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 June 30, 2016

 

OR

 

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

 

Commission file number: 814-00866

  

MONROE CAPITAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

Maryland 27-4895840

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

   

311 South Wacker Drive, Suite 6400

Chicago, Illinois

60606
(Address of Principal Executive Office) (Zip Code)

 

(312) 258-8300

(Registrant’s Telephone Number, Including Area Code)

  

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   x     No   ¨

 

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

 

Large accelerated filer     ¨ Accelerated filer      x
       
Non-accelerated filer      ¨   (Do not check if a smaller reporting company)      Smaller reporting company      ¨

 

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

 

As of August 5, 2016, the registrant had 16,573,007 shares of common stock, $0.001 par value, outstanding.

 

 

 

TABLE OF CONTENTS

 

    Page
PART I. FINANCIAL INFORMATION 3
   
Item 1. Consolidated Financial Statements 3
     
  Consolidated Statements of Assets and Liabilities as of June 30, 2016 (unaudited) and December 31, 2015 3
     
  Consolidated Statements of Operations for the three and six months ended June 30, 2016 (unaudited) and 2015 (unaudited) 4
     
  Consolidated Statements of Changes in Net Assets for the six months ended June 30, 2016 (unaudited) and 2015 (unaudited) 5
     
  Consolidated Statements of Cash Flows for the six months ended June 30, 2016 (unaudited) and 2015 (unaudited) 6
     
  Consolidated Schedules of Investments as of June 30, 2016 (unaudited) and December 31, 2015 7
     
  Notes to Consolidated Financial Statements (unaudited) 11
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 41
     
Item 4. Controls and Procedures 42
     
PART II. OTHER INFORMATION 43
     
Item 1. Legal Proceedings 43
     
Item 1A. Risk Factors 43
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 43
     
Item 3. Defaults Upon Senior Securities 43
     
Item 4. Mine Safety Disclosures 43
     
Item 5. Other Information 43
     
Item 6. Exhibits 44
     
Signatures   45

    

 2 

 

Part I. Financial Information

Item 1. Consolidated Financial Statements

 

MONROE CAPITAL CORPORATION

 

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

 

(in thousands, except per share data)

 

   June 30, 2016   December 31, 2015 
   (unaudited)     
         
ASSETS          
Investments, at fair value:          
Non-controlled/non-affiliate company investments  $293,578   $295,819 
Non-controlled affiliate company investments   41,880    38,747 
Controlled affiliate company investments   7,350    6,525 
Total investments, at fair value (cost of: $343,454 and $342,738, respectively)   342,808    341,091 
Cash   5,483    5,278 
Restricted cash   8,139    8,588 
Interest receivable   2,041    1,606 
Other assets   579    747 
Total assets   359,050    357,310 
           
LIABILITIES          
Debt:          
Revolving credit facility   127,200    123,700 
SBA debentures payable   40,000    40,000 
Total debt   167,200    163,700 
Less: Unamortized deferred financing costs   (4,037)   (3,569)
Total debt less unamortized deferred financing costs   163,163    160,131 
Secured borrowings, at fair value (proceeds of: $2,258 and $2,535, respectively)    2,112    2,476 
Payable for open trades   -    5,297 
Interest payable   534    577 
Management fees payable   1,504    1,503 
Incentive fees payable   1,554    1,251 
Accounts payable and accrued expenses   1,533    1,466 
Directors fees payable   -    74 
Total liabilities   170,400    172,775 
Net assets  $188,650   $184,535 
           
Commitments and contingencies (See Note 10)          
           
ANALYSIS OF NET ASSETS          
Common stock, $0.001 par value, 100,000 shares authorized, 13,008 and 13,008 shares issued and outstanding, respectively  $13   $13 
Capital in excess of par value   184,419    184,419 
Undistributed net investment income (accumulated distributions in excess of net investment income)   4,719    1,692 
Accumulated net unrealized appreciation (depreciation) on investments and secured borrowings   (501)   (1,589)
Total net assets  $188,650   $184,535 
           
Net asset value per share  $14.50   $14.19 

 

See Notes to Consolidated Financial Statements.

 

 3 

 

MONROE CAPITAL CORPORATION

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

(in thousands, except per share data)

 

   Three months ended June 30,   Six months ended June 30, 
   2016   2015   2016   2015 
Investment income:                    
Interest income:                    
Non-controlled/non-affiliate company investments  $8,965   $8,363   $17,569   $15,704 
Non-controlled affiliate company investments   1,092    962    2,165    1,452 
Controlled affiliate company investments   10    194    10    444 
Total interest income   10,067    9,519    19,744    17,600 
Dividend income:                    
Non-controlled/non-affiliate company investments   250    -    500    - 
Non-controlled affiliate company investments   801    -    2,413    - 
Total dividend income   1,051    -    2,913    - 
Total investment income   11,118    9,519    22,657    17,600 
                     
Operating expenses:                    
Interest and other debt financing expenses   1,773    1,251    3,464    2,354 
Base management fees   1,504    1,188    3,004    2,256 
Incentive fees   1,319    1,268    3,059    2,310 
Professional fees   238    193    445    431 
Administrative service fees   304    278    632    549 
General and administrative expenses   182    231    433    388 
Directors fees   39    39    74    74 
Total expenses   5,359    4,448    11,111    8,362 
Net investment income   5,759    5,071    11,546    9,238 
                     
Net gain (loss) on investments and secured borrowings:                    
Net realized gain (loss) on investments:                    
Non-controlled/non-affiliate company investments   -    -    587    - 
Net realized gain (loss) on investments   -    -    587    - 
                     
Net change in unrealized appreciation (depreciation) on investments:                    
Non-controlled/non-affiliate company investments   (261)   665    (1,120)   37 
Non-controlled affiliate company investments   1,368    698    3,196    981 
Controlled affiliate company investments   (1,648)   (1,339)   (1,075)   (1,324)
Net change in unrealized appreciation (depreciation) on investments   (541)   24    1,001    (306)
                     
Net change in unrealized (appreciation) depreciation on secured borrowings   59    (31)   87    8 
                     
Net gain (loss) on investments and secured borrowings   (482)   (7)   1,675    (298)
                     
Net increase (decrease) in net assets resulting from operations  $5,277   $5,064   $13,221   $8,940 
                     
Per common share data:                    
Net investment income per share - basic and diluted  $0.44   $0.43   $0.89   $0.87 
Net increase in net assets resulting from operations per share - basic and diluted  $0.41   $0.43   $1.02   $0.84 
Weighted average common shares outstanding - basic and diluted   13,008    11,718    13,008    10,646 

 

See Notes to Consolidated Financial Statements.

 

 4 

 

MONROE CAPITAL CORPORATION

 

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(unaudited)

 

(in thousands)

 

   Common Stock   Capital in  

Undistributed
net investment

income
(accumulated

distributions in

excess of net

  

Accumulated
net realized

   Accumulated
net unrealized
appreciation
(depreciation) on
investments and
     
   Number of
shares
   Par value   excess of
par value
   investment
income)
   gain (loss) on
investments
   secured
borrowings
   Total net
assets
 
Balances at December 31, 2014   9,518   $10   $134,803   $(639)  $-   $(436)  $133,738 
Net increase (decrease) in net assets resulting from operations   -    -    -    9,238    -    (298)   8,940 
Issuance of common stock, net of offering and underwriting costs   2,932    2    41,535    -    -    -    41,537 
Stockholder distributions paid   -    -    -    (7,728)   -    -    (7,728)
Balances at June 30, 2015   12,450   $12   $176,338   $871   $-   $(734)  $176,487 
                                    
Balances at December 31, 2015   13,008   $13   $184,419   $1,692   $-   $(1,589)  $184,535 
Net increase (decrease) in net assets resulting from operations   -    -    -    11,546    587    1,088    13,221 
Stockholder distributions paid   -    -    -    (8,519)   (587)   -    (9,106)
Balances at June 30, 2016   13,008   $13   $184,419   $4,719   $-   $(501)  $188,650 

 

See Notes to Consolidated Financial Statements.

 5 

 

MONROE CAPITAL CORPORATION

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

(in thousands)

 

   Six months ended June 30, 
   2016   2015 
         
Cash flows from operating activities:          
Net increase (decrease) in net assets resulting from operations  $13,221   $8,940 
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash
provided by (used in) operating activities:
          
Net change in unrealized (appreciation) depreciation on investments   (1,001)   306 
Net change in unrealized appreciation (depreciation) on secured borrowings   (87)   (8)
Net realized (gain) loss on investments   (587)   - 
Payment-in-kind interest income   (830)   (1,040)
Net accretion of discounts and amortization of premiums   (754)   (479)
Proceeds from principal payments and sales of investments   47,383    59,111 
Purchases of investments   (45,928)   (106,876)
Amortization of deferred financing costs   381    367 
Changes in operating assets and liabilities:          
Interest receivable   (435)   (332)
Other assets   168    313 
Payable for open trades   (5,297)   18,102 
Interest payable   (43)   151 
Management fees payable   1    138 
Incentive fees payable   303    128 
Accounts payable and accrued expenses   67    264 
Directors fees payable   (74)   - 
Net cash provided by (used in) operating activities   6,488    (20,915)
           
Cash flows from investing activities:          
Net change in restricted cash   449    154 
Net cash provided by (used in) investing activities   449    154 
           
Cash flows from financing activities:          
Borrowings on credit facility   24,000    49,900 
Repayments of credit facility   (20,500)   (82,500)
SBA debentures borrowings   -    20,000 
Payments of deferred financing costs   (849)   (552)
Repayments on secured borrowings   (277)   (550)
Proceeds from shares sold, net of offering and underwriting costs   -    41,537 
Stockholder distributions paid   (9,106)   (7,728)
Net cash provided by (used in) financing activities   (6,732)   20,107 
           
Net increase (decrease) in cash   205    (654)
Cash, beginning of period   5,278    4,561 
Cash, end of period  $5,483   $3,907 
           
Supplemental disclosure of cash flow information:          
Cash interest paid during the period  $2,974   $1,855 
Cash paid for excise taxes during the period  $167   $- 

 

See Notes to Consolidated Financial Statements.

 

 6 

 

MONROE CAPITAL CORPORATION

 

CONSOLIDATED SCHEDULE OF INVESTMENTS

(unaudited)

 

June 30, 2016

 

(in thousands, except for units)

Portfolio Company (a)  Industry  Spread Above Index (b)   Interest Rate   Maturity  Principal   Amortized Cost   Fair
Value (c)
   % of
Net
Assets (d)
 
Senior Secured Loans                                    
360 Holdings III Corp.  Consumer Goods: Non-Durable   L+9.00%    10.00%  10/1/2021   5,955   $5,731   $5,776    3.1%
American Community Homes, Inc. (e)  Banking, Finance, Insurance & Real Estate   L+8.00%    9.50%  7/22/2019   7,667    7,529    7,694    4.1%
American Community Homes, Inc. (e)  Banking, Finance, Insurance & Real Estate   L+12.50%    9.50% Cash/4.50% PIK   7/22/2019   4,122    4,053    4,183    2.2%
American Community Homes, Inc. (e)  Banking, Finance, Insurance & Real Estate   L+12.50%    9.50% Cash/4.50% PIK   n/a(w)  507    495    507    0.3%
Answers Corporation  High Tech Industries   L+5.25%    6.25%  10/1/2021   2,903    2,811    1,749    0.9%
BCC Software, LLC (f)  High Tech Industries   L+8.00%    9.00%  6/20/2019   2,735    2,708    2,681    1.4%
BCC Software, LLC (Revolver) (g)  High Tech Industries   L+8.00%    9.00%  6/20/2019   469    -    -    0.0%
Bluestem Brands, Inc.  Consumer Goods: Non-Durable   L+7.50%    8.50%  11/6/2020   2,839    2,814    2,522    1.3%
Cali Bamboo, LLC  Construction & Building   L+8.50%    9.00%  7/10/2020   5,450    5,368    5,404    2.9%
Cali Bamboo, LLC (Revolver) (g)  Construction & Building   L+8.50%    9.00%  7/10/2020   1,624    325    325    0.2%
Cornerstone Detention Products, Inc. (h)  Construction & Building   L+10.50%    10.50% Cash/1.00% PIK   4/8/2019   4,002    3,953    3,837    2.0%
Cornerstone Detention Products, Inc. (Revolver) (g)  Construction & Building   L+9.50%    10.50%  4/8/2019   400    -    -    0.0%
Cyalume Technologies Holdings, Inc. (f)  Aerospace & Defense   L+9.00%    10.00%  5/18/2020   4,902    4,791    5,027    2.7%
Cyalume Technologies Holdings, Inc. (Delayed Draw)  Aerospace & Defense   L+9.00%    10.00%  5/18/2020   441    441    452    0.2%
Cyalume Technologies Holdings, Inc. (Revolver) (g)  Aerospace & Defense   L+9.00%    10.00%  5/18/2020   1,528    153    153    0.1%
Diesel Direct Holdings, Inc. (f)  Energy: Oil & Gas   L+7.00%    7.50%  2/17/2020   5,294    5,258    5,283    2.8%
EB Employee Solutions, LLC (f)  Services: Business   L+8.50%    10.00%  2/28/2019   3,420    3,365    3,352    1.8%
Familia Dental Group Holdings, LLC (f)  Healthcare & Pharmaceuticals   L+8.00%    8.50%  4/8/2021   5,466    5,395    5,471    2.9%
Familia Dental Group Holdings, LLC (Delayed Draw) (g) (i)  Healthcare & Pharmaceuticals   L+8.00%    8.50%  4/8/2021   519    218    218    0.1%
Familia Dental Group Holdings, LLC (Revolver) (g)  Healthcare & Pharmaceuticals   L+8.00%    8.50%  4/8/2021   573    -    -    0.0%
G&M Opco LLC (f)  Construction & Building   L+7.50%    8.00%  6/23/2020   3,088    3,023    3,047    1.6%
InMobi Pte, Ltd. (Delayed Draw) (g) (i) (j)  Media: Advertising, Printing & Publishing   L+10.17%    10.86%  9/1/2018   10,000    6,667    6,630    3.5%
Jerry Lee Radio, LLC  Media: Broadcasting & Subscription   L+9.50%    10.00%  12/17/2020   14,196    13,872    14,459    7.7%
Landpoint, LLC  Energy: Oil & Gas   L+12.75%    12.00% Cash/2.25% PIK(q)  12/20/2018   3,500    3,450    3,341    1.8%
Landpoint, LLC (Revolver) (g)  Energy: Oil & Gas   L+10.50%    12.00%  12/20/2018   313    -    -    0.0%
L.A.R.K. Industries, Inc.  Construction & Building   L+7.00%    8.00%  9/3/2019   6,603    6,495    6,603    3.5%
Luxury Optical Holdings Co.  Retail   L+9.00%    9.00% Cash/1.00% PIK   9/12/2019   3,953    3,899    3,924    2.1%
Luxury Optical Holdings Co. (Revolver) (g)  Retail   L+8.00%    9.00%  9/12/2019   273    -    -    0.0%
Miles Media Group LLC  Hotels, Gaming & Leisure   L+12.50%    10.50% Cash/3.00% PIK   3/24/2021   6,093    6,024    6,075    3.2%
Miles Media Group LLC (Delayed Draw) (g) (i)  Hotels, Gaming & Leisure   L+12.50%    10.50% Cash/3.00% PIK   3/24/2021   1,455    -    -    0.0%
Miles Media Group LLC (Revolver) (g)  Hotels, Gaming & Leisure   L+12.50%    10.50% Cash/3.00% PIK   3/24/2021   320    -    -    0.0%
O'Brien Industrial Holdings, LLC  Metals & Mining   L+7.75%    8.75%  5/13/2019   5,286    5,205    5,260    2.8%
PD Products, LLC  Consumer Goods: Non-Durable   L+10.50%    12.00%  10/4/2018   12,349    12,259    12,386    6.6%
PD Products, LLC (Revolver) (g)  Consumer Goods: Non-Durable   L+10.50%    12.00%  10/4/2018   2,500    275    275    0.1%
PeopleConnect Intermediate, LLC (formerly Intelius, Inc.)  Services: Consumer   L+5.50%    6.50%  7/1/2020   4,739    4,650    4,749    2.5%
PeopleConnect Intermediate, LLC (formerly Intelius, Inc.)  Services: Consumer   L+11.50%    12.50%  7/1/2020   4,869    4,775    4,806    2.5%
PeopleConnect Intermediate, LLC (formerly Intelius, Inc.) (Revolver) (g)  Services: Consumer   L+8.50%    9.50%  7/1/2020   354    -    -    0.0%
Precision Toxicology, LLC (f)  Healthcare & Pharmaceuticals   L+11.50%    10.00% Cash/2.00% PIK   3/24/2020   4,336    4,269    4,331    2.3%
Rockdale Blackhawk, LLC (e)  Healthcare & Pharmaceuticals   L+11.00%    12.00%  3/31/2020   11,565    10,656    11,519    6.1%
Rockdale Blackhawk, LLC (Revolver) (e) (g)  Healthcare & Pharmaceuticals   L+11.00%    12.00%  3/31/2020   1,849    -    -    0.0%
Rockdale Blackhawk, LLC (Capex) (e)  Healthcare & Pharmaceuticals   L+11.00%    12.00%  3/31/2020   597    597    595    0.3%
Rocket Dog Brands, LLC (e)  Consumer Goods: Non-Durable   n/a    10.00%  8/29/2019   1,033    1,033    763    0.4%
Rocket Dog Brands, LLC (e)  Consumer Goods: Non-Durable   n/a    15.00%  8/29/2019   390    385    371    0.2%
Rocket Dog Brands, LLC (e)  Consumer Goods: Non-Durable   n/a    17.00%  9/30/2016   200    195    200    0.1%
SHI Holdings, Inc. (f)  Healthcare & Pharmaceuticals   L+9.25%    9.71%  7/10/2019   2,625    2,585    2,508    1.3%
SHI Holdings, Inc. (Revolver) (g)  Healthcare & Pharmaceuticals   L+9.25%    9.71%  7/10/2019   955    930    889    0.5%
Shields Land Company of Georgia, LLC  Banking, Finance, Insurance & Real Estate   L+9.50%    9.96%  12/28/2017   2,450    2,413    2,413    1.3%
SNI Companies (k)  Services: Business   L+8.00%    9.00%  12/31/2018   5,832    5,754    5,829    3.1%
SNI Companies (Revolver) (g)  Services: Business   L+8.00%    9.00%  12/31/2018   1,250    -    -    0.0%
Summit Container Corporation (e) (f)  Containers, Packaging & Glass   L+11.00%    11.00% Cash/2.00% PIK   1/6/2019   3,691    3,621    3,606    1.9%
Synergy Environmental Corporation (Solterra) (f)  Environmental Industries   L+8.00%    8.50%  4/29/2021   3,170    3,107    3,178    1.7%
Synergy Environmental Corporation (Solterra) (f)  Environmental Industries   L+8.00%    8.50%  4/29/2021   530    525    531    0.3%
Synergy Environmental Corporation (Solterra) (Delayed Draw) (g) (i)  Environmental Industries   L+8.00%    8.50%  4/29/2018   1,342    -    -    0.0%
Synergy Environmental Corporation (Solterra) (Revolver) (g)  Environmental Industries   L+8.00%    8.50%  4/29/2021   671    54    54    0.0%
TPP Acquisition, Inc. (l)  Retail   L+11.00%    10.50% Cash/2.00% PIK(r)  12/17/2017   6,835    6,769    2,987    1.6%
TPP Acquisition, Inc. (Revolver) (l)  Retail   L+11.00%    4.50% Cash/8.00% PIK(r)  12/17/2017   2,035    2,035    2,035    1.1%
TPP Acquisition, Inc. (g) (i) (l)  Retail   L+11.00%    4.00% Cash/8.50% PIK(r)  12/17/2017   3,400    1,900    830    0.4%
TPP Acquisition, Inc. (Delayed Draw) (l)  Retail   L+11.00%    10.50% Cash/2.00% PIK(r)  12/17/2017   3,429    3,429    1,498    0.8%
TRG, LLC  Hotels, Gaming & Leisure   L+11.51%    8.00% Cash/4.01% PIK(s)  3/31/2021   11,756    11,711    11,756    6.2%
TRG, LLC (Revolver)  Hotels, Gaming & Leisure   L+9.50%    10.00%  3/31/2021   131    131    131    0.1%
TRG, LLC (CapEx) (g)  Hotels, Gaming & Leisure   L+9.50%    8.00% Cash/2.00% PIK   3/31/2021   1,601    798    801    0.4%
TTM Technologies, Inc.  High Tech Industries   L+5.00%    6.00%  5/31/2021   1,181    1,145    1,172    0.6%
Vacation Innovations, LLC (m)  Hotels, Gaming & Leisure   L+8.50%    7.50% Cash/1.50% PIK   8/20/2020   11,004    10,804    11,081    5.9%
Vacation Innovations, LLC (Revolver) (g)  Hotels, Gaming & Leisure   L+8.50%    7.50% Cash/1.50% PIK   8/20/2020   342    -    -    0.0%
Vacation Innovations, LLC (Delayed Draw) (g) (i)  Hotels, Gaming & Leisure   L+8.50%    7.50% Cash/1.50% PIK   8/20/2020   2,037    -    -    0.0%
Yandy Holding, LLC  Retail   L+9.00%    10.00%  9/30/2019   5,840    5,778    5,735    3.0%
Yandy Holding, LLC (Revolver) (g)  Retail   L+9.00%    10.00%  9/30/2019   907    -    -    0.0%
Total Senior Secured Loans                   233,691    206,626    201,002    106.5%
                                     
Unitranche Loans                                    
Collaborative Neuroscience Network, LLC (n)  Healthcare & Pharmaceuticals   L+11.50%    13.00%  12/27/2017   7,058    6,977    6,129    3.2%
Collaborative Neuroscience Network, LLC  Healthcare & Pharmaceuticals   n/a    12.00% Cash/3.00% PIK   10/31/2016   282    282    282    0.1%
Fabco Automotive Corporation  Automotive   L+9.25%    10.25%  4/3/2017   8,438    8,400    4,350    2.3%
Gracelock Industries, LLC  Wholesale   L+13.74%    11.00% Cash/4.24% PIK(t)  5/7/2019   5,048    4,958    4,636    2.5%
Incipio Technologies, Inc. (o)  Consumer Goods: Non-Durable   L+6.00%    7.00%  12/26/2019   15,000    14,704    14,910    8.0%
MooreCo, Inc.  Consumer Goods: Durable   L+14.50%    13.50% Cash/2.50% PIK   12/27/2017   3,700    3,670    3,700    2.0%
Output Services Group, Inc.  Services: Business   L+9.00%    9.50% Cash/1.00% PIK   12/17/2018   6,678    6,592    6,588    3.5%
Output Services Group, Inc.  Services: Business   L+9.00%    9.50% Cash/1.00% PIK   12/17/2018   8,489    8,355    8,557    4.5%
Playtime, LLC  Hotels, Gaming & Leisure   L+8.50%    9.00% Cash/1.00% PIK   12/31/2021   5,400    5,364    4,768    2.5%
Total Unitranche Loans                   60,093    59,302    53,920    28.6%
                                     
Junior Secured Loans                                    
AIM Aerospace, Inc.  Aerospace & Defense   L+9.00%    10.00%  8/2/2022   5,000    4,930    4,970    2.6%
Confie Seguros Holdings II Co.  Banking, Finance, Insurance & Real Estate   L+9.00%    10.25%  5/8/2019   8,594    8,149    8,186    4.3%
CSM Bakery Supplies LLC  Beverage, Food & Tobacco   L+7.75%    8.75%  7/3/2021   5,792    5,757    5,503    2.9%
Education Corporation of America  Services: Consumer   L+11.00%    11.63%  12/31/2018   5,000    4,901    5,007    2.7%
Hyland Software Inc.  High Tech Industries   L+7.25%    8.25%  7/1/2023   5,000    4,821    4,825    2.6%
Mergermarket USA, Inc.  Media: Broadcasting & Subscription   L+6.50%    7.50%  12/19/2021   4,500    4,392    3,960    2.1%
Micro Holdings Corp.  High Tech Industries   L+7.50%    8.50%  7/8/2022   5,590    5,465    5,450    2.9%
Mud Pie, LLC  Consumer Goods: Non-Durable   n/a    10.00% Cash/1.50% PIK   11/4/2020   10,178    10,010    10,381    5.5%
New NSI Holdings, Inc.  Chemicals, Plastics & Rubber   L+8.25%    9.25%  7/28/2022   4,000    3,945    3,936    2.1%
Pre-Paid Legal Services, Inc. (Legal Shield)  Services: Consumer   L+9.00%    10.25%  7/1/2020   3,000    2,996    2,985    1.6%
Rocket Dog Brands, LLC (e)  Consumer Goods: Non-Durable   n/a    15.00% PIK   5/1/2020   1,800    1,800    14    0.0%
Sterling Merger Sub Corp.  Services: Business   L+7.75%    8.75%  6/19/2023   5,000    4,954    4,800    2.5%
SCP TPZ Acquisition, Inc.  Media: Diversified & Production   L+8.25%    9.25%  5/29/2022   5,000    4,933    4,938    2.6%
Total Junior Secured Loans                   68,454    67,053    64,955    34.4%

 

 7 

 

 

Equity Securities                                    
American Community Homes, Inc. (warrant to purchase up to 9.0% of the equity) (e)  Banking, Finance, Insurance & Real Estate   -    -(u)  10/9/2024   -    -    921    0.5%
BookIt Operating LLC (warrant to purchase up to 3.0% of the equity) (p)  Hotels, Gaming & Leisure   -    -(u)  12/21/2023   -    -    587    0.3%
Collaborative Neuroscience Network, LLC (warrant to purchase up to 1.67 LLC units) (p)  Healthcare & Pharmaceuticals   -    -(u)  12/27/2022   -    -    -    0.0%
Cyalume Technologies Holdings, Inc. - Series D Preferred Stock (3.06 shares) (p)  Aerospace & Defense   -    -(u)  -   -    -    485    0.3%
Education Corporation of America - Series G Preferred Stock (8,333 shares) (p)  Services: Consumer    n/a    12.00%  -   -    8,125    8,433    4.5%
InMobi Pte, Ltd. (represents the right to purchase 0.42% of the equity) (j) (p)  Media: Advertising, Printing & Publishing   -    -(u)  9/18/2025   -    -    107    0.1%
O'Brien Industrial Holdings, LLC (warrants to purchase up to 2.44% of certain affiliated entities of the company) (p)  Metals & Mining   -    -(u)  5/13/2024   -    -    -    0.0%
Output Services Group, Inc. (warrant to purchase up to 3.89% of the common stock) (p)  Services: Business   -    -(u)  12/17/2022   -    -    794    0.4%
Playtime, LLC - Preferred Units (8,665 units) (p)  Hotels, Gaming & Leisure   -    -(u)  -   -    200    8    0.0%
Rocket Dog Brands, LLC - Common Units (75,502 units) (e)  Consumer Goods: Non-Durable   -    -(u)  -   -    -    -    0.0%
Rocket Dog Brands, LLC - Preferred Units (10 units) (e)  Consumer Goods: Non-Durable   -     15.00% PIK(v)  -   -    967    -    0.0%
Rockdale Blackhawk, LLC - LLC Units (11.56% of the LLC interest) (e)  Healthcare & Pharmaceuticals   -    -(u)  -   -    1,093    11,507    6.1%
Summit Container Corporation (warrant to purchase up to 19.50% of the equity) (e)  Containers, Packaging & Glass   -    -(u)  1/6/2024   -    -    -    0.0%
The Tie Bar Operating Company, LLC - Class A Preferred Units (1,275 units) (p)  Retail   -    -(u)  -   -    87    89    0.0%
The Tie Bar Operating Company, LLC - Class B Preferred Units (1,275 units) (p)  Retail   -    -(u)  -   -    1    -    0.0%
TPP Acquisition, Inc. (829 shares of common stock) (l)  Retail   -    -(u)  -   -    -    -    0.0%
Total Equity Securities                        10,473    22,931    12.2%
TOTAL INVESTMENTS                       $343,454   $342,808    181.7%

 

 
(a)All of our investments are issued by eligible U.S. portfolio companies, as defined in the Investment Company Act of 1940 (the “1940 Act”) except for InMobi Pte, Ltd. which is an international company headquartered in California. All investments are non-controlled/non-affiliate company investments, unless otherwise noted.
(b)The majority of the investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”) or Prime Rate (“Prime” or “P”) which reset daily, monthly, quarterly, or semiannually. For each such investment, the Company has provided the spread over LIBOR or Prime and the current contractual interest rate in effect at June 30, 2016. Certain investments are subject to a LIBOR or Prime interest rate floor.
(c)Because there is no readily available market value for these investments, the fair value of these investments is determined in good faith by our board of directors as required by the Investment Company Act of 1940. (See Note 4 in the accompanying notes to the consolidated financial statements.)
(d)Percentages are based on net assets of $188,650 as of June 30, 2016.
(e)As defined in the 1940 Act, the Company is deemed to be an "Affiliated Person" of the portfolio company as it owns five percent or more of the portfolio company's voting securities. See Note 5 in the accompanying notes to the consolidated financial statements for additional information on transactions in which the issuer was an Affiliated Person (but not a portfolio company that the Company is deemed to control).
(f)All of this loan is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s revolving credit facility.
(g)All or a portion of this commitment was unfunded at June 30, 2016. As such, interest is earned only on the funded portion of this commitment.
(h)A portion of this loan (principal of $2,401) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s revolving credit facility.
(i)This delayed draw loan requires that certain financial covenants be met by the portfolio company prior to any fundings.
(j)This investment is treated as a non-qualifying investment under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of June 30, 2016, non-qualifying assets totaled 1.88% of the Company's total assets.
(k)A portion of this loan (principal of $3,740) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s revolving credit facility.
(l)As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” of and to “Control” this portfolio company as it owns more than 25% in company's voting securities. See Note 5 in the accompanying notes to the consolidated financial statements for additional information on transactions in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to Control.
(m)A portion of this loan (principal of $4,859) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s revolving credit facility.
(n)The sale of a portion of this loan does not qualify for sale accounting under ASC Topic 860 — Transfers and Servicing, and therefore, the entire unitranche loan asset remains on the Consolidated Schedule of Investments.
(o)A portion of this loan (principal of $5,500) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s revolving credit facility.
(p)Represents less than 5% ownership of the portfolio company's voting securities.
(q)The PIK portion of the interest rate for Landpoint, LLC is structured as a guaranteed fee paid upon the termination of the commitment. The fee accrues at 2.25% per annum and is subject to a minimum payment upon termination of $338.
(r)This position is currently on non-accrual status.
(s)A portion of the PIK interest rate for TRG, LLC is structured as a guaranteed fee paid upon the termination of the commitment. The fee accrues at 2.01% per annum and is subject to an estimated minimum payment upon termination of $1,407.
(t)The PIK portion of the interest rate for Gracelock Industries, LLC is structured as a fee paid upon the termination of the commitment. The fee currently accrues at 4.24% per annum.
(u)Represents a non-income producing security.
(v)This position includes a PIK dividend and is currently on non-accrual status.
(w)This is a demand note with no stated maturity.

n/a - not applicable

 

See Notes to Consolidated Financial Statements.

 

 8 

 

MONROE CAPITAL CORPORATION

 

CONSOLIDATED SCHEDULE OF INVESTMENTS

 

December 31, 2015

 

(in thousands, except for units)

Portfolio Company (a)  Industry  Spread Above
Index (b)
   Interest Rate   Maturity  Principal   Amortized
Cost
   Fair
Value (c)
   % of
Net
Assets (d)
 
Senior Secured Loans                                    
360 Holdings III Corp.  Consumer Goods: Non-Durable   L+9.00%    10.00%  10/1/2021   5,985   $5,746   $5,746    3.1%
Alora Pharmaceuticals, LLC (e)  Healthcare & Pharmaceuticals   L+7.50%    8.50%  9/13/2018   11,338    11,229    11,253    6.1%
Alora Pharmaceuticals, LLC (Revolver) (f)  Healthcare & Pharmaceuticals   L+7.50%    8.50%  9/13/2018   1,336    -    -    0.0%
American Community Homes, Inc. (g)  Banking, Finance, Insurance & Real Estate   L+8.00%    9.50%  7/22/2019   7,667    7,511    7,398    4.0%
American Community Homes, Inc. (g)  Banking, Finance, Insurance & Real Estate   L+12.50%    9.50% Cash/4.50% PIK   7/22/2019   4,029    3,951    3,941    2.1%
Answers Corporation  High Tech Industries   L+5.25%    6.25%  10/1/2021   2,918    2,818    1,984    1.1%
BCC Software, LLC (h)  High Tech Industries   L+8.00%    9.00%  6/20/2019   2,817    2,785    2,776    1.5%
BCC Software, LLC (Revolver) (f)  High Tech Industries   L+8.00%    9.00%  6/20/2019   469    -    -    0.0%
Bluestem Brands, Inc.  Consumer Goods: Non-Durable   L+7.50%    8.50%  11/6/2020   2,919    2,892    2,737    1.4%
Cali Bamboo, LLC  Construction & Building   L+8.50%    9.00%  7/10/2020   4,179    4,101    4,093    2.2%
Cali Bamboo, LLC (Revolver) (f)  Construction & Building   L+8.50%    9.00%  7/10/2020   1,624    1,039    1,039    0.6%
Cornerstone Detention Products, Inc. (i)  Construction & Building   L+10.50%    10.50% Cash/1.00% PIK   4/8/2019   4,221    4,161    3,969    2.2%
Cornerstone Detention Products, Inc. (Revolver) (f)  Construction & Building   L+9.50%    10.50%  4/8/2019   400    -    -    0.0%
Cyalume Technologies Holdings, Inc. (h)  Aerospace & Defense   L+9.00%    10.00%  5/18/2020   5,236    5,106    5,278    2.9%
Cyalume Technologies Holdings, Inc. (Delayed Draw)  Aerospace & Defense   L+9.00%    10.00%  5/18/2020   453    453    456    0.2%
Cyalume Technologies Holdings, Inc. (Revolver) (f)  Aerospace & Defense   L+9.00%    10.00%  5/18/2020   1,528    306    306    0.2%
Diesel Direct Holdings, Inc. (h)  Energy: Oil & Gas   L+9.00%    10.00%  2/17/2020   5,363    5,299    5,443    2.9%
EB Employee Solutions, LLC (h)  Services: Business   L+8.50%    10.00%  2/28/2019   3,470    3,406    3,399    1.8%
G&M Opco LLC (h)  Construction & Building   L+7.50%    8.00%  6/23/2020   3,169    3,096    3,109    1.7%
InMobi Pte, Ltd. (Delayed Draw) (f) (j) (k)  Media: Advertising, Printing & Publishing   L+10.17%    10.50%  9/1/2018   10,000    5,842    5,772    3.1%
Jerry Lee Radio, LLC  Media: Broadcasting & Subscription   L+9.50%    10.00%  12/17/2020   15,000    14,627    14,625    7.9%
Landpoint, LLC  Energy: Oil & Gas   L+12.75%    12.00% Cash/2.25% PIK(q)  12/20/2018   3,750    3,688    3,634    2.0%
Landpoint, LLC (Revolver) (f)  Energy: Oil & Gas   L+10.50%    12.00%  12/20/2018   313    -    -    0.0%
L.A.R.K. Industries, Inc.  Construction & Building   L+7.00%    8.00%  9/3/2019   6,690    6,562    6,657    3.6%
Luxury Optical Holdings Co.  Retail   L+9.00%    9.00% Cash/1.00% PIK   9/12/2019   4,035    3,972    3,986    2.2%
Luxury Optical Holdings Co. (Revolver) (f)  Retail   L+8.00%    9.00%  9/12/2019   273    -    -    0.0%
Miles Media Group LLC  Hotels, Gaming & Leisure   L+8.50%    9.50%  9/12/2019   3,875    3,814    3,864    2.1%
Miles Media Group LLC (Delayed Draw) (f) (j)  Hotels, Gaming & Leisure   L+8.50%    9.50%  9/12/2019   1,600    -    -    0.0%
Miles Media Group LLC (Revolver) (f)  Hotels, Gaming & Leisure   L+8.50%    9.50%  9/12/2019   320    -    -    0.0%
O'Brien Industrial Holdings, LLC  Metals & Mining   L+11.50%    11.00% Cash/2.00% PIK   5/13/2019   6,326    6,213    6,177    3.4%
O'Brien Industrial Holdings, LLC (Revolver) (f)  Metals & Mining   L+9.50%    11.00%  5/13/2019   2,844    1,219    1,219    0.7%
PD Products, LLC  Consumer Goods: Non-Durable   L+10.50%    12.00%  10/4/2018   12,698    12,589    12,679    6.9%
PD Products, LLC (Revolver) (f)  Consumer Goods: Non-Durable   L+10.50%    12.00%  10/4/2018   2,500    1,025    1,024    0.6%
PeopleConnect Intermediate, LLC (formerly Intelius, Inc.)  Services: Consumer   L+5.50%    6.50%  7/1/2020   4,958    4,855    4,993    2.7%
PeopleConnect Intermediate, LLC (formerly Intelius, Inc.)  Services: Consumer   L+11.50%    12.50%  7/1/2020   4,979    4,874    4,964    2.7%
PeopleConnect Intermediate, LLC (formerly Intelius, Inc.) (Revolver) (f)  Services: Consumer   L+8.50%    9.50%  7/1/2020   354    -    -    0.0%
Precision Toxicology, LLC (h)  Healthcare & Pharmaceuticals   L+8.00%    8.00% Cash/1.00% PIK   3/24/2020   5,440    5,345    5,358    2.9%
Precision Toxicology, LLC (Revolver) (f)  Healthcare & Pharmaceuticals   L+8.00%    8.00% Cash/1.00% PIK   3/24/2020   635    -    -    0.0%
Rockdale Blackhawk, LLC (g)  Healthcare & Pharmaceuticals   L+11.00%    12.00%  3/31/2020   12,207    11,155    12,299    6.7%
Rockdale Blackhawk, LLC (Revolver) (f) (g)  Healthcare & Pharmaceuticals   L+11.00%    12.00%  3/31/2020   1,849    789    786    0.4%
Rockdale Blackhawk, LLC (Capex) (f) (g)  Healthcare & Pharmaceuticals   L+11.00%    12.00%  3/31/2020   2,288    629    634    0.3%
Rocket Dog Brands, LLC (g)  Consumer Goods: Non-Durable   n/a    10.00%  8/29/2019   1,032    1,032    1,032    0.6%
Rocket Dog Brands, LLC (Delayed Draw) (f) (g) (j)  Consumer Goods: Non-Durable   n/a    15.00%  8/29/2019   350    150    150    0.1%
SHI Holdings, Inc. (h)  Healthcare & Pharmaceuticals   L+9.25%    9.67%  7/10/2019   2,737    2,688    2,710    1.5%
SHI Holdings, Inc. (Revolver) (f)  Healthcare & Pharmaceuticals   L+9.25%    9.67%  7/10/2019   818    573    573    0.3%
SNI Companies (l)  Services: Business   L+10.00%    11.00%  12/31/2018   6,852    6,743    6,842    3.7%
SNI Companies (Revolver) (f)  Services: Business   L+10.00%    11.00%  12/31/2018   1,250    125    125    0.1%
Summit Container Corporation (g) (h)  Containers, Packaging & Glass   L+9.00%    11.00%  1/6/2019   3,600    3,537    3,400    1.8%
The Sandbox Group LLC (h)  Media: Advertising, Printing & Publishing   L+10.00%    9.00% Cash/2.00% PIK   2/23/2020   5,388    5,274    5,329    2.9%
The Sandbox Group LLC (Revolver) (f)  Media: Advertising, Printing & Publishing   L+10.00%    9.00% Cash/2.00% PIK   2/23/2020   1,250    1,243    1,243    0.7%
TRG, LLC  Hotels, Gaming & Leisure   L+17.92%    11.00% Cash/7.92% PIK(r)  12/23/2019   3,068    3,017    3,040    1.6%
TRG, LLC (Revolver) (f)  Hotels, Gaming & Leisure   L+12.00%    13.00%  12/23/2019   131    -    -    0.0%
TRG, LLC (CapEx) (f)  Hotels, Gaming & Leisure   L+12.00%    11.00% Cash/2.00% PIK   12/23/2019   919    653    649    0.3%
TTM Technologies, Inc.  High Tech Industries   L+5.00%    6.00%  5/31/2021   1,330    1,287    1,207    0.6%
Vacation Innovations, LLC  Hotels, Gaming & Leisure   L+9.00%    9.50%  8/20/2020   6,211    6,093    6,236    3.4%
Vacation Innovations, LLC (Revolver) (f)  Hotels, Gaming & Leisure   L+9.00%    9.50%  8/20/2020   342    -    -    0.0%
Yandy Holding, LLC  Retail   L+9.00%    10.00%  9/30/2019   6,419    6,342    6,425    3.5%
Yandy Holding, LLC (Revolver) (f)  Retail   L+9.00%    10.00%  9/30/2019   907    -    -    0.0%
Total Senior Secured Loans                   214,659    189,854    190,559    103.3%
                                     
Unitranche Loans                                    
Accutest Corporation  Services: Business   L+9.50%    11.00%  6/5/2018   6,586    6,440    6,586    3.6%
Collaborative Neuroscience Network, LLC (m)  Healthcare & Pharmaceuticals   L+11.50%    13.00%  12/27/2017   7,058    6,968    6,733    3.6%
Fabco Automotive Corporation  Automotive   L+9.25%    10.25%  4/3/2017   8,437    8,393    5,358    2.9%
Gracelock Industries, LLC  Wholesale   L+12.05%    11.00% Cash/2.55% PIK(s)  5/7/2019   5,207    5,101    4,730    2.6%
Incipio Technologies, Inc. (n)  Consumer Goods: Non-Durable   L+6.00%    7.00%  12/26/2019   15,000    14,669    15,008    8.1%
MooreCo, Inc.  Consumer Goods: Durable   L+13.50%    12.50% Cash/2.50% PIK   12/27/2017   4,223    4,177    4,223    2.3%
Output Services Group, Inc.  Services: Business   L+9.00%    9.50% Cash/1.00% PIK   12/17/2018   6,655    6,555    6,562    3.6%
Output Services Group, Inc.  Services: Business   L+9.00%    9.50% Cash/1.00% PIK   12/17/2018   7,429    7,301    7,295    3.9%
Playtime, LLC (m)  Hotels, Gaming & Leisure   L+7.50%    9.00%  12/4/2017   5,677    5,627    5,070    2.8%
TPP Acquisition, Inc. (o)  Retail   L+11.00%    10.50% Cash/2.00% PIK   12/17/2017   6,835    6,769    2,990    1.6%
TPP Acquisition, Inc. (Revolver) (o)  Retail   L+11.00%    4.50% Cash/8.00% PIK   12/17/2017   2,035    2,035    2,035    1.1%
TPP Acquisition, Inc. (Delayed Draw) (o)  Retail   L+11.00%    10.50% Cash/2.00% PIK   12/17/2017   3,429    3,429    1,500    0.8%
Total Unitranche Loans                   78,571    77,464    68,090    36.9%
                                     
Junior Secured Loans                                    
Confie Seguros Holdings II Co.  Banking, Finance, Insurance & Real Estate   L+9.00%    10.25%  5/8/2019   5,594    5,555    5,538    3.0%
CSM Bakery Supplies LLC  Beverage, Food & Tobacco   L+7.75%    8.75%  7/3/2021   5,792    5,691    5,532    3.0%
Education Corporation of America  Services: Consumer   L+11.00%    11.60%  12/31/2018   5,833    5,698    5,854    3.2%
Hyland Software Inc.  High Tech Industries   L+7.25%    8.25%  7/1/2023   5,000    4,810    4,700    2.5%
Mergermarket USA, Inc.  Media: Broadcasting & Subscription   L+6.50%    7.50%  12/19/2021   4,500    4,384    4,016    2.2%
Micro Holdings Corp.  High Tech Industries   L+7.50%    8.50%  7/8/2022   5,590    5,455    5,339    2.9%
Mud Pie, LLC  Consumer Goods: Non-Durable   n/a    10.00% Cash/1.50% PIK   11/4/2020   10,101    9,919    10,060    5.4%
New NSI Holdings, Inc.  Chemicals, Plastics & Rubber   L+8.25%    9.25%  7/28/2022   4,000    3,942    3,948    2.1%
Pre-Paid Legal Services, Inc. (Legal Shield)  Services: Consumer   L+9.00%    10.25%  7/1/2020   3,000    2,988    2,950    1.6%
Physiotherapy Corporation  Healthcare & Pharmaceuticals   L+8.50%    9.50%  6/3/2022   5,000    4,953    5,000    2.7%
Rocket Dog Brands, LLC (g)  Consumer Goods: Non-Durable   n/a    15.00% PIK   5/1/2020   1,673    1,673    570    0.3%
Sterling Infosystems, Inc.  Services: Business   L+7.75%    8.75%  6/19/2023   5,000    4,952    4,956    2.7%
SCP TPZ Acquisition, Inc.  Media: Diversified & Production   L+8.25%    9.25%  5/29/2022   5,000    4,928    4,925    2.7%
Total Junior Secured Loans                   66,083    64,948    63,388    34.3%

 9 

 

 

Equity Securities                                    
American Community Homes, Inc. (warrant to purchase up to 9.0% of the equity) (p)  Banking, Finance, Insurance & Real Estate   -    -(t)  10/9/2024   -    -    353    0.2%
BookIt Operating LLC (warrant to purchase up to 3.0% of the equity) (p)  Hotels, Gaming & Leisure   -    -(t)  12/21/2023   -    -    587    0.3%
Collaborative Neuroscience Network, LLC (warrant to purchase up to 1.67 LLC units) (p)  Healthcare & Pharmaceuticals   -    -(t)  12/27/2022   -    -    147    0.1%
Cyalume Technologies Holdings, Inc. - Series D Preferred Stock (3.06 shares) (p)  Aerospace & Defense   -    -(t)  -   -    -    449    0.2%
Education Corporation of America - Series G Preferred Stock (8,333 shares) (p)  Services: Consumer    n/a    12.00%  -   -    8,125    8,345    4.5%
InMobi Pte, Ltd. (represents the right to purchase 0.42% of the equity) (k) (p)  Media: Advertising, Printing & Publishing   -    -(t)  9/18/2025   -    -    108    0.1%
O'Brien Industrial Holdings, LLC (warrants to purchase up to 2.44% of certain affiliated entities of the company) (p)  Metals & Mining   -    -(t)  5/13/2024   -    -    -    0.0%
Output Services Group, Inc. (warrant to purchase up to 3.89% of the common stock) (p)  Services: Business   -    -(t)  12/17/2022   -    -    450    0.2%
Playtime, LLC - Preferred Units (8,665 units) (p)  Hotels, Gaming & Leisure   -    -(t)  -   -    200    64    0.0%
Rocket Dog Brands, LLC - Common Units (75,502 units) (g)  Consumer Goods: Non-Durable   -    -(t)  -   -    -    -    0.0%
Rocket Dog Brands, LLC - Preferred Units (10 units) (g)  Consumer Goods: Non-Durable   -     15.00% PIK(u)  -   -    967    -    0.0%
Rockdale Blackhawk, LLC - LLC Units (11.56% of the LLC interest) (g)  Healthcare & Pharmaceuticals   -    -(t)  -   -    1,093    8,184    4.4%
Summit Container Corporation (warrant to purchase up to 19.50% of the equity) (g)  Containers, Packaging & Glass   -    -(t)  1/6/2024   -    -    -    0.0%
The Sandbox Group LLC (warrant to purchase up to 1.0% of the equity) (p)  Media: Advertising, Printing & Publishing   -    -(t)  -   -    -    277    0.2%
The Tie Bar Operating Company, LLC - Class A Preferred Units (1,275 units) (p)  Retail   -    -(t)  -   -    86    90    0.1%
The Tie Bar Operating Company, LLC - Class B Preferred Units (1,275 units) (p)  Retail   -    -(t)  -   -    1    -    0.0%
TPP Acquisition, Inc. (829 shares of common stock) (o)  Retail   -    -(t)  -   -    -    -    0.0%
Total Equity Securities                        10,472    19,054    10.3%
TOTAL INVESTMENTS                       $342,738   $341,091    184.8%

  

 
(a)All of our investments are issued by eligible U.S. portfolio companies, as defined in the Investment Company Act of 1940 (the “1940 Act”) except for InMobi Pte, Ltd. which is an international company headquartered in California.  All investments are non-controlled/non-affiliate company investments, unless otherwise noted.
(b)The majority of the investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”) or Prime Rate (“Prime” or “P”) which reset daily, monthly, quarterly, or semiannually. For each such investment the Company has provided the spread over LIBOR or Prime and the current contractual interest rate in effect at December 31, 2015. Certain investments are subject to a LIBOR or Prime interest rate floor.
(c)Because there is no readily available market value for these investments, the fair value of these investments is determined in good faith by our board of directors as required by the Investment Company Act of 1940. (See Note 4 in the accompanying notes to the consolidated financial statements.)
(d)Percentages are based on net assets of $184,535 as of December 31, 2015.
(e)A portion of this loan (principal of $4,679) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s revolving credit facility.
(f)All or a portion of this commitment was unfunded at December 31, 2015. As such, interest is earned only on the funded portion of this commitment.
(g)As defined in the 1940 Act, the Company is deemed to be an “Affiliated Person” of the portfolio company as it owns five percent or more of the portfolio company's voting securities. See Note 5 in the accompanying notes to the consolidated financial statements for additional information on transactions in which the issuer was an Affiliated Person (but not a portfolio company that the Company is deemed to control).
(h)All of this loan is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s revolving credit facility.
(i)A portion of this loan (principal of $2,532) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s revolving credit facility.
(j)This delayed draw loan requires that certain financial covenants be met by the portfolio company prior to any fundings.
(k)This investment is treated as a non-qualifying investment under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2015, non-qualifying assets totaled 1.60% of the Company’s total assets.
(l)A portion of this loan (principal of $4,394) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s revolving credit facility.
(m)The sale of a portion of this loan does not qualify for sale accounting under ASC Topic 860 — Transfers and Servicing, and therefore, the entire unitranche loan asset remains on the Consolidated Schedule of Investments.
(n)A portion of this loan (principal of $5,500) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s revolving credit facility.
(o)As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” of and to “Control” this portfolio company as it owns more than 25% percent of the portfolio company’s voting securities. See Note 5 in the accompanying notes to the consolidated financial statements for additional information on transactions in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to Control.
(p)Represents less than 5% ownership of the portfolio company’s voting securities.
(q)The PIK portion of the interest rate for Landpoint, LLC is structured as a guaranteed fee paid upon the termination of the commitment. The fee accrues at 2.25% per annum and is subject to a minimum payment upon termination of $338.
(r)A portion of the PIK interest rate for TRG, LLC is structured as a guaranteed fee paid upon the termination of the commitment. The fee accrues at 5.92% per annum and is subject to an estimated minimum payment upon termination of $891.
(s)The PIK portion of the interest rate for Gracelock Industries, LLC is structured as a fee paid upon the termination of the commitment. The fee accrues at 2.55% per annum.
(t)Represents a non-income producing security.
(u)This position includes a PIK dividend and is currently on non-accrual status.

n/a - not applicable

 

See Notes to Consolidated Financial Statements.

 

 10 

 

MONROE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(in thousands, except share and per share data)

 

Note 1. Organization and Principal Business

 

Monroe Capital Corporation (“Monroe Capital” and together with its subsidiaries, the “Company”) was formed in February 2011 to act as an externally managed non-diversified, closed-end management investment company and has elected to be treated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company had no substantive operating activities prior to October 24, 2012, the date of its initial public offering. Monroe Capital’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through investment in senior secured, junior secured and unitranche (a combination of senior secured and junior secured debt in the same facility) debt and, to a lesser extent, unsecured subordinated debt and equity investments. Monroe Capital is managed by Monroe Capital BDC Advisors, LLC (“MC Advisors”), a registered investment adviser under the Investment Advisers Act of 1940, as amended. In addition, for U.S. federal income tax purposes, Monroe Capital has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

 

On February 28, 2014, the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP (“MRCC SBIC”), a Delaware limited partnership, received a license from the Small Business Administration (“SBA”) to operate as a Small Business Investment Company (“SBIC”) under Section 301(c) of the Small Business Investment Act of 1958, as amended. MRCC SBIC commenced operations on September 16, 2013. As of June 30, 2016, MRCC SBIC had $20,000 in regulatory and leveragable capital and $40,000 in SBA-guaranteed debentures outstanding. On April 13, 2016, MRCC SBIC was approved by the SBA for an additional $75,000 in SBA-guaranteed debentures. See Note 7 for additional information.

 

On July 25, 2016, the Company closed a public offering of 3,100,000 shares of its common stock at a public offering price of $15.50 per share, raising approximately $48,050 in gross proceeds. On August 3, 2016, the Company sold an additional 465,000 shares of its common stock, at a public offering price of $15.50 per share, raising approximately $7,208 in gross proceeds pursuant to the underwriters’ exercise of the over-allotment option. Aggregate underwriters’ discounts and commissions were $2,210 and offering costs are expected to total approximately $350.

 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The accompanying consolidated financial statements of the Company and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X. The Company has determined it meets the definition of an investment company and follows the accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 — Financial Services — Investment Companies (“ASC Topic 946”). Certain prior period amounts have been reclassified to conform to the current period presentation.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Consolidation

 

As permitted under Regulation S-X and ASC Topic 946, the Company will generally not consolidate its investment in a portfolio company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company’s wholly-owned subsidiaries, in its consolidated financial statements. All intercompany balances and transactions have been eliminated.

 

Fair Value of Financial Instruments

 

The Company applies fair value to substantially all of its financial instruments in accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework used to measure fair value, and requires disclosures for fair value measurements, including the categorization of financial instruments into a three-level hierarchy based on the transparency of valuation inputs. See Note 4 to the consolidated financial statements for further discussion regarding the fair value measurements and hierarchy.

 

 11 

 

 

ASC Topic 820 requires disclosure of the fair value of financial instruments for which it is practical to estimate such value. The Company believes that the carrying amounts of its other financial instruments such as cash, receivables and payables approximate the fair value of such items due to the short maturity of such instruments.

 

Revenue Recognition

 

The Company’s revenue recognition policies are as follows:

 

Investments and related investment income: Interest and dividend income is recorded on the accrual basis to the extent that the Company expects to collect such amounts. Interest income is accrued based upon the outstanding principal amount and contractual terms of debt and preferred equity investments. Interest is accrued on a daily basis. All other income is recorded into income when earned. The Company records prepayment fees and amendment fees on loans as interest income in the period earned. For the three and six months ended June 30, 2016, interest income included $516 and $847 of prepayment and amendment fees, respectively. For the three and six months ended June 30, 2015, interest income included $559 and $1,125 of prepayment and amendment fees, respectively.

 

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies. Each distribution received from limited liability company (“LLC”) and limited partnership (“LP”) investments is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated tax-basis earnings and profits in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment. For the three and six months ended June 30, 2016, the Company recorded dividend income of $1,051 and $2,913, respectively. For both the three and six months ended June 30, 2015, the Company recorded no dividend income.

 

Loan origination fees, original issue discount and market discount or premiums are capitalized, and the Company then amortizes such amounts using the effective interest method as interest income over the life of the investment. Unamortized discounts and loan origination fees totaled $5,890 and $6,340 as of June 30, 2016 and December 31, 2015, respectively. Upfront loan origination and closing fees received for the three and six months ended June 30, 2016 totaled $350 and $1,496, respectively. For the three and six months ended June 30, 2015, upfront loan origination and closing fees received totaled $630 and $1,548, respectively. For the three and six months ended June 30, 2016, interest income included $389 and $754 of accretion of loan origination fees, original issue discounts and market discounts or premiums, respectively. For the three and six months ended June 30, 2015, interest income included $279 and $479 of accretion of loan origination fees, original issue discounts and market discounts or premiums, respectively. Upon the prepayment of a loan or debt security, any unamortized premium or discount or loan origination fees are recorded as interest income. For the three and six months ended June 30, 2016, interest income included $232 and $609 of unamortized discount or loan origination fees recorded as interest income upon prepayment of a loan or debt security, respectively. For the three and six months ended June 30, 2015, interest income included $503 and $770 of unamortized discount or loan origination fees recorded as interest income upon prepayment of a loan or debt security, respectively.

 

The Company has certain investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision, which represents contractual interest or dividends that are added to the principal balance and recorded as income. For the three and six months ended June 30, 2016, interest income included $460 and $830 of PIK interest, respectively. For the three and six months ended June 30, 2015, interest income included $510 and $1,040 of PIK interest, respectively. The Company stops accruing PIK interest when it is determined that PIK interest is no longer collectible. To maintain RIC tax treatment, and to avoid corporate tax, substantially all of this income must be paid out to stockholders in the form of distributions, even though the Company has not yet collected the cash.

 

Investment transactions are recorded on a trade-date basis. Realized gains or losses on portfolio investments are calculated based upon the difference between the net proceeds from the disposition and the amortized cost basis of the investment, without regard to unrealized gains and losses previously recognized. Realized gains and losses are recorded within net realized gain (loss) on investments in the consolidated statements of operations. Changes in the fair value of investments from the prior period, as determined by the Company’s board of directors (the “Board”) through the application of the Company’s valuation policy, are included within net change in unrealized appreciation (depreciation) on investments in the consolidated statements of operations.

 

Non-accrual: Loans or preferred equity securities are placed on non-accrual status when principal, interest or dividend payments become materially past due, or when there is reasonable doubt that principal, interest or dividends will be collected. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal, interest or dividends are paid and, in management’s judgment, are likely to remain current. On January 1, 2016, the Company placed its loan investments in TPP Acquisition, Inc. on non-accrual status. During the three and six months ended June 30, 2016, the Company received interest payments from TPP Acquisition, Inc. totaling $10, which were recognized as interest income. Prior to placing TPP Acquisition Inc. on non-accrual status there were no other loan investments on non-accrual status. The Company’s preferred unit investment in Rocket Dog Brands LLC, which has a stated PIK interest rate, continues to remain on non-accrual status, and no dividend income was recorded related to this investment for the three and six months ended June 30, 2016 and 2015. The fair value of the Company’s investments on non-accrual status totaled $7,350 and zero at June 30, 2016 and December 31, 2015, respectively.

 

 12 

 

 

Partial loan sales: The Company follows the guidance in ASC Topic 860 — Transfers and Servicing (“ASC Topic 860”), when accounting for loan participations and other partial loan sales. Such guidance requires a participation or other partial loan sale to meet the definition of a “participating interest,” as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain on the Company’s consolidated statements of assets and liabilities and the proceeds are recorded as a secured borrowing until the definition is met. For these partial loan sales, the interest earned on the entire loan balance is recorded within “interest income” and the interest earned by the buyer in the partial loan sale is recorded within “interest and other debt financing expenses” in the accompanying consolidated statements of operations. Changes in the fair value of secured borrowings from the prior period, as determined by the Board through the application of the Company’s valuation policy, are included as changes in unrealized appreciation (depreciation) on secured borrowings in the consolidated statements of operations. See Note 7 “Secured Borrowings” for additional information.

 

Distributions

 

Distributions to common stockholders are recorded on the record date. The amount, if any, to be distributed is determined by the Board each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are generally distributed at least annually, although the Company may decide to retain such capital gains for investment.

 

The determination of the tax attributes for the Company’s distributions is made annually, based upon its taxable income for the full year and distributions paid for the full year. Ordinary dividend distributions from a RIC do not qualify for the preferential tax rate on qualified dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes for distributions will generally include both ordinary income and capital gains, but may also include qualified dividends or return of capital.

 

The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if the Company declares a cash dividend, the Company’s stockholders who have not “opted out” of the DRIP at least three days prior to the dividend payment date will have their cash dividend automatically reinvested into additional shares of the Company’s common stock. The Company has the option to satisfy the share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases of common stock by the DRIP plan administrator. Newly issued shares are valued based upon the final closing price of the Company’s common stock on a date determined by the Board. Shares purchased in the open market to satisfy the DRIP requirements will be valued based upon the average price of the applicable shares purchased by the DRIP plan administrator, before any associated brokerage or other costs. See Note 8 regarding distributions for additional information.

 

Earnings per Share

 

In accordance with the provisions of ASC Topic 260 — Earnings per Share (“ASC Topic 260”), basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of shares outstanding during the period. The weighted average shares outstanding utilized in the calculation of earnings per share take into account share issues under the at-the-market (“ATM”) program on the issuance date and the Company’s repurchases of its common stock on the repurchase date. See Note 9 for additional information on the Company’s share issuances and repurchases. For the periods presented in these consolidated financial statements, there were no potentially dilutive common shares issued.

 

Segments

 

In accordance with ASC Topic 280 — Segment Reporting, the Company has determined that it has a single reporting segment and operating unit structure.

 

Cash

 

The Company deposits its cash in a financial institution and, at times, such balances may be in excess of the Federal Deposit Insurance Corporation insurance limits.

 

Restricted Cash

 

Restricted cash includes amounts held within MRCC SBIC. Cash held within an SBIC is generally restricted to the originations of new loans from the SBIC and the payment of SBA debentures and related interest expense.

 

Unamortized Deferred Financing Costs

 

Deferred financing costs represent fees and other direct incremental costs incurred in connection with the Company’s borrowings. As of June 30, 2016 and December 31, 2015, the Company had unamortized deferred financing costs of $4,037 and $3,569, respectively, presented as a direct reduction of the carrying amount of debt on the consolidated statements of assets and liabilities. These amounts are amortized and included in interest expense in the consolidated statements of operations over the estimated average life of the borrowings. Amortization of deferred financing costs for the three and six months ended June 30, 2016 was $199 and $381, respectively. Amortization of deferred financing costs for the three and six months ended June 30, 2015 was $200 and $367, respectively.

 

Offering Costs

 

Offering costs include, among other things, fees paid in relation to legal, accounting, regulatory and printing work completed in preparation of equity offerings. Offering costs are charged against the proceeds from equity offerings within the consolidated statements of changes in net assets. As of June 30, 2016 and December 31, 2015, other assets on the consolidated statements of assets and liabilities included $399 and $358, respectively, of deferred offering costs which will be charged against the proceeds from further equity offerings when rec