UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

Form 10-K/A

 

x

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

 

 

For the fiscal year ended February 28, 2013

 

o

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

 

 

For the transition period from          to         

 

Commission File No. 001-33376

 


 

SARATOGA INVESTMENT CORP.

(Exact name of Registrant as specified in its charter)

 

Maryland
(State or other jurisdiction of
incorporation or organization)

 

20-8700615
(I.R.S. Employer
Identification Number)

 

535 Madison Avenue

New York, New York 10022

(Address of principal executive offices)

 

(212) 906-7800

(Registrant’s telephone number, including area code)

 

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

 

 

Title of Each Class

 

Name of Each Exchange on Which Registered

 

 

Common Stock, par value $0.001 per share

 

The New York Stock Exchange

 

 

7.50% Notes due 2020

 

The New York Stock Exchange

 

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o  No x

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o  No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

 

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

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x
(Do not check if a smaller reporting company)

 

Smaller reporting company o

 

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

 

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of August 31, 2012 was approximately $41.6 million based upon a closing price of $16.50 reported for such date by the New York Stock Exchange.

 

The number of outstanding common shares of the registrant as of May 29, 2013 was 4,730,116.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 



 

EXPLANATORY NOTE

 

We are filing this Annual Report on Form 10-K/A to include the separate audited financial statements of GSC Investment Corp. CLO 2007, Ltd. required by Rule 3-09 of Regulation S-X in Part II, Item 8, and the exhibit required by Item 601(b)(32) of Regulation S-K.

 

Other than the changes described above, all other information in our original Annual Report on Form 10-K filed with the SEC on May 30, 2013 remains unchanged.

 

2


 


 

PART II

 

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Our financial statements are annexed to this Annual Report beginning on page F-1. In addition, the Financial Statements of GSC Investment Corp. CLO 2007 LTD. are annexed to this Annual Report beginning on page S-1.

 

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None

 

3



 

PART IV

 

ITEM 15.  EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

 

The following documents are filed or incorporated by reference as part of this Annual Report:

 

1.                                      Consolidated Financial Statements

 

The following financial statements of the Company are filed herewith:

 

Report of Independent Registered Public Accounting Firm

 

Consolidated Statements of Assets and Liabilities as of February 28, 2013 and February 29, 2012

 

Consolidated Statements of Operations for the years ended February 28, 2013, February 29, 2012, and February 28, 2011

 

4



 

Consolidated Schedules of Investments as of February 28, 2013 and February 29, 2012

 

Consolidated Statements of Changes in Net Assets for the years ended February 28, 2013, February 29, 2012, and February 28, 2011

 

Consolidated Statements of Cash Flows for the years ended February 28, 2013, February 29, 2012, and February 28, 2011

 

Notes to Consolidated Financial Statements

 

2.                                      Financial Statement Schedule

 

Reference is made to the Index to Other Financial Statements on page S-1.

 

5



 

3.                                      Exhibits required to be filed by Item 601 of Regulation S-K

 

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:

 

EXHIBIT INDEX

 

Exhibit

 

 

Number

 

Description

3.1(a)

 

Articles of Incorporation of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Form 10-Q for the quarterly period ended May 31, 2007, File No. 001-33376).

 

 

 

3.1(b)

 

Articles of Amendment of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed August 3, 2010).

 

 

 

3.1(c)

 

Articles of Amendment of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed August 13, 2010).

 

 

 

3.2

 

Amended and Restated Bylaws of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on March 5, 2008).

 

 

 

4.1

 

Specimen certificate of Saratoga Investment Corp.’s common stock, par value $0.001 per share. (incorporated by reference to Saratoga Investment Corp.’s Registration Statement on Form N-2, File No. 333-169135, filed on September 1, 2010).

 

 

 

4.2

 

Registration Rights Agreement dated July 30, 2010 between GSC Investment Corp., GSC CDO III L.L.C., and the investors party thereto (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).

 

 

 

4.3

 

Form of Dividend Reinvestment Plan (incorporated by reference to Amendment No. 2 to the Saratoga Investment Corp.’s Registration Statement on Form N-2, File No. 333-138051, filed on January 12, 2007).

 

 

 

4.4

 

Form of Indenture by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Saratoga Investment Corp.’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2, File No. 333-186323 filed April 30, 2013).

 

 

 

4.5

 

Form of First Supplemental Indenture between the Company and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2, File No. 333-186323 filed April 30, 2013).

 

 

 

4.6

 

Form of Note (Filed as Exhibit A to First Supplemental Indenture referred to in Exhibit 4.5).

 

 

 

10.1

 

Investment Advisory and Management Agreement dated July 30, 2010 between GSC Investment Corp. and Saratoga Investment Advisors, LLC (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).

 

 

 

10.2

 

Custodian Agreement dated March 21, 2007 between GSC Investment LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Form 10-Q for the quarterly period ended May 31, 2007).

 

 

 

10.3

 

Administration Agreement dated July 30, 2010 between GSC Investment Corp. and Saratoga Investment Advisors, LLC (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).

 

 

 

10.4

 

Trademark License Agreement dated July 30, 2010 between Saratoga Investment Advisors, LLC and GSC Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).

 

 

 

10.5

 

Credit, Security and Management Agreement dated July 30, 2010 by and among GSC Investment Funding LLC, Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Madison Capital Funding LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).

 

 

 

10.6

 

Form of Indemnification Agreement between Saratoga Investment Corp. and each officer and director of Saratoga Investment Corp. (incorporated by reference to Amendment No. 2 to Saratoga Investment Corp.’s Registration Statement on Form N-2 filed on January 12, 2007).

 

 

 

10.7

 

Amendment No. 1 to Credit, Security and Management Agreement dated February 24, 2012 by and among Saratoga Investment Funding LLC, Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Madison Capital Funding LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on February 29, 2012).

 

 

 

10.8

 

Indenture, dated as of January 22, 2008, among GSC Investment Corp. CLO 2007, Ltd., GSC Investment Corp. CLO 2007, Inc. and U.S. Bank National Association (incorporated by reference to the registrant’s Registration Statement on Form N-2, File No. 333-186323, filed on April 30, 2013).

 

 

 

12.1

 

Statement of Computation of Ratios of Earnings to Fixed Charges (incorporated by reference to the registrant’s Registration Statement on Form N-2, File No. 333-186323, filed on April 29, 2013).

 

 

 

21.1

 

List of Subsidiaries and jurisdiction of incorporation/organization: Saratoga Investment Funding LLC—Delaware; Saratoga Investment Corp. SBIC, LP—Delaware; and Saratoga Investment Corp. GP, LLC—Delaware.

 

 

 

24.1

 

Power of Attorney (included on signature page to Annual Report on Form 10-K filed with the SEC on May 30, 2013).

 

 

 

31.1*

 

Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2*

 

Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1*

 

Chief Executive Officer and Chief Financial Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 


*                                         Filed herewith

 

6



 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

SARATOGA INVESTMENT CORP.

 

 

Date: June 7, 2013

By:

/s/ CHRISTIAN L. OBERBECK

 

 

Christian L. Oberbeck

 

 

Chief Executive Officer

 

 

 

 

By:

/s/ RICHARD A. PETROCELLI

 

 

Richard A. Petrocelli
Chief Financial Officer, Chief Compliance Officer and Secretary

 

KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below hereby constitutes and appoints Christian L. Oberbeck and Richard A. Petrocelli, and each of them (with full power to each of them to act alone), his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign this report and any and all amendments thereto, and to file the same, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature

 

Title

 

Date

 

 

 

 

 

/s/ CHRISTIAN L. OBERBECK

 

Chairman of the Board of Directors, Chief Executive Officer (Principal Executive Officer)

 

June 7, 2013

Christian L. Oberbeck

 

 

 

 

 

 

 

 

*

 

Member of the Board of Directors

 

June 7, 2013

Michael J. Grisius

 

 

 

 

 

 

 

 

 

/s/ RICHARD A. PETROCELLI

 

Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer)

 

June 7, 2013

Richard A. Petrocelli

 

 

 

 

 

 

 

 

*

 

Member of the Board of Directors

 

June 7, 2013

Steven M. Looney

 

 

 

 

 

 

 

 

 

*

 

Member of the Board of Directors

 

June 7, 2013

Charles S. Whitman III

 

 

 

 

 

 

 

 

 

*

 

Member of the Board of Directors

 

June 7, 2013

Cabell Williams

 

 

 

 

 

* Signed by Richard A. Petrocelli pursuant to power of attorney signed by each individual on May 29, 2013.

 

7



 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Report of Independent Registered Public Accounting Firm

F-2

Consolidated Statements of Assets and Liabilities as of February 28, 2013 and February 29, 2012

F-3

Consolidated Statements of Operations for the years ended February 28, 2013, February 29, 2012, and February 28, 2011

F-4

Consolidated Schedules of Investments as of February 28, 2013 and February 29, 2012

F-5

Consolidated Statements of Changes in Net Assets for the years ended February 28, 2013, February 29, 2012, and February 28, 2011

F-8

Consolidated Statements of Cash Flows for the years ended February 28, 2013, February 29, 2012, and February 28, 2011

F-9

Notes to Consolidated Financial Statements

F-10

 

F-1



 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors and Shareholders of Saratoga Investment Corp.

 

We have audited the accompanying consolidated statements of assets and liabilities of Saratoga Investment Corp (the “Company”), including the consolidated schedules of investments, as of February 28, 2013 and February 29, 2012, and the related consolidated statements of operations, changes in net assets and cash flows for the years ended February 28, 2013, February 29, 2012, and February 28, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of February 28, 2013, by correspondence with the custodian and management or agents of the underlying investments. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Saratoga Investment Corp. at February 28, 2013 and February 29, 2012, and the consolidated results of its operations, changes in its net assets and its cash flows for the years ended February 28, 2013, February 29, 2012, and February 28, 2011, in conformity with U.S. generally accepted accounting principles.

 

/s/ Ernst & Young LLP

New York, NY

May 29, 2013

 

F-2



 

Saratoga Investment Corp.

 

Consolidated Statements of Assets and Liabilities

 

 

 

As of

 

 

 

February 28, 2013

 

February 29, 2012

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Investments at fair value

 

 

 

 

 

Non-control/non-affiliate investments (amortized cost of $130,465,086 and $73,161,722, respectively)

 

$

129,563,428

 

$

69,513,434

 

Control investments (cost of $18,944,966 and $23,540,517, respectively)

 

25,516,959

 

25,846,414

 

Total investments at fair value (amortized cost of $149,410,052 and $96,702,239, respectively)

 

155,080,387

 

95,359,848

 

Cash and cash equivalents

 

149,025

 

1,325,698

 

Cash and cash equivalents, reserve accounts

 

12,086,142

 

25,534,195

 

Outstanding interest rate cap at fair value (cost of $0 and $131,000, respectively)

 

 

75

 

Interest receivable, (net of reserve of $53,543 and $273,361, respectively)

 

2,889,358

 

1,689,404

 

Deferred credit facility financing costs, net

 

2,090,184

 

1,199,490

 

Management fee receivable

 

215,853

 

227,581

 

Other assets

 

83,407

 

94,823

 

Receivable from unsettled trades

 

1,817,074

 

59,511

 

Total assets

 

$

174,411,430

 

$

125,490,625

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Revolving credit facility

 

$

24,300,000

 

$

20,000,000

 

SBA debentures payable

 

36,000,000

 

 

Payable for unsettled trades

 

 

4,072,500

 

Management and incentive fees payable

 

4,509,322

 

2,885,670

 

Accounts payable and accrued expenses

 

435,038

 

704,949

 

Interest and credit facility fees payable

 

257,796

 

53,262

 

Due to manager

 

222,513

 

394,094

 

Total liabilities

 

$

65,724,669

 

$

28,110,475

 

 

 

 

 

 

 

NET ASSETS

 

 

 

 

 

Common stock, par value $.001, 100,000,000 common shares authorized, 4,730,116 and 3,876,661 common shares issued and outstanding, respectively

 

$

4,730

 

$

3,877

 

Capital in excess of par value

 

174,824,076

 

161,644,426

 

Distribution in excess of net investment income

 

(24,522,951

)

(13,920,068

)

Accumulated net realized loss from investments and derivatives

 

(47,289,427

)

(48,874,767

)

Net unrealized appreciation (depreciation) on investments and derivatives

 

5,670,333

 

(1,473,318

)

Total Net Assets

 

108,686,761

 

97,380,150

 

 

 

 

 

 

 

Total liabilities and Net Assets

 

$

174,411,430

 

$

125,490,625

 

 

 

 

 

 

 

NET ASSET VALUE PER SHARE

 

$

22.98

 

$

25.12

 

 

See accompanying notes to consolidated financial statements.

 

F-3



 

Saratoga Investment Corp.

 

Consolidated Statements of Operations

 

 

 

For the year
ended February 28,

 

For the year
ended February 29,

 

For the year
ended February 28,

 

 

 

2013

 

2012

 

2011

 

 

 

 

 

 

 

 

 

INVESTMENT INCOME

 

 

 

 

 

 

 

Interest from investments

 

 

 

 

 

 

 

Non-control/Non-affiliate investments

 

$

9,176,156

 

$

5,613,705

 

$

7,601,140

 

Payment-in-kind interest income from Non-control/Non-affiliate investments

 

1,062,687

 

1,442,004

 

1,144,799

 

Control investments

 

4,205,509

 

4,198,007

 

3,295,359

 

Total interest income

 

14,444,352

 

11,253,716

 

12,041,298

 

Interest from cash and cash equivalents

 

5,956

 

7,865

 

8,857

 

Management fee income

 

2,000,072

 

2,011,516

 

2,032,357

 

Other income

 

556,427

 

238,579

 

90,503

 

Total investment income

 

17,006,807

 

13,511,676

 

14,173,015

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

Interest and credit facility financing expenses

 

2,540,413

 

1,297,985

 

2,611,839

 

Base management fees

 

2,107,378

 

1,617,496

 

1,645,552

 

Professional fees

 

1,190,587

 

1,455,380

 

3,325,475

 

Administrator expenses

 

1,000,000

 

1,000,000

 

810,416

 

Incentive management fees

 

2,044,788

 

1,257,087

 

1,868,503

 

Insurance

 

516,121

 

578,746

 

704,800

 

Directors fees and expenses

 

206,705

 

208,851

 

373,385

 

General & administrative

 

368,815

 

389,825

 

478,730

 

Other expense

 

4,434

 

5,445

 

 

Expenses before expense waiver and reimbursement

 

9,979,241

 

7,810,815

 

11,818,700

 

Expense reimbursement

 

 

 

(258,562

)

Waiver of deferred incentive management fees

 

 

 

(2,636,146

)

Total expenses

 

9,979,241

 

7,810,815

 

8,923,992

 

 

 

 

 

 

 

 

 

NET INVESTMENT INCOME

 

7,027,566

 

5,700,861

 

5,249,023

 

 

 

 

 

 

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

 

 

 

 

 

 

 

Net realized gain (loss) from investments

 

561,700

 

(12,185,997

)

(24,684,262

)

Net realized loss from derivatives

 

(131,000

)

 

 

Net unrealized appreciation on investments

 

7,012,726

 

19,776,469

 

36,419,362

 

Net unrealized appreciation (depreciation) on derivatives

 

130,925

 

(16,190

)

(25,882

)

Net gain on investments

 

7,574,351

 

7,574,282

 

11,709,218

 

 

 

 

 

 

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$

14,601,917

 

$

13,275,143

 

$

16,958,241

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE

 

$

3.55

 

$

3.87

 

$

6.96

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED

 

4,110,484

 

3,434,345

 

2,437,577

 

 

See accompanying notes to consolidated financial statements.

 

F-4


 


 

Saratoga Investment Corp.

 

Consolidated Schedule of Investments

 

February 28, 2013

 

Company (a)

 

Industry

 

Investment Interest Rate / Maturity

 

Principal/
Number of Shares

 

Cost

 

Fair Value (c)

 

% of
Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-control/Non-affiliated investments - 119.2% (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coast Plating, Inc. (d)

 

Aerospace

 

First Lien Term Loan 11.70% Cash, 9/13/2014

 

$

2,550,000

 

$

2,550,000

 

$

2,550,000

 

2.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coast Plating, Inc. (d)

 

Aerospace

 

First Lien Term Loan 13.20% Cash, 9/13/2014

 

$

950,000

 

950,000

 

950,000

 

0.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Aerospace

 

 

 

3,500,000

 

3,500,000

 

3.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

National Truck Protection Co., Inc. (d), (h)

 

Automotive

 

Common Stock

 

589

 

500,000

 

591,827

 

0.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

National Truck Protection Co., Inc. (d)

 

Automotive

 

First Lien Term Loan 15.50% Cash 8/10/2017

 

$

5,500,000

 

5,500,000

 

5,500,000

 

5.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Take 5 Oil Change, L.L.C. (d)

 

Automotive

 

First Lien Term Loan 9.00% Cash, 11/28/2016

 

$

6,000,000

 

6,000,000

 

6,000,000

 

5.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Take 5 Oil Change, L.L.C. (d)

 

Automotive

 

First Lien Term Loan 13.00% Cash, 11/28/2016

 

$

2,000,000

 

1,961,761

 

2,000,000

 

1.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Take 5 Oil Change, L.L.C. (d), (h)

 

Automotive

 

Common Stock

 

7,128

 

712,800

 

712,800

 

0.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Automotive

 

 

 

14,674,561

 

14,804,627

 

13.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Cabinets Holdings (d), (h)

 

Building Products

 

Common Stock Voting A-1

 

2,535

 

220,900

 

 

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Cabinets Holdings (d), (h)

 

Building Products

 

Common Stock Voting B-1

 

1,600

 

139,424

 

 

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Cabinets, Inc. (d)

 

Building Products

 

First Lien Term Loan 7.25% (1.00% Cash/6.25% PIK), 5/3/2014

 

$

332,229

 

332,229

 

267,378

 

0.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Building Products

 

 

 

692,553

 

267,378

 

0.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emily Street Enterprises, L.L.C. (d)

 

Business Services

 

Senior Secured Note 14.00% (13.00% Cash/1.00% PIK), 12/28/2017

 

$

5,705,384

 

5,595,317

 

5,705,384

 

5.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emily Street Enterprises, L.L.C. (d), (h)

 

Business Services

 

Warrant Membership Interests

 

49,318

 

400,000

 

399,969

 

0.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dispensing Dynamics International (d)

 

Business Services

 

Senior Secured Note 12.50% Cash, 1/1/2018

 

$

7,000,000

 

6,860,186

 

7,000,000

 

6.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Knowland Technology Holdings, L.L.C. (d)

 

Business Services

 

First Lien Term Loan 11.00% Cash, 11/29/2017

 

$

6,200,000

 

6,082,248

 

6,200,000

 

5.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sourcehov LLC (d)

 

Business Services

 

Second Lien Term Loan 10.50% Cash, 4/29/2018

 

$

3,000,000

 

2,648,298

 

2,850,000

 

2.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Business Services

 

 

 

21,586,049

 

22,155,353

 

20.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

C.H.I. Overhead Doors, Inc. (d)

 

Consumer Products

 

First Lien Term Loan 7.25% Cash, 8/17/2017

 

$

4,974,747

 

4,930,481

 

5,024,495

 

4.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Targus Group International, Inc. (d)

 

Consumer Products

 

First Lien Term Loan 11.00% Cash, 5/24/2016

 

$

3,940,003

 

3,888,460

 

3,956,551

 

3.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Targus Holdings, Inc. (d)

 

Consumer Products

 

Unsecured Note 10.00% PIK, 6/14/2019

 

$

1,914,341

 

1,914,341

 

1,116,252

 

1.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Targus Holdings, Inc. (d)

 

Consumer Products

 

Unsecured Note 16.00% Cash, 10/26/2018

 

$

332,500

 

326,320

 

305,334

 

0.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Targus Holdings, Inc. (d), (h)

 

Consumer Products

 

Common Stock

 

62,413

 

566,765

 

3,324,741

 

3.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Consumer Products

 

 

 

11,626,367

 

13,727,373

 

12.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CFF Acquisition L.L.C. (d)

 

Consumer Services

 

First Lien Term Loan 7.50% Cash, 7/31/2015

 

$

2,161,391

 

2,032,060

 

2,154,475

 

2.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expedited Travel L.L.C. (d)

 

Consumer Services

 

First Lien Term Loan 12.00% Cash, 12/28/2017

 

$

5,500,000

 

5,380,520

 

5,500,000

 

5.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PrePaid Legal Services, Inc. (d)

 

Consumer Services

 

First Lien Term Loan 11.00% Cash, 12/31/2016

 

$

3,000,000

 

2,936,860

 

3,000,000

 

2.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Consumer Services

 

 

 

10,349,440

 

10,654,475

 

9.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

M/C Acquisition Corp., L.L.C. (d)

 

Education

 

First Lien Term Loan 1.00% Cash, 12/31/2012

 

$

2,740,780

 

1,586,846

 

291,893

 

0.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

M/C Acquisition Corp., L.L.C. (d), (h)

 

Education

 

Class A Common Stock

 

544,761

 

30,242

 

 

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Education

 

 

 

1,617,088

 

291,893

 

0.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group Dekko, Inc. (d)

 

Electronics

 

Second Lien Term Loan 11.00% (10.00% Cash/1.00% PIK), 5/1/2016

 

$

6,824,717

 

6,824,717

 

6,720,981

 

6.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Electronics

 

 

 

6,824,717

 

6,720,981

 

6.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USS Parent Holding Corp. (d), (h)

 

Environmental

 

Non Voting Common Stock

 

765

 

133,002

 

125,981

 

0.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USS Parent Holding Corp. (d), (h)

 

Environmental

 

Voting Common Stock

 

17,396

 

3,025,798

 

2,866,065

 

2.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Environmental

 

 

 

3,158,800

 

2,992,046

 

2.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DS Waters of America, Inc. (d)

 

Food and Beverage

 

First Lien Term Loan 10.50% Cash, 8/29/2017

 

$

3,970,000

 

3,994,704

 

4,049,400

 

3.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HOA Restaurant Group, L.L.C. (d)

 

Food and Beverage

 

Senior Secured Note 11.25% Cash, 4/1/2017

 

$

4,000,000

 

3,897,940

 

3,560,000

 

3.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TB Corp. (d)

 

Food and Beverage

 

First Lien Term Loan 5.81% Cash, 6/19/2018

 

$

5,153,506

 

5,128,662

 

5,140,622

 

4.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TB Corp. (d)

 

Food and Beverage

 

Unsecured Note 13.50% (12.00% Cash/1.50% PIK), 2/19/2017

 

$

2,504,585

 

2,468,317

 

2,492,062

 

2.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TM Restaurant Group L.L.C. (d)

 

Food and Beverage

 

First Lien Term Loan 7.75% Cash, 7/17/2017

 

$

2,962,500

 

2,943,045

 

2,956,871

 

2.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Food and Beverage

 

 

 

18,432,668

 

18,198,955

 

16.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oceans Acquisition, Inc. (d)

 

Healthcare Services

 

First Lien Term Loan 10.75% Cash, 12/27/2017

 

$

7,500,000

 

7,351,433

 

7,500,000

 

6.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maverick Healthcare Group (d)

 

Healthcare Services

 

First Lien Term Loan 10.75% Cash, 12/31/2016

 

$

4,900,000

 

4,835,389

 

4,900,000

 

4.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Healthcare Services

 

 

 

12,186,822

 

12,400,000

 

11.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

McMillin Companies L.L.C. (d), (h)

 

Homebuilding

 

Senior Secured Note 0% Cash, 12/31/2013

 

$

550,000

 

536,764

 

315,370

 

0.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Homebuilding

 

 

 

536,764

 

315,370

 

0.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capstone Logistics, L.L.C. (d)

 

Logistics

 

First Lien Term Loan 7.50% Cash, 9/16/2016

 

$

899,769

 

889,798

 

908,766

 

0.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capstone Logistics, L.L.C. (d)

 

Logistics

 

First Lien Term Loan 13.50% Cash, 9/16/2016

 

$

3,693,369

 

3,652,443

 

3,767,236

 

3.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Worldwide Express Operations, L.L.C. (d)

 

Logistics

 

First Lien Term Loan 7.50% Cash, 6/30/2013

 

$

6,527,979

 

6,461,295

 

6,504,478

 

6.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Logistics

 

 

 

11,003,536

 

11,180,480

 

10.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Elyria Foundry Company, L.L.C. (d)

 

Metals

 

Senior Secured Note 17.00% (13.00% Cash/4.00% PIK), 3/1/2013

 

$

7,728,566

 

7,728,566

 

6,723,852

 

6.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Elyria Foundry Company, L.L.C. (d), (h)

 

Metals

 

Warrants to Purchase Limited Liability Company Interests

 

3,000

 

 

 

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Metals

 

 

 

7,728,566

 

6,723,852

 

6.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network Communications, Inc. (d)

 

Publishing

 

Unsecured Note 8.60% PIK, 1/14/2020

 

$

2,500,198

 

2,049,660

 

960,827

 

0.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network Communications, Inc. (d), (h)

 

Publishing

 

Common Stock

 

211,429

 

 

 

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Penton Media, Inc. (d)

 

Publishing

 

First Lien Term Loan 6.00% (4.00% Cash/2.00% PIK), 8/1/2014

 

$

4,839,189

 

4,497,495

 

4,669,818

 

4.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Publishing

 

 

 

6,547,155

 

5,630,645

 

5.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Non-control/Non-affiliated investments

 

 

 

 

 

 

 

130,465,086

 

129,563,428

 

119.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Control investments - 23.5% (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GSC Partners CDO GP III, LP (g), (h)

 

Financial Services

 

100% General Partnership Interest

 

 

 

 

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GSC Investment Corp. CLO 2007 LTD. (d), (e), (g)

 

Structured Finance Securities

 

Other/Structured Finance Securities 23.06%, 1/21/2020

 

$

30,000,000

 

18,944,966

 

25,516,959

 

23.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Control investments

 

 

 

 

 

 

 

18,944,966

 

25,516,959

 

23.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate investments - 0.0% (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GSC Partners CDO GP III, LP (f), (h)

 

Financial Services

 

6.24% Limited Partnership Interest

 

 

 

 

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Affiliate investments

 

 

 

 

 

 

 

 

 

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS - 142.7% (b)

 

 

 

 

 

 

 

$

149,410,052

 

$

155,080,387

 

142.7

%

 


(a)

All of our equity and debt investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940, except GSC Investment Corp. CLO 2007 Ltd. and GSC Partners CDO GP III, LP.

(b)

Percentages are based on net assets of $108,686,761 as of February 28, 2013.

(c)

Because there is no readily available market value for these investments, the fair value of these investments is approved in good faith by our board of directors. (see Note 3 to the consolidated financial statements).

(d)

These securities are pledged as collateral under a senior secured revolving credit facility (see Note 6 to the consolidated financial statements).

(e)

23.06% represents the modeled effective interest rate that is expected to be earned over the life of the investment.

(f)

As defined in the Investment Company Act, we are an “Affiliate” of this portfolio company because we own 5% or more of the portfolio company’s outstanding voting securities. Transactions during the period in which the issuer was an Affiliate are as follows:

 

 

 

 

 

 

 

 

 

Interest

 

Management

 

Net Realized

 

Net Unrealized

 

Company

 

Purchases

 

Redemptions

 

Sales (cost)

 

Income

 

fee income

 

gains/(losses)

 

gains/(losses)

 

GSC Partners CDO GP III, LP

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

 

(g)

As defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the period in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

 

 

 

 

 

 

 

 

 

Interest

 

Management

 

Net Realized

 

Net Unrealized

 

Company

 

Purchases

 

Redemptions

 

Sales (cost)

 

Income

 

fee income

 

gains/(losses)

 

gains/(losses)

 

GSC Investment Corp. CLO 2007 LTD.

 

$

 

$

 

$

 

$

4,205,509

 

$

2,000,072

 

$

 

$

6,571,992

 

GSC Partners CDO GP III, LP

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

 

(h)

Non-income producing at February 28, 2013.

 

F-5



 

Saratoga Investment Corp.

 

Consolidated Schedule of Investments

 

February 29, 2012

 

Company(a)

 

Industry

 

Investment Interest Rate/Maturity

 

Principal/
Number of
Shares

 

Cost

 

Fair Value(c)

 

% of
Net
Assets

 

Non-control/Non-affiliated investments—71.4%(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

Coast Plating, Inc.(d)

 

Aerospace

 

First Lien Term Loan 11.77% Cash, 9/13/2014

 

$

2,550,000

 

$

2,550,000

 

$

2,550,000

 

2.6

%

Coast Plating, Inc.(d)

 

Aerospace

 

First Lien Term Loan 12.52% Cash, 9/13/2014

 

$

950,000

 

950,000.0

 

950,000

 

1.0

%

 

 

 

 

Total Aerospace

 

 

 

3,500,000

 

3,500,000

 

3.6

%

Legacy Cabinets Holdings(d)(h)

 

Building Products

 

Common Stock Voting A-1

 

2,535

 

220,900

 

 

0.0

%

Legacy Cabinets Holdings(d)(h)

 

Building Products

 

Common Stock Voting B-1

 

1,600

 

139,424

 

 

0.0

%

Legacy Cabinets, Inc.(d)

 

Building Products

 

First Lien Term Loan 7.25% (1.00% Cash/6.25% PIK), 5/3/2014

 

$

312,198

 

312,198

 

221,629

 

0.2

%

 

 

 

 

Total Building Products

 

 

 

672,522

 

221,629

 

0.2

%

Targus Group International, Inc.(d)

 

Consumer Products

 

First Lien Term Loan 11.00% Cash, 5/24/2016

 

$

3,980,000

 

3,911,828

 

3,944,976

 

4.1

%

Targus Holdings, Inc.(d)

 

Consumer Products

 

Unsecured Notes 10.00% PIK, 6/14/2019

 

$

1,799,479

 

1,799,479

 

963,621

 

1.0

%

Targus Holdings, Inc.(d)(h)

 

Consumer Products

 

Common Stock

 

62,413

 

566,765

 

2,675,645

 

2.7

%

 

 

 

 

Total Consumer Products

 

 

 

6,278,072

 

7,584,242

 

7.8

%

CFF Acquisition LLC(d)

 

Consumer Services

 

First Lien Term Loan 7.50% Cash, 7/31/2015

 

$

2,684,141

 

2,462,831

 

2,448,205

 

2.5

%

PrePaid Legal Services, Inc.(d)

 

Consumer Services

 

First Lien Term Loan 11.00% Cash, 12/31/2016

 

$

3,000,000

 

2,920,411

 

2,940,000

 

3.0

%

 

 

 

 

Total Consumer Services

 

 

 

5,383,242

 

5,388,205

 

5.5

%

M/C Acquisition Corp., LLC(d)

 

Education

 

First Lien Term Loan 10.00% (4.25% Cash/5.75% PIK), 12/31/2012

 

$

2,944,596

 

1,790,662

 

591,864

 

0.6

%

M/C Acquisition Corp., LLC(d)(h)

 

Education

 

Class A Common Stock

 

544,761

 

30,242

 

 

0.0

%

 

 

 

 

Total Education

 

 

 

1,820,904

 

591,864

 

0.6

%

Advanced Lighting Technologies, Inc.(d)

 

Electronics

 

Second Lien Term Loan 6.25% Cash, 6/1/2014

 

$

2,000,000

 

1,902,053

 

1,910,400

 

2.0

%

Group Dekko, Inc. (fka Dekko Technologies, LLC)(d)

 

Electronics

 

Second Lien Term Loan 10.50% (6.50% Cash/4.00% PIK), 5/1/2013

 

$

7,571,152

 

7,571,152

 

7,003,316

 

7.2

%

 

 

 

 

Total Electronics

 

 

 

9,473,205

 

8,913,716

 

9.2

%

USS Parent Holding Corp.(d)(h)

 

Environmental

 

Non Voting Common Stock

 

765

 

133,002

 

97,810

 

0.1

%

USS Parent Holding Corp.(d)(h)

 

Environmental

 

Voting Common Stock

 

17,396

 

3,025,798

 

2,225,180

 

2.3

%

 

 

 

 

Total Environmental

 

 

 

3,158,800

 

2,322,990

 

2.4

%

DCS Business Services, Inc.(d)

 

Financial Services

 

First Lien Term Loan 14.00% Cash, 9/30/2012

 

$

1,600,000

 

1,604,464

 

1,600,000

 

1.6

%

Big Train, Inc.(d)

 

Food and Beverage

 

First Lien Term Loan 7.75% Cash, 3/31/2012

 

$

1,406,768

 

1,389,640

 

1,368,785

 

1.4

%

HOA Restaurant Group, LLC.(d)

 

Food and Beverage

 

Senior Secured Notes 11.25% Cash, 4/1/2017

 

$

4,000,000

 

3,880,000

 

3,880,000

 

4.0

%

 

 

 

 

Total Food and Beverage

 

 

 

5,269,640

 

5,248,785

 

5.4

%

Maverick Healthcare Group(d)

 

Healthcare Services

 

First Lien Term Loan 10.75% Cash, 12/31/2016

 

$

4,950,000

 

4,867,725

 

4,824,270

 

5.0

%

McMillin Companies LLC(d)(h)

 

Homebuilding

 

Senior Secured Notes 0% Cash, 12/31/2013

 

$

550,000

 

511,952

 

288,915

 

0.3

%

Capstone Logistics, LLC(d)

 

Logistics

 

First Lien Term Loan 7.50% Cash, 9/16/2016

 

$

997,118

 

982,954

 

997,118

 

1.0

%

Capstone Logistics, LLC(d)

 

Logistics

 

First Lien Term Loan 13.50% Cash, 9/16/2016

 

$

4,000,000

 

3,943,183

 

4,000,000

 

4.1

%

Worldwide Express Operations, LLC(d)

 

Logistics

 

First Lien Term Loan 7.50% Cash, 6/30/2013

 

$

6,680,276

 

6,412,355

 

6,103,100

 

6.3

%

 

 

 

 

Total Logistics

 

 

 

11,338,492

 

11,100,218

 

11.4

%

Sabre Industries, Inc(d)

 

Manufacturing

 

Senior Unsecured Loan 15.00% (12.00% Cash/3.00% PIK), 6/6/2016

 

$

6,000,000

 

5,852,741

 

6,000,000

 

6.2

%

Elyria Foundry Company, LLC(d)

 

Metals

 

Senior Secured Notes 17.00% (13.00% Cash/4.00% PIK), 3/1/2013

 

$

7,428,456

 

7,224,787

 

6,537,041

 

6.7

%

Elyria Foundry Company, LLC(d)(h)

 

Metals

 

Warrants to Purchase Limited Liability Company Interests

 

3,000

 

 

 

0.0

%

 

 

 

 

Total Metals

 

 

 

7,224,787

 

6,537,041

 

6.7

%

Network Communications, Inc.(d)

 

Publishing

 

Unsecured Notes 8.60% PIK, 1/14/2020

 

$

2,422,095

 

1,924,577

 

1,044,892

 

1.0

%

Network Communications, Inc.(d)(h)

 

Publishing

 

Common Stock

 

211,429

 

 

691,373

 

0.7

%

Penton Media, Inc.(d)

 

Publishing

 

First Lien Term Loan 5.00% (4.00% Cash/ 1.00% PIK), 8/1/2014

 

$

4,839,526

 

4,280,599

 

3,655,294

 

3.8

%

 

 

 

 

Total Publishing

 

 

 

6,205,176

 

5,391,559

 

5.5

%

Sub Total Non-control/Non-affiliated investments

 

 

 

 

 

 

 

73,161,722

 

69,513,434

 

71.4

%

Control investments—26.5%(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

GSC Partners CDO GP III, LP(g)(h)

 

Financial Services

 

100% General Partnership Interest

 

 

 

 

0.0

%

GSC Investment Corp. CLO 2007 LTD.(d)(e)(g)

 

Structured Finance Securities

 

Other/Structured Finance Securities 17.38%, 1/21/2020

 

$

30,000,000

 

23,540,517

 

25,846,414

 

26.5

%

Sub Total Control investments

 

 

 

 

 

 

 

23,540,517

 

25,846,414

 

26.5

%

Affiliate investments—0.0%(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

GSC Partners CDO GP III, LP(f)(h)

 

Financial Services

 

6.24% Limited Partnership Interest

 

 

 

 

0.0

%

Sub Total Affiliate investments

 

 

 

 

 

 

 

 

 

0.0

%

TOTAL INVESTMENTS—97.9%(b)

 

 

 

 

 

 

 

$

96,702,239

 

$

95,359,848

 

97.9

%

 

Outstanding interest rate cap

 

Interest
rate

 

Maturity

 

Notional

 

Cost

 

Fair
Value

 

% of
Net
Assets

 

Interest rate cap

 

8.0

%

2/9/2014

 

$

19,591,837

 

$

87,000

 

$

54

 

0.0

%

Interest rate cap

 

8.0

%

11/30/2013

 

10,332,000

 

44,000

 

21

 

0.0

%

Total Outstanding interest rate cap

 

 

 

 

 

 

 

$

131,000

 

$

75

 

0.0

%

 


*                                           Amounts to less than 0.05%

 

(a)                                      All of our equity and debt investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940, except GSC Investment Corp. CLO 2007 Ltd. and GSC Partners CDO GP III, LP.

 

(b)                                     Percentages are based on net assets of $97,380,150 as of February 29, 2012.

 

F-6



 

(c)                                      Because there is no readily available market value for these investments, the fair value of these investments is approved in good faith by our board of directors. (see Note 3 to the consolidated financial statements).

 

(d)                                     These securities are pledged as collateral under a senior secured revolving credit facility (see Note 6 to the consolidated financial statements).

 

(e)                                      17.38% represents the modeled effective interest rate that is expected to be earned over the life of the investment.

 

(f)                                       As defined in the Investment Company Act, we are an “Affiliate” of this portfolio company because we own 5.0% or more of the portfolio company’s outstanding voting securities. Transactions during the period in which the issuer was an Affiliate are as follows:

 

Company

 

Purchases

 

Redemptions

 

Sales
(cost)

 

Interest
Income

 

Management
fee income

 

Net Realized
gains/(losses)

 

Net
Unrealized
gains/(losses)

 

GSC Partners CDO GP III, LP

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

 

(g)                                     As defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25.0% of the portfolio company’s outstanding voting securities. Transactions during the period in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

 

Company

 

Purchases

 

Redemptions

 

Sales
(cost)

 

Interest
Income

 

Management
fee income

 

Net Realized
gains/(losses)

 

Net
Unrealized
gains/(losses)

 

GSC Investment Corp. CLO 2007 LTD.

 

$

 

$

 

$

 

$

4,198,007

 

$

2,011,516

 

$

 

$

6,938,209

 

GSC Partners CDO GP III, LP

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

 

(h)                                     Non-income producing at February 29, 2012.

 

F-7


 


 

Saratoga Investment Corp.

 

Consolidated Statements of Changes in Net Assets

 

 

 

For the year ended
February 28, 2013

 

For the year ended
February 29, 2012

 

For the year ended
February 28, 2011

 

 

 

 

 

 

 

 

 

INCREASE FROM OPERATIONS:

 

 

 

 

 

 

 

Net investment income

 

$

7,027,566

 

$

5,700,861

 

$

5,249,023

 

Net realized gain (loss) from investments

 

561,700

 

(12,185,997

)

(24,684,262

)

Net realized loss from derivatives

 

(131,000

)

 

 

Net unrealized appreciation on investments

 

7,012,726

 

19,776,469

 

36,419,362

 

Net unrealized appreciation (depreciation) on derivatives

 

130,925

 

(16,190

)

(25,882

)

Net increase in net assets from operations

 

14,601,917

 

13,275,143

 

16,958,241

 

DECREASE FROM SHAREHOLDER DISTRIBUTIONS:

 

 

 

 

 

 

 

Distributions declared

 

(16,475,809

)

(9,831,231

)

(11,795,705

)

Net decrease in net assets from shareholder distributions

 

(16,475,809

)

(9,831,231

)

(11,795,705

)

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

Stock dividend distribution

 

13,180,503

 

7,864,784

 

10,615,905

 

Issuance of common stock, net of issuance costs

 

 

 

14,814,861

 

Net increase in net assets from capital share transactions

 

13,180,503

 

7,864,784

 

25,430,766

 

 

 

 

 

 

 

 

 

Total increase in net assets

 

11,306,611

 

11,308,696

 

30,593,302

 

Net assets at beginning of period

 

97,380,150

 

86,071,454

 

55,478,152

 

Net assets at end of period

 

$

108,686,761

 

$

97,380,150

 

$

86,071,454

 

 

 

 

 

 

 

 

 

Net asset value per common share

 

$

22.98

 

$

25.12

 

$

26.26

 

Common shares outstanding at end of period

 

4,730,116

 

3,876,661

 

3,277,077

 

 

 

 

 

 

 

 

 

Distribution in excess of net investment income

 

$

(24,522,951

)

$

(13,920,068

)

$

(8,918,890

)

 

See accompanying notes to consolidated financial statements.

 

F-8



 

Saratoga Investment Corp.

 

Consolidated Statements of Cash Flows

 

 

 

For the year ended
February 28, 2013

 

For the year ended
February 29, 2012

 

For the year ended
February 28, 2011

 

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

 

NET INCREASE IN NET ASSETS FROM OPERATIONS

 

$

14,601,917

 

$

13,275,143

 

$

16,958,241

 

ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS FROM OPERATIONS TO NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Paid-in-kind interest income

 

(1,062,687

)

(1,442,004

)

(1,144,799

)

Net accretion of discount on investments

 

(975,475

)

(1,191,822

)

(732,522

)

Amortization of deferred credit facility financing costs

 

482,306

 

674,724

 

397,164

 

Reversal of deferred incentive management fees

 

 

 

(2,636,146

)

Net realized (gain) loss from investments

 

(561,700

)

12,185,997

 

24,684,262

 

Net realized loss from derivatives

 

131,000

 

 

 

Net unrealized appreciation on investments

 

(7,012,726

)

(19,776,469

)

(36,419,362

)

Net unrealized (appreciation) depreciation on derivatives

 

(130,925

)

16,190

 

25,882

 

Proceeds from sale and redemption of investments

 

21,487,698

 

33,568,147

 

31,974,810

 

Purchase of investments

 

(71,595,649

)

(38,678,936

)

(9,014,000

)

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

Cash and cash equivalents, reserve accounts

 

13,448,053

 

(21,164,208

)

(4,144,563

)

Interest receivable

 

(1,199,954

)

(23,321

)

1,807,878

 

Management fee receivable

 

11,728

 

4,172

 

96,175

 

Other assets

 

11,416

 

(9,657

)

55,106

 

Receivable from unsettled trades

 

(1,757,563

)

(59,511

)

 

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

Payable for unsettled trades

 

(4,072,500

)

(827,500

)

4,900,000

 

Management and incentive fees payable

 

1,623,652

 

681,864

 

1,768,859

 

Accounts payable and accrued expenses

 

(269,911

)

(80,537

)

(325,595

)

Interest and credit facility fees payable

 

204,534

 

(14,530

)

(199,374

)

Due to manager

 

(171,581

)

154,094

 

224,398

 

NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES

 

(36,808,367

)

(22,708,164

)

28,276,414

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

Issuance of shares of common stock

 

 

 

15,000,001

 

Payment of common stock issuance costs

 

 

 

(185,140

)

Borrowings on debt

 

55,550,000

 

20,000,000

 

20,000,000

 

Paydowns on debt

 

(15,250,000

)

(4,500,000

)

(52,492,222

)

Credit facility financing cost

 

(1,373,000

)

(235,446

)

(2,035,932

)

Payments of cash dividends

 

(3,295,306

)

(1,966,447

)

(1,179,800

)

NET CASH PROVIDED BY (USED BY) FINANCING ACTIVITIES

 

35,631,694

 

13,298,107

 

(20,893,093

)

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

(1,176,673

)

(9,410,057

)

7,383,321

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

1,325,698

 

10,735,755

 

3,352,434

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

149,025

 

$

1,325,698

 

$

10,735,755

 

 

 

 

 

 

 

 

 

Supplemental Information:

 

 

 

 

 

 

 

Interest paid during the period

 

$

1,853,573

 

$

637,791

 

$

2,414,049

 

 

 

 

 

 

 

 

 

Supplemental non-cash information:

 

 

 

 

 

 

 

Paid-in-kind interest income

 

$

1,062,687

 

$

1,442,004

 

$

1,144,799

 

Net accretion of discount on investments

 

$

975,475

 

$

1,191,822

 

$

732,522

 

Amortization of deferred credit facility financing costs

 

$

482,306

 

$

674,724

 

$

397,164

 

Reversal of deferred incentive management fees

 

$

 

$

 

$

2,636,146

 

Stock dividend distribution

 

$

13,180,503

 

$

7,864,784

 

$

10,615,905

 

 

See accompanying notes to consolidated financial statements.

 

F-9


 


 

SARATOGA INVESTMENT CORP.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

February 28, 2013

 

Note 1. Organization and Basis of Presentation

 

Saratoga Investment Corp. (the “Company”, “we”, “our” and “us”) is a non-diversified closed end management investment company incorporated in Maryland that has elected to be treated and is regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). We commenced operations on March 23, 2007 as GSC Investment Corp. and completed our initial public offering (“IPO”) on March 28, 2007. We have elected to be treated as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code (the “Code”). We expect to continue to qualify and to elect to be treated for tax purposes as a RIC. Our investment objective is to generate current income and, to a lesser extent, capital appreciation from our investments.

 

GSC Investment, LLC (the “LLC”) was organized in May 2006 as a Maryland limited liability company. As of February 28, 2007, the LLC had not yet commenced its operations and investment activities.

 

On March 21, 2007, the Company was incorporated and concurrently therewith the LLC was merged with and into the Company, with the Company as the surviving entity, in accordance with the procedure for such merger in the LLC’s limited liability company agreement and Maryland law. In connection with such merger, each outstanding limited liability company interest of the LLC was converted into a share of common stock of the Company.

 

On July 30, 2010, the Company changed its name from “GSC Investment Corp.” to “Saratoga Investment Corp.” in conjunction with the transaction described in “Note 13. Recapitalization Transaction” below.

 

We are externally managed and advised by our investment adviser, Saratoga Investment Advisors, LLC (the “Manager”), pursuant to an investment advisory and management agreement. Prior to July 30, 2010, we were managed and advised by GSCP (NJ), L.P.

 

On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC, LP (“SBIC LP”), received a Small Business Investment Company (“SBIC”) license from the Small Business Administration (“SBA”).

 

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its special purpose financing subsidiary, Saratoga Investment Funding, LLC (previously known as GSC Investment Funding LLC). All intercompany accounts and transactions have been eliminated in consolidation. All references made to the “Company,” “we,” and “us” herein include Saratoga Investment Corp. and its consolidated subsidiary, except as stated otherwise.

 

Note 2. Summary of Significant Accounting Policies

 

Use of Estimates in the Preparation of Financial Statements

 

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and income, gains (losses) and expenses during the period reported. Actual results could differ materially from those estimates.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include short-term, liquid investments in a money market fund. Cash and cash equivalents are carried at cost which approximates fair value. Per section 12(d)(1)(A) of the 1940 Act, the Company may not invest in another registered investment company such as, a money market fund if such investment would cause the Company to exceed any of the following limitations:

 

·                  we were to own more than 3.0% of the total outstanding voting stock of the money market fund;

 

F-10



 

·                  we were to hold securities in the money market fund having an aggregate value in excess of 5.0% of the value of our total assets; or

 

·                  we were to hold securities in money market funds and other registered investment companies and BDCs having an aggregate value in excess of 10.0% of the value of our total assets.

 

Cash and Cash Equivalents, Reserve Accounts

 

Cash and cash equivalents, reserve accounts include amounts held in designated bank accounts in the form of cash and short-term liquid investments in money market funds representing payments received on secured investments or other reserved amounts associated with our $45.0 million senior secured revolving credit facility with Madison Capital Funding LLC. The Company is required to use these amounts to pay interest expense, reduce borrowings, or pay other amounts in accordance with the terms of the senior secured revolving credit facility.

 

Investment Classification

 

The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in companies in which we own more than 25.0% of the voting securities or maintain greater than 50.0% of the board representation. Under the 1940 Act, “Affiliated Investments” are defined as those non-control investments in companies in which we own between 5.0% and 25.0% of the voting securities. Under the 1940 Act, “Non-affiliated Investments” are defined as investments that are neither Control Investments nor Affiliated Investments.

 

Investment Valuation

 

The Company accounts for its investments at fair value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires the Company to assume that its investments are to be sold at the statement of assets and liabilities date in the principal market to independent market participants, or in the absence of a principal market, in the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

 

Investments for which market quotations are readily available are fair valued at such market quotations obtained from independent third party pricing services and market makers subject to any decision by our board of directors to approve a fair value determination to reflect significant events affecting the value of these investments. We value investments for which market quotations are not readily available at fair value as approved, in good faith, by our board of directors based on input from our Manager, the audit committee of our board of directors and a third party independent valuation firm. Determinations of fair value may involve subjective judgments and estimates. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.

 

We undertake a multi-step valuation process each quarter when valuing investments for which market quotations are not readily available, as described below:

 

·                  Each investment is initially valued by the responsible investment professionals of our Manager and preliminary valuation conclusions are documented and discussed with the senior management of our Manager; and

 

·                  An independent valuation firm engaged by our board of directors reviews approximately one quarter of these preliminary valuations each quarter so that the valuation of each investment for which market quotes are not readily available is reviewed by the independent valuation firm at least annually.

 

In addition, all our investments are subject to the following valuation process:

 

·                  The audit committee of our board of directors reviews each preliminary valuation and our Manager and independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee; and

 

F-11



 

·                  Our board of directors discusses the valuations and approves the fair value of each investment, in good faith, based on the input of our Manager, independent valuation firm (to the extent applicable) and the audit committee of our board of directors.

 

Our investment in GSC Investment Corp. CLO 2007, Ltd. (“Saratoga CLO”) is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flows analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO.

 

Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. The determination of fair value may differ materially from the values that would have been used if a ready market for these investments existed. Our net asset value could be materially affected if the determinations regarding the fair value of our investments were materially higher or lower than the values that we ultimately realize upon the disposal of such investments.

 

Derivative Financial Instruments

 

We account for derivative financial instruments in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”). ASC 815 requires recognizing all derivative instruments as either assets or liabilities on the consolidated statements of assets and liabilities at fair value. The Company values derivative contracts at the closing fair value provided by the counterparty. Changes in the values of derivative contracts are included in the consolidated statements of operations.

 

Investment Transactions and Income Recognition

 

Purchases and sales of investments and the related realized gains or losses are recorded on a trade-date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on its investments when it is determined that interest is no longer collectible. Discounts and premiums on investments purchased are accreted/amortized over the life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortizations of premium on investments.

 

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as a reduction in principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection.

 

Interest income on our investment in Saratoga CLO is recorded using the effective interest method in accordance with the provisions of ASC Topic 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets, based on the anticipated yield and the estimated cash flows over the projected life of the investment. Yields are revised when there are changes in actual or estimated cash flows due to changes in prepayments and/or re-investments, credit losses or asset pricing. Changes in estimated yield are recognized as an adjustment to the estimated yield over the remaining life of the investment from the date the estimated yield was changed.

 

Paid-in-Kind Interest

 

The Company holds debt investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision. The PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We stop accruing PIK interest if we do not expect the issuer to be able to pay all principal and interest when due.

 

F-12



 

Deferred Credit Facility Financing Costs

 

Financing costs incurred in connection with our credit facility are deferred and amortized using the straight line method over the life of their respective facilities. Financing costs incurred in connection with our SBA debentures are deferred and amortized using the effective yield method over the life of the debentures.

 

Contingencies

 

In the ordinary course of its business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on its history and experience, management feels that the likelihood of such an event is remote.

 

In the ordinary course of business, the Company may directly or indirectly be a defendant or plaintiff in legal actions with respect to bankruptcy, insolvency or other types of proceedings. Such lawsuits may involve claims that could adversely affect the value of certain financial instruments owned by the Company.

 

Income Taxes

 

The Company has filed an election to be treated for tax purposes as a RIC under Subchapter M of the Code and, among other things, intends to make the requisite distributions to its stockholders which will relieve the Company from federal income taxes. Therefore, no provision has been recorded for federal income taxes.

 

In order to qualify as a RIC, among other requirements, the Company is required to timely distribute to its stockholders at least 90.0% of its investment company taxable income, as defined by the Code, for each fiscal tax year. The Company will be subject to a nondeductible U.S. federal excise tax of 4.0% on undistributed income if it does not distribute at least 98.0% of its ordinary income in any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31.

 

Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year dividend distributions into the next tax year and pay a 4.0% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned.

 

In accordance with certain applicable Treasury regulations and private letter rulings issued by the Internal Revenue Service, a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. If too many stockholders elect to receive cash, each stockholder electing to receive cash will receive a pro rata amount of cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive less than 20.0% of his or her entire distribution in cash. If these and certain other requirements are met, for U.S federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.

 

ASC 740, Income Taxes, provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet a “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the consolidated statements of operations. During the fiscal year ended February 28, 2013, the Company did not incur any interest or penalties. Although we file federal and state tax returns, our major tax jurisdiction is federal. The 2010, 2011 and 2012 federal tax years for the Company remain subject to examination by the IRS.

 

Dividends

 

Dividends to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by the board of directors. Net realized capital gains, if any, are generally distributed at least annually, although we may decide to retain such capital gains for reinvestment.

 

F-13



 

We have adopted a dividend reinvestment plan that provides for reinvestment of our dividend distributions on behalf of our stockholders unless a stockholder elects to receive cash. As a result, if our board of directors authorizes, and we declare, a cash dividend, then our stockholders who have not “opted out” of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividends. If our common stock is trading below net asset value at the time of valuation, the plan administrator may receive the dividend or distribution in cash and purchase common stock in the open market, on the New York Stock Exchange or elsewhere, for the account of each participant in our dividend reinvestment plan.

 

Capital Gains Incentive Fee

 

The Company records an expense accrual on the consolidated statements of operations, relating to the capital gains incentive fee payable on the consolidated statements of assets and liabilities, by the Company to its investment adviser when the unrealized gains on its investments exceed all realized capital losses on its investments given the fact that a capital gains incentive fee would be owed to the investment adviser if the Company were to liquidate its investment portfolio at such time. The actual incentive fee payable to the Company’s investment adviser related to capital gains will be determined and payable in arrears at the end of each fiscal year and will include only realized capital gains for the period.

 

New Accounting Pronouncements

 

In December 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which requires entities to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The guidance is effective for fiscal years and interim periods beginning on or after January 1, 2013 with retrospective application for all comparative periods presented. The adoption of this guidance, which is related to disclosure only, is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

 

Risk Management

 

In the ordinary course of its business, the Company manages a variety of risks, including market risk and credit risk. Market risk is the risk of potential adverse changes to the value of investments because of changes in market conditions such as interest rate movements and volatility in investment prices.

 

Credit risk is the risk of default or non-performance by portfolio companies, equivalent to the investment’s carrying amount.

 

The Company is also exposed to credit risk related to maintaining all of its cash and cash equivalents, including those in reserve accounts, at a major financial institution and credit risk related to any of its derivative counterparties.

 

The Company has investments in lower rated and comparable quality unrated high yield bonds and bank loans. Investments in high yield investments are accompanied by a greater degree of credit risk. The risk of loss due to default by the issuer is significantly greater for holders of high yield securities, because such investments are generally unsecured and are often subordinated to other creditors of the issuer.

 

Note 3. Investments

 

As noted above, the Company values all investments in accordance with ASC 820. ASC 820 requires enhanced disclosures about assets and liabilities that are measured and reported at fair value. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

 

Based on the observability of the inputs used in the valuation techniques, the Company is required to provide disclosures on fair value measurements according to the fair value hierarchy. The fair value hierarchy ranks the observability of the inputs used to determine fair values. Investments carried at fair value are classified and disclosed in one of the following three categories:

 

F-14



 

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

 

·                  Level 2—Valuations based on inputs other than quoted prices in active markets, which are either directly or indirectly observable.

 

·                  Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The inputs used in the determination of fair value may require significant management judgment or estimation. Such information may be the result of consensus pricing information 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 asset, assuming no additional corroborating evidence.

 

In addition to using the above inputs in investment valuations, the Company continues to employ the valuation policy approved by the board of directors that is consistent with ASC 820 and the 1940 Act (see Note 2). Consistent with our Company’s valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value.

 

The following table presents fair value measurements of investments, by major class, as of February 28, 2013 (dollars in thousands), according to the fair value hierarchy:

 

 

 

Fair Value Measurements

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

First lien term loans

 

$

 

$

 

$

83,792

 

$

83,792

 

Second lien term loans

 

 

 

9,571

 

9,571

 

Senior secured notes

 

 

 

23,305

 

23,305

 

Unsecured notes

 

 

 

4,874

 

4,874

 

Structured finance securities

 

 

 

25,517

 

25,517

 

Equity interest

 

 

 

8,021

 

8,021

 

Limited partnership interest

 

 

 

 

 

Total

 

$

 

$

 

$

155,080

 

$

155,080

 

 

The following table presents fair value measurements of investments, by major class, as of February 29, 2012 (dollars in thousands), according to the fair value hierarchy:

 

 

 

Fair Value Measurements

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

First lien term loans

 

$

 

$

 

$

36,196

 

$

36,196

 

Second lien term loans

 

 

 

8,914

 

8,914

 

Senior secured notes

 

 

 

10,706

 

10,706

 

Senior unsecured loans

 

 

 

6,000

 

6,000

 

Unsecured notes

 

 

 

2,008

 

2,008

 

Structured finance securities

 

 

 

25,846

 

25,846

 

Equity interest

 

 

 

5,690

 

5,690

 

Limited partnership interest

 

 

 

 

 

Total

 

$

 

$

 

$

95,360

 

$

95,360

 

 

F-15



 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended February 28, 2013 (dollars in thousands):

 

 

 

First lien
term loans

 

Second lien
term loans

 

Senior
secured
notes

 

Senior
unsecured
loans

 

Unsecured
notes

 

Structured
finance
securities

 

Common
stock/equities

 

Total

 

Balance as of February 29, 2012

 

$

36,196

 

$

8,914

 

$

10,706

 

$

6,000

 

$

2,008

 

$

25,846

 

$

5,690

 

$

95,360

 

Net unrealized gains (losses)

 

2,090

 

657

 

(403

)

(148

)

(169

)

4,267

 

719

 

7,013

 

Purchases and other adjustments to cost

 

52,872

 

3,005

 

13,002

 

107

 

3,035

 

 

1,612

 

73,633

 

Sales and redemptions

 

(7,564

)

(3,092

)

 

(6,090

)

 

(4,596

)

(146

)

(21,488

)

Net realized gain (loss) from investments

 

198

 

87

 

 

131

 

 

 

146

 

562

 

Balance as of February 28, 2013

 

$

83,792

 

$

9,571

 

$

23,305

 

$

 

$

4,874

 

$

25,517

 

$

8,021

 

$

155,080

 

 

Purchases and other adjustments to cost include purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on debt securities, and PIK.

 

Sales and redemptions represent net proceeds received from investments sold, and principal paydowns received, during the period.

 

The net change in unrealized gain/loss on investments held as of February 28, 2013 is $7,143,012 and is included in net unrealized appreciation (depreciation) on investments in the consolidated statements of operations.

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended February 29, 2012 (dollars in thousands):

 

 

 

First lien
term loans

 

Second 
lien
term
loans

 

Senior
secured
notes

 

Senior
unsecured
loans

 

Unsecured
notes

 

Structured
finance
securities

 

Common
stock/equities

 

Total

 

Balance as of February 28, 2011

 

$

18,475

 

$

20,276

 

$

9,892

 

$

 

$

1,915

 

$

22,732

 

$

6,735

 

$

80,025

 

Net unrealized gains (losses)

 

(1,256

)

15,603

 

196

 

147

 

(807

)

6,938

 

(1,045

)

19,776

 

Purchases and other adjustments to cost

 

27,732

 

602

 

6,226

 

5,853

 

900

 

 

 

41,313

 

Sales and redemptions

 

(8,769

)

(14,868

)

(5,766

)

 

 

(3,824

)

(341

)

(33,568

)

Net realized gain (loss) from investments

 

14

 

(12,699

)

158

 

 

 

 

341

 

(12,186

)

Balance as of February 29, 2012

 

$

36,196

 

$

8,914

 

$

10,706

 

$

6,000

 

$

2,008

 

$

25,846

 

$

5,690

 

$

95,360

 

 

Purchases and other adjustments to cost include purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on debt securities, and PIK.

 

Sales and redemptions represent net proceeds received from investments sold, and principal paydowns received, during the period.

 

The net change in unrealized gain/loss on investments held as of February 29, 2012 is $4,057,635 and is included in net unrealized appreciation (depreciation) on investments in the consolidated statements of operations.

 

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of February 28, 2013 were as follows (dollars in thousands):

 

 

 

Fair Value

 

Valuation Technique

 

Unobservable Input

 

Range

 

 

 

 

 

 

 

 

 

 

 

First lien term loans

 

$

 83,792

 

Market Comparables

 

Market Yield (%)

 

5.8% - 26.9%

 

 

 

 

 

 

 

EBITDA Multiples (x)

 

3.0x

 

 

 

 

 

 

 

Third-Party Bid

 

96.5 - 102.0

 

 

 

 

 

 

 

 

 

 

 

Second lien term loans

 

9,571

 

Market Comparables

 

Market Yield (%)

 

11.5%

 

 

 

 

 

 

 

Third-Party Bid

 

90.5

 

 

 

 

 

 

 

 

 

 

 

Senior secured notes

 

23,305

 

Market Comparables

 

Market Yield (%)

 

14.0% - 42.5%

 

 

 

 

 

 

 

EBITDA Multiples (x)

 

5.5x

 

 

 

 

 

 

 

Third-Party Bid

 

89.0 – 101.0

 

 

 

 

 

 

 

 

 

 

 

Unsecured notes

 

4,874

 

Market Comparables

 

Market Yield (%)

 

13.6% - 23.8%

 

 

 

 

 

 

 

 

 

 

 

Structured finance securities

 

25,517

 

Discounted Cash Flow

 

Discount Rate (%)

 

13.0%

 

 

 

 

 

 

 

 

 

 

 

Equity interests

 

8,021

 

Market Comparables

 

EBITDA Multiples (x)

 

3.0x – 8.9x

 

 

F-16



 

For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the EBITDA valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement.

 

The composition of our investments as of February 28, 2013, at amortized cost and fair value were as follows (dollars in thousands):

 

 

 

Investments at
Amortized Cost

 

Amortized Cost
Percentage of
Total Portfolio

 

Investments at
Fair Value

 

Fair Value
Percentage of
Total Portfolio

 

First lien term loans

 

$

83,886

 

56.2

%

$

83,792

 

54.0

%

Second lien term loans

 

9,473

 

6.3

 

9,571

 

6.2

 

Senior secured notes

 

24,619

 

16.5

 

23,305

 

15.0

 

Unsecured notes

 

6,758

 

4.5

 

4,874

 

3.1

 

Structured finance securities

 

18,945

 

12.7

 

25,517

 

16.5

 

Equity interest

 

5,729

 

3.8

 

8,021

 

5.2

 

Limited partnership interest

 

 

 

 

 

Total

 

$

149,410

 

100.0

%

$

155,080

 

100.0

%

 

The composition of our investments as of February 29, 2012, at amortized cost and fair value were as follows (dollars in thousands):

 

 

 

Investments at
Amortized Cost

 

Amortized Cost
Percentage of
Total Portfolio

 

Investments at
Fair Value

 

Fair Value
Percentage of
Total Portfolio

 

First lien term loans

 

$

38,379

 

39.7

%

$

36,196

 

38.0

%

Second lien term loans

 

9,473

 

9.8

 

8,914

 

9.4

 

Senior secured notes

 

11,617

 

12.0

 

10,706

 

11.2

 

Senior unsecured loans

 

5,852

 

6.1

 

6,000

 

6.3

 

Unsecured notes

 

3,724

 

3.8

 

2,008

 

2.1

 

Structured finance securities

 

23,541

 

24.3

 

25,846

 

27.1

 

Equity interest

 

4,116

 

4.3

 

5,690

 

5.9

 

Limited partnership interest

 

 

 

 

 

Total

 

$

96,702

 

100.0

%

$

95,360

 

100.0

%

 

For loans and debt securities for which market quotations are not available, we determine their fair value based on third party indicative broker quotes, where available, or the assumptions that a hypothetical market participant would use to value the security in a current hypothetical sale using a market yield valuation methodology. In applying the market yield valuation methodology, we determine the fair value based on such factors as market participant assumptions including synthetic credit ratings, estimated remaining life, current market yield and interest rate spreads of similar securities as of the measurement date. If, in our judgment, the market yield methodology is not sufficient or appropriate, we may use additional methodologies such as an asset liquidation or expected recovery model.

 

F-17


 


 

For equity securities of portfolio companies and partnership interests, we determine the fair value based on the market approach with value then attributed to equity or equity like securities using the enterprise value waterfall valuation methodology. Under the enterprise value waterfall valuation methodology, we determine the enterprise fair value of the portfolio company and then waterfall the enterprise value over the portfolio company’s securities in order of their preference relative to one another. To estimate the enterprise value of the portfolio company, we weigh some or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value. The methodologies for performing investments may be based on, among other things: valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, third party valuations of the portfolio company, considering offers from third parties to buy the company, estimating the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company. For non-performing investments, we may estimate the liquidation or collateral value of the portfolio company’s assets and liabilities. We also take into account historical and anticipated financial results.

 

Our investment in GSC Investment Corp. CLO 2007, Ltd. (“Saratoga CLO”) is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations. The reinvestment period for the Saratoga CLO ended on January 20, 2013, and, as a result, reinvestment assumptions are no longer applicable. The assumptions are based on available market data and projections provided by third parties as well as management estimates. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flows analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO at February 28, 2013. The significant inputs for the valuation model include:

 

·                  Default rates: 3.0%

 

·                  Recovery rates: 35-70%

 

·                  Prepayment rate: 20.0%

 

Note 4. Investment in GSC Investment Corp. CLO 2007, Ltd. (“Saratoga CLO”)

 

On January 22, 2008, we invested $30 million in all of the outstanding subordinated notes of Saratoga CLO (which are referred in the statements of assets and liabilities of Saratoga CLO below as “Preference shares”), a collateralized loan obligation fund managed by us that invests primarily in senior secured loans. Additionally, we entered into a collateral management agreement with Saratoga CLO pursuant to which we act as collateral manager to it. In return for our collateral management services, we are entitled to a senior collateral management fee of 0.10% and a subordinate collateral management fee of 0.40% of the outstanding principal amount of Saratoga CLO’s assets, to be paid quarterly to the extent of available proceeds. We are also entitled to an incentive management fee equal to 20.0% of excess cash flow to the extent the Saratoga CLO subordinated notes receive an internal rate of return equal to or greater than 12.0%. For the years ended February 28, 2013, February 29, 2012, and February 28, 2011, we accrued $2.0 million, $2.0 million, and $2.0 million in management fee income, respectively and $4.2 million, $4.2 million, and $3.3 million in interest income, respectively, from Saratoga CLO. We did not accrue any amounts related to the incentive management fee as the 12.0% hurdle rate has not yet been achieved.

 

At February 28, 2013, the Company determined that the fair value of its investment in the subordinated notes of Saratoga CLO was $25.5 million, whereas the net asset value of Saratoga CLO on such date was $30.8 million. The Company does not believe that the net asset value of Saratoga CLO, which is the difference between Saratoga CLO’s assets and liabilities at a given point in time, necessarily equates to the fair value of its investment in the subordinated notes of Saratoga CLO. Specifically, the Company determines the fair value of its investment in the subordinated notes of Saratoga CLO based on the present value of the projected future cash flows of the subordinated notes over the life of Saratoga CLO. At February 28, 2013, Saratoga CLO had investments with a principal balance of $383.3 million and a weighted average spread over LIBOR of 4.3%, and had debt with a principal balance of $366.0 million with a weighted average spread over LIBOR of 1.4%. As a result, Saratoga CLO earns a “spread” between the interest income it receives on its investments and the interest expense it pays on its debt and other operating expenses, which is distributed quarterly to the Company as the

 

F-18



 

holder of its subordinated notes. At February 28, 2013, the total “spread”, or projected future cash flows of the subordinated notes, over the life of Saratoga CLO was $38.7 million, which had a present value of approximately $26.0 million, using a 13.0% discount rate. At February 28, 2013, the fair value of the subordinated notes, which we base upon the present value of the projected cash flows, was $25.5 million, which was less than the net asset value of Saratoga CLO on such date by approximately $5.3 million.

 

At February 29, 2012, the Company determined that the fair value of its investment in the subordinated notes of Saratoga CLO was $25.8 million, whereas the net asset value of Saratoga CLO on such date was $24.0 million. The Company does not believe that the net asset value of Saratoga CLO, which is the difference between Saratoga CLO’s assets and liabilities at a given point in time, necessarily equates to the fair value of its investment in the subordinated notes of Saratoga CLO. Specifically, the Company determines the fair value of its investment in the subordinated notes of Saratoga CLO based on the present value of the projected future cash flows of the subordinated notes over the life of Saratoga CLO. At February 29, 2012, Saratoga CLO had investments with a principal balance of $380.2 million and a weighted average spread over LIBOR of 3.6%, and had debt of $366.0 million with a weighted average spread over LIBOR of 1.4%. As a result, Saratoga CLO earns a “spread” between the interest income it receives on its investments and the interest expense it pays on its debt and other operating expenses, which is distributed quarterly to the Company as the holder of its subordinated notes. At February 29, 2012, the total “spread”, or projected future cash flows of the subordinated notes, over the life of Saratoga CLO was $47.1 million, which had a present value of approximately $26.3 million, using a 16.0% discount rate. At February 29, 2012, the fair value of the subordinated notes, which we base upon the present value of the projected cash flows, was $25.8 million, which was greater than the net asset value of Saratoga CLO on such date by approximately $1.8 million.

 

F-19



 

Note 5. Income Taxes

 

The Company intends to operate so as to qualify to be taxed as a RIC under Subchapter M of the Code and, as such, will not be subject to federal income tax on the portion of taxable income and gains distributed to stockholders.

 

The Company owns 100.0% of Saratoga CLO, an exempted company incorporated in the Cayman Islands. For financial reporting purposes, the Saratoga CLO is not included as part of the consolidated financial statements. For federal income tax purposes, the Company has requested and received approval from the Internal Revenue Service to treat the Saratoga CLO as a disregarded entity. As such, for federal income tax purposes and for purposes of meeting the RIC qualification and diversification tests, the results of operations of the Saratoga CLO are included with those of the Company.

 

To qualify as a RIC, the Company is required to meet certain income and asset diversification tests in addition to distributing at least 90.0% of its investment company taxable income, as defined by the Code. Because federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary in nature. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. As of February 28, 2013 and February 29, 2012, the Company reclassified for book purposes amounts arising from permanent book/tax differences primarily related to nondeductible excise tax, meals & entertainment, market discount, interest income with respect to the Saratoga CLO which is consolidated for tax purposes, and the tax character of distributions as follows (dollars in thousands):

 

 

 

February 28,
2013

 

February 29,
2012

 

Accumulated net investment income/(loss)

 

$

(1,155

)

$

(871

)

Accumulated net realized gains (losses) on investments

 

1,155

 

859

 

Additional paid-in-capital

 

 

12

 

 

For income tax purposes, distributions paid to shareholders are reported as ordinary income, return of capital, long term capital gains or a combination thereof. The tax character of distributions paid for the years ended February 28, 2013 and February 29, 2012 was as follows (dollars in thousands):

 

 

 

February 28,
2013

 

February 29,
2012

 

Ordinary Income

 

$

16,476

 

$

9,831

 

Capital gains

 

 

 

Return of capital

 

 

 

Total

 

$

16,476

 

$

9,831

 

 

For federal income tax purposes, as of February 28, 2013, the aggregate net unrealized depreciation for all securities is $2.7  million. The aggregate cost of securities for federal income tax purposes is $506.7  million.

 

For federal income tax purposes, as of February 29, 2012, the aggregate net unrealized depreciation for all securities is $8.3 million. The aggregate cost of securities for federal income tax purposes is $459.1 million.

 

At February 28, 2013 and February 29, 2012, the components of accumulated losses on a tax basis as detailed below differ from the amounts reflected per the Company’s consolidated statements of assets and liabilities by temporary book/tax differences primarily arising from the consolidation of the Saratoga CLO for tax purposes, market discount and original issue discount income, interest income accrual on defaulted bonds, write-off of investments, and amortization of organizational expenditures (dollars in thousands).

 

 

 

February 28,
2013

 

February 29,
2012

 

Post October loss deferred

 

$

 

$

(12,117

)

Accumulated capital losses

 

(58,248

)

(50,249

)

Other temporary differences

 

(1,515

)

(297

)

Undistributed ordinary income

 

3,927

 

4,385

 

Unrealized depreciation

 

(2,750

)

(8,266

)

Total components of accumulated losses

 

$

(58,586

)

$

(66,544

)

 

F-20



 

The Company has incurred capital losses of $19.3, $14.1 and $3.2 million for the years ended February 28, 2011, 2010 and 2009. Such capital losses will be available to offset future capital gains if any and if unused, will expire on February 28, 2019, 2018 and 2017.

 

At February 28, 2013, the Company had a short term capital loss of $10.4 million and a long-term capital loss of $11.2 million available to offset future capital gains. Post RIC-modernization act losses are deemed to arise on the first day of the fund’s following fiscal year and there is no expiration for these losses.

 

Management has analyzed the Company’s tax positions taken on federal income tax returns for all open years (fiscal years 2009-2013), and has concluded that no provision for uncertain income tax positions is required in the Company’s financial statements.

 

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Modernization Act”) was enacted, and the provisions with the Modernization Act are effective for the Company for the year ended February 29, 2012. The Modernization Act is the first major piece of legislation affecting RICs since 1986 and it modernizes several of the federal income and excise tax provisions related to RICs. Some highlights of the enacted provisions are as follows:

 

New capital losses may now be carried forward indefinitely, and retain the character of the original loss. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital, irrespective of the character of the original loss.

 

The Modernization Act contains simplification provisions, which are aimed at preventing disqualification of a RIC for “inadvertent” failures of the asset diversification and/or qualifying income tests. Additionally, the Modernization Act exempts RICs from the preferential dividend rule, and repealed the 60-day designation requirement for certain types of pay-through income and gains.

 

Finally, the Modernization Act contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions.

 

Note 6. Agreements

 

On July 30, 2010, the Company entered into an investment advisory and management agreement (the “Management Agreement”) with our Manager. The initial term of the Management Agreement is two years, with automatic, one-year renewals at the end of each year subject to certain approvals by our board of directors and/or our stockholders. On July 9, 2012, our board of directors approved the renewal of the Management Agreement for an additional one-year term. Pursuant to the Management Agreement, our Manager implements our business strategy on a day-to-day basis and performs certain services for us, subject to oversight by our board of directors. Our Manager is responsible for, among other duties, determining investment criteria, sourcing, analyzing and executing investments transactions, asset sales, financings and performing asset management duties. Under the Management Agreement, we have agreed to pay our Manager a management fee for investment advisory and management services consisting of a base management fee and an incentive fee.

 

The base management fee of 1.75% is calculated based on the average value of our gross assets (other than cash or cash equivalents, but including assets purchased with borrowed funds) at the end of the two most recently completed fiscal quarters, and appropriately adjusted for any share issuances or repurchases during the applicable fiscal quarter.

 

The incentive fee consists of the following two parts:

 

The first, payable quarterly in arrears, equals 20.0% of our pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding quarter, that exceeds a 1.875% quarterly (7.5% annualized) hurdle rate measured as of the end of each fiscal quarter, subject to a “catch-up” provision. Under this provision, in any fiscal quarter, our Manager receives no incentive fee unless our pre-incentive fee net investment income exceeds the hurdle rate of 1.875%. Our Manager will receive 100.0% of pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than or equal to 2.344% in any fiscal quarter (9.376% annualized); and 20.0% of the amount of the our pre-incentive fee net

 

F-21



 

investment income, if any, that exceeds 2.344% in any fiscal quarter (9.376% annualized).

 

The second part of the incentive fee is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Management Agreement) and equals 20.0% of our “incentive fee capital gains,” which equals our realized capital gains on a cumulative basis from May 31, 2010 through the end of the year, if any, 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 fee. Importantly, the capital gains portion of the incentive fee is based on realized gains and realized and unrealized losses from May 31, 2010. Therefore, realized and unrealized losses incurred prior to such time will not be taken into account when calculating the capital gains portion of the incentive fee, and our Manager will be entitled to 20.0% of incentive fee capital gains that arise after May 31, 2010. In addition, for the purpose of the “incentive fee capital gains” calculations, the cost basis for computing realized gains and losses on investments held by us as of May 31, 2010 will equal the fair value of such investments as of such date.

 

For the years ended February 28, 2013, February 29, 2012, and February 28, 2011, we incurred $2.1 million, $1.6 million, and $1.6 million in base management fees, respectively. For the years ended February 28, 2013, February 29, 2012, and February 28, 2011, we incurred $1.0 million, $0.5 million, and $0.4 million in incentive fees related to pre-incentive fee net investment income. For the year ended February 28, 2011, we incurred $0.4 million in incentive fees related to pre-incentive fee net investment income and recorded a $2.6 million reversal in previously recorded deferred incentive management fees related to net investment income as a result of the agreement of our former investment adviser, GSCP (NJ), L.P., to waive such amount in connection with the recapitalization transaction described in “Note 13. Recapitalization Transaction” below. For the years ended February 28, 2013, February 29, 2012, and February 28, 2011, we accrued $1.0 million, $0.7 million, and $1.5 million in incentive management fees related to capital gains, respectively. The accrual is calculated using both realized and unrealized capital gains for the period. The actual incentive fee related to capital gains will be determined and payable in arrears at the end of the fiscal year and will include only realized capital gains for the period. As of February 28, 2013, $0.6 million of base management fees and $3.9 million of incentive fees were accrued and included in management and incentive fees payable in the accompanying consolidated statements of assets and liabilities. As of February 29, 2012, $0.4 million of base management fees and $2.5 million of incentive fees were accrued and included in management and incentive fees payable in the accompanying consolidated statements of assets and liabilities.

 

On July 30, 2010, the Company entered into a separate administration agreement (the “Administration Agreement”) with our Manager, pursuant to which our Manager, as our administrator, has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations and provide managerial assistance on our behalf to those portfolio companies to which we are required to provide such assistance. The initial term of the Administration Agreement is two years, with automatic, one-year renewals at the end of each year subject to certain approvals by our board of directors and/or our stockholders. The amount of expenses payable or reimbursable thereunder by the Company is capped at $1.0 million for the initial two year term of the administration agreement. On July 9, 2012, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to maintain the cap on the payment or reimbursement of expenses by the Company thereunder to $1.0 million for the additional one-year term.

 

For the years ended February 28, 2013, February 29, 2012, and February 28, 2011, we recognized $1.0 million, $1.0 million and $0.8 million in administrator expenses for the periods, pertaining to bookkeeping, record keeping and other administrative services provided to us in addition to our allocable portion of rent and other overhead related expenses. As of February 28, 2013, $0.2 million of administrator expenses were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities. As of February 29, 2012, $0.4 million of administrator expenses were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities.

 

Note 7. Borrowings

 

Credit Facility

 

As a BDC, we are only allowed to employ leverage to the extent that our asset coverage, as defined in the 1940 Act, equals at least 200.0% after giving effect to such leverage. The amount of leverage that we employ at any time depends on our assessment of the market and other factors at the time of any proposed borrowing.

 

On April 11, 2007, we entered into a $100.0 million revolving securitized credit facility (the “Revolving Facility”). On May 1, 2007, we entered into a $25.7 million term securitized credit facility (the “Term Facility” and, together with the Revolving Facility, the “Facilities”), which was fully drawn at closing. In December 2007, we consolidated the Facilities by using a draw under the Revolving Facility to repay the Term Facility. In response to the market wide decline in financial asset prices, which negatively

 

F-22



 

affected the value of our portfolio, we terminated the revolving period of the Revolving Facility effective January 14, 2009 and commenced a two-year amortization period during which all principal proceeds from the collateral was used to repay outstanding borrowings. A significant percentage of our total assets had been pledged under the Revolving Facility to secure our obligations thereunder. Under the Revolving Facility, funds were borrowed from or through certain lenders and interest was payable monthly at the greater of the commercial paper rate and our lender’s prime rate plus 4.00% plus a default rate of 2.00% or, if the commercial paper market was unavailable, the greater of the prevailing LIBOR rates and our lender’s prime rate plus 6.00% plus a default rate of 3.00%.

 

In March 2009, we amended the Revolving Facility to increase the portion of the portfolio that could be invested in “CCC” rated investments in return for an increased interest rate and expedited amortization. As a result of these transactions, we expected to have additional cushion under our borrowing base under the Revolving Facility that would allow us to better manage our capital in times of declining asset prices and market dislocation.

 

On July 30, 2009, we exceeded the permissible borrowing limit under the Revolving Facility for 30 consecutive days, resulting in an event of default under the Revolving Facility. As a result of this event of default, our lender had the right to accelerate repayment of the outstanding indebtedness under the Revolving Facility and to foreclose and liquidate the collateral pledged thereunder. Acceleration of the outstanding indebtedness and/or liquidation of the collateral could have had a material adverse effect on our liquidity, financial condition and operations.

 

On July 30, 2010, we used the net proceeds from (i) the stock purchase transaction and (ii) a portion of the funds available to us under the $45.0 million senior secured revolving credit facility (the “Replacement Facility”) with Madison Capital Funding LLC, in each case, described in “Note 13. Recapitalization Transaction” below, to pay the full amount of principal and accrued interest, including default interest, outstanding under the Revolving Facility. As a result, the Revolving Facility was terminated in connection therewith. Substantially all of our total assets have been pledged under the Replacement Facility to secure our obligations thereunder.

 

On February 24, 2012, we amended our senior secured revolving credit facility with Madison Capital Funding LLC to, among other things:

 

·                  expand the borrowing capacity under the credit facility from $40.0 million to $45.0 million;

 

·                  extend the period during which we may make and repay borrowings under the credit facility from July 30, 2013 to February 24, 2015 (the “Revolving Period”). The Revolving Period may upon the occurrence of an event of default, by action of the lenders or automatically. All borrowings and other amounts payable under the credit facility are due and payable five years after the end of the Revolving Period; and

 

·                  remove the condition that we may not acquire additional loan assets without the prior written consent of Madison Capital Funding LLC.

 

As of February 28, 2013, there was $24.3 million outstanding under the Replacement Facility and the Company is in compliance with all of the limitations and requirements of the Replacement Facility. The carrying amount of the amount outstanding of the Replacement Facility approximates its fair value. $2.3 million of financing costs related to the Replacement Facility have been capitalized and are being amortized over the term of the facility. For the years ended February 28, 2013, February 29, 2012 and February 28, 2011, we recorded $2.0 million, $0.6 million, and $2.2 million of interest expense, respectively. For the years ended February 28, 2013, February 29, 2012 and February 28, 2011, we recorded $0.4 million, $0.7 million and $0.4 million of amortization of deferred financing costs related to the Replacement Facility and Revolving Facility, respectively. The interest rates during the years ended February 28, 2013, February 29, 2012 and February 28, 2011 on the outstanding borrowings under the Replacement Facility ranged from 7.50% to 7.50%, 0.75% to 7.50%, and 7.50% to 9.25% respectively.

 

The Replacement Facility contains limitations as to how borrowed funds may be used, such as restrictions on industry concentrations, asset size, weighted average life, currency denomination and collateral interests. The Replacement Facility also includes certain requirements relating to portfolio performance, the violation of which could result in the limit of further advances and, in some cases, result in an event of default, allowing the lenders to accelerate repayment of amounts owed thereunder. The Replacement Facility has an eight year term, consisting of a three year period (the “Revolving Period”), under which the Company may make and repay borrowings, and a final maturity five years from the end of the Revolving Period. Availability on the Replacement Facility will be subject to a borrowing base calculation, based on, among other things, applicable advance rates (which vary from 50.0% to 75.0% of par or fair value depending on the type of loan asset) and the value of certain “eligible” loan assets included as part of the Borrowing Base. Funds may be borrowed at the greater of the prevailing LIBOR rate and 2.00%, plus an applicable margin of 5.50%. At the Company’s option, funds may be borrowed based on an alternative base rate, which in no event

 

F-23



 

will be less than 3.00%, and the applicable margin over such alternative base rate is 4.50%. In addition, the Company will pay the lenders a commitment fee of 0.75% per year on the unused amount of the Replacement Facility for the duration of the Revolving Period.

 

Our borrowing base under the Replacement Facility was $35.7 million at February 28, 2013. For purposes of determining the borrowing base, most assets are assigned the values set forth in our most recent quarterly report on Form 10-Q filed with the SEC. Accordingly, the February 28, 2013 borrowing base relies upon the valuations set forth in the quarterly report on Form 10-Q for the quarter ended November 30, 2012. The valuations presented in this Annual Report on Form 10-K will not be incorporated into the borrowing base until after this Annual Report on Form 10-K is filed with the SEC.

 

SBA Debentures

 

SBIC LP 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 but not limited to an examination by the SBA. As of February 28, 2013, we have funded SBIC LP with $25.0 million of equity capital, and have $36.0 million of SBA-guaranteed debentures outstanding. SBA debentures are non-recourse to us, have a 10-year maturity, 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. SBA current regulations limit the amount that SBIC LP may borrow to a maximum of $150.0 million, which is up to twice its potential regulatory capital.

 

SBICs are designed to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses and invest in the equity securities of small businesses. Under present SBA regulations, eligible small businesses include businesses that have a tangible net worth not exceeding $18.0 million and have average annual fully taxed net income not exceeding $6.0 million for the two most recent fiscal years. In addition, an SBIC must devote 25.0% of its investment activity to ‘‘smaller’’ concerns as defined by the SBA. A smaller concern is one that has a tangible net worth not exceeding $6.0 million and has average annual fully taxed net income not exceeding $2.0 million for the two most recent fiscal years. SBA regulations also provide alternative size standard criteria to determine eligibility, which depend on the industry in which the business is engaged and are based on such factors as the number of employees and gross sales. According to SBA regulations, SBICs may make long-term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services.

 

SBIC LP is subject to regulation and oversight by the SBA, including requirements with respect to maintaining certain minimum financial ratios and other covenants. Receipt of an SBIC license does not assure that SBIC LP will receive SBA guaranteed debenture funding, which is dependent upon SBIC LP continuing to be in compliance with SBA regulations and policies. The SBA, as a creditor, will have a superior claim to SBIC LP’s assets over our stockholders in the event we liquidate SBIC LP or the SBA exercises its remedies under the SBA-guaranteed debentures issued by SBIC LP upon an event of default.

 

The Company received exemptive relief from the Securities and Exchange Commission to permit it to exclude the debt of SBIC LP guaranteed by the SBA from the definition of senior securities in the 200.0% asset coverage test under the 1940 Act. This allows the Company increased flexibility under the 200.0% asset coverage test by permitting it to borrow up to $150.0 million more than it would otherwise be able to absent the receipt of this exemptive relief.

 

As of February 28, 2013 there was $36.0 million outstanding of SBA debentures. The carrying amount of the amount outstanding of SBA debentures approximates its fair value. $1.4 million of financing costs related to the SBA debentures have been capitalized and are being amortized over the term of the commitment and drawdown. For the year ended February 28, 2013, we recorded $0.1 million of interest expense related to the SBA debentures. For the year ended February 28, 2013, we recorded $0.1 million of amortization of deferred financing costs related to the SBA debentures. The weighted average interest rate during the year ended February 28, 2013 on the outstanding borrowings of the SBA debentures was 1.42%. There were no outstanding SBA debentures at February 29, 2012.

 

Note 8. Directors Fees

 

The independent directors receive an annual fee of $40,000. They also receive $2,500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting and receive $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each committee meeting. In addition, the chairman of the Audit Committee receives an annual fee of $5,000 and the chairman of each other committee receives an annual fee of $2,000 for their additional services in these capacities. In addition, we have purchased directors’ and officers’ liability insurance on behalf of our directors and officers. Independent directors have the option to receive their directors’ fees in the form of our common stock issued at

 

F-24



 

a price per share equal to the greater of net asset value or the market price at the time of payment. No compensation is paid to directors who are “interested persons” of the Company (as such term is defined in the 1940 Act). For the years ended February 28, 2013, February 29, 2012 and February 28, 2011, we accrued $0.2 million, $0.2 million, and $0.4 million for directors’ fees expense, respectively. As of February 28, 2013 and February 29, 2012, $0.05 million and $0.05 million in directors’ fees expense were unpaid and included in accounts payable and accrued expenses in the consolidated statements of assets and liabilities. As of February 28, 2013, we had not issued any common stock to our directors as compensation for their services.

 

Note 9. Stockholders’ Equity

 

On May 16, 2006, GSC Group, Inc. capitalized the LLC, by contributing $1,000 in exchange for 67 shares, constituting all of the issued and outstanding shares of the LLC.

 

On March 20, 2007, the Company issued 95,995.5 and 8,136.2 shares of common stock, priced at $150.00 per share, to GSC Group and certain individual employees of GSC Group, respectively, in exchange for the general partnership interest and a limited partnership interest in GSC Partners CDO III GP, LP, collectively valued at $15.6 million. At this time, the 6.7 shares owned by GSC Group in the LLC were exchanged for 6.7 shares of the Company.

 

On March 28, 2007, the Company completed its IPO of 725,000 shares of common stock, priced at $150.00 per share, before underwriting discounts and commissions. Total proceeds received from the IPO, net of $7.1 million in underwriter’s discount and commissions, and $1.0 million in offering costs, were $100.7 million.

 

On November 13, 2009, we declared a dividend of $18.25 per share payable on December 31, 2009. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $2.1 million or $2.50 per share. Based on shareholder elections, the dividend consisted of $2.1 million in cash and 864,872.5 of newly issued shares of common stock.

 

On July 30, 2010, our Manager and its affiliates purchased 986,842 shares of common stock at $15.20 per share. Total proceeds received from this sale were $15.0 million. See “Note 13. Recapitalization Transaction.”

 

On August 12, 2010, we effected a one-for-ten reverse stock split of our outstanding common stock. As a result of the reverse stock split, every ten shares of our common stock were converted into one share of our common stock. Any fractional shares received as a result of the reverse stock split were redeemed for cash. The total cash payment in lieu of shares was $230. Immediately after the reverse stock split, we had 2,680,842 shares of our common stock outstanding.

 

On November 12, 2010, we declared a dividend of $4.40 per share payable on December 29, 2010. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $1.2 million or $0.44 per share. Based on shareholder elections, the dividend consisted of approximately $1.2 million in cash and 596,235 shares of common stock.

 

On November 15, 2011, we declared a dividend of $3.00 per share payable on December 30, 2011. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $2.0 million or $0.60 per share. Based on shareholder elections, the dividend consisted of approximately $2.0 million in cash and 599,584 shares of common stock.

 

On November 9, 2012, the Company declared a dividend of $4.25 per share payable on December 31, 2012. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $3.3 million or $0.85 per share.  Based on shareholder elections, the dividend consisted of approximately $3.3 million in cash and 853,455 shares of common stock.

 

Note 10. Earnings Per Share

 

In accordance with the provisions of FASB ASC 260, “Earnings per Share” (“ASC 260”), basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per

 

F-25



 

share on a diluted basis.

 

The following information sets forth the computation of the weighted average basic and diluted net decrease in net assets per share from operations for the years ended February 28, 2013, February 29, 2012 and February 28, 2011 (dollars in thousands except share and per share amounts):

 

Basic and diluted

 

February 28,
2013

 

February 29,
2012

 

February 28,
2011

 

Net increase in net assets from operations

 

$

14,602

 

$

13,275

 

$

16,958

 

Weighted average common shares outstanding

 

4,110,484

 

3,434,345

 

2,437,577

 

Earnings per common share-basic and diluted

 

$

3.55

 

$

3.87

 

$

6.96

 

 

Note 11. Dividend

 

On November 9, 2012, the Company declared a dividend of $4.25 per share payable on December 31, 2012. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $3.3 million or $0.85 per share.

 

Based on shareholder elections, the dividend consisted of approximately $3.3 million in cash and 853,455 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.444 per share, which equaled the volume weighted average trading price per share of the common stock on December 14, 17, 19, 2012. The consolidated financial statements for the period ended November 30, 2012 have been retroactively adjusted to reflect the increase in common stock as a result of the dividend in accordance with the provisions of ASC 505-20-S50 regarding disclosure of a capital structure change after the interim balance sheet but before the release of the financial statements.

 

On November 15, 2011, we declared a dividend of $3.00 per share payable on December 30, 2011. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $2.0 million or $0.60 per share.

 

Based on shareholder elections, the dividend consisted of approximately $2.0 million in cash and 599,584 shares of common stock, or 18.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $13.1171 per share, which equaled the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2011. The financial statements for the period ended November 30, 2011 have been retroactively adjusted to reflect the increase in common stock as a result of the dividend in accordance with the provisions of ASC 505-20-S50 regarding disclosure of a capital structure change after the interim balance sheet but before the release of the financial statements.

 

On November 12, 2010, we declared a dividend of $4.40 per share payable on December 23, 2010. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $1.2 million or $0.44 per share.

 

Based on shareholder elections, the dividend consisted of approximately $1.2 million in cash and 596,235 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 10.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.8049 per share, which equaled the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2010. The financial statements for the period ended November 30, 2010 have been retroactively adjusted to reflect the increase in common stock as a result of the dividend in accordance with the provisions of ASC 505-20-S50 regarding disclosure of a capital structure change after the interim balance sheet but before the release of the financial statements.

 

F-26



 

The following tables summarize dividends declared during the years ended February 28, 2013, February 29, 2012 and February 28, 2011 (dollars in thousands except per share amounts):

 

Date Declared

 

Record Date

 

Payment Date

 

Amount
Per Share*

 

Total
Amount

 

November 9, 2012

 

November 20, 2012

 

December 31, 2012

 

$

4.25

 

$

16,476

 

Total dividends declared

 

 

 

 

 

$

4.25

 

$

16,476

 

 

Date Declared

 

Record Date

 

Payment Date

 

Amount
Per Share*

 

Total
Amount

 

November 15, 2011

 

November 25, 2011

 

December 30, 2011

 

$

3.00

 

$

9,831

 

Total dividends declared

 

 

 

 

 

$

3.00

 

$

9,831

 

 

Date Declared

 

Record Date

 

Payment Date

 

Amount
Per Share*

 

Total
Amount

 

November 12, 2010

 

November 19, 2010

 

December 29, 2010

 

$

4.40

 

$

11,796

 

Total dividends declared

 

 

 

 

 

$

4.40

 

$

11,796

 

 


*                                         Amount per share is calculated based on the number of shares outstanding at the date of declaration.

 

Note 12. Financial Highlights

 

The following is a schedule of financial highlights for the years ended February 28, 2013, February 29, 2012, February 28, 2011, 2010, and 2009:

 

For 2010 and 2009 the amount per share has been adjusted to reflect a one-for-ten reverse stock split effectuated in August 2010.

 

 

 

February 28,
2013

 

February 29,
2012

 

February 28,
2011

 

February 28,
2010

 

February 28,
2009

 

Per share data:(7)

 

 

 

 

 

 

 

 

 

 

 

Net asset value at beginning of period

 

$

25.12

 

$

26.26

 

$

32.75

 

$

82.00

 

$

118.00

 

Net investment income(1)

 

1.71

 

1.66

 

2.15

 

5.40

 

16.70

 

Net realized and unrealized gains and losses on investments and derivatives

 

1.84

 

2.21

 

4.81

 

(15.30

)

(42.40

)

Net increase (decrease) in net assets from operations

 

3.55

 

3.87

 

6.96

 

(9.90

)

(25.70

)

Distributions declared from net investment income

 

(4.25

)

(3.00

)

(4.40

)

(18.25

)

(10.30

)

Distributions declared from net realized capital gains

 

 

 

 

 

 

Total distributions to stockholders

 

(4.25

)

(3.00

)

(4.40

)

(18.25

)

(10.30

)

Other(5)

 

(1.44

)

(2.01

)

(9.05

)

(21.10

)

 

Net asset value at end of period

 

$

22.98

 

$

25.12

 

$

26.26

 

$

32.75

 

$

82.00

 

Net assets at end of period

 

$

108,686,761

 

$

97,380,150

 

$

86,071,454

 

$

55,478,152

 

$

68,013,777

 

Shares outstanding at end of period

 

4,730,116

 

3,876,661

 

3,277,077

 

1,694,010

 

829,138

 

Per share market value at end of period(7)

 

$

17.02

 

$

15.88

 

$

21.25

 

$

19.20

 

$

19.90

 

Total return based on market value(2)

 

36.67

%

12.82

%

38.25

%

113.10

%

(70.33

)%

Total return based on net asset value(3)

 

16.65

%

17.51

%

0.16

%

(11.92

)%

14.40

%

Ratio/Supplemental data:(6)

 

 

 

 

 

 

 

 

 

 

 

Ratio of net investment income to average, net assets(4)(6)

 

6.73

%

6.11

%

6.53

%

8.10

%

15.19

%

Ratio of operating expenses to average net assets(4)

 

5.17

%

5.63

%

12.05

%

9.78

%

7.12

%

Ratio of incentive management fees to average net assets

 

1.96

%

1.35

%

2.45

%

0.52

%

2.05

%

Ratio of credit facility related expenses to average net assets

 

2.43

%

1.39

%

3.42

%

6.54

%

3.05

%

Ratio of total expenses to average net assets(4)

 

9.56

%

8.36

%

12.02

%

16.84

%

12.23

%

Portfolio turnover rate(8)

 

17.30

%

36.34

%

10.14

%

14.68

%

20.00

%

 


(1)                                 Net investment income per share is calculated using the weighted average shares outstanding during the period. Net investment income excluding expense waiver and reimbursement equals $2.05, $4.75 and $15.46 per share for the years ended February 28, 2011, 2010 and 2009, respectively.

 

(2)                                 Total investment return is calculated assuming a purchase of common shares at the current market value on the first day and a sale at the current market value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions. Total investment returns covering less than a full period are not annualized.

 

F-27



 

(3)                                 Total investment return is calculated assuming a purchase of common shares at the current net asset value on the first day and a sale at the current net asset value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions.

 

(4)                                 For the year ended February 28, 2011, net of the expense waiver and reimbursement arrangement, the ratio of net investment income, operating expenses, total expenses to average net assets is 6.87%, 11.71%, and 11.68%, respectively. For the year ended February 28, 2010, net of the expense waiver and reimbursement arrangement, the ratio of net investment income, operating expenses, total expenses to average net assets is 9.12%, 8.71% and 15.77%, respectively. For the year ended February 28, 2009, net of the expense waiver and reimbursement arrangement, the ratio of net investment income, operating expenses, total expenses to average net assets is 16.21%, 5.94% and 11.04%, respectively.

 

(5)                                 Represents the dilutive effect of issuing common stock below net asset value per share during the period in connection with the satisfaction of the Company’s annual RIC distribution requirement. See Note 10, Dividend.

 

(6)                                 These ratios for the years ended February 28, 2010 and 2009 do not include the effect of the waiver of deferred incentive fees which is (3.83)% on a non-annualized basis as this is a one time waiver.

 

(7)                                 February 28, 2010 and 2009 data has been adjusted to reflect a one-for-ten reverse stock split effectuated in August 2010.

 

(8)                                 Portfolio turnover rate is calculated using the lesser of year-to-date sales or year-to-date purchases over the average of the invested assets at fair value.

 

Note 13. Recapitalization Transaction

 

In July 2010, we consummated a recapitalization transaction that was necessitated by the fact that we had exceeded permissible borrowing limits under the Revolving Facility in July 2009, which resulted in an event of default under the Revolving Facility. As a result of the event of default under the Revolving Facility, the lender had the right to accelerate repayment of the outstanding indebtedness under the Revolving Facility and to foreclose and liquidate the collateral pledged thereunder. We engaged the investment banking firm of Stifel, Nicolaus & Company to evaluate strategic transaction opportunities and consider alternatives for us in December 2008. On April 14, 2010, we entered into a stock purchase agreement with our Manager and certain of its affiliates and an assignment, assumption and novation agreement with our Manager, pursuant to which we assumed certain rights and obligations of our Manager under a debt commitment letter our Manager received from Madison Capital Funding LLC, indicating Madison Capital Funding’s willingness to provide us with the Replacement Facility, subject to the satisfaction of certain terms and conditions. In addition, we and GSCP (NJ), L.P., our then external investment adviser, entered into a termination and release agreement, to be effective as of the closing of the transaction contemplated by the stock purchase agreement, pursuant to which GSCP (NJ), L.P., among other things, agreed to waive any and all accrued and unpaid deferred incentive management fees up to and as of the closing of the transaction contemplated by the stock purchase agreement but continued to be entitled to receive the base management fees earned through the date of the closing of the transaction contemplated by the stock purchase agreement.

 

On July 30, 2010, the transactions contemplated by the stock purchase agreement with our Manager and certain of its affiliates was completed, and included the following actions:

 

·                  the private sale of shares of our common stock for $15.0 million in aggregate purchase price to our Manager and certain of its affiliates;

 

·                  the closing of the $40.0 million Replacement Facility with Madison Capital Funding;

 

·                  the execution of a registration rights agreement with the investors in the private sale transaction, pursuant to which we agreed to file a registration statement with the SEC to register for resale the shares of our common stock sold in the private sale transaction;

 

·                  the execution of a trademark license agreement with our Manager pursuant to which our Manager granted us a non-exclusive, royalty-free license to use the “Saratoga” name, for so long as our Manager or one of its affiliates remains our investment adviser;

 

·                  replacing GSCP (NJ), L.P. as our investment adviser and administrator with our Manager by executing an investment advisory and management agreement, which was approved by our stockholders, and an administration agreement with our Manager;

 

F-28



 

·                  the resignations of Robert F. Cummings, Jr. and Richard M. Hayden, both of whom are affiliates of GSCP (NJ) L.P., as members of the board of directors and the election of Christian L. Oberbeck and Richard A. Petrocelli, both of whom are affiliates of our Manager, as members of the board of directors;

 

·                  the resignation of all of our then existing executive officers and the appointment by our board of directors of Mr. Oberbeck as our chief executive officer and Mr. Petrocelli as our chief financial officer, secretary and chief compliance officer; and

 

·                  our name change from “GSC Investment Corp.” to “Saratoga Investment Corp.”

 

We used the net proceeds from the private sale transaction and a portion of the funds available to us under the Replacement Facility to pay the full amount of principal and accrued interest, including default interest, outstanding under Revolving Facility. The Revolving Facility with Deutsche Bank was terminated in connection with our payment of all amounts outstanding thereunder on July 30, 2010.

 

Note 14. Selected Quarterly Data (Unaudited)

 

 

 

2013

 

($ in thousands, except per share numbers)

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Interest and related portfolio income

 

$

4,306

 

$

3,513

 

$

3,514

 

$

3,111

 

Net investment income

 

1,952

 

2,489

 

1,314

 

1,273

 

Net realized and unrealized gain (loss)

 

3,843

 

(1,744

)

3,557

 

1,918

 

Net increase in net assets resulting from operations

 

5,795

 

745

 

4,871

 

3,191

 

Net investment income per common share at end of each quarter

 

$

0.42

 

$

0.63

 

$

0.34

 

$

0.33

 

Net realized and unrealized gain (loss) per common share at end of each quarter

 

$

0.81

 

$

(0.44

)

$

0.92

 

$

0.49

 

Dividends declared per common share

 

$

 

$

4.25

 

$

 

$

 

Net asset value per common share

 

$

22.98

 

$

21.75

 

$

27.20

 

$

25.94

 

 

 

 

2012

 

($ in thousands, except per share numbers)

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Interest and related portfolio income

 

$

2,946

 

$

3,033

 

$

2,887

 

$

2,387

 

Net investment income

 

1,578

 

824

 

2,720

 

578

 

Net realized and unrealized gain (loss)

 

1,502

 

5,389

 

(4,448

)

5,131

 

Net increase (decrease) in net assets resulting from operations

 

3,080

 

6,213

 

(1,728

)

5,709

 

Net investment income per common share at end of each quarter

 

$

0.40

 

$

0.25

 

$

0.83

 

$

0.17

 

Net realized and unrealized gain (loss) per common share at end of each quarter

 

$

0.39

 

$

1.63

 

$

(1.36

)

$

1.57

 

Dividends declared per common share

 

$

 

$

3.00

 

$

 

$

 

Net asset value per common share

 

$

25.12

 

$

24.32

 

$

27.48

 

$

28.01

 

 

 

 

2011

 

($ in thousands, except per share numbers)

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Interest and related portfolio income

 

$

2,624

 

$

4,580

 

$

2,566

 

$

2,270

 

Net investment income

 

830

 

1,935

 

2,482

 

2

 

Net realized and unrealized gain

 

3,463

 

1,375

 

4,218

 

2,653

 

Net increase in net assets resulting from operations

 

4,294

 

3,310

 

6,700

 

2,655

 

Net investment income per common share at end of each quarter

 

$

0.25

 

$

0.70

 

$

1.21

 

$

0.00

 

Net realized and unrealized gain per common share at end of each quarter

 

$

1.06

 

$

0.50

 

$

2.06

 

$

1.57

 

Dividends declared per common share

 

$

 

$

4.40

 

$

 

$

 

Net asset value per common share

 

$

26.26

 

$

24.95

 

$

29.71

 

$

34.32

 

 

Note 15. Subsequent Events

 

Management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. There have been no subsequent events that occurred during such period that would require disclosure in this Form 10-K or would be required to be recognized in the consolidated financial statements as of and for the years ended February 28, 2013, except as disclosed below.

 

On May 10, 2013, the Company issued $42.0 million in aggregate principal amount of 7.50% fixed-rate notes due 2020.  The notes will mature on May 31, 2020, and may be redeemed in whole or in part at any time or from time to time at the Company's option on or after May 31, 2016.  Interest will be payable quarterly beginning August 15, 2013. 

 

On May 17, 2013, the Company closed an additional $6.3 million in aggregate principal amount of 7.50% fixed-rate notes due 2020, pursuant to the full exercise of the underwriters' option to purchase additional notes.

 

F-29



 

INDEX TO OTHER FINANCIAL STATEMENTS

 

GSC Investment Corp. CLO 2007, LTD.

 

Report of Independent Auditors

 

S-2

Statements of Assets and Liabilities as of February 28, 2013 and February 29, 2012

 

S-3

Statements of Operations for the years ended February 28, 2013, February 29, 2012, and February 28, 2011

 

S-4

Schedules of Investments as of February 28, 2013 and February 29, 2012

 

S-5

Statements of Changes in Net Assets for the years ended February 28, 2013, February 29, 2012 and February 28, 2011

 

S-7

Statements of Cash Flows for the years ended February 28, 2013 and February 29, 2012 and February 28, 2011

 

S-8

Notes to Financial Statements

 

S-9

 

IMPORTANT NOTE

 

In accordance with certain SEC rules, Saratoga Investment Corp. (the “Company”) is providing additional information regarding one of its portfolio companies, GSC Investment Corp. CLO 2007, LTD. (the “Saratoga CLO”). The Company owns 100% of the subordinated notes of the CLO.  The additional financial information regarding the CLO does not directly impact the Company’s financial position, results of operations or cash flows.

 

S-1



 

Report of Independent Auditors

 

The Collateral Manager and Directors,

 

GSC Investment Corp. CLO 2007, Ltd.

 

We have audited the accompanying financial statements of GSC Investment Corp. CLO 2007, Ltd. (the “Issuer”), which comprise the statements of assets and liabilities including the schedules of investments, as of February 28, 2013 and February 29, 2012, and the statements of operations, changes in net assets, and cash flows for the years ended February 28, 2013, February 29, 2012 and February 28, 2011, and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GSC Investment Corp. CLO 2007, Ltd. at February 28, 2013 and February 29, 2012, and the results of its operations, changes in its net assets, and its cash flows for the years ended February 28, 2013, February 29, 2012 and February 28, 2011, in conformity with U.S. generally accepted accounting principles.

 

/s/ Ernst & Young LLP

New York, New York

June 7, 2013

 

S-2



 

GSC Investment Corp. CLO 2007

 

Statements of Assets and Liabilities

 

 

 

As of

 

 

 

February 28, 2013

 

February 29, 2012

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

 

 

 

Fair value loans (amortized cost of $366,099,395 and $372,748,714, respectively)

 

$

362,494,006

 

$

365,780,893

 

Fair value other/structured finance securities (amortized cost of $13,743,946 and $17,274,888, respectively)

 

11,925,973

 

15,583,573

 

Total investments at fair value

 

374,419,979

 

381,364,466

 

Cash and cash equivalents

 

28,804,871

 

17,815,082

 

Receivable from open trades

 

5,131,538

 

10,046,640

 

Interest receivable

 

1,584,985

 

1,581,438

 

Deferred bond issuance

 

2,092,787

 

2,819,118

 

Total assets

 

$

412,034,160

 

$

413,626,744

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Interest payable

 

$

666,121

 

$

826,741

 

Payable from open trades

 

16,346,250

 

24,857,147

 

Accrued senior collateral management fee

 

43,171

 

45,516

 

Accrued subordinate collateral management fee

 

172,682

 

182,064

 

Class A notes

 

296,000,000

 

296,000,000

 

Class B notes

 

22,000,000

 

22,000,000

 

Discount on class B notes

 

(417,011

)

(477,483

)

Class C notes

 

14,000,000

 

14,000,000

 

Class D notes

 

16,000,000

 

16,000,000

 

Discount on class D notes

 

(441,136

)

(505,106

)

Class E notes

 

17,960,044

 

17,960,044

 

Discount on class E notes

 

(1,134,778

)

(1,299,337

)

Subordinated notes

 

30,000,000

 

30,000,000

 

Total liabilities

 

$

411,195,343

 

$

419,589,586

 

 

 

 

 

 

 

NET ASSETS

 

 

 

 

 

 

 

 

 

 

 

Ordinary equity, par value $1.00, 250 ordinary shares authorized, 250 and 250 issued and outstanding, respectively

 

$

250

 

$

250

 

Accumulated loss

 

(5,963,092

)

(3,132,908

)

Net income (loss)

 

6,801,659

 

(2,830,184

)

Total net assets

 

838,817

 

(5,962,842

)

 

 

 

 

 

 

Total liabilities and net assets

 

$

412,034,160

 

$

413,626,744

 

 

See accompanying notes to financial statements.

 

S-3



 

GSC Investment Corp. CLO 2007

 

Statements of Operations

 

 

 

For the year ended
February 28, 2013

 

For the year ended
February 29, 2012

 

For the year ended
February 28, 2011

 

 

 

 

 

 

 

 

 

INVESTMENT INCOME

 

 

 

 

 

 

 

Interest from investments

 

$

19,328,855

 

$

20,032,687

 

$

20,838,831

 

Interest from cash and cash equivalents

 

16,587

 

12,165

 

22,769

 

Other income

 

967,991

 

509,365

 

416,035

 

Total investment income

 

20,313,433

 

20,554,217

 

21,277,635

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

Interest expense

 

15,613,003

 

14,480,621

 

13,260,221

 

Professional fees

 

417,086

 

400,628

 

257,209

 

Misc. Fee Expense

 

133,794

 

176,768

 

3,532

 

Senior collateral management fee

 

400,014

 

402,303

 

406,471

 

Subordinate collateral management fee

 

1,600,057

 

1,609,213

 

1,625,886

 

Trustee expenses

 

100,820

 

100,551

 

101,625

 

Amortization expense

 

1,015,332

 

1,016,124

 

1,015,333

 

Total expenses

 

19,280,106

 

18,186,208

 

16,670,277

 

 

 

 

 

 

 

 

 

NET INVESTMENT INCOME

 

1,033,327

 

2,368,009

 

4,607,358

 

 

 

 

 

 

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

 

 

 

 

 

 

 

Net realized gain/(loss) on investments

 

2,532,558

 

(4,547,952

)

750,253

 

Net unrealized appreciation/(depreciation) on investments

 

3,235,774

 

(650,241

)

11,697,708

 

Net gain/(loss) on investments

 

5,768,332

 

(5,198,193

)

12,447,961

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

 

$

6,801,659

 

$

(2,830,184

)

$

17,055,319

 

 

See accompanying notes to financial statements.

 

S-4



 

GSC Investment Corp. CLO 2007

 

Schedule of Investments

 

February 28, 2013

 

Issuer_Name

 

Industry

 

Asset_Name

 

Asset_Type

 

Current Rate

 

Maturity Date

 

Principal / Number of
Shares

 

Cost

 

Fair Value

 

Elyria Foundry Company, LLC

 

Industrial Equipment

 

Warrants

 

Equity

 

0.00

%

 

 

 

$

 

$

 

Network Communications, Inc.

 

Business Equipment and Services

 

Common

 

Equity

 

0.00

%

 

 

169,143

 

169,143

 

659,658

 

OLD AII, Inc (fka Aleris International Inc.)

 

Conglomerate

 

Common

 

Equity

 

0.00

%

 

 

2,624

 

224,656

 

128,576

 

PATS Aircraft, LLC

 

Aerospace and Defense

 

Common

 

Equity

 

0.00

%

 

 

51,813

 

282,326

 

282,329

 

SuperMedia Inc. (fka Idearc Inc.)

 

Publishing

 

Common Stock

 

Equity

 

0.00

%

 

 

10,821

 

28,784

 

5,411

 

Academy, LTD.

 

Retailers (Except Food and Drugs)

 

Initial Term Loan (2012)

 

Loan

 

4.75

%

8/3/2018

 

$

1,980,037

 

1,966,002

 

2,000,927

 

ACCO Brands Corporation

 

Conglomerate

 

Term B Loan

 

Loan

 

4.25

%

5/1/2019

 

$

351,944

 

348,847

 

354,584

 

Acosta, Inc.

 

Food Products

 

Term D Loan

 

Loan

 

5.00

%

3/2/2018

 

$

4,183,659

 

4,120,774

 

4,216,082

 

Aderant North America, Inc.

 

Business Equipment and Services

 

Term Loan (First Lien)

 

Loan

 

6.25

%

12/20/2018

 

$

3,500,000

 

3,495,662

 

3,552,500

 

Aeroflex Incorporated

 

Aerospace and Defense

 

Tranche B Term Loan

 

Loan

 

5.75

%

5/9/2018

 

$

3,345,517

 

3,333,081

 

3,369,204

 

Alcatel-Lucent USA Inc.

 

Telecommunications/Cellular

 

US Term Loan

 

Loan

 

0.00

%

1/30/2019

 

$

1,075,000

 

1,069,625

 

1,087,008

 

Alere Inc. (fka IM US Holdings, LLC)

 

Healthcare

 

Incremental B-1 Term Loan

 

Loan

 

4.75

%

6/30/2017

 

$

1,980,000

 

1,941,348

 

1,999,444

 

Aptalis Pharma, Inc. (fka Axcan Intermediate Holdings Inc.)

 

Drugs

 

Term B-1 Loan

 

Loan

 

5.50

%

2/10/2017

 

$

1,960,000

 

1,953,535

 

1,963,920

 

Aramark Corporation

 

Food Products

 

LC-2 Facility

 

Loan

 

3.45

%

7/26/2016

 

$

79,187

 

79,187

 

79,600

 

Aramark Corporation

 

Food Products

 

LC-3 Facility

 

Loan

 

3.45

%

7/26/2016

 

$

43,961

 

43,961

 

44,190

 

Aramark Corporation

 

Food Products

 

U.S. Term B Loan (Extending)

 

Loan

 

3.45

%

7/26/2016

 

$

1,204,093

 

1,204,093

 

1,210,366

 

Aramark Corporation

 

Food Products

 

U.S. Term C Loan

 

Loan

 

3.52

%

7/26/2016

 

$

2,545,700

 

2,545,700

 

2,558,963

 

Armstrong World Industries, Inc

 

Building and Development

 

Term Loan B-1

 

Loan

 

4.00

%

3/10/2018

 

$

2,122,931

 

2,109,740

 

2,124,268

 

Asurion, LLC (fka Asurion Corporation)

 

Insurance

 

Amortizing Term Loan

 

Loan

 

4.75

%

7/23/2017

 

$

968,750

 

960,226

 

973,594

 

Asurion, LLC (fka Asurion Corporation)

 

Insurance

 

Incremental Tranche B-1 Term Loan

 

Loan

 

4.50

%

5/24/2019

 

$

5,659,091

 

5,602,698

 

5,674,144

 

Auction.Com, LLC

 

Business Equipment and Services

 

Term Loan A-4

 

Loan

 

4.96

%

8/30/2016

 

$

1,018,699

 

1,017,479

 

1,013,606

 

Aurora Diagnostics, LLC

 

Conglomerate

 

Tranche B Term Loan

 

Loan

 

6.25

%

5/26/2016

 

$

3,188,889

 

3,198,281

 

3,077,278

 

Autotrader.com, Inc.

 

Automotive

 

Tranche B-1 Term Loan

 

Loan

 

4.00

%

12/15/2016

 

$

3,830,768

 

3,830,768

 

3,853,522

 

Avantor Performance Materials Holdings, Inc.

 

Chemicals/Plastics

 

Term Loan

 

Loan

 

5.25

%

6/24/2017

 

$

4,925,000

 

4,907,124

 

4,925,000

 

AZ Chem US Inc.

 

Chemicals/Plastics

 

Term Loan

 

Loan

 

5.25

%

12/22/2017

 

$

1,570,579

 

1,532,447

 

1,585,170

 

Biomet, Inc.

 

Healthcare

 

Dollar Term B-1 Loan

 

Loan

 

4.00

%

7/25/2017

 

$

1,990,013

 

1,990,013

 

2,003,445

 

Bombardier Recreational Products Inc.

 

Leisure Goods/Activities/Movies

 

Term B Loan

 

Loan

 

5.00

%

1/30/2019

 

$

1,000,000

 

990,101

 

1,007,500

 

Brock Holdings III, Inc.

 

Industrial Equipment

 

Term Loan (First Lien)

 

Loan

 

0.00

%

3/16/2017

 

$

2,000,000

 

2,022,500

 

2,013,340

 

Burlington Coat Factory Warehouse Corporation

 

Retailers (Except Food and Drugs)

 

Term B-1 Loan

 

Loan

 

5.50

%

2/23/2017

 

$

2,776,843

 

2,767,803

 

2,802,306

 

C.H.I. Overhead Doors, Inc. (CHI)

 

Home Furnishings

 

Term Loan (First Lien)

 

Loan

 

7.25

%

8/17/2017

 

$

2,976,290

 

2,931,556

 

2,983,730

 

Camp International Holding Company

 

Aerospace and Defense

 

Refinanced Term Loan (First Lien)

 

Loan

 

5.25

%

5/31/2019

 

$

997,500

 

988,136

 

1,005,400

 

Capital Automotive L.P.

 

Conglomerate

 

Tranche B Term Loan

 

Loan

 

5.25

%

3/11/2017

 

$

2,811,086

 

2,817,777

 

2,823,961

 

Capstone Logistics, LLC

 

Business Equipment and Services

 

Term Note A

 

Loan

 

7.50

%

9/16/2016

 

$

2,699,305

 

2,669,394

 

2,658,816

 

Capsugel Holdings US, Inc.

 

Drugs

 

Initial Term Loan (New)

 

Loan

 

4.75

%

8/1/2018

 

$

3,605,198

 

3,595,976

 

3,641,214

 

Celanese US Holdings LLC

 

Chemicals/Plastics

 

Dollar Term C Loan (Extended)

 

Loan

 

3.06

%

10/31/2016

 

$

2,198,534

 

2,219,212

 

2,208,911

 

Cenveo Corporation

 

Publishing

 

Term B Facility

 

Loan

 

7.00

%

12/21/2016

 

$

2,437,399

 

2,421,925

 

2,444,516

 

Charter Communications Operating, LLC

 

Cable and Satellite Television

 

Term C Loan

 

Loan

 

3.46

%

9/6/2016

 

$

2,047,547

 

2,044,048

 

2,057,785

 

Charter Communications Operating, LLC

 

Cable and Satellite Television

 

Term D Loan

 

Loan

 

4.00

%

5/15/2019

 

$

1,985,000

 

1,976,313

 

2,000,503

 

CHS/ Community Health Systems, Inc.

 

Healthcare

 

Extended Term Loan

 

Loan

 

3.79

%

1/25/2017

 

$

4,064,516

 

3,963,653

 

4,090,935

 

Cinedigm Digital Funding I, LLC

 

Business Equipment and Services

 

Term Loan

 

Loan

 

5.75

%

2/28/2018

 

$

1,066,260

 

1,059,429

 

1,068,925

 

Contec, LLC

 

Electronics/Electric

 

Second Lien Term Notes

 

Loan

 

10.00

%

11/2/2016

 

$

401,202

 

2,400,891

 

2,578,210

 

Covanta Energy Corporation

 

Ecological Services and Equipment

 

Term Loan

 

Loan

 

4.00

%

3/28/2019

 

$

496,250

 

494,095

 

501,833

 

CPI International Acquisition, Inc. (f/k/a Catalyst Holdings, Inc.)

 

Electronics/Electric

 

Term B Loan

 

Loan

 

5.00

%

2/13/2017

 

$

4,805,833

 

4,789,964

 

4,829,862

 

Crown Castle Operating Company

 

Telecommunications/Cellular

 

Tranche B Term Loan

 

Loan

 

4.00

%

1/31/2019

 

$

1,980,000

 

1,963,120

 

1,989,484

 

Culligan International Company

 

Conglomerate

 

Dollar Loan (First Lien)

 

Loan

 

6.25

%

12/19/2017

 

$

795,675

 

732,459

 

729,372

 

Culligan International Company

 

Conglomerate

 

Dollar Loan (Second Lien)

 

Loan

 

9.50

%

6/19/2018

 

$

783,162

 

720,189

 

604,343

 

DaVita HealthCare Partners Inc. (fka DaVita Inc.)

 

Healthcare

 

Tranche B Term Loan

 

Loan

 

4.50

%

10/20/2016

 

$

3,949,622

 

3,949,622

 

3,977,822

 

DCS Business Services, Inc.

 

Financial Intermediaries

 

Term B Loan

 

Loan

 

7.25

%

3/19/2018

 

$

3,970,010

 

3,919,904

 

3,910,460

 

Del Monte Foods Company

 

Food Products

 

Initial Term Loan

 

Loan

 

4.00

%

3/8/2018

 

$

4,438,139

 

4,473,061

 

4,443,687

 

Delphi Corporation

 

Electronics/Electric

 

Tranche A Term Loan Retired 03/01/2013

 

Loan

 

4.25

%

3/31/2016

 

$

1,683,357

 

1,685,403

 

1,682,650

 

Digitalglobe, Inc.

 

Ecological Services and Equipment

 

Term Loan

 

Loan

 

0.00

%

1/31/2020

 

$

250,000

 

250,000

 

250,783

 

DS Waters of America, Inc.

 

Beverage and Tobacco

 

Term Loan (First Lien)

 

Loan

 

10.50

%

8/29/2017

 

$

2,977,500

 

2,928,511

 

3,037,050

 

Dunkin’ Brands, Inc.

 

Food Services

 

Term B-3 Loan

 

Loan

 

0.00

%

2/14/2020

 

$

4,000,000

 

3,990,000

 

3,990,000

 

DynCorp International Inc.

 

Aerospace and Defense

 

Term Loan

 

Loan

 

6.25

%

7/7/2016

 

$

574,161

 

567,732

 

577,606

 

Education Management LLC

 

Leisure Goods/Activities/Movies

 

Tranche C-2 Term Loan

 

Loan

 

4.31

%

6/1/2016

 

$

3,925,006

 

3,727,372

 

3,263,878

 

eInstruction Corporation

 

Electronics/Electric

 

Initial Term Loan

 

Loan

 

0.00

%

7/2/2013

 

$

2,997,722

 

2,931,236

 

899,317

 

Electrical Components International, Inc.

 

Electronics/Electric

 

Synthetic Revolving Loan

 

Loan

 

6.75

%

2/4/2016

 

$

117,647

 

116,611

 

117,647

 

Electrical Components International, Inc.

 

Electronics/Electric

 

Term Loan

 

Loan

 

6.75

%

2/4/2017

 

$

1,786,475

 

1,768,892

 

1,786,475

 

Evergreen Acqco 1 LP

 

Retailers (Except Food and Drugs)

 

New Term Loan

 

Loan

 

5.00

%

7/9/2019

 

$

497,503

 

492,828

 

501,702

 

Federal-Mogul Corporation

 

Automotive

 

Tranche B Term Loan

 

Loan

 

2.14

%

12/29/2014

 

$

2,589,036

 

2,498,894

 

2,467,351

 

Federal-Mogul Corporation

 

Automotive

 

Tranche C Term Loan

 

Loan

 

2.14

%

12/28/2015

 

$

1,320,937

 

1,264,234

 

1,258,853

 

First Data Corporation

 

Financial Intermediaries

 

2017 Dollar Term Loan

 

Loan

 

5.20

%

3/24/2017

 

$

2,111,028

 

2,027,434

 

2,111,914

 

First Data Corporation

 

Financial Intermediaries

 

2018 Dollar Term Loan

 

Loan

 

4.20

%

3/23/2018

 

$

2,290,451

 

2,216,829

 

2,261,591

 

Freescale Semiconductor, Inc.

 

Electronics/Electric

 

Tranche B-1 Term Loan Retired 03/01/2013

 

Loan

 

4.45

%

12/1/2016

 

$

2,534,348

 

2,450,139

 

2,535,945

 

FTD Group, Inc.

 

Retailers (Except Food and Drugs)

 

Initial Term Loan

 

Loan

 

4.75

%

6/11/2018

 

$

3,715,723

 

3,683,533

 

3,715,723

 

Generac Power Systems, Inc.

 

Industrial Equipment

 

Term Loan

 

Loan

 

6.25

%

5/30/2018

 

$

906,111

 

890,154

 

923,590

 

General Nutrition Centers, Inc.

 

Retailers (Except Food and Drugs)

 

Amended Tranche B Term Loan

 

Loan

 

3.75

%

3/2/2018

 

$

4,746,591

 

4,757,841

 

4,774,548

 

Global Tel*Link Corporation

 

Business Equipment and Services

 

Replacement Term Loan

 

Loan

 

6.00

%

12/14/2017

 

$

1,964,912

 

1,960,077

 

1,967,368

 

Goodyear Tire & Rubber Company, The

 

Chemicals/Plastics

 

Loan (Second Lien)

 

Loan

 

4.75

%

4/30/2019

 

$

4,000,000

 

3,929,629

 

4,015,000

 

Grifols Inc.

 

Drugs

 

New U.S. Tranche B Term Loan

 

Loan

 

4.25

%

6/1/2017

 

$

3,465,982

 

3,457,357

 

3,481,371

 

Grosvenor Capital Management Holdings, LLLP

 

Brokers/Dealers/Investment Houses

 

Tranche C Term Loan

 

Loan

 

4.25

%

12/5/2016

 

$

3,336,378

 

3,252,391

 

3,311,355

 

Hanger Orthopedic Group, Inc.

 

Healthcare

 

Term C Loan

 

Loan

 

4.00

%

12/1/2016

 

$

3,910,667

 

3,920,277

 

3,925,332

 

HCA Inc.

 

Healthcare

 

Tranche B-3 Term Loan

 

Loan

 

3.45

%

5/1/2018

 

$

5,734,690

 

5,440,293

 

5,764,912

 

Health Management Associates, Inc.

 

Healthcare

 

Term B Loan

 

Loan

 

4.50

%

11/16/2018

 

$

2,970,000

 

2,945,366

 

2,993,344

 

Hertz Corporation, The

 

Automotive

 

Tranche B-1 Term Loan

 

Loan

 

0.00

%

3/11/2018

 

$

3,000,000

 

3,045,000

 

3,045,000

 

HIBU PLC (fka Yell Group PLC)

 

Business Equipment and Services

 

Facility B1 - YB (USA) LLC (11/2009)

 

Loan

 

3.95

%

7/31/2014

 

$

3,030,606

 

2,983,167

 

530,356

 

HMH Holdings (Delaware) Inc.

 

Conglomerate

 

Term Loan (Exit Facility)

 

Loan

 

7.25

%

5/22/2018

 

$

992,500

 

974,925

 

997,463

 

Hologic, Inc.

 

Healthcare

 

Tranche A Term Loan

 

Loan

 

3.20

%

8/1/2017

 

$

2,437,500

 

2,432,069

 

2,439,328

 

Hunter Defense Technologies, Inc.

 

Aerospace and Defense

 

Term Loan

 

Loan

 

3.54

%

8/22/2014

 

$

3,679,939

 

3,647,610

 

3,385,544

 

Huntsman International LLC

 

Chemicals/Plastics

 

Extended Term B Loan

 

Loan

 

2.75

%

4/19/2017

 

$

3,920,000

 

3,883,690

 

3,920,000

 

Infor (US), Inc. ((fka Lawson Software Inc.)

 

Business Equipment and Services

 

Tranche B-2 Term Loan

 

Loan

 

5.25

%

4/5/2018

 

$

1,990,013

 

1,971,642

 

2,011,166

 

Inventiv Health, Inc. (fka Ventive Health, Inc)

 

Conglomerate

 

Consolidated Term Loan

 

Loan

 

7.50

%

8/4/2016

 

$

492,090

 

492,090

 

484,093

 

J. Crew Group, Inc.

 

Retailers (Except Food and Drugs)

 

Term B-1 Loan

 

Loan

 

4.00

%

3/7/2018

 

$

982,500

 

982,500

 

982,726

 

JFB Firth Rixson Inc.

 

Industrial Equipment

 

2013 Replacement Dollar Term Facility Loan

 

Loan

 

4.25

%

6/30/2017

 

$

2,590,213

 

2,577,375

 

2,598,838

 

Kalispel Tribal Economic Authority

 

Lodging and Casinos

 

Term Loan

 

Loan

 

7.50

%

2/24/2017

 

$

3,625,323

 

3,577,074

 

3,634,387

 

Kinetic Concepts, Inc.

 

Healthcare

 

Dollar Term C-1 Loan

 

Loan

 

5.50

%

5/4/2018

 

$

495,000

 

478,661

 

501,034

 

Kronos Worldwide, Inc.

 

Chemicals/Plastics

 

Initial Term Loan

 

Loan

 

7.00

%

6/13/2018

 

$

500,000

 

500,000

 

504,065

 

MetroPCS Wireless, Inc.

 

Telecommunications

 

Tranche B-2 Term Loan

 

Loan

 

4.07

%

11/3/2016

 

$

2,489,192

 

2,491,685

 

2,495,938

 

Michaels Stores, Inc.

 

Retailers (Except Food and Drugs)

 

Term B Loan

 

Loan

 

3.75

%

1/28/2020

 

$

500,000

 

500,000

 

501,110

 

Microsemi Corporation

 

Electronics/Electric

 

Term Loan

 

Loan

 

3.75

%

2/20/2020

 

$

2,688,796

 

2,682,872

 

2,697,212

 

National CineMedia, LLC

 

Leisure Goods/Activities/Movies

 

Term Loan

 

Loan

 

3.46

%

11/26/2019

 

$

1,086,207

 

1,050,910

 

1,089,607

 

Newsday, LLC

 

Publishing

 

Term Loan

 

Loan

 

3.70

%

10/12/2016

 

$

3,000,000

 

2,996,317

 

2,992,500

 

Novelis, Inc.

 

Conglomerate

 

Term B-2 Loan

 

Loan

 

4.00

%

3/10/2017

 

$

987,500

 

968,539

 

988,734

 

Novelis, Inc.

 

Conglomerate

 

Term Loan

 

Loan

 

4.00

%

3/10/2017

 

$

3,920,009

 

3,946,297

 

3,924,909

 

NPC International, Inc.

 

Food Services

 

Term Loan

 

Loan

 

4.50

%

12/28/2018

 

$

490,833

 

490,833

 

495,128

 

NRG Energy, Inc.

 

Utilities

 

Term Loan

 

Loan

 

3.25

%

7/1/2018

 

$

3,940,000

 

3,910,795

 

3,958,557

 

NuSil Technology LLC.

 

Chemicals/Plastics

 

Term Loan

 

Loan

 

5.00

%

4/7/2017

 

$

820,339

 

820,339

 

824,695

 

OEP Pearl Dutch Acquisition B.V.

 

Chemicals/Plastics

 

Initial BV Term Loan

 

Loan

 

6.50

%

3/30/2018

 

$

148,875

 

146,330

 

149,992

 

On Assignment, Inc.

 

Business Equipment and Services

 

Initial Term B Loan

 

Loan

 

5.00

%

5/15/2019

 

$

2,413,048

 

2,399,166

 

2,434,114

 

Onex Carestream Finance LP

 

Healthcare

 

Term Loan

 

Loan

 

5.00

%

2/25/2017

 

$

4,909,816

 

4,893,453

 

4,916,739

 

OpenLink International, Inc.

 

Business Equipment and Services

 

Initial Term Loan

 

Loan

 

7.75

%

10/30/2017

 

$

990,000

 

974,594

 

988,763

 

P.F. Chang’s China Bistro, Inc. (Wok Acquisition Corp.)

 

Food/Drug Retailers

 

Term Borrowing

 

Loan

 

5.25

%

6/22/2019

 

$

997,500

 

988,412

 

1,007,475

 

PATS Aircraft, LLC

 

Aerospace and Defense

 

Term Loan

 

Loan

 

8.50

%

10/6/2016

 

$

357,331

 

239,023

 

276,932

 

Penn National Gaming, Inc.

 

Lodging and Casinos

 

Term A Facility

 

Loan

 

1.72

%

7/14/2016

 

$

2,775,888

 

2,719,125

 

2,776,748

 

Penn National Gaming, Inc.

 

Lodging and Casinos

 

Term B Facility

 

Loan

 

3.75

%

7/16/2018

 

$

985,013

 

983,123

 

988,431

 

PetCo Animal Supplies, Inc.

 

Retailers (Except Food and Drugs)

 

New Loans

 

Loan

 

4.00

%

11/24/2017

 

$

1,496,173

 

1,494,329

 

1,501,784

 

Pharmaceutical Product Development, Inc. (Jaguar Holdings, LLC)

 

Conglomerate

 

2013 Term Loan

 

Loan

 

4.25

%

12/5/2018

 

$

1,980,000

 

1,950,704

 

1,989,583

 

Physician Oncology Services, LP

 

Healthcare

 

Delayed Draw Term Loan

 

Loan

 

7.75

%

1/31/2017

 

$

51,020

 

50,682

 

50,765

 

Physician Oncology Services, LP

 

Healthcare

 

Effective Date Term Loan

 

Loan

 

7.75

%

1/31/2017

 

$

419,961

 

417,178

 

417,861

 

Pinnacle Foods Finance LLC

 

Food Products

 

Extended Initial Term Loan

 

Loan

 

3.70

%

10/2/2016

 

$

5,726,579

 

5,491,534

 

5,761,168

 

Preferred Proppants, LLC

 

Nonferrous Metals/Minerals

 

Term B Loan

 

Loan

 

7.50

%

12/15/2016

 

$

1,980,000

 

1,949,170

 

1,841,400

 

Prestige Brands, Inc.

 

Drugs

 

Term B-1 Loan

 

Loan

 

3.76

%

1/31/2019

 

$

679,545

 

669,390

 

683,507

 

Pro Mach, Inc.

 

Industrial Equipment

 

Term Loan

 

Loan

 

5.00

%

7/6/2017

 

$

1,956,155

 

1,941,853

 

1,961,045

 

Quintiles Transnational Corp.

 

Conglomerate

 

Term B-2 Loan

 

Loan

 

4.50

%

6/8/2018

 

$

3,681,541

 

3,653,803

 

3,716,810

 

Ranpak Corp.

 

Food/Drug Retailers

 

USD Term Loan (First Lien)

 

Loan

 

4.75

%

4/20/2017

 

$

2,396,012

 

2,387,700

 

2,384,032

 

Rexnord LLC/RBS Global, Inc.

 

Industrial Equipment

 

Term B Loan Refinancing

 

Loan

 

4.50

%

4/1/2018

 

$

1,995,000

 

1,995,000

 

2,005,454

 

Reynolds Group Holdings Inc.

 

Industrial Equipment

 

U.S. Term Loan

 

Loan

 

4.75

%

9/28/2018

 

$

1,995,000

 

1,995,000

 

2,017,244

 

Rocket Software, Inc.

 

Business Equipment and Services

 

Term Loan (First Lien)

 

Loan

 

5.75

%

2/8/2018

 

$

1,980,000

 

1,947,152

 

1,986,197

 

Roundy’s Supermarkets, Inc.

 

Food/Drug Retailers

 

Tranche B Term Loan

 

Loan

 

5.75

%

2/13/2019

 

$

992,500

 

979,782

 

937,297

 

Rovi Solutions Corporation / Rovi Guides, Inc.

 

Electronics/Electric

 

Tranche A-2 Loan

 

Loan

 

2.46

%

3/29/2017

 

$

1,860,226

 

1,843,739

 

1,855,576

 

Rovi Solutions Corporation / Rovi Guides, Inc.

 

Electronics/Electric

 

Tranche B-2 Loan

 

Loan

 

4.00

%

3/29/2019

 

$

1,384,706

 

1,378,679

 

1,389,899

 

Royal Adhesives and Sealants, LLC

 

Chemicals/Plastics

 

Term A Loan

 

Loan

 

7.25

%

11/29/2015

 

$

4,498,210

 

4,459,450

 

4,432,399

 

RPI Finance Trust

 

Drugs

 

6.75 Year Term Loan(2012)

 

Loan

 

3.50

%

5/9/2018

 

$

5,398,833

 

5,373,794

 

5,449,474

 

Scientific Games International Inc.

 

Electronics/Electric

 

Tranche B-1 Term Loan

 

Loan

 

3.21

%

6/30/2015

 

$

1,977,810

 

1,965,672

 

1,985,226

 

Scitor Corporation

 

Business Equipment and Services

 

Term Loan

 

Loan

 

5.00

%

2/15/2017

 

$

463,977

 

462,444

 

460,692

 

Securus Technologies Holdings, Inc (fka Securus Technologies, Inc.)

 

Telecommunications

 

Tranche 2 Term Loan (First Lien)

 

Loan

 

6.50

%

5/31/2017

 

$

1,985,000

 

1,967,961

 

1,975,075

 

Sensata Technology BV/Sensata Technology Finance Company, LLC

 

Electronics/Electric

 

Term Loan

 

Loan

 

3.75

%

5/12/2018

 

$

2,969,849

 

2,969,849

 

2,986,540

 

Sensus USA Inc. (fka Sensus Metering Systems)

 

Utilities

 

Term Loan (First Lien)

 

Loan

 

4.75

%

5/9/2017

 

$

1,965,000

 

1,958,111

 

1,961,070

 

ServiceMaster Company, The

 

Conglomerate

 

Tranche B Term Loan

 

Loan

 

4.45

%

1/31/2017

 

$

2,851,387

 

2,861,398

 

2,857,089

 

SI Organization, Inc., The

 

Aerospace and Defense

 

New Tranche B Term Loan

 

Loan

 

4.50

%

11/22/2016

 

$

3,920,000

 

3,895,621

 

3,906,946

 

Sonneborn, LLC

 

Chemicals/Plastics

 

Initial US Term Loan

 

Loan

 

6.50

%

3/30/2018

 

$

843,625

 

829,202

 

849,952

 

Sophia, L.P.

 

Electronics/Electric

 

Term B Loan

 

Loan

 

4.50

%

7/19/2018

 

$

969,244

 

954,866

 

976,310

 

SRA International Inc.

 

Aerospace and Defense

 

Term Loan

 

Loan

 

6.50

%

7/20/2018

 

$

3,268,571

 

3,165,384

 

3,154,171

 

SRAM, LLC

 

Industrial Equipment

 

Term Loan (First Lien)

 

Loan

 

4.77

%

6/7/2018

 

$

3,441,181

 

3,411,986

 

3,458,386

 

SS&C Technologies, Inc., /Sunshine Acquisition II, Inc.

 

Business Equipment and Services

 

Funded Term B-1 Loan

 

Loan

 

5.00

%

6/7/2019

 

$

811,071

 

803,796

 

817,138

 

SS&C Technologies, Inc., /Sunshine Acquisition II, Inc.

 

Business Equipment and Services

 

Funded Term B-2 Loan

 

Loan

 

5.00

%

6/7/2019

 

$

83,904

 

83,151

 

84,531

 

SunCoke Energy, Inc.

 

Nonferrous Metals/Minerals

 

Tranche B Term Loan

 

Loan

 

4.00

%

7/26/2018

 

$

1,367,311

 

1,357,359

 

1,370,729

 

SunGard Data Systems Inc (Solar Capital Corp.)

 

Conglomerate

 

Tranche B U.S. Term Loan

 

Loan

 

3.85

%

2/28/2016

 

$

4,253,748

 

4,184,167

 

4,260,086

 

SunGard Data Systems Inc (Solar Capital Corp.)

 

Conglomerate

 

Tranche C Term Loan

 

Loan

 

3.95

%

2/28/2017

 

$

497,687

 

493,012

 

500,544

 

SuperMedia Inc. (fka Idearc Inc.)

 

Publishing

 

Loan

 

Loan

 

11.00

%

12/31/2015

 

$

289,811

 

281,918

 

214,875

 

Syniverse Holdings, Inc.

 

Telecommunications

 

Initial Term Loan

 

Loan

 

5.00

%

4/23/2019

 

$

497,500

 

493,115

 

500,609

 

Taminco Global Chemical Corporation

 

Chemicals/Plastics

 

Tranche B-2 Dollar Term Loan

 

Loan

 

4.25

%

2/15/2019

 

$

1,488,750

 

1,478,991

 

1,498,859

 

Team Health, Inc.

 

Healthcare

 

Tranche B Term Loan

 

Loan

 

3.75

%

6/29/2018

 

$

4,432,500

 

4,415,534

 

4,432,500

 

TECTUM HOLDINGS INC

 

Industrial Equipment

 

Term Loan

 

Loan

 

7.50

%

12/3/2015

 

$

4,000,000

 

3,981,089

 

3,980,000

 

Texas Competitive Electric Holdings Company, LLC (TXU)

 

Utilities

 

2014 Term Loan (Non-Extending)

 

Loan

 

3.73

%

10/10/2014

 

$

5,580,862

 

5,527,535

 

4,012,249

 

Tomkins, LLC / Tomkins, Inc. (f/k/a Pinafore, LLC / Pinafore, Inc.)

 

Conglomerate

 

Term B-2 Loan

 

Loan

 

3.75

%

9/29/2016

 

$

2,431,854

 

2,437,744

 

2,450,093

 

TransDigm Inc.

 

Aerospace and Defense

 

Tranche C Term Loan

 

Loan

 

3.75

%

2/28/2020

 

$

4,945,974

 

4,955,789

 

4,955,587

 

Tricorbraun Inc. (fka Kranson Industries, Inc.)

 

Containers/Glass Products

 

Term Loan

 

Loan

 

5.50

%

5/3/2018

 

$

1,990,000

 

1,981,374

 

2,008,666

 

Truven Health Analytics Inc. (fka Thomson Reuters (Healthcare) Inc.)

 

Healthcare

 

New Tranche B Term Loan

 

Loan

 

5.75

%

6/6/2019

 

$

497,500

 

488,158

 

501,853

 

Tube City IMS Corporation

 

Steel

 

Term Loan

 

Loan

 

5.75

%

3/20/2019

 

$

992,500

 

983,864

 

1,001,184

 

U.S. Security Associates Holdings, Inc.

 

Business Equipment and Services

 

Delayed Draw Term Loan

 

Loan

 

6.00

%

7/28/2017

 

$

161,778

 

160,586

 

162,688

 

U.S. Security Associates Holdings, Inc.

 

Business Equipment and Services

 

Term Loan B

 

Loan

 

6.00

%

7/28/2017

 

$

123,747

 

123,243

 

124,444

 

U.S. Security Associates Holdings, Inc.

 

Business Equipment and Services

 

Term Loan B

 

Loan

 

6.00

%

7/28/2017

 

$

826,540

 

820,452

 

831,193

 

U.S. Silica Company

 

Nonferrous Metals/Minerals

 

Loan

 

Loan

 

4.75

%

6/8/2017

 

$

1,970,000

 

1,962,974

 

1,974,925

 

U.S. Xpress Enterprises, Inc.

 

Industrial Equipment

 

Extended Term Loan

 

Loan

 

9.00

%

11/13/2016

 

$

2,913,628

 

2,858,339

 

2,906,344

 

United Surgical Partners International, Inc.

 

Healthcare

 

New Tranche B Term Loan

 

Loan

 

6.00

%

4/3/2019

 

$

2,481,281

 

2,448,808

 

2,486,715

 

Univar Inc.

 

Chemicals/Plastics

 

Term B Loan

 

Loan

 

5.00

%

6/30/2017

 

$

3,924,924

 

3,924,007

 

3,902,670

 

Univision Communications Inc.

 

Telecommunications

 

2013 Converted Extended First-Lien Term Loan

 

Loan

 

4.75

%

3/1/2020

 

$

3,000,000

 

2,981,257

 

3,000,870

 

UPC Financing Partnership

 

Broadcast Radio and Television

 

Facility AF

 

Loan

 

4.00

%

1/31/2021

 

$

1,000,000

 

970,954

 

1,010,000

 

Valeant Pharmaceuticals International, Inc.

 

Drugs

 

Series D-1 Tranche B Term Loan

 

Loan

 

3.50

%

2/13/2019

 

$

2,985,000

 

2,972,608

 

3,006,462

 

Vantiv, LLC (fka Fifth Third Processing Solutions, LLC)

 

Financial Intermediaries

 

Tranche B Term Loan

 

Loan

 

3.75

%

3/27/2019

 

$

1,063,393

 

1,058,765

 

1,065,520

 

Verint Systems Inc.

 

Business Equipment and Services

 

Term Loan 2011

 

Loan

 

4.50

%

10/27/2017

 

$

1,920,000

 

1,913,087

 

1,921,920

 

Vertafore, Inc.

 

Business Equipment and Services

 

Term Loan (First Lien)

 

Loan

 

5.25

%

7/29/2016

 

$

2,984,781

 

2,984,781

 

3,018,360

 

Visant Corporation (fka Jostens)

 

Leisure Goods/Activities/Movies

 

Tranche B Term Loan (2011)

 

Loan

 

5.25

%

12/22/2016

 

$

3,696,942

 

3,696,942

 

3,518,269

 

Washington Inventory Service

 

Business Equipment and Services

 

U.S. Term Loan (First Lien)

 

Loan

 

5.75

%

12/20/2018

 

$

2,000,000

 

2,029,513

 

2,007,500

 

Weight Watchers International, Inc.

 

Food Products

 

Term D Loan

 

Loan

 

2.56

%

6/30/2016

 

$

2,700,529

 

2,667,383

 

2,701,879

 

Wendy’s International, Inc

 

Food Services

 

Term Loan

 

Loan

 

4.75

%

5/15/2019

 

$

997,500

 

988,532

 

1,006,098

 

West Corporation

 

Telecommunications

 

Term B-8 Loan

 

Loan

 

4.25

%

6/30/2018

 

$

2,971,535

 

3,023,298

 

2,978,964

 

Wolverine World Wide, Inc.

 

Clothing/Textiles

 

Tranche B Term Loan

 

Loan

 

4.00

%

10/9/2019

 

$

854,821

 

846,633

 

861,233

 

Yankee Candle Company, Inc., The

 

Retailers (Except Food and Drugs)

 

Initial Term Loan

 

Loan

 

5.25

%

4/2/2019

 

$

2,256,466

 

2,236,833

 

2,268,877

 

BABSN 2007-1A

 

Financial Intermediaries

 

Floating - 01/2021 - D1 - 05617AAA9

 

ABS

 

3.55

%

1/18/2021

 

$

1,500,000

 

1,258,888

 

1,050,000

 

GALE 2007-3A

 

Financial Intermediaries

 

Floating - 04/2021 - E - 363205AA3

 

ABS

 

3.80

%

4/19/2021

 

$

4,000,000

 

3,386,571

 

2,800,000

 

KATO 2006-9A

 

Financial Intermediaries

 

Floating - 01/2019 - B2L - 486010AA9

 

ABS

 

3.80

%

1/25/2019

 

$

5,000,000

 

4,339,337

 

3,500,000

 

STCLO 2007-6A

 

Financial Intermediaries

 

Floating - 04/2021 - D- 86176YAG7

 

ABS

 

3.90

%

4/17/2021

 

$

5,000,000

 

4,054,244

 

3,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

379,843,341

 

$

374,419,979

 

 

S-5



 

GSC Investment Corp.

 

Schedule of Investments

 

February 29, 2012

 

Issuer_Name

 

Industry

 

Asset_Name

 

Asset_Type

 

Current Rate

 

Maturity Date

 

Principal / Number of
Shares

 

Cost

 

Fair Value

 

Elyria Foundry Company, LLC

 

Industrial Equipment

 

Warrants

 

Equity

 

0.00

%

 

 

2,000

 

$

 

$

 

Network Communications, Inc.

 

Business Equipment and Services

 

Common

 

Equity

 

0.00

%

 

 

169,143

 

169,143

 

659,658

 

OLD AII, Inc (fka Aleris International Inc.)

 

Conglomerate

 

Common

 

Equity

 

0.00

%

 

 

2,624

 

224,656

 

128,576

 

PATS Aircraft, LLC

 

Aerospace and Defense

 

Common

 

Equity

 

0.00

%

 

 

51,813

 

282,326

 

282,329

 

SuperMedia Inc. (fka Idearc Inc.)

 

Publishing

 

Common Stock

 

Equity

 

0.00

%

 

 

10,821

 

28,784

 

5,411

 

Academy, LTD.

 

Retailers (Except Food and Drugs)

 

Initial Term Loan

 

Loan

 

6.00

%

8/3/2018

 

$

2,000,000

 

1,986,129

 

1,999,540

 

Acosta, Inc.

 

Business Equipment and Services

 

Term B Loan

 

Loan

 

4.75

%

3/1/2018

 

$

4,243,447

 

4,177,485

 

4,210,561

 

Advanced Lighting Technologies, Inc.

 

Electronics/Electric

 

Deferred Draw Term Loan (First Lien)

 

Loan

 

3.00

%

6/1/2013

 

$

251,309

 

241,553

 

240,628

 

Advanced Lighting Technologies, Inc.

 

Electronics/Electric

 

Term Loan (First Lien)

 

Loan

 

3.00

%

6/1/2013

 

$

4,582,873

 

4,478,009

 

4,388,101

 

Aeroflex Incorporated

 

Aerospace and Defense

 

Tranche B Term Loan

 

Loan

 

4.25

%

5/9/2018

 

$

3,814,483

 

3,797,573

 

3,715,459

 

Aerostructures Acquisition LLC

 

Aerospace and Defense

 

Term Loan

 

Loan

 

7.25

%

3/1/2013

 

$

554,722

 

543,949

 

542,240

 

Alere Inc. (fka IM US Holdings, LLC)

 

Healthcare

 

Incremental B-1 Term Loan

 

Loan

 

4.50

%

6/30/2017

 

$

2,000,000

 

1,951,950

 

1,992,500

 

Aptalis Pharma, Inc. (fka Axcan Intermediate Holdings Inc.)

 

Drugs

 

Term Loan

 

Loan

 

5.50

%

2/10/2017

 

$

1,980,000

 

1,971,816

 

1,963,170

 

Ashland Inc.

 

Chemicals/Plastics

 

Term B Loan

 

Loan

 

3.75

%

8/23/2018

 

$

996,964

 

994,651

 

1,000,872

 

Asurion, LLC (fka Asurion Corporation)

 

Insurance

 

Term Loan (First Lien)

 

Loan

 

5.50

%

5/24/2018

 

$

5,659,091

 

5,608,344

 

5,635,040

 

Aurora Diagnostics, LLC

 

Conglomerate

 

Tranche B Term Loan

 

Loan

 

6.25

%

5/26/2016

 

$

508,611

 

508,611

 

499,288

 

Autotrader.com, Inc.

 

Automotive

 

Tranche B-1 Term Loan

 

Loan

 

4.00

%

12/15/2016

 

$

3,869,758

 

3,869,758

 

3,868,790

 

Avantor Performance Materials Holdings, Inc.

 

Chemicals/Plastics

 

Term Loan

 

Loan

 

5.00

%

6/24/2017

 

$

4,975,000

 

4,952,760

 

4,875,500

 

AZ Chem US Inc.

 

Chemicals/Plastics

 

Term Loan

 

Loan

 

7.25

%

12/22/2017

 

$

2,000,000

 

1,941,354

 

2,014,720

 

BakerCorp International, Inc. (f/k/a B-Corp Holdings, Inc.)

 

Equipment Leasing

 

Term Loan

 

Loan

 

5.00

%

6/1/2018

 

$

497,500

 

495,278

 

496,754

 

Bass Pro Group, LLC

 

Retailers (Except Food and Drugs)

 

Term Loan

 

Loan

 

5.25

%

6/13/2017

 

$

2,985,000

 

2,958,694

 

2,977,000

 

BJ’s Wholesale Club, Inc.

 

Retailers (Except Food and Drugs)

 

Initial Loan (First Lien) Retired 03/14/2012

 

Loan

 

7.00

%

9/28/2018

 

$

1,995,000

 

1,901,076

 

2,013,015

 

C.H.I. Overhead Doors, Inc. (CHI)

 

Home Furnishings

 

Term Loan (First Lien)

 

Loan

 

7.25

%

8/17/2017

 

$

3,079,513

 

3,022,863

 

3,035,876

 

Capstone Logistics, LLC

 

Business Equipment and Services

 

Term Note A

 

Loan

 

7.50

%

9/16/2016

 

$

2,991,353

 

2,948,863

 

2,946,483

 

Capsugel Holdings US, Inc.

 

Drugs

 

Initial Term Loan

 

Loan

 

5.25

%

8/1/2018

 

$

3,990,000

 

3,979,634

 

4,012,783

 

Celanese US Holdings LLC

 

Chemicals/Plastics

 

Dollar Term C Loan (Extended)

 

Loan

 

3.33

%

10/31/2016

 

$

3,464,824

 

3,506,288

 

3,478,198

 

Cenveo Corporation

 

Publishing

 

Term B Facility

 

Loan

 

6.25

%

12/21/2016

 

$

2,737,105

 

2,715,168

 

2,719,150

 

Charter Communications Operating, LLC

 

Cable and Satellite Television

 

Term C Loan

 

Loan

 

3.83

%

9/6/2016

 

$

3,979,695

 

3,972,997

 

3,949,291

 

CHS/ Community Health Systems, Inc.

 

Healthcare

 

Extended Term Loan

 

Loan

 

4.08

%

1/25/2017

 

$

4,170,088

 

4,042,207

 

4,120,589

 

Cinedigm Digital Funding I, LLC

 

Business Equipment and Services

 

Term Loan

 

Loan

 

5.25

%

4/29/2016

 

$

1,482,007

 

1,471,669

 

1,468,121

 

Cinemark USA, Inc.

 

Leisure Goods/Activities/Movies

 

Extended Term Loan

 

Loan

 

3.63

%

4/30/2016

 

$

5,587,889

 

5,348,623

 

5,576,546

 

Consolidated Container Company LLC

 

Chemicals/Plastics

 

Loan (First Lien)

 

Loan

 

2.50

%

3/28/2014

 

$

5,195,532

 

4,906,062

 

5,052,655

 

Contec, LLC

 

Electronics/Electric

 

Tranche B Term Loan

 

Loan

 

0.00

%

7/28/2014

 

$

2,644,318

 

2,613,795

 

1,057,727

 

Covanta Energy Corporation

 

Ecological Services and Equipment

 

Funded Letter of Credit

 

Loan

 

1.98

%

2/10/2014

 

$

877,007

 

860,931

 

871,525

 

Covanta Energy Corporation

 

Ecological Services and Equipment

 

Term Loan

 

Loan

 

1.79

%

2/10/2014

 

$

1,698,170

 

1,666,874

 

1,687,557

 

CPI International Acquisition, Inc. (f/k/a Catalyst Holdings, Inc.)

 

Electronics/Electric

 

Term B Loan

 

Loan

 

5.00

%

2/13/2017

 

$

4,950,000

 

4,929,526

 

4,912,875

 

CRC Health Corporation

 

Healthcare

 

Term B-2 Loan

 

Loan

 

5.08

%

11/16/2015

 

$

1,991,877

 

1,896,087

 

1,782,730

 

Crown Castle Operating Company

 

Telecommunications/Cellular

 

Tranche B Term Loan

 

Loan

 

4.00

%

1/31/2019

 

$

2,000,000

 

1,980,071

 

1,990,540

 

CSC Holdings, LLC (fka CSC Holdings Inc (Cablevision))

 

Cable and Satellite Television

 

Term A-3 Loan

 

Loan

 

2.24

%

3/31/2015

 

$

1,360,526

 

1,355,021

 

1,333,316

 

Culligan International Company

 

Conglomerate

 

Dollar Loan

 

Loan

 

2.50

%

11/24/2012

 

$

2,393,216

 

2,360,219

 

1,714,141

 

DaVita Inc.

 

Healthcare

 

Tranche B Term Loan

 

Loan

 

0.00

%

10/20/2016

 

$

3,989,924

 

3,989,924

 

3,999,061

 

Del Monte Foods Company

 

Food Products

 

Initial Term Loan

 

Loan

 

4.50

%

3/8/2018

 

$

1,492,500

 

1,489,291

 

1,464,098

 

Dollar General Corporation

 

Retailers (Except Food and Drugs)

 

Tranche B-1 Term Loan

 

Loan

 

3.14

%

7/7/2014

 

$

5,378,602

 

5,196,110

 

5,382,905

 

DS Waters of America, Inc.

 

Beverage and Tobacco

 

Term Loan (First Lien)

 

Loan

 

0.00

%

8/29/2017

 

$

3,000,000

 

2,446,849

 

2,456,712

 

DynCorp International Inc.

 

Aerospace and Defense

 

Term Loan

 

Loan

 

6.25

%

7/7/2016

 

$

732,056

 

721,414

 

729,538

 

Education Management LLC

 

Leisure Goods/Activities/Movies

 

Tranche C-2 Term Loan

 

Loan

 

4.63

%

6/1/2016

 

$

3,967,860

 

3,706,684

 

3,712,448

 

eInstruction Corporation

 

Electronics/Electric

 

Initial Term Loan

 

Loan

 

6.51

%

7/2/2013

 

$

3,005,574

 

2,923,634

 

2,705,017

 

Electrical Components International, Inc.

 

Electronics/Electric

 

Synthetic Revolving Loan

 

Loan

 

6.75

%

2/4/2016

 

$

117,647

 

116,257

 

104,118

 

Electrical Components International, Inc.

 

Electronics/Electric

 

Term Loan

 

Loan

 

6.75

%

2/4/2017

 

$

1,804,706

 

1,782,426

 

1,597,165

 

Federal-Mogul Corporation

 

Automotive

 

Tranche B Term Loan

 

Loan

 

2.20

%

12/29/2014

 

$

2,616,289

 

2,475,132

 

2,500,204

 

Federal-Mogul Corporation

 

Automotive

 

Tranche C Term Loan

 

Loan

 

2.19

%

12/28/2015

 

$

1,334,841

 

1,257,114

 

1,275,614

 

Fidelity National Information Services, Inc.

 

Business Equipment and Services

 

Term B Loan

 

Loan

 

4.25

%

7/18/2016

 

$

1,000,000

 

990,338

 

1,004,450

 

First Data Corporation

 

Financial Intermediaries

 

2018 Dollar Term Loan

 

Loan

 

4.24

%

3/23/2018

 

$

2,290,451

 

2,202,287

 

2,041,845

 

First Data Corporation

 

Financial Intermediaries

 

Non Extending B-1 Term Loan

 

Loan

 

2.99

%

9/24/2014

 

$

1,971,336

 

1,933,908

 

1,890,472

 

First Data Corporation

 

Financial Intermediaries

 

Non Extending B-2 Term Loan

 

Loan

 

2.99

%

9/24/2014

 

$

990,052

 

971,955

 

949,440

 

FleetPride Corporation

 

Business Equipment and Services

 

Term Loan

 

Loan

 

6.75

%

12/6/2017

 

$

1,000,000

 

980,767

 

995,000

 

FR Acquisitions Holding Corporation (Luxembourg), S.A.R.L.

 

Aerospace and Defense

 

Facility B (Dollar)

 

Loan

 

5.08

%

12/18/2015

 

$

1,295,106

 

1,291,993

 

1,221,454

 

FR Acquisitions Holding Corporation (Luxembourg), S.A.R.L.

 

Aerospace and Defense

 

Facility C (Dollar)

 

Loan

 

5.58

%

12/20/2016

 

$

1,295,106

 

1,291,613

 

1,227,929

 

Freescale Semiconductor, Inc.

 

Electronics/Electric

 

Tranche B-1 Term Loan

 

Loan

 

4.52

%

12/1/2016

 

$

1,534,348

 

1,468,484

 

1,496,711

 

Fresenius Medical Care AG & Co., KGaA/Fresenius Medical Care Holdings, Inc.

 

Healthcare

 

Tranche B Term Loan

 

Loan

 

1.95

%

3/31/2013

 

$

4,224,718

 

4,206,870

 

4,209,889

 

FTD Group, Inc.

 

Retailers (Except Food and Drugs)

 

Initial Term Loan

 

Loan

 

4.75

%

6/11/2018

 

$

3,982,494

 

3,943,002

 

3,902,844

 

Generac Power System, Inc.

 

Business Equipment and Services

 

Tranche B Term Loan

 

Loan

 

3.75

%

2/9/2019

 

$

500,000

 

497,509

 

497,855

 

General Nutrition Centers, Inc.

 

Retailers (Except Food and Drugs)

 

Tranche B Term Loan

 

Loan

 

4.25

%

3/2/2018

 

$

3,750,000

 

3,621,437

 

3,738,900

 

Goodyear Tire & Rubber Company, The

 

Chemicals/Plastics

 

Loan (Second Lien)

 

Loan

 

1.75

%

4/30/2014

 

$

5,700,000

 

5,339,456

 

5,607,375

 

Graphic Packaging International, Inc.

 

Forest Products

 

Term B Loan Retired 03/16/2012

 

Loan

 

2.34

%

5/16/2014

 

$

3,045,465

 

2,910,836

 

3,041,993

 

Grifols Inc.

 

Drugs

 

New U.S. Tranche B Term Loan

 

Loan

 

0.00

%

6/1/2017

 

$

500,000

 

497,500

 

499,530

 

Grosvenor Capital Management Holdings, LLLP

 

Brokers/Dealers/Investment Houses

 

Tranche C Term Loan

 

Loan

 

4.31

%

12/5/2016

 

$

3,430,885

 

3,321,594

 

3,276,495

 

Hanger Orthopedic Group, Inc.

 

Healthcare

 

Term C Loan

 

Loan

 

4.01

%

12/1/2016

 

$

3,960,000

 

3,972,323

 

3,905,550

 

HCA Inc.

 

Healthcare

 

Tranche B-3 Term Loan

 

Loan

 

3.49

%

5/1/2018

 

$

5,734,690

 

5,383,348

 

5,638,634

 

Health Management Associates, Inc.

 

Healthcare

 

Term B Loan

 

Loan

 

4.50

%

11/16/2018

 

$

3,000,000

 

2,970,763

 

2,981,640

 

Hilsinger Company, The

 

Personal & Non Durable Consumer Products

 

Term Loan

 

Loan

 

5.26

%

12/31/2013

 

$

1,218,491

 

1,203,274

 

1,072,272

 

Hunter Defense Technologies, Inc.

 

Aerospace and Defense

 

Term Loan

 

Loan

 

3.83

%

8/22/2014

 

$

4,459,263

 

4,388,148

 

3,879,559

 

Huntsman International LLC

 

Chemicals/Plastics

 

Extended Term B Loan

 

Loan

 

0.00

%

4/19/2017

 

$

4,000,000

 

3,955,000

 

3,923,200

 

Hygenic Corporation, The

 

Personal & Non Durable Consumer Products

 

Term Loan

 

Loan

 

2.76

%

4/30/2013

 

$

1,563,048

 

1,536,828

 

1,438,004

 

Infor Enterprise Solutions Holdings, Inc. (fka Magellan Holdings, Inc.)(Infor Global Solutions)

 

Electronics/Electric

 

Extended Delayed Draw Term Loan (First Lien)

 

Loan

 

6.00

%

7/28/2015

 

$

1,314,907

 

1,229,818

 

1,276,828

 

Infor Enterprise Solutions Holdings, Inc. (fka Magellan Holdings, Inc.)(Infor Global Solutions)

 

Electronics/Electric

 

Extended Initial U.S. Term Loan (First Lien)

 

Loan

 

6.00

%

7/28/2015

 

$

2,520,239

 

2,356,915

 

2,447,253

 

Inventiv Health, Inc. (fka Ventive Health, Inc)

 

Conglomerate

 

Consolidated Term Loan

 

Loan

 

6.50

%

8/4/2016

 

$

494,587

 

494,587

 

475,422

 

J. Crew Group, Inc.

 

Retailers (Except Food and Drugs)

 

Loan

 

Loan

 

4.75

%

3/7/2018

 

$

992,500

 

992,500

 

970,963

 

Kalispel Tribal Economic Authority

 

Lodging and Casinos

 

Term Loan

 

Loan

 

7.50

%

2/25/2017

 

$

3,859,091

 

3,794,849

 

3,627,546

 

Key Safety Systems, Inc.

 

Automotive

 

Term Loan (First Lien)

 

Loan

 

2.59

%

3/8/2014

 

$

3,821,774

 

3,604,295

 

3,667,718

 

Kinetic Concepts, Inc.

 

Healthcare

 

Dollar Term B-1 Loan

 

Loan

 

7.00

%

5/4/2018

 

$

500,000

 

483,349

 

508,125

 

Leslie’s Poolmart, Inc.

 

Retailers (Except Food and Drugs)

 

Tranche B Term Loan

 

Loan

 

4.50

%

11/21/2016

 

$

3,960,000

 

3,965,615

 

3,920,400

 

Metal Services, LLC

 

Nonferrous Metals/Minerals

 

Delayed Draw Term Loan

 

Loan

 

9.75

%

9/29/2017

 

$

132,353

 

129,737

 

132,022

 

Metal Services, LLC

 

Nonferrous Metals/Minerals

 

U.S. Term Loan

 

Loan

 

9.75

%

9/29/2017

 

$

1,367,647

 

1,340,612

 

1,364,228

 

Microsemi Corporation

 

Electronics/Electric

 

Term Loan

 

Loan

 

0.00

%

2/2/2018

 

$

3,000,000

 

2,992,500

 

2,997,750

 

National CineMedia, LLC

 

Leisure Goods/Activities/Movies

 

Term Loan

 

Loan

 

2.05

%

2/13/2015

 

$

2,655,172

 

2,572,741

 

2,608,707

 

Nielsen Finance LLC

 

Business Equipment and Services

 

Class A Dollar Term Loan

 

Loan

 

2.26

%

8/9/2013

 

$

720,738

 

710,645

 

717,134

 

Novelis, Inc.

 

Conglomerate

 

Term B-2 Loan

 

Loan

 

4.00

%

3/10/2017

 

$

997,500

 

973,592

 

993,141

 

Novelis, Inc.

 

Conglomerate

 

Term Loan

 

Loan

 

4.00

%

3/10/2017

 

$

3,960,000

 

3,993,151

 

3,939,487

 

Novell, Inc. (fka Attachmate Corporation, NetIQ Corporation)

 

Conglomerate

 

Term Loan (First Lien)

 

Loan

 

6.50

%

4/27/2017

 

$

4,937,500

 

4,913,011

 

4,873,313

 

NPC International, Inc.

 

Food Services

 

Term Loan

 

Loan

 

6.75

%

12/28/2018

 

$

500,000

 

490,246

 

502,970

 

NRG Energy, Inc.

 

Utilities

 

Term Loan

 

Loan

 

4.00

%

7/1/2018

 

$

3,980,000

 

3,951,892

 

3,961,334

 

NuSil Technology LLC.

 

Chemicals/Plastics

 

Term Loan

 

Loan

 

5.25

%

4/7/2017

 

$

905,085

 

905,085

 

902,071

 

Onex Carestream Finance LP

 

Healthcare

 

Term Loan

 

Loan

 

5.00

%

2/25/2017

 

$

4,961,770

 

4,941,092

 

4,707,479

 

OpenLink International, Inc.

 

Business Equipment and Services

 

Initial Term Loan

 

Loan

 

7.75

%

10/30/2017

 

$

1,000,000

 

981,105

 

1,000,000

 

PATS Aircraft, LLC

 

Aerospace and Defense

 

Term Loan

 

Loan

 

8.50

%

10/6/2016

 

$

431,472

 

248,964

 

388,325

 

Pelican Products, Inc.

 

Business Equipment and Services

 

Term Loan

 

Loan

 

5.00

%

3/7/2017

 

$

2,673,704

 

2,673,704

 

2,653,651

 

Penn National Gaming, Inc.

 

Lodging and Casinos

 

Term A Facility

 

Loan

 

1.79

%

7/14/2016

 

$

2,925,000

 

2,847,453

 

2,837,250

 

Penn National Gaming, Inc.

 

Lodging and Casinos

 

Term B Facility

 

Loan

 

3.75

%

7/16/2018

 

$

995,000

 

992,736

 

996,930

 

PetCo Animal Supplies, Inc.

 

Retailers (Except Food and Drugs)

 

New Loan

 

Loan

 

0.00

%

11/24/2017

 

$

1,500,000

 

1,498,125

 

1,493,115

 

Pharmaceutical Product Development, Inc. (Jaguar Holdings, LLC)

 

Conglomerate

 

Term Loan

 

Loan

 

6.25

%

12/5/2018

 

$

2,000,000

 

1,970,941

 

2,017,860

 

Pharmaceutical Research Associates Group B.V.

 

Drugs

 

Dutch Dollar Term Loan

 

Loan

 

3.81

%

12/15/2014

 

$

799,151

 

753,650

 

775,176

 

Physician Oncology Services, LP

 

Healthcare

 

Delayed Draw Term Loan

 

Loan

 

6.25

%

1/31/2017

 

$

51,020

 

50,596

 

49,235

 

Physician Oncology Services, LP

 

Healthcare

 

Effective Date Term Loan

 

Loan

 

6.25

%

1/31/2017

 

$

419,961

 

416,468

 

405,262

 

Pinnacle Foods Finance LLC

 

Food Products

 

Term Loan

 

Loan

 

2.84

%

4/2/2014

 

$

4,796,078

 

4,694,850

 

4,766,054

 

Polyone Corporation

 

Chemicals/Plastics

 

Loan

 

Loan

 

5.00

%

12/20/2017

 

$

500,000

 

495,160

 

500,730

 

PRA International

 

Drugs

 

U.S. Term Loan

 

Loan

 

3.81

%

12/15/2014

 

$

2,512,401

 

2,439,376

 

2,437,029

 

Preferred Proppants, LLC

 

Business Equipment and Services

 

Term B Loan

 

Loan

 

7.50

%

12/15/2016

 

$

2,000,000

 

1,960,652

 

1,945,000

 

Pre-Paid Legal Services, Inc.

 

Conglomerate

 

Tranche A Term Loan

 

Loan

 

7.50

%

12/31/2016

 

$

2,695,122

 

2,659,371

 

2,607,530

 

Prestige Brands, Inc.

 

Drugs

 

Term B Loan

 

Loan

 

5.25

%

1/31/2019

 

$

1,000,000

 

985,047

 

1,003,060

 

Pro Mach, Inc.

 

Industrial Equipment

 

Term Loan

 

Loan

 

6.25

%

7/6/2017

 

$

1,990,000

 

1,972,106

 

1,930,300

 

Quintiles Transnational Corp.

 

Conglomerate

 

Term B Loan

 

Loan

 

5.00

%

6/8/2018

 

$

3,980,000

 

3,944,328

 

3,953,692

 

RailAmerica, Inc.

 

Industrial Equipment

 

Initial Loan

 

Loan

 

0.00

%

3/1/2019

 

$

500,000

 

497,500

 

497,500

 

Ranpak Corp.

 

Food Products

 

USD Term Loan (First Lien)

 

Loan

 

4.75

%

4/20/2017

 

$

2,744,392

 

2,732,572

 

2,716,948

 

Rexnord LLC/RBS Global, Inc.

 

Industrial Equipment

 

Tranche B-2 Term B Loan Retired 03/15/2012

 

Loan

 

2.50

%

7/19/2013

 

$

1,607,683

 

1,566,832

 

1,590,609

 

Reynolds Group Holdings Inc.

 

Industrial Equipment

 

Tranche B Term Loan

 

Loan

 

6.50

%

2/9/2018

 

$

1,963,643

 

1,963,643

 

1,977,880

 

Reynolds Group Holdings Inc.

 

Industrial Equipment

 

Tranche C Term Loan

 

Loan

 

6.50

%

8/9/2018

 

$

1,973,590

 

1,955,434

 

1,992,398

 

Rocket Software, Inc.

 

Business Equipment and Services

 

Term Loan (First Lien)

 

Loan

 

7.00

%

2/8/2018

 

$

2,000,000

 

1,960,110

 

1,997,500

 

Roundy’s Supermarkets, Inc.

 

Food/Drug Retailers

 

Tranche B Term Loan

 

Loan

 

5.75

%

2/13/2019

 

$

1,000,000

 

985,035

 

1,000,780

 

Royal Adhesives and Sealants, LLC

 

Chemicals/Plastics

 

Term A Loan

 

Loan

 

7.25

%

11/29/2015

 

$

4,785,882

 

4,729,636

 

4,715,862

 

RPI Finance Trust

 

Drugs

 

6.75 Year Term Loan

 

Loan

 

4.00

%

5/9/2018

 

$

5,472,500

 

5,447,342

 

5,462,868

 

Safety-Kleen Systems, Inc.

 

Business Equipment and Services

 

Term Loan B

 

Loan

 

5.00

%

2/21/2017

 

$

250,000

 

247,501

 

250,000

 

Savers, Inc.

 

Food/Drug Retailers

 

New Term Loan

 

Loan

 

4.25

%

3/4/2017

 

$

464,891

 

464,891

 

464,426

 

Scientific Games International Inc.

 

Electronics/Electric

 

Tranche B-1 Term Loan

 

Loan

 

0.00

%

6/30/2015

 

$

2,000,000

 

1,985,000

 

1,985,000

 

Scitor Corporation

 

Business Equipment and Services

 

Term Loan

 

Loan

 

5.00

%

2/15/2017

 

$

476,818

 

474,846

 

458,937

 

Scotsman Industries, Inc.

 

Industrial Equipment

 

Term Loan

 

Loan

 

5.75

%

4/30/2016

 

$

1,873,081

 

1,867,006

 

1,863,716

 

Seminole Tribe of Florida

 

Lodging and Casinos

 

Term B-1 Delay Draw Loan

 

Loan

 

2.13

%

3/5/2014

 

$

616,208

 

605,662

 

607,476

 

Seminole Tribe of Florida

 

Lodging and Casinos

 

Term B-2 Delay Draw Loan

 

Loan

 

2.13

%

3/5/2014

 

$

2,230,224

 

2,192,054

 

2,198,622

 

Seminole Tribe of Florida

 

Lodging and Casinos

 

Term B-3 Delay Draw Loan

 

Loan

 

2.13

%

3/5/2014

 

$

1,108,287

 

1,082,950

 

1,092,583

 

Sensata Technology BV/Sensata Technology Finance Company, LLC

 

Electronics/Electric

 

Term Loan

 

Loan

 

0.00

%

5/12/2018

 

$

3,000,000

 

3,000,000

 

2,994,150

 

Sensus USA Inc. (fka Sensus Metering Systems)

 

Utilities

 

Term Loan (First Lien)

 

Loan

 

4.75

%

5/9/2017

 

$

1,985,000

 

1,976,380

 

1,981,030

 

SI Organization, Inc., The

 

Aerospace and Defense

 

New Tranche B Term Loan

 

Loan

 

4.50

%

11/22/2016

 

$

3,960,000

 

3,928,772

 

3,794,987

 

Sophia, L.P.

 

Electronics/Electric

 

Initial Term Loan

 

Loan

 

6.25

%

7/19/2018

 

$

1,000,000

 

985,259

 

1,010,630

 

SRA International Inc.

 

Aerospace and Defense

 

Term Loan

 

Loan

 

6.52

%

7/20/2018

 

$

3,725,714

 

3,582,427

 

3,665,171

 

SRAM, LLC

 

Industrial Equipment

 

Term Loan (First Lien)

 

Loan

 

4.76

%

6/7/2018

 

$

3,886,998

 

3,850,268

 

3,882,139

 

SunCoke Energy, Inc.

 

Nonferrous Metals/Minerals

 

Tranche B Term Loan

 

Loan

 

4.00

%

7/26/2018

 

$

4,484,984

 

4,452,979

 

4,473,771

 

SunGard Data Systems Inc (Solar Capital Corp.)

 

Conglomerate

 

Incremental Term B Loan

 

Loan

 

3.74

%

2/28/2014

 

$

356,996

 

356,996

 

355,911

 

SunGard Data Systems Inc (Solar Capital Corp.)

 

Conglomerate

 

Tranche A U.S. Term Loan

 

Loan

 

2.00

%

2/28/2014

 

$

140,691

 

138,222

 

140,363

 

SunGard Data Systems Inc (Solar Capital Corp.)

 

Conglomerate

 

Tranche B U.S. Term Loan

 

Loan

 

4.06

%

2/28/2016

 

$

3,253,748

 

3,173,463

 

3,246,265

 

Sunquest Information Systems, Inc. (Misys Hospital Systems, Inc.)

 

Conglomerate

 

Term Loan (First Lien)

 

Loan

 

6.25

%

12/16/2016

 

$

992,500

 

980,580

 

986,714

 

SuperMedia Inc. (fka Idearc Inc.)

 

Publishing

 

Loan

 

Loan

 

11.00

%

12/31/2015

 

$

326,109

 

317,228

 

164,685

 

Taminco Global Chemical Corporation

 

Chemicals/Plastics

 

Dollar Term Loan

 

Loan

 

6.25

%

2/15/2019

 

$

500,000

 

490,024

 

501,875

 

TDG Holding Company (fka Dwyer Acquisition, Inc.)

 

Business Equipment and Services

 

Term Loan

 

Loan

 

7.00

%

12/23/2015

 

$

3,463,273

 

3,422,302

 

3,411,324

 

Team Health, Inc.

 

Healthcare

 

Tranche B Term Loan

 

Loan

 

3.75

%

6/29/2018

 

$

4,477,500

 

4,457,147

 

4,331,981

 

Texas Competitive Electric Holdings Company, LLC (TXU)

 

Utilities

 

2014 Term Loan (Non-Extending)

 

Loan

 

3.76

%

10/10/2014

 

$

5,580,862

 

5,494,432

 

3,406,670

 

TransDigm Inc.

 

Aerospace and Defense

 

Tranche B-1 Term Loan

 

Loan

 

4.00

%

2/14/2017

 

$

3,988,779

 

4,002,125

 

3,985,269

 

TransFirst Holdings, Inc.

 

Financial Intermediaries

 

Term Loan (First Lien)

 

Loan

 

3.00

%

6/16/2014

 

$

2,387,500

 

2,350,983

 

2,282,044

 

U.S. Security Associates Holdings, Inc.

 

Business Equipment and Services

 

Delayed Draw Term Loan

 

Loan

 

6.00

%

7/28/2017

 

$

163,000

 

161,527

 

161,778

 

U.S. Security Associates Holdings, Inc.

 

Business Equipment and Services

 

Term Loan B

 

Loan

 

6.00

%

7/28/2017

 

$

125,000

 

124,375

 

124,688

 

U.S. Security Associates Holdings, Inc.

 

Business Equipment and Services

 

Term Loan B

 

Loan

 

6.00

%

7/28/2017

 

$

834,908

 

827,364

 

832,820

 

U.S. Silica Company

 

Nonferrous Metals/Minerals

 

Loan

 

Loan

 

4.75

%

6/8/2017

 

$

1,990,000

 

1,981,242

 

1,972,588

 

Univar Inc.

 

Chemicals/Plastics

 

Term B Loan

 

Loan

 

5.00

%

6/30/2017

 

$

3,964,975

 

3,963,846

 

3,928,021

 

UPC Financing Partnership

 

Broadcast Radio and Television

 

Facility AB

 

Loan

 

4.75

%

12/31/2017

 

$

1,000,000

 

971,447

 

998,250

 

USI Holdings Corporation

 

Building and Development

 

Tranche B Term Loan

 

Loan

 

2.75

%

5/5/2014

 

$

4,782,211

 

4,685,075

 

4,678,581

 

Valeant Pharmaceuticals International, Inc.

 

Drugs

 

Tranche B Term Loan

 

Loan

 

3.75

%

2/13/2019

 

$

1,000,000

 

995,002

 

996,880

 

Vantiv, LLC (fka Fifth Third Processing Solutions, LLC)

 

Financial Intermediaries

 

Term B-1 Loan (First Lien)

 

Loan

 

4.50

%

11/3/2016

 

$

3,979,950

 

3,988,810

 

3,982,776

 

Verint Systems Inc.

 

Business Equipment and Services

 

Term Loan 2011

 

Loan

 

4.50

%

10/27/2017

 

$

1,985,000

 

1,976,319

 

1,978,807

 

Visant Corporation (fka Jostens)

 

Leisure Goods/Activities/Movies

 

Tranche B Term Loan (2011)

 

Loan

 

5.25

%

12/22/2016

 

$

3,767,519

 

3,767,519

 

3,611,430

 

Weight Watchers International, Inc.

 

Food Products

 

Term B Loan

 

Loan

 

1.88

%

1/26/2014

 

$

1,229,200

 

1,220,261

 

1,221,518

 

Weight Watchers International, Inc.

 

Food Products

 

Term D Loan

 

Loan

 

2.88

%

6/30/2016

 

$

2,728,226

 

2,684,697

 

2,714,585

 

Wendy’s/Arby’s Restaurants, LLC

 

Food/Drug Retailers

 

Term Loan

 

Loan

 

5.00

%

5/24/2017

 

$

1,122,902

 

1,118,702

 

1,123,745

 

Wil Research Laboratories, LLC

 

Business Equipment and Services

 

Term B Loan

 

Loan

 

4.00

%

9/26/2013

 

$

1,808,039

 

1,726,498

 

1,663,396

 

WireCo WorldGroup Inc.

 

Nonferrous Metals/Minerals

 

Term Loan

 

Loan

 

5.00

%

2/10/2014

 

$

1,992,943

 

1,967,101

 

1,953,084

 

Yankee Candle Company, Inc., The

 

Retailers (Except Food and Drugs)

 

Term Loan

 

Loan

 

2.25

%

2/6/2014

 

$

2,537,336

 

2,419,740

 

2,523,428

 

Yell Group Plc

 

Publishing

 

Facility B1 - YB (USA) LLC (11/2009)

 

Loan

 

3.99

%

7/31/2014

 

$

3,139,856

 

3,090,757

 

961,141

 

ALM 2010-1A

 

Financial Intermediaries

 

Floating - 05/2020 - B - 00162VAE5

 

Other/Structured Finance Securities

 

2.78

%

5/20/2020

 

$

4,000,000

 

3,716,602

 

3,657,600

 

BABSN 2007-1A

 

Financial Intermediaries

 

Floating - 01/2021 - D1 - 05617AAA9

 

Other/Structured Finance Securities

 

3.81

%

1/18/2021

 

$

1,500,000

 

1,236,977

 

1,050,000

 

GALE 2007-3A

 

Financial Intermediaries

 

Floating - 04/2021 - E - 363205AA3

 

Other/Structured Finance Securities

 

4.06

%

4/19/2021

 

$

4,000,000

 

3,311,208

 

2,800,000

 

KATO 2006-9A

 

Financial Intermediaries

 

Floating - 01/2019 - B2L - 486010AA9

 

Other/Structured Finance Securities

 

4.06

%

1/25/2019

 

$

5,000,000

 

4,227,490

 

3,500,000

 

STCLO 2007-6A

 

Financial Intermediaries

 

Floating - 04/2021 - D- 86176YAG7

 

Other/Structured Finance Securities

 

4.17

%

4/17/2021

 

$

5,000,000

 

4,077,713

 

3,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

390,023,602

 

$

381,364,466

 

 

S-6



 

GSC Investment Corp. CLO 2007

 

Statements of Changes in Net Assets

 

 

 

For the year ended
February 28, 2013

 

For the year ended
February 29, 2012

 

For the year ended
February 28, 2011

 

 

 

 

 

 

 

 

 

INCREASE FROM OPERATIONS:

 

 

 

 

 

 

 

Net investment income

 

$

1,033,327

 

$

2,368,009

 

$

4,607,358

 

Net realized gain (loss) from investments

 

2,532,558

 

(4,547,952

)

750,253

 

Net unrealized appreciation/(depreciation) on investments

 

3,235,774

 

(650,241

)

11,697,708

 

Net increase (decrease) in net assets from operations

 

6,801,659

 

(2,830,184

)

17,055,319

 

 

 

 

 

 

 

 

 

Total increase/(decrease) in net assets

 

6,801,659

 

(2,830,184

)

17,055,319

 

Net assets at beginning of period

 

(5,962,842

)

(3,132,658

)

(20,187,977

)

Net assets at end of period

 

$

838,817

 

$

(5,962,842

)

$

(3,132,658

)

 

See accompanying notes to financial statements.

 

S-7



 

GSC Investment Corp. CLO 2007

 

Statements of Cash Flows

 

 

 

For the year ended
February 28, 2013

 

For the year ended
February 29, 2012

 

For the year ended
February 28, 2011

 

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS

 

$

6,801,659

 

$

(2,830,184

)

$

17,055,319

 

ADJUSTMENTS TO RECONCILE NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS TO NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Paid-in-kind interest income

 

 

(223,448

)

(361,110

)

Net accretion of discount on investments

 

(1,383,978

)

(2,997,514

)

(4,841,672

)

Amortization of notes and deferred issuance costs

 

1,015,332

 

1,016,124

 

1,015,333

 

Net realized (gain) loss from investments

 

(2,532,558

)

4,547,952

 

(750,253

)

Net unrealized appreciation on investments

 

(3,235,774

)

650,241

 

(11,697,708

)

Proceeds from sale and redemption of investments

 

165,363,963

 

216,319,521

 

129,804,279

 

Purchase of investments

 

(151,267,166

)

(208,491,101

)

(156,112,238

)

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

Interest receivable

 

(3,547

)

155,579

 

112,547

 

Receivable from open trades

 

4,915,102

 

(10,046,640

)

 

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

Interest payable

 

(160,620

)

125,101

 

21,097

 

Payable from open trades

 

(8,510,897

)

(293,957

)

24,668,506

 

Accrued senior collateral management fee

 

(2,345

)

(835

)

249

 

Accrued subordinate collateral management fee

 

(9,382

)

(3,338

)

(96,424

)

NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES

 

10,989,789

 

(2,072,499

)

(1,182,075

)

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

10,989,789

 

(2,072,499

)

(1,182,075

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

17,815,082

 

19,887,581

 

21,069,656

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

28,804,871

 

$

17,815,082

 

$

19,887,581

 

 

 

 

 

 

 

 

 

Supplemental Information:

 

 

 

 

 

 

 

Interest paid during the period

 

$

15,773,621

 

$

14,355,520

 

$

13,239,125

 

 

 

 

 

 

 

 

 

Supplemental non-cash information:

 

 

 

 

 

 

 

Paid-in-kind interest income

 

$

 

$

(223,448

)

$

(361,110

)

Net accretion of discount on investments

 

$

(1,383,978

)

$

(2,997,514

)

$

(4,841,672

)

Amortization of notes and deferred issuance costs

 

$

1,015,332

 

$

1,016,124

 

$

1,015,333

 

 

See accompanying notes to financial statements.

 

S-8



 

GSC INVESTMENT CORP. CLO 2007, LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

1. Organization and Purpose

 

GSC Investment Corp. CLO 2007, Ltd (the “Issuer”, “we”, “our”, “us”, “CLO” and “Saratoga CLO”), an exempted company with limited liability incorporated under the laws of the Cayman Islands was formed on November 28, 2007 and commenced operations on January 22, 2008. The Issuer was established to acquire or participate in U.S. dollar-denominated corporate debt obligations.

 

On January 22, 2008, the Issuer issued $400.0 million of notes, consisting of Class A Floating Rate Senior Notes, Class B Floating Rate Senior Notes, Class C Deferrable Floating Rate Notes, Class D Deferrable Floating Rate Notes, Class E Deferrable Floating Rate Notes, and Subordinated Notes. The notes were issued pursuant to an indenture, dated January 22, 2008 (the “Indenture”), with U.S. Bank National Association (the “Trustee”) servicing as the Trustee thereunder. As of February 28, 2013, Saratoga Investment Corp. owned 100% of the Subordinated Notes of the CLO. The Issuer’s defined investment period ended on January 23, 2013. Following the defined investment period, proceeds from principal payments in the investment portfolio of the Issuer are used to pay down its outstanding notes, sequentially in order of seniority.

 

Pursuant to a collateral management agreement (the “Collateral Management Agreement”), Saratoga Investment Corp. (the “Collateral Manager”), provides investment management services to the Issuer, and makes day-to-day investment decisions concerning the assets of the Issuer. The Collateral Manager also performs certain administrative services on behalf of the Issuer under the Collateral Management Agreement.

 

2. Significant Accounting Policies

 

Basis of Presentation

 

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are stated in U.S. dollars.  The following is a summary of the significant accounting policies followed by the Issuer in the preparation of its financial statements.

 

Use of Estimates

 

The preparation of the financial statements in conformity with U.S. GAAP requires the Collateral Manager to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, including the fair value of investments, and the amounts of income and expenses during the reporting period. Actual results could differ from these estimates and such differences could be material.

 

S-9



 

GSC INVESTMENT CORP. CLO 2007, LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

Cash and Cash Equivalents

 

The Issuer defines cash and cash equivalents as highly liquid financial instruments with original maturities of three months or less. Cash and cash equivalents may include investments in money market mutual funds, which are carried at fair value. At February 28, 2013 and February 29, 2012, cash and cash equivalents amounted to $28.8 million and $17.8 million, respectively, and were swept on an overnight basis into a money market deposit account and invested in shares of JP Morgan Liquidity Institutional fund held at the Trustee.

 

Valuation of Investments

 

The Issuer accounts for its investments at fair value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires the Issuer to assume that its investments are to be sold at the Statement of Assets and Liabilities date in the principal market to independent market participants, or in the absence of a principal market, in the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

 

Investments for which market quotations are readily available are fair valued at such market quotations obtained from independent third party pricing services and market makers subject to any decision by the Collateral Manager to approve a fair value determination to reflect significant events affecting the value of these investments. The Collateral Manager values investments for which market quotations are not readily available at fair value. Determinations of fair value may involve significant judgments and estimates. The types of factors that may be considered in determining the fair value of investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.

 

Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. The determination of fair value may differ materially from the values that would have been used if a ready market for these investments existed. Our net asset value could be materially affected if the determinations regarding the fair value of our investments were materially higher or lower than the values that are ultimately realized upon the disposal of such investments.

 

S-10



 

GSC INVESTMENT CORP. CLO 2007, LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

Investment Transactions and Income Recognition

 

Purchases and sales of investments and the related realized gains or losses are recorded on a trade-date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Issuer stops accruing interest on its investments when it is determined that interest is no longer collectible. Discounts and premiums on investments purchased are accreted/amortized over the life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortizations of premium on investments.

 

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as a reduction in principal depending upon the Collateral Manager’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection.

 

Paid-in-Kind Interest

 

The Issuer holds debt investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision. The PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We stop accruing PIK interest if we do not expect the issuer to be able to pay all principal and interest when due.

 

Deferred Bond Issuance Costs

 

Included in deferred bond issuance costs are structuring fees of the investment bank, rating agency fees and legal fees associated with the establishment of the Issuer in November 2007.

 

Such costs have been capitalized and amortized using an effective yield method, over the life of the facility.

 

Collateral Management Fees

 

The Issuer is externally managed by the Collateral Manager pursuant to the Collateral Management Agreement. As compensation for the performance of its obligations under the Collateral Management Agreement, the Collateral Manager is entitled to receive from the Issuer a senior collateral management fee (the “Senior Collateral Management Fee”), a subordinated collateral management fee (the “Subordinated Collateral Management Fee”) and an incentive collateral management fee (the “Incentive Collateral Management Fee”). The Senior Collateral Management Fee is payable in arrears quarterly (subject to availability of funds and to the satisfaction of payment obligations on the debt obligations of the Issuer (the “Priority of Payments”) in an amount equal to

 

S-11



 

GSC INVESTMENT CORP. CLO 2007, LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

0.10% per annum of the aggregate principal amount of the Issuer’s investments.  The Subordinated Collateral Management Fee is payable in arrears quarterly (subject to availability of funds and to the Priority of Payments) in an amount equal to 0.40% per annum of the aggregate principal amount of the Issuer’s investments. The Incentive Management Fee equals 20% of the amount of interest and principal payments remaining available for distribution to the Collateral Manager under the Priority of Payments at which the Incentive Management Fee may be paid. The Incentive Management Fee will be payable in accordance with the Priority of Payments on each payment date if the Subordinated Notes internal rate of return for such payment date is greater than or equal to 12%.

 

Expenses

 

The Issuer bears its own organizational and offering expenses, all expenses related to its investment program and expenses incurred in connection with its operations including, but not limited to, external legal, administrative, trustee, accounting, tax and audit expenses, costs related to trading, acquiring, monitoring or disposing of investments of the Issuer, and interest and other borrowing expenses, expenses of preparing and distributing reports, financial statements, and litigation or other extraordinary expenses. The Issuer has retained the Trustee to provide trustee services. Additionally, the Trustee performs loan administration, debt covenant compliance calculations, and monitoring and reporting services.  For the years ended February 28, 2013, February 29, 2012 and February 28, 2011, the Issuer paid $0.1 million, respectively, for trustee services provided and is included in other expenses in the Statement of Operations.

 

Interest Expense

 

The Issuer has issued rated and unrated notes to finance its operations. Interest on debt is calculated by the Trustee for the Issuer. Interest is accrued and generally paid quarterly. For the years ended February 28, 2013, February 29, 2012 and February 28, 2011, $8.8 million, $7.9 million and $6.7 million of payments to the Subordinated Notes were included in interest expense in the Statement of Operations, respectively.

 

Risk Management

 

In the ordinary course of its business, the Issuer manages a variety of risks, including market risk and credit risk. Market risk is the risk of potential adverse changes to the value of investments because of changes in market conditions such as interest rate movements and volatility in investment prices.

 

Credit risk is the risk of default or non-performance by portfolio companies, equivalent to the investment’s carrying amount.

 

The Issuer is also exposed to credit risk related to maintaining all of its cash and cash equivalents, including those in reserve accounts, at a major financial institution.

 

S-12



 

GSC INVESTMENT CORP. CLO 2007, LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

The Issuer has investments in lower rated and comparable quality unrated high yield bonds and bank loans. Investments in high yield investments are accompanied by a greater degree of credit risk. The risk of loss due to default by the issuer is significantly greater for holders of high yield securities, because such investments are generally unsecured and are often subordinated to other creditors of the issuer.

 

Recent Accounting Pronouncements

 

In December 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which requires entities to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The guidance is effective for fiscal years and interim periods beginning on or after January 1, 2013 with retrospective application for all comparative periods presented. The adoption of this guidance, which is related to disclosure only, is not expected to have a material impact on the Issuer’s financial position, results of operations or cash flows.

 

3. Fair Value Measurements

 

As noted above, the Issuer values all investments in accordance with ASC 820. ASC 820 requires enhanced disclosures about assets and liabilities that are measured and reported at fair value. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

 

Based on the observability of the inputs used in the valuation techniques, the Issuer is required to provide disclosures on fair value measurements according to the fair value hierarchy. The fair value hierarchy ranks the observability of the inputs used to determine fair values. Investments carried at fair value are classified and disclosed in one of the following three categories:

 

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

 

·      Level 2—Valuations based on inputs other than quoted prices in active markets, which are either directly or indirectly observable.

 

S-13



 

GSC INVESTMENT CORP. CLO 2007, LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

·                  Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The inputs used in the determination of fair value may require significant management judgment or estimation. Such information may be the result of consensus pricing information 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 asset, assuming no additional corroborating evidence.

 

In addition to using the above inputs in investment valuations, the Issuer continues to employ the valuation policy that is consistent with ASC 820.

 

The following table presents fair value measurements of investments, by major class, as of February 28, 2013, according to the fair value hierarchy:

 

 

 

Fair Value Measurements

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Term loans

 

$

 

$

358,237,074

 

$

4,256,932

 

$

362,494,006

 

Structured finance securities

 

 

 

10,850,000

 

10,850,000

 

Equity interest

 

5,410

 

 

1,070,563

 

1,075,973

 

Total

 

$

5,410

 

$

358,237,074

 

$

16,177,495

 

$

374,419,979

 

 

The following table presents fair value measurements of investments, by major class, as of February 29, 2012, according to the fair value hierarchy:

 

 

 

Fair Value Measurements

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Term loans

 

$

 

$

365,780,893

 

$

 

$

365,780,893

 

Structured finance securities

 

 

 

14,507,600

 

14,507,600

 

Equity interest

 

5,410

 

 

1,070,563

 

1,075,973

 

Total

 

$

5,410

 

$

365,780,893

 

$

15,578,163

 

$

381,364,466

 

 

Transfers into or out of Level 1, 2 or 3 are recognized at the reporting date.

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended February 28, 2013:

 

 

 

Term Loans

 

Structured Finance
Securities

 

Equity Interest

 

Balance as of February 29, 2012

 

$

 

$

14,507,600

 

$

1,070,563

 

Net unrealized gains (losses)

 

(102,541

)

(126,657

)

 

Purchases and other adjustments to cost

 

4,018,668

 

219,455

 

 

Sales and redemptions

 

(74,141

)

(4,000,000

)

 

Net realized gain (loss) from investments

 

26,621

 

249,602

 

 

Net transfers in and/or out of Level 3(1)

 

388,325

 

 

 

Balance as of February 28, 2013

 

$

4,256,932

 

$

10,850,000

 

$

1,070,563

 

 


(1)    The Issuer’s investment in PATS Aircraft, LLC was transferred into Level 3 during the year ended February, 28, 2013 due to changes in liquidity. These changes impacted the Collateral Manager’s ability to obtain observable market information. Accordingly, the determination of fair value for this investment required significant management judgment and estimation, resulting in a Level 3 classification for the year ended February 28, 2013.

 

S-14



 

GSC INVESTMENT CORP. CLO 2007, LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended February 29, 2012:

 

 

 

Term Loans

 

Structured Finance
Securities

 

Equity Interest

 

Balance as of February 29, 2011

 

$

2,243,464

 

$

14,507,600

 

$

849,125

 

Net unrealized gains (losses)

 

3,022,852

 

 

(60,888

)

Purchases and other adjustments to cost

 

77,814

 

 

282,326

 

Sales and redemptions

 

(2,375,630

)

 

 

Net realized gain (loss) from investments

 

(2,968,500

)

 

 

Net transfers in and/or out of Level 3

 

 

 

 

Balance as of February 28, 2012

 

$

 

$

14,507,600

 

$

1,070,563

 

 

Purchases and other adjustments to cost include purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on debt securities and PIK.

 

Sales and redemptions represent net proceeds received from investments sold and principal paydowns received during the period.

 

The net unrealized loss on level 3 investments held as of February 28, 2013 and February 29, 2012, is $1.8 million and $1.7 million, respectively, and is included in net unrealized appreciation on investments in the Statements of Operations.

 

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of February 28, 2013 were as follows:

 

 

 

Fair Value

 

Valuation Technique

 

Unobservable Input

 

Range

 

 

 

 

 

 

 

 

 

 

 

Term loans

 

$

4,256,932

 

Yield Analysis

 

Market Yield

 

7.7%-17.0%

 

 

 

 

 

 

 

 

 

 

 

Structured Finance Securities

 

$

10,850,000

 

Yield Analysis

 

Market Yield

 

8.9%-10.7%

 

 

 

 

 

 

 

 

 

 

 

Equity Interest

 

$

1,070,563

 

Market Comparable

 

EBITDA Multiples

 

5.5x-8.0x

 

 

Significant unobservable inputs used in the fair value measurement of the Issuer’s term loans and structured finance securities include comparable market yields.  For investments utilizing a yield analysis valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement.  Generally, a change in the assumption for comparable yields is accompanied by a directionally opposite change in the assumption used for pricing.

 

Significant unobservable inputs used in the fair value measurement of the Issuer’s equity interests include EBITDA multiples.  For investments utilizing EBITDA multiples, a significant increase (decrease) in the EBITDA multiple, in isolation, would result in a significant higher (lower) fair value measurement.

 

S-15



 

GSC INVESTMENT CORP. CLO 2007, LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

4. Financing

 

On January 22, 2008, the Issuer issued $400.0 million of notes, consisting of Class A Floating Rate Senior Notes, Class B Floating Rate Senior Notes, Class C Deferrable Floating Rate Notes, Class D Deferrable Floating Rate Notes, Class E Deferrable Floating Rate Notes (collectively the “Secured Notes”), and Subordinated Notes. The notes were issued pursuant to the Indenture.

 

The Secured Notes are limited recourse obligations of the Issuer. The Subordinated Notes are unsecured, limited recourse debt obligations of the Issuer. The relative order of seniority of payment of each class of securities is, as follows: first, Class A Notes, second, Class B Notes, third, Class C Notes, fourth, Class D Notes, fifth, Class E Notes and sixth, the Subordinated Notes, with (a) each class of securities (other than the Subordinated Notes) in such list being senior to each other class of securities that follows such class of securities in such list and (b) each class of securities (other than the Class A Notes) in such list being subordinate to each other class of securities that precedes such class of securities in such list. The Subordinated Notes are subordinated to the Secured Notes and are entitled to periodic payments from interest proceeds available in accordance with the Priority of Payments.

 

The table below sets forth certain information for each outstanding class of notes issued pursuant to the Indenture.

 

Debt Security

 

Interest Rate

 

Maturity

 

Principal Amount

 

Amount Outstanding

 

Class A Floating Rate Senior Notes

 

LIBOR + 0.75%

 

January 21, 2020

 

$

296,000,000

 

$

296,000,000

 

Class B Floating Rate Senior Notes

 

LIBOR + 2.50%

 

January 21, 2020

 

22,000,000

 

22,000,000

 

Class C Deferrable Floating Rate Notes

 

LIBOR + 3.75%

 

January 21, 2020

 

14,000,000

 

14,000,000

 

Class D Deferrable Floating Rate Notes

 

LIBOR + 4.70%

 

January 21, 2020

 

16,000,000

 

16,000,000

 

Class E Deferrable Floating Rate Notes

 

LIBOR + 6.45%

 

January 21, 2020

 

22,000,000

 

17,960,044

 

Subordinated Notes

 

N/A

 

January 21, 2020

 

30,000,000

 

30,000,000

 

 

 

 

 

 

 

$

400,000,000

 

$

395,960,044

 

 

The following table shows each outstanding class of notes issued, pursuant to the Indenture, at fair value at February 28, 2013 and February 29, 2012.

 

 

 

Fair Value

 

Debt Security

 

February 28, 2013

 

February 29, 2012

 

Class A Floating Rate Senior Notes

 

$

292,879,007

 

$

285,891,473

 

Class B Floating Rate Senior Notes

 

22,900,917

 

21,676,954

 

Class C Deferrable Floating Rate Notes

 

14,592,983

 

13,128,032

 

Class D Deferrable Floating Rate Notes

 

16,414,949

 

14,517,373

 

Class E Deferrable Floating Rate Notes

 

17,999,348

 

15,228,326

 

Subordinated Notes

 

25,516,959

 

25,846,414

 

 

 

$

390,304,163

 

$

376,288,572

 

 

S-16



 

GSC INVESTMENT CORP. CLO 2007, LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

The following table provides the weighted average interest rate for the years ended February 28, 2013, February 29, 2012 and February 28, 2011:

 

 

 

 

 

Weighted Average Interest Rate

 

Debt Security

 

Interest Rate

 

February 28, 2013

 

February 29, 2012

 

February 28, 2011

 

Class A Floating Rate Senior Notes

 

LIBOR + 0.75%

 

1.15

%

1.12

%

1.10

%

Class B Floating Rate Senior Notes

 

LIBOR + 2.50%

 

2.90

%

2.87

%

2.85

%

Class C Deferrable Floating Rate Notes

 

LIBOR + 3.75%

 

4.15

%

4.12

%

4.10

%

Class D Deferrable Floating Rate Notes

 

LIBOR + 4.70%

 

5.10

%

5.07

%

5.05

%

Class E Deferrable Floating Rate Notes

 

LIBOR + 6.45%

 

6.85

%

6.82

%

6.80

%

Subordinated Notes

 

N/A

 

N/A

 

N/A

 

N/A

 

 

The Indenture provides that payments on the Subordinated Notes shall rank subordinate in priority of payment to payments due on all classes of Secured Notes and subordinate in priority of payment to the payment of fees and expenses. Distributions on the Subordinated Notes are limited to the assets of the Issuer remaining after payment of all of the liabilities of the Issuer that rank senior in priority of payment to the Subordinated Notes. To the extent that the proceeds from the collateral are not sufficient to make distributions on the Subordinated Notes the Issuer will have no further obligation in respect of the Subordinated Notes.

 

Interest proceeds and, after the Secured Notes have been paid in full, principal proceeds, in each case will be distributed to the holders of the Subordinated Notes in accordance with the Indenture.

 

Distributions, if any, on the Subordinated Notes will be payable quarterly on the 20th day of each January, April, July and October of each calendar year or, if any such day is not a business day, on the next succeeding business day (each, a “Payment Date”), commencing on the first Payment Date, and on January 21, 2020 (or if any such day is not a business day, the next succeeding business day) (the “Stated Redemption Date”) (if not redeemed prior to such date) sequentially in order of seniority. At the Stated Redemption Date, the Subordinated Notes will be redeemed after payment in full of all of the Secured Notes and the payment of all administrative and other fees and expenses. The failure to pay interest proceeds or principal proceeds to the holders of the Subordinated Notes will not be an event of default under the Indenture.

 

In May of 2009, GSC Investment Corp. CLO 2007 Ltd. defaulted on its Class E overcollateralization ratio of 105.10%, at which point, $4.0 million of interest proceeds were used to repay the Class E Notes through November 2009.  Interest on the Class C, Class D, and Class E Notes was deferred and repaid in January of 2010 upon the Issuer’s return to compliance.  Distributions to the Subordinated Notes resumed in April of 2010.

 

As of February 28, 2013, the remaining unamortized discount on the Class B Notes, Class D Notes and Class E Notes were $0.4 million, $0.4 million and $1.1 million, respectively.

 

S-17



 

GSC INVESTMENT CORP. CLO 2007, LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

5. Income Tax

 

Under the current laws, the Issuer is not subject to net income taxation in the United States or the Cayman Islands. Accordingly, no provision for income taxes has been made in the accompanying financial statements.

 

Pursuant to ASC Topic 740, Accounting for Uncertainty in Income Taxes, the Issuer adopted the provisions of the FASB relating to accounting for uncertainty in income taxes which clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position must meet before being recognized in the financial statements and applies to all open tax years as of the effective date. The Collateral Manager has analyzed such tax positions for uncertain tax positions for tax years that may be open (2008 — 2013). The Issuer identifies its major tax jurisdictions as U.S. Federal, state and foreign jurisdictions where the Issuer makes investments. As of February 28, 2013 and February 29, 2012, there was no impact to the financial statements as a result of the Issuer’s accounting for uncertainty in income taxes. The Issuer does not have any unrecognized tax benefits or liabilities for the years ended February 28, 2013, February 29, 2012 and February 28, 2011. Also, the Issuer recognizes interest and, if applicable, penalties for any uncertain tax positions, as a component of income tax expense. No interest or penalty expense was recorded by the Issuer for the years ended February 28, 2013, February 29, 2012 and February 28, 2011.

 

6. Commitments and Contingencies

 

In the ordinary course of its business, the Issuer may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Issuer. Based on its history and experience, the Collateral Manager feels that the likelihood of such an event is remote.

 

In the ordinary course of business, the Issuer may directly or indirectly be a defendant or plaintiff in legal actions with respect to bankruptcy, insolvency or other types of proceedings. Such lawsuits may involve claims that could adversely affect the value of certain financial instruments owned by the Issuer. As of February 28, 2013 and February 29, 2012, the Issuer is not subject to any material legal proceedings.

 

The terms of Collateralized Debt Investments may require the Issuer to provide funding for any unfunded portion of a Collateralized Debt Investment at the request of the borrower. At February 28, 2013 and February 29, 2012, the Issuer had no unfunded commitments.

 

7. Related-Party Transactions

 

In the ordinary course of business and as permitted per the terms of the Indenture, the Issuer may acquire or sell investments to or from related parties at the fair value at such time. For the years ended February 28, 2013, February 29, 2012 and February 28, 2011, the Issuer bought no investments from related parties and sold no investments to related parties.

 

S-18



 

GSC INVESTMENT CORP. CLO 2007, LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

The Subordinated Notes are wholly owned by the Collateral Manager.  The Subordinated Notes do not have a stated coupon rates, but are entitled to residual cash flows from the CLO’s investments after all of the other tranches of debt and certain other fees and expenses are paid. For the years ended February 28, 2013, February 29, 2012 and February 28, 2011, $8.8 million, $7.9 million and $6.7 million of payments were made to the Subordinated Notes and were recorded as interest expense on the Statement of Operations, respectively.

 

8. Shareholders’ Capital

 

Capital contributions and distributions shall be made at such time and in such amounts as determined by the Collateral Manager and the Indenture.

 

The majority holder of the Subordinated Notes has various control rights over the CLO, including the ability to call the CLO prior to its legal maturity, replace the Collateral Manager under certain circumstances, and refinance any of the outstanding debt tranches.  The voting structure of the Subordinated Notes may require either majority or unanimous approval depending upon the issue.

 

The authorized share capital of the Issuer consists of 50,000 ordinary shares, 250 of which are owned by Maples Finance Limited and are held under the terms of a declaration of trust.

 

As of February 28, 2013 and February 29, 2012, net assets were $0.8 million and $(6.0) million, respectively.  These amounts include accumulated losses of $(6.0) million and $(3.1) million, respectively, which includes cumulative net investment income or loss, cumulative amounts of gains and losses realized from investment transactions, net unrealized appreciation or depreciation of investments, as well as the cumulative effect of accounting mismatches between investments accounted for at fair value and amortized cost or accrual-basis assets and liabilities as discussed in Significant Accounting Policies, above.  The Issuer’s investments continue to generate sufficient liquidity to satisfy its obligations on periodic payment dates as well as comply with all performance criteria as of the Statements of Assets and Liabilities date.

 

S-19



 

GSC INVESTMENT CORP. CLO 2007, LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

9. Financial Highlights

 

The following is a schedule of financial highlights for the years ended February 28, 2013, February 29, 2012 and February 28, 2011:

 

 

 

February 28, 2013

 

February 29, 2012

 

February 28, 2011

 

 

 

 

 

 

 

 

 

Average subordinated notes’ capital balance (1)

 

$

27,165,497

 

$

20,808,673

 

$

17,775,209

 

 

 

 

 

 

 

 

 

Ratios and supplemental data:

 

 

 

 

 

 

 

Total Return (2)

 

73.51

%

41.28

%

283.76

%

Net investment income (3)

 

3.80

%

11.38

%

25.92

%

Total expenses (3)

 

70.97

%

87.40

%

93.78

%

Senior collateral monitoring fee (3)

 

1.47

%

1.93

%

2.29

%

Subordinate collateral monitoring fee (3)

 

5.89

%

7.73

%

9.15

%

 


(1)   Subordinated notes’ capital balance is calculated based on the sum of the subordinated notes outstanding amount and total net assets, net of ordinary equity.

(2)   Total return is calculated based on a time-weighted rate of return methodology. Quarterly rates of return are compounded to derive the total return reflected above. Total return is calculated for the subordinated notes’ capital taken as a whole and assumes the purchase of the subordinated notes’ capital on the first day of the period and the sale of the last day of the period.

(3)   Calculated based on average subordinated notes’ capital balance.

 

10. Subsequent Events

 

The Collateral Manager has evaluated events or transactions that have occurred since February 28, 2013 through June 7, 2013, the date the financial statements were available for issuance. The Manager has determined that there are no material events that would require the disclosure in the financial statements.

 

S-20


Exhibit 31.1

 

CERTIFICATION PURSUANT TO

RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

 

I, Christian L. Oberbeck, certify that:

 

1.             I have reviewed this Annual Report on Form 10-K of Saratoga Investment Corp.;

 

2.             Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.             Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4.             The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

 

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)           Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)           Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5.             The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: June 7, 2013

 

 

/s/ CHRISTIAN L. OBERBECK

 

Christian L. Oberbeck

 

Chief Executive Officer

 


Exhibit 31.2

 

CERTIFICATION PURSUANT TO

RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

 

I, Richard A. Petrocelli, certify that:

 

1.             I have reviewed this Annual Report on Form 10-K of Saratoga Investment Corp.;

 

2.             Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.             Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4.             The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

 

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)           Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)           Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5.             The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: June 7, 2013

 

 

/s/ RICHARD A. PETROCELLI

 

Name: Richard A. Petrocelli

 

Chief Financial Officer, Chief Compliance Officer

 

and Secretary

 



 

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

The certification set forth below is being submitted in connection with the accompanying Annual Report of Saratoga Investment Corp. on Form 10-K (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

 

Christian L. Oberbeck, the Chief Executive Officer and Richard A. Petrocelli, the Chief Financial Officer, Chief Compliance Officer and Secretary of Saratoga Investment Corp., each certifies that, to the best of his knowledge:

 

1.                                      the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

 

2.                                      the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Saratoga Investment Corp.

 

Date: June 7, 2013

 

 

/s/ CHRISTIAN L. OBERBECK

 

Name: Christian L. Oberbeck

 

Chief Executive Officer

 

 

 

/s/ RICHARD A. PETROCELLI

 

Name: Richard A. Petrocelli

 

Chief Financial Officer, Chief Compliance Officer

 

and Secretary