10-Q 1 tm2223891d1_10q.htm FORM 10-Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

(Mark One)

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

 

For the quarterly period ended September 30, 2022

 

OR

 

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

 

For the transition period from                      to                     

 

Commission file number: 814-01154

 

 

 

AUDAX CREDIT BDC INC.

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE   47-3039124

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

101 HUNTINGTON AVENUE    
BOSTON, MASSACHUSETTS   02199
(Address of principal executive office)   (Zip Code)

 

(617) 859-1500

(Registrant’s telephone number, including area code)

 

Not Applicable

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

 

 

 

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

None.

 

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   ¨

 

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

 

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

 

Large accelerated filer ¨  Accelerated filer ¨
       
Non-accelerated filer x Smaller reporting company ¨
       
Emerging growth company x    

 

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

 

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

 

The registrant had 46,376,456 shares of common stock, par value $0.001 per share, outstanding as of November 14, 2022.

 

 

 

 

 

 

AUDAX CREDIT BDC INC.

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION:  
Item 1. Financial Statements  
  Statements of Assets and Liabilities as of September 30, 2022 (unaudited) and December 31, 2021 2
  Statements of Operations for the three and nine months ended September 30, 2022 (unaudited) and 2021 (unaudited) 3
  Statements of Changes in Net Assets for the nine months ended September 30, 2022 (unaudited) and 2021 (unaudited) 4
  Statements of Cash Flows for the nine months ended September 30, 2022 (unaudited) and 2021 (unaudited) 5
  Schedules of Investments as of September 30, 2022 (unaudited) and December 31, 2021 6
  Notes to Financial Statements (unaudited) 16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36
  Overview 37
  Results of Operations 39
  Financial Condition, Liquidity and Capital Resources 41
Item 3. Quantitative and Qualitative Disclosures About Market Risk 48
Item 4. Controls and Procedures 49
PART II. OTHER INFORMATION: 50
Item 1. Legal Proceedings 50
Item 1A. Risk Factors 50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 51
Item 3. Defaults Upon Senior Securities 51
Item 4. Mine Safety Disclosures 51
Item 5. Other Information 51
Item 6. Exhibits 51
SIGNATURES 52

 

 

 

 

Audax Credit BDC Inc.

Statements of Assets and Liabilities

September 30, 2022 and December 31, 2021

(Expressed in U.S. Dollars)

 

   September 30, 2022     
   (unaudited)   December 31, 2021 
Assets          
Investments, at fair value          
Non-Control/Non-Affiliate investments (Cost of $443,479,369 and $404,292,618, respectively)  $437,641,601   $403,054,374 
Cash and cash equivalents   11,339,067    11,058,796 
Interest receivable   1,957,924    1,043,554 
Receivable from bank loan repayment   104,952    26,771 
Other assets   52,500    - 
Total assets  $451,096,044   $415,183,495 
           
Liabilities          
Accrued expenses and other liabilities  $614,172   $326,497 
Fee due to administrator(a)   132,500    66,250 
Fees due to investment advisor, net of waivers(a)   1,816,602    640,329 
Payable for investments purchased   2,940,000    40,203,085 
Payable for short-term borrowings(b)   18,681,667    - 
Total liabilities  $24,184,941   $41,236,161 
Commitments and contingencies(c)          
           
Net Assets          
Common stock, $0.001 par value per share, 100,000,000 shares authorized, 45,314,885 and 39,961,408 shares issued and outstanding, respectively  $45,315   $39,961 
Capital in excess of par value   428,666,834    378,672,161 
Total distributable (loss) gain   (1,801,046)   (4,764,788)
Total Net Assets  $426,911,103   $373,947,334 
           
Net Asset Value per Share of Common Stock at End of Period  $9.42   $9.36 
           
Shares Outstanding   45,314,885    39,961,408 

 

(a) Refer to Note 4-Related Party Transactions for additional information.

(b) Refer to Note 8-Borrowings for additional information.

(c) Refer to Note 9-Commitments and Contingencies for additional information.

 

The accompanying notes are an integral part of these financial statements.

 

2

 

 

Audax Credit BDC Inc.

Statements of Operations

(Expressed in U.S. Dollars)

(unaudited)

 

   Three Months Ended   Three Months Ended   Nine Months Ended   Nine Months Ended 
   September 30, 2022   September 30, 2021   September 30, 2022   September 30, 2021 
Investment Income                    
Interest income                    
Non-Control/Non-Affiliate  $8,067,475   $4,924,039   $19,519,603   $14,455,194 
Other   10,850    477    11,630    1,107 
Total interest income   8,078,325    4,924,516    19,531,233    14,456,301 
Other income                    
Non-Control/Non-Affiliate   196,474    20,772    374,849    83,774 
Total income   8,274,799    4,945,288    19,906,082    14,540,075 
                     
Expenses                    
Base management fee(a)  $1,174,798   $947,361   $3,295,451   $2,810,141 
Incentive fee(a)   1,027,544    260,092    2,201,758    647,839 
Administrative fee(a)   66,250    66,250    198,750    198,750 
Directors' fees   60,000    56,250    180,000    168,750 
Professional fees   134,052    108,251    426,588    345,947 
Other expenses   79,077    108,702    236,011    314,632 
Interest expense   322,175    -    458,976    - 
Expenses before waivers from investment adviser and administrator   2,863,896    1,546,906    6,997,534    4,486,059 
Base management fee waivers(a)   (411,179)   (331,576)   (1,153,408)   (983,548)
Incentive fee waivers(a)   (771,274)   (234,083)   (1,809,582)   (583,056)
Total expenses, net of waivers   1,681,443    981,247    4,034,544    2,919,455 
Net Investment Income   6,593,356    3,964,041    15,871,538    11,620,620 
                     
Realized and Unrealized Gain (Loss) on Investments                    
Net realized gain (loss) on investments   93,515    183,204    431,080    (450,168)
Net change in unrealized appreciation (depreciation) on investments   71,842    94,068    (4,599,524)   2,369,406 
Net realized and unrealized gain (loss) on investments   165,357    277,272    (4,168,444)   1,919,238 
                     
Net Increase in Net Assets Resulting from Operations  $6,758,713   $4,241,313   $11,703,094   $13,539,858 
                     
Basic and Diluted per Share of Common Stock:                    
Net investment income  $0.14   $0.10   $0.36   $0.30 
Net increase in net assets resulting from operations  $0.15   $0.11   $0.26   $0.34 
                     
Weighted average shares of common stock outstanding basic diluted           45,789,768               39,909,673               44,439,981               39,295,800    

 

(a) Refer to Note 4-Related Party Transactions for additional information

 

The accompanying notes are an integral part of these financial statements.

 

3

 

 

Audax Credit BDC Inc.

Statements of Changes in Net Assets

(Expressed in U.S. Dollars)

(unaudited)

 

   Nine Months Ended September 30, 2022   Nine Months Ended September 30, 2021 
Operations          
Net investment income  $15,871,538   $11,620,620 
Net realized gain (loss) on investments   431,080    (450,168)
Net change in unrealized (depreciation) appreciation on investments   (4,599,524)   2,369,406 
Net increase in net assets resulting from operations   11,703,094    13,539,858 
           
Distributions:          
Distributions of ordinary income to common stockholders   (8,739,352)   (7,656,579)
Return of capital to common stockholders   -    (145,326)
Total distributions   (8,739,352)   (7,801,905)
           
Capital Share Transactions:          
Issuance of common stock   85,000,000    15,100,000 
Repurchases of common stock   (35,000,000)   - 
Reinvestment of common stock   27    25 
Net increase in net assets from capital share transactions   50,000,027    15,100,025 
           
Net Increase in Net Assets   52,963,769    20,837,978 
           
Net Assets, Beginning of Period   373,947,334    356,882,861 
           
Net Assets, End of Period  $426,911,103   $377,720,839 

 

The accompanying notes are an integral part of these financial statements.

 

4

 

 

Audax Credit BDC Inc.

Statements of Cash Flows

(Expressed in U.S. Dollars)

(unaudited)

 

   Nine Months Ended   Nine Months Ended 
   September 30, 2022   September 30, 2021 
Cash flows from operating activities:          
Net increase in net assets resulting from operations  $11,703,094   $13,539,858 
Adjustments to reconcile net increase in net assets from operations to net cash (used in) provided by operating activities:                                
Net realized (gain) loss on investments   (431,080)   450,168 
Net change in unrealized depreciation (appreciation) on investments   4,599,524    (2,369,406)
Accretion of original issue discount interest and payment-in-kind interest   (712,849)   (538,786)
Increase in receivable from investments sold   -    (3,714,278)
Increase in interest receivable   (914,370)   (111,810)
Increase in receivable from bank loan repayment   (78,181)   (35,553)
Increase in other assets   (52,500)   (48,750)
Increase (decrease) in accrued expenses and other liabilities   287,675    (30,400)
Increase in fee due to administrator(a)   66,250    - 
Increase in fees due to investment advisor (a)   1,176,273    26,950 
(Decrease) increase in payable for investments purchased   (37,263,085)   266,250 
Investment activity:          
Investments purchased   (94,344,641)   (89,312,556)
Proceeds from investments sold   4,047,932    17,331,786 
Repayment of bank loans   52,253,887    66,357,177 
Total investment activity   (38,042,822)   (5,623,593)
           
Net cash (used in) provided by operating activities   (59,662,071)   1,810,650 
           
Cash flows from financing activities:          
Issuance of shares of common stock   85,000,000    15,100,000 
Repurchases of shares of common stock   (35,000,000)   - 
Distributions paid to common stockholders   (8,739,325)   (7,801,880)
Short-term borrowings   18,681,667    - 
           
Net cash provided by financing activities   59,942,342    7,298,120 
           
Net increase in cash and cash equivalents   280,271    9,108,770 
           
Cash and cash equivalents:          
Cash and cash equivalents, beginning of period   11,058,796    4,289,122 
           
Cash and cash equivalents, end of period  $11,339,067   $13,397,892 
           
Supplemental cash flow information          
Interest paid on short-term financing  $261,872   $- 
           
Supplemental non-cash information          
Issuance of common shares in connection with dividend reinvestment plan  $27   $25 
Payment-in-kind ("PIK") interest income  $211,758   $200,382 

 

(a) Refer to Note 4-Related Party Transactions for additional information                

 

The accompanying notes are an integral part of these financial statements.

 

5

 

 

Audax Credit BDC Inc.

Schedule of Investments

As of September 30, 2022

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)   Acquisition Date  Par  Cost  Value  
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (101.8%)(g)(h):                
                 
Healthcare & Pharmaceuticals            
American Vision Partners, Unitranche, 9.50% (LIBOR + 5.75%), maturity 9/30/27 (i)  9/22/2021  $4,960,901  $4,890,964  $4,721,788 
RevHealth, Senior Secured Revolving Loan, 6.79% (SOFR + 5.75%), maturity 7/21/28 (i) (j)  7/22/2022   4,280,822   4,196,463   4,195,205 
Radiology Partners, Senior Secured Term B Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 7/9/25 (j)  6/28/2018   4,215,792   4,358,478   3,825,406 
Young, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 11/7/24  11/6/2017   3,726,039   3,719,887   3,688,779 
PharMedQuest, Unitranche, 9.25% (LIBOR + 5.50%), maturity 11/6/24 (i)  11/6/2019   3,285,898   3,266,766   3,285,898 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 3/14/25  5/30/2018   3,222,954   3,232,192   3,222,954 
InHealth Medical Alliance, Senior Secured Initial Term Loan, 9.75% (LIBOR + 6.00%), maturity 6/28/28  6/25/2021   3,465,000   3,434,272   3,187,800 
Waystar, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 10/22/26  9/19/2019   2,927,456   2,921,812   2,905,500 
Advancing Eyecare, Senior Secured Initial Term Loan, 9.34% (SOFR + 5.75%), maturity 6/13/29  5/27/2022   2,500,000   2,432,175   2,487,500 
Zelis RedCard, Senior Secured Term B-1 Loan, 7.25% (LIBOR + 3.50%), maturity 9/30/26 (j)  9/27/2019   2,402,303   2,394,529   2,341,414 
Premise Health, Senior Secured Initial Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 7/10/25  8/15/2018   2,264,906   2,269,013   2,259,244 
Soliant, Senior Secured Initial Term Loan, 7.75% (LIBOR + 4.00%), maturity 3/31/28  3/26/2021   2,115,249   2,099,542   2,115,249 
nThrive, Senior Secured Initial Loan (Second Lien), 10.50% (LIBOR + 6.75%), maturity 12/17/29  11/19/2021   2,000,000   1,974,500   1,985,000 
CPS, Unitranche, 9.50% (LIBOR + 5.75%), maturity 6/1/28 (i)  5/18/2022   1,953,546   1,948,778   1,953,546 
Upstream Rehabilitation, Senior Secured August 2021 Incremental Term Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 11/20/26  10/24/2019   1,956,484   1,953,887   1,936,920 
Gastro Health, Senior Secured Initial Term Loan (First Lien), 8.25% (LIBOR + 4.50%), maturity 7/3/28  7/2/2021   1,979,525   1,969,525   1,934,986 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 8.25% (LIBOR + 4.50%), maturity 12/22/25  12/19/2018   1,925,000   1,920,000   1,886,500 
Advanced Diabetes Supply, Senior Secured First Incremental Term Loan, 8.84% (SOFR + 5.25%), maturity 12/30/27  7/13/2021   1,858,306   1,841,680   1,839,723 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 7/24/26 (j)  7/23/2019   1,940,000   1,937,960   1,838,201 
Blue Cloud, Unitranche, 8.59% (SOFR + 5.00%), maturity 1/21/28  12/13/2021   1,492,500   1,471,063   1,477,575 
Mission Veterinary Partners, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 4/27/28  12/15/2021   1,485,000   1,471,585   1,477,575 
Quantum Health, Senior Secured Amendment No. 1 Refinancing Term Loan (First Lien), 8.25% (LIBOR + 4.50%), maturity 12/22/27  12/18/2020   1,481,250   1,462,508   1,473,844 
Therapy Brands, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 5/18/28  5/12/2021   1,485,000   1,478,547   1,470,150 
Symplr, Senior Secured Initial Term Loan (First Lien), 8.25% (LIBOR + 4.50%), maturity 12/22/27 (j)  11/23/2020   1,477,500   1,458,885   1,419,787 
Ivy Rehab, Senior Secured Initial Term Loan (First Lien), 8.34% (SOFR + 4.75%), maturity 4/23/29  3/11/2022   1,144,191   1,121,166   1,132,749 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 5/1/24  1/10/2019   1,146,777   1,146,181   1,115,240 
Solis Mammography, Senior Secured Initial Term Loan (First Lien), 8.50% (LIBOR + 4.75%), maturity 4/17/28  4/1/2021   1,073,333   1,064,881   1,067,967 
Paradigm Oral Health, Senior Secured Delayed Draw Term Loan, 8.34% (SOFR + 4.75%), maturity 7/9/26 (j)  4/11/2022   999,239   984,309   999,239 
Solis Mammography, Senior Secured Initial Term Loan (Second Lien), 11.75% (LIBOR + 8.00%), maturity 4/16/29  4/1/2021   1,000,000   987,022   992,500 
Micro Merchant Systems, Unitranche, 9.50% (LIBOR + 5.75%), maturity 12/14/27 (i)  3/2/2022   995,000   984,651   990,025 
Wedgewood Pharmacy, Senior Secured Initial Term Loan, 8.00% (LIBOR + 4.25%), maturity 3/31/28  2/24/2021   990,000   981,248   990,000 
nThrive, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 12/18/28  11/19/2021   995,000   990,750   987,538 
Allied Benefit Systems, Senior Secured Initial Term B Loan, 8.25% (LIBOR + 4.50%), maturity 11/18/26  10/21/2020   982,500   971,625   980,044 
Alcami, Senior Secured Initial Term Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 7/14/25  7/12/2018   960,000   957,812   928,800 
Forefront, Senior Secured Closing Date Term Loan, 7.84% (SOFR + 4.25%), maturity 4/2/29  3/23/2022   907,076   891,087   904,808 
Epic Staffing Group, Senior Secured Initial Term Loan, 9.59% (SOFR + 6.00%), maturity 6/28/29  6/27/2022   823,517   764,245   821,459 
UDG, Senior Secured Initial Dollar Term Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 8/19/28 (k)  8/6/2021   631,875   626,634   625,556 
ImageFirst, Senior Secured Initial Term Loan, 8.25% (LIBOR + 4.50%), maturity 4/27/28  4/26/2021   606,307   603,786   601,760 
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 8/31/26  8/2/2019   522,659   519,743   517,433 
Western Dental, Senior Secured Incremental Term Loan, 9.00% (LIBOR + 5.25%), maturity 8/18/28  6/21/2022   498,750   489,210   487,528 
AccentCare, Senior Secured 2021 Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 6/22/26  6/15/2021   493,750   493,750   485,109 
MedRisk, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 5/10/28 (j)  4/1/2021   495,000   490,642   473,908 
RMP & MedA/Rx, Senior Secured Term Loan, 8.25% (LIBOR + 4.50%), maturity 2/6/25  3/22/2021   471,875   467,995   470,695 
Press Ganey, Senior Secured 2020 Incremental Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 7/24/26 (j)  10/1/2020   492,516   488,797   466,672 
RMP & MedA/Rx, Senior Secured Term Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 2/6/25  2/27/2017   403,003   403,010   401,995 
CPS, Senior Secured Revolving Credit Loan, 9.50% (LIBOR + 5.75%), maturity 6/1/28 (i)  5/18/2022   -   (714)  - 
Paradigm Oral Health, Senior Secured Revolving Loan, 8.34% (SOFR + 4.75%), maturity 7/9/26 (j)  4/11/2022   -   (1,111)  - 
Ivy Rehab, Senior Secured Revolving Credit (First Lien), 8.34% (SOFR + 4.75%), maturity 4/23/29  3/11/2022   -   (3,367)  - 
                 
Services: Business                
LegalShield, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 12/15/28 (j)  12/7/2021   4,477,500   4,436,728   4,336,046 
InnovateMR, Unitranche, 9.25% (LIBOR + 5.50%), maturity 1/20/28 (i) (j)  12/16/2021   4,215,447   4,145,874   4,215,447 
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 8.75% (LIBOR + 5.00%), maturity 9/23/25 (l)  9/26/2019   3,880,000   3,858,533   3,880,000 
RevSpring, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 10/11/25 (l)  10/5/2018   3,850,000   3,847,559   3,850,000 
Eliassen, Unitranche, 9.34% (SOFR + 5.75%), maturity 4/14/28  3/31/2022   3,370,370   3,316,568   3,361,944 
Veritext, Senior Secured Initial Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 8/1/25 (j)  8/14/2018   3,087,118   3,072,996   3,087,118 
Discovery Education, Unitranche, 9.34% (SOFR + 5.75%), maturity 3/10/29 (l)  3/25/2022   3,000,000   2,951,503   2,985,000 
Fleetwash, Senior Secured Incremental Term Loan, 8.34% (SOFR + 4.75%), maturity 10/1/24  9/25/2018   2,880,731   2,869,660   2,851,924 
The Facilities Group, Unitranche, 9.50% (LIBOR + 5.75%), maturity 11/30/27  12/10/2021   2,528,612   2,504,755   2,515,969 
CoolSys, Senior Secured Closing Date Initial Term Loan, 8.50% (LIBOR + 4.75%), maturity 8/11/28  8/4/2021   2,570,851   2,543,714   2,506,579 
Service Logic, Senior Secured Closing Date Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 10/29/27  10/23/2020   2,508,655   2,488,499   2,489,840 
Duff & Phelps, Senior Secured Initial Dollar Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 4/9/27 (j)  3/6/2020   2,443,750   2,427,789   2,363,769 
TRC Companies, Senior Secured Initial Term Loan (Second Lien), 10.50% (LIBOR + 6.75%), maturity 12/7/29  11/19/2021   2,000,000   1,980,000   1,985,000 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 6/19/24  6/30/2017   1,921,213   1,921,213   1,921,213 
Veregy, Senior Secured Initial Term Loan, 9.75% (LIBOR + 6.00%), maturity 11/3/27  11/2/2020   1,965,000   1,919,336   1,920,788 
Mediaocean, Senior Secured Initial Term Loan, 7.25% (LIBOR + 3.50%), maturity 12/15/28 (j)  12/9/2021   1,990,000   1,971,930   1,914,334 
ECi Software, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 11/9/27 (j)  9/17/2020   1,965,000   1,958,320   1,902,497 
Liberty Group, Unitranche, 9.34% (SOFR + 5.75%), maturity 6/15/28 (i)  6/6/2022   1,813,636   1,775,563   1,784,841 
Addison Group, Senior Secured Initial Term Loan, 7.84% (SOFR + 4.25%), maturity 12/29/28  1/19/2022   1,492,500   1,489,052   1,488,769 

 

The accompanying notes are an integral part of these financial statements.

 

6

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of September 30, 2022

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)   Acquisition Date  Par  Cost  Value  
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                
                 
Services: Business (continued)                
Insight Global, Unitranche, 9.75% (LIBOR + 6.00%), maturity 9/22/28  9/22/2021  $1,485,000  $1,457,270  $1,485,000 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 8.25% (LIBOR + 4.50%), PIK, maturity 6/29/26  3/26/2018   1,440,325   1,438,500   1,353,906 
First Advantage, Senior Secured Term B-1 Loan (First Lien), 6.50% (LIBOR + 2.75%), maturity 1/31/27 (j)  1/23/2020   1,100,312   1,091,039   1,079,760 
Veritext, Senior Secured Initial Term Loan (Second Lien), 10.75% (LIBOR + 7.00%), maturity 7/31/26 (j)  8/14/2018   1,000,000   997,127   1,000,000 
Vistage, Senior Secured Term Loan, 8.84% (SOFR + 5.25%), maturity 7/13/29  7/18/2022   1,000,000   972,911   992,500 
trustaff Management, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 3/6/28  12/9/2021   989,950   987,717   989,950 
TRC Companies, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 12/8/28  11/19/2021   995,000   990,510   987,538 
Divisions Maintenance Group, Senior Secured Term B Loan, 8.50% (LIBOR + 4.75%), maturity 5/27/28  5/21/2021   990,000   981,545   987,525 
Restaurant Technologies, Senior Secured Initial Term Loan, 7.84% (SOFR + 4.25%), maturity 4/2/29 (j)  3/17/2022   995,000   972,012   974,306 
WCG, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 1/8/27 (j)  12/13/2019   977,500   970,988   940,054 
eResearch (ERT), Senior Secured Initial Term Loan (First Lien), 8.25% (LIBOR + 4.50%), maturity 2/4/27 (j)  12/1/2020   982,418   982,418   933,483 
Diversified, Senior Secured Initial Term Loan, 8.59% (SOFR + 5.00%), maturity 12/23/23  4/19/2019   899,347   897,202   870,118 
Secretariat International, Senior Secured Initial Term Loan (First Lien), 8.50% (LIBOR + 4.75%), maturity 12/29/28  12/16/2021   843,625   839,065   839,407 
VC3, Unitranche, 6.29% (SOFR + 5.25%), maturity 3/12/27 (i)  9/16/2022   744,288   696,212   740,567 
Therma Holdings, Senior Secured Initial Term Loan (2021), 7.50% (LIBOR + 3.75%), maturity 12/16/27  12/11/2020   501,585   500,516   494,061 
System One, Senior Secured Initial Term Loan, 7.75% (LIBOR + 4.00%), maturity 3/2/28  1/28/2021   493,750   491,794   490,047 
Liberty Group, Senior Secured Revolving Loan, 3.75%, maturity 12/15/28 (i)  6/6/2022   22,727   18,182   22,366 
VC3, Senior Secured Revolving Credit, 6.29% (SOFR + 5.25%), maturity 3/12/27 (i)  7/21/2022   -   (2,692)  - 
Discovery Education, Senior Secured Revolving Facility, 9.34% (SOFR + 5.75%), maturity 4/7/28  3/25/2022   -   (4,038)  - 
                 
High Tech Industries                
Qlik, Senior Secured 2021 Refinancing Term Loan, 7.75% (LIBOR + 4.00%), maturity 4/26/24 (j) (l)  3/29/2019   3,871,050   3,860,976   3,778,485 
Golden Source, Unitranche, 9.09% (SOFR + 5.50%), maturity 5/12/28 (i) (j)  3/25/2022   3,474,178   3,398,502   3,420,960 
Netsmart, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 10/1/27 (j)  9/29/2020   3,447,500   3,435,972   3,343,846 
Jaggaer, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 8/14/26 (j)  8/9/2019   3,067,383   3,064,120   2,997,132 
Infogroup, Senior Secured Term Loan (First Lien), 8.75% (LIBOR + 5.00%), maturity 4/3/23  3/28/2017   2,837,368   2,832,511   2,823,182 
Planview, Senior Secured Closing Date Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 12/17/27 (j)  12/11/2020   2,612,348   2,589,593   2,534,165 
Ivanti Software, Senior Secured 2021 Specified Refinancing Term Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 12/1/27 (j)  11/20/2020   2,970,075   2,937,450   2,482,661 
Idera, Senior Secured Term B-1 Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 3/2/28 (j)  6/27/2017   2,579,675   2,579,489   2,456,532 
PracticeTek, Unitranche, 9.25% (LIBOR + 5.50%), maturity 11/23/27 (i)  11/22/2021   2,391,729   2,334,599   2,319,738 
Precisely, Senior Secured Third Amendment Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 4/24/28 (j)  3/19/2021   2,475,000   2,463,100   2,305,261 
Flexera Software, Senior Secured Term B-1 Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 3/3/28 (j)  2/16/2020   2,364,197   2,364,197   2,285,864 
Barracuda, Senior Secured Second Lien Term Loan, 10.59% (SOFR + 7.00%), maturity 8/15/30  5/17/2022   2,000,000   1,940,000   1,985,000 
QuickBase, Senior Secured Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 4/2/26  3/29/2019   1,935,000   1,930,042   1,915,650 
Sophos, Senior Secured Dollar Tranche Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 3/5/27 (j) (m)  1/16/2020   1,955,021   1,877,724   1,903,494 
HelpSystems, Senior Secured Term Loan, 7.75% (LIBOR + 4.00%), maturity 11/19/26 (j)  12/19/2019   1,974,790   1,968,631   1,881,787 
Intermedia , Senior Secured New Term Loan (First Lien), 9.75% (LIBOR + 6.00%), maturity 7/21/25  7/13/2018   1,925,000   1,918,268   1,881,688 
MediaRadar, Unitranche, 9.34% (SOFR + 5.75%), maturity 6/1/29 (i) (j)  5/23/2022   1,837,037   1,791,111   1,783,704 
Bomgar, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 4/18/25  5/25/2018   1,614,897   1,619,803   1,610,859 
OEConnection, Senior Secured Initial Term Loan, 7.75% (LIBOR + 4.00%), maturity 9/25/26  9/24/2019   1,596,339   1,592,105   1,588,358 
Digital Room, Senior Secured Closing Date Term Loan (First Lien), 9.00% (LIBOR + 5.25%), maturity 12/21/28  12/16/2021   1,492,500   1,478,876   1,477,575 
Navex Global, Senior Secured Initial Term Loan (First Lien), 7.00% (LIBOR + 3.25%), maturity 9/5/25  8/15/2018   1,440,000   1,432,395   1,440,000 
WellSky, Senior Secured Incremental Term B-1 Loan (First Lien), 6.79% (SOFR + 5.75%), maturity 3/10/28  8/16/2022   1,000,000   970,441   992,500 
SmartBear, Senior Secured Initial Term Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 3/3/28  11/20/2020   987,500   979,131   985,031 
Imperva, Senior Secured Term Loan, 7.75% (LIBOR + 4.00%), maturity 1/12/26  9/23/2020   978,510   972,330   951,601 
ORBCOMM, Senior Secured Closing Date Term Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 9/1/28  6/17/2021   990,000   985,484   950,400 
Infoblox, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 12/1/27 (j)  10/7/2020   987,500   983,875   921,993 
Cloudera, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 10/8/28  8/10/2021   497,500   493,043   495,013 
Barracuda, Senior Secured First Lien Term Loan, 8.09% (SOFR + 4.50%), maturity 8/15/29 (j)  5/17/2022   500,000   485,000   480,308 
DigiCert, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 10/16/26 (j)  3/13/2020   487,500   469,145   471,888 
Golden Source, Senior Secured Revolving Credit, 9.09% (SOFR + 5.50%), maturity 5/12/28 (i) (j)  8/22/2022   35,211   25,822   34,672 
MediaRadar, Senior Secured Revolving Loan, 9.34% (SOFR + 5.75%), maturity 6/1/29 (i) (j)  9/16/2022   -   (7,407)  - 
PracticeTek, Senior Secured Revolving Loan, 9.25% (LIBOR + 5.50%), maturity 11/23/27 (i)  11/22/2021   -   (7,156)  - 
                 
Containers, Packaging & Glass                
InMark, Unitranche, 9.75% (LIBOR + 6.00%), maturity 12/23/26 (i)  12/10/2021   6,436,225   6,319,560   6,436,225 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 5/30/24  5/11/2017   3,326,837   3,321,790   3,235,349 
Brook & Whittle, Senior Secured Initial Term Loan (First Lien), 7.59% (SOFR + 4.00%), maturity 12/14/28  12/9/2021   3,139,165   3,115,175   3,131,317 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 7/18/26  7/17/2019   2,497,197   2,488,772   2,484,711 
Packaging Coordinators, Senior Secured Term B Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 11/30/27 (j)  9/25/2020   2,450,157   2,442,886   2,375,097 
Paragon Films, Senior Secured Closing Date Term Loan (First Lien), 8.75% (LIBOR + 5.00%), maturity 12/16/28  12/15/2021   1,990,000   1,970,451   1,975,075 
Intertape Polymer, Senior Secured Initial Term Loan (First Lien), 8.09% (SOFR + 4.50%), maturity 6/28/28 (j)  6/15/2022   2,000,000   1,923,769   1,883,805 
Resource Label Group, Senior Secured Closing Date Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 7/7/28  7/2/2021   1,865,649   1,857,279   1,865,649 
TricorBraun, Senior Secured Closing Date Initial Term Loan (First Lien), 7.00% (LIBOR + 3.25%), maturity 3/3/28 (j)  1/29/2021   1,814,977   1,807,220   1,744,569 
Potters Industries, Senior Secured Initial Term Loan, 7.75% (LIBOR + 4.00%), maturity 12/14/27  11/19/2020   1,477,500   1,466,634   1,466,419 
Technimark, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 7/7/28  6/30/2021   1,481,250   1,474,829   1,455,328 
Tekni-Plex, Senior Secured Tranche B-3 Initial Term Loan, 7.75% (LIBOR + 4.00%), maturity 9/15/28 (j)  7/29/2021   1,078,270   1,076,017   1,041,507 
Lacerta, Senior Secured Term Loan, 9.25% (LIBOR + 5.50%), maturity 12/30/26  2/8/2021   982,500   974,128   975,131 
Novolex, Senior Secured Term B Loan (First Lien), 7.84% (SOFR + 4.25%), maturity 4/13/29 (j)  3/30/2022   997,500   974,517   959,073 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 7/31/26 (j)  7/25/2019   972,500   971,081   941,138 
Applied Adhesives, Senior Secured Term A Loan, 8.75% (LIBOR + 5.00%), maturity 3/12/27  3/12/2021   594,664   589,774   593,178 
Five Star Holding Corp, Senior Secured Initial Term Loan (First Lien), 7.84% (SOFR + 4.25%), maturity 5/5/29  4/27/2022   500,000   492,859   496,250 
Pregis Corporation, Senior Secured Third Amendment Refinancing Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 7/31/26  12/9/2020   495,000   493,188   492,525 
Golden West Packaging, Senior Secured Initial Term Loan, 9.00% (LIBOR + 5.25%), maturity 12/1/27  11/29/2021   493,750   489,286   492,516 
Applied Adhesives, Senior Secured Revolving Loan, 8.75% (LIBOR + 5.00%), maturity 3/12/27  3/12/2021   -   (616)  - 

 

The accompanying notes are an integral part of these financial statements.

 

7

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of September 30, 2022

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)   Acquisition Date  Par  Cost  Value  
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                
                 
Banking, Finance, Insurance & Real Estate                
Cerity, Senior Secured Delayed Draw Term Loan, 9.34% (SOFR + 5.75%), maturity 5/31/29 (i) (j)  7/28/2022  $4,200,717  $4,130,085  $4,116,703 
Confluence, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 7/31/28  7/22/2021   3,970,000   3,950,985   3,930,300 
Ascensus, Senior Secured Initial Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 8/2/28  11/17/2021   2,985,000   2,972,244   2,955,150 
Cherry Bekaert, Unitranche, 9.09% (SOFR + 5.50%), maturity 6/30/28 (i)  6/13/2022   3,013,162   2,930,912   2,932,660 
EPIC Insurance, Unitranche, 9.00% (LIBOR + 5.25%), maturity 9/29/28  8/27/2021   2,280,897   2,247,906   2,269,492 
American Beacon Advisors, Senior Secured Tranche D Term Loan (Second Lien), 11.75% (LIBOR + 8.00%), maturity 4/30/25  10/31/2017   2,117,133   2,122,022   2,111,840 
BETA, Senior Secured Revolving Credit Facility, 8.84% (SOFR + 5.25%), maturity 7/1/27 (j)  6/24/2022   2,000,000   1,960,479   1,960,000 
Kestra Financial, Senior Secured Initial Term Loan, 8.00% (LIBOR + 4.25%), maturity 6/3/26  4/29/2019   1,940,000   1,928,890   1,930,300 
Orion, Senior Secured 2021 Refinancing Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 9/24/27 (j)  8/4/2020   1,473,806   1,461,056   1,416,818 
Alera, Unitranche, 10.09% (SOFR + 6.50%), maturity 10/2/28  8/31/2022   1,333,333   1,253,716   1,323,333 
SIAA, Unitranche, 10.00% (LIBOR + 6.25%), maturity 4/28/28  4/21/2021   1,163,701   1,145,332   1,163,701 
Advisor Group, Senior Secured Term B-1 Loan, 8.25% (LIBOR + 4.50%), maturity 7/31/26 (j)  1/31/2020   1,021,555   1,020,519   990,784 
Community Brands, Senior Secured Initial Term Loan, 9.34% (SOFR + 5.75%), maturity 2/24/28  2/23/2022   995,000   974,172   990,025 
LERETA, Senior Secured Initial Term Loan, 9.00% (LIBOR + 5.25%), maturity 7/30/28  7/27/2021   990,000   980,976   980,100 
Sedgwick Claims, Senior Secured Initial Term Loan, 7.00% (LIBOR + 3.25%), maturity 12/31/25 (j)  2/12/2020   486,111   485,712   471,634 
EdgeCo, Senior Secured Third Amendment Term Loan, 8.50% (LIBOR + 4.75%), maturity 6/1/26  3/29/2022   298,500   276,351   296,261 
Integro, Senior Secured Initial Term Loan (First Lien), 8.09% (SOFR + 4.50%), PIK, maturity 5/8/23  10/9/2015   228,698   232,323   228,698 
Cherry Bekaert, Senior Secured Revovling Credit, 3.75%, maturity 6/30/28 (i)  8/1/2022   61,647   61,647   60,000 
EPIC Insurance, Senior Secured Revolving Loan, 9.00% (LIBOR + 5.25%), maturity 9/30/27  8/27/2021   -   (269)  - 
BETA, Senior Secured Revolving Credit Facility, 8.84% (SOFR + 5.25%), maturity 7/1/27 (j)  6/24/2022   -   (6,216)  - 
                 
Capital Equipment                
Tank Holding, Unitranche, 9.59% (SOFR + 6.00%), maturity 3/31/28 (l)  3/25/2022   3,990,000   3,914,974   3,980,025 
FloWorks, Senior Secured Initial Term Loan (First Lien), 9.34% (SOFR + 5.75%), maturity 12/27/28  12/27/2021   3,990,000   3,862,500   3,970,050 
Plaskolite, Senior Secured 2021-1 Refinancing Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 12/15/25 (j)  12/12/2018   3,851,350   3,814,513   3,595,613 
Excelitas, Senior Secured Initial Euro Term Loan, 9.50% (Other + 5.75%), maturity 8/12/29  6/15/2022   2,969,565   3,011,498   2,947,293 
Burke Porter Group, Unitranche, 9.59% (SOFR + 6.00%), maturity 7/30/29  9/30/2022   2,333,333   2,269,207   2,315,833 
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 9/30/24  4/20/2018   2,037,185   2,037,185   2,037,185 
Flow Control Group, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 3/31/28 (j)  3/17/2021   1,670,433   1,668,036   1,619,688 
Radwell, Unitranche, 9.34% (SOFR + 5.75%), maturity 4/1/29  3/11/2022   1,496,250   1,472,466   1,485,028 
Edward Don, Senior Secured Initial Term Loan, 8.00% (LIBOR + 4.25%), maturity 7/2/25  6/26/2018   1,370,943   1,369,071   1,340,096 
Cleaver Brooks, Senior Secured Initial Term Loan, 9.34% (SOFR + 5.75%), maturity 7/18/28  7/18/2022   1,000,000   980,291   992,500 
Therm-O-Disc, Senior Secured Initial Term Loan (First Lien), 9.59% (SOFR + 6.00%), maturity 5/31/29  5/26/2022   1,000,000   923,622   992,500 
TriMark, Senior Secured Second Amendment Tranche B Loan (Super Senior priority), 7.25% (LIBOR + 3.50%), maturity 8/28/24  1/31/2022   966,053   966,053   685,898 
Culligan, Senior Secured 2022 Refinancing Term B Loan, 7.75% (LIBOR + 4.00%), maturity 7/31/28 (j)  6/17/2021   561,094   558,315   534,896 
Infinite Electronics, Senior Secured Initial Term Loan (First Lien), 7.00% (LIBOR + 3.25%), maturity 3/2/28  2/24/2021   493,750   492,775   492,516 
Duravant, Senior Secured Incremental Amendment No. 5 Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 5/19/28 (j)  3/5/2020   488,731   488,731   473,435 
SPX Flow, Senior Secured Term Loan, 8.09% (SOFR + 4.50%), maturity 4/5/29 (j)  3/18/2022   500,000   478,570   473,085 
Burke Porter Group, Senior Secured Revolving Credit Loan, 7.04% (SOFR + 6.00%), maturity 7/31/28  8/11/2022   25,658   15,262   25,465 
Cleaver Brooks, Senior Secured Revolving Credit, 9.59% (SOFR + 6.00%), maturity 7/18/28  7/21/2022   24,615   22,154   24,431 
Tank Holding, Senior Secured Revolving Credit Loan, 9.59% (SOFR + 6.00%), maturity 3/31/28  3/25/2022   -   (2,954)  - 
Radwell, Senior Secured Revolving Loan, 9.34% (SOFR + 5.75%), maturity 4/1/28  3/11/2022   -   (1,200)  - 
                 
Aerospace & Defense                
CPI International, Senior Secured Second Amendment Incremental Term Loan (First Lien), 8.50% (LIBOR + 4.75%), maturity 7/26/24  10/1/2019   5,182,544   5,148,694   5,182,544 
HDT Global, Senior Secured Initial Term Loan, 9.50% (LIBOR + 5.75%), maturity 7/8/27  6/30/2021   3,281,250   3,186,403   3,223,828 
StandardAero, Senior Secured 2020 Term B-1 Loan, 7.25% (LIBOR + 3.50%), maturity 4/6/26 (j)  1/24/2019   3,246,057   3,240,881   3,102,803 
CPI International, Senior Secured Term Loan, 9.09% (SOFR + 5.50%), maturity 4/14/30 (j)  5/18/2022   3,000,000   2,940,000   2,940,000 
Amentum, Senior Secured Tranche 3 Term Loan (First Lien), 7.59% (SOFR + 4.00%), maturity 2/15/29  2/10/2022   1,995,000   1,985,157   1,995,000 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 11.50% (LIBOR + 7.75%), maturity 4/30/26  5/10/2018   2,000,000   2,005,934   1,935,000 
Whitcraft, Unitranche, 9.75% (LIBOR + 6.00%), maturity 4/3/23  3/6/2020   1,947,357   1,940,973   1,884,068 
StandardAero, Senior Secured 2020 Term B-2 Loan, 7.25% (LIBOR + 3.50%), maturity 4/6/26 (j)  1/24/2019   1,745,192   1,742,409   1,668,174 
Tronair, Senior Secured Initial Term Loan (First Lien), 9.50% (LIBOR + 5.75%), PIK, maturity 9/8/23  9/30/2016   1,351,670   1,350,181   1,297,603 
Amentum, Senior Secured Tranche 1 Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 1/29/27 (j)  1/24/2020   977,500   956,475   951,940 
Peraton, Senior Secured Term B Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 2/1/28 (j)  2/23/2021   967,112   963,216   937,411 
API Technologies, Senior Secured Initial Term Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 5/9/26  1/15/2020   972,362   952,452   899,435 
BlueHalo, Unitranche, 9.75% (LIBOR + 6.00%), maturity 10/31/25  11/17/2021   495,268   488,531   490,315 
Novaria Group, Senior Secured Initial Term Loan, 9.25% (LIBOR + 5.50%), maturity 1/27/27  1/24/2020   481,818   478,577   472,182 
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 4/30/25  7/18/2019   484,287   482,841   464,915 
BlueHalo, Senior Secured Revolving Loan, 9.75% (LIBOR + 6.00%), maturity 10/31/25  11/17/2021   54,502   53,013   53,957 
                 
Chemicals, Plastics & Rubber                
DuBois Chemicals, Senior Secured Term Loan (Second Lien) - 2019, 12.25% (LIBOR + 8.50%), maturity 9/30/27  10/8/2019   3,000,000   2,980,225   2,985,000 
Vertellus, Senior Secured Initial Term Loan, 9.34% (SOFR + 5.75%), maturity 12/22/27  12/18/2020   2,970,056   2,907,656   2,925,505 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 7.00% (LIBOR + 3.25%), maturity 1/31/25  1/26/2018   2,607,150   2,612,132   2,577,820 
Unifrax, Senior Secured USD Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 12/12/25 (j)  11/5/2018   2,407,456   2,388,825   2,240,042 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 10.50% (LIBOR + 6.75%), maturity 9/6/26  8/16/2018   2,000,000   2,001,447   1,995,000 
USALCO, Unitranche, 9.75% (LIBOR + 6.00%), maturity 10/19/27  10/26/2021   1,968,871   1,950,959   1,949,182 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 8.25% (LIBOR + 4.50%), maturity 9/30/26  10/8/2019   1,763,820   1,737,006   1,750,591 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 10/28/24 (j)  11/30/2018   959,698   951,849   934,568 
Ascensus Specialties, Senior Secured Initial Term Loan, 8.00% (LIBOR + 4.25%), maturity 6/30/28  12/3/2021   494,978   486,478   491,265 
Polytek, Senior Secured Term Loan, 9.34% (SOFR + 5.75%), maturity 9/20/24  12/23/2020   491,359   486,659   471,705 
Boyd Corp, Senior Secured Initial Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 9/6/25 (j)  11/7/2018   488,550   467,800   463,840 
USALCO, Senior Secured Revolving Loan, 9.75% (LIBOR + 6.00%), maturity 10/19/26  10/26/2021   161,290   158,065   159,677 
Vertellus, Senior Secured Revolving Credit Loan, 9.75% (LIBOR + 6.00%), maturity 12/22/25  12/18/2020   67,817   57,485   66,800 

 

The accompanying notes are an integral part of these financial statements.

 

8

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of September 30, 2022

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)   Acquisition Date  Par  Cost  Value  
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                
                 
Services: Consumer                
Ned Stevens, Unitranche, 9.59% (SOFR + 6.00%), maturity 7/2/29 (i) (j)  6/22/2022  $3,781,954  $3,721,882  $3,781,954 
Weld North, Senior Secured 2021 Term Loan, 7.50% (LIBOR + 3.75%), maturity 12/21/27 (j)  12/21/2020   2,402,083   2,402,083   2,339,565 
A Place For Mom, Senior Secured Term Loan, 8.25% (LIBOR + 4.50%), maturity 2/10/26  7/28/2017   2,214,843   2,214,822   2,192,694 
Smart Start, Senior Secured Term B Loan (Second Lien), 11.50% (LIBOR + 7.75%), maturity 12/16/29  12/10/2021   2,000,000   1,966,000   1,977,500 
Smart Start, Senior Secured Term B Loan (First Lien), 8.25% (LIBOR + 4.50%), maturity 12/16/28  12/10/2021   1,985,000   1,970,607   1,962,669 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 6.75% (LIBOR + 3.00%), maturity 5/14/26 (j)  5/8/2019   1,528,610   1,527,146   1,490,014 
FullBloom, Senior Secured Initial Term Loan (First Lien), 7.84% (SOFR + 4.25%), maturity 12/15/28  12/10/2021   1,496,250   1,482,561   1,481,288 
Teaching Strategies, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 8/31/28  8/19/2021   992,500   983,046   992,500 
Spring Education, Senior Secured Initial Term Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 7/30/25 (j)  7/26/2018   960,000   958,882   922,243 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 9.25% (LIBOR + 5.50%), maturity 5/9/25  5/4/2018   607,811   604,170   607,811 
Ned Stevens, Senior Secured Revolving Credit, 9.59% (SOFR + 6.00%), maturity 6/30/28 (i) (j)  6/22/2022   36,311   32,226   36,311 
                 
Transportation: Cargo                
Evans Network, Senior Secured Initial Term Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 8/19/28  8/6/2021   3,636,735   3,600,503   3,636,735 
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 10/12/24 (j)  11/20/2018   3,544,010   3,541,904   3,442,851 
Capstone Logistics, Senior Secured Closing Date Term Loan (First Lien), 8.50% (LIBOR + 4.75%), maturity 11/12/27  11/12/2020   2,100,985   2,084,006   2,100,985 
AIT Worldwide Logistics, Senior Secured Initial Term Loan (First Lien), 8.50% (LIBOR + 4.75%), maturity 4/6/28  12/9/2021   1,980,000   1,975,496   1,980,000 
St. George Logistics, Senior Secured Initial Term Loan, 9.59% (SOFR + 6.00%), maturity 3/24/28  4/28/2022   1,492,500   1,471,013   1,492,500 
Worldwide Express, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 7/26/28 (j)  7/23/2021   1,488,750   1,478,601   1,405,254 
FLS Transportation, Senior Secured Term B Loan, 9.00% (LIBOR + 5.25%), maturity 12/18/28  4/14/2022   1,217,391   1,205,986   1,217,391 
Omni Logistics, Senior Secured Initial Term Loan (First Lien), 8.75% (LIBOR + 5.00%), maturity 12/30/26  11/24/2021   1,151,124   1,140,227   1,148,246 
Magnate, Senior Secured Initial Term Loan (First Lien), 9.25% (LIBOR + 5.50%), maturity 12/29/28  3/11/2022   921,607   904,466   921,607 
FLS Transportation, Senior Secured Revolving Loan, 9.00% (LIBOR + 5.25%), maturity 12/17/27  4/14/2022   -   (889)  - 
Omni Logistics, Senior Secured Revolving Credit Loan (First Lien), 8.75% (LIBOR + 5.00%), maturity 12/30/25  11/24/2021   -   (1,119)  - 
                 
Beverage, Food & Tobacco                
Bettcher Industries, Senior Secured Initial Term Loan (Second Lien), 10.84% (SOFR + 7.25%), maturity 12/14/29  12/13/2021   2,500,000   2,476,834   2,450,000 
Sovos Brands, Senior Secured Initial Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 6/8/28 (j)  6/8/2021   2,033,001   2,033,001   1,962,657 
Bettcher Industries, Senior Secured Initial Term Loan (First Lien), 7.59% (SOFR + 4.00%), maturity 12/14/28  12/13/2021   1,990,000   1,970,000   1,950,200 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 8/25/25  8/22/2018   1,920,000   1,916,173   1,881,600 
Hissho Sushi, Unitranche, 9.59% (SOFR + 6.00%), maturity 5/18/28 (i)  4/7/2022   1,852,500   1,814,903   1,821,156 
Dessert Holdings, Senior Secured Initial Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 6/9/28  6/7/2021   1,485,000   1,475,104   1,468,294 
Monogram Foods, Senior Secured Initial Term Loan, 7.75% (LIBOR + 4.00%), maturity 8/28/28  8/13/2021   992,500   983,488   975,131 
Hissho Sushi, Senior Secured Revolving Credit Loan, 9.59% (SOFR + 6.00%), maturity 5/18/28 (i)  4/7/2022   9,524   8,857   9,363 
                 
Automotive                
BBB Industries, Senior Secured Initial Term Loan (First Lien), 6.29% (SOFR + 5.25%), maturity 7/25/29 (i) (j)  6/30/2022   3,000,000   2,704,515   2,830,138 
Highline, Senior Secured Initial Term Loan (First Lien), 8.25% (LIBOR + 4.50%), maturity 11/9/27  10/29/2020   2,820,682   2,763,588   2,729,010 
Rough Country, Senior Secured Initial Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 7/28/28  7/26/2021   1,975,000   1,970,521   1,965,125 
Truck Hero, Senior Secured Initial Term Loan, 7.25% (LIBOR + 3.50%), maturity 1/31/28 (j)  1/20/2021   1,477,500   1,477,500   1,334,169 
IXS, Senior Secured Initial Term Loan, 8.00% (LIBOR + 4.25%), maturity 3/5/27  2/27/2020   788,197   786,954   693,613 
Safe Fleet, Senior Secured Initial Term Loan (Second Lien), 10.34% (SOFR + 6.75%), maturity 2/2/26  2/23/2022   500,000   500,000   497,500 
Wheel Pros, Senior Secured Initial Term Loan (First Lien), 8.25% (LIBOR + 4.50%), maturity 5/11/28 (j)  4/23/2021   495,000   491,073   387,319 
                 
Construction & Building                
Tangent, Senior Secured Closing Date Term Loan (First Lien), 8.50% (LIBOR + 4.75%), maturity 11/30/27  10/2/2019   1,781,392   1,773,773   1,763,578 
PlayPower, Senior Secured Initial Term Loan, 9.25% (LIBOR + 5.50%), maturity 5/8/26  5/10/2019   1,742,333   1,742,333   1,620,370 
PlayCore, Senior Secured Initial Term Loan (Second Lien), 11.50% (LIBOR + 7.75%), maturity 9/29/25  2/7/2020   1,500,000   1,479,390   1,500,000 
Dodge Construction Network, Senior Secured Initial Term Loan (First Lien), 8.34% (SOFR + 4.75%), maturity 2/23/29  2/10/2022   997,500   983,689   997,500 
PlayCore, Senior Secured Initial Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 9/30/24  9/18/2017   949,429   948,408   949,429 
Specialty Products & Insulation, Senior Secured Tranche B-1 Term Loan, 8.84% (SOFR + 5.25%), maturity 12/21/27  3/16/2022   894,492   886,120   892,256 
Acuren, Senior Secured Initial Term Loan, 8.00% (LIBOR + 4.25%), maturity 1/23/27  1/17/2020   475,026   473,472   475,026 
Hoffman Southwest, Senior Secured Initial Term Loan, 9.25% (LIBOR + 5.50%), maturity 8/14/23  5/16/2019   428,365   430,679   427,294 
                 
Consumer Goods: Non-durable                
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 11/21/23  11/9/2016   2,374,872   2,372,736   2,279,877 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 8.25% (LIBOR + 4.50%), maturity 10/26/23  11/2/2016   2,001,028   1,997,219   1,991,023 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 8.25% (LIBOR + 4.50%), maturity 9/11/23  9/29/2016   1,877,887   1,874,758   1,873,193 
Hoffmaster Group, Senior Secured Initial Term Loan (Second Lien), 13.25% (LIBOR + 9.50%), maturity 11/21/24  2/7/2020   1,250,000   1,250,000   1,209,375 
                 
Environmental Industries                
Alliance Environmental Group, Unitranche, 9.75% (LIBOR + 6.00%), maturity 12/30/27 (i)  12/30/2021   4,094,205   4,020,464   3,975,064 
Denali Water Solutions, Senior Secured Closing Date Term Loan, 8.00% (LIBOR + 4.25%), maturity 3/27/28  3/18/2021   1,975,000   1,956,874   1,950,313 
Keter Environmental Services, Unitranche, 10.25% (LIBOR + 6.50%), maturity 10/29/27  11/5/2021   496,250   491,771   492,528 
Denali Water Solutions, Senior Secured Amendment No. 3 Term Loan, 8.22% (SOFR + 4.63%), maturity 3/27/28  5/5/2022   498,750   482,068   492,516 
Alliance Environmental Group, Senior Secured Revolving Loan, 9.75% (LIBOR + 6.00%), maturity 12/30/27 (i)  12/30/2021   149,007   142,384   144,671 
Keter Environmental Services, Unitranche, 10.25% (LIBOR + 6.50%), maturity 10/29/27  11/5/2021   13,680   12,905   13,577 
                 
Wholesale                
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 6.75% (LIBOR + 3.00%), maturity 3/20/25 (l)  3/16/2018   3,819,731   3,820,324   3,776,759 
                 
Media: Diversified & Production                
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 2/9/26 (j)  1/16/2019   2,902,348   2,889,448   2,858,054 

 

The accompanying notes are an integral part of these financial statements.

 

9

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of September 30, 2022

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)   Acquisition Date  Par  Cost  Value  
BANK LOANS:  NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                
                 
Hotels, Gaming & Leisure                
Northstar, Senior Secured Term Loan, 7.38% (LIBOR + 3.63%) cash, 1.00% PIK maturity 6/7/24  5/8/2017  $1,312,848  $1,312,848  $1,270,180 
Auto Europe, Senior Secured Initial Dollar Term Loan, 8.75% (LIBOR + 5.00%), maturity 10/21/23  10/19/2016   1,119,231   1,116,737   895,385 
                 
Metals & Mining                
Dynatect, Senior Secured Term B Loan, 8.25% (LIBOR + 4.50%), maturity 9/30/24  8/16/2019   1,900,034   1,889,504   1,900,034 
                 
Forest Products & Paper                
Loparex, Senior Secured Initial Term Loan (First Lien), 8.25% (LIBOR + 4.50%), maturity 7/31/26  7/29/2019   1,455,000   1,446,244   1,455,000 
                 
Utilities: Electric                
Systems Control, Senior Secured Initial Term Loan, 8.50% (LIBOR + 4.75%), maturity 3/28/25  6/15/2021   1,479,355   1,477,515   1,449,768 
                 
Retail                
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 7.25% (LIBOR + 3.50%), maturity 12/16/24 (j)  10/17/2018   959,738   963,055   922,085 
StubHub, Senior Secured USD Term B Loan, 7.25% (LIBOR + 3.50%), maturity 2/12/27 (j)  1/31/2020   486,250   484,654   442,360 
                 
Media: Advertising, Printing & Publishing                
Ansira, Unitranche, 10.25% (LIBOR + 6.50%) PIK, maturity 12/20/24  12/20/2016   2,271,632   2,268,262   999,518 
                 
Utilities: Water                
Aegion, Senior Secured Initial Term Loan, 8.50% (LIBOR + 4.75%), maturity 5/17/28  4/1/2021   989,999   985,795   982,574 
                 
Energy: Electricity                
Franklin Energy, Senior Secured Term B Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 8/14/26  8/14/2019   970,000   968,390   953,025 
                 
Consumer Goods: Durable                
Careismatic Brands, Senior Secured Initial Term Loan (First Lien), 7.00% (LIBOR + 3.25%), maturity 1/6/28  1/22/2021   493,750   492,650   474,000 
Total Bank Loans         $440,936,825  $434,592,673 

 

Portfolio Investments (a) (b) (c) (d) (e) (f)   Acquisition Date  Par  Cost  Value  
EQUITY AND PREFERRED SHARES:  NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.7%)(g)(h):                
                 
Services: Business                
InnovateMR, Class A Units (387,311 Class A Units, Fair value of $535,116) (i) (j) (n) (o)  12/16/2021      $387,311  $535,116 
Liberty Group, Series A-Preferred Units (113,636 Series A-Preferred Units, Fair value of $123,684) (i) (j) (n) (p)  6/6/2022       113,636   123,684 
VC3, Class A Units (29,846 Class A Units, Fair value of $29,846) (i) (n) (q)  9/16/2022       29,846   29,846 
               
High Tech Industries                
PracticeTek, Class A Units (347,322 Class A Units, Fair value of $379,979) (i) (n) (r)  11/22/2021       377,255   379,979 
Golden Source, Class A Units (117,371 Class A Units, Fair value of $153,755) (i) (j) (n) (s)  3/25/2022       117,371   153,755 
MediaRadar, Class A-1 Units (74,074 Class A-1 Units, Fair value of $74,074) (i) (j) (n) (t)  9/16/2022       74,074   74,074 
               
Services: Consumer                
Ned Stevens, Class B Common Units (261,438 Common B Units, Fair value of $489,507) (i) (n) (u) (v)  9/30/2019       261,438   489,507 
               
Environmental Industries                
Alliance Environmental Group, A-1 Preferred Units (331,126 A-1 Preferred Units, Fair value of $326,198) (i) (n) (w)  9/30/2019       331,126   326,198 
               
Healthcare & Pharmaceuticals                
RevHealth, Class A-1 Units (205,479 Class A-1 Units, Fair value of $205,479) (i) (n) (x)  7/22/2022       205,479   205,479 
Ivy Rehab, Class A Units (100 Class A Units, Fair value of $75,426) (i) (n) (y)  3/11/2022       100,000   75,426 
                 
Chemicals, Plastics & Rubber                
Vertellus, Series A Units (1,651 Series A Units, Fair value of $259,368) (i) (n) (v) (z)  12/22/2020       165,138   259,368 
               
Beverage, Food & Tobacco                
Hissho Sushi, Class A Units (25,000 Class A Units, Fair value of $251,404) (i) (j) (n) (aa)  4/7/2022       250,000   251,404 
               
Banking, Finance, Insurance & Real Estate                
Cherry Bekaert, Class A Units (129,870 Class A Units, Fair value of $145,091) (i) (n) (ab)  6/30/2022       129,870   145,091 
Total Equity and Preferred Shares         $2,542,544  $3,048,928 
               
Total Portfolio Investments (ac)         $443,479,369  $437,641,601 

 

(a)All companies are located in the United States of America, unless otherwise noted.
(b)Interest rate percentages represent actual interest rates as of September 30, 2022, which are indexed to the noted reference rate.

The referenced rates are subject to interest floors which can vary based on contractual agreements with the borrower.

(c)All loans are income-producing, unless otherwise noted.
(d)All investments are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act") unless otherwise noted.
(e)All investments are exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act.
(f)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(g)Percentages are calculated using fair value of investments over net assets.
(h)As defined in 1940 Act, the Company is not deemed to be an “Affiliated Person” of or “Control” this portfolio company because it neither owns 5% or  more of the portfolio company’s outstanding voting securities nor has the power to exercise control over the management or policies of such portfolio company (including through a management agreement).
(i)Three of our affiliated funds, Audax Direct Lending Solutions Fund - A, L.P., Audax Direct Lending Solutions Fund - C, L.P., and Audax Direct Lending Solutions Fund - D, L.P., 'co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(j)Investment was valued using Level 2 inputs within the ASC 820 fair value hierarchy.  Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(k)The borrower for UDG Healthcare, Congachant Limited, is located in Ireland.
(l)All or portion of this security has an open position related to short-term borrowings, as described in footnote 8.
(m)The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.
(n)Investment is non-income producing.
(o)Represents an investment in APD INN Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(p)Represents an investment in APD TLG Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(q)Represents an investment in APD VC3 Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(r)Represents an investment in APD Ptek Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(s)Represents an investment in APD Gol Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(t)Represents an investment in APD MDR Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(u)Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(v)Other net assets of $0 at the aggregator levels are included in the fair value of the investments when using the net asset value as a practical expedient.
(w)Represents an investment in APD AEG Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(x)Represents an investment in APD RH Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(y)Represents an investment in APD IVY Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(z)Represents an investment in ADP VERT Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(aa)Represents an investment in APD Sush Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ab)Represents an investment in APD CBA Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(ac)At September 30, 2022, the cost of investments for income tax purposes was $443,479,369, the gross unrealized depreciation for federal tax purposes was $8,320,565, the gross unrealized appreciation for federal income tax purposes was $2,482,797, and the net unrealized depreciation was $5,837,768.

 

The accompanying notes are an integral part of these financial statements.

 

10

 

 

Audax Credit BDC Inc.
Schedule of Investments
As of December 31, 2021
(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (107.4%)(g)(h):                  
                   
Healthcare & Pharmaceuticals                  
Radiology Partners, Senior Secured Term B Loan (First Lien), 4.46% (Libor + 4.25%), maturity 7/9/25 (i)   6/28/2018  $4,215,792   $4,353,545   $4,168,783 
Advarra, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/26  6/26/2019   4,145,626    4,117,204    4,145,626 
Young, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/7/24  11/6/2017   3,755,525    3,748,227    3,717,970 
American Vision Partners, Senior Secured Term Loan, 6.50% (Libor + 5.75%), maturity 9/30/27 (i)(k)   9/22/2021   3,537,645    3,473,547    3,475,319 
InHealth Medical Alliance, Senior Secured Initial Term Loan, 7.00% (Libor + 6.00%), maturity 6/28/28  6/25/2021   3,491,250    3,457,150    3,377,784 
PharMedQuest, Senior Secured Initial Term Loan, 6.75% (Libor + 5.75%), maturity 10/31/24 (k)   11/6/2019   3,290,898    3,262,290    3,266,217 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 3/14/25 (i)   5/30/2018   3,239,110    3,251,658    3,169,814 
Waystar, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 10/22/26 (i)   9/19/2019   2,949,975    2,942,792    2,955,024 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.75%) PIK, maturity 8/18/23  8/18/2016   2,860,384    2,847,320    2,831,780 
Zelis RedCard, Senior Secured Term B-1 Loan, 3.71% (Libor + 3.50%), maturity 9/30/26 (i)   9/27/2019   2,420,641    2,410,411    2,410,524 
Soliant, Senior Secured Initial Term Loan, 5.00% (Libor + 4.25%), maturity 3/31/28  3/26/2021   2,331,250    2,313,766    2,331,250 
Premise Health, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 7/10/25  8/15/2018   2,282,601    2,287,690    2,282,601 
nThrive, Senior Secured Initial Loan (Second Lien), 7.25% (Libor + 6.75%), maturity 12/17/29 (i)   11/19/2021   2,000,000    1,970,000    2,005,377 
Advanced Diabetes Supply, Senior Secured Term Loan December 2020, 6.25% (Libor + 5.25%), maturity 12/30/26  7/13/2021   1,995,000    1,975,300    1,995,000 
Upstream Rehabilitation, Senior Secured August 2021 Incremental Term Loan (First Lien), 4.46% (Libor + 4.25%), maturity 11/20/26 (i)   10/24/2019   1,971,344    1,968,456    1,975,578 
Alpaca, Senior Secured Term Loan, 5.75% (Libor + 4.75%), maturity 4/19/24 (i)(k)   4/19/2019   1,962,032    1,944,465    1,962,032 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 7/24/26 (i)   7/23/2019   1,955,000    1,949,852    1,949,129 
Gastro Health, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 7/3/28  7/2/2021   1,900,025    1,890,025    1,881,025 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 4.50%), maturity 12/22/25  12/19/2018   1,940,000    1,929,264    1,876,950 
CareCentrix, Senior Secured Initial Term Loan, 4.71% (Libor + 4.50%), maturity 4/3/25 (i) (j)   4/2/2018   1,604,069    1,599,839    1,600,168 
Symplr, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 12/22/27 (i)   11/23/2020   1,488,750    1,466,850    1,494,123 
Therapy Brands, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 5/18/28  5/12/2021   1,496,250    1,489,050    1,488,769 
Blue Cloud, Unitranche, 6.00% (Libor + 5.00%), maturity 12/31/27 (i)   12/13/2021   1,500,000    1,485,000    1,485,000 
Quantum Health, Senior Secured Amendment No. 1 Refinancing Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 12/22/27  12/18/2020   1,492,500    1,470,450    1,481,306 
Mission Veterinary Partners, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 4/27/28 (i)   12/15/2021   1,496,250    1,481,288    1,481,288 
CPS, Unitranche, 6.25% (Libor + 5.25%), maturity 2/28/25 (k)   3/1/2019   1,462,164    1,449,283    1,462,164 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/1/24  1/10/2019   1,155,903    1,153,742    1,124,116 
Solis Mammography, Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.75%), maturity 4/17/28 (i)   4/1/2021   1,060,833    1,051,433    1,059,560 
nThrive, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 4.00%), maturity 12/18/28 (i)   11/19/2021   1,000,000    995,000    1,002,016 
Wedgewood Pharmacy, Senior Secured Initial Term Loan, 5.00% (Libor + 4.25%), maturity 3/31/28  2/24/2021   997,500    987,800    997,500 
Solis Mammography, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 8.00%), maturity 4/16/29  4/1/2021   1,000,000    985,600    992,500 
Allied Benefit Systems, Senior Secured Initial Term B Loan, 5.50% (Libor + 4.50%), maturity 11/18/26  10/21/2020   990,000    977,586    990,000 
Athena, Senior Secured Term B-1 Loan (First Lien), 4.46% (Libor + 4.25%), maturity 2/11/26 (i)   9/18/2019   980,038    973,278    981,573 
Dermatologists of Central States, Senior Secured Term Loan, 9.50% (Libor + 8.50%), maturity 4/20/22 (i)(k)   3/12/2020   957,461    957,461    957,461 
Alcami, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 4.25%), maturity 7/14/25  7/12/2018   967,500    964,765    928,800 
UDG, Senior Secured Initial Dollar Term Loan (First Lien), 4.75% (Libor + 4.25%), maturity 8/19/28 (i) (m)   8/6/2021   631,875    625,651    634,124 
ImageFirst, Senior Secured Initial Term Loan, 5.25% (Libor + 4.50%), maturity 4/27/28  4/26/2021   588,182    585,414    585,241 
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 4.25%), maturity 8/31/26 (i)   8/2/2019   526,700    522,986    527,034 
MedRisk, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 5/10/28 (i)   4/1/2021   498,750    493,900    499,590 
Press Ganey, Senior Secured 2020 Incremental Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 7/24/26 (i)   10/1/2020   496,256    492,037    497,719 
AccentCare, Senior Secured 2021 Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 6/22/26 (i)   6/15/2021   497,500    497,500    496,317 
RMP & MedA/Rx, Senior Secured Term Loan, 5.50% (Libor + 4.50%), maturity 2/6/25  3/22/2021   490,625    485,865    489,398 
AmeriVet, Senior Secured Incremental Delayed Draw Term Loan, 5.75% (Libor + 4.75%), maturity 6/5/24  8/27/2021   463,710    449,085    461,391 
RMP & MedA/Rx, Senior Secured Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 2/6/25  2/27/2017   419,565    419,470    417,467 
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/10/23 (i)   6/28/2016   343,442    343,870    332,194 
Alpaca, Senior Secured Revolver, 6.00% (Libor + 5.00%), maturity 4/19/24 (i)(k)   9/30/2019   129,426    125,543    129,426 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/24  6/26/2019   -    (7,619)   - 
                   
Services: Business                  
LegalShield, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 12/15/28 (i)   12/7/2021   4,500,000    4,455,000    4,496,243 
InnovateMR, Unitranche, 6.75% (Libor + 5.75%), maturity 1/20/28 (i)(k)   12/16/2021   4,247,302    4,172,974    4,172,974 
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 9/23/25 (i)   9/26/2019   3,910,000    3,884,414    3,910,000 
RevSpring, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 4.25%), maturity 10/11/25 (i)   10/5/2018   3,880,000    3,877,022    3,891,124 
Alliance Environmental Group, Unitranche, 7.00% (Libor + 6.00%), maturity 12/30/27 (i) (k)   12/30/2021   3,675,497    3,588,742    3,601,987 
Veritext, Senior Secured Initial Term Loan (First Lien), 3.46% (Libor + 3.25%), maturity 8/1/25 (i)   8/14/2018   3,121,087    3,106,891    3,104,654 
Fleetwash, Senior Secured Incremental Term Loan, 5.75% (Libor + 4.75%), maturity 10/1/24  9/25/2018   2,903,063    2,888,125    2,888,547 
CoolSys, Senior Secured Closing Date Initial Term Loan, 5.50% (Libor + 4.75%), maturity 8/11/28 (i)   8/4/2021   2,590,278    2,559,670    2,578,679 
Duff & Phelps, Senior Secured Initial Dollar Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 4/9/27 (i)   3/6/2020   2,462,500    2,443,427    2,470,032 
Service Logic, Senior Secured Closing Date Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 10/29/27  10/23/2020   2,364,497    2,342,229    2,346,764 
Vistage, Senior Secured Term B Loan (First Lien), 5.00% (Libor + 4.00%), maturity 2/10/25  2/6/2018   2,323,414    2,320,751    2,317,605 

 

The accompanying notes are an integral part of these financial statements.

 

11

 

 

Audax Credit BDC Inc.
Schedule of Investments (Continued)
As of December 31, 2021
(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Services: Business (continued)                  
The Facilities Group, Unitranche, 6.75% (Libor + 5.75%), maturity 11/30/27 (i)   12/10/2021  $2,258,671   $2,236,084   $2,236,084 
Mediaocean, Senior Secured Initial Term Loan, 4.00% (Libor + 3.50%), maturity 12/15/28 (i)   12/9/2021   2,000,000    1,980,000    2,001,789 
TRC Companies, Senior Secured Initial Term Loan (Second Lien), 7.25% (Libor + 6.75%), maturity 12/7/29  11/19/2021   2,000,000    1,980,000    1,985,000 
ECi Software, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 11/9/27 (i)   9/17/2020   1,980,000    1,972,543    1,984,655 
Veregy, Senior Secured Initial Term Loan, 7.00% (Libor + 6.00%), maturity 11/3/27  11/2/2020   1,980,000    1,928,567    1,960,200 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 6/19/24  6/30/2017   1,939,630    1,939,630    1,939,630 
Insight Global, Senior Secured Closing Date Term Loan, 6.75% (Libor + 6.00%), maturity 9/22/28 (j)   9/22/2021   1,496,250    1,463,626    1,492,509 
Epic Staffing Group, Senior Secured Initial Term Loan, 7.00% (Libor + 6.00%), maturity 2/5/27  2/3/2021   1,489,968    1,460,568    1,489,968 
Eliassen Group, Senior Secured Initial Term B Loan, 4.46% (Libor + 4.25%), maturity 11/5/24  10/19/2018   1,478,116    1,474,158    1,478,116 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 5.50% (Libor + 4.50%), maturity 3/27/24  3/26/2018   1,444,391    1,441,757    1,429,947 
First Advantage, Senior Secured Term B-1 Loan (First Lien), 2.96% (Libor + 2.75%), maturity 1/31/27 (i)   1/23/2020   1,100,312    1,089,150    1,097,467 
Veritext, Senior Secured Initial Term Loan (Second Lien), 6.96% (Libor + 6.75%), maturity 7/31/26  8/14/2018   1,000,000    996,678    997,500 
Divisions Maintenance Group, Senior Secured Term B Loan, 5.50% (Libor + 4.75%), maturity 5/27/28 (i)   5/21/2021   997,500    988,100    997,500 
TRC Companies, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 12/8/28 (i)   11/19/2021   1,000,000    995,000    996,581 
trustaff Management, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 3/6/28 (i)   12/9/2021   997,487    994,994    994,994 
eResearch (ERT), Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.50%), maturity 2/4/27 (i)   12/1/2020   989,956    989,956    994,805 
WCG, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 1/8/27 (i)   12/13/2019   985,000    977,291    989,251 
Diversified, Senior Secured Initial Term Loan, 5.75% (Libor + 4.75%), maturity 12/23/23  4/19/2019   899,347    895,961    892,602 
Secretariat International, Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.75%), maturity 12/29/28 (i)   12/16/2021   850,000    845,750    845,750 
Therma Holdings, Senior Secured Initial Term Loan (2021), 4.75% (Libor + 4.00%), maturity 12/16/27 (i)   12/11/2020   498,750    497,600    499,234 
System One, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 3/2/28 (i)   1/28/2021   497,500    495,300    497,500 
Insight Global, Senior Secured Revolving Loan, 6.75% (Libor + 6.00%), maturity 9/22/27  9/23/2021   67,089    67,089    66,921 
Alliance Environmental Group, Senior Secured Revolving Loan, 7.00% (Libor + 6.00%), maturity 12/30/27 (i) (k)   12/30/2021   -    (6,623)   - 
                   
High Tech Industries                  
Qlik, Senior Secured 2021 Refinancing Term Loan, 4.21% (Libor + 4.00%), maturity 4/26/24 (i)   3/29/2019   3,900,600    3,886,181    3,910,108 
Netsmart, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 10/1/27 (i)   9/29/2020   3,473,750    3,460,658    3,487,188 
Jaggaer, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 8/14/26 (i)   8/9/2019   3,091,100    3,087,301    3,091,058 
Ivanti Software, Senior Secured 2021 Specified Refinancing Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 12/1/27 (i)   11/20/2020   2,985,000    2,947,757    2,988,121 
Infogroup, Senior Secured Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 4/3/23 (i)   3/28/2017   2,859,887    2,849,374    2,736,884 
Planview, Senior Secured Closing Date Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 12/17/27 (i)   12/11/2020   2,632,290    2,607,384    2,637,045 
Idera, Senior Secured Term B-1 Loan (First Lien), 4.50% (Libor + 3.75%), maturity 3/2/28 (i)   6/27/2017   2,599,317    2,598,562    2,600,118 
Precisely, Senior Secured Third Amendment Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 4/24/28 (i)   3/19/2021   2,493,750    2,481,850    2,492,448 
Flexera Software, Senior Secured Term B-1 Loan (First Lien), 4.50% (Libor + 3.75%), maturity 3/3/28 (i)   2/16/2020   2,390,742    2,390,742    2,396,181 
PracticeTek, Unitranche, 5.71% (Libor + 5.50%), maturity 11/23/27 (i)(k)   11/22/2021   2,275,763    2,210,067    2,230,248 
Sophos, Senior Secured Dollar Tranche Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 3/5/27 (i)(n)   1/16/2020   1,970,012    1,877,597    1,959,343 
QuickBase, Senior Secured Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 4/2/26  3/29/2019   1,950,000    1,943,834    1,940,250 
Intermedia , Senior Secured New Term Loan (First Lien), 7.00% (Libor + 6.00%), maturity 7/21/25 (i)   7/13/2018   1,940,000    1,931,203    1,931,121 
Bomgar, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 4/18/25 (i)   5/25/2018   1,641,251    1,647,580    1,642,542 
OEConnection, Senior Secured Initial Term Loan, 4.21% (Libor + 4.00%), maturity 9/25/26 (i)   9/24/2019   1,608,578    1,603,485    1,606,567 
Digital Room, Senior Secured Closing Date Term Loan (First Lien), 5.75% (Libor + 5.25%), maturity 12/21/28 (i)   12/16/2021   1,500,000    1,485,000    1,493,953 
Navex Global, Senior Secured Initial Term Loan (First Lien), 3.46% (Libor + 3.25%), maturity 9/5/25 (i)   8/15/2018   1,451,250    1,441,800    1,446,663 
ORBCOMM, Senior Secured Closing Date Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 9/1/28 (i)   6/17/2021   997,500    992,500    999,322 
Infoblox, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 12/1/27 (i)   10/7/2020   995,000    990,862    997,873 
Veracode, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 11/5/27  10/30/2020   992,500    984,143    992,500 
Barracuda, Senior Secured 2020 Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 2/12/25 (i)   3/2/2018   987,500    987,500    991,652 
SmartBear, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.25%), maturity 3/3/28  11/20/2020   995,000    985,600    990,025 
HelpSystems, Senior Secured Seventh Amendment Refinancing Loan (First Lien), 4.75% (Libor + 4.00%), maturity 11/19/26 (i)   12/19/2019   989,981    987,772    989,981 
Imperva, Senior Secured Term Loan, 5.00% (Libor + 4.00%), maturity 1/12/26 (i)   9/23/2020   986,095    978,665    986,963 
Unison, Unitranche, 8.00% (Libor + 7.00%), maturity 6/25/26 (k)   6/25/2020   985,000    965,242    985,000 
Cloudera, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 10/8/28 (i)   8/10/2021   500,000    495,030    499,716 
DigiCert, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 4.00%), maturity 10/16/26 (i)   3/13/2020   491,250    469,316    491,532 
PracticeTek, Senior Secured Revolving Loan, 5.71% (Libor + 5.50%), maturity 11/23/27 (i)(k)   11/22/2021   -    (7,156)   - 
                   
Containers, Packaging & Glass                  
InMark, Senior Secured Incremental Term Loan, 7.00% (Libor + 6.00%), maturity 12/23/26 (i)(k)   12/10/2021   3,740,625    3,653,125    3,665,813 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/30/24 (j)   5/11/2017   3,353,069    3,345,694    3,244,094 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 7/18/26 (i)   7/17/2019   2,879,678    2,868,302    2,861,680 
Brook & Whittle, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 4.00%), maturity 12/14/28 (i)   12/9/2021   2,500,000    2,477,355    2,495,651 
Packaging Coordinators, Senior Secured Term B Loan (First Lien), 4.50% (Libor + 3.75%), maturity 11/30/27 (i)   9/25/2020   2,468,813    2,460,773    2,473,420 
Paragon Films, Senior Secured Closing Date Term Loan (First Lien), 5.50% (Libor + 5.00%), maturity 12/16/28 (i)   12/15/2021   2,000,000    1,978,515    1,980,000 
Resource Label Group, Senior Secured Closing Date Initial Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 7/7/28 (i)   7/2/2021   1,879,747    1,870,648    1,881,331 
TricorBraun, Senior Secured Closing Date Initial Term Loan (First Lien), 3.75% (Libor + 3.25%), maturity 3/3/28 (i)   1/29/2021   1,828,762    1,820,245    1,819,627 
Potters Industries, Senior Secured Initial Term Loan, 4.21% (Libor + 4.00%), maturity 12/14/27 (i)   11/19/2020   1,488,750    1,476,336    1,494,204 
Technimark, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 7/7/28 (i)   6/30/2021   1,492,500    1,485,300    1,490,683 
Tekni-Plex, Senior Secured Tranche B-3 Initial Term Loan, 4.50% (Libor + 4.00%), maturity 9/15/28 (i)   7/29/2021   1,054,520    1,052,080    1,056,280 
Lacerta, Senior Secured Term Loan, 6.25% (Libor + 5.50%), maturity 12/30/26  2/8/2021   990,000    980,150    990,000 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 7/31/26 (i)   7/25/2019   980,000    978,319    979,185 
Tank Holding, Senior Secured 2020 Refinancing Term Loan (First Lien), 3.46% (Libor + 3.25%), maturity 3/26/26 (i)   3/21/2019   977,500    974,681    971,563 
Applied Adhesives, Senior Secured Term A Loan, 5.75% (Libor + 5.00%), maturity 3/12/27  3/12/2021   563,158    557,688    558,934 
Golden West Packaging, Senior Secured Initial Term Loan, 6.00% (Libor + 5.25%), maturity 12/1/27  11/29/2021   500,000    495,000    496,250 
Pregis Corporation, Senior Secured Third Amendment Refinancing Term Loan (First Lien), 4.50% (Libor + 4.00%), maturity 7/31/26  12/9/2020   498,750    496,681    492,516 
Applied Adhesives, Senior Secured Revolving Loan, 5.75% (Libor + 5.00%), maturity 3/12/27  3/12/2021   7,111    6,400    7,058 

 

The accompanying notes are an integral part of these financial statements.

 

12

 

 

Audax Credit BDC Inc.
Schedule of Investments (Continued)
As of December 31, 2021
(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Banking, Finance, Insurance & Real Estate                  
Confluence, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 7/31/28 (i) (j)   7/22/2021  $4,000,000   $3,980,000   $3,980,000 
Ascensus, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 3.50%), maturity 8/2/28 (i)   11/17/2021   3,000,000    2,985,000    2,994,898 
AmeriLife, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 3/18/27 (i)   2/6/2020   2,462,828    2,449,570    2,460,960 
Newport Group, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 9/12/25 (i)   8/9/2018   2,421,181    2,412,499    2,419,686 
American Beacon Advisors, Senior Secured Tranche D Term Loan (Second Lien), 9.00% (Libor + 8.00%), maturity 4/30/25  10/31/2017   2,117,133    2,122,175    2,117,133 
Kestra Financial, Senior Secured Initial Term Loan, 4.46% (Libor + 4.25%), maturity 6/3/26 (i)   4/29/2019   1,955,000    1,941,773    1,949,240 
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 6.75% (Libor + 5.75%), maturity 10/31/22  10/9/2015   1,930,484    1,932,912    1,867,743 
EPIC Insurance, Unitranche, 6.00% (Libor + 5.25%), maturity 9/29/28  8/27/2021   1,599,440    1,568,405    1,591,442 
Orion, Senior Secured 2021 Refinancing Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 9/24/27 (i)   8/4/2020   1,485,028    1,470,028    1,489,469 
SIAA, Unitranche, 7.25% (Libor + 6.25%), maturity 4/28/28  4/21/2021   1,172,517    1,152,547    1,172,517 
Advisor Group, Senior Secured Term B-1 Loan, 4.71% (Libor + 4.50%), maturity 7/31/26 (i)   1/31/2020   1,029,433    1,025,199    1,033,203 
LERETA, Senior Secured Initial Term Loan, 6.00% (Libor + 5.25%), maturity 7/30/28 (i)   7/27/2021   997,500    987,500    995,006 
Community Brands, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 12/2/22  5/2/2018   817,262    815,063    811,133 
Sedgwick Claims, Senior Secured Initial Term Loan, 3.46% (Libor + 3.25%), maturity 12/31/25 (i)   2/12/2020   489,899    489,422    486,901 
                   
Chemicals, Plastics & Rubber                  
DuBois Chemicals, Senior Secured Term Loan (Second Lien) - 2019, 8.71% (Libor + 8.50%), maturity 9/30/27  10/8/2019   3,000,000    2,975,353    2,985,000 
Vertellus, Senior Secured Initial Term Loan, 7.00% (Libor + 6.00%), maturity 12/22/27  12/18/2020   2,977,500    2,905,500    2,970,056 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 1/31/25 (i)   1/26/2018   2,627,625    2,633,804    2,574,630 
Unifrax, Senior Secured USD Term Loan (First Lien), 3.96% (Libor + 3.75%), maturity 12/12/25 (i)   11/5/2018   2,426,216    2,407,584    2,403,249 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 6.96% (Libor + 6.75%), maturity 9/6/26 (i)   8/16/2018   2,000,000    2,001,674    1,996,853 
USALCO, Senior Secured Term Loan A, 7.00% (Libor + 6.00%), maturity 10/19/27  10/26/2021   2,000,000    1,980,000    1,985,000 
Meridian Adhesives Group, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 7/24/28  7/16/2021   2,000,000    1,980,300    1,985,000 
Q Holding, Senior Secured Term B Loan (2019), 6.00% (Libor + 5.00%), maturity 12/29/23  8/20/2019   1,955,000    1,948,615    1,935,450 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 4.71% (Libor + 4.50%), maturity 9/30/26  10/8/2019   1,777,250    1,745,650    1,763,920 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 3/31/25 (i)   3/22/2018   962,500    959,965    959,012 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 10/28/24 (i)   11/30/2018   967,254    956,813    951,552 
Polytek, Senior Secured Term Loan, 5.75% (Libor + 4.75%), maturity 9/20/24  12/23/2020   495,081    490,381    492,606 
Ascensus Specialties, Senior Secured Initial Term Loan, 5.00% (Libor + 4.25%), maturity 6/30/28 (i)   12/3/2021   498,744    488,744    488,770 
Boyd Corp, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 9/6/25 (i)   11/7/2018   492,366    465,615    487,876 
Vertellus, Senior Secured Revolving Credit Loan, 7.00% (Libor + 6.00%), maturity 12/22/25  12/18/2020   106,972    94,817    106,705 
USALCO, Senior Secured Revolving Loan, 7.00% (Libor + 6.00%), maturity 10/19/26  10/26/2021   24,194    20,968    24,012 
                   
Aerospace & Defense                  
CPI International, Senior Secured Second Amendment Incremental Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 7/26/24  10/1/2019   5,222,307    5,181,858    5,222,307 
HDT Global, Senior Secured Initial Term Loan, 6.50% (Libor + 5.75%), maturity 7/8/27  6/30/2021   3,412,500    3,307,500    3,378,375 
StandardAero, Senior Secured 2020 Term B-1 Loan, 3.71% (Libor + 3.50%), maturity 4/6/26 (i)   1/24/2019   3,271,155    3,264,358    3,197,669 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 7.75%), maturity 4/30/26  5/10/2018   2,000,000    2,007,007    1,920,000 
Whitcraft, Unitranche, 7.00% (Libor + 6.00%), maturity 4/3/23  3/6/2020   1,962,398    1,954,769    1,918,244 
StandardAero, Senior Secured 2020 Term B-2 Loan, 3.71% (Libor + 3.50%), maturity 4/6/26 (i)   1/24/2019   1,758,685    1,755,031    1,719,177 
Tronair, Senior Secured Initial Term Loan (First Lien), 6.75% (Libor + 5.75%) cash, 0.50% PIK, maturity 9/8/23  9/30/2016   1,372,158    1,369,408    1,325,504 
Peraton, Senior Secured Term B Loan (First Lien), 4.50% (Libor + 3.75%), maturity 2/1/28 (i)   2/23/2021   992,500    988,100    995,090 
Amentum, Senior Secured Tranche 2 Term Loan (First Lien), 5.50% (Libor + 4.75%), maturity 1/29/27 (i)   10/29/2020   992,500    975,947    994,823 
Amentum, Senior Secured Tranche 1 Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 1/29/27 (i)   1/24/2020   985,000    960,031    974,961 
API Technologies, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 4.25%), maturity 5/9/26  1/15/2020   979,900    956,544    962,751 
BlueHalo, Unitranche, 7.00% (Libor + 6.00%), maturity 10/31/25  11/17/2021   499,027    491,527    495,284 
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 4/30/25 (i)   7/18/2019   487,900    486,144    470,917 
Novaria Group, Senior Secured Initial Term Loan, 6.50% (Libor + 5.50%), maturity 1/27/27  1/24/2020   481,818    477,971    466,159 
BlueHalo, Senior Secured Revolving Loan, 7.00% (Libor + 6.00%), maturity 10/31/25  11/17/2021   25,305    23,815    25,115 
                   
Capital Equipment                  
FloWorks, Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 5.00%), maturity 12/27/28 (i)   12/27/2021   4,000,000    3,850,000    3,960,000 
Plaskolite, Senior Secured 2021-1 Refinancing Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 12/15/25 (i)   12/12/2018   3,880,675    3,836,318    3,850,705 
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 3.96% (Libor + 3.75%), maturity 9/30/24 (i)   4/20/2018   2,037,185    2,037,185    2,011,277 
Excelitas, Senior Secured Initial Term Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 12/1/25 (i)   2/19/2020   1,500,000    1,482,834    1,506,460 
Edward Don, Senior Secured Initial Term Loan, 5.25% (Libor + 4.25%), maturity 7/2/25  6/26/2018   1,370,943    1,367,973    1,302,395 
Flow Control Group, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 3/31/28 (i)   3/17/2021   1,184,544    1,181,906    1,184,320 
TriMark, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 8/28/24  6/13/2018   973,447    902,470    759,288 
Culligan, Senior Secured Initial Term B Loan, 4.50% (Libor + 4.00%), maturity 7/31/28 (i)   6/17/2021   500,000    497,500    502,107 
Restaurant Technologies, Senior Secured Initial Loan (Second Lien), 6.71% (Libor + 6.50%), maturity 10/1/26  2/11/2020   500,000    503,008    498,750 
Infinite Electronics, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 3/2/28 (i)   2/24/2021   497,500    496,400    496,938 
Duravant, Senior Secured Incremental Amendment No. 5 Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 5/19/28 (i)   3/5/2020   492,424    492,424    492,387 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 12/2/24 (i)   10/24/2018   483,627    486,011    485,701 
Flow Control Group, Senior Secured Amendment No. 1 Delayed Draw Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 3/31/28 (i)   7/27/2021   421,493    420,243    421,414 

 

The accompanying notes are an integral part of these financial statements.

 

13

 

 

Audax Credit BDC Inc.
Schedule of Investments (Continued)
As of December 31, 2021
(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Services: Consumer                  
A Place For Mom, Senior Secured Term Loan, 4.75% (Libor + 3.75%), maturity 2/10/26  7/28/2017  $2,611,593   $2,611,369   $2,565,890 
Weld North, Senior Secured 2021 Term Loan, 4.75% (Libor + 3.75%), maturity 12/21/27 (i)   12/21/2020   2,420,419    2,420,419    2,424,416 
Smart Start, Senior Secured Term B Loan (First Lien), 5.00% (Libor + 4.50%), maturity 12/16/28 (i)   12/10/2021   2,000,000    1,980,000    1,980,000 
Smart Start, Senior Secured Term B Loan (Second Lien), 8.25% (Libor + 7.75%), maturity 12/16/29 (i)   12/10/2021   2,000,000    1,960,000    1,960,000 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 3.21% (Libor + 3.00%), maturity 5/14/26 (i)   5/8/2019   1,532,172    1,529,857    1,527,120 
FullBloom, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 12/15/28 (i)   12/10/2021   1,500,000    1,485,000    1,485,000 
Ned Stevens, Senior Secured Term A Loan, 6.50% (Libor + 5.50%), maturity 9/30/25 (k)   9/30/2019   1,405,229    1,388,225    1,405,229 
Teaching Strategies, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.25%), maturity 8/31/28  8/19/2021   1,000,000    990,060    1,000,000 
Spring Education, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 4.25%), maturity 7/30/25 (i)   7/26/2018   967,500    966,117    941,386 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 6.50% (Libor + 5.50%), maturity 5/9/25 (i)   5/4/2018   718,618    712,798    710,570 
Ned Stevens, Senior Secured Revolving Loan, 6.50% (Libor + 5.50%), maturity 9/30/25 (k)   9/30/2019   -    (2,614)   - 
                   
Transportation: Cargo                  
Evans Network, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 8/19/28 (i)   8/6/2021   3,664,286    3,624,286    3,652,180 
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 10/12/24 (i)   11/20/2018   3,571,843    3,569,083    3,546,929 
Capstone Logistics, Senior Secured Closing Date Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 11/12/27  11/12/2020   2,117,015    2,097,983    2,111,723 
AIT Worldwide Logistics, Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.75%), maturity 4/6/28 (i)   12/9/2021   1,995,000    1,990,013    1,995,707 
Worldwide Express, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 7/26/28 (i)   7/23/2021   1,500,000    1,488,750    1,505,619 
Omni Logistics, Senior Secured Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 12/30/26  11/24/2021   1,109,719    1,098,000    1,101,396 
Omni Logistics, Senior Secured Revolving Credit Loan (First Lien), 6.00% (Libor + 5.00%), maturity 12/30/25  11/24/2021   28,459    27,320    28,245 
                   
Beverage, Food & Tobacco                  
Bettcher Industries, Senior Secured Initial Term Loan (Second Lien), 7.75% (Libor + 7.25%), maturity 12/14/29 (i)   12/13/2021   2,500,000    2,475,000    2,475,000 
Sovos Brands, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 6/8/28 (i)   6/8/2021   2,033,001    2,033,001    2,035,909 
Bettcher Industries, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 4.00%), maturity 12/14/28 (i)   12/13/2021   2,000,000    1,980,000    1,980,000 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 8/25/25  8/22/2018   1,935,000    1,930,127    1,905,975 
Dessert Holdings, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 6/9/28  6/7/2021   1,496,250    1,485,300    1,485,028 
Monogram Foods, Senior Secured Cov-Lite Term Loan B, 4.50% (Libor + 4.00%), maturity 8/28/28  8/13/2021   1,000,000    990,000    992,500 
                   
Automotive                  
Highline, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 11/9/27 (i)   10/29/2020   2,842,159    2,776,983    2,819,912 
Rough Country, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.50%), maturity 7/28/28 (i)   7/26/2021   1,995,000    1,990,000    1,995,000 
Truck Hero, Senior Secured Initial Term Loan, 4.00% (Libor + 3.25%), maturity 1/31/28 (i)   1/20/2021   1,488,750    1,488,750    1,485,737 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 2/3/25  11/28/2018   967,500    950,885    960,244 
IXS, Senior Secured Initial Term Loan, 5.00% (Libor + 4.25%), maturity 3/5/27 (i)   2/27/2020   794,417    792,552    782,495 
Wheel Pros, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 5/11/28 (i)   4/23/2021   498,750    494,350    498,850 
Safe Fleet, Senior Secured Initial Term Loan (Second Lien), 7.75% (Libor + 6.75%), maturity 2/2/26  2/7/2020   500,000    491,417    496,250 
                   
Construction & Building                  
Tangent, Senior Secured Closing Date Term Loan (First Lien), 4.96% (Libor + 4.75%), maturity 11/30/24 (i)   10/2/2019   1,792,819    1,783,355    1,774,891 
PlayPower, Senior Secured Initial Term Loan, 5.71% (Libor + 5.50%), maturity 5/8/26  5/10/2019   1,756,917    1,756,917    1,686,640 
PlayCore, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 7.75%), maturity 9/29/25  2/7/2020   1,500,000    1,475,188    1,500,000 
PlayCore, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 9/30/24 (i)   9/18/2017   956,924    955,673    955,693 
CHI Overhead Doors, Senior Secured Third Amendment Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 7/31/25 (i)   7/28/2015   615,739    617,179    617,221 
Acuren, Senior Secured Initial Term Loan, 4.21% (Libor + 4.00%), maturity 1/23/27  1/17/2020   479,011    477,104    479,011 
Hoffman Southwest, Senior Secured Initial Term Loan, 6.50% (Libor + 5.50%), maturity 8/14/23  5/16/2019   446,460    446,911    441,437 
                   
Wholesale                  
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 3.00%), maturity 3/20/25  3/16/2018   3,849,619    3,850,157    3,806,310 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 8/19/22  9/2/2015   1,875,184    1,869,627    1,814,241 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 6/15/23  6/14/2016   1,424,830    1,425,559    1,389,209 
                   
Hotels, Gaming & Leisure                  
Aimbridge, Senior Secured Initial Term Loan (2019) (First Lien), 3.96% (Libor + 3.75%), maturity 2/2/26 (i)   1/17/2019   2,922,725    2,915,974    2,871,577 
Northstar, Senior Secured Term Loan, 6.75% (Libor + 6.25%) cash, 1.00% PIK, maturity 6/7/24  5/8/2017   1,366,260    1,366,260    1,321,856 
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.00% (Libor + 5.00%), maturity 10/21/23  10/19/2016   1,119,231    1,115,110    895,385 
                   
Consumer Goods: Non-durable                  
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/21/23 (i)   11/9/2016   2,393,770    2,389,338    2,245,348 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 5.50% (Libor + 4.50%), maturity 10/26/23 (j)   11/2/2016   2,029,843    2,023,255    1,994,321 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.50%), maturity 9/11/23  9/29/2016   1,881,139    1,875,639    1,857,624 
Hoffmaster Group, Senior Secured Initial Term Loan (Second Lien), 10.50% (Libor + 9.50%), maturity 11/21/24  2/7/2020   1,250,000    1,250,000    1,209,375 

 

The accompanying notes are an integral part of these financial statements.

 

14

 

 

Audax Credit BDC Inc.
Schedule of Investments (Continued)
As of December 31, 2021
(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Media: Diversified & Production                  
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 2/9/26 (i)   1/16/2019  $2,924,905   $2,909,965   $2,928,921 
                   
Environmental Industries                  
Denali Water Solutions, Senior Secured Closing Date Term Loan, 5.00% (Libor + 4.25%), maturity 3/27/28  3/18/2021   1,990,000    1,970,000    1,967,613 
Keter Environmental Services, Unitranche, 7.50% (Libor + 6.50%), maturity 10/29/27 (i)   11/5/2021   500,000    495,000    495,000 
Keter Environmental Services, Unitranche, 7.50% (Libor + 6.50%), maturity 10/29/27 (i)   11/5/2021   4,560    4,514    4,514 
                   
Metals & Mining                  
Dynatect, Senior Secured Term B Loan, 5.50% (Libor + 4.50%), maturity 9/30/22 (i)   8/16/2019   1,937,063    1,926,533    1,917,692 
                   
Utilities: Electric                  
Systems Control, Senior Secured Initial Term Loan, 5.75% (Libor + 4.75%), maturity 3/28/25  6/15/2021   1,490,973    1,488,636    1,472,336 
                   
Forest Products & Paper                  
Loparex, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 4.50%), maturity 7/31/26  7/29/2019   1,466,250    1,455,917    1,462,584 
                   
Retail                  
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 12/16/24 (i)   10/17/2018   967,287    971,481    952,067 
StubHub, Senior Secured USD Term B Loan, 3.71% (Libor + 3.50%), maturity 2/12/27 (i)   1/31/2020   490,000    488,093    481,558 
                   
Media: Advertising, Printing & Publishing                  
Ansira, Unitranche, 7.50% (Libor + 6.50%) PIK, maturity 12/20/24  12/20/2016   2,171,946    2,166,066    1,346,607 
                   
Utilities: Water                  
Aegion, Senior Secured Initial Term Loan, 5.50% (Libor + 4.75%), maturity 5/17/28  4/1/2021   997,500    992,800    995,006 
                   
Energy: Electricity                  
Franklin Energy, Senior Secured Term B Loan (First Lien), 4.21% (Libor + 4.00%), maturity 8/14/26  8/14/2019   977,500    975,628    962,838 
                   
Consumer Goods: Durable                  
Careismatic Brands, Senior Secured Initial Term Loan (First Lien), 3.75% (Libor + 3.25%), maturity 1/6/28 (i)   1/22/2021   497,500    496,400    496,361 
                   
 Total Bank Loans          $403,106,122   $401,708,017 
                   
EQUITY AND PREFERRED SHARES:  NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.4%)(g)(h):                  
                   
High Tech Industries                  
PracticeTek, Class A Units (318,350 Class A units, Fair value of $348,282)(k)(l)(o)   11/22/2021       $348,282   $348,282 
                   
Services: Business                  
Alliance Environmental Group, A-1 Preferred Units (331,126 A-1 Preferred Units, Fair value of $331,126)(k)(l)(p)   12/30/2021        331,126    331,126 
                   
Services: Consumer                  
Ned Stevens, Class B Common Units (261,438 Common B units, Fair value of $280,604)(k)(l)(q)(t)   9/30/2019        261,438    280,604 
                   
Healthcare & Pharmaceuticals                  
Alpaca, Class A Units (45,746 Class A Units, Fair value of $205,742)(k)(l)(r)(t)   4/19/2019        80,512    205,742 
                   
Chemicals, Plastics & Rubber                  
Vertellus, Series A Units (1,651 Series A units, Fair value of $180,603)(l)(m)(t)   12/22/2020        165,138    180,603 
                   
 Total Equity and Preferred Shares          $1,186,496   $1,346,357 
                   
Total Portfolio Investments(u)          $404,292,618   $403,054,374 

 

(a) All companies are located in the United States of America, unless otherwise noted.
(b) Interest rate percentages represent actual interest rates which are indexed from then 30-day London Interbank Offered Rate ("LIBOR") unless otherwise noted. LIBOR rates are subject to interest rate floors which can vary based on the contractual agreement with the borrower.  Due dates represent the contractual maturity date.
(c) All loans are income-producing, unless otherwise noted.
(d) All investments are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act") unless otherwise noted.
(e) All investments are exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act.
(f) Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(g) Percentages are calculated using fair value of investments over net assets.
(h) As defined in 1940 Act, the Company is not deemed to be an “Affiliated Person” of or “Control” this portfolio company because it neither owns 5% or  more of the portfolio company’s outstanding voting securities nor has the power to exercise control over the management or policies of such portfolio company (including through a management agreement).
(i) Investment was valued using Level 2 inputs within the ASC 820 fair value hierarchy.  Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(j) All or portion of this security has an open position related to short-term borrowings, as described in footnote 8.
(k) Three of our affiliated funds, Audax Direct Lending Solutions Fund - A, L.P., Audax Direct Lending Solutions Fund - C, L.P., and Audax Direct Lending Solutions Fund - D, L.P., 'co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(l) Investment is non-income producing.
(m) The borrower for UDG Healthcare, Congachant Limited, is located in Ireland.
(n) The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.
(o) Represents an investment in APD Ptek Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(p) Represents an investment in APD AEG Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(q) Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(r) Represents an investment in APD ALP Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(s) Represents an investment in ADP VERT Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(t) Other net assets of $0 at the aggregator levels are included in the fair value of the investments when using the net asset value as a practical expedient.
(u) At December 31, 2021, the cost of investments for income tax purposes was $404,292,618, the gross unrealized depreciation for federal tax purposes was $3,278,981, the gross unrealized appreciation for federal income tax purposes was $2,040,737, and the net unrealized depreciation was $1,238,244.

 

The accompanying notes are an integral part of these financial statements.

 

15

 

 

Audax Credit BDC Inc.

Notes to Financial Statements

September 30, 2022

(unaudited)

 

Note 1. Organization

 

Audax Credit BDC Inc. (the “Company”) is a Delaware corporation that was formed on January 29, 2015. The Company is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, effective with the Company’s taxable year ended December 31, 2015, the Company has elected to be treated for federal income tax purposes, and intends to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).

 

The Company commenced business operations on July 8, 2015, the date on which the Company made its first investment. The Company was formed for the purpose of investing primarily in the debt of leveraged, non-investment grade middle market companies, with the principal objective of generating income and capital appreciation. The Company’s investment strategy is to invest primarily in first lien senior secured loans and selectively in second lien loans to middle market companies.

 

Audax Management Company (NY), LLC (the “Adviser”) is the investment adviser of the Company. The Adviser is registered as an investment adviser with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended.

 

Note 2. Significant Accounting Policies

 

Basis of Presentation

 

As an investment company, the accompanying financial statements of the Company are prepared in accordance with the investment company accounting and reporting guidance of ASC Topic 946, “Financial Services – Investment Companies,” as amended (“ASC Topic 946”), which incorporates the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X, as well as generally accepted accounting principles in the United States of America (“GAAP”).

 

Certain financial information that is normally included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management of the Company, the unaudited financial results included herein contain all adjustments, consisting solely of normal accruals, considered necessary for the fair presentation of financial statements for the interim period included herein. The current period’s results of operations are not necessarily indicative of the operating results to be expected for future periods. The accounting records of the Company are maintained in U.S. dollars.

 

Certain prior period information has been reclassified to conform to the current period presentation. The reclassification has no effect on the Company’s financial position or the results of operations as previously reported.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material.

 

16

 

 

Cash and Cash Equivalents

 

Cash and cash equivalents are stated at fair value. The Company considers all highly liquid investments purchased with maturities of three months or less and money market mutual funds to be cash equivalents. No cash equivalent balances were held on September 30, 2022 and December 31, 2021. At such dates, cash was not subject to any restrictions on withdrawal.

 

Expenses

 

The Company is responsible for investment expenses, legal expenses, auditing fees and other expenses related to the Company’s operations. Such fees and expenses, including expenses initially incurred by the Adviser, may be reimbursed by the Company.

 

Investment Valuation Policy

 

The Company conducts the valuation of the Company’s investments, pursuant to which the Company’s net asset value is determined, at all times consistent with GAAP and the 1940 Act. The Company’s Board of Directors (the “Board of Directors”), with the assistance of the Company’s Audit Committee (the “Audit Committee”), determines the fair value of the Company’s investments, for investments with a public market and for investments with no readily available public market, on at least a quarterly basis, in accordance with the terms of ASC Topic 820, “Fair Value Measurement,” (“ASC 820”). The Company’s valuation procedures are set forth in more detail below.

 

ASC 820 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.” Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

 

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

 

The three-level hierarchy for fair value measurement is defined as follows:

 

Level 1 —Inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these instruments, even in situations where the Company holds a large position, and a sale could reasonably be expected to impact the quoted price.

 

Level 2 —Inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

 

17

 

 

Level 3 —Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

 

Pursuant to the framework set forth above, the Company values securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets.

 

Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, the Company determines whether the quote obtained is sufficient in accordance with GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.

 

Securities that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Board of Directors, does not represent fair value, are each valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. Inputs for these valuation techniques include relative credit information, observed market movement, industry sector information, and other market data, which may include benchmarking of comparable securities, issuer spreads, reported trades, and reference data, such as market research publications, when available. The process used to determine the applicable value is as follows:

 

(i) Each portfolio company or investment is initially valued by the investment professionals of the Adviser responsible for the portfolio investment using a standardized template designed to approximate fair market value based on observable market inputs and updated credit statistics and unobservable inputs. Additionally, as a part of the Company’s valuation process, the Adviser may employ the services of one or more independent valuation firms engaged by the Company;

 

(ii) Preliminary valuation conclusions are documented and discussed with the Company’s senior management and members of the Adviser’s valuation team;

 

(iii) The Audit Committee reviews the assessments of the Adviser or independent valuation firm (to the extent applicable) and provides the Board of Directors with recommendations with respect to the fair value of the investments in the Company’s portfolio; and

 

(iv) The Board of Directors discusses the valuation recommendations of the Audit Committee and determines the fair value of the investments in the Company’s portfolio in good faith based on the input of the Adviser, the independent valuation firm (to the extent applicable) and in accordance with the Company’s valuation policy.

 

18

 

 

The Audit Committee’s recommendation of fair value is generally based on its assessment of the following factors, as relevant:

 

·the nature and realizable value of any collateral;

 

·call features, put features and other relevant terms of debt;

 

·the portfolio company’s ability to make payments;

 

·the portfolio company’s actual and expected earnings and discounted cash flow;

 

·prevailing interest rates for like securities and expected volatility in future interest rates;

 

·the markets in which the portfolio company does business and recent economic and/or market events; and

 

·comparisons to publicly traded securities.

 

Investment performance data utilized are the most recently available as of the measurement date, which in many cases may reflect up to a one quarter lag in information.

 

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include the following:

 

·private placements and restricted securities that do not have an active trading market;

 

·securities whose trading has been suspended or for which market quotes are no longer available;

 

·debt securities that have recently gone into default and for which there is no current market;

 

·securities whose prices are stale; and

 

·securities affected by significant events.

 

The Board of Directors is responsible for the determination, in good faith, of the fair value of the Company’s portfolio investments.

 

Determination of fair value involves subjective judgments and estimates. Accordingly, these notes to the Company’s financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the Company’s financial statements.

 

Security transactions are recorded on the trade date (the date the order to buy or sell is executed or, in the case of privately issued securities, the closing date, which is when all terms of the transactions have been defined).

 

Realized gains and losses on investments are determined based on the identified cost method.

 

In addition, on December 3, 2020, the SEC announced that it adopted Rule 2a-5 under the 1940 Act, which establishes an updated regulatory framework for determining fair value in good faith for purposes of the 1940 Act. The new rule clarifies how fund boards can satisfy their valuation obligations in light of recent market developments. The rule will permit boards, subject to board oversight and certain other conditions, to designate certain parties to perform the fair value determinations. As of September 30, 2022, no changes to the Company’s valuation policy have occurred as a result of this new rule.

 

19

 

 

Refer to Note 3 — Investments for additional information regarding fair value measurements and the Company’s application of ASC 820.

 

Interest Income Recognition

 

Interest income, adjusted for amortization of premium, acquisition costs, and amendment fees and the accretion of original issue discount (“OID”), are recorded on an accrual basis to the extent that such amounts are expected to be collected. Generally, when a loan becomes 120 days or more past due, or if the Company’s qualitative assessment indicates that the debtor is unable to service its debt or other obligations, the Company will place the loan on non-accrual status and cease recognizing interest income on that loan for financial reporting purposes until the borrower has demonstrated the ability and intent to pay contractual amounts due. However, the Company will remain contractually entitled to this interest. Interest payments received on non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current or, due to a restructuring, the interest income is deemed to be collectible. As of September 30, 2022 and December 31, 2021, the Company did not hold any investment on non-accrual.

 

The Company currently holds loans in the portfolio that contain OID and payment-in-kind (“PIK”) provisions. The Company recognizes OID for loans originally issued at a discount and recognizes the income over the life of the obligation based on an effective yield calculation. PIK interest, computed at the contractual rate specified in a loan agreement, is added to the principal balance of a loan and recorded as income over the life of the obligation. Therefore, the actual collection of PIK income may be deferred until the time of debt principal repayment. To maintain the ability to be taxed as a RIC, the Company may need to pay out of both OID and PIK non-cash income amounts in the form of distributions, even though the Company has not yet collected the cash on either.

 

As of September 30, 2022, the Company held 260 investments in loans with OID. The Company accrued OID income of $198,303 and $501,091 for the three and nine months ended September 30, 2022, respectively. The unamortized balance of OID on debt investments as of September 30, 2022, totaled $4,363,819. As of December 31, 2021, the Company held 231 investments in loans with OID. The Company accrued OID income of $109,095 and $338,404 for the three and nine months ended September 30, 2021, respectively. The unamortized balance of OID investments as of December 31, 2021, totaled $3,028,962.

 

As of September 30, 2022, the Company held five investments which had a PIK interest component. The Company recorded $142,626 and $211,758 of PIK interest income for three and nine months ended September 30, 2022, respectively. As of September 30, 2021, the Company held three investments which had a PIK interest component. The Company recorded $49,599 and $200,382 of PIK interest income for three and nine months ended September 30, 2021, respectively.

 

As of September 30, 2022 and December 31, 2021, the Company held $11,339,067 and $11,058,796 in cash and cash equivalents, respectively. For the three and nine months ended September 30, 2022, the Company earned $10,850 and $11,630, respectively, of interest income related to cash, which is included in other interest income within the accompanying statement of operations. For the three and nine months ended September 30, 2021, the Company earned $477 and $1,107, respectively, of interest income related to cash, which is included in other interest income within the accompanying statement of operations.

 

Other Income Recognition

 

The Company generally records prepayment fees and amendment fees upon receipt of cash or as soon as the Company becomes aware of the prepayment or amendment.

 

Dividend income on equity investments is accrued to the extent that such amounts are expected to be collected and if the Company has the option to collect such amounts in cash.

 

20

 

 

Prepayment fees, amendment fees and dividend income are accrued in other income in the accompanying statements of operations.

 

For the three and nine months ended September 30, 2022, the Company accrued $196,474 and $374,849 of other income, respectively, related to amendment fees. For the three and nine months ended September 30, 2021, the Company accrued $20,772 and $83,774 of other income, respectively, related to amendment fees.

 

New Accounting Pronouncements

 

In March 2020, FASB issued Accounting Standards Update No. 2020-04 (“ASU 2020-04”), “Reference Rate Reform (Topic 848)”. In response to concerns about structural risks of interbank offered rates, and particularly the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective as of March 12, 2020 through December 31, 2022.

 

Note 3. Investments

 

Fair Value

 

In accordance with ASC 820, the fair value of the Company’s investments is determined to be the price that would be received for an investment in a current sale, assuming an orderly transaction between willing market participants on the measurement date. This fair value definition focuses on exit price in the principal, or most advantageous, market and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. ASC 820 also establishes the three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of a financial instrument as of the measurement date as described in Note 2 – Significant Accounting Policies.

 

As of September 30, 2022, $297,396,692 of the Company’s investments were valued using unobservable inputs, and $140,244,909 were valued using observable inputs. During the nine months ended September 30, 2022, $124,403,117 were transferred into Level 3 due to a decrease in observable prices in the market and $6,219,807 were transferred out of Level 3 due to the liquidity in the market and transparency of inputs.

 

As of December 31, 2021, $153,189,910 of the Company’s investments were valued using unobservable inputs, and $249,864,464 were valued using observable inputs. During the nine months ended September 30, 2021, $21,840,607 were transferred into Level 3 due to a decrease in observable prices in the market and $46,432,486 were transferred out of Level 3 due to price transparency.

 

The following table presents the Company’s investments carried at fair value as of September 30, 2022 and December 31, 2021, by caption on the Company’s accompanying statements of assets and liabilities and by security type.

 

   Assets at Fair Value as of September 30, 2022 
   Level 1   Level 2   Level 3   Total 
First lien debt  $-   $117,042,066   $207,100,101   $324,142,167 
Unitranche debt   -    21,513,972    64,327,819    85,841,791 
Second lien debt   -    1,000,000    23,608,715    24,608,715 
Equity and Preferred Shares   -    688,871    2,360,057    3,048,928 
Total  $-   $140,244,909   $297,396,692   $437,641,601 

 

21

 

 

   Assets at Fair Value as of December 31, 2021 
   Level 1   Level 2   Level 3   Total 
First lien debt  $-   $218,558,349   $118,049,277   $336,607,626 
Unitranche debt   -    21,362,425    19,092,768    40,455,193 
Second lien debt   -    9,943,690    14,701,508    24,645,198 
Equity and Preferred Shares   -    -    1,346,357    1,346,357 
Total  $-   $249,864,464   $153,189,910   $403,054,374 

 

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of September 30, 2022. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

 

             As of September 30, 2022
   Fair   Valuation  Unobservable     Weighted
   Value   Technique  Inputs (1)    Range (2)  Average (3)
First lien debt  $199,452,615   Matrix Pricing  Senior Leverage  0.41x - 11.02x  5.06x
           Total Leverage  0.41x - 12.13x  6.04x
           Interest Coverage  (0.30)x - 22.88x  2.57x
           Debt Service Coverage  (0.18)x - 15.19x  2.06x
           TEV Coverage  0.80x - 24.72x  2.47x
           Liquidity  19.33% - 451.34%  133.17%
           Spread Comparison  300bps - 650bps  444bps
                  
    7,418,787   Market Analysis  Senior Leverage  5.64x - 185.03x  46.24x
           Total Leverage  5.64x - 185.03x  47.50x
           Interest Coverage  (0.39)x - 1.93x  0.98x
           Debt Service Coverage  (0.43)x - 1.70x  0.77x
           TEV Coverage  0.04x - 1.33x  0.86x
           Liquidity  (103.32)% - 977.67%  153.96%
           Spread Comparison  350bps - 625bps  493bps
                  
Unitranche debt   60,140,501   Matrix Pricing  Senior Leverage  4.95x - 11.53x  6.47x
           Total Leverage  4.95x - 11.53x  6.58x
           Interest Coverage  0.70x - 3.31x  2.20x
           Debt Service Coverage  0.61x - 2.83x  1.84x
           TEV Coverage  1.01x - 3.06x  1.92x
           Liquidity  69.00% - 210.07%  128.47%
           Spread Comparison  500bps - 650bps  580bps
                  
    4,187,318   Market Analysis  Senior Leverage  11.81x - 12.24x  11.91x
           Total Leverage  11.81x - 12.24x  11.91x
           Interest Coverage  0.40x - 0.91x  0.79x
           Debt Service Coverage  0.35x - 0.79x  0.69x
           TEV Coverage  0.63x - 0.91x  0.84x
           Liquidity  46.35% - 93.92%  82.56%
           Spread Comparison  600bps - 650bps  612bps
                  
Second lien debt   24,608,715   Matrix Pricing  Senior Leverage  2.00x - 3.00x  2.96x
           Total Leverage  3.63x - 9.87x  6.88x
           Interest Coverage  3.63x - 9.87x  6.88x
           Debt Service Coverage  0.71x - 5.93x  2.29x
           TEV Coverage  0.45x - 4.68x  1.83x
           Liquidity  81.89% - 277.65%  178.17%
           Spread Comparison  675bps - 950bps  754bps
                  
Total  $295,807,936             

 

(1)   For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility.  The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.
(2)   Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority.  The range may be a single data point when there is only one company represented in a specific credit seniority.
(3)   Inputs are weighted based on the fair value of the investments included in the range.

 

The table above does not include $1,588,756 of debt, equity and preferred shares which management values using other unobservable inputs, such as earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA multiples, as well as other qualitative information, including company specific information.

 

22

 

 

 

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of December 31, 2021. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

 

             As of December 31, 2021
   Fair   Valuation  Unobservable     Weighted
   Value   Technique  Inputs (1)  Range (2)  Average (3)
First lien debt  $113,747,244   Matrix Pricing  Senior Leverage  2.66x - 19.28x  5.28x
           Total Leverage  2.66x - 19.28x  6.28x
           Interest Coverage  (1.00)x - 7.01x  2.62x
           Debt Service Coverage  (0.92)x - 5.85x  2.10x
           TEV Coverage  0.48x - 6.32x  2.54x
           Liquidity  28.32% - 871.75%  140.69%
           Spread Comparison  300bps - 600bps  449bps
                  
Unitranche debt   17,746,161   Matrix Pricing  Senior Leverage  4.82x - 9.65x  6.78x
           Total Leverage  4.82x - 9.65x  6.80x
           Interest Coverage  1.17x - 3.11x  1.98x
           Debt Service Coverage  1.02x - 2.42x  1.59x
           TEV Coverage  1.12x - 2.43x  1.79x
           Liquidity  64.12% - 198.41%  136.96%
           Spread Comparison  525bps - 700bps  590bps
                  
Second lien debt   14,701,508   Matrix Pricing  Senior Leverage  4.05x - 11.68x  6.69x
           Total Leverage  4.05x - 11.68x  6.69x
           Interest Coverage  0.67x - 5.98x  2.82x
           Debt Service Coverage  0.53x - 4.66x  2.36x
           TEV Coverage  0.68x - 3.08x  2.20x
           Liquidity  56.63% - 353.33%  168.01%
           Spread Comparison  650bps - 950bps  785bps
                  
Total  $146,194,913             

 

(1)For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility.  The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.

 

(2)Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority.  The range may be a single data point when there is only one company represented in a specific credit seniority.

 

(3)Inputs are weighted based on the fair value of the investments included in the range.

 

The table above does not include $6,994,997 of debt, equity and preferred shares which management values using other unobservable inputs, such as EBITDA and EBITDA multiples, as well as other qualitative information, including company specific information.

 

Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in market yields, discounts rate, leverage, EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of the Company’s investments. Generally, an increase or decrease in market yields, discount rates or leverage or an increase/decrease in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a corresponding decrease or increase, respectively, in the fair value of certain of the Company’s investments.

 

The following tables provide the changes in fair value, broken out by security type, during the nine months ended September 30, 2022 and 2021 for all investments for which the Company determines fair value using unobservable (Level 3) factors.

 

23

 

 

Nine Months Ended September 30, 2022  First lien debt   Unitranche
debt		   Second lien
debt		   Equity and
Preferred Shares		   Total 
Fair Value as of December 31, 2021  $118,049,277   $19,092,768   $14,701,508   $1,346,357   $153,189,910 
Transfers into Level 3   98,776,437    17,189,450    8,437,230    -    124,403,117 
Transfers out of Level 3   (5,222,307)   -    (997,500)   -    (6,219,807)
Total gains:                         
Net realized gain (a)    230,389    38,731    5,583    107,938    382,641 
Net unrealized (depreciation) appreciation(b)   (397,896)   (464,832)   525    162,334    (699,869)
New investments, repayments and settlements:(c)                         
Purchases   25,853,721    31,063,583    2,440,000    931,878    60,289,182 
Settlements/repayments   (30,160,159)   (2,808,227)   (1,000,000)   -    (33,968,386)
Net amortization of premiums, PIK, discounts and fees   331,039    216,346    21,369    -    568,754 
Sales   (360,400)   -    -    (188,450)   (548,850)
Fair Value as of September 30, 2022  $207,100,101   $64,327,819   $23,608,715   $2,360,057   $297,396,692 

 

(a)Included in net realized gain on the accompanying Statement of Operations for the nine months ended September 30, 2022.
(b)Included in net change in unrealized appreciation on the accompanying Statement of Operations for the nine months ended September 30, 2022.
(c)Includes increases in the cost basis of investments resulting from portfolio investments, the amortization of discounts, and PIK, as well as decreases in the costs basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.

 

Nine Months Ended September 30, 2021  First lien debt   Unitranche
debt		   Second lien
debt		   Equity and
Preferred Shares		   Total 
Fair Value as of December 31, 2020  $162,506,538   $8,403,632   $27,290,845   $799,189   $199,000,204 
Transfers into Level 3   21,675,469    -    -    165,138    21,840,607 
Transfers out of Level 3   (39,527,665)   -    (6,904,821)   -    (46,432,486)
Total gains:                         
Net realized gain (loss)(a)    132,085    -    23,900    (383,174)   (227,189)
Net unrealized appreciation (depreciation)(b)   631,273    (360,868)   20,291    292,445    583,141 
New investments, repayments and settlements:(c)                         
Purchases   29,696,565    5,436,404    2,455,000    19,536    37,607,505 
Settlements/repayments   (33,309,519)   (39,263)   (4,332,867)   -    (37,681,649)
Net amortization of premiums, PIK, discounts and fees   171,466    129,272    82,430    -    383,168 
Sales   (1,496,250)   -    (1,445,770)   (417,361)   (3,359,381)
Fair Value as of September 30, 2021  $140,479,962   $13,569,177   $17,189,008   $475,773   $171,713,920 

 

(a)Included in net realized loss on the accompanying Statement of Operations for the nine months ended September 30, 2021.
(b)Included in net change in unrealized depreciation on the accompanying Statement of Operations for the nine months ended September 30, 2021.
(c)Includes increases in the cost basis of investments resulting from portfolio investments, the amortization of discounts, and PIK, as well as decreases in the costs basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.

 

The change in unrealized value attributable to investments still held at September 30, 2022 and 2021 was $(754,851) and $354,876, respectively.

 

Investment Activities

 

The Company held a total of 257 investments with an aggregate fair value of $437,641,601 as of September 30, 2022. During the nine months ended September 30, 2022, the Company invested in 105 new investments for a combined $85,123,197 and in existing investments for a combined $9,221,444. The Company also received $52,253,887 in repayments from investments and $4,047,932 from investments sold during the nine months ended September 30, 2022.

 

The Company held a total of 251 investments with an aggregate fair value of $403,054,374 as of December 31, 2021. During the nine months ended September 30, 2021, the Company invested in 68 new investments for a combined $81,669,043 and in existing investments for a combined $7,643,513. The Company also received $66,357,177 in repayments from investments and $17,331,786 from investments sold during the nine months ended September 30, 2021.

 

24

 

 

Investment Concentrations

 

As of September 30, 2022, the Company’s investment portfolio consisted of investments in 230 companies located in 37 states across 26 different industries, with an aggregate fair value of $437,641,601. The five largest investments at fair value as of September 30, 2022 totaled $25,447,577, or 5.81%, of the Company’s total investment portfolio as of such date. As of September 30, 2022, the Company’s average investment was $1,725,601 at cost.

 

As of December 31, 2021, the Company’s investment portfolio consisted of investments in 215 companies located in 35 states across 26 different industries, with an aggregate fair value of $403,054,374. The five largest investments at fair value as of December 31, 2021 totaled $22,205,933, or 5.51%, of the Company’s total investment portfolio as of such date. As of December 31, 2021, the Company’s average investment was $1,610,728 at cost.

 

The following table outlines the Company’s investments by security type as of September 30, 2022 and December 31, 2021:

 

   September 30, 2022   December 31, 2021 
       Percentage       Percentage       Percentage       Percentage 
       of Total       of Total       of Total       of Total 
   Cost   Investments   Fair Value   Investments   Cost   Investments   Fair Value   Investments 
First lien debt  $329,329,507    74.26%  $324,142,167    74.07%  $337,204,744    83.41%  $336,607,626    83.52%
Unitranche debt   86,946,817    19.61%   85,841,791    19.61%   41,225,444    10.20%   40,455,193    10.04%
Second lien debt   24,660,501    5.56%   24,608,715    5.62%   24,675,934    6.10%   24,645,198    6.11%
Total Debt Investments   440,936,825    99.43%   434,592,673    99.30%   403,106,122    99.71%   401,708,017    99.67%
Equity and Preferred Shares   2,542,544    0.57%   3,048,928    0.70%   1,186,496    0.29%   1,346,357    0.33%
Total Equity Investments   2,542,544    0.57%   3,048,928    0.70%   1,186,496    0.29%   1,346,357    0.33%
Total Investments  $443,479,369    100.00%  $437,641,601    100.00%  $404,292,618    100.00%  $403,054,374    100.00%

 

Investments at fair value consisted of the following industry classifications as of September 30, 2022 and December 31, 2021:

 

   September 30, 2022   December 31, 2021 
Industry  Fair Value   Percentage of
Total Investments		   Fair Value   Percentage of
Total Investments		 
Healthcare & Pharmaceuticals  $75,652,473    17.32%  $76,579,770    19.01%
Services: Business   67,230,312    15.36    63,977,738    15.87 
High Tech Industries   55,107,154    12.59    49,862,684    12.37 
Containers, Packaging & Glass   34,044,860    7.78    28,958,289    7.18 
Banking, Finance, Insurance & Real Estate   30,272,891    6.92    25,369,331    6.29 
Capital Equipment   27,985,539    6.39    17,471,742    4.33 
Aerospace & Defense   27,499,176    6.28    24,066,376    5.97 
Chemicals, Plastics & Rubber   19,270,364    4.40    24,290,294    6.03 
Services: Consumer   18,274,055    4.18    16,280,215    4.04 
Transportation: Cargo   17,345,569    3.96    13,941,799    3.46 
Beverage, Food & Tobacco   12,769,805    2.92    10,874,412    2.70 
Automotive   10,436,874    2.38    9,038,488    2.24 
Construction & Building   8,625,454    1.97    7,454,893    1.85 
Environmental Industries   7,394,866    1.69    2,467,127    0.61 
Consumer Goods: Non-durable   7,353,468    1.68    7,306,668    1.81 
Wholesale   3,776,759    0.86    7,009,760    1.74 
Media: Diversified & Production   2,858,054    0.65    2,928,921    0.73 
Hotels, Gaming & Leisure   2,165,565    0.49    5,088,818    1.26 
Metals & Mining   1,900,034    0.43    1,917,692    0.48 
Forest Products & Paper   1,455,000    0.33    1,462,584    0.36 
Utilities: Electric   1,449,768    0.33    1,472,336    0.37 
Retail   1,364,444    0.31    1,433,625    0.36 
Media: Advertising, Printing & Publishing   999,518    0.23    1,346,607    0.33 
Utilities: Water   982,574    0.22    995,006    0.25 
Energy: Electricity   953,025    0.22    962,838    0.24 
Consumer Goods: Durable   474,000    0.11    496,361    0.12 
   $437,641,601    100.00%  $403,054,374    100.00%

 

25

 

 

Investments at fair value were included in the following geographic regions of the United States as of September 30, 2022 and December 31, 2021:

 

   September 30, 2022   December 31, 2021 
       Percentage of Total       Percentage of Total 
Geographic Region  Fair Value   Investments   Fair Value   Investments 
Northeast  $109,882,272    25.11%  $96,521,842    23.95%
Midwest   97,873,320    22.36    86,519,372    21.47 
West   60,657,853    13.86    60,016,533    14.89 
Southeast   58,828,861    13.44    57,007,985    14.14 
Southwest   54,210,245    12.39    57,181,529    14.19 
East   39,255,536    8.97    33,945,083    8.42 
South   7,475,092    1.71    4,767,241    1.18 
Northwest   5,045,567    1.15    4,501,322    1.12 
Other(a)   4,412,855    1.01    2,593,467    0.64 
Total Investments  $437,641,601    100.00%  $403,054,374    100.00%

 

(a)The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.  The borrower for UDG Healthcare, Congachant Limited, is located in Ireland.

 

The geographic region indicates the location of the headquarters of the Company’s portfolio companies. A portfolio company may have a number of other business locations in other geographic regions.

 

Investment Principal Repayments

 

The following table summarizes the contractual principal repayments and maturity of the Company’s investment portfolio by fiscal year, assuming no voluntary prepayments, as of September 30, 2022:

 

For the Fiscal Years Ending December 31:  Amount 
2022  $4,344,592 
2023   19,046,288 
2024   44,768,630 
2025   55,956,892 
2026   63,257,339 
Thereafter   257,926,903 
Total contractual repayments   445,300,644 
Adjustments to cost basis on debt investments(a)   (4,363,819)
Total Cost Basis of Investments Held at September 30, 2022:  $440,936,825 

 

(a)Adjustment to cost basis related to unamortized balance of OID investments.

 

Note 4. Related Party Transactions

 

Investment Advisory Agreement

 

The Company has entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Adviser. In accordance with the Investment Advisory Agreement, the Company pays the Adviser certain fees as compensation for its services, such fees consisting of a base management fee and an incentive fee (the “Incentive Fee”). The services the Adviser provides to the Company, subject to the overall supervision of the Board of Directors, include managing the day-to-day operations of, and providing investment services to, the Company. The Company also entered into a management fee waiver agreement with the Adviser (the “Waiver Agreement”), which the Company or the Adviser may terminate upon 60 days’ prior written notice.

 

26

 

 

Management Fee

 

The base management fee is calculated at an annual rate of 1.0% of the Company’s average gross assets including cash and any temporary investments in cash-equivalents, including U.S. government securities and other high-quality investment grade debt investments that mature in 12 months or less from the date of investment, payable quarterly in arrears on a calendar quarter basis.

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive the base management fee to the extent necessary so that the base management fee payable under the Investment Advisory Agreement equals, and is calculated in the same manner as if, the base management fee otherwise payable by the Company were calculated at an annual rate equal to 0.65% (instead of an annual rate of 1.00%).

 

For the three and nine months ended September 30, 2022, the Company recorded base management fees of $1,174,798 and $3,295,451, respectively, and waivers to the base management fees of $411,179 and $1,153,408, respectively, as set forth within the accompanying statements of operations. For the three and nine months ended September 30, 2021, the Company recorded base management fees of $947,361 and $2,810,141, respectively, and waivers to the base management fees of $331,576 and $983,548, respectively, as set forth within the accompanying statements of operations.

 

Incentive Fee

 

The Incentive Fee has two parts, as follows: the first part of the Incentive Fee is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses accrued for the quarter (including the base management fee, expenses payable under the Administration Agreement (as defined below) and any interest expense on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee).

 

The Company determines pre-incentive fee net investment income in accordance with GAAP, including, in the case of investments with a deferred interest feature, such as debt instruments with PIK interest, OID securities and accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.0% per quarter (4.0% annualized). The Company determines its average gross assets during each fiscal quarter and calculates the base management fee payable with respect to such amount at the end of each fiscal quarter.  As a result, a portion of the Company’s net investment income is included in its gross assets for the period between the date on which such income is earned and the date on which such income is distributed. Therefore, the Company’s net investment income used to calculate part of the Incentive Fee is also included in the amount of the Company’s gross assets used to calculate the 1.0% annual base management fee. The Company pays its Adviser an Incentive Fee with respect to its pre-incentive fee net investment income in each calendar quarter as follows:

 

  ·

no amount is paid on the income-portion of the Incentive Fee in any calendar quarter in which the Company’s pre-incentive fee net investment income does not exceed the hurdle of 1.0% (4.0% annualized);

 

27

 

 

 

 ● 100% of the Company’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 1.1765% in any calendar quarter (4.706% annualized). The Company refers to this portion of its pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 1.1765%) as the “catch-up” provision. The catch-up is meant to provide the Adviser with 15.0% of the pre-incentive fee net investment income as if a hurdle rate did not apply if net investment income exceeds 1.1765% in any calendar quarter (4.706% annualized); and
     
  ● 15.0% of the amount of the Company’s pre-incentive fee net investment income, if any, that exceeds 1.1765% in any calendar quarter (4.706% annualized) is payable to the Adviser.

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive its right to receive the Incentive Fee on pre-incentive fee net investment income to the extent necessary so that such Incentive Fee equals, and is calculated in the same manner as, the corresponding Incentive Fee on pre-incentive fee net investment income, if such Incentive Fee (i) were calculated based upon the Adviser receiving 10.0% (instead of 15.0%) of the applicable pre-incentive fee net investment income and (ii) did not include any “catch-up” feature in favor of the Adviser.

 

The second part of the Incentive Fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 15.0% of the Company’s realized capital gains, if any, on a cumulative basis from June 16, 2015, the effective date of the Company’s registration statement on Form 10, through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain Incentive Fees with respect to each of the investments in the Company’s portfolio.

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive the Incentive Fee on capital gains to the extent necessary so that such portion of the Incentive Fee equals, and is calculated in the same manner as, the corresponding Incentive Fee on capital gains, if such portion of the Incentive Fee were calculated based upon the Adviser receiving 10.0% (instead of 15.0%).

 

In addition, pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive both components of the Incentive Fee to the extent necessary so that it does not receive Incentive Fees which are attributable to income and gains of the Company that exceed an annualized rate of 12.0% in any calendar quarter.

 

The waivers from the Adviser will remain effective until terminated earlier by either party upon 60 days’ prior written notice.

 

Under the Investment Advisory Agreement, we do not pay any Capital Gains Incentive Fee in respect of unrealized capital appreciation in our portfolio. However, under U.S. generally accepted accounting principles, or GAAP, we are required to accrue for the Capital Gain Incentive Fee on a quarterly basis as if such unrealized capital appreciation were realized in full at the end of each period. If the Capital Gain Incentive Fee Base, adjusted as required by GAAP to include unrealized appreciation, is positive at the end of a period, then GAAP and the terms of the Investment Advisory Agreement require us to accrue a capital gain incentive fee equal to 20% of such amount, less the aggregate amount of actual capital gain incentive fees paid or capital gain incentive fees accrued under GAAP in all prior periods. If such amount is negative, then there is no accrual for such period. The resulting accrual under GAAP for a capital gain incentive fee payable in any period will result in additional expense if such cumulative amount is greater than in the prior period, or in a reversal of previously recorded expense if such cumulative amount is less than in the prior period. We can offer no assurance that any unrealized capital appreciation will be realized in the future.

 

For the three and nine months ended September 30, 2022, the Company recorded incentive fees related to net investment income of $1,027,544 and $2,201,758, respectively. Offsetting the incentive fees were waivers of the incentive fees of $771,274 and $1,809,582 for the three and nine months ended September 30, 2022, respectively, as set forth within the accompanying statements of operations. For the three and nine months ended September 30, 2021, the Company recorded incentive fees related to net investment income of $260,092 and $647,839, respectively. Offsetting the incentive fees were waivers of the incentive fees of $234,083 and $583,056 for the three and nine months ended September 30, 2021, respectively, as set forth within the accompanying statements of operations.

 

28

 

 

Administration Agreement and Administrative Fee

 

The Company has also entered into an administration agreement (the “Administration Agreement”) with Audax Management Company, LLC (the “Administrator”) pursuant to which the Administrator provides administrative services to the Company. Under the Administration Agreement, the Administrator performs, or oversees the performance of administrative services necessary for the operation of the Company, which include being responsible for the financial records which the Company is required to maintain and prepare reports filed with the SEC. In addition, the Administrator assists in determining and publishing the Company’s net asset value, oversees the preparation and filing of the Company’s tax returns and the printing and dissemination of reports to the Company’s stockholders, and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. The Company reimburses the Administrator for its allocable portion of the costs and expenses incurred by the Administrator for overhead in performance by the Administrator of its duties under the Administration Agreement, including the cost of facilities, office equipment and the Company’s allocable portion of cost of compensation and related expenses of its Chief Financial Officer and Chief Compliance Officer and their respective staffs, as well as any costs and expenses incurred by the Administrator relating to any administrative or operating services provided by the Administrator to the Company. Such costs are reflected as an administrative fee in the accompanying statements of operations. 

 

The Company has also entered into a fee waiver agreement with the Administrator, pursuant to which the Administrator may waive, in whole or in part, its entitlement to receive reimbursements from the Company.

 

The Company accrued administrative fees of $66,250 and $198,750 for the three and nine months ended September 30, 2022, respectively, as set forth within the accompanying statements of operations. The Company accrued administrative fees of $66,250 and $198,750 for the three and nine months ended September 30, 2021, respectively, as set forth within the accompanying statements of operations.

 

Related Party Fees

 

Fees due to related parties as of September 30, 2022 and December 31, 2021 on the Company’s accompanying statements of assets and liabilities were as follows:

 

   September 30, 2022   December 31, 2021 
Net base management fee due to Adviser  $1,467,058   $620,269 
Net incentive fee due to Adviser   349,544    20,060 
Total fees due to Adviser, net of waivers   1,816,602    640,329 
Fee due to Administrator, net of waivers   132,500    66,250 
Total Related Party Fees Due  $1,949,102   $706,579 

 

29

 

 

Note 5. Net Increase in Net Assets Resulting from Operations Per Share of Common Stock:

 

The following table sets forth the computation of basic and diluted net increase in net assets resulting from operations per weighted average share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), for the three and nine months ended September 30, 2022 and 2021:

 

   Three Months Ended
September 30, 2022		   Three Months Ended
September 30, 2021		   Nine Months Ended
September 30, 2022		   Nine Months Ended
September 30, 2021		 
Numerator for basic and diluted net increase in net assets resulting from operations per common share  $6,758,713   $4,241,313   $11,703,094   $13,539,858 
Denominator for basic and diluted weighted average common shares   45,789,768    39,909,673    44,439,981    39,295,800 
Basic and diluted net increase in net assets resulting from operations per common share  $0.15   $0.11   $0.26   $0.34 

 

Note 6. Income Tax

 

The Company has elected to be regulated as a BDC under the 1940 Act, as well as elected to be treated, and intends to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code. As a RIC, the Company generally is not subject to corporate-level U.S. federal income taxes on any ordinary income or capital gains that it timely distributes as dividends for U.S. federal income tax purposes to its stockholders. To qualify to be treated as a RIC, the Company is required to meet certain source of income and asset diversification requirements, and to timely distribute dividends out of assets legally available for distributions to its stockholders of an amount generally equal to at least 90% of the sum of its net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any (i.e., “investment company taxable income,” determined without regard to any deduction for dividends paid), for each taxable year. The amount to be paid out as distributions to the Company’s stockholders is determined by the Board of Directors and is based on management’s estimate of the fiscal year earnings. Based on that estimate, the Company intends to make the requisite distributions to its stockholders, which will generally relieve the Company from corporate-level U.S. federal income taxes. Although the Company currently intends to distribute its net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, recognized in respect of each taxable year as dividends out of the Company’s assets legally available for distribution, the Company in the future may decide to retain for investment and be subject to entity-level income tax on such net capital gains. Additionally, depending on the level of taxable income earned in a taxable year, the Company may choose to carry forward taxable income in excess of current year distributions into the next taxable year and incur a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, the Company will accrue an excise tax, if any, on estimated excess taxable income as such excess taxable income is earned.

 

The Company had aggregate distributions declared and paid to its stockholders for the year ended December 31, 2021 of $15,794,187, or $0.40 per share. The tax character of the distributions declared and paid represented $15,541,807 from ordinary income and $252,380 from tax return of capital. The Company had aggregate distributions declared and paid to its stockholders for the year ended December 31, 2020 of $16,177,757, or $0.43 per share. The tax character of the distributions declared and paid represented $15,911,638 from ordinary income and $266,119 from tax return of capital.

 

During the nine months ended September 30, 2022, the Company declared distributions of $8,739,352, or $0.20 per share. The tax character of the distributions declared represented $8,739,352 from ordinary income. During the nine months ended September 30, 2021, the Company declared and paid distributions of $7,801,905, or $0.20 per share. The tax character of the distributions declared and paid represented $7,656,579 from ordinary income and $145,326 from tax return capital.

 

The determination of the tax attributes of the Company’s distributions is made annually at the end of the Company’s taxable year, based upon the Company’s taxable income for the full taxable year and distributions paid for the full taxable year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full taxable year. The actual tax characteristics of distributions to stockholders will be reported to the Company’s stockholders subject to information reporting after the close of each calendar year on Form 1099-DIV.

 

30

 

 

U.S. GAAP requires adjustments to certain components of net assets to reflect permanent differences between financial and tax reporting. These adjustments have no effect on net asset value per share. For the years ended December 31, 2021 and 2020, the Company recorded the following adjustments for permanent book to tax differences to reflect their tax characteristics. The adjustments only change the classification in net assets in the statements of assets and liabilities. During the years ended December 31, 2021 and 2020, the Company reclassified for book purposes amounts arising from permanent book/tax differences primarily related to distribution redesignations and return of capital distributions.

 

   Year Ended
December 31, 2021		   Year Ended
December 31, 2020		 
Capital in excess of par value  $   -   $- 
Accumulated net investment income   -    (37,662)
Accumulated net realized gain (loss)   -    37,662 

 

At December 31, 2021 and 2020, the components of distributable taxable earnings as detailed below differ from the amounts reflected in the Company’s statements of assets and liabilities by temporary book/tax differences primarily arising from amortization of organizational expenditures.

  

   As of
December 31,
2021		   As of
December 31,
2020		 
Other temporary book/tax differences  $(172,677)  $(192,992)
Net tax basis unrealized depreciation   (1,238,244)   (3,630,949)
Accumulated net realized loss   (3,353,867)   (3,157,649)
Components of tax distributable (loss) earnings at period end  $(4,764,788)  $(6,981,590)

 

Certain losses incurred by the Company after October 31 of a taxable year are deemed to arise on the first business day of the Company’s next taxable year. The Company did not incur such losses after October 31 of the Company’s taxable year ended December 31, 2021.

 

Capital losses are generally eligible to be carried forward indefinitely and retain their status as short-term or long-term in the manner originally incurred by the Company. As of December 31, 2021, the Company has long-term capital loss carryforward of $3,353,867. The Company has evaluated tax positions it has taken, expects to take, or that are otherwise relevant to the Company for purposes of determining whether any relevant tax positions would “more-likely-than-not” be sustained by the applicable tax authority in accordance with ASC Topic 740, “Income Taxes,” as modified by ASC Topic 946. The Company has analyzed such tax positions and has concluded that no unrecognized tax benefits should be recorded for uncertain tax positions for taxable years that may be open. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. The Company’s U.S. federal tax returns for fiscal years 2019, 2020, and 2021 remain subject to examination by the Internal Revenue Service. The Company records tax positions that are not deemed to meet a more-likely-than-not threshold as tax expenses as well as any applicable penalties or interest associated with such positions. During each of the years ended December 31, 2021, 2020, and 2019, no tax expense or any related interest or penalties were incurred.

 

31

 

 

Note 7. Equity

 

An investor made capital commitments to the Company in the amounts set forth below as of the date opposite each capital commitment:

 

Amount   Date
$140,000,000    June 23, 2015
$50,000,000    December 2, 2016
$100,000,000    On December 7, 2017
$40,000,000    March 22, 2019
$30,000,000    September 23, 2019
$11,200,000    March 20, 2020
$8,900,000    May 28, 2021
$110,000,000    December 15, 2021

 

As of September 30, 2022, $25,000,000 of total capital commitments remained unfunded by the Company’s investors.

 

The number of shares of Common Stock issued and outstanding as of September 30, 2022 and December 31, 2021, were 45,314,885 and 39,961,408, respectively.

 

On July 14, 2022, the Company issued a Tender Offer to repurchase $15.0 million worth of Common Stock from the stockholders. The Offer was accepted on August 11, 2022.

 

The following table details the activity of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021:

 

Three Months Ended September 30, 2022  Common Stock   Capital in Excess
of Par Value		   Total
Distributable
(Loss) Earnings		   Total
Stockholders'
Equity		 
Balance as of June 30, 2022  $43,697   $413,668,452   $(8,559,759)  $405,152,390 
Net investment income   -    -    6,593,356    6,593,356 
Net realized gain from investment transactions   -    -    93,515    93,515 
Net change in unrealized appreciation on investments   -    -    71,842    71,842 
Issuance of shares   3,236    29,996,764    -    30,000,000 
Repurchase of shares   (1,618)   (14,998,382)   -    (15,000,000)
Balance as of September 30, 2022  $45,315   $428,666,834   $(1,801,046)  $426,911,103 

 

Three Months Ended September 30, 2021  Common Stock   Capital in Excess
of Par Value		   Total
Distributable
(Loss) Earnings		   Total
Stockholders'
Equity		 
Balance as of June 30, 2021  $39,009   $369,880,141   $(5,339,624)  $364,579,526 
Net investment income   -    -    3,964,041    3,964,041 
Net realized gain from investment transactions   -    -    183,204    183,204 
Net change in unrealized appreciation on investments   -    -    94,068    94,068 
Issuance of shares   952    8,899,048    -    8,900,000 
Balance as of September 30, 2021  $39,961   $378,779,189   $(1,098,311)  $377,720,839 

 

32

 

 

 

Nine Months Ended September 30, 2022  Common Stock   Capital in Excess
of Par Value		   Total
Distributable
(Loss) Earnings		   Total
Stockholders'
Equity		 
Balance as of December 31, 2021  $39,961   $378,672,161   $(4,764,788)  $373,947,334 
Net investment income   -    -    15,871,538    15,871,538 
Net realized gain from investment transactions   -    -    431,080    431,080 
Net change in unrealized depreciation on investments   -    -    (4,599,524)   (4,599,524)
Issuance of shares   9,092    84,990,908    -    85,000,000 
Repurchase of shares   (3,738)   (34,996,262)   -    (35,000,000)
Distributions to Stockholders   -    -    (8,739,352)   (8,739,352)
Reinvested Dividends   -    27    -    27 
Balance as of September 30, 2022  $45,315   $428,666,834   $(1,801,046)  $426,911,103 
                     

 

Nine Months Ended September 30, 2021  Common Stock   Capital in Excess
of Par Value		   Total
Distributable
(Loss) Earnings		   Total
Stockholders'
Equity		 
Balance as of December 31, 2020  $38,343   $363,826,108   $(6,981,590)  $356,882,861 
Net investment income   -    -    11,620,620    11,620,620 
Net realized loss from investment transactions   -    -    (450,168)   (450,168)
Net change in unrealized appreciation on investments   -    -    2,369,406    2,369,406 
Issuance of shares   1,618    15,098,382    -    15,100,000 
Distributions to Stockholders   -    (145,326)   (7,656,579)   (7,801,905)
Reinvested Dividends   -    25    -    25 
Balance as of September 30, 2021  $39,961   $378,779,189   $(1,098,311)  $377,720,839 

 

Note 8. Borrowings

 

Short-Term Borrowngs

 

From time to time, the Company finances the purchase of certain investments through repurchase agreements. In the repurchase agreements, the Company enters into a trade to sell an investment and contemporaneously enters into a trade to buy the same investment back on a specified date in the future with the same counterparty. Investments sold under repurchase agreements are accounted for as collateralized borrowings as the sale of the investment does not qualify for sale accounting under ASC Topic 860—Transfers and Servicing and remains as an investment on the Statement of Assets and Liabilities. The Company uses repurchase agreements as a short-term financing alternative. As of September 30, 2022, the Company had short-term borrowings outstanding of $18,681,667. For the three and nine months ended September 30, 2022, the Company recorded interest expense in connection with short-term borrowings of $322,175 and $458,976, respectively. As of September 30, 2021, the Company had no short-term borrowings outstanding.

 

Note 9. Commitments and Contingencies

 

The Company may enter into certain credit agreements that include loan commitments where all or a portion of such commitment may be unfunded. The Company is generally obligated to fund the unfunded loan commitments at the borrowers’ discretion. Funded portions of credit agreements are presented on the accompanying schedule of investments. Unfunded loan commitments and funded portions of credit agreements are fair valued and unrealized appreciation or depreciation, if any, have been included in the accompanying statements of assets and liabilities and statements of operations.

 

33

 

 

The following table summarizes the Company’s significant contractual payment obligations as of September 30, 2022 and December 31, 2021:

 

Investment  Industry  September 30, 2022   December 31, 2021 
Alera, Unitranche, 10.09% (SOFR + 6.50%), maturity 10/2/28  Banking, Finance, Insurance & Real Estate  $2,666,667   $- 
PracticeTek, Senior Secured Delayed Draw Term Loan, 9.25% (LIBOR + 5.50%), maturity 11/23/27  High Tech Industries   1,889,313    2,862,595 
Cherry Bekaert, Senior Secured Delayed Draw Term Loan, 9.09% (SOFR + 5.50%), maturity 6/30/28  Banking, Finance, Insurance & Real Estate   1,232,944    - 
EdgeCo, Senior Secured Delayed Draw Term D Loan, 8.50% (LIBOR + 4.75%), maturity 6/1/26  Banking, Finance, Insurance & Real Estate   1,200,000    - 
VC3, Unitranche, 8.84% (SOFR + 5.25%), maturity 3/12/27  Services: Business   1,176,923    - 
Golden Source, Senior Secured , 9.09% (SOFR + 5.50%), maturity 5/12/28  High Tech Industries   938,967    - 
Discovery Education, Senior Secured Delayed Draw Term Loan, 9.34% (SOFR + 5.75%), maturity 3/10/29  Services: Business   807,692    - 
Eliassen, Senior Secured Initial Delayed Draw Term Loan, 9.34% (SOFR + 5.75%), maturity 4/14/28  Services: Business   629,630    - 
Ned Stevens, Senior Secured Delayed Draw Term Loan, 9.59% (SOFR + 6.00%), maturity 7/2/29  Services: Consumer   533,769    - 
RevHealth, Senior Secured Revolving Loan, 9.34% (SOFR + 5.75%), maturity 7/21/28  Healthcare & Pharmaceuticals   513,699    - 
Advancing Eyecare, Senior Secured Initial Delayed Draw Term Loan, 9.34% (SOFR + 5.75%), maturity 6/13/29  Healthcare & Pharmaceuticals   500,000    - 
CoolSys, Senior Secured Delayed Draw Term Loan, 8.50% (LIBOR + 4.75%), maturity 8/11/28  Services: Business   465,278    465,278 
Cerity, Senior Secured Delayed Draw Term Loan, 9.34% (SOFR + 5.75%), maturity 5/31/29  Banking, Finance, Insurance & Real Estate   458,781    - 
Golden Source, Senior Secured Revolving Credit, 9.09% (SOFR + 5.50%), maturity 5/12/28  High Tech Industries   434,272    - 
Vertellus, Senior Secured Revolving Credit Loan, 9.34% (SOFR + 5.75%), maturity 12/22/25  Chemicals, Plastics & Rubber   418,421    379,266 
Blue Cloud, Senior Secured Delayed Draw Term Loan, 8.75% (LIBOR + 5.00%), maturity 1/21/28  Healthcare & Pharmaceuticals   400,000    - 
Therapy Brands, Senior Secured Delayed Draw Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 5/18/28  Healthcare & Pharmaceuticals   382,979    382,979 
Micro Merchant Systems, Senior Secured Delayed Draw Term Loan, 9.50% (LIBOR + 5.75%), maturity 12/14/27  Healthcare & Pharmaceuticals   370,370    - 
Cherry Bekaert, Senior Secured Revovling Credit, 9.09% (SOFR + 5.50%), maturity 6/30/28  Banking, Finance, Insurance & Real Estate   369,883    - 
InnovateMR, Senior Secured Revolving Loan, 9.25% (LIBOR + 5.50%), maturity 1/20/28  Services: Business   365,388    - 
PracticeTek, Senior Secured Revolving Loan, 9.25% (LIBOR + 5.50%), maturity 11/23/27  High Tech Industries   357,824    357,824 
Liberty Group, Senior Secured Delayed Draw Term Loan, 9.34% (SOFR + 5.75%), maturity 6/15/28  Services: Business   340,909    - 
Evans Network, Senior Secured Delayed Draw Term Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 8/19/28  Transportation: Cargo   326,531    326,531 
The Facilities Group, Senior Secured Delayed Draw Term Loan, 9.50% (LIBOR + 5.75%), maturity 11/30/27  Services: Business   298,266    758,671 
Paragon Films, Senior Secured Delayed Draw Term Loan (First Lien), 8.75% (LIBOR + 5.00%), maturity 12/16/28  Containers, Packaging & Glass   297,030    297,030 
MediaRadar, Senior Secured Revolving Loan, 9.59% (SOFR + 6.00%), maturity 6/1/29  High Tech Industries   296,296    - 
Cerity, Senior Secured Revolving Credit Facility, 9.34% (SOFR + 5.75%), maturity 5/31/29  Banking, Finance, Insurance & Real Estate   286,738    - 
Dessert Holdings, Senior Secured Delayed Draw Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 6/9/28  Beverage, Food & Tobacco   281,250    281,250 
BETA, Senior Secured Revolving Credit Facility, 8.84% (SOFR + 5.25%), maturity 7/1/27  Banking, Finance, Insurance & Real Estate   276,289    - 
Burke Porter Group, Senior Secured Revolving Credit Loan, 9.59% (SOFR + 6.00%), maturity 7/31/28  Capital Equipment   273,333    - 
Ned Stevens, Senior Secured Revolving Credit, 9.59% (SOFR + 6.00%), maturity 6/30/28  Services: Consumer   236,020    - 
Discovery Education, Senior Secured Revolving Facility, 9.34% (SOFR + 5.75%), maturity 4/7/28  Services: Business   230,769    - 
Blue Cloud, Senior Secured Revolving Loan, 8.59% (SOFR + 5.00%), maturity 1/21/28  Healthcare & Pharmaceuticals   227,273    - 
Liberty Group, Senior Secured Revolving Loan, 9.34% (SOFR + 5.75%), maturity 12/15/28  Services: Business   204,545    - 
Radwell, Senior Secured Delayed Draw Term Loan, 9.34% (SOFR + 5.75%), maturity 4/1/29  Capital Equipment   200,001    - 
Alliance Environmental Group, Senior Secured Delayed Draw Term Loan, 9.75% (LIBOR + 6.00%), maturity 12/30/27  Environmental Industries   182,119    662,252 
Alliance Environmental Group, Senior Secured Revolving Loan, 9.75% (LIBOR + 6.00%), maturity 12/30/27  Environmental Industries   182,119    331,126 
Ivy Rehab, Senior Secured Delayed Draw Term Loan (First Lien), 8.34% (SOFR + 4.75%), maturity 4/23/29  Healthcare & Pharmaceuticals   179,739    - 
Epic Staffing Group, Senior Secured Delayed Draw Term Loan, 9.59% (SOFR + 6.00%), maturity 6/28/29  Healthcare & Pharmaceuticals   174,419    - 
Ivy Rehab, Senior Secured Revolving Credit (First Lien), 8.34% (SOFR + 4.75%), maturity 4/23/29  Healthcare & Pharmaceuticals   168,350    - 
EPIC Insurance, Senior Secured Revolving Loan, 9.00% (LIBOR + 5.25%), maturity 9/30/27  Banking, Finance, Insurance & Real Estate   161,841    125,909 
USALCO, Senior Secured Revolving Loan, 9.75% (LIBOR + 6.00%), maturity 10/19/26  Chemicals, Plastics & Rubber   161,290    298,387 
Tank Holding, Senior Secured Revolving Credit Loan, 9.59% (SOFR + 6.00%), maturity 3/31/28  Capital Equipment   147,692    - 
Secretariat International, Senior Secured Delayed Draw Term Loan (First Lien), 8.50% (LIBOR + 4.75%), maturity 12/29/28  Services: Business   134,211    - 
Hissho Sushi, Senior Secured Revolving Credit Loan, 9.59% (SOFR + 6.00%), maturity 5/18/28  Beverage, Food & Tobacco   133,333    - 
Insight Global, Senior Secured Revolving Loan, 9.75% (LIBOR + 6.00%), maturity 9/22/27  Services: Business   130,823    67,089 
Community Brands, Senior Secured Delayed Draw Term Loan, 9.34% (SOFR + 5.75%), maturity 2/24/28  Banking, Finance, Insurance & Real Estate   117,647    - 
Omni Logistics, Senior Secured Revolving Credit Loan (First Lien), 8.75% (LIBOR + 5.00%), maturity 12/30/25  Transportation: Cargo   113,834    85,376 
Micro Merchant Systems, Senior Secured Revolving Loan, 9.50% (LIBOR + 5.75%), maturity 12/14/27  Healthcare & Pharmaceuticals   111,111    - 
Cleaver Brooks, Senior Secured Revolving Credit, 9.34% (SOFR + 5.75%), maturity 7/18/28  Capital Equipment   107,692    - 
Specialty Products & Insulation, Senior Secured Delayed Draw Term Loan, 8.84% (SOFR + 5.25%), maturity 12/21/27  Construction & Building   101,523    - 
Forefront, Senior Secured Delayed Draw Term Loan, 7.84% (SOFR + 4.25%), maturity 4/2/29  Healthcare & Pharmaceuticals   90,818    - 
Therma Holdings, Senior Secured Initial DDTL (2021), 7.50% (LIBOR + 3.75%), maturity 12/16/27  Services: Business   90,276    - 
FLS Transportation, Senior Secured Revolving Loan, 9.00% (LIBOR + 5.25%), maturity 12/17/27  Transportation: Cargo   88,889    - 
Radwell, Senior Secured Revolving Loan, 9.34% (SOFR + 5.75%), maturity 4/1/28  Capital Equipment   79,998    - 
VC3, Senior Secured Revolving Credit, 8.84% (SOFR + 5.25%), maturity 3/12/27  Services: Business   76,923    - 
Paradigm Oral Health, Senior Secured Revolving Loan, 8.34% (SOFR + 4.75%), maturity 7/9/26  Healthcare & Pharmaceuticals   74,074    - 
CPS, Senior Secured Revolving Credit Loan, 9.50% (LIBOR + 5.75%), maturity 6/1/28  Healthcare & Pharmaceuticals   71,414    - 
Applied Adhesives, Senior Secured Revolving Loan, 8.75% (LIBOR + 5.00%), maturity 3/12/27  Containers, Packaging & Glass   71,111    64,000 
Omni Logistics, Senior Secured Tranche 2 DDTL (First Lien), 8.75% (LIBOR + 5.00%), maturity 12/30/26  Transportation: Cargo   68,750    118,750 
Keter Environmental Services, Unitranche, 10.25% (LIBOR + 6.50%), maturity 10/29/27  Environmental Industries   59,280    - 
Community Brands, Senior Secured Revolving Loan, 9.34% (SOFR + 5.75%), maturity 2/24/28  Banking, Finance, Insurance & Real Estate   58,824    - 
Tekni-Plex, Senior Secured Tranche B-3 DDTL Term Loan, 7.75% (LIBOR + 4.00%), maturity 9/15/28  Containers, Packaging & Glass   52,766    84,681 
Magnate, Senior Secured Delayed Draw Term Loan (First Lien), 9.25% (LIBOR + 5.50%), maturity 12/29/28  Transportation: Cargo   36,607    - 
Service Logic, Senior Secured Delayed Draw Term Loan (First Lien), 7.75% (LIBOR + 4.00%), maturity 10/29/27  Services: Business   33,462    196,154 
BlueHalo, Senior Secured Revolving Loan, 9.75% (LIBOR + 6.00%), maturity 10/31/25  Aerospace & Defense   31,144    73,967 
Applied Adhesives, Senior Secured Delayed Draw Term Loan, 8.75% (LIBOR + 5.00%), maturity 3/12/27  Containers, Packaging & Glass   27,721    62,963 
EPIC Insurance, Senior Secured Delayed Draw Term Loan, 9.00% (LIBOR + 5.25%), maturity 9/29/28  Banking, Finance, Insurance & Real Estate   21,877    241,379 
American Vision Partners, Senior Secured Delayed Draw Term Loan, 9.50% (LIBOR + 5.75%), maturity 9/30/27  Healthcare & Pharmaceuticals   -    1,453,488 
InMark, Senior Secured Initial Delayed Draw Term Loan, 9.75% (LIBOR + 6.00%), maturity 12/23/26  Containers, Packaging & Glass   -    1,250,000 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 8.00% (LIBOR + 4.25%), maturity 7/9/24  Healthcare & Pharmaceuticals   -    761,905 
AmeriVet, Senior Secured Incremental Delayed Draw Term Loan, 8.50% (LIBOR + 4.75%), maturity 6/5/24  Healthcare & Pharmaceuticals   -    536,000 
Brook & Whittle, Senior Secured Delayed Draw Term Loan (First Lien), 7.59% (SOFR + 4.00%), maturity 12/14/28  Containers, Packaging & Glass   -    529,101 
Capstone Logistics, Senior Secured Initial DDTL Loan (First Lien), 8.50% (LIBOR + 4.75%), maturity 11/12/27  Transportation: Cargo   -    221,132 
Ned Stevens, Senior Secured Revolving Loan, 8.50% (LIBOR + 4.75%), maturity 9/30/24  Services: Consumer   -    130,719 
Alpaca, Senior Secured Revolver, 8.75% (LIBOR + 5.00%), maturity 4/19/24  Healthcare & Pharmaceuticals   -    129,426 
Therma Holdings, Senior Secured Initial DDTL (2021), 7.50% (LIBOR + 3.75%), maturity 12/16/27  Services: Business   -    96,880 
Gastro Health, Senior Secured Delayed Draw Term Loan (First Lien), 8.25% (LIBOR + 4.50%), maturity 7/3/28  Healthcare & Pharmaceuticals   -    94,975 
Flow Control Group, Senior Secured Amendment No. 1 Delayed Draw Term Loan (First Lien), 7.50% (LIBOR + 3.75%), maturity 3/31/28  Capital Equipment   -    77,083 
Alpaca, Senior Secured Delayed Draw Term A-2 Loan, 9.00% (LIBOR + 5.25%), maturity 4/19/24  Healthcare & Pharmaceuticals   -    66,723 
ImageFirst, Senior Secured Delayed Draw Tranche A Term Loan, 8.25% (LIBOR + 4.50%), maturity 4/27/28  Healthcare & Pharmaceuticals   -    22,727 
Solis Mammography, Senior Secured Delayed Draw Term Loan (First Lien), 8.50% (LIBOR + 4.75%), maturity 4/17/28  Healthcare & Pharmaceuticals   -    20,000 
      $23,229,729   $13,913,615 

 

Unfunded commitments represent all amounts unfunded as of September 30, 2022 and December 31, 2021. These amounts may or may not be funded to the borrowing party now or in the future.

 

34

 

 

Note 10. Financial Highlights

 

   Three Months Ended
September 30, 2022		   Three Months Ended
September 30, 2021		   Nine Months Ended
September 30, 2022		   Nine Months Ended
September 30, 2021		 
Per Share Data:                    
Net asset value, beginning of period  $9.27   $9.35   $9.36   $9.31 
Net investment income(a)   0.14    0.10    0.36    0.30 
Net realized gain (loss) on investments and change in unrealized (depreciation) appreciation on investments(a)(b)   0.01    -    (0.10)   0.04 
Net increase in net assets resulting from operations  $0.15   $0.10   $0.26   $0.34 
                     
Effect of equity capital activity Distributions to stockholders from net investment income   -    -    (0.20)   (0.20)
Net asset value at end of period  $9.42   $9.45   $9.42   $9.45 
Total return(c)(g)   1.62%   1.07%   2.78%   3.65%
Shares of common stock outstanding at end of period   45,314,885    39,961,405    45,314,885    39,961,405 
                     
Statement of Assets and Liabilities Data:                    
Net assets at end of period  $426,911,103   $377,720,839   $426,911,103   $377,720,839 
Average net assets(d)   424,590,597    376,129,598    414,120,178    370,187,593 
                     
Ratio/Supplemental Data:                    
Ratio of gross expenses to average net assets-annualized(e)   2.68%   1.63%   2.26%   1.62%
Ratio of net expenses to average net assets- annualized(f)   1.57%   1.04%   1.30%   1.05%
Ratio of net investment income to average net assets-annualized   6.16%   4.18%   5.12%   4.20%
Portfolio turnover(g)   0.92%   1.38%   0.95%   4.80%

 

(a) Based on weighted average basic per share of Common Stock data.
(b) The per share amount varies from the net realized and unrealized gain (loss) for the period because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time.
(c) Total return is based on the change in net asset value during the respective periods.  Total return also takes into account
  dividends and distributions, if any, reinvested in accordance with the Company's dividend reinvestment plan.
(d) Average net assets are computed using the average balance of net assets at the end of each month of the reporting  period.
(e) Ratio of gross expenses to average net assets is computed using expenses before waivers from the Adviser and Administrator.
(f) Ratio of net expenses to average net assets is computed using total expenses net of waivers from the Adviser and Administrator.
(g) Not annualized.

 

Note 11. Indemnification

 

In the normal course of business, the Company may enter into certain contracts that provide a variety of indemnities. The Company’s maximum exposure under these indemnities is unknown. The Company does not consider it necessary to record a liability in this regard.

 

Note 12. Subsequent Events

 

Subsequent to September 30, 2022 through November 14, 2022, the Company invested $8,129,640 at cost in 22 different portfolio companies.

 

On September 23, 2022, the Company delivered a capital drawdown notice to an investor relating to the sale of 2,653,928 shares of the Common Stock for an aggregate offering price of $25.0 million. The sale closed on October 7, 2022. On October 14, 2022, the Company issued a Tender Offer to repurchase $15.0 million worth of Common Stock from the Stockholder. The Offer was accepted on November 10, 2022.

 

The sale of Common Stock was made pursuant to a subscription agreement entered into by the Company and the investor. Under the terms of the subscription agreement, the investor is required to fund drawdowns to purchase shares of Common Stock up to the amount of its capital commitment on an as-needed basis with a minimum of 10 calendar days’ prior notice.

 

The issuance of the Common Stock is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof. The Company has not engaged in general solicitation or advertising with regard to the issuance and sale of the Common Stock and has not offered securities to the public in connection with such issuance and sale.

 

35

 

 

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

 

In this quarterly report on Form 10-Q, except where the context suggests otherwise, the terms “we,” us,” our” and the “Company” refer to Audax Credit BDC Inc. The information contained in this section should be read in the conjunction with the financial statements and notes to the financial statements appearing elsewhere in this quarterly report.

 

This quarterly report and other statements contain forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, our current and prospective portfolio investments, our industry, our beliefs and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including:

 

●our future operating results;

●our business prospects and the prospects of our portfolio companies;

●changes in political, economic or industry conditions, rising interest rates and conditions affecting the financial and capital markets, which could result in changes to the value of our assets;

●changes in the general economy, slowing economy, rising inflation and risk of recession;

●supply chain disruptions in connection with shutdowns in China and elsewhere and similar factors related to COVID-19;

●uncertainty surrounding financial and political stability of the United States, the United Kingdom, the European Union, and China, and the war between Russia and Ukraine;

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

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

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

●risk associated with possible disruptions in our operations or the economy generally;

●the effect of investments that we expect to make;

●our contractual arrangements and relationships with third parties;

●actual and potential conflicts of interest with Adviser and its affiliates;

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

●our ability to continue to effectively manage our business due to COVID-19 and similar pandemics;

●the adequacy of our financing sources and working capital;

●the ability of our Adviser and its affiliates to attract and retain highly talented professionals;

●our ability to qualify and maintain our qualification as a BDC and as a RIC; and

●the risks, uncertainties and other factors we identify under “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K filed on March 25, 2022 (file no. 814-01154) (the “Annual Report”).

 

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this quarterly report should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in the section entitled “Item 1A. Risk Factors” of this quarterly report and our Annual Report as well as risk factors described or identified in other filings we may make with the SEC from time to time. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. Moreover, we assume no duty and do not undertake to update the forward-looking statements. The forward-looking statements and projections contained in this quarterly report are excluded from the safe harbor protection provided by Section 27A of the Securities Act and provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

36

 

 

OVERVIEW

 

Audax Credit BDC Inc. is a Delaware corporation that was formed on January 29, 2015. We are an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a BDC under the 1940 Act. In addition, we have elected to be treated for U.S. federal income tax purposes, and intends to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code.

 

Our investment objective is to generate current income and, to a lesser extent, long-term capital appreciation. We intend to meet our investment objective by investing primarily in senior secured debt of privately owned U.S. middle market companies. We intend to invest at least 80% of our net assets plus the amount of any borrowings in “credit instruments,” which we define as any fixed income instruments.

 

Although we have no present intention of doing so, we may decide to incur leverage. If we do incur leverage, however, we anticipate that it will be used in limited circumstances and on a short-term basis for purposes such as funding distributions. As a BDC, we are limited in our use of leverage under the 1940 Act. Under the 1940 Act, a BDC generally is required to maintain asset coverage of 200% for senior securities representing indebtedness (such as borrowings from banks or other financial institutions) or stock (such as preferred stock). The Small Business Credit Availability Act (the “SBCAA”), which was signed into law on March 23, 2018, provides that a BDC's required asset coverage under the 1940 Act may be reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). This reduction in asset coverage permits a BDC to double the amount of leverage it may utilize, subject to certain approval, timing and reporting requirements, including either stockholder approval or approval of a majority of the directors who are not “interested persons” (as defined in the 1940 Act) of the BDC and who have no financial interest in the arrangement. In addition, as a non-traded BDC, if we receive the relevant approval to increase our authorized leverage, we will be required to offer our stockholders the opportunity to sell their shares of Common Stock over the next year following the calendar quarter in which the approval was obtained. In determining whether to use leverage, we will analyze the maturity, covenants and interest rate structure of the proposed borrowings, as well as the risks of such borrowings within the context of our investment outlook and the impact of leverage on our investment portfolio. The amount of any leverage that we will employ as a BDC will be subject to oversight by our Board of Directors.

 

We generate revenue in the form of interest on the debt securities that we hold in our portfolio companies. The senior debt we invest in generally has stated terms of three to ten years. Our senior debt investments generally bear interest at a floating rate. Interest on debt securities is generally payable quarterly or semiannually. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally will become due at the maturity date. In addition, we may generate revenue in the form of commitment and other fees in connection with transactions, although we do not expect to do so. OID as well as market discount and premium are accreted and amortized in determining our interest income. We record any prepayment premiums on loans and debt securities as income.

 

COVID-19 and Related Developments

 

Market disruptions caused by the COVID-19 pandemic have adversely affected the business operations of some, if not all, of our portfolio companies and may continue to affect their operations, as well as and the operations of our Adviser. We cannot predict the ultimate full impact of COVID-19 on our business operations, the extent of the global economic recovery and the uncertainty surrounding the efficiency and success of the global vaccination efforts as more contagious strains of the virus emerge in various countries, including the United States. Such contagious variants, in conjunction with business re-openings, more frequent social gatherings, and decreasing public concern regarding COVID-19 have resulted in surges in the rates of COVID-19 infections in the United States and worldwide. Even if the prevalence of COVID-19 diminishes, lingering impacts such as supply chain disruptions and inflation are negatively affecting our portfolio companies and may lead to a decline in economic growth. We expect COVID-19 and/or other health pandemics and consequent supply chain disruptions to affect negatively our operating results and financial condition and the operating results and financial condition of our portfolio companies. We will continue to monitor developments relating to the COVID-19 pandemic and guidance from U.S. and international authorities, including federal, state and local public health officials and may take additional actions based on their recommendations.

 

37

 

 

 

PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY

 

Portfolio Composition

 

The fair value of our investments, comprised of syndicated loans and equity, as of September 30, 2022, was approximately $437,641,601 and held in 230 portfolio companies. The fair value of our investments, comprised of syndicated loans and equity, as of December 31, 2021, was approximately $403,054,374 and held in 215 portfolio companies as of December 31, 2021.

 

During the nine months ended September 30, 2022, we invested in 105 new investments for a combined $85,123,197 and in existing investments for a combined $9,221,444. We also received $52,253,887 in repayments from investments and $4,047,932 from investments sold during the nine months ended September 30, 2022. During the nine months ended September 30, 2021, we invested in 68 new investments for a combined $81,669,043 and in existing investments for a combined $7,643,513. We also received $66,357,177 in repayments from investments and $17,331,786 from investments sold during the nine months ended September 30, 2021.

 

In addition, for the three and nine months ended September 30, 2022, we had a change in unrealized appreciation (depreciation) of approximately $71,842 and $(4,599,524) respectively, and realized gains of $93,515 and $431,080, respectively. In addition, for the three and nine months ended September 30, 2021, we had a change in unrealized appreciation of approximately $94,068 and $2,369,406, respectively, and realized gains (losses) of $183,204 and $(450,168), respectively.

 

Our investment activity for the nine months ended September 30, 2022 and 2021, is presented below:

 

   Nine Months Ended
September 30, 2022		   Nine Months Ended
September 30, 2021		 
Beginning investment portfolio, at fair value  $403,054,374   $355,359,843 
           Investments in new portfolio investments   85,123,197    81,669,043 
           Investments in existing portfolio investments   9,221,444    7,643,513 
           Principal repayments   (52,253,887)   (66,357,177)
           Proceeds from investments sold   (4,047,932)   (17,331,786)
           Change in premiums, discounts and amortization   712,849    538,786 
           Net change in unrealized (depreciation) appreciation on investments   (4,599,524)   2,369,406 
           Realized gain (loss) on investments   431,080    (450,168)
Ending portfolio investment activity, at fair value  $437,641,601   $363,441,460 
Number of portfolio investments   257    233 
Average investment amount, at cost  $1,725,601   $1,565,249 
Percentage of  investments at floating rates   100.00%   99.42%

 

As of September 30, 2022 and December 31, 2021, our entire portfolio consisted of non-controlled/non-affiliated investments.

 

RECENT DEVELOPMENTS

 

Subsequent to September 30, 2022 and through November 14, 2022, we invested $8,129,640 at cost in 22 portfolio companies.

 

On September 23, 2022, we delivered a capital drawdown notice to an investor relating to the sale of 2,653,928 shares of the Common Stock for an aggregate offering price of $25.0 million. The sale closed on August 11, 2022. On October 13, 2022, the Company issued a Tender Offer to repurchase $15.0 million worth of Common Stock. The Offer was accepted on November 10, 2022.

 

38

 

 

The sale of Common Stock was made pursuant to a subscription agreement entered into by us and the investor. Under the terms of the subscription agreement, the investor is required to fund drawdowns to purchase shares of Common Stock up to the amount of its capital commitment on an as-needed basis with a minimum of 10 calendar days’ prior notice.

 

The issuance of the Common Stock is exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof. We have not engaged in general solicitation or advertising with regard to the issuance and sale of the Common Stock and have not offered securities to the public in connection with such issuance and sale.

 

RESULTS OF OPERATIONS

 

The net increase or decrease in net assets from operations may vary substantially from period to period as a result of various factors, including the recognition of realized gains and/or losses and net change in unrealized appreciation and depreciation. This “Results of Operations” section should be read in conjunction with the “COVID-19 Developments” section above.

 

Revenue

 

Total investment income for the three and nine months ended September 30, 2022 and 2021 is presented in the table below.

 

   Three Months Ended
September 30, 2022		   Three Months Ended
September 30, 2021		   Nine Months Ended
September 30, 2022		   Nine Months Ended
September 30, 2021		 
Total interest income from non-controlled/non- affiliated investments  $8,067,475   $4,924,039   $19,519,603   $14,455,194 
Total other interest income   10,850    477    11,630    1,107 
Total other income   196,474    20,772    374,849    83,774 
Total investment income  $8,274,799   $4,945,288   $19,906,082   $14,540,075 

 

Total investment income for the three months ended September 30, 2022 increased to $8,274,799 from $4,945,288 for the three months ended September 30, 2021, and was driven by the increase in LIBOR. Total investment income for the nine months ended September 30, 2022 increased to $19,906,082 from $14,540,075 for the nine months ended September 30, 2021, and was driven by an increase in LIBOR and from our increasing investment balance. As of September 30, 2022 and 2021, the size of our debt portfolio was $440,936,825 and $364,195,915 at amortized cost, respectively, with total debt principal amount outstanding of $445,300,644 and $366,609,077, respectively.

 

Expenses

 

Total expenses net of waivers for the three and nine months ended September 30, 2022 and 2021, were as follows:

 

   Three Months Ended
September 30, 2022		   Three Months Ended
September 30, 2021		  

Nine Months Ended

September 30, 2022

   Nine Months Ended
September 30, 2021		 
Base management fee(a)  $1,174,798   $947,361   $3,295,451   $2,810,141 
Incentive fee(a)   1,027,544    260,092    2,201,758    647,839 
Administrative fee(a)   66,250    66,250    198,750    198,750 
Directors' fees   60,000    56,250    180,000    168,750 
Professional fees   134,052    108,251    426,588    345,947 
Other expenses   79,077    108,702    236,011    314,632 
Interest expense   322,175    -    458,976    - 
Total expenses   2,863,896    1,546,906    6,997,534    4,486,059 
Base management fee waivers(a)   (411,179)   (331,576)   (1,153,408)   (983,548)
Incentive fee waivers(a)   (771,274)   (234,083)   (1,809,582)   (583,056)
Total expenses, net of waivers  $1,681,443   $981,247   $4,034,544   $2,919,455 

 

(a) Refer to Note 4-Related Party Transactions within the financial statements for a description of the relevant fees.  

 

39

 

 

The increase in base management fees before waivers for the three months ended September 30, 2022 in comparison to the three months ended September 30, 2021 was driven by our increasing invested balance. For the three months ended September 30, 2022 and 2021, we accrued gross base management fees before waivers of $1,174,798 and $947,361, respectively. Offsetting those fees, we recognized base management fee waivers of $411,179 and $331,576, respectively, for the same periods. The increase in incentive fees related to net investment income for the three months ended September 30, 2022 in comparison to the three months ended September 30, 2021 was driven by the increase in SOFR which increased the yield of our variable rate debt investments. For the three months ended September 30, 2022, we accrued incentive fees related to net investment income before waivers of $1,027,544, offset by incentive fee waivers of $771,274. For the three months ended September 30, 2021, we accrued incentive fees related to net investment income before waivers of $260,092, offset by incentive fee waivers of $234,083. Additionally, we accrued $66,250 of administrative fees for each of the three months ended September 30, 2022 and 2021. Refer to Note 4 — Related Party Transactions in the notes accompanying our financial statements for more information related to base management fees, incentive fees and waivers.

 

During the three months ended September 30, 2022 and 2021, we incurred other expenses of $79,077 and $108,702, respectively, related to subscription fees, operating fees, custody fees, and other company expenses. We also incurred expenses related to fees paid to our independent directors of $60,000 and $56,250 for the three months ended September 30, 2022 and 2021, respectively.

 

The increase in base management fees before waivers for the nine months ended September 30, 2022 in comparison to the nine months ended September 30, 2021 was driven by our increasing invested balance. For the nine months ended September 30, 2022 and 2021, we accrued gross base management fees before waivers of $3,295,451 and $2,810,141, respectively. Offsetting those fees, we recognized base management fee waivers of $1,153,408 and $983,548, respectively. The increase in incentive fees related to net investment income for the nine months ended September 30, 2022 in comparison to the nine months ended September 30, 2021 was driven by our increasing invested balance and the increase in SOFR, which increased the yield of our variable rate debt investments. For the nine months ended September 30, 2022, we accrued incentive fees related to net investment income before waivers of $2,201,758, offset by incentive fee waivers of $1,809,582. For the nine months ended September 30, 2021, we accrued incentive fees related to net investment income before waivers of $647,839, offset by incentive fee waivers of $583,056. Additionally, we accrued $198,750 of administrative fees for both the nine months ended September 30, 2022 and 2021. Refer to Note 4 — Related Party Transactions in the notes accompanying our financial statements for more information related to base management fees, incentive fees and waivers.

 

During the nine months ended September 30, 2022 and 2021, we incurred other expenses of $236,011 and $314,632, respectively, related to subscription fees, operating fees, custody fees, and other company expenses. We also incurred expenses related to fees paid to our independent directors of $180,000 and $168,750 for the nine-month period ended September 30, 2022 and 2021, respectively.

 

Realized and Unrealized Gains and Losses

 

We recognized $93,515 and $183,204 in net realized gains for the three months ended September 30, 2022 and 2021, respectively. We recognized $431,080 and $(450,168) in net realized gain (losses) for the nine months ended September 30, 2022 and 2021, respectively.

 

40

 

 

Net change in unrealized appreciation (depreciation) on investments for the three and nine months ended September 30, 2022 and 2021 was as follows:

 

Type  Three Months Ended
September 30, 2022		   Three Months Ended
September 30, 2021		   Nine Months Ended
September 30, 2022		   Nine Months Ended
September 30, 2021		 
First Lien Debt  $538,619   $183,118   $(4,590,221)  $1,801,863 
Unitranche Debt   (706,854)   (157,821)   (334,777)   (163,580)
Second Lien Debt   (36,679)   20,633    (21,050)   438,678 
Equity and Preferred Shares   276,756    48,138    346,524    292,445 
Net change in unrealized appreciation (depreciation) on investments  $71,842   $94,068   $(4,599,524)  $2,369,406 

 

Net change in unrealized depreciation on investments during the three and nine months ended September 30, 2022 was primarily due to the change in the results and financial position of the portfolio companies. Net change in unrealized appreciation on investments during the three and nine months ended September 30, 2021 was primarily due to the change in the results and financial position of the portfolio companies.

 

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

 

We generate cash primarily from the net proceeds of any offering of shares of our Common Stock, from cash flows from interest and fees earned from our investments, and from principal repayments and proceeds from sales of our investments. Our primary use of cash is investments in portfolio companies, payments of our expenses and cash distributions to our stockholders. As of September 30, 2022 and December 31, 2021, we had cash of $11,339,067 and $11,058,796, respectively. This “Financial Condition, Liquidity and Capital Resources” section should be read in conjunction with the “COVID-19 Developments” section above.

 

Operating Activities

 

Net cash used in operating activities for the nine months ended September 30, 2022 was $59,662,071. The primary operating activities during this period were investments in portfolio companies. This was partially offset by repayments of bank loans. Net cash provided by operating activities for the nine months ended September 30, 2021 was $1,810,650. The primary operating activities during this period were investments in portfolio companies. This was partially offset by repayments of bank loans.

 

As of September 30, 2022, we had 68 investments with unfunded commitments of $23,229,729. As of December 31, 2021, we had 36 investments with unfunded commitments of $13,913,615. We believe that, as of both September 30, 2022 and December 31, 2021, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

 

The following table summarizes our total portfolio activity during the nine months ended September 30, 2022 and 2021:

 

   Nine Months Ended
September 30, 2022		   Nine Months Ended
September 30, 2021		 
Beginning investment portfolio  $403,054,374   $355,359,843 
Investments in new portfolio investments   85,123,197    81,669,043 
Investments in existing portfolio investments   9,221,444    7,643,513 
Principal repayments   (52,253,887)   (66,357,177)
Proceeds from sales of investments   (4,047,932)   (17,331,786)
Net change in unrealized (depreciation) appreciation on investments   (4,599,524)   2,369,406 
Net realized gain (loss) on investments   431,080    (450,168)
Net change in premiums, discounts and amortization   712,849    538,786 
Investment Portfolio, at Fair Value  $437,641,601   $363,441,460 

 

41

 

 

Financing Activities

 

Net cash provided by our financing activities for the nine months ended September 30, 2022 was $59,942,342, which consisted of $85,000,000 from issuances of 9,092,488 Shares to our stockholders, in connection with our capital calls during the period and $18,681,667 in connection with our short-term borrowings during the period. This was partially offset by $35,000,000 in repurchases of shares to our stockholders, in connection to the Tender Offer during the period and $8,739,325 in distributions payable to stockholders. Net cash provided by our financing activities for the nine months ended September 30, 2021 was $7,298,120 which consisted of $15,100,000 from issuances of 1,617,822 shares of Common Stock to our stockholders, in connection with our capital calls during the period. This was partially offset by $7,801,880 of distributions paid to our common stockholders.

 

Equity Activity

 

An investor made capital commitments to us in the amounts set forth below as of the date opposite each capital commitment:

 

Amount   Date
$140,000,000    June 23, 2015
$50,000,000    December 2, 2016
$100,000,000    On December 7, 2017
$40,000,000    March 22, 2019
$30,000,000    September 23, 2019
$11,200,000    March 20, 2020
$8,900,000    May 28, 2021
$110,000,000    December 15, 2021

 

As of September 30, 2022, $25,000,000 of total capital commitments remained unfunded by our investors.

 

The number of shares of our Common Stock issued and outstanding as of September 30, 2022 and December 31, 2021, were 45,314,885 and 39,961,408, respectively.

 

Distributions to Stockholders – Common Stock Distributions

 

We have elected to be treated, and intends to comply with the requirements to qualify annually, as a RIC for U.S. federal income tax purposes. As a RIC, we generally are not subject to corporate-level U.S. federal income taxes on ordinary income or capital gains that we timely distribute as dividends for U.S. federal income tax purposes to our stockholders. To qualify to be taxed as a RIC and thus avoid corporate-level income tax on the income that we distribute as dividends to our stockholders, we are required to distribute dividends to our stockholders each taxable year generally of an amount at least equal to 90% of our investment company taxable income, determined without regard to the deduction for any dividends paid. To avoid a 4% excise tax on undistributed earnings, we are required to distribute dividends to our stockholders in respect of each calendar year of an amount at least equal to the sum of (i) 98% of our ordinary income (taking into account certain deferrals and elections) for such calendar year, (ii) 98.2% of our capital gain net income, adjusted for certain ordinary losses, for the one-year period ending October 31 of that calendar year and (iii) any income or capital gains recognized, but not distributed, in preceding calendar years and on which we incurred no federal income tax. We intend to make distributions to stockholders on an annual basis of substantially all of our net investment income. Although we intend to make distributions of net realized capital gains, if any, at least annually, out of assets legally available for such distributions, we may in the future decide to retain such capital gains for investment. In addition, the extent and timing of special dividends, if any, will be determined by our Board of Directors and will largely be driven by portfolio specific events and tax considerations.

 

42

 

 

We may fund our cash distributions from any sources of funds available, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee waivers from our Adviser. Our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from an offering. As a result, a portion of the distributions may represent a return of capital for U.S. federal income tax purposes. Thus the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a BDC under the 1940 Act. We declared distributions of $8,739,352, or $0.200 per share during the three and nine months ended September 30, 2022. We declared and paid distributions of $7,801,905, or $0.200 per share during the three and nine months ended September 30, 2021.

 

The determination of the tax attributes of our distributions is made annually at the end of our taxable year, based upon our taxable income for the full taxable year and distributions paid for the full taxable year. Therefore, estimates made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. The actual tax characteristics of distributions to stockholders will be reported to stockholders subject to information reporting after the close of each calendar year on Form 1099-DIV.

 

Related Party Fees

 

For the three months ended September 30, 2022 and 2021, we recorded base management fees of $1,174,798 and $947,361, respectively. Offsetting these fees were waivers to the base management fees of $411,179 and $331,576, respectively, as set forth within the accompanying statements of operations.

 

For the nine months ended September 30, 2022 and 2021, we recorded base management fees of $3,295,451 and $2,810,141, respectively. Offsetting those fees were waivers to the base management fees of $1,153,408 and $983,548, respectively, as set forth within the accompanying statements of operations.

 

For the three months ended September 30, 2022 and 2021, we recorded incentive fees of $1,027,544 and $260,092, respectively. Offsetting these fees were waivers to the incentive fees of $771,274 and $234,083, respectively, as set forth within the accompanying statements of operations.

 

For the nine months ended September 30, 2022 and 2021, we recorded incentive fees of $2,201,758 and $647,839, respectively. Offsetting those fees were waivers to the incentive fees of $1,809,582 and $583,056, respectively, as set forth within the accompanying statements of operations.

 

For both the three months ended September 30, 2022 and 2021, we recorded administrative fees of $62,500, as set forth within the accompanying statements of operations. For both the nine months ended September 30, 2022 and 2021, we recorded administrative fees of $198,750, as set forth within the accompanying statements of operations.

 

Fees due to related parties as of September 30, 2022 and December 31, 2021 on our accompanying statements of assets and liabilities were as follows:

 

   September 30, 2022   December 31, 2021 
Net base management fee due to Adviser  $1,467,058   $620,269 
Net incentive fee due to Adviser   349,544    20,060 
Total fees due to Adviser, net of waivers   1,816,602    640,329 
Fee due to Administrator, net of waivers   132,500    66,250 
Total Related Party Fees Due  $1,949,102   $706,579 

 

43

 

 

Tender Offers

 

To provide our stockholders with limited liquidity, we may, in the absolute discretion of our Board of Directors, conduct an annual Tender Offer. Our Tenders for the shares of Common Stock, if any, would be conducted on such terms as may be determined by our Board of Directors and in accordance with the requirements of applicable law, including Section 23(c) of the 1940 Act and Regulation M under the Exchange Act. On April 22, 2022, the Company issued a Tender Offer to repurchase $20.0 million worth of Common Stock from the stockholders. The Offer was accepted on May 19, 2022. On July 14, 2022, the Company issued a Tender Offer to repurchase $15.0 million worth of Common Stock from the stockholders. The Offer was accepted on August 11, 2022.

 

CRITICAL ACCOUNTING POLICIES

 

This discussion of our operations is based upon our financial statements, which are prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

 

Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we describe our critical accounting policies in the notes to our financial statements.

 

Valuation of Investments

 

We conduct the valuation of our investments, pursuant to which our net asset value is determined, at all times consistent with GAAP and the 1940 Act. Our Board of Directors, with the assistance of our Audit Committee, determines the fair value of our investments, for investments with a public market and for investments with no readily available public market, on at least a quarterly basis, in accordance with the terms of ASC 820. Our valuation procedures are set forth in more detail below.

 

ASC 820 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.” Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

 

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

 

The three-level hierarchy for fair value measurement is defined as follows:

 

Level 1 — Inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. We do not adjust the quoted price for these instruments, even in situations where we hold a large position, and a sale could reasonably be expected to impact the quoted price.

 

Level 2 — Inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

 

44

 

 

Level 3 — Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

 

Pursuant to the framework set forth above, we value securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. We may also obtain quotes with respect to certain of our investments from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets.

 

Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, we determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we use the quote obtained.

 

Securities that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of our Board of Directors, does not represent fair value, are each valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. Inputs for these valuation techniques include relative credit information, observed market movement, industry sector information, and other market data, which may include benchmarking of comparable securities, issuer spreads, reported trades, and reference data, such as market research publications, when available. The process used to determine the applicable value is as follows:

 

(i) Each portfolio company or investment is initially valued by the investment professionals of the Adviser responsible for the portfolio investment using a standardized template designed to approximate fair market value based on observable market inputs and updated credit statistics and unobservable inputs. Additionally, as a part of our valuation process, the Adviser may employ the services of one or more independent valuation firms engaged by us;

 

(ii) Preliminary valuation conclusions are documented and discussed with our senior management and members of the Adviser’s valuation team;

 

(iii) Our Audit Committee reviews the assessments of the Adviser or independent valuation firm (to the extent applicable) and provides our Board of Directors with recommendations with respect to the fair value of the investments in our portfolio; and

 

(iv) Our Board of Directors discusses the valuation recommendations of our Audit Committee and determines the fair value of the investments in our portfolio in good faith based on the input of the Adviser, the independent valuation firm (to the extent applicable) and in accordance with our valuation policy.

 

Our Audit Committee’s recommendation of fair value is generally based on its assessment of the following factors, as relevant:

 

●the nature and realizable value of any collateral;

 

45

 

 

●call features, put features and other relevant terms of debt;

 

●the portfolio company’s ability to make payments;

 

●the portfolio company’s actual and expected earnings and discounted cash flow;

 

●prevailing interest rates for like securities and expected volatility in future interest rates;

 

●the markets in which the portfolio company does business and recent economic and/or market events; and

 

●comparisons to publicly traded securities.

 

Investment performance data utilized are the most recently available as of the measurement date, which in many cases may reflect up to a one quarter lag in information.

 

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include the following:

 

●private placements and restricted securities that do not have an active trading market;

 

●securities whose trading has been suspended or for which market quotes are no longer available;

 

●debt securities that have recently gone into default and for which there is no current market;

 

●securities whose prices are stale; and

 

●securities affected by significant events.

 

Our Board of Directors is responsible for the determination, in good faith, of the fair value of our portfolio investments.

 

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.

 

Security transactions are recorded on the trade date (the date the order to buy or sell is executed or, in the case of privately issued securities, the closing date, which is when all terms of the transactions have been defined). Realized gains and losses on investments are determined based on the identified cost method. 

 

In addition, on December 3, 2020, the SEC announced that it adopted Rule 2a-5 under the 1940 Act, which establishes an updated regulatory framework for determining fair value in good faith for purposes of the 1940 Act. The new rule clarifies how fund boards can satisfy their valuation obligations in light of recent market developments. The rule will permit boards, subject to board oversight and certain other conditions, to designate certain parties to perform the fair value determinations. We will continue to review the adopted rule and its impact on us and our valuation policies.

 

Refer to Note 3 — Investments in the notes to our accompanying financial statements included elsewhere in this quarterly report for additional information regarding fair value measurements and our application of ASC 820.

 

46

 

 

Revenue Recognition

 

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the principal balance, we generally will not accrue PIK interest for accounting purposes if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities for accounting purposes if we have reason to doubt our ability to collect such interest. OID, market discounts or premiums are accreted or amortized using the effective interest method as interest income. We record prepayment premiums on loans and debt securities as interest income.

 

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

 

We measure net realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

 

PIK Interest

 

We may have investments in our portfolio that contain a PIK interest provision. Any PIK interest will be added to the principal balance of such investments and is recorded as income if the portfolio company valuation indicates that such PIK interest is collectible. In order to maintain our status as a RIC, substantially all of this income must be included in the amounts paid out by us to stockholders in the form of dividends, even if we have not collected any cash.

 

U.S. Income Taxes

 

We have elected to be subject to tax as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to incur any corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute as dividends to our stockholders. To qualify and maintain our qualification as a RIC, we must meet certain source-of-income and asset diversification requirements as well as distribute dividends to our stockholders each taxable year of an amount generally at least equal to 90% of our investment company taxable income, determined without regard to any distributions paid.

 

Depending on the level of taxable income earned in a taxable year, we may choose to retain taxable income in excess of current year distributions into the next taxable year. We would then incur a 4% excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income may exceed estimated current year distributions, we will accrue an excise tax, if any, on estimated excess taxable income as taxable income is earned. We did not accrue any excise tax for the fiscal years ended December 31, 2021, 2020, and 2019.

 

Because U.S. federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified within capital accounts in the financial statements to reflect their tax character. Permanent differences may also result from differences in classification in certain items, such as the treatment of short-term gains as ordinary income for tax purposes. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

 

47

 

 

We evaluate tax positions taken or expected to be taken in the course of preparing our financial statements to determine whether any relevant tax positions would “more-likely-than-not” be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expensed in the current fiscal year. All penalties and interest associated with any income taxes accrued are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax law, regulations and interpretations thereof. Our accounting policy on income taxes is critical because if we are unable to qualify, or once qualified, maintain our tax status as a RIC, we would be required to record a provision for corporate-level U.S. federal income taxes, as well as any related state or local taxes which may be significant to our financial results.

 

COMMITMENTS AND CONTINGENCIES

 

From time to time, we, the Adviser or the Administrator may become party to legal proceedings in the ordinary course of business, including proceedings related to the enforcement of our rights under contracts with our portfolio companies. Neither we, the Adviser nor the Administrator is currently subject to any material legal proceedings.

 

Unfunded commitments to provide funds to portfolio companies are not reflected in our accompanying statements of assets and liabilities. Our unfunded commitments may be significant from time to time. These commitments are subject to the same underwriting and ongoing portfolio maintenance as are the on-balance sheet financial instruments that we hold. Since these commitments may expire without being drawn, the total commitment amount does not necessarily represent future cash requirements. We use cash flow from normal and early principal repayments and proceeds from borrowings and offerings to fund these commitments. As of September 30, 2022, we had 68 investments with unfunded commitments of $23,229,729. As of December 31, 2021, we had 36 investments with unfunded commitments of $13,913,615. We believe that, as of September 30, 2022 and December 31, 2021, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are subject to financial market risks, including changes in interest rates. During the period covered by our financial statements, many of the loans in our portfolio had floating interest rates, and we expect that many of our loans to portfolio companies in the future will also have floating interest rates based on LIBOR or an equivalent risk-free index rate. Interest rate fluctuations may have a substantial negative impact on our investments, the value of our Common Stock and our rate of return on invested capital. In addition, U.S. and global capital markets and credit markets have experienced a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across such markets and a general decline in value of the securities held by us. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

 

Debt investments that we make may be based on floating rates, such as SOFR (as defined below), LIBOR, the Euro Interbank Offered Rate, the Federal Funds Rate or the Prime Rate. General interest rate fluctuations may have a substantial negative impact on our investments, the value of our securities and our rate of return on invested capital. It is unclear how increased regulatory oversight and the future of LIBOR may affect market liquidity and the value of the financial obligations to be held by or issued to us that are linked to LIBOR, or how such changes could affect our investments and transactions and financial condition or results of operations. On March 5, 2021, the Financial Conduct Authority and ICE Benchmark Authority announced that the publication of all EUR and CHF LIBOR settings, the Spot Next/Overnight, 1 week, 2 month and 12 month JPY and GBP LIBOR settings, and the 1 week and 2 months US dollar LIBOR settings ceased to be published as of December 31, 2021, while the publication of the overnight, 1 month, 3 month, 6 month, and 12 months U.S. dollar (“USD”) LIBOR settings will cease after June 30, 2023. The Alternative Reference Rates Committee, a U.S.-based group convened by the Federal Reserve and the Federal Reserve Bank of New York, has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by the U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. We expect that a substantial portion of our future floating rate investments will be linked to SOFR.

 

48

 

 

In addition, inflation resulting from supply chain disruptions caused by the war between Russia and Ukraine and the COVID-19 pandemic has resulted in a general increase of certain interest rates by the U.S. Federal Reserve and other central banks. A continued increase in interest rates, including SOFR, could affect our gross investment income.

 

Change in interest rates  Increase (decrease) in
investment income		 
Up 300 basis points   10,866,964 
Up 200 basis points   6,413,957 
Up 100 basis points   1,960,951 
Down 100 basis points   (88,131)
Down 200 basis points   (88,131)
Down 300 basis points   (88,131)

 

Although we believe that this measure is indicative of our sensitivity to interest rate changes, it does not reflect potential changes in the credit market, credit quality, size and composition of the assets on the Consolidated Statements of Assets and Liabilities and other business developments that could affect our net increase in net assets resulting from operations or net investment income. Accordingly, no assurances can be given that actual results would not differ materially from those shown above.

 

In addition, any investments we make that are denominated in a foreign currency will be subject to risks associated with changes in currency exchange rates. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved.

 

We may hedge against interest rate and currency exchange rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

As of the period covered by quarterly this report, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness and design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective at a reasonable assurance level in timely alerting management, including the Chief Executive Officer and Chief Financial Officer, of material information about us required to be included in periodic SEC filings. However, in evaluation of the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

49

 

 

PART II–OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not currently subject to any material legal proceeding, nor, to our knowledge, is any material legal proceeding threatened against us.

 

From time to time, we, our Adviser or Administrator may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

 

From time to time, we are involved in various legal proceedings, lawsuits and claims incidental to the conduct of our business. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us.

 

ITEM 1A. RISK FACTORS

 

In addition to the risks discussed below, important risk factors that could cause results or events to differ from current expectations are described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 25, 2022.

 

Legislation passed in 2018 allows us to incur additional leverage and would require us to offer liquidity to our stockholders.

 

Under the 1940 Act, a BDC generally is required to maintain asset coverage of 200% for senior securities representing indebtedness (such as borrowings from banks or other financial institutions) or stock (such as preferred stock). The SBCAA, which was signed into law on March 23, 2018, provides that a BDC’s required asset coverage under the 1940 Act may be reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). This reduction in asset coverage permits a BDC to double the amount of leverage it may utilize, subject to certain approval, timing and reporting requirements, including either stockholder approval or approval of a majority of the directors who are not “interested persons” (as defined in the 1940 Act) of the BDC and who have no financial interest in the arrangement. As a result, if we receive the relevant approval and we comply with the applicable disclosure requirements, we would be able to incur additional leverage, which may increase the risk of investing in us. In addition, since our base management fee is payable based upon our average adjusted gross assets, which includes any borrowings for investment purposes, our base management fee expenses may increase if we incur additional leverage.

 

As a non-traded BDC, if we receive the relevant approval to increase our authorized leverage, we will be required to offer our stockholders the opportunity to sell their Shares over the next year following the calendar quarter in which the approval was obtained. On April 22, 2022, the Company issued a Tender Offer to repurchase $20.0 million worth of Common Stock from the stockholders. The Offer was accepted on May 19, 2022. On July 14, 2022, the Company issued a Tender Offer to repurchase $15.0 million worth of Common Stock from the stockholders. The Offer was accepted on August 11, 2022.

 

Political, social and economic uncertainty, including uncertainty related to Russia’s military invasion of Ukraine, create and exacerbate risks.

 

Russia’s invasion of Ukraine in February 2022 and corresponding events have had, and could continue to have, severe adverse effects on regional and global economic markets. Following Russia’s actions, various governments, including the United States, have issued broad-ranging economic sanctions against Russia, including, among other actions, a prohibition on doing business with certain Russian companies, large financial institutions, officials and oligarchs; a commitment by certain countries and the European Union to remove selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications, the electronic banking network that connects banks globally; and restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions. The duration of hostilities and the vast array of sanctions and related events (including cyberattacks and espionage) cannot be predicted. Those events present material uncertainty and risk with respect to markets globally, which pose potential adverse risks to us and the performance of our investments and operations. Any such market disruptions could affect our portfolio companies’ operations and, as a result, could have a material adverse effect on our business, financial condition and results of operations.

 

50

 

 

Inflation and Supply Chain Risk

 

Economic activity has continued to accelerate across sectors and regions. Nevertheless, due to global supply chain issues, geopolitical events, a rise in energy prices and strong consumer demand as economies continue to reopen, inflation is showing signs of acceleration in the U.S. and globally. Inflation is likely to continue in the near to medium-term, particularly in the U.S., with the possibility that monetary policy may tighten in response. Persistent inflationary pressures could affect our portfolio companies profit margins.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

Refer to our Current Report on Form 8-K filed on July 8, 2022 for issuances of our Common Stock during the quarter ended September 30, 2022. Such issuances were exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act and Regulation D thereunder.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

Not applicable.

 

ITEM 6. EXHIBITS

 

3.1Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form 10 (File no. 000-55426), filed on April 17, 2015).

 

3.2Form of Bylaws (Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form 10 (File no. 000-55426), filed on April 17, 2015).

 

31.1*Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

 

31.2*Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

 

32.1*Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (18 U.S.C. 1350).

 

32.2*Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (18 U.S.C. 1350).

 

99.1Code of Ethics (Incorporated by reference to Exhibit 99.1 to Pre-Effective Amendment No. 1 to the Registration Statement on Form 10, File No. 000-55426, filed on June 5, 2015).

 

 

*            Filed herewith

 

51

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 

 Audax Credit BDC Inc.
  

Date: November 14, 2022

 By:

/s/ Michael P. McGonigle

    Michael P. McGonigle
    Chief Executive Officer

 

Date: November 14, 2022

 By:

/s/ Richard T. Joseph

    Richard T. Joseph
    Chief Financial Officer

 

52