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PNNT PennantPark Investment

Filed: 5 Aug 20, 4:05pm

`

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q 

 

(Mark One)

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

 

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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: 814-00736

 

PENNANTPARK INVESTMENT CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

MARYLAND

 

20-8250744

(State or other jurisdiction of incorporation or organization)

 

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

 

 

590 Madison Avenue, 15th Floor

New York, N.Y.

 

10022

(Address of principal executive offices)

 

(Zip Code)

 

(212) 905-1000

(Registrant’s Telephone Number, Including Area Code)

 

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

 

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $0.001 per share

PNNT

The Nasdaq Stock Market LLC

5.50% Notes due 2024

PNNTG

The Nasdaq Stock Market LLC

 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes     No  

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

☐  

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of August 5, 2020 was 67,045,105.

 


 

PENNANTPARK INVESTMENT CORPORATION

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2020

TABLE OF CONTENTS

 

 

 

 

2


 

PART I—CONSOLIDATED FINANCIAL INFORMATION

 

We are filing this Quarterly Report on Form 10-Q, or the Report, in compliance with Rule 13a-13 as promulgated by the Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In this Report, except where context suggest otherwise, the terms “Company,” “we,” “our” or “us” refer to PennantPark Investment Corporation and its consolidated subsidiaries; “PennantPark Investment” refers to only PennantPark Investment Corporation; our “SBIC Fund” refers collectively to our consolidated subsidiaries, PennantPark SBIC II LP, or “SBIC II”, and its general partner, PennantPark SBIC GP II, LLC; “Funding I” refers to PennantPark Investment Funding I, LLC; “Taxable Subsidiaries” refers to PNNT Cascade Environmental Holdings, LLC, PNNT CI (Galls) Prime Investment Holdings, LLC, PNNT ecoserve, LLC, PNNT Investment Holdings, LLC and PNNT New Gulf Resources, LLC; “PennantPark Investment Advisers” or “Investment Adviser” refer to PennantPark Investment Advisers, LLC; “PennantPark Investment Administration” or “Administrator” refer to PennantPark Investment Administration, LLC; “SBA” refers to the Small Business Administration; “SBIC” refers to a small business investment company under the Small Business Investment Act of 1958, as amended, or the “1958 Act”; “BNP Credit Facility” refers to our revolving credit facility with BNP Paribas; “Truist Credit Facility” refers to our multi-currency, senior secured revolving credit facility with Truist Bank (formerly SunTrust Bank), as amended and restated; “Credit Facilities” refers to the BNP Credit Facility and the Truist Credit Facility collectively; “2019 Notes” refers to our 4.5% notes due 2019, which we redeemed in March 2019; “2024 Notes” refers to our 5.5% Notes due 2024; “BDC” refers to a business development company under the Investment Company Act of 1940, as amended, or the “1940 Act”; “SBCAA” refers to the Small Business Credit Availability Act; “Code” refers to the Internal Revenue Code of 1986, as amended; and “RIC” refers to a regulated investment company under the Code. References to our portfolio, our investments and our business include investments we make through SBIC II and our other consolidated subsidiaries.

 

 

3


 

Item 1.

Consolidated Financial Statements

 

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

 

 

 

June 30, 2020

 

 

September 30, 2019

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Investments at fair value

 

 

 

 

 

 

 

 

Non-controlled, non-affiliated investments (cost—$1,084,872,788 and $922,304,099, respectively)

 

$

1,086,891,447

 

 

$

936,632,099

 

Non-controlled, affiliated investments (cost—$77,628,920 and $77,600,816, respectively)

 

 

33,132,158

 

 

 

49,349,338

 

Controlled, affiliated investments (cost—$275,946,491 and $257,117,800, respectively)

 

 

213,325,256

 

 

 

233,451,359

 

Total of investments (cost—$1,438,448,199 and $1,257,022,715, respectively)

 

 

1,333,348,861

 

 

 

1,219,432,796

 

Cash and cash equivalents (cost—$51,620,212 and $59,546,438, respectively)

 

 

51,565,044

 

 

 

59,516,236

 

Interest receivable

 

 

5,230,894

 

 

 

6,226,539

 

Prepaid expenses and other assets

 

 

1,099,585

 

 

 

662,442

 

Total assets

 

 

1,391,244,384

 

 

 

1,285,838,013

 

Liabilities

 

 

 

 

 

 

 

 

Distributions payable

 

 

8,045,413

 

 

 

12,068,119

 

BNP Credit Facility payable, at fair value (cost—$245,000,000 and $171,000,000, respectively) (See Notes 5 and 10)

 

 

236,670,000

 

 

 

170,145,000

 

Truist Credit Facility payable, at fair value (cost—$417,636,000 and $301,636,000, respectively) (See Notes 5 and 10)

 

 

397,419,103

 

 

 

295,245,214

 

2024 Notes payable, net (par—$86,250,000 and $75,000,000, respectively) (See Notes 5 and 10)

 

 

83,671,185

 

 

 

72,256,607

 

SBA debentures payable, net (par—$133,500,000 and $150,000,000, respectively) (See Notes 5 and 10)

 

 

130,383,825

 

 

 

146,111,055

 

Base management fee payable, net (See Note 3)

 

 

4,643,273

 

 

 

4,641,480

 

Interest payable on debt

 

 

5,666,385

 

 

 

2,895,695

 

Accrued other expenses

 

 

497,446

 

 

 

569,175

 

Total liabilities

 

 

866,996,630

 

 

 

703,932,345

 

Commitments and contingencies (See Note 11)

 

 

 

 

 

 

 

 

Net assets

 

 

 

 

 

 

 

 

Common stock, 67,045,105 and 67,045,105 shares issued and outstanding, respectively

   Par value $0.001 per share and 100,000,000 shares authorized

 

 

67,045

 

 

 

67,045

 

Paid-in capital in excess of par value

 

 

788,192,159

 

 

 

788,192,159

 

Distributable income

 

 

(264,011,450

)

 

 

(206,353,536

)

Total net assets

 

$

524,247,754

 

 

$

581,905,668

 

Total liabilities and net assets

 

$

1,391,244,384

 

 

$

1,285,838,013

 

Net asset value per share

 

$

7.82

 

 

$

8.68

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

4


 

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Nine Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Investment income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From non-controlled, non-affiliated investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

$

20,118,883

 

 

$

19,928,284

 

 

$

63,252,326

 

 

$

66,484,378

 

Payment-in-kind

 

 

2,099,536

 

 

 

1,987,294

 

 

 

5,962,936

 

 

 

4,625,804

 

Other income

 

 

1,165,825

 

 

 

530,923

 

 

 

2,107,027

 

 

 

1,992,875

 

From controlled, affiliated investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

 

588,818

 

 

 

3,435,510

 

 

 

1,793,442

 

 

 

7,272,766

 

Payment-in-kind

 

 

1,434,567

 

 

 

1,454,009

 

 

 

5,830,555

 

 

 

2,855,450

 

Other income

 

 

 

 

 

776,944

 

 

 

 

 

 

949,445

 

Total investment income

 

 

25,407,629

 

 

 

28,112,964

 

 

 

78,946,286

 

 

 

84,180,718

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base management fee (See Note 3)

 

 

4,643,273

 

 

 

4,653,657

 

 

 

14,266,402

 

 

 

13,583,748

 

Performance-based incentive fee (See Note 3)

 

 

1,921,984

 

 

 

2,471,085

 

 

 

4,579,657

 

 

 

5,146,696

 

Interest and expenses on debt (See Note 10)

 

 

8,316,571

 

 

 

7,808,175

 

 

 

26,145,154

 

 

 

21,119,041

 

Administrative services expenses (See Note 3)

 

 

521,520

 

 

 

538,125

 

 

 

1,564,560

 

 

 

1,592,375

 

Other general and administrative expenses

 

 

643,480

 

 

 

692,178

 

 

 

1,936,322

 

 

 

2,002,723

 

Expenses before performance-based incentive fees waiver, financing costs and provision for taxes

 

 

16,046,828

 

 

 

16,163,220

 

 

 

48,492,095

 

 

 

43,444,583

 

Performance-based incentive fee waiver (See Note 3)

 

 

(1,921,984

)

 

 

 

 

 

(1,921,984

)

 

 

 

Debt issuance costs (See Notes 5 and 10)

 

 

 

 

 

 

 

 

 

 

 

2,696,498

 

Make-whole premium (See Notes 5 and 10)

 

 

 

 

 

 

 

 

 

 

 

2,162,526

 

Provision for taxes

 

 

300,000

 

 

 

300,000

 

 

 

900,000

 

 

 

900,000

 

Net expenses

 

 

14,424,844

 

 

 

16,463,220

 

 

 

47,470,111

 

 

 

49,203,607

 

Net investment income

 

 

10,982,785

 

 

 

11,649,744

 

 

 

31,476,175

 

 

 

34,977,111

 

Realized and unrealized gain (loss) on investments and debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized loss on investments on:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlled, non-affiliated investments

 

 

(109,739

)

 

 

(43,486,868

)

 

 

(10,719,114

)

 

 

(33,757,334

)

Non-controlled and controlled, affiliated investments

 

 

 

 

 

(56,148,032

)

 

 

 

 

 

(56,375,131

)

Net realized loss on investments

 

 

(109,739

)

 

 

(99,634,900

)

 

 

(10,719,114

)

 

 

(90,132,465

)

Net change in unrealized appreciation (depreciation) on:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlled, non-affiliated investments

 

 

11,319,274

 

 

 

36,381,944

 

 

 

(12,334,358

)

 

 

7,535,406

 

Non-controlled and controlled, affiliated investments

 

 

18,495,283

 

 

 

57,045,559

 

 

 

(55,200,078

)

 

 

45,366,352

 

Debt (appreciation) depreciation (See Notes 5 and 10)

 

 

(25,073,673

)

 

 

186,504

 

 

 

21,301,111

 

 

 

9,914,139

 

Net change in unrealized appreciation (depreciation) on investments and debt

 

 

4,740,884

 

 

 

93,614,007

 

 

 

(46,233,325

)

 

 

62,815,897

 

Net realized and unrealized gain (loss) from investments and debt

 

 

4,631,145

 

 

 

(6,020,893

)

 

 

(56,952,439

)

 

 

(27,316,568

)

Net increase (decrease) in net assets resulting from operations

 

$

15,613,930

 

 

$

5,628,851

 

 

$

(25,476,264

)

 

$

7,660,543

 

Net increase (decrease) in net assets resulting from operations per common share (See Note 7)

 

$

0.23

 

 

$

0.08

 

 

$

(0.38

)

 

$

0.11

 

Net investment income per common share

 

$

0.16

 

 

$

0.17

 

 

$

0.47

 

 

$

0.51

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

5


 

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Nine Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net increase (decrease) in net assets resulting from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

$

10,982,785

 

 

$

11,649,744

 

 

$

31,476,175

 

 

$

34,977,111

 

Net realized loss on investments

 

 

(109,739

)

 

 

(99,634,900

)

 

 

(10,719,114

)

 

 

(90,132,465

)

Net change in unrealized appreciation (depreciation) on investments

 

 

29,814,557

 

 

 

93,427,503

 

 

 

(67,534,436

)

 

 

52,901,758

 

Net change in unrealized (appreciation) depreciation on debt

 

 

(25,073,673

)

 

 

186,504

 

 

 

21,301,111

 

 

 

9,914,139

 

Net increase (decrease) in net assets resulting from operations

 

 

15,613,930

 

 

 

5,628,851

 

 

 

(25,476,264

)

 

 

7,660,543

 

Distributions to stockholders

 

 

(8,045,413

)

 

 

(12,068,118

)

 

 

(32,181,650

)

 

 

(36,381,194

)

Capital transactions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

(14,471,720

)

Net increase (decrease) in net assets

 

 

7,568,517

 

 

 

(6,439,267

)

 

 

(57,657,914

)

 

 

(43,192,371

)

Net assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

 

516,679,237

 

 

 

592,148,791

 

 

 

581,905,668

 

 

 

628,901,895

 

End of period

 

$

524,247,754

 

 

$

585,709,524

 

 

$

524,247,754

 

 

$

585,709,524

 

Capital share activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares of common stock repurchased

 

 

 

 

 

 

 

 

 

 

 

(2,008,853

)

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

6


 

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net (decrease) increase in net assets resulting from operations

 

$

(25,476,264

)

 

$

7,660,543

 

Adjustments to reconcile net (decrease) increase in net assets resulting from

   operations to net cash used in operating activities:

 

 

 

 

 

 

 

 

Net change in net unrealized depreciation (appreciation) on investments

 

 

67,534,436

 

 

 

(52,901,758

)

Net change in unrealized depreciation on debt

 

 

(21,301,111

)

 

 

(9,914,139

)

Net realized loss on investments

 

 

10,719,114

 

 

 

90,132,465

 

Net accretion of discount and amortization of premium

 

 

(2,184,545

)

 

 

(2,095,442

)

Purchases of investments

 

 

(292,216,763

)

 

 

(494,793,457

)

Payment-in-kind income

 

 

(11,825,750

)

 

 

(8,765,915

)

Proceeds from dispositions of investments

 

 

114,085,199

 

 

 

325,598,567

 

Amortization of deferred financing costs

 

 

1,302,122

 

 

 

628,761

 

Decrease in interest receivable

 

 

995,645

 

 

 

387,222

 

(Increase) decrease in prepaid expenses and other assets

 

 

(437,143

)

 

 

546,453

 

Increase (decrease) in interest payable on debt

 

 

2,770,690

 

 

 

(2,568,650

)

Increase in base management fee payable, net

 

 

1,793

 

 

 

566,826

 

Decrease in performance-based incentive fee payable, net

 

 

 

 

 

(493,179

)

Decrease in accrued other expenses

 

 

(71,729

)

 

 

(726,208

)

Net cash used in operating activities

 

 

(156,104,306

)

 

 

(146,737,911

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repurchase of common stock

 

 

 

 

 

(14,471,720

)

Distributions paid to stockholders

 

 

(36,204,356

)

 

 

(36,742,787

)

Proceeds from 2024 Notes issuance

 

 

10,912,500

 

 

 

 

Repayments of 2019 Notes

 

 

 

 

 

(250,000,000

)

Repayments under SBA debentures

 

 

(16,500,000

)

 

 

(30,000,000

)

Borrowings under BNP Credit Facility

 

 

90,000,000

 

 

 

178,000,000

 

Repayments under BNP Credit Facility

 

 

(16,000,000

)

 

 

 

Borrowings under Truist Credit Facility

 

 

304,000,000

 

 

 

655,000,000

 

Repayments under Truist Credit Facility

 

 

(188,000,000

)

 

 

(352,884,000

)

Net cash provided by financing activities

 

 

148,208,144

 

 

 

148,901,493

 

Net (decrease) increase in cash equivalents

 

 

(7,896,162

)

 

 

2,163,582

 

Effect of exchange rate changes on cash

 

 

(55,030

)

 

 

75,100

 

Cash and cash equivalents, beginning of period

 

 

59,516,236

 

 

 

19,506,154

 

Cash and cash equivalents, end of period

 

$

51,565,044

 

 

$

21,744,836

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

22,072,342

 

 

$

23,058,930

 

Taxes paid

 

$

805,976

 

 

$

1,111,409

 

Non-cash exchanges and conversions

 

$

91,204,799

 

 

$

14,823,909

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

7


 

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

JUNE 30, 2020 (Unaudited)

Issuer Name

 

Maturity /

Expiration

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread Above

Index (4)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (3)

 

Investments in Non-Controlled, Non-Affiliated Portfolio Companies—207.3 (1), (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Secured Debt—144.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18 Freemont Street Acquisition, LLC

 

08/11/2025

 

Hotels, Motels, Inns and Gaming

 

 

9.50

%

 

1M L+800

 

 

 

8,302,303

 

 

$

7,516,285

 

 

$

7,804,165

 

Advantage Sales & Marketing (5)

 

07/23/2021

 

Grocery

 

 

4.25

%

 

1M L+325

 

 

 

8,650,037

 

 

 

8,377,645

 

 

 

7,875,859

 

Altamira Technologies, LLC (5)

 

07/24/2025

 

Aerospace and Defense

 

 

7.00

%

 

3M L+600

 

 

 

977,481

 

 

 

964,530

 

 

 

933,494

 

Altamira Technologies, LLC (Revolver)

 

07/24/2025

 

Aerospace and Defense

 

 

7.00

%

 

3M L+600

 

 

 

125,000

 

 

 

125,000

 

 

 

119,375

 

Altamira Technologies, LLC (Revolver) (7)

 

07/24/2025

 

Aerospace and Defense

 

 

 

 

 

 

 

 

62,500

 

 

 

 

 

 

(2,813

)

American Insulated Glass, LLC (5)

 

12/21/2023

 

Building Materials

 

 

6.87

%

 

3M L+550

 

 

 

30,810,145

 

 

 

30,355,939

 

 

 

29,577,739

 

Apex Service Partners, LLC (5)

 

07/31/2025

 

Personal, Food and Miscellaneous Services

 

 

6.25

%

 

1M L+525

 

 

 

6,623,051

 

 

 

6,561,925

 

 

 

6,440,918

 

Apex Service Partners, LLC (7)

 

07/31/2021

 

Personal, Food and Miscellaneous Services

 

 

 

 

 

 

 

 

1,344,715

 

 

 

 

 

 

(36,980

)

Bazaarvoice, Inc. (5)

 

02/01/2024

 

Printing and Publishing

 

 

6.82

%

 

1M L+575

 

 

 

14,665,025

 

 

 

14,539,287

 

 

 

14,298,399

 

Bottom Line Systems, LLC (5)

 

02/13/2023

 

Healthcare, Education and Childcare

 

 

6.57

%

 

1M L+550

 

 

 

21,722,525

 

 

 

21,553,613

 

 

 

21,086,055

 

Broder Bros., Co.

 

12/02/2022

 

Consumer Products

 

 

9.77

%

 

3M L+850

 

 

 

26,051,088

 

 

 

26,051,088

 

 

 

23,602,286

 

Cano Health, LLC (5)

 

12/23/2021

 

Healthcare, Education and Childcare

 

 

8.00

%

 

1M L+700

 

 

 

20,868,858

 

 

 

20,732,898

 

 

 

20,868,858

 

Compex Legal Services, Inc.

 

02/09/2026

 

Business Services

 

 

7.34

%

 

3M L+575

 

 

 

3,614,954

 

 

 

3,546,227

 

 

 

3,448,666

 

Compex Legal Services, Inc. (7)

 

02/08/2021

 

Business Services

 

 

 

 

 

 

 

 

1,549,743

 

 

 

 

 

 

(55,791

)

Compex Legal Services, Inc. (Revolver)

 

02/07/2025

 

Business Services

 

 

6.82

%

 

3M L+575

 

 

 

655,660

 

 

 

655,660

 

 

 

625,500

 

Datalot Inc. (5)

 

01/24/2025

 

Insurance

 

 

6.27

%

 

3M L+525

 

 

 

7,134,777

 

 

 

7,003,421

 

 

 

7,029,895

 

Datalot Inc. (Revolver)

 

01/24/2025

 

Insurance

 

 

6.25

%

 

3M L+525

 

 

 

1,788,165

 

 

 

1,788,165

 

 

 

1,761,879

 

DermaRite Industries LLC

 

03/03/2022

 

Manufacturing / Basic Industries

 

 

8.07

%

 

1M L+700

 

 

 

8,975,884

 

 

 

8,916,184

 

 

 

8,953,445

 

DRS Holdings III, Inc. (5)

 

11/03/2025

 

Consumer Products

 

 

6.75

%

 

1M L+575

 

 

 

13,598,894

 

 

 

13,476,105

 

 

 

13,292,918

 

DRS Holdings III, Inc. (Revolver)

 

11/03/2025

 

Consumer Products

 

 

6.75

%

 

1M L+575

 

 

 

611,241

 

 

 

611,241

 

 

 

597,488

 

DRS Holdings III, Inc. (Revolver) (7)

 

11/03/2025

 

Consumer Products

 

 

 

 

 

 

 

 

916,861

 

 

 

 

 

 

(20,629

)

ECM Industries, LLC (5)

 

12/23/2025

 

Electronics

 

 

5.50

%

 

1M L+450

 

 

 

2,880,406

 

 

 

2,852,125

 

 

 

2,837,200

 

ECM Industries, LLC (Revolver)

 

12/23/2025

 

Electronics

 

 

5.50

%

 

1M L+450

 

 

 

517,594

 

 

 

517,594

 

 

 

505,585

 

Holdco Sands Intermediate, LLC (5)

 

12/19/2025

 

Aerospace and Defense

 

 

7.50

%

 

3M L+600

 

 

 

12,224,286

 

 

 

12,052,930

 

 

 

11,796,436

 

HW Holdco, LLC (5)

 

12/10/2024

 

Media

 

 

5.50

%

 

3M L+450

 

 

 

17,348,710

 

 

 

17,204,994

 

 

 

16,828,249

 

HW Holdco, LLC (Revolver) (7)

 

12/10/2024

 

Media

 

 

 

 

 

 

 

 

3,387,097

 

 

 

 

 

 

(101,613

)

Impact Group, LLC (5)

 

06/27/2023

 

Personal, Food and Miscellaneous Services

 

 

8.59

%

 

1M L+737

 

 

 

19,941,835

 

 

 

19,858,253

 

 

 

19,742,417

 

Integrity Marketing Acquisition, LLC

 

08/27/2025

 

Insurance

 

 

7.01

%

 

3M L+575

 

 

 

6,404,198

 

 

 

6,358,526

 

 

 

6,212,072

 

Integrity Marketing Acquisition, LLC (7)

 

08/27/2025

 

Insurance

 

 

 

 

 

 

 

 

18,270,943

 

 

 

 

 

 

(411,097

)

Juniper Landscaping of Florida, LLC

 

12/22/2021

 

Personal, Food and Miscellaneous Services

 

 

9.50

%

 

1M L+850

 

 

 

13,886,584

 

 

 

13,780,414

 

 

 

13,886,584

 

K2 Pure Solutions NoCal, L.P. (5)

 

12/20/2023

 

Chemicals, Plastics and Rubber

 

 

8.00

%

 

1M L+700

 

 

 

26,726,333

 

 

 

26,429,617

 

 

 

26,124,990

 

K2 Pure Solutions NoCal, L.P. (Revolver)

 

12/20/2023

 

Chemicals, Plastics and Rubber

 

 

8.00

%

 

1M L+700

 

 

 

1,453,571

 

 

 

1,453,571

 

 

 

1,420,866

 

K2 Pure Solutions NoCal, L.P. (Revolver) (7)

 

12/20/2023

 

Chemicals, Plastics and Rubber

 

 

 

 

 

 

 

 

484,524

 

 

 

 

 

 

(10,902

)

Kentucky Downs, LLC (5)

 

03/07/2025

 

Hotels, Motels, Inns and Gaming

 

 

10.00

%

 

1M L+900

 

 

 

10,127,188

 

 

 

9,946,794

 

 

 

9,924,644

 

 

 

 

 

 

 

 

 

 

 

 

(PIK 3.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

Kentucky Downs, LLC (7)

 

03/07/2025

 

Hotels, Motels, Inns and Gaming

 

 

 

 

 

 

 

 

827,586

 

 

 

 

 

 

(16,552

)

Lash Opco, LLC - Term Loan (5)

 

12/12/2024

 

Consumer Products

 

 

8.75

%

 

1M L+725

 

 

 

9,663,879

 

 

 

9,398,797

 

 

 

9,306,315

 

Lash Opco, LLC (Revolver)

 

12/12/2024

 

Consumer Products

 

 

8.38

%

 

P+450

 

 

 

1,043,312

 

 

 

1,043,312

 

 

 

1,004,710

 

Lash Opco, LLC (Revolver) (7)

 

12/12/2024

 

Consumer Products

 

 

 

 

 

 

 

 

22

 

 

 

 

 

 

(1

)

LAV Gear Holdings, Inc. (5)

 

10/31/2024

 

Leisure, Amusement, Motion Pictures, Entertainment

 

 

6.50

%

 

1M L+550

 

 

 

2,731,999

 

 

 

2,707,619

 

 

 

2,605,507

 

Lightspeed Buyer Inc. (5)

 

02/03/2026

 

Healthcare, Education and Childcare

 

 

6.75

%

 

1M L+575

 

 

 

12,629,862

 

 

 

12,388,739

 

 

 

12,301,486

 

Lightspeed Buyer Inc. (7)

 

08/03/2021

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

2,450,209

 

 

 

 

 

 

(39,203

)

Lightspeed Buyer Inc. (Revolver)

 

02/03/2026

 

Healthcare, Education and Childcare

 

 

6.75

%

 

1M L+575

 

 

 

1,165,780

 

 

 

1,165,780

 

 

 

1,135,470

 

Lombart Brothers, Inc. (5)

 

04/13/2023

 

Healthcare, Education and Childcare

 

 

7.25

%

 

1M L+625

 

 

 

16,959,257

 

 

 

16,801,612

 

 

 

15,738,190

 

Lombart Brothers, Inc. (Revolver)

 

04/13/2023

 

Healthcare, Education and Childcare

 

 

7.25

%

 

1M L+625

 

 

 

1,769,912

 

 

 

1,769,912

 

 

 

1,642,478

 

MeritDirect, LLC (5)

 

05/23/2024

 

Media

 

 

6.50

%

 

3M L+550

 

 

 

17,198,881

 

 

 

16,988,834

 

 

 

16,424,931

 

MeritDirect, LLC (Revolver) (7)

 

05/23/2024

 

Media

 

 

 

 

 

 

 

 

2,518,345

 

 

 

 

 

 

(113,326

)

Ox Two, LLC

 

02/27/2023

 

Building Materials

 

 

7.25

%

 

1M L+625

 

 

 

21,460,472

 

 

 

21,198,683

 

 

 

20,945,421

 

Ox Two, LLC (Revolver)

 

02/27/2023

 

Building Materials

 

 

7.25

%

 

1M L+625

 

 

 

2,488,000

 

 

 

2,488,000

 

 

 

2,428,288

 

Ox Two, LLC (Revolver) (7)

 

02/27/2023

 

Building Materials

 

 

 

 

 

 

 

 

12,000

 

 

 

 

 

 

(288

)

Peninsula Pacific Entertainment LLC

 

11/13/2024

 

Hotels, Motels, Inns and Gaming

 

 

8.32

%

 

3M L+725

 

 

 

11,466,452

 

 

 

11,238,988

 

 

 

10,434,471

 

PlayPower, Inc. (5)

 

05/08/2026

 

Consumer Products

 

 

5.81

%

 

3M L+550

 

 

 

4,097,010

 

 

 

4,060,079

 

 

 

3,892,160

 

PRA Events, Inc.

 

08/08/2022

 

Business Services

 

 

11.25

%

 

P+800

 

 

 

19,180,820

 

 

 

18,996,357

 

 

 

18,049,152

 

PRA Events, Inc. (Revolver)

 

08/08/2022

 

Business Services

 

 

11.25

%

 

P+800

 

 

 

2,000,000

 

 

 

2,000,000

 

 

 

1,882,000

 

Provation Medical, Inc.

 

03/11/2024

 

Electronics

 

 

7.18

%

 

3M L+700

 

 

 

26,595,000

 

 

 

26,136,286

 

 

 

25,275,888

 

Questex, LLC

 

09/09/2024

 

Media

 

 

6.00

%

 

3M L+500

 

 

 

22,106,250

 

 

 

21,771,936

 

 

 

21,000,938

 

Questex, LLC (Revolver)

 

09/09/2024

 

Media

 

 

6.00

%

 

3M L+500

 

 

 

1,795,213

 

 

 

1,795,213

 

 

 

1,705,452

 

Questex, LLC (Revolver) (7)

 

09/09/2024

 

Media

 

 

 

 

 

 

 

 

1,795,213

 

 

 

 

 

 

(89,761

)

Radius Aerospace, Inc. (5)

 

03/31/2025

 

Aerospace and Defense

 

 

6.75

%

 

3M L+575

 

 

 

13,814,334

 

 

 

13,635,176

 

 

 

13,546,336

 

Radius Aerospace, Inc. (Revolver)

 

03/31/2025

 

Aerospace and Defense

 

 

6.75

%

 

3M L+575

 

 

 

2,227,142

 

 

 

2,227,142

 

 

 

2,183,936

 

Research Horizons, LLC

 

06/28/2022

 

Media

 

 

7.25

%

 

1M L+625

 

 

 

29,941,723

 

 

 

29,698,601

 

 

 

28,444,637

 

Research Now Group, Inc. and Survey

   Sampling International LLC (5)

 

12/20/2024

 

Business Services

 

 

6.50

%

 

3M L+550

 

 

 

17,806,717

 

 

 

17,680,552

 

 

 

16,315,405

 

Riverpoint Medical, LLC (5)

 

06/20/2025

 

Healthcare, Education and Childcare

 

 

5.75

%

 

3M L+475

 

 

 

1,980,000

 

 

 

1,962,651

 

 

 

1,898,028

 

Riverpoint Medical, LLC (Revolver) (7)

 

06/20/2025

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

363,636

 

 

 

 

 

 

(15,055

)

Riverside Assessments, LLC

 

03/10/2025

 

Education

 

 

6.75

%

 

3M L+575

 

 

 

15,710,625

 

 

 

15,413,973

 

 

 

14,846,541

 

Sargent & Greenleaf Inc.

 

12/20/2024

 

Electronics

 

 

7.00

%

 

1M L+550

 

 

 

5,476,140

 

 

 

5,402,119

 

 

 

5,361,141

 

Sargent & Greenleaf Inc. (Revolver)

 

12/20/2024

 

Electronics

 

 

7.00

%

 

1M L+550

 

 

 

298,972

 

 

 

298,972

 

 

 

292,693

 

Sargent & Greenleaf Inc. (Revolver) (7)

 

12/20/2024

 

Electronics

 

 

 

 

 

 

 

 

298,972

 

 

 

 

 

 

(6,278

)

Sales Benchmark Index LLC

 

01/03/2025

 

Business Services

 

 

7.75

%

 

3M L+600

 

 

 

7,907,012

 

 

 

7,761,317

 

 

 

7,693,523

 

Sales Benchmark Index LLC (7)

 

07/07/2021

 

Business Services

 

 

 

 

 

 

 

 

1,829,268

 

 

 

 

 

 

(49,390

)

Sales Benchmark Index LLC (Revolver)

 

01/03/2025

 

Business Services

 

 

7.75

%

 

3M L+600

 

 

 

487,805

 

 

 

487,805

 

 

 

474,634

 

Sales Benchmark Index LLC (Revolver) (7)

 

01/03/2025

 

Business Services

 

 

 

 

 

 

 

 

243,902

 

 

 

 

 

 

(6,585

)

Schlesinger Global, Inc.

 

07/14/2025

 

Business Services

 

 

7.00

%

 

3M L+600

 

 

 

516,643

 

 

 

510,543

 

 

 

486,161

 

Schlesinger Global, Inc. (Revolver)

 

07/14/2025

 

Business Services

 

 

7.00

%

 

3M L+600

 

 

 

15,759

 

 

 

15,759

 

 

 

14,830

 

Schlesinger Global, Inc. (Revolver) (7)

 

07/14/2025

 

Business Services

 

 

 

 

 

 

 

 

22,281

 

 

 

 

 

 

(1,315

)

Signature Systems Holding Company (5)

 

05/03/2024

 

Chemicals, Plastics and Rubber

 

 

7.50

%

 

3M L+650

 

 

 

14,437,500

 

 

 

14,270,055

 

 

 

13,744,500

 

Signature Systems Holding Company (Revolver)

 

05/03/2024

 

Chemicals, Plastics and Rubber

 

 

7.87

%

 

3M L+650

 

 

 

645,161

 

 

 

645,161

 

 

 

614,194

 

Signature Systems Holding Company (Revolver) (7)

 

05/03/2024

 

Chemicals, Plastics and Rubber

 

 

 

 

 

 

 

 

1,370,968

 

 

 

 

 

 

(65,806

)

Solutionreach, Inc. (5)

 

01/17/2024

 

Communications

 

 

6.75

%

 

3M L+575

 

 

 

12,597,723

 

 

 

12,405,192

 

 

 

12,265,144

 

Solutionreach, Inc. (Revolver)

 

01/17/2024

 

Communications

 

 

6.75

%

 

3M L+575

 

 

 

1,248,750

 

 

 

1,248,750

 

 

 

1,215,783

 

Solutionreach, Inc. (Revolver) (7)

 

01/17/2024

 

Communications

 

 

 

 

 

 

 

 

416,250

 

 

 

 

 

 

(10,989

)

Spear Education, LLC

 

02/26/2025

 

Education

 

 

6.25

%

 

3M L+525

 

 

 

15,087,188

 

 

 

14,938,449

 

 

 

14,785,444

 

Spear Education, LLC (7)

 

02/26/2022

 

Education

 

 

 

 

 

 

 

 

6,875,000

 

 

 

 

 

 

(137,500

)

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

8


 

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

JUNE 30, 2020 (Unaudited)

Issuer Name

 

Maturity /

Expiration

 

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread Above

Index (4)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (3)

 

Spectacle Gary Holdings, LLC

 

12/23/2025

 

 

Hotels, Motels, Inns and Gaming

 

 

11.00

%

 

1M L+900

 

 

 

20,478,378

 

 

$

19,781,941

 

 

 

19,659,243

 

Spectacle Gary Holdings, LLC (7)

 

12/23/2025

 

 

Hotels, Motels, Inns and Gaming

 

 

 

 

 

 

 

 

1,121,622

 

 

 

 

 

 

(44,865

)

STV Group Incorporated (5)

 

12/11/2026

 

 

Transportation

 

 

5.43

%

 

1M L+525

 

 

 

12,666,703

 

 

 

12,546,826

 

 

 

12,413,368

 

TeleGuam Holdings, LLC (5)

 

11/20/2025

 

 

Telecommunications

 

 

5.50

%

 

1M L+450

 

 

 

5,093,719

 

 

 

5,045,931

 

 

 

4,889,970

 

Teneo Holdings LLC (5)

 

07/18/2025

 

 

Financial Services

 

 

6.25

%

 

1M L+525

 

 

 

1,985,000

 

 

 

1,875,185

 

 

 

1,875,825

 

TPC Canada Parent, Inc. and TPC US Parent, LLC (5),(8),(11)

 

11/24/2025

 

 

Food

 

 

6.68

%

 

3M L+525

 

 

 

7,457,982

 

 

 

7,401,339

 

 

 

7,234,242

 

Triad Manufacturing, Inc.

 

12/28/2020

 

 

Manufacturing / Basic Industries

 

 

11.25

%

 

3M L+1,075

 

 

 

11,598,956

 

 

 

11,569,745

 

 

 

11,598,956

 

TVC Enterprises, LLC (5)

 

01/18/2024

 

 

Transportation

 

 

6.50

%

 

1M L+550

 

 

 

32,711,302

 

 

 

32,219,385

 

 

 

31,926,230

 

TVC Enterprises, LLC (Revolver)

 

01/18/2024

 

 

Transportation

 

 

6.50

%

 

1M L+550

 

 

 

2,702,152

 

 

 

2,702,152

 

 

 

2,637,300

 

TWS Acquisition Corporation (5)

 

06/16/2025

 

 

Education

 

 

7.25

%

 

1M L+625

 

 

 

8,644,186

 

 

 

8,460,181

 

 

 

8,384,860

 

TWS Acquisition Corporation (Revolver)

 

06/16/2025

 

 

Education

 

 

7.25

%

 

1M L+625

 

 

 

1,137,857

 

 

 

1,137,857

 

 

 

1,103,721

 

TWS Acquisition Corporation (Revolver) (7)

 

06/16/2025

 

 

Education

 

 

 

 

 

 

 

 

505,714

 

 

 

 

 

 

(15,171

)

Tyto Athene, LLC

 

08/27/2024

 

 

Aerospace and Defense

 

 

6.75

%

 

1M L+575

 

 

 

6,043,337

 

 

 

6,019,701

 

 

 

5,872,310

 

UBEO, LLC (5)

 

04/03/2024

 

 

Printing and Publishing

 

 

6.16

%

 

3M L+450

 

 

 

4,738,102

 

 

 

4,698,082

 

 

 

4,595,959

 

US Med Acquisition, Inc.

 

08/13/2021

 

 

Healthcare, Education and Childcare

 

 

10.00

%

 

1M L+900

 

 

 

8,323,438

 

 

 

8,323,438

 

 

 

8,198,586

 

Vision Purchaser Corporation (5)

 

06/10/2025

 

 

Media

 

 

7.33

%

 

1M L+625

 

 

 

14,394,527

 

 

 

14,134,937

 

 

 

13,818,746

 

Walker Edison Furniture Company LLC

 

09/26/2024

 

 

Home and Office Furnishings

 

 

7.70

%

 

3M L+650

 

 

 

21,656,250

 

 

 

21,325,527

 

 

 

21,656,250

 

Whitney, Bradley & Brown, Inc. (5)

 

10/18/2022

 

 

Aerospace and Defense

 

 

8.50

%

 

1M L+750

 

 

 

14,383,614

 

 

 

14,196,004

 

 

 

14,239,777

 

Wildcat Buyerco, Inc.

 

02/27/2026

 

 

Electronics

 

 

6.50

%

 

3M L+550

 

 

 

9,168,199

 

 

 

8,988,437

 

 

 

9,076,517

 

Wildcat Buyerco, Inc. (7)

 

02/27/2022

 

 

Electronics

 

 

 

 

 

 

 

 

2,573,529

 

 

 

 

 

 

3,217

 

Wildcat Buyerco, Inc. (Revolver)

 

02/27/2026

 

 

Electronics

 

 

6.89

%

 

3M L+550

 

 

 

176,471

 

 

 

176,471

 

 

 

173,259

 

Wildcat Buyerco, Inc. (Revolver) (7)

 

02/27/2026

 

 

Electronics

 

 

 

 

 

 

 

 

375,000

 

 

 

 

 

 

(6,825

)

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

774,385,534

 

 

 

755,651,370

 

Second Lien Secured Debt—35.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condor Borrower, LLC

 

04/25/2025

 

 

Business Services

 

 

9.75

%

 

3M L+875

 

 

 

10,344,828

 

 

 

10,193,074

 

 

 

10,055,172

 

Confie Seguros Holding Co.

 

10/31/2025

 

 

Insurance

 

 

10.08

%

 

3M L+850

 

 

 

14,500,000

 

 

 

14,273,525

 

 

 

13,775,000

 

DecoPac, Inc.

 

03/31/2025

 

 

Beverage, Food and Tobacco

 

 

9.25

%

 

3M L+825

 

 

 

19,627,143

 

 

 

19,371,075

 

 

 

19,627,143

 

Halo Buyer, Inc.

 

07/06/2026

 

 

Consumer Products

 

 

9.25

%

 

1M L+825

 

 

 

32,500,000

 

 

 

32,050,715

 

 

 

29,055,000

 

Infogroup, Inc.

 

04/03/2024

 

 

Other Media

 

 

10.25

%

 

3M L+925

 

 

 

20,400,000

 

 

 

20,142,117

 

 

 

19,380,000

 

MailSouth, Inc.

 

10/23/2024

 

 

Printing and Publishing

 

 

 

(6)

 

 

 

 

36,828,975

 

 

 

36,224,201

 

 

 

31,304,629

 

MBS Holdings, Inc.

 

01/02/2024

 

 

Telecommunications

 

 

9.59

%

 

1M L+850

 

 

 

19,623,649

 

 

 

19,339,510

 

 

 

19,133,058

 

VT Topco, Inc.

 

08/24/2026

 

 

Business Services

 

 

7.18

%

 

3M L+700

 

 

 

10,000,000

 

 

 

9,956,038

 

 

 

9,700,000

 

Winter Park Intermediate, Inc.

 

04/06/2026

 

 

Auto Sector

 

 

9.57

%

 

1M L+850

 

 

 

35,300,000

 

 

 

34,791,393

 

 

 

34,417,500

 

Total Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

196,341,648

 

 

 

186,447,502

 

Subordinated Debt/Corporate Notes—12.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blackhawk Industrial Distribution, Inc.

 

03/17/2025

 

 

Distribution

 

 

12.00

%

 

 

 

 

 

13,981,361

 

 

 

13,762,540

 

 

 

13,450,069

 

 

 

 

 

 

 

 

 

 

(PIK 2.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cascade Environmental LLC

 

08/20/2021

 

 

Environmental Services

 

 

15.00

%

 

 

 

 

 

54,031,384

 

 

 

53,777,970

 

 

 

52,302,380

 

 

 

 

 

 

 

 

 

 

(PIK 15.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Subordinated Debt/Corporate Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

67,540,510

 

 

 

65,752,449

 

Preferred Equity/Partnership Interests—0.6% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AH Holdings, Inc.

 

 

 

 

Healthcare, Education and Childcare

 

 

6.00

%

 

 

 

 

 

211

 

 

 

500,000

 

 

 

196,732

 

Condor Holdings Limited (8), (11)

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

556,000

 

 

 

64,277

 

 

 

64,277

 

Condor Top Holdco Limited (8), (11)

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

556,000

 

 

 

491,723

 

 

 

582,145

 

MeritDirect Holdings, LP (9)

 

 

 

 

Media

 

 

 

 

 

 

 

 

540

 

 

 

540,000

 

 

 

472,124

 

NXOF Holdings, Inc. (Tyto Athene, LLC)

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

107

 

 

 

106,823

 

 

 

119,003

 

Signature CR Intermediate Holdco, Inc.

 

 

 

 

Chemicals, Plastics and Rubber

 

 

12.00

%

 

 

 

 

 

1,347

 

 

 

1,346,530

 

 

 

1,544,351

 

TPC Holding Company, LP (8),(11)

 

 

 

 

Food

 

 

 

 

 

 

 

 

219

 

 

 

219,012

 

 

 

231,375

 

Total Preferred Equity/Partnership Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,268,365

 

 

 

3,210,007

 

Common Equity/Partnership Interests/Warrants—14.5% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affinion Group Holdings, Inc. (Warrants)

 

04/10/2024

 

 

Consumer Products

 

 

 

 

 

 

 

 

77,190

 

 

 

2,126,399

 

 

 

 

AG Investco LP (9)

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

805,164

 

 

 

805,164

 

 

 

732,365

 

AG Investco LP (7), (9)

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

194,836

 

 

 

 

 

 

(17,616

)

AH Holdings, Inc. (Warrants)

 

03/23/2021

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

753

 

 

 

 

 

 

 

Altamira Intermediate Company II, Inc.

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

125,000

 

 

 

125,000

 

 

 

87,882

 

ASP LCG Holdings, Inc. (Warrants)

 

05/05/2026

 

 

Education

 

 

 

 

 

 

 

 

933

 

 

 

586,975

 

 

 

2,169,900

 

Cascade Environmental LLC (9)

 

 

 

 

Environmental Services

 

 

 

 

 

 

 

 

33,901

 

 

 

2,852,080

 

 

 

806,270

 

CI (Allied) Investment Holdings, LLC

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

120,962

 

 

 

1,243,217

 

 

 

 

(PRA Events, Inc.) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CI (Summit) Investment Holdings LLC

 

 

 

 

Buildings and Real Estate

 

 

 

 

 

 

 

 

122,870

 

 

 

1,270,646

 

 

 

1,536,542

 

(SFP Holdings, Inc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cowboy Parent LLC

 

 

 

 

Distribution

 

 

 

 

 

 

 

 

22,500

 

 

 

2,250,000

 

 

 

1,273,553

 

(Blackhawk Industrial Distribution, Inc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DecoPac Holdings Inc.

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

3,449

 

 

 

3,448,658

 

 

 

5,874,063

 

ECM Investors, LLC (9)

 

 

 

 

Electronics

 

 

 

 

 

 

 

 

 

 

167,537

 

 

 

167,537

 

 

 

173,454

 

eCommission Holding Corporation (11)

 

 

 

 

Financial Services

 

 

 

 

 

 

 

 

80

 

 

 

1,004,625

 

 

 

1,411,883

 

Faraday Holdings, LLC

 

 

 

 

Building Materials

 

 

 

 

 

 

 

 

4,277

 

 

 

217,635

 

 

 

1,219,118

 

Gauge Lash Coinvest LLC

 

 

 

 

Consumer Products

 

 

 

 

 

 

 

 

673,029

 

 

 

673,029

 

 

 

673,029

 

Gauge Schlesinger Coinvest, LLC

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

9

 

 

 

8,896

 

 

 

15,670

 

Gauge TVC Coinvest, LLC

 

 

 

 

Transportation

 

 

 

 

 

 

 

 

810,645

 

 

 

810,645

 

 

 

800,107

 

(TVC Enterprises, LLC)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Go Dawgs Capital III, LP

 

 

 

 

Building Materials

 

 

 

 

 

 

 

 

675,325

 

 

 

675,325

 

 

 

594,286

 

(American Insulated Glass, LLC) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Green Veracity Holdings, LP - Class A

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

15,000

 

 

 

1,500,000

 

 

 

2,326,782

 

(VT Topco, Inc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Infogroup Parent Holdings, Inc.

 

 

 

 

Other Media

 

 

 

 

 

 

 

 

181,495

 

 

 

2,040,000

 

 

 

1,850,368

 

ITC Rumba, LLC (Cano Health, LLC) (9)

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

375,675

 

 

 

4,317,307

 

 

 

11,033,081

 

JWC-WE Holdings, L.P.

 

 

 

 

Home and Office Furnishings

 

 

 

 

 

 

 

 

1,906,433

 

 

 

1,906,433

 

 

 

8,769,594

 

(Walker Edison Furniture Company LLC) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kadmon Holdings, Inc. (12)

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

252,014

 

 

 

2,265,639

 

 

 

1,290,312

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

9


 

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

JUNE 30, 2020 (Unaudited)

 

Issuer Name

 

Maturity /

Expiration

 

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread Above

Index (4)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (3)

 

Kentucky Racing Holdco, LLC (Warrants)

 

 

 

 

Hotels, Motels, Inns and Gaming

 

 

 

 

 

 

 

 

161,252

 

 

$

 

 

$

309,652

 

Lariat ecoserv Co-Invest Holdings, LLC (9)

 

 

 

 

Environmental Services

 

 

 

 

 

 

 

 

363,656

 

 

 

363,656

 

 

 

687,310

 

Lightspeed Investment Holdco LLC

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

273,143

 

 

 

273,143

 

 

 

259,486

 

MeritDirect Holdings, LP (9)

 

 

 

 

Media

 

 

 

 

 

 

 

 

540

 

 

 

 

 

 

 

NXOF Holdings, Inc.

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

2,180

 

 

 

2,180

 

 

 

 

(Tyto Athene, LLC)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OceanSound Discovery Equity, LP

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

98,286

 

 

 

982,857

 

 

 

1,226,216

 

(Holdco Sands Intermediate, LLC) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QuantiTech InvestCo LP (9)

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

83,333

 

 

 

83,333

 

 

 

83,333

 

QuantiTech InvestCo LP (7), (9)

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

83,333

 

 

 

 

 

 

 

SBI Holdings Investments LLC

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

36,585

 

 

 

365,854

 

 

 

317,902

 

(Sales Benchmark Index LLC)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature CR Intermediate Holdco, Inc.

 

 

 

 

Chemicals, Plastics and Rubber

 

 

 

 

 

 

 

 

71

 

 

 

70,870

 

 

 

4,746

 

SSC Dominion Holdings, LLC

 

 

 

 

Electronics

 

 

 

 

 

 

 

 

1,500

 

 

 

1,500,000

 

 

 

1,620,000

 

Class A (US Dominion, Inc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SSC Dominion Holdings, LLC

 

 

 

 

Electronics

 

 

 

 

 

 

 

 

1,500

 

 

 

 

 

 

3,400,941

 

Class B (US Dominion, Inc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TPC Holding Company, LP (8). (11)

 

 

 

 

Food

 

 

 

 

 

 

 

 

11,527

 

 

 

11,527

 

 

 

75,847

 

U.S. Well Services, Inc. - Class A (11), (12)

 

 

 

 

Oil and Gas

 

 

 

 

 

 

 

 

1,261,201

 

 

 

3,021,880

 

 

 

614,835

 

WBB Equity, LLC

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

628,571

 

 

 

628,571

 

 

 

2,596,000

 

(Whitney, Bradley & Brown, Inc.) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wheel Pros Holdings, L.P.

 

 

 

 

Auto Sector

 

 

 

 

 

 

 

 

3,778,704

 

 

 

4,450,000

 

 

 

19,229,647

 

(Winter Park Intermediate, Inc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wildcat Parent, LP (Wildcat Buyerco, Inc.)

 

 

 

 

Electronics

 

 

 

 

 

 

 

 

2,314

 

 

 

231,400

 

 

 

208,969

 

ZS Juniper L.P.

 

 

 

 

Personal, Food and Miscellaneous Services

 

 

 

 

 

 

 

 

1,056

 

 

 

1,056,250

 

 

 

2,574,592

 

(Juniper Landscaping of Florida, LLC) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Common Equity/Partnership Interests/Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43,336,731

 

 

 

75,830,119

 

Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,084,872,788

 

 

 

1,086,891,447

 

Investments in Non-Controlled, Affiliated Portfolio Companies—6.3% (1), (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Equity/Partnership Interests—6.2% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ETX Energy, LLC

 

 

 

 

Oil and Gas

 

 

 

 

 

 

 

 

61,732

 

 

 

6,173,200

 

 

 

11,259,917

 

MidOcean JF Holdings Corp.

 

 

 

 

Distribution

 

 

 

 

 

 

 

 

153,922

 

 

 

15,392,189

 

 

 

21,217,095

 

Total Preferred Equity/Partnership Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,565,389

 

 

 

32,477,012

 

Common Equity/Partnership Interests/Warrants—0.1% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ETX Energy, LLC (9)

 

 

 

 

Oil and Gas

 

 

 

 

 

 

 

 

1,658,389

 

 

 

29,711,576

 

 

 

 

ETX Energy Management Company, LLC

 

 

 

 

Oil and Gas

 

 

 

 

 

 

 

 

1,754,104

 

 

 

1,562,020

 

 

 

 

MidOcean JF Holdings Corp.

 

 

 

 

Distribution

 

 

 

 

 

 

 

 

65,933

 

 

 

24,789,935

 

 

 

655,146

 

Total Common Equity/Partnership Interests/Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

56,063,531

 

 

 

655,146

 

Total Investments in Non-Controlled, Affiliated Portfolio Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77,628,920

 

 

 

33,132,158

 

Investments in Controlled, Affiliated Portfolio Companies—40.7% (1), (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Secured Debt—6.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AKW Holdings Limited (8), (10), (11)

 

03/13/2024

 

 

Healthcare, Education and Childcare

 

 

6.50

%

 

3M L+600

 

 

£

28,000,000

 

 

 

39,051,600

 

 

 

33,731,880

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39,051,600

 

 

 

33,731,880

 

Second Lien Secured Debt—9.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PT Network Intermediate Holdings, LLC

 

11/30/2024

 

 

Healthcare, Education and Childcare

 

 

11.22

%

 

3M L+1,000

 

 

 

51,032,056

 

 

 

50,632,571

 

 

 

51,032,056

 

 

 

 

 

 

 

 

 

 

(PIK 11.22

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50,632,571

 

 

 

51,032,056

 

Preferred Equity—2.3% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CI (PTN) Investment Holdings II, LLC

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

36,450

 

 

 

546,750

 

 

 

 

(PT Network, LLC) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PT Network Intermediate Holdings, LLC (9)

 

 

 

 

 

Healthcare, Education and Childcare

 

 

11.39

%

 

3M L+1,000

 

 

 

833

 

 

 

10,725,000

 

 

 

11,914,264

 

Total Preferred Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,271,750

 

 

 

11,914,264

 

Common Equity—22.3% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AKW Holdings Limited (8), (10), (11)

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

£

950

 

 

 

132,497

 

 

 

 

CI (PTN) Investment Holdings II, LLC

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

333,333

 

 

 

5,000,000

 

 

 

 

(PT Network, LLC) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PT Network Intermediate Holdings, LLC (9)

 

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

621

 

 

 

7,150,000

 

 

 

18,440,148

 

RAM Energy Holdings LLC

 

 

 

 

Energy and Utilities

 

 

 

 

 

 

 

 

180,805

 

 

 

162,708,073

 

 

 

98,206,908

 

Total Common Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

174,990,570

 

 

 

116,647,056

 

Total Investments in Controlled, Affiliated Portfolio Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

275,946,491

 

 

 

213,325,256

 

Total Investments—254.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,438,448,199

 

 

 

1,333,348,861

 

Cash and Cash Equivalents—9.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock Federal FD Institutional 30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,797,215

 

 

 

26,797,215

 

BNY Mellon Cash Reserve and Cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,822,997

 

 

 

24,767,829

 

Total Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51,620,212

 

 

 

51,565,044

 

Total Investments and Cash Equivalents—264.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,490,068,411

 

 

$

1,384,913,905

 

Liabilities in Excess of Other Assets—(164.2%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(860,666,151

)

Net Assets—100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

524,247,754

 

 

(1)

The provisions of the 1940 Act classify investments based on the level of control that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when we own 25% or less of the portfolio company’s voting securities and “controlled” when we own more than 25% of the portfolio company’s voting securities.

(2)

The provisions of the 1940 Act classify investments further based on the level of ownership that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when we own less than 5% of a portfolio company’s voting securities and “affiliated” when we own 5% or more of a portfolio company’s voting securities (See Note 6).

(3)

Valued based on our accounting policy (See Note 2).

(4)

Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable London Interbank Offered Rate, or LIBOR or “L” or Prime rate, or “P”. The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 90-day or 180-day LIBOR rate (1M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread includes payment-in-kind, or PIK, interest and other fee rates, if any.

(5)

The securities, or a portion thereof, are pledged as collateral under the BNP Credit Facility and held through Funding I.

(6)

Non-income producing securities.

(7)

Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.

(8)

Non-U.S. company or principal place of business outside the United States.

(9)

Investment is held through our Taxable Subsidiaries (See Note 1).

(10)

Par / shares amount is denominated in British Pounds (£) as denoted.

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

10


 

(11)

The investment is treated as a non-qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of our total assets. As of June 30, 2020, qualifying assets represent 97% of the Company’s total assets and non-qualifying assets represent 3% of the Company’s total assets.

(12)

The security was not valued using significant unobservable inputs. The value of all other securities was determined using significant unobservable inputs (See Note 5).

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

11


 

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2019

 

Issuer Name

 

Maturity /

Expiration

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread Above

Index (4)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (3)

 

Investments in Non-Controlled, Non-Affiliated Portfolio Companies—161.0 (1), (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Secured Debt—100.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Altamira Technologies, LLC (5)

 

07/24/2025

 

Aerospace and Defense

 

 

8.28

%

 

3M L+600

 

 

 

1,000,000

 

 

$

985,250

 

 

$

1,000,000

 

Altamira Technologies, LLC (Revolver) (7)

 

07/24/2025

 

Aerospace and Defense

 

 

 

 

 

 

 

 

187,500

 

 

 

 

 

 

 

American Insulated Glass, LLC (5)

 

12/21/2023

 

Building Materials

 

 

8.10

%

 

3M L+550

 

 

 

31,044,000

 

 

 

30,504,462

 

 

 

30,578,340

 

American Insulated Glass, LLC (7)

 

12/21/2023

 

Building Materials

 

 

 

 

 

 

 

 

1,350,649

 

 

 

 

 

 

(20,260

)

Bazaarvoice, Inc. (5)

 

02/01/2024

 

Printing and Publishing

 

 

7.79

%

 

1M L+575

 

 

 

14,775,844

 

 

 

14,652,557

 

 

 

14,628,085

 

Bottom Line Systems, LLC (5)

 

02/13/2023

 

Healthcare, Education and Childcare

 

 

8.04

%

 

1M L+600

 

 

 

21,722,525

 

 

 

21,510,208

 

 

 

21,718,181

 

Broder Bros., Co.

 

12/02/2022

 

Consumer Products

 

 

10.60

%

 

3M L+850

 

 

 

27,218,672

 

 

 

27,219,280

 

 

 

27,218,672

 

Cano Health, LLC (5)

 

12/23/2021

 

Healthcare, Education and Childcare

 

 

8.36

%

 

1M L+625

 

 

 

29,073,557

 

 

 

28,790,688

 

 

 

29,073,557

 

DermaRite Industries LLC

 

03/03/2022

 

Manufacturing / Basic Industries

 

 

9.04

%

 

1M L+700

 

 

 

9,750,000

 

 

 

9,663,494

 

 

 

9,255,675

 

Deva Holdings, Inc. (5)

 

10/31/2023

 

Consumer Products

 

 

7.54

%

 

3M L+550

 

 

 

4,486,071

 

 

 

4,421,743

 

 

 

4,486,071

 

Deva Holdings, Inc. (7)

 

10/31/2022

 

Consumer Products

 

 

 

 

 

 

 

 

385,000

 

 

 

 

 

 

 

HW Holdco, LLC (5)

 

12/10/2024

 

Media

 

 

8.39

%

 

3M L+625

 

 

 

17,480,806

 

 

 

17,317,655

 

 

 

17,480,806

 

HW Holdco, LLC (Revolver)

 

12/10/2024

 

Media

 

 

8.39

%

 

3M L+625

 

 

 

487,742

 

 

 

487,742

 

 

 

487,742

 

HW Holdco, LLC (Revolver) (7)

 

12/10/2024

 

Media

 

 

 

 

 

 

 

 

2,899,355

 

 

 

 

 

 

 

Impact Group, LLC (5)

 

06/27/2023

 

Personal, Food and Miscellaneous Services

 

 

8.72

%

 

1M L+650

 

 

 

20,101,907

 

 

 

20,001,084

 

 

 

19,900,888

 

Juniper Landscaping of Florida, LLC

 

12/22/2021

 

Personal, Food and Miscellaneous Services

 

 

10.61

%

 

1M L+850

 

 

 

14,627,202

 

 

 

14,463,765

 

 

 

14,627,202

 

K2 Pure Solutions NoCal, L.P. (5)

 

12/20/2023

 

Chemicals, Plastics and Rubber

 

 

7.33

%

 

1M L+475

 

 

 

26,929,833

 

 

 

26,577,555

 

 

 

26,603,982

 

K2 Pure Solutions NoCal, L.P. (Revolver)

 

12/20/2023

 

Chemicals, Plastics and Rubber

 

 

7.30

%

 

1M L+525

 

 

 

678,333

 

 

 

678,333

 

 

 

670,125

 

K2 Pure Solutions NoCal, L.P. (Revolver) (7)

 

12/20/2023

 

Chemicals, Plastics and Rubber

 

 

 

 

 

 

 

 

1,259,762

 

 

 

 

 

 

(15,243

)

Kentucky Downs, LLC (5)

 

03/07/2025

 

Hotels, Motels, Inns and Gaming

 

 

10.60

%

 

1M L+850

 

 

 

10,024,046

 

 

 

9,831,274

 

 

 

10,024,046

 

Kentucky Downs, LLC (7)

 

03/07/2025

 

Hotels, Motels, Inns and Gaming

 

 

 

 

 

 

 

 

2,482,759

 

 

 

 

 

 

 

Lombart Brothers, Inc. (5)

 

04/13/2023

 

Healthcare, Education and Childcare

 

 

8.35

%

 

3M L+625

 

 

 

17,093,818

 

 

 

16,900,562

 

 

 

16,922,880

 

Lombart Brothers, Inc. (Revolver)

 

04/13/2023

 

Healthcare, Education and Childcare

 

 

10.00

%

 

P+500

 

 

 

624,675

 

 

 

624,675

 

 

 

621,551

 

Lombart Brothers, Inc. (Revolver) (7)

 

04/13/2023

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

1,145,237

 

 

 

 

 

 

(5,726

)

MeritDirect, LLC (5)

 

05/23/2024

 

Media

 

 

8.06

%

 

3M L + 550

 

 

 

19,539,663

 

 

 

19,263,565

 

 

 

19,246,568

 

MeritDirect, LLC (Revolver) (7)

 

05/23/2024

 

Media

 

 

 

 

 

 

 

 

2,518,345

 

 

 

 

 

 

(37,775

)

Ox Two, LLC

 

02/27/2023

 

Building Materials

 

 

8.29

%

 

1M L+625

 

 

 

21,785,448

 

 

 

21,461,501

 

 

 

21,785,448

 

Ox Two, LLC (Revolver)

 

02/27/2023

 

Building Materials

 

 

12.25

%

 

P+725

 

 

 

2,288,000

 

 

 

2,288,000

 

 

 

2,288,000

 

Ox Two, LLC (Revolver) (7)

 

02/27/2023

 

Building Materials

 

 

 

 

 

 

 

 

212,000

 

 

 

 

 

 

 

Peninsula Pacific Entertainment LLC

 

11/13/2024

 

Hotels, Motels, Inns and Gaming

 

 

9.35

%

 

3M L+725

 

 

 

8,495,190

 

 

 

8,480,683

 

 

 

8,495,190

 

Pestell Minerals and Ingredients Inc. (5), (8), (11)

 

06/01/2023

 

Beverage, Food and Tobacco

 

 

7.57

%

 

3M L+525

 

 

 

5,458,750

 

 

 

5,411,313

 

 

 

5,404,163

 

PlayPower, Inc. (5)

 

05/08/2026

 

Consumer Products

 

 

7.60

%

 

3M L+550

 

 

 

4,189,500

 

 

 

4,148,451

 

 

 

4,184,263

 

PRA Events, Inc.

 

08/08/2022

 

Business Services

 

 

9.11

%

 

3M L+700

 

 

 

19,380,021

 

 

 

19,137,807

 

 

 

19,380,021

 

PRA Events, Inc. (Revolver) (7)

 

08/08/2022

 

Business Services

 

 

 

 

 

 

 

 

2,000,000

 

 

 

 

 

 

 

Provation Medical, Inc.

 

03/11/2024

 

Electronics

 

 

9.34

%

 

3M L+700

 

 

 

26,797,500

 

 

 

26,265,386

 

 

 

26,422,335

 

Quantum Spatial, Inc. (5)

 

09/04/24

 

Aerospace and Defense

 

 

7.32

%

 

1M L+525

 

 

 

15,000,000

 

 

 

14,777,156

 

 

 

14,775,000

 

Questex, LLC

 

09/09/2024

 

Media

 

 

7.11

%

 

3M L+500

 

 

 

22,275,000

 

 

 

21,892,186

 

 

 

22,052,250

 

Questex, LLC (Revolver) (7)

 

09/09/2024

 

Media

 

 

 

 

 

 

 

 

3,590,426

 

 

 

 

 

 

(35,904

)

Radius Aerospace, Inc. (5)

 

03/31/2025

 

Aerospace and Defense

 

 

7.85

%

 

3M L+575

 

 

 

8,528,572

 

 

 

8,408,418

 

 

 

8,464,608

 

Radius Aerospace, Inc. (Revolver)

 

03/31/2025

 

Aerospace and Defense

 

 

8.61

%

 

3M L+575

 

 

 

428,571

 

 

 

428,571

 

 

 

425,358

 

Radius Aerospace, Inc. (Revolver) (7)

 

03/31/2025

 

Aerospace and Defense

 

 

 

 

 

 

 

 

1,000,000

 

 

 

 

 

 

(7,498

)

Research Horizons, LLC

 

06/28/2022

 

Media

 

 

8.36

%

 

1M L+625

 

 

 

31,036,318

 

 

 

30,707,239

 

 

 

30,415,591

 

Research Now Group, Inc. and Survey

   Sampling International LLC (5)

 

12/20/2024

 

Business Services

 

 

7.75

%

 

3M L+550

 

 

 

9,924,242

 

 

 

9,782,674

 

 

 

9,939,724

 

Riverpoint Medical, LLC (5)

 

06/20/2025

 

Healthcare, Education and Childcare

 

 

7.39

%

 

3M L+500

 

 

 

1,995,000

 

 

 

1,975,739

 

 

 

1,984,626

 

Riverpoint Medical, LLC (Revolver) (7)

 

06/20/2025

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

363,636

 

 

 

 

 

 

(1,891

)

Schlesinger Global, Inc.

 

07/14/2025

 

Business Services

 

 

7.10

%

 

3M L+500

 

 

 

371,318

 

 

 

365,869

 

 

 

371,318

 

Schlesinger Global, Inc. (7)

 

07/14/2025

 

Business Services

 

 

 

 

 

 

 

 

81,514

 

 

 

 

 

 

 

Schlesinger Global, Inc. (Revolver)

 

07/14/2025

 

Business Services

 

 

7.82

%

 

3M L+500

 

 

 

13,586

 

 

 

13,586

 

 

 

13,586

 

Schlesinger Global, Inc. (Revolver) (7)

 

07/14/2025

 

Business Services

 

 

 

 

 

 

 

 

24,454

 

 

 

 

 

 

 

Signature Systems Holding Company (5)

 

05/03/2024

 

Chemicals, Plastics and Rubber

 

 

8.60

%

 

P+650

 

 

 

14,906,271

 

 

 

14,699,927

 

 

 

14,906,271

 

Signature Systems Holding Company (Revolver) (7)

 

05/03/2024

 

Chemicals, Plastics and Rubber

 

 

 

 

 

 

 

 

2,016,129

 

 

 

 

 

 

 

Solutionreach, Inc. (5)

 

01/17/2024

 

Communications

 

 

7.79

%

 

3M L+575

 

 

 

13,253,400

 

 

 

13,015,745

 

 

 

13,082,432

 

Solutionreach, Inc. (Revolver) (7)

 

01/17/2024

 

Communications

 

 

 

 

 

 

 

 

1,665,000

 

 

 

 

 

 

(21,478

)

Triad Manufacturing, Inc.

 

12/28/2020

 

Manufacturing / Basic Industries

 

 

13.29

%

 

3M L+1,125

 

 

 

21,589,610

 

 

 

21,447,963

 

 

 

21,373,714

 

TVC Enterprises, LLC (5)

 

01/18/2024

 

Transportation

 

 

7.55

%

 

1M L+550

 

 

 

32,960,373

 

 

 

32,378,623

 

 

 

32,960,373

 

TVC Enterprises, LLC (7)

 

01/18/2024

 

Transportation

 

 

 

 

 

 

 

 

4,053,227

 

 

 

 

 

 

 

TVC Enterprises, LLC (Revolver)

 

01/18/2024

 

Transportation

 

 

7.61

%

 

1M L+550

 

 

 

967,902

 

 

 

967,902

 

 

 

967,902

 

TVC Enterprises, LLC (Revolver) (7)

 

01/18/2024

 

Transportation

 

 

 

 

 

 

 

 

1,734,249

 

 

 

 

 

 

 

TWS Acquisition Corporation (5)

 

06/16/2025

 

Education

 

 

8.28

%

 

1M L+625

 

 

 

8,850,000

 

 

 

8,640,294

 

 

 

8,673,000

 

TWS Acquisition Corporation (Revolver)

 

06/16/2025

 

Education

 

 

8.28

%

 

1M L+625

 

 

 

505,714

 

 

 

505,714

 

 

 

495,600

 

TWS Acquisition Corporation (Revolver) (7)

 

06/16/2025

 

Education

 

 

 

 

 

 

 

 

1,137,857

 

 

 

 

 

 

(22,757

)

Tyto Athene, LLC

 

08/27/2024

 

Aerospace and Defense

 

 

7.80

%

 

1M L+575

 

 

 

6,203,031

 

 

 

6,175,004

 

 

 

6,018,180

 

UBEO, LLC (5)

 

04/03/2024

 

Printing and Publishing

 

 

6.78

%

 

3M L+450

 

 

 

2,300,400

 

 

 

2,279,160

 

 

 

2,277,396

 

US Med Acquisition, Inc.

 

08/13/2021

 

Healthcare, Education and Childcare

 

 

11.10

%

 

1M L+900

 

 

 

8,389,063

 

 

 

8,389,063

 

 

 

8,389,063

 

Vision Purchaser Corporation (5)

 

06/10/2025

 

Media

 

 

8.30

%

 

1M L+625

 

 

 

3,440,998

 

 

 

3,374,373

 

 

 

3,406,588

 

Walker Edison Furniture Company LLC

 

09/26/2024

 

Home and Office Furnishings

 

 

8.83

%

 

3M L+650

 

 

 

22,078,125

 

 

 

21,695,009

 

 

 

22,243,711

 

Whitney, Bradley & Brown, Inc. (5)

 

10/18/2022

 

Aerospace and Defense

 

 

9.55

%

 

1M L+750

 

 

 

10,204,866

 

 

 

10,061,266

 

 

 

10,204,866

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

583,068,514

 

 

 

585,776,415

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

12


 

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS – (Continued)

SEPTEMBER 30, 2019

 

Issuer Name

 

Maturity /

Expiration

 

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread Above

Index (4)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (3)

 

Second Lien Secured Debt—38.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condor Borrower, LLC

 

04/25/2025

 

 

Business Services

 

 

11.01

%

 

3M L+875

 

 

 

10,344,828

 

 

$

10,176,236

 

 

$

10,241,379

 

Confie Seguros Holding Co.

 

10/31/2025

 

 

Insurance

 

 

11.02

%

 

3M L+850

 

 

 

14,500,000

 

 

 

14,244,005

 

 

 

13,593,750

 

DecoPac, Inc.

 

03/31/2025

 

 

Beverage, Food and Tobacco

 

 

10.35

%

 

3M L+825

 

 

 

19,627,143

 

 

 

19,345,304

 

 

 

19,627,143

 

Halo Buyer, Inc.

 

07/06/2026

 

 

Consumer Products

 

 

10.29

%

 

1M L+825

 

 

 

32,500,000

 

 

 

32,034,317

 

 

 

32,012,500

 

Infogroup, Inc.

 

04/03/2024

 

 

Other Media

 

 

11.35

%

 

3M L+925

 

 

 

20,400,000

 

 

 

20,103,563

 

 

 

20,094,000

 

MailSouth, Inc.

 

10/23/2024

 

 

Printing and Publishing

 

 

12.00

%

 

12M L+925

 

 

 

36,828,975

 

 

 

36,207,203

 

 

 

35,724,106

 

MBS Holdings, Inc.

 

01/02/2024

 

 

Telecommunications

 

 

10.60

%

 

1M L+850

 

 

 

19,623,649

 

 

 

19,288,817

 

 

 

19,623,649

 

Shift4 Payments, LLC

 

11/28/2025

 

 

Financial Services

 

 

10.76

%

 

3M L+850

 

 

 

27,000,000

 

 

 

26,945,207

 

 

 

27,000,000

 

VT Topco, Inc.

 

08/24/2026

 

 

Business Services

 

 

9.10

%

 

3M L+700

 

 

 

10,000,000

 

 

 

9,953,252

 

 

 

9,950,000

 

Winter Park Intermediate, Inc.

 

04/06/2026

 

 

Auto Sector

 

 

10.54

%

 

1M L+850

 

 

 

35,300,000

 

 

 

34,742,373

 

 

 

35,300,000

 

Total Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

223,040,278

 

 

 

223,166,527

 

Subordinated Debt/Corporate Notes—10.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blackhawk Industrial Distribution, Inc.

 

03/17/2025

 

 

Distribution

 

 

12.00

%

 

 

 

 

 

13,773,533

 

 

 

13,529,203

 

 

 

13,773,533

 

 

 

 

 

 

 

 

 

 

(PIK 2.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cascade Environmental LLC

 

08/20/2021

 

 

Environmental Services

 

 

15.00

%

 

 

 

 

 

48,381,773

 

 

 

47,992,863

 

 

 

47,414,137

 

 

 

 

 

 

 

 

 

 

(PIK 15.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Subordinated Debt/Corporate Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61,522,066

 

 

 

61,187,670

 

Preferred Equity/Partnership Interests—0.5% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AH Holdings, Inc.

 

 

 

 

Healthcare, Education and Childcare

 

 

6.00

%

 

 

 

 

 

211

 

 

 

500,000

 

 

 

322,850

 

Condor Holdings Limited (8), (11)

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

556,000

 

 

 

64,277

 

 

 

71,556

 

Condor Top Holdco Limited (8), (11)

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

556,000

 

 

 

491,723

 

 

 

547,406

 

MeritDirect Holdings, LP

 

 

 

 

Media

 

 

 

 

 

 

 

 

540

 

 

 

540,000

 

 

 

563,657

 

NXOF Holdings, Inc. (Tyto Athene, LLC)

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

107

 

 

 

106,823

 

 

 

79,190

 

Signature CR Intermediate Holdco, Inc.

 

 

 

 

Chemicals, Plastics and Rubber

 

 

12.00

%

 

 

 

 

 

1,347

 

 

 

1,346,530

 

 

 

1,413,300

 

Total Preferred Equity/Partnership Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,049,353

 

 

 

2,997,959

 

Common Equity/Partnership Interests/Warrants—10.9% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affinion Group Holdings, Inc. (Warrants)

 

04/10/2024

 

 

Consumer Products

 

 

 

 

 

 

 

 

77,190

 

 

 

2,126,399

 

 

 

817,028

 

AG Investco LP (9)

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

714,652

 

 

 

714,652

 

 

 

714,652

 

AG Investco LP (7), (9)

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

285,348

 

 

 

 

 

 

 

AH Holdings, Inc. (Warrants)

 

03/23/2021

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

753

 

 

 

 

 

 

 

Altamira Intermediate Company II, Inc.

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

125,000

 

 

 

125,000

 

 

 

125,000

 

ASP LCG Holdings, Inc. (Warrants)

 

05/05/2026

 

 

Education

 

 

 

 

 

 

 

 

933

 

 

 

586,975

 

 

 

2,260,044

 

Autumn Games, LLC

 

 

 

 

Broadcasting and Entertainment

 

 

 

 

 

 

 

 

1,333,330

 

 

 

3,000,000

 

 

 

 

Cascade Environmental LLC (9)

 

 

 

 

Environmental Services

 

 

 

 

 

 

 

 

33,901

 

 

 

2,852,080

 

 

 

469,430

 

CI (Allied) Investment Holdings, LLC

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

120,962

 

 

 

1,243,217

 

 

 

1,260,269

 

(PRA Events, Inc.) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CI (Summit) Investment Holdings LLC

 

 

 

 

Buildings and Real Estate

 

 

 

 

 

 

 

 

114,646

 

 

 

1,171,206

 

 

 

1,504,587

 

(SFP Holdings, Inc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cowboy Parent LLC

 

 

 

 

Distribution

 

 

 

 

 

 

 

 

22,500

 

 

 

2,250,000

 

 

 

2,278,089

 

(Blackhawk Industrial Distribution, Inc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DecoPac Holdings Inc.

 

 

 

 

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

3,449

 

 

 

3,448,658

 

 

 

6,651,822

 

eCommission Holding Corporation (11)

 

 

 

 

Financial Services

 

 

 

 

 

 

 

 

80

 

 

 

1,004,625

 

 

 

1,481,743

 

Faraday Holdings, LLC

 

 

 

 

Building Materials

 

 

 

 

 

 

 

 

4,277

 

 

 

217,635

 

 

 

1,243,208

 

Gauge Schlesinger Coinvest, LLC

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

8

 

 

 

8,197

 

 

 

8,197

 

Gauge TVC Coinvest, LLC

 

 

 

 

Transportation

 

 

 

 

 

 

 

 

810,645

 

 

 

810,645

 

 

 

828,333

 

(TVC Enterprises, LLC)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Go Dawgs Capital III, LP

 

 

 

 

Building Materials

 

 

 

 

 

 

 

 

675,325

 

 

 

675,325

 

 

 

688,831

 

(American Insulated Glass, LLC) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Green Veracity Holdings, LP - Class A

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

15,000

 

 

 

1,500,000

 

 

 

2,367,746

 

(VT Topco, Inc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Infogroup Parent Holdings, Inc.

 

 

 

 

Other Media

 

 

 

 

 

 

 

 

181,495

 

 

 

2,040,000

 

 

 

2,119,257

 

ITC Rumba, LLC (Cano Health, LLC) (9)

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

252,176

 

 

 

2,993,665

 

 

 

7,110,734

 

JWC-WE Holdings, L.P.

 

 

 

 

Home and Office Furnishings

 

 

 

 

 

 

 

 

1,906,433

 

 

 

1,906,433

 

 

 

4,961,006

 

(Walker Edison Furniture Company LLC)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kadmon Holdings, Inc. (12)

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

252,014

 

 

 

2,265,639

 

 

 

635,075

 

Kentucky Racing Holdco, LLC (Warrants) (9)

 

 

 

 

 

Hotels, Motels, Inns and Gaming

 

 

 

 

 

 

 

 

161,252

 

 

 

 

 

 

307,888

 

Lariat ecoserv Co-Invest Holdings, LLC (9)

 

 

 

 

Environmental Services

 

 

 

 

 

 

 

 

363,656

 

 

 

363,656

 

 

 

451,341

 

MeritDirect Holdings, LP

 

 

 

 

Media

 

 

 

 

 

 

 

 

540

 

 

 

 

 

 

55,482

 

NXOF Holdings, Inc.

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

2,180

 

 

 

2,180

 

 

 

 

(Tyto Athene, LLC)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature CR Intermediate Holdco, Inc.

 

 

 

 

Chemicals, Plastics and Rubber

 

 

 

 

 

 

 

 

71

 

 

 

70,870

 

 

 

34,484

 

SSC Dominion Holdings, LLC

 

 

 

 

Electronics

 

 

 

 

 

 

 

 

1,500

 

 

 

1,500,000

 

 

 

1,620,000

 

Class A (US Dominion, Inc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SSC Dominion Holdings, LLC

 

 

 

 

Electronics

 

 

 

 

 

 

 

 

1,500

 

 

 

 

 

 

2,185,803

 

Class B (US Dominion, Inc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Well Services, Inc. - Class A (11), (12)

 

 

 

 

Oil and Gas

 

 

 

 

 

 

 

 

72,833

 

 

 

728,330

 

 

 

159,504

 

USWS Holdings, LLC (9), (11)

 

 

 

 

Oil and Gas

 

 

 

 

 

 

 

 

1,188,368

 

 

 

11,883,680

 

 

 

2,472,400

 

WBB Equity, LLC

 

 

 

 

Aerospace and Defense

 

 

 

 

 

 

 

 

628,571

 

 

 

628,571

 

 

 

2,193,714

 

(Whitney, Bradley & Brown, Inc.) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wheel Pros Holdings, L.P.

 

 

 

 

Auto Sector

 

 

 

 

 

 

 

 

3,778,704

 

 

 

4,450,000

 

 

 

14,655,027

 

(Winter Park Intermediate, Inc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ZS Juniper L.P.

 

 

 

 

Personal, Food and Miscellaneous Services

 

 

 

 

 

 

 

 

1,056

 

 

 

1,056,250

 

 

 

1,842,833

 

(Juniper Landscaping of Florida, LLC) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Common Equity/Partnership Interests/Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51,623,889

 

 

 

63,503,528

 

Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

922,304,099

 

 

 

936,632,099

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

13


 

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS – (Continued)

SEPTEMBER 30, 2019

 

 

Issuer Name

 

Maturity /

Expiration

 

 

Industry

 

Current

Coupon

 

 

Basis Point

Spread Above

Index (4)

 

 

Par /

Shares

 

 

Cost

 

 

Fair Value (3)

 

Investments in Non-Controlled, Affiliated Portfolio Companies—8.5% (1), (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Equity/Partnership Interests—8.1% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ETX Energy, LLC

 

 

 

 

Oil and Gas

 

 

 

 

 

 

 

 

61,732

 

 

$

6,173,200

 

 

$

22,717,376

 

MidOcean JF Holdings Corp.

 

 

 

 

Distribution

 

 

 

 

 

 

 

 

153,922

 

 

 

15,392,188

 

 

 

24,549,408

 

Total Preferred Equity/Partnership Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,565,388

 

 

 

47,266,784

 

Common Equity/Partnership Interests/Warrants—0.4% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ETX Energy, LLC (9)

 

 

 

 

Oil and Gas

 

 

 

 

 

 

 

 

1,658,389

 

 

 

29,711,576

 

 

 

 

ETX Energy Management Company, LLC

 

 

 

 

Oil and Gas

 

 

 

 

 

 

 

 

1,754,104

 

 

 

1,562,020

 

 

 

 

MidOcean JF Holdings Corp.

 

 

 

 

Distribution

 

 

 

 

 

 

 

 

65,933

 

 

 

24,761,831

 

 

 

2,082,554

 

Total Common Equity/Partnership Interests/Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

56,035,427

 

 

 

2,082,554

 

Total Investments in Non-Controlled, Affiliated Portfolio Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77,600,816

 

 

 

49,349,338

 

Investments in Controlled, Affiliated Portfolio Companies—40.1% (1), (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Secured Debt—18.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AKW Holdings Limited (8), (10), (11)

 

03/13/2024

 

 

Healthcare, Education and Childcare

 

 

6.54

%

 

3M L+575

 

 

£

28,000,000

 

 

 

39,051,600

 

 

 

34,504,400

 

RAM Energy LLC

 

07/01/2022

 

 

Energy and Utilities

 

 

8.00

%

 

 

 

 

 

35,000,000

 

 

 

35,000,000

 

 

 

35,000,000

 

RAM Energy LLC (Revolver)

 

07/01/2022

 

 

Energy and Utilities

 

 

8.00

%

 

 

 

 

 

40,000,000

 

 

 

40,000,000

 

 

 

40,000,000

 

Total First Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

114,051,600

 

 

 

109,504,400

 

Second Lien Secured Debt—7.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PT Network Intermediate Holdings, LLC

 

11/30/2024

 

 

Healthcare, Education and Childcare

 

 

12.30

%

 

3M L+1,000

 

 

 

46,610,223

 

 

 

46,163,881

 

 

 

46,144,120

 

 

 

 

 

 

 

 

 

 

(PIK 12.30

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Second Lien Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,163,881

 

 

 

46,144,120

 

Preferred Equity—1.6% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CI (PTN) Investment Holdings II, LLC

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

36,450

 

 

 

546,750

 

 

 

11,251

 

(PT Network, LLC) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PT Network Intermediate Holdings, LLC (9)

 

 

 

 

 

Healthcare, Education and Childcare

 

 

11.94

%

 

3M L+1,000

 

 

 

833

 

 

 

8,975,000

 

 

 

9,264,347

 

Total Preferred Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,521,750

 

 

 

9,275,598

 

Common Equity—11.8% (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AKW Holdings Limited (8), (10), (11)

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

£

950

 

 

 

132,497

 

 

 

2,554,804

 

CI (PTN) Investment Holdings II, LLC

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

333,333

 

 

 

5,000,000

 

 

 

 

(PT Network, LLC) (9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PT Network Intermediate Holdings, LLC (9)

 

 

 

 

 

Healthcare, Education and Childcare

 

 

 

 

 

 

 

 

621

 

 

 

5,983,333

 

 

 

17,014,720

 

RAM Energy Holdings LLC

 

 

 

 

Energy and Utilities

 

 

 

 

 

 

 

 

84,747

 

 

 

76,264,739

 

 

 

48,957,717

 

Total Common Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

87,380,569

 

 

 

68,527,241

 

Total Investments in Controlled, Affiliated Portfolio Companies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

257,117,800

 

 

 

233,451,359

 

Total Investments—209.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,257,022,715

 

 

 

1,219,432,796

 

Cash and Cash Equivalents—10.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock Federal FD Institutional 30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47,640,291

 

 

 

47,640,292

 

BNY Mellon Cash Reserve and Cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,906,147

 

 

 

11,875,944

 

Total Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

59,546,438

 

 

 

59,516,236

 

Total Investments and Cash Equivalents—219.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,316,569,153

 

 

$

1,278,949,032

 

Liabilities in Excess of Other Assets—(119.8%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(697,043,364

)

Net Assets—100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

581,905,668

 

(1)

The provisions of the 1940 Act classify investments based on the level of control that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when we own 25% or less of the portfolio company’s voting securities and “controlled” when we own more than 25% of the portfolio company’s voting securities.

(2)

The provisions of the 1940 Act classify investments further based on the level of ownership that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when we own less than 5% of a portfolio company’s voting securities and “affiliated” when we own 5% or more of a portfolio company’s voting securities (See Note 6).

(3)

Valued based on our accounting policy (See Note 2).

(4)

Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the LIBOR “L” or Prime rate, or “P”. The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 90-day or 180-day LIBOR rate (1M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread includes PIK interest and other fee rates, if any.

(5)

The securities, or a portion thereof, are pledged as collateral under the BNP Credit Facility and held through Funding I.

(6)

Non-income producing securities.

(7)

Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.

(8)

Non-U.S. company or principal place of business outside the United States.

(9)

Investment is held through our Taxable Subsidiaries (See Note 1).

(10)

Par / shares amount is denominated in British Pounds (£) as denoted.

(11)

The investment is treated as a non-qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2019, qualifying assets represent 96% of the Company’s total assets and non-qualifying assets represent 4% of the Company’s total assets.

(12)

The security was not valued using significant unobservable inputs. The value of all other securities was determined using significant unobservable inputs (See Note 5).

 

 

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

14


 

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(Unaudited)

 

1. ORGANIZATION

 

PennantPark Investment Corporation was organized as a Maryland corporation in January 2007. We are a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. Our investment objectives are to generate both current income and capital appreciation while seeking to preserve capital through debt and equity investments. We invest primarily in U.S. middle-market companies in the form of first lien secured debt, second lien secured debt and subordinated debt and, to a lesser extent, equity investments. On April 24, 2007, we closed our initial public offering and our common stock trades on the Nasdaq Global Select Market under the symbol “PNNT.”

 

We have entered into an investment management agreement, or the Investment Management Agreement, with the Investment Adviser, an external adviser that manages our day-to-day operations. PennantPark Investment, through the Investment Adviser, manages the day-to-day operations of and provides investment advisory services to SBIC II under a separate investment management agreement. We have also entered into an administration agreement, or the Administration Agreement, with the Administrator, which provides the administrative services necessary for us to operate. PennantPark Investment, through the Administrator, also provides similar services to our SBIC Fund under a separate administration agreement. See Note 3.

 

SBIC II, our wholly owned subsidiary, was organized as a Delaware limited partnership in 2012. SBIC II received a license from the SBA to operate as a SBIC, under Section 301(c) of the 1958 Act. SBIC II’s objectives are to generate both current income and capital appreciation through debt and equity investments generally by investing with us in SBA-eligible businesses that meet the investment selection criteria used by PennantPark Investment.

 

Funding I, our wholly owned subsidiary and a special purpose entity, was organized in Delaware as a limited liability company in February 2019. We formed Funding I in order to establish the BNP Credit Facility. The Investment Adviser serves as the servicer to Funding I and has irrevocably directed that the management fee owed to it with respect to such services be paid to us so long as the Investment Adviser remains the servicer. This arrangement does not increase our consolidated management fee. The BNP Credit Facility allows Funding I to borrow up to $250 million at LIBOR plus 260 basis points during the reinvestment period. The BNP Credit Facility is secured by all of the assets held by Funding I. See Note 10.

 

We have formed and expect to continue to form certain Taxable Subsidiaries, which are subject to tax as corporations. These Taxable Subsidiaries allow us to hold equity securities of certain portfolio companies treated as pass-through entities for U.S. federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.

 

We are operated by a person who has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a commodity pool operator under the Commodity Exchange Act.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

The preparation of our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Changes in the economic and regulatory environment, financial markets, the credit worthiness of our portfolio companies, the global outbreak of the novel coronavirus (“COVID-19”) during the first quarter of 2020, and any other parameters used in determining these estimates could cause actual results to differ from these estimates and assumptions. We may reclassify certain prior period amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions. References to the Financial Accounting Standards Board’s, or FASB’s, Accounting Standards Codification, as amended, or ASC, serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued.

 

Our Consolidated Financial Statements are prepared in accordance with GAAP, consistent with ASC Topic 946, Financial Services – Investment Companies, and pursuant to the requirements for reporting on Form 10-K/Q and Articles 6, 10 and 12 of Regulation S-X, as appropriate. In accordance with Article 6-09 of Regulation S-X, we have provided a Consolidated Statement of Changes in Net Assets in lieu of a Consolidated Statement of Changes in Stockholders’ Equity.

 

Our significant accounting policies consistently applied are as follows:

 

 

(a)

Investment Valuations

 

We expect that there may not be readily available market values for many of the investments which are or will be in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy and a consistently applied valuation process, as described in this Report. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and the difference may be material. See Note 5.

 

Our portfolio generally consists of illiquid securities, including debt and equity investments. With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, our board of directors undertakes a multi-step valuation process each quarter, as described below:

 

 

(1)

Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Investment Adviser responsible for the portfolio investment;

 

 

(2)

Preliminary valuation conclusions are then documented and discussed with the management of the Investment Adviser;

 

 

(3)

Our board of directors also engages independent valuation firms to conduct independent appraisals of our investments for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment. The independent valuation firms review management’s preliminary valuations in light of their own independent assessment and also in light of any market quotations obtained from an independent pricing service, broker, dealer or market maker;

 

 

(4)

The audit committee of our board of directors reviews the preliminary valuations of the Investment Adviser and those of the independent valuation firms on a quarterly basis, periodically assesses the valuation methodologies of the independent valuation firms, and responds to and supplements the valuation recommendations of the independent valuation firms to reflect any comments; and

 

15

 


PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2020

(Unaudited)

 

 

(5)

Our board of directors discusses these valuations and determines the fair value of each investment in our portfolio in good faith, based on the input of our Investment Adviser, the respective independent valuation firms and the audit committee.

 

Our board of directors generally uses market quotations to assess the value of our investments for which market quotations are readily available. We obtain these market values from independent pricing services or at the bid prices obtained from at least two brokers or dealers, if available, or otherwise from a principal market maker or a primary market dealer. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available.

 

 

(b)

Security Transactions, Revenue Recognition, and Realized/Unrealized Gains or Losses

 

Security transactions are recorded on a trade-date basis. We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized, but considering prepayment penalties. Net change in unrealized appreciation or depreciation reflects, as applicable, the change in the fair values of our portfolio investments, the Credit Facilities and, prior to their redemption, the 2019 Notes during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

 

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt investments with contractual PIK interest, which represents interest accrued and added to the loan balance that generally becomes due at maturity, we will generally not accrue PIK interest when the portfolio company valuation indicates that such PIK interest is not collectable. We do not accrue as a receivable interest on loans and debt investments if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount, or OID, market discount or premium and deferred financing costs on liabilities, which we do not fair value, are capitalized and then accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. We record prepayment penalties earned on loans and debt investments as income. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and amendment fees, and are recorded as other investment income when earned.

 

Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or if there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current. As of June 30, 2020, we had one portfolio company on non-accrual, representing 2.5% and 2.3% of our overall portfolio on a cost and fair value basis, respectively. As of September 30, 2019, we had no portfolio companies on non-accrual.

 

 

(c)

Income Taxes

 

We have complied with the requirements of Subchapter M of the Code and have qualified to be treated as a RIC for federal income tax purposes. In this regard, we account for income taxes using the asset and liability method prescribed by ASC Topic 740, Income Taxes, or ASC 740. Under this method, income taxes are provided for amounts currently payable and for amounts deferred as tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Based upon our qualification and election to be treated as a RIC, we do not anticipate incurring any material federal income taxes. However, we may choose to retain a portion of our calendar year income, which may result in the imposition of a U.S. federal excise tax. Additionally, certain of the Company’s consolidated subsidiaries are subject to U.S. federal and state income taxes. For the three and nine months ended June 30, 2020, we recorded a provision for taxes of $0.3 million (approximately one-half of which was for U.S. federal excise tax and the remainder for U.S. federal and state income taxes and franchise taxes related to the Taxable Subsidiaries) and $0.9 million (approximately one-half of which was for U.S. federal excise tax and the remainder for U.S. federal and state income taxes and franchise taxes related to the Taxable Subsidiaries), respectively. For both the three and nine months ended June 30, 2019, we recorded a provision for taxes of $0.3 million (which consisted of $0.2 million for U.S. federal excise tax and the remainder for U.S. federal and state income taxes and franchise taxes related to the Taxable Subsidiaries) and $0.9 million (which consisted of $0.6 million for U.S. federal excise tax and the remainder for U.S. federal and state income taxes and franchise taxes related to the Taxable Subsidiaries), respectively.

 

We recognize the effect of a tax position in our Consolidated Financial Statements in accordance with ASC 740 when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by the applicable tax authority. Tax positions not considered to satisfy the “more-likely-than-not” threshold would be recorded as a tax expense or benefit. Penalties or interest, if applicable, that may be assessed relating to income taxes would be classified as other operating expenses in the financial statements. There were no tax accruals relating to uncertain tax positions and no amounts accrued for any related interest or penalties with respect to the periods presented herein. The Company’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof. Although the Company files both U.S. federal and state income tax returns, the Company’s major tax jurisdiction is federal.

Because U.S. federal income tax regulations differ from GAAP, distributions characterized in accordance with tax regulations may differ from net investment income and net realized gains recognized for financial reporting purposes. Differences between tax regulations and GAAP may be permanent or temporary. Permanent differences are reclassified among capital accounts in the Consolidated Financial Statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

 

 

(d)

Distributions and Capital Transactions

 

Distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid, if any, as a distribution is determined by the board of directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are distributed at least annually. The tax attributes for distributions will generally include ordinary income and capital gains, but may also include certain tax-qualified dividends and/or a return of capital.

 

Capital transactions, in connection with our dividend reinvestment plan or through offerings of our common stock, are recorded when issued and offering costs are charged as a reduction of capital upon issuance of our common stock.

 

 

(e)

Foreign Currency Translation

 

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

 

 

1.

Fair value of investment securities, other assets and liabilities – at the exchange rates prevailing at the end of the applicable period; and

 

16


PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2020

(Unaudited)

 

 

2.

Purchases and sales of investment securities, income and expenses – at the exchange rates prevailing on the respective dates of such transactions.

 

Although net assets and fair values are presented based on the applicable foreign exchange rates described above, we do not isolate that portion of the results of operations due to changes in foreign exchange rates on investments, other assets and debt from the fluctuations arising from changes in fair values of investments and liabilities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments and liabilities.

 

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

 

 

(f)

Consolidation

 

As permitted under Regulation S-X and as explained by ASC paragraph 946-810-45-3, PennantPark Investment will generally not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to us. Accordingly, we have consolidated the results of our SBIC Fund and our Taxable Subsidiaries in our Consolidated Financial Statements.

 

 

(g)

Asset Transfers and Servicing

 

Asset transfers that do not meet ASC Topic 860, Transfers and Servicing, requirements for sale accounting treatment are reflected in the Consolidated Statements of Assets and Liabilities and the Consolidated Schedules of Investments as investments. The creditors of Funding I have received a security interest in all its assets and such assets are not intended to be available to the creditors of PennantPark Investment or any of its affiliates.

 

3. AGREEMENTS AND RELATED PARTY TRANSACTIONS

 

The Investment Management Agreement with the Investment Adviser was reapproved by our board of directors, including a majority of our directors who are not interested persons of us or the Investment Adviser, in February 2020. Under the Investment Management Agreement, the Investment Adviser, subject to the overall supervision of our board of directors, manages the day-to-day operations of and provides investment advisory services to us. The Investment Adviser serves as the servicer to Funding I and has irrevocably directed that the management fee owed to it with respect to such services be paid to the Company so long as the Investment Adviser remains the servicer. Our SBIC Fund’s investment management agreement does not affect the management or incentive fees that we pay to the Investment Adviser on a consolidated basis. For providing these services, the Investment Adviser receives a fee from us, consisting of two components— a base management fee and an incentive fee or, collectively, Management Fees.

 

The base management fee is calculated at an annual rate of 1.50% of our “average adjusted gross assets,” which equals our gross assets (exclusive of U.S. Treasury Bills, temporary draws under any credit facility, cash and cash equivalents, repurchase agreements or other balance sheet transactions undertaken at the end of a fiscal quarter for purposes of preserving investment flexibility for the next quarter and unfunded commitments, if any) and is payable quarterly in arrears. In addition, on November 13, 2018, in connection with our board of directors’ approval of the application of the modified asset coverage requirements under the 1940 Act to the Company, our board of directors also approved an amendment to the Investment Advisory Agreement reducing the Investment Adviser’s annual base management fee from 1.50% to 1.00% on gross assets that exceed 200% of the Company’s total net assets as of the immediately preceding quarter-end. This amendment became effective on February 5, 2019 with the amendment and restatement of the Investment Management Agreement on April 12, 2019. The base management fee is calculated based on the average adjusted gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. For example, if we sold shares on the 45th day of a quarter and did not use the proceeds from the sale to repay outstanding indebtedness, our gross assets for such quarter would give effect to the net proceeds of the issuance for only 45 days of the quarter during which the additional shares were outstanding. For the three and nine months ended June 30, 2020, the Investment Adviser earned a base management fee of $4.6 million and $14.3 million, respectively, from us. For the three and nine months ended June 30, 2019, the Investment Adviser earned a base management fee of $4.7 million and $13.6 million, respectively, from us.

 

The incentive fee has two parts, as follows:

One part is calculated and payable quarterly in arrears based on our 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 amendment, commitment, origination, prepayment penalties, structuring, diligence and consulting fees or other fees received from portfolio companies, accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement and any interest expense or amendment fees under any credit facility and distribution paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income 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 percentage of the value of our net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7.00% annualized). We pay the Investment Adviser an incentive fee with respect to our Pre- Incentive Fee Net Investment Income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 1.75%, (2) 100% of our Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than 2.1212% in any calendar quarter (8.4848% annualized), and (3) 17.5% of the amount of our Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.1212% in any calendar quarter. These calculations are pro-rated for any share issuances or repurchases during the relevant quarter, if applicable.

Beginning April 1, 2020 and through September 30, 2020, the Investment Adviser has voluntarily agreed, in consultation with our board of directors, to irrevocably waive the performance-based incentive fees. For the three and nine months ended June 30, 2020, the Investment Adviser earned zero (after waiver of $1.9 million) and $2.7 million (after waiver of $1.9 million), respectively, in incentive fees on net investment income from us. For the three and nine months ended June 30, 2019, the Investment Adviser earned $2.5 million and $5.1 million, respectively, in incentive fees on net investment income from us.

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 Management Agreement, as of the termination date) and equals 17.5% of our realized capital gains, if any, on a cumulative basis from inception 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. For each of the three and nine months ended June 30, 2020 and 2019, the Investment Adviser did not accrue an incentive fee on capital gains as calculated under the Investment Management Agreement (as described above).

Under GAAP, we are required to accrue a capital gains incentive fee based upon net realized capital gains and net unrealized capital appreciation and depreciation on investments held at the end of each period. In calculating the capital gains incentive fee accrual, we considered the cumulative aggregate unrealized capital appreciation in the

 

17


PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2020

(Unaudited)

 

calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Investment Management Agreement. This accrual is calculated using the aggregate cumulative realized capital gains and losses and cumulative unrealized capital appreciation or depreciation. If such amount is positive at the end of a period, then we record a capital gains incentive fee equal to 17.5% of such amount, less the aggregate amount of actual capital gains related to incentive fees paid in all prior years. If such amount is negative, then there is no accrual for such year. There can be no assurance that such unrealized capital appreciation will be realized in the future. For each of the three and nine months ended June 30, 2020 and 2019, the Investment Adviser did not accrue an incentive fee on capital gains as calculated under GAAP.

 

The Administration Agreement with the Administrator was reapproved by our board of directors, including a majority of our directors who are not interested persons of us, in February 2020. Under the Administration Agreement, the Administrator provides administrative services and office facilities to us. The Administrator provides similar services to our SBIC Fund under its administration agreement with PennantPark Investment. For providing these services, facilities and personnel, we have agreed to reimburse the Administrator for its allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer and their respective staffs. The Administrator also offers, on our behalf, significant managerial assistance to portfolio companies to which we are required to offer such assistance. Reimbursement for certain of these costs is included in administrative services expenses in the Consolidated Statements of Operations. For the three and nine months ended June 30, 2020, we reimbursed the Investment Adviser approximately $0.3 million and $1.2 million, respectively, including expenses the Investment Adviser incurred on behalf of the Administrator, for services described above. For the three and nine months ended June 30, 2019, we reimbursed the Investment Adviser approximately $0.4 million and $1.5 million, respectively, including expenses the Investment Adviser incurred on behalf of the Administrator, for services described above.

 

For the three and nine months ended June 30, 2020, the Company purchased zero and $15.0 million in total investments from an affiliated fund managed by our Investment Adviser in accordance with, and pursuant to, procedures adopted under Rule 17a-7 of the 1940 Act, respectively. There were no transactions subject to Rule 17a-7 under the 1940 Act during both the three and nine months ended June 30, 2019.

 

4. INVESTMENTS

 

Purchases of investments, including PIK interest, for the three and nine months ended June 30, 2020 totaled $15.3 million and $304.0 million, respectively. For the same periods in the prior year, purchases of investments, including PIK interest, totaled $120.5 million and $503.6 million, respectively. Sales and repayments of investments for the three and nine months ended June 30, 2020 totaled $66.5 million and $114.1 million, respectively. For the same periods in the prior year, sales and repayments of investments totaled $84.7 million and $325.6 million, respectively.

 

Investments and cash and cash equivalents consisted of the following:

 

 

 

June 30, 2020

 

 

September 30, 2019

 

Investment Classification

 

Cost

 

 

Fair Value

 

 

Cost

 

 

Fair Value

 

First lien

 

$

813,437,134

 

 

$

789,383,250

 

 

$

697,120,114

 

 

$

695,280,815

 

Second lien

 

 

246,974,219

 

 

 

237,479,558

 

 

 

269,204,159

 

 

 

269,310,647

 

Subordinated debt / corporate notes

 

 

67,540,510

 

 

 

65,752,449

 

 

 

61,522,066

 

 

 

61,187,670

 

Equity

 

 

310,496,336

 

 

 

240,733,604

 

 

 

229,176,376

 

 

 

193,653,664

 

Total investments

 

 

1,438,448,199

 

 

 

1,333,348,861

 

 

 

1,257,022,715

 

 

 

1,219,432,796

 

Cash and cash equivalents

 

 

51,620,212

 

 

 

51,565,044

 

 

 

59,546,438

 

 

 

59,516,236

 

Total investments and cash and cash equivalents

 

$

1,490,068,411

 

 

$

1,384,913,905

 

 

$

1,316,569,153

 

 

$

1,278,949,032

 

 

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets (excluding cash and cash equivalents) in such industries as of:

 

Industry Classification

 

June 30, 2020

 

 

 

September 30, 2019

 

 

Healthcare, Education and Childcare

 

 

16

 

%

 

 

16

 

%

Energy and Utilities

 

 

7

 

 

 

 

10

 

 

Media

 

 

7

 

 

 

 

8

 

 

Consumer Products

 

 

6

 

 

 

 

6

 

 

Business Services

 

 

5

 

 

 

 

4

 

 

Aerospace and Defense

 

 

4

 

 

 

 

4

 

 

Auto Sector

 

 

4

 

 

 

 

4

 

 

Building Materials

 

 

4

 

 

 

 

5

 

 

Electronics

 

 

4

 

 

 

 

2

 

 

Environmental Services

 

 

4

 

 

 

 

4

 

 

Hotels, Motels, Inns and Gaming

 

 

4

 

 

 

 

2

 

 

Printing and Publishing

 

 

4

 

 

 

 

4

 

 

Transportation

 

 

4

 

 

 

 

3

 

 

Chemicals, Plastics and Rubber

 

 

3

 

 

 

 

4

 

 

Distribution

 

 

3

 

 

 

 

3

 

 

Education

 

 

3

 

 

 

 

1

 

 

Personal, Food and Miscellaneous Services

 

 

3

 

 

 

 

3

 

 

Beverage, Food and Tobacco

 

 

2

 

 

 

 

3

 

 

Home and Office Furnishings

 

 

2

 

 

 

 

2

 

 

Insurance

 

 

2

 

 

 

 

1

 

 

Other Media

 

 

2

 

 

 

 

2

 

 

Telecommunications

 

 

2

 

 

 

 

2

 

 

Manufacturing / Basic Industries

 

 

1

 

 

 

 

3

 

 

Other

 

 

4

 

 

 

 

4

 

 

Total

 

 

100

 

%

 

100

 

%

 

18


PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2020

(Unaudited)

 

 

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Fair value, as defined under ASC 820, Fair Value Measurement, or ASC 820, is the price that we would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment or liability. ASC 820 emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing an asset or liability based on market data obtained from sources independent of us. Unobservable inputs reflect the assumptions market participants would use in pricing an asset or liability based on the best information available to us on the reporting period date.

 

ASC 820 classifies the inputs used to measure these fair values into the following hierarchies:

 

 

Level 1:

Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.

 

 

Level 2:

Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.

 

 

Level 3:

Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.

 

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments, our Credit Facilities and our SBA debentures are classified as Level 3. Our 2019 Notes were, and our 2024 Notes are, classified as Level 2, as they are financial instruments with readily observable market inputs. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.

 

The inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data is available, such information may be the result of consensus pricing information, disorderly transactions or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence were available. Corroborating evidence that would result in classifying these non-binding broker/dealer bids as a Level 2 asset includes observable orderly market-based transactions for the same or similar assets or other relevant observable market-based inputs that may be used in pricing an asset.

 

Our investments are generally structured as debt and equity investments in the form of first lien secured debt, second lien secured debt, subordinated debt and equity investments. The transaction price, excluding transaction costs, is typically the best estimate of fair value at inception. Ongoing reviews by our Investment Adviser and independent valuation firms are based on an assessment of each underlying investment, incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information including comparable transactions, performance multiples and yields, among other factors. These non-public investments valued using unobservable inputs are included in Level 3 of the fair value hierarchy.

 

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in our ability to observe valuation inputs may result in a reclassification for certain financial assets or liabilities.

 

In addition to using the above inputs to value cash equivalents, investments, our 2019 Notes, our SBA debentures, our 2024 Notes and our Credit Facilities, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value. See Note 2.

 

As outlined in the table below, some of our Level 3 investments using a market approach valuation technique are valued using the average of the bids from brokers or dealers. The bids include a disclaimer, may not have corroborating evidence, may be the result of a disorderly transaction and may be the result of consensus pricing. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such bids do not reflect the fair value of an investment, it may independently value such investment by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available.

 

The remainder of our investment portfolio and our long-term Credit Facilities are valued using a market comparable or an enterprise market value technique. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the pricing indicated by the external event, excluding transaction costs, is used to corroborate the valuation. When using earnings multiples to value a portfolio company, the multiple used requires the use of judgment and estimates in determining how a market participant would price such an asset. These non-public investments using unobservable inputs are included in Level 3 of the fair value hierarchy. Generally, the sensitivity of unobservable inputs or combination of inputs such as industry comparable companies, market outlook, consistency, discount rates and reliability of earnings and prospects for growth, or lack thereof, affects the multiple used in pricing an investment. As a result, any change in any one of those factors may have a significant impact on the valuation of an investment. Generally, an increase in a market yield will result in a decrease in the valuation of a debt investment, while a decrease in a market yield will have the opposite effect. Generally, an increase in an earnings before interest, taxes, depreciation and amortization, or EBITDA, multiple will result in an increase in the valuation of an investment, while a decrease in an EBITDA multiple will have the opposite effect.

 

 

19


PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2020

(Unaudited)

 

Our Level 3 valuation techniques, unobservable inputs and ranges were categorized as follows for ASC 820 purposes:

 

Asset Category

 

Fair Value at June 30, 2020

 

 

Valuation Technique

 

Unobservable Input

 

Range of Input

(Weighted Average) (1)

First lien

 

$

68,686,617

 

 

Market Comparable

 

Broker/Dealer bids or quotes

 

N/A

First lien

 

 

720,696,633

 

 

Market Comparable

 

Market Yield

 

6.4% – 14.5% (9.0%)

Second lien

 

 

237,479,558

 

 

Market Comparable

 

Market Yield

 

8.8% – 16.9% (11.5%)

Subordinated debt / corporate notes

 

 

65,752,449

 

 

Market Comparable

 

Market Yield

 

13.1% – 18.0% (17.0%)

Equity

 

 

238,828,457

 

 

Enterprise Market Value

 

EBITDA multiple

 

4.2x – 14.6x (12.3x)

Total Level 3 investments

 

$

1,331,443,714

 

 

 

 

 

 

 

Long-Term Credit Facilities

 

$

634,089,103

 

 

Market Comparable

 

Market Yield

 

3.6% – 3.9 % (3.8%)

 

Asset Category

 

Fair Value at

September 30, 2019

 

 

Valuation Technique

 

Unobservable Input

 

Range of Input

(Weighted Average) (1)

First lien

 

$

30,300,736

 

 

Market Comparable

 

Broker/Dealer bids or quotes

 

N/A

Second lien

 

 

55,556,250

 

 

Market Comparable

 

Broker/Dealer bids or quotes

 

N/A

First lien

 

 

664,980,079

 

 

Market Comparable

 

Market Yield

 

6.7% – 15.8% (8.7%)

Second lien

 

 

213,754,397

 

 

Market Comparable

 

Market Yield

 

10.3% – 12.7% (11.4%)

Subordinated debt / corporate notes

 

 

61,187,670

 

 

Market Comparable

 

Market Yield

 

12.0% – 16.1% (15.2%)

Equity

 

 

192,859,084

 

 

Enterprise Market Value

 

EBITDA multiple

 

0.6x – 17.3x (12.1x)

Total Level 3 investments

 

$

1,218,638,216

 

 

 

 

 

 

 

Long-Term Credit Facilities

 

$

465,390,214

 

 

Market Comparable

 

Market Yield

 

3.9% – 4.2% (4.1%)

 

(1)

The weighted averages disclosed in the table above were weighted by their relative fair value.

 

Our investments, cash and cash equivalents, Credit Facilities, SBA debentures and 2024 Notes were categorized as follows in the fair value hierarchy for ASC 820 purposes:

 

 

 

Fair Value at June 30, 2020

 

Description

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Debt investments

 

$

1,092,615,257

 

 

$

 

 

$

 

 

 

1,092,615,257

 

Equity investments

 

 

240,733,604

 

 

 

 

 

 

1,905,147

 

 

 

238,828,457

 

Total investments

 

 

1,333,348,861

 

 

 

 

 

 

1,905,147

 

 

 

1,331,443,714

 

Cash and cash equivalents

 

 

51,565,044

 

 

 

51,565,044

 

 

 

 

 

 

 

Total investments and cash and cash equivalents

 

$

1,384,913,905

 

 

$

51,565,044

 

 

$

1,905,147

 

 

$

1,331,443,714

 

BNP Credit Facility

 

$

236,670,000

 

 

$

 

 

$

 

 

$

236,670,000

 

Truist Credit Facility

 

 

397,419,103

 

 

 

 

 

 

 

 

 

397,419,103

 

SBA Debentures(1)

 

 

130,383,825

 

 

 

 

 

 

 

 

 

130,383,825

 

2024 Notes(1)

 

 

77,625,000

 

 

 

 

 

 

77,625,000

 

 

 

 

Total debt

 

$

842,097,928

 

 

$

 

 

$

77,625,000

 

 

$

764,472,928

 

 

 

 

Fair Value at September 30, 2019

 

Description

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Debt investments

 

$

1,025,779,132

 

 

$

 

 

$

 

 

$

1,025,779,132

 

Equity investments

 

 

193,653,664

 

 

 

794,580

 

 

 

 

 

 

192,859,084

 

Total investments

 

 

1,219,432,796

 

 

 

794,580

 

 

 

 

 

 

1,218,638,216

 

Cash and cash equivalents

 

 

59,516,236

 

 

 

59,516,236

 

 

 

 

 

 

 

Total investments and cash and cash equivalents

 

$

1,278,949,032

 

 

$

60,310,816

 

 

$

 

 

$

1,218,638,216

 

BNP Credit Facility

 

$

170,145,000

 

 

$

 

 

$

 

 

$

170,145,000

 

Truist Credit Facility

 

 

295,245,214

 

 

 

 

 

 

 

 

 

295,245,214

 

SBA Debentures(1)

 

 

146,111,055

 

 

 

 

 

 

 

 

 

146,111,055

 

2024 Notes(1)

 

 

72,256,607

 

 

 

 

 

 

72,256,607

 

 

 

 

Total debt

 

$

683,757,876

 

 

$

 

 

$

72,256,607

 

 

$

611,501,269

 

 

(1)

We elected not to apply the fair-value option allowed by ASC 825-10 to the SBA debentures or the 2024 Notes and thus the balance reported in the Consolidated Statement of Assets and Liabilities represents the carrying value. As of June 30, 2020 and September 30, 2019, the carrying value of the SBA debentures approximates the fair value. As of September 30, 2019, the carrying value of the 2024 Notes approximates the fair value.

 

 

20


PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2020

(Unaudited)

 

The tables below show a reconciliation of the beginning and ending balances for fair valued investments measured using significant unobservable inputs (Level 3):

 

 

 

Nine Months Ended June 30, 2020

 

Description

 

Debt

investments

 

 

Equity

investments

 

 

Totals

 

Beginning Balance

 

$

1,025,779,134

 

 

$

192,859,082

 

 

 

1,218,638,216

 

Net realized gain (loss)

 

 

1,410,495

 

 

 

(12,127,225

)

 

 

(10,716,730

)

Net change in unrealized depreciation

 

 

(33,269,398

)

 

 

(33,057,028

)

 

 

(66,326,426

)

Purchases, PIK interest, net discount accretion and non-cash exchanges

 

 

212,317,320

 

 

 

91,616,533

 

 

 

303,933,853

 

Sales, repayments and non-cash exchanges

 

 

(113,622,294

)

 

 

(462,905

)

 

 

(114,085,199

)

Transfers in/out of Level 3

 

 

 

 

 

 

 

 

 

Ending Balance

 

$

1,092,615,257

 

 

$

238,828,457

 

 

$

1,331,443,714

 

Net change in unrealized depreciation reported within the net change in

   unrealized depreciation on investments in our Consolidated Statements of Operations

   attributable to our Level 3 assets still held at the reporting date.

 

$

(33,179,844

)

 

$

(34,796,749

)

 

$

(67,976,593

)

 

 

 

Nine Months Ended June 30, 2019

 

Description

 

Debt

investments

 

 

Equity

investments

 

 

Totals

 

Beginning Balance

 

$

970,587,703

 

 

$

160,656,044

 

 

$

1,131,243,747

 

Net realized loss

 

 

(1,960,965

)

 

 

(88,205,089

)

 

 

(90,166,054

)

Net unrealized (depreciation) appreciation

 

 

(11,140,066

)

 

 

64,713,351

 

 

 

53,573,285

 

Purchases, PIK interest, net discount accretion and non-cash exchanges

 

 

455,226,215

 

 

 

49,614,789

 

 

 

504,841,004

 

Sales, repayments and non-cash exchanges

 

 

(316,284,666

)

 

 

(9,241,606

)

 

 

(325,526,272

)

Transfers in/out of Level 3

 

 

 

 

 

 

 

 

 

Ending Balance

 

$

1,096,428,221

 

 

$

177,537,489

 

 

$

1,273,965,710

 

Net change in unrealized (depreciation) appreciation reported within the net change in

   unrealized depreciation on investments in our Consolidated Statements of Operations

   attributable to our Level 3 assets still held at the reporting date.

 

$

(10,742,125

)

 

$

79,625,708

 

 

$

68,883,583

 

 

The table below shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significant unobservable inputs (Level 3):

 

 

 

Nine Months Ended June 30,

 

Credit Facilities

 

2020

 

 

2019

 

Beginning Balance (cost – $472,636,000 and $80,520,000, respectively)

 

$

465,390,214

 

 

$

77,645,830

 

Net change in unrealized depreciation included in earnings

 

 

(21,301,111

)

 

 

(8,591,639

)

Borrowings (1)

 

 

279,000,000

 

 

 

821,000,000

 

Repayments (1)

 

 

(89,000,000

)

 

 

(352,884,000

)

Transfers in and/or out of Level 3

 

 

 

 

 

 

Ending Balance (cost – $662,636,000 and $548,636,000, respectively)

 

$

634,089,103

 

 

$

537,170,191

 

Temporary draws outstanding, at cost

 

 

 

 

 

12,000,000

 

Ending Balance (cost – $662,636,000 and $560,636,000, respectively)

 

$

634,089,103

 

 

$

549,170,191

 

 

(1)

Excludes temporary draws.

 

As of June 30, 2020, we had outstanding non-U.S. dollar borrowings on our Credit Facilities. Net change in fair value on foreign currency translation on outstanding borrowings is listed below:

 

Foreign Currency

 

Amount Borrowed

 

 

Borrowing Cost

 

 

Current Value

 

 

Reset Date

 

Change in Fair Value

 

British Pound

 

£

29,000,000

 

 

$

40,136,000

 

 

$

35,832,400

 

 

September 17, 2020

 

$

(4,303,600

)

 

As of September 30, 2019, we had outstanding non-U.S. dollar borrowings on our Credit Facilities. Net change in fair value on foreign currency translation on outstanding borrowings is listed below:

 

Foreign Currency

 

Amount Borrowed

 

 

Borrowing Cost

 

 

Current Value

 

 

Reset Date

 

Change in Fair Value

 

British Pound

 

£

29,000,000

 

 

$

40,136,000

 

 

$

35,736,700

 

 

December 13, 2019

 

$

(4,399,300

)

 

Generally, the carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles under ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to our Credit Facilities and, prior to their redemption, the 2019 Notes. We elected to use the fair value option for the Credit Facilities and, prior to their redemption, the 2019 Notes to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we incurred no expenses for both the three and nine months ended June 30, 2020. During the three and nine months ended June 30, 2019, we incurred expenses of zero and $4.9 million, respectively, relating to debt issuance costs on the BNP Credit Facility and the prepayment of the 2019 Notes. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facilities and the 2019 Notes are reported in our Consolidated Statements of Operations. We elected not to apply ASC 825-10 to any other financial assets or liabilities, including the 2024 Notes and the SBA debentures. 

 

 

21


PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2020

(Unaudited)

 

For the three and nine months ended June 30, 2020, our Credit Facilities had a net change in unrealized (appreciation) depreciation of $(25.1) million and $21.3 million, respectively. For the three and nine months ended June 30, 2019, our Credit Facilities and the 2019 Notes had a net change in unrealized depreciation of $0.2 million and $9.9 million, respectively. As of June 30, 2020 and September 30, 2019, the net unrealized depreciation on our Credit Facilities totaled $28.5 million and $7.2 million, respectively. We use a nationally recognized independent valuation service to measure the fair value of our Credit Facilities and the 2019 Notes in a manner consistent with the valuation process that the board of directors uses to value our investments.

 

6. TRANSACTIONS WITH AFFILIATED COMPANIES

 

An affiliated portfolio company is a company in which we have ownership of 5% or more of its voting securities. A portfolio company is generally presumed to be a non-controlled affiliate when we own at least 5% but 25% or less of its voting securities and a controlled affiliate when we own more than 25% of its voting securities. Transactions related to our funded investments with both controlled and non-controlled affiliates for the nine months ended June 30, 2020 were as follows:

 

Name of Investment

 

Fair Value at September 30, 2019

 

 

Gross

Additions(1)

 

 

Gross

Reductions

 

 

Net Change in

Appreciation /

(Depreciation)

 

 

Fair Value at June 30, 2020

 

 

Interest

Income

 

 

PIK

Income

 

 

Net Realized

Gains

(Losses)

 

Controlled Affiliates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AKW Holdings Limited

 

$

37,059,204

 

 

$

 

 

$

 

 

$

(3,327,324

)

 

$

33,731,880

 

 

$

1,746,586

 

 

$

 

 

$

 

PT Networks, LLC

 

 

72,434,438

 

 

 

7,385,357

 

 

 

 

 

 

1,566,673

 

 

 

81,386,468

 

 

 

46,856

 

 

 

4,403,889

 

 

 

 

RAM Energy LLC

 

 

123,957,717

 

 

 

11,443,334

 

 

 

 

 

 

(37,194,143

)

 

 

98,206,908

 

 

 

 

 

 

1,426,666

 

 

 

 

Total Controlled Affiliates

 

$

233,451,359

 

 

$

18,828,691

 

 

$

 

 

$

(38,954,794

)

 

$

213,325,256

 

 

$

1,793,442

 

 

$

5,830,555

 

 

$

 

Non-Controlled Affiliates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ETX Energy, LLC

 

$

22,717,376

 

 

$

 

 

$

 

 

$

(11,457,459

)

 

$

11,259,917

 

 

$

 

 

$

 

 

$

 

MidOcean JF Holdings

   Corp.

 

 

26,631,962

 

 

 

28,104

 

 

 

 

 

 

(4,787,825

)

 

 

21,872,241

 

 

 

 

 

 

 

 

 

 

Total Non-Controlled

   Affiliates

 

$

49,349,338

 

 

$

28,104

 

 

$

 

 

$

(16,245,284

)

 

$

33,132,158

 

 

$

 

 

$

 

 

$

 

Total Controlled and

   Non-Controlled Affiliates

 

$

282,800,697

 

 

$

18,856,795

 

 

$

 

 

$

(55,200,078

)

 

$

246,457,414

 

 

$

1,793,442

 

 

$

5,830,555

 

 

$

 

 

(1)

Includes PIK.

 

7. CHANGE IN NET ASSETS FROM OPERATIONS PER COMMON SHARE

 

The following information sets forth the computation of basic and diluted per share net increase in net assets resulting from operations:

 

 

 

Three Months Ended June 30,

 

 

Nine Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Numerator for net increase (decrease) in net assets resulting from operations

 

$

15,613,930

 

 

$

5,628,851

 

 

$

(25,476,264

)

 

$

7,660,543

 

Denominator for basic and diluted weighted average shares

 

 

67,045,105

 

 

 

67,045,105

 

 

 

67,045,105

 

 

 

67,932,307

 

Basic and diluted net increase (decrease) in net assets per share resulting from operations

 

$

0.23

 

 

$

0.08

 

 

$

(0.38

)

 

$

0.11

 

 

8. CASH AND CASH EQUIVALENTS

 

Cash equivalents represent cash in money market funds pending investment in longer-term portfolio holdings. Our portfolio may consist of temporary investments in U.S. Treasury Bills (of varying maturities), repurchase agreements, money market funds or repurchase agreement-like treasury securities. These temporary investments with original maturities of 90 days or less are deemed cash equivalents and are included in the Consolidated Schedule of Investments. At the end of each fiscal quarter, we may take proactive steps to preserve investment flexibility for the next quarter by investing in cash equivalents, which is dependent upon the composition of our total assets at quarter-end. We may accomplish this in several ways, including purchasing U.S. Treasury Bills and closing out positions on a net cash basis after quarter-end, temporarily drawing down on the Credit Facilities, or utilizing repurchase agreements or other balance sheet transactions as are deemed appropriate for this purpose. These amounts are excluded from average adjusted gross assets for purposes of computing the Investment Adviser’s management fee. U.S. Treasury Bills with maturities greater than 60 days from the time of purchase are valued consistent with our valuation policy. As of June 30, 2020 and September 30, 2019, cash and cash equivalents consisted of money market funds in the amounts of $51.6 million and $59.5 million at fair value, respectively.

 

 

22


PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2020

(Unaudited)

 

9. FINANCIAL HIGHLIGHTS

 

Below are the financial highlights:

 

 

 

Nine Months Ended June 30,

 

 

 

2020

 

 

2019

 

Per Share Data:

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

8.68

 

 

$

9.11

 

Net investment income (1)

 

 

0.47

 

 

 

0.51

 

Net realized and change in unrealized loss (1)

 

 

(0.85

)

 

 

(0.40

)

Net (decrease) increase in net assets resulting from operations (1)

 

 

(0.38

)

 

 

0.11

 

Distributions to stockholders (1), (2)

 

 

(0.48

)

 

 

(0.54

)

Repurchase of common stock (1)

 

 

 

 

 

0.06

 

Net asset value, end of period

 

$

7.82

 

 

$

8.74

 

Per share market value, end of period

 

$

3.51

 

 

$

6.32

 

Total return* (3)

 

 

(35.86

)%

 

 

(8.21

)%

Shares outstanding at end of period

 

 

67,045,105

 

 

 

67,045,105

 

Ratios**/ Supplemental Data:

 

 

 

 

 

 

 

 

Ratio of operating expenses to average net assets (4)

 

 

5.06

%

(8)

 

5.05

%

Ratio of interest and expenses on debt to average net assets (5)

 

 

6.21

%

 

 

5.38

%

Ratio of total expenses to average net assets (5)

 

 

11.27

%

(8)

 

10.43

%

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

 

 

7.47

%

 

 

7.87

%

Net assets at end of period

 

$

524,247,754

 

 

$

585,709,524

 

Weighted average debt outstanding (6)

 

$

824,718,011

 

 

$

617,279,897

 

Weighted average debt per share (1), (6)

 

$

12.30

 

 

$

9.09

 

Asset coverage per unit (7)

 

$

1,672

 

 

$

2,036

 

Portfolio turnover ratio

 

 

11.39

%

 

 

36.92

%

 

*

Not annualized for periods less than one year.

**

Annualized for periods less than one year.

(1)

Based on the weighted average shares outstanding for the respective periods.

(2)

The tax status of distributions is calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP, and reported on Form 1099-DIV each calendar year.

(3)

Based on the change in market price per share during the periods and assumes distributions, if any, reinvested.

(4)

Excludes debt related costs.

(5)

Includes interest and expenses on debt (annualized) as well as Credit Facility amendment and debt issuance costs, if any (not annualized).

(6)

Includes SBA debentures outstanding.

(7)

The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by the senior securities representing indebtedness at par (changed from fair value). This asset coverage ratio is multiplied by $1,000 to determine the asset coverage per unit. These amounts exclude SBA debentures from our asset coverage per unit computation pursuant to exemptive relief received from the SEC in June 2011.

(8)

For the nine months ended June 30, 2020, the ratio of operating and total expenses before the performance-based incentive fee waiver to average net assets was 5.52%, and 11.73%, respectively.

 

10. DEBT

 

The annualized weighted average cost of debt for the nine months ended June 30, 2020 and 2019, inclusive of the fee on the undrawn commitment under the Credit Facilities, debt issuance costs on the BNP Credit Facility, prepayment penalties on the 2019 Notes and amortized upfront fees on the 2024 Notes and SBA debentures, was 4.2% and 5.4%, respectively. As of June 30, 2020, in accordance with the 1940 Act, with certain limited exceptions, we were only allowed to borrow amounts such that we are in compliance with a 150% asset coverage ratio requirement after such borrowing, excluding SBA debentures, pursuant to exemptive relief from the SEC received in June 2011.

 

On February 5, 2019, our stockholders approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the SBCAA), as approved by our board of directors on November 13, 2018. As a result, the asset coverage requirement applicable to us for senior securities was 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), subject to compliance with certain disclosure requirements. As of June 30, 2020 and September 30, 2019, our asset coverage ratio, as computed in accordance with the 1940 Act, was 167% and 207%, respectively.

 

BNP Credit Facility

 

On February 22, 2019, Funding I closed the BNP Credit Facility for up to $250.0 million in borrowings with certain lenders and BNP Paribas, as administrative agent, and The Bank of New York Mellon Trust Company, N.A., as collateral agent. As of June 30, 2020 and September 30, 2019, Funding I had $245.0 million and $171.0 million in outstanding borrowings under the BNP Credit Facility, respectively. The BNP Credit Facility had a weighted average interest rate of 2.8% and 4.6%, respectively, exclusive of the fee on undrawn commitments, as of June 30, 2020 and September 30, 2019. The BNP Credit Facility is a five-year revolving facility with a stated maturity date of February 22, 2024 and pricing set at 260 basis points over LIBOR (or an alternative risk-free floating interest rate index). As of June 30, 2020 and September 30, 2019, Funding I had $5.0 million and $79.0 million of unused borrowing capacity under the BNP Credit Facility, respectively, subject to leverage and borrowing base restrictions. The BNP Credit Facility is secured by all of our assets held by Funding I. As of June 30, 2020, we were in compliance with the terms of the BNP Credit Facility.

 

 

23


PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2020

(Unaudited)

 

Truist Credit Facility

 

As of June 30, 2020, we had the multi-currency Truist Credit Facility for up to $475.0 million in borrowings with certain lenders and Truist Bank (formerly SunTrust Bank), acting as administrative agent, and JPMorgan Chase Bank, N.A., acting as syndication agent for the lenders. As of June 30, 2020 and September 30, 2019, we had $417.6 million and $301.6 million (including a $15.0 million temporary draw), respectively, in outstanding borrowings under the Truist Credit Facility. The Truist Credit Facility had a weighted average interest rate of 2.5% and 4.2%, respectively, exclusive of the fee on undrawn commitments, as of June 30, 2020 and September 30, 2019. The Truist Credit Facility is a revolving facility with a stated maturity date of September 4, 2024 ($55.0 million of the $475 million commitment will mature May 25, 2022), with a one-year term-out period and pricing set at 225 basis points over LIBOR (or an alternative risk-free floating interest rate index). As of June 30, 2020 and September 30, 2019, we had $57.4 million and $173.4 million of unused borrowing capacity under the Truist Credit Facility, respectively, subject to leverage and borrowing base restrictions. The Truist Credit Facility is secured by substantially all of our assets, excluding assets held by Funding I and SBIC II. As of June 30, 2020, we were in compliance with the terms of the Truist Credit Facility.

 

SBA Debentures

 

SBIC II is able to borrow funds from the SBA against regulatory capital (which approximates equity capital) that is paid-in and is subject to customary regulatory requirements including an examination by the SBA. We have funded SBIC II with $75.0 million of equity capital and it had SBA debentures outstanding of $133.5 million as of June 30, 2020. SBA debentures are non-recourse to us and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over 10-year U.S. Treasury Notes. Under current SBA regulations, a SBIC may individually borrow up to a maximum of $175.0 million, which is up to twice its potential regulatory capital, and as part of a group of SBICs under common control may borrow a maximum of $350 million in the aggregate.      

 

As of both June 30, 2020 and September 30, 2019, SBIC II had an initial $150.0 million in debt commitments, all of which were drawn. During the three and nine months ended June 30, 2020, zero and $16.5 million in SBA debentures were repaid, respectively. As of June 30, 2020 and September 30, 2019, the unamortized fees on the SBA debentures were $3.1 million and $3.9 million, respectively. The SBA debentures’ upfront fees of 3.4% consist of a commitment fee of 1.0% and an issuance discount of 2.4%, which are being amortized.

 

Our fixed-rate SBA debentures were as follows:

 

Issuance Dates

 

Maturity

 

Fixed All-in Coupon Rate (1)

 

 

 

As of June 30, 2020

Principal Balance

 

March 23, 2016

 

March 1, 2026

 

 

2.9

%

 

 

$

 

22,500,000

 

September 21, 2016

 

September 1, 2026

 

 

2.4

 

 

 

 

 

25,000,000

 

September 20, 2017

 

September 1, 2027

 

 

2.9

 

 

 

 

 

27,500,000

 

March 21, 2018

 

March 1, 2028

 

 

3.5

 

 

 

 

 

58,500,000

 

Weighted Average Rate / Total

 

 

 

 

3.1

%

 

 

$

 

133,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance Dates

 

Maturity

 

Fixed All-in Coupon Rate (1)

 

 

 

As of September 30, 2019

Principal Balance

 

March 23, 2016

 

March 1, 2026

 

 

2.9

%

 

 

$

 

22,500,000

 

September 21, 2016

 

September 1, 2026

 

 

2.4

 

 

 

 

 

25,000,000

 

September 20, 2017

 

September 1, 2027

 

 

2.9

 

 

 

 

 

31,500,000

 

March 21, 2018

 

March 1, 2028

 

 

3.5

 

 

 

 

 

71,000,000

 

Weighted Average Rate / Total

 

 

 

 

3.1

%

 

 

$

 

150,000,000

 

 

(1)

Excluding 3.4% of upfront fees.

 

The SBIC program is designed to stimulate the flow of capital into eligible businesses. Under SBA regulations, our SBIC Fund is subject to regulatory requirements, including making investments in SBA eligible businesses, investing at least 25% of regulatory capital in eligible smaller businesses, as defined under the 1958 Act, placing certain limitations on the financing terms of investments, prohibiting investment in certain industries and requiring capitalization thresholds that limit distributions to us, and is subject to periodic audits and examinations of its financial statements that are prepared on a basis of accounting other than GAAP (for example, fair value, as defined under ASC 820, is not required to be used for assets or liabilities for such compliance reporting). As of June 30, 2020, SBIC II was in compliance with its regulatory requirements. 

 

2019 Notes

 

The 2019 Notes were redeemed on March 4, 2019 at a redemption price equal to $1,008.65 for each $1,000.00 of principal of notes outstanding, plus accrued and unpaid interest to March 4, 2019, pursuant to the indenture governing the 2019 Notes. Interest on the 2019 Notes was paid semi-annually on April 1 and October 1, at a rate of 4.5% per year. The 2019 Notes were scheduled to mature on October 1, 2019. The 2019 Notes were general, unsecured obligations and ranked equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2019 Notes were structurally subordinated to our SBA debentures and the assets pledged or secured under our Credit Facilities.

2024 Notes

As of June 30, 2020 and September 30, 2019, we had $86.3 million and $75.0 million in aggregate principal amount of 2024 Notes outstanding, respectively. Interest on the 2024 Notes is paid quarterly on January 15, April 15, July 15 and October 15, at a rate of 5.5% per year. The 2024 Notes mature on October 15, 2024. The 2024 Notes are general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2024 Notes are structurally subordinated to our SBA debentures and the assets pledged or secured under our Credit Facilities. The 2024 Notes may be repurchased from time to time in open market purchases and privately-negotiated transactions.

 

 

24


PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2020

(Unaudited)

 

11. COMMITMENTS AND CONTINGENCIES

 

From time to time, we, the Investment Adviser or the Administrator may be a party to legal proceedings, 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. Unfunded debt and equity investments, if any, are disclosed in the Consolidated Schedules of Investments. Under these arrangements, we may be required to supply a letter of credit to a third party if the portfolio company were to request a letter of credit. As of June 30, 2020 and September 30, 2019, we had $49.7 million and $30.4 million, respectively, in commitments to fund investments.

 

12. UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES

 

We determine which, if any, of our unconsolidated controlled portfolio companies is a "significant subsidiary" within the meaning of Regulation S-X. We have determined that, as of September 30, 2019, PT Networks, LLC and RAM Energy Holdings LLC triggered at least one of the significance tests. As a result and in accordance with  Rule 10-01(b) of Regulation S-X under the Securities Act, presented below is summarized unaudited financial information for the three and nine months ended June 30, 2020 and 2019.

 

 

a)

PT Networks, LLC:

 

 

 

Three Months Ended June  30,

 

 

Nine Months Ended June 30,

 

Income Statement (1)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Total revenue

 

$

48,150

 

 

$

52,868

 

 

$

156,797

 

 

$

144,008

 

Total expenses

 

 

(55,685

)

 

 

(68,683

)

 

 

(165,707

)

 

 

(181,901

)

Net loss

 

$

(7,535

)

 

$

(15,815

)

 

$

(8,910

)

 

$

(37,893

)

 

 

b)

RAM Energy Holdings LLC:

 

 

 

Three Months Ended June  30,

 

 

Nine Months Ended June 30,

 

Income Statement (1)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Total revenue

 

$

3,392

 

 

$

7,274

 

 

$

28,595

 

 

$

21,111

 

Total expenses

 

 

(46,450

)

 

 

(8,627

)

 

 

(69,520

)

 

 

(24,904

)

Net loss

 

$

(43,058

)

 

$

(1,353

)

 

$

(40,925

)

 

$

(3,793

)

 

(1)

All amounts are in thousands.

 

13. STOCK REPURCHASE PROGRAM

 

On May 9, 2018, we announced a share repurchase program which allowed us to repurchase up to $30 million of our outstanding common stock in the open market at prices below our net asset value as reported in our then most recently published consolidated financial statements. The program expired on May 9, 2019. During the three and nine months ended June 30, 2019, we repurchased zero and 2.0 million shares of common stock, respectively, in open market transactions for an aggregate cost (including transaction costs) of zero and $14.5 million, respectively. We repurchased 4.0 million shares of our common stock in open market transactions while the program was in effect for an aggregate cost (including transaction costs) of $29.5 million.

 

14. SUBSEQUENT EVENTS

 

On July 31, 2020, we and certain entities and managed accounts of the private credit investment manager of Pantheon Ventures (UK) LLP, or Pantheon, entered into an amended and restated limited liability company agreement to co-manage a newly-formed joint venture, PennantPark Senior Loan Fund, LLC, or “PSLF”, whereby Pantheon has invested $35.0 million to acquire a 28% stake in PSLF. PSLF will acquire Funding I from us. Funding I holds $356 million of senior loans as of July 31, 2020. Further, as a result of this transaction, Funding I will become a wholly-owned subsidiary of PSLF and deconsolidate from our financial statements. PSLF is expected to invest primarily in middle market senior loans consistent with our strategy.

 

 

 

 

25


 

Report of Independent Registered Public Accounting Firm

 

 

 

To the Stockholders and Board of Directors of PennantPark Investment Corporation and its Subsidiaries

  

Results of Review of Interim Financial Statements

 

We have reviewed the accompanying consolidated statement of assets and liabilities of PennantPark Investment Corporation and its Subsidiaries (collectively referred to as the “Company”), including the consolidated schedule of investments, as of June 30, 2020, the related consolidated statements of operations and the related consolidated statements of changes in net assets for the three and nine months ended June 30, 2020 and 2019, and cash flows for the nine months ended June 30, 2020 and 2019, and the related notes to the consolidated financial statements (collectively, the interim financial information or financial statements). Based on our reviews, we are not aware of any material modifications that should be made to the interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

 

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of assets and liabilities of the Company, including the consolidated schedule of investments, as of September 30, 2019, and the related consolidated statements of operations, changes in net assets, and cash flows for the year then ended (not presented herein), and in our report dated November 21, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of assets and liabilities as of September 30, 2019, is fairly stated, in all material respects, in relation to the consolidated statement of assets and liabilities from which it has been derived.

 

Basis for Review Results

 

These interim financial statements are the responsibility of the Company’s management. We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

/s/ RSM US LLP

New York, New York

August 5, 2020

 

 

 

 

 

26


 

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

 

FORWARD-LOOKING STATEMENTS

 

This Report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements that constitute forward-looking statements, which relate to us and our consolidated subsidiaries regarding future events or our future performance or future financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our Company, our industry, our beliefs and our assumptions. The forward-looking statements contained in this Report involve risks and uncertainties, including statements as to:

 

 

our future operating results;

 

 

our business prospects and the prospects of our prospective portfolio companies, including as a result of the current pandemic caused by COVID-19;

 

 

changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets that could result in changes to the value of our assets, including changes from the impact of the current COVID-19 pandemic;

 

 

our ability to continue to effectively manage our business due to the significant disruptions caused by the current COVID-19 pandemic;

 

 

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

 

 

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

 

 

the impact of investments that we expect to make;

 

 

the impact of fluctuations in interest rates and foreign exchange rates on our business and our portfolio companies;

 

 

our contractual arrangements and relationships with third parties;

 

 

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

 

 

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

 

 

our expected financings and investments;

 

 

the adequacy of our cash resources and working capital;

 

 

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

 

 

the impact of price and volume fluctuations in the stock market;

 

 

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

 

 

the impact of future legislation and regulation on our business and our portfolio companies; and

 

 

the impact of the United Kingdom’s withdrawal from the European Union (commonly known as “Brexit”) and other world economic and political issues.

 

We use words such as “anticipates,” “believes,” “expects,” “intends,” “seeks,” “plans,” “estimates” and similar expressions to identify forward-looking statements. You should not place undue influence on the forward-looking statements as our actual results could differ materially from those projected in the forward-looking statements for any reason.

 

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 as