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 September 30, 2010

 

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 November 4, 2010

Common stock, $0.001 par value

 

192,566,434

 

 

 



Table of Contents

 

ARES CAPITAL CORPORATION

 

INDEX

 

Part I.

Financial Information

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Balance Sheet as of September 30, 2010 (unaudited) and December 31, 2009

1

 

 

 

 

Consolidated Statement of Operations for the three and nine months ended September 30, 2010 (unaudited) and September 30, 2009 (unaudited)

2

 

 

 

 

Consolidated Schedule of Investments as of September 30, 2010 (unaudited) and December 31, 2009

3

 

 

 

 

Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2010 (unaudited)

39

 

 

 

 

Consolidated Statement of Cash Flows for the nine months ended September 30, 2010 (unaudited) and September 30, 2009 (unaudited)

40

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

41

 

 

 

Item 2.

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

62

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

79

 

 

 

Item 4.

Controls and Procedures

80

 

 

 

Part II.

Other Information

 

 

 

 

Item 1.

Legal Proceedings

80

 

 

 

Item 1A.

Risk Factors

81

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

81

 

 

 

Item 3.

Defaults Upon Senior Securities

81

 

 

 

Item 4.

(Removed and Reserved)

81

 

 

 

Item 5.

Other Information

81

 

 

 

Item 6.

Exhibits

81

 



Table of Contents

 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(dollar amounts in thousands, except per share data)

 

 

 

As of

 

 

 

September 30, 2010

 

December 31, 2009

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Investments at fair value (amortized cost of $4,174,139 and $2,376,384, respectively)

 

 

 

 

 

Non-controlled/non-affiliate company investments

 

$

2,343,641

 

$

1,568,423

 

Non-controlled affiliate company investments

 

565,988

 

276,351

 

Controlled affiliate company investments

 

1,240,161

 

327,040

 

Total investments at fair value

 

4,149,790

 

2,171,814

 

Cash and cash equivalents

 

134,362

 

99,227

 

Interest receivable

 

88,184

 

28,019

 

Other assets

 

59,845

 

14,455

 

Total assets

 

$

4,432,181

 

$

2,313,515

 

LIABILITIES

 

 

 

 

 

Debt

 

$

1,524,143

 

$

969,465

 

Management and incentive fees payable

 

33,241

 

66,495

 

Accounts payable and accrued expenses

 

79,996

 

16,533

 

Interest and facility fees payable

 

16,325

 

2,645

 

Payable for open trades

 

 

489

 

Total liabilities

 

1,653,705

 

1,055,627

 

Commitments and contingencies (Note 6)

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Common stock, par value $.001 per share, 300,000,000 common shares authorized, 192,566,434 and 109,944,674 common shares issued and outstanding, respectively

 

193

 

110

 

Capital in excess of par value

 

2,656,890

 

1,490,458

 

Accumulated (overdistributed) undistributed net investment income

 

(25,264

)

3,143

 

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

 

171,454

 

(31,115

)

Net unrealized loss on investments and foreign currency transactions

 

(24,797

)

(204,708

)

Total stockholders’ equity

 

2,778,476

 

1,257,888

 

Total liabilities and stockholders’ equity

 

$

4,432,181

 

$

2,313,515

 

NET ASSETS PER SHARE

 

$

14.43

 

$

11.44

 

 

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

 

For the nine months ended

 

 

 

September 30, 2010

 

September 30, 2009

 

September 30, 2010

 

September 30, 2009

 

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

INVESTMENT INCOME:

 

 

 

 

 

 

 

 

 

From non-controlled/non-affiliate company investments:

 

 

 

 

 

 

 

 

 

Interest from investments

 

$

66,319

 

$

49,728

 

$

177,285

 

$

138,866

 

Capital structuring service fees

 

8,122

 

 

15,258

 

1,653

 

Management fees

 

1,711

 

29

 

4,261

 

29

 

Dividend income

 

1,381

 

525

 

3,299

 

1,568

 

Interest from cash & cash equivalents

 

47

 

35

 

75

 

245

 

Other income

 

1,094

 

1,501

 

3,648

 

4,198

 

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

 

78,674

 

51,818

 

203,826

 

146,559

 

 

 

 

 

 

 

 

 

 

 

From non-controlled affiliate company investments:

 

 

 

 

 

 

 

 

 

Interest from investments

 

13,607

 

4,916

 

33,602

 

17,019

 

Dividend income

 

127

 

148

 

318

 

285

 

Management fees

 

75

 

63

 

363

 

1,380

 

Other income

 

63

 

140

 

485

 

308

 

Total investment income from non-controlled affiliate company investments

 

13,872

 

5,267

 

34,768

 

18,992

 

 

 

 

 

 

 

 

 

 

 

From controlled affiliate company investments:

 

 

 

 

 

 

 

 

 

Interest from investments

 

27,908

 

2,255

 

62,545

 

7,348

 

Capital structuring service fees

 

12,489

 

 

15,146

 

194

 

Dividend income

 

2,415

 

1,511

 

4,211

 

1,511

 

Management fees

 

2,652

 

 

5,430

 

1,286

 

Other income

 

116

 

30

 

300

 

118

 

Total investment income from controlled affiliate company investments

 

45,580

 

3,796

 

87,632

 

10,457

 

 

 

 

 

 

 

 

 

 

 

Total investment income

 

138,126

 

60,881

 

326,226

 

176,008

 

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

Interest and credit facility fees

 

22,755

 

5,721

 

54,453

 

18,603

 

Incentive management fees

 

17,805

 

8,227

 

40,922

 

23,764

 

Base management fees

 

15,436

 

7,508

 

35,574

 

22,502

 

Professional fees

 

3,233

 

2,044

 

9,191

 

5,749

 

Administrative

 

2,642

 

809

 

6,251

 

2,905

 

Professional fees and other costs related to the acquisition of Allied Capital Corporation

 

1,450

 

1,989

 

17,773

 

1,989

 

Rent

 

1,565

 

301

 

3,659

 

1,458

 

Insurance

 

539

 

313

 

1,433

 

988

 

Depreciation

 

252

 

167

 

662

 

505

 

Directors fees

 

198

 

134

 

476

 

370

 

Other

 

1,195

 

308

 

3,006

 

1,558

 

Total expenses

 

67,070

 

27,521

 

173,400

 

80,391

 

 

 

 

 

 

 

 

 

 

 

NET INVESTMENT INCOME BEFORE INCOME TAXES

 

71,056

 

33,360

 

152,826

 

95,617

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit), including excise tax

 

(164

)

454

 

360

 

563

 

 

 

 

 

 

 

 

 

 

 

NET INVESTMENT INCOME

 

71,220

 

32,906

 

152,466

 

95,054

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Net realized gains (losses):

 

 

 

 

 

 

 

 

 

Non-controlled/non-affiliate company investments

 

1,225

 

12,049

 

10,998

 

9,887

 

Non-controlled affiliate company investments

 

9

 

 

(3,725

)

(482

)

Controlled affiliate company investments

 

(6

)

(13,705

)

1,296

 

(13,705

)

Foreign currency transactions

 

 

 

85

 

68

 

Net realized gains (losses)

 

1,228

 

(1,656

)

8,654

 

(4,232

)

 

 

 

 

 

 

 

 

 

 

Net unrealized gains (losses):

 

 

 

 

 

 

 

 

 

Non-controlled/non-affiliate company investments

 

17,509

 

(552

)

113,590

 

1,336

 

Non-controlled affiliate company investments

 

16,064

 

14,916

 

35,152

 

3,644

 

Controlled affiliate company investments

 

23,934

 

17,699

 

31,321

 

10,773

 

Foreign currency transactions

 

 

(37

)

(152

)

(55

)

Net unrealized gains (losses)

 

57,507

 

32,026

 

179,911

 

15,698

 

 

 

 

 

 

 

 

 

 

 

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

 

58,735

 

30,370

 

188,565

 

11,466

 

 

 

 

 

 

 

 

 

 

 

GAIN ON THE ACQUISITION OF ALLIED CAPITAL CORPORATION

 

 

 

195,876

 

 

REALIZED GAIN (LOSS) ON EXTINGUISHMENT OF DEBT

 

(1,578

)

 

(1,961

)

26,543

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE IN STOCKHOLDERS’ EQUITY RESULTING FROM OPERATIONS

 

$

128,377

 

$

63,276

 

$

534,946

 

$

133,063

 

 

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED EARNINGS PER COMMON SHARE (Note 4)

 

$

0.67

 

$

0.62

 

$

3.16

 

$

1.34

 

 

 

 

 

 

 

 

 

 

 

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

 

192,167,337

 

102,831,909

 

169,499,905

 

99,066,652

 

 

See accompanying notes to consolidated financial statements.

 

2



Table of Contents

 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of September 30, 2010 (unaudited)

(dollar amounts in thousands, except per unit data)

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair
Value

 

Fair
Value
Per Unit

 

Percentage
of Net
Assets

 

Investment Funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AGILE Fund I, LLC (7)

 

Investment partnership

 

Member interest (0.50% interest)

 

 

 

4/1/2010

 

$

264

 

$

217

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BB&T Capital Partners/Windsor Mezzanine Fund, LLC (6)

 

Investment partnership

 

Member interest (32.59% interest)

 

 

 

4/1/2010

 

12,877

 

15,190

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Callidus Debt Partners CDO Fund I, Ltd. (8)

 

Investment company

 

Class C notes ($18,800 par due 12/2013)

 

4.59%

 

4/1/2010

 

2,518

 

1,448

 

$

0.08

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class D notes ($9,400 par due 12/2013)

 

 

 

4/1/2010

 

 

 

$

 —

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

2,518

 

1,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Callidus Debt Partners CLO Fund III, Ltd. (8)

 

Investment company

 

Preferred shares (23,600,000 shares )

 

9.05%

 

4/1/2010

 

4,753

 

6,874

 

$

0.31

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Callidus Debt Partners CLO Fund IV, Ltd. (8)

 

Investment company

 

Class D notes ($3,000 par due 4/2020)

 

4.84% (Libor + 4.55%/Q)

 

4/1/2010

 

1,789

 

1,741

 

$

0.58

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated notes ($17,500 par due 4/2020)

 

14.03%

 

4/1/2010

 

7,216

 

10,285

 

$

0.59

(16)

 

 

 

 

 

 

 

 

 

 

 

 

9,005

 

12,026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Callidus Debt Partners CLO Fund V, Ltd. (8)

 

Investment company

 

Subordinated notes ($14,150 par due 11/2020)

 

19.70%

 

4/1/2010

 

8,692

 

11,096

 

$

0.78

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Callidus Debt Partners CLO Fund VI, Ltd. (8)

 

Investment company

 

Class D notes ($9,000 par due 10/2021)

 

6.29% (Libor + 6.00%/Q)

 

4/1/2010

 

3,962

 

4,241

 

$

0.47

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated notes ($25,500 par due 10/2021)

 

18.39%

 

4/1/2010

 

11,050

 

17,101

 

$

0.67

(16)

 

 

 

 

 

 

 

 

 

 

 

 

15,012

 

21,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Callidus Debt Partners CLO Fund VII, Ltd. (8)

 

Investment company

 

Subordinated notes ($28,000 par due 1/2021)

 

13.27%

 

4/1/2010

 

10,374

 

15,080

 

$

0.54

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Callidus MAPS CLO Fund I LLC

 

Investment company

 

Class E notes ($17,000 par due 12/2017)

 

5.80% (Libor + 5.53%/Q)

 

4/1/2010

 

11,679

 

11,244

 

$

0.66

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated Notes ($47,900 par due 12/2017)

 

9.18%

 

4/1/2010

 

13,419

 

17,946

 

$

0.37

(16)

 

 

 

 

 

 

 

 

 

 

 

 

25,098

 

29,190

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Callidus MAPS CLO Fund II, Ltd.

 

Investment company

 

Class D notes ($7,700 par due 7/2022)

 

4.54% (Libor + 4.25%/Q)

 

4/1/2010

 

3,324

 

4,049

 

$

0.53

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated notes ($17,900 par due 7/2022)

 

19.30%

 

4/1/2010

 

8,977

 

12,906

 

$

0.72

(16)

 

 

 

 

 

 

 

 

 

 

 

 

12,301

 

16,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Catterton Partners VI, L.P.

 

Investment partnership

 

Limited partnership interest (0.50% interest)

 

 

 

4/1/2010

 

1,721

 

2,226

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CIC Flex, LP (9)

 

Investment partnership

 

Limited partnership units (0.94 unit)

 

 

 

9/7/2007

 

53

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cortec Group Fund IV, L.P.

 

Investment partnership

 

Limited partnership interest (2.53% interest)

 

 

 

4/1/2010

 

4,628

 

4,355

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covestia Capital Partners, LP (9)

 

Investment partnership

 

Limited partnership interest (47.00% interest)

 

 

 

6/17/2008

 

1,059

 

982

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dryden XVIII Leveraged Loan 2007 Limited (8)

 

Investment company

 

Class B notes ($9,000 par due 10/2019)

 

4.79% (Libor + 4.50%/Q)

 

4/1/2010

 

3,753

 

3,562

 

$

0.40

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated notes ($21,164 par due 10/2019)

 

22.03%

 

4/1/2010

 

12,715

 

16,486

 

$

0.78

(16)

 

 

 

 

 

 

 

 

 

 

 

 

16,468

 

20,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dynamic India Fund IV

 

Investment company

 

Member interest (5.44% interest)

 

 

 

4/1/2010

 

4,822

 

4,822

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fidus Mezzanine Capital, L.P.

 

Investment partnership

 

Limited partnership interest (29.12% interest)

 

 

 

4/1/2010

 

9,206

 

9,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Firstlight Financial Corporation (6)(9)

 

Investment company

 

Senior subordinated loan ($73,625 par due 12/2016)

 

1.00% PIK

 

12/31/2006

 

73,433

 

47,857

 

$

0.65

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (10,000 shares )

 

 

 

12/31/2006

 

10,000

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (30,000 shares )

 

 

 

12/31/2006

 

30,000

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

113,433

 

47,857

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HCI Private Equity Managers, LP (7) (8)

 

Investment company

 

Member interest (100% interest)

 

 

 

4/1/2010

 

808

 

973

 

$

0.81

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ivy Hill Middle Market Credit Fund, Ltd. (7)(8)(9)

 

Investment company

 

Class B deferrable interest notes ($40,000 par due 11/2018)

 

6.48% (Libor + 6.00%/Q)

 

11/20/2007

 

15,351

 

14,737

 

$

0.96

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated notes ($15,351 par due 11/2018)

 

15.50%

 

11/20/2007

 

40,000

 

37,200

 

$

0.93

(16)

 

 

 

 

 

 

 

 

 

 

 

 

55,351

 

51,937

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Knightsbridge CLO 2007-1 Ltd. (7)(8)

 

Investment company

 

Class E notes ($20,350 par due 1/2022)

 

9.29% (Libor + 9.00%/Q)

 

3/24/2010

 

14,852

 

11,296

 

$

0.56

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Knightsbridge CLO 2008-1 Ltd. (7)(8)

 

Investment company

 

Class C notes ($14,400 par due 6/2018)

 

7.79% (Libor + 7.50%/Q)

 

3/24/2010

 

14,400

 

14,400

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class D notes ($9,000 par due 6/2018)

 

8.79% (Libor + 8.50%/Q)

 

3/24/2010

 

9,000

 

9,000

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class E notes ($14,850 par due 6/2018)

 

5.29% (Libor + 5.00%/Q)

 

3/24/2010

 

13,596

 

9,914

 

$

0.67

(16)

 

 

 

 

 

 

 

 

 

 

 

 

36,996

 

33,314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kodiak Fund LP

 

Investment partnership

 

Limited partnership interest (1.52% interest)

 

 

 

4/1/2010

 

932

 

784

 

 

 

 

 

 

3



Table of Contents

 

Novak Biddle Venture Partners III, L.P.

 

Investment partnership

 

Limited partnership interest (2.47% interest)

 

 

 

4/1/2010

 

697

 

673

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pangaea CLO 2007-1 Ltd. (8)

 

Investment company

 

Class D notes ($15,000 par due 1/2021)

 

5.04% (Libor + 4.75%/Q)

 

4/1/2010

 

8,950

 

7,710

 

$

0.51

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partnership Capital Growth Fund I, LP (9)

 

Investment partnership

 

Limited partnership interest (25% interest)

 

 

 

6/16/2006

 

2,380

 

2,394

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Secured Loan Fund LLC (7) (15)

 

Investment partnership

 

Subordinated certificates ($411,173 par due 12/2015)

 

(Libor + 8.00%/Q)

 

10/30/2009

 

400,451

 

425,500

 

$

1.03

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SPP Mezzanine Funding II, L.P.

 

Investment partnership

 

Limited partnership interest (42.73% interest)

 

 

 

4/1/2010

 

5,605

 

6,226

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trivergance Capital Partners, LP (9)

 

Investment partnership

 

Limited partnership interest (100% interest)

 

 

 

6/5/2008

 

2,925

 

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Webster Capital II, L.P.

 

Investment partnership

 

Limited partnership interest (2.44% interest)

 

 

 

4/1/2010

 

1,220

 

1,227

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

783,451

 

761,330

 

 

 

27.40

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Avborne, Inc. (7)

 

Maintenance, repair and overhaul service provider

 

Common stock (27,500 shares)

 

 

 

4/1/2010

 

39

 

39

 

$

1.42

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aviation Properties Corporation(7)

 

Aviation services

 

Common stock (100 shares)

 

 

 

4/1/2010

 

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BenefitMall Holdings, Inc.

 

Employee benefits broker services company

 

Senior subordinated loan ($40,326 par due 6/2014)

 

18.00%

 

4/1/2010

 

40,326

 

40,326

 

$

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (39,274,290 shares )

 

 

 

4/1/2010

 

53,510

 

49,679

 

$

1.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants

 

 

 

4/1/2010

 

 

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

93,836

 

90,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Booz Allen Hamilton, Inc.

 

Strategy and technology consulting services

 

Senior subordinated loan ($211 par due 7/2016)

 

13.00%

 

7/31/2008

 

185

 

186

 

$

0.88

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($10,484 par due 7/2016)

 

13.00%

 

7/31/2008

 

10,423

 

10,509

 

$

1.00

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($735 par due 7/2015)

 

7.50% (Libor + 4.50%/Q)

 

7/31/2008

 

723

 

735

 

$

1.00

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

11,331

 

11,430

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CitiPostal Inc. (7)

 

Document storage and management services

 

Senior secured revolving loan ($691 par due 12/2013)

 

6.50% (Libor + 4.50%/M)

 

4/1/2010

 

691

 

691

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured revolving loan ($1,250 par due 12/2013)

 

6.75% (Base Rate + 3.50%/Q)

 

4/1/2010

 

1,250

 

1,250

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($484 par due 12/2013)

 

11.00% Cash, 2.00% PIK

 

4/1/2010

 

484

 

484

 

$

1.00

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($49,585 par due 12/2013)

 

11.00% Cash, 2.00% PIK

 

4/1/2010

 

49,585

 

49,585

 

$

1.00

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($12,034 par due 12/2015)

 

16.00% PIK

 

4/1/2010

 

12,034

 

12,034

 

$

1.00

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (37,024 shares )

 

 

 

4/1/2010

 

 

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

64,044

 

64,044

 

 

 

 

 

 

4



Table of Contents

 

Cook Inlet Alternative Risk, LLC

 

Risk management services

 

Senior secured loan ($40,000 par due 4/2013)

 

 

 

4/1/2010

 

25,124

 

25,114

 

$

0.63

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($47,600 par due 4/2013)

 

 

 

4/1/2010

 

29,876

 

29,886

 

$

0.63

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Member interest (3.17% interest)

 

 

 

4/1/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

55,000

 

55,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coverall North America, Inc. (7)

 

Commercial janitorial service provider

 

Senior secured loan ($15,763 par due 7/2011)

 

12.00%

 

4/1/2010

 

15,763

 

15,763

 

$

1.00

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($15,864 par due 7/2011)

 

12.00%

 

4/1/2010

 

15,864

 

15,864

 

$

1.00

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($5,578 par due 7/2011)

 

15.00% Cash, 1.00% PIK

 

4/1/2010

 

5,574

 

1,290

 

$

0.23

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (763,333 shares)

 

 

 

4/1/2010

 

2,999

 

 

 

$

   —

 

 

 

 

 

 

 

 

 

 

 

 

 

40,200

 

32,917

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital VideoStream, LLC

 

Media content supply chain services company

 

Senior secured loan ($259 par due 2/2012)

 

10.00% Cash, 1.00% PIK

 

4/1/2010

 

259

 

259

 

$

1.00

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($9 par due 2/2012)

 

10.00% Cash, 1.00% PIK

 

4/1/2010

 

7

 

9

 

$

1.04

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($10,626 par due 2/2012)

 

10.00% Cash, 1.00% PIK

 

4/1/2010

 

10,567

 

10,626

 

$

1.00

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible subordinated loan ($5,403 par due 2/2016)

 

10.00% PIK

 

4/1/2010

 

5,838

 

5,713

 

$

1.06

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

16,671

 

16,607

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diversified Collection Services, Inc.

 

Collections services

 

Senior secured loan ($7,000 par due 3/2012)

 

7.50% (Libor + 5.50%/Q)

 

4/1/2010

 

7,000

 

7,000

 

$

1.00

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($34,000 par due 9/2012)

 

13.75% (Libor + 11.75%/Q)

 

4/1/2010

 

34,000

 

34,000

 

$

1.00

(2)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($2,000 par due 9/2012)

 

13.75% (Libor + 11.75%/Q)

 

4/1/2010

 

2,000

 

2,000

 

$

1.00

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock (14,927 shares)

 

 

 

5/18/2006

 

169

 

284

 

$

         19.03

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (114,004 shares )

 

 

 

2/5/2005

 

295

 

520

 

$

4.56

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (478,816 shares )

 

 

 

4/1/2010

 

1,478

 

1,721

 

$

3.59

 

 

 

 

 

 

 

 

 

 

 

 

 

44,942

 

45,525

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diversified Mercury Communications, LLC

 

Business media consulting services

 

Senior secured loan ($1,957 par due 3/2013)

 

8.00% (Base Rate + 4.50%/Q)

 

4/1/2010

 

1,780

 

1,561

 

$

0.80

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impact Innovations Group, LLC (7)

 

IT consulting and outsourcing services

 

Member interest (50% interest)

 

 

 

4/1/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Group Services, LLC (6)

 

Business consulting for private equity and corporate clients

 

Limited liability company membership interest (10.00% interest)

 

 

 

6/22/2006

 

 

538

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Track Holdings, LLC

 

Business media consulting services company

 

Senior subordinated loan ($23,345 par due 6/2014)

 

11.50% Cash, 4.40% PIK

 

4/1/2010

 

23,345

 

23,345

 

$

1.00

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-Ad Services, Inc. (6)

 

Marketing services and software provider

 

Senior secured loan ($1,870 par due 11/2011)

 

11.25%

 

4/1/2010

 

1,870

 

1,870

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred units (1,725,280 units)

 

 

 

4/1/2010

 

788

 

1,269

 

$

0.73

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units (1,725,280 units)

 

 

 

4/1/2010

 

 

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

2,658

 

3,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MVL Group, Inc. (7)

 

Marketing research provider

 

Senior secured loan ($25,260 par due 7/2012)

 

12.00%

 

4/1/2010

 

25,260

 

25,260

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Junior subordinated loan ($37,127 par due 7/2012)

 

12.00% Cash, 2.50% PIK

 

4/1/2010

 

35,902

 

37,127

 

$

1.00

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Junior subordinated loan ($144 par due 7/2012)

 

10.00%

 

4/1/2010

 

 

24

 

$

0.17

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (554,091 shares )

 

 

 

4/1/2010

 

 

 

$

   —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (6,625 shares )

 

 

 

4/1/2010

 

 

 

$

   —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

61,162

 

62,411

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PC Helps Support, LLC

 

Technology support provider

 

Senior secured loan ($7,272 par due 12/2013)

 

3.55% (Libor + 3.25%/M)

 

4/1/2010

 

7,272

 

7,199

 

$

0.99

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($23,764 par due 12/2013)

 

12.76%

 

4/1/2010

 

23,764

 

23,764

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

31,036

 

30,963

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pillar Holdings LLC and PHL Holding Co. (6)

 

Mortgage services

 

Senior secured loan ($1,875 par due 5/2014)

 

14.50%

 

7/31/2008

 

1,875

 

1,875

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($5,500 par due 5/2014)

 

14.50%

 

7/31/2008

 

5,500

 

5,500

 

$

1.00

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($14,937 par due 11/2013)

 

5.79% (Libor + 5.50%/B)

 

11/20/2007

 

14,937

 

14,937

 

$

1.00

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($9,323 par due 11/2013)

 

5.79% (Libor + 5.50%/B)

 

11/20/2007

 

9,323

 

9,323

 

$

1.00

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (84.78 shares)

 

 

 

11/20/2007

 

3,768

 

7,080

 

$

   83,510.26

(16)

 

 

 

 

 

 

 

 

 

 

 

 

35,403

 

38,715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primis Marketing Group, Inc. and Primis Holdings, LLC (6)

 

Database marketing services

 

Senior subordinated loan ($10,222 par due 2/2013)

 

 

 

8/24/2006

 

10,222

 

102

 

$

0.01

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred units (4,000 units)

 

 

 

8/24/2006

 

3,600

 

 

$

   —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units (4,000,000 units)

 

 

 

8/24/2006

 

400

 

 

$

   —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

14,222

 

102

 

 

 

 

 

 

5



Table of Contents

 

Prommis Solutions, LLC, E-Default Services, LLC, Statewide Tax and Title Services, LLC & Statewide Publishing Services, LLC (formerly known as MR Processing Holding Corp.)

 

Bankruptcy and foreclosure processing services

 

Senior subordinated loan ($16,788 par due 2/2014)

 

11.50% Cash, 2.00% PIK

 

2/8/2007

 

16,788

 

16,788

 

$

1.00

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($27,032 par due 2/2014)

 

11.50% Cash, 2.00% PIK

 

2/8/2007

 

27,032

 

27,032

 

$

1.00

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred units (30,000 units)

 

 

 

4/11/2006

 

3,000

 

5,759

 

$

4.80

(16)

 

 

 

 

 

 

 

 

 

 

 

 

46,820

 

49,579

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Promo Works, LLC

 

Marketing services

 

Senior secured loan ($8,655 par due 12/2013)

 

11.00%

 

4/1/2010

 

5,105

 

7,394

 

$

0.85

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R2 Acquisition Corp.

 

Marketing services

 

Common stock (250,000 shares)

 

 

 

5/29/2007

 

250

 

176

 

$

0.70

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summit Business Media, LLC

 

Business media consulting services

 

Junior secured loan ($11,930 par due 7/2014)

 

 

 

8/3/2007

 

10,276

 

239

 

$

0.02

(3)(13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summit Energy Services, Inc.

 

Energy management consulting services

 

Common stock (38,778 shares)

 

 

 

4/1/2010

 

222

 

275

 

$

7.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (385,608 shares)

 

 

 

4/1/2010

 

2,336

 

2,732

 

$

7.09

 

 

 

 

 

 

 

 

 

 

 

 

 

2,558

 

3,007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradesmen International, Inc.

 

Construction labor support

 

Senior subordinated loan ($20,000 par due 5/2014)

 

10.00%

 

4/1/2010

 

14,048

 

18,000

 

$

0.90

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants to purchase up to 771,036 shares

 

 

 

4/1/2010

 

 

 

$

   —

 

 

 

 

 

 

 

 

 

 

 

 

 

14,048

 

18,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VSS-Tranzact Holdings, LLC (6)

 

Management consulting services

 

Common membership interest (8.51% interest)

 

 

 

10/26/2007

 

10,204

 

6,215

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trover Solutions, Inc.

 

Healthcare collections services

 

Senior subordinated loan ($2,829 par due 11/2012)

 

10.50% Cash, 1.50% PIK

 

4/1/2010

 

2,829

 

2,829

 

$

1.00

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($50,000 par due 11/2012)

 

10.50% Cash, 1.50% PIK

 

4/1/2010

 

50,000

 

50,000

 

$

1.00

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

52,829

 

52,829

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Venturehouse-Cibernet Investors, LLC

 

Financial settlement services for intercarrier wireless roaming

 

Equity interest 

 

 

 

4/1/2010

 

 

 

$

   —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

637,759

 

613,780

 

 

 

22.09%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare-Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Air Medical Group Holdings LLC (6)

 

Medical escort services

 

Senior secured revolving loan ($2,250 par due 3/2011)

 

4.00% (Base Rate + 0.75%/Q)

 

4/1/2010

 

2,202

 

2,250

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred equity interests

 

 

 

4/1/2010

 

15,107

 

27,439

 

$

         11.05

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred equity interests

 

 

 

4/1/2010

 

3,098

 

5,626

 

$

         11.05

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity interests

 

 

 

4/1/2010

 

 

 

$

   —

 

 

 

 

 

 

 

 

 

 

 

 

 

20,407

 

35,315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Axium Healthcare Pharmacy, Inc.

 

Specialty pharmacy provider

 

Senior subordinated loan ($3,160 par due 3/2015)

 

8.00% PIK

 

4/1/2010

 

2,903

 

3,002

 

$

0.95

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CCS Group Holdings, LLC

 

Correctional facility healthcare operator

 

Class A units (1,000,000 units)

 

 

 

8/19/2010

 

1,000

 

1,000

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Healthcare analysis services

 

Preferred stock (7,427 shares)

 

 

 

6/15/2007

 

8,763

 

8,325

 

$

     1,120.92

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (9,679 shares)

 

 

 

6/15/2007

 

4,000

 

9,595

 

$

       991.32

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (1,546 shares)

 

 

 

6/15/2007

 

 

1,533

 

$

       991.58

(16)

 

 

 

 

 

 

 

 

 

 

 

 

12,763

 

19,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DSI Renal Inc. (6)

 

Dialysis provider

 

Senior secured loan ($9,410 par due 3/2013)

 

9.00% (Libor + 7.00%/M)

 

4/4/2006

 

9,121

 

9,410

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($67,290 par due 4/2014)

 

6.00% Cash, 11.00% PIK

 

4/4/2006

 

66,804

 

67,290

 

$

1.00

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units (19,726 units)

 

 

 

4/4/2006

 

19,684

 

27,343

 

$

     1,386.14

(16)

 

 

 

 

 

 

 

 

 

 

 

 

95,609

 

104,043

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GG Merger Sub I, Inc.

 

Drug testing services

 

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

 

4.30% (Libor + 4.00%/Q)

 

12/14/2007

 

11,026

 

10,868

 

$

0.96

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

4.30% (Libor + 4.00%/Q)

 

12/14/2007

 

11,460

 

11,296

 

$

0.94

(3)

 

 

 

 

 

 

 

 

 

 

 

 

22,486

 

22,164

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HCP Acquisition Holdings, LLC (7)

 

Healthcare compliance advisory services

 

Class A units (10,044,176 units)

 

 

 

6/26/2008

 

10,044

 

5,154

 

$

0.51

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heartland Dental Care, Inc.

 

Dental services

 

Senior subordinated loan ($27,717 par due 7/2014)

 

14.25%

 

7/31/2008

 

27,717

 

27,717

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INC Research, Inc.

 

Consulting service provider to pharmaceutical and biotechnology companies

 

Senior subordinated loan ($10,000 par due 9/2017)

 

13.50%

 

9/27/2010

 

10,000

 

10,000

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (1,000,000 shares)

 

 

 

9/27/2010

 

1,000

 

1,000

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

11,000

 

11,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Healthcare professional provider

 

Senior secured revolving loan ($350 par due 9/2016)

 

9.75% (Libor + 8.75%/Q)

 

9/13/2010

 

350

 

350

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($127,500 par due 9/2016)

 

9.75% (Libor + 8.75%/Q)

 

9/13/2010

 

127,500

 

127,500

 

$

1.00

(14)(16)

 

 

 

6



Table of Contents

 

 

 

 

 

 

 

 

 

 

 

127,850

 

127,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MWD Acquisition Sub, Inc.

 

Dental services

 

Junior secured loan ($5,000 par due 5/2013)

 

6.51% (Libor + 6.25%/M)

 

5/3/2007

 

5,000

 

4,750

 

$

0.95

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Healthcare equipment services

 

Junior secured loan ($19,195 par due 1/2014)

 

 

 

1/31/2007

 

19,195

 

960

 

$

0.05

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Junior secured loan ($11,517 par due 1/2014)

 

 

 

1/31/2007

 

11,517

 

576

 

$

0.05

(3)(13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (50,000 shares )

 

 

 

1/31/2007

 

5,000

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

35,712

 

1,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NS Merger Sub. Inc. and NS Holdings, Inc.

 

Healthcare technology provider

 

Senior subordinated loan ($579 par due 6/2017)

 

13.50%

 

6/21/2010

 

579

 

579

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($50,000 par due 6/2017)

 

13.50%

 

6/21/2010

 

50,000

 

50,000

 

$

1.00

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (2,500,000 shares)

 

 

 

6/21/2010

 

2,500

 

2,500

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

53,079

 

53,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OnCURE Medical Corp.

 

Radiation oncology care provider

 

Common stock (857,143 shares)

 

 

 

8/18/2006

 

3,000

 

2,156

 

$

2.52

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Healthcare technology provider

 

Senior secured loan ($11,387 par due 5/2014)

 

10.50% (Libor + 7.50%/B)

 

5/9/2008

 

11,387

 

11,387

 

$

1.00

(2)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($10,511 par due 5/2014)

 

10.50% (Libor + 7.50%/B)

 

5/9/2008

 

10,511

 

10,511

 

$

1.00

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

10% PIK

 

7/30/2008

 

10,848

 

10,848

 

$

6.80

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (16,106 shares)

 

 

 

7/30/2008

 

100

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

32,846

 

32,746

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PG Mergersub, Inc.

 

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

 

Senior subordinated loan ($4,000 par due 3/2016)

 

12.50%

 

3/12/2008

 

3,946

 

4,000

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (16,667 shares)

 

 

 

3/12/2008

 

167

 

553

 

$

33.18

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock (333 shares)

 

 

 

3/12/2008

 

333

 

11

 

$

33.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

4,446

 

4,564

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reed Group, Ltd.

 

Medical disability management services provider

 

Senior secured revolving loan ($1,250 par due 12/2013)

 

 

 

4/1/2010

 

1,097

 

1,063

 

$

0.85

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($10,755 par due 12/2013)

 

 

 

4/1/2010

 

9,129

 

9,142

 

$

0.85

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($19,625 par due 12/2013)

 

 

 

4/1/2010

 

15,918

 

10,842

 

$

0.55

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity interests

 

 

 

4/1/2010

 

203

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

26,347

 

21,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regency Healthcare Group, LLC (6)

 

Hospice provider

 

Preferred member interest (1,293,960 units)

 

 

 

4/1/2010

 

2,007

 

1,778

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Soteria Imaging Services, LLC (6)

 

Outpatient medical imaging provider

 

Junior secured loan ($1,750 par due 11/2010)

 

14.50%

 

4/1/2010

 

1,707

 

1,575

 

$

0.90

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Junior secured loan ($2,500 par due 11/2010)

 

12.50%

 

4/1/2010

 

2,439

 

2,250

 

$

0.90

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred member interest (1,823,139 units)

 

 

 

4/1/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,146

 

3,825

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Renal Care, Inc.

 

Dialysis provider

 

Senior subordinated loan ($20,132 par due 5/2017)

 

11.25% Cash, 2.00% PIK

 

5/24/2010

 

20,132

 

20,132

 

$

1.00

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Univita Health, Inc.

 

Outsourced services provider

 

Senior subordinated loan ($20,935 par due 12/2014)

 

12.00% Cash, 3.00% PIK

 

12/22/2009

 

20,935

 

20,935

 

$

1.00

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VOTC Acquisition Corp.

 

Radiation oncology care provider

 

Senior secured loan ($7,542 par due 7/2012)

 

11.00% Cash, 2.00% PIK

 

6/30/2008

 

7,542

 

7,542

 

$

1.00

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock (3,888,222 shares)

 

 

 

7/14/2008

 

8,748

 

7,511

 

$

1.93

(16)

 

 

 

 

 

 

 

 

 

 

 

 

16,290

 

15,053

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

555,719

 

538,299

 

 

 

19.37%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurants and Food Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADF Capital, Inc. & ADF Restaurant Group, LLC

 

Restaurant owner and operator

 

Senior secured revolving loan ($2,010 par due 11/2012)

 

6.50% (Libor + 3.50%/Q)

 

11/27/2006

 

2,010

 

2,010

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured revolving loan ($108 par due 11/2012)

 

6.50% (Base Rate + 2.50%/Q)

 

11/27/2006

 

108

 

108

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($23,149 par due 11/2013)

 

12.50% (Libor + 6.50%/Q)

 

11/27/2006

 

23,155

 

23,149

 

$

1.00

(2)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($10,850 par due 11/2013)

 

12.50% (Libor + 6.50%/Q)

 

11/27/2006

 

10,850

 

10,850

 

$

1.00

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Promissory note ($13,105 par due 11/2016)

 

12.00% PIK

 

6/1/2006

 

14,886

 

13,214

 

$

1.01

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants to purchase up to 0.61 shares

 

 

 

6/1/2006

 

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

51,009

 

49,331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Encanto Restaurants, Inc. (8)

 

Restaurant owner and operator

 

Junior secured loan ($20,997 par due 8/2013)

 

11.00%

 

8/16/2006

 

20,997

 

19,317

 

$

0.92

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Junior secured loan ($3,999 par due 8/2013)

 

11.00%

 

8/16/2006

 

3,999

 

3,679

 

$

0.92

(3)

 

 

 

 

 

 

 

 

 

 

 

 

24,996

 

22,996

 

 

 

 

 

 

7



Table of Contents

 

Fulton Holdings Corp

 

Airport restaurant operator

 

Senior secured loan ($40,000 par due 5/2016)

 

12.50%

 

5/28/2010

 

40,000

 

40,000

 

$

1.00

(2)(11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (19,672 shares)

 

 

 

5/28/2010

 

1,967

 

2,292

 

$

 116.51

(16)

 

 

 

 

 

 

 

 

 

 

 

 

41,967

 

42,292

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hot Stuff Foods, LLC (7)

 

Convenience food service retailer

 

Senior secured loan ($36,467 par due 9/2014)

 

10.00% (Libor + 8.50%/M)

 

4/1/2010

 

36,467

 

36,467

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Junior secured loan ($31,320 par due 9/2014)

 

14.00%

 

4/1/2010

 

24,581

 

31,421

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($20,841 par due 2/2013)

 

 

 

4/1/2010

 

 

 

$

 —

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Junior subordinated loan ($31,532 par due 2/2013)

 

 

 

4/1/2010

 

 

 

$

 —

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A common units (25,001 units)

 

 

 

4/1/2010

 

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class B common units (1,122,452 units)

 

 

 

4/1/2010

 

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

61,048

 

67,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Huddle House, Inc. (7)

 

Restaurant owner and operator

 

Senior subordinated loan ($20,145 par due 12/2015)

 

12.00% Cash, 3.00% PIK

 

4/1/2010

 

19,893

 

16,469

 

$

0.82

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (358,428 shares)

 

 

 

4/1/2010

 

 

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

19,893

 

16,469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTG Management, Inc.

 

Airport restaurant operator

 

Junior secured loan ($7,546 par due 6/2013)

 

16.00% (Libor + 11.00% Cash, 2.00% PIK/M)

 

6/19/2008

 

7,546

 

7,546

 

$

1.00

(4)(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Junior secured loan ($41,603 par due 6/2013)

 

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

 

6/19/2008

 

41,695

 

41,603

 

$

1.00

(4)(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants to purchase up to 100,857 shares of common stock

 

 

 

6/19/2008

 

100

 

4,424

 

$

43.86

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants to purchase up to 9 shares of common stock

 

 

 

6/19/2008

 

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

49,341

 

53,573

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PMI Holdings, Inc.

 

Restaurant owner and operator

 

Senior secured revolving loan ($575 par due 5/2015)

 

10.00% (Libor + 8.00%/B)

 

5/5/2010

 

575

 

575

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($9,946 par due 5/2015)

 

10.00% (Libor + 8.00%/B)

 

5/5/2010

 

9,946

 

9,946

 

$

1.00

(2)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($9,946 par due 5/2015)

 

10.00% (Libor + 8.00%/B)

 

5/5/2010

 

9,946

 

9,946

 

$

1.00

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($4 par due 5/2015)

 

10.25% (Base Rate + 7.00%/M)

 

5/5/2010

 

4

 

4

 

$

0.92

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($4 par due 5/2015)

 

10.25% (Base Rate + 7.00%/M)

 

5/5/2010

 

4

 

4

 

$

0.92

(3)

 

 

 

 

 

 

 

 

 

 

 

 

20,475

 

20,475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

S.B. Restaurant Company

 

Restaurant owner and operator

 

Senior secured loan ($38,327 par due 4/2011)

 

11.75%

 

4/1/2010

 

28,546

 

35,598

 

$

0.93

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock (46,690 shares)

 

 

 

4/1/2010

 

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants to purchase up to 534,049 shares of common stock

 

 

 

4/1/2010

 

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

28,546

 

35,598

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vistar Corporation and Wellspring Distribution Corp.

 

Food service distributor

 

Senior subordinated loan ($31,625 par due 5/2015)

 

13.50%

 

5/23/2008

 

31,625

 

31,625

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($30,000 par due 5/2015)

 

13.50%

 

5/23/2008

 

30,000

 

30,000

 

$

1.00

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

5/3/2008

 

7,500

 

5,391

 

$

3.95

(16)

 

 

 

 

 

 

 

 

 

 

 

 

69,125

 

67,016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

366,400

 

375,638

 

 

 

13.52%

 

Financial Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AllBridge Financial, LLC (7)

 

Asset management services

 

Equity interests

 

 

 

4/1/2010

 

11,370

 

11,325

 

$

0.28

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Callidus Capital Corporation (7)

 

Asset management services

 

Senior subordinated loan ($4,594 par due 8/2013)

 

 

 

4/1/2010

 

4,120

 

4,594

 

$

1.00

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (100 shares )

 

 

 

4/1/2010

 

 

2,106

 

$

21,060

(16)

 

 

 

 

 

 

 

 

 

 

 

 

4,120

 

6,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carador PLC (6)(8)(9)

 

Investment company

 

Ordinary shares (7,110,525 shares )

 

 

 

12/15/2006

 

9,033

 

4,586

 

$

0.64

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ciena Capital LLC (7)

 

Real estate and small business loan servicer

 

Senior secured revolving loan ($319,031 par due 3/2009)

 

 

 

4/1/2010

 

78,971

 

77,690

 

$

0.24

(13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($4,969 par due 3/2011)

 

 

 

4/1/2010

 

5,041

 

1,210

 

$

0.24

(13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class B equity interests

 

 

 

4/1/2010

 

 

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class C equity interests

 

 

 

4/1/2010

 

 

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

84,012

 

78,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Credit Group, Inc.

 

Commercial equipment finance and leasing company

 

Senior subordinated loan ($6,000 par due 6/2015)

 

15.00%

 

4/1/2010

 

6,000

 

6,000

 

$

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($4,000 par due 6/2015)

 

15.00%

 

4/1/2010

 

4,000

 

4,000

 

$

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($9,500 par due 6/2015)

 

15.00%

 

4/1/2010

 

9,500

 

9,500

 

$

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

19,500

 

19,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compass Group Diversified Holdings, LLC (17)

 

Middle market business manager

 

Senior secured revolving loan ($5,147 par due 12/2012)

 

2.76% (Libor + 2.50%/Q)

 

4/1/2010

 

5,147

 

5,147

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured revolving loan ($882 par due 12/2012)

 

2.80% (Libor + 2.50%/Q)

 

4/1/2010

 

882

 

882

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured revolving loan ($735 par due 12/2012)

 

2.80% (Libor + 2.50%/Q)

 

4/1/2010

 

735

 

735

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured revolving loan ($684 par due 12/2012)

 

4.75% (Base Rate + 1.50%/M)

 

4/1/2010

 

684

 

684

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

7,448

 

7,448

 

 

 

 

 

 

8



Table of Contents

 

Financial Pacific Company (7)

 

Commercial finance leasing

 

Senior subordinated loan ($20,902 par due 2/2012)

 

7.99%

 

4/1/2010

 

11,264

 

11,760

 

$

 0.56

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($20,902 par due 2/2012)

 

7.99%

 

4/1/2010

 

11,263

 

11,760

 

$

0.56

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($19,334 par due 2/2012)

 

7.99%

 

4/1/2010

 

10,373

 

10,878

 

$

0.56

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Junior subordinated loan ($10,399 par due 8/2012)

 

 

 

4/1/2010

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock (8,583 shares )

 

 

 

4/1/2010

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock (424 shares )

 

 

 

4/1/2010

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock (450 shares )

 

 

 

4/1/2010

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (12,711 shares )

 

 

 

4/1/2010

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

32,900

 

34,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Imperial Capital Group, LLC and Imperial Capital Private Opportunities, LP (6)(9)

 

Investment company

 

Common units (2,526 shares )

 

 

 

5/10/2007

 

3

 

4,637

 

$

1,835.31

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units (315 shares )

 

 

 

5/10/2007

 

 

578

 

$

1,834.92

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units (7,710 shares )

 

 

 

5/10/2007

 

14,997

 

14,152

 

$

1,835.54

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limited partnership interest (80% interest)

 

 

 

5/10/2007

 

6,794

 

5,316

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

21,794

 

24,683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ivy Hill Asset Management, L.P. (7)

 

Asset management services

 

Member interest

 

 

 

6/15/2009

 

96,328

 

119,976

 

$

1.25

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VSC Investors LLC (9)

 

Investment company

 

Membership interest (4.63% interest)

 

 

 

1/24/2008

 

819

 

642

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

287,324

 

308,158

 

 

 

11.09%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products-Non-durable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Augusta Sportswear, Inc.

 

Manufacturer of athletic apparel

 

Senior secured loan ($15,561 par due 7/2015)

 

8.50% (Libor + 7.50%/Q)

 

9/3/2010

 

15,561

 

15,561

 

$

1.00

(2)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($9,377 par due 7/2015)

 

8.50% (Libor + 7.50%/Q)

 

9/3/2010

 

9,377

 

9,377

 

$

1.00

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

24,938

 

24,938

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blacksmith Brands Holdings, Inc. and Blacksmith Brands, Inc.

 

Consumer products and personal care manufacturer

 

Senior secured loan ($22,060 par due 12/2014)

 

12.50% (Base Rate + 8.50%/Q)

 

10/23/2009

 

22,060

 

22,060

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gilchrist & Soames, Inc.

 

Personal care manufacturer

 

Senior subordinated loan ($23,519 par due 10/2013)

 

13.44%

 

4/1/2010

 

22,686

 

23,519

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insight Pharmaceuticals Corporation (6)

 

OTC drug products manufacturer

 

Senior subordinated loan ($5,271 par due 9/2012)

 

13.00% Cash, 2.00% PIK

 

4/1/2010

 

5,271

 

5,271

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($50,000 par due 9/2012)

 

13.00% Cash, 2.00% PIK

 

4/1/2010

 

50,000

 

50,000

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (155,000 shares)

 

 

 

4/1/2010

 

12,070

 

12,627

 

$

81.46

(16)

 

 

 

 

 

 

 

 

 

 

 

 

67,341

 

67,898

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Making Memories Wholesale, Inc. (7)

 

Scrapbooking branded products manufacturer

 

Senior secured revolving loan ($250 par due 8/2014)

 

10.00% (Libor + 6.50%/Q)

 

8/21/2009

 

250

 

250

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured revolving loan ($250 par due 8/2014)

 

10.00% (Libor + 6.50%/Q)

 

8/21/2009

 

250

 

250

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured revolving loan ($500 par due 8/2014)

 

10.00% (Libor + 6.50%/Q)

 

8/21/2009

 

500

 

500

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($9,625 par due 8/2014)

 

10.00% (Base Rate + 5.50%/Q)

 

8/21/2009

 

7,670

 

7,475

 

$

0.78

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($5,436 par due 8/2014)

 

 

 

8/21/2009

 

4,059

 

 

$

(13)(16)

 

 

 

 

 

 

Common stock (100 shares)

 

 

 

8/21/2009

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,729

 

8,475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Step2 Company, LLC

 

Toy manufacturer

 

Senior secured loan ($94,358 par due 4/2012)

 

12.00% Cash, 1.00% PIK

 

4/1/2010

 

89,300

 

86,479

 

$

0.92

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity interest

 

 

 

4/1/2010

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred equity interest

 

 

 

4/1/2010

 

24

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

89,324

 

86,479

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Thymes, LLC (7)

 

Cosmetic products manufacturer

 

Preferred units (6,283 units)

 

8.00% PIK

 

6/21/2007

 

6,920

 

6,424

 

$

1,022.51

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units (5,400 units)

 

 

 

6/21/2007

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

6,920

 

6,424

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Woodstream Corporation

 

Pet products manufacturer

 

Senior subordinated loan ($4,743 par due 2/2015)

 

12.00%

 

1/22/2010

 

4,534

 

4,506

 

$

0.95

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($50,257 par due 2/2015)

 

12.00%

 

1/22/2010

 

43,264

 

47,745

 

$

0.95

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (4,254 shares)

 

 

 

1/22/2010

 

1,222

 

2,153

 

$

 506.12

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49,020

 

54,404

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

295,018

 

294,197

 

 

 

10.59%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Education

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Education software developer

 

Preferred stock (493,147 shares)

 

 

 

2/8/2008

 

9,949

 

13,811

 

$

28.01

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Community Education Centers, Inc.

 

Offender re-entry and in-prison treatment services provider

 

Senior subordinated loan ($38,096 par due 11/2013)

 

 

 

4/1/2010

 

35,203

 

37,334

 

$

0.98

(13)(16)

 

 

 

9



Table of Contents

 

eInstruction Corporation

 

Developer, manufacturer and retailer of educational products

 

Junior secured loan ($17,000 par due 7/2014)

 

7.79% (Libor + 7.50%/M)

 

4/1/2010

 

14,761

 

15,300

 

$

0.90

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($22,356 par due 1/2015)

 

16.00% PIK

 

4/1/2010

 

20,355

 

21,238

 

$

0.95

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (2,406 shares)

 

 

 

4/1/2010

 

926

 

1,710

 

$

 710.72

(16)

 

 

 

 

 

 

 

 

 

 

 

 

36,042

 

38,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ELC Acquisition Corporation

 

Developer, manufacturer and retailer of educational products

 

Senior secured loan ($160 par due 11/2012)

 

3.51% (Libor + 3.25%/M)

 

11/30/2006

 

160

 

160

 

$

1.00

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

7.26% (Libor + 7.00%/M)

 

11/30/2006

 

8,333

 

8,333

 

$

1.00

(3)

 

 

 

 

 

 

 

 

 

 

 

 

8,493

 

8,493

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Private school operator

 

Series B preferred stock (1,401,385 shares)

 

 

 

8/5/2010

 

4,004

 

4,004

 

$

2.86

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series B preferred stock (348,615 shares)

 

 

 

8/5/2010

 

996

 

996

 

$

2.86

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series C preferred stock (1,994,644 shares)

 

 

 

6/7/2010

 

547

 

2,586

 

$

1.30

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series C preferred stock (517,942 shares)

 

 

 

6/7/2010

 

142

 

672

 

$

1.30

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (16 shares)

 

 

 

6/7/2010

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (4 shares)

 

 

 

6/7/2010

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

5,689

 

8,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JTC Education Holdings, Inc.

 

Postsecondary school operator

 

Senior secured loan ($20,123 par due 12/2014)

 

12.50% (Libor + 9.50%/M)

 

12/31/2009

 

20,123

 

20,123

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($10,931 par due 12/2014)

 

12.50% (Libor + 9.50%/M)

 

12/31/2009

 

10,931

 

10,931

 

$

1.00

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

31,054

 

31,054

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Medical school operator

 

Senior secured loan ($6,775 par due 4/2013)

 

9.00% (Libor + 6.00%/M)

 

4/3/2007

 

6,775

 

10,181

 

$

1.50

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($10,113 par due 4/2013)

 

9.00% (Libor + 6.00%/Q)

 

9/21/2007

 

10,113

 

15,197

 

$

1.50

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

9.00% (Libor + 6.00%/Q)

 

9/21/2007

 

4,000

 

6,011

 

$

1.50

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($5,547 par due 4/2013)

 

13.00% PIK

 

12/8/2009

 

2,026

 

8,336

 

$

1.50

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock (8,000 shares)

 

 

 

7/30/2008

 

2,000

 

1,000

 

$

 125.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock (800 shares)

 

 

 

7/30/2008

 

200

 

100

 

$

 125.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants to purchase up to 27,890 shares

 

 

 

12/8/2009

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common membership interest (26.27% interest)

 

 

 

9/21/2007

 

15,800

 

20,708

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,914

 

61,533

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

167,344

 

198,731

 

 

 

7.15%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Component Hardware Group, Inc.

 

Commercial equipment

 

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

 

6.00% Cash, 4.00% PIK

 

8/4/2010

 

3,000

 

3,000

 

$

1.00

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior subordinated loan ($10,000 par due 12/2014)

 

6.00% Cash, 7.00% PIK

 

4/1/2010

 

5,566

 

10,000

 

$

1.00

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants to purchase up to 1,462,500 shares of common stock

 

 

 

8/4/2010

 

 

1,055

 

$

0.72

(16)

 

 

 

 

 

 

 

 

 

 

 

 

8,566

 

14,055

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emerald Performance Materials, LLC

 

Polymers and performance materials manufacturer

 

Senior secured loan ($5,867 par due 5/2011)

 

8.25% (Libor + 4.25%/M)

 

5/16/2006

 

5,867

 

5,867

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($375 par due 5/2011)

 

8.25% (Libor + 4.25%/M)

 

5/16/2006

 

375

 

375

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($8,392 par due 5/2011)

 

8.25% (Libor + 4.25%/M)

 

5/16/2006

 

8,392

 

8,392

 

$

1.00

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($536 par due 5/2011)

 

8.25% (Libor + 4.25%/M)

 

5/16/2006

 

536

 

536

 

$

1.00

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($9 par due 5/2011)

 

8.50% (Base Rate + 1.75%/M)

 

5/16/2006

 

9

 

9

 

$

1.00

(3)(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($13 par due 5/2011)

 

8.50% (Base Rate + 1.75%/M)

 

5/16/2006

 

13

 

13

 

$

1.01

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($3,806 par due 5/2011)

 

10.00% (Libor + 6.00%/M)

 

5/16/2006

 

3,806

 

3,806

 

$

1.00

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($1,579 par due 5/2011)

 

10.00% (Libor + 6.00%/M)

 

5/16/2006

 

1,579

 

1,579

 

$

1.00

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($3,532 par due 5/2011)

 

13.00% Cash, 3.00% PIK

 

5/16/2006

 

3,532

 

3,532

 

$

1.00

(4)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($5,051 par due 5/2011)

 

13.00% Cash, 3.00% PIK

 

5/16/2006

 

5,051

 

5,051

 

$

1.00

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

29,160

 

29,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial Air Tool, LP and Affiliates d/b/a Industrial Air Tool (7)

 

Industrial products

 

Senior subordinated loan ($6,000 par due 6/2014)

 

9.00%

 

4/1/2010

 

6,000

 

14,312

 

$

2.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Member interest (375 units)

 

 

 

4/1/2010

 

7,419

 

145

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

13,419

 

14,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jakel, Inc. (7)

 

Electric motor manufacturer

 

Senior subordinated loan ($748 par due 3/2011)

 

 

 

4/1/2010

 

 

 

$

(13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NetShape Technologies, Inc.

 

Metal precision engineered components manufacturer

 

Senior secured revolving loan ($972 par due 2/2013)

 

4.06% (Libor + 3.75%/B)

 

4/1/2010

 

521

 

526

 

$

0.54

(16)

 

 

 

10



Table of Contents

 

Reflexite Corporation (7)

 

Developer and manufacturer of high-visibility reflective products

 

Senior subordinated loan ($6,269 par due 11/2014)

 

20.00% (Base Rate + 9.25% Cash, 7.50% PIK/Q)

 

2/26/2008

 

6,269

 

6,583

 

$

1.05

(4)(14)(16)

 

 

 

 

 

 

Senior subordinated loan ($11,462 par due 11/2014)

 

20.00% (Base Rate + 9.25% Cash, 7.50% PIK/Q)

 

2/26/2008

 

11,462

 

12,035

 

$

1.05

(3)(4)(14)

 

 

 

 

 

 

Common stock (1,821,860 shares)

 

 

 

3/28/2006

 

27,435

 

28,233

 

$

15.50

(16)

 

 

 

 

 

 

 

 

 

 

 

 

45,166

 

46,851

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Saw Mill PCG Partners LLC

 

Precision components manufacturer

 

Common units (1,000 units)

 

 

 

2/2/2007

 

1,000

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STS Operating, Inc.

 

Hydraulic systems equipment and supplies provider

 

Senior subordinated loan ($30,386 par due 1/2013)

 

11.00%

 

4/1/2010

 

29,361

 

29,778

 

$

0.98

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UL Holding Co., LLC

 

Petroleum product manufacturer

 

Junior secured loan ($2,124 par due 12/2012)

 

14.50%

 

2/13/2009

 

2,124

 

2,018

 

$

0.95

(16)

 

 

 

 

 

 

Junior secured loan ($846 par due 12/2012)

 

14.50%

 

2/13/2009

 

846

 

804

 

$

0.95

(3)

 

 

 

 

 

 

Junior secured loan ($2,114 par due 12/2012)

 

9.82% (Libor + 9.38%/Q)

 

2/13/2009

 

2,114

 

2,008

 

$

0.95

(16)

 

 

 

 

 

 

Junior secured loan ($842 par due 12/2012)

 

9.82% (Libor + 9.38%/Q)

 

2/13/2009

 

842

 

799

 

$

0.95

(3)

 

 

 

 

 

 

Junior secured loan ($10,836 par due 12/2012)

 

9.82% (Libor + 9.38%/Q)

 

2/13/2009

 

10,836

 

10,294

 

$

0.95

(3)

 

 

 

 

 

 

Junior secured loan ($2,970 par due 12/2012)

 

14.50%

 

2/13/2009

 

2,970

 

2,822

 

$

0.95

(2)

 

 

 

 

 

 

Junior secured loan ($990 par due 12/2012)

 

14.50%

 

2/13/2009

 

990

 

941

 

$

0.95

(3)

 

 

 

 

 

 

Senior secured loan ($5,000 par due 12/2012)

 

15.00%

 

8/13/2010

 

5,000

 

5,000

 

$

1.00

(16)

 

 

 

 

 

 

Common units (50,000 units)

 

 

 

4/25/2008

 

500

 

97

 

$

1.94

(16)

 

 

 

 

 

 

Common units (207,843 units)

 

 

 

4/25/2008

 

 

403

 

$

1.94

(16)

 

 

 

 

 

 

 

 

 

 

 

 

26,222

 

25,186

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Universal Trailer Corporation (6)

 

Livestock and specialty trailer manufacturer

 

Common stock (74,920 shares)

 

 

 

10/8/2004

 

7,930

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

161,345

 

160,013

 

 

 

5.76

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Telecommunications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

American Broadband Communications, LLC and American Broadband Holding Company

 

Broadband communication services

 

Senior secured loan ($36,100 par due 9/2013)

 

7.50% (Libor + 5.50%/Q)

 

9/1/2010

 

34,545

 

36,100

 

$

1.00

(14)(16)

 

 

 

 

 

 

Senior secured loan ($9,400 par due 9/2013)

 

7.50% (Libor + 5.50%/Q)

 

9/1/2010

 

9,400

 

9,400

 

$

1.00

(3)(14)

 

 

 

 

 

 

Senior subordinated loan ($32,702 par due 11/2014)

 

12.00% Cash, 4.00% PIK

 

2/8/2008

 

32,702

 

32,702

 

$

1.00

(2)(4)

 

 

 

 

 

 

Senior subordinated loan ($10,327 par due 11/2014)

 

12.00% Cash, 4.00% PIK

 

11/7/2007

 

10,327

 

10,327

 

$

1.00

(4)(16)

 

 

 

 

 

 

Senior subordinated loan ($30,143 par due 11/2014)

 

12.00% Cash, 4.00% PIK

 

9/1/2010

 

30,143

 

30,143

 

$

1.00

(4)(16)

 

 

 

 

 

 

Warrants to purchase up to 200 shares

 

 

 

9/1/2010

 

 

 

$

(16)

 

 

 

 

 

 

Warrants to purchase up to 208 shares

 

 

 

11/7/2007

 

 

3,379

 

$

16,245.19

(16)

 

 

 

 

 

 

 

 

 

 

 

 

117,117

 

122,051

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Startec Equity, LLC (7)

 

Communication services

 

Member interest

 

 

 

4/1/2010

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

117,117

 

122,051

 

 

 

4.39

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products-Durable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bushnell, Inc.

 

Sports optics manufacturer

 

Senior subordinated loan ($41,325 par due 2/2014)

 

7.03% (Libor + 6.50%/Q)

 

4/1/2010

 

30,087

 

30,994

 

$

0.75

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carlisle Wide Plank Floors, Inc.

 

Hardwood floor manufacturer

 

Senior secured loan ($1,609 par due 6/2011)

 

12.00% Cash

 

4/1/2010

 

1,509

 

1,448

 

$

0.90

(16)

 

 

 

 

 

 

Common stock (345,056 shares)

 

 

 

4/1/2010

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

1,509

 

1,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct Buy Holdings, Inc. and Direct Buy Investors, LP  (6)

 

Membership based buying club franchisor and operator

 

Senior secured loan ($2,100 par due 11/2012)

 

7.75% (Libor + 6.00%/M)

 

12/14/2007

 

2,049

 

1,995

 

$

0.95

(2)(14)

 

 

 

 

 

 

Senior subordinated loan ($80,816 par due 5/2013)

 

12.00% Cash, 4.00% PIK

 

4/1/2010

 

76,787

 

76,776

 

$

0.95

(4)(16)

 

 

 

 

 

 

Partnership interest (80,000 shares)

 

 

 

4/1/2010

 

3,112

 

3,330

 

$

0.42

(16)

 

 

 

 

 

 

Partnership interest (100,000 shares)

 

 

 

11/30/2007

 

10,000

 

4,145

 

$

0.42

(16)

 

 

 

 

 

 

 

 

 

 

 

 

91,948

 

86,246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

123,544

 

118,688

 

 

 

4.27

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Juice manufacturer

 

Senior secured loan ($14,202 par due 10/2013)

 

12.00% (Libor + 9.00%/M)

 

10/5/2007

 

14,202

 

14,202

 

$

1.00

(14)(16)

 

 

 

 

 

 

Senior secured loan ($14,943 par due 10/2013)

 

12.00% (Libor + 9.00%/M)

 

10/5/2007

 

14,943

 

14,943

 

$

1.00

(3)(14)

 

 

 

 

 

 

Senior units (50,000 units)

 

 

 

10/5/2007

 

5,000

 

5,628

 

$

112.56

 

 

 

 

 

 

 

 

 

 

 

 

 

34,145

 

34,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Border Foods, Inc. (7)

 

Green chile and jalapeno products manufacturer

 

Senior secured loan ($28,526 par due 3/2012)

 

13.50%

 

4/1/2010

 

28,526

 

28,526

 

$

1.00

(16)

 

 

 

 

 

 

Preferred stock (100,000 shares)

 

 

 

4/1/2010

 

21,346

 

22,287

 

$

222.87

(16)

 

 

 

 

 

 

Common stock (148,838 shares)

 

 

 

4/1/2010

 

13,472

 

10,095

 

$

67.83

(16)

 

 

 

 

 

 

Common stock (87,707 shares)

 

 

 

4/1/2010

 

 

 

$

(16)

 

 

 

 

 

 

Common stock (23,922 shares)

 

 

 

4/1/2010

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

63,344

 

60,908

 

 

 

 

 

 

11



Table of Contents

 

Bumble Bee Foods, LLC and BB Co-Invest LP (8)

 

Canned seafood manufacturer

 

Common units (4,000 units)

 

 

 

11/18/2008

 

4,000

 

11,193

 

$

2,798.25

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charter Baking Company, Inc.

 

Baked goods manufacturer

 

Senior subordinated loan ($6,673 par due 2/2013)

 

13.00% PIK

 

2/6/2008

 

6,673

 

6,673

 

$

1.00

(4)(16)

 

 

 

 

 

 

Preferred stock (6,258 shares)

 

 

 

9/1/2006

 

2,500

 

1,585

 

$

253.27

(16)

 

 

 

 

 

 

 

 

 

 

 

 

9,173

 

8,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distant Lands Trading Co.

 

Coffee manufacturer

 

Common stock (1,294 shares)

 

 

 

4/1/2010

 

980

 

893

 

$

690.11

(16)

 

 

 

 

 

 

Common stock (2,157 shares)

 

 

 

4/1/2010

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

980

 

893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ideal Snacks Corporation

 

Snacks manufacturer

 

Senior secured revolving loan ($1,078 par due 6/2011)

 

8.50% (Base Rate + 4.00%/M)

 

4/1/2010

 

1,078

 

970

 

$

0.90

(14)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

112,720

 

116,995

 

 

 

4.21

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services-Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Growing Family, Inc. and GFH Holdings, LLC (6)

 

Photography services

 

Senior secured revolving loan ($157 par due 8/2011)

 

9.00% (Base Rate + 1.75% Cash, 4.00% PIK/M)

 

3/16/2007

 

156

 

69

 

$

0.44

(4)(14)(16)

 

 

 

 

 

 

Senior secured revolving loan ($2,252 par due 8/2011)

 

9.00% (Base Rate + 1.75% Cash, 4.00% PIK/M)

 

3/16/2007

 

2,218

 

992

 

$

0.44

(4)(14)(16)

 

 

 

 

 

 

Senior secured loan ($453 par due 3/2013)

 

9.00% (Base Rate + 1.75% Cash, 4.00% PIK/M)

 

3/16/2007

 

424

 

200

 

$

0.44

(4)(14)(16)

 

 

 

 

 

 

Senior secured loan ($6,498 par due 3/2013)

 

9.00% (Base Rate + 1.75% Cash, 4.00% PIK/M)

 

3/16/2007

 

6,437

 

2,862

 

$

0.44

(4)(14)(16)

 

 

 

 

 

 

Preferred stock (8,750 shares)

 

 

 

3/16/2007

 

 

 

$

(16)

 

 

 

 

 

 

Common stock (552,430 shares)

 

 

 

3/16/2007

 

872

 

 

$

(16)

 

 

 

 

 

 

Warrants to purchase up to 11,313,678 Class B units

 

 

 

3/16/2007

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

10,107

 

4,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NPA Acquisition, LLC

 

Powersport vehicle auction operator

 

Senior secured loan ($6,000 par due 2/2013)

 

7.01% (Libor + 6.75%/M)

 

8/23/2006

 

6,000

 

6,000

 

$

1.00

(3)

 

 

 

 

 

 

Common units (1,709 units)

 

 

 

8/23/2006

 

1,000

 

3,000

 

$

1,755.41

 

 

 

 

 

 

 

 

 

 

 

 

 

7,000

 

9,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PODS Funding Corp.

 

Storage and warehousing

 

Senior subordinated loan ($6,500 par due 12/2015)

 

16.64% PIK

 

12/23/2009

 

5,189

 

6,500

 

$

1.00

(4)(16)

 

 

 

 

 

 

Senior subordinated loan ($25,125 par due 6/2015)

 

15.00%

 

12/23/2009

 

25,125

 

25,125

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

30,314

 

31,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United Road Towing, Inc.

 

Towing company

 

Junior secured loan ($18,792 par due 1/2014)

 

14.75% (Libor + 11.25% Cash, 1.00% PIK/Q)

 

4/1/2010

 

18,542

 

18,792

 

$

1.00

(4)(14)(16)

 

 

 

 

 

 

Warrants to purchase up to 607 shares

 

 

 

4/1/2010

 

 

19

 

$

30.84

 

 

 

 

 

 

 

 

 

 

 

 

 

18,542

 

18,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Web Services Company, LLC

 

Laundry service and equipment provider

 

Senior secured loan ($4,900 par due 8/2014)

 

7.00% (Base Rate + 3.75%/Q)

 

6/15/2009

 

4,689

 

4,900

 

$

1.00

(3)

 

 

 

 

 

 

Senior subordinated loan ($13,478 par due 8/2016)

 

11.50% Cash, 2.50% PIK

 

8/29/2008

 

13,478

 

13,478

 

$

1.00

(4)(16)

 

 

 

 

 

 

Senior subordinated loan ($26,296 par due 8/2016)

 

11.50% Cash, 2.50% PIK

 

8/29/2008

 

26,296

 

26,296

 

$

1.00

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

44,463

 

44,674

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

110,426

 

108,233

 

 

 

3.90

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Apogee Retail, LLC

 

For-profit thrift retailer

 

Senior secured loan ($11,408 par due 9/2012)

 

12.00% Cash, 4.00% PIK

 

5/28/2008

 

11,408

 

11,408

 

$

1.00

(4)(16)

 

 

 

 

 

 

Senior secured loan ($2,947 par due 3/2012)

 

5.51% (Libor + 5.25%/M)

 

3/27/2007

 

2,947

 

2,829

 

$

0.96

(2)

 

 

 

 

 

 

Senior secured revolving loan ($780 par due 3/2012)

 

7.25% (Base Rate + 4.00%/Q)

 

3/27/2007

 

780

 

749

 

$

0.96

(16)

 

 

 

 

 

 

Senior secured loan ($3,386 par due 9/2012)

 

12.00% Cash, 4.00% PIK

 

5/28/2008

 

3,386

 

3,386

 

$

1.00

(4)(16)

 

 

 

 

 

 

Senior secured loan ($25,909 par due 3/2012)

 

5.51% (Libor + 5.25%/M)

 

3/27/2007

 

25,909

 

24,873

 

$

0.96

(2)

 

 

 

 

 

 

Senior secured loan ($11,337 par due 3/2012)

 

5.51% (Libor + 5.25%/M)

 

3/27/2007

 

11,337

 

10,884

 

$

0.96

(3)

 

 

 

 

 

 

 

 

 

 

 

 

55,767

 

54,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savers, Inc. and SAI Acquisition Corporation

 

For-profit thrift retailer

 

Common stock (1,170,182 shares)

 

 

 

8/8/2006

 

4,500

 

6,335

 

$

5.41

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Things Remembered, Inc. and TRM Holdings Corporation

 

Personalized gifts retailer

 

Senior secured loan ($63 par due 9/2012)

 

6.50% (Base Rate + 1.25% Cash, 1.00% PIK/M)

 

9/28/2006

 

63

 

61

 

$

0.97

(3)(4)(14)

 

 

 

 

 

 

Senior secured loan ($2,666 par due 9/2012)

 

6.50% (Base Rate + 1.25% Cash, 1.00% PIK/M)

 

9/28/2006

 

2,663

 

2,586

 

$

0.97

(3)(4)(14)

 

 

 

 

 

 

Senior secured loan ($760 par due 9/2012)

 

6.50% (Base Rate + 1.25% Cash, 1.00% PIK/M)

 

9/28/2006

 

759

 

737

 

$

0.97

(4)(14)(16)

 

 

 

 

 

 

Senior secured loan ($195 par due 9/2012)

 

6.50% (Base Rate + 1.25% Cash, 1.00% PIK/M)

 

9/28/2006

 

195

 

189

 

$

0.97

(3)(4)(14)

 

 

 

 

 

 

Senior secured loan ($27,130 par due 9/2012)

 

6.50% (Base Rate + 1.25% Cash, 1.00% PIK/M)

 

9/28/2006

 

27,098

 

26,314

 

$

0.97

(4)(14)(16)

 

 

 

 

 

 

Senior secured loan ($6,981 par due 9/2012)

 

6.50% (Base Rate + 1.25% Cash, 1.00% PIK/M)

 

9/28/2006

 

6,975

 

6,773

 

$

0.97

(3)(4)(14)

 

 

 

 

 

 

Preferred stock (73 shares)

 

 

 

3/19/2009

 

 

1,608

 

$

21,985.23

(16)

 

 

 

12



Table of Contents

 

 

 

 

 

Preferred stock (80 shares)

 

 

 

9/28/2006

 

1,800

 

1,759

 

$

21,987.50

(16)

 

 

 

 

 

 

Common stock (800 shares)

 

 

 

9/28/2006

 

200

 

 

$

(16)

 

 

 

 

 

 

Warrants to purchase up to 859 shares of preferred stock

 

 

 

3/19/2009

 

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

39,753

 

40,027

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100,020

 

100,491

 

 

 

3.62

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate Finance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10th Street, LLC (6)

 

Real estate holding company

 

Senior subordinated loan ($23,013 par due 11/2014)

 

8.93% Cash, 4.07% PIK

 

4/1/2010

 

23,013

 

23,013

 

$

1.00

(4)

 

 

 

 

 

 

Member interest (10.00% interest)

 

 

 

4/1/2010

 

594

 

592

 

 

 

 

 

 

 

 

 

Option (25,000 units)

 

 

 

4/1/2010

 

25

 

25

 

$

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

23,632

 

23,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allied Capital REIT, Inc. (7)

 

Real estate investment trust

 

Real estate equity interests

 

 

 

4/1/2010

 

165

 

574

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

American Commercial Coatings

 

Real estate property

 

Commercial mortgage loan ($2,000 par due 12/2025)

 

 

 

4/1/2010

 

1,976

 

1,875

 

$

0.94

(13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aquila Binks Forest Development, LLC

 

Real estate developer

 

Commercial mortgage loan ($12,676 par due 6/2011)

 

2.50%

 

4/1/2010

 

11,099

 

5,894

 

$

0.46

(16)

 

 

 

 

 

 

Real estate equity interests

 

 

 

4/1/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,099

 

5,894

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cleveland East Equity LLC

 

Hotel operator

 

Real estate equity interests

 

 

 

4/1/2010

 

1,026

 

1,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crescent Hotels & Resorts, LLC and affiliates (7)

 

Hotel operator

 

Senior subordinated loan ($433 par due 6/2010)

 

 

 

4/1/2010

 

433

 

455

 

$

1.05

(13)(16)

 

 

 

 

 

 

Senior subordinated loan ($4,124 par due 1/2012)

 

 

 

4/1/2010

 

1,475

 

 

$

(13)

 

 

 

 

 

 

Senior subordinated loan ($4,348 par due 6/2017)

 

 

 

4/1/2010

 

1,482

 

 

$

(13)(16)

 

 

 

 

 

 

Senior subordinated loan ($2,722 par due 6/2017)

 

 

 

4/1/2010

 

928

 

 

$

(13)(16)

 

 

 

 

 

 

Senior subordinated loan ($5,974 par due 9/2012)

 

 

 

4/1/2010

 

2,051

 

 

$

(13)

 

 

 

 

 

 

Senior subordinated loan ($263 par due 3/2013)

 

 

 

4/1/2010

 

263

 

 

$

(13)(16)

 

 

 

 

 

 

Senior subordinated loan ($3,078 par due 1/2012)

 

 

 

4/1/2010

 

 

 

$

(13)

 

 

 

 

 

 

Senior subordinated loan ($2,926 par due 6/2017)

 

 

 

4/1/2010

 

 

 

$

(13)

 

 

 

 

 

 

Senior subordinated loan ($2,112 par due 9/2011)

 

 

 

4/1/2010

 

 

 

$

(13)

 

 

 

 

 

 

Senior subordinated loan ($2,050 par due 6/2017)

 

 

 

4/1/2010

 

 

 

$

(13)

 

 

 

 

 

 

Senior subordinated loan ($4,826 par due 9/2012)

 

 

 

4/1/2010

 

 

 

$

(13)

 

 

 

 

 

 

Preferred equity interest

 

 

 

4/1/2010

 

 

1,875

 

 

 

 

 

 

 

 

 

Preferred equity interest

 

 

 

4/1/2010

 

 

1,700

 

 

 

 

 

 

 

 

 

Member interests

 

 

 

4/1/2010

 

 

 

 

 

 

 

 

 

 

 

Common equity interest

 

 

 

4/1/2010

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,649

 

4,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commons R-3, LLC

 

Real estate developer

 

Real estate equity interests

 

 

 

4/1/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DI Safford, LLC

 

Hotel operator

 

Commercial mortgage loan ($5,311 par due 5/2032)

 

 

 

4/1/2010

 

2,757

 

2,750

 

$

0.52

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Galley Equities, LLC

 

Food distribution facility

 

Commercial mortgage loan ($220 par due 1/2015)

 

 

 

4/1/2010

 

 

 

$

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Holiday Inn West Chester

 

Hotel property

 

Real estate owned

 

 

 

4/1/2010

 

3,513

 

3,570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hot Light Brands, Inc. (7)

 

Real estate holding company

 

Senior secured loan ($27,918 par due 2/2011)

 

 

 

4/1/2010

 

5,399

 

5,329

 

$

0.19

(13)(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (93,500 shares)

 

 

 

4/1/2010

 

 

 

$

 —

(16)

 

 

 

 

 

 

 

 

 

 

 

 

5,399

 

5,329

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MGP Park Place Equity, LLC

 

Office building operator

 

Commercial mortgage loan ($6,500 par due 5/2011)

 

 

 

4/1/2010

 

650

 

325

 

$

0.05

(13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NPH, Inc

 

Hotel property

 

Real estate equity interest

 

 

 

4/1/2010

 

5,291

 

7,606

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Van Ness Hotel, Inc.

 

Hotel operator

 

Commercial mortgage loan ($3,750 par due 8/2013)

 

 

 

4/1/2010

 

1,027

 

371

 

$

0.10

(13)(16)

 

 

 

 

 

 

Commercial mortgage loan ($13,702 par due 12/2011)

 

5.50%

 

4/1/2010

 

13,702

 

13,702

 

$

1.00

(16)

 

 

 

 

 

 

Real estate equity interests

 

 

 

4/1/2010

 

 

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

14,729

 

14,073

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

76,886

 

71,541

 

 

 

2.57

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale Distribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BECO Holding Company, Inc.

 

Wholesale distributor of first response fire protection equipment and related parts

 

Common stock (25,000 shares)

 

 

 

7/30/2010

 

2,500

 

2,500

 

$

100.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stag-Parkway, Inc. (7)

 

Automotive aftermarket components supplier

 

Senior secured loan ($34,500 par due 12/2014)

 

12.50% (Libor + 11.00%/B)

 

9/30/2010

 

34,500

 

34,500

 

$

1.00

(14)(16)

 

 

 

 

 

 

Preferred stock (4,200 shares)

 

16.50%

 

9/30/2010

 

2,310

 

4,200

 

$

1,000.00

 

 

 

 

 

 

 

Common stock (10,200 shares)

 

 

 

4/1/2010

 

 

12,200

 

$

1,196.08

(16)

 

 

 

 

 

 

 

 

 

 

 

 

36,810

 

50,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39,310

 

53,400

 

 

 

1.92

%

 

13



Table of Contents

 

Computers and Electronics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network Hardware Resale, Inc.

 

Networking equipment resale provider

 

Senior subordinated loan ($12,662 par due 12/2011)

 

12.00%

 

4/1/2010

 

12,662

 

12,662

 

$

1.00

(2)

 

 

 

 

 

 

Convertible junior subordinated loan ($17,518 par due 12/2013)

 

9.75%

 

4/1/2010

 

17,561

 

20,949

 

$

1.20

(16)

 

 

 

 

 

 

 

 

 

 

 

 

30,223

 

33,611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TZ Merger Sub, Inc.

 

Healthcare enterprise software developer

 

Senior secured loan ($4,678 par due 8/2015)

 

7.50% (Libor + 4.50%/Q)

 

6/15/2009

 

4,593

 

4,678

 

$

1.00

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34,816

 

38,289

 

 

 

1.38

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Printing, Publishing and Media

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canon Communications LLC

 

Print publications services

 

Senior secured loan ($12,155 par due 11/2011)

 

13.75% (Libor + 6.75% Cash, 2.00% PIK/Q)

 

5/25/2005

 

12,144

 

12,155

 

$

1.00

(2)(4)(14)

 

 

 

 

 

 

Senior secured loan ($12,387 par due 11/2011)

 

13.75% (Libor + 6.75% Cash, 2.00% PIK/Q)

 

5/25/2005

 

12,376

 

12,387

 

$

1.00

(3)(4)(14)

 

 

 

 

 

 

 

 

 

 

 

 

24,520

 

24,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EarthColor, Inc.  (7)

 

Printing management services

 

Common stock (89,435 shares)

 

 

 

4/1/2010

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LVCG Holdings LLC (7)

 

Commercial printer

 

Membership interests (56.53% interest)

 

 

 

10/12/2007

 

6,600

 

132

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

National Print Group, Inc.

 

Printing management services

 

Senior secured revolving loan ($1,141 par due 10/2012)

 

9.00% (Libor + 6.00%/S)

 

3/2/2006

 

1,141

 

966

 

$

0.85

(14)(16)

 

 

 

 

 

 

Senior secured revolving loan ($558 par due 10/2012)

 

9.00% (Base Rate + 5.00%/M)

 

3/2/2006

 

558

 

472

 

$

0.85

(14)(16)

 

 

 

 

 

 

Senior secured loan ($7,587 par due 10/2012)

 

14.00% (Libor + 6.00% Cash, 5.00% PIK/Q)

 

3/2/2006

 

7,275

 

6,419

 

$

0.85

(3)(4)(14)

 

 

 

 

 

 

Senior secured loan ($342 par due 10/2012)

 

14.00% (Base Rate + 5.00% Cash, 5.00% PIK/Q)

 

3/2/2006

 

329

 

289

 

$

0.84

(3)(4)(14)

 

 

 

 

 

 

Preferred stock (9,344 shares)

 

 

 

3/2/2006

 

2,000

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

11,303

 

8,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Teaching Company, LLC and The Teaching Company Holdings, Inc.

 

Education publications provider

 

Preferred stock (29,969 shares)

 

 

 

9/29/2006

 

2,997

 

3,540

 

$

118.12

(16)

 

 

 

 

 

 

Common stock (15,393 shares)

 

 

 

9/29/2006

 

3

 

4

 

$

0.26

 

 

 

 

 

 

 

 

 

 

 

 

 

3,000

 

3,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45,423

 

36,364

 

 

 

1.31

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Environmental Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AWTP, LLC

 

Water treatment services

 

Junior secured loan ($4,755 par due 12/2012)

 

 

 

12/23/2005

 

4,755

 

1,664

 

$

0.35

(13)(16)

 

 

 

 

 

 

Junior secured loan ($2,086 par due 12/2012)

 

 

 

12/23/2005

 

2,086

 

730

 

$

0.35

(3)(13)

 

 

 

 

 

 

Junior secured loan ($4,755 par due 12/2012)

 

 

 

12/23/2005

 

4,755

 

1,664

 

$

0.35

(13)(16)

 

 

 

 

 

 

Junior secured loan ($2,086 par due 12/2012)

 

 

 

12/23/2005

 

2,086

 

730

 

$

0.35

(3)(13)

 

 

 

 

 

 

 

 

 

 

 

 

13,682

 

4,788

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mactec, Inc.

 

Engineering and environmental services

 

Class B-4 stock (16 shares)

 

 

 

11/3/2004

 

 

1

 

$

62.27

(16)

 

 

 

 

 

 

Class C stock (5,556 shares)

 

 

 

11/3/2004

 

 

234

 

$

42.12

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sigma International Group, Inc. (8)

 

Water treatment parts manufacturer

 

Junior secured loan ($1,833 par due 10/2013)

 

16.00% (Libor + 8.00%/Q)

 

10/11/2007

 

1,833

 

1,283

 

$

0.70

(14)(16)

 

 

 

 

 

 

Junior secured loan ($917 par due 10/2013)

 

16.00% (Libor + 8.00%/Q)

 

10/11/2007

 

917

 

642

 

$

0.70

(14)(16)

 

 

 

 

 

 

Junior secured loan ($2,778 par due 10/2013)

 

16.00% (Libor + 8.00%/Q)

 

10/11/2007

 

2,778

 

1,944

 

$

0.70

(14)(16)

 

 

 

 

 

 

Junior secured loan ($4,000 par due 10/2013)

 

16.00% (Libor + 8.00%/Q)

 

10/11/2007

 

4,000

 

2,800

 

$

0.70

(3)(14)

 

 

 

 

 

 

Junior secured loan ($2,000 par due 10/2013)

 

16.00% (Libor + 8.00%/Q)

 

10/11/2007

 

2,000

 

1,400

 

$

0.70

(3)(14)

 

 

 

 

 

 

Junior secured loan ($6,060 par due 10/2013)

 

16.00% (Libor + 8.00%/Q)

 

10/11/2007

 

6,060

 

4,242

 

$

0.70

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

17,588

 

12,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Universal Environmental Services, LLC  (6)

 

Hydrocarbon recycling and related waste management services and products

 

Preferred member interest (15.00% interest)

 

 

 

4/1/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Waste Pro USA, Inc.

 

Waste management services

 

Preferred Class A common stock (611,615 shares )

 

 

 

11/9/2006

 

12,263

 

15,942

 

$

26.07

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wastequip, Inc. (6)

 

Waste management equipment manufacturer

 

Senior subordinated loan ($13,121 par due 2/2015)

 

 

 

2/5/2007

 

13,030

 

984

 

$

0.07

(13)(16)

 

 

 

 

 

 

Common stock (13,889 shares)

 

 

 

2/2/2007

 

1,389

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

14,419

 

984

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57,952

 

34,260

 

 

 

1.23

%

 

14



Table of Contents

 

Aerospace and Defense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AP Global Holdings, Inc.

 

Safety and security equipment manufacturer

 

Senior secured loan ($6,274 par due 10/2013)

 

4.77% (Libor + 4.50%/M)

 

11/18/2007

 

6,227

 

6,274

 

$

1.00

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ILC Industries, Inc.

 

Supplier of defense electronics and engineered materials

 

Junior secured loan ($12,000 par due 6/2014)

 

11.50%

 

6/27/2006

 

12,000

 

12,000

 

$

1.00

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thermal Solutions LLC and TSI Group, Inc.

 

Thermal management and electronics packaging manufacturer

 

Senior secured loan ($88 par due 3/2011)

 

7.00% (Base Rate + 3.75%/M)

 

3/28/2005

 

88

 

88

 

$

1.00

(3)

 

 

 

 

 

 

Senior secured loan ($2,708 par due 3/2012)

 

7.50% (Base Rate + 4.25%/M)

 

3/28/2005

 

2,708

 

2,708

 

$

1.00

(3)

 

 

 

 

 

 

Senior subordinated loan ($2,809 par due 3/2013)

 

11.50% Cash, 4.00% PIK

 

3/21/2006

 

2,806

 

2,809

 

$

1.00

(4)(16)

 

 

 

 

 

 

Senior subordinated loan ($3,502 par due 3/2013)

 

11.50% Cash, 4.25% PIK

 

3/28/2005

 

3,497

 

3,502

 

$

1.00

(4)(16)

 

 

 

 

 

 

Senior subordinated loan ($2,218 par due 3/2013)

 

11.50% Cash, 4.25% PIK

 

3/28/2005

 

2,215

 

2,218

 

$

1.00

(4)(16)

 

 

 

 

 

 

Preferred stock (71,552 shares)

 

 

 

3/28/2005

 

716

 

1,114

 

$

15.57

(16)

 

 

 

 

 

 

Common stock (1,460,246 shares)

 

 

 

3/28/2005

 

15

 

95

 

$

0.07

(16)

 

 

 

 

 

 

 

 

 

 

 

 

12,045

 

12,534

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wyle Laboratories, Inc. and Wyle Holdings, Inc.

 

Provider of specialized engineering, scientific and technical services

 

Senior preferred stock (775 shares)

 

 

 

1/17/2008

 

96

 

96

 

$

123.89

(16)

 

 

 

 

 

 

Common stock (1,885,195 shares)

 

 

 

1/17/2008

 

2,272

 

1,879

 

$

1.00

(16)

 

 

 

 

 

 

 

 

 

 

 

 

2,368

 

1,975

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,640

 

32,783

 

 

 

1.18

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Automotive Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Driven Brands, Inc. (6)

 

Automotive aftermarket car care franchisor

 

Senior secured loan ($3,200 par due 10/2014)

 

6.50% (Libor + 5.00%/M)

 

4/1/2010

 

3,113

 

3,200

 

$

1.00

(3)(14)

 

 

 

 

 

 

Senior secured loan ($520 par due 10/2014)

 

6.50% (Libor + 5.00%/M)

 

4/1/2010

 

504

 

520

 

$

1.00

(3)(14)

 

 

 

 

 

 

Senior secured loan ($237 par due 10/2014)

 

7.00% (Base Rate + 3.75%/M)

 

4/1/2010

 

230

 

237

 

$

1.00

(3)

 

 

 

 

 

 

Common stock (3,772,098 shares)

 

 

 

4/1/2010

 

4,939

 

5,810

 

$

1.54

 

 

 

 

 

 

 

 

 

 

 

 

 

8,786

 

9,767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Penn Detroit Diesel Allison, LLC (7)

 

Diesel engine manufacturer

 

Member interest (70,249 shares)

 

 

 

4/1/2010

 

20,069

 

18,619

 

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,855

 

28,386

 

 

 

1.02%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Containers-Packaging

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial Container Services, LLC (6)

 

Industrial container manufacturer, reconditioner and servicer

 

Senior secured loan ($20 par due 9/2011)

 

4.29% (Libor + 4.00%/M)

 

6/21/2006

 

20

 

20

 

$

0.99

(2)

 

 

 

 

 

 

Senior secured loan ($161 par due 9/2011)

 

4.26% (Libor + 4.00%/M)

 

6/21/2006

 

161

 

161

 

$

1.00

(2)

 

 

 

 

 

 

Senior secured loan ($308 par due 9/2011)

 

4.29% (Libor + 4.00%/M)

 

6/21/2006

 

308

 

308

 

$

1.00

(3)

 

 

 

 

 

 

Senior secured loan ($2,463 par due 9/2011)

 

4.26% (Libor + 4.00%/M)

 

6/21/2006

 

2,463

 

2,463

 

$

1.00

(3)

 

 

 

15



Table of Contents

 

 

 

 

 

Senior secured loan ($134 par due 9/2011)

 

4.29% (Libor + 4.00%/Q)

 

6/21/2006

 

134

 

134

 

$

1.00

(2)

 

 

 

 

 

 

Senior secured loan ($2,052 par due 9/2011)

 

4.29% (Libor + 4.00%/Q)

 

6/21/2006

 

2,052

 

2,052

 

$

1.00

(3)

 

 

 

 

 

 

Senior secured loan ($67 par due 9/2011)

 

5.75% (Base Rate + 2.50%/Q)

 

6/21/2006

 

67

 

67

 

$

1.00

(2)

 

 

 

 

 

 

Senior secured loan ($1,026 par due 9/2011)

 

5.75% (Base Rate + 2.50%/Q)

 

6/21/2006

 

1,026

 

1,026

 

$

1.00

(3)

 

 

 

 

 

 

Common units (1,800,000 units)

 

 

 

9/29/2005

 

1,800

 

13,086

 

$

7.27

(16)

 

 

 

 

 

 

 

 

 

 

 

 

8,031

 

19,317

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,031

 

19,317

 

 

 

0.70

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Clubs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Athletic Club Holdings, Inc.

 

Premier health club operator

 

Senior secured loan ($7,250 par due 10/2013)

 

4.76% (Libor + 4.50%/M)

 

10/11/2007

 

7,250

 

6,380

 

$

0.88

(2)(12)

 

 

 

 

 

 

Senior secured loan ($11,500 par due 10/2013)

 

4.76% (Libor + 4.50%/M)

 

10/11/2007

 

11,500

 

10,120

 

$

0.88

(3)(12)

 

 

 

 

 

 

 

 

 

 

 

 

18,750

 

16,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,750

 

16,500

 

 

 

0.59

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and Gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Geotrace Technologies, Inc.

 

Reservoir processing, development

 

Warrants to purchase up to 80,063 shares of preferred stock

 

 

 

4/1/2010

 

1,738

 

824

 

$

10.29

(16)

 

 

 

 

 

 

Warrants to purchase up to 130,390 shares of preferred stock

 

 

 

4/1/2010

 

1,067

 

1,343

 

$

10.30

(16)

 

 

 

 

 

 

Warrants to purchase up to 43,356 shares of common stock

 

 

 

4/1/2010

 

54

 

 

$

(16)

 

 

 

 

 

 

Warrants to purchase up to 26,622 shares of common stock

 

 

 

4/1/2010

 

33

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

2,892

 

2,167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,892

 

2,167

 

 

 

0.08

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Housing—Building Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HB&G Building Products

 

Synthetic and wood product manufacturer

 

Senior subordinated loan ($8,956 par due 3/2013)

 

 

 

10/8/2004

 

8,991

 

179

 

$

0.02

(13)(16)

 

 

 

 

 

 

Warrants to purchase up to 4,464 shares of common stock

 

 

 

10/8/2004

 

653

 

 

$

(16)

 

 

 

 

 

 

Common stock (2,743 shares)

 

 

 

10/8/2004

 

753

 

 

$

(16)

 

 

 

 

 

 

 

 

 

 

 

 

10,397

 

179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,397

 

179

 

 

 

0.01

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

4,174,139

 

$

4,149,790

 

 

 

 

 

 

16



Table of Contents

 


(1)                                 Other than our investments in AGILE Fund I, LLC, Allied Capital REIT, Inc., AllBridge Financial, LLC, Avborne, Inc., Aviation Properties Corporation, Border Foods, Inc., Callidus Capital Corporation, Ciena Capital LLC, Citipostal, Inc., Coverall North America, Inc., Crescent Equity Corp., EarthColor, Inc., Financial Pacific Company, HCI Equity, LLC, HCP Acquisition Holdings, LLC, Hot Light Brands, Inc., Hot Stuff Foods, LLC, Huddle House Inc., IAT Equity, LLC, Impact Innovations Group LLC, Ivy Hill Asset Management, L.P., Ivy Hill Middle Market Credit Fund, Ltd., Jakel, Inc., Knightsbridge CLO 2007-1 Ltd., Knightsbridge CLO 2008-1 Ltd., LVCG Holdings, LLC, Making Memories Wholesale, Inc., MVL Group, Inc, PENN Detroit Diesel Allison LLC, Reflexite Corporation, Senior Secured Loan Fund LLC, Stag-Parkway, Inc, Startec Equity, LLC and The Thymes, LLC, we do not “Control” any of our portfolio companies, as defined in the Investment Company Act. In general, under the Investment Company Act, we would “Control” a portfolio company if we owned more than 25% of its outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company. All of our portfolio company investments are subject to legal restrictions on sales which as of September 30, 2010 represented 149% of the Company’s net assets.

 

(2)                                 These assets are owned by the Company’s wholly owned subsidiary Ares Capital CP, are pledged as collateral for the CP Funding Facility and, as a result, are not directly available to the creditors of the Company to satisfy any obligations of the Company other than Ares Capital CP’s obligations under the CP Funding Facility (see Note 7 to the consolidated financial statements).

 

(3)                                 Pledged as collateral for the ARCC CLO.

 

(4)                                 Has a payment-in-kind interest feature (see Note 2 to the consolidated financial statements).

 

(5)                                 Investments without an interest rate are non-income producing at September 30, 2010.

 

(6)                                 As defined in the Investment Company Act, we are an “Affiliated Person” of this portfolio company because we own 5% or more of the portfolio company’s outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement). Transactions during the nine months ended September 30, 2010 in which the issuer was an Affiliated company (but not a portfolio company that we “Control”) are as follows (in thousands):

 

Company

 

Purchases

 

Redemptions
(cost)

 

Sales
(cost)

 

Interest
income

 

Capital
structuring
service fees

 

Dividend
Income

 

Other
income

 

Net realized
gains (losses)

 

Net unrealized
gains (losses)

 

10th Street LLC

 

$

23,171

 

$

 

$

 

$

1,480

 

$

 

$

 

$

 

$

 

$

(2

)

Air Medical Group

 

$

29,405

 

$

9,045

 

$

 

$

100

 

$

 

$

 

$

12

 

$

 

$

15,011

 

Apple & Eve, LLC and US Juice Partners, LLC

 

$

2,300

 

$

4,939

 

$

2,816

 

$

2,854

 

$

 

$

 

$

34

 

$

 

$

628

 

BB&T Capital

 

$

13,943

 

$

1,066

 

$

 

$

 

$

 

$

 

$

 

$

 

$

2,312

 

Carador, PLC

 

$

 

$

 

$

 

$

 

$

 

$

318

 

$

 

$

 

$

2,098

 

Campus Management Corp. and Campus Management Acquisition Corp.

 

$

 

$

43,462

 

$

 

$

4,829

 

$

 

$

 

$

(4

)

$

 

$

(221

)

CT Technologies Intermediate Holdings, Inc. and CT Technologies Holdings, LLC

 

$

 

$

 

$

 

$

297

 

$

 

$

 

$

 

$

 

$

2,999

 

Direct Buy Holdings, Inc. and Direct Buy Investors LP

 

$

78,350

 

$

21

 

$

 

$

7,102

 

$

 

$

 

$

 

$

1

 

$

1,494

 

Driven Brands, Inc.

 

$

103,157

 

$

41

 

$

96,643

 

$

1,873

 

$

 

 

$

 

 

$

 

 

$

843

 

$

990

 

DSI Renal, Inc.

 

$

1,505

 

$

5,296

 

$

7,991

 

$

6,573

 

$

 

$

 

$

26

 

$

3,090

 

$

6,488

 

Firstlight Financial Corporation

 

$

 

$

 

$

 

$

415

 

$

 

$

 

$

250

 

$

 

$

(7,353

)

Growing Family, Inc. and GFH Holdings, LLC

 

$

 

$

 

$

 

$

933

 

$

 

$

 

$

(1

)

$

(7,659

)

$

9,113

 

Imperial Capital Group, LLC

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

(300

)

Industrial Container Services, LLC

 

$

413

 

$

8,615

 

$

 

$

333

 

$

 

$

 

$

120

 

$

 

$

5,374

 

InSight Pharmaceuticals Corporation

 

$

66,791

 

$

 

$

 

$

4,177

 

$

 

$

 

$

 

$

 

$

557

 

 

17



Table of Contents

 

Investor Group Services, LLC

 

$

100

 

$

100

 

$

 

$

172

 

$

 

$

 

$

15

 

$

 

$

38

 

Multi-Ad Services, Inc.

 

$

2,666

 

$

16

 

$

 

$

112

 

$

 

$

 

$

13

 

$

 

$

482

 

Pillar Holdings LLC and PHL Holding Co.

 

$

 

$

4,261

 

$

 

$

1,796

 

$

 

$

 

$

27

 

$

 

$

(738

)

Primis Marketing Group, Inc. and Primis Holdings, LLC

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

(409

)

Regency Equity Corp.

 

$

2,007

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

(229

)

Service Champ, Inc.

 

$

28,463

 

$

26,585

 

$

28,463

 

$

208

 

$

 

$

 

$

75

 

$

 

$

 

Soteria Imaging Services, LLC

 

$

4,080

 

$

 

$

 

$

348

 

$

 

$

 

$

 

$

 

$

(255

)

VSS-Tranzact Holdings, LLC

 

$

204

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

(1,941

)

Universal Corporation

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

Universal Trailer Corporation

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

Wastequip, Inc.

 

$

 

$

 

$

 

$

 

$

 

$

 

$

281

 

$

 

$

(984

)

 

(7)                                 As defined in the Investment Company Act, we are an “Affiliated Person” of this portfolio company because we own 5% or more of the portfolio company’s outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement). In addition, as defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement). Transactions during the period for the nine months ended September 30, 2010 in which the issuer was both an Affiliated company and a portfolio company that we Control are as follows (in thousands):

 

Company

 

Purchases

 

Redemptions
(cost)

 

Sales
(cost)

 

Interest
income

 

Capital
structuring
service fees

 

Dividend
Income

 

Other
income

 

Net realized
gains (losses)

 

Net unrealized
gains (losses)

 

AGILE Fund I, LLC

 

$

264

 

$

 

$

 

$

 

$

 

$

78

 

$

 

$

 

$

(46

)

Allied Capital REIT, Inc.

 

$

765

 

$

600

 

$

 

$

 

$

 

$

 

$

 

$

 

$

409

 

AllBridge Financial, LLC

 

$

11,370

 

$

 

$

 

$

 

$

 

$

 

$

29

 

$

 

$

(44

)

Avborne, Inc.

 

$

39

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

Aviation Properties Corporation

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

Border Foods, Inc.

 

$

68,944

 

$

5,600

 

$

 

$

2,111

 

$

 

$

 

$

 

$

 

$

(2,436

)

Callidus Capital Corporation

 

$

20,120

 

$

16,000

 

$

 

$

 

$

 

$

 

$

 

$

 

$

2,580

 

Ciena Capital LLC

 

$

84,012

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

(6,604

)

Citipostal, Inc.

 

$

63,261

 

$

510

 

$

 

$

4,322

 

$

 

$

 

$

178

 

$

 

$

10

 

Coverall North America, Inc.

 

$

40,189

 

$

 

$

 

$

2,365

 

$

 

$

 

$

150

 

$

 

$

(7,282

)

Crescent Equity Corp.

 

$

6,653

 

$

 

$

 

$

363

 

$

 

$

 

$

 

$

216

 

$

(2,620

)

Direct Capital Corporation

 

$

10,109

 

$

10,109

 

$

 

$

 

$

 

$

 

$

 

$

(31

)

$

 

EarthColor, Inc.

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

Financial Pacific Company

 

$

32,800

 

$

 

$

 

$

3,638

 

$

 

$

 

$

417

 

$

 

$

1,500

 

HCI Equity, LLC

 

$

808

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

166

 

HCP Acquisition Holdings, LLC

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

898

 

Hot Light Brands, Inc.

 

$

6,746

 

$

1,372

 

$

 

$

2

 

$

 

$

 

$

 

$

266

 

$

291

 

Hot Stuff Foods, LLC

 

$

69,168

 

$

8,120

 

$

 

$

787

 

$

 

$

 

$

50

 

$

 

$

6,840

 

Huddle House Inc.

 

$

19,607

 

$

 

$

 

$

1,504

 

$

 

$

 

$

375

 

$

 

$

(3,424

)

IAT Equity, LLC

 

$

13,419

 

$

 

$

 

$

273

 

$

 

$

 

$

63

 

$

 

$

1,038

 

Impact Innovations Group LLC

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

Ivy Hill Asset Management, L.P.

 

$

59,248

 

$

96

 

$

 

$

 

$

 

$

4,296

 

$

 

$

 

$

12,503

 

Ivy Hill Middle Market Credit Fund, Ltd.

 

$

 

$

 

$

330

 

$

5,208

 

$

 

$

 

$

 

$

 

$

884

 

Jakel, Inc.

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

Knightsbridge CLO 2007-1 Ltd.

 

$

14,852

 

$

 

$

 

$

1,014

 

$

 

$

 

$

 

$

 

$

(9,056

)

Knightsbridge CLO 2008-1 Ltd.

 

$

36,996

 

$

 

$

 

$

1,499

 

$

 

$

 

$

 

$

 

$

(4,938

)

LVCG Holdings, LLC

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

(198

)

Making Memories Wholesale, Inc.

 

$

1,250

 

$

427

 

$

 

$

1,012

 

$

 

$

 

$

186

 

$

50

 

$

(2,804

)

MVL Group, Inc.

 

$

60,707

 

$

 

$

 

$

4,242

 

$

 

$

 

$

 

$

 

$

1,257

 

PENN Detroit Diesel Allison LLC

 

$

20,069

 

$

 

$

 

$

 

$

 

$

 

$

250

 

$

 

$

(1,450

)

Reflexite Corporation

 

$

 

$

 

$

 

$

2,572

 

$

 

$

 

$

75

 

$

 

$

4,525

 

Senior Secured Loan Fund LLC*

 

$

254,583

 

$

15,410

 

$

 

$

30,242

 

$

15,146

 

$

 

$

3,790

 

$

795

 

$

25,049

 

Stag-Parkway, Inc.

 

$

36,810

 

$

 

$

 

$

970

 

$

 

$

 

$

167

 

$

 

$

14,090

 

Startec Equity, LLC

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

The Thymes, LLC

 

$

 

$

 

$

 

$

421

 

$

 

$

(163

)

$

 

$

 

$

183

 

 

*                                         Together with GE Commercial Finance Investment Advisory Services LLC (“GE”), we serve as co-managers of the Senior Secured Loan Fund LLC.  Investments made by the program (and most decisions made in respect of program borrowers and the program itself) must be approved by both the Company and GE; therefore, although the Company owns more than 25% of the voting securities of the LLC, the Company does not believe that it has control over the Senior Secured Loan Fund (for purposes of the Investment Company Act of 1940 or otherwise).

 

(8)                                 Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

 

(9)                                 Non-registered investment company.

 

(10)                          A majority of the variable rate loans to our portfolio companies bear interest at a rate that may be determined by reference to either Libor or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), at the borrower’s

 

18



Table of Contents

 

option, which reset annually (A), semi-annually (S), quarterly (Q), bi-monthly (B), monthly (M) or daily (D). For each such loan, we have provided the interest rate in effect at September 30, 2010.

 

(11)                          In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 5% on $40 million aggregate principal amount of the portfolio company’s senior term debt previously syndicated by us.

 

(12)                      In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 2.50% on $25.0 million aggregate principal amount of the portfolio company’s senior term debt previously syndicated by us.

 

(13)                          Loan was on non-accrual status as of September 30, 2010.

 

(14)                          Loan includes interest rate floor feature.

 

(15)                          In addition to the interest earned based on the stated interest rate of this security, the notes entitle us to receive a portion of the excess cash flow from the Senior Secured Loan Fund’s loan portfolio, which may result in a return greater than the contractual rate.

 

(16)                          Pledge as collateral for the Revolving Credit Facility.

 

(17)                          Public company.

 

See accompanying notes to consolidated financial statements.

 

19



Table of Contents

 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of December 31, 2009

(dollar amounts in thousands, except per unit data)

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(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 ($902 par due 12/2010)

 

8.50% (Libor + 5.00%/D)

 

12/14/2005

 

$

902

 

$

902

 

$

1.00

(3)(15)

 

 

 

 

 

 

Senior secured loan ($10,389 par due 12/2011)

 

8.50% (Libor + 5.00%/Q)

 

12/14/2005

 

10,389

 

10,389

 

$

1.00

(3)(15)

 

 

 

 

 

 

 

 

 

 

 

 

11,291

 

11,291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capella Healthcare, Inc.

 

Acute care hospital operator

 

Junior secured loan ($12,500 par due 2/2016)

 

13.00%

 

2/29/2008

 

12,500

 

12,500

 

$

1.00

 

 

 

 

 

 

 

Junior secured loan ($30,000 par due 2/2016)

 

13.00%

 

2/29/2008

 

30,000

 

30,000

 

$

1.00

(2)

 

 

 

 

 

 

 

 

 

 

 

 

42,500

 

42,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CT Technologies Intermediate

 

Healthcare analysis services

 

Preferred stock (7,427 shares)

 

14.00% PIK

 

6/15/2007

 

8,467

 

8,043

 

$

950.00

(4)

 

 

Holdings, Inc. and CT Technologies

 

 

 

Common stock (9,679 shares)

 

 

 

6/15/2007

 

4,000

 

8,114

 

$

840.00

 

 

 

Holdings, LLC(6)

 

 

 

Common stock (1,546 shares)

 

 

 

6/15/2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,467

 

16,157

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DSI Renal, Inc.

 

Dialysis provider

 

Senior secured revolving loan ($2 par due 3/2011)

 

7.25% (Base Rate + 4.00%/M)

 

4/4/2006

 

2

 

2

 

$

0.95

 

 

 

 

 

 

 

Senior secured revolving loan ($132 par due 3/2011)

 

7.25% (Base Rate + 4.00%/M)

 

4/4/2006

 

132

 

126

 

$

0.95

 

 

 

 

 

 

 

Senior secured revolving loan ($20 par due 3/2011)

 

7.25% (Base Rate + 4.00%/M)

 

4/4/2006

 

20

 

19

 

$

0.95

 

 

 

 

 

 

 

Senior secured revolving loan ($7,392 par due 3/2011)

 

7.25% (Base Rate + 4.00%/M)

 

4/4/2006

 

7,392

 

7,022

 

$

0.95

 

 

 

 

 

 

 

Senior secured revolving loan ($122 par due 3/2011)

 

7.25% (Base Rate + 4.00%/M)

 

4/4/2006

 

122

 

116

 

$

0.95

 

 

 

 

 

 

 

Senior secured loan ($339 par due 3/2013)

 

7.25% (Base Rate + 4.00%/Q)

 

4/4/2006

 

237

 

322

 

$

0.95

 

 

 

 

 

 

 

Senior secured loan ($44 par due 3/2013)

 

7.25% (Base Rate + 4.00%/Q)

 

4/4/2006

 

31

 

42

 

$

0.95

 

 

 

 

 

 

 

Senior secured loan ($16,960 par due 3/2013)

 

7.25% (Base Rate + 4.00%/Q)

 

4/4/2006

 

12,323

 

16,112

 

$

0.95

 

 

 

 

 

 

 

Senior subordinated loan ($66,552 par due 4/2014)

 

16.00% PIK

 

4/4/2006

 

66,215

 

63,220

 

$

0.95

(4)

 

 

 

 

 

 

Senior subordinated loan ($14,285 par due 4/2014)

 

16.00% PIK

 

4/4/2006

 

14,211

 

13,571

 

$

0.95

(3)(4)

 

 

 

 

 

 

 

 

 

 

 

 

100,685

 

100,552

 

 

 

 

 

 

20



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

GG Merger Sub I, Inc.

 

Drug testing services

 

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

 

4.26% (Libor + 4.00%/Q)

 

12/14/2007

 

10,919

 

10,197

 

$

0.90

(2)

 

 

 

 

 

 

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

 

4.26% (Libor + 4.00%/Q)

 

12/14/2007

 

11,460

 

10,800

 

$

0.90

(3)

 

 

 

 

 

 

 

 

 

 

 

 

22,379

 

20,997

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HCP Acquisition Holdings, LLC(7)

 

Healthcare compliance advisory services

 

Class A units (10,044,176 units)

 

 

 

6/26/2008

 

10,044

 

4,256

 

$

0.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heartland Dental Care, Inc.

 

Dental services

 

Senior subordinated loan ($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

 

Health plan management company

 

Senior subordinated loan ($4,670 par due 1/2013)

 

12.75% Cash, 2.00% PIK

 

2/9/2009

 

3,363

 

4,670

 

$

1.00

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MPBP Holdings, Inc., Cohr Holdings, Inc. and

 

Healthcare equipment services

 

Senior secured loan ($997 par due 1/2013)

 

 

 

1/31/2007

 

489

 

628

 

$

0.63

 

 

 

MPBP Acquisition Co., Inc.

 

 

 

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

 

6.48% (Libor + 6.25%/B)

 

1/31/2007

 

20,049

 

5,000

 

$

0.25

 

 

 

 

 

 

 

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

 

6.48% (Libor + 6.25%/B)

 

1/31/2007

 

12,000

 

3,000

 

$

0.25

(3)

 

 

 

 

 

 

Common stock (50,000 shares)

 

 

 

1/31/2007

 

5,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37,538

 

8,628

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MWD Acquisition Sub, Inc.

 

Dental services

 

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

 

6.48% (Libor + 6.25%/M)

 

5/3/2007

 

5,000

 

4,350

 

$

0.87

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OnCURE Medical Corp.

 

Radiation oncology care provider

 

Senior secured loan ($3,068 par due 6/2012)

 

3.75% (Libor + 3.50%/M)

 

8/18/2006

 

3,068

 

2,761

 

$

0.90

(3)

 

 

 

 

 

 

Senior subordinated loan ($32,642 par due 8/2013)

 

11.00% Cash, 1.50% PIK

 

8/18/2006

 

32,664

 

29,378

 

$

0.90

(4)

 

 

 

 

 

 

Common stock (857,143 shares)

 

 

 

8/18/2006

 

3,000

 

3,000

 

$

3.50

 

 

 

 

 

 

 

 

 

 

 

 

 

38,732

 

35,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Passport Health Communications,

 

Healthcare technology provider

 

Senior secured loan ($12,660 par due 5/2014)

 

10.50% (Libor + 7.50%/M)

 

5/9/2008

 

12,660

 

12,660

 

$

1.00

(2)(15)

 

 

Inc., Passport Holding Corp. and

 

 

 

Senior secured loan ($11,686 par due 5/2014)

 

10.50% (Libor + 7.50%/M)

 

5/9/2008

 

11,686

 

11,686

 

$

1.00

(3)(15)

 

 

Prism Holding Corp.

 

 

 

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

 

 

 

7/30/2008

 

9,900

 

9,900

 

$

6.21

 

 

 

 

21



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

 

 

 

 

Common stock (16,106 shares)

 

 

 

7/30/2008

 

100

 

100

 

$

6.21

 

 

 

 

 

 

 

 

 

 

 

 

 

34,346

 

34,346

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PG Mergersub, Inc.

 

Provider of patient surveys, management reports and national

 

Senior subordinated loan ($4,000 par due 3/2016)

 

12.50%

 

3/12/2008

 

3,938

 

4,000

 

$

1.00

 

 

 

 

 

databases for the integrated healthcare

 

Preferred stock (333 shares)

 

 

 

3/12/2008

 

333

 

333

 

$

1,000.00

 

 

 

 

 

delivery system

 

Common stock (16,667 shares)

 

 

 

3/12/2008

 

167

 

167

 

$

10.00

 

 

 

 

 

 

 

 

 

 

 

 

 

4,438

 

4,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Schumacher Group of Delaware, Inc.

 

Outsourced physician service provider

 

Junior secured loan ($5,229 par due 7/2013)

 

11.13% Cash, 1.00% PIK

 

7/18/2008

 

5,229

 

5,229

 

$

1.00

(4)

 

 

 

 

 

 

Junior secured loan ($30,909 par due 7/2013)

 

11.13% Cash, 1.00% PIK

 

7/18/2008

 

30,943

 

30,909

 

$

1.00

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

36,172

 

36,138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Univita Health, Inc.

 

Outsourced services provider

 

Senior subordinated loan ($20,500 par due 12/2014)

 

15.00%

 

12/22/2009

 

20,500

 

20,500

 

$

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VOTC Acquisition Corp.

 

Radiation oncology care provider

 

Senior secured loan ($17,417 par due 7/2012)

 

11.00% Cash, 2.00% PIK

 

6/30/2008

 

17,417

 

17,417

 

$

1.00

(4)

 

 

 

 

 

 

Preferred stock (3,888,222 shares)

 

 

 

7/14/2008

 

8,748

 

3,800

 

$

0.98

 

 

 

 

 

 

 

 

 

 

 

 

 

26,165

 

21,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

438,337

 

397,958

 

 

 

31.64

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CIC Flex, LP(9)

 

Investment partnership

 

Limited partnership units (0.69 unit)

 

 

 

9/7/2007

 

41

 

41

 

$

40,505.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covestia Capital Partners, LP(9)

 

Investment partnership

 

Limited partnership interest (47% interest)

 

 

 

6/17/2008

 

1,059

 

1,059

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Firstlight Financial Corporation(6)(9)

 

Investment company

 

Senior subordinated loan ($73,077 par due 12/2016)

 

1.00% PIK

 

12/31/2006

 

73,032

 

54,808

 

$

0.75

(4)

 

 

 

 

 

 

Common stock (10,000 shares)

 

 

 

12/31/2006

 

10,000

 

 

 

 

 

 

 

 

 

Common stock (30,000 shares)

 

 

 

12/31/2006

 

30,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

113,032

 

54,808

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ivy Hill Middle Market Credit Fund, Ltd. (7)(8)(9)

 

Investment company

 

Class B deferrable interest notes ($40,000 par due 11/2018)

 

6.28% (Libor + 6.00%/Q)

 

11/20/2007

 

40,000

 

36,800

 

$

0.92

 

 

 

 

 

 

 

Subordinated notes ($15,681 par due 11/2018)

 

18.70%

 

11/20/2007

 

15,681

 

14,583

 

$

0.93

 

 

 

 

 

 

 

 

 

 

 

 

 

55,681

 

51,383

 

 

 

 

 

 

22



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

Partnership Capital Growth Fund I, LP(9)

 

Investment partnership

 

Limited partnership interest (25% interest)

 

 

 

6/16/2006

 

3,045

 

3,045

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Secured Loan Fund LLC(7)(17)

 

Investment partnership

 

Subordinated certificates ($172,796 par due 12/2015)

 

(Libor + 8.00%/Q)

 

10/30/2009

 

165,000

 

165,000

 

$

0.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trivergance Capital Partners, LP(9)

 

Investment partnership

 

Limited partnership interest (100% interest)

 

 

 

6/5/2008

 

2,016

 

2,016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

339,874

 

277,352

 

 

 

22.05

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Education

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Campus Management Corp. and Campus Management

 

Education software developer

 

Senior secured loan ($3,256 par due 8/2013)

 

10.00% Cash, 3.00% PIK

 

2/8/2008

 

3,256

 

3,256

 

$

1.00

(4)(16)

 

 

Acquisition Corp.(6)

 

 

 

Senior secured loan ($30,269 par due 8/2013)

 

10.00% Cash, 3.00% PIK

 

2/8/2008

 

30,269

 

30,269

 

$

1.00

(2)(4)(16)

 

 

 

 

 

 

Senior secured loan ($8,961 par due 8/2013)

 

10.00% Cash, 3.00% PIK

 

2/8/2008

 

8,961

 

8,961

 

$

1.00

(16)(4)

 

 

 

 

 

 

Preferred stock (493,147 shares)

 

8.00% PIK

 

2/8/2008

 

9,668

 

13,750

 

$

27.88

(4)

 

 

 

 

 

 

 

 

 

 

 

 

52,154

 

56,236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ELC Acquisition Corporation

 

Developer, manufacturer and

 

Senior secured loan ($162 par due 11/2012)

 

3.48% (Libor + 3.25%/M)

 

11/30/2006

 

162

 

157

 

$

0.97

(3)

 

 

 

 

retailer of educational products

 

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

 

7.23% (Libor + 7.00%/M)

 

11/30/2006

 

8,333

 

8,167

 

$

0.98

(3)

 

 

 

 

 

 

 

 

 

 

 

 

8,495

 

8,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Private school operator

 

Senior secured loan ($11,700 par due 3/2014)

 

8.50% (Libor + 6.00%/Q)

 

3/15/2007

 

11,700

 

11,700

 

$

1.00

(3)(15)

 

 

 

 

 

 

Senior subordinated loan ($30,877 par due 6/2014)

 

13.00% Cash, 3.00% PIK

 

6/4/2008

 

30,877

 

30,877

 

$

1.00

 

 

 

 

 

 

 

Preferred stock (165,811 shares)

 

 

 

6/4/2008

 

788

 

2,124

 

$

12.81

 

 

 

 

 

 

 

Preferred stock (140,577 shares)

 

 

 

3/31/2009

 

668

 

1,801

 

$

12.81

 

 

 

 

 

 

 

Common stock (214,286 shares)

 

 

 

6/4/2008

 

54

 

2,745

 

$

12.81

 

 

 

 

 

 

 

Common stock (140,577 shares)

 

 

 

3/31/2009

 

35

 

1,801

 

$

12.81

 

 

 

 

 

 

 

 

 

 

 

 

 

44,122

 

51,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JTC Education Holdings, Inc.

 

Postsecondary school operator

 

Senior secured loan ($31,250 par due 12/2014)

 

12.50% (Libor + 9.50%/M)

 

12/31/2009

 

31,250

 

31,250

 

$

1.00

(15)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lakeland Finance, LLC

 

Private school operator

 

Junior secured loan

 

11.50%

 

12/13/2005

 

2,423

 

2,423

 

$

1.00

 

 

 

 

23



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

 

 

 

 

($2,423 par due 12/2012)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Junior secured loan ($24,231 par due 12/2012)

 

11.50%

 

12/13/2005

 

24,231

 

24,231

 

$

1.00

(2)

 

 

 

 

 

 

 

 

 

 

 

 

26,654

 

26,654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R3 Education, Inc. (formerly known as

 

Medical school operator

 

Senior secured loan ($791 par due 6/2010)

 

9.00% (Libor + 6.00%/M)

 

4/24/2009

 

791

 

1,101

 

$

1.39

(15)

 

 

Equinox EIC Partners, LLC and MUA Management

 

 

 

Senior secured loan ($7,275 par due 4/2013)

 

9.00% (Libor + 6.00%/M)

 

4/3/2007

 

7,275

 

10,127

 

$

1.39

(3)(15)

 

 

Company) (7)(8)

 

 

 

Senior secured loan ($5,041 par due 4/2013)

 

13.00% PIK

 

12/8/2009

 

1,244

 

3,186

 

$

0.63

 

 

 

 

 

 

 

Senior secured loan ($14,113 par due 4/2013)

 

9.00% (Libor + 6.00%/M)

 

9/21/2007

 

14,113

 

19,646

 

$

1.39

(15)

 

 

 

 

 

 

Preferred stock (8,800 shares)

 

 

 

 

 

2,200

 

1,100

 

$

125.00

 

 

 

 

 

 

 

Warrants to purchase 27,890 shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common membership interest (26.27% interest)

 

 

 

9/21/2007

 

15,800

 

11,515

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41,423

 

46,675

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

204,098

 

220,187

 

 

 

17.50

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services—Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

American Residential Services, LLC

 

Plumbing, heating and air-conditioning services

 

Junior secured loan ($20,608 par due 4/2015)

 

10.00% Cash, 2.00% PIK

 

4/17/2007

 

20,608

 

20,195

 

$

0.98

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diversified Collection Services, Inc.

 

Collections services

 

Senior secured loan ($10,529 par due 2/2011)

 

9.50% (Libor + 6.75%/M)

 

2/2/2005

 

9,280

 

10,529

 

$

1.00

(2)(15)

 

 

 

 

 

 

Senior secured loan ($3,747 par due 2/2011)

 

9.50% (Libor + 6.75%/M)

 

2/2/2005

 

3,747

 

3,747

 

$

1.00

(3)(15)

 

 

 

 

 

 

Senior secured loan ($1,931 par due 8/2011)

 

13.75% (Libor + 11.00%/M)

 

2/2/2005

 

1,931

 

1,931

 

$

1.00

(2)(15)

 

 

 

 

 

 

Senior secured loan ($7,492 par due 8/2011)

 

13.75% (Libor + 11.00%/M)

 

2/2/2005

 

7,492

 

7,492

 

$

1.00

(3)(15)

 

 

 

 

 

 

Preferred stock (14,927 shares)

 

 

 

5/18/2006

 

169

 

269

 

$

18.02

 

 

 

 

 

 

 

Common stock (114,004 shares)

 

 

 

2/2/2005

 

295

 

402

 

$

3.53

 

 

 

 

 

 

 

 

 

 

 

 

 

22,914

 

24,370

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GCA Services Group, Inc.

 

Custodial services

 

Senior secured loan $(13,255 par due 12/2011)

 

12.00%

 

12/15/2006

 

13,171

 

13,255

 

$

1.00

 

 

 

 

 

 

 

Senior secured loan $(14,768 par due 12/2011)

 

12.00%

 

12/15/2006

 

14,765

 

14,768

 

$

1.00

(2)

 

 

 

24



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

 

 

 

 

Senior secured loan $(9,866 par due 12/2011)

 

12.00%

 

12/15/2006

 

9,866

 

9,866

 

$

1.00

(3)

 

 

 

 

 

 

 

 

 

 

 

 

37,802

 

37,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Growing Family, Inc. and GFH Holdings, LLC

 

Photography services

 

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

 

 

 

3/16/2007

 

11,188

 

2,238

 

$

0.20

(4)(14)

 

 

 

 

 

 

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

 

 

 

3/16/2007

 

372

 

74

 

$

0.20

(4)(14)

 

 

 

 

 

 

Senior secured revolving loan $(2,500 par due 8/2011)

 

 

 

3/16/2007

 

1,513

 

303

 

$

0.20

(4)(14)

 

 

 

 

 

 

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

 

 

 

3/16/2007

 

3,575

 

715

 

$

0.20

(4)(14)

 

 

 

 

 

 

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

 

 

 

3/16/2007

 

147

 

29

 

$

0.20

(4)(14)

 

 

 

 

 

 

Common stock (552,430 shares)

 

 

 

3/16/2007

 

872

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,667

 

3,359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NPA Acquisition, LLC

 

Powersport vehicle auction operator

 

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

 

6.98% (Libor + 6.75%/M)

 

8/23/2006

 

12,000

 

12,000

 

$

1.00

(3)

 

 

 

 

 

 

Common units (1,709 units)

 

 

 

8/23/2006

 

1,000

 

2,570

 

$

1,503.80

 

 

 

 

 

 

 

 

 

 

 

 

 

13,000

 

14,570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PODS Funding Corp.

 

Storage and warehousing provider

 

Senior subordinated loan $(25,125 par due 6/2015)

 

15.00%

 

12/23/2009

 

25,125

 

25,125

 

$

1.00

 

 

 

 

 

 

 

Subordinated loan $(6,500 par due 12/2015)

 

16.64%

 

12/23/2009

 

5,079

 

5,070

 

$

0.78

 

 

 

 

 

 

 

 

 

 

 

 

 

30,204

 

30,195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Web Services Company, LLC

 

Laundry service and equipment provider

 

Senior secured loan $(4,938 par due 8/2014)

 

7.00% (Base Rate + 3.75%/Q)

 

6/15/2009

 

4,607

 

4,938

 

$

1.00

(3)

 

 

 

 

 

 

Senior subordinated loan $(18,219 par due 8/2016)

 

11.50% Cash, 2.50% PIK

 

8/29/2008

 

18,219

 

17,308

 

$

0.95

(4)

 

 

 

 

 

 

Senior subordinated loan $(25,804 par due 8/2016)

 

11.50% Cash, 2.50% PIK

 

8/29/2008

 

25,804

 

24,513

 

$

0.95

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

48,630

 

46,759

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

190,825

 

177,337

 

 

 

14.10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurants and Food Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADF Capital, Inc. & ADF Restaurant Group, LLC

 

Restaurant owner and operator

 

Senior secured revolving loan $(3,592 par due 11/2012)

 

6.50% (Libor + 3.00% Cash, 0.50% PIK/S)

 

11/27/2006

 

2,010

 

2,010

 

$

0.56

(4)(15)

 

 

 

 

 

 

Senior secured revolving loan $(1,408 par due 11/2012)

 

6.50% (Base Rate + 2.50%/Q)

 

11/27/2006

 

1,408

 

1,408

 

$

1.00

(4)(15)

 

 

 

25



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

 

 

 

 

Senior secured loan $(23,574 par due 11/2013)

 

12.50% (Libor + 6.50% Cash, 3.00% PIK/Q)

 

11/27/2006

 

23,580

 

23,574

 

$

1.00

(2)(4)(15)

 

 

 

 

 

 

Senior secured loan $(11,049 par due 11/2013)

 

12.50% (Libor + 6.50% Cash, 3.00% PIK/Q)

 

11/27/2006

 

11,049

 

11,049

 

$

1.00

(3)(4)(15)

 

 

 

 

 

 

Promissory note $(13,105 par due 11/2016)

 

12.00% PIK

 

6/1/2006

 

13,093

 

13,105

 

$

1.00

(4)

 

 

 

 

 

 

Warrants to purchase 0.61 shares

 

 

 

6/1/2006

 

 

2,719

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51,140

 

53,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Encanto Restaurants,  Inc.(8)

 

Restaurant owner and operator

 

Junior secured loan $(20,997 par due 8/2013)

 

7.50% Cash, 3.50% PIK

 

8/16/2006

 

20,997

 

19,947

 

$

0.95

(2)(4)

 

 

 

 

 

 

Junior secured loan $(3,999 par due 8/2013)

 

7.50% Cash + 3.50% PIK

 

8/16/2006

 

3,999

 

3,799

 

$

0.95

(3)(4)

 

 

 

 

 

 

 

 

 

 

 

 

24,996

 

23,746

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTG Management,  Inc.

 

Airport restaurant operator

 

Senior secured loan $(16,149 par due 6/2013)

 

20.500% (Libor + 11.00% Cash, 6.50% PIK/M)

 

6/19/2008

 

16,149

 

16,149

 

$

1.00

(4)(15)

 

 

 

 

 

 

Warrants to purchase up to 88,991 shares of common stock

 

 

 

 

 

 

1,102

 

 

 

 

 

 

 

 

Warrants to purchase up to 9 shares of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,149

 

17,251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vistar Corporation and Wellspring

 

Food service distributor

 

Senior subordinated loan $(43,625 par due 5/2015)

 

13.50%

 

5/23/2008

 

43,625

 

41,444

 

$

0.95

 

 

 

Distribution Corp.

 

 

 

Senior subordinated loan $(30,000 par due 5/2015)

 

13.50%

 

5/23/2008

 

30,000

 

28,500

 

$

0.95

(2)

 

 

 

 

 

 

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

 

 

 

5/23/2008

 

7,500

 

4,050

 

$

2.96

 

 

 

 

 

 

 

 

 

 

 

 

 

81,125

 

73,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

173,410

 

168,856

 

 

 

13.42

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3091779 Nova Scotia Inc.(8)

 

Baked goods manufacturer

 

Senior secured revolving loan $(5,485 par due 1/2010)

 

8.00%

 

11/2/2007

 

1,385

 

1,494

 

$

0.27

(4)(12)

 

 

 

 

 

 

Senior secured revolving loan $(1,016 par due 1/2010)

 

8.00%

 

11/2/2007

 

1,016

 

969

 

$

0.95

 

 

 

 

 

 

 

Junior secured loan $(14,386 par due 1/2010)

 

10.00% Cash, 4.00% PIK

 

11/2/2007

 

15,147

 

10,292

 

$

0.72

(4)(12)

 

 

 

 

 

 

Warrants to purchase 57,545 shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,548

 

12,755

 

 

 

 

 

 

26



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

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

 

Juice manufacturer

 

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

 

12.00% (Libor + 9.00%/M)

 

10/5/2007

 

3,000

 

3,000

 

$

0.30

(15)

 

 

 

 

 

 

Senior secured loan $(17,963 par due 10/2013)

 

12.00% (Libor + 9.00%/M)

 

10/5/2007

 

17,963

 

17,963

 

$

1.00

(15)

 

 

 

 

 

 

Senior secured loan $(15,937 par due 10/2013)

 

12.00% (Libor + 9.00%/M)

 

10/5/2007

 

15,937

 

15,937

 

$

1.00

(3)(15)

 

 

 

 

 

 

Senior units (50,000 units)

 

 

 

 

 

5,000

 

5,000

 

$

100.00

 

 

 

 

 

 

 

 

 

 

 

 

 

41,900

 

41,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Best Brands Corporation

 

Baked goods manufacturer

 

Senior secured loan $(324 par due 12/2012)

 

7.48% (Libor + 7.25%/M)

 

2/15/2008

 

324

 

324

 

$

1.00

(4)

 

 

 

 

 

 

Senior secured loan $(13,034 par due 12/2012)

 

7.48% (Libor + 7.25%/M)

 

2/15/2008

 

11,035

 

13,034

 

$

1.00

(2)(4)

 

 

 

 

 

 

Junior secured loan $(28,692 par due 6/2013)

 

12.00% Cash, 4.00% PIK

 

12/14/2006

 

28,112

 

28,692

 

$

1.00

(4)

 

 

 

 

 

 

Junior secured loan $(11,733 par due 6/2013)

 

12.00% Cash, 4.00% PIK

 

12/14/2006

 

11,733

 

11,733

 

$

1.00

(2)(4)

 

 

 

 

 

 

Junior secured loan $(8,611 par due 6/2013)

 

12.00% Cash, 4.00% PIK

 

12/14/2006

 

8,531

 

8,611

 

$

1.00

(3)(4)

 

 

 

 

 

 

 

 

 

 

 

 

59,735

 

62,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bumble Bee Foods, LLC and BB Co-Invest LP

 

Canned seafood manufacturer

 

Common stock (4,000 shares)

 

 

 

11/18/2008

 

4,000

 

6,760

 

$

1,690.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charter Baking Company, Inc.

 

Baked goods manufacturer

 

Senior subordinated loan $(5,883 par due 2/2013)

 

13.00% PIK

 

2/6/2008

 

5,883

 

5,883

 

$

1.00

(4)

 

 

 

 

 

 

Preferred stock (6,258 shares)

 

 

 

9/1/2006

 

2,500

 

1,725

 

$

275.64

 

 

 

 

 

 

 

 

 

 

 

 

 

12,383

 

14,368

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

131,566

 

131,417

 

 

 

10.45

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Apogee Retail, LLC

 

For-profit thrift retailer

 

Senior secured loan $(1,859 par due 3/2012)

 

5.23% (Libor + 5.00%/M)

 

3/27/2007

 

1,859

 

1,747

 

$

0.94

 

 

 

 

 

 

 

Senior secured loan $(2,969 par due 3/2012)

 

5.23% (Libor + 5.00%/M)

 

3/27/2007

 

2,969

 

2,791

 

$

0.94

(2)

 

 

 

 

 

 

Senior secured loan $(26,670 par due 3/2012)

 

5.23% (Libor + 5.00%/M)

 

3/27/2007

 

26,670

 

25,070

 

$

0.94

(2)

 

 

 

 

 

 

Senior secured loan $(11,670 par due 3/2012)

 

5.23% (Libor + 5.00%/M)

 

3/27/2007

 

11,670

 

10,970

 

$

0.94

(3)

 

 

 

 

 

 

Senior secured loan $(11,069 par due 9/2012)

 

12.00% Cash, 4.00% PIK

 

5/28/2008

 

11,069

 

11,069

 

$

1.00

(4)

 

 

 

27



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

 

 

 

 

Senior secured loan $(11,411 par due 9/2012)

 

12.00% Cash, 4.00% PIK

 

5/28/2008

 

11,411

 

11,411

 

$

1.00

(4)

 

 

 

 

 

 

 

 

 

 

 

 

65,648

 

63,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dufry AG(8)

 

Retail newsstand operator

 

Common stock (39,056 shares)

 

 

 

3/28/2008

 

3,000

 

2,638

 

$

0.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savers, Inc. and SAI Acquisition Corporation

 

For-profit thrift retailer

 

Senior subordinated loan $(5,524 par due 8/2014)

 

10.00% Cash, 2.00% PIK

 

8/8/2006

 

5,524

 

5,524

 

$

1.00

(4)

 

 

 

 

 

 

Senior subordinated loan $(20,323 par due 8/2014)

 

10.00% Cash, 2.00% PIK

 

8/8/2006

 

20,323

 

20,323

 

$

1.00

(2)(4)

 

 

 

 

 

 

Common stock (1,170,182 shares)

 

 

 

8/8/2006

 

4,500

 

5,840

 

$

4.95

 

 

 

 

 

 

 

 

 

 

 

 

 

30,347

 

31,687

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Things Remembered, Inc. and TRM Holdings

 

Personalized gifts retailer

 

Senior secured loan $(11 par due 9/2012)

 

5.50% Cash, 1.00% PIK Option

 

9/28/2006

 

11

 

9

 

$

0.84

(3)(4)

 

 

Corporation

 

 

 

Senior secured loan $(3,626 par due 9/2012)

 

5.50% Cash, 1.00% PIK Option

 

9/28/2006

 

3,624

 

2,901

 

$

0.80

(3)(4)

 

 

 

 

 

 

Senior secured loan $(68 par due 9/2012)

 

5.50% Cash, 1.00% PIK Option

 

9/28/2006

 

68

 

55

 

$

0.80

(4)

 

 

 

 

 

 

Senior secured loan $(18 par due 9/2012)

 

5.50% Cash, 1.00% PIK Option

 

9/28/2006

 

18

 

14

 

$

0.80

(3)

 

 

 

 

 

 

Senior secured loan $(28,402 par due 9/2012)

 

5.50% Cash, 1.00% PIK Option

 

9/28/2006

 

28,388

 

22,722

 

$

0.80

 

 

 

 

 

 

 

Senior secured loan $(7,303 par due 9/2012)

 

5.50% Cash, 1.00% PIK Option

 

9/28/2006

 

7,300

 

5,843

 

$

0.80

(3)

 

 

 

 

 

 

Preferred stock (73 shares)

 

 

 

3/19/2009

 

 

 

 

 

 

 

 

 

 

Preferred stock (80 shares)

 

 

 

9/28/2006

 

1,800

 

 

 

 

 

 

 

 

 

Warrants to purchase 859 shares of preferred shares

 

 

 

3/19/2009

 

 

 

 

 

 

 

 

 

 

Common stock (800 shares)

 

 

 

9/28/2006

 

200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41,409

 

31,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

140,404

 

128,927

 

 

 

10.25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Booz Allen Hamilton, Inc.

 

Strategy and technology consulting

 

Senior secured loan $(741 par due 7/2015)

 

7.50% (Libor + 4.50%/S)

 

7/31/2008

 

727

 

741

 

$

1.00

(3)(15)

 

 

 

 

services

 

Senior subordinated loan $(250 par due 7/2016)

 

11.00% Cash, 2.00% PIK

 

7/31/2008

 

245

 

250

 

$

1.00

(4)

 

 

 

 

 

 

Senior subordinated loan $(12,400 par due 7/2016)

 

11.00% Cash, 2.00% PIK

 

7/31/2008

 

12,296

 

12,400

 

$

1.00

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

13,268

 

13,391

 

 

 

 

 

 

28



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

Investor Group Services, LLC(6)

 

Financial services

 

Limited liability company membership interest (10.00% interest)

 

 

 

6/22/2006

 

 

500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pillar Holdings LLC 
and PHL Holding  Co.(6)

 

Mortgage services

 

Senior secured revolving loan $(3,750 par due 11/2013)

 

5.78% (Libor + 5.50%/B)

 

11/20/2007

 

1,313

 

1,313

 

$

0.35

 

 

 

 

 

 

 

Senior secured loan $(16,752 par due 11/2013)

 

5.78% (Libor + 5.50%/B)

 

11/20/2007

 

16,752

 

16,752

 

$

1.00

(2)

 

 

 

 

 

 

Senior secured loan $(10,456 par due 11/2013)

 

5.78% (Libor + 5.50%/B)

 

11/20/2007

 

10,456

 

10,456

 

$

1.00

(3)

 

 

 

 

 

 

Senior secured loan $(1,875 par due 5/2014)

 

14.50%

 

7/31/2008

 

1,875

 

1,875

 

$

1.00

 

 

 

 

 

 

 

Senior secured loan $(5,500 par due 5/2014)

 

14.50%

 

7/31/2008

 

5,500

 

5,500

 

$

1.00

(2)

 

 

 

 

 

 

Common stock (84.78 shares)

 

 

 

11/20/2007

 

3,768

 

7,818

 

$

92,208.00

 

 

 

 

 

 

 

 

 

 

 

 

 

39,664

 

43,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primis Marketing Group, Inc. and Primis Holdings, LLC(6)

 

Database marketing services

 

Senior subordinated loan $(10,222 par due 2/2013)

 

 

 

8/24/2006

 

10,222

 

511

 

$

0.05

(4)(14)

 

 

 

 

 

 

Preferred units (4,000 units)

 

 

 

8/24/2006

 

3,600

 

 

 

 

 

 

 

 

 

Common units (4,000,000 units)

 

 

 

8/24/2006

 

400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,222

 

511

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prommis Solutions,  LLC, E-Default Services, LLC,

 

Bankruptcy and foreclosure processing services

 

Senior subordinated loan $(26,526 par due 2/2014)

 

11.50% Cash, 2.00% PIK

 

2/8/2007

 

26,526

 

26,526

 

$

1.00

(4)

 

 

Statewide Tax and Title Services, LLC & Statewide Publishing

 

 

 

Senior subordinated loan $(26,630 par due 2/2014)

 

11.50% Cash, 2.00% PIK

 

2/8/2007

 

26,630

 

26,630

 

$

1.00

(2)(4)

 

 

Services, LLC (formerly known as MR Processing Holding Corp.)

 

 

 

Preferred stock (30,000 shares)

 

 

 

4/11/2006

 

3,000

 

6,221

 

$

207.37

 

 

 

 

 

 

 

 

 

 

 

 

 

56,156

 

59,377

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R2 Acquisition Corp.

 

Marketing services

 

Common stock (250,000 shares)

 

 

 

5/29/2007

 

250

 

250

 

$

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summit Business Media, LLC

 

Business media consulting services

 

Junior secured loan $(11,078 par due 7/2014)

 

 

 

8/3/2007

 

10,018

 

554

 

$

0.05

(3)(4)(14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VSS-Tranzact Holdings, LLC(6)

 

Management consulting services

 

Common membership interest (8.51% interest)

 

 

 

10/26/2007

 

10,000

 

7,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

143,578

 

126,147

 

 

 

10.03

%

 

29



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

Manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arrow Group Industries, Inc.

 

Residential and outdoor shed manufacturer

 

Senior secured loan $(5,616 par due 4/2010)

 

5.25% (Libor + 5.00%/Q)

 

3/28/2005

 

5,653

 

4,437

 

$

0.79

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emerald Performance Materials, LLC

 

Polymers and performance materials

 

Senior secured loan $(536 par due 5/2011)

 

8.25% (Libor + 4.25%/M)

 

5/16/2006

 

536

 

531

 

$

0.99

(3)(15)

 

 

 

 

manufacturer

 

Senior secured loan $(8,392 par due 5/2011)

 

8.25% (Libor + 4.25%/M)

 

5/16/2006

 

8,392

 

8,308

 

$

0.99

(3)(15)

 

 

 

 

 

 

Senior secured loan $(626 par due 5/2011)

 

8.50% (Base Rate + 5.25%/M)

 

5/16/2006

 

626

 

620

 

$

0.99

(3)

 

 

 

 

 

 

Senior secured loan $(1,604 par due 5/2011)

 

10.00% (Libor + 6.00%/M)

 

5/16/2006

 

1,604

 

1,556

 

$

0.97

(3)(15)

 

 

 

 

 

 

Senior secured loan $(4,937 par due 5/2011)

 

13.00% Cash, 3.00% PIK

 

5/16/2006

 

4,937

 

4,838

 

$

0.98

(2)(4)

 

 

 

 

 

 

 

 

 

 

 

 

16,095

 

15,853

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reflexite Corporation(7)

 

Developer and manufacturer of high-

 

Senior subordinated loan $(16,785 par due 11/2014)

 

12.50% Cash, 5.50% PIK

 

2/26/2008

 

16,785

 

16,785

 

$

1.00

(4)

 

 

 

 

visibility reflective products

 

Common stock (1,821,860 shares)

 

 

 

3/28/2006

 

27,435

 

24,595

 

$

13.50

 

 

 

 

 

 

 

 

 

 

 

 

 

44,220

 

41,380

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Saw Mill PCG Partners LLC

 

Precision components manufacturer

 

Common units (1,000 units)

 

 

 

2/2/2007

 

1,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UL Holding Co., LLC

 

Petroleum product manufacturer

 

Senior secured loan $(2,978 par due 12/2012)

 

14.00%

 

2/13/2009

 

2,978

 

2,829

 

$

0.95

(2)

 

 

 

 

 

 

Senior secured loan $(993 par due 12/2012)

 

14.00%

 

2/13/2009

 

993

 

943

 

$

0.95

(3)

 

 

 

 

 

 

Senior secured loan $(848 par due 12/2012)

 

14.00%

 

2/13/2009

 

848

 

805

 

$

0.95

(3)

 

 

 

 

 

 

Senior secured loan $(2,130 par due 12/2012)

 

9.15% (Libor + 8.88%/Q)

 

2/13/2009

 

2,130

 

2,023

 

$

0.95

 

 

 

 

 

 

 

Senior secured loan $(2,130 par due 12/2012)

 

14.00%

 

2/13/2009

 

2,130

 

2,023

 

$

0.95

 

 

 

 

 

 

 

Senior secured loan $(848 par due 12/2012)

 

9.15% (Libor + 8.88%/Q)

 

2/13/2009

 

848

 

805

 

$

0.95

(3)

 

 

 

 

 

 

Senior secured loan $(10,918 par due 12/2012)

 

9.15% (Libor + 8.88%/Q)

 

2/13/2009

 

10,918

 

10,372

 

$

0.95

(3)

 

 

 

 

 

 

Common units (50,000 units)

 

 

 

4/25/2008

 

500

 

500

 

$

10.00

 

 

 

 

 

 

 

Common units (50,000 units)

 

 

 

4/25/2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,345

 

20,300

 

 

 

 

 

 

30



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

Universal Trailer Corporation(6)

 

Livestock and specialty trailer manufacturer

 

Common stock (74,920 shares)

 

 

 

10/8/2004

 

7,930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

96,243

 

81,970

 

 

 

6.52

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carador PLC(6)(8)(9)

 

Investment company

 

Ordinary shares (7,110,525 shares)

 

 

 

12/15/2006

 

9,033

 

2,489

 

$

0.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Imperial Capital Group, LLC and Imperial

 

Investment banking services

 

Common units (2,526 units)

 

 

 

5/10/2007

 

3

 

3

 

$

1.00

 

 

 

Capital Private Opportunities, LP(6)(9)

 

 

 

Common units (315 units)

 

 

 

5/10/2007

 

 

 

 

 

 

 

 

 

 

Common units (7,710 units)

 

 

 

5/10/2007

 

14,997

 

18,400

 

$

2,386.51

 

 

 

 

 

 

 

Limited partnership interest (80% interest)

 

 

 

5/10/2007

 

6,094

 

5,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,094

 

24,066

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ivy Hill Asset Management, L.P.(7)

 

Asset management services

 

Member interest

 

 

 

6/15/2009

 

37,176

 

48,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VSC Investors LLC(9)

 

Investment company

 

Membership interest (4.63% interest)

 

 

 

1/24/2008

 

648

 

648

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

67,951

 

75,524

 

 

 

6.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products—Non-Durable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blacksmith Brands Holdings, Inc. and Blacksmith Brands, Inc.

 

Consumer products and personal care manufacturer

 

Senior secured loan $(32,500 par due 12/2014)

 

12.50% (Base Rate + 8.50%/Q)

 

10/23/2009

 

32,500

 

32,500

 

$

1.00

(15)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Innovative Brands, LLC

 

Consumer products and personal care manufacturer

 

Senior secured loan $(8,881 par due 9/2011)

 

15.50%

 

10/12/2006

 

8,881

 

8,881

 

$

1.00

(2)

 

 

 

 

 

 

Senior secured loan $(8,198 par due 9/2011)

 

15.50%

 

10/12/2006

 

8,198

 

8,198

 

$

1.00

(3)

 

 

 

 

 

 

 

 

 

 

 

 

17,079

 

17,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Making Memories Wholesale, Inc.(6)

 

Scrapbooking branded products manufacturer

 

Senior secured loan $(9,750 par due 8/2014)

 

10.00% (Base Rate + 5.50%/Q)

 

8/21/2009

 

7,770

 

9,750

 

$

1.00

(15)

 

 

 

 

 

 

Senior secured loan $(5,138 par due 8/2014)

 

15.00% (7.50% Cash, 7.50% PIK/Q)

 

8/21/2009

 

4,062

 

514

 

$

0.10

(4)

 

 

 

 

 

 

Common stock (100 shares)

 

 

 

8/21/2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,832

 

10,264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Thymes, LLC(7)

 

Cosmetic products manufacturer

 

Preferred stock (6,283 shares)

 

8.00% PIK

 

6/21/2007

 

6,785

 

6,107

 

$

972.06

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock (5,400 shares)

 

 

 

6/21/2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,785

 

6,107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

68,196

 

65,950

 

 

 

5.24

%

 

31



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

Aerospace & Defense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AP Global Holdings, Inc.

 

Safety and security equipment manufacturer

 

Senior secured loan $(7,414 par due 10/2013)

 

4.74% (Libor + 4.50%/M)

 

11/8/2007

 

7,295

 

6,969

 

$

0.94

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ILC Industries,  Inc.

 

Industrial products provider

 

Junior secured loan $(12,000 par due 6/2014)

 

11.50%

 

6/27/2006

 

12,000

 

12,000

 

$

1.00

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thermal Solutions LLC and TSI Group, Inc.

 

Thermal management and electronics

 

Senior secured loan $(462 par due 3/2011)

 

4.00% (Libor + 3.75%/Q)

 

3/28/2005

 

462

 

444

 

$

0.96

(3)

 

 

 

 

packaging manufacturer

 

Senior secured loan $(2,732 par due 3/2012)

 

4.50% (Libor + 4.25%/Q)

 

3/28/2005

 

2,732

 

2,486

 

$

0.91

(3)

 

 

 

 

 

 

Senior subordinated loan $(2,747 par due 3/2013)

 

11.50% Cash, 2.50% PIK

 

3/21/2006

 

2,747

 

2,554

 

$

0.93

(4)

 

 

 

 

 

 

Senior subordinated loan $(2,165 par due 3/2013)

 

11.50% Cash, 2.75% PIK

 

3/28/2005

 

2,165

 

2,013

 

$

0.93

(4)

 

 

 

 

 

 

Senior subordinated loan $(3,418 par due 3/2013)

 

11.50% Cash, 2.75% PIK

 

3/28/2005

 

3,418

 

3,178

 

$

0.93

(4)

 

 

 

 

 

 

Preferred stock (71,552 shares)

 

 

 

3/28/2005

 

716

 

529

 

$

7.39

 

 

 

 

 

 

 

Common stock (1,460,246 shares)

 

 

 

3/28/2005

 

15

 

11

 

$

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

12,255

 

11,215

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wyle Laboratories,  Inc. and Wyle Holdings, Inc.

 

Provider of specialized engineering, scientific

 

Junior secured loan $(16,000 par due 1/2015)

 

15.00%

 

1/17/2008

 

16,000

 

16,000

 

$

1.00

(2)

 

 

 

 

and technical services

 

Junior secured loan $(12,000 par due 1/2015)

 

15.00%

 

1/17/2008

 

12,000

 

12,000

 

$

1.00

(3)

 

 

 

 

 

 

Senior preferred stock (775 shares)

 

8.00% PIK

 

1/17/2008

 

96

 

80

 

$

103.24

(4)

 

 

 

 

 

 

Common stock (1,616,976 shares)

 

 

 

1/17/2008

 

2,004

 

1,600

 

$

0.99

 

 

 

 

 

 

 

 

 

 

 

 

 

30,100

 

29,680

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61,650

 

59,864

 

 

 

4.76

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Printing, Publishing and Media

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canon Communications LLC

 

Print publications services

 

Junior secured loan $(11,968 par due 11/2011)

 

13.75% (Libor + 8.75% Cash, 2.00% PIK/Q)

 

5/25/2005

 

11,957

 

9,574

 

$

0.80

(2)(4)(15)

 

 

 

 

 

 

Junior secured loan $(12,197 par due 11/2011)

 

13.75% (Libor + 8.75% Cash, 2.00% PIK/Q)

 

5/25/2005

 

12,190

 

9,757

 

$

0.80

(3)(4)(15)

 

 

 

 

 

 

 

 

 

 

 

 

24,147

 

19,331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LVCG Holdings LLC(7)

 

Commercial printer

 

Membership interests (56.53% interest)

 

 

 

10/12/2007

 

6,600

 

330

 

 

 

 

 

 

32



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

National Print Group, Inc.

 

Printing management services

 

Senior secured revolving loan $(3,926 par due 3/2012)

 

9.00% (Libor + 6.00%/S)

 

3/2/2006

 

1,428

 

771

 

$

0.20

(15)

 

 

 

 

 

 

Senior secured revolving loan $(183 par due 3/2012)

 

9.00% (Libor + 5.00%/M)

 

3/2/2006

 

183

 

99

 

$

0.54

(15)

 

 

 

 

 

 

Senior secured loan $(7,119 par due 3/2012)

 

16.00% (Libor + 9.00% Cash, 4.00% PIK/Q)

 

3/2/2006

 

7,024

 

3,844

 

$

0.54

(3)(15)(4)

 

 

 

 

 

 

Senior secured loan $(1,071 par due 3/2012)

 

16.00% (Base Rate + 8.00% Cash, 4.00% PIK/M)

 

3/2/2006

 

1,071

 

578

 

$

0.54

(3)(15)(4)

 

 

 

 

 

 

Preferred stock (9,344 shares)

 

 

 

3/2/2006

 

2,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,706

 

5,292

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Teaching Company, LLC and The Teaching Company

 

Education publications provider

 

Senior secured loan $(18,000 par due 9/2012)

 

10.50%

 

9/29/2006

 

18,000

 

18,000

 

$

1.00

(2)(11)

 

 

Holdings, Inc.(11)

 

 

 

Senior secured loan $(10,000 par due 9/2012)

 

10.50%

 

9/29/2006

 

10,000

 

10,000

 

$

1.00

(3)(11)

 

 

 

 

 

 

Preferred stock (29,969 shares)

 

8.00%

 

9/29/2006

 

2,997

 

3,872

 

$

129.20

 

 

 

 

 

 

 

Common stock (15,393 shares)

 

 

 

9/29/2006

 

3

 

4

 

$

0.26

 

 

 

 

 

 

 

 

 

 

 

 

 

31,000

 

31,876

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

73,453

 

56,829

 

 

 

4.52

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Telecommunications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

American Broadband Communications, LLC and American

 

Broadband communication services

 

Senior subordinated loan $(31,902 par due 11/2014)

 

18.00% (10.00% Cash, 8.00% PIK/Q)

 

2/8/2008

 

31,902

 

31,902

 

$

1.00

(2)(4)

 

 

Broadband Holding Company

 

 

 

Senior subordinated loan $(8,050 par due 11/2014)

 

18.00% (10.00% Cash, 8.00% PIK/Q)

 

11/7/2007

 

8,050

 

8,050

 

$

1.00

(4)

 

 

 

 

 

 

Warrants to purchase 166 shares

 

 

 

11/7/2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39,952

 

39,952

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39,952

 

39,952

 

 

 

3.18

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Environmental Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AWTP, LLC

 

Water treatment services

 

Junior secured loan $(4,755 par due 12/2012)

 

 

 

12/23/2005

 

4,755

 

1,902

 

$

0.40

(14)

 

 

 

 

 

 

Junior secured loan $(2,086 par due 12/2012)

 

 

 

12/23/2005

 

2,086

 

834

 

$

0.40

(3)(14)

 

 

 

 

 

 

Junior secured loan $(4,755 par due 12/2012)

 

 

 

12/23/2005

 

4,755

 

1,902

 

$

0.40

(14)

 

 

 

 

 

 

Junior secured loan $(2,086 par due 12/2012)

 

 

 

12/23/2005

 

2,086

 

834

 

$

0.40

(3)(14)

 

 

 

 

 

 

 

 

 

 

 

 

13,682

 

5,472

 

 

 

 

 

 

33



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

Mactec, Inc.

 

Engineering and environmental services

 

Class B-4 stock (16 shares)

 

 

 

11/3/2004

 

 

 

 

 

 

 

 

 

 

Class C stock (5,556 shares)

 

 

 

11/3/2004

 

 

150

 

$

27.00

 

 

 

 

 

 

 

 

 

 

 

 

 

0

 

150

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sigma International Group, Inc.

 

Water treatment parts manufacturer

 

Junior secured loan $(917 par due 10/2013)

 

16.00% (Libor + 8.00%/Q)

 

11/6/2007

 

917

 

642

 

$

0.70

(15)

 

 

 

 

 

 

Junior secured loan $(2,750 par due 10/2013)

 

16.00% (Libor + 8.00%/Q)

 

11/1/2007

 

2,750

 

1,925

 

$

0.70

(15)

 

 

 

 

 

 

Junior secured loan $(1,833 par due 10/2013)

 

16.00% (Libor + 8.00%/Q)

 

10/11/2007

 

1,833

 

1,283

 

$

0.70

(15)

 

 

 

 

 

 

Junior secured loan ($2,000 par due 10/2013)

 

16.00% (Libor + 8.00%/Q)

 

11/6/2007

 

2,000

 

1,400

 

$

0.70

(3)(15)

 

 

 

 

 

 

Junior secured loan ($6,000 par due 10/2013)

 

16.00% (Libor + 8.00%/Q)

 

11/1/2007

 

6,000

 

4,200

 

$

0.70

(3)(15)

 

 

 

 

 

 

Junior secured loan ($4,000 par due 10/2013)

 

16.00% (Libor + 8.00%/Q)

 

10/11/2007

 

4,000

 

2,800

 

$

0.70

(3)(15)

 

 

 

 

 

 

 

 

 

 

 

 

17,500

 

12,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Waste Pro USA, Inc.

 

Waste management services

 

Preferred Class A common stock (611,615 shares)

 

14.00% PIK

 

11/9/2006

 

12,263

 

13,263

 

$

21.69

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wastequip, Inc.(6)

 

Waste management equipment manufacturer

 

Senior subordinated loan ($13,121 par due 2/2015)

 

10.00% Cash, 2.50% PIK

 

2/5/2007

 

13,030

 

1,968

 

$

0.15

(4)

 

 

 

 

 

 

Common stock (13,889 shares)

 

 

 

2/2/2007

 

1,389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,419

 

1,968

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57,864

 

33,103

 

 

 

2.63

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Computers and Electronics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RedPrairie Corporation

 

Software manufacturer

 

Junior secured loan ($3,300 par due 1/2013)

 

6.78% (Libor + 6.50%/Q)

 

7/13/2006

 

3,300

 

3,135

 

$

0.95

(2)

 

 

 

 

 

 

Junior secured loan ($12,000 par due 1/2013)

 

6.78% (Libor + 6.50%/Q)

 

7/13/2006

 

12,000

 

11,400

 

$

0.95

(3)

 

 

 

 

 

 

 

 

 

 

 

 

15,300

 

14,535

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TZ Merger Sub, Inc.

 

Computers and Electronics

 

Senior secured loan ($4,818 par due 7/2015)

 

7.50% (Libor + 4.50%/Q)

 

6/15/2009

 

4,711

 

4,818

 

$

1.00

(3)(15)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

X-rite, Incorporated

 

Artwork software manufacturer

 

Junior secured loan ($3,074 par due 7/2013)

 

14.38% (Libor + 11.38%/Q)

 

7/6/2006

 

3,074

 

3,074

 

$

1.00

(15)

 

 

 

 

 

 

Junior secured loan ($7,685 par due 7/2013)

 

14.38% (Libor + 11.38%/Q)

 

7/6/2006

 

7,685

 

7,685

 

$

1.00

(3)(15)

 

 

 

34



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

 

 

 

 

Junior secured loan ($42 par due 7/2013)

 

14.38% (Base Rate + 10.38%/Q)

 

7/6/2006

 

42

 

42

 

$

1.00

(15)

 

 

 

 

 

 

Junior secured loan ($105 par due 7/2013)

 

14.38% (Base Rate + 10.38%/Q)

 

7/6/2006

 

105

 

105

 

$

1.00

(3)(15)

 

 

 

 

 

 

 

 

 

 

 

 

15,617

 

10,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,917

 

30,259

 

 

 

2.41

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cargo Transport

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Kenan Advantage Group, Inc.

 

Fuel transportation provider

 

Senior secured loan ($2,400 par due 12/2011)

 

2.98% (Libor + 2.75%/M)

 

12/15/2005

 

2,400

 

2,304

 

$

0.96

(3)(4)

 

 

 

 

 

 

Senior subordinated loan ($26,125 par due 12/2013)

 

9.50% Cash, 3.50% PIK

 

12/15/2005

 

26,125

 

25,603

 

$

0.98

(2)(4)

 

 

 

 

 

 

Preferred stock (10,984 shares)

 

8.00% PIK

 

12/15/2005

 

1,454

 

1,932

 

$

175.89

(4)

 

 

 

 

 

 

Common stock (30,575 shares)

 

 

 

12/15/2005

 

31

 

41

 

$

1.34

 

 

 

 

 

 

 

 

 

 

 

 

 

30,010

 

29,880

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,010

 

29,880

 

 

 

2.38

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Clubs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Athletic Club Holdings, Inc.

 

Premier health club operator

 

Senior secured loan ($1,750 par due 10/2013)

 

4.73% (Libor + 4.50%/M)

 

10/11/2007

 

1,750

 

1,540

 

$

0.88

(2)(13)

 

 

 

 

 

 

Senior secured loan ($1,000 par due 10/2013)

 

4.73% (Libor + 4.50%/M)

 

10/11/2007

 

1,000

 

880

 

$

0.88

(2)(13)

 

 

 

 

 

 

Senior secured loan ($17 par due 10/2013)

 

6.75% (Base Rate + 3.50%/Q)

 

10/11/2007

 

17

 

15

 

$

0.87

(2)(13)

 

 

 

 

 

 

Senior secured loan ($16 par due 10/2013)

 

6.75% (Base Rate + 3.50%/Q)

 

10/11/2007

 

16

 

14

 

$

0.88

(3)(13)

 

 

 

 

 

 

Senior secured loan ($11,484 par due 10/2013)

 

4.73% (Libor + 4.50%/M)

 

10/11/2007

 

11,484

 

10,106

 

$

0.88

(3)(13)

 

 

 

 

 

 

Senior secured loan ($12,483 par due 10/2013)

 

6.75% (Base Rate + 3.50%/Q)

 

10/11/2007

 

12,483

 

10,985

 

$

0.88

(2)(13)

 

 

 

 

 

 

 

 

 

 

 

 

26,750

 

23,540

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,750

 

23,540

 

 

 

1.87

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Containers-Packaging

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial Container Services, LLC(6)

 

Industrial container manufacturer, reconditioner and servicer

 

Senior secured revolving loan ($15,696 par due 9/2011)

 

5.75% (Base Rate + 2.50%/M)

 

6/21/2006

 

950

 

922

 

$

0.06

 

 

 

 

 

 

 

Senior secured loan ($322 par due 9/2011)

 

4.23% (Libor + 4.00%/M)

 

6/21/2006

 

322

 

312

 

$

0.97

(2)

 

 

 

 

 

 

Senior secured loan ($134 par due 9/2011)

 

4.23% (Libor + 4.00%/M)

 

6/21/2006

 

134

 

130

 

$

0.97

(2)

 

 

 

 

 

 

Senior secured loan

 

4.23% (Libor +

 

6/21/2006

 

4,926

 

4,778

 

$

0.97

(3)

 

 

 

35



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

 

 

 

 

($4,926 par due 9/2011)

 

4.00%/M)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior secured loan ($2,052 par due 9/2011)

 

4.23% (Libor + 4.00%/M)

 

6/21/2006

 

2,052

 

1,991

 

$

0.97

(3)

 

 

 

 

 

 

Senior secured loan ($268 par due 9/2011)

 

4.25% (Libor + 4.00%/M)

 

6/21/2006

 

268

 

260

 

$

0.97

(2)

 

 

 

 

 

 

Senior secured loan ($4,105 par due 9/2011)

 

4.25% (Libor + 4.00%/M)

 

6/21/2006

 

4,105

 

3,982

 

$

0.97

(3)

 

 

 

 

 

 

Senior secured loan ($27 par due 9/2011)

 

5.75% (Base Rate + 2.50%/M)

 

6/21/2006

 

27

 

26

 

$

0.97

(2)

 

 

 

 

 

 

Senior secured loan ($410 par due 9/2011)

 

5.75% (Base Rate + 2.50%/M)

 

6/21/2006

 

410

 

398

 

$

0.97

(3)

 

 

 

 

 

 

Common stock (1,800,000 shares)

 

 

 

9/29/2005

 

1,800

 

8,550

 

$

4.75

 

 

 

 

 

 

 

 

 

 

 

 

 

14,994

 

21,349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,994

 

21,349

 

 

 

1.70

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grocery

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Planet Organic Health Corp.(8)

 

Organic grocery store operator

 

Junior secured loan ($876 par due 7/2013)

 

15.00% (Libor + 12.00%/Q)

 

7/3/2007

 

874

 

832

 

$

0.95

(15)

 

 

 

 

 

 

Junior secured loan ($10,436 par due 7/2013)

 

15.00% (Libor + 12.00%/Q)

 

7/3/2007

 

10,414

 

9,914

 

$

0.95

(3)(15)

 

 

 

 

 

 

Senior subordinated loan ($12,724 par due 7/2012)

 

13.00% Cash, 4.00% PIK

 

7/3/2007

 

12,572

 

9,416

 

$

0.74

(4)

 

 

 

 

 

 

 

 

 

 

 

 

23,860

 

20,162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,863

 

20,162

 

 

 

1.60

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products—Durable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct Buy Holdings, Inc. and Direct Buy

 

Membership-based buying club

 

Senior secured loan ($23 par due 11/2012)

 

6.75% (Libor + 5.00%/M)

 

12/14/2007

 

22

 

19

 

$

0.85

(2)(15)

 

 

Investors, LP(6)

 

franchisor and operator

 

Senior secured loan ($2,099 par due 11/2012)

 

6.75% (Libor + 5.00%/M)

 

12/14/2007

 

2,030

 

1,784

 

$

0.85

(2)(15)

 

 

 

 

 

 

Partnership interests (19.31% interest)

 

 

 

11/30/2007

 

10,000

 

3,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,052

 

4,803

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,052

 

4,803

 

 

 

0.38

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Housing—Building Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HB&G Building Products

 

Synthetic and wood product manufacturer

 

Senior subordinated loan ($8,956 par due 3/2011)

 

 

 

10/8/2004

 

8,991

 

448

 

$

0.05

(2)(4)(14)

 

 

 

 

 

 

Warrants to purchase 4,464 shares

 

 

 

10/8/2004

 

653

 

 

 

 

 

 

 

 

 

Common stock (2,743 shares)

 

 

 

10/8/2004

 

753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,397

 

448

 

 

 

 

 

 

36



Table of Contents

 

Company(1)

 

Industry

 

Investment

 

Interest(5)(10)

 

Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage
of Net
Assets

 

 

 

 

 

 

 

 

 

 

 

10,397

 

448

 

 

 

0.04

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,376,384

 

2,171,814

 

 

 

 

 

 


(1)

 

Other than our investments in HCP Acquisition Holdings, LLC, Ivy Hill Asset Management, L.P., Ivy Hill Middle Market Credit Fund, Ltd., LVCG Holdings, LLC, Making Memories Wholesale, Inc., Reflexite Corporation, Senior Secured Loan Fund LLC and The Thymes, LLC, we do not “Control” any of our portfolio companies, as defined in the Investment Company Act. In general, under the Investment Company Act, we would “Control” a portfolio company if we owned more than 25% of its outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company. All of our portfolio company investments are subject to legal restrictions on sales which as of December 31, 2009 represented 173% of the Company’s net assets.

 

 

 

(2)

 

These assets are owned by the Company’s wholly owned subsidiary Ares Capital CP, are pledged as collateral for the CP Funding Facility and, as a result, are not directly available to the creditors of the Company to satisfy any obligations of the Company other than Ares Capital CP’s obligations under the CP Funding Facility (see Note 7 to the consolidated financial statements). Unless otherwise noted, as of December 31, 2009, all other investments were pledged as collateral for the Revolving Credit Facility (see Note 7 to the consolidated financial statements).

 

 

 

(3)

 

Pledged as collateral for the ARCC CLO. Unless otherwise noted, as of December 31, 2009, all other investments were pledged as collateral for the Revolving Credit Facility (see Note 7 to the consolidated financial statements).

 

 

 

(4)

 

Has a payment-in-kind interest feature (see Note 2 to the consolidated financial statements).

 

 

 

(5)

 

Investments without an interest rate are non-income producing at December 31, 2009.

 

 

 

(6)

 

As defined in the Investment Company Act, we are an “Affiliated Person” of this portfolio company because we own 5% or more of the portfolio company’s outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement). Transactions during the period for the year ended December 31, 2009 in which the issuer was an Affiliated company (but not a portfolio company that we “Control”) are as follows (in thousands):

 

Company

 

Purchases

 

Redemptions
(cost)

 

Sales (cost)

 

Interest
income

 

Capital
structuring
service fees

 

Dividend
Income

 

Other income

 

Net realized
gains (losses)

 

Net unrealized
gains (losses)

 

Apple & Eve, LLC and US Juice Partners, LLC

 

$

7,500

 

$

15,019

 

$

9,800

 

$

5,335

 

$

 

$

 

$

37

 

$

 

$

12,283

 

Carador, PLC

 

$

 

$

 

$

 

$

 

$

 

$

285

 

$

 

$

 

$

(1,778

)

Campus Management Corp. and Campus Management Acquisition Corp.

 

$

 

$

2,953

 

$

15,000

 

$

6,518

 

$

 

$

 

$

90

 

$

(482

)

$

442

 

CT Technologies Intermediate Holdings, Inc. and CT Technologies Holdings, LLC

 

$

 

$

 

$

 

$

1,040

 

$

 

$

 

$

9

 

$

 

$

2,052

 

Direct Buy Holdings, Inc. and Direct Buy Investors LP

 

$

 

$

152

 

$

 

$

147

 

$

 

$

 

$

 

$

6

 

$

(3,218

)

Firstlight Financial Corporation

 

$

 

$

 

$

 

$

2,936

 

$

 

$

 

$

1,442

 

$

 

$

(11,055

)

Imperial Capital Group, LLC

 

$

5,210

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

2,972

 

Industrial Container Services, LLC

 

$

7,517

 

$

12,621

 

$

 

$

709

 

$

 

$

 

$

153

 

$

 

$

(341

)

Investor Group Services, LLC

 

$

 

$

750

 

$

 

$

 

$

 

$

 

$

26

 

$

 

$

 

Making Memories Wholesale, Inc.

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

(240

)

Pillar Holdings LLC and PHL Holding Co.

 

$

 

$

3,179

 

$

 

$

2,874

 

$

 

$

 

$

33

 

$

 

$

2,551

 

Primis Marketing Group, Inc. and Primis Holdings, LLC

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

(511

)

R3 Education, Inc.

 

$

24,000

 

$

31,600

 

$

 

$

697

 

$

 

$

 

$

29

 

$

 

$

87

 

VSS-Tranzact Holdings, LLC

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

1,850

 

Wastequip, Inc.

 

$

 

$

 

$

 

$

1,535

 

$

 

$

 

$

 

$

 

$

(5,787

)

Wear Me Apparel, LLC

 

$

 

$

34,110

 

$

 

$

75

 

$

 

$

 

$

 

$

(15,002

)

$

22,055

 

 

(7)

 

As defined in the Investment Company Act, we are an “Affiliated Person” of this portfolio company because we own 5% or more of the portfolio company’s outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement). In addition, as defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement). Transactions during the period for the year ended December 31, 2009 in which the issuer was both an Affiliated company and a portfolio company that we Control are as follows (in thousands):

 

Company

 

Purchases

 

Redemptions
(cost)

 

Sales (cost)

 

Interest
income

 

Capital
structuring
service fees

 

Dividend
Income

 

Other income

 

Net realized
gains
(losses)

 

Net unrealized
gains (losses)

 

HCP Acquisition Holdings, LLC

 

$

1,495

 

$

 

$

18

 

$

 

$

 

$

 

$

 

$

 

$

(3,721

)

Ivy Hill Asset Management, L.P.

 

$

37,406

 

$

 

$

236

 

$

 

$

 

$

2,391

 

$

 

$

494

 

$

19,145

 

Ivy Hill Middle Market Credit Fund, Ltd.

 

$

 

$

 

$

131

 

$

5,742

 

$

 

$

 

$

1,265

 

$

 

$

1,284

 

LVCG Holdings, LLC

 

$

 

$

 

$

 

$

 

$

 

$

 

$

66

 

$

 

$

(8,170

)

Making Memories Wholesale, Inc.

 

$

 

$

199

 

$

14,224

 

$

518

 

$

 

$

 

$

5

 

$

(14,173

)

$

12,822

 

R3 Education, Inc.

 

$

15,613

 

$

6,050

 

$

 

$

651

 

$

 

$

 

$

17

 

$

 

$

(3,696

)

Reflexite Corporation

 

$

7,800

 

$

 

$

2,000

 

$

2,830

 

$

194

 

$

 

$

71

 

$

 

$

(10,925

)

Senior Secured Loan Fund LLC*

 

$

165,000

 

$

 

$

 

$

4,831

 

$

 

$

 

$

640

 

$

 

$

 

The Thymes, LLC

 

$

 

$

 

$

 

$

502

 

$

 

$

 

$

 

$

 

$

455

 

 

37



Table of Contents

 

*

 

Together with GE Commercial Finance Investment Advisory Services LLC (“GE”), we serve as co-managers of the Senior Secured Loan Fund LLC.  Investments made by the program (and most decisions made in respect of program borrowers and the program itself) must be approved by both the Company and GE; therefore, although the Company owns more than 25% of the voting securities of the LLC, the Company does not believe that it has control over the Senior Secured Loan Fund (for purposes of the Investment Company Act of 1940 or otherwise).

 

 

 

(8)

 

Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

 

 

 

(9)

 

Non-registered investment company.

 

 

 

(10)

 

A majority of the variable rate loans to our portfolio companies bear interest at a rate that may be determined by reference to either Libor or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), at the borrower’s option, which reset annually (A), semi-annually (S), quarterly (Q), bi-monthly (B), monthly (M) or daily (D). For each such loan, we have provided the interest rate in effect at December 31, 2009.

 

 

 

(11)

 

In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 2.50% on $18.4 million aggregate principal amount of the portfolio company’s senior term debt previously syndicated by us.

 

 

 

(12)

 

Principal amount denominated in Canadian dollars has been translated into U.S. dollars (see Note 2 to the consolidated financial statements).

 

 

 

(13)

 

In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 2.50% on $25.0 million aggregate principal amount of the portfolio company’s senior term debt previously syndicated by us.

 

 

 

(14)

 

Loan was on non-accrual status as of December 31, 2009.

 

 

 

(15)

 

Loan includes interest rate floor feature.

 

 

 

(16)

 

In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 2.98% on $15.0 million aggregate principal amount of the portfolio company’s senior term debt previously syndicated by us.

 

 

 

(17)

 

In addition to the interest earned based on the stated interest rate of this security, the notes entitle us to receive a portion of the excess cash flow from the Senior Secured Loan Fund’s loan portfolio, which may result in a return greater than the contractual rate.

 

See accompanying notes to consolidated financial statements.

 

38



Table of Contents

 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2010 (unaudited)

(dollar amounts in thousands, except per share data)

 

 

 

Common Stock

 

Capital in
Excess of

 

Accumulated
(Overdistributed)Undistributed
Net Investment

 

Accumulated
Net Realized
Gain (Loss) on
Investments,
Foreign Currency
Transactions,
Extinguishment of
Debt and

 

Net Unrealized
Gain (Loss) on
Investments and
Foreign
Currency

 

Total
Stockholders’

 

 

 

Shares

 

Amount

 

Par Value

 

Income

 

Acquisitions

 

Transactions

 

Equity

 

Balance at December 31, 2009

 

109,944,674

 

$

110

 

$

1,490,458

 

$

3,143

 

$

(31,115

)

$

(204,708

)

$

1,257,888

 

Issuance of common stock in add-on offering (net of offering and underwriting costs)

 

22,957,993

 

23

 

277,021

 

 

 

 

277,044

 

Issuance of common stock in the Acquisition of Allied Capital Corporation

 

58,492,537

 

58

 

872,669

 

 

 

 

872,727

 

Gain on the acquisition of Allied Capital Corporation

 

 

 

 

 

195,876

 

 

195,876

 

Net increase in stockholders’ equity resulting from operations (excluding gain on the acquisition of Allied Capital Corporation)

 

 

 

 

152,466

 

6,693

 

179,911

 

339,070

 

Dividend declared ($1.05 per share)

 

 

 

 

(180,873

)

 

 

(180,873

)

Shares issued in connection with dividend reinvestment plan

 

1,171,230

 

2

 

16,742

 

 

 

 

16,744

 

Balance at September 30, 2010

 

192,566,434

 

$

193

 

$

2,656,890

 

$

(25,264

)

$

171,454

 

$

(24,797

)

$

2,778,476

 

 

See accompanying notes to consolidated financial statements.

 

39



Table of Contents

 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(dollar amounts in thousands)

 

 

 

For the nine months ended

 

 

 

September 30, 2010

 

September 30, 2009

 

 

 

(unaudited)

 

(unaudited)

 

OPERATING ACTIVITIES:

 

 

 

 

 

Net increase in stockholders’ equity resulting from operations

 

$

534,946

 

$

133,063

 

Adjustments to reconcile net increase in stockholders’ equity resulting from operations:

 

 

 

 

 

Gain on the acquisition of Allied Capital Corporation

 

(195,876

)

 

Realized loss (gain) on extinguishment of debt

 

1,961

 

(26,543

)

Net realized losses (gains) from investments

 

(8,654

)

4,232

 

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

 

(179,911

)

(15,698

)

Net accretion of discount on securities

 

(8,031

)

(1,640

)

Increase in accrued payment-in-kind dividends and interest

 

(34,117

)

(33,021

)

Amortization of debt issuance costs

 

6,802

 

3,251

 

Accretion of discount on Unsecured Notes

 

5,644

 

 

Depreciation

 

662

 

505

 

Acquisition of Allied Capital Corporation, net of cash acquired

 

(774,190

)

 

Proceeds from sale and redemption of investments

 

1,211,800

 

267,381

 

Purchase of investments

 

(1,126,780

)

(218,843

)

Changes in operating assets and liabilities:

 

 

 

 

 

Interest receivable

 

(19,712

)

1,227

 

Other assets

 

4,515

 

(1,052

)

Management and incentive fees payable

 

(33,254

)

23,538

 

Accounts payable and accrued expenses

 

(48,676

)

4,845

 

Interest and facility fees payable

 

(1

)

(1,152

)

Net cash provided by (used in) operating activities

 

(662,872

)

140,093

 

FINANCING ACTIVITIES:

 

 

 

 

 

Net proceeds from issuance of common stock

 

1,149,773

 

109,086

 

Borrowings on debt

 

1,192,264

 

246,700

 

Repayments on credit facility payable

 

(1,461,693

)

(362,678

)

Credit facility financing costs

 

(18,208

)

(6,010

)

Dividends paid in cash

 

(164,129

)

(155,105

)

Net cash provided by (used in) financing activities

 

698,007

 

(168,007

)

CHANGE IN CASH AND CASH EQUIVALENTS

 

35,135

 

(27,914

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

99,227

 

89,383

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

134,362

 

$

61,469

 

Supplemental Information:

 

 

 

 

 

Interest paid during the period

 

$

39,418

 

$

15,053

 

Taxes paid during the period

 

$

1,683

 

$

660

 

Dividends declared during the period

 

$

180,873

 

$

113,165

 

 

See accompanying notes to consolidated financial statements.

 

40



Table of Contents

 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2010 (unaudited)

(dollar amounts in thousands, except per share data and as otherwise indicated)

 

1.                                      ORGANIZATION

 

Ares Capital Corporation (the “Company” or “ARCC” or “we”) is a specialty finance company that is a closed-end, non-diversified management investment company incorporated in Maryland. We have elected to be regulated as a business development company under the Investment Company Act of 1940 (the “Investment Company Act”). We were incorporated on April 16, 2004 and were initially funded on June 23, 2004. On October 8, 2004, we completed our initial public offering (the “IPO”). On the same date, we commenced substantial investment operations.

 

On April 1, 2010, we consummated our acquisition (the “Allied Acquisition”) of Allied Capital Corporation (“Allied Capital”), in an all stock merger where each existing share of common stock of Allied Capital was exchanged for 0.325 shares of our common stock.  The Allied Acquisition was valued at approximately $908 million as of April 1, 2010.  In connection therewith, we issued approximately 58.5 million shares of our common stock to Allied Capital’s then-existing stockholders, thereby resulting in our then-existing stockholders owning approximately 69% of the combined company and then-existing Allied Capital stockholders owning approximately 31% of the combined company (see Note 15).

 

The Company has elected to be treated as a regulated investment company (a “RIC”) under subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and operates in a manner so as to qualify for the tax treatment applicable to RICs. Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first and second lien senior loans and mezzanine debt, which in some cases includes an equity component. To a lesser extent, we also make equity investments. Also, as a result of the Allied Acquisition, Allied Capital’s equity investments, including equity investments larger than those we have traditionally made and equity investments pursuant to which Allied Capital controlled a particular company, became part of our portfolio.

 

We are externally managed by Ares Capital Management LLC (“Ares Capital Management” or the “investment adviser”), an affiliate of Ares Management LLC (“Ares Management”), a global alternative asset manager and a Securities and Exchange Commission (“SEC”) registered investment adviser. Ares Operations LLC (“Ares Operations” or the “administrator”), an affiliate of Ares Management, provides the administrative services necessary for us to operate.

 

Interim financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X. In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of financial statements for the interim period, have been included. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2010.

 

2.                                      SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with GAAP, and include the accounts of the Company and its wholly owned subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition as of and for the periods presented. All significant intercompany balances and transactions have been eliminated.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include funds from time to time deposited with financial institutions and short-term, liquid investments in a money market fund. Cash and cash equivalents are carried at cost which approximates fair value.

 

Concentration of Credit Risk

 

The Company places its cash and cash equivalents with financial institutions and, at times, cash held in money market accounts may exceed the Federal Deposit Insurance Corporation insured limit.

 

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Investments

 

Investment transactions are recorded on the trade date. Realized gains or losses are computed using the specific identification method. Unrealized gains or losses reflect the change in investment values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. Investments for which market quotations are readily available are typically valued at such market quotations. In order to validate market quotations, we look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available (i.e., substantially all of our investments) are valued at fair value as determined in good faith by our board of directors, based on the input of our investment adviser, audit committee and independent third-party valuation firms that have been engaged at the direction of the board to assist in the valuation of each portfolio investment without a readily available market quotation at least once during a trailing 12 month period, and under a valuation policy and a consistently applied valuation process. The valuation process is conducted at the end of each fiscal quarter, and a minimum of 50% of our portfolio at fair value are subject to review by an independent valuation firm each quarter.

 

As part of the valuation process, we may take into account the following types of factors, if relevant, in determining the fair value of our investments: the enterprise value of a portfolio company (an estimate of the total fair value of the portfolio company’s debt and equity), the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison of the portfolio company’s securities to any similar publicly traded securities, changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made in the future and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate our valuation.

 

Because there is not a readily available market value for most of the investments in our portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by our board of directors, as described herein. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize.  Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize significantly less than the value at which we have recorded it.

 

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 gains or losses that would be realized based on the valuations currently assigned.

 

Our board of directors undertakes a multi-step valuation process each quarter, as described below:

 

·                  Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment in conjunction with our portfolio management team.

 

·                  Preliminary valuations are reviewed and discussed with the investment adviser’s management and investment professionals, and then valuation recommendations are presented to the board of directors.

 

·                 The audit committee of our board of directors reviews these valuations, as well as the input of independent third-party valuation firms with respect to the valuations of a minimum of 50% of our portfolio at fair value.

 

·                 The board of directors discusses valuations and determines the fair value of each investment in our portfolio without a readily available market quotation in good faith based on the input of our investment adviser, audit committee and, where applicable, independent third-party valuation firms.

 

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Effective January 1, 2008, the Company adopted Accounting Standards Codification (“ASC”) 820-10 (previously Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”)), which expands the application of fair value accounting for investments (see Note 8). Investments acquired as part of the Allied Acquisition were accounted for in accordance with ASC 805-10 (previously SFAS No. 141(R)), Business Combinations, which requires that all assets be recorded at fair value.  As a result, the initial amortized cost basis and fair value for the acquired investments were the same at April 1, 2010 (see Note 15).

 

Interest Income Recognition

 

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discounts and premiums from par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums, if any.

 

Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued 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 is paid and, in management’s judgment, are likely to remain current. The Company may make exceptions to this if the loan has sufficient collateral value and is in the process of collection. As of September 30, 2010, 7.5% of total investments at amortized cost (or 5.2% of total investments at fair value) were on non-accrual status, including 5.3% of total investments at amortized cost (or 5.0% of total investments at fair value) of investments acquired as part of the Allied Acquisition. As of December 31, 2009, 2.5% of total investments at amortized cost (or 0.5% at fair value) were on non-accrual status.

 

Payment-in-Kind Interest

 

The Company has loans in its portfolio that contain payment-in-kind (“PIK”) provisions. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan and recorded as interest income. To maintain the Company’s status as a RIC, this non-cash source of income must be paid out to stockholders in the form of dividends even though the Company has not yet collected the cash. For the three and nine months ended September 30, 2010, $13,345 and $34,117, respectively, in PIK income was recorded. Of the PIK income recorded for the three and nine months ended September 30, 2010, $3,255 and $8,992, respectively, was PIK income from investments acquired as part of the Allied Acquisition.  For the three and nine months ended September 30, 2009, $10,825 and $33,021, respectively, in PIK income were recorded.

 

Capital Structuring Service Fees and Other Income

 

The Company’s investment adviser seeks to provide assistance to our portfolio companies in connection with the Company’s investments and in return the Company may receive fees for capital structuring services. These fees are generally only available to the Company as a result of the Company’s underlying investments, are normally paid at the closing of the investments, are generally non-recurring and are recognized as revenue when earned upon closing of the investment. The services that the Company’s investment adviser provides vary by investment, but generally consist of reviewing existing credit facilities, arranging bank financing, arranging equity financing, structuring financing from multiple lenders, structuring financing from multiple equity investors, restructuring existing loans, raising equity and debt capital, and providing general financial advice, which concludes upon closing of the investment.  Any services of the above nature subsequent to the closing would generally generate a separate fee payable to the Company. In certain instances where the Company is invited to participate as a co-lender in a transaction and does not provide significant services in connection with the investment, a portion of loan fees paid to the Company in such situations will be deferred and amortized over the estimated life of the loan. The Company’s investment adviser may also take a seat on the board of directors of a portfolio company, or observe the meetings of the board of directors without taking a formal seat.

 

Other income includes fees for asset management, management and consulting services, loan guarantees, commitments, amendments and other services rendered by the Company to portfolio companies. Such fees are recognized as income when earned or the services are rendered.

 

Foreign Currency Translation

 

The Company’s books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:

 

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(1)        Market value of investment securities, other assets and liabilities — at the exchange rates prevailing at the end of the period.

 

(2)        Purchases and sales of investment securities, income and expenses — at the exchange rates prevailing on the respective dates of such transactions, income or expenses.

 

Results of operations based on changes in foreign exchange rates are separately disclosed in the statement of operations. Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuation and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.

 

Accounting for Derivative Instruments

 

The Company does not utilize hedge accounting and marks its derivatives to market through operations.

 

Offering Expenses

 

The Company’s offering costs, excluding underwriters’ fees, are charged against the proceeds from equity offerings when received. For the nine months ended September 30, 2010 and 2009, the Company incurred approximately $1,035 and $806, respectively, of offering costs.

 

Debt Issuance Costs

 

Debt issuance costs are being amortized over the life of the related credit facility using the straight line method, which closely approximates the effective yield method.

 

U.S. Federal Income Taxes

 

The Company has elected to be treated as a RIC under subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to qualify as a RIC, among other things, the Company is required to timely distribute to its stockholders at least 90% of investment company taxable income, as defined by the Code, for each year. The Company, among other things, has made and intends to continue to make the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal income taxes.

 

Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. For the three and nine months ended September 30, 2010, no amounts were recorded for U.S. Federal excise tax. For the three months ended September 30, 2009, no amount was recorded for U.S. federal excise tax. For the nine months ended September 30, 2009, a net benefit of $30 was recorded for U.S. Federal excise tax.

 

Certain of our wholly owned subsidiaries are subject to U.S. Federal and state income taxes. For the three and nine months ended September 30, 2010, we recorded a tax (benefit)/expense of approximately $(164) and $360, respectively, for these subsidiaries. For the three and nine months ended September 30, 2009, we recorded a tax expense of approximately $454 and $593, respectively, for these subsidiaries.

 

Income taxes for certain of our subsidiaries are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

Dividends to Common Stockholders

 

Dividends and distributions to common stockholders are recorded on the record date. The amount to be paid out as a dividend is determined by the board of directors each quarter and is generally based upon the earnings estimated by management. Net

 

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realized capital gains, if any, are generally distributed at least annually, although we may decide to retain such capital gains for investment.

 

We have adopted a dividend reinvestment plan that provides for reinvestment of any distributions we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our board of directors authorizes, and we declare, a cash dividend, then our stockholders who have not ‘‘opted out’’ of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividend.  While we generally use primarily newly issued shares to implement the plan (especially if our shares are trading at a premium to net asset value), we may purchase shares in the open market in connection with our obligations under the plan.  In particular, if our shares are trading at a significant enough discount to net asset value and we are otherwise permitted under applicable law to purchase such shares, we intend to purchase shares in the open market in connection with our obligations under our dividend reinvestment plan.

 

Use of Estimates in the Preparation of Financial Statements

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of actual and contingent assets and liabilities at the date of the financial statements and the reported amounts of income or loss and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the valuation of investments.

 

New Accounting Pronouncements

 

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update 2010-06, Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures About Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 adds new requirements for disclosures about transfers into and out of Level 1 and 2 inputs and separate disclosures about fair value measurements (see Note 8), particularly with respect to purchases, sales, issuances and settlements relating to Level 3 inputs. It also clarifies existing fair value disclosures about the level of disaggregation, will require that entities provide fair value measurement disclosures for each class of assets and liabilities, and adds requirements relating to inputs and valuation techniques used to measure fair value. Generally, ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, however, the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 inputs will not be required until fiscal years beginning after December 15, 2010. The adoption of ASU 2010-06 did not have a significant impact on the Company’s financial condition and results of operations.

 

3.                                      AGREEMENTS

 

Investment Advisory and Management Agreement

 

The Company is party to an investment advisory and management agreement (the “investment advisory and management agreement”) with Ares Capital Management. Subject to the overall supervision of our board of directors, Ares Capital Management provides investment advisory services to the Company. For providing these services, Ares Capital Management receives a fee from us, consisting of two components—a base management fee and an incentive fee. Ares Capital Management has committed to defer up to $15,000 in base management and incentive fees for each of the first two fiscal years following the Allied Acquisition if certain earnings targets are not met.

 

The base management fee is calculated at an annual rate of 1.5% based on the average value of our total assets (other than cash or cash equivalents but including assets purchased with borrowed funds) at the end of the two most recently completed calendar quarters. The base management fee is payable quarterly in arrears.

 

The incentive fee has two parts. One part is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the quarter. Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under the administration agreement, and any interest expense and dividends paid on any 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 market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero coupon securities, accrued income that we have not yet received in cash. The investment adviser is not under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued interest that we never actually receive.

 

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Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Because of the structure of the incentive fee, it is possible that we may pay an incentive fee in a quarter where we incur a loss. For example, if we receive pre-incentive fee net investment income in excess of the hurdle rate (as defined below) for a quarter, we will pay the applicable incentive fee even if we have incurred a loss in that quarter due to realized and unrealized capital losses.

 

Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter, is compared to a fixed “hurdle rate” of 2% per quarter. If market interest rates rise, we may be able to invest our funds in debt instruments that provide for a higher return, which would increase our pre-incentive fee net investment income and make it easier for our investment adviser to surpass the fixed hurdle rate and receive an incentive fee based on such net investment income. Our pre-incentive fee net investment income used to calculate this part of the incentive fee is also included in the amount of our total assets (other than cash and cash equivalents but including assets purchased with borrowed funds) used to calculate the 1.5% base management fee.

 

We pay the investment adviser an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:

 

·                  no incentive fee in any calendar quarter in which the pre-incentive fee net investment income does not exceed the hurdle rate;

 

·                  100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5% in any calendar quarter. We refer to this portion of our pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 2.5%) as the “catch-up” provision. The “catch-up” is meant to provide our investment adviser with 20% of the pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 2.5% in any calendar quarter; and

 

·                  20% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.5% in any calendar quarter.

 

These calculations are adjusted for any share issuances or repurchases during the quarter.

 

The second part of the incentive fee (the “Capital Gains Fee”), is determined and payable in arrears as of the end of each calendar year (or, upon termination of the investment advisory and management agreement, as of the termination date) and is calculated at the end of each applicable year by subtracting (a) the sum of our cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (b) our cumulative aggregate realized capital gains, in each case calculated from October 8, 2004. If such amount is positive at the end of such year, then the Capital Gains Fee for such year is equal to 20% of such amount, less the aggregate amount of Capital Gains Fees paid in all prior years. If such amount is negative, then there is no Capital Gains Fee for such year.

 

The cumulative aggregate realized capital gains are calculated as the sum of the differences, if positive, between (a) the net sales price of each investment in our portfolio when sold and (b) the accreted or amortized cost basis of such investment.

 

The cumulative aggregate realized capital losses are calculated as the sum of the amounts by which (a) the net sales price of each investment in our portfolio when sold is less than (b) the accreted or amortized cost basis of such investment.

 

The aggregate unrealized capital depreciation is calculated as the sum of the differences, if negative, between (a) the valuation of each investment in our portfolio as of the applicable Capital Gains Fee calculation date and (b) the accreted or amortized cost basis of such investment.

 

We defer cash payment of any incentive fee otherwise earned by the investment adviser if during the most recent four full calendar quarter period ending on or prior to the date such payment is to be made the sum of (a) the aggregate distributions to our stockholders and (b) the change in net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) is less than 8.0% of our net assets at the beginning of such period.

 

For the three and nine months ended September 30, 2010, we incurred $15,436 and $35,574, respectively, in base management fees and $17,805 and $40,922, respectively, in incentive management fees related to pre-incentive fee net

 

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investment income. For the three and nine months ended September 30, 2010, we accrued no incentive management fees related to net realized capital gains.  As of September 30, 2010, $33,241 was unpaid and included in “management and incentive fees payable” in the accompanying consolidated balance sheet.

 

For the three and nine months ended September 30, 2009, we incurred $7,508 and $22,502, respectively, in base management fees and $8,227 and $23,764, respectively, in incentive management fees related to pre-incentive fee net investment income. For the three and nine months ended September 30, 2009, we accrued no incentive management fees related to realized capital gains.

 

Administration Agreement

 

We are party to a separate administration agreement, referred to herein as the “administration agreement,” with our administrator, Ares Operations. Pursuant to the administration agreement, Ares Operations furnishes us with office equipment and clerical, bookkeeping and record keeping services. Under the administration agreement, Ares Operations also performs, or oversees the performance of, our required administrative services, which include, among other things, being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, Ares Operations assists us in determining and publishing our net asset value, oversees the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Payments under the administration agreement are equal to an amount based upon our allocable portion of Ares Operations’ overhead in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our executive officers and their respective staffs. The administration agreement may be terminated by either party without penalty upon 60-days’ written notice to the other party.

 

For the three and nine months ended September 30, 2010, we incurred $2,642 and $6,251, respectively, in administrative fees. As of September 30, 2010, $2,642 was unpaid and included in “accounts payable and accrued expenses” in the accompanying consolidated balance sheet.

 

For the three and nine months ended September 30, 2009, we incurred $809 and $2,905, respectively, in administrative fees.

 

4.                                      EARNINGS PER SHARE

 

The following information sets forth the computations of basic and diluted net increase in stockholders’ equity per share resulting from operations for the three and nine months ended September 30, 2010:

 

 

 

Three months ended
September 30, 2010

 

Nine months ended
September 30, 2010

 

Numerator for basic and diluted net increase in stockholders’ equity resulting from operations per share:

 

$

128,377

 

$

534,946

 

Denominator for basic and diluted net increase in stockholders’ equity resulting from operations per share:

 

192,167,337

 

169,499,905

 

Basic and diluted net increase in stockholders’ equity resulting from operations per share:

 

$

0.67

 

$

3.16

 

 

The following information sets forth the computations of basic and diluted net increase in stockholders’ equity per share resulting from the operations for the three and nine months ended September 30, 2009:

 

 

 

Three months ended
September 30, 2009

 

Nine months ended
September 30, 2009

 

Numerator for basic and diluted net increase in stockholders’ equity resulting from operations per share:

 

$

63,276

 

$

133,063

 

Denominator for basic and diluted net increase in stockholders’ equity resulting from operations per share:

 

102,831,909

 

99,066,652

 

Basic and diluted net increase in stockholders’ equity resulting from operations per share:

 

$

0.62

 

$

1.34

 

 

5.                                      INVESTMENTS

 

Under the Investment Company Act, we are required to separately identify non-controlled investments where we own more than 5% of a portfolio company’s outstanding voting securities as “affiliated companies.”  In addition, under the Investment

 

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Company Act, we are required to separately identify investments where we own more than 25% of a portfolio company’s outstanding voting securities as “control affiliated companies.”

 

For the three months ended September 30, 2010, the Company funded investments totaling $509 million including $236 million aggregate principal amount of senior term debt, $40 million aggregate principal amount of senior subordinated debt, $210 million for investments in the Senior Secured Loan Fund LLC (the “Senior Secured Loan Program”) (see Note 10), and $23 million of investments in equity securities.

 

In addition, for the three months ended September 30, 2010, $231 million of investments were sold or redeemed including $165 million aggregate principal amount of senior term debt, $62 million of senior subordinated debt, $3 million of investments in collateralized loan obligations and $1 million of investments in equity securities.  Within the total investments sold or redeemed for the three months ended September 30, 2010, approximately $99 million were originally acquired as part of the Allied Acquisition with a net realized gain of approximately $1.8 million recognized in these transactions.

 

As of September 30, 2010, investments and cash and cash equivalents consisted of the following:

 

 

 

Amortized Cost

 

Fair Value

 

Cash and cash equivalents

 

$

134,362

 

$

134,362

 

Senior term debt

 

1,594,972

 

1,550,673

 

Senior subordinated debt

 

1,252,715

 

1,212,003

 

Equity securities

 

664,425

 

684,744

 

Collateralized loan obligations

 

220,369

 

238,317

 

Subordinated Notes of Senior Secured Loan Program

 

400,451

 

425,500

 

Commercial real estate

 

41,207

 

38,553

 

Total

 

$

4,308,501

 

$

4,284,152

 

 

As of December 31, 2009, investments and cash and cash equivalents consisted of the following:

 

 

 

Amortized Cost

 

Fair Value

 

Cash and cash equivalents

 

$

99,227

 

$

99,227

 

Senior term debt

 

1,152,462

 

1,072,149

 

Senior subordinated debt

 

658,787

 

595,668

 

Equity securities

 

344,454

 

287,614

 

Subordinated Notes of Senior Secured Loan Program

 

165,000

 

165,000

 

Collateralized loan obligations

 

55,681

 

51,383

 

Total

 

$

2,475,611

 

$

2,271,041

 

 

The amortized cost represents the original cost adjusted for the accretion of discounts and amortization of premiums on debt using the effective interest method.

 

The industrial and geographic compositions of our portfolio at fair value at September 30, 2010 and December 31, 2009 were as follows:

 

Industry

 

September 30, 2010

 

December 31, 2009

 

Investment Funds

 

18.3

%

12.8

%

Business Services

 

14.8

 

5.8

 

Healthcare Services

 

13.0

 

18.3

 

Consumer Products

 

9.9

 

3.2

 

Restaurants and Food Services

 

9.1

 

7.8

 

Financial Services

 

7.4

 

3.4

 

Education

 

4.8

 

10.1

 

Manufacturing

 

3.9

 

3.8

 

Telecommunications

 

2.9

 

1.8

 

Beverage/Food/Tobacco

 

2.8

 

6.1

 

Other Services

 

2.6

 

8.2

 

Retail

 

2.4

 

5.9

 

Commercial Real Estate

 

1.7

 

0.0

 

Wholesale Distribution

 

1.3

 

0.0

 

Printing/Publishing/Media

 

0.9

 

2.6

 

Computers/Electronics

 

0.9

 

1.4

 

Aerospace and Defense

 

0.8

 

2.8

 

Environmental Services

 

0.8

 

1.5

 

Automotive Services

 

0.7

 

0.0

 

Containers/Packaging

 

0.5

 

1.0

 

Health Clubs

 

0.4

 

1.1

 

Oil and Gas

 

0.1

 

0.0

 

Homebuilding

 

0.0

 

0.1

 

Cargo Transport

 

0.0

 

1.4

 

Grocery

 

0.0

 

0.9

 

Total

 

100.0

%

100.0

%

 

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Geographic Region

 

September 30, 2010

 

December 31, 2009

 

Mid-Atlantic

 

29.0

%

22.2

%

Midwest

 

22.6

 

19.7

 

West

 

22.6

 

24.8

 

Southeast

 

18.6

 

19.7

 

International

 

4.3

 

10.4

 

Northeast

 

2.9

 

3.2

 

Total

 

100.0

%

100.0

%

 

Senior Secured Loan Program. In October 2009, the Company completed its acquisition from Allied Capital of subordinated notes issued by the Senior Secured Loan Program (the “SSLP Notes”).  The Senior Secured Loan Program was formed in December 2007 to invest in “unitranche” loans (loans that combine both senior and subordinated debt, generally in a first lien position) of middle-market companies. The cost and fair value of the SSLP Notes was $400.5 million and $425.5 million, respectively, at September 30, 2010, and $165.0 million and $165.0 million, respectively, at December 31, 2009.  The SSLP Notes pay a coupon of LIBOR plus 8.0% and also entitle the Company to receive a portion of the excess cash flow from the loan portfolio, which may result in a return greater than the contractual coupon. The Company is also entitled to certain other sourcing and management fees related to this investment. The Company’s yield on its investment in the Senior Secured Loan Program at fair value was 16.52% and 17.00% at September 30, 2010 and December 31, 2009, respectively.  For the three and nine months ended September 30, 2010, the Company earned interest income of $12,987 and $30,242, respectively, on the SSLP Notes.

 

As of September 30, 2010 and December 31, 2009, the Senior Secured Loan Program had total assets of $2.0 billion and $0.9 billion, respectively, in aggregate principal amount.  The senior debt obligations of the Senior Secured Loan Program were $1.5 billion and $0.7 billion in aggregate principal amount at September 30, 2010 and December 31, 2009, respectively. The SSLP Notes owned by the Company are junior to the senior debt obligations of the fund and the Company owns 87.5% of the outstanding class of such notes.

 

The Senior Secured Loan Program’s portfolio consisted of 17 and 11 different issuers as of September 30, 2010 and December 31, 2009, respectively. At September 30, 2010 and December 31, 2009, the portfolio was comprised of all first lien senior secured debt issued by U.S. middle-market companies and none of the loans were on non-accrual status. At September 30, 2010 and December 31, 2009, the single largest issuer in the Senior Secured Loan Program’s portfolio in aggregate principal amount was $254.4 million and $179.9 million, respectively, and the top five issuers totaled $1,053.9 million and $535.3 million, respectively.  The portfolio companies in the Senior Secured Loan Program are in similar industries as the companies in Ares Capital’s portfolio.

 

6.                                      COMMITMENTS AND CONTINGENCIES

 

As of September 30, 2010 and December 31, 2009, the Company had the following commitments to fund various revolving and delayed draw senior secured and subordinated loans to its portfolio companies:

 

 

 

September 30, 2010

 

December 31, 2009

 

Total revolving and delayed draw commitments

 

$

633,400

 

$

136,800

 

Less: funded commitments

 

(382,600

)

(37,200

)

Total unfunded commitments

 

250,800

 

99,600

 

Less: commitments substantially at discretion of the Company

 

(63,400

)

(4,000

)

Less: unavailable commitments due to borrowing base or other covenant restrictions

 

(16,100

)

(16,200

)

Total net adjusted unfunded commitments

 

$

171,300

 

$

79,400

 

 

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Of the total net adjusted unfunded commitments as of September 30, 2010, $78,100 are from commitments for investments acquired as part of the Allied Acquisition.  Also, of the total commitments as of September 30, 2010, $176,600 extend beyond the maturity date for our Revolving Credit Facility (as defined in Note 7). Included within the total commitments as of September 30, 2010 are commitments to issue up to $21,700 in standby letters of credit through a financial intermediary on behalf of certain portfolio companies. Under these arrangements, the Company would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. As of September 30, 2010, the Company had $18,700 in standby letters of credit issued and outstanding on behalf of the portfolio companies, of which no amounts were recorded as a liability on the balance sheet as they are considered in the valuation of the investments in the portfolio company.  Of these letters of credit, $300 expire in December 2010, $800 expire in January 2011, $8,200 expire in February 2011, $2,000 expire in March 2011, $2,300 expire in September 2011, and $5,100 expire in December 2012.

 

As of September 30, 2010 and December 31, 2009, the Company was subject to subscription agreements to fund equity investments in private equity and other investment partnerships as follows:

 

 

 

September 30, 2010

 

December 31, 2009

 

Total private equity commitments

 

$

567,600

 

$

428,300

 

Total unfunded private equity commitments

 

$

442,500

 

$

415,400

 

 

Of the total unfunded private equity commitments as of September 30, 2010, $400,500 are substantially at the discretion of the Company. Additionally, of the total unfunded private equity commitments as of September 30, 2010, $28,100 are for investments acquired as part of the Allied Acquisition.

 

See Note 10 for more information on the Company’s commitment to the Senior Secured Loan Program.

 

In the ordinary course of business, Allied Capital had issued guarantees on behalf of certain portfolio companies.  Under these arrangements, payments would be required to be made to third parties if the portfolio companies were to default on their related payment.  As part of the Allied Acquisition, the Company assumed such outstanding guarantees or similar obligations.  As a result, as of September 30, 2010, the Company had outstanding guarantees or similar obligations totaling $0.8 million and an outstanding servicer performance guaranty.  The servicer performance guaranty relates to one portfolio company’s servicing of loans held in a loan warehouse facility, and as of September 30, 2010, there were no known issues or claims with respect to such performance guaranty.

 

7.                                      BORROWINGS

 

In accordance with the Investment Company Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the Investment Company Act, is at least 200% after such borrowing. As of September 30, 2010, our asset coverage for borrowed amounts was 282%.

 

Our debt obligations consisted of the following as of September 30, 2010 and December 31, 2009:

 

 

 

September 30, 2010

 

December 31, 2009

 

 

 

Carrying
Value(1)

 

Total
Available(2)

 

Carrying
Value(1)

 

Total
Available(2)

 

CP Funding Facility

 

$

283,374

 

$

400,000

 

$

221,569

 

$

221,569

 

Revolving Credit Facility

 

431,000

 

810,000

 

474,144

 

525,000

 

CP Funding II Facility (3)

 

 

 

 

200,000

 

Debt Securitization

 

177,163

 

200,134

 

273,752

 

274,981

 

2011 Notes (principal amount outstanding of $300,584)

 

294,333

(4)

300,584

 

 

 

2012 Notes (principal amount outstanding of $161,210)

 

157,523

(4)

161,210

 

 

 

2047 Notes (principal amount outstanding of $230,000)

 

180,750

(4)

230,000

 

 

 

 

 

$

1,524,143

(5)

$

2,101,928

 

$

969,465

 

$

1,221,550

 

 


(1)                                 Except for the Unsecured Notes, all carrying values are the same as the principal amounts outstanding.

 

(2)           Subject to borrowing base and leverage restrictions.

 

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(3)                                The CP Funding II Facility was combined with the CP Funding Facility on January 22, 2010. In connection therewith, the CP Funding II Facility was terminated.

 

(4)                                Represents the aggregate principal amount of the applicable series of notes less the unaccreted discount initially recorded as a part of the Allied Acquisition.

 

(5)                                Total principal amount of debt outstanding totals $1,583,331.

 

The weighted average interest rate of all our debt obligations, at principal amount, as of September 30, 2010 and December 31, 2009 was 4.63% and 2.05%, respectively.

 

CP Funding Facility

 

In October 2004, we formed Ares Capital CP Funding LLC (“Ares Capital CP”), a wholly owned subsidiary of the Company, through which we established a revolving facility (as amended, the “CP Funding Facility”) that, as amended, allowed Ares Capital CP to issue up to $350,000 of variable funding certificates.  On May 7, 2009, the Company and Ares Capital CP entered into an amendment that, among other things, converted the CP Funding Facility from a revolving facility to an amortizing facility, extended the maturity from July 21, 2009 to May 7, 2012 and reduced the availability from $350,000 to $225,000.

 

On July 21, 2009, we entered into an agreement with Wachovia Bank N.A. (“Wachovia”) to establish a new revolving facility (the “CP Funding II Facility”) whereby Wachovia agreed to extend credit to us in an aggregate principal amount not exceeding $200,000 at any one time outstanding. The CP Funding II Facility was scheduled to expire on July 21, 2012.

 

On January 22, 2010, we combined the CP Funding Facility with the CP Funding II Facility into a single $400,000 revolving securitized facility (the “combined CP Funding Facility”). In connection with the combination, we terminated the CP Funding II Facility and entered into an Amended and Restated Purchase and Sale Agreement with Ares Capital CP Funding Holdings LLC, our wholly owned subsidiary (“CP Holdings”), pursuant to which we may sell to CP Holdings certain loans that we have originated or acquired, or will originate or acquire (the “Loans”) from time to time, which CP Holdings will subsequently sell to Ares Capital CP, which is a wholly owned subsidiary of CP Holdings. The combined CP Funding Facility is secured by all of the assets held by, and the membership interest in, Ares Capital CP. The combined CP Funding Facility, among other things, extended the maturity date of the facility to January 22, 2013 (with two one-year extension options, subject to mutual consent). Prior to January 22, 2010, the interest rate charged on the CP Funding Facility was the commercial paper rate plus 3.50%.  After January 22, 2010, subject to certain exceptions, the interest charged on the combined CP Funding Facility is based on LIBOR plus an applicable spread of between 2.25% and 3.75% or on a “base rate” (which is the higher of a prime rate, or the federal funds rate plus 0.50%) plus an applicable spread of between 1.25% to 2.75%, in each case, based on a pricing grid depending upon our credit rating. As of and for the three months ended September 30, 2010, the effective LIBOR spread under the combined CP Funding Facility was 2.75%.

 

As of September 30, 2010, there was $283,374 outstanding under the combined CP Funding Facility and the Company continues to be in material compliance with all of the limitations and requirements of the combined CP Funding Facility. As of December 31, 2009, there was $221,569 outstanding under the CP Funding Facility.  The combined CP Funding Facility is secured by all of the assets held by and the membership interest in Ares Capital CP, which as of September 30, 2010 consisted of 34 investments. As of September 30, 2010, the base rate in effect was one month LIBOR, which was 0.26%. For the three and nine months ended September 30, 2010, the average interest rates (i.e. rate in effect plus the spread) on the combined CP Funding Facility and the CP Funding Facility were 3.11% and 2.99%, respectively. For the three and nine months ended September 30, 2010, the average outstanding balances on the combined CP Funding Facility and the CP Funding Facility were $272,558 and $227,838, respectively.  For the three and nine months ended September 30, 2010, the interest expense incurred on the combined CP Funding Facility and the CP Funding Facility was $2,404 and $6,185, respectively. Cash paid for interest expense on the combined CP Funding Facility during the nine months ended September 30, 2010 was $5,106.

 

For the three and nine months ended September 30, 2009, the average interest rates (i.e., rate in effect plus the spread) for the CP Funding Facility were 3.77% and 3.62%, respectively. For the three and nine months ended September 30, 2009, the average outstanding balances on the CP Funding Facility were $223,345 and $165,172, respectively. For the three and nine months ended September 30, 2009, the interest expense incurred on the CP Funding Facility was $2,151 and $4,632, respectively. Cash paid for interest expense on the CP Funding Facility during the nine months ended September 30, 2009 was $4,349.

 

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We are required to pay a commitment fee of between 0.50% and 2.00% depending on the usage level on any unused portion of the combined CP Funding Facility.  Prior to May 7, 2009, we were required to pay a commitment fee for any unused portion of the CP Funding Facility equal to 0.50% per annum for any unused portion of the CP Funding Facility.  Prior to January 22, 2010, we were also required to pay a commitment fee on any unused portion of the CP Funding II Facility of between 0.50% and 2.00% depending on the usage level. For the three and nine months ended September 30, 2010, we incurred commitment fees on the CP Funding Facility together with the CP Funding II Facility of $285 and $1,319, respectively. For the three and nine months ended September 30, 2009, we incurred commitment fees on the CP Funding Facility together with the CP Funding II Facility of $260 and $351, respectively.

 

Revolving Credit Facility

 

In December 2005, we entered into a senior secured revolving credit facility (as amended and restated, the “Revolving Credit Facility”), under which, as amended, the lenders agreed to extend credit to the Company.  On January 22, 2010, we entered into an agreement to amend and restate the Revolving Credit Facility. The amendment and restatement of the Revolving Credit Facility, among other things, increased the size of the facility from $525,000 to $690,000 (comprised of $615,000 in commitments on a stand-alone basis and an additional $75,000 in commitments contingent upon the closing of the Allied Acquisition), extended the maturity date from December 28, 2010 to January 22, 2013 and modified pricing.  The Revolving Credit Facility also includes an “accordion” feature that allows, under certain circumstances, to increase the size of the facility to a maximum of $1,050,000.  During the nine months ended September 30, 2010, we exercised this “accordion” feature and increased the size of the facility by $120,000 to bring the total facility size to $810,000. As of September 30, 2010, there was $431,000 outstanding under the Revolving Credit Facility and the Company continues to be in material compliance with all of the limitations and requirements of the Revolving Credit Facility. As of December 31, 2009, there was $474,144 outstanding under the Revolving Credit Facility.

 

Prior to January 22, 2010, subject to certain exceptions, pricing on the Revolving Credit Facility was based on LIBOR plus 1.00% or on an “alternate base rate” (which was the highest of a prime rate, the federal funds rate plus 0.50%, or one month LIBOR plus 1.00%). After January 22, 2010, subject to certain exceptions, pricing under the Revolving Credit Facility is based on LIBOR plus an applicable spread of between 2.50% and 4.00% or on the “alternate base rate” plus an applicable spread of between 1.50% and 3.00%, in each case, based on a pricing grid depending upon our credit rating. As of and for the three months ended September 30, 2010, the effective LIBOR spread under the Revolving Credit Facility was 3.00%.  As of September 30, 2010, the one, two, three and six month LIBOR was 0.26%, 0.27%, 0.29% and 0.46%, respectively. As of December 31, 2009, the one, two, three and six month LIBOR was 0.23%, 0.24%, 0.25% and 0.43%, respectively. For the three and nine months ended September 30, 2010, the average interest rate was 4.66% and 4.09%, respectively, the average outstanding balance was $194,570 and $271,637, respectively, and the interest expense incurred was $2,972 and $10,526, respectively. For the three and nine months ended September 30, 2009, the average interest rate was 1.95% and 2.13%, respectively, the average outstanding balance was $328,600 and $414,121, respectively, and the interest expense incurred was $1,605 and $6,617, respectively. Cash paid for interest expense in respect of the revolving credit facility during the nine months ended September 30, 2010 and 2009 was $7,796 and $7,944, respectively.

 

Additionally, we are required to pay a commitment fee of 0.50% on any unused portion of the Revolving Credit Facility.  For the three and nine months ended September 30, 2010, the commitment fees incurred were $513 and $1,408, respectively. For the three and nine months ended September 30, 2009, the commitment fees incurred was $90 and $133, respectively.

 

In connection with the expansion and extension of the Revolving Credit Facility, we paid arrangement fees totaling $15.6 million.  With certain exceptions, the Revolving Credit Facility is secured by substantially all of the assets in our portfolio (other than investments held by Ares Capital CP under the combined CP Funding Facility, those held as a part of the Debt Securitization, discussed below and retain other investments). As of September 30, 2010, the Revolving Credit Facility was secured by 300 investments.

 

The amount available for borrowing under the Revolving Credit Facility is reduced by any standby letters of credit issued through the Revolving Credit Facility. As of September 30, 2010, the Company had $23,108 in standby letters of credit issued through the Revolving Credit Facility. As of December 31, 2009, the Company had $24,000 in standby letters of credit issued through the Revolving Credit Facility.

 

Debt Securitization

 

In July 2006, through ARCC Commercial Loan Trust 2006, a vehicle serviced by our wholly owned subsidiary, ARCC CLO 2006 LLC (“ARCC CLO”), we completed a $400,000 debt securitization (the “Debt Securitization”) and issued

 

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approximately $314,000 principal amount of asset-backed notes (including an aggregate amount of up to $50,000 of revolving notes, $27,029 of which was drawn down as of September 30, 2010) (the “CLO Notes”) to third parties that are secured by a pool of middle market loans that were purchased or originated by the Company. The CLO Notes are included in our September 30, 2010 consolidated balance sheet. We retained approximately $86,000 of aggregate principal amount of certain BBB and non-rated securities in the Debt Securitization at the time of issuance.

 

During the nine months ended September 30, 2010, we repaid $32,613, $21,742 and $42,234 of the Class A-1-A, Class A-1A VFN and Class A-2A Notes, respectively. During the nine months ended September 30, 2009, we repurchased, in several open market transactions, $34,790 of CLO Notes consisting of $14,000 of Class B Notes and $20,790 of Class C Notes for a total purchase price of $8,247. As a result of these purchases, we recognized a $26,543 gain on the extinguishment of debt for the nine months ended September 30, 2009. As of September 30, 2010, we held an aggregate principal amount of $120,790 of CLO Notes (the “Retained Notes”), in total. The CLO Notes mature on December 20, 2019, and, as of September 30, 2010, there was $177,163 outstanding under the Debt Securitization (excluding the Retained Notes). The blended pricing of the CLO Notes, excluding fees, is approximately 3-month LIBOR plus 35 basis points.

 

The classes, amounts, and interest rates (expressed as a spread to LIBOR) of the CLO Notes are as follows:

 

Class

 

Amount

 

LIBOR Spread
(basis points)

 

A-1A

 

$

40,544

 

25

 

A-1A VFN

 

27,029

(1)

28

 

A-1B

 

14,000

 

37

 

A-2A

 

30,380

 

22

 

A-2B

 

33,000

 

35

 

B

 

9,000

 

43

 

C

 

23,210

 

70

 

Total

 

$

177,163

 

 

 

 


(1)                                  Revolving Notes, in an aggregate amount of up to $50,000.

 

As of September 30, 2010, there were 44 investments securing the notes. The interest charged under the Debt Securitization is based on 3-month LIBOR, which as of September 30, 2010 was 0.29% and as of December 31, 2009 was 0.25%. For the three and nine months ended September 30, 2010, the effective average interest rates were 0.91% and 0.68%, respectively, the average outstanding balance was $209,996 and $246,364, respectively, and the interest expense incurred was $476 and $1,259, respectively. For the three and nine months ended September 30, 2009, the effective average interest rate was 1.04% and 1.44%, respectively, the average outstanding balance was $278,617 and $285,924, respectively, and the interest expense incurred was $726 and $3,082, respectively.

 

For the nine months ended September 30, 2010 and 2009, the cash paid for interest was $1,250 and $3,210, respectively. The Company is also required to pay a commitment fee of 0.175% for any unused portion of the Class A-1A VFN Notes. For the three and nine months ended September 30, 2010, we incurred $7 and $11, respectively, in commitment fees on these notes. There were no commitment fees incurred for the three and nine months ended September 30, 2009 on these notes.

 

Publicly Issued Unsecured Notes Payable

 

As part of the Allied Acquisition, the Company assumed all outstanding debt obligations of Allied Capital, including Allied Capital’s publicly issued unsecured notes which consisted of 6.625% Notes due on July 15, 2011 (the “2011 Notes”), 6.000% Notes due on April 1, 2012 (the “2012 Notes”) and 6.875% Notes due on April 15, 2047 (the “2047 Notes” and, together with the 2011 Notes and the 2012 Notes, the “Unsecured Notes”).

 

As of September 30, 2010, the Company had the following outstanding publicly issued Unsecured Notes (see Note 17):

 

 

 

Outstanding
Principal

 

Carrying
Value(1)

 

2011 Notes

 

$

300,584

 

$

294,333

 

2012 Notes

 

161,210

 

157,523

 

2047 Notes

 

230,000

 

180,750

 

Total

 

$

691,794

 

$

632,606

 

 

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(1)                                  Represents the principal amount of the notes less the unaccreted discount initially recorded as a part of the Allied Acquisition

 

The 2011 Notes and 2012 Notes require payment of interest semi-annually, and all principal is due upon maturity. The Company has the option to redeem these notes in whole or in part, together with a redemption premium, as stipulated in the notes.

 

The 2047 Notes require payment of interest quarterly, and all principal is due upon maturity. These notes are redeemable in whole or in part at any time or from time to time on or after April 15, 2012, at par and upon the occurrence of certain tax events as stipulated in the notes.

 

For the three and nine months ended September 30, 2010, we incurred $11,838 and $23,964 of interest expense in connection with the Unsecured Notes, respectively, and for the nine months ended September 30, 2010, the cash paid for interest on the Unsecured Notes was $25,266.

 

The Company may purchase the Unsecured Notes in the market to the extent permitted by the Investment Company Act.  During the three months ended September 30, 2010, the Company purchased $14,350 principal amount of the 2011 Notes and $29,400 principal amount of the 2012 Notes.  As a result of these transactions, we recognized a realized loss of $1,578 during the three months ended September 30, 2010. During the nine months ended September 30, 2010, the Company purchased $19,350 principal amount of the 2011 Notes and $34,400 principal amount of the 2012 Notes.  As a result of these transactions, we recognized a realized loss of $1,961 during the nine months ended September 30, 2010.

 

In accordance with ASC 805-10, the initial carrying value of the Unsecured Notes was equal to the fair value as of April 1, 2010 resulting in an initial unaccreted discount from the principal value of the Unsecured Notes of approximately $65.8 million.  For the three and nine months ended September 30, 2010, we recorded $2,968 and $5,644 of accretion expense, respectively, related to this discount which was included in “interest and credit facility fees” in the accompanying statement of operations.

 

8.                               FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Effective January 1, 2008, the Company adopted ASC 825-10 (previously SFAS No. 159, the Fair Value Option for Financial Assets and Liabilities), which provides companies the option to report selected financial assets and liabilities at fair value. ASC 825-10 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect of the company’s choice to use fair value on its earnings. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the balance sheet.  The Company has not elected the ASC 8 25-10 option to report selected financial assets and liabilities at fair value. As a result, with the exception of the line items entitled “other assets” and “debt,” which are reported at cost, all assets and liabilities approximate fair value on the balance sheet.  The carrying value of the line items entitled “interest receivable,” “receivable for open trades,” “payable for open trades,” “accounts payable and accrued expenses,” “management and incentive fees payable” and “interest and facility fees payable” approximate fair value due to their short maturity.

 

Effective January 1, 2008, the Company adopted ASC 820-10 (previously SFAS No. 157, Fair Value Measurements), which expands the application of fair value accounting. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements. ASC 820-10 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. ASC 820-10 requires the Company to assume that the portfolio investment is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market. 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 820-10, the Company has considered its principal market as the market in which the Company exits its portfolio investments with the greatest volume and level of activity. ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820-10, these inputs are summarized in the three broad levels listed below:

 

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

 

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·               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.

 

In addition to using the above inputs in investment valuations, we continue to employ the net asset valuation policy approved by our board of directors that is consistent with ASC 820-10 (see Note 2).  Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. Our valuation policy considers the fact that because there is not a readily available market value for most of the investments in our portfolio, the fair value of the investments must typically be determined using unobservable inputs.

 

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize significantly less than the value at which we have recorded it.

 

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 gains or losses that would be realized based on the valuations currently assigned.

 

The following table presents fair value measurements of cash and cash equivalents and investments as of September 30, 2010:

 

 

 

 

 

Fair Value Measurements Using

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Cash and cash equivalents

 

$

134,362

 

$

134,362

 

$

 

$

 

Investments

 

$

4,149,790

 

$

 

$

4,586

 

$

4,145,204

 

 

The following tables present changes in investments that use Level 3 inputs for the three and nine months ended September 30, 2010:

 

 

 

For the
three months ended
September 30, 2010

 

Balance as of June 30, 2010

 

$

3,790,038

 

Net realized and unrealized gains (losses)

 

58,131

 

Net purchases, sales or redemptions

 

297,035

 

Net transfers in and/or out of Level 3

 

 

Balance as of September 30, 2010

 

$

4,145,204

 

 

 

 

For the
nine months ended
September 30, 2010

 

Balance as of December 31, 2009

 

$

2,166,687

 

Net realized and unrealized gains (losses)

 

186,029

 

Net purchases, sales or redemptions (including investments acquired as part of the Allied Acquisition)

 

1,792,488

 

Net transfers in and/or out of Level 3

 

 

Balance as of September 30, 2010

 

$

4,145,204

 

 

As of September 30, 2010, the net unrealized loss on the investments that use Level 3 inputs was $19,900.

 

Following are the carrying and fair values of our debt instruments as of September 30, 2010 and December 31, 2009. For the CP Funding Facility, Revolving Credit Facility and the Debt Securitization, fair value is estimated by discounting remaining payments using applicable current market rates which take into account changes in the Company’s marketplace credit ratings.  For the Unsecured Notes, fair value is determined by using market prices.

 

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September 30, 2010

 

December 31, 2009

 

 

 

Carrying
Value

 

Fair
Value

 

Carrying
Value

 

Fair
Value

 

CP Funding Facility

 

$

283,374

 

$

283,374

 

$

221,569

 

$

226,000

 

Revolving Credit Facility

 

431,000

 

431,000

 

474,144

 

447,000

 

Debt Securitization

 

177,163

 

142,045

 

273,752

 

217,000

 

2011 Notes (principal amount outstanding of $300,584)

 

294,333

 

302,260

 

 

 

2012 Notes (principal amount outstanding of $161,210)

 

157,523

 

161,046

 

 

 

2047 Notes (principal amount outstanding of $230,000)

 

180,750

 

205,778

 

 

 

 

 

$

1,524,143

 

$

1,525,503

 

$

969,465

 

$

890,000

 

 

9.                               RELATED PARTY TRANSACTIONS

 

In accordance with the investment advisory and management agreement, we bear all costs and expenses of the operation of the Company and reimburse the investment adviser for certain of such costs and expenses incurred in the operation of the Company. For the three and nine months ended September 30, 2010, the investment adviser incurred such expenses totaling $721 and $2,253, respectively. For the three and nine months ended September 30, 2009, the investment adviser incurred such expenses totaling $456 and $1,400, respectively. As of September 30, 2010, there were no unpaid expenses.

 

We rent office space directly from a third party pursuant to a lease that expires on February 27, 2011. In addition, we have entered into a sublease agreement with Ares Management whereby Ares Management subleases approximately 25% of our office space for a fixed rent equal to 25% of the basic annual rent payable by us under this lease, plus certain additional costs and expenses. For the three and nine months ended September 30, 2010, such amounts payable to the Company totaled $1,231 and $1,917, respectively. For the three and nine months ended September 30, 2009, such amounts payable to the Company totaled $67 and $201, respectively. As of September 30, 2010, there were no unpaid amounts.

 

We recently entered into a new long-term office lease pursuant to which we will lease new office facilities from a third party, and start to pay rent on the new office space in the first quarter of 2011. We also entered into separate subleases with Ares Management and IHAM (as defined in Note 10), pursuant to which Ares Management and IHAM will sublease approximately 15% and 20%, respectively, of the new office space for a fixed rent equal to 15% and 20%, respectively, of the base annual rent payable by us under the new office lease, plus certain additional costs and expenses.

 

As of September 30, 2010, Ares Investments LLC, an affiliate of Ares Management (the sole member of our investment adviser) owned 2,859,882 shares of the Company’s common stock, representing approximately 1.5% of the total shares outstanding as of September 30, 2010.

 

See Notes 3 and 10 for descriptions of other related party transactions.

 

10.                        IVY HILL ASSET MANAGEMENT, L.P. AND OTHER MANAGED FUNDS

 

In November 2007, we established Ivy Hill Asset Management, L.P. (“IHAM”) to serve as a manager for Ivy Hill Middle Market Credit Fund, Ltd. (“Ivy Hill I”), an unconsolidated investment vehicle focusing on investments in middle market loans. From inception until the second quarter of 2009, IHAM’s financial results were consolidated with those of the Company. In June 2009, because of a shift in activity from being primarily a manager, with no dedicated employees, of funds in which the Company has invested debt and equity, to a manager with investment professionals dedicated to managing an increasing number of third party funds, we concluded that GAAP requires the financial results of IHAM to be reported as a portfolio company in our schedule of investments rather than as a consolidated subsidiary in the Company’s financial results. The Company made an initial equity investment of $3,816 into IHAM in June 2009. As of September 30, 2010, our total investment in IHAM at fair value was $119,976, including an unrealized gain of $23,647. For the three and nine months ended September 30, 2010, the Company received $2,500 and $4,296, respectively, in distributions from IHAM consisting entirely of dividend income.

 

IHAM receives a 0.50% management fee on the average total assets of Ivy Hill I as compensation for managing Ivy Hill I. For the three and nine months ended September 30, 2009, the Company earned $17 and $900, respectively, in management fees from IHAM’s management of Ivy Hill I prior to IHAM’s conversion to a portfolio company in June 2009. Ivy Hill I primarily invests in first and second lien bank debt of middle market companies. Ivy Hill I was initially funded with $404,000 of capital including a $56,000 investment by the Company, consisting of $40,000 of Class B notes and $16,000 of subordinated notes. For the three and nine months ended September 30, 2010, the Company earned $1,723 and $5,208, respectively, in interest income from its investments in Ivy Hill I. For the three and nine months ended September 30, 2009, the Company earned $1,402 and $4,424, respectively, in interest income from its investments in Ivy Hill I.

 

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Ivy Hill I purchased investments from the Company of $8,000 during the nine months ended September 30, 2010, and may from time to time purchase additional investments from the Company. Any such purchases require approval by third parties unaffiliated with the Company or IHAM. There was no gain or loss recognized by the Company on these transactions.

 

In November 2008, the Company established a second middle market credit fund, Ivy Hill Middle Market Credit Fund II, Ltd. (“Ivy Hill II” and, together with Ivy Hill I and Ivy Hill SDF (as defined below), the “Ivy Hill Funds”), which is also managed by IHAM. IHAM receives a 0.50% management fee on the average total assets of Ivy Hill II as compensation for managing this fund. Ivy Hill II primarily invests in second lien and subordinated bank debt of middle market companies. Ivy Hill II was established with an initial commitment of $250,000 of subordinated notes, of which $125,000 has been funded, and may grow over time with leverage. Ivy Hill II purchased $86,500 of investments from the Company during the nine months ended September 30, 2010 and may from time to time purchase additional investments from the Company. Any such purchases require approval by third parties unaffiliated with the Company or IHAM. A loss of $1,218 was recorded on these transactions. For the three and nine months ended September 30, 2009, the Company earned $12 and $365, respectively, in management fees from IHAM’s management of Ivy Hill II prior to IHAM’s conversion to a portfolio company in June 2009.

 

In December 2009, the Company made an incremental cash investment of approximately $33 million in IHAM to facilitate IHAM’s acquisition of Allied Capital’s management rights in respect of, and interests in, the Allied Capital Senior Debt Fund, L.P. (now referred to as Ivy Hill Senior Debt Fund, L.P. or the “Ivy Hill SDF”). The Ivy Hill SDF currently has approximately $193 million of committed capital invested primarily in first lien loans and, to a lesser extent, second lien loans of middle-market companies. IHAM manages the Ivy Hill SDF and receives fee income and is entitled to potential equity distributions in respect of interests that it acquired in the Ivy Hill SDF.

 

In March 2010, the Company made an incremental cash investment of approximately $48 million in IHAM to facilitate IHAM’s acquisition of Allied Capital’s management rights in respect of, and equity interests in, the Knightsbridge CLO 2007-1, Ltd. and Knightsbridge CLO 2008-1, Ltd. (the “Knightsbridge Funds”).  The Knightsbridge Funds have approximately $644 million of committed capital invested primarily in senior debt.  IHAM manages the Knightsbridge Funds and receives fee income and is entitled to potential equity distributions in respect of equity interests that it acquired in the Knightsbridge Funds.

 

In addition to the Ivy Hill Funds and the Knightsbridge Funds, IHAM also serves as the sub-adviser/sub-manager to four other funds: Colts 2005-1 Ltd., Colts 2005-2 Ltd., Colts 2007-1 Ltd. and Firstlight Funding I, Ltd., which is affiliated with our portfolio company, Firstlight Financial Corporation.

 

Beginning in November 2008, IHAM was party to a separate services agreement, referred to herein as the “services agreement,” with Ares Capital Management. Pursuant to the services agreement, Ares Capital Management provided IHAM with office facilities, equipment, clerical, bookkeeping and record keeping services, services of investment professionals and others to perform investment advisory, research and related services, services of, and oversight of, custodians, depositories, accountants, attorneys, underwriters and such other persons in any other capacity deemed to be necessary. Under the services agreement, IHAM reimbursed Ares Capital Management for all of the costs associated with such services, including Ares Capital Management’s allocable portion of overhead and the cost of its officers and respective staff in performing its obligations under the services agreement. The services agreement was terminated effective June 30, 2010 and replaced with a different services agreement with similar terms between IHAM and our administrator.  Prior to IHAM’s conversion to a portfolio company in June 2009, for the three and nine months ended September 30, 2009, IHAM incurred such expenses payable to Ares Capital Management of $0 and $538, respectively.

 

In October 2009, we completed our acquisition of Allied Capital’s subordinated notes in the Senior Secured Loan Program for $165,000. At September 30, 2010, the Company’s investment in the Senior Secured Loan Program was $425,500 at fair value, including an unrealized gain of $25,049. The Senior Secured Loan Program was formed in December 2007 to invest in “unitranche” loans (loans that combine both senior and subordinated debt, generally in a first lien position) of middle-market companies and currently has approximately $3.6 billion of total committed capital, approximately $2.0 billion in aggregate principal amount of which is currently funded. At September 30, 2010, the Company’s unfunded commitment to the Senior Secured Loan Program was $98 million. The Senior Secured Loan Program is capitalized as transactions are completed. Together with GE Commercial Finance Investment Advisory Services LLC (“GE”), we serve as co-managers of the Senior Secured Loan Program and investments made by the program must be approved by both the Company and GE. Our investment entitles us to a coupon of LIBOR plus 8.0% and also entitles us to receive a portion of the excess cash flow from the loan portfolio, which may result in a return greater than the contractual coupon. The Company is also entitled to certain other sourcing and management fees related to this investment. See Note 5 for additional information on the Company’s investment in the Senior Secured Loan Program.

 

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In addition, we manage an unconsolidated fund, AGILE Fund I, LLC, and our wholly owned subsidiary A.C. Corporation manages three unconsolidated loan funds: Emporia Preferred Funding I, Ltd., Emporia Preferred Funding II, Ltd. and Emporia Preferred Funding III, Ltd. For the three and nine months ended September 30, 2010, the Company earned management fees of $1,349 and $3,014, respectively, from these funds. In August 2010, the Company made an incremental cash investment of approximately $8 million in IHAM to facilitate IHAM’s acquisition of an equity interest in Emporia Preferred Funding III, Ltd.

 

11.                        DERIVATIVE INSTRUMENTS

 

In October 2008, we entered into an interest rate swap agreement that ends on December 20, 2010 to mitigate our exposure to adverse fluctuations in interest rates for a total notional amount of $75 million. Under the interest rate swap agreement, we will pay a fixed interest rate of 2.985% and receive a floating rate based on the prevailing three-month LIBOR. As of September 30, 2010 and December 31, 2009, the 3-month LIBOR was 0.29% and 0.25%, respectively. For the three and nine months ended September 30, 2010, we recognized $401 and $1,293, respectively, in unrealized appreciation related to this swap agreement. As of September 30, 2010 and December 31, 2009, this swap agreement had a fair value of $(448) and $(1,741), respectively, which is included in “accounts payable and other liabilities” in the accompanying consolidated balance sheet.

 

12.                        STOCKHOLDERS’ EQUITY

 

The following table summarizes the total shares issued and proceeds we received net of underwriter and offering costs for offerings closed during the nine months ended September 30, 2010 and 2009 (dollar amounts in millions, except per share data):

 

 

 

Shares issued

 

Offering price
per share

 

Proceeds net of
underwriting and
offering costs

 

February 2010 public offering

 

22,957,993

 

$

12.75

 

$

277.0

 

Total for the nine months ended September 30, 2010

 

22,957,993

 

 

 

$

277.0

 

 

 

 

 

 

 

 

 

August 2009 public offering

 

12,439,908

 

$

9.25

 

$

109.1

 

Total for the nine months ended September 30, 2009

 

12,439,908

 

 

 

$

109.1

 

 

In connection with the Allied Acquisition, on April 1, 2010, we issued 58,492,537 shares valued at approximately $872.7 million.

 

13.                        DIVIDENDS

 

The following table summarizes our dividends declared during the nine months ended September 30, 2010 and 2009 (in millions, except per share data): 

 

Date Declared

 

Record Date

 

Payment Date

 

Amount
Per Share

 

Total
Amount

 

August 5, 2010

 

September 15, 2010

 

September 30, 2010

 

$

0.35

 

$

67.3

 

May 10, 2010

 

June 15, 2010

 

June 30, 2010

 

$

0.35

 

$

67.1

 

February 25, 2010

 

March 15, 2010

 

March 31, 2010

 

$

0.35

 

$

46.5

 

Total declared for the nine months ended September 30, 2010

 

 

 

 

 

$

1.05

 

$

180.9

 

 

 

 

 

 

 

 

 

 

 

August 6, 2009

 

September 15, 2009

 

September 30, 2009

 

$

0.35

 

$

38.4

 

May 7, 2009

 

June 15, 2009

 

June 30, 2009

 

$

0.35

 

$

34.1

 

March 2, 2009

 

March 16, 2009

 

March 31, 2009

 

$

0.42

 

$

40.8

 

Total declared for the nine months ended September 30, 2009

 

 

 

 

 

$

1.12

 

$

113.3

 

 

During the nine months ended September 30, 2009, as part of the Company’s dividend reinvestment plan (the “DRIP”) for our common stockholders, we purchased 1,500,841 shares of our common stock at an average price of $6.86 per share in the

 

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open market in order to satisfy part of the reinvestment aspect of the DRIP. There were no purchases of shares of our common stock by the Company during the nine months ended September 30, 2010.

 

14.                        FINANCIAL HIGHLIGHTS

 

The following is a schedule of financial highlights for the nine months ended September 30, 2010 and 2009:

 

 

 

For the nine months ended

 

Per Share Data:

 

September 30, 2010

 

September 30, 2009

 

Net asset value, beginning of period(1)

 

$

11.44

 

$

11.27

 

 

 

 

 

 

 

Issuance of common stock

 

1.15

 

(0.28

)

 

 

 

 

 

 

Effect of antidilution

 

(0.27

)

(0.04

)

 

 

 

 

 

 

Net investment income for period(2)

 

0.90

 

0.96

 

 

 

 

 

 

 

Gain on the acquisition of Allied Capital Corporation

 

1.16

 

 

 

 

 

 

 

 

Net realized and unrealized gains for period(2)

 

1.10

 

0.38

 

 

 

 

 

 

 

Net increase in stockholders’ equity resulting from operations

 

3.16

 

1.34

 

 

 

 

 

 

 

Distributions from net investment income

 

(1.05

)

(1.00

)

 

 

 

 

 

 

Distributions from net realized capital gains on securities

 

 

(0.13

)

 

 

 

 

 

 

Total distributions to stockholders

 

(1.05

)

(1.13

)

 

 

 

 

 

 

Net asset value at end of period(1)

 

$

14.43

 

$

11.16

 

 

 

 

 

 

 

Per share market value at end of period

 

$

15.65

 

$

11.02

 

Total return based on market value(3)

 

34.14

%

91.94

%

Total return based on net asset value(4)

 

24.10

%

12.02

%

Shares outstanding at end of period

 

192,566,434

 

109,592,728

 

Ratio/Supplemental Data:

 

 

 

 

 

Net assets at end of period

 

$

2,778,476

 

$

1,222,591

 

Ratio of operating expenses to average net assets(5)(6)

 

10.51

%

9.72

%

Ratio of net investment income to average net assets(5)(7)

 

9.24

%

11.49

%

Portfolio turnover rate(5)

 

48

%

15

%

 


(1) The net assets used equals the total stockholders’ equity on the consolidated balance sheets.

 

(2) Weighted average basic per share data.

 

(3) For the nine months ended September 30, 2010, the total return based on market value equals the increase of the ending market value at September 30, 2010 of $15.65 per share over the ending market value at December 31, 2009 of $12.45 per share, plus the declared dividend of $1.05 per share for the nine months ended September 30, 2010, divided by the market value at December 31, 2009. For the nine months ended September 30, 2009, the total return based on market value equals the decrease of the ending market value at September 30, 2009 of $11.02 per share over the ending market value at December 31, 2008 of $6.33 per share, plus the declared dividend of $1.12 per share for the nine months ended September 30, 2009, divided by the market value at December 31, 2008. Total return based on market value is not annualized. The Company’s shares fluctuate in value. The Company’s performance changes over time and currently may be different than that shown. Past performance is no guarantee of future results.

 

(4) For the nine months ended September 30, 2010, the total return based on net asset value equals the change in net asset value during the period plus the declared dividends of $1.05 per share for the nine months ended September 30, 2010, divided by the beginning net asset value at January 1, 2010. For the nine months ended September 30, 2009, the total return based on net asset value equals the change in net asset value during the period plus the declared dividend of $1.12 per share for the nine months ended September 30, 2009, divided by the beginning net asset value at January 1, 2009. These calculations are adjusted for shares issued in connection with the dividend reinvestment plan and the issuance of common

 

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stock in connection with any equity offerings. Total return based on net asset value is not annualized. The Company’s performance changes over time and currently may be different than that shown. Past performance is no guarantee of future results.

 

(5) The ratios reflect an annualized amount.

 

(6) For the nine months ended September 30, 2010, the ratio of operating expenses to average net assets consisted of 2.16% of base management fees, 2.48% of incentive management fees, 3.30% of the cost of borrowing and other operating expenses of 2.57%. For the nine months ended September 30, 2009, the ratio of operating expenses to average net assets consisted of 2.72% of base management fees, 2.87% of incentive management fees, 2.25% of the cost of borrowing and other operating expenses of 1.88%. These ratios reflect annualized amounts.

 

(7) The ratio of net investment income to average net assets excludes income taxes related to realized gains.

 

15.                        ALLIED ACQUISITION

 

On October 26, 2009, we entered into a definitive agreement to acquire Allied Capital in an all stock transaction.  On April 1, 2010, we completed the Allied Acquisition by acquiring the outstanding shares of Allied Capital in exchange for shares of our common stock in a transaction valued at approximately $908 million as of the closing date.  Concurrently with the completion of the Allied Acquisition, we assumed and then repaid in full the $137 million of remaining amounts outstanding on Allied Capital’s $250 million senior secured term loan.  We also assumed all of Allied Capital’s other outstanding debt obligations, including approximately $745 million in principal amount of Allied Capital’s Unsecured Notes.

 

Under the terms of the transaction, each Allied Capital stockholder received 0.325 shares of our common stock for each share of Allied Capital common stock then owned by such stockholder. In connection with the Allied Acquisition, approximately 58.5 million shares of our common stock (including the effect of outstanding in-the money Allied Capital stock options) were issued to Allied Capital’s then-existing stockholders, thereby resulting in our then-existing stockholders owning approximately 69% of the combined company and the then-existing Allied Capital stockholders owning approximately 31% of the combined company.

 

The Allied Acquisition was accounted for in accordance with the acquisition method of accounting as detailed in ASC 805-10 (previously SFAS No. 141(R)), Business Combinations. The acquisition method of accounting requires an acquirer to recognize the assets acquired, the liabilities assumed and any noncontrolling interest in the acquired entity based on their fair values as of the date of acquisition. As described in more detail in ASC 805-10, if the total acquisition date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred, the excess will be recognized as a gain. Upon completion of our determination of the fair value of Allied Capital’s identifiable net assets as of April 1, 2010, the fair value of such net assets exceeded the fair value of the consideration transferred, thereby, resulting in the recognition of a gain.  The valuation of the investments acquired as part of the Allied Acquisition was done in accordance with Ares Capital’s valuation policy (see Notes 2 and 8).

 

Following is the allocation of the purchase price to the assets acquired and liabilities assumed as a result of the Allied Acquisition:

 

Common stock issued

 

$

872,727

 

Payments to holders of “in-the-money” Allied Capital stock options

 

35,011

(1)

Total purchase price

 

$

907,738

 

Assets acquired:

 

 

 

Investments

 

$

1,833,766

 

Cash and cash equivalents

 

133,548

 

Other assets

 

80,078

 

Total assets acquired

 

2,047,392

 

Debt and other liabilities assumed

 

(943,778

)

Net assets acquired

 

1,103,614

 

Gain on acquisition of Allied Capital

 

(195,876

)

 

 

$

907,738

 

 


(1)                                 Represents cash payment for holders of any “in-the-money” Allied Capital stock options that elected to receive cash.

 

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The following unaudited pro forma condensed combined financial information does not purport to be indicative of actual financial position or results of our operations had the Allied Acquisition actually been consummated at the beginning of each period presented.  Certain one-time charges have been eliminated. For the three and nine months ended September 30, 2010, we recognized $1,438 and $17,761, respectively, in professional fees and other costs related to the Allied Acquisition. The pro forma adjustments reflecting the allocation of the purchase price of Allied Capital and the gain of $195,876 recognized on the Allied Acquisition have been eliminated from all periods presented.  The pro forma condensed combined financial information does not reflect the potential impact of possible synergies and does not reflect any impact of additional accretion which would have been recognized on the transaction, except for that which was recorded after the transaction was consummated on April 1, 2010.

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

 

2010

 

2009

 

2010

 

2009

 

Total investment income

 

$

138,126

 

$

145,511

 

$

380,318

 

$

355,820

 

Net investment income

 

$

72,670

 

$

50,359

 

$

173,653

 

$

155,479

 

Net increase in stockholders’ equity resulting from operations

 

$

129,827

 

$

33,433

 

$

326,994

 

$

(259,362

)

Net increase in stockholders’ equity resulting from operations per share

 

$

0.68

 

$

0.21

 

$

1.73

 

$

(1.65

)

 

Prior to the completion of the Allied Acquisition, but subsequent to October 26, 2009, the date we entered into a definitive agreement to acquire Allied Capital, we purchased $340 million of assets from Allied Capital in arm’s length transactions.  Additionally, during the same period of time, IHAM purchased $69 million of assets from Allied Capital, also in arm’s length transactions.

 

16.                        LITIGATION

 

On July 29, 2010, the court in In re Allied Capital Corporation Shareholder Litigation, Case No. 322639V (Circuit Court for Montgomery County, Maryland) (the “Maryland action”) issued an order approving the settlement and dismissing all claims against Allied Capital, the Company and the other defendants in the Maryland action.  On August 3, 2010, the court in Ryan v. Walton, et al., Case No. 1:10-CV-000145-RMC (United States District Court for the District of Columbia) (the “D.C. Federal Court action”) dismissed the D.C. Federal Court action.  On August 10, 2010, Sandler v. Walton, et al., Case No. 2009 CA 008123 B (Superior Court for the District of Columbia), which was consolidated with Wienecki v. Allied Capital Corporation, et al., Case No. 2009 CA 008541 B (Superior Court for the District of Columbia), was dismissed.  All of these actions had been filed by stockholders of Allied Capital challenging the Allied Acquisition and were dismissed in connection with settlements among the plaintiffs, Allied Capital and the Company.  The settlements are not, and should not be construed as, an admission of wrongdoing or liability by any defendant.  The parties considered it desirable that the actions be settled to avoid the expense, risk, inconvenience and distraction of continued litigation and to fully resolve the settled claims.

 

In addition, the Company is party to certain lawsuits in the normal course of business.  Furthermore, third parties may try to seek to impose liability on Ares Capital in connection with the activities of its portfolio companies.  While the outcome of any such open legal proceedings cannot at this time be predicted with certainty, the Company does not expect these matters will materially affect its financial condition or results of operations.

 

17.                        SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. There have been no subsequent events that occurred during such period that would require disclosure in this Form 10-Q or would be required to be recognized in the Consolidated Financial Statements as of and for the nine months ended September 30, 2010, except as disclosed below.

 

On October 21, 2010, we issued $200 million of senior unsecured notes that mature on October 15, 2040 (the “2040 Notes”) and may be redeemed in whole or in part at our option at any time on or after October 15, 2015 at a par redemption price of $25 per security plus accrued and unpaid interest.  The principal amount of the 2040 Notes will be payable at maturity. Ares Capital used the net proceeds of this offering to repay outstanding indebtedness under the Revolving Credit Facility. The 2040 Notes bear interest at a rate of 7.75% per year payable quarterly commencing on January 15, 2011.  Total proceeds from the issuance of the 2040 Notes, net of underwriters’ discount and offering costs, were approximately $193 million.

 

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Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations.

 

The information contained in this section should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this quarterly report. In addition, some of the statements in this report constitute forward-looking statements, which relate to future events or the future performance or financial condition of Ares Capital Corporation (the “Company,” “ARCC,” “Ares Capital,” “we,” “us” or “our”). The forward-looking statements contained in this report involve risks and uncertainties, including statements as to:

 

·                  our, or our portfolio companies’, future business, operations, operating results or prospects;

 

·                  the return or impact of current and future investments;

 

·                  the impact of a protracted decline in the liquidity of credit markets on our business;

 

·                  the impact of fluctuations in interest rates on our business;

 

·                  the valuation of our investments in portfolio companies, particularly those having no liquid trading market;

 

·                  our ability to successfully integrate our business and Allied Capital’s business;

 

·                  the outcome and impact of any litigation relating to the Allied Acquisition;

 

·                  our ability to recover unrealized losses;

 

·                  market conditions and our ability to access alternative debt markets and additional debt and equity capital;

 

·                  our contractual arrangements and relationships with third parties;

 

·                  the general economy and its impact on the industries in which we invest;

 

·                  the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives;

 

·                  our expected financings and investments;

 

·                  our ability to successfully integrate any acquisitions;

 

·                  the adequacy of our cash resources and working capital;

 

·                  the timing, form and amount of any dividend distributions;

 

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

 

·                  the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments.

 

We use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” included in our annual report on Form 10-K for the fiscal year ended December 31, 2009.

 

We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.

 

OVERVIEW

 

We are a specialty finance company that is a closed-end, non-diversified management investment company incorporated in Maryland. We have elected to be regulated as a business development company (a “BDC”) under the Investment Company Act of 1940 (the “Investment Company Act”). We were founded on April 16, 2004, were initially funded on June 23, 2004 and on October 8, 2004 completed our initial public offering.

 

Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first and second lien senior loans and mezzanine debt, which in some cases includes an equity component like warrants.

 

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To a lesser extent, we also make equity investments, which have generally been non-control equity investments of less than $20 million (usually in conjunction with a concurrent loan investment). However, we may increase the size or nature of these investments. Also, as a result of the Allied Acquisition, Allied Capital’s equity investments, including equity investments larger than those we have traditionally made and equity investments pursuant to which Allied Capital controlled a particular portfolio company, became part of our portfolio. We intend to actively seek opportunities over time to dispose of certain of these investments and rotate them into higher-yielding first and second lien senior loans and mezzanine debt investments. However, there can be no assurance that this strategy will be successful.

 

We are externally managed by Ares Capital Management, an affiliate of Ares Management, a global alternative asset manager and an SEC-registered investment adviser, pursuant to an investment advisory and management agreement. Ares Operations, an affiliate of Ares Management, provides the administrative services necessary for us to operate.

 

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities and indebtedness of private U.S. companies and certain public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less.

 

The Company has elected to be treated as a regulated investment company (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements and timely distribute to our stockholders generally at least 90% of our investment company taxable income, as defined by the Code, for each year. Pursuant to this election, we generally will not have to pay corporate level taxes on any income that we distribute to our stockholders provided that we satisfy those requirements.

 

Allied Acquisition

 

On April 1, 2010, we consummated the Allied Acquisition in an all stock merger whereby each existing share of common stock of Allied Capital was exchanged for 0.325 shares of our common stock.  The Allied Acquisition was valued at approximately $908 million as of April 1, 2010.  In connection therewith, we issued approximately 58.5 million shares of our common stock to Allied Capital’s then-existing stockholders, thereby resulting in our then-existing stockholders owning approximately 69% of the combined company and the then-existing Allied Capital stockholders owning approximately 31% of the combined company. Accordingly, although information presented herein as of and for the three and nine months ended September 30, 2010 does include the results of operations and financial condition of the combined company, information presented herein as of and for the three and nine months ended September 30, 2009 relates solely to Ares Capital, as it existed before the Allied Acquisition.

 

PORTFOLIO AND INVESTMENT ACTIVITY

(in millions, except number of new investment commitments, terms and percentages)

 

 

 

Three months ended

 

 

 

September 30, 2010

 

September 30, 2009

 

New investment commitments (1):

 

 

 

 

 

New portfolio companies

 

$

39.5

 

$

 

Existing portfolio companies

 

472.3

 

54.5

 

Total new investment commitments

 

511.8

 

54.5

 

Less:

 

 

 

 

 

Investment commitments exited

 

230.7

 

85.4

 

Net investment commitments

 

$

281.1

 

$

(30.9

)

Principal amount of investments purchased:

 

 

 

 

 

Senior term debt

 

$

236.0

 

$

49.4

 

Senior subordinated debt

 

40.4

 

 

Subordinated Notes of Senior Secured Loan Program

 

209.9

 

 

Equity and other

 

23.0

 

16.4

 

Total

 

$

509.3

 

$

65.8

 

Principal amount of investments sold or repaid excluding investments acquired as part of the Allied Acquisition:

 

 

 

 

 

Senior term debt

 

$

74.7

 

$

43.4

 

Senior subordinated debt

 

56.5

 

43.5

 

Equity and other

 

0.1

 

18.9

 

Total

 

$

131.3

 

$

105.8

 

Principal amount of investments acquired as a part of the Allied Acquisition sold or repaid:

 

 

 

 

 

Senior term debt

 

$

90.5

 

$

 

Senior subordinated debt

 

5.0

 

 

Collateralized loan obligations

 

2.5

 

 

Equity and other

 

1.4

 

 

Total

 

$

99.4

 

$

 

Number of new investment commitments (2)

 

19

 

7

 

Average new investment commitments amount

 

$

26.9

 

$

7.8

 

Weighted average term for new investment commitments (in months)

 

57

 

47

 

Percentage of new investment commitments at floating rates

 

44

%

37

%

Percentage of new investment commitments at fixed rates

 

51

%

34

%

Weighted average yield of debt and income producing securities at fair value funded during the period (3)

 

13.01

%

10.27

%

Weighted average yield of debt and income producing securities at amortized cost funded during the period (3)

 

13.07

%

11.66

%

Weighted average yield of debt and income producing securities at fair value sold or repaid during the period (3)(4)

 

13.23

%

12.67

%

Weighted average yield of debt and income producing securities at amortized cost sold or repaid during the period (3)(4)

 

13.24

%

11.49

%

Weighted average yield of debt and income producing securities acquired as a part of the Allied Acquisition at fair value sold or repaid during the period (3)

 

13.31

%

%

Weighted average yield of debt and income producing securities acquired as a part of the Allied Acquisition at amortized cost sold or repaid during the period (3)

 

13.18

%

%

 

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(1)         New investment commitments include new agreements to fund revolving credit facilities or delayed draw loans.

 

(2)         Number of new investments represents each commitment to a particular portfolio company.

 

(3)         When we refer to the “weighted average yield at fair value” in this report, we compute it with respect to particular securities by taking the (a) annual stated interest rate or yield earned plus the net annual amortization of original issue discount and market discount earned on accruing debt included in such securities, and dividing it by (b) total debt and income producing securities at fair value included in such securities. When we refer to the “weighted average yield at amortized cost” in this report, we compute it with respect to particular securities by taking the (a) annual stated interest rate or yield earned plus the net annual amortization of original issue discount and market discount earned on accruing debt included in such securities, and dividing it by (b) total debt and income producing securities at amortized cost included in such securities.

 

(4)         Excludes investments acquired as a part of the Allied Acquisition on April 1, 2010.

 

The investment adviser employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our investment adviser grades the risk of all investments on a scale of 1 to 4 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e. at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. Under this system, investments with a grade of 4 involve the least amount of risk to our initial cost basis. The trends and risk factors for this investment since origination or acquisition are generally favorable, which may include the performance of the portfolio company or a potential exit. Investments graded 3 involve a level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. This portfolio company is generally performing as expected and the risk factors to our ability to ultimately recoup the cost of our investment are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a grade of 3. Investments graded 2 indicate that the risk to our ability to recoup the cost of such investment has increased materially since origination or acquisition, including as a result of factors such as declining performance and non- compliance with debt covenants; however, payments are generally not more than 120 days past due. An investment grade of 1 indicates that the risk to our ability to recoup the cost of such investment has substantially increased since origination or acquisition, and the portfolio company likely has materially declining performance. For debt investments with an investment grade of 1, most or all of the debt covenants are out of compliance and payments are substantially delinquent. For investments graded 1, it is not anticipated that we will be repaid in an amount equal to our full initial cost basis. For investments graded 1 or 2, our investment adviser enhances its level of scrutiny over the monitoring of such portfolio company.

 

Each investment acquired in the Allied Acquisition was initially assessed a grade of 3 (i.e., the grade we generally assign a portfolio company at acquisition) on April 1, 2010, the date of initial acquisition, reflecting the relative risk to our initial cost basis of such investments.  Ares Capital grades the investments in its portfolio each quarter and it is possible that the grade of certain of these portfolio investments may be reduced or increased over time.

 

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Set forth below is the distribution of our portfolio companies as of September 30, 2010 and December 31, 2009 (dollar amounts in thousands).

 

 

 

September 30, 2010

 

December 31, 2009

 

 

 

Fair Value

 

Number of
Companies

 

Fair Value

 

Number of
Companies

 

Grade 1

 

$

15,770

 

10

 

$

7,170

 

8

 

Grade 2

 

90,290

 

7

 

154,509

 

9

 

Grade 3

 

3,767,699

 

158

 

1,796,641

 

70

 

Grade 4

 

276,031

 

9

 

213,494

 

8

 

 

 

$

4,149,790

 

184

 

$

2,171,814

 

95

 

 

As of September 30, 2010, the weighted average grade of the investments in our portfolio (excluding investments acquired in connection with the Allied Acquisition), the investments in our portfolio acquired in connection with the Allied Acquisition and the investments in our portfolio as a whole were each 3.0.   The weighted average grade of the investments in our portfolio as of December 31, 2009 was 3.0.

 

As of September 30, 2010:

 

·                  2.2% of our investments (excluding investments acquired in connection with the Allied Acquisition) at amortized cost (0.2% at fair value) were on non-accrual status;

 

·                  5.3% of our investments acquired in connection with the Allied Acquisition at amortized cost (5.0% at fair value) were on non-accrual status; and

 

·                  7.5% of the investments in our portfolio as a whole at amortized cost (or 5.2% at fair value) were on non-accrual status.

 

As of December 31, 2009, 2.5% of our investments at amortized cost (or 0.5% at fair value) were on non-accrual status.

 

The weighted average yields of the following portions of our portfolio as of September 30, 2010 and December 31, 2009 were as follows:

 

 

 

September 30, 2010

 

December 31, 2009

 

 

 

Fair Value

 

Amortized Cost

 

Fair Value

 

Amortized Cost

 

Debt and income producing securities

 

12.90

%

13.10

%

12.67

%

12.08

%

Debt and income producing securities for investments acquired as part of the Allied Acquisition

 

13.68

%

14.35

%

%

%

Total portfolio

 

10.17

%

10.11

%

11.19

%

10.23

%

Senior term debt

 

9.95

%

9.67

%

11.42

%

10.62

%

Senior subordinated debt

 

13.19

%

12.76

%

13.74

%

12.47

%

Subordinated Notes of Senior Secured Loan Program

 

15.96

%

16.96

%

17.00

%

17.00

%

Income producing equity securities

 

16.47

%

19.04

%

9.61

%

10.52

%

First lien senior term debt

 

9.29

%

9.32

%

10.67

%

10.38

%

Second lien senior term debt

 

13.04

%

11.06

%

12.92

%

11.06

%

 

RESULTS OF OPERATIONS

 

For the three and nine months ended September 30, 2010 and 2009

 

Operating results for the three and nine months ended September 30, 2010 and 2009 are as follows (in thousands):

 

 

 

For the three months ended

 

For the nine months ended

 

 

 

September 30, 2010

 

September 30, 2009

 

September 30, 2010

 

September 30, 2009

 

Total investment income

 

$

138,126

 

$

60,881

 

$

326,226

 

$

176,008

 

Total expenses

 

67,070

 

27,521

 

173,400

 

80,391

 

Net investment income before income taxes

 

71,056

 

33,360

 

152, 826

 

95,617

 

Income tax expense (benefit), including excise tax

 

(164

)

454

 

360

 

563

 

Net investment income

 

71,220

 

32,906

 

152,466

 

95,054

 

Net realized gains (losses)

 

(350

)

(1,656

)

6,693

 

22,311

 

Net unrealized gains (losses)

 

57,507

 

32,026

 

179,911

 

15,698

 

Gain from acquisition of Allied Capital

 

 

 

195,876

 

 

Net increase in stockholders’ equity resulting from operations

 

$

128,377

 

$

63,276

 

$

534,946

 

$

133,063

 

 

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Net income can vary substantially from period to period as a result of various factors, including the recognition of realized gains and losses and unrealized appreciation and depreciation.  As a result, quarterly comparisons of net income may not be meaningful.

 

Investment Income

 

For the three months ended September 30, 2010, total investment income increased $77.2 million, or 127%, to $138.1 million from $60.9 million for the comparable period in 2009.  For the three months ended September 30, 2010, total investment income primarily consisted of $107.8 million in interest income from investments, $20.6 million in capital structuring service fees, $4.4 million in management fees and $3.9 million in dividend income. Interest income from investments increased $50.9 million, or 90%, to $107.8 million for the three months ended September 30, 2010 from $56.9 million for the comparable period in 2009.  The increase in interest income from investments was primarily due to the increase in investments as the average investments at fair value increased from $2.0 billion for the three months ended September 30, 2009 to $4.0 billion for the three months ended September 30, 2010, which was largely due to the investments acquired as part of the Allied Acquisition. Interest income from investments acquired as part of the Allied Acquisition was approximately $46.6 million for the three months ended September 30, 2010.   Capital structuring service fees earned for the three months ended September 30, 2010 were $20.6 million as compared to no capital structuring service fees earned for the three months ended September 30, 2009. The increase in capital structuring service fees was primarily due to the increase in new investment commitments for the three months ended September 30, 2010 as compared to the three months ended September 30, 2009. Capital structuring fees for the three months ended September 30, 2010 includes sourcing fees related to the Senior Secured Loan Program of $12.5 million. Management fees increased $4.3 million, or 4,757%, to $4.4 million for the three months ended September 30, 2010 from $0.1 million for the comparable period in 2009.  The increase in management fees was primarily related to $2.5 million in management fees earned from the investments and management contracts acquired as part of the Allied Acquisition as well as $1.8 million in management fees earned related to the Senior Secured Loan Program.

 

For the nine months ended September 30, 2010, total investment income increased $150.2 million, or 85%, to $326.2 million from $176.0 million for the comparable period in 2009.  For the nine months ended September 30, 2010, total investment income primarily consisted of $273.4 million in interest income from investments, $30.4 million in capital structuring service fees, $10.0 million in management fees and $7.8 million in dividend income. Interest income from investments increased $110.2 million, or 68%, to $273.4 million for the nine months ended September 30, 2010 from $163.2 million for the comparable period in 2009.  The increase in interest income from investments was primarily due to the increase in investments as the average investments at fair value increased from $2.0 billion for the nine months ended September 30, 2009 to $3.2 billion for the nine months ended September 30, 2010, which was largely due to the investments acquired as part of the Allied Acquisition.  Interest income from investments acquired as part of the Allied Acquisition were approximately $90.2 million for the nine months ended September 30, 2010.  Capital structuring service fees increased $28.6 million, or 1,546%, to $30.4 million for the nine months ended September 30, 2010 from $1.8 million for the comparable period in 2009. The increase in capital structuring service fees was primarily due to the increase in new investment commitments for the nine months ended September 30, 2010 as compared to the nine months ended September 30, 2009. Capital structuring fees for the nine months ended September 30, 2010 includes sourcing fees related to the Senior Secured Loan Program of $15.1 million. Management fees increased $7.4 million, or 273%, to $10.1 million for the nine months ended September 30, 2010 from $2.7 million for the comparable period in 2009.  The increase in management fees was primarily related to $5.4 million in management fees earned from the investments and management contracts acquired as part of the Allied Acquisition as well as $3.7 million in management fees earned from the Senior Secured Loan Program.

 

Operating Expenses

 

For the three months ended September 30, 2010, total expenses increased $39.6 million, or 144%, to $67.1 million from $27.5 million for the comparable period in 2009. Interest expense and credit facility fees increased $17.0 million, or 298%, to $22.8 million for the three months ended September 30, 2010 from $5.7 million for the comparable period in 2009, primarily due to the additional interest expense incurred for the three months ended September 30, 2010 on Allied Capital’s publicly issued unsecured notes assumed in the Allied Acquisition (the “Unsecured Notes”) of $14.8 million.  Base and incentive management fees increased $17.5 million, or 111%, to $33.2 million from $15.7 million in total for the comparable period in 2009, primarily due to the increase in investments and the related interest income on those investments as a result of the Allied Acquisition, partially offset by an increase in interest expense related to the assumption of the Unsecured Notes in the Allied Acquisition.

 

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For the nine months ended September 30, 2010, total expenses increased $93.0 million, or 116%, to $173.4 million from $80.4 million for the comparable period in 2009. Interest expense and credit facility fees increased $35.8 million, or 193%, to $54.5 million for the nine months ended September 30, 2010 from $18.6 million for the comparable period in 2009, primarily due to the additional interest expense incurred for the nine months ended September 30, 2010 on the Unsecured Notes assumed in the Allied Acquisition of $29.8 million.    For the nine months ended September 30, 2010, professional fees and other costs related to the Allied Acquisition increased $15.8 million, or 794%, to $17.8 million from $2.0 million for the comparable period in 2009.  Base and incentive management fees increased $30.2 million, or 66%, to $76.5 million from $46.3 million in total for the comparable period in 2009, primarily due to the increase in investments and the related interest income on those investments as a result of the Allied Acquisition.

 

Income Tax Expense, Including Excise Tax

 

The Company has elected to be treated as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, the Company must, among other things, timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. Among other things, the Company has, in order to maintain its RIC status, made and intends to continue to make the requisite distributions to its stockholders which will generally relieve the Company from U.S. Federal income taxes.

 

Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. For the three and nine months ended September 30, 2010, the Company recorded no amounts for U.S. Federal excise tax.  For the three months ended September 30, 2009, the Company recorded no amounts for U.S. Federal excise tax.  For the nine months ended September 30, 2009, the Company recognized a $0.1 million benefit for U.S. Federal excise tax.

 

Certain of our subsidiaries are subject to U.S. Federal and state income taxes. For the three and nine months ended September 30, 2010, we recorded a tax (benefit)/expense of $(0.2) million and $0.4 million, respectively, for these subsidiaries, and for the three and nine months ended September 30, 2009, we recorded tax provisions of approximately $0.5 million and $0.6 million, respectively, for these subsidiaries.

 

Net Unrealized Gains/Losses

 

For the three months ended September 30, 2010, the Company had net unrealized gains of $57.5 million, which were primarily comprised of $115.6 million in unrealized appreciation, $59.4 million in unrealized depreciation and $1.3 million related to the reversal of prior period net unrealized depreciation. Of the total net unrealized gains for the three months ended September 30, 2010, $19.1 million were related to investments acquired as part of the Allied Acquisition, which were primarily comprised of $59.3 million in unrealized appreciation, $41.5 million in unrealized depreciation, and $1.3 million related to the reversal of prior period net unrealized depreciation.  The most significant changes in net unrealized appreciation and depreciation for the total portfolio (excluding the reversal of prior period net unrealized appreciation) during the three months ended September 30, 2010 were as follows (in millions):

 

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For the three months
ended September 30, 2010

 

Portfolio Company

 

Net Unrealized
Appreciation
(Depreciation)

 

Senior Secured Loan Fund LLC (1)

 

$

12.8

 

Air Medical Group Holdings LLC

 

10.3

 

Stag-Parkway, Inc.

 

9.6

 

Hot Stuff Foods, LLC

 

6.0

 

DSI Renal, Inc.

 

5.2

 

Reflexite Corporation

 

4.5

 

Ivy Hill Asset Management, L.P. (1)

 

4.0

 

American Broadband Holding Company

 

4.0

 

Crescent Equity Corporation

 

3.6

 

Things Remembered, Inc.

 

3.2

 

National Print Group, Inc.

 

3.1

 

Bumble Bee Foods, LLC

 

2.7

 

Canon Communications LLC

 

2.4

 

InSight Pharmaceuticals Corporation

 

2.4

 

CT Technologies Intermediate Holdings

 

2.3

 

Callidus Debt Partners Equity Interest, Ltd.

 

2.1

 

S.B. Restaurant Company

 

1.9

 

Vistar Corporation

 

1.8

 

Thermal Solutions LLC

 

1.8

 

Callidus Debt Partners CDO Fund VI, Ltd.

 

1.7

 

Industrial Container Services, LLC

 

1.5

 

Community Educations Centers, Inc.

 

1.5

 

Network Hardware Resale LLC

 

1.5

 

Bushnell, Inc.

 

1.5

 

PENN Detroit Diesel Allison LLC

 

1.4

 

Dryden XVIII Leveraged Loan 2007 Limited

 

1.4

 

Cleveland East Equity LLC

 

1.2

 

Callidus Debt Partners CDO Fund III, Ltd.

 

(1.0

)

Prommis Solutions, LLC

 

(1.2

)

Callidus Debt Partners CDO Fund I, Ltd.

 

(1.3

)

Promo Works, LLC

 

(1.5

)

Huddle House, Inc.

 

(1.8

)

Pillar Holdings LLC

 

(2.1

)

ADF Restaurant Group, LLC

 

(2.3

)

Making Memories Wholesale, Inc.

 

(2.3

)

Aquila Binks Forest Development,LLC

 

(2.4

)

Ciena Capital LLC

 

(3.3

)

Crescent Hotels & Resorts, LLC

 

(3.8

)

Campus Management Corp.

 

(4.2

)

Reed Group, Ltd.

 

(5.2

)

Benefit Mall Holdings, Inc.

 

(8.0

)

Coverall North America, Inc.

 

(8.7

)

Other

 

9.9

 

Total

 

$

56.2

 

 


(1)           See Note 10 to the consolidated financial statements.

 

For the three months ended September 30, 2009, the Company had net unrealized gains of $32.0 million, which was primarily comprised of $17.6 million in unrealized depreciation, $45.7 million in unrealized appreciation and $3.9 million related to the reversal of prior period net unrealized depreciation. The most significant changes in net unrealized appreciation and depreciation during the

 

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three months ended September 30, 2009 were as follows (in millions):

 

 

 

For the three months
ended September 30, 2009

 

Portfolio Company

 

Unrealized
Appreciation
(Depreciation)

 

ADF Restaurant Group, LLC

 

$

5.1

 

Imperial Capital Group, LLC

 

5.0

 

Wear Me Apparel, LLC

 

4.8

 

CT Technologies Holdings, LLC

 

2.8

 

Apple & Eve, LLC

 

2.3

 

OTG Management, Inc.

 

1.8

 

Best Brands Corporation

 

1.8

 

Capella Healthcare, Inc.

 

1.7

 

Bumble Bee Foods, LLC

 

1.7

 

Prommis Solutions, LLC

 

1.6

 

National Print Group, Inc.

 

1.6

 

Instituto de Banca y Comercio, Inc.

 

1.5

 

The Teaching Company, LLC

 

1.4

 

Pillar Holdings LLC

 

1.0

 

3091779 Nova Scotia Inc.

 

(1.1

)

Wastequip, Inc.

 

(1.3

)

AWTP, LLC

 

(1.4

)

MPBP Holdings, Inc.

 

(1.9

)

LVCG Holdings LLC

 

(2.0

)

Canon Communications LLC

 

(2.2

)

R3 Education, Inc.

 

(3.5

)

Other

 

7.4

 

Total

 

$

28.1

 

 

For the nine months ended September 30, 2010, the Company had net unrealized gains of $179.9 million, which was primarily comprised of $298.6 million in unrealized appreciation, $119.2 million in unrealized depreciation and $0.5 million related to the reversal of prior period net unrealized depreciation. Of the total net unrealized gains for the nine months ended September 30, 2010, $65.4 million was related to investments acquired as part of the Allied Acquisition, which was primarily comprised of $132.4 million in unrealized appreciation, $68.3 million in unrealized depreciation, and $1.3 million related to the reversal of prior period net unrealized depreciation.  The most significant changes in net unrealized appreciation and depreciation for the total (excluding the reversal of prior period net unrealized depreciation) during the nine months ended September 30, 2010 were as follows (in millions):

 

 

 

For the nine months
ended September 30, 2010

 

Portfolio Company

 

Net Unrealized
Appreciation
(Depreciation)

 

Senior Secured Loan Fund LLC (1)

 

$

25.0

 

R3 Education, Inc.

 

15.7

 

Air Medical Group Holdings LLC

 

15.1

 

Stag-Parkway, Inc.

 

14.1

 

Ivy Hill Asset Management, L.P. (1)

 

12.5

 

DSI Renal, Inc.

 

11.6

 

Things Remembered, Inc.

 

10.1

 

S.B. Restaurant Company

 

7.1

 

Hot Stuff Foods, LLC

 

6.8

 

Callidus Debt Partners CDO Fund VI, Ltd.

 

6.4

 

Component Hardware Group, Inc.

 

5.5

 

Woodstream Corporation

 

5.4

 

 

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American Broadband Holding Company

 

4.9

 

Industrial Container Services, LLC

 

4.9

 

Canon Communications LLC

 

4.8

 

Callidus Debt Partners CDO Fund VII, Ltd.

 

4.7

 

Callidus MAPS CLO Fund II, LLC

 

4.7

 

Reflexite Corporation

 

4.5

 

Bumble Bee Foods, LLC

 

4.4

 

Callidus MAPS CLO Fund I, Ltd.

 

4.1

 

Tradesmen International, Inc.

 

4.0

 

Vantage Oncology, Inc

 

3.7

 

Vistar Corporation

 

3.7

 

Instituto de Banca y Comercio, Inc.

 

3.7

 

Dryden XVIII Leveraged Loan 2007 Limited

 

3.6

 

Crescent Equity Corporation

 

3.6

 

Network Hardware Resale LLC

 

3.4

 

National Print Group, Inc.

 

3.2

 

OTG Management, Inc.

 

3.1

 

Callidus Debt Partners Equity Interest, Ltd.

 

3.1

 

CT Technologies Intermediate Holdings, Inc.

 

3.0

 

Callidus Debt Partners CDO Fund IV, Ltd.

 

2.9

 

Waste Pro USA, Inc.

 

2.7

 

Callidus Debt Partners CDO Fund V, Ltd.

 

2.4

 

NPH, Inc

 

2.3

 

ALD TBB/WIN Equity, LLC

 

2.3

 

Promo Works, LLC

 

2.3

 

eInstruction Corporation

 

2.2

 

Web Services Company, LLC

 

2.2

 

Community Education Centers, Inc.

 

2.1

 

Callidus Debt Partners CDO Fund III

 

2.1

 

Carador, PLC

 

2.1

 

Planet Organic Health Corp.

 

1.9

 

Growing Family, Inc.

 

1.7

 

Thermal Solutions LLC

 

1.5

 

Financial Pacific Company

 

1.5

 

PODS Funding Corp.

 

1.4

 

The Kenan Advantage Group, Inc.

 

1.4

 

Vistar Corporation

 

1.3

 

MVL Group, Inc.

 

1.2

 

Bushnell, Inc.

 

1.2

 

PRA International, Inc.

 

1.1

 

STS Operating, Inc.

 

1.0

 

Pangaea CLO 2007-1 Ltd.

 

(1.2

)

Callidus Debt Partners CDO Fund I, Ltd.

 

(1.4

)

PENN Detroit Diesel Allison LLC

 

(1.5

)

Distant Lands Trading Co.

 

(1.7

)

Tranzact Holdings LLC

 

(1.8

)

Border Foods, Inc.

 

(2.4

)

Making Memories Wholesale, Inc.

 

(2.6

)

The Step2 Company, LLC

 

(2.8

)

Trivergance Capital Partners, LP

 

(2.9

)

CNA Holding Corporation

 

(3.0

)

Huddle House, Inc.

 

(3.4

)

Knightsbridge CLO 2007-1 Ltd.

 

(3.6

)

Knightsbridge CLO 2008-1 Ltd.

 

(3.7

)

 

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Eagle AC Holdings, Inc.

 

(3.8

)

Coverall North America, Inc.

 

(4.3

)

ADF Restaurant Group

 

(4.4

)

Reed Group, Ltd.

 

(5.1

)

Ciena Capital LLC

 

(5.1

)

Aquila Binks Forest Development, LLC

 

(5.2

)

MPBP Holdings, Inc.

 

(5.2

)

Crescent Hotels & Resorts, LLC

 

(6.2

)

FirstLight Financial Corporation

 

(7.4

)

Other

 

6.9

 

Total

 

$

179.4

 

 


(1) See Note 10 to the consolidated financial statements.

 

For the nine months ended September 30, 2009, the Company had net unrealized gains of $15.7 million, which was primarily comprised of $81.4 million in unrealized depreciation and $91.8 million in unrealized appreciation and $5.3 million relating to the reversal of prior period net unrealized depreciation. The most significant changes in net unrealized appreciation and depreciation during the nine months ended September 30, 2009 were as follows (in millions):

 

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For the nine months ended
September 30, 2009

 

Portfolio Company

 

Unrealized
Appreciation
(Depreciation)

 

Apple & Eve, LLC

 

$

10.5

 

Best Brands Corp.

 

8.2

 

Ivy Hill Asset Management, L.P. (1)

 

8.0

 

Capella Healthcare, Inc.

 

6.0

 

Wear Me Apparel, LLC

 

6.0

 

Imperial Capital Group, LLC

 

5.0

 

ADF Restaurant Group

 

4.9

 

Waste Pro USA, Inc.

 

4.2

 

Prommis Solutions, LLC

 

3.8

 

Booz Allen Hamilton, Inc.

 

3.5

 

DSI Renal, Inc.

 

2.8

 

Instituto de Banca y Comercio, Inc.

 

2.7

 

CT Technologies Holdings, LLC

 

2.4

 

Lakeland Finance, LLC

 

2.0

 

Pillar Holdings LLC

 

2.0

 

Bumble Bee Foods, LLC

 

1.7

 

Wyle Laboratories, Inc.

 

1.4

 

Savers, Inc.

 

1.4

 

Magnacare Holdings, Inc.

 

1.4

 

The Teaching Company, LLC

 

1.3

 

Encanto Restaurants, Inc.

 

1.2

 

American Residential Services, LLC

 

1.2

 

Hudson Group, Inc.

 

1.2

 

Diversified Collections Services, Inc.

 

1.0

 

Industrial Container Services, LLC

 

(1.3

)

Planet Organic Health Corp.

 

(1.3

)

Things Remembered, Inc.

 

(1.8

)

HB&G Building Products

 

(1.8

)

Sigma International Group, Inc.

 

(2.6

)

Canon Communications LLC

 

(2.6

)

VOTC Acquisition Corp.

 

(2.8

)

National Print Group, Inc.

 

(2.8

)

MPBP Holdings, Inc.

 

(3.2

)

Growing Family, Inc.

 

(3.4

)

R3 Education, Inc.

 

(3.4

)

Courtside Acquisition Corp.

 

(3.4

)

Wastequip, Inc.

 

(4.0

)

AWTP, LLC

 

(4.1

)

Direct Buy Holdings, Inc.

 

(4.2

)

Summit Business Media, LLC

 

(4.7

)

LVCG Holdings LLC

 

(6.5

)

Reflexite Corporation

 

(10.6

)

Firstlight Financial Corporation

 

(11.0

)

Other

 

2.1

 

Total

 

$

10.4

 

 


(1)           See Note 10 to the consolidated financial statements.

 

 

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Net Realized Gains/Losses

 

During the three months ended September 30, 2010, the Company had $231.8 million of sales and repayments resulting in $1.2 million of net realized gains. Net realized gains on investments were comprised of $3.6 million of gross realized gains and $2.4 million of gross realized losses. Of the $1.2 million of net realized gains, approximately $1.0 million were from investments acquired as part of the Allied Acquisition.  The most significant realized gains and losses on investments for the three months ended September 30, 2010 were as follows (in millions):

 

 

 

For the three months
ended September 30, 2010

 

Portfolio Company

 

Realized
Gain (Loss)

 

Component Hardware Group, Inc.

 

$

1.9

 

Promo Works, LLC

 

1.4

 

Distant Lands Trading Co.

 

(1.8

)

Other

 

(0.3

)

Total

 

$

1.2

 

 

During the three months ended September 30, 2009, the Company had $104.4 million of sales and repayments resulting in $1.7 million of net realized losses. These sales and repayments included $5.0 million of loans sold to the Ivy Hill’s managed funds, the two middle market credit funds managed by our affiliate, IHAM (see Note 10 to the consolidated financial statements for more detail on IHAM and its managed funds). Net realized losses on investments were comprised of $12.8 million of gross realized gains and $14.5 of gross realized losses. The most significant realized gains and losses on investments for the three months ended September 30, 2009 were as follows (in millions):

 

 

 

For the three months
ended September 30, 2009

 

Portfolio Company

 

Realized
Gain (Loss)

 

WastePro USA, Inc.

 

$

12.3

 

Making Memories Wholesale, Inc.

 

(14.2

)

Other

 

0.2

 

Total

 

$

(1.7

)

 

During the nine months ended September 30, 2010, the Company recognized a gain on the acquisition of Allied Capital of $195.9 million.  Additionally, during the nine months ended September 30, 2010, the Company had $1.2 billion of sales and repayments resulting in $8.7 million of net realized gains. These sales and repayments included $94.5 million of loans sold to Ivy Hill Middle Market Credit Fund, Ltd. (“Ivy Hill I”) and Ivy Hill Middle Market Credit Fund II, Ltd. (“Ivy Hill II”), two middle market credit funds managed by our portfolio company, IHAM (see Note 10 to the consolidated financial statements for more detail on IHAM and its managed funds). Net realized gains on investments were comprised of $26.2 million of gross realized gains and $17.5 million of gross realized losses. The most significant realized gains and losses on investments for the nine months ended September 30, 2010 were as follows (in millions):

 

 

 

For the nine months
ended September 30, 2010

 

Portfolio Company

 

Realized
Gain (Loss)

 

DSI Renal, Inc.

 

$

3.9

 

Instituto de Banca y Comercio, Inc.

 

3.6

 

Best Brands Corp.

 

2.4

 

Component Hardware Group, Inc.

 

1.9

 

The Kenan Advantage Group, Inc.

 

1.8

 

Capella Healthcare, Inc.

 

1.6

 

Promo Works, LLC

 

1.4

 

Daily Candy, Inc.

 

1.3

 

Magnacare Holdings, Inc.

 

1.2

 

Wyle Laboratories, Inc.

 

1.2

 

Savers, Inc.

 

1.0

 

Arrow Group Industries

 

(1.2

)

Distant Lands Trading Co.

 

(1.8

)

Planet Organic Health Corp.

 

(1.8

)

3091779 Nova Scotia, Inc.

 

(3.2

)

Growing Family, Inc.

 

(7.6

)

Other

 

3.0

 

Total

 

$

8.7

 

 

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During the nine months ended September 30, 2009, the Company repurchased $34.8 million of the CLO Notes (as defined below) resulting in a $26.5 million realized gain on the extinguishment of debt. The Company also had $267.4 million of sales and repayments resulting in $4.2 million of net realized losses. These sales and repayments included $45.5 million of loans sold to the Ivy Hill’s managed funds. Net realized losses on investments were comprised of $13.0 million of gross realized gains and $17.2 of gross realized losses. The most significant realized gains and losses on investments for the nine months ended September 30, 2009 were as follows (in millions):

 

Portfolio Company

 

Realized
Gain (Loss)

 

WastePro USA, Inc.

 

$

12.3

 

Capella Healthcare, Inc.

 

(1.0

)

Instituto de Banca y Commercio, Inc.

 

(1.2

)

Making Memories Wholesale, Inc.

 

(14.2

)

Other

 

(0.1

)

Total

 

$

(4.2

)

 

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

 

Since the Company’s inception, the Company’s liquidity and capital resources have been generated primarily from the net proceeds of public offerings of common stock, the Debt Securitization and advances from the combined CP Funding Facility (and its predecessors) and Revolving Credit Facility, each as defined below (together, the “Facilities”), as well as cash flows from operations. As part of the Allied Acquisition, the Company assumed all outstanding debt obligations of Allied Capital, including the Unsecured Notes, which consist of 6.625% Notes due on July 15, 2011 (the “2011 Notes”), 6.000% Notes due on April 1, 2012 (the “2012 Notes”) and 6.875% Notes due on April 15, 2047 (the “2047 Notes”).

 

As of September 30, 2010, the Company had $134 million in cash and cash equivalents and $1.5 billion in total indebtedness outstanding at carrying value ($1.6 billion at principal amount). Subject to leverage and borrowing base restrictions, the Company had approximately $495 million available for additional borrowings under the Facilities and Debt Securitization as of September 30, 2010.

 

Equity Offerings

 

The following table summarizes the total shares of common stock issued and proceeds we received in underwritten public offerings of our common stock net of underwriter, dealer-manager and offering costs for the nine months ended September 30, 2010 and 2009 (dollar amounts in millions, except per share data):

 

 

 

Shares issued

 

Offering price
per share

 

Proceeds net of
underwriting and
offering costs

 

February 2010 public offering

 

22,957,993

 

$

12.75

 

$

277.0

 

Total for the nine months ended September 30, 2010

 

22,957,993

 

 

 

$

277.0

 

 

 

 

 

 

 

 

 

August 2009 public offering

 

12,439,908

 

$

9.25

 

$

109.1

 

Total for the nine months ended September 30, 2009

 

12,439,908

 

 

 

$

109.1

 

 

In addition, in connection with the closing of the Allied Acquisition, on April 1, 2010, we issued 58,492,537 shares of common stock valued at approximately $872.7 million.

 

Part of the proceeds from the February 2010 and August 2009 public offerings were used to repay outstanding indebtedness.  The remaining unused portions of the proceeds from these public offerings were used to fund investments in portfolio companies in accordance with our investment objective and strategies and market conditions.

 

As of September 30, 2010, total equity market capitalization for the Company was $3.0 billion compared to $1.4 billion as of December 31, 2009.

 

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Debt Capital Activities

 

Our debt obligations as of September 30, 2010 and December 31, 2009 consisted of the following (in millions):

 

 

 

September 30, 2010

 

December 31, 2009

 

 

 

Carrying
Value(1)

 

Total
Available(2)

 

Carrying
Value

 

Total
Available(1)

 

 

 

 

 

 

 

 

 

 

 

CP Funding Facility

 

$

283.4

 

$

400.0

 

$

221.6

 

$

221.6

 

Revolving Credit Facility

 

431.0

 

810.0

 

474.1

 

525.0

 

CP Funding II Facility(3)

 

 

 

 

200.0

 

Debt Securitization

 

177.2

 

200.1

 

273.8

 

275.0

 

2011 Notes (principal amount outstanding of $300.6)

 

294.3

(4)

300.6

 

 

 

2012 Notes (principal amount outstanding of $161.2)

 

157.5

(4)

161.2

 

 

 

2047 Notes (principal amount outstanding of $230.0)

 

180.8

(4)

230.0

 

 

 

 

 

$

1,524.2

 

$

2,101.9

 

$

969.5

 

$

1,221.6

 

 


(1)         Except for the Unsecured Notes, all carrying values are the same as the principal amounts outstanding.

(2)         Subject to borrowing base and leverage restrictions.

(3)         The CP Funding II Facility was combined with the CP Funding Facility on January 22, 2010. In connection therewith the CP Funding II Facility was terminated.

(4)         Represents the aggregate principal amount of the applicable series of notes less the unaccreted discount initially recorded as a part of the Allied Acquisition.

 

The weighted average interest rate and weighted average maturity, both on principal value, of all our outstanding borrowings as of September 30, 2010 were 4.63% and 8 years, respectively. The weighted average interest rate and weighted average maturity of all our outstanding borrowings as of December 31, 2009 were 2.05% and 3.8 years, respectively.

 

The ratio of total principal debt outstanding to stockholders’ equity as of September 30, 2010 was 0.57:1.00 compared to 0.77:1.00 as of December 31, 2009. The ratio of total carrying value of debt to stockholders’ equity as of September 30, 2010 was 0.55:1.00 compared to 0.77:1.00 as of December 31, 2009.

 

As required by the Investment Company Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the Investment Company Act, is at least 200% after such borrowing. As of September 30, 2010, our asset coverage for borrowed amounts was 282%.

 

CP Funding Facilities

 

In October 2004, we formed Ares Capital CP Funding LLC (“Ares Capital CP”), a wholly owned subsidiary of the Company, through which we established a revolving facility (as amended, the “CP Funding Facility”) that, as amended, allowed Ares Capital CP to issue up to $350 million of variable funding certificates.  On May 7, 2009, the Company and Ares Capital CP entered into an amendment that, among other things, converted the CP Funding Facility from a revolving facility to an amortizing facility, extended the maturity from July 21, 2009 to May 7, 2012 and reduced the availability from $350 million to $225 million.

 

On July 21, 2009, we entered into an agreement with Wachovia Bank N.A. (“Wachovia”) to establish a new revolving facility (the “CP Funding II Facility”) whereby Wachovia agreed to extend credit to us in an aggregate principal amount not exceeding $200 million at any one time outstanding. Prior to its combination with the CP Funding Facility, the CP Funding II Facility was scheduled to expire on July 21, 2012.

 

On January 22, 2010, we combined the CP Funding Facility with the CP Funding II Facility into a single $400 million revolving securitized facility (the “combined CP Funding Facility”). In connection with the combination, we terminated the CP Funding II Facility and entered into an Amended and Restated Purchase and Sale Agreement with Ares Capital CP Funding Holdings LLC, our wholly owned subsidiary (“CP Holdings”), pursuant to which we may sell to CP Holdings certain loans that we have originated or acquired, or will originate or acquire (the “Loans”) from time to time, which CP Holdings will subsequently sell to Ares Capital CP, which is a wholly owned subsidiary of CP Holdings. The combined CP Funding Facility is secured by all of the assets held by, and the

 

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membership interest in, Ares Capital CP. The combined CP Funding Facility, among other things, extends the maturity date of the facility to January 22, 2013 (with two one-year extension options, subject to mutual consent). Prior to January 22, 2010, the interest rate charged on the CP Funding Facility was the commercial paper rate plus 3.50%.  After January 22, 2010, subject to certain exceptions, the interest charged on the combined CP Funding Facility is based on LIBOR plus an applicable spread of between 2.25% and 3.75% or on a “base rate” (which is the higher of a prime rate, or the federal funds rate plus 0.50%) plus an applicable spread of between 1.25% to 2.75%, in each case, based on a pricing grid depending upon our credit rating. Additionally, we are required to pay a commitment fee of between 0.50% and 2.00% depending on the usage level on any unused portion of the combined CP Funding Facility. As of September 30, 2010, the effective LIBOR spread under the CP Funding Facility was 2.75%.

 

As of September 30, 2010, the principal amount outstanding under the combined CP Funding Facility was $283.4 million and the Company continues to be in material compliance with all of the limitations and requirements of the CP Funding Facility. See Note 7 to our consolidated financial statements for more detail on the combined CP Funding Facility.

 

Revolving Credit Facility

 

In December 2005, we entered into a senior secured revolving credit facility (as amended and restated, the “Revolving Credit Facility”), under which, as amended, the lenders agreed to extend credit to the Company.  On January 22, 2010, we entered into an agreement to amend and restate the Revolving Credit Facility. The amendment and restatement of the Revolving Credit Facility, among other things, increased the size of the facility from $525 million to $690 million (comprised of $615 million in commitments on a stand-alone basis and an additional $75 million in commitments contingent upon the closing of the Allied Acquisition), extended the maturity date from December 28, 2010 to January 22, 2013 and modified pricing.  The Revolving Credit Facility also includes an “accordion” feature that allows, under certain circumstances, to increase the size of the facility to a maximum of $1.05 billion.  During the three months ended September 30, 2010, we exercised this “accordion” feature and increased the size of the facility by $60 million to bring the total facility size to $810 million.  As of September 30, 2010, there was $431.0 million outstanding under the Revolving Credit Facility and the Company continues to be in material compliance with all of the limitations and requirements of the Revolving Credit Facility.

 

Prior to January 22, 2010, subject to certain exceptions, pricing on the Revolving Credit Facility was based on LIBOR plus 1.00% or on an “alternate base rate” (which was the highest of a prime rate, the federal funds rate plus 0.50%, or one month LIBOR plus 1.00%). After January 22, 2010, subject to certain exceptions, pricing under the Revolving Credit Facility is based on LIBOR plus an applicable spread of between 2.50% and 4.00% or on the “alternate base rate” plus an applicable spread of between 1.50% and 3.00%, in each case, based on a pricing grid depending upon our credit rating.  As of September 30, 2010, the effective LIBOR spread under the Revolving Credit Facility was 3.00%. See Note 7 to our consolidated financial statements for more detail on the Revolving Credit Facility.

 

Debt Securitization

 

In July 2006, through ARCC Commercial Loan Trust 2006, a vehicle serviced by our wholly owned subsidiary, ARCC CLO 2006 LLC (“ARCC CLO”), we completed a $400 million debt securitization (the “Debt Securitization”) and issued approximately $314 million principal amount of asset-backed notes (including revolving notes in an aggregate amount of up to $50 million, $27.0 million of which were drawn down as of September 30, 2010) (the “CLO Notes”) to third parties that were secured by a pool of middle market loans that have been purchased or originated by the Company. The CLO Notes are included in the September 30, 2010 consolidated balance sheet. We retained approximately $86 million of aggregate principal amount of certain BBB and non-rated securities in the Debt Securitization. During the first quarter of 2009, we repurchased $34.8 million of additional CLO Notes, bringing our total holdings of CLO Notes to $120.8 million (the “Retained Notes”). During the nine months ended September 30, 2010, we repaid $96.6 million of the CLO Notes.

 

The CLO Notes mature on December 20, 2019 and have a blended pricing of LIBOR plus 0.35%. As of September 30, 2010, there was $177.2 million outstanding under the Debt Securitization (excluding the Retained Notes). See Note 7 to our consolidated financial statements for more detail on the Debt Securitization.

 

Publicly Issued Unsecured Notes Payable

 

As part of the Allied Acquisition, the Company assumed all outstanding debt obligations of Allied Capital, including the Unsecured Notes, which consist of the 2011 Notes, the 2012 Notes and the 2047 Notes.

 

 

 

Carrying
Value (1)

 

2011 Notes (principal amount of $300.6)

 

$

294.3

 

2012 Notes (principal amount of $161.2)

 

157.5

 

2047 Notes (principal amount of $230.0)

 

180.8

 

Total

 

$

632.6

 

 

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(1)                                 Represents the principal amount of the notes less the unaccreted discount initially recorded as a part of the Allied Acquisition.

 

The 2011 Notes and the 2012 Notes require payment of interest semi-annually, and all principal is due upon maturity. The Company has the option to redeem these notes in whole or in part, together with a redemption premium, as stipulated in the notes.

 

The 2047 Notes require payment of interest quarterly, and all principal is due upon maturity. These notes are redeemable in whole or in part at any time or from time to time on or after April 15, 2012, at par and upon the occurrence of certain tax events as stipulated in the notes.

 

In addition, the Company may purchase the Unsecured Notes in the market to the extent permitted by the Investment Company Act.  During the three months ended September 30, 2010, the Company purchased $14.4 million of the 2011 Notes and $29.4 million of the 2012 Notes.  As a result of these transactions a realized loss of $1.6 million was recognized during the period. During the nine months ended September 30, 2010, the Company purchased $19.4 million of the 2011 Notes and $34.4 million of the 2012 Notes.  As a result of these transactions a realized loss of $2.0 million was recognized during the period.

 

See Recent Developments and Note 17 to our consolidated financial statements for more detail on the issuance of unsecured notes on October 21, 2010.

 

PORTFOLIO VALUATION

 

Investment transactions are recorded on the trade date. Realized gains or losses are computed using the specific identification method. Investments for which market quotations are readily available are typically valued at such market quotations. In order to validate market quotations, we look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available (i.e., substantially all of our investments) are valued at fair value as determined in good faith by our board of directors, based on the input of our management and audit committee and independent valuation firms that have been engaged at the direction of the board to assist in the valuation of each portfolio investment without a readily available market quotation at least once during a trailing 12-month period, and under a valuation policy and a consistently applied valuation process. The valuation process is conducted at the end of each fiscal quarter, and a minimum 50% of our valuations of portfolio at fair value are subject to review by an independent valuation firm each quarter.

 

As part of the valuation process, we may take into account the following types of factors, if relevant, in determining the fair value of our investments: the enterprise value of a portfolio company (an estimate of the total fair value of the portfolio company’s debt and equity), the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company’s securities to publicly traded securities, changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made in the future and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate our valuation.

 

Because there is not a readily available market value for most of the investments in our portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by our board of directors, based on the input of our management and audit committee and independent valuation firms, under a valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize significantly less than the value at which we have recorded it.

 

In addition, changes in the market environment, such as inflation, 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 gains or losses that would be realized based on the valuations currently assigned. See the factors set forth in “Risk Factors” included in our annual report on Form 10-K for the fiscal year ended December 31, 2009, including the Risk Factor entitled “Risk Factors—Risks Relating to our Investments—Price declines and illiquidity in the corporate debt markets have adversely affected, and may continue to adversely affect, the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.”

 

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With respect to investments for which market quotations are not readily available, our board of directors undertakes a multi-step valuation process each quarter, as described below:

 

·                  Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment in conjunction with our portfolio management team.

 

·                  Preliminary valuations are reviewed and discussed with the entire investment portfolio and management team, and then valuation recommendations are presented to the board of directors.

 

·                  The audit committee of our board of directors reviews these valuations, as well as the input of independent third-party valuation firms with respect to the valuations of a minimum of 50% of our portfolio at fair value.

 

·                  The board of directors discusses valuations and determines the fair value of each investment in our portfolio without a readily available market quotation in good faith based on the input of our management and audit committee and independent third-party valuation firms.

 

Effective January 1, 2008, the Company adopted Accounting Standards Codification (“ASC”) 820-10 (previously Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”)), which expands the application of fair value accounting for investments (see Note 8 to the consolidated financial statements). Investments acquired as part of the Allied Acquisition were accounted for in accordance with ASC 805-10 (previously SFAS No. 141(R)), Business Combinations, which requires that all assets be recorded at fair value.  As a result, the initial amortized cost basis and fair value for the acquired investments were the same value at April 1, 2010 (see Note 15 to consolidated financial statements).

 

OFF BALANCE SHEET ARRANGEMENTS

 

As of September 30, 2010 and December 31, 2009, the Company had the following commitments to fund various revolving and delayed draw senior secured and subordinated loans to its portfolio companies (in millions):

 

 

 

September 30, 2010

 

December 31, 2009

 

Total revolving and delayed draw commitments

 

$

633.4

 

$

136.8

 

Less: funded commitments

 

(382.6

)

(37.2

)

Total unfunded commitments

 

250.8

 

99.6

 

Less: commitments substantially at discretion of the Company

 

(63.4

)

(4.0

)

Less: unavailable commitments due to borrowing base or other covenant restrictions

 

(16.1

)

(16.2

)

Total net adjusted unfunded commitments

 

$

171.3

 

$

79.4

 

 

Of the total net adjusted unfunded commitments as of September 30, 2010, $78.1 million are from commitments for investments acquired as part of the Allied Acquisition.  Also, of the total commitments as of September 30, 2010, $176.6 million extend beyond the maturity date for our Revolving Credit Facility. Included within the total commitments as of September 30, 2010 are commitments to issue up to $21.7 million in standby letters of credit through a financial intermediary on behalf of certain portfolio companies. Under these arrangements, the Company would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. As of September 30, 2010, the Company had $18.7 million in standby letters of credit issued and outstanding on behalf of the portfolio companies, of which no amounts were recorded as a liability on the balance sheet as they are considered in the valuation of the investments in the portfolio company.  Of these letters of credit, $0.3 million expire in December 2010, $0.8 million expire in January 2011, $8.2 million expire in February 2011, $2.0 million expire in March 2011, $2.3 million expire in September 2011, and $5.1 million expire in December 2011.

 

As of September 30, 2010 and December 31, 2009, the Company was a party to subscription agreements to fund equity investments in private equity investment partnerships as follows (in millions):

 

 

 

September 30, 2010

 

December 31, 2009

 

Total private equity commitments

 

$

567.6

 

$

428.3

 

Total unfunded private equity commitments

 

$

442.5

 

$

415.4

 

 

Of the total unfunded private equity commitments as of September 30, 2010, $400.5 million are substantially at the discretion of the Company. Additionally, of the total unfunded private equity commitments as of September 30, 2010, $28.1 million are for investments acquired as part of the Allied Acquisition.

 

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As of September 30, 2010, one of the Company’s portfolio companies, Ciena Capital LLC (“Ciena”), had one non-recourse securitization Small Business Administration (“SBA”) loan warehouse facility, which has reached its maturity date but remains outstanding. Ciena is working with the providers of the SBA loan warehouse facility with regard to the repayment of that facility. Allied Capital had previously issued a performance guaranty (which Ares Capital succeeded to as a result of the Allied Acquisition) whereby Ares Capital must indemnify the warehouse providers for any damages, losses, liabilities and related costs and expenses that they may incur as a result of Ciena’s failure to perform any of its obligations as loan originator, loan seller or loan servicer under the warehouse facility. As of September 30, 2010, there are no known issues or claims with respect to this performance guaranty.

 

See Notes 5 and 10 to the consolidated financial statements for more information on the Company’s commitment to the Senior Secured Loan Program.

 

RECENT DEVELOPMENTS

 

On October 21, 2010, we issued $200 million of senior unsecured notes that mature on October 15, 2040 (the “2040 Notes”) and may be redeemed in whole or in part at our option at any time on or after October 15, 2015 at a par redemption price of $25 per security plus accrued and unpaid interest.  The principal amount of the 2040 Notes will be payable at maturity. The 2040 Notes bear interest at a rate of 7.75% per year payable quarterly commencing on January 15, 2011.  Total proceeds from the issuance of the 2040 Notes, net of underwriters’ discount and offering costs, were approximately $193 million. Ares Capital used the net proceeds of this offering to repay outstanding indebtedness under the Revolving Credit Facility.

 

As of November 3, 2010, we had made new investment commitments of $128 million, all of which were funded, since September 30, 2010. Of these new investment commitments, 61% were in investments in subordinated notes of the Senior Secured Loan Program, 29% were in first lien senior secured debt, 2% were in second lien senior secured debt, and 8% were in equity securities. Of the $128 million of new investment commitments, 66% were fixed rate with a weighted average yield at amortized cost of 15.2% and 31% were floating rate with a weighted average spread at amortized cost of 6.2%.

 

As of November 3, 2010, we had exited $146 million of investments since September 30, 2010. Of these investments, 33% were in first lien senior secured debt, 37% were in senior subordinated debt, 17% were in second lien senior secured debt and 13% were in equity investments. Of the $146 million of investments, 30% were in fixed rate investments with a weighted average yield at amortized cost of 17.4%. Of the remaining investments, 54% were in floating rate investments with a weighted average spread at amortized cost of 6.7%, 3% were investments on non-accrual status and 13% were non-interest earning.  Also, of the $146 million of investments exited since September 30, 2010, $66 million were investments acquired as part of the Allied Acquisition including $4 million that were on non-accrual status. Additionally, we recognized net realized gains of approximately $19 million on the investments exited that were acquired as part of the Allied Acquisition.

 

In addition, as of November 3, 2010, we had an investment backlog and pipeline of $180 million and $310 million, respectively. We may syndicate a portion of these investments and commitments to third parties. The consummation of any of the investments in this backlog and pipeline depends upon, among other things: satisfactory completion of our due diligence investigation of the prospective portfolio company, our acceptance of the terms and structure of such investment and the execution and delivery of satisfactory transaction documentation. We cannot assure you that we will make any of these investments or that we will syndicate any portion of such investments and commitments.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

We are subject to financial market risks, including changes in interest rates and the valuations of our investment portfolio.

 

Interest Rate Risk

 

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

 

As of September 30, 2010, approximately 53% of the investments at fair value in our portfolio were at fixed rates while approximately 26% were at variable rates, 16% were non-interest earning and 5% were on non-accrual status. Additionally, as of September 30, 2010, 18% of the investments at fair value or 69% of the investments at fair value with variable rates contain interest rate floors. The Debt Securitization, the CP Funding Facility and the Revolving Credit Facility all bear interest at variable rates while the Unsecured Notes bear interest at fixed rates.

 

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We regularly measure our exposure to interest rate risk. We assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates.

 

In October 2008, we entered into an interest rate swap agreement that ends on December 20, 2010, for a total notional amount of $75 million. Under the interest rate swap agreement, we will pay a fixed interest rate of 2.985% and receive a floating rate based on the prevailing three-month LIBOR.

 

While hedging activities may mitigate our exposure to adverse fluctuations in interest rates, certain hedging transactions that we may enter into in the future, such as interest rate swap agreements, may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio investments.

 

Based on our September 30, 2010 balance sheet, the following table shows the annual impact on net income of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure and reflecting the effect of our interest rate swap agreement described above and in Note 11 to the consolidated financial statements (in millions):

 

Basis Point Change

 

Interest Income

 

Interest Expense

 

Net Income

 

Up 300 basis points

 

$

20.5

 

$

24.5

 

$

(4.0

)

Up 200 basis points

 

$

11.7

 

$

16.3

 

$

(4.6

)

Up 100 basis points

 

$

4.5

 

$

8.2

 

$

(3.7

)

Down 100 basis points

 

$

(1.4

)

$

(5.0

)

$

3.6

 

Down 200 basis points

 

$

(1.6

)

$

(5.0

)

$

3.4

 

Down 300 basis points

 

$

(1.7

)

$

(5.0

)

$

3.3

 

 

Based on our December 31, 2009 balance sheet, the following table shows the annual impact on net income of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure and reflecting the effect of our interest rate swap agreement described above and in Note 11 to the consolidated financial statements (in millions):

 

Basis Point Change

 

Interest Income

 

Interest Expense

 

Net Income

 

Up 300 basis points

 

$

17.6

 

$

26.8

 

$

(9.2

)

Up 200 basis points

 

$

11.2

 

$

17.9

 

$

(6.7

)

Up 100 basis points

 

$

5.6

 

$

8.9

 

$

(3.3

)

Down 100 basis points

 

$

(2.1

)

$

(2.9

)

$

0.8

 

Down 200 basis points

 

$

(3.1

)

$

(2.9

)

$

(0.2

)

Down 300 basis points

 

$

(4.1

)

$

(2.9

)

$

(1.2

)

 

Item 4. Controls and Procedures.

 

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

 

There have been no changes in our internal control over financial reporting during the three months ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

See Part II, Item 1 “Legal Proceedings,” in our Form 10-Q for the quarter ended June 30, 2010 (the “Previous 10-Q”) for a complete description of certain proceedings previously reported by us, including those described below.  Only significant subsequent developments in such proceedings and new matters, if any, since the filing of the Previous 10-Q are described below.

 

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On July 29, 2010, the court in In re Allied Capital Corporation Shareholder Litigation, Case No. 322639V (Circuit Court for Montgomery County, Maryland) (the “Maryland action”) issued an order approving the settlement and dismissing all claims against Allied Capital, the Company and the other defendants in the Maryland action.  On August 3, 2010, the court in Ryan v. Walton, et al., Case No. 1:10-CV-000145-RMC (United States District Court for the District of Columbia) (the “D.C. Federal Court action”) dismissed the D.C. Federal Court action.  On August 10, 2010, Sandler v. Walton, et al., Case No. 2009 CA 008123 B (Superior Court for the District of Columbia), which was consolidated with Wienecki v. Allied Capital Corporation, et al., Case No. 2009 CA 008541 B (Superior Court for the District of Columbia), was dismissed.  All of these actions had been filed by stockholders of Allied Capital challenging the Allied Acquisition and were dismissed in connection with settlements among the plaintiffs, Allied Capital and the Company.  The settlements are not, and should not be construed as, an admission of wrongdoing or liability by any defendant.  The parties considered it desirable that the actions be settled to avoid the expense, risk, inconvenience and distraction of continued litigation and to fully resolve the settled claims.

 

In addition, the Company is party to certain lawsuits in the normal course of business.  Furthermore, third parties may try to seek to impose liability on Ares Capital in connection with the activities of its portfolio companies.  While the outcome of any such open legal proceedings cannot at this time be predicted with certainty, the Company does not expect these matters will materially affect its financial condition or results of operations.

 

Item 1A. Risk Factors.

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (the “10-K”), those set forth under the caption “Risk Factors” in our registration statement on Form N-2/A filed on October 5, 2010 (the “N-2/A”), and those set forth under the caption “Risk Factors” in our prospectus supplement on Form 497 filed on October 15, 2010 (the “497”), which could materially affect our business, financial condition and/or operating results. The risks described in the 10-K, the N-2/A and the 497 are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

 

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

 

We did not sell any securities during the period covered in this report that were not registered under the Securities Act of 1933.

 

We did not repurchase any shares issued during the period covered in this report.

 

Item 3. Defaults Upon Senior Securities.

 

Not applicable.

 

Item 4.  (Removed and Reserved).

 

Item 5.  Other Information.

 

None.

 

Item 6.  Exhibits.

 

EXHIBIT INDEX

 

Number

 

Description

3.1

 

Articles of Amendment and Restatement, as amended(1)

 

 

 

3.2

 

Second Amended and Restated Bylaws, as amended(2)

 

 

 

4.1

 

Form of Stock Certificate(3)

 

 

 

10.1

 

Amendment No. 2 to the Senior Secured Revolving Credit Agreement, dated as of September 28, 2010, between the Registrant, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (4)

 

 

 

31.1

 

Certification by President pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

 

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31.2

 

Certification by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

 

 

 

32.1

 

Certification by President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

 


*

 

Filed herewith

 

 

 

(1)

 

Incorporated by reference to Exhibit 1 to the Company’s Registration Statement under the Securities Act of 1933, as amended, on Form N-14 (File No. 333-163760), filed on December 16, 2009.

 

 

 

(2)

 

Incorporated by reference to Exhibit (3.2) to the Company’s Form 10Q (File No. 814-00663), for the quarter ended June 30, 2010, filed on August 5, 2010.

 

 

 

(3)

 

Incorporated by reference to Exhibit (d) to the Company’s pre-effective Amendment No. 2 to the Registration Statement under the Securities Act of 1933, as amended, on Form N-2 (File No. 333-114656), filed on September 28, 2004.

 

 

 

(4)

 

Incorporated by reference to Exhibit (k)(12) to the Company’s pre-effective Amendment No. 2 to the Registration Statement under the Securities Act of 1933, as amended, on Form N-2 (File No. 333-165585), filed on October 5, 2010.

 

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SIGNATURES

 

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

 

 

ARES CAPITAL CORPORATION

 

 

 

 

 

 

Dated: November 4, 2010

By

/s/ Michael J. Arougheti

 

 

Michael J. Arougheti

 

 

President

 

 

 

Dated: November 4, 2010

By

/s/ Richard S. Davis

 

 

Richard S. Davis

 

 

Chief Financial Officer

 

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