CCAP 10-Q Quarter ended March 31, 2019

☒

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

☐

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

Delaware

47-3162282

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

11100 Santa Monica Blvd., Suite 2000, Los Angeles, CA

90025

(Address of Principal Executive Offices)

(Zip Code)

Large accelerated filer

☐

Accelerated filer

☐

Non-Accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

NA

NA

NA

INDEX

PAGE
NO.

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Statements of Assets and Liabilities as of March 31, 2019 (Unaudited) and December 31, 2018

2

Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018 (Unaudited)

3

Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2019 and 2018 (Unaudited)

4

Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018 (Unaudited)

5

Consolidated Schedule of Investments as of March 31, 2019 (Unaudited)

6

Consolidated Schedule of Investments as of December 31, 2018

14

Notes to Consolidated Financial Statements (Unaudited)

22

Item 2.

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

47

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

66

Item 4.

Controls and Procedures

67

PART II.

OTHER INFORMATION

67

Item 1.

Legal Proceedings

67

Item 1A.

Risk Factors

67

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

68

Item 3.

Defaults Upon Senior Securities

68

Item 4.

[Reserved]

68

Item 5.

Other Information

68

Item 6.

Exhibits

68

•

Potential fluctuation in quarterly operating results

•

Potential impact of economic recessions or downturns

•

Adverse developments in the credit markets

•

Operation in a highly competitive market for investment opportunities

•

Regulations governing our operation as a business development company

•

Financing investments with borrowed money

•

Lack of liquidity in investments

•

Defaults by portfolio companies

•

Uncertainty as to the value of certain portfolio investments

•

Potential resignation of the Advisor and or the Administrator

•

Changes in interest rates may affect our cost of capital and net investment income

•

Potential adverse effects of price declines and illiquidity in the corporate debt markets

•

Risks associated with original issue discount (“OID”) and payment-in-kind (“PIK”) interest income

•

Risks regarding distributions

•

Potential adverse effects of new or modified laws and regulations

As of

March 31, 2019

(Unaudited)

As of

December 31,

2018

Assets

Investments, non-controlled and non-affiliated, at fair value (cost of $507,304,573

and  $500,680,681, respectively)

$

502,994,605

$

493,341,724

Investments, controlled and affiliated, at fair value (cost of $17,500,000 and

$0, respectively)

17,259,320

—

Cash and cash equivalents

11,362,471

9,809,812

Cash denominated in foreign currency (cost of $648,201 and $580,874, respectively)

631,084

559,011

Receivable for investments sold

765,119

37,427

Interest receivable

1,974,640

1,334,535

Unrealized appreciation on foreign currency forward contracts

108,574

17,406

Prepaid expenses and other assets

126,404

20,041

Total assets

$

535,222,217

$

505,119,956

Liabilities

Debt (net of deferred financing costs of $1,518,357 and $1,695,193, respectively)

$

233,506,108

$

235,707,992

Unrealized depreciation on foreign currency forward contracts

118,542

—

Payable for investments purchased

2,006,855

299,570

Distributions payable

6,028,462

5,343,316

Management fees payable - affiliate

987,274

963,009

Due to Advisor - affiliate

101,203

136,235

Due to Administrator - affiliate

301,305

178,461

Professional fees payable

293,643

254,929

Directors’ fees payable

134,563

62,063

Interest and other debt financing costs payable

2,025,389

1,849,983

Deferred tax liability

753,992

304,928

Accrued expenses and other liabilities

316,480

440,630

Total liabilities

$

246,573,816

$

245,541,116

Commitments and Contingencies (Note 8)

Net Assets

Preferred stock, par value $0.001 per share (10,000 shares authorized, zero outstanding,

respectively)

$

—

$

—

Common stock, par value $0.001 per share (200,000,000 shares authorized, 14,703,566

and 13,358,289 shares issued and outstanding, respectively)

14,704

13,358

Paid-in capital in excess of par value

292,259,610

266,023,849

Distributable earnings (accumulated loss)

(3,625,913

)

(6,458,367

)

Total Net Assets

$

288,648,401

$

259,578,840

Total Liabilities and Net Assets

$

535,222,217

$

505,119,956

Net asset value per share

$

19.63

$

19.43

For the three

months ended

March 31, 2019

For the three

months ended

March 31, 2018

Investment Income:

From non-controlled and non-affiliated investments:

Interest income

$

10,623,524

$

6,639,590

Paid-in-kind interest

165,250

39,084

Dividend income

423,403

—

Other income

243,579

132,307

From controlled and affiliated investments:

Interest income

—

—

Dividend income

—

—

Other income

—

—

Total investment income

11,455,756

6,810,981

Expenses:

Interest and other debt financing costs

2,809,476

1,651,960

Management fees

1,890,126

1,208,594

Income incentive fees

1,024,378

554,977

Directors’ fees

72,500

72,500

Professional fees

192,171

185,448

Organization expenses

42,187

24,338

Other general and administrative expenses

520,617

439,913

Total expenses

6,551,455

4,137,730

Management and income incentive fees waived

(1,927,230

)

(470,842

)

Net expenses

4,624,225

3,666,888

Net investment income before taxes

6,831,531

3,144,093

Income and excise taxes

2,343

(779

)

Net investment income after taxes

6,829,188

3,144,872

Net realized and unrealized gains (losses) on investments:

Net realized gain/(loss) on:

Non-controlled and non-affiliated investments

(260,802

)

(175,123

)

Foreign currency transactions

13,304

2,134

Net change in unrealized appreciation (depreciation) on:

Non-controlled and non-affiliated investments and foreign currency translation

2,996,345

(161,222

)

Controlled and affiliated investments

(240,680

)

—

Foreign currency forward contracts

(27,374

)

—

Net realized and unrealized gains (losses) on investments

2,480,793

(334,211

)

Benefit/(Provision) for taxes on unrealized appreciation (depreciation) on investments

(449,065

)

31,406

Net increase (decrease) in net assets resulting from operations

$

8,860,916

$

2,842,067

Per Common Share Data:

Net increase in net assets resulting from operations per share (basic and diluted):

$

0.61

$

0.32

Net investment income per share (basic and diluted):

$

0.47

$

0.36

Weighted average shares outstanding (basic and diluted):

14,464,405

8,805,686

Common Stock

Paid in Capital in

Distributable

Total

Shares

Par Amount

Excess of Par

Earnings

Net Assets

Balance at December 31, 2017

8,597,116

$

8,597

$

170,755,891

$

2,035,501

$

172,799,989

Net increase (decrease) in net assets resulting from

operations:

—

—

—

—

—

Net investment income

—

—

—

3,144,872

3,144,872

Net realized gain (loss) on investments and foreign

currency transactions

—

—

—

(172,989

)

(172,989

)

Net change in unrealized appreciation/(depreciation)

on investments, foreign currency forward contracts

and foreign currency translation

—

—

—

(161,222

)

(161,222

)

Benefit/(Provision) for taxes on unrealized

appreciate/(depreciation) on investments

—

—

—

31,406

31,406

Shareholder distributions:

Issuance of common stock

741,876

742

14,999,258

—

15,000,000

Issuance of common shares pursuant to dividend

reinvestment plan

4,235

4

85,616

—

85,620

Equity offering costs

—

—

(34,047

)

—

(34,047

)

Distributions to shareholders

—

—

—

(3,035,614

)

(3,035,614

)

Total increase (decrease) for the three months

ended March 31, 2018

746,111

746

15,050,827

(193,547

)

14,858,026

Balance at March 31, 2018

9,343,227

$

9,343

$

185,806,718

$

1,841,954

$

187,658,015

Distributions to shareholders per share for the three months ended March 31, 2018

-

$

-

$

-

$

0.32

$

0.32

Balance at December 31, 2018

13,358,289

$

13,358

$

266,023,849

$

(6,458,367

)

$

259,578,840

Net increase (decrease) in net assets resulting from

operations:

Net investment income

—

—

—

6,829,188

6,829,188

Net realized gain (loss) on investments and foreign

currency transactions

—

—

—

(247,498

)

(247,498

)

Net change in unrealized appreciation/(depreciation)

on investments, foreign currency forward contracts

and foreign currency translation

—

—

—

2,728,291

2,728,291

Benefit/(Provision) for taxes on unrealized

appreciate/(depreciation) on investments

—

—

—

(449,065

)

(449,065

)

Shareholder distributions:

Issuance of common stock

1,330,128

1,330

25,998,670

—

26,000,000

Issuance of common shares pursuant to dividend

reinvestment plan

15,149

16

296,107

—

296,123

Equity offering costs

—

—

(59,016

)

—

(59,016

)

Distributions to shareholders

—

—

—

(6,028,462

)

(6,028,462

)

Total increase (decrease) for the three months

ended March 31, 2019

1,345,277

1,346

26,235,761

2,832,454

29,069,561

Balance at March 31, 2019

14,703,566

14,704

292,259,610

(3,625,913

)

288,648,401

Distributions to shareholders per share for the three months ended March 31, 2019

-

$

-

$

-

$

0.41

$

0.41

For the three

months ended

March 31, 2019

For the three

months ended

March 31, 2018

Cash flows from operating activities:

Net increase (decrease) in net assets resulting from operations

$

8,860,916

$

2,842,067

Adjustments to reconcile net increase (decrease) in net assets resulting from

operations to net cash provided by (used for) operating activities:

Purchases of investments

(63,382,349

)

(42,166,463

)

Paid-in-kind interest income

(165,250

)

(39,084

)

Proceeds from sales of investments and principal repayments

39,934,565

33,205,955

Net realized (gain) loss on investments

260,802

175,123

Net change in unrealized (appreciation) depreciation on investments and foreign

currency translation

(2,755,665

)

161,222

Net change in unrealized (appreciation) depreciation on foreign currency forward contracts

27,374

—

Amortization of premium and accretion of discount, net

(771,660

)

(485,989

)

Amortization of deferred financing costs

176,836

195,064

Change in operating assets and liabilities:

(Increase) decrease in receivable for investments sold

(727,692

)

(969,849

)

(Increase) decrease in interest receivable

(640,105

)

(325,553

)

(Increase) decrease in prepaid expenses and other assets

(106,363

)

38,717

Increase (decrease) in payable for investments purchased

1,707,285

2,206,425

Increase (decrease) in management fees payable - affiliate

24,265

3,248

Increase (decrease) in income incentive fees payable - affiliate

—

47,235

Increase (decrease) in due to Advisor - affiliate

(35,032

)

19,462

Increase (decrease) in due to Administrator - affiliate

122,844

(41,108

)

Increase (decrease) in professional fees payable

38,714

(80,166

)

Increase (decrease) in directors' fees payable

72,500

5,750

Increase (decrease) in interest and credit facility fees and expenses payable

175,406

43,871

Increase (decrease) in deferred tax liability

449,064

(31,406

)

Increase (decrease) in accrued expenses and other liabilities

(124,150

)

(16,596

)

Net cash provided by (used for) operating activities

(16,857,695

)

(5,212,075

)

Cash flows from financing activities:

Issuance of common stock

26,000,000

15,000,000

Distributions paid

(5,047,193

)

(2,621,612

)

Equity offering costs

(59,016

)

(34,047

)

Borrowings on debt

34,583,890

22,500,000

Repayments on debt

(37,000,000

)

(29,500,000

)

Net cash provided by (used for) financing activities

18,477,681

5,344,341

Effect of exchange rate changes on cash denominated in foreign currency

4,746

15,299

Net increase (decrease) in cash, cash equivalents and foreign currency

1,624,732

147,565

Cash, cash equivalents and foreign currency, beginning of period

10,368,823

9,270,912

Cash, cash equivalents and foreign currency, end of period

$

11,993,555

$

9,418,477

Supplemental and non-cash financing activities:

Cash paid during the period for interest

$

2,457,234

$

1,352,979

Issuance of common stock pursuant to distribution reinvestment plan

$

296,123

$

85,620

Accrued but unpaid equity offering costs

$

59,016

$

34,047

Accrued but unpaid distributions

$

6,028,462

$

3,035,614

Investment Type

Spread Above

Index *

Interest

Rate

Maturity

Date

Principal

Amount, Par

Value or Shares

Cost

Percentage

of Net

Assets **

Fair

Value

Investments ⁽¹⁾

United States

Debt Investments

Automobiles & Components

AP Exhaust Acquisition,

LLC ⁽²⁾

Senior Secured

Second Lien

L + 850 ⁽³⁾

11.49

%

05/2025

$

9,072,563

$

8,807,827

2.6

%

$

7,627,009

Auto-Vehicle Parts, LLC ⁽²⁾

Senior Secured

First Lien

L + 450 ⁽⁴⁾

7.00

%

01/2023

4,845,250

4,787,207

1.7

4,845,250

Auto-Vehicle Parts,

LLC ^{(2) (5) (6)}

Senior Secured

First Lien

01/2023

—

(6,767

)

—

—

Continental Battery

Company ⁽²⁾

Senior Secured

First Lien

L + 450 ⁽⁴⁾

7.00

%

12/2022

4,003,500

3,948,043

1.4

4,003,500

Continental Battery

Company ^{(2) (5)}

Senior Secured

First Lien

L + 450 ⁽⁴⁾

7.00

%

12/2022

5,701,919

5,603,407

2.0

5,701,919

Empire Auto Parts, LLC ⁽²⁾

Senior Secured

First Lien

L + 550 ⁽³⁾

8.10

%

09/2024

2,487,500

2,441,548

0.9

2,487,500

Empire Auto Parts,

LLC ^{(2) (5) (6)}

Senior Secured

First Lien

09/2024

—

(7,241

)

—

—

POC Investors, LLC ⁽²⁾

Senior Secured

First Lien

L + 550 ⁽³⁾

8.10

%

11/2021

9,534,957

9,429,298

3.3

9,534,957

POC Investors, LLC ^{(2) (5) (6)}

Senior Secured

First Lien

11/2021

—

(9,477

)

—

—

35,645,689

34,993,845

11.9

34,200,135

Capital Goods

Alion Science and Technology

Corporation

Senior Secured

First Lien

L + 450 ⁽⁴⁾

7.00

%

08/2021

3,000,000

3,000,000

1.0

3,000,000

Alion Science and Technology

Corporation ⁽²⁾

Unsecured Debt

11.00

%

08/2022

6,542,905

6,415,134

2.3

6,542,905

Midwest Industrial Rubber ⁽²⁾

Senior Secured

First Lien

L + 550 ⁽³⁾

8.10

%

12/2021

5,453,313

5,395,359

1.9

5,453,313

Midwest Industrial Rubber ^{(2) (5)}

Senior Secured

First Lien

L + 550 ⁽³⁾

8.10

%

12/2021

87,500

82,221

—

87,500

Potter Electric Signal

Company ^{(2) (5)}

Senior Secured

First Lien

P + 350 ⁽⁷⁾

9.00

%

12/2022

376,200

372,017

0.1

373,950

Potter Electric Signal

Company ⁽²⁾

Senior Secured

First Lien

L + 425 ⁽⁸⁾

7.06

%

12/2023

2,518,125

2,492,378

0.9

2,505,535

Potter Electric Signal

Company ^{(2) (5) (6)}

Senior Secured

First Lien

12/2023

—

(6,508

)

—

(3,500

)

17,978,043

17,750,601

6.2

17,959,703

Commercial & Professional

Services

Advantage Sales &

Marketing, Inc.

Senior Secured

First Lien

L + 325 ⁽⁴⁾

5.75

%

07/2021

817,884

818,062

0.2

698,142

Advantage Sales &

Marketing, Inc.

Senior Secured

Second Lien

L + 650 ⁽⁴⁾

9.00

%

07/2022

500,000

501,847

0.1

369,017

Allied Universal Holdco, LLC ⁽²⁾

Senior Secured

Second Lien

L + 850 ⁽⁴⁾

11.00

%

07/2023

750,000

718,634

0.3

747,257

ASP MCS Acquisition Corp.

Senior Secured

First Lien

L + 475 ⁽⁴⁾

7.25

%

05/2024

5,280,937

5,260,414

1.5

4,290,762

BFC Solmetex LLC & Bonded

Filter Co. LLC ^{(2) (5)}

Senior Secured

First Lien

L + 625 ⁽³⁾

7.25

%

04/2023

375,000

361,461

0.1

375,000

BFC Solmetex LLC & Bonded

Filter Co. LLC ⁽²⁾

Senior Secured

First Lien

L + 625 ⁽³⁾

7.25

%

09/2023

6,026,687

5,914,180

2.1

6,099,007

BFC Solmetex LLC & Bonded

Filter Co. LLC ⁽²⁾

Senior Secured

First Lien

L + 625 ⁽³⁾

8.85

%

09/2023

628,064

616,690

0.2

635,600

BFC Solmetex LLC & Bonded

Filter Co. LLC ^{(2) (5) (6)}

Senior Secured

First Lien

09/2023

—

(7,630

)

—

10,200

CHA Holdings, Inc ⁽²⁾

Senior Secured

First Lien

L + 450 ⁽³⁾

7.10

%

04/2025

4,891,607

4,869,854

1.7

4,855,879

CHA Holdings, Inc ^{(2) (5) (6)}

Senior Secured

First Lien

04/2025

—

(4,624

)

—

(7,826

)

DFS Intermediate Holdings,

LLC ⁽²⁾

Senior Secured

First Lien

L + 525 ⁽⁴⁾

7.74

%

03/2022

8,860,475

8,748,232

3.1

8,860,475

DFS Intermediate Holdings,

LLC ^{(2) (5)}

Senior Secured

First Lien

L + 525 ⁽⁴⁾

7.74

%

03/2022

4,066,579

3,983,928

1.4

4,066,579

GH Holding Company ⁽²⁾

Senior Secured

First Lien

L + 450 ⁽⁴⁾

7.00

%

02/2023

1,485,000

1,478,979

0.5

1,485,000

Investment Type

Spread Above

Index *

Interest

Rate

Maturity

Date

Principal

Amount, Par

Value or Shares

Cost

Percentage

of Net

Assets **

Fair

Value

GI Revelation Acquisition

LLC ⁽²⁾

Senior Secured

First Lien

L + 500 ⁽⁴⁾

7.50

%

04/2025

$

7,452,456

$

7,418,080

2.5

%

$

7,312,723

Hepaco, LLC ^{(2) (5) (6)}

Senior Secured

First Lien

08/2023

—

(2,978

)

—

—

Hepaco, LLC ⁽²⁾

Senior Secured

First Lien

L + 475 ⁽⁴⁾

7.25

%

08/2024

5,191,000

5,145,758

1.8

5,191,000

Hepaco, LLC ^{(2) (5)}

Senior Secured

First Lien

L + 475 ⁽⁴⁾

7.25

%

08/2024

4,006,753

3,967,891

1.4

4,006,753

Jordan Healthcare Inc. ^{(2) (5)}

Senior Secured

First Lien

L + 550 ⁽³⁾

8.10

%

07/2022

162,000

158,940

0.1

166,500

Jordan Healthcare Inc. ⁽²⁾

Senior Secured

First Lien

L + 550 ⁽³⁾

8.10

%

07/2022

4,052,191

4,022,657

1.4

4,092,713

Jordan Healthcare Inc. ^{(2) (5)}

Senior Secured

First Lien

L + 550 ^{( 3)}

8.10

%

07/2022

703,449

693,927

0.2

715,505

MHS Acquisition Holdings,

LLC ⁽²⁾

Senior Secured

Second Lien

L + 875 ⁽³⁾

11.35

%

03/2025

8,101,633

7,910,731

2.7

7,922,762

MHS Acquisition Holdings,

LLC ^{(2) (5)}

Senior Secured

Second Lien

L + 875 ⁽³⁾

11.35

%

03/2025

466,576

449,456

0.2

443,354

MHS Acquisition Holdings,

LLC ⁽²⁾

Unsecured Debt

L + 1350 PIK ⁽³⁾

13.50

%

03/2026

644,886

636,455

0.2

555,919

MHS Acquisition Holdings,

LLC ⁽²⁾

Unsecured Debt

L + 1350 PIK ⁽³⁾

13.50

%

03/2026

214,876

212,182

0.1

185,232

SavATree, LLC ⁽²⁾

Senior Secured

First Lien

L + 525 ⁽³⁾

7.85

%

06/2022

3,986,045

3,934,902

1.4

3,986,045

SavATree, LLC ^{(2) (5) (6)}

Senior Secured

First Lien

06/2022

—

(6,976

)

—

—

SavATree, LLC ^{(2) (5) (6)}

Senior Secured

First Lien

06/2022

—

(8,494

)

—

—

TecoStar Holdings, Inc. ⁽²⁾

Senior Secured

Second Lien

L + 850 ⁽⁴⁾

10.99

%

11/2024

5,000,000

4,898,640

1.7

5,000,000

USAGM HoldCo LLC ⁽²⁾

Senior Secured

Second Lien

11.00

%

07/2023

2,380,952

2,344,055

0.8

2,372,244

USAGM HoldCo LLC

Senior Secured

Second Lien

L + 850 ⁽⁴⁾