As filed with the Securities and Exchange Commission on November 25, 2024
Securities Act Registration
No. 333-[ ]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 |
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Check the appropriate box or boxes: |
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| ☐ Pre-Effective Amendment No. |
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| ☐ Post-Effective Amendment No. |
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(Exact Name of Registrant as Specified in Charter)
rd
Floor(Address of Principal Executive Offices)
(212 ) 891-2880
(Registrant’s Telephone Number, Including Area Code)
President and Chief Executive Officer
rd
Floor(Name and Address of Agent for Service)
COPIES TO:
Harry S. Pangas, Esq.
Alexander Karampatsos, Esq.
Dechert LLP
1900 K Street, NW
Washington, DC 20006
Telephone: (202)
261-3300
Fax: (202)
261-3333
Approximate date of proposed public offering:
| Check box if the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans. |
| Check box if any securities being registered on this Form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933 (“Securities Act”), other than securities offered in connection with a dividend reinvestment plan. |
| Check box if this Form is a registration statement pursuant to General Instruction A.2 or a post-effective amendment thereto. |
| Check box if this Form is a registration statement pursuant to General Instruction B or a post-effective amendment thereto that will become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act. |
| Check box if this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction B to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act. |
It is proposed that this filing will become effective (check appropriate box):
| when declared effective pursuant to Section 8(c) of the Securities Act. |
Check each box that appropriately characterizes the Registrant:
| Registered Closed-End Fund (closed-end company that is registered under the Investment Company Act of 1940 (“Investment Company Act”)). |
| Business Development Company (closed-end company that intends or has elected to be regulated as a business development company under the Investment Company Act). |
| Interval Fund (Registered Closed-End Fund or a Business Development Company that makes periodic repurchase offers under Rule 23c-3 under the Investment Company Act). |
| A.2 Qualified (qualified to register securities pursuant to General Instruction A.2 of this Form). |
| Well-Known Seasoned Issuer (as defined by Rule 405 under the Securities Act). |
| Emerging Growth Company (as defined by Rule 12b-2 under the Securities Exchange Act of 1934 (“Exchange Act”). |
| ☐ | If an Emerging Growth Company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. |
| New Registrant (registered or regulated under the Investment Company Act for less than 12 calendar months preceding this filing). |
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where an offer or sale is not permitted.
PROSPECTUS SUBJECT TO COMPLETION DATED November 25, 2024
$500,000,000
PORTMAN RIDGE FINANCE CORPORATION
Common Stock
Preferred Stock
Warrants
Subscription Rights
Debt Securities
Portman Ridge Finance Corporation, or “we” “us” or the “Company”, is an externally managed,
non-diversified
closed-end
investment company that has elected to be regulated as a business development company (“BDC”), under the Investment Company Act of 1940 (the “1940 Act”). Subject to the overall supervision of the Board of Directors of the Company (the “Board”), Sierra Crest Investment Management LLC (the “Adviser”) is responsible for managing our business and activities, including sourcing investment opportunities, conducting research, performing diligence on potential investments, structuring our investments, and monitoring our portfolio companies on an ongoing basis through a team of investment professionals. The Adviser is an affiliate of BC Partners LLP, or BC Partners. We originate, structure, and invest in secured term loans, bonds or notes and mezzanine debt primarily in privately-held middle market companies but may also invest in other investments such as loans to publicly-traded companies, high-yield bonds, and distressed debt securities (collectively, the “Debt Securities Portfolio”). We also invest in joint ventures and debt and subordinated securities issued by collateralized loan obligation funds (“CLO Fund Securities”). In addition, from time to time we may invest in the equity securities of privately held middle market companies and may also receive warrants or options to purchase common stock in connection with our debt investments.
In our Debt Securities Portfolio, our investment objective is to generate current income and, to a lesser extent, capital appreciation from the investments in senior secured term loans, mezzanine debt and selected equity investments in privately-held middle market companies. We define the middle market as comprising companies with EBITDA (earnings before interest, taxes, depreciation and amortization) of $10 million to $50 million and/or total debt of $25 million to $150 million. We primarily invest in first and second lien term loans which, because of their priority in a company’s capital structure, we expect will have lower default rates and higher rates of recovery of principal if there is a default and which we expect will create a stable stream of interest income. The first lien term loans may include traditional first lien senior secured loans or unitranche loans. Unitranche loans combine characteristics of traditional first lien senior secured loans as well as second lien and/or mezzanine debt, or junior debt. Unitranche loans will expose us to the risks associated with first lien loans and junior debt. While there is no specific collateral associated with senior unsecured debt, such positions are senior in payment priority over subordinated debt investments. The investments in our Debt Securities Portfolio are all or predominantly below investment grade, and have speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
From we have also made investments in CLO Fund Securities managed by other asset managers. Our collateralized loan obligation funds (“CLO Funds”) typically invest in broadly syndicated loans, high-yield bonds and other credit instruments.
time-to-time
Our portfolio may include “covenant-lite” loans which generally refer to loans that do not have a complete set of financial maintenance covenants. Generally, “covenant-lite” loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition. Accordingly, to the extent we invest in “covenant-lite” loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants.
We have elected to be treated for U.S. federal income tax purposes as a registered investment corporation (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and intend to operate in a manner to maintain our RIC status. As a RIC, we intend to distribute to our stockholders substantially all of our net ordinary taxable income and the excess of realized net short-term capital gains over realized net long-term capital losses, if any, for each year. To qualify
as a RIC, we must, among other things, meet certain and asset diversification requirements. Pursuant to this election, we generally will not have to pay corporate-level U.S. federal income taxes on any income that we timely distribute to our stockholders.
source-of-income
From time to time, we may seek to retire, repurchase, or exchange debt securities in open market purchases or by other means dependent on market conditions, liquidity, contractual obligations, and other matters. In addition, we evaluate strategic opportunities available to us, including mergers with unaffiliated funds and affiliated funds, divestures, spin-offs, joint ventures and other similar transactions from time to time.
We may offer, from time to time, in one or more offerings or series, up to $500,000,000 of our common stock, preferred stock, debt securities, subscription rights to purchase shares of our common stock, and/or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, which we refer to, collectively, as the “securities”. The preferred stock, debt securities, subscription rights and warrants offered hereby may be convertible or exchangeable into shares of our common stock. The securities may be offered at prices and on terms to be described in one or more supplements to this prospectus.
In the event we offer common stock, the net proceeds we receive on a per share basis, before offering expenses, will generally not be less than the net asset value (“NAV”) per share of our common stock at the time we make the offering. However, we may receive net proceeds on a per share basis, before offering expenses, that are less than our NAV per share (i) in connection with a rights offering to our existing stockholders, (ii) with the prior approval of the majority (as defined in the 1940 Act) of our common stockholders or (iii) under such other circumstances as the Securities and Exchange Commission (the “SEC”) may permit.
The securities may be offered directly to one or more purchasers, including existing stockholders in a rights offering, or through agents designated from time to time by us, or to or through underwriters or dealers. Each prospectus supplement relating to an offering will identify any agents or underwriters involved in the sale of the securities, and will disclose any applicable purchase price, fee, discount or commissions arrangement between us and our agents or underwriters or among our underwriters or the basis upon which such amount may be calculated. See “.”
Plan of Distribution
Our common stock is traded on the NASDAQ Global Select Market, or NASDAQ, under the symbol “PTMN.” The reported closing price for our common stock on November 21, 2024 was $17.03 per share.
Shares of
closed-end
investment companies, including BDCs, frequently trade at a discount to their NAV. If our shares trade at a discount to our NAV, it will likely increase the risk of loss for purchasers in an offering made pursuant to this prospectus or any related prospectus supplement. Investing in our securities involves a high degree of risk. Before investing in our securities, you should review carefully the risks and uncertainties, including the risk of leverage and dilution, described in the section titled “
” beginning on page 6 of this prospectus or otherwise incorporated by reference herein and included in, or incorporated by reference into, the applicable prospectus supplement and in any free writing prospectuses we have authorized for use in connection with a specific offering, and under similar headings in the other documents that are incorporated by reference into this prospectus.
This prospectus describes some of the general terms that may apply to an offering of our securities. We will provide the specific terms of these offerings and securities in one or more supplements to this prospectus. We may also authorize one or more free writing prospectuses to be provided to you in connection with these offerings. The accompanying prospectus supplement and any related free writing prospectus may also add, update, or change information contained in this prospectus. You should carefully read this prospectus, the accompanying prospectus supplement, any related free writing prospectus and the documents incorporated by reference herein, before investing in our securities and keep them for future reference. We file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC also maintains a website at http://www.sec.gov that contains such information. This information is also available free of charge by contacting us at 650 Madison Avenue, 3
rd
Floor, New York, New York 10022, Attention: Investor Relations, or by calling us collect at (212) 891-2880
or on our website at http://www.portmanridge.com. Information contained on our website is not incorporated by reference into this prospectus or any supplement to this prospectus and you should not consider that information to be part of this prospectus or any supplement hereto. Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This prospectus may not be used to consummate sales of securities unless accompanied by a prospectus supplement.
The date of this prospectus is [ ], 2024
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission (the “SEC”), using the “shelf” registration process. Under this shelf registration statement, we may offer, from time to time, in one or more offerings, up to $500,000,000 of our common stock, preferred stock, debt securities, subscription rights to purchase shares of our common stock, and/or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, on terms to be determined at the time of the offering. See “” for more information.
Plan of Distribution
This prospectus provides you with a general description of the securities that we may offer. Each time we use this prospectus to offer securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information relating to these offerings. In a prospectus supplement or free writing prospectus, we may also add, update, or change any of the information contained in this prospectus or in the documents we have incorporated by reference into this prospectus. This prospectus, together with the applicable prospectus supplement, any related free writing prospectus, and the documents incorporated by reference into this prospectus and the applicable prospectus supplement, will include all material information relating to the applicable offering. Before buying any of the securities being offered, please carefully read this prospectus, any accompanying prospectus supplement, any free writing prospectus and the documents incorporated by reference in this prospectus and any accompanying prospectus supplement.
This prospectus may contain estimates and information concerning our industry, including market size and growth rates of the markets in which we participate, that are based on industry publications and other third-party reports. This information involves many assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and reports. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described or referenced in the section titled “,” that could cause results to differ materially from those expressed in these publications and reports.
Risk Factors
This prospectus includes summaries of certain provisions contained in some of the documents described in this prospectus, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed or incorporated by reference, or will be filed or incorporated by reference, as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described in the section titled “.” Except for the documents incorporated by reference into this prospectus and any accompanying prospectus supplement, the references in this prospectus to the SEC’s website are not intended to and do not include or incorporate by reference into this prospectus the information on that website. Similarly, references to our website are not intended to and do not include or incorporate by reference into this prospectus the information on that website.
Available Information
You should rely only on the information included or incorporated by reference in this prospectus, any prospectus supplement or in any free writing prospectus prepared by us or on our behalf or to which we have referred you. We have not authorized any dealer, salesperson or other person to provide you with different information or to make representations as to matters not stated in this prospectus, in any accompanying prospectus supplement or in any free writing prospectus prepared by us or on our behalf or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus, any accompanying prospectus supplement and any free writing prospectus prepared by us or on our behalf or to which we have referred you do not constitute an offer to sell, or a solicitation of an offer to buy, any securities by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. You should not assume that
i
the information included or incorporated by reference in this prospectus, in any accompanying prospectus supplement or in any such free writing prospectus is accurate as of any date other than their respective dates. Our financial condition, results of operations and prospects may have changed since any such date. To the extent required by law, we will amend or supplement the information contained or incorporated by reference in this prospectus and any accompanying prospectus supplement to reflect any material changes to such information subsequent to the date of the prospectus and any accompanying prospectus supplement and prior to the completion of any offering pursuant to the prospectus and any accompanying prospectus supplement.
ii
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this prospectus or incorporated by reference into this prospectus. It is not complete and may not contain all of the information that you may want to consider before investing in our securities. You should carefully read the entire prospectus, the applicable prospectus supplement, and any related free writing prospectus, including the risks of investing in our securities discussed in the section titled “” in the applicable prospectus supplement and any related free writing prospectus, and under similar headings in the other documents that are incorporated by reference into this prospectus and the applicable prospectus supplement. Before making your investment decision, you should also carefully read the information incorporated by reference into this prospectus, including our financial statements and related notes, and the exhibits to the registration statement of which this prospectus is a part. Any yield information contained or incorporated by reference in this prospectus related to investments in our investment portfolio is not intended to approximate a return on your investment in us and does not take into account other aspects of our business, including our operating and other expenses, or other costs incurred by you in connection with your investment in us.
Risk Factors
Except as otherwise indicated in this prospectus, the terms:
| • | “we,” “us,” “our,” “PTMN,” “Company” and “Portman Ridge” refer to Portman Ridge Finance Corporation, a Delaware corporation, and its wholly owned subsidiaries; |
| • | “Adviser” or “Sierra Crest” refers to Sierra Crest Investment Management LLC, a Delaware limited liability company, our investment adviser and an affiliate of BC Partners LLP, or BC Partners; and |
| • | “Administrator” refers to BC Partners Management LLC, a Delaware limited liability company, our administrator and an affiliate of BC Partners and BC Partners Advisors L.P. |
Portman Ridge Finance Corporation
Formerly known as KCAP Financial, Inc., we are an externally managed,
non-diversified
closed-end
investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company was formed as a Delaware limited liability company on August 8, 2006 and, prior to the issuance of shares of the Company’s common stock in its initial public offering (“IPO”), converted to a corporation incorporated in Delaware on December 11, 2006. We originate, structure, and invest in secured term loans, bonds or notes and mezzanine debt primarily in privately-held middle market companies but may also invest in other investments such as loans to publicly-traded companies, high-yield bonds, and distressed debt securities (collectively, the “Debt Securities Portfolio”). We also invest in joint ventures and debt and subordinated securities issued by collateralized loan obligation funds (“CLO Fund Securities”). In addition, from time to time, we may invest in the equity securities of privately held middle market companies and may also receive warrants or options to purchase common stock in connection with our debt investments.
In our Debt Securities Portfolio, our investment objective is to generate current income and, to a lesser extent, capital appreciation from the investments in senior secured term loans, mezzanine debt and selected equity investments in privately-held middle market companies. We define the middle market as comprising companies with earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $10 million to $50 million and/or total debt of $25 million to $150 million. We primarily invest in first and second lien term loans which, because of their priority in a company’s capital structure, we expect will have lower default rates and higher rates of recovery of principal if there is a default and which we expect will create a stable stream of
1
interest income. The investments in our Debt Securities Portfolio are all or predominantly below investment grade, and have speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
From we have made investments in CLO Fund Securities managed by other asset managers. Our collateralized loan obligation funds (“CLO Funds”) typically invest in broadly syndicated loans, high-yield bonds and other credit instruments.
time-to-time
We have elected to be treated and intend to continue to qualify as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). To qualify as a RIC, we must, among other things, meet certain asset diversification and annual distribution requirements. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any income that we distribute in a timely manner to our stockholders.
source-of-income,
Our Adviser
Our investment activities are managed by our Adviser, which is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act, and is an affiliate of BC Partners. Subject to the overall supervision of the Board of Directors of the Company (the “Board”), the Adviser is responsible for managing the Company’s assets in accordance with our investment objective, policies and restrictions, determining the composition of the Company’s portfolio, the nature and timing of the changes to the portfolio and the manner of implementing such changes, identifying, evaluating and negotiating the structure of the Company’s investments, monitoring the Company’s investments, determining the securities and other assets that the Company will purchase, retain or sell, determining the fair valuation of the Company’s assets, directing investment professionals of the Adviser to provide managerial assistance to the Company’s portfolio companies and performing due diligence on prospective portfolio companies. Under the investment advisory agreement we have entered into with our Adviser (the “Investment Advisory Agreement”), we pay our Adviser a base management fee and an incentive fee for its services.
The Adviser seeks to invest on our behalf in performing, well-established middle market businesses that operate across a wide range of industries (i.e., no concentration in any one industry). The Adviser employs fundamental credit analysis, targeting investments in businesses with relatively low levels of cyclicality and operating risk. The holding size of each position will generally be dependent upon a number of factors including total facility size, pricing and structure, and the number of other lenders in the facility. The Adviser has experience managing levered vehicles, both public and private, and seeks to enhance our returns through the use of leverage with a prudent approach that prioritizes capital preservation. The Adviser believes this strategy and approach offers attractive risk/return with lower volatility given the potential for fewer defaults and greater resilience through market cycles.
BC Partners has been a leader in private markets investing for over 35 years and currently has approximately €40bn in assets under management through its offices in London, Paris, Hamburg and New York. The BC Partners organization comprises a private equity platform (hereinafter referred to as “BCP PE”), a credit platform (“BCP Credit” or “BC Partners Credit”) and a real estate platform (“BCP RE”), all operating as integrated businesses within the overall BC Partners organization.
Our Administrator
Under the terms of the Administration Agreement between us and the Administrator (the “Administration Agreement”), the Administrator will perform, or oversee the performance of, required administrative services, which includes providing office space, equipment and office services, maintaining financial records, preparing
2
reports to stockholders and reports filed with the SEC, and managing the payment of expenses and the performance of administrative and professional services rendered by others. We will reimburse the Administrator for services performed for us pursuant to the terms of the Administration Agreement. We pay the Administrator an amount equal to our allocable portion of the Administrator’s overhead resulting from its obligations under the Administration Agreement, including rent and the allocable portion of the cost of our Chief Compliance Officer and Chief Financial Officer and their respective staffs. In addition, pursuant to the terms of the Administration Agreement, the Administrator may delegate its obligations under the Administration Agreement to an affiliate or to a third party and we will reimburse the Administrator for any services performed for us by such affiliate or third party.
Payments under the Administration Agreement are equal to an amount that reimburses the Administrator for its costs and expenses in performing its obligations and providing personnel and facilities (including rent, office equipment and utilities) for our use under the Administration Agreement, including our allocable portion of the compensation paid to our chief compliance officer and chief financial officer and their respective staff who provide services to us. The Board, including the directors that are not “interested persons” as defined in the 1940 Act (the “Independent Directors”), will review the general nature of the services provided by the Administrator as well as the related cost to us for those services and consider whether the cost is reasonable in light of the services provided.
3
FEES AND EXPENSES
Information about the Company’s fees and expenses may be found in the “ ” section of the Company’s most recent Annual Report on Form
Item 9B. Other Information —
Fees and Expenses
10-K
for the fiscal year ended December 31, 2023, filed with the SEC on March 13, 2024 (“most recent Annual Report on Form 10-K”),
which is incorporated by reference herein. 4
FINANCIAL HIGHLIGHTS
The information in “” in our most recent Annual Report on Form ” in our audited consolidated financial statements appearing in our most recent Annual Report on Form
Item 9B. Other Information — Financial Highlights
10-K
and the “Consolidated Financial Highlights
10-K
is incorporated by reference herein. 5
RISK FACTORS
Investing in our securities involves a high degree of risk. Before deciding whether to invest in our securities, you should carefully consider the risks and uncertainties described in the section titled “” in the applicable prospectus supplement and any related free writing prospectus, and discussed in the section titled “” in our most recent Annual Report on .”
Risk Factors
Risk Factors
Form 10-K,
our subsequently filed Quarterly Reports on Form 10-Q,
and any subsequent filings we have made or will make with the SEC that are incorporated by reference into this prospectus, together with other information in this prospectus, the documents incorporated by reference herein, and any applicable prospectus supplement or free writing prospectus, including documents incorporated therein, that we may authorize for use in connection with this offering. The risks described in these documents are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business, financial condition and/or operating results. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. If any of these risks actually occurs, our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed. This could cause our net asset value (“NAV”) and the trading price of our securities to decline, resulting in a loss of all or part of your investment. Please also read carefully the section titled “Cautionary Statement Regarding Forward-Looking Statements
6
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information in “” of our most recent Annual Report on ” of our most recent Quarterly Report on
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-K
and the information in “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
for the fiscal quarter ended September 30, 2024, filed with the SEC on November 12, 2024 (“most recent Quarterly Report on Form 10-Q”)
are incorporated by reference herein. 7
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents that we incorporate by reference herein, contains, and any applicable prospectus supplement or free writing prospectus, including the documents we incorporate by reference therein, may contain forward-looking statements, including statements regarding our future financial condition, business strategy, and plans and objectives of management for future operations. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar words, although not all forward-looking statements include these words. Important assumptions include our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital, our ability to successfully and profitably integrate acquired assets and companies, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus, should not be regarded as a representation by us that our plans or objectives will be achieved.
The forward-looking statements contained or incorporated by reference in this prospectus and any applicable prospectus supplement or free writing prospectus may include statements as to:
| • | our future operating results; |
| • | our business prospects and the prospects of our existing and prospective portfolio companies; |
| • | the return or impact of current and future investments; |
| • | our contractual arrangements and other relationships with third parties; |
| • | the dependence of our future success on the general economy and its impact on the industries in which we invest; |
| • | the financial condition and ability of our existing and prospective portfolio companies to achieve their objectives; |
| • | our expected financings and investments; |
| • | our regulatory structure and tax treatment; |
| • | our ability to operate as a business development company and a regulated investment company, including the impact of changes in laws or regulations governing our operations or the operations of our portfolio companies; |
| • | the adequacy of our cash resources and working capital; |
| • | the timing of cash flows, if any, from the operations of our portfolio companies; |
| • | the impact of a protracted decline in the liquidity of credit markets on our business; |
| • | the impact of fluctuations in interest rates on our business; |
| • | the valuation of our investments in portfolio companies, particularly those having no liquid trading market; |
| • | our ability to recover unrealized losses; |
| • | market conditions and our ability to access additional capital; and |
| • | the timing, form and amount of any dividend distributions. |
We have based the forward-looking statements included in this prospectus and will base the forward-looking statements included in any accompanying prospectus supplement on information available to us on the date of this prospectus and any accompanying prospectus supplement, as appropriate, and we assume no
8
obligation to update any such forward-looking statements, except as required by law. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on
Form 10-K,
quarterly reports on Form 10-Q
and current reports on Form 8-K.
9
USE OF PROCEEDS
Unless otherwise specified in a prospectus supplement or in any free writing prospectus we have authorized for use in connection with a specific offering, we intend to use any net proceeds we receive from the sale of securities pursuant to this prospectus for general corporate purposes, which includes making new investments in accordance with our investment objective and strategies, paying operating expenses, including advisory and administrative fees and expenses and reducing the amount of any of our outstanding borrowings, and other expenses such as the due diligence expenses associated with potential new investments.
We anticipate that substantially all of the net proceeds of an offering of securities pursuant to this prospectus and a related prospectus supplement will be used for the above purposes within three months of any such offering, depending on the availability of appropriate investment opportunities consistent with our investment objective, but no longer than within six months of any such offerings.
Pending any new investments we may make or the payment of expenses described above, we intend to invest any net proceeds from an offering primarily in cash, cash equivalents, U.S. government securities and other high-quality investment grade investments that mature in one year or less from the date of investment. The income we earn on such temporary investments will generally be significantly less than what we would expect to receive from investments in the types of investments we intend to target. Our ability to achieve our investment objective may be limited to the extent that the net proceeds from an offering, pending full investment, are held in interest-bearing deposits or other short-term instruments. The prospectus supplement relating to an offering will more fully identify the use of proceeds from any offering.
10
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the NASDAQ under the symbol “PTMN.” The following table sets forth, for each fiscal quarter during the last two fiscal years and the current fiscal year to date, the NAV per share of our common stock, the high and low closing sales prices for our common stock and such sales prices as a percentage of NAV per share.
Period |
NAV(1) |
Closing Sale Prices(2) |
Premium / (Discount) of High Sale Price to NAV(3) |
Premium / (Discount) of Low Sale Price to NAV(3) |
||||||||||||||||
High |
Low |
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Fourth quarter of 2024 (as of November 21, 2024) |
$ |
$ |
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Third quarter of 2024 |
$ | $ | $ | ( |
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| (1) | NAV per share is determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period. |
| (2) | Closing sales price as provided by the NASDAQ. |
| (3) | Calculated as of the respective high or low closing sales price divided by the quarter end NAV. |
| * | Not determinable at the time of filing. |
On November 21, 2024, the reported closing sales price of our common stock was $17.03 per share. As of October 31, 2024, we had 47 stockholders of record, which did not include stockholders for whom shares are held in “nominee” or “street name”.
Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from NAV per share or at premiums that are unsustainable over the long term are separate and distinct from the risk that our NAV per share will decrease. It is not possible to predict whether our common stock will trade at, above, or below NAV per share. Since our initial public offering in December 2006, our shares of common stock have traded at prices both less than and exceeding our NAV per share.
11
SENIOR SECURITIES
Information about our senior securities as of the end of each of our last ten fiscal years can be found under “” in our most recent Annual Report on ” in our most recent Quarterly Report on
Notes to Consolidated Financial Statements — Note
6. Borrowings — Senior Securities
Form 10-K,
which is incorporated by reference herein. Information about our senior securities as of September 30, 2024 can be found under “Notes to Consolidated Financial Statements — Note
6. Borrowings — Senior Securities
Form 10-Q,
which is incorporated by reference herein. 12
BUSINESS
The information in “” of our most recent Annual Report on
Item
1. Business
Form 10-K
is incorporated by reference herein. 13
PORTFOLIO COMPANIES
The following table sets forth certain information as of September 30, 2024, for each portfolio company in which we had an investment. Amounts are presented in thousands, except share and per share amounts. Percentages shown for class of securities held by the Company represent percentage of the class owned and do not necessarily represent voting ownership or economic ownership. Other than these investments, our only formal relationships with our portfolio companies are the significant managerial assistance that we may provide upon request and the board observation or participation rights we may receive in connection with our investment. As defined by the 1940 Act, we do not “control” any of the portfolio companies, except as indicated below. In general, under the 1940 Act, we would be presumed to “control” a portfolio company if we owned more than 25% of its voting securities and would be an “affiliate” of a portfolio company if we owned more than 5% of its outstanding voting securities.
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
Investments in Non-Control, Non-Affiliate Portfolio Companies - 190.2% |
||||||||||||||||||||||||||||||||||||||
First Lien/Senior Secured Debt - 164.2% |
||||||||||||||||||||||||||||||||||||||
Accordion Partners LLC |
31 West 52nd Street, 16th Floor, New York, NY 10019 | Finance | First Lien/Senior Secured Debt | SOFR + 6.27% | 10.93 | % | 08/29/2029 | 9,401 | 9,266 | 9,368 | 5.0 | % | (13) | |||||||||||||||||||||||||
Accordion Partners LLC (Revolver) |
31 West 52nd Street, 16th Floor, New York, NY 10019 | Finance | First Lien/Senior Secured Debt | SOFR + 6.25% | 11.35 | % | 08/31/2028 | 765 | 743 | 759 | 0.4 | % | (20) | |||||||||||||||||||||||||
Accurate Background, LLC |
200 Spectrum Center Drive Suite 1100, Irvine, CA 92618 | Services: Business | First Lien/Senior Secured Debt | SOFR + 6.00% | 10.87 | % | 03/26/2029 | 4,379 | 4,177 | 4,330 | 2.3 | % | (13) | |||||||||||||||||||||||||
Advantage Capital Holdings LLC |
415 Bedford Road - Suite 102, Pleasantville, NY 10570 | Banking, Finance, Insurance & Real Estate | First Lien/Senior Secured Debt | 13.00%, 5.00% PIK | 13 | % | 04/14/2027 | 14,972 | 14,754 | 14,385 | 7.7 | % | (13) | |||||||||||||||||||||||||
AIDC IntermediateCo 2, LLC (Peak Technologies) |
901 Elkridge Landing Rd Suite 300, Linthicum Heights, MD 21090 | Services: Business | First Lien/Senior Secured Debt | SOFR + 5.25% | 10.53 | % | 07/22/2027 | 983 | 973 | 969 | 0.5 | % | (13) | |||||||||||||||||||||||||
14
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
AMCP Pet Holdings, Inc. |
801 Crescent Center Drive, Franklin, TN 37067 | Beverage, Food and Tobacco | First Lien/Senior Secured Debt | SOFR + 6.25%, 0.75% PIK | 11.95 | % | 10/06/2026 | 4,860 | 4,817 | 4,757 | 2.5 | % | (13) | |||||||||||||||||||||||||
AMCP Pet Holdings, Inc. (Revolver) |
801 Crescent Center Drive, Franklin, TN 37067 | Beverage, Food and Tobacco | First Lien/Senior Secured Debt | SOFR + 6.25%, 0.75% PIK | 11.67 | % | 10/06/2026 | 1,005 | 998 | 984 | 0.5 | % | ||||||||||||||||||||||||||
American Academy Holdings, LLC |
2222 Sedwick Drive, Durham, NC 27713 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 4.50%, 5.25% PIK | 14.62 | % | 06/30/2027 | 3,888 | 3,881 | 3,894 | 2.1 | % | (13) | |||||||||||||||||||||||||
Ancile Solutions, Inc. |
6085 Marshalee Drive Suite 300, Elkridge, MD 21075 | High Tech Industries | First Lien/Senior Secured Debt | SOFR + 10.00% | 15.21 | % | 06/11/2026 | 6,100 | 6,041 | 6,252 | 3.3 | % | (13) | |||||||||||||||||||||||||
Anthem Sports & Entertainment Inc. |
8269 E. 23rd Ave, Denver, CO 80238 | Media: Broadcasting & Subscription | First Lien/Senior Secured Debt | SOFR + 9.50%, 12.10% PIK | 15.10 | % | 11/15/2026 | 13,315 | 13,198 | 9,771 | 5.2 | % | (13) | |||||||||||||||||||||||||
Anthem Sports & Entertainment Inc. (Revolver) |
8269 E. 23rd Ave, Denver, CO 80238 | Media: Broadcasting & Subscription | First Lien/Senior Secured Debt | SOFR + 9.50%, 12.10% PIK | 14.37 | % | 11/15/2026 | 1,187 | 1,176 | 849 | 0.5 | % | (20) | |||||||||||||||||||||||||
Anthem Sports & Entertainment Inc. (Revolver 2022) |
8269 E. 23rd Ave, Denver, CO 80238 | Media: Broadcasting & Subscription | First Lien/Senior Secured Debt | SOFR + 9.50%, 12.10% PIK | 15.07 | % | 06/30/2024 | 563 | 563 | 413 | 0.2 | % | ||||||||||||||||||||||||||
Appfire Technologies, LLC |
1500 District Ave, Burlington, MA 01803 | High Tech Industries | First Lien/Senior Secured Debt | SOFR + 4.75% | 9.35 | % | 03/09/2028 | 5,847 | 5,842 | 5,835 | 3.1 | % | (13) | |||||||||||||||||||||||||
BetaNXT, Inc. |
55 Broadway, 8th Floor, New York, NY 10006 | Banking, Finance, Insurance & Real Estate | First Lien/Senior Secured Debt | SOFR + 5.75% | 10.35 | % | 07/01/2029 | 12,512 | 11,959 | 12,009 | 6.4 | % | (13) | |||||||||||||||||||||||||
BetaNXT, Inc. (Revolver) |
55 Broadway, 8th Floor, New York, NY 10006 | Banking, Finance, Insurance & Real Estate | First Lien/Senior Secured Debt | SOFR + 4.44% | 9.46 | % | 07/01/2027 | 1,159 | 1,159 | 1,062 | 0.6 | % | (20) | |||||||||||||||||||||||||
Bradshaw International Parent Corp. |
9409 Buffalo Ave, Rancho Cucamonga, CA 91730 | Consumer goods: Durable | First Lien/Senior Secured Debt | SOFR + 5.75% | 10.70 | % | 10/21/2027 | 492 | 486 | 487 | 0.3 | % | (13) | |||||||||||||||||||||||||
Bradshaw International Parent Corp. (Revolver) |
9409 Buffalo Ave, Rancho Cucamonga, CA 91730 | Consumer goods: Durable | First Lien/Senior Secured Debt | SOFR + 5.75% | 10.76 | % | 10/21/2026 | 307 | 284 | 298 | 0.2 | % | (20) | |||||||||||||||||||||||||
15
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
Bristol Hospice |
12404 Park Central Drive, Suite 400S, Dallas, TX 75251 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 5.25% | 10.20 | % | 12/22/2026 | 2,785 | 2,767 | 2,785 | 1.5 | % | (13) | |||||||||||||||||||||||||
C.P. Converters, Inc. |
15 Grumbacher Road, York, PA 17406 | Chemicals, Plastics and Rubber | First Lien/Senior Secured Debt | SOFR + 7.49%, 1.00% PIK | 13.46 | % | 11/15/2024 | 9,956 | 9,956 | 9,458 | 5.0 | % | (13) | |||||||||||||||||||||||||
CB MIDCO, LLC |
140 Summit St., Peabody, MA 01960 | Consumer goods: Durable | First Lien/Senior Secured Debt | SOFR + 5.75% | 10.70 | % | 09/27/2027 | 3,772 | 3,753 | 3,558 | 1.9 | % | (13) | |||||||||||||||||||||||||
CCMG Buyer, LLC (Care Connectors Medical Group) |
4695 MacArthur Court, Suite 1112A, Newport Beach, CA 92660 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 5.50% | 10.61 | % | 05/08/2030 | 3,159 | 3,122 | 3,151 | 1.7 | % | (13) | |||||||||||||||||||||||||
CCMG Buyer, LLC (Care Connectors Medical Group) (Revolver) |
4695 MacArthur Court, Suite 1112A, Newport Beach, CA 92660 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 5.75% | — | 05/08/2030 | 0 | -6 | -1 | 0.0 | % | (20) | ||||||||||||||||||||||||||
Cenexel Clinical Research, Inc. |
4516 S 700E, #230, Salt Lake City, UT 84107 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 6.00% | 10.96 | % | 11/08/2025 | 5,773 | 5,755 | 5,759 | 3.1 | % | (13) | |||||||||||||||||||||||||
Centric Brands Inc. |
350 Fifth Ave, Empire State Building, 6th Floor New York, NY 10118 | Machinery (Non-Agrclt/Constr/Electr) |
First Lien/Senior Secured Debt | SOFR + 5.50%, 2.00% PIK | 12.73 | % | 08/06/2029 | 3,689 | 3,689 | 3,689 | 2.0 | % | (13) | |||||||||||||||||||||||||
Centric Brands Inc. (Term Loan A1) |
350 Fifth Ave, Empire State Building, 6th Floor New York, NY 10118 | Machinery (Non-Agrclt/Constr/Electr) |
First Lien/Senior Secured Debt | SOFR + 6.50% | 11.73 | % | 02/06/2031 | 3,807 | 3,807 | 3,807 | 2.0 | % | ||||||||||||||||||||||||||
Centric Brands Inc. (Term Loan A2) |
350 Fifth Ave, Empire State Building, 6th Floor New York, NY 10118 | Machinery (Non-Agrclt/Constr/Electr) |
First Lien/Senior Secured Debt | SOFR + 8.00%, 13.23% PIK | 13.23 | % | 02/06/2031 | 3,350 | 3,350 | 3,350 | 1.8 | % | ||||||||||||||||||||||||||
Colonnade Intermediate, LLC |
800 Concar Drive, Suite 100, San Mateo, CA 94402 | Services: Business | First Lien/Senior Secured Debt | — | — | 04/27/2024 | 7,167 | 7,167 | 5,048 | 2.7 | % | (5) | ||||||||||||||||||||||||||
Colonnade Intermediate, LLC (Revolver) |
800 Concar Drive, Suite 100, San Mateo, CA 94402 | Services: Business | First Lien/Senior Secured Debt | — | — | 04/27/2024 | 685 | 685 | 483 | 0.3 | % | (5) | ||||||||||||||||||||||||||
16
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
Critical Nurse Staffing, LLC |
1114 N. 1st Street Suite 200, Grand Junction, CO 81501 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 6.50% | 11.88 | % | 10/30/2026 | 11,980 | 11,865 | 12,026 | 6.4 | % | (13) | |||||||||||||||||||||||||
Critical Nurse Staffing, LLC (Revolver) |
1114 N. 1st Street Suite 200, Grand Junction, CO 81501 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 5.75% | — | 10/30/2026 | 0 | -35 | 8 | 0.0 | % | (20) | ||||||||||||||||||||||||||
Datalink, LLC |
14055 Riveredge Dr Ste 600, Tampa, FL 33637 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 6.75% | 12.15 | % | 11/23/2026 | 2,659 | 2,633 | 2,456 | 1.3 | % | (13) | |||||||||||||||||||||||||
Dentive, LLC |
466 W 4800 N Ste 380, Provo, Utah, 84604 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 6.75% | 11.41 | % | 12/26/2028 | 2,661 | 2,612 | 2,605 | 1.4 | % | (13)(20) | |||||||||||||||||||||||||
Dentive, LLC (Revolver) |
466 W 4800 N Ste 380, Provo, Utah, 84604 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 6.75% | 11.39 | % | 12/23/2028 | 37 | 32 | 33 | 0.0 | % | (20) | |||||||||||||||||||||||||
Dodge Data & Analytics LLC |
34 Crosby Drive Suite 202, Bedford, MA 01730 | Construction & Building | First Lien/Senior Secured Debt | SOFR + 4.75% | 9.35 | % | 02/10/2029 | 1,466 | 1,452 | 1,094 | 0.6 | % | (13)(15) | |||||||||||||||||||||||||
Florida Food Products, LLC |
1025 Greenwood Blvd, Suite 500, Lake Mary, FL 32746 | Beverage, Food and Tobacco | First Lien/Senior Secured Debt | SOFR + 5.00% | 9.93 | % | 10/18/2028 | 6,840 | 6,729 | 6,023 | 3.2 | % | (13)(15) | |||||||||||||||||||||||||
Fortis Payment Systems, LLC |
1025 Greenwood Blvd, Suite 500, Lake Mary, FL 32746 | Diversified Financial Services | First Lien/Senior Secured Debt | SOFR + 5.25% | 9.95 | % | 02/13/2026 | 2,994 | 2,952 | 2,973 | 1.6 | % | (13)(20) | |||||||||||||||||||||||||
Franchise Group, Inc. |
109 Innovation Court Suite J, Delaware, OH 43015 | Retail | First Lien/Senior Secured Debt | SOFR + 4.75% | 10.39 | % | 03/10/2026 | 2,907 | 2,900 | 1,885 | 1.0 | % | (13)(15) | |||||||||||||||||||||||||
Global Integrated Flooring Systems Inc. |
9000 Regency Parkway Suite 400, Cary, NC 27518 | Consumer goods: Durable | First Lien/Senior Secured Debt | SOFR + 8.36%, 1.00% PIK | 14.70 | % | 06/30/2025 | 6,521 | 5,801 | 3,540 | 1.9 | % | ||||||||||||||||||||||||||
Global Integrated Flooring Systems Inc. (Revolver) |
9000 Regency Parkway Suite 400, Cary, NC 27518 | Consumer goods: Durable | First Lien/Senior Secured Debt | SOFR + 8.36% | 13.31 | % | 06/30/2025 | 51 | 45 | 27 | 0.0 | % | ||||||||||||||||||||||||||
H.W. Lochner, Inc. |
225 West Washington Street, 12th Floor, Chicago, Il 60606 | Services: Business | First Lien/Senior Secured Debt | SOFR + 6.25% | 11.72 | % | 07/02/2027 | 14,550 | 14,416 | 14,295 | 7.6 | % | (13) | |||||||||||||||||||||||||
17
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
H.W. Lochner, Inc. (Revolver) |
225 West Washington Street, 12th Floor, Chicago, Il 60606 | Services: Business | First Lien/Senior Secured Debt | SOFR + 6.25% | 11.23 | % | 07/02/2027 | 8,000 | 7,927 | 7,860 | 4.2 | % | ||||||||||||||||||||||||||
H-CA II, LLC |
P.O. Box 4980 Caguas, PR 00726 | Banking, Finance, Insurance & Real Estate | First Lien/Senior Secured Debt | — | — | 04/01/2024 | 1,808 | 1,808 | 1,804 | 1.0 | % | |||||||||||||||||||||||||||
HDC/HW Intermediate Holdings, LLC - Term Loan A |
620 Division Street, Elizabeth, NJ 07207 | High Tech Industries | First Lien/Senior Secured Debt | SOFR + 1.00%, 2.50% PIK | 8.75 | % | 06/21/2026 | 5,560 | 4,812 | 4,736 | 2.5 | % | ||||||||||||||||||||||||||
HDC/HW Intermediate Holdings, LLC - Term Loan B |
620 Division Street, Elizabeth, NJ 07207 | High Tech Industries | First Lien/Senior Secured Debt | — | — | 06/21/2026 | 3,876 | 940 | 0 | 0.0 | % | (5) | ||||||||||||||||||||||||||
Help Systems Holdings, Inc. |
11095 Viking Drive Suite 100, Eden Prairie, MN 55344 | High Tech Industries | First Lien/Senior Secured Debt | SOFR + 4.00% | 8.95 | % | 11/19/2026 | 1,959 | 1,867 | 1,873 | 1.0 | % | (13)(15) | |||||||||||||||||||||||||
Hollander Intermediate LLC |
901 Yamato Road, Suite 250, Boca Raton, FL 33431 | Consumer goods: Durable | First Lien/Senior Secured Debt | SOFR + 8.75% | 13.71 | % | 09/19/2026 | 5,548 | 5,462 | 4,772 | 2.5 | % | (13) | |||||||||||||||||||||||||
IDC Infusion Services LLC |
1726 Cole Blvd. Suite 250, Lakewood, CO 80401 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 6.50% | 11.55 | % | 07/07/2028 | 2,906 | 2,843 | 2,861 | 1.5 | % | (13)(20) | |||||||||||||||||||||||||
Ivanti Software, Inc. |
10377 South Jordan Gateway Suite 110, South Jordan, UT 84095 | High Tech Industries | First Lien/Senior Secured Debt | SOFR + 4.25% | 9.83 | % | 12/01/2027 | 980 | 839 | 835 | 0.4 | % | (13)(15) | |||||||||||||||||||||||||
JO ET Holdings Limited |
750 N San Vicente Blvd, West Hollywood, CA 90069 | Telecommunications | First Lien/Senior Secured Debt | SOFR + 6.00%, 7.00% PIK | 17.94 | % | 12/15/2026 | 2,290 | 2,272 | 2,335 | 1.2 | % | (3) | |||||||||||||||||||||||||
Keg Logistics LLC |
9110 E. Nichols Avenue, Suite 105, Centennial, CO 80112 | Services: Business | First Lien/Senior Secured Debt | SOFR + 6.25% | 11.47 | % | 11/23/2027 | 11,907 | 11,814 | 11,717 | 6.2 | % | (13) | |||||||||||||||||||||||||
Keg Logistics LLC (Revolver) |
9110 E. Nichols Avenue, Suite 105, Centennial, CO 80112 | Services: Business | First Lien/Senior Secured Debt | SOFR + 6.25% | 11.50 | % | 11/23/2027 | 872 | 859 | 858 | 0.5 | % | ||||||||||||||||||||||||||
18
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
Lifescan Global Corporation |
825 East Middlefield Road, Mountain View, CA 94043 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 6.50% | 11.73 | % | 12/31/2026 | 2,219 | 2,133 | 924 | 0.5 | % | (13)(15) | |||||||||||||||||||||||||
Luminii LLC |
30736 Wiegman Road, Hayward, CA 94544 | Construction & Building | First Lien/Senior Secured Debt | SOFR + 7.35% | 12.68 | % | 04/11/2025 | 5,888 | 5,888 | 5,888 | 3.1 | % | (13) | |||||||||||||||||||||||||
Luminii LLC (Revolver) |
30736 Wiegman Road, Hayward, CA 94544 | Construction & Building | First Lien/Senior Secured Debt | SOFR + 7.35% | 12.68 | % | 04/11/2025 | 343 | 343 | 343 | 0.2 | % | (13)(20) | |||||||||||||||||||||||||
MAG DS Corp. |
3923 Ranchero Drive, Ann Arbor, MI 48108 | Aerospace and Defense | First Lien/Senior Secured Debt | SOFR + 5.50% | 10.20 | % | 04/01/2027 | 3,634 | 3,391 | 3,435 | 1.8 | % | (13)(15) | |||||||||||||||||||||||||
Money Transfer Acquisition Inc. |
10777 Westheimer Rd. Suite 1040, Houston, TX 77042 | Finance | First Lien/Senior Secured Debt | SOFR + 8.25% | 13.20 | % | 12/14/2027 | 8,672 | 8,560 | 8,487 | 4.5 | % | (13) | |||||||||||||||||||||||||
Morae Global Corporation |
811 Louisiana St Ste 1020, Houston, TX 77002 | IT Consulting & Other Services | First Lien/Senior Secured Debt | SOFR + 8.00% | 13.43 | % | 10/26/2026 | 2,206 | 2,106 | 2,164 | 1.2 | % | (13) | |||||||||||||||||||||||||
Morae Global Corporation (Revolver) |
811 Louisiana St Ste 1020, Houston, TX 77002 | IT Consulting & Other Services | First Lien/Senior Secured Debt | SOFR + 8.00% | — | 10/26/2026 | 0 | -8 | -4 | 0.0 | % | (20) | ||||||||||||||||||||||||||
MSM Acquisitions, Inc. |
401 City Avenue, Bala Cynwyd, PA 19004 | Services: Business | First Lien/Senior Secured Debt | SOFR + 6.00% | 11.06 | % | 12/09/2026 | 9,877 | 9,847 | 9,174 | 4.9 | % | (13) | |||||||||||||||||||||||||
Neptune Bidco US Inc. |
675 Avenue of the Americas, New York, NY 10010 | Media: Broadcasting & Subscription | First Lien/Senior Secured Debt | SOFR + 5.00% | 10.40 | % | 04/11/2029 | 2,469 | 2,272 | 2,324 | 1.2 | % | (13)(15) | |||||||||||||||||||||||||
Netwrix Corporation |
6160 Warren Parkway, Suite 100, Frisco, TX, 75034 | High Tech Industries | First Lien/Senior Secured Debt | SOFR + 5.50% | 10.56 | % | 06/09/2029 | 4,259 | 4,243 | 4,209 | 2.2 | % | (13) | |||||||||||||||||||||||||
Netwrix Corporation (Revolver) |
6160 Warren Parkway, Suite 100, Frisco, TX, 75034 | High Tech Industries | First Lien/Senior Secured Debt | SOFR + 5.00% | — | 06/09/2029 | 0 | -8 | -14 | 0.0 | % | (20) | ||||||||||||||||||||||||||
One Stop Mailing LLC |
601 Regency Drive, Glendale Heights, IL 60139 | Transportation: Consumer | First Lien/Senior Secured Debt | SOFR + 6.25% | 11.21 | % | 04/29/2027 | 7,490 | 7,423 | 7,487 | 4.0 | % | (13) | |||||||||||||||||||||||||
PhyNet Dermatology LLC |
302 Innovation Drive Suite 400, Franklin, TN 37067 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 6.50% | 11.78 | % | 10/20/2029 | 1,297 | 1,269 | 1,283 | 0.7 | % | (20) | |||||||||||||||||||||||||
19
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
Pomeroy Technologies, LLC (Senior A) |
1020 Petersburg Rd, Hebron, KY 41048 | High Tech Industries | First Lien/Senior Secured Debt | — | — | 04/04/2026 | 1,838 | 1,650 | 0 | 0.0 | % | (5) | ||||||||||||||||||||||||||
Pomeroy Technologies, LLC (Senior B) |
1020 Petersburg Rd, Hebron, KY 41048 | High Tech Industries | First Lien/Senior Secured Debt | — | — | 04/04/2026 | 1,680 | 1,542 | 0 | 0.0 | % | (5) | ||||||||||||||||||||||||||
Pomeroy Technologies, LLC (Super Senior A) |
1020 Petersburg Rd, Hebron, KY 41048 | High Tech Industries | First Lien/Senior Secured Debt | — | |
10.00 PIK |
% |
04/04/2026 | 455 | 454 | 451 | 0.2 | % | |||||||||||||||||||||||||
Pomeroy Technologies, LLC (Super Senior B) |
1020 Petersburg Rd, Hebron, KY 41048 | High Tech Industries | First Lien/Senior Secured Debt | — | |
9.00 PIK |
% |
04/04/2026 | 1,350 | 1,345 | 1,031 | 0.5 | % | |||||||||||||||||||||||||
Premier Imaging, LLC |
100 E campus View Blvd Ste 100, Columbus, OH | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 7.57% | 12.87 | % | 01/02/2025 | 2,570 | 2,563 | 2,289 | 1.2 | % | (13) | |||||||||||||||||||||||||
Project Castle, Inc. |
131 Griffin Way, Mt. Washington, KY 40047 | Transportation: Cargo | First Lien/Senior Secured Debt | SOFR + 5.62% | 10.91 | % | 06/08/2029 | 3,027 | 2,812 | 2,778 | 1.5 | % | (13)(15) | |||||||||||||||||||||||||
Project Leopard Holdings, Inc. |
15211 Laguna Canyon Road, Irvine, CA 92618 | High Tech Industries | First Lien/Senior Secured Debt | SOFR + 5.25% | 10.60 | % | 07/20/2029 | 5,710 | 5,436 | 5,146 | 2.7 | % | (13)(15) | |||||||||||||||||||||||||
PVHC Holding Corp |
41 Spring Street, New Providence, NJ 07974 | Containers, Packaging and Glass | First Lien/Senior Secured Debt | SOFR + 6.00%, 0.75% PIK | 11.54 | % | 02/17/2027 | 2,731 | 2,730 | 2,680 | 1.4 | % | (13) | |||||||||||||||||||||||||
Radius Aerospace, Inc. |
32125 Solon Road, Suite 100, Solon, OH 44139 | Aerospace and Defense | First Lien/Senior Secured Debt | SOFR + 6.00% | 10.75 | % | 03/29/2027 | 6,079 | 6,068 | 6,033 | 3.2 | % | (13) | |||||||||||||||||||||||||
Reception Purchaser, LLC |
951 Thorndale Avenue, Bensenville, IL 60106 | Transportation: Cargo | First Lien/Senior Secured Debt | SOFR + 6.00% | 10.75 | % | 03/24/2028 | 4,394 | 4,327 | 2,065 | 1.1 | % | (13)(15) | |||||||||||||||||||||||||
Riskonnect Parent LLC |
380 Interstate North Pkwy SE Suite 400, Atlanta, GA 30339 | Application Software | First Lien/Senior Secured Debt | SOFR + 5.50% | 10.25 | % | 12/07/2028 | 1,219 | 1,164 | 1,154 | 0.6 | % | (13)(20) | |||||||||||||||||||||||||
Robertshaw US Holding Corp. |
5425 Wisconsin Avenue, Suite 200, Chevy Chase, MD 20815 | Capital Equipment | First Lien/Senior Secured Debt | — | 0 | % | 09/23/2024 | 147 | 140 | 147 | 0.1 | % | ||||||||||||||||||||||||||
20
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
South Street Securities Holdings, Inc |
6800 East 163rd Street, Belton, MO 64012 | Banking, Finance, Insurance & Real Estate | First Lien/Senior Secured Debt | — | 9 | % | 09/20/2027 | 3,150 | 2,838 | 2,489 | 1.3 | % | ||||||||||||||||||||||||||
Sundance Holdings Group, LLC |
11726 San Vicente Blvd., Suite 300, Los Angeles, CA 90049 | Retail | First Lien/Senior Secured Debt | SOFR + 7.82%, 1.68% PIK | 14.81 | % | 06/30/2025 | 6,639 | 6,638 | 6,192 | 3.3 | % | ||||||||||||||||||||||||||
Symplr Software, Inc. |
315 Capitol St., Suite 100, Houston, TX 77002 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 4.50% | 9.85 | % | 12/22/2027 | 1,657 | 1,655 | 1,518 | 0.8 | % | (13)(15) | |||||||||||||||||||||||||
Synamedia Americas Holdings, Inc. |
3500 Hyland Avenue, Costa Mesa, CA 92626 | Interactive Media & Services | First Lien/Senior Secured Debt | SOFR + 7.75% | 12.35 | % | 12/05/2028 | 2,645 | 2,568 | 2,589 | 1.4 | % | (13) | |||||||||||||||||||||||||
TA/WEG Holdings, LLC |
505 N. Highway 169, Suite 900, Plymouth, MN 55441 | Banking, Finance, Insurance & Real Estate | First Lien/Senior Secured Debt | SOFR + 5.50% | 10.68 | % | 10/02/2027 | 9,568 | 9,583 | 9,568 | 5.1 | % | (13) | |||||||||||||||||||||||||
TA/WEG Holdings, LLC (Revolver) |
505 N. Highway 169, Suite 900, Plymouth, MN 55441 | Banking, Finance, Insurance & Real Estate | First Lien/Senior Secured Debt | SOFR + 6.00% | — | 10/02/2027 | 0 | -2 | 0 | 0.0 | % | (20) | ||||||||||||||||||||||||||
Tactical Air Support, Inc. |
14505 Mount Anderson Street, Reno, NC 89506 | Aerospace and Defense | First Lien/Senior Secured Debt | SOFR + 8.50% | 13.91 | % | 12/22/2028 | 2,000 | 1,964 | 1,980 | 1.1 | % | (13)(20) | |||||||||||||||||||||||||
TLE Holdings, LLC |
4000 Legato Road, 9th Floor, Fairfax, VA 22033 | Healthcare, Education and Childcare | First Lien/Senior Secured Debt | SOFR + 5.50% | 10.45 | % | 06/29/2026 | 6,132 | 6,129 | 6,121 | 3.3 | % | (13) | |||||||||||||||||||||||||
VBC Spine Opco LLC (DxTx Pain and Spine LLC) |
431 Summit St Ste 101, Elgin, IL, 60120 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 8.00% | 13.45 | % | 06/14/2028 | 4,612 | 4,532 | 4,558 | 2.4 | % | (20) | |||||||||||||||||||||||||
VBC Spine Opco LLC (DxTx Pain and Spine LLC) (Revolver) |
431 Summit St Ste 101, Elgin, IL, 60120 | Healthcare & Pharmaceuticals | First Lien/Senior Secured Debt | SOFR + 8.00% | — | 06/14/2028 | 0 | -6 | -4 | 0.0 | % | (20) | ||||||||||||||||||||||||||
Second Lien/Senior Secured Debt - 13.3% |
||||||||||||||||||||||||||||||||||||||
American Academy Holdings, LLC |
2222 Sedwick Drive, Durham, NC 27713 | Healthcare & Pharmaceuticals | Second Lien/Senior Secured Debt | — | |
14.50 PIK |
% |
03/01/2028 | 6,574 | 6,496 | 6,196 | 3.3 | % | |||||||||||||||||||||||||
21
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
Confluence Technologies, Inc. |
233 Wilshire Blvd, Suite 800, Santa Monica, CA 90401 | Services: Business | Second Lien/Senior Secured Debt | SOFR + 6.50% | 11.25 | % | 07/23/2029 | 4,000 | 3,982 | 3,590 | 1.9 | % | (13) | |||||||||||||||||||||||||
Dcert Buyer, Inc. |
131 Griffin Way, Mount Washington, KY 40047 | High Tech Industries | Second Lien/Senior Secured Debt | SOFR + 7.00% | 11.85 | % | 02/16/2029 | 5,400 | 5,392 | 4,690 | 2.5 | % | (13)(15) | |||||||||||||||||||||||||
Idera, Inc. |
2950 North Loop Freeway West, Suite 700, Houston, TX 77042 | High Tech Industries | Second Lien/Senior Secured Debt | SOFR + 6.75% | 12.15 | % | 02/04/2029 | 2,024 | 2,013 | 1,992 | 1.1 | % | (13) | |||||||||||||||||||||||||
Ivanti Software, Inc. |
10377 South Jordan Gateway Suite 110, South Jordan, UT 84095 | High Tech Industries | Second Lien/Senior Secured Debt | SOFR + 7.25% | 12.83 | % | 12/01/2028 | 6,000 | 5,971 | 3,880 | 2.1 | % | (13)(15) | |||||||||||||||||||||||||
Project Leopard Holdings, Inc. |
15211 Laguna Canyon Road, Irvine, CA 92618 | High Tech Industries | Second Lien/Senior Secured Debt | SOFR + 7.75% | 13 | % | 07/20/2030 | 5,000 | 4,928 | 4,430 | 2.4 | % | ||||||||||||||||||||||||||
Robertshaw US Holding Corp. |
5425 Wisconsin Avenue, Suite 200, Chevy Chase, MD 20815 | Capital Equipment | Second Lien/Senior Secured Debt | — | — | 02/28/2026 | 3,000 | 2,976 | 178 | 0.1 | % | (5) | ||||||||||||||||||||||||||
Subordinated Debt - 0.9% |
||||||||||||||||||||||||||||||||||||||
Lucky Bucks Holdings LLC |
5820 Live Oak Parkway, Suite 300, Norcross, GA 30071 | Hotel, Gaming & Leisure | Subordinated Debt | — | — | 05/29/2028 | 6,258 | 5,565 | 1,212 | 0.6 | % | (5) | ||||||||||||||||||||||||||
DeltaDx Limited, LP (Money Transfer Acquisition Inc.) |
10777 Westheimer Rd. Suite 1040, Houston, Tx 77042 | Finance | Subordinated Debt | — | |
15.00 PIK |
% |
06/30/2028 | 484 | 484 | 484 | 0.3 | % | |||||||||||||||||||||||||
TRSO II, Inc. |
2700 E. Interstate 20 P.O. Box 2488, Odessa, TX 79760 | Energy: Oil & Gas | Subordinated Debt | — | — | 01/24/2025 | 76 | 76 | 0 | 0.0 | % | (5) | ||||||||||||||||||||||||||
Collateralized Loan Obligations - 3.6% |
||||||||||||||||||||||||||||||||||||||
Catamaran CLO 2014-1 Ltd. |
655 Broad Street 8th Floor, Newark, NJ 07102 | CLO Fund Securities | Collateralized Loan Obligations | — | 85.11 | % | 04/20/2030 | 22.2 | % | 15,161 | 120 | 120 | 0.1 | % | (3)(7)(10) | |||||||||||||||||||||||
22
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
Catamaran CLO 2018-1 Ltd |
Boundary Hall, Cricket Square PO Box 1093 Grand Cayman, Ky1-1102 Cayman Islands |
CLO Fund Securities | Collateralized Loan Obligations | — | 7.91 | % | 10/27/2031 | 24.8 | % | 10,000 | 3,339 | 2,832 | 1.5 | % | (3)(7)(10) | |||||||||||||||||||||||
Dryden 30 Senior Loan Fund |
Boundary Hall, Cricket Square PO Box 1093 Grand Cayman, Ky1-1102 Cayman Islands |
CLO Fund Securities | Collateralized Loan Obligations | — | 8.54 | % | 11/01/2028 | 6.8 | % | 3,250 | 170 | 170 | 0.1 | % | (3)(7)(10) | |||||||||||||||||||||||
JMP Credit Advisors CLO IV LTD |
75 Fort Street, P.O. Box 1350 Grand Cayman KY1 1108, Cayman Islands | CLO Fund Securities | Collateralized Loan Obligations | — | 15.3 | % | 07/17/2029 | 57.2 | % | 18,407 | 740 | 698 | 0.4 | % | (3)(7)(10) | |||||||||||||||||||||||
JMP Credit Advisors CLO V LTD |
75 Fort Street, P.O. Box 1350 Grand Cayman KY1 1108, Cayman Islands | CLO Fund Securities | Collateralized Loan Obligations | — | 10.88 | % | 07/17/2030 | 57.2 | % | 17,074 | 3,512 | 2,966 | 1.6 | % | (3)(7)(10) | |||||||||||||||||||||||
Preferred Stock and Units - 3.9% |
||||||||||||||||||||||||||||||||||||||
4L Ultimate Topco Corporation |
4200 Columbus Street, Ottawa, IL 61350 | Services: Business | Preferred Stock and Units | — | — | 0.3 | % | 321 | 29 | 0 | 0.0 | % | ||||||||||||||||||||||||||
AAPC Holdings, LLC |
2222 Sedwick Drive, Durham, NC 27713 | Healthcare & Pharmaceuticals | Preferred Stock and Units | — | |
18.00 PIK |
% |
0.1 | % | 146,214 | 4 | 218 | 0.1 | % | (22)(25) | |||||||||||||||||||||||
Advantage Capital Holdings LLC |
415 Bedford Road - Suite 102, Pleasantville, NY, 10570 | Banking, Finance, Insurance & Real Estate | Preferred Stock and Units | — | |
12.50 PIK |
% |
0.4 | % | 2,709,329 | 2,709 | 2,709 | 1.4 | % | (22)(25) | |||||||||||||||||||||||
Aperture Dodge 18 LLC |
10777 Westheimer Rd. Suite 1040, Houston, TX 77042 | Banking, Finance, Insurance & Real Estate | Preferred Stock and Units | — | — | 1.3 | % | 3,072,634 | 3,073 | 2,919 | 1.6 | % | ||||||||||||||||||||||||||
Epilog Partners SPV III, LLC (Care Connectors Medical Group) |
4695 MacArthur Court, Suite 1112A, Newport Beach, CA 92660 | Healthcare & Pharmaceuticals | Preferred Stock and Units | — | — | 0.7 | % | 1,173,118 | 1,173 | 1,194 | 0.6 | % | (20)(22) | |||||||||||||||||||||||||
Prosper Marketplace |
P.O. Box 396081, San Francisco, CA 94139 | Consumer goods: Durable | Preferred Stock and Units | — | — | 2.6 | % | 912,865 | 279 | 324 | 0.2 | % | (6) | |||||||||||||||||||||||||
23
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
Common Stock and Membership Units - 4.3% |
||||||||||||||||||||||||||||||||||||||
AAPC Holdings, LLC |
2222 Sedwick Drive, Durham, NC 27713 | Healthcare & Pharmaceuticals | Common Stock and Membership Units | — | — | 0.1 | % | 0 | 0 | 426 | 0.2 | % | (22) | |||||||||||||||||||||||||
Advantage Capital Holdings LLC - Class A Units |
415 Bedford Road - Suite 102, Pleasantville, NY, 10570 | Banking, Finance, Insurance & Real Estate | Common Stock and Membership Units | — | — | 0.6 | % | 822 | 500 | 1,948 | 1.0 | % | (22) | |||||||||||||||||||||||||
Anthem Sports & Entertainment Inc. - Class A Warrant |
8269 E. 23rd Ave, Denver, CO 80238 | Media: Broadcasting & Subscription | Common Stock and Membership Units | — | — | 0.9 | % | 510 | 46 | 0 | 0.0 | % | ||||||||||||||||||||||||||
Anthem Sports & Entertainment Inc. - Class B Warrant |
8269 E. 23rd Ave, Denver, CO 80238 | Media: Broadcasting & Subscription | Common Stock and Membership Units | — | — | 0.9 | % | 88 | 0 | 0 | 0.0 | % | ||||||||||||||||||||||||||
Anthem Sports & Entertainment Inc. - Warrant for CS |
8269 E. 23rd Ave, Denver, CO 80238 | Media: Broadcasting & Subscription | Common Stock and Membership Units | — | — | 0.7 | % | 1,644 | 0 | 0 | 0.0 | % | ||||||||||||||||||||||||||
ATP Oil & Gas Corporation |
4600 Post Oak Place, Suite 100, Houston, TX, 77027 | Energy: Oil & Gas | Common Stock and Membership Units | — | — | 5.0 | % | 0 | 0 | 0 | 0.0 | % | (11) | |||||||||||||||||||||||||
Carestream Health Holdings, Inc. |
150 Verona Street, Rochester, NY 14608 | Healthcare & Pharmaceuticals | Common Stock and Membership Units | — | — | 0.0 | % | 4,099 | 53 | 124 | 0.1 | % | ||||||||||||||||||||||||||
Centric Brands, L.P. |
350 Fifth Ave, Empire State Building, 6th Floor, New York, NY 10118 | Machinery (Non-Agrclt/Constr/Electr) |
Common Stock and Membership Units | — | — | 0.8 | % | 81,770 | 746 | 1,606 | 0.9 | % | (13) | |||||||||||||||||||||||||
DxTx Pain and Spine LLC |
431 Summit St Ste 101, Elgin, IL, 60120 | Healthcare & Pharmaceuticals | Common Stock and Membership Units | — | — | 0.5 | % | 158,166 | 258 | 274 | 0.1 | % | (22) | |||||||||||||||||||||||||
Everyware Global, Inc. |
519 N. Pierce Avenue, Lancaster, OH 43130 | Consumer goods: Durable | Common Stock and Membership Units | — | — | 1.3 | % | 1,085,565 | 346 | 344 | 0.2 | % | (16) | |||||||||||||||||||||||||
FP WRCA Coinvestment Fund VII, Ltd. - Class A |
2400 W75th St., Prairie Village, KS 66208 | Capital Equipment | Common Stock and Membership Units | — | — | 0.2 | % | 100 | 1,500 | 1,029 | 0.5 | % | (3)(7) | |||||||||||||||||||||||||
24
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
Fusion Connect, Inc. |
420 Lexington Ave., Suite 1718, New York, NY 10170 | Telecommunications | Common Stock and Membership Units | — | — | 3.1 | % | 14 | 866 | 0 | 0.0 | % | (13) | |||||||||||||||||||||||||
Fusion Connect, Inc. - Warrant |
420 Lexington Ave., Suite 1718, New York, NY 10170 | Telecommunications | Common Stock and Membership Units | — | — | 3.1 | % | 811,572 | 0 | 0 | 0.0 | % | ||||||||||||||||||||||||||
HDC/HW Holdings, LLC |
620 Division Street, Elizabeth, NJ 07207 | High Tech Industries | Common Stock and Membership Units | — | — | 1.5 | % | 148,826 | 0 | 0 | 0.0 | % | ||||||||||||||||||||||||||
LB NewHoldCo LLC |
5820 Live Oak Parkway, Suite 300, Norcross, GA 30071 | Hotel, Gaming & Leisure | Common Stock and Membership Units | — | — | 1.0 | % | 96,523 | 1,441 | 1,217 | 0.6 | % | (13) | |||||||||||||||||||||||||
Morae Global Holdings Inc. - Warrant |
811 Louisiana St Ste 1020, Houston, TX 77002 | IT Consulting & Other Services | Common Stock and Membership Units | — | — | 4.2 | % | 1 | 87 | 131 | 0.1 | % | ||||||||||||||||||||||||||
Ohene Holdings B.V. - Warrant |
1020 Petersburg Rd, Hebron, KY 41048 | High Tech Industries | Common Stock and Membership Units | — | — | 0.0 | % | 4 | 0 | 0 | 0.0 | % | (3)(7) | |||||||||||||||||||||||||
Roscoe Investors, LLC - Class A |
21973 Commerce Parkway, Strongsville, OH 44149 | Healthcare & Pharmaceuticals | Common Stock and Membership Units | — | — | 0.8 | % | 10,000 | 1,000 | 498 | 0.3 | % | ||||||||||||||||||||||||||
South Street Securities Holdings, Inc - Warrant |
6800 East 163rd Street, Belton, MO 64012 | Banking, Finance, Insurance & Real Estate | Common Stock and Membership Units | — | — | 3.6 | % | 3,966 | 455 | 450 | 0.2 | % | ||||||||||||||||||||||||||
Sundance Holdings Group, LLC |
11726 San Vicente Blvd., Suite 300, Los Angeles, CA 90049 | Retail | Common Stock and Membership Units | — | — | 1.5 | % | 14,603 | 0 | 0 | 0.0 | % | ||||||||||||||||||||||||||
World Business Lenders, LLC |
101 Hudson Street, 33rd Floor, Jersey City, NJ 07302 | Banking, Finance, Insurance & Real Estate | Common Stock and Membership Units | — | — | 0.3 | % | 49,209 | 0 | 0 | 0.0 | % | (7) | |||||||||||||||||||||||||
Derivatives - 0.0%(19) |
||||||||||||||||||||||||||||||||||||||
Advantage Capital Holdings LLC |
415 Bedford Road - Suite 102, Pleasantville, NY, 10570 | Banking, Finance, Insurance & Real Estate | Derivatives | — | — | 164 | 0 | 0 | 0.0 | % | (7)(22) | |||||||||||||||||||||||||||
Epilog Partners LP (Care Connectors Medical Group) |
4695 MacArthur Court, Suite 1112A Newport Beach, CA 92660 | Healthcare & Pharmaceuticals | Derivatives | — | — | 1,166,667 | 0 | 0 | 0.0 | % | (7)(22) | |||||||||||||||||||||||||||
25
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||||
HDNet Holdco LLC (Anthem) |
8269 E. 23rd Ave, Denver, CO 80238 | Media: Broadcasting & Subscription | Derivatives | — | — | 0 | 31 | 0 | 0.0 | % | (7) | |||||||||||||||||||||||||||
Total Investments in Non-Control, Non-Affiliate Portfolio Companies |
||||||||||||||||||||||||||||||||||||||
Investments in Affiliate Portfolio Companies - 31.1%(17) |
||||||||||||||||||||||||||||||||||||||
First Lien/Senior Secured Debt - 4.2% |
||||||||||||||||||||||||||||||||||||||
PMP OPCO, LLC (Princeton Medspa Partners, LLC) |
944 Main Street, Branford, CT 06405 | Services: Consumer | First Lien/Senior Secured Debt | SOFR + 8.50% | 13.35 | % | 05/31/2029 | 1,683 | 1,641 | 1,631 | 0.9 | % | (13)(20) | |||||||||||||||||||||||||
PMP OPCO, LLC (Princeton Medspa Partners, LLC) (Revolver) |
944 Main Street, Branford, CT 06405 | Services: Consumer | First Lien/Senior Secured Debt | SOFR + 8.50% | — | 05/31/2029 | 0 | -3 | -4 | 0.0 | % | (20) | ||||||||||||||||||||||||||
Riddell, Inc. |
1700 W. Higgins Road Suite 500, Des Plaines, IL 66018 | Consumer goods: Durable | First Lien/Senior Secured Debt | SOFR + 6.00% | 11.17 | % | 03/29/2029 | 6,284 | 6,182 | 6,207 | 3.3 | % | (13)(20) | |||||||||||||||||||||||||
Second Lien/Senior Secured Debt- 2.1% |
||||||||||||||||||||||||||||||||||||||
Northeast Metal Works LLC |
410 John Downey Drive, New Britain, CT 06051 | Metals & Mining | Second Lien/Senior Secured Debt | — | 8 | % | 04/05/2028 | 4,500 | 4,500 | 3,429 | 1.8 | % | ||||||||||||||||||||||||||
Northeast Metal Works LLC |
410 John Downey Drive, New Britain, CT 06051 | Metals & Mining | Second Lien/Senior Secured Debt | — | 8 | % | 01/01/2025 | 500 | 500 | 500 | 0.3 | % | ||||||||||||||||||||||||||
Joint Ventures- 20.9% |
||||||||||||||||||||||||||||||||||||||
Series A-Great Lakes Funding II LLC |
650 Madison Ave Fl 3, New York, NY 10022 | Joint Venture | Joint Venture | — | — | 38,318 | 38,318 | 39,276 | 20.9 | % | (7)(9)(20)(26) | |||||||||||||||||||||||||||
26
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||
Preferred Stock and Units - 3.1% |
||||||||||||||||||||||||||||||||||||
BMP Slappey Holdco, LLC |
4260 Cahaba Heights Court, Suite 100, Birmingham, AL 35243 | Telecommunications | Preferred Stock and Units | — | — | 1.8 | % | 200,000 | 467 | 626 | 0.3 | % | (21) | |||||||||||||||||||||||
BMP Slappey Investment II |
4260 Cahaba Heights Court, Suite 100, Birmingham, AL 35243 | Telecommunications | Preferred Stock and Units | — | — | 8.9 | % | 88,946 | 208 | 278 | 0.1 | % | (21) | |||||||||||||||||||||||
EBSC Holdings LLC (Riddell, Inc.) |
1700 W. Higgins Road Suite 500, Des Plaines, IL 66018 | Consumer goods: Durable | Preferred Stock and Units | — | 10.00% PIK |
1.6 | % | 2,100,969 | 2,075 | 2,096 | 1.1 | % | (25) | |||||||||||||||||||||||
GreenPark Infrastructure, LLC - Series A |
221 River St, Hoboken, NJ 07030 | Energy: Electricity | Preferred Stock and Units | — | — | 10.0 | % | 1,000 | 500 | 500 | 0.3 | % | (22) | |||||||||||||||||||||||
Northeast Metal Works LLC - Preferred |
410 John Downey Drive, New Britain, CT 06051 | Metals & Mining | Preferred Stock and Units | — | — | 50.3 | % | 2,368 | 0 | 0 | 0.0 | % | (21) | |||||||||||||||||||||||
Northeast Metal Works LLC - Class O Preferred |
410 John Downey Drive, New Britain, CT 06051 | Metals & Mining | Preferred Stock and Units | — | 10.00% PIK |
100.0 | % | 4,950,000 | 4,950 | 1,273 | 0.7 | % | (21)(25) | |||||||||||||||||||||||
Princeton Medspa Partners, LLC |
944 Main Street, Branford, CT 06405 | Services: Consumer | Preferred Stock and Units | — | 12.50% PIK |
2.5 | % | 1,032 | 1,032 | 987 | 0.5 | % | (22)(25) | |||||||||||||||||||||||
Common Stock and Membership Units - 0.9% |
||||||||||||||||||||||||||||||||||||
GreenPark Infrastructure, LLC - Series M-1 |
221 River St, Hoboken, NJ 07030 | Energy: Electricity | Common Stock and Membership Units | — | — | 50.0 | % | 500 | 171 | 172 | 0.1 | % | (20)(22) | |||||||||||||||||||||||
Kleen-Tech Acquisition, LLC |
7100 Broadway, Suite 6-L, Denver, CO 80221 |
Services: Business | Common Stock and Membership Units | — | — | 5.2 | % | 250,000 | 1,264 | 1,490 | 0.8 | % | (21) | |||||||||||||||||||||||
Princeton Medspa Partners, LLC - Warrant |
944 Main Street, Branford, CT 06405 | Services: Consumer | Common Stock and Membership Units | — | — | 2.5 | % | 0 | 0 | 46 | 0.0 | % | (22) | |||||||||||||||||||||||
Derivatives - 0.0%(19) |
||||||||||||||||||||||||||||||||||||
Princeton Medspa Partners, LLC |
944 Main Street, Branford, CT 06405 | Services: Consumer | Derivatives | — | — | 1,000,000 | 0 | 0 | 0.0 | % | (7)(22) | |||||||||||||||||||||||||
27
Investment (2), (4), (12), (14), (23), (24) |
Address |
Industry |
Investment Type |
Reference Rate and Spread (1) |
Interest Rate |
Maturity |
% of Class Held |
Principal /Par/ Shares (++) |
Cost |
Fair Value |
Percentage of Net Assets |
Footnotes | ||||||||||||||||||||||||
Total Investments in Affiliate Portfolio Companies |
||||||||||||||||||||||||||||||||||||
Investments in Controlled Afilliated Portfolio Companies - 6.9%(8) |
||||||||||||||||||||||||||||||||||||
Subordinated Debt - 0.0% |
||||||||||||||||||||||||||||||||||||
ProAir, LLC |
3260 Eagle Park Dr., NE, #100, Grand Rapids, MI 49525 | Capital Equipment | Subordinated Debt | — | — | 01/31/2023 | 2,020 | 1,931 | 0 | 0.0 | % | (5) | ||||||||||||||||||||||||
Common Stock and Membership Units - 0.0% |
||||||||||||||||||||||||||||||||||||
ProAir HoldCo, LLC |
3260 Eagle Park Dr., NE, #100, Grand Rapids, MI 49525 | Capital Equipment | Common Stock and Membership Units | — | — | 39.3 | % | 2,749,997 | 4,261 | 0 | 0.0 | % | ||||||||||||||||||||||||
Joint Ventures - 6.9% |
||||||||||||||||||||||||||||||||||||
KCAP Freedom 3 LLC |
650 Madison Ave Fl 3, New York, NY 10022 | Joint Venture | Joint Venture | — | — | 62.8 | % | 27,220 | 25,835 | 13,012 | 6.9 | % | (7) | |||||||||||||||||||||||
Asset Manager Affiliates - 0.0% |
||||||||||||||||||||||||||||||||||||
Asset Management Company |
650 Madison Ave Fl 3, New York, NY 10022 | Asset Management Company | Asset Management Company | — | — | 100.0 | % | 0 | 17,791 | 0 | 0.0 | % | (7) | |||||||||||||||||||||||
Total Investments in Controlled Affiliated Portfolio Companies |
||||||||||||||||||||||||||||||||||||
Total Investments - 228.2% |
||||||||||||||||||||||||||||||||||||
| (1) | A majority of the variable rate loans in the Company’s investment portfolio bear interest at a rate that may be determined by reference to either SOFR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower’s option. The borrower may also elect to have multiple interest reset periods for each September 30, 2024 loan. SOFR loans are typically indexed to 12 month, 6 month, 3 month, 2 month or 1 month SOFR rates. For each such loan, the Company has provided the weighted average annual stated interest rate in effect at September 30, 2024. As noted in the table above, 88.5% (based on par) of debt securities with floating rates contain floors which range between 0.50% and 5.25%. |
28
| (2) | Reflects the fair market value of all investments as of September 30, 2024 as determined in good faith using significant unobservable inputs by the Adviser in its role as “valuation designee” in accordance with Rule 2a-5 under the 1940 Act, pursuant to valuation policies and procedures that have been approved by the Board. |
| (3) | Non-U.S. company or principal place of business outside the U.S. |
| (4) | The aggregate cost of investments for federal income tax purposes is approximately $514.2 million. The aggregate gross unrealized appreciation is approximately $32.2 million, the aggregate gross unrealized depreciation is approximately $2.8 million, and the net unrealized depreciation is approximately $29.4 million. |
| (5) | Loan or debt security is on non-accrual status and therefore is considered non-income producing. |
| (6) | Held through Garrison Capital Equity Holdings II LLC and net of non-controlling member’s interest of 17.5% pursuant to the Amended and Restated Limited Liability Company Agreement of Garrison Capital Equity Holdings II LLC. |
| (7) | The investment is treated as a non-qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2024, qualifying assets represent 87.0% of the Company’s total assets and non-qualifying assets represent 13.0% of the Company’s total assets. |
| (8) | As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” and has “Control” of this portfolio company as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company. |
| (9) | Non-voting. |
| (10) | CLO Subordinated Investments are entitled to periodic distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s investments less contractual payments to debt holders and fund expenses. The estimated annualized effective yield indicated is based upon a current projection of the amount and timing of these distributions. Such projections are updated on a quarterly basis and the estimated effective yield is adjusted prospectively. |
| (11) | This investment receives a 5% royalty interest on oil being produced on certain fields. All production payments received are being applied to the cost basis and are considered return of capital. |
| (12) | All investments valued using unobservable inputs (Level III), unless otherwise noted. |
| (13) | As of September 30, 2024, this investment is pledged to secure the Company’s debt obligations. |
| (14) | The Company’s investments are generally acquired in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) and, therefore, are generally subject to limitations on resale, and may be deemed to be “restricted securities” under the Securities Act of 1933. |
| (15) | This investment is classified as Level II. |
| (16) | This investment is held by the Company’s wholly-owned subsidiary Garrison Capital Equity Holdings XI LLC. |
| (17) | Under the 1940 Act, the Company is deemed to be an “Affiliated Person” of, as defined in the 1940 Act, this portfolio company as the Company owns at least 5% of the portfolio company’s outstanding voting securities or is under common control with such portfolio company. |
| (18) | Not used. |
| (19) | Information related to the Company’s derivatives is presented below as of September 30, 2024: |
($ in thousands) |
||||||||||||||||||||
Description |
Counterparty |
Number of shares |
Notional amount |
Exercise price |
Expiration date |
Value |
||||||||||||||
Call option |
HDNet Holdco LLC | 0.2 | $ | 8 | 0.01 | N/A | — | |||||||||||||
Description |
Counterparty |
Number of shares |
Notional amount |
Exercise price |
Expiration date |
Value |
||||||||||||||
Put option |
Advantage Capital Holdings LLC | 164 | $ | 563 | 20 | N/A | — | |||||||||||||
Put option |
Epilog Partners LP (Care Connectors Medical Group) | 1,166,667 | $ | — | — | N/A | — | |||||||||||||
Put option |
Princeton Medspa Partners, LLC | 1,000,000 | $ | 1,000 | 2 | N/A | — | |||||||||||||
| (20) | Debt security has an unfunded commitment in addition to the amounts shown in the Consolidated Schedule of Investments. See “ Notes to Consolidated Financial Statements — Note 8. Commitments and Contingencies 10-K and our most recent Quarterly Report on Form 10-Q for additional information on the Company’s commitments and contingencies. |
| (21) | This investment is owned by HCAP Equity Holdings, LLC, one of the Company’s taxable blocker subsidiaries. |
| (22) | This investment is held by PTMN Sub Holdings LLC, one of the Company’s taxable blocker subsidiaries. |
| (23) | All debt investments are income producing, unless otherwise noted. Equity and warrant investments are non-income producing, unless otherwise noted. |
| (24) | Percentages are based on net assets as of September 30, 2024. |
| (25) | The equity investment is income producing. |
| (26) | The investment is valued at the NAV of the underlying fund. |
| (++) | Par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments. |
29
LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings except as set forth below.
Harvest Capital Credit Corporation (“HCAP”) and certain of its officers and directors as well as JMP Group LLC were named as defendants in two putative stockholder class action lawsuits, both filed in the Court of Chancery in the State of Delaware, captioned Stewart Thompson v. Joseph Jolson, et al., Case No. 2021-0164 and Ronald Tornese v. Joseph Jolson, et al., Case No. 2021-0167 (the “Delaware Actions”). The complaints in the Delaware Actions allege certain breaches of fiduciary duties against the defendants as well as aiding and abetting claims against JMP Group LLC and HCAP’s Chief Executive Officer concerning HCAP’s proposed merger with the Company and acquisition sub that resulted in the merger with and into the Company.
On June 9, 2021, HCAP merged with and into the Company with the Company as the surviving corporation. As a result, the Company became responsible for any claims against HCAP as well as for any advancement and/or indemnification owed to the former officers and directors of HCAP. On or about May 10, 2022, plaintiffs in the Delaware Actions filed a consolidated amended complaint seeking damages against defendants for allegedly breaching their fiduciary duties in connection with the proposed merger. On or about May 31, 2022, defendants moved to dismiss the Delaware Actions.
Thereafter, in December 2022, plaintiffs in the Delaware Actions again amended their complaint, and defendants again moved to dismiss the Delaware Action. On June 7, 2023, the Court heard oral argument on defendants’ motions to dismiss. The Court dismissed all claims against HCAP’s former independent directors but denied the motions of the remaining defendants.
On February 26, 2024, the parties in the Delaware Actions entered into a stipulation of settlement pursuant to which all claims will be dismissed with prejudice, subject to approval by the Court. On July 2, 2024, the Court held a settlement hearing and approved the settlement. The claims asserted against the defendants were dismissed with prejudice. The Company will not be responsible for paying any portion of the settlement amount, either directly or through indemnification of former officers or directors of HCAP.
30
FINANCIAL STATEMENTS
The information in “” in the Company’s most recent Annual Report on Form ” in the Company’s most recent Quarterly Report on Form ” as incorporated by reference herein.
Item 8. Financial Statements and Supplementary Data
10-K
and “Part 1, Item 1.
Financial Statements
10-Q
is incorporated by reference herein. The financial data should be read in conjunction with the Company’s consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations
31
MANAGEMENT
The information contained under “,” “,” “,” and “” of our most recent Definitive Proxy Statement on Schedule 14A filed with the SEC on April 29, 2024 (“most recent Definitive Proxy Statement on Schedule 14A”), and under “ — ” and “” of our most recent Annual Report on Form ” and “ ” of our most recent Quarterly Report on Form
Director and Executive Officer Information
Director Compensation
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
Item 1. Business —
Advisory Agreement
Board Approval of the Advisory Agreement
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Expenses
10-K,
and under “Notes to Consolidated Financial Statements — Note 5. Related Party Transactions — Board Approval of the Advisory Agreement
Part 1,
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Expenses
10-Q
is incorporated by reference herein. 32
PORTFOLIO MANAGEMENT
The management of our investment portfolio is the responsibility of Sierra Crest and our investment team (the “PTMN Investment Team”). All investment decisions require the majority approval of the PTMN investment committee (the “PTMN Investment Committee”). The PTMN Investment Team sources, identifies and diligences investment opportunities and presents the opportunity to the PTMN Investment Committee for approval. The PTMN Investment Committee is currently comprised of five members of BCP Credit (Ted Goldthorpe, Matthias Ederer, Henry Wang, Ivelin Dimitrov and Patrick Schafer). The PTMN Investment Committee meets regularly to review the opportunities presented by the PTMN Investment Team.
Follow-on
investments in existing portfolio companies may require the PTMN Investment Committee’s approval beyond that obtained when the initial investment in the company was made. In addition, temporary investments, such as those in cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less, may require approval by the PTMN Investment Committee. Our Board, including a majority of the Independent Directors, oversees and monitors our investment performance and annually reviews the compensation we pay to the Adviser. None of the Adviser’s investment professionals receive any direct compensation from us in connection with the management of our portfolio.
Biographical information regarding senior members of the PTMN Investment Committee who are not directors or executive officers is as follows:
Matthias Ederer
Mr. Ederer is a founding partner of BCP Credit, having previously been a partner and founding team member of Wingspan Investment Management, which he joined in 2013. Prior to Wingspan, he spent seven years in Goldman Sachs’ Special Situations Group and Bank Loan Distressed Investing Group in New York and London.
Henry Wang
Mr. Wang is a founding partner of BCP Credit, having formerly been a Partner at Stonerise Capital Partners where he spent over five years. Previously, he worked for over seven years at Goldman Sachs in its Special Situations Group and Investment Banking Division. Mr. Wang also worked for Vulcan Capital (Paul Allen’s investment firm,
co-founder
of Microsoft) and Thomas Weisel Partners. Ivelin Dimitrov
Mr. Dimitrov joined BC Partners in 2018 and is a Managing Director in the Credit team. Previously, he was a Partner at Fifth Street Management LLC, where he focused on the investment activities of the firm, including private debt origination and capital markets solutions for financials sponsors and corporate clients.
Material conflicts of interest may arise in connection with the PTMN Investment Committee’s management of our investments and the investments of the other accounts managed by the Adviser and its affiliates. See “ ” in our most recent Annual Report on
Item 1A.
Risk Factors —Risks Related to Our Business and Structure — There may be conflicts of interest related to obligations that the Adviser’s senior management and investment team has to other clients
Form 10-K,
incorporated by reference herein. 33
Equity Securities
The dollar range of equity securities in us beneficially owned at September 30, 2024 by each portfolio manager is as follows:
Name |
Dollar Range of Equity Securities in PTMN (1) |
|||
Matthias Ederer |
None | |||
Ted Goldthorpe |
$ | 100,001—$500,000 | ||
Patrick Schafer |
$ | 100,001—$500,000 | ||
Ivelin Dimitrov |
None | |||
Henry Wang |
None | |||
| (1) | Based on the closing price of PTMN Common Stock on NASDAQ on September 30, 2024 of $18.55 per share. The dollar range of equity securities beneficially owned are: none; $1 – $10,000; $10,001 – $50,000; $50,001 – $100,000; $100,001 – $500,000; $500,001 – $1,000,000; or Over $1,000,000. |
Other Accounts Managed
The information below lists the number of other accounts for which each portfolio manager was primarily responsible for the management as of September 30, 2024.
day-to-day
Name of PTMN Investment Committee Member |
Type of Accounts |
Total Number of Other Accounts Managed |
Total Assets (in millions) (1) |
Number of Accounts for which Advisory Fee is Based on Performance |
Total Assets for which Advisory Fee is Based on Performance (in millions) (2) |
|||||||||||||
Matthias Ederer |
Registered Investment Companies | 5 | $ | 811 | 5 | $ | 811 | |||||||||||
| Other Pooled Investment Vehicles | 8 | $ | 4,907 | 8 | $ | 4,907 | ||||||||||||
| Other Accounts | 3 | $ | 831 | 1 | $ | 17 | ||||||||||||
Ted Goldthorpe |
Registered Investment Companies | 5 | $ | 811 | 5 | $ | 811 | |||||||||||
| Other Pooled Investment Vehicles | 8 | $ | 4,907 | 8 | $ | 4,907 | ||||||||||||
| Other Accounts | 3 | $ | 831 | 1 | $ | 17 | ||||||||||||
Patrick Schafer |
Registered Investment Companies | 5 | $ | 811 | 5 | $ | 811 | |||||||||||
| Other Pooled Investment Vehicles | 8 | $ | 4,907 | 8 | $ | 4,907 | ||||||||||||
| Other Accounts | 3 | $ | 831 | 1 | $ | 17 | ||||||||||||
Ivelin Dimitrov |
Registered Investment Companies | 5 | $ | 811 | 5 | $ | 811 | |||||||||||
| Other Pooled Investment Vehicles | 8 | $ | 4,907 | 8 | $ | 4,907 | ||||||||||||
| Other Accounts | 3 | $ | 831 | 1 | $ | 17 | ||||||||||||
Henry Wang |
Registered Investment Companies | 5 | $ | 811 | 5 | $ | 811 | |||||||||||
| Other Pooled Investment Vehicles | 8 | $ | 4,907 | 8 | $ | 4,907 | ||||||||||||
| Other Accounts | 3 | $ | 831 | 1 | $ | 17 | ||||||||||||
| (1) | Total Assets as defined by BC Partners, which includes undrawn commitments. |
| (2) | Represents the assets under management of the accounts managed that have the potential to generate fees in addition to management fees based on total assets. |
Compensation
BC Partners’ financial arrangements with the portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include base compensation and performance-based, discretionary compensation.
34
Base Compensation
: Generally, the portfolio managers receive base compensation based on their position with the firm that is consistent with the market rate of annual salaries paid to similarly situated investment professionals. Discretionary Compensation
: The PTMN Investment Committee members also receive discretionary compensation generally consisting of two components: an annual bonus and carried interest. | • | Annual Bonus : Generally, a PTMN Investment Committee member receives an annual bonus based on the performance of BC Partners, the performance of the PTMN Investment Committee within BC Partners and the individual’s performance, achievement of certain internal objectives and contribution to the overall performance of these portfolios and BC Partners as a whole. |
| • | Carried Interest : Generally, a PTMN Investment Committee member receives carried interests with respect to the BC Partners-advised funds, subject to standard terms and conditions, including vesting. |
35
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The information contained under the caption “” in our most recent Definitive Proxy Statement on Schedule 14A is incorporated by reference herein.
Transactions with Related Persons
36
CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS
As of November 21, 2024, there were 9,201,425 shares of our common stock outstanding.
No person is deemed to control us, as such term is defined in the 1940 Act.
The following table sets forth, as of the date of this prospectus, information with respect to the beneficial ownership of our common stock by:
| • | each person known to us to beneficially own more than 5% of the outstanding shares of our common stock; |
| • | each of our directors and each named executive officer; and |
| • | all of our directors and executive officers as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Ownership information for those persons who beneficially own 5% or more of the shares of the Company’s common stock is based upon filings by such persons with the SEC and other information obtained from such persons, if available.
Unless otherwise indicated, the Company believes that each beneficial owner set forth in the table below has sole voting and investment power over the shares beneficially owned by such beneficial owner. The directors are divided into two groups — interested directors and independent directors. Each interested director is an “interested person” (as defined in Section 2(a)(19) of the 1940 Act) of the Company. The address of all executive officers and directors is c/o Portman Ridge Finance Corporation at 650 Madison Avenue, 3
rd
Floor, New York, New York
10022
. Number of Shares (1) |
Percentage of Class |
|||||||
| Name and Address |
||||||||
| Directors and Executive Officers: |
||||||||
| Independent Directors |
||||||||
| Alexander Duka |
1,000 | * | ||||||
| George Grunebaum |
— | — | ||||||
| Dean C. Kehler |
167,400 | 1.8 | % | |||||
| Robert Warshauer |
2,000 | * | ||||||
| Matthew Westwood |
4,571 | * | ||||||
| Joseph Morea |
969 | * | ||||||
| Jennifer Kwon Chou |
— | — | ||||||
| Interested Directors |
||||||||
| Ted Goldthorpe |
9,764 | * | ||||||
| Patrick Schafer |
8,315 | * | ||||||
| Executive Officers |
||||||||
| Brandon Satoren |
20 | * | ||||||
| David Held |
— | — | ||||||
| Directors and Executive Officers as a Group |
194,039 | 2.1 | % | |||||
| 5% Holders |
||||||||
| — |
— | — | ||||||
| * | Represents less than 1%. |
| (1) | Beneficial ownership has been determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 (the “Exchange Act”). |
37
The following table sets forth the dollar range of our equity securities beneficially owned by each of our directors as of December 31, 2023. We are not part of a “family of investment companies,” as that term is defined in Schedule 14A.
Name of Director |
Dollar Range of Equity Securities($) (1)(2) |
|||
Independent Directors |
||||
Alexander Duka |
$10,001-$50,000 |
|||
George Grunebaum |
None | |||
Dean C. Kehler |
Over $100,000 | |||
Robert Warshauer |
$10,001-$50,000 |
|||
Matthew Westwood |
$50,000-$100,000 |
|||
Joseph Morea |
$10,001-$50,000 |
|||
Jennifer Kwon Chou |
None | |||
Non-Independent Directors |
||||
Ted Goldthorpe |
Over $100,000 | |||
Patrick Schafer |
Over $100,000 | |||
| (1) | Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Exchange Act. |
| (2) | Based on the closing price of PTMN Common Stock on NASDAQ on December 29, 2023 of $18.19 per share. The dollar range of equity securities beneficially owned are: none, $1 – $10,000, $10,001 – $50,000, $50,001 – $100,000, or Over $100,000. |
The following table sets forth the dollar range of equity interests beneficially owned by any of our Independent Directors and his or her immediate family as of December 31, 2023 in other funds managed by the Adviser or its affiliates.
Name of Director |
Name of Owners |
Name of Investment |
Title of Class |
Value of Securities(1) | ||||
Alexander Duka |
Alexander Duka and Barbara Duka | BC Partners Special Opportunities Fund I LP | Limited Partnership | Over $100,000 | ||||
Alexander Duka |
Alexander Duka and Barbara Duka | BC Partners Lending Corporation |
Common Stock | Over $100,000 | ||||
Alexander Duka |
Alexander Duka | BC Partners Fund XI | Limited Partnership | Over $100,000 | ||||
George Grunebaum |
George Grunebaum | BC Partners Lending Corporation |
Common Stock | Over $100,000 | ||||
Robert Warshauer |
Robert Warshauer | BC Partners Lending Corporation | Common Stock | Over $100,000 | ||||
Robert Warshauer |
Robert Warshauer | BCP Special Opportunities Fund I LLP |
Limited Partnership | Over $100,000 | ||||
| (1) | Dollar ranges are as follows: none, $1 – $10,000, $10,001 – $50,000, $50,001 – $100,000, or Over $100,000. |
38
DETERMINATION OF NET ASSET VALUE
The NAV per share of our outstanding shares of common stock is determined quarterly by dividing the value of total assets minus liabilities by the total number of shares outstanding.
We calculate the value of our investments in accordance with the procedures described in “” of our most recent Annual Report on
Item
1. Business — Determination of Net Asset Value
Form 10-K,
which is incorporated by reference herein. 39
DIVIDEND REINVESTMENT PLAN
The information in “” in our most recent Annual Report on
Item 1. Business — Dividend Reinvestment Plan
Form 10-K
is incorporated by reference herein. 40
CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general summary of certain material U.S. federal income tax considerations applicable to us and to an investment in shares of our common stock. This discussion is based on the provisions of the Code, the regulations of the U.S. Department of Treasury promulgated thereunder, or “Treasury regulations,” and administrative and judicial interpretations, each as in effect as of the date of this prospectus and all of which are subject to change, possibly retroactively, which could affect the continuing validity of this discussion. This discussion does not constitute a detailed explanation of all U.S. federal income tax aspects affecting us and our stockholders and does not purport to deal with the U.S. federal income tax consequences that may be important to particular stockholders in light of their individual investment circumstances or to some types of stockholders subject to special tax rules, such as financial institutions, broker dealers, insurance companies,
tax-exempt
organizations, partnerships or other pass-through entities, persons holding our common stock in connection with a hedging, straddle, conversion or other integrated transaction, non-U.S. stockholders
(as defined below) engaged in a trade or business in the United States, persons who have ceased to be U.S. citizens or to be taxed as resident aliens or individual non-U.S. stockholders
present in the United States for 183 days or more during a taxable year. This discussion also does not address any aspects of U.S. estate or gift tax or foreign, state or local tax. This discussion assumes that our stockholders hold their shares of our common stock as capital assets for U.S. federal income tax purposes (generally, assets held for investment). No ruling has been or will be sought from the IRS regarding any matter discussed herein. This discussion does not discuss the consequences of an investment in our preferred stock, subscription rights, debt securities or warrants representing rights to purchase shares of our preferred stock, common stock, or debt securities. The U.S. federal income tax consequences of such an investment in the relevant prospectus supplement.
A “U.S. stockholder” is generally a beneficial owner of shares of our common stock that is for U.S. federal income tax purposes:
| • | an individual who is a citizen or resident of the United States; |
| • | a corporation or other entity classified as a corporation for U.S. tax purposes created or organized in or under the laws of the United States, any state therein or the District of Columbia; |
| • | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
| • | a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust (or a trust that has made a valid election to be treated as a U.S. trust). |
A
“non-U.S. stockholder”
generally is a beneficial owner of shares of our common stock other than a U.S. stockholder. If a partnership or other entity classified as a partnership, for U.S. federal income tax purposes, holds our shares, the U.S. tax treatment of the partnership and each partner generally depends on the status of the partner, the activities of the partnership and certain determinations made at the partner level. A partnership (and any partner in such partnership) considering an investment in our common stock should consult its own tax advisers regarding the U.S. federal income tax consequences of the acquisition, ownership and disposition of shares by the partnership.
Tax matters are very complicated and the tax consequences to an investor of an investment in our shares will depend on the facts of his, her or its particular situation. We encourage investors to consult their own tax advisers regarding the specific consequences of such an investment, including tax reporting requirements, the applicability of federal, state, local and foreign tax laws, eligibility for the benefits of any applicable tax treaty and the effect of any possible changes in the tax laws.
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Taxation of the Company
We have elected to be treated and intend to qualify each year as a RIC under Subchapter M of the Code. As a RIC, we generally do not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we timely distribute to our stockholders as dividends.
To qualify as a RIC, we must, among other things:
| • | derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, other income derived with respect to our business of investing in stock, securities or currencies, or net income derived from an interest in a “qualified publicly traded partnership,” or “QPTP,” hereinafter the “90% Gross Income Test;” and |
| • | diversify our holdings so that, at the end of each quarter of each taxable year: |
| • | at least 50% of the value of our total assets is represented by cash and cash items, U.S. Government securities, the securities of other RICs and other securities, with other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of our total assets and not more than 10% of the outstanding voting securities of such issuer, and |
| • | not more than 25% of the value of our total assets is invested in the securities of any issuer (other than U.S. Government securities and the securities of other regulated investment companies), the securities of any two or more issuers that we control and that are determined to be engaged in the same business or similar or related trades or businesses, or the securities of one or more QPTPs (the “Diversification Tests”). |
In the case of a RIC that furnishes capital to development corporations, there is an exception relating to the Diversification Tests described above. This exception is available only to RICs which the SEC determines to be principally engaged in the furnishing of capital to other corporations which are principally engaged in the development or exploitation of inventions, technological improvements, new processes, or products not previously generally available, which we refer to as “SEC Certification.” We have not sought SEC Certification, but it is possible that we will seek SEC Certification in future years. If we receive SEC Certification, we generally will be entitled to include, in the computation of the 50% value of our assets (described above), the value of any securities of an issuer, whether or not we own more than 10% of the outstanding voting securities of the issuer, if the basis of the securities, when added to our basis of any other securities of the issuer that we own, does not exceed 5% of the value of our total assets.
As a RIC, we are generally not subject to U.S. federal income tax on investment company taxable income and net capital gains that we distribute to our stockholders in any taxable year with respect to which we distribute an amount equal to at least 90% of the sum of our (i) investment company taxable income (which includes, among other items, dividends, interest and the excess of any net realized short-term capital gains over net realized long-term capital losses and other taxable income (other than any net capital gain), reduced by deductible expenses) determined without regard to the deduction for dividends and distributions paid and (ii) net
tax-exempt
interest income (which is the excess of our gross tax-exempt
interest income over certain disallowed deductions) (the “Annual Distribution Requirement”). We intend to distribute annually all or substantially all of such income. Generally, if we fail to meet this Annual Distribution Requirement for any taxable year, we will fail to qualify for tax treatment as a RIC for such taxable year. To the extent we meet the Annual Distribution Requirement for a taxable year, but retain our net capital gains for investment or any investment company taxable income, we are subject to U.S. federal income tax on such retained capital gains and investment company taxable income. We may choose to retain our net capital gains for investment or any investment company taxable income, and pay the associated U.S. federal corporate income tax. 42
We are subject to a nondeductible 4% U.S. federal excise tax on certain of our undistributed income, unless we timely distribute (or are deemed to have timely distributed) an amount equal to the sum of:
| • | at least 98% of our ordinary income (not taking into account any capital gains or losses) for the calendar year; |
| • | at least 98.2% of the amount by which our capital gains exceed our capital losses (adjusted for certain ordinary losses) for a one-year period generally ending on October 31 of the calendar year (unless an election is made by us to use our taxable year); and |
| • | certain undistributed amounts from previous years on which we paid no U.S. federal income tax. |
We are authorized to borrow funds and to sell assets in order to satisfy distribution requirements. However, under the 1940 Act, we are not permitted to make distributions to our stockholders while any senior securities are outstanding unless we meet the applicable asset coverage ratios. See “ ” in our most recent Annual Report on
Item 1.
Business—Regulation—Indebtedness; Coverage Ratio
Form 10-K,
as well as in subsequent filings we make with the SEC. Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification Tests. If we dispose of assets in order to meet the Annual Distribution Requirement or to avoid the 4% U.S. federal excise tax, we may make such dispositions at times that, from an investment standpoint, are not advantageous. A RIC is limited in its ability to deduct expenses in excess of its “investment company taxable income” (which is, generally, ordinary income plus the excess of net short-term capital gains over net long-term capital losses). If our expenses in a given year exceed investment company taxable income, we would experience a net operating loss for that year. However, a RIC is not permitted to carry forward net operating losses to subsequent years. In addition, expenses can be used only to offset investment company taxable income, not net capital gain. Due to these limits on the deductibility of expenses, we may for tax purposes have aggregate taxable income for several years that we are required to distribute and that is taxable to our stockholders even if such income is greater than the aggregate net income we actually earned during those years. Such required distributions may be made from our cash assets or by liquidation of investments, if necessary. We may realize gains or losses from such liquidations. In the event we realize net capital gains from such transactions, you may receive a larger capital gain distribution than you would have received in the absence of such transactions.
Company Investments
Certain of our investment practices are subject to special and complex U.S. federal income tax provisions that may, among other things, (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions, including the dividends received deduction, (ii) convert lower taxed long-term capital gains and qualified dividend income into higher taxed short-term capital gains or ordinary income, (iii) convert ordinary loss or a deduction into capital loss (the deductibility of which is more limited), (iv) cause us to recognize income or gain without a corresponding receipt of cash, (v) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (vi) adversely alter the characterization of certain complex financial transactions and (vii) produce income that will not qualify as good income for purposes of the 90% Gross Income Test. We monitor our transactions and may make certain tax elections and may be required to borrow money or dispose of securities to mitigate the effect of these rules and to prevent disqualification of us as a RIC but there can be no assurance that we will be successful in this regard.
Debt Instruments.
end-of-term
43
by us in the same taxable year. We may also have to include in income other amounts that we have not yet received in cash, such as PIK interest, deferred loan origination fees that are paid after origination of the loan or are paid in
non-cash
compensation such as warrants or stock, or certain income with respect to equity investments in foreign corporations. Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement and to avoid the 4% U.S. federal excise tax, even though we will not have received any corresponding cash amount. Warrants.
Foreign Investments.
Passive Foreign Investment Companies.
Foreign Currency Transactions.
Failure to Qualify as a RIC
If we were unable to qualify for treatment as a RIC, and if certain cure provisions described below are not available, we would be subject to tax on all of our taxable income (including our net capital gains) at regular corporate rates. We would not be able to deduct distributions to stockholders, nor would they be required to be made. Distributions, including distributions of net long-term capital gain, would generally be taxable to our stockholders as ordinary dividend income to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate stockholders would be eligible to claim a dividend received deduction with respect to such dividend; , the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if we had been liquidated) that we elect to recognize on requalification or when recognized over the next five years.
non-corporate
stockholders would generally be able to treat such dividends as “qualified dividend income,” which is subject to reduced rates of U.S. federal income tax. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. If we fail to qualify as a RIC for a period greater than two taxable years, to qualify as a RIC in a subsequent year we may be subject to regular corporate tax on any net built-in
gains with respect to certain of our assets (i.e.
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The remainder of this discussion assumes that we qualify for tax treatment as a RIC for each taxable year.
Taxation of U.S. stockholders
Distributions by us generally are taxable to U.S. stockholders as ordinary income or capital gains. Distributions of our “investment company taxable income” (which is, generally, our net ordinary income plus realized net short-term capital gains in excess of realized net long-term capital losses) are taxable as ordinary income to U.S. stockholders to the extent of our current or accumulated earnings and profits, whether paid in cash or reinvested in additional shares of our common stock. To the extent such distributions paid by us to
non-corporate
stockholders (including individuals) are attributable to dividends from U.S. corporations and certain qualified foreign corporations and if certain holding period requirements are met, such distributions generally will be treated as qualified dividend income and eligible for a maximum U.S. federal tax rate of 20%. In this regard, it is anticipated that distributions paid by us will generally not be attributable to dividends and, therefore, generally will not qualify for the 20% maximum U.S. federal tax rate. Distributions of our net capital gain (which is generally our realized net long-term capital gains in excess of realized net short-term capital losses) properly reported by us as “capital gain dividends” will be taxable to a U.S. stockholder as long-term capital gains (currently at a maximum U.S. federal tax rate of 20% in the case of individuals, trusts or estates), regardless of the U.S. stockholder’s holding period for his, her or its common stock and regardless of whether paid in cash or reinvested in additional common stock. Distributions in excess of our earnings and profits first will reduce a U.S. stockholder’s adjusted tax basis in such stockholder’s common stock and, after the adjusted basis is reduced to zero, will constitute capital gains to such U.S. stockholder. Stockholders receiving dividends or distributions in the form of additional shares of our common stock purchased in the market should be treated for U.S. federal income tax purposes as receiving a distribution in an amount equal to the amount of money that the stockholders receiving cash dividends or distributions will receive, and should have a cost basis in the shares received equal to such amount. Stockholders receiving dividends in newly issued shares of our common stock will be treated as receiving a distribution equal to the value of the shares received, and should have a cost basis of such amount.
Although we currently intend to distribute any net long-term capital gains at least annually, we may in the future decide to retain some or all of our net long-term capital gains but designate the retained amount as a “deemed distribution.” In that case, among other consequences, we will pay tax on the retained amount, each U.S. stockholder will be required to include their share of the deemed distribution in income as if it had been distributed to the U.S. stockholder, and the U.S. stockholder will be entitled to claim a credit equal to their allocable share of the tax paid on the deemed distribution by us. The amount of the deemed distribution net of such tax will be added to the U.S. stockholder’s tax basis for their common stock. Since we expect to pay tax on any retained capital gains at our regular corporate tax rate, and since that rate is in excess of the maximum rate currently payable by individuals on long-term capital gains, the amount of tax that individual stockholders will be treated as having paid and for which they will receive a credit will exceed the tax they owe on the retained net capital gain. Such excess generally may be claimed as a credit against the U.S. stockholder’s other U.S. federal income tax obligations or may be refunded to the extent it exceeds a stockholder’s liability for U.S. federal income tax. A stockholder that is not subject to U.S. federal income tax or otherwise required to file a U.S. federal income tax return would be required to file a U.S. federal income tax return on the appropriate form in order to claim a refund for the taxes we paid. In order to utilize the deemed distribution approach, we must provide written notice to our stockholders prior to the expiration of 60 days after the close of the relevant taxable year. We cannot treat any of our investment company taxable income as a “deemed distribution.”
An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from us and net gains from redemptions or other taxable dispositions of our shares) of U.S. individuals, estates, and trusts to the extent that such person’s “modified adjusted gross income” (in the case of an individual) or “adjusted gross income” (in the case of an estate or trust) exceeds certain threshold amounts.
45
Generally, you will be provided with a written notice each year reporting the amount of any (i) ordinary income dividends, and (ii) capital gain dividends. For purposes of determining (1) whether the Annual Distribution Requirement is satisfied for any year and (2) the amount of capital gain dividends paid for that year, we may, under certain circumstances, elect to treat a dividend that is paid during the following taxable year as if it had been paid during the taxable year in question. If we make such an election, the U.S. stockholder will still be treated as receiving the dividend in the taxable year in which the distribution is made. However, if we pay you a dividend in January which was declared in the previous October, November or December to stockholders of record on a specified date in one of these months, then the dividend will be treated for tax purposes as being paid by us and received by you on December 31 of the year in which the dividend was declared. If an investor purchases shares of our stock shortly before the record date of a distribution, the price of the shares will include the value of the distribution and the investor will be subject to tax on the distribution even though it represents a return of its investment.
Certain distributions reported by the Company as Section 163(j) interest dividends may be treated as interest income by shareholders for purposes of the tax rules applicable to interest expense limitations under Section 163(j) of the Code. Such treatment by the shareholder is generally subject to holding period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis. The amount that we are eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of our business interest income over the sum of our (i) business interest expense and (ii) other deductions properly allocable to our business interest income.
Dividend Reinvestment Plan.
Dividend Reinvestment Plan
Dispositions.
61-day
period beginning 30 days before and ending 30 days after the date that the shares are disposed. In this case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Tax Shelter Reporting Regulations.
non-corporate
U.S. stockholder or $10 million or more for a corporate U.S. stockholder in any single taxable year (or a greater loss over a combination of years), the U.S. stockholder must file with the IRS a disclosure statement on Form 8886. Direct U.S. stockholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, U.S. stockholders of a RIC are not excepted. Future guidance may extend the current exception from this 46
reporting requirement to U.S. stockholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. U.S. stockholders should consult their own tax advisers to determine the applicability of these regulations in light of their individual circumstances.
Backup Withholding.
non-corporate
U.S. stockholders who do not furnish us or the dividend-paying agent with their correct taxpayer identification number (in the case of individuals, their social security number) and certain certifications, or who are otherwise subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld from payments made to you may be refunded or credited against your U.S. federal income tax liability, if any, provided that the required information is timely furnished to the IRS. Taxation of
non-U.S. stockholders
The following discussion only applies to certain
non-U.S. stockholders.
Whether an investment in shares of our common stock is appropriate for a non-U.S. stockholder
depends upon that person’s particular circumstances. An investment in shares of our common stock by a non-U.S. stockholder
may have adverse tax consequences. Non-U.S. stockholders
should consult their own tax advisers before investing in shares of our common stock. Actual and Deemed Distributions; Dispositions.
non-U.S. stockholders,
subject to the discussion below, are generally subject to withholding of U.S. federal tax at a 30% rate (or lower rate provided by an applicable treaty) to the extent of our current or accumulated earnings and profits even if they are funded by income or gains (such as portfolio interest, short-term capital gains, or foreign-source dividend and interest income) that, if paid to a non-U.S. stockholder
directly, would not be subject to withholding. If the distributions are effectively connected with a U.S. trade or business of the Non-U.S. stockholder,
we will not be required to withhold federal tax if the Non-U.S. stockholder
complies with applicable certification and disclosure requirements, although the distributions will be subject to U.S. federal income tax at the rates applicable to U.S. persons. (Special certification requirements apply to a Non-U.S. stockholder
that is a foreign partnership or a foreign trust, and such entities are urged to consult their own tax advisers.) We or the applicable withholding agent generally are not required to withhold any amounts with respect to certain distributions of (i) U.S. source interest income, and (ii) net short term capital gains in excess of net long term capital losses, in each case to the extent we properly report such distributions as “interest-related dividends” or “short-term capital gain dividends” and certain other requirements were satisfied. We anticipate that a portion of our distributions will be eligible for this exemption from withholding; however, we cannot determine what portion of our distributions (if any) will be eligible for this exception until after the end of our taxable year. No certainty can be provided that any of our distributions will be reported as eligible for this exception.
If we distribute our net capital gains in the form of deemed rather than actual distributions, a
non-U.S. stockholder
will be entitled to a federal income tax credit or tax refund equal to the stockholder’s allocable share of the tax we pay on the capital gains deemed to have been distributed. In order to obtain the refund, the non-U.S. stockholder
must obtain a U.S. taxpayer identification number and file a federal income tax return even if the non-U.S. stockholder
is not otherwise required to obtain a U.S. taxpayer identification number or file a federal income tax return. For a non-U.S. stockholder,
distributions (both actual and deemed), and gains realized upon the sale of our common stock that are effectively connected with a U.S. trade or business may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate (or at a lower rate if provided for by an applicable tax treaty). Accordingly, investment in shares of our common stock may not be appropriate for certain non-U.S. stockholders.
Dividend Reinvestment Plan.
non-U.S. stockholder
owns shares of common stock registered in its own name, the non-U.S. stockholder
will have all cash distributions 47
automatically reinvested in additional shares of common stock unless it opts out of our dividend reinvestment plan by delivering a written notice to our dividend paying agent prior to the record date of the next dividend or distribution. See “.” If the distribution is a distribution of our investment company taxable income, is not reported by us as a short-term capital gains dividend or interest-related dividend and it is not effectively connected with a U.S. trade or business of the
Dividend Reinvestment Plan
non-U.S. stockholder
(or, if required by an applicable income tax treaty, is not attributable to a U.S. permanent establishment of the non-U.S. stockholder),
the amount distributed (to the extent of our current or accumulated earnings and profits) will be subject to withholding of U.S. federal income tax at a 30% rate (or lower rate provided by an applicable treaty) and only the net after-tax
amount will be reinvested in common stock. The non-U.S. stockholder
will have an adjusted basis in the additional common stock purchased through the plan equal to the amount reinvested. The additional shares will have a new holding period commencing on the day following the day on which the shares are credited to the non-U.S. stockholder’s
account. Backup Withholding.
non-U.S. stockholder
who is a nonresident alien individual, and who is otherwise subject to withholding of federal income tax, will be subject to information reporting, but may not be subject to backup withholding of federal income tax on taxable dividends or distributions if the non-U.S. stockholder
provides us or the dividend paying agent with an IRS Form W-8BEN,
IRS Form W-8BEN-E,
Foreign Account Tax Compliance
Legislation commonly referred to as the “Foreign Account Tax Compliance Act,” or “FATCA”, and the Treasury regulations promulgated thereunder, generally impose a withholding tax of 30% on certain payments of U.S. source interest, dividends and other fixed or determinable annual or periodical gains, profits, and income to foreign financial institutions (“FFIs”) unless such FFIs enter into an agreement with the U.S. Treasury to report certain required information with respect to accounts held by U.S. persons (or held by foreign entities that have U.S. persons as substantial owners), or such FFIs reside in a jurisdiction that has entered into an intergovernmental agreement with the IRS to provide such information and such FFIs comply with the terms of such intergovernmental agreement and any enabling legislation or administrative authority with respect to such intergovernmental agreement. The information required to be reported includes the identity and taxpayer identification number of each account holder that is a U.S. person and transaction activity within the holder’s account. In addition, subject to certain exceptions, this legislation also imposes a 30% withholding on payments to foreign entities that are not financial institutions unless such foreign entities certify that they do not have any greater than 10% U.S. owner or provides the withholding agent with identifying information on each greater than 10% U.S. owner. Depending on the status of a
Non-U.S. Holder
and the status of the intermediaries through which they hold their shares, Non-U.S. Holders
could be subject to this 30% withholding tax with respect to distributions on their shares of our common stock and proceeds from the sale of their shares of our common stock. Under certain circumstances, a Non-U.S. Holder
might be eligible for refunds or credits of such taxes. Each prospective investor is urged to consult its tax adviser regarding the applicability of FATCA and any other reporting requirements with respect to the prospective investor’s own situation, including investments through an intermediary.
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DESCRIPTION OF COMMON STOCK
Please refer to Exhibit 4.7, “Description of Portman Ridge Finance Corporation’s Registered Securities,” to our most recent Annual Report on
Form 10-K,
which is incorporated by reference herein, for a description of our common stock. We urge you to read the applicable prospectus supplement and any related free writing prospectus that we may authorize to be provided to you related to any shares of our capital stock being offered. The number of outstanding shares of our common stock as of November 21, 2024 was 9,201,425. 49
DESCRIPTION OF PREFERRED STOCK
In addition to shares of common stock, our charter authorizes the issuance of preferred stock. If we offer preferred stock under this prospectus, we will issue an appropriate prospectus supplement. We may issue preferred stock from time to time in one or more classes or series, without stockholder approval. Prior to issuance of shares of each class or series, our Board is required by Delaware law and by our charter to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Any such issuance must adhere to the requirements of the 1940 Act, Delaware law and any other limitations imposed by law.
The following is a general description of the terms of the preferred stock we may issue from time to time. Particular terms of any preferred stock we offer will be described in the prospectus supplement relating to such preferred stock.
If we issue preferred stock, it will pay dividends to the holders of the preferred stock at either a fixed rate or a rate that will be reset frequently based on short-term interest rates, as described in a prospectus supplement accompanying each preferred share offering.
You should note that any issuance of preferred stock must comply with the requirements of the 1940 Act. The 1940 Act requires, among other things, that (1) immediately after issuance and before any cash dividend or other distribution is made with respect to our common stock and before any purchase of common stock is made, the liquidation preference of any preferred stock, together with all other senior securities, must not exceed an amount equal to 66
2
/3
% of our total assets after deducting the amount of such dividend, distribution or purchase price, as the case may be, and (2) the holders of shares of preferred stock, if any are issued, must be entitled as a class to elect two directors at all times and to elect a majority of the directors if dividends on such preferred stock are in arrears by two full years or more. In addition, under the 1940 Act, shares of preferred stock must be cumulative as to dividends and have a complete preference over our common stock to payment of their liquidation preference in the event of a dissolution. Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding
preferred
stock. For example, holders of preferred stock would vote separately from the holders of common stock on a proposal to cease operations as a BDC. We believe that the availability for issuance of preferred stock provides us with increased flexibility in structuring future financings and acquisitions. However, we do not currently have any plans to issue preferred stock. For any class or series of preferred stock that we may issue, our Board will determine and the articles supplementary and prospectus supplement relating to such class or series will describe:
| • | the designation and number of shares of such class or series; |
| • | the rate, whether fixed or variable, and time at which, and the preferences and conditions under which, any dividends will be paid on shares of such class or series, as well as whether such dividends are participating or non-participating; |
| • | any provisions relating to convertibility or exchangeability of the shares of such class or series, including adjustments to the conversion price of such class or series; |
| • | the rights and preferences, if any, of holders of shares of such class or series upon our liquidation, dissolution or winding up of our affairs; |
| • | the voting powers, if any, of the holders of shares of such class or series; |
| • | any provisions relating to the redemption of the shares of such class or series; |
| • | any limitations on our ability to pay dividends or make distributions on, or acquire or redeem, other securities while shares of such class or series are outstanding; |
50
| • | any conditions or restrictions on our ability to issue additional shares of such class or series or other securities; |
| • | if applicable, a discussion of certain U.S. federal income tax considerations; and |
| • | any other relative powers, preferences and participating, optional or special rights of shares of such class or series, and the qualifications, limitations or restrictions thereof. |
All shares of preferred stock that we may issue will be identical and of equal rank except as to the particular terms thereof that may be fixed by our Board, and all shares of each class or series of preferred stock will be identical and of equal rank except as to the dates from which dividends, if any, thereon will be cumulative. We urge you to read the applicable prospectus supplement and any free writing prospectus that we may authorize to be provided to you related to any preferred stock being offered, as well as the complete articles supplementary that contain the terms of the applicable class or series of preferred stock.
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DESCRIPTION OF SUBSCRIPTION RIGHTS
General
We may issue subscription rights to our stockholders to purchase common stock. Subscription rights may be issued independently or together with any other offered security and may or may not be transferable by the person purchasing
or
receiving the subscription rights. In connection with a subscription rights offering to our stockholders, we would distribute certificates evidencing the subscription rights and a prospectus supplement to our stockholders on the record date that we set for receiving subscription rights in such subscription rights offering. You should read the prospectus supplement related to any such subscription rights offering. The applicable prospectus supplement would describe the following terms of subscription rights in respect of which this prospectus is being delivered:
| • | the period of time the offering would remain open (which shall be open a minimum number of days such that all record holders would be eligible to participate in the offering and shall not be open longer than 120 days) |
| • | the title of such subscription rights; |
| • | the exercise price for such subscription rights (or method of calculation thereof); |
| • | the ratio of the offering (which, in the case of transferable rights, will require a minimum of three shares to be held of record before a person is entitled to purchase an additional share); |
| • | the number of such subscription rights issued to each stockholder; |
| • | the extent to which such subscription rights are transferable and the market on which they may be traded if they are transferable; |
| • | if applicable, a discussion of certain U.S. federal income tax considerations applicable to the issuance or exercise of such subscription rights; |
| • | the date on which the right to exercise such subscription rights shall commence, and the date on which such right shall expire (subject to any extension); |
| • | the extent to which such subscription rights include an over-subscription privilege with respect to unsubscribed securities and the terms of such over-subscription privilege; |
| • | any termination right we may have in connection with such subscription rights offering; and |
| • | any other terms of such subscription rights, including exercise, settlement and other procedures and limitations relating to the transfer and exercise of such subscription rights. |
Exercise Of Subscription Rights
Each subscription right would entitle the holder of the subscription right to purchase for cash such amount of shares of common stock at such exercise price as shall in each case be set forth in, or be determinable as set forth in, the prospectus supplement relating to the subscription rights offered thereby. Subscription rights may be exercised at any time up to the close of business on the expiration date for such subscription rights set forth in the prospectus supplement. After the close of business on the expiration date, all unexercised subscription rights would become void.
Subscription rights may be exercised as set forth in the prospectus supplement relating to the subscription rights offered thereby. Upon receipt of payment and the subscription rights certificate properly completed and duly executed at the corporate trust office of the subscription rights agent or any other office indicated in the prospectus supplement we will forward, as soon as practicable, the shares of common stock purchasable upon such exercise. To the extent permissible under applicable law, we may determine to offer any unsubscribed
52
offered securities directly to persons other than stockholders, to or through agents, underwriters or dealers or through a combination of such methods, as set forth in the applicable prospectus supplement.
Dilutive Effects
Any stockholder who chooses not to participate in a rights offering should expect to own a smaller interest in us upon completion of such rights offering. Any rights offering will dilute the ownership interest and voting power of stockholders who do not fully exercise their subscription rights. Further, because the net proceeds per share from any rights offering may be lower than our then current NAV per share, the rights offering may reduce our NAV per share. The amount of dilution that a stockholder will experience could be substantial, particularly to the extent we engage in multiple rights offerings within a limited time period. In addition, the market price of our common stock could be adversely affected while a rights offering is ongoing as a result of the possibility that a significant number of additional shares may be issued upon completion of such rights offering. All of our stockholders will also indirectly bear the expenses associated with any rights offering we may conduct, regardless of whether they elect to exercise any rights.
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DESCRIPTION OF WARRANTS
The following is a general description of the terms of the warrants we may issue from time to time. Particular terms of any warrants we offer will be described in the prospectus supplement relating to such warrants. You should read the prospectus supplement related to any warrants offering.
We may issue warrants to purchase shares of our common stock, preferred stock or debt securities. Such warrants may be issued independently or together with shares of common stock, preferred stock or debt securities and may be attached or separate from such securities. We will issue each series of warrants under a separate warrant agreement to be entered into between us and a warrant agent. The warrant agent will act solely as our agent and will not assume any obligation or relationship of agency for or with holders or beneficial owners of warrants.
A prospectus supplement will describe the particular terms of any series of warrants we may issue, including the following:
| • | the aggregate number of such warrants; |
| • | the title of such warrants; |
| • | the price or prices at which such warrants will be issued; |
| • | the currency or currencies, including composite currencies, in which the price of such warrants may be payable; |
| • | if applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued with each such security or each principal amount of such security; |
| • | in the case of warrants to purchase debt securities, the principal amount of debt securities purchasable upon exercise of one warrant and the price at which and the currency or currencies, including composite currencies, in which this principal amount of debt securities may be purchased upon such exercise; |
| • | in the case of warrants to purchase common stock or preferred stock, the number of shares of common stock or preferred stock, as the case may be, purchasable upon exercise of one warrant and the price at which and the currency or currencies, including composite currencies, in which these shares may be purchased upon such exercise; |
| • | the date on which the right to exercise such warrants shall commence and the date on which such right will expire; |
| • | whether such warrants will be issued in registered form or bearer form; |
| • | if applicable, the minimum or maximum amount of such warrants which may be exercised at any one time; |
| • | if applicable, the number of such warrants issued with each security; |
| • | if applicable, the date on and after which such warrants and the related securities will be separately transferable; |
| • | information with respect to book-entry procedures, if any; |
| • | the terms of the securities issuable upon exercise of the warrants; |
| • | if applicable, a discussion of certain U.S. federal income tax considerations; and |
| • | any other terms of such warrants, including terms, procedures and limitations relating to the exchange and exercise of such warrants. |
We and the warrant agent may amend or supplement the warrant agreement for a series of warrants without the consent of the holders of the warrants issued thereunder to effect changes that are not inconsistent with the provisions of the warrants and that do not materially and adversely affect the interests of the holders of the warrants.
Prior to exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including, in the case of warrants to purchase debt securities, the right to receive principal, premium, if any, or interest payments, on the debt securities purchasable upon exercise or to enforce covenants in the applicable indenture or, in the case of warrants to purchase common stock or preferred stock, the right to receive dividends, if any, or payments upon our liquidation, dissolution or winding up or to exercise any voting rights.
Under the 1940 Act, we may generally only offer warrants provided that (1) the warrants expire by their terms within ten years; (2) the exercise or conversion price is not less than the current market value at the date of issuance; (3) our stockholders authorize the proposal to issue such warrants, and our Board approves such issuance on the basis that the issuance is in the best interests of us and our stockholders; and (4) if the warrants are accompanied by other securities, the warrants are not separately transferable unless no class of such warrants and the securities accompanying them has been publicly distributed. The 1940 Act also provides that the amount of our voting securities that would result from the exercise of all outstanding warrants at the time of issuance may not exceed 25.0% of our outstanding voting securities.
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DESCRIPTION OF OUR DEBT SECURITIES
We may issue debt securities in one or more series. The specific terms of each series of debt securities will be described in the particular prospectus supplement relating to that series. The prospectus supplement may or may not modify the general terms found in this prospectus and will be filed with the SEC. We urge you to read the applicable prospectus supplement and any free writing prospectus that we may authorize to be provided to you related to the series of debt securities being offered, as well as the complete indentures that contain the terms of the debt securities.
As required by federal law for all bonds and notes of companies that are publicly offered, the debt securities are governed by a document called an “indenture.” An indenture is a contract between us and the financial institution acting as trustee on your behalf, and is subject to and governed by the Trust Indenture Act of 1939, as amended. The trustee has two main roles. First, the trustee can enforce your rights against us if we default. There are some limitations on the extent to which the trustee acts on your behalf, described in the second paragraph under “.” Second, the trustee performs certain administrative duties for us with respect to the debt securities.
—Events of Default—Remedies if an Event of Default Occurs
This section includes a description of the material provisions of the indenture. Any accompanying prospectus supplement will describe any other material terms of the debt securities being offered thereunder. Because this section is a summary, however, it does not describe every aspect of the debt securities and the indenture. We urge you to read the indenture because it, and not this description, defines your rights as a holder of debt securities. A copy of the form of indenture is attached as an exhibit to the registration statement of which this prospectus is a part. We will file a supplemental indenture with the SEC in connection with any debt offering, at which time the supplemental indenture would be publicly available. See “” for information on how to obtain a copy of the indenture.
Available Information
The prospectus supplement, which will accompany this prospectus, will describe the particular series of debt securities being offered, including among other things:
| • | the designation or title of the series of debt securities; |
| • | the total principal amount of the series of debt securities; |
| • | the percentage of the principal amount at which the series of debt securities will be offered; |
| • | the date or dates on which principal will be payable; |
| • | the rate or rates (which may be either fixed or variable) and/or the method of determining such rate or rates of interest, if any; |
| • | the date or dates from which any interest will accrue, or the method of determining such date or dates, and the date or dates on which any interest will be payable; |
| • | whether any interest may be paid by issuing additional securities of the same series in lieu of cash (and the terms upon which any such interest may be paid by issuing additional securities); |
| • | the terms for redemption, extension or early repayment, if any; |
| • | the currencies in which the series of debt securities are issued and payable; |
| • | whether the amount of payments of principal, premium or interest, if any, on a series of debt securities will be determined with reference to an index, formula or other method (which could be based on one or more currencies, commodities, equity indices or other indices) and how these amounts will be determined; |
| • | the place or places of payment, transfer, conversion and/or exchange of the debt securities; |
| • | the denominations in which the offered debt securities will be issued (if other than $1,000 and any integral multiple thereof); |
| • | the provision for any sinking fund; |
| • | any restrictive covenants; |
| • | any Events of Default (as defined in “ Events of Default |
| • | whether the series of debt securities is issuable in certificated form; |
| • | any provisions for defeasance or covenant defeasance; |
| • | any special federal income tax implications, including, if applicable, federal income tax considerations relating to original issue discount; |
| • | whether and under what circumstances we will pay additional amounts in respect of any tax, assessment or governmental charge and, if so, whether we will have the option to redeem the debt securities rather than pay the additional amounts (and the terms of this option); |
| • | any provisions for convertibility or exchangeability of the debt securities into or for any other securities; |
| • | whether the debt securities are subject to subordination and the terms of such subordination; |
| • | whether the debt securities are secured and the terms of any security interest; |
| • | the listing, if any, on a securities exchange; and |
| • | any other terms. |
The debt securities may be secured or unsecured obligations. Under the provisions of the 1940 Act, we, as a BDC, are permitted to issue debt only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after each issuance of debt, but giving effect to any exemptive relief granted to us by the SEC. For a discussion of risks involved with incurring ad” in our most recent Annual Report on Form
ditio
nal leverage, see “Item 1A. Risk Factors
10-K,
as well as in any of our subsequent SEC filings. Unless the prospectus supplement states otherwise, principal (and premium, if any) and interest, if any, will be paid by us in immediately available funds
. General
The indenture provides that any debt securities proposed to be sold under this prospectus and the accompanying prospectus supplement (“offered debt securities”) and any debt securities issuable upon the exercise of warrants or upon conversion or exchange of other offered securities (“underlying debt securities”) may be issued under the indenture in one or more series.
For purposes of this prospectus, any reference to the payment of principal of, or premium or interest, if any, on, debt securities will include additional amounts if required by the terms of the debt securities.
The indenture does not limit the amount of debt securities that may be issued thereunder from time to time. Debt securities issued under the indenture, when a single trustee is acting for all debt securities issued under the indenture, are called the “indenture securities.” The indenture also provides that there may be more than one trustee thereunder, each with respect to one or more different series of indenture securities. See “—” below. At a time when two or more trustees are acting under the indenture, each with respect to only certain series, the term “indenture securities” means the one or more series of debt securities with respect to which each respective trustee is acting. In the event that there is more than one trustee under the indenture, the powers and trust obligations of each trustee described in this prospectus will extend only to the one or more series of indenture securities for which it is trustee. If two or more trustees are acting under the indenture, then the indenture securities for which each trustee is acting would be treated as if issued under separate indentures.
Resignation of Trustee
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Except as described under “” and “” below, the indenture does not contain any provisions that give you protection in the event we issue a large amount of debt or we are acquired by another entity.
—Events of Default
—Merger or Consolidation
We refer you to the prospectus supplement for information with respect to any deletions from, modifications of or additions to the Events of Default or our covenants, as applicable, that are described below, including any addition of a covenant or other provision providing event risk protection or similar protection.
We have the ability to issue indenture securities with terms different from those of indenture securities previously issued and, without the consent of the holders thereof, to reopen a previous issue of a series of indenture securities and issue additional indenture securities of that series unless the reopening was restricted when that series was created.
Conversion and Exchange
If any debt securities are convertible into or exchangeable for other securities, the prospectus supplement will explain the terms and conditions of the conversion or exchange, including the conversion price or exchange ratio (or the calculation method), the conversion or exchange period (or how the period will be determined), if conversion or exchange will be mandatory or at the option of the holder or us, provisions for adjusting the conversion price or the exchange ratio, and provisions affecting conversion or exchange in the event of the redemption of the underlying debt securities. These terms may also include provisions under which the number or amount of other securities to be received by the holders of the debt securities upon conversion or exchange would be calculated according to the market price of the other securities as of a time stated in the prospectus supplement.
Issuance of Securities in Registered Form
We may issue the debt securities in registered form, in which case we may issue them either in book-entry form only or in “certificated” form. Debt securities issued in book-entry form will be represented by global securities. We expect that we will usually issue debt securities in book-entry only form represented by global securities.
Book-Entry Holders
We will issue registered debt securities in book-entry form only, unless we specify otherwise in the applicable prospectus supplement. This means debt securities will be represented by one or more global securities registered in the name of a depositary that will hold them on behalf of financial institutions that participate in the depositary’s book-entry system. These participating institutions, in turn, hold beneficial interests in the debt securities held by the depositary or its nominee. These institutions may hold these interests on behalf of themselves or customers.
Under the indenture, only the person in whose name a debt security is registered is recognized as the holder of that debt security. Consequently, for debt securities issued in book-entry form, we will recognize only the depositary as the holder of the debt securities and we will make all payments on the debt securities to the depositary. The depositary will then pass along the payments it receives to its participants, which in turn will pass the payments along to their customers who are the beneficial owners. The depositary and its participants do so under agreements they have made with one another or with their customers; they are not obligated to do so under the terms of the debt securities.
As a result, investors will not own debt securities directly. Instead, they will own beneficial interests in a global security, through a bank, broker or other financial institution that participates in the depositary’s book-entry system or holds an interest through a participant. As long as the debt securities are represented by one or more global securities, investors will be indirect holders, and not holders, of the debt securities.
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Street Name Holders
In the future, we may issue debt securities in certificated form or terminate a global security. In these cases, investors may choose to hold their debt securities in their own names or in “street name.” Debt securities held in street name are registered in the name of a bank, broker or other financial institution chosen by the investor, and the investor would hold a beneficial interest in those debt securities through the account he or she maintains at that institution.
For debt securities held in street name, we will recognize only the intermediary banks, brokers and other financial institutions in whose names the debt securities are registered as the holders of those debt securities, and we will make all payments on those debt securities to them. These institutions will pass along the payments they receive to their customers who are the beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required to do so. Investors who hold debt securities in street name will be indirect holders, and not holders, of the debt securities.
Legal Holders
Our obligations, as well as the obligations of the applicable trustee and those of any third parties employed by us or the applicable trustee, run only to the legal holders of the debt securities. We do not have obligations to investors who hold beneficial interests in global securities, in street name or by any other indirect means. This will be the case whether an investor chooses to be an indirect holder of a debt security or has no choice because we are issuing the debt securities only in book-entry form.
For example, once we make a payment or give a notice to the holder, we have no further responsibility for the payment or notice even if that holder is required, under agreements with depositary participants or customers or by law, to pass it along to the indirect holders but does not do so. Similarly, if we want to obtain the approval of the holders for any purpose (for example, to amend an indenture or to relieve us of the consequences of a default or of our obligation to comply with a particular provision of an indenture), we would seek the approval only from the holders, and not the indirect holders, of the debt securities. Whether and how the holders contact the indirect holders is up to the holders.
When we refer to you in this “” section, we mean those who invest in the debt securities being offered by this prospectus, whether they are the holders or only indirect holders of those debt securities. When we refer to your debt securities, we mean the debt securities in which you hold a direct or indirect interest.
Description of Our Debt Securities
Special Considerations for Indirect Holders
If you hold debt securities through a bank, broker or other financial institution, either in book-entry form or in street name, we urge you to check with that institution to find out:
| • | how it handles securities payments and notices; |
| • | whether it imposes fees or charges; |
| • | how it would handle a request for the holders’ consent, if ever required; |
| • | whether and how you can instruct it to send you debt securities registered in your own name so you can be a holder, if that is permitted in the future for a particular series of debt securities; |
| • | how it would exercise rights under the debt securities if there were a default or other event triggering the need for holders to act to protect their interests; and |
| • | if the debt securities are in book-entry form, how the depositary’s rules and procedures will affect these matters. |
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Global Securities
As noted above, we usually will issue debt securities as registered securities in book-entry form only. A global security represents one or any other number of individual debt securities. Generally, all debt securities represented by the same global securities will have the same terms.
Each debt security issued in book-entry form will be represented by a global security that we deposit with and register in the name of a financial institution or its nominee that we select. The financial institution that we select for this purpose is called the depositary. Unless we specify otherwise in the applicable prospectus supplement, The Depository Trust Company, New York, New York, known as “DTC”, will be the depositary for all debt securities issued in book-entry form.
A global security may not be transferred to or registered in the name of anyone other than the depositary or its nominee, unless special termination situations arise. We describe those situations below under “As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner and holder of all debt securities represented by a global security, and investors will be permitted to own only beneficial interests in a global security. Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in turn has an account with the depositary or with another institution that has an account with the depositary. Thus, an investor whose security is represented by a global security will not be a holder of the debt security, but only an indirect holder of a beneficial interest in the global security.
—Termination of a Global Security.”
Special Considerations for Global Securities
As an indirect holder, an investor’s rights relating to a global security will be governed by the account rules of the investor’s financial institution and of the depositary, as well as general laws relating to securities transfers. The depositary that holds the global security will be considered the holder of the debt securities represented by the global security.
If debt securities are issued only in the form of a global security, an investor should be aware of the following:
| • | an investor cannot cause the debt securities to be registered in his, her or its name and cannot obtain certificates for his, her or its interest in the debt securities, except in the special situations we describe below; |
| • | an investor will be an indirect holder and must look to his, her or its own bank or broker for payments on the debt securities and protection of his, her or its legal rights relating to the debt securities, as we describe under “ —Issuance of Securities in Registered Form |
| • | an investor may not be able to sell interests in the debt securities to some insurance companies and other institutions that are required by law to own their securities in non-book-entry form; |
| • | an investor may not be able to pledge his, her or its interest in a global security in circumstances where certificates representing the debt securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective; |
| • | the depositary’s policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating to an investor’s interest in a global security. We and the trustee have no responsibility for any aspect of the depositary’s actions or for its records of ownership interests in a global security. We and the trustee also do not supervise the depositary in any way; |
| • | if we redeem less than all the debt securities of a particular series being redeemed, DTC’s practice is to determine by lot the amount to be redeemed from each of its participants holding that series; |
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| • | an investor is required to give notice of exercise of any option to elect repayment of its debt securities, through its participant, to the applicable trustee and to deliver the related debt securities by causing its participant to transfer its interest in those debt securities, on DTC’s records, to the applicable trustee; |
| • | DTC requires that those who purchase and sell interests in a global security deposited in its book-entry system use immediately available funds; your broker or bank may also require you to use immediately available funds when purchasing or selling interests in a global security; and |
| • | financial institutions that participate in the depositary’s book-entry system, and through which an investor holds its interest in a global security, may also have their own policies affecting payments, notices and other matters relating to the debt securities; there may be more than one financial intermediary in the chain of ownership for an investor; we do not monitor, nor are we responsible for the actions of, any of those intermediaries. |
Termination of a Global Security
If a global security is terminated for any reason, interests in it will be exchanged for certificates in ” above.
non-book-entry
form (certificated securities). After that exchange, the choice of whether to hold the certificated debt securities directly or in street name will be up to the investor. Investors must consult their own banks or brokers to find out how to have their interests in a global security transferred on termination to their own names, so that they will be holders. We have described the rights of legal holders and street name investors under “—Issuance of Securities in Registered Form
The prospectus supplement may list situations for terminating a global security that would apply only to the particular series of debt securities covered by the prospectus supplement. If a global security is terminated, only the depositary, and not us or the applicable trustee, is responsible for deciding the investors in whose names the debt securities represented by the global security will be registered and, therefore, who will be the holders of those debt securities.
Payment and Paying Agents
We will pay interest to the person listed in the applicable trustee’s records as the owner of the debt security at the close of business on a particular day in advance of each due date for interest, even if that person no longer owns the debt security on the interest due date. That day, usually about two weeks in advance of the interest due date, is called the “record date.” Since we will pay all the interest for an interest period to the holders on the record date, holders buying and selling debt securities must work out between themselves the appropriate purchase price. The most common manner is to adjust the sales price of the debt securities to prorate interest fairly between buyer and seller based on their respective ownership periods within the particular interest period. This prorated interest amount is called “accrued interest.”
Payments on Global Securities
We will make payments on a global security in accordance with the applicable policies of the depositary as in effect from time to time. Under those policies, we will make payments directly to the depositary, or its nominee, and not to any indirect holders who own beneficial interests in the global security. An indirect holder’s right to those payments will be governed by the rules and practices of the depositary and its participants, as described under “.”
—Special Considerations for Global Securities
Payments on Certificated Securities
We will make payments on a certificated debt security as follows. We will pay interest that is due on an interest payment date to the holder of debt securities as shown on the trustee’s records as of the close of business
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on the regular record date at our office and/or at other offices that may be specified in the prospectus supplement. We will make all payments of principal and premium, if any, by check at the office of the applicable trustee in New York, New York and/or at other offices that may be specified in the prospectus supplement or in a notice to holders against surrender of the debt security.
Alternatively, at our option, we may pay any cash interest that becomes due on the debt security by mailing a check to the holder at his, her, or its address shown on the trustee’s records as of the close of business on the regular record date or by transfer to an account at a bank in the United States, in either case, on the due date.
Payment When Offices Are Closed
If any payment is due on a debt security on a day that is not a business day, we will make the payment on the next day that is a business day. Payments made on the next business day in this situation will be treated under the indenture as if they were made on the original due date, except as otherwise indicated in the attached prospectus supplement. Such payment will not result in a default under any debt security or the indenture, and no interest will accrue on the payment amount from the original due date to the next day that is a business day.
Book-entry and other indirect holders should consult their banks or brokers for information on how they will receive payments on their debt securities.
Events of Default
You will have rights if an Event of Default occurs in respect of the debt securities of your series and is not cured, as described later in this subsection.
The term “Event of Default” in respect of the debt securities of your series means any of the following:
| • | we do not pay the principal of (or premium, if any, on) a debt security of the series within five days of its due date; |
| • | we do not pay interest on a debt security of the series within 30 days of its due date; |
| • | we do not deposit any sinking fund payment in respect of debt securities of the series within five days of its due date; |
| • | we remain in breach of a covenant in respect of debt securities of the series for 60 days after we receive a written notice of default stating we are in breach (the notice must be sent by either the trustee or holders of at least 25.0% of the principal amount of debt securities of the series); |
| • | we voluntarily file for bankruptcy or consent to the commencement of certain other events of bankruptcy, insolvency or reorganization; |
| • | a court of competent jurisdiction enters an order or decree under bankruptcy law that is for relief against us in an involuntary case or proceeding, adjudges us bankrupt or insolvent or orders the winding up or liquidation of us and the continuance of any such decree or order remains undischarged or unstayed for a period of 90 days; |
| • | the series of debt securities has an asset coverage, as such term is defined in the 1940 Act, of less than 100.0% on the last business day of each of 24 consecutive calendar months, giving effect to any exemptive relief granted to us by the SEC; or |
| • | any other Event of Default in respect of debt securities of the series described in the prospectus supplement occurs. |
An Event of Default for a particular series of debt securities does not necessarily constitute an Event of Default for any other series of debt securities issued under the same or any other indenture. The trustee may
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withhold notice to the holders of debt securities of any default, except in the payment of principal, premium, interest, or sinking or purchase fund installment, if it in good faith considers the withholding of notice to be in the interest of the holders.
Remedies if an Event of Default Occurs
If an Event of Default has occurred and is continuing, the trustee or the holders of not less than 25.0% in principal amount of the outstanding debt securities of the affected series may (and the trustee shall at the request of such holders) declare the entire principal amount of all the outstanding debt securities of that series to be due and immediately payable by a notice in writing to us (and to the trustee if given by such holders). This is called a declaration of acceleration of maturity. A declaration of acceleration of maturity may be canceled by the holders of a majority in principal amount of the outstanding debt securities of the affected series if (1) we have deposited with the trustee all amounts due and owing with respect to the securities (other than principal that has become due solely by reason of such acceleration) and certain other amounts, and (2) any other Events of Default have been cured or waived.
The trustee is not required to take any action under the indenture at the request of any holders unless the holders offer the trustee protection from expenses and liability reasonably satisfactory to it (called an “indemnity”). If indemnity reasonably satisfactory to the trustee is provided, the holders of a majority in principal amount of the outstanding debt securities of the relevant series may direct the time, method and place of conducting any lawsuit or other formal legal action seeking any remedy available to the trustee. The trustee may refuse to follow those directions in certain circumstances. No delay or omission in exercising any right or remedy will be treated as a waiver of that right, remedy or Event of Default.
Before you are allowed to bypass your trustee and bring your own lawsuit or other formal legal action or take other steps to enforce your rights or protect your interests relating to the debt securities, the following must occur:
| • | you must give the trustee written notice that an Event of Default with respect to the relevant series of debt securities has occurred and remains uncured; |
| • | the holders of at least 25.0% in principal amount of all outstanding debt securities of the relevant series must make a written request that the trustee take action because of the default and must offer indemnity, security, or both reasonably satisfactory to the trustee against the costs, expenses, and other liabilities of taking that action; |
| • | the trustee must not have taken action for 60 days after receipt of the above notice and offer of indemnity and/or security; and |
| • | the holders of a majority in principal amount of the outstanding debt securities of that series must not have given the trustee a direction inconsistent with the above notice during that 60-day period. |
However, you are entitled at any time to bring a lawsuit for the payment of money due on your debt securities on or after the due date.
Book-entry and other indirect holders should consult their banks or brokers for information on how to give notice or direction to or make a request of the trustee and how to declare or cancel an acceleration of maturity.
Each year, we will furnish to each trustee a written statement of certain of our officers certifying that to their knowledge we are in compliance with the indenture and the debt securities, or else specifying any default.
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Waiver of Default
Holders of a majority in principal amount of the outstanding debt securities of the affected series may waive any past defaults other than a default:
| • | in the payment of principal, any premium or interest; or |
| • | in respect of a covenant that cannot be modified or amended without the consent of each holder. |
Merger or Consolidation
Under the terms of the indenture, we are generally permitted to consolidate or merge with another entity. We are also permitted to sell all or substantially all of our assets to another entity. However, we may not take any of these actions unless all the following conditions are met:
| • | where we merge out of existence or sell substantially all of our assets, the resulting entity or transferee must agree to be legally responsible for our obligations under the debt securities; |
| • | the merger or sale of assets must not cause a default on the debt securities and we must not already be in default (unless the merger or sale would cure the default). For purposes of this no-default test, a default would include an Event of Default that has occurred and has not been cured, as described under “Events of Default |
| • | we must deliver certain certificates and documents to the trustee; and |
| • | we must satisfy any other requirements specified in the prospectus supplement relating to a particular series of debt securities. |
Modification or Waiver
There are three types of changes we can make to the indenture and the debt securities issued thereunder.
Changes Requiring Your Approval
First, there are changes that we cannot make to your debt securities without your specific approval. The following is a list of those types of changes:
| • | change the stated maturity of the principal of or interest on a debt security or the terms of any sinking fund with respect to any security; |
| • | reduce any amounts due on a debt security; |
| • | reduce the amount of principal payable upon acceleration of the maturity of an original issue discount or indexed security following a default or upon the redemption thereof or the amount thereof provable in a bankruptcy proceeding; |
| • | adversely affect any right of repayment at the holder’s option; |
| • | change the place or currency of payment on a debt security (except as otherwise described in the prospectus or prospectus supplement); |
| • | impair your right to sue for payment; |
| • | adversely affect any right to convert or exchange a debt security in accordance with its terms; |
| • | modify the subordination provisions in the indenture in a manner that is adverse to outstanding holders of the debt securities; |
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| • | reduce the percentage of holders of debt securities whose consent is needed to modify or amend the indenture; |
| • | reduce the percentage of holders of debt securities whose consent is needed to waive compliance with certain provisions of the indenture or to waive certain defaults; |
| • | modify any other aspect of the provisions of the indenture dealing with supplemental indentures with the consent of holders, waiver of past defaults, changes to the quorum or voting requirements or the waiver of certain covenants; and |
| • | change any obligation we have to pay additional amounts. |
Changes Not Requiring Approval
The second type of change does not require any vote by the holders of the debt securities. This type is limited to clarifications, establishment of the form or terms of new securities of any series as permitted by the indenture and certain other changes that would not adversely affect holders of the outstanding debt securities in any material respect. We also do not need any approval to make any change that affects only debt securities to be issued under the indenture after the change takes effect.
Changes Requiring Majority Approval
Any other change to the indenture and the debt securities would require the following approval:
| • | if the change affects only one series of debt securities, it must be approved by the holders of a majority in principal amount of that series; and |
| • | if the change affects more than one series of debt securities issued under the same indenture, it must be approved by the holders of a majority in principal amount of all of the series affected by the change, with all affected series voting together as one class for this purpose. |
In each case, the required approval must be given by written consent.
The holders of a majority in principal amount of a series of debt securities issued under the indenture, voting together as one class for this purpose, may waive our compliance with some of the covenants applicable to that series of debt securities. However, we cannot obtain a waiver of a payment default or of any of the matters covered by the bullet points included above under “.”
—Changes Requiring Your Approval
Further Details Concerning Voting
When taking a vote, we will use the following rules to decide how much principal to attribute to a debt security:
| • | for original issue discount securities, we will use the principal amount that would be due and payable on the voting date if the maturity of these debt securities were accelerated to that date because of a default; |
| • | for debt securities whose principal amount is not known (for example, because it is based on an index), we will use the principal face amount at original issuance or a special rule for that debt security described in the prospectus supplement; and |
| • | for debt securities denominated in one or more foreign currencies, we will use the U.S. dollar equivalent. |
Debt securities will not be considered outstanding, and therefore not eligible to vote, if we have deposited or set aside in trust money for their payment or redemption or if we, any other obligor, or any affiliate of us or any obligor own such debt securities. Debt securities will also not be eligible to vote if they have been fully defeased as described later under “”.
—Defeasance—Full Defeasance
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We will generally be entitled to set any day as a record date for the purpose of determining the holders of outstanding indenture securities that are entitled to vote or take other action under the indenture. However, the record date may not be more than 30 days before the date of the first solicitation of holders to vote on or take such action. If we set a record date for a vote or other action to be taken by holders of one or more series, that vote or action may be taken only by persons who are holders of outstanding indenture securities of those series on the record date and must be taken within 11 months following the record date.
Book-entry and other indirect holders should consult their banks or brokers for information on how approval may be granted or denied if we seek to change the indenture or the debt securities or request a waiver.
Defeasance
The following provisions will be applicable to each series of debt securities unless we state in the applicable prospectus supplement that the provisions of covenant defeasance and full defeasance will not be applicable to that series.
Covenant Defeasance
Under current U.S. federal tax law and the indenture, we can make the deposit described below and be released from some of the restrictive covenants in the indenture under which the particular series was issued. This is called “covenant defeasance”. In that event, you would lose the protection of those restrictive covenants but would gain the protection of having money and government securities set aside in trust to repay your debt securities. If we achieved covenant defeasance and your debt securities were subordinated as described under “” below, such subordination would not prevent the trustee under the indenture from applying the funds available to it from the deposit described in the first bullet below to the payment of amounts due in respect of such debt securities for the benefit of the subordinated debt holders. In order to achieve covenant defeasance, the following must occur:
—Indenture Provisions—Subordination
| • | we must deposit in trust for the benefit of all holders of a series of debt securities a combination of cash (in such currency in which such securities are then specified as payable at stated maturity) or government obligations applicable to such securities (determined on the basis of the currency in which such securities are then specified as payable at stated maturity) that will generate enough cash to make interest, principal and any other payments on the debt securities on their various due dates and any mandatory sinking fund payments or analogous payments; |
| • | we must deliver to the trustee a legal opinion of our counsel confirming that, under current U.S. federal income tax law, we may make the above deposit without causing you to be taxed on the debt securities any differently than if we did not make the deposit; |
| • | we must deliver to the trustee a legal opinion of our counsel stating that the above deposit does not require registration by us under the 1940 Act and a legal opinion and officers’ certificate stating that all conditions precedent to covenant defeasance have been complied with; |
| • | defeasance must not result in a breach or violation of, or result in a default under, of the indenture or any of our other material agreements or instruments, as applicable; |
| • | no default or event of default with respect to such debt securities shall have occurred and be continuing and no defaults or events of default related to bankruptcy, insolvency or reorganization shall occur during the next 90 days; and |
| • | satisfy the conditions for covenant defeasance contained in any supplemental indentures. |
If we accomplish covenant defeasance, you can still look to us for repayment of the debt securities if there were a shortfall in the trust deposit or the trustee is prevented from making payment. For example, if one of the
66
remaining Events of Default occurred (such as our bankruptcy) and the debt securities became immediately due and payable, there might be such a shortfall. However, there is no assurance that we would have sufficient funds to make payment of the shortfall.
Full Defeasance
If there is a change in U.S. federal tax law or we obtain an IRS ruling, as described in the second bullet below, we can legally release ourself from all payment and other obligations on the debt securities of a particular series (called “full defeasance”) if we put in place the following other arrangements for you to be repaid:
| • | we must deposit in trust for the benefit of all holders of a series of debt securities a combination of cash (in such currency in which such securities are then specified as payable at stated maturity) or government obligations applicable to such securities (determined on the basis of the currency in which such securities are then specified as payable at stated maturity) that will generate enough cash to make interest, principal and any other payments on the debt securities on their various due dates and any mandatory sinking fund payments or analogous payments; |
| • | we must deliver to the trustee a legal opinion confirming that there has been a change in current U.S. federal tax law or an IRS ruling that allows us to make the above deposit without causing you to be taxed on the debt securities any differently than if we did not make the deposit. Under current U.S. federal tax law, the deposit and our legal release from the debt securities would be treated as though we paid you your share of the cash and notes or bonds at the time the cash and notes or bonds were deposited in trust in exchange for your debt securities and you would recognize gain or loss on the debt securities at the time of the deposit; |
| • | we must deliver to the trustee a legal opinion of our counsel stating that the above deposit does not require registration by us under the 1940 Act and a legal opinion and officers’ certificate stating that all conditions precedent to defeasance have been complied with; |
| • | defeasance must not result in a breach or violation of, or constitute a default under, of the indenture or any of our other material agreements or instruments, as applicable; |
| • | no default or event of default with respect to such debt securities shall have occurred and be continuing and no defaults or events of default related to bankruptcy, insolvency or reorganization shall occur during the next 90 days; and |
| • | satisfy the conditions for full defeasance contained in any supplemental indentures. |
If we ever did accomplish full defeasance, as described above, you would have to rely solely on the trust deposit for repayment of the debt securities. You could not look to us for repayment in the unlikely event of any shortfall. Conversely, the trust deposit would most likely be protected from claims of our lenders and other creditors, as applicable, if we ever became bankrupt or insolvent. If your debt securities were subordinated as described later under “”, such subordination would not prevent the trustee under the indenture from applying the funds available to it from the deposit referred to in the first bullet of the preceding paragraph to the payment of amounts due in respect of such debt securities for the benefit of the subordinated debt holders.
—Indenture Provisions—Subordination
Form, Exchange and Transfer of Certificated Registered Securities
If registered debt securities cease to be issued in book-entry form, they will be issued:
| • | only in fully registered certificated form; |
| • | without interest coupons; and |
| • | unless we indicate otherwise in the prospectus supplement, in denominations of $1,000 and amounts that are multiples of $1,000. |
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Holders may exchange their certificated securities for debt securities of smaller denominations or combined into fewer debt securities of larger denominations, as long as the total principal amount is not changed and as long as the denomination is greater than the minimum denomination for such securities.
Holders may exchange or transfer their certificated securities at the office of the trustee. We have appointed the trustee to act as our agent for registering debt securities in the names of holders transferring debt securities. We may appoint another entity to perform these functions or perform them ourself.
Holders will not be required to pay a service charge to transfer or exchange their certificated securities, but they may be required to pay any tax or other governmental charge associated with the transfer or exchange. The transfer or exchange will be made only if our transfer agent, as applicable, is satisfied with the holder’s proof of legal ownership.
If we have designated additional transfer agents for your debt security, they will be named in the prospectus supplement. We may appoint additional transfer agents or cancel the appointment of any particular transfer agent. We may also approve a change in the office through which any transfer agent acts.
If any certificated securities of a particular series are redeemable and we redeem less than all the debt securities of that series, we may block the transfer or exchange of those debt securities during the period beginning 15 days before the day we mail the notice of redemption and ending on the day of that mailing, in order to freeze the list of holders to prepare the mailing. We may also refuse to register transfers or exchanges of any certificated securities selected for redemption, except that we will continue to permit transfers and exchanges of the unredeemed portion of any debt security that will be partially redeemed.
If a registered debt security is issued in book-entry form, only the depositary will be entitled to transfer and exchange the debt security as described in this subsection, since it will be the sole holder of the debt security.
Resignation of Trustee
Each trustee may resign or be removed with respect to one or more series of indenture securities provided that a successor trustee is appointed to act with respect to these series and has accepted such appointment. In the event that two or more persons are acting as trustee with respect to different series of indenture securities under the indenture, each of the trustees will be a trustee of a trust separate and apart from the trust administered by any other trustee.
Indenture Provisions—Subordination
Upon any distribution of our assets upon our dissolution, winding up, liquidation or reorganization, the payment of the principal of (and premium, if any) and interest, if any, on any indenture securities denominated as subordinated debt securities is to be subordinated to the extent provided in the indenture in right of payment to the prior payment in full of all Senior Indebtedness (as defined below), but our obligation to you to make payment of the principal of (and premium, if any) and interest, if any, on such subordinated debt securities will not otherwise be affected. In addition, no payment on account of principal (or premium, if any), sinking fund or interest, if any, may be made on such subordinated debt securities at any time unless full payment of all amounts due in respect of the principal (and premium, if any), sinking fund and interest on Senior Indebtedness has been made or duly provided for in money or money’s worth.
In the event that, notwithstanding the foregoing, any payment by us is received by the trustee in respect of subordinated debt securities or by the holders of any of such subordinated debt securities, upon our dissolution, winding up, liquidation or reorganization before all Senior Indebtedness is paid in full, the payment or distribution must be paid over to the holders of the Senior Indebtedness or on their behalf for application to the payment of all the Senior Indebtedness remaining unpaid until all the Senior Indebtedness has been paid in full,
68
after giving effect to any concurrent payment or distribution to the holders of the Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness upon this distribution by us, the holders of such subordinated debt securities will be subrogated to the rights of the holders of the Senior Indebtedness to the extent of payments made to the holders of the Senior Indebtedness out of the distributive share of such subordinated debt securities.
By reason of this subordination, in the event of a distribution of our assets upon our insolvency, certain of our senior creditors may recover more, ratably, than holders of any subordinated debt securities or the holders of any indenture securities that are not Senior Indebtedness. The indenture provides that these subordination provisions will not apply to money and securities held in trust under the defeasance provisions of the indenture.
Senior Indebtedness is defined in the indenture as the principal of (and premium, if any) and unpaid interest on:
| • | our indebtedness (including indebtedness of others guaranteed by us), whenever created, incurred, assumed or guaranteed, for money borrowed that we have designated as “Senior Indebtedness” for purposes of the indenture and in accordance with the terms of the indenture (including any indenture securities designated as Senior Indebtedness), and |
| • | renewals, extensions, modifications and refinancings of any of this indebtedness. |
If this prospectus is being delivered in connection with the offering of a series of indenture securities denominated as subordinated debt securities, the accompanying prospectus supplement will set forth the approximate amount of our Senior Indebtedness and of our other indebtedness outstanding as of a recent date.
Secured Indebtedness and Ranking
Certain of our indebtedness, including certain series of indenture securities, may be secured. The prospectus supplement for each series of indenture securities will describe the terms of any security interest for such series and will indicate the approximate amount of our secured indebtedness as of a recent date. Any unsecured indenture securities will effectively rank junior to any secured indebtedness, including any secured indenture securities, that we incur in the future to the extent of the value of the assets securing such future secured indebtedness. The debt securities, whether secured or unsecured, will rank structurally junior to all existing and future indebtedness (including trade payables) incurred by any subsidiaries, financing vehicles, or similar facilities we may have.
In the event of our bankruptcy, liquidation, reorganization or other winding up any of our assets that secure secured debt will be available to pay obligations on unsecured debt securities only after all indebtedness under such secured debt has been repaid in full from such assets. We advise you that there may not be sufficient assets remaining to pay amounts due on any or all unsecured debt securities then outstanding after fulfillment of this obligation. As a result, the holders of unsecured indenture securities may recover less, ratably, than holders of any of our secured indebtedness.
The Trustee under the Indenture
U.S. Bank National Association serves as the trustee under the indenture.
69
REGULATION
We are subject to regulation as described in “” of our most recent Annual Report on
Item
1. Business — Regulation
Form 10-K,
which is incorporated by reference herein. 70
PLAN OF DISTRIBUTION
We may offer from time to time, in one or more offerings or series, up to $500,000,000 of our common stock, preferred stock, debt securities, subscription rights to purchase shares of our common stock, and/or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, in one or more underwritten public offerings, offerings, negotiated transactions, block trades, best efforts offerings or a combination of these methods.
at-the-market
We may sell the securities through underwriters or dealers, directly to one or more purchasers, including existing stockholders in a rights offering by us, through agents or through a combination of any such methods of sale. In the case of a rights offering, the applicable prospectus supplement will set forth the number of shares of our common stock issuable upon the exercise of each right and the other terms of such rights offering. Any underwriter or agent involved in the offer and sale of the securities will be named in the applicable prospectus supplement. A prospectus supplement or supplements will also describe the terms of the offering of the securities, including: the purchase price of the securities and the proceeds we will receive from the sale; any over-allotment options under which underwriters may purchase additional securities from us; any agency fees or underwriting discounts and other items constituting agents’ or underwriters’ compensation; the public offering price; any discounts or concessions allowed or
re-allowed
or paid to dealers; and any securities exchange or market on which the securities may be listed. Only underwriters named in the prospectus supplement will be underwriters of the securities offered by the prospectus supplement. The distribution of the securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at prevailing market prices at the time of sale, at prices related to such prevailing market prices, or at negotiated prices, provided, however, that the offering price per share of common stock, less any underwriting commissions and discounts or agency fees paid, must equal or exceed the NAV per share of our common stock at the time of the offering except (i) in connection with a rights offering to our existing stockholders, (ii) with the prior approval of the majority (as defined in the 1940 Act) of our common stockholders, or (iii) under such other circumstances as the SEC may permit. Any offering of securities by us that requires the consent of the majority of our common stockholders, must occur, if at all, within one year after receiving such consent. The price at which the securities may be distributed may represent a discount from prevailing market prices.
In connection with the sale of our securities, underwriters or agents may receive compensation from us or from purchasers of our securities, for whom they may act as agents, in the form of discounts, concessions or commissions. Our common stockholders will bear, directly or indirectly, such expenses payable by us, as well as any other fees and the expenses incurred by us in connection with any offering of the securities, including debt securities.
Underwriters may sell our securities to or through dealers and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters, dealers and agents that participate in the distribution of our securities may be deemed to be underwriters under the Securities Act, and any discounts and commissions they receive from us and any profit realized by them on the resale of our securities may be deemed to be underwriting discounts and commissions under the Securities Act. Any such underwriter or agent will be identified and any such compensation received from us will be described in the applicable prospectus supplement.
Any underwriter may engage in over-allotment, stabilizing transactions, short-covering transactions and penalty bids in accordance with Regulation M under the Exchange Act in connection with an offering of our securities. Over-allotment involves sales in excess of the offering size, which create a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum price. Syndicate-covering or other short-covering transactions involve purchases of the securities, either through exercise of the over-allotment option or in the open market after the distribution is completed, to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased in a stabilizing or covering transaction to
71
cover short positions. Those activities may cause the price of the securities to be higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time.
Any underwriters that are qualified market makers on the NASDAQ may engage in passive market-making transactions in our common stock, preferred stock, subscription rights, warrants or debt securities, as applicable, on the NASDAQ in accordance with Regulation M under the Exchange Act, during the business day prior to the pricing of the offering, before the commencement of offers or sales of the securities. Passive market makers must comply with applicable volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded.
We may sell securities directly or through agents we designate from time to time. We will name any agent involved in the offering and sale of securities and we will describe any commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our agent will act on a best-efforts basis for the period of its appointment.
Unless otherwise specified in the applicable prospectus supplement, each class or series of securities will be a new issue with no trading market, other than our common stock, which is listed on the NASDAQ under the symbol “PTMN”. We may elect to list any other class or series of securities on any exchanges, but we are not obligated to do so. We cannot guarantee the liquidity of the trading markets for any securities.
Under agreements into which we may enter, underwriters, dealers and agents who participate in the distribution of our securities may be entitled to indemnification by us against certain liabilities, including liabilities under the Securities Act, or contribution with respect to payments that the agents or underwriters may make with respect to these liabilities. Underwriters, dealers and agents may engage in transactions with, or perform services for, us in the ordinary course of business.
If so indicated in the applicable prospectus supplement, we will authorize underwriters or other persons acting as our agents to solicit offers by certain institutions to purchase our securities from us pursuant to contracts providing for payment and delivery on a future date. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such institutions must be approved by us. The obligations of any purchaser under any such contract will be subject to the condition that the purchase of our securities shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject. The underwriters and such other agents will not have any responsibility in respect of the validity or performance of such contracts. Such contracts will be subject only to those conditions set forth in the prospectus supplement, and the prospectus supplement will set forth the commission payable for solicitation of such contracts.
We may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by us or borrowed from us or others to settle those sales or to close out any related open borrowings of stock, and may use securities received from us in settlement of those derivatives to close out any related open borrowings of stock. The third parties in such sale transactions will be underwriters and, if not identified in this prospectus, will be identified in the applicable prospectus supplement (or a post-effective amendment).
In order to comply with the securities laws of certain states, if applicable, our securities offered hereby will be sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states, our securities may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
72
CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR
Our assets are held by U.S. Bank National Association pursuant to a custody agreement. The principal business address of U.S. Bank National Association is One Federal Street, 3rd Floor, Boston, Massachusetts 02110. Equiniti Trust Company, LLC, serves as our transfer agent, registrar and dividend disbursing agent, pursuant to a transfer agency and registrar services agreement. The principal business address of Equiniti Trust Company, LLC, is 48 Wall Street, 23
rd
floor New York, New York, 10043. U.S. Bank National Association serves as our trustee under an indenture and the third supplemental indenture thereto relating to the 2026 Notes, is the paying agent, registrar and transfer agent relating to the 2026 Notes. The principal business address of U.S. Bank National Association is One Federal Street, 10th Floor, Boston, MA 02110.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Since we will generally acquire and dispose of investments in privately negotiated transactions, we will infrequently use brokers in the normal course of our business. Subject to policies established by our Board, our Adviser will be primarily responsible for the execution of the publicly traded securities portion of our portfolio transactions and the allocation of brokerage commissions. Our Adviser does not expect to execute transactions through any particular broker or dealer, but will seek to obtain the best net results for us, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities. While our Adviser generally will seek reasonably competitive trade execution costs, we will not necessarily pay the lowest spread or commission available. Subject to applicable legal requirements, our Adviser may select a broker based partly upon brokerage or research services provided to us, our Adviser and any other accounts. Such brokerage or research services may include research reports on companies, industries and securities; economic and financial data; financial publications; computer data bases; quotation equipment and services; and research-oriented computer hardware, software and other services. In return for such services, we may pay a higher commission than other brokers would charge if our Adviser determines in good faith that such commission is reasonable in relation to the services provided.
LEGAL MATTERS
Certain legal matters regarding the securities offered by this prospectus will be passed upon for the Company by Dechert LLP.
73
EXPERTS
Deloitte & Touche LLP, located at 30 Rockefeller Plaza, 41st Floor, New York, New York 10112 is our independent registered public accounting firm. Deloitte & Touche LLP audits our financial statements and provides audit related services.
The financial statements incorporated in this prospectus by reference to our most recent Annual Report on Form
10-K
have been so incorporated in reliance on the report of Deloitte & Touche LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. 74
INCORPORATION BY REFERENCE
This prospectus is part of a registration statement that we have filed with the SEC. The SEC allows us to “incorporate by reference” the information that we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to comprise a part of this prospectus from the date we file that document. Any reports filed by us with the SEC after the date of this prospectus and before the date that the offering of the securities by means of this prospectus is terminated will automatically update and, where applicable, supersede any information contained in this prospectus or incorporated by reference in this prospectus.
We incorporate by reference into this prospectus the documents listed below that we have previously filed with the SEC, and any reports and other documents we subsequently file pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering of the securities covered by this prospectus, including all such filings we may file with the SEC after the date of the initial filing of the registration statement of which this prospectus is part and prior to its effectiveness, will also be incorporated by reference into this prospectus and deemed to be part of this prospectus from the date of the filing of such reports and documents; provided, however, that information “furnished” under Item 2.02 or Item 7.01 of
Form 8-K,
or other information “furnished” to the SEC, which is not deemed filed is not and will not be incorporated by reference in this prospectus and any accompanying prospectus supplement: | • | our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 13, 2024; |
| • | our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, filed with the SEC on November 7, 2024; |
| • | our Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 29, 2024; and |
| • | any description of shares of our common stock contained in a registration statement filed pursuant to the Exchange Act and any amendment or report filed for the purpose of updating such description. |
To obtain copies of these filings, see “.”
Available Information
75
AVAILABLE INFORMATION
This prospectus is part of a registration statement we filed with the SEC. This prospectus does not contain all of the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and the securities we are offering under this prospectus, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or other document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed or incorporated by reference as an exhibit is qualified in all respects by such exhibit.
We file with or submit to the SEC annual, quarterly and current reports, proxy statements and other information meeting the informational requirements of the Exchange Act. The SEC maintains a website that contains reports, proxy and information statements and other information filed electronically by us with the SEC, which are available free of charge at . This information is also available free of charge by contacting us by telephone at (212) . Information contained on our website is not incorporated by reference into this prospectus or any prospectus supplement, and you should not consider that information to be part of this prospectus or any prospectus supplement.
www.sec.gov
891-2880
or on our website at www.portmanridge.com
You can request a copy of any of our SEC filings (other than exhibits, unless the exhibits are specifically incorporated by reference into these documents), including those incorporated by reference herein, at no cost, by writing or telephoning us at the following address or telephone number:
Portman Ridge Finance Corporation
650 Madison Avenue, 3
rd
Floor New York, New York 10022
(212)
891-2880
Attn: Secretary
76
$500,000,000
Portman Ridge Finance Corporation
Common Stock
Preferred Stock
Subscription Rights
Warrants
Debt Securities
PROSPECTUS
[ ], 2024
PORTMAN RIDGE FINANCE CORPORATION
PART C
OTHER INFORMATION
Item 25. Financial Statements and Exhibits
| (1) | Financial statements |
The report of Deloitte & Touche LLP, our independent registered public accounting firm, dated March 13, 2024, and the audited consolidated financial statements as of each of December 31, 2023 and December 31, 2022 and for each of the three years in the period ended December 31, 2023 have been incorporated by reference in this registration statement in “.”
Part A—Information Required in a Prospectus
The unaudited consolidated financial statements as of September 30, 2024 and for each of the nine months ended September 30, 2024 and September 30, 2023 have been incorporated by reference in this registration statement in “.”
Part A—Information Required in a Prospectus
| * | Filed herewith. |
Item 26.
Marketing
Arrangements
The information contained under the ” in the prospectus that is included in this
heading
“Plan of Distribution
registration
statement is incorporated by reference herein. Item 27. Other Expenses of Issuance and Distribution
Securities and Exchange Commission registration fee |
$ | 0 | * | |
FINRA filing fee |
500 | ** | ||
NASDAQ listing fees |
125,000 | ** | ||
Printing expenses |
100,000 | ** | ||
Accounting fees and expenses |
200,000 | ** | ||
Legal fees and expenses |
400,000 | ** | ||
Miscellaneous |
50,000 | ** | ||
Total |
$ | 875,500 | ** | |
| * | This amount has been offset against filing fees associated with unsold securities registered under a previous registration statement. |
| ** | Estimated for filing purposes. |
Item 28. Persons Controlled by or Under Common Control
The information contained under the headings “,” “” and “” in this Registration Statement is incorporated by reference herein.
Portman Ridge Finance Corporation
Management
Control Persons and Principal Stockholders
The following table sets forth the Company’s consolidated subsidiaries.
Katonah Management Holdings LLC (Delaware) |
100 | % | ||
Katonah X Management LLC (Delaware) |
100 | % | ||
Katonah 2007-I Management LLC (Delaware) |
100 | % | ||
KCAP Management, LLC (Delaware) |
100 | % | ||
Commodore Holdings, LLC (Delaware) |
100 | % | ||
KCAP Coastal, LLC (Delaware) |
100 | % | ||
Great Lakes KCAP Funding I, LLC (Delaware) |
100 | % | ||
PTMN Sub Holdings LLC (Delaware) |
100 | % | ||
Great Lakes Portman Ridge Funding I, LLC (Delaware) |
100 | % | ||
Kohlberg Capital Funding LLC I (Delaware) |
100 | % | ||
OHA Funding GP, LLC (Texas) |
100 | % | ||
OHA Nevada, LLC (Nevada) |
100 | % | ||
OHA Funding, LP (Texas) |
100 | % | ||
OHA Asset Holdings GP, LLC (Texas) |
100 | % | ||
OHA Asset Holdings II, LP (Texas) |
100 | % | ||
OHA/OCI Investments, LLC (Delaware) |
100 | % | ||
OHA Investment Corporation Sub, LLC (Delaware) |
100 | % | ||
Garrison Capital Equity Holdings I LLC (Delaware) |
100 | % | ||
Garrison Capital Equity Holdings II LLC (Delaware) |
83 | % | ||
Garrison Capital Equity Holdings VIII LLC (Delaware) |
100 | % | ||
Garrison Capital Equity Holdings XI LLC (Delaware) |
100 | % | ||
GIG Rooster Holdings I LLC (Delaware) |
100 | % | ||
Portman Ridge Funding 2018-2 Ltd. (Cayman Islands) |
100 | % | ||
Portman Ridge Funding 2018-2 LLC (Delaware) |
100 | % | ||
KCAP Freedom 3, LLC (Delaware) |
63 | % | ||
HCAP Equity Holdings, LLC (Delaware) |
100 | % | ||
HCAP ICC, LLC (Delaware) |
100 | % |
Item 29. Number of Holders of Securities
The following table sets forth the approximate number of record holders of the Company’s common stock as of October 31, 2024:
Title of Class |
Number of Record Holders |
|||
Common Stock, $0.01 par value |
47 | |||
Item 30. Indemnification
The indemnification of our officers and directors is governed by Section 145 of the DGCL, our certificate of incorporation and bylaws. Section 145(a) of the DGCL empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if (1) such person acted in good faith, (2) in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and (3) with respect to any criminal action or proceeding, such person had no reasonable cause to believe the person’s conduct was unlawful.
Section 145(b) of the DGCL empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests of the corporation, and except that no indemnification may be made in respect of any claim, issue or matter as to which such person has been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court deems proper.
Section 145 of the DGCL further provides that to the extent that a present or former director or officer is successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145 of the DGCL, or in defense of any claim, issue or matter therein, such person will be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with such action, suit or proceeding. In all cases in which indemnification is permitted under subsections (a) and (b) of Section 145 of the DGCL (unless ordered by a court), it will be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the applicable standard of conduct has been met by the party to be indemnified. Such determination must be made, with respect to a person who is a director or officer at the time of such determination, (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (4) by the stockholders. The statute authorizes the corporation to pay expenses incurred by an officer or director in advance of the final disposition of a proceeding upon receipt of an undertaking by or on behalf of the person to whom the advance will be made, to repay the advances if it is ultimately determined that he or she was not entitled to
indemnification. Section 145 of the DGCL also provides that indemnification and advancement of expenses permitted under such Section are not to be exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. Section 145 of the DGCL also authorizes the corporation to purchase and maintain liability insurance on behalf of its directors, officers, employees and agents regardless of whether the corporation would have the statutory power to indemnify such persons against the liabilities insured.
Our certificate of incorporation provides that our directors will not be liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by the current DGCL or as the DGCL may be amended. Section 102(b)(7) of the DGCL provides that the personal liability of a director to a corporation or its stockholders for breach of fiduciary duty as a director may be eliminated except for liability (1) for any breach of the director’s duty of loyalty to the registrant or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 174 of the DGCL, relating to unlawful payment of dividends or unlawful stock purchases or redemption of stock or (4) for any transaction from which the director derives an improper personal benefit.
Under our certificate of incorporation, we fully indemnify any person who was or is involved in any actual or threatened action, suit or proceeding by reason of the fact that such person is or was one of our directors or officers. So long as we are regulated under the 1940 Act, the above indemnification and limitation of liability is limited by the 1940 Act or by any valid rule, regulation or order of the SEC thereunder. The 1940 Act provides, among other things, that a company may not indemnify any director or officer against liability to it or its security holders to which he or she might otherwise be subject by reason of his or her willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office unless a determination is made by final decision of a court, by vote of a majority of a quorum of directors who are disinterested,
non-party
directors or by independent legal counsel that the liability for which indemnification is sought did not arise out of the foregoing conduct. We have obtained liability insurance for our directors and officers. In addition, we have entered into indemnification agreements with each of our directors and officers in order to effect the foregoing except to the extent that such indemnification would exceed the limitations on indemnification under Section 17(h) of the 1940 Act.
Pursuant to Rule 484 under the Securities Act of 1933, as amended, the Company furnishes the following undertaking: “Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Company pursuant to the provisions described above, or otherwise, the Company has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person in the successful defense of an action, suit or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue”.
Item 31. Business and Other Connections of Investment Adviser
A description of any other business, profession, vocation or employment of a substantial nature in which our Adviser, and each managing director, director or executive officer of our Adviser, is or has been during the past two fiscal years, engaged in for his or her own account or in the capacity of director, officer, employee, partner or trustee, is set forth in Part A of this registration statement in the section entitled “” or is otherwise incorporated by reference into Part A of this registration statement. Additional information regarding our Adviser and its officers and directors is set forth in its Form ADV, as filed with the SEC (SEC File
Portfolio Management
No. 801-114566),
and is incorporated by reference herein. Item 32. Location of Accounts and Records
All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act, and the rules thereunder are maintained at the offices of:
| (1) | the Company: Portman Ridge Finance Corporation, 650 Madison Avenue, 3 rd Floor, New York, New York 10022; |
| (2) | the Custodian: U.S. Bank National Association, Corporate Trust Services, One Federal Street, 3rd Floor, Boston, MA 02110; |
| (3) | the Transfer and Dividend Paying Agent and Registrar: Equiniti Trust Company, LLC, 48 Wall Street, 23 rd Floor, New York, New York 10043; |
| (4) | the Company’s Adviser: Sierra Crest Investment Management LLC, 650 Madison Avenue, 3 rd Floor, New York, New York 10022; and |
| (5) | the Company’s Administrator: BC Partners Management LLC, 650 Madison Avenue, 3 rd Floor, New York, New York 10022. |
Item 33. Management Services
Not applicable.
Item 34. Undertakings
| 1. | Not applicable. |
| 2. | Not applicable. |
| 3. | We hereby undertake: |
| a. | that, for the purpose of determining any liability under the Securities Act, each post-effective amendment to the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of those securities at that time shall be deemed to be the initial bona fide offering thereof. |
| b. | to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| c. | that, for the purpose of determining liability under the Securities Act to any purchaser that: |
| (1) | if we are relying on Rule 430B: |
| (A) | each prospectus filed pursuant to Rule 424(b)(3) shall be deemed to be part of the Registration Statement as of the date the filed prospectus was deemed part of and included in the Registration Statement; and |
| (B) | each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (x), or (xi) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the Registration Statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the Registration Statement relating to the securities in the Registration Statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; provided, however, that no statement made in a registration statement or prospectus that is part of the Registration Statement or made in a document incorporated or deemed incorporated by reference into the Registration Statement or |
| prospectus that is part of the Registration Statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the Registration Statement or prospectus that was part of the Registration Statement or made in any such document immediately prior to such effective date; or |
| (2) | if we are subject to Rule 430C under the Securities Act, each prospectus filed pursuant to Rule 424(b) under the Securities Act as part of this Registration Statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness, provided, however, that no statement made in a registration statement or prospectus that is part of the Registration Statement or made in a document incorporated or deemed incorporated by reference into the Registration Statement or prospectus that is part of the Registration Statement will, as to a purchaser with a time of contract of sale prior to such first use, supersedes or modify any statement that was made in the Registration Statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
| d. | that for the purpose of determining our liability under the Securities Act to any purchaser in the initial distribution of securities, we undertake that in a primary offering of our securities pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, we will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser: |
| (1) | any preliminary prospectus or prospectus of us relating to the offering required to be filed pursuant to Rule 424 under the Securities Act; |
| (2) | free writing prospectuses relating to the offering prepared by or on behalf of us or used or referred to by us; |
| (3) | the portion of any other free writing prospectuses or advertisement pursuant to Rule 482 under the Securities Act relating to the offering containing material information about us or our securities provided by or on behalf of us; and |
| (4) | any other communication that is an offer in the offering made by us to the purchaser. |
| 4. | Not applicable. |
| 5. | We hereby undertake that, for purposes of determining any liability under the Securities Act, each filing of our annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference into the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| 6. | Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by any of our directors, officers or controlling persons in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we undertake, unless in the opinion of our counsel the matter has been settled by controlling precedent, to submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and we will be governed by the final adjudication of such issue. |
| 7. | We hereby undertake to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any prospectus or Statement of Additional Information. |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the “Securities Act”), the has duly caused this Registration Statement on Form
Registrant
N-2
to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, in the State of New York, on November 25, 2024. PORTMAN RIDGE FINANCE CORPORATION | ||
| By: | /s/ Edward Goldthorpe | |
| Name: Edward Goldthorpe | ||
| Title: President and Chief Executive Officer | ||
Pursuant to the requirements of the Securities Act, this Registration Statement on Form has been signed by the following persons in the capacities and on the dates indicated. This document may be executed by the signatories hereto on any number of counterparts, all of which constitute one and the same instrument.
N-
2Signature |
Title |
Date | ||
/s/ Edward Goldthorpe Edward Goldthorpe |
President and Chief Executive Officer (Principal Executive Officer) |
November 25, 2024 | ||
/s/ Brandon Satoren Brandon Satoren |
Chief Financial Officer, Secretary and Treasurer (Principal Financial and Principal Accounting Officer) |
November 25, 2024 | ||
/s/ Patrick Schafer Patrick Schafer |
Director | November 25, 2024 | ||
* Alexander Duka |
Director | November 25, 2024 | ||
* George Grunebaum |
Director | November 25, 2024 | ||
* Jennifer Kwon Chou |
Director | November 25, 2024 | ||
* Dean C. Kehler |
Director | November 25, 2024 | ||
* Robert Warshauer |
Director | November 25, 2024 | ||
* Matthew Westwood |
Director | November 25, 2024 | ||
* Joseph Morea |
Director | November 25, 2024 | ||
*By: |
/s/ Brandon Satoren | |
Name: Brandon Satoren | ||
Title: Attorney-in-fact |