Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

x

 

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

 

 

 

For the quarterly period ended March 31, 2009

 

 

 

OR

 

 

 

o

 

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

 

For the transition period                   to

 

Commission File No. 000-50697

 

ARES CAPITAL CORPORATION

(Exact name of Registrant as specified in its charter)

 

Maryland

 

33-1089684

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification Number)

 

280 Park Avenue, 22nd Floor, Building East, New York, NY 10017

(Address of principal executive office)   (Zip Code)

 

(212) 750-7300

(Registrant’s telephone number, including area code)

 


 

N/A

(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  x    No  o

 

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 o  No o

 

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

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at May 6, 2009

Common stock, $0.001 par value

 

97,152,820

 

 

 



Table of Contents

 

ARES CAPITAL CORPORATION

 

INDEX

 

Part I.

Financial Information

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Balance Sheet as of March 31, 2009 (unaudited) and December 31, 2008

1

 

 

 

 

Consolidated Statement of Operations for the three months ended March 31, 2009 (unaudited) and March 31, 2008 (unaudited)

2

 

 

 

 

Consolidated Schedule of Investments as of March 31, 2009 (unaudited) and December 31, 2008

3

 

 

 

 

Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2009 (unaudited)

30

 

 

 

 

Consolidated Statement of Cash Flows for the three months ended March 31, 2009 (unaudited) and March 31, 2008 (unaudited)

31

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

32

 

 

 

Item 2.

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

47

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

55

 

 

 

Item 4.

Controls and Procedures

56

 

 

 

Part II.

Other Information

 

 

 

 

Item 1.

Legal Proceedings

56

 

 

 

Item 1A.

Risk Factors

57

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

57

 

 

 

Item 3.

Defaults Upon Senior Securities

57

 

 

 

Item 4.

Submission of Matters to a Vote of Security Holders

57

 

 

 

Item 5.

Other Information

57

 

 

 

Item 6.

Exhibits

58

 



Table of Contents

 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(dollar amounts in thousands, except per share data)

 

 

 

As of

 

 

 

March 31, 2009

 

December 31, 2008

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Investments at fair value (amortized cost of $2,283,959 and $2,267,593, respectively)

 

 

 

 

 

Non-controlled/non-affiliate company investments

 

$

1,492,300

 

$

1,477,492

 

Non-controlled affiliate company investments

 

312,084

 

329,326

 

Controlled affiliate company investments

 

164,720

 

166,159

 

Total investments at fair value

 

1,969,104

 

1,972,977

 

Cash and cash equivalents

 

48,016

 

89,383

 

Receivable for open trades

 

289

 

3

 

Interest receivable

 

17,275

 

17,547

 

Other assets

 

10,245

 

11,423

 

Total assets

 

$

2,044,929

 

$

2,091,333

 

LIABILITIES

 

 

 

 

 

Debt

 

$

902,619

 

$

908,786

 

Management and incentive fees payable

 

40,303

 

32,989

 

Accounts payable and accrued expenses

 

11,905

 

10,006

 

Interest and facility fees payable

 

2,031

 

3,869

 

Dividend payable

 

 

40,804

 

Total liabilities

 

956,858

 

996,454

 

Commitments and contingencies (Note 6)

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Common stock, par value $.001 per share, 200,000,000 common shares authorized, 97,152,820 common shares issued and outstanding

 

97

 

97

 

Capital in excess of par value

 

1,395,958

 

1,395,958

 

Accumulated undistributed net investment income (loss)

 

5,305

 

(7,637

)

Accumulated net realized gain (loss) on investments, foreign currency transactions and extinguishment of debt

 

 

(124

)

Net unrealized loss on investments and foreign currency transactions

 

(313,289

)

(293,415

)

Total stockholders’ equity

 

1,088,071

 

1,094,879

 

Total liabilities and stockholders’ equity

 

$

2,044,929

 

$

2,091,333

 

NET ASSETS PER SHARE

 

$

11.20

 

$

11.27

 

 

See accompanying notes to consolidated financial statements.

 

1



Table of Contents

 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(dollar amounts in thousands, except per share data)

 

 

 

For the three months ended

 

 

 

March 31, 2009

 

March 31, 2008

 

 

 

(unaudited)

 

(unaudited)

 

INVESTMENT INCOME:

 

 

 

 

 

From non-controlled/non-affiliate company investments:

 

 

 

 

 

Interest from investments

 

$

43,831

 

$

34,919

 

Capital structuring service fees

 

1,050

 

2,725

 

Interest from cash & cash equivalents

 

153

 

548

 

Dividend income

 

426

 

496

 

Management fees

 

 

 

Other income

 

949

 

825

 

Total investment income from non-controlled/non-affiliate company investments

 

46,409

 

39,513

 

 

 

 

 

 

 

From non-controlled affiliate company investments:

 

 

 

 

 

Interest from investments

 

5,575

 

8,546

 

Capital structuring service fees

 

 

1,095

 

Dividend income

 

14

 

48

 

Management fees

 

125

 

 

Other income

 

90

 

241

 

Total investment income from non-controlled affiliate company investments

 

5,804

 

9,930

 

 

 

 

 

 

 

From controlled affiliate company investments:

 

 

 

 

 

Interest from investments

 

2,938

 

2,422

 

Capital structuring service fees

 

194

 

100

 

Dividend income

 

 

 

Management fees

 

591

 

197

 

Other income

 

80

 

45

 

Total investment income from controlled affiliate company investments

 

3,803

 

2,764

 

 

 

 

 

 

 

Total investment income

 

56,016

 

52,207

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

Interest and credit facility fees

 

6,581

 

9,923

 

Base management fees

 

7,498

 

7,087

 

Incentive management fees

 

7,550

 

6,493

 

Professional fees

 

1,397

 

1,218

 

Insurance

 

334

 

277

 

Administrative

 

1,004

 

535

 

Depreciation

 

173

 

102

 

Directors fees

 

102

 

74

 

Other

 

1,146

 

847

 

Total expenses

 

25,785

 

26,556

 

 

 

 

 

 

 

NET INVESTMENT INCOME BEFORE INCOME TAXES

 

30,231

 

25,651

 

 

 

 

 

 

 

Income tax expense (benefit), including excise tax

 

31

 

(322

)

 

 

 

 

 

 

NET INVESTMENT INCOME

 

30,200

 

25,973

 

 

 

 

 

 

 

REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:

 

 

 

 

 

Net realized gains (losses):

 

 

 

 

 

Non-controlled/non-affiliate company investments

 

(1,305

)

207

 

Non-controlled affiliate company investments

 

(482

)

 

Controlled affiliate company investments

 

 

 

Foreign currency transactions

 

(48

)

(8

)

Net realized (losses) gains

 

(1,835

)

199

 

 

 

 

 

 

 

Net unrealized gains (losses):

 

 

 

 

 

Non-controlled/non-affiliate company investments

 

(8,559

)

(18,604

)

Non-controlled affiliate company investments

 

(2,006

)

(10,742

)

Controlled affiliate company investments

 

(9,324

)

12,333

 

Foreign currency transactions

 

15

 

7

 

Net unrealized losses

 

(19,874

)

(17,006

)

 

 

 

 

 

 

Net realized and unrealized (losses) from investments and foreign currency transactions

 

(21,709

)

(16,807

)

 

 

 

 

 

 

REALIZED GAIN ON EXTINGUISHMENT OF DEBT

 

26,543

 

 

 

 

 

 

 

 

NET INCREASE IN STOCKHOLDERS’ EQUITY RESULTING FROM OPERATIONS

 

$

35,034

 

$

9,166

 

 

 

 

 

 

 

BASIC AND DILUTED EARNINGS PER COMMON SHARE (see Note 4)

 

$

0.36

 

$

0.12

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING – BASIC AND DILUTED (see Note 4)

 

97,152,820

 

74,069,161

 

 

See accompanying notes to consolidated financial statements.

 

2


 


Table of Contents

 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of March 31, 2009 (unaudited)

(dollar amounts in thousands, except per unit data)

 

Company(1)

 

Industry

 

Investment

 

Interest(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

Healthcare—Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

American Renal Associates, Inc.

 

Dialysis provider

 

Senior secured loan ($1,443 par due 12/2010)

 

4.48% (Libor + 3.25%/Q)

 

12/14/2005

 

$

1,443

 

$

1,443

 

$

1.00

(3)

 

 

 

 

 

 

Senior secured loan ($5,705 par due 12/2011)

 

4.48% (Libor + 3.25%/Q)

 

12/14/2005

 

5,705

 

5,705

 

$

1.00

(3)

 

 

 

 

 

 

Senior secured loan ($20 par due 12/2011)

 

5.00% (Base Rate + 1.75%/D)

 

12/14/2005

 

20

 

19

 

$

1.00

(3)

 

 

 

 

 

 

Senior secured loan ($166 par due 12/2011)

 

4.48% (Libor + 3.25%/Q)

 

12/14/2005

 

166

 

166

 

$

1.00

(3)

 

 

 

 

 

 

Senior secured loan ($262 par due 12/2011)

 

4.48% (Libor + 3.25%/Q)

 

12/14/2005

 

262

 

262

 

$

1.00

(3)

 

 

 

 

 

 

Senior secured loan ($1,655 par due 12/2011)

 

4.69% (Libor + 3.25%/Q)

 

12/14/2005

 

1,655

 

1,655

 

$

1.00

(3)

 

 

 

 

 

 

Senior secured loan ($2,620 par due 12/2011)

 

4.69% (Libor + 3.25%/Q)

 

12/14/2005

 

2,620

 

2,620

 

$

1.00

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capella Healthcare, Inc.

 

Acute care hospital operator

 

Junior secured loan ($60,000 par due 2/2016)

 

13.00%

 

2/29/2008

 

60,000

 

55,200

 

$

0.92

 

 

 

 

 

 

 

Junior secured loan ($25,000 par due 2/2016)

 

13.00%

 

2/29/2008

 

25,000

 

23,000

 

$

0.92

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CT Technologies Intermediate Holdings, Inc. and CT Technologies Holdings, LLC(6)

 

Healthcare analysis services

 

Preferred stock (7,427 shares)

 

14.00% PIK

 

6/15/2007

 

7,683

 

7,312

 

$

950.00

(4)

 

 

 

 

 

 

Common stock (9,679 shares)

 

 

 

6/15/2007

 

4,000

 

5,382

 

$

556.10

(5)

 

 

 

 

 

 

Common stock (1,546 shares)

 

 

 

6/15/2007

 

 

 

$

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DSI Renal, Inc.

 

Dialysis provider

 

Senior secured revolving loan ($142 par due 3/2013)

 

6.25% (Base Rate + 3.00%/D)

 

4/4/2006

 

142

 

127

 

$

0.90

 

 

 

 

 

 

 

Senior secured revolving loan ($3,520 par due 3/2013)

 

5.50% (Libor + 5.00%/M)

 

4/4/2006

 

3,520

 

3,168

 

$

0.90

 

 

 

 

 

 

 

Senior secured revolving loan ($1,120 par due 3/2013)

 

5.47% (Libor + 5.00%/M)

 

4/4/2006

 

1,120

 

1,008

 

$

0.90

 

 

 

 

 

 

 

Senior secured revolving loan ($1,152 par due 3/2013)

 

5.56% (Libor + 5.00%/M)

 

4/4/2006

 

1,152

 

1,037

 

$

0.90

 

 

 

 

 

 

 

Senior secured revolving loan ($1,600 par due 3/2013)

 

5.56% (Libor + 5.00%/M)

 

4/4/2006

 

1,600

 

1,440

 

$

0.90

 

 

 

 

 

 

 

Senior subordinated note ($30,773 par due 4/2014)

 

16.00% PIK

 

4/4/2006

 

30,738

 

22,742

 

$

0.74

(4)

 

 

 

 

 

 

Senior subordinated note ($28,392 par due 4/2014)

 

16.00% PIK

 

4/4/2006

 

28,374

 

20,982

 

$

0.74

(2)(4)

 

 

 

 

 

 

Senior subordinated note ($12,699 par due 4/2014)

 

16.00% PIK

 

4/4/2006

 

12,699

 

9,385

 

$

0.74

(3)(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GG Merger Sub I, Inc.

 

Drug testing services

 

Senior secured loan ($11,330 par due 12/2014)

 

5.32% (Libor + 4.00%/Q)

 

12/14/2007

 

10,921

 

9,630

 

$

0.85

 

 

 

 

 

 

 

Senior secured loan ($12,000 par due 12/2014)

 

5.32% (Libor + 4.00%/Q)

 

12/14/2007

 

11,561

 

10,200

 

$

0.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HCP Acquisition Holdings, LLC(7)

 

Healthcare compliance advisory services

 

Class A units (8,566,824 units)

 

 

 

6/26/2008

 

8,567

 

6,125

 

$

0.72

(5)

 

 

 

3



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

Heartland Dental Care, Inc.

 

Dental services

 

Senior subordinated note ($32,717 par due 8/2013)

 

11.00% Cash, 3.25% PIK

 

7/31/2008

 

32,717

 

32,717

 

$

1.00

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Magnacare Holdings, Inc., Magnacare Administrative Services, LLC, and Magnacare, LLC

 

Healthcare professional provider

 

Senior subordinated note ($4,600 par due 12/2012)

 

12.75% Cash, 2.00% PIK

 

2/9/2009

 

3,120

 

4,614

 

$

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MPBP Holdings, Inc., Cohr Holdings, Inc. and MPBP Acquisition Co., Inc.

 

Healthcare equipment services

 

Junior secured loan ($20,000 par due 1/2014)

 

9.19% (Libor + 6.25%/Q)

 

1/31/2007

 

20,000

 

7,000

 

$

0.35

 

 

 

 

 

 

 

Junior secured loan ($12,000 par due 1/2014)

 

9.19% (Libor + 6.25%/Q)

 

1/31/2007

 

12,000

 

4,200

 

$

0.35

(3)

 

 

 

 

 

 

Common stock (50,000 shares)

 

 

 

1/31/2007

 

5,000

 

 

$

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MWD Acquisition Sub, Inc.

 

Dental services

 

Junior secured loan ($5,000 par due 5/2012)

 

6.78% (Libor + 6.25%/M)

 

5/3/2007

 

5,000

 

4,100

 

$

0.82

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OnCURE Medical Corp.

 

Radiation oncology care provider

 

Senior secured loan ($3,083 par due 8/2009)

 

4.06% (Libor + 3.50%/M)

 

8/18/2006

 

3,083

 

2,713

 

$

0.88

(3)

 

 

 

 

 

 

Senior subordinated note ($32,150 par due 8/2013)

 

11.00% Cash, 1.50% PIK

 

8/18/2006

 

32,175

 

28,935

 

$

0.90

(4)

 

 

 

 

 

 

Senior subordinated note ($121 par due 8/2013)

 

11.00% Cash, 1.50% PIK

 

8/18/2006

 

121

 

109

 

$

0.90

(4)

 

 

 

 

 

 

Common stock (857,143 shares)

 

 

 

8/18/2006

 

3,000

 

3,000

 

$

3.50

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Passport Health Communications, Inc., Passport Holding Corp. and Prism Holding Corp.

 

Healthcare technology provider

 

Senior secured loan ($12,870 par due 5/2014)

 

10.50% (Libor + 7.50%/S)

 

5/9/2008

 

12,870

 

12,613

 

$

0.98

(15)

 

 

 

 

 

 

Senior secured loan ($11,880 par due 5/2014)

 

10.50% (Libor + 7.50%/S)

 

5/9/2008

 

11,880

 

11,642

 

$

0.98

(3)(15)

 

 

 

 

 

 

Series A preferred stock (1,594,457 shares)

 

 

 

7/30/2008

 

9,900

 

9,900

 

$

6.21

(5)

 

 

 

 

 

 

Common stock (16,106 shares)

 

 

 

7/30/2008

 

100

 

100

 

$

6.21

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PG Mergersub, Inc.

 

Provider of patient surveys, management reports and national databases for the integrated healthcare delivery system

 

Senior subordinated loan ($5,000 par due 3/2016)

 

12.50%

 

3/12/2008

 

4,901

 

4,700

 

$

0.94

 

 

 

 

 

 

 

Preferred stock (333 shares)

 

 

 

3/12/2008

 

333

 

333

 

$

1,000.00

(5)

 

 

 

 

 

 

Common stock (16,667 shares)

 

 

 

3/12/2008

 

167

 

167

 

$

10.00

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Schumacher Group of Delaware, Inc.

 

Outsourced physician service provider

 

Senior subordinated loan ($35,784 par due 7/2012)

 

11.13% Cash, 2.50% PIK

 

7/18/2008

 

35,784

 

35,784

 

$

1.00

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Triad Laboratory Alliance, LLC

 

Laboratory services

 

Senior secured loan ($2,466 par due 12/2011)

 

4.47% (Libor + 3.25%/Q)

 

12/21/2005

 

2,466

 

2,269

 

$

0.92

(3)

 

 

 

 

 

 

Senior subordinated note ($15,399 par due 12/2012)

 

12.00% Cash, 1.75% PIK

 

12/21/2005

 

15,420

 

14,958

 

$

0.97

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VOTC Acquisition Corp.

 

Radiation oncology care provider

 

Senior secured loan ($3,154 par due 7/2012)

 

11.00% Cash, 2.00% PIK

 

6/30/2008

 

3,154

 

3,154

 

$

1.00

(4)

 

 

 

 

 

 

Senior secured loan ($14,000 par due 7/2012)

 

11.00% Cash, 2.00% PIK

 

6/30/2008

 

14,000

 

14,000

 

$

1.00

(4)

 

 

 

 

 

 

Series E preferred shares (3,888,222 shares)

 

 

 

7/14/2008

 

8,749

 

5,599

 

$

1.44

(5)

 

 

 

 

 

 

 

 

 

 

 

 

454,888

 

391,215

 

 

 

35.95

%

 

4



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

Education

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Campus Management Corp. and Campus Management Acquisition Corp.(6)

 

Education software developer

 

Senior secured loan ($8,084 par due 8/2013)

 

10.00%Cash, 3.00% PIK

 

2/8/2008

 

8,221

 

8,221

 

$

1.00

(16)

 

 

 

 

 

 

Senior secured loan ($25,108 par due 8/2013)

 

10.00%Cash, 3.00% PIK

 

2/8/2008

 

25,299

 

25,299

 

$

1.00

(2)(16)

 

 

 

 

 

 

Senior secured loan ($8,859 par due 8/2013)

 

10.00%Cash, 3.00% PIK

 

2/8/2008

 

8,946

 

8,946

 

$

1.00

(16)

 

 

 

 

 

 

Preferred stock (493,147 shares)

 

8.00% PIK

 

2/8/2008

 

9,129

 

12,177

 

$

24.33

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ELC Acquisition Corporation

 

Developer, manufacturer and retailer of educational products

 

Senior secured loan ($177 par due 11/2012)

 

4.27% (Libor + 3.75%/M)

 

11/30/2006

 

177

 

156

 

$

0.88

(3)

 

 

 

 

 

 

Junior secured loan ($8,333 par due 11/2013)

 

7.52% (Libor + 7.00%/M)

 

11/30/2006

 

8,333

 

7,083

 

$

0.85

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Instituto de Banca y Comercio, Inc. Leeds IV Advisors, Inc.(8)

 

Private school operator

 

Senior secured loan ($12,000 par due 3/2014)

 

8.50% (Libor + 6.00%/M)

 

3/15/2007

 

12,000

 

12,000

 

$

1.00

(15)

 

 

 

 

 

 

Senior secured loan ($7,247 par due 3/2014)

 

8.50% (Libor + 6.00%/M)

 

3/15/2007

 

7,247

 

7,247

 

$

1.00

(15)

 

 

 

 

 

 

Senior secured loan ($4,975 par due 3/2014)

 

8.50% (Libor + 6.00%/M)

 

3/15/2007

 

4,975

 

4,975

 

$

1.00

(3)(15)

 

 

 

 

 

 

Senior secured loan ($11,790 par due 3/2014)

 

8.50% (Libor + 6.00%/M)

 

3/15/2007

 

11,790

 

11,790

 

$

1.00

(3)(15)

 

 

 

 

 

 

Senior subordinated loan ($40,196 par due 6/2014)

 

10.50% Cash, 3.50% PIK

 

6/4/2008

 

40,309

 

40,309

 

$

1.00

(4)

 

 

 

 

 

 

Preferred stock (165,811 shares)

 

 

 

6/4/2008

 

788

 

2,146

 

$

12.94

(5)

 

 

 

 

 

 

Common stock (214,286 shares)

 

 

 

6/4/2008

 

54

 

214

 

$

1.00

(5)

 

 

 

 

 

 

Preferred stock (140,577 shares)

 

 

 

3/31/2009

 

668

 

1,820

 

$

12.94

(5)

 

 

 

 

 

 

Common stock (140,577 shares)

 

 

 

3/31/2009

 

35

 

1,820

 

$

12.94

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lakeland Finance, LLC

 

Private school operator

 

Senior secured note ($18,000 par due 12/2012)

 

11.50%

 

12/13/2005

 

18,000

 

17,280

 

$

0.96

 

 

 

 

 

 

 

Senior secured note ($15,000 par due 12/2012)

 

11.50%

 

12/13/2005

 

15,000

 

14,400

 

$

0.96

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R3 Education, Inc. (formerly known as Equinox EIC Partners, LLC and MUA Management Company)(7)(8)

 

Medical school operator

 

Senior secured revolving loan ($1,800 par due 12/2012)

 

8.25% (Base Rate + 5.00%/D)

 

4/3/2007

 

1,800

 

1,764

 

$

0.98

 

 

 

 

 

 

 

Senior secured revolving loan ($1,750 par due 12/2012)

 

8.25% (Base Rate + 5.00%/D)

 

4/3/2007

 

1,750

 

1,715

 

$

0.98

 

 

 

 

 

 

 

Senior secured revolving loan ($3,000 par due 12/2012)

 

9.25% (Base Rate + 6.00%/D)

 

4/3/2007

 

3,000

 

2,940

 

$

0.98

 

 

 

 

 

 

 

Senior secured revolving loan ($1,000 par due 12/2012)

 

6.48% (Libor + 6.00%/M)

 

4/3/2007

 

1,000

 

980

 

$

0.98

 

 

 

 

 

 

 

Senior secured loan ($2,411 par due 12/2012)

 

6.52% (Libor + 6.00%/M)

 

4/3/2007

 

2,411

 

2,363

 

$

0.98

(2)

 

 

 

 

 

 

Senior secured loan ($14,113 par due 12/2012)

 

6.52% (Libor + 6.00%/M)

 

9/21/2007

 

14,113

 

13,830

 

$

0.98

(2)

 

 

 

 

 

 

Senior secured loan ($7,325 par due 12/2012)

 

6.55% (Libor + 6.00%/M)

 

4/3/2007

 

7,325

 

7,179

 

$

0.98

(3)

 

 

 

5



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

 

 

 

 

Common membership interest (26.27% interest)

 

 

 

9/21/2007

 

15,800

 

20,785

 

$

1.32

(5)

 

 

 

 

 

 

Preferred stock (800 shares)

 

 

 

 

 

200

 

200

 

$

250.00

(5)

 

 

 

 

 

 

 

 

 

 

 

 

218,370

 

227,639

 

 

 

20.92

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurants and Food Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADF Capital, Inc. & ADF Restaurant Group, LLC

 

Restaurant owner and operator

 

Senior secured revolving loan ($1,632 par due 11/2013)

 

5.75% (Base Rate + 2.50%/D)

 

11/27/2006

 

1,632

 

1,485

 

$

0.91

 

 

 

 

 

 

 

Senior secured revolving loan ($2,005 par due 11/2013)

 

4.935% (Libor + 3.00% Cash, 0.50% PIK/Q)

 

11/27/2006

 

2,008

 

1,827

 

$

0.91

(4)

 

 

 

 

 

 

Senior secured loan ($22,596 par due 11/2012)

 

9.935% (Libor + 7.50% Cash, 1.00% PIK/Q)

 

11/27/2006

 

22,657

 

21,521

 

$

0.95

(4)

 

 

 

 

 

 

Senior secured loan ($990 par due 11/2012)

 

9.935% (Libor + 7.50% Cash, 1.00% PIK/Q)

 

11/27/2006

 

992

 

943

 

$

0.95

(2)(4)

 

 

 

 

 

 

Senior secured loan ($11,055 par due 11/2012)

 

9.935% (Libor + 7.50% Cash, 1.00% PIK/Q)

 

11/27/2006

 

11,076

 

10,529

 

$

0.95

(3)(4)

 

 

 

 

 

 

Promissory note ($12,079 par due 11/2016)

 

10.00% PIK

 

6/1/2006

 

12,395

 

12,406

 

$

1.00

(4)

 

 

 

 

 

 

Warrants to purchase 0.61 shares

 

 

 

6/1/2006

 

 

 

$

0.00

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Encanto Restaurants, Inc.(8)

 

Restaurant owner and operator

 

Junior secured loan ($21,000 par due 8/2013)

 

7.50% Cash, 3.50% PIK

 

8/16/2006

 

21,489

 

19,389

 

$

0.92

(2)(4)

 

 

 

 

 

 

Junior secured loan ($4,000 par due 8/2013)

 

7.50% Cash, 3.50% PIK

 

8/16/2006

 

4,093

 

3,693

 

$

0.92

(3)(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTG Management, Inc.

 

Airport restaurant operator

 

Junior secured loan ($15,466 par due 6/2013)

 

18.00% (Libor + 11.00% Cash, 4.00% PIK/Q)

 

6/19/2008

 

15,466

 

14,383

 

$

0.93

(4)(15)

 

 

 

 

 

 

Warrants to purchase up to 9 shares of common stock

 

 

 

 

 

 

 

$

0.00

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vistar Corporation and Wellspring Distribution Corp.

 

Food service distributor

 

Senior subordinated loan ($48,625 par due 5/2015)

 

13.50%

 

5/23/2008

 

48,625

 

46,680

 

$

0.96

 

 

 

 

 

 

 

Senior subordinated loan ($25,000 par due 5/2015)

 

13.50%

 

5/23/2008

 

25,000

 

24,000

 

$

0.96

(2)

 

 

 

 

 

 

Class A non-voting common stock (1,366,120 shares)

 

 

 

5/23/2008

 

7,500

 

3,490

 

$

2.55

(5)

 

 

 

 

 

 

 

 

 

 

 

 

172,933

 

160,346

 

 

 

14.74

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3091779 Nova Scotia Inc.(8)

 

Baked goods manufacturer

 

Junior secured loan (Cdn $14,117 par due 11/2012)

 

11.50% Cash, 1.50% PIK

 

11/2/2007

 

14,946

 

10,642

 

$

0.75

(4)(12)

 

 

 

 

 

 

Warrants to purchase 57,545 shares

 

 

 

 

 

 

 

$

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Apple & Eve, LLC and US Juice Partners, LLC(6)

 

Juice manufacturer

 

Senior secured revolving loan ($3,000 par due 10/2013)

 

6.51% (Libor + 6.00%/M)

 

10/5/2007

 

3,000

 

2,760

 

$

0.92

 

 

 

 

 

 

 

Senior secured revolving loan ($4,500 par due 10/2013)

 

6.94% (Libor + 6.00%/B)

 

10/5/2007

 

4,500

 

4,140

 

$

0.92

(5)

 

 

 

 

 

 

Senior secured revolving loan ($2,500 par due 10/2013)

 

6.95% (Libor + 6.00%/M)

 

10/5/2007

 

2,500

 

2,300

 

$

0.92

 

 

 

 

 

 

 

Senior secured revolving loan ($2,500 par due 10/2013)

 

6.97% (Libor + 6.00%/M)

 

10/5/2007

 

2,500

 

2,300

 

$

0.92

 

 

 

 

 

 

 

Senior secured loan ($9,445 par due 10/2013)

 

6.96% (Libor + 6.00%/M)

 

10/5/2007

 

9,445

 

8,689

 

$

0.92

 

 

 

 

6



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

 

 

 

 

Senior secured loan ($19,921 par due 10/2013)

 

6.96% (Libor + 6.00%/M)

 

10/5/2007

 

19,921

 

18,327

 

$

0.92

(2)

 

 

 

 

 

 

Senior secured loan ($11,937 par due 10/2013)

 

6.96% (Libor + 6.00%/M)

 

10/5/2007

 

11,937

 

10,982

 

$

0.92

(3)

 

 

 

 

 

 

Senior units (50,000 units)

 

 

 

 

 

5,000

 

2,500

 

$

50.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Best Brands Corporation

 

Baked goods manufacturer

 

Senior secured loan ($12,928 par due 12/2012)

 

7.75% (Libor + 5.00% Cash, 2.25% PIK/M)

 

2/15/2008

 

10,840

 

12,407

 

$

0.95

(4)

 

 

 

 

 

 

Junior secured loan ($4,329 par due 6/2013)

 

10.00% Cash, 8.00% PIK

 

12/14/2006

 

4,413

 

4,196

 

$

0.95

(4)

 

 

 

 

 

 

Junior secured loan ($26,341 par due 6/2013)

 

10.00% Cash, 8.00% PIK

 

12/14/2006

 

26,849

 

25,532

 

$

0.95

(2)(4)

 

 

 

 

 

 

Junior secured loan ($12,199 par due 6/2013)

 

10.00% Cash, 8.00% PIK

 

12/14/2006

 

12,405

 

11,795

 

$

0.95

(3)(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bumble Bee Foods, LLC and BB Co-Invest LP

 

Canned seafood manufacturer

 

Senior subordinated loan ($31,100 par due 11/2018)

 

16.25% (12.00% Cash, 4.25% Optional PIK)

 

11/18/2008

 

31,100

 

31,100

 

$

1.00

(4)

 

 

 

 

 

 

Common stock (4,000 shares)

 

 

 

11/18/2008

 

4,000

 

4,000

 

$

1,000.00

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charter Baking Company, Inc.

 

Baked goods manufacturer

 

Senior subordinated note ($5,543 par due 2/2013)

 

12.00% PIK

 

2/6/2008

 

5,704

 

5,704

 

$

1.00

(2)(4)

 

 

 

 

 

 

Preferred stock (6,258 shares)

 

 

 

9/1/2006

 

2,500

 

2,500

 

$

399.49

(5)

 

 

 

 

 

 

 

 

 

 

 

 

171,560

 

159,874

 

 

 

14.69

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services—Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

American Residential Services, LLC

 

Plumbing, heating and air-conditioning services

 

Junior secured loan ($20,201 par due 4/2015)

 

10.00% Cash, 2.00% PIK

 

4/17/2007

 

20,300

 

18,280

 

$

0.90

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diversified Collection Services, Inc.

 

Collections services

 

Senior secured loan ($11,355 par due 8/2011)

 

8.00% (Base Rate + 4.75%/D)

 

2/2/2005

 

9,302

 

10,787

 

$

0.95

 

 

 

 

 

 

 

Senior secured loan ($4,041 par due 8/2011)

 

8.00% (Base Rate + 4.75%/D)

 

2/2/2005

 

4,041

 

3,839

 

$

0.95

(3)

 

 

 

 

 

 

Senior secured loan ($1,837 par due 2/2011)

 

10.75% (Base Rate + 7.50%/D)

 

2/2/2005

 

1,837

 

1,745

 

$

0.95

(2)

 

 

 

 

 

 

Senior secured loan ($7,125 par due 8/2011)

 

10.75% (Base Rate + 7.50%/D)

 

2/2/2005

 

7,125

 

6,769

 

$

0.95

(3)

 

 

 

 

 

 

Preferred stock (14,927 shares)

 

 

 

5/18/2006

 

169

 

109

 

$

7.30

(5)

 

 

 

 

 

 

Common stock (114,004 shares)

 

 

 

2/2/2005

 

295

 

414

 

$

3.63

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GCA Services Group, Inc.

 

Custodial services

 

Senior secured loan ($23,927 par due 12/2011)

 

12.00%

 

12/15/2006

 

23,927

 

23,927

 

$

1.00

(2)

 

 

 

7



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

 

 

 

 

Senior secured loan ($2,838 par due 12/2011)

 

12.00%

 

12/15/2006

 

2,838

 

2,838

 

$

1.00

 

 

 

 

 

 

 

Senior secured loan ($10,706 par due 12/2011)

 

12.00%

 

12/15/2006

 

10,706

 

10,706

 

$

1.00

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Growing Family, Inc. and GFH  Holdings,  LLC

 

Photography services

 

Senior secured revolving loan ($1,513 par due 8/2011)

 

8.42% (Libor + 3.00% Cash, 4.00% PIK/M)

 

3/16/2007

 

1,513

 

454

 

$

0.30

(4)(14)

 

 

 

 

 

 

Senior secured loan ($11,188 par due 8/2011)

 

13.84% (Libor + 3.50% Cash, 6.00% PIK/Q)

 

3/16/2007

 

11,188

 

3,355

 

$

0.30

(4)(14)

 

 

 

 

 

 

Senior secured loan ($372 par due 8/2011)

 

11.25% (Libor + 3.50% Cash, 6.00%PIK/D)

 

3/16/2007

 

372

 

111

 

$

0.30

(4)(14)

 

 

 

 

 

 

Senior secured loan ($3,575 par due 8/2011)

 

16.34% (Libor + 6.00% Cash, 6.00% PIK/Q)

 

3/16/2007

 

3,575

 

1,073

 

$

0.30

(4)(14)

 

 

 

 

 

 

Senior secured loan ($147 par due 8/2011)

 

18.00% (Libor + 6.00% Cash, 6.00% PIK/Q)

 

3/16/2007

 

147

 

44

 

$

0.30

(4)(14)

 

 

 

 

 

 

Common stock (552,430 shares)

 

 

 

3/16/2007

 

872

 

 

$

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NPA Acquisition, LLC

 

Powersport vehicle auction operator

 

Junior secured loan ($12,000 par due 2/2013)

 

7.31% (Libor + 6.75%/M)

 

8/23/2006

 

12,000

 

12,000

 

$

1.00

(3)

 

 

 

 

 

 

Common units (1,709 shares)

 

 

 

8/23/2006

 

1,000

 

2,300

 

$

1,345.82

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Web Services Company, LLC

 

Laundry service and equipment provider

 

Senior subordinated loan ($17,875 par due 8/2016)

 

11.50% Cash, 2.50% PIK

 

8/29/2008

 

17,875

 

16,981

 

$

0.95

(4)

 

 

 

 

 

 

Senior subordinated loan ($25,317 par due 8/2016)

 

11.50% Cash, 2.50% PIK

 

8/29/2008

 

25,317

 

24,051

 

$

0.95

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

154,399

 

139,783

 

 

 

12.85

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carador PLC(6)(8)(9)

 

Investment company

 

Ordinary shares (7,110,525 shares)

 

 

 

12/15/2006

 

9,033

 

2,666

 

$

0.38

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CIC Flex, LP(9)

 

Investment partnership

 

Limited partnership units (0.69 unit)

 

 

 

9/7/2007

 

34

 

34

 

$

49,644.93

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covestia Capital Partners, LP(9)

 

Investment partnership

 

Limited partnership interest (47% interest)

 

 

 

6/17/2008

 

1,059

 

1,059

 

$

1.00

(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Firstlight Financial Corporation(6)(9)

 

Investment company

 

Senior subordinated loan ($71,289 par due 12/2016)

 

8.00% PIK

 

12/31/2006

 

71,289

 

64,160

 

$