OAKTREE SPECIALTY LENDING CORPORATION The following discussion should be read in connection with our Consolidated Financial Statements and the notes thereto included elsewhere in this quarterly report on Form 10-Q. Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to: •our future operating results and distribution projections; •the ability ofOaktree Fund Advisors, LLC , or Oaktree, to reposition our portfolio and to implement Oaktree's future plans with respect to our business; •the ability of Oaktree and its affiliates to attract and retain highly talented professionals; •our business prospects and the prospects of our portfolio companies; •the impact of the investments that we expect to make; •the ability of our portfolio companies to achieve their objectives; •our expected financings and investments and additional leverage we may seek to incur in the future; •the adequacy of our cash resources and working capital; •the timing of cash flows, if any, from the operations of our portfolio companies; and •the cost or potential outcome of any litigation to which we may be a party. In addition, words such as "anticipate," "believe," "expect," "seek," "plan," "should," "estimate," "project" and "intend" indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in "Item 1A. Risk Factors" in our annual report on Form 10-K for the year endedSeptember 30, 2019 and elsewhere in this quarterly report on Form 10-Q. Other factors that could cause actual results to differ materially include: •changes or potential disruptions in our operations, the economy, financial markets or political environment; •risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters or the COVID-19 pandemic; •future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to Business Development Companies or regulated investment companies, or RICs; •general considerations associated with the COVID-19 pandemic; and •other considerations that may be disclosed from time to time in our publicly disseminated documents and filings. We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with theSecurities and Exchange Commission , or theSEC , including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. All dollar amounts in tables are in thousands, except share and per share amounts and as otherwise indicated. Business Overview We are a specialty finance company that looks to provide customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. We are a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company under the Investment Company Act of 1940, as amended, or the Investment Company Act. In addition, we have qualified and elected to be treated as a RIC under the Internal Revenue Code of 1986, as amended, or the Code, for tax purposes. We are externally managed by Oaktree pursuant to an investment advisory agreement, as amended from time to time, or the Investment Advisory Agreement, between the Company and Oaktree.Oaktree Fund Administration, LLC , or the Oaktree Administrator, an affiliate of Oaktree, provides certain administrative and other services necessary for us to operate pursuant to an administration agreement, as amended from time to time, or the Administration Agreement. 71 -------------------------------------------------------------------------------- Our investment objective is to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and certain equity co-investments. We may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions. Our portfolio may also include certain structured finance and other non-traditional structures. We invest in companies that typically possess business models we expect to be resilient in the future with underlying fundamentals that will provide strength in economic downturns. We intend to deploy capital across credit and economic cycles with a focus on long-term results, which we believe will enable us to build lasting partnerships with financial sponsors and management teams, and we may seek to opportunistically take advantage of dislocations in the financial markets and other situations that may benefit from Oaktree's credit and structuring expertise, including during the COVID-19 pandemic. Sponsors may include financial sponsors, such as an institutional investor or a private equity firm, or a strategic entity seeking to invest in a portfolio company. Oaktree is generally focused on middle-market companies, which we define as companies with enterprise values of between$100 million and$750 million . We generally invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as "high yield" and "junk," have predominantly speculative characteristics with respect to the issuer's capacity to pay interest and repay principal. Oaktree intends to continue to rotate our portfolio into investments that are better aligned with Oaktree's overall approach to credit investing and that it believes have the potential to generate attractive returns across market cycles (which we call "core investments"). Oaktree has performed a comprehensive review of our portfolio and categorized our portfolio into core investments, non-core performing investments and underperforming investments. Certain additional information on such categorization and our portfolio composition is included in investor presentations that we file with theSEC . Since an Oaktree affiliate became our investment adviser inOctober 2017 , Oaktree and its affiliates have reduced the investments identified as non-core by over$700 million at fair value. Over time, Oaktree intends to rotate us out of the remaining non-core investments, which were approximately$134 million at fair value as ofJune 30, 2020 . Oaktree periodically reviews designations of investments as core and non-core and may change such designations over time. Business Environment and Developments We believe that the COVID-19 pandemic may have lasting effects on theU.S. and global financial markets and may cause further economic uncertainties or deterioration in the performance of the middle market inthe United States and worldwide. While the initial market disruptions have somewhat eased, the global economy continues to experience economic uncertainty. This uncertainty can impact the overall supply and demand of the market through changing spreads, deal terms and structures, and equity purchase price multiples. Despite this economic uncertainty, we believe attractive risk-adjusted returns can be achieved by making loans to companies in the middle market. Given the breadth of the investment platform of Oaktree and its affiliates, we believe that we have the resources and experience to source, diligence and structure investments in these companies and are well placed to generate attractive returns for investors. We have proactively taken a number of actions to evaluate and support our portfolio companies in light of the COVID-19 pandemic, including outreach to a variety of management teams and sponsors. We have been in close contact with many of our portfolio companies to understand their liquidity and solvency positions. We believe that these efforts to closely monitor and identify vulnerable investments will allow us to address potential problems early and provide constructive solutions to our portfolio companies. As ofJune 30, 2020 , 86.2% of our debt investment portfolio (at fair value) and 87.3% of our debt investment portfolio (at cost) bore interest at floating rates indexed to the London Interbank Offered Rate, or LIBOR, and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly or monthly at the borrower's option. As a result of the COVID-19 pandemic and the related decision of theU.S. Federal Reserve to reduce certain interest rates, LIBOR decreased beginning inMarch 2020 . A prolonged reduction in interest rates will result in a decrease in our total investment income and could result in a decrease in our net investment income to the extent the decreases are not offset by an increase in the spread on our floating rate investments, a decrease in our interest expense or a reduction of our incentive fee on income. InJuly 2017 , the head of theUnited Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021. TheU.S. Federal Reserve , in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of largeU.S. financial institutions, is considering replacingU.S. -dollar LIBOR with the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed byTreasury securities. Although there have been a few issuances utilizing SOFR or the Sterling Over Night Index Average, an alternative reference rate that is based on transactions, it remains unknown whether these alternative reference rates will attain market acceptance as replacements for LIBOR. If LIBOR ceases to exist, we may need to renegotiate any credit agreements extending beyond 2021 with our prospective portfolio companies that utilize LIBOR as a factor in determining the interest rate and may also need to renegotiate the terms of 72 -------------------------------------------------------------------------------- the Credit Facility (as defined below), which matures in 2024. Certain of the loan agreements with our portfolio companies have included fallback language in the event that LIBOR becomes unavailable. This language generally provides that the administrative agent may identify a replacement reference rate, typically with the consent of (or prior consultation with) the borrower. In certain cases, the administrative agent will be required to obtain the consent of either a majority of the lenders under the facility, or the consent of each lender, prior to identifying a replacement reference rate. Certain of the loan agreements with our portfolio companies do not include any fallback language providing a mechanism for the parties to negotiate a new reference interest rate and will instead revert to the base rate in the event LIBOR ceases to exist. It remains unclear whether the cessation of LIBOR will be delayed due to COVID-19 or what form any delay may take, and there are no assurances that there will be a delay. It is also unclear what the duration and severity of COVID-19 will be, and whether this will impact LIBOR transition planning. COVID-19 may also slow regulators' and others' efforts to develop and implement alternative reference rates, which could make LIBOR transition planning more difficult, particularly if the cessation of LIBOR is not delayed but an alternative reference rate does not emerge as industry standard. Critical Accounting Policies Basis of Presentation Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted inthe United States of America , or GAAP, and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the Consolidated Financial Statements have been made. All intercompany balances and transactions have been eliminated. We are an investment company following the accounting and reporting guidance inFinancial Accounting Standards Board , or FASB, Accounting Standards Codification, or ASC, Topic 946, Financial Services-Investment Companies, or ASC 946. Investment Valuation We value our investments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820, which defines fair value as the amount 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. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments' complexity. Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows: •Level 1 - Unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date. •Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities. •Level 3 - Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. If inputs used to measure fair value fall into different levels of the fair value hierarchy, an investment's level is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. These investments may be classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions. Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, Oaktree obtains and analyzes readily available market quotations provided by pricing vendors and brokers for all of our investments for which quotations are available. In determining the fair value of a particular investment, pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations. We seek to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If we are unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within our set 73 -------------------------------------------------------------------------------- threshold, we seek to obtain a quote directly from a broker making a market for the asset. Oaktree evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Oaktree also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, Oaktree performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process. Generally, we do not adjust any of the prices received from these sources. If the quotations obtained from pricing vendors or brokers are determined to not be reliable or are not readily available, we value such investments using any of three different valuation techniques. The first valuation technique is the transaction precedent technique, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value, or EV, of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine (i) the value of equity investments, (ii) whether there is credit impairment for debt investments and (iii) the value for debt investments that we are deemed to control under the Investment Company Act. To estimate the EV of a portfolio company, Oaktree analyzes various factors, including the portfolio company's historical and projected financial results, macroeconomic impacts on the company and competitive dynamics in the company's industry. Oaktree also utilizes some or all of the following information based on the individual circumstances of the portfolio company: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase prices as a multiple of their earnings or cash flow, (iv) the portfolio company's ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis, (vi) estimated liquidation or collateral value of the portfolio company's assets and (vii) offers from third parties to buy the portfolio company. We may probability weight potential sale outcomes with respect to a portfolio company when uncertainty exists as of the valuation date. The third valuation technique is a market yield technique, which is typically performed for non-credit impaired debt investments. In the market yield technique, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk, and we consider the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by us are substantially illiquid with no active transaction market, we depend on primary market data, including newly funded transactions and industry-specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable. In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. These investments are generally not redeemable. We estimate the fair value of privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an EV analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk-free rate. Changes in the subjective input assumptions can materially affect the fair value estimates. Our Board of Directors undertakes a multi-step valuation process each quarter in connection with determining the fair value of our investments: •The quarterly valuation process begins with each portfolio company or investment being initially valued by Oaktree's valuation team in conjunction with Oaktree's portfolio management team and investment professionals responsible for each portfolio investment; •Preliminary valuations are then reviewed and discussed with management of Oaktree; •Separately, independent valuation firms engaged by our Board of Directors prepare valuations of our investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to us and provide such reports to Oaktree and the Audit Committee of our Board of Directors; •Oaktree compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee; •The Audit Committee reviews the preliminary valuations with Oaktree, and Oaktree responds and supplements the preliminary valuations to reflect any discussions between Oaktree and the Audit Committee; •The Audit Committee makes a recommendation to our full Board of Directors regarding the fair value of the investments in our portfolio; and 74 -------------------------------------------------------------------------------- •Our Board of Directors discusses valuations and determines the fair value of each investment in our portfolio. The fair value of our investments as ofJune 30, 2020 andSeptember 30, 2019 was determined in good faith by our Board of Directors. Our Board of Directors has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of a portion of our portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board of Directors may reasonably rely on that assistance. As ofJune 30, 2020 , 92.8% of our portfolio at fair value was valued either based on market quotations, the transactions precedent approach or corroborated by independent valuation firms. However, our Board of Directors is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to our valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material. As ofJune 30, 2020 andSeptember 30, 2019 , approximately 94.8% and 97.1%, respectively, of our total assets represented investments at fair value. Revenue Recognition Interest Income Interest income, adjusted for accretion of original issue discount, or OID, is recorded on an accrual basis to the extent that such amounts are expected to be collected. We stop accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management's judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash, and the portfolio company, in management's judgment, is likely to continue timely payment of its remaining obligations. As ofJune 30, 2020 , there were three investments on which we had stopped accruing cash and/or payment in kind, or PIK, interest or OID income. In connection with our investment in a portfolio company, we sometimes receive nominal cost equity that is valued as part of the negotiation process with the portfolio company. When we receive nominal cost equity, we allocate our cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan. For our secured borrowings, the interest earned on the entire loan balance is recorded within interest income and the interest earned by the buyer from the partial loan sales is recorded within interest expense in the Consolidated Statements of Operations. PIK Interest Income Our investments in debt securities may contain PIK interest provisions. PIK interest, which typically represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We generally cease accruing PIK interest if there is insufficient value to support the accrual or if we do not expect the portfolio company to be able to pay all principal and interest due. Our decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; our assessment of the portfolio company's business development success; information obtained by us in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. Our determination to cease accruing PIK interest is generally made well before our full write-down of a loan or debt security. In addition, if it is subsequently determined that we will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on our debt investments increases the recorded cost bases of these investments in our Consolidated Financial Statements including for purposes of computing the capital gains incentive fee payable by us to Oaktree. To maintain our status as a RIC, certain income from PIK interest may be required to be distributed to our stockholders, even though we have not yet collected the cash and may never do so. 75 -------------------------------------------------------------------------------- Fee Income Oaktree or its affiliates may provide financial advisory services to portfolio companies and, in return, we may receive fees for capital structuring services. These fees are generally nonrecurring and are recognized by us upon the investment closing date. We may also receive additional fees in the ordinary course of business, including servicing, amendment and prepayment fees, which are classified as fee income and recognized as they are earned or the services are rendered. We have also structured exit fees across certain of our portfolio investments to be received upon the future exit of those investments. These fees are typically paid to us upon the earliest to occur of (i) a sale of the borrower or substantially all of the assets of the borrower, (ii) the maturity date of the loan or (iii) the date when full prepayment of the loan occurs. The receipt of such fees is contingent upon the occurrence of one of the events listed above for each of the investments. These fees are included in net investment income over the life of the loan. Dividend Income We generally recognize dividend income on the record date. Distributions received from equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will not record distributions from such equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment. Portfolio Composition Our investments principally consist of loans, common and preferred equity and warrants in privately-held companies andSenior Loan Fund JV I, LLC , or SLF JV I, a joint venture through which we andTrinity Universal Insurance Company , a subsidiary of Kemper Corporation, or Kemper, co-invest in senior secured loans of middle-market companies and other corporate debt securities. Our loans are typically secured by a first, second or subordinated lien on the assets of the portfolio company and generally have terms of up to ten years (but an expected average life of between three and four years). During the nine months endedJune 30, 2020 , we originated$667.6 million of investment commitments in 51 new and 20 existing portfolio companies and funded$586.4 million of investments. During the nine months endedJune 30, 2020 , we received$379.3 million of proceeds from prepayments, exits, other paydowns and sales and exited 36 portfolio companies. A summary of the composition of our investment portfolio at cost and fair value as a percentage of total investments is shown in the following tables: June 30, 2020 September 30, 2019 Cost: Senior secured debt 78.03 % 77.35 % Subordinated debt 6.92 6.88 Debt investment in SLF JV I 5.67 6.36 Common equity and warrants 4.14 3.48 LLC equity interests of SLF JV I 2.91 3.26 Preferred equity 2.33 2.67 Total 100.00 % 100.00 % June 30, 2020 September 30, 2019 Fair value: Senior secured debt 80.93 % 78.64 % Subordinated debt 7.18 5.65 Debt investment in SLF JV I 6.17 6.69 Common equity and warrants 2.92 4.10 Preferred equity 1.92 2.82 LLC equity interests of SLF JV I 0.88 2.10 Total 100.00 % 100.00 % 76
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The industry composition of our portfolio at cost and fair value as a percentage of total investments was as follows:
June 30, 2020 September 30, 2019
Cost:
Application Software 11.34 % 8.73 %
Multi-Sector Holdings (1) 9.03 9.67
Data Processing & Outsourced Services 6.43 6.46
Pharmaceuticals 5.87 3.92
Biotechnology 4.69 5.43
Health Care Services 4.20 6.62
Oil & Gas Refining & Marketing 3.71 2.01
Specialized Finance 3.12 3.52
Personal Products 3.08 0.00
Property & Casualty Insurance 2.91 4.83
Specialty Chemicals 2.67 2.10
Movies & Entertainment 2.63 1.25
Real Estate Services 2.30 2.60
Oil & Gas Storage & Transportation 2.01 0.77
Auto Parts & Equipment 1.98 2.82
Aerospace & Defense 1.95 2.23
Internet Services & Infrastructure 1.86 2.15
Health Care Technology 1.85
3.37
Research & Consulting Services 1.83 2.30 Managed Health Care 1.62 1.83 Alternative Carriers 1.61 1.94 Electronic Components 1.50 0.00 Education Services 1.36 1.04 Advertising 1.35 2.80 Airport Services 1.32 - Independent Power Producers & Energy Traders 1.28
-
Electrical Components & Equipment 1.24
1.40
Systems Software 1.22
2.10
Integrated Telecommunication Services 1.19
2.23
General Merchandise Stores 1.12
1.25
Diversified Support Services 1.11
1.24
Apparel, Accessories & Luxury Goods 1.02
1.20
Hotels, Resorts & Cruise Lines 0.91
-
Industrial Machinery 0.90
1.13
Diversified Real Estate Activities 0.90
-
IT Consulting & Other Services 0.88 0.99 Construction & Engineering 0.78 1.55 Health Care Distributors 0.76 1.49 Metal & Glass Containers 0.66 - Airlines 0.62 0.70 Trading Companies & Distributors 0.60 0.68 Restaurants 0.60 0.20 Commercial Printing 0.47 0.40 Food Retail 0.40 0.96 Distributors 0.22 - Oil & Gas Equipment & Services 0.20 0.80 Health Care Facilities 0.18 - Insurance Brokers 0.13 - Construction Materials 0.13 - Leisure Facilities 0.11 0.12 Specialty Stores 0.08 0.09 Thrifts & Mortgage Finance 0.06 0.08 Other Diversified Financial Services 0.01 0.01 Interactive Media & Services - 1.44 Specialized REITs - 0.55 Household Appliances - 0.52 Environmental & Facilities Services -
0.39
Human Resource & Employment Services - 0.05
Department Stores - 0.04
Total 100.00 % 100.00 %
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June 30, 2020 September 30, 2019
Fair value:
Application Software 11.86 % 9.00 %
Multi-Sector Holdings (1) 7.68 8.94
Pharmaceuticals 6.40 4.18
Data Processing & Outsourced Services 6.13 6.83
Biotechnology 5.76
5.96
Oil & Gas Refining & Marketing 4.44 2.20 Health Care Services 3.84 4.06 Personal Products 3.29 - Specialized Finance 3.11 3.58 Property & Casualty Insurance 2.98 5.16 Movies & Entertainment 2.79 1.29 Real Estate Services 2.35 2.75 Specialty Chemicals 2.33 1.64 Health Care Technology 2.01 3.64 Oil & Gas Storage & Transportation 1.97
0.83
Internet Services & Infrastructure 1.90
2.26
Research & Consulting Services 1.87 2.60 Auto Parts & Equipment 1.87 2.82 Aerospace & Defense 1.87 2.35 Alternative Carriers 1.69 2.06 Managed Health Care 1.64 1.93 Electronic Components 1.50 - Airport Services 1.37 - Independent Power Producers & Energy Traders 1.34
-
Systems Software 1.29
2.19
Electrical Components & Equipment 1.25
1.39
Diversified Support Services 1.06
1.30
Diversified Real Estate Activities 1.06
-
Hotels, Resorts & Cruise Lines 1.06 - General Merchandise Stores 1.05 1.18 Advertising 1.05 2.59 Integrated Telecommunication Services 1.02 2.01 Airlines 0.94 1.12 Construction & Engineering 0.83 1.67 IT Consulting & Other Services 0.83 0.96 Industrial Machinery 0.77 1.17 Metal & Glass Containers 0.77 - Health Care Distributors 0.75 1.53 Apparel, Accessories & Luxury Goods 0.72
0.92
Trading Companies & Distributors 0.64 0.72 Restaurants 0.48 0.19 Commercial Printing 0.48 0.41 Education Services 0.46 - Food Retail 0.44 1.04 Oil & Gas Equipment & Services 0.30 0.95 Distributors 0.26 - Health Care Facilities 0.22 - Insurance Brokers 0.14 - Construction Materials 0.12 - Thrifts & Mortgage Finance 0.02 0.05 Leisure Facilities - 0.33 Interactive Media & Services - 1.56 Leisure Products - 1.05 Specialized REITs - 0.57 Household Appliances - 0.53 Environmental & Facilities Services -
0.41
Human Resource & Employment Services - 0.05 Department Stores - 0.03 Total 100.00 % 100.00 % ___________________
(1)This industry includes our investments in SLF JV I, collateral loan obligations and certain limited partnership interests.
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Loans and Debt Securities on Non-Accrual Status
As of June 30, 2020 , non-accruals represented 1.3% of the debt portfolio at cost
and 0.2% at fair value in three positions. During the quarter ended June 30,
2020 , we placed one new investment on non-accrual status, representing 0.1% of
the debt portfolio at both cost and fair value and we exited one investment that
was previously on non-accrual status. As of each of June 30, 2020 and
September 30, 2019 , there were three investments on which we had stopped
accruing cash and/or PIK interest or OID income.
The percentages of our debt investments at cost and fair value by accrual status
as of June 30, 2020 and September 30, 2019 were as follows:
June 30, 2020 September 30, 2019
% of Debt Fair % of Debt % of Debt Fair % of Debt
Cost Portfolio Value Portfolio Cost Portfolio Value Portfolio
Accrual $ 1,517,762 98.72 % $ 1,469,325 99.83 % $ 1,311,849 95.72 % $ 1,305,718 99.79 %
PIK non-accrual (1) 12,661 0.82 - - 12,661 0.92 - -
Cash non-accrual (2) 7,108 0.46 2,497 0.17 46,107 3.36 2,706 0.21
Total $ 1,537,531 100.00 % $ 1,471,822 100.00 % $ 1,370,617 100.00 % $ 1,308,424 100.00 %
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(1)PIK non-accrual status is inclusive of other non-cash income, where applicable. (2)Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.Senior Loan Fund JV I, LLC InMay 2014 , we entered into a limited liability company, or LLC, agreement with Kemper to form SLF JV I. We co-invest in senior secured loans of middle-market companies and other corporate debt securities with Kemper through our investment in SLF JV I. SLF JV I is managed by a four person Board of Directors, two of whom are selected by us and two of whom are selected by Kemper. All portfolio decisions and investment decisions in respect of SLF JV I must be approved by the SLF JV I investment committee, which consists of one representative selected by us and one representative selected by Kemper (with approval from a representative of each required). Since we do not have a controlling financial interest in SLF JV I, we do not consolidate SLF JV I. SLF JV I is capitalized pro rata with LLC equity interests as transactions are completed and may be capitalized with additional subordinated notes issued to us and Kemper by SLF JV I. OnDecember 28, 2018 , we and Kemper directed the redemption of our holdings of mezzanine notes issued by SLF Repack Issuer 2016, LLC, a wholly-owned, special purpose issuer subsidiary of SLF JV I. Upon such redemption, the assets collateralizing the mezzanine notes, which consisted of equity interests ofSLF JV I Funding LLC , or the Equity Interests, were distributed in-kind to each of us and Kemper, based upon our respective holdings of mezzanine notes. Upon such distribution, we and Kemper each then directed that a portion of our respective Equity Interests holdings be contributed to SLF JV I in exchange for LLC equity interests of SLF JV I and the remainder be applied as payment for the subordinated notes of SLF JV I. SLF Repack Issuer 2016, LLC was dissolved following the foregoing redemption and liquidation. The subordinated notes issued by SLF JV I, or the SLF JV 1 Subordinated Notes, and the mezzanine notes issued by SLF Repack Issuer 2016, LLC, or the SLF Repack Notes, collectively are referred to as the SLF JV I Notes. Prior to their redemption onDecember 28, 2018 , the SLF Repack Notes consisted of Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed rate notes. The SLF JV I Subordinated Notes are (and the SLF Repack Notes were, prior to their redemption) senior in right of payment to SLF JV I LLC equity interests and subordinated in right of payment to SLF JV I's secured debt. As ofJune 30, 2020 andSeptember 30, 2019 , we and Kemper owned, in the aggregate, 87.5% and 12.5%, respectively, of the LLC equity interests of SLF JV I and the outstanding SLF JV I Subordinated Notes. SLF JV I has a senior revolving credit facility with Deutsche Bank AG,New York Branch, or, as amended, the Deutsche Bank I Facility, which permitted up to$250.0 million of borrowings (subject to borrowing base and other limitations) as ofJune 30, 2020 andSeptember 30, 2019 . Borrowings under the Deutsche Bank I Facility are secured by all of the assets ofSLF JV I Funding LLC , a special purpose financing subsidiary of SLF JV I. As ofJune 30, 2020 , the reinvestment period of the Deutsche Bank I Facility was scheduled to expireJune 28, 2021 and the maturity date for the Deutsche Bank I Facility wasJune 29, 2026 . As ofJune 30, 2020 , borrowings under the Deutsche Bank I Facility accrued interest at a rate equal to the 3-month LIBOR plus 1.85% per annum during the reinvestment period and 3-month LIBOR plus 2.00% per annum during the amortization period. Under the Deutsche Bank I Facility,$173.9 million and$170.2 million of borrowings were outstanding as ofJune 30, 2020 andSeptember 30, 2019 , respectively. 79 -------------------------------------------------------------------------------- OnJuly 10, 2020 , SLF JV I amended the Deutsche Bank I Facility to (a) establish a waiver period beginning onJuly 10, 2020 and ending 180 days thereafter (the "Waiver Period"), during which the facility agent is restricted from revaluing certain collateral obligations where the change in valuation is caused by or results from a business disruption due primarily to the COVID-19 pandemic and (b) modify the minimum utilization percentage from 75% to 50% until 90 days after the end of the Waiver Period. As ofJune 30, 2020 andSeptember 30, 2019 , SLF JV I had total assets of$315.4 million and$360.9 million , respectively. SLF JV I's portfolio primarily consisted of senior secured loans to 53 and 51 portfolio companies as ofJune 30, 2020 andSeptember 30, 2019 , respectively. The portfolio companies in SLF JV I are in industries similar to those in which we may invest directly. As ofJune 30, 2020 , our investment in SLF JV I consisted of LLC equity interests and SLF JV I Subordinated Notes of$110.0 million in aggregate at fair value. As ofSeptember 30, 2019 , our investment in SLF JV I consisted of LLC equity interests and SLF JV I Subordinated Notes of$126.3 million in aggregate at fair value. As of each ofJune 30, 2020 andSeptember 30, 2019 , we and Kemper had funded approximately$165.5 million to SLF JV I, of which$144.8 million was from us. As ofJune 30, 2020 andSeptember 30, 2019 , we and Kemper had the option to fund additional SLF JV I Notes, subject to additional equity funding to SLF JV I. As of each ofJune 30, 2020 andSeptember 30, 2019 , we had commitments to fund LLC equity interests in SLF JV I of$17.5 million , of which$1.3 million was unfunded. Below is a summary of SLF JV I's portfolio, followed by a listing of the individual loans in SLF JV I's portfolio as ofJune 30, 2020 andSeptember 30, 2019 : June 30, 2020 September 30, 2019 Senior secured loans (1)$306,759 $340,960 Weighted average interest rate on senior secured loans (2) 5.43% 6.57% Number of borrowers in SLF JV I 53 51 Largest exposure to a single borrower (1)$10,515 $10,835 Total of five largest loan exposures to borrowers (1)$49,198 $50,510 __________________ (1) At principal amount. (2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value. 80 -------------------------------------------------------------------------------- SLF JV I Portfolio as of June 30, 2020 Cash Interest Portfolio Company Investment Type Rate (1)(2) Industry Principal Cost Fair Value (3) Notes First Lien Term Loan, LIBOR+3.75% cash due Diversified Support Access CIG, LLC 2/27/2025 3.92 % Services$ 9,229 $ 9,192 $ 8,816 AdVenture Interactive, Corp. 927 shares of common stock Advertising 1,390 1,353 (4) First Lien Term Loan, AI Convoy (Luxembourg) LIBOR+3.50% cash due S.À.R.L. 1/18/2027 4.65 % Aerospace & Defense 5,647 5,619 5,414 First Lien Term Loan, AI Ladder (Luxembourg) LIBOR+4.50% cash due Electrical Components & Subco S.a.r.l. 7/9/2025 4.68 % Equipment 6,064 5,933 5,534 (4) First Lien Term Loan, LIBOR+7.50% cash due Hotels, Resorts & CruiseAirbnb, Inc. 4/17/2025 8.50 % Lines 3,059 2,984 3,197 First Lien Term Loan, Integrated LIBOR+4.00% cash due Telecommunication Altice France S.A. 8/14/2026 4.18 % Services 4,655 4,453 4,494 First Lien Term Loan, LIBOR+5.25% cash due Alvogen Pharma US, Inc. 12/31/2023 6.32 % Pharmaceuticals 9,879 9,603 9,237 First Lien Term Loan, LIBOR+4.00% cash due Amplify Finco Pty Ltd. 11/26/2026 4.75 % Movies & Entertainment 7,980 7,900 6,983 (4) First Lien Term Loan, LIBOR+3.75% cash due Anastasia Parent, LLC 8/11/2025 Personal Products 2,835 2,317 1,003 (6) First Lien Term Loan, LIBOR+7.25% cash due Apptio, Inc. 1/10/2025 8.25 % Application Software 4,615 4,546 4,512 (4) First Lien Revolver, LIBOR+7.25% cash due 1/10/2025 Application Software - (6) (9) (4)(5)Total Apptio, Inc. 4,540 4,503 First Lien Term Loan, LIBOR+6.00% cash due Aurora Lux Finco S.À.R.L. 12/24/2026 7.00 % Airport Services 6,484 6,334 6,036
(4)
First Lien Term Loan,
Blackhawk Network Holdings, LIBOR+3.00% cash due Data Processing &
Inc. 6/15/2025 3.18 % Outsourced Services 9,800 9,783 9,073
First Lien Term Loan,
LIBOR+4.25% cash due
Boxer Parent Company Inc. 10/2/2025 4.43 % Systems Software 7,552 7,466 7,174 (4)
First Lien Term Loan,
LIBOR+4.00% cash due Oil & Gas Equipment &
Brazos Delaware II, LLC 5/21/2025 4.19 % Services 7,350 7,324 5,053
Data Processing &
C5 Technology Holdings, LLC 171 Common Units Outsourced Services - - (4)
Data Processing &
7,193,539.63 Preferred Units Outsourced Services 7,194 5,683 (4)
Total C5 Technology
Holdings, LLC 7,194 5,683
First Lien Term Loan,
Carrols Restaurant Group, LIBOR+6.25% cash due
Inc. 4/30/2026 7.25 % Restaurants 4,000 3,800 3,840
First Lien Term Loan,
LIBOR+5.00% cash due Oil & Gas Refining &
CITGO Petroleum Corp. 3/28/2024 6.00 % Marketing 7,202 7,130 6,932 (4)
First Lien Term Loan,
Clear Channel Outdoor LIBOR+3.50% cash due
Holdings, Inc. 8/21/2026 4.26 % Advertising 331 289 302
First Lien Term Loan,
LIBOR+4.50% cash due
Connect U.S. Finco LLC 12/11/2026 5.50 % Alternative Carriers 7,456 7,274 7,041 (4)
First Lien Term Loan,
LIBOR+4.00% cash due
Curium Bidco S.à.r.l. 7/9/2026 5.07 % Biotechnology 5,955 5,910 5,851
First Lien Term Loan,
LIBOR+4.00% cash due Internet Services &
Dcert Buyer, Inc. 10/16/2026 4.18 % Infrastructure 7,980 7,960 7,744
First Lien Term Loan,
LIBOR+4.25% cash due
Dealer Tire, LLC 12/12/2025 4.43 % Distributors 945 903 906 (4)
First Lien Term Loan,
LIBOR+3.75% cash due
Ellie Mae, Inc. 4/17/2026 4.06 % Application Software 4,963 4,938 4,830
First Lien Term Loan,
LIBOR+4.50% cash due
eResearch Technology, Inc. 2/4/2027 5.50 % Application Software 7,500 7,425 7,371
First Lien Term Loan, Integrated
Frontier Communications PRIME+2.75% cash due Telecommunication
Corporation 6/15/2024 6.00 % Services 3,939 3,901 3,853
First Lien Term Loan,
LIBOR+4.25% cash due
Gigamon, Inc. 12/27/2024 5.25 % Systems Software 7,801 7,750 7,479
81--------------------------------------------------------------------------------
Cash Interest
Portfolio Company Investment Type Rate (1)(2) Industry Principal Cost Fair Value (3) Notes
Second Lien Term Loan,
LIBOR+8.00% cash due
Guidehouse LLP 5/1/2026 8.18 % Research & Consulting Services $ 6,000 $ 5,978 $ 5,490 (4)
First Lien Term Loan,
Helios Software Holdings , LIBOR+4.25% cash due
Inc. 10/24/2025 5.32 % Systems Software 3,980 3,940 3,852
First Lien Term Loan,
Intelsat Jackson Holdings PRIME+4.75% cash due
S.A. 11/27/2023 8.00 % Alternative Carriers 3,568 3,539 3,565
First Lien Delayed Draw
Term Loan, LIBOR+5.50%
cash due 7/13/2021 6.50 % Alternative Carriers 971 798 1,006 (5)
Total Intelsat Jackson
Holdings S.A. 4,337 4,571
First Lien Term Loan,
LIBOR+4.00% cash due
KIK Custom Products Inc. 5/15/2023 5.00 % Household Products 8,000 7,978 7,645
First Lien Term Loan,
LIBOR+7.00% cash 1.5% PIK Internet Services &
Mindbody, Inc. due 2/14/2025 8.00 % Infrastructure 4,529 4,459 4,185 (4)
First Lien Revolver,
LIBOR+8.00% cash due Internet Services &
2/14/2025 9.07 % Infrastructure 476 469 440 (4)
Total Mindbody, Inc. 4,928 4,625
First Lien Term Loan,
LIBOR+5.50% cash due
MRI Software LLC 2/10/2026 6.57 % Application Software 3,716 3,682 3,577 (4)
First Lien Delayed Draw
Term Loan, LIBOR+5.50%
cash due 2/10/2026 Application Software - (2) (10) (4)(5)
First Lien Revolver,
LIBOR+5.50% cash due
2/10/2026 Application Software - (3) (13) (4)(5)
Total MRI Software LLC 3,677 3,554
First Lien Term Loan,
LIBOR+4.00% cash due
Navicure, Inc. 10/22/2026 4.18 % Health Care Technology 5,985 5,955 5,761
First Lien Term Loan,
LIBOR+5.00% cash due
New IPT, Inc. 3/17/2021 6.00 % Oil & Gas Equipment & Services 1,072 1,072 1,072 (4)
21.876 Class A Common
Units in New IPT
Holdings, LLC Oil & Gas Equipment & Services - 512 (4)
Total New IPT, Inc. 1,072 1,584
First Lien Term Loan,
Northern Star Industries LIBOR+4.50% cash due
Inc. 3/31/2025 5.57 % Electrical Components & Equipment 6,843 6,819 6,329
First Lien Term Loan,
LIBOR+5.50% cash due Integrated Telecommunication
Northwest Fiber, LLC 6/5/2027 5.67 % Services 2,406 2,316 2,394
First Lien Term Loan,
LIBOR+5.00% cash due
Novetta Solutions, LLC 10/17/2022 6.00 % Application Software 5,946 5,922 5,832
First Lien Term Loan,
LIBOR+4.00% cash due
OEConnection LLC 9/25/2026 5.07 % Application Software 7,253 7,216 6,890
First Lien Delayed Draw
Term Loan, LIBOR+4.00%
cash due 9/25/2026 Application Software - (3) (35) (5)
Total OEConnection LLC 7,213 6,855
First Lien Term Loan,
LIBOR+6.50% cash due
Olaplex, Inc. 1/8/2026 7.50 % Personal Products 4,969 4,877 4,770 (4)
First Lien Revolver,
LIBOR+6.50% cash due
1/8/2025 7.50 % Personal Products 540 530 518 (4)
Total Olaplex, Inc. 5,407 5,288
First Lien Term Loan,
LIBOR+4.50% cash due
PG&E Corporation 6/23/2025 5.50 % Electric Utilities 6,000 5,910 5,904
First Lien Term Loan,
LIBOR+4.50% cash due
Sabert Corporation 12/10/2026 5.50 % Metal & Glass Containers 4,339 4,296 4,241
First Lien Term Loan,
LIBOR+6.50% cash due
Salient CRGT, Inc. 2/28/2022 7.57 % Aerospace & Defense 2,142 2,127 1,928 (4)
First Lien Term Loan,
LIBOR+5.00% cash due
SHO Holding I Corporation 10/27/2022 6.00 % Footwear 8,354 8,341 5,555
First Lien Term Loan,
LIBOR+4.50% cash due
Signify Health, LLC 12/23/2024 5.50 % Health Care Services 9,775 9,711 9,237
First Lien Term Loan,
LIBOR+5.50% cash due
Sirva Worldwide, Inc. 8/4/2025 5.68 %
Diversified Support Services 4,809 4,736 3,558
82--------------------------------------------------------------------------------
Cash Interest
Portfolio Company Investment Type Rate (1)(2) Industry Principal Cost Fair Value (3) Notes
First Lien Term Loan,
LIBOR+4.25% cash due
Star US Bidco LLC 3/17/2027 5.25 % Industrial Machinery $ 3,728 $ 3,534 $ 3,423
First Lien Term Loan,
LIBOR+4.25% cash due
Sunshine Luxembourg VII SARL 10/1/2026 5.32 % Personal Products 7,960 7,920 7,650
First Lien Term Loan,
LIBOR+3.75% cash due
Supermoose Borrower, LLC 8/29/2025 3.93 % Application Software 4,901 4,571 4,339 (4)
First Lien Term Loan,
LIBOR+3.25% cash due
Surgery Center Holdings, Inc. 9/3/2024 4.25 % Health Care Facilities 4,974 4,954 4,402 (4)
927 Class A Units in FS AVI
Thruline Marketing, Inc. Holdco, LLC Advertising 949 322 (4)
First Lien Term Loan,
LIBOR+4.00% cash due
Uber Technologies, Inc. 4/4/2025 5.00 % Application Software 8,005 7,947 7,718
First Lien Term Loan,
LIBOR+3.25% cash due
UFC Holdings, LLC 4/29/2026 4.25 % Movies & Entertainment 4,819 4,777 4,622
First Lien Term Loan,
LIBOR+4.50% cash due
Veritas US Inc. 1/27/2023 5.50 % Application Software 6,841 6,812 6,358 (4)
First Lien Term Loan,
LIBOR+4.50% cash due
Verscend Holding Corp. 8/27/2025 4.68 % Health Care Technology 4,122 4,090 3,998 (4)
First Lien Term Loan,
LIBOR+3.25% cash due Data Processing &
VM Consolidated, Inc. 2/28/2025 3.56 % Outsourced Services 10,515 10,525 10,068
Second Lien Term Loan,
LIBOR+7.75% cash due
WP CPP Holdings, LLC 4/30/2026 8.75 % Aerospace & Defense 6,000 5,955 4,530 (4)
$ 306,759 $ 312,009 $ 291,335
__________________
(1) Represents the current interest rate as of June 30, 2020 . All interest rates
are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate
loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate),
which typically resets semi-annually, quarterly, or monthly at the borrower's
option. The borrower may also elect to have multiple interest reset periods for
each loan. For each of these loans, we have provided the applicable margin over
LIBOR or the alternate base rate based on each respective credit agreement and
the cash interest rate as of period end. All the LIBOR shown above is in U.S.
dollars. As of June 30, 2020 , the reference rates for SLF JV I's variable rate
loans were the 30-day LIBOR at 0.18%, the 60-day LIBOR at 0.24%, the 90-day
LIBOR at 0.31%, the 180-day LIBOR at 0.36% and the PRIME at 3.25%. Most loans
include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of June 30, 2020
utilizing a similar technique as us in accordance with ASC 820. However, the
determination of such fair value is not included in our Board of Directors'
valuation process described elsewhere herein.
(4) This investment is held by both us and SLF JV I as of June 30, 2020 .
(5) Investment has undrawn commitments. Unamortized fees are classified as
unearned income which reduces cost basis, which may result in a negative cost
basis. A negative fair value may result from the unfunded commitment being
valued below par.
(6) This investment was on cash non-accrual status as of June 30, 2020 . Cash
non-accrual status is inclusive of PIK and other non-cash income, where
applicable.
SLF JV I Portfolio as of September 30, 2019
Cash Interest
Portfolio Company Investment Type Rate (1)(2) Industry Principal Cost Fair Value (3) Notes
First Lien Term Loan, Diversified support
Access CIG, LLC LIBOR+3.75% cash due 2/27/2025 6.07 %
services
927 shares of common stock Advertising 1,390 1,295 (4)
AI Ladder (Luxembourg) First Lien Term Loan, Electrical components & Subco S.a.r.l. LIBOR+4.50% cash due 7/9/2025 6.60 % equipment 6,145 5,992 5,659
(4)
First Lien Term Loan, IT consulting & other
Air Newco LP LIBOR+4.75% cash due 5/31/2024 6.79 % services 9,900 9,875 9,916
First Lien Term Loan, Oil & gas storage &
AL Midcoast Holdings LLC LIBOR+5.50% cash due 8/1/2025 7.60 % transportation 9,900 9,801 9,764
Integrated
First Lien Term Loan, telecommunication
Altice France S.A. LIBOR+4.00% cash due 8/14/2026 6.03 % services 7,444 7,282 7,439
First Lien Term Loan,
Alvogen Pharma US, Inc. LIBOR+4.75% cash due 4/1/2022 6.79 % Pharmaceuticals 7,656 7,656 6,963
First Lien Term Loan,
Apptio, Inc. LIBOR+7.25% cash due 1/10/2025 9.56 % Application software 4,615 4,534 4,530 (4)
First Lien Revolver,
LIBOR+7.25% cash due 1/10/2025 Application software - (7) (7) (4)(5)
Total Apptio, Inc. 4,527 4,523
83--------------------------------------------------------------------------------
Cash Interest
Portfolio Company Investment Type Rate (1)(2) Industry Principal Cost Fair Value (3) Notes
Blackhawk Network First Lien Term Loan, Data processing & outsourced
Holdings, Inc. LIBOR+3.00% cash due 6/15/2025 5.04 % services $ 9,875 $ 9,855 $ 9,858
First Lien Term Loan,
Boxer Parent Company Inc. LIBOR+4.25% cash due 10/2/2025 6.29 % Systems software 7,609 7,518 7,336 (4)
First Lien Term Loan,
Brazos Delaware II, LLC LIBOR+4.00% cash due
7,376 6,855
C5 Technology Holdings, Data Processing & Outsourced
LLC 171 Common Units Services - - (4)
7,193,539.63 Preferred Units 7,194 7,194 (4)
Total C5 Technology
Holdings, LLC 7,194 7,194
First Lien Term Loan,
Cast & Crew Payroll, LLC LIBOR+4.00% cash due 2/9/2026 6.05 % Application software 4,975 4,925 5,018
First Lien Term Loan,
7,880 8,010 (4)
First Lien Term Loan,
Connect U.S. Finco LLC LIBOR+4.50% cash due 9/23/2026 7.10 % Alternative Carriers 8,000 7,840 7,888 (4)
First Lien Term Loan,
Curium Bidco S.à r.l. LIBOR+4.00% cash due 7/9/2026 6.10 % Biotechnology 6,000 5,955 6,030
First Lien Term Loan, Internet services &
Dcert Buyer, Inc. LIBOR+4.00% cash due 8/8/2026 6.26 % infrastructure 8,000 7,980 7,985
First Lien Term Loan, Internet services &
DigiCert, Inc. LIBOR+4.00% cash due 10/31/2024 6.04 % infrastructure 8,250 8,148 8,249 (4)
First Lien Term Loan,
Ellie Mae, Inc. LIBOR+4.00% cash due 4/17/2026 6.04 % Application software 5,000 4,975 5,015
First Lien Term Loan,
Everi Payments Inc. LIBOR+3.00% cash due 5/9/2024 5.04 % Casinos & gaming 4,764 4,742 4,776
Falmouth Group Holdings First Lien Term Loan,
Corp. LIBOR+6.75% cash due 12/14/2021 8.95 % Specialty chemicals 4,938 4,909 4,910
Frontier Communications First Lien Term Loan, Integrated telecommunication
Corporation LIBOR+3.75% cash due 6/15/2024 5.80 % services 6,473 6,400 6,471
Gentiva Health Services, First Lien Term Loan,
Inc. LIBOR+3.75% cash due 7/2/2025 5.81 % Healthcare services 7,920 7,801 7,974
First Lien Term Loan,
Gigamon, Inc. LIBOR+4.25% cash due 12/27/2024 6.29 % Systems software 7,860 7,801 7,644
First Lien Term Loan,
GoodRx, Inc. LIBOR+2.75% cash due 10/10/2025 4.81 % Interactive media & services 7,852 7,835 7,862
Second Lien Term Loan,
Guidehouse LLP LIBOR+7.50% cash due 5/1/2026 9.54 % Research & consulting services 6,000 5,975 5,925 (4)
First Lien Term Loan,
Indivior Finance S.a.r.l. LIBOR+4.50% cash due 12/19/2022 6.76 % Pharmaceuticals 7,898 7,797 7,272
Intelsat Jackson Holdings First Lien Term Loan,
S.A. LIBOR+3.75% cash due 11/27/2023 5.80 % Alternative Carriers 10,000 9,891 10,042
First Lien Term Loan,
KIK Custom Products Inc. LIBOR+4.00% cash due 5/15/2023 6.26 % Household products 8,000 7,972 7,610
McDermott Technology First Lien Term Loan,
(Americas), Inc. LIBOR+5.00% cash due 5/9/2025 7.10 % Oil & gas equipment & services 4,187 4,119 2,676
First Lien Term Loan, Internet services &
Mindbody, Inc. LIBOR+7.00% cash due 2/14/2025 9.06 % infrastructure 4,524 4,443 4,438 (4)
First Lien Revolver, Internet services &
LIBOR+7.00% cash due 2/15/2025 infrastructure - (9) (9) (4)(5)
Total Mindbody, Inc. 4,434 4,429
First Lien Term Loan,
Navicure, Inc. LIBOR+3.75% cash due 9/18/2026 6.13 % Healthcare technology 6,000 5,970 6,008
First Lien Term Loan,
New IPT, Inc. LIBOR+5.00% cash due 3/17/2021 7.10 % Oil & gas equipment & services 1,422 1,422 1,422 (4)
21.876 Class A Common Units in
New IPT Holdings, LLC Oil & gas equipment & services - 1,268 (4)
Total New IPT, Inc. 1,422 2,690
Northern Star Industries First Lien Term Loan, Electrical components &
Inc. LIBOR+4.50% cash due 3/31/2025 6.56 % equipment 6,895 6,868 6,792
84--------------------------------------------------------------------------------
Cash Interest
Portfolio Company Investment Type Rate (1)(2) Industry Principal Cost Fair Value (3) Notes
First Lien Term Loan,
Novetta Solutions, LLC LIBOR+5.00% cash due 10/17/2022 7.05 % Application software $ 5,993 $ 5,961 $ 5,882
First Lien Term Loan,
OCI Beaumont LLC LIBOR+4.00% cash due 3/13/2025 6.10 % Commodity chemicals 7,880 7,872 7,890
First Lien Term Loan,
OEConnection LLC LIBOR+4.00% cash due 9/24/2026 6.13 % Application software 7,312 7,275 7,298
First Lien Delayed Draw Term
Loan, LIBOR+4.00% cash due
9/24/2026 Application software - (3) (1) (5)
Total OEConnection LLC 7,272 7,297
First Lien Term Loan, Interactive media &
Red Ventures, LLC LIBOR+3.00% cash due 11/8/2024 5.04 % services 3,990 3,971 4,011
First Lien Term Loan,
Salient CRGT, Inc. LIBOR+6.00% cash due 2/28/2022 8.05 % Aerospace & defense 2,205 2,183 2,094 (4)
Scientific Games First Lien Term Loan,
International, Inc. LIBOR+2.75% cash due 8/14/2024 4.79 % Casinos & gaming 6,516 6,491 6,470
First Lien Term Loan,
SHO Holding I Corporation LIBOR+5.00% cash due 10/27/2022 7.26 % Footwear 8,420 8,403 7,999
First Lien Term Loan,
Signify Health, LLC LIBOR+4.50% cash due 12/23/2024 6.60 % Healthcare services 9,850 9,775 9,838
First Lien Term Loan, Diversified support
Sirva Worldwide, Inc. LIBOR+5.50% cash due 8/4/2025 7.54 % services 4,906 4,833 4,759
First Lien Term Loan,
Sunshine Luxembourg VII SARL LIBOR+4.25% cash due
7,960 8,048
First Lien Term Loan,
Thruline Marketing, Inc. LIBOR+7.00% cash due 4/3/2022 9.10 % Advertising 1,854 1,851 1,854 (4)
927 Class A Units in FS AVI
Holdco, LLC Advertising 1,088 658 (4)
Total Thruline Marketing,
Inc. 2,939 2,512
Fixed Rate Bond 144A 9.0% Toggle
Triple Royalty Sub LLC PIK cash due 4/15/2033 Pharmaceuticals 5,000 5,000 5,175
First Lien Term Loan,
Uber Technologies, Inc. LIBOR+4.00% cash due 4/4/2025 6.03 % Application software 9,875 9,836 9,836 (4)
First Lien Term Loan,
UFC Holdings, LLC LIBOR+3.25% cash due 4/29/2026 5.30 % Movies & entertainment 4,489 4,489 4,506
First Lien Term Loan,
Uniti Group LP LIBOR+5.00% cash due 10/24/2022 7.04 % Specialized REITs 6,401 6,221 6,256 (4)
Valeant Pharmaceuticals First Lien Term Loan,
International Inc. LIBOR+2.75% cash due 11/27/2025 4.79 % Pharmaceuticals 1,772 1,764 1,778
First Lien Term Loan,
Veritas US Inc. LIBOR+4.50% cash due 1/27/2023 6.60 % Application software 6,894 6,856 6,534 (4)
First Lien Term Loan,
Data processing &
Verra Mobility, Corp. LIBOR+3.75% cash due
10,849 10,894
Second Lien Term Loan,
5,949 5,974 (4)
$ 340,960 $ 347,985 $ 345,032
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(1) Represents the current interest rate as of September 30, 2019 . All interest
rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate
loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate),
which typically resets semi-annually, quarterly, or monthly at the borrower's
option. The borrower may also elect to have multiple interest reset periods for
each loan. For each of these loans, we have provided the applicable margin over
LIBOR or the alternate base rate based on each respective credit agreement and
the cash interest rate as of period end. All the LIBOR shown above is in U.S.
dollars. As of September 30, 2019 , the reference rates for SLF JV I's variable
rate loans were the 30-day LIBOR at 2.04%, the 60-day LIBOR at 2.09%, the 90-day
LIBOR at 2.10%, the 180-day LIBOR at 2.06%, and the PRIME at 5.00%. Most loans
include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of September 30, 2019
utilizing a similar technique as us in accordance with ASC 820. However, the
determination of such fair value is not included in our Board of Directors'
valuation process described elsewhere herein.
(4) This investment was held by both us and SLF JV I as of September 30, 2019 .
(5) Investment had undrawn commitments. Unamortized fees are classified as
unearned income which reduces cost basis, which may result in a negative cost
basis. A negative fair value may result from the unfunded commitment being
valued below par.
Both the cost and fair value of our debt investment in the SLF JV I were $96.3
million as of each of June 30, 2020 and September 30, 2019 . We earned interest
income of $2.0 million and $6.3 million on our investments in the SLF JV I
Subordinated Notes for the three and nine months ended June 30, 2020 ,
respectively. We earned interest income of $2.3 million and $7.4 million on our
investments in the SLF JV I Notes for the three and nine months ended June 30,
2019 , respectively. The
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SLF JV I Subordinated Notes bear interest at a rate of one-month LIBOR plus 7.0% per annum and mature onDecember 29, 2028 . The cost and fair value of the LLC equity interests in SLF JV I held by us was$49.3 million and$13.8 million , respectively, as ofJune 30, 2020 , and$49.3 million and$30.1 million , respectively, as ofSeptember 30, 2019 . We did not earn dividend income for the three and nine months endedJune 30, 2020 and 2019 with respect to our investment in the LLC equity interests of SLF JVI. The LLC equity interests of SLF JV I are dividend producing to the extent SLF JV I has residual cash to be distributed on a quarterly basis. Below is certain summarized financial information for SLF JV I as ofJune 30, 2020 andSeptember 30, 2019 and for the three and nine months endedJune 30, 2020 and 2019:
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