UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

 

For the quarterly period ended March 31,September 30, 2020

 

OR

 

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

 

For the transition period from                      to                       

 

Commission file number: 814-01154

 

 

AUDAX CREDIT BDC INC.

(Exact name of registrant as specified in its charter)

 

 

DELAWARE47-3039124

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

 

101 HUNTINGTON AVENUE 
BOSTON, MASSACHUSETTS02199
(Address of principal executive office)(Zip Code)

 

(617) 859-1500

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

None.

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   ¨     No   ¨

 

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

 

Large accelerated filer¨Accelerated filer¨
    
Non-accelerated filerxSmaller reporting company¨
    
Emerging growth companyx  

 

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

 

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

 

The registrant had 37,793,52038,343,577 shares of common stock, par value $0.001 per share, outstanding as of June 18,November 13, 2020.

 

 

 

 

 

AUDAX CREDIT BDC INC.

TABLE OF CONTENTS

 

PART I.FINANCIAL INFORMATION: 
   
Item 1.Financial Statements 
   
 Statements of Assets and Liabilities as of March 31,September 30, 2020 (unaudited) and December 31, 2019  2
 Statements of Operations for the three and nine months ended March 31,September 30, 2020 (unaudited) and 2019 (unaudited)3
 Statements of Changes in Net Assets for the threenine months ended March 31,September 30, 2020 (unaudited) and 2019 (unaudited)4
 Statements of Cash Flows for the threenine months ended March 31,September 30, 2020 (unaudited) and 2019 (unaudited)5
 Schedules of Investments as of March 31,September 30, 2020 (unaudited) and December 31, 20196
 Notes to Financial Statements (unaudited)1615
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations34
   
 Overview3635
 Results of Operations3837
 Financial Condition, Liquidity and Capital Resources4039
   
Item 3.Quantitative and Qualitative Disclosures About Market Risk46
   
Item 4.Controls and Procedures47
   
PART II.OTHER INFORMATION:47
   
Item 1.Legal Proceedings4847
   
Item 1A.Risk Factors4947
   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds4948
   
Item 3.Defaults Upon Senior Securities5048
   
Item 4.Mine Safety Disclosures5048
   
Item 5.Other Information5048
   
Item 6.Exhibits5049
  
SIGNATURES5150

 

 

 

Audax Credit BDC Inc.

Statements of Assets and Liabilities

March 31,September 30, 2020 and December 31, 2019

(Expressed in U.S. Dollars)

 

 March 31, 2020 December 31, 2019  September 30, 2020 December 31, 2019 
 (unaudited)     (unaudited)    
Assets                
Investments, at fair value                
Non-Control/Non-Affiliate investments (Cost of $343,249,842 and $332,722,006, respectively) $325,865,214  $330,874,911 
Non-Control/Non-Affiliate investments (Cost of $350,068,000 and $332,722,006, respectively) $341,488,783  $330,874,911 
Cash and cash equivalents  23,294,471   5,506,217   24,955,930   5,506,217 
Interest receivable  898,785   942,329   1,031,575   942,329 
Receivable from investments sold  -   1,993,379   -   1,993,379 
Receivable from bank loan repayment  4,984,417   80,161   21,569   80,161 
Other assets  147,795   -   49,265   - 
        
Total assets $355,190,682  $339,396,997  $367,547,122  $339,396,997 
                
Liabilities                
Accrued expenses and other liabilities $415,912  $297,938  $224,959  $297,938 
Fee due to administrator(a)  66,250   66,250   66,250   66,250 
Fees due to investment advisor, net of waivers(a)  670,135   688,136   603,868   688,136 
Payable for investments purchased  18,869,115   6,945,000   8,957,495   6,945,000 
        
Total liabilities $20,021,412  $7,997,324  $9,852,572  $7,997,324 
Commitments and contingencies(b)                
                
Net Assets                
Common stock, $0.001 par value per share, 100,000,000 shares authorized, 36,698,229 and 35,109,246 shares issued and outstanding, respectively $

36,698

  $

35,110

 
Common stock, $0.001 par value per share, 100,000,000 shares authorized, 38,343,577 and 35,109,246 shares issued and outstanding, respectively $38,343  $35,110 
Capital in excess of par value  349,093,820   334,095,408   364,092,201   334,095,408 
Total distributable earnings  (13,961,248)  (2,730,845)  (6,435,994)  (2,730,845)
Total Net Assets $335,169,270  $331,399,673  $357,694,550  $331,399,673 
        
Net Asset Value per Share of Common Stock at End of Period $9.13  $9.44  $9.33  $9.44 
                
Shares Outstanding  36,698,229   35,109,246   38,343,577   35,109,246 
        

 

(a)Refer to Note 4-Related Party Transactionsfor additional information.
(b)Refer to Note 8-Commitments and Contingenciesfor additional information.
(c)As of December 31, 2017, components of total distributable earnings were comprised of accumulated net appreciation
on investments of $160,604 and accumulated distributions in excess of net investment income of $253,938.

 

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

 

2


Audax Credit BDC Inc.

Statements of Operations

(Expressed in U.S. Dollars)

(unaudited)

  Three Months Ended  Three Months Ended  Nine Months Ended  Nine Months Ended 
  September 30, 2020  September 30, 2019  September 30, 2020  September 30, 2019 
Investment Income                
Interest income                
Non-Control/Non-Affiliate $4,721,470  $5,347,398  $14,885,290  $15,433,946 
Other  1,058   28,722   31,053   122,237 
Total interest income  4,722,528   5,376,120   14,916,343   15,556,183 
Other income                
Non-Control/Non-Affiliate  14,577   5,214   153,950   38,364 
Total income  4,737,105   5,381,334   15,070,293   15,594,547 
                 
Expenses                
Base management fee(a) $874,188  $820,094  $2,697,570  $2,367,188 
Incentive fee(a)  356,461   680,250   1,641,419   1,939,486 
Administrative fee(a)  66,250   66,250   198,750   198,750 
Directors' fees  52,500   52,500   157,500   157,500 
Professional fees  132,514   136,660   369,572   524,791 
Other expenses  83,232   58,388   191,422   246,441 
                 
Expenses before waivers from investment adviser and administrator  1,565,145   1,814,142   5,256,233   5,434,156 
Base management fee waivers(a)  (305,966)  (287,033)  (944,150)  (828,516)
Incentive fee waivers(a)  (320,815)  (543,178)  (1,437,466)  (1,553,628)
Total expenses, net of waivers  938,364   983,931   2,874,617   3,052,012 
Net Investment Income  3,798,741   4,397,403   12,195,676   12,542,535 
                 
Realized and Unrealized Gain (Loss) on Investments                
Net realized loss on investments  (1,039,704)  (826,185)  (1,043,096)  (724,454)
Net change in unrealized appreciation (depreciation) on investments  6,436,468   182,576   (6,732,122)  (479,160)
Net realized and unrealized gain (loss) on investments  5,396,764   (643,609)  (7,775,218)  (1,203,614)
                 
Net Increase in Net Assets Resulting from Operations $9,195,505  $3,753,794  $4,420,458  $11,338,921 
                 
Basic and Diluted per Share of Common Stock:                
Net investment income $0.10  $0.13  $0.32  $0.39 
Net increase in net assets resulting from operations $0.24  $0.11  $0.12  $0.36 
                 
Weighted average shares of common stock outstanding basic diluted  38,265,852   33,504,019   37,528,161   31,856,849 

 

  Three Months Ended  Three Months Ended 
  March 31, 2020  March 31, 2019 
Investment Income        
Interest income        
Non-Control/Non-Affiliate $5,202,708  $4,870,004 
Other  28,670   50,720 
Total interest income  5,231,378   4,920,724 
Other income        
Non-Control/Non-Affiliate  14,740   17,810 
Total income  5,246,118   4,938,534 
         
Expenses        
Base management fee(a) $880,852  $738,654 
Incentive fee(a)  661,359   612,128 
Administrative fee(a)  66,250   66,250 
Directors' fees  52,500   52,500 
Professional fees  97,942   154,681 
Other expenses  48,385   104,601 
         
Expenses before waivers from investment adviser and administrator  1,807,288   1,728,814 
Base management fee waivers(a)  (308,298)  (258,529)
Incentive fee waivers(a)  (563,778)  (489,291)
Total expenses, net of waivers  935,212   980,994 
Net Investment Income  4,310,906   3,957,540 
         
Realized and Unrealized (Loss) Gain on Investments        
Net realized (loss) gain on investments  (3,776)  27,919 
Net change in unrealized depreciation on investments  (15,537,533)  (343,522)
Net realized and unrealized loss on investments  (15,541,309)  (315,603)
         
Net Decrease in Net Assets Resulting from Operations $(11,230,403) $3,641,937 
         
Basic and Diluted per Share of Common Stock:        
Net investment income $0.12  $0.13 
Net decrease in net assets resulting from operations $(0.31) $0.12 
         
Weighted average shares of common stock outstanding basic        
diluted  36,541,077   30,148,907 

(a) Refer to Note 4-Related Party Transactionsfor additional information

(a)Refer to Note 4-Related Party Transactions for additional information

 

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

 

3


Audax Credit BDC Inc.

Statements of Changes in Net Assets

(Expressed in U.S. Dollars)

(unaudited)

 

 Three Months Ended
March 31, 2020		  Three Months Ended
March 31, 2019		  Nine Months Ended
September 30, 2020		  Nine Months Ended
September 30, 2019		 
Operations                
Net investment income $4,310,906  $3,957,540  $12,195,676  $12,542,535 
Net realized (loss) gain on investments  (3,776)  27,919 
Net realized loss on investments  (1,043,096)  (724,454)
Net change in unrealized depreciation on investments  (15,537,533)  (343,522)  (6,732,122)  (479,160)
Net (decrease) increase in net assets resulting from operations  (11,230,403)  3,641,937 
Net increase in net assets resulting from operations  4,420,458   11,338,921 
        
Distributions:        
Distributions to common stockholders  (8,125,607)  (8,246,864)
Return of capital to common stockholders  -   (60,025)
Total distributions  (8,125,607)  (8,306,889)
                
Capital Share Transactions:                
Issuance of common stock  15,000,000   20,000,000   30,000,000   50,000,000 
Reinvestment of common stock  26   30 
Net increase in net assets from capital share transactions  15,000,000   20,000,000   30,000,026   50,000,030 
                
Net Increase in Net Assets  3,769,597   23,641,937   26,294,877   53,032,062 
                
Net Assets, Beginning of Period  331,399,673   267,423,235   331,399,673   267,423,235 
                
Net Assets, End of Period $335,169,270  $291,065,172  $357,694,550  $320,455,297 

 

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

 

4


Audax Credit BDC Inc.

Statements of Cash Flows

(Expressed in U.S. Dollars)

(unaudited)

 

 Three Months Ended Three Months Ended  Nine Months Ended Nine Months Ended 
 March 31, 2020 March 31, 2019  September 30, 2020  September 30, 2019 
Cash flows from operating activities:                
Net (decrease) increase in net assets resulting from operations $(11,230,403) $3,641,937 
Adjustments to reconcile net (decrease) increase in net assets from        
operations to net cash provided by (used in) operating activities:        
Net realized loss (gain) on investments  3,776   (27,919)
Net increase in net assets resulting from operations $4,420,458  $11,338,921 
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:   
Net realized loss on investments  1,043,096   724,452 
Net change in unrealized depreciation on investments  15,537,533   343,522   6,732,122   479,160 
Accretion of original issue discount interest and payment-in-kind interest  (93,473)  (62,751)  (357,873)  (199,813)
Decrease in receivable from investments sold  1,993,379   -   1,993,379   - 
Decrease (increase) in interest receivable  43,544   (66,050)
Increase in receivable from bank loan repayment  (4,904,256)  (9,660)
Increase in interest receivable  (89,246)  (409,770)
Decrease (increase) in receivable from bank loan repayment  58,592   (34,133)
Increase in other assets  (147,795)  (135,000)  (49,265)  (45,000)
Increase in accrued expenses and other liabilities  117,974   131,552 
(Decrease) increase in fees due to investment advisor(a)  (18,001)  67,048 
Increase in payable for investments purchased  11,924,115   995,087 
Decrease in accrued expenses and other liabilities  (72,979)  (89,937)
(Decrease) increase in fees due to investment advisor(a)  (84,268)  134,219 
Increase (decrease) in payable for investments purchased  2,012,495   (514,807)
Investment activity:                
Investments purchased  (34,327,808)  (45,273,530)  (52,376,341)  (110,656,983)
Proceeds from investments sold  5,743,556   -   6,437,456   5,017,964 
Repayment of bank loans  18,146,113   11,648,671   27,907,668   46,240,554 
Total investment activity  (10,438,139)  (33,624,859)  (18,031,217)  (59,398,465)
                
Net cash provided by (used in) operating activities  2,788,254   (28,747,093)
Net cash used in operating activities  (2,424,706)  (48,015,173)
                
Cash flows from financing activities:                
Issuance of shares of common stock  15,000,000   20,000,000   30,000,000   50,000,000 
Distributions paid to common stockholders  (8,125,581)  (8,306,859)
                
Net cash provided by financing activities  15,000,000   20,000,000   21,874,419   41,693,141 
                
Net decrease in cash and cash equivalents  17,788,254   (8,747,093)
Net increase (decrease) in cash and cash equivalents  19,449,713   (6,322,032)
                
Cash and cash equivalents:                
Cash and cash equivalents, beginning of period  5,506,217   17,715,145   5,506,217   17,715,145 
                
Cash and cash equivalents, end of period $23,294,471  $8,968,052  $24,955,930  $11,393,113 
                
Supplemental non-cash information                
Issuance of common shares in connection with dividend reinvestment plan $26  $30 
Payment-in-kind ("PIK") interest income $-  $32,822  $75,144  $32,822 
        

 

(a) Refer to Note 4-Related Party Transactions for additional information  

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

5(a)Refer to Note 4-Related Party Transactions for additional information

Audax Credit BDC Inc.

Schedule of Investments

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (97.0%)(g)(h):         
          
Healthcare & Pharmaceuticals         
          
Radiology Partners, Senior Secured Term B Loan (First Lien), 6.20% (Libor + 4.75%), maturity 7/9/25 $4,215,792  $4,342,655  $4,066,004 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 5/1/24  3,949,239   3,933,261   3,837,673 
Advarra, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/9/26  3,929,554   3,890,897   3,760,582 
Young, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 11/7/24  3,824,327   3,814,380   3,688,448 
Specialty Care, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 9/1/23  3,334,426   3,337,779   3,201,049 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 3/14/25  3,324,731   3,345,661   3,032,155 
Veritext, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 8/1/25  3,177,508   3,163,144   2,977,166 
Confluent Health, Senior Secured Initial Term Loan, 6.45% (Libor + 5.00%), maturity 6/24/26  2,977,500   2,950,902   2,871,709 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 8/18/23  2,899,394   2,880,320   2,789,333 
Waystar, Senior Secured Term Loan B, 5.45% (Libor + 4.00%), maturity 10/22/26  2,500,000   2,488,844   2,411,175 
MedRisk, Senior Secured Initial Term Loan (First Lien), 4.20% (Libor + 2.75%), maturity 12/27/24  2,443,750   2,448,739   2,374,714 
PharMedQuest, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 10/31/24  2,493,750   2,460,203   2,363,751 
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 9/23/24  2,439,891   2,421,247   2,347,272 
Premise Health, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 7/10/25  2,323,888   2,331,548   2,252,591 
OB Hospitalist Group, Senior Secured Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 8/1/24  2,316,088   2,305,879   2,250,658 
MedRisk, Senior Secured Initial Loan (Second Lien), 8.20% (Libor + 6.75%), maturity 12/29/25(i)  2,100,000   2,075,814   2,100,000 
Zelis RedCard, Senior Secured Initial Term Loan, 6.20% (Libor + 4.75%), maturity 9/30/26  1,995,000   1,977,754   1,924,118 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 7/24/26  1,990,000   1,983,068   1,919,295 
CareCentrix, Senior Secured Initial Term Loan, 5.95% (Libor + 4.50%), maturity 4/3/25  1,900,000   1,892,744   1,846,325 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 12/22/25  1,975,000   1,959,003   1,818,975 
Alpaca, Senior Secured Term Loan, 5.95% (Libor + 4.50%), maturity 4/19/24  1,669,921   1,647,042   1,606,530 
Injured Workers Pharmacy, Senior Secured Term Loan (First Lien), 6.70% (Libor + 5.25%), maturity 3/3/22(i)  1,569,378   1,545,837   1,545,837 
Upstream Rehabilitation, Senior Secured Term Loan, 5.95% (Libor + 4.50%), maturity 11/20/26(i)  1,500,000   1,497,678   1,507,500 
CPS, Unitranche, 6.95% (Libor + 5.50%), maturity 2/28/25  1,488,777   1,469,751   1,439,498 
Stepping Stones, Unitranche, 7.20% (Libor + 5.75%), maturity 12/12/24  1,480,325   1,473,482   1,424,132 
Athena, Senior Secured Term B Loan (First Lien), 5.95% (Libor + 4.50%), maturity 2/11/26(i)  994,981   985,502   980,056 
Ensemble, Senior Secured Closing Date Term Loan, 5.20% (Libor + 3.75%), maturity 8/3/26(i)  995,000   990,380   970,125 
Dermatologists of Central States, Senior Secured Term Loan, 7.95% (Libor + 6.50%), maturity 4/20/22  974,827   974,827   967,516 
Packaging Coordinators, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 6/30/23  982,143   987,442   949,634 
Alcami, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/14/25  985,000   981,058   942,645 
Veritext, Senior Secured Initial Term Loan (Second Lien), 8.45% (Libor + 7.00%), maturity 7/31/26  1,000,000   995,741   936,950 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 6.95% (Libor + 5.50%), maturity 5/9/25  985,000   973,442   902,024 
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 5/10/23  919,633   924,176   884,724 
Specialty Care, Senior Secured Initial Term Loan (Second Lien), 9.70% (Libor + 8.25%), maturity 9/1/24  850,000   843,619   825,988 
RMP & MedA/Rx, Senior Secured Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 2/6/25  438,887   437,920   436,692 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/9/26  380,952   373,333   364,571 
Injured Workers Pharmacy, Senior Secured Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 7/22/20  377,202   377,022   358,440 
Alpaca, Senior Secured Revolver, 5.95% (Libor + 4.50%), maturity 4/19/24  258,852   254,969   249,026 

             
High Tech Industries            
Qlik, Senior Secured 2019 Incremental Term Loan, 5.70% (Libor + 4.25%), maturity 4/26/24  3,970,000   3,945,860   3,692,100 
Masergy, Senior Secured Initial Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 12/16/24(i)  3,428,571   3,420,539   3,428,571 
Barracuda, Senior Secured 2019 Incremental Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 2/12/25(i)  3,442,462   3,454,895   3,339,188 
Syncsort, Senior Secured 2018 Refinancing Term Loan (First Lien), 7.70% (Libor + 6.25%), maturity 8/16/24  3,413,025   3,389,664   3,277,596 
Jaggaer, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 8/14/26  3,146,440   3,141,918   3,052,110 
Infogroup, Senior Secured Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 4/3/23  2,912,431   2,889,605   2,803,914 
McAfee, Senior Secured Term B USD Loan, 5.20% (Libor + 3.75%), maturity 9/30/24(i)  2,857,180   2,867,708   2,732,104 
Idera, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 6/28/24  2,639,307   2,637,390   2,560,180 
ECi Software Solutions, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 9/27/24  2,457,278   2,446,283   2,365,720 
EverCommerce, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 8/23/25  2,431,370   2,386,387   2,352,569 
Intermedia , Senior Secured New Term Loan (First Lien), 7.45% (Libor + 6.00%), maturity 7/21/25  1,975,000   1,960,535   1,970,063 
QuickBase, Senior Secured Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 4/2/26  1,985,000   1,976,321   1,911,039 
Sophos, Senior Secured Dollar Tranche Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 3/5/27(i)(q)  2,000,000   1,878,750   1,900,000 
Flexera Software, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 2/26/25  1,960,000   1,965,675   1,896,476 
Corsair, Senior Secured Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 8/28/24  1,977,384   1,963,954   1,861,925 
GlobalLogic, Senior Secured Initial Term Loan, 4.20% (Libor + 2.75%), maturity 8/1/25  1,728,438   1,720,243   1,676,619 
Bomgar, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 4/18/25  1,719,375   1,729,039   1,646,972 
Liaison, Senior Secured Initial Term Loan, 5.95% (Libor + 4.50%), maturity 12/20/26  1,496,250   1,492,500   1,447,757 
OEConnection, Senior Secured Initial Term Loan, 5.45% (Libor + 4.00%), maturity 9/25/26  1,492,500   1,485,199   1,405,935 
Navex Global, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 9/5/25  1,477,500   1,463,903   1,429,614 
Compusearch Software Systems, Senior Secured Term Loan C, 5.70% (Libor + 4.25%), maturity 5/8/23  1,429,387   1,428,902   1,379,602 
Ultimate Software , Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 5/4/26(i)  1,077,917   1,079,712   1,013,242 
Insurity, Senior Secured Closing Date Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 7/31/26  997,500   992,880   965,171 

 

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

 

6

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31,September 30, 2020

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):         
          
High Tech Industries (continued)         
LANDesk, Senior Secured Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 1/20/24 $976,252  $967,968  $936,323 
Community Brands, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 12/2/22  832,133   828,548   799,114 
Sparta, Senior Secured New Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 8/21/24  794,008   794,411   749,020 
Global Knowledge, Senior Secured Initial Term Loan (Second Lien), 11.70% (Libor + 10.25%), maturity 1/20/22  1,000,000   995,949   650,000 
Idera, Senior Secured Loan (Second Lien), 10.45% (Libor + 9.00%), maturity 6/28/27  500,000   505,000   485,010 
HelpSystems, Senior Secured Initial Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 11/19/26  500,000   498,750   496,250 
DigiCert, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 4.00%), maturity 10/16/26(i)  500,000   471,250   495,000 
McAfee, Senior Secured Initial Loan (Second Lien), 9.95% (Libor + 8.50%), maturity 9/29/25(i)  500,000   492,500   492,500 
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 12/15/23  483,658   482,237   465,763 
Endurance Int'l Group, Senior Secured Refinancing Loan (2018), 5.20% (Libor + 3.75%), maturity 2/9/23  402,181   401,518   388,173 

Services: Business            
RevSpring, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 10/11/25  3,950,000   3,945,880   3,821,981 
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 9/23/25  3,980,000   3,943,810   3,562,100 
Fleetwash, Senior Secured Incremental Term Loan, 6.20% (Libor + 4.75%), maturity 10/1/24  2,955,169   2,931,780   2,933,005 
Aimbridge, Senior Secured Initial Term Loan (2019) (First Lien), 5.20% (Libor + 3.75%), maturity 2/2/26  2,975,050   2,966,038   2,895,765 
Addison, Senior Secured Initial Term Loan, 6.20% (Libor + 4.75%), maturity 4/15/26  2,977,500   2,925,889   2,782,742 
Service Logic, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 12/31/24(i)  2,749,451   2,740,030   2,721,956 
Duff & Phelps, Senior Secured Term Loan, 5.20% (Libor + 3.75%), maturity 5/15/27(i)  2,500,000   2,475,000   2,484,375 
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 2/9/26(i)  2,475,000   2,478,286   2,406,938 
HireRight, Senior Secured Initial Term Loan (Second Lien), 8.70% (Libor + 7.25%), maturity 7/10/26  2,500,000   2,480,208   2,336,475 
Allied Universal, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 7/10/26  2,484,804   2,465,749   2,322,273 
Vistage, Senior Secured Term B Loan (First Lien), 5.45% (Libor + 4.00%), maturity 2/10/25  2,458,728   2,453,168   2,315,261 
Newport Group, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 9/12/25  2,464,975   2,452,564   2,282,715 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 6/19/24  2,388,079   2,388,079   2,237,511 
Eliassen Group, Senior Secured Initial Term B Loan, 5.95% (Libor + 4.50%), maturity 11/5/24  1,491,247   1,485,110   1,439,307 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 5.95% (Libor + 4.50%), maturity 3/27/24  1,470,641   1,466,226   1,419,419 
DBi Services, Senior Secured Term B Loan (Second Lien), 8.00% (Libor + 9.00%), maturity 2/2/26  1,268,869   1,268,869   1,268,869 
First Advantage, Senior Secured Term Facility (First Lien), 4.95% (Libor + 3.50%), maturity 1/31/27(i)  1,000,000   995,000   995,000 
WCG, Senior Secured Term Loan, 5.45% (Libor + 4.00%), maturity 1/8/27(i)  1,000,000   990,000   995,000 
Diversified, Senior Secured Initial Term Loan, 6.20% (Libor + 4.75%), maturity 12/23/23  990,019   983,903   953,131 
Franklin Energy, Senior Secured Term B Loan (First Lien), 5.45% (Libor + 4.00%), maturity 8/14/26  995,000   992,622   913,410 
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 6/3/26  497,494   493,659   497,200 

Chemicals, Plastics & Rubber            
Plaskolite, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 12/15/25  3,950,000   3,889,059   3,610,300 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 5/30/24  3,418,856   3,406,134   3,146,886 
DuBois Chemicals, Senior Secured Term Loan (Second Lien), 9.95% (Libor + 8.50%), maturity 9/30/27  3,000,000   2,963,450   2,810,910 
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 10/4/21  2,803,961   2,799,472   2,571,457 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 1/31/25  2,675,400   2,684,261   2,462,572 
Unifrax, Senior Secured USD Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 12/12/25  2,469,987   2,449,064   2,057,500 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 8.20% (Libor + 6.75%), maturity 9/6/26  2,000,000   2,002,152   1,873,940 
Q Holding, Senior Secured Term B Loan (2019), 6.45% (Libor + 5.00%), maturity 12/29/23  1,990,000   1,980,976   1,840,750 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 5.95% (Libor + 4.50%), maturity 9/30/26  1,813,558   1,770,824   1,699,249 
Zep, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 8/12/24  1,951,222   1,949,345   1,580,490 
Spartech, Senior Secured Term Loan, 6.45% (Libor + 5.00%), maturity 10/17/25  997,500   983,035   936,982 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 3/31/25  980,000   976,253   899,728 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 10/28/24(i)  984,887   968,736   925,793 
             
Services: Consumer            
CIBT Holdings, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 6/3/24  5,410,358   5,394,083   4,663,728 
A Place For Mom, Senior Secured Term Loan, 5.20% (Libor + 3.75%), maturity 8/10/24  2,659,325   2,658,718   2,538,990 
Cambium Learning, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 12/18/25  2,468,750   2,362,772   2,396,934 
Weld North, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 2/15/25  2,457,406   2,436,216   2,336,993 
Smart Start, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 2/21/22  2,411,410   2,411,410   2,286,017 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 5/14/26  2,084,750   2,080,140   2,029,191 
Valet Living, Senior Secured Initial Term Loan, 5.20% (Libor + 3.75%), maturity 9/28/25  1,978,696   1,974,504   1,865,911 
LegalShield, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 5/1/25  1,940,510   1,928,009   1,944,236 
Ned Stevens, Senior Secured Term A Loan, 7.20% (Libor + 5.75%), maturity 9/30/25  1,580,980   1,553,332   1,531,132 
Spring Education, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/30/25  985,000   983,031   956,346 
LegalShield, Senior Secured Initial Term Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 5/1/26  500,000   500,000   499,705 
StubHub, Senior Secured USD Term B Loan, 4.95% (Libor + 3.50%), maturity 2/12/27  498,750   496,250   472,715 
Ned Stevens, Senior Secured Revolver, 6.20% (Libor + 4.75%), maturity 9/30/25  -   (2,614)  - 
Portfolio Investments (a) (b) (c) (d) (e) (f) Par  Cost  Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (95.2%)(g)(h):            
             
Healthcare & Pharmaceuticals            
Radiology Partners, Senior Secured Term B Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/25(i) $4,215,792  $4,345,712  $4,081,429 
Advarra, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/26  3,909,806   3,873,848   3,909,805 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/1/24(i)  3,928,827   3,914,207   3,860,072 
Young, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/7/24  3,804,669   3,795,542   3,757,109 
Specialty Care, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 9/1/23  3,317,371   3,320,262   3,309,076 
Veritext, Senior Secured Initial Term Loan (First Lien), 3.48% (Libor + 3.25%), maturity 8/1/25  3,161,388   3,147,073   3,113,966 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 3/14/25  3,247,592   3,265,442   2,955,308 
Confluent Health, Senior Secured Initial Term Loan, 5.23% (Libor + 5.00%), maturity 6/24/26  2,962,500   2,938,237   2,955,094 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 8/18/23  2,887,958   2,870,561   2,794,100 
Waystar, Senior Secured Term Loan B, 4.23% (Libor + 4.00%), maturity 10/22/26  2,487,500   2,477,839   2,487,500 
PharMedQuest, Senior Secured Initial Term Loan, 6.25% (Libor + 5.25%), maturity 10/31/24  2,481,250   2,452,364   2,481,250 
MedRisk, Senior Secured Initial Term Loan (First Lien), 2.98% (Libor + 2.75%), maturity 12/27/24  2,431,250   2,435,776   2,431,250 
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.50%), maturity 9/23/24  2,427,643   2,410,238   2,415,505 
OB Hospitalist Group, Senior Secured Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 8/1/24  2,316,088   2,306,941   2,316,088 
Premise Health, Senior Secured Initial Term Loan (First Lien), 3.73% (Libor + 3.50%), maturity 7/10/25  2,312,092   2,318,760   2,312,092 
MedRisk, Senior Secured Initial Loan (Second Lien), 6.98% (Libor + 6.75%), maturity 12/29/25  2,100,000   2,077,798   2,100,000 
Packaging Coordinators, Senior Secured Term Loan, 9.75% (Libor + 8.75%), maturity 10/1/27(i)  2,000,000   1,992,500   2,000,000 
Zelis RedCard, Senior Secured Initial Term Loan, 4.98% (Libor + 4.75%), maturity 9/30/26(i)  1,950,004   1,935,858   1,943,542 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 4.73% (Libor + 4.50%), maturity 12/22/25  1,965,000   1,950,929   1,930,613 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 3.73% (Libor + 3.50%), maturity 7/24/26(i)  1,980,000   1,973,551   1,927,953 
CareCentrix, Senior Secured Initial Term Loan, 4.73% (Libor + 4.50%), maturity 4/3/25(i)  1,875,000   1,868,441   1,802,578 
Alpaca, Senior Secured Term Loan, 7.75% (Libor + 6.75%), maturity 4/19/24(j)  1,661,508   1,640,127   1,615,816 
Upstream Rehabilitation, Senior Secured Term Loan, 4.73% (Libor + 4.50%), maturity 11/20/26  1,492,500   1,490,402   1,481,306 
CPS, Unitranche, 6.50% (Libor + 5.50%), maturity 2/28/25  1,481,331   1,464,014   1,451,704 
Stepping Stones, Unitranche, 6.75% (Libor + 5.75%), maturity 12/12/24  1,472,873   1,466,532   1,450,780 
Ensemble, Senior Secured Closing Date Term Loan, 3.98% (Libor + 3.75%), maturity 8/3/26(i)  990,000   985,710   985,317 
Veritext, Senior Secured Initial Term Loan (Second Lien), 7.23% (Libor + 7.00%), maturity 7/31/26  1,000,000   995,998   985,000 
Athena, Senior Secured Term B Loan (First Lien), 4.73% (Libor + 4.50%), maturity 2/11/26(i)  989,956   981,393   982,969 
Packaging Coordinators, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 6/30/23(i)  977,041   981,570   977,041 
Alcami, Senior Secured Initial Term Loan (First Lien), 4.48% (Libor + 4.25%), maturity 7/14/25  980,000   976,396   948,150 
Dermatologists of Central States, Senior Secured Term Loan, 7.50% (Libor + 6.50%), maturity 4/20/22  969,861   969,861   943,190 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 6.50% (Libor + 5.50%), maturity 5/9/25  980,000   969,429   940,800 
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/10/23(i)  914,856   918,723   880,549 
Specialty Care, Senior Secured Initial Term Loan (Second Lien), 9.25% (Libor + 8.25%), maturity 9/1/24  850,000   844,216   850,000 
Waystar, Senior Secured 2020 Incremental Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 10/22/26(i)  500,000   498,750   498,750 
RMP & MedA/Rx, Senior Secured Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 2/6/25  433,366   432,651   433,366 
Alpaca, Senior Secured Revolver, 7.75% (Libor + 6.75%), maturity 4/19/24(j)  258,852   254,969   251,734 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/26  -   (7,619)  - 
             
High Tech Industries            
Qlik, Senior Secured 2019 Incremental Term Loan, 4.48% (Libor + 4.25%), maturity 4/26/24(i)  3,950,000   3,928,594   3,923,465 
Netsmart, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 10/1/27(i)  3,500,000   3,484,375   3,500,000 
Masergy, Senior Secured Initial Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 12/16/24  3,428,571   3,421,397   3,428,571 
Barracuda, Senior Secured 2019 Incremental Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 2/12/25(i)  3,424,943   3,436,190   3,410,505 
Syncsort, Senior Secured 2018 Refinancing Term Loan (First Lien), 6.48% (Libor + 6.25%), maturity 8/16/24(i)  3,395,700   3,374,769   3,360,917 
EverCommerce, Senior Secured Initial Term Loan, 5.73% (Libor + 5.50%), maturity 8/23/25  3,130,180   3,084,621   3,130,180 
Jaggaer, Senior Secured Initial Term Loan (First Lien), 4.23% (Libor + 4.00%), maturity 8/14/26(i)  3,130,629   3,126,018   3,109,327 
McAfee, Senior Secured Term B USD Loan, 3.98% (Libor + 3.75%), maturity 9/30/24(i)  2,842,676   2,852,276   2,828,873 
Idera, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 6/28/24(i)  2,625,742   2,624,087   2,625,742 
Infogroup, Senior Secured Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 4/3/23(i)  2,897,419   2,878,026   2,567,475 
ECi Software, Senior Secured Initial Term Loan, 5.25% (Libor + 4.25%), maturity 9/27/24(i)  2,444,677   2,435,896   2,444,677 
ECi Software, Senior Secured Term Loan, 4.50% (Libor + 3.75%), maturity 9/30/27(i)  2,000,000   1,992,500   1,992,500 
Sophos, Senior Secured Dollar Tranche Term Loan (First Lien), 3.73% (Libor + 3.50%), maturity 3/5/27(i)(q)  1,995,000   1,878,459   1,963,707 
QuickBase, Senior Secured Term Loan (First Lien), 4.23% (Libor + 4.00%), maturity 4/2/26  1,975,000   1,966,886   1,960,188 
Intermedia , Senior Secured New Term Loan (First Lien), 7.00% (Libor + 6.00%), maturity 7/21/25  1,965,000   1,952,993   1,950,263 
Flexera Software, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 2/26/25(i)  1,950,000   1,955,844   1,945,125 
GlobalLogic, Senior Secured Initial Term Loan, 2.98% (Libor + 2.75%), maturity 8/1/25  1,719,688   1,712,086   1,719,688 
Bomgar, Senior Secured Initial Term Loan (First Lien), 4.23% (Libor + 4.00%), maturity 4/18/25(i)  1,710,625   1,719,334   1,697,795 
Corsair, Senior Secured Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 8/28/24  1,598,987   1,588,670   1,598,987 
Ultimate Software , Senior Secured Initial Term Loan (First Lien), 3.98% (Libor + 3.75%), maturity 5/4/26(i)  1,571,241   1,571,186   1,564,433 
OEConnection, Senior Secured Initial Term Loan, 5.00% (Libor + 4.00%), maturity 9/25/26(i)  1,530,207   1,523,837   1,518,730 
Liaison, Senior Secured Initial Term Loan, 5.50% (Libor + 4.50%), maturity 12/20/26  1,488,750   1,485,119   1,488,750 
Navex Global, Senior Secured Initial Term Loan (First Lien), 3.48% (Libor + 3.25%), maturity 9/5/25(i)  1,470,000   1,457,569   1,441,426 
Unison, Senior Secured 2020 Term Loan, 8.00% (Libor + 7.00%), maturity 6/25/26(j)  997,500   973,344   990,019 
Insurity, Senior Secured Closing Date Term Loan (First Lien), 4.23% (Libor + 4.00%), maturity 7/31/26  992,500   988,209   987,538 

 

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

 

7


Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31,September 30, 2020

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h)(Continued):            
Aerospace & Defense            
CPI International, Senior Secured TL, 6.20% (Libor + 4.75%), maturity 7/26/24 $3,855,880  $3,817,321  $3,667,597 
StandardAero, Senior Secured 2020 Term B-1 Loan, 4.95% (Libor + 3.50%), maturity 4/6/26  3,559,038   3,547,949   3,310,689 
Whitcraft, Unitranche, 7.45% (Libor + 6.00%), maturity 4/3/23(i)  1,997,493   1,987,493   1,987,506 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 9.20% (Libor + 7.75%), maturity 4/30/26(i)  2,000,000   2,009,421   1,980,000 
StandardAero, Senior Secured 2020 Term B-2 Loan, 4.95% (Libor + 3.50%), maturity 4/6/26  1,913,462   1,907,499   1,779,940 
Tronair, Senior Secured Initial Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 9/8/23  1,452,374   1,446,531   1,333,962 
Amentum, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 1/29/27(i)  1,000,000   967,500   990,000 
API Technologies, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 5/9/26  997,487   967,487   927,883 
Eton, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 5/1/25  498,731   498,731   472,797 
Eton, Senior Secured Initial Term Loan (Second Lien), 9.45% (Libor + 8.00%), maturity 5/1/26  500,000   495,000   466,285 
Novaria Group, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 1/27/27  500,000   495,000   466,285 
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 4/30/25  497,481   495,126   463,936 
             
Banking, Finance, Insurance & Real Estate            
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 4/30/23(i)  2,500,000   2,506,250   2,531,250 
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 7.20% (Libor + 5.75%), maturity 10/31/22  1,980,672   1,947,667   1,939,712 
Kestra Financial, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 6/3/26  1,990,000   1,972,030   1,852,153 
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 9/6/24  1,466,250   1,463,785   1,456,177 
Advisor Group, Senior Secured Initial Term B Loan, 6.45% (Libor + 5.00%), maturity 7/31/26  1,496,250   1,482,294   1,390,016 
AmeriLife, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 3/18/27  1,329,545   1,326,222   1,319,574 
Aperio, Senior Secured Loan, 6.45% (Libor + 5.00%), maturity 10/25/24  933,889   929,820   871,374 
Sedgwick Claims, Senior Secured Initial Term Loan, 4.70% (Libor + 3.25%), maturity 12/31/25  498,737   498,112   473,801 
             
Capital Equipment            
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 9/30/24  2,437,500   2,437,500   2,286,375 
BAS, Senior Secured Repricing Term Loan, 5.20% (Libor + 3.75%), maturity 5/21/24  1,964,586   1,966,296   1,836,731 
Excelitas, Senior Secured Initial Term Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 12/1/25(i)  1,500,000   1,477,500   1,477,500 
Edward Don, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 7/2/25  1,475,025   1,469,390   1,361,699 
Cole-Parmer, Senior Secured Closing Date Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 11/4/26  1,000,000   995,442   957,000 
Duravant, Senior Secured Incremental Amendment No. 2 Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/19/24(i)  498,737   498,737   498,737 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 12/2/24  492,443   495,992   467,220 
Restaurant Technologies, Senior Secured Initial Loan (Second Lien), 7.95% (Libor + 6.50%), maturity 10/1/26  500,000   503,750   465,110 
TriMark, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 8/28/24  489,951   491,337   453,459 
             
Construction & Building            
PlayPower, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 5/8/26  1,929,861   1,929,861   1,775,472 
Tangent, Senior Secured Closing Date Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 11/30/24  1,824,977   1,810,785   1,709,949 
PlayCore, Senior Secured Initial Term Loan (Second Lien), 9.20% (Libor + 7.75%), maturity 9/29/25  1,500,000   1,467,188   1,400,310 
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 4.45% (Libor + 3.00%), maturity 6/3/24  1,471,052   1,459,806   1,368,402 
PlayCore, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 9/30/24  974,414   972,639   909,654 
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 7/29/22  626,806   621,609   588,953 
Hoffman Southwest, Senior Secured Initial Term Loan, 5.95% (Libor + 4.50%), maturity 8/14/23  527,876   524,122   492,108 
Acuren, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 1/23/27  500,000   497,500   467,295 
DiversiTech Corporation, Senior Secured Initial Term Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 6/2/25  500,000   488,750   466,285 
             
Containers, Packaging & Glass            
ProAmpac, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 11/20/23  2,992,801   3,008,486   2,837,176 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 7/18/26  1,990,000   1,980,702   1,878,660 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 7/31/26(i)  997,500   995,208   988,772 
Tank Holding, Senior Secured 2020 Refinancing Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 3/26/26  995,000   990,861   932,285 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 7.45% (Libor + 6.00%), maturity 11/12/21(i)  487,587   487,085   482,712 
Berlin Packaging, Senior Secured Initial Term Loan (First Lien), 3.00% (Libor + 3.00%), maturity 11/7/25(i)  498,731   476,288   481,275 
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 11/30/23(i)  493,627   493,627   464,009 
             
Consumer Goods: Non-durable            
Manna Pro, Senior Secured Term Loan, 7.45% (Libor + 6.00%), maturity 12/8/23  3,430,000   3,392,420   3,285,940 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 5.95% (Libor + 4.50%), maturity 10/26/23  2,221,890   2,208,700   1,981,926 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 9/11/23  1,906,766   1,896,071   1,757,638 
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 12/16/24  984,902   990,954   929,964 
             
Automotive            
Mavis, Senior Secured Closing Date Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 3/20/25  3,927,708   3,913,101   3,428,889 
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 9.70% (Libor + 8.25%), maturity 4/21/25  1,800,000   1,798,564   1,708,200 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 2/3/25  985,000   961,944   920,896 
IXS, Senior Secured Initial Term Loan, 6.45% (Libor + 5.00%), maturity 3/15/27  500,000   495,000   474,500 
Safe Fleet, Senior Secured Initial Term Loan (Second Lien), 8.20% (Libor + 6.75%), maturity 2/2/26  500,000   488,750   466,285 
             
Transportation: Cargo            
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 10/12/24  3,615,344   3,611,340   3,358,654 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 10/7/24  2,460,182   2,453,888   2,285,509 
Capstone Logistics, Senior Secured Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 10/7/21  1,161,707   1,161,868   1,144,282 
Portfolio Investments (a) (b) (c) (d) (e) (f) Par  Cost  Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):            
             
High Tech Industries (continued)            
LANDesk, Senior Secured Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 1/20/24(i) $971,501  $964,055  $971,501 
Community Brands, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 12/2/22  827,884   824,687   817,536 
Sparta, Senior Secured New Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 8/21/24  789,937   790,250   780,062 
Global Knowledge, Senior Secured Initial Term Loan (Second Lien), 13.25% (Libor + 12.25%), maturity 1/20/22(i)(m)  1,000,000   996,979   600,000 
McAfee, Senior Secured Initial Loan (Second Lien), 9.50% (Libor + 8.50%), maturity 9/29/25(i)  500,000   492,791   505,805 
Idera, Senior Secured Loan (Second Lien), 10.00% (Libor + 9.00%), maturity 6/28/27  500,000   504,806   500,000 
MultiPlan, Senior Secured Initial Term Loan, 3.75% (Libor + 2.75%), maturity 6/7/23(i)  500,000   495,975   500,000 
HelpSystems, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 11/19/26(i)  497,500   496,297   497,500 
DigiCert, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 4.00%), maturity 10/16/26(i)  497,500   469,866   495,013 
Imperva, Senior Secured Term Loan, 5.00% (Libor + 4.00%), maturity 1/12/26(i)  498,737   495,620   493,063 
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 12/15/23(i)  481,158   479,909   472,150 
Endurance Int'l Group, Senior Secured Refinancing Loan (2018), 4.75% (Libor + 3.75%), maturity 2/9/23(i)  397,529   396,977   397,070 
             
Services: Business            
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 9/23/25  3,960,000   3,927,931   3,950,100 
RevSpring, Senior Secured Initial Term Loan (First Lien), 4.48% (Libor + 4.25%), maturity 10/11/25(i)  3,930,000   3,926,168   3,851,400 
Addison, Senior Secured Initial Term Loan, 4.98% (Libor + 4.75%), maturity 4/15/26  2,962,500   2,915,513   2,955,094 
Fleetwash, Senior Secured Incremental Term Loan, 5.75% (Libor + 4.75%), maturity 10/1/24  2,940,281   2,919,253   2,918,229 
Service Logic, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 12/31/24(i)  2,914,675   2,905,911   2,914,675 
Aimbridge, Senior Secured Initial Term Loan (2019) (First Lien), 3.98% (Libor + 3.75%), maturity 2/2/26(i)  2,960,100   2,951,626   2,694,154 
Duff & Phelps, Senior Secured Initial Dollar Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 4/9/27(i)  2,493,750   2,469,721   2,490,774 
HireRight, Senior Secured Initial Term Loan (Second Lien), 7.48% (Libor + 7.25%), maturity 7/10/26  2,500,000   2,481,901   2,475,000 
Allied Universal, Senior Secured Initial Term Loan, 4.48% (Libor + 4.25%), maturity 7/10/26(i)  2,472,349   2,455,710   2,466,168 
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 3.98% (Libor + 3.75%), maturity 2/9/26(i)  2,462,500   2,465,533   2,450,188 
Newport Group, Senior Secured Initial Term Loan (First Lien), 3.73% (Libor + 3.50%), maturity 9/12/25(i)  2,452,462   2,441,096   2,378,888 
Vistage, Senior Secured Term B Loan (First Lien), 5.00% (Libor + 4.00%), maturity 2/10/25  2,335,958   2,331,041   2,330,118 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 6/19/24(i)  2,375,801   2,375,801   2,157,464 
Eliassen Group, Senior Secured Initial Term B Loan, 4.48% (Libor + 4.25%), maturity 11/5/24  1,487,495   1,481,968   1,487,495 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 4.73% (Libor + 4.50%), maturity 3/27/24  1,463,141   1,459,225   1,446,681 
DBi Services, Senior Secured Term B Loan (Second Lien), 8.00% (Libor + 9.00%), maturity 2/2/26  1,268,604   1,268,604   1,268,604 
WCG, Senior Secured Term Loan, 5.00% (Libor + 4.00%), maturity 1/8/27(i)  997,500   987,877   997,500 
Diversified, Senior Secured Initial Term Loan, 5.75% (Libor + 4.75%), maturity 12/23/23  985,056   979,702   980,131 
First Advantage, Senior Secured Term Facility (First Lien), 3.48% (Libor + 3.25%), maturity 1/31/27(i)  997,500   992,694   978,797 
Franklin Energy, Senior Secured Term B Loan (First Lien), 4.23% (Libor + 4.00%), maturity 8/14/26  990,000   987,704   920,700 
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 4.23% (Libor + 4.00%), maturity 6/3/26  494,987   491,520   493,750 
             
Chemicals, Plastics & Rubber            
Plaskolite, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 12/15/25(i)  3,930,000   3,873,595   3,875,963 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/30/24  3,401,368   3,390,285   3,316,334 
DuBois Chemicals, Senior Secured Term Loan (Second Lien), 8.73% (Libor + 8.50%), maturity 9/30/27  3,000,000   2,967,566   2,977,500 
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 10/4/21  2,788,959   2,785,926   2,677,401 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 1/31/25(i)  2,661,750   2,669,856   2,418,296 
Unifrax, Senior Secured USD Term Loan (First Lien), 3.98% (Libor + 3.75%), maturity 12/12/25(i)  2,457,481   2,437,202   2,184,320 
Q Holding, Senior Secured Term B Loan (2019), 6.00% (Libor + 5.00%), maturity 12/29/23  1,980,000   1,971,899   1,957,725 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 4.73% (Libor + 4.50%), maturity 9/30/26  1,799,928   1,760,713   1,786,428 
Zep, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 8/12/24(i)  1,941,216   1,939,534   1,832,327 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 6.98% (Libor + 6.75%), maturity 9/6/26(i)  2,000,000   2,002,020   1,768,186 
Spartech, Senior Secured Term Loan, 5.50% (Libor + 4.50%), maturity 10/17/25  992,500   979,001   992,500 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 3/31/25(i)  975,000   971,594   900,870 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 10/28/24(i)  979,849   965,297   887,235 
Boyd Corp, Senior Secured Initial Term Loan (First Lien), 3.73% (Libor + 3.50%), maturity 9/6/25(i)  498,728   463,728   467,142 
             
Services: Consumer            
CIBT Holdings, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 6/3/24(i)  5,382,541   5,367,814   3,983,080 
A Place For Mom, Senior Secured Term Loan, 4.75% (Libor + 3.75%), maturity 8/10/24  2,645,687   2,645,188   2,586,159 
Cambium Learning, Senior Secured Initial Term Loan (First Lien), 4.73% (Libor + 4.50%), maturity 12/18/25  2,456,210   2,358,273   2,456,210 
Weld North, Senior Secured Initial Term Loan, 4.48% (Libor + 4.25%), maturity 2/15/25(i)  2,444,868   2,425,614   2,438,756 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 5/14/26(i)  2,074,250   2,070,043   1,977,290 
LegalShield, Senior Secured Initial Term Loan (First Lien), 3.48% (Libor + 3.25%), maturity 5/1/25(i)  1,927,000   1,915,817   1,876,187 
Ned Stevens, Senior Secured Term A Loan, 6.75% (Libor + 5.75%), maturity 9/30/25(j)  1,515,033   1,491,945   1,503,670 
Smart Start, Senior Secured Initial Term Loan, 5.75% (Libor + 4.75%), maturity 8/19/27  1,000,000   990,000   992,500 
Spring Education, Senior Secured Initial Term Loan (First Lien), 4.48% (Libor + 4.25%), maturity 7/30/25(i)  980,000   978,196   934,739 
LegalShield, Senior Secured Incremental Term Loan, 0.00%, maturity 5/1/25(i)  500,000   492,500   492,500 
StubHub, Senior Secured USD Term B Loan, 3.73% (Libor + 3.50%), maturity 2/12/27(i)  496,250   493,847   440,687 
LegalShield, Senior Secured Initial Term Loan (Second Lien), 7.73% (Libor + 7.50%), maturity 5/1/26  27,778   27,778   27,639 
Ned Stevens, Senior Secured Revolver, 5.75% (Libor + 4.75%), maturity 9/30/25(j)  -   (2,614)  - 

 

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

 


Audax Credit BDC Inc.

8

Schedule of Investments (Continued)

As of September 30, 2020

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f) Par  Cost  Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):            
Aerospace & Defense            
CPI International, Senior Secured Second Amendment Incremental Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 7/26/24 $5,288,580  $5,237,621  $5,275,359 
StandardAero, Senior Secured 2020 Term B-1 Loan, 3.73% (Libor + 3.50%), maturity 4/6/26(i)  3,541,154   3,531,095   3,182,096 
Whitcraft, Unitranche, 7.00% (Libor + 6.00%), maturity 4/3/23  1,987,466   1,977,854   1,962,623 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 7.75%), maturity 4/30/26  2,000,000   2,008,648   1,955,000 
StandardAero, Senior Secured 2020 Term B-2 Loan, 3.73% (Libor + 3.50%), maturity 4/6/26(i)  1,903,846   1,898,438   1,710,804 
Tronair, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 9/8/23  1,444,848   1,439,841   1,309,033 
Amentum, Senior Secured Initial Term Loan (First Lien), 3.73% (Libor + 3.50%), maturity 1/29/27(i)  997,500   966,227   990,604 
API Technologies, Senior Secured Initial Term Loan (First Lien), 4.48% (Libor + 4.25%), maturity 5/9/26  992,462   963,556   980,057 
Eton, Senior Secured Initial Term Loan (Second Lien), 8.23% (Libor + 8.00%), maturity 5/1/26  500,000   495,169   496,250 
Eton, Senior Secured Initial Term Loan (First Lien), 4.73% (Libor + 4.50%), maturity 5/1/25(i)  496,193   496,193   494,759 
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 4/30/25  493,923   491,668   485,279 
Novaria Group, Senior Secured Initial Term Loan, 6.25% (Libor + 5.25%), maturity 1/27/27  481,818   477,007   478,205 
             
Banking, Finance, Insurance & Real Estate            
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 4/30/23  2,500,000   2,506,203   2,493,750 
AmeriLife, Senior Secured Initial Term Loan (First Lien), 4.23% (Libor + 4.00%), maturity 3/18/27(i)  2,392,651   2,377,248   2,380,688 
Kestra Financial, Senior Secured Initial Term Loan, 4.48% (Libor + 4.25%), maturity 6/3/26(i)  1,980,000   1,963,363   1,965,150 
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 6.75% (Libor + 5.75%), maturity 10/31/22  1,966,333   1,943,176   1,956,501 
Orion, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 9/24/27(i)  1,500,000   1,485,000   1,492,602 
Advisor Group, Senior Secured Initial Term B Loan, 5.23% (Libor + 5.00%), maturity 7/31/26(i)  1,488,750   1,475,807   1,450,891 
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 9/6/24  1,458,750   1,456,670   1,444,163 
Mitchell International, Senior Secured Amendment No. 2 New Term Loan Facility (First Lien), 4.75% (Libor + 4.25%), maturity 11/29/24(i)  1,000,000   946,074   982,081 
Aperio, Senior Secured Initial Commitment, 5.23% (Libor + 5.00%), maturity 10/25/24  933,889   930,216   933,889 
Sedgwick Claims, Senior Secured Initial Term Loan, 3.48% (Libor + 3.25%), maturity 12/31/25(i)  496,212   495,611   481,834 
             
Capital Equipment            
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 3.98% (Libor + 3.75%), maturity 9/30/24(i)  2,425,000   2,425,000   2,205,711 
BAS, Senior Secured Repricing Term Loan, 4.75% (Libor + 3.75%), maturity 5/21/24  1,954,438   1,956,545   1,949,551 
Excelitas, Senior Secured Initial Term Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 12/1/25(i)  1,500,000   1,478,374   1,479,674 
Edward Don, Senior Secured Initial Term Loan, 5.25% (Libor + 4.25%), maturity 7/2/25  1,467,538   1,462,577   1,394,161 
Cole-Parmer, Senior Secured Closing Date Term Loan (First Lien), 4.48% (Libor + 4.25%), maturity 11/4/26(i)  995,000   990,968   992,513 
TriMark, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 8/28/24(i)  986,153   885,776   601,297 
Restaurant Technologies, Senior Secured Initial Loan (Second Lien), 6.73% (Libor + 6.50%), maturity 10/1/26  500,000   503,629   495,000 
Duravant, Senior Secured Incremental Amendment No. 2 Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/19/24  496,212   496,212   492,491 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 12/2/24  489,924   493,185   486,250 
             
Construction & Building            
Tangent, Senior Secured Closing Date Term Loan (First Lien), 4.98% (Libor + 4.75%), maturity 11/30/24  1,815,789   1,803,401   1,802,171 
PlayPower, Senior Secured Initial Term Loan, 5.73% (Libor + 5.50%), maturity 5/8/26  1,863,667   1,863,667   1,733,210 
PlayCore, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 7.75%), maturity 9/29/25  1,500,000   1,468,498   1,492,500 
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 4.00% (Libor + 3.00%), maturity 6/3/24(i)  1,463,492   1,453,459   1,448,857 
PlayCore, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 9/30/24  969,417   967,793   964,570 
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 7/29/22  623,533   619,423   623,533 
Hoffman Southwest, Senior Secured Initial Term Loan, 6.00% (Libor + 5.00%), maturity 8/14/23  527,876   525,262   523,917 
DiversiTech Corporation, Senior Secured Initial Term Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 6/2/25  500,000   489,324   497,500 
Acuren, Senior Secured Initial Term Loan, 4.48% (Libor + 4.25%), maturity 1/23/27(i)  497,500   495,097   496,878 
             
Containers, Packaging & Glass            
ProAmpac, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 11/20/23(i)  2,977,335   2,991,226   2,977,335 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 3.98% (Libor + 3.75%), maturity 7/18/26  2,416,597   2,407,887   2,416,597 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 3.98% (Libor + 3.75%), maturity 7/31/26(i)  992,500   990,395   982,575 
Tank Holding, Senior Secured 2020 Refinancing Term Loan (First Lien), 3.73% (Libor + 3.50%), maturity 3/26/26(i)  990,000   986,352   972,876 
Berlin Packaging, Senior Secured Initial Term Loan (First Lien), 3.00% (Libor + 3.00%), maturity 11/7/25(i)  496,193   474,701   484,221 
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 11/30/23(i)  483,602   483,602   480,048 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 7.00% (Libor + 6.00%), maturity 11/12/21  483,212   482,776   479,588 
             
Consumer Goods: Non-durable            
Manna Pro, Senior Secured Term Loan, 7.00% (Libor + 6.00%), maturity 12/8/23  3,412,500   3,378,463   3,395,438 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 5.50% (Libor + 4.50%), maturity 10/26/23  2,209,019   2,197,476   1,988,118 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 9/11/23  1,906,766   1,897,523   1,863,864 
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 12/16/24(i)  979,869   985,476   831,872 
             
Automotive            
Mavis, Senior Secured Closing Date Term Loan (First Lien), 3.48% (Libor + 3.25%), maturity 3/20/25(i)  3,839,353   3,826,741   3,682,216 
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 9.25% (Libor + 8.25%), maturity 4/21/25  1,800,000   1,798,681   1,800,000 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 2/3/25  975,849   954,599   963,651 
Safe Fleet, Senior Secured Initial Term Loan (Second Lien), 6.98% (Libor + 6.75%), maturity 2/2/26  500,000   489,187   492,500 
IXS, Senior Secured Initial Term Loan, 6.00% (Libor + 5.00%), maturity 3/5/27(i)  303,492   300,636   300,780 
             
Wholesale            
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 3.00%), maturity 3/20/25  3,905,783   3,906,232   3,876,490 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 8/19/22  1,900,184   1,884,522   1,748,170 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 6/15/23  1,443,627   1,442,406   1,403,927 

 

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


Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31,September 30, 2020

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h)(Continued):            
Wholesale            
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.45% (Libor + 3.00%), maturity 3/20/25 $3,925,708  $3,926,133  $3,548,840 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 8/19/22  1,910,184   1,890,605   1,661,860 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 6/15/23  1,451,146   1,449,084   1,378,429 
             
Forest Products & Paper            
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 11/21/23  2,919,733   2,908,514   2,636,519 
Loparex, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 7/31/26  1,492,500   1,478,641   1,402,950 
Hoffmaster Group, Senior Secured Initial Term Loan (Second Lien), 10.95% (Libor + 9.50%), maturity 11/21/24  1,250,000   1,250,000   1,181,775 
             
Media: Advertising, Printing & Publishing            
Ansira, Unitranche, 7.20% (Libor + 5.75%), maturity 12/20/22  1,900,675   1,889,359   1,615,575 
Northstar, Senior Secured Term Loan, 7.70% (Libor + 6.25%), maturity 6/7/22  1,445,268   1,445,268   1,391,417 
Vestcom International, Senior Secured L/C Collaterilized, 5.45% (Libor + 4.00%), maturity 12/19/23  783,878   786,538   732,605 
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 6.20% (Libor + 4.75%), maturity 6/21/22  1,455,000   1,448,210   727,500 
             
Beverage, Food & Tobacco            
Sovos Brands, Senior Secured Initial Term Loan (2018), 6.45% (Libor + 5.00%), maturity 11/20/25  1,975,000   1,958,320   1,892,050 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 5.20% (Libor + 3.75%), maturity 8/25/25  1,970,000   1,962,468   1,876,721 
             
Consumer Goods: Durable            
Strategic Partners, Senior Secured Initial Term Loan, 5.20% (Libor + 3.75%), maturity 6/30/23  2,303,551   2,300,565   2,211,409 
             
Retail            
Grocery Outlet, Senior Secured 2020 Term Loan (First Lien), 4.20% (Libor + 2.75%), maturity 10/22/25  1,269,483   1,267,102   1,206,009 
             
Hotel, Gaming & Leisure            
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.45% (Libor + 5.00%), maturity 10/21/23  1,119,231   1,111,339   1,039,765 
             
Metals & Mining            
Dynatect, Senior Secured Term B Loan, 5.95% (Libor + 4.50%), maturity 9/30/22  995,159   990,249   925,717 
             
Health Care Equipment & Services            
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 8/31/26  584,789   579,029   562,590 
             
 Total Bank Loans     $342,129,261  $325,175,888 
Portfolio Investments (a) (b) (c) (d) (e) (f) Par  Cost  Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):            
Transportation: Cargo            
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 10/12/24(i) $3,614,314  $3,610,514  $3,425,590 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 10/7/24  2,448,360   2,442,858   2,442,239 
Capstone Logistics, Senior Secured Term Loan (First Lien), 5.50% (Libor + 4.50%), maturity 10/7/21(i)  1,160,469   1,160,608   1,160,469 
             
Forest Products & Paper            
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/21/23(i)  2,904,644   2,894,898   2,488,009 
Loparex, Senior Secured Initial Term Loan (First Lien), 4.73% (Libor + 4.50%), maturity 7/31/26  1,485,000   1,472,127   1,473,863 
Hoffmaster Group, Senior Secured Initial Term Loan (Second Lien), 10.50% (Libor + 9.50%), maturity 11/21/24  1,250,000   1,250,000   1,209,375 
             
Beverage, Food & Tobacco            
Sovos Brands, Senior Secured Initial Term Loan (2018), 4.98% (Libor + 4.75%), maturity 11/20/25  1,965,000   1,949,614   1,965,000 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 4.75% (Libor + 3.75%), maturity 8/25/25  1,960,000   1,953,448   1,945,300 
             
Media: Advertising, Printing & Publishing            
Ansira, Unitranche, 7.50% (Libor + 6.50%), maturity 12/20/24  1,976,306   1,966,499   1,581,046 
Northstar, Senior Secured Term Loan, 7.25% (Libor + 6.25%), maturity 6/7/22  1,402,843   1,402,843   1,385,308 
Vestcom International, Senior Secured L/C Collaterilized, 5.00% (Libor + 4.00%), maturity 12/19/23  781,751   784,077   773,933 
             
Consumer Goods: Durable            
Strategic Partners, Senior Secured Initial Term Loan, 4.75% (Libor + 3.75%), maturity 6/30/23(i)  2,291,799   2,289,275   2,280,340 
             
Retail            
Grocery Outlet, Senior Secured 2020 Term Loan (First Lien), 2.98% (Libor + 2.75%), maturity 10/22/25(i)  1,269,483   1,267,497   1,253,955 
             
Metals & Mining            
Dynatect, Senior Secured Term B Loan, 5.50% (Libor + 4.50%), maturity 9/30/22  990,317   989,788   972,987 
             
Hotel, Gaming & Leisure            
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.00% (Libor + 5.00%), maturity 10/21/23  1,119,231   1,112,450   951,346 
             
Health Care Equipment & Services            
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 4.48% (Libor + 4.25%), maturity 8/31/26(i)  581,851   576,553   556,479 
             
Total Bank Loans     $348,947,419  $340,683,844 

 

Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value  Par Cost Value 
EQUITY AND PREFERRED SHARES: NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.2%)(g)(h):                        
                        
Services: Business                        
DBi Services, Class A-1 Preferred Units (800.53 units)(k)     $800,535  $400,267      $800,535  $576,385 
DBi Services, Class B Common Shares (169,362.31 shares)(l)(m)      -   -       -   - 
                        
Services: Consumer                        
Ned Stevens, Class B Common Units (261,438 Common B units, Fair value of $261,438)(f)(j)(m)(n)(o)      261,438   241,379 
Ned Stevens, Class B Common Units (261,438 Common B units, Fair value of $220,135)(j)(m)(n)(o)      261,438   220,135 
                        
Healthcare & Pharmaceuticals                        
Alpaca, Class A Units (33,300.04 Class A Units, Fair value of $57,552)(f)(j)(m)(o)(p)      58,608   47,680 
Alpaca, Class A Units (33,300.04 Class A Units, Fair value of $8,419)(j)(m)(o)(p)      58,608   8,419 
            
Total Equity and Preferred Shares     $1,120,581  $689,326      $1,120,581  $804,939 
                        
                        
Total Portfolio Investments(r)     $343,249,842  $325,865,214      $350,068,000  $341,488,783 

 

(a)All companies are located in the United States of America, unless otherwise noted.
(b)Interest rate percentages represent actual interest rates which are indexed from then 30-day London Interbank Offered Rate ("LIBOR") unless otherwise noted. LIBOR rates are subject to interest rate floors which can vary based on the contractual agreement with the borrower.  Due dates represent the contractual maturity date.
(c)All loans are income-producing, unless otherwise noted.
(d)All investments are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act") unless otherwise noted.
(e)All investments are exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act.
(f)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(g)Percentages are calculated using fair value of investments over net assets.
(h)As defined in 1940 Act, the Company is not deemed to be an “Affiliated Person” of or “Control” this portfolio company because it neither owns 5% or  more of the portfolio company’s outstanding voting securities nor has the power to exercise control over the management or policies of such portfolio company (including through a management agreement).
(i)Investment was valued using Level 2 inputs within the ASC 820 fair value hierarchy.  Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(j)Three of our affiliated funds, Audax Direct Lending Solutions Fund - A, L.P., Audax Direct Lending Solutions Fund - C, L.P., and Audax Direct Lending Solutions Fund - D, L.P.,'co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(k)Represents an investment owned by APD Dbi Preferred, Inc., a holding company for the investment in DBi.
(l)Represents an investment owned by APD Dbi Common, Inc., a holding company for the investment in DBi.

 

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

 

9

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31,September 30, 2020

(Expressed in U.S. Dollars)

(unaudited)

 

(l)Represents an investment owned by APD Dbi Common, Inc., a holding company for the investment in DBi.
(m)Investment is non-income producing.
(n)Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(o)Other net assets of $0 at the aggregator levels are included in the fair value of the investments when using the net asset value as a practical expedient.
(p)Represents an investment in APD ALP Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(q)The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.
(r)At March 31,September 30, 2020, the cost of investments for income tax purposes was $343,249,842$350,068,000 the gross unrealized depreciation for federal tax purposes was $17,605,839,$9,547,748, the gross unrealized appreciation for federal income tax purposes was $221,211,$968,531, and the net unrealized depreciation was $17,384,628.$8,579,217.

 

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

 

10


 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of MarchDecember 31, 20202019

(Expressed in U.S. Dollars)

(unaudited)

Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value  Par Cost Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (99.6%)(g)(h):                        
                        
Healthcare & Pharmaceuticals                        
Radiology Partners, Senior Secured Term B Loan (First Lien), 6.66% (Libor + 4.75%), maturity 7/9/25(i) $5,187,469  $5,149,488  $5,211,316  $5,187,469  $5,149,488  $5,211,316 
Pathway, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 12/20/24  4,956,161   4,911,269   4,943,769   4,956,161   4,911,269   4,943,769 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 5/1/24  3,959,391   3,942,690   3,949,491   3,959,391   3,942,690   3,949,491 
Advarra, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 7/9/26(j)  3,939,427   3,899,562   3,909,879   3,939,427   3,899,562   3,909,879 
Young, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 11/7/24  3,834,156   3,823,748   3,805,398   3,834,156   3,823,748   3,805,398 
Specialty Care, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 9/1/23  3,342,954   3,346,536   3,334,596   3,342,954   3,346,536   3,334,596 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 3/14/25(i)  3,333,213   3,356,177   3,199,884   3,333,213   3,356,177   3,199,884 
Veritext, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 8/1/25  3,187,891   3,173,500   3,171,951   3,187,891   3,173,500   3,171,951 
Confluent Health, Senior Secured Initial Term Loan, 6.91% (Libor + 5.00%), maturity 6/24/26  2,985,000   2,957,225   2,962,613   2,985,000   2,957,225   2,962,613 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/18/23  2,906,775   2,886,868   2,874,073   2,906,775   2,886,868   2,874,073 
PharMedQuest, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 10/31/24  2,500,000   2,463,488   2,481,250   2,500,000   2,463,488   2,481,250 
Waystar, Senior Secured Term Loan B, 5.91% (Libor + 4.00%), maturity 10/22/26  2,500,000   2,487,836   2,481,250   2,500,000   2,487,836   2,481,250 
MedRisk, Senior Secured Initial Term Loan (First Lien), 4.66% (Libor + 2.75%), maturity 12/27/24  2,450,000   2,455,219   2,450,000   2,450,000   2,455,219   2,450,000 
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 9/23/24  2,446,014   2,426,873   2,421,554   2,446,014   2,426,873   2,421,554 
OB Hospitalist Group, Senior Secured Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 8/1/24  2,316,088   2,305,375   2,316,088   2,316,088   2,305,375   2,316,088 
MedRisk, Senior Secured Initial Loan (Second Lien), 8.66% (Libor + 6.75%), maturity 12/29/25  2,100,000   2,074,832   2,100,000   2,100,000   2,074,832   2,100,000 
Zelis RedCard, Senior Secured Initial Term Loan, 6.66% (Libor + 4.75%), maturity 9/30/26(i)  2,000,000   1,980,688   2,014,889   2,000,000   1,980,688   2,014,889 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 7/24/26(i)  1,995,000   1,987,841   2,011,774   1,995,000   1,987,841   2,011,774 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 12/22/25  1,980,000   1,962,728   1,957,725   1,980,000   1,962,728   1,957,725 
CareCentrix, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 4/3/25  1,912,500   1,904,900   1,912,500   1,912,500   1,904,900   1,912,500 
Premise Health, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 7/10/25  1,829,786   1,838,127   1,825,212   1,829,786   1,838,127   1,825,212 
Alpaca, Senior Secured Term Loan, 6.16% (Libor + 4.25%), maturity 4/19/24(j)  1,674,127   1,650,502   1,669,942   1,674,127   1,650,502   1,669,942 
CPS, Unitranche, 7.16% (Libor + 5.25%), maturity 2/28/25  1,492,500   1,472,625   1,488,769   1,492,500   1,472,625   1,488,769 
Stepping Stones, Unitranche, 7.41% (Libor + 5.50%), maturity 12/12/24  1,484,409   1,477,320   1,467,709   1,484,409   1,477,320   1,467,709 
Ensemble, Senior Secured Closing Date Term Loan, 5.66% (Libor + 3.75%), maturity 8/3/26(i)  997,500   992,719   1,006,949   997,500   992,719   1,006,949 
Veritext, Senior Secured Initial Term Loan (Second Lien), 8.91% (Libor + 7.00%), maturity 7/31/26  1,000,000   995,613   995,000   1,000,000   995,613   995,000 
Upstream Rehabilitation, Senior Secured Term Loan, 6.41% (Libor + 4.50%), maturity 11/20/26  1,000,000   995,045   992,500   1,000,000   995,045   992,500 
Packaging Coordinators, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 6/30/23(i)  984,694   990,391   978,540   984,694   990,391   978,540 
Alcami, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 7/14/25  987,500   983,389   972,688   987,500   983,389   972,688 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 7.41% (Libor + 5.50%), maturity 5/9/25  987,500   975,453   960,344   987,500   975,453   960,344 
Dermatologists of Central States, Senior Secured Term Loan, 8.41% (Libor + 6.50%), maturity 4/20/22  977,310   970,785   960,207   977,310   970,785   960,207 
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 5/10/23(i)  922,022   926,900   920,657   922,022   926,900   920,657 
Specialty Care, Senior Secured Initial Term Loan (Second Lien), 10.16% (Libor + 8.25%), maturity 9/1/24  850,000   843,325   850,000   850,000   843,325   850,000 
Athena, Senior Secured Term B Loan (First Lien), 6.41% (Libor + 4.50%), maturity 2/11/26(i)  497,494   495,129   500,973   497,494   495,129   500,973 
RMP & MedA/Rx, Senior Secured Term Loan, 6.41% (Libor + 4.50%), maturity 3/2/22  441,647   440,553   441,647   441,647   440,553   441,647 
Injured Workers Pharmacy, Senior Secured Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 7/22/20  378,724   375,038   375,883   378,724   375,038   375,883 
Alpaca, Senior Secured Revolver, 6.16% (Libor + 4.25%), maturity 4/19/24(j)  134,215   130,332   133,879   134,215   130,332   133,879 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 6.16% (Libor + 4.25%), maturity 7/9/26(j)  -   (7,619)  -   -   (7,619)  - 
                        
High Tech Industries                        
Qlik, Senior Secured 2019 Incremental Term Loan, 6.16% (Libor + 4.25%), maturity 4/26/24  3,980,000   3,954,501   3,950,150   3,980,000   3,954,501   3,950,150 
Barracuda, Senior Secured 2019 Incremental Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 2/12/25(i)  3,451,222   3,464,246   3,477,852   3,451,222   3,464,246   3,477,852 
Masergy, Senior Secured Initial Loan (Second Lien), 9.41% (Libor + 7.50%), maturity 12/16/24  3,428,571   3,420,116   3,411,429   3,428,571   3,420,116   3,411,429 
Syncsort, Senior Secured 2018 Refinancing Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 8/16/24  3,421,688   3,397,118   3,387,471   3,421,688   3,397,118   3,387,471 
Sparta, Senior Secured New Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 8/21/24  3,421,250   3,423,008   3,344,272   3,421,250   3,423,008   3,344,272 
Jaggaer, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 8/14/26(i)  3,154,345   3,150,077   3,166,174   3,154,345   3,150,077   3,166,174 
Infogroup, Senior Secured Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 4/3/23  2,919,937   2,895,405   2,890,738   2,919,937   2,895,405   2,890,738 
McAfee, Senior Secured Term B USD Loan, 5.66% (Libor + 3.75%), maturity 9/30/24(i)  2,864,431   2,875,358   2,883,023   2,864,431   2,875,358   2,883,023 
eResearch (ERT), Senior Secured Initial Term Loan, 5.66% (Libor + 3.75%), maturity 5/2/23(i)  2,538,022   2,538,022   2,538,022   2,538,022   2,538,022   2,538,022 
ECi Software Solutions, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 9/27/24(i)  2,463,579   2,451,402   2,468,662   2,463,579   2,451,402   2,468,662 
EverCommerce, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 8/23/25  2,184,679   2,142,420   2,179,217   2,184,679   2,142,420   2,179,217 
Idera, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 6/28/24  2,146,089   2,145,337   2,146,089   2,146,089   2,145,337   2,146,089 
Intermedia , Senior Secured New Term Loan (First Lien), 7.91% (Libor + 6.00%), maturity 7/21/25(i)  1,980,000   1,963,699   1,985,107   1,980,000   1,963,699   1,985,107 
Flexera Software, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 2/26/25(i)  1,965,000   1,970,591   1,973,626   1,965,000   1,970,591   1,973,626 
QuickBase, Senior Secured Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 4/2/26  1,990,000   1,981,139   1,970,100   1,990,000   1,981,139   1,970,100 
GlobalLogic, Senior Secured Initial Term Loan, 5.16% (Libor + 3.25%), maturity 8/1/25(i)  1,728,438   1,719,948   1,728,438   1,728,438   1,719,948   1,728,438 
Bomgar, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 4/18/25  1,723,750   1,733,891   1,702,203   1,723,750   1,733,891   1,702,203 
Liaison, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 12/20/26(i)  1,500,000   1,496,250   1,496,250   1,500,000   1,496,250   1,496,250 
OEConnection, Senior Secured Initial Term Loan, 5.91% (Libor + 4.00%), maturity 9/25/26  1,496,250   1,488,267   1,485,028   1,496,250   1,488,267   1,485,028 
Navex Global, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 9/5/25(i)  1,481,250   1,467,074   1,484,310   1,481,250   1,467,074   1,484,310 
Compusearch Software Systems, Senior Secured Term Loan C, 6.16% (Libor + 4.25%), maturity 5/8/23  1,432,979   1,432,391   1,425,814   1,432,979   1,432,391   1,425,814 
Ultimate Software , Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 5/4/26(i)  1,080,625   1,082,379   1,089,829   1,080,625   1,082,379   1,089,829 
Insurity, Senior Secured Closing Date Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/31/26  1,000,000   995,219   997,500   1,000,000   995,219   997,500 
Global Knowledge, Senior Secured Initial Term Loan (Second Lien), 12.16% (Libor + 10.25%), maturity 1/20/22  1,000,000   995,441   988,750   1,000,000   995,441   988,750 
LANDesk, Senior Secured Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 1/20/24(i)  978,627   969,988   981,924   978,627   969,988   981,924 
Corsair, Senior Secured Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/28/24  982,444   978,622   967,707   982,444   978,622   967,707 
Community Brands, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 12/2/22  834,254   830,477   825,912   834,254   830,477   825,912 
HelpSystems, Senior Secured Initial Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 11/19/26(i)  500,000   498,750   498,750   500,000   498,750   498,750 
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 12/15/23  484,908   483,405   482,484   484,908   483,405   482,484 
Endurance Int'l Group, Senior Secured Refinancing Loan (2018), 5.66% (Libor + 3.75%), maturity 2/9/23(i)  404,507   403,788   401,013   404,507   403,788   401,013 

 

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

 

11


Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of MarchDecember 31, 20202019 (Continued)

(Expressed in U.S. Dollars)

(unaudited)

Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value  Par Cost Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h)(Continued):                        
                        
Services: Business                        
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 9/23/25 $3,990,000  $3,950,952  $3,970,050  $3,990,000  $3,950,952  $3,970,050 
RevSpring, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 10/11/25  3,960,000   3,955,758   3,950,100   3,960,000   3,955,758   3,950,100 
Aimbridge, Senior Secured Initial Term Loan (2019) (First Lien), 5.66% (Libor + 3.75%), maturity 2/2/26  2,982,525   2,973,315   2,975,069   2,982,525   2,973,315   2,975,069 
Addison, Senior Secured Initial Term Loan, 6.91% (Libor + 5.00%), maturity 4/15/26  2,985,000   2,931,090   2,962,613   2,985,000   2,931,090   2,962,613 
Fleetwash, Senior Secured Incremental Term Loan, 6.66% (Libor + 4.75%), maturity 10/1/24  2,962,613   2,938,051   2,947,799   2,962,613   2,938,051   2,947,799 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 6/19/24(i)  2,894,218   2,894,218   2,883,365   2,894,218   2,894,218   2,883,365 
Allied Universal, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 7/10/26(i)  2,613,149   2,591,810   2,635,788   2,613,149   2,591,810   2,635,788 
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 2/9/26(i)  2,481,250   2,484,662   2,497,618   2,481,250   2,484,662   2,497,618 
HireRight, Senior Secured Initial Term Loan (Second Lien), 9.16% (Libor + 7.25%), maturity 7/10/26  2,500,000   2,479,365   2,481,250   2,500,000   2,479,365   2,481,250 
Newport Group, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/12/25  2,471,231   2,458,304   2,452,697   2,471,231   2,458,304   2,452,697 
First Advantage, Senior Secured Term Loan (First Lien), 7.16% (Libor + 5.25%), maturity 6/30/22  2,000,000   1,996,094   1,990,000   2,000,000   1,996,094   1,990,000 
Vistage, Senior Secured Term B Loan (First Lien), 5.91% (Libor + 4.00%), maturity 2/10/25  1,965,000   1,961,739   1,960,088   1,965,000   1,961,739   1,960,088 
Service Logic, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 12/31/24  2,339,998   2,333,703   2,316,598   2,339,998   2,333,703   2,316,598 
Eliassen Group, Senior Secured Initial Term B Loan, 6.41% (Libor + 4.50%), maturity 11/5/24  1,493,123   1,486,683   1,489,390   1,493,123   1,486,683   1,489,390 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 6.41% (Libor + 4.50%), maturity 3/27/24  1,474,855   1,470,192   1,467,481   1,474,855   1,470,192   1,467,481 
DBi Services, Senior Secured Term B Loan (Second Lien), 8.00% (Libor + 8.00%), maturity 2/2/26  1,268,869   1,268,869   1,268,869   1,268,869   1,268,869   1,268,869 
Diversified, Senior Secured Initial Term Loan, 6.66% (Libor + 4.75%), maturity 12/23/23  992,500   986,007   990,019   992,500   986,007   990,019 
WCG, Senior Secured Term Loan, 5.91% (Libor + 4.00%), maturity 1/8/27(i)  1,000,000   990,000   990,000   1,000,000   990,000   990,000 
Franklin Energy, Senior Secured Term B Loan (First Lien), 5.91% (Libor + 4.00%), maturity 8/14/26  997,500   995,123   987,525   997,500   995,123   987,525 
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 6/3/26(i)  498,747   494,694   498,747   498,747   494,694   498,747 
                        
Chemicals, Plastics & Rubber                        
Plaskolite, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 12/15/25  3,960,000   3,896,852   3,920,400   3,960,000   3,896,852   3,920,400 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 5/30/24  3,427,599   3,413,966   3,341,909   3,427,599   3,413,966   3,341,909 
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 10/4/21  2,811,462   2,806,249   2,741,176   2,811,462   2,806,249   2,741,176 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 1/31/25  2,682,225   2,691,463   2,615,169   2,682,225   2,691,463   2,615,169 
Unifrax, Senior Secured USD Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 12/12/25(i)  2,476,241   2,454,997   2,286,895   2,476,241   2,454,997   2,286,895 
Q Holding, Senior Secured Term B Loan (2019), 6.91% (Libor + 5.00%), maturity 12/29/23  1,995,000   1,985,388   1,985,025   1,995,000   1,985,388   1,985,025 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 8.66% (Libor + 6.75%), maturity 9/6/26  2,000,000   2,002,217   1,985,000   2,000,000   2,002,217   1,985,000 
DuBois Chemicals 2019, Senior Secured Term Loan (Second Lien), 10.41% (Libor + 8.50%), maturity 9/30/27  2,000,000   1,950,862   1,985,000   2,000,000   1,950,862   1,985,000 
Borchers, Senior Secured Term Loan, 6.41% (Libor + 4.50%), maturity 11/1/24  1,910,136   1,905,332   1,900,585   1,910,136   1,905,332   1,900,585 
Zep, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 8/12/24  1,956,225   1,954,251   1,584,542   1,956,225   1,954,251   1,584,542 
DuBois Chemicals 2019, Senior Secured Term Loan B (First Lien), 6.41% (Libor + 4.50%), maturity 9/30/26  1,560,865   1,516,107   1,549,159   1,560,865   1,516,107   1,549,159 
Spartech, Senior Secured Term Loan, 6.91% (Libor + 5.00%), maturity 10/17/25  1,000,000   985,134   992,500   1,000,000   985,134   992,500 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 10/28/24  987,406   970,460   967,657   987,406   970,460   967,657 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 3/31/25(i)  982,500   978,584   892,145   982,500   978,584   892,145 
                        
Services: Consumer                        
CIBT Holdings, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 6/3/24  5,424,266   5,407,341   5,370,023   5,424,266   5,407,341   5,370,023 
A Place For Mom, Senior Secured Term Loan, 5.66% (Libor + 3.75%), maturity 8/10/24  2,666,144   2,665,484   2,599,490   2,666,144   2,665,484   2,599,490 
Weld North, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 2/15/25  2,463,674   2,441,530   2,463,674   2,463,674   2,441,530   2,463,674 
Cambium Learning, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 12/18/25  2,475,000   2,365,058   2,462,625   2,475,000   2,365,058   2,462,625 
Smart Start, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 2/21/22  2,417,625   2,417,625   2,399,493   2,417,625   2,417,625   2,399,493 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 5/14/26(i)  1,990,000   1,985,439   2,002,726   1,990,000   1,985,439   2,002,726 
SMG, Senior Secured Initial Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 1/23/25(i)  1,976,118   1,963,737   1,976,118   1,976,118   1,963,737   1,976,118 
Valet Living, Senior Secured Initial Term Loan, 5.91% (Libor + 4.00%), maturity 9/28/25  1,983,718   1,979,195   1,973,800   1,983,718   1,979,195   1,973,800 
LegalShield, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 5/1/25  1,940,510   1,927,273   1,935,659   1,940,510   1,927,273   1,935,659 
Ned Stevens, Senior Secured Term A Loan, 7.66% (Libor + 5.75%), maturity 9/30/25(j)  1,603,824   1,572,794   1,591,795   1,603,824   1,572,794   1,591,795 
Spring Education, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 7/30/25  987,500   985,450   982,563   987,500   985,450   982,563 
Ned Stevens, Senior Secured Revolver, 6.66% (Libor + 4.75%), maturity 9/30/25(j)  -   (2,614)  -   -   (2,614)  - 
                        
Aerospace & Defense                        
CPI International, Senior Secured TL, 6.66% (Libor + 4.75%), maturity 7/26/24  4,000,000   3,960,000   3,970,000   4,000,000   3,960,000   3,970,000 
StandardAero, Senior Secured Initial Term B-1 Loan, 5.91% (Libor + 4.00%), maturity 4/6/26(i)  3,567,981   3,556,378   3,599,650   3,567,981   3,556,378   3,599,650 
StandardAero, Senior Secured Initial Term B-2 Loan, 5.91% (Libor + 4.00%), maturity 4/6/26(i)  1,918,269   1,912,031   1,935,296   1,918,269   1,912,031   1,935,296 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 9.66% (Libor + 7.75%), maturity 4/30/26  1,500,000   1,514,877   1,485,000   1,500,000   1,514,877   1,485,000 
Tronair, Senior Secured Initial Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 9/8/23  1,459,899   1,453,639   1,427,051   1,459,899   1,453,639   1,427,051 
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 4/30/25(i)  497,481   495,124   494,358   497,481   495,124   494,358 
                        
Banking, Finance, Insurance & Real Estate                        
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 9.41% (Libor + 7.50%), maturity 4/30/23  2,000,000   2,000,000   1,995,000   2,000,000   2,000,000   1,995,000 
Kestra Financial, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 6/3/26  1,995,000   1,976,368   1,990,013   1,995,000   1,976,368   1,990,013 
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 7.66% (Libor + 5.75%), maturity 10/31/22  1,989,457   1,951,565   1,939,721   1,989,457   1,951,565   1,939,721 
Advisor Group, Senior Secured Initial Term B Loan, 6.91% (Libor + 5.00%), maturity 7/31/26(i)  1,490,625   1,465,245   1,478,349   1,490,625   1,465,245   1,478,349 
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 9/6/24  1,470,000   1,467,280   1,458,975   1,470,000   1,467,280   1,458,975 
AmeriLife Group, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 6/12/26  978,070   973,369   970,735   978,070   973,369   970,735 
Aperio, Senior Secured Loan, 6.91% (Libor + 5.00%), maturity 10/25/24  933,889   929,619   933,889   933,889   929,619   933,889 
                        
Consumer Goods: Non-durable                        
Manna Pro, Senior Secured Term Loan, 7.91% (Libor + 6.00%), maturity 12/8/23  3,438,750   3,399,412   3,412,959   3,438,750   3,399,412   3,412,959 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 10/26/23  2,228,517   2,214,540   2,211,804   2,228,517   2,214,540   2,211,804 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 9/11/23  1,906,766   1,895,349   1,873,398   1,906,766   1,895,349   1,873,398 
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 12/16/24(i)  987,418   993,636   973,861   987,418   993,636   973,861 

 

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


Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 2019

(Expressed in U.S. Dollars)

 

12
Portfolio Investments (a) (b) (c) (d) (e) (f) Par  Cost  Value 
BANK LOANS:  NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):            
             
Containers, Packaging & Glass            
ProAmpac, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 11/20/23(i) $3,000,535  $3,017,391  $2,972,870 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/18/26  1,995,000   1,985,448   1,995,000 
Tank Holding, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 3/26/26(i)  997,500   993,032   1,003,416 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/31/26  1,000,000   997,605   995,000 
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 11/30/23(i)  494,901   494,901   491,978 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 6.16% (Libor + 4.25%), maturity 5/12/20  488,837   488,275   483,338 
             
Capital Equipment            
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24  2,443,750   2,443,750   2,419,313 
BAS, Senior Secured Repricing Term Loan, 5.66% (Libor + 3.75%), maturity 5/21/24  1,969,661   1,971,159   1,959,812 
Edward Don, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 7/2/25  1,478,769   1,472,799   1,452,890 
Cole-Parmer, Senior Secured Closing Date Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 11/4/26  1,000,000   995,111   992,500 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 12/2/24  493,703   497,366   490,000 
TriMark, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 8/28/24(i)  491,207   492,665   406,376 
             
Wholesale            
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 3/20/25  3,935,671   3,936,089   3,906,153 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 8/19/22  1,915,184   1,893,658   1,891,245 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 6/15/23  1,454,906   1,452,426   1,422,170 
             
Transportation: Cargo            
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 10/12/24  3,615,344   3,611,340   3,588,229 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 10/7/24(i)  2,466,458   2,459,768   2,460,292 
Capstone Logistics, Senior Secured Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 10/7/21  1,161,707   1,161,868   1,144,282 
             
Construction & Building            
PlayPower, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 5/8/26  1,934,722   1,934,722   1,920,212 
Tangent, Senior Secured Closing Date Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 11/30/24  1,496,238   1,480,815   1,488,757 
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 6/3/24  1,474,832   1,462,983   1,460,084 
PlayCore, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24(i)  976,912   975,059   964,701 
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 7/29/22(i)  628,442   623,246   630,799 
Hoffman Southwest, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 8/14/23  527,876   523,556   525,237 
             
Automotive            
Mavis, Senior Secured Closing Date Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 3/20/25(i)  3,592,566   3,578,510   3,516,090 
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 10.16% (Libor + 8.25%), maturity 4/21/25  1,800,000   1,798,507   1,795,500 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 2/3/25  987,500   963,545   982,563 
             
Media: Advertising, Printing & Publishing            
Ansira, Unitranche, 7.66% (Libor + 5.75%), maturity 12/20/22  1,905,523   1,893,460   1,872,177 
Northstar, Senior Secured Term Loan, 8.16% (Libor + 6.25%), maturity 6/7/22  1,449,510   1,449,510   1,438,639 
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 6.66% (Libor + 4.75%), maturity 6/21/22  1,458,750   1,451,152   1,035,712 
Vestcom International, Senior Secured L/C Collaterilized, 5.91% (Libor + 4.00%), maturity 12/19/23  783,878   786,703   777,999 
             
Forest Products & Paper            
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 11/21/23  2,927,277   2,915,319   2,898,005 
Loparex, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 7/31/26  1,496,250   1,481,906   1,481,288 
             
Beverage, Food & Tobacco            
Sovos Brands, Senior Secured Initial Term Loan (2018), 6.91% (Libor + 5.00%), maturity 11/20/25  1,980,000   1,962,677   1,960,200 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 5.66% (Libor + 3.75%), maturity 8/25/25  1,975,000   1,966,820   1,970,063 
             
Hotel, Gaming & Leisure            
On Location, Senior Secured Second Amendment Term Loan, 6.91% (Libor + 5.00%), maturity 9/29/21  2,396,566   2,384,489   2,384,584 
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.91% (Libor + 5.00%), maturity 10/21/23  1,119,231   1,110,756   1,119,231 
             
Consumer Goods: Durable            
Strategic Partners, Senior Secured Initial Term Loan, 5.66% (Libor + 3.75%), maturity 6/30/23  2,309,428   2,306,211   2,309,428 
             
Retail            
Grocery Outlet, Senior Secured 2019 Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 10/22/25(i)  1,269,483   1,266,905   1,286,070 
             
Metals & Mining            
Dynatect, Senior Secured Term B Loan, 6.41% (Libor + 4.50%), maturity 9/30/22  997,579   990,633   987,604 
             
Health Care Equipment & Services            
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/31/26(i)  525,311   519,256   526,851 
             
Total Bank Loans     $331,601,425  $330,155,654 

 


Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 2019

(Expressed in U.S. Dollars)

 

Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value 
          
BANK LOANS:  NON-CONTROL/NON-AFFILIATE INVESTMENTS(h)(Continued):            
             
Containers, Packaging & Glass            
ProAmpac, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 11/20/23(i) $3,000,535  $3,017,391  $2,972,870 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/18/26  1,995,000   1,985,448   1,995,000 
Tank Holding, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 3/26/26(i)  997,500   993,032   1,003,416 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/31/26  1,000,000   997,605   995,000 
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 11/30/23(i)  494,901   494,901   491,978 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 6.16% (Libor + 4.25%), maturity 5/12/20  488,837   488,275   483,338 
             
Capital Equipment            
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24  2,443,750   2,443,750   2,419,313 
BAS, Senior Secured Repricing Term Loan, 5.66% (Libor + 3.75%), maturity 5/21/24  1,969,661   1,971,159   1,959,812 
Edward Don, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 7/2/25  1,478,769   1,472,799   1,452,890 
Cole-Parmer, Senior Secured Closing Date Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 11/4/26  1,000,000   995,111   992,500 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 12/2/24  493,703   497,366   490,000 
TriMark, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 8/28/24(i)  491,207   492,665   406,376 
             
Wholesale            
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 3/20/25  3,935,671   3,936,089   3,906,153 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 8/19/22  1,915,184   1,893,658   1,891,245 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 6/15/23  1,454,906   1,452,426   1,422,170 
             
Transportation: Cargo            
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 10/12/24  3,615,344   3,611,340   3,588,229 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 10/7/24(i)  2,466,458   2,459,768   2,460,292 
Capstone Logistics, Senior Secured Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 10/7/21  1,161,707   1,161,868   1,144,282 
             
Construction & Building            
PlayPower, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 5/8/26  1,934,722   1,934,722   1,920,212 
Tangent, Senior Secured Closing Date Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 11/30/24  1,496,238   1,480,815   1,488,757 
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 6/3/24  1,474,832   1,462,983   1,460,084 
PlayCore, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24(i)  976,912   975,059   964,701 
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 7/29/22(i)  628,442   623,246   630,799 
Hoffman Southwest, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 8/14/23  527,876   523,556   525,237 
             
Automotive            
Mavis, Senior Secured Closing Date Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 3/20/25(i)  3,592,566   3,578,510   3,516,090 
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 10.16% (Libor + 8.25%), maturity 4/21/25  1,800,000   1,798,507   1,795,500 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 2/3/25  987,500   963,545   982,563 
             
Media: Advertising, Printing & Publishing            
Ansira, Unitranche, 7.66% (Libor + 5.75%), maturity 12/20/22  1,905,523   1,893,460   1,872,177 
Northstar, Senior Secured Term Loan, 8.16% (Libor + 6.25%), maturity 6/7/22  1,449,510   1,449,510   1,438,639 
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 6.66% (Libor + 4.75%), maturity 6/21/22  1,458,750   1,451,152   1,035,712 
Vestcom International, Senior Secured L/C Collaterilized, 5.91% (Libor + 4.00%), maturity 12/19/23  783,878   786,703   777,999 
             
Forest Products & Paper            
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 11/21/23  2,927,277   2,915,319   2,898,005 
Loparex, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 7/31/26  1,496,250   1,481,906   1,481,288 
             
Beverage, Food & Tobacco            
Sovos Brands, Senior Secured Initial Term Loan (2018), 6.91% (Libor + 5.00%), maturity 11/20/25  1,980,000   1,962,677   1,960,200 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 5.66% (Libor + 3.75%), maturity 8/25/25  1,975,000   1,966,820   1,970,063 
             
Hotel, Gaming & Leisure            
On Location, Senior Secured Second Amendment Term Loan, 6.91% (Libor + 5.00%), maturity 9/29/21  2,396,566   2,384,489   2,384,584 
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.91% (Libor + 5.00%), maturity 10/21/23  1,119,231   1,110,756   1,119,231 
             
Consumer Goods: Durable            
Strategic Partners, Senior Secured Initial Term Loan, 5.66% (Libor + 3.75%), maturity 6/30/23  2,309,428   2,306,211   2,309,428 
             
Retail            
Grocery Outlet, Senior Secured 2019 Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 10/22/25(i)  1,269,483   1,266,905   1,286,070 
             
Metals & Mining            
Dynatect, Senior Secured Term B Loan, 6.41% (Libor + 4.50%), maturity 9/30/22  997,579   990,633   987,604 
             
Health Care Equipment & Services            
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/31/26(i)  525,311   519,256   526,851 
             
Total Bank Loans     $331,601,425  $330,155,654 

13

Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value 
          
BANK LOANS:  NON-CONTROL/NON-AFFILIATE INVESTMENTS(h)(Continued):            
             
Containers, Packaging & Glass            
ProAmpac, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 11/20/23(i) $3,000,535  $3,017,391  $2,972,870 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/18/26  1,995,000   1,985,448   1,995,000 
Tank Holding, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 3/26/26(i)  997,500   993,032   1,003,416 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/31/26  1,000,000   997,605   995,000 
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 11/30/23(i)  494,901   494,901   491,978 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 6.16% (Libor + 4.25%), maturity 5/12/20  488,837   488,275   483,338 
             
Capital Equipment            
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24  2,443,750   2,443,750   2,419,313 
BAS, Senior Secured Repricing Term Loan, 5.66% (Libor + 3.75%), maturity 5/21/24  1,969,661   1,971,159   1,959,812 
Edward Don, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 7/2/25  1,478,769   1,472,799   1,452,890 
Cole-Parmer, Senior Secured Closing Date Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 11/4/26  1,000,000   995,111   992,500 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 12/2/24  493,703   497,366   490,000 
TriMark, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 8/28/24(i)  491,207   492,665   406,376 
             
Wholesale            
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 3/20/25  3,935,671   3,936,089   3,906,153 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 8/19/22  1,915,184   1,893,658   1,891,245 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 6/15/23  1,454,906   1,452,426   1,422,170 
             
Transportation: Cargo            
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 10/12/24  3,615,344   3,611,340   3,588,229 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 10/7/24(i)  2,466,458   2,459,768   2,460,292 
Capstone Logistics, Senior Secured Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 10/7/21  1,161,707   1,161,868   1,144,282 
             
Construction & Building            
PlayPower, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 5/8/26  1,934,722   1,934,722   1,920,212 
Tangent, Senior Secured Closing Date Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 11/30/24  1,496,238   1,480,815   1,488,757 
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 6/3/24  1,474,832   1,462,983   1,460,084 
PlayCore, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24(i)  976,912   975,059   964,701 
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 7/29/22(i)  628,442   623,246   630,799 
Hoffman Southwest, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 8/14/23  527,876   523,556   525,237 
             
Automotive            
Mavis, Senior Secured Closing Date Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 3/20/25(i)  3,592,566   3,578,510   3,516,090 
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 10.16% (Libor + 8.25%), maturity 4/21/25  1,800,000   1,798,507   1,795,500 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 2/3/25  987,500   963,545   982,563 
             
Media: Advertising, Printing & Publishing            
Ansira, Unitranche, 7.66% (Libor + 5.75%), maturity 12/20/22  1,905,523   1,893,460   1,872,177 
Northstar, Senior Secured Term Loan, 8.16% (Libor + 6.25%), maturity 6/7/22  1,449,510   1,449,510   1,438,639 
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 6.66% (Libor + 4.75%), maturity 6/21/22  1,458,750   1,451,152   1,035,712 
Vestcom International, Senior Secured L/C Collaterilized, 5.91% (Libor + 4.00%), maturity 12/19/23  783,878   786,703   777,999 
             
Forest Products & Paper            
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 11/21/23  2,927,277   2,915,319   2,898,005 
Loparex, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 7/31/26  1,496,250   1,481,906   1,481,288 
             
Beverage, Food & Tobacco            
Sovos Brands, Senior Secured Initial Term Loan (2018), 6.91% (Libor + 5.00%), maturity 11/20/25  1,980,000   1,962,677   1,960,200 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 5.66% (Libor + 3.75%), maturity 8/25/25  1,975,000   1,966,820   1,970,063 
             
Hotel, Gaming & Leisure            
On Location, Senior Secured Second Amendment Term Loan, 6.91% (Libor + 5.00%), maturity 9/29/21  2,396,566   2,384,489   2,384,584 
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.91% (Libor + 5.00%), maturity 10/21/23  1,119,231   1,110,756   1,119,231 
             
Consumer Goods: Durable            
Strategic Partners, Senior Secured Initial Term Loan, 5.66% (Libor + 3.75%), maturity 6/30/23  2,309,428   2,306,211   2,309,428 
             
Retail            
Grocery Outlet, Senior Secured 2019 Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 10/22/25(i)  1,269,483   1,266,905   1,286,070 
             
Metals & Mining            
Dynatect, Senior Secured Term B Loan, 6.41% (Libor + 4.50%), maturity 9/30/22  997,579   990,633   987,604 
             
Health Care Equipment & Services            
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/31/26(i)  525,311   519,256   526,851 
             
Total Bank Loans     $331,601,425  $330,155,654 

14

Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value  Par Cost Value 
EQUITY AND PREFERRED SHARES: NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.2%)(g)(h):                        
                        
Services: Business                       
DBi Services, Class A-1 Preferred Units (800.53 units)(k)     $800,535  $400,267      $800,535  $400,267 
DBi Services, Class B Common Shares (169,362.31 shares)(l)(m)      -   -       -   - 
                        
Services: Consumer                        
Ned Stevens, Class B Common Units (261,438 Common B units, Fair value of $261,438)(f)(j)(m)(n)(o)      261,438   261,438       261,438   261,438 
                        
Healthcare & Pharmaceuticals                        
Alpaca, Class A Units (33,300.04 Class A Units, Fair value of $57,552)(f)(i)(j)(m)(o)(p)      58,608   57,552       58,608   57,552 
                        
Total Equity and Preferred Shares     $1,120,581  $719,257      $1,120,581  $719,257 
                        
            
Total Portfolio Investments(q)     $332,722,006  $330,874,911      $332,722,006  $330,874,911 

 

(a)All companies are located in the United States of America, unless otherwise noted.
(b)Interest rate percentages represent actual interest rates which are indexed from then 30-day London Interbank Offered Rate ("LIBOR") unless otherwise noted. LIBOR rates are subject to interest rate floors which can vary based on the contractual agreement with the borrower.  Due dates represent the contractual maturity date.
(c)All loans are income-producing, unless otherwise noted.
(d)All investments are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act") unless otherwise noted.
(e)All investments are exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act.
(f)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.

(g)Percentages are calculated using fair value of investments over net assets.
(h)As defined in 1940 Act, the Company is not deemed to be an “Affiliated Person” of or “Control” this portfolio company because it neither owns 5% or  more of the portfolio company’s outstanding voting securities nor has the power to exercise control over the management or policies of such portfolio company (including through a management agreement).
(i)Investment was valued using Level 2 inputs within the ASC 820 fair value hierarchy.  Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.

(j)Three of our affiliated funds, Audax Direct Lending Solutions Fund - A, L.P., Audax Direct Lending Solutions Fund - C, L.P., and Audax Direct Lending Solutions Fund - D, L.P.," 'co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(k)Represents an investment owned by APD Dbi Preferred, Inc., a holding company for the investment in DBi.
(l)Represents an investment owned by APD Dbi Common, Inc., a holding company for the investment in DBi.
(m)Investment is non-income producing.
(n)Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(o)Other net assets of $0 at the aggregator levels are included in the fair value of the investments when using the net asset value as a practical expedient.
(p)Represents an investment in APD ALP Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(q)At December 31, 2019, the cost of investments for income tax purposes was $332,722,006 the gross unrealized depreciation for federal tax purposes was 2,951,506,$2,951,506, the gross unrealized appreciation for federal income tax purposes was $1,104,411, and the net unrealized depreciation was $1,847,095.

 

15


 

Audax Credit BDC Inc.

Notes to Financial Statements

March 31,September 30, 2020

(unaudited)

 

Note 1. Organization

 

Audax Credit BDC Inc. (the “Company”) is a Delaware corporation that was formed on January 29, 2015. The Company is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, effective with the Company’s taxable year ended December 31, 2015, the Company has elected to be treated for federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).

 

The Company commenced business operations on July 8, 2015, the date on which the Company made its first investment. The Company has been formed for the purpose of investing primarily in the debt of leveraged, non-investment grade middle market companies, with the principal objective of generating income and capital appreciation. The Company’s investment strategy is to invest primarily in first lien senior secured loans and selectively in second lien loans to middle market companies. During the period prior to July 8, 2015, the Company was a development stage company, as defined in Paragraph 915-10-05,Development Stage Entity, of the Financial Accounting Standards Board’s (“FASB’s”) Accounting Standards Codification, as amended (“ASC”). During this time, the Company was devoting substantially all of its efforts to establishing its business and its planned principal operations had not commenced. All losses incurred during the period prior to July 8, 2015 have been considered a part of the Company’s development stage activities.

 

Audax Management Company (NY), LLC (the “Adviser”) is the investment adviser of the Company. The Adviser is registered as an investment adviser with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended.

 

Note 2. Significant Accounting Policies

 

Basis of Presentation

As an investment company, the accompanying financial statements of the Company are prepared in accordance with the investment company accounting and reporting guidance of ASC Topic 946, “Financial Services – Investment Companies,” as amended (“ASC Topic 946”), which incorporates the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X, as well as generally accepted accounting principles in the United States of America (“GAAP”).

 

Certain financial information that is normally included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management of the Company, the unaudited financial results included herein contain all adjustments, consisting solely of normal accruals, considered necessary for the fair presentation of financial statements for the interim period included herein. The current period’s results of operations are not necessarily indicative of the operating results to be expected for future periods. The accounting records of the Company are maintained in U.S. dollars.

 

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material.

16


 

Cash and Cash Equivalents

Cash and cash equivalents are stated at fair value. The Company considers all highly liquid investments purchased with maturities of three months or less and money market mutual funds to be cash equivalents. No cash equivalent balances were held at March 31,September 30, 2020 and December 31, 2019. At such dates, cash was not subject to any restrictions on withdrawal.

 

Expenses

The Company is responsible for investment expenses, legal expenses, auditing fees and other expenses related to the Company’s operations. Such fees and expenses, including expenses initially incurred by the Adviser, may be reimbursed by the Company.

 

Investment Valuation Policy

The Company conducts the valuation of the Company’s investments, pursuant to which the Company’s net asset value is determined, at all times consistent with GAAP and the 1940 Act. The Company’s Board of Directors (the “Board of Directors”), with the assistance of the Company’s Audit Committee (the “Audit Committee”), determines the fair value of the Company’s investments, for investments with a public market and for investments with no readily available public market, on at least a quarterly basis, in accordance with the terms of ASC Topic 820, “Fair Value Measurement,” (“ASC 820”). The Company’s valuation procedures are set forth in more detail below.

 

ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

 

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

 

The three-level hierarchy for fair value measurement is defined as follows:

Level 1— Inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these instruments, even in situations where the Company holds a large position, and a sale could reasonably be expected to impact the quoted price.

Level 2— Inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

Level1 —Inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these instruments, even in situations where the Company holds a large position, and a sale could reasonably be expected to impact the quoted price.

 

Level 3— Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management

judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

Level2 —Inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

 

17Level3 —Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

 


In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

 

Pursuant to the framework set forth above, the Company values securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets.

 

Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, the Company determines whether the quote obtained is sufficient in accordance with GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.

 

Securities that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Company’s Board of Directors, does not represent fair value, are each valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. Inputs for these valuation techniques include relative credit information, observed market movement, industry sector information, and other market data, which may include benchmarking of comparable securities, issuer spreads, reported trades, and reference data, such as market research publications, when available. The process used to determine the applicable value is as follows:

(i) eachEach portfolio company or investment is initially valued by the investment professionals of the Adviser responsible for the portfolio investment using a standardized template designed to approximate fair market value based on observable market inputs and updated credit statistics and unobservable inputs. Additionally, as a part of the Company’s valuation process, the Adviser may be assisted byemploy the services of one or more independent valuation firms engaged by the Company;

(ii) preliminaryPreliminary valuation conclusions are documented and discussed with the Company’s senior management and members of the Adviser’s valuation team;

(iii) the Company’sThe Audit Committee reviews the assessments of the Adviser or independent valuation firm (to the extent applicable) and provides the Company’s Board of Directors with recommendations with respect to the fair value of the investments in the Company’s portfolio; and

(iv) the Company’sThe Board of Directors discusses the valuation recommendations of the Company’s Audit Committee and determines the fair value of the investments in the Company’s portfolio in good faith based on the input of the Adviser, the independent valuation firm (to the extent applicable) and in accordance with the Company’s valuation policy.

 

The Company’s Audit Committee’s recommendation of fair value is generally based on its assessment of the following factors, as relevant:

 


·the nature and realizable value of any collateral;

 

·call features, put features and other relevant terms of debt;

 

·the portfolio company’s ability to make payments;

18

 

·the portfolio company’s actual and expected earnings and discounted cash flow;

 

·prevailing interest rates for like securities and expected volatility in future interest rates;

 

·the markets in which the portfolio company does business and recent economic and/or market events; and

 

·comparisons to publicly traded securities.

 

Investment performance data utilized are the most recently available as of the measurement date, which in many cases may reflect up to a one quarter lag in information.

 

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include the following:

 

·private placements and restricted securities that do not have an active trading market;

 

·securities whose trading has been suspended or for which market quotes are no longer available;

 

·debt securities that have recently gone into default and for which there is no current market;

 

·securities whose prices are stale; and

 

·securities affected by significant events.

 

The Company’s Board of Directors is responsible for the determination, in good faith, of the fair value of the Company’s portfolio investments.

 

Determination of fair value involves subjective judgments and estimates. Accordingly, these notes to the

Company’s financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the Company’s financial statements.

 

Security transactions are recorded on the trade date (the date the order to buy or sell is executed or, in the case of privately issued securities, the closing date, which is when all terms of the transactions have been defined).

 

Realized gains and losses on investments are determined based on the identified cost method.

 

Refer to Note 3 —Investments for additional information regarding fair value measurements and the Company’s application of ASC 820.

 

Interest Income Recognition

Interest income, adjusted for amortization of premium, acquisition costs, and amendment fees and the accretion of original issue discount (“OID”), are recorded on an accrual basis to the extent that such amounts are expected to be collected. Generally, when a loan becomes 120 days or more past due, or if the Company’s qualitative assessment indicates that the debtor is unable to service its debt or other obligations, the Company will place the loan on non-accrual status and cease recognizing interest income on that loan for financial reporting purposes until the borrower has demonstrated the ability and intent to pay contractual amounts due. However, the Company will remain contractually entitled to this interest. Interest payments received on non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current or, due to a restructuring, the interest income is deemed to be collectible. As of September 30, 2020, the Company had one investment on non-accrual which totaled 0.28% and 0.18% of its total portfolio at cost and fair market value, respectively. The Company did not have any investments on non-accrual as of December 31, 2019.

 

19


The Company currently holds loans in the portfolio that contain OID and expects to hold loans in the future that contain payment-in-kind (“PIK”) provisions. The Company recognizes OID for loans originally issued at a discount and recognizes the income over the life of the obligation based on an effective yield calculation. PIK interest, computed at the contractual rate specified in a loan agreement, is added to the principal balance of a loan and recorded as income over the life of the obligation. Therefore, the actual collection of PIK income may be deferred until the time of debt principal repayment. To maintain the ability to be taxed as a RIC, the Company may need to pay out of both OID and PIK non-cash income amounts in the form of distributions, even though the Company has not yet collected the cash on either.

 

As of March 31,September 30, 2020, the Company held 179186 investments in loans with OID. The Company accrued OID income of $93,473$102,083 and $282,729 for the three and nine months ended March 31, 2020.September 30, 2020, respectively. The unamortized balance of OID on debt investments as of March 31,September 30, 2020, totaled $1,797,901.$1,901,454. As of December 31, 2019, the Company held 162 investments in loans with OID. The Company accrued OID income of $62,751$64,494 and $199,813 for the three and nine months ended March 31, 2019.September 30, 2019, respectively. The unamortized balance of OID investments as of December 31, 2019, totaled $1,733,632.

 

As of March 31,September 30, 2020, the Company held one investmentthree investments which had a PIK interest component. The Company did not record anyrecorded $39,222 and $75,145 of PIK interest income for the three and nine months ended March 31, 2020.September 30, 2020, respectively. As of March 31,September 30, 2019, the Company held one investment which had a PIK interest component. The Company recorded $0 and $32,822 of PIK interest income for the three and nine months ended March 31, 2019.September 30, 2019, respectively.

 

As of March 31,September 30, 2020 and December 31, 2019, the Company held $23,294,471$24,955,930 and $5,506,217 cash and cash equivalents, respectively. For the three and nine months ended March 31,September 30, 2020, the Company earned $1,058 and $31,053, respectively, of interest income related to cash, which is included in other interest income within the accompanying statement of operations. For the three and nine months ended September 30, 2019, the Company earned $28,670$28,722 and $50,720,$122,237, respectively, of interest income related to cash, which is included in other interest income within the accompanying statement of operations.

 

Other Income Recognition

The Company generally records prepayment fees and amendment fees upon receipt of cash or as soon as the Company becomes aware of the prepayment.prepayment or amendment.

 

Dividend income on equity investments is accrued to the extent that such amounts are expected to be collected and if the Company has the option to collect such amounts in cash.

 

Prepayment fees, amendment fees and dividend income are both accrued in other income in the accompanying statements of operations.

 

For the three and nine months ended March 31,September 30, 2020, and 2019, the Company accrued $14,740$14,577 and $17,810$153,950 of other income, respectively, related to amendment fees. For the three and nine months ended September 30, 2019, the Company accrued $5,214 and $38,364 of other income, respectively, related to amendment and documentation fees.

 

New Accounting Pronouncements

In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13") which introduces new fair value disclosure requirements as well as eliminates and modifies certain existing fair value disclosure requirements. ASU 2018-13 would be effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of ASU2018-13did not have a material impact on the Company’s disclosures.

 


Note 3. Investments

 

Fair Value

 

In accordance with ASC 820, the fair value of the Company’s investments is determined to be the price that would be received for an investment in a current sale, assuming an orderly transaction between willing market participants on the measurement date. This fair value definition focuses on exit price in the principal, or most advantageous, market and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. ASC 820 also establishes the three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of a financial instrument as of the measurement date as described in Note–2 –Significant Accounting Policies.

20

 

As of March 31,September 30, 2020, $282,476,467$182,630,994 of the Company’s investments were valued using unobservable inputs, and $43,388,747$158,857,789 were valued using observable inputs. During the threenine months ended March 31,September 30, 2020, $65,946,077$15,434,694 transferred into Level 3 due to a decrease in observable prices in the market and $20,650,498$74,210,909 transferred out of Level 3 due to price transparency.the liquidity in the market and transparency of inputs.

 

As of December 31, 2019, $249,452,590 of the Company’s investments were valued using unobservable inputs, and $81,422,321 were valued using observable inputs. During the threenine months ended March 31,September 30, 2019, $46,005,506$61,185,683 into Level 3 due to a decrease in observable prices in the marker and $22,977,630 of investments$20,300,196 transferred into and out of Level 3 respectively.due to the liquidity in the market and transparency of inputs.

 

The following table presents the Company’s investments carried at fair value as of March 31,September 30, 2020 and December 31, 2019, by caption on the Company’s accompanying statements of assets and liabilities and by security type.

 

 Assets at Fair Value as of March 31, 2020  Assets at Fair Value as of September 30, 2020 
 Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
First lien debt $-  $31,378,926  $263,945,044  $295,323,970  $-  $154,504,124  $156,281,866  $310,785,990 
Second lien debt  -   12,009,821   17,842,097   29,851,918   -   4,353,665   25,544,189   29,897,854 
Equity and Preferred Shares  -   -   689,326   689,326   -   -   804,939   804,939 
Total $-  $43,388,747  $282,476,467  $325,865,214  $-  $158,857,789  $182,630,994  $341,488,783 

 

 Assets at Fair Value as of December 31, 2019  Assets at Fair Value as of December 31, 2019 
 Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
First lien debt $-  $81,422,321  $227,392,535  $308,814,856  $-  $81,422,321  $227,392,535  $308,814,856 
Second lien debt  -   -   21,340,798   21,340,798   -   -   21,340,798   21,340,798 
Equity and Preferred Shares  -   -   719,257   719,257   -   -   719,257   719,257 
Total $-  $81,422,321  $249,452,590  $330,874,911  $-  $81,422,321  $249,452,590  $330,874,911 

 

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of March 31,September 30, 2020. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

 

21

 

        As of March 31, 2020        As of September 30, 2020
 Fair Valuation Unobservable   Weighted  Fair Valuation Unobservable   Weighted
 Value  Technique   Inputs(1) Range(2)   Average(3)  Value  Technique Inputs (1) Range (2) Average (3)
First lien debt $176,718,387   Matrix Pricing  Senior Leverage 2.47x - 7.02x  4.84x $143,094,935  Matrix Pricing  Senior Leverage 2.80x - 10.54x 5.12x
       Total Leverage 2.80x - 10.54x 6.20x
       Interest Coverage 0.87x - 5.22x 2.31x
       Debt Service Coverage 0.80x - 4.04x 1.93x
       TEV Coverage 0.78x - 6.88x 2.42x
       Liquidity 33.77% - 333.00% 154.79%
       Spread Comparison 275bps - 700bps 449bps
      Total Leverage 3.10x - 9.80x  6.01x        
      Interest Coverage 1.14x - 5.09x  2.23x  12,235,585  Market Analysis  Senior Leverage 5.39x - 18.12x 7.64x
      Debt Service Coverage 0.93x - 4.44x  1.85x        Total Leverage 5.70x - 19.75x 9.21x
      TEV Coverage 1.27x - 5.70x  2.51x        Interest Coverage 0.26x - 2.34x 1.57x
      Liquidity 5.75% - 587.90%  145.94%        Debt Service Coverage 0.26x - 2.34x 1.27x
      Spread Comparison 275bps - 625bps  423bps        TEV Coverage 0.44x - 1.82x 1.47x
                    Liquidity 33.06% - 226.94% 133.59%
  83,303,092   Discounted Cash Flow  Market Yield 4.43% - 11.89%  8.00%        Spread Comparison 350bps - 650bps 478bps
                    
Second lien debt  15,923,228   Matrix Pricing  Senior Leverage 4.89x - 7.11x  6.11x  24,275,585  Matrix Pricing  Senior Leverage 4.61x - 8.99x 6.10x
      Total Leverage 4.89x - 7.11x  6.11x       Total Leverage 4.61x - 8.99x 6.10x
      Interest Coverage 1.38x - 3.06x  2.09x       Interest Coverage 1.17x - 3.19x 2.13x
      Debt Service Coverage 1.20x - 2.55x  1.77x       Debt Service Coverage 1.01x - 2.83x 1.82x
      TEV Coverage 1.07x - 2.44x  1.79x       TEV Coverage 0.87x - 2.51x 1.77x
      Liquidity 79.62% - 307.12%  131.34%       Liquidity 85.32% - 257.41% 151.86%
      Spread Comparison 650bps - 950bps  782bps       Spread Comparison 650bps - 950bps 773bps
                    
Total $275,944,707      $179,606,105  

 

(1)For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility.  The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.

(2)Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority.  The range may be a single data point when there is only one company represented in a specific credit seniority.

(3)Inputs are weighted based on the fair value of the investments included in the range.

 

The table above does not include $6,531,760$3,024,889 of debt, equity and preferred shares which management values using other unobservable inputs, such as earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA multiples, as well as other qualitative information, including company specific information.

 

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of December 31, 2019. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

 

22


 

        As of December 31, 2019
                As of December 31, 2019
 Fair Valuation Unobservable   Weighted  Fair Valuation Unobservable   Weighted
 Value  Technique Inputs(1)   Range(2)   Average(3)  Value  Technique   Inputs (1)   Range (2)   Average (3)
First lien debt $224,772,281  Matrix Pricing Senior Leverage 2.33x - 7.55x  4.89x $224,772,281   Matrix Pricing  Senior Leverage 2.33x - 7.55x 4.89x
     Total Leverage 3.10x - 9.79x  6.07x       Total Leverage 3.10x - 9.79x 6.07x
     Interest Coverage 1.14x - 4.80x  2.10x       Interest Coverage 1.14x - 4.80x 2.10x
     Debt Service Coverage 0.93x - 3.68x  1.76x       Debt Service Coverage 0.93x - 3.68x 1.76x
     TEV Coverage 1.27x - 5.70x  2.42x       TEV Coverage 1.27x - 5.70x 2.42x
     Liquidity 5.75% - 587.90%  141.43%       Liquidity 5.75% - 587.90% 141.43%
     Spread Comparison 275bps - 650bps  435bps       Spread Comparison 275bps - 650bps 435bps
                    
Second lien debt  20,071,929  Matrix Pricing Senior Leverage 4.60x - 7.06x  5.87x  20,071,929   Matrix Pricing  Senior Leverage 4.60x - 7.06x 5.87x
     Total Leverage 4.60x - 7.06x  5.88x       Total Leverage 4.60x - 7.06x 5.88x
     Interest Coverage 1.54x - 3.21x  2.17x       Interest Coverage 1.54x - 3.21x 2.17x
     Debt Service Coverage 1.38x - 2.86x  1.89x       Debt Service Coverage 1.38x - 2.86x 1.89x
     TEV Coverage 1.52x - 2.44x  1.98x       TEV Coverage 1.52x - 2.44x 1.98x
     Liquidity 52.00% - 347.60%  149.91%       Liquidity 52.00% - 347.60% 149.91%
     Spread Comparison 675bps - 1025bps  764bps       Spread Comparison 675bps - 1025bps 764bps
                    
Total $244,844,210      $244,844,210  

 

(1)For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility.  The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.

 

(2)Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority.  The range may be a single data point when there is only one company represented in a specific credit seniority.

 

(3)Inputs are weighted based on the fair value of the investments included in the range.

 

The table above does not include $4,608,380 of debt, equity and preferred shares which management values using other unobservable inputs, such as EBITDA and EBITDA multiples, as well as other qualitative information, including company specific information.

 

Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in market yields, discounts rates,rate, leverage, EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of the Company’s investments. Generally, an increase or decrease in market yields, discount rates or leverage or a an increase/decrease in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a corresponding decrease or increase, respectively, in the fair value of certain of the Company’s investments.

 

The following tables provide the changes in fair value, broken out by security type, during the threenine months ended March 31,September 30, 2020 and 2019 for all investments for which the Company determines fair value using unobservable (Level 3) factors.

 

23


 

Three Months Ended March 31, 2020 First lien debt  Second lien debt  Equity and Preferred Shares  Total 
Nine Months Ended September 30, 2020 First lien debt Second lien
debt		 Equity and
Preferred
Shares		 Total 
Fair Value as of December 31, 2019 $227,392,535  $21,340,798  $719,257  $249,452,590  $227,392,535  $21,340,798  $719,257  $249,452,590 
Transfers into Level 3  65,946,077   -   -   65,946,077   15,434,694   -   -   15,434,694 
Transfers out of Level 3  (11,659,069)  (8,991,429)  -   (20,650,498)  (71,237,159)  (2,973,750)  -   (74,210,909)
Total gains:                                
Net realized (loss) gain(a)  (53,247)  -   -   (53,247)
Net realized loss(a)   (1,221,555)  -   -   (1,221,555)
Net unrealized (depreciation) appreciation(b)  (13,839,089)  (1,220,061)  (29,931)  (15,089,081)  (1,110,239)  (76,159)  85,682   (1,100,716)
New investments, repayments and settlements:(c)                                
Purchases  11,440,787   6,708,438   -   18,149,225   13,199,175   7,709,688   -   20,908,863 
Settlements/repayments  (9,624,849)  -   -   (9,624,849)  (21,689,548)  (472,222)  -   (22,161,770)
Net amortization of premiums, PIK, discounts and fees  85,455   4,351   -   89,806   253,400   15,834   -   269,234 
Sales  (5,743,556)  -   -   (5,743,556)  (4,739,437)  -   -   (4,739,437)
Fair Value as of March 31, 2020 $263,945,044  $17,842,097  $689,326  $282,476,467 
Fair Value as of September 30, 2020 $156,281,866  $25,544,189  $804,939  $182,630,994 

 

(a)Included in net realized gainloss on the accompanyingStatement of Operationsfor the threenine months ended March 31,September 30, 2020.

(b)Included in net change in unrealized depreciation on the accompanyingStatement of Operationsfor the threenine months ended March 31,September 30, 2020.

(c)Includes increases in the cost basis of investments resulting from portfolio investments, the amortization of discounts, and PIK, as well as decreases in the costs basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.

 

Three Months Ended March 31, 2019 First lien debt  Second lien debt  Equity and Preferred Shares  Total 
Nine Months Ended September 30, 2019 First lien debt Second lien
debt		 Equity and
Preferred
Shares		 Total 
Fair Value as of December 31, 2018 $124,975,467  $17,044,607  $-  $142,020,074  $124,975,467  $17,044,607  $-  $142,020,074 
Transfers into Level 3  41,904,236   4,101,270   -   46,005,506   59,681,933   1,503,750   -   61,185,683 
Transfers out of Level 3  (21,885,880)  (1,091,750)  -   (22,977,630)  (18,817,071)  (1,483,125)  -   (20,300,196)
Total gains:                                
Net realized gain(a)  20,496   -   -   20,496   99,771   5,476   -   105,247 
Net unrealized appreciation (depreciation)(b)  246,724   7,725   (400,268)  (145,819)
Net unrealized (depreciation) appreciation(b)  (267,439)  44,955   (400,268)  (622,752)
New investments, repayments and settlements:(c)                                
Purchases  8,653,557   1,209,731   800,535   10,663,823   41,582,955   2,192,231   800,535   44,575,721 
Settlements/repayments  (9,257,506)  -   -   (9,257,506)  (26,036,040)  (2,000,000)  -   (28,036,040)
Net amortization of premiums, PIK, discounts and fees  56,942   2,397   -   59,339   170,738   7,891   -   178,629 
Sales  -   -   -   -   (499,500)  -   -   (499,500)
Fair Value as of March 31, 2019 $144,714,036  $21,273,980  $400,267  $166,388,283 
Fair Value as of September 30, 2019 $180,890,814  $17,315,785  $400,267  $198,606,866 

 

(a)Included in net realized gain on the accompanyingStatement of Operationsfor the threenine months ended March 31,September 30, 2019.
(b)Included in net change in unrealized depreciation on the accompanyingStatement of Operationsfor the threenine months ended March 31,September 30, 2019.

(c)Includes increases in the cost basis of investments resulting from portfolio investments, the amortization of discounts, and PIK, as well as decreases in the costs basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.

 

The change in unrealized value attributable to investments still held at March 31,September 30, 2020 and 2019 was $(1,046,694)were $(1,542,355) and $(324,446)$(949,494), respectively.

 

Investment Activities

The Company held a total of 196202 investments with an aggregate fair value of $325,865,214$341,488,783 as of March 31,September 30, 2020. During the threenine months ended March 31,September 30, 2020, the Company invested in 2840 new investments for a combined $25,224,701$39,542,336 and in existing investments for a combined $9,103,107.$12,834,005. The Company also received $18,146,113$27,907,668 in repayments from investments and $5,743,556$6,437,456 from investments sold during the threenine months ended March 31,September 30, 2020.

24

 

The Company held a total of 176 investments with an aggregate fair value of $330,874,911 as of December 31, 2019. During the threenine months ended March 31,September 30, 2019, the Company invested in 1454 new investments for a combined $29,730,870$90,412,665 and in existing investments for a combined $15,542,660.$20,244,318. The Company also received $11,648,671$46,240,554 in repayments from investments and $5,017,964 from investments sold during the threenine months ended March 31,September 30, 2019.


Investment Concentrations

 

As of March 31,September 30, 2020, the Company’s investment portfolio consisted of investments in 172174 companies located in 3435 states across 22 different industries, with an aggregate fair value of $325,865,214.$341,488,783. The five largest investments at fair value as of March 31,September 30, 2020 totaled $20,149,968,$21,213,433 or 6.18%6.21% of the Company’s total investment portfolio as of such date. As of March 31,September 30, 2020, the Company’s average investment by obligor was $1,751,725$1,733,010 at cost.

 

As of December 31, 2019, the Company’s investment portfolio consisted of investments in 164 companies located in 33 states across 22 different industries, with an aggregate fair value of $330,874,911. The five largest investments at fair value as of December 31, 2019 totaled $21,465,158 or 7.16% of the Company’s total investment portfolio as of such date. As of December 31, 2019, the Company’s average investment by obligor was $2,028,793 at cost.

 

The following table outlines the Company’s investments by security type as of March 31,September 30, 2020 and December 31, 2019:

 

  September 30, 2020  December 31, 2019 
     Percentage of     Percentage of     Percentage     Percentage 
     Total     Total     of Total     of Total 
  Cost  Investments  Fair Value  Investments  Cost  Investments  Fair Value  Investments 
First lien debt $318,377,852   90.95% $310,785,990   91.01% $310,257,401   93.25% $308,814,856   93.33%
Second lien debt  30,569,567   8.73%  29,897,854   8.76%  21,344,024   6.41%  21,340,798   6.46%
        Total Debt Investments  348,947,419   99.68%  340,683,844   99.77%  331,601,425   99.66%  330,155,654   99.79%
Equity and Preferred Shares  1,120,581   0.32%  804,939   0.23%  1,120,581   0.34%  719,257   0.21%
        Total Equity Investments  1,120,581   0.32%  804,939   0.23%  1,120,581   0.34%  719,257   0.21%
     Total Investments $350,068,000   100.00% $341,488,783   100.00% $332,722,006   100.00% $330,874,911   100.00%

 

  March 31, 2020  December 31, 2019 
  Cost  Percentage of Total Investments  Fair Value  Percentage of Total Investments  Cost  Percentage of Total Investments  Fair Value  Percentage of Total Investments 
First lien debt $311,100,247   90.63% $295,323,970   90.63% $310,257,401   93.25% $308,814,856   93.33%
Second lien debt  31,029,014   9.04%  29,851,918   9.17%  21,344,024   6.41%  21,340,798   6.46%
Total Debt Investments  342,129,261   99.67%  325,175,888   99.80%  331,601,425   99.66%  330,155,654   99.79%
Equity and Preferred Shares  1,120,581   0.33%  689,326   0.20%  1,120,581   0.34%  719,257.00   0.21%
Total Equity Investments  1,120,581   0.33%  689,326   0.20%  1,120,581   0.34%  719,257   0.21%
Total Investments $343,249,842   100.00% $325,865,214   100.00% $332,722,006   100.00% $330,874,911   100.00%


Investments at fair value consisted of the following industry classifications as of March 31,September 30, 2020 and December 31, 2019:

 

25

   March 31, 2020  December 31, 2019 
 Industry Fair Value  Percentage of Total Investments  Fair Value  Percentage of Total Investments 
 Healthcare & Pharmaceuticals $71,172,561   21.84% $76,108,451   23.00%
 High Tech Industries  56,065,620   17.21   58,327,844   17.63 
 Services: Business  44,226,079   13.57   44,376,771   13.41 
 Chemicals, Plastics & Rubber  26,416,557   8.11   28,747,162   8.69 
 Services: Consumer  23,521,898   7.22   25,757,966   7.78 
 Aerospace & Defense  17,846,880   5.48   12,911,355   3.90 
 Banking, Finance, Insurance & Real Estate  11,834,057   3.63   10,766,682   3.25 
 Capital Equipment  9,803,831   3.01   7,720,891   2.33 
 Construction & Building  9,178,428   2.82   6,989,790   2.11 
 Consumer Goods: Non-durable  7,955,468   2.44   8,472,022   2.56 
 Containers, Packaging & Glass  8,064,889   2.47   7,941,602   2.40 
 Automotive  6,998,770   2.15   6,294,153   1.90 
 Wholesale  6,589,129   2.02   7,219,568   2.18 
 Transportation: Cargo  6,788,445   2.08   7,192,803   2.17 
 Forest Products & Paper  5,221,244   1.60   4,379,293   1.32 
 Media: Advertising, Printing & Publishing  4,467,097   1.37   5,124,527   1.55 
 Beverage, Food & Tobacco  3,768,771   1.16   3,930,263   1.19 
 Consumer Goods: Durable  2,211,409   0.68   2,309,428   0.70 
 Retail  1,206,009   0.37   1,286,070   0.39 
 Hotel, Gaming & Leisure  1,039,765   0.32   3,503,815   1.06 
 Metals & Mining  925,717   0.28   987,604   0.31 
 Health Care Equipment & Services  562,590   0.17   526,851   0.17 
   $325,865,214   100.00% $330,874,911   100.00%
  September 30, 2020  December 31, 2019 
     Percentage of     Percentage of 
Industry Fair Value  Total Investments  Fair Value  Total Investments 
Healthcare & Pharmaceuticals $72,569,221   21.25% $76,108,451   23.00%
High Tech Industries  64,178,581   18.79   58,327,844   17.63 
Services: Business  45,402,430   13.30   44,376,771   13.41 
Chemicals, Plastics & Rubber  28,042,227   8.21   28,747,162   8.69 
Services: Consumer  19,709,417   5.77   25,757,966   7.78 
Aerospace & Defense  19,320,069   5.66   12,911,355   3.90 
Banking, Finance, Insurance & Real Estate  15,581,549   4.56   10,766,682   3.25 
Capital Equipment  10,096,648   2.96   7,720,891   2.33 
Construction & Building  9,583,136   2.81   6,989,790   2.11 
Containers, Packaging & Glass  8,793,240   2.57   7,941,602   2.40 
Consumer Goods: Non-durable  8,079,292   2.37   8,472,022   2.56 
Automotive  7,239,147   2.12   6,294,153   1.90 
Wholesale  7,028,587   2.06   7,219,568   2.18 
Transportation: Cargo  7,028,298   2.06   7,192,803   2.17 
Forest Products & Paper  5,171,247   1.51   4,379,293   1.32 
Beverage, Food & Tobacco  3,910,300   1.15   3,930,263   1.19 
Media: Advertising, Printing & Publishing  3,740,287   1.10   5,124,527   1.55 
Consumer Goods: Durable  2,280,340   0.67   2,309,428   0.70 
Retail  1,253,955   0.37   1,286,070   0.39 
Metals & Mining  972,987   0.28   987,604   0.31 
Hotel, Gaming & Leisure  951,346   0.27   3,503,815   1.06 
Health Care Equipment & Services  556,479   0.16   526,851   0.17 
  $341,488,783   100.00% $330,874,911   100.00%

 

Investments at fair value were included in the following geographic regions of the United States as of March 31,September 30, 2020 and December 31, 2019:

 

 September 30, 2020  December 31, 2019 
 March 31, 2020  December 31, 2019     Percentage of     Percentage of 
    Percentage of Total     Percentage of Total    Total   Total 
Geographic Region  Fair Value   Investments   Fair Value   Investments  Fair Value Investments Fair Value Investments 
Northeast $83,401,228   25.59% $87,146,010   26.34% $85,824,540   25.13% $87,146,010   26.34%
Midwest  67,487,094   20.71   68,357,102   20.66   74,389,638   21.78   68,357,102   20.66 
West  51,633,872   15.85   52,320,288   15.81   56,500,337   16.55   52,320,288   15.81 
Southwest  39,143,872   12.01   42,469,487   12.84   39,668,478   11.62   42,469,487   12.84 
East  39,469,099   11.56   39,053,575   11.80 
Southeast  36,169,835   11.10   35,674,150   10.78   37,089,380   10.86   35,674,150   10.78 
East  39,446,104   12.11   39,053,575   11.80 
Northwest  3,968,605   1.22   4,083,800   1.23   4,027,586   1.18   4,083,800   1.23 
South  2,714,604   0.83   1,770,499   0.54   2,556,018   0.75   1,770,499   0.54 
Other(a)  1,900,000   0.58   -   -   1,963,707   0.57   -   - 
Total Investments $325,865,214   100.00% $330,874,911   100.00% $341,488,783   100.00% $330,874,911   100.00%

 

(a) The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.

(a)The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.

 

The geographic region indicates the location of the headquarters of the Company’s portfolio companies. A portfolio company may have a number of other business locations in other geographic regions.

 

26

Investment Principal Repayments

The following table summarizes the contractual principal repayments and maturity of the Company’s investment portfolio by fiscal year, assuming no voluntary prepayments, as of March 31,September 30, 2020:

 

For the Fiscal Years Ending December 31: Amount  Amount 
2020 $2,641,641  $754,813 
2021  10,234,648   8,813,633 
2022  24,729,641   21,775,107 
2023  45,545,325   46,356,875 
2024  80,048,648   80,285,522 
Thereafter  180,727,259   192,862,923 
Total contractual repayments  343,927,162   350,848,873 
Adjustments to cost basis on debt investments(a)  (1,797,901)  (1,901,454)
Total Cost Basis of Debt Investments Held at March 31, 2020: $342,129,261 
Total Cost Basis of Debt Investments Held at September 30, 2020: $348,947,419 
    

 

(a)    Adjustment to cost basis related to unamortized balance of OID investments.

(a)Adjustment to cost basis related to unamortized balance of OID investments.

 

COVID-19 Developments

In addition, duringDuring the three and nine months ended March 31,September 30, 2020 and subsequent to March 31,September 30, 2020, the COVID-19 pandemic has had a significant impact on the U.SU.S. economy. To the extentCertain of the Company's portfolio companies arehave been adversely impacted by the effects of the COVID-19 pandemic, it maywhich have resulted in a material adverse impact on the Company's net asset value, net investment income, the fair value of its portfolio investments, its financial condition and the results of operations and financial condition of the Company's portfolio companies and may continue to adversely affect the Company’s future net asset value, net investment income, the fair value of its portfolio investments, its financial condition and the results of operations and financial condition of the Company's portfolio companies.

Note 4. Related Party Transactions

 

Investment Advisory Agreement

The Company has entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Adviser. In accordance with the Investment Advisory Agreement, the Company pays the Adviser certain fees as compensation for its services, such fees consisting of a base management fee and an incentive fee (the “Incentive Fee”). The services the Adviser provides to the Company, subject to the overall supervision of the Company’s Board of Directors, include managing the day-to-day operations of, and providing investment services to, the Company. The Company also entered into a management fee waiver agreement with the Adviser (the “Waiver Agreement”), which the Company or the Adviser may terminate upon 60 days’ prior written notice.

Management Fee

The base management fee is calculated at an annual rate of 1.0% of the Company’s average gross assets including cash and any temporary investments in cash-equivalents, including U.S. government securities and other high-quality investment grade debt investments that mature in 12 months or less from the date of investment, payable quarterly in arrears on a calendar quarter basis.

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive the base management fee to the extent necessary so that the base management fee payable under the Investment Advisory Agreement equals, and is calculated in the same manner as if, the base management fee otherwise payable by the Company were calculated at an annual rate equal to 0.65% (instead of an annual rate of 1.00%).

 

27


 

For the three and nine months ended March 31,September 30, 2020, the Company recorded base management fees of $880,852$874,188 and $2,697,570, respectively, and waivers to the base management fees of $308,298,$305,966 and $944,150, respectively, as set forth within the accompanying statements of operations. For the three and nine months ended March 31,September 30, 2019, the Company recorded base management fees of $738,654$820,094 and $2,367,188, respectively, and waivers to the base management fees of $258,529,$287,033 and $828,516, respectively, as set forth within the accompanying statements of operations.

Incentive Fee

The Incentive Fee has two parts, as follows: onethe first part of the Incentive Fee is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses accrued for the quarter (including the base management fee, expenses payable under the Administration Agreement (as defined below) and any interest expense on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee).

 

The Company determines pre-incentive fee net investment income in accordance with GAAP, including, in the case of investments with a deferred interest feature, such as debt instruments with PIK interest, OID securities and accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.0% per quarter (4.0% annualized). The Company determines its average gross assets during each fiscal quarter and calculates the base management fee payable with respect to such amount at the end of each fiscal quarter.  As a result, a portion of the Company’s net investment income is included in its gross assets for the period between the date on which such income is earned and the date on which such income is distributed. Therefore, the Company’s net investment income used to calculate part of the Incentive Fee is also included in the amount of the Company’s gross assets used to calculate the 1.0% annual base management fee. The Company pays its Adviser an Incentive Fee with respect to its pre-incentive fee net investment income in each calendar quarter as follows:

 

 ·

no amount is paid on the income-portion of the Incentive Fee in any calendar quarter in which the Company’s pre-incentive fee net investment income does not exceed the hurdle of 1.0% (4.0% annualized);

·100% of the Company’s 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 1.1765 % in any calendar quarter (4.706% annualized). The Company refers to this portion of its pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 1.1765%) as the “catch-up” provision. The catch-up is meant to provide the Adviser with 15.0% of the pre-incentive fee net investment income as if a hurdle rate did not apply if net investment income exceeds 1.1765% in any calendar quarter (4.706% annualized); and
 ·15.0% of the amount of the Company’s pre-incentive fee net investment income, if any, that exceeds 1.1765% in any calendar quarter (4.706% annualized) is payable to the Adviser.

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive its right to receive the Incentive Fee on pre-incentive fee net investment income to the extent necessary so that such Incentive Fee equals, and is calculated in the same manner as, the corresponding Incentive Fee on pre-incentive fee net investment income, if such Incentive Fee (i) were calculated based upon the Adviser receiving 10.0% (instead of 15.0%) of the applicable pre-incentive fee net investment income and (ii) did not include any “catch-up” feature in favor of the Adviser.

28


 

The second part of the Incentive Fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 15.0% of the Company’s realized capital gains, if any, on a cumulative basis from June 16, 2015, the effective date of ourthe Company’s registration statement on Form 10 (file no. 000-55426), through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain Incentive Fees with respect to each of the investments in the Company’s portfolio.

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive the Incentive Fee on capital gains to the extent necessary so that such portion of the Incentive Fee equals, and is calculated in the same manner as, the corresponding Incentive Fee on capital gains, if such portion of the Incentive Fee were calculated based upon the Adviser receiving 10.0% (instead of 15.0%).

 

In addition, pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive both components of the Incentive Fee to the extent necessary so that it does not receive Incentive Fees which are attributable to income and gains of the Company that exceed an annualized rate of 12.0% in any calendar quarter.

 

The waivers from the Adviser will remain effective until terminated earlier by either party upon 60 days’ prior written notice.

 

For the three and nine months ended March 31,September 30, 2020, the Company recorded incentive fees related to net investment income of $661,359.$356,461 and $1,641,419, respectively. Offsetting the incentive fees were waivers of the incentive fees of $563,778$320,815 and $1,437,466 for the three and nine months ended March 31,September 30, 2020, respectively, as set forth within the accompanying statements of operations. For the three and nine months ended March 31,September 30, 2019, the Company recorded incentive fees related to net investment income of $612,128.$680,250 and $1,939,486, respectively. Offsetting the incentive fees were waivers of the incentive fessfees of $489,291$543,178 and $1,553,628 for the three and nine months ended March 31,September 30, 2019, respectively, as set forth within the accompanying statements of operations.

 

Administrative Fee

The Company has also entered into an administration agreement (the “Administration Agreement”) with Audax Management Company, LLC (the “Administrator”) underpursuant to which the Administrator provides administrative services to the Company. Under the Administration Agreement, the Administrator performs, or oversees the performance of administrative services necessary for the operation of the Company, which include being responsible for the financial records which the Company is required to maintain and prepare reports filed with the SEC. In addition, the Administrator assists in determining and publishing the Company’s net asset value, oversees the preparation and filing of the Company’s tax returns and the printing and dissemination of reports to the Company’s stockholders, and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. The Company reimburses the Administrator for its allocable portion of the costs and expenses incurred by the Administrator for overhead in performance by the Administrator of its duties under the Administration Agreement, including the cost of facilities, office equipment and the Company’s allocable portion of cost of compensation and related expenses of its Chief Financial Officer and Chief Compliance Officer and their respective staffs, as well as any costs and expenses incurred by the Administrator relating to any administrative or operating services provided by the Administrator to the Company. Such costs are reflected as an administrative fee in the accompanying statements of operations.

 

The Company has also entered into a fee waiver agreement with the Administrator, pursuant to which the Administrator may waive, in whole or in part, its entitlement to receive reimbursements from the Company.

 

The Company accrued administrative fees of $66,250 and $198,750 for each of the three and nine months ended March 31,September 30, 2020, and 2019,respectively, as set forth within the accompanying statements of operations.

The Company accrued administrative fees of $66,250 and $198,750 for the three and nine months ended September 30, 2019, respectively, as set forth within the accompanying statements of operations.

29

Related Party Fees

Fees due to related parties as of March 31,September 30, 2020 and December 31, 2019 on the Company’s accompanying statements of assets and liabilities were as follows:

 

  March 31, 2020  December 31, 2019 
Net base management fee due to Adviser $572,554  $569,600 
Net incentive fee due to Adviser  97,581   118,536 
        Total fees due to Adviser, net of waivers  670,135   688,136 
        Fee due to Administrator, net of waivers  66,250   66,250 
              Total Related Party Fees Due $736,385  $754,386 

(a) Expenses paid on behalf of the Company by the Adviser  

  September 30, 2020  December 31, 2019 
Net base management fee due to Adviser $568,222  $569,600 
Net incentive fee due to Adviser  35,646   118,536 
Total fees due to Adviser, net of waivers  603,868   688,136 
Fee due to Administrator, net of waivers  66,250   66,250 
Total Related Party Fees Due $670,118  $754,386 

 

Note 5. Net (Decrease) Increase in Net Assets Resulting from Operations Per Share of Common Stock:

 

The following table sets forth the computation of basic and diluted net (decrease) increase in net assets resulting from operations per weighted average share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), for the three and nine months ended March 31,September 30, 2020 and 2019:

 

  Three Months Ended
March 31, 2020		  Three Months Ended
March 31, 2019		 
Numerator for basic and diluted net (decrease) increase in net assets resulting from operations per common share $(11,230,403) $3,641,937 
Denominator for basic and diluted weighted average common shares  36,541,077   30,148,907 
Basic and diluted net (decrease) increase in net assets resulting from operations per common share $(0.31) $0.12 
  Three Months Ended
September 30, 2020		  Three Months Ended
September 30, 2019		  Nine Months Ended
September 30, 2020		  Nine Months Ended
September 30, 2019		 
Numerator for basic and diluted net increase in net assets resulting from operations per common share $9,195,505  $3,753,794  $4,420,458  $11,338,921 
Denominator for basic and diluted weighted average common shares  38,265,852   33,504,019   37,528,161   31,856,849 
Basic and diluted net increase in net assets resulting from operations per common share $0.24  $0.11  $0.12  $0.36 

 

 

Note 6. Income Tax

 

The Company has elected to be regulated as a BDC under the 1940 Act, as well as elected to be treated as a RIC under Subchapter M of the Code. As a RIC, the Company generally is not subject to corporate-level U.S. federal income taxes on any ordinary income or capital gains that it timely distributes as dividends for U.S. federal income tax purposes to its stockholders. To qualify to be treated as a RIC, the Company is required to meet certain source of income and asset diversification requirements, and to timely distribute dividends out of assets legally available for distributions to its stockholders of an amount generally equal to at least 90% of the sum of its net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any (i.e., “investment company taxable income,” determined without regard to any deduction for dividends paid), for each taxable year. The amount to be paid out as distributions to the Company’s stockholders is determined by the Company’s Board of Directors and is based on management’s estimate of the fiscal year earnings. Based on that estimate, the Company intends to make the requisite distributions to its stockholders, which will generally relieve the Company from corporate-level U.S. federal income taxes. Although the Company currently intends to distribute its net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, recognized in respect of each taxable year as dividends out of the Company’s assets legally available for distribution, the Company in the future may decide to retain for investment and be subject to entity-level income tax on such net capital gains. Additionally, depending on the level of taxable income earned in a taxable year, the Company may choose to carry forward taxable income in excess of current year distributions into the next taxable year and incur a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, the Company will accrue an excise tax, if any, on estimated excess taxable income as such excess taxable income is earned.

 

30

The Company had aggregate distributions declared and paid to its stockholders for the year ended December 31, 2019 of $17,084,202, or $0.52 per share. The tax character of the distributions declared and paid represented $16,941,968 from ordinary income and $142,234 from tax return of capital. The Company had aggregate distributions declared and paid to its stockholders for the year ended December 31, 2018 of $13,002,172, or $0.52 per share. The tax character of the distributions declared and paid represented $12,537,786 from ordinary income, $450,049 capital gains, and $14,337 from tax return of capital.

During the nine months ended September 30, 2020, the Company declared and paid distributions of $8,125,607, or $0.215 per share. The tax character of the distributions declared and paid represented $8,125,607 from ordinary income. During the nine months ended September 30, 2019, the Company declared and paid distributions of $8,306,889, or $0.26 per share. The tax character of the distributions declared and paid represented $8,246,864 from ordinary income and $60,025 from capital gains.

 

The determination of the tax attributes of the Company’s distributions is made annually at the end of the Company’s taxable year, based upon the Company’s taxable income for the full taxable year and distributions paid for the full taxable year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full taxable year. The actual tax characteristics of distributions to stockholders will be reported to the Company’s stockholders subject to information reporting after the close of each calendar year on Form 1099-DIV.

 

As of December 31, 2019, the components of accumulated net unrealized appreciation on investments and net investment losses and losses on a tax basis as detailed below differ from the amounts reflected in the Company’s statements of assets and liabilities by temporary book/tax differences primarily arising from amortization of organizational expenditures.

 

 As of December 31, 2019  As of December 31,
2019		 
Other temporary book/tax differences $(213,307) $(213,307)
Net tax basis unrealized depreciation  (1,847,095)  (1,847,095)
Accumulated net realized loss  (670,443)  (670,443)
Components of tax distributable deficit at period end $(2,730,845) $(2,730,845)

 

Certain losses incurred by the Company after October 31 of a taxable year are deemed to arise on the first business day of the Company’s next taxable year. The Company did not incur such losses after October 31 of the Company’s taxable year ended December 31, 2019.

 

Capital losses are generally eligible to be carried forward indefinitely, and retain their status as short-term or long-term in the manner originally incurred by the Company. The Company did not maintain any capital losses as of December 31, 2019. The Company has evaluated tax positions it has taken, expects to take, or that are otherwise relevant to the Company for purposes of determining whether any relevant tax positions would “more-likely-than-not” be sustained by the applicable tax authority in accordance with ASC Topic 740, “Income Taxes,” as modified by ASC Topic 946. The Company has analyzed such tax positions and has concluded that no unrecognized tax benefits should be recorded for uncertain tax positions for taxable years that may be open. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. The Company’s U.S. federal tax returns for fiscal years 2017, 2018 and 2019 remain subject to examination by the Internal Revenue Service. The Company records tax positions that are not deemed to meet a more-likely-than-not threshold as tax expenses as well as any applicable penalties or interest associated with such positions. During each of the three and nine months ended March 31,September 30, 2020 and 2019, no tax expense or any related interest or penalties were incurred.


Note 7. Equity

 

On June 23, 2015, an investor made a $140,000,000 capital commitment to the Company. On December 2, 2016, the same investor made an additional capital commitment of $50,000,000. On December 7, 2017, the same investor made an additional capital commitment of $100,000,000. On March 22, 2019, the same investor made an additional capital commitment of $40,000,000. On September 23, 2019, the same investor made an additional capital commitment of $30,000,000. On March 20, 2020, the same investor made an additional capital commitment of $11,200,000. As of March 31,September 30, 2020, $21,200,000$6,200,000 of total capital commitments remained unfunded by the Company’s investors.

31

 

The number of shares of Common Stock issued and outstanding as of March 31,September 30, 2020 and December 31, 2019, were 36,698,22938,343,577 and 35,109,246, respectively.

 

The following table details the activity of Stockholders’ Equity for the three and nine months ended March 31,September 30, 2020 and 2019:

 

Three Months Ended March 31, 2020 Common Stock  Capital in Excess
of Par Value		  Total
Distributable
(Loss) Earnings		  Total
Stockholders'
Equity		 
Balance as of December 31, 2019 $35,110  $334,095,408  $(2,730,845) $331,399,673 
   Net investment income  -   -   4,310,906   4,310,906 
   Net realized losses from investment transactions  -   -   (3,776)  (3,776)
   Net change in unrealized depreciation on investments  -   -   (15,537,533)  (15,537,533)
   Issuance of shares  1,588   14,998,412   -   15,000,000 
Balance as of March 31, 2020 $36,698  $349,093,820  $(13,961,248) $335,169,270 
Three Months Ended September 30, 2020 Common Stock  Capital in Excess
of Par Value		  Total
Distributable
(Loss) Earnings		  Total
Stockholders'
Equity		 
Balance as of June 30, 2020 $37,793  $359,092,751  $(15,631,499) $343,499,045 
Net investment income  -   -   3,798,741   3,798,741 
Net realized losses from investment transactions  -   -   (1,039,704)  (1,039,704)
Net change in unrealized appreciation on investments  -   -   6,436,468   6,436,468 
Issuance of shares  550   4,999,450   -   5,000,000 
Balance as of September 30, 2020 $38,343  $364,092,201  $(6,435,994) $357,694,550 

 

Three Months Ended September 30, 2019 Common Stock  Capital in Excess
of Par Value		  Total
Distributable
(Loss) Earnings		  Total
Stockholders'
Equity		 
Balance as of March 31, 2019 $31,950  $304,182,330  $(2,512,777) $301,701,503 
Net investment income  -   -   4,397,403   4,397,403 
Net realized losses from investment transactions  -   -   (826,185)  (826,185)
Net change in unrealized appreciation on investments  -   -   182,576   182,576 
Issuance of shares  1,589   14,998,411   -   15,000,000 
Balance as of June 30, 2019 $33,539  $319,180,741  $1,241,017  $320,455,297 

 

Three Months Ended March 31, 2019 Common Stock  Capital in Excess
of Par Value		  Total
Distributable
(Loss) Earnings		  Total
Stockholders'
Equity		 
Balance as of December 31, 2018 $28,270  $269,246,005  $(1,851,040) $267,423,235 
   Net investment income  -   -   3,957,540   3,957,540 
   Net realized gains from investment transactions  -   -   27,919   27,919 
   Net change in unrealized depreciation on investments  -   -   (343,522)  (343,522)
   Issuance of shares  2,114   19,997,886   -   20,000,000 
Balance as of March 31, 2019 $30,384  $289,243,891  $1,790,897  $291,065,172 
Nine Months Ended September 30, 2020 Common Stock  Capital in Excess
of Par Value		  Total
Distributable
(Loss) Earnings		  Total
Stockholders'
Equity		 
Balance as of December 31, 2019 $35,110  $334,095,408  $(2,730,845) $331,399,673 
Net investment income  -   -   12,195,676   12,195,676 
Net realized losses from investment transactions  -   -   (1,043,096)  (1,043,096)
Net change in unrealized depreciation on investments  -   -   (6,732,122)  (6,732,122)
Issuance of shares  3,233   29,996,767   -   30,000,000 
Distributions to Stockholders  -   -   (8,125,607)  (8,125,607)
Reinvested Dividends  -   26   -   26 
Balance as of September 30, 2020 $38,343  $364,092,201  $(6,435,994) $357,694,550 

Nine Months Ended September 30, 2019 Common Stock  Capital in Excess
of Par Value		  Total
Distributable
(Loss) Earnings		  Total
Stockholders'
Equity		 
Balance as of December 31, 2018 $28,270  $269,246,005  $(1,851,040) $267,423,235 
Net investment income  -   -   12,542,535   12,542,535 
Net realized losses from investment transactions  -   -   (724,454)  (724,454)
Net change in unrealized depreciation on investments  -   -   (479,160)  (479,160)
Issuance of shares  5,269   49,994,731   -   50,000,000 
Distributions to Stockholders  -   (60,025)  (8,246,864)  (8,306,889)
Reinvested Dividends  -   30   -   30 
Balance as of September 30, 2019 $33,539  $319,180,741  $1,241,017  $320,455,297 

 

Note 8. Commitments and Contingencies

 

The Company may enter into certain credit agreements that include loan commitments where all or a portion of such commitment may be unfunded. The Company is generally obligated to fund the unfunded loan commitments at the borrowers’ discretion. Funded portions of credit agreements are presented on the accompanying schedule of investments. Unfunded loan commitments and funded portions of credit agreements are fair valued and unrealized appreciation or depreciation, if any, have been included in the accompanying statements of assets and liabilities and statements of operations.

 

The following table summarizes the Company’s significant contractual payment obligations as of March 31,September 30, 2020 and December 31, 2019:

 

32

Investment Industry March 31, 2020  December 31, 2019 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/9/26 Healthcare & Pharmaceuticals $761,905  $761,905 
Service Logic, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 12/31/24(i) Services: Business  720,000   136,667 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 7/18/26 Containers, Packaging & Glass  437,500   437,500 
Advarra, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/9/26 Healthcare & Pharmaceuticals  288,796   288,796 
EverCommerce, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 8/23/25 High Tech Industries  211,983   464,713 
Premise Health, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 7/10/25 Healthcare & Pharmaceuticals  187,237   147,052 
AmeriLife, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 3/18/27 Banking, Finance, Insurance & Real Estate  170,455   - 
OEConnection, Senior Secured Initial Term Loan, 5.45% (Libor + 4.00%), maturity 9/25/26 High Tech Industries  142,180   142,180 
Ned Stevens, Senior Secured Revolver, 6.20% (Libor + 4.75%), maturity 9/30/25 Services: Consumer  130,719   130,719 
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 6/3/26 Services: Business  50,125   50,125 
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 8/31/26 Health Care Equipment & Services  37,278   98,225 
Stepping Stones, Unitranche, 7.20% (Libor + 5.75%), maturity 12/12/24 Healthcare & Pharmaceuticals  9,519   9,519 
Mavis, Senior Secured Closing Date Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 3/20/25 Automotive  -   345,141 
Tangent, Senior Secured Closing Date Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 11/30/24 Construction & Building  -   333,333 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 5.95% (Libor + 4.50%), maturity 9/30/26 Chemicals, Plastics & Rubber  -   252,692 
Alpaca, Senior Secured Term Loan, 5.95% (Libor + 4.50%), maturity 4/19/24 Healthcare & Pharmaceuticals  -   124,637 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 5/14/26 Services: Consumer  -   100,000 
Ansira, Unitranche, 7.20% (Libor + 5.75%), maturity 12/20/22 Media: Advertising, Printing & Publishing  -   38,214 
AmeriLife Group, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 6/12/26 Banking, Finance, Insurance & Real Estate  -   17,544 
           
    $3,147,697  $3,878,962 
Investment Industry September 30, 2020  December 31, 2019 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/26 Healthcare & Pharmaceuticals $761,905  $761,905 
Service Logic, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 12/31/24 Services: Business  540,000   136,667 
EverCommerce, Senior Secured Initial Term Loan, 5.73% (Libor + 5.50%), maturity 8/23/25 High Tech Industries  498,632   464,713 
Advarra, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/26 Healthcare & Pharmaceuticals  288,796   288,796 
Ned Stevens, Senior Secured Revolver, 5.75% (Libor + 4.75%), maturity 9/30/25 Services: Consumer  130,719   130,719 
Stepping Stones, Unitranche, 6.75% (Libor + 5.75%), maturity 12/12/24 Healthcare & Pharmaceuticals  101,130   9,519 
OEConnection, Senior Secured Initial Term Loan, 5.00% (Libor + 4.00%), maturity 9/25/26(i) High Tech Industries  96,860   142,180 
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 4.23% (Libor + 4.00%), maturity 6/3/26 Services: Business  50,125   50,125 
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 4.48% (Libor + 4.25%), maturity 8/31/26 Health Care Equipment & Services  37,278   98,225 
AmeriLife, Senior Secured Initial Term Loan (First Lien), 4.23% (Libor + 4.00%), maturity 3/18/27 Banking, Finance, Insurance & Real Estate  -   - 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 3.98% (Libor + 3.75%), maturity 7/18/26 Containers, Packaging & Glass  -   437,500 
Premise Health, Senior Secured Initial Term Loan (First Lien), 3.73% (Libor + 3.50%), maturity 7/10/25 Healthcare & Pharmaceuticals  -   147,052 
Mavis, Senior Secured Closing Date Term Loan (First Lien), 3.48% (Libor + 3.25%), maturity 3/20/25 Automotive  -   345,141 
Tangent, Senior Secured Closing Date Term Loan (First Lien), 4.98% (Libor + 4.75%), maturity 11/30/24 Construction & Building  -   333,333 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 4.73% (Libor + 4.50%), maturity 9/30/26 Chemicals, Plastics & Rubber  -   252,692 
Alpaca, Senior Secured Term Loan, 7.75% (Libor + 6.75%), maturity 4/19/24 Healthcare & Pharmaceuticals  -   124,637 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 5/14/26 Services: Consumer  -   100,000 
Ansira, Unitranche, 7.50% (Libor + 6.50%), maturity 12/20/24 Media: Advertising, Printing & Publishing  -   38,214 
AmeriLife Group, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 6/12/26 Banking, Finance, Insurance & Real Estate  -   17,544 
           
    $2,505,445  $3,878,962 

 

Unfunded commitments represent all amounts unfunded as of March 31,September 30, 2020 and December 31, 2019. These amounts may or may not be funded to the borrowing party now or in the future.


Note 9. Financial Highlights

 

 Three Months Ended March 31, 2020  Three Months Ended March 31, 2019  Three Months Ended
September 30, 2020		  Three Months Ended
September 30, 2019		  Nine Months Ended
September 30, 2020		  Nine Months Ended
September 30, 2019		 
Per Share Data:                        
Net asset value, beginning of period $9.44  $9.46  $9.09  $9.44  $9.44  $9.46 
Net investment income(a)  0.12   0.13   0.10   0.13   0.32   0.39 
Net realized (loss) gain on investments and change in unrealized depreciation on investments(a)(b)  (0.43)  (0.01)  0.14   (0.02)  (0.22)  (0.04)
Net (decrease) increase in net assets resulting from operations $(0.31) $0.12 
Net increase (decrease) in net assets resulting from operations $0.24  $0.11  $0.10  $0.35 
                
Effect of equity capital activity                
Distributions to stockholders from net investment income  -   -   (0.21)  (0.25)
Distributions to stockholders from return of capital  -   -   -   (0.01)
Net asset value at end of period $9.13  $9.58  $9.33  $9.55  $9.33  $9.55 
Total return(c)(g)  (3.28)%  1.27%  2.64%  1.17%  1.16%  3.69%
Shares of common stock outstanding at end of period  36,698,229   30,383,814   38,343,577   33,538,562   38,343,577   33,538,562 
                        
Statement of Assets and Liabilities Data:                        
Net assets at end of period $335,169,270  $291,065,172  $357,694,550  $320,455,297  $357,694,550  $320,455,297 
Average net assets(d)  344,131,639   290,011,675   353,156,796   319,461,535   348,029,571   308,451,516 
                        
Ratio/Supplemental Data:                        
Ratio of gross expenses to average net assets-annualized(e)  2.11%  2.42%
Ratio of gross expenses to average net assets- annualized(e)  1.76%  2.25%  2.02%  2.36%
Ratio of net expenses to average net assets-annualized(f)  1.09%  1.37%  1.06%  1.22%  1.10%  1.32%
Ratio of net investment income to average net assets- annualized  5.04%  5.53%
Ratio of net investment income to average net assets- 4.28% 5.46% 4.68% 5.44% annualized                
Portfolio turnover(g)  1.75%  3.98%  0.21%  1.58%  1.95%  1.64%

 

(a)Based on weighted average basic per share of Common Stock data.
(b)The per share amount varies from the net realized and unrealized gain (loss) for the period because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time.
(c)Total return is based on the change in net asset value during the respective periods.  Total return also takes into account dividends and distributions, if any, reinvested in accordance with the Company's dividend reinvestment plan.
(d)Average net assets are computed using the average balance of net assets at the end of each  month of the reporting  period.
(e)Ratio of gross expenses to average net assets is computed using expenses before waivers from the Adviser and Administrator.
(f)Ratio of net expenses to average net assets is computed using total expenses net of waivers from the Adviser and Administrator.
(g)Not annualized.

33

 

Note 10. Indemnification

 

In the normal course of business, the Company may enter into certain contracts that provide a variety of indemnities. The Company’s maximum exposure under these indemnities is unknown. The Company does not consider it necessary to record a liability in this regard.

 

Note 11. Subsequent Events

On March 18, 2020, the Company delivered a capital drawdown notice to an investor relating to the sale of 1,095,290 shares of the Common Stock for an aggregate offering price of $10 million. The sale closed on April 3, 2020.

The sale of Common Stock was made pursuant to a subscription agreement entered into by the Company and the investor. Under the terms of the subscription agreement, the investor is required to fund drawdowns to purchase shares of Common Stock up to the amount of its capital commitment on an as-needed basis with a minimum of 10 calendar days’ prior notice.

The issuance of the Common Stock is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof. The Company has not engaged in general solicitation or advertising with regard to the issuance and sale of the Common Stock and has not offered securities to the public in connection with such issuance and sale.

 

COVID-19

 

The Company is continuing to assess what additionalthe adverse financial and operational consequences that have resulted and may in the future result from the COVID-19 pandemic and the associated economic turbulence. The potential impact to our results will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic, including the consequences resulting from another wave of infections and the actions taken by authorities and other entities to contain the spread of COVID-19, prevent another wave of infections or reduce its impact, all of which are beyond our control. As such, the Company cannot predict the extent to which its financial condition and results of operations will continue to be affected, and the magnitude of such consequences remains uncertain as of the filing of this quarterly report.

34

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

In this quarterly report on Form 10-Q, except where the context suggests otherwise, the terms “we,” us,” our” and the “Company” refer to Audax Credit BDC Inc. The information contained in this section should be read in the conjunction with the financial statements and notes to the financial statements appearing elsewhere in this quarterly report.

 

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

 

·our future operating results;

·our business prospects and the prospects of our portfolio companies;

·our ability to continue to effectively manage our business due to COVID-19 and similar pandemics;

·the ability of our portfolio companies to achieve their objectives;

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

·the ability of our Adviser to locate suitable investments for us and to monitor and administer our investments;

·changes in the general economy;

·risk associated with possible disruptions in our operations or the economy generally;

·the effect of investments that we expect to make;

·our contractual arrangements and relationships with third parties;

·actual and potential conflicts of interest with Adviser and its affiliates;

·the dependence of our future success on the general economy and its effect on the industries in which we invest;

·changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes to the value of our assets;

·the adequacy of our financing sources and working capital;

·the ability of our Adviser and its affiliates to attract and retain highly talented professionals;

·our ability to qualify and maintain our qualification as a BDC and as a RIC; and

·the risks, uncertainties and other factors we identify under “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K filed on March 17, 2020 (file no. 814-01154) (the “Annual Report”) and our Current Report on Form 8-K filed on May 18, 2020 (file no. 814-01154) (“Form 8-K”).

 

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in the section entitled “Item 1A. Risk Factors” of this Reportquarterly report and our Annual Report.Report as well as risk factors described or identified in the Form 8-K. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. Moreover, we assume no duty and do not undertake to update the forward-looking statements. The forward-looking statements and projections contained in this quarterly report are excluded from the safe harbor protection provided by Section 27A of the Securities Act and provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

35


OVERVIEW

 

Audax Credit BDC Inc. is a Delaware corporation that was formed on January 29, 2015. We are an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a BDC under the 1940 Act. In addition, we have elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code.

 

Our investment objective is to generate current income and, to a lesser extent, long-term capital appreciation. We intend to meet our investment objective by investing primarily in senior secured debt of privately owned U.S. middle- market companies. We intend to invest at least 80% of our net assets plus the amount of any borrowings in “credit instruments,” which we define as any fixed income instruments.

 

Although we have no present intention of doing so, we may decide to incur leverage. If we do incur leverage, however, we anticipate that it will be used in limited circumstances and on a short-term basis for purposes such as funding distributions. As a BDC, we are limited in our use of leverage under the 1940 Act. Under the 1940 Act, a BDC generally is required to maintain asset coverage of 200% for senior securities representing indebtedness (such as borrowings from banks or other financial institutions) or stock (such as preferred stock). The Small Business Credit Availability Act, which was signed into law on March 23, 2018, provides that a BDC's required asset coverage under the 1940 Act may be reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). This reduction in asset coverage permits a BDC to double the amount of leverage it may utilize, subject to certain approval, timing and reporting requirements, including either stockholder approval or approval of a majority of the directors who are not “interested persons” (as defined in the 1940 Act) of the BDC and who have no financial interest in the arrangement. In addition, as a non-traded BDC, if we receive the relevant approval to increase our authorized leverage, we will be required to offer our stockholders the opportunity to sell their shares of Common Stock over the next year following the calendar quarter in which the approval was obtained. In determining whether to use leverage, we will analyze the maturity, covenants and interest rate structure of the proposed borrowings, as well as the risks of such borrowings within the context of our investment outlook and the impact of leverage on our investment portfolio. The amount of any leverage that we will employ as a BDC will be subject to oversight by our Board of Directors.

 

We generate revenue in the form of interest on the debt securities that we hold in our portfolio companies. The senior debt we invest in generally has stated terms of three to ten years. Our senior debt investments generally bear interest at a floating rate. Interest on debt securities is generally payable quarterly or semiannually. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally will become due at the maturity date. In addition, we may generate revenue in the form of commitment and other fees in connection with transactions, although we do not expect to do so. OID as well as market discount and premium are accreted and amortized in determining our interest income. We record any prepayment premiums on loans and debt securities as income.

 

COVID-19

 

The market disruptions caused by the COVID-19 pandemic have continued to adversely affect the business operations of some, if not all, of our portfolio companies and have affected, and may continue to affect, our operations and the operations of our Adviser. While we are closely monitoring this situation, we cannot predict the impact of COVID-19 on our future financial condition with any level of certainty. However, we expect that the COVID-19 pandemic will continue to have a material adverse impact on our future net asset value, net investment income, the fair value of our portfolio investments, and the results of operations and financial condition of our portfolio companies. For more information, see “Recent Developments—COVID-19 Developments” below.

 

36

PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY

Portfolio Composition

 

The fair value of our investments, comprised of syndicated loans and equity, as of March 31,September 30, 2020, was approximately $325,865,214$341,488,783 and held in 172174 portfolio companies as of March 31,September 30, 2020. The fair value of our investments, comprised of syndicated loans and equity, as of December 31, 2019, was approximately $330,874,911 and held in 164 portfolio companies as of December 31, 2019.

 

During the threenine months ended March 31,September 30, 2020, we invested in 2840 new syndicated investments for a combined $25,224,701$39,542,336 and in existing investments for a combined $9,103,107.$12,834,005. We also received $18,146,113$27,907,668 in repayments from investments and $5,743,556$6,437,456 from investments sold during the threenine months ended March 31,September 30, 2020. During the threenine months ended March 31,September 30, 2019, we invested in 1454 new syndicated investments for a combined $29,730,870$90,412,665 and in existing investments for a combined $15,542,660.$20,244,318. We also received $11,648,671$46,240,554 in repayments from investments and $5,017,964 from investments sold during the threenine months ended March 31,September 30, 2019. The decrease in the value of our investments during the nine months ended September 30, 2020 as compared to the same period during the previous year was primarily due to the adverse impact of the COVID-19 pandemic impact on market conditions.

  

In addition, for the three and nine months ended March 31,September 30, 2020, we had a change in unrealized depreciationappreciation (depreciation) of approximately $15,537,533$6,436,468 and $(6,732,122), respectively, and realized losses of $3,776. For$1,039,704 and $1,043,096, respectively. In addition, for the three and nine months ended March 31,September 30, 2019, we had a change in unrealized depreciationappreciation (depreciation) of approximately $343,522$182,576 and $(479,160), respectively, and realized gainslosses of $27,919.$826,185 and $724,454, respectively.

 

Our investment activity for the threenine months ended March 31,September 30, 2020 and 2019, is presented below:

 

 Three Months Ended March 31, 2020 Three Months Ended March 31, 2019  Nine Months Ended
September 30, 2020		  Nine Months Ended
September 30, 2019		 
Beginning investment portfolio, at fair value $330,874,911  $264,662,881  $330,874,911  $264,662,881 
Investments in new portfolio investments  25,224,701   29,730,870   39,542,336   90,412,665 
Investments in existing portfolio investments  9,103,107   15,542,660   12,834,005   20,244,318 
Principal repayments  (18,146,113)  (11,648,671)  (27,907,668)  (46,240,554)
Proceeds from investments sold  (5,743,556)  -   (6,437,456)  (5,017,964)
Change in premiums, discounts and amortization  93,473   62,751   357,873   199,813 
Net change in unrealized depreciation on investments  (15,537,533)  (343,522)  (6,732,122)  (479,160)
Realized (loss) gain on investments  (3,776)  27,919 
Realized loss on investments  (1,043,096)  (724,452)
Ending portfolio investment activity, at fair value $325,865,214  $298,034,888  $341,488,783  $323,057,547 
Number of portfolio investments  196   153   202   168 
Average investment amount, at cost $1,751,275  $1,960,757  $1,733,010  $1,935,441 
Percentage of investments at floating rates  99.40%  100.00%  99.41%  100.00%

 

As of March 31, 2019September 30, 2020 and December 31, 2019, our entire portfolio consisted of non-controlled/non-affiliated investments.

 

RECENT DEVELOPMENTS

 

Subsequent to March 31,September 30, 2020 and through June 18,November 13, 2020, we invested $206,025$2,453,983 at cost in twoeight portfolio companies.

 

On March 18, 2020, the Company delivered a capital drawdown notice to an investor relating to the sale of 1,095,290 shares of the Common Stock for an aggregate offering price of $10 million. The sale closed on April 3, 2020.

The sale of Common Stock was made pursuant to a subscription agreement entered into by the Company and the investor. Under the terms of the subscription agreement, the investor is required to fund drawdowns to purchase shares of Common Stock up to the amount of its capital commitment on an as-needed basis with a minimum of 10 calendar days’ prior notice.

37

The issuance of the Common Stock is exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof. The Company has not engaged in general solicitation or advertising with regard to the issuance and sale of the Common Stock and has not offered securities to the public in connection with such issuance and sale.

COVID-19 Developments

As the COVID-19 outbreak continues to evolve, we cannot reasonably predict its full impact on our business operations, including itsduration in the United States and worldwide and the magnitude of the economic impact of the outbreak, including with respect to the travel restrictions, business closures and other quarantine measures imposed on service providers and other individuals by various local, state, and federal governmental authorities, as well as non-U.S. governmental authorities.authorities in response to another wave of infections. As such, the extent to which COVID-19 and/or other health pandemics may continue to negatively affect our operating results and financial condition and the operating results and financial condition of our portfolio companies, or the duration of any potential business or supply-chain disruption for us, our Adviser and/or our portfolio companies, is uncertain.

 

We will continue to monitor the rapidly evolving developments relating to the COVID-19 pandemic and guidance from U.S. and international authorities, including federal, state and local public health officials and may take additional actions based on their recommendations. In these circumstances, there may be developments beyond our control requiring us to adjust our plan of operation. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. However, we do expect that it will continue to have a material adverse impact on our future net asset value, net investment income, the fair value of our portfolio investments, and the results of operations and financial condition of our portfolio companies, and that such adverse effects will continuepersist for the duration of the pandemic and potentially for some time thereafter.

 

RESULTS OF OPERATIONS

 

The net increase or decrease in net assets from operations may vary substantially from period to period as a result of various factors, including the recognition of realized gains and/or losses and net change in unrealized appreciation and depreciation. This “Results of Operations” section should be read in conjunction with the “COVID-19 Developments” section above.

Revenue

 

Total investment income for the three and nine months ended March 31,September 30, 2020 and 2019 is presented in the table below.

 

 Three Months Ended
March 31, 2020		  Three Months Ended
March 31, 2019		  Three Months Ended
September 30, 2020		  Three Months Ended
September 30, 2019		  Nine Months Ended
September 30, 2020		  Nine Months Ended
September 30, 2019		 
Total interest income from non-controlled/non-affiliated investments $5,202,708  $4,870,004 

Total interest income from non-controlled/non- affiliated

investments

 $4,721,470  $5,347,398  $14,885,290  $15,433,946 
Total other interest income  28,670   50,720   1,058   28,722   31,053   122,237 
Total other income  14,740   17,810   14,577   5,214   153,950   38,364 
Total investment income $5,246,118  $4,938,534  $4,737,105  $5,381,334  $15,070,293  $15,594,547 

 

38

Total investment income for the three months ended March 31,September 30, 2020 increaseddecreased to $5,246,118$4,737,106 from $4,938,534$5,381,334 for the three months ended March 31,September 30, 2019, and was driven by a decrease in LIBOR over the period which was partially offset by our interestincreasing investment balance. Total investment income for the nine months ended September 30, 2020 decreased to $15,070,293 from $15,594,547 for the nine months ended September 30, 2019, and was driven by a decrease in LIBOR over the period which was partially offset by our increasing investment balance. As of March 31,September 30, 2020 and 2019, the size of our debt portfolio was $342,129,261$348,947,419 and $299,195,293$324,033,544 at amortized cost, respectively, with total debt principal amount outstanding of $343,927,162$350,848,873 and $300,491,292,$325,653,783, respectively.


Expenses

Total expenses net of waivers for the three and nine months ended March 31,September 30, 2020 and 2019, were as follows:

 

  Three Months Ended
March 31, 2020		  Three Months Ended
March 31, 2019		 
       
Base management fee(a) $880,852  $738,654 
Incentive fee(a)  661,359   612,128 
Administrative fee(a)  66,250   66,250 
Directors' fees  52,500   52,500 
Professional fees  97,942   154,681 
Other expenses  48,385   104,601 
Total expenses  1,807,288   1,728,814 
Base management fee waivers(a)  (308,298)  (258,529)
Incentive fee waivers(a)  (563,778)  (489,291)
Total expenses, net of waivers $935,212  $980,994 

  Three Months Ended
September 30, 2020		  Three Months Ended
September 30, 2019		  Nine Months Ended
September 30, 2020		  Nine Months Ended
September 30, 2019		 
Base management fee(a) $874,188  $820,094  $2,697,570  $2,367,188 
Incentive fee(a)  356,461   680,250   1,641,419   1,939,486 
Administrative fee(a)  66,250   66,250   198,750   198,750 
Directors' fees  52,500   52,500   157,500   157,500 
Professional fees  132,514   136,660   369,572   524,791 
Other expenses  83,232   58,388   191,422   246,441 
Total expenses  1,565,145   1,814,142   5,256,233   5,434,156 
Base management fee waivers(a)  (305,966)  (287,033)  (944,150)  (828,516)
Incentive fee waivers(a)  (320,815)  (543,178)  (1,437,466)  (1,553,628)
Total expenses, net of waivers $938,364  $983,931  $2,874,617  $3,052,012 

 

(a) Refer to Note 4-Related Party Transactionswithin the financial statements for a description of the relevant fees.

 

The increase in base management fees before waivers for the three months ended March 31,September 30, 2020 in comparison to the three months ended March 31,September 30, 2019 was driven by our increasing invested balance. For the three months ended March 31,September 30, 2020 and 2019, we accrued gross base management fees before waivers of $880,852$874,188 and $738,654,$820,094, respectively. Offsetting those fees, we recognized base management fee waivers of $308,298$305,966 and $258,529 for three months ended March 31, 2020 and 2019,$287,033, respectively. For the three months ended March 31,September 30, 2020, andwe accrued incentive fees related to net investment income before waivers of $356,461, offset by incentive fee waivers of $320,815. For the three months ended September 30, 2019, we accrued incentive fees related to net investment income before waivers of $661,359 and $612,128, respectively. Offsetting those fees, we recognized$680,250, offset by incentive fee waivers of $563,778 and $489,291, respectively.$543,178. Additionally, we accrued $66,250 of administrative fees for each of the three months ended March 31,September 30, 2020 and 2019. Refer to Note 4 —Related Party Transactionsin the notes accompanying our financial statements for more information related to base management fees, incentive fees and waivers.

 

During the three months ended March 31,September 30, 2020 and 2019, we incurred professional fees of $97,942$132,514 and $154,681,$136,660, respectively, related to audit fees, tax fees, and legal fees. We also incurred expenses related to fees paid to our independent directors of $52,500 for both the three months ended September 30, 2020 and 2019.

The increase in base management fees before waivers for the nine months ended September 30, 2020 in comparison to the nine months ended September 30, 2019 was driven by our increasing invested balance. For the nine months ended September 30, 2020 and 2019, we accrued gross base management fees before waivers of $2,697,570 and $2,367,188, respectively. Offsetting those fees, we recognized base management fee waivers of $944,150 and $828,516, respectively. For the nine months ended September 30, 2020, we accrued incentive fees related to net investment income before waivers of $1,641,419, offset by incentive fee waivers of $1,437,466. For the nine months ended September 30, 2019, we accrued incentive fees related to net investment income before waivers of $1,939,486, offset by incentive fee waivers of $1,553,628. Additionally, we accrued $198,750 of administrative fees for the nine months ended September 30, 2020 and 2019. Refer to Note 4 — Related Party Transactions in the notes accompanying our financial statements for more information related to base management fees, incentive fees and waivers.

During the nine months ended September 30, 2020 and 2019, we incurred professional fees of $369,572 and $524,791, respectively, related to audit fees, tax fees, and legal fees. The decrease in professional fees was driven by a decrease in legal expenses during the threenine months ended March 31,September 30, 2020 as compared to the threenine months ended March 31,September 30, 2019. We also incurred expenses related to fees paid to our independent directors of $52,500$157,500 for each ofboth the threenine months ended March 31,September 30, 2020 and 2019.

 


Realized and Unrealized Gains and Losses

 

We recognized $(3,776)$1,039,704 and $27,919$826,185 in net realized (losses) gainslosses for the three months ended March 31,September 30, 2020 and 2019, respectively. We recognized $1,043,096 and $724,454 in net realized losses gains for the nine months ended September 30, 2020 and 2019, respectively.

 

39

Net change in unrealized depreciationappreciation (depreciation) on investments for the three and nine months ended March 31,September 30, 2020 and 2019 was as follows:

  

Type Three Months Ended
March 31, 2020		  Three Months Ended
March 31, 2019		  Three Months Ended
September 30, 2020		 Three Months Ended
September 30, 2019		 Nine Months Ended
September 30, 2020		 Nine Months Ended
September 30, 2019		 
First Lien Debt $(14,333,735) $54,772  $6,103,810  $232,811  $(6,149,319) $89,811 
Second Lien Debt  (1,173,867)  1,974   381,273   (50,235)  (668,484)  (168,705)
Equity and Preferred Shares  (29,931)  (400,268)  (48,615)  -   85,681   (400,266)
Net change in unrealized depreciation on investments $(15,537,533) $(343,522)

Net change in unrealized appreciation (depreciation) on investments

 $6,436,468  $182,576  $(6,732,122) $(479,160)

 

Net change in unrealized depreciationappreciation (depreciation) on investments during the three and nine months ended March 31,September 30, 2020 was primarily due to the change in the results and financial position of the portfolio companiescompanies. Net change in unrealized depreciation on investments during the three and nine months ended March 31,September 30, 2019 was primarily due to a decreasethe change in performancethe results and financial position of ourthe portfolio companies.

 

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

 

We generate cash primarily from the net proceeds of any offering of shares of our common stockCommon Stock (“Shares”), from cash flows from interest and fees earned from our investments, and from principal repayments and proceeds from sales of our investments. Our primary use of cash is investments in portfolio companies, payments of our expenses and cash distributions to our stockholders. As of March 31,September 30, 2020 and December 31, 2019, we had cash of $23,294,471$24,955,930 and $5,506,217, respectively. This “Financial Condition, Liquidity and Capital Resources” section should be read in conjunction with the “COVID-19 Developments” section above.

Operating Activities

 

Net cash provided byused in operating activities for the threenine months ended March 31,September 30, 2020 was $2,788,254.$2,424,706. The primary operating activities during this period were investments in portfolio companies. This was partially offset by repayments of bank loans and sales of investments.loans. Net cash used in operating activities for the threenine months ended March 31,September 30, 2019 was $28,747,093.$48,015,173. The primary operating activityactivities during this period was investmentwere investments in portfolio companies. This was partially offset by repayments of bank loans.

 

As of March 31,September 30, 2020 and December 31, 2019, we had twelvenine and eighteen investments, respectively, with unfunded commitments of $3,147,697$2,505,445 and $3,878,962, respectively. We believe that, as of March 31,September 30, 2020 and December 31, 2019, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

 


The following table summarizes our total portfolio activity during the threenine months ended March 31,September 30, 2020 and 2019:

  Three Months Ended
March 31, 2020		  Three Months Ended
March 31, 2019		 
       
Beginning investment portfolio $330,874,911  $264,662,881 
Investments in new portfolio investments  25,224,701   29,730,870 
Investments in existing portfolio investments  9,103,107   15,542,660 
Principal repayments  (18,146,113)  (11,648,671)
Proceeds from sales of investments  (5,743,556)  - 
Net change in unrealized depreciation on investments  (15,537,533)  (343,522)
Net realized (loss) gain on investments  (3,776)  27,919 
Net change in premiums, discounts and amortization  93,473   62,751 
Investment Portfolio, at Fair Value $325,865,214  $298,034,888 

40

  Nine Months Ended
September 30, 2020		  Nine Months Ended
September 30, 2019		 
Beginning investment portfolio $330,874,911  $264,662,881 
Investments in new portfolio investments  39,542,336   90,412,665 
Investments in existing portfolio investments  12,834,005   20,244,318 
Principal repayments  (27,907,668)  (46,240,554)
Proceeds from sales of investments  (6,437,456)  (5,017,964)
Net change in unrealized depreciation on investments  (6,732,122)  (479,160)
Net realized loss on investments  (1,043,096)  (724,452)
Net change in premiums, discounts and amortization  357,873   199,813 
Investment Portfolio, at Fair Value $341,488,783  $323,057,547 

 

Financing Activities

 

Net cash provided by our financing activities for the threenine months ended March 31,September 30, 2020 was $15,000,000$21,874,419 from issuances of 1,588,983 shares of Common Stock3,234,331 Shares to our stockholders, in connection with our capital calls and our dividend reinvestment program during the period. This was partially offset by $8,125,581 of distributions paid to our common stockholders. Net cash provided by our financing activities for the threenine months ended March 31,September 30, 2019 was $20,000,000$41,693,141 from issuances of 2,114,165 shares of Common Stock5,268,913 Shares to our stockholders, in connection with our capital calls and our dividend reinvestment program during the period. This was partially offset by $8,306,859 of distributions paid to our common stockholders.

 

Equity Activity

On June 23, 2015, an investor made a $140,000,000 capital commitment to the Company. On December 2, 2016, the same investor made an additional capital commitment of $50,000,000. On December 7, 2017, the same investor made an additional capital commitment of $100,000,000. On March 22, 2019, the same investor made an additional capital commitment of $40,000,000. On September 23, 2019, the same investor made an additional capital commitment of $30,000,000. On March 20, 2020, the same investor made an additional capital commitment of $11,200,000. As of March 31,September 30, 2020, $21,200,000$6,200,000 of total capital commitments remained unfunded by the Company’s investors.

 

The number of shares of Common StockShares issued and outstanding as of March 31,September 30, 2020 and December 31, 2019, were 36,698,22938,343,577 and 35,109,246, respectively.

Distributions to Stockholders – Common Stock Distributions

 

We have elected to be treated as a RIC for U.S. federal income tax purposes. As a RIC, we generally are not subject to corporate-level U.S. federal income taxes on ordinary income or capital gains that we timely distribute as dividends for U.S. federal income tax purposes to our stockholders. To qualify to be taxed as a RIC and thus avoid corporate-level income tax on the income that we distribute as dividends to our stockholders, we are required to distribute dividends to our stockholders each taxable year generally of an amount at least equal to 90% of our investment company taxable income, determined without regard to the deduction for any dividends paid. To avoid a 4% excise tax on undistributed earnings, we are required to distribute dividends to our stockholders in respect of each calendar year of an amount at least equal to the sum of (i) 98% of our ordinary income (taking into account certain deferrals and elections) for such calendar year, (ii) 98.2% of our capital gain net income, adjusted for certain ordinary losses, for the one-year period ending October 31 of that calendar year and (iii) any income or capital gains recognized, but not distributed, in preceding calendar years and on which we incurred no federal income tax. We intend to make distributions to stockholders on an annual basis of substantially all of our net investment income. Although we intend to make distributions of net realized capital gains, if any, at least annually, out of assets legally available for such distributions, we may in the future decide to retain such capital gains for investment. In addition, the extent and timing of special dividends, if any, will be determined by our Board of Directors and will largely be driven by portfolio specific events and tax considerations.

 


We may fund our cash distributions from any sources of funds available, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee waivers from our Adviser. Our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from an offering. As a result, a portion of the distributions may represent a return of capital for U.S. federal income tax purposes. Thus the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a BDC under the 1940 Act. We did not declaredeclared and paid distributions of $8,125,607, or pay distributions for$0.215 per share during the threenine months ended March 31, 2020September 30, 2020. We declared and paid distributions of $8,306,889, or $0.26 per share during the nine months ended September 30, 2019.

 

The determination of the tax attributes of our distributions is made annually at the end of our taxable year, based upon our taxable income for the full taxable year and distributions paid for the full taxable year. Therefore,estimates made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. The actual tax characteristics of distributions to stockholders will be reported to stockholders subject to information reporting after the close of each calendar year on Form 1099-DIV.

 

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Related Party Fees

 

For the three months ended March 31,September 30, 2020 and 2019, we recorded base management fees of $880,852$874,188 and $738,654,$820,094, respectively. Offsetting these fees were waivers to the base management fees of $308,298$305,966 and $258,529,$287,033, respectively, as set forth within the accompanying statements of operations.

For the nine months ended September 30, 2020 and 2019, we recorded base management fees of $2,697,570 and $2,367,188, respectively. Offsetting those fees were waivers to the base management fees of $944,150 and $828,516, respectively, as set forth within the accompanying statements of operations.

For the three and nine months ended September 30, 2020, we recorded incentive fees of $356,461 and $1,641,419, respectively. Offsetting these fees were waivers to the incentive fees of $320,815 and $1,437,466, respectively, as set forth within the accompanying statements of operations. For the three and nine months ended September 30, 2019, we recorded incentive fees of $680,250 and $1,939,486, respectively. Offsetting these fees were waivers to the incentive fees of $543,178 and $1,553,628, respectively, as set forth within the accompanying statements of operations.

 

For the three months ended March 31, 2020 and 2019, we recorded incentive fees of $661,359 and $612,128, respectively. Offsetting these waivers to the incentive fees of $563,778 and $489,291, respectively, as set forth within the accompanying statements of operations.

For each of the three months ended March 31,September 30, 2020 and 2019, we recorded administrative fees of $62,500, respectively, as set forth within the accompanying statements of operations. For both the nine months ended September 30, 2020 and 2019, we recorded administrative fees of $198,750 as set forth within the accompanying statements of operations.

 

Fees due to related parties as of March 31,September 30, 2020 and December 31, 2019 on our accompanying statements of assets and liabilities were as follows:

  September 30, 2020  December 31, 2019 
Net base management fee due to Adviser $568,222  $569,600 
Net incentive fee due to Adviser  35,646   118,536 
Total fees due to Adviser, net of waivers  603,868   688,136 
Fee due to Administrator, net of waivers  66,250   66,250 
Total Related Party Fees Due $670,118  $754,386 

  March 31, 2020  December 31, 2019 
Net base management fee due to Adviser $572,554  $569,600 
Net incentive fee due to Adviser  97,581   118,536 
Total fees due to Adviser, net of waivers  670,135   688,136 
Fee due to Administrator, net of waivers  66,250   66,250 
  Total Related Party Fees Due $736,385  $754,386 

(a) Expenses paid on behalf of the Company by the Adviser

Tender Offers

 

We do not currently intend to list shares of our Common Stock on any securities exchange, and we do not expect a public market for them to develop in the foreseeable future. Therefore, stockholders should not expect to be able to sell their shares of our Common Stock promptly or at a desired price. To provide our stockholders with limited liquidity, we may, in the absolute discretion of our Board of Directors, conduct an annual tender offer. Our tenders for the shares of Common Stock, if any, would be conducted on such terms as may be determined by our Board of Directors and in accordance with the requirements of applicable law, including Section 23(c) of the 1940 Act and Regulation M under the Exchange Act. We have not commenced any tender offers, and we do not currently intend to conduct any tender offers.

 

CRITICAL ACCOUNTING POLICIES

 

This discussion of our operations is based upon our financial statements, which are prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

  

Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we describe our critical accounting policies in the notes to our financial statements.

Valuation of Investments

 

We conduct the valuation of our investments, pursuant to which our net asset value is determined, at all times consistent with GAAP and the 1940 Act. Our Board of Directors, with the assistance of our Audit Committee,determines the fair value of our investments, for investments with a public market and for investments with no readily available public market, on at least a quarterly basis, in accordance with the terms of ASC 820. Our valuation procedures are set forth in more detail below.

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ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

  

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

 

The three-level hierarchy for fair value measurement is defined as follows:

Level 1— Inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. We do not adjust the quoted price for these instruments, even in situations where we hold a large position, and a sale could reasonably be expected to impact the quoted price.

Level 2— Inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

 

Level 3— Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.


 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

 

Pursuant to the framework set forth above, we value securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. We may also obtain quotes with respect to certain of our investments from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets.

 

Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, we determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we use the quote obtained.

 

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Securities that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the our Board of Directors, does not represent fair value, are each valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. Inputs for these valuation techniques include relative credit information, observed market movement, industry sector information, and other market data, which may include benchmarking of comparable securities, issuer spreads, reported trades, and reference data, such as market research publications, when available. The process used to determine the applicable value is as follows:

(i) eachEach portfolio company or investment is initially valued by the investment professionals of the Adviser responsible for the portfolio investment using a standardized template designed to approximate fair market value based on observable market inputs and updated credit statistics and unobservable inputs. Additionally, as a part of our valuation process, the Adviser may be assisted byemploy the services of one or more independent valuation firms engaged by us;

(ii) preliminaryPreliminary valuation conclusions are documented and discussed with our senior management and members of the Adviser’s valuation team;

(iii) theOur Audit Committee reviews the assessments of the Adviser or independent valuation firm (to the extent applicable) and provides our Board of Directors with recommendations with respect to the fair value of the investments in our portfolio; and

(iv) Our Board of Directors discusses the valuation recommendations of the our Audit Committee and determines the fair value of the investments in our portfolio in good faith based on the input of the Adviser, the independent valuation firm (to the extent applicable) and in accordance with our valuation policy.


 

Our Audit Committee’s recommendation of fair value is generally based on its assessment of the following factors, as relevant:

 

·the nature and realizable value of any collateral;

  

·call features, put features and other relevant terms of debt;

  

·the portfolio company’s ability to make payments;

  

·the portfolio company’s actual and expected earnings and discounted cash flow;

  

·prevailing interest rates for like securities and expected volatility in future interest rates;

  

·the markets in which the portfolio company does business and recent economic and/or market events; and

  

·comparisons to publicly traded securities.

  

Investment performance data utilized are the most recently available as of the measurement date, which in many cases may reflect up to a one quarter lag in information.

 

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include the following:

  

·private placements and restricted securities that do not have an active trading market;

 

·securities whose trading has been suspended or for which market quotes are no longer available;

  

·debt securities that have recently gone into default and for which there is no current market;

 

·securities whose prices are stale; and

 

·securities affected by significant events.

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Our Board of Directors is responsible for the determination, in good faith, of the fair value of our portfolio investments.

 

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.

 

Security transactions are recorded on the trade date (the date the order to buy or sell is executed or, in the case of privately issued securities, the closing date, which is when all terms of the transactions have been defined). Realized gains and losses on investments are determined based on the identified cost method.

 

Refer to Note 3 —Investmentsin the notes to our accompanying financial statements included elsewhere in this quarterly report for additional information regarding fair value measurements and our application of ASC 820.


Revenue Recognition

 

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the principal balance, we generally will not accrue PIK interest for accounting purposes if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities for accounting purposes if we have reason to doubt our ability to collect such interest. OID, market discounts or premiums are accreted or amortized using the effective interest method as interest income. We record prepayment premiums on loans and debt securities as interest income.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

 

We measure net realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

PIK Interest

 

We may have investments in our portfolio that contain a PIK interest provision. Any PIK interest will be added to the principal balance of such investments and is recorded as income if the portfolio company valuation indicates that such PIK interest is collectible. In order to maintain our status as a RIC, substantially all of this income must be included in the amounts paid out by us to stockholders in the form of dividends, even if we have not collected any cash.

U.S. Income Taxes

 

We have elected to be subject to tax as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to incur any corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute as dividends to our stockholders. To qualify and maintain our qualification as a RIC, we must meet certain source-of-income and asset diversification requirements as well as distribute dividends to our stockholders each taxable year of an amount generally at least equal to 90% of our investment company taxable income, determined without regard to any distributions paid.

 

Depending on the level of taxable income earned in a taxable year, we may choose to retain taxable income in excess of current year distributions into the next taxable year. We would then incur a 4% excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income may exceed estimated current year distributions, we will accrue an excise tax, if any, on estimated excess taxable income as taxable income is earned. We did not accrue any excise tax for the fiscal years ended December 31, 2019, 2018, and 2017.

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Because U.S. federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified within capital accounts in the financial statements to reflect their tax character. Permanent differences may also result from differences in classification in certain items, such as the treatment of short-term gains as ordinary income for tax purposes. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

  

We evaluate tax positions taken or expected to be taken in the course of preparing our financial statements to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current fiscal year. All penalties and interest associated with any income taxes accrued are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax law, regulations and interpretations thereof. Our accounting policy on income taxes is critical because if we are unable to qualify, or once qualified, maintain our tax status as a RIC, we would be required to record a provision for corporate-level U.S. federal income taxes, as well as any related state or local taxes which may be significant to our financial results.

 


COMMITMENTS AND CONTINGENCIES

 

From time to time, we, or the Adviser, may become party to legal proceedings in the ordinary course of business, including proceedings related to the enforcement of our rights under contracts with our portfolio companies. Neither we nor the Adviser is currently subject to any material legal proceedings.

 

Unfunded commitments to provide funds to portfolio companies are not reflected in our accompanying statements of assets and liabilities. Our unfunded commitments may be significant from time to time. These commitments are subject to the same underwriting and ongoing portfolio maintenance as are the on-balance sheet financial instruments that we hold. Since these commitments may expire without being drawn, the total commitment amount does not necessarily represent future cash requirements. We use cash flow from normal and early principal repayments and proceeds from borrowings and offerings to fund these commitments. As of March 31,September 30, 2020, we had twelvenine investments with unfunded commitments of $3,147,697.$2,505,445. As of December 31, 2019, we had eighteen investments with unfunded commitments of $3,878,962. We believe that, as of March 31,September 30, 2020 and December 31, 2019, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

  

ITEM3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  

We are subject to financial market risks, including changes in interest rates. During the period covered by our financial statements, many of the loans in our portfolio had floating interest rates, and we expect that many of our loans to portfolio companies in the future will also have floating interest rates based on LIBOR or an equivalent risk-free index rate. Interest rate fluctuations may have a substantial negative impact on our investments, the value of our Common Stock and our rate of return on invested capital. In addition, U.S. and global capital markets and credit markets have experienced a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across such markets and a general decline in value of the securities held by us. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. As of March 31,September 30, 2020 and December 31, 2019, all of our investments included variable rates with a minimum guaranteed rate, or floor, and bore interest at the minimum guaranteed rate.

 

In addition, the COVID-19 pandemic has resulted in a decrease in LIBOR and a general reduction of certain interest rates by the U.S. Federal Reserve and other central banks. A continued decline in interest rates, including LIBOR, could result in a reduction of our gross investment income.

 

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Change in interest rates 

Increase (decrease) in

investment income

 
Down 300 basis points  (1,309,014208,207)
Down 200 basis points  (1,309,014208,207)
Down 100 basis points  (1,309,014208,207)
Up 100 basis points  3,415,4331,736,360 
Up 200 basis points  6,786,7055,244,849 
Up 300 basis points  10,187,4188,753,338 

 

Although we believe that this measure is indicative of our sensitivity to interest rate changes, it does not reflect potential changes in the credit market, credit quality, size and composition of the assets on the Consolidated Statements of Assets and Liabilities and other business developments that could affect our net increase in net assets resulting from operations or net investment income. Accordingly, no assurances can be given that actual results would not differ materially from those shown above.


 

In addition, any investments we make that are denominated in a foreign currency will be subject to risks associated with changes in currency exchange rates. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved.

 

We may hedge against interest rate and currency exchange rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates.

ITEM 4.CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of March 31, 2020,the period covered by this report, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of theand design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).procedures. Based on that evaluation, our management, including ourthe Chief Executive Officer and Chief Financial Officer, concluded that there was a material weakness in our internal controls over financial reporting specifically related to valuations in the context of an unprecedented and severe market dislocation, as described below. Our management has designed additional procedures, including via the use of independent valuation experts where applicable, to help us better achieve our disclosure objectivescontrols and procedures were effective at a reasonable assurance level in future periods. We also note that,timely alerting management, including the Chief Executive Officer and Chief Financial Officer, of material information about us required to be included in theperiodic SEC filings. However, in evaluation of ourthe disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management’s Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Management has assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2020. Based on the assessment, management concluded that the Company did not maintain effective controls over the application of fair value accounting with respect to the validation of fair value methodologies for certain of the Company’s investments. Specifically, the controls were not sufficiently designed to ensure the appropriateness of the fair value determinations reached for certain Level 3 debt holdings in the context of the current period of extreme market dislocation and volatility caused by the COVID-19 pandemic. As a result, our disclosure controls and procedures were ineffective in providing reasonable assurance that material valuation information about us was recorded and timely communicated to our management.

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As described below, this deficiency in internal control over financial reporting did not result in a misstatement due to the proactive steps taken by our management. However, in the absence of such steps, it could have resulted in a misstatement to the valuations of one or more of our investments. In turn, such a misstatement could have resulted in a material misstatement to our interim financial statements as of March 31, 2020 that would not have been prevented or detected. Accordingly, management has determined that this control deficiency constituted a “material weakness” (which is generally defined as “a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not have been prevented or detected on a timely basis”).

This material weakness was brought to the attention of management prior to the issuance of any financial statements covering the period during which the material weakness existed (i.e., the period covered by this Quarterly Report on Form 10-Q). Based on a number of factors, including the timely discovery and expected short duration of the material weakness as being directly tied to the current period of extreme market dislocation and volatility caused by COVID-19, and our performance of the remedial procedures performed, our management has concluded that the financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows in conformity with GAAP. Further, based upon our investigation and analysis of the identified weakness, our management has concluded that such material weakness did not affect any financial statements issued for any period prior to the reporting period covered by this Quarterly Report on Form 10-Q.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Remediation Plan

Management plans to implement steps to remediate the material weakness described above related to our valuation process. For example, during periods determined by management, such as a period of severe market dislocation and volatility, management would determine whether to utilize one or more independent valuation experts as part of its valuation process for Level 3 debt holdings. Management also plans to undertake additional review procedures, which may include designating a member of the Valuation Committee to monitor and report to the Valuation Committee to ensure that, particularly during any period of market dislocation and volatility, fair values for all Level 3 debt holdings are validated through one or more other valuation techniques or processes that are acceptable under ASC 820 (which may include the use of independent valuation experts).

Changes in Internal Control Over Financial Reporting

 

Except as specified above, thereThere have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II–OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS

 

We are not currently subject to any material legal proceeding, nor, to our knowledge, is any material legal proceeding threatened against us.

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From time to time, we, our Adviser or Administrator may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

 

From time to time, we are involved in various legal proceedings, lawsuits and claims incidental to the conduct of our business. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us.

 

ITEM 1A. RISK FACTORS

ITEM 1A. RISK FACTORS

 

In addition to the risks discussed below, important risk factors that could cause results or events to differ from current expectations are described in Part I, Item 1A “Risk Factors” of the Company’sour Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 17, 2020 as well as our Current Report on Form 8-K filed with the SEC on May 18, 2020.


 

Legislation passed in 2018 allows us to incur additional leverage and would require us to offer liquidity to our stockholders.

 

Under the 1940 Act, a BDC generally is required to maintain asset coverage of 200% for senior securities representing indebtedness (such as borrowings from banks or other financial institutions) or stock (such as preferred stock). The Small Business Credit Availability Act, which was signed into law on March 23, 2018, provides that a BDC’s required asset coverage under the 1940 Act may be reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). This reduction in asset coverage permits a BDC to double the amount of leverage it may utilize, subject to certain approval, timing and reporting requirements, including either stockholder approval or approval of a majority of the directors who are not “interested persons” (as defined in the 1940 Act) of the BDC and who have no financial interest in the arrangement. As a result, if we receive the relevant approval and we comply with the applicable disclosure requirements, we would be able to incur additional leverage, which may increase the risk of investing in us. In addition, since our base management fee is payable based upon our average adjusted gross assets, which includes any borrowings for investment purposes, our base management fee expenses may increase if we incur additional leverage.

 

We have not commenced any tender offers, and we do not currently intend to conduct any tender offers. As a non-traded BDC, however, if we receive the relevant approval to increase our authorized leverage, we will be required to offer our stockholders the opportunity to sell their Shares over the next year following the calendar quarter in which the approval was obtained. The timing and method for such offers has not been determined at this time.

 

Global capital markets could enter a period of severe disruption and instability due to future recessions, political instability, geopolitical turmoil and foreign hostilities, disease pandemics and other serious health events. These market disruptions have historically had and could again have a materially adverse effect on debt and equity capital markets in the United States, which could have a materially adverse impact on our business and financial condition.

 

The U.S. capital markets have experienced extreme volatility and disruption following the global outbreak of COVID-19. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets and valuation impacts. Such disruptions are adversely affecting our business, and future market disruptions and/or illiquidity could continue to impact us negatively. These events have limited, and could continue to limit, our investment opportunities, may limit our ability to grow and could negatively impact our operating results and the fair values of our investments.

  

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Please refer to “Item 1.Financial Statements—Notes to Consolidated Financial Statements—Note 11. Subsequent Events” and “Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments” in this quarterly report and our current reports on Form 8-K filed on January 10, 2020 and April 3, 2020 for issuances of our Common Stock during the quarter ended March 31, 2020 and during the period subsequent to March 31, 2020 and through June 18, 2020. Such issuances were made pursuant to Section 4(a)(2) of the Securities Act and Regulation D thereunder.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

  

Not applicable.

  

ITEM 4. MINE SAFETY DISCLOSURES

 5. OTHER INFORMATION

Due to the outbreak of the COVID-19 pandemic, and the resulting local, state and federal government responses, the Company availed itself of an extension to file its Quarterly Report originally due on May 15, 2020 by filing a Current Report on Form 8-K with the SEC. In taking such action, the Company relied on the order issued by the SEC on March 25, 2020 (which extended and superseded a prior order issued on March 4, 2020), pursuant to Section 36 of the Exchange Act (Release No. 34-88465) (the “COVID-19 Filing Extension Order”), regarding exemptions granted to certain public companies. The COVID-19 Filing Extension Order allows a registrant up to an additional 45 days after the original due date to file certain required reports with the SEC, if the registrant’s ability to file such reports timely was affected due to COVID-19.

 

Due to the unprecedented conditions surrounding the spread of COVID-19 throughout the United States, and the significant market disruptions that have resulted from such spread, the Company undertook additional review of the fair value of its portfolio with the assistance of third-party independent valuation firms. Given the time taken for this additional review of the Company’s portfolio investments, the Company’s preparation of the Quarterly Report originally due on May 15, 2020 was disrupted. As such, the Company relied on the COVID-19 Filing Extension Order and made use of the 45-day grace period provided by the COVID-19 Filing Extension Order to delay the filing of that Quarterly Report.Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.


ITEM 6. EXHIBITS

 

ITEM 6. EXHIBITS

3.1Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form 10 (File no. 000-55426), filed on April 17, 2015).

 

3.2Form of Bylaws (Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form 10 (File no. 000-55426), filed on April 17, 2015).

  

10.1*Subscription Agreement, dated as of March 20, 2020, by and between the Company and Mercer Audax Credit Feeder Fund LP.

31.1*Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

31.2*Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

32.1*Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (18 U.S.C. 1350).

32.2*Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (18 U.S.C. 1350).

99.1Code of Ethics (Incorporated by reference to Exhibit 99.1 to Pre-Effective Amendment No. 1 to the Registration Statement on Form 10, File No. 000-55426, filed on June 5, 2015).

 

*            Filed herewith

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this reportthisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 

 Audax Credit BDC Inc.
  
Date: June 18,November 13, 2020By:/s/ Michael P. McGonigle
  Michael P. McGonigle
  Chief Executive Officer

Date: November 13, 2020   
Date: June 18, 2020By:/s/ Richard T. Joseph
  Richard T. Joseph
  Chief Financial Officer

 

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