UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 


 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2006

 

OR

 

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

 

For the transition period          to         

 

Commission File No. 000-50697

 


 

ARES CAPITAL CORPORATION

(Exact name of Registrant as specified in its charter)

 

Maryland

 

33-1089684

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification Number)

 

280 Park Avenue, 22nd Floor, New York, NY 10017

(Address of principal executive office)   (Zip Code)

 

(212) 750-7300

(Registrant’s telephone number, including area code)

 


 

N/A

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

 


 

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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o  Accelerated filer x  Non-accelerated filer o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

 

 

Outstanding at November 8, 2006

 

Common stock, $0.001 par value

 

49,091,195

 

 




ARES CAPITAL CORPORATION

INDEX

Part I.

 

Financial Information

 

 

 

Item 1.

 

Financial Statements.

 

 

 

 

 

Consolidated Balance Sheets as of September 30, 2006 (unaudited) and December 31, 2005

 

 

 

 

 

Consolidated Schedules of Investments as of September 30, 2006 (unaudited) and December 31, 2005

 

 

 

 

 

Consolidated Statement of Operations for the three and nine months ended September 30, 2006 (unaudited) and September 30, 2005 (unaudited)

 

 

 

 

 

Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2006 (unaudited) and September 30, 2005 (unaudited)

 

 

 

 

 

Consolidated Statement of Cash Flows for the nine months ended September 30, 2006 (unaudited) and September 30, 2005 (unaudited)

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk.

 

 

 

Item 4.

 

Controls and Procedures.

 

 

 

Part II.

 

Other Information

 

 

 

Item 1.

 

Legal Proceedings.

 

 

 

Item 1A.

 

Risk Factors.

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds.

 

 

 

Item 3.

 

Defaults Upon Senior Securities.

 

 

 

Item 4.

 

Submission of Matters to a Vote of Security Holders.

 

 

 

Item 5.

 

Other Information.

 

 

 

Item 6.

 

Exhibits.

 

1




 

PART I  —  FINANCIAL INFORMATION

Item 1.  Financial Statements.

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

As of

 

 

 

September 30, 2006

 

December 31, 2005

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Investments at fair value (amortized cost of $1,044,109,177 and $581,351,865, respectively):

 

 

 

 

 

Non-control/Non-affiliate investments

 

$

859,503,669

 

$

515,184,991

 

Affiliate investments

 

173,483,619

 

70,783,384

 

Total investments at fair value

 

1,032,987,288

 

585,968,375

 

Cash and cash equivalents

 

67,610,129

 

16,613,334

 

Receivable for open trades

 

1,676,990

 

1,581,752

 

Interest receivable

 

10,931,480

 

5,828,098

 

Other assets

 

9,350,178

 

3,653,585

 

 

 

 

 

 

 

Total assets

 

$

1,122,556,065

 

$

613,645,144

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Debt

 

$

366,000,000

 

$

18,000,000

 

Reimbursed underwriting costs payable to the Investment Adviser

 

 

2,475,000

 

Dividend payable

 

 

12,889,225

 

Payable for open trades

 

 

5,500,000

 

Accounts payable and accrued expenses

 

2,234,296

 

1,222,678

 

Management and incentive fees payable

 

10,981,600

 

3,478,034

 

Interest and facility fees payable

 

4,071,299

 

313,930

 

Interest payable to the Investment Adviser

 

 

154,078

 

 

 

 

 

 

 

Total liabilities

 

383,287,195

 

44,032,945

 

 

 

 

 

 

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Common stock, par value $.001 per share, 100,000,000 common shares authorized, 49,091,195 and 37,909,484 common shares issued and outstanding, respectively

 

49,092

 

37,910

 

Capital in excess of par value

 

727,920,560

 

559,192,554

 

Accumulated net realized gain on sale of investments

 

22,421,107

 

5,765,225

 

Net unrealized (depreciation) appreciation on investments

 

(11,121,889

)

4,616,510

 

 

 

 

 

 

 

Total stockholders’ equity

 

739,268,870

 

569,612,199

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

1,122,556,065

 

$

613,645,144

 

 

 

 

 

 

 

NET ASSETS PER SHARE

 

$

15.06

 

$

15.03

 

 

See accompanying notes to consolidated financial statements.

2




 

ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of September 30, 2006 (unaudited)

 

Company {1}

 

Industry

 

Investment

 

Interest {15}

 

Initial
Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage of
Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare - Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

American Renal Associates, Inc.

 

Dialysis provider

 

Senior secured loan ($3,049,180 par due 12/2010)

 

9.57% (Libor+ 4.00%/S)

 

12/14/05

 

$

3,049,180

 

$

3,049,180

 

$

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($196,721 par due 12/2010)

 

10.75% (Base Rate + 2.50%/D)

 

12/14/05

 

196,721

 

196,721

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($5,836,066 par due 12/2011)

 

10.07% (Libor + 4.50%/S)

 

12/14/05

 

5,836,066

 

5,836,066

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($36,066 par due 12/2011)

 

11.25% (Base Rate + 3.00%/D)

 

12/14/05

 

36,066

 

36,066

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($393,741 par due 12/2011)

 

12.57% (Libor + 7.00%/Q)

 

12/14/05

 

393,741

 

393,741

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($261,997 par due 12/2011)

 

12.57 (Libor + 7.00%/Q)

 

12/14/05

 

261,997

 

261,997

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($3,937,406 par due 12/2011)

 

14.25% (Base Rate + 6.00% /D)

 

12/14/05

 

3,937,406

 

3,937,406

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($2,619,971 par due 12/2011)

 

14.25% (Base Rate + 6.00%/D)

 

12/14/05

 

2,619,971

 

2,619,971

 

1.00{3

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capella Healthcare, Inc.

 

Acute care hospital operator

 

Junior secured loan ($19,000,000 par due 11/2013)

 

11.37% (Libor + 6.00%/Q)

 

12/1/05

 

19,000,000

 

19,000,000

 

1.00

 

 

 

 

 

 

 

Junior secured loan ($12,000,000 par due 11/2013)

 

11.37% (Libor + 6.00%/Q)

 

12/1/05

 

12,000,000

 

12,000,000

 

1.00{3

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DSI Renal, Inc.

 

Dialysis provider

 

Senior subordinated note ($60,637,680 par due 4/2014)

 

12.00% Cash, 2.00% PIK

 

4/4/06

 

60,637,680

 

60,637,680

 

1.00{4

}

 

 

 

 

 

 

Senior subordinated note ($5,025,000 par due 4/2014)

 

12.00% Cash, 2.00% PIK

 

4/4/06

 

5,025,000

 

5,025,000

 

1.00{4}{3

}

 

 

 

 

 

 

Senior secured loan ($3,200,000 par due 3/2013)

 

8.50% (Libor + 3.00%/Q)

 

4/4/06

 

3,200,000

 

3,200,000

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($960,000 par due 3/2013)

 

8.44% (Libor + 3.00%/Q)

 

4/4/06

 

960,000

 

960,000

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($1,600,000 par due 3/2013)

 

8.38% (Libor + 3.00%/M)

 

4/4/06

 

1,600,000

 

1,600,000

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($1,440,000 par due 3/2013)

 

10.75% (Base Rate + 2.50%/D)

 

4/4/06

 

1,440,000

 

1,440,000

 

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OnCURE Medical Corp.

 

Radiation oncology care provider

 

Senior subordinated note ($23,230,012 par due 8/2012)

 

11.00% cash, 1.50% PIK

 

8/16/06

 

23,230,012

 

23,230,012

 

1.00{4

}

 

 

 

 

 

 

Senior secured loan ($3,489,063 par due 8/2011)

 

8.94% (Libor + 3.50%/S)

 

8/23/06

 

3,489,063

 

3,489,063

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($10,938 par due 8/2011)

 

8.94% (Libor + 3.50%/Q)

 

8/23/06

 

10,938

 

10,938

 

1.00

 

 

 

 

 

 

 

Common stock (857,143 shares)

 

 

 

8/16/06

 

3,000,000

 

3,000,000

 

3.50{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PHNS, Inc.

 

Information technology and business process outsourcing

 

Senior subordinated loan ($16,000,000 par due 11/2011)

 

13.50% cash, 2.50% PIK

 

10/29/04

 

15,804,452

 

16,320,000

 

1.02{4

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Triad Laboratory Alliance, LLC

 

Laboratory services

 

Senior subordinated note ($14,762,865 par due 12/2012)

 

12.00% cash, 1.75% PIK

 

12/21/05

 

14,762,865

 

14,762,865

 

1.00{4

}

 

 

 

 

 

 

Senior secured loan ($6,947,500 par due 12/2011)

 

8.62% (Libor + 3.25%/Q)

 

12/21/05

 

6,947,500

 

6,947,500

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($2,977,500 par due 12/2011)

 

8.62% (Libor + 3.25%/Q)

 

12/21/05

 

2,977,500

 

2,977,500

 

1.00{3

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

190,416,158

 

190,931,706

 

 

 

25.83

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Printing, Publishing and Broadcasting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canon Communications LLC

 

Print publications services

 

Junior secured loan ($7,525,000 par due 11/2011)

 

12.37% (Libor + 6.75%/S)

 

5/25/05

 

7,525,000

 

7,525,000

 

1.00

 

 

 

 

 

 

 

Junior secured loan ($4,250,000 par due 11/2011)

 

12.37% (Libor + 6.75%/S)

 

5/25/05

 

4,250,000

 

4,250,000

 

1.00{2

}

 

 

 

 

 

 

Junior secured loan ($12,000,000 par due 11/2011)

 

12.37% (Libor + 6.75%/S)

 

5/25/05

 

12,000,000

 

12,000,000

 

1.00{3

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily Candy, Inc. {11}

 

Internet publication provider

 

Senior secured loan ($19,200,000 par due 5/2009)

 

10.62% (Libor + 5.00%/S)

 

5/25/06

 

19,494,406

 

19,200,000

 

0.98

 

 

 

 

 

 

 

Senior secured loan ($4,800,000 par due 5/2009)

 

10.62% (Libor + 5.00%/S)

 

5/25/06

 

4,873,601

 

4,800,000

 

0.98{3

}

 

 

 

 

 

 

Senior secured loan ($700,000 par due 5/2009)

 

10.37% (Libor + 5.00%/Q)

 

5/25/06

 

700,000

 

700,000

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($175,000 par due 5/2009)

 

10.37% (Libor + 5.00%/Q)

 

5/25/06

 

175,000

 

175,000

 

1.00{3

}

 

 

 

 

 

 

Common stock (1,250,000 shares)

 

 

 

5/25/06

 

2,375,000

 

2,375,000

 

1.90{5

}

 

 

 

 

 

 

Warrants to purchase (1,381,578 shares)

 

 

 

5/25/06

 

2,624,998

 

2,624,998

 

1.90{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

National Print Group, Inc.

 

Printing management services

 

Senior secured revolving loan ($1,338,451 par due 3/2012)

 

10.75% (Base Rate + 2.50%/D)

 

3/2/06

 

1,338,451

 

1,338,451

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($11,047,826 par due 3/2012)

 

8.87% (Libor + 3.50%/Q)

 

3/2/06

 

11,047,826

 

11,047,826

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($182,609 par due 3/2012)

 

10.75% (Base Rate + 2.50%/D)

 

3/2/06

 

182,609

 

182,609

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($2,319,367 par due 3/2012)

 

12.32% (Libor + 7.00%/S)

 

3/2/06

 

2,319,368

 

2,319,368

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($419,763 par due 8/2012)

 

12.32% (Libor + 7.00%/S)

 

3/2/06

 

419,763

 

419,763

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($1,932,806 par due 8/2012)

 

12.49% (Libor + 7.00%/Q)

 

3/2/06

 

1,932,806

 

1,932,806

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($349,802 par due 8/2012)

 

12.49% (Libor + 7.00%/Q)

 

3/2/06

 

349,802

 

349,802

 

1.00{3

}

 

 

 

 

 

 

Preferred stock (9,344 shares)

 

 

 

3/2/06

 

2,000,000

 

2,000,000

 

214.04{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Teaching Company, LLC and

 

Education publications provider

 

Senior secured revolving loan ($1,000,000 par due 9/2011)

 

12.25% (Base Rate + 4.00%/D)

 

9/28/06

 

1,000,000

 

1,000,000

 

1.00

 

 

 

The Teaching Company Holdings, Inc.

 

 

 

Senior secured loan ($6,250,000 par due 9/2012)

 

12.25% (Base Rate + 4.00%/D)

 

9/28/06

 

6,250,000

 

6,250,000

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($28,000,000 par due 9/2012)

 

10.50%{16}

 

9/28/06

 

28,000,000

 

28,000,000

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($12,000,000 par due 9/2012)

 

10.50%{16}

 

9/28/06

 

12,000,000

 

12,000,000

 

1.00{3

}

 

 

 

 

 

 

Preferred stock (29,969 shares)

 

 

 

9/28/06

 

2,996,921

 

2,996,921

 

100.00{5

}

 

 

 

 

 

 

Common stock (3,079 shares)

 

 

 

9/28/06

 

3,079

 

3,079

 

1.00{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

123,858,630

 

123,490,623

 

 

 

16.70

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arrow Group Industries, Inc.

 

Residential and outdoor shed manufacturer

 

Senior secured loan ($6,000,000 par due 4/2010)

 

10.37% (Libor + 5.00%/Q)

 

3/28/05

 

6,038,785

 

6,000,000

 

1.00{3

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emerald Performance Materials, LLC

 

Polymers and performance materials manufacturer

 

Senior secured loan ($10,473,684 par due 5/2011)

 

9.58% (Libor + 4.25%/M)

 

5/16/06

 

10,473,684

 

10,473,684

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($5,263,158 par due 5/2011)

 

11.33% (Libor + 6.00%/M)

 

5/16/06

 

5,263,158

 

5,263,158

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($4,210,526 par due 5/2011)

 

13.00%

 

5/16/06

 

4,210,526

 

4,210,526

 

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Qualitor, Inc.

 

Automotive aftermarket components supplier

 

Senior secured loan ($1,965,000 par due 12/2011)

 

9.62% (Libor + 4.25%/Q)

 

12/29/04

 

1,965,000

 

1,965,000

 

1.00{3

}

 

 

 

 

 

 

Junior secured loan ($5,000,000 par due 6/2012)

 

12.62% (Libor + 7.25%/Q)

 

12/29/04

 

5,000,000

 

5,000,000

 

1.00{3

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional Paint, Inc.

 

Paint manufacturer

 

Junior secured loan ($16,500,000 par due 5/2013)

 

11.38% (Libor + 5.75%/S)

 

5/25/06

 

16,500,000

 

16,500,000

 

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reflexite Corporation {10}

 

Developer and manufacturer of high visibility reflective products

 

Senior subordinated loan ($10,537,043 par due 12/2011)

 

11.00% cash, 3.00% PIK

 

12/30/04

 

10,537,043

 

10,537,043

 

1.00{2}{4

}

 

 

 

 

 

 

Common Stock (1,729,627 shares)

 

 

 

3/28/06

 

25,682,891

 

25,682,891

 

14.85{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Universal Trailer Corporation {6}

 

Livestock and specialty trailer manufacturer

 

Common stock (50,000 shares)

 

 

 

10/8/04

 

6,424,645

 

4,154,665

 

83.09{5

}

 

 

 

 

 

 

Warrants to purchase 22,208 shares

 

 

 

10/8/04

 

1,505,776

 

1,845,336

 

83.09{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Varel Holdings, Inc.

 

Drill bit manufacturer

 

Senior secured loan ($8,578,759 par due 12/2010)

 

9.49% (Libor + 4.00%/Q)

 

5/18/05

 

8,578,759

 

8,578,759

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($3,333,333 par due 12/2011)

 

13.33% (Libor + 8.00%/M)

 

5/18/05

 

3,333,333

 

3,333,333

 

1.00{3

}

 

 

 

 

 

 

Senior secured revolving loan ($500,000 par due 10/2010)

 

10.50% (Base Rate + 2.25%/D)

 

5/18/05

 

500,000

 

500,000

 

1.00

 

 

 

 

See accompanying notes to consolidated financial statements.

3




Company {1}

 

Industry

 

Investment

 

Interest {15}

 

Initial
Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage of
Net Assets

 

 

 

 

 

Preferred stock (33,884 shares)

 

 

 

5/18/05

 

1,109,363

 

1,109,363

 

32.74{5

}

 

 

 

 

 

 

Common stock (30,451 shares)

 

 

 

5/18/05

 

3,045

 

1,011,569

 

33.22{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107,126,008

 

106,165,327

 

 

 

14.36

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services - Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diversified Collection Services, Inc.

 

Collections services

 

Senior secured loan ($5,242,026 par due 2/2011)

 

9.57% (Libor + 4.25%/M)

 

2/2/05

 

5,242,026

 

5,242,026

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($1,742,026 par due 8/2011)

 

11.37% (Libor + 6.00%/M)

 

2/2/05

 

1,742,026

 

1,742,026

 

1.00{2

}

 

 

 

 

 

 

Senior secured loan ($6,757,974 par due 8/2011)

 

11.37% (Libor + 6.00%/M)

 

2/2/05

 

6,757,974

 

6,757,974

 

1.00{3

}

 

 

 

 

 

 

Preferred stock (14,927 shares)

 

 

 

5/18/06

 

169,123

 

169,123

 

11.33{5

}

 

 

 

 

 

 

Common stock (114,004 shares)

 

 

 

2/2/05

 

295,270

 

295,270

 

2.59{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Event Rentals, Inc.

 

Party rental services

 

Senior secured loan ($2,277,902 par due 11/2011)

 

10.77% (Libor+ 5.25%/S)

 

11/17/05

 

2,277,902

 

2,277,902

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($5,005,581 par due 11/2011)

 

10.69% (Libor + 5.25%/S)

 

11/17/05

 

5,005,581

 

5,005,581

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($1,244,489 par due 11/2011)

 

10.74% (Libor + 5.25%/S)

 

11/17/05

 

1,244,489

 

1,244,489

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($2,466,518 par due 11/2011)

 

10.74% (Libor + 5.25%/S)

 

11/17/05

 

2,466,518

 

2,466,518

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($15,354 par due 11/2011)

 

12.50% (Base Rate + 4.25%/D)

 

11/17/05

 

15,354

 

15,354

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($5,952 par due 11/2011)

 

12.50% (Base Rate + 4.25%/D)

 

11/17/05

 

5,952

 

5,952

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($5,742,560 par due 11/2011)

 

10.77% (Libor + 5.25%/S)

 

11/17/05

 

5,742,560

 

5,742,560

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($2,226,190 par due 11/2011)

 

10.77% (Libor + 5.25%/S)

 

11/17/05

 

2,226,190

 

2,226,190

 

1.00{3

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GCA Services Group, Inc.

 

Custodial services

 

Senior subordinated loan ($33,486,024 par due 1/2010)

 

12.00% cash, 3.00% PIK

 

7/25/05

 

33,486,024

 

33,486,024

 

1.00{4

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NPA Acquisition, LLC

 

Powersport vehicle auction operator

 

Senior secured loan ($5,000,000 par due 8/2012)

 

8.64% (Libor + 3.25%/Q)

 

8/23/06

 

5,000,000

 

5,000,000

 

1.00

 

 

 

 

 

 

 

Junior secured loan ($14,000,000 par due 2/2013)

 

12.12% (Libor + 6.75%/Q)

 

8/23/06

 

14,000,000

 

14,000,000

 

1.00

 

 

 

 

 

 

 

Common stock (1,709 shares)

 

 

 

8/23/06

 

1,000,000

 

1,000,000

 

585.14{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

86,676,989

 

86,676,989

 

 

 

11.72

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savers, Inc and SAI Acquisition Corporation

 

For-profit thrift retailer

 

Senior subordinated note ($28,077,778 par due 8/2014)

 

10.00% cash, 2.00% PIK

 

8/8/06

 

28,077,778

 

28,077,778

 

1.00{4

}

 

 

 

 

 

 

Common stock (1,170,182 shares)

 

 

 

8/8/06

 

4,500,000

 

4,500,000

 

3.85{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Things Remembered, Inc. and TRM Holdings Corporation

 

Personalized gifts retailer

 

Senior secured revolving loan ($357,143 par due 9/2012)

 

12.00% (Base Rate + 3.75%/D){17}

 

9/28/06

 

357,143

 

357,143

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($4,800,000 par due 9/2012)

 

12.00% (Base Rate + 3.75%/D)

 

9/28/06

 

4,800,000

 

4,800,000

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($28,000,000 par due 9/2013)

 

13.25% (Base Rate + 5.00%/D)

 

9/28/06

 

28,000,000

 

28,000,000

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($7,200,000 par due 9/2013)

 

13.25% (Base Rate + 5.00%/D)

 

9/28/06

 

7,200,000

 

7,200,000

 

1.00{3

}

 

 

 

 

 

 

Preferred stock (80 shares)

 

 

 

9/28/06

 

1,800,000

 

1,800,000

 

22,500.00{5

}

 

 

 

 

 

 

Common stock (800 shares)

 

 

 

9/28/06

 

200,000

 

200,000

 

250.00{5

}

 

 

 

 

 

 

 

 

 

 

 

 

74,934,921

 

74,934,921

 

 

 

10.14

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Containers-Packaging

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Captive Plastics, Inc.

 

Plastics container manufacturer

 

Junior secured loan ($4,000,000 par due 2/2012)

 

12.76% (Libor + 7.25%/Q)

 

12/19/05

 

4,000,000

 

4,000,000

 

1.00

 

 

 

 

 

 

 

Junior secured loan ($12,000,000 par due 2/2012)

 

12.76% (Libor + 7.25%/Q)

 

12/19/05

 

12,000,000

 

12,000,000

 

1.00{3

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial Container Services, LLC {8}

 

Industrial container manufacturer, reconditioner and servicer

 

Senior secured loan ($96,250 par due 9/2011)

 

13.25% (Base Rate + 5.00%/D)

 

9/30/05

 

96,250

 

96,250

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($30,227 par due 9/2011)

 

13.25% (Base Rate + 5.00%/D)

 

9/30/05

 

30,227

 

30,227

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($11,939,547 par due 9/2011)

 

11.94% (Libor + 6.50%/S)

 

9/30/05

 

11,939,547

 

11,939,547

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($16,450,281 par due 9/2011)

 

11.94% (Libor + 6.50%/S)

 

6/21/06

 

16,450,281

 

16,450,281

 

1.00

 

 

 

 

 

 

 

Senior secured revolving loan ($25,000 par due 9/2011)

 

11.89% (Libor + 6.50%/Q)

 

9/30/05

 

25,000

 

25,000

 

1.00

 

 

 

 

 

 

 

Senior secured revolving loan ($9,950,000 par due 9/2011)

 

11.94% (Libor + 6.50.%/S)

 

9/30/05

 

9,950,000

 

9,950,000

 

1.00

 

 

 

 

 

 

 

Senior secured revolving loan ($4,130,435 par due 9/2011)

 

10.02% (Libor + 4.50%/Q)

 

9/30/05

 

4,130,435

 

4,130,435

 

1.00

 

 

 

 

 

 

 

Senior secured revolving loan ($826,087 par due 9/2011)

 

9.82% (Libor + 4.50%/D)

 

9/30/05

 

826,087

 

826,087

 

1.00

 

 

 

 

 

 

 

Senior secured revolving loan ($826,087 par due 9/2011)

 

9.83% (Libor + 4.50%/D)

 

9/30/05

 

826,087

 

826,087

 

1.00

 

 

 

 

 

 

 

Senior secured revolving loan ($1,156,522 par due 9/2011)

 

11.25% (Base Rate + 3.00%/D)

 

9/30/05

 

1,156,522

 

1,156,522

 

1.00

 

 

 

 

 

 

 

Common stock (1,800,000 shares)

 

 

 

9/29/05

 

1,800,000

 

1,800,000

 

1.00{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LabelCorp Holdings, Inc.

 

Consumer product labels manufacturer

 

Senior subordinated notes ($9,250,088 par due 9/2012)

 

12.00% cash, 3.00% PIK

 

3/16/06

 

9,250,088

 

9,250,088

 

1.00{4

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72,480,524

 

72,480,524

 

 

 

9.80

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products - Non-Durable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Making Memories Wholesale, Inc. {7}

 

Scrapbooking branded products manufacturer

 

Senior secured loan ($7,916,667 par due 3/2011)

 

9.875% (Libor + 4.50%/Q)

 

5/5/05

 

7,916,667

 

7,916,667

 

1.00{3

}

 

 

 

 

 

 

Senior subordinated loan ($10,152,435 par due 5/2012)

 

12.50% cash, 2.00% PIK

 

5/5/05

 

10,152,435

 

10,152,435

 

1.00{4

}

 

 

 

 

 

 

Preferred stock (3,500 shares)

 

 

 

5/5/05

 

3,758,800

 

1,320,000

 

351.25{4

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shoes for Crews, LLC

 

Safety footwear and slip-related mats

 

Senior secured loan ($1,370,173 par due 7/2010)

 

8.87% (Libor + 3.25%/S)

 

10/8/04

 

1,378,236

 

1,378,236

 

1.00{3

}

 

 

 

 

 

 

Senior secured revolving loan ($3,333,333 par due 7/2010)

 

10.25% (Base Rate + 2.00%/D)

 

6/16/06

 

3,333,333

 

3,333,333

 

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tumi Holdings, Inc.

 

Branded luggage designer, marketer and distributor

 

Senior secured loan ($2,500,000 par due 12/2012)

 

8.11% (Libor + 2.75%/Q)

 

5/24/05

 

2,500,000

 

2,500,000

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($5,000,000 par due 12/2013)

 

8.62% (Libor + 3.25%/Q)

 

3/14/05

 

5,000,000

 

5,000,000

 

1.00{3

}

 

 

 

 

 

 

Senior subordinated loan ($13,510,171 par due 12/2014)

 

16.37% (Libor + 6.00% cash, 5.00% PIK/Q)

 

3/14/05

 

13,510,171

 

13,510,171

 

1.00{2} {4

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UCG Paper Crafts, Inc.

 

Scrapbooking materials manufacturer

 

Senior secured loan ($1,990,000 par due 2/2013)

 

8.58% (Libor + 3.25%/M)

 

2/23/06

 

1,990,000

 

1,990,000

 

1.00{3

}

 

 

 

 

 

 

Junior secured loan ($2,960,063 par due 2/2013)

 

12.83% (Libor + 7.50%/M)

 

2/23/06

 

2,960,063

 

2,960,063

 

1.00

 

 

 

 

 

 

 

Junior secured loan ($9,974,937 par due 2/2013)

 

12.83% (Libor + 7.50%/M)

 

2/23/06

 

9,974,937

 

9,974,937

 

1.00{3

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62,474,642

 

60,035,842

 

 

 

8.12

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Education

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equinox SMU Partners LLC and

 

Medical school operator

 

Senior secured revolving loan ($1,550,000 par due 12/2010)

 

13.25% (Base Rate + 5.00%/Q)

 

1/26/06

 

1,550,000

 

1,550,000

 

1.00

 

 

 

SMU Acquisition Corp. {9} {13}

 

 

 

Senior secured revolving loan ($2,032,342 par due 12/2010)

 

11.06% (Libor + 6.00%/S)

 

1/26/06

 

2,032,342

 

2,032,342

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($10,162,500 par due 12/2010)

 

11.39% (Libor + 6.00%/Q)

 

1/26/06

 

10,162,500

 

10,162,500

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($1,500,000 par due 12/2010)

 

11.39% (Libor + 6.00%/Q)

 

1/26/06

 

1,500,000

 

1,500,000

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($1,500,000 par due 12/2010)

 

11.39% (Libor + 6.00%/Q)

 

1/26/06

 

1,500,000

 

1,500,000

 

1.00{3

}

 

 

 

 

 

 

Limited liability company membership interest (17.39% interest)

 

 

 

1/25/06

 

4,000,000

 

4,000,000

 

{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lakeland Finance, LLC

 

Private school operator

 

Senior secured note ($33,000,000 par due 12/2012)

 

11.50%

 

12/13/05

 

33,000,000

 

33,000,000

 

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

53,744,842

 

53,744,842

 

 

 

7.27

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Group Services, LLC

 

Financial services

 

Senior secured loan ($1,500,000 par due 6/2011)

 

12.00%

 

6/22/06

 

1,500,000

 

1,500,000

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($500,000 par due 6/2011)

 

11.04% (Libor + 5.50%/S)

 

6/22/06

 

500,000

 

500,000

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($150,000 par due 6/2011)

 

12.75% (Base Rate + 4.50%/D)

 

6/22/06

 

150,000

 

150,000

 

1.00

 

 

 

 

See accompanying notes to consolidated financial statements.

4




 

Company {1}

 

Industry

 

Investment

 

Interest {15}

 

Initial
Acquisition
Date

 

Amortized
Cost

 

Fair Value

 

Fair Value
Per Unit

 

Percentage of
Net Assets

 

 

 

 

 

Limited liability company membership interest (10.00% interest)

 

 

 

6/22/06

 

 

 

{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Miller Heiman, Inc.

 

Sales consulting services

 

Senior secured loan ($3,173,113 par due 6/2010)

 

8.83% (Libor + 3.50%/M)

 

6/20/05

 

3,173,113

 

3,173,113

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($4,027,788 par due 6/2012)

 

9.37% (Libor + 4.00%/Q)

 

6/20/05

 

4,027,788

 

4,027,788

 

1.00{3

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MR Processing Holding Corp.

 

Bankruptcy and foreclosure processing services

 

Senior subordinated note ($20,202,733 par due 2/2013)

 

12.00% Cash, 2.00% PIK

 

3/23/06

 

20,202,733

 

20,202,733

 

1.00{4

}

 

 

 

 

 

 

Senior secured loan ($1,990,000 par due 2/2012)

 

9.02% (Libor + 3.50%/S)

 

3/28/06

 

1,990,000

 

1,990,000

 

1.00

 

 

 

 

 

 

 

Preferred stock (30,000 shares)

 

 

 

4/11/06

 

3,000,000

 

3,000,000

 

100.00{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primis Marketing Group, Inc. and Primis Holdings, LLC {12}

 

Database marketing services

 

Senior secured loan ($10,024,306 par due 2/2013)

 

11.00% Cash, 2.50% PIK

 

8/24/06

 

10,024,306

 

10,024,306

 

1.00{4

}

 

 

 

 

 

 

Preferred stock (4,000 shares)

 

 

 

8/24/06

 

3,600,000

 

3,600,000

 

9.00{5

}

 

 

 

 

 

 

Common stock (4,000,000 shares)

 

 

 

8/24/06

 

400,000

 

400,000

 

0.10{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48,567,940

 

48,567,940

 

 

 

6.57%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADF Capital, Inc. & ADF Restaurant Group, LLC

 

Restaurant owner and operator

 

Senior secured revolving loan ($1,700,000 par due 6/2013)

 

13.75% (Base Rate + 5.50%/D)

 

6/1/06

 

1,700,000

 

1,700,000

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($5,970,000 par due 6/2013)

 

13.75% (Base Rate + 5.50%/D)

 

6/1/06

 

5,970,000

 

5,970,000

 

1.00

 

 

 

 

 

 

 

Senior secured loan ($11,940,000 par due 6/2013)

 

13.75% (Base Rate + 5.50%/D)

 

6/1/06

 

11,940,000

 

11,940,000

 

1.00{3

}

 

 

 

 

 

 

Warrants to purchase 0.882353 units

 

 

 

6/1/06

 

2,410,000

 

2,410,000

 

2,731,333.15{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Encanto Restaurants, Inc. {13}

 

Restaurant owner and operator

 

Junior secured loan ($25,104,514 par due 8/2013)

 

7.50% Cash, 3.50% PIK

 

8/16/06

 

25,104,514

 

25,104,514

 

1.00{4

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47,124,514

 

47,124,514

 

 

 

6.37

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Environmental Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mactec, Inc.

 

Engineering and environmental

 

Common stock (186 shares)

 

 

 

11/3/04

 

 

 

0.00{5

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wastequip, Inc.

 

Waste management equipment manufacturer

 

Junior secured loan ($15,000,000 par due 7/2012)

 

10.82% (Libor + 5.50%/M)

 

8/4/05

 

15,000,000

 

15,000,000

 

1.00

 

 

 

 

 

 

 

Junior secured loan ($12,000,000 par due 7/2012)

 

10.82% (Libor + 5.50%/M)

 

8/4/05

 

12,000,000

 

12,000,000

 

1.00{3

}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,000,000

 

27,000,000

 

 

 

3.65

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Defense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ILC Industries, Inc.

 

Industrial products provider

 

Junior secured loan ($12,000,000 par due 8/2012)

 

11.50%

 

6/27/06

 

12,000,000

 

12,000,000

 

1.00{3

}

 

 

 

 

 

 

Junior secured loan ($3,000,000 par due 8/2012)

 

11.50%

 

6/27/06

 

3,000,000

 

3,000,000

 

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thermal Solutions LLC and TSI Group, Inc.

 

Thermal management and electronics packaging manufacturer

 

Senior secured loan ($3,233,750 par due 3/2012)

 

9.52% (Libor + 4.00%/Q)

 

3/28/05

 

3,233,750

 

3,233,750

 

1.00{3

}

 

 

 

 

 

 

Senior secured loan ($1,657,895 par due 3/2011)

 

9.02% (Libor + 3.50%/Q)

 

3/28/05

 

1,657,895

 

1,657,895

 

1.00{3

}

 

 

 

 

 

 

Senior subordinated notes ($3,105,314 par due 9/2012)

 

11.50% cash, 2.75% PIK

 

3/28/05

 

3,114,692

 

3,105,314

 

1.00{2}{4

}

 

 

 

 

 

 

Senior subordinated notes ($2,532,920 par due 3/2013)

 

11.50% cash, 2.50% PIK

 

3/21/06

 

2,532,920

 

2,532,920

 

1.00{2}{4

}

 

 

 

 

 

 

Preferred stock (53,900 shares)

 

 

 

3/28/05

 

539,000

 

539,000

 

10.00{5

}

 

 

 

 

 

 

Common stock (1,100,000 shares)

 

 

 

3/28/05

 

11,000

 

11,000

 

0.01{5

}