þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 26-1219283 | |
(State or jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
10 Bank Street, 12th Floor White Plains, NY |
10606 | |
(Address of principal executive office) | (Zip Code) |
Title of Each Class | Name of Each Exchange on Which Registered |
|
Common Stock, par value $0.01 per share | New York Stock Exchange |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
2
December 31, 2010 | September 30, 2010 | |||||||
Assets |
||||||||
Investments at fair value: |
||||||||
Control investments (cost 12/31/10: $9,681,508; cost 9/30/10: $12,195,029) |
$ | 9,088,988 | $ | 3,700,000 | ||||
Affiliate investments (cost 12/31/10: $50,136,804; cost 9/30/10: $50,133,521) |
45,645,034 | 47,222,059 | ||||||
Non-control/Non-affiliate investments (cost 12/31/10: $695,146,171; cost
9/30/10: $530,168,045) |
687,661,313 | 512,899,257 | ||||||
Total investments at fair value (cost 12/31/10: $754,964,483; cost 9/30/10:
$592,496,595) |
742,395,335 | 563,821,316 | ||||||
Cash and cash equivalents |
43,020,557 | 76,765,254 | ||||||
Interest and fees receivable |
4,663,901 | 3,813,757 | ||||||
Due from portfolio company |
151,962 | 103,426 | ||||||
Deferred financing costs |
7,026,645 | 5,465,964 | ||||||
Collateral posted to bank and other assets |
1,517,868 | 1,956,013 | ||||||
Total Assets |
$ | 798,776,268 | $ | 651,925,730 | ||||
Liabilities and Net Assets |
||||||||
Liabilities: |
||||||||
Accounts payable, accrued expenses and other liabilities |
$ | 708,382 | $ | 1,322,282 | ||||
Base management fee payable |
3,778,779 | 2,875,802 | ||||||
Incentive fee payable |
3,513,901 | 2,859,139 | ||||||
Due to FSC, Inc. |
1,261,541 | 1,083,038 | ||||||
Interest payable |
1,147,642 | 282,640 | ||||||
Payments received in advance from portfolio companies |
1,146,210 | 1,330,724 | ||||||
Loans payable |
89,000,000 | | ||||||
SBA debentures payable |
123,300,000 | 73,000,000 | ||||||
Total Liabilities |
223,856,455 | 82,753,625 | ||||||
Net Assets: |
||||||||
Common stock, $0.01 par value, 150,000,000 shares authorized, 55,059,057 and
54,550,290 shares issued and outstanding at December 31, 2010 and September
30, 2010 |
550,591 | 545,503 | ||||||
Additional paid-in-capital |
625,519,180 | 619,759,984 | ||||||
Net unrealized depreciation on investments and interest rate swap |
(12,606,190 | ) | (29,448,713 | ) | ||||
Net realized loss on investments |
(46,541,180 | ) | (33,090,961 | ) | ||||
Accumulated undistributed net investment income |
7,997,412 | 11,406,292 | ||||||
Total Net
Assets (equivalent to $10.44 and $10.43 per common share at
December 31, 2010 and September 30, 2010) (Note 12) |
574,919,813 | 569,172,105 | ||||||
Total Liabilities and Net Assets |
$ | 798,776,268 | $ | 651,925,730 |
3
Three months | Three months | |||||||
ended December 31, | ended December 31, | |||||||
2010 | 2009 | |||||||
Interest income: |
||||||||
Control investments |
$ | 969 | $ | 224,746 | ||||
Affiliate investments |
1,162,516 | 2,259,501 | ||||||
Non-control/Non-affiliate investments |
16,489,184 | 7,673,326 | ||||||
Interest on cash and cash equivalents |
9,136 | 195,662 | ||||||
Total interest income |
17,661,805 | 10,353,235 | ||||||
PIK interest income: |
||||||||
Control investments |
33,333 | | ||||||
Affiliate investments |
281,800 | 331,616 | ||||||
Non-control/Non-affiliate investments |
2,828,555 | 1,630,158 | ||||||
Total PIK interest income |
3,143,688 | 1,961,774 | ||||||
Fee income: |
||||||||
Control investments |
126,486 | | ||||||
Affiliate investments |
133,554 | 253,777 | ||||||
Non-control/Non-affiliate investments |
4,267,216 | 661,364 | ||||||
Total fee income |
4,527,256 | 915,141 | ||||||
Dividend and other income: |
||||||||
Control investments |
| | ||||||
Affiliate investments |
| | ||||||
Non-control/Non-affiliate investments |
2,434 | 11,333 | ||||||
Total dividend and other income |
2,434 | 11,333 | ||||||
Total Investment Income |
25,335,183 | 13,241,483 | ||||||
Expenses: |
||||||||
Base management fee |
3,778,779 | 2,267,003 | ||||||
Incentive fee |
3,513,901 | 2,087,264 | ||||||
Professional fees |
690,489 | 301,605 | ||||||
Board of Directors fees |
49,500 | 38,000 | ||||||
Interest expense |
1,938,710 | 91,179 | ||||||
Administrator expense |
354,169 | 251,818 | ||||||
General and administrative expenses |
954,033 | 582,623 | ||||||
Total expenses |
11,279,581 | 5,619,492 | ||||||
Base management fee waived |
| (727,067 | ) | |||||
Net expenses |
11,279,581 | 4,892,425 | ||||||
Net Investment Income |
14,055,602 | 8,349,058 | ||||||
Unrealized appreciation on interest rate swap |
736,390 | | ||||||
Unrealized appreciation (depreciation) on
investments: |
||||||||
Control investments |
8,070,596 | 1,993,222 | ||||||
Affiliate investments |
(1,580,308 | ) | 399,934 | |||||
Non-control/Non-affiliate investments |
9,615,845 | (1,393,862 | ) | |||||
Net unrealized appreciation on investments |
16,106,133 | 999,294 | ||||||
Realized gain (loss) on investments: |
||||||||
Control investments |
(7,765,119 | ) | | |||||
Affiliate investments |
| | ||||||
Non-control/Non-affiliate investments |
(5,685,100 | ) | 106,000 | |||||
Net realized gain (loss) on investments |
(13,450,219 | ) | 106,000 | |||||
Net increase in net assets resulting from operations |
$ | 17,447,906 | $ | 9,454,352 | ||||
Net investment income per common share basic and
diluted |
$ | 0.26 | $ | 0.22 | ||||
Earnings per common share basic and diluted |
$ | 0.32 | $ | 0.25 | ||||
Weighted average common shares basic and diluted |
54,641,164 | 37,880,435 |
4
Three months ended | Three months ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
Operations: |
||||||||
Net investment income |
$ | 14,055,602 | $ | 8,349,058 | ||||
Net unrealized appreciation on investments and interest rate swap |
16,842,523 | 999,294 | ||||||
Net realized gain (loss) on investments |
(13,450,219 | ) | 106,000 | |||||
Net increase in net assets from operations |
17,447,906 | 9,454,352 | ||||||
Stockholder transactions: |
||||||||
Distributions to stockholders from net investment income |
(17,464,482 | ) | (10,227,326 | ) | ||||
Net decrease in net assets from stockholder transactions |
(17,464,482 | ) | (10,227,326 | ) | ||||
Capital share transactions: |
||||||||
Issuance of common stock, net |
4,814,310 | (12,138 | ) | |||||
Issuance of common stock under dividend reinvestment plan |
949,974 | 486,392 | ||||||
Net increase in net assets from capital share transactions |
5,764,284 | 474,254 | ||||||
Total
increase (decrease) in net assets |
5,747,708 | (298,720 | ) | |||||
Net assets at beginning of period |
569,172,105 | 410,556,071 | ||||||
Net assets at end of period |
$ | 574,919,813 | $ | 410,257,351 | ||||
Net asset value per common share |
$ | 10.44 | $ | 10.82 | ||||
Common shares outstanding at end of period |
55,059,057 | 37,923,407 |
5
Three months ended | Three months ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
Cash flows from operating activities: |
||||||||
Net increase in net assets resulting from operations |
$ | 17,447,906 | $ | 9,454,352 | ||||
Adjustments to reconcile net increase in net assets resulting from operations
to net cash used by operating activities: |
||||||||
Net unrealized appreciation on investments and interest rate swap |
(16,842,523 | ) | (999,294 | ) | ||||
Net realized (gains) losses on investments |
13,450,219 | (106,000 | ) | |||||
PIK interest income |
(3,143,688 | ) | (1,961,774 | ) | ||||
Recognition of fee income |
(4,527,256 | ) | (915,141 | ) | ||||
Accretion of original issue discount on investments |
(388,637 | ) | (220,943 | ) | ||||
Amortization of deferred financing costs |
409,095 | | ||||||
Change in operating assets and liabilities: |
||||||||
PIK interest income received in cash |
5,109,022 | 525,194 | ||||||
Fee income received |
8,005,581 | 4,834,926 | ||||||
Increase in interest and fees receivable |
(850,144 | ) | (575,625 | ) | ||||
Increase in due from portfolio company |
(48,536 | ) | (27,269 | ) | ||||
(Increase)
decrease in collateral posted to bank and other assets |
438,145 | (984,419 | ) | |||||
Increase (decrease) in accounts payable, accrued expenses and other liabilities |
122,488 | (448,360 | ) | |||||
Increase (decrease) in base management fee payable |
902,977 | (12,224 | ) | |||||
Increase in incentive fee payable |
654,762 | 143,001 | ||||||
Increase in due to FSC, Inc. |
178,503 | 24,115 | ||||||
Increase in interest payable |
865,002 | 49,513 | ||||||
Increase (decrease) in payments received in advance from portfolio companies |
(184,514 | ) | 58,640 | |||||
Purchase of investments |
(238,577,119 | ) | (144,203,972 | ) | ||||
Proceeds from the sale of investments |
| 106,000 | ||||||
Principal payments received on investments (scheduled repayments and revolver
paydowns) |
7,883,358 | 1,973,601 | ||||||
Principal payments received on investments (payoffs) |
49,720,635 | 3,885,000 | ||||||
Net cash used by operating activities |
(159,374,724 | ) | (129,400,679 | ) | ||||
Cash flows from financing activities: |
||||||||
Dividends paid in cash |
(16,514,508 | ) | (9,740,934 | ) | ||||
Borrowings under SBA debentures payable |
50,300,000 | | ||||||
Borrowings under credit facilities |
126,000,000 | 38,000,000 | ||||||
Repayments of borrowings under credit facilities |
(37,000,000 | ) | | |||||
Deferred financing costs paid |
(1,969,775 | ) | | |||||
Proceeds from the issuance of common stock |
4,992,802 | | ||||||
Offering costs paid |
(178,492 | ) | (281,358 | ) | ||||
Net cash provided by financing activities |
125,630,027 | 27,977,708 | ||||||
Net decrease in cash and cash equivalents |
(33,744,697 | ) | (101,422,971 | ) | ||||
Cash and cash equivalents, beginning of period |
76,765,254 | 113,205,287 | ||||||
Cash and cash equivalents, end of period |
$ | 43,020,557 | $ | 11,782,316 | ||||
Supplemental Information: |
||||||||
Cash paid for interest |
$ | 664,613 | $ | | ||||
Non-cash financing activities: |
||||||||
Issuance of shares of common stock under dividend reinvestment plan |
$ | 949,974 | $ | 486,392 |
6
Portfolio Company/Type of Investment (1)(2)(5) | Industry | Principal (8) | Cost | Fair Value | ||||||||||||
Control Investments (3) |
||||||||||||||||
Lighting By Gregory, LLC (13)(14) |
Housewares & Specialties | |||||||||||||||
First Lien Term Loan A, 9.75% due 2/28/2013 |
$ | 4,055,655 | $ | 3,996,187 | $ | 4,055,655 | ||||||||||
First Lien Bridge Loan, 8% due 10/15/2010 |
155,404 | 150,000 | | |||||||||||||
97.38% membership interest |
410,000 | | ||||||||||||||
4,556,187 | 4,055,655 | |||||||||||||||
Nicos Polymers & Grinding Inc. (15) |
Environmental & facilities services | |||||||||||||||
First Lien Term Loan, 8% due 12/4/2017 |
5,033,333 | 4,957,235 | 5,033,333 | |||||||||||||
First Lien Revolver, 8% due 12/4/2017 |
| | | |||||||||||||
50% Membership Interest in CD Holdco, LLC |
168,086 | | ||||||||||||||
5,125,321 | 5,033,333 | |||||||||||||||
Total Control Investments |
$ | 9,681,508 | $ | 9,088,988 | ||||||||||||
Affiliate Investments (4) |
||||||||||||||||
OCurrance, Inc. |
Data Processing & Outsourced Services | |||||||||||||||
First Lien Term Loan A, 16.875% due 3/21/2012 |
11,073,880 | $ | 10,997,715 | $ | 10,879,458 | |||||||||||
First Lien Term Loan B, 16.875%, due 3/21/2012 |
1,872,993 | 1,851,757 | 1,913,528 | |||||||||||||
1.75% Preferred Membership interest in OCurrance Holding Co.,
LLC |
130,413 | 3,587 | ||||||||||||||
3.3% Membership Interest in OCurrance Holding Co., LLC |
250,000 | | ||||||||||||||
13,229,885 | 12,796,573 | |||||||||||||||
MK Network, LLC (13)(14) |
Education services | |||||||||||||||
First Lien Term Loan A, 13.5% due 6/1/2012 |
9,789,304 | 9,539,188 | 6,928,697 | |||||||||||||
First Lien Term Loan B, 17.5% due 6/1/2012 |
4,950,941 | 4,748,004 | 3,448,666 | |||||||||||||
First Lien Revolver, Prime + 1.5% (10% floor), due 6/1/2010 (10) |
| | | |||||||||||||
11,030 Membership Units (6) |
771,575 | | ||||||||||||||
15,058,767 | 10,377,363 | |||||||||||||||
Caregiver Services, Inc. |
Healthcare services | |||||||||||||||
Second Lien Term Loan A, LIBOR+6.85% (12% floor) due 2/25/2013 |
6,783,839 | 6,492,617 | 6,768,521 | |||||||||||||
Second Lien Term Loan B, 16.5% due 2/25/2013 |
14,808,616 | 14,275,137 | 14,353,376 | |||||||||||||
1,080,399 shares of Series A Preferred Stock |
1,080,398 | 1,349,201 | ||||||||||||||
21,848,152 | 22,471,098 | |||||||||||||||
Total Affiliate Investments |
$ | 50,136,804 | $ | 45,645,034 | ||||||||||||
Non-Control/Non-Affiliate Investments (7) |
||||||||||||||||
CPAC, Inc. |
Household Products | |||||||||||||||
Subordinated Term Loan, 12.5% due 6/1/2012 |
1,098,928 | $ | 1,098,928 | $ | 1,098,928 | |||||||||||
1,098,928 | 1,098,928 | |||||||||||||||
7
Portfolio Company/Type of Investment (1)(2)(5) | Industry | Principal (8) | Cost | Fair Value | ||||||||||||
Repechage Investments Limited |
Restaurants | |||||||||||||||
First Lien Term Loan, 15.5% due 10/16/2011 |
3,584,394 | 3,388,830 | 3,417,458 | |||||||||||||
7,500 shares of Series A Preferred Stock of Elephant & Castle,
Inc. |
750,000 | 438,902 | ||||||||||||||
4,138,830 | 3,856,360 | |||||||||||||||
Traffic Control & Safety Corporation |
Construction and Engineering | |||||||||||||||
Senior Term Loan A, 7.741% due 6/29/2012 |
2,361,779 | 2,243,690 | 2,243,690 | |||||||||||||
Senior Term Loan B, 5.29% due 6/29/2012 |
2,846,473 | 2,704,149 | 2,704,149 | |||||||||||||
Senior Term Loan C, 5.29% due 6/29/2012 |
4,027,956 | 3,826,558 | 3,826,558 | |||||||||||||
Senior Revolver, 5.29% due 6/29/2012 |
5,250,000 | 4,987,501 | 4,987,501 | |||||||||||||
Second Lien Term Loan, 15% due 5/28/2015 (9) |
20,174,355 | 19,942,451 | 19,742,401 | |||||||||||||
Subordinated Loan, 15% due 5/28/2015 |
4,755,534 | 4,755,534 | 4,221,399 | |||||||||||||
24,750 shares of Series B Preferred Stock |
247,500 | | ||||||||||||||
43,494 shares of Series D Preferred Stock (6) |
434,937 | | ||||||||||||||
25,000 shares of Common Stock |
2,500 | | ||||||||||||||
39,144,820 | 37,725,698 | |||||||||||||||
TBA Global, LLC |
Advertising | |||||||||||||||
53,994 Senior Preferred Shares |
215,975 | 215,975 | ||||||||||||||
191,977 Shares A Shares |
191,977 | 179,240 | ||||||||||||||
407,952 | 395,215 | |||||||||||||||
Fitness Edge, LLC |
Leisure facilities | |||||||||||||||
First Lien Term Loan A, LIBOR+5.25% (10% floor), due 8/8/2012 |
1,125,000 | 1,121,180 | 1,125,818 | |||||||||||||
First Lien Term Loan B, 15% due 8/8/2012 |
5,667,603 | 5,619,154 | 5,726,159 | |||||||||||||
1,000 Common Units (6) |
42,908 | 121,545 | ||||||||||||||
6,783,242 | 6,973,522 | |||||||||||||||
Filet of Chicken (9) |
Food Distributors | |||||||||||||||
Second Lien Term Loan, 14.5% due 7/31/2012 |
9,327,820 | 9,108,209 | 9,023,399 | |||||||||||||
9,108,209 | 9,023,399 | |||||||||||||||
Boot Barn (9) |
Apparel, accessories & luxury goods | |||||||||||||||
247.06 shares of Series A Preferred Stock |
247,060 | 71,394 | ||||||||||||||
1,308 shares of Common Stock |
131 | | ||||||||||||||
247,191 | 71,394 | |||||||||||||||
Premier Trailer Leasing, Inc. (9)(13)(14) |
Trucking | |||||||||||||||
Second Lien Term Loan, 16.5% due 10/23/2012 |
18,606,639 | 17,063,645 | 4,597,412 | |||||||||||||
285 shares of Common Stock |
1,140 | | ||||||||||||||
17,064,785 | 4,597,412 | |||||||||||||||
Pacific Press Technologies, Inc. (9) |
||||||||||||||||
Second Lien Term Loan, 14.75% due 1/10/2013 |
Industrial machinery | 10,123,432 | 9,877,279 | 9,917,997 | ||||||||||||
33,463 shares of Common Stock |
344,513 | 739,542 | ||||||||||||||
10,221,792 | 10,657,539 | |||||||||||||||
Rail Acquisition Corp. (9) |
Electronic manufacturing services | |||||||||||||||
First Lien Term Loan, 17% due 9/1/2013 |
16,821,351 | 14,042,454 | 11,680,404 | |||||||||||||
First Lien Revolver, 7.85% due 9/1/2013 |
4,959,135 | 4,959,135 | 4,959,135 | |||||||||||||
19,001,589 | 16,639,539 |
8
Portfolio Company/Type of Investment (1)(2)(5) | Industry | Principal (8) | Cost | Fair Value | ||||||||||||
Western Emulsions, Inc. (9) |
Construction materials | |||||||||||||||
Second Lien Term Loan, 15% due 6/30/2014 |
6,615,232 | 6,477,386 | 6,477,386 | |||||||||||||
6,477,386 | 6,477,386 | |||||||||||||||
Storyteller Theaters Corporation |
Movies & entertainment | |||||||||||||||
1,692 shares of Common Stock |
169 | 61,613 | ||||||||||||||
20,000 shares of Preferred Stock |
200,000 | 200,000 | ||||||||||||||
200,169 | 261,613 | |||||||||||||||
HealthDrive Corporation (9) |
Healthcare services | |||||||||||||||
First Lien Term Loan A, 10% due 7/17/2013 |
6,562,970 | 6,255,358 | 6,485,832 | |||||||||||||
First Lien Term Loan B, 13% due 7/17/2013 |
10,204,760 | 10,104,760 | 10,082,408 | |||||||||||||
First Lien Revolver, 12% due 7/17/2013 |
500,000 | 490,000 | 546,086 | |||||||||||||
16,850,118 | 17,114,326 | |||||||||||||||
idX Corporation |
Distributors | |||||||||||||||
Second Lien Term Loan, 14.5% due 7/1/2014 |
13,658,366 | 13,436,082 | 13,415,216 | |||||||||||||
13,436,082 | 13,415,216 | |||||||||||||||
Cenegenics, LLC |
Healthcare services | |||||||||||||||
First Lien Term Loan, 17% due 10/27/2014 |
20,051,045 | 19,186,297 | 19,569,475 | |||||||||||||
414,419 Common Units (6) |
598,382 | 1,319,149 | ||||||||||||||
19,784,679 | 20,888,624 | |||||||||||||||
IZI Medical Products, Inc. |
Healthcare technology | |||||||||||||||
First Lien Term Loan A, 12% due 3/31/2014 |
4,249,775 | 4,196,179 | 4,232,773 | |||||||||||||
First Lien Term Loan B, 16% due 3/31/2014 |
17,259,468 | 16,743,527 | 17,113,683 | |||||||||||||
First Lien Revolver, 10% due 3/31/2014 (11) |
| (32,500 | ) | | ||||||||||||
453,755 Preferred units of IZI Holdings, LLC (6) |
453,755 | 647,069 | ||||||||||||||
21,360,961 | 21,993,525 | |||||||||||||||
Trans-Trade, Inc. |
Air freight & logistics | |||||||||||||||
First Lien Term Loan, 15.5% due 9/10/2014 |
16,006,996 | 15,710,301 | 15,878,390 | |||||||||||||
First Lien Revolver, 12% due 9/10/2014 |
2,000,000 | 1,890,667 | 1,956,755 | |||||||||||||
17,600,968 | 17,835,145 | |||||||||||||||
Riverlake Equity Partners II, LP |
Multi-sector holdings | |||||||||||||||
1.89% limited partnership interest |
122,105 | 122,105 | ||||||||||||||
122,105 | 122,105 | |||||||||||||||
Riverside Fund IV, LP |
Multi-sector holdings | |||||||||||||||
0.25% limited partnership interest |
321,417 | 321,417 | ||||||||||||||
321,417 | 321,417 | |||||||||||||||
ADAPCO, Inc. |
Fertilizers & agricultural chemicals | |||||||||||||||
First Lien Term Loan A, 10% due 12/17/2014 |
8,500,000 | 8,311,428 | 8,365,910 | |||||||||||||
First Lien Term Loan B, 14% due 12/17/2014 |
14,298,448 | 13,985,575 | 14,002,842 | |||||||||||||
First Lien Term Revolver, 10% due 12/17/2014 |
4,250,000 | 4,026,520 | 4,170,584 | |||||||||||||
26,323,523 | 26,539,336 | |||||||||||||||
Ambath/Rebath Holdings, Inc. |
Home improvement retail | |||||||||||||||
First Lien Term Loan A, LIBOR+7% (10% floor) due 12/30/2014 |
9,250,000 | 9,048,648 | 8,951,281 | |||||||||||||
First Lien Term Loan B, 15% due 12/30/2014 |
22,567,297 | 22,101,997 | 21,922,954 | |||||||||||||
First Lien Term Revolver, LIBOR+6.5% (9.5% floor) due 12/30/2014 |
1,500,000 | 1,436,550 | 1,444,374 | |||||||||||||
32,587,195 | 32,318,609 | |||||||||||||||
9
Portfolio Company/Type of Investment (1)(2)(5) | Industry | Principal (8) | Cost | Fair Value | ||||||||||||
JTC Education, Inc. |
Education services | |||||||||||||||
First Lien Term Loan, LIBOR+9.5% (12.5% floor) due 12/31/2014 |
30,859,375 | 30,093,388 | 30,457,010 | |||||||||||||
First Lien Revolver, LIBOR+9.5% (12.5% floor) due 12/31/2014 (11) |
| (377,222 | ) | | ||||||||||||
29,716,166 | 30,457,010 | |||||||||||||||
Tegra Medical, LLC |
Healthcare equipment | |||||||||||||||
First Lien Term Loan A, LIBOR+7% (10% floor) due 12/31/2014 |
25,480,000 | 25,075,398 | 25,525,452 | |||||||||||||
First Lien Term Loan B, 14% due 12/31/2014 |
22,212,109 | 21,864,318 | 22,164,301 | |||||||||||||
First Lien Revolver, LIBOR+7% (10% floor) due 12/31/2014 (11) |
| (62,667 | ) | | ||||||||||||
46,877,049 | 47,689,753 | |||||||||||||||
Flatout, Inc. |
Food retail | |||||||||||||||
First Lien Term Loan A, 10% due 12/31/2014 |
7,050,000 | 6,888,024 | 6,927,166 | |||||||||||||
First Lien Term Loan B, 15% due 12/31/2014 |
12,863,830 | 12,560,321 | 12,686,564 | |||||||||||||
First Lien Revolver, 10% due 12/31/2014 (11) |
| (35,847 | ) | | ||||||||||||
19,412,498 | 19,613,730 | |||||||||||||||
Psilos Group Partners IV, LP |
Multi-sector holdings | |||||||||||||||
2.52% limited partnership interest (12) |
| | ||||||||||||||
Mansell Group, Inc. |
Advertising | |||||||||||||||
First Lien Term Loan A, LIBOR+7% (10% floor) due 4/30/2015 |
9,937,500 | 9,755,254 | 9,753,678 | |||||||||||||
First Lien Term Loan B, LIBOR+9% (12% floor) due 4/30/2015 |
8,046,018 | 7,898,194 | 7,995,656 | |||||||||||||
First Lien Revolver, LIBOR+6% (9% floor) due 4/30/2015 (11) |
| (34,667 | ) | | ||||||||||||
17,618,781 | 17,749,334 | |||||||||||||||
NDSSI Holdings, Inc. |
Electronic equipment & instruments | |||||||||||||||
First Lien Term Loan, LIBOR+9.75% (12.75% floor) due 4/30/2015 |
30,132,293 | 29,603,069 | 29,284,795 | |||||||||||||
First Lien Revolver, LIBOR+7% (10% floor) due 4/30/2015 |
3,500,000 | 3,415,385 | 3,397,632 | |||||||||||||
33,018,454 | 32,682,427 | |||||||||||||||
Eagle Hospital Physicians, Inc. |
Healthcare services | |||||||||||||||
First Lien Term Loan, LIBOR+8.75% (11.75% floor) due 8/11/2015 |
8,000,000 | 7,801,966 | 7,808,773 | |||||||||||||
First Lien Revolver, LIBOR+5.75% (8.75% floor) due 8/11/2015 |
| (60,076 | ) | | ||||||||||||
7,741,890 | 7,803,773 | |||||||||||||||
Enhanced Recovery Company, LLC |
Diversified support services | |||||||||||||||
First Lien Term Loan A, LIBOR+7% (9% floor) due 8/13/2015 |
15,250,000 | 14,950,346 | 14,892,359 | |||||||||||||
First Lien Term Loan B, LIBOR+10% (13% floor) due 8/13/2015 |
11,043,150 | 10,827,388 | 10,928,166 | |||||||||||||
First Lien Revolver, LIBOR+7% (9% floor) due 8/13/2015 |
| (78,459 | ) | | ||||||||||||
25,699,275 | 25,820,525 | |||||||||||||||
Epic Acquisition, Inc. |
Healthcare services | |||||||||||||||
First Lien Term Loan A, LIBOR+8% (11% floor) due 8/13/2015 |
9,685,000 | 9,459,263 | 9,423,141 | |||||||||||||
First Lien Term Loan B, 15.25% due 8/13/2015 |
17,031,895 | 16,624,539 | 16,680,678 | |||||||||||||
First Lien Revolver, LIBOR+6.5% (9.5% floor) due 8/13/2015 |
800,000 | 728,544 | 779,105 | |||||||||||||
26,812,346 | 26,882,924 | |||||||||||||||
Specialty Bakers LLC |
Food distributors | |||||||||||||||
First Lien Term Loan A, LIBOR+8.5% due 9/15/2015 |
9,000,000 | 8,769,920 | 8,799,561 | |||||||||||||
First Lien Term Loan B, LIBOR+11% (13.5% floor) due 9/15/2015 |
11,000,000 | 10,723,533 | 10,706,353 | |||||||||||||
First Lien Revolver, LIBOR+8.5% due 9/15/2015 |
| (100,533 | ) | | ||||||||||||
19,392,920 | 19,505,914 |
10
Portfolio Company/Type of Investment (1)(2)(5) | Industry | Principal (8) | Cost | Fair Value | ||||||||||||
CRGT, Inc. |
IT consulting & other services | |||||||||||||||
First Lien Term Loan A, LIBOR+7.5% due 10/1/2015 |
29,000,000 | 28,460,094 | 29,000,000 | |||||||||||||
First Lien Term Loan B, 12.5% due 10/1/2015 |
22,000,000 | 21,582,000 | 22,000,000 | |||||||||||||
First Lien Revolver, LIBOR+7.5% due 10/1/2015 |
| (237,500 | ) | | ||||||||||||
49,804,594 | 51,000,000 | |||||||||||||||
Welocalize, Inc. |
Internet software & services | |||||||||||||||
First Lien Term Loan A, LIBOR+8% (10% floor) due 11/19/2015 |
16,400,000 | 16,079,508 | 16,400,000 | |||||||||||||
First Lien Term Loan, LIBOR+9% (12.25% floor) due 11/19/2015 |
21,030,634 | 20,624,634 | 21,030,634 | |||||||||||||
First Lien Revolver, LIBOR+7% (9% floor) due 11/19/2015 |
1,250,000 | 1,134,000 | 1,250,000 | |||||||||||||
2,086,163 Common Units in RPWL Holdings, LLC |
2,086,163 | 2,086,163 | ||||||||||||||
39,924,305 | 40,766,797 | |||||||||||||||
Miche Bag, LLC |
Apparel, accessories & luxury goods | |||||||||||||||
First Lien Term Loan B, LIBOR+9% (12% floor) due 12/7/2013 |
15,500,000 | 15,118,187 | 15,500,000 | |||||||||||||
First Lien Term Loan, LIBOR+10% (16% floor) due 12/7/2015 |
17,034,000 | 14,152,177 | 14,534,000 | |||||||||||||
First Lien Revolver, LIBOR+7% (10% floor) due 12/7/2015 |
| (124,555 | ) | | ||||||||||||
10,371 Preferred Equity units in Miche Holdings, LLC |
1,037,112 | 1,037,112 | ||||||||||||||
146,289 Series D Common Equity units in Miche Holdings, LLC |
1,462,888 | 1,462,888 | ||||||||||||||
31,645,809 | 32,534,000 | |||||||||||||||
Bunker Hill Capital II (QP), L.P. |
Multi-sector holdings | |||||||||||||||
0.50% limited partnership interest (12) |
| | ||||||||||||||
| | |||||||||||||||
Dominion Diagnostics, LLC |
Healthcare services | |||||||||||||||
First Lien Term Loan A, LIBOR+7% (9% floor) due 12/17/2015 |
30,750,000 | 30,140,651 | 30,750,000 | |||||||||||||
First Lien Term Loan, LIBOR+9% (12.5% floor) due 12/17/2015 |
20,008,333 | 19,615,000 | 20,008,333 | |||||||||||||
First Lien Revolver, LIBOR+6.5% (9% floor) due 12/17/2015 |
| (98,083 | ) | | ||||||||||||
49,657,568 | 50,758,333 | |||||||||||||||
Advanced Pain Management |
Healthcare services | |||||||||||||||
First Lien Term Loan, LIBOR+5% (6.75% floor) due 12/22/2015 |
8,200,000 | 8,056,673 | 8,200,000 | |||||||||||||
First Lien Revolver, LIBOR+5% (6.75% floor) due 12/22/2015 |
| (5,900 | ) | | ||||||||||||
8,050,773 | 8,200,000 | |||||||||||||||
DISA, Inc. |
Human resources & employment services | |||||||||||||||
First Lien Term Loan A, LIBOR+7.5% (8.25% floor) due 12/30/2015 |
13,000,000 | 12,727,732 | 13,000,000 | |||||||||||||
First Lien Term Loan B, LIBOR+11.5% (12.5% floor) due 12/30/2015 |
8,300,346 | 8,128,965 | 8,300,346 | |||||||||||||
First Lien Revolver, LIBOR+6% (7% floor) due 12/30/2015 |
| (82,593 | ) | | ||||||||||||
20,774,104 | 21,300,346 | |||||||||||||||
Saddleback Fence and Vinyl Products, Inc. (9) (16) |
Building products | |||||||||||||||
First Lien Term Loan, 8% due 11/30/2013 |
757,516 | 757,516 | 757,516 | |||||||||||||
First Lien Revolver, 8% due 11/30/2011 |
| | | |||||||||||||
757,516 | 757,516 |
11
Portfolio Company/Type of Investment (1)(2)(5) | Industry | Principal (8) | Cost | Fair Value | ||||||||||||
Best Vinyl Fence & Deck, LLC (9) (16) |
Building Products | |||||||||||||||
First Lien Term Loan A, 8% due 11/30/2013 |
2,020,043 | 1,916,192 | 2,020,043 | |||||||||||||
First Lien Term Loan B, 8% due 5/31/2011 |
3,787,580 | 3,787,580 | 3,787,580 | |||||||||||||
First Lien Revolver, 8% due 11/30/2011 |
| | | |||||||||||||
25,641 Shares of Series A Preferred Stock in Vanguard Vinyl, Inc. |
253,846 | | ||||||||||||||
25,641 Shares of Common Stock in Vanguard Vinyl, Inc. |
2,564 | | ||||||||||||||
5,960,182 | 5,807,623 | |||||||||||||||
Total Non-Control/Non-Affiliate Investments |
$ | 695,146,171 | $ | 687,661,313 | ||||||||||||
Total Portfolio Investments |
$ | 754,964,483 | $ | 742,395,335 | ||||||||||||
(1) | All debt investments are income producing unless otherwise noted in (13) or (14). Equity is non-income producing unless otherwise noted. | |
(2) | See Note 3 to the Consolidated Financial Statements for portfolio composition by geographic region. | |
(3) | Control Investments are defined by the Investment Company Act of 1940 (1940 Act) as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation. | |
(4) | Affiliate Investments are defined by the 1940 Act as investments in companies in which the Company owns between 5% and 25% of the voting securities. | |
(5) | Equity ownership may be held in shares or units of companies related to the portfolio companies. | |
(6) | Income producing through payment of dividends or distributions. | |
(7) | Non-Control/Non-Affiliate Investments are defined by the 1940 Act as investments that are neither Control Investments nor Affiliate Investments. | |
(8) | Principal includes accumulated PIK interest and is net of repayments. | |
(9) | Interest rates have been adjusted on certain term loans and revolvers. These rate adjustments are temporary in nature due to financial or payment covenant violations in the original credit agreements, or permanent in nature per loan amendment or waiver documents. The table below summarizes these rate adjustments by portfolio company: |
12
Portfolio Company | Effective date | Cash interest | PIK interest | Reason | ||||
Traffic Control & Safety Corp.
|
May 28, 2010 | - 4.0% on Term Loan | + 1.0% on Term Loan | Per restructuring agreement | ||||
Filet of Chicken
|
October 1, 2010 | + 1.0% on Term Loan | + 1.0% on Term Loan | Tier pricing per waiver agreement | ||||
Premier Trailer Leasing, Inc.
|
August 4, 2009 | + 4.0% on Term Loan | Default interest per credit agreement | |||||
HealthDrive Corporation
|
April 30, 2009 | + 2.0% on Term Loan A | Per waiver agreement |
(10) | Revolving credit line has been suspended and is deemed unlikely to be renewed in the future. | |
(11) | Amounts represent unearned income related to undrawn commitments. | |
(12) | Represents an unfunded commitment to fund a limited partnership interest. | |
(13) | Investment was on cash non-accrual status as of December 31, 2010. | |
(14) | Investment was on PIK non-accrual status as of December 31, 2010. | |
(15) | On October 13, 2010, Nicos Polymers & Grinding, Inc., an existing portfolio company, filed for Chapter 11 bankruptcy as part of a restructuring of that investment. On December 2, 2010, the Company and the major shareholder of Nicos Polymers & Grinding, Inc. closed on a restructuring agreement via an out of court foreclosure process, resulting in a restructured facility and these terms. | |
(16) | On November 4, 2010, the Company held a foreclosure auction of the assets of Vanguard Vinyl, Inc., an existing portfolio company, as part of a loan restructuring. The restructuring broke up Vanguard Vinyl, Inc. into two operating companies. Saddleback Fence and Vinyl Products, Inc., which is located in California, and Best Vinyl Fence & Deck, LLC, which will manage operations in Utah and Hawaii, and resulted in a restructured facility and these terms. |
13
Portfolio Company/Type | ||||||||||||||
of Investment(1)(2)(5) | Industry | Principal(8) | Cost | Fair Value | ||||||||||
Control Investments(3) |
||||||||||||||
Lighting By Gregory, LLC(13)(14)
|
Housewares & Specialties |
|||||||||||||
First Lien Term Loan A, 9.75% due 2/28/2013
|
$ | 5,419,495 | $ | 4,728,589 | $ | 1,503,716 | ||||||||
First Lien Term Loan B, 14.5% due 2/28/2013
|
8,575,783 | 6,906,440 | 2,196,284 | |||||||||||
First Lien Bridge Loan, 8% due 10/15/2010
|
152,312 | 150,000 | | |||||||||||
97.38% membership interest
|
410,000 | | ||||||||||||
12,195,029 | 3,700,000 | |||||||||||||
Total Control Investments
|
$ | 12,195,029 | $ | 3,700,000 | ||||||||||
Affiliate Investments(4) |
||||||||||||||
OCurrance, Inc.
|
Data Processing & Outsourced Services |
|||||||||||||
First Lien Term Loan A, 16.875% due 3/21/2012
|
10,961,448 | $ | 10,869,262 | $ | 10,805,775 | |||||||||
First Lien Term Loan B, 16.875%, due 3/21/2012
|
1,853,976 | 1,828,494 | 1,896,645 | |||||||||||
1.75% Preferred Membership interest in OCurrance Holding Co., LLC
|
130,413 | 38,592 | ||||||||||||
3.3% Membership Interest in OCurrance Holding Co., LLC
|
250,000 | | ||||||||||||
13,078,169 | 12,741,012 | |||||||||||||
MK Network, LLC(13)(14)
|
Education services | |||||||||||||
First Lien Term Loan A, 13.5% due 6/1/2012
|
9,740,358 | 9,539,188 | 7,913,140 | |||||||||||
First Lien Term Loan B, 17.5% due 6/1/2012
|
4,926,187 | 4,748,004 | 3,938,660 | |||||||||||
First Lien Revolver, Prime + 1.5% (10% floor), due 6/1/2010(10)
|
| | | |||||||||||
11,030 Membership Units(6)
|
771,575 | | ||||||||||||
15,058,767 | 11,851,800 | |||||||||||||
Caregiver Services, Inc.
|
Healthcare services | |||||||||||||
Second Lien Term Loan A, LIBOR+6.85% (12% floor) due 2/25/2013
|
7,141,190 | 6,813,431 | 7,113,622 | |||||||||||
Second Lien Term Loan B, 16.5% due 2/25/2013
|
14,692,015 | 14,102,756 | 14,179,626 | |||||||||||
1,080,399 shares of Series A Preferred Stock
|
1,080,398 | 1,335,999 | ||||||||||||
21,996,585 | 22,629,247 | |||||||||||||
Total Affiliate Investments
|
$ | 50,133,521 | $ | 47,222,059 | ||||||||||
Non-Control/Non-Affiliate Investments(7) |
||||||||||||||
CPAC, Inc.
|
Household Products | |||||||||||||
Subordinated Term Loan, 12.5% due 6/1/2012
|
1,064,910 | $ | 1,064,910 | $ | 1,064,910 | |||||||||
1,064,910 | 1,064,910 | |||||||||||||
Vanguard Vinyl, Inc.(9)(13)(14)
|
Building Products | |||||||||||||
First Lien Term Loan, 12% due 3/30/2013
|
7,000,000 | 6,827,373 | 5,812,199 | |||||||||||
First Lien Revolver, LIBOR+7% (10% floor) due 3/30/2013
|
1,250,000 | 1,207,895 | 1,029,268 | |||||||||||
25,641 Shares of Series A Preferred Stock
|
253,846 | | ||||||||||||
25,641 Shares of Common Stock
|
2,564 | | ||||||||||||
8,291,678 | 6,841,467 | |||||||||||||
Repechage Investments Limited
|
Restaurants | |||||||||||||
First Lien Term Loan, 15.5% due 10/16/2011
|
3,708,971 | 3,475,906 | 3,486,342 | |||||||||||
7,500 shares of Series A Preferred Stock of Elephant & Castle, Inc.
|
750,000 | 354,114 | ||||||||||||
4,225,906 | 3,840,456 |
14
Portfolio Company/Type | ||||||||||||||
of Investment(1)(2)(5) | Industry | Principal(8) | Cost | Fair Value | ||||||||||
Traffic Control & Safety Corporation(9)
|
Construction and Engineering |
|||||||||||||
Second Lien Term Loan, 15% due 5/28/2015
|
19,969,524 | 19,724,493 | 19,440,090 | |||||||||||
Subordinated Loan, 15% due 5/28/2015
|
4,577,800 | 4,577,800 | 4,404,746 | |||||||||||
24,750 shares of Series B Preferred Stock
|
247,500 | | ||||||||||||
43,494 shares of Series D Preferred Stock(6)
|
434,937 | | ||||||||||||
25,000 shares of Common Stock
|
2,500 | | ||||||||||||
24,987,230 | 23,844,836 | |||||||||||||
Nicos Polymers & Grinding Inc.(9)(13)(14)
|
Environmental & facilities services |
|||||||||||||
First Lien Term Loan A, LIBOR+5% (10% floor), due 7/17/2012
|
3,154,876 | 3,040,465 | 1,782,181 | |||||||||||
First Lien Term Loan B, 13.5% due 7/17/2012
|
6,180,185 | 5,713,125 | 3,347,672 | |||||||||||
3.32% Interest in Crownbrook Acquisition I LLC
|
168,086 | | ||||||||||||
8,921,676 | 5,129,853 | |||||||||||||
TBA Global, LLC(9)
|
Advertising | |||||||||||||
Second Lien Term Loan B, 14.5% due 8/3/2012
|
10,840,081 | 10,594,939 | 10,625,867 | |||||||||||
53,994 Senior Preferred Shares
|
215,975 | 215,975 | ||||||||||||
191,977 Shares A Shares
|
191,977 | 179,240 | ||||||||||||
11,002,891 | 11,021,082 | |||||||||||||
Fitness Edge, LLC
|
Leisure Facilities | |||||||||||||
First Lien Term Loan A, LIBOR+5.25% (10% floor), due 8/8/2012
|
1,250,000 | 1,245,136 | 1,247,418 | |||||||||||
First Lien Term Loan B, 15% due 8/8/2012
|
5,631,547 | 5,575,477 | 5,674,493 | |||||||||||
1,000 Common Units (6)
|
42,908 | 118,132 | ||||||||||||
6,863,521 | 7,040,043 | |||||||||||||
Filet of Chicken(9)
|
Food Distributors | |||||||||||||
Second Lien Term Loan, 14.5% due 7/31/2012
|
9,316,518 | 9,063,155 | 8,964,766 | |||||||||||
9,063,155 | 8,964,766 | |||||||||||||
Boot Barn(9)
|
Apparel,
accessories & luxury goods |
|||||||||||||
Second Lien Term Loan, 14.5% due 10/3/2013
|
23,545,479 | 23,288,566 | 23,477,539 | |||||||||||
247.06 shares of Series A Preferred Stock
|
247,060 | 71,394 | ||||||||||||
1,308 shares of Common Stock
|
131 | | ||||||||||||
23,535,757 | 23,548,933 | |||||||||||||
Premier Trailer Leasing, Inc.(9)(13)(14)
|
Trucking | |||||||||||||
Second Lien Term Loan, 16.5% due 10/23/2012
|
18,452,952 | 17,063,645 | 4,597,412 | |||||||||||
285 shares of Common Stock
|
1,140 | | ||||||||||||
17,064,785 | 4,597,412 | |||||||||||||
Pacific Press Technologies, Inc.(9) |
||||||||||||||
Second Lien Term Loan, 14.75% due 7/10/2013
|
Industrial machinery | 10,071,866 | 9,798,901 | 9,829,869 | ||||||||||
33,786 shares of Common Stock
|
344,513 | 402,894 | ||||||||||||
10,143,414 | 10,232,763 | |||||||||||||
Goldco, LLC |
||||||||||||||
Second Lien Term Loan, 17.5% due 1/31/2013
|
Restaurants | 8,355,688 | 8,259,479 | 8,259,479 | ||||||||||
8,259,479 | 8,259,479 | |||||||||||||
Rail Acquisition Corp.(9)
|
Electronic
manufacturing services |
|||||||||||||
First Lien Term Loan, 17% due 9/1/2013
|
16,315,866 | 13,536,969 | 12,854,425 | |||||||||||
First Lien Revolver, 7.85% due 9/1/2013
|
5,201,103 | 5,201,103 | 5,201,103 | |||||||||||
18,738,072 | 18,055,528 |
15
Portfolio Company/Type | ||||||||||||||
of Investment(1)(2)(5) | Industry | Principal(8) | Cost | Fair Value | ||||||||||
Western Emulsions, Inc.(9)
|
Construction materials | |||||||||||||
Second Lien Term Loan, 15% due 6/30/2014
|
17,864,713 | 17,475,899 | 17,039,751 | |||||||||||
17,475,899 | 17,039,751 | |||||||||||||
Storyteller Theaters Corporation
|
Movies & entertainment | |||||||||||||
1,692 shares of Common Stock
|
169 | 61,613 | ||||||||||||
20,000 shares of Preferred Stock
|
200,000 | 200,000 | ||||||||||||
200,169 | 261,613 | |||||||||||||
HealthDrive Corporation(9)
|
Healthcare services | |||||||||||||
First Lien Term Loan A, 10% due 7/17/2013
|
6,662,970 | 6,324,339 | 6,488,990 | |||||||||||
First Lien Term Loan B, 13% due 7/17/2013
|
10,178,726 | 10,068,726 | 9,962,414 | |||||||||||
First Lien Revolver, 12% due 7/17/2013
|
500,000 | 489,000 | 508,967 | |||||||||||
16,882,065 | 16,960,371 | |||||||||||||
idX Corporation
|
Distributors | |||||||||||||
Second Lien Term Loan, 14.5% due 7/1/2014
|
13,588,794 | 13,350,633 | 13,258,317 | |||||||||||
13,350,633 | 13,258,317 | |||||||||||||
Cenegenics, LLC
|
Healthcare services | |||||||||||||
First Lien Term Loan, 17% due 10/27/2014
|
20,172,004 | 19,257,215 | 19,544,864 | |||||||||||
414,419 Common Units(6)
|
598,382 | 1,417,886 | ||||||||||||
19,855,597 | 20,962,750 | |||||||||||||
IZI Medical Products, Inc.
|
Healthcare technology | |||||||||||||
First Lien Term Loan A, 12% due 3/31/2014
|
4,449,775 | 4,387,947 | 4,406,684 | |||||||||||
First Lien Term Loan B, 16% due 3/31/2014
|
17,258,033 | 16,702,405 | 17,092,868 | |||||||||||
First Lien Revolver, 10% due 3/31/2014(11)
|
| (35,000 | ) | (35,000 | ) | |||||||||
453,755 Preferred units of IZI Holdings, LLC (6)
|
453,755 | 676,061 | ||||||||||||
21,509,107 | 22,140,613 | |||||||||||||
Trans-Trade, Inc.
|
Air freight & logistics | |||||||||||||
First Lien Term Loan, 15.5% due 9/10/2014
|
12,751,463 | 12,536,099 | 12,549,159 | |||||||||||
First Lien Revolver, 12% due 9/10/2014
|
1,500,000 | 1,468,667 | 1,491,373 | |||||||||||
14,004,766 | 14,040,532 | |||||||||||||
Riverlake Equity Partners II, LP
|
Multi-sector holdings | |||||||||||||
1.87% limited partnership interest
|
33,640 | 33,640 | ||||||||||||
33,640 | 33,640 | |||||||||||||
Riverside Fund IV, LP
|
Multi-sector holdings | |||||||||||||
0.33% limited partnership interest
|
135,825 | 135,825 | ||||||||||||
135,825 | 135,825 | |||||||||||||
ADAPCO, Inc.
|
Fertilizers
& agricultural chemicals |
|||||||||||||
First Lien Term Loan A, 10% due 12/17/2014
|
9,000,000 | 8,789,498 | 8,806,763 | |||||||||||
First Lien Term Loan B, 14% due 12/17/2014
|
14,225,615 | 13,892,772 | 13,897,677 | |||||||||||
First Lien Term Revolver, 10% due 12/17/2014
|
4,250,000 | 4,012,255 | 4,107,420 | |||||||||||
26,694,525 | 26,811,860 |
16
Portfolio Company/Type | ||||||||||||||
of Investment(1)(2)(5) | Industry | Principal(8) | Cost | Fair Value | ||||||||||
Ambath/Rebath Holdings, Inc.
|
Home
improvement retail |
|||||||||||||
First Lien Term Loan A, LIBOR+7% (10% floor) due 12/30/2014
|
9,500,000 | 9,277,900 | 9,127,886 | |||||||||||
First Lien Term Loan B, 15% due 12/30/2014
|
22,423,729 | 21,920,479 | 21,913,276 | |||||||||||
First Lien Term Revolver, LIBOR+6.5% (9.5% floor) due 12/30/2014
|
1,500,000 | 1,432,500 | 1,442,696 | |||||||||||
32,630,879 | 32,483,858 | |||||||||||||
JTC Education, Inc.
|
Education services | |||||||||||||
First Lien Term Loan, LIBOR+9.5% (12.5% floor) due 12/31/2014
|
31,054,688 | 30,243,946 | 30,660,049 | |||||||||||
First Lien Revolver, LIBOR+9.5% (12.5% floor) due 12/31/2014(11)
|
| (401,111 | ) | (401,111 | ) | |||||||||
29,842,835 | 30,258,938 | |||||||||||||
Tegra Medical, LLC
|
Healthcare equipment | |||||||||||||
First Lien Term Loan A, LIBOR+7% (10% floor) due 12/31/2014
|
26,320,000 | 25,877,206 | 26,250,475 | |||||||||||
First Lien Term Loan B, 14% due 12/31/2014
|
22,098,966 | 21,729,057 | 22,114,113 | |||||||||||
First Lien Revolver, LIBOR+7% (10% floor) due 12/31/2014(11)
|
| (66,667 | ) | (66,667 | ) | |||||||||
47,539,596 | 48,297,921 | |||||||||||||
Flatout, Inc.
|
Food retail | |||||||||||||
First Lien Term Loan A, 10% due 12/31/2014
|
7,300,000 | 7,120,671 | 7,144,136 | |||||||||||
First Lien Term Loan B, 15% due 12/31/2014
|
12,862,760 | 12,539,879 | 12,644,316 | |||||||||||
First Lien Revolver, 10% due 12/31/2014(11)
|
| (38,136 | ) | (38,136 | ) | |||||||||
19,622,414 | 19,750,316 | |||||||||||||
Psilos Group Partners IV, LP
|
Multi-sector holdings | |||||||||||||
2.53% limited partnership interest(12)
|
| | ||||||||||||
| | |||||||||||||
Mansell Group, Inc.
|
Advertising | |||||||||||||
First Lien Term Loan A, LIBOR+7% (10% floor) due 4/30/2015
|
5,000,000 | 4,909,720 | 4,915,885 | |||||||||||
First Lien Term Loan B, LIBOR+9% (13.5% floor) due 4/30/2015
|
4,025,733 | 3,952,399 | 3,946,765 | |||||||||||
First Lien Revolver, LIBOR+6% (9% floor) due 4/30/2015(11)
|
| (36,667 | ) | (36,667 | ) | |||||||||
8,825,452 | 8,825,983 | |||||||||||||
NDSSI Holdings, Inc.
|
Electronic equipment & instruments |
|||||||||||||
First Lien Term Loan, LIBOR+9.75% (13.75% floor) due 9/10/2014
|
30,245,558 | 29,684,880 | 29,409,043 | |||||||||||
First Lien Revolver, LIBOR+7% (10% floor) due 9/10/2014
|
3,500,000 | 3,409,615 | 3,478,724 | |||||||||||
33,094,495 | 32,887,767 | |||||||||||||
Eagle Hospital Physicians, Inc.
|
Healthcare services | |||||||||||||
First Lien Term Loan, LIBOR+8.75% (11.75% floor) due 8/11/2015
|
8,000,000 | 7,783,892 | 7,783,892 | |||||||||||
First Lien Revolver, LIBOR+5.75% (8.75% floor) due 8/11/2015
|
| (64,394 | ) | (64,394 | ) | |||||||||
7,719,498 | 7,719,498 | |||||||||||||
Enhanced Recovery Company, LLC
|
Diversified
support services |
|||||||||||||
First Lien Term Loan A, LIBOR+7% (9% floor) due 8/13/2015
|
15,500,000 | 15,171,867 | 15,171,867 | |||||||||||
First Lien Term Loan B, LIBOR+10% (13% floor) due 8/13/2015
|
11,014,977 | 10,782,174 | 10,782,174 | |||||||||||
First Lien Revolver, LIBOR+7% (9% floor) due 8/13/2015
|
376,852 | 292,196 | 292,196 | |||||||||||
26,246,237 | 26,246,237 |
17
Portfolio Company/Type | ||||||||||||||
of Investment(1)(2)(5) | Industry | Principal(8) | Cost | Fair Value | ||||||||||
Epic Acquisition, Inc.
|
Healthcare services | |||||||||||||
First Lien Term Loan A, LIBOR+8% (11% floor) due 8/13/2015
|
7,750,000 | 7,554,728 | 7,554,728 | |||||||||||
First Lien Term Loan B, 15.25% due 8/13/2015
|
13,555,178 | 13,211,532 | 13,211,532 | |||||||||||
First Lien Revolver, LIBOR+6.5% (9.5% floor) due 8/13/2015
|
300,000 | 223,634 | 223,634 | |||||||||||
20,989,894 | 20,989,894 | |||||||||||||
Specialty Bakers LLC
|
Food distributors | |||||||||||||
First Lien Term Loan A, LIBOR+8.5% due 9/15/2015
|
9,000,000 | 8,755,670 | 8,755,670 | |||||||||||
First Lien Term Loan B, LIBOR+11% (13.5% floor) due 9/15/2015
|
11,000,000 | 10,704,008 | 10,704,008 | |||||||||||
First Lien Revolver, LIBOR+8.5% due 9/15/2015
|
2,000,000 | 1,892,367 | 1,892,367 | |||||||||||
21,352,045 | 21,352,045 | |||||||||||||
Total Non-Control/Non-Affiliate Investments
|
$ | 530,168,045 | $ | 512,899,257 | ||||||||||
Total Portfolio Investments
|
$ | 592,496,595 | $ | 563,821,316 | ||||||||||
(1) | All debt investments are income producing unless otherwise noted in (13) or (14). Equity is non-income producing unless otherwise noted. | |
(2) | See Note 3 to the Consolidated Financial Statements for portfolio composition by geographic region. | |
(3) | Control Investments are defined by the Investment Company Act of 1940 (1940 Act) as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation. | |
(4) | Affiliate Investments are defined by the 1940 Act as investments in companies in which the Company owns between 5% and 25% of the voting securities. | |
(5) | Equity ownership may be held in shares or units of companies related to the portfolio companies. | |
(6) | Income producing through payment of dividends or distributions. | |
(7) | Non-Control/Non-Affiliate Investments are defined by the 1940 Act as investments that are neither Control Investments nor Affiliate Investments. | |
(8) | Principal includes accumulated PIK interest and is net of repayments. | |
(9) | Interest rates have been adjusted on certain term loans and revolvers. These rate adjustments are temporary in nature due to financial or payment covenant violations in the original credit agreements, or permanent in nature per loan amendment or waiver documents. The table below summarizes these rate adjustments by portfolio company: |
18
Portfolio Company | Effective date | Cash interest | PIK interest | Reason | ||||
Nicos Polymers &
Grinding, Inc.
|
February 10, 2008 | + 2.0% on Term Loan A & B | Per waiver agreement | |||||
TBA Global, LLC
|
February 15, 2008 | + 2.0% on Term Loan B | Per waiver agreement | |||||
Vanguard Vinyl, Inc.
|
April 1, 2008 | + 0.5% on Term Loan | Per loan amendment | |||||
Filet of Chicken
|
January 1, 2009 | + 1.0% on Term Loan | Tier pricing per waiver agreement | |||||
Boot Barn
|
January 1, 2009 | + 1.0% on Term Loan | + 2.5% on Term Loan | Tier pricing per waiver agreement | ||||
HealthDrive Corporation
|
April 30, 2009 | + 2.0% on Term Loan A | Per waiver agreement | |||||
Premier Trailer Leasing, Inc.
|
August 4, 2009 | + 4.0% on Term Loan | Default interest per credit agreement | |||||
Rail Acquisition Corp.
|
May 1, 2010 | - 4.5% on Term Loan | - 0.5% on Term Loan | Per restructuring agreement | ||||
Traffic Control & Safety Corp.
|
May 28, 2010 | - 4.0% on Term Loan | + 1.0% on Term Loan | Per restructuring agreement | ||||
Pacific Press Technologies,
Inc.
|
July 1, 2010 | - 2.0% on Term Loan | - 0.75% on Term Loan | Per waiver agreement | ||||
Western Emulsions, Inc.
|
September 30, 2010 | + 3.0% on Term Loan | Per loan agreement |
(10) | Revolving credit line has been suspended and is deemed unlikely to be renewed in the future. | |
(11) | Amounts represent unearned income related to undrawn commitments. | |
(12) | Represents an unfunded commitment to fund a limited partnership interest. | |
(13) | Investment was on cash non-accrual status as of September 30, 2010. | |
(14) | Investment was on PIK non-accrual status as of September 30, 2010. |
19
Offering | ||||||||||||||||
Date | Transaction | Shares | price | Gross proceeds | ||||||||||||
June 17, 2008 | Initial public offering |
10,000,000 | $ | 14.12 | $141.2 million | |||||||||||
July 21, 2009 | Follow-on public
offering (including
underwriters exercise
of over-allotment
option) |
9,487,500 | $ | 9.25 | $87.8 million | |||||||||||
September 25, 2009 | Follow-on public
offering (including
underwriters exercise
of over-allotment
option) |
5,520,000 | $ | 10.50 | $58.0 million | |||||||||||
January 27, 2010 | Follow-on public offering |
7,000,000 | $ | 11.20 | $78.4 million | |||||||||||
February 25, 2010 | Underwriters exercise
of over-allotment option |
300,500 | $ | 11.20 | $3.4 million | |||||||||||
June 21, 2010 | Follow-on public
offering (including
underwriters exercise
of over-allotment
option) |
9,200,000 | $ | 11.50 | $105.8 million | |||||||||||
December 2010 | At-the-Market offering |
429,110 | $ | 11.87 | (1) | $5.1 million |
20
21
22
| Level 1 Unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. | ||
| Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities. | ||
| Level 3 Unobservable inputs that reflect managements best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. |
| The quarterly valuation process begins with each portfolio company or investment being initially valued by the deal team within the Investment Adviser responsible for the portfolio investment; |
23
| Preliminary valuations are then reviewed and discussed with the principals of the Investment Adviser; | ||
| Separately, independent valuation firms engaged by the Board of Directors prepare preliminary valuations on a selected basis and submit the reports to the Company; | ||
| The deal team compares and contrasts its preliminary valuations to the preliminary valuations of the independent valuation firms; | ||
| The deal team prepares a valuation report for the Valuation Committee of the Board of Directors; | ||
| The Valuation Committee of the Board of Directors is apprised of the preliminary valuations of the independent valuation firms; | ||
| The Valuation Committee of the Board of Directors reviews the preliminary valuations, and the deal team responds and supplements the preliminary valuations to reflect any comments provided by the Valuation Committee; | ||
| The Valuation Committee of the Board of Directors makes a recommendation to the Board of Directors; and | ||
| The Board of Directors discusses valuations and determines the fair value of each investment in the Companys portfolio in good faith. |
24
25
26
December 31, 2010 | September 30, 2010 | |||||||||||||||
Fair Value | % of Portfolio | Fair Value | % of Portfolio | |||||||||||||
Fixed rate debt securities |
$ | 366,003,445 | 50.00 | % | $ | 375,584,242 | 67.24 | % | ||||||||
Floating rate debt securities |
366,014,988 | 50.00 | % | 182,995,709 | 32.76 | % | ||||||||||
Total |
$ | 732,018,433 | 100.00 | % | $ | 558,579,951 | 100.00 | % | ||||||||
December 31, 2010 | September 30, 2010 | |||||||||||||||
Cost | Fair Value | Cost | Fair Value | |||||||||||||
Investments in debt securities |
$ | 743,136,969 | $ | 732,018,433 | $ | 585,529,301 | $ | 558,579,951 | ||||||||
Investments in equity securities |
11,827,514 | 10,376,902 | 6,967,294 | 5,241,365 | ||||||||||||
Total |
$ | 754,964,483 | $ | 742,395,335 | $ | 592,496,595 | $ | 563,821,316 | ||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Cash equivalents |
$ | | $ | | $ | | $ | | ||||||||
Investments in debt securities (first lien) |
| | 642,402,398 | 642,402,398 | ||||||||||||
Investments in debt securities (second lien) |
| | 85,394,636 | 85,394,636 | ||||||||||||
Investments in debt securities (subordinated) |
| | 4,221,399 | 4,221,399 | ||||||||||||
Investments in equity securities (preferred) |
| | 3,963,240 | 3,963,240 | ||||||||||||
Investments in equity securities (common) |
| | 6,413,662 | 6,413,662 | ||||||||||||
Total investments at fair value |
$ | | $ | | $ | 742,395,335 | $ | 742,395,335 | ||||||||
Interest rate swap |
| 37,045 | | 37,045 | ||||||||||||
Total liabilities at fair value |
$ | | $ | 37,045 | $ | | $ | 37,045 | ||||||||
27
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Cash equivalents |
$ | | $ | | $ | | $ | | ||||||||
Investments in debt securities (first lien) |
| | 416,323,957 | 416,323,957 | ||||||||||||
Investments in debt securities (second lien) |
| | 137,851,248 | 137,851,248 | ||||||||||||
Investments in debt securities (subordinated) |
| | 4,404,746 | 4,404,746 | ||||||||||||
Investments in equity securities (preferred) |
| | 2,892,135 | 2,892,135 | ||||||||||||
Investments in equity securities (common) |
| | 2,349,230 | 2,349,230 | ||||||||||||
Total investments at fair value |
$ | | $ | | $ | 563,821,316 | $ | 563,821,316 | ||||||||
Interest rate swap |
| 773,435 | | 773,435 | ||||||||||||
Total liabilities at fair value |
$ | | $ | 773,435 | $ | | $ | 773,435 | ||||||||
First | Second | Subordinated | Preferred | Common | ||||||||||||||||||||
Lien Debt | Lien Debt | Debt | Equity | Equity | Total | |||||||||||||||||||
Fair value as
of September 30,
2010 |
$ | 416,323,957 | $ | 137,851,248 | $ | 4,404,746 | $ | 2,892,135 | $ | 2,349,230 | $ | 563,821,316 | ||||||||||||
Purchases and other
increases |
231,619,326 | 1,973,839 | 177,734 | 1,037,112 | 3,823,108 | 238,631,119 | ||||||||||||||||||
Redemptions,
repayments and
other decreases |
(7,910,103 | ) | (54,802,911 | ) | | | | (62,713,014 | ) | |||||||||||||||
Net realized losses |
(13,450,219 | ) | | | | | (13,450,219 | ) | ||||||||||||||||
Net unrealized
appreciation
(depreciation) |
15,819,437 | 372,460 | (361,081 | ) | 33,993 | 241,324 | 16,106,133 | |||||||||||||||||
Transfers into (out
of) level 3 |
| | | | | | ||||||||||||||||||
Fair value as of
December 31, 2010 |
$ | 642,402,398 | $ | 85,394,636 | $ | 4,221,399 | $ | 3,963,240 | $ | 6,413,662 | $ | 742,395,335 | ||||||||||||
Net
unrealized
appreciation
(depreciation)
relating to Level 3
assets still held
at December 31,
2010 and reported
within net
unrealized
appreciation
(depreciation) on
investments in the
Consolidated
Statement of
Operations for the
three months ended
December 31, 2010 |
$ | 5,559,340 | $ | 592,361 | $ | (361,081 | ) | $ | 33,993 | $ | 241,324 | $ | 6,065,937 |
28
First | Second | Subordinated | Preferred | Common | ||||||||||||||||||||
Lien Debt | Lien Debt | Debt | Equity | Equity | Total | |||||||||||||||||||
Fair value as
of September 30,
2009 |
$ | 142,016,942 | $ | 153,904,458 | $ | | $ | 2,889,471 | $ | 800,266 | $ | 299,611,137 | ||||||||||||
Purchases and other
increases |
138,819,323 | 3,387,609 | | | 153,972 | 142,360,904 | ||||||||||||||||||
Redemptions,
repayments and
other decreases |
(1,711,417 | ) | (4,672,378 | ) | | | | (6,383,795 | ) | |||||||||||||||
Net realized losses |
| 106,000 | | | | 106,000 | ||||||||||||||||||
Net unrealized
appreciation
(depreciation) |
1,643,654 | (470,920 | ) | | (227,648 | ) | 54,208 | 999,294 | ||||||||||||||||
Transfers into (out
of) level 3 |
| | | | | | ||||||||||||||||||
Fair value as of
December 31, 2009 |
$ | 280,768,502 | $ | 152,254,769 | $ | | $ | 2,661,823 | $ | 1,008,446 | $ | 436,693,540 | ||||||||||||
Net
unrealized
appreciation
(depreciation)
relating to Level 3
assets still held
at December 31,
2009 and reported
within net
unrealized
appreciation
(depreciation) on
investments in the
Consolidated
Statement of
Operations for the
three months ended
December 31, 2009 |
$ | 1,643,654 | $ | (712,563 | ) | $ | | $ | (227,648 | ) | $ | 54,208 | $ | 757,651 |
29
Debt | Equity | Total | ||||||||||||||
Fair value as of September 30, 2010 |
$ | 558,579,951 | $ | 5,241,365 | $ | 563,821,316 | ||||||||||
New investments |
233,716,898 | 4,860,221 | 238,577,119 | |||||||||||||
Redemptions/ repayments |
(60,794,114 | ) | | (60,794,114 | ) | |||||||||||
Net accrual of PIK interest income |
(1,965,334 | ) | | (1,965,334 | ) | |||||||||||
Accretion of original issue discount |
388,637 | | 388,637 | |||||||||||||
Net change in unearned income |
(3,478,325 | ) | | (3,478,325 | ) | |||||||||||
Net unrealized appreciation (depreciation) |
15,830,817 | 275,316 | 16,106,133 | |||||||||||||
Net changes from unrealized to realized |
(10,260,097 | ) | | (10,260,097 | ) | |||||||||||
Fair value as of December 31, 2010 |
$ | 732,018,433 | $ | 10,376,902 | $ | 742,395,335 | ||||||||||
30
December 31, 2010 | September 30, 2010 | |||||||
HealthDrive Corporation |
$ | 1,500,000 | $ | 1,500,000 | ||||
IZI Medical Products, Inc. |
2,500,000 | 2,500,000 | ||||||
Trans-Trade, Inc. |
4,000,000 | 500,000 | ||||||
Riverlake Equity Partners II, LP (limited partnership interest) |
877,895 | 966,360 | ||||||
Riverside Fund IV, LP (limited partnership interest) |
678,583 | 864,175 | ||||||
ADAPCO, Inc. |
5,750,000 | 5,750,000 | ||||||
AmBath/ReBath Holdings, Inc. |
1,500,000 | 1,500,000 | ||||||
JTC Education, Inc. |
14,000,000 | 9,062,453 | ||||||
Tegra Medical, LLC |
4,000,000 | 4,000,000 | ||||||
Vanguard Vinyl, Inc. |
| 1,250,000 | ||||||
Flatout, Inc. |
1,500,000 | 1,500,000 | ||||||
Psilos Group Partners IV, LP (limited partnership interest) |
1,000,000 | 1,000,000 | ||||||
Mansell Group, Inc. |
2,000,000 | 2,000,000 | ||||||
NDSSI Holdings, Inc. |
1,500,000 | 1,500,000 | ||||||
Eagle Hospital Physicians, Inc. |
2,500,000 | 2,500,000 | ||||||
Enhanced Recovery Company, LLC |
4,000,000 | 3,623,148 | ||||||
Epic Acquisition, Inc. |
2,200,000 | 2,700,000 | ||||||
Specialty Bakers, LLC |
4,000,000 | 2,000,000 | ||||||
Rail Acquisition Corp. |
5,040,865 | 4,798,897 | ||||||
Bunker Hill Capital II (QP), L.P. (limited partnership interest) |
1,000,000 | | ||||||
Nicos Polymers & Grinding Inc. |
500,000 | | ||||||
CRGT, Inc. |
12,500,000 | | ||||||
Welocalize, Inc. |
4,750,000 | | ||||||
Miche Bag, LLC |
5,000,000 | | ||||||
Dominion Diagnostics, LLC |
5,000,000 | | ||||||
Advanced Pain Management |
400,000 | | ||||||
DISA, Inc. |
4,000,000 | | ||||||
Best Vinyl Fence & Deck, LLC |
1,000,000 | | ||||||
Saddleback Fence and Vinyl Products, Inc. |
400,000 | | ||||||
Traffic Control & Safety Corporation |
2,250,000 | | ||||||
Total |
$ | 95,347,343 | $ | 49,515,033 | ||||
December 31, 2010 | September 30, 2010 | |||||||||||||||
Cost: |
||||||||||||||||
First lien debt |
$ | 640,609,701 | 84.85 | % | $ | 430,200,694 | 72.61 | % | ||||||||
Second lien debt |
96,672,806 | 12.80 | % | 150,600,807 | 25.42 | % | ||||||||||
Subordinated debt |
5,854,462 | 0.78 | % | 4,727,800 | 0.80 | % | ||||||||||
Purchased equity |
4,416,468 | 0.58 | % | 2,330,305 | 0.39 | % | ||||||||||
Equity grants |
6,967,524 | 0.92 | % | 4,467,524 | 0.75 | % | ||||||||||
Limited partnership interests |
443,522 | 0.07 | % | 169,465 | 0.03 | % | ||||||||||
Total |
$ | 754,964,483 | 100.00 | % | $ | 592,496,595 | 100.00 | % | ||||||||
31
December 31, 2010 | September 30, 2010 | |||||||||||||||
Fair value: |
||||||||||||||||
First lien debt |
$ | 642,402,398 | 86.53 | % | $ | 416,323,957 | 73.84 | % | ||||||||
Second lien debt |
84,295,708 | 11.35 | % | 137,851,248 | 24.45 | % | ||||||||||
Subordinated debt |
5,320,327 | 0.72 | % | 4,404,746 | 0.78 | % | ||||||||||
Purchased equity |
2,955,827 | 0.40 | % | 625,371 | 0.11 | % | ||||||||||
Equity grants |
6,977,553 | 0.94 | % | 4,446,529 | 0.79 | % | ||||||||||
Limited partnership interests |
443,522 | 0.06 | % | 169,465 | 0.03 | % | ||||||||||
Total |
$ | 742,395,335 | 100.00 | % | $ | 563,821,316 | 100.00 | % | ||||||||
December 31, 2010 | September 30, 2010 | |||||||||||||||
Cost: |
||||||||||||||||
Northeast |
$ | 210,633,806 | 27.90 | % | $ | 175,370,861 | 29.60 | % | ||||||||
Southwest |
180,442,847 | 23.91 | % | 121,104,464 | 20.44 | % | ||||||||||
Southeast |
158,144,424 | 20.95 | % | 108,804,931 | 18.36 | % | ||||||||||
West |
144,318,593 | 19.12 | % | 133,879,457 | 22.60 | % | ||||||||||
Midwest |
61,424,813 | 8.12 | % | 53,336,882 | 9.00 | % | ||||||||||
Total |
$ | 754,964,483 | 100.00 | % | $ | 592,496,595 | 100.00 | % | ||||||||
December 31, 2010 | September 30, 2010 | |||||||||||||||
Fair value: |
||||||||||||||||
Northeast |
$ | 208,392,159 | 28.07 | % | $ | 161,264,153 | 28.60 | % | ||||||||
Southwest |
167,079,771 | 22.51 | % | 107,468,588 | 19.07 | % | ||||||||||
Southeast |
160,412,465 | 21.61 | % | 109,457,070 | 19.41 | % | ||||||||||
West |
143,781,175 | 19.37 | % | 131,881,487 | 23.39 | % | ||||||||||
Midwest |
62,729,765 | 8.44 | % | 53,750,018 | 9.53 | % | ||||||||||
Total |
$ | 742,395,335 | 100.00 | % | $ | 563,821,316 | 100.00 | % | ||||||||
32
December 31, 2010 | September 30, 2010 | |||||||||||||||
Cost: |
||||||||||||||||
Healthcare services |
$ | 150,745,526 | 19.97 | % | $ | 87,443,639 | 14.76 | % | ||||||||
IT consulting & other services |
49,804,594 | 6.60 | % | | 0.00 | % | ||||||||||
Healthcare equipment |
46,877,049 | 6.21 | % | 47,539,596 | 8.02 | % | ||||||||||
Education services |
44,774,933 | 5.93 | % | 44,901,602 | 7.58 | % | ||||||||||
Internet software & services |
39,924,305 | 5.29 | % | | 0.00 | % | ||||||||||
Construction and engineering |
39,144,820 | 5.18 | % | 24,987,230 | 4.22 | % | ||||||||||
Electronic equipment & instruments |
33,018,454 | 4.37 | % | 33,094,495 | 5.59 | % | ||||||||||
Home improvement retail |
32,587,195 | 4.32 | % | 32,630,879 | 5.51 | % | ||||||||||
Apparel, accessories & luxury goods |
31,893,000 | 4.22 | % | 23,535,757 | 3.97 | % | ||||||||||
Food distributors |
28,501,129 | 3.78 | % | 30,415,200 | 5.13 | % | ||||||||||
Fertilizers & agricultural chemicals |
26,323,523 | 3.49 | % | 26,694,525 | 4.51 | % | ||||||||||
Diversified support services |
25,699,275 | 3.40 | % | 26,246,237 | 4.43 | % | ||||||||||
Healthcare technology |
21,360,961 | 2.83 | % | 21,509,107 | 3.63 | % | ||||||||||
Human resources & employment services |
20,774,104 | 2.75 | % | | 0.00 | % | ||||||||||
Food retail |
19,412,498 | 2.57 | % | 19,622,414 | 3.31 | % | ||||||||||
Electronic manufacturing services |
19,001,589 | 2.52 | % | 18,738,072 | 3.16 | % | ||||||||||
Media Advertising |
18,026,733 | 2.39 | % | 19,828,343 | 3.35 | % | ||||||||||
Air freight and logistics |
17,600,968 | 2.33 | % | 14,004,766 | 2.36 | % | ||||||||||
Trucking |
17,064,785 | 2.26 | % | 17,064,785 | 2.88 | % | ||||||||||
Distributors |
13,436,082 | 1.78 | % | 13,350,633 | 2.25 | % | ||||||||||
Data processing and outsourced services |
13,229,885 | 1.75 | % | 13,078,169 | 2.21 | % | ||||||||||
Industrial machinery |
10,221,792 | 1.35 | % | 10,143,414 | 1.71 | % | ||||||||||
Leisure facilities |
6,783,242 | 0.90 | % | 6,863,521 | 1.16 | % | ||||||||||
Building products |
6,717,698 | 0.89 | % | 8,291,678 | 1.40 | % | ||||||||||
Construction materials |
6,477,386 | 0.86 | % | 17,475,899 | 2.95 | % | ||||||||||
Environmental & facilities services |
5,125,321 | 0.68 | % | 8,921,676 | 1.51 | % | ||||||||||
Housewares & specialties |
4,556,187 | 0.60 | % | 12,195,029 | 2.06 | % | ||||||||||
Restaurants |
4,138,830 | 0.55 | % | 12,485,385 | 2.11 | % | ||||||||||
Household products |
1,098,928 | 0.15 | % | 1,064,910 | 0.18 | % | ||||||||||
Multi-sector holdings |
443,522 | 0.05 | % | 169,465 | 0.02 | % | ||||||||||
Movies & entertainment |
200,169 | 0.03 | % | 200,169 | 0.03 | % | ||||||||||
Total |
$ | 754,964,483 | 100.00 | % | $ | 592,496,595 | 100.00 | % | ||||||||
December 31, 2010 | September 30, 2010 | |||||||||||||||
Fair Value: |
||||||||||||||||
Healthcare services |
$ | 154,124,078 | 20.76 | % | $ | 89,261,760 | 15.83 | % | ||||||||
IT consulting & other services |
51,000,000 | 6.87 | % | | 0.00 | % | ||||||||||
Healthcare equipment |
47,689,753 | 6.42 | % | 48,297,921 | 8.57 | % | ||||||||||
Education services |
40,834,373 | 5.50 | % | 42,110,738 | 7.47 | % | ||||||||||
Internet software & services |
40,766,797 | 5.49 | % | | 0.00 | % | ||||||||||
Construction and engineering |
37,725,698 | 5.08 | % | 23,844,836 | 4.23 | % | ||||||||||
Electronic equipment & instruments |
32,682,427 | 4.40 | % | 32,887,767 | 5.83 | % | ||||||||||
Apparel, accessories & luxury goods |
32,605,394 | 4.39 | % | 23,548,933 | 4.18 | % | ||||||||||
Home improvement retail |
32,318,609 | 4.35 | % | 32,483,858 | 5.76 | % | ||||||||||
Food distributors |
28,529,313 | 3.84 | % | 30,316,811 | 5.38 | % | ||||||||||
Fertilizers & agricultural chemicals |
26,539,336 | 3.57 | % | 26,811,860 | 4.76 | % | ||||||||||
Diversified support services |
25,820,525 | 3.48 | % | 26,246,237 | 4.66 | % |
33
December 31, 2010 | September 30, 2010 | |||||||||||||||
Healthcare technology |
21,993,525 | 2.96 | % | 22,140,613 | 3.93 | % | ||||||||||
Human resources & employment services |
21,300,346 | 2.87 | % | | 0.00 | % | ||||||||||
Food retail |
19,613,730 | 2.64 | % | 19,750,316 | 3.50 | % | ||||||||||
Media Advertising |
18,144,549 | 2.44 | % | 19,847,065 | 3.52 | % | ||||||||||
Air freight and logistics |
17,835,145 | 2.40 | % | 14,040,532 | 2.49 | % | ||||||||||
Electronic manufacturing services |
16,639,539 | 2.24 | % | 18,055,528 | 3.20 | % | ||||||||||
Distributors |
13,415,216 | 1.81 | % | 13,258,317 | 2.35 | % | ||||||||||
Data processing and outsourced services |
12,796,573 | 1.72 | % | 12,741,012 | 2.26 | % | ||||||||||
Industrial machinery |
10,657,539 | 1.44 | % | 10,232,763 | 1.81 | % | ||||||||||
Leisure facilities |
6,973,522 | 0.94 | % | 7,040,043 | 1.25 | % | ||||||||||
Building products |
6,565,139 | 0.88 | % | 6,841,467 | 1.21 | % | ||||||||||
Construction materials |
6,477,386 | 0.87 | % | 17,039,751 | 3.02 | % | ||||||||||
Environmental & facilities services |
5,033,333 | 0.68 | % | 5,129,853 | 0.91 | % | ||||||||||
Trucking |
4,597,412 | 0.62 | % | 4,597,412 | 0.82 | % | ||||||||||
Housewares & specialties |
4,055,655 | 0.55 | % | 3,700,000 | 0.66 | % | ||||||||||
Restaurants |
3,856,360 | 0.52 | % | 12,099,935 | 2.15 | % | ||||||||||
Household products |
1,098,928 | 0.15 | % | 1,064,910 | 0.19 | % | ||||||||||
Multi-sector holdings |
443,522 | 0.08 | % | 169,465 | 0.01 | % | ||||||||||
Movies & entertainment |
261,613 | 0.04 | % | 261,613 | 0.05 | % | ||||||||||
Total |
$ | 742,395,335 | 100.00 | % | $ | 563,821,316 | 100.00 | % | ||||||||
34
Three months | Three months | |||||||
ended December 31, | ended December 31, | |||||||
2010 | 2009 | |||||||
Beginning unearned fee income balance |
$ | 11,900,871 | $ | 5,589,630 | ||||
Net fees received |
4,706,689 | 4,861,907 | ||||||
Unearned fee income recognized |
(1,228,366 | ) | (915,129 | ) | ||||
Ending unearned fee income balance |
$ | 15,379,194 | $ | 9,536,408 | ||||
35
Three months | Three months | |||||||
ended December 31, 2010 | ended December 31, 2009 | |||||||
Weighted
average common
shares outstanding,
basic and diluted |
54,641,164 | 37,880,435 | ||||||
36
Record | Payment | Amount | Cash | DRIP Shares | DRIP Shares | |||||||||||||||||||
Date Declared | Date | Date | per Share | Distribution | Issued | Value | ||||||||||||||||||
5/1/2008 |
5/19/2008 | 6/3/2008 | $ | 0.30 | $1.9 million | 133,317 | $1.9 million | |||||||||||||||||
8/6/2008 |
9/10/2008 | 9/26/2008 | 0.31 | 5.1 million | 196,786 | (1) | 1.9 million | |||||||||||||||||
12/9/2008 |
12/19/2008 | 12/29/2008 | 0.32 | 6.4 million | 105,326 | 0.8 million | ||||||||||||||||||
12/9/2008 |
12/30/2008 | 1/29/2009 | 0.33 | 6.6 million | 139,995 | 0.8 million | ||||||||||||||||||
12/18/2008 |
12/30/2008 | 1/29/2009 | 0.05 | 1.0 million | 21,211 | 0.1 million | ||||||||||||||||||
4/14/2009 |
5/26/2009 | 6/25/2009 | 0.25 | 5.6 million | 11,776 | 0.1 million | ||||||||||||||||||
8/3/2009 |
9/8/2009 | 9/25/2009 | 0.25 | 7.5 million | 56,890 | 0.6 million | ||||||||||||||||||
11/12/2009 |
12/10/2009 | 12/29/2009 | 0.27 | 9.7 million | 44,420 | 0.5 million | ||||||||||||||||||
1/12/2010 |
3/3/2010 | 3/30/2010 | 0.30 | 12.9 million | 58,689 | 0.7 million | ||||||||||||||||||
5/3/2010 |
5/20/2010 | 6/30/2010 | 0.32 | 14.0 million | 42,269 | 0.5 million | ||||||||||||||||||
8/2/2010 |
9/1/2010 | 9/29/2010 | 0.10 | 5.2 million | 25,425 | 0.3 million | ||||||||||||||||||
8/2/2010 |
10/6/2010 | 10/27/2010 | 0.10 | 5.5 million | 24,850 | 0.3 million | ||||||||||||||||||
8/2/2010 |
11/3/2010 | 11/24/2010 | 0.11 | 6.0 million | 26,569 | 0.3 million | ||||||||||||||||||
8/2/2010 |
12/1/2010 | 12/29/2010 | 0.11 | 6.0 million | 28,238 | 0.3 million |
(1) | Shares were purchased on the open market and distributed. |
37
38
39
Three months ended | Three months ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
PIK balance at beginning of period |
$ | 19,300,954 | $ | 12,059,478 | ||||
Gross PIK interest accrued |
3,384,078 | 2,430,656 | ||||||
PIK income reserves |
(240,390 | ) | (468,882 | ) | ||||
PIK interest received in cash |
(5,109,022 | ) | (525,194 | ) | ||||
Adjustments due to loan exits |
| (530,061 | ) | |||||
PIK balance at end of period |
$ | 17,335,620 | $ | 12,965,997 | ||||
December 31, 2010 | September 30, 2010 | December 31, 2009 | ||||||||||
Lighting by Gregory, LLC |
Cash non-accrual | Cash non-accrual | Cash non-accrual | |||||||||
CPAC, Inc. |
| | PIK non-accrual | |||||||||
Martini Park, LLC |
| | PIK non-accrual | |||||||||
Nicos Polymers & Grinding, Inc. |
| Cash non-accrual | PIK non-accrual | |||||||||
MK Network, LLC |
Cash non-accrual | Cash non-accrual | | |||||||||
Premier Trailer Leasing, Inc. |
Cash non-accrual | Cash non-accrual | Cash non-accrual | |||||||||
Vanguard Vinyl, Inc. |
| Cash non-accrual | |
Three months ended | Three months ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
Cash interest income |
$ | 2,106,432 | $ | 1,134,564 | ||||
PIK interest income |
240,390 | 468,882 | ||||||
OID income |
30,138 | 103,911 | ||||||
Total |
$ | 2,376,960 | $ | 1,707,357 | ||||
40
Three months ended | ||||
December 31, 2010 | ||||
Net increase in net assets resulting from operations |
$ | 17,448,000 | ||
Net unrealized appreciation |
(16,843,000 | ) | ||
Book/tax difference due to deferred loan origination fees, net |
3,478,000 | |||
Book/tax difference due to organizational and deferred offering costs |
(22,000 | ) | ||
Book/tax difference due to interest income on certain loans |
1,051,000 | |||
Book/tax difference due to capital losses not recognized |
13,450,000 | |||
Other book-tax differences |
131,000 | |||
Taxable/Distributable Income (1) |
$ | 18,693,000 | ||
(1) | The Companys taxable income for 2011 is an estimate and will not be finally determined until the Company files its tax return for the fiscal year ended September 30, 2011. Therefore, the final taxable income may be different than the estimate. |
41
Dividend Type | Date Declared | Record Date | Payment Date | Amount per Share | ||||||||||||
Quarterly |
5/1/2008 | 5/19/2008 | 6/3/2008 | $ | 0.30 | |||||||||||
Quarterly |
8/6/2008 | 9/10/2008 | 9/26/2008 | $ | 0.31 | |||||||||||
Quarterly |
12/9/2008 | 12/19/2008 | 12/29/2008 | $ | 0.32 | |||||||||||
Quarterly |
12/9/2008 | 12/30/2008 | 1/29/2009 | $ | 0.33 | |||||||||||
Special |
12/18/2008 | 12/30/2008 | 1/29/2009 | $ | 0.05 | |||||||||||
Quarterly |
4/14/2009 | 5/26/2009 | 6/25/2009 | $ | 0.25 | |||||||||||
Quarterly |
8/3/2009 | 9/8/2009 | 9/25/2009 | $ | 0.25 | |||||||||||
Quarterly |
11/12/2009 | 12/10/2009 | 12/29/2009 | $ | 0.27 | |||||||||||
Quarterly |
1/12/2010 | 3/3/2010 | 3/30/2010 | $ | 0.30 | |||||||||||
Quarterly |
5/3/2010 | 5/20/2010 | 6/30/2010 | $ | 0.32 | |||||||||||
Quarterly |
8/2/2010 | 9/1/2010 | 9/29/2010 | $ | 0.10 | |||||||||||
Monthly |
8/2/2010 | 10/6/2010 | 10/27/2010 | $ | 0.10 | |||||||||||
Monthly |
8/2/2010 | 11/3/2010 | 11/24/2010 | $ | 0.11 | |||||||||||
Monthly |
8/2/2010 | 12/1/2010 | 12/29/2010 | $ | 0.11 | |||||||||||
Monthly |
11/30/2010 | 1/4/2011 | 1/31/2011 | $ | 0.1066 | |||||||||||
Monthly |
11/30/2010 | 2/1/2011 | 2/28/2011 | $ | 0.1066 | |||||||||||
Monthly |
11/30/2010 | 3/1/2011 | 3/31/2011 | $ | 0.1066 |
| In October 2010, the Company received a cash payment of $8.7 million from Goldco, Inc. in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on this transaction; | ||
| In November 2010, the Company received a cash payment of $11.0 million from TBA Global, LLC in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on this transaction; | ||
| In November 2010, the Company restructured its investment in Vanguard Vinyl, Inc. The restructuring resulted in a material modification of the terms of the loan agreement. As such, the Company recorded a realized loss in the |
42
amount of $1.7 million in accordance with ASC 470-50; | |||
| In December 2010, the Company restructured its investment in Nicos Polymers & Grinding, Inc. The restructuring resulted in a material modification of the terms of the loan agreement. As such, the Company recorded a realized loss in the amount of $3.9 million in accordance with ASC 470-50; | ||
| In December 2010, the Company received a cash payment of $25.3 million from Boot Barn in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on this transaction; | ||
| In December 2010, the Company received a cash payment of $11.7 million from Western Emulsions, Inc. in partial satisfaction of the obligations under the loan agreement. No realized gain or loss was recorded on this transaction; and | ||
| In December 2010, the Company restructured its investment in Lighting by Gregory, LLC. The restructuring resulted in a material modification of the terms of the loan agreement. As such, the Company recorded a realized loss in the amount of $7.8 million in accordance with ASC 470-50. |
| In October 2009, the Company received a cash payment in the amount of $0.1 million representing a payment in full of all amounts due in connection with the cancellation of its loan agreement with American Hardwoods Industries, LLC. The Company recorded a $0.1 million reduction to the previously recorded $10.4 million realized loss on the investment in American Hardwoods; and | ||
| In October 2009, the Company received a cash payment of $3.9 million from Elephant & Castle, Inc. in partial satisfaction of the obligations under the loan agreement. No realized gain or loss was recorded on this transaction. |
43
| To waive the portion of its base management fee for the quarter ended December 31, 2009 attributable to four new portfolio investments, as well as cash and cash equivalents. The amount of the management fee waived was $727,000; and | ||
| To permanently waive that portion of its base management fee attributable to the Companys assets held in the form of cash and cash equivalents as of the end of each quarter beginning March 31, 2010. |
| No incentive fee is payable to the Investment Adviser in any fiscal quarter in which the Companys Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 2% (the preferred return or hurdle); | ||
| 100% of the Companys 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 or equal to 2.5% in any fiscal quarter (10% annualized) is payable to the Investment Adviser. The Company refers to this portion of its Pre-Incentive Fee Net Investment Income (which exceeds the hurdle rate but is less than or equal to 2.5%) as the catch-up. The catch-up provision is intended to provide the Investment Adviser with an incentive fee of 20% on all of the Companys Pre-Incentive Fee Net Investment Income as if a hurdle rate did not apply when the Companys Pre-Incentive Fee Net Investment Income exceeds 2.5% in any fiscal quarter; and |
44
| 20% of the amount of the Companys Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.5% in any fiscal quarter (10% annualized) is payable to the Investment Adviser once the hurdle is reached and the catch-up is achieved (20% of all Pre-Incentive Fee Net Investment Income thereafter is allocated to the Investment Adviser). |
45
Three | Three | |||||||
months ended | months ended | |||||||
Per share data: | December 31, 2010 | December 31, 2009 | ||||||
Net asset value at beginning of period |
$ | 10.43 | $ | 10.84 | ||||
Net investment income |
0.26 | 0.22 | ||||||
Net unrealized appreciation on investments
and interest rate swap |
0.31 | 0.03 | ||||||
Net realized loss on investments |
(0.24 | ) | | |||||
Dividends declared |
(0.32 | ) | (0.27 | ) | ||||
Issuance of common stock |
| | ||||||
Net asset value at end of period |
$ | 10.44 | $ | 10.82 | ||||
Per share market value at beginning of period |
$ | 11.14 | $ | 10.93 | ||||
Per share market value at end of period |
$ | 12.14 | $ | 10.74 | ||||
Total return (1) |
11.93 | % | 0.68 | % | ||||
Common shares outstanding at beginning of
period |
54,550,290 | 37,878,987 | ||||||
Common shares outstanding at end of period |
55,059,057 | 37,923,407 | ||||||
Net assets at beginning of period |
$ | 569,172,105 | $ | 410,556,071 | ||||
Net assets at end of period |
$ | 574,921,159 | $ | 410,257,351 | ||||
Average net assets (2) |
$ | 572,151,947 | $ | 409,840,589 | ||||
Ratio of net investment income to average
net assets (3) |
9.75 | % | 8.08 | % | ||||
Ratio of total expenses to average net
assets (3) |
7.82 | % | 4.74 | % | ||||
Ratio of portfolio turnover to average
investments at fair value |
2.17 | % | 0.00 | % | ||||
Weighted average outstanding debt (4) |
$ | 102,678,261 | $ | 500,000 | ||||
Average debt per share |
$ | 1.86 | $ | 0.01 |
(1) | Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming dividend reinvestment prices obtained under the Companys dividend reinvestment plan. Total return is not annualized. | |
(2) | Calculated based upon the daily weighted average net assets for the period. | |
(3) | Interim periods are annualized. | |
(4) | Calculated based upon the daily weighted average of loans payable for the period. |
46
47
| our future operating results and dividend projections; | ||
| our business prospects and the prospects of our portfolio companies; | ||
| the impact of the investments that we expect to make; | ||
| the ability of our portfolio companies to achieve their objectives; | ||
| our expected financings and investments; | ||
| the adequacy of our cash resources and working capital; and | ||
| the timing of cash flows, if any, from the operations of our portfolio companies. |
| changes in the economy and the financial markets; | ||
| risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; | ||
| future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to business development companies, small business investment companies, or SBICs, and regulated investment companies, or RICs; and | ||
| other considerations that may be disclosed from time to time in our publicly disseminated documents and filings. |
48
49
50
| Our quarterly valuation process begins with each portfolio company or investment being initially valued by the deal team within our investment adviser responsible for the portfolio investment; | ||
| Preliminary valuations are then reviewed and discussed with the principals of our investment adviser; | ||
| Separately, independent valuation firms engaged by our Board of Directors prepare preliminary valuations on a selected basis and submit reports to us; | ||
| The deal team compares and contrasts its preliminary valuations to the preliminary valuations of the independent valuation firms; | ||
| The deal team prepares a valuation report for the Valuation Committee of our Board of Directors; | ||
| The Valuation Committee of our Board of Directors is apprised of the preliminary valuations of the independent valuation firms; | ||
| The Valuation Committee of our Board of Directors reviews the preliminary valuations, and the deal team responds and supplements the preliminary valuations to reflect any comments provided by the Valuation Committee; |
51
| The Valuation Committee of our Board of Directors makes a recommendation to the Board of Directors; and | ||
| Our Board of Directors discusses valuations and determines the fair value of each investment in our portfolio in good faith. |
For the quarter ending December 31, 2007 |
91.9 | % | ||
For the quarter ending March 31, 2008 |
92.1 | % | ||
For the quarter ending June 30, 2008 |
91.7 | % | ||
For the quarter ending September 30, 2008 |
92.8 | % | ||
For the quarter ending December 31, 2008 |
100.0 | % | ||
For the quarter ending March 31, 2009 |
88.7 | %(1) | ||
For the quarter ending June 30, 2009 |
92.1 | % | ||
For the quarter ending September 30, 2009 |
28.1 | % | ||
For the quarter ending December 31, 2009 |
17.2 | %(2) | ||
For the quarter ending March 31, 2010 |
26.9 | % | ||
For the quarter ending December 31, 2009 |
53.1 | % | ||
For the quarter ending September 30, 2010 |
61.8 | % | ||
For the quarter ending December 31, 2010 |
73.9 | % |
(1) | 96.0% excluding our investment in IZI Medical Products, Inc., which closed on December 31, 2009 and therefore was not part of the independent valuation process | |
(2) | 24.8% excluding four investments that closed in December 2009 and therefore were not part of the independent valuation process |
52
53
December 31, | September 30, | |||||||
2010 | 2010 | |||||||
Cost: |
||||||||
First lien debt |
84.85 | % | 72.61 | % | ||||
Second lien debt |
12.80 | % | 25.42 | % | ||||
Subordinated debt |
0.78 | % | 0.80 | % | ||||
Purchased equity |
0.58 | % | 0.39 | % | ||||
Equity grants |
0.92 | % | 0.75 | % | ||||
Limited partnership interests |
0.07 | % | 0.03 | % | ||||
Total |
100.00 | % | 100.00 | % | ||||
December 31, | September 30, | |||||||
2010 | 2010 | |||||||
Fair value: |
||||||||
First lien debt |
86.53 | % | 73.84 | % | ||||
Second lien debt |
11.35 | % | 24.45 | % | ||||
Subordinated debt |
0.72 | % | 0.78 | % | ||||
Purchased equity |
0.40 | % | 0.11 | % | ||||
Equity grants |
0.94 | % | 0.79 | % | ||||
Limited partnership interests |
0.06 | % | 0.03 | % | ||||
Total |
100.00 | % | 100.00 | % | ||||
December 31, 2010 | September 30, 2010 | |||||||
Cost: |
||||||||
Healthcare services |
19.97 | % | 14.76 | % | ||||
IT consulting & other services |
6.60 | % | 0.00 | % | ||||
Healthcare equipment |
6.21 | % | 8.02 | % | ||||
Education services |
5.93 | % | 7.58 | % | ||||
Internet software & services |
5.29 | % | 0.00 | % | ||||
Construction and engineering |
5.18 | % | 4.22 | % | ||||
Electronic equipment & instruments |
4.37 | % | 5.59 | % | ||||
Home improvement retail |
4.32 | % | 5.51 | % | ||||
Apparel, accessories & luxury goods |
4.22 | % | 3.97 | % | ||||
Food distributors |
3.78 | % | 5.13 | % | ||||
Fertilizers & agricultural chemicals |
3.49 | % | 4.51 | % | ||||
Diversified support services |
3.40 | % | 4.43 | % | ||||
Healthcare technology |
2.83 | % | 3.63 | % | ||||
Human resources & employment services |
2.75 | % | 0.00 | % | ||||
Food retail |
2.57 | % | 3.31 | % | ||||
Electronic manufacturing services |
2.52 | % | 3.16 | % | ||||
Media Advertising |
2.39 | % | 3.35 | % | ||||
Air freight and logistics |
2.33 | % | 2.36 | % | ||||
Trucking |
2.26 | % | 2.88 | % | ||||
Distributors |
1.78 | % | 2.25 | % | ||||
Data processing and outsourced services |
1.75 | % | 2.21 | % | ||||
Industrial machinery |
1.35 | % | 1.71 | % | ||||
Leisure facilities |
0.90 | % | 1.16 | % | ||||
Building products |
0.89 | % | 1.40 | % | ||||
Construction materials |
0.86 | % | 2.95 | % | ||||
Environmental & facilities services |
0.68 | % | 1.51 | % | ||||
Housewares & specialties |
0.60 | % | 2.06 | % | ||||
Restaurants |
0.55 | % | 2.11 | % | ||||
Household products |
0.15 | % | 0.18 | % | ||||
Multi-sector holdings |
0.05 | % | 0.02 | % | ||||
Movies & entertainment |
0.03 | % | 0.03 | % | ||||
Total |
100.00 | % | 100.00 | % | ||||
54
December 31, 2010 | September 30, 2010 | |||||||
Fair Value: |
||||||||
Healthcare services |
20.76 | % | 15.83 | % | ||||
IT consulting & other services |
6.87 | % | 0.00 | % | ||||
Healthcare equipment |
6.42 | % | 8.57 | % | ||||
Education services |
5.50 | % | 7.47 | % | ||||
Internet software & services |
5.49 | % | 0.00 | % | ||||
Construction and engineering |
5.08 | % | 4.23 | % | ||||
Electronic equipment & instruments |
4.40 | % | 5.83 | % | ||||
Apparel, accessories & luxury goods |
4.39 | % | 4.18 | % | ||||
Home improvement retail |
4.35 | % | 5.76 | % | ||||
Food distributors |
3.84 | % | 5.38 | % | ||||
Fertilizers & agricultural chemicals |
3.57 | % | 4.76 | % | ||||
Diversified support services |
3.48 | % | 4.66 | % | ||||
Healthcare technology |
2.96 | % | 3.93 | % | ||||
Human resources & employment services |
2.87 | % | 0.00 | % | ||||
Food retail |
2.64 | % | 3.50 | % | ||||
Media Advertising |
2.44 | % | 3.52 | % | ||||
Air freight and logistics |
2.40 | % | 2.49 | % | ||||
Electronic manufacturing services |
2.24 | % | 3.20 | % | ||||
Distributors |
1.81 | % | 2.35 | % | ||||
Data processing and outsourced services |
1.72 | % | 2.26 | % | ||||
Industrial machinery |
1.44 | % | 1.81 | % | ||||
Leisure facilities |
0.94 | % | 1.25 | % | ||||
Building products |
0.88 | % | 1.21 | % | ||||
Construction materials |
0.87 | % | 3.02 | % | ||||
Environmental & facilities services |
0.68 | % | 0.91 | % | ||||
Trucking |
0.62 | % | 0.82 | % | ||||
Housewares & specialties |
0.55 | % | 0.66 | % | ||||
Restaurants |
0.52 | % | 2.15 | % | ||||
Household products |
0.15 | % | 0.19 | % | ||||
Multi-sector holdings |
0.08 | % | 0.01 | % | ||||
Movies & entertainment |
0.04 | % | 0.05 | % | ||||
Total |
100.00 | % | 100.00 | % | ||||
55
| Investment Rating 1 is used for investments that are performing above expectations and/or a capital gain is expected. | ||
| Investment Rating 2 is used for investments that are performing substantially within our expectations, and whose risks remain neutral or favorable compared to the potential risk at the time of the original investment. All new investments are initially rated 2. | ||
| Investment Rating 3 is used for investments that are performing below our expectations and that require closer monitoring, but where we expect no loss of investment return (interest and/or dividends) or principal. Companies with a rating of 3 may be out of compliance with financial covenants. | ||
| Investment Rating 4 is used for investments that are performing below our expectations and for which risk has increased materially since the original investment. We expect some loss of investment return, but no loss of principal. | ||
| Investment Rating 5 is used for investments that are performing substantially below our expectations and whose risks have increased substantially since the original investment. Investments with a rating of 5 are those for which some loss of principal is expected. |
December 31, 2010 | September 30, 2010 | |||||||||||||||||||||||
Percentage of | Leverage | Percentage of | Leverage | |||||||||||||||||||||
Fair Value | Total Portfolio | Ratio | Fair Value | Total Portfolio | Ratio | |||||||||||||||||||
1 |
$ | 80,790,254 | 10.88 | % | 3.00 | $ | 89,150,457 | 15.81 | % | 2.97 | ||||||||||||||
2 |
620,901,779 | 83.63 | % | 3.40 | 424,494,799 | 75.29 | % | 4.31 | ||||||||||||||||
3 |
21,672,872 | 2.92 | % | 11.16 | 18,055,528 | 3.20 | % | 13.25 | ||||||||||||||||
4 |
| 0.00 | % | | 23,823,120 | 4.23 | % | 8.13 | ||||||||||||||||
5 |
19,030,430 | 2.57 | % | NM | (1) | 8,297,412 | 1.47 | % | NM | (1) | ||||||||||||||
Total |
$ | 742,395,335 | 100.00 | % | 3.25 | $ | 563,821,316 | 100.00 | % | 4.53 | ||||||||||||||
(1) | Due to operating performance this ratio is not measurable and, as a result, is excluded from the total portfolio calculation. |
56
December 31, 2010 | September 30, 2010 | December 31, 2009 | ||||||||||
Lighting by Gregory, LLC |
Cash non-accrual | Cash non-accrual | Cash non-accrual | |||||||||
CPAC, Inc. |
| | PIK non-accrual | |||||||||
Martini Park, LLC |
| | PIK non-accrual | |||||||||
Nicos Polymers & Grinding, Inc. |
| Cash non-accrual | PIK non-accrual | |||||||||
MK Network, LLC |
Cash non-accrual | Cash non-accrual | | |||||||||
Premier Trailer Leasing, Inc. |
Cash non-accrual | Cash non-accrual | Cash non-accrual | |||||||||
Vanguard Vinyl, Inc. |
| Cash non-accrual | |
Three months ended | Three months ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
Cash interest income |
$ | 2,106,432 | $ | 1,134,564 | ||||
PIK interest income |
240,390 | 468,882 | ||||||
OID income |
30,138 | 103,911 | ||||||
Total |
$ | 2,376,960 | $ | 1,707,357 | ||||
57
58
| In November 2010, we restructured our investment in Best Vinyl, Inc., which resulted in a material modification of the terms of the loan agreement. As such, we recorded a realized loss in the amount of $1.7 million in accordance with ASC 470-50; | ||
| In December 2010, we restructured our investment in Nicos Polymers & Grinding Inc., which resulted in a material modification of the terms of the loan agreement. As such, we recorded a realized loss in the amount of $3.9 million in accordance with ASC 470-50; | ||
| In December 2010, we cancelled Lighting by Gregory, LLCs entire Term Loan B balance and $1.5 million of Term Loan A. We recorded a realized loss on this investment in the amount of $7.8 million. |
59
60
Date | Record | Payment | Amount | Cash | DRIP Shares | DRIP Shares | ||||||||||||||
Declared | Date | Date | per Share | Distribution | Issued | Value | ||||||||||||||
December 9, 2008 |
December 19, 2008 | December 29, 2008 | $ | 0.32 | $6.4 million | 105,326 | $0.8 million | |||||||||||||
December 9, 2008 |
December 30, 2008 | January 29, 2009 | 0.33 | 6.6 million | 139,995 | 0.8 million | ||||||||||||||
December 18, 2008 |
December 30, 2008 | January 29, 2009 | 0.05 | 1.0 million | 21,211 | 0.1 million | ||||||||||||||
April 14, 2009 |
May 26, 2009 | June 25, 2009 | 0.25 | 5.6 million | 11,776 | 0.1 million | ||||||||||||||
August 3, 2009 |
September 8, 2009 | September 25, 2009 | 0.25 | 7.5 million | 56,890 | 0.6 million | ||||||||||||||
November 12, 2009 |
December 10, 2009 | December 29, 2009 | 0.27 | 9.7 million | 44,420 | 0.5 million | ||||||||||||||
January 12, 2010 |
March 3, 2010 | March 30, 2010 | 0.30 | 12.9 million | 58,689 | 0.7 million | ||||||||||||||
May 3, 2010 |
May 20, 2010 | June 30, 2010 | 0.32 | 14.0 million | 42,269 | 0.5 million | ||||||||||||||
August 2, 2010 |
September 1, 2010 | September 29, 2010 | 0.10 | 5.2 million | 25,425 | 0.3 million | ||||||||||||||
August 2, 2010 |
October 6, 2010 | October 27, 2010 | 0.10 | 5.5 million | 24,850 | 0.3 million | ||||||||||||||
August 2, 2010 |
November 3, 2010 | November 24, 2010 | 0.11 | 6.0 million | 26,569 | 0.3 million | ||||||||||||||
August 2, 2010 |
December 1, 2010 | December 29, 2010 | 0.11 | 6.0 million | 28,238 | 0.3 million | ||||||||||||||
November 30, 2010 |
January 4, 2011 | January 31, 2011 | 0.1066 | 5.4 million | 24,850 | 0.5 million | ||||||||||||||
November 30, 2010 |
February 1, 2011 | February 28, 2011 | 0.1066 | | | | ||||||||||||||
November 30, 2010 |
March 1, 2011 | March 31, 2011 | 0.1066 | | | |
Date | Transaction | Shares | Share Price | Gross Proceeds (Uses) | ||||||||||||
October 27, 2008 | Repurchase shares |
39,000 | $ | 5.96 | $(0.2 million) | |||||||||||
October 28, 2008 | Repurchase shares |
39,000 | 5.89 | (0.2 million) | ||||||||||||
July 21, 2009 | Public offering 1 |
9,487,500 | 9.25 | 87.8 million | ||||||||||||
September 25, 2009 | Public offering 1 |
5,520,000 | 10.50 | 58.0 million | ||||||||||||
January 27, 2010 | Public offering |
7,000,000 | 11.20 | 78.4 million | ||||||||||||
February 25, 2010 | Underwriters exercise of over-allotment |
300,500 | 11.20 | 3.4 million | ||||||||||||
June 21, 2010 | Public offering 1 |
9,200,000 | 11.50 | 105.8 million | ||||||||||||
December 2010 | At-the-market offering |
429,110 | 11.87 | 2 | 5.1 million |
1 | Includes the underwriters full exercise of their over-allotment option | |
2 | Average offering price |
61
62
Financial | ||||||||
Facility | Covenant | Description | Target Value | Reported Value (1) | ||||
Wells Fargo facility
|
Minimum shareholders equity (inclusive of affiliates) | Net assets shall not be less than $200 million plus 75% of the aggregate net proceeds of all sales of equity interests after November 16, 2009 | $338 million | $569 million | ||||
Minimum shareholders equity (exclusive of affiliates) | Net assets exclusive of affiliates other than Funding shall not be less than $250 million | $250 million | $494 million | |||||
Asset coverage ratio | Asset coverage ratio shall not be less than 2.00:1 | 2.00:1 | 2.78:1 | |||||
ING facility
|
Minimum shareholders equity | Net assets shall not be less than the greater of (a) 55% of total assets; and (b) $385 million plus 50% of the aggregate net proceeds of all sales of equity interests after February 24, 2010 | $436 million | $569 million | ||||
Asset coverage ratio | Asset coverage ratio shall not be less than 2.25:1 | 2.25:1 | 8.80:1 | |||||
Interest coverage ratio | Interest coverage ratio shall not be less than 2.50:1 | 2.50:1 | 43.18:1 | |||||
Eligible portfolio investments test |
Aggregate value of (a) Cash and cash equivalents and (b) Portfolio investments rated 1, 2 or 3 shall not be less than $175 million | $175 million | $288 million |
(1) | As contractually required, we report financial covenants based on the last filed quarterly or annual report, in this case our Form 10-K for the year ended September 30, 2010. |
63
Total | ||||||||||||||
Facility | Upfront | Amount | Interest | |||||||||||
Amount | fee Paid | Availability | Drawn | Rate | ||||||||||
Bank of Montreal
|
December 30, 2008 | Renewed credit facility | $50 million | $0.3 million | $ | $ | LIBOR + 3.25% | |||||||
September 16, 2009 | Terminated credit facility | |||||||||||||
Wells Fargo facility
|
November 16, 2009 | Entered into credit facility |
50 million | 0.8 million | LIBOR + 4.00% | |||||||||
May 26, 2010 | Expanded credit facility | 100 million | 0.9 million | 91 million (1) | 38 million | LIBOR + 3.50% | ||||||||
ING facility
|
May 27, 2010 | Entered into credit facility |
90 million | 0.8 million | 90 million | 51 million | LIBOR + 3.50% | |||||||
SBA
|
February 16, 2010 | Received capital commitment | 75 million | 0.8 million | ||||||||||
September 21, 2010 | Received capital commitment |
150 million | 0.8 million | 150 million | 123.3 million | 3.50% (2) |
(1) | Availability to increase upon our decision to further collateralize the facility. | |
(2) | Includes the SBA annual charge of 0.285%. |
64
| Debt outstanding as of September 30, 2010; | ||
| Debt outstanding as of December 31, 2010; | ||
| Weighted average debt outstanding for the three months ended December 31, 2010; | ||
| Maximum debt outstanding during the three months ended December 31, 2010; |
Weighted average debt outstanding | Maximum debt outstanding | |||||||||||||||
Debt Outstanding as of | Debt Outstanding as of | for the three months ended | for the three months ended | |||||||||||||
September 30, 2010 | December 31, 2010 | December 31, 2010 | December 31, 2010 | |||||||||||||
SBA debentures payable |
$ | 73,000,000 | $ | 123,300,000 | $ | 81,276,087 | $ | 123,300,000 | ||||||||
Wells Fargo facility |
| 38,000,000 | 16,380,435 | 75,000,000 | ||||||||||||
ING facility |
| 51,000,000 | 5,021,739 | 51,000,000 | ||||||||||||
Total debt |
73,000,000 | 212,300,000 | 102,678,261 | 234,300,000 |
Payments due by period as of December 31, 2010 | ||||||||||||||||||||
Total | < 1 year | 1-3 years | 3-5 years | > 5 years | ||||||||||||||||
SBA debentures payable |
$ | 123,300,000 | $ | | $ | | $ | | $ | 123,300,000 | ||||||||||
Interest due on SBA debentures |
42,112,568 | 3,237,603 | 8,642,822 | 8,631,000 | 21,601,143 | |||||||||||||||
Wells Fargo facility |
38,000,000 | | 38,000,000 | | | |||||||||||||||
Interest due on Wells Fargo facility |
5,266,012 | 2,179,039 | 3,086,972 | | | |||||||||||||||
ING facility |
51,000,000 | | 51,000,000 | | | |||||||||||||||
Interest due on ING facility |
5,686,226 | 2,352,921 | 3,333,305 | | | |||||||||||||||
Total |
$ | 265,364,806 | $ | 7,769,563 | $ | 104,063,099 | $ | 8,631,000 | $ | 144,901,143 |
December 31, 2010 | September 30, 2010 | |||||||
HealthDrive Corporation |
$ | 1,500,000 | $ | 1,500,000 | ||||
IZI Medical Products, Inc. |
2,500,000 | 2,500,000 | ||||||
Trans-Trade, Inc. |
4,000,000 | 500,000 | ||||||
Riverlake Equity Partners II, LP (limited partnership interest) |
877,895 | 966,360 | ||||||
Riverside Fund IV, LP (limited partnership interest) |
678,583 | 864,175 | ||||||
ADAPCO, Inc. |
5,750,000 | 5,750,000 | ||||||
AmBath/ReBath Holdings, Inc. |
1,500,000 | 1,500,000 | ||||||
JTC Education, Inc. |
14,000,000 | 9,062,453 | ||||||
Tegra Medical, LLC |
4,000,000 | 4,000,000 | ||||||
Vanguard Vinyl, Inc. |
| 1,250,000 | ||||||
Flatout, Inc. |
1,500,000 | 1,500,000 | ||||||
Psilos Group Partners IV, LP (limited partnership interest) |
1,000,000 | 1,000,000 | ||||||
Mansell Group, Inc. |
2,000,000 | 2,000,000 | ||||||
NDSSI Holdings, Inc. |
1,500,000 | 1,500,000 | ||||||
Eagle Hospital Physicians, Inc. |
2,500,000 | 2,500,000 | ||||||
Enhanced Recovery Company, LLC |
4,000,000 | 3,623,148 | ||||||
Epic Acquisition, Inc. |
2,200,000 | 2,700,000 | ||||||
Specialty Bakers, LLC |
4,000,000 | 2,000,000 | ||||||
Rail Acquisition Corp. |
5,040,865 | 4,798,897 | ||||||
Bunker Hill Capital II (QP), L.P. (limited partnership interest) |
1,000,000 | | ||||||
Nicos Polymers & Grinding Inc. |
500,000 | | ||||||
CRGT, Inc. |
12,500,000 | | ||||||
Welocalize, Inc. |
4,750,000 | | ||||||
Miche Bag, LLC |
5,000,000 | | ||||||
Dominion Diagnostics, LLC |
5,000,000 | | ||||||
Advanced Pain Management |
400,000 | | ||||||
DISA, Inc. |
4,000,000 | | ||||||
Best Vinyl Fence & Deck, LLC |
1,000,000 | | ||||||
Saddleback Fence and Vinyl Products, Inc. |
400,000 | | ||||||
Traffic Control & Safety Corporation |
2,250,000 | | ||||||
Total |
$ | 95,347,343 | $ | 49,515,033 | ||||
65
66
67
| $0.1066 per share, payable on April 29, 2011 to stockholders of record on April 1, 2011; | ||
| $0.1066 per share, payable on May 31, 2011 to stockholders of record on May 2, 2011; and | ||
| $0.1066 per share, payable on June 30, 2011 to stockholders of record on June 1, 2011. |
68
(a) | 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 Chief Executive Officer 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 Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective in timely identifying, recording, processing, summarizing, and reporting any material information relating to us that is required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934. | ||
(b) | Changes in Internal Controls |
69
70
71
Exhibit | ||
Number | Description of Exhibit | |
10.1*
|
Custody Agreement, dated January 31, 2011, by and between Fifth Street Finance Corp. and U.S. Bank National Association | |
31.1*
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. | |
31.2*
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. | |
32.1*
|
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
32.2*
|
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
* | Submitted herewith. |
72
Fifth Street Finance Corp. |
||||
Date: January 31, 2011 | /s/ Leonard M. Tannenbaum | |||
Leonard M. Tannenbaum | ||||
Chairman and Chief Executive Officer | ||||
Date: January 31, 2011 | /s/ William H. Craig | |||
William H. Craig | ||||
Chief Financial Officer |
73
Exhibit | ||
Number | Description of Exhibit | |
10.1*
|
Custody Agreement, dated January 31, 2011, by and between Fifth Street Finance Corp. and U.S. Bank National Association | |
31.1*
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. | |
31.2*
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. | |
32.1*
|
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
32.2*
|
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
* | Submitted herewith. |
74
Page | ||||||
1. |
DEFINITIONS | 1 | ||||
2. |
APPOINTMENT OF CUSTODIAN | 6 | ||||
3. |
DUTIES OF CUSTODIAN | 7 | ||||
4. |
REPORTING | 15 | ||||
5. |
DEPOSIT IN U.S. SECURITIES SYSTEMS | 15 | ||||
6. |
RESERVED. | 16 | ||||
7. |
CERTAIN GENERAL TERMS | 16 | ||||
8. |
COMPENSATION OF CUSTODIAN | 17 | ||||
9. |
RESPONSIBILITY OF CUSTODIAN | 18 | ||||
10. |
SECURITY CODES | 21 | ||||
11. |
TAX LAW | 21 | ||||
12. |
EFFECTIVE PERIOD, TERMINATION AND AMENDMENT | 21 | ||||
13. |
REPRESENTATIONS AND WARRANTIES | 22 | ||||
14. |
PARTIES IN INTEREST; NO THIRD PARTY BENEFIT | 23 | ||||
15. |
NOTICES | 23 | ||||
16. |
CHOICE OF LAW AND JURISDICTION | 24 | ||||
17. |
ENTIRE AGREEMENT; COUNTERPARTS | 24 | ||||
18. |
AMENDMENT; WAIVER | 24 | ||||
19. |
SUCCESSOR AND ASSIGNS | 24 | ||||
20. |
SEVERABILITY | 25 | ||||
21. |
INSTRUMENT UNDER SEAL; HEADINGS | 25 | ||||
22. |
REQUEST FOR INSTRUCTIONS | 25 | ||||
23. |
OTHER BUSINESS | 25 | ||||
24. |
REPRODUCTION OF DOCUMENTS | 25 | ||||
25. |
MISCELLANEOUS | 26 | ||||
SCHEDULES | ||||||
SCHEDULE A -- Initial Authorized Persons |
1. | DEFINITIONS | |
1.1 Defined Terms. In addition to terms expressly defined elsewhere herein, the following words shall have the following meanings as used in this Agreement: | ||
Account or Accounts means the Cash Account, the Securities Account, any Subsidiary Cash Account and any Subsidiary Securities Account, collectively. | ||
Agreement means this Custody Agreement (as the same may be amended from time to time in accordance with the terms hereof). | ||
Authorized Person has the meaning set forth in Section 7.4. | ||
Business Day means a day on which the Custodian is open for business in the market or country in which a transaction is to take place. | ||
Cash Account means the trust account to be established at the Custodian to which the Custodian shall deposit and hold any cash Proceeds received by it from time to time from or with respect to the Securities or the sale of the common stock of the Company, as applicable, which deposit account shall be designated the Fifth Street Finance Corp. Cash Proceeds Account. | ||
Company means Fifth Street Finance Corp., its successors or permitted assigns. |
1
Confidential Information means any databases, computer programs, screen formats, screen designs, report formats, interactive design techniques, and other similar or related information that may be furnished to the Company by the Custodian from time to time pursuant to this Agreement. | ||
Custodian has the meaning set forth in the first paragraph of this Agreement. | ||
Document Custodian means the Custodian when acting in the role of a document custodian hereunder. | ||
Eligible Investment means any investment that at the time of its acquisition is one or more of the following: |
Eligible Securities Depository has the meaning set forth in Section (b)(1) of Rule 17f-7 under the 1940 Act. | ||
Federal Reserve Bank Book-Entry System means a depository and securities transfer system operated by the Federal Reserve Bank of the United States on which are eligible to be held all United States Government direct obligation bills, notes and bonds. | ||
Loan means any U.S. dollar denominated commercial loan, or participation therein, made by a bank or other financial institution that by its terms provides for payments of principal and/or interest, including discount obligations and payment- in-kind obligations, acquired by the Company from time to time. | ||
Loan Checklist means a list delivered to the Document Custodian in connection with delivery of a Loan to the Custodian that identifies the items contained in the related Loan File. |
2
Loan File means, with respect to each Loan delivered to the Document Custodian, each of the Required Loan Documents identified on the related Loan Checklist. | ||
Noteless Loan means a Loan with respect to which (i) the related loan agreement does not require the obligor to execute and deliver an Underlying Note to evidence the indebtedness created under such Loan and (ii) no Underlying Notes are outstanding with respect to the portion of the Loan transferred to the Company. | ||
Participation means an interest in a Loan that is acquired indirectly by way of a participation from a selling institution. | ||
Person means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof) unincorporated organization, or any government or agency or political subdivision thereof. | ||
Proceeds means, collectively, (i) the net cash proceeds to the Company of the initial public offering by the Company and any subsequent offering by the Company of any class of securities issued by the Company, (ii) all cash distributions, earnings, dividends, fees and other cash payments paid on the Securities (or, as applicable, Subsidiary Securities) by or on behalf of the issuer or obligor thereof, or applicable paying agent, (iii) the net cash proceeds of the sale or other disposition of the Securities (or, as applicable, Subsidiary Securities) pursuant to the terms of this Agreement (and any Reinvestment Earnings from investment of the foregoing, as defined in Section 3.6(b) hereof) and (iv) the net cash proceeds to the Company of any borrowing or other financing by the Company. | ||
Proper Instructions means instructions (including Trade Confirmations) received by the Custodian in form acceptable to it, from the Company, or any Person duly authorized by the Company in any of the following forms acceptable to the Custodian: |
Required Loan Documents means, for each Loan: |
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Securities means, collectively, the (i) investments, including Loans, acquired by the Company and delivered to the Custodian by the Company from time to time during the term of, and pursuant to the terms of, this Agreement and (ii) all dividends in kind (e.g., non-cash dividends) from the investments described in clause (i), all of which shall be in U.S. denomination. | ||
Securities Account means the segregated trust account to be established at the Custodian to which the Custodian shall deposit or credit and hold the Securities (other than Loans) received by it pursuant to this Agreement, which account shall be designated the Fifth Street Finance Corp. Securities Custody Account. | ||
Securities Custodian means the Custodian when acting in the role of a securities custodian hereunder. | ||
Securities Depository means The Depository Trust Company and any other clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, as amended (the 1934 Act), which acts as a system for the central handling of Securities where all Securities of any particular class or series of an issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of the Securities. | ||
Securities System means the Federal Reserve Book-Entry System, a clearing agency which acts as a Securities Depository, or another book entry system for the central handling of securities (including an Eligible Securities Depository). | ||
Shares means the shares of common stock issued by Fifth Street Finance Corp., a Delaware corporation. | ||
Street Delivery Custom means a custom of the United States securities market to deliver securities which are being sold to the buying broker for examination to determine that the securities are in proper form. |
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Street Name means the form of registration in which the securities are held by a broker who is delivering the securities to another broker for the purposes of sale, it being an accepted custom in the United States securities industry that a security in Street Name is in proper form for delivery to a buyer and that a security may be re-registered by a buyer in the ordinary course. | ||
Subsidiary Cash Account shall have the meaning set forth in Section 3.13(b). | ||
Subsidiary Securities collectively, the (i) investments, including Loans, acquired by a Subsidiary and delivered to the Custodian from time to time during the term of, and pursuant to the terms of, this Agreement and (ii) all dividends in kind (e.g., non-cash dividends) from the investments described in clause (i). | ||
Subsidiary Securities Account shall have the meaning set forth in Section 3.13(a). | ||
Subsidiary means, collectively, any wholly owned subsidiary of the Company, except for those wholly-owned subsidiaries whose assets are held in custody by a custodian other than the Custodian. | ||
. | Trade Confirmation means a confirmation to the Custodian from the Company of the Companys acquisition of a Loan, and setting forth applicable information with respect to such Loan, which confirmation may be in such form as may be agreed to by the Custodian and the Company from time to time. | |
Underlying Loan Agreement means, with respect to any Loan, the document or documents evidencing the commercial loan agreement or facility pursuant to which such Loan is made. | ||
Underlying Loan Documents means, with respect to any Loan, the related Underlying Loan Agreement together with any agreements and instruments (including any Underlying Note) executed or delivered in connection therewith. | ||
Underlying Note means the one or more promissory notes executed by an obligor evidence a Loan. | ||
1.2 Construction. In this Agreement unless the contrary intention appears: |
(a) | any reference to this Agreement or another agreement or instrument refers to such agreement or instrument as the same may be amended, modified or otherwise rewritten from time to time; | ||
(b) | a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them; |
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(c) | any term defined in the singular form may be used in, and shall include, the plural with the same meaning, and vice versa; | ||
(d) | a reference to a Person includes a reference to the Persons executors, Custodian, successors and permitted assigns; | ||
(e) | an agreement, representation or warranty in favor of two or more Persons is for the benefit of them jointly and severally; | ||
(f) | an agreement, representation or warranty on the part of two or more Persons binds them jointly and severally; | ||
(g) | a reference to the term including means including, without limitation, and | ||
(h) | a reference to any accounting term is to be interpreted in accordance with generally accepted principles and practices in the United States, consistently applied, unless otherwise instructed by the Company. |
1.3 Headings. Headings are inserted for convenience and do not affect the interpretation of this Agreement. |
2. | APPOINTMENT OF CUSTODIAN | |
2.1 Appointment and Acceptance. The Company hereby appoints the Custodian as custodian of all Securities and cash owned by the Company and the Subsidiaries (as applicable) at any time during the period of this Agreement, on the terms and conditions set forth in this Agreement (which shall include any addendum hereto which is hereby incorporated herein and made a part of this Agreement), and the Custodian hereby accepts such appointment and agrees to perform the services and duties set forth in this Agreement with respect to it subject to and in accordance with the provisions hereof. | ||
2.2 Instructions. The Company agrees that it shall from time to time provide, or cause to be provided, to the Custodian all necessary instructions and information, and shall respond promptly to all inquiries and requests of the Custodian, as may reasonably be necessary to enable the Custodian to perform its duties hereunder. | ||
2.3 Company Responsible For Directions. The Company is solely responsible for directing the Custodian with respect to deposits to, withdrawals from and transfers to or from the Account. Without limiting the generality of the foregoing, the Custodian has no responsibility for compliance with any restrictions, covenants, limitations or obligations to which the Company may be subject or for which it may have obligations to third-parties in respect of the Account, and the Custodian shall have no liability for the application of any funds made at the direction of the Company. The Company shall be solely responsible for properly instructing all applicable payors to make all appropriate payments to the Custodian for deposit to the Account, and for properly instructing the Custodian with respect to the allocation or application of all such deposits. |
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2.4 Appointment of Sub-Custodian. With prior written notice to the Company, the Custodian may from time to time employ one or more sub-custodians located in the United States, but only in accordance with the approval of the board of directors of the Company. The Custodian shall not appoint a sub-custodian unless the agreement between the Custodian and such sub-custodian requires the sub-custodian to: (i) at a minimum, exercise due care in accordance with reasonable commercial standards in discharging its duty as a sub-custodian to obtain and thereafter maintain such financial assets; (ii) provide, promptly upon request by the Company, such reports as are available concerning the internal accounting controls and financial strength of the sub-custodian; and (iii) at a minimum, exercise due care in accordance with reasonable commercial standards in discharging its duty as a sub-custodian to obtain and thereafter maintain financial assets corresponding to the security entitlements of its entitlement holders. |
3. | DUTIES OF CUSTODIAN | |
3.1 Segregation. All Securities and non-cash property held by the Custodian, as applicable, for the account of the Company (other than Securities maintained in a Securities Depository or Securities System) shall be physically segregated from other Securities and non-cash property in the possession of the Custodian (including the Securities and non-cash property of the other series of the Company, if applicable) and shall be identified as subject to this Agreement. | ||
3.2 Securities Custody Account. The Custodian shall open and maintain in its trust department a segregated trust account in the name of the Company, subject only to order of the Custodian, in which the Custodian shall enter and carry, subject to Section 3.3(b), all Securities (other than Loans), cash and other assets of the Company which are delivered to it in accordance with this Agreement. For avoidance of doubt, the Custodian shall not be required to credit or deposit Loans in the Securities Account but shall instead maintain a register (in book-entry form or in such other form as it shall deem necessary or desirable) of such Loans, containing such information as the Company and the Custodian may reasonably agree; provided that, with respect to such Loans, all Required Loan Documents shall be held in safekeeping by the Document Custodian, individually segregated from the securities and investments of any other person and marked so as to clearly identify them as the property of the Company in a manner consistent with this Agreement. | ||
3.3 Delivery of Securities to Custodian. |
(a) | The Company shall deliver, or cause to be delivered, to the Custodian all of the Companys Securities, cash and other investment assets, including (a) all payments of income, payments of principal and capital distributions received by the Company with respect to such Securities, cash or other assets owned by the Company at any time during the period of this Agreement, and (b) all cash received by the Company for the issuance, at any time during such period, of Shares or other securities or in connection with a borrowing by the Company. With respect to Loans, the Required Loan Documents and other underlying loan |
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documents shall be delivered to the Custodian in its role as, and at the address identified for, the Document Custodian. With respect to assets other than Loans, such assets shall be delivered to the Custodian in its role as, and (where relevant) at the address identified for, the Securities Custodian. Except to the extent otherwise expressly provided herein, delivery of Securities to the Custodian shall be in Street Name or other good delivery form. The Custodian shall not be responsible for such Securities, cash or other assets until actually delivered to, and received by it. | |||
(b) | (i) In connection with its acquisition of a Loan or other delivery of a Security constituting a Loan, the Company shall deliver or cause to be delivered to the Custodian (in its roles as, and at the address identified for, the Custodian and Document Custodian) a properly completed Trade Confirmation containing such information in respect of such Loan as the Custodian may reasonably require in order to enable the Custodian to perform its duties hereunder in respect of such Loan and on which the Custodian may conclusively rely without further inquiry or investigation, in such form and format as the Custodian reasonably may require, and shall deliver to the Document Custodian (in its role as, and at the address identified for, the Document Custodian) the Required Loan Documents for all Loans, including the Loan Checklist. | ||
(ii) Notwithstanding anything herein to the contrary, delivery of Loans acquired by the Company (or, if applicable, Subsidiary thereof) which constitute Noteless Loans or Participations or which are otherwise not evidenced by a security or instrument as defined in Section 8-102 and Section 9-102(a)(47) of the UCC, respectively, shall be made by delivery to the Document Custodian of (i) in the case of a Noteless Loan, a copy of the loan register with respect to such Noteless Loan evidencing registration of such Loan on the books and records of the applicable obligor or bank agent to the name of the Company or, if applicable, a Subsidiary (or, in either case, its nominee) or a copy (which may be a facsimile copy) of an assignment agreement in favor of the Company (or the applicable Subsidiary) as assignee, and (ii) in the case of a Participation, a copy of the related participation agreement. Any duty on the part of the Custodian with respect to the custody of such Loans shall be limited to the exercise of reasonable care by the Custodian in the physical custody of any such documents delivered to it, and any related instrument, security, credit agreement, assignment agreement and/or other agreements or documents, if any (collectively, Financing Documents), that may be delivered to it. Nothing herein shall require the Custodian to credit to the Securities Account or to treat as a financial asset (within the meaning of Section 8-102(a)(9) of the UCC) any such Loan or other asset in the nature of a general intangible (as defined in Section 9-102(a)(42) of the UCC) or to maintain a sufficient quantity thereof. | |||
(iii) The Custodian may assume the genuineness of any such Financing Document it may receive and the genuineness and due authority of any signatures |
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appearing thereon, and shall be entitled to assume that each such Financing Document it may receive is what it purports to be. If an original security or instrument as defined in Section 8-102 and Section 9-102(a)(47) of the UCC, respectively, is or shall be or become available with respect to any Loan to be held by the Custodian under this Agreement, it shall be the sole responsibility of the Company to make or cause delivery thereof to the Document Custodian, and the Custodian shall not be under any obligation at any time to determine whether any such original security or instrument has been or is required to be issued or made available in respect of any Loan or to compel or cause delivery thereof to the Custodian. | |||
(iv) Contemporaneously with the acquisition of any Loan, the Company shall (i) cause the Required Loan Documents evidencing such Loan to be delivered to the Document Custodian; (ii) if requested by the Custodian, provide to the Custodian an amortization schedule of principal payments and a schedule of the interest payable date(s) identifying the amount and due dates of all scheduled principal and interest payments for such Loan and (iii) a properly completed Trade Confirmation containing such information in respect of such Loan as the Custodian may reasonably require in order to enable the Custodian to perform its duties hereunder in respect of such Loan on which the Custodian may conclusively rely without further inquiry or investigation, in such form and format as the Custodian reasonably may require; (iv) take all actions necessary for the Company to acquire good title to such Loan; and (v) take all actions as may be necessary (including appropriate payment notices and instructions to bank agents or other applicable paying agents) to cause (A) all payments in respect of the Loan to be made to the Custodian and (B) all notices, solicitations and other communications in respect of such Loan to be directed to the Company. The Custodian shall have no liability for any delay or failure on the part of the Company to provide necessary information to the Custodian, or for any inaccuracy therein or incompleteness thereof, or for any delay or failure on the part of the Company to give such effective payment instruction to bank agents and other paying agents, in respect of the Loans. With respect to each such Loan, the Custodian shall be entitled to rely on any information and notices it may receive from time to time from the related bank agent, obligor or similar party with respect to the related Loan Asset, and shall be entitled to update its records (as it may deem necessary or appropriate), or from the Company, on the basis of such information or notices received, without any obligation on its part independently to verify, investigate or recalculate such information. |
3.4 | Release of Securities. | ||
(a) | The Custodian shall release and deliver, or direct its agents or sub-custodian to release and deliver, as the case may be, Securities or Required Loan Documents of the Company held by the Custodian, its agents or its sub-custodian from time to time upon receipt of Proper Instructions (which shall, among other things, |
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specify the Securities or Required Loan Documents to be released, with such delivery and other information as may be necessary to enable the Custodian to perform), which may be standing instructions (in form acceptable to the Custodian) in the following cases: |
(i) | upon sale of such Securities by or on behalf of the Company and, unless otherwise directed by Proper Instructions: |
(A) | in accordance with the customary or established practices and procedures in the jurisdiction or market where the transactions occur, including delivery to the purchaser thereof or to a dealer therefor (or an agent of such purchaser or dealer) against expectation of receiving later payment; or | ||
(B) | in the case of a sale effected through a Securities System, in accordance with the rules governing the operations of the securities System; |
(ii) | upon the receipt of payment in connection with any repurchase agreement related to such securities; | ||
(iii) | to a depositary agent in connection with tender or other similar offers for securities; | ||
(iv) | to the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable (unless otherwise directed by Proper Instructions, the cash or other consideration is to be delivered to the Custodian, its agents or its sub-custodian); | ||
(v) | to an issuer thereof, or its agent, for transfer into the name of the Custodian or of any nominee of the Custodian or into the name of any of its agents or sub-custodian or their nominees or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; | ||
(vi) | to brokers clearing banks or other clearing agents for examination in accordance with the Street Delivery Custom; | ||
(vii) | for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to any deposit agreement (unless otherwise directed by Proper Instructions, the new securities and cash, if any, are to be delivered to the Custodian, its agents or its sub-custodian); | ||
(viii) | in the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive |
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securities (unless otherwise directed by Proper Instructions, the new securities and cash, if any, are to be delivered to the Custodian, its agents or its sub-custodian); and/or | |||
(ix) | for any other purpose, but only upon receipt of Proper Instructions and an officers certificate signed by an officer of the Company (which officer shall not have been the Authorized Person providing the Proper Instructions) stating (i) the specified securities to be delivered, (ii) the purpose for such delivery, (iii) that such purpose is a proper corporate purpose and (iv) naming the person or persons to whom delivery of such securities shall be made and attaching a certified copy of a resolution of the board of directors of Fifth Street Finance Corp. or an authorized committee thereof approving the delivery of such Proper Instructions. |
3.5 Registration of Securities. Securities held by the Custodian, its agents or its sub-custodian (other than bearer securities, securities held in a Securities System or Securities that are Noteless Loans or Participations) shall be registered in the name of the Company or its nominee; or, at the option of the Custodian, in the name of the Custodian or in the name of any nominee of the Custodian, or in the name of its agents or its sub-custodian or their nominees; or if directed by the Company by Proper Instruction, may be maintained in Street Name. The Custodian, its agents and its sub-custodian shall not be obligated to accept Securities on behalf of the Company under the terms of this Agreement unless such Securities are in Street Name or other good deliverable form. |
3.6 | Bank Accounts, and Management of Cash | ||
(a) | Proceeds from the Securities received by the Custodian from time to time shall be credited to the Cash Account. All amounts credited to the Cash Account shall be subject to clearance and receipt of final payment by the Custodian. | ||
(b) | Amounts held in the Cash Account from time to time may be invested in Eligible Investments pursuant to specific written Proper Instructions (which may be standing instructions) received by the Custodian from an Authorized Person acting on behalf of the Company. Such investments shall be subject to availability and the Custodians then applicable transaction charges (which shall be at the Companys expense). The Custodian shall have no liability for any loss incurred on any such investment. Absent receipt of such written instruction from the Company, the Custodian shall have no obligation to invest (or otherwise pay interest on) amounts on deposit in the Cash Account. In no instance will the Custodian have any obligation to provide investment advice to the Company. Any earnings from such investment of amounts held in the Cash Account from time to time (collectively, Reinvestment Earnings) shall be redeposited in the Cash Account (and may be reinvested at the written direction of the Company). |
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(c) | In the event that the Company shall at any time request a withdrawal of amounts from the Cash Account, the Custodian shall be entitled to liquidate, and shall have no liability for any loss incurred as a result of the liquidation of, any investment of the funds credited to such account as needed to provide necessary liquidity. Investment instructions may be in the form of standing instructions (in the form of Proper Instructions acceptable to Custodian). | ||
(d) | The Company acknowledges that cash deposited or invested with any bank (including the bank acting as Custodian) may make a margin or generate banking income for which such bank shall not be required to account to the Company. | ||
3.7 | [Reserved] |
3.8 Collection of Income. The Custodian, its agents or its sub-custodian shall use reasonable efforts to collect on a timely basis all income and other payments with respect to the Securities held hereunder to which the Company shall be entitled, to the extent consistent with usual custom in the securities custodian business in the United States. Such efforts shall include collection of interest income, dividends and other payments with respect to registered domestic securities if on the record date with respect to the date of payment by the issuer the Security is registered in the name of the Custodian or its nominee (or in the name of its agent or sub-custodian, or their nominee); and interest income, dividends and other payments with respect to bearer domestic securities if, on the date of payment by the issuer such securities are held by the Custodian or its sub-custodian or agent; provided, however, that in the case of Securities held in Street Name, the Custodian shall use commercially reasonable efforts only to timely collect income. In no event shall the Custodians agreement herein to collect income be construed to obligate the Custodian to commence, undertake or prosecute any legal proceedings. |
3.9 | Payment of Moneys. | ||
(a) | Upon receipt of Proper Instructions, which may be standing instructions, the Custodian shall pay out from the Cash Account (or remit to its agents or its sub-custodian, and direct them to pay out) moneys of the Company on deposit therein in the following cases: |
(i) | upon the purchase of Securities for the Company pursuant to such Proper Instruction; and such purchase may, unless and except to the extent otherwise directed by Proper Instructions, be carried out by the Custodian: |
(A) | in accordance with the customary or established practices and procedures in the jurisdiction or market where the transactions occur, including delivering money to the seller thereof or to a dealer therefor (or any agent for such seller or dealer) against expectation of receiving later delivery of such securities; or |
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(B) | in the case of a purchase effected through a Securities System, in accordance with the rules governing the operation of such Securities System; |
(ii) | [reserved]; and | ||
(iii) | for any other purpose directed by the Company, but only upon receipt of Proper Instructions specifying the amount of such payment, and naming the Person or Persons to whom such payment is to be made. |
(b) | At any time or times, the Custodian shall be entitled to pay (i) itself from the Cash Account, whether or not in receipt of express direction or instruction from the Company, any amounts due and payable to it pursuant to Section 8 hereof, and (ii) as otherwise permitted by Section 7.5, 9.4 or Section 12.5 below, provided, however, that in each case all such payments shall be accounted for to the Company. |
3.10 Voting and Other Action. The Custodian shall promptly deliver any notices, proxies, or proxy soliciting materials to the Company, but without indicating the manner in which any such proxies are to be voted. Neither the Custodian nor any nominee of the Custodian shall vote any of the securities held hereunder by or for the account of the Company, except in accordance with Proper Instructions of the Company. In the absence of such Proper Instructions, or in the event that such Proper Instructions are not received in a timely fashion, the Custodian shall be under no duty to act with regard to such proxies. | ||
3.11 Communications Relating to Securities. The Custodian shall transmit promptly to the Company all written information (including pendency of calls and maturities of Securities and expirations of rights in connection therewith) received by the Custodian, from its agents or its sub-custodian or from issuers of the Securities being held for the Company. The Custodian shall have no obligation or duty to exercise any right or power, or otherwise to preserve rights, in or under any Securities unless and except to the extent it has received timely Proper Instruction from the Company in accordance with the next sentence. The Custodian will not be liable for any untimely exercise of any right or power in connection with Securities at any time held by the Custodian, its agents or sub-custodian unless: |
(i) | the Custodian has received Proper Instructions with regard to the exercise of any such right or power; and | ||
(ii) | the Custodian, or its agents or sub-custodian are in actual possession of such Securities, |
in each case, at least three (3) Business Days prior to the date on which such right or power is to be exercised. It will be the responsibility of the Company to notify the |
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Custodian of the Person to whom such communications must be forwarded under this Section. | ||
3.12 Records. The Custodian shall create and maintain complete and accurate records relating to its activities under this Agreement with respect to the Securities, cash or other property held for the Company under this Agreement, with particular attention to Section 31 of the 1940 Act, and Rules 31a-1 and 32a-2 thereunder. To the extent that the Custodian, in its sole opinion, is able to do so, the Custodian shall provide assistance to the Company (at the Companys reasonable request made from time to time) by providing sub-certifications regarding certain of its services performed hereunder to the Company in connection with the Companys certification requirements pursuant to the Sarbanes-Oxley Act of 2002, as amended. All such records shall be the property of the Company and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Company or its affiliates and employees and agents of the Securities and Exchange Commission, upon reasonable request and prior notice and at the Companys expense. The Custodian shall, at the Companys request, supply the Company with a tabulation of securities owned by the Company and held by the Custodian and shall, when requested to do so by the Company and for such compensation as shall be agreed upon between the Company and the Custodian, include, to the extent applicable, the certificate numbers in such tabulations, to the extent such information is available to the Custodian. |
3.13 | Custody of Subsidiary Securities. | ||
(a) | With respect to each Subsidiary identified to the Custodian by the Company, there shall be established at the Custodian a segregated trust account to which the Custodian shall deposit and hold any Subsidiary Securities (other than Loans) received by it (and any Proceeds received by it in the form of dividends in kind) pursuant to this Agreement, which account shall be designated the [INSERT NAME OF SUBSIDIARY] Securities Account (the Subsidiary Securities Account). | ||
(b) | With respect to each Subsidiary identified to the Custodian by the Company, there shall be established at the Custodian a segregated trust account to which the Custodian shall deposit and hold any cash Proceeds received by it from time to time from or with respect to Subsidiary Securities, which account shall be designated the [INSERT NAME OF SUBSIDIARY] Cash Proceeds Account (the Subsidiary Cash Account) | ||
(c) | To the maximum extent possible, the provisions of this Agreement regarding Securities of the Company, the Securities Account and the Cash Account shall be applicable to any Subsidiary Securities, Subsidiary Securities Account and Subsidiary Cash Account, respectively. The parties hereto agree that the Company shall notify the Custodian in writing as to the establishment of any Subsidiary as to which the Custodian is to serve as custodian pursuant to the terms |
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of this Agreement; and identify in writing any accounts the Custodian shall be required to establish for such Subsidiary as herein provided. |
4. | REPORTING |
(a) | The Custodian shall render to the Company a monthly report of an itemized statement of the Securities held pursuant to this Agreement as of the end of each month. | ||
(b) | For each Business Day, the Custodian shall render to the Company a daily report of all deposits to and withdrawals from the Cash Account for such Business Day and the outstanding balance as of the end of such Business Day. | ||
(c) | The Custodian shall have no duty or obligation to undertake any market valuation of the Securities under any circumstance. | ||
(d) | The Custodian shall provide the Company with such reports as are reasonably available to it and as the Company may reasonably request from time to time, on the internal accounting controls and procedures for safeguarding securities, which are employed by the Custodian. |
5. | DEPOSIT IN U.S. SECURITIES SYSTEMS |
(a) | The Custodian may keep domestic Securities in a U.S. Securities System provided that such Securities are represented in an account of the Custodian in the U.S. Securities System which shall not include any assets of the Custodian other than assets held by it as a fiduciary, custodian or otherwise for customers; | ||
(b) | The records of the Custodian with respect to Securities which are maintained in a U.S. Securities System shall identify by book-entry those Securities belonging to the Company; | ||
(c) | If requested by the Company, the Custodian shall provide to the Company copies of all notices received from the U.S. Securities System of transfers of Securities for the account of the Company; and | ||
(d) | Anything to the contrary in this Agreement notwithstanding, the Custodian shall not be liable to the Company for any direct loss, damage, cost, expense, liability or claim to the Company resulting from use of any Securities System (other than to the extent resulting from the gross negligence, misfeasance or misconduct of the Custodian itself, or from failure of the Custodian to enforce effectively such rights as it may have against the U.S. Securities System.) |
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6. | RESERVED. | |
7. | CERTAIN GENERAL TERMS | |
7.1 No Duty to Examine Underlying Instruments. Nothing herein shall obligate the Custodian to review or examine the terms of any underlying instrument, certificate, credit agreement, indenture, loan agreement, promissory note, or other financing document evidencing or governing any Security to determine the validity, sufficiency, marketability or enforceability of any Security (and shall have no responsibility for the genuineness or completeness thereof), or otherwise. | ||
7.2 Resolution of Discrepancies. In the event of any discrepancy between the information set forth in any report provided by the Custodian to the Company and any information contained in the books or records of the Company, the Company shall promptly notify the Custodian thereof and the parties shall cooperate to diligently resolve the discrepancy. | ||
7.3 Improper Instructions. Notwithstanding anything herein to the contrary, the Custodian shall not be obligated to take any action (or forebear from taking any action), which it reasonably determines (at its sole option) to be contrary to the terms of this Agreement or applicable law. In no instance shall the Custodian be obligated to provide services on any day that is not a Business Day. | ||
7.4 Proper Instructions |
(a) | The Company will give a notice to the Custodian, in form acceptable to the Custodian, specifying the names and specimen signatures of persons authorized to give Proper Instructions (collectively, Authorized Persons and each is an Authorized Person) which notice shall be signed by an Authorized Person previously certified to the Custodian. The Custodian shall be entitled to rely upon the identity and authority of such persons until it receives written notice from an Authorized Person of the Company to the contrary. The initial Authorized Persons are set forth on Schedule A attached hereto and made a part hereof (as such Schedule A may be modified from time to time by written notice from the Company to the Custodian). | ||
(b) | The Custodian shall have no responsibility or liability to the Company (or any other person or entity), and shall be indemnified and held harmless by the Company, in the event that a subsequent written confirmation of an oral instruction fails to conform to the oral instructions received by the Custodian. The Custodian shall not have an obligation to act in accordance with purported instructions to the extent that they conflict with applicable law or regulations, local market practice or the Custodians operating policies and practices. The Custodian shall not be liable for any loss resulting from a delay while it obtains clarification of any Proper Instructions. |
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7.5 Actions Permitted Without Express Authority. The Custodian may, at its discretion, without express authority from the Company: |
(a) | make payments to itself as described in or pursuant to Section 3.9(b), or to make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this agreement, provided that all such payments shall be accounted for to the Company; | ||
(b) | surrender Securities in temporary form for Securities in definitive form; | ||
(c) | endorse for collection cheques, drafts and other negotiable instruments; and | ||
(d) | in general attend to all nondiscretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Company. |
7.6 Evidence of Authority. The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate instrument or paper reasonably believed by it to be genuine and to have been properly executed or otherwise given by or on behalf of the Company by an Authorized Officer. The Custodian may receive and accept a certificate signed by any Authorized Officer as conclusive evidence of: |
(a) | the authority of any person to act in accordance with such certificate; or | ||
(b) | any determination or of any action by the Company as described in such certificate, |
and such certificate may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary from an Authorized Officer of the Company. | ||
7.7 Receipt of Communications. Any communication received by the Custodian on a day which is not a Business Day or after 3:30 p.m., Eastern time (or such other time as is agreed by the Company and the Custodian from time to time), on a Business Day will be deemed to have been received on the next Business Day (but in the case of communications so received after 3:30 p.m., Eastern time, on a Business Day the Custodian will use its best efforts to process such communications as soon as possible after receipt). | ||
8. | COMPENSATION OF CUSTODIAN | |
8.1 Fees. The Custodian shall be entitled to compensation for its services in accordance with the terms of that certain fee letter dated January 14, 2011, between the Company and the Custodian. | ||
8.2 Expenses. The Company agrees to pay or reimburse to the Custodian upon its request from time to time all costs, disbursements, advances, and expenses (including reasonable fees and expenses of legal counsel) incurred, and any disbursements and |
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advances made (including any account overdraft resulting from any settlement or assumed settlement, provisional credit, chargeback, returned deposit item, reclaimed payment or claw-back, or the like), in connection with the preparation or execution of this Agreement, or in connection with the transactions contemplated hereby or the administration of this Agreement or performance by the Custodian of its duties and services under this Agreement, from time to time (including the reasonable costs and expenses of any action deemed necessary by the Custodian to collect any amounts owing to it under this Agreement). | ||
9. | RESPONSIBILITY OF CUSTODIAN | |
9.1 General Duties. The Custodian shall have no duties, obligations or responsibilities under this Agreement or with respect to the Securities or Proceeds except for such duties as are expressly and specifically set forth in this Agreement, and the duties and obligations of the Custodian shall be determined solely by the express provisions of this Agreement. No implied duties, obligations or responsibilities shall be read into this Agreement against, or on the part of, the Custodian. | ||
9.2 Instructions |
(a) | The Custodian shall be entitled to refrain from taking any action unless it has such instruction (in the form of Proper Instructions) from the Company as it reasonably deems necessary, and shall be entitled to require, upon notice to the Company, that Proper Instructions to it be in writing. The Custodian shall have no liability for any action (or forbearance from action) taken pursuant to the Proper Instruction of the Company. | ||
(b) | Whenever the Custodian is entitled or required to receive or obtain any communications or information pursuant to or as contemplated by this Agreement, it shall be entitled to receive the same in writing, in form, content and medium reasonably acceptable to it and otherwise in accordance with any applicable terms of this Agreement; and whenever any report or other information is required to be produced or distributed by the Custodian it shall be in form, content and medium reasonably acceptable to it and the Company, and otherwise in accordance with any applicable terms of this Agreement. |
9.3 General Standards of Care. Notwithstanding any terms herein contained to the contrary, the acceptance by the Custodian of its appointment hereunder is expressly subject to the following terms, which shall govern and apply to each of the terms and provisions of this Agreement (whether or not so stated therein): |
(a) | The Custodian may rely on and shall be protected in acting or refraining from acting upon any written notice, instruction, statement, certificate, request, waiver, consent, opinion, report, receipt or other paper or document furnished to it (including any of the foregoing provided to it by telecopier or electronic means), not only as to its due execution and validity, but also as to the truth and accuracy |
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of any information therein contained, which it in good faith believes to be genuine and signed or presented by the proper person (which in the case of any instruction from or on behalf of the Company shall be an Authorized Person); and the Custodian shall be entitled to presume the genuineness and due authority of any signature appearing thereon. The Custodian shall not be bound to make any independent investigation into the facts or matters stated in any such notice, instruction, statement, certificate, request, waiver, consent, opinion, report, receipt or other paper or document, provided, however, that if the form thereof is specifically prescribed by the terms of this Agreement, the Custodian shall examine the same to determine whether it substantially conforms on its face to such requirements hereof. | |||
(b) | Neither the Custodian nor any of its directors, officers or employees shall be liable to anyone for any error of judgment, or for any act done or step taken or omitted to be taken by it (or any of its directors, officers of employees), or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection herewith, unless such action constitutes gross negligence, willful misconduct or bad faith on its part and in breach of the terms of this Agreement. The Custodian shall not be liable for any action taken by it in good faith and reasonably believed by it to be within powers conferred upon it, or taken by it pursuant to any direction or instruction by which it is governed hereunder, or omitted to be taken by it by reason of the lack of direction or instruction required hereby for such action. The Custodian shall not be under any obligation at any time to ascertain whether the Company is in compliance with the 1940 Act, the regulations thereunder, or the Companys investment objectives and policies then in effect. | ||
(c) | In no event shall the Custodian be liable for any indirect, special or consequential damages (including lost profits) whether or not it has been advised of the likelihood of such damages. | ||
(d) | The Custodian may consult with, and obtain advice from, legal counsel selected in good faith with respect to any question as to any of the provisions hereof or its duties hereunder, or any matter relating hereto, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Custodian in good faith in accordance with the advice of such counsel; the reasonable cost of such services shall be reimbursed pursuant to Section 8.2 above. | ||
(e) | The Custodian shall not be deemed to have notice of any fact, claim or demand with respect hereto unless actually known by an officer working in its Corporate Trust Services group and charged with responsibility for administering this Agreement or unless (and then only to the extent received) in writing by the Custodian at the applicable address(es) as set forth in Section 15 and specifically referencing this Agreement. |
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(f) | No provision of this Agreement shall require the Custodian to expend or risk its own funds, or to take any action (or forbear from action) hereunder which might in its judgment involve any expense or any financial or other liability unless it shall be furnished with acceptable indemnification. Nothing herein shall obligate the Custodian to commence, prosecute or defend legal proceedings in any instance, whether on behalf of the Company or on its own behalf or otherwise, with respect to any matter arising hereunder, or relating to this Agreement or the services contemplated hereby. | ||
(g) | The permissive right of the Custodian to take any action hereunder shall not be construed as duty. | ||
(h) | The Custodian may act or exercise its duties or powers hereunder through agents or attorneys, and the Custodian shall not be liable or responsible for the actions or omissions of any such agent or attorney appointed and maintained with reasonable due care. | ||
(i) | All indemnifications contained in this Agreement in favor of the Custodian shall survive the termination of this Agreement. |
9.4 Indemnification; Custodians Lien. |
(a) | The Company shall and does hereby indemnify and hold harmless the Custodian for and from any and all costs and expenses (including reasonable attorneys fees and expenses), and any and all losses, damages, claims and liabilities, that may arise, be brought against or incurred by the Custodian, and any advances or disbursements made by the Custodian (including in respect of any Account overdraft, returned deposit item, chargeback, provisional credit, settlement or assumed settlement, reclaimed payment, claw-back or the like), as a result of, relating to, or arising out of this Agreement, or the administration or performance of the Custodians duties hereunder, or the relationship between the Company (including, for the avoidance of doubt, any Subsidiary) and the Custodian created hereby, other than such liabilities, losses, damages, claims, costs and expenses as are directly caused by the Custodians own actions constituting gross negligence or willful misconduct. | ||
(b) | If the Company requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement), or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominees own negligent action, negligent failure to act or willful misconduct, or if the Company fails to compensate the Custodian pursuant to Section 8 hereof, any cash at any time held for the account of the Company shall be security therefor and should the |
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Company fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash to the extent necessary to obtain reimbursement. |
9.5 Force Majeure. Without prejudice to the generality of the foregoing, the Custodian shall be without liability to the Company for any damage or loss resulting from or caused by events or circumstances beyond the Custodians reasonable control including (a) nationalization, expropriation, currency restrictions, the interruption, disruption or suspension of the normal procedures and practices of any securities market, power, mechanical, communications or other technological failures or interruptions, computer viruses or the like, fires, floods, earthquakes or other natural disasters, civil and military disturbance, acts of war or terrorism, riots, revolution, acts of God, work stoppages, strikes, national disasters of any kind, or other similar events or acts; (b) errors by the Company (including any Authorized Person) in its instructions to the Custodian; or (c) changes in applicable law, regulation or orders. | ||
10. | SECURITY CODES |
11. | TAX LAW | |
11.1 Domestic Tax Law. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Company or the Custodian as custodian of the Securities or the Proceeds, by the tax law of the United States or any state or political subdivision thereof. The Custodian shall be kept indemnified by and be without liability to the Company for such obligations including taxes, (but excluding any income taxes assessable in respect of compensation paid to the Custodian pursuant to this agreement) withholding, certification and reporting requirements, claims for exemption or refund, additions for late payment interest, penalties and other expenses (including legal expenses) that may be assessed against the Company, or the Custodian as custodian of the Securities or Proceeds. | ||
11.2 [Reserved]. | ||
12. | EFFECTIVE PERIOD, TERMINATION AND AMENDMENT | |
12.1 Effective Date. This Agreement shall become effective as of its due execution and delivery by each of the parties. This Agreement shall continue in full force and effect until terminated as hereinafter provided. This Agreement may only be amended by mutual written agreement of the parties hereto. This Agreement may be terminated by the Custodian or the Company pursuant to Section 12.2. | ||
12.2 Termination. This Agreement shall terminate upon the earliest of (a) the effective date of termination specified in any written notice of termination given by either party to |
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the other which effective date shall be not less than ninety (90) days from the date that such notice is given in accordance with Section 15, and (b) such other date of termination as may be mutually agreed upon by the parties in writing. | ||
12.3 Resignation. The Custodian may at any time resign under this Agreement by giving not less than ninety (90) days advance written notice thereof to the Company. | ||
12.4 Successor. Prior to the effective date of termination of this Agreement, or the effective date of the resignation of the Custodian, as the case may be, the Company shall give Proper Instruction to the Custodian designating a successor Custodian, if applicable. | ||
12.5 Payment of Fees, etc. Upon termination of this Agreement or resignation of the Custodian, the Company shall pay to the Custodian such compensation, and shall likewise reimburse the Custodian for its costs, expenses and disbursements, as may be due as of the date of such termination or resignation (or removal, as the case may be). All indemnifications in favor of the Custodian under this Agreement shall survive the termination of this Agreement, or any resignation or removal of the Custodian. | ||
12.6 Final Report. In the event of any resignation or removal of the Custodian, the Custodian shall provide to the Company a complete final written report or data file transfer of any Confidential Information as of the date of such resignation or removal. | ||
13. | REPRESENTATIONS AND WARRANTIES | |
13.1 Representations of the Company. The Company represents and warrants to the Custodian that: |
(a) | it has the power and authority to enter into and perform its obligations under this Agreement, and it has duly authorized and executed this Agreement so as to constitute its valid and binding obligation; and | ||
(b) | in giving any instructions which purport to be Proper Instructions under this Agreement, the Company will act in accordance with the provisions of its certificate of incorporation and bylaws and any applicable laws and regulations. |
13.2 Representations of the Custodian. The Custodian hereby represents and warrants to the Company that: |
(a) | it is qualified to act as a custodian pursuant to Section 26(a)(1) of the 1940 Act; | ||
(b) | it has the power and authority to enter into and perform its obligations under this Agreement; | ||
(c) | it has duly authorized and executed this Agreement so as to constitute its valid and binding obligations; and |
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(d) | that it maintains business continuity policies and standards that include data file backup and recovery procedures that comply with all applicable regulatory requirements. |
14. | PARTIES IN INTEREST; NO THIRD PARTY BENEFIT |
15. | NOTICES |
(a) | if to the Company, to |
Fifth Street Finance Corp. 10 Bank Street 12th Floor White Plains, NY 10606 Attention: William H. Craig, Chief Financial Officer Fax: (914) 328-4214 |
(b) | if to the Custodian (other than in its role as Document Custodian), to |
U.S. Bank National Association Corporate Trust Services One Federal Street, 3rd Floor Boston, MA 02110 Ref: Fifth Street Finance Corp. Attention: Donald Higgins Email: donald.higgins@usbank.com Fax: 866.592.7151 |
(c) | if to the Custodian solely in its role as Document Custodian, to |
U.S. Bank National Association 1719 Range Way Florence, South Carolina 29501 Mail Code: Ex SC FLOR |
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Ref: Fifth Street Finance Corp. Attn: Steven Garrett E-mail: steven.garrett@usbank.com Facsimile No.: 843-673-0162 |
16. | CHOICE OF LAW AND JURISDICTION |
17. | ENTIRE AGREEMENT; COUNTERPARTS | |
17.1 Complete Agreement. This Agreement constitutes the complete and exclusive agreement of the parties with regard to the matters addressed herein and supersedes and terminates as of the date hereof, all prior agreements, agreements or understandings, oral or written between the parties to this Agreement relating to such matters. | ||
17.2 Counterparts. This Agreement may be executed in any number of counterparts and all counterparts taken together shall constitute one and the same instrument. | ||
17.3 Facsimile Signatures. The exchange of copies of this Agreement and of signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes. |
18. | AMENDMENT; WAIVER | |
18.1 Amendment. This Agreement may not be amended except by an express written instrument duly executed by each of the Company and the Custodian. | ||
18.2 Waiver. In no instance shall any delay or failure to act be deemed to be or effective as a waiver of any right, power or term hereunder, unless and except to the extent such waiver is set forth in an expressly written instrument signed by the party against whom it is to be charged. | ||
19. | SUCCESSOR AND ASSIGNS | |
19.1 Successors Bound. The covenants and agreements set forth herein shall be binding upon and inure to the benefit of each of the parties and their respective successors and permitted assigns. Neither party shall be permitted to assign their rights under this Agreement without the written consent of the other party; provided, however, that the foregoing shall not limit the ability of the Custodian to delegate certain duties or |
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services to or perform them through agents or attorneys appointed with due care as expressly provided in this Agreement. | ||
19.2 Merger and Consolidation. Any corporation or association into which the Custodian may be merged or converted or with which it may be consolidated, or any corporation or association resulting from any merger, conversion or consolidation to which the Custodian shall be a party, or any corporation or association to which the Custodian transfers all or substantially all of its corporate trust business, shall be the successor of the Custodian hereunder, and shall succeed to all of the rights, powers and duties of the Custodian hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto. | ||
20. | SEVERABILITY |
21. | INSTRUMENT UNDER SEAL; HEADINGS |
22. | REQUEST FOR INSTRUCTIONS |
23. | OTHER BUSINESS |
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24. | REPRODUCTION OF DOCUMENTS |
25. | MISCELLANEOUS |
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Witness: | FIFTH STREET FINANCE CORP. | |||||
By: | ||||||
Title:
|
Title: | |||||
Witness: | U.S. BANK NATIONAL ASSOCIATION | |||||
By: | ||||||
Title:
|
Title: |
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1. | I have reviewed this quarterly report on Form 10-Q for the quarterly period ended December 31, 2010 of Fifth Street Finance Corp.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
By: | /s/ Leonard M. Tannenbaum | |||
Leonard M. Tannenbaum | ||||
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q for the quarterly period ended December 31, 2010 of Fifth Street Finance Corp.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
By: | /s/ William H. Craig | |||
William H. Craig | ||||
Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
/s/ Leonard M. Tannenbaum | ||||
Name: | Leonard M. Tannenbaum | |||
Date: January 31, 2011 |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
/s/ William H. Craig | ||||
Name: | William H. Craig | |||
Date: January 31, 2011 | ||||