolver	—			1,875
Northern Oil and Gas, Inc. - Delayed Draw		6,500		16,250
PageUp People Limited - Delayed Draw		3,694	—
PayLease, LLC - Revolver		3,333		3,333
PaySimple, Inc. - Revolver	—			5,000
Rex Energy Corporation DIP - Delayed Draw		6,500		11,050
Riskonnect, Inc. - Revolver		5,000		5,000
ScentAir Technologies, Inc. - Revolver		750		750
Sovos Compliance, LLC - Delayed Draw		3,030		3,030
Sovos Compliance, LLC - Revolver		1,657		1,657
Total Portfolio Company Commitments	$	104,614	$	79,759

Other Commitments and Contingencies

As of June 30, 2018 and December 31, 2017, the Company did not have any unfunded commitments to fund investments to new borrowers that were not current portfolio companies as of such date.

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of June 30, 2018 and December 31, 2017, management is not aware of any pending or threatened litigation.

9. Net Assets

In March 2018, the Company issued a total of 3,750,000 shares of common stock at $17.45 per share. Net of underwriting fees and offering costs, the Company received total cash proceeds of $63.0 million. Subsequent to the offering the Company issued an additional 522,224 shares in April 2018 pursuant to the overallotment option granted to underwriters and received, net of underwriting fees, total cash proceeds of $8.8 million.

The Company has a dividend reinvestment plan, whereby the Company may buy shares of its common stock in the open market or issue new shares in order to satisfy dividend reinvestment requests. The number of shares to be issued to a stockholder is determined by dividing the total dollar amount of the cash dividend or distribution payable to a stockholder by the market price per share of the Company’s common stock at the close of regular trading on the NYSE on the payment date of a distribution, or if no sale is reported for such day, the average of the reported bid and ask prices. However, if the market price per share on the payment date of a cash dividend or distribution exceeds the most recently computed net asset value per share, the Company will issue shares at the greater of (i) the most recently computed net asset value per share or (ii) 95% of the current market price per share (or such lesser discount to the current market price per share that still exceeded the most recently computed net asset value per share). Shares purchased in open market transactions by the plan administrator will be allocated to a stockholder based on the average purchase price, excluding any brokerage charges or other charges, of all shares of common stock purchased in the open market.

Pursuant to the Company’s dividend reinvestment plan, the following tables summarize the shares issued to stockholders who have not opted out of the Company’s dividend reinvestment plan during the six months ended June 30, 2018 and 2017. All shares issued to stockholders in the tables below are newly issued shares.

	Six Months Ended
	June 30, 2018
			Date
Date Declared	Dividend ⁽¹⁾	Record Date	Shares Issued	Shares Issued
November 7, 2017	Base	December 15, 2017	January 12, 2018		153,295
February 21, 2018	Supplemental	February 28, 2018	March 30, 2018		16,455
February 21, 2018	Base	March 15, 2018	April 13, 2018		198,296
May 3, 2018	Supplemental	May 31, 2018	June 29, 2018		33,055
Total Shares Issued					401,101

	Six Months Ended
	June 30, 2017
			Date
Date Declared	Dividend ⁽¹⁾	Record Date	Shares Issued	Shares Issued
November 7, 2016	Base	December 31, 2016	February 1, 2017		122,836
February 22, 2017	Base	April 7, 2017 ⁽²⁾	May 1, 2017		109,847
May 3, 2017	Supplemental	May 31, 2017	June 30, 2017		11,786
Total Shares Issued					244,469

(1)	See Note 11 for further information on base and supplemental dividends.

(2)

Subsequent to the declaration date, the record date for the dividend declared on February 22, 2017 was moved from its original date of March 31, 2017 to a revised date of April 7, 2017 in order to ensure compliance with notification requirements promulgated by the NYSE. The dividend payable associated with this declaration was recognized in the Company’s consolidated balance sheet as of March 31, 2017. There was no change to the dividend amount or payment date.

On November 3, 2014, the Company’s Board approved a stock repurchase plan (the “Company 10b5-1 Plan”) to acquire up to $50 million in the aggregate of the Company’s common stock at prices just below the Company’s net asset value per share over a specified period, in accordance with the guidelines specified in Rule 10b-18 and Rule 10b5-1 of the Exchange Act.

The Company 10b5-1 Plan is designed to allow the Company to repurchase its common stock at times when it otherwise might be prevented from doing so under insider trading laws. The Company 10b5-1 Plan requires Goldman Sachs & Co. LLC, as agent, to repurchase shares of common stock on the Company’s behalf when the market price per share is below the most recently reported net asset value per share (including any updates, corrections or adjustments publicly announced by the Company to any previously announced net asset value per share). Under the Company 10b5-1 Plan, the agent will increase the volume of purchases made as the price of the Company’s common stock declines, subject to volume restrictions. The timing and amount of any stock repurchases depend on the terms and conditions of the Company 10b5-1 Plan, the market price of the common stock and trading volumes, and no assurance can be given that any particular amount of common stock will be repurchased.

The purchase of shares pursuant to the Company 10b5-1 Plan is intended to satisfy the conditions of Rule 10b5-1 and Rule 10b-18 under the Exchange Act, and will otherwise be subject to applicable law, including Regulation M, which may prohibit purchases under certain circumstances.

On August 1, 2018, the Board authorized the extension of the termination date of the Company 10b5-1 Plan to February 28, 2019. Unless extended or terminated by the Board, the Company 10b5-1 Plan will be in effect through the earlier of February 28, 2019 or such time as the current approved repurchase amount of up to $50 million has been fully utilized, subject to certain conditions.

During the three and six months ended June 30, 2018 and 2017, no shares were repurchased under the Company 10b5-1 Plan.

10. Earnings per share

The following table sets forth the computation of basic and diluted earnings per common share:

	Three Months Ended				Six Months Ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Increase in net assets resulting from operations	$	33,569	$	31,826	$	67,405	$	60,104
Weighted average shares of common stock outstanding—basic and diluted		64,758,752		59,912,804		62,810,429		59,855,088
Earnings per common share—basic and diluted	$	0.52	$	0.53	$	1.07	$	1.00

For the purpose of calculating diluted earnings per common share, the average closing price of the Company’s common stock for the three and six months ended June 30, 2018 was less than the conversion price for the Convertible Notes outstanding as of June 30, 2018. Therefore, for all periods presented in the consolidated financial statements, the underlying shares for the intrinsic value of the embedded options in the Convertible Notes have no impact on the computation of diluted earnings per common share.

11. Dividends

The Company has historically paid a dividend to stockholders on a quarterly basis. Following the completion of the quarter ended March 31, 2017, the Company introduced a dividend framework that provides for a quarterly base dividend and a variable supplemental dividend, subject to satisfaction of certain measurement tests and the approval of the Board.

The following tables summarize dividends declared during the six months ended June 30, 2018 and 2017:

	Six Months Ended
	June 30, 2018
Date Declared	Dividend	Record Date	Payment Date	Dividend per Share
February 21, 2018	Supplemental	February 28, 2018	March 30, 2018	$	0.03
February 21, 2018	Base	March 15, 2018	April 13, 2018		0.39
May 3, 2018	Supplemental	May 31, 2018	June 29, 2018		0.06
May 3, 2018	Base	June 15, 2018	July 13, 2018		0.39
Total Dividends Declared				$	0.87

	Six Months Ended
	June 30, 2017
Date Declared	Dividend	Record Date	Payment Date	Dividend per Share
February 22, 2017	Base	April 7, 2017⁽¹⁾	April 28, 2017	$	0.39
May 3, 2017	Supplemental	May 31, 2017	June 30, 2017		0.04
May 3, 2017	Base	June 15, 2017	July 14, 2017

Sixth Street Specialty Lending, Inc. - FORM 10-Q - August 1, 2018

Attached files