BBDC 10-Q Quarterly Report March 31, 2017 | Alphaminr
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BBDC 10-Q Quarter ended March 31, 2017

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Income Statement
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10-Q 1 a2017033110qtcap.htm 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________
Form 10-Q
__________________________________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017
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 814-00733
__________________________________________________________
Triangle Capital Corporation
(Exact name of registrant as specified in its charter)
__________________________________________________________
Maryland
06-1798488
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
3700 Glenwood Avenue, Suite 530
Raleigh, North Carolina
27612
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (919) 719-4770
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A
__________________________________________________________
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 ý 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ¨ 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,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
ý
Accelerated filer
¨
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨
Emerging growth company
¨
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 ý
The number of shares outstanding of the registrant’s Common Stock on May 3, 2017 was 47,681,397.



TRIANGLE CAPITAL CORPORATION
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q

Page
PART I – FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


2


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.
TRIANGLE CAPITAL CORPORATION
Consolidated Balance Sheets
March 31, 2017
December 31, 2016
(Unaudited)
Assets:
Investments at fair value:
Non-Control / Non-Affiliate investments (cost of $948,873,881 and $888,974,154 as of March 31, 2017 and December 31, 2016, respectively)
$
922,229,496

$
857,604,639

Affiliate investments (cost of $199,044,196 and $162,539,224 as of March 31, 2017 and December 31, 2016, respectively)
192,981,537

161,510,773

Control investments (cost of $42,926,673 and $45,418,113 as of March 31, 2017 and December 31, 2016, respectively)
17,997,769

18,791,769

Total investments at fair value
1,133,208,802

1,037,907,181

Cash and cash equivalents
90,603,276

107,087,663

Interest, fees and other receivables
5,494,514

10,189,788

Prepaid expenses and other current assets
1,848,178

1,659,570

Deferred financing fees
3,001,250

2,699,960

Property and equipment, net
107,211

106,494

Total assets
$
1,234,263,231

$
1,159,650,656

Liabilities:
Accounts payable and accrued liabilities
$
3,301,982

$
6,797,244

Interest payable
1,559,113

3,996,940

Taxes payable
—

489,691

Deferred income taxes
570,505

2,053,701

Borrowings under credit facility
91,090,267

127,011,475

Notes
162,914,760

162,755,381

SBA-guaranteed debentures payable
245,619,315

245,389,966

Total liabilities
505,055,942

548,494,398

Commitments and contingencies (Note 7)
Net Assets:
Common stock, $0.001 par value per share (150,000,000 shares authorized, 47,681,397 and 40,401,292 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively)
47,681

40,401

Additional paid-in capital
819,123,942

686,835,054

Investment income in excess of distributions
2,265,568

5,884,512

Accumulated realized losses
(37,530,553
)
(24,211,594
)
Net unrealized depreciation
(54,699,349
)
(57,392,115
)
Total net assets
729,207,289

611,156,258

Total liabilities and net assets
$
1,234,263,231

$
1,159,650,656

Net asset value per share
$
15.29

$
15.13


See accompanying notes.


3


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Operations
Three Months
Ended
Three Months
Ended
March 31,
2017
March 31,
2016
Investment income:
Interest income:
Non-Control / Non-Affiliate investments
$
20,470,837

$
18,182,654

Affiliate investments
3,372,135

3,384,369

Control investments
269,536

193,616

Total interest income
24,112,508

21,760,639

Dividend income:
Non-Control / Non-Affiliate investments
281,229

(1,246,760
)
Affiliate investments
—

160,055

Total dividend income
281,229

(1,086,705
)
Fee and other income:
Non-Control / Non-Affiliate investments
1,917,238

1,623,886

Affiliate investments
300,264

310,015

Control investments
100,000

100,000

Total fee and other income
2,317,502

2,033,901

Payment-in-kind interest income:
Non-Control / Non-Affiliate investments
2,639,382

2,921,604

Affiliate investments
738,466

989,213

Total payment-in-kind interest income
3,377,848

3,910,817

Interest income from cash and cash equivalents
101,683

37,218

Total investment income
30,190,770

26,655,870

Operating expenses:
Interest and other financing fees
6,910,303

6,518,570

Compensation expenses
4,250,413

9,450,493

General and administrative expenses
1,210,621

1,088,724

Total operating expenses
12,371,337

17,057,787

Net investment income
17,819,433

9,598,083

Realized and unrealized gains (losses) on investments and foreign currency borrowings:
Net realized gains (losses):
Non-Control / Non-Affiliate investments
(12,360,335
)
584,787

Affiliate investments
3,532,816

1,427

Control investments
(4,491,440
)
—

Net realized gains (losses)
(13,318,959
)
586,214

Net unrealized appreciation (depreciation):
Investments
2,871,558

3,084,323

Foreign currency borrowings
(178,792
)
(852,523
)
Net unrealized appreciation (depreciation)
2,692,766

2,231,800

Net realized and unrealized gains (losses) on investments and foreign currency borrowings
(10,626,193
)
2,818,014

Tax benefit
—

11,161

Net increase in net assets resulting from operations
$
7,193,240

$
12,427,258

Net investment income per share—basic and diluted
$
0.42

$
0.29

Net increase in net assets resulting from operations per share—basic and diluted
$
0.17

$
0.37

Dividends/distributions per share:
Regular quarterly dividends/distributions
$
0.45

$
0.54

Total dividends/distributions per share
$
0.45

$
0.54

Weighted average shares outstanding—basic and diluted
42,743,469

33,480,346

See accompanying notes.

4


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Changes in Net Assets
Common Stock
Additional
Paid-In
Capital
Investment
Income
in Excess of
Distributions
Accumulated
Realized
Gains (Losses) on Investments
Net
Unrealized
Appreciation(Depreciation)
Total
Net
Assets
Number
of Shares
Par
Value
Balance, December 31, 2015
33,375,126

$
33,375

$
549,242,439

$
16,127,141

$
(25,813,329
)
$
(31,221,871
)
$
508,367,755

Net investment income
—

—

—

9,598,083

—

—

9,598,083

Stock-based compensation
—

—

4,301,118

—

—

—

4,301,118

Realized gain (loss) on investments
—

—

—

—

586,214

(351,458
)
234,756

Net unrealized gain on investments / foreign currency
—

—

—

—

—

2,583,258

2,583,258

Tax benefit
—

—

—

11,161

—

—

11,161

Dividends / distributions
42,694

42

844,036

(18,108,221
)
—

—

(17,264,143
)
Issuance of restricted stock
351,000

351

(351
)
—

—

—

—

Common stock withheld for payroll taxes upon vesting of restricted stock
(192,384
)
(192
)
(3,483,882
)
—

—

—

(3,484,074
)
Balance, March 31, 2016
33,576,436

$
33,576

$
550,903,360

$
7,628,164

$
(25,227,115
)
$
(28,990,071
)
$
504,347,914

Common Stock
Additional
Paid-In
Capital
Investment
Income
in Excess of
Distributions
Accumulated
Realized
Losses on Investments
Net
Unrealized
Appreciation (Depreciation)
Total
Net
Assets
Number
of Shares
Par
Value
Balance, December 31, 2016
40,401,292

$
40,401

$
686,835,054

$
5,884,512

$
(24,211,594
)
$
(57,392,115
)
$
611,156,258

Net investment income
—

—

—

17,819,433

—

—

17,819,433

Stock-based compensation
—

—

1,453,904

—

—

—

1,453,904

Realized gain (loss) on investments
—

—

—

—

(13,318,959
)
12,342,077

(976,882
)
Net unrealized loss on investments / foreign currency
—

—

—

—

—

(9,649,311
)
(9,649,311
)
Dividends / distributions
40,559

40

749,913

(21,438,377
)
—

—

(20,688,424
)
Public offering of common stock
7,000,000

7,000

132,198,931

—

—

—

132,205,931

Issuance of restricted stock
347,000

347

(347
)
—

—

—

—

Common stock withheld for payroll taxes upon vesting of restricted stock
(107,454
)
(107
)
(2,113,513
)
—

—

—

(2,113,620
)
Balance, March 31, 2017
47,681,397

$
47,681

$
819,123,942

$
2,265,568

$
(37,530,553
)
$
(54,699,349
)
$
729,207,289


See accompanying notes.


5


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Cash Flows
Three Months Ended
Three Months Ended
March 31, 2017
March 31, 2016
Cash flows from operating activities:
Net increase in net assets resulting from operations
$
7,193,240

$
12,427,258

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of portfolio investments
(161,518,093
)
(11,812,331
)
Repayments received/sales of portfolio investments
53,770,711

53,620,680

Loan origination and other fees received
2,638,485

274,158

Net realized (gain) loss on investments
13,318,959

(586,214
)
Net unrealized appreciation on investments
(1,388,362
)
(2,647,804
)
Net unrealized depreciation on foreign currency borrowings
178,792

852,523

Deferred income taxes
(1,483,196
)
(436,517
)
Payment-in-kind interest accrued, net of payments received
(690,432
)
(317,840
)
Amortization of deferred financing fees
587,438

531,993

Accretion of loan origination and other fees
(1,349,409
)
(1,135,001
)
Accretion of loan discounts
(83,480
)
(95,188
)
Accretion of discount on SBA-guaranteed debentures payable
—

31,899

Depreciation expense
17,790

15,592

Stock-based compensation
1,453,904

4,301,118

Changes in operating assets and liabilities:
Interest, fees and other receivables
4,695,274

(1,891,253
)
Prepaid expenses and other current assets
(188,608
)
(886,837
)
Accounts payable and accrued liabilities
(3,495,262
)
(5,225,308
)
Interest payable
(2,437,827
)
(2,156,101
)
Taxes payable
(489,691
)
(735,498
)
Net cash provided by (used in) operating activities
(89,269,767
)
44,129,329

Cash flows from investing activities:
Purchases of property and equipment
(18,507
)
(33,916
)
Net cash used in investing activities
(18,507
)
(33,916
)
Cash flows from financing activities:
Repayments of SBA-guaranteed debentures payable
—

(7,800,000
)
Borrowings under credit facility
50,000,000

30,000,000

Repayments of credit facility
(86,100,000
)
(34,000,000
)
Financing fees paid
(500,000
)
—

Net proceeds related to public offering of common stock
132,205,931

—

Common stock withheld for payroll taxes upon vesting of restricted stock
(2,113,620
)
(3,484,074
)
Cash dividends/distributions paid
(20,688,424
)
(17,264,143
)
Net cash provided by (used in) financing activities
72,803,887

(32,548,217
)
Net increase (decrease) in cash and cash equivalents
(16,484,387
)
11,547,196

Cash and cash equivalents, beginning of period
107,087,663

52,615,418

Cash and cash equivalents, end of period
$
90,603,276

$
64,162,614

Supplemental disclosure of cash flow information:
Cash paid for interest
$
8,541,314

$
7,932,474

Summary of non-cash financing transactions:
Dividends/distributions paid through DRIP share issuances
$
749,953

$
844,078


See accompanying notes.


6


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments
March 31, 2017
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
Non–Control / Non–Affiliate Investments:
ACA Holdings LLC (F/K/A My Alarm Center, LLC) (0%)*
Security Company
Preferred Units (2,000,000 units)
$
2,000,000

$
—

2,000,000

—

Access Medical Acquisition, Inc. (2%)*
Operator of Primary Care Clinics
Subordinated Notes (10% Cash, 2% PIK, Due 01/22)
$
13,819,514

13,602,148

13,602,148

Class A Units (1,500,000 units)
901,026

3,772,000

13,819,514

14,503,174

17,374,148

Aden & Anais Holdings, Inc. (0%)*
Baby Products
Common Stock (20,000 shares)
2,000,000

2,000,000

2,000,000

2,000,000

Agilex Flavors & Fragrances, Inc. (2%)*
Custom Fragrance Producer
Subordinated Note (12% Cash, Due 11/21)
13,168,124

13,053,417

13,053,417

Common Units (1,250 units)
1,250,000

2,432,000

13,168,124

14,303,417

15,485,417

AGM Automotive, LLC (1%)*
Auto Industry Interior Components Supplier
Units (1,500,000 units)
630,134

4,364,000

630,134

4,364,000

AM General, LLC (4%)*
Defense Manufacturing
Senior Note (8.3% Cash, Due 12/21)
9,750,000

9,606,135

9,606,135

Second Lien Term Note (12.8% Cash, Due 06/22)
20,000,000

19,419,234

19,419,234

29,750,000

29,025,369

29,025,369

Avantor Performance Materials Holdings, LLC (2%)*
Life Sciences and Advanced Technologies
Second Lien Term Note (9.3% Cash, Due 03/25)
14,368,421

14,218,421

14,218,421

14,368,421

14,218,421

14,218,421

Avkem International, LLC (1%)*
Flux and Foundry Manufacturer and Supplier
Subordinated Note (10% Cash, 4% PIK, Due 12/17)
4,112,935

4,084,270

4,084,270

4,112,935

4,084,270

4,084,270

AVL Holdings, Inc. (0%)*
Manufacturer and Distributor for Independent Artists and Authors
Common Stock (138 shares)
1,300,000

1,831,000

1,300,000

1,831,000

Baker Hill Acquisition, LLC (2%)*
Loan Origination Software Solutions Provider
Second Lien Term Notes (12% Cash, Due 03/21)
13,500,000

13,342,258

12,371,000

Limited Partnership Interest
1,498,500

721,000

13,500,000

14,840,758

13,092,000

Cafe Enterprises, Inc. (1%)*
Restaurant
Subordinated Note (7% Cash, 7% PIK, Due 09/19)
14,128,449

13,999,989

10,253,000

Series C Preferred Stock (10,000 shares)
1,000,000

—

14,128,449

14,999,989

10,253,000

Captek Softgel International, Inc.
(2%)*
Nutraceutical Manufacturer
Subordinated Note (10% Cash, 2% PIK, Due 06/21)
15,484,373

15,239,007

15,239,007

Common Stock (15,000 shares)
1,500,000

1,511,000

15,484,373

16,739,007

16,750,007

Carolina Beverage Group, LLC (0%)*
Beverage Manufacturing
and Packaging
Class B Units (11,974 units)
119,735

597,000

119,735

597,000

Centerfield Media Holding Company (0%)*
Digital Marketing
Common Shares (500 shares)
500,000

1,110,000



500,000

1,110,000

Community Intervention Services, Inc. (2%)*
Provider of Behavioral Health Services
Subordinated Note (7% Cash, 6% PIK, Due 01/21) (5)
19,017,309

17,732,558

12,440,000

19,017,309

17,732,558

12,440,000

Comverge, Inc. (2%)*
Provider of Intelligent Energy Management Solutions
Senior Note (12% Cash, Due 05/18)
15,505,583

15,422,028

15,422,028

Preferred Stock (703 shares)
554,458

851,000

Common Stock (1,000,000 shares)
100,000

1,350,000

15,505,583

16,076,486

17,623,028

CPower Ultimate HoldCo, LLC (0%)*
Demand Response Business
Units (345,542 units)
345,542

345,542

345,542

345,542


7


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments — (Continued)
March 31, 2017
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
CWS Holding Company, LLC (0%)*
Manufacturer of Custom Windows and Sliding Doors
Class A Units (1,500,000 units)
$
1,500,000

$
2,127,000

1,500,000

2,127,000

Data Source Holdings, LLC (0%)*
Print Supply Chain Management Services
Common Units (47,503 units)
1,000,000

889,000

1,000,000

889,000

Del Real, LLC (2%)*
Hispanic Refrigerated Foods Company
Subordinated Note (11% Cash, Due 04/23)
$
14,000,000

13,735,237

13,735,237

Class A Units (3,000,000 units)
3,000,000

3,000,000

14,000,000

16,735,237

16,735,237

DialogDirect, Inc. (1%)*
Business Process Outsourcing Provider
Subordinated Notes (12% Cash, 1.5% PIK, Due 04/20) (6)
16,676,951

16,020,226

9,380,000

16,676,951

16,020,226

9,380,000

Dimora Brands, Inc. (F/K/A TK USA Enterprises, Inc.) (2%)*
Hardware Designer and Distributor
Second Lien Term Note (11% Cash, Due 10/23)
12,500,000

12,273,646

12,273,646

12,500,000

12,273,646

12,273,646

DLC Acquisition, LLC (5%)*
Staffing Firm
Senior Notes (10% Cash, Due 12/20)
22,425,000

22,183,724

22,183,724

Senior Note (10% Cash, 2% PIK, Due 12/20)
17,014,412

16,830,451

16,830,451

39,439,412

39,014,175

39,014,175

Dyno Acquiror, Inc. (1%)*
Sewing Products and Seasonal Decorative Products Supplier
Subordinated Note (10.5% Cash, 1.5% PIK, Due 08/20)
4,611,389

4,579,161

4,579,161

Series A Units (600,000 units)
600,000

808,000

4,611,389

5,179,161

5,387,161

Eckler's Holdings, Inc. (1%)*
Restoration Parts and Accessories for Classic Cars and Trucks
Subordinated Note (10% Cash, 5.5% PIK, Due 03/19)
10,966,663

10,915,450

9,087,000

Common Stock (18,029 shares)
183,562

—

Series A Preferred Stock (1,596 shares)
1,596,126

—

Series B Preferred Stock (702 shares)
435,127

—

10,966,663

13,130,265

9,087,000

Flowchem Holdings LLC (0%)*
Services to Crude Oil Pipeline Operators
Common Units (1,000,000 units)
782,356

2,718,000

782,356

2,718,000

Fridababy Holdings, LLC (3%)*
Baby Products
Senior Notes (10.1% Cash, Due 10/21)
23,000,000

22,576,465

22,576,465

Class B Units (4,500 units)
273,401

273,401

23,000,000

22,849,866

22,849,866

FrontStream Holdings, LLC (2%)*
Payment and Donation Management Product Service Provider
Subordinated Note (13% Cash, Due 12/20)
13,375,000

13,260,545

12,247,000

Series C-2 Preferred Shares (500 shares)
500,000

203,000

13,375,000

13,760,545

12,450,000

Frontstreet Facility Solutions, Inc. (1%)*
Retail, Restaurant and Commercial Facilities Maintenance
Subordinated Note (11% Cash, 2% PIK, Due 07/18)
8,462,629

8,425,293

3,850,000

Series A Convertible Preferred Stock (2,500 shares)
250,000

—

Series B Convertible Preferred Stock (5,556 shares)
500,000

—

8,462,629

9,175,293

3,850,000

Frozen Specialties, Inc. (2%)*
Frozen Foods Manufacturer
Subordinated Note (10% Cash, 4% PIK, Due 12/17)
13,812,107

13,812,107

13,812,107

13,812,107

13,812,107

13,812,107

GST AutoLeather, Inc. (3%)*
Supplier of Automotive Interior Leather
Subordinated Note (11% Cash, 2% PIK, Due 01/21)
23,247,130

22,941,643

22,941,643

23,247,130

22,941,643

22,941,643

Halo Branded Solutions, Inc. (2%)*
Supply Chain Services
Subordinated Notes (11% Cash, 1% PIK, Due 10/22)
10,436,424

10,223,983

10,223,983

Class A1 Units (2,600 units)
2,600,000

4,078,000

10,436,424

12,823,983

14,301,983

HKW Capital Partners IV, L.P.
(0%)* (4)
Multi-Sector Holdings
0.6% Limited Partnership Interest
972,171

1,367,888

972,171

1,367,888


8


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments — (Continued)
March 31, 2017
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
HTC Borrower, LLC (4%)*
Hunting and Outdoor Products
Subordinated Notes (10% Cash, 3% PIK, Due 09/20)
$
26,327,694

$
26,066,199

$
26,066,199

26,327,694

26,066,199

26,066,199

ICP Industrial, Inc. (3%)*
Coatings Formulator and Manufacturer
Subordinated Note (9.5% Cash, Due 04/22)
7,500,000

7,437,820

7,437,820

Subordinated Notes (10% Cash, 1% PIK, Due 10/22)
8,108,568

7,971,222

7,971,222

Subordinated Notes (14% PIK, Due 10/22)
5,946,403

5,893,249

5,893,249

Class A Units (1,289 units)
1,751,483

1,941,000

21,554,971

23,053,774

23,243,291

Inland Pipe Rehabilitation Holding Company LLC (0%)*
Cleaning and Repair Services
Membership Interest Purchase Warrant (3%)
853,500

1,749,000

853,500

1,749,000

IPS Structural Adhesives Holdings, Inc. (2%)*
Specialty Adhesives and Plumbing Products Manufacturer
Second Lien Term Note (10.5% Cash, Due 12/24)
15,000,000

14,706,098

14,706,098

15,000,000

14,706,098

14,706,098

KidKraft, Inc. (4%)*
Children's Toy Manufacturer and Distributor
Second Lien Term Note (11% Cash, 1% PIK, Due 03/22)
27,737,601

27,223,302

27,223,302

27,737,601

27,223,302

27,223,302

K-Square Restaurant Partners, LP (F/K/A The Krystal Company) (1%)*
Restaurant
Class A Units of Limited Partnership (2,000 units)
638,260

3,808,000

638,260

3,808,000

Lakeview Health Holdings, Inc. (3%)*
Substance Abuse Treatment Service Provider
Senior Note (7.8% Cash, Due 12/21)
18,566,101

18,374,384

18,374,384

Common Stock (2,000 shares)
2,000,000

2,000,000

18,566,101

20,374,384

20,374,384

Media Storm, LLC (1%)*
Marketing Services
Subordinated Note (10% Cash, Due 08/19)
6,545,455

6,537,680

5,541,000

Membership Units (1,216,204 units)
1,176,957

378,000

6,545,455

7,714,637

5,919,000

MIC Holding LLC (F/K/A Magpul Industries Corp.) (2%)*
Firearm Accessories Manufacturer and Distributor
Preferred Units (1,470 units)
1,470,000

3,114,000

Common Units (30,000 units)
30,000

8,787,000

1,500,000

11,901,000

Micross Solutions LLC (4%)*
Provider of Semiconductor Products and Services
Subordinated Note (12% Cash, 3% PIK, Due 06/18)
24,618,795

24,540,305

24,540,305

Class A-2 Common Units (1,979,524 units)
2,019,693

1,884,000

24,618,795

26,559,998

26,424,305

Motor Vehicle Software Corporation (3%)*
Provider of EVR Services
Subordinated Note (10% Cash, 0.5% PIK, Due 03/21)
20,270,406

19,958,931

19,958,931

Class A Units (1,000,000 units)
1,087,460

1,396,000

20,270,406

21,046,391

21,354,931

Nautic Partners VII, LP (0%)* (4)
Multi-Sector Holdings
0.4% Limited Partnership Interest
1,062,707

1,516,000

1,062,707

1,516,000

Nomacorc, LLC (2%)*
Synthetic Wine Cork Producer
Subordinated Note (10% Cash, 2.3% PIK, Due 07/21)
20,993,317

20,703,887

16,852,000

Limited Partnership Interest
2,153,274

—

20,993,317

22,857,161

16,852,000

Orchid Underwriters Agency, LLC (1%)*
Insurance Underwriter
Subordinated Note (10% Cash, 1.5% PIK, Due 03/23)
2,601,517

2,549,517

2,549,517

Subordinated Note (13.5% PIK, Due 03/24)
904,725

886,725

886,725

Class A Preferred Units (15,000 units)
338,158

869,000

Class A Common Units (15,000 units)
—

919,000

3,506,242

3,774,400

5,224,242

Pike Corporation (0%)*
Provider of Energy Infrastructure Solutions
Subordinated Note (9% Cash, Due 09/24)
1,000,000

990,000

990,000

1,000,000

990,000

990,000

PowerDirect Marketing, LLC (0%)*
Marketing Services
Senior Note (13% Cash, 2% PIK, Due 06/17) (6)
8,498,403

4,677,482

450,000

Common Unit Purchase Warrants
590,200

—

8,498,403

5,267,682

450,000

ProAmpac PG Borrower LLC (2%)*
Manufacturer of Flexible Packaging Products
Second Lien Term Note (9.6% Cash, Due 11/24)
15,000,000

14,779,774

14,779,774

15,000,000

14,779,774

14,779,774


9


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments — (Continued)
March 31, 2017
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
REP WWEX Acquisition Parent, LLC (2%)*
Third-Party Logistics Provider
Second Lien Term Note (9.8% Cash, Due 02/25)
$
15,000,000

$
14,779,723

$
14,779,723

15,000,000

14,779,723

14,779,723

RMP Group, Inc. (1%)*
Provider of RCM Services to Hospitals and Physician Groups
Subordinated Note (10.5% Cash, 1% PIK, Due 09/22)
10,008,219

9,808,219

9,808,219

Units (1,000 units)
1,000,000

1,000,000

10,008,219

10,808,219

10,808,219

RockYou, Inc. (0%)*
Mobile Game Advertising Network
Common Stock (67,585 shares)
111,000

111,000

111,000

111,000

Rotolo Consultants, Inc. (1%)*
Landscape Services
Subordinated Note (11% Cash, 3% PIK, Due 08/21)
6,956,121

6,849,145

6,849,145

Series A Preferred Units (39 units)
3,654,253

2,444,000

6,956,121

10,503,398

9,293,145

SCA Pharmaceuticals, LLC (0%)*
Provider of Pharmaceutical Products
Subordinated Note (10.1% Cash, Due 12/20)
3,000,000

2,715,480

2,715,480

3,000,000

2,715,480

2,715,480

SCUF Gaming, Inc. (4%)*
Gaming Controller Manufacturer
Senior Notes (9.5% Cash, Due 12/21)
25,008,000

24,527,667

24,527,667

Revolver Loan (9.5% Cash, Due 06/18)
1,500,000

1,500,000

1,500,000

Common Stock (27,112 shares)
742,000

742,000

26,508,000

26,769,667

26,769,667

Smile Brands, Inc. (3%)*
Dental Service Organization
Subordinated Notes (10% Cash, 2% PIK, Due 02/23)
22,454,231

22,035,700

22,035,700

Class A Units (3,000 units)
3,000,000

1,952,000

22,454,231

25,035,700

23,987,700

SPC Partners V, LP (0%)* (4)
Multi-Sector Holdings
0.7% Limited Partnership Interest
1,922,865

2,092,000

1,922,865

2,092,000

Specialized Desanders, Inc. (2%)* (4)
Sand and Particulate Removal Equipment Provider for Oil and Gas Companies
Subordinated Note (12% Cash, 2% PIK, Due 03/20)
16,110,042

15,979,621

12,643,516

Class C Partnership Units (2,000,000 units)
1,937,421

3,006,000

16,110,042

17,917,042

15,649,516

Tate's Bake Shop (2%)*
Producer of Baked Goods
Subordinated Note (10% Cash, 3% PIK, Due 02/20)
10,817,982

10,695,615

10,695,615

Limited Partnership Interest
925,000

1,308,000

10,817,982

11,620,615

12,003,615

TCFI Merlin LLC ("Merlin") and TCFI CSG LLC ("CSG") (3%)*
Specialty Staffing Service Provider
Senior Notes (9.5% Cash Due 09/19)
20,528,936

20,204,484

20,204,484

Limited Partnership Units - Merlin (500,500 units)
285,485

286,000

Class A Units - CSG (100,000 units)
100,000

100,000

20,528,936

20,589,969

20,590,484

The Cook & Boardman Group, LLC (2%)*
Distributor of Doors and Related Products
Subordinated Note (10% Cash, 2.5% PIK, Due 03/20)
14,933,072

14,761,757

14,761,757

Class A Units (1,400,000 units)
1,400,000

2,483,000

14,933,072

16,161,757

17,244,757

Tosca Services, LLC (4%)*
Perishable Food Supply Chain Management
Senior Note (10.5% Cash, Due 12/20)
29,250,000

28,952,542

28,952,542

29,250,000

28,952,542

28,952,542

Trademark Global LLC (2%)*
Supplier to Mass Market Internet Retail
Subordinated Note (10% Cash, 1.3% PIK, Due 04/23)
14,800,000

14,590,484

14,590,484

Class A Units (1,500,000 units)
1,500,000

1,500,000

Class B Units (1,500,000 units)
—

—

14,800,000

16,090,484

16,090,484

Travelpro Products, Inc. ("Travelpro") and TP - Holiday Group Limited ("TP") (3%)*
Luggage and Travel Bag Supplier
Second Lien Term Note - Travelpro (11% Cash, 2% PIK, Due 11/22)
10,176,685

9,976,856

9,976,856

Second Lien Term Note - TP (11% Cash, 2% PIK, Due 11/22) (4)
9,014,272

8,834,426

8,685,393

Common Units - Travelpro (2,000,000 units)
2,000,000

2,321,000

19,190,957

20,811,282

20,983,249


10


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments — (Continued)
March 31, 2017
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
United Biologics, LLC (2%)*
Allergy Immunotherapy
Senior Note (12% Cash, 2% PIK, Due 04/18)
$
12,823,343

$
12,823,342

$
12,823,342

Class A-1 Common Units (18,818 units)
137,324

137,000

Class A Common Units (177,935 units)
1,999,989

1,579,000

Class A-2 Common Kicker Units (444,003 units)
—

—

Class A-1 Common Kicker Units (14,114 units)
—

—

Class A, Class A-1, Class A-1 Kicker & Class B Unit Purchase Warrants
838,117

328,000

12,823,343

15,798,772

14,867,342

Vantage Mobility International, LLC (4%)*
Wheelchair Accessible Vehicle Manufacturer
Subordinated Notes (10.2% Cash, Due 09/21)
29,350,000

28,809,367

28,809,367

Class A Units (1,750,000 units)
1,750,000

1,587,000

29,350,000

30,559,367

30,396,367

Water Pik, Inc. (4%)*
Oral Health and Shower Head Supplier
Second Lien Term Loan (9.8% Cash, Due 01/21)
31,150,970

30,788,788

30,788,788

31,150,970

30,788,788

30,788,788

Wheel Pros Holdings, Inc. (2%)*
Wheel/Rim and Performance Tire Distributor
Subordinated Note (11% Cash, Due 06/20)
13,822,500

13,617,984

13,617,984

Class A Units (2,000 units)
1,954,144

2,000,000

13,822,500

15,572,128

15,617,984

Women's Marketing, Inc. (2%)*
Full-Service Media Organization
Subordinated Note (11% Cash, 1.5% PIK, Due 06/21) (6)
17,402,357

16,141,439

11,093,000

Class A Common Units (16,300 units)
1,630,000

—

17,402,357

17,771,439

11,093,000

WSO Holdings, LP (1%)*
Organic/Fair Trade Sugar, Syrup, Nectar and Honey Producer
Common Points (3,121 points)
3,089,581

3,679,000

3,089,581

3,679,000

YummyEarth Inc. (3%)*
Organic Candy Manufacturer
Senior Notes (9.6% Cash, Due 08/20)
23,500,000

23,149,762

21,356,000

Limited Partnership Interest
3,496,500

—

23,500,000

26,646,262

21,356,000

Subtotal Non–Control / Non–Affiliate Investments
890,608,128

948,873,881

922,229,496

Affiliate Investments:
All Metals Holding, LLC (1%)*
Steel Processor and Distributor
Subordinated Note (12% Cash, 1% PIK, Due 12/21)
6,449,609

6,272,347

6,272,347

Units (318,977 units)
793,331

777,000

6,449,609

7,065,678

7,049,347

CIS Secure Computing Inc. (2%)*
Secure Communications and Computing Solutions Provider
Subordinated Note (12% Cash, 2% PIK, Due 03/18)
10,736,796

10,736,796

10,736,796

Common Stock (84 shares)
502,320

1,904,000

10,736,796

11,239,116

12,640,796

Consolidated Lumber Holdings, LLC (0%)*
Lumber Yard Operator
Class A Units (15,000 units)
1,500,000

2,449,000



1,500,000

2,449,000

DPII Holdings, LLC (0%)*
Satellite Communication Business
Tranche I & II Subordinated Notes (12% Cash, 4% PIK, Due 01/18) (6)
3,782,281

3,114,285

2,669,001

Tranche III Subordinated Note (19% PIK, Due 01/18) (6)
2,524,987

2,148,462

—

Class A Membership Interest (17,308 units)
1,107,692

—

6,307,268

6,370,439

2,669,001

FCL Holding SPV, LLC (0%)*
Commercial Printing Services
Class A Interest (24,873 units)
292,000

596,000

Class B Interest (48,427 units)
—

—

Class C Interest (3,746 units)
—

—

292,000

596,000


11


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments — (Continued)
March 31, 2017
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
Frank Entertainment Group, LLC
(2%)*
Movie Theatre and Family Entertainment Operator
Senior Note (10% Cash, 5.8% PIK, Due 06/18)
$
10,141,360

$
10,093,317

$
9,561,000

Class A Redeemable Preferred Units (196,718 units)
3,934,666

4,566,904

Class B Redeemable Preferred Units (18,667 units)
433,334

660,810

Class C Redeemable Preferred Units (25,846 units)
600,000

—

Class A Common Units (43,077 units)
1,000,000

—

Class A Common Warrants
632,000

—

10,141,360

16,693,317

14,788,714

Native Maine Operations, Inc. (3%)*
Fresh Foodservice Distributor
Senior Notes (10.1% Cash, Due 01/22)
18,000,000

17,634,876

17,634,876

Series A Preferred Units (20,000 units)
2,000,000

2,000,000

18,000,000

19,634,876

19,634,876

NB Products, Inc. (7%)*
Distributor of Work Apparel and Accessories
Subordinated Note (12% Cash, 2% PIK, Due 02/20)
23,220,842

22,888,502

22,888,502

Jr. Subordinated Note (10% PIK, Due 02/20)
4,823,476

4,720,827

4,720,827

Jr. Subordinated Bridge Note (20% PIK, Due 05/21)
2,102,715

2,074,768

2,074,768

Series A Redeemable Senior Preferred Stock (7,839 shares)
7,621,648

9,645,000

Common Stock (1,668,691 shares)
333,738

11,270,000

30,147,033

37,639,483

50,599,097

Passport Food Group, LLC (3%)*
Manufacturer of Ethnic Food Products
Senior Notes (10.1% Cash, Due 03/22)
20,000,000

19,600,000

19,600,000

Common Shares (20,000 shares)
2,000,000

2,000,000

20,000,000

21,600,000

21,600,000

PCX Aerostructures, LLC (3%)*
Aerospace Component Manufacturer
Subordinated Note (10.5% Cash, Due 10/19)
29,647,359

29,171,148

22,452,000

Series A Preferred Stock (6,066 shares)
6,065,621

—

Series B Preferred Stock (411 shares)
410,514

—

Class A Common Stock (121,922 shares)
30,480

—

29,647,359

35,677,763

22,452,000

Team Waste, LLC (1%)*
Environmental and Facilities Services
Preferred Units (455,000 units)
9,100,000

9,240,000

9,100,000

9,240,000

Technology Crops, LLC (2%)*
Supply Chain Management Services
Subordinated Notes (12% Cash, 5% PIK, Due 09/17)
11,986,209

11,986,209

11,986,209

Common Units (50 units)
500,000

—

11,986,209

12,486,209

11,986,209

TGaS Advisors, LLC (1%)*
Advisory Solutions to Pharmaceutical Companies
Senior Note (10% Cash, 1% PIK, Due 11/19)
9,636,239

9,498,497

9,498,497

Preferred Units (1,685,357 units)
1,556,069

1,244,000

9,636,239

11,054,566

10,742,497

Tulcan Fund IV, L.P. (F/K/A Dyson Corporation) (0%)*
Custom Forging and Fastener Supplies
Common Units (1,000,000 units)
1,000,000

—

1,000,000

—

United Retirement Plan Consultants, Inc. (0%)*
Retirement Plan Administrator
Series A Preferred Shares (9,400 shares)
205,748

265,000

Common Shares (100,000 shares)
1,000,000

300,000

1,205,748

565,000

Waste Recyclers Holdings, LLC (0%)*
Environmental and Facilities Services
Class A Preferred Units (280 units)
2,251,100

—

Class B Preferred Units (11,484,867 units)
3,304,218

713,000

Common Unit Purchase Warrant (1,170,083 units)
748,900

—

Common Units (153,219 units)
180,783

—

6,485,001

713,000

Wythe Will Tzetzo, LLC (1%)*
Confectionery Goods Distributor
Series A Preferred Units (99,829 units)
—

5,256,000

—

5,256,000

Subtotal Affiliate Investments
153,051,873

199,044,196

192,981,537


12


TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments — (Continued)
March 31, 2017
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
Control Investments:
CRS Reprocessing, LLC (1%)*
Fluid
Reprocessing
Services
Senior Notes (4.5% Cash, Due 06/17)
$
2,942,769

$
2,942,769

$
2,942,769

Split Collateral Term Loans (8% Cash, Due 06/17)
13,192,464

13,192,464

6,110,000

Series F Preferred Units (705,321 units)
9,134,807

—

Common Units (15,174 units)
—

—

16,135,233

25,270,040

9,052,769

DCWV Acquisition Corporation
(0%)*
Arts & Crafts and Home Decor Products Designer and Supplier
Senior Subordinated Note (15% PIK, Due 12/19) (6)
302,958

250,000

250,000

Subordinated Note (12% Cash, 3% PIK, Due 12/19) (6)
8,399,803

6,178,633

667,000

Jr. Subordinated Note (15% PIK, Due 12/19) (6)
2,533,508

2,000,000

—

Series A Preferred Equity (1,200 shares)
1,200,000

—

100% Common Shares
—

—

11,236,269

9,628,633

917,000

SRC Worldwide, Inc. (1%)*
Specialty Chemical Manufacturer
Common Stock (5,000 shares)
8,028,000

8,028,000

8,028,000

8,028,000

Subtotal Control Investments
27,371,502

42,926,673

17,997,769

Total Investments, March 31, 2017 (155%)*
$
1,071,031,503

$
1,190,844,750

$
1,133,208,802


*    Fair value as a percent of net assets
(1)
All debt investments are income producing, unless otherwise noted. Equity and equity-linked investments are non-income producing, unless otherwise noted.
(2)
Disclosures of interest rates on notes include cash interest rates and payment-in-kind (“PIK”) interest rates.
(3)
All investments are restricted as to resale and were valued at fair value as determined in good faith by the Board of Directors.
(4)
Investment is not a qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 2.6% of total investments at fair value as of March 31, 2017 . Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets. If at any time qualifying assets do not represent at least 70% of the Company's total assets, the Company will be precluded from acquiring any additional non-qualifying asset until such time as it complies with the requirements of Section 55(a).
(5)
PIK non-accrual investment
(6)
Non-accrual investment
(7)
All of the Company's investments, unless otherwise noted, are encumbered either as security for the Company's senior secured credit facility or in support of the SBA-guaranteed debentures issued by Triangle Mezzanine Fund LLLP and Triangle Mezzanine Fund II LP.

See accompanying notes.

13


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments
December 31, 2016

Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
Non–Control / Non–Affiliate Investments:
ACA Holdings LLC (F/K/A My Alarm Center, LLC) (0%)*
Security Company
Preferred Units (2,000,000 units)
$
2,000,000

$
1,242,000

2,000,000

1,242,000

Access Medical Acquisition, Inc. (3%)*
Operator of Primary Care Clinics
Subordinated Notes (10% Cash, 2% PIK, Due 01/22)
$
13,819,514

13,593,292

13,593,292

Class A Units (1,500,000 units)
901,026

3,618,000

13,819,514

14,494,318

17,211,292

Aden & Anais Holdings, Inc. (0%)*
Baby Products
Common Stock (20,000 shares)
2,000,000

2,000,000

2,000,000

2,000,000

Agilex Flavors & Fragrances, Inc. (2%)*
Custom Fragrance Producer
Subordinated Note (12% Cash, Due 11/21)
13,168,124

13,048,983

13,048,983

Common Units (1,250 units)
1,250,000

2,227,000

13,168,124

14,298,983

15,275,983

AGM Automotive, LLC (1%)*
Auto Industry Interior Components Supplier
Units (1,500,000 units)
630,134

4,266,000

630,134

4,266,000

Avkem International, LLC (1%)*
Flux and Foundry Manufacturer and Supplier
Subordinated Note (10% Cash, 4% PIK, Due 12/17)
4,112,935

4,075,177

4,075,177

4,112,935

4,075,177

4,075,177

AVL Holdings, Inc. (0%)*
Manufacturer and Distributor for Independent Artists and Authors
Common Stock (138 shares)
1,300,000

1,767,000

1,300,000

1,767,000

Baker Hill Acquisition, LLC (2%)*
Loan Origination Software Solutions Provider
Subordinated Notes (12% Cash, Due 03/21)
13,500,000

13,334,260

12,320,000

Limited Partnership Interest
1,498,500

721,000

13,500,000

14,832,760

13,041,000

Cafe Enterprises, Inc. (2%)*
Restaurant
Subordinated Note (7% Cash, 7% PIK, Due 09/19)
13,882,800

13,743,461

10,331,000

Series C Preferred Stock (10,000 shares)
1,000,000

—

13,882,800

14,743,461

10,331,000

Capital Contractors, Inc. (0%)*
Janitorial and Facilities Maintenance Services
Subordinated Notes (5% Cash, Due 6/20)
9,843,542

9,711,658

—

Series A Redeemable Preferred Stock (200 shares)
2,000,000

—

Common Stock Warrants (20 shares)
492,000

—

9,843,542

12,203,658

—

Captek Softgel International, Inc.
(3%)*
Nutraceutical Manufacturer
Subordinated Note (10% Cash, 2.5% PIK, Due 06/21)
15,407,336

15,150,497

15,150,497

Common Stock (15,000 shares)
1,500,000

1,500,000

15,407,336

16,650,497

16,650,497

Carolina Beverage Group, LLC (0%)*
Beverage Manufacturing
and Packaging
Class B Units (11,974 units)
119,735

264,000

119,735

264,000

Centerfield Media Holding Company (4%)*
Digital Marketing
Subordinated Note (10% Cash, 3.5% PIK, Due 03/21)
18,857,978

18,567,590

19,235,000

Common Shares (1,000 shares)
1,000,000

2,220,000

18,857,978

19,567,590

21,455,000

Community Intervention Services, Inc. (2%)*
Provider of Behavioral Health Services
Subordinated Note (7% Cash, 6% PIK, Due 01/21) (5)
18,736,265

17,717,756

14,134,000

18,736,265

17,717,756

14,134,000

Comverge, Inc. (3%)*
Provider of Intelligent Energy Management Solutions
Senior Note (12% Cash, Due 05/18)
15,505,583

15,406,749

15,406,749

Preferred Stock (703 shares)
554,458

835,000

Common Stock (1,000,000 shares)
100,000

353,000

15,505,583

16,061,207

16,594,749

CPower Ultimate HoldCo, LLC (0%)*
Demand Response Business
Units (345,542 units)
345,542

345,542

345,542

345,542


14


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments — (Continued)
December 31, 2016
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
CWS Holding Company, LLC (0%)*
Manufacturer of Custom Windows and Sliding Doors
Class A Units (1,500,000 units)
$
1,500,000

$
2,076,000

1,500,000

2,076,000

Data Source Holdings, LLC (0%)*
Print Supply Chain Management Services
Common Units (47,503 units)
1,000,000

940,000

1,000,000

940,000

Del Real, LLC (2%)*
Hispanic Refrigerated Foods Company
Subordinated Note (11% Cash, Due 04/23)
$
14,000,000

13,727,515

13,727,515

Class A Units (3,000,000 units)
3,000,000

3,000,000

14,000,000

16,727,515

16,727,515

DialogDirect, Inc. (2%)*
Business Process Outsourcing Provider
Subordinated Notes (12% Cash, 1.5% PIK, Due 04/20)
16,126,541

16,020,226

11,994,000

16,126,541

16,020,226

11,994,000

Dimora Brands, Inc. (F/K/A TK USA Enterprises, Inc.) (2%)*
Hardware Designer and Distributor
Subordinated Note (11% Cash, Due 10/23)
12,500,000

12,267,514

12,267,514

12,500,000

12,267,514

12,267,514

DLC Acquisition, LLC (6%)*
Staffing Firm
Senior Notes (10% Cash, Due 12/20)
21,312,500

21,047,577

21,047,577

Senior Note (10% Cash, 2% PIK, Due 12/20)
16,929,763

16,735,793

16,735,793

38,242,263

37,783,370

37,783,370

Dyno Acquiror, Inc. (1%)*
Sewing Products and Seasonal Decorative Products Supplier
Subordinated Note (12% Cash, 2% PIK, Due 11/19)
7,531,330

7,474,744

7,474,744

Series A Units (600,000 units)
600,000

739,000

7,531,330

8,074,744

8,213,744

Eckler's Holdings, Inc. (1%)*
Restoration Parts and Accessories for Classic Cars and Trucks
Subordinated Note (11% Cash, 4.5% PIK, Due 07/18)
9,941,563

9,882,596

8,396,000

Common Stock (18,029 shares)
183,562

—

Series A Preferred Stock (1,596 shares)
1,596,126

—

Series B Preferred Stock (185 shares)
185,127

—

9,941,563

11,847,411

8,396,000

Fresh-G Restaurant Holding, LLC (0%)*
Restaurant
Class A Units (5,000 units)
500,000

—

500,000

—

Flowchem Holdings LLC (0%)*
Services to Crude Oil Pipeline Operators
Common Units (1,000,000 units)
782,356

2,552,000

782,356

2,552,000

Fridababy Holdings, LLC (4%)*
Baby Products
Senior Notes (10% Cash, Due 10/21)
23,000,000

22,558,007

22,558,007

Class B Units (4,500 units)
273,401

273,401

23,000,000

22,831,408

22,831,408

FrontStream Holdings, LLC (2%)*
Payment and Donation Management Product Service Provider
Subordinated Note (12.5% Cash, Due 12/20)
13,375,000

13,254,632

12,643,000

Series C-2 Preferred Shares (500 shares)
500,000

435,000

13,375,000

13,754,632

13,078,000

Frontstreet Facility Solutions, Inc. (1%)*
Retail, Restaurant and Commercial Facilities Maintenance
Subordinated Note (11% Cash, 2% PIK, Due 07/18)
8,462,629

8,418,332

6,771,000

Series A Convertible Preferred Stock (2,500 shares)
250,000

—

Series B Convertible Preferred Stock (5,556 shares)
500,000

—

8,462,629

9,168,332

6,771,000

Frozen Specialties, Inc. (2%)*
Frozen Foods Manufacturer
Subordinated Note (10% Cash, 4% PIK, Due 12/17)
13,675,353

13,675,353

13,675,353

13,675,353

13,675,353

13,675,353

GST AutoLeather, Inc. (4%)*
Supplier of Automotive Interior Leather
Subordinated Note (11% Cash, 2% PIK, Due 01/21)
23,131,473

22,812,032

22,812,032

23,131,473

22,812,032

22,812,032

Halo Branded Solutions, Inc. (2%)*
Supply Chain Services
Subordinated Notes (11% Cash, 1% PIK, Due 10/22)
10,410,398

10,190,992

10,190,992

Class A1 Units (2,600 units)
2,600,000

3,308,000

10,410,398

12,790,992

13,498,992

HKW Capital Partners IV, L.P.
(0%)* (4)
Multi-Sector Holdings
0.6% Limited Partnership Interest
835,283

1,231,000

835,283

1,231,000


15


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments — (Continued)
December 31, 2016
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
HTC Borrower, LLC (4%)*
Hunting and Outdoor Products
Subordinated Notes (10% Cash, 3% PIK, Due 09/20)
$
26,131,706

$
25,854,767

$
25,854,767

26,131,706

25,854,767

25,854,767

ICP Industrial, Inc. (4%)*
Coatings Formulator and Manufacturer
Subordinated Note (9.5% Cash, Due 04/22)
7,500,000

7,435,556

7,435,556

Subordinated Notes (10% Cash, 1% PIK, Due 10/22)
8,088,123

7,946,278

7,946,278

Subordinated Notes (14% PIK, Due 10/22)
5,743,159

5,688,352

5,688,352

Class A Units (1,289 units)
1,751,483

1,929,000

21,331,282

22,821,669

22,999,186

Inland Pipe Rehabilitation Holding Company LLC (0%)*
Cleaning and Repair Services
Membership Interest Purchase Warrant (3%)
853,500

1,527,000

853,500

1,527,000

IPS Structural Adhesives Holdings, Inc. (2%)*
Specialty Adhesives and Plumbing Products Manufacturer
Second Lien Term Note (10.5% Cash, Due 12/24)
15,000,000

14,700,000

14,700,000

15,000,000

14,700,000

14,700,000

KidKraft, Inc. (4%)*
Children's Toy Manufacturer and Distributor
Second Lien Term Note (11% Cash, 1% PIK, Due 03/22)
27,668,623

27,135,218

27,135,218

27,668,623

27,135,218

27,135,218

K-Square Restaurant Partners, LP (F/K/A The Krystal Company) (1%)*
Restaurant
Class A Units of Limited Partnership (2,000 units)
638,260

3,830,000

638,260

3,830,000

Lakeview Health Holdings, Inc. (3%)*
Substance Abuse Treatment Service Provider
Senior Note (7.8% Cash, Due 12/21)
18,612,633

18,412,633

18,412,633

Common Stock (2,000 shares)
2,000,000

2,000,000

18,612,633

20,412,633

20,412,633

Media Storm, LLC (1%)*
Marketing Services
Subordinated Note (10% Cash, Due 08/19)
6,545,455

6,533,934

5,055,000

Membership Units (1,216,204 units)
1,176,957

260,000

6,545,455

7,710,891

5,315,000

MIC Holding LLC (F/K/A Magpul Industries Corp.) (2%)*
Firearm Accessories Manufacturer and Distributor
Preferred Units (1,470 units)
1,470,000

3,012,000

Common Units (30,000 units)
30,000

8,837,000

1,500,000

11,849,000

Micross Solutions LLC (4%)*
Provider of Semiconductor Products and Services
Subordinated Note (12% Cash, 3% PIK, Due 06/18)
24,435,074

24,342,230

24,342,230

Class A-2 Common Units (1,979,524 units)
2,019,693

1,875,000

24,435,074

26,361,923

26,217,230

Motor Vehicle Software Corporation (3%)*
Provider of EVR Services
Subordinated Note (10% Cash, 0.5% PIK, Due 03/21)
20,245,100

19,917,945

19,917,945

Class A Units (1,000,000 units)
1,076,210

1,372,000

20,245,100

20,994,155

21,289,945

Nautic Partners VII, LP (0%)* (4)
Multi-Sector Holdings
0.4% Limited Partnership Interest
1,093,312

1,520,000

1,093,312

1,520,000

Nomacorc, LLC (3%)*
Synthetic Wine Cork Producer
Subordinated Note (10% Cash, 2.3% PIK, Due 07/21)
20,875,890

20,572,926

16,597,000

Limited Partnership Interest
2,150,637

—

20,875,890

22,723,563

16,597,000

Orchid Underwriters Agency, LLC (4%)*
Insurance Underwriter
Term B Note (10% Cash, Due 11/19)
21,409,670

21,125,036

21,125,036

Class A Preferred Units (15,000 units)
1,500,000

1,972,000

Class A Common Units (15,000 units)
—

1,624,000

21,409,670

22,625,036

24,721,036

PowerDirect Marketing, LLC (0%)*
Marketing Services
Senior Note (13% Cash, 2% PIK, Due 06/17) (6)
8,573,531

5,077,482

850,000

Common Unit Purchase Warrants
590,200

—

8,573,531

5,667,682

850,000

ProAmpac PG Borrower LLC (2%)*
Manufacturer of Flexible Packaging Products
Second Lien Term Note (9.5% Cash, Due 11/24)
15,000,000

14,775,000

14,775,000

15,000,000

14,775,000

14,775,000


16


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments — (Continued)
December 31, 2016
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
RockYou, Inc. (0%)*
Mobile Game Advertising Network
Common Stock (67,585 shares)
$
111,000

$
111,000

111,000

111,000

Rotolo Consultants, Inc. (1%)*
Landscape Services
Subordinated Note (11% Cash, 3% PIK, Due 08/21)
$
6,904,210

6,792,686

6,792,686

Series A Preferred Units (39 units)
3,654,253

1,671,000

6,904,210

10,446,939

8,463,686

SCA Pharmaceuticals, LLC (0%)*
Provider of Pharmaceutical Products
Subordinated Note (10% Cash, Due 12/20)
3,000,000

2,700,000

2,700,000

3,000,000

2,700,000

2,700,000

SCUF Gaming, Inc. (4%)*
Gaming Controller Manufacturer
Senior Notes (9.5% Cash, Due 12/21)
25,008,000

24,507,840

24,507,840

Common Stock (27,112 shares)
742,000

742,000

25,008,000

25,249,840

25,249,840

Smile Brands, Inc. (4%)*
Dental Service Organization
Subordinated Notes (10% Cash, 2% PIK, Due 02/23)
22,341,283

21,910,129

21,910,129

Class A Units (3,000 units)
3,000,000

3,000,000

22,341,283

24,910,129

24,910,129

SPC Partners V, LP (0%)* (4)
Multi-Sector Holdings
0.7% Limited Partnership Interest
1,922,865

2,019,000

1,922,865

2,019,000

Specialized Desanders, Inc. (2%)* (4)
Sand and Particulate Removal Equipment Provider for Oil and Gas Companies
Subordinated Note (12% Cash, 2% PIK, Due 03/20)
16,110,042

15,966,524

12,524,143

Class C Partnership Units (2,000,000 units)
1,937,421

2,813,000

16,110,042

17,903,945

15,337,143

Tate's Bake Shop (2%)*
Producer of Baked Goods
Subordinated Note (10% Cash, 3% PIK, Due 02/20)
10,737,451

10,606,430

10,606,430

Limited Partnership Interest
925,000

1,310,000

10,737,451

11,531,430

11,916,430

TCFI Merlin LLC (2%)*
Specialty Staffing Service Provider
Senior Notes (10% Cash, 1% PIK, Due 09/19)
13,396,027

13,212,935

13,212,935

Limited Partnership Units (500,500 units)
500,000

578,000

13,396,027

13,712,935

13,790,935

The Cook & Boardman Group, LLC (3%)*
Distributor of Doors and Related Products
Subordinated Note (10% Cash, 2.5% PIK, Due 03/20)
14,840,320

14,656,890

14,656,890

Class A Units (1,400,000 units)
1,400,000

2,663,000

14,840,320

16,056,890

17,319,890

Trademark Global LLC (3%)*
Supplier to Mass Market Internet Retail
Subordinated Note (10% Cash, 1.3% PIK, Due 04/23)
14,800,000

14,584,165

14,584,165

Class A Units (1,500,000 units)
1,500,000

1,500,000

Class B Units (1,500,000 units)
—

—

14,800,000

16,084,165

16,084,165

Travelpro Products, Inc. ("Travelpro") and TP - Holiday Group Limited ("TP") (3%)*
Luggage and Travel Bag Supplier
Second Lien Term Note - Travelpro (11% Cash, 2% PIK, Due 11/22)
10,126,055

9,919,675

9,919,675

Second Lien Term Note - TP (11% Cash, 2% PIK, Due 11/22) (4)
8,970,540

8,784,798

8,562,599

Common Units - Travelpro (2,000,000 units)
2,000,000

2,077,000

19,096,595

20,704,473

20,559,274

United Biologics, LLC (2%)*
Allergy Immunotherapy
Senior Note (12% Cash, 2% PIK, Due 04/18)
12,758,807

12,686,184

12,686,184

Class A-1 Common Units (18,818 units)
137,324

137,000

Class A Common Units (177,935 units)
1,999,989

1,767,000

Class A-2 Common Kicker Units (444,003 units)
—

—

Class A-1 Common Kicker Units (14,114 units)
—

—

Class A, Class A-1, Class A-1 Kicker & Class B Unit Purchase Warrants
838,117

361,000

12,758,807

15,661,614

14,951,184

Vantage Mobility International, LLC (5%)*
Wheelchair Accessible Vehicle Manufacturer
Subordinated Notes (10.2% Cash, Due 09/21)
29,350,000

28,785,893

28,785,893

Class A Units (1,750,000 units)
1,750,000

1,750,000

29,350,000

30,535,893

30,535,893


17


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments — (Continued)
December 31, 2016
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
Water Pik, Inc. (5%)*
Oral Health and Shower Head Supplier
Second Lien Term Loan (9.8% Cash, Due 01/21)
$
31,150,970

$
30,769,847

$
30,769,847

31,150,970

30,769,847

30,769,847

Wheel Pros Holdings, Inc. (3%)*
Wheel/Rim and Performance Tire Distributor
Subordinated Note (11% Cash, Due 06/20)
13,822,500

13,605,040

13,605,040

Class A Units (2,000 units)
1,954,144

1,954,000

13,822,500

15,559,184

15,559,040

Women's Marketing, Inc. (2%)*
Full-Service Media Organization
Subordinated Note (11% Cash, 1.5% PIK, Due 06/21) (6)
16,868,045

16,141,439

11,093,000

Class A Common Units (16,300 units)
1,630,000

—

16,868,045

17,771,439

11,093,000

WSO Holdings, LP (1%)*
Organic/Fair Trade Sugar, Syrup, Nectar and Honey Producer
Common Points (3,000 points)
3,000,000

3,576,000

3,000,000

3,576,000

YummyEarth Inc. (3%)*
Organic Candy Manufacturer
Senior Notes (9.5% Cash, Due 08/20)
22,000,000

21,565,471

19,564,000

Limited Partnership Interest
3,496,500

—

22,000,000

25,061,971

19,564,000

Subtotal Non–Control / Non–Affiliate Investments
825,243,841

888,974,154

857,604,639

Affiliate Investments:
All Metals Holding, LLC (1%)*
Steel Processor and Distributor
Subordinated Note (12% Cash, 1% PIK, Due 12/21)
6,433,333

6,249,220

6,249,220

Units (318,977 units)
793,331

754,000

6,433,333

7,042,551

7,003,220

CIS Secure Computing Inc. (2%)*
Secure Communications and Computing Solutions Provider
Subordinated Note (12% Cash, 3% PIK, Due 03/18)
11,670,708

11,670,708

11,670,708

Common Stock (84 shares)
502,320

2,155,000

11,670,708

12,173,028

13,825,708

Consolidated Lumber Company LLC (1%)*
Lumber Yard Operator
Subordinated Note (10% Cash, 2% PIK, Due 09/20)
4,193,848

4,121,389

4,278,000

Class A Units (15,000 units)
1,500,000

2,481,000

4,193,848

5,621,389

6,759,000

DPII Holdings, LLC (0%)*
Satellite Communication Business
Tranche I & II Subordinated Notes (12% Cash, 4% PIK, Due 01/18) (6)
3,744,709

3,227,001

2,356,001

Tranche III Subordinated Note (19% PIK, Due 01/18) (6)
2,408,752

2,148,462

—

Class A Membership Interest (17,308 units)
1,107,692

—

6,153,461

6,483,155

2,356,001

FCL Holding SPV, LLC (0%)*
Commercial Printing Services
Class A Interest (24,873 units)
292,000

645,000

Class B Interest (48,427 units)
—

101,000

Class C Interest (3,746 units)
—

—

292,000

746,000

Frank Entertainment Group, LLC
(3%)*
Movie Theatre and Family Entertainment Operator
Senior Note (10% Cash, 5.8% PIK, Due 06/18)
9,997,644

9,940,684

9,940,684

Class A Redeemable Preferred Units (10.5% Cash) (196,718 units)
3,934,666

4,566,904

Class B Redeemable Preferred Units (18,667 units)
433,334

1,660,810

Class C Redeemable Preferred Units (25,846 units)
600,000

600,000

Class A Common Units (43,077 units)
1,000,000

—

Class A Common Warrants
632,000

—

9,997,644

16,540,684

16,768,398

MS Bakery Holdings, Inc. (F/K/A Main Street Gourmet, LLC) (1%)*
Baked Goods Provider
Preferred Units (233 units)
211,867

397,000

Common B Units (3,000 units)
23,140

2,110,000

Common A Units (1,652 units)
14,993

1,162,000

250,000

3,669,000


18


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments — (Continued)
December 31, 2016
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
NB Products, Inc. (8%)*
Distributor of Work Apparel and Accessories
Subordinated Note (12% Cash, 2% PIK, Due 02/20)
$
23,105,315

$
22,751,190

$
22,751,190

Jr. Subordinated Note (10% PIK, Due 02/20)
4,705,830

4,595,921

4,595,921

Jr. Subordinated Bridge Note (20% PIK, Due 05/21)
2,002,586

1,972,727

1,972,727

Series A Redeemable Senior Preferred Stock (7,839 shares)
7,621,648

9,412,000

Common Stock (1,668,691 shares)
333,738

9,779,000

29,813,731

37,275,224

48,510,838

PCX Aerostructures, LLC (4%)*
Aerospace Component Manufacturer
Subordinated Note (10.5% Cash, Due 10/19)
29,647,359

29,148,152

21,960,000

Series A Preferred Stock (6,066 shares)
6,065,621

—

Series B Preferred Stock (411 shares)
410,514

—

Class A Common Stock (121,922 shares)
30,480

—

29,647,359

35,654,767

21,960,000

Team Waste, LLC (1%)*
Environmental and Facilities Services
Preferred Units (455,000 units)
9,100,000

9,100,000

9,100,000

9,100,000

Technology Crops, LLC (2%)*
Supply Chain Management Services
Subordinated Notes (12% Cash, 5% PIK, Due 09/17)
11,837,622

11,837,622

11,837,622

Common Units (50 units)
500,000

—

11,837,622

12,337,622

11,837,622

TGaS Advisors, LLC (2%)*
Advisory Solutions to Pharmaceutical Companies
Senior Note (10% Cash, 1% PIK, Due 11/19)
9,674,276

9,521,986

9,521,986

Preferred Units (1,685,357 units)
1,556,069

1,270,000

9,674,276

11,078,055

10,791,986

Tulcan Fund IV, L.P. (F/K/A Dyson Corporation) (0%)*
Custom Forging and Fastener Supplies
Common Units (1,000,000 units)
1,000,000

—

1,000,000

—

United Retirement Plan Consultants, Inc. (0%)*
Retirement Plan Administrator
Series A Preferred Shares (9,400 shares)
205,748

257,000

Common Shares (100,000 shares)
1,000,000

301,000

1,205,748

558,000

Waste Recyclers Holdings, LLC (0%)*
Environmental and Facilities Services
Class A Preferred Units (280 units)
2,251,100

—

Class B Preferred Units (11,484,867 units)
3,304,218

817,000

Common Unit Purchase Warrant (1,170,083 units)
748,900

—

Common Units (153,219 units)
180,783

—

6,485,001

817,000

Wythe Will Tzetzo, LLC (1%)*
Confectionery Goods Distributor
Series A Preferred Units (99,829 units)
—

6,808,000

—

6,808,000

Subtotal Affiliate Investments
119,421,982

162,539,224

161,510,773

Control Investments:
CRS Reprocessing, LLC (1%)*
Fluid
Reprocessing
Services
Senior Notes (4.3% Cash, Due 06/17)
2,942,769

2,942,769

2,942,769

Split Collateral Term Loans (8% Cash, Due 06/17)
11,192,464

11,192,464

6,182,000

Series F Preferred Units (705,321 units)
9,134,807

—

Common Units (15,174 units)
—

—

14,135,233

23,270,040

9,124,769

DCWV Acquisition Corporation
(0%)*
Arts & Crafts and Home Decor Products Designer and Supplier
Senior Subordinated Note (15% PIK, Due 12/19) (6)
291,875

250,000

250,000

Subordinated Note (12% Cash, 3% PIK, Due 12/19) (6)
8,090,699

6,178,633

1,389,000

Jr. Subordinated Note (15% PIK, Due 12/19) (6)
2,440,829

2,000,000

—

Series A Preferred Equity (1,200 shares)
1,200,000

—

100% Common Shares
—

—

10,823,403

9,628,633

1,639,000


19


TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments — (Continued)
December 31, 2016
Portfolio Company
Industry
Type of Investment (1)(2)(7)
Principal
Amount
Cost
Fair
Value (3)
Gerli & Company (0%)*
Specialty Woven Fabrics Manufacturer
Subordinated Note (13% Cash, Due 1/17) (6)
$
648,527

$
375,000

$
—

Subordinated Note (8.5% Cash, Due 1/17) (6)
4,900,843

3,000,000

—

Class A Preferred Shares (1,211 shares)
855,000

—

Class C Preferred Shares (744 shares)
—

—

Class E Preferred Shares (400 shares)
161,440

—

Common Stock (300 shares)
100,000

—

5,549,370

4,491,440

—

SRC Worldwide, Inc. (1%)*
Specialty Chemical Manufacturer
Common Stock (5,000 shares)
8,028,000

8,028,000

8,028,000

8,028,000

Subtotal Control Investments
30,508,006

45,418,113

18,791,769

Total Investments, December 31, 2016 (170%)*
$
975,173,829

$
1,096,931,491

$
1,037,907,181


*    Fair value as a percent of net assets

(1)
All debt investments are income producing, unless otherwise noted. Equity and equity-linked investments are non-income producing, unless otherwise noted.
(2)
Disclosures of interest rates on notes include cash interest rates and payment-in-kind (“PIK”) interest rates.
(3)
All investments are restricted as to resale and were valued at fair value as determined in good faith by the Board of Directors.
(4)
Investment is not a qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 2.5% of total investments at fair value as of December 31, 2016. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets. If at any time qualifying assets do not represent at least 70% of the Company's total assets, the Company will be precluded from acquiring any additional non-qualifying asset until such time as it complies with the requirements of Section 55(a).
(5)
PIK non-accrual investment
(6)
Non-accrual investment
(7)
All of the Company's investments, unless otherwise noted, are encumbered either as security for the Company's senior secured credit facility or in support of the SBA-guaranteed debentures issued by Triangle Mezzanine Fund LLLP and Triangle Mezzanine Fund II LP.

See accompanying notes.


20


TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Consolidated Financial Statements

1. ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
Organization and Business
Triangle Capital Corporation and its wholly owned subsidiaries, including Triangle Mezzanine Fund LLLP (“Triangle SBIC”), Triangle Mezzanine Fund II LP (“Triangle SBIC II”) and Triangle Mezzanine Fund III LP (“Triangle SBIC III”) (collectively, the “Company”), are specialty finance companies. Triangle SBIC, Triangle SBIC II and Triangle SBIC III are specialty finance limited partnerships formed to make investments primarily in lower middle market companies located throughout the United States. On September 11, 2003, Triangle SBIC was licensed to operate as a Small Business Investment Company (“SBIC”) under the authority of the United States Small Business Administration (“SBA”). On May 26, 2010, Triangle SBIC II obtained its license to operate as an SBIC and on January 6, 2017, Triangle SBIC III obtained its license to operate as an SBIC. As SBICs, Triangle SBIC, Triangle SBIC II and Triangle SBIC III are subject to a variety of regulations concerning, among other things, the size and nature of the companies in which they may invest and the structure of those investments.
The Company currently operates as a closed-end, non-diversified investment company and has elected to be treated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). The Company is internally managed by its executive officers under the supervision of its Board of Directors (the "Board"). The Company does not pay management or advisory fees, but instead incurs the operating costs associated with employing executive management and investment and portfolio management professionals. Triangle SBIC has also elected to be treated as a BDC under the 1940 Act.
Basis of Presentation
The financial statements of the Company include the accounts of Triangle Capital Corporation and its wholly-owned subsidiaries. The effects of all intercompany transactions between Triangle Capital Corporation and its subsidiaries have been eliminated in consolidation. Under the investment company rules and regulations pursuant to Article 6 of Regulation S-X and Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946, Financial Services - Investment Companies , the Company is precluded from consolidating portfolio company investments, including those in which it has a controlling interest, unless the portfolio company is another investment company. An exception to this general principle occurs if the Company holds a controlling interest in an operating company that provides all or substantially all of its services directly to the Company or to its portfolio companies. None of the portfolio investments made by the Company qualify for this exception. Therefore, the Company's investment portfolio is carried on the Consolidated Balance Sheets at fair value, as discussed further in Note 2, with any adjustments to fair value recognized as “Net unrealized appreciation (depreciation)” on the Unaudited Consolidated Statements of Operations.
The accompanying unaudited financial statements are presented in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments necessary for the fair presentation of financial statements for the interim period, have been reflected in the unaudited consolidated financial statements. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. Additionally, the unaudited financial statements and accompanying notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2016 . Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

Public Offering of Common Stock

On February 28, 2017, the Company filed a prospectus supplement pursuant to which 7,000,000 shares of common stock were offered for sale at a price to the public of $19.50 per share. Pursuant to this offering, 7,000,000 shares were sold and delivered resulting in net proceeds to the Company, after underwriting discounts and offering expenses, of approximately $132.2 million.

21

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


2. INVESTMENTS
Portfolio Composition
The Company primarily invests in subordinated debt securities of privately held companies, generally secured by second lien security interests in portfolio company assets. In addition, the Company generally invests in an equity instrument of the borrower, such as warrants to purchase common stock in the portfolio company or direct preferred or common equity interests. On a more limited basis, the Company also invests in senior debt securities secured by first lien security interests in portfolio companies. The Company's investments generally range from $5.0 million to $50.0 million per portfolio company.
The cost basis of the Company's debt investments includes any unamortized original issue discount, unamortized loan origination fees and payment-in-kind (“PIK”) interest, if any. Summaries of the composition of the Company’s investment portfolio at cost and fair value, and as a percentage of total investments, are shown in the following tables:
Cost
Percentage of
Total Portfolio
Fair Value
Percentage of
Total Portfolio
March 31, 2017:
Subordinated debt and 2 nd lien notes
$
759,242,347

64
%
$
698,774,893

62
%
Senior debt and 1 st lien notes
287,597,925

24

280,154,364

25

Equity shares
140,341,761

12

152,202,545

13

Equity warrants
3,662,717

—

2,077,000

—

$
1,190,844,750

100
%
$
1,133,208,802

100
%
December 31, 2016:
Subordinated debt and 2 nd lien notes
$
753,635,857

69
%
$
690,159,367

67
%
Senior debt and 1 st lien notes
198,616,110

18

191,643,157

18

Equity shares
140,524,807

13

154,216,657

15

Equity warrants
4,154,717

—

1,888,000

—

$
1,096,931,491

100
%
$
1,037,907,181

100
%
During the three months ended March 31, 2017 , the Company made nine new investments totaling approximately $146.6 million and investments in ten existing portfolio companies totaling approximately $14.9 million. During the three months ended March 31, 2016, the Company made investments in ten existing portfolio companies totaling approximately $11.8 million.
Investment Valuation Process
The Company has established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring basis in accordance with the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”). Under ASC Topic 820, a financial instrument is categorized within the ASC Topic 820 valuation hierarchy based upon the lowest level of input to the valuation process that is significant to the fair value measurement. The three levels of valuation inputs established by ASC Topic 820 are as follows:
Level 1 Inputs – include quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Inputs – include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 Inputs – include inputs that are unobservable and significant to the fair value measurement.
The Company’s investment portfolio is comprised of debt and equity instruments of privately held companies for which quoted prices or other inputs falling within the categories of Level 1 and Level 2 are generally not available. Therefore, the Company determines the fair value of its investments in good faith using Level 3 inputs, pursuant to a valuation policy and process that is established by the management of the Company with the assistance of certain third-party advisors and subsequently approved by the Board. There is no single standard for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment. The recorded fair values of the Company’s investments may differ significantly from fair values that would have been used had an active market for the securities existed. In addition,

22

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.
The Company’s valuation process is led by the Company’s executive officers. The Company’s valuation process begins with a quarterly review of each investment in the Company’s investment portfolio by the Company’s executive officers and investment committee. Valuations of each portfolio security are then prepared by the Company’s investment professionals, who have direct responsibility for the origination, management and monitoring of each investment. Under the Company’s valuation policy, each investment valuation is subject to (i) a review by the lead investment officer responsible for the portfolio company investment and (ii) a peer review by a second investment officer or executive officer of the Company. Generally, any investment that is valued below cost is subjected to review by one of the Company’s executive officers. After the peer review is complete, the Company engages two independent valuation firms, including Duff & Phelps, LLC (collectively, the “Valuation Firms”), to provide third-party reviews of certain investments, as described further below. Finally, the Board has the responsibility for reviewing and approving, in good faith, the fair value of the Company’s investments in accordance with the 1940 Act.
The Valuation Firms provide third-party valuation consulting services to the Company which consist of certain procedures that the Company identified and requested the Valuation Firms to perform (hereinafter referred to as the “Procedures”). The Procedures are performed with respect to each portfolio company at least once in every calendar year and for new portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In addition, the Procedures are generally performed with respect to a portfolio company when there has been a significant change in the fair value of the investment. In certain instances, the Company may determine that it is not cost-effective, and as a result is not in the Company’s stockholders’ best interest, to request the Valuation Firms to perform the Procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of the investment in the portfolio company is determined to be insignificant relative to the total investment portfolio.
The total number of investments and the percentage of the investment portfolio on which the Procedures were performed are summarized below by period:
For the quarter ended:
Total
companies
Percent of total
investments at
fair value (1)
March 31, 2016
18
27%
June 30, 2016
19
30%
September 30, 2016
19
33%
December 31, 2016
20
33%
March 31, 2017
18
30%

(1)
Exclusive of the fair value of new investments made during the quarter.
Upon completion of the Procedures, the Valuation Firms concluded that, with respect to each investment reviewed by each Valuation Firm, the fair value of those investments subjected to the Procedures appeared reasonable. The Board is ultimately responsible for determining the fair value of the Company’s investments in good faith.
Investment Valuation Inputs
Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date. For the Company’s portfolio securities, fair value is generally the amount that the Company might reasonably expect to receive upon the current sale of the security. Under ASC Topic 820, the fair value measurement assumes that the sale occurs in the principal market for the security, or in the absence of a principal market, in the most advantageous market for the security. Under ASC Topic 820, if no market for the security exists or if the Company does not have access to the principal market, the security should be valued based on the sale occurring in a hypothetical market. The securities in which the Company invests are generally only purchased and sold in merger and acquisition transactions, in which case the entire portfolio company is sold to a third-party purchaser. As a result, unless the Company has the ability to control such a transaction, the assumed principal market for the Company’s securities is a hypothetical secondary market. The Level 3 inputs to the Company’s valuation process reflect the Company’s best estimate of the assumptions that would be used by market participants in pricing the investment in a transaction in a hypothetical secondary market.

23

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


Enterprise Value Waterfall Approach
In valuing equity securities (including warrants), the Company estimates fair value using an “Enterprise Value Waterfall” valuation model. The Company estimates the enterprise value of a portfolio company and then allocates the enterprise value to the portfolio company’s securities in order of their relative liquidation preference. In addition, the Company assumes that any outstanding debt or other securities that are senior to the Company’s equity securities are required to be repaid at par. Additionally, the Company estimates the fair value of a limited number of its debt securities using the Enterprise Value Waterfall approach in cases where the Company does not expect to receive full repayment.
To estimate the enterprise value of the portfolio company, the Company primarily uses a valuation model based on a transaction multiple, which generally is the original transaction multiple, and measures of the portfolio company’s financial performance. In addition, the Company considers other factors, including but not limited to (i) offers from third parties to purchase the portfolio company, (ii) the implied value of recent investments in the equity securities of the portfolio company, (iii) publicly available information regarding recent sales of private companies in comparable transactions and (iv) when the Company believes there are comparable companies that are publicly traded, the Company performs a review of these publicly traded companies and the market multiple of their equity securities. For certain non-performing assets, the Company may utilize the liquidation or collateral value of the portfolio company's assets in its estimation of enterprise value.
The significant Level 3 inputs to the Enterprise Value Waterfall model are (i) an appropriate transaction multiple and (ii) a measure of the portfolio company’s financial performance, which generally is either earnings before interest, taxes, depreciation and amortization, as adjusted (“Adjusted EBITDA”) or revenues. Such inputs can be based on historical operating results, projections of future operating results or a combination thereof. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for certain non-recurring items. In determining the operating results input, the Company utilizes the most recent portfolio company financial statements and forecasts available as of the valuation date. The Company also consults with the portfolio company’s senior management to obtain updates on the portfolio company’s performance, including information such as industry trends, new product development, loss of customers and other operational issues.
Fair value measurements using the Enterprise Value Waterfall model can be sensitive to changes in one or more of the inputs. Assuming all other inputs to the Enterprise Value Waterfall model remain constant, any increase (decrease) in either the transaction multiple, Adjusted EBITDA or revenues for a particular equity security would result in a higher (lower) fair value for that security.
Income Approach
In valuing debt securities, the Company utilizes an “Income Approach” model that considers factors including, but not limited to, (i) the stated yield on the debt security, (ii) the portfolio company’s current Adjusted EBITDA as compared to the portfolio company’s historical or projected Adjusted EBITDA as of the date the investment was made and the portfolio company’s anticipated Adjusted EBITDA for the next twelve months of operations, (iii) the portfolio company’s current Leverage Ratio (defined as the portfolio company’s total indebtedness divided by Adjusted EBITDA) as compared to its Leverage Ratio as of the date the investment was made, (iv) publicly available information regarding current pricing and credit metrics for similar proposed and executed investment transactions of private companies and (v) when the Company believes a relevant comparison exists, current pricing and credit metrics for similar proposed and executed investment transactions of publicly traded debt. In addition, the Company uses a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. This risk rating system covers both qualitative and quantitative aspects of the business and the securities held.
The Company considers the factors above, particularly any significant changes in the portfolio company’s results of operations and leverage, and develops an expectation of the yield that a hypothetical market participant would require when purchasing the debt investment (the “Required Rate of Return”). The Required Rate of Return, along with the Leverage Ratio and Adjusted EBITDA, are the significant Level 3 inputs to the Income Approach model. For investments where the Leverage Ratio and Adjusted EBITDA have not fluctuated significantly from the date the investment was made or have not fluctuated significantly from the Company’s expectations as of the date the investment was made, and where there have been no significant fluctuations in the market pricing for such investments, the Company may conclude that the Required Rate of Return is equal to the stated rate on the investment and therefore, the debt security is appropriately priced. In instances where the Company determines that the Required Rate of Return is different from the stated rate on the investment, the Company discounts the contractual cash flows on the debt instrument using the Required Rate of Return in order to estimate the fair value of the debt security.

24

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


Fair value measurements using the Income Approach model can be sensitive to changes in one or more of the inputs. Assuming all other inputs to the Income Approach model remain constant, any increase (decrease) in the Required Rate of Return or Leverage Ratio inputs for a particular debt security would result in a lower (higher) fair value for that security. Assuming all other inputs to the Income Approach model remain constant, any increase (decrease) in the Adjusted EBITDA input for a particular debt security would result in a higher (lower) fair value for that security.
The fair value of the Company’s royalty rights are calculated based on specific provisions contained in the pertinent operating or royalty agreements. The determination of the fair value of such royalty rights is not a significant component of the Company’s valuation process.
The ranges and weighted average values of the significant Level 3 inputs used in the valuation of the Company’s debt and equity securities at March 31, 2017 and December 31, 2016 are summarized as follows:
March 31, 2017:
Fair Value(1)
Valuation
Model
Level 3
Inputs
Range of
Inputs
Weighted
Average
Subordinated debt and 2nd lien notes
$
674,451,893

Income
Approach
Required Rate of Return
8.3% – 35.0%
13.4%
Leverage Ratio
0.1x – 10.6x
4.8x
Adjusted EBITDA
$2.5 million – $291.4 million
$38.5 million
Subordinated debt and 2nd lien notes
24,323,000

Enterprise
Value Waterfall
Approach
Adjusted EBITDA Multiple
5.7x – 8.6x
6.9x
Adjusted EBITDA
$0.9 million – $8.4 million
$5.5 million
Revenue Multiple
0.8x – 0.8x
0.8x
Revenues
$98.0 million – $98.0 million
$98.0 million
Senior debt and 1 st lien notes
279,704,364

Income
Approach
Required Rate of Return
4.5% – 20.0%
10.8%
Leverage Ratio
0.0x – 8.7x
3.5x
Adjusted EBITDA
$4.0 million – $110.3 million
$14.4 million
Equity shares and warrants
149,915,545

Enterprise
Value Waterfall
Approach
Adjusted EBITDA Multiple
3.3x – 14.9x
7.5x
Adjusted EBITDA
$0.0 million – $80.1 million
$15.2 million
Revenue Multiple
0.8x – 3.4x
1.4x
Revenues
$18.1 million – $98.0 million
$63.4 million
(1)
One equity security with a total fair value of $4,364,000 was redeemed subsequent to the end of the reporting period and was valued at its transaction price. One senior debt investment with a total fair value of $450,000 is expected to be repaid subsequent to the end of the reporting period and was valued at its expected settlement value.


25

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


December 31, 2016:
Fair Value(1)
Valuation
Model
Level 3
Input
Range of
Inputs
Weighted
Average
Subordinated debt and 2nd lien notes
$
646,856,367

Income
Approach
Required Rate of Return
9.5% – 35.0%
13.8%
Leverage Ratio
0.1x – 9.5x
4.8x
Adjusted EBITDA
$2.6 million – $169.8 million
$27.9 million
Subordinated debt and 2nd lien notes
19,790,000

Enterprise
Value Waterfall
Approach
Adjusted EBITDA Multiple
5.0x – 6.7x
5.8x
Adjusted EBITDA
$0.6 million – 4.9 million
$2.1 million
Revenue Multiple
0.8x – 0.8x
0.8x
Revenues
$98.0 million – $98.0 million
$98.0 million
Senior debt and 1st lien notes
190,793,157

Income
Approach
Required Rate of Return
4.3% – 20.0%
11.0%
Leverage Ratio
0.0x – 8.3x
3.2x
Adjusted EBITDA
$4.0 million – $14.1 million
$9.3 million
Equity shares and warrants
152,435,657

Enterprise
Value Waterfall
Approach
Adjusted EBITDA Multiple
3.3x – 14.9x
7.4x
Adjusted EBITDA
($1.4 million) – $82.1 million
$15.0 million
Revenue Multiple
0.8x – 4.0x
1.4x
Revenues
$19.0 million – $98.0 million
$61.7 million
(1)
Certain subordinated debt investments with a total fair value of $23,513,000 and certain equity securities with a total fair value of $3,669,000 were repaid or redeemed subsequent to the end of the reporting period and were valued at their transaction price. One senior debt investment with a total fair value of $850,000 is expected to be repaid subsequent to the end of the reporting period and was valued at its expected settlement value.

The following table presents the Company’s investment portfolio at fair value as of March 31, 2017 and December 31, 2016 , categorized by the ASC Topic 820 valuation hierarchy, as previously described:
Fair Value as of March 31, 2017
Level 1
Level 2
Level 3
Total
Subordinated debt and 2 nd lien notes
$
—

$
—

$
698,774,893

$
698,774,893

Senior debt and 1 st lien notes
—

—

280,154,364

280,154,364

Equity shares
—

—

152,202,545

152,202,545

Equity warrants
—

—

2,077,000

2,077,000

$
—

$
—

$
1,133,208,802

$
1,133,208,802

Fair Value as of December 31, 2016
Level 1
Level 2
Level 3
Total
Subordinated debt and 2 nd lien notes
$
—

$
—

$
690,159,367

$
690,159,367

Senior debt and 1 st lien notes
—

—

191,643,157

191,643,157

Equity shares
—

—

154,216,657

154,216,657

Equity warrants
—

—

1,888,000

1,888,000

$
—

$
—

$
1,037,907,181

$
1,037,907,181



26

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


The following tables reconcile the beginning and ending balances of the Company’s investment portfolio measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2017 and 2016 :
Three Months Ended
March 31, 2017:
Subordinated
Debt and 2 nd
Lien Notes
Senior Debt
and 1 st Lien
Notes
Equity
Shares
Equity
Warrants
Total
Fair value, beginning of period
$
690,159,367

$
191,643,157

$
154,216,657

$
1,888,000

$
1,037,907,181

New investments
64,868,421

91,059,316

5,590,356

—

161,518,093

Proceeds from sales of investments
—

—

(6,266,765
)
(33,003
)
(6,299,768
)
Loan origination fees received
(1,255,000
)
(1,383,485
)
—

—

(2,638,485
)
Principal repayments received
(46,128,905
)
(1,342,038
)
—

—

(47,470,943
)
PIK interest earned
3,041,385

336,463

—

—

3,377,848

PIK interest payments received
(2,687,416
)


—

—

(2,687,416
)
Accretion of loan discounts
28,786

54,694

—

—

83,480

Accretion of deferred loan origination revenue
1,092,544

256,865

—

—

1,349,409

Realized gain (loss)
(13,353,325
)
—

493,363

(458,997
)
(13,318,959
)
Unrealized gain (loss)
3,009,036

(470,608
)
(1,831,066
)
681,000

1,388,362

Fair value, end of period
$
698,774,893

$
280,154,364

$
152,202,545

$
2,077,000

$
1,133,208,802


Three Months Ended
March 31, 2016:
Subordinated
Debt and 2 nd
Lien Notes
Senior Debt
and 1 st Lien
Notes
Equity
Shares
Equity
Warrants
Total
Fair value, beginning of period
$
699,125,083

$
132,929,264

$
141,555,369

$
3,667,000

$
977,276,716

New investments
8,027,333

1,000,000

2,134,998

650,000

11,812,331

Reclassifications
6,748,247

(6,748,247
)
—

—

—

Proceeds from sales of investments
—

—

(4,522,005
)
(112,876
)
(4,634,881
)
Loan origination fees received
(274,158
)
—

—

—

(274,158
)
Principal repayments received
(47,493,762
)
(1,492,037
)
—

—

(48,985,799
)
PIK interest earned
3,552,577

358,240

—

—

3,910,817

PIK interest payments received
(3,399,684
)
(193,293
)
—

—

(3,592,977
)
Accretion of loan discounts
46,593

48,595

—

—

95,188

Accretion of deferred loan origination revenue
1,019,361

115,640

—

—

1,135,001

Realized gain (loss)
—

(1,560,322
)
2,309,760

(163,224
)
586,214

Unrealized gain (loss)
(3,680,421
)
2,400,226

2,475,899

1,452,100

2,647,804

Fair value, end of period
$
663,671,169

$
126,858,066

$
143,954,021

$
5,493,000

$
939,976,256


All realized and unrealized gains and losses are included in earnings (changes in net assets) and are reported on separate line items within the Company’s Unaudited Consolidated Statements of Operations. Pre-tax net unrealized losses on investments of $11.0 million during the three months ended March 31, 2017 , were related to portfolio company investments that were still held by the Company as of March 31, 2017 . Pre-tax net unrealized gains on investments of $3.4 million during the three months ended March 31, 2016 were related to portfolio company investments that were still held by the Company as of March 31, 2016.
The Company’s primary investment objective is to generate current income and capital appreciation by investing directly in privately-held lower middle market companies to help these companies fund acquisitions, growth or refinancing. During the three months ended March 31, 2017 , the Company made investments of approximately $157.2 million in portfolio companies to which it was not previously contractually committed to provide such financing. During the three months ended March 31, 2017 , the Company made investments of $4.3 million in companies to which it was previously committed to provide such

27

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


financing. During the three months ended March 31, 2016, the Company made investments of approximately $9.2 million in portfolio companies to which it was not previously contractually committed to provide such financing. During the three months ended March 31, 2016, the Company made investments of $2.6 million in companies to which it was previously committed to provide such financing. The details of the Company’s investments have been disclosed on the Consolidated Schedules of Investments.
Warrants
When originating a debt security, the Company will sometimes receive warrants or other equity-related securities from the borrower. The Company determines the cost basis of the warrants or other equity-related securities received based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and warrants or other equity-related securities received. Any resulting difference between the face amount of the debt and its recorded fair value resulting from the assignment of value to the warrant or other equity instruments is treated as original issue discount and accreted into interest income over the life of the loan.
Realized Gain or Loss and Unrealized Appreciation or Depreciation of Portfolio Investments
Realized gains or losses are recorded upon the sale or liquidation of investments and are calculated as the difference between the net proceeds from the sale or liquidation, if any, and the cost basis of the investment using the specific identification method. Unrealized appreciation or depreciation reflects the difference between the fair value of the investments and the cost basis of the investments.
Investment Classification
In accordance with the provisions of the 1940 Act, the Company classifies investments by level of control. As defined in the 1940 Act, “Control Investments” are investments in those companies that the Company is deemed to “Control.” “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, other than Control Investments. “Non-Control / Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments. Generally, under the 1940 Act, the Company is deemed to control a company in which it has invested if the Company owns more than 25.0% of the voting securities of such company, has greater than 50.0% representation on its board or has the power to exercise control over management or policies of such portfolio company. The Company is deemed to be an affiliate of a company in which the Company has invested if it owns at least 5.0%, but no more than 25.0%, of the voting securities of such company.
Investment Income
Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes, until all principal and interest has been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Company writes off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. Dividend income is recorded on the ex-dividend date. The Company had negative dividend income of approximately $1.1 million during the three months ended March 31, 2016, consisting of dividend income of approximately $0.2 million and a negative true-up adjustment of $1.3 million related to a portfolio company distribution that was received in 2015. In 2015, the Company received information that indicated that the tax character of the distribution was 100% dividend income, but received updated information in 2016 indicating that only 14% of the distribution was dividend income and the remainder was a return of capital, which necessitated the adjustment.
Fee Income
Origination, facility, commitment, consent and other advance fees received in connection with loan agreements ("Loan Origination Fees") are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of its business, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and loan waiver and amendment fees, and are recorded as investment income when earned.

28

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


Fee income for the three months ended March 31, 2017 and 2016 was as follows:
Three Months Ended
Three Months Ended
March 31, 2017
March 31, 2016
Recurring Fee Income:
Amortization of loan origination fees
$
619,200

$
557,240

Management, valuation and other fees
201,960

192,128

Total Recurring Fee Income
821,160

749,368

Non-Recurring Fee Income:
Prepayment fees
716,133

614,471

Acceleration of unamortized loan origination fees
730,209

577,762

Loan amendment fees
50,000

10,000

Other fees
—

82,300

Total Non-Recurring Fee Income
1,496,342

1,284,533

Total Fee Income
$
2,317,502

$
2,033,901

Payment-in-Kind Interest
The Company currently holds, and expects to hold in the future, some loans in its portfolio that contain PIK interest provisions. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan, rather than being paid to the Company in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.
PIK interest, which is a non-cash source of income at the time of recognition, is included in the Company’s taxable income and therefore affects the amount the Company is required to distribute to its stockholders to maintain its qualification as a regulated investment company ("RIC") for federal income tax purposes, even though the Company has not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Company writes off any accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.
Concentration of Credit Risk
The Company’s investments are generally in lower middle market companies in a variety of industries. As of both March 31, 2017 and December 31, 2016 , there were no individual investments representing greater than 10% of the fair value of the Company’s portfolio. As of March 31, 2017 and December 31, 2016 , the Company’s largest single portfolio company investment represented approximately 4.5% and 4.7%, respectively, of the fair value of the Company’s portfolio. Income, consisting of interest, dividends, fees, other investment income and realization of gains or losses on equity interests, can fluctuate dramatically upon repayment of an investment or sale of an equity interest and in any given year can be highly concentrated among several portfolio companies.
The Company’s investments carry a number of risks including, but not limited to: (i) investing in lower middle market companies which may have limited financial resources and may have limited operating histories, (ii) investing in senior subordinated debt which ranks equal to or lower than debt held by other investors and (iii) holding investments that are not publicly traded and are subject to legal and other restrictions on resale and other risks common to investing in below investment grade debt and equity instruments.
As of March 31, 2017 , $842.6 million of the Company's assets were pledged as collateral for the Company's third amended and restated senior secured credit facility (the “Credit Facility”) and $391.7 million were subject to superior claim over the Company's shareholders by the SBA. If the Company defaults on its obligations under the Credit Facility or its SBA-guaranteed debentures, the lenders and/or the SBA may have the right to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interests or their superior claims.


29

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


Investments Denominated in Foreign Currency
As of both March 31, 2017 and December 31, 2016 , the Company held investments in two portfolio companies that were denominated in Canadian dollars.
At each balance sheet date, portfolio company investments denominated in foreign currencies are translated into United States dollars using the spot exchange rate on the last business day of the period. Purchases and sales of foreign portfolio company investments, and any income from such investments, are translated into United States dollars using the rates of exchange prevailing on the respective dates of such transactions.
Although the fair values of foreign portfolio company investments and the fluctuation in such fair values are translated into United States dollars using the applicable foreign exchange rates described above, the Company does not isolate that portion of the change in fair values resulting from foreign currency exchange rates fluctuations from the change in fair values of the underlying investment. All fluctuations in fair value are included in net unrealized appreciation (depreciation) of investments in the Company's Unaudited Consolidated Statements of Operations.
Investments denominated in foreign currencies and foreign currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the United States dollar.
3. INCOME TAXES
The Company has elected for federal income tax purposes to be treated as a RIC under the Internal Revenue Code of 1986, as amended (the "Code"), and intends to make the required distributions to its stockholders as specified therein. In order to maintain its qualification as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute (actually or constructively) and certain built-in gains. The Company has historically met its minimum distribution requirements and continually monitors its distribution requirements with the goal of ensuring compliance with the Code.
The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% U.S. federal excise tax on such excess. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. The Company may be required to recognize ICTI in certain circumstances in which it does not receive cash. For example, if the Company holds debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), the Company must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by the Company in the same taxable year. The Company may also have to include in ICTI other amounts that it has not yet received in cash, such as (i) PIK interest income and (ii) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included in the Company’s ICTI for the year of accrual, the Company may be required to make a distribution to its stockholders in order to satisfy the minimum distribution requirements, even though the Company will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
The Company has certain wholly-owned taxable subsidiaries (the “Taxable Subsidiaries”), each of which holds one or more of its portfolio investments that are listed on the Consolidated Schedule of Investments. The Taxable Subsidiaries are consolidated for financial reporting purposes, such that the Company’s consolidated financial statements reflect the Company’s investments in the portfolio companies owned by the Taxable Subsidiaries. The purpose of the Taxable Subsidiaries is to permit the Company to hold certain portfolio companies that are organized as limited liability companies (“LLCs”) (or other forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of the RIC’s gross revenue for income tax purposes must consist of investment income. Absent the Taxable Subsidiaries, a proportionate amount of any gross income of an LLC (or other pass-through entity) portfolio investment would flow through directly to the RIC. To the extent that such income did not consist of investment income, it could jeopardize the Company’s ability to qualify as a RIC and therefore cause

30

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


the Company to incur significant amounts of federal income taxes. When LLCs (or other pass-through entities) are owned by the Taxable Subsidiaries, their income is taxed to the Taxable Subsidiaries and does not flow through to the RIC, thereby helping the Company preserve its RIC status and resultant tax advantages. The Taxable Subsidiaries are not consolidated for income tax purposes and may generate income tax expense as a result of their ownership of the portfolio companies. This income tax expense is reflected in the Company’s Unaudited Consolidated Statements of Operations. Additionally, any unrealized appreciation related to portfolio investments held by the Taxable Subsidiaries (net of unrealized depreciation related to portfolio investments held by the Taxable Subsidiaries) is reflected net of applicable federal and state income taxes in the Company's Unaudited Consolidated Statements of Operations, with the related deferred tax assets presented in the Company's Unaudited Consolidated Balance Sheet.
For federal income tax purposes, the cost of investments owned as of March 31, 2017 and December 31, 2016 was approximately $1.2 billion and $1.1 billion, respectively.
4. BORROWINGS
The Company had the following borrowings outstanding as of March 31, 2017 and December 31, 2016 :
Issuance/Pooling Date
Maturity Date
Interest Rate as of March 31, 2017
March 31, 2017
December 31, 2016
SBA-Guaranteed Debentures:
March 25, 2009
March 1, 2019
5.337%
$
22,000,000

$
22,000,000

March 24, 2010
March 1, 2020
4.825%
6,800,000

6,800,000

September 22, 2010
September 1, 2020
3.687%
32,590,000

32,590,000

March 29, 2011
March 1, 2021
4.474%
75,400,000

75,400,000

September 21, 2011
September 1, 2021
3.392%
19,100,000

19,100,000

March 27, 2013
March 1, 2023
3.155%
30,000,000

30,000,000

September 24, 2014
September 1, 2024
3.790%
31,310,000

31,310,000

September 21, 2016
September 1, 2026
2.723%
32,800,000

32,800,000

Less: Deferred financing fees
(4,380,685
)
(4,610,034
)
Total SBA-Guaranteed Debentures
$
245,619,315

$
245,389,966

Credit Facility:
May 4, 2015
May 3, 2020
3.579%
$
91,090,267

$
127,011,475

Total Credit Facility
$
91,090,267

$
127,011,475

Notes:
October 19, 2012
December 15, 2022
6.375%
$
80,500,000

$
80,500,000

February 6, 2015
March 15, 2022
6.375%
86,250,000

86,250,000

Less: Deferred financing fees
(3,835,240
)
(3,994,619
)
Total Notes
$
162,914,760

$
162,755,381


SBA-Guaranteed Debentures
Under the Small Business Investment Act of 1958, as amended (the "Small Business Investment Act"), and current SBA policy applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding at any time, SBA-guaranteed debentures up to two times (and in certain cases, up to three times) the amount of its regulatory capital. As of March 31, 2017 , the maximum statutory limit on the dollar amount of outstanding SBA-guaranteed debentures that can be issued by a single SBIC was $150.0 million and by a group of SBICs under common control was $350.0 million. As of March 31, 2017 , Triangle SBIC had issued the maximum $150.0 million of SBA-guaranteed debentures and Triangle SBIC II had issued $100.0 million of SBA-guaranteed debentures, leaving borrowing capacity of a maximum of $100.0 million of SBA-guaranteed debentures for Triangle SBIC III. Interest payments on SBA-guaranteed debentures are payable semi-annually and there are no principal payments required on these debentures prior to maturity, nor do the debentures carry any prepayment penalties. The weighted average interest rates for all SBA-guaranteed debentures as of both March 31, 2017 and December 31, 2016 were 3.90%. As of both March 31, 2017 and December 31, 2016 , all SBA-guaranteed debentures were pooled.

31

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


In addition to a one-time 1.0% fee on the total commitment from the SBA, the Company also pays a one-time 2.425% fee on the amount of each SBA-guaranteed debenture issued. These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements using the effective interest method. Upon prepayment of an SBA-guaranteed debenture, any unamortized deferred financing costs related to the SBA-guaranteed debenture are written off and recognized as a loss on extinguishment of debt in the Unaudited Consolidated Statements of Operations.
The fair values of the SBA-guaranteed debentures are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of March 31, 2017 and December 31, 2016 , the carrying amounts of the SBA-guaranteed debentures were approximately $245.6 million and $245.4 million, respectively. As of March 31, 2017 and December 31, 2016 , the fair values of the SBA-guaranteed debentures were $257.7 million and $264.9 million, respectively.
Credit Facility
In May 2015, the Company entered into the Credit Facility, which has a current commitment of $300.0 million supported by 13 financial institutions. The revolving period of the Credit Facility ends May 3, 2019 followed by a one-year amortization period with a final maturity date of May 3, 2020. The Company has the ability to borrow foreign currencies under the Credit Facility.
The Credit Facility has an accordion feature that allows for an increase in the total borrowing size up to $350.0 million, subject to certain conditions and the satisfaction of specified financial covenants. The Credit Facility, which is structured to operate like a revolving credit facility, is secured primarily by the Company's assets, excluding the assets of the Company’s wholly-owned SBIC subsidiaries.
Borrowings under the Credit Facility bear interest, subject to the Company's election, on a per annum basis equal to (i) the applicable base rate plus 1.75% (or 1.50% if the Company receives an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.75% (or 2.50% if the Company receives an investment grade credit rating) or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75% (or 2.50% if the Company receives an investment grade credit rating). The applicable base rate is equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR plus 2.0%. The applicable LIBOR rate depends on the term of the draw under the Credit Facility. The Company pays a commitment fee of 1.00% per annum on undrawn amounts if the used portion of the Credit Facility is less than or equal to 25.0% of total commitments, or 0.375% per annum on undrawn amounts if the used portion of the Credit Facility is greater than 25.0% of total commitments. These commitment fees are included in interest and other financing fees on the Company's Unaudited Consolidated Statements of Operations. Borrowings under the Credit Facility are limited to a borrowing base, which includes certain cash and a portion of eligible debt investments.
As of March 31, 2017 , the Company had United States dollar borrowings of $69.6 million outstanding under the Credit Facility with an interest rate of 3.54% and non-United States dollar borrowings denominated in Canadian dollars of $28.6 million ($21.5 million in United States dollars) outstanding under the Credit Facility with a weighted average interest rate of 3.70%. The borrowings denominated in Canadian dollars are translated into United States dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign exchange rates on the Credit Facility borrowings is included in unrealized appreciation (depreciation) on foreign currency borrowings in the Company's Unaudited Consolidated Statements of Operations. The borrowings denominated in Canadian dollars may be positively or negatively affected by movements in the rate of exchange between the United States dollar and the Canadian dollar. This movement is beyond the control of the Company and cannot be predicted. As of December 31, 2016 , the Company had United States dollar borrowings of $105.7 million outstanding under the Credit Facility with an interest rate of 3.37% and non-United States dollar borrowings denominated in Canadian dollars of $28.6 million ($21.3 million United States dollars) outstanding under the Credit Facility with an interest rate of 3.64%.
The fair value of the borrowings outstanding under the Credit Facility are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. As of March 31, 2017 and December 31, 2016 , the fair values of the borrowings outstanding under the Credit Facility were $91.1 million and $127.0 million, respectively.
The Credit Facility contains certain affirmative and negative covenants, including but not limited to (i) maintaining a minimum interest coverage ratio, (ii) maintaining a minimum consolidated tangible net worth, (iii) maintaining a minimum asset coverage ratio and (iv) maintaining the Company's status as a RIC and as a BDC. The Credit Facility also contains customary events of default with customary cure and notice provisions, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, change of control, and material adverse effect. The Credit Facility also permits Branch Banking and

32

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


Trust Company, the administrative agent, to select an independent third-party valuation firm to determine valuations of certain portfolio investments for purposes of borrowing base provisions. As of March 31, 2017 and December 31, 2016 , the Company was in compliance with all covenants of the Credit Facility.
Notes
In October 2012, the Company issued $70.0 million of unsecured notes due 2022 (the "December 2022 Notes") and in November 2012, issued $10.5 million of December 2022 Notes pursuant to the exercise of an over-allotment option. The December 2022 Notes mature on December 15, 2022, and may be redeemed in whole or in part at any time or from time to time at the Company's option on or after December 15, 2015. The December 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning December 15, 2012. As of March 31, 2017 and December 31, 2016 , the carrying amounts of the December 2022 Notes were $78.8 million and $78.7 million, respectively. As of March 31, 2017 and December 31, 2016 , the fair values of the December 2022 Notes were $82.3 million and $81.9 million, respectively.
In February 2015, the Company issued $86.3 million of unsecured notes due 2022 (the "March 2022 Notes"). The March 2022 Notes mature on March 15, 2022 and may be redeemed in whole or in part at any time or from time to time at the Company's option on or after March 15, 2018. The March 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning March 15, 2015. The net proceeds to the Company from the sale of the March 2022 Notes, after underwriting discounts and offering expenses, were approximately $83.4 million. As of March 31, 2017 and December 31, 2016 , the carrying amounts of the March 2022 Notes were $84.2 million and $84.1 million, respectively. As of March 31, 2017 and December 31, 2016 , the fair values of the March 2022 Notes were $89.2 million and $87.7 million, respectively. The fair values of the December 2022 Notes and the March 2022 Notes are based on the closing prices of each respective security on the New York Stock Exchange, which are Level 1 inputs under ASC 820.
The indenture and supplements thereto relating to the December 2022 Notes and the March 2022 Notes contain certain covenants, including but not limited to (i) a requirement that the Company comply with the asset coverage requirement of the 1940 Act or any successor provisions, after giving effect to any exemptive relief granted to the Company by the Securities and Exchange Commission (“SEC”), (ii) a requirement that the Company will not declare any cash dividend, or declare any other cash distribution, upon a class of its capital stock, or purchase any such capital stock, unless, in every such case, at the time of the declaration of any such dividend or distribution, or at the time of any such purchase, the Company has an asset coverage (as defined in the 1940 Act) of at least 200% after deducting the amount of such dividend, distribution or purchase price, as the case may be, giving effect to any exemptive relief granted to the Company by the SEC and (iii) a requirement to provide financial information to the holders of the notes and the trustee under the indenture if the Company should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of March 31, 2017 and December 31, 2016 , the Company was in compliance with all covenants of the December 2022 Notes and the March 2022 Notes.

33

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


5. EQUITY-BASED AND OTHER COMPENSATION PLANS
The Board and the Company's stockholders have approved the Triangle Capital Corporation Amended and Restated 2007 Equity Incentive Plan (the “Plan”), under which there are 2,400,000 shares of the Company’s Common Stock authorized for issuance. Under the Plan, the Board (or compensation committee, if delegated administrative authority by the Board) may award stock options, restricted stock or other stock-based incentive awards to executive officers, employees and directors. Equity-based awards granted under the Plan to independent directors generally will vest over a one-year period and equity-based awards granted under the Plan to executive officers and employees generally will vest ratably over a four-year period.
The Company accounts for its equity-based compensation plan using the fair value method, as prescribed by ASC Topic 718, Stock Compensation . Accordingly, for restricted stock awards, the Company measures the grant date fair value based upon the market price of the Company’s common stock on the date of the grant and amortizes this fair value to compensation expense ratably over the requisite service period or vesting term.
The following table presents information with respect to the Plan for the three months ended March 31, 2017 and 2016 :
Three Months Ended
March 31, 2017
Three Months Ended
March 31, 2016
Number of
Shares
Weighted Average
Grant Date Fair
Value per Share
Number of
Shares
Weighted Average
Grant Date Fair
Value per Share
Unvested shares, beginning of period
631,622

$21.23
778,116

$24.10
Shares granted during the period
347,000

$19.25
351,000

$17.53
Shares vested during the period
(219,609
)
$22.65
(396,771
)
$23.13
Unvested shares, end of period
759,013

$19.92
732,345

$21.48

In the three months ended March 31, 2017 , the Company recognized equity-based compensation expense of approximately $1.5 million . In the three months ended March 31, 2016 , the Company recognized equity-based compensation expense of approximately $4.3 million , $2.7 million of which related to the accelerated vesting of outstanding shares of restricted stock of the Company's former Chief Executive Officer, Garland S. Tucker, III, who retired from his officer positions in February 2016. This expense is included in compensation expenses in the Company’s Unaudited Consolidated Statements of Operations.
As of March 31, 2017 , there was approximately $13.9 million of total unrecognized compensation cost related to the Company’s non-vested restricted shares. This cost is expected to be recognized over a weighted average period of approximately 2.6 years.
In February 2017, both the compensation committee of the Board and the Board adopted the Omnibus Incentive Plan, or the Omnibus Plan, and recommended that it be submitted to the Company’s stockholders for their approval at the Company’s 2017 Annual Meeting of Stockholders. The Company currently compensates its professionals through two separate plans: the Plan, which provides for grants of restricted stock and options to employees, officers and directors, and the 2012 Executive Cash Incentive Plan, or the Cash Incentive Plan, which provides for the payment of cash bonuses to employees and officers. The Omnibus Plan was created primarily for the purpose of combining the Plan and the Cash Incentive Plan in order to reduce the administrative burden of monitoring the terms and conditions of two separate plans. The terms of the Plan and the Cash Incentive Plan, as combined and reflected in the Omnibus Plan, are substantially similar to the respective terms of each standalone plan. The Omnibus Plan will provide for grants of restricted stock, incentive stock options, non-statutory stock options and cash-based and/or stock-based performance awards, collectively, “Awards,” to the Company’s existing and future employees. In addition, the Omnibus Plan will increase the maximum number of shares of the Company’s common stock with respect to which Awards may be granted under the Omnibus Plan to 4,000,000 shares of the Company’s common stock from 2,400,000 shares of the Company’s common stock that were approved under the Plan. Finally, if approved by the Company’s stockholders, the Omnibus Plan will not expire until ten years following such approval. If stockholders approve the Omnibus Plan at the 2017 Annual Meeting of Stockholders, no further awards will be issued under the terms of the Plan or the Cash Incentive Plan, but will instead be granted under the terms of the Omnibus Plan. The effective date of the Omnibus Plan will be the date on which it is approved by the Company’s stockholders, if at all.
The Board has adopted a nonqualified deferred compensation plan covering the Company’s executive officers and key employees. Any compensation deferred and the Company’s contributions will earn a return based on the returns on certain investments designated by the Compensation Committee of the Board. Participants are 100% vested in amounts deferred under

34

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


the deferred compensation plan and the earnings thereon. Contributions to the plan and earnings thereon generally vest ratably over a four-year period.
The Company maintains a 401(k) plan in which all full-time employees who are at least 21 years of age and have 90 days of service are eligible to participate and receive employer contributions. Eligible employees may contribute a portion of their compensation on a pretax basis into the 401(k) plan up to the maximum amount allowed under the Code, and direct the investment of their contributions.
6. TRANSACTIONS WITH CONTROLLED COMPANIES
During each of the three months ended March 31, 2017 and 2016 , the Company received management fees from SRC Worldwide, Inc., a 100%-owned portfolio company, of $100,000. These fees were recognized as fee income in the Company's Unaudited Consolidated Statements of Operations.
7. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is party to financial instruments with off-balance sheet risk, consisting primarily of unused commitments to extend financing to the Company's portfolio companies. Since commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The balances of unused commitments to extend financing as of March 31, 2017 and December 31, 2016 were as follows:
Portfolio Company
Investment Type
March 31, 2017
December 31, 2016
Avantor Performance Materials Holdings, LLC
Delayed Draw Term Loan
$
631,579

$
—

Cafe Enterprises, Inc.
Second Lien Debt
500,000

—

DPII Holdings LLC
Guaranty
576,925

576,925

DLC Acquisition, LLC
Revolver
1,800,000

3,000,000

Eckler's Holdings, Inc.
Equity Investment
1,000,000

—

Halo Branded Solutions, Inc.
Delayed Draw Term Loan
3,250,000

3,250,000

HKW Capital Partners IV, L.P.
Private Equity
393,144

530,032

Lakeview Health Acquisition Company
Revolver
1,387,367

1,387,367

Native Maine Operations
Revolver
1,000,000

—

Nautic Partners VII, LP
Private Equity
645,739

642,172

Nomacorc, LLC
Equity Investment
846,725

849,362

Orchid Underwriters Agency, LLC
Delayed Draw Term Loan
800,000

8,400,000

Orchid Underwriters Agency, LLC
Revolver
—

5,000,000

SCA Pharmaceuticals, LLC
Delayed Draw Term Loan
12,000,000

12,000,000

SCUF Gaming, Inc.
Revolver
2,000,000

3,500,000

Smile Brands, Inc.
Equity Investment
1,000,000

1,000,000

Smile Brands, Inc.
Delayed Draw Term Loan
18,826,531

18,826,531

SPC Partners V, LP
Private Equity
522,881

522,881

SPC Partners VI, LP
Private Equity
3,000,000

3,000,000

TCFI Merlin LLC ("Merlin") and TCFI CSG LLC ("CSG")
Revolver
687,790

—

Team Waste, LLC
Equity Investment
900,000

900,000

TGaS Advisors, LLC
Revolver
2,000,000

2,000,000

YummyEarth Inc.
Delayed Draw Term Loan
—

1,500,000

Total unused commitments to extend financing
$
53,768,681

$
66,885,270

The Company may, in the future, be involved in litigation arising out of its operations in the normal course of business or otherwise. Furthermore, third parties may try to seek to impose liability on the Company in connection with the activities of its portfolio companies. Since its inception, neither Triangle Capital Corporation nor any of its subsidiaries have been party to any material legal proceedings.


35

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


8. FINANCIAL HIGHLIGHTS
The following is a schedule of financial highlights for the three months ended March 31, 2017 and 2016 :
Three Months Ended March 31,
2017
2016
Per share data:
Net asset value at beginning of period
$
15.13

$
15.23

Net investment income(1)
0.42

0.29

Net realized loss on investments(1)
(0.31
)
0.02

Net unrealized appreciation (depreciation) on investments / foreign currency(1)
0.06

0.07

Total increase from investment operations(1)
0.17

0.38

Dividends paid to stockholders from net investment income
(0.45
)
(0.54
)
Total dividends paid
(0.45
)
(0.54
)
Shares issued pursuant to Dividend Reinvestment Plan
—

0.01

Common stock offering
0.61

—

Stock-based compensation
(0.11
)
(0.04
)
Other(2)
(0.06
)
(0.02
)
Net asset value at end of period
$
15.29

$
15.02

Market value at end of period(3)
$
19.09

$
20.58

Shares outstanding at end of period
47,681,397

33,576,436

Net assets at end of period
$
729,207,289

$
504,347,914

Average net assets
$
613,068,728

$
512,794,887

Ratio of total expenses, including provision for taxes, to average net assets (annualized)
8.07
%
13.30
%
Ratio of net investment income to average net assets (annualized)
11.63
%
7.49
%
Portfolio turnover ratio
5.44
%
1.25
%
Total return(4)
6.54
%
10.52
%
Supplemental Data:
Efficiency ratio(5)
18.09
%
39.54
%
(1)
Weighted average basic per share data.
(2)
Represents the impact of the different share amounts used in calculating per share data as a result of calculating certain per share data based upon the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.
(3)
Represents the closing price of the Company’s common stock on the last day of the period.
(4)
Total return equals the change in the market value of the Company’s common stock during the period, plus dividends declared per share during the period, divided by the market value of the Company’s common stock at the beginning of the period. Total return is not annualized.
(5)
Efficiency ratio equals the sum of (i) compensation and related expenses and (ii) general and administrative expenses divided by total investment income.

36

Triangle Capital Corporation
Notes to Unaudited Consolidated Financial Statements — (Continued)


9. SUBSEQUENT EVENTS
In April 2017, the Company invested $5.0 million in a debt security of Constellis Holdings. Under the terms of the investment, the debt security bears interest at a rate of LIBOR plus 9.0% per annum.
In May 2017, the Company amended its Credit Facility to, among other things, increase current commitments from $300 million to $435 million and extend the maturity by two years (the "Amended Credit Facility"). The current commitments of $435 million are supported by a diversified group of thirteen lenders, and the Amended Credit Facility has an accordion feature that allows for an increase in commitments to up to $550 million from new and existing lenders on the same terms and conditions as the existing commitments. The revolving period of the Amended Credit Facility ends April 30, 2021 followed by a one-year amortization period with a final maturity date of April 30, 2022.






37


TRIANGLE CAPITAL CORPORATION
Unaudited Schedule of Investments in and Advances to Affiliates
Three Months Ended March 31, 2017

Portfolio Company
Type of Investment(1)
Amount of Realized Gain/ (Loss)
Amount of Unrealized Gain/ (Loss)
Amount of Interest or Dividends Credited to Income(2)
December 31, 2016
Value
Gross Additions(3)
Gross Reductions(4)
March 31, 2017
Value
Control Investments:
CRS Reprocessing, LLC
Senior Notes (4.5% Cash)
$
—

$
—

$
32,020

$
2,942,769

$
—

$
—

$
2,942,769

Split Collateral Term Loans (8% Cash)
—

(2,072,000
)
237,516

6,182,000

2,000,000

2,072,000

6,110,000

Series F Preferred Units (705,321 units)
—

—

—

—

—

—

—

Common Units (15,174 units)
—

—

—

—

—

—

—

(2,072,000
)
269,536

9,124,769

2,000,000

2,072,000

9,052,769

DCWV Acquisition Corporation
Senior Subordinated Note (15% PIK) (5)
—

—

—

250,000

—

—

250,000

Subordinated Note (12% Cash, 3% PIK) (5)
—

(722,000
)
—

1,389,000

—

722,000

667,000

Jr. Subordinated Note (15% PIK) (5)
—

—

—

—

—

—

—

Series A Preferred Equity (1,200 shares)
—

—

—

—

—

—

—

100% Common Shares
—

—

—

—

—

—

—

—

(722,000
)
—

1,639,000

—

722,000

917,000

Gerli & Company
Subordinated Note (13% Cash)
(375,000
)
375,000

—

—

375,000

375,000

—

Subordinated Note (8.5% Cash)
(3,000,000
)
3,000,000

—

—

3,000,000

3,000,000

—

Class A Preferred Shares (1,211 shares)
(855,000
)
855,000

—

—

855,000

855,000

—

Class C Preferred Shares (744 shares)
—

—

—

—

—

—

—

Class E Preferred Shares (400 shares)
(161,440
)
161,440

—

—

161,440

161,440

—

Common Stock (300 shares)
(100,000
)
100,000

—

—

100,000

100,000

—

(4,491,440
)
4,491,440

—

—

4,491,440

4,491,440

—

SRC Worldwide, Inc.
Common Stock (5,000 shares)
—

—

100,000

8,028,000

8,028,000

—

—

100,000

8,028,000

—

—

8,028,000

Total Control Investments
(4,491,440
)
1,697,440

369,536

18,791,769

6,491,440

7,285,440

17,997,769

Affiliate Investments:
All Metals Holding, LLC
Subordinated Note (12% Cash, 1% PIK)
—

—

218,436

6,249,220

23,127

—

6,272,347

Units (318,977 units)
—

23,000

—

754,000

23,000

—

777,000

—

23,000

218,436

7,003,220

46,127

—

7,049,347

CIS Secure Computing Inc.
Subordinated Note (12% Cash, 2% PIK)
—

—

402,316

11,670,708

66,088

1,000,000

10,736,796

Common Stock (84 shares)
—

(251,000
)
—

2,155,000

—

251,000

1,904,000

—

(251,000
)
402,316

13,825,708

66,088

1,251,000

12,640,796


38


TRIANGLE CAPITAL CORPORATION
Unaudited Schedule of Investments in and Advances to Affiliates — (Continued)
Three Months Ended March 31, 2017
Portfolio Company
Type of Investment(1)
Amount of Realized Gain/ (Loss)
Amount of Unrealized Gain/ (Loss)
Amount of Interest or Dividends Credited to Income(2)
December 31, 2016
Value
Gross Additions(3)
Gross Reductions(4)
March 31, 2017
Value
Consolidated Lumber Company LLC
Subordinated Note (10% Cash, 2% PIK)
$
—

$
(156,611
)
$
194,082

$
4,278,000

$
78,750

$
4,356,750

$
—

Class A Units (15,000 units)
—

(32,000
)
—

2,481,000

—

32,000

2,449,000

—

(188,611
)
194,082

6,759,000

78,750

4,388,750

2,449,000

DPII Holdings, LLC
Tranche I & II Subordinated Notes (12% Cash, 4% PIK) (5)
—

425,716

—

2,356,001

425,716

112,716

2,669,001

Tranche III Subordinated Note (19% PIK) (5)
—

—

—

—

—

—

—

Class A Membership Interest (17,308 units)
—

—

—

—

—

—

—

—

425,716

—

2,356,001

425,716

112,716

2,669,001

FCL Holding SPV, LLC
Class A Interest (24,873 units)
—

(49,000
)
—

645,000

—

49,000

596,000

Class B Interest (48,427 units)
—

(101,000
)
—

101,000

—

101,000

—

Class B Interest (3,746 units)
—

—

—

—

—

—

—

(150,000
)
—

746,000

—

150,000

596,000

Frank Entertainment Group, LLC
Senior Note (10% Cash, 5.8% PIK)
—

(532,317
)
402,574

9,940,684

152,633

532,317

9,561,000

Class A Redeemable Preferred Units (10.5% Cash) (196,718 units)
—

—

—

4,566,904

—

—

4,566,904

Class B Redeemable Preferred Units (18,667 units)
—

(1,000,000
)
—

1,660,810

—

1,000,000

660,810

Class C Redeemable Preferred Units (25,846 units)
—

(600,000
)
—

600,000

—

600,000

—

Class A Common Units (43,077 units)
—

—

—

—

—

—

—

Class A Common Warrants
—

—

—

—

—

—

—

—

(2,132,317
)
402,574

16,768,398

152,633

2,132,317

14,788,714

MS Bakery Holdings, Inc. (F/K/A Main Street Gourmet, LLC)
Preferred Units (233 units)
185,133

(185,133
)
—

397,000

185,133

582,133

—

Common B Units (3,000 units)
2,087,323

(2,086,860
)
—

2,110,000

2,087,323

4,197,323

—

Common A Units (1,652 units)
1,147,007

(1,147,007
)
—

1,162,000

1,147,007

2,309,007

—

3,419,463

(3,419,000
)
—

3,669,000

3,419,463

7,088,463

—

Native Maine Operations, Inc.
Senior Notes (10.1% Cash)
—

—

504,164

—

17,634,876

—

17,634,876

Preferred Units (20,000 units)
—

—

—

—

2,000,000

—

2,000,000

—

—

504,164

—

19,634,876

—

19,634,876


39


TRIANGLE CAPITAL CORPORATION
Unaudited Schedule of Investments in and Advances to Affiliates — (Continued)
Three Months Ended March 31, 2017
Portfolio Company
Type of Investment(1)
Amount of Realized Gain/ (Loss)
Amount of Unrealized Gain/ (Loss)
Amount of Interest or Dividends Credited to Income(2)
December 31, 2016
Value
Gross Additions(3)
Gross Reductions(4)
March 31, 2017
Value
NB Products, Inc.
Subordinated Note (12% Cash, 2% PIK)
$
—

$
—

$
884,270

$
22,751,190

$
137,312

$
—

$
22,888,502

Jr. Subordinated Note (10% PIK)
—

—

117,646

4,595,921

124,906

—

4,720,827

Jr. Subordinated Bridge Note (20% PIK)
—

—

100,129

1,972,727

102,041

—

2,074,768

Series A Redeemable Senior Preferred Stock (7,839 shares)
—

233,000

—

9,412,000

233,000

—

9,645,000

Common Stock (1,668,691 shares)
—

1,491,000

—

9,779,000

1,491,000

—

11,270,000

—

1,724,000

1,102,045

48,510,838

2,088,259

—

50,599,097

Passport Food Group, LLC
Senior Notes (10% Cash)
—

—

—

—

19,600,000

—

19,600,000

Common Shares (20,000 shares)
—

—

—

—

2,000,000

—

2,000,000

—

—

—

—

21,600,000

—

21,600,000

PCX Aerostructures, LLC
Subordinated Note (10.5% Cash)
—

469,004

801,239

21,960,000

492,000

—

22,452,000

Series A Preferred Stock (6,066 shares)
—

—

—

—

—

—

Series B Preferred Stock (411 shares)
—

—

—

—

—

—

—

Class A Common Stock (121,922 shares)
—

—

—

—

—

—

—

—

469,004

801,239

21,960,000

492,000

—

22,452,000

Team Waste, LLC
Preferred Units (455,000 units)
—

140,000

—

9,100,000

140,000

—

9,240,000

—

140,000

—

9,100,000

140,000

—

9,240,000

Technology Crops, LLC
Subordinated Notes (12% Cash, 5% PIK)
—

—

505,196

11,837,622

148,587

—

11,986,209

Common Units (50 units)
—

—

—

—

—

—

—

—

—

505,196

11,837,622

148,587

—

11,986,209

TGaS Advisors, LLC
Senior Note (10% Cash, 1% PIK)
—

—

280,813

9,521,986

38,754

62,243

9,498,497

Preferred Units (1,685,357 units)
—

(26,000
)
—

1,270,000

—

26,000

1,244,000

—

(26,000
)
280,813

10,791,986

38,754

88,243

10,742,497

Tulcan Fund IV, L.P. (F/K/A Dyson Corporation)
Common Units (1,000,000 units)
—

—

—

—

—

—

—

—

—

—

—

—

—

—

United Retirement Plan Consultants, Inc.
Series A Preferred Shares (9,400 shares)
—

8,000

—

257,000

8,000

—

265,000

Common Shares (100,000 shares)
—

(1,000
)
—

301,000

—

1,000

300,000

—

7,000

—

558,000

8,000

1,000

565,000


40


TRIANGLE CAPITAL CORPORATION
Unaudited Schedule of Investments in and Advances to Affiliates — (Continued)
Three Months Ended March 31, 2017
Portfolio Company
Type of Investment(1)
Amount of Realized Gain/ (Loss)
Amount of Unrealized Gain/ (Loss)
Amount of Interest or Dividends Credited to Income(2)
December 31, 2016
Value
Gross Additions(3)
Gross Reductions(4)
March 31, 2017
Value
Waste Recyclers Holdings, LLC
Class A Preferred Units (280 units)
$
—

$
—

$
—

$
—

$
—

$
—

$
—

Class B Preferred Units (11,484,867 units)
—

(104,000
)
—

817,000

—

104,000

713,000

Common Unit Purchase Warrant (1,170,083 units)
—

—

—

—

—

—

—

Common Units (153,219 units)
—

—

—

—

—

—

—

—

(104,000
)
—

817,000

—

104,000

713,000

Wythe Will Tzetzo, LLC
Series A Preferred Units (99,829 units)
—

(1,552,000
)
—

6,808,000

—

1,552,000

5,256,000

—

(1,552,000
)
—

6,808,000

—

1,552,000

5,256,000

Investments not held at the end of the period
113,353

—

—

—

113,353

113,353

—

Total Affiliate Investments
$
3,532,816

$
(5,034,208
)
$
4,410,865

$
161,510,773

$
48,452,606

$
16,981,842

$
192,981,537


(1)
All debt investments are income producing, unless otherwise noted. Equity and equity-linked investments are non-income producing, unless otherwise noted.
(2)
Represents the total amount of interest, fees or dividends credited to income for the portion of the year an investment was included in Control or Affiliate categories, respectively.
(3)
Gross additions include increase in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest. Gross Additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation.
(4)
Gross reductions include decreases in the total cost basis of investments resulting from principal or PIK repayments or sales. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.
(5)
Non-accrual investment

This schedule should be read in conjunction with Triangle Capital Corporation's Unaudited Consolidated Financial Statements, including the Unaudited Consolidated Schedule of Investments.


41


TRIANGLE CAPITAL CORPORATION
Schedule of Investments in and Advances to Affiliates
Year Ended December 31, 2016
Portfolio Company
Type of Investment(1)
Amount of Realized Gain/ (Loss)
Amount of Unrealized Gain/ (Loss)
Amount of Interest or Dividends Credited to Income(2)
December 31, 2015
Value
Gross Additions(3)
Gross Reductions(4)
December 31, 2016
Value
Control Investments:
CRS Reprocessing, LLC
Senior Notes (4.3% Cash)
$
—

$
—

$
120,067

$
2,942,769

$
—

$
—

$
2,942,769

Split Collateral Term Loans (8% Cash)
—

(5,010,464
)
897,649

6,192,464

5,000,000

5,010,464

6,182,000

Series F Preferred Units (705,321 units)
—

(5,221,000
)
—

5,221,000

—

5,221,000

—

Common Units (15,174 units)
—

—

333

—

—

—

—

(10,231,464
)
1,018,049

14,356,233

5,000,000

10,231,464

9,124,769

DCWV Acquisition Corporation
Senior Subordinated Note (15% PIK) (5)
—

—

—

250,000

—

—

250,000

Subordinated Note (12% Cash, 3% PIK) (5)
—

(1,728,000
)
—

3,117,000

—

1,728,000

1,389,000

Jr. Subordinated Note (15% PIK) (5)
—

—

—

—

—

—

—

Series A Preferred Equity (1,200 shares)
—

—

—

—

—

—

—

100% Common Shares
—

—

—

—

—

—

—

—

(1,728,000
)
—

3,367,000

—

1,728,000

1,639,000

Gerli & Company
Subordinated Note (13% Cash) (5)
—

(375,000
)
—

375,000

—

375,000

—

Subordinated Note (8.5% Cash) (5)
—

(437,000
)
—

437,000

—

437,000

—

Class A Preferred Shares (1,211 shares)
—

—

—

—

—

—

—

Class C Preferred Shares (744 shares)
—

—

—

—

—

—

—

Class E Preferred Shares (400 shares)
—

—

—

—

—

—

—

Common Stock (300 shares)
—

—

—

—

—

—

—

—

(812,000
)
—

812,000

—

812,000

—

SRC Worldwide, Inc.
Common Stock (5,000 shares)
—

1,307,000

700,000

6,921,000

1,307,000

200,000

8,028,000

—

1,307,000

700,000

6,921,000

1,307,000

200,000

8,028,000

Total Control Investments
—

(11,464,464
)
1,718,049

25,456,233

6,307,000

12,971,464

18,791,769

Affiliate Investments:
All Aboard America! Holdings Inc.
Subordinated Note (12% Cash, 3% PIK)
—

—

2,440,362

14,953,191

577,433

15,530,624

—

Membership Units in LLC
3,118,958

(2,723,218
)
—

5,024,000

3,118,958

8,142,958

—

3,118,958

(2,723,218
)
2,440,362

19,977,191

3,696,391

23,673,582

—

All Metals Holding, LLC
Subordinated Note (12% Cash, 1% PIK)
—

—

—

—

6,249,220

—

6,249,220

Units (318,977 units)
—

(39,331
)
—

—

793,331

39,331

754,000

—

(39,331
)
—

—

7,042,551

39,331

7,003,220


42


TRIANGLE CAPITAL CORPORATION
Schedule of Investments in and Advances to Affiliates — (Continued)
Year Ended December 31, 2016
Portfolio Company
Type of Investment(1)
Amount of Realized Gain/ (Loss)
Amount of Unrealized Gain/ (Loss)
Amount of Interest or Dividends Credited to Income(2)
December 31, 2015
Value
Gross Additions(3)
Gross Reductions(4)
December 31, 2016
Value
American De-Rosa Lamparts, LLC and Hallmark Lighting, LLC
Subordinated Note (12% Cash, 3% PIK)
$
—

$
—

$
663,502

$
7,186,235

$
227,130

$
7,413,365

$
—

Membership Units (8,364 units)
3,555,652

(3,251,347
)
102,800

3,872,000

3,555,652

7,427,652

—

3,555,652

(3,251,347
)
766,302

11,058,235

3,782,782

14,841,017

—

CIS Secure Computing Inc.
Subordinated Note (12% Cash, 3% PIK)
—

—

1,757,750

11,323,440

347,268

—

11,670,708

Common Stock (84 shares)
—

1,956,000

—

199,000

1,956,000

—

2,155,000

—

1,956,000

1,757,750

11,522,440

2,303,268

—

13,825,708

Consolidated Lumber Company LLC
Subordinated Note (10% Cash, 2% PIK)
—

156,611

1,480,383

14,332,445

564,627

10,619,072

4,278,000

Class A Units (15,000 units)
—

981,000

451,128

1,500,000

981,000

—

2,481,000

—

1,137,611

1,931,511

15,832,445

1,545,627

10,619,072

6,759,000

DPII Holdings, LLC
Tranche I & II Subordinated Notes (12% Cash, 4% PIK) (5)
—

(871,000
)
115,147

3,558,804

5,708

1,208,511

2,356,001

Tranche III Subordinated Note (19% PIK) (5)
—

(2,148,462
)
—

—

2,148,462

2,148,462

—

Class A Membership Interest (17,308 units)
—

(795,000
)
—

795,000

—

795,000

—

—

(3,814,462
)
115,147

4,353,804

2,154,170

4,151,973

2,356,001

FCL Holding SPV, LLC
Class A Interest (24,873 units)
—

(416,000
)
—

—

645,000

—

645,000

Class B Interest (48,427 units)
—

101,000

—

—

101,000

—

101,000

Class B Interest (3,746 units)
—

353,000

—

—

—

—

—

—

38,000

—

—

746,000

—

746,000

Frank Entertainment Group, LLC
Senior Note (10% Cash, 5.8% PIK)
—

—

1,599,606

9,592,545

605,281

257,142

9,940,684

Class A Redeemable Preferred Units (10.5% Cash) (196,718 units)
—

—

324,995

4,566,904

—

—

4,566,904

Class B Redeemable Preferred Units (18,667 units)
—

—

—

1,660,810

—

—

1,660,810

Class C Redeemable Preferred Units (25,846 units)
—

—

—

600,000

—

—

600,000

Class A Common Units (43,077 units)
—

—

—

—

—

—

—

Class A Common Warrants
—

—

—

—

—

—

—

—

—

1,924,601

16,420,259

605,281

257,142

16,768,398

GenPref LLC
7.0% LLC Interest
30,823

6,762

—

16,400

37,585

53,985

—

30,823

6,762

—

16,400

37,585

53,985

—

MS Bakery Holdings, Inc. (F/K/A Main Street Gourmet, LLC)
Preferred Units (233 units)
—

30,000

—

367,000

30,000

—

397,000

Common B Units (3,000 units)
—

303,000

—

1,807,000

303,000

—

2,110,000

Common A Units (1,652 units)
—

167,000

—

995,000

167,000

—

1,162,000

—

500,000

—

3,169,000

500,000

—

3,669,000


43


TRIANGLE CAPITAL CORPORATION
Schedule of Investments in and Advances to Affiliates — (Continued)
Year Ended December 31, 2016
Portfolio Company
Type of Investment(1)
Amount of Realized Gain/ (Loss)
Amount of Unrealized Gain/ (Loss)
Amount of Interest or Dividends Credited to Income(2)
December 31, 2015
Value
Gross Additions(3)
Gross Reductions(4)
December 31, 2016
Value
NB Products, Inc.
Subordinated Note (12% Cash, 2% PIK)
$
—

$
—

$
3,368,353

$
20,327,140

$
2,424,050

$
—

$
22,751,190

Jr. Subordinated Note (10% PIK)
—

—

462,929

4,126,030

469,891

—

4,595,921

Jr. Subordinated Bridge Note (20% PIK)
—

—

244,654

—

1,972,727

—

1,972,727

Series A Redeemable Senior Preferred Stock (7,839 shares)
—

887,000

—

8,525,000

887,000

—

9,412,000

Common Stock (1,668,691 shares)
—

5,782,000

—

3,997,000

5,782,000

—

9,779,000

—

6,669,000

4,075,936

36,975,170

11,535,668

—

48,510,838

PCX Aerostructures, LLC
Subordinated Note (10.5% Cash)
—

(6,001,060
)
3,339,521

18,612,000

9,409,060

6,061,060

21,960,000

Series A Preferred Stock (6,066 shares)
—

(1,912,668
)
—

1,191,000

721,668

1,912,668

—

Series B Preferred Stock (411 shares)
—

(410,514
)
—

—

410,514

410,514

—

Class A Common Stock (121,922 shares)
—

(3,626
)
—

—

3,626

3,626

—

—

(8,327,868
)
3,339,521

19,803,000

10,544,868

8,387,868

21,960,000

Team Waste, LLC
Preferred Units (455,000 units)
—

—

36,000

5,500,000

3,600,000

—

9,100,000

—

—

36,000

5,500,000

3,600,000

—

9,100,000

Technology Crops, LLC
Subordinated Notes (12% Cash, 5% PIK)
—

—

1,944,252

11,252,123

585,499

—

11,837,622

Common Units (50 units)
—

(400,000
)
—

400,000

—

400,000

—

—

(400,000
)
1,944,252

11,652,123

585,499

400,000

11,837,622

TGaS Advisors, LLC
Senior Note (10% Cash, 1% PIK)
—

—

1,180,938

9,633,898

177,061

288,973

9,521,986

Preferred Units (1,685,357 units)
—

(27,712
)
33,000

1,427,000

—

157,000

1,270,000

—

(27,712
)
1,213,938

11,060,898

177,061

445,973

10,791,986

Tulcan Fund IV, L.P. (F/K/A Dyson Corporation)
Common Units (1,000,000 units)
—

—

—

416,000

—

416,000

—

—

—

—

416,000

—

416,000

—

UCS Super HoldCo LLC
Membership Units (1,000 units)
(2,000,000
)
2,000,000

—

—

2,000,000

2,000,000

—

Participation Interest
(626,437
)
700,000

—

300,000

700,000

1,000,000

—

(2,626,437
)
2,700,000

—

300,000

2,700,000

3,000,000

—

United Retirement Plan Consultants, Inc.
Series A Preferred Shares (9,400 shares)
—

505,252

—

446,000

265,000

454,000

257,000

Common Shares (100,000 shares)
—

(599,000
)
—

—

611,000

310,000

301,000

—

(93,748
)
—

446,000

876,000

764,000

558,000


44


TRIANGLE CAPITAL CORPORATION
Schedule of Investments in and Advances to Affiliates — (Continued)
Year Ended December 31, 2016
Portfolio Company
Type of Investment(1)
Amount of Realized Gain/ (Loss)
Amount of Unrealized Gain/ (Loss)
Amount of Interest or Dividends Credited to Income(2)
December 31, 2015
Value
Gross Additions(3)
Gross Reductions(4)
December 31, 2016
Value
Waste Recyclers Holdings, LLC
Class A Preferred Units (280 units)
$
—

$
—

$
—

$
—

$
—

$
—

$
—

Class B Preferred Units (11,484,867 units)
—

74,000

—

743,000

74,000

—

817,000

Common Unit Purchase Warrant (1,170,083 units)
—

—

—

—

—

—

—

Common Units (153,219 units)
—

—

—

—

—

—

—

—

74,000

—

743,000

74,000

—

817,000

Wythe Will Tzetzo, LLC
Series A Preferred Units (99,829 units)
—

(1,528,000
)
195,997

8,336,000

—

1,528,000

6,808,000

—

(1,528,000
)
195,997

8,336,000

—

1,528,000

6,808,000

Investments not held at the end of the period
319,802

—

—

—

319,802

319,802

—

Total Affiliate Investments
$
4,398,798

$
(7,124,313
)
$
19,741,317

$
177,581,965

$
52,826,553

$
68,897,745

$
161,510,773



(1)
All debt investments are income producing, unless otherwise noted. Equity and equity-linked investments are non-income producing, unless otherwise noted.
(2)
Represents the total amount of interest, fees or dividends credited to income for the portion of the year an investment was included in Control or Affiliate categories, respectively.
(3)
Gross additions include increase in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest. Gross Additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation.
(4)
Gross reductions include decreases in the total cost basis of investments resulting from principal or PIK repayments or sales. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.
(5)
Non-accrual investment

This schedule should be read in conjunction with Triangle Capital Corporation's Consolidated Financial Statements for the year ended December 31, 2016 , including the Consolidated Schedule of Investments as of December 31, 2016 .


45


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion is designed to provide a better understanding of our unaudited consolidated financial statements for the three months ended March 31, 2017 , including a brief discussion of our business, key factors that impacted our performance and a summary of our operating results. The following discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2016 . Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods.
Forward-Looking Statements
Some of the statements in this Quarterly Report constitute forward-looking statements because they relate to future events or our future performance or financial condition. Forward-looking statements may include, among other things, statements as to our future operating results, our business prospects and the prospects of our portfolio companies, the impact of the investments that we expect to make, the ability of our portfolio companies to achieve their objectives, our expected financings and investments, the adequacy of our cash resources and working capital, and the timing of cash flows, if any, from the operations of our portfolio companies. Words such as “expect,” “anticipate,” “target,” “goals,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “forecast,” “may,” “should,” “potential,” variations of such words, and similar expressions indicate a forward-looking statement, although not all forward-looking statements include these words. Readers are cautioned that the forward-looking statements contained in this Quarterly Report are only predictions, are not guarantees of future performance, and are subject to risks, events, uncertainties and assumptions that are difficult to predict. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors discussed herein and in Item 1A entitled “Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2016. Other factors that could cause actual results to differ materially include, but are not limited to, changes in the economy, risks associated with possible disruption due to terrorism in our operations or the economy generally, and future changes in laws or regulations and conditions in our operating areas. These statements are based on our current expectations, estimates, forecasts, information and projections about the industry in which we operate and the beliefs and assumptions of our management as of the date of this Quarterly Report. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless we are required to do so by law. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
Overview of Our Business
We are a Maryland corporation which has elected to be treated and operates as an internally managed business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. Our wholly-owned subsidiaries, Triangle Mezzanine Fund LLLP, or Triangle SBIC, Triangle Mezzanine Fund II LP, or Triangle SBIC II and Triangle Mezzanine Fund III LP, or Triangle SBIC III, are licensed as small business investment companies, or SBICs, by the United States Small Business Administration, or SBA. In addition, Triangle SBIC has also elected to be treated as a BDC under the 1940 Act. We, Triangle SBIC, Triangle SBIC II and Triangle SBIC III invest primarily in debt instruments, equity investments, warrants and other securities of lower middle market privately-held companies located primarily in the United States.
Our business is to provide capital to lower middle market companies located primarily in the United States. We focus on investments in companies with a history of generating revenues and positive cash flows, an established market position and a proven management team with a strong operating discipline. Our target portfolio company has annual revenues between $20.0 million and $300.0 million and annual earnings before interest, taxes, depreciation and amortization, or EBITDA, between $5.0 million and $75.0 million.
We invest primarily in subordinated debt securities secured by second lien security interests in portfolio company assets, coupled with equity interests. On a more limited basis, we also invest in senior debt securities secured by first lien security interests in portfolio company assets. Our investments generally range from $5.0 million to $50.0 million per portfolio company. In certain situations, we have partnered with other funds to provide larger financing commitments.
We generate revenues in the form of interest income, primarily from our investments in debt securities, loan origination and other fees and dividend income. Fees generated in connection with our debt investments are recognized over the life of the

46


loan using the effective interest method or, in some cases, recognized as earned. In addition, we generate revenue in the form of capital gains, if any, on warrants or other equity-related securities that we acquire from our portfolio companies. Our debt investments generally have a term of between three and seven years. In addition, our fixed debt investments typically bear interest between 10.0% and 15.0% per annum and our variable debt investments are generally LIBOR-based and typically bear interest between 8.0% and 13.0% per annum. Certain of our debt investments have a form of interest, referred to as payment-in-kind, or PIK, interest, that is not paid currently but is instead accrued and added to the loan balance and paid at the end of the term. In our negotiations with potential portfolio companies, we generally seek to minimize PIK interest. Cash interest on our debt investments is generally payable monthly; however, some of our debt investments pay cash interest on a quarterly basis. As of March 31, 2017 and December 31, 2016 , the weighted average yield on our outstanding debt investments other than non-accrual debt investments was approximately 11.5% and 11.7%, respectively. The weighted average yield on all of our outstanding investments (including equity and equity-linked investments but excluding non-accrual debt investments) was approximately 10.1% and 10.2% as of March 31, 2017 and December 31, 2016 , respectively. The weighted average yield on all of our outstanding investments (including equity and equity-linked investments and non-accrual debt investments) was approximately 10.1% and 9.7% as of March 31, 2017 and December 31, 2016 , respectively.
Triangle SBIC, Triangle SBIC II and Triangle SBIC III are eligible to issue debentures to the SBA, which pools these with debentures of other SBICs and sells them in the capital markets at favorable interest rates, in part as a result of the guarantee of payment from the SBA. Triangle SBIC, Triangle SBIC II and Triangle SBIC III invest these funds in portfolio companies. We intend to continue to operate Triangle SBIC, Triangle SBIC II and Triangle SBIC III as SBICs, subject to SBA approval, and to utilize the proceeds from the issuance of SBA-guaranteed debentures, referred to herein as SBA leverage, to enhance returns to our stockholders.
Portfolio Investment Composition
The total value of our investment portfolio was $1.1 billion as of March 31, 2017 , as compared to $1.0 billion as of December 31, 2016 . As of March 31, 2017 , we had investments in 92 portfolio companies with an aggregate cost of $1.2 billion . As of December 31, 2016 , we had investments in 88 portfolio companies with an aggregate cost of $1.1 billion . As of both March 31, 2017 and December 31, 2016 , none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.
As of March 31, 2017 and December 31, 2016 , our investment portfolio consisted of the following investments:
Cost
Percentage of
Total
Portfolio
Fair Value
Percentage of
Total
Portfolio
March 31, 2017:
Subordinated debt and 2nd lien notes
$
759,242,347

64
%
$
698,774,893

62
%
Senior debt and 1st lien notes
287,597,925

24

280,154,364

25

Equity shares
140,341,761

12

152,202,545

13

Equity warrants
3,662,717

—

2,077,000

—

$
1,190,844,750

100
%
$
1,133,208,802

100
%
December 31, 2016:
Subordinated debt and 2nd lien notes
$
753,635,857

69
%
$
690,159,367

67
%
Senior debt and 1st lien notes
198,616,110

18

191,643,157

18

Equity shares
140,524,807

13

154,216,657

15

Equity warrants
4,154,717

—

1,888,000

—

$
1,096,931,491

100
%
$
1,037,907,181

100
%

Investment Activity
During the three months ended March 31, 2017 , we made nine new investments totaling $146.6 million, debt investments in six existing portfolio companies totaling $14.3 million and equity investments in six existing portfolio companies totaling $0.6 million. We had three portfolio company loans repaid at par totaling $43.6 million and received normal principal repayments and partial loan prepayments totaling $3.9 million in the three months ended March 31, 2017 . We converted a portion of a subordinated debt investment in one portfolio company into an equity investment and recognized a realized loss on such conversion totaling $0.3 million. We wrote off equity investments in three portfolio companies and recognized realized losses on the write-offs totaling $4.1 million and wrote off debt investments in two portfolio companies and recognized realized losses on the write-offs of $13.1 million. In addition, we received proceeds related to the sales of certain equity securities

47


totaling $6.3 million and recognized net realized gains on such sales totaling $4.1 million in the three months ended March 31, 2017 .
During the three months ended March 31, 2016, we made debt investments in four existing portfolio companies totaling $9.2 million and equity investments in seven existing portfolio companies totaling $2.6 million. We had three portfolio company loans repaid at par totaling $43.9 million and received normal principal repayments and partial loan prepayments totaling $4.8 million in the three months ended March 31, 2016. We converted subordinated debt investments in one portfolio company into an equity investment and recognized a realized loss on such conversion totaling $1.6 million. In addition, we received proceeds related to the sales of certain equity securities totaling $4.9 million and recognized net realized gains on such sales totaling $2.1 million in the three months ended March 31, 2016.
Total portfolio investment activity for the three months ended March 31, 2017 and 2016 was as follows:
Three Months Ended
March 31, 2017:
Subordinated
Debt and 2 nd
Lien Notes
Senior Debt
and 1 st Lien
Notes
Equity
Shares
Equity
Warrants
Total
Fair value, beginning of period
$
690,159,367

$
191,643,157

$
154,216,657

$
1,888,000

$
1,037,907,181

New investments
64,868,421

91,059,316

5,590,356

—

161,518,093

Proceeds from sales of investments
—

—

(6,266,765
)
(33,003
)
(6,299,768
)
Loan origination fees received
(1,255,000
)
(1,383,485
)
—

—

(2,638,485
)
Principal repayments received
(46,128,905
)
(1,342,038
)
—

—

(47,470,943
)
PIK interest earned
3,041,385

336,463

—

—

3,377,848

PIK interest payments received
(2,687,416
)


—

—

(2,687,416
)
Accretion of loan discounts
28,786

54,694

—

—

83,480

Accretion of deferred loan origination revenue
1,092,544

256,865

—

—

1,349,409

Realized gain (loss)
(13,353,325
)
—

493,363

(458,997
)
(13,318,959
)
Unrealized gain (loss)
3,009,036

(470,608
)
(1,831,066
)
681,000

1,388,362

Fair value, end of period
$
698,774,893

$
280,154,364

$
152,202,545

$
2,077,000

$
1,133,208,802

Weighted average yield on debt investments at end of period(1)
11.5
%
Weighted average yield on total investments at end of period(1)
10.1
%
Weighted average yield on total investments at end of period
10.1
%
(1)
Excludes non-accrual debt investments

Three Months Ended
March 31, 2016:
Subordinated
Debt and 2 nd
Lien Notes
Senior Debt
and 1 st Lien
Notes
Equity
Shares
Equity
Warrants
Total
Fair value, beginning of period
$
699,125,083

$
132,929,264

$
141,555,369

$
3,667,000

$
977,276,716

New investments
8,027,333

1,000,000

2,134,998

650,000

11,812,331

Reclassifications
6,748,247

(6,748,247
)
—

—

—

Proceeds from sales of investments
—

—

(4,522,005
)
(112,876
)
(4,634,881
)
Loan origination fees received
(274,158
)
—

—

—

(274,158
)
Principal repayments received
(47,493,762
)
(1,492,037
)
—

—

(48,985,799
)
PIK interest earned
3,552,577

358,240

—

—

3,910,817

PIK interest payments received
(3,399,684
)
(193,293
)
—

—

(3,592,977
)
Accretion of loan discounts
46,593

48,595

—

—

95,188

Accretion of deferred loan origination revenue
1,019,361

115,640

—

—

1,135,001

Realized gain (loss)
—

(1,560,322
)
2,309,760

(163,224
)
586,214

Unrealized gain (loss)
(3,680,421
)
2,400,226

2,475,899

1,452,100

2,647,804

Fair value, end of period
$
663,671,169

$
126,858,066

$
143,954,021

$
5,493,000

$
939,976,256

Weighted average yield on debt investments at end of period(1)
12.3
%
Weighted average yield on total investments at end of period(1)
10.6
%
Weighted average yield on total investments at end of period
10.2
%
(1)
Excludes non-accrual debt investments

48


Non-Accrual Assets
Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. As of March 31, 2017 , the fair value of our non-accrual assets was $24.5 million , which comprised 2.2% of the total fair value of our portfolio, and the cost of our non-accrual assets was $50.5 million , which comprised 4.2% of the total cost of our portfolio. As of December 31, 2016, the fair value of our non-accrual assets was $15.9 million, which comprised 1.5% of the total fair value of our portfolio, and the cost of our non-accrual assets was $38.4 million, which comprised 3.5% of the total cost of our portfolio.
Our non-accrual assets as of March 31, 2017 were as follows:
DCWV Acquisition Corporation
In September 2015, we placed our debt investments in DCWV Acquisition Corporation, or DCWV, on non-accrual status effective with the monthly payment due September 30, 2015. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investments in DCWV for financial reporting purposes. As of March 31, 2017 , the cost of our debt investments in DCWV was $8.4 million and the fair value of such investments was $0.9 million .
DialogDirect, Inc.
In March 2017, we placed our debt investments in DialogDirect, Inc., or Dialog, on non-accrual status effective with the monthly payment due January 31, 2017. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investments in Dialog for financial reporting purposes. As of March 31, 2017 , the cost of our debt investments in Dialog was $16.0 million and the fair value of such investments was $9.4 million .
DPII Holdings, LLC
During the three months ended March 31, 2016, we placed our Tranche I & II subordinated debt investments in DPII Holdings, LLC, or Datapath, on PIK non-accrual status. During the three months ended June 30, 2016, we invested approximately $1.6 million in a Tranche III subordinated debt investment in order to provide liquidity to support Datapath. This Tranche III subordinated debt investment bears interest at a rate of 0% Cash and 19% PIK. In the three months ended June 30, 2016, we placed both our Tranche I & II subordinated debt investments and our Tranche III subordinated debt investment in Datapath on full non-accrual status. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investments in Datapath for financial reporting purposes. As of March 31, 2017 , the cost of our debt investments in Datapath was $5.3 million and the fair value of such investments was $2.7 million .
PowerDirect Marketing, LLC
In August 2014, we placed our debt investment in PowerDirect Marketing, LLC, or PowerDirect, on non-accrual status effective with the monthly payment due July 31, 2014. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in PowerDirect for financial reporting purposes. As of March 31, 2017 , the cost of our debt investment in PowerDirect was $4.7 million and the fair value of such investment was $0.5 million .
Women's Marketing, Inc.
During the three months ended September 30, 2016, we placed our debt investment in Women's Marketing, Inc., or Women's Marketing, on PIK non-accrual status. In December 2016, we placed our debt investment in Women's Marketing on non-accrual status effective with the monthly payment due November 30, 2016. As a result, under U.S. GAAP, we no longer recognize interest income on our debt investment in Women's Marketing for financial reporting purposes. As of March 31, 2017 , the cost of our debt investment in Women's Marketing was $16.1 million and the fair value of such investment was $11.1 million .
PIK Non-Accrual Assets
In addition to our non-accrual assets, as of March 31, 2017 , we had a debt investment in one portfolio company (our subordinated debt in Community Intervention Services, Inc.) that was on non-accrual only with respect to the PIK interest component of the loan. As of March 31, 2017 , the fair value of this debt investment was $12.4 million , or 1.1% of the total fair value of our portfolio, and the cost of this debt investment was $17.7 million , or 1.5% of the total cost of our portfolio.


49


Results of Operations
Comparison of three months ended March 31, 2017 and March 31, 2016
Investment Income
For the three months ended March 31, 2017 , total investment income was $30.2 million , a 13.3% increase from $26.7 million of total investment income for the three months ended March 31, 2016 . This increase was primarily attributable to an increase in portfolio debt investments from March 31, 2016 to March 31, 2017 , a $1.5 million increase in non-recurring dividend income and a $0.2 million increase in non-recurring fee income, partially offset by a decrease in PIK interest income due to a decrease in PIK yielding investments from March 31, 2016 to March 31, 2017 , and a $0.8 million decrease in investment income relating to non-accrual assets. Non-recurring fee income was $1.5 million for the three months ended March 31, 2017 , as compared to $1.3 million for the three months ended March 31, 2016 . Non-recurring dividend income was $0.3 million for the three months ended March 31, 2017 , as compared to ($1.2 million) for the three months ended March 31, 2016 . Our net negative non-recurring dividend income during the three months ended March 31, 2016 consisted of non-recurring dividend income of approximately $0.2 million and a negative true-up adjustment of $1.3 million related to a portfolio company distribution that was received in 2015. In 2015, we received information that indicated that the tax character of the distribution was 100% dividend income, but received updated information in 2016 indicating that only 14% of the distribution was dividend income and the remainder was a return of capital, which necessitated the adjustment.
Operating Expenses
For the three months ended March 31, 2017 , operating expenses decreased by 27.5% to $12.4 million from $17.1 million for the three months ended March 31, 2016 . Our operating expenses consist of interest and other financing fees, compensation expenses and general and administrative expenses.
For the three months ended March 31, 2017 , interest and other financing fees increased by 6.0% to $6.9 million from $6.5 million for the three months ended March 31, 2016 . The increase in interest and other financing fees was related primarily to the interest and fee amortization of $0.2 million on the incremental $25.0 million of borrowings outstanding under our SBA-guaranteed debentures and an increase in interest and other financing fees of $0.1 million related to increased borrowings under our third amended and restated senior secured credit facility, or the Credit Facility.
Compensation expenses are primarily influenced by headcount and levels of business activity. Our compensation expenses include salaries, discretionary compensation, equity-based compensation and benefits. Discretionary compensation is significantly impacted by our level of total investment income, our investment results including investment realizations, prevailing labor markets and the external environment. As a result of these and other factors, our compensation expenses can fluctuate materially from period to period. Accordingly, the amount of compensation expenses recognized in any particular period may not be indicative of compensation expenses in a future period.
For the three months ended March 31, 2017 , compensation expenses decreased by 55.0% to $4.3 million from $9.5 million for the three months ended March 31, 2016 . This decrease in compensation expenses was primarily related to one-time expenses associated with the retirement of our former Chief Executive Officer, Garland S. Tucker, III, from his officer positions in February 2016. Our Board of Directors, or the Board, awarded Mr. Tucker a $2.5 million cash bonus and accelerated the v esting of his outstanding shares of restricted stock, including 47,000 shares of restricted stock awarded to him in February 2016 based on his performance during 2015, and certain other compensation in connection with his retirement and in recognition of his long service. We recognized $5.5 million in one-time compensation expenses for the three months ended March 31, 2016 associated with Mr. Tucker's retirement.
For the three months ended March 31, 2017 , general and administrative expenses increased by 11.2% to $1.2 million from $1.1 million for the three months ended March 31, 2016 .
In addition, our efficiency ratio (defined as the sum of compensation expenses and general and administrative expenses as a percentage of total investment income) decreased to 18.1% for the three months ended March 31, 2017 from 39.5% for the three months ended March 31, 2016 .
Net Investment Income
As a result of the $3.5 million increase in total investment income and the $4.7 million decrease in operating expenses, net investment income increased by 85.7% to $17.8 million for the three months ended March 31, 2017 as compared to $9.6 million for the three months ended March 31, 2016 .

50


Net Increase/Decrease in Net Assets Resulting from Operations
In the three months ended March 31, 2017 , we recognized realized losses totaling $13.3 million , which consisted primarily of a net loss on the write-off of one control investment totaling $4.5 million and net losses on the restructuring/write-off of three non-control investments totaling $13.0 million , partially offset by a net gain on the sale of one non-control/non-affiliate investment totaling $0.6 million and net gains on the sales of three affiliate investments totaling $3.5 million . In addition, during the three months ended March 31, 2017 , we recorded net unrealized appreciation totaling $2.7 million , consisting of net unrealized depreciation on our current portfolio of $9.6 million and net unrealized appreciation reclassification adjustments of $12.3 million related to the realized gains and losses noted above.
In the three months ended March 31, 2016, we recognized realized gains totaling $0.6 million, which consisted primarily of net gains on the sales/repayments of six non-control/non-affiliate investments totaling $2.1 million, partially offset by a loss on the restructuring of one non-control/non-affiliate investment totaling $1.5 million. In addition, during the three months ended March 31, 2016, we recorded net unrealized appreciation totaling $2.2 million, consisting of net unrealized appreciation on our current portfolio of $2.6 million and net unrealized depreciation reclassification adjustments of $0.4 million related to the realized gains and losses noted above.
As a result of these events, our net increase in net assets resulting from operations was $7.2 million for the three months ended March 31, 2017 , as compared to a net increase in net assets resulting from operations of $12.4 million for the three months ended March 31, 2016 .
Liquidity and Capital Resources
We believe that our current cash and cash equivalents on hand, our available borrowing capacity under the Credit Facility and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months.
In the future, depending on the valuation of Triangle SBIC’s assets, Triangle SBIC II's assets and Triangle SBIC III’s assets pursuant to SBA guidelines, Triangle SBIC, Triangle SBIC II and Triangle SBIC III may be limited by provisions of the Small Business Investment Act of 1958, or the Small Business Investment Act, and SBA regulations governing SBICs, from making certain distributions to Triangle Capital Corporation that may be necessary to enable Triangle Capital Corporation to make the minimum required distributions to its stockholders and qualify as a regulated investment company, or RIC.
Cash Flows
For the three months ended March 31, 2017 , we experienced a net decrease in cash and cash equivalents in the amount of $16.5 million . During that period, our operating activities used $89.3 million in cash, consisting primarily of new portfolio investments of $161.5 million , partially offset by repayments received from portfolio companies and proceeds from sales of portfolio investments of approximately $53.8 million . In addition, our financing activities increased cash by $72.8 million , consisting primarily of proceeds from our public stock offering of $132.2 million , partially offset by cash dividends paid in the amount of $20.7 million and net repayments under the Credit Facility of $36.1 million. As of March 31, 2017 , we had $90.6 million of cash and cash equivalents on hand.
For the three months ended March 31, 2016, we experienced a net increase in cash and cash equivalents in the amount of $11.5 million. During that period, our operating activities provided $44.1 million in cash, consisting primarily of repayments received from portfolio companies and proceeds from sales of portfolio investments of approximately $53.6 million, partially offset by new portfolio investments of $11.8 million. In addition, our financing activities decreased cash by $32.5 million, primarily due to cash dividends paid in the amount of $17.3 million, net repayments under the Credit Facility of $4.0 million and the repayment of the SBA-guaranteed LMI debenture of $7.8 million. As of March 31, 2016, we had $64.2 million of cash and cash equivalents on hand.
Financing Transactions
Due to Triangle SBIC’s, Triangle SBIC II's and Triangle SBIC III’s status as licensed SBICs, Triangle SBIC, Triangle SBIC II and Triangle SBIC III have the ability to issue debentures guaranteed by the SBA at favorable interest rates. Under the Small Business Investment Act and the SBA rules applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding at any time debentures guaranteed by the SBA up to two times (and in certain cases, up to three times) the amount of its regulatory capital, which generally is the amount raised from private investors. The maximum statutory limit on the dollar amount of outstanding debentures guaranteed by the SBA issued by a single SBIC is currently $150.0 million and by a group of SBICs under common control is $350.0 million. Debentures guaranteed by the SBA have a maturity of ten years, with interest payable semi-annually. The principal amount of the debentures is not required to be paid before maturity but may

51


be prepaid at any time, without penalty. As a result of its guarantee of our SBA-guaranteed debentures, the SBA has fixed-dollar claims on the assets of Triangle SBIC, Triangle SBIC II and Triangle SBIC III that are superior to the claims of our security holders.
As of March 31, 2017 , Triangle SBIC had issued the maximum $150.0 million of SBA-guaranteed debentures and Triangle SBIC II had issued $100.0 million of SBA-guaranteed debentures, leaving borrowing capacity of a maximum of $100.0 million of SBA-guaranteed debentures for Triangle SBIC III. In addition to the one-time 1.0% fee on the total commitment from the SBA, we also pay a one-time 2.425% fee on the amount of each debenture issued. These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements using the effective interest method. The weighted average interest rate for all SBA-guaranteed debentures as of March 31, 2017 was 3.90%. As of both March 31, 2017 and December 31, 2016 , all SBA-guaranteed debentures were pooled.
In May 2015, we entered the Credit Facility, which has a current commitment of $300.0 million supported by 13 financial institutions. The revolving period of the Credit Facility ends May 3, 2019 followed by a one-year amortization period with a final maturity date of May 3, 2020. We have the ability to borrow in both United States dollars as well as foreign currencies under the Credit Facility.
The Credit Facility has an accordion feature that allows for an increase in the total borrowing size up to $350.0 million, subject to certain conditions and the satisfaction of specified financial covenants. The Credit Facility, which is structured to operate like a revolving credit facility, is secured primarily by our assets, excluding the assets of our wholly-owned SBIC subsidiaries.
Borrowings under the Credit Facility bear interest, subject to our election, on a per annum basis equal to (i) the applicable base rate plus 1.75% (or 1.50% if we receive an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.75% (or 2.50% if we receive an investment grade credit rating) or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75% (or 2.50% if we receive an investment grade credit rating). The applicable base rate is equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR plus 2.0%. The applicable LIBOR rate depends on the term of the draw under the Credit Facility. We pay a commitment fee of 1.00% per annum on undrawn amounts if the used portion of the Credit Facility is less than or equal to 25.0% of total commitments, or 0.375% per annum on undrawn amounts if the used portion of the Credit Facility is greater than 25.0% of total commitments.
As of March 31, 2017 , we had United States dollar borrowings of $69.6 million outstanding under the Credit Facility with an interest rate of 3.54% and non-United States dollar borrowings denominated in Canadian dollars of $28.6 million ($21.5 million in United States dollars) outstanding under the Credit Facility with a weighted average interest rate of 3.70%. The borrowings denominated in Canadian dollars are translated into United States dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign exchange rates on the Credit Facility borrowings is included in unrealized appreciation (depreciation) on foreign currency borrowings in our Unaudited Consolidated Statements of Operations. The borrowings denominated in Canadian dollars may be positively or negatively affected by movements in the rate of exchange between the United States dollar and the Canadian dollar. This movement is beyond our control and cannot be predicted.
The Credit Facility contains certain affirmative and negative covenants, including but not limited to (i) maintaining a minimum interest coverage ratio, (ii) maintaining a minimum consolidated tangible net worth, (iii) maintaining a minimum asset coverage ratio and (iv) maintaining our status as a RIC and as a BDC. The Credit Facility also contains customary events of default with customary cure and notice provisions, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, change of control, and material adverse effect. The Credit Facility also permits Branch Banking and Trust Company, the administrative agent, to select an independent third-party valuation firm to determine valuations of certain portfolio investments for purposes of borrowing base provisions. In connection with the Credit Facility, we also entered into new collateral documents. As of March 31, 2017 , we were in compliance with all covenants of the Credit Facility.
In October 2012, we issued $70.0 million of unsecured notes due December 2022, or the December 2022 Notes, and in November 2012, we issued $10.5 million of December 2022 Notes pursuant to the exercise of an over-allotment option. The December 2022 Notes mature on December 15, 2022, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 15, 2015. The December 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning December 15, 2012.
In February 2015, we issued $86.3 million of unsecured notes due March 2022, or the March 2022 Notes. The March 2022 Notes mature on March 15, 2022 and may be redeemed in whole or in part at any time or from time to time at our option on or after March 15, 2018. The March 2022 Notes bear interest at a rate of 6.375% per year payable quarterly on March 15,

52


June 15, September 15 and December 15 of each year, beginning March 15, 2015. The net proceeds from the sale of the March 2022 Notes, after underwriting discounts and offering expenses, were $83.4 million.
The indenture and related supplements thereto relating to the December 2022 Notes and the March 2022 Notes contain certain covenants, including but not limited to (i) a requirement that we comply with the asset coverage requirement of the 1940 Act or any successor provisions, after giving effect to any exemptive relief granted to us by the SEC, (ii) a requirement that we will not declare any cash dividend, or declare any other cash distribution, upon a class of our capital stock, or purchase any such capital stock, unless, in every such case, at the time of the declaration of any such dividend or distribution, or at the time of any such purchase, we have an asset coverage (as defined in the 1940 Act) of at least 200% after deducting the amount of such dividend, distribution or purchase price, as the case may be, giving effect to any exemptive relief granted to us by the SEC, and (iii) a requirement that we provide financial information to the holders of the notes and the trustee under the indenture if we should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, or the Exchange Act. As of March 31, 2017 and December 31, 2016 , we were in compliance with all covenants of the December 2022 Notes and the March 2022 Notes.
Distributions to Stockholders
We have elected to be treated as a RIC under the Internal Revenue Code of 1986, as amended, or the Code, and intend to make the required distributions to our stockholders as specified therein. In order to maintain our qualification as a RIC and to obtain RIC tax benefits, we must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then we are generally required to pay income taxes only on the portion of our taxable income and gains we do not distribute (actually or constructively) and certain built-in gains. We have historically met our minimum distribution requirements and continually monitor our distribution requirements with the goal of ensuring compliance with the Code. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and our ability to make distributions will be limited by the asset coverage requirement and related provisions under the 1940 Act and contained in the indenture and related supplements governing the December 2022 Notes and the March 2022 Notes.
The minimum distribution requirements applicable to RICs require us to distribute to our stockholders each year at least 90% of our investment company taxable income, or ICTI, as defined by the Code. Depending on the level of ICTI earned in a tax year, we may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% U.S. federal excise tax on such excess. Any such carryover ICTI must be distributed before the end of the next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. We may be required to recognize ICTI in certain circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), we must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in ICTI other amounts that we have not yet received in cash, such as (i) PIK interest income and (ii) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included in our ICTI for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
Recent Developments
In April 2017, we invested $5.0 million in a debt security of Constellis Holdings. Under the terms of the investment, the debt security bears interest at a rate of LIBOR plus 9.0% per annum.
In May 2017, we amended our Credit Facility to, among other things, increase current commitments from $300 million to $435 million and extend the maturity by two years, such amended Credit Facility referred to herein as the Amended Credit Facility. The current commitments of $435 million are supported by a diversified group of thirteen lenders, and the Amended Credit Facility has an accordion feature that allows for an increase in commitments to up to $550 million from new and existing lenders on the same terms and conditions as the existing commitments. The revolving period of the Amended Credit Facility ends April 30, 2021 followed by a one-year amortization period with a final maturity date of April 30, 2022.



53


Critical Accounting Policies and Use of Estimates
The preparation of our unaudited financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods covered by such financial statements. We have identified investment valuation and revenue recognition as our most critical accounting estimates. On an on-going basis, we evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.
Investment Valuation
The most significant estimate inherent in the preparation of our financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We have established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring (quarterly) basis in accordance with the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820. Under ASC Topic 820, a financial instrument is categorized within the ASC Topic 820 valuation hierarchy based upon the lowest level of input to the valuation process that is significant to the fair value measurement. The three levels of valuation inputs established by ASC Topic 820 are as follows:
Level 1 Inputs – include quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Inputs – include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 Inputs – include inputs that are unobservable and significant to the fair value measurement.
Our investment portfolio is comprised of debt and equity instruments of privately held companies for which quoted prices or other inputs falling within the categories of Level 1 and Level 2 are generally not available. Therefore, we determine the fair value of our investments in good faith using Level 3 inputs, pursuant to a valuation policy and process that is established by our management with the assistance of certain third-party advisors and subsequently approved by the Board. There is no single standard for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment. The recorded fair values of our investments may differ significantly from fair values that would have been used had an active market for the securities existed. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.
Our valuation process is led by our executive officers. The valuation process begins with a quarterly review of each investment in our investment portfolio by our executive officers and our investment committee. Valuations of each portfolio security are then prepared by our investment professionals, who have direct responsibility for the origination, management and monitoring of each investment. Under our valuation policy, each investment valuation is subject to (i) a review by the lead investment officer responsible for the portfolio company investment and (ii) a peer review by a second investment officer or executive officer. Generally, any investment that is valued below cost is subjected to review by one of our executive officers. After the peer review is complete, we engage two independent valuation firms, including Duff & Phelps, LLC, collectively, the "Valuation Firms," to provide third-party reviews of certain investments, as described further below. Finally, the Board has the responsibility for reviewing and approving, in good faith, the fair value of our investments in accordance with the 1940 Act.
The Valuation Firms provide third-party valuation consulting services to us which consist of certain limited procedures that we identified and requested the Valuation Firms to perform, which we refer to herein as the Procedures. The Procedures are performed with respect to each portfolio company at least once in every calendar year and for new portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In addition, the Procedures are generally performed with respect to a portfolio company when there has been a significant change in the fair value of the investment. In certain instances, we may determine that it is not cost-effective, and as a result is not in our stockholders’ best interest, to request the Valuation Firms to perform the Procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of the investment in the portfolio company is determined to be insignificant relative to the total investment portfolio.

54


The total number of investments and the percentage of our investment portfolio on which the Procedures were performed are summarized below by period:
For the quarter ended:
Total
companies
Percent of total
investments at
fair value (1)
March 31, 2016
18
27%
June 30, 2016
19
30%
September 30, 2016
19
33%
December 31, 2016
20
33%
March 31, 2017
18
30%
(1)
Exclusive of the fair value of new investments made during the quarter.
Upon completion of the Procedures, the Valuation Firms concluded that, with respect to each investment reviewed by each Valuation Firm, the fair value of those investments subjected to the Procedures appeared reasonable. The Board is ultimately responsible for determining the fair value of our investments in good faith.
Investment Valuation Inputs
Under ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between a willing buyer and a willing seller at the measurement date. For our portfolio securities, fair value is generally the amount that we might reasonably expect to receive upon the current sale of the security. Under ASC Topic 820, the fair value measurement assumes that the sale occurs in the principal market for the security, or in the absence of a principal market, in the most advantageous market for the security. Under ASC Topic 820, if no market for the security exists or if we do not have access to the principal market, the security should be valued based on the sale occurring in a hypothetical market. The securities in which we invest are generally only purchased and sold in merger and acquisition transactions, in which case the entire portfolio company is sold to a third-party purchaser. As a result, unless we have the ability to control such a transaction, the assumed principal market for our securities is a hypothetical secondary market. The Level 3 inputs to our valuation process reflect management’s best estimate of the assumptions that would be used by market participants in pricing the investment in a transaction in a hypothetical secondary market.
Enterprise Value Waterfall Approach
In valuing equity securities (including warrants), we estimate fair value using an “Enterprise Value Waterfall” valuation model. We estimate the enterprise value of a portfolio company and then allocate the enterprise value to the portfolio company’s securities in order of their relative liquidation preference. In addition, the model assumes that any outstanding debt or other securities that are senior to our equity securities are required to be repaid at par. Additionally, we estimate the fair value of a limited number of our debt securities using the Enterprise Value Waterfall approach in cases where we do not expect to receive full repayment.
To estimate the enterprise value of the portfolio company, we primarily use a valuation model based on a transaction multiple, which generally is the original transaction multiple, and measures of the portfolio company’s financial performance. In addition, we consider other factors, including but not limited to (i) offers from third parties to purchase the portfolio company, (ii) the implied value of recent investments in the equity securities of the portfolio company, (iii) publicly available information regarding recent sales of private companies in comparable transactions and (iv) when management believes there are comparable companies that are publicly traded, we perform a review of these publicly traded companies and the market multiple of their equity securities. For certain non-performing assets, we may utilize the liquidation or collateral value of the portfolio company's assets in our estimation of enterprise value.
The significant Level 3 inputs to the Enterprise Value Waterfall model are (i) an appropriate transaction multiple and (ii) a measure of the portfolio company’s financial performance, which generally is either earnings before interest, taxes, depreciation and amortization, as adjusted, or Adjusted EBITDA, or revenues. Such inputs can be based on historical operating results, projections of future operating results or a combination thereof. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for certain non-recurring items. In determining the operating results input, we utilize the most recent portfolio company financial statements and forecasts available as of the valuation date. Management also consults with the portfolio company’s senior management to obtain updates on the portfolio company’s performance, including information such as industry trends, new product development, loss of customers and other operational issues. Additionally, we consider some or all of the following factors:
•
financial standing of the issuer of the security;

55


•
comparison of the business and financial plan of the issuer with actual results;
•
the size of the security held;
•
pending reorganization activity affecting the issuer, such as merger or debt restructuring;
•
ability of the issuer to obtain needed financing;
•
changes in the economy affecting the issuer;
•
financial statements and reports from portfolio company senior management and ownership;
•
the type of security, the security’s cost at the date of purchase and any contractual restrictions on the disposition of the security;
•
information as to any transactions or offers with respect to the security and/or sales to third parties of similar securities;
•
the issuer’s ability to make payments and the type of collateral;
•
the current and forecasted earnings of the issuer;
•
statistical ratios compared to lending standards and to other similar securities;
•
pending public offering of common stock by the issuer of the security;
•
special reports prepared by analysts; and
•
any other factors we deem pertinent with respect to a particular investment.
Fair value measurements using the Enterprise Value Waterfall model can be sensitive to changes in one or more of the inputs. Assuming all other inputs to the Enterprise Value Waterfall model remain constant, any increase (decrease) in either the transaction multiple, Adjusted EBITDA or revenues for a particular equity security would result in a higher (lower) fair value for that security.
Income Approach
In valuing debt securities, we utilize an “Income Approach” model that considers factors including, but not limited to, (i) the stated yield on the debt security, (ii) the portfolio company’s current Adjusted EBITDA as compared to the portfolio company’s historical or projected Adjusted EBITDA as of the date the investment was made and the portfolio company’s anticipated Adjusted EBITDA for the next twelve months of operations, (iii) the portfolio company’s current Leverage Ratio (defined as the portfolio company’s total indebtedness divided by Adjusted EBITDA) as compared to its Leverage Ratio as of the date the investment was made, (iv) publicly available information regarding current pricing and credit metrics for similar proposed and executed investment transactions of private companies and (v) when management believes a relevant comparison exists, current pricing and credit metrics for similar proposed and executed investment transactions of publicly traded debt. In addition, we use a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. This risk rating system covers both qualitative and quantitative aspects of the business and the securities held.
We consider the factors above, particularly any significant changes in the portfolio company’s results of operations and leverage, and develop an expectation of the yield that a hypothetical market participant would require when purchasing the debt investment, which we refer to herein as the Required Rate of Return. The Required Rate of Return, along with the Leverage Ratio and Adjusted EBITDA, are the significant Level 3 inputs to the Income Approach model. For investments where the Leverage Ratio and Adjusted EBITDA have not fluctuated significantly from the date the investment was made or have not fluctuated significantly from management’s expectations as of the date the investment was made, and where there have been no significant fluctuations in the market pricing for such investments, we may conclude that the Required Rate of Return is equal to the stated rate on the investment and therefore, the debt security is appropriately priced. In instances where we determine that the Required Rate of Return is different from the stated rate on the investment, we discount the contractual cash flows on the debt instrument using the Required Rate of Return in order to estimate the fair value of the debt security.
Fair value measurements using the Income Approach model can be sensitive to changes in one or more of the inputs. Assuming all other inputs to the Income Approach model remain constant, any increase (decrease) in the Required Rate of Return or Leverage Ratio inputs for a particular debt security would result in a lower (higher) fair value for that security. Assuming all other inputs to the Income Approach model remain constant, any increase (decrease) in the Adjusted EBITDA input for a particular debt security would result in a higher (lower) fair value for that security.

56


The fair value of our royalty rights are calculated based on specific provisions contained in the pertinent operating or royalty agreements. The determination of the fair value of such royalty rights is not a significant component of our valuation process.
Revenue Recognition
Interest and Dividend Income
Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The cessation of recognition of such interest will negatively impact the reported fair value of the investment. We write off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. Dividend income is recorded on the ex-dividend date.
We may have to include in our ICTI interest income, including OID income, from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements to maintain our RIC status, even though we will not have received and may not ever receive any corresponding cash amount. Additionally, any loss recognized by us for U.S. federal income tax purposes on previously accrued interest income will be treated as a capital loss.
Fee Income
Origination, facility, commitment, consent and other advance fees received in connection with the origination of a loan, or Loan Origination Fees, are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized Loan Origination Fees are recorded as investment income. In the general course of our business, we receive certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and loan waiver and amendment fees, and are recorded as investment income when earned.
Payment-in-Kind (PIK) Interest Income
We currently hold, and we expect to hold in the future, some loans in our portfolio that contain PIK interest provisions. The PIK interest, computed at the contractual rate specified in each loan agreement, is periodically added to the principal balance of the loan, rather than being paid to us in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.
PIK interest, which is a non-cash source of income until it is collected, is included in our taxable income and therefore affects the amount we are required to distribute to our stockholders to maintain our qualification as a RIC for U.S. federal income tax purposes, even though we have not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. We write off any previously accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.
We may have to include in our ICTI, PIK interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. As a result, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount.

57


Off-Balance Sheet Arrangements
In the normal course of business, we are party to financial instruments with off-balance sheet risk, consisting primarily of unused commitments to extend financing to our portfolio companies. Since commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The balances of unused commitments to extend financing as of March 31, 2017 and December 31, 2016 were as follows:
Portfolio Company
Investment Type
March 31, 2017
December 31, 2016
Avantor Performance Materials Holdings, LLC
Delayed Draw Term Loan
$
631,579

$
—

Cafe Enterprises, Inc.
Second Lien Debt
500,000

—

DPII Holdings LLC
Guaranty
576,925

576,925

DLC Acquisition, LLC
Revolver
1,800,000

3,000,000

Eckler's Holdings, Inc.
Equity Investment
1,000,000

—

Halo Branded Solutions, Inc.
Delayed Draw Term Loan
3,250,000

3,250,000

HKW Capital Partners IV, L.P.
Private Equity
393,144

530,032

Lakeview Health Acquisition Company
Revolver
1,387,367

1,387,367

Native Maine Operations
Revolver
1,000,000

—

Nautic Partners VII, LP
Private Equity
645,739

642,172

Nomacorc, LLC
Equity Investment
846,725

849,362

Orchid Underwriters Agency, LLC
Delayed Draw Term Loan
800,000

8,400,000

Orchid Underwriters Agency, LLC
Revolver
—

5,000,000

SCA Pharmaceuticals, LLC
Delayed Draw Term Loan
12,000,000

12,000,000

SCUF Gaming, Inc.
Revolver
2,000,000

3,500,000

Smile Brands, Inc.
Equity Investment
1,000,000

1,000,000

Smile Brands, Inc.
Delayed Draw Term Loan
18,826,531

18,826,531

SPC Partners V, LP
Private Equity
522,881

522,881

SPC Partners VI, LP
Private Equity
3,000,000

3,000,000

TCFI Merlin LLC ("Merlin") and TCFI CSG LLC ("CSG")
Revolver
687,790

—

Team Waste, LLC
Equity Investment
900,000

900,000

TGaS Advisors, LLC
Revolver
2,000,000

2,000,000

YummyEarth Inc.
Delayed Draw Term Loan
—

1,500,000

Total unused commitments to extend financing
$
53,768,681

$
66,885,270



58


Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are subject to market risk. Market risk includes risks that arise from changes in interest rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. The prices of securities held by us may decline in response to certain events, including those directly involving the companies we invest in; conditions affecting the general economy; overall market changes; legislative reform; local, regional, national or global political, social or economic instability; and interest rate fluctuations.
In addition, we are subject to interest rate risk. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. Our net investment income is affected by fluctuations in various interest rates, including LIBOR, Canadian Dealer Offered Rate and prime rates. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks. We regularly measure exposure to interest rate risk and determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. As of March 31, 2017 , we were not a party to any hedging arrangements.
As of March 31, 2017 , 59.6% , or $624.4 million (at cost), of our debt portfolio investments bore interest at fixed rates and 40.4% , or $422.4 million (at cost), of our debt portfolio investments bore interest at variable rates, which generally are LIBOR-based, and many of which are subject to certain floors. A hypothetical 200 basis point increase or decrease in the interest rates on our variable-rate debt investments could increase or decrease, as applicable, our investment income by a maximum of $8.4 million on an annual basis. All of our SBA-guaranteed debentures, our December 2022 Notes and our March 2022 Notes bear interest at fixed rates. Our Credit Facility bears interest, subject to our election, on a per annum basis equal to (i) the applicable base rate plus 1.75% (or 1.50% if we receive an investment grade credit rating), (ii) the applicable LIBOR rate plus 2.75% (or 2.50% if we receive an investment grade credit rating), or (iii) for borrowings denominated in Canadian dollars, the applicable Canadian Dealer Offered Rate plus 2.75% (or 2.50% if we receive an investment grade credit rating). The applicable base rate is equal to the greater of (i) the prime rate, (ii) the federal funds rate plus 0.5% or (iii) the adjusted one-month LIBOR plus 2.0%. The applicable LIBOR rate depends on the term of the draw under the Credit Facility. We pay a commitment fee of 1.00% per annum on undrawn amounts if the used portion of the facility is less than or equal to 25.0% of total commitments, or 0.375% per annum on undrawn amounts if the used portion of the facility is greater than 25.0% of total commitments.
Because we currently borrow, and plan to borrow in the future, money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest the funds borrowed. Accordingly, 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. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income if there is not a corresponding increase in interest income generated by our investment portfolio.

We may also have exposure to foreign currencies (currently the Canadian dollar) related to certain investments. Such investments are translated into United States dollars based on the spot rate at each balance sheet date, exposing us to movements in the exchange rate. In order to reduce our exposure to fluctuations in exchange rates, we generally borrow in Canadian dollars under our Credit Facility to finance such investments. As of March 31, 2017 , we had non-United States dollar borrowings denominated in Canadian dollars of $28.6 million ($21.5 million United States dollars) outstanding under the Credit Facility with a weighted average interest rate of 3.70%.

Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. It should be noted that any system of controls,

59


however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the first quarter of 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
Neither Triangle Capital Corporation nor any of its subsidiaries is currently a party to any material pending legal proceedings.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 , filed with the SEC on February 22, 2017 , which could materially affect our business, financial condition or operating results. There have been no material changes during the three months ended March 31, 2017 to the risk factors discussed in our Annual Report on Form 10-K. The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Sales of Unregistered Securities
During the three months ended March 31, 2017 , we issued 40,559 shares of our common stock under our dividend reinvestment plan. These issuances were not subject to the registration requirements of the Securities Act of 1933, as amended. The aggregate value for the shares of common stock issued during the three months ended March 31, 2017 under the dividend reinvestment plan was approximately $0.7 million.
Issuer Purchases of Equity Securities
During the three months ended March 31, 2017 , 107,454 shares of our common stock were delivered to us at an average price per share of $19.67 in satisfaction of tax withholding obligations of holders of restricted shares issued under the Triangle Capital Corporation Amended and Restated 2007 Equity Incentive Plan that vested during the period. These shares are reflected in the following table:
Period
Total Number of Shares Purchased
Average Price Paid Per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number
of Shares that
May Yet Be
Purchased Under the Plans or Programs
January 1 through January 31, 2017
—

—

—

—

February 1 through February 28, 2017
107,454

$
19.67

—

—

March 1 through March 31, 2017
—

—

—

—


Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.


60


Item 6. Exhibits.
Number
Exhibit
3.1
Articles of Amendment and Restatement of the Registrant (Filed as Exhibit (a)(3) to the Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-138418) filed with the Securities and Exchange Commission on December 29, 2006 and incorporated herein by reference).
3.2
Fifth Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 9, 2015 and incorporated herein by reference).
4.1
Form of Common Stock Certificate (Filed as Exhibit (d) to the Registrant’s Post-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-138418) filed with the Securities and Exchange Commission on February 15, 2007 and incorporated herein by reference).
4.2
Dividend Reinvestment Plan of the Registrant (Filed as Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission on March 12, 2008 and incorporated herein by reference).
4.3
Agreement to Furnish Certain Instruments (Filed as Exhibit 4.19 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on February 25, 2009 and incorporated herein by reference).
4.4
Indenture, dated March 2, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit (d)(5) to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 (File No. 33-175160) filed with the Securities and Exchange Commission on March 2, 2012 and incorporated herein by reference).
4.5
Second Supplemental Indenture, dated October 19, 2012 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2012 and incorporated herein by reference).
4.6
Form of 6.375% Note due 2022 (Included as part of Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2012 and incorporated herein by reference).
4.7
Third Supplemental Indenture, dated February 6, 2015 between the Registrant and the Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit (d)(12) to the Registrant's Post-Effective Amendment No. 1 on Form N-2 (File No. 333-199102) filed with the Securities and Exchange Commission on February 6, 2015 and incorporated herein by reference).
4.8
Form of 6.375% Note due 2022 (Included as part of Exhibit (d)(12) to the Registrant's Post-Effective Amendment No. 1 on Form N-2 (File No. 333-199102) filed with the Securities and Exchange Commission on February 6, 2015 and incorporated herein by reference).
11
Statement re computation of per share earnings (Included in the consolidated financial statements filed with this report).*
31.1
Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2
Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
Chief Executive Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2
Chief Financial Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
*
Filed Herewith.
**
Furnished Herewith.

61


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TRIANGLE CAPITAL CORPORATION
Date:
May 3, 2017
/s/    E. Ashton Poole
E. Ashton Poole
President and Chief Executive Officer
(Principal Executive Officer)
Date:
May 3, 2017
/s/    Steven C. Lilly
Steven C. Lilly
Chief Financial Officer and Secretary
(Principal Financial Officer)
Date:
May 3, 2017
/s/    C. Robert Knox, Jr.
C. Robert Knox, Jr.
Principal Accounting Officer


62


EXHIBIT INDEX

Number
Exhibit
11
Statement re computation of per share earnings (Included in the consolidated financial statements filed with this report).*
31.1
Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2
Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
Chief Executive Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2
Chief Financial Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
*
Filed Herewith.
**
Furnished Herewith.

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