Notes
to Consolidated Financial Statements
June
30, 2021
(unaudited)
Note
1. Organization
PhenixFIN
Corporation (“PhenixFIN”, the “Company,” “we” and “us”) is a non-diversified closed-end
management investment company incorporated in Delaware that has elected to be regulated as a business development company (“BDC”)
under the Investment Company Act of 1940, as amended (the “1940 Act”). We completed our initial public offering (“IPO”)
and commenced operations on January 20, 2011. The Company has elected, and intends to qualify annually, to be treated, for U.S. federal
income tax purposes, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as
amended (the “Code”). On November 18, 2020, the board of directors of the Company approved the adoption of an internalized
management structure, effective January 1, 2021. Until close of business on December 31, 2020 we were externally managed and advised
by MCC Advisors LLC (“MCC Advisors”), pursuant to an investment management agreement. MCC Advisors is a wholly owned subsidiary
of Medley LLC, which is controlled by Medley Management Inc. (NYSE: MDLY), a publicly traded asset management firm (“MDLY”),
which in turn is controlled by Medley Group LLC, an entity wholly owned by the senior professionals of Medley LLC. We use the term “Medley”
to refer collectively to the activities and operations of Medley Capital LLC, Medley LLC, MDLY, Medley Group LLC, MCC Advisors, associated
investment funds and their respective affiliates herein. Since January 1, 2021 the Company has been managed pursuant to an internalized
management structure.
On
March 26, 2013, our wholly owned subsidiary, Medley SBIC, LP (“SBIC LP”), a Delaware limited partnership that we own directly
and through our wholly owned subsidiary, Medley SBIC GP, LLC, received a license from the Small Business Administration (“SBA”)
to operate as a Small Business Investment Company (“SBIC”) under Section 301(c) of the Small Business Investment Company
Act of 1958, as amended. Effective July 1, 2019, SBIC LP surrendered its SBIC license and changed its name to Medley Small Business Fund,
LP. In addition, Medley SBIC GP, LLC changed its name to Medley Small Business Fund GP, LLC. Medley Small Business Fund, LP and Medley
Small Business Fund GP, LLC have since changed their names to PhenixFIN Small Business Fund, LP and PhenixFIN Small Business Fund GP,
LLC, respectively.
The
Company has formed and expects to continue to form certain taxable subsidiaries (the “Taxable Subsidiaries”), which are taxed
as corporations for federal income tax purposes. These Taxable Subsidiaries allow us to, among other things, hold equity securities of
portfolio companies organized as pass-through entities while continuing to satisfy the requirements of a RIC under the Code.
The
Company’s investment objective is to generate current income and capital appreciation. The management team seeks to achieve this
objective primarily through making loans, private equity or other investments in privately-held companies. The Company may also make
debt, equity or other investments in publicly-traded companies. (These investments may also include investments in other BDCs, closed-end
funds or REITs.) We may also pursue other strategic opportunities and invest in other assets or operate other businesses to achieve our
investment objective, such as operating and managing an asset-based lending business. The portfolio generally consists of senior secured
first lien term loans, senior secured second lien term loans, senior secured bonds, preferred equity and common equity. Occasionally,
we will receive warrants or other equity participation features which we believe will have the potential to increase total investment
returns. Our loan and other debt investments are primarily rated below investment grade or are unrated. Investments in below investment
grade securities are considered predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal
when due.
Reverse
Stock Split; Authorized Share Reduction
At
the Company’s 2020 Annual Meeting of Stockholders held on June 30, 2020 (the “2020 Annual Meeting”), stockholders approved
a proposal to grant discretionary authority to the Company’s board of directors to amend the Company’s Certificate of Incorporation
(the “Certificate of Incorporation”) to effect a reverse stock split of its common stock, of 1-20 (the “Reverse Stock
Split”) and with the Reverse Stock Split to be effective at such time and date, if at all, as determined by the board of directors,
but not later than 60 days after stockholder approval thereof and, if and when the reverse stock split is effected, reduce the number
of authorized shares of common stock by the approved reverse stock split ratio (the “Authorized Share Reduction”).
Following
the 2020 Annual Meeting, on July 7, 2020, the board of directors determined that it was in the best interests of the Company and its
stockholders to implement the Reverse Stock Split and the Authorized Share Reduction. Accordingly, on July 13, 2020, the Company filed
a Certificate of Amendment (the “Certificate of Amendment”) to the Certificate of Incorporation with the Secretary of State
of the State of Delaware to effect the Reverse Stock Split and the Authorized Share Reduction.
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note
1. Organization (continued)
Pursuant
to the Certificate of Amendment, effective as of 5:00 p.m., Eastern Time, on July 24, 2020 (the “Effective Time”), each twenty
(20) shares of common stock issued and outstanding, immediately prior to the Effective Time, automatically and without any action on
the part of the respective holders thereof, were combined and converted into one (1) share of common stock. In connection with the Reverse
Stock Split, the Certificate of Amendment provided for a reduction in the number of authorized shares of common stock from 100,000,000
to 5,000,000 shares of common stock. No fractional shares were issued as a result of the Reverse Stock Split. Instead, any stockholder
who would have been entitled to receive a fractional share as a result of the Reverse Stock Split received cash payments in lieu of such
fractional shares (without interest and subject to backup withholding and applicable withholding taxes).
On
December 21, 2020, the Company announced that it completed the application process for and was authorized to transfer the listing of
its shares of common stock to the NASDAQ Global Market. The listing and trading of the common stock on the NYSE ceased at the close of
trading on December 31, 2020. Since January 4, 2021, the common stock trades on the NASDAQ Global Market under the trading symbol “PFX.”
Sale
of MCC JV
On
October 8, 2020, the Company, Great American Life Insurance Company (“GALIC”), MCC Senior Loan Strategy JV I LLC (the “MCC
JV”), and an affiliate of Golub Capital LLC (“Golub”) entered into a Membership Interest Purchase Agreement pursuant
to which a fund affiliated with and managed by Golub concurrently purchased all of the Company’s interest in the MCC JV and all
of GALIC’s interest in the MCC JV for a pre-adjusted gross purchase price of $156.4 million and an adjusted gross purchase price
(which constitutes the aggregate consideration for the membership interests) of $145.3 million (giving effect to adjustments primarily
for principal and interest payments from portfolio companies of MCC JV from July 1, 2020 through October 7, 2020), resulting in net proceeds
(before transaction expenses) of $41.0 million and $6.6 million for the Company and GALIC, respectively, on the terms and subject to
the conditions set forth in the Membership Interest Purchase Agreement, including the representations, warranties, covenants and indemnities
contained therein. In connection with the closing of the transaction on October 8, 2020, MCC JV repaid in full all outstanding borrowings
under, and terminated, its senior secured revolving credit facility, dated as of August 4, 2015, as amended, administered by Deutsche
Bank AG, New York Branch.
COVID-19
Developments
The
COVID-19 pandemic continues to have adverse consequences on the U.S. and global economies, as well as on the Company (including
certain portfolio companies) in particular. The ultimate economic fallout from the pandemic, and the long-term impact on economies,
markets, industries and individual portfolio companies, remains uncertain. The Company’s performance (including that of
certain of its portfolio companies) was negatively impacted during the pandemic. The longer-term impact of COVID-19 on the
operations and the performance of the Company (including certain portfolio companies) is difficult to predict, but may continue to
be adverse. The longer-term potential impact on such operations and performance could depend to a large extent on future
developments and actions taken by authorities and other entities to mitigate COVID-19 and its economic impact. The impacts, as well
as the uncertainty over impacts to come, of COVID-19 have adversely affected the performance of the Company (including certain
portfolio companies) and may continue to do so in the future. Further, the potential exists for variants of COVID-19, including
the Delta variant, to impede the global economic recovery and exacerbate geographic differences in the spread of,
and response to, COVID-19.
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note
2. Significant Accounting Policies
Basis
of Presentation
The
Company is an investment company following the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies. The accompanying consolidated
financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles
(“GAAP”) and include the consolidated accounts of the Company and its wholly owned subsidiaries PhenixFIN Small Business
Fund, LP (f/k/a Medley Small Business Fund, LP) (“PhenixFIN Small Business Fund”) and PhenixFIN SLF Funding I LLC (f/k/a
Medley SLF Funding I LLC) (“PhenixFIN SLF”), and its wholly owned Taxable Subsidiaries. All references made to the “Company,”
“we,” and “us” herein include PhenixFIN Corporation and its consolidated subsidiaries, except as stated otherwise.
Additionally, the accompanying consolidated financial statements of the Company and related financial information have been prepared
pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1933. In the opinion
of management, the consolidated financial statements reflect all adjustments and reclassifications, which are of a normal recurring nature,
that are necessary for the fair presentation of financial results as of and for the periods presented. Therefore, this Form 10-Q should
be read in conjunction with the Company’s annual report on Form 10-K for the year ended September 30, 2020. The current period’s
results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending September
30, 2021.
Use
of Estimates in the Preparation of Financial Statements
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers cash equivalents to be highly liquid investments with original maturities of three months or less. Cash and cash equivalents
include deposits in a money market account. The Company deposits its cash in financial institutions and, at times, such balances may
be in excess of the Federal Deposit Insurance Corporation insurance limits.
Debt
Issuance Costs
Debt
issuance costs incurred in connection with any credit facilities and unsecured notes (see Note 5) are deferred and amortized over the
life of the respective credit facility or instrument.
Indemnification
In
the normal course of business, the Company enters into contractual agreements that provide general indemnifications against losses, costs,
claims and liabilities arising from the performance of individual obligations under such agreements. The Company has had no material
claims or payments pursuant to such agreements. The Company’s individual maximum exposure under these arrangements is unknown,
as this would involve future claims that may be made against the Company that have not yet occurred. However, based on management’s
experience, the Company expects the risk of loss to be remote.
Revenue
Recognition
Interest
income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Dividend income, which represents
dividends from equity investments and distributions from Taxable Subsidiaries, is recorded on the ex-dividend date and when the distribution
is received, respectively.
The
Company holds debt investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision. PIK interest,
which represents contractually deferred interest added to the investment balance that is generally due at maturity, is recorded on the
accrual basis to the extent such amounts are expected to be collected. PIK interest is not accrued if the Company does not expect the
issuer to be able to pay all principal and interest when due. For the three and nine months ended June 30, 2021, the Company earned approximately
$0.5 and $0.6 million in PIK interest, respectively. For the three and nine months ended June 30, 2020, the Company earned approximately
$0.6 million and $3.1 million in PIK interest, respectively.
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note
2. Significant Accounting Policies (continued)
Revenue
Recognition (continued)
Origination/closing,
amendment and transaction break-up fees associated with investments in portfolio companies are recognized as income when we become entitled
to such fees. Prepayment penalties received by the Company for debt instruments paid back to the Company prior to the maturity date are
recorded as income upon repayment of debt. Administrative agent fees received by the Company are capitalized as deferred revenue and
recorded as fee income when the services are rendered. For the three and nine months ended June 30, 2021, fee income was approximately
$0.1 million and $0.7 million, respectively (see Note 9). For the three and nine months ended June 30, 2020, fee income was approximately
$0.2 million and $0.6 million, respectively (see Note 9).
Investment
transactions are accounted for on a trade date basis. Realized gains or losses on investments are measured by the difference between
the net proceeds from the disposition and the amortized cost basis of investment, without regard to unrealized gains or losses previously
recognized. There were no realized gains or losses related to non-cash restructuring transactions during the three and nine months ended
June 30, 2021 and 2020. The Company reports changes in fair value of investments as a component of the net unrealized appreciation/(depreciation)
on investments in the Consolidated Statements of Operations.
Management
reviews all loans that become 90 days or more past due on principal or interest or when there is reasonable doubt that principal or interest
will be collected for possible placement on management’s designation of non-accrual status. Interest receivable is analyzed regularly
and may be reserved against when deemed uncollectible. Interest payments received on non-accrual loans may be recognized as income or
applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status
when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may make
exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection. At June 30, 2021, certain
investments in ten portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $13.6
million, or 7.5% of the fair value of our portfolio. At September 30, 2020, certain investments in eight portfolio companies held by
the Company were on non-accrual status with a combined fair value of approximately $21.7 million, or 8.8% of the fair value of our portfolio.
Investment
Classification
The
Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, we would be deemed to “control”
a portfolio company if we owned more than 25% of its outstanding voting securities and/or had the power to exercise control over the
management or policies of such portfolio company. We refer to such investments in portfolio companies that we “control” as
“Control Investments.” Under the 1940 Act, we would be deemed to be an “Affiliated Person” of a portfolio company
if we own between 5% and 25% of the portfolio company’s outstanding voting securities or we are under common control with such
portfolio company. We refer to such investments in Affiliated Persons as “Affiliated Investments.”
Valuation
of Investments
The
Company applies fair value accounting to all of its financial instruments in accordance with the 1940 Act and ASC Topic 820 - Fair Value
Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework used to measure fair value
and requires disclosures for fair value measurements. In accordance with ASC 820, the Company has categorized its financial instruments
carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy as discussed in Note
4. Fair value is a market-based measure considered from the perspective of the market participant who holds the financial instrument
rather than an entity specific measure. Therefore, when market assumptions are not readily available, the Company’s own assumptions
are set to reflect those that management believes market participants would use in pricing the financial instrument at the measurement
date.
Investments
for which market quotations are readily available are valued at such market quotations, which are generally obtained from an independent
pricing service or multiple broker-dealers or market makers. We weight the use of third-party broker quotations, if any, in determining
fair value based on our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote
was an indicative price or binding offer. However, debt investments with remaining maturities within 60 days that are not credit impaired
are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value. Investments for which market quotations
are not readily available are valued at fair value as determined by the Company’s board of directors based upon input from management
and third-party valuation firms. Because these investments are illiquid and because there may not be any directly comparable companies
whose financial instruments have observable market values, these loans are valued using a fundamental valuation methodology, consistent
with traditional asset pricing standards, that is objective and consistently applied across all loans and through time.
Investments
in investment funds are valued at fair value. Fair values are generally determined utilizing the NAV supplied by, or on behalf of, management
of each investment fund, which is net of management and incentive fees or allocations charged by the investment fund and is in accordance
with the “practical expedient”, as defined by FASB Accounting Standards Update (“ASU”) 2009-12, Investments
in Certain Entities that Calculate Net Asset Value per Share. NAVs received by, or on behalf of, management of each investment fund
are based on the fair value of the investment funds’ underlying investments in accordance with policies established by management
of each investment fund, as described in each of their financial statements and offering memorandum. If the Company is in the process
of the sale of an investment fund, fair value will be determined by actual or estimated sale proceeds.
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note
2. Significant Accounting Policies (continued)
Valuation
of Investments (continued)
The
methodologies utilized by the Company in estimating the fair value of its investments categorized as Level 3 generally fall into the
following two categories:
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The
“Market Approach” uses prices and other relevant information generated by market transactions involving identical or
comparable (that is, similar) assets, liabilities, or a group of assets and liabilities, such as a business.
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The
“Income Approach” converts future amounts (for example, cash flows or income and expenses) to a single current (that
is, discounted) amount. When the Income Approach is used, the fair value measurement reflects current market expectations about those
future amounts.
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The
Company has engaged third-party valuation firms (the “Valuation Firms”) to assist it and its board of directors in the valuation
of its portfolio investments. The valuation reports generated by the Valuation Firms consider the evaluation of financing and sale transactions
with third parties, expected cash flows and market-based information, including comparable transactions, performance multiples, and movement
in yields of debt instruments, among other factors. The Company uses a market yield analysis under the Income Approach or an enterprise
model of valuation under the Market Approach, or a combination thereof. In applying the market yield analysis, the value of the Company’s
loans is determined based upon inputs such as the coupon rate, current market yield, interest rate spreads of similar securities, the
stated value of the loan, and the length to maturity. In applying the enterprise model, the Company uses a waterfall analysis, which
takes into account the specific capital structure of the borrower and the related seniority of the instruments within the borrower’s
capital structure into consideration. To estimate the enterprise value of the portfolio company, we weigh some or all of the traditional
market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise
value.
The
methodologies and information that the Company utilizes when applying the Market Approach for performing investments include, among other
things:
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valuations
of comparable public companies (“Guideline Comparable Approach”);
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recent
sales of private and public comparable companies (“Guideline Comparable Approach”);
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recent
acquisition prices of the company, debt securities or equity securities (“Recent Arms-Length Transaction”);
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external
valuations of the portfolio company, offers from third parties to buy the company (“Estimated Sales Proceeds Approach”);
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subsequent
sales made by the company of its investments (“Expected Sales Proceeds Approach”); and
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estimating
the value to potential buyers.
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The
methodologies and information that the Company utilizes when applying the Income Approach for performing investments include:
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discounting
the forecasted cash flows of the portfolio company or securities (Discounted Cash Flow (“DCF”) Approach); and
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Black-Scholes
model or simulation models or a combination thereof (Income Approach - Option Model) with respect to the valuation of warrants.
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PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note
2. Significant Accounting Policies (continued)
Valuation
of Investments (continued)
For
non-performing investments, we may estimate the liquidation or collateral value of the portfolio company’s assets and liabilities
using an expected recovery model (Market Approach - Expected Recovery Analysis or Estimated Liquidation Proceeds).
We
undertake a multi-step valuation process each quarter when valuing investments for which market quotations are not readily available,
as described below:
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our
quarterly valuation process begins with each portfolio investment being initially valued by one or more Valuation Firms;
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preliminary
valuation conclusions will then be documented and discussed with senior management;
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the
audit committee of the board of directors reviews the preliminary valuations with management and the Valuation Firms; and
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the
board of directors discusses the valuations and determines the fair value of each investment in the Company’s portfolio in
good faith based on the input of management, the respective Valuation Firms and the audit committee.
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Due
to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair
value of our investments may differ from the values that would have been used had a readily available market value existed for such investments,
and the differences could be material. In addition, changes in the market environment (including the impact of COVID-19 on financial
markets), portfolio company performance, and other events may occur over the lives of the investments that may cause the gains or losses
ultimately realized on these investments to be materially different than the valuations currently assigned.
Fair
Value of Financial Instruments
The
carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts payable and accrued expenses,
approximate fair value due to their short-term nature. The carrying amounts and fair values of our long-term obligations are discussed
in Note 5.
Recently
Adopted Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference
rate reform (Topic 848)—Facilitation of the effects of reference rate reform on financial reporting.” The amendments in this
update provide optional expedients and exceptions for applying U.S. GAAP to certain contracts and hedging relationships that reference
LIBOR or another reference rate expected to be discontinued due to reference rate reform and became effective upon issuance for all entities.
The Company has agreements that have LIBOR as a reference rate with certain portfolio companies and also with certain lenders. Many of
these agreements include language for choosing an alternative successor rate if LIBOR reference is no longer considered to be appropriate.
Contract modifications are required to be evaluated in determining whether the modifications result in the establishment of new contracts
or the continuation of existing contracts. In January 2021, the FASB issued ASU 2021-01, “Reference rate reform (Topic 848),”
which expanded the scope of Topic 848. ASU 2020-04 and ASU 2021-01 are effective through December 31, 2022 when the Company plans to apply
the amendments in this update to account for contract modifications due to changes in reference rates. The Company does not believe the
adoption of ASU 2020-04 and ASU 2021-01 will have a material impact on its consolidated financial statements and disclosures.
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note
2. Significant Accounting Policies (continued)
Recently
Adopted Accounting Pronouncements (continued)
In
May 2020, the SEC adopted rule amendments that impacted the requirement of investment companies, including BDCs, to disclose the financial
statements of certain of their portfolio companies or certain acquired funds (the “Final Rules”). The Final Rules adopted
a new definition of “significant subsidiary” set forth in Rule 1-02(w)(2) of Regulation S-X under the Securities Act. Rules
3-09 and 4-08(g) of Regulation S-X require investment companies to include separate financial statements or summary financial information,
respectively, in such investment company’s periodic reports for any portfolio company that meets the definition of “significant
subsidiary.” The Final Rules adopt a new definition of “significant subsidiary” applicable only to investment companies
that (i) modifies the investment test and the income test, and (ii) eliminates the asset test currently in the definition of “significant
subsidiary” in Rule 1-02(w) of Regulation S-X. The new Rule 1-02(w)(2) of Regulation S-X is intended to more accurately capture
those portfolio companies that are more likely to materially impact the financial condition of an investment company. The Final Rules
became effective January 1, 2021. The Company evaluated the impact of the Final Rules and determined its impact not to be material and
began voluntary compliance with the Final Rules since the quarter ended June 30, 2020.
Federal
Income Taxes
The
Company has elected, and intends to qualify annually, to be treated as a RIC under Subchapter M of the Code. In order to continue to
qualify as a RIC and be eligible for tax treatment under Subchapter M of the Code, among other things, the Company is required to meet
certain source of income and asset diversification requirements and timely distribute to its stockholders at least 90% of the sum of
investment company taxable income (“ICTI”), as defined by the Code, including PIK interest, and net tax exempt interest income
(which is the excess of our gross tax exempt interest income over certain disallowed deductions) for each taxable year. Depending on
the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year dividend distributions
into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared
prior to filing the final tax return related to the year which generated such ICTI.
The
Company is subject to a nondeductible U.S. federal excise tax of 4% on undistributed income if it does not distribute at least 98% of
its ordinary income in any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31 of such
calendar year and any income realized, but not distributed, in preceding years and on which it did not pay federal income tax. To the
extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year
dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable
income is earned. There was no provision for federal excise tax at June 30, 2021 and June 30, 2020.
The
Company’s Taxable Subsidiaries accrue income taxes payable based on the applicable corporate rates on the unrealized gains generated
by the investments held by the Taxable Subsidiaries. As of June 30, 2021 and September 30, 2020, the Company did not record a deferred
tax liability on the Consolidated Statements of Assets and Liabilities. The change in provision for deferred taxes is included as a component
of net realized and unrealized gain/(loss) on investments in the Consolidated Statements of Operations. For the three and nine months
ended June 30, 2021 the Company did not record a change in provision for deferred taxes on the unrealized (appreciation)/depreciation
on investments. By comparison, for the three and nine months ended June 30, 2020, the Company recorded a change in provision for deferred
taxes on the unrealized (appreciation)/depreciation on investments of $36.0 thousand and $(49.7) thousand, respectively.
As of June 30, 2021 and September 30, 2020, the
Company had a deferred tax asset of $19.9 million and $22.8 million, respectively, consisting primarily of net operating losses and net
unrealized losses on the investments held within its Taxable Subsidiaries. As of June 30, 2021 and September 30, 2020, the Company
has booked a valuation allowance of $19.9 million and $22.8 million, respectively, against its deferred tax asset.
ICTI
generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition
of income and expenses. The Company may be required to recognize ICTI in certain circumstances in which it does not receive cash. For
example, if the Company holds debt obligations that are treated under applicable tax rules as having original issue discount, the Company
must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether
cash representing such income is received by the Company in the same taxable year. The Company may also have to include in ICTI other
amounts that it has not yet received in cash, such as 1) PIK interest income and 2) interest income from investments that have been classified
as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting
purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included in the Company’s
ICTI for the year of accrual, the Company may be required to make a distribution to its stockholders in order to satisfy the minimum
distribution requirements, even though the Company will not have received and may not ever receive any corresponding cash amount. ICTI
also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they
are realized.
The
Company accounts for income taxes in conformity with ASC Topic 740 - Income Taxes (“ASC 740”). ASC 740 provides guidelines
for how uncertain tax positions should be recognized, measured, presented and disclosed in financial statements. ASC 740 requires the
evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether
the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to
meet a “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period. The Company
recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Consolidated Statements
of Operations. There were no material uncertain income tax positions at June 30, 2021. Although we file federal and state
tax returns, our major tax jurisdiction is federal. The Company’s federal and state tax returns for the prior three fiscal years
remain open, subject to examination by the Internal Revenue Service and applicable state tax authorities.
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note
2. Significant Accounting Policies (continued)
Retroactive
Adjustments for Reverse Stock Split and the Authorized Share Reduction
The
per share amount of the common stock and the authorized shares of common stock in the unaudited financial statements and notes thereto
have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split effected on July 24, 2020. See Note
1 for more information regarding the Reverse Stock Split and the Authorized Share Reduction.
Segments
The
Company invests in various industries. The Company separately evaluates the performance of each of its investment relationships. However,
because each of these investment relationships has similar business and economic characteristics, they have been aggregated into a single
investment segment. All applicable segment disclosures are included in or can be derived from the Company’s financial statements.
See Note 3 for further information.
Company
Investment Risk, Concentration of Credit Risk, and Liquidity Risk
The
Company has broad discretion in making investments. Investments generally consist of debt instruments that may be affected by business,
financial market or legal uncertainties. Prices of investments may be volatile, and a variety of factors that are inherently difficult
to predict, such as domestic or international economic and political developments, may significantly affect the results of the Company’s
activities and the value of its investments. In addition, the value of the Company’s portfolio may fluctuate as the general level
of interest rates fluctuate.
The
value of the Company’s investments in loans may be detrimentally affected to the extent, among other things, that a borrower defaults
on its obligations, there is insufficient collateral and/or there are extensive legal and other costs incurred in collecting on a defaulted
loan, observable secondary or primary market yields for similar instruments issued by comparable companies increase materially or risk
premiums required in the market between smaller companies, such as our borrowers, and those for which market yields are observable increase
materially.
The
Company’s assets may, at any time, include securities and other financial instruments or obligations that are illiquid or thinly
traded, making purchase or sale of such securities and financial instruments at desired prices or in desired quantities difficult. Furthermore,
the sale of any such investments may be possible only at substantial discounts, and it may be extremely difficult to value any such investments
accurately.
Company
performance (including that of certain of its portfolio companies) has been and may continue to be negatively impacted by the COVID-19
pandemic’s effects. The COVID-19 pandemic has adversely impacted economies and capital markets around the world in ways that may
continue and may change in unforeseen ways for an indeterminate period. The pandemic has also adversely affected various businesses,
including some in which we are invested. The COVID-19 pandemic may exacerbate pre-existing business performance, political, social and
economic risks affecting certain companies and countries generally. The impacts, as well as the uncertainty over impacts to come, of
COVID-19 have adversely affected the performance of the Company (including certain portfolio companies) and may continue to do so in
the future. Further, the potential exists for variants of COVID-19, including the Delta variant,
to impede the global economic recovery and exacerbate geographic differences in the spread of, and response to, COVID-19.
Note
3. Investments
The
composition of our investments as of June 30, 2021 as a percentage of our total portfolio, at amortized cost and fair value were as follows
(dollars in thousands):
|
|
|
Amortized
Cost
|
|
|
Percentage
|
|
|
Fair Value
|
|
|
Percentage
|
|
|
Senior Secured First Lien Term Loans
|
|
$
|
165,696
|
|
|
|
73.4
|
%
|
|
$
|
90,280
|
|
|
|
49.6
|
%
|
|
Senior Secured Second Lien Term Loans
|
|
|
2,600
|
|
|
|
1.2
|
|
|
|
2,483
|
|
|
|
1.4
|
|
|
Senior Secured Notes
|
|
|
3,757
|
|
|
|
1.7
|
|
|
|
3,726
|
|
|
|
2.1
|
|
|
Unsecured Debt
|
|
|
3,846
|
|
|
|
1.7
|
|
|
|
2,110
|
|
|
|
1.2
|
|
|
Equity/Warrants
|
|
|
49,631
|
|
|
|
22.0
|
|
|
|
83,020
|
|
|
|
45.7
|
|
|
Total Investments
|
|
$
|
225,530
|
|
|
|
100.0
|
%
|
|
$
|
181,619
|
|
|
|
100.0
|
%
|
The
composition of our investments as of September 30, 2020 as a percentage of our total portfolio, at amortized cost and fair value were
as follows (dollars in thousands):
|
|
|
Amortized
Cost
|
|
|
Percentage
|
|
|
Fair Value
|
|
|
Percentage
|
|
|
Senior Secured First Lien Term Loans
|
|
$
|
178,843
|
|
|
|
54.5
|
%
|
|
$
|
106,463
|
|
|
|
43.2
|
%
|
|
Senior Secured Second Lien Term Loans
|
|
|
15,476
|
|
|
|
4.7
|
|
|
|
13,927
|
|
|
|
5.6
|
|
|
Unsecured Debt
|
|
|
4,601
|
|
|
|
1.4
|
|
|
|
2,669
|
|
|
|
1.1
|
|
|
MCC Senior Loan Strategy JV I LLC
|
|
|
79,888
|
|
|
|
24.4
|
|
|
|
41,019
|
|
|
|
16.6
|
|
|
Equity/Warrants
|
|
|
49,327
|
|
|
|
15.0
|
|
|
|
82,666
|
|
|
|
33.5
|
|
|
Total
|
|
$
|
328,135
|
|
|
|
100.0
|
%
|
|
$
|
246,744
|
|
|
|
100.0
|
%
|
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note
3. Investments (continued)
In connection with certain of the Company’s
investments, the Company receives warrants that are obtained for the objective of increasing the total investment returns and are not
held for hedging purposes. At June 30, 2021 and September 30, 2020, the total fair value of warrants was $1.1 million and $15.3 thousand,
respectively, and were included in investments at fair value on the Consolidated Statements of Assets and Liabilities. During the three
months ended June 30, 2021, the Company did not acquire warrants in existing portfolio companies, and during the nine months ended June
30, 2021, the Company acquired warrants in 1 existing portfolio company. During the three and nine months ended June 30, 2020, the Company
had no warrant activity.
For
the three and nine months ended June 30, 2021, there was $1.1 million and $1.1 million, respectively, of unrealized appreciation related
to warrants, which was recorded on the Consolidated Statements of Operations as net unrealized appreciation/(depreciation) on investments.
For the three and nine months ended June 30, 2020, there was $0 and $25.0 thousand, respectively, of unrealized depreciation related
to warrants, which was recorded on the Consolidated Statements of Operations as net unrealized appreciation/(depreciation) on investments.
The warrants are received in connection with individual investments and are not subject to master netting arrangements.
The
following table shows the portfolio composition by industry grouping at fair value at June 30, 2021 (dollars in thousands):
|
|
|
Fair Value
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
Construction & Building
|
|
$
|
38,001
|
|
|
|
20.7
|
%
|
|
Services: Business
|
|
|
31,707
|
|
|
|
17.5
|
|
|
Banking, Finance, Insurance & Real Estate
|
|
|
21,194
|
|
|
|
11.7
|
|
|
High Tech Industries
|
|
|
17,059
|
|
|
|
9.4
|
|
|
Automotive
|
|
|
13,005
|
|
|
|
7.2
|
|
|
Hotel, Gaming & Leisure
|
|
|
11,884
|
|
|
|
6.5
|
|
|
Containers, Packaging & Glass
|
|
|
11,536
|
|
|
|
6.4
|
|
|
Environmental Industries
|
|
|
10,070
|
|
|
|
5.5
|
|
|
Consumer goods: Durable
|
|
|
7,538
|
|
|
|
4.2
|
|
|
Energy: Oil & Gas
|
|
|
3,751
|
|
|
|
2.1
|
|
|
Forest Products & Paper
|
|
|
3,767
|
|
|
|
2.1
|
|
|
Manufacturing
|
|
|
3,726
|
|
|
|
2.1
|
|
|
Healthcare & Pharmaceuticals
|
|
|
2,911
|
|
|
|
1.6
|
|
|
Aerospace & Defense
|
|
|
2,611
|
|
|
|
1.4
|
|
|
Metals & Mining
|
|
|
2,859
|
|
|
|
1.6
|
|
|
Total
|
|
$
|
181,619
|
|
|
|
100.0
|
%
|
The
following table shows the portfolio composition by industry grouping at fair value at September 30, 2020 (dollars in thousands):
|
|
|
Fair Value
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
Construction & Building
|
|
$
|
51,964
|
|
|
|
21.1
|
%
|
|
Multisector Holdings
|
|
|
41,019
|
|
|
|
16.6
|
|
|
High Tech Industries
|
|
|
26,165
|
|
|
|
10.6
|
|
|
Healthcare & Pharmaceuticals
|
|
|
23,481
|
|
|
|
9.5
|
|
|
Services: Business
|
|
|
21,841
|
|
|
|
8.9
|
|
|
Hotel, Gaming & Leisure
|
|
|
12,337
|
|
|
|
5.0
|
|
|
Wholesale
|
|
|
12,278
|
|
|
|
5.0
|
|
|
Containers, Packaging & Glass
|
|
|
11,987
|
|
|
|
4.8
|
|
|
Consumer goods: Durable
|
|
|
9,520
|
|
|
|
3.8
|
|
|
Banking, Finance, Insurance & Real Estate
|
|
|
6,557
|
|
|
|
2.7
|
|
|
Consumer goods: Non-durable
|
|
|
6,164
|
|
|
|
2.5
|
|
|
Environmental Industries
|
|
|
5,846
|
|
|
|
2.4
|
|
|
Energy: Oil & Gas
|
|
|
5,626
|
|
|
|
2.3
|
|
|
Metals & Mining
|
|
|
3,530
|
|
|
|
1.4
|
|
|
Forest Products & Paper
|
|
|
2,991
|
|
|
|
1.2
|
|
|
Aerospace & Defense
|
|
|
2,942
|
|
|
|
1.2
|
|
|
Media: Broadcasting & Subscription
|
|
|
1,110
|
|
|
|
0.5
|
|
|
Automotive
|
|
|
1,043
|
|
|
|
0.4
|
|
|
Retail
|
|
|
343
|
|
|
|
0.1
|
|
|
Total
|
|
$
|
246,744
|
|
|
|
100.0
|
%
|
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note
3. Investments (continued)
The
Company invests in portfolio companies principally located in North America. The geographic composition is determined by the location
of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company’s
business.
The
following table shows the portfolio composition by geographic location at fair value at June 30, 2021 (dollars in thousands):
|
|
|
Fair Value
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
West
|
|
$
|
54,617
|
|
|
|
30.1
|
%
|
|
Northeast
|
|
|
54,374
|
|
|
|
29.9
|
|
|
Southeast
|
|
|
35,418
|
|
|
|
19.5
|
|
|
Southwest
|
|
|
20,085
|
|
|
|
11.1
|
|
|
Midwest
|
|
|
16,920
|
|
|
|
9.3
|
|
|
Mid-Atlantic
|
|
|
205
|
|
|
|
0.1
|
|
|
Total
|
|
$
|
181,619
|
|
|
|
100.0
|
%
|
The
following table shows the portfolio composition by geographic location at fair value at September 30, 2020 (dollars in thousands):
|
|
|
Fair Value
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
Northeast
|
|
$
|
98,555
|
|
|
|
39.9
|
%
|
|
West
|
|
|
55,400
|
|
|
|
22.5
|
|
|
Southeast
|
|
|
42,321
|
|
|
|
17.1
|
|
|
Midwest
|
|
|
27,574
|
|
|
|
11.2
|
|
|
Mid-Atlantic
|
|
|
13,334
|
|
|
|
5.4
|
|
|
Southwest
|
|
|
9,560
|
|
|
|
3.9
|
|
|
Total
|
|
$
|
246,744
|
|
|
|
100.0
|
%
|
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note
3. Investments (continued)
Transactions
With Affiliated/Controlled Companies
The
Company had investments in portfolio companies designated as Affiliated Investments and Controlled Investments under the 1940 Act. Transactions
with Affiliated Investments and Controlled Investments during the nine months ended June 30, 2021 and 2020 were as follows:
|
Name of Investment(3)(4)
|
|
Type of Investment
|
|
Fair Value at
September 30,
2020
|
|
|
Purchases/
(Sales) of or
Advances/
(Distributions)
|
|
|
Transfers
In/(Out) of
Affiliates
|
|
|
Unrealized
Gain/(Loss)
|
|
|
Realized
Gain/(Loss)
|
|
|
Fair Value at June 30,
2021
|
|
|
Income Earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliated Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1888 Industrial Services, LLC
|
|
Senior Secured First Lien Term Loan C
|
|
$
|
1,166,763
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(969,654
|
)
|
|
$
|
-
|
|
|
$
|
197,109
|
|
|
$
|
75,148
|
|
|
|
|
Revolving Credit Facility
|
|
|
3,554,069
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,554,069
|
|
|
|
164,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Access Media Holdings, LLC
|
|
Senior Secured First Lien Term Loan
|
|
|
1,110,563
|
|
|
|
(1,239,336
|
)
|
|
|
-
|
|
|
|
7,335,822
|
|
|
|
(7,207,049
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Preferred Equity Series A
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,600,000
|
|
|
|
(1,600,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Preferred Equity Series AA
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
800,000
|
|
|
|
(800,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Preferred Equity Series AAA
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
971,200
|
|
|
|
(971,200
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Black Angus Steakhouses,LLC
|
|
Senior Secured First Lien Delayed Draw Term Loan
|
|
|
758,929
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
758,929
|
|
|
|
57,552
|
|
|
|
|
Senior Secured First Lien Term Loan
|
|
|
5,047,557
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,910,758
|
)
|
|
|
-
|
|
|
|
2,136,799
|
|
|
|
-
|
|
|
|
|
Senior Secured First Lien Super Priority DDTL
|
|
|
-
|
|
|
|
1,500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,500,000
|
|
|
|
86,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Caddo Investors Holdings 1 LLC
|
|
Equity
|
|
|
2,990,776
|
|
|
|
-
|
|
|
|
-
|
|
|
|
776,046
|
|
|
|
-
|
|
|
|
3,766,822
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dynamic Energy Services International LLC
|
|
Senior Secured First Lien Term Loan
|
|
|
905,116
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(905,116
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JFL-NGS Partners, LLC
|
|
Preferred Equity A-2
|
|
|
1,795,034
|
|
|
|
(2,110,987
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
315,953
|
|
|
|
-
|
|
|
|
(16,377
|
)
|
|
|
|
Preferred Equity A-1
|
|
|
232,292
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(232,292
|
)
|
|
|
-
|
|
|
|
(2,119
|
)
|
|
|
|
Equity
|
|
|
38,780,067
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,396,855
|
)
|
|
|
-
|
|
|
|
33,383,212
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JFL-WCS Partners, LLC
|
|
Preferred Equity Class A
|
|
|
1,310,649
|
|
|
|
(1,330,460
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
19,811
|
|
|
|
-
|
|
|
|
(53,623
|
)
|
|
|
|
Equity
|
|
|
4,535,580
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,534,874
|
|
|
|
-
|
|
|
|
10,070,454
|
|
|
|
-
|
|
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note
3. Investments (continued)
Transactions
With Affiliated/Controlled Companies (continued)
|
Name of Investment(3)(4)
|
|
Type of
Investment
|
|
Fair Value at
September 30,
2020
|
|
Purchases/
(Sales) of or
Advances/
(Distributions)
|
|
Transfers
In/(Out) of
Affiliates
|
|
Unrealized
Gain/(Loss)
|
|
Realized
Gain/(Loss)
|
|
Fair Value at June 30,
2021
|
|
Income Earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kemmerer Operations, LLC
|
|
Senior Secured First Lien Term Loan
|
|
|
2,051,705
|
|
|
|
242,342
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,294,047
|
|
|
|
242,443
|
|
|
|
|
Senior Secured First Lien Delayed Draw Term Loan
|
|
|
515,699
|
|
|
|
(227,085
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
288,614
|
|
|
|
44,007
|
|
|
|
|
Equity
|
|
|
962,717
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(686,639
|
)
|
|
|
-
|
|
|
|
276,078
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Path Medical, LLC
|
|
Senior Secured First Lien Term Loan A
|
|
|
5,905,080
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,993,876
|
)
|
|
|
-
|
|
|
|
2,911,204
|
|
|
|
105,061
|
|
|
|
|
Senior Secured First Lien Term Loan B
|
|
|
6,794,514
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,794,514
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
3,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
URT Acquisition Holdings Corporation
|
|
Unsecured Debt
|
|
|
2,567,929
|
|
|
|
(500,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
41,660
|
|
|
|
2,109,589
|
|
|
|
120,092
|
|
|
|
|
Warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,070,000
|
|
|
|
-
|
|
|
|
1,070,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Multifamily, LLC
|
|
Senior Secured First Lien Term Loan
|
|
|
5,123,913
|
|
|
|
(2,546,495
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,577,418
|
|
|
|
257,660
|
|
|
|
|
Equity
|
|
|
1,332,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
496,639
|
|
|
|
-
|
|
|
|
1,828,639
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Affiliated Investments
|
|
|
|
$
|
87,440,952
|
|
|
$
|
(6,212,021
|
)
|
|
$
|
-
|
|
|
$
|
(2,072,831
|
)
|
|
$
|
(10,433,117
|
)
|
|
$
|
68,722,983
|
|
|
$
|
1,084,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MCC Senior Loan Strategy JV I LLC(1)(2)
|
|
Equity
|
|
|
41,018,500
|
|
|
|
(39,739,929
|
)
|
|
|
-
|
|
|
|
38,868,999
|
|
|
|
(40,147,570
|
)
|
|
|
-
|
|
|
|
-
|
|
|
NVTN LLC
|
|
Senior Secured First Lien Term Loan
|
|
|
4,530,078
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,497,395
|
|
|
|
-
|
|
|
|
6,027,473
|
|
|
|
-
|
|
|
|
|
Super Priority Senior Secured First Lien Term Loan
|
|
|
2,000,000
|
|
|
|
(500,000
|
)
|
|
|
-
|
|
|
|
(40,850
|
)
|
|
|
1,850
|
|
|
|
1,461,000
|
|
|
|
-
|
|
|
Total Controlled Investments
|
|
|
|
$
|
47,548,578
|
|
|
$
|
(40,239,929
|
)
|
|
$
|
-
|
|
|
$
|
40,325,544
|
|
|
$
|
(40,145,720
|
)
|
|
$
|
7,488,473
|
|
|
$
|
-
|
|
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
|
Name of Investment(3)
|
|
Type of
Investment
|
|
Fair
Value at
September 30,
2019
|
|
|
Purchases/
(Sales) of or
Advances/
(Distributions)
|
|
|
Transfers
In/(Out) of
Affiliates
|
|
|
Unrealized
Gain/(Loss)
|
|
|
Realized
Gain/(Loss)
|
|
|
Fair
Value at June 30,
2020
|
|
|
Income
Earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliated Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1888 Industrial Services, LLC
|
|
Senior Secured First Lien Term Loan A
|
|
$
|
9,304,145
|
|
|
$
|
168,923
|
|
|
$
|
-
|
|
|
$
|
(9,473,068
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
167,086
|
|
|
|
|
Senior Secured First Lien Term Loan B
|
|
|
5,886,892
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,886,892
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Senior Secured First Lien Term Loan C
|
|
|
1,170,014
|
|
|
|
21,243
|
|
|
|
-
|
|
|
|
(24,494
|
)
|
|
|
-
|
|
|
|
1,166,763
|
|
|
|
21,011
|
|
|
|
|
Senior Secured First Lien Term Loan D
|
|
|
224,456
|
|
|
|
11,878
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
236,334
|
|
|
|
11,874
|
|
|
|
|
Senior Secured First Lien Term Loan E
|
|
|
-
|
|
|
|
851,840
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
851,840
|
|
|
|
41,700
|
|
|
|
|
Revolving Credit Facility
|
|
|
4,387,025
|
|
|
|
(887,985
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,499,040
|
|
|
|
189,855
|
|
|
|
|
Equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Access Media Holdings, LLC
|
|
Senior Secured First Lien Term Loan
|
|
|
2,509,089
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(885,101
|
)
|
|
|
-
|
|
|
|
1,623,988
|
|
|
|
-
|
|
|
|
|
Preferred Equity Series A
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Preferred Equity Series AA
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Preferred Equity Series AAA
|
|
|
(100,800
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(100,800
|
)
|
|
|
-
|
|
|
|
|
Equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Caddo Investors Holdings 1 LLC
|
|
Equity
|
|
|
2,830,051
|
|
|
|
2,452
|
|
|
|
-
|
|
|
|
212,812
|
|
|
|
-
|
|
|
|
3,045,315
|
|
|
|
-
|
|
|
Dynamic Energy Services International LLC
|
|
Senior Secured First Lien Term Loan
|
|
|
1,264,841
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(390,933
|
)
|
|
|
-
|
|
|
|
873,908
|
|
|
|
-
|
|
|
|
|
Revolving Credit Facility
|
|
|
545,103
|
|
|
|
(545,103
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,692
|
|
|
|
|
Equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
JFL-NGS Partners, LLC
|
|
Preferred Equity A-2
|
|
|
20,150,684
|
|
|
|
(18,355,650
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,795,034
|
|
|
|
338,741
|
|
|
|
|
Preferred Equity A-1
|
|
|
2,607,661
|
|
|
|
(2,375,369
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
232,292
|
|
|
|
43,836
|
|
|
|
|
Equity
|
|
|
19,096,371
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,683,696
|
|
|
|
-
|
|
|
|
38,780,067
|
|
|
|
-
|
|
|
JFL-WCS Partners, LLC
|
|
Preferred Equity Class A
|
|
|
1,236,269
|
|
|
|
74,380
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,310,649
|
|
|
|
57,590
|
|
|
|
|
Equity
|
|
|
2,755,041
|
|
|
|
-
|
|
|
|
-
|
|
|
|
614,247
|
|
|
|
-
|
|
|
|
3,369,288
|
|
|
|
-
|
|
|
Kemmerer Operations, LLC
|
|
Senior Secured First Lien Term Loan
|
|
|
1,766,511
|
|
|
|
209,449
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,975,960
|
|
|
|
209,536
|
|
|
|
|
Senior Secured First Lien Delayed Draw Term Loan
|
|
|
706,604
|
|
|
|
(209,944
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
496,660
|
|
|
|
61,155
|
|
|
|
|
Equity
|
|
|
962,717
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
962,717
|
|
|
|
-
|
|
|
Path Medical, LLC
|
|
Senior Secured First Lien Term Loan
|
|
|
8,845,167
|
|
|
|
826,133
|
|
|
|
-
|
|
|
|
(114,496
|
)
|
|
|
-
|
|
|
|
9,556,804
|
|
|
|
913,579
|
|
|
|
|
Senior Secured First Lien Term Loan A
|
|
|
3,047,473
|
|
|
|
257,147
|
|
|
|
-
|
|
|
|
(11,963
|
)
|
|
|
-
|
|
|
|
3,292,657
|
|
|
|
287,276
|
|
|
|
|
Senior Secured First Lien Term Loan C
|
|
|
344,291
|
|
|
|
(344,463
|
)
|
|
|
-
|
|
|
|
172
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,776
|
|
|
|
|
Equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
US Multifamily, LLC
|
|
Senior Secured First Lien Term Loan
|
|
|
6,670,000
|
|
|
|
(1,546,087
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,123,913
|
|
|
|
464,630
|
|
|
|
|
Equity
|
|
|
3,330,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,165,500
|
)
|
|
|
-
|
|
|
|
2,164,500
|
|
|
|
-
|
|
|
Total Affiliated Investments
|
|
|
|
$
|
99,539,605
|
|
|
$
|
(21,841,156
|
)
|
|
$
|
-
|
|
|
$
|
2,558,480
|
|
|
$
|
-
|
|
|
$
|
80,256,929
|
|
|
$
|
2,832,337
|
|
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
|
Name of Investment(3)
|
|
Type of
Investment
|
|
Fair
Value at
September 30,
2019
|
|
|
Purchases/
(Sales)
of or
Advances/
(Distributions)
|
|
|
Transfers
In/(Out) of Affiliates
|
|
|
Unrealized
Gain/(Loss)
|
|
|
Realized
Gain/(Loss)
|
|
|
Fair
Value
at June 30,
2020
|
|
|
Income
Earned
|
|
|
Controlled Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MCC Senior Loan Strategy
JV I LLC(1)(2)
|
|
Equity
|
|
$
|
69,948,970
|
|
|
$
|
1,312,500
|
|
|
$
|
-
|
|
|
$
|
24,126,289
|
|
|
$
|
-
|
|
|
$
|
47,135,181
|
|
|
$
|
4,725,000
|
|
|
NVTN LLC
|
|
Senior Secured First Lien Term Loan
|
|
|
4,255,990
|
|
|
|
2,309,884
|
|
|
|
-
|
|
|
|
2,035,796
|
|
|
|
-
|
|
|
|
4,530,078
|
|
|
|
62,840
|
|
|
|
|
Super Priority Senior Secured First Lien Term Loan
|
|
|
-
|
|
|
|
1,995,374
|
|
|
|
-
|
|
|
|
4,626
|
|
|
|
-
|
|
|
|
2,000,000
|
|
|
|
1,983
|
|
|
|
|
Senior Secured First Lien Term Loan B
|
|
|
7,152,352
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,152,352
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Senior Secured First Lien Term Loan C
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
TPG Plastics LLC
|
|
Senior Secured Second Lien Term Loan
|
|
|
352,984
|
|
|
|
352,984
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,806
|
|
|
|
|
Unsecured Debt
|
|
|
278,810
|
|
|
|
278,810
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,876
|
|
|
|
|
Unsecured Debt
|
|
|
1,644,751
|
|
|
|
1,630,312
|
|
|
|
-
|
|
|
|
1,672,398
|
|
|
|
1,686,837
|
|
|
|
-
|
|
|
|
-
|
|
|
URT Acquisition Holdings Corporation
|
|
Senior Secured Second Lien Term Loan
|
|
|
18,905,403
|
|
|
|
1,594,416
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,499,819
|
|
|
|
-
|
|
|
|
500,767
|
|
|
|
|
Preferred Equity
|
|
|
4,914,667
|
|
|
|
2,533,622
|
|
|
|
-
|
|
|
|
1,638,223
|
|
|
|
4,019,268
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Equity
|
|
|
-
|
|
|
|
66,378
|
|
|
|
-
|
|
|
|
12,936,879
|
|
|
|
12,870,501
|
|
|
|
-
|
|
|
|
-
|
|
|
Total Controlled Investments
|
|
|
|
$
|
107,453,927
|
|
|
$
|
12,074,280
|
|
|
$
|
-
|
|
|
$
|
49,566,563
|
|
|
$
|
39,076,425
|
|
|
$
|
53,665,259
|
|
|
$
|
5,310,272
|
|
|
|
(1)
|
The
Company and GALIC were the members of MCC JV, a joint venture formed as a Delaware limited liability company that was not consolidated
by either member for financial reporting purposes. The members of MCC JV made capital contributions as investments by MCC JV were completed,
and all portfolio and other material decisions regarding MCC JV were submitted to MCC JV’s board of managers, which was comprised
of an equal number of members appointed by each of the Company and GALIC. Approval of MCC JV’s board of managers required the unanimous
approval of a quorum of the board of managers, with a quorum consisting of equal representation of members appointed by each of the Company
and GALIC. Because management of MCC JV was shared equally between the Company and GALIC, the Company did not have operational control
over MCC JV for purposes of the 1940 Act or otherwise. On October 8, 2020, the Company, GALIC, MCC JV, and an affiliate of Golub entered
into a Membership Interest Purchase Agreement pursuant to which a fund affiliated with and managed by Golub concurrently purchased all
of the Company’s interest in MCC JV and all of GALIC’s interest in MCC JV.
|
|
|
(2)
|
Amount
of income earned represented distributions from MCC JV to the Company and is a component of dividend income, net of provisional taxes
in the Consolidated Statements of Operations.
|
|
|
(3)
|
The
par amount and additional detail are shown in the Consolidated Schedule of Investments.
|
|
|
(4)
|
Securities
with a zero value at the beginning and end of the period, and those that had no transaction activity were excluded from the roll forward.
|
Purchases/(sales) of or advances to/(distributions) from Affiliated
Investments and Controlled Investments represent the proceeds from sales and settlements of investments, purchases, originations and participations,
investment increases due to PIK interest as well as net amortization of premium/(discount) on investments and are included in the purchases
and sales presented on the Consolidated Statements of Cash Flows for the nine months ended June 30, 2021 and 2020. Transfers in/(out)
of Affiliated Investments and Controlled Investments represent the fair value for the month an investment became or was removed as an
Affiliated Investment or a Controlled Investment, as applicable. Income received from Affiliated Investments and Controlled Investments
is included in total investment income on the Consolidated Statements of Operations for the three and nine months ended June 30, 2021
and 2020.
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 3. Investments (continued)
Loan Participation Sales
The Company may sell portions of its investments
via participation agreements to a managed account, managed by an affiliate or non-affiliate of the Company. At June 30, 2021, there were
no participation agreements outstanding. At September 30, 2020, there were two participation agreements outstanding with an aggregate
fair value of $6.8 million. The transfer of the participated portion of the investments met the criteria set forth in ASC 860, Transfers
and Servicing for treatment as a sale. In each case, the Company’s loan participation agreements satisfy the following conditions:
|
|
●
|
transferred
investments have been isolated from the Company, and put presumptively beyond the reach of the Company and its creditors, even in bankruptcy
or other receivership,
|
|
|
●
|
each
participant has the right to pledge or exchange the transferred investments it received, and no condition both constrains the participant
from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the Company; and
|
|
|
●
|
the
Company, its consolidated affiliates or its agents do not maintain effective control over the transferred investments through either:
(i) an agreement that entitles and/or obligates the Company to repurchase or redeem the assets before maturity, or (ii) the ability to
unilaterally cause the holder to return specific assets, other than through a cleanup call.
|
Such investments where the Company has retained
proportionate interests are included in the consolidated schedule of investments. All of these investments are classified within Level
3 of the fair value hierarchy, as defined in Note 4.
During the three and nine months ended June 30,
2021, the Company did not collect interest and principal payments on behalf of any participant, since there were no participation agreements
outstanding. During the three and nine months ended June 30, 2020, the Company collected interest and principal payments on behalf of
the participants in aggregate amounts of $0.7 million and $2.0 million, respectively. Under the terms of the participation agreements,
the Company collected and remitted periodic payments to the participants equal to the participant’s proportionate share of any principal
and interest payments received by the Company from the underlying investee companies.
MCC Senior Loan Strategy JV I LLC
On March 27, 2015, the Company and GALIC entered
into a limited liability company operating agreement to co-manage MCC JV. All portfolio and other material decisions regarding MCC JV
were submitted to MCC JV’s board of managers, which was comprised of four members, two of whom were selected by the Company and
the other two of whom were selected by GALIC. The Company concluded that it did not operationally control MCC JV. As the Company did not
operationally control MCC JV, it did not consolidate the operations of MCC JV within the consolidated financial statements.
On August 4, 2015, MCC JV entered into a senior
secured revolving credit facility (the “JV Facility”) led by Credit Suisse AG, Cayman Islands Branch (“CS”) with
commitments of $100 million subject to leverage and borrowing base restrictions. On March 30, 2017, the Company amended the JV Facility
previously administered by CS and facilitated the assignment of all rights and obligations of CS under the JV Facility to Deutsche Bank
AG, New York Branch (“DB”) and increased the total loan commitments to $200 million. On March 29, 2019, the JV Facility reinvestment
period was extended from March 30, 2019 to June 28, 2019. On June 28, 2019, the JV Facility reinvestment period was further extended from
June 28, 2019 to October 28, 2019. On October 28, 2019, the JV Facility reinvestment period was further extended from October 28, 2019
to March 31, 2020 and the interest rate was modified from bearing an interest rate of LIBOR (with a 0.00% floor) + 2.50% per annum to
LIBOR (with a 0.00% floor) + 2.75% per annum. Effective as of March 31, 2020, the maturity date of the JV Facility was extended to March
31, 2023. As of September 30, 2020, there was approximately $111.3 million outstanding under the JV Facility.
On March 31, 2020, the JV Facility ended
its reinvestment period and entered its amortization period, during which time the interest rate was increased to LIBOR (with a 0.00%
floor) + 3.00% per annum.
On April 20, 2020, the JV Facility was amended
to (i) during each 12-month period during the amortization period permit the sale of investments below a price of 97% as long as the sale
was approved by DB and the balance of all such investments sold is not greater than 30% of the adjusted balance of all loans as of the
first date of each 12-month period and (ii) establish a target effective advance rate at various measurement dates during the amortization
period. All principal collections were to be swept to amortize the amount outstanding under the JV Facility and interest collections were
to be swept, as applicable, in order to meet the target effective advance rate for the applicable period.
On October 8, 2020, the Company, GALIC, MCC JV,
and an affiliate of Golub entered into a Membership Interest Purchase Agreement pursuant to which a fund affiliated with and managed by
Golub concurrently purchased all of the Company’s interest in MCC JV and all of GALIC’s interest in MCC JV for a pre-adjusted
gross purchase price of $156.4 million and an adjusted gross purchase price (which constitutes the aggregate consideration for the membership
interests) of $145.3 million (giving effect to adjustments primarily for principal and interest payments from portfolio companies of MCC
JV from July 1, 2020 through October 7, 2020), resulting in net proceeds (before transaction expenses) of $41.0 million and $6.6 million
for the Company and GALIC, respectively, on the terms and subject to the conditions set forth in the Membership Interest Purchase Agreement,
including the representations, warranties, covenants and indemnities contained therein. In connection with the closing of the transaction
on October 8, 2020, MCC JV repaid in full all outstanding borrowings under, and terminated, its senior secured revolving credit facility,
dated as of August 4, 2015, as amended, administered by Deutsche Bank AG, New York Branch.
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 3. Investments (continued)
MCC Senior Loan Strategy JV I LLC (continued)
Due to the sale transaction on October 8, 2020,
the Company no longer held an investment in MCC JV at June 30, 2021. At September 30, 2020, MCC JV had total investments at fair value
of $163.1 million. As of September 30, 2020, MCC JV’s portfolio was comprised of senior secured first lien term loans of 45 borrowers.
As of September 30, 2020, certain investments in one portfolio company held by MCC JV were on non-accrual status.
Below is a summary of MCC JV’s portfolio,
excluding equity investments, as of September 30, 2020, followed by a listing of the individual investments in MCC JV’s portfolio
as of September 30, 2020:
|
|
|
September 30,
2020
|
|
Senior secured loans(1)
|
|
$
|
182,514,110
|
|
|
Weighted average current interest rate on senior secured loans(2)
|
|
|
6.02
|
%
|
|
Number of borrowers in MCC JV
|
|
|
45
|
|
|
Largest loan to a single borrower(1)
|
|
$
|
10,653,501
|
|
|
Total of five largest loans to borrowers(1)
|
|
$
|
39,191,213
|
|
|
|
(2)
|
Computed
as the (a) annual stated interest rate on accruing senior secured loans, divided by (b) total senior secured loans at par.
|
MCC JV Loan Portfolio as of September 30, 2020
|
Company
|
|
Industry
|
|
Type of Investment
|
|
Maturity
|
|
Par
Amount
|
|
Cost
|
|
Fair
Value(2)
|
|
% of Net
Assets(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4Over International, LLC
|
|
Media: Advertising, Printing & Publishing
|
|
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
|
|
|
6/7/2022
|
|
|
$
|
10,653,501
|
|
|
$
|
10,653,501
|
|
|
$
|
9,995,115
|
|
|
|
16.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
10,653,501
|
|
|
|
10,653,501
|
|
|
|
9,995,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardenas Markets LLC
|
|
Retail
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.75%, 1.00% LIBOR Floor)(1)
|
|
|
11/29/2023
|
|
|
|
5,293,750
|
|
|
|
5,269,829
|
|
|
|
5,287,398
|
|
|
|
8.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
5,293,750
|
|
|
|
5,269,829
|
|
|
|
5,287,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHA Consulting, Inc.
|
|
Construction & Building
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
|
|
|
4/10/2025
|
|
|
|
1,340,389
|
|
|
|
1,336,046
|
|
|
|
1,274,308
|
|
|
|
2.1
|
%
|
|
|
|
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
|
|
|
4/10/2025
|
|
|
|
592,500
|
|
|
|
592,500
|
|
|
|
563,290
|
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
1,932,889
|
|
|
|
1,928,546
|
|
|
|
1,837,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covenant Surgical Partners, Inc.
|
|
Healthcare & Pharmaceuticals
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.00%)(1)
|
|
|
7/1/2026
|
|
|
|
4,950,187
|
|
|
|
4,909,373
|
|
|
|
4,435,496
|
|
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
4,950,187
|
|
|
|
4,909,373
|
|
|
|
4,435,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CT Technologies Intermediate Holdings, Inc.
|
|
Healthcare & Pharmaceuticals
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(1)
|
|
|
12/1/2021
|
|
|
|
5,086,116
|
|
|
|
5,005,862
|
|
|
|
4,875,042
|
|
|
|
8.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
5,086,116
|
|
|
|
5,005,862
|
|
|
|
4,875,042
|
|
|
|
|
|
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note
3. Investments (continued)
MCC
Senior Loan Strategy JV I LLC (continued)
|
Company
|
|
Industry
|
|
Type of Investment
|
|
Maturity
|
|
Par
Amount
|
|
Cost
|
|
Fair
Value(2)
|
|
% of Net
Assets(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Envision Healthcare Corporation
|
|
Healthcare & Pharmaceuticals
|
|
Senior Secured First Lien Term Loan (LIBOR + 3.75%, 1.00% LIBOR Floor)(1)
|
|
|
10/10/2025
|
|
|
|
1,940,438
|
|
|
|
1,888,530
|
|
|
|
1,397,503
|
|
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
1,940,438
|
|
|
|
1,888,530
|
|
|
|
1,397,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GC EOS Buyer, Inc.
|
|
Automotive
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
|
|
|
8/1/2025
|
|
|
|
1,420,440
|
|
|
|
1,404,814
|
|
|
|
1,304,532
|
|
|
|
2.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
1,420,440
|
|
|
|
1,404,814
|
|
|
|
1,304,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GK Holdings, Inc.
|
|
Services: Business
|
|
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
|
|
|
1/20/2021
|
|
|
|
2,877,863
|
|
|
|
2,876,803
|
|
|
|
2,142,856
|
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2,877,863
|
|
|
|
2,876,803
|
|
|
|
2,142,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glass Mountain Pipeline Holdings, LLC
|
|
Energy: Oil & Gas
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
|
|
|
12/23/2024
|
|
|
|
4,850,625
|
|
|
|
4,839,587
|
|
|
|
2,601,390
|
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
4,850,625
|
|
|
|
4,839,587
|
|
|
|
2,601,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Golden West Packaging Group LLC
|
|
Forest Products & Paper
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
|
|
|
6/20/2023
|
|
|
|
4,069,771
|
|
|
|
4,069,771
|
|
|
|
3,968,027
|
|
|
|
6.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
4,069,771
|
|
|
|
4,069,771
|
|
|
|
3,968,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High Ridge Brands Co.
|
|
Consumer Goods: Non-Durable
|
|
Senior Secured First Lien Term Loan (LIBOR + 7.00%, 1.00% LIBOR Floor)(1)(4)
|
|
|
6/30/2022
|
|
|
|
1,732,439
|
|
|
|
1,724,570
|
|
|
|
593,187
|
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
1,732,439
|
|
|
|
1,724,570
|
|
|
|
593,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highline Aftermarket Acquisitions, LLC
|
|
Automotive
|
|
Senior Secured First Lien Term Loan (LIBOR + 3.50%, 1.00% LIBOR Floor)(1)
|
|
|
4/26/2025
|
|
|
|
4,025,000
|
|
|
|
4,016,286
|
|
|
|
3,597,545
|
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
4,025,000
|
|
|
|
4,016,286
|
|
|
|
3,597,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infogroup, Inc.
|
|
High Tech Industries
|
|
Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(1)
|
|
|
4/3/2023
|
|
|
|
4,825,000
|
|
|
|
4,804,770
|
|
|
|
4,224,770
|
|
|
|
7.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
4,825,000
|
|
|
|
4,804,770
|
|
|
|
4,224,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate LLC
|
|
High Tech Industries
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor)(1)
|
|
|
7/1/2026
|
|
|
|
2,722,500
|
|
|
|
2,708,089
|
|
|
|
2,513,684
|
|
|
|
4.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2,722,500
|
|
|
|
2,708,089
|
|
|
|
2,513,684
|
|
|
|
|
|
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 3. Investments (continued)
MCC Senior Loan Strategy JV I LLC (continued)
|
Company
|
|
Industry
|
|
Type of Investment
|
|
Maturity
|
|
Par
Amount
|
|
Cost
|
|
Fair
Value(2)
|
|
% of Net
Assets(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Isagenix International, LLC
|
|
Wholesale
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.75%, 1.00% LIBOR Floor)(1)
|
|
|
6/16/2025
|
|
|
|
2,626,629
|
|
|
|
2,616,715
|
|
|
|
1,337,742
|
|
|
|
2.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2,626,629
|
|
|
|
2,616,715
|
|
|
|
1,337,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IXS Holdings, Inc.
|
|
Automotive
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)
|
|
|
3/5/2027
|
|
|
|
994,874
|
|
|
|
985,714
|
|
|
|
981,543
|
|
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
994,874
|
|
|
|
985,714
|
|
|
|
981,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keystone Acquisition Corp.
|
|
Healthcare & Pharmaceuticals
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
|
|
|
5/1/2024
|
|
|
|
6,099,815
|
|
|
|
6,040,757
|
|
|
|
5,505,083
|
|
|
|
9.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
6,099,815
|
|
|
|
6,040,757
|
|
|
|
5,505,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KNB Holdings Corporation
|
|
Consumer Goods: Durable
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(1)
|
|
|
4/26/2024
|
|
|
|
4,743,170
|
|
|
|
4,694,643
|
|
|
|
1,992,131
|
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
4,743,170
|
|
|
|
4,694,643
|
|
|
|
1,992,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liason Acquisition, LLC
|
|
High Tech Industries
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
|
|
|
12/20/2026
|
|
|
|
3,466,288
|
|
|
|
3,458,579
|
|
|
|
3,372,351
|
|
|
|
5.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
3,466,288
|
|
|
|
3,458,579
|
|
|
|
3,372,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LifeMiles Ltd.
|
|
Services: Consumer
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(1)
|
|
|
8/18/2022
|
|
|
|
4,229,263
|
|
|
|
4,220,573
|
|
|
|
3,880,349
|
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
4,229,263
|
|
|
|
4,220,573
|
|
|
|
3,880,349
|
|
|
|
|
|
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 3. Investments (continued)
MCC Senior Loan Strategy JV I LLC (continued)
|
Company
|
|
Industry
|
|
Type of Investment
|
|
Maturity
|
|
Par
Amount
|
|
|
Cost
|
|
|
Fair
Value(2)
|
|
|
% of Net
Assets(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manna Pro Products, LLC
|
|
Consumer Goods: Non-Durable
|
|
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
|
|
12/8/2023
|
|
|
2,998,542
|
|
|
|
2,998,542
|
|
|
|
2,875,002
|
|
|
|
4.8
|
%
|
|
|
|
|
|
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
|
|
12/8/2023
|
|
|
608,958
|
|
|
|
608,958
|
|
|
|
583,869
|
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
3,607,500
|
|
|
|
3,607,500
|
|
|
|
3,458,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mileage Plus Holdings, LLC
|
|
Transportation: Consumer
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
|
|
6/21/2027
|
|
|
4,401,819
|
|
|
|
4,407,746
|
|
|
|
4,475,769
|
|
|
|
7.5
|
%
|
|
|
|
|
|
|
|
|
|
|
4,401,819
|
|
|
|
4,407,746
|
|
|
|
4,475,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGS US Finco, LLC
|
|
Capital Equipment
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(1)
|
|
10/1/2025
|
|
|
2,943,223
|
|
|
|
2,932,700
|
|
|
|
2,755,445
|
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
2,943,223
|
|
|
|
2,932,700
|
|
|
|
2,755,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern Star Industries, Inc.
|
|
Capital Equipment
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
|
|
3/28/2025
|
|
|
4,143,750
|
|
|
|
4,130,394
|
|
|
|
3,630,754
|
|
|
|
6.1
|
%
|
|
|
|
|
|
|
|
|
|
|
4,143,750
|
|
|
|
4,130,394
|
|
|
|
3,630,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offen, Inc.
|
|
Transportation: Cargo
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.00%)(1)
|
|
6/22/2026
|
|
|
3,626,659
|
|
|
|
3,596,886
|
|
|
|
3,494,880
|
|
|
|
5.9
|
%
|
|
|
|
|
|
|
|
|
|
|
3,626,659
|
|
|
|
3,596,886
|
|
|
|
3,494,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patriot Rail Company LLC
|
|
Transportation: Cargo
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
|
|
10/19/2026
|
|
|
1,741,250
|
|
|
|
1,711,104
|
|
|
|
1,730,454
|
|
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
|
1,741,250
|
|
|
|
1,711,104
|
|
|
|
1,730,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PetroChoice Holdings, Inc.
|
|
Chemicals, Plastics and Rubber
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)
|
|
8/19/2022
|
|
|
6,279,803
|
|
|
|
6,270,073
|
|
|
|
5,418,842
|
|
|
|
9.1
|
%
|
|
|
|
|
|
|
|
|
|
|
6,279,803
|
|
|
|
6,270,073
|
|
|
|
5,418,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Port Townsend Holdings Company, Inc.
|
|
Forest Products & Paper
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
|
|
4/3/2024
|
|
|
2,945,600
|
|
|
|
2,928,240
|
|
|
|
2,632,777
|
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
|
2,945,600
|
|
|
|
2,928,240
|
|
|
|
2,632,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PT Network, LLC
|
|
Healthcare & Pharmaceuticals
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor, 2% PIK)(1)(5)
|
|
11/30/2023
|
|
|
4,955,627
|
|
|
|
4,638,237
|
|
|
|
4,460,064
|
|
|
|
7.5
|
%
|
|
|
|
|
|
Class C Common Stock
|
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,955,628
|
|
|
|
4,638,237
|
|
|
|
4,460,064
|
|
|
|
|
|
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 3. Investments (continued)
MCC Senior Loan Strategy JV I LLC (continued)
|
Company
|
|
Industry
|
|
Type of Investment
|
|
Maturity
|
|
Par
Amount
|
|
|
Cost
|
|
|
Fair
Value(2)
|
|
|
% of Net
Assets(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PVHC Holding Corp
|
|
Containers, Packaging and Glass
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
|
|
8/5/2024
|
|
|
1,952,427
|
|
|
|
1,946,107
|
|
|
|
1,850,511
|
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
1,952,427
|
|
|
|
1,946,107
|
|
|
|
1,850,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quartz Holding Company
|
|
High Tech Industries
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor)(1)
|
|
4/2/2026
|
|
|
3,936,357
|
|
|
|
3,924,382
|
|
|
|
3,847,789
|
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
3,936,357
|
|
|
|
3,924,382
|
|
|
|
3,847,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RB Media, Inc.
|
|
Media: Diversified & Production
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
|
|
8/29/2025
|
|
|
5,651,270
|
|
|
|
5,620,482
|
|
|
|
5,605,495
|
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
|
5,651,270
|
|
|
|
5,620,482
|
|
|
|
5,605,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salient CRGT Inc.
|
|
High Tech Industries
|
|
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
|
|
2/28/2022
|
|
|
2,533,036
|
|
|
|
2,518,601
|
|
|
|
2,343,058
|
|
|
|
3.9
|
%
|
|
|
|
|
|
|
|
|
|
|
2,533,036
|
|
|
|
2,518,601
|
|
|
|
2,343,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SFP Holding, Inc.
|
|
Construction & Building
|
|
Senior Secured First Lien Term Loan (LIBOR + 6.25%, 1.00% LIBOR Floor)(1)
|
|
9/1/2022
|
|
|
4,776,954
|
|
|
|
4,739,017
|
|
|
|
4,733,961
|
|
|
|
7.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured First Lien Term Loan (LIBOR + 6.25%, 1.00% LIBOR Floor)(1)
|
|
9/1/2022
|
|
|
1,852,521
|
|
|
|
1,852,521
|
|
|
|
1,835,849
|
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
6,629,475
|
|
|
|
6,591,538
|
|
|
|
6,569,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shift4 Payments, LLC
|
|
Banking, Finance, Insurance & Real Estate
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
|
|
11/29/2024
|
|
|
7,304,819
|
|
|
|
7,283,042
|
|
|
|
7,255,877
|
|
|
|
12.2
|
%
|
|
|
|
|
|
|
|
|
|
|
7,304,819
|
|
|
|
7,283,042
|
|
|
|
7,255,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Simplified Logistics, LLC
|
|
Services: Business
|
|
Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(1)
|
|
2/27/2022
|
|
|
3,447,500
|
|
|
|
3,447,500
|
|
|
|
3,358,899
|
|
|
|
5.6
|
%
|
|
|
|
|
|
|
|
|
|
|
3,447,500
|
|
|
|
3,447,500
|
|
|
|
3,358,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syniverse Holdings, Inc.
|
|
High Tech Industries
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)
|
|
3/9/2023
|
|
|
2,905,253
|
|
|
|
2,891,007
|
|
|
|
2,229,200
|
|
|
|
3.7
|
%
|
|
|
|
|
|
|
|
|
|
|
2,905,253
|
|
|
|
2,891,007
|
|
|
|
2,229,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Octave Music Group, Inc.
|
|
Media: Diversified & Production
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
|
|
5/29/2025
|
|
|
5,896,552
|
|
|
|
5,844,063
|
|
|
|
5,071,034
|
|
|
|
8.5
|
%
|
|
|
|
|
|
|
|
|
|
|
5,896,552
|
|
|
|
5,844,063
|
|
|
|
5,071,034
|
|
|
|
|
|
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 3. Investments (continued)
MCC Senior Loan Strategy JV I LLC (continued)
|
Company
|
|
Industry
|
|
Type of Investment
|
|
Maturity
|
|
Par
Amount
|
|
|
Cost
|
|
|
Fair
Value(2)
|
|
|
% of Net
Assets(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ThoughtWorks, Inc.
|
|
High Tech Industries
|
|
Senior Secured First Lien Term Loan (LIBOR + 3.75%, 1.00% LIBOR Floor)(1)
|
|
10/11/2024
|
|
|
2,627,704
|
|
|
|
2,620,849
|
|
|
|
2,585,136
|
|
|
|
4.3
|
%
|
|
|
|
|
|
|
|
|
|
|
2,627,704
|
|
|
|
2,620,849
|
|
|
|
2,585,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vero Parent, Inc.
|
|
High Tech Industries
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
|
|
8/16/2024
|
|
|
3,875,924
|
|
|
|
3,856,982
|
|
|
|
3,813,522
|
|
|
|
6.4
|
%
|
|
|
|
|
|
|
|
|
|
|
3,875,924
|
|
|
|
3,856,982
|
|
|
|
3,813,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wawona Delaware Holdings, LLC
|
|
Beverage & Food
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
|
|
9/11/2026
|
|
|
945,350
|
|
|
|
937,295
|
|
|
|
912,358
|
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
945,350
|
|
|
|
937,295
|
|
|
|
912,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wheels Up Partners LLC
|
|
Aerospace & Defense
|
|
Senior Secured First Lien Term Loan (LIBOR + 8.55%, 1.00% LIBOR Floor)(1)
|
|
10/15/2021
|
|
|
1,509,917
|
|
|
|
1,497,761
|
|
|
|
1,509,917
|
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
|
1,509,917
|
|
|
|
1,497,761
|
|
|
|
1,509,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wok Holdings Inc.
|
|
Retail
|
|
Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(1)
|
|
3/1/2026
|
|
|
6,550,249
|
|
|
|
6,505,809
|
|
|
|
4,864,216
|
|
|
|
8.2
|
%
|
|
|
|
|
|
|
|
|
|
|
6,550,249
|
|
|
|
6,505,809
|
|
|
|
4,864,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wrench Group LLC
|
|
Services: Consumer
|
|
Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(1)
|
|
4/30/2026
|
|
|
2,942,820
|
|
|
|
2,920,082
|
|
|
|
2,834,231
|
|
|
|
4.8
|
%
|
|
|
|
|
|
|
|
|
|
|
2,942,820
|
|
|
|
2,920,082
|
|
|
|
2,834,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xebec Global Holdings, LLC
|
|
High Tech Industries
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
|
|
2/12/2024
|
|
|
8,053,168
|
|
|
|
8,053,168
|
|
|
|
8,053,168
|
|
|
|
13.5
|
%
|
|
|
|
|
|
|
|
|
|
|
8,053,168
|
|
|
|
8,053,168
|
|
|
|
8,053,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Z Medica, LLC
|
|
Healthcare & Pharmaceuticals
|
|
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(1)
|
|
9/29/2022
|
|
|
2,566,500
|
|
|
|
2,566,500
|
|
|
|
2,528,002
|
|
|
|
4.3
|
%
|
|
|
|
|
|
|
|
|
|
|
2,566,500
|
|
|
|
2,566,500
|
|
|
|
2,528,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments, September 30, 2020
|
|
|
|
$
|
182,514,111
|
|
|
$
|
181,365,360
|
|
|
$
|
163,133,421
|
|
|
|
273.5
|
%
|
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 3. Investments (continued)
MCC Senior Loan Strategy JV I LLC (continued)
|
(1)
|
Represents
the annual current interest rate as of September 30, 2020. All interest rates are payable in cash, unless otherwise noted.
|
|
|
|
|
(2)
|
Represents
the fair value in accordance with ASC 820 as reported by MCC JV. The determination of such fair value is not included in the Company’s
board of directors’ valuation process described elsewhere herein.
|
|
|
|
|
(3)
|
Percentage
is based on MCC JV’s net assets of $59,617,800 as of September 30, 2020.
|
|
|
|
|
(4)
|
This
investment was on non-accrual status as of September 30, 2020.
|
|
|
|
|
(5)
|
Par
amount includes accumulated PIK interest and is net of repayments.
|
Below is certain summarized financial Information
for MCC JV as of September 30, 2020, and for the three and nine months ended June 30, 2020:
|
|
|
September 30,
2020
|
|
|
|
|
|
|
|
Selected Consolidated Statement of Assets and Liabilities Information:
|
|
|
|
|
Investments in loans at fair value (amortized cost of $181,365,360)
|
|
$
|
163,133,421
|
|
|
Cash
|
|
|
6,055,178
|
|
|
Other assets
|
|
|
1,148,102
|
|
|
Total assets
|
|
$
|
170,336,701
|
|
|
|
|
|
|
|
|
Line of credit (net of debt issuance costs of $1,574,115)
|
|
$
|
109,745,367
|
|
|
Other liabilities
|
|
|
424,095
|
|
|
Interest payable
|
|
|
549,439
|
|
|
Total liabilities
|
|
|
110,718,901
|
|
|
Members’ capital
|
|
|
59,617,800
|
|
|
Total liabilities and members’ capital
|
|
$
|
170,336,701
|
|
|
|
|
For the
three months
ended
June 30,
|
|
|
For the
nine months
ended
June 30,
|
|
|
|
|
2020
|
|
|
2020
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Selected Consolidated Statement of Operations Information:
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
3,580,358
|
|
|
$
|
12,763,742
|
|
|
Total expenses
|
|
|
(2,291,528
|
)
|
|
|
(7,612,876
|
)
|
|
Net unrealized appreciation/(depreciation)
|
|
|
17,149,719
|
|
|
|
(14,703,646
|
)
|
|
Net realized gain/(loss)
|
|
|
(12,586,171
|
)
|
|
|
(12,620,121
|
)
|
|
Net income/(loss)
|
|
$
|
5,852,378
|
|
|
$
|
(22,172,901
|
)
|
Unconsolidated Significant Subsidiaries
The Company evaluated and determined that it had no significant subsidiaries
as of June 30, 2021.
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 4. Fair Value Measurements
The Company follows ASC 820 for measuring the
fair value of portfolio investments. Fair value is the price that would be received in the sale of an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market
prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models
are applied. These valuation models involve some level of management estimation and judgment, the degree of which is dependent on the
price transparency for the instruments or market and the instruments’ complexity. The Company’s fair value analysis includes
an analysis of the value of any unfunded loan commitments. Financial investments recorded at fair value in the consolidated financial
statements are categorized for disclosure purposes based upon the level of judgment associated with the inputs used to measure their value.
The valuation hierarchical levels are based upon the transparency of the inputs to the valuation of the investment as of the measurement
date. Investments which are valued using NAV as a practical expedient are excluded from this hierarchy, and certain prior period amounts
have been reclassified to conform to the current period presentation. The three levels are defined below:
|
|
●
|
Level
1 - Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date.
|
|
|
●
|
Level
2 - Valuations based on inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly
observable at the measurement date. This category includes quoted prices for similar assets or liabilities in active markets, quoted
prices for identical or similar assets or liabilities in non-active markets including actionable bids from third parties for privately
held assets or liabilities, and observable inputs other than quoted prices such as yield curves and forward currency rates that are entered
directly into valuation models to determine the value of derivatives or other assets or liabilities.
|
|
|
●
|
Level
3 - Valuations based on inputs that are unobservable and where there is little, if any, market activity at the measurement date. The
inputs for the determination of fair value may require significant management judgment or estimation and are based upon management’s
assessment of the assumptions that market participants would use in pricing the assets or liabilities. These investments include debt
and equity investments in private companies or assets valued using the Market or Income Approach and may involve pricing models whose
inputs require significant judgment or estimation because of the absence of any meaningful current market data for identical or similar
investments. The inputs in these valuations may include, but are not limited to, capitalization and discount rates, beta and EBITDA multiples.
The information may also include pricing information or broker quotes which include a disclaimer that the broker would not be held to
such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result
in classification as Level 3 information, assuming no additional corroborating evidence.
|
In addition to using the above inputs in investment
valuations, the Company continues to employ a valuation policy approved by the board of directors that is consistent with ASC 820 (see
Note 2). Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading,
in determining fair value.
The following table presents the fair value measurements
of our investments, by major class according to the fair value hierarchy, as of June 30, 2021 (dollars in thousands):
|
|
|
Fair Value Hierarchy as of June 30, 2021
|
|
|
|
|
1
|
|
|
2
|
|
|
3
|
|
|
|
|
|
Investments:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Senior Secured First Lien Term Loans
|
|
$
|
—
|
|
|
$
|
6,120
|
|
|
$
|
84,160
|
|
|
$
|
90,280
|
|
|
Senior Secured Second Lien Term Loans
|
|
|
—
|
|
|
|
—
|
|
|
|
2,483
|
|
|
|
2,483
|
|
|
Senior Secured Notes
|
|
|
—
|
|
|
|
3,726
|
|
|
|
—
|
|
|
|
3,726
|
|
|
Unsecured Debt
|
|
|
—
|
|
|
|
—
|
|
|
|
2,110
|
|
|
|
2,110
|
|
|
Equity/Warrants
|
|
|
16,788
|
|
|
|
—
|
|
|
|
62,465
|
|
|
|
79,253
|
|
|
Total
|
|
$
|
16,788
|
|
|
$
|
9,846
|
|
|
$
|
151,218
|
|
|
$
|
177,852
|
|
|
Investments measured at net asset value(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,767
|
|
|
Total Investments, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
181,619
|
|
|
|
(1)
|
Certain investments that are measured at fair value using NAV have not been categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amount presented in the Consolidated Statements of Assets and Liabilities.
|
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 4. Fair Value Measurements (continued)
The following table presents the fair value measurements
of our investments, by major class according to the fair value hierarchy, as of September 30, 2020 (dollars in thousands):
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Senior Secured First Lien Term Loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
106,463
|
|
|
$
|
106,463
|
|
|
Senior Secured Second Lien Term Loans
|
|
|
—
|
|
|
|
—
|
|
|
|
13,927
|
|
|
|
13,927
|
|
|
Unsecured Debt
|
|
|
—
|
|
|
|
—
|
|
|
|
2,669
|
|
|
|
2,669
|
|
|
MCC Senior Loan Strategy JV I LLC(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
41,019
|
|
|
|
41,019
|
|
|
Equity/Warrants
|
|
|
12,278
|
|
|
|
—
|
|
|
|
67,397
|
|
|
|
79,675
|
|
|
Total
|
|
$
|
12,278
|
|
|
$
|
—
|
|
|
$
|
231,475
|
|
|
$
|
243,753
|
|
|
Investments measured at net asset value(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,991
|
|
|
Total Investments, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
246,744
|
|
|
|
(1)
|
MCC Senior Loan Strategy JV I LLC was sold on October 8, 2020 and as such fair value was measured as a Level 3 investment as of September 30, 2020. Previously, fair value had been measured using NAV.
|
|
|
(2)
|
Certain investments that are measured at fair value using NAV have not been categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amount presented in the Consolidated Statements of Assets and Liabilities.
|
The following table provides a reconciliation of the beginning and
ending balances for investments that use Level 3 inputs for the nine months ended June 30, 2021 (dollars in thousands):
|
|
|
Senior Secured First Lien Term Loans
|
|
|
Senior Secured Second Lien Term Loans
|
|
|
Unsecured Debt
|
|
|
MCC Senior Loan Strategy JV I LLC
|
|
|
Equities/ Warrants
|
|
|
Total
|
|
|
Balance as of September 30, 2020
|
|
$
|
106,463
|
|
|
$
|
13,927
|
|
|
$
|
2,669
|
|
|
$
|
41,019
|
|
|
$
|
67,397
|
|
|
$
|
231,475
|
|
|
Purchases and other adjustments to cost
|
|
|
4,258
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,258
|
|
|
Sales
|
|
|
1,887
|
|
|
|
(11,892
|
)
|
|
|
(782
|
)
|
|
|
(39,739
|
)
|
|
|
(3,085
|
)
|
|
|
(53,611
|
)
|
|
Net realized gains/(losses) from investments
|
|
|
(25,263
|
)
|
|
|
4
|
|
|
|
27
|
|
|
|
(40,148
|
)
|
|
|
(3,268
|
)
|
|
|
(68,648
|
)
|
|
Net unrealized gains/(losses)
|
|
|
(3,185
|
)
|
|
|
444
|
|
|
|
196
|
|
|
|
38,868
|
|
|
|
1,421
|
|
|
|
37,744
|
|
|
Balance as of June 30, 2021
|
|
$
|
84,160
|
|
|
$
|
2,483
|
|
|
$
|
2,110
|
|
|
$
|
—
|
|
|
$
|
62,465
|
|
|
$
|
151,218
|
|
The following table provides a reconciliation of the beginning and
ending balances for investments that use Level 3 inputs for the nine months ended June 30, 2020 (dollars in thousands):
|
|
|
Senior Secured First Lien Term Loans
|
|
|
Senior Secured Second Lien Term Loans
|
|
|
Unsecured Debt
|
|
|
Equities/ Warrants
|
|
|
Total
|
|
|
Balance as of September 30, 2019
|
|
$
|
192,770
|
|
|
$
|
36,508
|
|
|
$
|
2,653
|
|
|
$
|
78,329
|
|
|
$
|
310,260
|
|
|
Purchases and other adjustments to cost
|
|
|
1,519
|
|
|
|
654
|
|
|
|
5
|
|
|
|
1,083
|
|
|
|
3,261
|
|
|
Originations
|
|
|
14,629
|
|
|
|
944
|
|
|
|
2,500
|
|
|
|
182
|
|
|
|
18,255
|
|
|
Sales
|
|
|
(186
|
)
|
|
|
(1,160
|
)
|
|
|
—
|
|
|
|
(5,714
|
)
|
|
|
(7,060
|
)
|
|
Settlements
|
|
|
(70,541
|
)
|
|
|
(537
|
)
|
|
|
(549
|
)
|
|
|
(25,430
|
)
|
|
|
(97,057
|
)
|
|
Net realized gains/(losses) from investments
|
|
|
—
|
|
|
|
(20,729
|
)
|
|
|
—
|
|
|
|
(18,577
|
)
|
|
|
(39,306
|
)
|
|
Net unrealized gains/(losses)
|
|
|
(30,853
|
)
|
|
|
(2,441
|
)
|
|
|
(1,371
|
)
|
|
|
34,293
|
|
|
|
(372
|
)
|
|
Balance as of June 30, 2020
|
|
$
|
107,338
|
|
|
$
|
13,239
|
|
|
$
|
3,238
|
|
|
$
|
64,166
|
|
|
$
|
187,981
|
|
Net change in unrealized gain (loss) for the nine
months ended June 30, 2021 and 2020 included in earnings related to investments still held as of June 30, 2021 and 2020, was approximately
$(10.9) million and $34.4 million, respectively.
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 4. Fair Value Measurements (continued)
Purchases and other adjustments to cost include
purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on
debt securities, and PIK.
Sales represent net proceeds received from investments
sold.
Settlements represent principal paydowns received.
A review of the fair value hierarchy classifications
is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial
assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3
category as of the beginning of the quarter in which the reclassifications occur. During the nine months ended June 30, 2021 and 2020,
none of our investments transferred in or out of Level 3.
The following table presents the quantitative
information about Level 3 fair value measurements of our investments, as of June 30, 2021 (dollars in thousands):
|
|
|
Fair Value
|
|
Valuation Technique
|
|
Unobservable Input(1)
|
|
Range (Weighted Average)
|
|
Senior Secured First Lien Term Loans
|
|
$
|
3,753
|
|
|
Market Approach
|
|
LTM Revenue Multiple
|
|
0.25x - 0.55x (0.50x)
|
|
Senior Secured First Lien Term Loans
|
|
|
2,577
|
|
|
Enterprise Value Analysis / Market Approach
|
|
Expected Proceeds / Capitalization Rate
|
|
$4.50 - $5.50 ($5.00)
|
|
Senior Secured First Lien Term Loans
|
|
|
6,518
|
|
|
Income Approach (DCF)
|
|
Market Yield
|
|
8.50% - 9.50% (9.00%)
|
|
Senior Secured First Lien Term Loans
|
|
|
29,824
|
|
|
Market Approach
|
|
Market Yield
|
|
5.50% - 20.00% (12.98%)
|
|
Senior Secured First Lien Term Loans
|
|
|
6,978
|
|
|
Market Approach
|
|
EBITDA Multiple
|
|
2.00x - 5.00x (3.76x)
|
|
Senior Secured First Lien Term Loans
|
|
|
11,639
|
|
|
Market Approach (DCF)
|
|
Market Yield
|
|
6.75% - 7.25% (7.00%)
|
|
Senior Secured First Lien Term Loans
|
|
|
19,960
|
|
|
Market Approach (Guideline Comparable)
|
|
Market Yield
|
|
5.00% - 10.00% (7.99%)
|
|
Senior Secured First Lien Term Loans
|
|
|
2,911
|
|
|
Market Approach
|
|
NFY Revenue Multiple
|
|
0.30x - 0.40x (0.35x)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured Second Lien Term Loans
|
|
|
2,483
|
|
|
Market Approach
|
|
LTM EBITDA multiple
|
|
0.10x - 0.11x (0.10x)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Debt
|
|
|
2,110
|
|
|
Market Approach
|
|
Market Yield
|
|
9.50% - 10.50% (10.00%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity/Warrants
|
|
|
1,830
|
|
|
Enterprise Value Analysis / Market Approach
|
|
Expected Proceeds / Capitalization Rate
|
|
$4.50 - $5.50 ($5.00)
|
|
Equity/Warrants
|
|
|
1,070
|
|
|
Market Approach
|
|
EV/EBITDA Multiple
|
|
4.00x - 4.50x (4.25x)
|
|
Equity/Warrants
|
|
|
43,454
|
|
|
Market Approach
|
|
LTM EBITDA multiple
|
|
8.50x - 9.50x (9.00x)
|
|
Equity/Warrants
|
|
|
2,349
|
|
|
Market Approach
|
|
LTM Revenue Multiple
|
|
0.15x - 0.55x (0.20x)
|
|
Equity/Warrants
|
|
|
7,665
|
|
|
Market Approach
|
|
EBITDA Multiple / Revenue Multiple
|
|
6.88x - 15.00x (13.39x)
|
|
Equity/Warrants
|
|
|
864
|
|
|
Market Approach (Guideline Comparable)
|
|
EBITDA Multiple / Revenue Multiple
|
|
2.00x - 6.50x (6.50x)
|
|
Equity/Warrants
|
|
|
4,616
|
|
|
Market Approach
|
|
Market Yield
|
|
10.50% - 12.00% (11.25%)
|
|
Equity/Warrants
|
|
|
205
|
|
|
Market Approach (Guideline Comparable)
|
|
EBITDA Multiple
|
|
2.25x - 4.50x (4.50x)
|
|
Equity/Warrants
|
|
|
276
|
|
|
Market Approach
|
|
EBITDA Multiple
|
|
1.75x - 2.75x (2.25x)
|
|
Equity/Warrants
|
|
|
62
|
|
|
Market Approach
|
|
EV/CFY Multiple
|
|
5.92x - 6.99x (6.46x)
|
|
Equity/Warrants
|
|
|
74
|
|
|
Market Approach
|
|
Fully Diluted
|
|
$0.01 - $0.01 ($0.01)
|
|
Total
|
|
$
|
151,218
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents
inputs used when the Company has determined that market participants would use such multiples when measuring the fair value of these
investments.
|
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 4. Fair Value Measurements (continued)
The following table presents the quantitative
information about Level 3 fair value measurements of our investments, as of September 30, 2020 (dollars in thousands):
|
|
|
Fair
Value
|
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range
(Weighted Average)
|
|
Senior Secured First Lien Term Loans
|
|
$
|
50,135
|
|
|
Income Approach (DCF)
|
|
Market yield
|
|
7.52% - 15.27% (10.34%)
|
|
Senior Secured First Lien Term Loans
|
|
|
55,856
|
|
|
Market Approach
(Guideline Comparable)/Income Approach (DCF)/ Enterprise Value Analysis
|
|
Revenue Multiple(1)
|
|
0.25x – 0.50x (0.49x)
|
|
|
|
|
|
|
|
|
|
EBITDA Multiple(1)
|
|
2.50x - 8.50x (5.73x)
|
|
|
|
|
|
|
|
|
|
Capitalization rate
|
|
5.50x - 5.50x (5.50x)
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
17.90% - 17.90% (17.90%)
|
|
|
|
|
|
|
|
|
|
Expected Proceeds
|
|
$8.25 - $52.00 ($45.65)
|
|
Senior Secured First Lien Term Loans
|
|
|
472
|
|
|
Recent Arms-Length Transaction
|
|
Recent Arms Length Transaction
|
|
N/A
|
|
Senior Secured Second Lien Term Loan
|
|
|
9,978
|
|
|
Income Approach (DCF)
|
|
Market yield
|
|
12.01% - 14.82% (14.01%)
|
|
Senior Secured Second Lien Term Loans
|
|
|
3,949
|
|
|
Market Approach
(Guideline Comparable)/Income Approach (DCF)
|
|
EBITDA Multiple(1)
|
|
8.00x - 8.00x (8.00x)
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
21.00% - 21.00% (21.00%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Debt
|
|
|
-
|
|
|
Market Approach (Guideline Comparable)
|
|
EBITDA Multiple(1)
|
|
2.50x - 4.50x (3.50x)
|
|
Unsecured Debt
|
|
|
2,669
|
|
|
Recent Arms-Length Transaction
|
|
Recent Arms Length Transaction
|
|
N/A
|
|
MCC Senior Loan Strategy JV I LLC
|
|
|
41,019
|
|
|
Recent Arms-Length Transaction
|
|
Recent Arms Length Transaction
|
|
N/A
|
|
Equity
|
|
|
63,468
|
|
|
Market Approach
(Guideline Comparable)/ Income Approach
(DCF)/Enterprise Value Analysis
|
|
Revenue Multiple(1)
|
|
0.50x - 0.88x (0.69x)
|
|
|
|
|
|
|
|
|
|
EBITDA Multiple(1)
|
|
2.50x - 9.50x (8.25x)
|
|
|
|
|
|
|
|
|
|
Capitalization rate
|
|
5.50% - 5.50% (5.50%)
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
14.50% - 14.50% (14.50%)
|
|
|
|
|
|
|
|
|
|
Expected Proceeds
|
|
$8.25 - $52.00 ($38.00)
|
|
Equity
|
|
|
3,929
|
|
|
Income Approach (DCF)
|
|
Market Yield
|
|
15.40% - 15.40% (15.40%)
|
|
Total
|
|
$
|
231,475
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents
inputs used when the Company has determined that market participants would use such multiples when measuring the fair value of these
investments.
|
The significant unobservable inputs used in the
fair value measurement of the Company’s debt and derivative investments are market yields. Increases in market yields would result
in lower fair value measurements.
The significant unobservable inputs used in the
fair value measurement of the Company’s equity/warrants investments are comparable company multiples of revenue or EBITDA for the
latest twelve months (“LTM”), next twelve months (“NTM”) or a reasonable period a market participant would consider.
Increases in EBITDA multiples in isolation would result in higher fair value measurement.
In September 2017, the Company entered into an
agreement with Global Accessories Group, LLC (“Global Accessories”), in which the Company exchanged its full position in Lydell
Jewelry Design Studio, LLC for a 3.8% membership interest in Global Accessories, which is included in the Consolidated Schedule of Investments.
As part of the agreement, the Company is entitled to contingent consideration in the form of cash payments (“Earnout”), as
well as up to an additional 5% membership interest (“AMI”), provided Global Accessories achieves certain financial benchmarks
through calendar year ended 2022. The Earnout and AMI were initially recorded with an aggregate fair value of $2.4 million on the transaction
date using the Income Approach and were included on the Consolidated Statements of Assets and Liabilities in other assets. The contingent
consideration is remeasured to fair value at each reporting date until the contingency is resolved. Any changes in fair value will be
recognized in earnings. As of June 30, 2021 and September 30, 2020, the Company deemed the contingent consideration to be uncollectible.
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 5. Borrowings
As a BDC, we are generally only allowed to employ
leverage to the extent that our asset coverage, as defined in the 1940 Act, equals at least 200% after giving effect to such leverage.
The amount of leverage that we employ at any time depends on our assessment of the market and other factors at the time of any proposed
borrowing.
However, in March 2018, the Small Business Credit
Availability Act modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur from 200% to 150%, if
certain requirements under the 1940 Act are met. Under the 1940 Act, we are allowed to increase our leverage capacity if stockholders
representing at least a majority of the votes cast, when a quorum is present, approve a proposal to do so. If we receive stockholder approval,
we would be allowed to increase our leverage capacity on the first day after such approval. Alternatively, the 1940 Act allows the majority
of our independent directors to approve an increase in our leverage capacity, and such approval would become effective after the one-year
anniversary of such approval. In either case, we would be required to make certain disclosures on our website and in SEC filings regarding,
among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage.
As of June 30, 2021, the Company’s asset
coverage was 302.5% after giving effect to leverage and therefore the Company’s asset coverage was greater than 200%, the minimum
asset coverage requirement applicable presently to the Company under the 1940 Act.
As of September 30, 2020, the Company’s
asset coverage was 199.2% after giving effect to leverage and therefore the Company’s asset coverage was below 200%, the minimum
asset coverage requirement under the 1940 Act. As a result, the Company was prohibited from making distributions to stockholders, including
the payment of any dividend, and could not employ further leverage until the Company’s asset coverage was at least 200% after giving
effect to such leverage.
The Company’s outstanding debt as of June
30, 2021 and September 30, 2020 was as follows (dollars in thousands):
|
|
|
June 30, 2021
|
|
|
September 30, 2020
|
|
|
|
|
Aggregate Principal Available
|
|
|
Principal Amount Outstanding
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Aggregate Principal Available
|
|
|
Principal Amount Outstanding
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
2021 Notes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
74,013
|
|
|
$
|
74,013
|
|
|
$
|
73,803
|
|
|
$
|
73,095
|
|
|
2023 Notes
|
|
$
|
77,847
|
|
|
$
|
77,847
|
|
|
$
|
77,364
|
|
|
$
|
78,937
|
|
|
$
|
77,847
|
|
|
$
|
77,847
|
|
|
$
|
77,158
|
|
|
$
|
72,460
|
|
|
Total debt
|
|
$
|
77,847
|
|
|
$
|
77,847
|
|
|
$
|
77,364
|
|
|
$
|
78,937
|
|
|
$
|
151,860
|
|
|
$
|
151,860
|
|
|
$
|
150,961
|
|
|
$
|
145,555
|
|
Unsecured Notes
2021 Notes
On December 17, 2015, the Company issued $70.8
million in aggregate principal amount of 6.50% unsecured notes that mature on January 30, 2021 (the “2021 Notes”). On January
14, 2016, the Company closed an additional $3.25 million in aggregate principal amount of the 2021 Notes, pursuant to the partial exercise
of the underwriters’ option to purchase additional notes. The 2021 Notes bore interest at a rate of 6.50% per year, payable quarterly
on January 30, April 30, July 30 and October 30 of each year, beginning January 30, 2016.
On October 21, 2020, the Company caused notices
to be issued to the holders of the 2021 Notes regarding the Company’s exercise of its option to redeem, in whole, the issued and
outstanding 2021 Notes, pursuant to Section 1104 of the Indenture dated as of February 7, 2012, between the Company and U.S. Bank National
Association, as trustee, and Section 101(h) of the Third Supplemental Indenture dated as of December 17, 2015. The Company redeemed $74,012,825
in aggregate principal amount of the issued and outstanding 2021 Notes on November 20, 2020 (the “Redemption Date”).
The 2021 Notes were redeemed at 100% of their principal amount ($25 per 2021 Note), plus the accrued and unpaid interest thereon from
October 31, 2020, through, but excluding, the Redemption Date. The Company funded the redemption of the 2021 Notes with cash on hand.
2023 Notes
On March 18, 2013, the Company issued $60.0 million
in aggregate principal amount of 6.125% unsecured notes that mature on March 30, 2023 (the “2023 Notes”). On March 26, 2013,
the Company closed an additional $3.5 million in aggregate principal amount of the 2023 Notes, pursuant to the partial exercise of the
underwriters’ option to purchase additional notes. As of March 30, 2016, the 2023 Notes may be redeemed in whole or in part at any
time or from time to time at the Company’s option. The 2023 Notes bear interest at a rate of 6.125% per year, payable quarterly
on March 30, June 30, September 30 and December 30 of each year, beginning June 30, 2013.
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 5. Borrowings (continued)
Unsecured Notes (continued)
On December 12, 2016, the Company entered into
an “At-The-Market” (“ATM”) debt distribution agreement with FBR Capital Markets & Co., through which the Company
could offer for sale, from time to time, up to $40.0 million in aggregate principal amount of the 2023 Notes. The Company sold 1,573,872
of the 2023 Notes at an average price of $25.03 per note, and raised $38.6 million in net proceeds, through the ATM debt distribution
agreement.
On March 10, 2018, the Company redeemed $13.0
million in aggregate principal amount of the 2023 Notes. On December 31, 2018, the Company redeemed $12.0 million in aggregate principal
amount of the 2023 Notes. The redemption was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments,
which resulted in a realized loss of $0.2 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment
of debt.
On December 21, 2020, the Company announced that
it completed the application process for and was authorized to transfer the listing of the 2023 Notes to the NASDAQ Global Market. The
listing and trading of the 2023 Notes on the NYSE ceased at the close of trading on December 31, 2020. Effective January 4, 2021, the
2023 Notes began trading on the NASDAQ Global Market under the trading symbol “PFXNL.”
Secured Notes
Israeli Notes
On January 26, 2018, the Company priced a debt
offering in Israel of $121.3 million of Israeli Notes (as defined below). The Israeli Notes were listed on the TASE and denominated in
New Israeli Shekels, but linked to the US Dollar at a fixed exchange rate which mitigates any currency exposure to the Company.
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 5. Borrowings (continued)
Secured Notes (continued)
On June 5, 2018, the Company announced that on
June 1, 2018, its board of directors authorized the Company to repurchase and retire up to $20 million of the Company’s outstanding
Israeli Notes on the TASE.
During the quarter ended December 31, 2018, the
Company exchanged $1.0 million United States Dollars to New Israeli Shekels at a rate of 3.73 USD/NIS in order to repurchase the Israeli
Notes on the TASE. As the Israeli Notes were trading below par at the time of the repurchase, and the USD/NIS (foreign currency) spot
rate was higher than the fixed exchange rate agreed upon in the deed of trust, the Company was able to repurchase and retire 3,812,000
units, which resulted in $1,119,201 aggregate principal amount of the Israeli Notes being retired. The redemption was accounted for as
a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized gain of $0.1 million
and was recorded on the Consolidated Statements of Operations as a gain on extinguishment of debt.
On December 31, 2019, in addition to the scheduled
12.5% quarterly amortization payment, the Company used proceeds from its principal repayments in assets held by PhenixFIN SLF and PhenixFIN
Small Business Fund to pre-pay an additional $19.1 million of the Israeli Notes. The pre-payment was accounted for as a debt extinguishment
in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.9 million and was recorded on
the Consolidated Statements of Operations as a net loss on extinguishment of debt.
On March 31, 2020, in addition to the scheduled
12.5% quarterly amortization payment, the Company used proceeds from its principal repayments in assets held by PhenixFIN SLF and PhenixFIN
Small Business Fund to pre-pay an additional $19.8 million of the Israeli Notes. The pre-payment was accounted for as a debt extinguishment
in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.9 million and was recorded on
the Consolidated Statements of Operations as a loss on extinguishment of debt.
On April 14, 2020, the Company repaid the remaining
$21.1 million of Israeli Notes outstanding, and as such is no longer subject to any covenants relating thereto. The Israeli Notes were
redeemed at 100% of their principal amount, plus the accrued interest thereon, through April 14, 2020.
Fair Value of Debt Obligations
The fair values of our debt obligations are determined
in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction
between market participants at the measurement date under current market conditions. The fair value of the Notes, which are publicly traded,
is based upon closing market quotes as of the measurement date. As of June 30, 2021 and September 30, 2020, the Notes would be deemed
to be Level 1 in the fair value hierarchy, as defined in Note 4.
In accordance with ASU 2015-03, the debt issuance
costs related to the Notes are reported on the Consolidated Statements of Assets and Liabilities as a direct deduction from the face amount
of the Notes. As of June 30, 2021 and September 30, 2020, debt issuance costs related to the Notes were as follows (dollars in thousands):
|
|
|
June 30, 2021
|
|
|
September 30, 2020
|
|
|
|
|
2023 Notes
|
|
|
Total
|
|
|
2021 Notes
|
|
|
2023 Notes
|
|
|
Total
|
|
|
Total debt issuance costs
|
|
$
|
3,102
|
|
|
$
|
3,102
|
|
|
$
|
3,226
|
|
|
$
|
3,102
|
|
|
$
|
6,328
|
|
|
Amortized debt issuance costs
|
|
|
2,620
|
|
|
|
2,620
|
|
|
|
3,016
|
|
|
|
2,406
|
|
|
$
|
5,422
|
|
|
Unamortized debt issuance costs
|
|
$
|
482
|
|
|
$
|
482
|
|
|
$
|
210
|
|
|
$
|
696
|
|
|
$
|
906
|
|
For the three and nine months ended June
30, 2021 and 2020, the components of interest expense, amortized debt issuance costs, weighted average stated interest rate and weighted
average outstanding debt balance for the Notes were as follows (dollars in thousands):
|
|
|
For the Three Months Ended June 30
|
|
|
For the Nine Months Ended June 30
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
2021 Notes Interest
|
|
$
|
—
|
|
|
$
|
1,203
|
|
|
$
|
668
|
|
|
$
|
3,608
|
|
|
2023 Notes Interest
|
|
|
1,192
|
|
|
|
1,192
|
|
|
|
3,576
|
|
|
|
3,576
|
|
|
2023 Notes Premium
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
Israeli Notes Interest
|
|
|
—
|
|
|
|
58
|
|
|
|
—
|
|
|
|
2,486
|
|
|
Amortization of debt issuance costs
|
|
|
69
|
|
|
|
284
|
|
|
|
294
|
|
|
|
2,644
|
|
|
Total
|
|
$
|
1,261
|
|
|
$
|
2,736
|
|
|
$
|
4,538
|
|
|
$
|
12,312
|
|
|
Weighted average stated interest rate
|
|
|
2.2
|
%
|
|
|
6.4
|
%
|
|
|
7.2
|
%
|
|
|
6.4
|
%
|
|
Weighted average outstanding balance
|
|
$
|
77,847
|
|
|
$
|
154,881
|
|
|
$
|
84,649
|
|
|
$
|
201,523
|
|
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 6. Agreements
Investment Management Agreement
We had entered into an investment management agreement
with MCC Advisors (the “Investment Management Agreement”), which expired on December 31, 2020. Mr. Brook Taube, our Chairman
and Chief Executive Officer through December 31, 2020 and one of our directors through January 21, 2021 and Mr. Seth Taube, one of our
directors through January 21, 2021 are both affiliated with MCC Advisors and Medley.
Under the terms of the Investment Management Agreement,
MCC Advisors:
|
|
●
|
determined
the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;
|
|
|
●
|
identified,
evaluated and negotiated the structure of the investments we made (including performing due diligence on our prospective portfolio companies);
and
|
|
|
●
|
executed,
closed, monitored and administered the investments we made, including the exercise of any voting or consent rights.
|
MCC Advisors’ services under the
Investment Management Agreement were not exclusive, and it was free to furnish similar services to other entities so long as its services
to us were not impaired.
Pursuant to the Investment Management
Agreement, we paid MCC Advisors a fee for investment advisory and management services consisting of a base management fee and a two-part
incentive fee.
On December 3, 2015, MCC Advisors recommended
and, in consultation with the Board, agreed to reduce fees under the Investment Management Agreement. Beginning January 1, 2016, the base
management fee was reduced to 1.50% on gross assets above $1 billion. In addition, MCC Advisors reduced its incentive fee from 20% on
pre-incentive fee net investment income over an 8% hurdle, to 17.5% on pre-incentive fee net investment income over a 6% hurdle. Moreover,
the revised incentive fee includes a netting mechanism and is subject to a rolling three-year look back from January 1, 2016 forward.
Under no circumstances would the new fee structure result in higher fees to MCC Advisors than fees under the prior investment management
agreement.
The following discussion of our base management
fee and two-part incentive fee reflect the terms of the fee waiver agreement executed by MCC Advisors on February 8, 2016 (the “Fee
Waiver Agreement”). The terms of the Fee Waiver Agreement were effective as of January 1, 2016 and were a permanent reduction in
the base management fee and incentive fee on net investment income payable to MCC Advisors for the investment advisory and management
services it provided under the Investment Management Agreement. The Fee Waiver Agreement did not change the second component of the incentive
fee, which was the incentive fee on capital gains.
On January 15, 2020, the Company’s board
of directors, including all of the independent directors, approved the renewal of the Investment Management Agreement through the later
of April 1, 2020 or so long as the Amended and Restated Agreement and Plan of Merger, dated as of July 29, 2019 (the “Amended MCC
Merger Agreement”), by and between the Company and Sierra (the “Amended MCC Merger Agreement”) was in effect, but no
longer than a year; provided that, if the Amended MCC Merger Agreement was terminated by Sierra, then the termination of the Investment
Management Agreement would be effective on the 30th day following receipt of Sierra’s notice of termination to the Company. On May
1, 2020, the Company received a notice of termination of the Amended MCC Merger Agreement from Sierra. Under the Amended MCC Merger Agreement,
either party was permitted, subject to certain conditions, to terminate the Amended MCC Merger Agreement if the merger was not consummated
by March 31, 2020. Sierra elected to do so on May 1, 2020. As result of the termination by Sierra of the Amended MCC Merger Agreement
on May 1, 2020, the Investment Management Agreement would have been terminated effective as of May 31, 2020. On May 21, 2020, the Board,
including all of the independent directors, extended the term of the Investment Management Agreement through the end of the then-current
quarter, June 30, 2020. On June 15, 2020, the Board, including all of the independent directors, extended the term of the Investment Management
Agreement through the end of the then-current quarter, September 30, 2020. On September 29, 2020, the Board, including all of the independent
directors, extended the term of the Investment Management Agreement through December 31, 2020.
On November 18, 2020, the Board approved the adoption
of an internalized management structure effective January 1, 2021. The new management structure replaces the current Investment Management
and Administration Agreements with MCC Advisors LLC, which expired on December 31, 2020. To lead the internalized management team, the
Board approved the appointment of David Lorber, who had served as an independent director of the Company since April 2019, as interim
Chief Executive Officer, and Ellida McMillan as Chief Financial Officer of the Company, each effective January 1, 2021. In connection
with his appointment, Mr. Lorber stepped down from the Compensation Committee of the Board, the Nominating and Corporate Governance Committee
of the Board, and the Special Committee of the Board.
Base Management Fee
Through December 31, 2020, for providing investment
advisory and management services to us, MCC Advisors received a base management fee. The base management fee was calculated at an annual
rate of 1.75% (0.4375% per quarter) of up to $1.0 billion of the Company’s gross assets and 1.50% (0.375% per quarter) of any amounts
over $1.0 billion of the Company’s gross assets and was payable quarterly in arrears. The base management fee was calculated based
on the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters.
PHENIXFIN
CORPORATION
Notes
to Consolidated Financial Statements (continued)
June
30, 2021
(unaudited)
Note 6.
Agreements (continued)
Base Management Fee (continued)
For the three
and nine months ended June 30, 2021, the Company incurred base management fees to MCC Advisors of $0 and $1.1 million, respectively.
For the three and nine months ended June 30, 2020, the Company incurred base management fees to MCC Advisors of $1.3 million and $5.0
million, respectively.
Incentive
Fee
Through December
31, 2020, the incentive fee had two components, as follows:
Incentive Fee Based on Income
The first component of the incentive fee was payable
quarterly in arrears and was based on our pre-incentive fee net investment income earned during the calendar quarter for which the incentive
fee was being calculated. MCC Advisors was entitled to receive the incentive fee on net investment income from us if our Ordinary Income
(as defined below) exceeded a quarterly “hurdle rate” of 1.5%. The hurdle amount was calculated after making appropriate adjustments
to the Company’s net assets, as determined as of the beginning of each applicable calendar quarter, in order to account for any
capital raising or other capital actions as a result of any issuances by the Company of its common stock (including issuances pursuant
to our dividend reinvestment plan), any repurchase by the Company of its own common stock, and any dividends paid by the Company, each
as may have occurred during the relevant quarter.
Beginning with the calendar quarter that commenced
on January 1, 2016, the incentive fee on net investment income was determined and paid quarterly in arrears at the end of each calendar
quarter by reference to our aggregate net investment income, as adjusted as described below, from the calendar quarter then ending and
the eleven preceding calendar quarters (or if shorter, the number of quarters that have occurred since January 1, 2016). We refer to such
period as the “Trailing Twelve Quarters.”
The hurdle amount for the incentive fee on net
investment income was determined on a quarterly basis and was equal to 1.5% multiplied by the Company’s net asset value at the beginning
of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The hurdle amount was calculated after making appropriate
adjustments to the Company’s net assets, as determined as of the beginning of each applicable calendar quarter, in order to account
for any capital raising or other capital actions as a result of any issuances by the Company of its common stock (including issuances
pursuant to our dividend reinvestment plan), any repurchase by the Company of its own common stock, and any dividends paid by the Company,
each as may have occurred during the relevant quarter. The incentive fee for any partial period was to be appropriately pro-rated. Any
incentive fee on net investment income was to be paid to MCC Advisors on a quarterly basis and was to be based on the amount by which
(A) aggregate net investment income (“Ordinary Income”) in respect of the relevant Trailing Twelve Quarters exceeded (B) the
hurdle amount for such Trailing Twelve Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing
Twelve Quarters is referred to as the “Excess Income Amount.” For the avoidance of doubt, Ordinary Income was net of all fees
and expenses, including the reduced base management fee but excluding any incentive fee on Pre-Incentive Fee net investment income or
on the Company’s capital gains.
Determination of Quarterly Incentive Fee
Based on Income
The incentive fee on net investment income for
each quarter was determined as follows:
|
|
●
|
No
incentive fee on net investment income was payable to MCC Advisors for any calendar quarter for which there was no Excess Income Amount;
|
|
|
●
|
100%
of the Ordinary Income, if any, that exceeded the hurdle amount, but was less than or equal to an amount, which we refer to as the “Catch-up
Amount,” determined as the sum of 1.8182% multiplied by the Company’s net assets at the beginning of each applicable calendar
quarter, as adjusted as noted above, comprising the relevant Trailing Twelve Quarters was included in the calculation of the incentive
fee on net investment income; and
|
|
|
●
|
17.5%
of the Ordinary Income that exceeds the Catch-up Amount was included in the calculation of the incentive fee on net investment income.
|
The amount of the incentive fee on net investment
income that was to be paid to MCC Advisors for a particular quarter would equal the excess of the incentive fee so calculated minus the
aggregate incentive fees on net investment income that were paid in respect of the first eleven calendar quarters (or the portion thereof)
included in the relevant Trailing Twelve Quarters but not in excess of the Incentive Fee Cap (as described below).
The incentive fee on net investment income
that was paid to MCC Advisors for a particular quarter was subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap
for any quarter was an amount equal to (a) 17.5% of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarters
minus (b) the aggregate incentive fees on net investment income that were paid in respect of the first eleven calendar quarters
(or the portion thereof) included in the relevant Trailing Twelve Quarters.
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 6. Agreements (continued)
Incentive Fee (continued)
“Cumulative Net Return” means (x)
the Ordinary Income in respect of the relevant Trailing Twelve Quarters minus (y) any Net Capital Loss (as described below), if
any, in respect of the relevant Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap was zero or a negative value, the
Company would pay no incentive fee on net investment income to MCC Advisors for such quarter. If, in any quarter, the Incentive Fee Cap
for such quarter was a positive value but was less than the incentive fee on net investment income that was payable to MCC Advisors for
such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company would pay an incentive fee on
net investment income to MCC Advisors equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such
quarter was equal to or greater than the incentive fee on net investment income that was payable to MCC Advisors for such quarter (before
giving effect to the Incentive Fee Cap) calculated as described above, the Company would pay an incentive fee on net investment income
to MCC Advisors, calculated as described above, for such quarter without regard to the Incentive Fee Cap.
“Net Capital Loss” in respect of a
particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, and dilution
to the Company’s net assets due to capital raising or capital actions, in such period and (ii) aggregate capital gains, whether
realized or unrealized and accretion to the Company’s net assets due to capital raising or capital action, in such period.
Dilution to the Company’s net assets due
to capital raising was calculated, in the case of issuances of common stock, as the amount by which the net asset value per share was
adjusted over the transaction price per share, multiplied by the number of shares issued. Accretion to the Company’s net assets
due to capital raising was calculated, in the case of issuances of common stock (including issuances pursuant to our dividend reinvestment
plan), as the excess of the transaction price per share over the amount by which the net asset value per share was adjusted, multiplied
by the number of shares issued. Accretion to the Company’s net assets due to other capital action was calculated, in the case of
repurchases by the Company of its own common stock, as the excess of the amount by which the net asset value per share was adjusted over
the transaction price per share multiplied by the number of shares repurchased by the Company.
Incentive Fee Based on Capital Gains
The second component of the incentive fee was
determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement as of
the termination date) and equaled 20.0% of our cumulative aggregate realized capital gains less cumulative realized capital losses, unrealized
capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year) and all capital
gains upon which prior performance-based capital gains incentive fee payments were previously made to the investment adviser.
Under GAAP, the Company calculated the second
component of the incentive fee as if the Company had realized all assets at their fair values as of the reporting date. Accordingly, when
applicable, the Company accrued a provisional capital gains incentive fee taking into account any unrealized gains or losses. As the provisional
capital gains incentive fee was subject to the performance of investments until there was a realization event, the amount of the provisional
capital gains incentive fee accrued at a reporting date may have varied from the capital gains incentive that was ultimately realized
and the differences could have been material.
The incentive fees shown in the Consolidated Statements
of Operations were calculated using the fee structure set forth in the Investment Management Agreement, and then adjusted to reflect the
terms of the Fee Waiver Agreement. Pursuant to the Investment Management Agreement, pre-incentive fee net investment income was compared
to a hurdle rate of 2.0% of the net asset value at the beginning of the period and was calculated as follows:
|
|
1)
|
No
incentive fee was recorded during the quarter in which our pre-incentive fee net investment income did not exceed the hurdle rate;
|
|
|
2)
|
100%
of pre-incentive fee net investment income that exceeded the hurdle rate but was less than 2.5% in the quarter; and
|
|
|
3)
|
20.0%
of the amount of pre-incentive fee net investment income, if any, that exceeded 2.5% of the hurdle rate.
|
For purposes of implementing the fee waiver under
the Fee Waiver Agreement, we calculated the incentive fee based upon the formula that existed under the Investment Management Agreement,
and then applied the terms of waiver set forth in the Fee Waiver Agreement, if applicable.
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 6. Agreements (continued)
Incentive Fee (continued)
For the three and nine months ended June 30, 2021
and 2020, the Company did not incur any incentive fees on net investment income because pre-incentive fee net investment income did not
exceed the hurdle amount under the formula set forth in the Investment Management Agreement. The Investment Management Agreement terminated
as of December 31, 2020, and the Company no longer incurs incentive fees under the Investment Management Agreement as a result.
As of June 30, 2021 and September 30, 2020, $0
and $1.4 million, respectively, were included in “management and incentive fees payable” in the accompanying Consolidated
Statements of Assets and Liabilities.
Administration Agreement
On January 19, 2011, the Company entered into
an administration agreement with MCC Advisors. Pursuant to the administration agreement, MCC Advisors furnished us with office facilities
and equipment, clerical, bookkeeping, recordkeeping and other administrative services related to the operations of the Company. We reimbursed
MCC Advisors for our allocable portion of overhead and other expenses incurred by it performing its obligations under the administration
agreement, including rent and our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer and their
respective staffs. From time to time, our administrator was able to pay amounts owed by us to third-party service providers and we would
subsequently reimburse our administrator for such amounts paid on our behalf. In connection with the adoption by the board of directors
of an internalized management structure, on November 19, 2020, the Company entered into a Fund Accounting Servicing Agreement and an Administration
Servicing Agreement on customary terms with U.S. Bancorp Fund Services, LLC d/b/a U.S. Bank Global Fund Services (“U.S. Bancorp”).
The administration agreement with MCC Advisors terminated by its terms on December 31, 2020. For the three and nine months ended June
30, 2021, we recorded $0.1 million and $0.5 million, respectively, in administrator expenses. For the three and nine months ended June 30,
2020, we incurred $0.6 million and $1.7 million in administrator expenses, respectively.
As of June 30, 2021 and September 30,
2020, $0.1 million and $0.2 million, respectively, were included in “administrator expenses payable” in the accompanying Consolidated
Statements of Assets and Liabilities.
Expense Support Agreement
On June 12, 2020, the Company entered into an
expense support agreement (the “Expense Support Agreement”) with MCC Advisors and Medley LLC, pursuant to which MCC Advisors
and Medley LLC agreed (jointly and severally) to cap the management fee and all of the Company’s other operating expenses (except
interest expenses, certain extraordinary strategic transaction expenses and other expenses approved by the Special Committee (as defined
in Note 10)) at $667,000 per month (the “Cap”). Under the Expense Support Agreement, the Cap became effective on June 1, 2020
and expires on September 30, 2020. On September 29, 2020, the board of directors, including all of the independent directors, extended
the term of the Expense Support Agreement through the end of quarter ending December 31, 2020. The Expense Support Agreement expired by
its terms at the close of business on December 31, 2020, in connection with the adoption of the internalized management structure by the
board of directors.
Note 7. Related Party Transactions
Due to Affiliate
Due to affiliate consists of certain general and administrative expenses
paid by an affiliate on behalf of the Company.
Other Related Party Transactions
Opportunities for co-investments may arise when
an affiliated investment adviser becomes aware of investment opportunities that may be appropriate for the Company, other clients, or
affiliated funds. On November 25, 2013, the Company obtained an exemptive order from the SEC that permits us to participate in negotiated
co-investment transactions with certain affiliates, each of whose investment adviser is Medley, LLC or an investment adviser controlled
by Medley, LLC in a manner consistent with our investment objective, strategies and restrictions, as well as regulatory requirements and
other pertinent factors (the “Prior Exemptive Order”). On March 29, 2017, the Company, MCC Advisors and certain other affiliated
funds and investment advisers received an exemptive order (the “Exemptive Order”) that supersedes the Prior Exemptive Order
and allows affiliated registered investment companies to participate in co-investment transactions with us that would otherwise have been
prohibited under Section 17(d) and 57(a)(4) of the 1940 Act and Rule 17d-1 thereunder. On October 4, 2017, the Company, MCC Advisors and
certain of our affiliates received an exemptive order that supersedes the Exemptive Order (the “Current Exemptive Order”)
and allows, in addition to the entities already covered by the Exemptive Order, Medley LLC and its subsidiary, Medley Capital LLC, to
the extent they hold financial assets in a principal capacity, and any direct or indirect, wholly or majority owned subsidiary of Medley
LLC that is formed in the future, to participate in co-investment transactions with us that would otherwise be prohibited by either or
both of Sections 17(d) and 57(a)(4) of the 1940 Act. Co-investment under the Current Exemptive Order is subject to certain conditions
therein, including the condition that, in the case of each co-investment transaction, the board of directors determines that it would
be in the Company’s best interest to participate in the transaction. However, neither we nor the affiliated funds are obligated
to invest or co-invest when investment opportunities are referred to us or them. The Company does not expect to avail itself of the current
exemptive order, given the internalization and termination of the Investment Management Agreement.
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 8. Commitments
Insurance
Reimbursements Related to Professional Fees
The Company has received insurance proceeds during
fiscal year 2021 under its insurance policy primarily relating to the legal expenses associated with the dismissed stockholder class action,
captioned as FrontFour Capital Group LLC, et al. v Brook Taube et al. During the three and nine months ended June 30, 2021, the Company
received $1.0 million and $2.1 million, respectively, of insurance proceeds. During the three and nine months ended June 30, 2020, the
Company received $1.0 million and $5.8 million of insurance proceeds, respectively. The reimbursements have been recorded as an offset
or reduction in professional fees and expenses on the Consolidated Statements of Operations.
Unfunded commitments
As of June 30, 2021 and September 30, 2020, we
had commitments under loan and financing agreements to fund up to $5.1 million to seven portfolio companies and $3.9 million to five portfolio
companies, respectively. These commitments are primarily composed of senior secured term loans and revolvers, and the determination of
their fair value is included in the Consolidated Schedule of Investments. The commitments are generally subject to the borrowers meeting
certain criteria such as compliance with covenants and certain operational metrics. The terms of the borrowings and financings subject
to commitment are comparable to the terms of other loan and equity securities in our portfolio. A summary of the composition of the unfunded
commitments as of June 30, 2021 and September 30, 2020 is shown in the table below (dollars in thousands):
|
|
|
June 30,
2021
|
|
|
September 30,
2020
|
|
|
Redwood Services Group, LLC - Revolver
|
|
$
|
1,575
|
|
|
$
|
1,050
|
|
|
1888 Industrial Services, LLC - Revolver
|
|
|
1,078
|
|
|
|
1,078
|
|
|
Alpine SG - Revolver
|
|
|
1,000
|
|
|
|
—
|
|
|
Kemmerer Operations, LLC - Delayed Draw Term Loan
|
|
|
908
|
|
|
|
908
|
|
|
NVTN LLC - DDTL
|
|
|
220
|
|
|
|
220
|
|
|
Black Angus Steakhouses, LLC - Super Priority DDTL
|
|
|
167
|
|
|
|
—
|
|
|
DataOnline Corp. - Revolver
|
|
|
107
|
|
|
|
179
|
|
|
NVTN LLC - Super Priority DDTL
|
|
|
—
|
|
|
|
500
|
|
|
Total unfunded commitments
|
|
$
|
5,055
|
|
|
$
|
3,935
|
|
Note 9. Fee Income
Fee income consists of origination/closing
fees, amendment fees, prepayment penalty and other miscellaneous fees which are non-recurring in nature, as well as administrative agent
fees, which are recurring in nature. The following table summarizes the Company’s fee income for the three and nine months ended
June 30, 2021 and 2020 (dollars in thousands):
|
|
|
For the Three Months
Ended June 30
|
|
|
For the Nine Months
Ended June 30
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Administrative agent fee
|
|
$
|
54
|
|
|
$
|
44
|
|
|
$
|
381
|
|
|
$
|
163
|
|
|
Prepayment fee
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
139
|
|
|
Amendment fee
|
|
|
5
|
|
|
|
124
|
|
|
|
94
|
|
|
|
138
|
|
|
Other fees
|
|
|
12
|
|
|
|
34
|
|
|
|
175
|
|
|
|
91
|
|
|
Origination fee
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
87
|
|
|
Fee income
|
|
$
|
71
|
|
|
$
|
202
|
|
|
$
|
650
|
|
|
$
|
618
|
|
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 10. Directors Fees
During calendar year 2021, the Company’s
independent directors each receive an annual fee of $100,000. In addition, the lead independent director receives an annual retainer of
$30,000; the chair of the Audit Committee receives an annual retainer of $25,000, and each of its other members receives an annual retainer
of $12,500; and the chairs of the Nominating and Corporate Governance Committee and of the Compensation Committee each receive an annual
retainer of $15,000 and each of the other members of these committees receive annual retainers of $8,000. The Company’s independent
directors also receive a fee of $3,000 for each board meeting and $2,500 for each committee meeting that they attend. Prior to calendar
year 2021, the Company’s independent directors each received an annual fee of $90,000. They also received $3,000, plus reimbursement
of reasonable out-of-pocket expenses incurred in connection with attending each board meeting, and $2,500, plus reimbursement of reasonable
out-of-pocket expenses incurred in connection with attending each Audit Committee, Nominating and Corporate Governance Committee, Transition
Committee and Compensation Committee meeting. The chair of the Audit Committee received an annual fee of $25,000 and the chair of the
Nominating and Corporate Governance Committee and the Compensation Committee received an annual fee of $10,000 for their additional services
in these capacities. In addition, other members of the Audit Committee received an annual fee of $12,500, and other members of the Nominating
and Corporate Governance Committee and the Compensation Committee received an annual fee of $6,000.
On January 26, 2018, the board of directors established
the special committee of the Board, comprised solely of directors who are not “interested persons” of the Company as such
term is defined in Section 2(a)(19) of the 1940 Act (the “Special Committee”), for the purpose of assessing the merits of
various proposed strategic transactions. As compensation for serving on the Special Committee, each independent director received a one-time
retainer of $25,000 plus reimbursement of out-of-pocket expenses, consistent with the Company’s policies for reimbursement of members
of the board of directors. In addition, the chairman of the Special Committee received a monthly fee of $15,000 and other members received
a monthly fee of $10,000. The Special Committee is no longer active. The Special Committee as well as the Transition Committee are each
no longer in operation.
No board service compensation is paid to directors
who are “interested persons” of the Company (as such term is defined in the 1940 Act). For the three and nine months ended
June 30, 2021, we accrued $0.2 million and $0.9 million for directors’ fees expense, respectively. For the three and nine months
ended June 30, 2020, we accrued $0.3 million and $1.0 million for directors’ fees expense, respectively.
Note 11. Earnings Per Share
In accordance with the provisions of ASC Topic
260 - Earnings per Share, basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average
number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered
when calculating earnings per share on a diluted basis. The Company does not have any potentially dilutive common shares as of June 30,
2021.
The following information sets forth the
computation of the weighted average basic and diluted net increase/(decrease) in net assets per share from operations for the three and
nine months ended June 30, 2021 and 2020 (dollars in thousands, except share and per share amounts):
|
|
|
For the Three Months
Ended June 30
|
|
|
For the Nine Months
Ended June 30
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets resulting from operations
|
|
$
|
6,969
|
|
|
$
|
7,604
|
|
|
$
|
8,318
|
|
|
$
|
(67,086
|
)
|
|
Weighted average shares of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding - basic and diluted
|
|
|
2,683,093
|
|
|
|
2,723,711
|
|
|
|
2,707,794
|
|
|
|
2,723,711
|
|
|
Earnings (loss) per share of common stock - basic and diluted
|
|
$
|
2.60
|
|
|
$
|
2.79
|
|
|
$
|
3.07
|
|
|
$
|
(24.63
|
)
|
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 12. Financial Highlights
The following is a schedule of financial highlights for the nine months
ended June 30, 2021 and 2020:
|
|
|
For the Nine Months Ended
June 30
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Per share data
|
|
|
|
|
|
|
|
Net Asset Value per share at Beginning of Period
|
|
$
|
55.30
|
|
|
$
|
79.46
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations:
|
|
|
|
|
|
|
|
|
|
Net Investment Income/(Loss)(1)
|
|
|
6.44
|
|
|
|
(0.68
|
)
|
|
Net Realized Gain/(Loss) on Investments
|
|
|
(17.17
|
)
|
|
|
(14.60
|
)
|
|
Net Unrealized Gain/(Loss) on Investments
|
|
|
13.85
|
|
|
|
(8.42
|
)
|
|
Change in provision for deferred taxes on unrealized appreciation/(depreciation) on investments
|
|
|
—
|
|
|
|
(0.02
|
)
|
|
Net loss on extinguishment of debt
|
|
|
(0.05
|
)
|
|
|
(0.91
|
)
|
|
Net Increase (Decrease) in Net Assets Resulting from Operations
|
|
|
3.07
|
|
|
|
(24.63
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Capital Share Transactions
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock under stock repurchase program
|
|
|
0.12
|
|
|
|
—
|
|
|
Net Increase (Decrease) Resulting from Capital Share Transactions
|
|
|
0.12
|
|
|
|
—
|
|
|
Net Asset Value per share at End of Period
|
|
$
|
58.49
|
|
|
$
|
54.83
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets at End of Period
|
|
$
|
156,678,576
|
|
|
$
|
149,346,046
|
|
|
Shares Outstanding at End of Period
|
|
|
2,678,921
|
|
|
|
2,723,711
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share market value at end of period
|
|
$
|
40.80
|
|
|
$
|
15.40
|
|
|
Total return based on market value(2)
|
|
|
128.83
|
%
|
|
|
(70.27
|
%)
|
|
Total return based on net asset value(3)
|
|
|
4.02
|
%
|
|
|
(30.99
|
%)
|
|
Portfolio turnover rate(4)
|
|
|
21.93
|
%
|
|
|
7.20
|
%
|
The following is a schedule of ratios and supplemental
data for the nine months ended June 30, 2021 and 2020:
|
Ratios:
|
|
|
|
|
|
|
|
Ratio of net investment income/(loss) to average net assets after waivers, discounts and reimbursements(4)(5)
|
|
|
15.41
|
%
|
|
|
(1.43
|
%)
|
|
Ratio of total expenses to average net assets after waivers, discounts and reimbursements(4)(5)
|
|
|
9.31
|
%
|
|
|
13.98
|
%
|
|
Ratio of incentive fees to average net assets after waivers(5)
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
Ratio of net operating expenses and credit facility related expenses to average net assets(4)(5)(9)
|
|
|
9.31
|
%
|
|
|
14.17
|
%
|
|
Percentage of non-recurring fee income(6)
|
|
|
2.33
|
%
|
|
|
2.66
|
%
|
|
Average debt outstanding(7)
|
|
|
84,649,449
|
|
|
|
201,704,498
|
|
|
Average debt outstanding per common share
|
|
|
31.26
|
|
|
|
74.06
|
|
|
Asset coverage ratio per unit(8)
|
|
|
3,025
|
|
|
|
1,983
|
|
|
Total Debt Outstanding(10)
|
|
|
|
|
|
|
|
|
|
2021 Notes
|
|
|
—
|
|
|
|
73,644,036
|
|
|
2023 Notes
|
|
|
77,364,454
|
|
|
|
77,088,530
|
|
|
|
|
|
|
|
|
|
|
|
|
Average market value per unit:
|
|
|
|
|
|
|
|
|
|
2021 Notes
|
|
|
N/A
|
|
|
|
22.19
|
|
|
2023 Notes
|
|
|
24.80
|
|
|
|
19.84
|
|
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 12. Financial Highlights (continued)
|
|
(1)
|
Net
investment income/(loss) excluding management and incentive fee waivers, discounts and reimbursements based on total weighted average
common stock outstanding equals $6.51 and $(2.73) per share for the three months ended June 30, 2021 and 2020 respectively.
|
|
|
(2)
|
Total
return is historical and assumes changes in share price, reinvestments of all dividends and distributions at prices obtained under the
Company’s dividend reinvestment plan, and no sales charge for the period. Calculation is not annualized.
|
|
|
(3)
|
Total
return is historical and assumes changes in NAV, reinvestments of all dividends and distributions at prices obtained under the Company’s
dividend reinvestment plan, and no sales charge for the period. Calculation is not annualized.
|
|
|
(4)
|
Ratios
are annualized during interim periods.
|
|
|
(5)
|
For the nine months ended June 30, 2021, prior to the effect of Expense Support Agreement, the ratio of net investment income/(loss), total expenses, incentive fees, and operating expenses and credit facility related expenses to average net assets is 15.41%, 9.31%, 0.00%, and 9.31%, respectively For the nine months ended June 30, 2020, excluding management and incentive fee waivers, discounts and reimbursements, the ratio of net investment income/(loss), total expenses, incentive fees, and operating expenses and credit facility related expenses to average net assets is (5.72)%, 18.27%, 0.00%, and 18.27%, respectively.
|
|
|
(6)
|
Represents
the impact of the non-recurring fees as a percentage of total investment income.
|
|
|
(7)
|
Based
on daily weighted average carrying value of debt outstanding during the period.
|
|
|
(8)
|
Asset
coverage per unit is the ratio of the carrying value of our total consolidated assets, less
all liabilities and indebtedness not represented by senior securities, to the aggregate amount
of senior securities representing indebtedness. Asset coverage per unit is expressed in terms
of dollar amounts per $1,000 of indebtedness. As of June 30, 2021, the Company’s asset
coverage was 302.5% after giving effect to leverage and therefore the Company’s asset
coverage was above 200%, the minimum asset coverage requirement under the 1940 Act.
|
|
|
(9)
|
Excludes
incentive fees.
|
|
|
(10)
|
Total
amount of each class of senior securities outstanding at the end of the period excluding debt issuance costs.
|
PHENIXFIN CORPORATION
Notes to Consolidated Financial Statements (continued)
June 30, 2021
(unaudited)
Note 13. Dividends
Dividends and distributions to common stockholders
are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by our board of directors.
We have adopted an “opt out” dividend
reinvestment plan for our common stockholders. As a result, if we declare a cash dividend or other distribution, each stockholder that
has not “opted out” of our dividend reinvestment plan will have its dividends automatically reinvested in additional shares
of our common stock rather than receiving cash dividends. Stockholders who receive distributions in the form of shares of common stock
will be subject to the same federal, state and local tax consequences as if they received cash distributions.
The Company did not make any distributions during
the nine months ended June 30, 2021 and 2020.
Note 14. Share Transactions
On January 11, 2021, the Company announced that
its board of directors approved a share repurchase program.
The following table sets forth the number of shares
of common stock repurchased by the Company at an average price of $33.42 per share under its share repurchase program from February 10,
2021 through June 30, 2021:
|
Month Ended
|
|
Shares Repurchased
|
|
|
Repurchase
Price Per Share
|
|
Aggregate Consideration for Repurchased Shares
|
|
|
January 2021
|
|
|
—
|
|
|
—
|
|
$
|
—
|
|
|
February 2021
|
|
|
13,082
|
|
|
$30.25 - $30.96
|
|
|
396,961
|
|
|
March 2021
|
|
|
12,241
|
|
|
$30.25 - $34.42
|
|
|
393,504
|
|
|
April 2021
|
|
|
14,390
|
|
|
$33.11 - $34.89
|
|
|
490,885
|
|
|
May 2021
|
|
|
5,075
|
|
|
$34.56 - $35.98
|
|
|
177,688
|
|
|
June 2021
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
|
44,788
|
|
|
|
|
$
|
1,459,038
|
|
The Company’s net asset value per share
was increased by approximately $0.12 as a result of the share repurchases.
The Company funded additional share repurchases
of 20,000 shares with a total cost of approximately $0.8 million on May 28, 2021 which had not settled as of June 30, 2021.
Note
15. Subsequent Events
Management has evaluated subsequent events through
the date of issuance of the consolidated financial statements included herein. Other than the items disclosed herein, there have been
no subsequent events that occurred during such period that would require disclosure in this Form 10-Q or would be required to be recognized
in the Consolidated Financial Statements as of and for the nine months ended June 30, 2021.
