The following excerpt is from the company's
SEC filing.
Item 1.
Financial Statements (Unaudited)
Consolidated Statements of Assets and Liabilities as of
September 30, 2015 and December 31, 2014
Consolidated Schedule of Investments as of September 30,
2015
Consolidated Schedule of Investments as of December 31, 2014
Consolidated Statements of Operations for the three and nine
months ended September 30, 2015 and 2014
Consolidated Statements of Changes in Net Assets for the nine
months ended September 30, 2015 and for the year ended December 31,
2014
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2015 and 2014
Notes to Consolidated Financial Statements
Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations
Cautionary Statements Regarding Forward-Looking Statements
Overview
Critical Accounting Policies
Portfolio Composition and Investment Activity
Liquidity and Capital Resources
Recent Developments
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
PART II. OTHER INFORMATION
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
SIGNATURES
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
TICC CAPITAL CORP.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)
Non-affiliated/non-control investments (cost: $970,201,027
@ 9/30/15; $999,433,538 @ 12/31/14)
908,962,186
967,612,035
Affiliated investments (cost: $7,367,738 @ 9/30/15; $4,268,722 @
12/31/14)
5,314,226
1,585,303
Control investments (cost: $16,750,000 @ 9/30/15; $16,800,000 @
12/31/14)
12,904,375
14,960,000
Total investments at fair value (cost: $994,318,765
@ 9/30/15; $1,020,502,260 @ 12/31/14)
927,180,787
984,157,338
Cash and cash equivalents
21,216,120
20,505,323
Restricted cash
18,637,328
20,576,250
Deferred debt issuance costs
4,601,098
5,669,747
Interest and distributions receivable
12,597,507
11,442,289
Securities sold not settled
10,242
Other assets
308,726
290,245
Total assets
984,551,808
1,042,641,192
Accrued interest payable
4,964,485
2,596,564
Investment advisory fee and net investment income incentive fee
payable to affiliate
5,830,902
6,183,486
Securities purchased not settled
2,850,000
11,343,179
Credit facility
150,000,000
Accrued expenses
940,623
629,127
Notes payable TICC CLO 2012-1 LLC, net of discount
236,407,052
236,075,775
Convertible senior notes payable
115,000,000
Total liabilities
515,993,062
521,828,131
COMMITMENTS AND CONTINGENCIES (Note 14)
NET ASSETS
Common stock, $0.01 par value, 100,000,000 share authorized;
59,987,986 and 60,303,769 shares issued and outstanding,
respectively
599,880
603,038
Capital in excess of par value
620,635,767
623,018,818
Net unrealized depreciation on investments
(67,137,978
(36,344,922
Accumulated net realized losses on investments
(65,368,395
(63,212,472
Distributions in excess of investment income
(20,170,528
(3,251,401
Total net assets
468,558,746
520,813,061
Total liabilities and net assets
Net asset value per common share
See Accompanying Notes.
CONSOLIDATED SCHEDULE OF INVESTMENTS
COMPANY/INVESTMENT
INDUSTRY
PRINCIPAL
AMOUNT
FAIR VALUE
Senior Secured Notes
ABB/Con Cise Optical Group
retail
tranche B term loan, PRIME + 2.50% due
February 06, 2019
6,500,000
6,479,139
6,462,105
Algorithmic Implementations, Inc. (d/b/a Ai Squared)
software
senior secured notes, LIBOR + 6.00% (9.84% all-in floor) due
September 11, 2016
13,750,000
Albertsons LLC
grocery
first lien senior secured notes, LIBOR + 4.50% (1.00% floor) due
August 25, 2021
16,875,508
16,902,889
16,865,045
AmeriLife Group
diversified insurance
first lien senior secured notes, LIBOR + 4.75% (1.00% floor) due
July 10, 2022
17,955,000
17,777,846
17,887,669
Amneal Pharmaceuticals LLC
pharmaceuticals
first lien senior secured notes, LIBOR + 4.00% (1.00% floor) due
November 01, 2019
8,902,880
8,889,607
8,880,623
Aricent Technologies, Inc.
telecommunication services
first lien senior secured notes, LIBOR + 4.50% (1.00% floor) due
April 14, 2021
14,811,381
14,770,775
14,686,373
second lien senior secured notes, LIBOR + 8.50% (1.00% floor)
due April 14, 2022
14,000,000
14,003,932
13,851,320
Ascensus, Inc.
financial intermediaries
senior secured notes, LIBOR + 4.00% (1.00% floor) due December
02, 2019
8,888,028
8,898,364
8,865,808
second lien senior secured notes, LIBOR + 8.00% (1.00% floor)
due December 2, 2020
2,000,000
1,976,665
1,992,500
Birch Communications, Inc.
first lien senior secured notes, LIBOR + 6.75% (1.00% floor) due
July 18, 2020
18,544,444
18,276,663
18,498,083
BMC Software Finance, Inc.
business services
first lien senior secured notes, LIBOR + 4.00% (1.00% floor) due
September 10, 2020
4,738,889
4,752,477
4,295,803
Capstone Logistics Acquisition, Inc.
logistics
first lien senior secured notes, LIBOR + 4.50% (1.00% floor) due
October 7, 2021
18,882,437
18,887,469
18,764,422
ConvergeOne Holdings Corp.
first lien senior secured notes, LIBOR + 5.00% (1.00% floor) due
June 17, 2020
17,789,924
17,730,793
17,612,025
second lien senior secured notes, LIBOR + 8.00% (1.00% floor)
due June 17, 2021
3,000,000
2,973,849
2,970,000
CRCI Holdings, Inc. (a/k/a CLEAResult)
utilities
first lien senior secured notes, LIBOR + 4.00% (1.00% floor) due
July 10, 2019
9,822,500
9,795,727
9,760,225
incremental first lien senior secured notes,
LIBOR + 4.25% (1.00% floor) due
6,483,689
6,467,967
6,451,271
Crowne Group, LLC
auto parts manufacturer
first lien senior secured notes, LIBOR + 5.00% (1.00% floor) due
September 30, 2020
5,683,195
5,640,571
(Continued on next page)
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
Senior Secured Notes (continued)
CT Technologies Intermediate Holdings, Inc.
(a/k/a Healthport)
healthcare
first lien senior secured notes, LIBOR + 4.25%, (1.00% floor)
due December 01, 2021
13,421,363
13,372,388
13,359,893
Edmentum, Inc. (f/k/a Plato, Inc.)
education
(1.00% floor) Cash, 2.00% PIK due
June 10, 2019
6,020,503
5,981,924
4,234,400
First American Payment Systems
first lien senior secured notes, LIBOR + 4.50% (1.25% floor) due
October 12, 2018
3,035,078
3,042,700
3,013,590
second lien senior secured notes, LIBOR + 9.50% (1.25% floor)
due April 12, 2019
13,982,241
13,800,767
13,842,419
First Data Corporation
first lien senior secured notes, LIBOR + 4.00% due March 24,
2021
16,050,721
16,011,632
16,010,594
Global Healthcare Exchange
first lien senior secured notes, LIBOR + 4.50% (1.00% floor) due
August 13, 2022
19,000,000
18,983,820
19,047,500
GlobalLogic Holdings Inc.
first lien senior secured notes, LIBOR + 5.25% (1.00% floor) due
June 02, 2019
17,193,750
17,134,105
17,107,781
Global Tel Link Corp
telecommunication services
first lien senior secured notes, LIBOR + 3.75% (1.25% floor) due
May 23, 2020
6,031,345
6,007,356
5,896,725
second lien senior secured notes, LIBOR + 7.75% (1.25% floor)
due November 23, 2020
13,000,000
12,879,264
12,285,000
Help/Systems Holdings, Inc.
senior secured notes, LIBOR + 4.50 (1.00% floor) due June 28,
2019
14,700,000
14,588,359
second lien senior secured notes LIBOR + 8.50% (1.00% floor) due
June 28, 2020
14,826,782
iEnergizer Limited
printing and publishing
first lien senior secured notes, LIBOR + 6.00% (1.25% floor) due
May 01, 2019
5,694,081
5,600,002
5,124,673
Immucor, Inc.
senior secured term B notes, LIBOR + 3.75% (1.25% floor) due
August 19, 2018
4,321,711
4,237,960
4,285,236
Integra Telecom Holdings, Inc
first lien senior secured notes, LIBOR + 4.00% (1.25% floor) due
August 14, 2020
11,258,596
11,220,451
11,181,249
second lien senior secured notes, LIBOR + 8.50%, (1.25% floor)
due February 14, 2021
10,806,404
10,871,433
10,729,895
Jackson Hewitt Tax Service, Inc.
consumer services
first lien senior secured notes, LIBOR + 7.00% (1.50% floor) due
July 30, 2020
18,000,000
17,676,840
17,640,000
Merrill Communications, LLC
first lien senior secured notes, LIBOR + 4.75% (1.00% floor) due
June 01, 2022
23,856,471
23,569,958
23,677,547
NAB Holdings, LLC
first lien senior secured notes, LIBOR + 3.75% (1.00% floor) due
May 21, 2021
17,780,000
17,662,039
17,691,100
Novetta, LLC
aerospace and defense
first lien senior secured notes, LIBOR + 5.00% (1.00% floor) due
October 2, 2020
12,622,500
12,526,428
12,559,388
Novitex Enterprise Solutions (f/k/a Pitney Bowes Management
Services, Inc.)
first lien senior secured notes, LIBOR + 6.25% (1.25% floor) due
July 07, 2020
15,661,650
15,576,944
14,721,951
PGX Holdings
first lien senior secured notes, LIBOR + 4.75% (1.00% floor) due
September 29,2020
14,835,714
14,807,219
14,829,483
Petco Animal Supplies, Inc.
first lien senior secured notes, LIBOR + 3.00% (1.00% floor) due
November 24, 2017
5,937,662
5,905,818
5,927,034
Petsmart, Inc.
first lien senior secured notes, LIBOR + 4.00% (1.00% floor) due
March 11, 2022
5,985,000
6,008,065
5,969,439
ProQuest LLC
senior secured notes, LIBOR + 4.25% (1.00% floor) due October
24, 2021
5,954,927
5,988,340
5,944,982
RBS Holding Company
second lien senior secured notes, PRIME + 7.00% due March 23,
2016
22,759,516
15,491,384
18,913,158
Recorded Books, Inc. (f/k/a Volume Holdings, Inc.)
senior secured notes, LIBOR + 4.50% (1.00% floor) due July 31,
2021
8,955,478
8,955,000
SCS Holdings I Inc. (Sirius Computer Solutions, Inc.)
electronics
first lien senior secured notes, LIBOR + 5.75% (1.25% floor) due
December 07, 2018
8,009,615
8,025,776
Securus Technologies, Inc.
first lien senior secured notes, LIBOR + 3.50% (1.25% floor) due
April 30, 2020
5,899,812
5,858,793
5,698,864
second lien senior secured notes, LIBOR + 7.75% (1.25% floor)
due April 30, 2021
6,400,000
6,375,238
5,752,000
Sesac Holdco II LLC
radio and television
first lien senior secured notes, LIBOR + 4.00% (1.00% floor) due
February 08, 2019
14,023,105
14,034,750
13,988,047
Serena Software Inc.
enterprise software
first lien senior secured notes, LIBOR + 6.50% (1.00% floor) due
April 14, 2020
18,691,246
18,376,270
18,613,304
Source Hov, LLC
first lien senior secured notes, LIBOR + 6.75% (1.00% floor) due
October 31, 2019
17,662,500
17,202,191
15,918,328
second lien senior secured notes, LIBOR + 10.50% (1.00% floor)
due April 30, 2020
14,468,082
12,900,000
Stratus Technologies, Inc.
computer hardware
first lien senior secured notes, LIBOR + 5.00% (1.00% floor) due
April 28, 2021
17,354,167
17,211,347
17,252,992
Teleguam Holdings LLC
second lien senior secured notes, LIBOR + 7.50% (1.25% floor)
due June 10, 2019
7,975,044
7,960,000
The TOPPS Company, Inc.
leisure goods
first lien senior secured notes, LIBOR + 6.00% (1.25% floor) due
October 02, 2018
9,825,000
9,756,578
9,628,500
Total Merchant Services, Inc.
first lien senior secured notes, LIBOR + 5.50% (1.00% floor) due
December 5, 2020
15,880,000
15,737,128
15,959,400
Travel Leaders Group, LLC
travel
first lien senior secured notes, LIBOR + 6.00% (1.00% floor) due
December 07, 2020
14,600,000
14,376,711
14,563,500
Unitek Global Services, Inc.
IT consulting
first lien senior secured tranche B term loan,
LIBOR + 7.50%, (1.00% floor) due January 13, 2019
2,638,748
2,605,645
2,498,894
U.S. Telepacific Corp.
first lien senior secured notes, LIBOR + 5.00% (1.00% floor) due
November 25, 2020
9,925,000
9,832,837
9,875,375
Vision Solutions
first lien senior secured notes, LIBOR + 4.50% (1.50% floor) due
July 23, 2016
4,728,153
4,698,873
4,722,243
second lien senior secured notes, LIBOR + 8.00% (1.50% floor)
due July 23, 2017
10,000,000
9,970,413
9,950,000
Wall Street Systems
first lien senior secured notes, LIBOR + 3.50% (1.00% floor) due
April 30, 2021
8,124,639
8,128,033
8,080,603
Total Senior Secured Notes
685,378,522
680,407,920
Subordinated Debt
Holdco PIK Debt Cash 0.00%, 15.00% PIK, due July 13, 2019
555,554
550,093
508,332
Total Subrodinated Debt
Collateralized Loan Obligation Debt Investments
Telos CLO 2013-3, Ltd.
structured finance
CLO secured class F notes, LIBOR + 5.50% due January 17,
2024
3,000,000
2,762,650
2,300,700
Total Collateralized Loan Obligation Debt Investments
Collateralized Loan Obligation Equity Investments
AMMC CLO XI, Ltd.
CLO subordinated notes, estimated yield 14.12% due October 30,
2023
6,000,000
3,527,288
3,600,000
AMMC CLO XII, Ltd.
CLO subordinated notes, estimated yield 11.18% due May 10,
2025
12,921,429
8,867,391
7,752,857
Collateralized Loan Obligation Equity Investments
(continued)
Ares XXV CLO Ltd.
CLO subordinated notes, estimated yield 4.76% due January 17,
2024
15,500,000
11,503,418
8,370,000
Ares XXVI CLO Ltd.
CLO subordinated notes, estimated yield 9.80% due April 15,
2025
14,250,000
10,577,547
7,346,757
Ares XXIX CLO Ltd.
CLO subordinated notes, estimated yield 11.92% due April 17,
2026
12,750,000
10,338,546
7,440,953
Benefit Street Partners CLO II, Ltd.
CLO subordinated notes, estimated yield 13.65% due July 15,
2024
23,450,000
22,638,457
19,850,265
Carlyle Global Market Strategies
CLO 2013-2, Ltd.
CLO subordinated notes, estimated yield 16.98% due April 18,
2025
10,125,000
7,789,656
7,028,021
CLO 2014-4, Ltd.
CLO subordinated notes, estimated yield 15.98% due October 15,
2026
25,784,000
19,477,450
17,902,222
Catamaran CLO 2012-1 Ltd.
CLO subordinated notes, estimated yield (.40%) due December 20,
2023
22,000,000
17,096,038
9,055,200
Catamaran CLO 2013-1 Ltd.
CLO subordinated notes, estimated yield 7.14% due January 27,
2025
8,517,770
Cedar Funding II CLO, Ltd.
CLO subordinated notes, estimated yield 10.73% due March 9,
2025
18,750,000
14,817,101
12,515,625
CIFC Funding 2012-1, Ltd.
CLO subordinated notes, estimated yield 13.64% due August 14,
2024
8,400,000
7,905,000
Halcyon Loan Advisors Funding 2012-2 Ltd.
CLO subordinated notes, estimated yield 16.15% due December 20,
2024
7,500,000
5,940,551
5,156,250
Halcyon Loan Advisors Funding 2014-2 Ltd.
CLO subordinated notes, estimated yield 15.72% due April 28,
2025
6,551,394
5,520,000
Hull Street CLO Ltd.
CLO subordinated notes, estimated yield 16.31% due October 18,
2026
4,157,285
3,025,500
Ivy Hill Middle Market Credit Fund VII, Ltd.
CLO subordinated notes, estimated yield 14.85% due October 20,
2025
12,549,004
11,783,733
Jamestown CLO V Ltd.
CLO subordinated notes, estimated yield 15.30% due January 17,
2027
6,196,275
4,000,800
Marea CLO, Ltd.
CLO subordinated notes, estimated yield 5.54% due October 15,
2023
14,217,000
11,642,231
7,160,315
MidOcean Credit CLO IV
CLO income notes, estimated yield 19.59% due April 15, 2027
9,500,000
8,620,993
8,455,000
Mountain Hawk III CLO, Ltd.
CLO income notes, estimated yield 7.59% due April 18, 2025
12,379,826
6,403,308
CLO M notes due April 18, 2025
2,389,676
539,194
Newmark Capital Funding 2013-1 CLO Ltd.
CLO income notes, estimated yield 12.71% due June 2, 2025
20,000,000
14,530,875
11,400,000
Och Ziff CLO XII, Ltd.
CLO subordinated notes, estimated yield 14.22% due April 30,
2027
13,850,000
13,170,498
12,465,000
CS Advisors CLO I Ltd.
CLO subordinated notes, estimated yield (46.37%) due August 27,
2020
10,100,000
1,809,726
50,500
Shackleton 2013-III CLO, Ltd.
CLO subordinated notes, estimated yield 8.67% due April 15,
2025
9,407,500
8,159,594
5,101,978
Shackleton 2013-IV CLO, Ltd.
CLO subordinated notes, estimated yield 11.72% due January 13,
2025
21,500,000
18,320,851
12,747,015
CLO subordinated notes, estimated yield 11.05% due January 17,
2024
10,416,666
8,544,099
7,083,333
Telos CLO 2013-4, Ltd.
CLO subordinated notes, estimated yield 20.39% due July 17,
2024
6,478,082
6,287,445
Telos CLO 2014-5, Ltd.
CLO subordinated notes, estimated yield 14.04% due April 17,
2015
10,500,000
8,450,800
6,235,847
Windriver 2012-1 CLO, Ltd.
CLO subordinated notes, estimated yield 16.14% due January 15,
2024
5,650,357
5,446,771
CLO equity side letter related
3,103,898
Total Collateralized Loan Obligation Equity Investments
296,703,103
237,232,787
Common Stock
common stock
Integra Telecom Holdings, Inc.
775,846
1,712,397
4,424,048
AMOUNT/SHARES
Common Stock (continued)
common equity
815,266
535,000
Total Common Stock
5,247,397
4,424,048
Preferred Equity
Series A Preferred Equity
5,706,866
3,677,000
2,307,000
Total Preferred Equity
3,677,000
2,307,000
Total Investments
994,318,765
927,180,787
Other than Algorithmic Implementation, Inc. (d/b/a Ai Squared),
which we may be deemed to control and Unitek Global Services, Inc.,
of which we are deemed to be an affiliate. We do not control and
are not an affiliate of any of our portfolio companies, each as
defined in the Investment Company Act of 1940 (the 1940 Act). In
general, under the 1940 Act, we would be presumed to control a
portfolio company if we owned 25% or more of its voting securities
and would be an affiliate of a portfolio company if we owned 5% or
more of its voting securities.
Fair value is determined in good faith by the Board of Directors
of the Company.
Portfolio includes $29,335,573 of principal amount of debt
investments which contain a PIK provision at September 30, 2015, or
during the quarter then ended.
Notes bear interest at variable rates.
Cost value reflects accretion of original issue discount or
market discount.
Cost value reflects repayment of principal.
Non-income producing at the relevant period end.
Aggregate gross unrealized appreciation for federal income tax
purposes is $12,829,314; aggregate gross unrealized depreciation
for federal income tax purposes is $127,966,167. Net unrealized
depreciation is $115,136,853 based upon a tax cost basis of
$1,042,317,640.
All or a portion of this investment represents collateral under
the TICC Funding LLC credit facility.
All or a portion of this investment represents TICC CLO 2012-1
LLC collateral.
Indicates assets that the Company believes do not represent
qualifying assets under Section 55(a) of the Investment Company Act
of 1940, as amended. Qualifying assets must represent at least 70%
of the Company's total assets at the time of acquisition of any
additional non-qualifying assets.
Investment not domiciled in the United States.
Fair value represents discounted cash flows associated with fees
earned from CLO equity investments.
Aggregate investments represent greater than 5% of net
assets.
The principal balance outstanding for this debt investment, in
whole or in part, is indexed to 90-day LIBOR.
The principal balance outstanding for this debt investment, in
whole or in part, is indexed to 1 year LIBOR.
The principal balance outstanding for this debt investment, in
whole or in part, is indexed to 30-day LIBOR
The principal balance outstanding for this debt investment, in
whole or in part, is indexed to 180-day LIBOR
The CLO subordinated notes and income notes are considered
equity positions in the CLO funds. Equity investments are entitled
to recurring distributions which are generally equal to the
remaining cash flow of the payments made by the underlying fund's
securities less contractual payments to debt holders and fund
expenses. The estimated yield indicated is based upon a current
projection of the amount and timing of these recurring
distributions and the estimated amount of repayment of principal
upon termination. Such projections are periodically reviewed and
adjusted, and the estimated yield may not ultimately be
realized.
DECEMBER 31, 2014
% OF NET
tranche B term loan, LIBOR + 3.50% (1.00% floor) due February
06, 2019
6,541,775
6,517,166
6,378,231
13,800,000
first lien senior secured notes, 4.50% due April 14, 2021
13,009,539
12,986,480
4,991,646
4,971,679
4,972,927
14,923,753
14,877,921
14,874,057
14,005,937
13,982,500
Novitex Enterprise Solutions (F/K/A Pitney Bowes Management
Services, Inc.)
first lien senior secured notes, LIBOR + 6.25% (1.25% floor) due
October 01, 2019
15,840,300
15,746,596
15,048,285
9,402,519
9,415,372
9,320,247
1,974,098
1,976,260
15,544,444
15,270,572
15,233,555
Blue Coat System, Inc.
first lien senior secured notes, LIBOR + 3.00% (1.00% floor) due
May 31, 2019
3,979,856
3,996,178
3,832,601
second lien senior secured notes, LIBOR + 8.50% (1.00% floor)
due June 28, 2020
14,874,235
14,625,000
4,776,389
4,791,903
4,636,106
first lien senior secured notes, LIBOR + 4.50% (1.00% floor) due
June 17, 2020
13,965,000
14,024,103
13,877,719
15,920,000
15,864,439
15,840,400
2,971,530
2,910,000
9,897,500
9,866,707
9,610,473
first lien senior secured notes, LIBOR + 5.00%, (1.00% floor)
due December 01, 2021
8,969,867
8,932,500
Deltek Systems, Inc.
first lien senior secured notes, LIBOR + 3.50% (1.00% floor) due
October 10, 2018
4,557,000
4,534,433
4,500,038
second lien senior secured notes, LIBOR + 8.75% (1.25% floor)
due October 10, 2019
9,899,125
10,025,000
Edmentum, Inc. (F/K/A Plato, Inc.)
first lien senior secured notes, LIBOR + 4.50% (1.00% floor) due
May 17, 2018
6,508,724
6,455,462
5,272,066
first lien senior secured notes, LIBOR + 4.50% (1.25% floor) due
October 04, 2018
3,044,185
3,002,845
13,766,556
13,860,036
first lien senior secured notes, (LIBOR + 4.00%) due March 24,
2021
16,007,723
15,797,601
17,325,000
17,255,320
17,065,125
6,081,329
6,057,284
6,010,360
12,862,984
12,685,790
14,812,500
14,688,520
14,590,313
14,809,418
14,775,000
6,682,947
6,120,000
4,355,040
4,257,926
4,291,064
first lien senior secured notes, LIBOR + 4.00% (1.25% floor) due
February 22, 2019
10,341,486
10,302,601
10,037,757
second lien senior secured notes, LIBOR + 8.50%, (1.25% floor)
due February 22, 2020
8,850,000
8,896,162
8,772,563
first lien senior secured notes, LIBOR + 8.50% (1.25% floor) due
October 16, 2017
20,682,892
20,152,560
20,579,478
Knowledge Universe Education
first lien senior secured notes, LIBOR + 4.25% (1.00% floor) due
March 18, 2021
10,947,425
10,982,820
10,920,056
first lien senior secured notes, LIBOR + 4.75% (1.00% floor) due
March 08, 2018
17,083,900
17,084,727
16,955,771
17,915,000
17,784,542
17,803,031
Nextag, Inc.
senior secured notes, Cash 0.00%/9.25% PIK, due
June 04, 2019
2,264,719
2,264,720
first lien senior secured notes, LIBOR + 5.00% (1.00% floor) due
September 29, 2020
12,718,125
12,610,453
12,654,534
first lien senior secured notes, LIBOR + 5.25% (1.00% floor) due
September 29, 2020
15,403,125
15,367,784
15,383,871
5,984,416
5,941,589
5,907,097
Presidio IS Corp.
senior secured notes, LIBOR + 4.00% (1.00% floor) due March 31,
2017
8,331,082
8,315,126
8,305,091
6,037,262
5,940,000
second lien senior secured notes, LIBOR + 6.75% (1.50% floor)
cash 1.25% PIK due March 23, 2017
22,731,656
12,520,134
15,502,989
Recorded Books, Inc. (F/K/A Volume Holdings, Inc.)
senior secured notes, LIBOR + 4.25% (1.00% floor) due January
31, 2020
9,300,000
9,213,403
9,207,000
Safenet, Inc.
first lien senior secured notes PRIME + 3.5% due March 05,
2020
9,837,828
3,388,942
3,363,761
5,944,956
5,898,190
5,858,754
6,370,703
6,272,000
14,384,593
14,397,006
14,231,829
19,640,149
19,768,800
17,471,194
17,460,000
14,405,564
14,287,500
STG-Fairway Acquisitions
first lien senior secured notes, LIBOR + 5.00% (1.25% floor) due
February 28, 2019
9,211,018
9,141,920
9,038,311
19,075,000
18,909,604
18,939,949
Symphony Teleca Services Inc.
first lien senior secured notes, LIBOR + 4.75% (1.00% floor) due
August 07, 2019
16,000,000
15,847,256
15,840,000
7,962,890
7,952,000
9,900,000
9,816,492
9,603,000
financial intermediary
15,840,699
first lien senior secured notes, LIBOR + 6.00% (1.00% floor) due
December 05, 2018
15,200,000
14,934,118
15,124,000
tranche B term loan, LIBOR + 13.50%, (1.50% floor) Cash
0.00%/PIK 15.00% due April 15, 2018
12,772,315
11,608,604
6,667,148
9,900,312
9,779,200
US FT HoldCo. Inc. (A/K/A Fundtech)
first lien senior secured notes, LIBOR + 3.50% (1.00% floor) due
November 30, 2017
6,207,712
6,227,876
6,139,427
5,248,096
5,202,145
5,195,615
second lien senior secured notes, LIBOR + 8.00% (1.50% floor)
due July 23, 2016
9,958,342
9,600,000
5,878,332
5,863,887
5,654,955
705,342,148
696,953,550
Senior Unsecured Notes
senior unsecured PIK notes Cash 0.00%/10.00% PIK, due March 08,
2023
6,351,153
3,724,816
Total Senior Unsecured Notes
CLO secured class F notes, LIBOR + 5.05% due May 10, 2025
4,500,000
3,936,123
3,701,250
CLO secured class F notes, LIBOR + 5.40% due April 18, 2025
5,183,376
5,122,200
2,744,951
2,521,200
11,864,450
11,344,650
ACAS CLO 2012-1, Ltd.
CLO subordinated notes due September 20, 2023
4,050,000
CLO subordinated notes due May 10, 2025
9,949,500
9,303,429
CLO subordinated notes due January 17, 2024
12,620,875
10,850,000
CLO subordinated notes due April 15, 2025
22,750,000
18,295,625
15,479,495
CLO subordinated notes due April 17, 2026
11,156,250
10,784,314
CLO subordinated notes due July 15, 2024
24,704,625
22,760,050
Carlyle Global Market Strategies CLO 2013-2, Ltd.
CLO subordinated notes due April 18, 2025
7,848,089
Carlyle Global Market Strategies CLO 2014-4, Ltd.
CLO subordinated notes due October 15, 2026
22,689,920
21,916,400
CLO subordinated notes due December 20,
20,075,000
14,520,000
CLO subordinated notes due January 27, 2025
9,750,000
8,300,000
CLO subordinated notes due March 9, 2025
15,631,250
14,062,500
7,200,000
CLO subordinated notes due October 18, 2026
4,412,500
CLO subordinated notes due October 20, 2025
13,272,000
11,343,930
CLO subordinated notes due January 17, 2027
CLO subordinated notes due October 15, 2023
12,644,215
10,750,460
CLO income notes due April 18, 2025
13,473,000
11,729,070
570,082
CLO income notes due June 2, 2025
16,400,000
15,400,000
CLO subordinated notes due August 27, 2020
4,543,935
2,070,500
13,407,500
13,073,425
10,496,657
CLO subordinated notes due January 13, 2025
20,573,750
17,688,284
12,666,666
11,558,333
10,639,999
CLO subordinated notes due April 17, 2015
9,450,000
7,671,510
Other CLO equity related investments
CLO other
3,816,649
289,429,203
259,813,918
1,160,000
4,258,112
728,442
3,425,244
4,275,955
11,226,123
2,004,002
Total Common Stock Investments
10,141,643
9,694,067
Warrants
warrants to purchase common stock
309,080
Total Warrants
Other than Algorithmic Implementation, Inc. (d/b/a Ai Squared),
which we may be deemed to control and Nextag, Inc., of which we are
deemed to be an affiliate. We do not control and are not an
affiliate of any of our portfolio companies, each as defined in the
Investment Company Act of 1940 (the 1940 Act). In general, under
the 1940 Act, we would be presumed to control a portfolio company
if we owned 25% or more of its voting securities and would be an
affiliate of a portfolio company if we owned 5% or more of its
voting securities.
Portfolio includes $44,119,843 of principal amount of debt
investments which contain a PIK provision.
Aggregate gross unrealized appreciation for federal income tax
purposes is $14,859,779; aggregate gross unrealized depreciation
for federal income tax purposes is $69,463,970. Net unrealized
depreciation is $54,604,191 based upon a tax cost basis of
$1,038,761,529.
All or a portion of this investment represents collateral under
the revolving credit agreement.
Indicates assets that the Company believes do not represent
qualifying assets under Section 55(a) of the Investment Company Act
of 1940, as amended. Qualifying assets must represent at least 70%
of the Companys total assets at the time of acquisition of any
additional non-qualifying assets.
Aggregate investments represent greater than 5% of net assets on
a fair value basis.
Investment is on non-accrual status. During the period ended
December 31, 2014, the investment defaulted on its principal and
interest payments.
The principal balance outstanding for this debt investment, in
whole or in part, is indexed to 30-day LIBOR.
The principal balance outstanding for this debt investment, in
whole or in part, is indexed to 180-day LIBOR.
The principal balance outstanding for this debt investment, in
whole or in part, is indexed to 60-day LIBOR.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months
Ended
Nine Months
INVESTMENT INCOME
From non-affiliated/non-control investments:
Interest income debt investments
13,720,125
12,727,990
39,025,069
38,350,310
Income from securitization vehicles and investments
8,617,121
15,170,869
26,396,541
45,047,290
Commitment, amendment fee income and other income
372,935
1,877,067
1,985,306
4,267,879
Total investment income from non-affiliated/non-control
investments
22,710,181
29,775,926
67,406,916
87,665,479
From affiliated investments:
78,616
50,436
221,097
65,139
Total investment income from affiliated investments
From control investments:
345,591
349,361
1,026,283
1,036,691
Total investment income from control investments
23,134,388
30,175,723
68,654,296
88,767,309
EXPENSES
Compensation expense
89,660
472,903
965,293
1,399,476
Investment advisory fees
5,255,583
5,366,277
15,574,269
15,764,248
Professional fees
818,926
603,940
2,330,702
1,601,883
Interest expense and other debt financing expenses
5,031,343
4,963,796
14,969,915
14,805,182
General and administrative
488,939
384,543
1,673,389
1,567,799
Total expenses before incentive fees
11,684,451
11,791,459
35,513,568
35,138,588
Net investment income incentive fees
575,319
1,701,699
(929,933
4,806,278
Capital gains incentive fees
(837,963
(3,872,853
Total incentive fees
863,736
933,425
12,259,770
12,655,195
34,583,635
36,072,013
10,874,618
17,520,528
34,070,661
52,695,296
Net change in unrealized appreciation/depreciation on
investments
Non-Affiliate/non-control investments
(37,399,544
(15,123,443
(34,358,991
(18,359,672
(1,610,530
(198,545
5,571,560
3,728,836
(2,005,625
(740,000
Total net change in unrealized appreciation/depreciation on
investments
(41,015,699
(15,321,988
(30,793,056
(15,370,836
Net realized gains/(losses) on investments
Non-Affiliated/non-control investments
406,343
(3,460,465
4,606,405
(6,925,632
(6,762,328
(5,264,838
Total net realized gains/(losses) on investments
(2,155,923
(12,190,470
Net (decrease) increase in net assets resulting from
operations
(29,734,738
(1,261,925
1,121,682
25,133,990
Net increase in net assets resulting from net investment income
per common share:
Diluted
Net (decrease) increase in net assets resulting from operations
per common share:
(0.50
(0.02
Weighted average shares of common stock outstanding:
60,268,078
59,997,565
58,307,825
70,021,138
70,301,230
70,030,717
68,340,977
Distributions per share
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Increase (decrease) in net assets from operations:
34,070,661
65,457,844
Net realized losses on investments
(19,492,649
Net change in unrealized appreciation/(depreciation) on
investments
(49,313,595
Net increase (decrease) in net assets resulting from
operations
(3,348,400
Distributions to shareholders
Distributions from net investment income
(50,989,788
(60,189,322
Tax return of capital distributions
(9,697,552
Total distributions to shareholders
(69,886,874
Capital share transactions:
Issuance of common stock (net of offering costs of $0 and
$2,033,950, respectively)
66,411,050
Repurchase of common stock
(2,386,209
(1,172,574
Reinvestment of distributions
2,567,433
Net (decrease)/increase in net assets from capital share
transactions
67,805,909
Total decrease in net assets
(52,254,315
(5,429,365
Net assets at beginning of period
526,242,426
Net assets at end of period (including over distributed net
investment income of $20,170,528 and $3,251,401, respectively)
468,558,746
520,813,061
Capital share activity:
Shares sold
Shares repurchased
(315,783
(154,600
Shares issued from reinvestment of distributions
307,624
Net (decrease) increase in capital share activity
6,903,024
CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations
25,133,989
Adjustments to reconcile net increase in net assets resulting
from operations to net cash used by operating activities:
Accretion of discounts on investments
(30,137,613
(2,084,266
Accretion of discount on notes payable and deferred debt
issuance costs
1,400,334
1,394,558
Increase in investments due to PIK
(519,286
(966,960
Purchases of investments
(215,296,186
(355,027,153
Repayments of principal and reductions to investment cost
value
210,451,894
220,455,237
Proceeds from the sale of investments
51,024,934
102,755,346
Increase in interest and distributions receivable
(1,155,218
(2,012,971
Increase in other assets
(18,481
(374,667
Increase in accrued interest payable
2,367,921
2,154,771
Decrease in investment advisory fee payable
(352,584
(76,504
Decrease in accrued capital gains incentive fee
Increase in accrued expenses
311,496
367,040
Net cash provided (used) by operating activities
52,147,872
15,406,873
CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash
1,938,922
(18,610,225
Net cash provided (used) by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock
68,445,000
Offering expenses from the issuance of common stock
(2,033,950
Distributions paid (net of stock issued under dividend
reinvestment plan of $0 and $1,847,625, respectively)
(50,535,499
Net cash (used) provided by financing activities
(53,375,997
15,875,551
Net increase in cash and cash equivalents
710,797
12,672,200
Cash and cash equivalents, beginning of period
14,933,074
Cash and cash equivalents, end of period
21,216,120
27,605,274
NON-CASH FINANCING ACTIVITIES
Value of shares issued in connection with dividend reinvestment
plan
1,847,625
SUPPLEMENTAL DISCLOSURES
10,242
2,850,000
10,721,250
Cash paid for interest
11,201,660
11,255,851
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. UNAUDITED INTERIM FINANCIAL STATEMENTS
Interim consolidated financial statements of TICC Capital Corp.
(TICC and, together with its subsidiaries, the Company) are
prepared in accordance with generally accepted accounting
principles (GAAP) for interim financial information and pursuant to
the requirements for reporting on Form 10-Q and Article 10 of
Regulation S-X. Accordingly, certain disclosures accompanying
annual financial statements prepared in accordance with GAAP are
omitted. In the opinion of management, all adjustments, consisting
of normal recurring accruals, necessary for the fair statement of
consolidated financial results for the interim periods have been
included. The current periods consolidated results of operations
are not necessarily indicative of results that may be achieved for
the year. The interim consolidated financial statements and notes
thereto should be read in conjunction with the financial statements
and notes thereto included in the Companys Form 10-K for the year
ended December 31, 2014, as filed with the Securities and Exchange
Commission (SEC).
NOTE 2. ORGANIZATION
TICC was incorporated under the General Corporation Laws of the
State of Maryland on July 21, 2003 and is a non-diversified,
closed-end investment company. TICC has elected to be treated as a
business development company under the Investment Company Act of
1940, as amended (the 1940 Act). In addition, TICC has elected to
be treated for tax purposes as a regulated investment company
(RIC), under Subchapter M of the Internal Revenue Code of 1986, as
amended (the Code). The Companys investment objective is to
maximize its total return, by investing primarily in corporate debt
securities.
TICCs investment activities are managed by TICC Management, LLC
(TICC Management), a registered investment adviser under the
Investment Advisers Act of 1940, as amended. BDC Partners, LLC (BDC
Partners) is the managing member of TICC Management and serves as
the administrator of TICC.
The Companys operations include the activities of its
wholly-owned subsidiary, TICC Capital Corp. 2011-1 Holdings, LLC
(Holdings), TICC CLO LLC (2011 Securitization Issuer or TICC CLO),
TICC CLO 2012-1 LLC (2012 Securitization Issuer or TICC CLO 2012-1)
and TICC Funding, LLC (TICC Funding) for the periods in which they
were held. These subsidiaries were formed for the purpose of
enabling the Company to obtain debt financing and are operated
solely for the investment activities of the Company, and the
Company has substantial equity at risk. TICC Funding was formed on
September 17, 2014, for the purpose of entering into a credit and
security agreement with Citibank, N.A., to replace the financing
previously obtained through TICC CLO. TICC CLO effectively ceased
operations on October 27, 2014, and the notes payable by TICC CLO
were repaid with borrowings under the debt facility of TICC
Funding. See Note 7. Borrowings for additional information on the
Companys subsidiaries and their borrowings.
NOTE 3. CHANGE OF ACCOUNTING FOR COLLATERALIZED LOAN OBLIGATION
EQUITY INVESTMENT INCOME
During the first quarter of 2015, the Company identified a
non-material error in its accounting for income from Collateralized
Loan Obligation (CLO) equity investments. The Company had recorded
income from its CLO equity investments using the dividend
recognition model as described in ASC 946-320; specifically,
dividends were recognized on the applicable record date, subject to
estimation and collectability, with a reduction to cost basis in
those instances where the Company believed that a return of capital
had occurred. The Company has determined that the appropriate
method for recording investment income on CLO equity investments is
the effective yield method as described in ASC 325-40. This method
requires the calculation of an effective yield to expected
redemption based upon an estimation of the amount and timing of
future cash flows, including recurring cash flows as well as future
principal repayments; the difference between the actual cash
received (and record date distributions to be received) and the
effective yield income calculation is an adjustment to cost. The
effective yield is reviewed quarterly and adjusted as
appropriate.
NOTE 3. CHANGE OF ACCOUNTING FOR COLLATERALIZED LOAN OBLIGATION
EQUITY INVESTMENT INCOME (continued)
The difference between the two methods resulted in an income
reclassification error which would generally have resulted in a
decrease in total investment income with a corresponding and
offsetting increase to net change in unrealized
appreciation/depreciation on investments and net realized
gains/losses on investments. The Company quantified this error and
assessed it in accordance with the guidance provided in SEC Staff
Accounting Bulletin (SAB) 108,
Considering the Effects of Prior Year Misstatements When
Quantifying Misstatements in Current Year Financial Statements
. Based on this assessment, the Company concluded that the error
in income classification did not have a material impact on the
Companys previously filed consolidated financial statements.
As a result of this misclassification of income, net investment
income incentive fees were overstated by approximately $2.4 million
on a cumulative basis through 2014 and, as a result, total net
assets as of December 31, 2014 were understated by the same amount,
approximately $0.04 per share. The Company also considered this
indirect impact of the error in classification, concluded that the
error was not material to the Companys previously filed
consolidated financial statements. The error was corrected by an
out-of-period adjustment in the first quarter of 2015, reducing net
investment income incentive fees by approximately $2.4 million and
recognizing a corresponding due from affiliate of $2.4 million.
TICC Management repaid in full to TICC, on April 30, 2015, the
portion of its previously paid net investment income incentive fees
attributable to the overstated amounts.
Prospectively as of January 1, 2015, the Company records income
from its CLO equity investments using the effective yield method in
accordance with the accounting guidance in ASC 325-40,
Beneficial Interests in Securitized Financial Assets
, based upon an estimation of an effective yield to maturity
utilizing assumed cash flows.
NOTE 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries,
Holdings, TICC CLO, TICC CLO 2012-1 and TICC Funding. All
inter-company accounts and transaction have been eliminated in
consolidation.
During the quarter ended September 30, 2015, the Company
recorded an out of period adjustment related to a miscalculation of
discount accretion which increased interest income and increased
investment cost, by approximately $1.4 million. The increase in the
investment cost has a corresponding effect on the investment's
unrealized depreciation of the same amount. Management concluded
the adjustment was not material to previously filed financial
statements.
The Company follows the accounting and reporting guidance in
FASB Accounting Standards Codification 946.
USE OF ESTIMATES
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America that require management to make estimates
and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual
results may differ from those estimates.
In the normal course of business, the Company may enter into
contracts that contain a variety of representations and provide
indemnifications. The Companys maximum exposure under these
arrangements is unknown as this would involve future claims that
may be made against the Company that have not yet occurred.
However, based upon experience, the Company expects the risk of
loss to be remote.
NOTE 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
CONSOLIDATION
As provided under Regulation S-X and ASC Topic 946-810 Financial
Services Investment Companies, the Company will generally not
consolidate its investment in a company other than a wholly-owned
investment company or a controlled operating company whose business
consists of providing services to the Company. TICC CLO, TICC CLO
2012-1 and TICC Funding would be considered investment companies
but for the exceptions under Sections 3(c)(1) and 3(c)(7) under the
1940 Act, and were established solely for the purpose of allowing
the Company to borrow funds for the purpose of making investments.
The Company owns all of the equity in these entities and controls
the decision making power that drives their economic performance.
Accordingly, the Company consolidates the results of the Companys
wholly-owned subsidiaries in its financial statements, and follows
the accounting and reporting guidance in ASC 946-810.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents consist of demand deposits and highly
liquid investments with original maturities of three months or
less. Cash and cash equivalents are carried at cost or amortized
cost which approximates fair value. At September 30, 2015 and
December 31, 2014, cash and cash equivalents consisted solely of
demand deposits.
Restricted cash represents the cash held by the trustees of the
Companys CLO and special purpose vehicle subsidiaries. These
amounts are held by the trustee for payment of interest expense and
operating expenses of the entity, principal repayments on
borrowings, or new investments, based upon the terms of the
respective indenture, and are not available for general corporate
purposes.
INVESTMENT VALUATION
The Company fair values its investment portfolio in accordance
with the provisions of ASC 820,
Fair Value Measurement and Disclosure
. Estimates made in the preparation of TICCs consolidated
financial statements include the valuation of investments and the
related amounts of unrealized appreciation and depreciation of
investments recorded. TICC believes that there is no single
definitive method for determining fair value in good faith. As a
result, determining fair value requires that judgment be applied to
the specific facts and circumstances of each portfolio investment
while employing a consistently applied valuation process for the
types of investments TICC makes.
ASC 820-10 clarified the definition of fair value and requires
companies to expand their disclosure about the use of fair value to
measure assets and liabilities in interim and annual periods
subsequent to initial recognition. ASC 820-10 defines fair value as
the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date. ASC 820-10 also establishes a
three-tier fair value hierarchy, which prioritizes the inputs used
in measuring fair value. These tiers include: Level 1, defined as
observable inputs such as quoted prices in active markets; Level 2,
which includes inputs such as quoted prices for similar securities
in active markets and quoted prices for identical securities in
markets that are not active; and Level 3, defined as unobservable
inputs for which little or no market data exists, therefore
requiring an entity to develop its own assumptions. TICC considers
the attributes of current market conditions on an on-going basis
and has determined that due to the general illiquidity of the
market for its investment portfolio, whereby little or no market
data exists, almost all of TICCs investments are based upon Level 3
inputs as of September 30, 2015.
TICCs Board of Directors determines the value of its investment
portfolio each quarter. In connection with that determination,
members of TICC Managements portfolio management team prepare a
quarterly analysis of each portfolio investment using the most
recent portfolio company financial statements, forecasts and other
relevant financial and operational information. Since March 2004,
TICC has engaged third-party valuation firms to provide assistance
in valuing certain of its syndicated loans and bilateral
investments,
including related equity investments, although TICCs Board of
Directors ultimately determines the appropriate valuation of each
such investment. Changes in fair value, as described above, are
recorded in the statement of operations as net change in unrealized
appreciation or depreciation.
Syndicated Loans
In accordance with ASC 820-10-35, TICCs valuation procedures
specifically provide for the review of indicative quotes supplied
by the large agent banks that make a market for each security.
However, the marketplace from which TICC obtains indicative bid
quotes for purposes of determining the fair value of its syndicated
loan investments has shown attributes of illiquidity as described
by ASC-820-10-35. During such periods of illiquidity, when TICC
believes that the non-binding indicative bids received from agent
banks for certain syndicated investments that we own may not be
determinative of their fair value or when no market indicative
quote is available, TICC may engage third-party valuation firms to
provide assistance in valuing certain syndicated investments that
TICC owns. In addition, TICC Management prepares an analysis of
each syndicated loan, financial summary, covenant compliance
review, recent trading activity in the security, if known, and
other business developments related to the portfolio company. All
available information, including non-binding indicative bids which
may not be determinative of fair value, is presented to the
Valuation Committee to consider in its determination of fair value.
In some instances, there may be limited trading activity in a
security even though the market for the security is considered not
active. In such cases the Valuation Committee will consider the
number of trades, the size and timing of each trade, and other
circumstances around such trades, to the extent such information is
available, in its determination of fair value. The Valuation
Committee will evaluate the impact of such additional information,
and factor it into its consideration of the fair value that is
indicated by the analysis provided by third-party valuation firms,
if any.
Collateralized Loan Obligations Debt and Equity
During the past several years, TICC has acquired a number of
debt and equity positions in CLO investment vehicles and more
recently CLO warehouse investments. These investments are special
purpose financing vehicles. In valuing such investments, TICC
considers the indicative prices provided by a recognized industry
pricing service as a primary source, and the implied yield of such
prices, supplemented by actual trades executed in the market at or
around period-end, as well as the indicative prices provided by the
broker who arranges transactions in such investment vehicles. TICC
also considers those instances in which the record date for an
equity distribution payment falls on the last day of the period,
and the likelihood that a prospective purchaser would require a
downward adjustment to the indicative price representing
substantially all of the pending distribution. Additional factors
include any available information on other relevant transactions
including firm bids and offers in the market and information
resulting from bids-wanted- in-competition. In addition, TICC
considers the operating metrics of the specific investment vehicle,
including compliance with collateralization tests, defaulted and
restructured securities, and payment defaults, if any. TICC
Management or the Valuation Committee may request an additional
analysis by a third-party firm to assist in the valuation process
of CLO investment vehicles. All information is presented to TICCs
Board of Directors for its determination of fair value of these
investments.
Bilateral Investments (Including Equity)
Bilateral investments for which market quotations are readily
available are valued by an independent pricing agent or market
maker. If such market quotations are not readily available, under
the valuation procedures approved by TICCs Board of Directors, upon
the recommendation of the Valuation Committee, a third-party
valuation firm will prepare valuations for each of TICCs bilateral
investments that, when combined with all other investments in the
same portfolio company, (i) have a value as of the previous quarter
of greater than or equal to 2.5% of its total assets as of the
previous quarter, and (ii) have a value as of the current quarter
of greater than or equal to 2.5% of its total assets as of the
previous quarter, after taking into
account any repayment of principal during the current quarter.
In addition, in those instances where a third-party valuation is
prepared for a portfolio investment which meets the parameters
noted in (i) and (ii) above, the frequency of those third-party
valuations is based upon the grade assigned to each such security
under its credit grading system as follows: Grade 1, at least
annually; Grade 2, at least semi-annually; Grades 3, 4, and 5, at
least quarterly. Bilateral investments which do not meet the
parameters in (i) and (ii) above are not required to have a
third-party valuation and, in those instances, a valuation analysis
will be prepared by TICC Management. TICC Management also retains
the authority to seek, on TICCs behalf, additional third party
valuations with respect to both TICCs bilateral portfolio
securities and TICCs syndicated loan investments. TICCs Board of
Directors retains ultimate authority as to the third-party review
cycle as well as the appropriate valuation of each investment.
Interest Income
Interest income is recorded on an accrual basis using the
contractual rate applicable to each debt investment and includes
the accretion of discounts and amortization of premiums. Discounts
from and premiums to par value on securities purchased are
accreted/amortized into interest income over the life of the
respective security using the effective yield method. The amortized
cost of investments represents the original cost adjusted for the
accretion of discounts and amortization of premiums, if any.
Generally, when interest and/or principal payments on a loan
become past due, or if the Company otherwise does not expect the
borrower to be able to service its debt and other obligations, the
Company will place the loan on non-accrual status and will
generally cease recognizing interest income on that loan for
financial reporting purposes until all principal and interest have
been brought current through payment or due to restructuring such
that the interest income is deemed to be collectible. The Company
generally restores non-accrual loans to accrual status when past
due principal and interest is paid and, in the Companys judgment,
is likely to remain current. As of September 30, 2015, the Company
held no non-accrual assets in its portfolio; as of September 30,
2014, the Companys investment in Unitek Global Services, Inc.s
senior secured notes was on non-accrual status.
In addition, the Company earns income from the discount on debt
securities it purchases, including original issue discount (OID)
and market discount. Original issue discount and market discounts
are capitalized and amortized into income using the interest
method, as applicable.
Income from Securitization Vehicles and Equity Investments
Income from investments in the equity class securities of CLO
vehicles (typically income notes or subordinated notes) is recorded
using the effective interest method in accordance with the
provisions of ASC 325-40,
, based upon an estimation of an effective yield to maturity
utilizing assumed cash flows, including those CLO equity
investments that have not made their inaugural distribution for the
relevant period end. The Company monitors the expected residual
payments, and effective yield is determined and updated
periodically, as needed. Accordingly, investment income recognized
on CLO equity securities in the GAAP statement of operations
differs from both the tax-basis investment income and from the cash
distributions actually received by the Company during the
period.
Payment-In-Kind
TICC has investments in its portfolio which contain a
contractual payment-in-kind (PIK) provision. Certain PIK
investments offer issuers the option at each payment date of making
payments in cash or additional securities. PIK interest computed at
the contractual rate is accrued into income and added to the
principal balance on the capitalization date. Upon capitalization,
PIK is subject to the fair value estimates
associated with their related investments. PIK investments on
non-accrual status are restored to accrual status once it becomes
probable that PIK will be realized. To maintain its status as a
RIC, this income must be paid out to stockholders in the form of
dividends, even though TICC has not collected any cash. Amounts
necessary to pay these dividends may come from available cash or
the liquidation of certain investments.
Other Income
Other income includes distributions from fee letters, closing or
origination fees, and success fees associated with portfolio
investments. Distributions from fee letters are an enhancement to
the return on a CLO equity investment and are based upon a
percentage of the collateral managers fees, and are recorded as
other income when earned. Closing or origination fees, if any, are
normally paid at closing of an investment, are fully earned and
non-refundable, and generally are non-recurring. The Company may
also earn success fees associated with its investments in certain
securitization vehicles or CLO warehouse facilities, which are
contingent upon a take-out of the warehouse by a permanent CLO
structure; such fees are earned and recognized when the take-out is
completed.
DEFERRED DEBT ISSUANCE COSTS
Deferred debt issuance costs consist of fees and expenses
incurred in connection with the closing or amending of credit
facilities and debt offerings, and are capitalized at the time of
payment. These costs are amortized using the straight line method
over the terms of the respective credit facilities and debt
securities. This amortization expense is included in interest
expense in the Companys financial statements. Upon early
termination of debt, or a credit facility, the remaining balance of
unaccreted fees related to such debt is accelerated into interest
expense.
EQUITY OFFERING COSTS
Equity offering costs consist of fees and expenses incurred in
connection with the registration and public offer and sale of the
Companys common stock, including legal, accounting and printing
fees. These costs are deferred at the time of incurrence and are
subsequently charged to capital when the offering takes place or as
shares are issued. Deferred costs are periodically reviewed and
expensed if the related registration is no longer active.
SHARE REPURCHASES
From time to time, the Companys Board of Directors m