OFS Capital Corporation and Subsidiaries
Consolidated Statements of Operations (unaudited)
(Dollar amounts in thousands, except per share data)
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| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
| Investment income | | | | | | | |
| Interest income: | | | | | | | |
Non-control/non-affiliate investments | | | | | $ | 13,393 | | | $ | 9,647 | |
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Control investment | | | | | — | | | 141 | |
Total interest income | | | | | 13,393 | | | 9,788 | |
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| Dividend income: | | | | | | | |
Non-control/non-affiliate investments | | | | | 2 | | | 713 | |
Affiliate investments | | | | | 783 | | | — | |
Control investment | | | | | — | | | 45 | |
Total dividend income | | | | | 785 | | | 758 | |
| Fee income: | | | | | | | |
Non-control/non-affiliate investments | | | | | 105 | | | 394 | |
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Control investment | | | | | — | | | 6 | |
Total fee income | | | | | 105 | | | 400 | |
Total investment income | | | | | 14,283 | | | 10,946 | |
| Expenses | | | | | | | |
| Interest expense | | | | | 4,874 | | | 3,624 | |
| Management fee | | | | | 1,894 | | | 2,020 | |
| Income Incentive Fee | | | | | 1,238 | | | — | |
| Capital Gains Fee | | | | | — | | | 1,072 | |
| Professional fees | | | | | 436 | | | 407 | |
| Administration fee | | | | | 482 | | | 451 | |
| Other expenses | | | | | 409 | | | 367 | |
| Total expenses | | | | | 9,333 | | | 7,941 | |
Net investment income | | | | | 4,950 | | | 3,005 | |
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Net realized and unrealized gain (loss) on investments | | | | | | | |
| Net realized gain (loss) on non-control/non-affiliate investments | | | | | 167 | | | (13) | |
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| Net realized gain on control investments | | | | | — | | | 278 | |
| Income tax expense on net realized investment gains | | | | | (171) | | | (48) | |
| Net unrealized depreciation on non-control/non-affiliate investments | | | | | (2,196) | | | (4,784) | |
| Net unrealized appreciation on affiliate investments | | | | | 2,338 | | | 11,792 | |
| Net unrealized depreciation on control investment | | | | | (1,104) | | | (1,684) | |
| Deferred tax expense on net unrealized appreciation | | | | | (159) | | | (41) | |
| Net gain (loss) on investments | | | | | (1,125) | | | 5,500 | |
| Loss on extinguishment of debt | | | | | (19) | | | (144) | |
| Net increase in net assets resulting from operations | | | | | $ | 3,806 | | | $ | 8,361 | |
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Net investment income per common share – basic and diluted | | | | | $ | 0.37 | | | $ | 0.22 | |
| Net increase in net assets resulting from operations per common share – basic and diluted | | | | | $ | 0.28 | | | $ | 0.62 | |
| Distributions declared per common share | | | | | $ | 0.33 | | | $ | 0.28 | |
| Basic and diluted weighted average shares outstanding | | | | | 13,398,078 | | | 13,422,447 | |
See Notes to Consolidated Financial Statements (unaudited).
OFS Capital Corporation and Subsidiaries
Consolidated Statements of Changes in Net Assets (unaudited)
(Dollar amounts in thousands, except per share data)
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| Preferred Stock | | Common Stock | | Paid-in capital in excess of par | | Total distributable earnings (losses) | | Total net assets |
| Number of shares | | Par value | | Number of shares | | Par value |
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| Balances at December 31, 2021 | — | | | $ | — | | | 13,422,413 | | | $ | 134 | | | $ | 185,113 | | | $ | 18,497 | | | $ | 203,744 | |
| Net increase in net assets resulting from operations: | | | | | | | | | | | | | |
| Net investment income | — | | | — | | | — | | | — | | | — | | | 3,005 | | | 3,005 | |
| Net realized gain on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | 217 | | | 217 | |
| Loss on extinguishment of debt | — | | | — | | | — | | | — | | | — | | | (144) | | | (144) | |
| Net unrealized appreciation on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | 5,283 | | | 5,283 | |
| Distributions to stockholders: | | | | | | | | | | | | | |
Common stock issued from reinvestment of stockholder distributions | — | | | — | | | 3,016 | | | — | | | 39 | | | — | | | 39 | |
| Dividends declared | — | | | — | | | — | | | — | | | — | | | (3,758) | | | (3,758) | |
| Net increase for the three month period ended March 31, 2022 | — | | | — | | | 3,016 | | | — | | | 39 | | | 4,603 | | | 4,642 | |
| Balances at March 31, 2022 | — | | | $ | — | | | 13,425,429 | | | $ | 134 | | | $ | 185,152 | | | $ | 23,100 | | | $ | 208,386 | |
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| Balances at December 31, 2022 | — | | | $ | — | | | 13,398,078 | | | $ | 134 | | | $ | 184,841 | | | $ | (4,552) | | | $ | 180,423 | |
| Net increase in net assets resulting from operations: | | | | | | | | | | | | | |
| Net investment income | — | | | — | | | — | | | — | | | — | | | 4,950 | | | 4,950 | |
| Net realized loss on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | (4) | | | (4) | |
| Loss on extinguishment of debt | — | | | — | | | — | | | — | | | — | | | (19) | | | (19) | |
| Net unrealized depreciation on investments, net of taxes | — | | | — | | | — | | | — | | | — | | | (1,121) | | | (1,121) | |
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| Distributions to stockholders: | | | | | | | | | | | | | |
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| Dividends declared | — | | | — | | | — | | | — | | | — | | | (4,421) | | | (4,421) | |
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| Net decrease for the three month period ended March 31, 2023 | — | | | — | | | — | | | — | | | — | | | (615) | | | (615) | |
| Balances at March 31, 2023 | — | | | $ | — | | | 13,398,078 | | | $ | 134 | | | $ | 184,841 | | | $ | (5,167) | | | $ | 179,808 | |
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See Notes to Consolidated Financial Statements (unaudited).
OFS Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(Dollar amounts in thousands)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2023 | | 2022 |
| Cash flows from operating activities | | | |
| Net increase in net assets resulting from operations | $ | 3,806 | | | $ | 8,361 | |
| Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities: | | | |
| Net realized gain on investments | (167) | | | (265) | |
| Income tax expense on net realized investment gains | 171 | | | 48 | |
Loss on extinguishment of debt | 19 | | | 144 | |
| Net unrealized (appreciation) depreciation on investments, net of taxes | 1,121 | | | (5,283) | |
Amortization of Net Loan Fees | (409) | | | (284) | |
Amendment fees collected | 39 | | | 90 | |
Payment-in-kind interest and dividend income | (462) | | | (270) | |
| Accretion of interest income on Structured Finance Securities | (3,002) | | | (2,282) | |
Amortization of debt issuance costs | 387 | | | 375 | |
Amortization of intangible asset | 102 | | | 103 | |
Purchase and origination of portfolio investments | (9,944) | | | (70,164) | |
Proceeds from principal payments on portfolio investments | 1,791 | | | 19,606 | |
Proceeds from sale or redemption of portfolio investments | 8,919 | | | 3,143 | |
| Proceeds from distributions received from portfolio investments | 3,138 | | | 5,743 | |
Changes in operating assets and liabilities: | | | |
Interest receivable | 1 | | | (617) | |
Interest payable | (1,843) | | | (2,028) | |
Payable to adviser and affiliates | 116 | | | (313) | |
Receivable for investment sold | — | | | 14,893 | |
Payable for investments purchased | — | | | 4,249 | |
Other assets and liabilities | 174 | | | 367 | |
| Net cash provided by (used in) operating activities | 3,957 | | | (24,384) | |
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| Cash flows from financing activities | | | |
Distributions paid to stockholders | (4,421) | | | (3,719) | |
Borrowings under revolving lines of credit | 12,300 | | | 14,650 | |
Repayments under revolving lines of credit | (11,000) | | | — | |
Repayments of SBA debentures | (5,000) | | | (19,000) | |
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Payment of deferred financing costs | — | | | (122) | |
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| Net cash used in financing activities | (8,121) | | | (8,191) | |
| Net decrease in cash | (4,164) | | | (32,575) | |
| Cash at beginning of period | 14,937 | | | 43,048 | |
| Cash at end of period | $ | 10,773 | | | $ | 10,473 | |
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| Supplemental Disclosure of Cash Flow Information: | | | |
Cash paid for interest | $ | 6,330 | | | $ | 5,277 | |
Reinvestment of distributions to stockholders | — | | | 39 | |
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See Notes to Consolidated Financial Statements (unaudited).
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments (unaudited)
March 31, 2023
(Dollar amounts in thousands)
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Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Non-control/Non-affiliate Investments | | | | | | | | | | | | | | | | | | | |
Debt and Equity Investments | | | | | | | | | | | | | | | | | | | |
| 24 Seven Holdco, LLC (15) | | Temporary Help Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.01% | | SOFR+ | 6.00% | | 1/28/2022 | | 11/16/2027 | | $ | 8,889 | | | $ | 8,838 | | | $ | 8,763 | | | 4.9 | % |
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| AIDC IntermediateCo 2, LLC (15) | | Computer Systems Design Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.06% | | SOFR+ | 6.25% | | 7/22/2022 | | 7/22/2027 | | 1,995 | | | 1,956 | | | 1,930 | | | 1.1 | |
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| Allen Media, LLC (14) (15) | | Cable and Other Subscription Programming | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.55% | | SOFR+ | 5.50% | | 3/2/2021 | | 2/10/2027 | | 3,759 | | | 3,754 | | | 3,326 | | | 1.8 | |
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| All Star Auto Lights, Inc. (4) (15) (21) | | Motor Vehicle Parts (Used) Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.41% | | L+ | 7.25% | | 12/19/2019 | | 8/20/2025 | | 23,035 | | | 22,826 | | | 22,948 | | | 12.8 | |
| Senior Secured Loan | | | | 12.06% | | L+ | 7.25% | | 8/4/2022 | | 8/20/2025 | | 4,963 | | | 4,885 | | | 4,942 | | | 2.7 | |
| | | | | | | | | | | | | 27,998 | | | 27,711 | | | 27,890 | | | 15.5 | |
| Astro One Acquisition Corporation | | Other Miscellaneous Nondurable Goods Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 13.66% | | L+ | 8.50% | | 1/31/2022 | | 9/14/2029 | | 3,000 | | | 2,692 | | | 1,540 | | | 0.9 | |
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| Atlantis Holding, LLC (14) (15) | | Electronics and Appliance Stores | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.15% | | SOFR+ | 7.25% | | 3/29/2022 | | 3/31/2029 | | 6,730 | | | 6,513 | | | 6,573 | | | 3.7 | |
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| Avison Young (22) | | Nonresidential Property Managers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 10.67% | | SOFR+ | 5.75% | | 11/25/2021 | | 1/31/2026 | | 3,935 | | | 3,911 | | | 3,311 | | | 1.8 | |
| Senior Secured Loan | | | | 11.92% | | SOFR+ | 7.00% | | 8/19/2022 | | 1/31/2026 | | 796 | | | 755 | | | 697 | | | 0.4 | |
| | | | | | | | | | | | | 4,731 | | | 4,666 | | | 4,008 | | | 2.2 | |
| BayMark Health Services, Inc. (15) | | Outpatient Mental Health and Substance. Abuse Centers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 13.66% | | L+ | 8.50% | | 6/10/2021 | | 6/11/2028 | | 4,962 | | | 4,907 | | | 4,888 | | | 2.7 | |
| Senior Secured Loan (Delayed Draw) | | | | 13.66% | | L+ | 8.50% | | 6/10/2021 | | 6/11/2028 | | 3,988 | | | 3,941 | | | 3,928 | | | 2.2 | |
| | | | | | | | | | | | | 8,950 | | | 8,848 | | | 8,816 | | | 4.9 | |
| BCPE North Star US Holdco 2, Inc. (F/K/A Dessert Holdings) | | Ice Cream and Frozen Dessert Manufacturing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.41% | | L+ | 7.25% | | 2/2/2022 | | 6/8/2029 | | 1,667 | | | 1,642 | | | 1,459 | | | 0.8 | |
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OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
March 31, 2023
(Dollar amounts in thousands)
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Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Boca Home Care Holdings, Inc. (20) | | Services for the Elderly and Persons with Disabilities | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (Delayed Draw) (15) | | | | 11.65% | | SOFR+ | 6.50% | | 2/25/2022 | | 2/25/2027 | | $ | 11,187 | | | $ | 11,079 | | | $ | 10,820 | | | 6.0 | % |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | SOFR+ | 6.50% | | 2/25/2022 | | 2/25/2027 | | — | | | (10) | | | (42) | | | — | |
Common Equity (1,290 Class A units) (10) (13) | | | | | | | | | 2/25/2022 | | | | | | 1,290 | | | 1,268 | | | 0.7 | |
Preferred Equity (1,723 Class A Units) 12.0% cash / 2.0% PIK | | | | | | | | | 3/3/2023 | | | | | | 172 | | | 172 | | | 0.1 | |
| | | | | | | | | | | | | 11,187 | | | 12,531 | | | 12,218 | | | 6.8 | |
| Constellis Holdings, LLC (10) | | Other Justice, Public Order, and Safety Activities | | | | | | | | | | | | | | | | | |
Common Equity (20,628 common shares) | | | | | | | | | 3/27/2020 | | | | | | 703 | | | 40 | | | — | |
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| Convergint Technologies Holdings, LLC | | Security Systems Services (except Locksmiths) | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.59% | | L+ | 6.75% | | 9/28/2018 | | 3/30/2029 | | 5,938 | | | 5,849 | | | 5,885 | | | 3.3 | |
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| Creation Technologies (15) (22) | | Bare Printed Circuit Board Manufacturing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.28% | | L+ | 5.50% | | 9/24/2021 | | 10/5/2028 | | 1,985 | | | 1,973 | | | 1,838 | | | 1.0 | |
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| Diamond Sports Group, LLC (14) (15) | | Television Broadcasting | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.78% | | SOFR+ | 8.00% | | 3/9/2022 | | 5/25/2026 | | 252 | | | 247 | | | 238 | | | 0.1 | |
| Senior Secured Loan (6) (10) | | | | 8.31% | | SOFR+ | 3.25% | | 11/19/2019 | | 8/24/2026 | | 1,935 | | | 1,935 | | | 111 | | | 0.1 | |
| | | | | | | | | | | | | 2,187 | | | 2,182 | | | 349 | | | 0.2 | |
| East West Manufacturing (15) | | Fluid Power Pump and Motor Manufacturing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.43% | | SOFR+ | 5.75% | | 2/11/2022 | | 12/22/2028 | | 1,945 | | | 1,928 | | | 1,721 | | | 1.0 | |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | SOFR+ | 5.75% | | 2/11/2022 | | 12/22/2028 | | — | | | (2) | | | (2) | | | — | |
| | | | | | | | | | | | | 1,945 | | | 1,926 | | | 1,719 | | | 1.0 | |
| Electrical Components International, Inc. | | Current-Carrying Wiring Device Manufacturing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 13.34% | | L+ | 8.50% | | 4/8/2021 | | 6/26/2026 | | 3,679 | | | 3,383 | | | 2,952 | | | 1.6 | |
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OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
March 31, 2023
(Dollar amounts in thousands)
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Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4) (19) | | Electrical Contractors and Other Wiring Installation Contractors | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.50% | | N/A | | | 6/30/2017 | | 12/31/2025 | | $ | 6,343 | | | $ | 6,343 | | | $ | 6,343 | | | 3.5 | % |
| Senior Secured Loan (6) (10) | | | | 10.00% PIK | | N/A | | | 6/30/2017 | | 12/31/2026 | | 7,278 | | | 6,584 | | | 4,254 | | | 2.4 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | N/A | | | 11/29/2021 | | 12/31/2025 | | — | | | — | | | — | | | — | |
| Equity Participation Rights (10) (23) | | | | | | | | | 12/31/2021 | | | | | | 4,722 | | | — | | | — | |
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| | | | | | | | | | | | | 13,621 | | | 17,649 | | | 10,597 | | | 5.9 | |
| Excelin Home Health, LLC (4) | | Home Health Care Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 14.66% cash / 2.25% PIK | | SOFR+ | 9.50% | | 10/25/2018 | | 9/30/2025 | | 4,290 | | | 4,197 | | | 4,158 | | | 2.3 | |
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| GGC Aerospace Topco L.P. (10) | | Other Aircraft Parts and Auxiliary Equipment Manufacturing | | | | | | | | | | | | | | | | | |
Common Equity (368,852 Class A units) | | | | | | | | | 12/29/2017 | | | | | | 450 | | | — | | | — | |
Common Equity (40,984 Class B units) | | | | | | | | | 12/29/2017 | | | | | | 50 | | | — | | | — | |
| | | | | | | | | | | | | | | 500 | | | — | | | — | |
| Honor HN Buyer Inc. | | Services for the Elderly and Persons with Disabilities | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 10.80% | | SOFR+ | 5.75% | | 10/15/2021 | | 10/15/2027 | | 6,516 | | | 6,417 | | | 6,522 | | | 3.6 | |
| Senior Secured Loan (Delayed Draw) (5) (15) | | | | 10.80% | | SOFR+ | 5.75% | | 10/15/2021 | | 10/15/2027 | | 1,899 | | | 1,812 | | | 1,907 | | | 1.1 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | SOFR+ | 5.75% | | 10/15/2021 | | 10/15/2027 | | — | | | (11) | | | — | | | — | |
| | | | | | | | | | | | | 8,415 | | | 8,218 | | | 8,429 | | | 4.7 | |
| Idera | | Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.51% | | L+ | 6.75% | | 1/27/2022 | | 3/2/2029 | | 4,000 | | | 4,000 | | | 3,796 | | | 2.1 | |
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| Inergex Holdings, LLC | | Other Computer Related Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.23% | | SOFR+ | 7.00% | | 10/1/2018 | | 10/1/2024 | | 14,868 | | | 14,697 | | | 14,868 | | | 8.3 | |
| Senior Secured Loan (Revolver) | | | | 12.41% | | SOFR+ | 7.00% | | 10/1/2018 | | 10/1/2024 | | 2,344 | | | 2,281 | | | 2,344 | | | 1.3 | |
| | | | | | | | | | | | | 17,212 | | | 16,978 | | | 17,212 | | | 9.6 | |
| Ivanti Software, Inc. (14) (15) | | Software Publishers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.21% | | L+ | 4.25% | | 3/26/2021 | | 12/1/2027 | | 2,955 | | | 2,964 | | | 2,437 | | | 1.4 | |
| | | | | | | | | | | | | | | | | | | |
| JP Intermediate B, LLC (15) | | Drugs and Druggists' Sundries Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.33% | | L+ | 5.50% | | 1/14/2021 | | 11/15/2025 | | 5,278 | | | 5,150 | | | 4,147 | | | 2.3 | |
| | | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
March 31, 2023
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Karman Buyer Corp (14) (15) | | Advertising Agencies | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.31% | | L+ | 4.50% | | 3/2/2022 | | 10/28/2027 | | $ | 2,279 | | | $ | 2,251 | | | $ | 1,967 | | | 1.1 | % |
| | | | | | | | | | | | | | | | | | | |
| KNS Acquisition Corp. (14) (15) | | Electronic Shopping and Mail-Order Houses | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.17% | | L+ | 6.25% | | 4/16/2021 | | 4/21/2027 | | 6,738 | | | 6,706 | | | 6,555 | | | 3.6 | |
| | | | | | | | | | | | | | | | | | | |
| Kreg LLC | | Other Ambulatory Health Care Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 7.30% cash / 4.50% PIK | | SOFR+ | 2.25% | | 12/20/2021 | | 12/20/2026 | | 16,735 | | | 16,642 | | | 15,385 | | | 8.6 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | SOFR+ | 6.25% | | 12/20/2021 | | 12/20/2026 | | — | | | (7) | | | (108) | | | (0.1) | |
| | | | | | | | | | | | | 16,735 | | | 16,635 | | | 15,277 | | | 8.5 | |
| LogMeIn, Inc. (14) (15) | | Data Processing, Hosting, and Related Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.59% | | L+ | 4.75% | | 3/26/2021 | | 8/31/2027 | | 2,939 | | | 2,938 | | | 1,694 | | | 0.9 | |
| | | | | | | | | | | | | | | | | | | |
| Metasource (15) | | All Other Business Support Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.17% | | SOFR+ | 6.25% | | 5/17/2022 | | 5/17/2027 | | 2,772 | | | 2,749 | | | 2,613 | | | 1.5 | |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | SOFR+ | 6.25% | | 5/17/2022 | | 5/17/2027 | | — | | | (7) | | | (69) | | | — | |
| | | | | | | | | | | | | 2,772 | | | 2,742 | | | 2,544 | | | 1.5 | |
| Milrose Consultants, LLC (4) (21) | | Administrative Management and General Management Consulting Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 11.65% | | SOFR+ | 6.50% | | 7/16/2019 | | 7/16/2025 | | 27,103 | | | 27,084 | | | 26,669 | | | 14.9 | |
| Senior Secured Loan (Revolver) (5) | | | | 11.65% | | SOFR+ | 6.50% | | 7/16/2019 | | 7/16/2025 | | 476 | | | 470 | | | 450 | | | 0.3 | |
| | | | | | | | | | | | | 27,579 | | | 27,554 | | | 27,119 | | | 15.2 | |
| One GI LLC | | Offices of Other Holding Companies | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (Delayed Draw) (15) | | | | 11.66% | | SOFR+ | 6.75% | | 12/13/2021 | | 12/22/2025 | | 7,489 | | | 7,386 | | | 6,892 | | | 3.8 | |
| Senior Secured Loan (Delayed Draw) (5) (15) | | | | 11.61% | | SOFR+ | 6.75% | | 12/13/2021 | | 12/22/2025 | | 3,946 | | | 3,876 | | | 3,629 | | | 2.0 | |
| Senior Secured Loan (Revolver) | | | | 11.66% | | SOFR+ | 6.75% | | 12/13/2021 | | 12/22/2025 | | 1,444 | | | 1,425 | | | 1,329 | | | 0.7 | |
| | | | | | | | | | | | | 12,879 | | | 12,687 | | | 11,850 | | | 6.5 | |
| Planet Bingo, LLC (F/K/A 3rd Rock Gaming Holdings, LLC) (6) (10) | | Software Publishers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 4.00% | | N/A | | | 3/13/2018 | | 1/1/2024 | | 16,648 | | | 14,113 | | | 6,972 | | | 3.9 | |
| | | | | | | | | | | | | | | | | | | |
| PM Acquisition LLC (10) (20) | | All Other General Merchandise Stores | | | | | | | | | | | | | | | | | |
Common Equity (499 units) | | | | | | | | | 9/30/2017 | | | | | | 499 | | | 893 | | | 0.5 | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
March 31, 2023
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| | | | | | | | | | | | | | | | | | | |
| Reception Purchaser LLC (15) | | Transportation and Warehousing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.78% | | SOFR+ | 6.00% | | 4/28/2022 | | 3/24/2028 | | $ | 2,535 | | | $ | 2,503 | | | $ | 2,502 | | | 1.4 | % |
| | | | | | | | | | | | | | | | | | | |
| RPLF Holdings, LLC (10) (13) | | Software Publishers | | | | | | | | | | | | | | | | | |
Common Equity (345,339 Class A units) | | | | | | | | | 1/17/2018 | | | | — | | | — | | | 1,146 | | | 0.6 | |
| | | | | | | | | | | | | | | | | | | |
| RSA Security (15) | | Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (14) | | | | 9.57% | | L+ | 4.75% | | 4/16/2021 | | 4/27/2028 | | 2,762 | | | 2,750 | | | 2,184 | | | 1.2 | |
| Senior Secured Loan | | | | 12.56% | | L+ | 7.75% | | 4/16/2021 | | 4/27/2029 | | 4,450 | | | 4,401 | | | 2,591 | | | 1.4 | |
| | | | | | | | | | | | | 7,212 | | | 7,151 | | | 4,775 | | | 2.6 | |
| RumbleOn, Inc. (15) (22) | | Other Industrial Machinery Manufacturing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 13.41% | | L+ | 8.25% | | 8/31/2021 | | 8/31/2026 | | 3,985 | | | 3,828 | | | 3,642 | | | 2.0 | |
| Senior Secured Loan (Delayed Draw) | | | | 13.41% | | L+ | 8.25% | | 8/31/2021 | | 8/31/2026 | | 1,206 | | | 1,190 | | | 1,102 | | | 0.6 | |
Warrants (warrants to purchase up to $600,000 in common stock) | | | | | | | | | 8/31/2021 | | 7/25/2023 (12) | | | | 200 | | | — | | | — | |
| | | | | | | | | | | | | 5,191 | | | 5,218 | | | 4,744 | | | 2.6 | |
| Sentry Centers Holdings, LLC (10) (13) | | Convention and Trade Show Organizers | | | | | | | | | | | | | | | | | |
Preferred Equity (1,603 Series B units) | | | | | | | | | 9/4/2020 | | | | | | 160 | | | 120 | | | 0.1 | |
| | | | | | | | | | | | | | | | | | | |
| Signal Parent, Inc. (15) | | New Single-Family Housing Construction (except For-Sale Builders) | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.31% | | L+ | 3.50% | | 3/25/2021 | | 4/3/2028 | | 1,817 | | | 1,803 | | | 1,218 | | | 0.7 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Spear Education Holdings, LLC | | Professional and Management Development Training | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.55% | | SOFR+ | 7.50% | | 2/10/2023 | | 12/15/2027 | | 1,496 | | | 1,460 | | | 1,460 | | | 0.8 | |
| | | | | | | | | | | | | | | | | | | |
| Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.,) (15) | | Child Day Care Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 13.41% | | L+ | 8.25% | | 7/26/2018 | | 7/30/2026 | | 6,399 | | | 6,384 | | | 6,079 | | | 3.4 | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
March 31, 2023
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| | | | | | | | | | | | | | | | | | | |
| SSJA Bariatric Management LLC (15) | | Offices of Physicians, Mental Health Specialists | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.30% | | SOFR+ | 5.25% | | 8/26/2019 | | 8/26/2024 | | $ | 9,650 | | | $ | 9,623 | | | $ | 9,440 | | | 5.3 | % |
| Senior Secured Loan | | | | 10.30% | | SOFR+ | 5.25% | | 12/31/2020 | | 8/26/2024 | | 1,043 | | | 1,039 | | | 1,020 | | | 0.6 | |
| Senior Secured Loan | | | | 10.30% | | SOFR+ | 5.25% | | 12/8/2021 | | 8/26/2024 | | 2,627 | | | 2,613 | | | 2,569 | | | 1.4 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | SOFR+ | 5.25% | | 8/26/2019 | | 8/26/2024 | | — | | | (2) | | | (15) | | | — | |
| | | | | | | | | | | | | 13,320 | | | 13,273 | | | 13,014 | | | 7.3 | |
| SS Acquisition, LLC (15) | | Sports and Recreation Instruction | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (8) | | | | 11.70% | | SOFR+ | 6.84% | | 12/30/2021 | | 12/30/2026 | | 3,042 | | | 3,019 | | | 3,017 | | | 1.7 | |
| Senior Secured Loan (Delayed Draw) | | | | 12.40% | | SOFR+ | 7.59% | | 12/30/2021 | | 12/30/2026 | | 1,460 | | | 1,447 | | | 1,475 | | | 0.8 | |
| | | | | | | | | | | | | 4,502 | | | 4,466 | | | 4,492 | | | 2.5 | |
| Staples, Inc. (14) (15) (22) | | Business to Business Electronic Markets | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.81% | | L+ | 5.00% | | 6/24/2019 | | 4/16/2026 | | 2,892 | | | 2,854 | | | 2,670 | | | 1.5 | |
| | | | | | | | | | | | | | | | | | | |
| STS Operating, Inc. | | Industrial Machinery and Equipment Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.84% | | L+ | 8.00% | | 5/15/2018 | | 4/30/2026 | | 9,073 | | | 9,072 | | | 9,073 | | | 5.0 | |
| | | | | | | | | | | | | | | | | | | |
| The Escape Game, LLC (4) | | Other amusement and recreation industries | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.84% | | L+ | 7.00% | | 12/21/2021 | | 12/22/2024 | | 16,333 | | | 16,333 | | | 16,497 | | | 9.2 | |
| Senior Secured Loan (Revolver) (5) | | | | 11.84% | | L+ | 7.00% | | 12/21/2021 | | 12/22/2024 | | 1,867 | | | 1,840 | | | 1,867 | | | 1.0 | |
| | | | | | | | | | | | | 18,200 | | | 18,173 | | | 18,364 | | | 10.2 | |
| Thryv, Inc. (14) (15) | | Directory and Mailing List Publishers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 13.34% | | L+ | 8.50% | | 2/18/2021 | | 3/1/2026 | | 3,654 | | | 3,596 | | | 3,638 | | | 2.0 | |
| | | | | | | | | | | | | | | | | | | |
| Tolemar Acquisition, Inc. | | Motorcycle, Bicycle, and Parts Manufacturing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 10.70% | | L+ | 5.75% | | 10/14/2021 | | 10/14/2026 | | 15,465 | | | 15,410 | | | 15,001 | | | 8.3 | |
| Senior Secured Loan (Revolver) (5) | | | | 10.60% | | L+ | 5.75% | | 10/14/2021 | | 10/14/2026 | | 438 | | | 428 | | | 360 | | | 0.2 | |
| | | | | | | | | | | | | 15,903 | | | 15,838 | | | 15,361 | | | 8.5 | |
| Tony's Fresh Market / Cardenas Markets (15) | | Supermarkets and Other Grocery (except Convenience) Stores | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.75% | | SOFR+ | 6.75% | | 7/20/2022 | | 8/1/2029 | | 5,970 | | | 5,645 | | | 5,586 | | | 3.1 | |
| | | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
March 31, 2023
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| TruGreen Limited Partnership | | Landscaping Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 13.33% | | L+ | 8.50% | | 5/13/2021 | | 11/2/2028 | | $ | 4,500 | | | $ | 4,606 | | | $ | 4,232 | | | 2.4 | % |
| | | | | | | | | | | | | | | | | | | |
| United Biologics Holdings, LLC (4) (10) | | Medical Laboratories | | | | | | | | | | | | | | | | | |
Preferred Equity (4,701 units) | | | | | | | | | 4/16/2013 | | | | | | 9 | | | 18 | | | — | |
Warrants (3,976 units) | | | | | | | | | 7/26/2012 | | 4/16/2023 (12) | | | | 8 | | | 15 | | | — | |
| | | | | | | | | | | | | | | 17 | | | 33 | | | — | |
| | | | | | | | | | | | | | | | | | | |
| Total Debt and Equity Investments | | | | | | | | | | | | | $ | 341,644 | | | $ | 343,167 | | | $ | 313,461 | | | 174.4 | % |
| | | | | | | | | | | | | | | | | | | |
| Structured Finance Securities (22) | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2020 Ltd. (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 20.28% | | | | | 11/16/2020 | | 10/20/2031 | | $ | 11,080 | | | $ | 10,119 | | | $ | 7,452 | | | 4.1 | % |
| | | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2021 Ltd (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 17.59% | | | | | 5/28/2021 | | 7/18/2034 | | 8,630 | | | 7,299 | | | 5,968 | | | 3.3 | |
| | | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2022-1A (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 16.28% | | | | | 4/28/2022 | | 4/22/2033 | | 10,726 | | | 8,701 | | | 7,806 | | | 4.3 | |
| | | | | | | | | | | | | | | | | | | |
| Ares L CLO (9) | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E | | | | 10.48% | | L+ | 5.65% | | 2/17/2022 | | 1/15/2032 | | 6,000 | | | 5,769 | | | 5,277 | | | 2.9 | |
| | | | | | | | | | | | | | | | | | | |
| Barings CLO 2019-I Ltd. (9) | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E | | | | 11.69% | | L+ | 6.86% | | 2/23/2022 | | 4/15/2035 | | 8,000 | | | 7,904 | | | 7,313 | | | 4.1 | |
| | | | | | | | | | | | | | | | | | | |
| Battalion CLO XI, Ltd. (9) | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E | | | | 11.67% | | L+ | 6.85% | | 4/25/2022 | | 4/24/2034 | | 6,000 | | | 5,871 | | | 5,446 | | | 3.0 | |
| | | | | | | | | | | | | | | | | | | |
| Brightwood Capital MM CLO 2022-1, LTD (10) (17) | | | | | | | | | | | | | | | | | | | |
| Loan accumulation facility | | | | 0.00% | | | | | 1/5/2022 | | 12/31/2032 | | 8,500 | | | 8,500 | | | 8,140 | | | 4.5 | |
| | | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
March 31, 2023
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Dryden 53 CLO, Ltd. (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes - Income | | | | 22.77% | | | | | 10/26/2020 | | 1/15/2031 | | $ | 2,700 | | | $ | 1,517 | | | $ | 969 | | | 0.5 | % |
| Subordinated Notes | | | | 24.58% | | | | | 10/26/2020 | | 1/15/2031 | | 2,159 | | | 1,187 | | | 775 | | | 0.4 | |
| | | | | | | | | | | | | 4,859 | | | 2,703 | | | 1,744 | | | 0.9 | |
| Dryden 76 CLO, Ltd. (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 19.59% | | | | | 9/27/2019 | | 10/20/2032 | | 2,750 | | | 2,328 | | | 2,112 | | | 1.2 | |
| | | | | | | | | | | | | | | | | | | |
| Elevation CLO 2017-7, Ltd. (7) (9) (10) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 0.00% | | | | | 2/6/2019 | | 7/15/2030 | | 5,448 | | | 1,310 | | | 97 | | | 0.1 | |
| | | | | | | | | | | | | | | | | | | |
| Flatiron CLO 18, Ltd. (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 19.31% | | | | | 1/2/2019 | | 4/17/2031 | | 9,680 | | | 6,940 | | | 5,719 | | | 3.2 | |
| | | | | | | | | | | | | | | | | | | |
| Madison Park Funding XXIII, Ltd. (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 24.84% | | | | | 1/8/2020 | | 7/27/2047 | | 10,000 | | | 6,160 | | | 5,492 | | | 3.1 | |
| | | | | | | | | | | | | | | | | | | |
| Madison Park Funding XXIX, Ltd. (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 21.85% | | | | | 12/22/2020 | | 10/18/2047 | | 9,500 | | | 6,476 | | | 5,934 | | | 3.3 | |
| | | | | | | | | | | | | | | | | | | |
| Monroe Capital MML CLO X, Ltd. (9) | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E-R | | | | 13.55% | | SOFR+ | 8.75% | | 4/22/2022 | | 5/20/2034 | | 1,000 | | | 949 | | | 945 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | | |
| Octagon Investment Partners 39, Ltd. (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 17.44% | | | | | 1/23/2020 | | 10/20/2030 | | 7,000 | | | 4,539 | | | 3,084 | | | 1.7 | |
| | | | | | | | | | | | | | | | | | | |
| Park Avenue Institutional Advisers CLO Ltd 2021-1 (9) | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E | | | | 12.11% | | L+ | 7.30% | | 1/26/2021 | | 1/20/2034 | | 1,000 | | | 979 | | | 911 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | | |
| Redding Ridge 4 (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 15.34% | | | | | 3/4/2021 | | 4/15/2030 | | 1,300 | | | 1,024 | | | 691 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | | |
| Regatta II Funding (9) | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class DR2 | | | | 11.78% | | L+ | 6.95% | | 6/5/2020 | | 1/15/2029 | | 800 | | | 788 | | | 740 | | | 0.4 | |
| | | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
March 31, 2023
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| Regatta XXII Funding Ltd (9) | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E | | | | 11.83% | | SOFR+ | 7.19% | | 5/6/2022 | | 7/20/2035 | | $ | 3,000 | | | $ | 2,972 | | | $ | 2,990 | | | 1.7 | % |
| | | | | | | | | | | | | | | | | | | |
| THL Credit Wind River 2019‐3 CLO Ltd (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 13.84% | | | | | 4/5/2019 | | 4/15/2031 | | 7,000 | | | 5,321 | | | 3,708 | | | 2.1 | |
| | | | | | | | | | | | | | | | | | | |
| Trinitas CLO VIII (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 23.02% | | | | | 3/4/2021 | | 7/20/2117 | | 5,200 | | | 3,094 | | | 2,139 | | | 1.2 | |
| | | | | | | | | | | | | | | | | | | |
| Venture 45 CLO Ltd. (9) | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E | | | | 12.34% | | SOFR+ | 7.70% | | 4/18/2022 | | 7/20/2035 | | 3,000 | | | 2,934 | | | 2,876 | | | 1.6 | |
| | | | | | | | | | | | | | | | | | | |
| Wellfleet CLO 2018-2 (7) (9) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 22.01% | | | | | 3/4/2021 | | 10/20/2031 | | 1,000 | | | 680 | | | 439 | | | 0.2 | |
| | | | | | | | | | | | | | | | | | | |
| Total Structured Finance Securities | | | | | | | | | | | | | $ | 131,473 | | | $ | 103,360 | | | $ | 87,023 | | | 48.3 | % |
| | | | | | | | | | | | | | | | | | | |
| Total Non-control/Non-affiliate Investments | | | | | | | | | | | | | $ | 473,117 | | | $ | 446,527 | | | $ | 400,484 | | | 222.7 | % |
| Affiliate Investments | | | | | | | | | | | | | | | | | | | |
| Contract Datascan Holdings, Inc. (4) (20) | | Office Machinery and Equipment Rental and Leasing | | | | | | | | | | | | | | | | | |
Preferred Equity (3,061 Series A shares), 10% PIK | | | | | | | | | 8/5/2015 | | | | | | $ | 6,551 | | | $ | 8,010 | | | 4.5 | % |
Common Equity (11,273 shares) (10) | | | | | | | | | 6/28/2016 | | | | | | 104 | | | 1,520 | | | 0.8 | |
| | | | | | | | | | | | | | | 6,655 | | | 9,530 | | | 5.3 | |
| DRS Imaging Services, LLC (10) (13) (20) | | Data Processing, Hosting, and Related Services | | | | | | | | | | | | | | | | | |
Common Equity (1,135 units) | | | | | | | | | 3/8/2018 | | | | | | 1,135 | | | 1,525 | | | 0.8 | |
| | | | | | | | | | | | | | | | | | | |
| Master Cutlery, LLC (4) (10) (20) | | Sporting and Recreational Goods and Supplies Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Subordinated Loan (6) (11) | | | | 13.00% PIK | | N/A | | | 4/17/2015 | | 7/20/2023 | | 8,857 | | | 4,680 | | | 129 | | | 0.1 | |
Preferred Equity (3,723 Series A units), 8% PIK | | | | | | | | | 4/17/2015 | | | | | | 3,483 | | | — | | | — | |
Common Equity (15,564 units) | | | | | | | | | 4/17/2015 | | | | | | — | | | — | | | — | |
| | | | | | | | | | | | | 8,857 | | | 8,163 | | | 129 | | | 0.1 | |
| Pfanstiehl Holdings, Inc. (4) (20) (21) | | Pharmaceutical Preparation Manufacturing | | | | | | | | | | | | | | | | | |
Common Equity (400 Class A shares) | | | | | | | | | 1/1/2014 | | | | | | 217 | | | 85,429 | | | 47.5 | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
March 31, 2023
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above Index (2) | | Initial Acquisition Date | | Maturity | | Principal Amount | | Amortized Cost | | Fair Value (3) | | Percent of Net Assets |
| | | | | | | | | | | | | | | | | | | |
| TalentSmart Holdings, LLC (10) (13) (20) | | Professional and Management Development Training | | | | | | | | | | | | | | | | | |
Common Equity (1,595,238 Class A shares) | | | | | | | | | 10/11/2019 | | | | | | $ | 1,595 | | | $ | 761 | | | 0.4 | % |
| | | | | | | | | | | | | | | | | | | |
| TRS Services, LLC (4) (10) (20) | | Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | | | | | | | | | | | | | | | | | |
Preferred Equity (1,937,191 Class A units), 11% PIK | | | | | | | | | 12/10/2014 | | | | | | — | | | 1,901 | | | 1.1 | |
Common Equity (3,000,000 units) | | | | | | | | | 12/10/2014 | | | | | | 572 | | | — | | | — | |
| | | | | | | | | | | | | | | 572 | | | 1,901 | | | 1.1 | |
| | | | | | | | | | | | | | | | | | | |
| Total Affiliate Investments | | | | | | | | | | | | | $ | 8,857 | | | $ | 18,337 | | | $ | 99,275 | | | 55.2 | % |
| Control Investments | | | | | | | | | | | | | | | | | | | |
| Eblens Holdings, Inc. (10) (20) | | Shoe Store | | | | | | | | | | | | | | | | | |
| Subordinated Loan (6) | | | | 13.00% PIK | | N/A | | | 7/13/2017 | | 10/3/2025 | | $ | 5,109 | | | $ | 4,605 | | | $ | — | | | — | % |
| Subordinated Loan (6) | | | | 13.00% PIK | | N/A | | | 7/13/2017 | | 10/3/2025 | | 5,109 | | | 4,605 | | | — | | | — | |
Common Equity (356 Class A units) | | | | | | | | | 10/3/2022 | | | | | | 950 | | | — | | | — | |
| | | | | | | | | | | | | 10,218 | | | 10,160 | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | |
| Total Control Investments | | | | | | | | | | | | | $ | 10,218 | | | $ | 10,160 | | | $ | — | | | — | % |
| | | | | | | | | | | | | | | | | | | |
| Total Investments | | | | | | | | | | | | | $ | 492,192 | | | $ | 475,024 | | | $ | 499,759 | | | 277.9 | % |
(1)Equity ownership may be held in shares or units of companies affiliated with the portfolio company. The Company’s investments are generally classified as “restricted securities” as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144.
(2)At March 31, 2023, the Company held loans with an aggregate principal amount of $311,371, or 94% of the total loan portfolio, that bear interest at a variable rate indexed to LIBOR (L) or SOFR, and reset monthly, quarterly, or semi-annually. For each variable-rate investment, the Company has provided the spread over the reference rate and current interest rate in effect at March 31, 2023. Unless otherwise noted, all investments with a stated PIK rate require interest payments with the issuance of additional securities as payment of the entire PIK provision.
(3)Unless otherwise noted in footnote 14, fair value was determined using significant unobservable inputs for all of the Company’s investments and are considered Level 3 under GAAP. See Note 5 for further details.
(4)Investments (or portion thereof) held by SBIC I LP. These assets are pledged as collateral of the SBA debentures and cannot be pledged under any debt obligation of the Company.
(5)Subject to unfunded commitments. See Note 6.
(6)Investment was on non-accrual status as of March 31, 2023, meaning the Company has suspended recognition of all or a portion of income on the investment. See Note 4 for further details.
(7)Amortized cost reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO subordinated note investments. CLO subordinated note positions are entitled to recurring distributions, which are generally equal to the residual cash flow of payments received on underlying securities less contractual payments to debt holders and fund expenses.
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments - Continued (unaudited)
March 31, 2023
(Dollar amounts in thousands)
(8)The Company has entered into a contractual arrangement with co‑lenders whereby, subject to certain conditions, it has agreed to receive its payment after the repayment of certain co‑lenders pursuant to a payment waterfall. The table below provides additional details as of March 31, 2023:
| | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | | Reported Interest Rate | | Interest Rate per Credit Agreement | | Additional Interest per Annum |
| SS Acquisition, LLC | | 11.70% | | 11.09% | | 0.61% |
| SS Acquisition, LLC (Delayed Draw) | | 12.40% | | 11.19% | | 1.21% |
(9)The rate disclosed on CLO subordinated note investments is the estimated effective yield, generally established at purchase and re-evaluated upon receipt of distributions, and based upon projected amounts and timing of future distributions and the projected amounts and timing of terminal principal payments at the time of estimation. The estimated yield and investment cost may ultimately not be realized.
(10)Non-income producing.
(11)The interest rate on these investments contains a PIK provision, whereby the issuer has the option to make interest payments in cash or with the issuance of additional securities as payment of the entire PIK provision. The interest rate in the schedule represents the current interest rate in effect for these investments. The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed as of March 31, 2023: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | | Investment Type | | Range of PIK
Option | | Range of Cash
Option | | Maximum PIK
Rate Allowed |
| Kreg, LLC | | Senior Secured Loan | | 0% to 4.00% | | 7.30% to 11.30% | | 4.50% |
| Master Cutlery, LLC | | Subordinated Loan | | 0% to 13.00% | | 0% to 13.00% | | 13.00% |
(12)Represents expiration date of the warrants.
(13)All or a portion of investment held by a wholly owned subsidiary subject to income tax.
(14)Fair value was determined by reference to observable inputs other than quoted prices in active markets and are considered Level 2 under GAAP. See Note 5 for further details.
(15)Investments (or a portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the BNP Facility and cannot be pledged under any debt obligation of the Parent.
(16)As of March 31, 2023, the effective accretable yield has been estimated to be 0%, as the aggregate amount of projected distributions, including projected distributions related to liquidation of the underlying portfolio upon the security's anticipated optional redemption, is less than current amortized cost. Projected distributions are periodically monitored and re-evaluated. All actual distributions will be recognized as reductions to amortized cost until such time, if and when occurring, a future aggregate amount of then-projected distributions exceeds the security's then-current amortized cost.
(17)Loan accumulation facilities are financing structures intended to aggregate loans that are expected to form part of the portfolio of a future CLO vehicle. Reported yields represent an estimated yield to be earned on the investment. Income notes associated with loan accumulation facilities generally pay returns equal to the actual income earned on facility assets less costs of senior financing and manager costs. As of March 31, 2023, the fair value of the loan accumulation facility was determined by a probability weighted NAV analysis.
(18)Not meaningful as there is no outstanding balance on the revolver or delayed draw facility. The Company earns unfunded commitment fees on undrawn revolving lines of credit balances, which are reported in fee income.
(19)The Company holds at least one seat on the portfolio company’s board of directors.
(20)The Company has an observer seat on the portfolio company’s board of directors.
(21)Portfolio company represents greater than 5% of total assets at March 31, 2023.
(22)Non-qualifying assets under Section 55(a) of the 1940 Act. Qualifying assets as defined in Section 55 of the 1940 Act must represent at least 70% of the Company’s assets immediately following the acquisition of any additional non-qualifying assets. As of March 31, 2023, approximately 81% of the Company's assets were qualifying assets.
(23)Equity participation rights issued by unaffiliated third party fully covered with underlying positions in the portfolio company.
See Notes to Consolidated Financial Statements (unaudited).
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Non-control/Non-affiliate Investments | | | | | | | | | | | | | | | |
| 24 Seven Holdco, LLC (15) | | Temporary Help Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.39% | | L+ | 6.00% | | 1/28/2022 | | 11/16/2027 | | $ | 8,910 | | | $ | 8,854 | | | $ | 8,821 | | | 4.9 | % |
| | | | | | | | | | | | | | | | | | | |
| AIDC IntermediateCo 2, LLC (15) | | Computer Systems Design Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.44% | | SOFR+ | 6.25% | | 7/22/2022 | | 7/22/2027 | | 2,000 | | | 1,959 | | | 1,943 | | | 1.1 | |
| | | | | | | | | | | | | | | | | | | |
| Allen Media, LLC (14) (15) | | Cable and Other Subscription Programming | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.23% | | SOFR+ | 5.50% | | 3/2/2021 | | 2/10/2027 | | 3,768 | | | 3,763 | | | 3,103 | | | 1.7 | |
| | | | | | | | | | | | | | | | | | | |
| All Star Auto Lights, Inc. (4) (15) (21) | | Motor Vehicle Parts (Used) Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.00% | | L+ | 7.25% | | 12/19/2019 | | 8/20/2025 | | 23,098 | | | 22,863 | | | 22,890 | | | 12.7 | |
| Senior Secured Loan | | | | 11.76% | | L+ | 7.25% | | 8/4/2022 | | 8/20/2025 | | 4,975 | | | 4,889 | | 4,930 | | 2.7 | |
| | | | | | | | | | | | | 28,073 | | | 27,752 | | | 27,820 | | | 15.4 | |
| | | | | | | | | | | | | | | | | | | |
| Astro One Acquisition Corporation | | Other Miscellaneous Nondurable Goods Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 13.23% | | L+ | 8.50% | | 1/31/2022 | | 9/14/2029 | | 3,000 | | | 2,680 | | | 2,246 | | | 1.2 | |
| | | | | | | | | | | | | | | | | | | |
| Asurion, LLC (14) | | Communication Equipment Repair and Maintenance | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.63% | | L+ | 5.25% | | 6/28/2022 | | 1/31/2028 | | 2,000 | | | 1,766 | | | 1,572 | | | 0.9 | |
| | | | | | | | | | | | | | | | | | | |
| Atlantis Holding, LLC (14) (15) | | Electronics and Appliance Stores | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.83% | | SOFR+ | 7.25% | | 3/29/2022 | | 3/31/2029 | | 8,316 | | | 8,037 | | | 8,102 | | | 4.5 | |
| | | | | | | | | | | | | | | | | | | |
| Avison Young (22) | | Nonresidential Property Managers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.19% | | SOFR+ | 5.75% | | 11/25/2021 | | 1/31/2026 | | 3,946 | | | 3,926 | | | 3,475 | | | 1.9 | |
| Senior Secured Loan (15) | | | | 11.44% | | SOFR+ | 7.00% | | 8/19/2022 | | 1/31/2026 | | 798 | | | 755 | | | 732 | | | 0.4 | |
| | | | | | | | | | | | | 4,744 | | | 4,681 | | | 4,207 | | | 2.3 | |
| | | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| BayMark Health Services, Inc. (15) | | Outpatient Mental Health and Substance Abuse Centers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 13.23% | | L+ | 8.50% | | 6/10/2021 | | 6/11/2028 | | $ | 4,962 | | | $ | 4,904 | | | $ | 4,861 | | | 2.7 | % |
| Senior Secured Loan (Delayed Draw) (5) | | | | 13.23% | | L+ | 8.50% | | 6/10/2021 | | 6/11/2028 | | 3,988 | | | 3,883 | | | 3,814 | | | 2.1 | |
| | | | | | | | | | | | | 8,950 | | | 8,787 | | | 8,675 | | | 4.8 | |
| | | | | | | | | | | | | | | | | | | |
| BCPE North Star US Holdco 2, Inc. (F/K/A Dessert Holdings) | | Ice Cream and Frozen Dessert Manufacturing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.98% | | L+ | 7.25% | | 2/2/2022 | | 6/8/2029 | | 1,667 | | | 1,641 | | | 1,540 | | | 0.9 | |
| | | | | | | | | | | | | | | | | | | |
| Boca Home Care Holdings, Inc. (20) | | Services for the Elderly and Persons with Disabilities | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 11.33% | | SOFR+ | 6.50% | | 2/25/2022 | | 2/25/2027 | | 9,548 | | | 9,469 | | | 9,201 | | | 5.1 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | SOFR+ | 1.00% | | 2/25/2022 | | 2/25/2027 | | — | | | (11) | | | (47) | | | — | |
Common Equity (1,290 Class A units) (10) (13) | | | | | | | | | 2/25/2022 | | | | | | 1,290 | | | 1,098 | | | 0.6 | |
| | | | | | | | | | | | | 9,548 | | | 10,748 | | | 10,252 | | | 5.7 | |
| | | | | | | | | | | | | | | | | | | |
| Constellis Holdings, LLC (10) | | Other Justice, Public Order, and Safety Activities | | | | | | | | | | | | | | | | | |
Common Equity (20,628 common shares) | | | | | | | | | 3/27/2020 | | | | | | 703 | | | 32 | | | — | |
| | | | | | | | | | | | | | | | | | | |
| Convergint Technologies Holdings, LLC | | Security Systems Services (except Locksmiths) | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.07% | | SOFR+ | 6.75% | | 9/28/2018 | | 3/30/2029 | | 5,938 | | | 5,849 | | | 5,767 | | | 3.2 | |
| | | | | | | | | | | | | | | | | | | |
| Creation Technologies (15) (22) | | Bare Printed Circuit Board Manufacturing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.25% | | L+ | 5.50% | | 9/24/2021 | | 10/5/2028 | | 1,990 | | | 1,977 | | | 1,854 | | | 1.0 | |
| | | | | | | | | | | | | | | | | | | |
| Diamond Sports Group, LLC (14) (15) | | Television Broadcasting | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.32% | | SOFR+ | 8.00% | | 3/9/2022 | | 5/25/2026 | | 252 | | | 246 | | | 240 | | | 0.1 | |
| Senior Secured Loan (6) | | | | 7.57% | | SOFR+ | 3.25% | | 11/19/2019 | | 8/24/2026 | | 1,935 | | | 1,935 | | | 248 | | | 0.1 | |
| | | | | | | | | | | | | 2,187 | | | 2,181 | | | 488 | | | 0.2 | |
| | | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| East West Manufacturing (15) | | Fluid Power Pump and Motor Manufacturing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.07% | | SOFR+ | 5.75% | | 2/11/2022 | | 12/22/2028 | | $ | 1,950 | | | $ | 1,933 | | | $ | 1,873 | | | 1.0 | % |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | SOFR+ | 2.88% | | 2/11/2022 | | 12/22/2028 | | — | | | (3) | | | (11) | | | — | |
| | | | | | | | | | | | | 1,950 | | | 1,930 | | | 1,862 | | | 1.0 | |
| Electrical Components International, Inc. | | Current-Carrying Wiring Device Manufacturing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.88% | | L+ | 8.50% | | 4/8/2021 | | 6/26/2026 | | 3,679 | | | 3,360 | | | 3,468 | | | 1.9 | |
| | | | | | | | | | | | | | | | | | | |
| EnergySolutions, LLC (15) | | Hazardous Waste Treatment and Disposal | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.48% | | L+ | 3.75% | | 7/8/2021 | | 5/9/2025 | | 1,768 | | | 1,765 | | | 1,652 | | | 0.9 | |
| | | | | | | | | | | | | | | | | | | |
| Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4) (19) | | Electrical Contractors and Other Wiring Installation Contractors | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.50% | | N/A | | | 6/30/2017 | | 12/31/2025 | | 6,359 | | | 6,359 | | | 6,359 | | | 3.5 | |
| Senior Secured Loan (6) (10) | | | | 10.00% PIK | | N/A | | | 6/30/2017 | | 12/31/2026 | | 7,098 | | | 6,584 | | | 2,887 | | | 1.6 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | N/A | | | 11/29/2021 | | 12/31/2025 | | — | | | — | | | — | | | — | |
| Equity Participation Rights (10) (23) | | | | | | | | | 12/31/2021 | | | | | | 4,722 | | | — | | | — | |
| | | | | | | | | | | | | 13,457 | | | 17,665 | | | 9,246 | | | 5.1 | |
| Excelin Home Health, LLC (4) | | Home Health Care Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 14.23% cash / 1.25% PIK | | L+ | 9.50% | | 10/25/2018 | | 9/30/2025 | | 4,277 | | | 4,210 | | | 3,987 | | | 2.2 | |
| | | | | | | | | | | | | | | | | | | |
| GGC Aerospace Topco L.P. | | Other Aircraft Parts and Auxiliary Equipment Manufacturing | | | | | | | | | | | | | | | | | |
Common Equity (368,852 Class A units) (10) | | | | | | | | | 12/29/2017 | | | | | | 450 | | | — | | | — | |
Common Equity (40,984 Class B units) (10) | | | | | | | | | 12/29/2017 | | | | | | 50 | | | — | | | — | |
| | | | | | | | | | | | | | | 500 | | | — | | | — | |
| Honor HN Buyer Inc (15) | | Services for the Elderly and Persons with Disabilities | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.48% | | SOFR+ | 5.75% | | 10/15/2021 | | 10/15/2027 | | 6,532 | | | 6,428 | | | 6,426 | | | 3.6 | |
| Senior Secured Loan (Delayed Draw) (5) | | | | 10.48% | | SOFR+ | 5.75% | | 10/15/2021 | | 10/15/2027 | | 1,904 | | | 1,812 | | | 1,762 | | | 1.0 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | SOFR+ | 5.75% | | 10/15/2021 | | 10/15/2027 | | — | | | (12) | | | (12) | | | — | |
| | | | | | | | | | | | | 8,436 | | | 8,228 | | | 8,176 | | | 4.6 | |
| | | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Idera | | Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.50% | | L+ | 6.75% | | 1/27/2022 | | 3/2/2029 | | $ | 4,000 | | | $ | 4,000 | | | $ | 3,732 | | | 2.1 | % |
| | | | | | | | | | | | | | | | | | | |
| Inergex Holdings, LLC | | Other Computer Related Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (11) | | | | 12.15% cash / 2.00% PIK | | L+ | 7.00% | | 10/1/2018 | | 10/1/2024 | | 14,868 | | | 14,669 | | | 14,868 | | | 8.2 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | L+ | 7.00% | | 10/1/2018 | | 10/1/2024 | | — | | | (73) | | | — | | | — | |
| | | | | | | | | | | | | 14,868 | | | 14,596 | | | 14,868 | | | 8.2 | |
| | | | | | | | | | | | | | | | | | | |
| Ivanti Software, Inc. (14) (15) | | Software Publishers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.01% | | L+ | 4.25% | | 3/26/2021 | | 12/1/2027 | | 2,963 | | | 2,972 | | | 2,359 | | | 1.3 | |
| | | | | | | | | | | | | | | | | | | |
| JP Intermediate B, LLC (15) | | Drugs and Druggists' Sundries Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.91% | | L+ | 5.50% | | 1/14/2021 | | 11/15/2025 | | 5,369 | | | 5,227 | | | 4,622 | | | 2.6 | |
| | | | | | | | | | | | | | | | | | | |
| Karman Buyer Corp (14) (15) | | Advertising Agencies | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 8.28% | | L+ | 4.50% | | 3/2/2022 | | 10/28/2027 | | 2,284 | | | 2,256 | | | 1,898 | | | 1.1 | |
| | | | | | | | | | | | | | | | | | | |
| KNS Acquisition Corp. (15) | | Electronic Shopping and Mail-Order Houses | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.42% | | L+ | 6.25% | | 4/16/2021 | | 4/21/2027 | | 6,781 | | | 6,747 | | | 6,515 | | | 3.6 | |
| | | | | | | | | | | | | | | | | | | |
| Kreg LLC (15) | | Other Ambulatory Health Care Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.98% cash / 0.50% PIK | | SOFR+ | 6.25% | | 12/20/2021 | | 12/20/2026 | | 16,550 | | | 16,452 | | | 15,675 | | | 8.7 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | SOFR+ | 6.25% | | 12/20/2021 | | 12/20/2026 | | — | | | (8) | | | (71) | | | — | |
| | | | | | | | | | | | | 16,550 | | | 16,444 | | | 15,604 | | | 8.7 | |
| LogMeIn, Inc. (14) (15) | | Data Processing, Hosting, and Related Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.14% | | L+ | 4.75% | | 3/26/2021 | | 8/31/2027 | | 2,946 | | | 2,945 | | | 1,909 | | | 1.1 | |
| | | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Metasource (15) | | All Other Business Support Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.69% | | SOFR+ | 6.25% | | 5/17/2022 | | 5/17/2027 | | $ | 2,779 | | | $ | 2,754 | | | $ | 2,592 | | | 1.4 | % |
| Senior Secured Loan (Delayed Draw) (5) | | | | n/m (18) | | SOFR+ | 6.25% | | 5/17/2022 | | 5/17/2027 | | — | | | (8) | | | (81) | | | — | |
| | | | | | | | | | | | | 2,779 | | | 2,746 | | | 2,511 | | | 1.4 | |
| | | | | | | | | | | | | | | | | | | |
| Milrose Consultants, LLC (4) (21) | | Administrative Management and General Management Consulting Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 11.33% | | SOFR+ | 6.50% | | 7/16/2019 | | 7/16/2025 | | 27,172 | | | 27,151 | | | 26,700 | | | 14.8 | |
| Senior Secured Loan (Revolver) (5) | | | | 11.33% | | SOFR+ | 6.50% | | 7/16/2019 | | 7/16/2025 | | 476 | | | 470 | | | 448 | | | 0.2 | |
| | | | | | | | | | | | | 27,648 | | | 27,621 | | | 27,148 | | | 15.0 | |
| | | | | | | | | | | | | | | | | | | |
| One GI LLC | | Offices of Other Holding Companies | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (15) | | | | 11.13% | | L+ | 6.75% | | 12/13/2021 | | 12/22/2025 | | 7,508 | | | 7,395 | | | 7,039 | | | 3.9 | |
| Senior Secured Loan (Delayed Draw) (5) (15) | | | | 11.14% | | L+ | 6.75% | | 12/13/2021 | | 12/22/2025 | | 3,946 | | | 3,866 | | | 3,698 | | | 2.0 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | L+ | 6.75% | | 12/13/2021 | | 12/22/2025 | | — | | | (21) | | | (90) | | | — | |
| | | | | | | | | | | | | 11,454 | | | 11,240 | | | 10,647 | | | 5.9 | |
| | | | | | | | | | | | | | | | | | | |
| Planet Bingo, LLC (F/K/A 3rd Rock Gaming Holdings, LLC) | | Software Publishers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (6) | | | | 4.00% | | N/A | | | 3/13/2018 | | 1/1/2024 | | 16,648 | | | 14,113 | | | 6,864 | | | 3.8 | |
| | | | | | | | | | | | | | | | | | | |
| PM Acquisition LLC | | All Other General Merchandise Stores | | | | | | | | | | | | | | | | | |
Common Equity (499 units) (10) (13) | | | | | | | | | 9/30/2017 | | | | | | 499 | | | 967 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | | |
| RC Buyer, Inc. | | Other Automotive Mechanical and Electrical Repair and Maintenance | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.23% | | L+ | 6.50% | | 6/24/2022 | | 7/30/2029 | | 1,125 | | | 1,083 | | | 1,064 | | | 0.6 | |
| | | | | | | | | | | | | | | | | | | |
| Reception Purchaser LLC (15) | | Transportation and Warehousing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 10.42% | | SOFR+ | 6.00% | | 4/28/2022 | | 3/24/2028 | | 2,548 | | | 2,514 | | | 2,501 | | | 1.4 | |
| | | | | | | | | | | | | | | | | | | |
| RPLF Holdings, LLC (10) (13) | | Software Publishers | | | | | | | | | | | | | | | | | |
Common Equity (345,339 Class A units) | | | | | | | | | 1/17/2018 | | | | | | 492 | | | 406 | | | 0.2 | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| | | | | | | | | | | | | | | | | | | |
| RSA Security (15) | | Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (14) | | | | 9.11% | | L+ | 4.75% | | 4/16/2021 | | 4/27/2028 | | $ | 2,769 | | | $ | 2,756 | | | $ | 1,931 | | | 1.1 | % |
| Senior Secured Loan | | | | 12.11% | | L+ | 7.75% | | 4/16/2021 | | 4/27/2029 | | 4,450 | | | 4,400 | | | 3,350 | | | 1.9 | |
| | | | | | | | | | | | | 7,219 | | | 7,156 | | | 5,281 | | | 3.0 | |
| RumbleOn, Inc. (15) (22) | | Other Industrial Machinery Manufacturing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.98% | | L+ | 8.25% | | 8/31/2021 | | 8/31/2026 | | 3,985 | | | 3,817 | | | 3,617 | | | 2.0 | |
| Senior Secured Loan (Delayed Draw) (5) | | | | 12.98% | | L+ | 8.25% | | 8/31/2021 | | 8/31/2026 | | 1,202 | | | 1,186 | | | 1,042 | | | 0.6 | |
Warrants (warrants to purchase up to $600,000 in common stock) | | | | | | | | | 8/31/2021 | | 7/25/2023 (12) | | | | 200 | | | — | | | — | |
| | | | | | | | | | | | | 5,187 | | | 5,203 | | | 4,659 | | | 2.6 | |
| Sentry Centers Holdings, LLC (10) (13) | | Other Professional, Scientific, and Technical Services | | | | | | | | | | | | | | | | | |
Preferred Equity (1,603 Series B units) | | | | | | | | | 9/4/2020 | | | | | | 160 | | | 80 | | | — | |
| | | | | | | | | | | | | | | | | | | |
| Signal Parent, Inc. (14) (15) | | New Single-Family Housing Construction (except For-Sale Builders) | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 7.89% | | L+ | 3.50% | | 3/25/2021 | | 4/3/2028 | | 1,822 | | | 1,807 | | | 1,566 | | | 0.9 | |
| | | | | | | | | | | | | | | | | | | |
| Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.) (15) | | Child Day Care Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.98% | | L+ | 8.25% | | 7/26/2018 | | 7/30/2026 | | 6,399 | | | 6,375 | | | 6,182 | | | 3.4 | |
| | | | | | | | | | | | | | | | | | | |
| SSJA Bariatric Management LLC (15) | | Offices of Physicians, Mental Health Specialists | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.98% | | SOFR+ | 5.25% | | 8/26/2019 | | 8/26/2024 | | 9,675 | | | 9,643 | | | 9,513 | | | 5.3 | |
| Senior Secured Loan | | | | 9.98% | | SOFR+ | 5.25% | | 12/31/2020 | | 8/26/2024 | | 1,045 | | | 1,041 | | | 1,028 | | | 0.6 | |
| Senior Secured Loan | | | | 9.98% | | SOFR+ | 5.25% | | 12/8/2021 | | 8/26/2024 | | 2,633 | | | 2,617 | | | 2,589 | | | 1.4 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | SOFR+ | 5.25% | | 8/26/2019 | | 8/26/2024 | | — | | | (2) | | | (11) | | | — | |
| | | | | | | | | | | | | 13,353 | | | 13,299 | | | 13,119 | | | 7.3 | |
| SS Acquisition, LLC (15) | | Sports and Recreation Instruction | | | | | | | | | | | | | | | | | |
| Senior Secured Loan (8) | | | | 11.10% | | SOFR+ | 6.85% | | 12/30/2021 | | 12/30/2026 | | 3,042 | | | 3,017 | | | 2,988 | | | 1.7 | |
| Senior Secured Loan (Delayed Draw) (5) | | | | 11.84% | | SOFR+ | 7.59% | | 12/30/2021 | | 12/30/2026 | | 1,217 | | | 1,205 | | | 1,184 | | | 0.7 | |
| | | | | | | | | | | | | 4,259 | | | 4,222 | | | 4,172 | | | 2.4 | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Staples, Inc. (14) (15) (22) | | Business to Business Electronic Markets | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.44% | | L+ | 5.00% | | 6/24/2019 | | 4/16/2026 | | $ | 2,900 | | | $ | 2,858 | | | $ | 2,689 | | | 1.5 | % |
| | | | | | | | | | | | | | | | | | | |
| STS Operating, Inc. | | Industrial Machinery and Equipment Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.38% | | L+ | 8.00% | | 5/15/2018 | | 4/30/2026 | | 9,073 | | | 9,071 | | | 9,073 | | | 5.0 | |
| | | | | | | | | | | | | | | | | | | |
| The Escape Game, LLC (4) | | Other amusement and recreation industries | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.38% | | L+ | 7.00% | | 12/21/2021 | | 12/22/2024 | | 16,333 | | | 16,333 | | | 16,497 | | | 9.1 | |
| Senior Secured Loan (Revolver) (5) | | | | n/m (18) | | L+ | 7.00% | | 12/21/2021 | | 12/22/2024 | | — | | | (31) | | | — | | | — | |
| | | | | | | | | | | | | 16,333 | | | 16,302 | | | 16,497 | | | 9.1 | |
| Thryv, Inc. (14) (15) | | Directory and Mailing List Publishers | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.88% | | L+ | 8.50% | | 2/18/2021 | | 3/1/2026 | | 3,978 | | | 3,910 | | | 3,930 | | | 2.2 | |
| | | | | | | | | | | | | | | | | | | |
| Tolemar Acquisition, Inc. (15) | | Motorcycle, Bicycle, and Parts Manufacturing | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.32% | | L+ | 5.75% | | 10/14/2021 | | 10/14/2026 | | 15,504 | | | 15,445 | | | 15,504 | | | 8.6 | |
| Senior Secured Loan (Revolver) (5) | | | | 12.25% | | Prime + | 4.75% | | 10/14/2021 | | 10/14/2026 | | 438 | | | 428 | | | 438 | | | 0.2 | |
| | | | | | | | | | | | | 15,942 | | | 15,873 | | | 15,942 | | | 8.8 | |
| | | | | | | | | | | | | | | | | | | |
| Tony's Fresh Market / Cardenas Markets (15) | | Supermarkets and Other Grocery (except Convenience) Stores | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 11.44% | | SOFR+ | 6.75% | | 7/20/2022 | | 8/1/2029 | | 5,985 | | | 5,647 | | | 5,532 | | | 3.1 | |
| | | | | | | | | | | | | | | | | | | |
| TruGreen Limited Partnership | | Landscaping Services | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 12.91% | | L+ | 8.50% | | 5/13/2021 | | 11/2/2028 | | 4,500 | | | 4,611 | | | 4,226 | | | 2.3 | |
| | | | | | | | | | | | | | | | | | | |
| United Biologics Holdings, LLC (4) (10) | | Medical Laboratories | | | | | | | | | | | | | | | | | |
Preferred Equity (4,701 units) | | | | | | | | | 4/16/2013 | | | | | | 8 | | | 24 | | | — | |
Warrants (3,976 units) | | | | | | | | | 7/26/2012 | | 4/16/2023 (12) | | | | 9 | | | 11 | | | — | |
| | | | | | | | | | | | | | | 17 | | | 35 | | | — | |
| | | | | | | | | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2022
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Yahoo / Verizon Media (14) (15) | | Internet Publishing and Broadcasting and Web Search Portals | | | | | | | | | | | | | | | | | |
| Senior Secured Loan | | | | 9.88% | | L+ | 5.50% | | 7/21/2021 | | 9/1/2027 | | $ | 3,127 | | | $ | 3,100 | | | $ | 2,843 | | | 1.6 | % |
| | | | | | | | | | | | | | | | | | | |
| Total Debt and Equity Investments | | | | | | | | | | | | | 342,699 | | | 344,143 | | | 314,253 | | | 174.2 | % |
| | | | | | | | | | | | | | | | | | | |
| Structured Finance Securities (22) | | | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2020 (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 19.26% | | | | | 11/16/2020 | | 10/20/2031 | | 11,080 | | | 9,915 | | | 7,996 | | | 4.4 | % |
| | | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2021 Ltd (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 18.54% | | | | | 5/28/2021 | | 7/18/2034 | | 8,630 | | | 7,198 | | | 6,141 | | | 3.4 | |
| | | | | | | | | | | | | | | | | | | |
| Apex Credit CLO 2022-1A (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 16.48% | | | | | 4/28/2022 | | 4/22/2033 | | 10,726 | | | 8,389 | | | 8,611 | | | 4.8 | |
| | | | | | | | | | | | | | | | | | | |
| Ares L CLO | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E | | | | 9.73% | | L+ | 5.65% | | 2/17/2022 | | 1/15/2032 | | 6,000 | | | 5,749 | | | 5,272 | | | 2.9 | |
| | | | | | | | | | | | | | | | | | | |
| Barings CLO 2019-I Ltd. | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E | | | | 10.94% | | L+ | 6.86% | | 2/23/2022 | | 4/15/2035 | | 8,000 | | | 7,899 | | | 7,308 | | | 4.1 | |
| | | | | | | | | | | | | | | | | | | |
| Battalion CLO XI, Ltd. | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E | | | | 11.17% | | L+ | 6.85% | | 4/24/2022 | | 4/24/2034 | | 6,000 | | | 5,855 | | | 5,445 | | | 3.0 | |
| | | | | | | | | | | | | | | | | | | |
| Brightwood Capital MM CLO 2022-1, LTD (17) | | | | | | | | | | | | | | | | | | | |
| Loan accumulation facility | | | | 14.50% | | | | | 1/5/2022 | | 12/31/2032 | | 8,500 | | | 8,500 | | | 8,299 | | | 4.6 | |
| | | | | | | | | | | | | | | | | | | |
| Dryden 53 CLO, LTD. (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes - Income | | | | 23.00% | | | | | 10/26/2020 | | 1/15/2031 | | 2,700 | | | 1,499 | | | 1,029 | | | 0.5 | |
| Subordinated Notes | | | | 22.97% | | | | | 10/26/2020 | | 1/15/2031 | | 2,159 | | | 1,199 | | | 823 | | | 0.5 | |
| | | | | | | | | | | | | 4,859 | | | 2,698 | | | 1,852 | | | 1.0 | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2022
(Dollar amounts in thousands)
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Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Dryden 76 CLO, Ltd. (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 19.75% | | | | | 9/27/2019 | | 10/20/2032 | | $ | 2,750 | | | $ | 2,266 | | | $ | 2,030 | | | 1.1 | % |
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| Elevation CLO 2017-7, Ltd. (7) (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 0.00% | | | | | 2/6/2019 | | 7/15/2030 | | 5,449 | | | 1,311 | | | 118 | | | 0.1 | |
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| Flatiron CLO 18, Ltd. (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 20.94% | | | | | 1/2/2019 | | 4/17/2031 | | 9,680 | | | 6,907 | | | 5,587 | | | 3.1 | |
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| Madison Park Funding XXIII, Ltd. (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 23.69% | | | | | 1/8/2020 | | 7/27/2047 | | 10,000 | | | 6,112 | | | 5,319 | | | 2.9 | |
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| Madison Park Funding XXIX, Ltd. (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 19.83% | | | | | 12/22/2020 | | 10/18/2047 | | 9,500 | | | 6,459 | | | 5,645 | | | 3.1 | |
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| Monroe Capital MML CLO X, Ltd. | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E-R | | | | 13.03% | | SOFR+ | 8.75% | | 4/22/2022 | | 5/20/2034 | | 1,000 | | | 945 | | | 874 | | | 0.5 | |
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| Octagon Investment Partners 39, Ltd. (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 18.97% | | | | | 1/23/2020 | | 10/20/2030 | | 7,000 | | | 4,504 | | | 3,202 | | | 1.8 | |
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| Park Avenue Institutional Advisers CLO Ltd 2021-1 | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E | | | | 11.54% | | L+ | 7.30% | | 1/26/2021 | | 1/20/2034 | | 1,000 | | | 978 | | | 910 | | | 0.5 | |
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| Redding Ridge 4 (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 17.49% | | | | | 3/4/2021 | | 4/15/2030 | | 1,300 | | | 1,034 | | | 695 | | | 0.4 | |
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| Regatta II Funding | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class DR2 | | | | 11.03% | | L+ | 6.95% | | 6/5/2020 | | 1/15/2029 | | 800 | | | 778 | | | 738 | | | 0.4 | |
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| Regatta XXII Funding Ltd | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E | | | | 11.24% | | SOFR+ | 7.19% | | 5/6/2022 | | 7/20/2035 | | 3,000 | | | 2,971 | | | 2,990 | | | 1.7 | |
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OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2022
(Dollar amounts in thousands)
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Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| THL Credit Wind River 2019‐3 CLO Ltd. (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 14.24% | | | | | 4/5/2019 | | 4/15/2031 | | $ | 7,000 | | | $ | 5,347 | | | $ | 3,926 | | | 2.2 | % |
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| Trinitas CLO VIII (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 23.02% | | | | | 3/4/2021 | | 7/20/2117 | | 5,200 | | | 3,060 | | | 2,216 | | | 1.2 | |
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| Venture 45 CLO Ltd. | | | | | | | | | | | | | | | | | | | |
| Mezzanine Debt - Class E | | | | 11.66% | | SOFR+ | 7.70% | | 4/18/2022 | | 7/20/2035 | | 3,000 | | | 2,931 | | | 2,876 | | | 1.6 | |
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| Wellfleet CLO 2018-2 (9) (16) | | | | | | | | | | | | | | | | | | | |
| Subordinated Notes | | | | 23.88% | | | | | 3/4/2021 | | 10/20/2031 | | 1,000 | | | 670 | | | 471 | | | 0.3 | |
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| Total Structured Finance Securities | | | | | | | | | | | | | 131,474 | | | 102,477 | | | 88,518 | | | 49.1 | |
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| Total Non-control/Non-affiliate Investments | | | | | | | | | | | | | 474,173 | | | 446,620 | | | 402,771 | | | 223.2 | |
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| Affiliate Investments | | | | | | | | | | | | | | | | | | | |
| Contract Datascan Holdings, Inc. (4) (20) | | Office Machinery and Equipment Rental and Leasing | | | | | | | | | | | | | | | | | |
Preferred Equity (3,061 Series A shares) 10% PIK | | | | | | | | | 8/5/2015 | | | | | | 6,315 | | | 6,202 | | | 3.4 | |
Common Equity (11,273 shares) (10) | | | | | | | | | 6/28/2016 | | | | | | 104 | | | 510 | | | 0.3 | |
| | | | | | | | | | | | | | | 6,419 | | | 6,712 | | | 3.7 | |
| DRS Imaging Services, LLC (10) (13) (20) | | Data Processing, Hosting, and Related Services | | | | | | | | | | | | | | | | | |
Common Equity (1,135 units) | | | | | | | | | 3/8/2018 | | | | | | 1,135 | | | 1,568 | | | 0.9 | |
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| Master Cutlery, LLC (4) (10) (20) | | Sporting and Recreational Goods and Supplies Merchant Wholesalers | | | | | | | | | | | | | | | | | |
| Subordinated Loan (6) (11) | | | | 13.00% PIK | | N/A | | | 4/17/2015 | | 7/20/2023 | | 8,578 | | | 4,680 | | | 122 | | | 0.1 | % |
Preferred Equity (3,723 Series A units), 8% PIK | | | | | | | | | 4/17/2015 | | | | | | 3,483 | | | — | | | — | |
Common Equity (15,564 units) | | | | | | | | | 4/17/2015 | | | | | | — | | | — | | | — | |
| | | | | | | | | | | | | 8,578 | | | 8,163 | | | 122 | | | 0.1 | |
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2022
(Dollar amounts in thousands)
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Portfolio Company (1)
Investment Type | | Industry | | Interest Rate (2) | | Spread Above
Index (2) | | Initial Acquisition Date | | Maturity | | Principal
Amount | | Amortized Cost | | Fair Value (3) | | Percent of
Net Assets |
| Pfanstiehl Holdings, Inc. (4) (10) (20) (21) | | Pharmaceutical Preparation Manufacturing | | | | | | | | | | | | | | | | | |
Common Equity (400 Class A shares) | | | | | | | | | 1/1/2014 | | | | | | $ | 217 | | | $ | 85,456 | | | 47.4 | % |
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| TalentSmart Holdings, LLC (10) (13) (20) | | Professional and Management Development Training | | | | | | | | | | | | | | | | | |
Common Equity (1,595,238 Class A shares) | | | | | | | | | 10/11/2019 | | | | | | 1,595 | | | 953 | | | 0.5 | |
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| TRS Services, LLC (4) (20) | | Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | | | | | | | | | | | | | | | | | |
Preferred Equity (1,937,191 Class A units), 11% PIK | | | | | | | | | 12/10/2014 | | | | | | — | | | 1,890 | | | 1.0 | |
Common Equity (3,000,000 units) | | | | | | | | | 12/10/2014 | | | | | | 572 | | | — | | | — | |
| | | | | | | | | | | | | | | 572 | | | 1,890 | | | 1.0 | |
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| Total Affiliate Investments | | | | | | | | | | | | | 8,578 | | | 18,101 | | | 96,701 | | | 53.6 | |
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| Control Investment | | | | | | | | | | | | | | | | | | | |
| Eblens Holdings, Inc. (20) | | Shoe Store | | | | | | | | | | | | | | | | | |
| Subordinated Loan (6) | | | | 13.00% PIK | | N/A | | | 7/13/2017 | | 10/3/2025 | | 4,945 | | | 4,605 | | | 1,104 | | | 0.6 | |
| Subordinated Loan (6) | | | | 13.00% PIK | | N/A | | | 7/13/2017 | | 10/3/2025 | | 4,945 | | | 4,605 | | | — | | | — | |
Common Equity (356 Class A units) (10) | | | | | | | | | 10/3/2022 | | | | | | 950 | | | — | | | — | |
| | | | | | | | | | | | | 9,890 | | | 10,160 | | | 1,104 | | | 0.6 | |
| Total Control Investment | | | | | | | | | | | | | 9,890 | | | 10,160 | | | 1,104 | | | 0.6 | |
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| Total Investments | | | | | | | | | | | | | $ | 492,641 | | | $ | 474,880 | | | $ | 500,576 | | | 277.4 | % |
(1)Equity ownership may be held in shares or units of companies affiliated with the portfolio company. The Company’s investments are generally classified as “restricted securities” as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144.
(2)At December 31, 2022, the Company held loans with an aggregate principal amount of $312,595, or 87% of the total loan portfolio, that bear interest at a variable rate indexed to LIBOR (L) or SOFR, and reset monthly, quarterly, or semi-annually. For each variable-rate investment, the Company has provided the spread over the reference rate and current interest rate in effect at December 31, 2022. Unless otherwise noted, all investments with a stated PIK rate require interest payments with the issuance of additional securities as payment of the entire PIK provision.
(3)Unless otherwise noted with footnote 14, fair value was determined using significant unobservable inputs for all of the Company’s investments and are considered Level 3 under GAAP. See Note 5 for further details.
(4)Investments (or portion thereof) held by SBIC I LP. These assets are pledged as collateral of the SBA debentures and cannot be pledged under any debt obligation of the Company.
(5)Subject to unfunded commitments. See Note 6.
(6)Investment was on non-accrual status as of December 31, 2022, meaning the Company has suspended recognition of all or a portion of income on the investment. See Note 4 for further details.
OFS Capital Corporation and Subsidiaries
Consolidated Schedule of Investments
December 31, 2022
(Dollar amounts in thousands)
(7)As of December 31, 2022, the effective accretable yield has been estimated to be 0%, as the aggregate amount of projected distributions, including projected distributions related to liquidation of the underlying portfolio upon the security's anticipated optional redemption, is less than current amortized cost. Projected distributions are periodically monitored and re-evaluated. All actual distributions will be recognized as reductions to amortized cost until such time, if and when occurring, a future aggregate amount of then-projected distributions exceeds the security's then-current amortized cost.
(8)The Company has entered into a contractual arrangement with co‑lenders whereby, subject to certain conditions, it has agreed to receive its payment after the repayment of certain co‑lenders pursuant to a payment waterfall. The table below provides additional details as of December 31, 2022: | | | | | | | | | | | | | | | | | |
| Portfolio Company | Reported Interest Rate | | Interest Rate per Credit Agreement | | Additional Interest per Annum |
| SS Acquisition, LLC | 11.10% | | 10.49% | | 0.61% |
| SS Acquisition, LLC (Delayed Draw) | 11.84% | | 10.49% | | 1.35% |
(9) The rate disclosed on subordinated note investments is the estimated effective yield, generally established at purchase and re-evaluated upon receipt of distributions, and based upon projected amounts and timing of future distributions and the projected amounts and timing of terminal principal payments at the time of estimation. The estimated yield and investment cost may ultimately not be realized.
(10) Non-income producing.
(11) The interest rate on these investments contains a PIK provision, whereby the issuer has the option to make interest payments in cash or with the issuance of additional securities as payment of the entire PIK provision. The interest rate in the schedule represents the current interest rate in effect for these investments. The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed as of December 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | | Investment Type | | Range of PIK
Option | | Range of Cash
Option | | Maximum PIK
Rate Allowed |
| | | | | | | | |
| Inergex Holdings, LLC | | Senior Secured Loan | | 0% to 2.00% | | 12.15% to 14.15% | | 2.00% |
| Master Cutlery, LLC | | Senior Secured Loan | | 0% to 13.00% | | 0% to 13.00% | | 13.00% |
(12)Represents expiration date of the warrants.
(13)All or a portion of investment held by a wholly owned subsidiary subject to income tax.
(14)Fair value was determined by reference to observable inputs other than quoted prices in active markets and are considered Level 2 under GAAP. See Note 5 for further details.
(15)Investments (or a portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the BNP Facility and cannot be pledged under any other debt obligation of the Company.
(16)Amortized cost reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO subordinated note investments. CLO subordinated note positions are entitled to recurring distributions, which are generally equal to the residual cash flow of payments received on underlying securities less contractual payments to debt holders and fund expenses.
(17)Loan accumulation facilities are financing structures intended to aggregate loans that are expected to form part of the portfolio of a future CLO vehicle. Reported yields represent an estimated yield to be earned on the investment. Income notes associated with loan accumulation facilities generally pay returns equal to the income earned on facility assets, less costs of debt financing and manager costs and expenses. In January 2023, the Company prospectively adjusted the estimated yield on this position to 0.00% due to an adverse change in estimated cash flows in accordance with ASC 325-40. As of December 31, 2022, the fair value of the loan accumulation facility was determined by a probability weighted NAV analysis.
(18)Not meaningful as there is no outstanding balance on the revolver or delayed draw loan. The Company earns unfunded commitment fees on undrawn revolving lines of credit balances, which are reported in fee income.
(19)The Company holds at least one seat on the portfolio company’s board of directors.
(20)The Company has an observer seat on the portfolio company’s board of directors.
(21)Portfolio company at fair value represents greater than 5% of total assets at December 31, 2022.
(22)Non-qualifying assets under Section 55(a) of the 1940 Act. Qualifying assets as defined in Section 55 of the 1940 Act must represent at least 70% of the Company's assets immediately following the acquisition of any additional non-qualifying assets. As of December 31, 2022, approximately 80% of the Company's assets were qualifying assets.
(23)Equity participation rights issued by unaffiliated third party fully covered with underlying positions in the portfolio company.
See Notes to Consolidated Financial Statements.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Note 1. Organization
OFS Capital Corporation, a Delaware corporation, is an externally managed, closed-end, non-diversified management investment company. The Company has elected to be regulated as a BDC under the 1940 Act. In addition, for income tax purposes, the Company has elected to be treated as a RIC under Subchapter M of the Code.
The Company’s investment objective is to provide stockholders with both current income and capital appreciation primarily through debt investments and, to a lesser extent, equity investments.
OFS Advisor manages the day-to-day operations of, and provides investment advisory services to, the Company. In addition, OFS Advisor serves as the investment adviser for HPCI, a non-traded BDC with an investment strategy and objective similar to that of the Company. OFS Advisor also serves as the investment adviser for OCCI, a non-diversified, externally managed, closed-end management investment company that is registered as an investment company under the 1940 Act and that primarily invests in Structured Finance Securities. Additionally, OFS Advisor serves as the adviser to separately-managed accounts and sub-advisor to investment companies managed by an affiliate.
The Company may make investments directly or through one or more of its subsidiaries: OFSCC-FS, SBIC I LP or OFSCC-MB.
OFSCC-FS, an indirect wholly owned and consolidated subsidiary of the Company, is a special-purpose vehicle formed in April 2019 for the purpose of acquiring senior secured loan investments. OFSCC-FS has debt financing through its BNP Facility, which provides OFSCC-FS with borrowing capacity of up to $150,000, subject to a borrowing base and other covenants.
SBIC I LP is an investment company subsidiary licensed under the SBA’s small business investment company program. The Company is limited to follow-on investments in current portfolio companies held through SBIC I LP. SBIC I LP is subject to SBA regulations and policies, including periodic examinations by the SBA. SBIC I LP intends to continue to repay its outstanding SBA debentures prior to their scheduled maturity dates.
OFSCC-MB is a wholly owned and consolidated subsidiary taxed under subchapter C of the Code that generally holds the Company’s equity investments in portfolio companies that are taxed as pass-through entities.
Note 2. Summary of Significant Accounting Policies
Basis of presentation: The Company is an investment company as defined in the accounting and reporting guidance under ASC Topic 946, Financial Services–Investment Companies. The accompanying interim consolidated financial statements of the Company and related financial information have been prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q, and Articles 6, 10 and 12 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. However, in the opinion of management, the consolidated financial statements include all adjustments, consisting only of normal and recurring accruals and adjustments, necessary for fair presentation as of, and for, the periods presented. These consolidated financial statements and notes hereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 3, 2023. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.
Significant Accounting Policies: The following information supplements the description of significant accounting policies contained in Note 2 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Reclassifications: Certain prior period amounts have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes thereto. Reclassifications did not impact net increase in net assets resulting from operations, total assets, total liabilities or total net assets, or consolidated statements of changes in net assets and consolidated statements of cash flows classifications.
Use of estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.
Concentration of credit risk: Aside from the Company’s investments, financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits at financial institutions. At various times during
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
the year, the Company exceeds the federally insured limits. The Company places cash deposits only with high credit quality institutions which OFS Advisor believes will mitigate the risk of loss due to credit risk. The amount of loss due to credit risk from its investments, if borrowers completely fail to perform according to the terms of the contracts, is equal to the sum of the Company’s recorded investments and the unfunded commitments disclosed in Note 6.
Cash: The Company’s cash balances are maintained with a member bank of the Federal Deposit Insurance Corporation (“FDIC”) and at times, such balances exceed the FDIC insurance limit. The Company does not believe its cash balances are exposed to any significant credit risk. Cash balances are held in US Bank N.A. and Citibank N.A. money market deposit accounts. In addition, the Company’s use of cash held by SBIC I LP and OFSCC-FS is limited by SBA regulation and the terms and conditions of the BNP Facility, respectively, including but not limited to, payment of interest expense and principal on the outstanding borrowings.
Note 3. Related Party Transactions
Investment Advisory and Management Agreement: OFS Advisor manages the day-to-day operations of, and provides investment advisory services to, the Company pursuant to the Investment Advisory Agreement. The continuation of the Investment Advisory Agreement was most recently approved by the Board on April 5, 2023. Under the terms of the Investment Advisory Agreement, which are in accordance with the 1940 Act and subject to the overall supervision of the Board, OFS Advisor is responsible for sourcing potential investments, conducting research and diligence on potential investments and equity sponsors, analyzing investment opportunities, structuring investments, and monitoring investments and portfolio companies on an ongoing basis.
OFS Advisor’s services under the Investment Advisory Agreement are not exclusive to the Company and OFS Advisor is free to furnish similar services to other entities, including other funds affiliated with OFS Advisor, so long as its services to the Company are not impaired. OFS Advisor also serves as the investment adviser to other companies, including HPCI and OCCI.
OFS Advisor receives fees for providing services to the Company, consisting of two components: a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 1.75% and based on the average value of the Company’s total assets (other than cash, but including assets purchased with borrowed amounts and assets owned by any consolidated entity) at the end of the two most recently completed calendar quarters, adjusted for any share issuances or repurchases during the quarter.
For the years ended December 31, 2023 and 2022, OFS Advisor agreed to reduce its base management fee attributable to all of the OFSCC-FS Assets to 0.25% per quarter (1.00% annualized) of the average value of the OFSCC-FS Assets (excluding cash) at the end of the two most recently completed calendar quarters. OFS Advisor’s base management fee reduction is renewable on an annual basis, and OFS Advisor is not entitled to recoup the amount of the base management fee reduced with respect to the OFSCC-FS Assets. OFS Advisor most recently renewed the agreement for the 2023 calendar year on January 11, 2023.
The incentive fee has two parts. The first part of the incentive fee (“Income Incentive Fee”) is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination and sourcing, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies, but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest or dividend feature (such as OID, debt instruments with PIK interest, equity investments with accruing or PIK dividend and zero coupon securities), accrued income that the Company has not yet received in cash.
Pre-incentive fee net investment income is expressed as a rate of return on the value of the Company’s net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter and adjusted for any share issuances or repurchases during such quarter.
The incentive fee with respect to pre-incentive fee net income is 20.0% of the amount, if any, by which the pre-incentive fee net investment income for the immediately preceding calendar quarter exceeds a 2.0% hurdle rate (which is 8.0% annualized) and a “catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, OFS Advisor receives no incentive fee until the net investment income equals the hurdle rate of 2.0%, but then receives, as a “catch-up,” 100.0% of the pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, OFS Advisor will receive 20.0% of the pre-incentive fee net investment income.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Because of the structure of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter in which the Company incurs a loss. For example, if the Company receives pre-incentive fee net investment income in excess of the quarterly minimum hurdle rate, the Company will pay the applicable incentive fee even if the Company has incurred a loss in that quarter due to realized and unrealized capital losses. The Company’s net investment income used to calculate this part of the incentive fee is also included in the amount of the Company’s gross assets used to calculate the base management fee. These calculations are appropriately prorated for any period of less than three months.
The second part of the incentive fee (the “Capital Gains Fee”) is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20.0% of the Company’s aggregate realized capital gains, if any, on a cumulative basis from the date of the election to be a BDC through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation at the end of such year, less all previous amounts paid in respect of the Capital Gains Fee. Since inception through March 31, 2023, the Company has not made a Capital Gains Fee payment.
The Company accrues the Capital Gains Fee if, on a cumulative basis, the sum of net realized capital gains (losses) plus net unrealized appreciation (depreciation) is positive. An accrued Capital Gains Fee relating to net unrealized appreciation is deferred, and not due to OFS Advisor, until the close of the year in which such gains are realized. If, on a cumulative basis, the sum of net realized capital gains (losses) plus net unrealized appreciation (depreciation) decreases during a period, the Company will reverse any excess Capital Gains Fee previously accrued such that the amount of Capital Gains Fee accrued is no more than 20% of the sum of net realized capital gains (losses) plus net unrealized appreciation (depreciation). As of March 31, 2023 and December 31, 2022, there were no accrued Capital Gains Fees.
License Agreement: The Company is party to a license agreement with OFSAM under which OFSAM has granted the Company a non-exclusive, royalty-free license to use the name “OFS.”
Administration Agreement: OFS Services furnishes the Company with office facilities and equipment, necessary software licenses and subscriptions, and clerical, bookkeeping and record keeping services at such facilities pursuant to the Administration Agreement. The continuation of the Administration Agreement was most recently approved by the Board on April 5, 2023. Under the Administration Agreement, OFS Services performs, or oversees the performance of, the Company’s required administrative services, which include being responsible for the financial records that the Company is required to maintain and preparing reports to its stockholders and all other reports and materials required to be filed with the SEC or any other regulatory authority. In addition, OFS Services assists the Company in determining and publishing its net asset value, oversees the preparation and filing of its tax returns and the printing and dissemination of reports to its stockholders, and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. Under the Administration Agreement, OFS Services also provides managerial assistance on the Company’s behalf to those portfolio companies that have accepted the Company’s offer to provide such assistance. Payment under the Administration Agreement is equal to an amount based upon the Company’s allocable portion of OFS Services’s overhead in performing its obligations under the Administration Agreement, including, but not limited to, rent, information technology services and the Company’s allocable portion of the cost of its officers, including its chief executive officer, chief financial officer, chief compliance officer, chief accounting officer and their respective staffs. To the extent that OFS Services outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis without profit to OFS Services.
Equity Ownership: As of March 31, 2023, affiliates of OFS Advisor held approximately 3,020,992 shares of common stock, which is approximately 22.5% of the Company’s outstanding shares of common stock.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Expenses recognized under agreements with OFS Advisor and OFS Services and distributions paid to affiliates for the three months ended March 31, 2023 and 2022, are presented below:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
| Management fee | | | | | $ | 1,894 | | | $ | 2,020 | |
| Incentive fees: | | | | | | | |
| Income Incentive Fee | | | | | 1,238 | | | — | |
Capital Gains Fee(1) | | | | | — | | | 1,072 | |
| Administration fee | | | | | 482 | | | 451 | |
| Distributions paid to affiliates | | | | | 997 | | | 846 | |
(1) As of March 31, 2022, the Capital Gains Fee of $1,072 was deferred and not due to OFS Advisor.
Note 4. Investments
As of March 31, 2023, the Company had loans to 47 portfolio companies, of which approximately 99% were senior secured loans and 1% were subordinated loans, at fair value. The Company also had equity investments in 17 portfolio companies and 23 investments in Structured Finance Securities. At March 31, 2023, the Company’s investments consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Percentage of Total | | | | Percentage of Total |
| Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Senior secured debt investments | $ | 334,903 | | | 70.5 | % | | 186.4 | % | | $ | 309,789 | | | 62.1 | % | | 172.2 | % |
| Subordinated debt investments | 13,890 | | | 2.9 | | | 7.7 | | | 129 | | | — | | | 0.1 | |
| Preferred equity | 10,375 | | | 2.2 | | | 5.8 | | | 10,221 | | | 2.0 | | | 5.7 | |
Common equity, warrants and other(1) | 12,495 | | | 2.6 | | | 6.9 | | | 92,597 | | | 18.5 | | | 51.5 | |
| Total Portfolio Company Investments | 371,663 | | | 78.2 | | | 206.8 | | | 412,736 | | | 82.6 | | | 229.5 | |
| Structured Finance Securities | 103,361 | | | 21.8 | | | 57.5 | | | 87,023 | | | 17.4 | | | 48.4 | |
| Total investments | $ | 475,024 | | | 100.0 | % | | 264.3 | % | | $ | 499,759 | | | 100.0 | % | | 277.9 | % |
(1) Includes the Company’s investment in Pfanstiehl Holdings, Inc. See “Note 4 — Portfolio Concentration” for additional information.
Geographic composition is determined by the location of the corporate headquarters of the portfolio company. All international investments are denominated in US dollars. As of March 31, 2023 and December 31, 2022, the Company’s investment portfolio was domiciled as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| United States | $ | 366,997 | | | $ | 408,728 | | | $ | 367,723 | | | $ | 407,851 | |
| Canada | 4,666 | | | 4,008 | | | 4,680 | | | 4,207 | |
Cayman Islands(1) | 103,361 | | | 87,023 | | | 102,477 | | | 88,518 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total investments | $ | 475,024 | | | $ | 499,759 | | | $ | 474,880 | | | $ | 500,576 | |
(1) Investments domiciled in the Cayman Islands represent Structured Finance Securities held by the Company. These investments generally represent beneficial interests in underlying portfolios of debt investments in companies domiciled in the United States.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
As of March 31, 2023, the industry composition of the Company’s investment portfolio was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Administrative and Support and Waste Management and Remediation Services | | | | | | | | | | | | |
| All Other Business Support Services | | $ | 2,742 | | | 0.6 | % | | 1.5 | % | | $ | 2,544 | | | 0.5 | % | | 1.4 | % |
| Convention and Trade Show Organizers | | 160 | | | — | | | 0.1 | | | 120 | | | — | | | 0.1 | |
| | | | | | | | | | | | |
| Landscaping Services | | 4,606 | | | 1.0 | | | 2.6 | | | 4,232 | | | 0.8 | | | 2.4 | |
| | | | | | | | | | | | |
| Security Systems Services (except Locksmiths) | | 5,852 | | | 1.2 | | | 3.3 | | | 5,885 | | | 1.2 | | | 3.3 | |
| Temporary Help Services | | 8,838 | | | 1.9 | | | 4.9 | | | 8,763 | | | 1.8 | | | 4.9 | |
| | | | | | | | | | | | |
| Arts, Entertainment, and Recreation | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Other Amusement and Recreation Industries | | 18,173 | | | 3.8 | | | 10.1 | | | 18,364 | | | 3.7 | | | 10.2 | |
| Construction | | | | | | | | | | | | |
| Electrical Contractors and Other Wiring Installation Contractors | | 17,649 | | | 3.7 | | | 9.8 | | | 10,597 | | | 2.1 | | | 5.9 | |
| New Single-Family Housing Construction (except For-Sale Builders) | | 1,803 | | | 0.4 | | | 1.0 | | | 1,218 | | | 0.2 | | | 0.7 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Education Services | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Professional and Management Development Training | | 3,055 | | | 0.6 | | | 1.7 | | | 2,221 | | | 0.4 | | | 1.2 | |
| Sports and Recreation Instruction | | 4,466 | | | 0.9 | | | 2.5 | | | 4,492 | | | 0.9 | | | 2.5 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Health Care and Social Assistance | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Child Day Care Services | | 6,384 | | | 1.3 | | | 3.6 | | | 6,079 | | | 1.2 | | | 3.4 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Home Health Care Services | | 4,197 | | | 0.9 | | | 2.3 | | | 4,158 | | | 0.8 | | | 2.3 | |
| Medical Laboratories | | 17 | | | — | | | — | | | 33 | | | — | | | — | |
| Offices of Physicians, Mental Health Specialists | | 13,273 | | | 2.8 | | | 7.4 | | | 13,014 | | | 2.6 | | | 7.2 | |
| Other Ambulatory Health Care Services | | 16,635 | | | 3.5 | | | 9.3 | | | 15,277 | | | 3.1 | | | 8.5 | |
| | | | | | | | | | | | |
| Outpatient Mental Health and Substance Abuse Centers | | 8,848 | | | 1.9 | | | 4.9 | | | 8,816 | | | 1.8 | | | 4.9 | |
| | | | | | | | | | | | |
| Services for the Elderly and Persons with Disabilities | | 20,749 | | | 4.4 | | | 11.5 | | | 20,647 | | | 4.1 | | | 11.5 | |
| Information | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Cable and Other Subscription Programming | | 3,754 | | | 0.8 | | | 2.1 | | | 3,326 | | | 0.7 | | | 1.8 | |
| Data Processing, Hosting, and Related Services | | 4,073 | | | 0.9 | | | 2.3 | | | 3,219 | | | 0.6 | | | 1.8 | |
| Directory and Mailing List Publishers | | 3,596 | | | 0.8 | | | 2.0 | | | 3,638 | | | 0.7 | | | 2.0 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Software Publishers | | 17,077 | | | 3.6 | | | 9.5 | | | 10,555 | | | 2.1 | | | 5.9 | |
| Television Broadcasting | | 2,182 | | | 0.5 | | | 1.2 | | | 349 | | | 0.1 | | | 0.2 | |
| | | | | | | | | | | | |
| Management of Companies and Enterprises | | | | | | | | | | | | |
| Offices of Other Holding Companies | | 12,687 | | | 2.7 | | | 7.1 | | | 11,850 | | | 2.4 | | | 6.6 | |
| Manufacturing | | | | | | | | | | | | |
| Bare Printed Circuit Board Manufacturing | | 1,973 | | | 0.4 | | | 1.1 | | | 1,838 | | | 0.4 | | | 1.0 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Current-Carrying Wiring Device Manufacturing | | 3,383 | | | 0.7 | | | 1.9 | | | 2,952 | | | 0.6 | | | 1.6 | |
| | | | | | | | | | | | |
| Other Aircraft Parts and Auxiliary Equipment Manufacturing | | 500 | | | 0.1 | | | 0.3 | | | — | | | — | | | — | |
| | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Fluid Power Pump and Motor Manufacturing | | $ | 1,926 | | | 0.4 | % | | 1.1 | % | | $ | 1,719 | | | 0.3 | % | | 1.0 | % |
| Ice Cream and Frozen Dessert Manufacturing | | 1,642 | | | 0.3 | | | 0.9 | | | 1,459 | | | 0.3 | | | 0.8 | |
| Motorcycle, Bicycle, and Parts Manufacturing | | 15,838 | | | 3.3 | | | 8.8 | | | 15,361 | | | 3.1 | | | 8.5 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Other Industrial Machinery Manufacturing | | 5,218 | | | 1.1 | | | 2.9 | | | 4,744 | | | 0.9 | | | 2.6 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Pharmaceutical Preparation Manufacturing | | 217 | | | — | | | 0.1 | | | 85,429 | | | 17.4 | | | 47.5 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Other Services (except Public Administration) | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | | 572 | | | 0.1 | | | 0.3 | | | 1,901 | | | 0.4 | | | 1.1 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Professional, Scientific, and Technical Services | | | | | | | | | | | | |
| Administrative Management and General Management Consulting Services | | 27,554 | | | 5.9 | | | 15.3 | | | 27,119 | | | 5.4 | | | 15.1 | |
| Advertising Agencies | | 2,251 | | | 0.5 | | | 1.3 | | | 1,967 | | | 0.4 | | | 1.1 | |
| | | | | | | | | | | | |
| Computer Systems Design Services | | 1,956 | | | 0.4 | | | 1.1 | | | 1,930 | | | 0.4 | | | 1.1 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Other Computer Related Services | | 16,978 | | | 3.6 | | | 9.4 | | | 17,212 | | | 3.4 | | | 9.6 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Public Administration | | | | | | | | | | | | |
| Other Justice, Public Order, and Safety Activities | | 703 | | | 0.1 | | | 0.4 | | | 40 | | | — | | | — | |
| | | | | | | | | | | | |
| Real Estate and Rental and Leasing | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Nonresidential Property Managers | | 4,666 | | | 1.0 | | | 2.6 | | | 4,008 | | | 0.8 | | | 2.2 | |
| Office Machinery and Equipment Rental and Leasing | | 6,655 | | | 1.4 | | | 3.7 | | | 9,530 | | | 1.9 | | | 5.3 | |
| | | | | | | | | | | | |
| Retail Trade | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Electronics and Appliance Stores | | 6,513 | | | 1.4 | | | 3.6 | | | 6,573 | | | 1.3 | | | 3.7 | |
| Electronic Shopping and Mail-Order Houses | | 6,706 | | | 1.4 | | | 3.7 | | | 6,555 | | | 1.3 | | | 3.6 | |
| Shoe store | | 10,160 | | | 2.1 | | | 5.7 | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| Supermarkets and Other Grocery (except Convenience) Stores | | 5,645 | | | 1.2 | | | 3.1 | | | 5,586 | | | 1.1 | | | 3.1 | |
| | | | | | | | | | | | |
| All Other General Merchandise Stores | | 499 | | | 0.1 | | | 0.3 | | | 893 | | | 0.2 | | | 0.5 | |
| Transportation and Warehousing | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Transportation and Warehousing | | 2,503 | | | 0.5 | | | 1.4 | | | 2,502 | | | 0.5 | | | 1.4 | |
| Wholesale Trade | | | | | | | | | | | | |
| Business to Business Electronic Markets | | 2,854 | | | 0.6 | | | 1.6 | | | 2,670 | | | 0.5 | | | 1.5 | |
| Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | 11,147 | | | 2.3 | | | 6.2 | | | 8,572 | | | 1.7 | | | 4.8 | |
| | | | | | | | | | | | |
| Drugs and Druggists' Sundries Merchant Wholesalers | | 5,150 | | | 1.1 | | | 2.9 | | | 4,147 | | | 0.8 | | | 2.3 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Industrial Machinery and Equipment Merchant Wholesalers | | 9,072 | | | 1.9 | | | 5.0 | | | 9,073 | | | 1.8 | | | 5.0 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Motor Vehicle Parts (Used) Merchant Wholesalers | | 27,711 | | | 5.8 | | | 15.3 | | | 27,890 | | | 5.6 | | | 15.5 | |
| | | | | | | | | | | | |
| Other Miscellaneous Nondurable Goods Merchant Wholesalers | | 2,692 | | | 0.6 | | | 1.5 | | | 1,540 | | | 0.3 | | | 0.9 | |
| Sporting and Recreational Goods and Supplies Merchant Wholesalers | | 8,163 | | | 1.7 | | | 4.5 | | | 129 | | | — | | | 0.1 | |
| | | | | | | | | | | | |
| Total Portfolio Company Investments | | $ | 371,663 | | | 78.2 | % | | 206.8 | % | | $ | 412,736 | | | 82.6 | % | | 229.5 | % |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Structured Finance Securities | | 103,361 | | | 21.8 | | | 57.5 | | | 87,023 | | | 17.4 | | | 48.4 | |
| Total investments | | $ | 475,024 | | | 100.0 | % | | 264.3 | % | | $ | 499,759 | | | 100.0 | % | | 277.9 | % |
As of December 31, 2022, the Company had loans to 52 portfolio companies, of which 99.6% were senior secured loans and 0.4% were subordinated loans, at fair value. The Company also held equity investments in 16 portfolio companies and 23 investments in Structured Finance Securities. At December 31, 2022, the Company’s investments consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Percentage of Total | | | | Percentage of Total |
| Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Senior secured debt investments | $ | 335,558 | | | 70.7 | % | | 186.0 | % | | $ | 311,636 | | | 62.3 | % | | 172.7 | % |
| Subordinated debt investments | 13,890 | | | 2.9 | | | 7.7 | | | 1,226 | | | 0.2 | | | 0.7 | |
| Preferred equity | 9,966 | | | 2.1 | | | 5.5 | | | 8,196 | | | 1.6 | | | 4.5 | |
| Common equity, warrants and other | 12,989 | | | 2.7 | | | 7.2 | | | 91,000 | | | 18.2 | | | 50.4 | |
| Total debt and equity investments | $ | 372,403 | | | 78.4 | % | | 206.4 | % | | $ | 412,058 | | | 82.3 | % | | 228.3 | % |
| Structured Finance Securities | 102,477 | | | 21.6 | | | 56.8 | | | 88,518 | | | 17.7 | | | 49.1 | |
| Total | $ | 474,880 | | | 100.0 | % | | 263.2 | % | | $ | 500,576 | | | 100.0 | % | | 277.4 | % |
As of December 31, 2022, the industry compositions of the Company’s debt and equity investments were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Administrative and Support and Waste Management and Remediation Services | | | | | | | | | | | | |
| All Other Business Support Services | | $ | 2,745 | | | 0.6 | % | | 1.5 | % | | $ | 2,511 | | | 0.5 | % | | 1.4 | % |
| Convention and Trade Show Organizers | | 160 | | | — | | | 0.1 | | | 80 | | | — | | | — | |
| Hazardous Waste Treatment and Disposal | | 1,765 | | | 0.4 | | | 1.0 | | | 1,652 | | | 0.3 | | | 0.9 | |
| Landscaping Services | | 4,611 | | | 1.0 | | | 2.6 | | | 4,226 | | | 0.8 | | | 2.3 | |
| | | | | | | | | | | | |
| Security Systems Services (except Locksmiths) | | 5,849 | | | 1.2 | | | 3.2 | | | 5,767 | | | 1.2 | | | 3.2 | |
| Temporary Help Services | | 8,854 | | | 1.9 | | | 4.9 | | | 8,821 | | | 1.8 | | | 4.9 | |
| | | | | | | | | | | | |
| Arts, Entertainment, and Recreation | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Other Amusement and Recreation Industries | | 16,303 | | | 3.4 | | | 9.0 | | | 16,497 | | | 3.3 | | | 9.1 | |
| Construction | | | | | | | | | | | | |
| Electrical Contractors and Other Wiring Installation Contractors | | 17,666 | | | 3.7 | | | 9.8 | | | 9,247 | | | 1.8 | | | 5.1 | |
| New Single-Family Housing Construction (except For-Sale Builders) | | 1,807 | | | 0.4 | | | 1.0 | | | 1,566 | | | 0.3 | | | 0.9 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Education Services | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Professional and Management Development Training | | 1,595 | | | 0.3 | | | 0.9 | | | 953 | | | 0.2 | | | 0.5 | |
| Sports and Recreation Instruction | | 4,222 | | | 0.9 | | | 2.3 | | | 4,172 | | | 0.8 | | | 2.3 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Health Care and Social Assistance | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Child Day Care Services | | 6,375 | | | 1.3 | | | 3.5 | | | 6,182 | | | 1.2 | | | 3.4 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Home Health Care Services | | 4,210 | | | 0.9 | | | 2.3 | | | 3,987 | | | 0.8 | | | 2.2 | |
| Medical Laboratories | | 17 | | | — | | | — | | | 35 | | | — | | | — | |
| Offices of Physicians, Mental Health Specialists | | 13,299 | | | 2.8 | | | 7.4 | | | 13,119 | | | 2.6 | | | 7.3 | |
| Other Ambulatory Health Care Services | | 16,444 | | | 3.5 | | | 9.1 | | | 15,604 | | | 3.1 | | | 8.6 | |
| | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Outpatient Mental Health and Substance Abuse Centers | | $ | 8,787 | | | 1.9 | % | | 4.9 | % | | $ | 8,675 | | | 1.7 | % | | 4.8 | % |
| | | | | | | | | | | | |
| Services for the Elderly and Persons with Disabilities | | 18,977 | | | 4.0 | | | 10.5 | | | 18,427 | | | 3.7 | | | 10.2 | |
| Information | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Cable and Other Subscription Programming | | 3,763 | | | 0.8 | | | 2.1 | | | 3,103 | | | 0.6 | | | 1.7 | |
| Data Processing, Hosting, and Related Services | | 4,080 | | | 0.9 | | | 2.3 | | | 3,477 | | | 0.7 | | | 1.9 | |
| Directory and Mailing List Publishers | | 3,910 | | | 0.8 | | | 2.2 | | | 3,930 | | | 0.8 | | | 2.2 | |
| Internet Publishing and Broadcasting and Web Search Portals | | 3,100 | | | 0.7 | | | 1.7 | | | 2,843 | | | 0.6 | | | 1.6 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Software Publishers | | 17,577 | | | 3.7 | | | 9.7 | | | 9,629 | | | 1.9 | | | 5.3 | |
| Television Broadcasting | | 2,182 | | | 0.5 | | | 1.2 | | | 488 | | | 0.1 | | | 0.3 | |
| | | | | | | | | | | | |
| Management of Companies and Enterprises | | | | | | | | | | | | |
| Offices of Other Holding Companies | | 11,240 | | | 2.4 | | | 6.2 | | | 10,646 | | | 2.1 | | | 5.9 | |
| Manufacturing | | | | | | | | | | | | |
| Bare Printed Circuit Board Manufacturing | | 1,977 | | | 0.4 | | | 1.1 | | | 1,854 | | | 0.4 | | | 1.0 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Current-Carrying Wiring Device Manufacturing | | 3,360 | | | 0.7 | | | 1.9 | | | 3,468 | | | 0.7 | | | 1.9 | |
| | | | | | | | | | | | |
| Fluid Power Pump and Motor Manufacturing | | 1,931 | | | 0.4 | | | 1.1 | | | 1,862 | | | 0.4 | | | 1.0 | |
| Ice Cream and Frozen Dessert Manufacturing | | 1,641 | | | 0.3 | | | 0.9 | | | 1,540 | | | 0.3 | | | 0.9 | |
| Motorcycle, Bicycle, and Parts Manufacturing | | 15,873 | | | 3.3 | | | 8.8 | | | 15,942 | | | 3.2 | | | 8.8 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Other Aircraft Parts and Auxiliary Equipment Manufacturing | | 500 | | | 0.1 | | | 0.3 | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| Other Industrial Machinery Manufacturing | | 5,203 | | | 1.1 | | | 2.9 | | | 4,660 | | | 0.9 | | | 2.6 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Pharmaceutical Preparation Manufacturing | | 217 | | | — | | | 0.1 | | | 85,456 | | | 17.1 | | | 47.4 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Other Services (except Public Administration) | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance | | 572 | | | 0.1 | | | 0.3 | | | 1,890 | | | 0.4 | | | 1.0 | |
| Communication Equipment Repair and Maintenance | | 1,766 | | | 0.4 | | | 1.0 | | | 1,572 | | | 0.3 | | | 0.9 | |
| Other Automotive Mechanical and Electrical Repair and Maintenance | | 1,083 | | | 0.2 | | | 0.6 | | | 1,064 | | | 0.2 | | | 0.6 | |
| | | | | | | | | | | | |
| Professional, Scientific, and Technical Services | | | | | | | | | | | | |
| Administrative Management and General Management Consulting Services | | 27,621 | | | 5.8 | | | 15.3 | | | 27,148 | | | 5.4 | | | 15.0 | |
| Advertising Agencies | | 2,256 | | | 0.5 | | | 1.3 | | | 1,898 | | | 0.4 | | | 1.1 | |
| | | | | | | | | | | | |
| Computer Systems Design Services | | 1,959 | | | 0.4 | | | 1.1 | | | 1,943 | | | 0.4 | | | 1.1 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Other Computer Related Services | | 14,595 | | | 3.1 | | | 8.1 | | | 14,868 | | | 3.0 | | | 8.2 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Public Administration | | | | | | | | | | | | |
| Other Justice, Public Order, and Safety Activities | | 703 | | | 0.1 | | | 0.4 | | | 32 | | | — | | | — | |
| | | | | | | | | | | | |
| Real Estate and Rental and Leasing | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Nonresidential Property Managers | | 4,680 | | | 1.0 | | | 2.6 | | | 4,207 | | | 0.8 | | | 2.3 | |
| Office Machinery and Equipment Rental and Leasing | | 6,418 | | | 1.4 | | | 3.6 | | | 6,713 | | | 1.3 | | | 3.7 | |
| | | | | | | | | | | | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage of Total | | | | Percentage of Total |
| | Amortized Cost | | Amortized Cost | | Net Assets | | Fair Value | | Fair Value | | Net Assets |
| Retail Trade | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Electronic Shopping and Mail-Order Houses | | $ | 6,747 | | | 1.4 | % | | 3.7 | % | | $ | 6,515 | | | 1.3 | % | | 3.6 | % |
| Electronics and Appliance Stores | | 8,037 | | | 1.7 | | | 4.5 | | | 8,102 | | | 1.6 | | | 4.5 | |
| Shoe Store | | 10,160 | | | 2.1 | | | 5.6 | | | 1,104 | | | 0.2 | | | 0.6 | |
| | | | | | | | | | | | |
| Supermarkets and Other Grocery (except Convenience) Stores | | 5,647 | | | 1.2 | | | 3.1 | | | 5,532 | | | 1.1 | | | 3.1 | |
| | | | | | | | | | | | |
| All Other General Merchandise Stores | | 499 | | | 0.1 | | | 0.3 | | | 967 | | | 0.2 | | | 0.5 | |
| Transportation and Warehousing | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Transportation and Warehousing | | 2,514 | | | 0.5 | | | 1.4 | | | 2,501 | | | 0.5 | | | 1.4 | |
| Wholesale Trade | | | | | | | | | | | | |
| Business to Business Electronic Markets | | 2,858 | | | 0.6 | | | 1.6 | | | 2,689 | | | 0.5 | | | 1.5 | |
| Computer and Computer Peripheral Equipment and Software Merchant Wholesalers | | 11,156 | | | 2.3 | | | 6.2 | | | 9,013 | | | 1.8 | | | 5.0 | |
| | | | | | | | | | | | |
| Drugs and Druggists' Sundries Merchant Wholesalers | | 5,227 | | | 1.1 | | | 2.9 | | | 4,622 | | | 0.9 | | | 2.6 | |
| | | | | | | | | | | | |
| Industrial Machinery and Equipment Merchant Wholesalers | | 9,071 | | | 1.9 | | | 5.0 | | | 9,073 | | | 1.8 | | | 5.0 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Motor Vehicle Parts (Used) Merchant Wholesalers | | 27,751 | | | 5.8 | | | 15.4 | | | 27,821 | | | 5.6 | | | 15.4 | |
| | | | | | | | | | | | |
| Other Miscellaneous Nondurable Goods Merchant Wholesalers | | 2,680 | | | 0.6 | | | 1.5 | | | 2,246 | | | 0.4 | | | 1.2 | |
| Sporting and Recreational Goods and Supplies Merchant Wholesalers | | 8,163 | | | 1.7 | | | 4.4 | | | 122 | | | — | | | 0.1 | |
| | | | | | | | | | | | |
| Total debt and equity investments | | $ | 372,403 | | | 78.4 | % | | 206.4 | % | | 412,058 | | | 82.3 | % | | 228.3 | % |
| Structured Finance Securities | | 102,477 | | | 21.6 | | | 56.8 | | | 88,518 | | | 17.7 | | | 49.1 | |
| Total investments | | $ | 474,880 | | | 100.0 | % | | 263.2 | % | | 500,576 | | | 100.0 | % | | 277.4 | % |
Non-Accrual Loans: Management reviews, for placement on non-accrual status, all loans that become past due on principal and interest, and/or when there is reasonable doubt that principal, cash interest, or PIK interest will be collected. When a loan is placed on non-accrual status, unpaid interest is credited to income and reversed. Additionally, Net Loan Fees are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments subsequently received on non-accrual investments may be recognized as income or applied to principal depending upon management’s judgment. Interest accruals and Net Loan Fee amortization are resumed on non-accrual investments only when they are brought current with respect to principal and interest payments and, in the judgment of management, the investments are estimated to be fully collectible as to all principal and interest. The aggregate amortized cost and fair value of loans on non-accrual status with respect to all interest and Net Loan Fee amortization as of March 31, 2023 was $36,522 and $11,466, respectively, and as of December 31, 2022 was $36,522 and $11,225, respectively.
Portfolio Concentration: As of March 31, 2023, the Company’s common equity investment in Pfanstiehl Holdings, Inc., a global manufacturer of high-purity pharmaceutical ingredients, accounted for 17.1% and 47.5% of its total portfolio at fair value and its total net assets, respectively.
Note 5. Fair Value of Financial Instruments
The Company’s investments are carried at fair value and determined in accordance with a documented valuation policy that is applied in a consistent manner. On September 7, 2022, pursuant to Rule 2a-5 of the 1940 Act (“Rule 2a-5”), the Board designated OFS Advisor as the valuation designee to perform fair value determinations relating to the Company’s investments, commencing with the quarter ended September 30, 2022, and the Board maintains oversight of OFS Advisor in its capacity as valuation designee, as prescribed in Rule 2a-5.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair values are determined with models or other valuation techniques,
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
valuation inputs, and assumptions that market participants would use in pricing the subject asset or liability. Valuation inputs are organized in a hierarchy that gives the highest priority to prices for identical assets or liabilities quoted in active markets (Level 1) and the lowest priority to fair values based on unobservable inputs (Level 3). The three levels of inputs in the fair value hierarchy are described below:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
Level 2: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include: (i) quoted prices for similar assets or liabilities in active markets; (ii) quoted prices for identical or similar assets or liabilities in markets that are not active; (iii) inputs other than quoted prices that are observable for the asset or liability; and (iv) inputs that are derived principally from or corroborated by observable market data.
Level 3: Unobservable inputs for the asset or liability, and situations where there is little, if any, market activity for the asset or liability at the measurement date.
The inputs into the determination of fair value are based upon the best information under the circumstances and may require management to exercise significant judgment or estimation. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. The Company generally categorizes its investment portfolio into Level 3, and to a lesser extent Level 2, of the hierarchy.
The Company assesses the levels of the investments at each measurement date, and transfers between levels are recognized on the measurement date. The following table presents the Company’s transfers of Level 2 and Level 3 loans for the three months ended March 31, 2023 and 2022:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
| Transfers from Level 2 to Level 3 | | | | | $ | — | | | $ | — | |
| Transfers from Level 3 to Level 2 | | | | | 3,809 | | | 6,773 | |
Transfers between levels during the reporting periods were due to availability of reliable Indicative Prices in those periods.
Due to the inherent uncertainty of determining the fair value of Level 3 investments, the fair value of the investments may differ significantly from the values that would have been used had a ready market or observable inputs existed for such investments and may differ materially from the values that may ultimately be received or settled. Further, such investments are generally subject to legal and other restrictions, or otherwise are less liquid than publicly traded instruments. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, the Company might realize significantly less than the value at which such investment had previously been recorded. The Company’s investments are subject to market risk as a result of economic and political developments, including impacts from rising interest rates and elevated inflation rates, the ongoing war between Russia and Ukraine, instability in the U.S. and international banking systems, the risk of recession and of a failure to increase the U.S. debt ceiling and related market volatility. Market risk is directly impacted by the volatility and liquidity in the markets in which certain investments are traded and can affect the fair value of the Company's investments.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
The following tables present the Company's investment portfolio measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Security | | Level 1 | | Level 2 | | Level 3 | | Fair Value at March 31, 2023 |
| Debt investments | | $ | — | | | $ | 28,646 | | | $ | 281,272 | | | $ | 309,918 | |
| Equity investments | | — | | | — | | | 102,818 | | | 102,818 | |
| Structured Finance Securities | | — | | | — | | | 87,023 | | | 87,023 | |
| | $ | — | | | $ | 28,646 | | | $ | 471,113 | | | $ | 499,759 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Security | | Level 1 | | Level 2 | | Level 3 | | Fair Value at December 31, 2022 |
| Debt investments | | $ | — | | | $ | 30,823 | | | $ | 282,039 | | | $ | 312,862 | |
| Equity investments | | — | | | — | | | 99,196 | | | 99,196 | |
| Structured Finance Securities | | — | | | — | | | 88,518 | | | 88,518 | |
| | $ | — | | | $ | 30,823 | | | $ | 469,753 | | | $ | 500,576 | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
The following tables provide quantitative information about valuation techniques and the Company’s unobservable inputs to its Level 3 fair value measurements as of March 31, 2023 and December 31, 2022. In addition to the techniques and unobservable inputs noted in the tables below and in accordance with OFS Advisor’s valuation policy, OFS Advisor, as valuation designee, may also use other valuation techniques and methodologies when determining the fair value measurements of the Company’s investment assets.
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value at March 31, 2023 | | Valuation technique | | Unobservable inputs | | Range
(Weighted average) |
| Debt investments: | | | | | | | |
| Senior secured | $ | 249,824 | | | Discounted cash flow | | Discount rates | | 9.72% - 20.37% (12.89%) |
| Senior secured | 1,540 | | | Market approach | | EBITDA multiples | | 9.50x - 9.50x (9.50x) |
| Senior secured | 17,569 | | | Market approach | | Revenue multiples | | 0.43x - 0.70x (0.54x) |
| Senior secured | 12,210 | | | Market approach | | Transaction Price | | |
| | | | | | | |
| | | | | | | |
| Subordinated | 129 | | | Market approach | | Revenue multiples | | 0.40x - 0.40x (0.40x) |
| | | | | | | |
| | | | | | | |
| Structured Finance Securities: | | | | | | | |
Subordinated notes(1) | 52,288 | | | Discounted cash flow | | Discount rates | | 19.50% - 36.00% (26.84%) |
| | | | | Constant default rate | | 2.00% - 2.00% (2.00%) |
| | | | | | | |
| | | | | Recovery rate | | 65.00% - 65.00% (65.00%) |
| | | | | | | |
| Subordinated notes | 97 | | | Market approach | | Net asset value liquidation(2) | | |
| | | | | | | |
| Mezzanine debt | 26,498 | | | Discounted cash flow | | Discount margin | | 7.25% - 9.95% (8.53%) |
| | | | | Constant default rate | | 2.00% - 3.00% (2.04%) |
| | | | | | | |
| | | | | Recovery rate | | 65.00% - 65.00% (65.00%) |
| | | | | | | |
| Loan Accumulation Facility | 8,140 | | | Market approach | | Net asset value liquidation(2) | | |
| | | | | | | |
| Equity investments: | | | | | | | |
| Preferred equity | 8,028 | | | Market approach | | EBITDA multiples | | 7.50x - 7.50x (7.50x) |
| Preferred equity | 2,021 | | | Market approach | | Revenue multiples | | 0.84x - 3.50x (1.00x) |
| Preferred equity | 172 | | | Market Approach | | Transaction Price | | |
| Common equity, warrants and other | 91,451 | | | Market approach | | EBITDA multiples | | 3.88x - 11.50x (11.24x) |
Common equity, warrants and other(3) | — | | | Market approach | | Revenue multiples | | 0.40x - 0.84x (0.46x) |
| Common equity, warrants and other | 1,146 | | | Market approach | | Transaction Price | | |
| $ | 471,113 | | | | | | | |
(1) The cash flows utilized in the discounted cash flow calculations assume: (i) liquidation of (a) certain distressed investments and (b) all investments currently in default held by the issuing CLO at their current market prices; and (ii) redeployment of proceeds at the issuing CLO’s assumed reinvestment rate.
(2) Net asset value liquidation represents the fair value, or estimated expected residual value, of the Structured Finance Security that has been optionally redeemed.
(3) As of March 31, 2023, the aggregate fair value of these investments was $0.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value at December 31, 2022 | | Valuation technique | | Unobservable inputs | | Range
(Weighted average) |
| Debt investments: | | | | | | | |
| Senior secured | $ | 264,702 | | | Discounted cash flow | | Discount rates | | 10.21% - 20.71% (12.94%) |
| Senior secured | 16,110 | | | Market approach | | Revenue multiples | | 0.46x - 0.70x (0.56x) |
| Subordinated | 1,226 | | | Market approach | | EBITDA multiples | | 10.50x - 10.50x (10.50x) |
| | | | | | | |
| Structured Finance Securities: | | | | | | | |
Subordinated notes(1) | 53,688 | | | Discounted cash flow | | Discount rates | | 12.50% - 34.00% (22.14%) |
| | | | | Constant default rate | | 2.00% - 2.00% (2.00%) |
| | | | | | | |
| | | | | Recovery rate | | 65.00% - 65.00% (65.00%) |
| | | | | | | |
| Mezzanine debt | 26,413 | | | Discounted cash flow | | Discount margin | | 7.25% - 11.60% (8.58%) |
| | | | | Constant default rate | | 2.00% - 3.00% (2.03%) |
| | | | | | | |
| | | | | Recovery rate | | 65.00% - 65.00% (65.00%) |
| | | | | | | |
| Subordinated notes | 118 | | | Market approach | | Net asset value liquidation(2) | | |
| | | | | | | |
| Loan accumulation facility | 8,299 | | | Market approach | | Probability weighted NAV analysis | | |
| | | | | | | |
| Equity investments: | | | | | | | |
| Preferred equity | 6,202 | | | Market approach | | EBITDA multiples | | 7.25x - 7.25x (7.25x) |
| Preferred equity | 1,901 | | | Market approach | | Revenue multiples | | 0.15x - 0.87x (0.87x) |
| | | | | | | |
| Common equity, warrants and other | 91,070 | | | Market approach | | EBITDA multiples | | 3.72x - 11.75x (9.63x) |
| Common equity, warrants and other | 24 | | | Market approach | | Revenue multiples | | 0.15x - 0.87x (0.15x) |
| | | | | | | |
| $ | 469,753 | | | | | | | |
(1) The cash flows utilized in the discounted cash flow calculations assume: (i) liquidation of (a) certain distressed investments and (b) all investments currently in default held by the issuing CLO at their current market prices; and (ii) redeployment of proceeds at the issuing CLO’s assumed reinvestment rate.
(2) NAV liquidation represents the fair value, or estimated expected residual value, of the investment.
Averages in the preceding two tables were weighted by the fair value of the related instruments.
Changes in market credit spreads or events impacting the credit quality of the underlying portfolio company (both of which could impact the discount rate), as well as changes in EBITDA and/or EBITDA multiples, among other things, could have a significant impact on fair values, with the fair value of a particular debt investment susceptible to change in inverse relation to the changes in the discount rate. Changes in EBITDA and/or EBITDA multiples, as well as changes in the discount rate, could have a significant impact on fair values, with the fair value of an equity investment susceptible to change in tandem with the changes in EBITDA and/or EBITDA multiples, and in inverse relation to changes in the discount rate. Due to the wide range of approaches used in developing input assumptions to these valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
The following tables present changes in investments measured at fair value using Level 3 inputs for the three months ended March 31, 2023 and March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
| Senior
Secured Debt
Investments | | Subordinated
Debt
Investments | | Preferred Equity | | Common Equity, Warrants and Other | | Structured Finance Securities | | Total |
| Level 3 assets, December 31, 2022 | $ | 280,813 | | | $ | 1,226 | | | $ | 8,196 | | | $ | 91,000 | | | $ | 88,518 | | | $ | 469,753 | |
| | | | | | | | | | | |
| Net realized gain (loss) on investments | (140) | | | — | | | — | | | 470 | | | — | | | 330 | |
| Net unrealized appreciation (depreciation) on investments | (1,948) | | | (1,097) | | | 1,617 | | | 2,089 | | | (2,380) | | | (1,719) | |
| Amortization of Net Loan Fees | 313 | | | — | | | — | | | — | | | 59 | | | 372 | |
| Accretion of interest income on Structured Finance Securities | — | | | — | | | — | | | — | | | 3,002 | | | 3,002 | |
| Capitalized PIK interest and dividends | 226 | | | — | | | 236 | | | — | | | — | | | 462 | |
| Amendment fees | (39) | | | — | | | — | | | — | | | — | | | (39) | |
| Purchase and origination of portfolio investments | 9,772 | | | — | | | 172 | | | — | | | — | | | 9,944 | |
| Proceeds from principal payments on portfolio investments | (1,335) | | | — | | | — | | | — | | | — | | | (1,335) | |
| Sale and redemption of portfolio investments | (2,710) | | | — | | | — | | | — | | | — | | | (2,710) | |
| Proceeds from distributions received from portfolio investments | — | | | — | | | — | | | (962) | | | (2,176) | | | (3,138) | |
| Transfers out of Level 3 | (3,809) | | | — | | | — | | | — | | | — | | | (3,809) | |
| | | | | | | | | | | |
| Level 3 assets, March 31, 2023 | $ | 281,143 | | | $ | 129 | | | $ | 10,221 | | | $ | 92,597 | | | $ | 87,023 | | | $ | 471,113 | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| Senior
Secured Debt
Investments | | Subordinated
Debt
Investments | | Preferred Equity | | Common Equity, Warrants and Other | | Structured Finance Securities | | Total |
| Level 3 assets, December 31, 2021 | $ | 261,113 | | | $ | 17,943 | | | $ | 3,765 | | | $ | 83,486 | | | $ | 75,201 | | | $ | 441,508 | |
| Net realized gain on investments | — | | | — | | | — | | | 72 | | | — | | | 72 | |
| Net unrealized appreciation (depreciation) on investments | (319) | | | (424) | | | 2,430 | | | 7,965 | | | (3,449) | | | 6,203 | |
| Amortization of Net Loan Fees | 228 | | | 6 | | | — | | | — | | | 25 | | | 259 | |
| Accretion of interest income on Structured Finance Securities | — | | | — | | | — | | | — | | | 2,282 | | | 2,282 | |
| Capitalized PIK interest and dividends | 211 | | | 58 | | | — | | | — | | | — | | | 269 | |
| Amendment fees | (90) | | | — | | | — | | | — | | | — | | | (90) | |
| Purchase and origination of portfolio investments | 43,818 | | | — | | | — | | | 1,290 | | | 22,061 | | | 67,169 | |
| Proceeds from principal payments on portfolio investments | (5,976) | | | (8,230) | | | — | | | — | | | — | | | (14,206) | |
| Sale and redemption of portfolio investments | — | | | — | | | — | | | (3,141) | | | — | | | (3,141) | |
| Proceeds from distributions received from portfolio investments | — | | | — | | | — | | | — | | | (5,743) | | | (5,743) | |
| | | | | | | | | | | |
| Transfers out of Level 3 | (6,773) | | | — | | | — | | | — | | | — | | | (6,773) | |
| Level 3 assets, March 31, 2022 | $ | 292,212 | | | $ | 9,353 | | | $ | 6,195 | | | $ | 89,672 | | | $ | 90,377 | | | $ | 487,809 | |
The net unrealized appreciation (depreciation) reported in the Company’s consolidated statements of operations for the three months ended March 31, 2023 and 2022, attributable to the Company’s Level 3 assets still held at those respective period ends, was as follows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2023 | | 2022 |
| Senior secured debt investments | $ | (971) | | | $ | (249) | |
| Subordinated debt investments | (1,097) | | | (424) | |
| Preferred equity | 1,630 | | | 2,430 | |
| Common equity, warrants and other | 2,075 | | | 9,649 | |
| Structured Finance Securities | (2,383) | | | (3,449) | |
| Net unrealized appreciation (depreciation) on investments held | $ | (746) | | | $ | 7,957 | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Other Financial Assets and Liabilities
The Company provides disclosure of the fair value of financial instruments for which it is practical to estimate such value. The Company believes that the carrying amounts of its other financial instruments, such as cash, receivables and payables approximate the fair value of such items due to the short maturity of such financial instruments. The PWB Credit Facility and BNP Facility are variable rate instruments and fair value is estimated to approximate carrying value.
The following table sets forth carrying values and fair values of the Company’s debt as of March 31, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2023 | | As of December 31, 2022 |
| Description | Carrying Value(1) | | Fair Value | | Carrying Value(1) | | Fair Value |
| PWB Credit Facility | $ | 5,000 | | | $ | 5,000 | | | $ | — | | | $ | — | |
| BNP Facility | 101,000 | | | 101,000 | | | 104,700 | | | 104,700 | |
| Unsecured Notes Due February 2026 | 122,741 | | | 112,327 | | | 122,547 | | | 109,037 | |
| Unsecured Notes Due October 2028 | 53,857 | | | 48,840 | | | 53,806 | | | 47,058 | |
SBA-guaranteed debentures | 45,762 | | | 44,032 | | | 50,697 | | | 49,470 | |
| Total debt | $ | 328,360 | | | $ | 311,199 | | | $ | 331,750 | | | $ | 310,265 | |
(1) Carrying value is calculated as the outstanding principal amount less unamortized deferred debt issuance costs.
The following tables present the fair value measurements of the Company's debt and indicate the fair value hierarchy of the significant unobservable inputs utilized by the Company to determine such fair values as of March 31, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 |
| Description | Level 1(1) | | Level 2 | | Level 3 (2) | | Total |
| PWB Credit Facility | $ | — | | | $ | — | | | $ | 5,000 | | | $ | 5,000 | |
| BNP Facility | — | | | — | | | 101,000 | | | 101,000 | |
| Unsecured Notes Due February 2026 | — | | | — | | | 112,327 | | | 112,327 | |
Unsecured Notes Due October 2028 | 48,840 | | | — | | | — | | | 48,840 | |
SBA-guaranteed debentures | — | | | — | | | 44,032 | | | 44,032 | |
| Total debt, at fair value | $ | 48,840 | | | $ | — | | | $ | 262,359 | | | $ | 311,199 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Description | Level 1(1) | | Level 2 | | Level 3 (2) | | Total |
| PWB Credit Facility | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| BNP Facility | — | | | — | | | 104,700 | | | 104,700 | |
| Unsecured Notes Due February 2026 | — | | | — | | | 109,037 | | | 109,037 | |
Unsecured Notes Due October 2028 | 47,058 | | | — | | | — | | | 47,058 | |
SBA-guaranteed debentures | — | | | — | | | 49,470 | | | 49,470 | |
| Total debt, at fair value | $ | 47,058 | | | $ | — | | | $ | 263,207 | | | $ | 310,265 | |
(1) For Level 1 measurements, fair value is estimated by using the closing price of the security on the Nasdaq Global Select Market.
(2) For Level 3 measurements, fair value is estimated by discounting remaining payments at current market rates for similar instruments at the measurement date and considering such factors as the legal maturity date.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Note 6. Commitments and Contingencies
As of March 31, 2023, the Company has outstanding commitments to fund investments totaling $21,312 under various undrawn revolvers and other credit facilities.
Legal and regulatory proceedings: From time to time, the Company is involved in legal proceedings in the normal course of its business. Although the outcome of such litigation cannot be predicted with any certainty, management is of the opinion, based on the advice of legal counsel, that final disposition of any litigation should not have a material adverse effect on the financial position of the Company as of March 31, 2023.
Additionally, the Company is subject to periodic inspection by regulators to assess compliance with applicable BDC regulations and SBIC I LP is subject to periodic inspections by the SBA.
Indemnifications: In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties that provide for general indemnification. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. The Company believes the risk of any material obligation under these indemnifications to be low.
Note 7. Borrowings
SBA Debentures: The SBA debentures issued by SBIC I LP and other SBA regulations generally restrict assets held by SBIC I LP. On a stand-alone basis, at March 31, 2023 and December 31, 2022, SBIC I LP held $175,337 and $176,521 in assets, respectively, which accounted for approximately 34% and 34% of the Company’s total consolidated assets, respectively. These assets cannot be pledged under any debt obligation of the Company.
On March 1, 2023, SBIC I LP redeemed $5,000 of SBA debentures that were contractually due March 1, 2025. As of March 31, 2023, SBIC I LP had outstanding debentures totaling $45,920, which bear a fixed interest rate of 2.87% and mature on March 1, 2025.
For the three months ended March 31, 2023 and 2022, the components of interest expense, cash paid for interest, effective interest rates and average outstanding balances for the SBA debentures were as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
| Stated interest expense | | | | | $ | 348 | | | $ | 451 | |
| Amortization of debt issuance costs | | | | | 46 | | | 44 | |
| Total interest and debt financing costs | | | | | $ | 394 | | | $ | 495 | |
| Cash paid for interest expense | | | | | $ | 725 | | | $ | 1,002 | |
| Effective interest rate | | | | | 3.21 | % | | 3.12 | % |
| Average outstanding balance | | | | | $ | 49,198 | | | $ | 63,375 | |
BNP Facility: On June 20, 2019, OFSCC-FS entered into the BNP Facility, which provides for borrowings in an aggregate principal amount up to $150,000, subject to a borrowing base and other covenants. On June 24, 2022, OFSCC-FS amended the BNP facility to, among other things: (i) extend the reinvestment period under the BNP Facility for three years from June 20, 2022 to June 20, 2025; (ii) extend the maturity date under the BNP Facility from June 20, 2024 to June 20, 2027; (iii) convert the benchmark interest rate from LIBOR to SOFR; (iv) increase the applicable margin by 0.40% on all classes of loans; and (v) increase the applicable margin floor from 1.925% to 2.65%. OFSCC-FS also pays a non-usage fee depending on the size of the unused portion of the BNP Facility. Fees and legal costs incurred in connection with the BNP Facility are amortized over the life of the facility.
The BNP Facility is collateralized by all the assets held by OFSCC-FS. OFSCC-FS and the Company have each made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.
As of March 31, 2023 and December 31, 2022, OFSCC-FS had outstanding debt of $101,000 and $104,700, respectively. As of March 31, 2023, the unused commitment under the BNP Facility was $49,000.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
For the three months ended March 31, 2023 and 2022, the components of interest expense, cash paid for interest, average interest rates and average outstanding balances for the BNP Facility were as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
Stated interest expense(1) | | | | | $ | 1,908 | | | $ | 616 | |
| Amortization of debt issuance costs | | | | | 95 | | | 67 | |
| Total interest and debt financing costs | | | | | $ | 2,003 | | | $ | 683 | |
| Cash paid for interest expense | | | | | $ | 1,905 | | | $ | 585 | |
| Effective interest rate | | | | | 7.63 | % | | 2.56 | % |
| Average outstanding balance | | | | | $ | 105,030 | | | $ | 106,850 | |
(1) Stated interest expense includes unused fees.
PWB Credit Facility: On March 7, 2018, the Company entered into the PWB Credit Facility. On April 22, 2022, the Company amended the PWB Credit Facility to: (i) increase the maximum amount available under the PWB Credit Facility from $25,000 to $35,000; and (ii) extend the maturity date of the PWB Credit Facility from February 28, 2023 to February 28, 2024. On December 15, 2022, the Company amended the PWB Credit Facility to: (i) reduce the maximum amount available under the PWB Credit Facility from $35,000 to $25,000; and (ii) eliminate the “No Net Losses” covenant, which restricted net losses (defined as income after adjustments to the investment portfolio for gains and losses, realized and unrealized, also shown as net increase (decrease) in net assets resulting from operations) in more than two quarters during the prior four quarters then ended. Fees and legal costs incurred in connection with the PWB Credit Facility are amortized over the life of the facility.
The maximum availability of the PWB Credit Facility is equal to 50% of the aggregate outstanding principal amount of eligible loans included in the borrowing base as specified in the BLA. The PWB Credit Facility is guaranteed by OFSCC-MB and secured by all of our current and future assets, excluding assets held by SBIC I LP, OFSCC-FS, and the Company’s partnership interests in SBIC I LP and SBIC I GP. The Company has made customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.
As of March 31, 2023 and December 31, 2022, the Company had $5,000 and $-0-, respectively, of outstanding debt under the PWB Credit Facility. As of March 31, 2023, the unused commitment under the PWB Credit Facility was $20,000.
For the three months ended March 31, 2023 and 2022, the components of interest expense, cash paid for interest, average interest rates and average outstanding balances for the PWB Credit Facility were as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
Stated interest expense(1) | | | | | $ | 66 | | | $ | 18 | |
| Amortization of debt issuance costs | | | | | 1 | | | 1 | |
| Total interest and debt financing costs | | | | | $ | 67 | | | $ | 19 | |
| Cash paid for interest expense | | | | | $ | 51 | | | $ | 18 | |
Effective interest rate(2) | | | | | 8.07 | % | | 5.14 | % |
| Average outstanding balance | | | | | $ | 2,669 | | | $ | 506 | |
(1) Stated interest expense includes unused fees.
(2) Unused fees were excluded from the calculation.
Unsecured Notes: As of March 31, 2023 and December 31, 2022, the Company had the following Unsecured Notes outstanding:
Unsecured Notes Due February 2026: On February 10, 2021 and March 18, 2021, the Company issued $125,000 in aggregate principal of unsecured notes. The Unsecured Notes Due February 2026 bear interest at a rate of 4.75% per year payable semi-annually and mature on February 10, 2026. The Company may redeem the Unsecured Notes Due February 2026 in whole or in part at any time, or from time to time, at its option at par plus a “make-whole” premium, if applicable.
Unsecured Notes Due October 2028: On October 28, 2021 and November 1, 2021, the Company issued $55,000 in aggregate principal of unsecured notes. The Unsecured Notes Due October 2028 bear interest at a rate of 4.95% per year payable semi-
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
annually and mature on October 31, 2028. The Company may redeem the Unsecured Notes Due October 2028 in whole or in part at any time, or from time to time, at its option on or after October 31, 2023.
The Unsecured Notes are direct unsecured obligations and rank equal in right of payment with all current and future unsecured indebtedness of the Company. Because the Unsecured Notes are not secured by any of the Company’s assets, they are effectively subordinated to all existing and future secured unsubordinated indebtedness (or any indebtedness that is initially unsecured as to which the Company subsequently grants a security interest), to the extent of the value of the assets securing such indebtedness, including, without limitation, borrowings under the PWB Credit Facility.
The indenture governing the Unsecured Notes contains certain covenants, including: (i) prohibiting additional borrowings, including through the issuance of additional debt securities, unless the Company's asset coverage, as defined in the 1940 Act, after giving effect to any exemptive relief granted to the Company by the SEC, equals at least 150% after such borrowings; and (ii) prohibiting (a) the declaration of any cash dividend or distribution upon any class of the Company’s capital stock (except to the extent necessary for the Company to maintain its treatment as a RIC under Subchapter M of the Code), or (b) the purchase of any capital stock unless the Company’s asset coverage, as defined in the 1940 Act, is at least 150% at the time of such capital transaction and after deducting the amount of such transaction.
For the three months ended March 31, 2023 and 2022, the components of interest expense, cash paid for interest, average interest rates and average outstanding balances for the Unsecured Notes were as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
| Stated interest expense | | | | | $ | 2,165 | | | $ | 2,165 | |
| Amortization of debt issuance costs | | | | | 245 | | | 262 | |
| Total interest and debt financing costs | | | | | $ | 2,410 | | | $ | 2,427 | |
| Cash paid for interest expense | | | | | $ | 3,649 | | | $ | 3,672 | |
| Effective interest rate | | | | | 5.35 | % | | 5.40 | % |
| Average outstanding balance | | | | | $ | 180,000 | | | $ | 180,000 | |
The following table shows the scheduled maturities of the principal balances of the Company’s outstanding borrowings as of March 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Payments due by period |
| | Total | | Less than
1 year | | 1-3 years | | 4-5 years | | After 5 years |
| PWB Credit Facility | | $ | 5,000 | | | $ | 5,000 | | | $ | — | | | $ | — | | | $ | — | |
| Unsecured Notes | | 180,000 | | | — | | | 125,000 | | | — | | | 55,000 | |
| SBA Debentures | | 45,920 | | | — | | | 45,920 | | | — | | | — | |
| BNP Facility | | 101,000 | | | — | | | — | | | 101,000 | | | — | |
| Total | | $ | 331,920 | | | $ | 5,000 | | | $ | 170,920 | | | $ | 101,000 | | | $ | 55,000 | |
For the three months ended March 31, 2023 and 2022, the average dollar borrowings and weighted average effective interest rate on the Company’s outstanding borrowings were as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
| Average dollar borrowings | | | | | $ | 336,897 | | | $ | 350,731 | |
| Weighted average effective interest rate | | | | | 5.79 | % | | 4.19 | % |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Note 8. Financial Highlights
The following is a schedule of financial highlights for the three months ended March 31, 2023 and 2022:
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended
March 31, |
| | | | | 2023 | | 2022 |
| Per share operating performance: | | | | | | | |
| Net asset value per share at beginning of period | | | | | $ | 13.47 | | | $ | 15.18 | |
Net investment income(4) | | | | | 0.37 | | | 0.22 | |
Net realized gain on investments, net of taxes(4) | | | | | — | | | 0.02 | |
Net unrealized appreciation (depreciation) on investments, net of taxes(4) | | | | | (0.09) | | | 0.39 | |
Loss on extinguishment of debt(4) | | | | | — | | | (0.01) | |
| Total income from operations | | | | | 0.28 | | | 0.62 | |
| Distributions declared | | | | | (0.33) | | | (0.28) | |
| | | | | | | |
| Net asset value per share at end of period | | | | | $ | 13.42 | | | $ | 15.52 | |
| | | | | | | |
| Per share market value, end of period | | | | | $ | 10.29 | | | $ | 13.00 | |
Total return based on market value(1)(7) | | | | | 4.6 | % | | 21.8 | % |
Total return based on net asset value(2)(7) | | | | | 2.8 | % | | 4.4 | % |
| Shares outstanding at end of period | | | | | 13,398,078 | | | 13,425,429 | |
| Weighted average shares outstanding | | | | | 13,398,078 | | | 13,422,447 | |
| Ratio/Supplemental Data (dollar amounts in thousands) | | | | | | | |
Average net asset value(3) | | | | | $ | 180,116 | | | $ | 206,065 | |
| Net asset value at end of period | | | | | $ | 179,808 | | | $ | 208,386 | |
| Net investment income | | | | | $ | 4,950 | | | $ | 3,005 | |
Ratio of total expenses to average net assets(5) | | | | | 20.7 | % | | 15.4 | % |
Ratio of total expenses and loss on extinguishment of debt to average net assets(5) | | | | | 20.7 | % | | 15.5 | % |
Ratio of net investment income to average net assets(5) | | | | | 11.0 | % | | 5.8 | % |
Ratio of loss on extinguishment of debt to average net assets(7) | | | | | 0.0% | | 0.1 | % |
Portfolio turnover(6) | | | | | 2.0 | % | | 5.4 | % |
(1)Calculated as ending market value less beginning market value, adjusted for distributions reinvested at prices based on the Company’s DRIP for the respective distributions.
(2)Calculated as ending net asset value less beginning net asset value, adjusted for distributions reinvested at prices based on the Company’s DRIP for the respective distributions.
(3)Based on the average of the net asset value at the beginning and end of the indicated period and, if applicable, the preceding calendar quarters.
(4)Calculated on the average share method.
(5)Annualized.
(6)Portfolio turnover rate is calculated using the lesser of period-to-date sales, portfolio investment distributions and principal payments or period-to-date purchases over the average of the invested assets at fair value.
(7)Not annualized.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Note 9. Capital Transactions
Distributions: The Company intends to distribute to stockholders, on a quarterly basis, substantially all of its net investment income. In addition, although the Company intends to distribute at least annually net realized capital gains, net of taxes if any, out of assets legally available for such distribution, the Company may also retain such capital gains for investment through a deemed distribution. If the Company makes a deemed distribution, shareholders will be treated for U.S. federal income tax purposes as if they had received an actual distribution of the capital gains, net of taxes.
The Company is limited on the use of cash held by OFS SBIC I LP under restrictions imposed by SBA regulations. In addition, distributions from OFSCC-FS to the Company are restricted by the terms and conditions of the BNP Facility.
The following table summarizes distributions declared and paid for the three months ended March 31, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Date Declared | | Record Date | | Payment Date | | Amount
Per Share | | Cash
Distribution | | DRIP Shares
Issued | | DRIP Shares
Value | |
| Three Months Ended March 31, 2022 | | | | | | | | | | | |
| March 1, 2022 | | March 24, 2022 | | March 31, 2022 | | $ | 0.28 | | | $ | 3,719 | | | 3,016 | | | $ | 39 | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 | | | | | | | | | | | |
| February 28, 2023 | | March 24, 2023 | | March 31, 2023 | | $ | 0.33 | | | $ | 4,421 | | | — | | | $ | — | | (1) |
| | | | | | | | | | | | | |
(1) During the three months ended March 31, 2023, the Company directed the DRIP plan administrator to purchase shares on the open market in order to satisfy the DRIP obligation to deliver shares of common stock. Accordingly, the Company purchased shares to satisfy the DRIP obligation as follows:
| | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2023 | | Number of Shares Purchased | | Average Price Paid Per Share | | Total Amount Paid |
| January 1, 2023 through March 31, 2023 | | 5,096 | | | $ | 10.43 | | | $ | 53 | |
Distributions in excess of the Company’s current and accumulated ICTI would be treated first as a return of capital to the extent of the stockholder’s adjusted tax basis, and any remaining distributions would be treated as a capital gain. The determination of the tax attributes of the Company’s distributions is made annually as of the end of its fiscal year based upon its estimated ICTI for the full year and distributions paid for the full year. Each year, a statement on Form 1099-DIV identifying the tax character of distributions is mailed to the Company’s stockholders.
Stock Repurchase Program:
The Company maintains a Stock Repurchase Program under which the Company may acquire up to $10.0 million of its outstanding common stock. The Stock Repurchase Program currently expires on May 22, 2024, or when the approved dollar amount has been used to repurchase shares.
During the three months ended March 31, 2023 and 2022, the Company did not make any repurchases of its common stock on the open market under the Stock Repurchase Program.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Note 10. Consolidated Schedule of Investments In and Advances To Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Month Period Ended March 31, 2023 | | | | | | | | |
| Name of Portfolio Company | | Investment Type (1) | | Net Realized Gain (Loss) | | Net change in unrealized appreciation/(depreciation) | | Interest | | Dividends | | Fees | | Total Income (2) | | December 31, 2022, Fair Value | | Gross
Additions (3) | | Gross
Reductions (4) | | March 31, 2023, Fair Value (5) |
| Control Investment | | | | | | | | | | | | | | | | | | | | | | |
| Eblens Holdings, Inc. | | Subordinated Loan (6) | | $ | — | | | $ | (1,104) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,104 | | | $ | — | | | $ | (1,104) | | | $ | — | |
| | Subordinated Loan (6) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Common Equity (6) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | — | | | (1,104) | | | — | | | — | | | — | | | — | | | 1,104 | | | — | | | (1,104) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | |
Total Control Investment | | | | — | | | (1,104) | | | — | | | — | | | — | | | — | | | 1,104 | | | — | | | (1,104) | | | — | |
Affiliate Investments | | | | | | | | | | | | | | | | | | | | | | |
| Contract Datascan Holdings, Inc. | | Preferred Equity (7) | | — | | | 1,572 | | | — | | | 236 | | | — | | | 236 | | | 6,202 | | | 1,808 | | | — | | | 8,010 | |
| | Common Equity (6) | | — | | | 1,010 | | | — | | | — | | | — | | | — | | | 510 | | | 1,010 | | | — | | | 1,520 | |
| | | | — | | | 2,582 | | | — | | | 236 | | | — | | | 236 | | | 6,712 | | | 2,818 | | | — | | | 9,530 | |
| | | | | | | | | | | | | | | | | | | | | | |
| DRS Imaging Services, LLC | | Common Equity (6) | | — | | | (43) | | | — | | | — | | | — | | | — | | | 1,569 | | | — | | | (44) | | | 1,525 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Master Cutlery, LLC | | Subordinated Loan (6) | | — | | | 7 | | | — | | | — | | | — | | | — | | | 122 | | | 7 | | | — | | | 129 | |
| | Preferred Equity (6) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Common Equity (6) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | — | | | 7 | | | — | | | — | | | — | | | — | | | 122 | | | 7 | | | — | | | 129 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Pfanstiehl Holdings, Inc | | Common Equity | | — | | | (27) | | | — | | | 547 | | | — | | | 547 | | | 85,456 | | | — | | | (27) | | | 85,429 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| TalentSmart Holdings, LLC | | Common Equity (6) | | — | | | (192) | | | — | | | — | | | — | | | — | | | 953 | | | — | | | (192) | | | 761 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| TRS Services, Inc. | | Preferred Equity (6) | | — | | | 11 | | | — | | | — | | | — | | | — | | | 1,890 | | | 11 | | | — | | | 1,901 | |
| | Common Equity (6) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | — | | | 11 | | | — | | | — | | | — | | | — | | | 1,890 | | | 11 | | | — | | | 1,901 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Total Affiliate Investments | | | | — | | | 2,338 | | | — | | | 783 | | | — | | | 783 | | | 96,701 | | | 2,836 | | | (263) | | | 99,275 | |
| Total Control and Affiliate Investments | | | | $ | — | | | $ | 1,234 | | | $ | — | | | $ | 783 | | | $ | — | | | $ | 783 | | | $ | 97,805 | | | $ | 2,836 | | | $ | (1,367) | | | $ | 99,275 | |
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
(1)Principal balance, interest rate and maturity of debt investments, and ownership detail for equity investments are presented in the consolidated schedule of investments. The Company’s investments are generally classified as “restricted securities” as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144.
(2)Represents the total amount of interest, fees or dividends included in income for the three months ended March 31, 2023, during which an investment was included in the Control Investment or Affiliate Investment categories.
(3)Gross additions include increases in cost basis of investments resulting from a new portfolio investment, PIK interest, fees and dividends; accretion of Net Loan Fees, and net increases in unrealized appreciation or decreases in net unrealized depreciation.
(4)Gross reductions include decreases in the cost basis of investments resulting from principal repayments and sales, if any, and net decreases in net unrealized appreciation or net increases in net unrealized depreciation.
(5)Fair value was determined using significant unobservable inputs. See Note 5 for further details.
(6)Non-income producing.
(7)Dividends recognized as income include PIK dividends contractually earned but not declared.
OFS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data)
Note 11. Subsequent Events
On May 2, 2023, the Board declared a distribution of $0.33 per share for the second quarter of 2023, payable on June 30, 2023 to stockholders of record as of June 23, 2023.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. For additional overview information on the Company, see “Item 1. Business” in our Annual Report on Form 10-K for the year ended December 31, 2022.
Overview
Key performance metrics per common share are presented below:
| | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| Net asset value | | $ | 13.42 | | | $ | 13.47 | |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
| | March 31, 2023 | | December 31, 2022 | | | | |
| Net investment income | | $ | 0.37 | | | $ | 0.35 | | | | | |
| Net increase in net assets resulting from operations | | 0.28 | | | 0.18 | | | | | |
| Distributions paid | | 0.33 | | | 0.30 | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
As of March 31, 2023, our NAV per common share of $13.42 remained stable compared to $13.47 at December 31, 2022. For the quarter ended March 31, 2023, net investment income of $0.37 per common share exceeded our quarterly distribution of $0.33 per common share.
For the quarter ended March 31, 2023, total investment income increased to $14.3 million from $14.0 million in the prior quarter, primarily due to an increase in dividend income. For the quarter ended March 31, 2023, dividend income of $0.8 million was primarily related to a $0.5 million dividend from Pfanstiehl Holdings, Inc. For the quarter ended March 31, 2023, our portfolio’s weighted-average performing income yield on debt investments increased to 12.3% from 11.5% in the prior quarter. The increase in our weighted-average performing yield was primarily due to rising interest rates, as 94% of our loan portfolio at fair value consisted of floating rate loans. We continue to believe that our loan portfolio is well positioned and will continue to produce strong net investment income and perform well in the current interest rate environment.
For the quarter ended March 31, 2023, our weighted-average debt interest costs increased to 5.8% compared to 5.5% for the quarter ended December 31, 2022, primarily due to an increase in the cost of debt on our BNP Facility resulting from SOFR rate increases. As of March 31, 2023, approximately 85% of our outstanding debt matures in 2026 and beyond, 68% of our outstanding debt carry fixed interest rates and 54% of our outstanding debt is unsecured.
For the quarter ended March 31, 2023, we recognized a net loss on investments of $1.1 million, or $0.09 per common share, primarily due to issuer specific declines on certain debt investments and Structured Finance Securities, partially offset by net unrealized appreciation on our equity investments.
During the quarter ended March 31, 2023, no new loans were placed on non-accrual status. As of March 31, 2023, our loan portfolio had five non-accrual loans with an aggregate fair value of $11.5 million, or 2.3% of our total investments at fair value.
At March 31, 2023, our asset coverage ratio of 163% exceeded the minimum asset coverage requirement of 150% under the 1940 Act, and we remained in compliance with all applicable covenants under our outstanding debt facilities. As of March 31, 2023, we had access to $20.0 million under our PWB Credit Facility, as well as $49.0 million under our BNP Facility, each of which are subject to a borrowing base and other covenants. Based on our regulatory asset coverage ratio as of March 31, 2023, we could access our aggregate unused lines of credit of $69.0 million, subject to the provisions of the borrowing bases as of any borrowing date, and remain in compliance with asset coverage ratio requirements. As of March 31, 2023, we had unfunded commitments of $21.3 million to 12 portfolio companies.
On May 2, 2023, the Board declared a distribution of $0.33 per share for the second quarter of 2023, payable on June 30, 2023, to stockholders of record as of June 23, 2023.
We are also subject to financial risks, including changes in market interest rates. As of March 31, 2023, approximately $292.2 million (aggregate fair value), or 94%, of our debt investments bore interest at variable rates, of which 46% are LIBOR-based. We have prepared and planned for the transition away from LIBOR by incorporating alternate reference rates to be used
in our credit agreements. As of March 31, 2023, 54% of our variable rate loans at fair value have transitioned from LIBOR to SOFR with minimal impact to us.
Critical Accounting Policies and Significant Estimates
Our critical accounting policies and estimates are those relating to revenue recognition and fair value estimates. Management has discussed the development and selection of each critical accounting policy and estimate with the Audit Committee of the Board. For descriptions of our revenue recognition and fair value policies, see “Item 8. Financial Statements - Notes to Consolidated Financial Statements - Note 2” and “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Significant Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2022.
The following table illustrates the impact of our fair value measures if we selected the low or high end of the range of values for all investments at March 31, 2023 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | |
Investment Type | | Fair Value at March 31, 2023 | | Range of Fair Value |
| | Low-end | | High-end |
| Debt investments: | | | | | | |
Senior secured | | $ | 309,789 | | | $ | 303,111 | | | $ | 316,651 | |
Subordinated | | 129 | | | 129 | | | 129 | |
| | | | | | |
| Structured Finance Securities: | | | | | | |
Subordinated notes | | 52,385 | | | 49,686 | | | 55,085 | |
Mezzanine debt | | 26,498 | | | 26,155 | | | 26,837 | |
| Loan accumulation facilities | | 8,140 | | | 7,977 | | | 8,303 | |
| | | | | | |
| Equity investments: | | | | | | |
Preferred equity | | 10,221 | | | 9,369 | | | 11,039 | |
Common equity, warrants and other | | 92,597 | | | 86,678 | | | 97,757 | |
| | $ | 499,759 | | | $ | 483,105 | | | $ | 515,801 | |
Related Party Transactions
We have entered into a number of business relationships with affiliated or related parties, including the following:
•The Investment Advisory Agreement with OFS Advisor to manage our operating and investment activities. Under the Investment Advisory Agreement we have agreed to pay OFS Advisor an annual base management fee based on the average value of our total assets (other than cash but including assets purchased with borrowed amounts and including assets owned by any consolidated entity) as well as an incentive fee based on our investment performance. See “Item 1–Financial Statements–Note 3”.
•The Administration Agreement with OFS Services, an affiliate of OFS Advisor, to provide us with the office facilities and administrative services necessary to conduct our operations. See “Item 1–Financial Statements–Note 3”.
•A license agreement with OFSAM, the parent company of OFS Advisor, under which OFSAM has agreed to grant us a non-exclusive, royalty-free license to use the name “OFS.” Under this agreement, we have a right to use the “OFS” name for so long as OFS Advisor or one of its affiliates remains our investment adviser. Other than with respect to this limited license, we have no legal right to the “OFS” name. This license agreement will remain in effect for so long as the Investment Advisory Agreement with OFS Advisor is in effect.
OFS Advisor’s services under the Investment Advisory Agreement are not exclusive to us and OFS Advisor is free to furnish similar services to other entities, including other funds affiliated with OFS Advisor, so long as its services to us are not impaired. OFS Advisor also serves as the investment adviser to other funds, including HPCI and OCCI. Additionally, OFS Advisor provides sub-advisory services to (i) CMFT Securities Investments, LLC, a wholly owned subsidiary of CIM Real Estate Finance Trust, Inc., a corporation that qualifies as a real estate investment trust and (ii) CIM Real Assets & Credit Fund, an externally managed registered investment company that operates as an interval fund that invests primarily in a combination of real estate, credit and related investments.
For the years ended December 31, 2023 and 2022, OFS Advisor agreed to reduce its base management fee attributable to all of the OFSCC-FS Assets to 0.25% per quarter (1.00% annualized) of the average value of the OFSCC-FS Assets
(excluding cash) at the end of the two most recently completed calendar quarters. OFS Advisor’s base management fee reduction is renewable on an annual basis and OFS Advisor is not entitled to recoup the amount of the base management fee reduced with respect to the OFSCC-FS Assets. OFS Advisor most recently renewed the agreement for the 2023 calendar year on January 11, 2023.
The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with certain affiliates absent an order from the SEC permitting the BDC to do so. On August 4, 2020, we received the Order, which superseded a previous order that we received on October 12, 2016, and provides us with greater flexibility to enter into co-investment transactions with certain Affiliated Funds in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions. We are generally permitted to co-invest with Affiliated Funds if, under the terms of the Order, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.
In addition, we may file an application for an amendment to our existing Order to permit us to participate in follow-on investments in our existing portfolio companies with private funds that do not hold any investments in such existing portfolio companies. However, if filed, there is no guarantee that such application will be granted.
Conflicts may arise when we make an investment in conjunction with an investment being made by an Affiliated Account, or in a transaction where an Affiliated Account has already made an investment. Investment opportunities are, from time to time, appropriate for more than one account in the same, different or overlapping securities of a portfolio company’s capital structure. Conflicts arise in determining the terms of investments, particularly where these accounts may invest in different types of securities in a single portfolio company. Potential conflicts arise when addressing, among other things, questions as to whether payment obligations and covenants should be enforced, modified or waived, or whether debt should be restructured, modified or refinanced. For a discussion of the risks associated with conflicts of interest, see “Item 1. Business — Conflicts of Interest”, “Item 1A. Risk Factors — Risks Related to OFS Advisor and its Affiliates —We have potential conflicts of interest related to the purchases and sales that OFS Advisor makes on our behalf and/or on behalf of Affiliated Accounts” and “Item 1. Business — Regulation — Conflicts of Interest — Conflicts Related to Portfolio Investments” in our Annual Report on Form 10-K for the year ended December 31, 2022.
Portfolio Composition and Investment Activity
Portfolio Composition
As of March 31, 2023, the fair value of our debt investment portfolio totaled $309.9 million in 47 portfolio companies, of which approximately 99% were senior secured loans. As of March 31, 2023, we had equity investments in 17 portfolio companies with a fair value of approximately $102.8 million. As of March 31, 2023, we also had 23 investments in Structured Finance Securities with a fair value of $87.0 million. We had unfunded commitments of $21.3 million to 12 portfolio companies as of March 31, 2023. Set forth in the tables and charts below is selected information with respect to our portfolio as of March 31, 2023 and December 31, 2022.
The following table presents our investment portfolio by each wholly owned legal entity within the consolidated group as of March 31, 2023 and December 31, 2022 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| OFS Capital Corporation (Parent) | $ | 199,759 | | | $ | 161,288 | | | $ | 195,823 | | | $ | 162,308 | |
| SBIC I LP | 97,331 | | | 171,569 | | | 97,214 | | | 167,211 | |
| OFSCC-FS | 175,044 | | | 163,350 | | | 178,460 | | | 168,050 | |
| OFSCC-MB | 2,890 | | | 3,552 | | | 3,383 | | | 3,007 | |
Total investments | $ | 475,024 | | | $ | 499,759 | | | $ | 474,880 | | | $ | 500,576 | |
The following table presents our ten largest debt and equity investments by portfolio company based on fair value as of March 31, 2023 (dollar amounts in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | | Type | | Amortized Cost | | Fair Value | | % of Total Portfolio, at Fair Value |
| Pfanstiehl Holdings, Inc. | | Equity | | $ | 217 | | | $ | 85,429 | | | 17.1 | % |
| All Star Auto Lights, Inc. | | Debt | | 27,711 | | | 27,886 | | | 5.6 | % |
| Milrose Consultants, LLC | | Debt | | 27,554 | | | 27,120 | | | 5.4 | % |
| The Escape Game, LLC | | Debt | | 18,173 | | | 18,363 | | | 3.7 | % |
| Inergex Holdings | | Debt | | 16,978 | | | 17,212 | | | 3.4 | % |
| Tolemar Acquisition, Inc. | | Debt | | 15,838 | | | 15,361 | | | 3.1 | % |
| Kreg LLC | | Debt | | 16,635 | | | 15,277 | | | 3.1 | % |
| SSJA Bariatric Management LLC | | Debt | | 13,273 | | | 13,015 | | | 2.6 | % |
| Boca Home Care Holdings, Inc. | | Debt and Equity | | 12,531 | | | 12,218 | | | 2.4 | % |
| One GI LLC | | Debt | | 12,687 | | | 11,851 | | | 2.4 | % |
| Total | | | | $ | 161,597 | | | $ | 243,732 | | | 48.8 | % |
As of March 31, 2023, approximately 4.2% and 11.8% of our total portfolio at fair value and net assets, respectively, were comprised of Structured Finance Securities managed by a single adviser, and 4.5% and 12.6%, respectively, as of December 31, 2022.
Portfolio Yields
The following table presents weighted-average yield metrics for our portfolio as of March 31, 2023 and December 31, 2022:
| | | | | | | | | | | |
| |
| For the Three Months Ended |
| March 31, 2023 | | December 31, 2022 |
Weighted-average performing income yield(1): | | | |
| Debt investments | 12.3 | % | | 11.5 | % |
| Structured Finance Securities | 15.5 | % | | 16.3 | % |
| Interest-bearing investments | 13.0 | % | | 12.7 | % |
| | | |
Weighted-average realized yield(2): | | | |
| Interest-bearing investments | 11.8 | % | | 11.7 | % |
(1) Performing income yield is calculated as (a) the actual amount earned on performing interest-bearing investments, including interest, prepayment fees and amortization of Net Loan Fees, divided by (b) the weighted-average of total performing interest-bearing investments at amortized cost.
(2) Realized yield is calculated as (a) the actual amount earned on interest-bearing investments, including interest, prepayment fees and amortization of Net Loan Fees, divided by (b) the weighted-average of total interest-bearing investments at amortized cost, in each case, including debt investments on non-accrual status and non-income producing Structured Finance Securities.
For the quarter ended March 31, 2023, the weighted average performing income yield on interest-bearing investments increased primarily due to rising interest rates as 94% of our loan portfolio at fair value consisted of floating rate loans.
Weighted-average yields of our investments are not the same as a return on investment for our stockholders, but rather the gross investment income from our investment portfolio before the payment of all of our fees and expenses. There can be no assurance that the weighted average yields will remain at their current levels.
Portfolio Company Investments
The following table summarizes the composition of our Portfolio Company Investments as of March 31, 2023 and December 31, 2022 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| Senior secured debt investments | $ | 334,903 | | | $ | 309,789 | | | $ | 335,558 | | | $ | 311,636 | |
| Subordinated debt investments | 13,890 | | | 129 | | | 13,890 | | | 1,226 | |
| Preferred equity | 10,375 | | | 10,221 | | | 9,966 | | | 8,196 | |
| Common equity, warrants and other | 12,495 | | | 92,597 | | | 12,989 | | | 91,000 | |
Total Portfolio Company Investments | $ | 371,663 | | | $ | 412,736 | | | $ | 372,403 | | | $ | 412,058 | |
| Number of portfolio companies | 58 | | | 58 | | | 63 | | | 63 | |
At March 31, 2023, approximately 99% and 62% of our loan portfolio and total portfolio, respectively, consisted of senior secured loans, based on fair value. We believe the seniority of our debt investments in the borrowers’ capital structures may provide greater downside protection against adverse economic changes, including those caused by the impacts of the ongoing war between Russia and Ukraine, rising interest and elevated inflation rates, instability in the U.S. and international banking systems, the risk of recession and of a failure to increase the U.S. debt ceiling and related market volatility.
As of March 31, 2023, the three largest industries of our Portfolio Company Investments by fair value, were (1) Manufacturing (27.5%), (2) Health Care and Social Assistance (16.5%) and (3) Wholesale Trade (13.1%), totaling an aggregate of approximately 57.1% of our Portfolio Company Investment portfolio. For a full summary of our investment portfolio by industry, see “Item 1–Financial Statements–Note 4.”
As of March 31, 2023, our common equity investment in Pfanstiehl Holdings, Inc., a global manufacturer of high-purity pharmaceutical ingredients, accounted for 17.1% and 47.5% of our total portfolio at fair value and our total net assets, respectively. The value of this investment is substantially comprised of unrealized appreciation of $85.2 million. A deterioration in the operating performance of the company or other factors underlying the valuation of this investment could have a material impact on our NAV.
Structured Finance Securities
The following table summarizes the composition of our Structured Finance Securities as of March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| Subordinated notes | $ | 66,695 | | | $ | 52,385 | | | $ | 65,870 | | | $ | 53,807 | |
| Mezzanine debt | 28,166 | | | 26,498 | | | 28,107 | | | 26,412 | |
| Loan accumulation facilities | 8,500 | | | 8,140 | | | 8,500 | | | 8,299 | |
| Total Structured Finance Securities | $ | 103,361 | | | $ | 87,023 | | | $ | 102,477 | | | $ | 88,518 | |
| Number of Structured Finance Securities | 23 | | | 23 | | | 23 | | | 23 | |
As of March 31, 2023, the aggregate amortized cost and fair value of non-performing Structured Finance Securities was $9.8 million and $8.2 million, respectively, and $1.3 million and $0.1 million, respectively, as of December 31, 2022.
Investment Activity
The following is a summary of our investment activity for the three months ended March 31, 2023 (dollar amounts in millions):
| | | | | | | | | | |
| | | Three Months Ended
March 31, 2023 | | |
| Investments in debt and equity securities | | $ | 9.9 | | | |
| Investments in Structured Finance Securities | | — | | | |
| Total investment purchases and originations | | $ | 9.9 | | | |
| | | | |
| Proceeds from principal payments | | $ | 1.8 | | | |
| Proceeds from investments sold or redeemed | | 8.9 | | | |
| Proceeds from distributions received from portfolio investments | | 3.1 | | | |
| Total proceeds from principal payments, sales and distributions from portfolio investments | | $ | 13.8 | | | |
Risk Monitoring
We categorize investments in the debt securities of portfolio companies into seven risk categories based on relevant information about the ability of borrowers to service their debt. For additional information regarding our risk categories, see “Item 1. Business–Portfolio Review/Risk Monitoring” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 3, 2023. The following table shows the classification of our debt securities of portfolio companies, excluding Structured Finance Securities, by credit risk rating as of March 31, 2023 and December 31, 2022 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Debt Investments, at Fair Value |
| Risk Category | | March 31, 2023 | | December 31, 2022 |
| 1 (Low Risk) | | $ | — | | | — | % | | $ | — | | | — | % |
2 (Below Average Risk) | | — | | | — | | | — | | | — | |
| 3 (Average) | | 286,184 | | | 92.3 | | | 288,170 | | | 92.2 | |
| 4 (Special Mention) | | 16,284 | | | 5.3 | | | 17,218 | | | 5.5 | |
| 5 (Substandard) | | 7,210 | | | 2.3 | | | 7,352 | | | 2.3 | |
| 6 (Doubtful) | | 240 | | | 0.1 | | | 122 | | | — | |
| 7 (Loss) | | — | | | — | | | — | | | — | |
| | $ | 309,918 | | | 100.0 | % | | $ | 312,862 | | | 100.0 | % |
Non-Accrual Loans
Management reviews, for placement on non-accrual status, all loans that become past due on principal and interest, and/or when there is reasonable doubt that principal, cash interest, or PIK interest will be collected. When a loan is placed on non-accrual status, unpaid interest is credited to income and reversed. Additionally, Net Loan Fees are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments subsequently received on non-accrual investments may be recognized as income or applied to principal depending upon management’s judgment. Interest accruals and Net Loan Fee amortization are resumed on non-accrual investments only when they are brought current with respect to principal and interest payments and, in the judgment of management, the investments are estimated to be fully collectible as to all principal and interest. During the quarter ended March 31, 2023, no new loans were placed on non-accrual status. As of March 31, 2023, the aggregate amortized cost and fair value of loans on non-accrual status with respect to all interest and Net Loan Fee amortization was $36.5 million and $11.5 million, respectively, and $36.5 million and $11.2 million, respectively, as of December 31, 2022.
Results of Operations
Our key financial measures are described in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations–Results of Operations–Key Financial Measures” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 3, 2023. The following is a discussion of the key financial measures that management employs in reviewing the performance of our operations.
We do not believe that our historical operating performance is necessarily indicative of our future results of operations. We are primarily focused on debt investments in middle-market and larger companies in the United States and, to a lesser extent, equity investments, including warrants and other minority equity securities, and Structured Finance Securities, which differs to some degree from our historical investment concentration in that we now also focus on the debt of larger U.S. companies and Structured Finance Securities. Moreover, as a BDC and a RIC, we are also subject to certain constraints on our operations, including, but not limited to, limitations imposed by the 1940 Act and the Code. In addition, SBIC I LP is subject to regulation and oversight by the SBA. For the reasons described above, the results of operations described below may not necessarily be indicative of the results we expect to report in future periods.
Net increase (decrease) in net assets resulting from operations can vary substantially from period to period for various reasons, including the recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, annual comparisons of net increase (decrease) in net assets resulting from operations may not be meaningful.
The following analysis compares our quarterly results of operations to the preceding quarter, as well as our year-to-date results of operations to the corresponding period in the prior year. We believe a comparison of our current quarterly results to the preceding quarter is more meaningful and transparent than a comparison to the corresponding prior-year quarter as our results of operations are not influenced by seasonal factors the latter comparison is designed to elicit and highlight.
Comparison of the three months ended March 31, 2023 and December 31, 2022
Consolidated operating results for the three months ended March 31, 2023 and December 31, 2022 are as follows (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31, 2023 | | December 31, 2022 | | | | |
| Investment income | | | | | | | |
| Interest income: | | | | | | | |
| Cash interest income | $ | 9,698 | | | $ | 9,954 | | | | | |
| PIK interest income | 226 | | | 92 | | | | | |
Net Loan Fee amortization | 409 | | | 408 | | | | | |
| Accretion of interest income on Structured Finance Securities | 3,002 | | | 3,009 | | | | | |
Other interest income | 58 | | | 56 | | | | | |
| Total interest income | 13,393 | | | 13,519 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Dividend income: | | | | | | | |
| Cash dividends | 549 | | | 136 | | | | | |
| Preferred equity PIK dividends | 236 | | | 236 | | | | | |
| Total dividend income | 785 | | | 372 | | | | | |
| Fee income: | | | | | | | |
| Syndication fees | 36 | | | — | | | | | |
Prepayment and other fees | 69 | | | 107 | | | | | |
| Total fee income | 105 | | | 107 | | | | | |
| Total investment income | 14,283 | | | 13,998 | | | | | |
| Total expenses | 9,333 | | | 9,272 | | | | | |
| Net investment income | 4,950 | | | 4,726 | | | | | |
| Net loss on investments | (1,125) | | | (2,292) | | | | | |
| Loss on extinguishment of debt | (19) | | | — | | | | | |
| Net increase in net assets resulting from operations | $ | 3,806 | | | $ | 2,434 | | | | | |
Investment Income
For the quarter ended March 31, 2023, total investment income increased to $14.3 million from $14.0 million in the prior quarter, primarily due to an increase in total dividend income of $0.5 million.
Interest income decreased $0.1 million during the three months ended March 31, 2023 compared to the prior quarter, primarily due to a decrease in our weighted-average performing income yield to 15.5% in our Structured Finance Securities for the quarter ended March 31, 2023 from 16.3% in the prior quarter.
Prepayment fees and syndication fees generally result from periodic transactions rather than from holding portfolio investments and are considered non-recurring. We receive syndication fees on investments where OFS Advisor sources, structures, and arranges the lending group. For the quarter ended March 31, 2023, total fee income was stable compared to the prior quarter.
Expenses
Operating expenses for the three months ended March 31, 2023 and December 31, 2022 are presented below (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31, 2023 | | December 31, 2022 | | | | |
| Interest expense | $ | 4,874 | | | $ | 4,801 | | | | | |
| Management fee | 1,894 | | | 1,918 | | | | | |
| Income Incentive Fee | 1,238 | | | 1,183 | | | | | |
| | | | | | | |
| Professional fees | 436 | | | 453 | | | | | |
| Administration fee | 482 | | | 433 | | | | | |
| Other expenses | 409 | | | 484 | | | | | |
| Total expenses | $ | 9,333 | | | $ | 9,272 | | | | | |
Comparison of the three months ended March 31, 2023 and December 31, 2022
Interest expense for the quarter ended March 31, 2023 increased $0.1 million compared to the prior quarter, primarily due to the increase in the effective interest rate on our BNP Facility resulting from SOFR rate increases.
Management fee expense for the quarter ended March 31, 2023 remained stable compared to the prior quarter.
The Income Incentive Fee for the quarter ended March 31, 2023 increased $0.1 million compared to the prior quarter, primarily due to the increase in net investment income.
For the quarter ended March 31, 2023, professional fees, administration fee and other expenses remained stable compared to the prior quarter.
Net realized and unrealized gain (loss) on investments
Net gain (loss), inclusive of realized and unrealized gains (losses), by investment type for the three months ended March 31, 2023 and December 31, 2022 were as follows (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31, 2023 | | December 31, 2022 | | | | |
| Senior secured debt | $ | (1,443) | | | $ | (689) | | | | | |
| Subordinated debt | (1,097) | | | (3,049) | | | | | |
| Preferred equity | 1,630 | | | 483 | | | | | |
| Common equity, warrants and other | 2,498 | | | 2,779 | | | | | |
| Structured Finance Securities | (2,383) | | | (1,612) | | | | | |
| Income tax expense on net realized investment gains | (171) | | | (210) | | | | | |
| Deferred tax benefit (expense) | (159) | | | 6 | | | | | |
| Total net loss on investments | $ | (1,125) | | | $ | (2,292) | | | | | |
Net gain (loss) on investments for the three months ended March 31, 2023 and December 31, 2022
Three months ended March 31, 2023
For the quarter ended March 31, 2023, we recognized a net loss on investments of $1.1 million, or $0.09 per common share, primarily due to issuer specific declines on certain debt investments and Structured Finance Securities, partially offset by net unrealized appreciation on our equity investments.
Three months ended December 31, 2022
During the three months ended December 31, 2022, our portfolio experienced net losses of $2.3 million, primarily related to unrealized depreciation of $4.0 million on our debt and equity investments in a non-accrual portfolio company.
Loss on Extinguishment of Debt
Three months ended March 31, 2023
During the three months ended March 31, 2023, we redeemed $5.0 million of SBA debentures and, as a result, we recognized loss on extinguishment of debt of $0.02 million related to the acceleration of unamortized deferred borrowing costs on the redeemed debentures.
Three months ended March 31, 2022
During the three months ended March 31, 2022, we redeemed $19.0 million of SBA debentures, and, as a result, we recognized losses on extinguishment of debt of $0.1 million related to the charge-off of unamortized deferred borrowing costs on these instruments.
Non-GAAP Financial Measure – Adjusted Net Investment Income
On a supplemental basis, we disclose adjusted net investment income (“Adjusted NII”) (including on a per share basis), which is a financial measure calculated and presented on basis other than in accordance with GAAP. Adjusted NII represents net investment income, excluding the capital gains incentive fee, in periods in which such expense occurs. GAAP requires recognition of a capital gains incentive fee in our financial statements when aggregate net realized and unrealized capital gains, if any, on a cumulative basis is positive from the date of the election to be a BDC through the reporting date. Such fees are subject to further conditions specified in the Investment Advisory Agreement, principally related to the realization of such net gains, before OFS Advisor is entitled to payment, and such recognized fees are subject to the risk of reversal should unrealized gains diminish to become losses. Management believes that Adjusted NII is a useful indicator of operations exclusive of any net capital gains incentive fee, as net investment income does not include the net gains, realized or unrealized, associated with the capital gains incentive fee.
Management believes Adjusted NII facilitates the analysis of our results of operations and provides greater transparency into the determination of incentive fees. Adjusted NII is not meant as a substitute for net investment income determined in accordance with GAAP and should be considered in the context of the entirety of our reported results of operations, financial position and cash flows determined in accordance with GAAP.
The following table provides a reconciliation from net investment income (the most comparable GAAP measure) to Adjusted NII for the quarters ended March 31, 2023 and December 31, 2022 and three months ended March 31, 2023 and 2022, respectively (dollar amounts in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended March 31, |
| March 31, 2023 | | December 31, 2022 | | 2023 | | 2022 |
| (000's) | | Per Share | | (000's) | | Per Share | | (000's) | | Per Share | | (000's) | | Per Share |
Net investment income | $ | 4,950 | | | $ | 0.37 | | | $ | 4,726 | | | $ | 0.35 | | | $ | 4,950 | | | $ | 0.37 | | | $ | 3,005 | | | $ | 0.22 | |
Capital Gains Fee | — | | | — | | | — | | | — | | | — | | | — | | | 1,072 | | | 0.08 | |
Adjusted NII | $ | 4,950 | | | $ | 0.37 | | | $ | 4,726 | | | $ | 0.35 | | | $ | 4,950 | | | $ | 0.37 | | | $ | 4,077 | | | $ | 0.30 | |
Although these non-GAAP financial measures are intended to enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP.
Liquidity and Capital Resources
As of March 31, 2023, we held cash of $10.8 million, which includes $3.1 million held by SBIC I LP, our wholly owned SBIC, and $3.6 million held by OFSCC-FS. Our use of cash held by SBIC I LP may be restricted by SBA regulation, including limitations on the amount of cash SBIC I LP can distribute to the Parent. Any such distributions to the Parent from SBIC I LP are generally restricted under SBA regulations to a statutory measure of undistributed accumulated earnings (“READ”) or regulatory capital of SBIC I LP. During the three months ended March 31, 2023, the Parent received READ from SBIC I LP of $2.5 million. Distributions from OFSCC-FS to the Parent are restricted by the terms and conditions of the BNP Facility. During the three months ended March 31, 2023, the Parent received $2.8 million in cash distributions from OFSCC-FS. As of March 31, 2023, cash available to be distributed from SBIC I LP and OFSCC-FS were $3.8 million and $-0- million, respectively.
As of March 31, 2023, we had an unused commitment of $20.0 million under our PWB Credit Facility, as well as an unused commitment of $49.0 million under our BNP Facility, both of which are subject to a borrowing base requirements and other covenants. Based on our regulatory asset coverage ratio as of March 31, 2023, we could access our aggregate unused lines of credit of $69.0 million, subject to the provisions of the borrowing bases as of any borrowing date, and remain in compliance with asset coverage ratio requirements.
The Parent may make unsecured loans to SBIC I LP, of which the aggregate cannot exceed $35 million at any given time, and no interest may be charged on the unpaid principal balance. There were no intercompany loans between the Parent and SBIC I LP as of March 31, 2023.
Sources and Uses of Cash
We generate operating cash flows from net investment income and the net liquidation of portfolio investments, and use cash in our operations in the net purchase of portfolio investments and payment of expenses. Significant variations may exist between net investment income and cash from net investment income, primarily due to the recognition of non-cash investment income, including certain Net Loan Fee amortization, PIK interest and PIK dividends, which generally will not be fully realized in cash until we exit the investment, as well as accreted interest income on Structured Finance Securities, which may not coincide with cash distributions from these investments. As discussed in “Item 1.–Financial Statements–Note 3,” we pay OFS Advisor a quarterly incentive fee with respect to our pre-incentive fee net investment income, which may include investment income that we have not received in cash. In addition, we must distribute substantially all of our taxable income, which approximates, but will not always equal, the cash we generate from net investment income to maintain our RIC tax treatment. We also obtain cash to fund investments or general corporate activities from the issuance of securities and our revolving line of credit. These principal sources and uses of cash and liquidity are presented below (in thousands):
| | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2023 | | 2022 |
Cash from net investment income(1) | | $ | 3,055 | | | $ | 428 | |
Net (purchases and originations)/repayments and sales of portfolio investments(1) | | 902 | | | (24,812) | |
| Net cash provided by (used in) operating activities | | 3,957 | | | (24,384) | |
| | | | |
Distributions paid to stockholders(2) | | (4,421) | | | (3,719) | |
| Net borrowings under lines of credit | | 1,300 | | | 14,650 | |
| Repayments of SBA debentures | | (5,000) | | | (19,000) | |
| | | | |
| | | | |
| Other financing activities | | — | | | (122) | |
| Net cash used in financing activities | | (8,121) | | | (8,191) | |
| Net decrease in cash | | $ | (4,164) | | | $ | (32,575) | |
(1) Net purchases and originations/repayments and sales of portfolio investments includes the purchase and origination of portfolio investments, proceeds from principal payments on portfolio investments, proceeds from sale or redemption of portfolio investments, changes in receivable for investments sold, payable from investments purchased as reported in our statements of cash flows, as well as the excess of proceeds from distributions received from Structured Finance Securities over accretion of interest income on Structured Finance Securities. Cash from net investment income includes all other cash flows from operating activities reported in our statements of cash flows.
(2) The determination of the tax attributes of our distributions is made annually as of the end of our fiscal year based upon our ICTI for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of our distributions for a full year.
Cash from net investment income
Cash from net investment income increased $2.6 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to an increase of $2.7 million in cash interest income.
Net (purchases and originations)/repayments and sales of portfolio investments
During the three months ended March 31, 2023, net purchases and originations of portfolio investments of $0.9 million were primarily due to $9.9 million of cash we used to purchase portfolio investments, offset by $10.8 million of cash we received from amortized cost repayments, sales on our portfolio investments and the net proceeds from distributions received from Structured Finance Securities and accretion of interest income on Structured Finance Securities. During the three months ended March 31, 2022, net purchases and originations of portfolio investments of $24.8 million were primarily due to $65.9 million of cash we used to purchase portfolio investments, offset by $41.1 million of cash we received from amortized cost repayments, sales on our portfolio investments and the net proceeds from distributions received from Structured Finance Securities and accretion of interest income on Structured Finance Securities. See “—Portfolio Composition and Investment Activity–Investment Activity.”
Borrowings
SBA Debentures
SBIC I LP’s SBIC license allowed it to obtain leverage by issuing SBA-guaranteed debentures, subject to issuance of a capital commitment by the SBA and customary procedures. These debentures are non-recourse to us, and bear interest payable semi-annually, and each debenture has a maturity date that is ten years following issuance. The interest rate was fixed at the first pooling date after issuance, which was March and September of each year, at a market-driven spread over U.S. Treasury Notes with ten-year maturities. As of March 31, 2023 and December 31, 2022, SBIC I LP had outstanding debentures of $45.9 million and $50.9 million, respectively.
On a stand-alone basis, at March 31, 2023 and December 31, 2022, SBIC I LP held $175.3 million and $176.5 million in total assets, respectively, which accounted for approximately 34% and 34% of the Company’s total consolidated assets, respectively.
As part of our plans to focus on providing first lien senior secured loans to larger borrowers, which we believe will improve our overall risk profile, SBIC I LP is repaying over time its outstanding SBA debentures prior to their scheduled maturity dates. Under a plan approved by the SBA, we will only make follow-on investments in current portfolio companies held by SBIC I LP. During the three months ended March 31, 2023, SBIC I LP redeemed $5.0 million of SBA debentures that were contractually due March 1, 2025.
SBIC I LP is periodically examined and audited by the SBA’s staff to determine its compliance with SBA regulations. If SBIC I LP fails to comply with applicable SBA regulations, the SBA could, depending on the severity of the violation, limit or prohibit SBIC I LP’s use of debentures, declare outstanding debentures immediately due and payable, and/or limit SBIC I LP from making distributions.
We have received exemptive relief from the SEC effective November 26, 2013, which permits us to exclude SBA guaranteed debentures from the definition of senior securities in the statutory 150% asset coverage ratio under the 1940 Act.
PWB Credit Facility
We are party to a BLA with Pacific Western Bank, as lender, to provide us with a senior secured revolving credit facility, or the PWB Credit Facility, which is available for general corporate purposes including investment funding. The maximum availability of the PWB Credit Facility is equal to 50% of the aggregate outstanding principal amount of eligible loans included in the borrowing base, which excludes subordinated loan investments (as defined in the BLA) and as otherwise specified in the BLA. The PWB Credit Facility is guaranteed by OFSCC-MB, Inc. and secured by all of our current and future assets, excluding assets held by SBIC I LP, OFSCC-FS and the Company’s partnership interests in SBIC I LP and OFS SBIC I, GP.
On April 22, 2022, we amended the BLA to: (i) increase the maximum amount available under the PWB Credit Facility from $25.0 million to $35.0 million; and (ii) extend the maturity date of the PWB Credit Facility from February 28, 2023 to February 28, 2024.
On December 15, 2022, we amended the PWB Credit Facility to: (i) reduce the maximum amount available under the PWB Credit Facility from $35.0 million to $25.0 million; and (ii) eliminate the No Net Losses covenant, which restricted net losses (defined as income after adjustments to the investment portfolio for gains and losses, realized and unrealized, also shown as net increase (decrease) in net assets resulting from operations) in more than two quarters during the prior four quarters then ended.
As of March 31, 2023, we had $5.0 million outstanding and an unused commitment of $20.0 million under the PWB Credit Facility, subject to a borrowing base and other covenants. As of March 31, 2023, the effective interest rate on the PWB Credit Facility was 8.55%.
The BLA contains customary terms and conditions, including, without limitation, affirmative and negative covenants, such as information reporting requirements, a minimum tangible net asset value, a minimum quarterly net investment income after incentive fees, a debt/worth ratio and a net loss restriction. The BLA also contains customary events of default, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, change in investment advisor, and the occurrence of a material adverse change in our financial condition. As of March 31, 2023, we were in compliance in all material respects with the applicable covenants under the PWB Credit Facility.
Unsecured Notes
The Unsecured Notes are direct unsecured obligations and rank equal in right of payment with all of our current and future unsecured indebtedness. Because the Unsecured Notes are not secured by any of our assets, they are effectively subordinated to all existing and future secured unsubordinated indebtedness (or any indebtedness that is initially unsecured as to
which we subsequently grant a security interest), to the extent of the value of the assets securing such indebtedness, including, without limitation, borrowings under the PWB Credit Facility. As of March 31, 2023 and December 31, 2022, we had $180.0 million in Unsecured Notes.
In order to, among other things, reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may, from time to time, purchase the Unsecured Notes for cash in open market purchases and/or privately negotiated transactions. We will evaluate any such transactions in light of then-existing market conditions, taking into account our current liquidity, prospects for future access to capital, contractual restrictions and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material.
BNP Facility
On June 20, 2019, OFSCC-FS entered into the BNP Facility, as amended, which provides for borrowings in an aggregate principal amount up to $150.0 million, of which $101.0 million was drawn as of March 31, 2023. Borrowings under the BNP Facility bear interest based on SOFR for the relevant interest period, plus an applicable spread (subject to an effective floor of 2.65%). The BNP Facility will mature on the earlier of June 20, 2027 or upon certain other events defined in the credit agreement which may result in accelerated maturity. Borrowings under the BNP Facility are secured by substantially all of the assets held by OFSCC-FS. As of March 31, 2023, we were in compliance in all material respects with the applicable covenants under the BNP Facility.
On June 24, 2022, we amended the BNP Facility to, among other things: (i) extend the reinvestment period under the BNP Facility for three years from June 20, 2022 to June 20, 2025; (ii) extend the maturity date under the BNP Facility from June 20, 2024 to June 20, 2027; (iii) convert the benchmark interest rate from LIBOR to SOFR; (iv) increase the top two Moody’s Industry concentrations from 15% to 17.5% and 20%; (v) increase the applicable margin by 0.40% on all classes of loans; and (vi) increase the applicable margin floor from 1.925% to 2.65%.
As of March 31, 2023, the effective interest rate on the BNP Facility was 8.00% and the unused commitment under the was $49.0 million. On a stand-alone basis, at March 31, 2023 and December 31, 2022, OFSCC-FS held approximately $168.9 million and $173.7 million in total assets, respectively, which accounted for approximately 33% and 33% of our total consolidated assets, respectively.
Other Liquidity Matters
We expect to fund the growth of our investment portfolio utilizing our current borrowings, follow-on equity offerings, and issuances of senior securities or future borrowings to the extent permitted by the 1940 Act. We cannot assure stockholders that our plans to raise capital will be successful. In addition, we intend to distribute to our stockholders substantially all of our taxable income in order to satisfy the requirements applicable to RICs under Subchapter M of the Code. Consequently, we may not have the funds or the ability to fund new investments or make additional investments in our portfolio companies. The illiquidity of our portfolio investments may make it difficult for us to sell these investments when desired and, if we are required to sell these investments, we may realize significantly less than their recorded value.
As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our assets, as defined by the 1940 Act, are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules, the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case organized in the United States. Conversely, we may invest up to 30% of our portfolio in opportunistic investments not otherwise eligible under BDC regulations. Specifically, as part of this 30% basket, we may consider investments in investment funds that are operating pursuant to certain exceptions to the 1940 Act and in advisers to similar investment funds, as well as in debt or equity of middle-market portfolio companies located outside of the United States and debt and equity of public companies that do not meet the definition of eligible portfolio companies because their market capitalization of publicly traded equity securities exceeds the levels provided for in the 1940 Act. We have, and may continue to, make opportunistic investments in Structured Finance Securities and other non-qualifying assets, consistent with our investment strategy. As of March 31, 2023, approximately 81% of our investments were qualifying assets.
BDCs are generally required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities to total senior securities. We received an exemptive order from the SEC to permit us to exclude the debt of SBIC I LP guaranteed by the SBA from the definition of Senior Securities in the statutory asset coverage ratio under the 1940 Act, which limits the amount that we may borrow. To fund growth in our investment portfolio in the future, we anticipate the need to raise additional capital from various sources, including the equity markets and the securitization or other debt-related markets, which may or may not be available on favorable terms, if at all.
On May 3, 2018, our Board, including a required majority (as such term is defined in Section 57(o) of the 1940 Act) thereof, approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, our minimum required asset coverage ratio decreased from 200% to 150%, effective May 3, 2019.
On May 22, 2018, the Board authorized the Stock Repurchase Program under which we could acquire up to $10.0 million of our outstanding common stock through the two-year period ending May 22, 2020. On May 4, 2020 and May 3, 2022, the Board extended the Stock Repurchase Program for additional two-year periods. Under the extended Stock Repurchase Program, we are authorized to repurchase shares in open-market transactions, including through block purchases, depending on prevailing market conditions and other factors. We expect the Stock Repurchase Program to be in place through May 22, 2024, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not obligate us to acquire any specific number of shares, and all repurchases will be made in accordance with SEC Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases. The Stock Repurchase Program may be extended, modified or discontinued at any time for any reason. We have provided our stockholders with notice of our intention to repurchase shares of our common stock in accordance with 1940 Act requirements. We retire all shares of common stock that we purchased in connection with the Stock Repurchase Program. During the three months ended March 31, 2023, we did not make any repurchases of common stock on the open market under the Stock Repurchase Program. As of March 31, 2023, the approximate dollar value of shares remaining that may be purchased under the program was $9.64 million.
As of March 31, 2023, the aggregate amount outstanding of the senior securities issued by us was $331.9 million, for which our asset coverage was 163%. The Small Business Administration debentures are not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC effective November 26, 2013. The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness.
As a BDC, we are generally not permitted to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if the Board determines that such sale is in the best interests of us and our stockholders, and if our stockholders approve such sale. On July 13, 2022, our stockholders approved a proposal to authorize us, with approval of our Board, to sell or otherwise issue shares of our common stock (during a twelve-month period) at a price below our then-current net asset value per share in one or more offerings, subject to certain limitations (including that the cumulative number of shares sold pursuant to such authority does not exceed 25% of our then outstanding common stock immediately prior to each such sale). We have not sold any shares below net asset value pursuant to the proposal approved by our stockholders.
We continue to monitor the instability in the current banking environment arising from recent bank failures. If the banks and financial institutions with whom we have credit facilities enter into receivership or become insolvent in the future, our liquidity may be reduced significantly. At various times, our cash balances at third-party financial institutions exceed the federally insured limit. Our cash balances are retained in custodian accounts with U.S. Bank N.A and Citibank N.A., and we do not believe they are exposed to any significant credit risk. We continue to monitor our portfolio and believe the deposit risk and counterparty risk to be minimal.
Contractual Obligations and Off-Balance Sheet Arrangements
At March 31, 2023, we had $10.8 million of cash and cash equivalents, as well as $20.0 million and $49.0 million of unfunded commitments under our PWB Credit Facility and BNP Facility, respectively, to meet our short-term contractual obligations. At March 31, 2023, we had $21.3 million in outstanding commitments to fund portfolio investments under various undrawn revolvers and other credit facilities. Long-term contractual obligations, such as our BNP Facility that matures in 2027 and has $101.0 million outstanding at March 31, 2023, can be repaid by selling OFSCC-FS portfolio investments that have a fair value of $163.4 million at March 31, 2023. The OFSCC-FS portfolio is primarily comprised of broadly syndicated loans that can be sold over a relatively short period to generate cash. We cannot, however, be certain that this source of funds will be available and upon terms acceptable to us in sufficient amounts in the future.
At March 31, 2023, we have $45.9 million of outstanding SBA debentures that mature in 2025, which we may repay prior to their maturity dates by using proceeds from investment repayments. At March 31, 2023, the SBIC I LP investment portfolio had a fair value of $171.6 million.
As of March 31, 2023, we continue to believe our long-dated financing, which includes approximately 85% of our total outstanding debt, and contractually matures in 2026 and beyond, affords us operational flexibility.
We have entered into contracts with third parties under which we have material future commitments—the Investment Advisory Agreement, pursuant to which OFS Advisor has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to which OFS Services has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations.
We may become a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. There is no guarantee that these amounts will be funded to the borrowing party now or in the future. We continue to believe that we have sufficient levels of liquidity to support our existing portfolio companies and will meet these unfunded commitments by using our cash on hand or utilizing our available borrowings under the PWB Credit Facility and BNP Facility. In addition, we generally hold broadly syndicated loans in larger portfolio companies that can be sold over a relatively short period to generate cash.
Distributions
We are taxed as a RIC under the Code. In order to maintain our tax treatment as a RIC, we are required to distribute annually to our stockholders at least 90% of our ICTI, as defined by the Code. Additionally, to avoid a 4% excise tax on undistributed earnings we are required to distribute each calendar year the sum of: (i) 98% of our ordinary income for such calendar year; (ii) 98.2% of our net capital gains for the one-year period ending October 31 of that calendar year; and (iii) any income recognized, but not distributed, in preceding years and on which we paid no federal income tax. Maintenance of our RIC status requires adherence to certain source of income and asset diversification requirements. Generally, a RIC is entitled to deduct dividends it pays to its stockholders from its income to determine “taxable income.” Taxable income includes our taxable interest, dividend and fee income, and taxable net capital gains. Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation, as gains or losses are not included in taxable income until they are realized. In addition, gains realized for financial reporting purposes may differ from gains included in taxable income as a result of our election to recognize gains using installment sale treatment, which generally results in the deferment of gains for tax purposes until notes or other amounts, including amounts held in escrow received as consideration from the sale of investments, are collected in cash. Taxable income includes non-cash income, such as changes in accrued and reinvested interest and dividends, which includes contractual PIK interest, and the amortization of discounts and fees. Cash collections of income resulting from contractual PIK interest and dividends or the amortization of discounts and fees generally occur upon the repayment of the loans or debt securities that include such items. Non-cash taxable income is reduced by non-cash expenses, such as realized losses and depreciation, and amortization expense.
Our Board maintains a variable dividend policy with the objective of distributing quarterly distributions in an amount not less than 90-100% of our taxable quarterly income or potential annual income for a particular year. In addition, during the year, we may pay a special dividend, such that we may distribute approximately all of our annual taxable income in the year it was earned, while maintaining the option to spill over our excess taxable income to a following year. We may choose to retain a portion of our taxable income in any year and pay the 4% U.S. federal excise tax on the retained amounts. Each year, a statement on Form 1099-DIV identifying the source of the distribution is mailed to the Company’s stockholders.
Recent Developments
On May 2, 2023, our Board declared a distribution of $0.33 per share for the second quarter of 2023, payable on June 30, 2023 to stockholders of record as of June 23, 2023.
On April 10, 2023, Ross Teune notified our Board of his intention to resign. Mr. Teune’s resignation as Chief Accounting Officer was effective on April 21, 2023. The resignation was not in any way related to a disagreement with the Company on any matter relating to the Company’s operations, policies, practices or otherwise.
On April 12, 2023, our Board voted to appoint Kyle Spina as Chief Accounting Officer of the Company, effective as of April 21, 2023, to fill the vacancy created by the resignation of Mr. Teune.